form10qcorp.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



For the transition period from	to


Commission File Number:	1-13274



	Mack-Cali Realty Corporation
(Exact name of registrant as specified in its charter)




Maryland		22-3305147
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer 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)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ninety (90) days. YES X NO ___


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No ___

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company) 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 July 22, 2013, there were 88,010,316 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.

MACK-CALI REALTY CORPORATION

FORM 10-Q

INDEX

Part I	Financial Information		Page

	Item 1.	Financial Statements (unaudited):

		Consolidated Balance Sheets as of June 30, 2013
		and December 31, 2012	4

		Consolidated Statements of Operations for the three and six months
		ended June 30, 2013 and 2012	5

		Consolidated Statement of Changes in Equity for the six months
		ended June 30, 2013	6

		Consolidated Statements of Cash Flows for the six months
		ended June 30, 2013 and 2012	7

		Notes to Consolidated Financial Statements	8-47

	Item 2.	Management’s Discussion and Analysis of Financial Condition
		and Results of Operations	48-68

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	68

	Item 4.	Controls and Procedures	68

Part II	Other Information

	Item 1.	Legal Proceedings	69

	Item 1A.	Risk Factors	69

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69

	Item 3.	Defaults Upon Senior Securities	69

	Item 4.	Mine Safety Disclosures	69

	Item 5.	Other Information	69

	Item 6.	Exhibits	69

Signatures			70

Exhibit Index			71-91

MACK-CALI REALTY CORPORATION

Part I – Financial Information

Item 1. Financial Statements

The accompanying unaudited consolidated balance sheets, statements of operations, of changes in equity, and of cash flows and related notes thereto, have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. The financial statements reflect all adjustments consisting only of normal, recurring adjustments, which are, in the opinion of management, necessary for a fair presentation for the interim periods.

The aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in Mack-Cali Realty Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

The results of operations for the three and six month periods ended June 30, 2013 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (unaudited)



		June 30,		December 31,
ASSETS		2013		2012
Rental property
Land and leasehold interests	$	781,347	$	782,315
Buildings and improvements		4,142,086		4,104,472
Tenant improvements		463,726		489,608
Furniture, fixtures and equipment		4,513		3,041
		5,391,672		5,379,436
Less – accumulated depreciation and amortization		(1,465,104)		(1,478,214)
		3,926,568		3,901,222
Rental property held for sale, net		12,851		60,863
Net investment in rental property		3,939,419		3,962,085
Cash and cash equivalents		177,939		58,245
Investments in unconsolidated joint ventures		135,722		132,339
Unbilled rents receivable, net		142,722		139,984
Deferred charges, goodwill and other assets		214,615		204,874
Restricted cash		19,639		19,339
Accounts receivable, net of allowance for doubtful accounts
of $2,084 and $2,614		8,008		9,179

Total assets	$	4,638,064	$	4,526,045

LIABILITIES AND EQUITY
Senior unsecured notes	$	1,616,099	$	1,446,894
Mortgages, loans payable and other obligations		753,054		757,495
Dividends and distributions payable		29,983		44,855
Accounts payable, accrued expenses and other liabilities		126,116		124,822
Rents received in advance and security deposits		49,159		55,917
Accrued interest payable		28,561		27,555
Total liabilities		2,602,972		2,457,538
Commitments and contingencies

Equity:
Mack-Cali Realty Corporation stockholders’ equity:
Common stock, $0.01 par value, 190,000,000 shares authorized,
88,004,354 and 87,536,292 shares outstanding		880		875
Additional paid-in capital		2,535,814		2,530,621
Dividends in excess of net earnings		(795,700)		(764,522)
Total Mack-Cali Realty Corporation stockholders’ equity		1,740,994		1,766,974

Noncontrolling interests in subsidiaries:
Operating Partnership		237,461		245,091
Consolidated joint ventures		56,637		56,442
Total noncontrolling interests in subsidiaries		294,098		301,533

Total equity		2,035,092		2,068,507

Total liabilities and equity	$	4,638,064	$	4,526,045

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

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)(unaudited)


			Three Months Ended				Six Months Ended
	June 30,						June 30,
REVENUES			2013		2012		2013		2012
Base rents		$	144,034	$	143,031	$	286,273	$	286,337
Escalations and recoveries from tenants			18,314		19,970		38,971		39,246
Construction services			6,746		4,604		14,972		8,066
Real estate services			6,642		1,100		13,085		2,271
Parking income			1,603		1,530		3,002		3,141
Other income			599		1,810		2,356		9,692
Total revenues			177,938		172,045		358,659		348,753

EXPENSES
Real estate taxes			21,001		24,228		43,842		46,467
Utilities			14,425		14,103		31,610		29,738
Operating services			27,096		26,223		54,168		51,204
Direct construction costs			6,511		4,337		14,336		7,615
Real estate services expenses			5,304		501		10,257		1,006
General and administrative			13,157		11,873		25,162		22,643
Depreciation and amortization			48,422		46,326		94,482		92,526
Impairments			23,851		-		23,851		-
Total expenses			159,767		127,591		297,708		251,199
Operating income			18,171		44,454		60,951		97,554

OTHER (EXPENSE) INCOME
Interest expense			(31,271)		(31,565)		(61,140)		(62,112)
Interest and other investment income			1,094		7		1,100		20
Equity in earnings (loss) of unconsolidated joint ventures			(80)		1,733		(1,830)		2,333
Loss from early extinguishment of debt			-		(4,415)		-		(4,415)
Total other (expense) income			(30,257)		(34,240)		(61,870)		(64,174)
Income (loss) from continuing operations			(12,086)		10,214		(919)		33,380
Discontinued operations:
Income from discontinued operations			1,364		2,831		3,286		4,920
Loss from early extinguishment of debt			(703)		-		(703)		-
Realized gains (losses) and unrealized losses
on disposition of rental property, net			37,609		(1,634)		37,609		2,378
Total discontinued operations, net			38,270		1,197		40,192		7,298
Net income			26,184		11,411		39,273		40,678
Noncontrolling interest in consolidated joint ventures			62		92		124		171
Noncontrolling interest in Operating Partnership			1,455		(1,256)		93		(4,090)
Noncontrolling interest in discontinued operations			(4,630)		(146)		(4,863)		(891)
Net income available to common shareholders		$	23,071	$	10,101	$	34,627	$	35,868

Basic earnings per common share:
Income (loss) from continuing operations		$	(0.12)	$	0.10	$	(0.01)	$	0.34
Discontinued operations			0.38		0.01		0.40		0.07
Net income available to common shareholders		$	0.26	$	0.11	$	0.39	$	0.41

Diluted earnings per common share:
Income (loss) from continuing operations		$	(0.12)	$	0.10	$	(0.01)	$	0.34
Discontinued operations			0.38		0.01		0.40		0.07
Net income available to common shareholders		$	0.26	$	0.11	$	0.39	$	0.41

Basic weighted average shares outstanding			87,708		87,817		87,688		87,808

Diluted weighted average shares outstanding			99,780		100,069		99,773		100,065

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

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (in thousands) (unaudited)



					Additional		Dividends in		Noncontrolling
	Common Stock				Paid-In		Excess of		Interests		Total
	Shares		Par Value		Capital		Net Earnings		in Subsidiaries		Equity
Balance at January 1, 2013	87,536	$	875	$	2,530,621	$	(764,522)	$	301,533	$	2,068,507
Net income	-		-		-		34,627		4,646		39,273
Common stock dividends	-		-		-		(65,805)		-		(65,805)
Common unit distributions	-		-		-		-		(9,038)		(9,038)
Increase in noncontrolling interests	-		-		-		-		319		319
Redemption of common units
for common stock	139		2		2,766		-		(2,768)		-
Shares issued under Dividend
Reinvestment and Stock
Purchase Plan	5		-		149		-		-		149
Stock compensation	324		3		1,684		-		-		1,687
Rebalancing of ownership percentage
between parent and subsidiaries	-		-		594		-		(594)		-
Balance at June 30, 2013	88,004	$	880	$	2,535,814	$	(795,700)	$	294,098	$	2,035,092

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

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)



		Six Months Ended
		June 30,
CASH FLOWS FROM OPERATING ACTIVITIES		2013		2012
Net income	$	39,273	$	40,678
Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and amortization, including related intangible assets		94,418		92,447
Depreciation and amortization on discontinued operations		974		3,716
Amortization of stock compensation		1,687		1,635
Amortization of deferred financing costs and debt discount		1,582		1,272
Write off of unamortized discount on senior unsecured notes		-		370
Equity in loss (earnings) of unconsolidated joint venture, net		1,830		(2,333)
Distributions of cumulative earnings from unconsolidated
joint ventures		4,712		1,494
Realized (gains) and unrealized losses on disposition
of rental property, net		(37,609)		(2,378)
Impairments		23,851		-
Changes in operating assets and liabilities:
Increase in unbilled rents receivable, net		(8,216)		(1,610)
Increase in deferred charges, goodwill and other assets		(16,859)		(7,322)
Decrease (increase) in accounts receivable, net		1,171		(1,829)
Increase in accounts payable, accrued expenses
and other liabilities		3,120		10,229
(Decrease) increase in rents received in advance and security deposits		(6,758)		201
Increase (decrease) in accrued interest payable		1,007		(6)

Net cash provided by operating activities	$	104,183	$	136,564

CASH FLOWS FROM INVESTING ACTIVITIES
Rental property acquisitions and related intangibles	$	(149,200)		-
Rental property additions and improvements		(39,688)	$	(33,348)
Development of rental property		(12,204)		(8,352)
Proceeds from the sale of rental property		161,727		-
Repayment of notes receivable		83		-
Investment in unconsolidated joint ventures		(31,500)		(32,475)
Distributions in excess of cumulative earnings from
unconsolidated joint ventures		20,354		988
Payment of contingent consideration		(2,755)		-
Increase in restricted cash		(300)		(195)

Net cash used in investing activities	$	(53,483)	$	(73,382)

CASH FLOW FROM FINANCING ACTIVITIES
Borrowings from revolving credit facility	$	289,000	$	302,526
Repayment of revolving credit facility		(289,000)		(348,026)
Proceeds from senior unsecured notes		268,928		299,403
Repayment of senior unsecured notes		(100,000)		(221,019)
Proceeds from mortgages and loans payable		1,798		-
Repayment of mortgages, loans payable and other obligations		(9,420)		(4,674)
Payment of financing costs		(2,643)		(2,635)
Payment of dividends and distributions		(89,669)		(89,950)

Net cash provided by (used in) financing activities	$	68,994	$	(64,375)

Net increase (decrease) in cash and cash equivalents	$	119,694	$	(1,193)
Cash and cash equivalents, beginning of period		58,245		20,496

Cash and cash equivalents, end of period	$	177,939	$	19,303

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

MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 and third parties. As of June 30, 2013, the Company owned or had interests in 273 properties plus developable land (collectively, the “Properties”). The Properties aggregate approximately 30.6 million square feet, which are comprised of 250 buildings, primarily office and office/flex buildings totaling approximately 30.1 million square feet (which include four buildings, primarily office buildings aggregating approximately 0.8 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, nine multi-family properties totaling 3,319 apartments (which include seven properties aggregating 2,597 apartments owned by unconsolidated joint ventures in which the Company has investment interests), four retail properties totaling approximately 98,800 square feet (which include two buildings aggregating 81,500 square feet owned by unconsolidated joint ventures in which the Company has investment interests), one hotel (which is owned by an unconsolidated joint venture in which the Company has an investment interest) and three parcels of land leased to others. The Properties are located in seven 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, for the Company’s treatment of unconsolidated joint venture interests. Intercompany accounts and transactions have been eliminated.

