<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from...............to...............................
Commission file number 1-13274
MACK-CALI REALTY CORPORATION
------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 22-3305147
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
11 COMMERCE DRIVE, CRANFORD, NEW JERSEY 07016-3501
------------------------------------------------------------------------------
(Address or principal executive office)
(Zip Code)
(908) 272-8000
------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or such shorter period that the
Registrant was required to file such report) YES X NO____ and (2) has been
subject to such filing requirements for the past ninety (90) days YES X
NO____________.
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 7, 2000, there were 58,878,195 shares of $0.01 par value common
stock outstanding.
<PAGE>
MACK-CALI REALTY CORPORATION
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 2000
and December 31, 1999 ..................................... 4
Consolidated Statements of Operations for the three
and six month periods ended June 30, 2000 and 1999 ........ 5
Consolidated Statement of Changes in Stockholders'
Equity for the six months ended June 30, 2000 ............. 6
Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and 1999 .............................. 7
Notes to Consolidated Financial Statements ................... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 33
Item 3. Quantitative and Qualitative Disclosures about Market Risk .. 61
PART II OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings ........................................... 62
Item 2. Changes in Securities and Use of Proceeds ................... 62
Item 3. Defaults Upon Senior Securities ............................. 62
Item 4. Submission of Matters to a Vote of Security Holders ......... 62
Item 5. Other Information ........................................... 62
Item 6. Exhibits .................................................... 63
Signatures ................................................... 66
2
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MACK-CALI REALTY CORPORATION
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
The accompanying unaudited consolidated balance sheets, statements of
operations, of changes in stockholders' equity, and of cash flows and
related notes, have been prepared in accordance with generally accepted
accounting principles ("GAAP") for interim financial information and in
conjunction with the rules and regulations of the Securities and
Exchange Commission ("SEC"). Accordingly, they do not include all of the
disclosures required by GAAP for complete financial statements. The
financial statements reflect all adjustments consisting only of normal,
recurring adjustments, which are in the opinion of management, necessary
for a fair presentation for the interim periods.
The aforementioned financial statements should be read in conjunction
with the notes to the aforementioned financial statements and
Management's Discussion and Analysis of Financial Condition and Results
of Operations and the financial statements and notes thereto included in
Mack-Cali Realty Corporation's Annual Report on Form 10-K and Form
10-K/A for the fiscal year ended December 31, 1999.
The results of operations for the three and six month periods ended June
30, 2000 are not necessarily indicative of the results to be expected
for the entire fiscal year or any other period.
3
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<TABLE>
<CAPTION>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
===========================================================================================================
June 30,
2000 December 31,
ASSETS (UNAUDITED) 1999
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Rental property
Land and leasehold interests $ 548,813 $ 549,096
Buildings and improvements 3,015,197 3,014,532
Tenant improvements 84,687 85,057
Furniture, fixtures and equipment 6,169 6,160
-----------------------------------------------------------------------------------------------------------
3,654,866 3,654,845
Less - accumulated depreciation and amortization (270,065) (256,629)
-----------------------------------------------------------------------------------------------------------
Total rental property 3,384,801 3,398,216
Cash and cash equivalents 10,535 8,671
Investments in unconsolidated joint ventures 95,382 89,134
Unbilled rents receivable 43,821 53,253
Deferred charges and other assets, net 80,117 66,436
Restricted cash 6,498 7,081
Accounts receivable, net of allowance for doubtful accounts
of $537 and $672 6,950 6,810
-----------------------------------------------------------------------------------------------------------
Total assets $ 3,628,104 $ 3,629,601
===========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
-----------------------------------------------------------------------------------------------------------
Senior unsecured notes $ 782,942 $ 782,785
Revolving credit facilities 215,730 177,000
Mortgages and loans payable 488,605 530,390
Dividends and distributions payable 42,543 42,499
Accounts payable and accrued expenses 74,376 63,394
Rents received in advance and security deposits 34,170 36,150
Accrued interest payable 16,263 16,626
-----------------------------------------------------------------------------------------------------------
Total liabilities 1,654,629 1,648,844
-----------------------------------------------------------------------------------------------------------
MINORITY INTERESTS:
Operating Partnership 455,645 455,275
Partially-owned properties -- 83,600
-----------------------------------------------------------------------------------------------------------
Total minority interests 455,645 538,875
-----------------------------------------------------------------------------------------------------------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares authorized, none issued -- --
Common stock, $0.01 par value, 190,000,000 shares authorized,
58,782,808 and 58,446,552 shares outstanding 588 584
Additional paid-in capital 1,561,547 1,549,888
Dividends in excess of net earnings (40,997) (103,902)
Unamortized stock compensation (3,308) (4,688)
-----------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,517,830 1,441,882
-----------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 3,628,104 $ 3,629,601
===========================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
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<TABLE>
<CAPTION>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS) (UNAUDITED)
===========================================================================================================
Three Months Ended June 30, Six Months Ended June 30,
REVENUES 2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Base rents $122,072 $116,499 $243,670 $232,579
Escalations and recoveries from tenants 14,627 16,366 31,295 31,226
Parking and other 6,128 3,061 9,450 6,961
Equity in earnings of unconsolidated joint ventures 1,070 834 2,207 628
Interest income 1,992 215 2,246 470
-----------------------------------------------------------------------------------------------------------
Total revenues 145,889 136,975 288,868 271,864
-----------------------------------------------------------------------------------------------------------
EXPENSES
-----------------------------------------------------------------------------------------------------------
Real estate taxes 14,733 14,208 29,437 28,051
Utilities 10,014 9,829 20,393 19,421
Operating services 16,822 17,429 34,564 34,516
General and administrative 5,159 5,568 11,272 13,531
Depreciation and amortization 22,945 22,465 45,127 44,434
Interest expense 26,835 25,697 53,261 49,319
Non-recurring charges 9,228 16,458 9,228 16,458
-----------------------------------------------------------------------------------------------------------
Total expenses 105,736 111,654 203,282 205,730
-----------------------------------------------------------------------------------------------------------
Income before gain on sales of
rental property and minority interests 40,153 25,321 85,586 66,134
Gain on sales of rental property 73,921 -- 76,169 --
-----------------------------------------------------------------------------------------------------------
Income before minority interests 114,074 25,321 161,755 66,134
MINORITY INTERESTS:
Operating Partnership 16,784 6,635 25,760 15,384
Partially-owned properties 2,982 -- 5,072 --
-----------------------------------------------------------------------------------------------------------
Net income $ 94,308 $ 18,686 $130,923 $ 50,750
===========================================================================================================
Basic earnings per share $ 1.61 $ 0.32 $ 2.24 $ 0.87
Diluted earnings per share $ 1.52 $ 0.32 $ 2.14 $ 0.87
-----------------------------------------------------------------------------------------------------------
Dividends declared per common share $ 0.58 $ 0.55 $ 1.16 $ 1.10
-----------------------------------------------------------------------------------------------------------
Basic weighted average shares outstanding 58,545 58,510 58,420 58,337
Diluted weighted average shares outstanding 73,284 67,486 73,237 67,385
-----------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
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<TABLE>
<CAPTION>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS)
(UNAUDITED)
================================================================================================================================
Additional Dividends in Unamortized Total
Common Stock Paid-In Excess of Stock Stockholders'
Shares Par Value Capital Net Earnings Compensation Equity
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 58,447 $ 584 $ 1,549,888 $ (103,902) $ (4,688) $ 1,441,882
Net income -- -- -- 130,923 -- 130,923
Dividends -- -- -- (68,018) -- (68,018)
Redemption of common units
for shares of common stock 256 3 8,361 -- -- 8,364
Proceeds from stock options
exercised 80 1 1,664 -- -- 1,665
Deferred compensation plan for
directors -- -- 54 -- -- 54
Amortization of stock compensation -- -- -- -- 1,313 1,313
Adjustment to fair value of restricted
stock -- -- 30 -- 67 97
Stock options charge -- -- 1,550 -- -- 1,550
--------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2000 58,783 $ 588 $ 1,561,547 $ (40,997) $ (3,308) $ 1,517,830
================================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
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<TABLE>
<CAPTION>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
===================================================================================================
Six Months Ended June 30,
CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 130,923 $ 50,750
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 45,127 44,434
Amortization of stock compensation 1,410 --
Amortization of deferred financing costs and debt discount 1,802 1,518
Stock options charge 1,550 --
Equity in earnings of unconsolidated joint ventures (2,207) (628)
Gain on sales of rental property (76,169) --
Minority interests 30,832 15,384
Changes in operating assets and liabilities:
Increase in unbilled rents receivable (5,537) (7,397)
Increase in deferred charges and other assets, net (15,697) (10,794)
Increase in accounts receivable, net (140) (2,770)
Increase in accounts payable and accrued expenses 10,982 5,891
(Decrease) increase in rents received in advance and security deposits (1,937) 1,137
(Decrease) increase in accrued interest payable (363) 12,483
---------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 120,576 $ 110,008
===================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES
---------------------------------------------------------------------------------------------------
Additions to rental property $(170,062) $ (71,107)
Investments in unconsolidated joint ventures (11,081) (29,941)
Distributions from unconsolidated joint ventures 7,040 10,634
Proceeds from sales of rental property 235,849 --
Decrease (increase) in restricted cash 583 (134)
---------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities $ 62,329 $ (90,548)
===================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES
---------------------------------------------------------------------------------------------------
Proceeds from senior unsecured notes $ -- $ 597,252
Proceeds from revolving credit facilities 435,030 130,900
Proceeds from mortgages and loans payable -- 45,500
Repayments of revolving credit facilities (396,300) (653,900)
Repayments of mortgages and loans payable (41,785) (45,819)
Distributions to minority interest in partially-owned properties (88,672) --
Repurchase of common stock -- (713)
Payment of financing costs (5,979) (6,592)
Proceeds from stock options exercised 1,665 933
Proceeds from dividend reinvestment and stock purchase plan -- 10
Payment of dividends and distributions (85,000) (81,321)
---------------------------------------------------------------------------------------------------
Net cash used in financing activities $(181,041) $ (13,750)
===================================================================================================
Net increase in cash and cash equivalents $ 1,864 $ 5,710
Cash and cash equivalents, beginning of period $ 8,671 $ 5,809
---------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 10,535 $ 11,519
===================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
7
<PAGE>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER
SHARE/UNIT AMOUNTS)
==============================================================================
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Mack-Cali Realty Corporation, a Maryland corporation, and subsidiaries (the
"Company") is a fully-integrated, self-administered, self-managed real estate
investment trust ("REIT") providing leasing, management, acquisition,
development, construction and tenant-related services for its properties. As of
June 30, 2000, the Company owned or had interests in 266 properties plus
developable land (collectively, the "Properties"). The Properties aggregate
approximately 28.4 million square feet, and are comprised of 163 office
buildings and 90 office/flex buildings totaling approximately 28.0 million
square feet (which includes eight office buildings and four office/flex
buildings aggregating 1.5 million square feet, owned by unconsolidated joint
ventures in which the Company has investment interests), six
industrial/warehouse buildings totaling approximately 387,400 square feet, two
multi-family residential complexes consisting of 451 units, two stand-alone
retail properties and three land leases. The Properties are located in 12
states, primarily in the Northeast, plus the District of Columbia.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include all accounts of the
Company, its majority-owned and/or controlled subsidiaries, which consist
principally of Mack-Cali Realty, L.P. ("Operating Partnership"). See Investments
in Unconsolidated Joint Ventures in Note 2 for the Company's treatment of
unconsolidated joint venture interests. All significant intercompany accounts
and transactions have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
RENTAL
PROPERTY Rental properties are stated at cost less accumulated
depreciation and amortization. Costs directly related to the
acquisition and development of rental properties are
capitalized. Capitalized development costs include interest,
property taxes, insurance and other project costs incurred
during the period of development. Included in total rental
property is construction-in-progress of $163,179 and $98,438
as of June 30, 2000 and December 31, 1999, respectively.
Ordinary repairs and maintenance are expensed as incurred;
major replacements and betterments, which improve or extend
the life of the asset, are capitalized and depreciated over
their estimated useful lives. Fully-depreciated assets are
removed from the accounts.
Properties are depreciated using the straight-line method over
the estimated useful lives of the assets. The estimated useful
lives are as follows:
Leasehold interests Remaining lease term
--------------------------------------------------------------
Buildings and improvements 5 to 40 years
--------------------------------------------------------------
Tenant improvements The shorter of the term of
the related lease or useful life
--------------------------------------------------------------
Furniture, fixtures and equipment 5 to 10 years
--------------------------------------------------------------
On a periodic basis, management assesses whether there are any
indicators that the value of the real estate properties may be
impaired. A property's value is impaired only if management's
estimate of the aggregate future cash flows (undiscounted and
without interest charges) to be generated by the property are
less than the carrying value of the property. To
8
<PAGE>
the extent impairment has occurred, the loss shall be measured
as the excess of the carrying amount of the property over the
fair value of the property. Management does not believe that
the value of any of its rental properties is impaired.
When assets are identified by management as held for sale, the
Company discontinues depreciating the assets and estimates the
sales price, net of selling costs, of such assets. If, in
management's opinion, the net sales price of the assets which
have been identified for sale is less than the net book value of
the assets, a valuation allowance is established.
INVESTMENTS IN
UNCONSOLIDATED
JOINT VENTURES The Company accounts for its investments in unconsolidated
joint ventures under the equity method of accounting as the
Company exercises significant influence, but does not control
these entities. These investments are recorded initially at
cost, as Investments in Unconsolidated Joint Ventures, and
subsequently adjusted for equity in earnings and cash
contributions and distributions. Any difference between the
carrying amount of these investments on the balance sheet of
the Company and the underlying equity in net assets is
amortized as an adjustment to equity in earnings of
unconsolidated joint ventures over 40 years. See Note 4.
CASH AND CASH
EQUIVALENTS All highly liquid investments with a maturity of three months or
less when purchased are considered to be cash equivalents.
DEFERRED
FINANCING
COSTS Costs incurred in obtaining financing are capitalized and
amortized on a straight-line basis, which approximates the
effective interest method, over the term of the related
indebtedness. Amortization of such costs is included in interest
expense and was $901 and $917 for the three months ended June
30, 2000 and 1999, respectively, and $1,802 and $1,518 for the
six months ended June 30, 2000 and 1999, respectively.
DEFERRED
LEASING COSTS Costs incurred in connection with leases are capitalized and
amortized on a straight-line basis over the terms of the
related leases and included in depreciation and amortization.
Unamortized deferred leasing costs are charged to amortization
expense upon early termination of the lease. Certain employees
of the Company provide leasing services to the Properties and
receive compensation based on space leased. The portion of
such compensation which is capitalized and amortized,
approximated $896 and $743 for the three months ended June 30,
2000 and 1999, respectively, and $1,589 and $1,401 for the six
months ended June 30, 2000 and 1999, respectively.
REVENUE
RECOGNITION Base rental revenue is recognized on a straight-line basis
over the terms of the respective leases. Unbilled rents
receivable represents the amount by which straight-line rental
revenue exceeds rents currently billed in accordance with the
lease agreements. Parking revenue includes income from parking
spaces leased to tenants. Rental income on residential
property under operating leases having terms generally of one
year or less is recognized when earned.
Reimbursements are received from tenants for certain costs as
provided in the lease agreements. These costs generally include
real estate taxes, utilities, insurance, common area maintenance
and other recoverable costs. See Note 14.
9
<PAGE>
INCOME AND
OTHER TAXES The Company has elected to be taxed as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986, as
amended (the "Code"). As a REIT, the Company generally will
not be subject to corporate federal income tax on net income
that it currently distributes to its shareholders, provided
that the Company satisfies certain organizational and
operational requirements including the requirement to
distribute at least 95 percent of its REIT taxable income to
its shareholders. If the Company fails to qualify as a REIT in
any taxable year, the Company will be subject to federal
income tax (including any applicable alternative minimum tax)
on its taxable income at regular corporate tax rates. The
Company is subject to certain state and local taxes.
INTEREST RATE
CONTRACTS Interest rate contracts are utilized by the
Company to reduce interest rate risks. The Company does not
hold or issue derivative financial instruments for trading
purposes. The differentials to be received or paid under
contracts designated as hedges are recognized over the life of
the contracts as adjustments to interest expense.
In certain situations, the Company uses forward treasury lock
agreements to mitigate the potential effects of changes in
interest rates for prospective transactions. Gains and losses
are deferred and amortized as adjustments to interest expense
over the remaining life of the associated debt to the extent
that such debt remains outstanding.
EARNINGS
PER SHARE In accordance with the Statement of Financial Accounting
Standards No. 128 ("FASB No. 128"), the Company presents both
basic and diluted earnings per share ("EPS"). Basic EPS
excludes dilution and is computed by dividing net income
available to common stockholders by the weighted average
number of shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or
converted into common stock, where such exercise or conversion
would result in a lower EPS amount.
DIVIDENDS AND
DISTRIBUTIONS
PAYABLE The dividends and distributions payable at June 30, 2000
represents dividends payable to shareholders of record as of
July 6, 2000 (58,782,808 shares), distributions payable to
minority interest common unitholders (8,075,720 common units)
on that same date and preferred distributions payable to
preferred unitholders (223,124 preferred units) for the second
quarter 2000. The second quarter 2000 dividends and common
unit distributions of $0.58 per share and per common unit, as
well as the second quarter preferred unit distribution of
$16.875 per preferred unit, were approved by the Board of
Directors on June 20, 2000 and paid on July 24, 2000.
The dividends and distributions payable at December 31, 1999
represents dividends payable to shareholders of record as of
January 4, 2000 (58,450,552 shares), distributions payable to
minority interest common unitholders (8,153,710 common units) on
that same date and preferred distributions payable to preferred
unitholders (229,304 preferred units) for the fourth quarter
1999. The fourth quarter 1999 dividends and common unit
distributions of $0.58 per share and per common unit (pro-rated
for units issued during the quarter), as well as the fourth
quarter preferred unit distribution of $16.875 per preferred
unit, were approved by the Board of Directors on December 17,
1999 and paid on January 21, 2000.
UNDERWRITING
COMMISSIONS
AND COSTS Underwriting commissions and costs incurred in connection
with the Company's stock offerings are reflected as a reduction
of additional paid-in capital.
10
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STOCK OPTIONS The Company accounts for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations ("APB No. 25"). Under
APB No. 25, compensation cost is measured as the excess, if
any, of the quoted market price of the Company's stock at the
date of grant over the exercise price of the option granted.
Compensation cost for stock options, if any, is recognized
ratably over the vesting period. The Company's policy is to
grant options with an exercise price equal to the quoted
closing market price of the Company's stock on the business
day preceding the grant date. Accordingly, no compensation
cost has been recognized under the Company's stock option
plans for the granting of stock options. See Note 15.
NON-RECURRING
CHARGES The Company considers non-recurring charges as costs incurred
specific to significant non-recurring events that impact the
comparative measurement of the Company's performance.
RECLASSIFICATIONS Certain reclassifications have been made to prior period
amounts in order to conform with current period presentation.
3. ACQUISITIONS/TRANSACTIONS
2000 TRANSACTIONS
OPERATING PROPERTY ACQUISITIONS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Acquisition # of Rentable Investment by
Date Property/Portfolio Name Location Bldgs. Square Feet Company (a)
------------------------------------------------------------------------------------------------------
OFFICE
<S> <C> <C> <C> <C> <C>
5/23/00 555 & 565 Taxter Road Elmsford, Westchester County, NY 2 341,108 $ 42,980
6/14/00 Four Gatehall Drive Parsippany, Morris County, NJ 1 248,480 42,381
------------------------------------------------------------------------------------------------------
TOTAL OFFICE PROPERTY ACQUISITIONS: 3 589,588 $ 85,361
------------------------------------------------------------------------------------------------------
OFFICE/FLEX
3/24/00 Two Executive Drive (b) Moorestown, Burlington County, NJ 1 60,800 $ 4,007
------------------------------------------------------------------------------------------------------
TOTAL OFFICE/FLEX PROPERTY ACQUISITION: 1 60,800 $ 4,007
------------------------------------------------------------------------------------------------------
TOTAL OPERATING PROPERTY ACQUISITIONS: 4 650,388 $ 89,368
======================================================================================================
</TABLE>
SEE FOOTNOTES ON PAGE 13.
LAND TRANSACTIONS
On January 13, 2000, the Company acquired approximately 12.7 acres of
developable land located at the Company's Airport Business Center, Lester,
Delaware County, Pennsylvania. The land was acquired for approximately $2,069.
OTHER TRANSACTIONS
On June 27, 2000, the Company, the Operating Partnership, Prentiss Properties
Trust, a Maryland REIT ("Prentiss"), and Prentiss Properties Acquisition
Partners, L.P., a Delaware limited partnership of which Prentiss (through a
wholly-owned direct subsidiary) is the sole general partner ("Prentiss
Partnership"), entered into an agreement and plan of merger ("Merger
Agreement"). The Merger Agreement provides for a merger of Prentiss with and
into the Company ("the Merger"), with the Company being the surviving
corporation and, immediately prior to the merger, a merger of Prentiss
Partnership with and into the Operating Partnership (or a limited liability
company or a limited partnership owned entirely directly or indirectly by the
Operating Partnership) (the "Partnership Merger" and, together with the Merger,
the "Mergers").
Under the terms of the Merger Agreement, Prentiss common stock will be exchanged
for the Company's common stock at a fixed exchange ratio of 0.956 of a share of
the Company's stock for each share of Prentiss stock. The exchange ratio is not
subject to change based on changes in the market prices of either company's
common stock and there is no "collar" for the exchange ratio. The transaction
values Prentiss at approximately $2,300,000, including approximately
11
<PAGE>
$1,000,000 of debt and $245,000 in preferred equity. The Company expects to
issue approximately 36.6 million new shares of common stock in the transaction.
