UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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
(IRS Employer
incorporation or organization)
Identification No.)


343 Thornall Street, Edison, New Jersey
08837-2206
(Address of principal executive offices)
(Zip code)

(732) 590-1000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 
(Title of Each Class)
(Name of Each Exchange on Which Registered)
Common Stock, $0.01 par value
Preferred Share Purchase Rights
New York Stock Exchange

 
 
 

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes X No ___

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes ___ No X

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 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes X    No ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K.  [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “accelerated filer," "large accelerated filer,” and "smaller reporting company" in Rule 12b-2 of the Exchange Act.  (Check One):

Large accelerated filer X                                       Accelerated filer ___                                Non-accelerated filer ___                                Smaller reporting company___

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)  Yes ___ No X

As of June 30, 2007, the aggregate market value of the voting stock held by non-affiliates of the registrant was $2,922,992,821.  The aggregate market value was computed with reference to the closing price on the New York Stock Exchange on such date.  This calculation does not reflect a determination that persons are affiliates for any other purpose.

As of February 8, 2008, 65,664,851 shares of common stock, $0.01 par value, of the Company (“Common Stock”) were outstanding.

LOCATION OF EXHIBIT INDEX:  The index of exhibits is contained herein on page number 122.

DOCUMENTS INCORPORATED BY REFERENCE:  Portions of the registrant’s definitive proxy statement for fiscal year ended December 31, 2007 to be issued in conjunction with the registrant’s annual meeting of shareholders expected to be held on May 21, 2008 are incorporated by reference in Part III of this Form 10-K.  The definitive proxy statement will be filed by the registrant with the SEC not later than 120 days from the end of the registrant’s fiscal year ended December 31, 2007.

 
 
 

FORM 10-K

Table of Contents


PART I
  
Page No.
Item 1
Business
3
Item 1A
Risk Factors
8
Item 1B
Unresolved Staff Comments
16
Item 2
Properties
17
Item 3
Legal Proceedings
37
Item 4
Submission of Matters to a Vote of Security Holders
37
     
PART II
    
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters
  
 
and Issuer Purchases of Equity Securities
38
Item 6
Selected Financial Data
41
Item 7
Management’s Discussion and Analysis of Financial Condition and
  
 
Results of Operations
42
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
61
Item 8
Financial Statements and Supplementary Data
62
Item 9
Changes in and Disagreements with Accountants on Accounting and
  
 
Financial Disclosure
62
Item 9A
Controls and Procedures
62
Item 9B
Other Information
63
     
PART III
    
Item 10
Directors, Executive Officers and Corporate Governance
63
Item 11
Executive Compensation
63
Item 12
Security Ownership of Certain Beneficial Owners and Management
  
 
and Related Stockholder Matters
63
Item 13
Certain Relationships and Related Transactions, and Director Independence
63
Item 14
Principal Accounting Fees and Services
63
     
PART IV
    
Item 15
Exhibits and Financial Statement Schedules
64
     
SIGNATURES
  
120
     
EXHIBIT INDEX
  
122
 
 
 
 

 

 
2
 


PART I

ITEM 1.        BUSINESS

GENERAL
Mack-Cali Realty Corporation, a Maryland corporation (together with its subsidiaries, the “Company”), is a fully-integrated, self-administered and self-managed real estate investment trust (“REIT”) that owns and operates a real estate portfolio comprised predominantly of Class A office and office/flex properties located primarily in the Northeast.  The Company performs substantially all commercial real estate leasing, management, acquisition, development and construction services on an in-house basis.  Mack-Cali Realty Corporation was incorporated on May 24, 1994.  The Company’s executive offices are located at 343 Thornall Street, Edison, New Jersey 08837-2206, and its telephone number is (732) 590-1000.  The Company has an internet website at www.mack-cali.com.

As of December 31, 2007, the Company owned or had interests in 294 properties, aggregating approximately 33.7 million square feet, plus developable land (collectively, the “Properties”), which are leased to approximately 2,200 tenants.  The Properties are comprised of: (a) 255 wholly-owned or Company-controlled properties consisting of 150 office buildings and 95 office/flex buildings aggregating approximately 28.8 million square feet, six industrial/warehouse buildings totaling approximately 387,400 square feet, two stand-alone retail properties totaling approximately  17,300 square feet, and two land leases (collectively, the “Consolidated Properties”); and (b) 38 buildings, which are primarily office properties, aggregating approximately 4.5 million square feet, and a 350-room hotel, which are owned by unconsolidated joint ventures in which the Company has investment interests.  Unless otherwise indicated, all references to square feet represent net rentable area.  As of December 31, 2007, the office, office/flex, industrial/warehouse and stand-alone retail properties included in the Consolidated Properties were 92.7 percent leased.  Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2007, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases that expire at the period end date.  Leases that expire as of December 31, 2007 aggregate 146,261 square feet, or 0.5 percent of the net rentable square footage.  The Properties are located in six states, primarily in the Northeast, and the District of Columbia.  See Item 2: Properties.

The Company’s strategy has been to focus its operations, acquisition and development of office properties in high-barrier-to-entry markets and sub-markets where it believes it is, or can become, a significant and preferred owner and operator.  The Company plans to continue this strategy by expanding through acquisitions and/or development in Northeast markets where it has, or can achieve, similar status.  The Company believes that its Properties have excellent locations and access and are well-maintained and professionally managed.  As a result, the Company believes that its Properties attract high quality tenants and achieve among the highest rental, occupancy and tenant retention rates within their markets.  The Company also believes that its extensive market knowledge provides it with a significant competitive advantage, which is further enhanced by its strong reputation for, and emphasis on, delivering highly responsive, professional management services.  See “Business Strategies.”

As of December 31, 2007, executive officers and directors of the Company and their affiliates owned approximately 9 percent of the Company’s outstanding shares of Common Stock (including Units redeemable into shares of Common Stock).  As used herein, the term “Units” refers to limited partnership interests in Mack-Cali Realty, L.P., a Delaware limited partnership (the “Operating Partnership”) through which the Company conducts its real estate activities.  The Company’s executive officers have been employed by the Company and/or its predecessor companies for an average of approximately 20 years.


BUSINESS STRATEGIES
Operations
Reputation: The Company has established a reputation as a highly-regarded landlord with an emphasis on delivering quality tenant services in buildings it owns and/or manages.  The Company believes that its continued success depends in part on enhancing its reputation as an operator of choice, which will facilitate the retention of current tenants and the attraction of new tenants.  The Company believes it provides a superior level of service to its tenants, which should in turn, allow the Company to outperform the market with respect to occupancy rates, as well as improve tenant retention.
 
 
 
3

 
Communication with tenants: The Company emphasizes frequent communication with tenants to ensure first-class service to the Properties.  Property management personnel generally are located on site at the Properties to provide convenient access to management and to ensure that the Properties are well-maintained.  Property management’s primary responsibility is to ensure that buildings are operated at peak efficiency in order to meet both the Company’s and tenants’ needs and expectations.  Property management personnel additionally budget and oversee capital improvements and building system upgrades to enhance the Properties’ competitive advantages in their markets and to maintain the quality of the Company’s properties.

Additionally, the Company’s in-house leasing representatives develop and maintain long-term relationships with the Company’s diverse tenant base and coordinate leasing, expansion, relocation and build-to-suit opportunities within the Company’s portfolio.  This approach allows the Company to offer office space in the appropriate size and location to current or prospective tenants in any of its sub-markets.

Growth
The Company plans to continue to own and operate a portfolio of properties in high-barrier-to-entry markets, with a primary focus in the Northeast.  The Company’s primary objectives are to maximize operating cash flow and to enhance the value of its portfolio through effective management, acquisition, development and property sales strategies, as follows:

Internal Growth: The Company seeks to maximize the value of its existing portfolio through implementing operating strategies designed to produce the highest effective rental and occupancy rates and lowest tenant installation cost within the markets that it operates.  The Company continues to pursue internal growth through re-leasing space at higher effective rents with contractual rent increases and developing or redeveloping space for its diverse base of high credit tenants, including New Cingular Wireless PCS LLC, Morgan Stanley and The United States of America - GSA.  In addition, the Company seeks economies of scale through volume discounts to take advantage of its size and dominance in particular sub-markets, and operating efficiencies through the use of in-house management, leasing, marketing, financing, accounting, legal, development and construction services.

Acquisitions: The Company also believes that growth opportunities exist through acquiring operating properties or properties for redevelopment with attractive returns in its core Northeast sub-markets where, based on its expertise in leasing, managing and operating properties, it believes it is, or can become, a significant and preferred owner and operator.  The Company intends either directly or through joint ventures to acquire, invest in or redevelop additional properties that: (i) are expected to provide attractive initial yields with potential for growth in cash flow from operations; (ii) are well-located, of high quality and competitive in their respective sub-markets; (iii) are located in its existing sub-markets or in sub-markets in which the Company can become a significant and preferred owner and operator; and (iv) it believes have been under-managed or are otherwise capable of improved performance through intensive management, capital improvements and/or leasing that should result in increased effective rental and occupancy rates.

Development: The Company seeks to selectively develop additional properties either directly or through joint ventures where it believes such development will result in a favorable risk-adjusted return on investment in coordination with the above operating strategies.  Such development primarily will occur: (i) when leases have been executed prior to construction; (ii) in stable core Northeast sub-markets where the demand for such space exceeds available supply; and (iii) where the Company is, or can become, a significant and preferred owner and operator.

Property Sales: While management’s principal intention is to own and operate its properties on a long-term basis, it periodically assesses the attributes of each of its properties, with a particular focus on the supply and demand fundamentals of the sub-markets in which they are located.  Based on these ongoing assessments, the Company may, from time to time, decide to sell any of its properties.

Financial
The Company currently intends to maintain a ratio of debt-to-undepreciated assets (total debt of the Company as a percentage of total undepreciated assets) of 50 percent or less.  As of December 31, 2007 and 2006, the Company’s total debt constituted approximately 40.2 and 41.4 percent of total undepreciated assets of the Company, respectively.  The Company has three investment grade credit ratings.  Standard & Poor’s Rating Services (“S&P”) and Fitch, Inc. (“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 existing and prospective preferred stock offerings of the Company.  Moody’s Investors Service (“Moody’s”) has assigned its Baa2 rating to existing and prospective senior unsecured debt of the Operating Partnership and its Baa3 rating to existing and prospective preferred stock offerings of the Company.  Although there is no limit in the Company’s organizational documents on the amount of indebtedness that the Company may incur or a requirement for the maintenance of investment grade credit ratings, the Company has entered into certain financial agreements which contain covenants that limit the Company’s ability to incur indebtedness under certain circumstances.  The Company intends to conduct its operations so as to best be able to maintain its investment grade rated status.  The Company intends to utilize the most appropriate sources of capital for future acquisitions, development, capital improvements and other investments, which may include funds from operating activities, proceeds from property and land sales, short-term and long-term borrowings (including draws on the Company’s revolving credit facility), and the issuance of additional debt or equity securities.
 
 
 
4

 
EMPLOYEES

As of December 31, 2007, the Company had approximately 485 full-time employees.

COMPETITION

The leasing of real estate is highly competitive.  The Properties compete for tenants with lessors and developers of similar properties located in their respective markets primarily on the basis of location, rent charged, services provided, and the design and condition of the Properties.  The Company also experiences competition when attempting to acquire or dispose of real estate, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension trusts, trust funds, partnerships, individual investors and others.

REGULATIONS

Many laws and governmental regulations are applicable to the Properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.

Under various laws and regulations relating to the protection of the environment, an owner of real estate may be held liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property.  These laws often impose liability without regard to whether the owner was responsible for, or even knew of, the presence of such substances.  The presence of such substances may adversely affect the owner’s ability to rent or sell the property or to borrow using such property as collateral and may expose it to liability resulting from any release of, or exposure to, such substances.  Persons who arrange for the disposal or treatment of hazardous or toxic substances at another location may also be liable for the costs of re­moval or remediation of such substances at the disposal or treatment facility, whether or not such facility is owned or operated by such person.  Certain environmental laws impose liability for the release of asbestos-containing materials into the air, and third parties may also seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances.

In connection with the ownership (direct or indirect), operation, management and development of real properties, the Company may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental penalties and injuries to persons and property.

There can be no assurance that (i) future laws, ordinances or regulations will not impose any material environmental liability, (ii) the current environmental condition of the Properties will not be affected by tenants, by the condition of land or operations in the vicinity of the Properties (such as the presence of underground storage tanks), or by third parties unrelated to the Company, or (iii) the Company’s assessments reveal all environmental liabilities and that there are no material environmental liabilities of which the Company is aware.  If compliance with the various laws and regulations, now existing or hereafter adopted, exceeds the Company’s budgets for such items, the Company’s ability to make expected distributions to stockholders could be adversely affected.

There are no other laws or regulations which have a material effect on the Company’s operations, other than typical federal, state and local laws affecting the development and operation of real property, such as zoning laws.
 
 
 
5

 
INDUSTRY SEGMENTS

The Company operates in two industry segments:  (i) real estate; and (ii) construction services.  As of December 31, 2007, the Company does not have any foreign operations and its business is not seasonal.  In May 2006, in conjunction with the Company’s acquisition of the Gale Company and related businesses, the Company acquired a business specializing solely in construction and related services whose operations comprise the Company’s construction services segment.  Please see our financial statements attached hereto and incorporated by reference herein for financial information relating to our industry segments.

RECENT DEVELOPMENTS

The Company’s core markets continue to be weak.  The percentage leased in the Company’s consolidated portfolio of stabilized operating properties was 92.7 percent at December 31, 2007 as compared to 92.0 percent at December 31, 2006 and 91.0 percent at December 31, 2005.  Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2007, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases that expire at the period end date.  Leases that expired as of December 31, 2007, 2006 and 2005 aggregate 146,261, 103,477 and 311,623 square feet, respectively, or 0.5, 0.4 and 1.1 percentage of the net rentable square footage, respectively.  Rental rates on the Company’s space that was re-leased (based on first rents payable) during the year  ended December 31, 2007 decreased an average of 0.2 percent compared to rates that were in effect under the prior leases, as compared to a 0.2 percent decrease in 2006 and an 8.2 percent decrease in 2005.  The Company believes that vacancy rates may continue to increase in some of its markets in 2008.  As a result, the Company’s future earnings and cash flow may continue to be negatively impacted by current market conditions.

Property Acquisitions
The Company acquired the following office properties during the year ended December 31, 2007:  (dollars in thousands)

Acquisition
    
# of
Rentable
Acquisition
Date
Property/Address
Location
Bldgs.
Square Feet
Cost
05/08/07
AAA Properties (a) (c)
Hamilton Township, New Jersey
2
69,232
$    9,048
06/11/07
125 Broad Street (b) (c)
New York, New York
1
524,476
274,091
         
Total Property Acquisitions:
  
3
593,708
$283,139
         
(a)  Included in this transaction was the acquisition of two parcels of developable land aggregating approximately 13 acres.
(b)  Acquisition represented two units of office condominium interests, which collectively comprise floors 2 through 16, or 39.6 percent, of the 40-story, 1.2 million square-foot building.
(c)  Transaction was funded primarily through borrowing on the Company’s revolving credit facility.

Properties Commencing Initial Operations
The following office property commenced initial operations during the year ended December 31, 2007 (dollars in thousands):

     
# of
Rentable
Investment by
Date
Property/Address
Location
Bldgs.
Square Feet
Company (a)
05/08/07
700 Horizon Drive
Hamilton Township, New Jersey
1
120,000
$16,751
         
Total Properties Commencing Initial Operations:
  
1
120,000
$16,751
         
(a)  Development costs were funded primarily through borrowing on the Company’s revolving credit facility.  Amounts are as of December 31, 2007.

Land Acquisition
In February 2007, the Company exercised its option to acquire approximately 43 acres of land sites within its Capital Office Park complex in Greenbelt, Maryland, which is able to accommodate the development of up to 600,000 square feet of office space, for $13 million.  On May 25, 2007, the Company completed the purchase of the land for approximately $13 million, which consisted of 114,911 common operating partnership units valued at $5.2 million, and the remainder in cash.
 
 
 
6

 
Sales
The Company sold the following office properties during the year ended December 31, 2007:  (dollars in thousands)

       
Rentable
Net
Net
  
Sale
    
# of
Square
Sales
Book
Realized
Date
Property/Address
Location
Bldgs.
 Feet
Proceeds
Value
Gain
05/10/07
1000 Bridgeport Avenue
Shelton, Connecticut
1
133,000
$16,411
$13,782
$  2,629
06/11/07
500 W. Putnam Avenue
Greenwich, Connecticut
1
121,250
54,344
18,113
36,231
07/13/07
100 & 200 Decadon Drive
Egg Harbor, New Jersey
2
80,344
11,448
5,894
5,554
             
Total Office Property Sales:
  
4
334,594
$82,203
$37,789
$44,414

FINANCING ACTIVITY

On February 7, 2007, the Company completed an underwritten offer and sale of 4,650,000 shares of its common stock and used the net proceeds, which totaled approximately $252 million (after offering costs), primarily to pay down its outstanding borrowings under the Company’s revolving credit facility and for general corporate purposes.

On September 12, 2007, the Board of Directors authorized an increase to the Company’s repurchase program under which the Company was permitted to purchase up to $150 million of the Company’s outstanding common stock (“Repurchase Program”).  During the year ended December 31, 2007 and through February 8, 2008, the Company purchased and retired 2,893,630 shares of its outstanding common stock for an aggregate cost of approximately $104 million.  The Company has a remaining authorization to repurchase up to approximately $46 million of its outstanding common stock, which it may repurchase from time to time in open market transactions at prevailing prices or through privately negotiated transactions.

AVAILABLE INFORMATION

The Company’s internet website is www.mack-cali.com.  The Company makes available free of charge on or through its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after it electronically files or furnishes such materials to the Securities and Exchange Commission.  In addition, the Company’s internet website includes other items related to corporate governance matters, including, among other things, the Company’s corporate governance guidelines, charters of various committees of the Board of Directors, and the Company’s code of business conduct and ethics applicable to all employees, officers and directors.  The Company intends to disclose on its internet website any amendments to or waivers from its code of business conduct and ethics as well as any amendments to its corporate governance principles or the charters of various committees of the Board of Directors.  Copies of these documents may be obtained, free of charge, from our internet website.  Any shareholder also may obtain copies of these documents, free of charge, by sending a request in writing to: Mack-Cali Investor Relations Department, 343 Thornall Street, Edison, NJ  08837-2206.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

We consider portions of this report, including the documents incorporated by reference, to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.  We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of such act.  Such forward-looking statements relate to, without limitation, our future economic performance, plans and objectives for future operations and projections of revenue and other financial items.  Forward-looking statements can be identified by the use of words such as “may,” “will,” “plan,” “should,” “expect,” “anticipate,” “estimate,” “continue” or comparable terminology.  Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate.  Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved.  Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements.
 
 
 
7

 
Among the factors about which we have made assumptions are:

·  
changes in the general economic climate and conditions, including those affecting industries in which our principal tenants operate;

·  
the extent of any tenant bankruptcies or of any early lease terminations;

·  
our ability to lease or re-lease space at current or anticipated rents;

·  
changes in the supply of and demand for office, office/flex and industrial/warehouse properties;

·  
changes in interest rate levels;

·  
changes in operating costs;

·  
our ability to obtain adequate insurance, including coverage for terrorist acts;

·  
the availability of financing;

·  
changes in governmental regulation, tax rates and similar matters; and

·  
other risks associated with the development and acquisition of properties, including risks that the development may not be completed on schedule, that the tenants will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated.

For further information on factors which could impact us and the statements contained herein, see Item 1A: Risk Factors. We assume no obligation to update and supplement forward-looking statements that become untrue because of subsequent events, new information or otherwise.

ITEM 1A.         RISK FACTORS

Our results from operations and ability to make distributions on our equity and debt service on our indebtedness may be affected by the risk factors set forth below.  All investors should consider the following risk factors before deciding to purchase securities of the Company.  The Company refers to itself as “we” or “our” in the following risk factors.

Declines in economic activities in the Northeastern office markets could adversely affect our operating results.
A majority of our revenues are derived from our properties located in the Northeast, particularly in New Jersey, New York and Pennsylvania.  Adverse economic developments in this region could adversely impact the operations of our properties and, therefore, our profitability.  Because our portfolio consists primarily of office and office/flex buildings (as compared to a more diversified real estate portfolio), a decline in the economy and/or a decline in the demand for office space may adversely affect our ability to make distributions or payments to our investors.

Our performance is subject to risks associated with the real estate industry.
General: Our business and our ability to make distributions or payments to our investors depend on the ability of our properties to generate funds in excess of operating expenses (including scheduled principal payments on debt and capital expenditures).  Events or conditions that are beyond our control may adversely affect our operations and the value of our properties.  Such events or conditions could include:
 
·  
changes in the general economic climate;
·  
changes in local conditions, such as an oversupply of office space, a reduction in demand for office space, or reductions in office market rental rates;
·  
decreased attractiveness of our properties to tenants;
·  
competition from other office and office/flex properties;
·  
our inability to provide adequate maintenance;
·  
increased operating costs, including insurance premiums, utilities and real estate taxes, due to inflation and other factors which may not necessarily be offset by increased rents;
·  
changes in laws and regulations (including tax, environmental, zoning and building codes, and housing laws and regulations) and agency or court interpretations of such laws and regulations and the related costs of compliance;
·  
changes in interest rate levels and the availability of financing;
·  
the inability of a significant number of tenants to pay rent;
·  
our inability to rent office space on favorable terms; and
·  
civil unrest, earthquakes, acts of terrorism and other natural disasters or acts of God that may result in uninsured losses.
 
 
 
 
8

 
We may suffer adverse consequences if our revenues decline since our operating costs do not necessarily decline in proportion to our revenue:  We earn a significant portion of our income from renting our properties. Our operating costs, however, do not necessarily fluctuate in relation to changes in our rental revenue. This means that our costs will not necessarily decline even if our revenues do.  Our operating costs could also increase while our revenues do not. If our operating costs increase but our rental revenues do not, we may be forced to borrow to cover our costs, we may incur losses and we may not have cash available for distributions to our stockholders.

Financially distressed tenants may be unable to pay rent: If a tenant defaults, we may experience delays and incur substantial costs in enforcing our rights as landlord and protecting our investments.  If a tenant files for bankruptcy, a potential court judgment rejecting and terminating such tenant’s lease could adversely affect our ability to make distributions or payments to our investors.

Renewing leases or re-letting space could be costly: If a tenant does not renew its lease upon expiration or terminates its lease early, we may not be able to re-lease the space.  If a tenant does renew its lease or we re-lease the space, the terms of the renewal or new lease, including the cost of required renovations or concessions to the tenant, may be less favorable than the current lease terms, which could adversely affect our ability to make distributions or payments to our investors.

Our insurance coverage on our properties may be inadequate: We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire and flood.  We cannot guarantee that the limits of our current policies will be sufficient in the event of a catastrophe to our properties.  We cannot guarantee that we will be able to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices.  In addition, while our current insurance policies insure us against loss from terrorist acts and toxic mold, in the future, insurance companies may no longer offer coverage against these types of losses, or, if offered, these types of insurance may be prohibitively expensive. If any or all of the foregoing should occur, we may not have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available.  Should an uninsured loss or a loss in excess of our insured limits occur, we could lose all or a portion of the capital we have invested in a property or properties, as well as the anticipated future revenue from the property or properties.  Nevertheless, we might remain obligated for any mortgage debt or other financial obligations related to the property or properties.  We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future.  If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property.  Such events could adversely affect our ability to make distributions or payments to our investors.

Illiquidity of real estate limits our ability to act quickly: Real estate investments are relatively illiquid.  Such illiquidity may limit our ability to react quickly in response to changes in economic and other conditions.  If we want to sell an investment, we might not be able to dispose of that investment in the time period we desire, and the sales price of that investment might not recoup or exceed the amount of our investment.  The prohibition in the Internal Revenue Code of 1986, as amended (the “Code”), and related regulations on a real estate investment trust holding property for sale also may restrict our ability to sell property.  In addition, we acquired a significant number of our properties from individuals to whom we issued Units as part of the purchase price.  In connection with the acquisition of these properties, in order to preserve such individual’s income tax deferral, we contractually agreed not to sell or otherwise transfer the properties for a specified period of time, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate individuals for the income tax consequences of the recognition of such built-in-gains.  As of December 31, 2007, 13 of our properties, with an aggregate net book value of approximately $220.9 million, were subject to these restrictions, which expire periodically through 2016.  For those properties where such restrictions have lapsed, we are generally required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the appropriate individuals. 124 of our properties, with an aggregate net book value of approximately $1.9 billion, have lapsed restrictions and are subject to these conditions.  The above limitations on our ability to sell our investments could adversely affect our ability to make distributions or payments to our investors.
 
 
 
9

 
Americans with Disabilities Act compliance could be costly: Under the Americans with Disabilities Act of 1990 (“ADA”), all public accommodations and commercial facilities must meet certain federal requirements related to access and use by disabled persons.  Compliance with the ADA requirements could involve removal of structural barriers from certain disabled persons’ entrances.  Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such accesses.  Although we believe that our properties are substantially in compliance with present requirements, noncompliance with the ADA or related laws or regulations could result in the United States government imposing fines or private litigants being awarded damages against us.  Such costs may adversely affect our ability to make distributions or payments to our investors.

Environmental problems are possible and may be costly: Various federal, state and local laws and regulations subject property owners or operators to liability for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property.  These laws often impose liability without regard to whether the owner or operator was responsible for or even knew of the presence of such substances.  The presence of or failure to properly remediate hazardous or toxic substances (such as toxic mold) may adversely affect our ability to rent, sell or borrow against contaminated property and may impose liability upon us for personal injury to persons exposed to such substances.  Various laws and regulations also impose liability on persons who arrange for the disposal or treatment of hazardous or toxic substances at another location for the costs of removal or remediation of such substances at the disposal or treatment facility.  These laws often impose liability whether or not the person arranging for such disposal ever owned or operated the disposal facility.  Certain other environmental laws and regulations impose liability on owners or operators of property for injuries relating to the release of asbestos-containing or other materials into the air, water or otherwise into the environment.  As owners and operators of property and as potential arrangers for hazardous substance disposal, we may be liable under such laws and regulations for removal or remediation costs, governmental penalties, property damage, personal injuries and related expenses.  Payment of such costs and expenses could adversely affect our ability to make distributions or payments to our investors.

Competition for acquisitions may result in increased prices for properties: We plan to acquire additional properties in New Jersey, New York and Pennsylvania and in the Northeast generally.  We may be competing for investment opportunities with entities that have greater financial resources.  Several office building developers and real estate companies may compete with us in seeking properties for acquisition, land for development and prospective tenants. Such competition may adversely affect our ability to make distributions or payments to our investors by:
 
·  
reducing the number of suitable investment opportunities offered to us;
·  
increasing the bargaining power of property owners;
·  
interfering with our ability to attract and retain tenants;
·  
increasing vacancies which lowers market rental rates and limits our ability to negotiate rental rates; and/or
·  
adversely affecting our ability to minimize expenses of operation.

New acquisitions may fail to perform as expect:  We may require new office properties, assuming we are able to obtain capital on favorable terms.  Such newly acquired properties may not perform as expected.  Inaccurate assumptions regarding future rental or occupancy rates could result in overly optimistic estimates of future revenues.  In addition, future operating expenses or the costs necessary to bring an acquired property up to standards established for its intended market position may be underestimated.

Development of real estate could be costly: As part of our operating strategy, we may acquire land for development or construct on owned land, under certain conditions.  Included among the risks of the real estate development business are the following, which may adversely affect our ability to make distributions or payments to our investors:
 
 
 
10

 
·  
financing for development projects may not be available on favorable terms;
·  
long-term financing may not be available upon completion of construction; and
·  
failure to complete construction on schedule or within budget may increase debt service expense and construction costs.

Property ownership through joint ventures could subject us to the contrary business objectives of our co-venturers: We, from time to time, invest in joint ventures or partnerships in which we do not hold a controlling interest in the assets underlying the entities in which we invest, including joint ventures in which (i) we own a direct interest in an entity which controls such assets, or (ii) we own a direct interest in an equity which owns indirect interests, through one or more intermediaries, of such assets.  These investments involve risks that do not exist with properties in which we own a controlling interest with respect to the underlying assets, including the possibility that our co-venturers or partners may, at any time, have business, economic or other objectives that are inconsistent with our objectives.  Because we lack a controlling interest, our co-venturers or partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives.  While we seek protective rights against such contrary actions, there can be no assurance that we will be successful in procuring any such protective rights, or if procured, that the rights will be sufficient to fully protect us against contrary actions.  Our organizational documents do not limit the amount of available funds that we may invest in joint ventures or partnerships.  If the objectives of our co-venturers or partners are inconsistent with ours, it may adversely affect our ability to make distributions or payments to our investors.

Our real estate construction management activities are subject to risks particular to third-party construction projects.
As a result of the Gale/Green Transactions, we now perform fixed price construction services for third parties and we are subject to a variety of risks unique to these activities.  If construction costs of a project exceed original estimates, such costs may have to be absorbed by us, thereby making the project less profitable than originally estimated, or possibly not profitable at all. In addition, a construction project may be delayed due to government or regulatory approvals, supply shortages, or other events and circumstances beyond our control, or the time required to complete a construction project may be greater than originally anticipated. If any such excess costs or project delays were to be material, such events may adversely effect our cash flow and liquidity and thereby impact our ability to pay dividends or make distributions to our investors.

Debt financing could adversely affect our economic performance.
Scheduled debt payments and refinancing could adversely affect our financial condition: We are subject to the risks normally associated with debt financing.  These risks, including the following, may adversely affect our ability to make distributions or payments to our investors:

·  
our cash flow may be insufficient to meet required payments of principal and interest;
·  
payments of principal and interest on borrowings may leave us with insufficient cash resources to pay operating expenses;
·  
we may not be able to refinance indebtedness on our properties at maturity; and
·  
if refinanced, the terms of refinancing may not be as favorable as the original terms of the related indebtedness.

As of December 31, 2007, we had total outstanding indebtedness of $2.2 billion comprised of $1.6 billion of senior unsecured notes, outstanding borrowings of $250 million under our $775 million revolving credit facility and approximately $329 million of mortgage loans payable and other obligations indebtedness.  We may have to refinance the principal due on our current or future indebtedness at maturity, and we may not be able to do so.

If we are unable to refinance our indebtedness on acceptable terms, or at all, events or conditions that may adversely affect our ability to make distributions or payments to our investors include the following:

·  
we may need to dispose of one or more of our properties upon disadvantageous terms;
·  
prevailing interest rates or other factors at the time of refinancing could increase interest rates and, therefore, our interest expense;
·  
if we mortgage property to secure payment of indebtedness and are unable to meet mortgage payments, the mortgagee could foreclose upon such property or appoint a receiver to receive an assignment of our rents and leases; and
·  
foreclosures upon mortgaged property could create taxable income without accompanying cash proceeds and, therefore, hinder our ability to meet the real estate investment trust distribution requirements of the Internal Revenue Code.
 
 
 
11

 
We are obligated to comply with financial covenants in our indebtedness that could restrict our range of operating activities: The mortgages on our properties contain customary negative covenants, including limitations on our ability, without the prior consent of the lender, to further mortgage the property, to enter into new leases outside of stipulated guidelines or to materially modify existing leases.  In addition, our credit facility contains customary requirements, including restrictions and other limitations on our ability to incur debt, debt to assets ratios, secured debt to total assets ratios, interest coverage ratios and minimum ratios of unencumbered assets to unsecured debt.  The indentures under which our senior unsecured debt have been issued contain financial and operating covenants including coverage ratios and limitations on our ability to incur secured and unsecured debt.  These covenants limit our flexibility in conducting our operations and create a risk of default on our indebtedness if we cannot continue to satisfy them.

Rising interest rates may adversely affect our cash flow: As of December 31, 2007, outstanding borrowings of approximately $250 million under our revolving credit facility bear interest at variable rates.  We may incur additional indebtedness in the future that also bears interest at variable rates.  Variable rate debt creates higher debt service requirements if market interest rates increase.  Higher debt service requirements could adversely affect our ability to make distributions or payments to our investors and/or cause us to default under certain debt covenants.

Our degree of leverage could adversely affect our cash flow: We fund acquisition opportunities and development partially through short-term borrowings (including our revolving credit facility), as well as from proceeds from property sales and undistributed cash.  We expect to refinance projects purchased with short-term debt either with long-term indebtedness or equity financing depending upon the economic conditions at the time of refinancing.  Our Board of Directors has a general policy of limiting the ratio of our indebtedness to total undepreciated assets (total debt as a percentage of total undepreciated assets) to 50 percent or less, although there is no limit in Mack-Cali Realty, L.P.’s or our organizational documents on the amount of indebtedness that we may incur.  However, we have entered into certain financial agreements which contain financial and operating covenants that limit our ability under certain circumstances to incur additional secured and unsecured indebtedness.  The Board of Directors could alter or eliminate its current policy on borrowing at any time at its discretion.  If this policy were changed, we could become more highly leveraged, resulting in an increase in debt service that could adversely affect our cash flow and our ability to make distributions or payments to our investors and/or could cause an increased risk of default on our obligations.

We are dependent on external sources of capital for future growth: To qualify as a real estate investment trust, we must distribute to our shareholders each year at least 90 percent of our net taxable income, excluding any net capital gain. Because of this distribution requirement, it is not likely that we will be able to fund all future capital needs, including for acquisitions and developments, from income from operations.  Therefore, we will have to rely on third-party sources of capital, which may or may not be available on favorable terms or at all.  Our access to third-party sources of capital depends on a number of things, including the market’s perception of our growth potential and our current and potential future earnings.  Moreover, additional equity offerings may result in substantial dilution of our shareholders’ interests, and additional debt financing may substantially increase our leverage.

Competition for skilled personnel could increase our labor costs.
We compete with various other companies in attracting and retaining qualified and skilled personnel.  We depend on our ability to attract and retain skilled management personnel who are responsible for the day-to-day operations of our company.  Competitive pressures may require that we enhance our pay and benefits package to compete effectively for such personnel.  We may not be able to offset such added costs by increasing the rates we charge our tenants.  If there is an increase in these costs or if we fail to attract and retain qualified and skilled personnel, our business and operating results could be harmed.

We are dependent on our key personnel whose continued service is not guaranteed.
We are dependent upon our executive officers for strategic business direction and real estate experience.  While we believe that we could find replacements for these key personnel, loss of their services could adversely affect our operations.  We have entered into an employment agreement (including non-competition provisions) which provides for a continuous four-year employment term with each of Mitchell E. Hersh, Barry Lefkowitz and Roger W. Thomas, a continuous one-year employment term with Michael A. Grossman, and a three-year employment term with Mark Yeager which, as of May 9, 2009, shall convert to a continuous one-year employment term.  We do not have key man life insurance for our executive officers.
 
 
 
12

 
Certain provisions of Maryland law and our charter and bylaws as well as our stockholder rights plan could hinder, delay or prevent changes in control.
Certain provisions of Maryland law, our charter and our bylaws, as well as our stockholder rights plan have the effect of discouraging, delaying or preventing transactions that involve an actual or threatened change in control.  These provisions include the following:

Classified Board of Directors: Our Board of Directors is divided into three classes with staggered terms of office of three years each.  The classification and staggered terms of office of our directors make it more difficult for a third party to gain control of our board of directors.  At least two annual meetings of stockholders, instead of one, generally would be required to affect a change in a majority of the board of directors.

Removal of Directors: Under our charter, subject to the rights of one or more classes or series of preferred stock to elect one or more directors, a director may be removed only for cause and only by the affirmative vote of at least two-thirds of all votes entitled to be cast by our stockholders generally in the election of directors.  Neither the Maryland General Corporation Law nor our charter define the term “cause.”  As a result, removal for “cause” is subject to Maryland common law and to judicial interpretation and review in the context of the facts and circumstances of any particular situation.

Number of Directors, Board Vacancies, Terms of Office: We have, in our bylaws, elected to be subject to certain provisions of Maryland law which vest in the Board of Directors the exclusive right to determine the number of directors and the exclusive right, by the affirmative vote of a majority of the remaining directors, even if the remaining directors do not constitute a quorum, to fill vacancies on the board.  These provisions of Maryland law, which are applicable even if other provisions of Maryland law or the charter or bylaws provide to the contrary, also provide that any director elected to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, rather than the next annual meeting of stockholders as would otherwise be the case, and until his or her successor is elected and qualifies.

Stockholder Requested Special Meetings: Our bylaws provide that our stockholders have the right to call a special meeting only upon the written request of the stockholders entitled to cast not less than a majority of all the votes entitled to be cast by the stockholders at such meeting.

Advance Notice Provisions for Stockholder Nominations and Proposals: Our bylaws require advance written notice for stockholders to nominate persons for election as directors at, or to bring other business before, any meeting of stockholders.  This bylaw provision limits the ability of stockholders to make nominations of persons for election as directors or to introduce other proposals unless we are notified in a timely manner prior to the meeting.

Exclusive Authority of the Board to Amend the Bylaws: Our bylaws provide that our board of directors has the exclusive power to adopt, alter or repeal any provision of the bylaws or to make new bylaws.  Thus, our stockholders may not effect any changes to our bylaws.

Preferred Stock: Under our charter, our Board of Directors has authority to issue preferred stock from time to time in one or more series and to establish the terms, preferences and rights of any such series of preferred stock, all without approval of our stockholders.

Duties of Directors with Respect to Unsolicited Takeovers: Maryland law provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the directors in unsolicited takeover situations. The duties of directors of Maryland corporations do not require them to (a) accept, recommend or respond to any proposal by a person seeking to acquire control of the corporation, (b) authorize the corporation to redeem any rights under, or modify or render inapplicable, any stockholders rights plan, (c) make a determination under the Maryland Business Combination Act or the Maryland Control Share Acquisition Act, or (d) act or fail to act solely because of the effect of the act or failure to act may have on an acquisition or potential acquisition of control of the corporation or the amount or type of consideration that may be offered or paid to the stockholders in an acquisition.  Moreover, under Maryland law, the act of a director of a Maryland corporation relating to or affecting an acquisition or potential acquisition of control is not subject to any higher duty or greater scrutiny than is applied to any other act of a director. Maryland law also contains a statutory presumption that an act of a director of a Maryland corporation satisfies the applicable standards of conduct for directors under Maryland law.
 
 
 
13

 
Ownership Limit: In order to preserve our status as a real estate investment trust under the Code, our charter generally prohibits any single stockholder, or any group of affiliated stockholders, from beneficially owning more than 9.8 percent of our outstanding capital stock unless our Board of Directors waives or modifies this ownership limit.

Maryland Business Combination Act: The Maryland Business Combination Act provides that unless exempted, a Maryland corporation may not engage in business combinations, including mergers, dispositions of 10 percent or more of its assets, certain issuances of shares of stock and other specified transactions, with an “interested stockholder” or an affiliate of an interested stockholder, for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter unless specified criteria are met.  An interested stockholder is generally a person owning or controlling, directly or indirectly, 10 percent or more of the voting power of the outstanding stock of the Maryland corporation.  Our board of directors has exempted from this statute business combinations between the Company and certain affiliated individuals and entities.  However, unless our board adopts other exemptions, the provisions of the Maryland Business Combination Act will be applicable to business combinations with other persons.

Maryland Control Share Acquisition Act: Maryland law provides that “control shares” of a corporation acquired in a “control share acquisition” shall have no voting rights except to the extent approved by a vote of two-thirds of the votes eligible to cast on the matter under the Maryland Control Share Acquisition Act.  “Control Shares” means shares of stock that, if aggregated with all other shares of stock previously acquired by the acquirer, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of the voting power:  one-tenth or more but less than one-third, one-third or more but less than a majority or a majority or more of all voting power.  A “control share acquisition” means the acquisition of control shares, subject to certain exceptions.

If voting rights of control shares acquired in a control share acquisition are not approved at a stockholder’s meeting, then subject to certain conditions and limitations, the issuer may redeem any or all of the control shares for fair value.  If voting rights of such control shares are approved at a stockholder’s meeting and the acquirer becomes entitled to vote a majority of the shares of stock entitled to vote, all other stockholders may exercise appraisal rights.  Our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any acquisitions of shares by certain affiliated individuals and entities, any directors, officers or employees of the Company and any person approved by the board of directors prior to the acquisition by such person of control shares.  Any control shares acquired in a control share acquisition which are not exempt under the foregoing provisions of our bylaws will be subject to the Maryland Control Share Acquisition Act.

Stockholder Rights Plan: We have adopted a stockholder rights plan that may discourage any potential acquirer from acquiring more than 15 percent of our outstanding common stock since, upon this type of acquisition without approval of our board of directors, all other common stockholders will have the right to purchase a specified amount of common stock at a substantial discount from market price.

Consequences of failure to qualify as a real estate investment trust could adversely affect our financial condition. Failure to maintain ownership limits could cause us to lose our qualification as a real estate investment trust: In order for us to maintain our qualification as a real estate investment trust, not more than 50 percent in value of our outstanding stock may be actually and/or constructively owned by five or fewer individuals (as defined in the Code to include certain entities).  We have limited the ownership of our outstanding shares of our common stock by any single stockholder to 9.8 percent of the outstanding shares of our common stock.  Our Board of Directors could waive this restriction if they were satisfied, based upon the advice of tax counsel or otherwise, that such action would be in our best interests and would not affect our qualification as a real estate investment trust.  Common stock acquired or transferred in breach of the limitation may be redeemed by us for the lesser of the price paid and the average closing price for the 10 trading days immediately preceding redemption or sold at the direction of us.  We may elect to redeem such shares of common stock for Units, which are nontransferable except in very limited circumstances.  Any transfer of shares of common stock which, as a result of such transfer, causes us to be in violation of any ownership limit, will be deemed void.  Although we currently intend to continue to operate in a manner which will enable us to continue to qualify as a real estate investment trust, it is possible that future economic, market, legal, tax or other considerations may cause our Board of Directors to revoke the election for us to qualify as a real estate investment trust.  Under our organizational documents, our Board of Directors can make such revocation without the consent of our stockholders.
 
 
 
14

 
In addition, the consent of the holders of at least 85 percent of Mack-Cali Realty, L.P.’s partnership units is required: (i) to merge (or permit the merger of) us with another unrelated person, pursuant to a transaction in which Mack-Cali Realty, L.P. is not the surviving entity; (ii) to dissolve, liquidate or wind up Mack-Cali Realty, L.P.; or (iii) to convey or otherwise transfer all or substantially all of Mack-Cali Realty, L.P.’s assets.  As of February 8, 2008, as general partner, we own approximately 81.4 percent of Mack-Cali Realty, L.P.’s outstanding common partnership units.

Tax liabilities as a consequence of failure to qualify as a real estate investment trust: We have elected to be treated and have operated so as to qualify as a real estate investment trust for federal income tax purposes since our taxable year ended December 31, 1994.  Although we believe we will continue to operate in such manner, we cannot guarantee that we will do so.  Qualification as a real estate investment trust involves the satisfaction of various requirements (some on an annual and some on a quarterly basis) established under highly technical and complex tax provisions of the Internal Revenue Code.  Because few judicial or administrative interpretations of such provisions exist and qualification determinations are fact sensitive, we cannot assure you that we will qualify as a real estate investment trust for any taxable year.