Accounting Standards Codification (“ASC”) 810, Consolidation, 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 VIEs. Generally, the consideration of whether an entity is a VIE 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. The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the variable interest entity’s performance: and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE.

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. Acquisition-related costs are expensed as incurred. 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. Capitalized development and construction salaries and related costs approximated $0.9 million and $0.9 million for the three months ended June 30, 2013 and 2012, respectively, and $1.7 million and $ 1.8 million for the six months ended June 30, 2013 and 2012, respectively. Included in total rental property is construction, tenant improvement and development in-progress of $92.4 million and $107.6 million as of June 30, 2013 and December 31, 2012, 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, primarily based on a percentage of the relative square footage of each portion, 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

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 assumed, 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 fair values. The Company records goodwill or a gain on bargain purchase (if any) if the net assets acquired/liabilities assumed exceed the purchase consideration of a transaction. 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 initially 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 terms 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 rental properties held for use may be impaired. In addition to identifying any specific circumstances which may affect a property or properties, management considers other criteria for determining which properties may require assessment for potential impairment. The criteria considered by management include reviewing low leased percentages, significant near-term lease expirations, recently acquired properties, current and historical operating and/or cash flow losses, near-term mortgage debt maturities or other factors that might impact the Company’s intent and ability to hold the property. 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. These assumptions are generally based on management’s experience in its local real estate markets and the effects of current market conditions. The assumptions 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, and actual losses or impairments may be realized in the future.

As of June 30, 2013 and December 31, 2012, the Company’s consolidated real estate joint ventures in which the Company is deemed to be the primary beneficiary have total real estate assets of $198.1 million and $198.3 million, respectively, mortgages of $78.9 million and $77.1 million, respectively, and other liabilities of $15.7 million and $16.5 million, respectively. These consolidated ventures were acquired as part of the Roseland Transaction (as defined in Note 13: Commitments and Contingencies).

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 estimated 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 disposed of 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

The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting. The Company applies the equity method by initially recording these investments at cost, as Investments in Unconsolidated Joint Ventures, subsequently adjusted for equity in earnings and cash contributions and distributions. The outside basis portion of the Company’s joint ventures is amortized over the anticipated useful lives of the underlying ventures’ tangible and intangible assets acquired and liabilities assumed. Generally, the Company would discontinue applying the equity method when the investment (and any advances) is reduced to zero and would not provide for additional losses unless the Company has guaranteed obligations of the venture or is otherwise committed to providing further financial support for the investee. If the venture subsequently generates income, the Company only recognizes its share of such income to the extend it exceeds its share of previously unrecognized losses.

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. The Company’s estimates of value for each investment (particularly in commercial real estate joint ventures) 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 operating costs. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the values estimated by management in its impairment analyses may not be realized, and actual losses or impairment may be realized in the future. See Note 4: Investments in Unconsolidated Joint Ventures.

Cash and Cash

Equivalents

All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

Deferred

Financing Costs

Costs incurred in obtaining financing are capitalized and amortized over the term of the related indebtedness. Amortization of such costs is included in interest expense and was $809,000 and $661,000 for the three months ended June 30, 2013 and 2012, respectively, and $1,582,000 and $1,272,000 for the six months ended June 30, 2013 and 2012, respectively. If a financing obligation is extinguished early, any unamortized deferred financing costs are written off and included in gains (loss) on early extinguishment of debt. Such unamortized costs which were written off amounted to zero and $370,000 for the three months ended June 30, 2013 and 2012, respectively, and zero and $370,000 for the six months ended June 30, 2013 and 2012, 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 $1,033,000 and $1,060,000 for the three months ended June 30, 2013 and 2012, respectively, and $2,206,000 and $2,156,000 for the six months ended June 30, 2013 and 2012, respectively.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. Management performs an annual impairment test for goodwill during the fourth quarter. Additionally, management evaluates the recoverability of goodwill whenever events or changes in circumstances indicate that the carrying amounts of goodwill may not be fully recoverable.

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 cumulative 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 initially 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 for acquired properties are amortized as a reduction of base rental revenue over the remaining terms 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 14: 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 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, development and leasing commission fees and other services, and payroll and related costs reimbursed from clients. Fee income derived from the Company’s unconsolidated joint ventures (which are capitalized by such ventures) are recognized to the extent attributable to the unaffiliated ownership interests. Other income includes income from tenants for additional services arranged for by 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 collectability 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.

Pursuant to the amended provisions related to uncertain tax provisions of ASC 740, Income Taxes, 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.

In the normal course of business, the Company or one of its subsidiaries is subject to examination by federal, state and local jurisdictions in which it operates, where applicable. As of June 30, 2013, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are generally from the year 2008 forward.

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. Shares whose issuance is contingent upon the satisfaction of certain conditions shall be considered outstanding and included in the computation of diluted EPS as follows (i) if all necessary conditions have been satisfied by the end of the period (the events have occurred), those shares shall be included as of the beginning of the period in which the conditions were satisfied (or as of the date of the grant, if later) or (ii) if all necessary conditions have not been satisfied by the end of the period, the number of contingently issuable shares included in diluted EPS shall be based on the number of shares, if any, that would be issuable if the end of the reporting period were the end of the contingency period (for example, the number of shares that would be issuable based on current period earnings or period-end market price) and if the result would be dilutive. Those contingently issuable shares shall be included in the denominator of diluted EPS as of the beginning of the period (or as of the date of the grant, if later).

Dividends and

Distributions

Payable

The dividends and distributions payable at June 30, 2013 represents dividends payable to common shareholders (87,748,884 shares) and distributions payable to noncontrolling interest common unitholders of the Operating Partnership (12,003,241 common units) for all such holders of record as of July 3, 2013 with respect to the second quarter 2013. The second quarter 2013 common stock dividends and common unit distributions of $0.30 per common share and unit were approved by the Board of Directors on May 15, 2013. The common stock dividends and common unit distributions payable were paid on July 12, 2013.

The dividends and distributions payable at December 31, 2012 represents dividends payable to common shareholders (87,537,250 shares) and distributions payable to noncontrolling interest common unitholders of the Operating Partnership (12,141,836 common units) for all such holders of record as of January 4, 2013 with respect to the fourth quarter 2012. The fourth quarter 2012 common stock dividends and common unit distributions of $0.45 per common share and unit were approved by the Board of Directors on December 3, 2012. The common stock dividends and common unit distributions payable were paid on January 11, 2013.

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 compensation in accordance with the provisions of ASC 718, Compensation-Stock Compensation. These provisions require that the estimated fair value of restricted stock (“Restricted Stock Awards”), TSR-based Performance Shares and stock options (if any) at the grant date be amortized ratably into expense over the appropriate vesting period. The Company recorded stock compensation expense of $981,000 and $579,000 for the three months ended June 30, 2013 and 2012, respectively, and $2,014,000 and $1,393,000 for the six months ended June 30, 2013 and 2012, respectively.

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. There was no difference in other comprehensive income to net income for the three and six months ended June 30, 2013 and 2012, and no accumulated other comprehensive income as of June 30, 2013 and 2012.

3. REAL ESTATE TRANSACTIONS

Acquisitions

On January 18, 2013, the Company acquired Alterra at Overlook Ridge 1A (“Alterra 1A”), a 310-unit multi-family rental property located in Revere, Massachusetts, for approximately $61.3 million in cash, which was funded primarily through borrowings under the Company’s unsecured revolving credit facility.

On April 4, 2013, the Company acquired Alterra at Overlook Ridge IB (“Alterra 1B”), a 412-unit multi-family property in Revere, Massachusetts, for approximately $88 million in cash, which was funded primarily through borrowings under the Company’s unsecured revolving credit facility.

The purchase prices were allocated to the net assets acquired during the six months ended June 30, 2013 as follows (in thousands):



								Total
		Alterra 1A			Alterra 1B			Acquisitions
Land	$	9,042		$	12,055		$	21,097
Buildings and improvements		50,671			71,409			122,080
Furniture, fixtures and equipment		801			1,474			2,275
In-place lease values		931	(1)		3,148	(1)		4,079
		61,445			88,086			149,531

Less: Below market lease values		195	(1)		136	(1)		331
		195			136			331

Net cash paid at acquisition	$	61,250		$	87,950		$	149,200

(1) In-place lease values and below market lease values will be amortized over one year or less.

For the six months ended June 30, 2013, included in general and administrative expense was an aggregate of approximately $214,000 in transaction costs related to the property acquisitions.

Properties Commencing Initial Operations

The following property commenced initial operations during the six months ended June 30, 2013 (dollars in thousands, except per square foot):



						Development		Development
			# of	Rentable		Costs Incurred		Costs
Date	Property/Address	Location	Bldgs.	Square Feet		by Company (a)		Per Square Foot
6/5/2013	14 Sylvan Way	Parsippany, New Jersey	1	203,506	$	50,661	$	248.94

(a) Development costs included approximately $13.1 million in land costs and $4.3 million in leasing costs. Amounts are as of June 30, 2013.

