PROSPECTUS SUPPLEMENT Filed Pursuant to (TO PROSPECTUS DATED JANUARY 7, 1997) Rule 424(B)3 Reg. No. 333-19101 - -------------------------------------------------------------------------------- 650,407 Shares MACK-CALI REALTY CORPORATION Common Stock - -------------------------------------------------------------------------------- Mack-Cali Realty Corporation (the "Company") is a fully-integrated, self-administered and self-managed real estate investment trust ("REIT") that owns and operates a portfolio comprised predominantly of Class A office and office/flex buildings located primarily in the Northeast and Southwest, as well as commercial real estate leasing, management, acquisition, development and construction businesses. As of March 16, 1998, the Company and its subsidiaries owned and operated 210 properties, totaling approximately 23.4 million square feet (collectively, the "Properties"). The 650,407 shares of common stock of the Company, par value $.01 per share (the "Common Stock"), offered hereby (the "Offering") are being sold by the Company. The Common Stock is listed on the New York Stock Exchange (the "NYSE") under the symbol "CLI." The last reported sales price of the Common Stock on the NYSE on March 24, 1998 was $38.4375 per share. See "Price Range of Common Stock and Distributions." The shares of Common Stock are subject to certain restrictions on ownership designed to preserve the Company's status as a REIT for federal income tax purposes. See "Description of Common Stock" and "Restrictions on Ownership of Offered Securities" in the accompanying Prospectus. SEE "RISK FACTORS" ON PAGES S-4 TO S-8 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY. - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- Price to Underwriting Discounts and Proceeds to Trust (1) Commissions (1)(3) Company (2) - -------------------------------------------------------------------------------- Per Share . . . $38.437500 $1.921875 $36.515625 - -------------------------------------------------------------------------------- Total . . . . . $25,000,019.06 $1,250,000.95 $23,750,018.11 - -------------------------------------------------------------------------------- (1) The Underwriter intends to sell the Common Stock to Van Kampen American Capital for $24,000,018.30, which company will deposit the Common Stock into the Wheat First Union REIT Income and Growth Trust, Series 1 (the "Trust"), in exchange for units in the Trust. See "Underwriting." (2) Before deducting expenses payable by the Company estimated to be $35,000.00. (3) The Company has agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act of 1993, as amended. See "Underwriting." - -------------------------------------------------------------------------------- The shares of Common Stock are offered by the Underwriter, subject to delivery by the Company and acceptance by the Underwriter, to prior sale and to withdrawal, cancellation or modification of the offer without notice. Delivery of the shares of Common Stock to the Underwriter is expected to be made through the facilities of the Depository Trust Company, New York, New York, on or about March 27, 1998. WHEAT FIRST UNION March 24, 1998 CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK MAINTAINED BY THE UNDERWRITER AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." S-2 AVAILABLE INFORMATION The Company has filed a Registration Statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act") with the Securities and Exchange Commission (the "Commission") covering the Common Stock offered hereby. As permitted by the rules and regulations of the Commission, this Prospectus Supplement and the accompanying Prospectus omits certain information, exhibits and undertakings contained in the Registration Statement. For further information pertaining to the securities offered hereby, reference is made to the Registration Statement, including the exhibits filed as a part thereof. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Commission. Reports, proxy statements and other information filed by the Company with the Commission in accordance with the Exchange Act can be inspected and copied at the Commission's public reference section, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following regional offices of the Commission: Seven World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be obtained at prescribed rates by writing to the public reference section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of the Commission's Web site is: http://www.sec.gov. In addition, the Company's Common Stock is listed on the New York Stock Exchange (the "NYSE") and the Pacific Exchange, and similar information concerning the Company can be inspected and copied at the offices of the NYSE, 20 Broad Street, New York, New York 10005, and the Pacific Exchange, 301 Pine Street, San Francisco, California 90082. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the Commission by the Company pursuant to the Exchange Act are hereby incorporated by reference: a. The Company's Annual Report on Form 10-K (File No. 1-13274) for the fiscal year ended December 31, 1996; b. The Company's Quarterly Reports on Form 10-Q (File No. 1-13274) for the fiscal quarters ended March 31, 1997, June 30, 1997 and September 30, 1997; c. The Company's Current Reports on Form 8-K and Form 8-K/A (File No. 1-13274), dated January 31, 1997, September 18, 1997, September 19, 1997, December 11, 1997 and January 16, 1998; d. The Company's Proxy Statements relating to the Annual Meeting of Shareholders held on May 15, 1997 and the Special Meeting of Shareholders held on December 11, 1997; and e. The description of the Common Stock and the description of certain provisions of Maryland Law and the Company's Articles of Incorporation and Bylaws, both contained in the Company's Registration Statement on Form 8-A, dated August 9, 1994. Copies of all documents which are incorporated herein by reference (not including the exhibits to such information, unless such exhibits are specifically incorporated by reference in such information) are available without charge upon request from the Company, 11 Commerce Drive, Cranford, New Jersey 07016-3510 (telephone number: (908) 272-8000). S-3 THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING ELSEWHERE IN THE ACCOMPANYING PROSPECTUS OR INCORPORATED HEREIN OR THEREIN BY REFERENCE. ALL REFERENCES TO THE COMPANY IN THIS PROSPECTUS SUPPLEMENT INCLUDE THE COMPANY, ITS SUBSIDIARIES AND THE OTHER ENTITIES OWNED OR CONTROLLED BY THE COMPANY, INCLUDING MACK-CALI SERVICES, INC., UNLESS THE CONTEXT INDICATES OTHERWISE. AS USED HEREIN, "UNITS" REFERS TO LIMITED PARTNERSHIP INTERESTS IN MACK-CALI REALTY, L.P., A DELAWARE LIMITED PARTNERSHIP (THE "OPERATING PARTNERSHIP") THROUGH WHICH THE COMPANY CONDUCTS ITS REAL ESTATE ACTIVITIES. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, INCLUDING DOCUMENTS INCORPORATED BY REFERENCE, CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. FORWARD-LOOKING STATEMENTS ARE INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES, MANY OF WHICH CANNOT BE PREDICTED WITH ACCURACY AND SOME OF WHICH MIGHT NOT EVEN BE ANTICIPATED. FUTURE EVENTS AND ACTUAL RESULTS, FINANCIAL AND OTHERWISE, MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. CERTAIN FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" BELOW AND IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION" INCLUDED IN THE COMPANY'S QUARTERLY REPORTS ON FORM 10-Q FOR THE PERIODS ENDED MARCH 31, 1997, JUNE 30, 1997 AND SEPTEMBER 30, 1997 AND THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996, INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. RISK FACTORS An investment in shares of Common Stock involves various risks. Prospective investors should consider carefully the following risk factors, in addition to the other information set forth in this Prospectus Supplement, in connection with an investment in the shares of Common Stock offered hereby. DEPENDENCE ON NORTHEASTERN AND SOUTHWESTERN OFFICE MARKETS. A majority of the Properties are located in the Northeastern and Southwestern United States, particularly in New Jersey, New York, Pennsylvania and Texas. The Company's performance will be linked to economic conditions and the demand for office space in these states. A decline in the economy in these states generally may result in a decline in the demand for office space, which may adversely affect the ability of the Company to make distributions to stockholders. Such declines could have a greater adverse effect on the Company because its portfolio consists primarily of office and office/flex buildings (compared to a more diversified real estate portfolio). REAL ESTATE INVESTMENT CONSIDERATIONS. GENERAL. Real property investments are subject to varying degrees of risk. The yields available from equity investments in real estate depend on the amount of income earned and capital appreciation generated by the related properties as well as the expenses incurred in connection therewith. If the properties do not generate income sufficient to meet operating expenses, including debt service and capital expenditures, the ability to make distributions to the Company's stockholders could be adversely affected. Income from the Properties may be adversely affected by the general economic climate, local conditions such as oversupply of office space or a reduction in demand for office space in the area, the attractiveness of the Properties to potential tenants, competition from other office and office/flex buildings, the ability of the Company to provide adequate maintenance and increased operating costs (including insurance premiums and real estate taxes). In addition, revenues from properties and real estate values are also affected by such factors as the cost of compliance with regulations and the potential for liability under applicable laws, including changes in tax laws and housing laws, interest rate levels and the availability of financing. The Company's income would be adversely affected if a significant number of tenants were unable to pay rent or if office space could not be rented on favorable terms. Certain significant expenditures associated with an investment in real estate (such as mortgage payments, real estate taxes and S-4 maintenance costs) generally are not reduced when circumstances cause a reduction in income from the investment. FINANCIALLY DISTRESSED TENANTS. In the event of any default by a tenant, the Company may experience delays in enforcing its rights as landlord and may incur substantial costs in protecting its investment. A tenant of the Properties may seek the protection of the bankruptcy laws at any time, which could result in the rejection and termination of such tenant's lease and thereby cause a reduction in the cash flow available for distribution by the Company. ILLIQUIDITY OF REAL ESTATE. Real estate investments are relatively illiquid and, therefore, the Company has limited ability to vary its portfolio quickly in response to changes in economic or other conditions. In addition, the prohibition in the Internal Revenue Code of 1986, as amended (the "Code"), and related regulations on a REIT holding property for sale may affect the Company's ability to sell properties without adversely affecting distributions to the Company's stockholders. COMPLIANCE WITH LAWS AND REGULATIONS. Many laws and governmental regulations are applicable to the Properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently. Under the Americans with Disabilities Act of 1990 (the "ADA"), all places of public accommodation, effective beginning in 1992, are required to meet certain federal requirements related to access and use by disabled persons. Compliance with the ADA requires removal of structural barriers to handicapped access in certain public areas where such removal is "readily achievable." A number of additional federal, state and local laws exist which also may require modifications to the Properties, or restrict certain further renovations thereof, with respect to access thereto by disabled persons. Noncompliance with the ADA or any of such other laws could result in the imposition of fines or an award of damages to private litigants. Although management of the Company believes that the Properties are substantially in compliance with present requirements, final regulations under the ADA have not yet been promulgated and the Company is likely to incur additional costs of complying with the ADA. If required changes involve a greater amount of