If we fail to qualify as a real estate investment trust in any taxable year, we will be subject to the following:

·  
we will not be allowed a deduction for dividends paid to shareholders;
·  
we will be subject to federal income tax at regular corporate rates, including any alternative minimum tax, if applicable; and
·  
unless we are entitled to relief under certain statutory provisions, we will not be permitted to qualify as a real estate investment trust for the four taxable years following the year during which we were disqualified.

A loss of our status as a real estate investment trust could have an adverse effect on us.  Failure to qualify as a real estate investment trust also would eliminate the requirement that we pay dividends to our stockholders.

Other tax liabilities: Even if we qualify as a real estate investment trust, we are subject to certain federal, state and local taxes on our income and property and, in some circumstances, certain other state and local taxes.  In addition, our taxable REIT subsidiaries will be subject to federal, state and local income tax for income received in connection with certain non-customary services performed for tenants and/or third parties.

Risk of changes in the tax law applicable to real estate investment trusts: Since the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted.  Any of such legislative action may prospectively or retroactively modify our and Mack-Cali Realty, L.P.’s tax treatment and, therefore, may adversely affect taxation of us, Mack-Cali Realty, L.P., and/or our investors.

Changes in market conditions could adversely affect the market price of our common stock.
As with other publicly traded equity securities, the value of our common stock depends on various market conditions, which may change from time to time. Among the market conditions that may affect the value of our common stock are the following:
 
·  
the extent of your interest in us;
·  
 the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies;
·  
 our financial performance; and
·  
 general stock and bond market conditions.
 
 
 
15
 

 
The market value of our common stock is based primarily upon the market’s perception of our growth potential and our current and potential future earnings and cash dividends. Consequently, our common stock may trade at prices that are higher or lower than our net asset value per share of common stock.


ITEM 1B.        UNRESOLVED STAFF COMMENTS

None.


 
16
 


ITEM 2.            PROPERTIES

PROPERTY LIST

As of December 31, 2007, the Company’s Consolidated Properties consisted of 251 in-service office, office/flex and industrial/warehouse properties, as well as two stand-alone retail properties and two land leases.  The Consolidated Properties are located primarily in the Northeast.  The Consolidated Properties are easily accessible from major thoroughfares and are in close proximity to numerous amenities.  The Consolidated Properties contain a total of approximately 29.2 million square feet, with the individual properties ranging from 6,216 to 1,246,283 square feet.  The Consolidated Properties, managed by on-site employees, generally have attractively landscaped sites and atriums in addition to quality design and construction.  The Company’s tenants include many service sector employers, including a large number of professional firms and national and international businesses.  The Company believes that all of its properties are well-maintained and do not require significant capital improvements.

 
17
 


 
Office Properties
                
 
             
2007
     
Percentage
2007
  
2007
Average
   
Net
Leased
Base
  
Average
Effective
   
Rentable
as of
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/07
($000’s)
of Total 2007
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
 (b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
               
NEW JERSEY
              
               
Bergen County
              
Fair Lawn
              
17-17 Route 208 North
1987
143,000
68.6
3,144
0.55
32.05
27.79
Fort Lee
              
One Bridge Plaza
1981
200,000
72.7
2,784
0.48
19.15
17.75
2115 Linwood Avenue
1981
68,000
40.2
865
0.15
31.64
30.40
Little Ferry
              
200 Riser Road
1974
286,628
100.0
2,071
0.36
7.23
6.67
Montvale
              
95 Chestnut Ridge Road
1975
47,700
100.0
796
0.14
16.69
15.28
135 Chestnut Ridge Road
1981
66,150
100.0
1,520
0.26
22.98
19.09
Paramus
              
15 East Midland Avenue
1988
259,823
80.5
5,235
0.91
25.03
24.27
140 East Ridgewood Avenue
1981
239,680
98.4
4,846
0.84
20.55
18.73
461 From Road
1988
253,554
98.6
6,125
1.06
24.50
24.42
650 From Road
1978
348,510
92.2
7,786
1.36
24.23
21.42
61 South Paramus Avenue
1985
269,191
100.0
7,208
1.25
26.78
23.99
Ridgefield Park
              
105 Challenger Road
1992
150,050
87.5
4,250
0.74
32.37
29.72
Rochelle Park
              
120 Passaic Street
1972
52,000
99.6
1,402
0.24
27.07
25.53
365 West Passaic Street
1976
212,578
100.0
4,473
0.78
21.04
18.78
395 West Passaic Street
1979
100,589
96.9
2,217
0.39
22.75
19.64
Upper Saddle River
              
1 Lake Street
1973/94
474,801
100.0
7,465
1.30
15.72
15.72
10 Mountainview Road
1986
192,000
98.2
4,328
0.75
22.95
20.84
Woodcliff Lake
              
400 Chestnut Ridge Road
1982
89,200
100.0
1,950
0.34
21.86
16.32
470 Chestnut Ridge Road
1987
52,500
100.0
1,107
0.19
21.09
19.83
530 Chestnut Ridge Road
1986
57,204
100.0
1,199
0.21
20.96
20.40
50 Tice Boulevard
1984
235,000
98.7
6,140
1.07
26.47
23.93
300 Tice Boulevard
1991
230,000
99.8
5,880
1.02
25.62
23.18
               
Burlington County
              
Moorestown
              
224 Strawbridge Drive
1984
74,000
98.4
1,521
0.26
20.89
18.35
228 Strawbridge Drive
1984
74,000
100.0
1,043
0.18
14.09
12.11
232 Strawbridge Drive
1986
74,258
98.8
1,461
0.25
19.91
16.22
               
Essex County
              
Millburn
              
150 J.F. Kennedy Parkway
1980
247,476
100.0
7,539
1.31
30.46
26.58

 
18
 


Office Properties
                
(Continued)
 
             
2007
     
Percentage
2007
  
2007
Average
   
Net
Leased
Base
  
Average
Effective
   
Rentable
as of
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/07
($000’s)
of Total 2007
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
 (b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
               
Roseland
              
101 Eisenhower Parkway
1980
237,000
95.8
5,642
0.98
24.85
22.33
103 Eisenhower Parkway
1985
151,545
78.6
2,934
0.51
24.63
21.53
105 Eisenhower Parkway
2001
220,000
91.9
4,636
0.81
22.93
17.23
               
Hudson County
              
Jersey City
              
Harborside Financial Center Plaza 1
1983
400,000
100.0
10,016
1.74
25.04
22.48
Harborside Financial Center Plaza 2
1990
761,200
100.0
18,987
3.30
24.94
22.12
Harborside Financial Center Plaza 3
1990
725,600
99.1
17,983
3.12
25.01
22.16
Harborside Financial Center Plaza 4-A
2000
207,670
97.7
6,206
1.08
30.59
26.31
Harborside Financial Center Plaza 5
2002
977,225
99.9
34,428
5.99
35.27
29.08
101 Hudson Street
1992
1,246,283
99.2
26,528
4.61
21.46
18.80
               
Mercer County
              
Hamilton Township
              
3 AAA Drive (f)
1981
35,270
62.6
124
0.02
8.61
8.06
2 South Gold Drive (f)
1974
33,962
64.5
258
0.04
18.06
17.22
600 Horizon Drive
2002
95,000
100.0
1,373
0.24
14.45
14.45
700 Horizon Drive (f)
2007
120,000
100.0
1,593
0.28
20.36
19.22
Princeton
              
103 Carnegie Center
1984
96,000
72.5
1,837
0.32
26.39
21.98
3 Independence Way
1983
111,300
50.7
1,102
0.19
19.53
15.40
100 Overlook Center
1988
149,600
100.0
4,859
0.84
32.48
28.36
5 Vaughn Drive
1987
98,500
100.0
2,391
0.42
24.27
21.43
               
Middlesex County
              
East Brunswick
              
377 Summerhill Road
1977
40,000
100.0
353
0.06
8.83
8.65
Edison
              
343 Thornall Street (c)
1991
195,709
100.0
4,008
0.70
20.48
17.58
Piscataway
              
30 Knightsbridge Road, Bldg 3
1977
160,000
100.0
2,465
0.43
15.41
15.41
30 Knightsbridge Road, Bldg 4
1977
115,000
100.0
1,771
0.31
15.40
15.40
30 Knightsbridge Road, Bldg 5
1977
332,607
62.9
2,437
0.42
11.65
8.30
30 Knightsbridge Road, Bldg 6
1977
72,743
63.8
172
0.03
3.71
1.90
Plainsboro
              
500 College Road East
1984
158,235
95.7
4,261
0.74
28.14
25.91
Woodbridge
              
581 Main Street
1991
200,000
100.0
5,268
0.92
26.34
23.15
               
Monmouth County
              
Freehold
              
2 Paragon Way
1989
44,524
38.1
374
0.06
22.05
13.85
3 Paragon Way
1991
66,898
100.0
785
0.14
11.73
9.55
4 Paragon Way
2002
63,989
100.0
1,097
0.19
17.14
12.96
100 Willbowbrook
1988
60,557
74.8
880
0.15
19.43
16.62
Holmdel
              
23 Main Street
1977
350,000
100.0
4,012
0.70
11.46
8.64
               

 
19
 

Office Properties
                
(Continued)
 
             
2007
     
Percentage
2007
  
2007
Average
   
Net
Leased
Base
  
Average
Effective
   
Rentable
as of
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/07
($000’s)
of Total 2007
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
 (b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
               
Middletown
              
One River Center Bldg 1
1983
122,594
100.0
3,097
0.54
25.26
21.22
One River Center Bldg 2
1983
120,360
100.0
2,874
0.50
23.88
22.75
One River Center Bldg 3
1984
214,518
93.6
4,593
0.80
22.87
22.57
Neptune
              
3600 Route 66
1989
180,000
100.0
2,400
0.42
13.33
12.06
Wall Township
              
1305 Campus Parkway
1988
23,350
77.3
443
0.08
24.54
23.66
1350 Campus Parkway
1990
79,747
91.9
1,571
0.27
21.44
18.83
               
Morris County
              
Florham Park
              
325 Columbia Turnpike
1987
168,144
96.1
4,005
0.70
24.79
21.96
Morris Plains
              
250 Johnson Road
1977
75,000
100.0
1,579
0.27
21.05
18.47
201 Littleton Road
1979
88,369
88.6
1,750
0.30
22.35
19.92
Morris Township
              
412 Mt. Kemble Avenue
1986
475,100
36.7
2,664
0.46
15.28
12.78
Parsippany
              
4 Campus Drive
1983
147,475
94.3
3,298
0.57
23.71
21.01
6 Campus Drive
1983
148,291
75.1
2,422
0.42
21.75
17.94
7 Campus Drive
1982
154,395
67.8
979
0.17
9.35
8.75
8 Campus Drive
1987
215,265
100.0
6,249
1.09
29.03
25.66
9 Campus Drive
1983
156,495
93.6
3,483
0.61
23.78
19.93
4 Century Drive
1981
100,036
78.9
1,641
0.29
20.79
18.70
5 Century Drive
1981
79,739
97.3
1,293
0.22
16.67
16.54
6 Century Drive
1981
100,036
72.4
1,351
0.23
18.65
11.87
2 Dryden Way
1990
6,216
100.0
96
0.02
15.44
15.44
4 Gatehall Drive
1988
248,480
89.6
5,655
0.98
25.40
22.66
2 Hilton Court
1991
181,592
100.0
4,224
0.73
23.26
20.58
1633 Littleton Road
1978
57,722
100.0
1,131
0.20
19.59
19.59
600 Parsippany Road
1978
96,000
92.4
1,596
0.28
17.99
13.96
1 Sylvan Way
1989
150,557
100.0
3,621
0.63
24.05
21.41
5 Sylvan Way
1989
151,383
100.0
4,157
0.72
27.46
24.69
7 Sylvan Way
1987
145,983
100.0
3,219
0.56
22.05
19.29
35 Waterview Boulevard
1990
172,498
96.2
4,460
0.78
26.88
24.03
5 Wood Hollow Road
1979
317,040
96.7
6,118
1.07
19.96
17.10
               
Passaic County
              
Clifton
              
777 Passaic Avenue
1983
75,000
100.0
1,627
0.28
21.69
19.53
Totowa
              
999 Riverview Drive
1988
56,066
100.0
1,084
0.19
19.33
17.21
               
Somerset County
              
Basking Ridge
              
222 Mt. Airy Road
1986
49,000
60.7
615
0.11
20.68
15.53
233 Mt. Airy Road
1987
66,000
100.0
1,315
0.23
19.92
16.71

 
20
 

Office Properties
                
(Continued)
 
             
2007
     
Percentage
2007
  
2007
Average
   
Net
Leased
Base
  
Average
Effective
   
Rentable
as of
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/07
($000’s)
of Total 2007
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
 (b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
               
Bernards
              
106 Allen Road
2000
132,010
96.2
3,149
0.55
24.80
18.74
Bridgewater
              
721 Route 202/206
1989
192,741
81.2
3,817
0.66
24.39
22.93
               
Union County
              
Clark
              
100 Walnut Avenue
1985
182,555
98.5
4,624
0.80
25.72
22.67
Cranford
              
6 Commerce Drive
1973
56,000
84.1
1,029
0.18
21.85
19.05
11 Commerce Drive
1981
90,000
71.3
1,389
0.24
21.65
18.73
12 Commerce Drive
1967
72,260
95.1
967
0.17
14.07
11.54
14 Commerce Drive
1971
67,189
64.3
1,031
0.18
23.86
23.12
20 Commerce Drive
1990
176,600
99.8
4,531
0.79
25.71
22.60
25 Commerce Drive
1971
67,749
90.1
1,333
0.23
21.84
20.30
65 Jackson Drive
1984
82,778
97.5
1,857
0.32
23.01
19.99
New Providence
              
890 Mountain Avenue
1977
80,000
95.1
1,797
0.31
23.62
22.31
               
Total New Jersey Office
  
17,646,642
92.4
373,269
64.88
22.94
20.22
               
NEW YORK
              
               
New York County
              
New York
              
125 Broad Street (f)
1970
524,476
100.0
11,579
2.02
39.50
35.69
               
Rockland County
              
Suffern
              
400 Rella Boulevard
1988
180,000
91.4
3,752
0.65
22.81
19.18
               
Westchester County
              
Elmsford
              
100 Clearbrook Road (c)
1975
60,000
94.4
1,083
0.19
19.12
17.39
101 Executive Boulevard
1971
50,000
43.0
513
0.09
23.86
21.77
555 Taxter Road
1986
170,554
100.0
4,263
0.74
25.00
20.87
565 Taxter Road
1988
170,554
98.8
4,138
0.72
24.56
20.37
570 Taxter Road
1972
75,000
77.8
1,648
0.29
28.24
26.24
Hawthorne
              
1 Skyline Drive
1980
20,400
99.0
340
0.06
16.84
15.70
2 Skyline Drive
1987
30,000
98.9
490
0.09
16.51
14.19
7 Skyline Drive
1987
109,000
98.7
2,570
0.45
23.89
21.90
17 Skyline Drive
1989
85,000
100.0
871
0.15
10.25
10.15
19 Skyline Drive
1982
248,400
100.0
4,471
0.78
18.00
16.80
               
               

 
21
 

Office Properties
                
(Continued)
 
             
2007
     
Percentage
2007
  
2007
Average
   
Net
Leased
Base
  
Average
Effective
   
Rentable
as of
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/07
($000’s)
of Total 2007
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
 (b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
               
Tarrytown
              
200 White Plains Road
1982
89,000
99.3
1,905
0.33
21.56
19.38
220 White Plains Road
1984
89,000
95.9
2,052
0.36
24.04
21.91
White Plains
              
1 Barker Avenue
1975
68,000
97.3
1,749
0.30
26.43
24.67
3 Barker Avenue
1983
65,300
100.0
1,659
0.29
25.41
23.29
50 Main Street
1985
309,000
99.1
9,438
1.65
30.82
28.01
11 Martine Avenue
1987
180,000
85.6
4,599
0.80
29.85
26.90
1 Water Street
1979
45,700
100.0
1,177
0.20
25.75
22.30
Yonkers
              
1 Executive Boulevard
1982
112,000
100.0
2,848
0.49
25.43
22.19
3 Executive Boulevard
1987
58,000
100.0
1,507
0.26
25.98
22.66
               
Total New York Office
  
2,739,384
96.2
62,652
10.91
27.23
24.37
               
PENNSYLVANIA
              
               
Chester County
              
Berwyn
              
1000 Westlakes Drive
1989
60,696
95.7
1,589
0.28
27.36
26.20
1055 Westlakes Drive
1990
118,487
96.8
2,622
0.46
22.86
18.69
1205 Westlakes Drive
1988
130,265
84.7
2,464
0.43
22.33
19.25
1235 Westlakes Drive
1986
134,902
97.7
2,951
0.51
22.39
18.41
               
Delaware County
              
Lester
              
100 Stevens Drive
1986
95,000
100.0
2,551
0.44
26.85
24.82
200 Stevens Drive
1987
208,000
100.0
5,656
0.98
27.19
25.52
300 Stevens Drive
1992
68,000
89.6
1,519
0.26
24.93
20.09
Media
              
1400 Providence Road - Center I
1986
100,000
95.4
2,072
0.36
21.72
19.73
1400 Providence Road - Center II
1990
160,000
94.0
3,394
0.59
22.57
19.24
               
Montgomery County
              
Bala Cynwyd
              
150 Monument Road
1981
125,783
99.9
2,946
0.51
23.44
21.30
Blue Bell
              
4 Sentry Parkway
1982
63,930
94.1
1,337
0.23
22.22
22.08
5 Sentry Parkway East
1984
91,600
50.3
632
0.11
13.72
12.61
5 Sentry Parkway West
1984
38,400
31.5
158
0.03
13.06
12.40
16 Sentry Parkway
1988
93,093
100.0
2,281
0.40
24.50
22.49
18 Sentry Parkway
1988
95,010
88.5
2,198
0.38
26.14
23.90
King of Prussia
              
2200 Renaissance Boulevard
1985
174,124
79.4
2,433
0.42
17.60
15.28
Lower Providence
              
1000 Madison Avenue
1990
100,700
81.3
1,404
0.24
17.15
13.28
Plymouth Meeting
              
1150 Plymouth Meeting Mall
1970
167,748
92.6
3,131
0.54
20.16
15.92
               
Total Pennsylvania Office
  
2,025,738
89.9
41,338
7.17
22.70
19.98
               

 
22
 

Office Properties
                
(Continued)
 
             
2007
     
Percentage
2007
  
2007
Average
   
Net
Leased
Base
  
Average
Effective
   
Rentable
as of
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/07
($000’s)
of Total 2007
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
 (b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
               
CONNECTICUT
              
               
Fairfield County
              
Norwalk
              
40 Richards Avenue
1985
145,487
76.6
2,446
0.43
21.95
19.35
Stamford
              
1266 East Main Street
1984
179,260
73.3
3,615
0.63
27.51
24.64
               
Total Connecticut Office
  
324,747
74.8
6,061
1.06
24.96
22.21
               
DISTRICT OF COLUMBIA
              
               
Washington
              
1201 Connecticut Avenue, NW
1940
169,549
100.0
6,742
1.18
39.76
36.86
1400 L Street, NW
1987
159,000
100.0
5,539
0.96
34.84
29.81
               
Total District of Columbia Office
  
328,549
100.0
12,281
2.14
37.38
33.45
               
MARYLAND
              
               
Prince George’s County
              
Greenbelt
              
9200 Edmonston Road
1973
38,690
100.0
911
0.16
23.55
21.19
6301 Ivy Lane
1979
112,003
87.2
2,104
0.37
21.54
18.54
6303 Ivy Lane
1980
112,047
62.2
2,182
0.38
31.31
27.74
6305 Ivy Lane
1982
112,022
70.2
1,610
0.28
20.47
16.63
6404 Ivy Lane
1987
165,234
77.9
2,637
0.46
20.49
15.98
6406 Ivy Lane
1991
163,857
100.0
2,905
0.50
17.73
16.58
6411 Ivy Lane
1984
138,405
88.5
2,854
0.50
23.30
20.17
Lanham
              
4200 Parliament Place
1989
122,000
85.8
2,719
0.47
25.98
24.08
               
Total Maryland Office
  
964,258
83.4
17,922
3.12
22.28
19.44
               
TOTAL OFFICE PROPERTIES
  
24,029,318
92.2
513,523
89.28
23.65
20.89
               
               

 
23
 

Office/Flex Properties
                
 
 
             
2007
     
Percentage
2007
  
2007
Average
   
Net
Leased
Base
  
Average
Effective
   
Rentable
as of
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/07
($000’s)
of Total 2007
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
 (b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
               
NEW JERSEY
              
               
Burlington County
              
Burlington
              
3 Terri Lane
1991
64,500
100.0
507
0.09
7.86
4.40
5 Terri Lane
1992
74,555
100.0
627
0.11
8.41
7.01
Moorestown
              
2 Commerce Drive
1986
49,000
21.3
145
0.03
13.89
9.29
101 Commerce Drive
1988
64,700
100.0
275
0.05
4.25
3.85
102 Commerce Drive
1987
38,400
100.0
209
0.04
5.44
4.27
201 Commerce Drive
1986
38,400
75.0
173
0.03
6.01
4.24
202 Commerce Drive
1988
51,200
100.0
252
0.04
4.92
3.54
1 Executive Drive
1989
20,570
81.1
157
0.03
9.41
6.41
2 Executive Drive
1988
60,800
100.0
430
0.07
7.07
5.00
101 Executive Drive
1990
29,355
90.2
296
0.05
11.18
9.18
102 Executive Drive
1990
64,000
100.0
383
0.07
5.98
5.38
225 Executive Drive
1990
50,600
67.6
232
0.04
6.78
5.06
97 Foster Road
1982
43,200
50.0
113
0.02
5.23
4.54
1507 Lancer Drive
1995
32,700
100.0
134
0.02
4.10
3.79
1245 North Church Street
1998
52,810
90.5
313
0.05
6.55
6.19
1247 North Church Street
1998
52,790
58.1
281
0.05
9.16
8.12
1256 North Church Street
1984
63,495
100.0
452
0.08
7.12
5.83
840 North Lenola Road
1995
38,300
100.0
367
0.06
9.58
7.96
844 North Lenola Road
1995
28,670
100.0
180
0.03
6.28
5.06
915 North Lenola Road
1998
52,488
100.0
290
0.05
5.53
4.46
2 Twosome Drive
2000
48,600
100.0
429
0.07
8.83
8.29
30 Twosome Drive
1997
39,675
89.9
226
0.04
6.34
5.13
31 Twosome Drive
1998
84,200
100.0
468
0.08
5.56
5.51
40 Twosome Drive
1996
40,265
100.0
291
0.05
7.23
5.84
41 Twosome Drive
1998
43,050
100.0
231
0.04
5.37
5.16
50 Twosome Drive
1997
34,075
100.0
249
0.04
7.31
6.96
               
Gloucester County
              
West Deptford
              
1451 Metropolitan Drive
1996
21,600
100.0
148
0.03
6.85
6.85
               
Mercer County
              
Hamilton Township
              
100 Horizon Center Boulevard
1989
13,275
100.0
193
0.03
14.54
12.58
200 Horizon Drive
1991
45,770
100.0
591
0.10
12.91
11.73
300 Horizon Drive
1989
69,780
100.0
1,155
0.20
16.55
13.43
500 Horizon Drive
1990
41,205
100.0
620
0.11
15.05
14.51
               

 
24
 


Office/Flex Properties
                
(Continued)
 
             
2007
     
Percentage
2007
  
2007
Average
   
Net
Leased
Base
  
Average
Effective
   
Rentable
as of
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/07
($000’s)
of Total 2007
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
 (b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
               
Monmouth County
              
Wall Township
              
1325 Campus Parkway
1988
35,000
100.0
655
0.11
18.71
14.06
1340 Campus Parkway
1992
72,502
100.0
948
0.16
13.08
9.75
1345 Campus Parkway
1995
76,300
100.0
947
0.16
12.41
9.12
1433 Highway 34
1985
69,020
76.4
525
0.09
9.96
8.08
1320 Wyckoff Avenue
1986
20,336
100.0
178
0.03
8.75
8.31
1324 Wyckoff Avenue
1987
21,168
100.0
229
0.04
10.82
10.16
               
Passaic County
              
Totowa
              
1 Center Court
1999
38,961
100.0
534
0.09
13.71
11.06
2 Center Court
1998
30,600
99.3
373
0.06
12.28
10.89
11 Commerce Way
1989
47,025
100.0
576
0.10
12.25
11.50
20 Commerce Way
1992
42,540
100.0
330
0.06
7.76
6.44
29 Commerce Way
1990
48,930
100.0
711
0.12
14.53
11.44
40 Commerce Way
1987
50,576
72.1
564
0.10
15.47
14.53
45 Commerce Way
1992
51,207
96.4
428
0.07
8.67
6.89
60 Commerce Way
1988
50,333
73.6
519
0.09
14.01
12.61
80 Commerce Way
1996
22,500
100.0
311
0.05
13.82
12.80
100 Commerce Way
1996
24,600
66.9
340
0.06
20.66
19.20
120 Commerce Way
1994
9,024
100.0
125
0.02
13.85
12.74
140 Commerce Way
1994
26,881
99.5
374
0.06
13.98
12.86
               
Total New Jersey Office/Flex
  
2,189,531
91.9
19,084
3.27
9.49
7.95
               
NEW YORK
              
               
Westchester County
              
Elmsford
              
11 Clearbrook Road
1974
31,800
100.0
427
0.07
13.43
12.26
75 Clearbrook Road
1990
32,720
100.0
702
0.12
21.45
20.35
125 Clearbrook Road
2002
33,000
100.0
712
0.12
21.58
17.94
150 Clearbrook Road
1975
74,900
100.0
1,181
0.21
15.77
14.46
175 Clearbrook Road
1973
98,900
100.0
1,592
0.28
16.10
14.93
200 Clearbrook Road
1974
94,000
99.8
1,288
0.22
13.73
12.47
250 Clearbrook Road
1973
155,000
97.3
1,416
0.25
9.39
8.47
50 Executive Boulevard
1969
45,200
98.2
490
0.09
11.04
10.63
77 Executive Boulevard
1977
13,000
100.0
183
0.03
14.08
13.31
85 Executive Boulevard
1968
31,000
93.8
546
0.09
18.78
16.20
300 Executive Boulevard
1970
60,000
100.0
415
0.07
6.92
6.45
350 Executive Boulevard
1970
15,400
98.8
296
0.05
19.45
17.88
399 Executive Boulevard
1962
80,000
100.0
922
0.16
11.53
11.09
400 Executive Boulevard
1970
42,200
100.0
774
0.13
18.34
16.21
500 Executive Boulevard
1970
41,600
78.3
585
0.10
17.96
16.15

 
25
 

Office/Flex Properties
                
(Continued)
 
             
2007
     
Percentage
2007
  
2007
Average
   
Net
Leased
Base
  
Average
Effective
   
Rentable
as of
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/07
($000’s)
of Total 2007
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
 (b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
               
525 Executive Boulevard
1972
61,700
83.6
814
0.14
15.78
13.76
1 Westchester Plaza
1967
25,000
100.0
335
0.06
13.40
12.72
2 Westchester Plaza
1968
25,000
100.0
514
0.09
20.56
19.32
3 Westchester Plaza
1969
93,500
100.0
636
0.11
6.80
5.90
4 Westchester Plaza
1969
44,700
93.1
467
0.08
11.22
9.80
5 Westchester Plaza
1969
20,000
88.9
292
0.05
16.42
14.45
6 Westchester Plaza
1968
20,000
100.0
322
0.06
16.10
15.00
7 Westchester Plaza
1972
46,200
100.0
765
0.13
16.56
16.26
8 Westchester Plaza
1971
67,200
100.0
921
0.16
13.71
12.31
Hawthorne
              
200 Saw Mill River Road
1965
51,100
100.0
684
0.12
13.39
12.23
4 Skyline Drive
1987
80,600
92.2
1,319
0.23
17.75
14.98
5 Skyline Drive
1980
124,022
99.3
1,642
0.29
13.33
11.90
6 Skyline Drive
1980
44,155
100.0
571
0.10
12.93
12.86
8 Skyline Drive
1985
50,000
85.3
768
0.13
18.01
10.39
10 Skyline Drive
1985
20,000
100.0
368
0.06
18.40
13.00
11 Skyline Drive
1989
45,000
100.0
803
0.14
17.84
16.91
12 Skyline Drive
1999
46,850
100.0
676
0.12
14.43
10.82
15 Skyline Drive
1989
55,000
88.2
920
0.16
18.97
18.04
Yonkers
              
100 Corporate Boulevard
1987
78,000
98.3
1,391
0.24
18.14
17.10
200 Corporate Boulevard South
1990
84,000
99.8
1,569
0.27
18.72
17.82
4 Executive Plaza
1986
80,000
100.0
1,374
0.24
17.18
14.15
6 Executive Plaza
1987
80,000
95.7
1,391
0.24
18.17
16.90
1 Odell Plaza
1980
106,000
99.9
1,495
0.26
14.12
13.35
3 Odell Plaza
1984
71,065
100.0
1,597
0.28
22.47
20.84
5 Odell Plaza
1983
38,400
74.4
445
0.08
15.58
14.67
7 Odell Plaza
1984
42,600
99.6
740
0.13
17.44
16.80
               
Total New York Office/Flex
  
2,348,812
97.1
34,348
5.96
15.06
13.59
               
CONNECTICUT
              
               
Fairfield County
              
Stamford
              
419 West Avenue
1986
88,000
100.0
1,360
0.24
15.45
13.81
500 West Avenue
1988
25,000
82.3
375
0.07
18.23
15.89
550 West Avenue
1990
54,000
100.0
858
0.15
15.89
15.80
600 West Avenue
1999
66,000
100.0
804
0.14
12.18
11.62
650 West Avenue
1998
40,000
100.0
609
0.11
15.23
14.55
               
Total Connecticut Office/Flex
  
273,000
98.4
4,006
0.71
14.92
13.94
               
               
TOTAL OFFICE/FLEX PROPERTIES
4,811,343
94.8
57,438
9.94
12.59
11.12


 
26
 


Industrial/Warehouse, Retail and Land Lease Properties
          
 
             
2007
     
Percentage
2007
  
2007
Average
   
Net
Leased
Base
  
Average
Effective
   
Rentable
as of
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/07
($000’s)
of Total 2007
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
 (b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
               
NEW YORK
              
               
Westchester County
              
Elmsford
              
1 Warehouse Lane
1957
6,600
100.0
86
0.01
13.03
12.73
2 Warehouse Lane
1957
10,900
100.0
161
0.03
14.77
13.03
3 Warehouse Lane
1957
77,200
100.0
324
0.06
4.20
3.80
4 Warehouse Lane
1957
195,500
97.4
1,738
0.30
9.13
8.11
5 Warehouse Lane
1957
75,100
97.1
963
0.17
13.21
11.78
6 Warehouse Lane
1982
22,100
100.0
513
0.09
23.21
22.62
               
Total Industrial/Warehouse Properties
387,400
98.1
3,785
0.66
9.96
9.00
               
Westchester County
              
Tarrytown
              
230 White Plains Road
1984
9,300
100.0
195
0.03
20.97
19.68
Yonkers
              
2 Executive Boulevard
1986
8,000
100.0
223
0.04
27.88
27.88
               
Total Retail Properties
  
17,300
100.0
418
0.07
24.16
23.47
               
Westchester County
              
Elmsford
              
700 Executive Boulevard
--
--
--
114
0.02
--
--
Yonkers
              
1 Enterprise Boulevard
--
--
--
185
0.03
--
--
               
Total Land Leases
  
--
--
299
0.05
--
--
               
               
TOTAL PROPERTIES
  
29,245,361
92.7
575,463
100.00
21.61
19.09

(a)
Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2007, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases expiring December 31, 2007 aggregating 146,261 square feet (representing 0.5 percent of the Company’s total net rentable square footage) for which no new leases were signed.
(b)
Total base rent for 2007, determined in accordance with generally accepted accounting principles (“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.
(c)
Excludes space leased by the Company.
(d)
Base rent for 2007 divided by net rentable square feet leased at December 31, 2007.  For those properties acquired during 2007, amounts are annualized, as per Note f.
(e)
Total base rent for 2007 minus total 2007 amortization of tenant improvements, leasing commissions and other concessions and costs, determined in accordance with GAAP, divided by net rentable square feet leased at December 31, 2007.  For those properties acquired during 2007, amounts are annualized, as described in Note f.
(f)  
As this property was acquired by the Company during 2007, the amounts represented in 2007 base rent and 2007 effective rent reflect only that portion of the year during which the Company owned the property.  Accordingly, these amounts may not be indicative of the property’s full year results.  For comparison purposes, the amounts represented in 2007 average base rent per sq. ft. and 2007 average effective rent per sq. ft. for this property have been calculated by taking 2007 base rent and 2007 effective rent for such property and annualizing these partial-year results, dividing such annualized amounts by the net rentable square feet leased at December 31, 2007.  These annualized per square foot amounts may not be indicative of the property’s results had the Company owned the property for the entirety of 2007.

 
27
 

PERCENTAGE LEASED

The following table sets forth the year-end percentages of square feet leased in the Company’s stabilized operating Consolidated Properties for the last five years:

 
Percentage of
December 31,
Square Feet Leased (%) (a)
2007
92.7
   
2006
92.0
   
2005
91.0
   
2004
91.2
   
2003
91.5
   

(a)  
Percentage of square-feet leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases that expire at the period end date.



 
28
 


SIGNIFICANT TENANTS

The following table sets forth a schedule of the Company’s 50 largest tenants for the Consolidated Properties as of December 31, 2007 based upon annualized base rental revenue:

     
Percentage of
      
   
Annualized
Company
Square
Percentage
Year of
 
Number of
Base Rental
Annualized Base
Feet
Total Company
Lease
 
Properties
Revenue ($) (a)
Rental Revenue (%)
 Leased
Leased Sq. Ft. (%)
Expiration
6
14,276,232
2.4
466,489
1.8
2018
(b)
DB Services New Jersey, Inc.
2
10,861,093
1.8
402,068
1.5
2017
  
National Union Fire Insurance
1
10,490,646
1.8
394,849
1.5
2012
  
Morgan Stanley & Co., Inc.
5
9,493,227
1.6
381,576
1.4
2013
(c)
New Cingular Wireless PCS, LLC
4
9,144,930
1.5
410,313
1.6
2014
(d)
United States Of America-GSA
11
8,993,139
1.5
283,685
1.1
2017
(e)
Keystone Mercy Health Plan
2
8,003,134
1.3
303,149
1.1
2015
  
Prentice-Hall, Inc.
1
7,694,097
1.3
474,801
1.9
2014
  
Forest Laboratories, Inc.
2
7,463,777
1.3
202,857
0.8
2017
(f)
American Institute of Certified Public
              
  Accountants
1
6,653,005
1.1
249,768
0.9
2012
  
ICAP Securities USA, LLC
1
6,236,408
1.0
159,834
0.6
2017
  
Toys 'R' Us – NJ, Inc.
1
6,072,651
1.0
242,518
0.9
2012
  
Lehman Brothers Holdings, Inc.
1
5,839,982
1.0
270,063
1.0
2018
(g)
Allstate Insurance Company
10
5,713,563
1.0
237,559
0.9
2017
(h)
TD Ameritrade Online Holdings
1
5,701,671
1.0
184,222
0.7
2015
  
Merrill Lynch Pierce Fenner
3
5,294,084
0.9
306,125
1.1
2017
(i)
Credit Suisse First Boston
1
5,212,307
0.9
153,464
0.6
2012
(j)
KPMG, LLP
3
5,024,296
0.8
181,025
0.7
2012
(k)
National Financial Services
1
4,798,621
0.8
112,964
0.4
2012
  
IBM Corporation
3
4,788,402
0.8
310,263
1.2
2012
(l)
Daiichi Sankyo, Inc.
3
4,009,822
0.7
136,366
0.5
2022
(m)
Bank Of Tokyo-Mitsubishi, Ltd.
1
3,872,785
0.6
137,076
0.5
2019
  
Vonage America, Inc.
1
3,857,000
0.6
350,000
1.3
2017
  
AT&T Corp.
1
3,805,000
0.6
275,000
1.0
2014
  
Wyndham Worldwide Corporation
1
3,773,775
0.6
150,951
0.6
2009
  
Samsung Electronics America
1
3,678,028
0.6
131,300
0.5
2010
  
Montefiore Medical Center
5
3,533,233
0.6
170,064
0.6
2019
(n)
Hewlett-Packard Company
2
3,520,179
0.6
166,977
0.6
2010
(o)
SSB Realty, LLC
1
3,492,830
0.6
114,519
0.4
2009
  
Wyndham Worldwide Operations
1
3,211,626
0.5
145,983
0.5
2011
  
E*Trade Financial Corporation
1
3,124,160
0.5
106,573
0.4
2022
  
Dow Jones & Company, Inc.
1
3,057,773
0.5
92,312
0.3
2012
  
High Point Safety & Insurance
2
2,727,009
0.5
116,889
0.4
2020
  
American Home Assurance Co.
2
2,686,732
0.5
131,174
0.5
2019
(p)
SunAmerica Asset Management
1
2,680,409
0.4
69,621
0.3
2018
  
Moody’s Investors Service
1
2,671,149
0.4
91,344
0.3
2011
(q)
Oppenheimer & Co., Inc.
1
2,636,192
0.4
104,008
0.4
2013
  
Barr Laboratories, Inc.
2
2,579,597
0.4
109,510
0.4
2015
(r)
United States Life Insurance Co.
1
2,520,000
0.4
180,000
0.7
2013
  
AAA Mid-Atlantic, Inc.
2
2,517,680
0.4
129,784
0.5
2022
(s)
New Jersey Turnpike Authority
1
2,455,463
0.4
100,223
0.4
2017
  
Natixis North America, Inc.
1
2,408,679
0.4
83,629
0.3
2021
  
Regus Business Centre Corp.
2
2,321,656
0.4
79,805
0.3
2011
  
Movado Group, Inc
1
2,283,547
0.4
90,050
0.3
2013
  
Deloitte & Touche USA, LLP
1
2,171,275
0.4
86,851
0.3
2008
  
UBS Financial Services, Inc.
3
2,127,185
0.4
79,530
0.3
2016
(t)
Thomson Tradeweb, LLC
1
2,116,075
0.4
56,547
0.2
2017
  
Ark Asset Management Co., Inc.
1
2,094,608
0.4
67,568
0.3
2017
  
Nextel of New York, Inc.
2
2,093,440
0.4
97,436
0.4
2014
(u)
GAB Robins North America Inc.
2
2,087,199
0.4
84,649
0.3
2009
(v)
             
Totals
  
233,869,371
39.2
9,463,331
35.5
  

See footnotes on subsequent page.

 
29
 


Significant Tenants Footnotes

(a)  
Annualized base rental revenue is based on actual December, 2007 billings times 12.  For leases whose rent commences after January 1, 2008, 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.
(b)  
4,412 square feet expire in 2008; 38,196 square feet expire in 2009; 330,900 square feet expire in 2010; 26,834 square feet expire in 2014; 26,262 square feet expire in 2016; 39,885 square feet expire in 2018.
(c)  
19,500 square feet expire in 2008; 7,000 square feet expire in 2009; 48,906 square feet expire in 2010; 306,170 square feet expire in 2013.
(d)  
4,783 square feet expire in 2008; 333,145 square feet expire in 2013; 72,385 square feet expire in 2014.
(e)  
7,008 square feet expire in 2008; 4,950 square feet expire in 2010; 9,901 square feet expire in 2011; 11,216 square feet expire in 2012; 58,392 square feet expire in 2013; 4,879 square feet expire in 2014; 180,729 square feet expire in 2015; 6,610 square feet expire in 2017.
(f)  
22,785 square feet expire in 2010; 180,072 square feet expire in 2017.
(g)  
198,559 square feet expire in 2010; 71,504 square feet expire in 2018.
(h)  
2,138 square feet expire in 2008; 22,185 square feet expire in 2009; 46,555 square feet expire in 2010; 83,693 square feet expire in 2011; 29,005 square feet expire in 2013; 53,983 square feet expire in 2017.
(i)  
7,485 square feet expire in 2008; 4,451 square feet expire in 2009; 294,189 square feet expire in 2017.
(j)  
71,511 square feet expire in 2011; 81,953 square feet expire in 2012.
(k)  
46,440 square feet expire in 2009; 57,204 square feet expire in 2010; 77,381 square feet expire in 2012.
(l)  
61,864 square feet expire in 2010; 248,399 square feet expire in 2012.
(m)  
46,000 square feet expire in 2009; 5,315 square feet expire in 2011; 85,051 square feet expire in 2022.
(n)  
6,800 square feet expire in 2009; 5,850 square feet expire in 2014; 7,200 square feet expire in 2016; 30,872 square feet expire in 2017; 6,535 square feet expire in 2018; 112,807 square feet expire in 2019.
(o)  
163,857 square feet expire in 2008; 3,120 square feet expire in 2010.
(p)  
14,056 square feet expire in 2008; 117,118 square feet expire in 2019.
(q)  
43,344 square feet expire in 2009; 36,193 square feet expire in 2010; 11,807 square feet expire in 2011.
(r)  
20,000 square feet expire in 2008; 89,510 square feet expire in 2015.
(s)  
9,784 square feet expire in 2017; 120,000 square feet expire in 2022.
(t)  
21,554 square feet expire in 2010; 20,811 square feet expire in 2013; 37,165 square feet expire in 2016.
(u)  
62,436 square feet expire in 2010; 35,000 square feet expire in 2014.
(v)  
75,049 square feet expire in 2008; 9,600 square feet expire in 2009.