Property Sales

The Company sold the following office properties during the six months ended June 30, 2013 (dollars in thousands):



				Rentable		Net		Net
Sale			# of	Square		Sales		Book	Realized
Date	Property/Address	Location	Bldgs.	Feet		Proceeds		Value	Gain (loss)
04/10/13	19 Skyline Drive (a)	Hawthorne, New York	1	248,400	$	16,131	$	16,005	126
04/26/13	55 Corporate Drive	Bridgewater, New Jersey	1	204,057		70,967		51,308	19,659
05/02/13	200 Riser Road	Little Ferry, New Jersey	1	286,628		31,775		14,852	16,923
05/13/13	777 Passaic Avenue	Clifton, New Jersey	1	75,000		5,640		3,713	1,927
05/30/13	16 and 18 Sentry Parkway West (b)	Blue Bell, Pennsylvania	2	188,103		19,041		19,721	(680)
05/31/13	51 Imclone Drive (c)	Branchburg, New Jersey	1	63,213		6,101		5,278	823
06/28/13	40 Richards Avenue	Norwalk, Connecticut	1	145,487		15,858		17,027	(1,169)

Totals:			8	1,210,888	$	165,513	$	127,904	37,609

(a) The Company recognized a valuation allowance of $7.1 million on this property at December 31, 2012. In connection with the sale, the Company provided an interest-free note receivable to the buyer of $5 million (with a net present value of $3.7 million at June 30, 2013) which matures in ten years and requires monthly payments of principal. See Note 5: Deferred charges, goodwill and other assets.
(b) The Company recorded an $8.4 million impairment charge on these properties at December 31, 2012. The Company has retained a subordinated interest in these properties.
(c) The property was encumbered by a mortgage loan which was satisfied by the Company at the time of the sale. The Company incurred $0.7 million in costs for the debt satisfaction, which was included in discontinued operations: loss from early retirement of debt for the three and six months ended June 30, 2013.

On July 10, 2013, the Company sold its 132,010 square foot office property located at 106 Allen Road in Bernards, New Jersey for approximately $18.0 million.

In July 2013, the Company entered into a contract to sell its 1.66 million square foot Pennsylvania office portfolio and several developable land parcels for approximately $233 million: $201 million in cash, a $10 million mortgage on one of the properties and subordinated equity interests in each of the properties being sold with capital accounts aggregating $22 million. The purchasers of the Pennsylvania office portfolio will be joint ventures to be formed between the Company and affiliates of the Keystone Property Group (the “Keystone Affiliates”). The mortgage loan will have a term of two years with a one year extension option and bears interest at LIBOR plus six percent. The Company's equity interests in the joint ventures will be subordinated to Keystone Affiliates receiving a 15 percent internal rate of return (“IRR”) after which the Company will receive a ten percent IRR on its subordinated equity and then all profit will be split equally.

As part of the transaction, the Company will have rights to own, after zoning-approval-subdivision, land at the 150 Monument Road Property located in Bala Cynwyd, Pennsylvania, for a contemplated multi-family residential development (the “Bala Rights”). If the Keystone Affiliates are unable to secure a mortgage loan prior to closing which will provide for the non-encumbrance of the Bala Rights, then the Company has agreed to provide a $16.5 million mortgage loan, to be secured by the 150 Monument Property and having a two year term with an interest rate of LIBOR plus six percent, in lieu of the corresponding amount of the cash portion of the purchase price. The loan may be extended for one year at the option of the Company.

In addition, the Company anticipates that, in exchange for agreeing to provide a non-recourse, carve-out guaranty on an existing approximate $50 million mortgage loan secured by unrelated properties owned by the Keystone Affiliates, the Company will obtain a majority interest in a contemplated multi-family residential development site located at One Presidential Boulevard in Bala Cynwyd, Pennsylvania.

The transaction is subject to the buyer’s completion of due diligence by August 19, 2013 which date may be extended under certain conditions. The agreement provides for the sale to close after the completion of due diligence, subject to normal and customary closing conditions.

At June 30, 2013, as a result of management’s current intentions regarding their potential disposition, the Company estimated that the carrying value of the Company’s five office properties located in Blue Bell, Pennsylvania, Lower Providence, Pennsylvania and Plymouth Meeting, Pennsylvania, aggregating 462,378 square feet, may not be recoverable over their anticipated holding periods. In order to reduce the carrying value of the five properties to their estimated fair market values (categorized on a level 3 basis as provided by ASC 820, Fair Value Measurements and Disclosures), the Company recorded impairment charges of $23.9 million at June 30, 2013.

4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

As of June 30, 2013, the Company had an aggregate investment of approximately $135.7 million in its equity method joint ventures. The Company formed these ventures with unaffiliated third parties, or acquired interests in them, to develop or manage primarily office and multi-family rental properties, or to acquire land in anticipation of possible development of office and multi-family rental properties. As of June 30, 2013, the unconsolidated joint ventures owned: three office and two retail properties aggregating approximately 0.4 million square feet, seven multi-family properties totaling 2,597 apartments, a 350-room hotel, a senior mezzanine loan position in the capital stack of a 1.7 million square foot commercial property; development projects for up to approximately 2,739 apartments; and interests and/or rights to developable land parcels able to accommodate up to 4,071 apartments, 1.2 million square feet of office space. The Company’s unconsolidated interests range from 7.5 percent to 80 percent subject to specified priority allocations in certain of the joint ventures.

The amounts reflected in the following tables (except for the Company’s share of equity in earnings) are based on the historical financial information of the individual joint ventures. The Company does not record losses of the joint ventures in excess of its investment balances unless the Company is liable for the obligations of the joint venture or is otherwise committed to provide financial support to the joint venture. The outside basis portion of the Company’s joint ventures is amortized over the anticipated useful lives of the underlying ventures’ tangible and intangible assets acquired and liabilities assumed. Unless otherwise noted below, the debt of the Company’s unconsolidated joint ventures generally 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 had $581,000 and $370,000 in accounts receivable due from its unconsolidated joint ventures as of June 30, 2013 and December 31, 2012, respectively.

Included in the Company’s investments in unconsolidated joint ventures as of June 30, 2013 are six unconsolidated development joint ventures, which are VIEs for which the Company is not the primary beneficiary. These joint ventures are primarily established to develop real estate property for long-term investment and were deemed VIEs primarily based on the fact that the equity investment at risk was not sufficient to permit the entities to finance their activities without additional financial support. The initial equity contributed to these entities was not sufficient to fully finance the real estate construction as development costs are funded by the partners throughout the construction period. The Company determined that it was not the primary beneficiary of these VIEs based on the fact that the Company has shared control of these entities along with the entity’s partners and therefore does not have controlling financial interests in these VIEs. The Company’s aggregate investment in these VIEs was approximately $13.6 million as of June 30, 2013. The Company’s maximum exposure to loss as a result of its involvement with these VIEs is estimated to be approximately $18.9 million, which includes the Company’s current investment and estimated future funding commitments of approximately $5.3 million. The Company has not provided financial support to these VIEs that it was not previously contractually required to provide. In general, future costs of development not financed through third party will be funded with capital contributions from the Company and its outside partners in accordance with their respective ownership percentages.

The following is a summary of the financial position of the unconsolidated joint ventures in which the Company had investment interests as of June 30, 2013 and December 31, 2012: (dollars in thousands)


		June 30,		December 31,
		2013		2012
Assets:
Rental property, net	$	442,372	$	180,254
Loan receivable		43,641		42,276
Other assets		380,353		311,847
Total assets	$	866,366	$	534,377
Liabilities and partners'/
members' capital:
Mortgages and loans payable	$	387,945	$	168,908
Other liabilities		51,965		12,141
Partners'/members' capital		426,456		353,328
Total liabilities and
partners'/members' capital	$	866,366	$	534,377

The following is a summary of the Company's investments in unconsolidated joint ventures as of June 30, 2013 and December 31, 2012: (dollars in thousands)


		June 30,		December 31,
Entity		2013		2012
Plaza VIII & IX Associates, L.L.C.	$	4,042	$	4,321
South Pier at Harborside		(2,180)		(1,225)
Red Bank Corporate Plaza, L.L.C.		3,864		3,876
12 Vreeland Associates, L.L.C.		5,465		12,840
Boston Downtown Crossing		-		13,012
Gale Jefferson, L.L.C.		-		1,029
Stamford SM LLC		35,094		34,006
Marbella RoseGarden, L.L.C.		16,241		16,918
RoseGarden Monaco Holdings, L.L.C.		3,940		4,761
Rosewood Lafayette Holdings, L.L.C.		1,413		1,988
PruRose Port Imperial South 15, LLC		-		606
Rosewood Morristown, L.L.C.		6,786		7,091
Overlook Ridge JV, L.L.C.		-		-
Overlook Ridge, L.L.C.		144		31
Overlook Ridge JV 2C/3B, L.L.C.		-		179
Roseland/North Retail, L.L.C.		2,029		2,161
BNES Associates III		1,790		1,955
Portside Master Company, L.L.C.		3,550		3,651
PruRose Port Imperial South 13, LLC		2,627		2,920
Roseland/Port Imperial Partners, L.P.		2,689		2,582
RoseGarden Marbella South, L.L.C.		6,617		6,182
PruRose Riverwalk G, L.L.C.		3,646		4,136
Elmajo Urban Renewal Associates, LLC		322		629
Estuary Urban Renewal Unit B, LLC		125		220
Riverpark at Harrison I, L.L.C.		3,082		2,606
150 Main Street, L.L.C.		2,635		2,395
RoseGarden Monaco, L.L.C.		1,193		1,165
Hillsborough 206 Holdings, L.L.C.		1,979		1,967
Grand Jersey Waterfront Urban Renewal Associates, L.L.C.		362		337
Crystal House Apartments Investors LLC		28,267		-
Company's investment in unconsolidated joint ventures	$	135,722	$	132,339

The following is a summary of the results from operations of the unconsolidated joint ventures for the period in which the Company had investment interests during the three and six months ended June 30, 2013 and 2012: (dollars in thousands)


		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2013		2012		2013		2012

Total revenues	$	91,274	$	15,354	$	103,693	$	27,058
Operating and other expenses		(81,321)		(9,080)		(89,268)		(16,259)
Depreciation and amortization		(10,083)		(2,398)		(13,174)		(4,788)
Interest expense		(3,310)		(1,652)		(5,322)		(3,342)
Net income	$	(3,440)	$	2,224	$	(4,071)	$	2,669

The following is a summary of the Company’s equity in earnings (loss) of unconsolidated joint ventures for the three and six months ended June 30, 2013 and 2012: (dollars in thousands)


		Three Months Ended				Six Months Ended
		June 30,				June 30,
Entity		2013		2012		2013		2012
Plaza VIII & IX Associates, L.L.C.	$	19	$	12	$	28	$	22
South Pier at Harborside		1,056		792		545		804
Red Bank Corporate Plaza, L.L.C.		106		101		207		204
12 Vreeland Associates, L.L.C.		116		125		24		324
Boston Downtown Crossing		651		(227)		646		(327)
Gale Jefferson, L.L.C.		-		20		68		40
Stamford SM LLC		897		910		1,782		1,266
Marbella RoseGarden, L.L.C.		(165)		-		(276)		-
RoseGarden Monaco Holdings, L.L.C.		(423)		-		(822)		-
Rosewood Lafayette Holdings, L.L.C.		(284)		-		(574)		-
PruRose Port Imperial South 15, LLC		-		-		(606)		-
Rosewood Morristown, L.L.C.		(117)		-		(241)		-
Overlook Ridge JV, L.L.C.		-		-		-		-
Overlook Ridge, L.L.C.		-		-		-		-
Overlook Ridge JV 2C/3B, L.L.C.		224		-		151		-
Roseland/North Retail, L.L.C.		(83)		-		(132)		-
BNES Associates III		(2)		-		(71)		-
Portside Master Company, L.L.C.		(68)		-		(113)		-
PruRose Port Imperial South 13, LLC		(145)		-		(278)		-
Roseland/Port Imperial Partners, L.P.		-		-		-		-
RoseGarden Marbella South, L.L.C.		(19)		-		(37)		-
PruRose Riverwalk G, L.L.C.		(192)		-		(378)		-
Elmajo Urban Renewal Associates, LLC		(82)		-		(168)		-
Estuary Urban Renewal Unit B, LLC		(34)		-		(63)		-
Riverpark at Harrison I, L.L.C.		-		-		-		-
150 Main Street, L.L.C.		-		-		-		-
RoseGarden Monaco, L.L.C.		-		-		-		-
Hillsborough 206 Holdings, L.L.C.		-		-		-		-
Grand Jersey Waterfront Urban Renewal Associates, L.L.C.		-		-		-		-
Crystal House Apartments Investors LLC		(1,535)		-		(1,522)		-
Company's equity in earnings of unconsolidated joint ventures	$	(80)	$	1,733	$	(1,830)	$	2,333

Plaza VIII and IX Associates, L.L.C.