The Company intends to finance any cash requirements of the transaction with
funds made available through borrowings on the Company's credit facilities.
With the completion of the transaction, the composition of the Company's
13-member Board of Directors will change and increase to 14 with the addition of
Michael V. Prentiss, currently Chairman of the board of trustees at Prentiss, as
Co-Chairman of the Board of Directors of the Company.
Subject to certain conditions, including, without limitation, applicable
approval from the shareholders of both the Company and Prentiss, and the
unitholders of the Operating Partnership and Prentiss Partnership, the Company
expects to consummate the Mergers in the fourth quarter of 2000.
Concurrently with the announcement of the Merger Agreement, the Company
announced that William L. Mack was appointed Chairman of the Board of Directors
and John J. Cali was named Chairman Emeritus of the Board of Directors. Brant
Cali resigned as Executive Vice President, Chief Operating Officer and Assistant
Secretary of the Company and as a member of the Board of Directors, and John R.
Cali resigned as Executive Vice President, Development of the Company. John R.
Cali was appointed to the Board of Directors of the Company to take the seat
previously held by Brant Cali. (See Note 13).
DISPOSITIONS
On February 25, 2000, the Company sold 39.1 acres of vacant land located at the
Company's Horizon Center Business Park in Hamilton Township, Mercer County, New
Jersey for net proceeds, after selling costs, of approximately $4,179.
On April 17, 2000, the Company sold 95 Christopher Columbus Drive located in
Jersey City, Hudson County, New Jersey for net proceeds, after selling costs, of
approximately $148,222.
On April 20, 2000, the Company sold Atrium at Coulter Ridge located in Amarillo,
Potter County, Texas for net proceeds, after selling costs, of approximately
$1,467.
On June 9, 2000, the Company sold 412 Mt. Kemble Avenue located in Morris
Township, Morris County, New Jersey for net proceeds, after selling costs, of
approximately $81,981.
1999 TRANSACTIONS
OPERATING PROPERTY ACQUISITIONS
The Company acquired the following operating properties during the year ended
December 31, 1999:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Acquisition # of Rentable Investment by
Date Property/Portfolio Name Location Bldgs. Square Feet Company (c)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OFFICE
3/05/99 Pacifica Portfolio - Phase III (d) Colorado Springs, El Paso County, CO 2 94,737 $ 5,709
7/21/99 1201 Connecticut Avenue, NW Washington, D.C. 1 169,549 32,799
-----------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE PROPERTY ACQUISITIONS: 3 264,286 $ 38,508
-----------------------------------------------------------------------------------------------------------------------
OFFICE/FLEX
12/21/99 McGarvey Portfolio - Phase III (b) Moorestown, Burlington County, NJ 3 138,600 $ 8,012
-----------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE/FLEX PROPERTY ACQUISITION: 3 138,600 $ 8,012
-----------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING PROPERTY ACQUISITIONS: 6 402,886 $ 46,520
=======================================================================================================================
</TABLE>
SEE FOOTNOTES ON PAGE 13.
12
<PAGE>
PROPERTIES PLACED IN SERVICE
The Company placed in service the following properties through the completion of
development or redevelopment during the year ended December 31, 1999:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Date Placed # of Rentable Investment by
in Service Property Name Location Bldgs. Square Feet Company (c)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OFFICE
8/09/99 2115 Linwood Avenue Fort Lee, Bergen County, NJ 1 68,000 $ 8,147
11/01/99 795 Folsom Street (e) San Francisco, San Francisco County, CA 1 183,445 37,337
------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE PROPERTIES PLACED IN SERVICE: 2 251,445 $ 45,484
------------------------------------------------------------------------------------------------------------------
OFFICE/FLEX
3/01/99 One Center Court Totowa, Passaic County, NJ 1 38,961 $ 2,140
9/17/99 12 Skyline Drive Hawthorne, Westchester County, NY 1 46,850 5,023
12/10/99 600 West Avenue (f) Stamford, Fairfield County, CT 1 66,000 5,429
------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE/FLEX PROPERTIES PLACED IN SERVICE: 3 151,811 $ 12,592
------------------------------------------------------------------------------------------------------------------
LAND LEASE
2/01/99 Horizon Center Business Park (g) Hamilton Township, Mercer County, NJ N/A 27.7 acres $ 1,007
------------------------------------------------------------------------------------------------------------------
TOTAL LAND LEASE TRANSACTIONS: 27.7 acres $ 1,007
------------------------------------------------------------------------------------------------------------------
TOTAL PROPERTIES PLACED IN SERVICE: 5 403,256 $ 59,083
==================================================================================================================
</TABLE>
(a) Transaction was funded primarily from net proceeds received in the sale or
sales of rental property.
(b) The properties were acquired through the exercise of a purchase option
obtained in the initial acquisition of the McGarvey portfolio in January
1998.
(c) Unless otherwise noted, transactions were funded by the Company with funds
primarily made available through draws on the Company's credit facilities.
(d) William L. Mack, Chairman of the Board of Directors of the Company and an
equity holder of the Operating Partnership, was an indirect owner of an
interest in certain of the buildings contained in the Pacifica portfolio.
(e) On June 1, 1999, the building was acquired for redevelopment for
approximately $34,282.
(f) On May 4, 1999, the Company acquired, from an entity whose principals
include Timothy M. Jones, Martin S. Berger and Robert F. Weinberg, each
of whom are affiliated with the Company as the President of the Company,
a current member of the Board of Directors and a former member of the
Board of Directors of the Company, respectively, approximately 2.5 acres
of vacant land in the Stamford Executive Park, located in Stamford,
Fairfield County, Connecticut. The Company acquired the land for
approximately $2,181.
(g) On February 1, 1999, the Company entered into a ground lease agreement to
lease 27.7 acres of developable land located at the Company's Horizon
Center Business Park, located in Hamilton Township, Mercer County, New
Jersey on which Home Depot constructed a 134,000 square-foot retail
store.
LAND TRANSACTIONS
On February 26, 1999, the Company acquired approximately 2.3 acres of vacant
land adjacent to one of the Company's operating properties located in San
Antonio, Bexar County, Texas for approximately $1,524, which was made available
from the Company's cash reserves.
On March 2, 1999, the Company entered into a joint venture agreement with SJP
Vaughn Drive, L.L.C. Under the agreement, the Company has agreed to contribute
its vacant land at Three Vaughn Drive, Princeton, Mercer County, New Jersey,
subject to satisfaction of certain conditions, for an equity interest in the
venture.
On March 15, 1999, the Company entered into a joint venture with SJP 106 Allen
Road, L.L.C. to form MC-SJP Pinson Development, LLC, which acquired vacant land
located in Bernards Township, Somerset County, New Jersey. The venture has
commenced construction of a 132,010 square-foot office building on this site.
The Company accounts for the joint venture on a consolidated basis.
On August 31, 1999, the Company acquired, from an entity whose principals
include Brant Cali, a former Executive Vice President and Chief Operating
Officer of the Company and a former member of the Board of Directors of the
Company, and certain immediate family members of John J. Cali, Chairman Emeritus
of the Board of Directors of the Company, approximately 28.1 acres of
developable land adjacent to two of the Company's operating properties
13
<PAGE>
located in Roseland, Essex County, New Jersey for approximately $6,097. The
acquisition was funded with cash and the issuance of 121,624 common units to the
seller (see Note 11). The Company has commenced construction of a 220,000
square-foot office building on the acquired land.
In August 1999, the Company entered into an agreement with SJP Properties
Company ("SJP Properties") which provides a cooperative effort in seeking
approvals to develop up to approximately 1.8 million square feet of office
development on certain vacant land owned or controlled, respectively, by the
Company and SJP Properties, in Hanover and Parsippany, Morris County, New
Jersey. The agreement provides that the parties shall share equally in the costs
associated with seeking such requisite approvals. Subsequent to obtaining the
requisite approvals, upon mutual consent, the Company and SJP Properties may
enter into one or more joint ventures to construct on the vacant land, or seek
to dispose of their respective vacant land parcels subject to the agreement.
DISPOSITIONS
On November 15, 1999, the Company sold its 70,550 square-foot office building
located at 400 Alexander Road in Princeton, Mercer County, New Jersey for net
proceeds, after selling costs, of approximately $8,628.
On December 15, 1999, the Company sold its 119,301 square-foot office building
located at 20002 North 19th Avenue in Phoenix, Maricopa County, Arizona for net
proceeds, after selling costs, of approximately $8,772.
4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
PRU-BETA 3 (NINE CAMPUS DRIVE)
On March 27, 1998, the Company acquired a 50 percent interest in an existing
joint venture with The Prudential Insurance Company of America ("Prudential"),
known as Pru-Beta 3, which owns and operates Nine Campus Drive, a 156,495
square-foot office building, located in the Mack-Cali Business Campus (formerly
Prudential Business Campus) office complex in Parsippany, Morris County, New
Jersey. The Company performs management and leasing services for the property
owned by the joint venture and recognized $75 and $75 in fees for such services
in the six months ended June 30, 2000 and 1999, respectively.
HPMC
On April 23, 1998, the Company entered into a joint venture agreement with HCG
Development, L.L.C. and Summit Partners I, L.L.C. to form HPMC Development
Partners, L.P. and, on July 21, 1998, entered into a second joint venture, HPMC
Development Partners II, L.P. (formerly known as HPMC Lava Ridge Partners,
L.P.), with these same parties. HPMC Development Partners, L.P.'s efforts have
focused on two development projects, commonly referred to as Continental Grand
II and Summit Ridge. HPMC Development Partners II, L.P.'s efforts have focused
on three development projects, commonly referred to as Lava Ridge, Peninsula
Gateway and Stadium Gateway. Among other things, the partnership agreements
provide for a preferred return on the Company's invested capital in each
venture, in addition to 50 percent of such venture's profit above the preferred
returns, as defined in each agreement.
CONTINENTAL GRAND II
Continental Grand II is a 237,360 square-foot office building located in El
Segundo, Los Angeles County, California, which was constructed and placed in
service by the venture.
SUMMIT RIDGE
Summit Ridge is an office complex of three one-story buildings aggregating
133,750 square feet located in San Diego, San Diego County, California, which
was constructed and placed in service by the venture.
LAVA RIDGE
Lava Ridge is an office complex of three two-story buildings aggregating
183,200 square feet located in Roseville, Placer County, California, which was
constructed and placed in service by the venture.
14
<PAGE>
PENINSULA GATEWAY
Peninsula Gateway is a parcel of land purchased from the City of Daly City,
California, upon which the venture has commenced construction of an office
building and theater and retail complex aggregating 471,379 square feet.
STADIUM GATEWAY
Stadium Gateway is a 1.5 acre site located in Anaheim, Orange County,
California, acquired by the venture upon which it has commenced construction
of a six-story 261,554 square-foot office building.
G&G MARTCO (CONVENTION PLAZA)
On April 30, 1998, the Company acquired a 49.9 percent interest in an existing
joint venture, known as G&G Martco, which owns Convention Plaza, a 305,618
square-foot office building, located in San Francisco, San Francisco County,
California. A portion of its initial investment was financed through the
issuance of common units, as well as funds drawn from the Company's credit
facilities. Subsequently, on June 4, 1999, the Company acquired an additional
0.1 percent interest in G&G Martco through the issuance of common units (see
Note 11). The Company performs management and leasing services for the property
owned by the joint venture and recognized $104 and $108 in fees for such
services in the six months ended June 30, 2000 and 1999, respectively.
AMERICAN FINANCIAL EXCHANGE L.L.C.
On May 20, 1998, the Company entered into a joint venture agreement with
Columbia Development Company, L.L.C. to form American Financial Exchange L.L.C.
The venture was initially formed to acquire land for future development, located
on the Hudson River waterfront in Jersey City, Hudson County, New Jersey,
adjacent to the Company's Harborside Financial Center office complex. The
Company holds a 50 percent interest in the joint venture. Among other things,
the partnership agreement provides for a preferred return on the Company's
invested capital in the venture, in addition to the Company's proportionate
share of the venture's profit, as defined in the agreement. The joint venture
acquired land on which it constructed a parking facility, which is currently
leased to a parking operator under a 10-year agreement. Such parking facility
serves a ferry service between the Company's Harborside property and Manhattan.
RAMLAND REALTY ASSOCIATES L.L.C. (ONE RAMLAND ROAD)
On August 20, 1998, the Company entered into a joint venture agreement with S.B.
New York Realty Corp. to form Ramland Realty Associates L.L.C. The venture was
formed to own, manage and operate One Ramland Road, a 232,000 square-foot
office/flex building plus adjacent developable land, located in Orangeburg,
Rockland County, New York. In August 1999, the joint venture completed
redevelopment of the property and placed the office/flex building in service.
The Company holds a 50 percent interest in the joint venture. The Company
performs management, leasing and other services for the property owned by the
joint venture and recognized $147 and $0 in fees for such services in the six
months ended June 30, 2000 and 1999, respectively.
ASHFORD LOOP ASSOCIATES L.P. (1001 SOUTH DAIRY ASHFORD/2100 WEST LOOP SOUTH) On
September 18, 1998, the Company entered into a joint venture agreement with
Prudential to form Ashford Loop Associates L.P. The venture was formed to own,
manage and operate 1001 South Dairy Ashford, a 130,000 square-foot office
building acquired on September 18, 1998 and 2100 West Loop South, a 168,000
square-foot office building acquired on November 25, 1998, both located in
Houston, Harris County, Texas. The Company holds a 20 percent interest in the
joint venture. The joint venture may be required to pay additional consideration
due to earn-out provisions in the acquisition contracts. Subsequently, through
June 30, 2000, the venture paid $16,519 ($3,304 representing the Company's
share) in accordance with earn-out provisions in the acquisition contracts. The
Company performs management and leasing services for the properties owned by the
joint venture and recognized $59 and $63 in fees for such services in the six
months ended June 30, 2000 and 1999, respectively.
ARCAP INVESTORS, L.L.C.
On March 18, 1999, the Company invested in ARCap Investors, L.L.C., a joint
venture with several participants, which was formed to invest in sub-investment
grade tranches of commercial mortgage-backed securities ("CMBS"). The Company
has invested $20,000 in the venture. William L. Mack, Chairman of the Board of
Directors of the Company and an equity holder of the Operating Partnership, is a
principal of the managing member of the venture. At June 30, 2000, the venture
held approximately $338,961 face value of CMBS bonds at an aggregate cost of
$147,872.
15
<PAGE>
NORTH PIER AT HARBORSIDE RESIDENTIAL DEVELOPMENT
On August 5, 1999, the Company entered into an agreement which, upon
satisfaction of certain conditions, provides for the contribution of its North
Pier at Harborside Financial Center, Jersey City, Hudson County, New Jersey to a
joint venture with Lincoln Property Company Southwest, Inc., in exchange for
cash and an equity interest in the venture. The venture intends to develop
residential housing on the property.
SOUTH PIER AT HARBORSIDE HOTEL DEVELOPMENT
On November 17, 1999, the Company entered into an agreement with Hyatt
Corporation to develop a 350-room luxury hotel on the Company's South Pier at
Harborside Financial Center, Jersey City, Hudson County, New Jersey, subject to
the satisfaction of certain conditions.
SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
The following is a summary of the financial position of the unconsolidated joint
ventures in which the Company had investment interests as of June 30, 2000 and
December 31, 1999:
<TABLE>
<CAPTION>
June 30, 2000
---------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Total
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Rental property, net $ 21,312 $101,147 $ 11,100 $ 10,918 $ 19,417 $ 34,664 $ -- $198,558
Other assets 2,616 13,968 2,778 134 4,110 893 274,434 298,933
----------------------------------------------------------------------------------------------------------------------
Total assets $ 23,928 $115,115 $ 13,878 $ 11,052 $ 23,527 $ 35,557 $274,434 $497,491
======================================================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $ 56,345 $ 50,000 $ -- $ 17,012 $ -- $136,953 $260,310
Other liabilities 171 6,643 1,321 1 331 533 36,989 45,989
Partners'/members' capital 23,757 52,127 (37,443) 11,051 6,184 35,024 100,492 191,192
----------------------------------------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $ 23,928 $115,115 $ 13,878 $ 11,052 $ 23,527 $ 35,557 $274,434 $497,491
======================================================================================================================
Company's net investment
in unconsolidated
joint ventures $ 16,397 $ 33,219 $ 4,949 $ 11,100 $ 2,655 $ 7,349 $ 19,713 $ 95,382
----------------------------------------------------------------------------------------------------------------------
<CAPTION>
December 31, 1999
----------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Total
-----------------------------------------------------------------------------------------------------------------------
ASSETS:
Rental property, net $ 21,817 $ 70,823 $ 13,672 $ 10,752 $ 19,549 $ 28,755 $ -- $165,368
Other assets 3,319 3,260 2,467 773 5,069 704 239,441 255,033
-----------------------------------------------------------------------------------------------------------------------
Total assets $ 25,136 $ 74,083 $ 16,139 $ 11,525 $ 24,618 $ 29,459 $239,441 $420,401
=======================================================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $ 41,274 $ 43,081 $ -- $ 17,300 $ -- $108,407 $210,062
Other liabilities 186 4,769 1,383 2 1,263 815 36,109 44,527
Partners'/members' capita 24,950 28,040 (28,325) 11,523 6,055 28,644 94,925 165,812
-----------------------------------------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $ 25,136 $ 74,083 $ 16,139 $ 11,525 $ 24,618 $ 29,459 $239,441 $420,401
=======================================================================================================================
Company's net investment
in unconsolidated
joint ventures $ 17,072 $ 23,337 $ 8,352 $ 11,571 $ 2,697 $ 6,073 $ 20,032 $ 89,134
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
The following is a summary of the results of operations of the unconsolidated
joint ventures for the period in which the Company had investment interests
during the three and six month periods ended June 30, 2000 and 1999:
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000
----------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Total
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $ 1,234 $ 2,504 $ 2,569 $ 254 $ 969 $ 1,469 $ 4,606 $ 13,605
Operating and other expenses (401) (813) (793) (51) (273) (641) (721) (3,693)
Depreciation and amortization (305) (1,065) (336) (7) (241) (210) -- (2,164)
Interest expense -- (793) (1,039) -- (377) -- (932) (3,141)
----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 528 $ (167) $ 401 $ 196 $ 78 $ 618 $ 2,953 $ 4,607
============================================================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 225 $ 102 $ 43 $ 139 $ 37 $ 124 $ 400 $ 1,070
----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended June 30, 1999
----------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Total
----------------------------------------------------------------------------------------------------------------------------
Total revenues $ 1,239 -- $ 2,160 $ 229 -- $ 1,071 $ 2,528 $ 7,227
Operating and other expenses (371) -- (699) (61) -- (575) (1,622) (3,328)
Depreciation and amortization (307) -- (230) (23) -- (108) -- (668)
Interest expense -- -- (738) -- -- -- (519) (1,257)
----------------------------------------------------------------------------------------------------------------------------
Net income $ 561 -- $ 493 $ 145 -- $ 388 $ 387 $ 1,974
============================================================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 242 -- $ 89 $ 145 -- $ 78 $ 280 $ 834
----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended June 30, 2000
------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Total
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $ 2,468 $ 3,560 $ 5,281 $ 504 $ 1,947 $ 2,832 $ 11,150 $ 27,742
Operating and other expenses (819) (987) (1,553) (82) (590) (1,271) (1,292) (6,594)
Depreciation and amortization (611) (1,406) (762) (20) (482) (403) -- (3,684)
Interest expense -- (1,120) (1,914) -- (746) -- (1,701) (5,481)
------------------------------------------------------------------------------------------------------------------------------
Net income $ 1,038 $ 47 $ 1,052 $ 402 $ 129 $ 1,158 $ 8,157 $ 11,983
==============================================================================================================================
Company's equity in earnings
of unconsolidated
joint ventures $ 441 $ 102 $ 212 $ 345 $ 62 $ 245 $ 800 $ 2,207
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
------------------------------------------------------------------------------------------------
American
G&G Financial Ramland Ashford Combined
Pru-Beta 3 HPMC Martco Exchange Realty Loop ARCap Total
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $ 2,470 -- $ 4,150 $ 417 -- $ 1,988 $ 2,775 $ 11,800
Operating and other expenses (745) -- (1,390) (130) -- (1,048) (2,012) (5,325)
Depreciation and amortization (625) -- (463) (46) -- (216) -- (1,350)
Interest expense -- -- (1,448) -- -- -- (544) (1,992)
------------------------------------------------------------------------------------------------------------------------------
Net income $ 1,100 -- $ 849 $ 241 -- $ 724 $ 219 $ 3,133
==============================================================================================================================
Company's equity in earnings
(loss) of unconsolidated
joint ventures $ 356 -- $ (277) $ 191 -- $ 134 $ 224 $ 628
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5. DEFERRED CHARGES AND OTHER ASSETS
June 30, December 31,
2000 1999
--------------------------------------------------------------------------------
Deferred leasing costs $ 70,274 $ 62,076
Deferred financing costs 22,669 16,690
--------------------------------------------------------------------------------
92,943 78,766
Accumulated amortization (22,002) (20,197)
--------------------------------------------------------------------------------
Deferred charges, net 70,941 58,569
Prepaid expenses and other assets 9,176 7,867
--------------------------------------------------------------------------------
Total deferred charges and other assets, net $ 80,117 $ 66,436
================================================================================
6. RESTRICTED CASH
Restricted cash includes security deposits for the Company's residential
properties and certain commercial properties, and escrow and reserve funds for
debt service, real estate taxes, property insurance, capital improvements,
tenant improvements, and leasing costs established pursuant to certain mortgage
financing arrangements, and is comprised of the following:
June 30, December 31,
2000 1999
------------------------------------------------------------------------------
Security deposits $6,377 $6,021
Escrow and other reserve funds 121 1,060
--------------------------------------------------------------------------------
Total restricted cash $6,498 $7,081
================================================================================
7. RENTAL PROPERTY HELD FOR SALE
As of June 30, 2000 and December 31, 1999, included in total rental property is
an office property that the Company has identified as held for sale. The office
property has a carrying value of $12,493 and $12,479 as of June 30, 2000 and
December 31, 1999, respectively, and is located in Omaha, Douglas County,
Nebraska.