 
30
 

SCHEDULE OF LEASE EXPIRATIONS: ALL CONSOLIDATED PROPERTIES

The following table sets forth a schedule of 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 January 1, 2008, assuming that none of the tenants exercise renewal or termination options:

         
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
Revenue Under
Represented
Rent Under
Year Of
Leases
Leases
By Expiring
Expiring
By Expiring
Expiring
Expiration
Expiring (a)
(Sq. Ft.)
Leases (%)
Leases ($) (b)
Leases ($)
Leases (%)
             
2008 (c)
293
1,930,173
7.2
40,605,709
21.04
6.8
             
2009
361
2,397,663
9.0
53,293,256
22.23
8.9
             
2010
376
3,208,062
12.0
73,768,677
22.99
12.4
             
2011
358
3,386,416
12.7
76,565,941
22.61
12.9
             
2012
261
2,855,408
10.7
67,133,300
23.51
11.3
             
2013
225
3,095,963
11.6
66,615,433
21.52
11.2
             
2014
114
1,719,904
6.4
37,835,190
22.00
6.3
             
2015
72
2,281,276
8.6
50,220,025
22.01
8.4
             
2016
64
904,243
3.4
17,907,753
19.80
3.0
             
2017
75
2,278,116
8.6
54,153,943
23.77
9.1
             
2018
47
811,852
3.1
20,054,181
24.70
3.4
             
2019 and thereafter
55
1,784,202
6.7
37,833,109
21.20
6.3
Totals/Weighted
            
  Average
2,301
26,653,278 (d)
100.0
595,986,517
22.36
100.0

(a)  
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.
(b)  
Annualized base rental revenue is based on actual December 2007 billings times 12.  For leases whose rent commences after January 1, 2008, 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.
(c)  
Includes leases expiring December 31, 2007 aggregating 146,261 square feet and representing annualized rent of $2,237,232 for which no new leases were signed.
(d)  
Reconciliation to Company’s total net rentable square footage is as follows:


 
Square Feet
Square footage leased to commercial tenants
26,653,278
Square footage used for corporate offices, management offices,
  
building use, retail tenants, food services, other ancillary
  
service tenants and occupancy adjustments
452,348
Square footage unleased
2,139,735
Total net rentable square footage (does not include land leases)
29,245,361

 
31
 

SCHEDULE OF LEASE EXPIRATIONS: OFFICE PROPERTIES

The following table sets forth a schedule of lease expirations for the office properties beginning January 1, 2008, assuming that none of the tenants exercise renewal or termination options:

         
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 (a)
(Sq. Ft.)
Leases (%)
Leases ($) (b)
Leases ($)
Leases (%)
             
2008 (c)
226
1,442,795
6.6
34,349,088
23.81
6.4
             
2009
275
1,763,173
8.1
44,595,505
25.29
8.4
             
2010
288
2,382,681
11.0
62,482,351
26.22
11.8
             
2011
295
2,853,419
13.2
70,304,107
24.64
13.2
             
2012
192
2,246,355
10.4
59,201,643
26.35
11.1
             
2013
171
2,414,424
11.1
58,168,960
24.09
11.0
             
2014
96
1,533,173
7.1
35,278,848
23.01
6.6
             
2015
62
2,131,479
9.8
48,736,523
22.87
9.2
             
2016
50
587,594
2.7
13,725,094
23.36
2.6
             
2017
62
2,116,810
9.8
51,506,338
24.33
9.7
             
2018
32
612,032
2.8
17,424,818
28.47
3.3
             
2019 and thereafter
47
1,615,268
7.4
35,478,909
21.96
6.7
Totals/Weighted
            
  Average
1,796
21,699,203 (c)
100.0
531,252,184
24.48
100.0

(a)  
Includes office tenants only.  Excludes leases for amenity, retail, parking and month-to-month tenants.  Some tenants have multiple leases.
(b)  
Annualized base rental revenue is based on actual December 2007 billings times 12.  For leases whose rent commences after January 1, 2008, 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.
(c)  
Includes leases expiring December 31, 2007 aggregating 14,273 square feet and representing annualized rent of $316,943 for which no new leases were signed..

 
32
 

SCHEDULE OF LEASE EXPIRATIONS: OFFICE/FLEX PROPERTIES

The following table sets forth a schedule of lease expirations for the office/flex properties beginning January 1, 2008, assuming that none of the tenants exercise renewal or termination options:

         
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 (a)
(Sq. Ft.)
Leases (%)
Leases ($) (b)
Leases ($)
Leases (%)
             
2008 (c)
65
480,138
10.6
6,173,940
12.86
10.2
             
2009
81
582,845
12.8
7,772,201
13.33
12.9
             
2010
86
792,431
17.4
10,889,226
13.74
18.1
             
2011
62
525,397
11.5
6,166,834
11.74
10.2
             
2012
68
602,415
13.2
7,867,932
13.06
13.1
             
2013
44
533,124
11.7
7,198,386
13.50
11.9
             
2014
18
186,731
4.1
2,556,342
13.69
4.2
             
2015
10
149,797
3.3
1,483,502
9.90
2.5
             
2016
12
181,567
4.0
2,764,298
15.22
4.6
             
2017
13
161,306
3.5
2,647,605
16.41
4.4
             
2018
14
191,820
4.2
2,404,363
12.53
4.0
             
2019 and thereafter
8
168,934
3.7
2,354,200
13.94
3.9
Totals/Weighted
            
  Average
481
4,556,505 (c)
100.0
60,278,829
13.23
100.0

(a)  
Includes office/flex tenants only.  Excludes leases for amenity, retail, parking and month-to-month tenants.  Some tenants have multiple leases.
(b)  
Annualized base rental revenue is based on actual December 2007 billings times 12.  For leases whose rent commences after January 1, 2008, 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. Includes office/flex tenants only.  Excludes leases for amenity, retail, parking and month-to-month tenants.  Some tenants have multiple leases.
(c)  
Includes leases expiring December 31, 2007 aggregating 131,988 square feet and representing annualized rent of $1,920,290 for which no new leases were signed.



 
33
 

SCHEDULE OF LEASE EXPIRATIONS: INDUSTRIAL/WAREHOUSE PROPERTIES

The following table sets forth a schedule of lease expirations for the industrial/warehouse properties beginning January 1, 2008, assuming that none of the tenants exercise renewal or termination options:

         
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 (a)
(Sq. Ft.)
Leases (%)
Leases ($) (b)
Leases ($)
Leases (%)
             
2008
2
7,240
1.9
82,681
11.42
2.0
             
2009
4
42,345
11.1
730,550
17.25
18.1
             
2010
2
32,950
8.7
397,100
12.05
9.8
             
2011
1
7,600
2.0
95,000
12.50
2.4
             
2012
1
6,638
1.8
63,725
9.60
1.6
             
2013
10
148,415
39.0
1,248,087
8.41
30.9
             
2016
2
135,082
35.5
1,418,361
10.50
35.2
Totals/Weighted
            
  Average
22
380,270
100.0
4,035,504
10.61
100.0

(a)  
Includes industrial/warehouse tenants only.  Excludes leases for amenity, retail, parking and month-to-month industrial/warehouse tenants.  Some tenants have multiple leases.
(b)  
Annualized base rental revenue is based on actual December 2007 billings times 12.  For leases whose rent commences after January 1, 2008, 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 lease expirations for the stand-alone retail properties beginning January 1, 2008, assuming that none of the tenants exercise renewal or termination options:

         
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 (a)
(Sq. Ft.)
Leases (%)
Leases ($) (b)
Leases ($)
Leases (%)
             
2009
1
9,300
53.8
195,000
20.97
46.4
             
2018
1
8,000
46.2
225,000
28.13
53.6
Totals/Weighted
            
  Average
2
17,300
100.0
420,000
24.28
100.0
 
 
(a)  
Includes stand-alone retail property tenants only.
(b)  
Annualized base rental revenue is based on actual December 2007 billings times 12.  For leases whose rent commences after January 1, 2008 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.

 
 
34
 


INDUSTRY DIVERSIFICATION

The following table lists the Company’s 30 largest industry classifications based on annualized contractual base rent of the Consolidated Properties:

 
Annualized
Percentage of
  
Percentage of
 
Base Rental
Company
Square
Total Company
 
Revenue
Annualized Base
Feet
Leased
Industry Classification (a)
($) (b) (c) (d)
Rental Revenue (%)
Leased (d)
Sq. Ft. (%)
Securities, Commodity Contracts
        
  & Other Financial
116,331,972
19.5
4,183,589
15.6
Insurance Carriers & Related Activities
48,755,385
8.2
2,118,350
7.9
Manufacturing
47,051,663
7.9
2,216,972
8.3
Computer System Design Services
28,484,708
4.8
1,364,041
5.1
Credit Intermediation & Related Activities
27,705,517
4.6
1,119,532
4.2
Telecommunications
27,147,675
4.6
1,315,096
4.9
Legal Services
24,070,028
4.0
955,919
3.6
Health Care & Social Assistance
24,012,704
4.0
1,198,337
4.5
Wholesale Trade
21,961,034
3.7
1,422,646
5.3
Scientific Research/Development
21,549,733
3.6
937,094
3.5
Other Professional
20,466,810
3.4
885,610
3.3
Accounting/Tax Prep.
18,109,960
3.0
727,704
2.7
Public Administration
16,234,770
2.7
617,621
2.3
Retail Trade
15,563,071
2.6
933,701
3.5
Advertising/Related Services
15,206,639
2.6
619,917
2.3
Other Services (except Public Administration)
14,935,857
2.5
789,184
3.0
Information Services
10,146,488
1.7
436,007
1.6
Arts, Entertainment & Recreation
9,361,518
1.6
566,414
2.1
Architectural/Engineering
9,193,910
1.5
409,436
1.5
Real Estate & Rental & Leasing
8,844,972
1.5
413,448
1.6
Construction
8,584,162
1.4
395,943
1.5
Broadcasting
7,603,641
1.3
475,740
1.8
Utilities
7,206,837
1.2
339,377
1.3
Admin & Support, Waste Mgt.
        
  & Remediation Services
6,951,228
1.2
400,488
1.5
Data Processing Services
5,845,322
1.0
240,585
0.9
Transportation
5,830,219
1.0
308,274
1.2
Educational Services
5,508,496
0.9
282,336
1.1
Specialized Design Services
4,175,140
0.7
183,273
0.7
Management of Companies & Finance
3,664,372
0.6
147,079
0.6
Publishing Industries
3,557,304
0.6
185,610
0.7
Other
11,925,382
2.1
463,955
1.9
         
Totals
595,986,517
100.0
26,653,278
100.0

(a)  
The Company’s tenants are classified according to the U.S. Government’s North American Industrial Classification System (NAICS) which has replaced the Standard Industrial Code (SIC) system.
(b)  
Annualized base rental revenue is based on actual December 2007 billings times 12.  For leases whose rent commences after January 1, 2008, 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.
(c)  
Includes office, office/flex, industrial/warehouse and stand-alone retail tenants only.  Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.
(d)  
Includes leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2007, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases expiring December 31, 2007 aggregating 146,261 square feet and representing annualized rent of $2,237,232 for which no new leases were signed.



 
35
 

MARKET DIVERSIFICATION

The following table lists the Company’s markets (MSAs), based on annualized contractual base rent of the Consolidated Properties:

 

   
Percentage Of
    
   
Company
    
 
Annualized Base
Annualized
Total Property
  
 
Rental Revenue
Base Rental
Size Rentable
Percentage Of
Market (MSA)
($) (a) (b) (c)
Revenue (%)
Area (b) (c)
Rentable Area (%)
Jersey City, NJ
117,129,345
19.6
4,317,978
14.8
Newark, NJ
        
 (Essex-Morris-Union Counties)
116,048,183
19.5
5,847,318
20.0
Westchester-Rockland, NY
92,728,821
15.6
4,968,420
17.0
Bergen-Passaic, NJ
91,792,074
15.4
4,602,401
15.7
Philadelphia, PA-NJ
55,501,093
9.3
3,529,994
12.1
Washington, DC-MD-VA-WV
31,191,296
5.2
1,292,807
4.4
Monmouth-Ocean, NJ
26,235,892
4.4
1,620,863
5.5
Trenton, NJ
20,568,550
3.5
956,597
3.3
Middlesex-Somerset-Hunterdon, NJ
19,567,698
3.3
986,760
3.4
New York, NY
        
 (Manhattan)
15,442,033
2.6
524,476
1.8
Stamford-Norwalk, CT
7,305,712
1.2
452,260
1.5
Bridgeport, CT
2,475,820
0.4
145,487
0.5
         
Totals
595,986,517
100.0
29,245,361
100.0

(a)  
Annualized base rental revenue is based on actual December 2007 billings times 12.  For leases whose rent commences after January 1, 2008, 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.
(b)  
Includes leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2007, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases expiring December 31, 2007 aggregating 146,261 feet and representing annualized rent of $2,237,232 for which no new leases were signed.
(c)  
Includes office, office/flex, industrial/warehouse and stand-alone retail tenants only.  Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.


 
36
 

ITEM 3.        LEGAL PROCEEDINGS

There are no material pending legal proceedings, other than ordinary routine litigation incidental to its business, to which the Company is a party or to which any of the Properties is subject.

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.

 
37
 

PART II
 
ITEM 5.        MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
 
MARKET INFORMATION
The shares of the Company’s Common Stock are traded on the New York Stock Exchange (“NYSE”) under the symbol “CLI.”

The following table sets forth the quarterly high, low, and closing price per share of Common Stock reported on the NYSE for the years ended December 31, 2007 and 2006, respectively:

For the Year Ended December 31, 2007:
       
 
High
Low
Close
First Quarter
$56.52
$46.89
$47.63
Second Quarter
$50.83
$42.33
$43.49
Third Quarter
$44.98
$36.80
$41.10
Fourth Quarter
$46.51
$30.41
$34.00
       
For the Year Ended December 31, 2006:
       
 
High
Low
Close
First Quarter
$48.37
$42.34
$48.00
Second Quarter
$47.47
$42.17
$45.92
Third Quarter
$53.66
$45.47
$51.80
Fourth Quarter
$55.37
$48.24
$51.00

On February 8, 2008, the closing Common Stock price reported on the NYSE was $33.67 per share.

On June 20, 2007, the Company filed with the NYSE its annual CEO Certification and Annual Written Affirmation pursuant to Section 303A.12 of the NYSE Listed Company Manual, each certifying that the Company was in compliance with all of the listing standards of the NYSE.

HOLDERS

On February 8, 2008, the Company had 585 common shareholders of record.

RECENT SALES OF UNREGISTERED SECURITIES; USES OF PROCEEDS FROM REGISTERED SECURITIES

During the three months ended December 31, 2007, the Company issued 261,090 shares of common stock to holders of common units in the Operating Partnership upon the redemption of such common units in private offerings pursuant to Section 4(2) of the Securities Act.  The holders of the common units were limited partners of the Operating Partnership and accredited investors under Rule 501 of the Securities Act.  The common units were converted into an equal number of shares of common stock.  The Company has registered the resale of such shares under the Securities Act.

DIVIDENDS AND DISTRIBUTIONS

During the year ended December 31, 2007, the Company declared four quarterly common stock dividends and common unit distributions in the amounts of $0.64, $0.64, $0.64 and $0.64 per share and per unit from the first to the fourth quarter, respectively.  Additionally, in 2007, the Company declared quarterly preferred stock dividends of $50.00 per preferred share from the first to the fourth quarter.

 
38
 


During the year ended December 31, 2006, the Company declared four quarterly common stock dividends and common unit distributions in the amounts of $0.63, $0.63, $0.64 and $0.64 per share and per unit from the first to the fourth quarter, respectively.  Additionally, in 2006, the Company declared quarterly preferred stock dividends of $50.00 per preferred share from the first to the fourth quarter.

The declaration and payment of dividends and distributions will continue to be determined by the Board of Directors in light of conditions then existing, including the Company’s earnings, financial condition, capital requirements, applicable REIT and legal restrictions and other factors.
 
PERFORMANCE GRAPH

The following graph compares total stockholder returns from the last five fiscal years to the Standard & Poor’s 500 Index (“S&P 500”) and to the National Association of Real Estate Investment Trusts, Inc.’s Equity REIT Total Return Index (“NAREIT”).  The graph assumes that the value of the investment in the Company’s Common Stock and in the S&P 500 and NAREIT indices was $100 at December 31, 2002 and that all dividends were reinvested.  The price of the Company’s Common Stock on December 31, 2002 (on which the graph is based) was $30.30.  The stockholder return shown on the following graph is not necessarily indicative of future performance.

Comparison of Five-Year Cumulative Total Return
 
 
 


 
39
 

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

Information regarding securities authorized for issuance under our equity compensation plans is disclosed in Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.


PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

     
Total Number of
Maximum Dollar Value
 
Total Number of
  
Shares Purchased as
of Shares That May Yet
 
Shares
Average Price
Part of Publicly
be Purchase under the
Period
Purchased
Paid Per Share
Announced Plan (1)
Announced Plan (1)
October 1, 2007 to
  October 31, 2007
--
N/A
--
$138,829,930.70
November 1, 2007
  November 30, 2007
1,633,700
$36.28
1,633,700
$  79,512,789.61
December 1, 2007 to
  December 31, 2007
976,230
$34.32
976,230
$  45,983,692.60
         
Total:
2,609,930
$35.54
2,609,930
$  45,983,692.60
 
(1)  
The Board of Directors of the Company adopted a $100 million share repurchase program on August 6, 1998 and re-authorized and increased the share repurchase program to $150 million on September 13, 2000.  From September 2000 through August 2007, approximately $105.5 million of shares of the Company's common stock were repurchased.  On September 12, 2007, the Board of Directors of the Company further re-authorized and increased the share repurchase program to $150 million.  The share repurchase program authorizes repurchases from time to time in open market transactions at prevailing prices or through privately negotiated transactions and is not subject to an expiration date.
 
 
 
 
40
 


ITEM 6.        SELECTED FINANCIAL DATA

The following table sets forth selected financial data on a consolidated basis for the Company.  The consolidated selected operating, balance sheet and other data of the Company as of December 31, 2007, 2006, 2005, 2004 and 2003, and for the years then ended have been derived from the Company’s financial statements for the respective periods.

Operating Data (a)
Year Ended December 31,
In thousands, except per share data
2007
2006
2005
2004
2003
Total revenues
$   808,350
$   732,012
$   591,991
$   529,225
$   509,099
Property expenses (b)
$   270,913
$   253,667
$   207,558
$   168,021
$   156,073
Direct construction costs
$     85,180
$     53,602
--
--
--
General and administrative
$     52,162
$     49,074
$     32,432
$     31,305
$     30,827
Interest expense
$   126,672
$   134,964
$   119,070
$   109,211
$   114,919
Income from continuing operations
$     73,129
$     84,679
$     73,987
$     77,977
$   110,731
Net income available to common shareholders
$   108,466
$   142,666
$     93,488
$   100,453
$   141,381
Income from continuing operations
          
  per share – basic
$         1.06
$         1.33
$         1.17
$         1.26
$         1.89
Income from continuing operations
          
  per share – diluted
$         1.06
$         1.32
$         1.16
$         1.25
$         1.88
Net income per share – basic
$         1.62
$         2.29
$         1.52
$         1.66
$         2.45
Net income per share – diluted
$         1.61
$         2.28
$         1.51
$         1.65
$         2.43
Dividends declared per common share
$         2.56
$         2.54
$         2.52
$         2.52
$         2.52
Basic weighted average shares outstanding
67,026
62,237
61,477
60,351
57,724
Diluted weighted average shares outstanding
82,500
77,901
74,189
68,743
65,980

Balance Sheet Data
December 31,
In thousands
2007
2006
2005
2004
2003
Rental property, before accumulated
          
  depreciation and amortization
$4,885,429
$4,573,587
$4,491,752
$4,160,959
$3,954,632
Rental property held for sale, net
--
--
--
$     19,132
--
Total assets
$4,593,202
$4,422,889
$4,247,502
$3,850,165
$3,749,570
Total debt (c)
$2,211,735
$2,159,959
$2,126,181
$1,702,300
$1,628,584
Total liabilities
$2,492,797
$2,412,762
$2,335,396
$1,877,096
$1,779,983
Minority interests
$   457,850
$   482,220
$   400,819
$   427,958
$   428,099
Stockholders’ equity
$1,642,555
$1,527,907
$1,511,287
$1,545,111
$1,541,488
________________________

(a)
Certain reclassifications have been made to prior period amounts in order to conform with current period presentation.
(b)
Property expenses is calculated by taking the sum of real estate taxes, utilities and operating services for each of the periods presented.
(c)
Total debt is calculated by taking the sum of senior unsecured notes, revolving credit facilities, and mortgages, loans payable and other obligations.

 
41
 
 
 
ITEM 7.      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 (collectively, the “Financial Statements”).  Certain defined terms used herein have the meaning ascribed to them in the Financial Statements.


Executive Overview

Mack-Cali Realty Corporation (the “Company”) is one of the largest real estate investment trusts (REITs) in the United States, with a total market capitalization of approximately $5.0 billion at December 31, 2007.  The Company has been involved in all aspects of commercial real estate development, management and ownership for over 50 years and has been a publicly-traded REIT since 1994.  The Company owns or has interests in 294 properties (collectively, the “Properties”), primarily class A office and office/flex buildings, totaling approximately 33.7 million square feet, leased to approximately 2,200 tenants.  The properties are located primarily in suburban markets of the Northeast, some with adjacent, Company-controlled developable land sites able to accommodate up to 11.3 million square feet of additional commercial space.

The Company’s strategy is to be a significant real estate owner and operator in its core, high-barriers-to-entry markets, primarily in the Northeast.

As an owner of real estate, almost all of the Company’s earnings and cash flow is derived from rental revenue received pursuant to leased space at the Properties.  Key factors that affect the Company’s business and financial results include the following:

· 
  the general economic climate;
· 
  the occupancy rates of the Properties;
· 
  rental rates on new or renewed leases;
· 
  tenant improvement and leasing costs incurred to obtain and retain tenants;
· 
  the extent of early lease terminations;
· 
  operating expenses;
· 
  cost of capital; and
· 
  the extent of acquisitions, development and sales of real estate.

Any negative effects of the above key factors could potentially cause a deterioration in the Company’s revenue and/or earnings.  Such negative effects could include: (1) failure to renew or execute new leases as current leases expire; (2) failure to renew or execute new leases with rental terms at or above the terms of in-place leases; and (3) tenant defaults.

A failure to renew or execute new leases as current leases expire or to execute new leases with rental terms at or above the terms of in-place leases may be affected by several factors such as: (1) the local economic climate, which may be adversely impacted by business layoffs or downsizing, industry slowdowns, changing demographics and other factors; and (2) local real estate conditions, such as oversupply of office and office/flex space or competition within the market.

The Company’s core markets continue to be weak.  The percentage leased in the Company’s consolidated portfolio of stabilized operating properties was 92.7 percent at December 31, 2007 as compared to 92.0 percent at December 31, 2006 and 91.0 percent at December 31, 2005.  Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2007, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases that expire at the period end date.  Leases that expired as of December 31, 2007, 2006 and 2005 aggregate 146,261, 103,477 and 311,623 square feet, respectively, or 0.5, 0.4 and 1.1 percentage of the net rentable square footage, respectively.  Rental rates on the Company’s space that was re-leased (based on first rents payable) during the year  ended December 31, 2007 decreased an average of 0.2 percent compared to rates that were in effect under the prior leases, as compared to a 0.2 percent decrease in 2006 and an 8.2 percent decrease in 2005.  The Company believes that vacancy rates may continue to increase in some of its markets in 2008.  As a result, the Company’s future earnings and cash flow may continue to be negatively impacted by current market conditions.
 
 
42

The remaining portion of this Management’s Discussion and Analysis of Financial Condition and Results of Operations should help the reader understand:

· 
  property transactions during the period;
· 
  critical accounting policies and estimates;
· 
  results of operations for the year ended December 31, 2007 as compared to the year ended December 31, 2006;
· 
  results of operations for the year ended December 31, 2006 as compared to the year ended December 31, 2005; and
· 
  liquidity and capital resources.


Summary of 2007 Transactions

Property Acquisitions
The Company acquired the following office properties during the year ended December 31, 2007 (dollars in thousands):
 
Acquisition
    
# of
Rentable
Acquisition
Date
Property/Address
Location
Bldgs.
Square Feet
Cost
05/08/07
AAA Properties (a) (c)
Hamilton Township, New Jersey
2
69,232
$    9,048
06/11/07
125 Broad Street (b) (c)
New York, New York
1
524,476
274,091
         
Total Property Acquisitions:
  
3
593,708
$283,139
         
(a)  Included in this transaction was the acquisition of two parcels of developable land aggregating approximately 13 acres.
(b)  Acquisition represented two units of office condominium interests, which collectively comprise floors 2 through 16, or 39.6 percent, of the 40-story, 1.2 million square-foot building.
(c)   Transaction was funded primarily through borrowing on the Company’s revolving credit facility.

Properties Commencing Initial Operations
The following office property commenced initial operations during the year ended December 31, 2007 (dollars in thousands):

     
# of
Rentable
Investment by
Date
Property/Address
Location
Bldgs.
Square Feet
Company (a)
05/08/07
700 Horizon Drive
Hamilton Township, New Jersey
1
120,000
$16,751
         
Total Properties Commencing Initial Operations:
  
1
120,000
$16,751
         
(a)   Development costs were funded primarily through borrowing on the Company’s revolving credit facility.  Amounts are as of December 31, 2007.

Land Acquisition
In February 2007, the Company exercised its option to acquire approximately 43 acres of land sites within its Capital Office Park complex in Greenbelt, Maryland, which is able to accommodate the development of up to 600,000 square feet of office space, for $13 million.  On May 25, 2007, the Company completed the purchase of the land for approximately $13 million, which consisted of 114,911 common operating partnership units valued at $5.2 million, and the remainder in cash.

 
43
 

Property Sales
The Company sold the following office properties during the year ended December 31, 2007 (dollars in thousands):

       
Rentable
Net
Net
  
Sale
    
# of
Square
Sales
Book
Realized
Date
Property/Address
Location
Bldgs.
 Feet
Proceeds
Value
Gain
05/10/07
1000 Bridgeport Avenue
Shelton, Connecticut
1
133,000
$16,411
$13,782
$  2,629
06/11/07
500 W. Putnam Avenue
Greenwich, Connecticut
1
121,250
54,344
18,113
36,231
07/13/07
100& 200 Decadon Drive
Egg Harbor, New Jersey
2
80,344
11,448
5,894
5,554
             
Total Office Property Sales:
  
4
334,594
$82,203
$37,789
$44,414


Critical Accounting Policies and Estimates

The Financial Statements have been prepared in conformity with generally accepted accounting principles.  The preparation of the Financial Statements 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 reported period.  These estimates and assumptions are based on management’s historical experience that are believed to be reasonable at the time.  However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment.  The Company’s critical accounting policies are those which require assumptions to be made about matters that are highly uncertain.  Different estimates could have a material effect on the Company’s financial results.  Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances.

Rental Property:
Rental properties are stated at cost less accumulated depreciation and amortization.  Costs directly related to the acquisition, development and construction of rental properties are capitalized.  Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development.  Interest capitalized by the Company for the years ended December 31, 2007, 2006 and 2005 was $5.1 million, $6.1, million and $5.5 million, 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.

The Company considers a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity (as distinguished from activities such as routine maintenance and cleanup).  If portions of a rental project are substantially completed and occupied by tenants, or held available for occupancy, and other portions have not yet reached that stage, the substantially completed portions are accounted for as a separate project.  The Company allocates costs incurred between the portions under construction and the portions substantially completed and held available for occupancy and capitalizes only those costs associated with the portion under construction.

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


 
44
 

Upon acquisition of rental property, the Company estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships.  The Company allocates the purchase price to the assets acquired and liabilities assumed based on their relative fair values.  In estimating the fair value of the tangible and intangible assets acquired, the Company considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information.  The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

Above-market and below-market lease values for acquired properties are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the remaining initial term plus the term of any below-market fixed rate renewal options for below-market leases.  The capitalized above-market lease values are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases.

Other intangible assets acquired include amounts for in-place lease values and tenant relationship values which are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the respective tenant.  Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases.  In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions.  In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses.  Characteristics considered by management in valuing tenant relationships include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals.  The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases.  The value of tenant relationship intangibles will be amortized to expense over the anticipated life of the relationships.

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s rental 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 is less than the carrying value of the property.  To 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.  The Company’s estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property.  As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved.  Management does not believe that the value of any of the Company’s rental properties is impaired.

Rental Property Held for Sale and Discontinued Operations:
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 as held for sale is less than the net book value of the assets, a valuation allowance is established.  Properties identified as held for sale and/or sold are presented in discontinued operations for all periods presented.

If circumstances arise that previously were considered unlikely and, as a result, the Company decides not to sell a property previously classified as held for sale, the property is reclassified as held and used.  A property that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the property was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the property been continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell.
 
 
 
45

 
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.  Above-market and below-market lease values for acquired properties are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed-rate renewal options for below-market leases.  The capitalized above-market lease values for acquired properties are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed-rate renewal options of the respective leases.  Escalations and recoveries from tenants 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.

Construction services revenue includes fees earned and reimbursements received by the Company for providing construction management and general contractor services to clients.  Construction services revenue is recognized on the percentage of completion method.  Using this method, profits are recorded on the basis of our estimates of the overall profit and percentage of completion of individual contracts.  A portion of the estimated profits is accrued based upon estimates of the percentage of completion of the construction contract.  This revenue recognition method involves inherent risks relating to profit and cost estimates.  Real estate services revenue includes property management, facilities management, leasing commission fees and other services, and payroll and related costs reimbursed from clients.  Other income includes income from parking spaces leased to tenants, income from tenants for additional services arranged for the Company and income from tenants for early lease terminations.

Allowance for Doubtful Accounts:
Management periodically performs a detailed review of amounts due from tenants to determine if accounts receivable balances are impaired based on factors affecting the collectibility of those balances.  Management’s estimate of the allowance for doubtful accounts requires management to exercise significant judgment about the timing, frequency and severity of collection losses, which affects the allowance and net income.
 
 
 
46
 



Results From Operations

The following comparisons for the year ended December 31, 2007 (“2007”), as compared to the year ended December 31, 2006 (“2006”), and for 2006, as compared to the year ended December 31, 2005 (“2005”), make reference to the following:  (i) the effect of the “Same-Store Properties,” which represents all in-service properties owned by the Company at December 31, 2005, (for the 2007 versus 2006 comparison) and which represents all in-service properties owned by the Company at December 31, 2004, (for the 2006 versus 2005 comparison), excluding properties sold or held for sale through December 31, 2007, and (ii) the effect of the “Acquired Properties,” which represents all properties acquired by the Company or commencing initial operations from January 1, 2006 through December 31, 2007 (for the 2007 versus 2006 comparison) and which represent all properties acquired by the Company or commencing initial operation from January 1, 2005 through December 31, 2006 (for the 2006 versus 2005 comparison).

 
47
 


Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

 
Year Ended
    
 
December 31,
Dollar
Percent
(dollars in thousands)
2007
2006
Change
Change
Revenue from rental operations:
        
Base rents
$575,463
$532,879
$ 42,584
8.0%
Escalations and recoveries from tenants
104,781
90,214
14,567
16.1
Other income
22,070
21,649
421
1.9
Total revenues from rental operations
702,314
644,742
57,572
8.9
         
Property expenses:
        
Real estate taxes
90,895
85,999
4,896
5.7
Utilities
73,072
59,788
13,284
22.2
Operating services
106,946
107,880
(934)
(0.9)
Total property expenses
270,913
253,667
17,246
6.8
         
Non-property revenues:
        
Construction services
88,066
56,225
31,841
56.6
Real estate services
17,970
31,045
(13,075)
(42.1)
Total non-property revenues
106,036
87,270
18,766
21.5
         
Non-property expenses:
        
Direct constructions costs
85,179
53,602
31,577
58.9
General and administrative
52,162
49,074
3,088
6.3
Depreciation and amortization
183,564
159,096
24,468
15.4
Total non-property expenses
320,905
261,772
59,133
22.6
Operating Income
216,532
216,573
(41)
--
Other (expense) income:
        
Interest expense
(126,672)
(134,964)
8,292
6.1
Interest and other investment income
4,670
3,054
1,616
52.9
Equity in earnings (loss) of unconsolidated
        
joint ventures
(5,918)
(5,556)
(362)
(6.5)
Minority interest in consolidated joint ventures
643
218
425
195.0
Gain on sale of investment in marketable securities
--
15,060
(15,060)
(100.0)
Gain on sale of investment in joint ventures
--
10,831
(10,831)
(100.0)
Gain/(loss) on sale of land and other assets
--
(416)
416
100.0
Total other (expense) income
(127,277)
(111,773)
(15,504)
(13.9)
Income from continuing operations before minority
        
interest in Operating Partnership
89,255
104,800
(15,545)
(14.8)
Minority interest in Operating Partnership
(16,126)
(20,121)
3,995
19.9
Income from continuing operations
73,129
84,679
(11,550)
(13.6)
Discontinued operations (net of minority interest):
        
Income (loss) from discontinued operations
1,057
12,272
(11,215)
(91.4)
Realized gains (losses) and unrealized losses
        
on disposition of rental property, net
36,280
47,715
(11,435)
(24.0)
Total discontinued operations, net
37,337
59,987
(22,650)
(37.8)
Net income
110,466
144,666
(34,200)
(23.6)
Preferred stock dividends
(2,000)
(2,000)
--
--
         
Net income available to common shareholders
$108,466
$142,666
$(34,200)
(24.0)%

 
48
 


The following is a summary of the changes in revenue from rental operations and property expenses in 2007 as compared to 2006 divided into Same-Store Properties and Acquired Properties (dollars in thousands):


 
Total Company
Same-Store Properties
Acquired Properties
 
Dollar
Percent
Dollar
Percent     
Dollar
Percent
 
Change
Change
Change
Change     
Change
Change
Revenue from rental operations:
            
Base rents
$42,584
8.0%
$19,823
3.7%      
$  22,761
4.3%
Escalations and recoveries
        
 
 
   from tenants
14,567
16.1
9,086
10.1         
5,481
6.0
Other income
421
1.9
2,037
9.4         
(1,616)
(7.5)
Total
$57,572
8.9%
$30,946
4.8%     
$  26,626
4.1%
             
Property expenses:
            
Real estate taxes
$  4,896
5.7%
$1,660
1.9%     
$3,236
3.8%
Utilities
13,284
22.2
10,878
18.2        
2,406
4.0
Operating services
(934)
(0.9)
8,884
8.2        
(9,818)
(9.1)
Total
$17,246
6.8%
$21,422
8.4%    
$ (4,176)
(1.6)%
             
OTHER DATA:
            
Number of Consolidated Properties
255
  
240
  
15
  
Square feet (in thousands)
29,245
  
27,070
  
2,175
  

Base rents for the Same-Store Properties increased $19.8 million, or 3.7 percent, for 2007 as compared to 2006, due primarily to an increase in the percentage of space leased at the properties in 2007 from 2006.  Escalations and recoveries from tenants for the Same-Store Properties increased $9.1 million, or 10.1 percent, for 2007 over 2006, due primarily to an increased amount of total property expenses in 2007.  Other income for the Same-Store Properties increased $2.0 million, or 9.4 percent, due primarily to an increase in lease termination fees in 2007.

Real estate taxes on the Same-Store Properties increased $1.7 million, or 1.9 percent, for 2007 as compared to 2006, due primarily to property tax rate increases in certain municipalities in 2007, partially offset by reduced assessments on certain properties in 2007.  Utilities for the Same-Store Properties increased $10.9 million, or 18.2 percent, for 2007 as compared to 2006, due primarily to increased electric rates in 2007 as compared to 2006.  Operating services for the Same-Store Properties increased $8.9 million, or 8.2 percent, due primarily to increases in maintenance costs of $3.9 million, snow removal costs of $2.0 million, salaries and related expenses of $1.0 million, and property insurance expense of $0.7 million in 2007 as compared to 2006.

Construction services revenue increased $31.8 million in 2007 as compared to 2006, due to the effect of the Gale/Green transactions completed in May 2006 (“Gale/Green Transactions”).  Real estate services revenues decreased by $13.1 million, or 42.1 percent, for 2007 as compared to 2006, due primarily to the contribution of the Gale facilities management business to an unconsolidated joint venture in late 2006.

Direct construction costs increased $31.6 million in 2007 as compared to 2006, due primarily to the effect of the Gale/Green Transactions.

General and administrative increased by $3.1 million, or 6.3 percent, for 2007 as compared to 2006 due primarily to the effect of the Gale/Green Transactions.

Depreciation and amortization increased by $24.5 million, or 15.4 percent, for 2007 over 2006.  Of this increase, $8.8 million, or 5.5 percent, was attributable to the Same-Store Properties and $15.7 million, or 9.9 percent, was due to the Acquired Properties.
 
 
 
49
 

 
Interest expense decreased $8.3 million, or 6.1 percent, for 2007 as compared to 2006.  This decrease was primarily as a result of lower average debt balances in 2007 as compared to 2006, partially due to the use of proceeds from the common stock offering in February 2007 to repay outstanding borrowings.

Interest and other investment income increased $1.6 million, or 52.9 percent, for 2007 as compared to 2006.  This increase was due primarily to higher cash balances invested in 2007.

Equity in earnings of unconsolidated joint ventures decreased $0.4 million, or 6.5 percent, for 2007 as compared to 2006. The decrease was due primarily to an increased loss of $2.1 million in the Route 93 joint venture and an increased loss of $1.7 million in the Mack-Green joint venture.  These losses were partially offset by 2006 losses of $1.9 million in the Meadowlands Xanadu venture and $0.9 million in the G&G Martco venture, with no activity for these ventures in 2007, and an increased net income of $0.4 million in 2007 in the 12 Vreeland venture.

The Company recognized a gain on sale of investment in marketable securities of $15.1 million in 2006.

Gain on sale of investment in unconsolidated joint ventures amounted to $10.8 million in 2006 from the sale of the Company’s interest in the G&G Martco joint venture.

Gain (loss) on sale of land and other assets amounted to a loss of $0.4 million in 2006 due to a loss on the sale of Gale Global Facilities and related companies in 2006 of $1.5 million, partially offset by a gain of $1.1 million from the sale of a parcel of land in Hamilton, New Jersey.

Income from continuing operations before minority interest in Operating Partnership decreased to approximately $89.2 million in 2007 from $104.8 million in 2006.  The decrease of approximately $15.6 million was due to the factors discussed above.

Net income available to common shareholders decreased by $34.2 million, or 24.0 percent, from $142.7 million in 2006 to $108.5 million in 2007.  This decrease was primarily the result of realized gains on disposition of rental property of $47.7 million in 2006, decrease in income from continuing operations before minority interest in Operating Partnership of approximately $15.6 million and a decrease in income from discontinued operations of $11.2 million for 2007 as compared to 2006.  These were partially offset by realized gains on disposition of rental property of $36.3 million in 2007, and a decrease in minority interest in Operating Partnership in 2007 of $4.0 million as compared to 2006.



 
50
 

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005


 
Year Ended
    
 
December 31,
Dollar
Percent
(dollars in thousands)
2006
2005
Change
Change
Revenue from rental operations:
        
Base rents
$532,879
$497,358
$35,521
7.1%
Escalations and recoveries from tenants
90,214
77,109
13,105
17.0
Other income
21,649
14,607
7,042
48.2
Total revenues from rental operations
644,742
589,074
55,668
9.5
         
Property expenses:
        
Real estate taxes
85,999
76,653
9,346
12.2
Utilities
59,788
51,720
8,068
15.6
Operating services
107,880
79,185
28,695
36.2
Total property expenses
253,667
207,558
46,109
22.2
         
Non-property revenues:
        
Construction services
56,225
--
56,225
--
Real estate services
31,045
2,917
28,128
964.3
Total non-property revenues
87,270
2,917
84,353
2,891.8
         
Non-property expenses:
        
Direct constructions costs
53,602
--
53,602
--
General and administrative
49,074
32,432
16,642
51.3
Depreciation and amortization
159,096
141,771
17,325
12.2
Total non-property expenses
261,772
174,203
87,569
50.3
Operating Income
216,573
210,230
6,343
3.0
Other (expense) income:
        
Interest expense
(134,964)
(119,070)
(15,894)
(13.3)
Interest and other investment income
3,054
856
2,198
256.8
Equity in earnings (loss) of unconsolidated
        
joint ventures
(5,556)
248
(5,804)
(2,340.3)
Minority interest in consolidated joint ventures
218
(74)
292
394.6
Gain on sale of investment in marketable
15,060
--
15,060
--
securities
10,831
35
10,796
30,845.7
Gain on sale of investment in joint ventures
(416)
--
(416)
--
Total other (expense) income
(111,773)
(118,005)
6,232
5.3
Income from continuing operations before minority
        
interest in Operating Partnership
104,800
92,225
12,575
13.6
Minority interest in Operating Partnership
(20,121)
(18,238)
(1,883)
(10.3)
Income from continuing operations
84,679
73,987
10,692
14.5
Discontinued operations (net of minority interest):
        
Income (loss) from discontinued operations
12,272
17,075
(4,803)
(28.1)
Realized gains (losses) and unrealized losses
      
 
on disposition of rental property, net
47,715
4,426
43,289
978.1
Total discontinued operations, net
59,987
21,501
38,486
179.0
Net income
144,666
95,488
49,178
51.5
Preferred stock dividends
(2,000)
(2,000)
--
--
       
 
Net income available to common shareholders
$142,666
$ 93,488
$49,178
52.6%

 
51
 

The following is a summary of the changes in revenue from rental operations and property expenses in 2006 as compared to 2005 divided into Same-Store Properties and Acquired Properties (dollars in thousands):


 
Total Company
Same-Store Properties
Acquired Properties
 
Dollar
Percent
Dollar
Percent
Dollar
Percent
 
Change
Change
Change
Change
Change
Change
Revenue from rental operations:
            
Base rents
$35,521
7.1%   
$  6,155
1.2%
$29,366
5.9%
Escalations and recoveries
            
   from tenants
13,105
17.0
6,557
8.5
6,548
8.5
Other income
7,042
48.2
6,181
42.3
861
5.9
Total
$55,668
9.5%
$18,893
3.2%
$36,775
6.3%
             
Property expenses:
            
Real estate taxes
$  9,346
12.2%
$  5,215
6.8%
$  4,131
5.4%
Utilities
8,068
15.6
3,803
7.4
4,265
8.2
Operating services
28,695
36.2
1,778
2.2
26,917
34.0
Total
$46,109
22.2%
$10,796
5.2%
$35,313
17.0%
             
OTHER DATA:
            
Number of Consolidated Properties
251
  
234    
 
17
  
Square feet (in thousands)
28,531
  
25,238    
 
3,293
  
 
 
Base rents for the Same-Store Properties increased $6.2 million, or 1.2 percent, for 2006 as compared to 2005, due primarily to an increase in the percentage of space leased at the properties in 2006 from 2005.  Escalations and recoveries from tenants for the Same-Store Properties increased $6.6 million, or 8.5 percent, for 2006 over 2005, due primarily to an increased amount of total property expenses in 2006.  Other income for the Same-Store Properties increased $6.2 million, or 42.3 percent, due primarily to an increase in lease breakage fees.

Real estate taxes on the Same-Store Properties increased $5.2 million, or 6.8 percent, for 2006 as compared to 2005, due primarily to property tax rate increases in certain municipalities in 2006.  Utilities for the Same-Store Properties increased $3.8 million, or 7.4 percent, for 2006 as compared to 2005, due primarily to increased electric rates in 2006 as compared to 2005.  Operating services for the Same-Store Properties increased $1.8 million, or 2.2 percent, due primarily to increased maintenance and related labor costs of $5.1 million for 2006 as compared to 2005, partially offset by a decrease in snow removal costs in 2006 of $3.1 million.

Construction services amounted to $56.2 million in 2006, due to the effect of the Gale/Green Transactions.  Real estate services increased by $28.1 million, or 964.3 percent, for 2006 as compared to 2005, also due primarily to the effect of the Gale/Green Transactions.

Direct construction costs totaled $53.6 million in 2006, due primarily to the effect of the Gale/Green Transactions.  General and administrative increased by $16.6 million, or 51.3 percent, for 2006 as compared to 2005 due primarily to the effect of the Gale/Green Transactions.

Depreciation and amortization increased by $17.3 million, or 12.2 percent, for 2006 over 2005.  Of this increase, $2.9 million, or 2.1 percent, was attributable to the Same-Store Properties and $14.4 million, or 10.1 percent, was due to the Acquired Properties.

Interest expense increased $15.9 million, or 13.3 percent, for 2006 as compared to 2005.  This increase was primarily as a result of higher average debt balances in 2006, as compared to 2005.

Interest and other investment income increased $2.2 million, or 256.8 percent, for 2006 as compared to 2005.  This increase was due primarily to  the receipt of approximately $0.9 million in dividends on the Company’s investment in marketable securities, as well as higher cash balances invested in 2006 due primarily to property sales proceeds as compared to 2005.
 
 
 
52
 
 
Equity in earnings of unconsolidated joint ventures decreased $5.8 million, or 2,340.3 percent, for 2006 as compared to 2005.  The decrease was due primarily to a loss of $4.9 million in 2006 in the Mack-Green joint venture and a loss of $1.9 million in 2006 in the Meadowlands Xanadu joint venture, partially offset by an increase of $1.1 million in the Harborside South Pier joint venture.