expenditures than the Company currently anticipates or if the changes must be made on a more accelerated schedule than the Company currently anticipates, the Company's ability to make expected distributions to stockholders could be adversely affected. Under various laws and regulations relating to the protection of the environment, an owner of real estate may be held liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner was responsible for, or even knew of, the presence of such substances. The presence of such substances may adversely affect the owner's ability to rent or sell the property or to borrow using such property as collateral and may expose it to liability resulting from any release or exposure of such substances. Persons who arrange for the disposal or treatment of hazardous or toxic substances at another location may also be liable for the costs of removal or remediation of such substances at the disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain environmental laws impose liability for release of asbestos-containing materials into the air, and third parties may also seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances. In connection with the ownership (direct or indirect), operation, management and development of real properties, the Company may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental penalties and injuries to persons and property. COMPETITION IN THE COMPANY'S MARKETS. The Company plans to acquire additional properties in S-5 New Jersey, New York, Pennsylvania, Texas and in the Northeast and Southwest generally. There are a number of office building developers and real estate companies that compete with the Company in seeking properties for acquisition, prospective tenants and land for development. All of the Properties are in developed areas where there are other properties of the same type. Competition from other office properties may affect the Company's ability to attract and retain tenants, rental rates and expenses of operation (particularly in light of the higher vacancy rates of many competing properties which may result in lower-priced space being available in such properties). The Company may be competing with other entities that have greater resources than the Company and whose managers have more experience than the Company's directors and officers. RISKS OF REAL ESTATE DEVELOPMENT. While the Company's primary focus is on acquisitions of property, it is a part of the Company's operating strategy, under certain conditions, to seek selective, attractive opportunities for development. The real estate development business involves significant risks in addition to those involved in the ownership and operation of established office, office/flex, industrial/warehouse or multifamily residential apartment buildings, including the risks that financing may not be available on favorable terms for development projects, construction may not be completed on schedule or on budget, resulting in increased debt service expense and construction costs, and long-term financing may not be available upon completion of construction. REAL ESTATE FINANCING RISKS. DEBT FINANCING AND DEBT MATURITIES. The Company is subject to the risks normally associated with debt financing, including the risk that the Company's cash flow will be insufficient to meet required payments of principal and interest, the risk that indebtedness on the Properties will not be able to be refinanced at maturity or that the terms of such refinancing will not be as favorable as the terms of such indebtedness. As of March 16, 1998, the Company had outstanding an aggregate of approximately $858.9 million of mortgage indebtedness (in addition to borrowings under the Company's revolving credit facilities). As of March 16, 1998, $180.6 million was outstanding under the Company's revolving credit facilities. The Company currently believes it will have to refinance the principal due on its long-term mortgage indebtedness at maturity. There can be no assurance, however, that the Company will be able to refinance any indebtedness the Company may incur. If the Company were unable to refinance its indebtedness on acceptable terms, or at all, the Company might be forced to dispose of one or more of the Properties upon disadvantageous terms, which might result in losses to the Company and might adversely affect its ability to make distributions. If prevailing interest rates or other factors at the time of refinancing result in higher interest rates on refinancings, the Company's interest expense would increase, which would adversely affect the Company's cash flow and its ability to pay expected distributions to stockholders. Further, if a Property is mortgaged to secure payment of indebtedness and the Company is unable to meet mortgage payments, the mortgagee could foreclose upon the Property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent loss of income and asset value to the Company. Foreclosures could also create taxable income without accompanying cash proceeds, thereby hindering the Company's ability to meet the REIT distribution requirements of the Code. RISK OF RISING INTEREST RATES. Advances under the Company's revolving credit facilities, as well as $291.4 million (as of March 16, 1998) of borrowings under the Company's mortgage indebtedness, bear interest at variable rates. In addition, the Company may incur other indebtedness in the future that also bears interest at a variable rate. Accordingly, increases in interest rates could increase the Company's interest expense, which could adversely affect the Company's cash flow and its ability to pay expected S-6 distributions to stockholders or cause the Company to be in default under certain debt covenants. NO LIMITATION ON DEBT. The Company funds acquisition opportunities and development partially through short-term borrowings (including the revolving credit facilities), as well as out of undistributed cash. It expects to refinance projects purchased with short-term debt either with long-term indebtedness or equity financing depending upon the economic conditions at the time of refinancing. The Board of Directors has a general policy of limiting the ratio of its indebtedness to total market capitalization (i.e., the market value of the issued and outstanding shares of Common Stock, including interests redeemable therefor, plus any preferred stock that may be outstanding and total debt), but the organizational documents of the Company do not contain any limitation on the amount or percentage of indebtedness, funded or otherwise, that the Company may incur. The Board of Directors could alter or eliminate its current policy on borrowing at any time at its discretion. If this policy were changed, the Company could become more highly leveraged, resulting in an increase in debt service that could adversely affect the Company's cash flow and its ability to make expected distributions to its stockholders and an increased risk of default on the Company's obligations. LIMITS ON OWNERSHIP. In order to maintain its qualification as a REIT, not more than 50 percent in value of the outstanding stock of the Company may be actually and/or constructively owned by five or fewer individuals (as defined in the Code to include certain entities). In light of the ownership positions of certain stockholders of the Company immediately following the closing of its initial public offering of shares of Common Stock (the "IPO"), the Company has limited ownership of the outstanding shares of Common Stock by any single stockholder to 9.8 percent of the outstanding shares of Common Stock (with exceptions for the former principals of the Cali Group who in the aggregate currently own Units redeemable for approximately 3.8 percent of the outstanding shares of Common Stock, after giving effect to the conversion of such Units). The former principals of the Cali Group are permitted to acquire additional shares of Common Stock, except to the extent that such acquisition results in more than 50 percent in value of the outstanding shares of Common Stock of the Company being actually and/or constructively owned by five or fewer individuals. The Board of Directors could waive this restriction if it was satisfied, based upon the advice of tax counsel or otherwise, that such action would be in the best interests of the Company and would not affect the Company's qualifications as a REIT. Common Stock acquired or transferred in breach of the limitation may be redeemed by the Company for the lesser of the price paid and the average closing price for the 10 trading days immediately preceding redemption or sold at the direction of the Company. The Company may elect to redeem such shares of Common Stock for Units, which are nontransferable except in very limited circumstances. Any transfer of shares of Common Stock which, as a result of such transfer, causes the Company to be in violation of any ownership limit will be deemed void. Although the Company currently intends to continue to operate in a manner which will enable the Company to continue to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause the Company's Board of Directors to revoke the election for the Company to qualify as a REIT. Under the Company's Articles of Incorporation, the Board of Directors can make such revocation without the consent of the Company's stockholders. In addition, the consent of the holders of at least 85 percent of the Units is required: (i) to merge (or permit the merger of) the Operating Partnership with another unrelated person, pursuant to a transaction in which the Operating Partnership is not the surviving entity; (ii) to dissolve, liquidate or wind-up the Operating Partnership; or (iii) to convey or otherwise transfer all or substantially all of the Operating Partnership's assets. Following the completion of this Offering, the Company, as general partner of the Operating Partnership, will own approximately 81.3 percent of the outstanding Units (assuming conversion of all Preferred Units). DEPENDENCE ON KEY PERSONNEL. The Company is dependent on the efforts of its executive S-7 officers for strategic business direction and real estate experience. While the Company believes that it could find replacements for these key personnel, the loss of their services could have an adverse effect on the operations of the Company. The Company has entered into an employment agreement (including non-competition provisions) which provides for a continuous five-year employment term with each of Thomas A. Rizk, Mitchell E. Hersh, Brant Cali, John R. Cali, Timothy M. Jones, Barry Lefkowitz and Roger W. Thomas, and a five-year employment agreement with an automatic one-year extension at the end of the five-year term and each subsequent term with each of James Nugent and Albert Spring. The Company does not have key man life insurance for its executive officers. ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT. TAX LIABILITIES AS A CONSEQUENCE OF FAILURE TO QUALIFY AS A REIT. The Company has operated so as to qualify as a REIT under the Code, commencing with its taxable year ended December 31, 1994. Although the Company believes that it will continue to operate in such a manner, no assurance can be given that the Company will be able to operate in a manner so as to remain so qualified. Qualification as a REIT involves the satisfaction of numerous requirements (some on an annual and quarterly basis) established under highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations, and involve the determination of various factual matters and circumstances not entirely within the Company's control. If the Company were to fail to qualify as a REIT in any taxable year, the Company would be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at corporate rates and would not be permitted a deduction for the distributions paid to its stockholders. Moreover, unless entitled to relief under certain statutory provisions, the Company also would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. This treatment would reduce the net earnings of the Company available for investment or distribution to stockholders because of the additional tax liability of the Company for the years involved. In addition, distributions to stockholders would no longer be required to be made. See "Certain United States Federal Income Tax Considerations to the Company of its REIT Election-Failure to Qualify" in the accompanying Prospectus. OTHER TAX LIABILITIES. The Company, notwithstanding its REIT status, is subject to certain federal, state and local taxes on its income and property and certain states might contend that the Company is subject to certain additional taxes. In addition, the Company's net income, if any, from third party management and tenant improvements will be subject to United States federal income tax. RISK OF CHANGES IN THE TAX LAW APPLICABLE TO REITS. The rules dealing with federal income taxation are constantly under review by the Internal Revenue Service ("IRS"), the Treasury Department and Congress. New federal tax legislation or other provisions may be enacted into law or new interpretations, rulings or Treasury Regulations could be adopted, all of which could adversely affect the taxation of the Company or its stockholders. No prediction can be made as to the likelihood of passage of any new tax legislation or other provisions either directly or indirectly affecting the Company or its stockholders. Consequently, the tax treatment described herein may be modified prospectively or retroactively by legislative action which is beyond the control of the Company. See "Proposed Tax Legislation." EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON STOCK. Since the market price of shares of a publicly traded REIT, such as the Company, is determined in part by the attractiveness of the yield on those shares compared to the prevailing interest rates on fixed-income securities, an increase in interest rates could lead purchasers of Common Stock to demand a higher yield, which could adversely affect the market price of the Common Stock. S-8 THE COMPANY The Company is a fully-integrated REIT that owns and operates a portfolio comprised primarily of Class A office and office/flex buildings located primarily in the Northeast and Southwest, as well as commercial real estate leasing, management, acquisition, development and construction businesses. As of March 16, 1998, the Company owned and operated 210 properties, aggregating approximately 23.4 million square feet. The Properties are comprised of 198 office and office/flex buildings totaling approximately 23.0 million square feet, six industrial/warehouse properties containing an aggregate of approximately 400,000 square feet (the "Industrial/Warehouse Properties"), two multi-family residential properties, two stand-alone retail properties and two land leases. The 198 office and office/flex properties are comprised of 122 office buildings containing an aggregate of 19.2 million square feet (the "Office Properties") and 76 office/flex buildings containing an aggregate of approximately 3.8 million square feet (the "Office/Flex Properties"). The Company believes that its Properties have excellent locations and access and are well-maintained and professionally managed. As a result, the Company believes that its Properties attract high quality tenants and achieve among the highest rental, occupancy and tenant retention rates within their markets. The Company's strategy has been to focus its development and ownership of office properties in submarkets where it is, or can become, a significant and preferred owner and operator. The Company will continue this strategy by expanding, primarily through acquisitions, initially into submarkets where it has, or can achieve, similar status. Management believes that the recent trend towards increasing rental and occupancy rates in office buildings in the Company's sub-markets continues to present significant opportunities for growth. The Company may also develop properties in such submarkets, particularly with a view towards potential utilization of certain vacant land recently acquired or on which the Company holds options. Management believes that its extensive market knowledge provides the Company with a significant competitive advantage which is further enhanced by its strong reputation for and emphasis on delivering highly responsive management services, including direct and continued access to the Company's senior management. The Company performs substantially all construction, leasing, management and tenant improvements on an "in-house" basis and is self-administered and self-managed. As of March 16, 1998, the Company had over 300 employees. The Company was incorporated under the laws of Maryland on May 24, 1994. Its executive offices are located at 11 Commerce Drive, Cranford, New Jersey 07016-3510, and its telephone number is (908) 272-8000. The Company has an internet Web site at "http://www.mack-cali.com." RECENT DEVELOPMENTS ACQUISITIONS Since the closing of the Robert Martin Company acquisition on January 31, 1997, the Company has acquired the following properties: On May 8, 1997, the Company acquired four buildings in Westlakes Office Park, a suburban Class A office complex located in Berwyn, Chester County, Pennsylvania, totaling approximately 444,350 square feet. The properties were acquired for a total cost of approximately $74.7 million, which was made available primarily from drawing on one of the Company's credit facilities. On July 21, 1997, the Company acquired two vacant office buildings in the Moorestown Corporate Center, a suburban Class A office complex located in Moorestown, Burlington County, New Jersey. The properties, each consisting of 74,000 square feet, were acquired for a total cost of approximately $10.2 million, which was made available from drawing on one of the Company's credit S-9 facilities. On August 1, 1997, the Company acquired 1000 Bridgeport Avenue, a 133,000 square foot Class A office building located in Shelton, Fairfield County, Connecticut. The property was acquired for a total cost of approximately $15.8 million, which was made available from drawing on one of the Company's credit facilities. On August 15, 1997, the Company acquired 200 Corporate Boulevard South, an 84,000 square foot office/flex building located in the South Westchester Executive Park complex in Yonkers, Westchester County, New York. The property was acquired through the exercise of a purchase option obtained in the Robert Martin Company acquisition for a total cost of approximately $8.1 million, which was financed primarily from the Company's cash reserves. On September 3, 1997, the Company acquired Three Independence Way, a 111,300 square foot Class A office building in the Princeton Corporate Center in Princeton, Mercer County, New Jersey. The property was acquired for a total cost of approximately $13.4 million, which was made available primarily from drawing on one of the Company's credit facilities. On November 19, 1997, the Company acquired 1000 Madison Avenue, a 100,700 square foot office building located in Lower Providence Township, Montgomery County, Pennsylvania. The property was acquired for approximately $14.3 million, which was made available from the Company's cash reserves. On December 11, 1997, the Company, then named Cali Realty Corporation, and its operating partnership, then named Cali Realty, L.P., acquired 54 Class A office properties (the "Mack Properties"), aggregating approximately 9.2 million square feet, from The Mack Company and Patriot American Office Group for a total cost of approximately $1.1 billion (the "Mack Transaction"). The Mack Properties are located in nine states, primarily in the Northeast and Southwest. In connection with the Mack Transaction, each of Cali Realty Corporation and Cali Realty, L.P. changed its name to Mack-Cali Realty Corporation and Mack-Cali Realty, L.P., respectively. On December 19, 1997, the Company acquired 100 Overlook Center, a 149,600 square foot Class A office building, together with a 20 acre land parcel zoned for an additional 149,600 square feet of office development, in Princeton, Mercer County, New Jersey. The property, including the land parcel, was acquired for a total cost of approximately $27.2 million, which was made available from drawing on one of the Company's credit facilities and issuing Units. Also on December 19, 1997, the Company acquired 200 Concord Plaza Drive, a 248,700 square foot Class A office building in suburban San Antonio, Bexar County, Texas. The property was acquired for a total cost of approximately $34.1 million, which was made available from drawing on one of the Company's credit facilities. On January 23, 1998, the Company acquired ten acres of land at 650 West Avenue in the Stamford Executive Park in Stamford, Fairfield County, Connecticut. The Company intends to develop a 40,000 square foot office/flex building, which is fully pre-leased. The land was acquired for a total cost of approximately $1.3 million, which was funded from the Company's cash reserves. On January 30, 1998, the Company acquired a portfolio of 17 office/flex buildings from McGarvey Development Company totaling approximately 748,660 square feet in the Moorestown West Corporate Center in Moorestown, Burlington County, New Jersey and Bromley Commons in Burlington, S-10 Burlington County, New Jersey. The properties were acquired for a total cost of approximately $47.0 million, which was funded from the Company's cash reserves, drawing on one of the Company's credit facilities and assuming certain indebtedness. The Company remains under contract to purchase four additional office/flex buildings from McGarvey Development Company for approximately $15.0 million and an 88,000 square foot build-to-suit office/flex property for approximately $3.7 million. The Company also has a right of first refusal to purchase up to six additional properties totaling 202,000 square feet. There can be no assurance that the purchases of the properties indicated in the preceding two sentences will be consummated or that certain conditions or purchase terms will not be modified or amended. This Offering is not conditioned on the closing of such transaction or any other transactions. On February 2, 1998, the Company acquired 2115 Linwood Avenue, a 68,000 square foot vacant office building in Fort Lee, Bergen County, New Jersey. The property was acquired for a total cost of approximately $5.1 million, which funds were made available by drawing on one of the Company's credit facilities. On February 4, 1998, the Company entered into a contract to acquire Morris County Financial Center, a 308,215 square foot Class A office complex in Parsippany, Morris County, New Jersey. The property will be acquired for a total cost of approximately $52.5 million, which funds will be made available by drawing on one of the Company's credit facilities. On February 5, 1998, the Company acquired 500 West Putnam Avenue, a 121,250 square foot Class A office building in Greenwich, Fairfield County, Connecticut. The property was acquired for a total cost of approximately $20.1 million, which funds were made available by drawing on one of the Company's credit facilities and assuming certain indebtedness. On February 18, 1998, the Company entered into a contract to acquire substantially all of the interests in Prudential Business Campus, a 875,000 square foot Class A office complex consisting of five office buildings and 74 acres of land parcels in Parsippany, Morris County, New Jersey. The property will be acquired for a total cost of approximately $170 million, which funds will be made available from the Company's cash reserves and by drawing on one of the Company's credit facilities. On February 25, 1998, the Company acquired 10 Mountainview Road, a 192,000 square foot Class A office building in Upper Saddle River, Bergen County, New Jersey. The property was acquired for a total cost of approximately $24.5 million, which funds were made available by drawing on one of the Company's credit facilities. On March 3, 1998, the Company entered into a letter of intent to acquire Pacifica Holding Company, a private real estate owner and operator in Denver, Colorado. Upon consummation of the transaction, the Company will acquire 19 Class A office buildings and related operations located in suburban Denver and Colorado Springs, totaling approximately 1.4 million square feet, together with 2.5 acres of land located in the Denver Tech Center. The properties will be acquired for a total cost of approximately $188.0 million, which funds will be made available by drawing on one of the Company's credit facilities and by issuing approximately $20 million in equity. On March 12, 1998, the Company acquired 1250 Capital of Texas Highway South, a 270,703 square foot Class A office building in Austin, Travis County, Texas. The property was acquired for a total cost of approximately $37.0 million, which funds were made available by drawing on one of the Company's credit facilities. S-11 