The Company has a joint venture with Columbia Development Company, L.L.C. (“Columbia”), which owns land for future development currently used as a parking facility and located on the Hudson River waterfront in Jersey City, New Jersey, adjacent to the Company’s Harborside complex. The Company holds a 50 percent interest in the venture.

South Pier at Harborside – Hotel

The Company has a joint venture with Hyatt Corporation (“Hyatt”) which owns a 350-room hotel on the South Pier at Harborside, Jersey City, New Jersey. The Company holds a 50 percent interest in the venture.

The venture has a non-recourse mortgage loan with a balance as of June 30, 2013 of $63.4 million collateralized by the hotel property. The loan carries an interest rate of 6.15 percent and matures in November 2016. The venture also has a loan with a balance as of June 30, 2013 of $5.1 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 $5.1 million letter of credit in support of this loan, half of which is indemnified by Hyatt.

Red Bank Corporate Plaza, L.L.C.

The Company has a joint venture with The PRC Group, which owns Red Bank Corporate Plaza, a 92,878 square foot office building located in Red Bank, New Jersey. The property is fully leased to Hovnanian Enterprises, Inc. through September 30, 2017. The Company holds a 50 percent interest in the venture.

The venture has a $17.0 million mortgage loan collateralized by the office property, which bears interest at a rate of the London Interbank Offered Rate (“LIBOR”) plus 300 basis points and matures in May 2016. LIBOR was 0.19 percent at June 30, 2013. The loan includes contingent guarantees for a portion of the principal by the Company based on certain conditions. On September 22, 2011, the interest rate on 75 percent of the loan was fixed at 3.99375 percent effective from October 17, 2011 through maturity.

The Company performed management, leasing, and other services for the property owned by the joint venture and recognized $27,000 and $25,000 in fees for such services in the three months ended June 30, 2013 and 2012, respectively, and $54,000 and $50,000 for the six months ended June 30, 2013 and 2012, respectively.

12 Vreeland Associates, L.L.C.

The Company entered into a joint venture to form M-C Vreeland, LLC (“M-C Vreeland”), which acquired a 50 percent interest in 12 Vreeland Associates, L.L.C., which owns a 139,750 square foot office property located at 12 Vreeland Road, Florham Park, New Jersey.

On June 18, 2013, 12 Vreeland Associates, L.L.C. obtained a mortgage loan which is collateralized by its office property. The amortizable loan with a balance of $16.0 million as of June 30, 2013 bears interest at 2.87 percent and matures on July 2023. The venture subsequently distributed $14.8 million of the loan proceeds, of which the Company’s share was $7.4 million.

The operating agreement of M-C Vreeland provides, among other things, for the Participation Rights (see Note 16: Noncontrolling Interests in Subsidiaries – Participation Rights).

Boston Downtown Crossing

The Company had a joint venture with affiliates of Vornado Realty LP (“Vornado”) and JP Morgan Chase Bank (“JPM”), which was created to acquire and redevelop the Filenes property located in the Downtown Crossing district of Boston, Massachusetts (the “Filenes Property”). The venture was organized in contemplation of developing and converting the Filenes Property into a condominium consisting of a retail unit, an office unit, a parking unit, a hotel unit and a residential unit, aggregating 1.2 million square feet. The Company, through subsidiaries, separately holds approximately a 15 percent indirect ownership interest in each of the units. The project is subject to governmental approvals.

On April 23, 2013, the Company and JPM sold their interests in the venture for $45 million, of which the Company’s share was $13.5 million. The Company realized its share of the gain on the sale of $754,000 which is included in equity in earnings.

Gale Jefferson, L.L.C.

The Company had a joint venture with a Gale Affiliate to form M-C Jefferson, L.L.C. (“M-C Jefferson”) which owned an 8.33 percent indirect interest in One Jefferson Road LLC (“One Jefferson”), which developed and managed a 100,010 square foot office property at One Jefferson Road, Parsippany, New Jersey (the “Jefferson Property”). The property is fully leased to a single tenant through August 2025.

One Jefferson had a loan in the amount of $20.2 million, which bore interest at a rate of LIBOR plus 160 basis points and was scheduled to mature in October 2013. On January 4, 2013, Gale Jefferson, L.L.C. sold its membership interest to JPM for $3.2 million, of which the Company’s share was $1.1 million. The Company realized its share of the gain on the sale of $69,000 which is included in equity in earnings.

The Company performed management, leasing, and other services for the Jefferson Property and recognized zero and $48,000 in income for such services in the three months ended June 30, 2013 and 2012, respectively, and $16,000 and $96,000 for the six months ended June 30, 2013 and 2012, respectively.

Stamford SM LLC

On February 17, 2012, the Company entered into a joint venture to form Stamford SM LLC (“Stamford SM”) which acquired a senior mezzanine loan (the “Mezz Loan”) position in the capital stack of a 1.7 million square foot class A portfolio in Stamford, Connecticut for $40 million. The Mezz Loan has a face value of $50 million and is secured by the equity interests in a seven-building portfolio containing 1.67 million square feet of class A office space and 106 residential rental units totaling 70,500 square feet, all located in the Stamford Central Business District. The interest-only Mezz Loan has a carrying value of $43.6 million as of June 30, 2013. The Mezz Loan is subject to an agreement, which provides subject to certain conditions, that principal proceeds above $47 million are paid to another party. The Mezz Loan bears interest at LIBOR plus 325 basis points and matures in August 2013 with a one-year extension option, subject to certain conditions.

The operating agreement of Stamford SM provides, among other things, for distributions of net available cash in accordance with its members’ respective ownership percentages. The Company holds an 80 percent interest in the venture. The Company and the 20 percent member share equally in decision-making on all major decisions involving the operations of the venture.

Marbella RoseGarden, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 24.27 percent indirect residual interest in an entity that owns a 412-unit, 40-story multi-family rental property which aggregates 369,607 square feet and is located in Jersey City, New Jersey (the “Marbella Property”).

The Company owns 48.5325 percent of Marbella RoseGarden, L.L.C. (“RoseGarden”) with the remaining interest owned by MG Marbella Partners, L.L.C.

RoseGarden owns a 50 percent interest in the property-owning entity, PruRose/Marbella I, L.L.C. (“PruRose/Marbella”), with the remaining interest owned by Prudential-Marbella Partnership (“Prudential-Marbella”).

In general, the operating agreement of PruRose/Marbella provides that operating cash flows are distributed to members first to Prudential-Marbella and then to RoseGarden based on a 9.5 percent operating return on each members’ capital balance in priorities as detailed in the operating agreement. Excess operating cash flows are distributed to the members in accordance with their ownership percentages. As of June 30, 2013, Prudential-Marbella had a capital balance of $7.6 million and RoseGarden had a capital balance of $0.1 million. There was no accumulated unpaid operating return as of June 30, 2013.

Net cash flows from a capital event are distributed first to the extent of any accumulated unpaid operating return and then to repay each members’ capital balance in the same priority as operating cash flows, with any excess distributed to the members in accordance with their ownership percentages.

In general, the operating agreement of RoseGarden provides for the distribution of available cash flow to the members in accordance with their ownership percentages.

PruRose/Marbella has a mortgage loan, with a balance of $95 million as of June 30, 2013, which bears interest at 4.99 percent and matures in May 2018. The interest-only loan is collateralized by the Marbella Property.

The Company performed management, leasing, and other services for PruRose/Marbella and recognized $84,000 and $179,000 in income for such services in the three and six months ended June 30, 2013, respectively.

RoseGarden Monaco Holdings, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 15 percent indirect residual interest in an entity that owns two 50-story multi-family rental properties with 523 units (the “Monaco Property”). The Monaco Property aggregates 477,254 square feet and is located in Jersey City, New Jersey.

The Company owns 50 percent of RoseGarden Monaco Holdings L.L.C. (“RoseGarden Monaco”) with the remaining interest owned by MG Monaco, L.L.C. RoseGarden Monaco holds a 60 percent interest in Monaco Holdings, L.L.C. (“Monaco Holdings”) with the remaining interest owned by Hudson Hotel Monaco L.L.C.

Monaco Holdings owns a 50 percent interest in the property-owning entity, PruRose Monaco Holdings, L.L.C. (“PruRose Monaco”) with the remaining interest owned by The Prudential Insurance Company of America (“Prudential”).

In general, the operating agreement of PruRose Monaco provides that operating cash flows are distributed to members first to Prudential and then to Monaco Holdings based on a nine percent operating return on each members’ capital balance in priorities as detailed in the operating agreement. Excess operating cash flows are distributed to the members in accordance with their ownership percentages. As of June 30, 2013, Prudential had a capital balance of $76 million and an accumulated unpaid operating return of $3.0 million. It is not anticipated that Monaco Holdings will be required to fund any capital.

The operating agreement of Monaco Holdings provides, among other things, for the distributions of net cash flows to the members, first, in respect of unrecovered capital on a pro rata basis, with any remaining cash flow in accordance with their ownership percentages.

The operating agreement of RoseGarden Monaco provides, among other things, for the distribution of available cash flow to the members in accordance with their ownership percentages.

PruRose Monaco has an interest-only mortgage loan, collateralized by the property with a balance of $165 million as of June 30, 2013. The mortgage loan bears interest at 4.19 percent and matures in February 2021.

The Company performed management, leasing, and other services for PruRose Monaco and recognized $114,000 and $235,000 in income for such services in the three and six months ended June 30, 2013, respectively.