The Company recognized a gain on sale of investment in marketable securities of $15.1 million in 2006.

Gain on sale of investment in unconsolidated joint ventures amounted to $10.8 million in 2006 from the sale of the Company’s interest in the G&G Martco joint venture.  Gain on sale of investment in unconsolidated joint ventures amounted to $35,000 in 2005 from the sale of the Company’s interest in the Ashford Loop joint venture.

Gain (loss) on sale of land and other assets amounted to a loss of $0.4 million in 2006 due to a loss on the sale of Gale Global Facilities and related companies in 2006 of $1.5 million, partially offset by a gain of $1.1 million from the sale of a parcel of land in Hamilton, New Jersey.

Income from continuing operations before minority interest in Operating Partnership increased to $104.8 million in 2006 from $92.2 million in 2005.  The increase of approximately $12.6 million was due to the factors discussed above.

Net income available to common shareholders increased by $49.2 million, or 52.6 percent, from $93.5 million in 2005 to $142.7 million in 2006.  This increase was primarily the result of realized gains on disposition of rental property of $47.7 million in 2006 and an increase in income from continuing operations before minority interest in Operating Partnership of $12.6 million.  These were partially offset by a decrease in income from discontinued operations of $4.8 million in 2006 as compared to 2005, realized gains on disposition of rental property of $4.4 million in 2005, and an increase in minority interest in Operating Partnership in 2006 of $1.9 million as compared to 2005.


LIQUIDITY AND CAPITAL RESOURCES


Liquidity

Overview:
Historically, rental revenue has been the principal source of funds to pay operating expenses, debt service, capital expenditures and dividends, excluding non-recurring capital expenditures.  To the extent that the Company’s cash flow from operating activities is insufficient to finance its non-recurring capital expenditures such as property acquisitions, development and construction costs and other capital expenditures, the Company has and expects to continue to finance such activities through borrowings under its revolving credit facility and other debt and equity financings.

The Company believes that with the general downturn in the Company’s markets in recent years, it is reasonably likely that vacancy rates may continue to increase, effective rental rates on new and renewed leases may continue to decrease and tenant installation costs, including concessions, may continue to increase in most or all of its markets in 2008.  As a result of the potential negative effects on the Company’s revenue from the overall reduced demand for office space, the Company’s cash flow could be insufficient to cover increased tenant installation costs over the short-term.  If this situation were to occur, the Company expects that it would finance any shortfalls through borrowings under its revolving credit facility and other debt and equity financings.

The Company expects to meet its short-term liquidity requirements generally through its working capital, net cash provided by operating activities and from its revolving credit facility.  The Company frequently examines potential property acquisitions and development projects and, at any given time, one or more of such acquisitions or development projects may be under consideration.  Accordingly, the ability to fund property acquisitions and development 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 and short-term borrowings (including draws on the Company’s revolving credit facility) and the issuance of additional debt and/or equity securities.

 
53
 
 
 
Construction Projects:
The Company owns a 15 percent indirect interest in a joint venture which plans to develop approximately 1.2 million square foot mixed-use project in downtown Boston consisting of office and retail space, condominium apartments, a hotel and garage.  The development project, which is subject to government approval, is currently projected to cost approximately $710 million, of which the Company is currently projected to invest a total of approximately $26 million (of which the Company has invested $18.8 million through February 8, 2008).

On February 22, 2007, the Company announced that it agreed to develop a 250,000 square-foot class A office building for Wyndham Worldwide Corporation for its corporate headquarters.  In July 2007, the Company commenced construction on the building, which Wyndham Worldwide pre-leased for 15 years, on a land site located in the Company’s Mack-Cali Business Campus in Parsippany, New Jersey.  The building is expected to be completed in the fourth quarter 2008 at a total estimated cost of approximately $64.8 million.

On June 9, 2006, the Company entered into a joint venture with a Gale Affiliate to form 55 Corporate Partners L.L.C. (“55 Corporate”).  55 Corporate was formed for the sole purpose of acquiring from a Gale Affiliate a 50 percent interest in SLG 55 Corporate Drive II LLC (“SLG 55”), an entity presently holding a 100 percent indirect condominium interest in a vacant land parcel located in Bridgewater, New Jersey, which can accommodate development of an approximately 200,000 square foot office building (the “55 Corporate Property”).  The remaining 50 percent in SLG 55 is owned by SLG Gale 55 Corporate LLC, an affiliate of SL Green Realty Corp (“SLG Gale 55”).

In November 2007, Sanofi-Aventis U.S. Inc. (“Sanofi”), which occupies neighboring buildings, exercised its option to cause the venture to construct a building on the Property and has signed a lease thereof.  The lease has a term of fifteen years, subject to three five-year extension options.  The construction of the building, estimated to cost approximately $58 million, is not required to commence until July 1, 2009 for a July 2011 delivery; however, if Sanofi gives a Construction Start Date Acceleration Notice in accordance with the provisions of its lease, then construction shall promptly commence after the necessary permits are obtained, even if such construction start date shall occur prior to July 1, 2009.

Gale Earn-Out and Agreement:
The agreement to acquire the Gale Company (“Gale Agreement”), which was completed as part of the Gale/Green transactions on May 9, 2006, contained earn-out provisions (“Earn-Out”) providing for the payment of contingent purchase consideration of up to $18 million in cash based upon the achievement of Gross Income and NOI (as such terms were defined in the Gale Agreement) targets and other events for the three years following the closing date.

On May 23, 2007, the Company entered into an amendment (the “Amendment”) to the Gale Agreement.  The Amendment eliminated the Earn-Out and substituted an aggregate of $14 million in payments by the Company consisting of the following:  (1) $8 million, which was paid on May 31, 2007; (2) $3 million on May 9, 2008; and (3) $3 million on May 9, 2009.

In October 2007, the Company reached an agreement with Stanley C. Gale, the seller of the Gale Company, Mark Yeager, an executive officer of the Company, and certain affiliates of Messrs. Gale and Yeager, which are parties to certain non-portfolio interest joint ventures with the Company, to provide primarily for the following:

 
(1)
The Company agreed to satisfy the requirements for the $3 million payment due on May 9, 2008 and the $3 million payment due on May 9, 2009 as of October 31, 2007 by:

 
(a)
paying $4 million in cash; and
 
(b)
transferring to an entity whose beneficial owners includes Messrs. Gale and Yeager a 49.8 percent interest in an entity that owns one of the non-portfolio interests in a development project located in Belmar, New Jersey, which the Company acquired in June 2006 pursuant to the Gale Agreement for $1.6 million.  In 2007, the Company wrote off $2.1 million of costs related to this project, as it believes the project is no longer viable, which is included in general and administrative expense for the year ended December 31, 2007.
 
(2)
Under the Gale Agreement, the Company is obligated to acquire from an entity whose beneficial owners include Messrs. Gale and Yeager (the “Florham Entity”), a 50 percent interest in a venture which owns a developable land parcel in Florham Park, New Jersey (the “Florham Park Land”) for a maximum purchase price of up to $10.5 million, subject to reduction based on developable square feet approved and other conditions, with the completion of such acquisition subject to the Florham Entity obtaining final development permits and approvals and related conditions necessary to allow for office development expected to be 600,000 square feet.  The Company has agreed to waive its contractual rights for reimbursement from the Florham Entity for certain costs incurred by the Company securing approvals for the development of the Florham Park Land and to defer collection of other costs.  Such deferred other costs, including a carrying charge of six percent per annum,  will be credited against the purchase price of the Florham Park Land at closing.  In the event the acquisition of the Florham Park Land does not close by May 9, 2009, subject to certain conditions, the Florham Entity will be obligated to pay the deferred other costs and an additional $1 million to the Company at that time.
 
 
 
54
 
 
 
(3)
The Company has agreed to settle a dispute and treat the right to receive certain commission payments in the approximate amount of $2.3 million as an excluded asset under the Gale Agreement, which commissions may become payable in connection with Sanofi-Aventis’ exercise of its option to cause the 55 Corporate venture (see Note 4: Investment in Unconsolidated Joint Ventures) to construct a building for Sanofi-Aventis will lease on a long-term basis, as well as the completion of certain related events. The Company has agreed to pay directly to an entity whose beneficial owners include Messrs. Gale and Yeager up to $769,000 of these commissions when due.

REIT Restrictions:
To maintain its qualification as a REIT, the Company must make annual distributions to its stockholders of at least 90 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 common stockholders which, based upon current policy, in the aggregate would equal approximately $173.9 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, including borrowings and other sources, after meeting operating requirements, preferred stock dividends and distributions, and scheduled debt service on the Company’s debt.

Property Lock-Ups:
The Company may not dispose of or distribute certain of its properties, currently comprising 11 properties with an aggregate net book value of approximately $208.1 million, which were originally contributed by the sellers of certain properties to the Company, without the express written consent of a representative of the contributors of such properties, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate members for the tax consequences of the recognition of such built-in-gains.  These transfer restrictions are scheduled to expire periodically through 2016.  Additionally, the Company may not dispose of or distribute two properties with an aggregate net book value of approximately $12.8 million, which were originally contributed by members of the Cali Group (which includes John R. Cali, director, and John J. Cali, a former director) under similar terms and conditions, for which such restrictions are scheduled to expire in June 2008. The aforementioned restrictions do not apply in the event that the Company sells all of its properties or in connection with a sale transaction which the Company’s Board of Directors determines is reasonably necessary to satisfy a material monetary default on any unsecured debt, judgment or liability of the Company or to cure any material monetary default on any mortgage secured by a property.  Upon expiration, the Company generally is required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the contributors of the properties.  124 of the Company’s properties which were originally contributed by members of either the Mack Group (which includes William L. Mack, Chairman of the Company’s Board of Directors; David S. Mack, director; Earle I. Mack, a former director; and Mitchell E. Hersh, president, chief executive officer and director), the Robert Martin Group (which includes Martin S. Berger, director; Robert F. Weinberg, a former director; and Timothy M. Jones, former president), the Cali Group (which includes John R. Cali, director, and John J. Cali, a former director) or certain other common unitholders, with an aggregate net book value of approximately $1.9 billion, have lapsed restrictions and are subject to these conditions.

Unencumbered Properties:
As of December 31, 2007, the Company had 238 unencumbered properties, totaling 25.7 million square feet, representing 87.7 percent of the Company’s total portfolio on a square footage basis.
 
 
 
55

 
Credit Ratings:
The Company has three investment grade credit ratings.  Standard & Poor’s Rating Services (“S&P”) and Fitch, Inc. (“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 existing and prospective preferred stock offerings of the Company.  Moody’s Investors Service (“Moody’s”) has assigned its Baa2 rating to existing and prospective senior unsecured debt of the Operating Partnership and its Baa3 rating to its existing and prospective preferred stock offerings of the Company.


Cash Flows

Cash and cash equivalents decreased by $76.5 million to $24.7 million at December 31, 2007, compared to $101.2 million at December 31, 2006.  This decrease is comprised of the following net cash flow items:

(1)  
$260 million provided by operating activities.

(2)  
$355.9 million used in investing activities, consisting primarily of the following:
(a)  
$382.7 million used for additions to rental property; minus
(b)  
$29 million used for investments in unconsolidated joint ventures; minus
(c)  
$4.9 million used for the purchase of marketable securities; plus
(d)  
$57.2 million received from proceeds from sale of rental properties; plus
(e)  
$0.6 million received from proceeds from the sale of investment in unconsolidated joint ventures; plus
(f)  
$1 million received from distributions from investments in unconsolidated joint ventures.

 
(3)  
$19.3 million provided by financing activities, consisting primarily of the following:
(a)  
$539 million from borrowings under the revolving credit facility; minus
(b)  
$251.7 million from proceeds received from stock options and warrants exercised; plus
(c)  
$434 million used for repayments of borrowings under the Company’s unsecured credit facility; plus
(d)  
$211.5 million used for payments of dividends and distributions; plus
(e)  
$29 million used for repayments of mortgages, loans payable and other obligations; plus
(f)  
$98.8 million used for the repurchase of common stock.


Debt Financing

Summary of Debt:
The following is a breakdown of the Company’s debt between fixed and variable-rate financing as of December 31, 2007:

 
Balance
  
Weighted Average
Weighted Average Maturity
 
($000’s)
% of Total
Interest Rate (a)
in Years
Fixed Rate Unsecured Debt
$1,660,204
75.07%
6.29%
4.31
Fixed Rate Secured Debt and
        
  Other Obligations
301,531
13.63%
5.36%
4.02
Variable Rate Unsecured Debt
250,000
11.30%
5.55%
3.48
         
Totals/Weighted Average:
$2,211,735
100.00%
6.08%
4.18

Debt Maturities:
Scheduled principal payments and related weighted average annual interest rates for the Company’s debt as of December 31, 2007 are as follows:

 
56
 


 
Scheduled
Principal
  
Weighted Avg.
 
Amortization
Maturities
Total
Interest Rate of
Period
($000’s)
($000’s)
($000’s)
Future Repayments (a)
2008
$21,191
$     12,563
$     33,754
5.21%
2009
11,471
300,000
311,471
7.40%
2010
2,583
334,500
337,083
5.26%
2011
2,745
550,000
552,745
6.84%
2012
2,864
210,148
213,012
6.13%
Thereafter
5,702
760,618
766,320
5.41%
Sub-total
46,556
2,167,829
2,214,385
6.08%
Adjustment for unamortized debt
        
  discount/premium, net, as of
        
  December 31, 2007
(2,650)
0
(2,650)
  
         
Totals/Weighted Average
$43,906
$2,167,829
$2,211,735
6.08%
         
(a)   Actual weighted average LIBOR contract rates relating to the Company’s outstanding debt as of December 31, 2007 of 5.01 percent was used in calculating revolving credit facility.

Senior Unsecured Notes:
The terms of the Company’s senior unsecured notes (which totaled approximately $1.6 billion as of December 31, 2007) 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.

Unsecured Revolving Credit Facility:
The Company has an unsecured revolving credit facility with a borrowing capacity of $775 million (expandable to $800 million).  The interest rate on outstanding borrowings (not electing the Company’s competitive bid feature) under the unsecured facility is currently LIBOR plus 55 basis points.  The facility has a competitive bid feature, which allows the Company to solicit bids from lenders under the facility to borrow up to $300 million at interest rates less than the current LIBOR plus 55 basis point spread.  As of December 31, 2007, the Company’s outstanding borrowings carried a weighted average interest rate of LIBOR plus 55 basis points.  The Company may also elect an interest rate representing the higher of the lender’s prime rate or the Federal Funds rate plus 50 basis points.  The unsecured facility, which also requires a 15 basis point facility fee on the current borrowing capacity payable quarterly in arrears, is scheduled to mature in June 2011 and has an extension option of one year, which would require a payment of 15 basis points of the then borrowing capacity of the facility upon exercise.  As of February 8, 2008, the Company had $291 million of outstanding borrowings under its unsecured revolving credit facility.

The interest rate and the facility fee are subject to adjustment, on a sliding scale, based upon the operating partnership’s unsecured debt ratings.  In the event of a change in the Operating Partnership’s unsecured debt rating, the interest and facility fee rates will be adjusted in accordance with the following table:

Operating Partnership’s
Interest Rate –
  
Unsecured Debt Ratings:
Applicable Basis Points
Facility Fee
S&P Moody’s/Fitch (a)
Above LIBOR
Basis Points
No ratings or less than BBB-/Baa3/BBB-
100.0
25.0
BBB-/Baa3/BBB-
75.0
20.0
BBB/Baa2/BBB (current)
55.0
15.0
BBB+/Baa1/BBB+
42.5
15.0
A-/A3/A- or higher
37.5
12.5
     
(a)   If the Operating Partnership has debt ratings from two rating agencies, one of which is Standard & Poor’s Rating Services (“S&P”) or Moody’s Investors Service (“Moody’s”), the rates per the above table shall be based on the lower of such ratings.  If the Operating Partnership has debt ratings from three rating agencies, one of which is S&P or Moody’s, the rates per the above table shall be based on the lower of the two highest ratings.  If the Operating Partnership has debt ratings from only one agency, it will be considered to have no rating or less than BBB-/Baa3/BBB- per the above table.
 
 
 
57

 
The terms of the 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 real estate properties (to the extent that: (i) such property dispositions cause the Company to default on any of the financial ratios of the facility described below, or (ii) the property dispositions are completed while the Company is under an event of default under the facility, unless, under certain circumstances, such disposition is being carried out to cure such default), 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 fixed charge coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property interest coverage and certain investment limitations.  The dividend restriction referred to above provides that, if an event of default has occurred and is continuing, the Company will not make any excess distributions with respect to common stock or other common equity interests except to enable the Company to continue to qualify as a REIT under the Code.

The lending group for the credit facility consists of: JPMorgan Chase Bank, N.A., as administrative agent (the “Agent”); Bank of America, N.A., as syndication agent; Scotiabanc, Inc., Wachovia Bank, National Association, and Wells Fargo Bank, National Association, as documentation agents; SunTrust Bank, as senior managing agent; US Bank National Association, Citicorp North America, Inc. and PNC Bank, National Association, as managing agents; and Bank of China, New York Branch, The Bank of New York; Chevy Chase Bank, F.S.B., The Royal Bank of Scotland PLC, Mizuho Corporate Bank, Ltd., The Bank of Tokyo-Mitsubishi UFJ, Ltd. (Successor by merger to UFJ Bank Limited), North Fork Bank, Bank Hapoalim B.M., Comerica Bank, Chang Hwa Commercial Bank, Ltd., New York Branch, First Commercial Bank, New York Agency, Mega International Commercial Bank Co. Ltd., New York Branch, Deutsche Bank Trust Company Americas and Hua Nan Commercial Bank, New York Agency, as participants.

Mortgages, Loans Payable and Other Obligations:
The Company has mortgages, loans payable and other obligations which consist of various loans collateralized by certain of the Company’s rental properties.  Payments on mortgages, loans payable and other obligations are generally due in monthly installments of principal and interest, or interest only.

Debt Strategy:
The Company does not intend to reserve funds to retire the Company’s senior unsecured notes or its mortgages, loans payable and other obligations 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 on or before the applicable maturity dates.  If it cannot raise sufficient proceeds to retire the maturing debt, the Company may draw on its revolving credit facility to retire the maturing indebtedness, which would reduce the future availability of funds under such facility.  As of February 8, 2008, the Company had $291 million in outstanding borrowings under its $775 million unsecured revolving credit facility.  The Company is reviewing various refinancing options, including the purchase of its senior unsecured notes in privately-negotiated transactions, the issuance of additional, or exchange of current, unsecured debt, preferred stock, and/or obtaining additional mortgage debt, some or all of which may be completed during 2008.  The Company anticipates that its available cash and cash equivalents and cash flows from operating activities, together with cash available from borrowings and other 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.



 
58
 

Equity Financing and Registration Statements

Equity Activity:
The following table presents the changes in the Company’s issued and outstanding shares of Common Stock and the Operating Partnership’s common units since December 31, 2006:

 
Common
Common
  
 
Stock
Units
Total
Outstanding at December 31, 2006
62,925,191
15,342,283
78,267,474
Common Stock offering
4,650,000
--
4,650,000
Stock options exercised
132,770
--
132,770
Common units redeemed for Common Stock
471,656
(471,656)
--
Common units issued
--
114,911
114,911
Shares issued under Dividend Reinvestment
      
  and Stock Purchase Plan
7,738
--
7,738
Restricted shares issued
113,118
--
113,118  
Repurchase of Common Stock
(2,742,400)
--
(2,742,400)  
       
Outstanding at December 31, 2007
65,558,073
14,985,538
80,543,611

Share Repurchase Program:
The Company has a share repurchase program to purchase up to $150 million of the Company’s outstanding common stock (“Repurchase Program”), which it may repurchase from time to time in open market transactions at prevailing prices or through privately negotiated transactions.  From January 1, 2007 through February 8, 2008, the Company purchased and retired 2,893,630 shares of its outstanding common stock for a cost of approximately $104 million, with a remaining authorization under the Repurchase Program of approximately $46 million.

Shelf Registration Statements:
The Company has an effective shelf registration statement on Form S-3 filed with the Securities and Exchange Commission (“SEC”) for an aggregate amount of $2.0 billion in common stock, preferred stock, depositary shares, and/or warrants of the Company, under which $260.1 million of securities have been sold through December 31, 2007 and $1.7 billion remains available for future issuances.
 
The Company and the Operating Partnership also have an effective shelf registration statement on Form S-3 filed with the SEC for an aggregate amount of $2.5 billion in common stock, preferred stock, depositary shares and guarantees of the Company and debt securities of the Operating Partnership, under which $600 million of securities have been sold through February 8, 2008 and $1.9 billion remains available for future issuances.


Off-Balance Sheet Arrangements

Unconsolidated Joint Venture Debt:
The debt of the Company’s unconsolidated joint ventures aggregating $535 million at December 31, 2007, is non-recourse to the Company except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions and material misrepresentations.  The Company has also posted a $7.0 million letter of credit in support of the Harborside South Pier joint venture, $3.5 million of which is indemnified by Hyatt.

The Company’s off-balance sheet arrangements are further discussed in Note 4: Investments in Unconsolidated Joint Ventures to the Financial Statements.
 
 
59


Contractual Obligations

The following table outlines the timing of payment requirements related to the Company’s debt (principal and interest), PILOT agreements, ground lease and other agreements as of December 31, 2007:

 
Payments Due by Period
   
Less than 1
1 – 3
4 – 5
6 – 10
After 10
(dollars in thousands)
Total
Year
Years
Years
Years
Years
Senior unsecured notes
$2,097,254
$100,494
$629,576
$597,402
$769,782
--
Revolving credit facility
299,168
13,884
27,769
256,942
573
--
Mortgages, loans payable
            
  and other obligations
394,021
50,386
206,324
33,950
75,140
$28,221
Payments in lieu of taxes
            
  (PILOT)
65,909
4,194
12,780
8,697
23,835
16,403
Operating lease payments
81
62
19
--
--
--
Ground lease payments
37,442
486
1,503
1,002
2,418
32,033
Total
$2,893,875
$169,506
$877,971
$897,993
$871,748
$76,657


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

We consider portions of this information, including the documents incorporated by reference, to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.  We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of such act.  Such forward-looking statements relate to, without limitation, our future economic performance, plans and objectives for future operations and projections of revenue and other financial items.  Forward-looking statements can be identified by the use of words such as “may,” “will,” “plan,” “should,” “expect,” “anticipate,” “estimate,” “continue” or comparable terminology.  Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate.  Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved.  Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements.

Among the factors about which we have made assumptions are:

· 
 changes in the general economic climate and conditions, including those affecting industries in which our principal tenants compete;
   
· 
 the extent of any tenant bankruptcies or of any early lease terminations;
   
· 
 our ability to lease or re-lease space at current or anticipated rents;
   
· 
 changes in the supply of and demand for office, office/flex and industrial/warehouse properties;
   
· 
 changes in interest rate levels;
   
· 
 changes in operating costs;
   
· 
 our ability to obtain adequate insurance, including coverage for terrorist acts;
   
· 
 the availability of financing;
   
· 
 changes in governmental regulation, tax rates and similar matters; and
   
· 
 other risks associated with the development and acquisition of properties, including risks that the development may not be completed on schedule, that the tenants will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated.
 
 
 
60
 
ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices.  In pursuing its business plan, the primary market risk to which the Company is exposed is interest rate risk.  Changes in the general level of interest rates prevailing in the financial markets may affect the spread between the Company’s yield on invested assets and cost of funds and, in turn, its ability to make distributions or payments to its investors.

Approximately $2.0 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 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 average interest rate on the variable rate debt as of December 31, 2007 was LIBOR plus 55 basis points.

December 31, 2007
                
Debt,
                
including current portion
($’s in thousands)
2008
2009
2010
2011
2012
Thereafter
Total
Fair Value
                 
Fixed Rate
$32,782
$310,568
$336,407
$302,329
$212,806
$766,843
$1,961,735
$1,906,615
Average Interest Rate
5.21%
7.40%
5.26%
7.91%
6.13%
5.41%
6.15%
  
                 
Variable Rate
      
$250,000
    
$   250,000
$   250,000

While the Company has not experienced any significant credit losses, in the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in losses to the Company which could adversely affect its operating results and liquidity.


 
61
 


ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 8 is contained in the Consolidated Financial Statements and Report of PricewaterhouseCoopers LLP, together with the notes to the Consolidated Financial Statements and the report of independent registered public accounting firm, filed with this annual report on Form 10-K, see Item 15: Exhibits and Financial Statements.


ITEM 9.         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A.       CONTROLS AND PROCEDURES

Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company's chief executive officer and chief financial officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

Management’s Report on Internal Control Over Financial Reporting.  Internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, is a process designed by, or under the supervision of, the Company’s chief executive officer and chief financial officer, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, has established and maintained policies and procedures designed to maintain the adequacy of the Company’s internal control over financial reporting, and includes those policies and procedures that:

 
(1)
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
 
 
(2)
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

 
(3)
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

The Company’s management has evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007 based on the criteria established in a report entitled Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based on our assessment and those criteria, the Company’s management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2007.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
 
 
62

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2007 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Changes In Internal Control Over Financial Reporting.  There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.


ITEM 9B.        OTHER INFORMATION

Not Applicable.


PART III

ITEM 10.         DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 will be set forth in the Company’s definitive proxy statement for its annual meeting of shareholders expected to be held on May 21, 2008, and is incorporated herein by reference.


ITEM 11.         EXECUTIVE COMPENSATION

The information required by Item 11 will be set forth in the Company’s definitive proxy statement for its annual meeting of shareholders expected to be held on May 21, 2008, and is incorporated herein by reference.

 
ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
The information required by Item 12 will be set forth in the Company’s definitive proxy statement for its annual meeting of shareholders expected to be held on May 21, 2008, and is incorporated herein by reference.
 
 
ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 will be set forth in the Company’s definitive proxy statement for its annual meeting of shareholders expected to be held on May 21, 2008, and is incorporated herein by reference.


ITEM 14.        PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by Item 14 will be set forth in the Company’s definitive proxy statement for its annual meeting of shareholders expected to be held on May 21, 2008, and is incorporated herein by reference.



 
63
 

PART IV


ITEM 15.         EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


(a) 1.
All Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2007 and 2006

Consolidated Statements of Operations for the Years Ended December 31, 2007, 2006 and 2005

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2007, 2006 and 2005

Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005

Notes to Consolidated Financial Statements
 
(a) 2.   
Financial Statement Schedules

Schedule III - Real Estate Investments and Accumulated Depreciation as of December 31, 2007

All other schedules are omitted because they are not required or the required information is shown in the financial statements or notes thereto.
 
(a) 3.   
Exhibits
     
The exhibits required by this item are set forth on the Exhibit Index attached hereto.

 
64
 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To Board of Directors and Shareholders
of Mack-Cali Realty Corporation:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Mack-Cali Realty Corporation and its subsidiaries (collectively, the "Company") at December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America.  In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.  Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Controls Over Financial Reporting appearing under Item 9A.  Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
New York, New York
February 13, 2008

 
65
 

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts)

 
December 31,
ASSETS
2007
2006
Rental property
    
Land and leasehold interests
$   726,253
$   659,169
Buildings and improvements
3,753,088
3,549,699
Tenant improvements
397,132
356,495
Furniture, fixtures and equipment
8,956
8,224
 
4,885,429
4,573,587
Less – accumulated depreciation and amortization
(907,013)
(796,793)
Net investment in rental property
3,978,416
3,776,794
Cash and cash equivalents
24,716
101,223
Marketable securities available for sale at fair value
4,839
--
Investments in unconsolidated joint ventures
181,066
160,301
Unbilled rents receivable, net
107,761
100,847
Deferred charges and other assets, net
246,386
240,637
Restricted cash
13,613
15,448
Accounts receivable, net of allowance for doubtful accounts
    
of $1,576 and $1,260
36,405
27,639
     
Total assets
$4,593,202
$4,422,889
     
LIABILITIES AND STOCKHOLDERS’ EQUITY
    
Senior unsecured notes
$1,632,547
$1,631,482
Revolving credit facilities
250,000
145,000
Mortgages, loans payable and other obligations
329,188
383,477
Dividends and distributions payable
52,099
50,591
Accounts payable, accrued expenses and other liabilities
142,778
122,134
Rents received in advance and security deposits
51,992
45,972
Accrued interest payable
34,193
34,106
Total liabilities
2,492,797
2,412,762
     
Minority interests:
    
Operating Partnership
456,436
480,103
Consolidated joint ventures
1,414
2,117
     
Total minority interests
457,850
482,220
     
Commitments and contingencies
    
     
Stockholders’ equity:
    
Preferred stock, $0.01 par value, 5,000,000 shares authorized, 10,000
    
and 10,000 shares outstanding, at liquidation preference
25,000
25,000
Common stock, $0.01 par value, 190,000,000 shares authorized,
    
65,558,073 and 62,925,191 shares outstanding
656
629
Additional paid-in capital
1,886,467
1,708,053
Dividends in excess of net earnings
(269,521)
(205,775)
Accumulated other comprehensive loss
(47)
--
Total stockholders’ equity
1,642,555
1,527,907
     
Total liabilities and stockholders’ equity
$4,593,202
$4,422,889
     
     
The accompanying notes are an integral part of these consolidated financial statements.

 
66
 

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)

 
     Year Ended December 31,
REVENUES
2007
2006
2005
Base rents
$575,463
$532,879
$497,358
Escalations and recoveries from tenants
104,781
90,214
77,109
Construction services
88,066
56,225
--
Real estate services
17,970
31,045
2,917
Other income
22,070
21,649
14,607
Total revenues
808,350
732,012
591,991
       
EXPENSES
      
Real estate taxes
90,895
85,999
76,653
Utilities
73,072
59,788
51,720
Operating services
106,946
107,880
79,185
Direct construction costs
85,179
53,602
--
General and administrative
52,162
49,074
32,432
Depreciation and amortization
183,564
159,096
141,771
Total expenses
591,818
515,439
381,761
Operating Income
216,532
216,573
210,230
       
OTHER (EXPENSE) INCOME
      
Interest expense
(126,672)
(134,964)
(119,070)
Interest and other investment income
4,670
3,054
856
Equity in earnings (loss) of unconsolidated joint ventures
(5,918)
(5,556)
248
Minority interest in consolidated joint ventures
643
218
(74)
Gain on sale of investment in marketable securities
--
15,060
--
Gain on sale of investment in unconsolidated joint ventures
--
10,831
35
Gain/(loss) on sale of land and other assets
--
(416)
--
Total other (expense) income
(127,277)
(111,773)
(118,005)
Income from continuing operations before minority interest
 
   
in Operating Partnership
89,255
104,800
92,225
Minority interest in Operating Partnership
(16,126)
(20,121)
(18,238)
Income from continuing operations
73,129
84,679
73,987
Discontinued operations (net of minority interest):
  
 
 
Income from discontinued operations
1,057
12,272
17,075
Realized gains (losses) and unrealized losses
      
  on disposition of rental property, net
36,280
47,715
4,426
Total discontinued operations, net
37,337
59,987
21,501
Net income
110,466
144,666
95,488
Preferred stock dividends
(2,000)
(2,000)
(2,000)
Net income available to common shareholders
$108,466
$142,666
$ 93,488
       
Basic earnings per common share:
      
Income from continuing operations
$     1.06
$      1.33
$     1.17
Discontinued operations
   0.56
      0.96
     0.35
Net income available to common shareholders
$     1.62
$      2.29
$     1.52
       
Diluted earnings per common share:
      
Income from continuing operations
$     1.06
$      1.32
$     1.16
Discontinued operations
     0.55
      0.96
     0.35
Net income available to common shareholders
$     1.61
$      2.28
$     1.51
       
Dividends declared per common share
$     2.56
$      2.54
$     2.52
 
 
   
Basic weighted average shares outstanding
67,026
62,237
61,477
       
Diluted weighted average shares outstanding
82,500
77,901
74,189
       
       
The accompanying notes are an integral part of these consolidated financial statements.

 
67
 

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands)


                                                   
                                 
Accumulated
                
               
Additional
    
Unamortized
    
Dividends in
    
Other
    
Total
          
   
Preferred Stock
    
Common Stock
    
Paid-In
    
Stock
    
Excess of
    
Comprehensive
    
Stockholders’
      
Comprehensive
  
   
Shares
    
Amount
    
Shares
    
Par Value
    
Capital
    
Compensation
    
Net Earnings
    
Income (Loss)
    
Equity
      
Income
  
Balance at January 1, 2005
     10     $ 25,000       61,039     $ 610     $ 1,650,834     $ (3,968 )   $ (127,365 )     --     $ 1,545,111         --  
Net income
     --       --       --       --       --       --       95,488       --       95,488       $ 95,488  
Preferred stock dividends
     --       --       --       --       --       --       (2,000 )     --       (2,000 )       --  
Common stock dividends
     --       --       --       --       --       --       (155,702 )     --       (155,702 )       --  
Redemption of common units
                                                                                  
  for common stock
     --       --       235       2       6,788       --       --       --       6,790         --  
Shares issued under Dividend
                                                                                  
  Reinvestment and Stock
                                                                                  
  Purchase Plan
     --       --       9       --       390       --       --       --       390         --  
Stock options exercised
     --       --       574       6       16,597       --       --       --       16,603         --  
Stock options expense
     --       --       --       --       448       --       --       --       448         --  
Comprehensive Loss:
                                                                                  
  Unrealized holding loss
                                                                                  
  on marketable securities
                                                                                  
  available for sale
     --       --       --       --       --       --       --       (790 )     (790 )       (790 )
Directors Deferred comp.  plan
     --       --       5       --       288       --       --       --       288         --  
Issuance of restricted stock
     --       --       166       2       7,189       (7,191 )     --       --       --         --  
Amortization of stock comp.
     --       --       --       --       --       4,661       --       --       4,661         --  
Adj. to fair value of
                                                                                  
  restricted stock
     --       --       --       --       (37 )     37       --       --       --         --  
Cancellation of restricted stock
     --       --       (8 )     --       (356 )     356       --       --       --         --  
Balance at December 31, 2005
     10     $ 25,000       62,020     $ 620     $ 1,682,141     $ (6,105 )   $ (189,579 )   $ (790 )   $ 1,511,287       $ 94,698  
Reclassification upon the
                                                                                  
  adoption of FASB No. 123(R)
     --       --       --       --       (6,105 )     6,105       --       --       --         --  
Net income
     --       --       --       --       --       --       144,666       --       144,666         144,666  
Preferred stock dividends
     --       --       --       --       --       --       (2,000 )     --       (2,000 )       --  
Common stock dividends
     --       --       --       --       --       --       (158,862 )     --       (158,862 )       --  
Redemption of common units
                                                                                  
  for common stock
     --       --       475       5       14,669       --       --       --       14,674         --  
Shares issued under Dividend
                                                                                  
  Reinvestment and Stock
                                                                                  
  Purchase Plan
     --       --       5       --       244       --       --       --       244         --  
Stock options exercised
     --       --       353       3       10,442       --       --       --       10,445         --  
Stock options expense
     --       --       --       --       465       --       --       --       465         --  
Comprehensive Gain:
                                                                                  
  Unrealized holding gain
                                                                                  
  on marketable securities
                                                                                  
  available for sale
     --       --       --       --       --       --       --       15,850       15,850         15,850  
Directors Deferred comp. plan
     --       --       --       --       302       --       --       --       302         --  
Issuance of restricted stock
     --       --       81       1       --       --       --       --       1         --  
Amortization of stock comp.
     --       --       --       --       5,895       --       --       --       5,895         --  
Cancellation of restricted stock
     --       --       (9 )     --       --       --       --       --       --         --  
Reclassification adjustment
                                                                                  
  for realized gain included
                                                                                  
  in net income
     --       --       --       --       --       --       --       (15,060 )     (15,060 )       (15,060 )
Balance at December 31, 2006
     10     $ 25,000       62,925     $ 629     $ 1,708,053       --     $ (205,775 )     --     $ 1,527,907       $ 145,456  
Net income
     --       --       --       --       --       --       110,466       --       110,466         110,466  
Preferred stock dividends
     --       --       --       --       --       --       (2,000 )     --       (2,000 )       --  
Common stock dividends
     --       --       --       --       --       --       (172,212 )     --       (172,212 )       --  
Common stock offering
     --       --       4,650       47       251,685       --       --       --       251,732         --  
Redemption of common units
                                                                                  
  for common stock
     --       --       472       5       14,618       --       --       --       14,623         --  
Shares issued under Dividend
                                                                                  
  Reinvestment and Stock
                                                                     --         --  
  Purchase Plan
                     7       --       311       --       --       --       311         --  
Stock options exercised
     --       --       133       1       3,801       --       --       --       3,802         --  
Stock options expense
     --       --       --       --       132       --       --       --       132         --  
Comprehensive Gain:
                                                                                  
  Unrealized holding gain
                                                                                  
  on marketable securities
                                                                                  
  available for sale
     --       --       --       --       --       --       --     $ (47 )     (47 )       (47 )
Directors Deferred comp. plan
     --       --       --       --       323       --       --       --       323         --  
Issuance of restricted stock
     --       --       113       1       2,851       --       --       --       2,852         --  
Amortization of stock comp.
     --       --       --       --       3,487       --       --       --       3,487         --  
Cancellation of restricted stock
     --       --       --       --                                                    
Repurchase of common stock
     --       --       (2,742 )     (27 )     (98,794 )     --       --       --       (98,821 )       --  
Balance at December 31, 2007
     10     $ 25,000       65,558     $ 656     $ 1,886,467       --     $ (269,521 )   $ (47 )   $ 1,642,555    
 
   $ 110,419  


The accompanying notes are an integral part of these consolidated financial statements.

 
68
 

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

   
Year Ended December 31,
  
CASH FLOWS FROM OPERATING ACTIVITIES
  
2007
    
2006
    
2005
  
Net income
   $ 110,466     $ 144,666     $ 95,488  
Adjustments to reconcile net income to net cash provided by
                        
Operating activities:
                        
Depreciation and amortization, including related intangible assets
     179,705       156,987       138,047  
Depreciation and amortization on discontinued operations
     424       8,853       14,327  
Stock options expense
     132       465       448  
Amortization of stock compensation
     3,487       5,895       4,661  
Amortization of deferred financing costs and debt discount
     2,808       3,157       3,271  
Equity in earnings of unconsolidated joint venture, net
     5,918       5,556       (248 )
Gain on sale of investment in unconsolidated joint ventures
     --       (10,831 )     (35 )
Gain on sale of marketable securities available for sale
     --       (15,060 )     --  
Loss on sale of land and other assets
     --       416       --  
(Realized gains) unrealized losses on disposition of rental property
                        
(net of minority interest)
     (36,280 )     (47,715 )     (4,426 )
Distributions of cumulative earnings from unconsolidated joint ventures
     1,875       2,302       --  
Minority interest in Operating Partnership
     16,126       20,533       18,758  
Minority interest in consolidated joint ventures
     (643 )     (218 )     74  
Minority interest in income from discontinued operations
     240       2,603       2,777  
Changes in operating assets and liabilities:
                        
Increase in unbilled rents receivable, net
     (7,490 )     (15,989 )     (13,283 )
Increase in deferred charges and other assets, net
     (20,665 )     (37,975 )     (36,841 )
(Increase) decrease in accounts receivable, net
     (8,766 )     3,162       (1,237 )
Increase in accounts payable, accrued expenses and
                        
  other liabilities
     6,532       4,598       15,674  
Increase (decrease) in rents received in advance and security deposits
     6,020       (1,713 )     (253 )
Increase in accrued interest payable
     87       6,235       5,727  
                         
Net cash provided by operating activities
   $ 259,976     $ 235,927     $ 242,929  
                         
CASH FLOWS FROM INVESTING ACTIVITIES
                        
Additions to rental property, related intangibles and service companies
   $ (382,742 )   $ (217,804 )   $ (451,335 )
Repayment of mortgage note receivable
     159       150       81  
Investment in unconsolidated joint ventures
     (29,017 )     (163,428 )     (17,788 )
Distributions from unconsolidated joint ventures
     992       39,982       --  
Proceeds from sale of investment in unconsolidated joint venture
     575       16,324       2,676  
Acquisition of minority interest in consolidated joint venture
     --       --       (7,713 )
Proceeds from sales of rental property and service company
     57,204       338,546       102,980  
Purchase of marketable securities available for sale
     (4,884 )     (11,912 )     (51,637 )
Proceeds from sale of marketable securities available for sale
     --       78,609       --  
Decrease (increase) in restricted cash
     1,835       (6,227 )     1,256  
                         
Net cash (used in) provided by investing activities
   $ (355,878 )   $ 74,240     $ (421,480 )
                         
CASH FLOW FROM FINANCING ACTIVITIES
                        
Borrowings from revolving credit facility
   $ 539,000     $ 983,250     $ 1,041,560  
Proceeds from senior unsecured notes
     --       199,914       398,480  
Proceeds from mortgages
     --       --       58,500  
Repurchase of common stock
     (98,821 )     --       --  
Repayment of revolving credit facility
     (434,000 )     (1,104,643 )     (921,560 )
Repayment of mortgages, loans payable and other obligations
     (29,038 )     (160,626 )     (169,935 )
Payment of financing costs
     (1,797 )     (646 )     (5,071 )
Proceeds from stock options exercised
     3,802       10,445       16,603  
Proceeds from issuance of common stock
     251,732       --       --  
Payment of dividends and distributions
     (211,483 )     (197,035 )     (191,899 )
                         
Net cash provided by (used in) financing activities
   $ 19,395     $ (269,341 )   $ 226,678  
                         
Net (decrease) increase in cash and cash equivalents
   $ (76,507 )   $ 40,826     $ 48,127  
Cash and cash equivalents, beginning of period
     101,223       60,397       12,270  
                         
Cash and cash equivalents, end of period
   $ 24,716     $ 101,223     $ 60,397  
                         
                         
The accompanying notes are an integral part of these consolidated financial statements.
  

 
69
 

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  
ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION
Mack-Cali Realty Corporation, a Maryland corporation, together with its subsidiaries (collectively, 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 December 31, 2007, the Company owned or had interests in 294 properties plus developable land (collectively, the “Properties”).  The Properties aggregate approximately 33.7 million square feet, which are comprised of 283 buildings, primarily office and office/flex buildings totaling approximately 33.3 million square feet (which include 38 buildings, primarily office buildings aggregating approximately 4.5 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 retail properties totaling approximately 17,300 square feet, one hotel (which is owned by an unconsolidated joint venture in which the Company has an investment interest) and two parcels of land leased to others.  The Properties are located in six 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. (the “Operating Partnership”) and variable interest entities for which the Company has determined itself to be the primary beneficiary, if any.  See Note 2: Significant Accounting Policies – Investments in Unconsolidated Joint Ventures, Net for the Company’s treatment of unconsolidated joint venture interests.  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.

Certain reclassifications have been made to prior period amounts in order to conform with current period presentation.


2.  
SIGNIFICANT ACCOUNTING POLICIES

 
Rental
Property
Rental properties are stated at cost less accumulated depreciation and amortization.  Costs directly related to the acquisition, development and construction of rental properties are capitalized.  Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development.  Included in total rental property is construction and development in-progress of $126,470,000 and $116,151,000 (including land of $68,328,000 and $63,136,000) as of December 31, 2007 and 2006, 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.

The Company considers a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity (as distinguished from activities such as routine maintenance and cleanup).  If portions of a rental project are substantially completed and occupied by tenants, or held available for occupancy, and other portions have not yet reached that stage, the substantially completed portions are accounted for as a separate project.  The Company allocates costs incurred between the portions under construction and the portions substantially completed and held available for occupancy, and capitalizes only those costs associated with the portion under construction.
 
 
 
70
 
 
 

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

Upon acquisition of rental property, the Company estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities, generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships.  The Company allocates the purchase price to the assets acquired and liabilities assumed based on their relative fair values.  In estimating the fair value of the tangible and intangible assets acquired, the Company considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information.  The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

Above-market and below-market lease values for acquired properties are recorded based on the present value, (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. The capitalized above-market lease values are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases.

Other intangible assets acquired include amounts for in-place lease values and tenant relationship values, which are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the respective tenant.  Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases.  In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions.  In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses.  Characteristics considered by management in valuing tenant relationships include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals.  The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases.  The value of tenant relationship intangibles are amortized to expense over the anticipated life of the relationships.

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s real estate properties held for use 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 is less than the carrying value of the property.  To 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.  The Company’s estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property.  As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved.  Management does not believe that the value of any of the Company’s rental properties is impaired.
 
 
 
71
 

 
Rental Property
 
Held for Sale and
 
Discontinued
 
Operations
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 as held for sale is less than the net book value of the assets, a valuation allowance is established.  Properties identified as held for sale and/or sold are presented in discontinued operations for all periods presented.  See Note 7: Discontinued Operations.

If circumstances arise that previously were considered unlikely and, as a result, the Company decides not to sell a property previously classified as held for sale, the property is reclassified as held and used.  A property that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the property was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the property been continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell.

 
Investments in
Unconsolidated
Joint Ventures, Net
The Company accounts for its investments in unconsolidated joint ventures for which Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46”) does not apply 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.

 
FIN 46 provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIE (the “primary beneficiary”).  Generally, FIN 46 applies when either (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest, (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest.

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in unconsolidated joint ventures may be impaired.  An investment is impaired only if management’s estimate of the value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary.  To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the value of the investment.  Management does not believe that the value of any of the Company’s investments in unconsolidated joint ventures is impaired.  See Note 4: Investments in Unconsolidated Joint Ventures.
 
 
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Cash and Cash
Equivalents
 
All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

Marketable
 
Securities
The Company classifies its marketable securities among three categories: Held-to-maturity, trading and available-for-sale.  Unrealized holding gains and losses relating to available-for-sale securities are excluded from earnings and reported as other comprehensive income (loss) in stockholders’ equity until realized.  A decline in the market value of any marketable security below cost that is deemed to be other than temporary results in a reduction in the carrying amount to fair value.  Any impairment would be charged to earnings and a new cost basis for the security established.

The Company’s marketable securities at December 31, 2007 carried a value of $4.8 million and consisted of common equity securities.  The Company’s marketable securities at December 31, 2007 were classified as available-for-sale and were carried at fair value based on quoted market prices.  The Company recorded an unrealized holding loss of $46,000 as other comprehensive loss in 2007.

The Company received dividend income of approximately $130,000 from its holdings in marketable securities during the year ended December 31, 2007, which is included in interest and other investment income.

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 $2,808,000, $3,157,000, and $3,271,000 for the years ended December 31, 2007, 2006 and 2005, 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 are compensated for providing leasing services to the Properties.  The portion of such compensation, which is capitalized and amortized, approximated $4,132,000, $3,749,000 and $3,855,000 for the years ended December 31, 2007, 2006 and 2005, respectively.

Derivative
Instruments
The Company measures derivative instruments, including certain derivative instruments embedded in other contracts, at fair value and records them as an asset or liability, depending on the Company’s rights or obligations under the applicable derivative contract.  For derivatives designated and qualifying as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged item are recorded in earnings.  For derivatives designated as cash flow hedges, the effective portions of the derivative are reported in other comprehensive income (“OCI”) and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedging and ineffective portions of hedges are recognized in earnings in the affected period.

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.  Above-market and below-market lease values for acquired properties are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed-rate renewal options for below-market leases.  The capitalized above-market lease values for acquired properties are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed-rate renewal options of the respective leases.  Escalations and recoveries from tenants 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 15: Tenant Leases.  Construction services revenue includes fees earned and reimbursements received by the Company for providing construction management and general contractor services to clients.  Construction services revenue is recognized on the percentage of completion method.  Using this method, profits are recorded on the basis of estimates of the overall profit and percentage of completion of individual contracts.  A portion of the estimated profits is accrued based upon estimates of the percentage of completion of the construction contract.  This revenue recognition method involves inherent risks relating to profit and cost estimates.  Real estate services revenue includes property management, facilities management, leasing commission fees and other services, and payroll and related costs reimbursed from clients.  Other income includes income from parking spaces leased to tenants, income from tenants for additional services arranged for by the Company and income from tenants for early lease terminations.
 
 
 
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Allowance for
Doubtful Accounts
Management periodically performs a detailed review of amounts due from tenants to determine if accounts receivable balances are impaired based on factors affecting the collectibility of those balances.  Management’s estimate of the allowance for doubtful accounts requires management to exercise significant judgment about the timing, frequency and severity of collection losses, which affects the allowance and net income.

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 (including alternative minimum 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 90 percent of its REIT taxable income to its shareholders.  The Company has elected to treat certain of its corporate subsidiaries as taxable REIT subsidiaries (each a “TRS”).  In general, a TRS of the Company may perform additional services for tenants of the Company and generally may engage in any real estate or non-real estate related business (except for the operation or management of health care facilities or lodging facilities or the providing to any person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated).  A TRS is subject to corporate federal income tax.  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.

 
The Company adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FAS No. 109”) on January 1, 2007.  As a result of the implementation of FIN 48, the Company recognized no material adjustments regarding its tax accounting treatment.  The Company expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which is included in general and administrative expense.
 
 
 
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 Earnings
 
Per Share
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 shareholders 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 December 31, 2007 represents dividends payable to preferred shareholders (10,000 shares) and common shareholders (65,637,709 shares), and distributions payable to minority interest common unitholders of the Operating Partnership (14,985,538 common units) for all such holders of record as of January 4, 2008 with respect to the fourth quarter 2007.  The fourth quarter 2007 preferred stock dividends of $50.00 per share, common stock dividends and common unit distributions of $0.64 per common share and unit were approved by the Board of Directors on December 4, 2007.  The common stock dividends and common unit distributions payable were paid on January 14, 2008.  The preferred stock dividends payable were paid on January 15, 2008.

The dividends and distributions payable at December 31, 2006 represents dividends payable to preferred shareholders (10,000 shares) and common shareholders (62,925,271 shares), and distributions payable to minority interest common unitholders of the Operating Partnership (15,342,283 common units) for all such holders of record as of January 4, 2007 with respect to the fourth quarter 2006.  The fourth quarter 2006 preferred stock dividends of $50.00 per share, common stock dividends and common unit distributions of $0.64 per common share and unit were approved by the Board of Directors on December 5, 2006.  The common stock dividends and common unit distributions payable were paid on January 12, 2007.  The preferred stock dividends payable were paid on January 16, 2007.

The Company has determined that the $2.56 dividend per common share paid during the year ended December 31, 2007 represented approximately 80 percent ordinary income and approximately 20 percent capital gain to its stockholders; the $2.53 dividend per common share paid during the year ended December 31, 2006 represented 81 percent ordinary income and approximately 19 percent capital gain to its stockholders; and the $2.52 dividend per common share paid during the year ended December 31, 2005 represented approximately 100 percent ordinary income to its stockholders.

Costs Incurred
 
For Stock
 
Issuances
Costs incurred in connection with the Company’s stock issuances are reflected as a reduction of additional paid-in capital.

Stock
 
Compensation
The Company accounts for stock options and restricted stock awards granted prior to 2002 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 for stock options 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 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 made prior to 2002.  Restricted stock awards granted prior to 2002 are valued at the vesting dates of such awards with compensation cost for such awards recognized ratably over the vesting period.
 
 
 
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In 2002, the Company adopted the provisions of FASB No. 123, and in 2006, the Company adopted the provisions of FASB No. 123(R), which did not have a material effect on the Company’s financial position and results of operations.  These provisions require that the estimated fair value of restricted stock (“Restricted Stock Awards”) and stock options at the grant date be amortized ratably into expense over the appropriate vesting period.  For the years ended December 31, 2007, 2006 and 2005, the Company recorded restricted stock and stock options expense of $6,470,000, $6,360,000 and $5,109,000, respectively.  FASB No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, was issued in December 2002 and amends FASB No. 123, Accounting for Stock Based Compensation.  FASB No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock based compensation.  In addition, this Statement amends the disclosure requirements of FASB No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  FASB No. 148 disclosure requirements are presented below:

The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all outstanding and unvested stock awards for the year ended December 31, 2005: (dollars in thousands)

Net income, as reported
    
$95,488
Add:        Stock-based compensation expense included in reported
      
                      net income (net of minority interest)
    
4,260
Deduct:   Total stock-based compensation expense determined
      
   under fair value based method for all awards
    
(5,391)
Add:        Minority interest on stock-based compensation expense
      
   under fair value based method
    
896
Pro forma net income
    
95,253
Deduct:   Preferred stock dividends
    
(2,000)
Pro forma net income available to common shareholders – basic
    
$93,253
       
Earnings Per Share:
      
Basic – as reported
    
$   1.52
Basic – pro forma
    
$   1.52
       
Diluted – as reported
    
$   1.51
Diluted – pro forma
    
$   1.51

Other
 
Comprehensive
 
Income
Other comprehensive income (loss) includes items that are recorded in equity, such as unrealized holding gains or losses on marketable securities available for sale.


 
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3.  
REAL ESTATE TRANSACTIONS

Property Acquisitions
The Company acquired the following office properties during the year ended December 31, 2007 (dollars in thousands):

Acquisition
    
# of
Rentable
Acquisition
Date
Property/Address
Location
Bldgs.
Square Feet
Cost
05/08/07
AAA Properties (a) (c)
Hamilton Township, New Jersey
2
69,232
$    9,048
06/11/07
125 Broad Street (b) (c)
New York, New York
1
524,476
274,091
         
Total Property Acquisitions:
  
3
593,708
$283,139
         
(a) Included in this transaction was the acquisition of two parcels of developable land aggregating approximately 13 acres.
(b) Acquisition represented two units of office condominium interests, which collectively comprise floors 2 through 16, or 39.6 percent, of the 40-story, 1.2 million square-foot building.
(c) Transaction was funded primarily through borrowing on the Company’s revolving credit facility.

Properties Commencing Initial Operations
The following office property commenced initial operations during the year ended December 31, 2007 (dollars in thousands):

     
# of
Rentable
Investment by
Date
Property/Address
Location
Bldgs.
Square Feet
Company (a)
05/08/07
700 Horizon Drive
Hamilton Township, New Jersey
1
120,000
$16,751
         
Total Properties Commencing Initial Operations:
  
1
120,000
$16,751
         
(a) Development costs were funded primarily through borrowing on the Company’s revolving credit facility.  Amounts are as of December 31, 2007.

Land Acquisition
In February 2007, the Company exercised its option to acquire approximately 43 acres of land sites within its Capital Office Park complex in Greenbelt, Maryland, which is able to accommodate the development of up to 600,000 square feet of office space, for $13 million.  On May 25, 2007, the Company completed the purchase of the land for approximately $13 million, which consisted of 114,911 common operating partnership units valued at $5.2 million, and the remainder in cash.

Property Sales
The Company sold the following office properties during the year ended December 31, 2007 (dollars in thousands):

       
Rentable
Net
Net
  
Sale
    
# of
Square
Sales
Book
Realized
Date
Property/Address
Location
Bldgs.
 Feet
Proceeds
Value
Gain
05/10/07
1000 Bridgeport Avenue
Shelton, Connecticut
1
133,000
$16,411
$13,782
$  2,629
06/11/07
500 W. Putnam Avenue
Greenwich, Connecticut
1
121,250
54,344
18,113
36,231
07/13/07
100& 200 Decadon Drive
Egg Harbor, New Jersey
2
80,344
11,448
5,894
5,554
             
Total Office Property Sales:
  
4
334,594
$82,203
$37,789
$44,414

Gale Earn-Out and Agreement:
The agreement to acquire the Gale Company (“Gale Agreement”), which was completed as part of the Gale/Green transactions on May 9, 2006, contained earn-out provisions (“Earn-Out”) providing for the payment of contingent purchase consideration of up to $18 million in cash based upon the achievement of Gross Income and NOI (as such terms were defined in the Gale Agreement) targets and other events for the three years following the closing date.

On May 23, 2007, the Company entered into an amendment (the “Amendment”) to the Gale Agreement.  The Amendment eliminated the Earn-Out and substituted an aggregate of $14 million in payments by the Company consisting of the following:  (1) $8 million, which was paid on May 31, 2007; (2) $3 million on May 9, 2008; and (3) $3 million on May 9, 2009.
 
 
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In October 2007, the Company reached an agreement with Stanley C. Gale, the seller of the Gale Company, Mark Yeager, an executive officer of the Company, and certain affiliates of Messrs. Gale and Yeager, which are parties to certain non-portfolio interest joint ventures with the Company, to provide primarily for the following:

 
(1)
The Company agreed to satisfy the requirements for the $3 million payment due on May 9, 2008 and the $3 million payment due on May 9, 2009 as of October 31, 2007 by:

 
(a)
paying $4 million in cash; and
 
(b)
transferring to an entity whose beneficial owners includes Messrs. Gale and Yeager a 49.8 percent interest in an entity that owns one of the non-portfolio interests in a development project located in Belmar, New Jersey, which the Company acquired in June 2006 pursuant to the Gale Agreement for $1.6 million.  In 2007, the Company wrote off $2.1 million of costs related to this project, as it believes the project is no longer viable, which is included in general and administrative expense for the year ended December 31, 2007.

(2)  
Under the Gale Agreement, the Company is obligated to acquire from an entity whose beneficial owners include Messrs. Gale and Yeager (the “Florham Entity”), a 50 percent interest in a venture which owns a developable land parcel in Florham Park, New Jersey (the “Florham Park Land”) for a maximum purchase price of up to $10.5 million, subject to reduction based on developable square feet approved and other conditions, with the completion of such acquisition subject to the Florham Entity obtaining final development permits and approvals and related conditions necessary to allow for office development expected to be 600,000 square feet.  The Company has agreed to waive its contractual rights for reimbursement from the Florham Entity for certain costs incurred by the Company securing approvals for the development of the Florham Park Land and to defer collection of other costs.  Such deferred other costs, including a carrying charge of six percent per annum,  will be credited against the purchase price of the Florham Park Land at closing.  In the event the acquisition of the Florham Park Land does not close by May 9, 2009, subject to certain conditions, the Florham Entity will be obligated to pay the deferred other costs and an additional $1 million to the Company at that time.\

(3)  
The Company has agreed to settle a dispute and treat the right to receive certain commission payments in the approximate amount of $2.3 million as an excluded asset under the Gale Agreement, which commissions may become payable in connection with Sanofi-Aventis’ exercise of its option to cause the 55 Corporate venture (see Note 4: Investment in Unconsolidated Joint Ventures) to construct a building for Sanofi-Aventis will lease on a long-term basis, as well as the completion of certain related events. The Company has agreed to pay directly to an entity whose beneficial owners include Messrs. Gale and Yeager up to $769,000 of these commissions when due.


4.  
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

The debt of the Company’s unconsolidated joint ventures aggregating $535 million as of December 31, 2007 is non-recourse to the Company, except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions and material misrepresentations, and except as otherwise indicated below.

PLAZA VIII AND IX ASSOCIATES, L.L.C.
Plaza VIII and IX Associates, L.L.C. is a joint venture between the Company and Columbia Development Company, L.L.C. (“Columbia”).  The venture was formed to acquire land for future development, located on the Hudson River waterfront in Jersey City, New Jersey, adjacent to the Company’s Harborside Financial Center office complex.  The Company and Columbia each hold a 50 percent interest in the 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 venture owns undeveloped land currently used as a parking facility.
 
 
 
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RAMLAND REALTY ASSOCIATES L.L.C. (One Ramland Road)
On August 20, 1998, the Company entered into a joint venture 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 and adjacent developable land, located in Orangeburg, 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 venture has a mortgage loan with a $14.8 million balance at December 31, 2007 collateralized by its office/flex property.  The mortgage bears interest at a rate of LIBOR plus 175 basis points and is scheduled to mature in January 2009.

The Company performs management, leasing and other services for the property owned by the joint venture and recognized $63,000, $100,000 and $93,000 in fees for such services in the years ended December 31, 2007, 2006 and 2005, respectively.

SOUTH PIER AT HARBORSIDE – HOTEL DEVELOPMENT
On November 17, 1999, the Company entered into a joint venture with Hyatt Corporation (“Hyatt”) to develop a 350-room hotel on the South Pier at Harborside Financial Center, Jersey City, New Jersey, which was completed and commenced initial operations in July 2002.  The Company owns a 50 percent interest in the venture.

The venture has a $70.0 million mortgage loan (with a balance as of December 31, 2007 of $69.1 million) collateralized by the hotel property.  The loan carries an interest rate of 6.15 percent and matures in November 2016.  The venture has a loan with a balance as of December 31, 2007 of $7.0 million with the City of Jersey City, provided by the U.S. Department of Housing and Urban Development.  The loan currently bears interest at fixed rates ranging from 6.09 percent to 6.62 percent and matures in August 2020.  The Company has posted a $7.0 million letter of credit in support of this loan, $3.5 million of which is indemnified by Hyatt.

RED BANK CORPORATE PLAZA L.L.C./RED BANK CORPORATE PLAZA II, L.L.C.
On March 23, 2006, the Company entered into a joint venture with The PRC Group (“PRC”) to form Red Bank Corporate Plaza L.L.C.  The venture was formed to develop Red Bank Corporate Plaza, a 92,878 square foot office building located in Red Bank, New Jersey, which has been fully pre-leased to Hovnanian Enterprises, Inc. for a 10-year term.  The Company holds a 50 percent interest in the venture.  PRC contributed the vacant land for the development of the office building as its initial capital in the venture.  The Company funded the costs of development up to the value of the land contributed by PRC of $3.5 million as its initial capital.

On October 20, 2006, the venture entered into a $22.0 million construction loan with a commercial bank collateralized by the land and development project.  The loan (with a balance as of December 31, 2007 of $18.1 million), carries an interest rate of LIBOR plus 130 basis points and matures in April 2009.  The interest rate will be reduced to LIBOR plus 125 basis points in April 2008.  The loan currently has two one-year extension options subject to certain conditions, each of which requires payment of a fee.

In September 2007, the joint venture completed development of the property and placed the office building in service.  The Company performs management, leasing and other services for the property owned by the joint venture and recognized $678,000 in fees for such services during the year ended December 31, 2007.

On July 20, 2006, the Company entered into a second joint venture agreement with PRC to form Red Bank Corporate Plaza II L.L.C.  The venture was formed to hold land on which it plans to develop Red Bank Corporate Plaza II, an 18,561 square foot office building located in Red Bank, New Jersey.  The Company holds a 50 percent interest in the venture.  The terms of the venture are similar to Red Bank Corporate Plaza L.L.C.  PRC contributed the vacant land as its initial capital in the venture.

MACK-GREEN-GALE LLC
On May 9, 2006, as part of the Gale/Green transactions completed in May 2006, the Company entered into a joint venture, Mack-Green-Gale LLC (“Mack-Green”), with SL Green, pursuant to which Mack-Green holds a 96 percent interest in and acts as general partner of Gale SLG NJ Operating Partnership, L.P. (the “OP LP”).  The Company’s acquisition cost for its interest in Mack-Green was approximately $125 million, which was funded primarily through borrowing under the Company’s revolving credit facility.  The OP LP owns 100 percent of entities which own 25 office properties (the “OP LP Properties”) which aggregate 3.5 million square feet (consisting of 17 office properties aggregating 2.3 million square feet located in New Jersey and eight properties aggregating 1.2 million square feet located in Troy, Michigan), as well as a minor, non-controlling interest in four office properties aggregating 419,000 square feet located in Naperville, Illinois, which was subsequently sold.  In December 2007, the OP LP sold its eight properties located in Troy, Michigan for $83.5 million.  The venture recognized a loss of approximately $22.3 million from the sale. Included in the Company’s equity in earnings in 2007 was $223,000 in loss related to the sale.
 
 
 
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As defined in the Mack-Green operating agreement, the Company shares decision-making equally with SL Green regarding:  (i) all major decisions involving the operations of Mack-Green; and (ii) overall general partner responsibilities in operating the OP LP.

The Mack-Green operating agreement generally provides for profits and losses to be allocated as follows:

(i)  
99 percent of Mack-Green’s share of the profits and losses from 10 specific OP LP Properties allocable to the Company and one percent allocable to SL Green;
(ii)  
one percent of Mack-Green’s share of the profits and losses from eight specific OP LP Properties and its minor interest in four office properties allocable to the Company and 99 percent allocable to SL Green; and
(iii)  
50 percent of all other profits and losses allocable to the Company and 50 percent allocable to SL Green.

Substantially all of the OP LP Properties are encumbered by mortgage loans with an aggregate outstanding principal balance of $282 million at December 31, 2007.  $188.2 million of the mortgage loans bear interest at a weighted average fixed interest rate of 6.26 percent per annum and mature at various times through May 2016.  $93.6 million of the mortgage loans bear interest at a floating rate ranging from LIBOR plus 275 basis points to LIBOR plus 400 basis points per annum and mature at various times through January 2009.  Included in the floating rate mortgage loans are $90.3 million provided by an affiliate of SL Green.

The Company performs management, leasing, and construction services for the properties owned by the joint venture and recognized $3.9 million and $2.3 million in income (net of $974,000 and $2.2 million in direct costs) for such services in the years ended December 31, 2007, and 2006, respectively.

GE/GALE FUNDING LLC (PFV)
The Gale agreement signed as part of the Gale/Green transactions in May 2006 provides for the Company to acquire certain ownership interests in real estate projects (the “Non-Portfolio Properties”), subject to obtaining certain third party consents and the satisfaction of various project-related and/or other conditions.  Each of the Company’s acquired interests in the Non-Portfolio Properties provide for the initial distributions of net cash flow solely to the Company, and thereafter an affiliate of Mr. Gale (“Gale Affiliate”) has participation rights (“Gale Participation Rights”) in 50 percent of the excess net cash flow remaining after the distribution to the Company of the aggregate amount equal to the sum of: (a) the Company’s capital contributions, plus (b) an internal rate of return (“IRR”) of 10 percent per annum, accruing on the date or dates of the Company’s investments.

On May 9, 2006, as part of the Gale/Green transactions, the Company acquired from a Gale Affiliate for $1.8 million a 50 percent controlling interest in GMW Village Associates, LLC (“GMW Village”).  GMW Village holds a 20 percent interest in GE/Gale Funding LLC (“GE Gale”).  GE Gale owns a 100 percent interest in the entity owning Princeton Forrestal Village, a mixed-use, office/retail complex aggregating 527,015 square feet and located in Plainsboro, New Jersey (“Princeton Forrestal Village” or “PFV”).

In addition to the cash consideration paid to acquire the interest, the Company provided a Gale affiliate with the Gale Participation Rights.

The operating agreement of GE Gale, which is owned 80 percent by GEBAM, Inc., provides for, among other things, distributions of net cash flow, initially, in proportion to each member’s interest and subject to adjustment upon achievement of certain financial goals, as defined in the operating agreement.
 
 
 
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GE Gale has a mortgage loan with a balance of $52.8 million at December 31, 2007.  The loan bears interest at a rate of LIBOR plus 275 basis points and matures on January 9, 2009, with an extension option through January 9, 2011.

The Company performs management, leasing, and construction services for PFV and recognized $1.1 million and $956,000 in income (net of $1.6 million and $7.0 million in direct costs) for such services in the years ended December 31, 2007 and 2006, respectively.

ROUTE 93 MASTER LLC (“Route 93 Participant”)/ROUTE 93 BEDFORD MASTER LLC (with the Route 93 Participant, collectively, the “Route 93 Venture”)
On June 1, 2006, the Route 93 Venture was formed between the Route 93 Participant, a majority-owned subsidiary of the Company, having a 30 percent interest and the Commingled Pension Trust Fund (Special Situation Property) of JPMorgan Chase Bank having a 70 percent interest, for the purpose of acquiring seven office buildings, aggregating 666,697 square feet, located in the towns of Andover, Bedford and Billerica, Massachusetts.  Profits and losses are shared by the partners in proportion to their respective interests until the investment yields an 11 percent IRR, then sharing will shift to 40/60, and when the IRR reaches 15 percent, then sharing will shift to 50/50.

The Route 93 Participant is a joint venture between the Company and a Gale affiliate.  Profits and losses are shared by the partners under this venture in proportion to their respective interests (83.3/16.7) until the investment yields an 11 percent IRR, then sharing will shift to 50/50.

The Route 93 Ventures has a mortgage loan with an amount not to exceed $58.6 million, with a $42.5 million balance at December 31, 2007 collateralized by its office properties.  The loan provides the venture the ability to draw additional monies for qualified leasing and capital improvement costs.  The loan bears interest at a rate of LIBOR plus 220 basis points and matures on July 11, 2008, with three one-year extension options.

GALE KIMBALL, L.L.C.
On June 15, 2006, the Company entered into a joint venture with a Gale Affiliate to form M-C Kimball, LLC (“M-C Kimball”).  M-C Kimball was formed for the sole purpose of acquiring a Gale Affiliate’s 33.33 percent membership interest in Gale Kimball, L.L.C. (“Gale Kimball”), an entity holding a 25 percent interest in 100 Kimball Drive LLC (“100 Kimball”), which developed and placed in service a 175,000 square foot office property that has been substantially pre-leased to a single tenant, located at 100 Kimball Drive, Parsippany, New Jersey (the “Kimball Property”).

The operating agreement of M-C Kimball provides, among other things, for the Gale Participation Rights (of which Mark Yeager, an Executive Vice President of the Company, has a direct 26 percent interest).

Gale Kimball is owned 33.33 percent by M-C Kimball and 66.67 percent by the Hampshire Generational Fund, L.L.C. (“Hampshire”).  The operating agreement of Gale Kimball provides, among other things, for the distribution of net cash flow, initially, in accordance with its members’ respective membership interests and, upon achievement of certain financial conditions, 50 percent to each of the Company and Hampshire.

100 Kimball is owned 25 percent by Gale Kimball and 75 percent by 100 Kimball Drive Realty Member LLC, an affiliate of JPMorgan (“JPM”). The operating agreement of 100 Kimball provides, among other things, for the distributions to be made in the following order:

(i)  
first, to JPM, such that JPM is provided with an annual 12 percent compound preferred return on Preferred Equity Capital Contributions (as such term is defined in the operating agreement of 100 Kimball and largely comprised of development and construction costs);
(ii)  
second, to JPM, as return of Preferred Equity Capital Contributions until complete repayment of such Preferred Equity Capital Contributions;
(iii)  
third, to each of JPM and Gale Kimball in proportion to their respective membership interests until each member is provided, as a result of such distributions, with an annual twelve percent compound return on the Member’s Capital Contributions (as defined in the operating agreement of 100 Kimball, and excluding Preferred Equity Capital Contributions, if any); and
(iv)  
fourth, 50 percent to each of JPM and Gale Kimball.
 
 
 
81

 
On September 21, 2007, the venture obtained a mortgage loan which allows a maximum principal amount of $47 million (with a balance of $40.4 million at December 31, 2007).   The loan provides the ability to draw funds for qualified leasing and capital improvement costs.  The loan bears interest at a rate of 5.95 percent and matures in September 2012.

The Company performs management, leasing, construction and development services for the property owned by 100 Kimball for which it recognized $1.7 million and $271,000 in income (net of $9.4 million and $6.6 million in direct costs) in the years ended December 31, 2007, and 2006, respectively.

55 CORPORATE PARTNERS, LLC
On June 9, 2006, the Company entered into a joint venture with a Gale Affiliate to form 55 Corporate Partners L.L.C. (“55 Corporate”).  55 Corporate was formed for the sole purpose of acquiring from a Gale Affiliate a 50 percent interest in SLG 55 Corporate Drive II LLC (“SLG 55”), an entity presently holding a 100 percent indirect condominium interest in a vacant land parcel located in Bridgewater, New Jersey, which can accommodate development of an approximately 200,000 square foot office building (the “55 Corporate Property”).  The remaining 50 percent in SLG 55 is owned by SLG Gale 55 Corporate LLC, an affiliate of SL Green Realty Corp. (“SLG Gale 55”).

In November 2007, Sanofi-Aventis U.S. Inc. (“Sanofi”), which occupies neighboring buildings, exercised its option to cause the venture to construct a building on the Property and has signed a lease thereof.  The lease has a term of fifteen years, subject to three five-year extension options.  The construction of the building, estimated to cost approximately $58 million, is not required to commence until July 1, 2009 for a July 2011 delivery; however, if Sanofi gives a Construction Start Date Acceleration Notice in accordance with the provisions of its lease, then construction shall promptly commence after the necessary permits are obtained, even if such construction start date shall occur prior to July 1, 2009.

The operating agreement of 55 Corporate provides, among other things, for the Gale Participation Rights (of which Mr. Yeager has a direct 26 percent interest).  If Mr. Gale receives any commission payments with respect to a Sanofi lease on the development property, Mr. Gale has agreed to pay to Mr. Yeager 26 percent of such payments.

The operating agreement of SLG 55 provides, among other things, for the distribution of the available net cash flow to each of 55 Corporate and SLG Gale 55 in proportion to their respective membership interests in SLG 55 (50 percent each).

12 VREELAND ASSOCIATES, L.L.C.
On September 8, 2006, the Company entered into a joint venture with a Gale Affiliate to form M-C Vreeland, LLC (“M-C Vreeland”).  M-C Vreeland was formed for the sole purpose of acquiring a Gale Affiliate’s 50 percent membership interest in 12 Vreeland Associates, L.L.C., an entity owning an office property located at 12 Vreeland Road, Florham Park, New Jersey.

The operating agreement of M-C Vreeland provides, among other things, for the Gale Participation Rights (of which Mr. Yeager has a direct 15 percent interest).

The office property at 12 Vreeland is a 139,750 square foot office building that is fully leased to a single tenant through June 15, 2012.  The property is subject to a mortgage loan, which matures on July 1, 2012, and bears interest at 6.9 percent per annum.  As of December 31, 2007 the outstanding balance on the mortgage note was $8.8 million.

Under the operating agreement of 12 Vreeland Associates, L.L.C., M-C Vreeland has a 50 percent interest, with S/K Florham Park Associates, L.L.C. (the managing member) and its affiliate holding the other 50 percent.

BOSTON-FILENES
On October 20, 2006, the Company formed a joint venture (the “MC/Gale JV LLC”) with Gale International/426 Washington St. LLC (“Gale/426”), which, in turn, entered into a joint venture (the “Vornado JV LLC”) with VNO 426 Washington Street JV LLC (“Vornado”), an affiliate of Vornado Realty LP, which was formed to acquire and redevelop the Filenes property located in the Downtown Crossing district of Boston, Massachusetts (the “Filenes Property”).
 
 
 
82

 
On January 25, 2007, (i) each of M-C/Gale JV LLC, Gale and Washington Street Realty Member LLC (“JPM”) formed a joint venture (“JPM JV LLC”), (ii) M-C/Gale JV LLC assigned its entire 50 percent ownership interest in the Vornado JV LLC to JPM JV LLC, (iii) the Limited Liability Company Agreement of Vornado JV LLC was amended to reflect, among other things, the change in the ownership structure described in subsection (ii) above, and (iv) the Limited Liability Company Agreement of MC/Gale JV LLC was amended and restated to reflect, among other things, the change in the ownership structure described in subsection (ii) above.  The Vornado JV LLC acquired the Filenes Property on January 29, 2007, for approximately $100 million.

As a result of the foregoing transactions, as of January 29, 2007, (i) the Filenes Property is owned by Vornado JV LLC, (ii) Vornado JV LLC is owned 50 percent by each of Vornado and JPM JV LLC, (iii) JPM JV LLC is owned 30 percent by M-C/Gale JV LLC, 70 percent by JPM and managed by Gale/426, which has no ownership interest in JPM JV LLC, and (iv) M-C/Gale JV LLC is owned 99.99 percent by the Company and 0.01 percent by Gale/426.  Thus, the Company holds approximately a 15 percent indirect ownership interest in the Vornado JV LLC and the Filenes Property.

Distributions are made (i) by Vornado JV LLC in proportion to its members’ respective ownership interests, (ii) by JPM JV LLC (a) initially, in proportion to its members’ respective ownership interests until JPM’s investment yields an 11 percent IRR, (b) thereafter, 60/40 to JPM and MC/Gale JV LLC, respectively, until JPM’s investment yields a 15 percent IRR and (c) thereafter, 50/50 to JPM and MC/Gale JV LLC, respectively, and (iii) by MC/Gale JV LLC (w) initially, in proportion to its members’ respective ownership interests until each member has received a 10 percent IRR on its investment, (x) thereafter, 65/35 to the Company and Gale/426, respectively, until the Company’s investment yields a 15 percent IRR, (y) if by the time the Company receives a 15 percent IRR on its investment, Gale/426 has not done so, 100 percent to Gale/426 until Gale/426’s investment yields a 15 percent IRR, and (z) thereafter,  50/50 to each of the Company and Gale/426.

The joint venture’s current plans for the development of the Filenes Property include approximately 1.2 million square feet consisting of office, retail, condominium apartments, hotel and a garage.  The project is subject to governmental approvals.

NKFGMS OWNERS, LLC
On December 28, 2006, the Company contributed its facilities management business, which was acquired on May 9, 2006 as part of the Gale/Green transactions, to a newly-formed joint venture called NKFGMS Owners, LLC.  With the contribution, the Company received $600,000 in cash and a 40 percent interest in the joint venture.  In connection with the Contribution, the Company recognized a loss of approximately $1.5 million.  The joint venture operating agreement provided for, among other things, profits and losses generally to be allocated in proportion to each member’s interest.

On September 21, 2007, the Company sold its 40 percent interest in NKFGMS to its joint venture partner for net proceeds of $575,000, and recorded a gain of $19,000 on the sale.

GALE JEFFERSON, L.L.C.
On August 22, 2007, the Company entered into a joint venture with a Gale Affiliate to form M-C Jefferson, L.L.C. (“M-C Jefferson”).  M-C Jefferson was formed for the sole purpose of acquiring a Gale Affiliate’s 33.33 percent membership interest in Gale Jefferson, L.L.C. (“Gale Jefferson”), an entity holding a 25 percent interest in One Jefferson Road LLC (“One Jefferson”), which is developing a 100,000 square foot office property located at 1 Jefferson Road, Parsippany, New Jersey (the “Jefferson Property”).

The operating agreement of M-C Jefferson provides, among other things, for the Gale Participation Rights (of which Mark Yeager, an Executive Vice President of the Company, has a direct 26 percent interest).  Gale Jefferson is owned 33.33 percent by M-C Jefferson and 66.67 percent by the Hampshire Generational Fund, L.L.C. (“Hampshire”).  The operating agreements of Gale Jefferson provides, among other things, for the distribution of net cash flow, first, in accordance with its member’s respective interests until each member is provided, as a result of such distributions, with an annual 12 percent compound return on the Member’s Capital Contributions, as defined in the operating agreement and secondly, 50 percent to each of the Company and Hampshire.

One Jefferson is owned 25 percent by Gale Jefferson and 75 percent by One Jefferson Road Realty Member LLC, an affiliate of JPMorgan (“JPM”).  The operating agreement of One Jefferson provides, among other things, for the distribution of net cash flow, first, in accordance with its members’ respective interests until each member is provided, as a result of such distributions, with an annual 12 percent compound return on the Member’s Capital Contributions, as defined in the operating agreement and secondly, 50 percent to JPM and Gale Jefferson.  One Jefferson has a construction loan in an amount not to exceed $21 million (with no balance drawn as of December 31, 2007), bearing interest at a rate of LIBOR plus 160 basis points and maturing on October 24, 2010 with a one-year extension option.
 
 
 
83

 
The Company performs management, leasing and construction services for Gale Jefferson and recognized $102,000 in income (net of $4.0 million in direct costs) for such services in the year ended December 31, 2007.

MEADOWLANDS XANADU
On November 25, 2003, the Company and affiliates of The Mills Corporation (“Mills”) entered into a joint venture agreement (“Meadowlands Xanadu Venture Agreement”) to form Meadowlands Mills/Mack-Cali Limited Partnership (“Meadowlands Venture”) for the purpose of developing a $1.3 billion family entertainment, recreation and retail complex with an office and hotel component to be built at the Meadowlands sports complex in East Rutherford, New Jersey (“Meadowlands Xanadu”).  Meadowlands Xanadu’s approximately 4.76 million-square-foot complex is expected to feature a family entertainment, recreation and retail destination comprising five themed zones: sports; entertainment; children’s education; fashion; and food and home, in addition to four office buildings, aggregating approximately 1.8 million square feet, and a 520-room hotel.

The Company and Mills owned a 20 percent and 80 percent interest, respectively, in the Meadowlands Venture.  The Meadowlands Xanadu Venture Agreement required the Company to make an equity contribution up to a maximum of $32.5 million, which it fulfilled in April 2005.

On August 21, 2006, Mills announced that it had signed a non-binding letter of intent with Colony Capital Acquisitions, LLC (“Colony”) and Kan Am USA Management XXII Limited Partnership (“Kan Am”) under which Colony would arrange for construction financing for Meadowlands Xanadu and make a significant equity infusion into the Meadowlands Venture, and Mills would not have any financial obligations post closing (“Colony Transaction”).  Kan Am had been a partner with Mills in the Meadowlands Venture since the formation of the venture.

On November 22, 2006, the Company entered into and consummated a Redemption Agreement (the “Redemption Agreement”) with the Meadowlands Venture, Meadowlands Developer Holding Corp., a limited partner in the Meadowlands Venture, and the Meadowlands Limited Partnership (f/k/a Meadowlands/Mills Limited Partnership, and hereafter “MLP”), a general partner and a limited partner in the Meadowlands Venture.  Immediately prior to entering into the Redemption Agreement, the investors in MLP undertook a restructuring of MLP whereby Colony became an indirect owner of MLP.

In connection with the Colony Transaction and pursuant to the Redemption Agreement, the Meadowlands Venture redeemed (the “Redemption”) the Company’s entire interest in the Meadowlands Venture and its right to participate in the development of the ERC component in exchange for (i) $22.5 million in cash and (ii) a non-economic partner interest in each of the office and hotel components of Meadowlands Xanadu.  In connection with the Redemption, the Operating Partnership also received a non-interest bearing promissory note for an additional $2.5 million, which note is payable in full by MLP only at such time as the Operating Partnership exercises one of its options to develop the first of the office and hotel components of Meadowlands Xanadu.  The Company’s remaining investment of approximately $11.9 million is included in deferred charges and other assets, net, as of December 31, 2007 and 2006.

Concurrent with the execution of the Redemption Agreement, the Company also entered into the Mack-Cali Rights, Obligations and Option Agreement (the “Rights Agreement”) by and among the Meadowlands Venture, MLP, Meadowlands Mack-Cali GP, L.L.C., Mack-Cali, Baseball Meadowlands Limited Partnership, A-B Office Meadowlands Mack-Cali Limited Partnership, C-D Office Meadowlands Limited Partnership, Hotel Meadowlands Mack-Cali Limited Partnership and ERC Meadowlands Mills/Mack-Cali Limited Partnership.  Pursuant to the Rights Agreement, the Operating Partnership retained certain rights and obligations it held under the Meadowlands Xanadu Venture Agreement with respect to the development of the office and hotel components of Meadowlands Xanadu, including an option to develop any of the office or hotel components of Meadowlands Xanadu (each, a “Take Down Option”).  Upon the exercise of an initial Take Down Option, the Operating Partnership will receive economic interests in each of the office or hotel component partnerships as both a general partner and a limited partner in the applicable office or hotel component, and following receipt of $2.5 million in full payment of the note from MLP, the Operating Partnership’s ownership interest in each of the office or hotel component partnerships will be reduced from 80 percent (as provided in the Meadowlands Xanadu Venture Agreement) to 75 percent.
 
 
 
84

 
G&G MARTCO (Convention Plaza)
The Company held a 50 percent interest in G&G Martco, which owns Convention Plaza, a 305,618 square foot office building, located in San Francisco, California.  On November 6, 2006, the Company sold substantially all of its interest in the venture to an affiliate of its joint venture partner for approximately $16.3 million, realizing a gain on the sale of approximately $10.8 million.  The Company performed management and leasing services for the property owned by the joint venture through the date of sale and recognized $132,000 and $161,000 in fees for such services in the years ended December 31, 2006 and 2005, respectively.


 
85
 

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 December 31, 2007 and 2006:  (dollars in thousands)


 
December 31, 2007
  
 
Plaza
    
Red Bank
Mack-
Princeton
          
NKFGMS
    
 
VIII & IX
Ramland
Harborside
Corporate
Gale-
Forrestal
Route 93
Gale
55
12
Boston-
Owners
Gale
Combined
 
Associates
Realty
South Pier
Plaza I & II
Green
Village
Portfolio
Kimball
Corporate
Vreeland
Filenes
LLC
Jefferson
Total
Assets:
                            
Rental property, net
$ 10,787
$ 11,522
$ 64,882
$ 23,594
$ 368,028
$ 42,713
$ 56,226
$   7,785
$ 17,000
$ 7,954
--
--
$ 1,838
$ 612,329
Other assets
2,250
762
15,039
2,843
52,741
25,471
2,307
1,809
--
851
$ 65,134
--
80
169,287
Total assets
$ 13,037
$ 12,284
$ 79,921
$ 26,437
$ 420,769
$ 68,184
$ 58,533
$   9,594
$ 17,000
$ 8,805
$ 65,134
--
$ 1,918
$ 781,616
Liabilities and
                            
 partners’/members’
                            
 capital (deficit):
                            
Mortgages, loans
                            
  payable and other
                            
  obligations
--
$ 14,771
$ 76,072
$ 18,116
$ 281,746
$ 52,800
$ 42,495
$ 10,103
--
$ 8,761
--
--
--
$ 504,864
Other liabilities
$     532
365
2,711
133
23,809
6,923
857
30
--
--
$   4,171
--
$     80
39,611
Partners’/members’
                            
  capital (deficit)
12,505
(2,852)
1,138
8,188
115,214
8,461
15,181
(539)
$ 17,000
44
60,963
--
1,838
237,141
Total liabilities and
                            
  partners’/members’
                            
  capital (deficit)
$ 13,037
$ 12,284
$ 79,921
$ 26,437
$ 420,769
$ 68,184
$ 58,533
$   9,594
$ 17,000
$ 8,805
$ 65,134
--
$ 1,918
$ 781,616
Company’s
                            
  investment
                            
  in unconsolidated
                            
  joint ventures, net
$   6,175
--
$      513
$   3,703
$ 128,107
$   2,029
$   4,729
--
$   8,518
$ 7,752
$ 18,828
--
$    712
$ 181,066

 
December 31, 2006
  
 
Plaza
    
Red Bank
Mack-
Princeton
          
NKFGMS
    
 
VIII & IX
Ramland
Harborside
Corporate
Gale-
Forrestal
Route 93
Gale
55
12
Boston-
Owners
Gale
Combined
 
Associates
Realty
South Pier
Plaza I & II
Green
Village
Portfolio
Kimball
Corporate
Vreeland
Filenes
LLC
Jefferson
Total
Assets:
                            
Rental property, net
$ 11,404
$ 12,141
$ 69,303
$ 13,205
$ 479,245
$ 39,538
$ 54,866
$  6,650
$ 17,000
$  8,221
--
$    239
--
$ 711,812
Other assets
1,408
851
11,170
3,320
76,704
24,830
6,857
164
--
909
$ 10,500
2,638
--
139,351
Total assets
$ 12,812
$ 12,992
$ 80,473
$ 16,525
$ 555,949
$ 64,368
$ 61,723
$  6,814
$ 17,000
$  9,130
$ 10,500
$ 2,877
--
$ 851,163
Liabilities and
                            
 partners’/members’
                            
 capital (deficit):
                            
Mortgages, loans
                            
  payable and other
                            
  obligations
--
$ 14,936
$ 77,217
$  8,673
$ 358,063
$ 47,761
$ 39,435
$  3,838
--
$ 10,253
--
--
--
$ 560,176
Other liabilities
$     532
259
4,944
13
40,106
5,972
846
--
--
--
--
$ 1,329
--
54,001
Partners’/members’
                            
  capital (deficit)
12,280
(2,203)
(1,688)
7,839
157,780
10,635
21,442
2,976
$ 17,000
(1,123)
$ 10,500
1,548
--
236,986
Total liabilities and
                            
  partners’/members’
                            
  capital (deficit)
$ 12,812
$ 12,992
$ 80,473
$ 16,525
$ 555,949
$ 64,368
$ 61,723
$  6,814
$ 17,000
$  9,130
$ 10,500
$ 2,877
--
$ 851,163
Company’s
                            
  investment
                            
  in unconsolidated
                            
  joint ventures, net
$   6,060
--
--
$   3,647
$ 119,061
$   2,560
$   6,669
$  1,024
$   8,500
$  7,130
$   5,250
$    400
--
$ 160,301



 
86
 

SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
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 years ended December 31, 2007, 2006 and 2005:  (dollars in thousands)

 
Year Ended December 31, 2007
 
Plaza
      
Red Bank
Mack-
Princeton
          
NKFGMS
        
 
VIII & IX
Ramland
Ashford
Harborside
Corporate
Green-
Forrestal
Route 93
Gale
55
12
Boston-
Owners
Gale
Meadowlands
G&G
Combined
 
Associates
Realty
Loop
South Pier
Plaza I & II
Gale
Village
Portfolio
Kimball
Corporate
Vreeland
Filenes
LLC
Jefferson
Xanadu
Martco
Total
Total revenues
$ 1,015
$  1,903
--
$ 43,952
$ 1,098
$  67,113
$  12,637
$  2,541
$    12
--
$ 2,280
$ 664
--
--
--
--
$ 133,215
Operating and
                                  
  other expenses
(174)
(1,528)
--
(26,661)
(237)
(53,123)
(6,471)
(3,674)
(83)
--
(65)
(698)
--
--
--
--
(92,714)
Depreciation and
                                  
  amortization
(616)
(727)
--
(5,929)
(208)
(24,751)
(3,589)
(2,794)
(146)
--
(352)
--
--
--
--
--
(39,112)
Interest expense
--
(1,047)
--
(4,785)
(367)
(26,706)
(4,751)
(3,429)
(324)
--
(663)
--
--
--
--
--
(42,072)
                                   
Net income
$    225
$ (1,399)
--
$   6,577
$    286
$ (37,467)
$  (2,174)
$ (7,356)
$ (541)
--
$ 1,200
$   (34)
--
--
--
--
$  (40,683)
Company’s equity
                                  
  in earnings (loss)
                                  
  of unconsolidated
                                  
  joint ventures
$    113
$    (375)
--
$   3,182
$    143
$   (6,677)
$     (531)
$ (2,236)
$ (180)
--
$    600
$   (10)
$53
--
--
--
$    (5,918)



 
Year Ended December 31, 2006
 
Plaza
      
Red Bank
Mack-
Princeton
          
NKFGMS
        
 
VIII & IX
Ramland
Ashford
Harborside
Corporate
Green-
Forrestal
Route 93
Gale
55
12
Boston-
Owners
Gale
Meadowlands
G&G
Combined
 
Associates
Realty
Loop
South Pier
Plaza I & II
Gale
Village
Portfolio
Kimball
Corporate
Vreeland
Filenes
LLC
Jefferson
Xanadu
Martco
Total
Total revenues
$ 755
$  2,058
--
$ 39,229
$ 15
$  44,262
$  9,495
$  3,486
$ 1
--
$ 2,102
--
--
--
--
$ 5,990
$ 107,393
Operating and
                                  
  other expenses
(186)
(1,496)
--
(23,591)
(6)
(19,136)
(5,925)
(1,585)
--
--
(76)
--
--
--
--
(2,702)
(54,703)
Depreciation and
                                  
  amortization
(616)
(736)
--
(5,853)
--
(21,129)
(2,908)
(622)
--
--
(352)
--
--
--
--
(1,216)
(33,432)
Interest expense
--
(1,022)
--
(4,078)
--
(17,117)
(3,063)
(1,969)
--
--
(755)
--
--
--
--
(2,499)
(30,503)
                                   
Net income
$  (47)
$ (1,196)
--
$   5,707
$   9
$ (13,120)
$ (2,401)
$    (690)
$ 1
--
$    919
--
--
--
--
$   (427)
$ (11,245)
Company’s equity
                                  
  in earnings (loss)
                                  
  of unconsolidated
                                  
  joint ventures
$  (24)
$    (225)
--
$   2,820
--
$   (4,945)
$    (436)
$    (148)
--
--
$    208
--
--
--
$ (1,876)
$   (930)
$   (5,556)



 
Year Ended December 31, 2005
 
Plaza
      
Red Bank
Mack-
Princeton
          
NKFGMS
        
 
VIII & IX
Ramland
Ashford
Harborside
Corporate
Green-
Forrestal
Route 93
Gale
55
12
Boston-
Owners
Gale
Meadowlands
G&G
Combined
 
Associates
Realty
Loop
South Pier
Plaza I & II
Gale
Village
Portfolio
Kimball
Corporate
Vreeland
Filenes
LLC
Jefferson
Xanadu
Martco
Total
Total revenues
$  396
$ 2,028
--
$  35,198
--
--
--
--
--
--
--
--
--
--
--
$  6,767
$ 44,389
Operating and
                                  
  other expenses
(169)
(1,407)
--
(22,251)
--
--
--
--
--
--
--
--
--
--
--
(3,662)
(27,489)
Depreciation and
                                  
  amortization
(616)
(638)
--
(5,778)
--
--
--
--
--
--
--
--
--
--
--
(1,205)
(8,237)
Interest expense
--
(759)
--
(4,176)
--
--
--
--
--
--
--
--
--
--
--
(2,270)
(7,205)
                                   
Net income
$ (389)
$   (776)
--
$    2,993
--
--
--
--
--
--
--
--
--
--
--
$    (370)
$   1,458
Company’s equity
                                  
  in earnings (loss)
                                  
  of unconsolidated
                                  
  joint ventures
$ (196)
--
$   (30)
$    1,693
--
--
--
--
--
--
--
--
--
--
--
$ (1,219)
$      248


 
87
 

5.  
DEFERRED CHARGES AND OTHER ASSETS

 
December 31,
(dollars in thousands)
2007
2006
Deferred leasing costs
$202,282
$184,175
Deferred financing costs
22,922
21,252
 
225,204
205,427
Accumulated amortization
(90,482)
(76,407)
Deferred charges, net
134,722
129,020
Notes receivable
11,610
11,769
In-place lease values and related intangible assets, net
64,212
58,495
Prepaid expenses and other assets, net
35,842
41,353
     
Total deferred charges and other assets, net
$246,386
$240,637


6.  
RESTRICTED CASH

Restricted cash includes security deposits for certain of the Company’s 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:  (dollars in thousands)


 
December 31,
 
2007
2006
Security deposits
$  8,710
$  8,496
Escrow and other reserve funds
4,903
6,952
     
Total restricted cash
$13,613
$15,448



7.  
DISCONTINUED OPERATIONS

On May 10, 2007, the Company sold its 133,000 square-foot office building located at 1000 Bridgeport Avenue in Shelton, Connecticut for net sales proceeds of approximately $16.4 million and recognized a gain of approximately $2.6 million on the sale.

On June 11, 2007, the Company sold its 121,250 square-foot office building located at 500 West Putnam Avenue in Greenwich, Connecticut for net sales proceeds of approximately $54.3 million and recognized a gain of approximately $36.2 million on the sale.

On July 13, 2007, the Company sold two office buildings in Egg Harbor Township, New Jersey, totaling 80,344 square feet, for approximately $12.5 million and recognized a gain of approximately $5.6 million.
 
The Company has presented these assets as discontinued operations in its statements of operations for the periods presented.  As the Company sold 300 Westage Business Center Drive in Fishkill, New York, 1510 Lancer Drive in Moorestown, New Jersey; a Colorado portfolio in various cities throughout Colorado; and a portfolio in San Francisco, California during the year ended December 31, 2006, the Company has presented these assets as discontinued operations in its statements of operations for all periods presented.

As the Company sold 300 Westage Business Center Drive in Fishkill, New York; 1510 Lancer Drive in Moorestown, New Jersey; the entire Colorado portfolio; and its entire California portfolio during the year ended December 31, 2006; and 111 East Shore Road and 600 Community Drive in North Hempstead, New York; 210 South 16th Street in Omaha, Nebraska; 3600 South Yosemite in Denver Colorado; 201 Willowbrook Boulevard in Wayne, New Jersey; 1122 Alma Road in Richardson, Texas; and 3 Skyline Drive in Hawthorne, New York during the year ended December 31, 2005; the Company has presented these assets as discontinued operations in the statement of operations for all periods presented.
 
 
88

 
There are no properties identified as held for sale as of December 31, 2007.

The following tables summarize income from discontinued operations (net of minority interest) and the related realized gains (losses) and unrealized losses on disposition of rental property (net of minority interest), net for the years ended December 31, 2007, 2006 and 2005:  (dollars in thousands)

 
Year Ended December 31,
 
2007
2006
2005
Total revenues
$  3,881
$ 43,645
$ 56,667
Operating and other expenses
(1,638)
(18,214)
(21,744)
Depreciation and amortization
(424)
(8,853)
(14,327)
Interest expense (net of interest income)
(522)
(1,291)
(224)
Minority interest
(240)
(3,015)
(3,297)
       
Income from discontinued operations (net of minority interest)
$ 1,057
$ 12,272
$ 17,075


 
Year Ended December 31,
 
2007
2006
2005
Realized gains (losses) on disposition of rental property, net
$44,414
$ 59,605
$  7,136
Unrealized losses on disposition of rental property
--
--
   (1,613)
Minority interest
(8,134)
(11,890)
(1,097)
       
Realized gains (losses) and unrealized losses on disposition
      
  of rental property (net of minority interest), net
$ 36,280
$ 47,715
$  4,426


8.  
SENIOR UNSECURED NOTES

A summary of the Company’s senior unsecured notes as of December 31, 2007 and 2006 is as follows:  (dollars in thousands)

 
December 31,
Effective
 
2007
2006
Rate (a)
7.250% Senior Unsecured Notes, due March 15, 2009
$  299,716
$   299,481
7.49%
5.050% Senior Unsecured Notes, due April 15, 2010
149,874
149,819
5.27%
7.835% Senior Unsecured Notes, due December 15, 2010
15,000
15,000
7.95%
7.750% Senior Unsecured Notes, due February 15, 2011
299,468
299,295
7.93%
5.250% Senior Unsecured Notes, due January 15, 2012
99,210
99,015
5.46%
6.150% Senior Unsecured Notes, due December 15, 2012
92,472
91,981
6.89%
5.820% Senior Unsecured Notes, due March 15, 2013
25,530
25,420
6.45%
4.600% Senior Unsecured Notes, due June 15, 2013
99,844
99,815
4.74%
5.125% Senior Unsecured Notes, due February 15, 2014
201,468
201,708
5.11%
5.125% Senior Unsecured Notes, due January 15, 2015
149,349
149,256
5.30%
5.800% Senior Unsecured Notes, due January 15, 2016
200,616
200,692
5.81%
       
Total Senior Unsecured Notes
$1,632,547
$1,631,482
6.28%
       
(a)   Interest rate for unsecured notes reflects effective rate of debt, including cost of treasury lock agreement (if any), offering and other transaction costs and the discount on the notes, as applicable.
 
 
 
89

9.  
UNSECURED REVOLVING CREDIT FACILITY

On June 22, 2007, the Company extended and modified its unsecured credit facility with a group of 23 Lenders.  Amongst other modifications, the facility was extended for an additional two years and matures in June 2011, with an extension option of one year, which would require a payment of 15 basis points of the then borrowing capacity of the facility upon exercise.  In addition, the interest rate on outstanding borrowings (not electing the Company’s competitive bid feature) was reduced by 10 basis points to LIBOR plus 55 basis points at the BBB/Baa2 pricing level.  As of December 31, 2007, the Company’s outstanding borrowings carried a weighted average interest rate of LIBOR plus 55 basis points.

On September 21, 2007, the Company exercised an option to expand the borrowing capacity under its unsecured credit facility from $600 million to $775 million (further expandable to $800 million).

The facility has a competitive bid feature, which allows the Company to solicit bids from lenders under the facility to borrow up to $300 million at interest rates less than the current LIBOR plus 55 basis point spread.  The Company may also elect an interest rate representing the higher of the lender’s prime rate or the Federal Funds rate plus 50 basis points. The unsecured facility also requires a 15 basis point facility fee on the current borrowing capacity payable quarterly in arrears.

The interest rate and the facility fee are subject to adjustment, on a sliding scale, based upon the operating partnership’s unsecured debt ratings.  In the event of a change in the Operating Partnership’s unsecured debt rating, the interest and facility fee rates will be adjusted in accordance with the following table:

Operating Partnership’s
Interest Rate –
  
Unsecured Debt Ratings:
Applicable Basis Points
Facility Fee
S&P Moody’s/Fitch (a)
Above LIBOR
Basis Points
No ratings or less than BBB-/Baa3/BBB-
100.0
25.0
BBB-/Baa3/BBB-
75.0
20.0
BBB/Baa2/BBB (current)
55.0
15.0
BBB+/Baa1/BBB+
42.5
15.0
A-/A3/A- or higher
37.5
12.5
     
(a)   If the Operating Partnership has debt ratings from two rating agencies, one of which is Standard & Poor’s Rating Services (“S&P”) or Moody’s Investors Service (“Moody’s”), the rates per the above table shall be based on the lower of such ratings. If the Operating Partnership has debt ratings from three rating agencies, one of which is S&P or Moody’s, the rates per the above table shall be based on the lower of the two highest ratings.  If the Operating Partnership has debt ratings from only one agency, it will be considered to have no rating or less than BBB-/Baa3/BBB- per the above table.

The terms of the 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 real estate properties (to the extent that: (i) such property dispositions cause the Company to default on any of the financial ratios of the facility described below, or (ii) the property dispositions are completed while the Company is under an event of default under the facility, unless, under certain circumstances, such disposition is being carried out to cure such default), 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 fixed charge coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property interest coverage and certain investment limitations.  The dividend restriction referred to above provides that, if an event of default has occurred and is continuing, the Company will not make any excess distributions with respect to common stock or other common equity interests except to enable the Company to continue to qualify as a REIT under the Code.

The lending group for the credit facility consists of: JPMorgan Chase Bank, N.A., as administrative agent (the “Agent”); Bank of America, N.A., as syndication agent; Scotiabanc, Inc., Wachovia Bank, National Association, and Wells Fargo Bank, National Association, as documentation agents; SunTrust Bank, as senior managing agent; US Bank National Association, Citicorp North America, Inc. and PNC Bank, National Association, as managing agents; and Bank of China, New York Branch, The Bank of New York; Chevy Chase Bank, F.S.B., The Royal Bank of Scotland PLC, Mizuho Corporate Bank, Ltd., The Bank of Tokyo-Mitsubishi UFJ, Ltd. (Successor by merger to UFJ Bank Limited), North Fork Bank, Bank Hapoalim B.M., Comerica Bank, Chang Hwa Commercial Bank, Ltd., New York Branch, First Commercial Bank, New York Agency, Mega International Commercial Bank Co. Ltd., New York Branch, Deutsche Bank Trust Company Americas and Hua Nan Commercial Bank, New York Agency, as participants.
 
 
90

 
SUMMARY
As of December 31, 2007 and 2006, the Company had outstanding borrowings of $250 million and $145 million, respectively, under its unsecured revolving credit facility.


10.  
MORTGAGES, LOANS PAYABLE AND OTHER OBLIGATIONS

The Company has mortgages, loans payable and other obligations which primarily consist of various loans collateralized by certain of the Company’s rental properties.  As of December 31, 2007, 19 of the Company’s properties, with a total book value of approximately $548 million, are encumbered by the Company’s mortgages and loans payable.  Payments on mortgages, loans payable and other obligations are generally due in monthly installments of principal and interest, or interest only.

A summary of the Company’s mortgages, loans payable and other obligations as of December 31, 2007 and 2006 is as follows: (dollars in thousands)

   
Effective
Principal Balance at
  
   
Interest
          December 31,
  
Property Name
Lender
Rate (a)
2007
2006
    Maturity
Mack-Cali Airport
Allstate Life Insurance Co.
7.05%
--
$   9,422
04/01/07 (b)
6303 Ivy Lane
State Farm Life Insurance Co.
5.57%
--
6,020
07/01/07 (c)
6404 Ivy Lane
Wachovia CMBS
5.58%
$ 13,029
13,665
08/01/08
Assumed obligations
Various
4.92%
27,657
38,742
05/01/09 (d)
Various (e)
Prudential Insurance Co.
4.84%
150,000
150,000
01/15/10
105 Challenger Road
Archon Financial CMBS
6.24%
18,968
18,748
06/06/10
2200 Renaissance Boulevard
Wachovia CMBS
5.89%
17,442
17,819
12/01/12
Soundview Plaza
Morgan Stanley CMBS
6.02%
17,575
18,013
01/01/13
9200 Edmonston Road
Principal Commercial Funding, L.L.C.
5.53%
5,096
5,232
05/01/13
6305 Ivy Lane
John Hancock Life Insurance Co.
5.53%
7,098
7,285
01/01/14
395 West Passaic
State Farm Life Insurance Co.
6.00%
12,596
12,996
05/01/14
6301 Ivy Lane
John Hancock Life Insurance Co.
5.52%
6,655
6,821
07/01/14
35 Waterview
Wachovia CMBS
6.35%
20,104
20,318
08/11/14
500 West Putnam Avenue
New York Life Ins. Co.
5.57%
--
25,000
01/10/16 (f)
23 Main Street
JP Morgan CMBS
5.59%
32,968
33,396
09/01/18
           
Total Mortgages, loans payable and other obligations:
    
$329,188
$383,477
  
           
(a)  Effective interest rate for mortgages loans payable and other obligations reflects effective rate of debt, including deferred financing costs, comprised of the cost of terminated treasury lock agreements (if any), debt initiation costs and other transaction costs, as applicable.
  
(b)  On February 5, 2007, the Company repaid this mortgage loan at par, using available cash.
  
(c)  On February 15, 2007, the Company repaid this mortgage loan at par, using available cash.
  
(d)  The obligations mature at various times through May 2009.
  
(e)  Mortgage is collateralized by seven properties.
  
(f)  On June 11, 2007, the Company assigned this loan with the sale of the property and the purchaser assumed this obligation..
  

SCHEDULED PRINCIPAL PAYMENTS
Scheduled principal payments and related weighted average annual interest rates for the Company’s senior unsecured notes (see Note 8), unsecured revolving credit facility and mortgages, loans payable and other obligations as of December 31, 2007 are as follows: (dollars in thousands)

 
91
 


       
Weighted Avg.
 
Scheduled
Principal
  
Interest Rate of
Period
Amortization
Maturities
Total
Future Repayments (a)
2008
$21,191
$     12,563
$     33,754
5.21%
2009
11,471
300,000
311,471
7.40%
2010
2,583
334,500
337,083
5.26%
2011
2,745
550,000
552,745
6.84%
2012
2,864
210,148
213,012
6.13%
Thereafter
5,702
760,618
766,320
5.41%
Sub-total
46,556
2,167,829
2,214,385
6.08%
Adjustment for unamortized debt
        
  discount/premium, net, as of
        
  December 31, 2007
(2,650)
0
(2,650)
  
         
Totals/Weighted Average
$43,906
$2,167,829
$2,211,735
6.08%

(a)  
Actual weighted average LIBOR contract rates relating to the Company’s outstanding debt as of December 31, 2007 of 5.01 percent was used in calculating revolving credit facility and other variable rate debt interest rates.

CASH PAID FOR INTEREST AND INTEREST CAPITALIZED
Cash paid for interest for the years ended December 31, 2007, 2006 and 2005 was $128,678,000, $132,904,000, and $115,359,000, respectively.  Interest capitalized by the Company for the years ended December 31, 2007, 2006 and 2005 was $5,101,000, $6,058,000 and $5,518,000, respectively.

SUMMARY OF INDEBTEDNESS
As of December 31, 2007 the Company’s total indebtedness of $2,211,735,000 (weighted average interest rate of 6.08 percent) was comprised of $250,000,000 of revolving credit facility borrowings (weighted average rate of 5.55 percent) and fixed rate debt and other obligations of $1,961,735,000 (weighted average rate of 6.15 percent).

As of December 31, 2006, the Company’s total indebtedness of $2,159,959,000 (weighted average interest rate of 6.11 percent) was comprised of $145,000,000 of revolving credit facility borrowings (weighted average rate of 5.76 percent) and fixed rate debt and other obligations of $2,014,959,000 (weighted average rate of 6.14 percent).


11.  
MINORITY INTERESTS

OPERATING PARTNERSHIP
Minority interests in the accompanying consolidated financial statements relate to (i) preferred units (“Preferred Units”) and common units in the Operating Partnership, held by parties other than the Company, and (ii) interests in consolidated joint ventures for the portion of such properties not owned by the Company.

Preferred Units
The Operating Partnership has one class of outstanding Preferred Units, the Series C Preferred Units, and one class of Preferred Units, the Series B Preferred Units, which were converted to common units on June 13, 2005, each of which are described as follows:

Series C
In connection with the Company’s issuance of $25 million of Series C cumulative redeemable perpetual preferred stock, the Company acquired from the Operating Partnership $25 million of Series C Preferred Units (the “Series C Preferred Units”), which have terms essentially identical to the Series C preferred stock.  See Note 16: Stockholders’ Equity – Preferred Stock.
 
 
92
 
 
Series B
The Series B Preferred Units had a stated value of $1,000 per unit and were 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.  The quarterly distribution on each Series B Preferred Unit was an amount equal to the greater of (i) $16.875 (representing 6.75 percent of the Series B Preferred Unit stated value of an annualized basis) or (ii) the quarterly distribution attributable to a Series B Preferred Unit determined as if such unit had been converted into common units, subject to adjustment for customary anti-dilution rights.

On June 13, 2005, the Operating Partnership caused the mandatory conversion (the “Conversion”) of all 215,018 outstanding Series B Preferred Units into 6,205,425.72 Common Units.  Each Series B Preferred Unit was converted into whole and fractional Common Units equal to (x) the $1,000 stated value, divided by (y) the conversion price of $34.65.  A description of the rights, preferences and privileges of the Common Units is set forth below.

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.  The common unitholders may not put the units for cash to the Company or the Operating Partnership.  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.

Unit Transactions
The following table sets forth the changes in minority interest which relate to the Series B Preferred Units and common units in the Operating Partnership for the years ended December 31, 2007, 2006 and 2005: (dollars in thousands)

 
Series B
  
Series B
    
 
Preferred
Common
Preferred
Common
  
 
Units
Units
Unitholders
Unitholders
Total
Balance at January 1, 2005
215,018
7,616,447
$220,547
$196,308
$416,855
Net income
--
--
3,909
18,722
22,631
Distributions
--
--
(3,909)
(30,754)
(34,663)
Conversion of Preferred Units
          
into common units
(215,018)
6,205,426
(220,547)
220,547
--
Issuance of common units
--
63,328
--
2,786
2,786
Redemption of common
          
units for shares of
          
common stock
--
(234,762)
--
(6,790)
(6,790)
Balance at December 31, 2005
--
13,650,439
--
$400,819
$400,819
Net income
--
--
--
35,026
35,026
Distributions
--
--
--
(38,585)
(38,585)
Issuance of common units
--
2,167,053
--
97,517
97,517
Redemption of common
          
units for shares of
          
common stock
--
(475,209)
--
(14,674)
(14,674)
Balance at December 31, 2006
--
15,342,283
--
$480,103
$480,103
Net income
--
--
--
24,500
24,500
Distributions
--
--
--
(38,788)
(38,788)
Issuance of common units
--
114,911
--
5,244
5,244
Redemption of common
          
units for shares of
          
common stock
--
(471,656)
--
(14,623)
(14,623)
           
Balance at December 31, 2007
--
14,985,538
--
$456,436
$456,436
 
 
 
93
 
 
Minority Interest Ownership
As of December 31, 2007 and December 31, 2006, the minority interest common unitholders owned 18.5 percent and 19.6 percent of the Operating Partnership, respectively.

CONSOLIDATED JOINT VENTURES
The Company has ownership interests in certain joint ventures which it consolidates.  Various entities and/or individuals hold minority interests in many of these ventures.


12.  
EMPLOYEE BENEFIT 401(k) PLANS

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 from 1 to 30 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 401(k) Plan for each of the three years ended December 31, 2007, 2006 and 2005 was $400,000.

All employees of the Gale Company and other affiliated participating employers, other than certain employees who are represented for collective bargaining purposes by a labor organization, who meet certain minimum age and period of service requirements are eligible to participate in a 401(k) defined contribution plan (the “Gale Plan”).  The Gale Plan allows eligible employees to defer from their annual compensation, the maximum amount permitted under federal law.  The amounts contributed by employees are immediately vested and non-forfeitable.  The Gale Company or the participant’s employer matches the employee’s deferral at the rate of 50 percent on the first six percent of the employee’s annual compensation for employees who have at least 1,000 hours of service and are employed on the last day of the plan year.  In addition, the Company, at management’s discretion, may make discretionary contributions.  Participants become 50 percent vested in employer contributions after two years of service and become 100 percent vested after three years of service.  Effective April 1, 2007, the Gale Plan was merged into the 401(k) Plan.  In accordance with the Gale/Green transactions, the Company continued to make matching contributions to former Gale Plan participants under the Gale Plan matching contribution formula through the payroll period ending May 4, 2007.  Moreover, federal law requires the Company to preserve (i) the Gale Plan vesting schedule for certain Gale Plan participants with three or more years of service as of May 4, 2007 and (ii) certain benefits previously offered under the Gale Plan.  Total expense recognized after the completion of the Gale/Green Transactions by the Company for the Gale Plan for the years ended December 31, 2007 and 2006 was $111,000 and $370,000, respectively.


13.  
DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of estimated fair value was determined by management using available market information and appropriate valuation methodologies.  However, considerable judgment is necessary to interpret market data and develop estimated fair value.  Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments at December 31, 2007 and 2006.  The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash equivalents, marketable securities, receivables, accounts payable, and accrued expenses and other liabilities are carried at amounts which reasonably approximate their fair values as of December 31, 2007 and 2006.

The fair value of the fixed-rate mortgage debt and unsecured notes as of December 31, 2007 and 2006 approximated the book value of approximately $2.0 billion as of December 31, 2007 and 2006.  The fair value of the mortgage debt and the unsecured notes was determined by discounting the future contractual interest and principal payments by a market rate.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 2007 and 2006.  Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since December 31, 2007 and current estimates of fair value may differ significantly from the amounts presented herein.
 
 
 
94
 

 
14.  
COMMITMENTS AND CONTINGENCIES

TAX ABATEMENT AGREEMENTS
Harborside Financial Center
Pursuant to agreements with the City of Jersey City, New Jersey, the Company is required to make payments in lieu of property taxes (“PILOT”) on certain of its properties located in Jersey City, as follows:

The Harborside Plaza 4-A agreement, which commenced in 2000, is for a term of 20 years.  The PILOT is equal to two percent of Total Project costs, as defined, and increases by 10 percent in years 7, 10 and 13 and by 50 percent in year 16.  Total Project costs, as defined, are $45.5 million.  The PILOT totaled $1,001,000 for the year ended December 31, 2007 and $910,000 for each of the years ended December 31, 2006 and 2005.

The Harborside Plaza 5 agreement, as amended, which commenced in 2002 upon substantial completion of the property, as defined, is for a term of 20 years.  The PILOT is equal to two percent of Total Project Costs.  Total Project Costs, as defined, are $159.6 million.  The PILOT totaled $3.2 million for each of the years ended December 31, 2007, 2006 and 2005.

At the conclusion of the above-referenced PILOT agreements, it is expected that the properties will be assessed by the municipality and be subject to real estate taxes at the then prevailing rates.

LITIGATION
The Company is a defendant in litigation arising in the normal course of its business activities.  Management does not believe that the ultimate resolution of these matters will have a materially adverse effect upon the Company’s financial condition taken as whole.

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 December 31, 2007, are as follows: (dollars in thousands)

Year
Amount
2008
$     486
2009
501
2010
501
2011
501
2012
501
2013 through 2084
34,952
   
Total
$37,442

Ground lease expense incurred by the Company during the years ended December 31, 2007, 2006 and 2005 amounted to $663,000, $698,000 and $606,000, respectively.

OTHER
The Company may not dispose of or distribute certain of its properties, currently comprising 11 properties with an aggregate net book value of approximately $208.1 million, which were originally contributed by the sellers of certain properties to the Company, without the express written consent of a representative of the contributors of such properties, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate members for the tax consequences of the recognition of such built-in-gains.  These transfer restrictions are scheduled to expire periodically through 2016.  Additionally, the Company may not dispose of or distribute two properties with an aggregate net book value of approximately $12.8 million, which were originally contributed by members of the Cali Group (which includes John R. Cali, director, and John J. Cali, a former director) under similar terms and conditions, for which such restrictions are scheduled to expire in June 2008. The aforementioned restrictions do not apply in the event that the Company sells all of its properties or in connection with a sale transaction which the Company’s Board of Directors determines is reasonably necessary to satisfy a material monetary default on any unsecured debt, judgment or liability of the Company or to cure any material monetary default on any mortgage secured by a property.  Upon expiration, the Company generally is required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the contributors of the properties.  124 of the Company’s properties which were originally contributed by members of either the Mack Group (which includes William L. Mack, Chairman of the Company’s Board of Directors; David S. Mack, director; Earle I. Mack, a former director; and Mitchell E. Hersh, president, chief executive officer and director), the Robert Martin Group (which includes Martin S. Berger, director; Robert F. Weinberg, a former director; and Timothy M. Jones, former president), the Cali Group (which includes John R. Cali, director, and John J. Cali, a former director) or certain other common unitholders, with an aggregate net book value of approximately $1.9 billion, have lapsed restrictions and are subject to these conditions.
 
 
 
95

 

15.  
TENANT LEASES

The Properties are leased to tenants under operating leases with various expiration dates through 2026.  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.

Future minimum rentals to be received under non-cancelable operating leases at December 31, 2007 are as follows: (dollars in thousands)

Year
Amount      
2008
$   574,203
2009
540,826
2010
478,828
2011
410,746
2012
342,727
2013 and thereafter
1,068,116
   
Total
$3,415,446


16.  
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 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 demands 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 February 7, 2007, the Company completed an underwritten offer and sale of 4,650,000 shares of its common stock and used the net proceeds, which totaled approximately $252 million (after offering costs), primarily to pay down its outstanding borrowings under the Company’s revolving credit facility and general corporate purposes.

PREFERRED STOCK
On March 14, 2003, in a publicly registered transaction with a single institutional buyer, the Company completed the sale and issuance of 10,000 shares of eight-percent Series C cumulative redeemable perpetual preferred stock (“Series C Preferred Stock”) in the form of 1,000,000 depositary shares ($25 stated value per depositary share).  Each depositary share represents 1/100th of a share of Series C Preferred Stock.  The Company received net proceeds of approximately $24.8 million from the sale.  See Note 11: Minority Interests – Operating Partnership – Preferred Units.
 
 
 
96
 

 
The Series C Preferred Stock has preference rights with respect to liquidation and distributions over the common stock. Holders of the Series C Preferred Stock, except under certain limited conditions, will not be entitled to vote on any matters.  In the event of a cumulative arrearage equal to six quarterly dividends, holders of the Series C Preferred Stock will have the right to elect two additional members to serve on the Company’s Board of Directors until dividends have been paid in full.  At December 31, 2007, there were no dividends in arrears.  The Company may issue unlimited additional preferred stock ranking on a parity with the Series C Preferred Stock but may not issue any preferred stock senior to the Series C Preferred Stock without the consent of two-thirds of its holders.  The Series C Preferred Stock is essentially on an equivalent basis in priority with the Preferred Units.

Except under certain conditions relating to the Company’s qualification as a REIT, the Series C Preferred Stock is not redeemable prior to March 14, 2008.  On and after such date, the Series C Preferred Stock will be redeemable at the option of the Company, in whole or in part, at $25 per depositary share, plus accrued and unpaid dividends.

SHARE REPURCHASE PROGRAM
On September 12, 2007, the Board of Directors authorized an increase to the Company’s repurchase program under which the Company was permitted to purchase up to $150 million of the Company’s outstanding common stock (“Repurchase Program”).  During the year ended December 31, 2007 and through February 8, 2008, the Company purchased and retired 2,893,630 shares of its outstanding common stock for an aggregate cost of approximately $104 million.  The Company has a remaining authorization to repurchase up to approximately $46 million of its outstanding common stock, which it may repurchase from time to time in open market transactions at prevailing prices or through privately negotiated transactions.

DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company has a dividend reinvestment and stock purchase plan, which commenced in March 1999.

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.

STOCK OPTION PLANS
In May 2004, the Company established the 2004 Incentive Stock Plan under which a total of 2,500,000 shares have been reserved for issuance.  No options have been granted through December 31, 2007 under this plan.  In September 2000, the Company established the 2000 Employee Stock Option Plan (“2000 Employee Plan”) and the Amended and Restated 2000 Director Stock Option Plan (“2000 Director Plan”).  In May 2002, shareholders of the Company approved amendments to both plans to increase the total shares reserved for issuance under both of the 2000 plans from 2,700,000 to 4,350,000 shares of the Company’s common stock (from 2,500,000 to 4,000,000 shares under the 2000 Employee Plan and from 200,000 to 350,000 shares under the 2000 Director Plan).  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 had been reserved for issuance (4,980,188 shares under the Employee Plan and 400,000 shares under the Director Plan).  As the Employee Plan and Director Plan expired in 2004, stock options may no longer be issued under those plans.  Stock options granted under the Employee Plan in 1994 and 1995 became exercisable over a three-year period.  Stock options granted under the 2000 Employee Plan and those options granted subsequent to 1995 under the Employee Plan become exercisable over a five-year period.  All stock options granted under both the 2000 Director Plan and 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 December 31, 2007 and December 31, 2006, the stock options outstanding had a weighted average remaining contractual life of approximately 4.1 and 4.7 years, respectively.  Stock options exercisable at December 31, 2007 and December 31, 2006 had a weighted average remaining contractual life of approximately 4.0 and 4.5 years, respectively.
 
 
 
97

 
Information regarding the Company’s stock option plans is summarized below:

   
Weighted
Aggregate
 
Shares
Average
Intrinsic
 
Under
Exercise
Value
 
Options
Price
$(000’s)
Outstanding at January 1, 2005
1,703,631
$29.31
  
Granted
5,000
$45.47
  
Exercised
(574,506)
$28.92
  
Lapsed or canceled
(50,540)
$28.60
  
Outstanding at December 31, 2005
1,083,585
$29.63
  
Exercised
(352,699)
$29.65
  
Lapsed or canceled
(40,580)
$28.53
  
Outstanding at December 31, 2006
690,306
$29.68
  
Exercised
(132,770)
$28.63
  
Lapsed or canceled
(59,805)
$37.44
  
Outstanding at December 31, 2007 ($26.75 – $45.47)
497,731
$29.03
$  2,776
Options exercisable at December 31, 2006
571,026
$29.94
$12,017
Options exercisable at December 31, 2007
497,731
$29.03
$  2,474
Available for grant at December 31, 2006
4,547,214
    
Available for grant at December 31, 2007
4,537,574
    

The weighted average fair value of options granted during 2005 was $3.62 per option. The fair value of each significant option grant is estimated on the date of grant using the Black-Scholes model.  The following weighted average assumptions are included in the Company’s fair value calculations of stock options granted during the year ended December 31, 2005.

       
Expected life (in years)
    
6
Risk-free interest rate
    
3.97%
Volatility
    
15.00%
Dividend yield
    
5.54%

No stock options were granted during the year ended December 31, 2007 and 2006.

Cash received from options exercised under all stock option plans was $3.8 million, $10.5 million and $16.6 million for the years ended December 31, 2007, 2006 and 2005, respectively.  The total intrinsic value of options exercised during the years ended December 31, 2007, 2006 and 2005 was $3.2 million, $6.2 million and $9.1 million, respectively.  The Company has a policy of issuing new shares to satisfy stock option exercises.

The Company recognized stock options expense of $132,000, $465,000 and $448,000 for the years ended December 31, 2007, 2006 and 2005, respectively.  As of December 31, 2007, the Company had $11.7 million of total unrecognized compensation cost related to unvested stock compensation granted under the Company’s stock compensation plans.  That cost is expected to be recognized over a weighted average period of 4.5 years.
 
 
 
98

 
STOCK COMPENSATION
The Company has granted stock awards (“Restricted Stock Awards”) to officers, certain other employees, and non-employee members of the Board of Directors of the Company, which allow the holders to each receive a certain amount of shares of the Company’s common stock generally over a one to five-year vesting period and generally based on time and service, of which 170,811 shares were outstanding at December 31, 2007.  Of the outstanding Restricted Stock Awards granted to executive officers and senior management, 49,673 are contingent upon the Company meeting certain performance and/or stock price appreciation objectives.  All Restricted Stock Awards provided to the officers and certain other employees were granted under the 2000 Employee Plan and the Employee Plan.  Restricted Stock Awards granted to directors were granted under the 2000 Director Plan.

Information regarding the Restricted Stock Awards is summarized below:

   
Weighted-Average
   
Grant – Date
 
Shares
Fair Value
Outstanding at January 1, 2005
198,703
$  33.19
Granted (a)
165,660
$  43.41
Vested
(109,419)
$  40.36
Forfeited
(8,000)
$  43.85
Outstanding at December 31, 2005
246,944
$  37.17
Granted (b)
81,034
$  52.94
Vested
(102,808)
$  43.72
Forfeited
(8,550)
$  43.59
Outstanding at December 31, 2006
216,620
$  39.78
Granted (c)
113,118
$  36.29
Vested
(158,927)
$  42.10
     
Outstanding at December 31, 2007
170,811
$  35.32
   
(a)  Included in the 165,660 Restricted Stock Awards granted in 2005 were 37,960 awards granted to the Company’s four executive officers, Mitchell E. Hersh, Barry Lefkowitz, Roger W. Thomas and Michael Grossman.
(b)  Included in the 81,034 Restricted Stock Awards granted in 2006 were 67,834 awards granted to the Company’s five executive officers, Mitchell E. Hersh, Barry Lefkowitz, Roger W. Thomas, Michael Grossman and Mark Yeager.
(c)  Included in the 113,118 Restricted Stock Awards granted in 2007 were 82,518 awards granted to the Company’s five executive officers, Mitchell E. Hersh, Barry Lefkowitz, Roger W. Thomas, Michael Grossman and Mark Yeager.

On September 12, 2007, the Board of Directors of the Company approved the recommendations and ratified the determinations of the Executive Compensation and Option Committee of the Board of Directors (the “Committee”) with respect to new Restricted Stock Awards totaling 230,586 shares for its executive officers.

The Restricted Stock Awards may vest commencing January 1, 2009, with the number of Restricted Stock Awards scheduled to be vested and earned on each vesting date on an annual basis over a five to seven year vesting schedule, with each annual vesting of each tranche of Restricted Stock Awards is subject to the attainment of annual performance goals to be set by the Committee for each year.  In connection with the authorization of the Restricted Stock Awards, the Company also authorized the entering into of tax gross-up agreements with each of the executive officers.

DEFERRED STOCK COMPENSATION PLAN FOR DIRECTORS
The Deferred Compensation Plan for Directors, which commenced January 1, 1999, 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.
 
 
 
99

 
During the years ended December 31, 2007, 2006 and 2005, 8,054, 6,266 and 6,655 deferred stock units were earned, respectively.  As of December 31, 2007 and 2006, there were 44,179 and 37,263 director stock units outstanding, respectively.

EARNINGS PER SHARE
Basic EPS excludes dilution and is computed by dividing net income available to common shareholders 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 years ended December 31, 2007, 2006 and 2005 in accordance with FASB No. 128:  (dollars in thousands)

 
Year Ended December 31,
Computation of Basic EPS
2007
2006
2005
Income from continuing operations
$  73,129
$  84,679
$  73,987
Deduct:  Preferred stock dividends
(2,000)
(2,000)
(2,000)
Income from continuing operations available to common shareholders
71,129
82,679
71,987
Income from discontinued operations
37,337
59,987
21,501
Net income available to common shareholders
$108,466
$142,666
$  93,488
       
Weighted average common shares
67,026
62,237
61,477
       
Basic EPS:
      
Income from continuing operations
$      1.06
$      1.33
$      1.17
Income from discontinued operations
0.56
0.96
0.35
Net income available to common shareholders
$      1.62
$      2.29
$      1.52


 
Year Ended December 31,
Computation of Diluted EPS
2007
2006
2005
Income from continuing operations available to common shareholders
$  71,129
$  82,679
$  71,987
Add:     Income from continuing operations attributable to
    
 
Operating Partnership – common units
16,126
20,121
14,329
Income from continuing operations for diluted earnings per share
87,255
102,800
86,316
Income from discontinued operations for diluted earnings per share
45,711
74,892
25,894
Net income available to common shareholders
$132,966
$177,692
$112,210
       
Weighted average common shares
82,500
77,901
74,189
       
Diluted EPS:
      
Income from continuing operations
$      1.06
$      1.32
$      1.16
Income from discontinued operations
0.55
0.96
0.35
Net income available to common shareholders
$      1.61
$      2.28
$      1.51


 
100
 


The following schedule reconciles the shares used in the basic EPS calculation to the shares used in the diluted EPS calculation:

 
Year Ended December 31,
 
2007
2006
2005
Basic EPS shares
67,026
62,237
61,477
Add:   Operating Partnership – common units
15,190
15,286
12,252
Stock options
185
310
401
Restricted Stock Awards
99
68
59
Stock Warrants
--
--
--
Diluted EPS Shares
82,500
77,901
74,189

Not included in the computations of diluted EPS were 5,000, 0, and 1,507 stock options as such securities were anti-dilutive during the years ended December 31, 2007, 2006 and 2005, respectively.  Also excluded from diluted EPS computations was 1,530,105 Series B Preferred Units, on an as converted basis into common units, as such securities were anti-dilutive during the year ended December 31, 2005.  Unvested restricted stock outstanding as of December 31, 2007, 2006 and 2005 were 170,811, 216,620 and 246,944, respectively.


 
101
 


17.  
SEGMENT REPORTING

The Company operates in two business segments: (i) real estate and (ii) construction services.  The Company provides leasing, property and facilities management, acquisition, development, construction and tenant-related services for its portfolio.  In May 2006, in conjunction with the Company’s acquisition of the Gale Company and related businesses, the Company acquired a business specializing solely in construction and related services whose operations comprise the Company’s construction services segment.  The Company had no revenues from foreign countries recorded for the year ended December 31, 2007.  Included in the Company’s revenues for the year ended December 31, 2006 was $4,806,000 derived from foreign countries.  The Company had no long lived assets in foreign locations as of December 31, 2007 and 2006.  The accounting policies of the segments are the same as those described in Note 2: Significant Accounting Policies, excluding depreciation and amortization.

The Company evaluates performance based upon net operating income from the combined properties in the real estate segment and net operating income from its construction services segment.

 
102
 

Selected results of operations for the years ended December 31, 2007, 2006 and 2005 and selected asset information as of December 31, 2007 and 2006 regarding the Company’s operating segments are as follows: (dollars in thousands)

 
 
Real Estate
Construction
Services
Corporate
& Other (d)
 
 Total Company
  
Total revenues:
          
2007
$   716,932
$97,951
$    (6,533)
$   808,350
  
2006
  668,297
  56,582
     7,133
   732,012
  
2005
   589,242
--
      2,749
591,991
  
           
Total operating and interest expenses (a):
          
2007
$   263,175
$96,699
$ 170,382
$   530,256
(e)
2006
  257,688
  55,871
  174,694
   488,253
(f)
2005
  207,522
--
 150,682
   358,204
(g)
           
Equity in earnings of unconsolidated
          
  joint ventures:
          
2007
$      (5,918)
--
--
$    ( 5,918)
  
2006
       (5,556)
          --
            --
     (5,556)
  
2005
          248
--
          --
          248
  
           
Net operating income (b):
          
2007
$   447,839
$  1,252
$(176,915)
$   272,176
(e)
2006
   405,053
       711
 (167,561)
   238,203
(f)
2005
   381,968
--
(147,933)
   234,035
(g)
           
Total assets:
          
2007
$4,633,500
$35,019
$  (75,317)
$4,593,202
  
2006
4,281,222
  28,353
  113,314
4,422,889
  
           
Total long-lived assets (c):
          
2007
$4,268,260
--
$    (1,017)
$4,267,243
  
2006
4,036,393
          --
     1,550
4,037,943
  
           

(a)
Total operating and interest expenses represent the sum of:   real estate taxes; utilities; operating services; direct construction costs; real estate services salaries, wages and other costs; general and administrative and interest expense (net of interest income). All interest expense, net of interest income, (including for property-level mortgages) is excluded from segment amounts and classified in Corporate & Other for all periods.
(b)
Net operating income represents total revenues less total operating and interest expenses [as defined in Note (a)], plus equity in earnings (loss) of unconsolidated joint ventures, for the period.
(c)
Long-lived assets are comprised of net investment in rental property, unbilled rents receivable and investments in unconsolidated joint ventures.
(d)
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.
(e)
Excludes $183,564 of depreciation and amortization.
(f)  
Excludes $159,096 of depreciation and amortization.
(g)  
Excludes $141,771 of depreciation and amortization.


 
103
 

18.  
RELATED PARTY TRANSACTIONS

William L. Mack, Chairman of the Board of Directors of the Company (“W. Mack”), David S. Mack, a director of the Company, and Earle I. Mack, a former director of the Company (“E. Mack”), are the executive officers, directors and stockholders of a corporation that leases approximately 7,801 square feet at one of the Company’s office properties, which is scheduled to expire in November 2008.  The Company has recognized $233,000, $228,000 and $242,000  in revenue under this lease for the years ended December 31, 2007, 2006 and 2005, respectively, and had no accounts receivable from the corporation as of December 31, 2007 and 2006.

The Company has conducted business with certain entities (“RMC Entity” or “RMC Entities”), whose principals include Timothy M. Jones, Martin S. Berger and Robert F. Weinberg, each of whom are affiliated with the Company as the former 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.  In connection with the Company’s acquisition of 65 Class A properties from The Robert Martin Company (“Robert Martin”) on January 31, 1997, as subsequently modified, the Company granted Robert Martin the right to designate one seat on the Company’s Board of Directors (“RM Board Seat”), which right has since expired.  The RM Board Seat had historically been shared between Robert F. Weinberg and Martin S. Berger, each of whom had agreed that, for so long as either of them serves on the Board of Directors, that such board seat would be rotated among Mr. Berger and Mr. Weinberg annually at the time of each annual meeting of stockholders.  At the Company’s 2003 annual meeting of stockholders, Mr. Berger was elected to the Board of Directors and he continued to share his board seat with Mr. Weinberg.  At the Company’s 2006 annual meeting of stockholders, Mr. Weinberg was elected to the Board of Directors and he resigned after the Company’s 2007 annual meeting of stockholder and Mr. Berger was appointed to his board seat.  The business that the Company has conducted with RMC Entities was as follows:

(1)  
The Company provides management, leasing and construction-related services to properties in which RMC Entities have an ownership interest.  The Company recognized approximately $2 million, $2 million and $1.1 million in revenue from RMC Entities for the years ended December 31, 2007, 2006 and 2005, respectively.  As of December 31, 2007 and 2006, respectively, the Company had $319,000 and $131,000 accounts receivable from RMC Entities.
(2)  
An RMC Entity leased space at one of the Company’s office properties for approximately 3,330 square feet, which, after a three-year renewal and expansion signed with the Company in 2005, now leases 4,860 square feet which is scheduled to expire in October 2008.  The Company has recognized $132,000, $119,000 and $89,000, in revenue under this lease for the years ended December 31, 2007, 2006 and 2005, respectively, and had zero accounts receivable due from the RMC Entity, as of December 31, 2007 and 2006, respectively.

Through June 2007, Mr. Berger held a 24 percent interest, acted as chairman and chief executive officer, Mr. Weinberg also held a 24 percent interest and was a director, and W. Mack held a nine percent interest and was a director of City and Suburban Federal Savings Bank and/or one of its affiliates, which leases a 12,842 square feet of space at one of the Company’s office properties, which was scheduled to expire in April 2013.  In July 2007, Messrs. Berger, Weinberg and Mack sold their interests and no longer are directors of City and Suburban Federal Savings Bank and/or its affiliates.  The Company recognized $190,000, $404,000 and $396,000 in revenue under the leases for the years ended December 31, 2007, 2006 and 2005, respectively, and had no accounts receivable from the company as of December 31, 2007 and 2006.

Pursuant to an agreement between the Company and certain members and associates of the Cali family executed June 27, 2000, John J. Cali served as the Chairman Emeritus and a Board member of the Company, and as a consultant to the Company and was paid an annual salary of $150,000 from June 27, 2000 through June 27, 2003.  Additionally, the Company provided office space and administrative support to John J. Cali and Ed Leshowitz, his business partner (the “Cali Group”).  Such services were in effect from June 27, 2000 through June 27, 2004.  From June 27, 2004 through June 26, 2005, the Company agreed to provide office space at no cost to the Cali Group.  The Company also provides administrative support and related services for which it was reimbursed $192,000, $184,000 and $115,000 from the Cali Group for the years ended December 31, 2007, 2006 and 2005, respectively.  On June 27, 2005, an affiliate of the Cali Group entered into a three-year lease for 1,825 square feet of space at one of the Company’s office properties, which is scheduled to expire at the end of 2011. On September 18, 2006, an affiliate of the Cali Group entered into another lease agreement for 806 additional square feet, in the same building, commencing on December 29, 2006, which is scheduled to expire at the end of 2011.  The Company recognized approximately $68,000, $47,000 and $24,000 in total revenue under the leases for the year ended December 31, 2007, 2006 and 2005, respectively, and had no accounts receivable from the affiliate as of December 31, 2007 and 2006.

 
 
104

 
19.  
IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS

FASB Statement No. 157 (“FASB No. 157”), Fair Value Measurements

FASB No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements.  FASB No. 157 applies under other accounting pronouncements that require or permit fair value measurements, FASB having previously concluded in those accounting pronouncements that fair value is their relevant measurement attribute.  Accordingly, this FASB No. 157 does not require any new fair value measurements.  However, for some entities, the application of this FASB No. 157 will change current practice.  This statement is effective for financial statements for fiscal years beginning after November 15, 2007.  The Company does not expect that the implementation of FASB No. 157 will have a material effect on the Company’s consolidated financial position or results of operations.

FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) Statement No. 159 (“FASB No. 159”), The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115

FASB No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value.  The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.  FASB No. 159 is expected to expand the use of fair value measurement, which is consistent with FASB’s long-term measurement objectives for accounting for financial instruments.  This Statement applies to all entities, including not-for-profit organizations.  Most of the provisions of this Statement apply only to entities that elect the fair value option.  However, the amendment to FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities.  Some requirements apply differently to entities that do not report net income.
The following are eligible items for the measurement option established by FASB No. 159.

1.  
Recognized financial assets and financial liabilities except:
a.  
An investment in a subsidiary that the entity is required to consolidate;
b.  
An interest in a variable interest entity that the entity is required to consolidate;
c.  
Employers’ and plans’ obligations (or assets representing net overfunded positions) for pension benefits, other postretirement benefits (including health care and life insurance benefits), postemployment benefits, employee stock option and stock purchase plans, and other forms of deferred compensation arrangements, as defined in FASB Statements No. 35, Accounting and Reporting by Defined Benefit Pension Plans, No. 87, Employers’ Accounting for Pensions, No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions, No. 112, Employers’ Accounting for Postemployment Benefits, No. 123 (revised December 2004), Share-Based Payment, No. 43, Accounting for Compensated Absences, No. 146, Accounting for Costs Associated with Exit or Disposal Activities, and No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, and APB Opinion No. 12, Omnibus Opinion—1967;
d.  
Financial assets and financial liabilities recognized under leases as defined in FASB Statement No. 13, Accounting for Leases (This exception does not apply to a guarantee of a third-party lease obligation or a contingent obligation arising from a cancelled lease.);
e.  
Deposit liabilities, withdrawable on demand, of banks, savings and loan associations, credit unions, and other similar depository institutions; and
f.  
Financial instruments that are, in whole or in part, classified by the issuer as a component of shareholder’s equity (including “temporary equity”).  An example is a convertible debt security with a noncontingent beneficial conversion feature.
2.  
Firm commitments that would otherwise not be recognized at inception and that involve only financial instruments.
3.  
Nonfinancial insurance contracts and warranties that the insurer can settle by paying a third party to provide those goods or services.
4.  
Host financial instruments resulting from separation of an embedded nonfinancial derivative instrument from a nonfinancial hybrid instrument.
 
 
 
105

 
The fair value option established by FASB No. 159 permits all entities to choose to measure eligible items at fair value at specified election dates.  A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date.  FASB No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007.  The Company does not expect that the implementation of FASB No. 159 will have a material effect on the Company’s consolidated financial position or results of operations.

FASB Statement No. 141(R) – (revised 2007), (“FASB No. 141(R)”), Business Combinations

In December 2007, the FASB issued FASB No. 141(R) which establishes principles and requirements for how the acquirer shall recognize and measure in its financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquiree and goodwill acquired in a business combination. This statement is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.  The Company is currently assessing the potential impact that the adoption of FASB No. 141(R) will have on its financial position and results of operations.

FASB Statement No. 160 (“FASB No. 160”), Noncontrolling Interests in Consolidated Financial Statements — an Amendment of ARB No. 51

In December 2007, the FASB issued No. 160, which establishes and expands accounting and reporting standards for minority interests, which will be recharacterized as noncontrolling interests, in a subsidiary and the deconsolidation of a subsidiary. FASB 160 is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. This statement is effective for fiscal years beginning on or after December 15, 2008.  The Company is currently assessing the potential impact that the adoption of FASB No. 160 will have on its financial position and results of operations.




 
106
 


20.  
CONDENSED QUARTERLY FINANCIAL INFORMATION (unaudited)

The following summarizes the condensed quarterly financial information for the Company: (dollars in thousands)

Quarter Ended 2007:
December 31
September 30
June 30
March 31
Total revenues
$201,682
$212,881
$200,530
$193,257
Operating and other expenses
67,281
71,462
66,529
65,641
Direct construction costs
19,155
22,479
22,634
20,911
General and administrative
14,811
13,411
12,870
11,070
Depreciation and amortization
48,500
49,790
43,823
41,451
Total expenses
149,747
157,142
145,856
139,073
Operating Income
51,935
55,739
54,674
54,184
Interest expense
(32,240)
(32,163)
(31,333)
(30,936)
Interest and other investment income
497
985
1,571
1,617
Equity in earnings (loss) of unconsolidated
        
joint ventures
(432)
(1,559)
(1,696)
(2,231)
Minority interest in consolidated joint ventures
151
51
214
227
Gain on sale of investment in marketable securities
--
--
--
--
Gain on sale of investment in unconsolidated
        
joint ventures
--
--
--
--
Gain/(loss) on sale of land and other assets
--
--
--
--
Total other (expense) income
(32,024)
(32,686)
(31,244)
(31,323)
Income from continuing operations before minority
        
interest in Operating Partnership
19,911
23,053
23,430
22,861
Minority interest in Operating Partnership
(3,562)
(4,146)
(4,197)
(4,221)
Income from continuing operations
16,349
18,907
19,233
18,640
Discontinued operations (net of minority interest):
        
Income from discontinued operations
--
20
598
439
Realized gains (losses) and unrealized losses
        
  on disposition of rental property, net
--
4,533
31,747
--
Total discontinued operations, net
--
4,553
32,345
439
Net income
16,349
23,460
51,578
19,079
Preferred stock dividends
(500)
(500)
(500)
(500)
Net income available to common shareholders
$  15,849
$  22,960
$  51,078
$  18,579
         
Basic earnings per common share:
        
Income from continuing operations
$      0.24
$      0.27
$      0.28
$      0.27
Discontinued operations
--
0.07
0.48
0.01
Net income available to common shareholders
$      0.24
$      0.34
$      0.76
$      0.28
         
Diluted earnings per common share:
        
Income from continuing operations
$      0.24
$      0.27
$      0.28
$      0.27
Discontinued operations
--
0.07
0.47
0.01
Net income available to common shareholders
$      0.24
$      0.34
$      0.75
$      0.28
         
Dividends declared per common share
$      0.64
$      0.64
$      0.64
$      0.64

 
107
 


Quarter Ended 2006:
December 31
September 30
June 30
March 31
Total revenues
$ 196,082
$ 201,252
$ 182,789
$ 151,889
Operating and other expenses
67,134
70,895
60,256
55,382
Direct construction costs
18,454
22,569
12,579
--
General and administrative
16,280
12,173
11,846
8,775
Depreciation and amortization
43,415
39,726
39,476
36,479
Total expenses
145,283
145,363
124,157
100,636
Operating Income
50,799
55,889
58,632
51,253
Interest expense
(35,390)
(35,466)
(33,034)
(31,075)
Interest and other investment income
696
514
399
1,446
Equity in earnings (loss) of unconsolidated
        
joint ventures
(200)
(4,757)
(846)
247
Minority interest in consolidated joint ventures
75
113
30
--
Gain on sale of investment in marketable securities
--
--
--
15,060
Gain on sale of investment in unconsolidated
        
joint ventures
10,831
--
--
--
Gain/(loss) on sale of land and other assets
(416)
--
--
--
Total other (expense) income
(24,404)
(39,596)
(33,451)
(14,322)
Income from continuing operations before minority
        
interest in Operating Partnership
26,395
16,293
25,181
36,931
Minority interest in Operating Partnership
(5,162)
(3,169)
(4,950)
(6,840)
Income from continuing operations
21,233
13,124
20,231
30,091
Discontinued operations (net of minority interest):
        
Income from discontinued operations
2,897
3,387
2,982
3,006
Realized gains (losses) and unrealized losses
        
  on disposition of rental property, net
43,794
--
3,921
--
Total discontinued operations, net
46,691
3,387
6,903
3,006
Net income
67,924
16,511
27,134
33,097
Preferred stock dividends
(500)
(500)
(500)
(500)
Net income available to common shareholders
$  67,424
$  16,011
$  26,634
$  32,597
         
Basic earnings per common share:
        
Income from continuing operations
$      0.33
$      0.20
$      0.32
$      0.48
Discontinued operations
0.75
0.06
0.11
0.04
Net income available to common shareholders
$      1.08
$      0.26
$      0.43
$      0.52
         
Diluted earnings per common share:
        
Income from continuing operations
$      0.32
$      0.20
$      0.32
$      0.48
Discontinued operations
0.75
0.06
0.11
0.04
Net income available to common shareholders
$      1.07
$      0.26
$      0.43
$      0.52
         
Dividends declared per common share
$      0.64
$      0.64
$      0.63
$      0.63



 
108
 


                     
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2007
(dollars in thousands)
                     
                 
SCHEDULE III
                     
             
Gross Amount at Which
  
           
Costs
Carried at Close of
  
       
Initial Costs
                   Capitalized
Period (a)
  
 
Year
  
Related
  
Building and
Subsequent
  
Building and
  
Accumulated
Property Location (b)
Built
Acquired
Encumbrances
Land
Improvements
to Acquisition
Land
Improvements
Total
Depreciation (c)
                     
NEW JERSEY
                    
Bergen County
                    
Fair Lawn
                    
17-17 Rte 208 North (O)
1987
1995
--
3,067
19,415
2,628
3,067
22,043
25,110
8,075
Fort Lee
                    
One Bridge Plaza (O)
1981
1996
--
2,439
24,462
4,876
2,439
29,338
31,777
7,591
2115 Linwood Avenue (O)
1981
1998
--
474
4,419
3,772
474
8,191
8,665
1,767
Little Ferry
                    
200 Riser Road (O)
1974
1997
--
3,888
15,551
575
3,888
16,126
20,014
4,209
Montvale
                    
95 Chestnut Ridge Road (O)
1975
1997
--
1,227
4,907
718
1,227
5,625
6,852
1,664
135 Chestnut Ridge Road (O)
1981
1997
--
2,587
10,350
2,305
2,588
12,654
15,242
3,901
Paramus
                    
15 East Midland Avenue (O)
1988
1997
20,600
10,375
41,497
520
10,374
42,018
52,392
10,439
461 From Road (O)
1988
1997
--
13,194
52,778
264
13,194
53,042
66,236
13,340
650 From Road (O)
1978
1997
25,600
10,487
41,949
6,378
10,487
48,327
58,814
13,687
140 East Ridgewood
                    
  Avenue (O)
1981
1997
16,100
7,932
31,463
4,619
7,932
36,082
44,014
9,141
61 South Paramus Avenue (O)
1985
1997
20,800
9,005
36,018
6,245
9,005
42,263
51,268
11,005
Ridgefield Park
                    
105 Challenger Road (O)
--
2006
18,968
4,714
29,768
--
4,714
29,768
34,482
1,764
Rochelle Park
                    
120 Passaic Street (O)
1972
1997
--
1,354
5,415
102
1,357
5,514
6,871
1,402
365 West Passaic Street (O)
1976
1997
12,250
4,148
16,592
3,472
4,148
20,064
24,212
5,463
395 West Passaic Street (O)
1979
2006
12,596
2,550
17,131
394
2,550
17,525
20,075
970
Upper Saddle River
    
--
              
1 Lake Street (O)
1994
1997
35,550
13,952
55,812
51
13,953
55,862
69,815
14,023
10 Mountainview Road (O)
1986
1998
--
4,240
20,485
2,522
4,240
23,007
27,247
5,827
Woodcliff Lake
                    
400 Chestnut Ridge Road (O)
1982
1997
--
4,201
16,802
5,080
4,201
21,882
26,083
5,943
470 Chestnut Ridge Road (O)
1987
1997
--
2,346
9,385
1,213
2,346
10,598
12,944
2,364
530 Chestnut Ridge Road (O)
1986
1997
--
1,860
7,441
3
1,860
7,444
9,304
1,869
300 Tice Boulevard (O)
1991
1996
--
5,424
29,688
3,116
5,424
32,804
38,228
9,821
50 Tice Boulevard (O)
1984
1994
19,100
4,500
--
25,739
4,500
25,739
30,239
14,455
                     

 
109
 

                     
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2007
(dollars in thousands)
                     
                 
SCHEDULE III
                     
             
Gross Amount at Which
  
           
Costs
Carried at Close of
  
       
Initial Costs
                  Capitalized
Period (a)
  
 
Year
  
Related
  
Building and
Subsequent
  
Building and
  
Accumulated
Property Location (b)
Built
Acquired
Encumbrances
Land
Improvements
to Acquisition
Land
Improvements
Total
Depreciation (c)
                     
Burlington County
                    
Burlington
                    
3 Terri Lane (F)
1991
1998
--
652
3,433
1,744
658
5,171
5,829
1,538
5 Terri Lane (F)
1992
1998
--
564
3,792
2,146
569
5,933
6,502
1,948
Moorestown
                    
2 Commerce Drive (F)
1986
1999
--
723
2,893
471
723
3,364
4,087
667
101 Commerce Drive (F)
1988
1998
--
422
3,528
437
426
3,961
4,387
1,009
102 Commerce Drive (F)
1987
1999
--
389
1,554
321
389
1,875
2,264
419
201 Commerce Drive (F)
1986
1998
--
254
1,694
502
258
2,192
2,450
664
202 Commerce Drive (F)
1988
1999
--
490
1,963
455
490
2,418
2,908
600
1 Executive Drive (F)
1989
1998
--
226
1,453
418
228
1,869
2,097
577
2 Executive Drive (F)
1988
2000
--
801
3,206
905
801
4,111
4,912
942
101 Executive Drive (F)
1990
1998
--
241
2,262
557
244
2,816
3,060
744
102 Executive Drive (F)
1990
1998
--
353
3,607
217
357
3,820
4,177
1,027
225 Executive Drive (F)
1990
1998
--
323
2,477
482
326
2,956
3,282
823
97 Foster Road (F)
1982
1998
--
208
1,382
310
211
1,689
1,900
450
1507 Lancer Drive (F)
1995
1998
--
119
1,106
51
120
1,156
1,276
299
840 North Lenola Road (F)
1995
1998
--
329
2,366
527
333
2,889
3,222
879
844 North Lenola Road (F)
1995
1998
--
239
1,714
260
241
1,972
2,213
602
915 North Lenola Road (F)
1998
2000
--
508
2,034
285
508
2,319
2,827
621
1245 North Church Street (F)
1998
2001
--
691
2,810
17
691
2,827
3,518
477
1247 North Church Street (F)
1998
2001
--
805
3,269
205
805
3,474
4,279
602
1256 North Church (F)
1984
1998
--
354
3,098
532
357
3,627
3,984
1,158
224 Strawbridge Drive (O)
1984
1997
--
766
4,335
3,846
767
8,180
8,947
2,989
228 Strawbridge Drive (O)
1984
1997
--
766
4,334
2,208
767
6,541
7,308
1,855
232 Strawbridge Drive (O)
1986
2004
--
1,521
7,076
1,935
1,521
9,011
10,532
891
2 Twosome Drive (F)
2000
2001
--
701
2,807
18
701
2,825
3,526
471
30 Twosome Drive (F)
1997
1998
--
234
1,954
424
236
2,376
2,612
574
31 Twosome Drive (F)
1998
2001
--
815
3,276
102
815
3,378
4,193
588
40 Twosome Drive (F)
1996
1998
--
297
2,393
274
301
2,663
2,964
784
41 Twosome Drive (F)
1998
2001
--
605
2,459
43
605
2,502
3,107
435
50 Twosome Drive (F)
1997
1998
--
301
2,330
120
304
2,447
2,751
680
West Deptford
                    
1451 Metropolitan Drive (F)
1996
1998
--
203
1,189
30
206
1,216
1,422
327
                     
Essex County
                    
Millburn
                    
150 J.F. Kennedy Parkway (O)
1980
1997
--
12,606
50,425
8,620
12,606
59,045
71,651
15,958
                     

 
110
 

                     
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2007
(dollars in thousands)
                     
                 
SCHEDULE III
                     
             
Gross Amount at Which
  
           
Costs
Carried at Close of
  
       
Initial Costs
                   Capitalized
Period (a)
  
 
Year
  
Related
  
Building and
Subsequent
  
Building and
  
Accumulated
Property Location (b)
Built
Acquired
Encumbrances
Land
Improvements
to Acquisition
Land
Improvements
Total
Depreciation (c)
                     
Roseland
                    
101 Eisenhower Parkway (O)
1980
1994
--
228
--
15,969
228
15,969
16,197
10,288
103 Eisenhower Parkway (O)
1985
1994
--
--
--
14,971
2,300
12,671
14,971
7,353
105 Eisenhower Parkway (O)
2001
2001
--
4,430
42,898
2,363
--
49,691
49,691
10,701
                     
Hudson County
                    
Jersey City
                    
Harborside Financial Center
                    
  Plaza 1 (O)
1983
1996
--
3,923
51,013
25,709
3,923
76,722
80,645
15,176
Harborside Financial Center
                    
  Plaza 2 (O)
1990
1996
--
17,655
101,546
16,663
15,057
120,807
135,864
34,410
Harborside Financial Center
                    
  Plaza 3 (O)
1990
1996
--
17,655
101,878
16,332
15,058
120,807
135,865
34,411
Harborside Financial Center
                    
  Plaza 4A (O)
2000
2000
--
1,244
56,144
8,722
1,244
64,866
66,110
13,574
Harborside Financial Center
                    
  Plaza 5 (O)
2002
2002
--
6,218
170,682
55,712
5,705
226,907
232,612
34,175
101 Hudson Street (O)
1992
2004
--
45,530
271,376
4,422
45,530
275,798
321,328
27,024
                     
Mercer County
                    
Hamilton Township
                    
3 AAA Drive (O)
1981
2007
--
242
3,218
346
242
3,564
3,806
54
100 Horizon Drive (F)
1989
1995
--
205
1,676
83
172
1,792
1,964
554
200 Horizon Drive (F)
1991
1995
--
205
3,027
213
205
3,240
3,445
1,060
300 Horizon Drive (F)
1989
1995
--
379
4,355
1,104
379
5,459
5,838
1,834
500 Horizon Drive (F)
1990
1995
--
379
3,395
641
344
4,071
4,415
1,353
600 Horizon Drive (F)
2002
2002
--
--
7,549
651
685
7,515
8,200
955
700 Horizon Drive (O)
2007
2007
--
490
43
16,990
1,355
16,168
17,523
238
2 South Gold Drive (O)
1974
2007
--
476
3,487
25
476
3,512
3,988
58
Princeton
                    
103 Carnegie Center (O)
1984
1996
--
2,566
7,868
2,025
2,566
9,893
12,459
3,152
100 Overlook Center (O)
1988
1997
--
2,378
21,754
4,468
2,378
26,222
28,600
7,108
5 Vaughn Drive (O)
1987
1995
--
657
9,800
1,732
657
11,532
12,189
4,181
                     
Middlesex County
                    
East Brunswick
                    
377 Summerhill Road (O)
1977
1997
--
649
2,594
374
649
2,968
3,617
751
Edison
                    
343 Thornall Street (O)
1991
2006
--
6,027
39,101
4,620
6,027
43,721
49,748
2,212
Piscataway
                    
30 Knightsbridge Road,
                    
  Building 3 (O)
1977
2004
--
1,030
7,269
316
1,034
7,581
8,615
657
30 Knightsbridge Road,
                    
  Building 4 (O)
1977
2004
--
1,433
10,121
344
1,429
10,469
11,898
908
                     

 
111
 

                     
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2007
(dollars in thousands)
                     
                 
SCHEDULE III
                     
             
Gross Amount at Which
  
           
Costs
Carried at Close of
  
       
Initial Costs
                   Capitalized
Period (a)
  
 
Year
  
Related
  
Building and
Subsequent
  
Building and
  
Accumulated
Property Location (b)
Built
Acquired
Encumbrances
Land
Improvements
to Acquisition
Land
Improvements
Total
Depreciation (c)
                     
30 Knightsbridge Road,
                    
  Building 5 (O)
1977
2004
--
2,979
21,035
6,898
2,979
27,933
30,912
2,543
30 Knightsbridge Road,
                    
  Building 6 (O)
1977
2004
--
448
3,161
4,469
448
7,630
8,078
426
Plainsboro
                    
500 College Road East (O)
1984
1998
--
614
20,626
1,514
614
22,140
22,754
5,482
South Brunswick
                    
3 Independence Way (O)
1983
1997
--
1,997
11,391
1,307
1,997
12,698
14,695
3,379
Woodbridge
                    
581 Main Street (O)
1991
1997
--
3,237
12,949
24,217
8,115
32,288
40,403
7,446
                     
Monmouth County
                    
Middletown
                    
23 Main Street (O)
1977
2005
32,968
4,336
19,544
8,903
4,336
28,447
32,783
2,739
2 Paragon Way (O)
1989
2005
--
999
4,619
763
999
5,382
6,381
617
3 Paragon Way (O)
1991
2005
--
1,423
6,041
1,693
1,423
7,734
9,157
582
4 Paragon Way (O)
2002
2005
--
1,961
8,827
43
1,961
8,870
10,831
1,172
One River Center,
                    
  Building 1 (O)
1983
2004
--
3,070
17,414
2,104
2,451
20,137
22,588
2,235
One River Center,
                    
  Building 2 (O)
1983
2004
--
2,468
15,043
971
2,452
16,030
18,482
1,273
One River Center,
                    
  Building 3 (O)
1984
2004
--
4,051
24,790
4,358
4,627
28,572
33,199
2,273
100 Willowbrook Road (O)
1988
2005
--
1,264
5,573
772
1,264
6,345
7,609
576
Neptune
                    
3600 Route 66 (O)
1989
1995
--
1,098
18,146
1,462
1,098
19,608
20,706
5,728
Wall Township
                    
1305 Campus Parkway (O)
1988
1995
--
335
2,560
482
335
3,042
3,377
830
1325 Campus Parkway (F)
1988
1995
--
270
2,928
1,337
270
4,265
4,535
1,713
1340 Campus Parkway (F)
1992
1995
--
489
4,621
1,664
489
6,285
6,774
1,882
1345 Campus Parkway (F)
1995
1997
--
1,023
5,703
1,558
1,024
7,260
8,284
2,449
1350 Campus Parkway (O)
1990
1995
--
454
7,134
1,046
454
8,180
8,634
2,597
1433 Highway 34 (F)
1985
1995
--
889
4,321
1,040
889
5,361
6,250
1,587
1320 Wyckoff Avenue (F)
1986
1995
--
255
1,285
68
255
1,353
1,608
405
1324 Wyckoff Avenue (F)
1987
1995
--
230
1,439
246
230
1,685
1,915
500
                     

 
112
 

                     
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2007
(dollars in thousands)
                     
                 
SCHEDULE III
                     
             
Gross Amount at Which
  
           
Costs
Carried at Close of
  
       
Initial Costs
                   Capitalized
Period (a)
  
 
Year
  
Related
  
Building and
Subsequent
  
Building and
  
Accumulated
Property Location (b)
Built
Acquired
Encumbrances
Land
Improvements
to Acquisition
Land
Improvements
Total
Depreciation (c)
                     
Morris County
                    
Florham Park
                    
325 Columbia Parkway (O)
1987
1994
--
1,564
--
14,847
1,564
14,847
16,411
7,400
Morris Plains
                    
250 Johnson Road (O)
1977
1997
--
2,004
8,016
1,175
2,004
9,191
11,195
2,354
201 Littleton Road (O)
1979
1997
--
2,407
9,627
1,096
2,407
10,723
13,130
2,916
Morris Township
                    
412 Mt. Kemble Avenue (O)
1985
2004
--
4,360
33,167
5,884
4,360
39,051
43,411
3,286
Parsippany
                    
4 Campus Drive (O)
1983
2001
--
5,213
20,984
1,665
5,213
22,649
27,862
4,160
6 Campus Drive (O)
1983
2001
--
4,411
17,796
2,604
4,411
20,400
24,811
3,927
7 Campus Drive (O)
1982
1998
--
1,932
27,788
2,176
1,932
29,964
31,896
6,893
8 Campus Drive (O)
1987
1998
--
1,865
35,456
4,123
1,865
39,579
41,444
10,685
9 Campus Drive (O)
1983
2001
--
3,277
11,796
17,370
5,842
26,601
32,443
6,710
4 Century Drive (O)
1981
2004
--
1,787
9,575
1,067
1,787
10,642
12,429
974
5 Century Drive (O)
1981
2004
--
1,762
9,341
446
1,762
9,787
11,549
718
6 Century Drive (O)
1981
2004
--
1,289
6,848
2,596
1,289
9,444
10,733
946
2 Dryden Way (O)
1990
1998
--
778
420
110
778
530
1,308
116
4 Gatehall Drive (O)
1988
2000
--
8,452
33,929
3,810
8,452
37,739
46,191
7,630
2 Hilton Court (O)
1991
1998
--
1,971
32,007
3,069
1,971
35,076
37,047
9,201
1633 Littleton Road (O)
1978
2002
--
2,283
9,550
163
2,355
9,641
11,996
1,807
600 Parsippany Road (O)
1978
1994
--
1,257
5,594
3,128
1,257
8,722
9,979
2,954
1 Sylvan Way (O)
1989
1998
--
1,689
24,699
394
1,021
25,761
26,782
7,794
5 Sylvan Way (O)
1989
1998
--
1,160
25,214
2,250
1,161
27,463
28,624
7,037
7 Sylvan Way (O)
1987
1998
--
2,084
26,083
2,092
2,084
28,175
30,259
7,521
35 Waterview Boulevard (O)
1990
2006
20,104
5,133
28,059
605
5,133
28,664
33,797
1,762
5 Wood Hollow Road (O)
1979
2004
--
5,302
26,488
12,578
5,302
39,066
44,368
3,592
                     
Passaic County
                    
Clifton
                    
777 Passaic Avenue (O)
1983
1994
--
--
--
6,981
1,100
5,881
6,981
3,147
Totowa
                    
1 Center Court (F)
1999
1999
--
270
1,824
627
270
2,451
2,721
971
2 Center Court (F)
1998
1998
--
191
--
2,255
191
2,255
2,446
519
11 Commerce Way (F)
1989
1995
--
586
2,986
95
586
3,081
3,667
960
20 Commerce Way (F)
1992
1995
--
516
3,108
81
516
3,189
3,705
978
29 Commerce Way (F)
1990
1995
--
586
3,092
950
586
4,042
4,628
1,467
40 Commerce Way (F)
1987
1995
--
516
3,260
85
516
3,345
3,861
1,012
45 Commerce Way (F)
1992
1995
--
536
3,379
515
536
3,894
4,430
1,192
60 Commerce Way (F)
1988
1995
--
526
3,257
431
526
3,688
4,214
1,231
                     

 
113
 

                     
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2007
(dollars in thousands)
                     
                 
SCHEDULE III
                     
             
Gross Amount at Which
  
           
Costs
Carried at Close of
  
       
Initial Costs
                   Capitalized
Period (a)
  
 
Year
  
Related
  
Building and
Subsequent
  
Building and
  
Accumulated
Property Location (b)
Built
Acquired
Encumbrances
Land
Improvements
to Acquisition
Land
Improvements
Total
Depreciation (c)
                     
80 Commerce Way (F)
1996
1996
--
227
--
1,513
453
1,287
1,740
480
100 Commerce Way (F)
1996
1996
--
226
--
1,060
--
1,286
1,286
480
120 Commerce Way (F)
1994
1995
--
228
--
1,574
457
1,345
1,802
414
140 Commerce Way (F)
1994
1995
--
229
--
1,016
--
1,245
1,245
414
999 Riverview Drive (O)
1988
1995
--
476
6,024
626
476
6,650
7,126
2,143
                     
Somerset County
                    
Basking Ridge
                    
106 Allen Road (O)
2000
2000
--
3,853
14,465
3,806
4,093
18,031
22,124
5,407
222 Mt. Airy Road (O)
1986
1996
--
775
3,636
2,162
775
5,798
6,573
1,461
233 Mt. Airy Road (O)
1987
1996
--
1,034
5,033
1,646
1,034
6,679
7,713
2,384
Bridgewater
                    
721 Route 202/206 (O)
1989
1997
--
6,730
26,919
8,278
6,730
35,197
41,927
7,094
                     
Union County
                    
Clark
                    
100 Walnut Avenue (O)
1985
1994
--
--
--
16,750
1,822
14,928
16,750
8,494
Cranford
                    
6 Commerce Drive (O)
1973
1994
--
250
--
2,948
250
2,948
3,198
1,895
11 Commerce Drive (O)
1981
1994
--
470
--
5,749
470
5,749
6,219
3,559
12 Commerce Drive (O)
1967
1997
--
887
3,549
1,851
887
5,400
6,287
1,723
14 Commerce Drive (O)
1971
2003
--
1,283
6,344
49
1,283
6,393
7,676
683
20 Commerce Drive (O)
1990
1994
--
2,346
--
20,714
2,346
20,714
23,060
8,425
25 Commerce Drive (O)
1971
2002
--
1,520
6,186
320
1,520
6,506
8,026
1,651
65 Jackson Drive (O)
1984
1994
--
541
--
6,374
542
6,373
6,915
3,367
New Providence
                    
890 Mountain Road (O)
1977
1997
--
2,796
11,185
5,021
3,765
15,237
19,002
3,803
                     
NEW YORK
                    
New York County
                    
New York
                    
125 Broad Street (O)
1970
2007
  
50,191
207,002
7,309
50,191
214,311
264,502
4,135
                     
Rockland County
                    
Suffern
                    
400 Rella Boulevard (O)
1988
1995
--
1,090
13,412
3,019
1,090
16,431
17,521
5,836
                     
Westchester County
                    
Elmsford
                    
11 Clearbrook Road (F)
1974
1997
--
149
2,159
425
149
2,584
2,733
699
75 Clearbrook Road (F)
1990
1997
--
2,314
4,716
107
2,314
4,823
7,137
1,306
100 Clearbrook Road (O)
1975
1997
--
220
5,366
1,262
220
6,628
6,848
1,893
125 Clearbrook Road (F)
2002
2002
--
1,055
3,676
(51)
1,055
3,625
4,680
931
150 Clearbrook Road (F)
1975
1997
--
497
7,030
1,198
497
8,228
8,725
2,241
                     

 
114
 

                     
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2007
(dollars in thousands)
                     
                 
SCHEDULE III
                     
             
Gross Amount at Which
  
           
Costs
Carried at Close of
  
       
Initial Costs
                   Capitalized
Period (a)
  
 
Year
  
Related
  
Building and
Subsequent
  
Building and
  
Accumulated
Property Location (b)
Built
Acquired
Encumbrances
Land
Improvements
to Acquisition
Land
Improvements
Total
Depreciation (c)
                     
175 Clearbrook Road (F)
1973
1997
--
655
7,473
907
655
8,380
9,035
2,444
200 Clearbrook Road (F)
1974
1997
--
579
6,620
1,031
579
7,651
8,230
2,273
250 Clearbrook Road (F)
1973
1997
--
867
8,647
1,476
867
10,123
10,990
2,927
50 Executive Boulevard (F)
1969
1997
--
237
2,617
235
237
2,852
3,089
749
77 Executive Boulevard (F)
1977
1997
--
34
1,104
154
34
1,258
1,292
374
85 Executive Boulevard (F)
1968
1997
--
155
2,507
539
155
3,046
3,201
798
101 Executive Boulevard (O)
1971
1997
--
267
5,838
868
267
6,706
6,973
1,884
300 Executive Boulevard (F)
1970
1997
--
460
3,609
322
460
3,931
4,391
1,058
350 Executive Boulevard (F)
1970
1997
--
100
1,793
153
100
1,946
2,046
618
399 Executive Boulevard (F)
1962
1997
--
531
7,191
62
531
7,253
7,784
1,977
400 Executive Boulevard (F)
1970
1997
--
2,202
1,846
450
2,202
2,296
4,498
783
500 Executive Boulevard (F)
1970
1997
--
258
4,183
781
258
4,964
5,222
1,563
525 Executive Boulevard (F)
1972
1997
--
345
5,499
724
345
6,223
6,568
1,856
700 Executive Boulevard (L)
N/A
1997
--
970
--
--
970
--
970
--
3 Odell Plaza (O)
1984
2003
--
1,322
4,777
2,100
1,322
6,877
8,199
1,061
5 Skyline Drive (F)
1980
2001
--
2,219
8,916
1,555
2,219
10,471
12,690
2,157
6 Skyline Drive (F)
1980
2001
--
740
2,971
24
740
2,995
3,735
949
555 Taxter Road (O)
1986
2000
--
4,285
17,205
5,603
4,285
22,808
27,093
4,980
565 Taxter Road (O)
1988
2000
--
4,285
17,205
3,580
4,233
20,837
25,070
4,620
570 Taxter Road (O)
1972
1997
--
438
6,078
951
438
7,029
7,467
2,208
1 Warehouse Lane (I)
1957
1997
--
3
268
234
3
502
505
124
2 Warehouse Lane (I)
1957
1997
--
4
672
188
4
860
864
309
3 Warehouse Lane (I)
1957
1997
--
21
1,948
526
21
2,474
2,495
784
4 Warehouse Lane (I)
1957
1997
--
84
13,393
2,704
85
16,096
16,181
4,435
5 Warehouse Lane (I)
1957
1997
--
19
4,804
1,436
19
6,240
6,259
1,703
6 Warehouse Lane (I)
1982
1997
--
10
4,419
328
10
4,747
4,757
1,279
1 Westchester Plaza (F)
1967
1997
--
199
2,023
187
199
2,210
2,409
618
2 Westchester Plaza (F)
1968
1997
--
234
2,726
226
234
2,952
3,186
805
3 Westchester Plaza (F)
1969
1997
--
655
7,936
527
655
8,463
9,118
2,415
4 Westchester Plaza (F)
1969
1997
--
320
3,729
404
320
4,133
4,453
1,083
5 Westchester Plaza (F)
1969
1997
--
118
1,949
200
118
2,149
2,267
691
6 Westchester Plaza (F)
1968
1997
--
164
1,998
226
164
2,224
2,388
691
7 Westchester Plaza (F)
1972
1997
--
286
4,321
214
286
4,535
4,821
1,237
8 Westchester Plaza (F)
1971
1997
--
447
5,262
995
447
6,257
6,704
1,675
Hawthorne
 
                 
200 Saw Mill River Road (F)
1965
1997
--
353
3,353
487
353
3,840
4,193
1,105
1 Skyline Drive (O)
1980
1997
--
66
1,711
301
66
2,012
2,078
571
2 Skyline Drive (O)
1987
1997
--
109
3,128
471
109
3,599
3,708
1,154
4 Skyline Drive (F)
1987
1997
--
363
7,513
1,738
363
9,251
9,614
2,615
7 Skyline Drive (O)
1987
1998
--
330
13,013
1,440
330
14,453
14,783
3,706
                     

 
115
 

                     
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2007
(dollars in thousands)
                     
                 
SCHEDULE III
                     
             
Gross Amount at Which
  
           
Costs
Carried at Close of
  
       
Initial Costs
                  Capitalized
Period (a)
  
 
Year
  
Related
  
Building and
Subsequent
  
Building and
  
Accumulated
Property Location (b)
Built
Acquired
Encumbrances
Land
Improvements
to Acquisition
Land
Improvements
Total
Depreciation (c)
                     
8 Skyline Drive (F)
1985
1997
--
212
4,410
1,967
212
6,377
6,589
2,251
10 Skyline Drive (F)
1985
1997
--
134
2,799
605
134
3,404
3,538
830
11 Skyline Drive (F)
1989
1997
--
--
4,788
430
--
5,218
5,218
1,580
12 Skyline Drive (F)
1999
1999
--
1,562
3,254
1,142
1,320
4,638
5,958
1,536
14 Skyline Drive (L)
N/A
2002
--
964
  
16
980
--
980
--
15 Skyline Drive (F)
1989
1997
--
--
7,449
344
  
7,793
7,793
2,233
16 Skyline Drive (L)
N/A
2002
--
850
--
31
881
--
881
--
17 Skyline Drive (O)
1989
1997
--
--
7,269
776
--
8,045
8,045
2,051
19 Skyline Drive (O)
1982
1997
--
2,355
34,254
3,536
2,356
37,789
40,145
12,185
Tarrytown
 
                 
200 White Plains Road (O)
1982
1997
--
378
8,367
1,258
378
9,625
10,003
2,666
220 White Plains Road (O)
1984
1997
--
367
8,112
1,246
367
9,358
9,725
2,591
230 White Plains Road (R)
1984
1997
--
124
1,845
107
124
1,952
2,076
508
White Plains
 
                 
1 Barker Avenue (O)
1975
1997
--
208
9,629
1,145
207
10,775
10,982
3,074
3 Barker Avenue (O)
1983
1997
--
122
7,864
2,003
122
9,867
9,989
3,071
50 Main Street (O)
1985
1997
--
564
48,105
7,642
564
55,747
56,311
16,029
11 Martine Avenue (O)
1987
1997
--
127
26,833
4,896
127
31,729
31,856
9,740
1 Water Street (O)
1979
1997
--
211
5,382
1,177
211
6,559
6,770
1,906
Yonkers
 
                 
100 Corporate Boulevard (F)
1987
1997
--
602
9,910
870
602
10,780
11,382
3,152
200 Corporate Boulevard
                    
  South (F)
1990
1997
--
502
7,575
456
502
8,031
8,533
2,146
250 Corporate Boulevard
                    
  South (L)
N/A
2002
--
1,028
--
255
1,139
144
1,283
  
1 Enterprise Boulevard (L)
N/A
1997
--
1,379
--
1
1,380
--
1,380
--
1 Executive Boulevard (O)
1982
1997
--
1,104
11,904
2,021
1,105
13,924
15,029
4,055
2 Executive Plaza (R)
1986
1997
--
89
2,439
3
89
2,442
2,531
666
3 Executive Plaza (O)
1987
1997
--
385
6,256
1,728
385
7,984
8,369
2,753
4 Executive Plaza (F)
1986
1997
--
584
6,134
1,859
584
7,993
8,577
2,348
6 Executive Plaza (F)
1987
1997
--
546
7,246
384
546
7,630
8,176
2,119
1 Odell Plaza (F)
1980
1997
--
1,206
6,815
880
1,206
7,695
8,901
2,100
5 Odell Plaza (F)
1983
1997
--
331
2,988
270
331
3,258
3,589
902
7 Odell Plaza (F)
1984
1997
--
419
4,418
470
419
4,888
5,307
1,307
                     
PENNSYLVANIA
                    
Chester County
                    
Berwyn
                    
1000 Westlakes Drive (O)
1989
1997
--
619
9,016
570
619
9,586
10,205
2,768
1055 Westlakes Drive (O)
1990
1997
--
1,951
19,046
4,218
1,951
23,264
25,215
7,164
                     

 
116
 

                     
MACK-CALI REALTY CORPORATION
  
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
  
December 31, 2007
  
(dollars in thousands)
  
                       
                 
SCHEDULE III
  
                       
             
Gross Amount at Which
    
           
Costs
Carried at Close of
    
       
Initial Costs
                  Capitalized
Period (a)
    
 
Year
  
Related
  
Building and
Subsequent
  
Building and
  
Accumulated
  
Property Location (b)
Built
Acquired
Encumbrances
Land
Improvements
to Acquisition
Land
Improvements
Total
Depreciation (c)
  
                       
1205 Westlakes Drive (O)
1988
1997
--
1,323
20,098
2,643
1,323
22,741
24,064
6,275
  
1235 Westlakes Drive (O)
1986
1997
--
1,417
21,215
3,433
1,418
24,647
26,065
6,902
  
                       
Delaware County
                      
Lester
                      
100 Stevens Drive (O)
1986
1996
--
1,349
10,018
3,154
1,349
13,172
14,521
4,101
  
200 Stevens Drive (O)
1987
1996
--
1,644
20,186
4,748
1,644
24,934
26,578
7,752
  
300 Stevens Drive (O)
1992
1996
--
491
9,490
1,919
491
11,409
11,900
3,683
  
Media
                      
1400 Providence Rd,
                      
  Center I (O)
1986
1996
--
1,042
9,054
2,457
1,042
11,511
12,553
3,724
  
1400 Providence Rd,
                      
  Center II (O)
1990
1996
--
1,543
16,464
3,138
1,544
19,601
21,145
6,455
  
                       
Montgomery County
                      
Bala Cynwyd
                      
150 Monument Road (O)
1981
2004
--
2,845
14,780
3,352
2,845
18,132
20,977
1,455
  
Blue Bell
                      
4 Sentry Parkway (O)
1982
2003
--
1,749
7,721
189
1,749
7,910
9,659
854
  
16 Sentry Parkway (O)
1988
2002
--
3,377
13,511
1,344
3,377
14,855
18,232
3,138
  
18 Sentry Parkway (O)
1988
2002
--
3,515
14,062
1,544
3,515
15,606
19,121
3,172
  
King of Prussia
                      
2200 Renaissance Blvd (O)
1985
2002
22,034
5,347
21,453
2,696
5,347
24,149
29,496
5,709
  
Lower Providence
                      
1000 Madison Avenue (O)
1990
1997
--
1,713
12,559
2,539
1,714
15,097
16,811
3,887
  
Plymouth Meeting
                      
1150 Plymouth Meeting
                      
  Mall (O)
1970
1997
--
125
499
31,117
6,219
25,522
31,741
6,973
  
Five Sentry Parkway East (O)
1984
1996
--
642
7,992
1,306
642
9,298
9,940
2,419
  
Five Sentry Parkway West (O)
1984
1996
--
268
3,334
543
268
3,877
4,145
957
  
                       
CONNETICUT
                      
Fairfield County
                      
Norwalk
                      
40 Richards Avenue (O)
1985
1998
--
1,087
18,399
3,363
1,087
21,762
22,849
5,213
  
Stamford
                      
1266 East Main Street (O)
1984
2002
17,575
6,638
26,567
3,565
6,638
30,132
36,770
5,499
  
                       

 
117
 

                     
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2007
(dollars in thousands)
                     
                 
SCHEDULE III
                     
             
Gross Amount at Which
  
           
Costs
Carried at Close of
  
       
Initial Costs
                   Capitalized
Period (a)
  
 
Year
  
Related
  
Building and
Subsequent
  
Building and
  
Accumulated
Property Location (b)
Built
Acquired
Encumbrances
Land
Improvements
to Acquisition
Land
Improvements
Total
Depreciation (c)
                     
419 West Avenue (F)
1986
1997
--
4,538
9,246
1,241
4,538
10,487
15,025
3,131
500 West Avenue (F)
1988
1997
--
415
1,679
165
415
1,844
2,259
564
550 West Avenue (F)
1990
1997
--
1,975
3,856
59
1,975
3,915
5,890
1,057
600 West Avenue (F)
1999
1999
--
2,305
2,863
839
2,305
3,702
6,007
761
650 West Avenue (F)
1998
1998
--
1,328
--
4,260
1,328
4,260
5,588
1,690
                     
DISTRICT OF COLUMBIA
                    
Washington,
                    
1201 Connecticut Avenue,
                    
  NW (O)
1940
1999
--
14,228
18,571
3,153
14,228
21,724
35,952
4,773
1400 L Street, NW (O)
1987
1998
--
13,054
27,423
6,441
13,054
33,864
46,918
7,570
                     
MARYLAND
                    
Prince George’s County
                    
Greenbelt
                    
9200 Edmonston Road (O)
1973/03
2006
5,096
1,547
4,131
51
1,547
4,182
5,729
327
6301 Ivy Lane (O)
1979/95
2006
6,655
5,168
14,706
360
5,168
15,066
20,234
1,130
6303 Ivy Lane (O)
1980/03
2006
--
5,115
13,860
155
5,115
14,015
19,130
1,016
6305 Ivy Lane (O)
1982/95
2006
7,098
5,615
14,420
389
5,615
14,809
20,424
1,163
6404 Ivy Lane (O)
1987
2006
13,029
7,578
20,785
462
7,578
21,247
28,825
1,860
6406 Ivy Lane (O)
1991
2006
--
7,514
21,152
145
7,514
21,297
28,811
1,349
6411 Ivy Lane (O)
1984/05
2006
--
6,867
17,470
337
6,867
17,807
24,674
1,393
Lanham
                    
4200 Parliament Place (O)
1989
1998
--
2,114
13,546
626
1,393
14,893
16,286
4,227
                     
                     
Projects Under Development
                    
  and Developable Land
    
--
122,796
17,949
--
122,796
17,949
140,745
297
                     
Furniture, Fixtures
                    
  and Equipment
    
--
--
--
8,956
--
8,956
8,956
6,810
                     
TOTALS
    
306,123
716,382
3,436,947
732,100
726,253
4,159,176
4,885,429
907,013
                     

(a)
The aggregate cost for federal income tax purposes at December 31, 2007 was approximately $3.0 billion.

(b)   Legend of Property Codes:
(O)=Office Property                                           (R)=Stand-alone Retail Property
(F)=Office/Flex Property                                           (L)=Land Lease
(I)=Industrial/Warehouse Property

(c)   Depreciation of the buildings and improvements are calculated over lives ranging from the life of the lease to 40 years.

 
118
 

MACK-CALI REALTY CORPORATION
NOTE TO SCHEDULE III



Changes in rental properties and accumulated depreciation for the periods ended December 31, 2007, 2006 and 2005 are as follows: (dollars in thousands)

 
2007
2006
2005
Rental Properties
      
Balance at beginning of year
$4,573,587
$4,491,752
$4,160,959
Additions
372,793
405,883
485,680
Properties sold
(47,394)
(313,345)
(120,755)
Retirements/disposals
     (19,488)
     (10,703)
     (34,132)
Balance at end of year
$4,879,498
$4,573,587
$4,491,752
       
       
Accumulated Depreciation
  
 
 
Balance at beginning of year
$    796,793
$   722,980
$   641,626
Depreciation expense
140,240
131,848
128,814
Properties sold
(11,224)
(53,037)
(16,691)
Retirements/disposals
     (18,796)
       (4,998)
     (30,769)
Balance at end of year
$   907,013
$   796,793
$   722,980

 
119
 

MACK-CALI REALTY CORPORATION

Signatures


Pursuant to the requirements of Section 13 or 15(d) 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: February 13, 2008                                                                       /s/ Barry Lefkowitz                                                                
Barry Lefkowitz
Executive Vice President and
  Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
 
 
 
Name
Title
Date
     
/s/ William L. Mack
Chairman of the Board
February 13, 2008
William L. Mack
    
     
/s/ Mitchell E. Hersh
President and Chief Executive
February 13, 2008
Mitchell E. Hersh
Officer and Director
  
     
/s/ Barry Lefkowitz
Executive Vice President and
February 13, 2008
Barry Lefkowitz
Chief Financial Officer
  
     
/s/ Martin S. Berger
Director
February 13, 2008
Martin S. Berger    
     
/s/ Alan S. Bernikow
Director
February 13, 2008
Alan S. Bernikow
    
     
/s/ John R. Cali
Director
February 13, 2008
John R. Cali
    
     
/s/ Kenneth M. Duberstein
Director
February 13, 2008
Kenneth M. Duberstein
    
     
 
 
 
 
120
 

 
Name
Title
Date
     
/s/ Nathan Gantcher
Director
February 13, 2008
Nathan Gantcher
    
   
/s/ David S. Mack
Director
February 13, 2008
David S. Mack
    
   
/s/ Alan G. Philibosian
Director
February 13, 2008
Alan G. Philibosian
    
   
/s/ Irvin D. Reid
Director
February 13, 2008
Irvin D. Reid
    
   
/s/ Vincent Tese
Director
February 13, 2008
Vincent Tese
    
   
/s/ Roy J. Zuckerberg
Director
February 13, 2008
Roy J. Zuckerberg
    
 
 
121
 

MACK-CALI REALTY CORPORATION

EXHIBIT INDEX


Exhibit
Number
  
Exhibit Title
     
3.1
  
Restated Charter of Mack-Cali Realty Corporation dated June 11, 2001 (filed as Exhibit 3.1 to the Company’s Form 10-Q dated June 30, 2001 and 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
  
Amendment No. 1 to the Amended and Restated Bylaws of Mack-Cali Realty Corporation dated March 4, 2003, (filed as Exhibit 3.3 to the Company’s Form 10-Q dated March 31, 2003 and incorporated herein by reference).
     
3.4
  
Amendment No. 2 to the Mack-Cali Realty Corporation Amended and Restated Bylaws dated May 24, 2006 (filed as Exhibit 3.1 to the Company’s Form 8-K dated May 24, 2006 and incorporated herein by reference).
     
3.5
  
Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated December 11, 1997 (filed as Exhibit 10.110 to the Company’s Form 8-K dated December 11, 1997 and incorporated herein by reference).
     
3.6
  
Amendment No. 1 to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated August 21, 1998 (filed as Exhibit 3.1 to the Company’s and the Operating Partnership’s Registration Statement on Form S-3, Registration No. 333-57103, and incorporated herein by reference).
     
3.7
  
Second Amendment to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated July 6, 1999 (filed as Exhibit 10.1 to the Company’s Form 8-K dated July 6, 1999 and incorporated herein by reference).
     
3.8
  
Third Amendment to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated September 30, 2003 (filed as Exhibit 3.7 to the Company’s Form 10-Q dated September 30, 2003 and incorporated herein by reference).
     
3.9
  
Certificate of Designation of Series B Preferred Operating Partnership Units of Limited Partnership Interest of Mack-Cali Realty, L.P. (filed as Exhibit 10.101 to the Company’s Form 8-K dated December 11, 1997 and incorporated herein by reference).
     
3.10
  
Articles Supplementary for the 8% Series C Cumulative Redeemable Perpetual Preferred Stock dated March 11, 2003 (filed as Exhibit 3.1 to the Company’s Form 8-K dated March 14, 2003 and incorporated herein by reference).
     
3.11
  
Certificate of Designation for the 8% Series C Cumulative Redeemable Perpetual Preferred Operating Partnership Units dated March 14, 2003 (filed as Exhibit 3.2 to the Company’s Form 8-K dated March 14, 2003 and incorporated herein by reference).
     
 


 
122
 

 
Exhibit
Number
  
Exhibit Title
     
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 and incorporated herein by reference).
     
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 Operating Partnership’s Form 8-K dated March 16, 1999 and incorporated herein by reference).
     
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 Operating Partnership’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 Operating Partnership’s Form 10-Q dated June 30, 1999 and incorporated herein by reference).
     
4.6
  
Supplemental Indenture No. 3 dated as of December 21, 2000, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated December 21, 2000 and incorporated herein by reference).
     
4.7
  
Supplemental Indenture No. 4 dated as of January 29, 2001, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated January 29, 2001 and incorporated herein by reference).
     
4.8
  
Supplemental Indenture No. 5 dated as of December 20, 2002, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership’s Form 8-K dated December 20, 2002 and incorporated herein by reference).
     
4.9
  
Supplemental Indenture No. 6 dated as of March 14, 2003, by and between 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 14, 2003 and incorporated herein by reference).
     
4.10
  
Supplemental Indenture No. 7 dated as of June 12, 2003, by and between 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 June 12, 2003 and incorporated herein by reference).
     
4.11
  
Supplemental Indenture No. 8 dated as of February 9, 2004, by and between 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 February 9, 2004 and incorporated herein by reference).
     
 

 
123
 


Exhibit
Number
  
Exhibit Title
     
4.12
  
Supplemental Indenture No. 9 dated as of March 22, 2004, by and between 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 22, 2004 and incorporated herein by reference).
     
4.13
  
Supplemental Indenture No. 10 dated as of January 25, 2005, by and between 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 January 25, 2005 and incorporated herein by reference).
     
4.14
  
Supplemental Indenture No. 11 dated as of April 15, 2005, by and between 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 April 15, 2005 and incorporated herein by reference).
     
4.15
  
Supplemental Indenture No. 12 dated as of November 30, 2005, by and between 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 November 30, 2005 and incorporated herein by reference).
     
4.16
  
Supplemental Indenture No. 13 dated as of January 24, 2006, by and between 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 January 18, 2006 and incorporated herein by reference).
     
4.17
  
Deposit Agreement dated March 14, 2003 by and among Mack-Cali Realty Corporation, EquiServe Trust Company, N.A., and the holders from time to time of the Depositary Receipts described therein (filed as Exhibit 4.1 to the Company’s Form 8-K dated March 14, 2003 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 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).
     
10.3
  
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).
     
10.4
  
Employment Agreement dated as of December 5, 2000 between Michael Grossman and Mack-Cali Realty Corporation (filed as Exhibit 10.5 to the Company’s Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).
     
10.5
  
Employment Agreement dated as of May 9, 2006 by and between Mark Yeager and Mack-Cali Realty Corporation (filed as Exhibit 10.15 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     

 
124
 


Exhibit
Number
  
Exhibit Title
     
10.6
  
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).
     
10.7
  
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).
     
10.8
  
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).
     
10.9
  
Restricted Share Award Agreement dated as of March 12, 2001 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.10 to the Company’s Form 10-Q dated March 31, 2001 and incorporated herein by reference).
     
10.10
  
Restricted Share Award Agreement dated as of March 12, 2001 between Michael Grossman and Mack-Cali Realty Corporation (filed as Exhibit 10.11 to the Company’s Form 10-Q dated March 31, 2001 and incorporated herein by reference).
     
10.11
  
Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.1 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.12
  
Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.13
  
First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.3 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.14
  
Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.7 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.15
  
Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.8 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.16
  
First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.9 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     


 
125
 


Exhibit
Number
  
Exhibit Title
     
10.17
  
Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.10 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.18
  
Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.11 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.19
  
First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.12 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.20
  
First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated March 12, 2001 between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.13 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.21
  
Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.14 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.22
  
Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.15 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.23
  
Restricted Share Award Agreement dated December 6, 1999 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.16 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.24
  
First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated December 6, 1999 between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.17 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.25
  
First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated March 12, 2001 between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.18 to the Company’s Form 8-K dated January 2, 2003 and incorporated herein by reference).
     
10.26
  
Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.1 to the Company’s Form 8-K dated December 2, 2003 and incorporated herein by reference).
     


 
126
 


Exhibit
Number
  
Exhibit Title
     
10.27
  
Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Company’s Form 8-K dated December 2, 2003 and incorporated herein by reference).
     
10.28
  
Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.5 to the Company’s Form 8-K dated December 2, 2003 and incorporated herein by reference).
     
10.29
  
Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.6 to the Company’s Form 8-K dated December 2, 2003 and incorporated herein by reference).
     
10.30
  
Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.7 to the Company’s Form 8-K dated December 2, 2003 and incorporated herein by reference).
     
10.31
  
Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.8 to the Company’s Form 8-K dated December 2, 2003 and incorporated herein by reference).
     
10.32
  
Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Michael Grossman (filed as Exhibit 10.9 to the Company’s Form 8-K dated December 2, 2003 and incorporated herein by reference).
     
10.33
  
Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Michael Grossman (filed as Exhibit 10.10 to the Company’s Form 8-K dated December 2, 2003 and incorporated herein by reference).
     
10.34
  
Restricted Share Award Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Company’s Form 8-K dated December 7, 2004 and incorporated herein by reference).
     
10.35
  
Tax Gross Up Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.3 to the Company’s Form 8-K dated December 7, 2004 and incorporated herein by reference).
     
10.36
  
Restricted Share Award Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.4 to the Company’s Form 8-K dated December 7, 2004 and incorporated herein by reference).
     
10.37
  
Tax Gross Up Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.5 to the Company’s Form 8-K dated December 7, 2004 and incorporated herein by reference).
     


 
127
 


Exhibit
Number
  
Exhibit Title
     
10.38
  
Restricted Share Award Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.6 to the Company’s Form 8-K dated December 7, 2004 and incorporated herein by reference).
     
10.39
  
Tax Gross Up Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.7 to the Company’s Form 8-K dated December 7, 2004 and incorporated herein by reference).
     
10.40
  
Restricted Share Award Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.8 to the Company’s Form 8-K dated December 7, 2004 and incorporated herein by reference).
     
10.41
  
Tax Gross Up Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.9 to the Company’s Form 8-K dated December 7, 2004 and incorporated herein by reference).
     
10.42
  
Restricted Share Award Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Company’s Form 8-K dated December 6, 2005 and incorporated herein by reference).
     
10.43
  
Tax Gross Up Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.3 to the Company’s Form 8-K dated December 6, 2005 and incorporated herein by reference).
     
10.44
  
Restricted Share Award Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.4 to the Company’s Form 8-K dated December 6, 2005 and incorporated herein by reference).
     
10.45
  
Tax Gross Up Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.5 to the Company’s Form 8-K dated December 6, 2005 and incorporated herein by reference).
     
10.46
  
Restricted Share Award Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.6 to the Company’s Form 8-K dated December 6, 2005 and incorporated herein by reference).
     
10.47
  
Tax Gross Up Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.7 to the Company’s Form 8-K dated December 6, 2005 and incorporated herein by reference).
     
10.48
  
Restricted Share Award Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.8 to the Company’s Form 8-K dated December 6, 2005 and incorporated herein by reference).

 
128
 


Exhibit
Number
  
Exhibit Title
     
10.49
  
Tax Gross Up Agreement effective December 6, 2005 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.9 to the Company’s Form 8-K dated December 6, 2005 and incorporated herein by reference).
     
10.50
  
Restricted Share Award Agreement by and between Mack-Cali Realty Corporation and Mark Yeager (filed as Exhibit 10.16 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.51
  
Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.1 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
 
     
10.52
  
Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
 
     
10.53
  
Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.3 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.54
  
Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.4 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.55
  
Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.5 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.56
  
Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.6 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.57
  
Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.7 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.58
  
Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.8 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).

 
129
 


Exhibit
Number
  
Exhibit Title
     
10.59
  
Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.9 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.60
  
Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.10 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.61
  
Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.11 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.62
  
Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.12 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.63
  
Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.13 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.64
  
Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.14 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.65
  
Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.15 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.66
  
Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.16 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.67
  
Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mark Yeager (filed as Exhibit 10.17 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.68
  
Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mark Yeager (filed as Exhibit 10.18 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.69
  
Restricted Share Award Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mark Yeager (filed as Exhibit 10.19 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     

 
130
 


Exhibit
Number
  
Exhibit Title
     
10.70
  
Tax Gross Up Agreement effective December 5, 2006 by and between Mack-Cali Realty Corporation and Mark Yeager (filed as Exhibit 10.20 to the Company’s Form 8-K dated December 5, 2006 and incorporated herein by reference).
     
10.71
  
Form of Multi-Year Restricted Share Award Agreement (filed as Exhibit 10.1 to the Company’s Form 8-K dated September 12, 2007 and incorporated herein by reference).
     
10.72
  
Form of Tax Gross-Up Agreement (filed as Exhibit 10.2 to the Company’s Form 8-K dated September 12, 2007 and incorporated herein by reference).
     
10.73
  
Form of Restricted Share Award Agreement effective December 4, 2007 by and between Mack-Cali Realty Corporation and each of Mitchell E. Hersh, Barry Lefkowitz, Michael Grossman, Mark Yeager and Roger W. Thomas (filed as Exhibit 10.1 to the Company’s Form 8-K dated December 4, 2007 and incorporated herein by reference).
     
10.74
  
Form of Tax Gross-Up Agreement effective December 4, 2007 by and between Mack-Cali Realty Corporation and each of Mitchell E. Hersh, Barry Lefkowitz, Michael Grossman, Mark Yeager and Roger W. Thomas (filed as Exhibit 10.2 to the Company’s Form 8-K dated December 4, 2007 and incorporated herein by reference).
     
10.75
  
Amended and Restated Revolving Credit Agreement dated as of September 27, 2002, among Mack-Cali Realty, L.P. and JPMorgan Chase Bank, Fleet National Bank and Other Lenders Which May Become Parties Thereto with JPMorgan Chase Bank, as administrative agent, swing lender and fronting bank, Fleet National Bank and Commerzbank AG, New York and Grand Cayman branches as syndication agents, Bank of America, N.A. and Wells Fargo Bank, National Association, as documentation agents, and J.P. Morgan Securities Inc. and Fleet Securities, Inc, as arrangers (filed as Exhibit 10.1 to the Company’s Form 8-K dated September 27, 2002 and incorporated herein by reference).
     
10.76
  
Second Amended and Restated Revolving Credit Agreement among Mack-Cali Realty, L.P., JPMorgan Chase Bank, N.A., Bank of America, N.A., and other lending institutions that are or may become a party to the Second Amended and Restated Revolving Credit Agreement dated as of November 23, 2004 (filed as Exhibit 10.1 to the Company’s Form 8-K dated November 23, 2004 and incorporated herein by reference).
     
10.77
  
Extension and Modification Agreement dated as of September 16, 2005 by and among Mack-Cali Realty, L.P., JPMorgan Chase Bank, N.A., as administrative agent, and the several Lenders Party thereto (filed as Exhibit 10.1 to the Company’s Form 8-K dated September 16, 2005 and incorporated herein by reference).
     
10.78
  
Second Modification Agreement dated as of July 14, 2006 by and among Mack-Cali Realty, L.P., JPMorgan Chase Bank, N.A., as administrative agent, and the several Lenders party thereto (filed as Exhibit 10.1 to the Company’s Form 8-K dated July 14, 2006 and incorporated herein by reference).
     
10.79
  
Extension and Third Modification Agreement dated as of June 22, 2007 by and among Mack-Cali Realty, L.P., JPMorgan Chase Bank, N.A., as administrative agent, and the several Lenders party thereto. (filed as Exhibit 10.1 to the Company’s Form 8-K dated June 22, 2007 and incorporated herein by reference).
     

 
131
 


Exhibit
Number
  
Exhibit Title
     
10.80
  
Fourth Modification Agreement dated as of September 21, 2007 by and among Mack Cali Realty, L.P., JPMorgan Chase Bank, N.A., as administrative agent and the several Lenders party thereto (filed as Exhibit 10.1 to the Company’s Form 8-K dated September 21, 2007 and incorporated herein by reference).
     
10.81
  
Amended and Restated Master Loan Agreement dated as of November 12, 2004 among Mack-Cali Realty, L.P., and Affiliates of Mack-Cali Realty Corporation and Mack-Cali Realty, L.P., as Borrowers, Mack-Cali Realty Corporation and Mack-Cali Realty L.P., as Guarantors and The Prudential Insurance Company of America, as Lender (filed as Exhibit 10.1 to the Company’s Form 8-K dated November 12, 2004 and incorporated herein by reference).
     
10.82
  
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).
     
10.83
  
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).
     
10.84
  
Employee Stock Option Plan of Mack-Cali Realty Corporation (filed as Exhibit 10.1 to the Company’s Post-Effective Amendment No. 1 to Form S-8, Registration No. 333-44443, and incorporated herein by reference).
     
10.85
  
Director Stock Option Plan of Mack-Cali Realty Corporation (filed as Exhibit 10.2 to the Company’s Post-Effective Amendment No. 1 to Form S-8, Registration No. 333-44443, and incorporated herein by reference).
     
10.86
  
2000 Employee Stock Option Plan (filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-8, Registration No. 333-52478, and incorporated herein by reference), as amended by the First Amendment to the 2000 Employee Stock Option Plan (filed as Exhibit 10.17 to the Company’s Form 10-Q dated June 30, 2002 and incorporated herein by reference).
     
10.87
  
Amended and Restated 2000 Director Stock Option Plan (filed as Exhibit 10.2 to the Company’s Post-Effective Amendment No. 1 to Registration Statement on Form S-8, Registration No. 333-100244, and incorporated herein by reference).
     
10.88
  
Mack-Cali Realty Corporation 2004 Incentive Stock Plan (filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-8, Registration No. 333-116437, and incorporated herein by reference).
     
10.89
  
Deferred Compensation Plan for Directors (filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-8, Registration No. 333-80081, and incorporated herein by reference).
     

 
132
 


Exhibit
Number
  
Exhibit Title
     
10.90
  
Form of Indemnification Agreement by and between Mack-Cali Realty Corporation and each of William L. Mack, John J. Cali, Mitchell E. Hersh, John R. Cali, David S. Mack, Martin S. Berger, Alan S. Bernikow, Kenneth M. Duberstein, Martin D. Gruss, Nathan Gantcher, Vincent Tese, Roy J. Zuckerberg, Alan G. Philibosian, Irvin D. Reid, Robert F. Weinberg, Barry Lefkowitz, Roger W. Thomas, Michael A. Grossman, Mark Yeager, Anthony Krug, Dean Cingolani, Anthony DeCaro Jr., Mark Durno, William Fitzpatrick, John Kropke, Nicholas Mitarotonda, Jr., Michael Nevins, Virginia Sobol, Albert Spring, Daniel Wagner, Deborah Franklin, John Marazzo, Christopher DeLorenzo, Jeffrey Warner, Diane Chayes and James Corrigan (filed as Exhibit 10.28 to the Company’s Form 10-Q dated September 30, 2002 and incorporated herein by reference).
     
10.91
  
Indemnification Agreement dated October 22, 2002 by and between Mack-Cali Realty Corporation and John Crandall (filed as Exhibit 10.29 to the Company’s Form 10-Q dated September 30, 2002 and incorporated herein by reference).
     
10.92
  
Second Amendment to Contribution and Exchange Agreement, dated as of June 27, 2000, between RMC Development Company, LLC f/k/a Robert Martin Company, LLC, Robert Martin Eastview North Company, L.P., the Company and the Operating Partnership (filed as Exhibit 10.44 to the Company’s Form 10-K dated December 31, 2002 and incorporated herein by reference).
     
10.93
  
Limited Partnership Agreement of Meadowlands Mills/Mack-Cali Limited Partnership by and between Meadowlands Mills Limited Partnership, Mack-Cali Meadowlands Entertainment L.L.C. and Mack-Cali Meadowlands Special L.L.C. dated November 25, 2003 (filed as Exhibit 10.1 to the Company’s Form 8-K dated December 3, 2003 and incorporated herein by reference).
     
10.94
  
Redevelopment Agreement by and between the New Jersey Sports and Exposition Authority and Meadowlands Mills/Mack-Cali Limited Partnership dated December 3, 2003 (filed as Exhibit 10.2 to the Company’s Form 8-K dated December 3, 2003 and incorporated herein by reference).
     
10.95
  
First Amendment to Redevelopment Agreement by and between the New Jersey Sports and Exposition Authority and Meadowlands Mills/Mack-Cali Limited Partnership dated October 5, 2004 (filed as Exhibit 10.54 to the Company’s Form 10-Q dated September 30, 2004 and incorporated herein by reference).
     
10.96
  
Letter Agreement by and between Mack-Cali Realty Corporation and The Mills Corporation dated October 5, 2004 (filed as Exhibit 10.55 to the Company’s Form 10-Q dated September 30, 2004 and incorporated herein by reference).
     
10.97
  
First Amendment to Limited Partnership Agreement of Meadowlands Mills/Mack-Cali Limited Partnership by and between Meadowlands Mills Limited Partnership, Mack-Cali Meadowlands Entertainment L.L.C. and Mack-Cali Meadowlands Special L.L.C. dated as of June 30, 2005 (filed as Exhibit 10.66 to the Company’s Form 10-Q dated June 30, 2005 and incorporated herein by reference).
     

 
133
 


Exhibit
Number
  
Exhibit Title
     
10.98
  
Mack-Cali Rights, Obligations and Option Agreement by and between Meadowlands Developer Limited Partnership, Meadowlands Limited Partnership, Meadowlands Developer Holding Corp., Meadowlands Mack-Cali GP, L.L.C., Mack-Cali Meadowlands Special, L.L.C., Baseball Meadowlands Mills/Mack-Cali Limited Partnership, A-B Office Meadowlands Mack-Cali Limited Partnership, C-D Office Meadowlands Mack-Cali Limited Partnership, Hotel Meadowlands Mack-Cali Limited Partnership and ERC Meadowlands Mills/Mack-Cali Limited Partnership dated November 22, 2006 (filed as Exhibit 10.92 to the Company’s Form 10-K dated December 31, 2006 and incorporated herein by reference).
     
10.99
  
Redemption Agreement by and among Meadowlands Developer Limited Partnership, Meadowlands Developer Holding Corp., Mack-Cali Meadowlands entertainment L.L.C., Mack-Cali Meadowlands Special L.L.C., and Meadowlands Limited Partnership dated November 22, 2006 (filed as Exhibit 10.93 to the Company’s Form 10-K dated December 31, 2006 and incorporated herein by reference).
     
10.100
  
Contribution and Exchange Agreement by and between Mack-Cali Realty, L.P. and Tenth Springhill Lake Associates L.L.L.P., Eleventh Springhill Lake Associates L.L.L.P., Twelfth Springhill Lake Associates L.L.L.P., Fourteenth Springhill Lake Associates L.L.L.P., each a Maryland limited liability limited partnership, Greenbelt Associates, a Maryland general partnership, and Sixteenth Springhill Lake Associates L.L.L.P., a Maryland limited liability limited partnership, and certain other natural persons, dated as of November 21, 2005 (filed as Exhibit 10.69 to the Company’s Form 10-K dated December 31, 2005 and incorporated herein by reference).
     
10.101
  
Membership Interest Purchase and Contribution Agreement by and among Mr. Stanley C. Gale, SCG Holding Corp., Mack-Cali Realty Acquisition Corp. and Mack-Cali Realty, L.P. dated as of March 7, 2006 (filed as Exhibit 10.1 to the Company’s Form 8-K dated March 7, 2006 and incorporated herein by reference).
     
10.102
  
Amendment No. 1 to Membership Interest Purchase and Contribution Agreement dated as of March 31, 2006 (filed as Exhibit 10.1 to the Company’s Form 8-K dated March 28, 2006 and incorporated herein by reference).
     
10.103
  
Amendment No. 2 to Membership Interest Purchase and Contribution Agreement dated as of May 9, 2006 (filed as Exhibit 10.1 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.104
  
Amendment No. 8 to Membership Interest Purchase and Contribution Agreement by and among Mr. Stanley C. Gale, SCG Holding Corp., Mack-Cali Realty Acquisition Corp. and Mack-Cali Realty, L.P. dated as of May 23, 2007 (filed as Exhibit 10.1 to the Company’s Form 8-K dated May 23, 2007.
     
10.105
  
Contribution and Sale Agreement by and among Gale SLG NJ LLC, a Delaware limited liability company, Gale SLG NJ MEZZ LLC, a Delaware limited liability company, and Gale SLG RIDGEFIELD MEZZ LLC, a Delaware limited liability company and Mack-Cali Ventures L.L.C. dated as of March 7, 2006 (filed as Exhibit 10.2 to the Company’s Form 8-K dated March 7, 2006 and incorporated herein by reference).
     

 
134
 


Exhibit
Number
  
Exhibit Title
     
10.106
  
First Amendment to Contribution and Sale Agreement by and among GALE SLG NJ LLC, a Delaware limited liability company, GALE SLG NJ MEZZ LLC, a Delaware limited liability company, and GALE SLG RIDGEFIELD MEZZ LLC, a Delaware limited liability company, and Mack-Cali Ventures L.L.C., a Delaware limited liability company, dated as of May 9, 2006 (filed as Exhibit 10.4 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.107
  
Non-Portfolio Property Interest Contribution Agreement by and among Mr. Stanley C. Gale, Mr. Mark Yeager, GCF II Investor LLC, The Gale Investments Company, LLC, Gale & Wentworth Vreeland, LLC, Gale Urban Solutions LLC, MSGW-ONE Campus Investors, LLC, Mack-Cali Realty Acquisition Corp. and Mack-Cali Realty, L.P. dated as of May 9, 2006 (filed as Exhibit 10.2 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.108
  
Loan Agreement by and among the entities set forth on Exhibit A, collectively, as Borrowers, and Gramercy Warehouse Funding I LLC, as Lender, dated May 9, 2006 (filed as Exhibit 10.5 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.109
  
Promissory Note of One Grande SPE LLC, 1280 Wall SPE LLC, 10 Sylvan SPE LLC, 5 Independence SPE LLC, 1 Independence SPE LLC, and 3 Becker SPE LLC, as Borrowers, in favor of Gramercy Warehouse Funding I, LLC, as Lender, in the principal amount of $90,286,551 dated May 9, 2006 (filed as Exhibit 10.6 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.110
  
Mortgage, Security Agreement and Fixture Filing by and between 4 Becker SPE LLC, as Borrower, and Wachovia Bank, National Association, as Lender, dated May 9, 2006 (filed as Exhibit 10.7 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.111
  
Promissory Note of 4 Becker SPE LLC, as Borrower, in favor of Wachovia Bank, National Association, as Lender, in the principal amount of $43,000,000 dated May 9, 2006 (filed as Exhibit 10.8 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.112
  
Mortgage, Security Agreement and Fixture Filing by and between 210 Clay SPE LLC, as Borrower, and Wachovia Bank, National Association, as Lender, dated May 9, 2006 (filed as Exhibit 10.9 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.113
  
Promissory Note of 210 Clay SPE LLC, as Borrower, in favor of Wachovia Bank, National Association, as Lender, in the principal amount of $16,000,000 dated May 9, 2006 (filed as Exhibit 10.10 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.114
  
Mortgage, Security Agreement and Fixture Filing by and between 5 Becker SPE LLC, as Borrower, and Wachovia Bank, National Association, as Lender, dated May 9, 2006 (filed as Exhibit 10.11 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.115
  
Promissory Note of 5 Becker SPE LLC, as Borrower, in favor of Wachovia Bank, National Association, as Lender, in the principal amount of $15,500,000 dated May 9, 2006 (filed as Exhibit 10.12 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.116
  
Mortgage, Security Agreement and Fixture Filing by and between 51 CHUBB SPE LLC, as Borrower, and Wachovia Bank, National Association, as Lender, dated May 9, 2006 (filed as Exhibit 10.13 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     


 
135
 


Exhibit
Number
  
Exhibit Title
     
10.117
  
Promissory Note of 51 CHUBB SPE LLC, as Borrower, in favor of Wachovia Bank, National Association, as Lender, in the principal amount of $4,500,000 dated May 9, 2006 (filed as Exhibit 10.14 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.118
  
Form of Amended and Restated Limited Liability Company Agreement of Mack-Green-Gale LLC dated                 , 2006 (filed as Exhibit 10.3 to the Company’s Form 8-K dated March 7, 2006 and incorporated herein by reference).
     
10.119
  
Form of Limited Liability Company Operating Agreement (filed as Exhibit 10.3 to the Company’s Form 8-K dated May 9, 2006 and incorporated herein by reference).
     
10.120
  
Agreement of Sale and Purchase dated August 9, 2006 by and between Mack-Cali Realty, L.P. and Westcore Properties AC, LLC (filed as Exhibit 10.91 to the Company’s Form 10-Q dated September 30, 2006 and incorporated herein by reference).
     
10.121
  
First Amendment to Agreement of Sale and Purchase dated September 6, 2006 by and between Mack-Cali Realty, L.P. and Westcore Properties AC, LLC (filed as Exhibit 10.92 to the Company’s Form 10-Q dated September 30, 2006 and incorporated herein by reference).
     
10.122
  
Second Amendment to Agreement of Sale and Purchase dated September 15, 2006 by and between Mack-Cali Realty, L.P. and Westcore Properties AC, LLC (filed as Exhibit 10.93 to the Company’s Form 10-Q dated September 30, 2006 and incorporated herein by reference).
     
10.123
  
Agreement of Sale and Purchase dated September 25, 2006 by and between Phelan Realty Associates L.P., 795 Folsom Realty Associates L.P. and Westcore Properties AC, LLC (filed as Exhibit 10.94 to the Company’s Form 10-Q dated September 30, 2006 and incorporated herein by reference).
     
10.124
  
Membership Interest Purchase and Contribution Agreement dated as of December 28, 2006, by and among NKFGMS Owners, LLC, The Gale Construction Services Company, L.L.C., NKFFM Limited Liability Company, Scott Panzer, Ian Marlow, Newmark & Company Real Estate, Inc. d/b/a Newmark Knight Frank, and Mack-Cali Realty, L.P (filed as Exhibit 10.117 to the Company’s Form 10-K dated December 31, 2006 and incorporated herein by reference).
     
10.125
  
Operating Agreement of NKFGMS Owners, LLC (filed as Exhibit 10.118 to the Company’s Form 10-K dated December 31, 2006 and incorporated herein by reference).
     
10.126
  
Loans, Sale and Services Agreement dated December 28, 2006 by and between Newmark & Company Real Estate, Inc. d/b/a Newmark Knight Frank, Mack-Cali Realty, L.P., and Newmark Knight Frank Global Management Services, LLC (filed as Exhibit 10.119 to the Company’s Form 10-K dated December 31, 2006 and incorporated herein by reference).
     
10.127
  
Term Loan Agreement among Mack-Cali Realty, L.P. and JPMorgan Chase Bank, N.A. as Administrative Agent, J.P. Morgan Securities Inc. as Arranger, and other lender which may become parties to this Agreement dated November 29, 2006 (filed as Exhibit 10.120 to the Company’s Form 10-K dated December 31, 2006 and incorporated herein by reference).
     

 
136
 



Exhibit
Number
  
Exhibit Title
     
10.128
  
Agreement of Purchase and Sale among SLG Broad Street A LLC and SLG Broad Street C LLC, as Sellers, and M-C Broad 125 A L.L.C. and M-C Broad 125 C L.L.C., as Purchasers, dated as of March 15, 2007 (filed as Exhibit 10.121 to the Company’s Form 10-Q dated March 31, 2007 and incorporated herein by reference).
     
10.129
  
Agreement of Purchase and Sale among 500 West Putnam L.L.C., as Seller, and SLG 500 West Putnam LLC, as Purchaser, dated as of March 15, 2007 (filed as Exhibit 10.122 to the Company’s Form 10-Q dated March 31, 2007 and incorporated herein by reference).
     
10.130
  
Letter Agreement by and between Mack-Cali Realty, L.P., Mack-Cali Realty Acquisition Corp., Mack-Cali Belmar Realty, LLC, M-C Belmar, LLC, Mr. Stanley C. Gale, SCG Holding Corp., Mr. Mark Yeager, GCF II Investor LLC, The Gale Investments Company, LLC, Gale & Wentworth Vreeland, LLC, Gale Urban Solutions LLC, MSGW-ONE Campus Investors, LLC and Gale/Yeager Investments LLC dated October 31, 2007 (filed as Exhibit 10.128 to the Company’s Form 10-Q dated September 30, 2007 and incorporated herein by reference).
     
21.1*
  
Subsidiaries of the Company.
     
23.1*
  
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.
     
31.1*
  
Certification of the Company’s President and Chief Executive Officer, Mitchell E. Hersh, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2*
  
Certification of the Company’s Chief Financial Officer, Barry Lefkowitz, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1*
  
Certification of the Company’s President and Chief Executive Officer, Mitchell E. Hersh, and the Company’s Chief Financial Officer, Barry Lefkowitz, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*filed herewith



 


 
137