EQUITY OFFERINGS On February, 25, 1998, the Company completed an underwritten public offer and sale of 2,500,000 shares of its Common Stock using Prudential Securities Incorporated to underwrite such public offer and sale. The Company received approximately $91.9 million in net proceeds (after offering costs) and used such funds to reduce outstanding borrowings under its revolving credit facilities and for general corporate purposes including acquisitions. On March 18, 1998, the Company completed the sale of 2,705,628 shares of its Common Stock pursuant to a Stock Purchase Agreement with The Prudential Insurance Company of America, Strategic Value Investors, LLC and Strategic Value Investors International, LLC. The Company received approximately $100 million in proceeds and intends to use such funds to fund a portion of the purchase price of the Prudential Business Campus acquisition. FINANCING ACTIVITIES As of March 16, 1998, the Company's two revolving credit facilities consisted of the Unsecured Facility and the Prudential Facility (each described below) with an aggregate borrowing capacity of $500.0 million and an aggregate outstanding balance of $180.6 million. As of March 16, 1998, the Company had 130 unencumbered properties totaling approximately 12.4 million square feet, representing approximately 53.0 percent of the Company's portfolio. The Company's total debt constituted approximately 29.9 percent of the total market capitalization of the Company as of March 16, 1998, based on a Common Stock price of $37.3125 per share. CREDIT FACILITIES. On August 6, 1997, the Company obtained an unsecured revolving credit facility (the "Unsecured Facility") in the amount of $400.0 million from a group of 13 lender banks. The Unsecured Facility has a three-year term and currently bears interest at 125 basis points over LIBOR. Based upon the Company's achievement of an investment grade long-term unsecured debt rating, the interest rate will be reduced, on a sliding scale, and a competitive bid option will become available. The lending group for the Unsecured Facility includes: Fleet National Bank, The Chase Manhattan Bank, and Bankers Trust Company, as agents; PNC Bank, N.A., Bank of America National Trust and Savings Association, Commerzbank, and First National Bank of Chicago, as co-agents; and Keybank, Summit Bank, Crestar Bank, Mellon Bank, N.A., Signet Bank, and Kredeitbank NV. The terms of the Unsecured Facility include certain restrictions and covenants which limit, among other things, dividend payments and additional indebtedness and which require compliance with specified financial ratios and other financial measurements. The Unsecured Facility also requires a fee on the unused balance payable quarterly in arrears, at a rate ranging from one-eighth of one percent to one-quarter of one percent of such balance, depending on the level of borrowings outstanding in relation to the total facility commitment. Concurrently with the closing of the Unsecured Facility, the Company drew funds on such facility to repay in full and terminate two of the Company's existing secured revolving credit facilities and to repay in full the outstanding balance under its remaining $100.0 million revolving credit facility (the "Prudential Facility") with Prudential Securities Credit Corp. ("PSC"), an affiliate of Prudential Securities Incorporated. In addition, in August 1997, the Company retired its remaining $64.5 million real estate mortgage investment conduit (REMIC) secured financing primarily from funds drawn on the Unsecured Facility. On December 10, 1997, the Company obtained a loan (the "Prudential Loan") in the amount of $200.0 million from PSC. The Prudential Loan has a one-year term and bears interest at 110 basis points S-12 over LIBOR. On February 26, 1998, the Company obtained a commitment for a $150 million loan secured by Prudential Insurance Company of America. The secured loan will have a seven-year term and will bear interest only at 6.9 percent. On March 10, 1998, the Company obtained a commitment from Fleet National Bank and The Chase Manhattan Bank to expand the Unsecured Facility by $400 million, from $400 million to $800 million. The Unsecured Facility will have a three-year term and will bear interest at 110 basis points over LIBOR. USE OF PROCEEDS The net proceeds to the Company from the sale of the Common Stock offered hereby, after deduction of the underwriting discounts and commissions and estimated offering expenses, are approximately $23.7 million. The Company presently intends to use the net proceeds from the Offering to reduce outstanding borrowings under its revolving credit facilities and for general corporate purposes including acquisitions. The Company continually examines potential property acquisitions and, at any given time, one or more of such acquisitions may be under consideration. There is no assurance that any such acquisitions will be consummated. Pending such uses, the Company may invest the remaining net proceeds of the Offering in short-term investment-grade income producing investments such as investments in commercial paper, government securities or money market funds that invest in government securities. The Unsecured Facility matures in August 2000 and currently bears interest at 125 basis points over LIBOR. The Prudential Facility matures in March 1999 and currently bears interest at 110 basis points over one-month LIBOR. As of March 16, 1998, the aggregate outstanding balance under these two facilities was $180.6 million. PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS The Company's Common Stock is listed on the NYSE under the symbol "CLI." The following sets forth the high and low closing sales prices for the Common Stock for the fiscal periods indicated as reported by the NYSE and the distributions per share paid by the Company with respect to each such period. HIGH LOW DISTRIBUTION ---- --- ------------ 1996 First Quarter . . . . . . . . . . . . . $23.625 $20.750 $.425 Second Quarter. . . . . . . . . . . . . $24.625 $21.500 $.425 Third Quarter . . . . . . . . . . . . . $27.125 $22.625 $.450 Fourth Quarter. . . . . . . . . . . . . $30.875 $26.125 $.450 1997 First Quarter . . . . . . . . . . . . . $34.875 $30.000 $.450 Second Quarter. . . . . . . . . . . . . $34.000 $28.750 $.450 Third Quarter . . . . . . . . . . . . . $41.625 $32.375 $.500 Fourth Quarter. . . . . . . . . . . . . $42.6875 $36.250 $.500 1998 First Quarter (through March 24, 1998). $40.9375 $37.0625 N/A As of March 16, 1998, there were 345 registered holders of shares of Common Stock. S-13 OPERATING PERFORMANCE The Company has consistently increased its Funds from Operations since the closing of its initial public offering. The Company's Funds from Operations (after adjustment for the straight-lining of rents) for the nine months ended September 30, 1997 grew to $77.8 million from $30.0 million for the corresponding 1996 period. As a result of the Company's improved operating performance, on September 16, 1997, the Company announced an 11.1 percent increase in its regular quarterly distribution, commencing with the Company's distribution with respect to the third quarter of 1997, from $0.45 per share to $0.50 per share of Common Stock ($2.00 per share of Common Stock on an annualized basis). Since 1995, the Company has increased its regular quarterly distribution by 23.8 percent. Future distributions by the Company will be at the discretion of the Board of Directors and will depend on the actual cash flow of the Company, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Directors deems relevant. Distributions by the Company to the extent of its current earnings and profits for federal income tax purposes are taxable to stockholders as ordinary dividend income (unless such distributions are designated as capital gain distributions). Distributions in excess of earnings and profits will be treated as a tax-free return of capital, reducing the stockholder's tax basis in the Common Stock, and distributions in excess of such stockholder's tax basis in the Common Stock will be treated as gain realized from the sale of such shares. See "Federal Income Tax Considerations-Taxation of Taxable U.S. Stockholders Generally" and "Federal Income Tax Considerations-Taxation of Non-U.S. Stockholders-Distributions." The Company has determined that all of the distributions paid during 1995, 1996 and 1997 represented ordinary dividend income to its stockholders. FEDERAL INCOME TAX CONSIDERATIONS The following summary of certain United States federal income tax considerations to holders of Common Stock is based on current law, is for general information only, and is not tax advice. The tax treatment of a holder of Common Stock will vary depending upon such holder's particular situation, and this discussion does not purport to deal with all aspects of taxation that may be relevant to particular stockholders in light of their personal investment or tax circumstances, or to certain types of stockholders (including insurance companies, financial institutions or broker-dealers, tax-exempt organizations, foreign corporations, and persons who are not citizens or residents of the United States, except to the extent discussed under the heading "Taxation of Tax-Exempt Stockholders" and "Taxation of Non-U.S. Stockholders") subject to special treatment under the United States federal income tax laws. THIS SUMMARY SUPPLEMENTS THE DISCUSSION SET FORTH IN THE SECTION IN THE ACCOMPANYING PROSPECTUS ENTITLED "CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS TO THE COMPANY OF ITS REIT ELECTION," WHICH CONTAINS A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS TO THE COMPANY, AND SHOULD BE READ TOGETHER THEREWITH. EACH INVESTOR IS ADVISED TO CONSULT WITH HIS OWN TAX ADVISOR, REGARDING THE TAX CONSEQUENCES TO HIM OF THE ACQUISITION, OWNERSHIP AND SALE OF COMMON STOCK, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS. S-14 TAXPAYER RELIEF ACT OF 1997 The Taxpayer Relief Act of 1997 (the "Act") revised several of the REIT-related requirements, and in general, modified the general requirements for qualification as a REIT as well as the rules governing the taxation of a REIT. The amendments in the law resulting from the Act became applicable to the Company as of the beginning of its current taxable year which began on January 1, 1998. Set forth below is a brief summary of certain provisions of the Act, together with a discussion of their effect on the Company. In order for Company to maintain its qualification as a REIT, during the last half of each taxable year, not more than 50 percent in value of the Company's outstanding stock may be owned, actually or constructively, by five or fewer individuals (as defined to include certain entities). (See "Certain United States Federal Income Tax Considerations to the Company of its REIT Election-Taxation of the Company as a REIT-Requirements for Qualification" in the accompanying Prospectus). Prior to 1998, the Company's failure to comply with the Treasury regulations requiring a REIT to maintain permanent records showing the actual ownership of its stock (the "Stock Ownership Regulations") could have resulted in the Company's disqualification as a REIT for the taxable year of the failure. Pursuant to the Act, effective for the Company's taxable years beginning on or after January 1, 1998, if the Company fails to comply with the Stock Ownership Regulations, the Company will not lose its qualifications as a REIT as a result of a violation of the foregoing requirement if it neither knows nor upon exercising reasonable diligence would have known of such violation. Effective for the Company's taxable years beginning on or after January 1, 1998, instead of being disqualified as a REIT, the Company would be subject to a financial penalty of $25,000 ($50,000 for intentional violations) for any year in which the Company failed to comply with the Stock Ownership Regulations. Furthermore, if the Company could establish that its failure to comply was due to reasonable cause and not to willful neglect, no penalty would be imposed. The Company must also satisfy certain gross income tests on an annual basis. (See "Certain United States Federal Income Tax Considerations to the Company of its REIT Election-Taxation of the Company as a REIT-Income Tests" in the accompanying Prospectus), Under pre-Act law, short-term gain from the sale or other disposition of stock or securities, gain from prohibited transactions and gain on the sale or other disposition of real property