Also, as of December 31, 1999, included in total rental property were two office
properties that the Company had identified as held for sale. The two office
properties had an aggregate carrying value of $65,304 as of December 31, 1999
and were located in Jersey City, Hudson County, New Jersey and Amarillo, Potter
County, Texas. The
18
<PAGE>
Hudson County, New Jersey and Potter County, Texas properties were each sold in
April 2000 in two separate transactions (see Note 3).
The following is a summary of the condensed results of operations of the rental
property held for sale at June 30, 2000 for the six months ended June 30, 2000
and 1999:
Six Months Ended June 30,
2000 1999
---------------------------------------------------------------------
Total revenues $ 1,931 $ 1,881
Operating and other expenses (1,017) (993)
Depreciation and amortization (1) (186)
---------------------------------------------------------------------
Net income $ 913 $ 702
=====================================================================
There can be no assurance if and when the sale of the Company's rental property
in Douglas County, Nebraska will occur.
8. SENIOR UNSECURED NOTES
On March 16, 1999, the Operating Partnership issued $600,000 face amount of
senior unsecured notes with interest payable semi-annually in arrears. The total
proceeds from the issuance (net of selling commissions and discount) of
approximately $593,500 were used to pay down outstanding borrowings under the
Unsecured Facility, as defined in Note 9, and to pay off certain mortgage loans.
The senior unsecured notes were issued at a discount of approximately $2,748,
which is being amortized over the terms of the respective tranches as an
adjustment to interest expense.
On August 2, 1999, the Operating Partnership issued an additional $185,283 of
senior unsecured notes with interest payable monthly. The Company used the
proceeds to retire the TIAA Mortgage, as defined in Note 10.
The Operating Partnership's total senior unsecured notes (collectively, "Senior
Unsecured Notes") are redeemable at any time at the option of the Company,
subject to certain conditions including yield maintenance.
A summary of the terms of the Senior Unsecured Notes outstanding as of June 30,
2000 and December 31, 1999 is as follows:
<TABLE>
<CAPTION>
June 30, December 31, Effective
2000 1999 Rate (1)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
7.18% Senior Unsecured Notes, due December 31, 2003 $185,283 $185,283 7.23%
7.00% Senior Unsecured Notes, due March 15, 2004 299,704 299,665 7.27%
7.25% Senior Unsecured Notes, due March 15, 2009 297,955 297,837 7.49%
-----------------------------------------------------------------------------------------
Total Senior Unsecured Notes $782,942 $782,785 7.34%
=========================================================================================
</TABLE>
(1) Includes the cost of terminated treasury lock agreements (if any),
offering and other transaction costs and the discount on the notes, as
applicable.
The terms of the Senior Unsecured Notes include certain restrictions and
covenants which require compliance with financial ratios relating to the maximum
amount of debt leverage, the maximum amount of secured indebtedness, the minimum
amount of debt service coverage and the maximum amount of unsecured debt as a
percent of unsecured assets.
19
<PAGE>
9. REVOLVING CREDIT FACILITIES
2000 UNSECURED FACILITY
On June 22, 2000, the Company obtained an unsecured revolving credit facility
("2000 Unsecured Facility") with a current borrowing capacity of $800,000 from a
group of 24 lenders. The interest rate on outstanding borrowings under the
credit line is currently the London Inter-Bank Offered Rate ("LIBOR") (6.64
percent at June 30, 2000) plus 80 basis points. The Company may instead elect an
interest rate representing the higher of the lender's prime rate or the Federal
Funds rate plus 50 basis points. Based upon a change in the Company's unsecured
debt rating, the interest rate will be changed on a sliding scale. The 2000
Unsecured Facility also requires a 20 basis point facility fee on the current
borrowing capacity payable quarterly in arrears. Subject to certain conditions,
the Company has the ability to increase the borrowing capacity of the credit
line up to $1,000,000. The 2000 Unsecured Facility matures in June 2003, with an
extension option of one year, which would require a payment of 25 basis points
of the then borrowing capacity of the credit line upon exercise.
The terms of the 2000 Unsecured Facility include certain restrictions and
covenants which limit, among other things the payment of dividends (as discussed
below), the incurrence of additional indebtedness, the incurrence of liens and
the disposition of assets, and which require compliance with financial ratios
relating to the maximum leverage ratio, the maximum amount of secured
indebtedness, the minimum amount of tangible net worth, the minimum amount of
debt service coverage, the minimum amount of fixed charge coverage, the maximum
amount of unsecured indebtedness, the minimum amount of unencumbered property
debt service coverage and certain investment limitations. The dividend
restriction referred to above provides that, except to enable the Company to
continue to qualify as a REIT under the Code, the Company will not during any
four consecutive fiscal quarters make distributions with respect to common stock
or other equity interests in an aggregate amount in excess of 90 percent of
funds from operations (as defined) for such period, subject to certain other
adjustments.
The lending group for the 2000 Unsecured Facility consists of: Chase Manhattan
Bank, as administrative agent; Fleet National Bank, as syndication agent; Bank
of America, N.A., as documentation agent; Bank One, NA, Commerzbank
Aktiengesellschaft, First Union National Bank, as senior managing agents; PNC
Bank, N.A., as managing agent; Bank Austria Creditanstalt Corporate Finance,
Inc., Bayerische Hypo-und Vereinsbank AG, Dresdner Bank AG, Societe Generale,
Summit Bank, Wells Fargo Bank, N.A., as co-agents; and Bayerische Landesbank
Girozentrale; Citizens Bank of Massachusetts; European American Bank; Chevy
Chase Bank; Citicorp Real Estate, Inc.; DG Bank Deutsche Genossenschaftsbank,
AG; Erste Bank; KBC Bank N.V.; SunTrust Bank; Bank Leumi USA; and Israel
Discount Bank of New York.
In conjunction with obtaining the 2000 Unsecured Facility, the Company drew
funds on the new facility to repay in full and terminate the Unsecured Facility.
UNSECURED FACILITY
The Company had an unsecured revolving credit facility ("Unsecured Facility")
with a borrowing capacity of $1,000,000 from a group of 28 lenders. The interest
rate was based on the Company's achievement of investment grade unsecured debt
ratings and, at the Company's election, bore interest at either 90 basis points
over LIBOR or the higher of the lender's prime rate or the Federal Funds rate
plus 50 basis points. In conjunction with obtaining the 2000 Unsecured Facility,
the Company repaid in full and terminated the Unsecured Facility on June 22,
2000.
PRUDENTIAL FACILITY
The Company has a revolving credit facility ("Prudential Facility") with
Prudential Securities Corp. ("PSC") in the amount of $100,000, which currently
bears interest at 110 basis points over one-month LIBOR, with a maturity date of
June 29, 2001. The Prudential Facility is a recourse liability of the Operating
Partnership and is secured by the Company's equity interest in Harborside Plazas
II and III. The Prudential Facility limits the ability of the Operating
Partnership to make any distributions during any fiscal quarter in an amount in
excess of 100 percent of the Operating Partnership's available funds from
operations (as defined) for the immediately preceding fiscal quarter (except
to the extent such excess distributions or dividends are attributable to
gains from the sale of the Operating Partnership's assets or are required for
the Company to maintain its status as a REIT under the Code); provided,
however, that the Operating Partnership may make distributions and pay
dividends in excess of 100 percent of available funds from operations (as
defined) for the preceding fiscal quarter for not more than three consecutive
quarters. In addition to the foregoing, the Prudential Facility limits the
liens placed upon the subject property and certain collateral, the use of
proceeds
20
<PAGE>
from the Prudential Facility, and the maintenance of ownership of the subject
property and assets derived from said ownership.
SUMMARY
As of June 30, 2000 and December 31, 1999, the Company had outstanding
borrowings of $215,730 and $177,000, respectively, under its revolving credit
facilities (with aggregate borrowing capacity of $900,000 and $1,000,000,
respectively). The total outstanding borrowings were from the 2000 Unsecured
Facility at June 30, 2000 and from the Unsecured Facility at December 31, 1999,
with no outstanding borrowings under the Prudential Facility.
10. MORTGAGES AND LOANS PAYABLE
June 30, December 31,
2000 1999
--------------------------------------------------------------------------------
Portfolio Mortgages $150,000 $150,000
Property Mortgages 338,605 380,390
--------------------------------------------------------------------------------
Total mortgages and loans payable $488,605 $530,390
================================================================================
PORTFOLIO MORTGAGES
TIAA MORTGAGE
The Company had a $185,283 non-recourse mortgage loan with Teachers Insurance
and Annuity Association of America, with interest only payable monthly at a
fixed annual rate of 7.18 percent ("TIAA Mortgage"). The TIAA Mortgage was
secured and cross collateralized by 43 properties. The TIAA Mortgage was
prepayable in whole or in part subject to certain provisions, including yield
maintenance.
Using the proceeds from the issuance of $185,283 of senior unsecured notes on
August 2, 1999 (see Note 8), the Company repaid in full and retired the TIAA
Mortgage.
$150,000 PRUDENTIAL MORTGAGE LOAN
The Company has a $150,000, interest-only, non-recourse mortgage loan from
Prudential ("$150,000 Prudential Mortgage Loan"). The loan, which is secured by
11 properties, has an effective annual interest rate of 7.10 percent and a
seven-year term. The Company has the option to convert the mortgage loan to
unsecured debt as a result of the achievement of an investment grade credit
rating. The mortgage loan is prepayable in whole or in part subject to certain
provisions, including yield maintenance.
PROPERTY MORTGAGES
The Company's property mortgages ("Property Mortgages") are comprised of various
non-recourse loans which are collateralized by certain of the Company's rental
properties. Payments on Property Mortgages are generally due in monthly
installments of principal and interest, or interest only.
21
<PAGE>
A summary of the Property Mortgages as of June 30, 2000 and December 31, 1999
is as follows:
<TABLE>
<CAPTION>
PRINCIPAL BALANCE AT
--------------------
EFFECTIVE
INTEREST JUNE 30, DECEMBER 31,
PROPERTY NAME LENDER RATE 2000 1999 MATURITY
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
201 Commerce Drive Sun Life Assurance Co. 6.240% $ 1,026 $ 1,059 09/01/00
3 & 5 Terri Lane First Union National Bank 6.220% 4,414 4,434 10/31/00
101 & 225 Executive Drive Sun Life Assurance Co. 6.270% 2,281 2,375 06/01/01
Mack-Cali Morris Plains Corestates Bank 7.510% 2,196 2,235 12/31/01
Mack-Cali Willowbrook CIGNA 8.670% 9,797 10,250 10/01/03
400 Chestnut Ridge Prudential Insurance Co. 9.440% 14,027 14,446 07/01/04
Mack-Cali Centre VI Principal Life Insurance Co. 6.865% 35,000 35,000 04/01/05
Mack-Cali Bridgewater I New York Life Ins. Co. 7.000% 23,000 23,000 09/10/05
Mack-Cali Woodbridge II New York Life Ins. Co. 7.500% 17,500 17,500 09/10/05
Mack-Cali Short Hills Prudential Insurance Co. 7.740% 26,238 26,604 10/01/05
500 West Putnam Avenue New York Life Ins. Co. 6.520% 10,448 10,784 10/10/05
Harborside - Plaza I U.S. West Pension Trust 5.610% 52,662 51,015 01/01/06
Harborside - Plaza II and III Northwestern Mutual Life Ins. 7.320% 97,338 98,985 01/01/06
Mack-Cali Airport Allstate Life Insurance Co. 7.050% 10,500 10,500 04/01/07
Kemble Plaza II Mitsubishi Tr & Bk Co. LIBOR+0.65% -- 40,025 01/31/08
Kemble Plaza I Mitsubishi Tr & Bk Co. LIBOR+0.65% 32,178 32,178 01/31/09
---------------------------------------------------------------------------------------------------------------
Total Property Mortgages $338,605 $380,390
===============================================================================================================
</TABLE>
INTEREST RATE CONTRACTS
On May 24, 1995, the Company entered into an interest rate swap agreement with a
commercial bank. The swap agreement fixed the Company's one-month LIBOR base to
6.285 percent per annum on a notional amount of $24,000. The swap agreement
expired in August 1999.
On January 23, 1996, the Company entered into an interest rate swap agreement
with a commercial bank. The swap agreement fixed the Company's one-month LIBOR
base to 5.265 percent per annum on a notional amount of $26,000. The swap
agreement expired in January 1999.
On November 20, 1997, the Company entered into a forward treasury rate lock
agreement with a commercial bank. The agreement locked an interest rate of 5.88
percent per annum for the interpolated seven-year U.S. Treasury Note effective
March 1, 1998, on a notional amount of $150,000. The agreement was used to fix
the interest rate on the $150,000 Prudential Mortgage Loan. On March 2, 1998,
the Company paid $2,035 in settlement of the agreement, which is being amortized
to interest expense over the term of the $150,000 Prudential Mortgage Loan.
On October 1, 1998, the Company entered into a forward treasury rate lock
agreement with a commercial bank. The agreement locked an interest rate of 4.089
percent per annum for the three-year U.S. Treasury Note effective November 4,
1999, on a notional amount of $50,000. The agreement was used to fix the Index
Rate on $50,000 of the Harborside-Plaza I mortgage, for which the interest rate
was re-set to the three-year U.S. Treasury Note (5.82 percent) plus 110 basis
points for the three years beginning November 4, 1999 (see "Property Mortgages:
Harborside-Plaza I"). The Company received $2,208 in settlement of the
agreement, which is being amortized to interest expense over the three
year-period.
In connection with the issuance of the $600,000 face amount of Senior Unsecured
Notes in March 1999, the Company entered into and settled forward treasury rate
lock agreements. These agreements were settled at a cost of approximately $517,
which is being amortized to interest expense over the terms of the respective
tranches.
22
<PAGE>
SCHEDULED PRINCIPAL PAYMENTS
Scheduled principal payments and related weighted average annual interest rates
for the Company's Senior Unsecured Notes (Note 8), revolving credit facilities
(Note 9) and mortgages and loans payable as of June 30, 2000 are as follows:
WEIGHTED AVG.
SCHEDULED PRINCIPAL INTEREST RATE OF
YEAR AMORTIZATION MATURITIES TOTAL FUTURE REPAYMENTS (A)
------------------------------------------------------------------------------
July through December 2000 $ 1,705 $ 5,419 $ 7,124 6.93%
2001 3,257 4,211 7,468 7.44%
2002 3,458 -- 3,458 8.20%
2003 3,518 407,824 411,342 7.40%
2004 2,332 309,863 312,195 7.34%
Thereafter 970 744,720 745,690 7.19%
--------------------------------------------------------------------------------
Totals/Weighted Average $15,240 $1,472,037 $1,487,277 7.28%
================================================================================
(a) Assumes weighted average LIBOR at June 30, 2000 of 6.59 percent in
calculating revolving credit facility and other variable rate debt interest
rates.
Scheduled principal payments during the six months ended June 30, 2000 and 1999
amounted to $1,603 and $1,815, respectively.
CASH PAID FOR INTEREST & INTEREST CAPITALIZED
Cash paid for interest for the six months ended June 30, 2000 and 1999 was
$56,035 and $38,216, respectively. Interest capitalized by the Company for the
six months ended June 30, 2000 and 1999 was $4,189 and $3,019, respectively.
SUMMARY OF INDEBTEDNESS
As of June 30, 2000, the Company's total indebtedness of $1,487,277 (weighted
average interest rate of 7.28 percent) was comprised of $247,908 of revolving
credit facility borrowings and other variable rate mortgage debt (weighted
average rate of 7.46 percent) and fixed rate debt of $1,239,369 (weighted
average rate of 7.24 percent).
As of December 31, 1999, the Company's total indebtedness of $1,490,175
(weighted average interest rate of 7.27 percent) was comprised of $249,204 of
revolving credit facility borrowings and other variable rate mortgage debt
(weighted average rate of 7.42 percent) and fixed rate debt of $1,240,971
(weighted average rate of 7.24 percent).
11. MINORITY INTERESTS
Minority interests in the accompanying consolidated financial statements relate
to (i) common units in the Operating Partnership, in addition to preferred units
("Preferred Units") and warrants to purchase common units ("Unit Warrants")
issued in connection with the Company's December 1997 acquisition of 54 office
properties ("Mack Properties") from the Mack Company and Patriot American Office
Group ("Mack Transaction"), held by parties other than the Company, and (ii)
interests in consolidated partially-owned properties for the portion of such
properties not owned by the Company.
OPERATING PARTNERSHIP
PREFERRED UNITS
In connection with the Mack Transaction in December 1997, the Company issued
15,237 Series A Preferred Units and 215,325 Series B Preferred Units, with an
aggregate value of $236,491. The Preferred Units have a stated value of $1,000
per unit and are preferred as to assets over any class of common units or other
class of preferred units of the Company, based on circumstances per the
applicable unit certificates.
23
<PAGE>
The quarterly distribution on each Preferred Unit (representing 6.75 percent of
the Preferred Unit stated value of $1,000 on an annualized basis) is an amount
equal to the greater of (i) $16.875 or (ii) the quarterly distribution
attributable to a Preferred Unit determined as if such unit had been converted
into common units, subject to adjustment for customary anti-dilution rights.
Each of the Series A Preferred Units may be converted at any time into common
units at a conversion price of $34.65 per unit, and, after the one year
anniversary of the date of the Series A Preferred Units' initial issuance,
common units received pursuant to such conversion may be redeemed into common
stock. Each of the Series B Preferred Units may be converted at any time into
common units at a conversion price of $34.65 per unit, and, after the three year
anniversary of the date of the Series B Preferred Units' initial issuance,
common units received pursuant to such conversion may be redeemed into common
stock. Each of the common units are redeemable for an equal number of shares of
common stock.
During 1999, 20,952 Series A Preferred Units were converted into 604,675 common
units. During the six months ended June 30, 2000, 6,180 Series A Preferred Units
were converted into 178,355 common units.
As of June 30, 2000, there were 223,124 Series B Preferred Units outstanding
(convertible into 6,439,366 common units).
COMMON UNITS
Certain individuals and entities own common units in the Operating Partnership.
A common unit and a share of common stock of the Company have substantially the
same economic characteristics in as much as they effectively share equally in
the net income or loss of the Operating Partnership.
Common units are redeemable by the common unitholders at their option, subject
to certain restrictions, on the basis of one common unit for either one share of
common stock or cash equal to the fair market value of a share at the time of
the redemption. The Company has the option to deliver shares of common stock in
exchange for all or any portion of the cash requested. When a unitholder redeems
a common unit, minority interest in the Operating Partnership is reduced and the
Company's investment in the Operating Partnership is increased.
On June 4, 1999, in connection with the acquisition of a 0.1 percent interest in
the G&G Martco joint venture (see Note 4), the Company issued 437 common units,
valued at approximately $17.
On August 31, 1999, in connection with the acquisition of 28.1 acres of
developable land located in Roseland, New Jersey, the Company issued 121,624
common units, valued at approximately $3,345 (see Note 3).
During 1999, an aggregate of 1,934,657 common units were redeemed for an
equivalent number of shares of common stock in the Company.
During 1999, the Company also issued 275,046 common units, valued at
approximately $8,141, in connection with the achievement of certain performance
goals at the Mack Properties in redemption of an equivalent number of contingent
common units.
During the six months ended June 30, 2000, an aggregate of 256,346 common units
were redeemed for an equivalent number of shares of common stock in the Company.
As of June 30, 2000, there were 8,075,720 common units outstanding.
CONTINGENT COMMON & PREFERRED UNITS
In connection with the Mack Transaction in December 1997, 2,006,432 contingent
common units, 11,895 Series A contingent Preferred Units and 7,799 Series B
contingent Preferred Units were issued as contingent non-participating units
("Contingent Units"). Redemption of such Contingent Units occurred upon the
achievement of certain performance goals relating to certain of the Mack
Properties, specifically the achievement of certain leasing activity. When
Contingent Units are redeemed for common and Preferred Units, an adjustment to
the purchase price of certain of the Mack Properties is recorded, based on the
value of the units issued.
24
<PAGE>
On account of certain of the performance goals at the Mack Properties having
been achieved during 1999, the Company redeemed 275,046 contingent common units
and issued an equivalent number of common units, as indicated above. There were
no Contingent Units outstanding as of December 31, 1999.
UNIT WARRANTS
The Company has 2,000,000 Unit Warrants outstanding. The Unit Warrants are
exercisable at $37.80 per common unit and expire on December 11, 2002.
MINORITY INTEREST OWNERSHIP
As of June 30, 2000 and December 31, 1999, the minority interest common
unitholders owned 12.1 percent (19.8 percent, including the effect of the
conversion of Preferred Units into common units) and 12.2 percent (20.2 percent
including the effect of the conversion of Preferred Units into common units) of
the Operating Partnership, respectively (excluding any effect for the exercise
of Unit Warrants).
PARTIALLY-OWNED PROPERTIES
On December 28, 1999, the Company sold an interest in six office properties
located in Parsippany, Morris County, New Jersey for $83,600. Amongst other
things, the operating agreements provided for a preferred return to the joint
venture members. On June 29, 2000 the Company acquired a 100 percent interest in
these properties and the Company paid an additional $836 to the minority
interest member in excess of its investment.
The Company controls these operations and has consolidated the financial
position and results of operations of partially-owned properties in the
financial statements of the Company. The equity interests of the other members
are reflected as minority interests: partially-owned properties in the
consolidated financial statements of the Company.