Rosewood Lafayette Holdings, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 25 percent indirect residual interest in an entity that owns a 217-unit multi-family rental property which aggregates 185,733 square feet and is located in Morristown, New Jersey (the “Highlands Property”).

The Company owns 50 percent of Rosewood Lafayette Holdings, L.L.C. (“Rosewood”) with the remaining interest owned by Woodmont Transit Village, L.L.C.

Rosewood owns a 50 percent interest in the property-owning entity, Rosewood Lafayette Commons, L.L.C. (“Rosewood Lafayette”) with the remaining interest owned by Prudential.

In general, the operating agreement of Rosewood Lafayette provides that operating cash flows are distributed to members first to Prudential and then to Rosewood based on an eight percent operating return to December 23, 2012 and nine percent thereafter on each members’ capital balance in priorities as detailed in the operating agreement. Excess operating cash flows are distributed to the members in accordance with their ownership percentages. As of June 30, 2013, Prudential had a capital balance of $29.4 million and an accumulated unpaid operating return of $1.8 million. It is not anticipated that Rosewood will be required to fund any capital.

In general, the operating agreement of Rosewood provides for the distribution of available cash flow to the members in accordance with their ownership percentages.

Rosewood Lafayette has a mortgage loan, with a balance of $39.7 million as of June 30, 2013, which bears interest at 4.0 percent and matures in July 2015. The loan requires principal and interest payments based on a 30-year amortization schedule and is collateralized by the Highlands Property.

The Company performed management, leasing, and other services for Rosewood Lafayette and recognized $48,000 and $94,000 in income for such services in the three and six months ended June 30, 2013, respectively.

PruRose Port Imperial South 15, LLC

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 50 percent residual interest in PruRose Port Imperial South 15, LLC (“Port Imperial 15”), an entity that owns a 236-unit multi-family rental property which aggregates 214,402 square feet and is located in Weehawken, New Jersey (the “RiversEdge Property”).

Port Imperial 15 is owned 50 percent by the Company and 50 percent by PRII Port Imperial South 15, LLC (“Prudential-Port”).

In general, the operating agreement of Port Imperial 15 provides that operating cash flows are distributed to members first to Prudential-Port and then to the Company based on a nine percent operating return on each members’ capital balance in priorities as detailed in the operating agreement. Excess operating cash flows are distributed to the members in accordance with their ownership percentages. As of June 30, 2013, Prudential-Port had a capital balance of $33.3 million and an accumulated unpaid operating return of $4.7 million. It is not anticipated that the Company will be required to fund any capital.

Subject to a letter agreement, 20 percent of distributions received by the Company, in excess of an eight percent IRR shall be paid to a third party based on certain conditions.

Port Imperial 15 has a mortgage loan, with a balance of $57 million as of June 30, 2013, which bears interest at LIBOR plus 235 basis points and matures in August 2013. The loan provides, subject to certain conditions, two one-year extension options with a fee of 25 basis points each. The interest-only loan is collateralized by the RiversEdge Property. On June 30, 2010, the interest rate on the loan was fixed at 3.78 percent through June 30, 2013.

The Company performed management, leasing, and other services for Port Imperial 15 and recognized $62,000 and $123,000 in income for such services in the three and six months ended June 30, 2013, respectively.

Rosewood Morristown, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 50 percent interest in Rosewood Morristown, L.L.C. (“Rosewood”) with the remaining interest owned by Woodmont Epsteins, L.L.C.

Rosewood owns a 50 percent interest in Morristown Epsteins, L.L.C. (“Morristown”) with the remaining 50 percent owned by a third party. Morristown owns an interest in a 76-unit-for-sale luxury condominium community (the “40 Park Condominiums Property”), three of which were unsold at acquisition, all of which have been sold as of June 30, 2013. Morristown also owns land where it intends to build a 91-unit, seven-story, multi-family rental property (the “Lofts at 40 Park Property”). Morristown also owns a 50 percent residual interest in the entity that owns a 130-unit multi-family rental property (the “Metropolitan Property”) and approximately 60,000 square feet of retail space in two buildings (the “Shops”), Epsteins B Rentals, L.L.C. (“Epsteins”), with the remaining interest owned by Prudential. All of the properties are located in Morristown, New Jersey.

The operating agreement of Morristown provides, among other things, for the distribution of net available cash to the members, as follows:

·	to pay accrued and unpaid interest at a rate of eight percent on the balance note, as defined;

·	to Rosewood in an amount equal to its current year’s annual preferred return rate of eight percent on its adjusted capital, as defined;

·	to pay the outstanding balance remaining on the balance note, which was $975,000 as of June 30, 2013;

·	to Rosewood in an amount equal to its adjusted capital balance, which was $3.2 million as of June 30, 2013; and

·	to the members in accordance with their ownership percentages.

The operating agreement of Rosewood provides, among other things, for the distribution of net cash flow to the members in accordance with their ownership percentages.

PR II/Morristown Prudential, LLC, an affiliate of Prudential, has a 15 percent participating interest in the net sales proceeds from the sale of the 40 Park Condominiums Property units, as defined, pursuant to an August 2011 Participation Agreement, related to a previously satisfied mezzanine loan.

In general, the operating agreement of Epsteins provides that operating cash flows are distributed to members first to Prudential and then to Rosewood based on a nine percent return on each members’ capital balance in priorities as detailed in the operating agreement. Excess operating cash flows are distributed to the members in accordance with their ownership percentages. As of June 30, 2013, Prudential had a capital balance of $14.8 million and Rosewood had a capital balance of $0.7 million. There was no accumulated unpaid operating return as of June 30, 2013.

Net cash flows from a capital event are distributed first to the extent of any accumulated unpaid operating return balance and then to repay each members’ capital balance in the same priority as operating cash flows, with any excess distributed to the members in accordance with their ownership percentages.

Epsteins has a mortgage loan, with a balance of $48.5 million as of June 30, 2013, which bears interest at LIBOR plus 275 basis points, matures in February 2014 and requires a $1.9 million principal payment in August 2013. The interest-only loan is collateralized by the Metropolitan Property.

Morristown has a mortgage loan, with a balance of $1.1 million as of June 30, 2013, which bears interest at LIBOR plus 250 basis points and matures in September 2013. The loan is collateralized by the Lofts at 40 Park Property and is fully guaranteed by the Company.

The Company performed management, leasing, and other services for Epsteins and recognized $44,000 and $87,000 in income for such services in the three and six months ended June 30, 2013, respectively.

Overlook Ridge JV, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 25 percent indirect interest in an entity that owns a 251-unit multi-family rental property (“Quarrystone I Property”) and a 50 percent indirect interest in an entity that owns a land parcel located in Malden, Massachusetts (“Overlook Phase III”). The Quarrystone I Property aggregates 278,721 square feet and is located in Malden, Massachusetts.

The Company owns 50 percent of Overlook Ridge JV, L.L.C. (“Overlook Ridge JV”) with the remaining interest owned by Rowe Contracting Company (“Rowe”).

Overlook Ridge JV owns a 50 percent interest in the property-owning entity, LR JV-C Associates, L.L.C. (“LR Overlook”) with the remaining interest owned by Lennar Massachusetts Properties Inc. (“Lennar”) and a 100 percent interest in the property-owning entity LR Overlook Phase III, L.L.C. (“LR Overlook Phase III”).

In general, the operating agreement of LR Overlook provides, among other things, for distributions of cash flow to the members in accordance with their ownership percentages, subject to the repayment of priority partnership loans. As of June 30, 2013, Lennar has a priority partnership loan of $18.8 million, which has an accrued interest balance of $13.5 million.

The operating agreement of Overlook Ridge JV provides, among other things, for the distribution of distributable cash, as defined, to the members, as follows:

·	First, to the members in proportion to their respective unrecovered capital percentages, as defined in the agreement, until each member’s unrecovered capital has been reduced to zero; and

·	Second, to the members in accordance with their ownership percentages.

LR Overlook has mortgage loans, with a balance of $69.9 million as of June 30, 2013, which mature in March 2016. The senior loan, with a balance of $52.9 million, which bears interest at LIBOR plus 200 basis points is collateralized by the Quarrystone I property. The junior loan, with a balance of $17 million, which bears interest at LIBOR plus 90 basis points is collateralized by a $17 million letter of credit provided by an affiliate of Lennar.

LR Overlook Phase III has a mortgage loan, with a balance of $5.6 million as of June 30, 2013, which bears interest at a rate of LIBOR plus 250 basis points and matures in April 2015. The loan provides, subject to certain conditions, a one-year extension option with a fee of 25 basis points. The interest-only loan is collateralized by the Overlook Phase III Land. The Company has guaranteed repayment of up to $1.5 million and all interest under the loan.

The Company performed management, leasing, and other services for LR Overlook and recognized $45,000 and $90,000 in income for such services in the three and six months ended June 30, 2013, respectively.

Overlook Ridge, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 50 percent interest in land parcels at Overlook Ridge, L.L.C. (“Overlook Ridge”), referred to as Sites IIIA, IIIC, and IIID (“Overlook Land”), which are located in Malden and Revere, Massachusetts. The remaining interest in the property-owning entity, Overlook Ridge, is owned by Rowe.

The operating agreement of Overlook Ridge provides, among other things, for the distribution of net cash flow to the members, as follows:

·	First, to the members in proportion to their unrecovered capital percentages, as defined, until the cumulative amounts distributed equal such member’s return of six percent on the unrecovered capital; and

·	Second, to the members in accordance with their ownership percentages.

In addition, the operating agreement provides that both Rowe and the Company receive a notional land capital account based on the development of each Overlook Land, as defined. Based on the anticipated development of each remaining Overlook Land, the total notional land capital account is approximately $20 million, and is allocated 97 percent to Rowe and three percent to the Company.

Overlook Ridge has a mortgage loan collateralized by Overlook Land, not to exceed $17.4 million, with a balance of $16.3 million as of June 30, 2013. The loan bears interest at a rate of LIBOR plus 350 basis points and matures in March 2014. The loan provides, subject to certain conditions, a one-year extension option with a fee of 25 basis points. The Company has guaranteed repayment of the outstanding principal balance of the loan.

Overlook Ridge JV 2C/3B, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 25 percent indirect residual interest in a to-be-built, 371-unit multi-family rental development spanning four buildings (the “Overlook 2C/3B Project”) which is located in Malden, Massachusetts. Construction began in January 2013 with anticipated initial deliveries in the first quarter 2014.

The Company owns a 50 percent interest in Overlook Ridge JV 2C/3B, L.L.C. (“Overlook 2C/3B”) with the remaining interest owned by Rowe. Overlook 2C/3B owns a 50 percent interest in the development project-owning entity, Overlook Ridge Apartments Investors LLC (“Overlook Apartments Investors”) with the remaining interests owned by Overlook Ridge Apartments Member LLC (“Overlook Apartments Member”). Pursuant to the operating agreement Overlook Apartments Member is required to fund $23.9 million of the total development costs of $79.4 million, with the balance to be funded by a $55.5 million construction loan.