held for fewer than four years (apart from involuntary conversions and sales of foreclosure property) must have constituted less than 30 percent of the Company's gross income (including gross income from prohibited transactions) for each taxable year (the "30 Percent Test"). Effective for the Company's current taxable year and thereafter, the Company is no longer subject to the 30 Percent Test. For purposes of the 75 percent and 95 percent gross income tests (together, the "Gross Income Tests"), in order for the rents received by the Company in respect of property to qualify as "rents from real property," the Company is generally not permitted to operate or manage the property or furnish or render services to the tenants of such property, other than through an "independent contractor" from whom the Company derives no revenue; except that the Company may directly perform certain services that are "usually or customarily rendered" in connection with the rental of space for occupancy only and are not otherwise considered "rendered to the occupant" of the property. (See "Certain United States Federal Income Tax Considerations to the Company of its REIT Election-Taxation of the Company as a REIT-Income Tests" in the accompanying Prospectus). Pursuant to the Act, effective for the Company's taxable years beginning on or after January 1, 1998, the Company may render a DE MINIMIS amount of impermissible services to tenants, or in connection with the management of a property (together, "Impermissible Services"), without having otherwise qualifying rents from the property being disqualified as "rents from real property." In order to qualify for this DE MINIMIS exception, the value of the Impermissible Services may not exceed 1 percent of the Company's gross income from the property, and such Impermissible Services may not be valued at less than 150 percent of the Company's direct cost. S-15 However, the amount of any income that the Company receives for Impermissible Services will not be treated as "rents from real property" for purposes of the Gross Income Tests and, accordingly, must be considered together with other nonqualifying income for purposes of satisfying the Gross Income Tests. The Operating Partnership may receive fees in consideration of the performance of management and administrative services with respect to properties that are not owned entirely by the Operating Partnership. Although a portion of such management and administrative fees generally will not constitute "qualifying income" for purposes of the Gross Income Tests, the Company believes that the aggregate amount of such fees (plus any income from Impermissible Services and other nonqualifying income) in any taxable year will not cause the Company to fail the Gross Income Tests. Rents received by the Company from a tenant will not qualify as "rents from real property" for purposes of the Gross Income Tests if the Company, or a direct or constructive owner of 10 percent or more of the Company, directly or constructively owns 10 percent or more of such tenant (a "Related Tenant") (See "Certain United States Federal Income Tax Considerations to the Company of its REIT Election-Taxation of the Company as a REIT-Income Tests" in the accompanying Prospectus). Effective for the Company's current taxable year and thereafter, the constructive ownership rules for determining whether a tenant is a Related Tenant have been modified with respect to partners and partnerships to provide that attribution between partners and partnerships occurs only when a partner owns, directly and/or indirectly, a 25 percent-or-greater interest in the partnership. Thus, a tenant will not be treated as a Related Tenant with respect to the Company if shares of the Company are owned by a partnership and a partner that owns, directly and indirectly, a less-than-25 percent interest in such partnership also owns an interest in the tenant. A tenant will also not be a Related Tenant with respect to the Company if stockholders of the Company and owners of such tenant are partners in a partnership in which neither own, directly and/or indirectly, a 25 percent-or-greater interest. Also effective for the Company's taxable years beginning on or after January 1, 1998, except to the extent provided by regulations, "qualifying income" for purposes of the Gross Income Tests includes payments to the Company under an interest rate swap, cap agreement, option, futures contract, forward rate agreement or any similar financial instrument entered into by the Company to hedge its indebtedness, as well as any gain from the disposition of any of the foregoing investments. Other amendments enacted pursuant to the Act include: (a) an earnings and profits ("E&P") sourcing rule which, for purposes of determining whether a REIT has non-REIT, E&P as of the close of its taxable year, treats a REIT's distributions of accumulated E&P as being made out of the REIT's earliest accumulated E&P (b) an extension of the period for which property may be treated as "foreclosure property," (c) the exclusion of involuntarily converted property from the "prohibited transaction" rules, (d) the treatment of any wholly-owned subsidiary of a REIT (whether or not the subsidiary has always been wholly-owned by the REIT) as a "qualified REIT subsidiary" (although certain tax consequences may result from such treatment), (e) the expansion of the list of "excess noncash" items for purposes of the annual 95 percent distribution requirement and (f) an election to allow the Company to retain its net long-term capital gain (discussed below). TAXATION OF TAXABLE U.S. STOCKHOLDERS GENERALLY As used herein, the term "U.S. Stockholder" means a holder of shares of Common Stock who (for United States federal income tax purposes) is (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity that is treated as a domestic entity for federal income tax purposes (iii) an estate the income of which is subject to United States federal income taxation regardless of its source, (iv) a trust (other than a grantor trust) which (x) was in existence on August 20, 1996 and was treated as a U.S. person on August 19, 1996 and (y) has elected, pursuant to regulations (which have not S-16 yet been issued), to continue to be treated as a U.S. person, or (v) a trust not described in (iv) above, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States fiduciaries have the authority to control all substantial decisions of the trust. As long as the Company qualifies as a REIT, distributions made by the Company out of its current or accumulated earnings and profits (and not designated as capital gain dividends) will constitute dividends taxable to its taxable U.S. Stockholders as ordinary income. Such distributions will not be eligible for the dividends-received deduction in the case of U.S. Stockholders that are corporations. Distributions made by the Company that are properly designated by the Company as capital gain dividends will be taxable to taxable U.S. Stockholders as long-term capital gains (to the extent that they do not exceed the Company's actual net capital gain for the taxable year) without regard to the period for which a U.S. Stockholder has held his shares of stock. U.S. Stockholders that are corporations may, however, be required to treat up to 20 percent of certain capital gain dividends as ordinary income. Pursuant to the Act, the portion of any such capital gain dividends attributable to gain recognized after July 28, 1997 with respect to capital assets held by the Company for more than 18 months on the date of sale (and so designated by the Company subject to certain limits) will be treated as long-term capital gain taxable to non-corporate stockholders at a maximum rate of 20 percent (or 25 percent to the extent any such gain arises from the recapture of straight-line depreciation deductions reflected in the basis of real property that has been held by the Company for more than 18 months as of the date of sale), and the portion of such capital gain dividends attributable to gain recognized with respect to capital assets held for more than one year but not more than 18 months (and so designated by the Company subject to certain limits) will be treated as long-term capital gain taxable to non-corporate stockholders at a maximum rate of 28 percent. If the Company fails to make a designation of the capital gain rate applicable to any capital gain distribution that otherwise has been properly designated as such (including any deemed distribution on Retained Gains as described below), the distributions will be taxed at 28%. As indicated above, pursuant to the Act, effective for its taxable years beginning on or after January 1, 1998, the Company may elect to retain its net long term capital gains recognized during a taxable year ("Retained Gains") and pay a corporate-level tax on such Retained Gains. Corporations are currently subject to a maximum 35 percent tax on recognized capital gains. A stockholder owning shares of the Company's stock on December 31st of a taxable year in which the Company has Retained Gains would be required to include in gross income for that year such stockholder's proportionate share of the Retained Gains (as designated by the Company in a notice mailed to stockholders within 60 days following the end of the taxable year). The amount of any corporate-level tax paid by the Company in respect of the Retained Gains (the "Company Tax") would be treated as having been paid by the stockholders of the Company and each stockholder would receive a credit or refund for such stockholder's proportionate share of the Company Tax. A stockholder receiving any such Retained Gains would increase his adjusted tax basis in his shares of Company stock by the excess of such stockholder's proportionate share of the Retained Gains over the stockholder's share of the Company Tax. To the extent that the Company makes distributions (not designated as capital gain dividends) in excess of its current and accumulated earnings and profits, such distributions to U.S. Stockholders will be treated first as a tax-free return of capital to each U.S. Stockholder, reducing the adjusted tax basis which such U.S. Stockholder has in his shares of stock for tax purposes by the amount of such distribution (but not below zero), with distributions in excess of the U.S. Stockholder's adjusted tax basis in his shares taxable being treated as capital gains (provided that the shares have been held as a capital asset). Any such distribution in excess of a U.S. Stockholder's adjusted tax basis in his shares of Company stock will be included in income as (i) long-term capital gain and, for non-corporate stockholders, will be subject to a maximum rate of 20 percent if the gain is recognized after July 28, 1997, and the shares have been held for more than 18 months at the time of distribution, (ii) long-term capital gain subject to a maximum tax rate S-17 of 28 percent if the shares have been held for more than one year but not more than 18 months as of the time of distribution and (iii) short-term capital gain subject to a maximum rate of up to 39.6 percent if the shares were held for no more than one year at the time of the distribution. Distributions declared by the Company in October, November or December of any year and payable to a stockholder of record on a specified date in any such month shall be treated as both paid by the Company and received by the stockholder on December 31 of such year, provided that the dividend is actually paid by the Company on or before January 31 of the following calendar year. Stockholders may not include in their own income tax returns any net operating losses or capital losses of the Company. Distributions made by the Company and gain arising from the sale or exchange by a U.S. Stockholder of shares of Company stock will not be treated as passive activity income, and as a result, U.S. Stockholders generally will not be able to apply any "passive losses" against such income or gain . Distributions made by the Company to U.S. Stockholders (to the extent they do not constitute a return of capital) generally will be treated as investment income for purposes of computing the investment income limitation. Gain arising from the sale or disposition of Company stock by a U.S. Stockholder ,however, will not be treated as investment income unless the U.S. Stockholder elects to reduce the amount of his total net capital gain eligible for the 28 percent maximum capital gains rate by the amount of such gain with