12. EMPLOYEE BENEFIT PLAN
All employees of the Company who meet certain minimum age and period of service
requirements are eligible to participate in a 401(k) defined contribution plan
(the "401(k) Plan"). The 401(k) Plan allows eligible employees to defer up to 15
percent of their annual compensation, subject to certain limitations imposed by
federal law. The amounts contributed by employees are immediately vested and
non-forfeitable. The Company, at management's discretion, may match employee
contributions and/or make discretionary contributions. Total expense recognized
by the Company for the six months ended June 30, 2000 and 1999 was $200 and $0,
respectively.
13. COMMITMENTS AND CONTINGENCIES
TAX ABATEMENT AGREEMENTS
HARBORSIDE FINANCIAL CENTER PROPERTY
Pursuant to an agreement with the City of Jersey City, New Jersey obtained by
the former owner of the Harborside property in 1988 and assumed by the Company
as part of the acquisition of the property in November 1996, the Company is
required to make payments in lieu of property taxes ("PILOT") on its
Harborside property. The agreement, which commenced in 1990, is for a term of
15 years. Such PILOT is equal to two percent of Total Project Costs, as
defined, in year one and increases by $75 per annum through year fifteen.
Total Project Costs, as defined, are $145,644. The PILOT totaled $1,338 and
$1,302 for the six months ended June 30, 2000 and 1999, respectively.
25
<PAGE>
GROUND LEASE AGREEMENTS
Future minimum rental payments under the terms of all non-cancelable ground
leases under which the Company is the lessee, as of June 30, 2000, are as
follows:
YEAR AMOUNT
------------------------------------------------------------------------------
July 1, 2000 to December 31, 2000 $ 266
2001 531
2002 531
2003 531
2004 534
Thereafter 22,532
------------------------------------------------------------------------------
Total $24,925
==============================================================================
Ground lease expense incurred during the six months ended June 30, 2000 and 1999
amounted to $285 and $260, respectively.
OTHER
On April 19, 1999, the Company announced the following changes in the membership
of its Board of Directors and the identities, titles and responsibilities of its
executive officers: (i) Thomas A. Rizk resigned from the Board of Directors, the
Executive Committee of the Board of Directors, his position as Chief Executive
Officer and as an employee of the Company; (ii) Mitchell E. Hersh was appointed
Chief Executive Officer of the Company simultaneous with his resignation from
his positions as President and Chief Operating Officer of the Company; (iii)
Timothy M. Jones was appointed President of the Company simultaneous with his
resignation from his positions as Executive Vice President and Chief Investment
Officer of the Company; and (iv) Brant Cali was appointed to the Board of
Directors of the Company to fill the remainder of Thomas A. Rizk's term as a
Class III Director and was appointed Chief Operating Officer of the Company,
also remaining as an Executive Vice President and Assistant Secretary of the
Company.
Pursuant to the terms of Mr. Rizk's employment agreement entered into with the
Company in December 1997 and an agreement entered into simultaneous with his
resigning from the Company, Mr. Rizk received a payment of approximately $14,490
in April 1999, $500 in April 2000 and $500 annually over the next two years. All
costs associated with Mr. Rizk's resignation are included in non-recurring
charges for the three and six month periods ended June 30, 1999.
On June 27, 2000, pursuant to the Cali agreement, both Brant Cali and John R.
Cali resigned their positions as officers of the Company and Brant Cali resigned
as director of the Company ("Cali Agreement"). As required by Brant Cali and
John R. Cali's amended and restated employment agreements, under the Cali
Agreement: (i) the Company paid $2,820 and $2,806 (less applicable withholding)
to Brant Cali and John R. Cali, respectively; and (ii) all options to acquire
shares of the Company's common stock and Restricted Stock Awards (as hereinafter
defined) held by Brant Cali and John R. Cali became fully vested on the
effective date of their resignations from the Company. All costs associated with
Brant Cali and John R. Cali's resignations are included in non-recurring charges
for the three and six month periods ended June 30, 2000.
The Company is a defendant in certain litigation arising in the normal course of
business activities. Management does not believe that the resolution of these
matters will have a materially adverse effect upon the Company.
14. TENANT LEASES
The Properties are leased to tenants under operating leases with various
expiration dates through 2016. Substantially all of the leases provide for
annual base rents plus recoveries and escalation charges based upon the tenant's
proportionate share of and/or increases in real estate taxes and certain
operating costs, as defined, and the pass through of charges for electrical
usage.
26
<PAGE>
15. STOCKHOLDERS' EQUITY
To maintain its qualification as a REIT, not more than 50 percent in value of
the outstanding shares of the Company may be owned, directly or indirectly, by
five or fewer individuals at any time during the last half of any taxable year
of the Company, other than its initial taxable year (defined to include certain
entities), applying certain constructive ownership rules. To help ensure that
the Company will not fail this test, the Company's Articles of Incorporation
provide for, among other things, certain restrictions on the transfer of the
common stock to prevent further concentration of stock ownership. Moreover, to
evidence compliance with these requirements, the Company must maintain records
that disclose the actual ownership of its outstanding common stock and will
demand written statements each year from the holders of record of designated
percentages of its common stock requesting the disclosure of the beneficial
owners of such common stock.
COMMON STOCK
On August 6, 1998, the Board of Directors of the Company authorized a share
repurchase program ("Repurchase Program") under which the Company is permitted
to purchase up to $100,000 of the Company's outstanding common stock. Purchases
can be made from time to time in open market transactions at prevailing prices
or through privately negotiated transactions.
Through December 31, 1999, the Company, under the Repurchase Program, purchased
for constructive retirement, 1,869,200 shares of its outstanding common stock
for an aggregate cost of approximately $52,558. Concurrent with these purchases,
the Company sold to the Operating Partnership 1,869,200 common units for
approximately $52,558. The Company did not purchase any of its outstanding
common stock during the six months ended June 30, 2000.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company filed a registration statement with the SEC for the Company's
dividend reinvestment and stock purchase plan ("Plan") which was declared
effective in February 1999. The Plan commenced on March 1, 1999.
During the year ended December 31, 1999, 1,082 shares were issued and proceeds
of approximately $32 were received from stock purchases and/or dividend
reinvestments under the Plan. The Company did not issue any shares under the
Plan during the six months ended June 30, 2000.
SHAREHOLDER RIGHTS PLAN
On June 10, 1999, the Board of Directors of the Company authorized a dividend
distribution of one preferred share purchase right ("Right") for each
outstanding share of common stock which were distributed to all holders of
record of the common stock on July 6, 1999. Each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series A
junior participating preferred stock, par value $0.01 per share ("Preferred
Shares"), at a price of $100.00 per one one-thousandth of a Preferred Share
("Purchase Price"), subject to adjustment as provided in the rights agreement.
The Rights expire on July 6, 2009, unless the expiration date is extended or the
Right is redeemed or exchanged earlier by the Company.
The Rights are attached to each share of common stock. The Rights are generally
exercisable only if a person or group becomes the beneficial owner of 15 percent
or more of the outstanding common stock or announces a tender offer for 15
percent or more of the outstanding common stock ("Acquiring Person"). In the
event that a person or group becomes an Acquiring Person, each holder of a Right
will have the right to receive, upon exercise, common stock having a market
value equal to two times the Purchase Price of the Right.
On June 27, 2000, the Company amended its shareholder rights plan to prevent the
triggering of such plan as a result of the Mergers.
STOCK OPTION PLANS
In 1994, and as subsequently amended, the Company established the Mack-Cali
Employee Stock Option Plan ("Employee Plan") and the Mack-Cali Director Stock
Option Plan ("Director Plan") under which a total of 5,380,188 shares (subject
to adjustment) of the Company's common stock have been reserved for issuance
(4,980,188 shares under the Employee Plan and 400,000 shares under the Director
Plan). Stock options granted
27
<PAGE>
under the Employee Plan in 1994 and 1995 have become exercisable over a
three-year period and those options granted under the Employee Plan in 1996,
1997, 1998 and 1999 become exercisable over a five-year period. All stock
options granted under the Director Plan become exercisable in one year. All
options were granted at the fair market value at the dates of grant and have
terms of ten years. As of June 30, 2000 and December 31, 1999, the stock options
outstanding had a weighted average remaining contractual life of approximately
6.8 and 7.4 years, respectively.
Information regarding the Company's stock option plans is summarized below:
Weighted
Shares Average
Under Exercise
Options Price
------------------------------------------------------------------------------
Outstanding at January 1, 1999 3,939,982 $33.22
Granted 426,400 $25.23
Exercised (47,583) $22.31
Lapsed or canceled (591,648) $36.92
------------------------------------------------------------------------------
Outstanding at December 31, 1999 3,727,151 $31.86
Granted -- --
Exercised (79,910) $20.90
Lapsed or canceled (212,423) $34.91
------------------------------------------------------------------------------
Outstanding at June 30, 2000 3,434,818 $31.93
==============================================================================
Options exercisable at December 31, 1999 1,724,920 $29.78
Options exercisable at June 30, 2000 2,246,063 $31.25
------------------------------------------------------------------------------
Available for grant at December 31, 1999 662,878
Available for grant at June 30, 2000 875,301
------------------------------------------------------------------------------
STOCK WARRANTS
The Company has outstanding 380,000 warrants to purchase an equal number of
shares of common stock ("Stock Warrants") at $33 per share (the market price at
date of grant). Such warrants are all currently exercisable and expire on
January 31, 2007.
The Company also has outstanding 464,976 Stock Warrants to purchase an equal
number of shares of common stock at $38.75 per share (the market price at date
of grant). Such warrants vest equally over a five-year period through December
31, 2001 and expire on December 12, 2007.
As of June 30, 2000 and December 31, 1999, there were a total of 844,976 and
914,976 Stock Warrants outstanding, respectively. As of June 30, 2000 and
December 31, 1999 there were 688,985 and 585,989 Stock Warrants exercisable,
respectively. During the six months ended June 30, 2000 and 1999, 70,000 and no
Stock Warrants were canceled, respectively. No Stock Warrants have been
exercised through June 30, 2000.
STOCK COMPENSATION
In July 1999, the Company entered into amended and restated employment contracts
with six of its then key executive officers which provided for, among other
things, compensation in the form of stock awards and associated tax obligation
payments. In addition, in December 1999, the Company granted stock awards to
certain other officers of the Company. In connection with the stock awards
(collectively, "Restricted Stock Awards"), the executive officers and certain
other officers are to receive up to a total of 211,593 shares of the Company's
common stock vesting over a five-year period contingent upon the Company meeting
certain performance and/or stock price appreciation objectives. The Restricted
Stock Awards provided to the executive officers and certain other officers were
granted under the Employee Plan. Effective January 1, 2000, 31,737 shares of the
Company's common stock were issued to the executive officers and certain other
officers upon meeting the required objectives.
Pursuant to the Cali Agreement, an aggregate of 38,649 shares of the Company's
common stock were issued to Brant Cali and John R. Cali upon vesting of their
remaining Restricted Stock Awards.
28
<PAGE>
DEFERRED STOCK COMPENSATION PLAN FOR DIRECTORS
The Deferred Compensation Plan for Directors ("Deferred Compensation Plan"),
which commenced January 1, 1999, is a plan which allows non-employee directors
of the Company to elect to defer up to 100 percent of their annual retainer fee
into deferred stock units. The deferred stock units are convertible into an
equal number of shares of common stock upon the directors' termination of
service from the Board of Directors or a change in control of the Company, as
defined in the plan. Deferred stock units are credited to each director
quarterly using the closing price of the Company's common stock on the
applicable dividend record date for the respective quarter. Each participating
director's account is also credited for an equivalent amount of deferred stock
units based on the dividend rate for each quarter.
During 1999, 3,319 deferred stock units were earned. During the six months ended
June 30, 2000, 2,132 deferred stock units were earned.
EARNINGS PER SHARE
FASB No. 128 requires a dual presentation of basic and diluted EPS on the face
of the income statement for all companies with complex capital structures even
where the effect of such dilution is not material. Basic EPS excludes dilution
and is computed by dividing net income available to common stockholders by the
weighted average number of shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
The following information presents the Company's results for the three and six
month periods ended June 30, 2000 and 1999 in accordance with FASB No.
128:
<TABLE>
<CAPTION>
Three Months Ended June 30,
2000 1999
--------------------------------------------------
Basic EPS Diluted EPS Basic EPS Diluted EPS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $94,308 $ 94,308 $18,686 $ 18,686
Add: Net income attributable to
Operating Partnership - common units -- 13,019 -- 2,766
Net income attributable to
Operating Partnership - preferred units -- 3,765 -- --
--------------------------------------------------------------------------------------------------------
Adjusted net income $94,308 $111,092 $18,686 $ 21,452
========================================================================================================
Weighted average shares 58,545 73,284 58,510 67,486
--------------------------------------------------------------------------------------------------------
Per Share $ 1.61 $ 1.52 $ 0.32 $ 0.32
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
---------------------------------------------------
Basic EPS Diluted EPS Basic EPS Diluted EPS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $130,923 $130,923 $ 50,750 $50,750
Add: Net income attributable to
Operating Partnership - common units -- 18,126 -- 7,646
Net income attributable to
Operating Partnership - preferred units -- 7,634 -- --
--------------------------------------------------------------------------------------------------------
Adjusted net income $130,923 $156,683 $ 50,750 $58,396
========================================================================================================
Weighted average shares 58,420 73,237 58,337 67,385
--------------------------------------------------------------------------------------------------------
Per Share $ 2.24 $ 2.14 $ 0.87 $ 0.87
========================================================================================================
</TABLE>
29
<PAGE>
The following schedule reconciles the shares used in the basic EPS calculation
to the shares used in the diluted EPS calculation:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic EPS Shares: 58,545 58,510 58,420 58,337
Add: Operating Partnership - common units 8,082 8,663 8,107 8,755
Operating Partnership - preferred units
(after conversion to common units) 6,457 -- 6,537 --
Stock options 200 313 173 293
-------------------------------------------------------------------------------------------
Diluted EPS Shares: 73,284 67,486 73,237 67,385
===========================================================================================
</TABLE>
Contingent Units and Restricted Stock Awards outstanding in 2000 and 1999, if
any, were not included in the computation of diluted EPS as such units were
anti-dilutive during each of the periods. Preferred Units outstanding in 1999
were not included in the 1999 computation of diluted EPS as such units were
anti-dilutive during the periods.
Pursuant to the Repurchase Program during 1999, the Company purchased for
constructive retirement 1,014,500 shares of its outstanding common stock for
approximately $27,500. The Company did not purchase any of its outstanding
common stock during the six months ended June 30, 2000.
16. SEGMENT REPORTING
The Company operates in one business segment - real estate. The Company provides
leasing, management, acquisition, development, construction and tenant-related
services for its portfolio. The Company does not have any foreign operations.
The accounting policies of the segments are the same as those described in
Note 2, excluding straight-line rent adjustments and depreciation and
amortization.
The Company evaluates performance based upon net operating income from the
combined properties in the segment.
30
<PAGE>
Selected results of operations for the three and six month periods ended
June 30, 2000 and 1999 and selected asset information as of June 30, 2000 and
December 31, 1999 regarding the Company's operating segment are as follows:
<TABLE>
<CAPTION>
Total Corporate & Total
Segment Other (e) Company
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL CONTRACT REVENUES (a):
Three months ended:
June 30, 2000 $ 140,117 $ 2,372 $ 142,489 (f)
June 30, 1999 132,575 567 133,142 (g)
Six months ended:
June 30, 2000 $ 280,258 $ 3,020 $ 283,278 (h)
June 30, 1999 264,344 142 264,486 (i)
TOTAL OPERATING AND INTEREST EXPENSES (b):
Three months ended:
June 30, 2000 $ 46,079 $ 27,484 $ 73,563 (j)
June 30, 1999 44,567 28,164 72,731 (k)
Six months ended:
June 30, 2000 $ 92,809 $ 56,118 $ 148,927 (l)
June 30, 1999 87,723 57,115 144,838 (m)
NET OPERATING INCOME (c):
Three months ended:
June 30, 2000 $ 94,038 $ (25,112) $ 68,926 (f) (j)
June 30, 1999 88,008 (27,597) 60,411 (g) (k)
Six months ended:
June 30, 2000 $ 187,449 $ (53,098) $ 134,351 (h) (l)
June 30, 1999 176,621 (56,973) 119,648 (i) (m)
TOTAL ASSETS:
June 30, 2000 $3,567,243 $ 60,861 $3,628,104
December 31, 1999 3,576,806 52,795 3,629,601
TOTAL LONG-LIVED ASSETS (d):
June 30, 2000 $3,481,751 $ 42,253 $3,524,004
December 31, 1999 3,510,285 30,318 3,540,603
--------------------------------------------------------------------------------------
</TABLE>
(a) Total contract revenues represent all revenues during the period (including
the Company's share of net income from unconsolidated joint ventures),
excluding adjustments for straight-lining of rents and the Company's share
of straight-line rent adjustments from unconsolidated joint ventures. All
interest income is excluded from segment amounts and is classified in
Corporate & Other for all periods.
(b) Total operating and interest expenses represent the sum of real estate
taxes, utilities, operating services, general and administrative and
interest expense. All interest expense (including for property-level
mortgages) is excluded from segment amounts and is classified in Corporate
and Other for all periods.
(c) Net operating income represents total contract revenues [as defined in Note
(a)] less total operating and interest expenses [as defined in Note (b)]
for the period.
(d) Long-lived assets are comprised of total rental property, unbilled rents
receivable and investments in unconsolidated joint ventures.
(e) Corporate & Other represents all corporate-level items (including interest
and other investment income, interest expense and non-property general and
administrative expense) as well as intercompany eliminations necessary to
reconcile to consolidated Company totals.
(f) Excludes $3,403 adjustments for straight-lining of rents and ($3) for the
Company's share of straight-line rent adjustments from unconsolidated joint
ventures.
(g) Excludes $3,859 of adjustments for straight-lining of rents and ($26) for
the Company's share of straight-line rent adjustments from unconsolidated
joint ventures.
(h) Excludes $5,536 of adjustments for straight-lining of rents and $54 for the
Company's share of straight-line rent adjustments from unconsolidated joint
ventures.
(i) Excludes $7,422 of adjustments for straight-lining of rents and ($44) for
the Company's share of straight line rent adjustments from unconsolidated
joint ventures.
(j) Excludes $22,945 of depreciation and amortization and non-recurring charges
of $9,228.
(k) Excludes $22,465 of depreciation and amortization and non-recurring charges
of $16,458.
(l) Excludes $45,127 of depreciation and amortization and non-recurring charges
of $9,228.
(m) Excludes $44,434 of depreciation and amortization and non-recurring charges
of $16,458.
31
<PAGE>
17. IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities
("FASB No. 133"). FASB No. 133 is effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. In June 1999, the FASB delayed the
implementation date of FASB No. 133 by one year (January 1, 2001 for the
Company). FASB No. 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Changes in the fair value of derivatives
are recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. Management of the Company
anticipates that, due to its limited use of derivative instruments, the
adoption of FASB No. 133 will not have a significant effect on the Company's
results of operations or its financial position.
32
<PAGE>
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements of Mack-Cali Realty Corporation and the notes thereto.
Certain defined terms used herein have the meaning ascribed to them in the
Consolidated Financial Statements.
The following comparisons for the three and six month periods ended June 30,
2000 ("2000"), as compared to the three and six month periods ended June 30,
1999 ("1999") make reference to the following: (i) the effect of the "Same-Store
Properties," which represents all in-service properties owned by the Company at
March 31, 1999 (for the three-month period comparisons), and which represents
all in-service properties owned by the Company at December 31, 1998 (for the
six-month period comparisons), all such properties being owned by the Company
for the entirety of both periods being compared, (ii) the effect of the
"Acquired Properties," which represents all properties acquired or placed in
service by the Company from April 1, 1999 through June 30, 2000 (for the
three-month period comparisons), and which represents all properties acquired or
placed in-service by the Company from January 1, 1999 through June 30, 2000 (for
the six-month period comparisons), and (iii) the effect of the "Dispositions,"
which represents the Company's sales of rental property during the respective
periods.