In general, the operating agreement of Overlook Apartments Investors provides that operating cash flows are distributed to members first to Overlook Apartments Member and then to Overlook 2C/3B based on a 6.5 percent preferred return on each members’ capital balance in priorities as detailed in the operating agreement. Excess operating cash flows are distributed to the members in accordance with their ownership percentages. As of June 30, 2013, Overlook Apartments Member had a capital balance of $22.6 million with an accumulated unpaid preferred return of $0.7 million. It is anticipated that Overlook 2C/3B will not be required to fund any capital.

Net cash flows from a capital event are distributed first to the extent of any accumulated unpaid preferred return, then to repay each members’ capital balance in the same priority as operating cash flows, then 100 percent to Overlook Apartments Member until it receives a nine percent IRR, and then 70 percent to Overlook Apartments Member and 30 percent to Overlook 2C/3B, pari passu, until Overlook Apartments Member receives an 11 percent IRR, as defined, with any excess distributed to the members in accordance with their ownership percentages.

Overlook 2C/3B and its affiliates are restricted from commencing any new residential real property development at Overlook Ridge until January 2015, without the prior written consent of Overlook Apartments Member. Thereafter, Overlook Apartments Member has a right of first offer to participate in future Overlook Ridge Projects, all as more fully set forth in the operating agreement of Overlook Ridge Apartments Investors.

Overlook Apartments Investors has a construction loan not to exceed $55.5 million with no balance at June 30, 2013, which bears interest at LIBOR plus 250 basis points and matures in December 2015. The loan provides, subject to certain conditions, two one-year extension options with a fee of 25 basis points each. The Company has guaranteed lien-free completion of the project to the lender and Overlook Apartments Member. The Company has also guaranteed repayment of $8.3 million of the loan. Upon the project achieving a debt service coverage ratio of 1.25, as defined, the repayment guaranty ends. Additionally, the Company has guaranteed payment of all interest due under the loan. On January 18, 2013, the interest rate on an amount not expected to exceed 95 percent of the outstanding loan balance was fixed at 3.0875 percent from September 3, 2013 to November 2, 2015.

The operating agreement of Overlook 2C/3B provides, among other things, for the distribution of net operating cash flow to the members, as follows:

·	First, to each member in proportion to and to the extent of such member’s unrecovered return of nine percent on unrecovered capital; and

·	Second, to the members in accordance with their ownership percentages.

Rowe has an unrecovered notional capital account balance of $7.2 million and the Company has an unrecovered capital account with $0.2 million associated with its land capital as of June 30, 2013.

The Company performed development, management, and other services for Overlook Apartments Investors and recognized $109,000 and $178,000 in income for such services in the three and six months ended June 30, 2013, respectively.

Roseland/North Retail, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 20 percent residual interest in Port Imperial North Retail, L.L.C. (“PI North Retail”), an entity that owns commercial condominium units (the “Riverwalk Property”), with the remaining interest owned by PR II Port Imperial Retail, LLC (“Prudential-PI”). The Riverwalk Property aggregates 30,745 square feet of retail space and is located in West New York, New Jersey.

In general, the operating agreement of PI North Retail provides that operating cash flows are distributed first to Prudential-PI and then to the Company based on a nine percent operating return on each members’ capital balance in priorities as detailed in the operating agreement. Excess operating cash flows are distributed to the members in accordance with ownership percentages. As of June 30, 2013, Prudential-PI had a capital balance of $4.3 million and an accumulated unpaid operating return of $1.5 million and the Company had no capital balance.

The Company performed management, leasing, and other services for PI North Retail and recognized $7,000 and $15,000 in income for such services in the three and six months ended June 30, 2013, respectively.

BNES Associates III

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 31.25 percent indirect interest in an entity that owns a 106,345 square foot fully-leased office property located in West Orange, New Jersey.

The Company owns 50 percent of BNES Associates III (“BNES”) with the remaining interest owned by L.A.H. Partners Crystal Lake, L.L.C. BNES owns a 62.50 percent interest in the property-owning entity, The Offices at Crystal Lake, L.L.C. (“Crystal Lake”).

The operating agreement of Crystal Lake provides, among other things, for the distribution of net cash flow to the members in accordance with their percentage interests.

Crystal Lake has a mortgage loan, with a balance of $7.6 million as of June 30, 2013 collateralized by the office property, which bears interest at 4.76 percent and matures in November 2023.

Portside Master Company, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 38.25 percent indirect residual interest in a to-be-built, 176-unit multi-family rental property (“Portside at Pier One Building Seven Project”). The Portside at Pier One Building Seven Project is located in East Boston, Massachusetts and began construction in December 2012 with anticipated initial deliveries in the third quarter 2014. The project is subject to a ground lease with the Massachusetts Port Authority. The ground lease provides for fixed and percentage rent.

The Company owns 85 percent of Portside Master Company, L.L.C. (“Portside Master”) with the remaining interest owned by Portside Boston, L.L.C. Portside Master holds a 45 percent interest in the development project-owning entity, Portside Apartment Holdings, L.L.C. (“Portside Apartment Holdings”) with the remaining interest owned by PR II Portside Investors L.L.C. (“Prudential Portside”). Pursuant to the operating agreement, Prudential Portside is required to fund $23.8 million of the estimated total development costs of $66.3 million, with the balance to be funded by a $42.5 million construction loan.

In general, the operating agreement of Portside Apartment Holdings provides that operating cash flows are distributed to members first to Prudential Portside and then to Portside Master based on a nine percent operating return on each members’ capital balance in priorities as detailed in the operating agreement. Excess operating cash flows are distributed to the members in accordance with their ownership percentages. As of June 30, 2013, Prudential Portside had a capital balance of $8.7 million and an unpaid operating return of $0.3 million. It is anticipated that Portside Master will not be required to fund any capital.

Net cash flows from a capital event are distributed first to the extent of any accumulated unpaid operating return, then to repay each members’ capital balance in the same priority as operating cash flows, and then 65 percent to Prudential Portside and 35 percent to Portside Master, pari passu, until Prudential Portside receives a 12 percent IRR, as defined, with any excess distributed to the members in accordance with their ownership percentages.

The operating agreement of Portside Master provides, among other things, for the distribution of net cash flow to the members in accordance with their ownership percentages.

Portside Apartment Holdings has a construction loan in an amount not to exceed $42.5 million with no balance at June 30, 2013, which bears interest at LIBOR plus 250 basis points and matures in December 2015. The loan provides, subject to certain conditions, two one-year extension options with a fee of 12.5 basis points for year one and 25 basis points for year two. The Company has guaranteed lien-free completion of the project to the lender, Prudential Portside and Massachusetts Port Authority. The Company has also guaranteed repayment of 50 percent of the loan until project completion, when the repayment guaranty is reduced to 25 percent. The Company’s repayment guaranty is further reduced to 10 percent upon achieving a debt service coverage ratio of 1.25, as defined. Additionally, the Company has guaranteed payment of all interest due under the loan.

The Company performed development, management, and other services for Portside Apartment Holdings and recognized $169,000 and $211,000 in income for such services in the three and six months ended June 30, 2013, respectively.

PruRose Port Imperial South 13, LLC

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 20 percent residual interest in a to-be-built, 280-unit multi-family rental property (“Port Imperial 13”) located in Weehawken, New Jersey. Port Imperial 13 began construction in January 2013 with anticipated initial deliveries in the fourth quarter 2014.

The remaining interest in the PruRose Port Imperial South 13, LLC (“PruRose 13”) is owned by PR II Port Imperial South 13 Investor LLC (“Prudential 13”). Pursuant to the operating agreement, Prudential 13 is required to fund $23.1 million of the estimated total development costs of $96.4 million, not including contributed land capital of $21 million, which is allocated $19.2 million to Prudential 13 and $1.8 million to the Company, with the balance to be funded by a $73.4 million construction loan.

In general, the operating agreement of PruRose 13 provides that operating cash flows are distributed to members first to Prudential 13 and then to the Company based on a nine percent operating return on each members’ capital balance in priorities as detailed in the operating agreement. Excess operating cash flows are distributed to the members in accordance with their ownership percentages. As of June 30, 2013, Prudential 13 had a capital balance of $32.5 million and an accumulated unpaid operating return of $1.8 million and the Company had a capital balance of $1.8 million and an accumulated unpaid operating return of $0.1 million.

Subject to an agreement, 20 percent of distributions received by the Company, in excess of an eight percent IRR, shall be paid to another party.

PruRose 13 has a construction loan in an amount not to exceed $73.4 million with no balance at June 30, 2013. The loan bears interest at a rate of LIBOR plus 215 basis points and matures in June 2016. The loan provides, subject to certain conditions, a one-year extension option followed by a six-month extension option with a fee of 25 basis points each. The Company has guaranteed lien-free completion of the project to the lender and Prudential. The Company has also guaranteed repayment of up to $11 million of the loan. The Company’s guaranty of repayment is reduced to $7.4 million upon achieving a debt service coverage ratio of 1.25, and to zero upon achieving a debt service coverage ratio of 1.40, as defined. Additionally, the Company has guaranteed payment of all interest due under the loan. On December 28, 2012, the interest rate on an amount not expected to exceed 95 percent of the outstanding loan balance was fixed at 2.79 percent from July 1, 2013 to January 1, 2016.

The Company performed development, management, and other services for PruRose 13 and recognized $283,000 and $325,000 in income for such services in the three and six months ended June 30, 2013, respectively.

Roseland/Port Imperial Partners, L.P.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 20 percent residual interest in a to-be-built, 363-unit multi-family rental property (the “Parcel C Project”), undeveloped land parcels, parcels 6, I and J (“Port Imperial North Land”), and a parcel of land with a ground lease to a retail tenant all located in West New York, New Jersey.

The remaining interests in the development project-owning entity, Roseland/Port Imperial Partners, L.P. (“Roseland/PI”) are owned 79 percent by Prudential and one percent by Prudential-Port Imperial LLC (“Prudential LLC”).

The operating agreement of Roseland/PI provides, among other things, for the distribution of net cash flow to the members, as follows:

·	to Prudential and Prudential LLC, in proportion to the excess of their operating return of ten percent on Prudential’s Parcel C contribution, as defined, accrued to the date of such distribution over the aggregate amounts previously distributed to such partner for such return;

·	to the partners, to the extent of any excess of such partner’s operating return of ten percent on its additional capital contributions over the aggregate amounts previously distributed for such return; and

·	to the partners in accordance with their percentage interests.

As of June 30, 2013, Prudential and Prudential LLC had a Parcel C capital balance of $18.2 million and an accumulated unpaid operating return of $3.3 million and the Company had a capital balance of $8,000. Construction of the Parcel C Project is expected to start in 2015.

In addition, the operating agreement provides each member a land capital account associated with the Port Imperial North Land. As of June 30, 2013, Prudential and Prudential LLC had a land capital account balance of $58.1 million and the Company had a land capital account of $5.1 million. The land capital account balances do not earn a return and will be contributed to a development entity upon construction start for each development parcel, as defined. Also, as of June 30, 2013, Prudential and Prudential LLC had a capital balance of $394,000 and the Company had a capital balance of $98,000 related to the Port Imperial North land.

RoseGarden Marbella South, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 24.27 percent indirect residual interest in a to-be-built, 311-unit high-rise multi-family rental property (the “Marbella II Project”) which is located in Jersey City, New Jersey. The Marbella II Project is scheduled to begin construction in the third quarter 2013.

The Company owns 48.5325 percent of RoseGarden Marbella South, L.L.C. (“RoseGarden South”) with the remaining interest owned by MG Marbella Partners II, L.L.C.

RoseGarden South holds a 50 percent interest in the development project-owning entity, PruRose Marbella II, L.L.C. (“PruRose/Marbella II”), with the remaining interest owned by PRISA III Investments LLC (“Prudential-Marbella II”). Total estimated development costs of $132.1 million are anticipated to be funded with $54.7 million of member capital, $41.4 million from Prudential-Marbella II and $13.3 million from the Company, with the balance to be funded by a $77.4 million construction loan.

In general, the operating agreement of PruRose/Marbella II provides that operating cash flows are distributed to members pro-rata based on a nine percent operating return on each members’ capital balance in priorities as detailed in the operating agreement. Excess operating cash flows are distributed to the members in accordance with their ownership percentages. As of June 30, 2013, Prudential-Marbella II had a capital balance of $3.2 million and an accumulated unpaid operating return of $0.3 million and RoseGarden South had a capital balance of $0.7 million with an unpaid operating return of $4,000.

Net cash flow for RoseGarden South is distributed to the members in accordance with their ownership percentages.

The Company performed development, management and other services for PruRose Marbella II and recognized $3,000 and $18,000 in income for such services in the three and six months ended June 30, 2013, respectively.

PruRose Riverwalk G, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 25 percent indirect residual interest in a to-be-built, 12-story, 316-unit multi-family rental property (the “RiverTrace Project”). The RiverTrace Project is located in West New York, New Jersey. The RiverTrace Project began construction in November 2011 with anticipated initial deliveries in the third quarter 2013.

The Company owns 50 percent of PruRose Riverwalk G, L.L.C. (“PruRose Riverwalk”) with the remaining interest owned by Prudential.

PruRose Riverwalk owns a 50 percent interest in the project-owning entity, Riverwalk G Urban Renewal, L.L.C. (“Riverwalk G”), with the remaining interest owned by West New York Parcel G Apartments Investors, LLC (“Investor”). Pursuant to the operating agreement, Investor is required to fund $35 million of the estimated total development costs of $118.1 million, with the balance to be funded by an $83.1 million construction loan.

In general, the operating agreement of Riverwalk G provides that operating cash flows are distributed to members first to Investor and then to PruRose Riverwalk based on a 7.75 percent operating return on each members’ capital balance in priorities as detailed in the operating agreement. Excess operating cash flows are distributed to the members in accordance with their ownership percentages. As of June 30, 2013, Investor had a capital balance of $35 million and an unpaid operating return of $5.2 million. It is not anticipated that PruRose Riverwalk will be required to fund any capital.

Net cash flows from a capital event are distributed first to the extent of any accumulated unpaid operating return, then to repay each members’ capital balance in the same priority as operating cash flows, and then 100 percent to Investor until Investor receives a 7.75 percent IRR, as defined, with any excess distributed to the members in accordance with their ownership percentages.

The operating agreement of PruRose Riverwalk provides, among other things, for the distribution of net cash flow to the members in accordance with their ownership percentages. In addition, the operating agreement requires that the initial $1.3 million in distributions to the Company be redirected to Prudential.

Riverwalk G has a construction loan in an amount not to exceed $83.1 million, with a balance of $41.4 million as of June 30, 2013, which bears interest at six percent and matures in July 2021. The interest-only loan is collateralized by the RiverTrace Project. The Company has guaranteed a lien-free completion of the project to the lender and Investor. The Company fully guarantees the loan until six months after completion of the project.

The Company performed development, management, and other services for Riverwalk G and recognized $174,000 and $349,000 in income for such services in the three and six months ended June 30, 2013, respectively.

ELMAJO Urban Renewal Associates, LLC/Estuary Urban Renewal Unit B, LLC

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 7.5 percent residual interest in a to-be-built, three-building, 582 multi-family rental property located in Weehawken, New Jersey (the “Lincoln Harbor Project”), with the remaining interest owned by ELMAJO Management, Inc. (“EMI”). The first phase, Building A, with 181 units, and Building C, with 174 units, began construction in 2012 and the second phase, Building B, with 227 units, began construction in January 2013. On March 13, 2013, Estuary Urban Renewal Unit B, LLC (“Estuary UR”) was formed to own and develop the second phase, Building B. Estimated total development costs for the Lincoln Harbor Project is $218.3 million. EMI is required to fund any capital requirements in excess of construction financing. The Company has no funding requirements to the venture.

The operating agreements of ELMAJO Urban Renewal Associates, LLC (“ELMAJO UR”), the entity which owns the Lincoln Harbor Project, Building A and C, and Estuary UR, the entity that owns the Lincoln Harbor Project Building B, provides, among other things, for the distribution of net distributable cash to the members, as follows:

·	First, to the members to the extent of and in proportion to their respective preferred return of 8.50 percent on the member’s unrecovered capital; and

·	Second, to the members in accordance with their ownership percentages.

As of June 30, 2013, EMI and Estuary UR have a combined capital balance of $68.6 million and an unpaid preferred return of $11.8 million.

ELMAJO UR has a construction loan for Building A and Building C in an amount not to exceed $95 million, with a balance of $26.4 million as of June 30, 2013, which bears interest at LIBOR plus 210 basis points and matures in June 2016. The loan provides, subject to certain conditions, a one-year extension option with a fee of 25 basis points.

The Company performed development and other services for ELMAJO UR and Estuary UR and recognized $240,000 and $480,000 in income for such services in the three and six months ended June 30, 2013, respectively.

Riverpark at Harrison I, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 36 percent interest in a multi-phase project located in Harrison, New Jersey (the “Riverpark Project”). Construction of a 141-unit multi-family rental property of the Riverpark Project is projected to start in the near term. Estimated total development costs of $28.2 million are expected to be funded with a $23.4 million construction loan, with the balance to be funded with member capital. The Company is required to fund 40.5 percent of capital.

The remaining interests in the development project-owning entity, Riverpark at Harrison I Urban Renewal, L.L.C. (“Riverpark”) are owned 36 percent by Chall Enterprises, L.L.C. and 28 percent by an investor group.

In general, the operating agreement of Riverpark provides, among other things, for the distribution of net cash flow to the members in accordance with their ownership percentages.

On June 27, 2013, Riverpark obtained a construction loan in an amount not to exceed $23.4 million with no balance at June 30, 2013. The loan, which bears interest at LIBOR plus 235 basis points, matures in June 2016 and provides, subject to certain conditions, two one-year extension options with a fee of 20 basis points for each year. The Company has guaranteed lien-free completion of the project to the lender and repayment of 25 percent of the principal amount at maturity. The Company’s repayment guaranty is reduced to 10 percent upon project completion, achieving a debt service coverage ratio of 1.30 and satisfaction of the loan-to-value ratio of 65 percent, as defined. Additionally, the Company has guaranteed payment of all interest due under the loan.

150 Main Street, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 26.25 percent interest in a to-be-built, 108-unit multi-family rental property located in Eastchester, New York (the “Eastchester Project”).

The remaining interests in the development project-owning entity, 150 Main Street, L.L.C. (“Eastchester”) are owned 26.25 percent by JMP Eastchester, L.L.C. and 47.5 percent by Hudson Valley Land Holdings, L.L.C. (“HVLH”). Subsequent to quarter end, operating agreement modifications have increased the Company’s effective ownership to 76.25 percent. The Eastchester Project is expected to start in the near term. Estimated total development costs of $46 million are expected to be funded with a $27.5 million construction loan and the balance of $18.5 million to be funded with member capital.

The operating agreement of Eastchester provides, among other things, for the distribution of net operating cash flow to the members, as follows:

·	to HVLH to the extent of its accrued but unpaid preferred return of eight percent on the unrecovered allocated land value, as defined;

·	to the members, pro rata, to the extent of their respective accrued but unpaid return of eight percent on their unrecovered capital percentages; and

·	to the members in accordance with their ownership percentages.

Net cash flows from a capital event are distributed to the members, first, in respect of unrecovered return and then unrecovered capital on a pro rata basis, with any excess in accordance with their ownership percentages.

The Company performed development and other services for Eastchester and recognized zero and $15,000 in income for such services in the three and six months ended June 30, 2013, respectively.

RoseGarden Monaco, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 41.67 percent interest in the rights to acquire a land parcel (“San Remo Land”) located in Jersey City, New Jersey, pursuant to an agreement which expires in 2017.

The remaining interest in the rights-owning entity, RoseGarden Monaco, L.L.C. is owned by MG Monaco Partners, L.L.C. The operating agreement requires capital contributions and distributions in accordance with their ownership percentages.

Hillsborough 206 Holdings, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 50 percent interest in a site zoned for retail uses (excluding supermarkets) which is located in Hillsborough, New Jersey.

The remaining interest in the property-owning entity, Hillsborough 206 Holdings, L.L.C. (“Hillsborough 206”) is owned by BNE Investors VIII, L.L.C.

The operating agreement of Hillsborough 206 provides, among other things, for the distribution of distributable cash to the members, in accordance with their ownership percentages.

Grand Jersey Waterfront Urban Renewal Associates, L.L.C.

On October 23, 2012, as part of the Roseland Transaction, the Company acquired a 50 percent interest in an entity designated as redeveloper of a land parcel (“Liberty Landings”) located in Jersey City, New Jersey. The remaining interest in the entity, Grand Jersey Waterfront Urban Renewal Associates, L.L.C., is owned by Waterfront Realty Company, L.L.C.

Capital requirements are funded in accordance with ownership percentages.

Crystal House Apartments Investors LLC

On March 20, 2013, the Company entered into a joint venture with a fund advised by UBS Global Asset Management (“UBS”) to form Crystal House Apartments Investors LLC (“CHAI”) which acquired the 828-unit multi-family property known as Crystal House located in Arlington, Virginia (“Crystal House Property”) for approximately $262.5 million. The acquisition included vacant land to accommodate the development of approximately 295 additional units of which 252 are currently approved. The Company holds a 25 percent interest in the Crystal House property and a 50 percent interest in the vacant land.

In general, the operating agreement of CHAI provides that net operating cash flows are distributed to the members in accordance with ownership percentages. Net cash flows from a capital event are distributed first to the members in accordance with ownership percentages until they receive a nine percent IRR, as defined, with any excess distributed 50 percent to the Company and 50 percent to UBS.

CHAI obtained a mortgage loan on the acquired property, which has a balance of $165 million as of June 30, 2013, bears interest at 3.17 percent and matures in March 2020. The loan, which is interest-only during the initial 5-year term and amortizable over a 30-year period for the remaining term, is collateralized by the Crystal House Property.

The Company performed management, leasing and other services for CHAI and recognized $119,000 in income for such services in the three and six months ended June 30, 2013.

5. DEFERRED CHARGES, GOODWILL AND OTHER ASSETS



		June 30,		December 31,
(dollars in thousands)		2013		2012
Deferred leasing costs	$	263,701	$	267,197
Deferred financing costs		22,625		20,447
		286,326		287,644
Accumulated amortization		(125,037)		(131,613)
Deferred charges, net		161,289		156,031
Notes receivable		3,683		-
In-place lease values, related intangible and other assets, net		17,431		19,284
Goodwill		2,945		2,945
Prepaid expenses and other assets, net		29,267		26,614

Total deferred charges, goodwill and other assets	$	214,615	$	204,874

6. RESTRICTED CASH

Restricted cash includes tenant 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)



		June 30,		December 31,
		2013		2012
Security deposits	$	7,774	$	7,165
Escrow and other reserve funds		11,865		12,174

Total restricted cash	$	19,639	$	19,339

7. DISCONTINUED OPERATIONS

Property Sales

The Company sold eight office properties, aggregating 1.2 million square feet for total net sales proceeds of approximately $165.5 million during the six months ended June 30, 2013, and has presented them as discontinued operations in its statement of operations for all periods presented (See Note 3: Real Estate Transactions – Property Sales):

Held for Sale

The Company identified the following property as held for sale as of June 30, 2013 and presented its results as discontinued operations in its statements of operations for all periods presented (dollars in thousands):

# of

Rentable

Gross

Accumulated

Net

Property

Location

Bldgs.

Square Feet

Book Value

Depreciation

Book Value

106 Allen Road (a)

Bernards Township, New Jersey

132,010

17,895

(5,044)

12,851

(a) On July 10, 2013, the Company sold this property for approximately $18.0 million.

As the Company disposed of 2200 Renaissance Boulevard in King of Prussia, Pennsylvania; 95 Chestnut Ridge Road in Montvale, New Jersey; and three office buildings in Moorestown, New Jersey during the year ended December 31, 2012, the Company has presented the results from these assets as discontinued operations in its statements of operations for all periods presented.

The following table summarizes income from discontinued operations and the related realized gains (losses) and unrealized losses on disposition of rental property, net, for the three and six month periods ended June 30, 2013 and 2012: (dollars in thousands)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
		2013		2012		2013		2012
Total revenues	$	2,742	$	7,355	$	7,804	$	15,155
Operating and other expenses		(1,109)		(2,766)		(3,428)		(5,930)
Depreciation and amortization		(234)		(1,678)		(974)		(3,716)
Interest expense (net of interest income)		(35)		(80)		(116)		(589)

Income from discontinued operations		1,364		2,831		3,286		4,920

Loss from early extinguishment of debt		(703)		-		(703)		-

Unrealized losses on disposition of rental property		-		(1,634)		-		(2,133)
Realized gains (losses) on
disposition of rental property, net		37,609		-		37,609		4,511

Realized gains (losses) and unrealized losses on
disposition of rental property, net		37,609		(1,634)		37,609		2,378

Total discontinued operations, net	$	38,270	$	1,197	$	40,192	$	7,298

8. SENIOR UNSECURED NOTES

On May 8, 2013, the Company completed the sale of $275 million face amount of 3.15 percent senior unsecured notes due May 15, 2023 with interest payable semi-annually in arrears. The net proceeds from the issuance of approximately $266.5 million, after underwriting discount and offering expenses, were used primarily to repay outstanding borrowings under the Company’s unsecured revolving credit facility.

A summary of the Company’s senior unsecured notes as of June 30, 2013 and December 31, 2012 is as follows: (dollars in thousands)


		June 30,		December 31,	Effective
		2013		2012	Rate (1)
4.600% Senior Unsecured Notes, due June 15, 2013 (2)		-	$	99,987	4.742	%
5.125% Senior Unsecured Notes, due February 15, 2014	$	200,150		200,270	5.110	%
5.125% Senior Unsecured Notes, due January 15, 2015		149,856		149,810	5.297	%
5.800% Senior Unsecured Notes, due January 15, 2016		200,199		200,237	5.806	%
2.500% Senior Unsecured Notes, due December 15, 2017		248,707		248,560	2.803	%
7.750% Senior Unsecured Notes, due August 15, 2019		248,693		248,585	8.017	%
4.500% Senior Unsecured Notes, due April 18, 2022		299,475		299,445	4.612	%
3.150% Senior Unsecured Notes, due May 15, 2023		269,019		-	3.517	%

Total senior unsecured notes	$	1,616,099	$	1,446,894

(1)	Includes the cost of terminated treasury lock agreements (if any), offering and other transaction costs and the discount/premium on the notes, as applicable.

(2)	These notes were paid at maturity using available cash.

The terms of the Company’s senior unsecured notes include certain restrictions and covenants which require compliance with financial ratios relating to the maximum amount of debt leverage, the maximum amount of secured indebtedness, the minimum amount of debt service coverage and the maximum amount of unsecured debt as a percent of unsecured assets.

9. UNSECURED REVOLVING CREDIT FACILITY

On July 16, 2013, the Company amended and restated its unsecured revolving credit facility with a group of 17 lenders. The $600 million facility is expandable to $1 billion and matures in July 2017. It has two six month extension options each requiring the payment of a 7.5 basis point fee. The interest rate on outstanding borrowings (not electing the Company’s competitive bid feature) and the facility fee on the current borrowing capacity payable quarterly in arrears are based upon the Operating Partnership’s unsecured debt ratings, as follows:

Operating Partnership’s	Interest Rate –
Unsecured Debt Ratings:	Applicable Basis Points	Facility Fee
Higher of S&P or Moody’s	Above LIBOR	Basis Points
No ratings or less than BBB-/Baa3	170.0	35.0
BBB- or Baa3	130.0	30.0
BBB or Baa2(current)	110.0	20.0
BBB+ or Baa1	100.0	15.0
A- or A3 or higher	92.5	12.5

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 those above.

The terms of the unsecured facility include certain restrictions and covenants which limit, among other things 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 fixed charge coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property interest coverage and certain investment limitations. If an event of default has occurred and is continuing, the Company will not make any excess distributions 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; Bank of America, N.A., as syndication agent; Deutsche Bank AG New York Branch; U.S. Bank National Association and Wells Fargo Bank, N.A., as documentation agents; Capital One, National Association; Citibank N.A.; Comerica Bank; PNC Bank, National Association; SunTrust Bank; The Bank of Tokyo-Mitsubishi UFJ, LTD.; The Bank of New York Mellon; as managing agents; and Compass Bank; Branch Banking and Trust Company; TD Bank, N.A.; Citizens Bank of Pennsylvania; Mega International Commercial Bank Co., LTD. New York Branch, as participants.

As of June 30, 2013 and December 31, 2012, the Company had no outstanding borrowings under its unsecured revolving credit facility.

Through July 15, 2013, the Company had a $600 million unsecured revolving credit facility, which had an interest rate on outstanding borrowings of LIBOR plus 125 basis points and a facility fee of 25 basis points.

MONEY MARKET LOAN

The Company has an agreement with JPMorgan Chase Bank to participate in a noncommitted money market loan program (“Money Market Loan”). The Money Market Loan is an unsecured borrowing of up to $75 million arranged by JPMorgan Chase Bank with maturities of 30 days or less. The rate of interest on the Money Market Loan borrowing is set at the time of each borrowing. As of June 30, 2013 and December 31, 2012, the Company had no outstanding borrowings under the Money Market Loan.

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 June 30, 2013, 30 of the Company’s properties, with a total book value of approximately $995 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 June 30, 2013 and December 31, 2012 is as follows: (dollars in thousands)


			Effective			June 30,		December 31,
Property Name	Lender		Rate (a)			2013		2012	Maturity
51 Imclone (b)	Wachovia CMBS		8.390	%		-	$	3,878	-
9200 Edmonston Road (c)	Principal Commercial Funding L.L.C.		5.534	%	$	4,243		4,305	05/01/13
Port Imperial South	Wells Fargo Bank N.A.	LIBOR+2.75		%		42,500		42,168	08/20/13
Port Imperial South 4/5	Wells Fargo Bank N.A.	LIBOR+3.50		%		36,355		34,889	09/30/13
6305 Ivy Lane	RGA Reinsurance Company		5.525	%		5,876		5,984	01/01/14
395 West Passaic	State Farm Life Insurance Co.		6.004	%		9,995		10,231	05/01/14
6301 Ivy Lane	RGA Reinsurance Company		5.520	%		5,572		5,667	07/01/14
35 Waterview Boulevard	Wachovia CMBS		6.348	%		18,583		18,746	08/11/14
6 Becker, 85 Livingston,	Wachovia CMBS		10.220	%		63,665		63,126	08/11/14
75 Livingston &
20 Waterview
4 Sylvan	Wachovia CMBS		10.190	%		14,511		14,485	08/11/14
10 Independence	Wachovia CMBS		12.440	%		16,438		16,251	08/11/14
4 Becker	Wachovia CMBS		9.550	%		38,536		38,274	05/11/16
5 Becker	Wachovia CMBS		12.830	%		12,751		12,507	05/11/16
210 Clay	Wachovia CMBS		13.420	%		12,513		12,275	05/11/16
Various (d)	Prudential Insurance		6.332	%		148,393		149,281	01/15/17
23 Main Street	JPMorgan CMBS		5.587	%		30,144		30,395	09/01/18
Harborside Plaza 5	The Northwestern Mutual Life		6.842	%		226,838		228,481	11/01/18
	Insurance Co. & New York Life
	Insurance Co.
233 Canoe Brook Road	The Provident Bank		4.375	%		3,911		3,945	02/01/19
100 Walnut Avenue	Guardian Life Insurance Co.		7.311	%		18,910		19,025	02/01/19
One River Center (e)	Guardian Life Insurance Co.		7.311	%		43,320		43,582	02/01/19

Total mortgages, loans payable and other obligations					$	753,054	$