respect to such stock. A U.S. Stockholder will recognize gain or loss for federal income tax purposes upon the sale or other disposition of Company stock held as a capital asset in an amount equal to the difference between (i) the amount of cash and the fair market value of any property received on such sale or other disposition and (ii) the U.S. Stockholder's adjusted tax basis in such Company stock. Such gain or loss will be capital gain or loss if the shares of Company stock have been held for more than one year and, generally, as short term capital gain or loss otherwise. Any loss recognized by a U.S. Stockholder upon a sale or exchange of shares of Company stock held for only six months or less (after applying certain holding period rules) will be treated as long-term capital loss to the extent of distributions from the Company required to be treated by such U.S. Stockholder as long-term capital gain. BACKUP WITHHOLDING The Company will report to its U.S. Stockholders and to the IRS the amount of dividends paid during each calendar year and the amount of tax withheld, if any. Under the backup withholding rules, a stockholder may be subject to backup withholding at the rate of 31 percent with respect to dividends paid unless such holder (a) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact or (b) provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A U.S. Stockholder that does not provide the Company with the correct taxpayer identification number may also be subject to penalties imposed by the IRS. Any amount paid as backup withholding will be creditable against the stockholder's income tax liability. In addition, the Company may be required to withhold a portion of capital gain distributions to any stockholders who fail to certify their non-foreign status to the Company. See "Taxation of Non-U.S. Stockholders." TAXATION OF TAX-EXEMPT STOCKHOLDERS In applying the REIT stock ownership test under the Code, a pension trust generally is not treated as a single individual. Rather, beneficiaries of certain pension trusts are treated as holding the shares of a REIT in proportion to their actuarial interests in such trust, and thus permitting certain pension trusts to acquire more concentrated ownership of a REIT. S-18 In addition, a pension fund owning more than 10 percent of a REIT may be required to treat a percentage of dividends from the REIT as "unrelated business taxable income" ("UBTI"). The percentage is determined by dividing the REIT's gross income derived from an unrelated trade or business for that year by the gross income of the REIT for the year in which the dividends are paid. If this percentage is less than five percent, however, dividends are not treated as UBTI. In general, the UBTI rule applies to a REIT where the REIT qualifies as a REIT by reason of the above modification of the stock ownership test and (i) one pension trust owns more than 25 percent of the value of the REIT; or (ii) a group of pension trusts individually holding more than 10 percent of the value of the REIT collectively owns more than 50 percent of the value of the RElT. TAXATION OF NON-U.S. STOCKHOLDERS The rules governing United States federal income taxation of the ownership and disposition of stock by persons that are, for purposes of such taxation, nonresident alien individuals, foreign corporations, foreign partnerships or foreign estates or trusts (collectively, "Non-U.S. Stockholders") are complex, and no attempt is made herein to provide more than a brief summary of such rules. Accordingly, the discussion does not address all aspects of United States federal income tax and does not address state, local or foreign tax consequences (including treaty benefits, if any, that may be available in certain instances) that may be relevant to a Non-U.S. Stockholder in light of its particular circumstances. In addition, this discussion is based on current law, which is subject to change, and assumes that the Company qualifies for taxation as a REIT. Prospective Non-U.S. Stockholders should consult with their own tax advisers to determine the impact of federal, state, local and foreign income tax laws with regard to an investment in stock, including any reporting requirements. DISTRIBUTIONS. Distributions by the Company to a Non-U.S. Stockholder that are neither attributable to gain from sales or exchanges by the Company of "United States real property interests" (discussed below) nor designated by the Company as capital gains dividends will be treated as dividends of ordinary income to the extent that they are made out of current or accumulated earnings and profits of the Company. Such distributions ordinarily will be subject to withholding of United States federal income tax on a gross basis (that is, without allowance of deductions) at a 30 percent rate unless an applicable treaty lowers the withholding rate. However, if income from the investment in Common Stock is treated as effectively connected with the conduct by the Non-U.S. Stockholder of a United States trade or business, the Non-U.S. Stockholder generally will be subject to tax at graduated rates, in the same manner as U.S. Stockholders are taxed with respect to such distributions, and are generally not subject to withholding. Any such effectively connected distributions received by a Non-U.S. Stockholder that is a corporation may also be subject to an additional branch profits tax at a 30 percent rate or such lower rate as may be specified by an applicable income tax treaty. The Company expects to withhold United States federal income tax at the rate of 30 percent on the gross amount of any distributions paid to a Non-U.S. Stockholder unless (i) a lower treaty rate applies and the required form evidencing eligibility for that reduced rate is filed with the Company or (ii) the Non-U.S. Stockholder files an IRS Form 4224 with the Company claiming that the distribution is "effectively connected" income. Distributions in excess of current or accumulated earnings and profits of the Company will not be taxable to a Non-U.S. Stockholder to the extent that they do not exceed the adjusted basis of the stockholder's stock, but rather will reduce the adjusted basis of such stock. For FIRPTA withholding purposes (discussed below), such distributions will be treated as consideration for the slae or exchange of shares of Company stock. To the extent that such distributions exceed the adjusted basis of a Non-U.S. Stockholder's stock, they will give rise to tax liability if the Non-U.S. Stockholder would otherwise be subject to tax on any gain from the sale or disposition of his stock, as described below. If it cannot be determined at the time a distribution is made whether or not such distribution will be in excess of current and accumulated earnings and profits, the distribution will be subject to withholding at the rate applicable S-19 to dividends. However, amounts thus withheld are generally refundable if it is subsequently determined that such distribution was, in fact, in excess of current and accumulated earnings and profits of the Company. In such a case, the Non-U.S. Stockholder must file a U.S. income tax return with the IRS to claim a refund. Distributions to a Non-U.S. Stockholder that are designated by the Company at the time of distribution as capital gains dividends (other than those arising from the disposition of a United States real property interest) generally will not be subject to United States federal income taxation, unless (i) investment in the stock is effectively connected with the Non-U.S. Stockholder's United States trade or business, in which case the Non U.S. Stockholder will be subject to the same treatment as U.S. Stockholders with respect to such gain (except that a stockholder that is a foreign corporation may also be subject to the 30 percent branch profits tax, as discussed above), or (ii) the Non-U.S. Stockholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and has a "tax home" in the United States, in which case the nonresident alien individual will be subject to a 30 percent tax on the individual's capital gains. Distributions to a Non-U.S. Stockholder that are attributable to gain from sales or exchanges by the Company of United States real property interests will be taxed to a Non-U.S. Stockholder under the provisions of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA, these distributions are taxed to a Non-U.S. Stockholder as if such gain as income effectively connected with a United States trade or business. The Non-U.S. Stockholders would thus be taxed at the normal capital gains rates applicable to U.S. Stockholders (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals). Also, such gain might also be subject to a 30 percent branch profits tax in the hands of a Non-U.S. Stockholder that is a corporation, as discussed above. The Company is required to withhold 35 percent of any such distribution that could be designated by the Company as a capital gains dividend. Any such withheld amount is creditable against the Non-U.S. Stockholder's United States federal income tax liability. SALE OF STOCK. Gain recognized by a Non-U.S. Stockholder upon the sale or exchange of shares of stock generally will not be subject to FIRPTA so long as the Company is a "domestically controlled REIT" defined generally as a REIT in which at all times during a specified testing period less than 50 percent in value of its stock is held directly or indirectly by Non-U.S. Stockholders. The Company believes that it is currently a "domestically controlled REIT" and therefore the sale of stock will not be subject to taxation under FIRPTA. Because the stock of the Company is publicly traded, however, no assurance can be given that the Company will continue to be a domestically controlled REIT. If the Company is not or ceases to be, a "domestically-controlled REIT" whether gain arising from the sale or exchange of shares of stock by a Non-U.S. Stockholder would be subject to United States taxation under FIRPTA as a sale of a "United States real property interest" will depend on whether the shares are "regularly traded" (as defined by applicable Treasury regulations) on an established securities market (e.g., the New York Stock Exchange) and on the size of the selling Non-U.S. Stockholder's interest in the Company. In the case where the Company is not or ceases to be a "domestically-controlled REIT" and the Common Stock is "regularly traded" on an established securities market at any time during the calendar year, a sale of shares of Common Stock by a Non-U.S. Stockholder will only be treated as a sale of a "United States real property interest" (and thus subject to taxation under FIRPTA) if such selling shareholder beneficially owns (including by attribution) more than 5 percent of the total fair market value of the Common Stock at any time during the shorter of the period such Non-U.S. Stockholder held the stock or the five-year period ending either on the date of such sale or other applicable determination dates. If gain on the sale or exchange of shares of stock were subject to taxation under FIRPTA, the Non-U.S. Stockholder would be subject to regular United States income tax with respect to such gain in the same manner as a U.S. Stockholder (subject to any applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals); provided, however, that deductions otherwise allowable will be S-20 allowed as deductions only if the tax returns were filed within the time prescribed by law. In general, the purchaser of the stock would be required to withhold and remit to the IRS 10 percent of the amount realized by the seller on the sale of such stock. Notwithstanding the foregoing, gain from the sale or exchange of shares of stock not otherwise subject to FIRPTA will be taxable to a Non-U.S. Stockholder if either (i) investment in the stock is effectively connected with the Non-U.S. Stockholder's United States trade or business, in which case the Non-U.S. Stockholder will be subject to the same treatment as a U.S. Stockholder with respect to such gain (a Non-U.S. Stockholder that is a foreign corporation may also be subject to a 30 percent branch profits tax, as discussed above), or (ii) the Non-U.S. Stockholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and has a "tax home" in the United States, in which case the nonresident alien individual will be subject to a 30 percent United States withholding tax on the amount of such individual's gain. If the gain on the sale of stock were to be subject to taxation under FIRPTA, the