33
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Quarter Ended
June 30, Dollar Percent
(IN THOUSANDS) 2000 1999 Change Change
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE FROM RENTAL OPERATIONS:
Base rents $ 122,072 $ 116,499 $ 5,573 4.8%
Escalations and recoveries from tenants 14,627 16,366 (1,739) (10.6)
Parking and other 6,128 3,061 3,067 100.2
------------------------------------------------------------------------------------------
Sub-total 142,827 135,926 6,901 5.1
Equity in earnings of
unconsolidated joint ventures 1,070 834 236 28.3
Interest income 1,992 215 1,777 826.5
------------------------------------------------------------------------------------------
Total revenues 145,889 136,975 8,914 6.5
------------------------------------------------------------------------------------------
PROPERTY EXPENSES:
Real estate taxes 14,733 14,208 525 3.7
Utilities 10,014 9,829 185 1.9
Operating services 16,822 17,429 (607) (3.5)
------------------------------------------------------------------------------------------
Sub-total 41,569 41,466 103 0.2
General and administrative 5,159 5,568 (409) (7.3)
Depreciation and amortization 22,945 22,465 480 2.1
Interest expense 26,835 25,697 1,138 4.4
Non-recurring charges 9,228 16,458 (7,230) (43.9)
------------------------------------------------------------------------------------------
Total expenses 105,736 111,654 (5,918) (5.3)
------------------------------------------------------------------------------------------
Income before gain on sales of rental
property and minority interests 40,153 25,321 14,832 58.6
Gain on sales of rental property 73,921 -- 73,921 --
------------------------------------------------------------------------------------------
Income before minority interests 114,074 25,321 88,753 350.5
MINORITY INTERESTS:
Operating Partnership (16,784) (6,635) (10,149) 153.0
Partially-owned properties (2,982) -- (2,982) --
------------------------------------------------------------------------------------------
Net income $ 94,308 $ 18,686 $ 75,622 404.7%
==========================================================================================
</TABLE>
34
<PAGE>
The following is a summary of the changes in revenue from rental operations and
property expenses divided into Acquired Properties, Same-Store Properties and
Dispositions (in thousands):
<TABLE>
<CAPTION>
Acquired Same-Store
Total Company Properties Properties Dispositions
--------------------- ---------------- ------------------ ------------------
Dollar Percent Dollar Percent Dollar Percent Dollar Percent
Change Change Change Change Change Change Change Change
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE FROM RENTAL OPERATIONS:
Base rents $ 5,573 4.8% $ 4,833 4.2% $ 4,350 3.7% $(3,610) (3.1)%
Escalations and recoveries
from tenants (1,739) (10.6) 232 1.4 (758) (4.6) (1,213) (7.4)
Parking and other 3,067 100.2 47 1.5 3,265 106.7 (245) (8.0)
-----------------------------------------------------------------------------------------------------------------------------------
Totals $ 6,901 5.1% $ 5,112 3.8% $ 6,857 5.0% $(5,068) (3.7)%
===================================================================================================================================
PROPERTY EXPENSES:
Real estate taxes $ 525 3.7% $ 523 3.7% $ 453 3.2% $ (451) (3.2)%
Utilities 185 1.9 243 2.5 373 3.8 (431) (4.4)
Operating services (607) (3.5) 933 5.3 (861) (4.9) (679) (3.9)
-----------------------------------------------------------------------------------------------------------------------------------
Totals $ 103 0.2% $ 1,699 4.1% $ (35) (0.1)% $(1,561) (3.8)%
===================================================================================================================================
OTHER DATA:
Number of Consolidated Properties 254 11 243 5
Square feet (in thousands) 26,865 1,255 25,610 1,359
</TABLE>
Base rents for the Same-Store Properties increased $4.4 million, or 3.7 percent,
for 2000 as compared to 1999, due primarily to rental rate increases in 2000.
Escalations and recoveries from tenants for the Same-Store Properties decreased
$0.8 million, or 4.6 percent, for 2000 over 1999, due primarily to the recovery
of a decreased amount of total property expenses, as well as fewer settle-up
billings during the same period in 2000. Parking and other income for the
Same-Store Properties increased $3.3 million, or 106.7 percent, due primarily to
increased lease termination fees in 2000.
Real estate taxes on the Same-Store Properties increased $0.5 million, or 3.2
percent, for 2000 as compared to 1999, due primarily to property tax rate
increases in certain municipalities in 2000. Utilities for the Same-Store
Properties increased $0.4 million, or 3.8 percent, for 2000 as compared to 1999,
due primarily to increased usage in 2000. Operating services for the Same-Store
Properties decreased $0.9 million, or 4.9 percent, due primarily to decreased
salaries.
Equity in earnings of unconsolidated joint ventures increased $0.2 million, or
28.3 percent, in 2000 as compared to 1999. This is due primarily to increased
joint venture investments made by the Company (see Note 4 to the Financial
Statements).
Interest income increased $1.8 million, or 826.5 percent, for 2000 as compared
to 1999, due primarily to the effect of proceeds from the Dispositions in 2000
being invested in cash and cash equivalents.
General and administrative expense decreased by $0.4 million, or 7.3 percent,
for 2000 as compared to 1999. This decrease is due primarily to decreased
payroll and related costs in 2000.
Depreciation and amortization increased by $0.5 million, or 2.1 percent, for
2000 over 1999. Of this increase, $0.9 million or 4.0 percent, is attributable
to the Acquired Properties, and $0.5 million, or 2.3 percent, due to the
Same-Store Properties, partially offset by a decrease of $0.9 million, or 4.2
percent, due to the Dispositions.
Interest expense increased $1.1 million, or 4.4 percent, for 2000 as compared to
1999. This increase is due primarily to the increase in LIBOR which resulted in
higher borrowing costs on floating rate debt.
35
<PAGE>
Non-recurring charges of $9.2 million were incurred in 2000, as a result of the
resignations of Brant Cali and John R. Cali (see Note 13 to the Financial
Statements). Non-recurring charges of $16.5 million were incurred in 1999, as a
result of the resignation of Thomas A. Rizk (see Note 13 to the Financial
Statements).
Income before gain on sales of rental property and minority interests increased
to $40.2 million in 2000 from $25.3 million in 1999. The increase of
approximately $14.9 million is due to the factors discussed above.
Net income increased by $75.6 million, from $18.7 million in 1999 to $94.3
million in 2000. This increase was a result of an increase in income before gain
on sales of rental property and minority interests of $14.9 million, and gain on
sales of rental property of $73.9 million in 2000. These were partially offset
by an increase in minority interests of $13.2 million.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Six Months Ended
June 30, Dollar Percent
(IN THOUSANDS) 2000 1999 Change Change
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE FROM RENTAL OPERATIONS:
Base rents $ 243,670 $ 232,579 $ 11,091 4.8%
Escalations and recoveries from tenants 31,295 31,226 69 0.2
Parking and other 9,450 6,961 2,489 35.8
------------------------------------------------------------------------------------------
Sub-total 284,415 270,766 13,649 5.0
Equity in earnings of
unconsolidated joint ventures 2,207 628 1,579 251.4
Interest income 2,246 470 1,776 377.9
------------------------------------------------------------------------------------------
Total revenues 288,868 271,864 17,004 6.3
------------------------------------------------------------------------------------------
PROPERTY EXPENSES:
Real estate taxes 29,437 28,051 1,386 4.9
Utilities 20,393 19,421 972 5.0
Operating services 34,564 34,516 48 0.1
------------------------------------------------------------------------------------------
Sub-total 84,394 81,988 2,406 2.9
General and administrative 11,272 13,531 (2,259) (16.7)
Depreciation and amortization 45,127 44,434 693 1.6
Interest expense 53,261 49,319 3,942 8.0
Non-recurring charges 9,228 16,458 (7,230) (43.9)
------------------------------------------------------------------------------------------
Total expenses 203,282 205,730 (2,448) (1.2)
------------------------------------------------------------------------------------------
Income before gain on sales
of rental property
and minority interests 85,586 66,134 19,452 29.4
Gain on sales of rental property 76,169 -- 76,169 --
------------------------------------------------------------------------------------------
Income before minority interests 161,755 66,134 95,621 144.6
MINORITY INTERESTS:
Operating Partnership (25,760) (15,384) (10,376) 67.4
Partially-owned properties (5,072) -- (5,072) --
------------------------------------------------------------------------------------------
Net income $ 130,923 $ 50,750 $ 80,173 158.0%
==========================================================================================
</TABLE>
36
<PAGE>
The following is a summary of the changes in revenue from rental operations and
property expenses divided into Acquired Properties, Same-Store Properties and
Dispositions (in thousands):
<TABLE>
<CAPTION>
Acquired Same-Store
Total Company Properties Properties Dispositions
--------------------- ---------------- ------------------ ------------------
Dollar Percent Dollar Percent Dollar Percent Dollar Percent
Change Change Change Change Change Change Change Change
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE FROM RENTAL OPERATIONS:
Base rents $11,091 4.8% $ 8,576 3.8% $ 6,612 2.8% $(4,097) (1.8)%
Escalations and recoveries
from tenants 69 0.2 519 1.6 687 2.2 (1,137) (3.6)
Parking and other 2,489 35.8 61 0.9 2,667 38.3 (239) (3.4)
-----------------------------------------------------------------------------------------------------------------------------------
Totals $13,649 5.0% $ 9,156 3.3% $ 9,966 3.7% $(5,473) (2.0)%
===================================================================================================================================
PROPERTY EXPENSES:
Real estate taxes $ 1,386 4.9% $ 913 3.3% $ 941 3.3% $ (468) (1.7)%
Utilities 972 5.0 467 2.4 1,009 5.2 (504) (2.6)
Operating services 48 0.1 1,500 4.3 (754) (2.2) (698) (2.0)
-----------------------------------------------------------------------------------------------------------------------------------
Totals $ 2,406 2.9% $ 2,880 3.5% $ 1,196 1.4% $(1,670) (2.0)%
===================================================================================================================================
OTHER DATA:
Number of Consolidated Properties 254 15 239 5
Square feet (in thousands) 26,865 1,389 25,476 1,359
</TABLE>
Base rents for the Same-Store Properties increased $6.6 million, or 2.8 percent,
for 2000 as compared to 1999, due primarily to rental rate increases in 2000.
Escalations and recoveries from tenants for the Same-Store Properties increased
$0.7 million, or 2.2 percent, for 2000 over 1999, due primarily to the recovery
of an increased amount of total property expenses, as well as additional
settle-up billings in 2000. Parking and other income for the Same-Store
Properties increased $2.7 million, or 38.3 percent, due primarily to increased
lease termination fees received in 2000.
Real estate taxes on the Same-Store Properties increased $0.9 million, or 3.3
percent, for 2000 as compared to 1999, due primarily to property tax rate
increases in certain municipalities in 2000. Utilities for the Same-Store
Properties increased $1.0 million, or 5.2 percent, for 2000 as compared to 1999,
due primarily to increased usage in 2000. Operating services for the Same-Store
Properties decreased $0.8 million, or 2.2 percent, due primarily to decreased
salaries.
Equity in earnings of unconsolidated joint ventures increased $1.6 million, or
251.4 percent, in 2000 as compared to 1999. This is due primarily to increased
joint venture investments made by the Company (see Note 4 to the Financial
Statements).
Interest income increased $1.8 million, or 377.9 percent, for 2000 as compared
to 1999, due primarily to the effect of proceeds from the Dispositions in 2000
being invested in cash and cash equivalents.
General and administrative expense decreased by $2.3 million, or 16.7 percent,
for 2000 as compared to 1999. This decrease is due primarily to decreased
payroll and related costs in 2000.
Depreciation and amortization increased by $0.7 million, or 1.6 percent, for
2000 over 1999. Of this increase, $1.6 million or 3.6 percent, is attributable
to the Acquired Properties and $0.9 million, or 2.1 percent, due to the
Same-Store Properties, partially offset by a decrease of $1.8 million, or 4.1
percent, due to the Dispositions.
Interest expense increased $3.9 million, or 8.0 percent, for 2000 as compared to
1999. This increase is due primarily to the replacement in 1999 of short-term
credit facility borrowings with long-term fixed rate unsecured notes.
37
<PAGE>
Non-recurring charges of $9.2 million were incurred in 2000, as a result of the
resignations of Brant Cali and John R. Cali (see Note 13 to the Financial
Statements). Non-recurring charges of $16.5 million were incurred in 1999, as a
result of the resignation of Thomas A. Rizk (see Note 13 to the Financial
Statements).
Income before gain on sales of rental property and minority interests increased
to $85.6 million in 2000 from $66.1 million in 1999. The increase of
approximately $19.5 million is due to the factors discussed above.
Net income increased by $80.1 million, from $50.8 million in 1999 to $130.9
million in 2000. This increase was a result of an increase in income before gain
on sales of rental property and minority interests of $19.5 million and gain on
sales of rental property of $76.1 million in 2000. These were partially offset
by an increase in minority interests of $15.5 million.
LIQUIDITY AND CAPITAL RESOURCES
STATEMENT OF CASH FLOWS During the six months ended June 30, 2000, the
Company generated $120.6 million in cash flows from operating activities, and
together with $435.0 million in borrowings from the Company's revolving
credit facilities, $235.8 million in proceeds from sales of rental property,
$7.1 million in distributions received from unconsolidated joint ventures,
$1.7 million in proceeds from stock options exercised and $0.6 million from
restricted cash, used an aggregate of approximately $800.8 million to acquire
properties and land parcels and pay for other tenant and building
improvements totaling $170.1 million, repay outstanding borrowings on its
revolving credit facilities and other mortgage debt of $438.1 million, pay
quarterly dividends and distributions of $85.0 million, invest $11.0 million
in unconsolidated joint ventures, distribute $88.7 million to minority
interest in partially-owned properties, pay financing costs of $6.0 million
and increase the Company's cash and cash equivalents by $1.9 million.
CAPITALIZATION
In August 1998, the Board of Directors of the Company authorized a share
repurchase program under which the Company was permitted to purchase up to
$100.0 million of the Company's outstanding common stock. Purchases could be
made from time to time in open market transactions at prevailing prices or
through privately negotiated transactions. Subsequently, through December 31,
1999, the Company purchased for constructive retirement, 1,869,200 shares of its
outstanding common stock for an aggregate cost of approximately $52.6 million.
Concurrent with these purchases, the Company sold to the Operating Partnership
1,869,200 common units for approximately $52.6 million. The Company did not
purchase any of its outstanding common stock during the six months ended June
30, 2000.
As of June 30, 2000, the Company's total indebtedness of $1.5 billion (weighted
average interest rate of 7.28 percent) was comprised of $247.9 million of
revolving credit facility borrowings and other variable rate mortgage debt
(weighted average rate of 7.46 percent) and fixed rate debt of $1.2 billion
(weighted average rate of 7.24 percent).
As of June 30, 2000, the Company had outstanding borrowings of $215.7 million
under its revolving credit facilities (with aggregate borrowing capacity of
$900.0 million). The total outstanding borrowings were from the 2000
Unsecured Facility, with no outstanding borrowings under the Prudential
Facility. The interest rate on outstanding borrowings under the 2000
Unsecured Facility is currently LIBOR plus 80 basis points. The Company may
instead elect an interest rate representing the higher of the lender's prime
rate or the Federal Funds rate plus 50 basis points. Based upon a change in
the Company's unsecured debt rating, the interest rate will be changed on a
sliding scale. The 2000 Unsecured Facility also requires a 20 basis point
facility fee on the current borrowing capacity payable quarterly in arrears.
Subject to certain conditions, the Company has the ability to increase the
borrowing capacity of the 2000 Unsecured Facility up to $1.0 billion. The
2000 Unsecured Facility matures in June 2003, with an extension option of one
year, which would require a payment of 25 basis points of the then borrowing
capacity of the credit line upon exercise. The Prudential Facility carries an
interest rate of 110 basis points over LIBOR and matures in June 2001.
The terms of the 2000 Unsecured Facility include certain restrictions and
covenants which limit, among other things, the payment of dividends (as
discussed below), the incurrence of additional indebtedness, the incurrence of
liens and the disposition of assets, and which require compliance with financial
ratios relating to the maximum leverage ratio,
38
<PAGE>
the maximum amount of secured indebtedness, the minimum amount of tangible net
worth, the minimum amount of debt service coverage, the minimum amount of fixed
charge coverage, the maximum amount of unsecured indebtedness, the minimum
amount of unencumbered property debt service coverage and certain investment
limitations. The dividend restriction referred to above provides that, except to
enable the Company to continue to qualify as a REIT under the Code, the Company
will not during any four consecutive fiscal quarters make distributions with
respect to common stock or other equity interests in an aggregate amount in
excess of 90 percent of funds from operations (as defined) for such period,
subject to certain other adjustments.
The Company has three investment grade credit ratings. Standard & Poor's
Rating Services ("S&P") and Fitch IBCA ("Fitch") have each assigned their BBB
rating to existing and prospective senior unsecured debt of the Operating
Partnership. S&P and Fitch have also assigned their BBB- rating to prospective
preferred stock offerings of the Company. Moody's Investors Service has
assigned its Baa3 rating to the existing and prospective senior unsecured
debt of the Operating Partnership and its Ba1 rating to prospective preferred
stock offerings of the Company.
The terms of the Company's unsecured corporate debt include certain restrictions
and covenants which require compliance with financial ratios relating to the
maximum amount of debt leverage, the maximum amount of secured indebtedness, the
minimum amount of debt service coverage and the maximum amount of unsecured debt
as a percent of unsecured assets.
As of June 30, 2000, the Company had 225 unencumbered properties, totaling 20.4
million square feet, representing 76.0 percent of the Company's total portfolio
on a square footage basis.
The Company has an effective shelf registration statement with the SEC for an
aggregate amount of $2.0 billion in equity securities of the Company. The
Company and Operating Partnership also have an effective shelf registration
statement with the SEC for an aggregate of $2.0 billion in debt securities,
preferred stock and preferred stock represented by depositary shares, under
which the Operating Partnership has issued an aggregate of $785.3 million of
unsecured corporate debt. The Company also has an effective registration
statement with the SEC for a dividend reinvestment and stock purchase plan,
which commenced in March 1999.
Historically, rental revenue has been the principal source of funds to pay
operating expenses, debt service and capital expenditures, excluding
non-recurring capital expenditures. Management believes that the Company will
have access to the capital resources necessary to expand and develop its
business. To the extent that the Company's cash flow from operating activities
is insufficient to finance its non-recurring capital expenditures such as
property acquisition and construction project costs and other capital
expenditures, the Company expects to finance such activities through borrowings
under its revolving credit facilities and other debt and equity financing.
The Company expects to meet its short-term liquidity requirements generally
through its working capital and net cash provided by operating activities, along
with the 2000 Unsecured Facility and the Prudential Facility. The Company is
frequently examining potential property acquisitions and construction projects
and, at any given time, one or more of such acquisitions or construction
projects may be under consideration. Accordingly, the ability to fund property
acquisitions and construction projects is a major part of the Company's
financing requirements. The Company expects to meet its financing requirements
through funds generated from operating activities, proceeds from property sales,
long-term or short-term borrowings (including draws on the Company's revolving
credit facilities) and the issuance of additional debt or equity securities. In
addition, the Company anticipates utilizing the 2000 Unsecured Facility and the
Prudential Facility primarily to fund property acquisitions and construction
projects.
As of June 30, 2000, the Company's total debt had a weighted average term to
maturity of 5.1 years. The Company does not intend to reserve funds to retire
the Company's unsecured corporate debt, Harborside mortgages, $150.0 Million
Prudential Mortgage Loan, its other property mortgages or other long-term
mortgages and loans payable upon maturity. Instead, the Company will seek to
refinance such debt at maturity or retire such debt through the issuance of
additional equity or debt securities. The Company is reviewing various
refinancing options, including the issuance of additional unsecured corporate
debt, preferred stock, and/or obtaining additional mortgage debt, some or all of
which may be completed during 2000. The Company anticipates that its available
cash and cash equivalents and cash flows from operating activities, together
with cash available from borrowings and other
39
<PAGE>
sources, will be adequate to meet the Company's capital and liquidity needs both
in the short and long-term. However, if these sources of funds are insufficient
or unavailable, the Company's ability to make the expected distributions
discussed below may be adversely affected.
To maintain its qualification as a REIT, the Company must make annual
distributions to its stockholders of at least 95 percent of its REIT taxable
income, determined without regard to the dividends paid deduction and by
excluding net capital gains. Moreover, the Company intends to continue to make
regular quarterly distributions to its stockholders which, based upon current
policy, in the aggregate would equal approximately $136.6 million on an
annualized basis. However, any such distribution, whether for federal income tax
purposes or otherwise, would only be paid out of available cash after meeting
both operating requirements and scheduled debt service on mortgages and loans
payable.
40
<PAGE>
SIGNIFICANT TENANTS
The following table sets forth a schedule of the Company's 20 largest tenants
for the Consolidated Properties as of June 30, 2000, based upon annualized base
rents:
<TABLE>
<CAPTION>
Percentage of
Annualized Company Square Percentage of Year of
Number of Base Rental Annualized Base Feet Total Company Lease
Properties Revenue($)(1) Rental Revenue(%) Leased Leased Sq.Ft.(%) Expiration
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Donaldson, Lufkin &
Jenrette Securities Corp. 1 8,316,096 1.8 271,953 1.1 2011
AT&T Wireless Services 2 8,199,960 1.7 382,030 1.5 2007 (2)
AT&T Corporation 4 8,069,341 1.7 520,496 2.0 2009 (3)
Keystone Mercy Health Plan 3 7,532,982 1.6 330,394 1.3 2015 (4)
IBM Corporation 4 7,028,473 1.5 362,753 1.4 2007 (5)
Prentice-Hall Inc. 1 6,744,495 1.4 474,801 1.9 2014
Allstate Insurance Company 9 5,863,006 1.2 270,154 1.1 2009 (6)
Nabisco Inc. 3 5,694,073 1.2 310,243 1.2 2005 (7)
Toys `R' US - NJ, Inc. 1 5,342,672 1.1 242,518 0.9 2012
American Institute of Certified
Public Accountants 1 4,981,357 1.1 249,768 1.0 2012
Board of Gov./Federal Reserve 1 4,694,247 1.0 117,008 0.5 2009 (8)
Dean Witter Trust Company 1 4,319,507 0.9 221,019 0.9 2008
Winston & Strawn 1 4,302,008 0.9 108,100 0.4 2003
CMP Media Inc. 1 4,206,598 0.9 206,274 0.8 2014
KPMG Peat Marwick, LLP 2 3,824,080 0.8 161,760 0.6 2007 (9)
Move.com 1 3,701,763 0.8 94,917 0.4 2006
Bank of Tokyo - Mitsubishi Ltd. 1 3,378,924 0.7 137,076 0.5 2009
Bankers Trust Harborside Inc. 1 3,272,500 0.7 385,000 1.5 2003
Cendant Operations Inc. 1 3,117,051 0.7 148,431 0.6 2008
Deloitte & Touche USA, LLP 1 3,073,126 0.7 115,967 0.4 2002
-------------------------------------------------------------------------------------------------------------------------------
Totals 105,662,259 22.4 5,110,662 20.0
===============================================================================================================================
</TABLE>
(1) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
(2) 12,150 square feet expire September 2004; 345,799 square feet expire March
2007; 24,081 square feet expire June 2007.
(3) 3,950 square feet expire August 2000; 66,268 square feet expire December
2000; 63,278 square feet expire May 2004; 387,000 square feet expire
January 2009.
(4) 27,245 square feet expire January 2003; 303,149 square feet expire April
2015.
(5) 28,289 square feet expire January 2002; 1,065 square feet expire November
2002; 85,000 square feet expire December 2005; 248,399 square feet expire
December 2007.
(6) 22,444 square feet expire July 2001; 47,364 square feet expire September
2002; 18,882 square feet expire April 2003; 2,867 square feet expire
January 2004; 36,305 square feet expire January 2005; 23,024 square feet
expire October 2005; 6,108 square feet expire August 2006; 70,517 square
feet expire June 2007; 31,143 square feet expire April 2008; 11,500 square
feet expire April 2009.
(7) 9,865 square feet expire September 2001; 300,378 square feet expire
December 2005.
(8) 94,719 square feet expire May 2005; 22,289 square feet expire July 2009.
(9) 104,556 square feet expire September 2002; 57,204 square feet expire July
2007.
41
<PAGE>
SCHEDULE OF LEASE EXPIRATIONS
The following table sets forth a schedule of the lease expirations for the total
of the Company's office, office/flex, industrial/warehouse and stand-alone
retail properties, included in the Consolidated Properties, beginning July 1,
2000, assuming that none of the tenants exercise renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage Of Rent Per Net
Net Rentable Total Leased Annualized Rentable Percentage Of
Area Subject Square Feet Base Rental Square Foot Annual Base
Number Of To Expiring Represented By Revenue Under Represented Rent Under
Year Of Leases Leases Expiring Expiring By Expiring Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) Leases($)(3) Leases ($) Leases (%)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7/1/00-12/31/00 256 1,490,198 5.8 26,192,268 17.58 5.6
2001..... 527 2,834,176 11.1 45,918,474 16.20 9.7
2002..... 536 3,585,845 14.0 62,957,243 17.56 13.3
2003..... 448 3,717,746 14.5 65,181,163 17.53 13.8
2004..... 334 2,323,366 9.1 44,334,554 19.08 9.4
2005..... 286 2,859,481 11.2 56,116,970 19.62 11.9
2006..... 105 1,412,989 5.5 29,696,175 21.02 6.3
2007..... 64 1,521,732 5.9 31,383,457 20.62 6.7
2008..... 40 1,084,117 4.2 18,254,250 16.84 3.9
2009..... 36 1,097,738 4.3 21,298,156 19.40 4.5
2010..... 61 944,524 3.7 19,212,405 20.34 4.1
2011 and thereafter 49 2,731,935 10.7 50,927,546 18.64 10.8
----------------------------------------------------------------------------------------------------------------
Totals/Weighted
Average 2,742 25,603,847 100.0 471,472,661 18.41 100.0
================================================================================================================
</TABLE>
(1) Includes office, office/flex, industrial/warehouse and stand-alone retail
property tenants only. Excludes leases for amenity, retail, parking and
month-to-month tenants. Some tenants have multiple leases.
(2) Excludes all unleased space as of June 30, 2000.
(3) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
(4) Reconciliation to Company's total net rentable square footage is as
follows:
<TABLE>
<CAPTION>
SQUARE FEET PERCENTAGE OF TOTAL
----------- -------------------
<S> <C> <C>
Square footage leased to commercial tenants 25,603,847 95.3%
Square footage used for corporate offices, management offices,
building use, retail tenants, food services, other ancillary
service tenants and occupancy adjustments 425,086 1.6
Square footage unleased 835,958 3.1
----------- ------
Total net rentable square footage (does not include
residential, land lease, retail or not-in-service properties) 26,864,891 100.0%
=========== ======
</TABLE>
42
<PAGE>
SCHEDULE OF LEASE EXPIRATIONS: OFFICE PROPERTIES
The following table sets forth a schedule of the lease expirations for the
office properties beginning July 1, 2000, assuming that none of the tenants
exercise renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage Of Rent Per Net
Net Rentable Total Leased Annualized Rentable Percentage Of
Area Subject Square Feet Base Rental Square Foot Annual Base
Number Of To Expiring Represented By Revenue Under Represented Rent Under
Year Of Leases Leases Expiring Expiring By Expiring Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) Leases($)(3) Leases ($) Leases (%)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7/1/00-12/31/00 213 1,214,468 5.7 22,985,977 18.93 5.5
2001..... 437 2,159,752 10.2 38,977,000 18.05 9.3
2002..... 434 2,731,188 12.9 53,967,997 19.76 12.8
2003..... 375 3,121,966 14.8 59,322,147 19.00 14.1
2004..... 284 1,822,335 8.6 38,538,729 21.15 9.1
2005..... 239 2,440,656 11.5 50,947,678 20.87 12.1
2006..... 86 1,134,526 5.4 25,192,679 22.21 6.0
2007..... 56 1,386,301 6.5 29,412,223 21.22 7.0
2008..... 36 925,747 4.4 17,171,967 18.55 4.1
2009..... 26 966,678 4.6 19,469,636 20.14 4.6
2010..... 47 750,968 3.5 16,568,653 22.06 3.9
2011 and thereafter 42 2,510,911 11.9 48,363,186 19.26 11.5
----------------------------------------------------------------------------------------------------------------
Totals/Weighted
Average 2,275 21,165,496 100.0 420,917,872 19.89 100.0
================================================================================================================
</TABLE>
(1) Includes office tenants only. Excludes leases for amenity, retail, parking
and month-to-month office tenants. Some tenants have multiple leases.
(2) Excludes all unleased space as of June 30, 2000.
(3) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
43
<PAGE>
SCHEDULE OF LEASE EXPIRATIONS: OFFICE/FLEX PROPERTIES
The following table sets forth a schedule of the lease expirations for the
office/flex properties beginning July 1, 2000, assuming that none of the tenants
exercise renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage Of Rent Per Net
Net Rentable Total Leased Annualized Rentable Percentage Of
Area Subject Square Feet Base Rental Square Foot Annual Base
Number Of To Expiring Represented By Revenue Under Represented Rent Under
Year Of Leases Leases Expiring Expiring By Expiring Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) Leases($)(3) Leases ($) Leases (%)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7/1/00-12/31/00 40 274,395 6.8 3,189,396 11.62 6.9
2001..... 87 664,977 16.5 6,849,197 10.30 14.8
2002..... 100 808,217 20.0 8,491,539 10.51 18.3
2003..... 69 497,806 12.3 5,357,898 10.76 11.5
2004..... 39 291,611 7.2 3,303,333 11.33 7.1
2005..... 44 405,671 10.0 4,987,415 12.29 10.8
2006..... 19 278,463 6.9 4,503,496 16.17 9.7
2007..... 8 135,431 3.4 1,971,234 14.56 4.2
2008..... 4 158,370 3.9 1,082,283 6.83 2.3
2009..... 9 119,260 2.9 1,722,320 14.44 3.7
2010..... 14 193,556 4.8 2,643,752 13.66 5.7
2011 and thereafter 6 213,024 5.3 2,299,360 10.79 5.0
----------------------------------------------------------------------------------------------------------------
Totals/Weighted
Average 439 4,040,781 100.0 46,401,223 11.48 100.0
================================================================================================================
</TABLE>
(1) Includes office/flex tenants only. Excludes leases for amenity, retail,
parking and month-to-month office/flex tenants. Some tenants have multiple
leases.
(2) Excludes all unleased space as of June 30, 2000.
(3) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
44
<PAGE>
SCHEDULE OF LEASE EXPIRATIONS: INDUSTRIAL/WAREHOUSE PROPERTIES
The following table sets forth a schedule of the lease expirations for the
industrial/warehouse properties beginning July 1, 2000, assuming that none of
the tenants exercise renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage Of Rent Per Net
Net Rentable Total Leased Annualized Rentable Percentage Of
Area Subject Square Feet Base Rental Square Foot Annual Base
Number Of To Expiring Represented By Revenue Under Represented Rent Under
Year Of Leases Leases Expiring Expiring By Expiring Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%) Leases($)(2) Leases ($) Leases (%)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7/1/00-12/31/00 3 1,335 0.3 16,895 12.66 0.4
2001..... 3 9,447 2.5 92,277 9.77 2.5
2002..... 2 46,440 12.2 497,707 10.72 13.5
2003..... 4 97,974 25.8 501,118 5.11 13.6
2004..... 10 200,120 52.6 2,297,492 11.48 62.2
2005..... 3 13,154 3.5 181,877 13.83 4.9
2009..... 1 11,800 3.1 106,200 9.00 2.9
----------------------------------------------------------------------------------------------------------------
Totals/Weighted
Average 26 380,270 100.0 3,693,566 9.71 100.0
================================================================================================================
</TABLE>
(1) Includes industrial/warehouse tenants only. Excludes leases for amenity,
retail, parking and month-to-month industrial/warehouse tenants. Some
tenants have multiple leases.
(2) Excludes all unleased space as of June 30, 2000.
(3) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
the historical results may differ from those set forth above.
SCHEDULE OF LEASE EXPIRATIONS: STAND-ALONE RETAIL PROPERTIES
The following table sets forth a schedule of the lease expirations for the
stand-alone retail properties beginning July 1, 2000, assuming that none of the
tenants exercise renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage Of Rent Per Net
Net Rentable Total Leased Annualized Rentable Percentage Of
Area Subject Square Feet Base Rental Square Foot Annual Base
Number Of To Expiring Represented By Revenue Under Represented Rent Under
Year Of Leases Leases Expiring Expiring By Expiring Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%) Leases($)(2) Leases ($) Leases (%)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2004..... 1 9,300 53.8 195,000 20.97 42.4
2012..... 1 8,000 46.2 265,000 33.12 57.6
----------------------------------------------------------------------------------------------------------------
Totals/Weighted
Average 2 17,300 100.0 460,000 26.59 100.0
================================================================================================================
</TABLE>
(1) Includes stand-alone retail property tenants only.
(2) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
45
<PAGE>
INDUSTRY DIVERSIFICATION
The following table lists the Company's 30 largest industry classifications
based on annualized contractual base rent of the Consolidated Properties:
<TABLE>
<CAPTION>
Annualized Percentage of Percentage of
Base Rental Company Square Total Company
Revenue Annualized Base Feet Leased
Industry Classification (3) ($)(1)(2) Rental Revenue (%) Leased Sq. Ft. (%)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities, Commodity Contracts & Other Financial 48,482,254 10.3 2,163,027 8.4
Manufacturing 45,744,817 9.7 2,766,760 10.8
Computer System Design Svcs 34,196,330 7.2 1,814,397 7.1
Insurance Carriers & Related Activities 33,713,281 7.1 1,744,424 6.8
Telecommunications 32,802,016 6.9 1,929,988 7.5
Legal Services 27,804,546 5.9 1,264,086 4.9
Health Care & Social Assistance 22,341,554 4.7 1,144,152 4.5
Credit Intermediation & Related Activities 21,982,908 4.7 1,282,516 5.0
Wholesale Trade 17,473,059 3.7 1,247,374 4.9
Accounting/Tax Prep 15,908,652 3.4 752,393 2.9
Other Professional 15,687,935 3.3 919,295 3.6
Retail Trade 13,942,320 3.0 833,258 3.3
Information Services 13,385,639 2.8 623,356 2.4
Publishing Industries 12,555,371 2.7 563,273 2.2
Arts, Entertainment & Recreation 11,478,864 2.4 785,759 3.1
Public Administration 10,383,217 2.2 360,322 1.4
Other Services (except Public Administration) 8,916,277 1.9 699,883 2.7
Transportation 8,757,450 1.9 673,895 2.6
Advertising/Related Services 8,270,160 1.8 399,462 1.6
Real Estate & Rental & Leasing 7,747,291 1.6 378,753 1.5
Management/Scientific 7,573,469 1.6 388,954 1.5
Management of Companies & Finance 7,076,808 1.5 372,430 1.5
Scientific Research/Development 6,890,375 1.5 412,902 1.6
Data Processing Services 6,062,894 1.3 277,639 1.1
Architectural/Engineering 5,561,039 1.2 312,488 1.2
Construction 4,504,058 1.0 269,431 1.1
Educational Services 3,684,716 0.8 211,205 0.8
Utilities 3,567,432 0.8 170,462 0.7
Specialized Design Services 3,408,726 0.7 161,504 0.6
Admin. & Support, Waste Mgt. & Remediation Svc 3,101,016 0.6 222,856 0.9
Other 8,468,187 1.8 457,603 1.8
-------------------------------------------------------------------------------------------------------------------
Totals 471,472,661 100.0 25,603,847 100.0
===================================================================================================================
</TABLE>
(1) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
(2) Includes office, office/flex, industrial/warehouse and stand-alone retail
tenants only. Excludes leases for amenity, retail, parking and
month-to-month office tenants. Some tenants have multiple leases.
(3) The Company's tenants are classified according to the U.S. Government's new
North American Industrial Classification System (NAICS) which has replaced
the Standard Industrial Code (SIC) system.
46
<PAGE>
MARKET DIVERSIFICATION
The following table lists the Company's 25 largest markets (MSAs), based on
annualized contractual base rent of the Consolidated Properties:
<TABLE>
<CAPTION>
Annualized Percentage of
Base Rental Company Total
Revenue Annualized Base Property Size Percentage of
Market (MSA) ($)(1)(2) Rental Revenue (%) Rentable Area Rentable Area (%)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bergen-Passaic, NJ 82,841,703 17.6 4,530,091 16.9
New York, NY (Westchester-Rockland Counties) 78,809,935 16.7 4,696,178 17.5
Newark, NJ (Essex-Morris-Union Counties) 71,270,588 15.1 3,444,598 12.8
Philadelphia, PA-NJ 37,779,413 8.0 2,657,858 9.9
Jersey City, NJ 37,245,542 7.9 1,886,800 7.0
Washington, DC-MD-VA 18,992,505 4.0 616,549 2.3
Denver, CO 16,915,371 3.6 1,007,931 3.8
Dallas, TX 14,782,631 3.1 959,463 3.6
Trenton, NJ (Mercer County) 12,714,136 2.7 672,365 2.5
Middlesex-Somerset-Hunterdon, NJ 12,706,631 2.7 659,041 2.5
San Antonio, TX 11,793,657 2.5 940,302 3.5
San Francisco, CA 11,725,703 2.5 450,891 1.7
Stamford-Norwalk, CT 9,054,159 1.9 527,250 2.0
Houston, TX 8,888,939 1.9 700,008 2.6
Monmouth-Ocean, NJ 7,176,808 1.5 577,423 2.1
Nassau-Suffolk, NY 5,762,698 1.2 261,849 1.0
Austin-San Marcos, TX 5,751,591 1.2 270,703 1.0
Phoenix-Mesa, AZ 5,411,031 1.1 416,967 1.5
Boulder-Longmont, CO 3,578,893 0.8 270,421 1.0
Tampa-St. Petersburg-Clearwater, FL 3,415,060 0.7 297,429 1.1
Bridgeport, CT 3,104,796 0.7 145,487 0.5
Omaha, NE-IA 3,096,315 0.7 319,535 1.2
Colorado Springs, CO 2,837,673 0.6 209,987 0.8
Dutchess County, NY 2,172,749 0.5 118,727 0.4
Atlantic-Cape May, NJ 1,464,090 0.3 80,344 0.3
Other 2,180,044 0.5 146,694 0.5
---------------------------------------------------------------------------------------------------------------------------------
Totals 471,472,661 100.0 26,864,891 100.0
=================================================================================================================================
</TABLE>
(1) Annualized base rental revenue is based on actual June 2000 billings times
12. For leases whose rent commences after July 1, 2000, annualized base
rental revenue is based on the first full month's billing times 12. As
annualized base rental revenue is not derived from historical GAAP results,
historical results may differ from those set forth above.
(2) Includes office, office/flex, industrial/warehouse and stand-alone retail
tenants only. Excludes leases for amenity, retail, parking and
month-to-month office tenants. Some tenants have multiple leases.
47
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE TOTAL OFFICE,
NET LEASED ANNUAL OFFICE/FLEX, AVERAGE
RENTABLE AS OF BASE AND INDUSTRIAL/ BASE RENT
PROPERTY YEAR AREA 6/30/00 RENT WAREHOUSE PER SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000'S)(2) BASE RENT(%) ($)(3)(5)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ATLANTIC COUNTY, NEW JERSEY
EGG HARBOR
100 Decadon Drive......................... 1987 40,422 100.0 784 0.16 19.40
200 Decadon Drive......................... 1991 39,922 95.3 735 0.15 19.32
BERGEN COUNTY, NEW JERSEY
FAIR LAWN
17-17 Route 208 North..................... 1987 143,000 96.0 3,445 0.70 25.09
FORT LEE
One Bridge Plaza.......................... 1981 200,000 99.5 4,658 0.95 23.41
2115 Linwood Avenue (4)................... 1981 68,000 88.4 687 0.14 11.43
LITTLE FERRY
200 Riser Road............................ 1974 286,628 100.0 1,882 0.39 6.57
MONTVALE
95 Chestnut Ridge Road.................... 1975 47,700 100.0 570 0.12 11.95
135 Chestnut Ridge Road................... 1981 66,150 92.1 971 0.20 15.94
PARAMUS
15 East Midland Avenue.................... 1988 259,823 100.0 6,639 1.36 25.55
461 From Road............................. 1988 253,554 99.8 6,084 1.24 24.04
650 From Road............................. 1978 348,510 100.0 7,584 1.55 21.76
140 Ridgewood Avenue...................... 1981 239,680 100.0 5,134 1.05 21.42
61 South Paramus Avenue................... 1985 269,191 100.0 5,705 1.17 21.19
ROCHELLE PARK
120 Passaic Street........................ 1972 52,000 100.0 576 0.12 11.08
365 West Passaic Street................... 1976 212,578 96.5 3,620 0.74 17.65
SADDLE RIVER
1 Lake Street............................. 1973/94 474,801 100.0 7,466 1.53 15.72
UPPER SADDLE RIVER
10 Mountainview Road...................... 1986 192,000 100.0 3,773 0.77 19.65
WOODCLIFF LAKE
400 Chestnut Ridge Road................... 1982 89,200 100.0 2,129 0.44 23.87
470 Chestnut Ridge Road................... 1987 52,500 100.0 1,192 0.24 22.70
530 Chestnut Ridge Road................... 1986 57,204 100.0 1,166 0.24 20.38
50 Tice Boulevard......................... 1984 235,000 100.0 4,837 0.99 20.58
300 Tice Boulevard........................ 1991 230,000 100.0 4,968 1.02 21.60
BURLINGTON COUNTY, NEW JERSEY
MOORESTOWN
224 Strawbridge Drive..................... 1984 74,000 95.2 1,162 0.24 16.49
228 Strawbridge Drive..................... 1984 74,000 100.0 1,434 0.29 19.38
ESSEX COUNTY, NEW JERSEY
MILLBURN
150 J.F. Kennedy Parkway.................. 1980 247,476 100.0 5,770 1.18 23.32
ROSELAND
101 Eisenhower Parkway.................... 1980 237,000 95.1 4,127 0.84 18.31
103 Eisenhower Parkway.................... 1985 151,545 99.8 3,154 0.65 20.85
HUDSON COUNTY, NEW JERSEY
JERSEY CITY
95 Christopher Columbus Drive (7)......... 1989 n/a n/a 10,266 2.10 n/a
Harborside Financial Center Plaza I....... 1983 400,000 99.0 3,305 0.68 8.35
Harborside Financial Center Plaza II...... 1990 761,200 100.0 17,721 3.63 23.28
Harborside Financial Center Plaza III..... 1990 725,600 100.0 17,027 3.48 23.47
</TABLE>
48
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE TOTAL OFFICE,
NET LEASED ANNUAL OFFICE/FLEX, AVERAGE
RENTABLE AS OF BASE AND INDUSTRIAL/ BASE RENT
PROPERTY YEAR AREA 6/30/00 RENT WAREHOUSE PER SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000'S)(2) BASE RENT(%) ($)(3)(5)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MERCER COUNTY, NEW JERSEY
PRINCETON
400 Alexander Road (6).................... 1987 n/a n/a 466 0.10 n/a
103 Carnegie Center....................... 1984 96,000 100.0 2,237 0.46 23.30
100 Overlook Center....................... 1988 149,600 99.8 3,738 0.76 25.04
5 Vaughn Drive............................ 1987 98,500 100.0 2,271 0.46 23.06
MIDDLESEX COUNTY, NEW JERSEY
EAST BRUNSWICK
377 Summerhill Road....................... 1977 40,000 100.0 373 0.08 9.33
PLAINSBORO
500 College Road East..................... 1984 158,235 100.0 3,404 0.70 21.51
SOUTH BRUNSWICK
3 Independence Way........................ 1983 111,300 99.9 2,101 0.43 18.90
WOODBRIDGE
581 Main Street........................... 1991 200,000 100.0 4,574 0.94 22.87
MONMOUTH COUNTY, NEW JERSEY
NEPTUNE
3600 Route 66............................. 1989 180,000 100.0 2,413 0.49 13.41
WALL TOWNSHIP
1305 Campus Parkway....................... 1988 23,350 92.4 423 0.09 19.61
1350 Campus Parkway....................... 1990 79,747 99.9 1,329 0.27 16.68
MORRIS COUNTY, NEW JERSEY
FLORHAM PARK
325 Columbia Turnpike..................... 1987 168,144 100.0 4,022 0.82 23.92
MORRIS PLAINS
201 Littleton Road........................ 1979 88,369 100.0 1,771 0.36 20.04
250 Johnson Road.......................... 1977 75,000 100.0 1,090 0.22 14.53
MORRIS TOWNSHIP
340 Mt. Kemble Avenue..................... 1985 387,000 100.0 5,529 1.13 14.29
412 Mt. Kemble Avenue (7)................. 1986 n/a n/a 6,481 1.33 n/a
PARSIPPANY
7 Campus Drive............................ 1982 154,395 100.0 2,551 0.52 16.52
8 Campus Drive ........................... 1987 215,265 100.0 5,235 1.07 24.32
2 Dryden Way.............................. 1990 6,216 100.0 68 0.01 10.94
4 Gatehall Drive (4)...................... 1988 248,480 98.2 5,856 1.20 24.00
2 Hilton Court............................ 1991 181,592 100.0 4,556 0.93 25.09
600 Parsippany Road....................... 1978 96,000 100.0 1,347 0.28 14.03
1 Sylvan Way.............................. 1989 150,557 100.0 3,513 0.72 23.33
5 Sylvan Way.............................. 1989 151,383 96.8 3,542 0.72 24.17
7 Sylvan Way.............................. 1987 145,983 100.0 2,920 0.60 20.00
PASSAIC COUNTY, NEW JERSEY
CLIFTON
777 Passaic Avenue........................ 1983 75,000 63.1 939 0.19 19.84
TOTOWA
999 Riverview Drive....................... 1988 56,066 100.0 930 0.19 16.59
WAYNE
201 Willowbrook Boulevard................. 1970 178,329 99.0 2,426 0.50 13.74
</TABLE>
49
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE TOTAL OFFICE,
NET LEASED ANNUAL OFFICE/FLEX, AVERAGE
RENTABLE AS OF BASE AND INDUSTRIAL/ BASE RENT
PROPERTY YEAR AREA 6/30/00 RENT WAREHOUSE PER SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000'S)(2) BASE RENT(%) ($)(3)(5)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SOMERSET COUNTY, NEW JERSEY
BASKING RIDGE
222 Mt. Airy Road......................... 1986 49,000 100.0 743 0.15 15.16
233 Mt. Airy Road......................... 1987 66,000 100.0 762 0.16 11.55
BRIDGEWATER
721 Route 202/206......................... 1989 192,741 100.0 3,974 0.81 20.62
UNION COUNTY, NEW JERSEY
CLARK
100 Walnut Avenue......................... 1985 182,555 100.0 4,548 0.93 24.91
CRANFORD
6 Commerce Drive.......................... 1973 56,000 85.5 1,048 0.21 21.89
11 Commerce Drive......................... 1981 90,000 90.8 1,053 0.22 12.89
12 Commerce Drive......................... 1967 72,260 89.4 613 0.13 9.49
20 Commerce Drive......................... 1990 176,600 100.0 3,819 0.78 21.63
65 Jackson Drive.......................... 1984 82,778 100.0 1,591 0.33 19.22
NEW PROVIDENCE
890 Mountain Road......................... 1977 80,000 100.0 2,051 0.42 25.64
--------------------------------------------------------------------------------------------------------------------------------
TOTAL NEW JERSEY OFFICE 11,091,129 99.0 234,878 48.07 21.40
--------------------------------------------------------------------------------------------------------------------------------
DUTCHESS COUNTY, NEW YORK
FISHKILL
300 South Lake Drive...................... 1987 118,727 98.3 2,144 0.44 18.37
NASSAU COUNTY, NEW YORK
NORTH HEMPSTEAD
111 East Shore Road....................... 1980 55,575 100.0 1,515 0.31 27.26
600 Community Drive....................... 1983 206,274 100.0 4,860 0.99 23.56
ROCKLAND COUNTY, NEW YORK
SUFFERN
400 Rella Boulevard....................... 1988 180,000 99.0 3,579 0.73 20.08
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
100 Clearbrook Road....................... 1975 60,000 100.0 939 0.19 15.65
101 Executive Boulevard................... 1971 50,000 79.5 802 0.16 20.18
555 Taxter Road (4)....................... 1986 170,554 100.0 4,017 0.82 23.55
565 Taxter Road (4)....................... 1988 170,554 78.7 3,294 0.67 24.54
570 Taxter Road........................... 1972 75,000 86.2 1,431 0.29 22.13
HAWTHORNE
30 Saw Mill River Road.................... 1982 248,400 100.0 5,221 1.07 21.02
1 Skyline Drive........................... 1980 20,400 99.0 249 0.05 12.33
2 Skyline Drive........................... 1987 30,000 98.9 510 0.10 17.19
17 Skyline Drive.......................... 1989 85,000 100.0 1,237 0.25 14.55
7 Skyline Drive........................... 1987 109,000 100.0 2,176 0.45 19.96
TARRYTOWN
200 White Plains Road..................... 1982 89,000 88.1 1,805 0.37 23.02
220 White Plains Road..................... 1984 89,000 99.4 1,896 0.39 21.43
WHITE PLAINS
1 Barker Avenue........................... 1975 68,000 96.6 1,600 0.33 24.36
3 Barker Avenue........................... 1983 65,300 93.3 1,257 0.26 20.63
50 Main Street............................ 1985 309,000 98.8 7,682 1.57 25.16
11 Martine Avenue......................... 1987 180,000 100.0 4,376 0.90 24.31
1 Water Street............................ 1979 45,700 99.8 994 0.20 21.79
</TABLE>
50
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE TOTAL OFFICE,
NET LEASED ANNUAL OFFICE/FLEX, AVERAGE
RENTABLE AS OF BASE AND INDUSTRIAL/ BASE RENT
PROPERTY YEAR AREA 6/30/00 RENT WAREHOUSE PER SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000'S)(2) BASE RENT(%) ($)(3)(5)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YONKERS
1 Executive Boulevard..................... 1982 112,000 100.0 2,453 0.50 21.90
3 Executive Plaza......................... 1987 58,000 100.0 1,258 0.26 21.69
--------------------------------------------------------------------------------------------------------------------------------
TOTAL NEW YORK OFFICE 2,595,484 96.8 55,295 11.30 22.01
--------------------------------------------------------------------------------------------------------------------------------
CHESTER COUNTY, PENNSYLVANIA
BERWYN
1000 Westlakes Drive...................... 1989 60,696 93.0 1,455 0.30 25.78
1055 Westlakes Drive...................... 1990 118,487 100.0 2,298 0.47 19.39
1205 Westlakes Drive...................... 1988 130,265 99.8 2,861 0.59 22.01
1235 Westlakes Drive...................... 1986 134,902 99.7 3,062 0.63 22.77
DELAWARE COUNTY, PENNSYLVANIA
LESTER
100 Stevens Drive......................... 1986 95,000 100.0 853 0.17 8.98
200 Stevens Drive......................... 1987 208,000 100.0 3,785 0.77 18.20
300 Stevens Drive......................... 1992 68,000 100.0 1,140 0.23 16.76
MEDIA
1400 Providence Road - Center I........... 1986 100,000 81.3 1,812 0.37 22.29
1400 Providence Road - Center II.......... 1990 160,000 83.5 3,086 0.63 23.10
MONTGOMERY COUNTY, PENNSYLVANIA
LOWER PROVIDENCE
1000 Madison Avenue....................... 1990 100,700 100.0 1,815 0.37 18.02
PLYMOUTH MEETING
1150 Plymouth Meeting Mall................ 1970 167,748 84.8 2,975 0.61 20.91
Five Sentry Parkway East.................. 1984 91,600 100.0 1,498 0.31 16.35
Five Sentry Parkway West.................. 1984 38,400 100.0 664 0.14 17.29
--------------------------------------------------------------------------------------------------------------------------------
TOTAL PENNSYLVANIA OFFICE 1,473,798 94.9 27,304 5.59 19.53
--------------------------------------------------------------------------------------------------------------------------------
FAIRFIELD COUNTY, CONNECTICUT
GREENWICH
500 West Putnam........................... 1973 121,250 98.3 2,779 0.57 23.32
NORWALK
40 Richards Avenue........................ 1985 145,487 97.7 2,841 0.58 19.99
SHELTON
1000 Bridgeport Avenue.................... 1986 133,000 89.5 2,316 0.47 19.46
--------------------------------------------------------------------------------------------------------------------------------
TOTAL CONNECTICUT OFFICE 399,737 95.2 7,936 1.62 20.86
--------------------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA
WASHINGTON
1201 Connecticut Avenue, NW (4)........... 1940 169,549 96.6 4,643 0.95 28.35
1400 L Street, NW......................... 1987 159,000 100.0 5,868 1.20 36.91
1709 New York Avenue, NW.................. 1972 166,000 100.0 6,893 1.41 41.52
--------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRICT OF COLUMBIA OFFICE 494,549 98.8 17,404 3.56 35.61
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE TOTAL OFFICE,
NET LEASED ANNUAL OFFICE/FLEX, AVERAGE
RENTABLE AS OF BASE AND INDUSTRIAL/ BASE RENT
PROPERTY YEAR AREA 6/30/00 RENT WAREHOUSE PER SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000'S)(2) BASE RENT(%) ($)(3)(5)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRINCE GEORGE'S COUNTY, MARYLAND
LANHAM
4200 Parliament Place..................... 1989 122,000 91.3 2,335 0.48 20.96
--------------------------------------------------------------------------------------------------------------------------------
TOTAL MARYLAND OFFICE 122,000 91.3 2,335 0.48 20.96
--------------------------------------------------------------------------------------------------------------------------------
BEXAR COUNTY, TEXAS
SAN ANTONIO
200 Concord Plaza Drive................... 1986 248,700 92.4 4,451 0.91 19.37
1777 N.E. Loop 410........................ 1986 256,137 92.8 3,573 0.73 15.03
84 N.E. Loop 410.......................... 1971 187,312 87.9 2,477 0.51 15.04
111 Soledad............................... 1918 248,153 93.0 2,452 0.50 10.62
COLLIN COUNTY, TEXAS
PLANO
555 Republic Place........................ 1986 97,889 97.2 1,472 0.30 15.47
DALLAS COUNTY,TEXAS
DALLAS
3030 LBJ Freeway.......................... 1984 367,018 96.1 6,347 1.30 18.00
3100 Monticello........................... 1984 173,837 94.9 2,763 0.57 16.75
8214 Westchester.......................... 1983 95,509 79.2 1,301 0.27 17.20
IRVING
2300 Valley View.......................... 1985 142,634 85.4 2,204 0.45 18.09
RICHARDSON
1122 Alma Road............................ 1977 82,576 100.0 607 0.12 7.35
HARRIS COUNTY, TEXAS
HOUSTON
14511 Falling Creek....................... 1982 70,999 98.8 853 0.17 12.16
5225 Katy Freeway......................... 1983 112,213 100.0 1,429 0.29 12.73
5300 Memorial............................. 1982 155,099 100.0 2,297 0.47 14.81
1717 St. James Place...................... 1975 109,574 94.0 1,345 0.28 13.06
1770 St. James Place...................... 1973 103,689 90.4 1,374 0.28 14.66
10497 Town & Country Way.................. 1981 148,434 81.1 1,904 0.39 15.82
POTTER COUNTY, TEXAS
AMARILLO
6900 IH - 40 West (7)..................... 1986 n/a n/a 458 0.09 n./a
TARRANT COUNTY, TEXAS
EULESS
150 West Parkway.......................... 1984 74,429 95.9 1,032 0.21 14.46
TRAVIS COUNTY, TEXAS
AUSTIN
1250 Capital of Texas Hwy. South.......... 1985 270,703 98.8 5,571 1.14 20.83
--------------------------------------------------------------------------------------------------------------------------------
TOTAL TEXAS OFFICE 2,944,905 93.4 43,910 8.98 15.97
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE TOTAL OFFICE,
NET LEASED ANNUAL OFFICE/FLEX, AVERAGE
RENTABLE AS OF BASE AND INDUSTRIAL/ BASE RENT
PROPERTY YEAR AREA 6/30/00 RENT WAREHOUSE PER SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000'S)(2) BASE RENT(%) ($)(3)(5)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MARICOPA COUNTY, ARIZONA
GLENDALE
5551 West Talavi Boulevard................ 1991 181,596 100.0 1,614 0.33 8.89
PHOENIX
19640 North 31st Street................... 1990 124,171 100.0 1,198 0.25 9.65
20002 North 19th Avenue (6)............... 1986 n/a n/a 307 0.06 n/a
SCOTTSDALE
9060 E. Via Linda Boulevard............... 1984 111,200 100.0 2,407 0.49 21.65
--------------------------------------------------------------------------------------------------------------------------------
TOTAL ARIZONA OFFICE 416,967 100.0 5,526 1.13 13.25
--------------------------------------------------------------------------------------------------------------------------------
ARAPAHOE COUNTY, COLORADO
AURORA
750 South Richfield Street................ 1997 108,240 100.0 2,911 0.60 26.89
DENVER
400 South Colorado Boulevard.............. 1983 125,415 97.2 2,066 0.42 16.95
ENGLEWOOD
9359 East Nichols Avenue.................. 1997 72,610 100.0 903 0.18 12.44
5350 South Roslyn Street.................. 1982 63,754 96.2 1,058 0.22 17.25
BOULDER COUNTY, COLORADO
BROOMFIELD
105 South Technology Court................ 1997 37,574 100.0 539 0.11 14.35
303 South Technology Court-A.............. 1997 34,454 100.0 421 0.09 12.22
303 South Technology Court-B.............. 1997 40,416 100.0 421 0.09 10.42
LOUISVILLE
1172 Century Drive........................ 1996 49,566 100.0 562 0.11 11.34
248 Centennial Parkway.................... 1996 39,266 100.0 563 0.12 14.34
285 Century Place......................... 1997 69,145 100.0 1,117 0.23 16.15
DENVER COUNTY, COLORADO
DENVER
3600 South Yosemite....................... 1974 133,743 100.0 1,289 0.26 9.64
DOUGLAS COUNTY, COLORADO
ENGLEWOOD
384 Inverness Drive South................. 1985 51,523 100.0 813 0.17 15.78
400 Inverness Drive....................... 1997 111,608 99.9 2,756 0.56 24.72
67 Inverness Drive East................... 1996 54,280 100.0 662 0.14 12.20
5975 South Quebec Street.................. 1996 102,877 99.8 2,380 0.49 23.18
PARKER
9777 Pyramid Court........................ 1995 120,281 100.0 1,323 0.27 11.00
EL PASO COUNTY, COLORADO
COLORADO SPRINGS
8415 Explorer............................. 1998 47,368 100.0 570 0.12 12.03
1975 Research Parkway..................... 1997 115,250 100.0 1,679 0.34 14.57
2375 Telstar Drive........................ 1998 47,369 100.0 570 0.12 12.03
</TABLE>
53
<PAGE>
PROPERTY LISTING
OFFICE PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE TOTAL OFFICE,
NET LEASED ANNUAL OFFICE/FLEX, AVERAGE
RENTABLE AS OF BASE AND INDUSTRIAL/ BASE RENT
PROPERTY YEAR AREA 6/30/00 RENT WAREHOUSE PER SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000'S)(2) BASE RENT(%) ($)(3)(5)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
JEFFERSON COUNTY, COLORADO
LAKEWOOD
141 Union Boulevard....................... 1985 63,600 98.9 1,099 0.22 17.47
--------------------------------------------------------------------------------------------------------------------------------
TOTAL COLORADO OFFICE 1,488,339 99.5 23,702 4.86 16.00
--------------------------------------------------------------------------------------------------------------------------------
SAN FRANCISCO COUNTY, CALIFORNIA
SAN FRANCISCO
795 Folsom Street (4)..................... 1977 183,445 100.0 4,701 0.96 25.63
760 Market Street......................... 1908 267,446 95.1 7,877 1.61 30.97
--------------------------------------------------------------------------------------------------------------------------------
TOTAL CALIFORNIA OFFICE 450,891 97.1 12,578 2.57 28.73
--------------------------------------------------------------------------------------------------------------------------------
HILLSBOROUGH COUNTY, FLORIDA
TAMPA
501 Kennedy Boulevard..................... 1982 297,429 88.8 3,786 0.77 14.33
--------------------------------------------------------------------------------------------------------------------------------
TOTAL FLORIDA OFFICE 297,429 88.8 3,786 0.77 14.33
--------------------------------------------------------------------------------------------------------------------------------
POLK COUNTY, IOWA
WEST DES MOINES
2600 Westown Parkway...................... 1988 72,265 100.0 1,120 0.23 15.50
--------------------------------------------------------------------------------------------------------------------------------
TOTAL IOWA OFFICE 72,265 100.0 1,120 0.23 15.50
--------------------------------------------------------------------------------------------------------------------------------
DOUGLAS COUNTY, NEBRASKA
OMAHA
210 South 16th Street..................... 1894 319,535 94.3 3,310 0.68 10.98
--------------------------------------------------------------------------------------------------------------------------------
TOTAL NEBRASKA OFFICE 319,535 94.3 3,310 0.68 10.98
--------------------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE PROPERTIES 22,167,028 97.4 439,084 89.84 20.34
================================================================================================================================
</TABLE>
54
<PAGE>
PROPERTY LISTING
OFFICE/FLEX PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE TOTAL OFFICE,
NET LEASED ANNUAL OFFICE/FLEX, AVERAGE
RENTABLE AS OF BASE AND INDUSTRIAL/ BASE RENT
PROPERTY YEAR AREA 6/30/00 RENT WAREHOUSE PER SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000'S)(2) BASE RENT(%) ($)(3)(5)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BURLINGTON COUNTY, NEW JERSEY
BURLINGTON
3 Terri Lane.............................. 1991 64,500 61.4 399 0.08 10.07
5 Terri Lane.............................. 1992 74,555 62.2 413 0.08 8.91
MOORESTOWN
2 Commerce Drive (4)...................... 1986 49,000 100.0 364 0.07 7.43
101 Commerce Drive........................ 1988 64,700 100.0 336 0.07 5.19
102 Commerce Drive (4).................... 1987 38,400 87.5 182 0.04 5.42
201 Commerce Drive........................ 1986 38,400 100.0 196 0.04 5.10
202 Commerce Drive (4).................... 1988 51,200 100.0 269 0.06 5.26
1 Executive Drive......................... 1989 20,570 91.2 107 0.02 5.70
2 Executive Drive (4)..................... 1988 60,800 100.0 473 0.10 5.42
101 Executive Drive....................... 1990 29,355 45.8 125 0.03 9.30
102 Executive Drive....................... 1990 64,000 90.0 422 0.09 7.33
225 Executive Drive....................... 1990 50,600 100.0 320 0.07 6.32
97 Foster Road............................ 1982 43,200 100.0 187 0.04 4.33
1507 Lancer Drive......................... 1995 32,700 100.0 139 0.03 4.25
1510 Lancer Drive......................... 1998 88,000 100.0 370 0.08 4.20
1256 North Church......................... 1984 63,495 49.9 319 0.07 10.07
840 North Lenola.......................... 1995 38,300 100.0 272 0.06 7.10
844 North Lenola.......................... 1995 28,670 100.0 213 0.04 7.43
30 Twosome Drive.......................... 1997 39,675 100.0 223 0.05 5.62
40 Twosome Drive.......................... 1996 40,265 63.1 196 0.04 7.71
50 Twosome Drive.......................... 1997 34,075 100.0 269 0.06 7.89
WEST DEPTFORD
1451 Metropolitan Drive................... 1996 21,600 100.0 149 0.03 6.90
MERCER COUNTY, NEW JERSEY
HAMILTON TOWNSHIP
100 Horizon Drive......................... 1989 13,275 0.0 13 0.00 0.00
200 Horizon Drive......................... 1991 45,770 100.0 446 0.09 9.74
300 Horizon Drive......................... 1989 69,780 73.8 826 0.17 16.04
500 Horizon Drive......................... 1990 41,205 57.8 313 0.06 13.14
MONMOUTH COUNTY, NEW JERSEY
WALL TOWNSHIP
1325 Campus Parkway....................... 1988 35,000 100.0 261 0.05 7.46
1340 Campus Parkway....................... 1992 72,502 94.6 793 0.16 11.56
1345 Campus Parkway....................... 1995 76,300 100.0 707 0.14 9.27
1433 Highway 34........................... 1985 69,020 79.1 445 0.09 8.15
1320 Wyckoff Avenue....................... 1986 20,336 100.0 47 0.01 2.31
1324 Wyckoff Avenue....................... 1987 21,168 100.0 188 0.04 8.88
PASSAIC COUNTY, NEW JERSEY
TOTOWA
1 Center Court............................ 1999 38,961 37.8 144 0.03 9.78
2 Center Court............................ 1998 30,600 99.3 349 0.07 11.49
11 Commerce Way........................... 1989 47,025 100.0 476 0.10 10.12
20 Commerce Way........................... 1992 42,540 100.0 412 0.08 9.69
29 Commerce Way........................... 1990 48,930 100.0 482 0.10 9.85
40 Commerce Way........................... 1987 50,576 100.0 560 0.11 11.07
45 Commerce Way........................... 1992 51,207 100.0 483 0.10 9.43
60 Commerce Way........................... 1988 50,333 84.3 348 0.07 8.20
80 Commerce Way........................... 1996 22,500 100.0 286 0.06 12.71
</TABLE>
55
<PAGE>
PROPERTY LISTING
OFFICE/FLEX PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE TOTAL OFFICE,
NET LEASED ANNUAL OFFICE/FLEX, AVERAGE
RENTABLE AS OF BASE AND INDUSTRIAL/ BASE RENT
PROPERTY YEAR AREA 6/30/00 RENT WAREHOUSE PER SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000'S)(2) BASE RENT(%) ($)(3)(5)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
100 Commerce Way.......................... 1996 24,600 100.0 285 0.06 11.59
120 Commerce Way.......................... 1994 9,024 100.0 92 0.02 10.20
140 Commerce Way.......................... 1994 26,881 99.5 278 0.06 10.39
--------------------------------------------------------------------------------------------------------------------------------
TOTAL NEW JERSEY OFFICE/FLEX 1,943,593 88.2 14,177 2.92 8.27
--------------------------------------------------------------------------------------------------------------------------------
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
11 Clearbrook Road........................ 1974 31,800 100.0 334 0.07 10.50
75 Clearbrook Road........................ 1990 32,720 100.0 816 0.17 24.94
150 Clearbrook Road....................... 1975 74,900 100.0 1,049 0.21 14.01
175 Clearbrook Road....................... 1973 98,900 98.5 1,441 0.29 14.79
200 Clearbrook Road....................... 1974 94,000 99.8 1,184 0.24 12.62
250 Clearbrook Road....................... 1973 155,000 94.5 1,277 0.26 8.72
50 Executive Boulevard.................... 1969 45,200 97.2 384 0.08 8.74
77 Executive Boulevard.................... 1977 13,000 100.0 166 0.03 12.77
85 Executive Boulevard.................... 1968 31,000 99.4 407 0.08 13.21
300 Executive Boulevard................... 1970 60,000 99.7 581 0.12 9.71
350 Executive Boulevard................... 1970 15,400 98.8 243 0.05 15.97
399 Executive Boulevard................... 1962 80,000 100.0 967 0.20 12.09
400 Executive Boulevard................... 1970 42,200 100.0 618 0.13 14.64
500 Executive Boulevard................... 1970 41,600 100.0 574 0.12 13.80
525 Executive Boulevard................... 1972 61,700 100.0 837 0.17 13.57
1 Westchester Plaza....................... 1967 25,000 100.0 294 0.06 11.76
2 Westchester Plaza....................... 1968 25,000 100.0 447 0.09 17.88
3 Westchester Plaza....................... 1969 93,500 98.5 1,117 0.23 12.13
4 Westchester Plaza....................... 1969 44,700 99.8 629 0.13 14.10
5 Westchester Plaza....................... 1969 20,000 100.0 291 0.06 14.55
6 Westchester Plaza....................... 1968 20,000 100.0 301 0.06 15.05
7 Westchester Plaza....................... 1972 46,200 100.0 650 0.13 14.07
8 Westchester Plaza....................... 1971 67,200 100.0 866 0.18 12.89
HAWTHORNE
200 Saw Mill River Road................... 1965 51,100 88.8 623 0.13 13.73
4 Skyline Drive........................... 1987 80,600 100.0 1,246 0.25 15.46
8 Skyline Drive........................... 1985 50,000 98.9 797 0.16 16.12
10 Skyline Drive.......................... 1985 20,000 100.0 283 0.06 14.15
11 Skyline Drive.......................... 1989 45,000 100.0 683 0.14 15.18
12 Skyline Drive (4)...................... 1999 46,850 100.0 733 0.15 15.65
15 Skyline Drive.......................... 1989 55,000 100.0 972 0.20 17.67
YONKERS
100 Corporate Boulevard................... 1987 78,000 98.2 1,269 0.26 16.57
200 Corporate Boulevard South............. 1990 84,000 99.8 1,383 0.28 16.50
4 Executive Plaza......................... 1986 80,000 99.9 1,033 0.21 12.93
6 Executive Plaza......................... 1987 80,000 100.0 1,025 0.21 12.81
1 Odell Plaza............................. 1980 106,000 100.0 1,309 0.27 12.35
5 Odell Plaza............................. 1983 38,400 99.6 504 0.10 13.18
7 Odell Plaza............................. 1984 42,600 99.6 665 0.14 15.67
--------------------------------------------------------------------------------------------------------------------------------
TOTAL NEW YORK OFFICE/FLEX 2,076,570 99.0 27,998 5.72 13.63
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE>
PROPERTY LISTING
OFFICE/FLEX PROPERTIES
(CONTINUED)
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE TOTAL OFFICE,
NET LEASED ANNUAL OFFICE/FLEX, AVERAGE
RENTABLE AS OF BASE AND INDUSTRIAL/ BASE RENT
PROPERTY YEAR AREA 6/30/00 RENT WAREHOUSE PER SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000'S)(2) BASE RENT(%) ($)(3)(5)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FAIRFIELD COUNTY, CONNECTICUT
STAMFORD
419 West Avenue........................... 1986 88,000 96.8 1,431 0.29 16.80
500 West Avenue........................... 1988 25,000 100.0 361 0.07 14.44
550 West Avenue........................... 1990 54,000 100.0 779 0.16 14.43
600 West Avenue (4)....................... 1999 66,000 100.0 623 0.13 9.43
650 West Avenue........................... 1998 40,000 100.0 632 0.13 15.80
--------------------------------------------------------------------------------------------------------------------------------
TOTAL CONNECTICUT OFFICE/FLEX 273,000 99.0 3,826 0.78 14.16
--------------------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE/FLEX PROPERTIES 4,293,163 94.1 46,001 9.42 11.39
================================================================================================================================
</TABLE>
57
<PAGE>
PROPERTY LISTING
INDUSTRIAL/WAREHOUSE PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE TOTAL OFFICE,
NET LEASED ANNUAL OFFICE/FLEX, AVERAGE
RENTABLE AS OF BASE AND INDUSTRIAL/ BASE RENT
PROPERTY YEAR AREA 6/30/00 RENT WAREHOUSE PER SQ. FT.
LOCATION BUILT (SQ. FT.) (%)(1) ($000'S)(2) BASE RENT(%) ($)(3)(5)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
1 Warehouse Lane.......................... 1957 6,600 100.0 57 0.01 8.64
2 Warehouse Lane.......................... 1957 10,900 100.0 113 0.02 10.37
3 Warehouse Lane.......................... 1957 77,200 100.0 290 0.06 3.76
4 Warehouse Lane.......................... 1957 195,500 97.4 1,938 0.40 10.18
5 Warehouse Lane.......................... 1957 75,100 97.1 725 0.15 9.94
6 Warehouse Lane.......................... 1982 22,100 100.0 514 0.10 23.26
--------------------------------------------------------------------------------------------------------------------------------
TOTAL INDUSTRIAL/WAREHOUSE PROPERTIES 387,400 98.1 3,637 0.74 9.57
--------------------------------------------------------------------------------------------------------------------------------
TOTAL OFFICE, OFFICE/FLEX,
AND INDUSTRIAL/WAREHOUSE
PROPERTIES 26,847,591 96.9 488,722 100.00 18.79
================================================================================================================================
</TABLE>
(1) Based on all leases in effect as of June 30, 2000.
(2) Total base rent for 12 months ended June 30, 2000, determined in accordance
with GAAP. Substantially all of the leases provide for annual base rents
plus recoveries and escalation charges based upon the tenant's
proportionate share of and/or increases in real estate taxes and certain
operating costs, as defined, and the pass through of charges for electrical
usage. For those properties acquired or placed in service during the 12
months ended June 30, 2000, amounts are annualized, as per Note 4.
(3) Base rent for the 12 months ended June 30, 2000 divided by net rentable
square feet leased at June 30, 2000. For those properties acquired or
placed in service during 12 months ended June 30, 2000, amounts are
annualized, as per Note 4.
(4) As this property was acquired or placed in service during the 12 months
ended June 30, 2000, the amounts represented for base rent are annualized.
These annualized amounts may not be indicative of the property's results
had the Company owned or placed such property in service for the entire 12
months ended June 30, 2000.
(5) Excludes office space leased by the Company.
(6) The property was sold by the Company in 1999.
(7) The property was sold by the Company in 2000.
-------------------------------
58
<PAGE>
FUNDS FROM OPERATIONS
The Company considers funds from operations ("FFO"), after adjustment for
straight-lining of rents and non-recurring charges, one measure of REIT
performance. Funds from operations is defined as net income (loss) before
minority interest of unitholders, computed in accordance with GAAP, excluding
gains (or losses) from debt restructuring, other extraordinary items, and
sales of depreciable rental property, plus real estate-related depreciation
and amortization. Funds from operations should not be considered as an
alternative to net income as an indication of the Company's performance or to
cash flows as a measure of liquidity. Funds from operations presented herein
is not necessarily comparable to funds from operations presented by other
real estate companies due to the fact that not all real estate companies use
the same definition. However, the Company's funds from operations is
comparable to the funds from operations of real estate companies that use the
current definition of the National Association of Real Estate Investment
Trusts ("NAREIT"), after the adjustment for straight-lining of rents and
non-recurring charges.
Funds from operations for the three and six month periods ended June 30, 2000
and 1999 as calculated in accordance with NAREIT's definition as published in
October 1999, after adjustment for straight-lining of rents and non-recurring
charges, are summarized in the following table (IN THOUSANDS):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before gain on sales of rental property
and minority interests $ 40,153 $ 25,321 $ 85,586 $ 66,134
Add: Real estate-related depreciation and
amortization (1) 23,434 22,769 46,152 45,720
Gain on sale of land -- -- 2,248
Non-recurring charges 9,228 16,458 9,228 16,458
Deduct: Rental income adjustment for
straight-lining of rents (2) (3,400) (3,833) (5,590) (7,378)
Minority interests:
partially-owned properties (2,982) -- (5,072) --
------------------------------------------------------------------------------------------------------------
Funds from operations, after adjustment
for straight-lining of rents
and non-recurring charges $ 66,433 $ 60,715 $ 132,552 $ 120,934
Deduct: Distributions to preferred unitholders (3,765) (3,869) (7,634) (7,738)
------------------------------------------------------------------------------------------------------------
Funds from operations, after adjustment for
straight-lining of rents and non-recurring charges,
after distributions to preferred unitholders $ 62,668 $ 56,846 $ 124,918 $ 113,196
============================================================================================================
Cash flows provided by operating activities $ 120,576 $ 110,008
Cash flows provided by (used in)
investing activities $ 62,329 $ (90,548)
Cash flows used in financing activities $(181,041) $ (13,750)
------------------------------------------------------------------------------------------------------------
Basic weighted average shares/units
outstanding (3) 66,627 67,173 66,527 67,092
------------------------------------------------------------------------------------------------------------
Diluted weighted average shares/units
outstanding (3) 73,284 74,104 73,237 74,040
------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes the Company's share from unconsolidated joint ventures of $686 and
$509 for the three months ended June 30, 2000 and 1999, respectively, and
$1,420 and $1,610 for the six months ended June 30, 2000 and 1999,
respectively.
(2) Includes the Company's share from unconsolidated joint ventures of ($3) and
($26) for the three months ended June 30, 2000 and 1999, respectively, and
$54 and ($44) for the six months ended June 30, 2000 and 1999,
respectively.
(3) See calculations for the amounts presented in the following reconciliation.
59
<PAGE>
The following schedule reconciles the Company's basic weighted average shares to
the basic and diluted weighted average shares/units presented above:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic weighted average shares: 58,545 58,510 58,420 58,337
Add: Weighted average common units 8,082 8,663 8,107 8,755
------------------------------------------------------------------------------
Basic weighted average shares/units: 66,627 67,173 66,527 67,092
Add: Weighted average preferred units 6,457 6,618 6,537 6,655
(after conversion to common units)
Stock options 200 313 173 293
------------------------------------------------------------------------------
Diluted weighted average shares/units: 73,284 74,104 73,237 74,040
==============================================================================
</TABLE>
INFLATION
The Company's leases with the majority of its tenants provide for recoveries and
escalation charges based upon the tenant's proportionate share of, and/or
increases in, real estate taxes and certain operating costs, which reduce the
Company's exposure to increases in operating costs resulting from inflation.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The Company considers portions of this information to be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of The Securities Exchange Act of 1934. Although the Company
believes that the expectations reflected in such forward-looking statements are
based upon reasonable assumptions, it can give no assurance that its
expectations will be achieved.
60
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Approximately $1.2 billion of the Company's long-term debt bears interest at
fixed rates, and therefore the fair value of these instruments is affected by
changes in the market interest rates. The following table presents principal
cash flows (in thousands) based upon maturity dates of the debt obligations and
the related weighted-average interest rates by expected maturity dates for the
fixed rate debt. The interest rate on the variable rate debt as of June 30, 2000
ranged from LIBOR plus 65 basis points to LIBOR plus 80 basis points.
JUNE 30, 2000
<TABLE>
<CAPTION>
LONG-TERM
DEBT, INCLUDING 7/1/00- FAIR
CURRENT PORTION 12/31/00 2001 2002 2003 2004 THEREAFTER TOTAL VALUE
--------------- -------- ---- ---- ---- ---- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate...... $ 7,124 $ 7,468 $ 3,458 $ 195,612 $ 312,195 $ 713,512 $ 1,239,369 $1,184,442
Average Interest
Rate......... 6.93% 7.44% 8.20% 7.30% 7.34% 7.19% 7.24%
Variable Rate... $ 215,730 $ 32,178 $ 247,908 $ 247,908
</TABLE>
61
<PAGE>
MACK-CALI REALTY CORPORATION
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Reference is made to "Other Contingencies" in Note 13 (Commitments and
Contingencies) to the Consolidated Financial Statements, which is
specifically incorporated by reference herein.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
Item 5. OTHER INFORMATION
Not Applicable.
62
<PAGE>
MACK-CALI REALTY CORPORATION
PART II - OTHER INFORMATION (CONTINUED)
ITEM 6 - EXHIBITS
(a) Exhibits
The following exhibits are filed herewith or are incorporated by reference
to exhibits previously filed:
EXHIBIT
NUMBER EXHIBIT TITLE
2.1 Agreement and Plan of Merger, dated as of June 27, 2000, among
Mack-Cali Realty Corporation, Mack-Cali Realty, L.P., Prentiss
Properties Trust and Prentiss Properties Acquisition Partners,
L.P. (filed as Exhibit 2.1 to the Company's Form 8-K dated
June 27, 2000).
3.1 Restated Charter of Mack-Cali Realty Corporation dated June 2,
1999, together with Articles Supplementary thereto (filed as
Exhibit 3.1 to the Company's Form 8-K dated June 10, 1999 and
as Exhibit 4.2 to the Company's Form 8-K dated July 6, 1999
and each incorporated herein by reference).
3.2 Amended and Restated Bylaws of Mack-Cali Realty Corporation
dated June 10, 1999 (filed as Exhibit 3.2 to the Company's
Form 8-K dated June 10, 1999 and incorporated herein by
reference).
3.3 Second Amended and Restated Agreement of Limited Partnership
dated December 11, 1997, for Mack-Cali Realty, L.P. (filed as
Exhibit 10.110 to the Company's Form 8-K dated December 11,
1997 and incorporated herein by reference).
3.4 Amendment No. 1 to the Second Amended and Restated Agreement
of Limited Partnership of Mack-Cali Realty, L.P. (filed as
Exhibit 3.1 to the Company's Registration Statement on Form
S-3, Registration No. 333-57103, and incorporated herein by
reference).
3.5 Second Amendment to the Second Amended and Restated Agreement
of Limited Partnership of Mack-Cali Realty, L.P. (filed as
Exhibit 10.2 to the Company's Form 8-K dated July 6, 1999 and
incorporated herein by reference).
4.1 Amended and Restated Shareholder Rights Agreement, dated as of
March 7, 2000, between Mack-Cali Realty Corporation and
EquiServe Trust Company, N.A., as Rights Agent (filed as
Exhibit 4.1 to the Company's Form 8-K dated March 7, 2000 and
incorporated herein by reference).
4.2 Amendment No. 1 to the Amended and Restated Shareholder Rights
Agreement, dated as of June 27, 2000, by and among Mack-Cali
Realty Corporation and Equiserve Trust Company, N.A. (filed as
Exhibit 4.1 to the Company's Form 8-K dated June 27, 2000).
4.3 Indenture dated as of March 16, 1999, by and among Mack-Cali
Realty, L.P., as issuer, Mack-Cali Realty Corporation, as
guarantor, and Wilmington Trust Company, as trustee (filed as
Exhibit 4.1 to the Company's Form 8-K dated March 16, 1999 and
incorporated herein by reference).
63
<PAGE>
EXHIBIT
NUMBER EXHIBIT TITLE
4.4 Supplemental Indenture No. 1 dated as of March 16, 1999, by
and among Mack-Cali Realty, L.P., as issuer, and Wilmington
Trust Company, as trustee (filed as Exhibit 4.2 to the
Company's Form 8-K dated March 16, 1999 and incorporated
herein by reference).
4.5 Supplemental Indenture No. 2 dated as of August 2, 1999, by
and among Mack-Cali Realty, L.P., as issuer, and Wilmington
Trust Company, as trustee (filed as Exhibit 4.4 to the
Company's Form 10-Q dated June 30, 1999 and incorporated
herein by reference).
10.1 Amended and Restated Employment Agreement dated as of July 1,
1999 between Mitchell E. Hersh and Mack-Cali Realty
Corporation (filed as Exhibit 10.2 to the Company's Form 10-Q
dated June 30, 1999 and incorporated herein by reference).
10.2 Second Amended and Restated Employment Agreement dated as of
July 1, 1999 between Timothy M. Jones and Mack-Cali Realty
Corporation (filed as Exhibit 10.3 to the Company's Form 10-Q
dated June 30, 1999 and incorporated herein by reference).
10.3 Amended and Restated Employment Agreement dated as of July 1,
1999 between John R. Cali and Mack-Cali Realty Corporation
(filed as Exhibit 10.4 to the Company's Form 10-Q dated June
30, 1999 and incorporated herein by reference).
10.4 Amended and Restated Employment Agreement dated as of July 1,
1999 between Brant Cali and Mack-Cali Realty Corporation
(filed as Exhibit 10.5 to the Company's Form 10-Q dated
June 30, 1999 and incorporated herein by reference).
10.5 Second Amended and Restated Employment Agreement dated as of
July 1, 1999 between Barry Lefkowitz and Mack-Cali Realty
Corporation (filed as Exhibit 10.6 to the Company's Form 10-Q
dated June 30, 1999 and incorporated herein by reference).
10.6 Second Amended and Restated Employment Agreement dated as of
July 1, 1999 between Roger W. Thomas and Mack-Cali Realty
Corporation (filed as Exhibit 10.7 to the Company's Form 10-Q
dated June 30, 1999 and incorporated herein by reference).
10.7 Restricted Share Award Agreement dated as of July 1, 1999
between Mitchell E. Hersh and Mack-Cali Realty Corporation
(filed as Exhibit 10.8 to the Company's Form 10-Q dated
June 30, 1999 and incorporated herein by reference).
10.8 Restricted Share Award Agreement dated as of July 1, 1999
between Timothy M. Jones and Mack-Cali Realty Corporation
(filed as Exhibit 10.9 to the Company's Form 10-Q dated
June 30, 1999 and incorporated herein by reference).
10.9 Restricted Share Award Agreement dated as of July 1, 1999
between John R. Cali and Mack-Cali Realty Corporation (filed
as Exhibit 10.10 to the Company's Form 10-Q dated June 30,
1999 and incorporated herein by reference).
10.10 Restricted Share Award Agreement dated as of July 1, 1999
between Brant Cali and Mack-Cali Realty Corporation (filed as
Exhibit 10.11 to the Company's Form 10-Q dated June 30, 1999
and incorporated herein by reference).
10.11 Restricted Share Award Agreement dated as of July 1, 1999
between Barry Lefkowitz and Mack-Cali Realty Corporation
(filed as Exhibit 10.12 to the Company's Form 10-Q dated
June 30, 1999 and incorporated herein by reference).
64
<PAGE>
EXHIBIT
NUMBER EXHIBIT TITLE
10.12 Restricted Share Award Agreement dated as of July 1, 1999
between Roger W. Thomas and Mack-Cali Realty Corporation
(filed as Exhibit 10.13 to the Company's Form 10-Q dated
June 30, 1999 and incorporated herein by reference).
10.13 Credit Agreement, dated as of December 10, 1997, by and among
Cali Realty, L.P. and the other signatories thereto (filed as
Exhibit 10.122 to the Company's Form 8-K dated December 11,
1997 and incorporated herein by reference).
10.14 Amendment No. 1 to Revolving Credit Agreement dated July 20,
1998, by and among Mack-Cali Realty, L.P. and The Chase
Manhattan Bank, Fleet National Bank and Other Lenders Which
May Become Parties Thereto (filed as Exhibit 10.5 to the
Company's Form 10-K dated December 31, 1998 and incorporated
herein by reference).
10.15 Amendment No. 2 to Revolving Credit Agreement dated December
30, 1998, by and among Mack-Cali Realty, L.P. and The Chase
Manhattan Bank, Fleet National Bank and Other Lenders Which
May Become Parties Thereto (filed as Exhibit 10.6 to the
Company's Form 10-K dated December 31, 1998 and incorporated
herein by reference).
10.16 Contribution and Exchange Agreement among The MK Contributors,
The MK Entities, The Patriot Contributors, The Patriot
Entities, Patriot American Management and Leasing Corp., Cali
Realty, L.P. and Cali Realty Corporation, dated September 18,
1997 (filed as Exhibit 10.98 to the Company's Form 8-K dated
September 19, 1997 and incorporated herein by reference).
10.17 First Amendment to Contribution and Exchange Agreement, dated
as of December 11, 1997, by and among the Company and the Mack
Group (filed as Exhibit 10.99 to the Company's Form 8-K dated
December 11, 1997 and incorporated herein by reference).
*27 Financial Data Schedule
(b) Reports on Form 8-K
During the second quarter of 2000, the Company filed a report on Form 8-K
dated June 8, 2000, reporting under Item 5 that the Board of Directors of the
Company, upon the unanimous recommendation of the Audit Committee of the Board
of Directors of the Company, approved and adopted the Mack-Cali Realty
Corporation Audit Committee Charter.
--------------
*filed herewith
65
<PAGE>
MACK-CALI REALTY CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MACK-CALI REALTY CORPORATION
(Registrant)
Date: August 9, 2000 /s/ Mitchell E. Hersh
----------------------------
Mitchell E. Hersh
Chief Executive Officer
Date: August 9, 2000 /s/ Barry Lefkowitz
----------------------------
Barry Lefkowitz
Executive Vice President &
Chief Financial Officer