Non-U.S. Stockholder would be subject to the same treatment as U.S. Stockholders with respect to such gain (subject to applicable alternative minimum tax, possible withholding tax and a special alternative minimum tax in the case of nonresident alien individuals). NEW WITHHOLDING REGULATIONS. Final regulations pertaining to withholding tax on income paid to foreign persons and related matters (the "New Withholding Regulations") were issued by the Treasury Department on October 6, 1997 and published in the Federal Register on October 14, 1997. The New Withholding Regulations will generally be effective for payments made after December 31, 1998, subject to certain transition rules. In general, the New Withholding Regulations do not significantly alter the substantive withholding and information reporting requirements, but unify current certification procedures and forms and clarify reliance standards. The New Withholding Regulations, however, adopt a certification rule applicable to distributions after December 31, 1998, subject to special transitional rules, under which a Non-U.S. Stockholder who wishes to claim the benefit of an applicable tax treaty rate with respect to dividends from a U.S. corporation will be required to satisfy certain additional certification and other requirements. Certain pass-through entities (i.e., partnerships) also may be subject to different requirements under the New Withholding Regulations. In addition, the New Withholding Regulations impose more stringent conditions on the ability of financial intermediaries acting for Non-U.S. Stockholders to provide certifications on behalf of Non-U.S. Stockholders, which may include entering into an agreement with the IRS to audit certain documentation with respect to such certifications. The New Withholding Regulations also require a corporation that is a REIT to treat as a dividend the portion of a distribution that is not designated as a capital gain dividend or return of basis and apply the 30 percent withholding tax (subject to any applicable deduction or exemption) to such portion, and to apply the FIRPTA withholding rules (discussed above) with respect to the portion of the distribution designated by the REIT as capital gain dividend. EXCEPT AS NOTED, THE DISCUSSION SET FORTH ABOVE IN "TAXATION OF FOREIGN SHAREHOLDERS" DOES NOT TAKE THE NEW WITHHOLDING REGULATIONS INTO ACCOUNT. PROSPECTIVE FOREIGN SHAREHOLDERS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE NEW WITHHOLDING REGULATIONS. OTHER TAX CONSEQUENCES The Company and its stockholders may be subject to state or local taxation in various state or local jurisdictions, including those in which it or they transact business or reside. The state and local tax treatment of the Company and its stockholders may not conform to the United States federal income tax consequences discussed above. Consequently, prospective stockholders should consult their own tax advisors regarding the effect of state and local tax laws on an investment in the Company. S-21 PROPOSED TAX LEGISLATION On February 2, 1998, the Clinton administration released its budget proposal for fiscal year 1999. The proposal includes a number of provisions affecting REITs. One proposed provision would amend the REIT asset tests with respect to subsidiary corporations other than qualified REIT subsidiaries or corporations that qualify as REITs (each, an "Affected Subsidiary"). Under current law, a REIT is precluded from owning more thatn 10% of the voting securities of any Affected Subsidiary. Pursuant to the Clinton administration proposal, a REIT would remain subject to this restriction and would be precluded from owning more than 10% of the VALUE of all classes of stock of any Affected Subsidiary. If the proposal were enacted as currently drafted, existing Affected Subsidiaries would be "grandfathered," I.E., a REIT would be subject only to current law with respect to such subsidiaries. The grandfathered status would terminate with respect to an Affected Subsidiary if : (i) the subsidiary engaged in a new trade or business; (ii) the subsidiary acquired substantial new assets; or (iii) the REIT made a substantial contribution to the capital of the subsidiary. Although the administration's budget proposals may affect the manner in which the Company conducts its business (particularly with respect to the Company's ability to conduct third party management services and/or other non-customary services), the proposals should not materially affect either the status of the Company for federal income tax purposes or its business operations. UNDERWRITING Wheat First Securities, Inc. (the "Underwriter") has agreed, subject to the terms and conditions contained in the Underwriting Agreement, to purchase from the Company the shares of Common Stock offered hereby. The Company is obligated to sell, and the Underwriter is obligated to purchase, all of the shares of Common Stock offered hereby if any are purchased. The Underwriter has advised the Company that it proposes to sell the shares of Common Stock offered hereby to Van Kampen American Capital ("Van Kampen"), which intends to deposit the shares of Common Stock, together with the common stock of other entities also purchased from the Underwriter, into the Wheat First Union REIT Income & Growth Trust, Series 1 (the "Trust"), in exchange for units in the Trust. The Underwriter is not an affiliate of Van Kampen or the Trust. The Underwriter intends to sell the shares of Common Stock offered hereby to Van Kampen at an aggregate purchase price of $24,000,018.30. It is anticipated that the Underwriter also will participate in the distribution of the units in the Trust and will receive compensation of 3.25% of the public offering price of the units in the Trust sold by it. The Company has agreed to indemnify the Underwriter or to contribute to losses arising out of certain liabilities, including liabilities under the Securities Act. S-22 In the ordinary course of their businesses, the Underwriter and its affiliates have engaged, and may in the future engage, in investment banking or commercial banking transactions with the Company. In connection with the Offering, the Underwriter and its affiliates may engage in transactions that stabilize, maintain or otherwise affect the market price of the Common Stock. Such transactions may include stabilization transactions effected in accordance with Rule 104 of Regulation M promulgated by the Commission, pursuant to which such persons may bid for or purchase Common Stock for the purpose of stabilizing its market price. The Underwriter also may create a short position for its account by selling more Common Stock in connection with the Offering than it is committed to purchase from the Company, and in such case may purchase Common Stock in the open market following the closing of the Offering to cover all or a portion of such short position. Any of the transactions described in this paragraph may result in the maintenance of the price of the Common Stock at a level above that which might otherwise prevail in the open market. None of the transactions described in this paragraph is required, and, if they are undertaken, may be discontinued at any time. EXPERTS The financial statements incorporated by reference in this Prospectus Supplement by reference to the Annual Report on Form 10-K of the Company for the year ended December 31, 1996, have been so incorporated in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The combined financial statements of the Robert Martin Group, for the year ended December 31, 1996 included in the Company's Current Report on Form 8-K/A, dated January 31, 1997 and filed March 28, 1997, have been so incorporated in reliance on the reports of Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such combined financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The financial statements incorporated by reference in this Prospectus Supplement by reference to the Current Reports on Form 8-K of the Company, dated September 18, 1997 and January 16, 1998, respectively, have been so incorporated in reliance on the reports of Schonbraun Safris McCann Bekritsky & Co., LLC, independent accountants, given on the authority of said firm as experts in auditing and accounting. The financial statements of The Mack Group incorporated in this Prospectus Supplement by reference to the Company's Proxy Statement, dated November 10, 1997, except as they relate to the unaudited nine-month periods ended September 30, 1997 and 1996 and except as they relate to Patriot American Office Group, have been audited by Price Waterhouse LLP, independent accountants, and, insofar as they relate to Patriot American Office Group, by Ernst & Young LLP, independent accountants, whose reports thereon are incorporated by reference in this Prospectus Supplement. Such financial statements have been so included in reliance on the reports of such independent accountants given on the authority of such firms as experts in auditing and accounting. LEGAL MATTERS Certain legal matters in connection with the shares of Common Stock offered hereby will be passed upon for the Company by Pryor, Cashman, Sherman & Flynn, New York, New York. Certain legal matters relating to Maryland law, including the validity of the issuance of the securities registered hereby, will be passed upon for the Company by Ballard, Spahr, Andrews & Ingersoll. Certain legal matters will be passed upon for the Underwriter by Hunton & Williams, Richmond, Virginia. S-23 PROSPECTUS CALI REALTY CORPORATION $1,000,000,000 PREFERRED STOCK, COMMON STOCK AND WARRANTS Cali Realty Corporation (together with its subsidiaries, the "Company") may from time to time offer in one or more series (i) shares or fractional shares of its preferred stock, par value $.01 per share (the "Preferred Stock"), (ii) shares of its common stock, par value $.01 per share (the "Common Stock"), or (iii) warrants to purchase Common Stock or Preferred Stock (the "Warrants"), with an aggregate initial public offering price of up to $1,000,000,000 on terms to be determined at the time of offering. The Preferred Stock, Common Stock and Warrants (collectively, the "Offered Securities") may be offered, separately or together, in separate series in amounts, at prices and on terms to be set forth in a supplement to this Prospectus (a "Prospectus Supplement"). The specific terms of the Offered Securities in respect of which this Prospectus is being delivered will be set forth in the applicable Prospectus Supplement and will include, where applicable: (i) in the case of Preferred Stock, the specific title and stated value, any dividend, liquidation, redemption, conversion, voting and other rights and the initial public offering price; (ii) in the case of Common Stock, the initial public offering price; and (iii) in the case of Warrants, the securities as to which such Warrants may be exercised, the duration, offering price, exercise price and detachability. In addition, such specific terms may include limitations on direct or beneficial ownership and restrictions on transfer of the Offered Securities, in each case as may be appropriate to preserve the status of the Company as a real estate investment trust ("REIT") for United States federal income tax purposes. See "Restrictions on Ownership of Capital Stock". The applicable Prospectus Supplement will also contain information, where applicable, about certain United States federal income tax considerations relating to, and any listing on a securities exchange of, the Offered Securities covered by such Prospectus Supplement. The Offered Securities may be offered directly, through agents designated from time to time by the Company, or to or through underwriters or dealers. If any agents or underwriters are involved in the sale of any of the Offered Securities, their names, and any applicable purchase price, fee, commission or discount arrangement between or among them, will be set forth, or will be calculable from the information set forth, in the applicable Prospectus Supplement. See "Plan of Distribution." No Offered Securities may be sold without delivery of the applicable Prospectus Supplement describing the method and terms of the offering of such series of Offered Securities. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. ------------------------ The date of this Prospectus is January 7, 1997. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). The Registration Statement, the exhibits and schedules forming a part thereof and the reports, proxy statements and other information filed by the Company with the Commission in accordance with the Exchange Act can be inspected and copied at the Commission's public reference section, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following regional offices of the Commission: Seven World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be obtained at prescribed rates by writing to the public reference section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of the Commission's Web site is: http://www.sec.gov. In addition, the Company's Common Stock is listed on the New York Stock Exchange (the "NYSE") and similar information concerning the Company can be inspected and copied at the offices of the NYSE, 20 Broad Street, New York, New York 10005. The Company has filed with the Commission a registration statement (the "Registration Statement") (of which this Prospectus is a part) under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Offered Securities. This Prospectus does not contain all of the information set forth in the Registration Statement, certain portions of which have been omitted as permitted by the rules and regulations of the Commission. Statements contained in this Prospectus as to the contents of any contract or other document are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference and the exhibits and schedules thereto. For further information regarding the Company and the Offered Securities, reference is hereby made to the Registration Statement and such exhibits and schedules which may be obtained from the Commission at its principal office in Washington, D.C. upon payment of the fees prescribed by the Commission. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The documents listed below have been filed by the Company (File No. 1-13274) under the Exchange Act with the Commission and are incorporated herein by reference: a. The Company's Current Reports on Form 8-K dated July 16, 1996, August 12, 1996, October 8, 1996, October 28, 1996, October 29, 1996, November 18, 1996, November 21, 1996, December 30, 1996 and December 31, 1996; b. The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995; c. The Company's Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1996, June 30, 1996 and September 30, 1996; d. The Company's Proxy Statement relating to the Annual Meeting of Shareholders held on May 13, 1996; e. The description of the Common Stock and the description of certain provisions of Maryland Law and the Company's Articles of Incorporation and Bylaws, both contained in the Company's Registration Statement on Form 8-A, dated August 9, 1994. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Offered Securities shall be deemed to be incorporated by reference in this Prospectus and to be part hereof from 2 the date of filing such documents (provided, however, that the information referred to in Item 402(a)(8) of Regulation S-K of the Commission shall not be deemed specifically incorporated by reference herein). Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein (or in the applicable Prospectus Supplement) or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Copies of all documents which are incorporated herein by reference (not including the exhibits to such information, unless such exhibits are specifically incorporated by reference in such information) will be provided without charge to each person, including any beneficial owner of the Offered Securities, to whom this Prospectus is delivered, upon written or oral request. Requests should be made to Barry Lefkowitz, Vice President-Finance and Chief Financial Officer of the Company, 11 Commerce Drive, Cranford, New Jersey 07016-3510 (telephone number: (908) 272-8000). 3 THE COMPANY Cali Realty Corporation (together with its subsidiaries, the "Company") is a fully-integrated real estate investment trust ("REIT") that owns and operates a portfolio comprised predominantly of Class A office and office/flex buildings located primarily in New Jersey, as well as commercial real estate leasing, management, acquisition, development and construction businesses. As of September 30, 1996, the Company owned 100 percent of 44 office and office/flex properties encompassing approximately 4.3 million net rentable square feet and one 327 unit multifamily residential property (collectively, the "Properties"). The 44 office and office/flex properties are comprised of 27 office buildings containing an aggregate of 3.6 million square feet (the "Office Properties") and 17 office/flex buildings containing an aggregate of approximately 700,000 square feet (the "Office/Flex Properties"). The Company believes that its Properties have excellent locations and access and are well-maintained and professionally managed. As a result, the Company believes that its properties attract high quality tenants and achieve among the highest rent, occupancy and tenant retention rates within their markets. As of September 30, 1996, the Office Properties and Office/Flex Properties were approximately 97 percent leased to over 430 tenants. On November 4, 1996, the Company acquired Harborside, a 1.9 million square foot office complex located in Jersey City, New Jersey for an initial acquisition cost of approximately $286.7 million. The purchase price included the assumption of existing and seller-provided financing aggregating approximately $150.0 million. The balance of the acquisition cost, totaling approximately $137.4 million, was paid in cash and was financed substantially through drawings on the Company's existing credit facilities. As part of the purchase, the Company also acquired 11.3 acres of land fully zoned and permitted for an additional 4.1 million square feet of development and the water rights associated with 27.4 acres of land extending into the Hudson immediately east of Harborside, including two piers with an area of 5.8 acres. The terms of the acquisition of the vacant parcels at Harborside provide for payments (with an estimated net present value of approximately $5.3 million) to be made to the seller for development rights if and when the Company commences construction on the site during the next several years. However, the agreement provides, among other things, that even if the Company does not commence construction, the seller may nevertheless require the Company to acquire these rights during the six-month period after the end of the sixth year. After such period, the seller's option lapses, but any development in years 7 through 30 will require a payment, on an increasing scale, for the development rights. In addition, on November 7, 1996, the Company acquired Five Sentry Parkway East & West ("Five Sentry"), a two-building office complex comprised of approximately 131,000 net rentable square feet located in Plymouth Meeting, Montgomery County, Pennsylvania, for approximately $12.4 million in cash, which was drawn from one of the Company's credit facilities. Such borrowing was subsequently repaid from the net proceeds received from the Company's public common stock offering of 17,537,500 shares (the "November Offering") on November 23, 1996. On December 10, 1996, the Company acquired 300 Tice Boulevard ("Whiteweld"), a 230,000 net rentable square foot office building located in Woodcliff Lake, Bergen County, New Jersey, for approximately $35.0 million in cash, made available from the net proceeds received from the November Offering. On December 16, 1996, the Company acquired One Bridge Plaza, a 200,000 net rentable square foot office building located in Fort Lee, Bergen County, New Jersey, for approximately $26.8 million in cash, made available from the net proceeds received from the November Offering. On December 17, 1996, the Company acquired the International Court at Airport Business Center ("Airport Center"), a three-building office complex comprised of approximately 370,000 net rentable square feet located in Lester, Delaware County, Pennsylvania for approximately $43.0 million in cash, made available from the net proceeds received from the November Offering. The Company's strategy has been to focus its development and ownership of properties in sub-markets where it is, or can become, a significant and preferred owner and operator. The Company will continue this strategy by expanding, primarily through acquisitions, into sub-markets where it has, or can achieve, similar status. Management believes that the recent trend towards increasing rental and occupancy rates in Class A office buildings in the Company's sub-markets presents significant opportunities for 4 growth. The Company may also develop properties in such sub-markets. Management believes that its extensive market knowledge provides the Company with a significant competitive advantage which is further enhanced by its strong reputation for and emphasis on delivering highly responsive management services, including direct and continued access to the Company's senior management. The Company performs substantially all construction, leasing, management and tenant improvements on an "in-house" basis and is self-administered and self-managed. Cali Associates, the entity whose business the Company succeeded in 1994, was founded by John J. Cali, Angelo R. Cali and Edward Leshowitz (the "Founders"), who have been involved in the development, leasing, management, operation and disposition of commercial and residential properties in Northern and Central New Jersey for over 40 years and have been primarily focusing on office building development for the past 17 years. In addition to the Founders, the Company's executive officers have been employed by the Company and its predecessor for an average of approximately ten years. The Company and its predecessor have built approximately four million square feet of office space, more than one million square feet of industrial facilities and over 5,500 residential units. The Company has elected to be taxed as a REIT for federal income tax purposes and expects to continue to elect such status. Although the Company believes that it was organized and has been operating in conformity with the requirements for qualification under the Internal Revenue Code of 1986, as amended (the "Code"), no assurance can be given that the Company will continue to qualify as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions of which there are only limited judicial or administrative interpretations. If in any taxable year the Company were to fail to qualify as a REIT, the Company would not be allowed a deduction for distributions to stockholders in computing taxable income and would be subject to federal taxation at regular corporate rates. As a result, such a failure would adversely affect the Company's ability to make distributions to its stockholders and could have an adverse affect on the market value and marketability of the Offered Securities. To ensure that the Company qualifies as a REIT, the transfer of shares of Common Stock and Preferred Stock (as defined below) is subject to certain restrictions, and ownership of capital stock by any single person is limited to 9.8 percent of the value of such capital stock, subject to certain exceptions. The Company's Articles of Incorporation provide that any purported transfer in violation of the above-described ownership limitations shall be void ab initio. The shares of Common Stock of the Company are listed on the NYSE under the symbol "CLI." The Company has paid regular quarterly distributions on its Common Stock since it commenced operations as a REIT in 1994. The Company intends to continue making regular quarterly distributions to its Common Stockholders. Distributions depend upon a variety of factors, and there can be no assurance that distributions will be made. All of the Company's interests in the Properties are held by, and its operations are conducted through, Cali Realty, L.P., a Delaware limited partnership (the "Operating Partnership"), or by entities controlled by the Operating Partnership. The Company owned, as of November 30, 1996, approximately 93.1 percent of the Operating Partnership's outstanding units of partnership interest ("Units"), and is the sole general partner of the Operating Partnership. The Company was incorporated under the laws of Maryland on May 24, 1994. Its executive offices are located at 11 Commerce Drive, Cranford, New Jersey 07016, and its telephone number is (908) 272-8000. 5 RATIOS OF EARNINGS TO FIXED CHARGES The following tables set forth the Company's consolidated ratios of earnings to fixed charges for the periods shown: