- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-13274 MACK-CALI REALTY CORPORATION (Exact Name of Registrant as specified in its charter) MARYLAND 22-3305147 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 11 COMMERCE DRIVE, CRANFORD, NEW JERSEY 07016-3599 (Address of principal executive offices) (Zip code)
(908) 272-8000 (Registrant's telephone number, including area code) -------------------------- Securities registered pursuant to Section 12(b) of the Act: (Title of Each Class) (Name of Each Exchange on Which Registered) COMMON STOCK, $0.01 PAR VALUE NEW YORK STOCK EXCHANGE PACIFIC EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be con-tained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. /X/ As of March 1, 1999, the aggregate market value of the voting stock held by non-affiliates of the registrant was $1,665,740,874. The aggregate market value was computed with references to the closing price on the New York Stock Exchange on such date. This calculation does not reflect a determination that persons are affiliates for any other purpose. As of March 1, 1999, 58,287,261 shares of common stock, $0.01 par value, of the Company ("Common Stock") were outstanding. LOCATION OF EXHIBIT INDEX: The index of exhibits is contained in Part IV herein on page number 54. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's definitive proxy statement to be issued in conjunction with the registrant's annual meeting of shareholders to be held on May 19, 1999 are incorporated by reference in Part III of this Form 10-K. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS FORM 10-K
PAGE NO. ---- PART I Item 1 Business................................................ 3 Item 2 Properties.............................................. 17 Item 3 Legal Proceedings....................................... 43 Item 4 Submission of Matters to a Vote of Security Holders..... 43 PART II Item 5 Market for Registrant's Common Stock and Related Stockholder Matters................................... 44 Item 6 Selected Financial Data................................. 46 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations................... 47 Item 7a Quantitative and Qualitative Disclosures About Market Risk.................................................. 53 Item 8 Financial Statements and Supplementary Data............. 54 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 54 PART III Item 10 Directors and Executive Officers of the Registrant...... 54 Item 11 Executive Compensation.................................. 54 Item 12 Security Ownership of Certain Beneficial Owners and Management............................................ 54 Item 13 Certain Relationships and Related Transactions.......... 54 PART IV Item 14 Exhibits, Financial Statements, Schedules and Reports on Form 8-K.............................................. 54
2 PART I ITEM 1. BUSINESS GENERAL Mack-Cali Realty Corporation (together with its subsidiaries, the "Company") is a fully-integrated, self-administered and self-managed real estate investment trust ("REIT") that owns and operates a portfolio comprised predominantly of Class A office and office/flex properties located primarily in the Northeast, as well as commercial real estate leasing, management, acquisition, development and construction businesses. As of December 31, 1998, the Company's portfolio consisted of 249 properties, aggregating approximately 27.8 million square feet, plus developable land. Included in the Company's portfolio are 244 wholly-owned properties aggregating approximately 26.8 million square feet (collectively, the "Properties"). The Properties are comprised of 153 office properties aggregating approximately 22.5 million square feet (the "Office Properties"), 79 office/flex properties aggregating approximately 3.9 million square feet (the "Office/Flex Properties"), six industrial/warehouse properties aggregating approximately 387,400 square feet (the "Industrial/Warehouse Properties"), two multi-family residential complexes consisting of 453 units, two stand-alone retail properties and two land leases. The Company's portfolio also includes ownership interests in unconsolidated joint ventures which own four office properties and one office/flex property, aggregating approximately 1.0 million square feet. See "Investments in Unconsolidated Joint Ventures." Unless otherwise indicated, all references to square feet represent net rentable area. As of December 31, 1998, the Office Properties, Office/Flex Properties and Industrial/Warehouse Properties were approximately 96.6 percent leased to over 2,400 tenants. The Company's portfolio is located in 12 states, primarily in the Northeast, plus the District of Columbia. The Company's strategy has been to focus its acquisition, operation and development of office properties in markets and sub-markets where it is, or can become, a significant and preferred owner and operator. 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 will continue this strategy by expanding, through acquisitions or development in markets and sub-markets where it has, or can achieve, similar status. Consistent with its growth strategy, during 1998, the Company acquired or placed in service 56 office and office/flex properties aggregating approximately 4.9 million square feet, for an aggregate cost of approximately $686.6 million (the "Property Acquisitions"). In addition, the Company acquired ownership interests in unconsolidated joint ventures which own five office and office/flex properties, totaling approximately 1.0 million square feet, for a net investment of approximately $66.5 million. Management believes that the recent trend towards rising rental and occupancy rates in the Company's sub-markets continues to present significant opportunities for internal growth. The Company also may develop properties in such sub-markets, particularly with a view towards the development of the Company's vacant holdings, which principally are located adjacent to the Company's existing properties. 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, professional management services. See "Business Strategies". The principals of Cali Associates, the entity to whose business the Company succeeded in 1994, have been involved in the development, leasing, management, operation and disposition of commercial and residential properties in Northern and Central New Jersey for over 50 years and have been primarily focusing on office building development for the past 20 years. In January 1997, the Company acquired 65 Class A properties located in Westchester County, New York and Fairfield County, Connecticut, aggregating approximately 4.1 million square feet from the Robert Martin Company, LLC and affiliates for a total cost of approximately $450.0 million (the "RM Transaction"). In December 1997, the Company acquired 54 Class A office properties, primarily in New Jersey and Texas, aggregating approximately 9.2 million 3 square feet, from The Mack Company and Patriot American Office Group for a total cost of approximately $1.1 billion (the "Mack Transaction"). Upon the completion of the Mack Transaction, the Company changed its name from Cali Realty Corporation to Mack-Cali Realty Corporation. The Company's executive officers have been employed by the Company and/or its predecessor companies for an average of approximately 10 years. The Company and its predecessors have extensive development experience, having developed 11.9 million square feet or 44.4 percent of the Company's portfolio. As of December 31, 1998, executive officers and directors of the Company owned approximately 10.5 percent of the Company's outstanding shares of Common Stock (including Units redeemable or convertible for shares of Common Stock). As used herein, the term "Units" refers to limited partnership interests in Mack-Cali Realty, L.P., a Delaware limited partnership (the "Operating Partnership"), through which the Company conducts its real estate activities. The Company performs substantially all construction, development, leasing, management and tenant improvements on an "in-house" basis and is self-administered and self-managed. The Company was incorporated on May 24, 1994. The Company's executive offices are located at 11 Commerce Drive, Cranford, New Jersey 07016, and its telephone number is (908) 272-8000. The Company has an internet website at "http://www.mack-cali.com". BUSINESS STRATEGIES OPERATIONS REPUTATION: The Company has established a reputation as a highly-regarded landlord with an emphasis on delivering professional quality tenant services in buildings it owns or manages. The Company believes that its continued success depends in part on enhancing its reputation as an operator of choice, which will facilitate the retention of current tenants and the attraction of new tenants. The Company believes it provides a superior level of service to its tenants, which in turn creates higher than average occupancy rates, as well as lower than average turnover. COMMUNICATION WITH TENANTS: The Company's property management department emphasizes frequent communication with tenants to ensure first-class service to the Properties. Property managers generally are located on site at the Properties to provide convenient access to management and to ensure that the Properties are well-maintained. Property management's primary responsibility is ensuring that buildings are operated at peak efficiency in order to meet both the Company's and tenants' needs and expectations. The property managers additionally budget and oversee capital improvements and building system upgrades to enhance the Properties' competitive advantages in their markets. Additionally, the Company's leasing department develops and maintains long-term relationships with its diverse tenant base, and coordinates leasing, expansion, relocation and build-to-suit opportunities within its portfolio. This approach allows the Company to offer office space in the appropriate size and location to current or prospective tenants in any of its sub-markets. GROWTH INTERNAL GROWTH: The Company's objectives are to maximize growth in funds from operations and to enhance the value of its portfolio through effective management, acquisition and development strategies. The Company seeks to maximize the value of its existing portfolio through implementing operating strategies to produce increased effective rental and occupancy rates and decreased concession and tenant installation costs. The Company believes that it has a unique opportunity for internal growth through re-leasing space at higher effective rents with contractual rent increases and developing or redeveloping space for its diverse base of high credit tenants, which include AT&T Corporation, Allstate Insurance Company and International Business Machines Corporation. In addition, the Company's management 4 seeks volume discounts to take advantage of the Company's size and dominance in particular sub-markets, and operating efficiencies through the use of in-house management, leasing, marketing, financing, accounting, legal and construction functions. The Company believes that these combined factors should provide the Company with sustainable internal growth over the next several years. EXTERNAL GROWTH: The Company also believes that opportunities exist to increase funds from operations by acquiring or developing properties with attractive returns in sub-markets where, based on its expertise in leasing, managing and operating properties, it is, or can become, a significant and preferred owner and operator. The Company will acquire, invest in or develop additional properties that: (i) provide attractive initial yields with significant potential for growth in cash flow from operations; (ii) are well located, of high quality and competitive in their respective sub-markets; (iii) are located in its existing sub-markets or in sub-markets in which the Company can become a significant and preferred owner or operator; and (iv) have been under-managed or are otherwise capable of improved performance through intensive management, capital improvements and/or leasing that will result in increased occupancy and rental revenues. DEVELOPMENT: In addition, the Company owns 238 acres of land held for development, on which it can build up to approximately 10 million square feet of office space. The Company may selectively develop buildings where such development will result in a favorable risk-adjusted return on investment in coordination with the above operating strategies. Such development will primarily occur only when leases have been executed prior to construction, in stable sub-markets where the demand for such space exceeds available supply and where the Company is, or can become, a significant and preferred owner and operator. FINANCIAL The Company currently intends to maintain a ratio of debt to total market capitalization (total debt of the Company as a percentage of the total market value of issued and outstanding shares of Common Stock, including interests redeemable therefor, plus total debt) of approximately 50 percent or less. Although there is no limit in the Company's organizational documents on the amount of indebtedness that the Company may incur, the Company has entered into certain financial agreements which contain covenants that limit the Company's ability to incur indebtedness under certain circumstances. As of December 31, 1998, the Company's total debt constituted approximately 38.5 percent of the total market capitalization of the Company. The Company will utilize the most appropriate sources of capital for future acquisitions, development, capital improvements and other investments, which may include funds from operating activities, short-term and long-term borrowings (including draws on the Company's revolving credit facilities), and issuances of debt securities or additional equity securities. EMPLOYEES As of December 31, 1998, the Company had over 450 employees. COMPETITION The leasing of real estate is highly competitive. The Properties compete for tenants with lessors and developers of similar properties located in its respective markets primarily on the basis of location, rent charged, services provided, and the design and condition of the Properties. The Company also experiences competition when attempting to acquire desirable real estate, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension trusts, trust funds, partnerships and individual investors. 5 REGULATIONS Many laws and governmental regulations are applicable to the Properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently. Under various laws and regulations relating to the protection of the environment, an owner of real estate may be held liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner was responsible for, or even knew of, the presence of such substances. The presence of such substances may adversely affect the owner's ability to rent or sell the property or to borrow using such property as collateral and may expose it to liability resulting from any release of, or exposure to, such substances. Persons who arrange for the disposal or treatment of hazardous or toxic substances at another location may also be liable for the costs of removal or remediation of such substances at the disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain environmental laws impose liability for release of asbestos-containing materials into the air, and third parties may also seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances. In connection with the ownership (direct or indirect), operation, management and development of real properties, the Company may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental penalties and injuries to persons and property. There can be no assurance that (i) future laws, ordinances or regulations will not impose any material environmental liability, (ii) the current environmental condition of the Properties will not be affected by tenants, by the condition of land or operations in the vicinity of the Properties (such as the presence of underground storage tanks), or by third parties unrelated to the Company, or (iii) the Company's assessments reveal all environmental liabilities and that there are no material environmental liabilities of which the Company is aware. If compliance with the various laws and regulations, now existing or hereafter adopted, exceeds the Company's budgets for such items, the Company's ability to make expected distributions to stockholders could be adversely affected. There are no other laws or regulations which have a material effect on the Company's operations, other than typical federal, state and local laws affecting the development and operation of real property, such as zoning laws. INDUSTRY SEGMENTS The Company operates in only one industry segment-real estate. The Company does not have any foreign operations and its business is not seasonal. RECENT DEVELOPMENTS The Company's funds from operations (after adjustment for straight-lining of rents) for the year ended December 31, 1998 was $216.9 million as compared to $111.8 million for the year ended December 31, 1997. As a result of the Company's improved operating performance, the Company announced, in September 1998, a 10 percent increase in its regular quarterly dividend, commencing with the Company's dividend with respect to the third quarter of 1998, from $0.50 per share of Common Stock ($2.00 per share of Common Stock on an annualized basis) to $0.55 per share of Common Stock ($2.20 per share of Common Stock on an annualized basis). The Company declared a cash dividend of $0.55 per share on December 15, 1998 to shareholders of record on January 6, 1999. The dividend was paid on January 26, 1999. The Company has increased its regular quarterly dividend for four consecutive years for an increase of 36.2 percent over the period. 6 In 1998, the Company: - acquired 52 operating properties aggregating 4.7 million square feet at a total cost of approximately $663.6 million, - placed in service four properties aggregating 218,600 square feet at a total cost of approximately $23.0 million, - acquired seven redevelopment properties/developable land parcels at a total cost of approximately $41.4 million, and - acquired interests in unconsolidated joint ventures with an investment of approximately $66.5 million at December 31, 1998. These transactions increased the total square footage of the Company's portfolio by 26.7 percent. OPERATING PROPERTY ACQUISITIONS The Company acquired the following operating properties during the year ended December 31, 1998:
INVESTMENT BY COMPANY(A) ACQUISITION SQUARE ------------- DATE PROPERTY/PORTFOLIO NAME LOCATION # OF BLDGS. FEET - ---------- --------------------------------- --------------------------------------- ----------- --------- (IN THOUSANDS) OFFICE 2/05/98 500 West Putnam Avenue(b) Greenwich, Fairfield County, CT 1 121,250 $ 20,125 2/25/98 10 Mountainview Road Upper Saddle River, Bergen County, NJ 1 192,000 24,754 3/12/98 1250 Capital of Texas Highway South Austin, Travis County, TX 1 270,703 37,266 3/27/98 Prudential Business Campus(c) Parsippany, Morris County, NJ 5 703,451 130,437 3/27/98 Pacifica Portfolio--Phase I(d)(e) Denver & Colorado Springs, CO 10 620,017 74,966 3/30/98 Morris County Financial Center Parsippany, Morris County, NJ 2 301,940 52,763 5/13/98 3600 South Yosemite Denver, Denver County, CO 1 133,743 13,555 5/22/98 500 College Road East(f) Princeton, Mercer County, NJ 1 158,235 21,334 6/01/98 1709 New York Ave./ 1400 L Street N.W. Washington, D.C. 2 325,000 90,385 6/03/98 400 South Colorado Boulevard Denver, Denver County, CO 1 125,415 12,147 6/08/98 Pacifica Portfolio--Phase II(d)(e)(g) Denver & Colorado Springs, CO 6 514,427 85,910 7/16/98 4200 Parliament Drive(h) Lanham, Prince George's County, MD 1 122,000 15,807 9/10/98 40 Richards Avenue(d) Norwalk, Fairfield County, CT 1 145,487 19,587 9/15/98 Seven Skyline Drive(i) Hawthorne, Westchester County, NY 1 109,000 13,379 -- --------- ------------- TOTAL OFFICE PROPERTY ACQUISITIONS: 34 3,842,668 $ 612,415 -- --------- ------------- OFFICE/FLEX 1/30/98 McGarvey Portfolio(j) Moorestown, Burlington County, NJ 17 748,660 $ 47,526 7/14/98 1510 Lancer Road(k) Moorestown, Burlington County, NJ 1 88,000 3,700 -- --------- ------------- TOTAL OFFICE/FLEX PROPERTY ACQUISITIONS: 18 836,660 $ 51,226 -- --------- ------------- TOTAL OPERATING PROPERTY ACQUISITIONS: 52 4,679,328 $ 663,641 -- -- --------- ------------- --------- -------------
PROPERTIES PLACED IN SERVICE The Company placed in service the following properties through the completion of development or redevelopment during the year ended December 31, 1998:
INVESTMENT BY COMPANY(A) DATE PLACED ------------- IN SERVICE PROPERTY NAME LOCATION # OF BLDGS. SQUARE FEET - ----------- ------------------------- ------------------------------------ ----------- ----------- (IN THOUSANDS) OFFICE 1/15/98 224 Strawbridge Drive Moorestown, Burlington County, NJ 1 74,000 $ 7,796 8/01/98 228 Strawbridge Drive Moorestown, Burlington County, NJ 1 74,000 7,986 -- ----------- ------------- TOTAL OFFICE PROPERTIES PLACED IN SERVICE: 2 148,000 $ 15,782 -- ----------- ------------- OFFICE/FLEX 6/08/98 Two Center Court Totowa, Passaic County, NJ 1 30,600 $ 2,231 10/23/98 650 West Avenue Stamford, Fairfield County, CT 1 40,000 4,952 -- ----------- ------------- TOTAL OFFICE/FLEX PROPERTIES PLACED IN SERVICE: 2 70,600 $ 7,183 -- ----------- ------------- TOTAL PROPERTIES PLACED IN SERVICE: 4 218,600 $ 22,965 -- -- ----------- ------------- ----------- -------------
- ------------------------------ SEE FOOTNOTES TO THESE SCHEDULES ON SUBSEQUENT PAGE. 7 - ------------------------------ FOOTNOTES TO SCHEDULES ON PREVIOUS PAGE: (a) Unless otherwise noted, transactions were funded by the Company with funds primarily made available through draws on the Company's credit facilities. (b) The acquisition was funded with cash as well as the assumption of mortgage debt (estimated fair value of approximately $12,104, with annual effective interest rate of 6.52 percent.) (c) The acquisition was funded primarily from proceeds received from the sale of 2,705,628 shares of common stock. Also included in the acquisition, but excluded from this schedule, is (i) Nine Campus Drive in which the Company has a 50 percent interest through an unconsolidated joint venture (see "Investments in Unconsolidated Joint Ventures"), and (ii) developable land adjacent to the acquired portfolio (see "Redevelopment Properties/Developable Land Acquisitions.") (d) The acquisition was funded with cash and the issuance of common units to the seller (see Note 9 to the Financial Statements). (e) The Company may be required to pay additional consideration due to earn-out provisions in the agreement. The Company is under contract to acquire two remaining office buildings, encompassing 95,360 square feet (for an aggregate price of approximately $12,300). (f) The property was acquired subject to a ground lease, which is prepaid through 2031, and has two 10-year renewal options, at rent levels as defined in the lease agreement. (g) Also included in the acquisition, but excluded from this schedule, is developable land adjacent to the acquired portfolio (see "Redevelopment Properties/Developable Land Acquisitions.") (h) Includes land adjacent to the operating property, which may be sub-divided for future development. (i) The property was acquired through the exercise of a purchase option obtained in the RM Transaction. The acquisition was funded with cash, net of the repayment by the seller of the remaining balance of the RM Note Receivable (see Note 7 to the Financial Statements). (j) The acquisition was funded with cash as well as the assumption of mortgage debt (aggregate estimated fair value of approximately $8,354, with weighted average annual effective interest rate of 6.24 percent.) The Company is under contract to acquire an additional four office/flex properties and has a right of first refusal to acquire six additional office/flex properties. (k) The property was acquired through the exercise of a purchase option obtained in the acquisition of the McGarvey portfolio in January 1998. - ------------------------------ REDEVELOPMENT PROPERTIES/DEVELOPABLE LAND ACQUISITIONS On January 23, 1998, the Company acquired 10 acres of vacant land in the Stamford Executive Park, located in Stamford, Fairfield County, Connecticut for approximately $1.3 million, funded from the Company's cash reserves. In October 1998, the Company completed and placed in service a 40,000 square-foot office/flex property on the acquired land (see "Properties Placed in Service.") On February 2, 1998, the Company acquired 2115 Linwood Avenue, a 68,000 square-foot vacant office building located in Fort Lee, Bergen County, New Jersey. The building was acquired for approximately $5.2 million, which was made available from drawing on one of the Company's credit facilities. The Company is currently redeveloping the property for future lease-up and operation. On March 27, 1998, as part of the purchase of the Prudential Business Campus (see "Operating Property Acquisitions"), the Company acquired approximately 95 acres of vacant land adjacent to the operating properties for approximately $27.5 million. On June 8, 1998, as part of the Pacifica portfolio-phase II acquisition (see "Operating Property Acquisitions"), the Company acquired vacant land adjacent to the operating properties for approximately $2.0 million. On September 4, 1998, the Company acquired approximately 128 acres of vacant land located at the Horizon Center Business Park, Hamilton Township, Mercer County, New Jersey, through the exercise of a purchase option obtained in the Company's acquisition of the Horizon Center Business Park in November 1995. The land was acquired for approximately $1.7 million, which was funded from the Company's cash reserves. On November 10, 1998, the Company acquired approximately 10.1 acres of land located at Three Vaughn Drive, Princeton, Mercer County, New Jersey. The Company acquired the land for approximately $2.1 million, which was funded from the Company's cash reserves. 8 On December 3, 1998, the Company acquired approximately 2.7 acres of land located at 12 Skyline Drive, Hawthorne, Westchester County, New York. The Company acquired the land for approximately $1.5 million, which was funded from the Company's cash reserves. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES The following is a summary of the Company's net investment in unconsolidated joint ventures as of December 31, 1998:
COMPANY'S NET INVESTMENT -------------- UNCONSOLIDATED JOINT VENTURE (IN THOUSANDS) - -------------------------------------------------------------------------------------------------- Pru-Beta 3........................................................................................ $ 17,980 HPMC.............................................................................................. 17,578 G&G Martco........................................................................................ 10,964 American Financial Exchange L.L.C................................................................. 10,983 Ramland Realty Associates L.L.C................................................................... 4,851 Ashford Loop Associates L.P....................................................................... 4,152 ------- Total............................................................................................. $ 66,508 ------- -------
PRU-BETA 3 (NINE CAMPUS DRIVE): On March 27, 1998, the Company acquired a 50 percent interest in an existing joint venture with The Prudential Insurance Company of America ("Prudential"), known as Pru-Beta 3, which owns and operates Nine Campus Drive, a 156,495 square-foot office building, located in the Mack-Cali Business Campus (formerly Prudential Business Campus) office complex in Parsippany, Morris County, New Jersey. The Company performs management and leasing services for the property owned by the joint venture. HPMC (CONTINENTAL GRAND II/SUMMIT RIDGE/LAVA RIDGE): On April 23, 1998, the Company entered into a joint venture agreement with HCG Development, L.L.C. and Summit Partners I, L.L.C. to form HPMC Development Partners, L.P. and, on July 21, 1998, entered into a second joint venture named HPMC Lava Ridge Partners, L.P. with these same parties. HPMC Development Partners, L.P.'s efforts have focused on two development projects, commonly referred to as Continental Grand II and Summit Ridge. Continental Grand II is a 4.2 acre site located in El Segundo, Los Angeles County, California, acquired by the venture upon which it has commenced construction of a 237,000 square-foot office property. Summit Ridge is a 7.3 acre site located in San Diego, San Diego County, California, acquired by the venture upon which it has commenced construction of a 132,000 square-foot office/flex property. HPMC Lava Ridge Partners, L.P. has commenced construction of three two-story buildings aggregating 183,200 square-feet of office space on a 12.1 acre site located in Roseville, Placer County, California. The Company is required to make capital contributions to the ventures totaling up to $26.6 million, pursuant to the partnership agreements. Among other things, the partnership agreements provide for a preferred return on the Company's invested capital in each venture, in addition to 50 percent of such venture's profit above such preferred returns, as defined in each agreement. G&G MARTCO (CONVENTION PLAZA): On April 30, 1998, the Company acquired a 49.9 percent interest in an existing joint venture, known as G&G Martco, which owns Convention Plaza, a 305,618 square-foot office building, located in San Francisco, San Francisco County, California. A portion of its initial investment was financed through the issuance of common units (see Note 9 to the Financial Statements), as well as funds drawn from the Company's credit facilities. The Company performs management and leasing services for the property owned by the joint venture. AMERICAN FINANCIAL EXCHANGE L.L.C.: On May 20, 1998, the Company entered into a joint venture agreement with Columbia Development Corp. to form American Financial Exchange L.L.C. The venture 9 was initially formed to acquire land for future development, located on the Hudson River waterfront in Jersey City, Hudson County, New Jersey, adjacent to the Company's Harborside property. The Company holds a 50 percent interest in the joint venture. Among other things, the partnership agreement provides for a preferred return on the Company's invested capital in the venture, in addition to the Company's proportionate share of the venture's profit, as defined in the agreement. The joint venture has acquired land on which it has constructed a parking facility, which is currently leased to a parking operator under a 10-year agreement. Such parking facility serves a ferry service between the Company's Harborside Financial Center and Manhattan. RAMLAND REALTY ASSOCIATES L.L.C. (ONE RAMLAND ROAD): On August 20, 1998, the Company entered into a joint venture agreement with S.B. New York Realty Corp. to form Ramland Realty Associates L.L.C. The venture was formed to own, manage and operate One Ramland Road, a 232,000 square-foot office/ flex building plus adjacent developable land, located in Orangeburg, Rockland County, New York. The office/flex building is being redeveloped for future lease-up and operation. The Company holds a 50 percent interest in the joint venture. ASHFORD LOOP ASSOCIATES L.P. (1001 SOUTH DAIRY ASHFORD/2100 WEST LOOP SOUTH): On September 18, 1998, the Company entered into a joint venture agreement with Prudential to form Ashford Loop Associates L.P. The venture was formed to own, manage and operate 1001 South Dairy Ashford, a 130,000 square-foot office building acquired on September 18, 1998 and 2100 West Loop South, a 168,000 square-foot office building acquired on November 25, 1998, both located in Houston, Harris County, Texas. The Company holds a 20 percent interest in the joint venture. The joint venture may be required to pay additional consideration due to earn-out provisions in the acquisition contracts. The Company performs management and leasing services for the properties owned by the joint venture. FINANCING ACTIVITY During 1998, the Company issued approximately 8.0 million shares in several offerings and sales of its common stock (at a weighted average price of $37.38 per share) raising aggregate net proceeds of approximately $288.4 million. Concurrent with these offerings and sales, the Company purchased from the Operating Partnership approximately 8.0 million Common Units, as defined below, for approximately $288.4 million. Additionally, during 1998, in conjunction with the funding of several of its property acquisitions as well as redemption of certain of the contingent units issued in the Mack Transaction, the Company issued a total of approximately 3.1 million common operating partnership units ("Common Units") and 19,694 preferred operating partnership units (convertible into 568,369 Common Units), with a total value of approximately $126.3 million at time of issuance. In October 1998, the Company entered into a forward treasury rate lock agreement with a commercial bank. The agreement locked an interest rate of 4.089 percent per annum for the three-year U.S. Treasury Note effective November 4, 1999, on a notional amount of $50.0 million. The agreement will be used to fix the Index Rate on $50.0 million of the Harborside mortgages, for which the Company's interest rate re-sets for three years beginning November 4, 1999 to the interpolated three-year U.S. Treasury Note plus 110 basis points (see Note 8 to the Financial Statements--"Harborside Mortgages"). In August 1998, the Board of Directors of the Company authorized a share repurchase program under which the Company was permitted to purchase up to $100.0 million of the Company's outstanding Common Stock. Purchases could be made from time to time in open market transactions at prevailing prices or through privately-negotiated transactions. Subsequently, the Company purchased in the open market, for constructive retirement, 854,700 shares of its outstanding Common Stock for an aggregate cost of approximately $25.1 million. Concurrent with these purchases, the Company sold to the Operating Partnership 854,700 Common Units for approximately $25.1 million. 10 On April 30, 1998, the Company retired a $200 million term loan which it obtained from Prudential Securities Credit Corp. on December 10, 1997. Such loan had a one-year term and bore interest at 110 basis points over one-month LIBOR. Also on April 30, 1998, the Company obtained a loan in the amount of $150 million from The Prudential Insurance Company of America. Such loan has a seven-year term and bears interest at an effective rate of 7.1 percent. On April 17, 1998, the Company repaid in full and terminated the Original Unsecured Facility and obtained a new unsecured revolving credit facility (the "1998 Unsecured Facility") in the amount of $870.0 million from a group of 26 lender banks. In July 1998, the 1998 Unsecured Facility was expanded to $900.0 million with the addition of two new lender banks into the facility, bringing the total number of participants to 28. In December 1998, the 1998 Unsecured Facility was further expanded to $1.0 billion. The 1998 Unsecured Facility has a three-year term and bore interest at 110 basis points over LIBOR. In November 1998, with the Company's achievement of investment grade unsecured debt ratings, the interest rate was reduced to 90 basis points over LIBOR. The Company has three investment grade credit ratings. Duff & Phelps Credit Rating Co. ("DCR") and Standard & Poors Rating Services ("S&P") have each assigned their BBB rating to prospective senior unsecured debt offerings of the Operating Partnership. DCR and S&P have also assigned their BBB- rating to prospective preferred stock offerings of the Company. Moody's Investors Service has assigned its Baa3 rating to prospective senior unsecured debt of the Operating Partnership and its Ba1 rating to prospective preferred stock offerings of the Company. RISK FACTORS Our results from operations and ability to pay dividends on our equity and debt service on our indebtedness may be affected by the risk factors set forth below. All investors should consider the following risk factors before deciding to purchase securities of the Company. The Company refers to itself as "we" or "our" in the following risk factors. WE ARE DEPENDENT UPON THE ECONOMICS OF THE NORTHEASTERN OFFICE MARKETS. A majority of our revenues are derived from our properties located in the Northeast, particularly in New Jersey, New York, Pennsylvania and Connecticut. Adverse economic developments in these states could adversely impact the operations of our properties and, therefore, our profitability. Because our portfolio consists primarily of office and office/flex buildings (as compared to a more diversified real estate portfolio), a decline in the economy and/or a decline in the demand for office space may adversely affect our ability to make distributions or payments to our investors. OUR PERFORMANCE IS SUBJECT TO RISKS ASSOCIATED WITH THE REAL ESTATE INDUSTRY. GENERAL: Our ability to make distributions or payments to our investors depends on the ability of our properties to generate funds in excess of operating expenses (including scheduled principal payments on debt and capital expenditure requirements). Events or conditions that are beyond our control may adversely affect our operations and the value of our properties. Such events or conditions could include: - changes in the general economic climate; - changes in local conditions such as oversupply of office space or a reduction in demand for office space; - decreased attractiveness of our properties to potential tenants; - competition from other office and office/flex buildings; 11 - our inability to provide adequate maintenance; - increased operating costs, including insurance premiums and real estate taxes, due to inflation and other factors which may not necessarily be offset by increased rents; - changes in laws and regulations (including tax, environmental and housing laws and regulations) and agency or court interpretations of such laws and regulations and the related costs of compliance; - changes in interest rate levels and the availability of financing; - the inability of a significant number of tenants to pay rent; - our inability to rent office space on favorable terms; and - civil unrest, earthquakes and other natural disasters or acts of God that may result in uninsured losses. FINANCIALLY DISTRESSED TENANTS MAY BE UNABLE TO PAY RENT: If a tenant defaults, we may experience delays and incur substantial costs in enforcing our rights as landlord and protecting our investments. If a tenant files for bankruptcy, a potential court judgment rejecting and terminating such tenant's lease could adversely affect our ability to make distributions or payments to our investors. ILLIQUIDITY OF REAL ESTATE LIMITS OUR ABILITY TO ACT QUICKLY: Real estate investments are relatively illiquid. Such illiquidity may limit our ability to react quickly in response to changes in economic and other conditions. If we want to sell an investment, we might not be able to dispose of that investment in the time period we desire, and the sales price of that investment might not recoup or exceed the amount of our investment. The prohibition in the Internal Revenue Code of 1986, as amended, and related regulations on a real estate investment trust holding property for sale also may restrict our ability to sell property. In addition, we acquired a significant number of our properties from individuals to whom we issued limited partnership units as part of the purchase price. In connection with the acquisition of these properties, in order to preserve such individual's tax deferral, we contractually agreed not to sell or otherwise transfer the properties for a specified period of time, subject to certain exceptions. The above limitations on our ability to sell our investments could adversely affect our ability to make distributions or payments to our investors. AMERICANS WITH DISABILITIES ACT COMPLIANCE COULD BE COSTLY: Under the Americans with Disabilities Act of 1990, all public accommodations and commercial facilities must meet certain federal requirements related to access and use by disabled persons. Compliance with the ADA requirements could involve removal of structural barriers from certain disabled persons' entrances. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such accesses. Although we believe that our properties are substantially in compliance with present requirements, noncompliance with the ADA or related laws or regulations could result in the United States government imposing fines or private litigants being awarded damages against us. Such costs may adversely affect our ability to make distributions or payments to our investors. ENVIRONMENTAL PROBLEMS ARE POSSIBLE AND MAY BE COSTLY: Various federal, state and local laws and regulations subject property owners or operators to liability for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner or operator was responsible for or even knew of the presence of such substances. The presence of or failure to properly remediate hazardous or toxic substances may adversely affect our ability to rent, sell or borrow against contaminated property. Various laws and regulations also impose liability on persons who arrange for the disposal or treatment of hazardous or toxic substances at another location for the costs of removal or remediation of such substances at the disposal or treatment facility. These laws often impose liability whether or not the person arranging for such disposal ever owned 12 or operated the disposal facility. Certain other environmental laws and regulations impose liability on owners or operators of property for injuries relating to the release of asbestos-containing materials into the air. As owners and operators of property and as potential arrangers for hazardous substance disposal, we may be liable under such laws and regulations for removal or remediation costs, governmental penalties, property damage, personal injuries and related expenses. Payment of such costs and expenses could adversely affect our ability to make distributions or payments to our investors. COMPETITION FOR ACQUISITIONS MAY RESULT IN INCREASED PRICES FOR PROPERTIES: We plan to acquire additional properties in New Jersey, New York and Pennsylvania and in the Northeast generally. We may be competing for investment opportunities with entities that have greater financial resources and more experienced managers. Several office building developers and real estate companies may compete with us in seeking properties for acquisition, land for development and prospective tenants. Such competition may adversely affect our ability to make distributions or payments to our investors by: - reducing the number of suitable investment opportunities offered to us; - increasing the bargaining power of property owners; - interfering with our ability to attract and retain tenants; - increasing vacancies which lowers market rental rates and limits our ability to negotiate rental rates; and/or - adversely affecting our ability to minimize expenses of operation. DEVELOPMENT OF REAL ESTATE COULD BE COSTLY: As part of our operating strategy, we may acquire land for development under certain conditions. Included among the risks of the real estate development business are the following, which may adversely affect our ability to make distributions or payments to our investors: - financing for development projects may not be available on favorable terms; - long-term financing may not be available upon completion of construction; and - failure to complete construction on schedule or within budget may increase debt service expense and construction costs. DEBT FINANCING COULD ADVERSELY AFFECT OUR ECONOMIC PERFORMANCE. SCHEDULED DEBT PAYMENTS AND REFINANCING COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION: We are subject to the risks normally associated with debt financing. These risks, including the following, may adversely affect our ability to make distributions or payments to our investors: - our cash flow may be insufficient to meet required payments of principal and interest; - payments of principal and interest on borrowings may leave us with insufficient cash resources to pay operating expenses; - we may not be able to refinance indebtedness on our properties at maturity; and - if refinanced, the terms of refinancing may not be as favorable as the original terms of the related indebtedness. As of December 31, 1998, we had outstanding an aggregate of approximately $743.2 million of mortgage indebtedness (in addition to borrowings under our revolving credit facilities). As of December 31, 1998, we had outstanding borrowings of $671.6 million under our revolving credit facilities (with aggregate borrowing capacity of $1.1 billion). The outstanding borrowings were comprised of $671.6 million from our unsecured $1.0 billion credit facility, with no outstanding borrowings on our $100.0 million credit facility. We may have to refinance the principal due on our indebtedness at maturity, and we may not be able to refinance any indebtedness we incur in the future. 13 If we are unable to refinance our indebtedness on acceptable terms, or at all, events or conditions that may adversely affect our ability to make distributions or payments to our investors include the following: - we may need to dispose of one or more of our properties upon disadvantageous terms; - prevailing interest rates or other factors at the time of refinancing could increase interest rates and, therefore, our interest expense; - if we mortgage property to secure payment of indebtedness and are unable to meet mortgage payments, the mortgagee could foreclose upon such property or appoint a receiver to receive an assignment of our rents and leases; and - foreclosures upon mortgaged property could create taxable income without accompanying cash proceeds and, therefore, hinder our ability to meet the real estate investment trust distribution requirements of the Internal Revenue Code. RISING INTEREST RATES MAY ADVERSELY AFFECT OUR CASH FLOW: Outstanding borrowings of approximately $671.6 million (as of December 31, 1998) under our revolving credit facilities and approximately $80.2 million (as of December 31, 1998) of our mortgage indebtedness bear interest at variable rates. We may incur additional indebtedness in the future that also bears interest at variable rates. Variable rate debt creates higher debt service requirements if market interest rates increase. Higher debt service requirements could adversely affect our ability to make distributions or payments to our investors or cause us to default under certain debt covenants. OUR DEGREE OF LEVERAGE COULD ADVERSELY AFFECT OUR CASH FLOW: We fund acquisition opportunities and development partially through short-term borrowings (including our revolving credit facilities), as well as out of undistributed cash. We expect to refinance projects purchased with short-term debt either with long-term indebtedness or equity financing depending upon the economic conditions at the time of refinancing. Our Board of Directors has a general policy of limiting the ratio of our indebtedness to total market capitalization (total debt as a percentage of the total market value of the issued and outstanding shares of our common stock, including interests redeemable therefor, plus total debt) of 50 percent or less, although there is no limit in Mack-Cali Realty, L.P.'s or our organizational documents on the amount of indebtedness that we may incur. However, we have entered into certain financial agreements which contain financial and operating covenants that limit our ability under certain circumstances to incur additional secured and unsecured indebtedness. The Board of Directors could alter or eliminate its current policy on borrowing at any time at its discretion. If this policy were changed, we could become more highly leveraged, resulting in an increase in debt service that could adversely affect our cash flow and our ability to make distributions or payments to our investors and could cause an increased risk of default on our obligations. ANY UNSECURED INDEBTEDNESS THAT WE MAY ISSUE IS EFFECTIVELY SUBORDINATED TO OUR SECURED INDEBTEDNESS AND INDEBTEDNESS OF OUR SUBSIDIARIES: Any unsecured indebtedness that we may issue will be effectively subordinated to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness and indebtedness of our subsidiaries. As of December 31, 1998, our total secured indebtedness (including secured indebtedness issued by our subsidiaries) was approximately $743.2 million. Consequently, in the event we are involved in a bankruptcy, liquidation, dissolution, reorganization or similar proceeding, the holders of any secured indebtedness will be entitled to proceed against the collateral that secures any such secured indebtedness, and such collateral will not be available for satisfaction of any amounts owned under our unsecured indebtedness, including the notes. In addition, in the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding of our subsidiaries, holders of indebtedness of our subsidiaries (whether secured or unsecured) and trade creditors of our subsidiaries generally will be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. 14 WE ARE DEPENDENT ON OUR KEY PERSONNEL WHOSE CONTINUED SERVICE IS NOT GUARANTEED. We are dependent upon our executive officers for strategic business direction and real estate experience. While we believe that we could find replacements for these key personnel, loss of their services could adversely affect our operations. We have entered into an employment agreement (including non-competition provisions) which provides for a continuous five-year employment term with each of Thomas A. Rizk, Mitchell E. Hersh, Brant B. Cali, John R. Cali, Timothy M. Jones, Barry Lefkowitz and Roger W. Thomas. We do not have key man life insurance for our executive officers. A YEAR 2000 FAILURE COULD DISRUPT OUR OPERATIONS. The year 2000 problem is the result of computer programs and embedded chips using a two-digit format, as opposed to four digits, to indicate the year. Such computer systems may be unable to interpret dates beyond the year 1999, which could cause a system failure or other computer errors, leading to disruptions in operations. The failure to correct a material year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such failures could materially and adversely affect our results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the year 2000 problem, resulting in part from the uncertainty of the year 2000 readiness of third-party vendors and tenants, we are unable to determine at this time whether the consequences of year 2000 failures will have a material impact on our results of operations, liquidity or financial condition. See "Item 7--Management's Discussion and Analysis of Financial Condition and Results of Operations." CONSEQUENCES OF FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION. FAILURE TO MAINTAIN OWNERSHIP LIMITS COULD CAUSE US TO LOSE OUR QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST: In order for us to maintain our qualification as a real estate investment trust, not more than 50 percent in value of our outstanding stock may be actually and/or constructively owned by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities). We have limited ownership of our outstanding shares of our common stock by any single stockholder to 9.8 percent of the outstanding shares of our common stock. Our Board of Directors could waive this restriction if they were satisfied, based upon the advice of tax counsel or otherwise, that such action would be in our best interests and would not affect our qualifications as a real estate investment trust. Common stock acquired or transferred in breach of the limitation may be redeemed by us for the lesser of the price paid and the average closing price for the 10 trading days immediately preceding redemption or sold at the direction of us. We may elect to redeem such shares of common stock for limited partnership units, which are nontransferable except in very limited circumstances. Any transfer of shares of common stock which, as a result of such transfer, causes us to be in violation of any ownership limit will be deemed void. Although we currently intend to continue to operate in a manner which will enable us to continue to qualify as a real estate investment trust, it is possible that future economic, market, legal, tax or other considerations may cause our Board of Directors to revoke the election for us to qualify as a real estate investment trust. Under our organizational documents, our Board of Directors can make such revocation without the consent of our stockholders. In addition, the consent of the holders of at least 85 percent of Mack-Cali Realty, L.P.'s partnership units is required: (i) to merge (or permit the merger of) us with another unrelated person, pursuant to a transaction in which Mack-Cali Realty, L.P. is not the surviving entity; (ii) to dissolve, liquidate or wind Mack-Cali Realty, L.P. up; or (iii) to convey or otherwise transfer all or substantially all of Mack-Cali Realty, L.P.'s assets. As general partner, we own approximately 77.8 percent of Mack-Cali Realty, L.P.'s outstanding partnership units (assuming conversion of all preferred limited partnership units). 15 TAX LIABILITIES AS A CONSEQUENCE OF FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST: We have elected to be treated and have operated so as to qualify as a real estate investment trust for federal income tax purposes since our taxable year ended December 31, 1994. Although we believe we will continue to operate in such manner, we cannot guarantee that we will do so. Qualification as a real estate investment trust involves the satisfaction of various requirements (some on an annual and quarterly basis) established under highly technical and complex tax provisions of the Internal Revenue Code. Because few judicial or administrative interpretations of such provisions exist and qualification determinations are fact sensitive, we cannot assure you that we will qualify as a real estate investment trust for any taxable year. If we fail to qualify as a real estate investment trust in any taxable year, we will be subject to the following: - we will not be allowed a deduction for dividends to shareholders; - we will be subject to federal income tax at regular corporate rates, including any alternative minimum tax, if applicable; and - unless we are entitled to relief under certain statutory provisions, we will not be permitted to qualify as a real estate investment trust for the four taxable years following the year during which we were disqualified. A loss of our status as a real estate investment trust could have an adverse effect on us. Failure to qualify as a real estate investment trust also would eliminate the requirement that we pay dividends to our shareholders. OTHER TAX LIABILITIES: Even if we qualify as a real estate investment trust, we are subject to certain federal, state and local taxes on our income and property and, in some circumstances, certain other state taxes. Our net income from third party management and tenant improvements, if any, also may be subject to federal income tax. RISK OF CHANGES IN THE TAX LAW APPLICABLE TO REAL ESTATE INVESTMENT TRUSTS: Since the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any of such legislative action may prospectively or retroactively modify our and Mack-Cali Realty, L.P.'s tax treatment and, therefore, may adversely affect taxation of us, Mack-Cali Realty, L.P., and/or investors. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS. The Company considers portions of this information to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of The Securities Exchange Act of 1934. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. 16 ITEM 2. PROPERTIES PROPERTY LIST As of December 31, 1998, the Company's Properties consisted of 237 in-service office, office/flex and industrial/warehouse properties, ranging from one to 19 stories, as well as two multi-family residential properties, two stand-alone retail properties, two land leases and one redevelopment office property. The Properties are located primarily in the Northeast. The Properties are easily accessible from major thoroughfares and are in close proximity to numerous amenities. The Properties contain a total of approximately 26.8 million square feet, with the individual properties ranging from approximately 6,600 to 761,200 square feet. The Properties, managed by on-site employees, generally have attractively landscaped sites, atriums and covered parking in addition to quality design and construction. The Company's tenants include many service sector employers, including a large number of professional firms and national and international businesses. The Company believes that all of its properties are well-maintained and do not require significant capital improvements. 17
PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- OFFICE PROPERTIES ATLANTIC COUNTY, NEW JERSEY EGG HARBOR 100 Decadon Drive...................... 1987 40,422 100.0 770 770 0.18 19.05 200 Decadon Drive...................... 1991 39,922 99.8 501 477 0.12 12.57 BERGEN COUNTY, NEW JERSEY FAIR LAWN 17-17 Route 208 North.................. 1987 143,000 96.0 3,391 3,327 0.80 24.70 FORT LEE One Bridge Plaza....................... 1981 200,000 98.2 4,686 4,539 1.11 23.86 LITTLE FERRY 200 Riser Road......................... 1974 286,628 100.0 1,858 1,858 0.44 6.48 MONTVALE 95 Chestnut Ridge Road................. 1975 47,700 100.0 565 565 0.13 11.84 135 Chestnut Ridge Road................ 1981 66,150 100.0 1,217 1,217 0.29 18.40 PARAMUS 140 Ridgewood Avenue................... 1981 239,680 100.0 5,141 5,128 1.22 21.45 15 East Midland Avenue................. 1988 259,823 100.0 6,749 6,749 1.60 25.98 461 From Road.......................... 1988 253,554 99.8 5,993 5,991 1.42 23.68 650 From Road.......................... 1978 348,510 96.7 7,538 7,535 1.79 22.37 61 South Paramus Avenue................ 1985 269,191 99.0 5,596 5,556 1.33 21.00 ROCHELLE PARK 120 Passaic Street..................... 1972 52,000 100.0 575 575 0.14 11.06 365 West Passaic Street................ 1976 212,578 84.0 3,463 3,428 0.82 19.39 SADDLE RIVER 1 Lake Street.......................... 1994 474,801 100.0 7,465 7,465 1.77 15.72 UPPER SADDLE RIVER 10 Mountainview Road(7)................ 1986 192,000 100.0 3,053 2,952 0.72 18.72 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- OFFICE PROPERTIES ATLANTIC COUNTY, NEW JERSEY EGG HARBOR 100 Decadon Drive...................... 19.05 Computer Sciences Corp. (80%), United States of America--GSA (20%) 200 Decadon Drive...................... 11.97 Computer Sciences Corp. (45%), Advanced Casino Corp. (33%), Dimensions International Inc. (15%) BERGEN COUNTY, NEW JERSEY FAIR LAWN 17-17 Route 208 North.................. 24.24 Lonza, Inc. (63%), Boron-Lepore Assoc., Inc. (16%) FORT LEE One Bridge Plaza....................... 23.11 PricewaterhouseCoopers LLP (26%), Broadview Associates (16%), Bozell Worldwide, Inc. (16%) LITTLE FERRY 200 Riser Road......................... 6.48 Ford Motor Company (34%), Dassault Falcon Jet Corp. (33%), Sanyo Fisher Service Corp. (33%) MONTVALE 95 Chestnut Ridge Road................. 11.84 Roussel-UCLAF Holdings Corp. (100%) 135 Chestnut Ridge Road................ 18.40 Alliance Funding Company (100%) PARAMUS 140 Ridgewood Avenue................... 21.40 AT&T Wireless Services (46%), Smith Barney Shearson Inc. (19%) 15 East Midland Avenue................. 25.98 AT&T Wireless Services (98%) 461 From Road.......................... 23.68 Toys 'R' Us--NJ Inc. (96%) 650 From Road.......................... 22.36 Western Union Financial Services, Inc. (38%) 61 South Paramus Avenue................ 20.85 Dun & Bradstreet Software Services, Inc. (11%) ROCHELLE PARK 120 Passaic Street..................... 11.06 Electronic Data Systems Corp. (100%) 365 West Passaic Street................ 19.20 United Retail Incorporated (26%), Catalina Marketing Corp. (10%), Financial Telesis Inc. (10%) SADDLE RIVER 1 Lake Street.......................... 15.72 Prentice-Hall Inc. (100%) UPPER SADDLE RIVER 10 Mountainview Road(7)................ 18.10 Thomson Minwax Company (23%), Corning Life Sciences (15%), ITT Fluid Technology (14%), Professional Detailing Inc. (14%), Neuromedical Systems Inc. (14%), Innapharma Inc. (10%)
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PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- WOODCLIFF LAKE 400 Chestnut Ridge Road................ 1982 89,200 100.0 2,120 2,120 0.50 23.77 470 Chestnut Ridge Road................ 1987 52,500 100.0 1,192 1,192 0.28 22.70 530 Chestnut Ridge Road................ 1986 57,204 100.0 1,166 1,166 0.28 20.38 50 Tice Boulevard...................... 1984 235,000 100.0 4,372 3,732 1.04 18.60 300 Tice Boulevard..................... 1991 230,000 100.0 5,022 4,951 1.19 21.83 BURLINGTON COUNTY, NEW JERSEY MOORESTOWN 224 Strawbridge Drive(7)............... 1984 74,000 63.4 800 734 0.19 17.05 228 Strawbridge Drive(7)............... 1984 74,000 100.0 597 459 0.14 8.07 ESSEX COUNTY, NEW JERSEY MILLBURN 150 J.F. Kennedy Parkway............... 1980 247,476 100.0 6,572 6,565 1.56 26.56 ROSELAND 101 Eisenhower Parkway................. 1980 237,000 95.2 4,084 3,800 0.97 18.10 103 Eisenhower Parkway................. 1985 151,545 94.1 3,195 2,934 0.76 22.40 HUDSON COUNTY, NEW JERSEY JERSEY CITY 95 Christopher Columbus Drive.......... 1989 621,900 100.0 12,717 11,552 3.02 20.45 Harborside Financial Center Plaza I.... 1983 400,000 98.8 3,264 3,264 0.77 8.26 Harborside Financial Center Plaza II... 1990 761,200 100.0 17,145 17,047 4.06 22.52 Harborside Financial Center Plaza III.. 1990 725,600 100.0 16,341 16,247 3.87 22.52 MERCER COUNTY, NEW JERSEY PRINCETON 5 Vaughn Drive......................... 1987 98,500 94.9 2,095 2,052 0.50 22.41 400 Alexander Road..................... 1987 70,550 100.0 1,270 1,081 0.30 18.00 103 Carnegie Center.................... 1984 96,000 100.0 2,038 1,929 0.48 21.23 100 Overlook Center.................... 1988 149,600 99.8 3,862 3,862 0.92 25.87 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- WOODCLIFF LAKE 400 Chestnut Ridge Road................ 23.77 Timeplex, Inc. (100%) 470 Chestnut Ridge Road................ 22.70 Andermatt LP (100%) 530 Chestnut Ridge Road................ 20.38 KPMG Peat Marwick, LLP (100%) 50 Tice Boulevard...................... 15.88 Syncsort, Inc. (22%) 300 Tice Boulevard..................... 21.53 Merck-Medco Managed Care LLC (20%), Xerox Corp. (14%), Chase Manhattan Mortgage Corp. (12%), Comdisco, Inc. (11%), NYCE, Corp. (11%) BURLINGTON COUNTY, NEW JERSEY MOORESTOWN 224 Strawbridge Drive(7)............... 15.64 Allstate Insurance Co. (49%) 228 Strawbridge Drive(7)............... 6.20 Cendant Mortgage Corporation (100%) ESSEX COUNTY, NEW JERSEY MILLBURN 150 J.F. Kennedy Parkway............... 26.53 KPMG Peat Marwick, LLP (42%), Budd Larner Gross (23%), Coldwell Banker Residential Real Estate (14%) ROSELAND 101 Eisenhower Parkway................. 16.84 Arthur Andersen, LLP (31%), Brach, Eichler, Rosenberg (13%) 103 Eisenhower Parkway................. 20.57 Ravin, Sarasohn, Cook, Baumgarten (18%), Lum, Danzis, Drasco (16%), Chelsea GCA Realty Corp. (15%), Salomon Smith Barney, Inc. (11%) HUDSON COUNTY, NEW JERSEY JERSEY CITY 95 Christopher Columbus Drive.......... 18.58 DLJ Securities Corp. (Pershing) (72%), NTT Data Corp. (22%) Harborside Financial Center Plaza I.... 8.26 Bankers Trust Harborside, Inc. (96%) Harborside Financial Center Plaza II... 22.39 Dow Jones Telerate Systems, Inc. (44%), Morgan Stanley Dean Witter (30%), Lewco Sercurities (11%) Harborside Financial Center Plaza III.. 22.39 AICPA (34%), BTM Information Services, Inc. (19%) MERCER COUNTY, NEW JERSEY PRINCETON 5 Vaughn Drive......................... 21.95 U.S. Trust Co. of NJ (19%), Woodrow Wilson National Fellowship Foundation (14%), Princeton Venture Research Corp. (14%), Villeroy & Boch Tableware Ltd. (11%) 400 Alexander Road..................... 15.32 Berlitz International Inc. (100%) 103 Carnegie Center.................... 20.09 Ronin Development Corp. (15%), R.G. Vanderweil Engineers (14%) 100 Overlook Center.................... 25.87 Squibb-Novo Inc. (24%), Xerox Corp. (24%), IFP North America Inc. (14%)
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PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- MIDDLESEX COUNTY, NEW JERSEY EAST BRUNSWICK 377 Summerhill Road.................... 1977 40,000 100.0 373 373 0.09 9.33 PLAINSBORO 500 College Road East(7)............... 1984 158,235 100.0 2,060 2,060 0.49 21.21 SOUTH BRUNSWICK 3 Independence Way..................... 1983 111,300 87.3 1,913 1,912 0.45 19.69 WOODBRIDGE 581 Main Street........................ 1991 200,000 94.0 3,078 3,043 0.73 16.37 MONMOUTH COUNTY, NEW JERSEY NEPTUNE 3600 Route 66.......................... 1989 180,000 100.0 2,411 2,411 0.57 13.39 WALL TOWNSHIP 1305 Campus Parkway.................... 1988 23,350 92.3 402 391 0.10 18.65 1350 Campus Parkway.................... 1990 79,747 97.5 1,324 1,233 0.31 17.03 MORRIS COUNTY, NEW JERSEY FLORHAM PARK 325 Columbia Parkway................... 1987 168,144 100.0 3,749 3,279 0.89 22.30 PARSIPPANY 1 Sylvan Way(7)........................ 1989 150,557 100.0 2,427 2,381 0.58 21.24 2 Dryden Way(7)........................ 1990 6,216 100.0 51 51 0.01 10.69 2 Hilton Court(7)...................... 1991 181,592 100.0 4,745 4,745 1.12 34.06 5 Sylvan Way(7)........................ 1989 151,383 93.0 2,576 2,576 0.61 24.11 7 Campus Drive(7)...................... 1982 154,395 100.0 1,945 1,945 0.46 16.42 7 Sylvan Way(7)........................ 1987 145,983 100.0 2,229 2,229 0.53 19.90 8 Campus Drive(7)...................... 1987 215,265 92.8 3,495 3,491 0.83 22.81 600 Parsippany Road.................... 1978 96,000 100.0 1,592 1,542 0.38 16.58 MORRIS PLAINS 201 Littleton Road..................... 1979 88,369 100.0 1,703 1,702 0.40 19.27 250 Johnson Road....................... 1977 75,000 100.0 1,090 1,090 0.26 14.53 MORRIS TOWNSHIP 340 Mt. Kemble Avenue.................. 1985 387,000 100.0 5,530 5,530 1.31 14.29 412 Mt. Kemble Avenue.................. 1986 475,100 100.0 6,902 6,902 1.64 14.53 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- MIDDLESEX COUNTY, NEW JERSEY EAST BRUNSWICK 377 Summerhill Road.................... 9.33 Greater New York Mutual Insurance Company (100%) PLAINSBORO 500 College Road East(7)............... 21.21 Merrill Lynch Asset Mgmt (72%), Buchanan Ingersoll P.C. (17%) SOUTH BRUNSWICK 3 Independence Way..................... 19.68 Merrill Lynch Pierce Fenner & Smith (72%) WOODBRIDGE 581 Main Street........................ 16.19 First Investors Management Company, Inc. (38%), Cast North America Ltd. (11%) MONMOUTH COUNTY, NEW JERSEY NEPTUNE 3600 Route 66.......................... 13.39 The United States Life Insurance Company (100%) WALL TOWNSHIP 1305 Campus Parkway.................... 18.14 Centennial Cellular Corp. (41%), McLaughlin, Bennett, Gelson (35%), NJ Natural Energy Co. (10%) 1350 Campus Parkway.................... 15.86 Meridan Health Realty Corp. (22%), New Jersey National Bank/Core States (17%), Stephen E. Gertler Law Office (17%), Milestone Materials Inc. (16%), Hospital Computer Systems Inc. (11%) MORRIS COUNTY, NEW JERSEY FLORHAM PARK 325 Columbia Parkway................... 19.50 Bressler Amery & Ross (24%), Atlantic Health Systems (12%), Dun & Bradstreet Inc. (12%), QWest Communications Corp. (11%) PARSIPPANY 1 Sylvan Way(7)........................ 20.84 Cendant Operations Inc. (99%) 2 Dryden Way(7)........................ 10.69 Bright Horizons Childrens Center (100%) 2 Hilton Court(7)...................... 34.06 Deloitte & Touche USA LLP (66%), Northern Telecom Inc. (16%) 5 Sylvan Way(7)........................ 24.11 Integrated Communications (50%), Experian Information Solution (15%) 7 Campus Drive(7)...................... 16.42 Nabisco Inc. (100%) 7 Sylvan Way(7)........................ 19.90 Nabisco Inc. (100%) 8 Campus Drive(7)...................... 22.78 Prudential Insurance Co. (31%), Bay Networks Inc. (27%), MCI Telecommunications Corp. (18%), Ayco Company LP (13%) 600 Parsippany Road.................... 16.06 Metropolitan Life Insurance Co. (36%), IBM Corporation (30%) MORRIS PLAINS 201 Littleton Road..................... 19.26 Xerox Corp. (35%), Bozell Worldwide Inc. (34%), Willis Corroon Corp. of New Jersey (20%), Chep USA (11%) 250 Johnson Road....................... 14.53 Electronic Data Systems Corp. (100%) MORRIS TOWNSHIP 340 Mt. Kemble Avenue.................. 14.29 AT&T Corp. (100%) 412 Mt. Kemble Avenue.................. 14.53 AT&T Corp. (100%)
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PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- PASSAIC COUNTY, NEW JERSEY CLIFTON 777 Passaic Avenue..................... 1983 75,000 76.8 1,036 891 0.25 17.99 TOTOWA 999 Riverview Drive.................... 1988 56,066 95.1 937 914 0.22 17.57 WAYNE 201 Willowbrook Boulevard.............. 1970 178,329 99.0 2,446 2,435 0.58 13.85 SOMERSET COUNTY, NEW JERSEY BASKING RIDGE 222 Mt. Airy Road...................... 1986 49,000 100.0 434 434 0.10 8.86 233 Mt. Airy Road...................... 1987 66,000 100.0 762 720 0.18 11.55 BRIDGEWATER 721 Route 202/206...................... 1989 192,741 100.0 3,900 3,900 0.92 20.23 UNION COUNTY, NEW JERSEY CLARK 100 Walnut Avenue...................... 1985 182,555 100.0 4,105 3,579 0.97 22.49 CRANFORD 6 Commerce Drive....................... 1973 56,000 100.0 996 912 0.24 17.79 11 Commerce Drive(6)................... 1981 90,000 96.2 881 742 0.21 10.18 12 Commerce Drive...................... 1967 72,260 90.6 594 594 0.14 9.07 20 Commerce Drive...................... 1990 176,600 87.0 3,090 2,689 0.73 20.11 65 Jackson Drive....................... 1984 82,778 100.0 1,636 1,233 0.39 19.76 NEW PROVIDENCE 890 Mountain Road...................... 1977 80,000 100.0 2,030 2,028 0.48 25.38 DUTCHESS COUNTY, NEW YORK FISHKILL 300 South Lake Drive................... 1987 118,727 99.8 2,026 2,023 0.48 17.10 NASSAU COUNTY, NEW YORK NORTH HEMPSTEAD 111 East Shore Road.................... 1980 55,575 100.0 1,528 1,528 0.36 27.49 600 Community Drive.................... 1983 206,274 100.0 4,966 4,966 1.17 24.07 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- PASSAIC COUNTY, NEW JERSEY CLIFTON 777 Passaic Avenue..................... 15.47 Motorola Inc. (19%) TOTOWA 999 Riverview Drive.................... 17.14 Bank of New York (56%), Commonwealth Land Title Insurance Co. (11%), Bankers Mortgage Company (10%) WAYNE 201 Willowbrook Boulevard.............. 13.79 The Grand Union Co. (75%), Woodward-Clyde Consultants (24%) SOMERSET COUNTY, NEW JERSEY BASKING RIDGE 222 Mt. Airy Road...................... 8.86 Lucent Technologies Inc. (100%) 233 Mt. Airy Road...................... 10.91 AT&T Corp. (100%) BRIDGEWATER 721 Route 202/206...................... 20.23 Allstate Insurance Company (37%), Norris, McLaughlin & Marcus, PA (31%), AT&T Corp. (20%) UNION COUNTY, NEW JERSEY CLARK 100 Walnut Avenue...................... 19.61 BDSI, Inc. (41%), Allstate Insurance Company (13%), The Equitable Life Assurance Society of the United States (10%) CRANFORD 6 Commerce Drive....................... 16.29 Kendle International Inc. (32%), PSE&G--American Resurgence (18%), Columbia National, Inc. (13%) 11 Commerce Drive(6)................... 8.57 Northeast Administrators Inc. (10%) 12 Commerce Drive...................... 9.07 Dames & Moore (40%), Registrar & Transfer Co. (24%) 20 Commerce Drive...................... 17.50 PSE&G--American Resurgence (26%), Quintiles Inc. (15%) 65 Jackson Drive....................... 14.90 Kraft General Foods, Inc. (35%), Allstate Insurance Co. (27%), Procter & Gamble Distribution Co., Inc. (18%), Unum Life Insurance Co. (14%) NEW PROVIDENCE 890 Mountain Road...................... 25.35 Allstate Insurance Co. (58%), Dun & Bradstreet (26%), K Line America, Inc. (16%) DUTCHESS COUNTY, NEW YORK FISHKILL 300 South Lake Drive................... 17.07 Allstate Insurance Company (16%) NASSAU COUNTY, NEW YORK NORTH HEMPSTEAD 111 East Shore Road.................... 27.49 Administrators For The Professions, Inc. (100%) 600 Community Drive.................... 24.07 CMP Media, Inc. (100%)
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PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- ROCKLAND COUNTY, NEW YORK SUFFERN 400 Rella Boulevard.................... 1988 180,000 96.5 3,269 3,191 0.78 18.82 WESTCHESTER COUNTY, NEW YORK ELMSFORD 100 Clearbrook Road(6)................. 1975 60,000 100.0 693 676 0.16 11.55 101 Executive Boulevard................ 1971 50,000 94.2 877 861 0.21 18.62 570 Taxter Road........................ 1972 75,000 91.4 1,431 1,414 0.34 20.88 HAWTHORNE 1 Skyline Drive........................ 1980 20,400 99.0 274 270 0.06 13.57 2 Skyline Drive........................ 1987 30,000 98.9 394 394 0.09 13.28 17 Skyline Drive....................... 1989 85,000 100.0 1,103 1,103 0.26 12.98 30 Saw Mill River Road................. 1982 248,400 100.0 5,216 4,919 1.24 21.00 7 Skyline Drive(7)..................... 1987 109,000 97.8 634 634 0.15 20.10 TARRYTOWN 200 White Plains Road.................. 1982 89,000 98.5 1,767 1,702 0.42 20.16 220 White Plains Road.................. 1984 89,000 83.5 1,677 1,631 0.40 22.57 WHITE PLAINS 1 Barker Avenue........................ 1975 68,000 95.9 1,482 1,469 0.35 22.73 3 Barker Avenue........................ 1983 65,300 100.0 1,380 1,351 0.33 21.13 1 Water Street......................... 1979 45,700 99.8 899 893 0.21 19.71 11 Martine Avenue...................... 1987 180,000 86.1 3,441 3,410 0.82 22.20 50 Main Street......................... 1985 309,000 97.9 7,265 7,133 1.72 24.02 YONKERS 1 Executive Boulevard.................. 1982 112,000 100.0 2,270 2,209 0.54 20.27 3 Executive Plaza...................... 1987 58,000 65.6 890 888 0.21 23.39 CHESTER COUNTY, PENNSYLVANIA BERWYN 1000 Westlakes Drive................... 1989 60,696 100.0 1,361 1,359 0.32 22.42 1055 Westlakes Drive................... 1990 118,487 100.0 2,298 2,298 0.54 19.39 1205 Westlakes Drive................... 1988 130,265 99.8 2,782 2,774 0.66 21.40 1235 Westlakes Drive................... 1986 134,902 98.4 2,827 2,824 0.67 21.30 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- ROCKLAND COUNTY, NEW YORK SUFFERN 400 Rella Boulevard.................... 18.37 The Prudential Insurance Co. (21%), Provident Savings F.A. (20%), Allstate Insurance Co. (19%), John Alden Life Insurance Co. (11%) WESTCHESTER COUNTY, NEW YORK ELMSFORD 100 Clearbrook Road(6)................. 11.27 MIM Corporation (18%), Amerihealth Inc. (13%) 101 Executive Boulevard................ 18.28 Pennysaver Group Inc. (23%), MCS Business Solutions Inc. (11%) 570 Taxter Road........................ 20.63 Lincoln Financial Adivsors Inc. (16%), New York State United Teachers Association (10%) HAWTHORNE 1 Skyline Drive........................ 13.37 Boxx International Corp. (50%), Childtime Childcare Inc. (49%) 2 Skyline Drive........................ 13.28 MW Samara (56%), Perini Corp. (43%) 17 Skyline Drive....................... 12.98 IBM Corp. (100%) 30 Saw Mill River Road................. 19.80 IBM Corp. (100%) 7 Skyline Drive(7)..................... 20.10 E.M. Industries Inc. (42%), Cortlandt Group Inc. (14%) TARRYTOWN 200 White Plains Road.................. 19.41 Independent Health Associates (28%), Allmerica Financial (17%), NYS Dept. of Environmental CNS (13%) 220 White Plains Road.................. 21.95 Clientsoft Inc. (13%), Eagle Family Foods Inc. (11%) WHITE PLAINS 1 Barker Avenue........................ 22.53 O'Connor McGuinness Conte (19%), United Skys Realty Corp. (18%) 3 Barker Avenue........................ 20.69 Bernard C. Harris Publishing Co. Inc. (56%) 1 Water Street......................... 19.58 Trigen Energy Co. (48%), Stewart Title Insurance Co. (16%) 11 Martine Avenue...................... 22.00 McCarthy Fingar Donovan (11%), David Worby (11%), Dean Witter Reynolds Inc. (11%) 50 Main Street......................... 23.58 Heineken USA Inc. (10%), National Economic Research (10%) YONKERS 1 Executive Boulevard.................. 19.72 Wise Contact US Optical Corp. (12%), Pedal Holdings Inc. (12%), Protective Tech International (11%), York, International Agency Inc. (11%) 3 Executive Plaza...................... 23.34 Metropolitan Life Insurance (22%), Allstate Insurance Company (20%), City & Suburban Federal Savings Bank (15%) CHESTER COUNTY, PENNSYLVANIA BERWYN 1000 Westlakes Drive................... 22.39 PNC Bank, NA (38%), Drinker Biddle & Reath (24%), Manchester, Inc. (14%) 1055 Westlakes Drive................... 19.39 Tokai Financial Services Inc. (92%) 1205 Westlakes Drive................... 21.34 Provident Mutual Life Insurance Co. (35%), Oracle Corp. (30%) 1235 Westlakes Drive................... 21.27 Pepper Hamilton & Scheetz (18%), Ratner & Prestia (16%)
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PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- DELAWARE COUNTY, PENNSYLVANIA MEDIA 1400 Providence Road--Center I......... 1986 100,000 97.9 1,969 1,908 0.47 20.11 1400 Providence Road--Center II........ 1990 160,000 99.9 3,062 2,927 0.73 19.16 LESTER 100 Stevens Drive...................... 1986 95,000 99.7 2,074 2,073 0.49 21.90 200 Stevens Drive...................... 1987 208,000 99.7 4,146 4,106 0.98 19.99 300 Stevens Drive...................... 1992 68,000 100.0 1,441 1,438 0.34 21.19 MONTGOMERY COUNTY, PENNSYLVANIA LOWER PROVIDENCE 1000 Madison Avenue.................... 1990 100,700 96.5 1,650 1,650 0.39 16.98 PLYMOUTH MEETING Five Sentry Parkway East............... 1984 91,600 100.0 1,456 1,454 0.35 15.90 Five Sentry Parkway West............... 1984 38,400 100.0 640 640 0.15 16.67 1150 Plymouth Meeting Mall............. 1970 167,748 100.0 3,193 3,178 0.76 19.03 FAIRFIELD COUNTY, CONNECTICUT GREENWICH 500 West Putnam........................ 1973 121,250 100.0 2,480 2,474 0.59 22.62 NORWALK 40 Richards Avenue(7).................. 1985 145,487 97.1 876 863 0.21 20.03 SHELTON 1000 Bridgeport Avenue................. 1986 133,000 100.0 2,453 2,433 0.58 18.44 DISTRICT OF COLUMBIA WASHINGTON 1400 L Street, NW(7)................... 1987 159,000 86.2 3,165 3,164 0.75 39.38 1709 New York Avenue, NW(7)............ 1972 166,000 94.4 3,731 3,731 0.88 40.61 PRINCE GEORGE'S COUNTY, MARYLAND LANHAM 4200 Parliament Place(7)............... 1989 122,000 80.0 1,032 1,028 0.24 22.84 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- DELAWARE COUNTY, PENNSYLVANIA MEDIA 1400 Providence Road--Center I......... 19.49 General Services Admin (13%), Erie Insurance Company (11%) 1400 Providence Road--Center II........ 18.31 Barnett International (36%) LESTER 100 Stevens Drive...................... 21.89 SAP America, Inc. (82%) 200 Stevens Drive...................... 19.80 PNC Bank NA (52%), Keystone Mercy Health Plan (42%) 300 Stevens Drive...................... 21.15 SAP America, Inc. (50%), Keystone Mercy Health Plan (28%) MONTGOMERY COUNTY, PENNSYLVANIA LOWER PROVIDENCE 1000 Madison Avenue.................... 16.98 Reality Online Inc. (37%), First Chicago Nat'l Proc. (21%), Danka Corp. (14%), Seton Company (12%) PLYMOUTH MEETING Five Sentry Parkway East............... 15.87 Merck & Co. Inc. (77%), Selas Fluid Processing Corp. (23%) Five Sentry Parkway West............... 16.67 Merck & Co. Inc. (70%), David Cutler Group (30%) 1150 Plymouth Meeting Mall............. 18.95 Computer Learning Centers, Inc. (18%), Ken-Crest Services (17%), ATC Group Services Inc. (15%), ECC Management Services (13%) FAIRFIELD COUNTY, CONNECTICUT GREENWICH 500 West Putnam........................ 22.57 Hachette Filipacchi Magazines (27%), Great Brands of Europe Inc. (13%), Winklevoss Consultants Inc. (12%), Orthapaedic Associates (11%) NORWALK 40 Richards Avenue(7).................. 19.73 -- SHELTON 1000 Bridgeport Avenue................. 18.29 Weseley Software Development (22%), William Carter Company (20%), Unilever Home and Personal CA (15%), Toyota Motor Credit Corp. (11%), Land Star System, Inc. (11%) DISTRICT OF COLUMBIA WASHINGTON 1400 L Street, NW(7)................... 39.37 Winston & Strawn (59%) 1709 New York Avenue, NW(7)............ 40.61 Board of Gov/Federal Reserve (71%), United States of America--GSA (13%) PRINCE GEORGE'S COUNTY, MARYLAND LANHAM 4200 Parliament Place(7)............... 22.75 Group I Software Inc. (43%), State Farm Mutual Auto Ins. Co. (11%)
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PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- BEXAR COUNTY, TEXAS SAN ANTONIO 111 Soledad............................ 1918 248,153 90.7 2,346 2,320 0.56 10.42 1777 N.E. Loop 410..................... 1986 256,137 94.8 3,533 3,504 0.84 14.55 84 N.E. Loop 410....................... 1971 187,312 89.3 2,497 2,497 0.59 14.93 200 Concord Plaza Drive................ 1986 248,700 98.8 4,290 4,280 1.02 17.46 COLLIN COUNTY, TEXAS PLANO 555 Republic Place..................... 1986 97,889 94.7 1,389 1,379 0.33 14.98 DALLAS COUNTY, TEXAS DALLAS 3030 LBJ Freeway(6).................... 1984 367,018 93.5 5,863 5,803 1.38 17.09 3100 Monticello........................ 1984 173,837 93.7 2,577 2,571 0.61 15.82 8214 Westchester....................... 1983 95,509 96.2 1,418 1,417 0.34 15.43 IRVING 2300 Valley View....................... 1985 142,634 97.5 2,311 2,292 0.55 16.62 RICHARDSON 1122 Alma Road......................... 1977 82,576 100.0 607 607 0.14 7.35 HARRIS COUNTY, TEXAS HOUSTON 10497 Town & Country Way............... 1981 148,434 91.5 1,886 1,869 0.45 13.89 14511 Falling Creek.................... 1982 70,999 84.6 650 646 0.15 10.82 1717 St. James Place................... 1975 109,574 99.0 1,299 1,278 0.31 11.97 1770 St. James Place................... 1973 103,689 99.0 1,209 1,192 0.29 11.78 5225 Katy Freeway...................... 1983 112,213 91.0 1,134 1,127 0.27 11.11 5300 Memorial.......................... 1982 155,099 99.4 1,956 1,952 0.46 12.69 POTTER COUNTY, TEXAS AMARILLO 6900 IH--40 West....................... 1986 71,771 74.9 522 515 0.12 9.71 TARRANT COUNTY, TEXAS EULESS 150 West Parkway....................... 1984 74,429 99.7 1,000 997 0.24 13.48 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- BEXAR COUNTY, TEXAS SAN ANTONIO 111 Soledad............................ 10.31 SBC Communications, Inc. (34%) 1777 N.E. Loop 410..................... 14.43 -- 84 N.E. Loop 410....................... 14.93 Pacificare of Texas, Inc. (30%), KBL Cable, Inc. (26%), Kraft General Foods Inc. (25%) 200 Concord Plaza Drive................ 17.42 Merrill Lynch Pierce Fenner Smith (12%) COLLIN COUNTY, TEXAS PLANO 555 Republic Place..................... 14.88 William Smith Enterprises (22%), Texas Health Choice (17%), Dayton Hudson Corporation (14%) DALLAS COUNTY, TEXAS DALLAS 3030 LBJ Freeway(6).................... 16.91 Club Corporation of America (32%) 3100 Monticello........................ 15.78 Insignia Commercial, Inc. (23%), Time Marketing Corporation/Evans Group (12%), Heath Insurance Brokers, Inc. (10%) 8214 Westchester....................... 15.42 Preston Business Center, Inc. (15%), Malone Mortgage Company of America, Inc. (12%), State Bank & Trust Co. (11%) IRVING 2300 Valley View....................... 16.48 Nokia, Inc. (38%), Alltel Information Services, Inc. (18%), Computer Task Group, Inc. (12%), Tricon Restaurant Services (11%) RICHARDSON 1122 Alma Road......................... 7.35 MCI Telecommunications Corp. (100%) HARRIS COUNTY, TEXAS HOUSTON 10497 Town & Country Way............... 13.76 Vastar Resources, Inc. (23%), Texas Ohio Gas, Inc. (11%) 14511 Falling Creek.................... 10.75 Nationwide Mutual Insurance Company (12%) 1717 St. James Place................... 11.78 MCX Corp (14%), Home Loan Corporation (10%) 1770 St. James Place................... 11.61 Neosoft Inc. (10%) 5225 Katy Freeway...................... 11.04 -- 5300 Memorial.......................... 12.66 Drypers Corporation (20%), Datavox, Inc. (20%), HCI Chemicals (USA) Ltd. Inc. (15%) POTTER COUNTY, TEXAS AMARILLO 6900 IH--40 West....................... 9.58 Sitel Corporation (16%) TARRANT COUNTY, TEXAS EULESS 150 West Parkway....................... 13.44 Warrantech Automotive, Inc. (34%), Landmark BankMid-Cities (18%), Mike Bowman Realtors/Century 21 (17%)
24
PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- TRAVIS COUNTY, TEXAS AUSTIN 1250 Capital of Texas Hwy. South(7).... 1985 270,703 99.5 4,369 4,360 1.04 20.07 MARICOPA COUNTY, ARIZONA GLENDALE 5551 West Talavi Boulevard............. 1991 181,596 100.0 1,454 1,451 0.34 8.01 PHOENIX 19640 North 31st Street................ 1990 124,171 100.0 1,584 1,572 0.38 12.76 20002 North 19th Avenue................ 1986 119,301 100.0 679 679 0.16 5.69 SCOTTSDALE 9060 E. Via Linda Boulevard............ 1984 111,200 100.0 2,161 2,161 0.51 19.43 SAN FRANCISCO COUNTY, CALIFORNIA SAN FRANCISCO 760 Market Street...................... 1908 267,446 87.7 4,512 4,490 1.07 19.24 ARAPAHOE COUNTY, COLORADO AURORA 750 South Richfield Street(7).......... 1997 108,240 100.0 1,642 1,642 0.39 26.75 DENVER 400 South Colorado Boulevard(7)........ 1983 125,415 94.5 1,048 1,041 0.25 15.22 ENGLEWOOD 5350 South Roslyn Street (6) (7)....... 1982 63,754 100.0 816 815 0.19 16.68 9359 East Nichols Avenue(7)............ 1997 72,610 100.0 509 509 0.12 12.36 BOULDER COUNTY, COLORADO BROOMFIELD 105 South Technology Court(7).......... 1997 37,574 100.0 340 340 0.08 15.95 303 South Technology Court-A(7)........ 1997 34,454 100.0 290 290 0.07 10.97 303 South Technology Court-B(7)........ 1997 40,416 100.0 341 341 0.08 11.00 LOUISVILLE 1172 Century Drive(7).................. 1996 49,566 100.0 467 467 0.11 12.28 248 Centennial Parkway(7).............. 1996 39,266 93.1 370 370 0.09 13.19 285 Century Place(7)................... 1997 69,145 100.0 617 617 0.15 15.73 DENVER COUNTY, COLORADO DENVER 3600 South Yosemite(7)................. 1974 133,743 100.0 812 812 0.19 9.51 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- TRAVIS COUNTY, TEXAS AUSTIN 1250 Capital of Texas Hwy. South(7).... 20.03 Intelliquest Inc. (14%) MARICOPA COUNTY, ARIZONA GLENDALE 5551 West Talavi Boulevard............. 7.99 Honeywell, Inc. (100%) PHOENIX 19640 North 31st Street................ 12.66 American Express (100%) 20002 North 19th Avenue................ 5.69 American Express (100%) SCOTTSDALE 9060 E. Via Linda Boulevard............ 19.43 Sentry Insurance (63%), Rite Aid Corporation (37%) SAN FRANCISCO COUNTY, CALIFORNIA SAN FRANCISCO 760 Market Street...................... 19.14 Macy's c/o Federated Department Stores (19%) ARAPAHOE COUNTY, COLORADO AURORA 750 South Richfield Street(7).......... 26.75 T.R.W. Inc. (100%) DENVER 400 South Colorado Boulevard(7)........ 15.12 Community Health Plan (12%), Department of Revenue (12%), Norwest Bank Colorado N.A. (11%), Senter GoldFarb & Rice (10%) ENGLEWOOD 5350 South Roslyn Street (6) (7)....... 16.66 Westland Enterprises (17%), Business World Inc. (17%) 9359 East Nichols Avenue(7)............ 12.36 First Tennessee Bank NA (100%) BOULDER COUNTY, COLORADO BROOMFIELD 105 South Technology Court(7).......... 15.95 Sun Microsystems Inc. (100%) 303 South Technology Court-A(7)........ 10.97 Sun Microsystems Inc. (100%) 303 South Technology Court-B(7)........ 11.00 Sun Microsystems Inc. (100%) LOUISVILLE 1172 Century Drive(7).................. 12.28 Skyconnect Inc. (40%), Evolving Systems Inc. (22%), MCI Systemhouse Corp. (22%), RX Kinetix Inc. (16%) 248 Centennial Parkway(7).............. 13.19 Rock Bottom Restaurants Inc. (59%), Aircell Inc. (28%) 285 Century Place(7)................... 15.73 HBO & Company of Georgia (100%) DENVER COUNTY, COLORADO DENVER 3600 South Yosemite(7)................. 9.51 M.D.C. Holdings Inc. (100%)
25
PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- DOUGLAS COUNTY, COLORADO ENGLEWOOD 384 Inverness Drive South(7)........... 1985 51,523 100.0 603 594 0.14 15.26 400 Inverness Drive(7)................. 1997 111,608 99.9 1,343 1,339 0.32 21.24 5975 South Quebec Street(7)............ 1996 102,877 98.7 1,728 1,725 0.41 22.18 67 Inverness Drive East(7)............. 1996 54,280 100.0 489 489 0.12 11.74 PARKER 9777 Pyramid Court(7).................. 1995 120,281 100.0 1,021 1,021 0.24 11.06 EL PASO COUNTY, COLORADO COLORADO SPRINGS 1975 Research Parkway(7)............... 1997 115,250 95.7 719 710 0.17 11.49 JEFFERSON COUNTY, COLORADO LAKEWOOD 141 Union Boulevard(7)................. 1985 63,600 94.7 739 720 0.18 15.99 HILLSBOROUGH COUNTY, FLORIDA TAMPA 501 Kennedy Boulevard.................. 1982 297,429 89.7 3,402 3,389 0.81 12.75 POLK COUNTY, IOWA WEST DES MOINES 2600 Westown Parkway................... 1988 72,265 98.2 1,088 1,079 0.26 15.33 DOUGLAS COUNTY, NEBRASKA OMAHA 210 South 16th Street.................. 1894 319,535 95.0 3,225 3,216 0.76 10.62 ---------- ----- --------- --------- ------ ----------- Total Office Properties................ 22,420,331 97.11 $ 377,828 $ 370,248 89.56 $ 18.51 ---------- ----- --------- --------- ------ ----------- 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- DOUGLAS COUNTY, COLORADO ENGLEWOOD 384 Inverness Drive South(7)........... 15.03 Quickpen International Corp. (37%), United States of America--GSA (19%) 400 Inverness Drive(7)................. 21.17 Convergent Communications Inc. (26%), Summit Group Inc. (22%), Compuware Corp. (17%), Ani Colorado Inc./Alliance Int'l (16%) 5975 South Quebec Street(7)............ 22.14 Northern Telecom Inc. (43%), Silicon Graphics Inc. (28%) 67 Inverness Drive East(7)............. 11.74 T-Netix Inc. (69%), Convergent Communications Inc. (31%) PARKER 9777 Pyramid Court(7).................. 11.06 Evolving System Inc. (100%) EL PASO COUNTY, COLORADO COLORADO SPRINGS 1975 Research Parkway(7)............... 11.35 Bombardier Capital Florida (69%), Concert Management Services (18%) JEFFERSON COUNTY, COLORADO LAKEWOOD 141 Union Boulevard(7)................. 15.58 Arbitration Forums Inc. (18%), Special District Management (11%) HILLSBOROUGH COUNTY, FLORIDA TAMPA 501 Kennedy Boulevard.................. 12.70 Fowler, White, Gillen, Boggs, Villareal & Banker, PA (33%), Raytheon Engineers & Constructors, Inc. (31%) POLK COUNTY, IOWA WEST DES MOINES 2600 Westown Parkway................... 15.20 St. Paul Fire and Marine Insurance Company (19%), MCI Telecommunications Corp. (14%), New England Mutual Life Insurance Company (13%), American Express Financial Advisors, Inc. (12%) DOUGLAS COUNTY, NEBRASKA OMAHA 210 South 16th Street.................. 10.59 Union Pacific Railroad Company (70%) ----------- Total Office Properties................ $ 18.16 -----------
26
PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- OFFICE/FLEX PROPERTIES BURLINGTON COUNTY, NEW JERSEY BURLINGTON 3 Terri Lane(7)........................ 1991 64,500 82.8 486 486 0.12 9.89 5 Terri Lane(7)........................ 1992 74,555 100.0 506 505 0.12 7.37 MOORESTOWN 1 Executive Drive(7)................... 1989 20,570 43.0 115 115 0.03 14.12 101 Commerce Drive(7).................. 1988 64,700 100.0 335 315 0.08 5.62 101 Executive Drive(7)................. 1990 29,355 84.2 205 205 0.05 9.01 102 Executive Drive(7)................. 1990 64,000 80.0 321 314 0.08 6.81 1256 North Church(7)................... 1984 63,495 100.0 316 289 0.07 5.41 1507 Lancer Drive(7)................... 1995 32,700 100.0 28 28 0.01 0.93 1510 Lancer Drive(7)................... 1998 88,000 100.0 171 171 0.04 4.15 201 Commerce Drive(7).................. 1986 38,400 100.0 178 178 0.04 5.04 225 Executive Drive(7)................. 1990 50,600 85.8 243 233 0.06 6.08 30 Twosome Drive(7).................... 1997 39,675 100.0 205 205 0.05 5.61 40 Twosome Drive(7).................... 1996 40,265 100.0 255 255 0.06 6.88 50 Twosome Drive(7).................... 1997 34,075 100.0 248 248 0.06 7.91 840 North Lenola(7).................... 1995 38,300 100.0 250 250 0.06 7.09 844 North Lenola(7).................... 1995 28,670 100.0 196 196 0.05 7.43 97 Foster Road(7)...................... 1982 43,200 100.0 170 170 0.04 4.27 WEST DEPTFORD 1451 Metropolitan Drive(7)............. 1996 21,600 100.0 137 137 0.03 6.89 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- OFFICE/FLEX PROPERTIES BURLINGTON COUNTY, NEW JERSEY BURLINGTON 3 Terri Lane(7)........................ 9.89 Tempel Steel Company (18%), Signature Home Care (16%), BCM Engineers Inc. (15%), General Services Administrators (10%) 5 Terri Lane(7)........................ 7.36 Actimed Laboratories Inc. (38%), Lykes Dispensing Systems Inc. (20%), West Electronics Inc. (12%) MOORESTOWN 1 Executive Drive(7)................... 14.12 T.T.I. (18%) 101 Commerce Drive(7).................. 5.29 Beckett Corporation (100%) 101 Executive Drive(7)................. 9.01 Bayada Nurses Inc. (24%), Total Package Marketing Inc. (20%), National Service Solutions (15%) 102 Executive Drive(7)................. 6.66 Comtrex Systems Corp. (29%), Commonwealth Scientific Corp. (21%), Judge Computer (20%), Judge Imaging Systems Inc. (10%) 1256 North Church(7)................... 4.94 Package Coordinators Inc. (50%), James C. Anderson Associates (30%), Ketec Inc. (20%) 1507 Lancer Drive(7)................... 0.93 Tad's Delivery Service Inc. (31%) 1510 Lancer Drive(7)................... 4.15 Tad's Delivery Service Inc. (100%) 201 Commerce Drive(7).................. 5.04 Flow Thru Metals Inc. (25%), Franchise Stores Realty Corp. (25%), RE/ Com Group (25%), Tropicana Products Inc. (25%) 225 Executive Drive(7)................. 5.83 Eastern Research Inc. (33%), Schermerhorn Brothers Inc. (19%), Bioclimatic Inc. (14%), Band-It Index Inc. (11%) 30 Twosome Drive(7).................... 5.61 Hartman Cards Inc. (28%), Sagot Office Interiors Inc. (24%), Aramark Sports/Entertainment (14%), The Closet Factory (12%), C&L Packaging Inc. (12%), Mosler Inc. (10%) 40 Twosome Drive(7).................... 6.88 Vitalink Pharmacy Services (49%), A.D.P. Inc. (37%), Bellstar Inc. (14%) 50 Twosome Drive(7).................... 7.91 Wells Fargo (44%), Sussex Wine Merchants (30%), McCarthy Associates Inc. (14%), Inacomp Financial Services (12%) 840 North Lenola(7).................... 7.09 Millar Elevator Service Co. (31%), Twin Pines Construction Co. (31%), Technology Service Solutions (25%), Computer Integration Services (13%) 844 North Lenola(7).................... 7.43 First Union National Bank (41%), Curbell Inc. (34%), James J. Martin Inc. (25%) 97 Foster Road(7)...................... 4.27 Consumer Response Company Inc. (50%), Pioneer and Company Inc. (33%), Colornet Inc. (17%) WEST DEPTFORD 1451 Metropolitan Drive(7)............. 6.89 Garlock Bearings Inc. (100%)
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PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- MERCER COUNTY, NEW JERSEY HAMILTON TOWNSHIP 100 Horizon Drive...................... 1989 13,275 100.0 226 226 0.05 17.02 200 Horizon Drive...................... 1991 45,770 85.3 445 432 0.11 11.40 300 Horizon Drive...................... 1989 69,780 100.0 912 903 0.22 13.07 500 Horizon Drive...................... 1990 41,205 81.9 383 357 0.09 11.35 MONMOUTH COUNTY, NEW JERSEY WALL TOWNSHIP 1320 Wykoff Avenue..................... 1986 20,336 28.6 143 143 0.03 24.59 1324 Wykoff Avenue..................... 1987 21,168 75.0 227 195 0.05 14.30 1325 Campus Parkway.................... 1988 35,000 92.9 232 221 0.06 7.14 1340 Campus Parkway.................... 1992 72,502 94.6 748 659 0.18 10.91 1345 Campus Parkway(7)................. 1995 76,300 100.0 699 699 0.17 9.16 1433 Highway 34........................ 1985 69,020 58.2 517 435 0.12 12.87 PASSAIC COUNTY, NEW JERSEY TOTOWA 2 Center Court(7)...................... 1998 30,600 99.3 149 116 0.04 8.65 11 Commerce Way........................ 1989 47,025 77.8 403 392 0.10 11.02 20 Commerce Way........................ 1992 42,540 85.9 371 371 0.09 10.15 29 Commerce Way........................ 1990 48,930 100.0 465 420 0.11 9.50 40 Commerce Way........................ 1987 50,576 100.0 552 458 0.13 10.91 45 Commerce Way........................ 1992 51,207 100.0 475 445 0.11 9.28 60 Commerce Way........................ 1988 50,333 100.0 406 352 0.10 8.07 80 Commerce Way........................ 1996 22,500 100.0 268 166 0.06 11.91 100 Commerce Way....................... 1996 24,600 100.0 293 169 0.07 11.91 120 Commerce Way....................... 1994 9,024 100.0 87 85 0.02 9.64 140 Commerce Way....................... 1994 26,881 99.5 261 257 0.06 9.76 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- MERCER COUNTY, NEW JERSEY HAMILTON TOWNSHIP 100 Horizon Drive...................... 17.02 HIP of New Jersey Inc. (100%) 200 Horizon Drive...................... 11.07 O.H.M. Remediation Services Corp. (85%) 300 Horizon Drive...................... 12.94 State of NJ/DEP (50%), McFaul & Lyons Inc. (26%), Fluor Daniel GTI (24%) 500 Horizon Drive...................... 10.58 Anacomp Inc. (30%), Lakeview Child Center Inc. (19%), NJ Builders Assoc. (14%), Diedre Moire Corp. (11%) MONMOUTH COUNTY, NEW JERSEY WALL TOWNSHIP 1320 Wykoff Avenue..................... 24.59 Lucent Technologies Inc. (29%) 1324 Wykoff Avenue..................... 12.28 Collectors Alliance Inc. (53%), Supply-Saver, Inc. (22%) 1325 Campus Parkway.................... 6.80 American Press Inc. (71%), Centennial Cellular Corp. (14%) 1340 Campus Parkway.................... 9.61 Groundwater Environmental Services Inc. (33%), GEAC Computers Inc. (22%), State Farm Co. (17%), Association For Retarded Citizens (11%), Digital Lightwave, Inc. (11%) 1345 Campus Parkway(7)................. 9.16 Depot America, Inc. (37%), Quadramed Corp. (24%), De Vine Corp. (11%) 1433 Highway 34........................ 10.83 State Farm Mutual Insurance Co. (30%), New Jersey Natural Gas Co (11%) PASSAIC COUNTY, NEW JERSEY TOTOWA 2 Center Court(7)...................... 6.73 Nomadic Display (36%), Electro Rent Corp. (33%), Alpine Electronics of America (30%) 11 Commerce Way........................ 10.71 Coram Alternative Site Services (56%), Olsten Health Services (11%), Siemens Electromechanical (11%) 20 Commerce Way........................ 10.15 Motorola Inc. (45%), Siemens Fiber Optics (41%) 29 Commerce Way........................ 8.58 Sandvik Sorting Systems, Inc. (44%), Patterson Dental Supply Inc. (23%), Fujitec America Inc. (22%), Wiltel Communications LLC (11%) 40 Commerce Way........................ 9.06 Thomson Electron Tubes (43%), Intertek Testing Services Inc. (29%), Snap-On, Inc. (14%), System 3R USA Inc. (14%) 45 Commerce Way........................ 8.69 Ericsson Radio Systems Inc. (52%), Woodward-Clyde Consultants (27%), Security Technologies, Inc. (10%), Oakwood Corporate Housing (10%) 60 Commerce Way........................ 6.99 Relectronic Service Corp. (43%), Ericsson Inc. (29%), Maxlite S.K. America (14%), HW Exhibits (14%) 80 Commerce Way........................ 7.38 Hey Diddle Diddle Inc. (40%), Idexx Veterinary Services (37%), Inter- American Safety Council (12%), Bell Atlantic (11%) 100 Commerce Way....................... 6.87 Minolta Business Systems, Inc. (34%), Pharmamerica Inc. (34%), CCH Inc. (32%) 120 Commerce Way....................... 9.42 Deerfield Healthcare (100%) 140 Commerce Way....................... 9.61 Advanced Image System Inc. (20%), MSR Publications Inc. (19%), Holder Group, Inc. (11%), Alpha Testing (10%), Dairygold (10%), Showa Tool USA, Inc. (10%), Telsource, Inc. (10%), Universal Hospital Services (10%)
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PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- WESTCHESTER COUNTY, NEW YORK ELMSFORD 1 Westchester Plaza.................... 1967 25,000 100.0 292 284 0.07 11.68 2 Westchester Plaza.................... 1968 25,000 100.0 407 407 0.10 16.28 3 Westchester Plaza.................... 1969 93,500 100.0 1,094 1,093 0.26 11.70 4 Westchester Plaza.................... 1969 44,700 92.4 573 549 0.14 13.87 5 Westchester Plaza.................... 1969 20,000 100.0 276 274 0.07 13.80 6 Westchester Plaza.................... 1968 20,000 78.0 201 198 0.05 12.88 7 Westchester Plaza.................... 1972 46,200 100.0 617 615 0.15 13.35 8 Westchester Plaza.................... 1971 67,200 100.0 889 803 0.21 13.23 11 Clearbrook Road..................... 1974 31,800 100.0 324 323 0.08 10.19 75 Clearbrook Road..................... 1990 32,720 100.0 816 816 0.19 24.94 150 Clearbrook Road.................... 1975 74,900 100.0 1,014 1,006 0.24 13.54 175 Clearbrook Road.................... 1973 98,900 65.8 897 862 0.21 13.78 200 Clearbrook Road.................... 1974 94,000 99.7 793 781 0.19 8.46 250 Clearbrook Road.................... 1973 155,000 83.6 1,124 1,123 0.27 8.67 50 Executive Boulevard................. 1969 45,200 97.2 383 379 0.09 8.72 77 Executive Boulevard................. 1977 13,000 100.0 180 179 0.04 13.85 85 Executive Boulevard................. 1968 31,000 99.4 387 384 0.09 12.56 300 Executive Boulevard................ 1970 60,000 99.7 575 575 0.14 9.61 350 Executive Boulevard................ 1970 15,400 98.8 243 243 0.06 15.97 399 Executive Boulevard................ 1962 80,000 89.5 930 929 0.22 12.99 400 Executive Boulevard................ 1970 42,200 99.9 532 526 0.13 12.62 500 Executive Boulevard................ 1970 41,600 88.3 564 559 0.13 15.35 525 Executive Boulevard................ 1972 61,700 100.0 838 832 0.20 13.58 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- WESTCHESTER COUNTY, NEW YORK ELMSFORD 1 Westchester Plaza.................... 11.36 British Apparel Collection (40%), American Greeting Corp. (20%), RS Knapp (20%), Thin Film Concepts Inc. (20%) 2 Westchester Plaza.................... 16.28 Board of Cooperative Education (80%), Kin-Tronics Inc. (10%), Squires Productions Inc. (10%) 3 Westchester Plaza.................... 11.69 Apria Healthcare Inc. (32%), Kangol Headware Inc. (28%), V-Band Corp. (16%), Dental Concepts Inc. (12%) 4 Westchester Plaza.................... 13.29 Metropolitan Life (38%), EEV Inc. (34%), Arsys Innotech Corp. (13%) 5 Westchester Plaza.................... 13.70 Kramer Scientific Corp. (26%), Rokonet Industries USA Inc. (25%), UA Plumbers Education Fund (25%), Fujitsu (12%), Furniture Etc. Inc. (12%) 6 Westchester Plaza.................... 12.69 Signacon Controls Inc. (28%), Xerox Corp. (28%), Girard Rubber Co. (13%) 7 Westchester Plaza.................... 13.31 Emigrant Savings Bank (69%), Fire End Croker Corp. (22%) 8 Westchester Plaza.................... 11.95 Mamiya America Corp. (24%), Ciba Specialty Chemicals Corp. (19%), Kubra Data Transfer Ltd. (15%) 11 Clearbrook Road..................... 10.16 Eastern Jungle Gym (27%), MCS Marketing Group Inc. (24%), Treetops Inc. (21%), Creative Medical Supplies (14%), Westchester Party Rental Inc. (14%) 75 Clearbrook Road..................... 24.94 Evening Out Inc. (100%) 150 Clearbrook Road.................... 13.43 Court Sports I LLC (24%), Philips Medical (18%), Transwestern Publications (12%) 175 Clearbrook Road.................... 13.25 Hypres Inc (15%) 200 Clearbrook Road.................... 8.33 Brunschwig & Fils Inc. (39%), Proftech Corp. (20%), WYSE Technology (15%) 250 Clearbrook Road.................... 8.67 AFP Imaging Corp. (42%), The Artina Group Inc. (14%), Conri Services Inc. (11%) 50 Executive Boulevard................. 8.63 MMO Music Group (71%), Medical Billing Associates (22%) 77 Executive Boulevard................. 13.77 Bright Horizons Children (55%), WNN Corp. (45%) 85 Executive Boulevard................. 12.46 VREX Inc. (49%), Westhab Inc. (18%), John Caufield Fiber Optical (13%), Saturn II Systems Inc. (11%) 300 Executive Boulevard................ 9.61 Varta Batteries Inc. (44%), Princeton Ski Outlet Corp. (43%), LMG International Inc. (12%) 350 Executive Boulevard................ 15.97 Copytex Corp. (99%) 399 Executive Boulevard................ 12.97 American Banknote Holographic (74%), Wine Enthusiast Inc. (16%) 400 Executive Boulevard................ 12.48 Baker Engineering NY Inc. (39%), North American Van Lines (25%) 500 Executive Boulevard................ 15.22 Original Consumer (36%), Dover Elevator (16%), Angelica Corp. (16%), Charles Martine Inc.(13%) 525 Executive Boulevard................ 13.48 Vie De France Yamasaki Inc. (59%), New York Blood Center Inc. (21%)
29
PERCENTAGE OF TOTAL 1998 OFFICE, 1998 NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- HAWTHORNE 4 Skyline Drive........................ 1987 80,600 96.8 1,137 1,044 0.27 14.57 8 Skyline Drive........................ 1985 50,000 98.9 682 665 0.16 13.79 10 Skyline Drive....................... 1985 20,000 100.0 278 260 0.07 13.90 11 Skyline Drive....................... 1989 45,000 100.0 670 656 0.16 14.89 15 Skyline Drive....................... 1989 55,000 100.0 856 789 0.20 15.56 200 Saw Mill River Road................ 1965 51,100 99.6 537 521 0.13 10.55 YONKERS 1 Odell Plaza.......................... 1980 106,000 98.5 1,224 1,220 0.29 11.72 5 Odell Plaza.......................... 1983 38,400 99.6 498 498 0.12 13.02 7 Odell Plaza.......................... 1984 42,600 99.6 636 616 0.15 14.99 4 Executive Plaza...................... 1986 80,000 99.9 989 937 0.23 12.37 6 Executive Plaza...................... 1987 80,000 90.4 1,056 1,040 0.25 14.60 100 Corporate Boulevard................ 1987 78,000 78.5 1,208 1,206 0.29 19.73 200 Corporate Boulevard South.......... 1990 84,000 99.8 1,314 1,295 0.31 15.67 FAIRFIELD COUNTY, CONNECTICUT STAMFORD 419 West Avenue........................ 1986 88,000 99.7 1,534 1,528 0.36 17.48 500 West Avenue........................ 1988 25,000 100.0 332 328 0.08 13.28 550 West Avenue........................ 1990 54,000 100.0 753 743 0.18 13.94 650 West Avenue(7)..................... 1998 40,000 100.0 105 85 0.02 13.69 ---------- ----- --------- --------- ------ ----------- Total Office/Flex Properties........... 3,941,952 93.76 $ 40,385 $ 38,972 9.62 $ 11.23 ---------- ----- --------- --------- ------ ----------- 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- HAWTHORNE 4 Skyline Drive........................ 13.38 GEC Alsthom Int'l. (60%) 8 Skyline Drive........................ 13.45 Cityscape Corp. (62%), Reveo Inc (29%) 10 Skyline Drive....................... 13.00 Bi-Tronics Inc./LCA Sales Corp. (52%), Phoenix Systems Int'l (32%), Galson Corp. (16%) 11 Skyline Drive....................... 14.58 Cube Computer (41%), Bowthorpe Holdings (19%), Agathon Machine Inc. (12%), Planned Parenthood (11%) 15 Skyline Drive....................... 14.35 Tellabs Inc. (33%), Emisphere Technology (24%), Minolta Copier Corp. (16%) 200 Saw Mill River Road................ 10.24 Walter Degruyter Inc. (21%), Abscoa Industries Inc. (18%), Monohans Plumbing Inc. (17%), Argents Air Express Ltd. (12%) YONKERS 1 Odell Plaza.......................... 11.68 Court Sports II LLC (19%), Gannet Satellite Info Network (11%) 5 Odell Plaza.......................... 13.02 Voyerta Technologies Inc. (44%), Photo File Inc. (34%), Pharmerica Inc. (22%) 7 Odell Plaza.......................... 14.52 US Postal Service (41%), TT Systems Co. (24%), Bright Horizons (16%) 4 Executive Plaza...................... 11.72 O.K. Industries (42%), E&B Giftware Inc. (22%), Universal Outdoor Advertising (12%) 6 Executive Plaza...................... 14.38 Cablevision Systems Corp. (40%), Yonkers Savings & Loan Assoc. (11%) 100 Corporate Boulevard................ 19.70 MonteFiore Medical Center (19%), Sempra Energy Trading Corp. (13%), Minami International Corp. (12%), Medigene Inc. (11%) 200 Corporate Boulevard South.......... 15.45 Belmay Inc. (32%), Montefiore Medical Center (23%) Advanced Viral Research Corp. (20%) FAIRFIELD COUNTY, CONNECTICUT STAMFORD 419 West Avenue........................ 17.42 Fuji Medical Systems USA Inc. (80%) 500 West Avenue........................ 13.12 Stamford Associates (26%), Convergent Communications (26%), Lead Trackers Inc. (20%), Seneca Media Group Inc. (17%), M. Cohen and Sons Inc. (11%) 550 West Avenue........................ 13.76 Lifecodes Corp. (68%), Davidoff of Geneva Inc. (32%) 650 West Avenue(7)..................... 11.08 Davidoff of Geneva (CT) Inc. (100%) ----------- Total Office/Flex Properties........... $ 10.81 -----------
30
PERCENTAGE OF TOTAL 1998 OFFICE, OFFICE/FLEX, AND 1998 NET PERCENTAGE 1998 INDUSTRIAL/ AVERAGE RENTABLE LEASED AS OF 1998 BASE EFFECTIVE WAREHOUSE BASE BASE RENT YEAR AREA (SQ. 12/31/98 RENT RENT RENT PER SQ. FT. PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) (%) ($)(4) - --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- ----------- INDUSTRIAL/WAREHOUSE PROPERTIES WESTCHESTER COUNTY, NEW YORK ELMSFORD 1 Warehouse Lane....................... 1957 6,600 100.0 57 56 0.01 8.64 2 Warehouse Lane....................... 1957 10,900 100.0 114 113 0.03 10.46 3 Warehouse Lane....................... 1957 77,200 100.0 269 269 0.06 3.48 4 Warehouse Lane....................... 1957 195,500 88.9 1,855 1,826 0.44 10.67 5 Warehouse Lane....................... 1957 75,100 94.8 678 672 0.16 9.52 6 Warehouse Lane....................... 1982 22,100 100.0 504 504 0.12 22.81 ---------- ----- --------- --------- ------ ----------- Total Industrial/Warehouse Properties.. 387,400 93.39% $ 3,477 $ 3,440 0.82 $ 9.61 ---------- ----- --------- --------- ------ ----------- Total Office, Office/Flex, and Industrial/ Warehouse Properties..... 26,749,683 96.56% $ 421,690 $ 412,660 100.00 $ 17.35 ---------- ----- --------- --------- ------ ----------- ---------- ----- --------- --------- ------ ----------- 1998 AVERAGE EFFECTIVE RENT PER SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF PROPERTY LOCATION ($)(5) 12/31/98 - --------------------------------------- ----------- -------------------------------------------------------------------------- INDUSTRIAL/WAREHOUSE PROPERTIES WESTCHESTER COUNTY, NEW YORK ELMSFORD 1 Warehouse Lane....................... 8.48 JP Trucking Service Inc. (100%) 2 Warehouse Lane....................... 10.37 RJ Bruno Roofing Inc. (55%), Savin Engineers PC (41%) 3 Warehouse Lane....................... 3.48 United Parcel Service (100%) 4 Warehouse Lane....................... 10.51 San Mar Laboratories Inc. (63%), Westinghouse Air Brake Co. (14%) 5 Warehouse Lane....................... 9.44 F&V Distribution Co. (62%), E & H Tire Buying Service (19%) 6 Warehouse Lane....................... 22.81 Conway Central Express (100%) ----------- Total Industrial/Warehouse Properties.. $ 9.51 ----------- Total Office, Office/Flex, and Industrial/ Warehouse Properties..... $ 16.99 ----------- -----------
SEE FOOTNOTES ON SUBSEQUENT PAGE. 31 - ------------------------------ (1) Based on all leases in effect as of December 31, 1998. (2) Total base rent for 1998, determined in accordance with generally accepted accounting principles ("GAAP"). Substantially all of the leases provide for annual base rents plus recoveries and escalation charges based upon the tenant's proportionate share of and/or increases in real estate taxes and certain operating costs, as defined, and the pass through of charges for electrical usage. (3) Total base rent for 1998 minus total 1998 amortization of tenant improvements, leasing commissions and other concessions and costs, determined in accordance with GAAP. (4) Base rent for 1998 divided by net rentable square feet leased at December 31, 1998. For those properties acquired by the Company during 1998, amounts presented are annualized, as per Note 7. (5) Effective rent for 1998 divided by net rentable square feet leased at December 31, 1998. For those properties acquired by the Company during 1998, amounts presented are annualized, as per Note 7. (6) Excludes office space leased by the Company from base rent, effective rent and per square foot amounts. (7) As this property was acquired or placed in service by the Company during 1998, the amounts represented in 1998 base rent and 1998 effective rent reflect only that portion of the year during which the Company owned or placed the property in service. Accordingly, these amounts may not be indicative of the property's full year results. For comparison purposes, the amounts represented in 1998 average base rent per sq. ft. and 1998 average effective rent per sq. ft. for this property have been calculated by taking 1998 base rent and 1998 effective rent for such property and annualizing these partial-year results, dividing such annualized amounts by the net rentable square feet leased at December 31, 1998. These annualized per square foot amounts may not be indicative of the property's results had the Company owned or placed such property in service for the entirety of 1998. RETAIL PROPERTIES The Company owned two stand-alone retail properties as of December 31, 1998, described below: The Company owns an 8,000 square foot restaurant, constructed in 1986, located at 2 Executive Plaza in the South Westchester Executive Park in Yonkers, Westchester County, New York. The restaurant is 100 percent leased to Magic at Yonkers, Inc. for use as a Red Robin restaurant under a 25-year lease. The lease currently provides for fixed annual base rent of $265,000, with fully-reimbursed real estate taxes, and operating expenses escalated based on the consumer price index ("CPI") over a base year CPI. The lease, which expires in June 2012, includes scheduled rent increases in July 2002 to approximately $300,000 annually, and in July 2007 to approximately $345,000 annually. The lease also provides for additional rent calculated as a percentage of sales over a specified sales amount, as well as for two five-year renewal options. 1998 total base rent for the property, calculated in accordance with GAAP, was approximately $301,356. The Company also owns a 9,300 square foot restaurant, constructed in 1984, located at 230 White Plains Road, Tarrytown, Westchester County, New York. The restaurant is 100 percent leased to TGI Fridays under a 10-year lease which provides for fixed annual base rent of approximately $195,000, with fully-reimbursed real estate taxes, and operating expenses escalated based on CPI over a base year CPI. The lease, which expires in August 2004, also provides for additional rent calculated as a percentage of sales over a specified sales amount, as well as for four five-year renewal options. 1998 total base rent for the property, calculated in accordance with GAAP, was approximately $195,000. LAND LEASES The Company owned two land leases as of December 31, 1998, described below: The Company leases land to Star Enterprises, where a 2,264 square-foot Texaco gas station was constructed, located at 1 Enterprise Boulevard in Yonkers, Westchester County, New York. The 15-year, triple-net land lease provided for annual rent of approximately $125,000 through January 1998, with an increase to approximately $145,000 annual rent through April 30, 2005. The lease also provides for two five-year renewal options. 1998 total base rent under this lease, calculated in accordance with GAAP, was approximately $143,972. 32 The Company also leases five acres of land to Rake Realty, where a 103,500 square-foot office building exists, located at 700 Executive Boulevard, Elmsford, Westchester County, New York. The 22-year, triple-net land lease provides for fixed annual rent plus a CPI adjustment every five years, and expires in November 2000. 1998 total base rent under this lease, calculated in accordance with GAAP, was approximately $96,456. The lease also provides for several renewal options which could extend the lease term for an additional 30 years. MULTI-FAMILY RESIDENTIAL PROPERTIES The Company owned two multi-family residential properties, as of December 31, 1998, described below: TENBY CHASE APARTMENTS, DELRAN, BURLINGTON COUNTY, NEW JERSEY: The Company's multi-family residential property, known as the Tenby Chase Apartments, was built in 1970. The property contains 327 units, comprised of 196 one-bedroom units and 131 two-bedroom units, with an average size of approximately 1,235 square feet per unit. The property had an average monthly rental rate of approximately $721 per unit during 1998 and was approximately 98.2 percent leased as of December 31, 1998. The property had 1998 total base rent of approximately $2.8 million, which represented approximately 0.6 percent of the Company's 1998 total base rent. The average occupancy rate for the property in each of 1998, 1997 and 1996 was 96.0 percent, 95.5 percent, and 95.3 percent, respectively. 25 MARTINE AVENUE, WHITE PLAINS, WESTCHESTER COUNTY, NEW YORK: The Company's multi-family residential property, acquired in the RM Transaction and known as 25 Martine Avenue, was built in 1987. The property contains 124 residential units, comprised of 18 studio units, 71 one-bedroom units and 35 two-bedroom units, with an average size of approximately 722 square feet per unit. The property had an average monthly rental rate of approximately $1,497 per unit during 1998 and was 97.6 percent leased as of December 31, 1998. The property also has retail space. The property had 1998 total base rent of approximately $2.3 million, which represented approximately 0.5 percent of the Company's 1998 total base rent. The average occupancy rate for the property in each of 1998, 1997 and 1996 was 96.4 percent, 97.6 percent, and 96.4 percent, respectively. REDEVELOPMENT OFFICE PROPERTY As of December 31, 1998, the Company owned 2115 Linwood Avenue, a 68,000 square-foot vacant office building located in Fort Lee, Bergen County, New Jersey, which the Company is redeveloping for future lease-up and operation. OCCUPANCY The table below sets forth the year-end percentage of square feet leased in the Company's in-service Properties for the last five years:
PERCENTAGE OF YEAR ENDED DECEMBER 31, SQUARE FEET LEASED (%) - ------------------------------------------------------------- ------------------------- 1998......................................................... 96.6 1997......................................................... 95.8 1996......................................................... 96.4 1995......................................................... 92.5 1994......................................................... 93.2
33 SIGNIFICANT TENANTS The following table sets out a schedule of the Company's 20 largest tenants, for wholly-owned properties as of December 31, 1998, based upon annualized base rents:
PERCENTAGE OF COMPANY ANNUALIZED ANNUALIZED BASE PERCENTAGE OF NUMBER OF BASE RENTAL RENTAL REVENUE SQUARE FEET COMPANY LEASED YEAR OF LEASE PROPERTIES REVENUE (1) (%) LEASED SQ. FT. (%) EXPIRATION ----------------- -------------- --------------- ----------- --------------- --------------- AT&T Corporation................. 5 $ 13,825,038 3.2 971,501 3.8 2009(2) Donaldson, Lufkin & Jenrette Securities Corp................ 1 7,943,706 1.8 420,672 1.7 2009 AT&T Wireless Services........... 2 7,826,368 1.8 365,593 1.4 2007 International Business Machines Corporation.................... 6 7,639,928 1.8 396,912 1.6 2007(3) Dow Jones Telerate Systems Inc............................ 1 7,436,452 1.7 373,132 1.5 2006(4) Nabisco Inc...................... 3 5,921,014 1.4 321,735 1.3 2000(5) Allstate Insurance Company....... 9 5,829,329 1.3 270,796 1.1 2009(6) Prentice-Hall Inc................ 1 5,794,893 1.3 474,801 1.9 2014 Toys "R" Us--NJ, Inc............. 1 5,342,672 1.2 242,518 1.0 2012 American Institute of Certified Public Accountants (AICPA)..... 1 4,981,357 1.1 249,768 1.0 2012 CMP Media Inc.................... 1 4,826,107 1.1 206,274 0.8 2014 Board of Gov./Federal Reserve.... 1 4,432,397 1.0 117,008 0.5 2009(7) Winston & Strawn................. 1 3,765,833 0.9 94,283 0.4 2003 KPMG Peat Marwick, LLP........... 2 3,510,412 0.8 161,760 0.6 2007(8) Bankers Trust Harborside Inc..... 1 3,272,500 0.8 385,000 1.5 2003 Morgan Stanley Dean Witter....... 1 3,188,532 0.7 179,131 0.7 2008 Deloitte & Touche USA LLP........ 1 3,162,933 0.7 118,864 0.5 2000 NTT Data Corporation............. 1 3,036,880 0.7 136,960 0.5 2005 PNC Bank N.A..................... 3 2,967,979 0.7 146,459 0.6 2003(9) Cendant Operations Inc........... 1 2,854,614 0.7 135,934 0.5 2008 -------------- --- ----------- --- Totals........................... $ 107,558,944 24.7 5,769,101 22.9 -------------- --- ----------- --- -------------- --- ----------- ---
- ------------------------------ (1) Annualized base rental revenue is based on actual December 1998 billing times 12. For leases in effect at December 31, 1998 whose rent commences after December 31, 1998 annualized base rental revenue is based on the first month's billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results for the year ended December 31, 1998 may differ from those set forth above. (2) 39,183 square feet expire February 2000; 66,268 square feet expire December 2000; 3,950 square feet expire August 2002; 475,100 square feet expire January 2008; 387,000 square feet expire January 2009. (3) 6,542 square feet expire April 1999; 29,157 square feet expire October 2000; 85,000 square feet expire December 2000; 26,749 square feet expire January 2002; 1,065 square feet expire November 2002; 248,399 square feet expire December 2007. (4) 39,985 square feet expire June 1999; 283,260 square feet expire June 2000; 4,700 square feet expire March 2001; 45,187 square feet expire June 2006. (5) 21,357 square feet expire March 1999; 300,378 square feet expire December 2000. (6) 22,444 square feet expire July 2001; 70,517 square feet expire June 2002; 71,030 square feet expire September 2002; 18,882 square feet expire April 2003; 2,867 square feet expire January 2004; 36,305 square feet expire January 2005; 6,108 square feet expire August 2006; 31,143 square feet expire April 2008; 11,500 square feet expire January 2009. (7) 94,719 square feet expire May 2005; 22,289 square feet expire June 2009. (8) 104,556 square feet expire September 2002; 57,204 square feet expire July 2007. (9) 23,337 square feet expire October 1999; 107,320 square feet expire February 2000; 15,802 square feet expire August 2003. 34 SCHEDULE OF LEASE EXPIRATIONS The following table sets forth a schedule of the lease expirations for the total of the wholly-owned office, office/flex and industrial/warehouse properties beginning January 1, 1999, assuming that none of the tenants exercises renewal options:
PERCENTAGE OF AVERAGE ANNUAL NET RENTABLE TOTAL LEASED RENT PER NET PERCENTAGE OF AREA SUBJECT SQUARE FEET ANNUALIZED BASE RENTABLE SQUARE ANNUAL BASE NUMBER OF TO EXPIRING REPRESENTED BY RENTAL REVENUE FOOT RENT UNDER LEASES LEASES (SQ. EXPIRING LEASES UNDER EXPIRING REPRESENTED BY EXPIRING LEASES YEAR OF EXPIRATION EXPIRING(1) FT.)(1) (%)(2) LEASES(3) EXPIRING LEASES (%) - ---------------------------- ------------- ------------ --------------- --------------- --------------- --------------- 1999........................ 561 2,248,282 8.8 $ 39,556,954 $ 17.59 9.1 2000........................ 500 4,207,612 16.5 71,008,335 16.88 16.4 2001........................ 485 2,881,985 11.3 46,854,713 16.26 10.8 2002........................ 374 3,188,941 12.5 55,613,195 17.44 12.8 2003........................ 360 3,747,096 14.7 63,456,710 16.93 14.6 2004........................ 98 1,518,445 6.0 24,623,059 16.22 5.7 2005........................ 72 1,253,643 4.9 24,969,295 19.92 5.8 2006........................ 39 747,973 2.9 14,129,895 18.89 3.3 2007........................ 32 1,161,650 4.6 22,198,687 19.11 5.1 2008........................ 32 1,416,405 5.6 22,077,078 15.59 5.1 2009........................ 18 1,104,856 4.3 19,393,870 17.55 4.5 2010 and thereafter......... 28 1,962,960 7.9 29,696,020 15.13 6.8 ----- ------------ ----- --------------- ------ ----- Totals/Weighted Average..... 2,599 25,439,848 100.0(4) $ 433,577,811 $ 17.04 100.0 ----- ------------ ----- --------------- ------ ----- ----- ------------ ----- --------------- ------ -----
- ------------------------------ (1) Includes office, office/flex, industrial/warehouse and stand-alone retail property tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases. (2) Excludes all space vacant as of December 31, 1998. (3) Annualized base rental revenue is based on actual December 1998 billings times 12. For leases in effect at December 31, 1998 whose rent commences after December 31, 1998, annualized base rental revenue is based on the first month's billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results for the year ended December 31, 1998 may differ from those set forth above. (4) Reconciliation to Company's total net rentable square footage is as follows:
SQUARE FEET PERCENTAGE OF TOTAL ----------- ------------------- Square footage leased to commercial tenants.............................. 25,439,848 95.1% Square footage used for corporate offices, management offices, building use, retail tenants, food services, other anciliary service tenants and occupancy adjustments.................................................. 407,609 1.5 Square footage vacant.................................................... 919,526 3.4 ----------- ------- Total net rentable square footage (does not include residential, land lease, retail or not-in-service properties)............................ 26,766,983 100.0% ----------- ------- ----------- -------
35 SCHEDULE OF LEASE EXPIRATIONS: OFFICE PROPERTIES The following table sets forth a schedule of the lease expirations for the Office Properties beginning January 1, 1999, assuming that none of the tenants exercises renewal options:
PERCENTAGE OF AVERAGE ANNUAL NET RENTABLE TOTAL LEASED RENT PER NET PERCENTAGE OF AREA SUBJECT SQUARE FEET ANNUALIZED BASE RENTABLE SQUARE ANNUAL BASE NUMBER OF TO EXPIRING REPRESENTED BY RENTAL REVENUE FOOT RENT UNDER LEASES LEASES (SQ. EXPIRING LEASES UNDER EXPIRING REPRESENTED BY EXPIRING LEASES YEAR OF EXPIRATION EXPIRING(1) FT.)(1) (%)(2) LEASES(3) EXPIRING LEASES (%) - ---------------------------- ------------- ------------ --------------- --------------- --------------- --------------- 1999........................ 479 1,768,091 8.3 $ 34,655,892 $ 19.60 8.9 2000........................ 419 3,515,089 16.5 63,697,337 18.12 16.4 2001........................ 400 2,254,109 10.6 39,609,773 17.57 10.2 2002........................ 299 2,509,326 11.7 48,215,382 19.21 12.4 2003........................ 302 3,172,457 14.9 57,869,143 18.24 14.9 2004........................ 78 1,220,194 5.7 21,135,616 17.32 5.4 2005........................ 57 1,062,346 5.0 22,897,475 21.55 5.9 2006........................ 32 554,481 2.6 10,838,389 19.55 2.8 2007........................ 27 1,049,969 4.9 20,625,703 19.64 5.3 2008........................ 30 1,314,545 6.2 21,612,570 16.44 5.6 2009........................ 15 1,057,956 5.0 18,757,850 17.73 4.8 2010 and thereafter......... 25 1,878,272 8.6 28,580,471 15.22 7.4 ----- ------------ ----- --------------- ------ ----- Totals/Weighted Average..... 2,163 21,356,835 100.0 $ 388,495,601 $ 18.19 100.0 ----- ------------ ----- --------------- ------ ----- ----- ------------ ----- --------------- ------ -----
- ------------------------------ (1) Includes office tenants only. Excludes leases for amenity, retail, parking and month-to-month office tenants. Some tenants have multiple leases. (2) Excludes all space vacant as of December 31, 1998. (3) Annualized base rental revenue is based on actual December 1998 billings times 12. For leases in effect at December 31, 1998 whose rent commences after December 31, 1998, annualized base rental revenue is based on the first month's billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results for the year ended December 31, 1998 may differ from those set forth above. 36 SCHEDULE OF LEASE EXPIRATIONS: OFFICE/FLEX PROPERTIES The following table sets forth a schedule of the lease expirations for the Office/flex Properties beginning January 1, 1999, assuming that none of the tenants exercises renewal options:
PERCENTAGE OF AVERAGE ANNUAL NET RENTABLE TOTAL LEASED RENT PER NET PERCENTAGE OF AREA SUBJECT SQUARE FEET ANNUALIZED BASE RENTABLE SQUARE ANNUAL BASE NUMBER OF TO EXPIRING REPRESENTED BY RENTAL REVENUE FOOT RENT UNDER LEASES LEASES (SQ. EXPIRING LEASES UNDER EXPIRING REPRESENTED BY EXPIRING LEASES YEAR OF EXPIRATION EXPIRING(1) FT.)(1) (%)(2) LEASES(3) EXPIRING LEASES (%) - ---------------------------- --------------- ------------ --------------- --------------- --------------- --------------- 1999........................ 77 471,356 12.7 $ 4,810,642 $ 10.21 11.7 2000........................ 76 626,479 16.9 6,651,722 10.62 16.2 2001........................ 81 599,329 16.2 6,676,885 11.14 16.2 2002........................ 74 669,465 18.1 7,293,268 10.89 17.7 2003........................ 55 483,165 13.0 5,161,814 10.68 12.5 2004........................ 14 132,031 3.6 1,697,843 12.86 4.1 2005........................ 15 191,297 5.2 2,071,820 10.83 5.0 2006........................ 7 193,492 5.2 3,291,506 17.01 8.0 2007........................ 5 111,681 3.0 1,572,984 14.08 3.8 2008........................ 2 101,860 2.8 464,508 4.56 1.1 2009........................ 3 46,900 1.3 636,020 13.56 1.5 2010 and thereafter......... 2 76,688 2.0 850,549 11.09 2.2 --- ------------ ----- --------------- ------ ----- Totals/Weighted Average..... 411 3,703,743 100.0 $ 41,179,561 $ 11.12 100.0 --- ------------ ----- --------------- ------ ----- --- ------------ ----- --------------- ------ -----
- ------------------------------ (1) Includes office/flex tenants only. Excludes leases for amenity, retail, parking and month-to-month office/flex tenants. Some tenants have multiple leases. (2) Excludes all space vacant as of December 31, 1998. (3) Annualized base rental revenue is based on actual December 1998 billings times 12. For leases in effect at December 31, 1998 whose rent commences after December 31, 1998, annualized base rental revenue is based on the first month's billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results for the year ended December 31, 1998 may differ from those set forth above. 37 SCHEDULE OF LEASE EXPIRATIONS: INDUSTRIAL/WAREHOUSE PROPERTIES The following table sets forth a schedule of the lease expirations for the Industrial/Warehouse Properties beginning January 1, 1999, assuming that none of the tenants exercises renewal options:
PERCENTAGE OF AVERAGE ANNUAL TOTAL LEASED RENT PER NET NET RENTABLE SQUARE FEET ANNUALIZED BASE RENTABLE SQUARE NUMBER OF AREA SUBJECT TO REPRESENTED BY RENTAL REVENUE FOOT REPRESENTED LEASES EXPIRING LEASES EXPIRING LEASES UNDER EXPIRING BY EXPIRING YEAR OF EXPIRATION EXPIRING(1) (SQ. FT.)(1) (%)(2) LEASES(3) LEASES - ------------------------ --------------- ---------------- ----------------- ------------------ ----------------- 1999.................... 5 8,835 2.4 $ 90,420 $ 10.23 2000.................... 5 66,044 18.2 659,276 9.98 2001.................... 4 28,547 7.9 568,055 19.90 2002.................... 1 10,150 2.8 104,545 10.30 2003.................... 3 91,474 25.3 425,753 4.65 2004.................... 5 156,920 43.4 1,594,600 10.16 -- ------- ----- ------------------ ------ Totals/Weighted Average............... 23 361,970 100.0 $ 3,442,649 $ 9.51 -- -- ------- ----- ------------------ ------ ------- ----- ------------------ ------ PERCENTAGE OF ANNUAL BASE RENT UNDER EXPIRING LEASES YEAR OF EXPIRATION (%) - ------------------------ ----------------- 1999.................... 2.6 2000.................... 19.2 2001.................... 16.5 2002.................... 3.0 2003.................... 12.4 2004.................... 46.3 ----- Totals/Weighted Average............... 100.0 ----- -----
- ------------------------------ (1) Includes industrial/warehouse tenants only. Excludes leases for amenity, retail, parking and month-to-month industrial/warehouse. Some tenants have multiple leases. (2) Excludes all space vacant as of December 31, 1998. (3) Annualized base rental revenue is based on actual December 1998 billings times 12. For leases in effect at December 31, 1998 whose rent commences after December 31, 1998, annualized base rent revenue is based on the first month's billing times 12. As annualized base rental revenue is not derived from historical GAAP results, the historical results for the year ended December 31, 1998 may differ from those set forth above. SCHEDULE OF LEASE EXPIRATIONS: STAND-ALONE RETAIL PROPERTIES The following table sets forth a schedule of the lease expirations for the stand-alone retail properties beginning January 1, 1999, assuming that none of the tenants exercises renewal options:
PERCENTAGE OF AVERAGE ANNUAL TOTAL LEASED RENT PER NET NET RENTABLE SQUARE FEET ANNUALIZED BASE RENTABLE SQUARE NUMBER OF AREA SUBJECT TO REPRESENTED BY RENTAL REVENUE FOOT REPRESENTED LEASES EXPIRING LEASES EXPIRING LEASES UNDER EXPIRING BY EXPIRING YEAR OF EXPIRATION EXPIRING(1) (SQ. FT.)(1) (%) LEASES(2) LEASES - ------------------------ --------------- ---------------- ----------------- ------------------ ----------------- 2004.................... 1 9,300 53.8 $ 195,000 $ 20.97 2010.................... 1 8,000 46.2 265,000 33.13 -- ------ ----- -------- ------ Totals/Weighted Average............... 2 17,300 100.0 $ 460,000 $ 26.59 -- -- ------ ----- -------- ------ ------ ----- -------- ------ PERCENTAGE OF ANNUAL BASE RENT UNDER EXPIRING LEASES YEAR OF EXPIRATION (%) - ------------------------ ----------------- 2004.................... 42.4 2010.................... 57.6 ----- Totals/Weighted Average............... 100.0 ----- -----
- ------------------------------ (1) Includes stand-alone retail property tenants only. (2) Annualized base rental revenue is based on actual December 1998 billings times 12. For leases in effect at December 31, 1998 whose rent commences after December 31, 1998, annualized base rental revenue is based on the first month's billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results for the year ended December 31, 1998 may differ from those set forth above. 38 INDUSTRY DIVERSIFICATION The following table lists the Company's 30 largest industry classifications (NAICS) for its Properties, based on annualized base rent:
PERCENTAGE OF ANNUALIZED COMPANY ANNUALIZED PERCENTAGE OF BASE RENTAL BASE RENTAL REVENUE SQUARE FEET COMPANY LEASED INDUSTRY CLASSIFICATION (NAICS)(3) REVENUE (1)(2) (%) LEASED(2) SQ. FT. (%) - --------------------------------------------- -------------- ------------------- ------------ ----------------- Manufacturing................................ $ 42,053,778 9.7 2,659,489 10.5 Securities, Commodity Contracts & Other Financial.................................. 39,884,148 9.2 2,161,142 8.5 Telecommunications........................... 32,094,189 7.4 2,086,370 8.2 Computer System Design Svcs.................. 31,629,774 7.3 1,745,622 6.9 Insurance Carriers & Related Activities...... 30,595,287 7.1 1,647,337 6.5 Legal Services............................... 23,218,635 5.4 1,156,108 4.5 Credit Intermediation & Related Activities... 23,143,458 5.3 1,447,412 5.7 Wholesale Trade.............................. 20,339,326 4.7 1,428,770 5.6 Information Services......................... 19,299,991 4.5 956,470 3.8 Health Care & Social Assistance.............. 16,709,332 3.9 940,970 3.7 Accounting/Tax Prep.......................... 14,730,504 3.4 712,492 2.8 Other Professional........................... 13,300,651 3.1 853,559 3.4 Retail Trade................................. 11,750,806 2.7 706,635 2.8 Transportation............................... 11,020,770 2.5 794,014 3.1 Arts, Entertainment & Recreation............. 10,242,449 2.4 784,346 3.1 Public Administration........................ 8,703,697 2.0 311,210 1.2 Publishing Industries........................ 8,600,074 2.0 429,573 1.7 Other Services (except Public Adminsitration)............................ 8,267,854 1.9 702,168 2.8 Advertising/Related Services................. 6,906,212 1.6 356,097 1.4 Real Estate & Rental & Leasing............... 6,624,316 1.5 381,873 1.5 Management of Companies & Finance............ 6,528,595 1.5 381,392 1.5 Data Processing Services..................... 6,126,999 1.4 286,533 1.1 Architectural/Engineering.................... 5,940,726 1.4 375,371 1.5 Scientific Research/Development.............. 5,052,728 1.2 323,815 1.3 Monetary Authorities--Central Banks.......... 4,520,606 1.0 266,340 1.0 Management/Scientific........................ 4,370,192 1.0 228,168 0.9 Educational Services......................... 4,194,159 1.0 254,678 1.0 Construction................................. 3,911,270 0.9 234,335 0.9 Admin & Support, Waste Mgt. & Remediation Svcs....................................... 3,395,234 0.8 260,519 1.0 Utilities.................................... 3,250,727 0.7 170,797 0.7 Other........................................ 7,171,324 1.5 396,243 1.4 -------------- ----- ------------ ----- Totals....................................... $ 433,577,811 100.0 25,439,848 100.0 -------------- ----- ------------ ----- -------------- ----- ------------ -----
- ------------------------------ (1) Annualized base rental revenue is based on actual December 1998 billings times 12. For leases in effect at December 31, 1998 whose rent commences after December 31, 1998, annualized base rental revenue is based on the first month's billing times 12. As annualized base rental revenue is not derived from historical GAAP results, the historical results for the year ended December 31, 1998 may differ from those set forth above. (2) Includes office, office/flex, industrial/warehouse and stand-alone retail property tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases. (3) The Company's tenants are classified according to the U.S. Government's new North American Industrial Classification System (NAICS) which is replacing the Standard Industrial Code (SIC) system. 39 MARKET DIVERSIFICATION The following table lists the Company's 20 largest markets, by Metropolitan Statistical Area (MSA), based on annualized base rent:
PERCENTAGE OF COMPANY PERCENTAGE OF ANNUALIZED BASE ANNUALIZED BASE TOTAL SQUARE RENTAL REVENUE RENTAL REVENUE TOTAL SQUARE FEET MARKET (MSA) (1)(2) (%) FEET(2) (%) - ------------------------------------------------ --------------- ----------------- ------------- --------------- Bergen-Passaic, NJ.............................. $ 76,274,305 17.6 4,423,130 16.5 Newark, NJ (Essex-Morris-Union Counties)........ 69,282,808 16.0 3,671,218 13.7 New York, NY (Westchester-Rockland Counties).... 65,948,814 15.2 4,308,220 16.1 Jersey City, NJ................................. 43,335,031 10.0 2,508,700 9.4 Philadelphia, PA-NJ............................. 35,472,514 8.2 2,458,458 9.2 Denver, CO...................................... 16,299,545 3.8 1,007,931 3.8 Trenton, NJ (Mercer County)..................... 14,278,963 3.3 742,915 2.8 Dallas, TX...................................... 14,208,226 3.3 959,463 3.6 Washington, DC-MD-VA............................ 12,607,712 2.9 447,000 1.7 Middlesex-Somerset-Hunterdon, NJ................ 11,180,747 2.6 659,041 2.5 San Antonio, TX................................. 11,086,913 2.6 940,302 3.5 Stamford-Norwalk, CT............................ 8,387,008 1.9 461,250 1.7 Houston, TX..................................... 8,020,341 1.8 700,008 2.6 Monmouth-Ocean, NJ.............................. 6,724,616 1.6 577,423 2.2 Nassau-Suffolk, NY.............................. 6,215,482 1.4 261,849 1.0 Phoenix-Mesa, AZ................................ 6,067,186 1.4 536,268 2.0 Austin-San Marcos, TX........................... 5,322,896 1.2 270,703 1.0 Boulder-Longmont, CO............................ 3,450,304 0.8 270,421 1.0 San Francisco, CA............................... 3,376,861 0.8 267,446 1.0 Omaha, NE-IA.................................... 2,968,193 0.7 319,535 1.2 Other........................................... 13,069,346 2.9 975,702 3.5 --------------- ----- ------------- ----- Totals.......................................... $ 433,577,811 100.0 26,766,983 100.0 --------------- ----- ------------- ----- --------------- ----- ------------- -----
- ------------------------------ (1) Annualized base rental revenue is based on actual December 1998 billings times 12. For leases in effect at December 31, 1998 whose rent commences after December 31, 1998, annualized base rental revenue is based on the first month's billing times 12. As annualized base rental revenue is not derived from historical GAAP results, the historical results for the year ended December 31, 1998 may differ from those set forth above. (2) Includes office, office/flex, industrial/warehouse and stand-alone retail property tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases. 40 THE COMPANY'S REAL ESTATE MARKETS The Company's Properties are located primarily in the Northeast, including a predominant presence in New Jersey, New York and Pennsylvania. The following is a discussion of the markets within which substantially all of the Company's properties are located: NORTHERN NEW JERSEY The Northern New Jersey market consists of Bergen, Essex, Hudson, Morris and Passaic Counties. Northern New Jersey's five counties are part of the greater New York metropolitan area, are less than a 45 minute drive from Manhattan, and are widely regarded as major centers for corporate and international business. The region has direct access to New York City by public transportation and extensive road networks. In addition to being home to the two largest cities in New Jersey, Newark and Jersey City, Newark International Airport and the New York/New Jersey Harbor are also located within the five-county boundary. Overall vacancy rates have declined in the Northern New Jersey market for six out of the last seven years as a direct result of an increase in leasing activity and net absorption levels. Build-to-suit activity is present, and selective speculative construction exists. The Company owns and operates approximately 10.1 million square feet of office and office/flex space in Northern New Jersey. CENTRAL NEW JERSEY The Central New Jersey market consists of Union, Somerset, Hunterdon, Middlesex, Mercer and Monmouth Counties. Encompassing approximately 2,000 square miles in six counties, Central New Jersey is notable for its proximity to major highway arteries, including Interstates 78 and 287, Route 1, the Garden State Parkway and the New Jersey Turnpike. This market continues to be a prime location for Fortune 500 headquarters, research & development operations and information businesses. Central New Jersey vacancy rates are decreasing while average asking rents are increasing. This is, in part, attributable to the increase in demand, measured by leasing activity, which rose predominantly due to corporate expansions. The Company owns and operates approximately 2.7 million square feet of office and office/flex space in the Central New Jersey counties of Union, Middlesex, Somerset, Mercer and Monmouth. SUBURBAN PHILADELPHIA, PENNSYLVANIA The Suburban Philadelphia market consists of six counties in Pennsylvania on the west side of the Delaware River and eight counties in New Jersey on the east side of the Delaware River. The Pennsylvania counties consist of Bucks, Chester, Delaware, Montgomery, Lehigh and Northampton Counties. These six counties surround the City of Philadelphia, are home to many affluent communities, and are regarded as major centers for corporate and international business. The areas are served by an extensive highway network allowing easy access to Philadelphia International Airport and the Port of Philadelphia. Over the last few years the overall vacancy rate in this region has declined as a result of strong leasing activity and moderate new construction. The New Jersey counties consist of Burlington, Camden, Atlantic, Ocean, Gloucester, Salem, Cumberland and Cape May Counties. This market has extensive geographic boundaries, stretching from the Delaware River to the Atlantic Ocean and Atlantic City. This region is mainly suburban and is home to many affluent communities, and Atlantic City, one of the nation's largest centers for gaming/tourism. The Company owns and operates approximately 2.5 million square feet of office and office/flex space and a 327-unit multi-family residential complex in Suburban Philadelphia. WESTCHESTER COUNTY, NEW YORK Westchester County, New York, is located immediately north of New York City and is accessible to New York City by public transportation and through an extensive road network. Westchester County has a population of almost 900,000 and is considered to be one of the most prestigious counties surrounding New York City. The Company owns and operates approximately 3.7 million square feet of office and 41 office/flex space, 387,400 square feet of industrial/warehouse space, a 124-unit multi-family residential property, two stand-alone retail properties, and two land leases in Westchester County, New York. ROCKLAND COUNTY, NEW YORK Rockland County, New York is located north of the New Jersey/New York border directly adjacent to Bergen County. Rockland County has excellent highway access to both New York City via Interstate 87 and to New Jersey via Interstate 287. The Company owns or has an interest in approximately 412,000 square feet of office and office/flex space in Rockland County. FAIRFIELD COUNTY, CONNECTICUT Fairfield County, Connecticut is the county in Connecticut closest in proximity with New York City. It has direct access to New York City via public transportation and through an extensive road network. The county is home to 10 Fortune 500 headquarters and there has been a substantial decline in vacancy during the past three years. The Company owns and operates approximately 606,000 square feet of office and office/flex space in Fairfield County. DALLAS-FORT WORTH, TEXAS The Dallas-Fort Worth market includes Dallas, Tarrant and portions of Collin and Denton Counties. The market includes the central business districts of both Dallas and Fort Worth and the suburban areas primarily to the north of those cities. Dallas-Forth Worth International Airport is one of the busiest airports in the nation and is important to the growth of the area. This area is home to the headquarters of numerous Fortune 500 high-technology and telecommunications companies. The Company owns and operates approximately 1.0 million square feet of office space in Dallas, Tarrant and Collin Counties. HOUSTON, TEXAS The Houston market is comprised primarily of the city of Houston and its surrounding suburbs. Houston is a major location of Fortune 500 companies' headquarters. Houston is also a major port serving the southern portion of the United States. The Company owns and operates approximately 1.0 million square feet of office space in the Houston market. SAN ANTONIO, TEXAS The San Antonio market consists primarily of Bexar County. San Antonio is located at the cross roads of two major arteries, Interstate 35 and Interstate 10, and is a primary location of military facilities. San Antonio is the third largest metropolitan area in Texas, behind Dallas and Houston. The Company owns and operates approximately 940,000 square feet of office space in Bexar County. PHOENIX, ARIZONA The Phoenix market is comprised primarily of the city of Phoenix and several suburbs to the north and west, including Scottsdale. Phoenix is the focal point of Arizona, in addition to being the state capital. It is the location of numerous corporate headquarters and regional headquarter facilities. The Phoenix market has been considered one of the most rapidly growing markets in the county. The Company owns and operates approximately 536,000 square feet of office space in the Phoenix market. DENVER, COLORADO The Denver Market is comprised primarily of the city of Denver and several suburbs to the north, east, and south. Denver is the focal point of Colorado, in addition to being the state capital. It is the 42 location of numerous corporate headquarters, with a large emergence of high-technology and telecommunication industries. Its new airport could become a major transportation artery for the near-western states. The Company owns and operates approximately 1.3 million square feet of office space in the Denver market. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings, other than ordinary routine litigation incidental to its business, to which the Company is a party or to which any of its Properties is subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 43 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The shares of the Company's common stock are traded on the New York Stock Exchange ("NYSE") and the Pacific Exchange under the symbol "CLI". MARKET INFORMATION The following table sets forth the quarterly high, low, and closing price per share of Common Stock reported on the NYSE for the years ended December 31, 1998 and 1997, respectively: For the Year Ended December 31, 1998:
HIGH LOW CLOSE ---------- ---------- ---------- First Quarter............................................ $ 41.2500 $ 36.7500 $ 39.0625 Second Quarter........................................... $ 39.3125 $ 31.5000 $ 34.3750 Third Quarter............................................ $ 35.6250 $ 26.1250 $ 30.0000 Fourth Quarter........................................... $ 32.1250 $ 26.8750 $ 30.8750
For the Year Ended December 31, 1997:
HIGH LOW CLOSE ---------- ---------- ---------- First Quarter............................................ $ 34.8750 $ 30.0000 $ 32.0000 Second Quarter........................................... $ 34.0000 $ 28.7500 $ 34.0000 Third Quarter............................................ $ 41.6250 $ 32.3750 $ 41.6250 Fourth Quarter........................................... $ 42.6875 $ 36.2500 $ 41.0000
On March 1, 1999, the closing Common Stock sales price on the NYSE was $28.750 per share. HOLDERS On March 1, 1999, the Company had 349 common shareholders of record. RECENT SALES OF UNREGISTERED SECURITIES Reference is made to Notes 3 (1997 Transactions) and 9 of the Consolidated Financial Statements contained in Item 14 of this Form 10-K for a description of equity issuances of common and preferred Units in the Operating Partnership (and warrants exercisable for common units) which are redeemable under certain circumstances for shares of Common Stock in the Company. All of such equity issuances were issued to the holders directly by the Company without the use of an underwriter or placement agent and without registration under the Securities Act of 1933, as amended, pursuant to the private placement exemption contained in Section 4(2) of such Act. Reference also is made to Note 14 (Stock Warrants) contained in Item 14 of this Form 10-K for a description of equity issuances of warrants to purchase Common Stock of the Company. All of such warrants were issued to the holders (who are executives of the Company) directly by the Company without the use of an underwriter or placement agent and without registration under the Securities Act pursuant to the private placement exemption contained in Section 4(2) of such Act. DIVIDENDS AND DISTRIBUTIONS The dividends and distributions payable by the Company at December 31, 1998 represents dividends payable to shareholders of record on January 6, 1999 (57,266,737 shares), distributions payable to minority interest common unitholders (9,086,585 common units) on that same date and preferred distributions to preferred unitholders (250,256 preferred units) for the fourth quarter 1998. The fourth quarter 1998 44 dividends and common unit distributions of $0.55 per share and per common unit (pro-rated for units issued during the quarter), as well as the fourth quarter preferred unit distribution of $16.875 per preferred unit, were approved by the Board of Directors on December 15, 1998 and paid on January 26, 1999. The dividends and distributions payable by the Company at December 31, 1997 represents dividends payable to shareholders of record on January 5, 1998 (49,856,289 shares), distributions payable to minority interest common unitholders (6,097,477 common units) on that same date and preferred distributions to preferred unitholders (230,562 preferred units) for the fourth quarter 1997. The fourth quarter 1997 dividends and common unit distributions of $0.50 per share and per common unit (pro-rated for units issued during the quarter), as well as the fourth quarter preferred unit distribution of $16.875 per preferred unit (pro-rated for units issued during the quarter), were approved by the Board of Directors on December 17, 1997 and paid on January 16, 1998. 45 ITEM 6. SELECTED FINANCIAL DATA SELECTED FINANCIAL DATA Mack-Cali Realty Corporation and Subsidiaries The following table sets forth selected financial data on a consolidated basis for the Company and on a combined basis for the Cali Group. The consolidated selected operating, balance sheet and cash flow data of the Company as of December 31, 1998, 1997, 1996, 1995 and 1994, and for the periods then ended, and the combined selected operating and cash flow data of the Cali Group for the period ended August 30, 1994 have been derived from financial statements audited by PricewaterhouseCoopers LLP, independent accountants. OPERATING DATA
The Company The Cali Group August 31, January 1, 1994 to 1994 to Year Ended December 31, December 31, August 30, IN THOUSANDS, EXCEPT PER SHARE DATA 1998 1997 1996 1995 1994 1994 Total revenues $ 493,699 $ 249,801 $ 95,472 $ 62,335 $ 16,841 $ 33,637 Operating and other expenses $ 149,704 $ 75,150 $ 29,662 $ 20,705 $ 5,240 $ 11,155 General and administrative $ 25,572 $ 15,862 $ 5,800 $ 3,712 $ 1,079 $ 2,228 Depreciation and amortization $ 78,916 $ 36,825 $ 14,731 $ 10,655 $ 3,319 $ 5,093 Interest expense $ 88,043 $ 39,078 $ 13,758 $ 10,117 $ 2,213 $ 13,969 Non-recurring merger-related charges -- $ 46,519 -- -- -- -- Income (loss) before minority interest and extraordinary item $ 151,464 $ 36,367 $ 37,179 $ 17,146 $ 4,990 $ (110) Income (loss) before extraordinary item $ 118,951 $ 4,988 $ 32,419 $ 13,638 $ 3,939 $ (110) Basic earnings per share-before extraordinary item $ 2.13 $ 0.13 $ 1.76 $ 1.23 $ 0.38 Diluted earnings per share-before extraordinary item $ 2.11 $ 0.12 $ 1.73 $ 1.22 $ 0.38 Dividends declared per common share $ 2.10 $ 1.90 $ 1.75 $ 1.66 $ 0.54 Basic weighted average shares outstanding 55,840 39,266 18,461 11,122 10,500 Diluted weighted average shares outstanding 63,893 44,156 21,436 14,041 13,302 BALANCE SHEET DATA The Company December 31, IN THOUSANDS 1998 1997 1996 1995 1994 Rental property, before accumulated depreciation and amortization $ 3,467,799 $ 2,629,616 $ 853,352 $ 387,675 $ 234,470 Total assets $ 3,452,194 $ 2,593,444 $ 1,026,328 $ 363,949 $ 225,295 Mortgages and loans payable $ 1,420,931 $ 972,650 $ 268,010 $ 135,464 $ 77,000 Total liabilities $ 1,526,974 $ 1,056,759 $ 297,985 $ 150,058 $ 88,081 Minority interest $ 501,313 $ 379,245 $ 26,964 $ 28,083 $ 28,903 Stockholders' equity $ 1,423,907 $ 1,157,440 $ 701,379 $ 185,808 $ 108,311 OTHER DATA The Company The Cali Group August 31, January 1, 1994 to 1994 to Year Ended December 31, December 31, August 30, IN THOUSANDS 1998 1997 1996 1995 1994 1994 Cash flows provided by operating activities $ 208,761 $ 98,142 $ 46,823 $ 28,446 $ 6,367 $ 6,328 Cash flows (used in) provided by investing activities $ (749,067) $ (939,501) $ (307,752) $ (133,736) $ (8,947) $ 1,975 Cash flows provided by (used in) financing activities $ 543,411 $ 639,256 $ 464,769 $ 99,863 $ 8,974 $ (1,038) Funds from operations(1), before distributions to preferred unitholders $ 216,949 $ 111,752 $ 45,220 $ 27,397 $ 8,404 Funds from operations(1), after distributions to preferred unitholders $ 200,636 $ 110,864 $ 45,220 $ 27,397 $ 8,404
(1) The Company considers funds from operations (after adjustment for straight-lining of rents) one measure of REIT performance. Funds from operations ("FFO") is defined as net income (loss) before minority interest of unitholders (preferred and common) computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from debt restructuring, other extraordinary and significant non-recurring items and sales of property, plus real estate-related depreciation and amortization. Funds from operations should not be considered as an alternative for net income as an indication of the Company's performance or to cash flows as a measure of liquidity. Funds from operations presented herein is not necessarily comparable to funds from operations presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, the Company's funds from operations is comparable to the funds from operations of real estate companies that use the current definition of the National Association of Real Estate Investment Trusts ("NAREIT"), after the adjustment for straight-lining of rents. Refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations," contained elsewhere in this Report, for the calculation of FFO for the periods presented. 46 ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Mack-Cali Realty Corporation and Subsidiaries The following discussion should be read in conjunction with the Consolidated Financial Statements of Mack-Cali Realty Corporation and the notes thereto. Certain defined terms used herein have the meaning ascribed to them in the Consolidated Financial Statements. The following comparisons for the year ended December 31, 1998 ("1998"), as compared to the year ended December 31, 1997 ("1997") and for 1997, as compared to the year ended December 31, 1996 ("1996") make reference to the following: (i) the effect of the "Same-Store Properties," which represents all properties owned by the Company at December 31, 1996 (for the 1998 versus 1997 comparison), and which represents all properties owned by the Company at December 31, 1995 (for the 1997 versus 1996 comparison), (ii) the effect of the acquisition of the RM Properties on January 31, 1997, (iii) the effect of the acquisition of the Mack Properties on December 11, 1997, and (iv) the effect of the "Acquired Properties," which represents all properties acquired by the Company from January 1, 1997 through December 31, 1998, excluding RM Properties and Mack Properties (for the 1998 versus 1997 comparison), and which represents all properties acquired by the Company from January 1, 1996 through December 31, 1997, excluding RM Properties and Mack Properties (for the 1997 versus 1996 comparison), and (v) the effect of the "Disposition" which refers to the Company's sale of its Essex Road property on March 20, 1996. YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997 Total revenues increased by $243.9 million, or 97.6 percent, for 1998 over 1997. Base rents increased by $221.3 million, or 107.3 percent, of which an increase of $138.9 million, or 67.3 percent, was due to the Mack Properties, an increase of $75.1 million, or 36.4 percent, was attributable to the Acquired Properties, an increase of $5.5 million, or 2.7 percent, was due to the RM Properties, and an increase of $1.8 million, or 0.9 percent, was due to occupancy and rental rate changes at the Same-Store Properties. Escalations and recoveries from tenants increased by $20.8 million, or 67.0 percent, of which an increase of $11.1 million, or 35.9 percent, was due to the Mack Properties, an increase of $9.1 million, or 29.1 percent, was attributable to the Acquired Properties, an increase of $0.4 million, or 1.3 percent, at the Same-Store Properties, and an increase of $0.2 million, or 0.7 percent, due to the RM Properties. Parking and other income increased by $3.8 million, or 55.0 percent, of which $3.3 million, or 48.3 percent, was attributable to the Same-Store Properties, and an increase of $0.5 million, or 6.7 percent, was due to the RM Properties. Interest income decreased by $3.1 million, or 56.3 percent, due primarily to investment of the funds held from the Company's October 1997 common stock offering in 1997. Additionally, the Company recognized $1.1 million from equity in earnings of unconsolidated joint ventures in 1998. Total expenses for 1998 increased by $128.8 million, or 60.3 percent, as compared to 1997. Real estate taxes increased by $22.3 million, or 85.8 percent, for 1998 over 1997, of which an increase of $11.7 million, or 44.9 percent, was due to the Mack Properties, an increase of $8.8 million, or 33.8 percent, was attributable to the Acquired Properties, an increase of $1.0 million, or 3.9 percent, due to the RM Properties, and an increase of $0.8 million, or 3.2 percent, attributable to the Same-Store Properties. Additionally, operating services increased by $32.1 million, or 103.7 percent, and utilities increased by $20.2 million, or 110.7 percent, for 1998 over 1997. The aggregate increase in operating services and utilities of $52.3 million, or 106.3 percent, consists of an increase of $33.9 million, or 69.0 percent, due to the Mack Properties, an increase of $18.3 million, or 37.2 percent, attributable to the Acquired Properties and an increase of $0.9 million, or 1.8 percent, due to the RM Properties, offset by a decrease of $0.8 million, or 1.7 percent, attributable to the Same-Store Properties. General and administrative expense increased $9.7 million, or 61.2 percent, of which $6.6 million, or 41.4 percent, is due primarily to an increase in payroll and related costs as a result of the Company's expansion in late 1997 and 1998 and $3.1 million, or 19.8 percent, is attributable to additional costs related to the Mack Properties. Depreciation and amortization increased by $42.1 million, or 114.3 percent, for 1998 over 1997, of which $22.6 million, or 61.1 percent, was due to the Mack Properties, an increase of $16.2 million, or 44.0 percent, relates to depreciation on the Acquired Properties, an increase of $1.8 million, or 5.0 percent, due to the RM Properties, and an increase of $1.5 million, or 4.2 percent, due to the Same-Store Properties. Interest expense increased by $48.9 million, or 125.3 percent, for 1998 over 1997, of which $23.4 million, or 60.0 percent, was due to assumed mortgages from the Mack Properties, an increase of $23.2 million, or 59.5 percent, due to net additional drawings from the Company's credit facilities as a result of Company acquisitions and the $200 million Prudential Term Loan obtained in December 1997, as well as changes in LIBOR, $1.2 million, or 3.0 percent, was attributable to assumed mortgages on Acquired Properties, and an increase of $1.1 million, or 2.8 percent, due to the TIAA Mortgage. Non-recurring merger-related charges of $46.5 million were incurred in 1997, as a result of the Mack Transaction. Income before minority interest and extraordinary item increased to $151.5 million in 1998 from $36.4 million in 1997. The increase of $115.1 million was due to the factors discussed above. Net income increased by $115.2 million for 1998, from $1.4 million in 1997 to $116.6 million in 1998. This increase was a result of an increase in income before minority interest and extraordinary item of $115.1 million, and an extraordinary item of $3.6 million (net of minority interest), related to early retirement of debt in 1997, offset by an extraordinary item of $2.4 million (net of minority interest), related to early retirement of debt in 1998, and an increase of $1.1 million in minority interest. YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 Total revenues increased $154.3 million, or 161.6 percent, for 1997 over 1996. Base rents increased $129.3 million, or 168.1 percent, of which an increase of $61.4 million, or 79.7 percent, was attributable to the Acquired Properties, an increase of $58.4 million, or 75.9 percent, due to the RM Properties, an increase of $8.0 million, or 10.4 percent, due to the Mack Properties and an increase of $1.8 million, or 2.4 percent, due to occupancy and rental rate changes at the Same-Store Properties, offset by a decrease of $0.3 million, or 0.3 percent, due to the Disposition. Escalations and recoveries increased $16.7 million, or 115.7 percent, of which an increase of $11.2 million, or 77.4 percent, was attributable to the Acquired Properties, an increase of $4.9 million, or 34.2 percent, due to the 47 MD&A Mack-Cali Realty Corporation and Subsidiaries RM Properties, an increase of $0.5 million, or 3.7 percent, due to the Mack Properties, and an increase of $0.1 million, or 0.4 percent, due to occupancy changes at the Same-Store Properties. Parking and other income increased $4.7 million, or 213.5 percent, of which $4.0 million, or 182.1 percent, was attributable to the RM Properties and $0.8 million, or 37.6 percent, was attributable to the Acquired Properties, offset by a decrease of $0.1 million, or 6.2 percent, due to the Same-Store Properties. Interest income increased $3.6 million, or 189.3 percent, due primarily to investment of the funds held from the Company's October 1997 common stock offering. Total expenses for 1997 increased $149.4 million, or 233.7 percent, as compared to 1996. Real estate taxes increased $16.6 million, or 176.7 percent, for 1997 over 1996, of which an increase of $6.6 million, or 69.6 percent, was attributable to the Acquired Properties, an increase of $9.0 million, or 95.9 percent, due to the RM Properties, an increase of $0.6 million, or 6.6 percent, due to the Mack Properties, and an increase of $0.5 million, or 5.1 percent, attributable to the Same-Store Properties, offset by a decrease of $0.1 million, or 0.5 percent, due to the Disposition. Additionally, operating services increased $18.7 million, or 154.9 percent, and utilities increased $10.1 million, or 124.2 percent, for 1997 over 1996. The aggregate increase in operating services and utilities of $28.8 million, or 142.6 percent, consists of $15.5 million, or 76.7 percent, attributable to the Acquired Properties, an increase of $12.9 million, or 63.8 percent, due to the RM Properties, and an increase of $1.7 million, or 8.2 percent, due to the Mack Properties, offset by a decrease of $1.1 million, or 5.3 percent, attributable to the Same-Store Properties and a decrease of $0.2 million, or 0.8 percent, due to the Disposition. General and administrative expense increased $10.1 million, or 173.5 percent, of which $7.1 million, or 121.1 percent, is due primarily to an increase in payroll and related costs as a result of the Company's expansion in late 1996 and 1997 and $3.0 million, or 52.4 percent, is attributable to additional costs related to the RM Properties. Depreciation and amortization increased $22.1 million, or 150.0 percent, for 1997 over 1996, of which $10.4 million, or 70.4 percent, relates to depreciation on the Acquired Properties, an increase of $10.0 million, or 67.7 percent, attributable to the RM Properties, an increase of $1.0 million, or 6.6 percent, due to the Mack Properties, and an increase of $0.8 million, or 5.8 percent, due to the Same-Store Properties, offset by a decrease of $0.1 million, or 0.5 percent, due to the Disposition. Interest expense increased $25.3 million, or 184.0 percent, for 1997 over 1996, of which $12.2 million, or 88.6 percent, was attributable to the TIAA Mortgage, $9.1 million, or 66.5 percent, due to the Harborside Mortgages, an increase of $1.4 million, or 9.9 percent, due to assumed mortgages from the Mack Properties, and an increase of $8.3 million, or 60.1 percent, due to net additional drawings from the Company's credit facilities as a result of Company acquisitions and the $200 million Prudential Term Loan obtained in December 1997, as well as changes in LIBOR, offset by a decrease of $5.7 million, or 41.1 percent, due to the August 1997 prepayment of the Mortgage Financing. Non-recurring merger-related charges of $46.5 million were incurred in 1997, as a result of the Mack Transaction. Income before gain on sale of rental property, minority interest, and extraordinary items increased to $36.4 million in 1997 from $31.5 million in 1996. The increase of $4.9 million was due to the factors discussed above. Net income decreased $30.5 million for 1997, from $31.9 million in 1996 to $1.4 million in 1997, primarily as a result of an increase in income allocable to minority interests of $26.6 million, including the effect of the beneficial conversion feature and distributions to preferred unitholders (See Note 9 to Financial Statements). Net income was also effected by a gain on the sale of the Disposition property of $5.7 million in 1996 and the recognition in 1997 of an extraordinary loss of $3.6 million (net of minority interest), offset by an increase in income before gain on sale of rental property, minority interest and extraordinary items of $4.9 million, and the recognition in 1996 of an extraordinary loss of $0.5 million (net of minority interest). LIQUIDITY AND CAPITAL RESOURCES STATEMENT OF CASH FLOWS During the year ended December 31, 1998, the Company generated $208.8 million in cash flows from operating activities, and together with $1.5 billion in borrowings from the Company's credit facilities and funds from additional mortgage debt, $288.4 million in net proceeds from the Company's common stock offerings, $20.0 million received from a repayment of a mortgage note receivable, $5.5 million in proceeds from stock options exercised, $1.7 million in distributions received from unconsolidated joint ventures, and $0.8 million in restricted cash, used an aggregate of approximately $2.0 billion to acquire properties, land parcels and pay for other tenant improvements and building improvements totaling $692.8 million, repay outstanding borrowings on its credit facilities and other mortgage debt of $1.1 billion, pay quarterly dividends and distributions of $139.8 million, invest $58.8 million in unconsolidated joint ventures, repurchase 854,700 shares of its outstanding common stock for $25.1 million, provide $20.0 million for a mortgage note receivable, pay financing costs of $10.1 million, and redeem 82,880 common units for $3.2 million. CAPITALIZATION During 1998, the Company issued 8.0 million shares in several offerings and sales of its common stock (at a weighted average price of $37.38 per share) raising aggregate net proceeds of approximately $288.4 million. Additionally, during 1998, in conjunction with the funding of several of its property acquisitions as well as redemption of certain of the contingent units issued in the Mack Transaction, the Company issued a total of approximately 3.1 million Common Units and 19,694 Preferred Units (convertible into 568,369 Common Units), with a total value of approximately $126.3 million at time of issuance. In August 1998, the Board of Directors of the Company authorized a share repurchase program under which the Company was permitted to purchase up to $100.0 million of the Company's outstanding common stock. Purchases could be made from time to time in open market transactions at prevailing prices or through privately negotiated transactions. Subsequently, the Company purchased, for constructive retirement, 854,700 shares of its outstanding common stock for an aggregate cost of approximately $25.1 million. Concurrent with these purchases, the Company sold to the Operating Partnership 854,700 Common Units for approximately $25.1 million. At December 31, 1998, the Company's total mortgages and loans payable of $1.4 billion (weighted average interest rate of 6.93 percent) was comprised of $751.8 million of credit line borrowings and other variable rate mortgage debt (average rate of 6.61 percent), 48 fixed rate mortgage debt of $663.0 million (average rate of 7.32 percent), and a Contingent Obligation of $6.2 million. The Company's total mortgage debt of approximately $743.2 million was comprised of $663.0 million in fixed rate debt and $80.2 million of variable rate mortgage debt with a weighted average annual interest rate of 65 basis points over LIBOR. At year-end, the Company had outstanding borrowings of $671.6 million under its revolving credit facilities (with aggregate borrowing capacity of $1.1 billion). The outstanding borrowings were comprised of $671.6 million from its unsecured $1.0 billion facility ("1998 Unsecured Facility"), with no outstanding borrowings on its $100.0 million credit facility with Prudential Securities Corp. ("Prudential Facility"). The 1998 Unsecured Facility, with 28 lender banks, carries an interest rate of 90 basis points over LIBOR and matures in April 2001. The Prudential Facility carries an interest rate of 110 basis points over LIBOR and matures in December 1999. The terms of the 1998 Unsecured Facility include certain restrictions and covenants which limit, among other things, the payment of dividends (as discussed below), the incurrence of additional indebtedness, the incurrence of liens and the disposition of assets, and which require compliance with financial ratios relating to the maximum leverage ratio, the maximum amount of secured indebtedness, the minimum amount of tangible net worth, the minimum amount of debt service coverage, the minimum amount of fixed charge coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property debt service coverage and certain investment limitations. The dividend restriction referred to above provides that, except to enable the Company to continue to qualify as a REIT under the Code, the Company will not during any four consecutive fiscal quarters make distributions with respect to common stock or other equity interests in an aggregate amount in excess of 90 percent of funds from operations for such period, subject to certain other adjustments. The 1998 Unsecured Facility also requires a 17.5 basis point fee on the unused balance payable quarterly in arrears. The Company has three investment grade credit ratings. Duff & Phelps Credit Rating Co. ("DCR") and Standard & Poors Rating Services ("S&P") have each assigned their BBB rating to prospective senior unsecured debt offerings of the Operating Partnership. DCR and S&P have also assigned their BBB- rating to prospective preferred stock offerings of the Company. Moody's Investors Service has assigned its Baa3 rating to prospective senior unsecured debt of the Operating Partnership and its Ba1 rating to prospective preferred stock offerings of the Company. In May 1995, the Company entered into an interest rate swap agreement with a commercial bank. The swap agreement fixes the Company's one-month LIBOR base for 6.285 percent per annum on a notional amount of $24.0 million through August 1999. In October 1998, the Company entered into a forward treasury rate lock agreement with a commercial bank. The agreement locked an interest rate of 4.089 percent per annum for the three-year U.S. Treasury Note effective November 4, 1999, on a notional amount of $50.0 million. The agreement will be used to fix the Index Rate on $50.0 million of the Harborside Mortgages, for which the Company's interest rate re-sets for three years beginning November 4, 1999 to the interpolated three-year U.S. Treasury Note plus 110 basis points (see Note 8 to the Financial Statements--"Harborside Mortgages"). As of December 31, 1998, the Company had 167 unencumbered properties, totaling 16.5 million square feet, representing 61.4 percent of the Company's total portfolio on a square footage basis. An additional 55 properties, aggregating 5.4 million square feet (20.3 percent of Company's portfolio) are currently encumbered by $335.3 million of mortgage debt, which may be converted to unsecured debt at the Company's option. The Company is currently reviewing its options to convert any of the mortgage debt to unsecured debt. The Company has an effective shelf registration statement with the SEC for an aggregate amount of $2.0 billion in equity securities of the Company. The Company and Operating Partnership also have an effective shelf registration statement with the SECfor an aggregate of $2.0 billion in debt securities, preferred stock and preferred stock represented by depositary shares. The Company presently has not issued any securities under these registration statements. The Company also has an effective registration statement with the SEC for a dividend reinvestment and stock purchase plan which commenced on March 1, 1999. Historically, rental revenue has been the principal source of funds to pay operating expenses, debt service and capital expenditures, excluding non-recurring capital expenditures. Management believes that the Company will have access to the capital resources necessary to expand and develop its business. To the extent that the Company's cash flow from operating activities is insufficient to finance its non-recurring capital expenditures such as property acquisition costs and other capital expenditures, the Company expects to finance such activities through borrowings under its credit facilities and other debt and equity financing. The Company expects to meet its short-term liquidity requirements generally through its working capital and net cash provided by operating activities, along with the 1998 Unsecured Facility and the Prudential Facility. The Company is frequently examining potential property acquisitions and, at any given time, one or more of such acquisitions may be under consideration. Accordingly, the ability to fund property acquisitions is a major part of the Company's financing requirements. The Company expects to meet its financing requirements through funds generated from operating activities, long-term or short term borrowings (including draws on the Company's credit facilities) and the issuance of debt securities or additional equity securities. In addition, the Company anticipates utilizing the 1998 Unsecured Facility and the Prudential Facility primarily to fund property acquisitions. The Company's total debt at December 31, 1998 had a weighted average term to maturity of approximately 4.2 years. The Company expects to increase the average term to maturity on its debt in 1999. The Company has commitments to refinance $35.9 million of its mortgages which mature in the first quarter of 1999 with $45.5 million of new mortgage debt. The Company does not intend to reserve funds to retire its TIAA Mortgage, Harborside Mortgages, $150.0 Million Prudential Mortgage Loan, its other property mortgages or other long-term mortgages and loans payable upon maturity. Instead, the Company will seek to refinance such debt at maturity or retire such debt through the issuance of additional debt or equity instruments. The Company is considering refinancing a portion of its outstanding borrowings from the 1998 Unsecured Facility. The Company is reviewing various refinancing options, including the issuance of unsecured public debt, preferred stock, and/or obtaining additional mortgage debt, some or all of which may be completed during 1999. The Company anticipates that its available cash and cash equivalents and cash flows from operating 49 MD&A Mack-Cali Realty Corporation and Subsidiaries activities, together with cash available from borrowings and other sources, will be adequate to meet the Company's capital and liquidity needs both in the short and long-term. However, if these sources of funds are insufficient or unavailable, the Company's ability to make the expected distributions discussed below may be adversely affected. To maintain its qualification as a REIT, the Company must make annual distributions to its stockholders of at least 95 percent of its REIT taxable income, determined without regard to the dividends paid deduction and by excluding net capital gains. Moreover, the Company intends to continue to make regular quarterly distributions to its stockholders which, based upon current policy, in the aggregate would equal approximately $128.2 million on an annualized basis. However, any such distribution, whether for federal income tax purposes or otherwise, would only be paid out of available cash after meeting both operating requirements and scheduled debt service on mortgages and loans payable. FUNDS FROM OPERATIONS The Company considers funds from operations ("FFO"), after adjustment for straight-lining of rents, one measure of REIT performance. Funds from operations is defined as net income (loss) before minority interest of unitholders, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from debt restructuring, other extraordinary and significant non-recurring items, and sales of property, plus real estate-related depreciation and amortization. Funds from operations should not be considered as an alternative to net income as an indication of the Company's performance or to cash flows as a measure of liquidity. Funds from operations presented herein is not necessarily comparable to funds from operations presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, the Company's funds from operations is comparable to the funds from operations of real estate companies that use the current definition of the National Association of Real Estate Investment Trusts ("NAREIT"), after the adjustment for straight-lining of rents. NAREIT's definition of funds from operations indicates that the calculation should be made before any extraordinary item (determined in accordance with GAAP), and before any deduction of significant non-recurring events that materially distort the comparative measurement of the Company's performance. Funds from operations for the years ended December 31, 1998, 1997 and 1996 as calculated in accordance with NAREIT's definition as published in March 1995, are summarized in the following table:
IN THOUSANDS YEAR ENDED DECEMBER 31, 1998 1997 1996 - ---------------------- ---- ---- ---- Income before non-recurring merger- related charges, gain on sale of rental property, distributions to preferred unitholders, minority interest and extraordinary item $ 151,464 $ 82,886 $ 31,521 Add: Real estate-related depreciation and amortization(1) 79,169 36,599 14,677 Deduct: Rental income adjustment for straight-lining of rents(1) (13,684) (7,733) (978) Funds from operations, after adjustment for straight-lining of rents, before distributions to preferred unitholders $ 216,949 $111,752 $ 45,220 Deduct: Distributions to preferred unitholders (16,313) (888) -- Funds from operations, after adjustment for straight-lining of rents, after distributions to preferred unitholders $ 200,636 $ 110,864 $ 45,220 Cash flows provided by operating activities $ 208,761 $ 98,142 $ 46,823 Cash flows used in investing activities $(749,067) $(939,501) $(307,752) Cash flows provided by financing activities $ 543,411 $ 639,256 $ 464,769 Basic weighted average shares/units outstanding(2) 63,438 43,356 21,172 Diluted weighted average shares/units outstanding(2) 70,867 44,351 21,436
(1) Includes FFO adjustments in 1998 related to the Company's investments in unconsolidated joint ventures. (2) See calculations for the amounts presented in the reconciliation below. 50 The following schedule reconciles the Company's basic weighted average shares to the basic and diluted weighted average shares/units presented above:
Year Ended December 31, 1998 1997 1996 - ----------------------- ---- ---- ---- Basic weighted average shares: 55,840 39,266 18,461 Add: Weighted average common units 7,598 4,090 2,711 Basic weighted average shares/units: 63,438 43,356 21,172 Add: Weighted average preferred units 6,974 383 -- (after conversion to common units) Stock options 411 579 264 Stock warrants 44 33 -- Diluted weighted average share/units: 70,867 44,351 21,436
INFLATION The Company's leases with the majority of its tenants provide for recoveries and escalation charges based upon the tenant's proportionate share of, and/or increases in, real estate taxes and certain operating costs, which reduce the Company's exposure to increases in operating costs resulting from inflation. DISRUPTION IN OPERATIONS DUE TO YEAR 2000 PROBLEMS GENERAL The Year 2000 issue is the result of computer programs and embedded chips using a two-digit format, as opposed to four digits, to indicate the year. Such computer systems may be unable to interpret dates beyond the year 1999, which could cause a system failure or other computer errors, leading to disruptions in operations. We have developed a three-phase Year 2000 project (the "Project") to determine our Year 2000 systems compliance. Phase I is to identify those systems with which we have exposure to Year 2000 issues. Phase II is the development and implementation of action plans to be Year 2000 compliant in all areas by early 1999. Phase III, to be completed by mid-1999, is the final testing of each major area of exposure to assure compliance. We have identified three major areas critical for successful Year 2000 compliance: (i) our central accounting and operating computer system at our Cranford, New Jersey headquarters and local networks and related systems in our regional offices, (ii) inquiries of our tenants and key vendors as to their Year 2000 readiness and (iii) assessment of our individual buildings as to the Year 2000 readiness of their operating systems. We believe that progress in all such areas is proceeding on schedule and that we will experience no material adverse effect as a result of the Year 2000 issue. There can, however, be no assurance that this will be the case. Set forth below is a more detailed analysis of the Project and its anticipated impact on us. CENTRAL ACCOUNTING AND OPERATING SYSTEMS We have completed a review of key computer hardware and software and other equipment, and have modified, upgraded or replaced all identified hardware and equipment in our corporate and regional offices that we believe may be affected by problems associated with Year 2000. Such hardware includes desktop and laptop computers, servers, printers, telecopier machines and telephones. We, as part of our routine modernization efforts, have completed necessary upgrades to identified secondary software systems, such as word processing, spreadsheet applications, telephone voicemail systems and computer calendar programs. The software supplier of our accounting system is currently completing its Year 2000 upgrade and is scheduled to supply us with Year 2000 compliant software by March 31, 1999 at no cost to us. We are confident that such software will be delivered as indicated. We anticipate internal testing of such software to be completed by June 1999. TENANT COMPLIANCE We believe that the completion of the Project as scheduled will minimize Year 2000 related issues in our internal operations. However, we may still be adversely impacted by Year 2000 related issues as a result of problems outside our control, such as the inability of tenants to pay rent when due. In order to gauge such risk, we sent questionnaires to each of our then existing tenants in August 1998 to assess their Year 2000 compliance status. The responses to these questionnaires continue to be received, reviewed and evaluated. Based on the responses received, we do not anticipate any material adverse impact on the orderly payment of monthly rent. Therefore, while there can be no assurance that Year 2000 problems of tenants will not have a material adverse effect on our operating results or financial condition, the information available to us indicates such an occurrence is not likely. PROPERTY COMPLIANCE Our property managers have completed Phase I of the Project, a building by building survey of all of our properties to determine whether building support systems such as heat, power, light, security, garages and elevators will be affected by the advent of the Year 2000. Most of such systems either are already Year 2000 compliant or contain no computerized parts. Our property managers are currently completing Phase II of the Project, the development and implementation of action plans to modify, upgrade or replace non-compliant building systems. Once installed, these building systems will be tested for compliance pursuant to Phase III of the Project. We have communicated with vendors of building systems or other services to our buildings regarding their Year 2000 compliance. In many instances, we will rely on the written representations from these vendors regarding the Year 2000 compliance of their product or service. We are also relying on assurances requested from utility providers of their Year 2000 compliance and their continued ability to provide uninterrupted service to our buildings. We anticipate incurring a total of approximately $1.0 million in costs to modify, upgrade and/or replace identified building support systems for Year 2000 compliance. WORST CASE EXPOSURE We are aware that it is generally believed that the Year 2000 problem, if uncorrected, may result in a worldwide economic crisis. We are unable to determine whether such predictions are true or false. However, if such predictions prove true, we assume that all companies (including ours) will experience the effects in one way or another. The most reasonably likely worst case scenario we anticipate in connection with the Year 2000 issue relates to the failure of the upgrade to our accounting system to effectively become Year 2000 compliant. We believe that such an event is 51 MD&A Mack-Cali Realty Corporation and Subsidiaries unlikely, but an occurrence of the foregoing might have a material adverse impact on our operations. We cannot currently assess the financial impact of such a worst case scenario. CONTINGENCY PLANS We are developing contingency plans to address the Year 2000 non-compliance of (i) critical building support systems and (ii) our accounting system. CRITICAL BUILDING SYSTEMS. We believe that the failure of any of the following critical building support systems due to Year 2000 issues could have a material adverse impact on the performance of an individual building: security systems, elevator systems or fire/life safety systems. We believe that in the event of a Year 2000 related failure in a building security system, we would be able to maintain adequate security at the building through the use of security guards. We believe that in the event of a Year 2000 related failure in a building elevator system, adequate access would exist at most of our buildings through existing stairways. We believe that in the event of a Year 2000 related failure in a building fire/life safety system, our property management staff would be able to manually operate such system. ACCOUNTING SOFTWARE. We believe that failure of the Year 2000 compliance upgrade to our accounting software might have a material adverse impact on our operations. However, we believe that financial data within any given fiscal year will remain intact and retrievable. We believe that alternative accounting software and/or manual bookkeeping would minimize the impact of a Year 2000 related failure of our current accounting software. RISKS The failure to correct a material Year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such failures could materially and adversely affect our results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of third-party vendors and tenants, we are unable to determine at this time whether the consequences of Year 2000 failures will have a material impact on our results of operations, liquidity or financial condition. The Project is expected to significantly reduce our level of uncertainty about the Year 2000 problem. We believe that, with the implementation and completion of the Project as scheduled, the possibility of significant interruptions of normal operations should be reduced. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS The Company considers portions of this information to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of The Securities Exchange Act of 1934. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. 52 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Approximately $669.1 million of the Company's long-term debt bears interest at fixed rates, and therefore the fair value of these instruments is affected by changes in the market interest rates. The following table presents principal cash flows (in thousands) based upon maturity dates of the debt obligations and the related weighted-average interest rates by expected maturity dates for the fixed rate debt. The interest rate on the variable rate debt as of December 31, 1998 ranged from LIBOR plus 0.65% to LIBOR plus 0.90%. December 31, 1998
LONG-TERM DEBT, INCLUDING FAIR CURRENT PORTION 1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE - -------------------- --------- --------- ---------- --------- ---------- ---------- ---------- ---------- Fixed Rate.......... $ 47,450 $ 9,069 $ 8,003 $ 11,783 $ 211,286 $ 381,536 $ 669,127 $ 679,156 Avg. Interest Rate.............. 7.65% 7.30% 7.28% 7.10% 7.31% 7.23% Variable Rate....... $ 8,000 $ 671,600 $ 72,204 $ 751,804 $751,804
53 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is submitted as a separate section of this Form 10-K. See Item 14. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 is incorporated by reference from the Company's definitive proxy statement for its annual meeting of shareholders to be held on May 19, 1999. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 is incorporated by reference from the Company's definitive proxy statement for its annual meeting of shareholders to be held on May 19, 1999. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 is incorporated by reference from the Company's definitive proxy statement for its annual meeting of shareholders to be held on May 19, 1999. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 is incorporated by reference from the Company's definitive proxy statement for its annual meeting of shareholders to be held on May 19, 1999. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (A) 1. Financial Statements and Report of PricewaterhouseCoopers LLP, Independent Accountants Consolidated Balance Sheets as of December 31, 1998 and 1997 Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996 Consolidated Statement of Changes in Stockholders' Equity for the Years Ended December 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 Notes to Consolidated Financial Statements (A) 2. FINANCIAL STATEMENT SCHEDULE Schedule III--Real Estate Investments and Accumulated Depreciation as of December 31, 1998 All other schedules are omitted because they are not required or the required information is shown in the financial statements or notes thereto. 54 (A) 3. EXHIBITS The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed:
EXHIBIT NUMBER EXHIBIT TITLE - --------- -------------------------------------------------------------------------------------------------------- 10.1 Agreement of Limited Partnership of HPMC Development Partners, L.P., dated as of April 23, 1998, by and among HCG Development, L.L.C., Summit Partners I, L.L.C. and Mack-Cali California Development Associates L.P. 10.2 Supplement to Agreement of Limited Partnership of HPMC Development Partners, L.P., dated as of April 23, 1998, by and among HCG Development, L.L.C., Summit Partners I, L.L.C. and Mack-Cali California Development Associates L.P. 10.3 First Amendment to Agreement of Limited Partnership of HPMC Development Partners, L.P., dated as of October 8, 1998, by and among HCG Development, L.L.C., Summit Partners I, L.L.C. and Mack-Cali California Development Associates L.P. 10.4 Agreement of Limited Partnership of HPMC Lava Ridge Partners, L.P., dated as of July 21, 1998, by and among HCG Development L.L.C., Summit Partners I, L.L.C. and Mack-Cali California Development Associates L.P. 10.5 Amendment No. 1 to Revolving Credit Agreement dated July 20, 1998, by and among Mack-Cali Realty, L.P. and The Chase Manhattan Bank, Fleet National Bank and Other Lenders Which May Become Parties Thereto 10.6 Amendment No. 2 to Revolving Credit Agreement, dated as of December 30, 1998, among Mack-Cali Realty, L.P. and The Chase Manhattan Bank, Fleet National Bank and Other Lenders Which May Become Parties Thereto 23 Consent of PricewaterhouseCoopers LLP 27 Financial Data Schedule
(B) REPORTS ON FORM 8-K The Company filed a Current Report on Form 8-K, dated December 16, 1998, during the quarter ended December 31, 1998. Items 5 and 7 were reported. 55 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Mack-Cali Realty Corporation In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 54 present fairly, in all material respects, the financial position of Mack-Cali Realty Corporation and its subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 14(a)(2) on page 54 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP New York, New York February 23, 1999 56 CONSOLIDATED BALANCE SHEETS Mack-Cali Realty Corporation and Subsidiaries Dollars in thousands, except per share amounts December 31,
1998 1997 ASSETS Rental property Land and leasehold interests $ 510,534 $ 374,242 Buildings and improvements 2,887,115 2,206,462 Tenant improvements 64,464 44,596 Furniture, fixtures and equipment 5,686 4,316 3,467,799 2,629,616 Less--accumulated depreciation and amortization (177,934) (103,133) Total rental property 3,289,865 2,526,483 Cash and cash equivalents 5,809 2,704 Investments in unconsolidated joint ventures 66,508 -- Unbilled rents receivable 41,038 27,438 Deferred charges and other assets, net 39,020 18,989 Restricted cash 6,026 6,844 Accounts receivable, net of allowance for doubtful accounts of $670 and $327 3,928 3,736 Mortgage note receivable -- 7,250 Total assets $3,452,194 $2,593,444 LIABILITIES AND STOCKHOLDERS' EQUITY Mortgages and loans payable $1,420,931 $ 972,650 Dividends and distributions payable 40,564 28,089 Accounts payable and accrued expenses 33,253 31,136 Rents received in advance and security deposits 29,980 21,395 Accrued interest payable 2,246 3,489 Total liabilities 1,526,974 1,056,759 Minority interest of unitholders in Operating Partnership 501,313 379,245 Commitments and contingencies STOCKHOLDERS' EQUITY: Preferred stock, 5,000,000 shares authorized, none issued -- -- Common stock, $.01 par value, 190,000,000 shares authorized, 57,266,137 and 49,856,289 shares outstanding 573 499 Additional paid-in capital 1,514,648 1,244,883 Dividends in excess of net earnings (91,314) (87,942) Total stockholders' equity 1,423,907 1,157,440 Total liabilities and stockholders' equity $3,452,194 $2,593,444
The accompanying notes are an integral part of these consolidated financial statements. 57 CONSOLIDATED STATEMENTS OF OPERATIONS Mack-Cali Realty Corporation and Subsidiaries In thousands, except per share amounts Year Ended December 31,
1998 1997 1996 REVENUES Base rents $ 427,528 $ 206,215 $ 76,922 Escalations and recoveries from tenants 51,981 31,130 14,429 Parking and other 10,712 6,910 2,204 Interest income 2,423 5,546 1,917 Equity in earnings of unconsolidated joint ventures 1,055 -- -- Total revenues 493,699 249,801 95,472 EXPENSES Real estate taxes 48,297 25,992 9,395 Utilities 38,440 18,246 8,138 Operating services 62,967 30,912 12,129 General and administrative 25,572 15,862 5,800 Depreciation and amortization 78,916 36,825 14,731 Interest expense 88,043 39,078 13,758 Non-recurring merger-related charges -- 46,519 -- Total expenses 342,235 213,434 63,951 Income before gain on sale of rental property, minority interest and extraordinary item 151,464 36,367 31,521 Gain on sale of rental property -- -- 5,658 Income before minority interest and extraordinary item 151,464 36,367 37,179 Minority interest 32,513 31,379 4,760 Income before extraordinary item 118,951 4,988 32,419 Extraordinary item--loss on early retirement of debt (net of minority interest's share of $297, $402 and $86) (2,373) (3,583) (475) Net income $ 116,578 $ 1,405 $ 31,944 BASIC EARNINGS PER SHARE: Income before extraordinary item $ 2.13 $ 0.13 $ 1.76 Extraordinary item--loss on early retirement of debt (0.04) (0.09) (0.03) Net income $ 2.09 $ 0.04 $ 1.73 DILUTED EARNINGS PER SHARE: Income before extraordinary item $ 2.11 $ 0.12 $ 1.73 EXTRAORDINARY item--loss on early retirement of debt (0.04) (0.08) (0.02) Net income $ 2.07 $ 0.04 $ 1.71 Dividends declared per common share $ 2.10 $ 1.90 $ 1.75 Basic weighted average shares outstanding 55,840 39,266 18,461 Diluted weighted average shares outstanding 63,893 44,156 21,436
The accompanying notes are an integral part of these consolidated financial statements. 58 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY Mack-Cali Realty Corporation and Subsidiaries
Additional Dividends in Unamortized Total Common Stock Paid-In Excess of Stock Stockholders' In thousands Shares Par Value Capital Net Earnings Compensation Equity Balance at January 1, 1996 15,105 $ 151 $ 192,971 $ (7,314) $ -- $ 185,808 Net income -- -- -- 31,944 -- 31,944 Dividends -- -- -- (37,666) -- (37,666) Net proceeds from common stock offerings 20,987 210 518,009 -- -- 518,219 Redemption of common units for shares of common stock 101 1 1,072 -- -- 1,073 Proceeds from stock options exercised 126 1 2,000 -- -- 2,001 Balance at December 31, 1996 36,319 363 714,052 (13,036) -- 701,379 Net income -- -- -- 1,405 -- 1,405 Dividends -- -- -- (76,311) -- (76,311) Net proceeds from common stock offerings 13,000 130 488,986 -- -- 489,116 Issuance of Stock Award Rights and Stock Purchase Rights 351 4 12,522 -- (12,526) -- Amortization of stock compensation -- -- -- -- 12,526 12,526 Beneficial conversion feature -- -- 26,801 -- -- 26,801 Redemption of common units for shares of common stock 1 -- 17 -- -- 17 Proceeds from stock options exercised 337 4 7,183 -- -- 7,187 Repurchase of common stock (152) (2) (4,678) -- -- (4,680) Balance at December 31, 1997 49,856 499 1,244,883 (87,942) -- 1,157,440 Net income -- -- -- 116,578 -- 116,578 Dividends -- -- -- (119,950) -- (119,950) Net proceeds from common stock offerings 7,968 80 288,313 -- -- 288,393 Redemption of common units for shares of common stock 29 -- 1,029 -- -- 1,029 Proceeds from stock options exercised 268 3 5,472 -- -- 5,475 Repurchase of common stock (855) (9) (25,049) -- -- (25,058) Balance at December 31, 1998 57,266 $573 $1,514,648 $ (91,314) $ -- $1,423,907
The accompanying notes are an integral part of these consolidated financial statements. 59 CONSOLIDATED STATEMENTS OF CASH FLOWS Mack-Cali Realty Corporation and Subsidiaries
In thousands Year Ended December 31, 1998 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 116,578 $ 1,405 $ 31,944 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 78,916 36,825 14,731 Amortization of stock compensation -- 12,526 -- Amortization of deferred financing costs 1,580 983 1,081 Equity in earnings of unconsolidated joint ventures (1,055) -- -- Gain on sale of rental property -- -- (5,658) Minority interest 32,513 31,379 4,760 Extraordinary item--loss on early retirement of debt 2,373 3,583 475 Changes in operating assets and liabilities: Increase in unbilled rents receivable (13,600) (7,733) (979) Increase in deferred charges and other assets, net (17,811) (9,507) (4,335) Increase in accounts receivable, net (192) (1,663) (629) Increase in accounts payable and accrued expenses 2,117 17,569 1,823 Increase in rents received in advance and security deposits 8,585 10,614 2,911 (Decrease) increase in accrued interest payable (1,243) 2,161 699 Net cash provided by operating activities $ 208,761 $ 98,142 $ 46,823 CASH FLOWS FROM INVESTING ACTIVITIES Additions to rental property $ (692,766) $(928,974) $(318,145) Issuance of mortgage note receivable (20,000) (11,600) -- Repayment of mortgage note receivable 20,000 -- -- Investments in unconsolidated joint ventures (58,844) -- -- Distributions from unconsolidated joint ventures 1,725 -- -- Proceeds from sale of rental property -- -- 10,324 Decrease in restricted cash 818 1,073 69 Net cash used in investing activities $ (749,067) $(939,501) $(307,752) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from mortgages and loans payable $1,525,758 $669,180 $272,113 Repayments of mortgages and loans payable (1,098,065) (442,185) (294,819) Debt prepayment premiums and other costs -- (1,812) (312) Repurchase of common stock (25,058) (4,680) -- Redemption of common units (3,163) -- -- Payment of financing costs (10,110) (3,095) -- Net proceeds from common stock offerings 288,393 489,116 518,219 Proceeds from stock options exercised 5,475 7,187 2,001 Payment of dividends and distributions (139,819) (74,455) (32,433) Net cash provided by financing activities $ 543,411 $639,256 $464,769 Net increase (decrease) in cash and cash equivalents $ 3,105 $(202,103) $203,840 Cash and cash equivalents, beginning of period 2,704 204,807 967 Cash and cash equivalents, end of period $ 5,809 $ 2,704 $204,807
The accompanying notes are an integral part of these consolidated financial statements. 60 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Mack-Cali Realty Corporation and Subsidiaries (dollars in thousands, except per share or unit amounts) 1) ORGANIZATION AND BASIS OF PRESENTATION ORGANIZATION Mack-Cali Realty Corporation, a Maryland corporation, and subsidiaries (the "Company"), is a fully-integrated, self-administered, self-managed real estate investment trust ("REIT") providing leasing, management, acquisition, development, construction and tenant-related services for its properties. As of December 31, 1998, the Company owned or had interests in 249 properties plus developable land (collectively, the "Properties"). The Properties aggregate approximately 27.8 million square feet, and are comprised of 157 office and 80 office/flex buildings totaling approximately 27.4 million square feet (which included four office properties and one office/flex property, aggregating 1.0 million square feet, owned by unconsolidated joint ventures in which the Company has investment interests), six industrial/warehouse buildings totaling approximately 387,400 square feet, two multi-family residential complexes consisting of 453 units, two stand-alone retail properties and two land leases. The Properties are located in 12 states, primarily in the Northeast, plus the District of Columbia. BASIS OF PRESENTATION The accompanying consolidated financial statements include all accounts of the Company and its majority-owned subsidiaries, which consist principally of Mack-Cali Realty, L.P. (the "Operating Partnership"). See Investments in Unconsolidated Joint Ventures in Note 2 for the Company's treatment of unconsolidated joint venture interests. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2) SIGNIFICANT ACCOUNTING POLICIES RENTAL PROPERTY Rental properties are stated at cost less accumulated depreciation and amortization. Costs directly related to the acquisition and development of rental properties are capitalized. Capitalized development costs include interest, property taxes, insurance and other project costs incurred during the period of construction. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts. Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows: Leasehold interests Remaining lease term Buildings and improvements 5 to 40 years Tenant improvements The shorter of the term of the related lease or useful life Furniture, fixtures and equipment 5 to 10 years
On a periodic basis, management assesses whether there are any indicators that the value of the real estate properties may be impaired. A property's value is impaired only if management's estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property are less than the carrying value of the property. To the extent an impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property. Management does not believe that the value of any of its rental properties is impaired. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting as the Company exercises significant influence, but does not control these entities. These investments are recorded initially at cost, as Investments in Unconsolidated Joint Ventures, and subsequently adjusted for equity in earnings (loss) and cash contributions and distributions. See Note 4. CASH AND CASH EQUIVALENTS All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. DEFERRED FINANCING COSTS Costs incurred in obtaining financing are capitalized and amortized on a straight-line basis, which approximates the effective interest method, over the term of the related indebtedness. Amortization of such costs is included in interest expense and was $1,580, $983 and $1,081 for the years ended December 31, 1998, 1997 and 1996, respectively. DEFERRED LEASING COSTS Costs incurred in connection with leases are capitalized and amortized on a straight-line basis over the terms of the related leases and included in depreciation and amortization. Unamortized deferred leasing costs are charged to amortization expense upon early termination of the lease. Certain employees of the Operating Partnership provide leasing services to the Properties and receive compensation based on space leased. Such compensation, which is capitalized and amortized, approximated $3,509, $1,859 and $490 for the years ended December 31, 1998, 1997 and 1996, respectively. 61 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Mack-Cali Realty Corporation and Subsidiaries (dollars in thousands, except per share or unit amounts) REVENUE RECOGNITION Base rental revenue is recognized on a straight-line basis over the terms of the respective leases. Unbilled rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with the lease agreements. Parking revenue includes income from parking spaces leased to tenants. Rental income on residential property under operating leases having terms generally of one year or less is recognized when earned. Reimbursements are received from tenants for certain costs as provided in the lease agreements. These costs generally include real estate taxes, utilities, insurance, common area maintenance and other recoverable costs (see Note 13). INCOME AND OTHER TAXES The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes at least 95 percent of its REIT taxable income to its shareholders and satisfies certain other requirements. REITs are subject to a number of organizational and operational requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates. The Company is subject to certain state and local taxes. INTEREST RATE CONTRACTS Interest rate contracts are utilized by the Company to reduce interest rate risks. The Company does not hold or issue derivative financial instruments for trading purposes. The differentials to be received or paid under contracts designated as hedges are recognized in income over the life of the contracts as adjustments to interest expense. In certain situations, the Company uses forward treasury lock agreements to mitigate the potential effects of changes in interest rates for prospective transactions. Gains and losses are deferred and amortized as adjustments to interest expense over the remaining life of the associated debt to the extent that such debt remains outstanding. EARNINGS PER SHARE In accordance with the Statement of Financial Accounting Standards No. 128 ("FASB No. 128"), the Company presents both basic and diluted earnings per share ("EPS"). Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS amount. DIVIDENDS AND DISTRIBUTIONS PAYABLE The dividends and distributions payable at December 31, 1998 represents dividends payable to shareholders of record on January 6, 1999 (57,266,737 shares), distributions payable to minority interest common unitholders (9,086,585 common units) on that same date and preferred distributions to preferred unitholders (250,256 preferred units) for the fourth quarter 1998. The fourth quarter 1998 dividends and common unit distributions of $0.55 per share and per common unit (pro-rated for units issued during the quarter), as well as the fourth quarter preferred unit distribution of $16.875 per preferred unit, were approved by the Board of Directors on December 15, 1998 and paid on January 26, 1999. The dividends and distributions payable at December 31, 1997 represents dividends payable to shareholders of record on January 5, 1998 (49,856,289 shares), distributions payable to minority interest common unitholders (6,097,477 common units) on that same date and preferred distributions to preferred unitholders (230,562 preferred units) for the fourth quarter 1997. The fourth quarter 1997 dividends and common unit distributions of $0.50 per share and per common unit (pro-rated for units issued during the quarter), as well as the fourth quarter preferred unit distribution of $16.875 per preferred unit (pro-rated for units issued during the quarter), were approved by the Board of Directors on December 17, 1997 and paid on January 16, 1998. EXTRAORDINARY ITEM Extraordinary item represents the effect resulting from the early settlement of certain debt obligations, including related deferred financing costs, prepayment penalties, yield maintenance payments and other related items. UNDERWRITING COMMISSIONS AND COSTS Underwriting commissions and costs incurred in connection with the Company's stock offerings are reflected as a reduction of additional paid-in-capital. STOCK OPTIONS The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations ("APB No. 25"). Under APB No. 25, compensation cost is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the exercise price of the option granted. Compensation cost for stock options, if any, is recognized ratably over the vesting period. The Company's policy is to grant options with an exercise price equal to the quoted closing market price of the Company's stock on the business day preceding the grant date. Accordingly, no compensation cost has been recognized for the Company's stock option plans. The Company provides additional pro forma disclosures as required under Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("FASB No. 123"). See Note 14. NON-RECURRING CHARGES The Company considers non-recurring charges as costs incurred specific to significant non-recurring events that materially distort the comparative measurement of the Company's performance. 62 3) ACQUISITIONS/TRANSACTIONS 1998 TRANSACTIONS OPERATING PROPERTY ACQUISITIONS The Company acquired the following operating properties during the year ended December 31, 1998:
ACQUISITION # OF RENTABLE INVESTMENT BY DATE PROPERTY/PORTFOLIO NAME LOCATION BLDGS. SQUARE FEET COMPANY(A) OFFICE 2/05/98 500 West Putnam Avenue(b) Greenwich, Fairfield County, CT 1 121,250 $ 20,125 2/25/98 10 Mountainview Road Upper Saddle River, Bergen County, NJ 1 192,000 24,754 3/12/98 1250 Capital of Texas Highway South Austin, Travis County, TX 1 270,703 37,266 3/27/98 Prudential Business Campus(c) Parsippany, Morris County, NJ 5 703,451 130,437 3/27/98 Pacifica Portfolio--Phase I(d)(e) Denver & Colorado Springs, CO 10 620,017 74,966 3/30/98 Morris County Financial Center Parsippany, Morris County, NJ 2 301,940 52,763 5/13/98 3600 South Yosemite Denver, Denver County, CO 1 133,743 13,555 5/22/98 500 College Road East(f) Princeton, Mercer County, NJ 1 158,235 21,334 6/01/98 1709 New York Ave./1400 L Street N.W. Washington, D.C. 2 325,000 90,385 6/03/98 400 South Colorado Boulevard Denver, Denver County, CO 1 125,415 12,147 6/08/98 Pacifica Portfolio--Phase II(d)(e)(g) Denver & Colorado Springs, CO 6 514,427 85,910 7/16/98 4200 Parliament Drive(h) Lanham, Prince George's County, MD 1 122,000 15,807 9/10/98 40 Richards Avenue(d) Norwalk, Fairfield County, CT 1 145,487 19,587 9/15/98 Seven Skyline Drive(i) Hawthorne, Westchester County, NY 1 109,000 13,379 TOTAL OFFICE PROPERTY ACQUISITIONS: 34 3,842,668 $612,415 OFFICE/FLEX 1/30/98 McGarvey Portfolio(j) Moorestown, Burlington County, NJ 17 748,660 $ 47,526 7/14/98 1510 Lancer Road(k) Moorestown, Burlington County, NJ 1 88,000 3,700 TOTAL OFFICE/FLEX PROPERTY ACQUISITIONS: 18 836,660 $ 51,226 TOTAL OPERATING PROPERTY ACQUISITIONS: 52 4,679,328 $663,641
PROPERTIES PLACED IN SERVICE The Company placed in service the following properties through the completion of development or redevelopment during the year ended December 31, 1998:
DATE PLACED # OF RENTABLE INVESTMENT BY IN SERVICE PROPERTY NAME LOCATION BLDGS. SQUARE FEET COMPANY(A) OFFICE 1/15/98 224 Strawbridge Drive Moorestown, Burlington County, NJ 1 74,000 $ 7,796 8/01/98 228 Strawbridge Drive Moorestown, Burlington County, NJ 1 74,000 7,986 TOTAL OFFICE PROPERTIES PLACED IN SERVICE: 2 148,000 $15,782 OFFICE/FLEX 6/08/98 Two Center Court Totowa, Passaic County, NJ 1 30,600 $ 2,231 10/23/98 650 West Avenue Stamford, Fairfield County, CT 1 40,000 4,952 TOTAL OFFICE/FLEX PROPERTIES PLACED IN SERVICE: 2 70,600 $ 7,183 TOTAL PROPERTIES PLACED IN SERVICE: 4 218,600 $22,965
(a) Unless otherwise noted, transactions were funded by the Company with funds primarily made available through draws on the Company's credit facilities. (b) The acquisition was funded with cash as well as the assumption of mortgage debt (estimated fair value of approximately $12,104, with annual effective interest rate of 6.52 percent.) (c) The acquisition was funded primarily from proceeds received from the sale of 2,705,628 shares of common stock (see Note 14). Also included in the acquisition, but excluded from this schedule, are (i) Nine Campus Drive, which the Company has a 50 percent interest through an unconsolidated joint venture (see Note 4), and (ii) developable land adjacent to the acquired portfolio (see "Redevelopment Properties/Developable Land Acquisitions.") (d) The acquisition was funded with cash and the issuance of common units to the seller (see Note 9). (e) The Company may be required to pay additional consideration due to earn-out provisions in the agreement. William L. Mack, a director and equity holder of the Company, was an indirect owner of an interest in certain of the buildings contained in the Pacifica portfolio. The Company is under contract to acquire two remaining office buildings, encompassing 95,360 square feet (for an aggregate price of approximately $12,300). (f) The property was acquired subject to a ground lease, which is prepaid through 2031, and has two 10-year renewal options, at rent levels as defined in the lease agreement. (g) Also included in the acquisition, but excluded from this schedule, is developable land adjacent to the acquired portfolio (see "Redevelopment Properties/Developable Land Acquisitions.") (h) Includes land adjacent to the operating property, which may be sub-divided for future development. (i) The property was acquired through the exercise of a purchase option obtained in the RM Transaction.The acquisition was funded with cash, net of the repayment by the seller of the remaining balance of the RM Note Receivable (see Note 7). (j) The acquisition was funded with cash as well as the assumption of mortgage debt (aggregate estimated fair value of approximately $8,354, with weighted average annual effective interest rate of 6.24 percent.) The Company is under contract to acquire an additional four office/flex properties and has a right of first refusal to acquire six additional office/flex properties. (k) The property was acquired through the exercise of a purchase option obtained in the acquisition of the McGarvey portfolio in January 1998. 63 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Mack-Cali Realty Corporation and Subsidiaries (dollars in thousands, except per share or unit amounts) REDEVELOPMENT PROPERTIES/DEVELOPABLE LAND ACQUISITIONS On January 23, 1998, the Company acquired 10 acres of vacant land in the Stamford Executive Park, located in Stamford, Fairfield County, Connecticut for approximately $1,341, funded from the Company's cash reserves. In October 1998, the Company completed and placed in service a 40,000 square-foot office/flex property on the acquired land (see "Properties Placed in Service.") On February 2, 1998, the Company acquired 2115 Linwood Avenue, a 68,000 square-foot vacant office building located in Fort Lee, Bergen County, New Jersey. The building was acquired for approximately $5,164, which was made available from drawing on one of the Company's credit facilities. The Company is currently redeveloping the property for future lease-up and operation. On March 27, 1998, as part of the purchase of the Prudential Business Campus (see "Operating Property Acquisitions"), the Company acquired approximately 95 acres of vacant land adjacent to the operating properties for approximately $27,500. On June 8, 1998, as part of the Pacifica portfolio-phase II acquisition (see "Operating Property Acquisitions"), the Company acquired vacant land adjacent to the operating properties for approximately $2,006. On September 4, 1998, the Company acquired approximately 128 acres of vacant land located at the Horizon Center Business Park, Hamilton Township, Mercer County, New Jersey, through the exercise of a purchase option obtained in the Company's acquisition of the Horizon Center Business Park in November 1995. The land was acquired for approximately $1,698, which was funded from the Company's cash reserves. On November 10, 1998, the Company acquired approximately 10.1 acres of land located at Three Vaughn Drive, Princeton, Mercer County, New Jersey. The Company acquired the land for approximately $2,146, which was funded from the Company's cash reserves. On December 3, 1998, the Company acquired approximately 2.7 acres of land located at 12 Skyline Drive, Hawthorne, Westchester County, New York. The Company acquired the land for approximately $1,540, which was funded from the Company's cash reserves. 1997 TRANSACTIONS On January 31, 1997, the Company acquired 65 properties, aggregating approximately 4.1 million square feet, ("RM Properties") from Robert Martin Company, LLC and affiliates ("RM") for a total cost of approximately $450,000. The cost of the transaction ("RM Transaction") was financed through the assumption of $185,283 of mortgage indebtedness, the payment of approximately $220,000 in cash, substantially all of which was obtained from the Company's cash reserves, and the issuance of 1,401,225 common units, valued at $43,788. On December 11, 1997, the Company acquired 54 office properties, aggregating approximately 9.2 million square feet, ("Mack Properties") from the Mack Company and Patriot American Office Group, pursuant to a Contribution and Exchange Agreement ("Agreement"), for a total cost of approximately $1,102,024 ("Mack Transaction"). With the completion of the Mack Transaction, the Cali Realty Corporation name was changed to Mack-Cali Realty Corporation, and the name of the Operating Partnership was changed from Cali Realty, L.P. to Mack-Cali Realty, L.P. The total cost of the Mack Transaction was financed as follows: (i) $498,757 in cash made available from the Company's cash reserves and from the $200,000 Prudential Term Loan (see Note 8), (ii) $291,879 in debt assumed by the Company ("Mack Mortgages"), (iii) the issuance of 1,965,886 common units, valued at approximately $66,373, (iv) the issuance of 15,237 Series A preferred units and 215,325 Series B preferred units, valued at approximately $236,491 (collectively, the "Preferred Units"), (v) warrants to purchase 2,000,000 common units ("Unit Warrants"), valued at approximately $8,524, and (vi) the issuance of Contingent Units (see Note 9). In accordance with the Agreement, Thomas A. Rizk remained Chief Executive Officer and resigned as President of the Company, and Mitchell E. Hersh was appointed as President and Chief Operating Officer. The Company's other officers retained their existing positions and responsibilities, except that Brant Cali resigned as Chief Operating Officer and John R. Cali resigned as Chief Administrative Officer. Brant Cali and John R. Cali remained as officers of the Company as Executive Vice Presidents. Entering into new employment agreements with the Company after the Mack Transaction were Thomas A. Rizk, Mitchell E. Hersh, Brant Cali and John R. Cali. Entering into amended and restated employment agreements were Roger W. Thomas, as Executive Vice President, General Counsel and Secretary, Barry Lefkowitz, as Executive Vice President and Chief Financial Officer and Timothy M. Jones, as Executive Vice President. In connection with the Mack Transaction, under each of the Company's executive officer's then existing employment agreements, due to a change of control of the Company (as defined in each employment agreement), each of the aforementioned officers received the benefit of the acceleration of (i) the immediate vesting and issuance of his restricted stock, including tax gross-up payments associated therewith, (ii) the forgiveness of his Stock Purchase Rights loan, including tax gross-up payments associated therewith, and (iii) the vesting of his unvested employee stock options and warrants. Additionally, under each of Thomas Rizk's, Brant Cali's and John R. Cali's employment agreements with the Company, each of these officers became entitled to receive certain severance-type payments, as a result of certain provisions in each of their agreements, triggered as a result of the Mack Transaction. Finally, certain officers and employees of the Company were given transaction-based payments as a reward for their efforts and performance in connection with the Mack Transaction. The total expense associated with the acceleration of vesting of restricted stock, the forgiveness of Stock Purchase Rights loans, and the payment of certain severance-type payments, as well as performance payments and related tax-obligation payments, which were approved by the Company's Board of Directors and which took place simultaneous with completion of the Mack Transaction, totaled $45,769. Such expenses are included in non-recurring merger-related charges for the year ended December 31, 1997, (see Note 14). In 1997, the Company also acquired 13 additional office and office/flex properties, aggregating approximately 1.5 million square 64 feet, in nine separate transactions with separate sellers, for an aggregate cost of approximately $204,446. Such acquisitions were funded primarily from drawings on the Company's credit facilities. 1996 TRANSACTIONS In 1996, the Company acquired 15 office properties and placed in service two office/flex properties, totaling approximately 3.3 million square feet, for a total cost of approximately $451,623. The acquired and placed in service properties are all located in New Jersey and Pennsylvania. Concurrently with the acquisition of 103 Carnegie Center in Princeton, Mercer County, New Jersey, the Company sold its office building at 15 Essex Road in Paramus, Bergen County, New Jersey. The concurrent transactions with unrelated parties qualified as a tax-free exchange, as the Company used substantially all of the proceeds from the sale of 15 Essex Road to acquire 103 Carnegie Center. 4) INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES PRU-BETA 3 (NINE CAMPUS DRIVE) On March 27, 1998, the Company acquired a 50 percent interest in an existing joint venture with The Prudential Insurance Company of America ("Prudential"), known as Pru-Beta 3, which owns and operates Nine Campus Drive, a 156,495 square-foot office building, located in the Prudential Business Campus office complex in Parsippany, Morris County, New Jersey (see Note 3). The Company performs management and leasing services for the property owned by the joint venture and received $114 in fees for such services in 1998. HPMC (CONTINENTAL GRAND II/SUMMIT RIDGE/LAVA RIDGE) On April 23, 1998, the Company entered into a joint venture agreement with HCG Development, L.L.C. and Summit Partners I, L.L.C. to form HPMC Development Partners, L.P. and, on July 21, 1998, entered into a second joint venture named HPMC Lava Ridge Partners, L.P. with these same parties. HPMC Development Partners, L.P.'s efforts have focused on two development projects, commonly referred to as Continental Grand II and Summit Ridge. Continental Grand II is a 4.2 acre site located in El Segundo, Los Angeles County, California, acquired by the venture upon which it has commenced construction of a 237,000 square-foot office property. Summit Ridge is a 7.3 acre site located in San Diego, San Diego County, California, acquired by the venture upon which it has commenced construction of a 132,000 square-foot office/flex property. HPMC Lava Ridge Partners, L.P. has commenced construction of three two-story buildings aggregating 183,200 square-feet of office space on a 12.1 acre site located in Roseville, Placer County, California. The Company is required to make capital contributions to the ventures totaling up to $26,566, pursuant to the partnership agreements. Among other things, the partnership agreements provide for a preferred return on the Company's invested capital in each venture, in addition to 50 percent of such venture's profit above the preferred returns, as defined in each agreement. G&G MARTCO (CONVENTION PLAZA) On April 30, 1998, the Company acquired a 49.9 percent interest in an existing joint venture, known as G&G Martco, which owns Convention Plaza, a 305,618 square-foot office building, located in San Francisco, San Francisco County, California. A portion of its initial investment was financed through the issuance of common units (see Note 9), as well as funds drawn from the Company's credit facilities. The Company performs management and leasing services for the property owned by the joint venture and received $20 in fees for such services in 1998. AMERICAN FINANCIAL EXCHANGE L.L.C. On May 20, 1998, the Company entered into a joint venture agreement with Columbia Development Corp. to form American Financial Exchange L.L.C. The venture was initially formed to acquire land for future development, located on the Hudson River waterfront in Jersey City, Hudson County, New Jersey, adjacent to the Company's Harborside property. The Company holds a 50 percent interest in the joint venture. Among other things, the partnership agreement provides for a preferred return on the Company's invested capital in the venture, in addition to the Company's proportionate share of the venture's profit, as defined in the agreement. The joint venture acquired land on which it constructed a parking facility, which is currently leased to a parking operator under a 10-year agreement. Such parking facility serves a ferry service between the Company's Harborside property and Manhattan. RAMLAND REALTY ASSOCIATES L.L.C. (ONE RAMLAND ROAD) On August 20, 1998, the Company entered into a joint venture agreement with S.B. New York Realty Corp. to form Ramland Realty Associates L.L.C. The venture was formed to own, manage and operate One Ramland Road, a 232,000 square-foot office/flex building plus adjacent developable land, located in Orangeburg, Rockland County, New York. The office/flex building is being redeveloped for future lease-up and operation. The Company holds a 50 percent interest in the joint venture. ASHFORD LOOP ASSOCIATES L.P. (1001 SOUTH DAIRY ASHFORD/ 2100 WEST LOOP SOUTH) On September 18, 1998, the Company entered into a joint venture agreement with Prudential to form Ashford Loop Associates L.P. The venture was formed to own, manage and operate 1001 South Dairy Ashford, a 130,000 square-foot office building acquired on September 18, 1998 and 2100 West Loop South, a 168,000 square-foot office building acquired on November 25, 1998, both located in Houston, Harris County, Texas. The Company holds a 20 percent interest in the joint venture. The joint venture may be required to pay additional consideration due to earn-out provisions in the acquisition contracts.The Company performs management and leasing services for the properties owned by the joint venture and received $30 in fees for such services in 1998. 65 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Mack-Cali Realty Corporation and Subsidiaries (dollars in thousands, except per share or unit amounts) SUMMARIES OF UNCONSOLIDATED JOINT VENTURES The following is a summary of the financial position of the unconsolidated joint ventures in which the Company has investment interests as of December 31, 1998:
AMERICAN G&G FINANCIAL RAMLAND ASHFORD COMBINED PRU-BETA 3 HPMC MARTCO EXCHANGE REALTY LOOP TOTAL Assets: Rental property, net $ 22,711 $ 30,278 $ 11,099 $ 10,621 $ 8,467 $ 19,166 $102,342 Other assets 3,995 1,097 4,058 389 1,101 378 11,018 Total assets $ 26,706 $ 31,375 $ 15,157 $ 11,010 $ 9,568 $ 19,544 $113,360 Liabilities and partners'/ members' capital: Mortgage payable $-- $ 632 $ 39,762 $-- $-- $-- $ 40,394 Other liabilities 484 3,522 2,096 79 6 509 6,696 Partners'/members' capital 26,222 27,221 (26,701) 10,931 9,562 19,035 66,270 Total liabilities and partners'/members' capital $ 26,706 $ 31,375 $ 15,157 $ 11,010 $ 9,568 $ 19,544 $113,360 Company's net investment in unconsolidated joint ventures $ 17,980 $ 17,578 $ 10,964 $ 10,983 $ 4,851 $ 4,152 $ 66,508
The following is a summary of the results of operations of the unconsolidated joint ventures for the period in which the Company had investment interests during the year ended December 31, 1998:
AMERICAN G&G FINANCIAL RAMLAND ASHFORD COMBINED PRU-BETA 3 HPMC MARTCO EXCHANGE REALTY LOOP TOTAL Total revenues $3,544 $-- $4,103 $490 $-- $659 $8,796 Operating and other expenses (1,124) -- (1,704) (35) -- (286) (3,149) Depreciation and amortization (1,000) -- (604) -- -- (76) (1,680) Interest expense -- -- (2,097) -- -- -- (2,097) Net income (loss) $1,420 $-- $ (302) $455 $-- $297 $1,870 Company's equity in earnings (loss) of unconsolidated joint ventures $ 723 $-- $ (182) $455 $-- $ 59 $1,055
5) DEFERRED CHARGES AND OTHER ASSETS
DECEMBER 31, 1998 1997 Deferred leasing costs $ 35,151 $ 20,297 Deferred financing costs 9,962 3,640 45,113 23,937 Accumulated amortization (13,527) (9,535) Deferred charges, net 31,586 14,402 Prepaid expenses and other assets 7,434 4,587 Total deferred charges and other assets, net $ 39,020 $ 18,989
6) RESTRICTED CASH Restricted cash includes security deposits for the Company's residential properties and certain commercial properties, and escrow and reserve funds for debt service, real estate taxes, property insurance, capital improvements, tenant improvements, and leasing costs established pursuant to certain mortgage financing arrangements, and is comprised of the following:
DECEMBER 31, 1998 1997 Security deposits $5,696 $5,566 Escrow and other reserve funds 330 1,278 Total restricted cash $6,026 $6,844
7) MORTGAGE NOTE RECEIVABLE In connection with the RM Transaction on January 31, 1997, the Company provided a $11,600 non-recourse mortgage loan ("RM Note Receivable") to entities controlled by the RM principals, which bore interest at an annual rate of 450 basis points over the one-month London Inter-Bank Offered Rate ("LIBOR") (5.75 percent at December 31, 1998). The RM Note Receivable, which was secured by two properties under purchase options ("Option Properties") and guaranteed by certain of the RM principals, was scheduled to mature on February 1, 2000. In conjunction with the acquisition of one of the Option Properties on August 15, 1997, the sellers of the property, certain RM principals, prepaid $4,350 of the RM Note Receivable. The RM Note Receivable was subsequently prepaid in full in connection with the acquisition of the second Option Property on September 15, 1998 (see Note 3). The Company received a prepayment fee of $152 with the retirement of the RM Note Receivable. On March 6, 1998, prior to the completion of the Pacifica portfolio-phase I acquisition, the Company provided a $20,000 mortgage loan to an entity controlled by certain principals of Pacifica Holding Company. The mortgage loan was secured by an office property in California and bore interest at an annual rate of 9.25 percent. The mortgage loan was subsequently prepaid in full by the borrower on June 10, 1998. The Company received a prepayment fee of $200 with the retirement of the mortgage loan. 66 8) MORTGAGES AND LOANS PAYABLE
DECEMBER 31, 1998 1997 Prudential Mortgages $ 210,265 $ 262,205 TIAA Mortgage 185,283 185,283 Harborside Mortgages 150,000 150,000 Mitsubishi Mortgages 72,204 72,204 CIGNA Mortgages 46,989 86,650 Other Mortgages 78,440 88,474 Revolving Credit Facilities 671,600 122,100 Contingent Obligation 6,150 5,734 Total mortgages and loans payable $1,420,931 $ 972,650
Prudential Mortgages The Company has mortgage debt from Prudential and its subsidiaries ("Prudential Mortgages") aggregating $210,265 and $262,205 as of December 31, 1998 and 1997, respectively, comprised of the following: On April 30, 1998, the Company obtained a $150,000, interest-only, non-recourse mortgage loan from Prudential ("$150,000 Prudential Mortgage Loan"). The loan, which is secured by 12 of the Company's properties, has an effective annual interest rate of 7.10 percent and a seven-year term. The Company has the option to convert the mortgage loan to unsecured debt as a result of the achievement of an investment grade credit rating. The mortgage loan is prepayable in whole or in part subject to certain provisions, including yield maintenance. The proceeds of the new loan were used, along with funds drawn from the Company's credit facilities, to retire the Prudential Term Loan (as defined below), as well as approximately $48,224 of certain other mortgages. The Company also has certain other non-recourse mortgage debt, aggregating $60,265 and $62,205 in principal as of December 31, 1998 and 1997, respectively, with Prudential. Such mortgages, which are secured by three properties, bear interest at a weighted average fixed rate of 8.25 percent per annum. The mortgages require monthly payments of interest and principal, and mature between October 2003 and October 2005. On December 10, 1997, the Company obtained a $200,000 term loan ("Prudential Term Loan") from Prudential Securities Corp. ("PSC"). The proceeds of the loan were used to fund a portion of the cash consideration in completion of the Mack Transaction. The loan had a one-year term and interest payments were required monthly at an interest rate of 110 basis points over one-month LIBOR. The Prudential Term Loan was retired in April 1998, simultaneous with the Company obtaining the $150,000 Prudential Mortgage Loan. On account of prepayment fees, loan origination fees, legal fees and other costs incurred in the retirement of the Prudential Term Loan, an extraordinary loss of $46, net of minority interest's share of the loss ($6), was recorded for the year ended December 31, 1998. TIAA MORTGAGE In connection with the RM Transaction on January 31, 1997, the Company assumed a $185,283 non-recourse mortgage loan with Teachers Insurance and Annuity Association of America ("TIAA"), with interest only payable monthly at a fixed annual rate of 7.18 percent ("TIAA Mortgage"). The TIAA Mortgage is secured and cross-collateralized by 43 of the RM Properties and matures in December 2003. The Company has the option to convert, without any yield maintenance obligation or prepayment premium, the TIAA Mortgage to unsecured public debt as a result of the achievement of an investment grade credit rating. The TIAA Mortgage is prepayable in whole or in part subject to certain provisions, including yield maintenance which is 100 basis points over United States Treasury obligations of similar maturity to the remaining maturity of the TIAA Mortgage at the time prepayment is being sought. HARBORSIDE MORTGAGES In connection with the acquisition of Harborside Financial Center ("Harborside") on November 4, 1996, the Company assumed existing mortgage debt and was provided seller-financed mortgage debt aggregating $150,000. The existing non-recourse mortgage financing, with a principal balance of $101,852 and $104,768 as of December 31, 1998 and 1997, respectively, bears interest at an annual fixed rate of 7.32 percent and matures in January 2006. The seller-provided mortgage financing, with a principal balance of $48,148 and $45,232 as of December 31, 1998 and 1997, respectively, matures in January 2006 and currently bears interest at an annual rate of 6.99 percent. The interest rate on the seller-provided financing will be reset at the end of the third and sixth loan years based on the yield of the interpolated three-year treasury note at that time with spreads of 110 basis points in years four through six and 130 basis points in years seven through maturity. See "Interest Rate Contracts." MITSUBISHI MORTGAGES The Company has non-recourse, variable-rate mortgage debt aggregating $72,204 in principal as of December 31, 1998 and 1997 with Mitsubishi Trust and Banking Corporation ("Mitsubishi Mortgages"). Such mortgages assumed in the Mack Transaction, which are secured by two of the Mack Properties, bear interest at a variable rate of 65 basis points over LIBOR and mature between January 2008 and January 2009. CIGNA MORTGAGES The Company has non-recourse mortgage debt aggregating $46,989 and $86,650 in principal as of December 31, 1998 and 1997, respectively, with Connecticut General Life Insurance Company ("CIGNA Mortgages"). Such mortgages assumed in the Mack Transaction, which are secured by three of the Mack Properties, bear interest at a weighted average annual fixed rate of 7.79 percent and require monthly payments of interest and principal on various term amortization schedules. The various mortgages mature between March 1999 and October 2003. In 1998, the Company retired certain of the CIGNA Mortgages with an aggregate principal balance of $37,773, of which $27,886 was made available from the $150,000 Prudential Mortgage Loan and $9,887 from drawing on the Company's credit facilities. 67 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Mack-Cali Realty Corporation and Subsidiaries (dollars in thousands, except per share or unit amounts) OTHER MORTGAGES The Company has mortgage debt aggregating $78,440 and $88,474 in principal as of December 31, 1998 and 1997, respectively, with six different lenders, all of which were assumed in the Mack Transaction as well as certain 1998 property acquisitions, and are secured by 11 individual properties ("Other Mortgages"). The Other Mortgages bear interest at a weighted average annual fixed effective rate of 6.95 percent. Certain of the mortgages require monthly payments of principal, in addition to interest on various term amortization schedules. The Other Mortgages mature between May 1999 and October 2005. Variable rate debt included in Other Mortgages at December 31, 1997, aggregating $20,338, which bore interest at 115 basis points over LIBOR, was retired in April 1998, simultaneous with the Company obtaining the $150,000 Prudential Mortgage Loan. On account of prepayment fees, legal fees and other costs incurred in the retirement of certain of the Other Mortgages in April 1998, an extraordinary loss of $124, net of minority interest's share of the loss ($16), was recorded for the year ended December 31, 1998. REVOLVING CREDIT FACILITIES ORIGINAL UNSECURED FACILITY On August 6, 1997, the Company obtained an unsecured revolving credit facility ("Original Unsecured Facility") in the amount of $400,000 from a group of 13 lender banks. The facility carried a three-year term and bore interest at 125 basis points over one-month LIBOR. The terms of the Original Unsecured Facility included certain restrictions and covenants which limited, among other things, dividend payments and additional indebtedness and which required compliance with specified financial ratios and other financial measurements. The facility also required 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. The Company had outstanding borrowings of $122,100 at December 31, 1997, under the Original Unsecured Facility. The Original Unsecured Facility was repaid in full and retired in connection with the Company obtaining the 1998 Unsecured Facility in April 1998, as described below. On account of prepayment fees, loan origination fees, legal fees and other costs incurred in the retirement of the Original Unsecured Facility, an extraordinary loss of $2,203, net of minority interest's share of the loss ($275), was recorded for the year ended December 31, 1998. 1998 UNSECURED FACILITY On April 17, 1998, the Company repaid in full and terminated the Original Unsecured Facility and obtained a new unsecured revolving credit facility ("1998 Unsecured Facility") in the amount of $870,000 from a group of 26 lender banks. In July 1998, the 1998 Unsecured Facility was expanded to $900,000 with the addition of two new lender banks into the facility, bringing the total number of participants to 28. In December 1998, the 1998 Unsecured Facility was further expanded to $1,000,000. The 1998 Unsecured Facility has a three-year term and bore interest at 110 basis points over LIBOR. In November 1998, with the Company's achievement of investment grade unsecured debt ratings, the interest rate was reduced to 90 basis points over LIBOR. The terms of the 1998 Unsecured Facility include certain restrictions and covenants which limit, among other things, the payment of dividends (as discussed below), the incurrence of additional indebtedness, the incurrence of liens and the disposition of assets, and which require compliance with financial ratios relating to the maximum leverage ratio, the maximum amount of secured indebtedness, the minimum amount of tangible net worth, the minimum amount of debt service coverage, the minimum amount of fixed charge coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property debt service coverage and certain investment limitations. The dividend restriction referred to above provides that, except to enable the Company to continue to qualify as a REIT under the Code, the Company will not during any four consecutive fiscal quarters make distributions with respect to common stock or other equity interests in an aggregate amount in excess of 90 percent of funds from operations for such period, subject to certain other adjustments. The 1998 Unsecured Facility also requires a 17.5 basis point fee on the unused balance payable quarterly in arrears. The lending group for the 1998 Unsecured Facility consists of: The Chase Manhattan Bank, as administrative agent; Fleet National Bank, as syndication agent; PNC Bank, N.A. and NationsBank, as documentation agents; Bankers Trust, Commerzbank, AG, The First National Bank of Chicago and First Union National Bank, as managing agents; Creditanstalt Corporate Finance, Inc., Dresdner Bank, AG, European American Bank, HypoBank, Societe Generale and Summit Bank, as co-agents; and Kredietbank, N.V., Key Bank N.A., Mellon Bank, N.A., The Bank of New York, Citizens Bank of Rhode Island, Crestar Bank, DG Bank Deutsche, The Tokai Bank Limited, USTrust, Bayerische Landesbank Girozentrale, LaSalle National Bank, Erste Bank, BankLeumi USA and Bank One, Arizona, NA. PRUDENTIAL FACILITY The Company has a revolving credit facility ("Prudential Facility") from PSC in the amount of $100,000, which currently bears interest at 110 basis points over one-month LIBOR, with a maturity date of December 31, 1999. The Prudential Facility is a recourse liability of the Operating Partnership and is secured by the Company's equity interest in Harborside. The Prudential Facility limits the ability of the Operating Partnership to make any distributions during any fiscal quarter in an amount in excess of 100 percent of the Operating Partnership's available funds from operations for the immediately preceding fiscal quarter (except to the extent such excess distributions or dividends are attributable to gains from the sale of the Operating Partnership's assets or are required for the Company to maintain its status as a REIT under the Code); provided, however, that the Operating Partnership may make distributions and pay dividends in excess of 100 percent of available funds from operations for the preceding fiscal quarter for not more than three consecutive quarters. In addition to the foregoing, the Prudential Facility limits the liens placed upon the subject property and certain collateral, the use of proceeds from the Prudential Facility, and the maintenance of ownership of the subject property and assets derived from said ownership. The Company had no outstanding borrowings at December 31, 1998 and 1997 under the Prudential Facility. 68 CONTINGENT OBLIGATION As part of the Harborside acquisition in November 1996, the Company agreed to make payments (with an estimated net present value of approximately $5,252 at acquisition date) to the seller for development rights ("Contingent Obligation") if and when the Company commences construction on the acquired 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. The Company is currently in the pre-development phase of a long-range plan to develop the Harborside site on a multi-property, multi-use basis. For the year ended December 31, 1998, interest was imputed on the Contingent Obligation, thereby increasing the balance of the Contingent Obligation from $5,734 as of December 31, 1997 to $6,150 as of December 31, 1998. Mortgage Financing On August 12, 1997, the Company retired certain mortgage financing ("Mortgage Financing") with funds made available primarily from drawing on the Original Unsecured Facility. On account of prepayment fees, loan origination fees, legal fees and other costs incurred in the retirement of the Mortgage Financing, an extraordinary loss of $3,583, net of minority interest's share of the loss ($402), was recorded for the year ended December 31, 1997. INTEREST RATE CONTRACTS On May 24, 1995, the Company entered into an interest rate swap agreement with a commercial bank. The swap agreement fixes the Company's one-month LIBOR base to 6.285 percent per annum on a notional amount of $24,000 through August 1999. On January 23, 1996, the Company entered into an interest rate swap agreement with a commercial bank. The swap agreement fixed the Company's one-month LIBOR base to 5.265 percent per annum on a notional amount of $26,000. The swap agreement expired in January 1999. On November 20, 1997, the Company entered into a forward treasury rate lock agreement with a commercial bank. The agreement locked an interest rate of 5.88 percent per annum for the interpolated seven-year U.S. Treasury Note effective March 1, 1998, on a notional amount of $150,000. The agreement was used to fix the interest rate on the $150,000 Prudential Mortgage Loan. The Company settled the agreement on March 2, 1998 for $2,035 which is being amortized to interest expense over the term of the $150,000 Prudential Mortgage Loan. On October 1, 1998, the Company entered into a forward treasury rate lock agreement with a commercial bank. The agreement locked an interest rate of 4.089 percent per annum for the three-year U.S. Treasury Note effective November 4, 1999, on a notional amount of $50,000. The agreement will be used to fix the Index Rate on $50,000 of the Harborside Mortgages, for which the company's interest rate re-sets for three years beginning November 4, 1999 to the three-year U.S. Treasury Note plus 110 basis points (see "Harborside Mortgages"). The Company is exposed to credit loss in the event of non-performance by the other parties to the interest rate contracts. However, the Company does not anticipate non-performance by any of the counter parties. The Company is also exposed to market risk from the movement in interest rates pertaining to the forward treasury rate lock agreement. SCHEDULED PRINCIPAL PAYMENTS Scheduled principal payments and related weighted average interest rates on the mortgages and loans payable, as of December 31, 1998, are as follows:
WEIGHTED AVG. SCHEDULED PRINCIPAL INTEREST RATE OF YEAR AMORTIZATION MATURITIES TOTAL FUTURE REPAYMENTS(A) 1999 $ 3,653 $ 51,797 $ 55,450 7.36% 2000 3,651 5,418 9,069 7.30% 2001 3,792 675,811 679,603 6.66% 2002 3,969 7,814 11,783 7.10% 2003 4,315 206,971 211,286 7.31% Thereafter 5,279 448,461 453,740 7.10% Totals/Weighted Average $ 24,659 $1,396,272 $1,420,931 6.93%
(a) Assumes LIBOR rate at December 31, 1998 of 5.75 percent in calculating credit line and other variable rate debt interest rates. 69 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Mack-Cali Realty Corporation and Subsidiaries (dollars in thousands, except per share or unit amounts) LOAN COMMITMENTS The Company has obtained mortgage commitments amounting to $45,500 to refinance two of the CIGNA Mortgages with principal balances aggregating $35,940 maturing in 1999. The new mortgages will have a weighted average effective interest rate of 6.91 percent per annum, versus the average rate of 7.60 percent per annum for the maturing mortgages. CASH PAID FOR INTEREST & INTEREST CAPITALIZED Cash paid for interest for the years ended December 31, 1998, 1997 and 1996 was $92,441, $36,917 and $12,096, respectively. Interest capitalized by the Company for the years ended December 31, 1998, 1997 and 1996 was $3,547, $820 and $118, respectively. 9) MINORITY INTEREST Minority interest in the accompanying consolidated financial statements relates to common units in the Operating Partnership, in addition to Preferred Units and Unit Warrants issued in connection with the Mack Transaction, held by parties other than the Company. PREFERRED UNITS As described in Note 3, in connection with the funding of the Mack Transaction, the Company issued 15,237 Series A Preferred Units and 215,325 Series B Preferred Units, with an aggregate value of $236,491. The Preferred Units have a stated value of $1,000 per unit and are preferred as to assets over any class of common units or other class of preferred units of the Company, based on circumstances per the applicable unit certificates. The quarterly distribution on each Preferred Unit (representing 6.75 percent of the Preferred Unit stated value of $1,000 on an annualized basis) is an amount equal to the greater of (i) $16.875 or (ii) the quarterly distribution attributable to a Preferred Unit determined as if such unit had been converted into common units, subject to adjustment for customary anti-dilution rights. Each of the Series A Preferred Units may be converted at any time into common units at a conversion price of $34.65 per unit, and, after the one year anniversary of the date of the Series A Preferred Units' initial issuance, common units received pursuant to such conversion may be redeemed into common stock. Each of the Series B Preferred Units may be converted at any time into common units at a conversion price of $34.65 per unit, and, after the three year anniversary of the date of the Series B Preferred Units' initial issuance, common units received pursuant to such conversion may be redeemed into common stock. Each of the common units are redeemable after one year for an equal number of shares of common stock. The Preferred Units, issued in the Mack Transaction, are convertible into common units at $34.65 per common unit, which is an amount less than the $39.0625 closing stock price on the date of closing of the Mack Transaction. Accordingly, the Company recorded, on December 11, 1997, the financial value ascribed to the beneficial conversion feature inherent in the Preferred Units upon issuance, which totaled $26,801 ($29,361, before allocation to minority common unitholders) and was recorded as beneficial conversion feature in stockholders' equity. The beneficial conversion feature was amortized in full as the Preferred Units were immediately convertible upon issuance; such amortization was included in minority interest for the year ended December 31, 1997. During 1998, the Company issued 19,694 additional Preferred Units (11,895 of Series A and 7,799 of Series B), convertible into 568,369 common units and valued at approximately $20,200, in connection with the achievement of certain performance goals at the Mack Properties in redemption of an equivalent number of contingent Preferred Units. Such Preferred Units carry the identical terms as those issued in the Mack Transaction. As of December 31, 1998, there are no contingent Preferred Units outstanding, as all contingent Preferred Units were redeemed for Preferred Units. In January 1999, 20,952 Series A Preferred Units were converted into 604,675 common units. COMMON UNITS Certain individuals and entities own common units in the Operating Partnership. A common unit and a share of common stock of the Company have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the Operating Partnership. Common units are redeemable by the common unitholders at their option, subject to certain restrictions, on the basis of one common unit for either one share of common stock or cash equal to the fair market value of a share at the time of the redemption. The Company has the option to deliver shares of common stock in exchange for all or any portion of the cash requested. When a unitholder redeems a common unit, minority interest is reduced and the Company's investment in the Operating Partnership is increased. During 1998, the Operating Partnership redeemed a total of 82,880 common units in exchange for an aggregate of $3,163 in cash. Additionally, the Operating Partnership redeemed an aggregate of 29,300 common units for an equivalent number of shares of common stock in the Company. As described in Note 3, the Company issued an aggregate of 3,408,532 common units in 1997 in connection with the completion of the RM Transaction, the Mack Transaction and a 1997 single-property acquisition. On March 26, 1998, in connection with the Pacifica portfolio-phase I acquisition, the Company issued 100,175 common units, valued at approximately $3,779. On April 30, 1998, in connection with the acquisition of a 49.9 percent interest in the G&G Martco joint venture (see Note 4), the Company issued 218,105 common units, valued at approximately $8,334. On June 8, 1998, in connection with the Pacifica portfolio-phase II acquisition, the Company issued 585,263 common units, valued at approximately $20,753. On July 20, 1998, in connection with the expansion of one of the Mack Properties, the Company issued 52,245 common units, valued at approximately $1,632. On September 10, 1998, in connection with the acquisition of 40 Richards Avenue, the Company issued 414,114 common units, valued at approximately $12,615. During 1998, the Company also issued 1,731,386 common units, valued at approximately $58,936, in connection with the achievement of certain performance goals at the Mack Properties in 70 redemption of an equivalent number of contingent common units. There were 275,046 contingent common units outstanding as of December 31, 1998. In January 1999, the Operating Partnership redeemed an aggregate of 1,000,000 common units for an equivalent number of shares of common stock in the Company. CONTINGENT COMMON & PREFERRED UNITS In conjunction with the completion of the Mack Transaction (see Note 3), 2,006,432 contingent common units, 11,895 Series A contingent Preferred Units and 7,799 Series B contingent Preferred Units were issued as contingent non-participating units. Such Contingent Units have no voting, distribution or other rights until such time as they are redeemed into common units, Series A Preferred Units, and Series B Preferred Units, respectively. Redemption of such Contingent Units shall occur upon the achievement of certain performance goals relating to certain of the Mack Properties, specifically the achievement of certain leasing activity. When Contingent Units are redeemed for common and Preferred Units, an adjustment to the purchase price of certain of the Mack Properties is recorded, based on the value of the units issued. On account of certain of the performance goals having been achieved during 1998, the Company redeemed 1,731,386 contingent common units and 19,694 contingent Preferred Units and issued an equivalent number of common and Preferred Units, as indicated above. There were no contingent Preferred Units outstanding and 275,046 contingent common units outstanding as of December 31, 1998. UNIT WARRANTS As described in Note 3, in connection with the funding of the Mack Transaction, the Company granted warrants to purchase 2,000,000 common units. The Unit Warrants are exercisable at any time after one year from the date of their issuance and prior to the fifth anniversary date thereof at an exercise price of $37.80 per common unit. MINORITY OWNERSHIP As of December 31, 1998 and 1997, the minority interest common unitholders owned 13.7 percent (22.2 percent, including the effect of the conversion of Preferred Units into common units) and 10.9 percent (20.4 percent including the effect of the conversion of Preferred Units into common units) of the Operating Partnership, respectively (excluding any effect for the exercise of Unit Warrants). 10) EMPLOYEE BENEFIT PLAN All employees of the Company who meet certain minimum age and period of service requirements are eligible to participate in a 401(k) defined contribution plan (the "Plan"). The Plan allows eligible employees to defer up to 15 percent of their annual compensation. The amounts contributed by employees are immediately vested and non-forfeitable. The Company, at management's discretion, may match employee contributions, although no employer contributions have been made to date. 11) DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosure of estimated fair value was determined by management using available market information and appropriate valuation methodologies. However, considerable judgement is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments at December 31, 1998 and 1997. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Cash equivalents, receivables, accounts payable, and accrued expenses and other liabilities are carried at amounts which reasonably approximate their fair values. Mortgages and loans payable had an aggregate carrying value of $1,420,931 and $972,650 as of December 31, 1998 and 1997, respectively, which approximates their estimated aggregate fair value (excluding prepayment penalties) based upon then current interest rates for debt with similar terms and remaining maturities. The estimated amount to be received/(paid) to settle the Company's interest rate contracts at December 31, 1998 and 1997, based on quoted market prices of comparable contracts, was $339 and ($1,404), respectively. Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 1998 and 1997. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since December 31, 1998 and current estimates of fair value may differ significantly from the amounts presented herein. 12) COMMITMENTS AND CONTINGENCIES TAX ABATEMENT AGREEMENTS GROVE STREET PROPERTY Pursuant to an agreement with the City of Jersey City, New Jersey, as amended, expiring in 2004, the Company is required to make payments in lieu of property taxes ("PILOT") on its property at 95 Christopher Columbus Drive, Jersey City, Hudson County, New Jersey. Such PILOT, as defined, is $1,267 per annum through May 31, 1999 and $1,584 per annum through May 31, 2004. HARBORSIDE FINANCIAL CENTER PROPERTY Pursuant to an agreement with the City of Jersey City, New Jersey obtained by the former owner of the Harborside property in 1988 and assumed by the Company as part of the acquisition of the property in November 1996, the Company is required to make PILOT payments on its Harborside property. The agreement, which commenced in 1990, is for a term of 15 years. Such PILOT is equal to two percent of Total Project Costs, as defined, in year one and increases by $75 per annum through year fifteen. Total Project Costs, as defined, are $145,644. Such PILOT totaled $2,570, $2,502 and $393 for the years ended December 31, 1998, 1997 and 1996, respectively. 71 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Mack-Cali Realty Corporation and Subsidiaries (dollars in thousands, except per share or unit amounts) GROUND LEASE AGREEMENTS Future minimum rental payments under the terms of all non-cancelable ground leases, under which the Company is the lessee, as of December 31, 1998, are as follows:
Year Amount 1999 $ 422 2000 425 2001 427 2002 427 2003 427 Thereafter 21,934 Total $24,062
OTHER CONTINGENCIES On December 10, 1997, a Shareholder's Derivative Action was filed in Maryland Court on behalf of a shareholder. The complaint questioned certain executive compensation decisions made by the Company's Board of Directors in connection with the Mack Transaction. The Board's compensation decisions were discussed in the proxy materials distributed in connection with the Mack Transaction and were approved by in excess of 99 percent of the voting shareholders. Although the Company believed that this lawsuit was factually and legally baseless, the Company on May 4, 1998 agreed to a settlement which included making certain changes to employment agreements of certain of its executive officers. The Company incurred $750 in costs associated with this action, which was provided for at December 31, 1997. The Company is a defendant in other certain litigation arising in the normal course of business activities. Management does not believe that the resolution of these matters will have a materially adverse effect upon the Company. 13) TENANT LEASES The Properties are leased to tenants under operating leases with various expiration dates through 2016. Substantially all of the leases provide for annual base rents plus recoveries and escalation charges based upon the tenant's proportionate share of and/or increases in real estate taxes and certain operating costs, as defined, and the pass through of charges for electrical usage. Future minimum rentals to be received under non-cancelable operating leases at December 31, 1998, are as follows:
YEAR AMOUNT 1999 $ 432,060 2000 391,417 2001 329,843 2002 281,748 2003 220,576 Thereafter 825,762 Total $2,481,406
14) STOCKHOLDERS' EQUITY To maintain its qualification as a REIT, not more than 50 percent in value of the outstanding shares of the Company may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of any taxable year of the Company, other than its initial taxable year (defined to include certain entities), applying certain constructive ownership rules. To help ensure that the Company will not fail this test, the Company's Articles of Incorporation provide for, among other things, certain restrictions on the transfer of the common stock to prevent further concentration of stock ownership. Moreover, to evidence compliance with these requirements, the Company must maintain records that disclose the actual ownership of its outstanding common stock and will demand written statements each year from the holders of record of designated percentages of its common stock requesting the disclosure of the beneficial owners of such common stock. COMMON STOCK On May 15, 1997, the stockholders approved an increase in the authorized shares of common stock in the Company to 190,000,000. On October 15, 1997, the Company completed an underwritten public offer and sale of 13,000,000 shares (the "1997 Offering") of its common stock. The Company received approximately $489,116 in net proceeds (after offering costs) from the 1997 Offering. The Company used $160,000 of such proceeds to repay outstanding borrowings on its Original Unsecured Facility and the remainder of the proceeds to fund a portion of the purchase price of the Mack Transaction, for other potential acquisitions, and for general corporate purposes. On February 25, 1998, the Company completed an underwritten public offer and sale of 2,500,000 shares of its common stock and used the net proceeds, which totaled approximately $92,194 (after offering costs) to pay down a portion of its outstanding borrowings under the Company's credit facilities and fund the acquisition of 10 Mountainview Road (see Note 3). On March 18, 1998, in connection with the acquisition of Prudential Business Campus, the Company completed an offer and sale of 2,705,628 shares of its common stock using the net proceeds of approximately $99,899 (after offering costs) in the funding of such acquisition (see Note 3). On March 27, 1998, the Company completed an underwritten public offer and sale of 650,407 shares of its common stock and used the net proceeds, which totaled approximately $23,690 (after offering costs) to pay down a portion of its outstanding borrowings under the Company's credit facilities. On April 29, 1998, the Company completed an underwritten offer and sale of 994,228 shares of its common stock and used the net proceeds, which totaled approximately $34,570 (after offering costs), primarily to pay down a portion of its outstanding borrowings under the Company's credit facilities. On May 29, 1998, the Company completed an underwritten offer and sale of 984,615 shares of its common stock and used the net proceeds, which totaled approximately $34,100 (after offering costs), primarily to pay down a portion of its outstanding borrowings under the Company's credit facilities. 72 On December 31, 1998, the Company completed an offer and sale of 132,710 shares of its common stock, using the net proceeds of approximately $3,940 for general corporate purposes. On August 6, 1998, the Board of Directors of the Company authorized a share repurchase program ("Repurchase Program") under which the Company was permitted to purchase up to $100,000 of the Company's outstanding common stock. Purchases could be made from time to time in open market transactions at prevailing prices or through privately negotiated transactions. For the year ended December 31, 1998, the Company purchased, for constructive retirement 854,700 shares of its outstanding common stock for an aggregate cost of approximately $25,058. Concurrent with these purchases, the Company sold to the Operating Partnership 854,700 common units for approximately $25,058. REGISTRATION STATEMENTS The Company filed a shelf registration statement with the Securities and Exchange Commission ("SEC") for an aggregate of $2.0 billion in equity securities of the Company, which was declared effective in January 1998. The Company and the Operating Partnership filed a shelf registration statement with the SEC for an aggregate of $2.0 billion in debt securities, preferred stock and preferred stock represented by depositary shares, which was declared effective in September 1998. The Company filed a registration statement with the SEC for the Company's dividend reinvestment and stock purchase plan ("Plan"), which was declared effective in February 1999. The Plan commenced on March 1, 1999. STOCK OPTION PLANS In 1994, and as subsequently amended, the Company established the Mack-Cali Employee Stock Option Plan ("Employee Plan") and the Mack-Cali Director Stock Option Plan ("Director Plan") under which a total of 5,380,188 shares (subject to adjustment) of the Company's common stock have been reserved for issuance (4,980,188 shares under the Employee Plan and 400,000 shares under the Director Plan). Stock options granted under the Employee Plan in 1994 and 1995 become exercisable over a three-year period and those options granted under the Employee Plan in 1998, 1997 and 1996 become exercisable over a five-year period. All stock options granted under the Director Plan become exercisable in one year. All options were granted at the fair market value at the dates of grant and have terms of ten years. As of December 31, 1998, and 1997, the stock options outstanding had a weighted average remaining contractual life of approximately 8.5 and 9.0 years, respectively. As a result of certain provisions contained in certain of the Corporation's executive officers' employment agreements, on December 11, 1997, the Mack Transaction triggered the accelerated vesting of unvested stock options held by such officers on that date. Information regarding the Company's stock option plans is summarized below:
WEIGHTED SHARES AVERAGE UNDER EXERCISE OPTIONS PRICE Outstanding at January 1, 1995 625,000 $ 17.23 Granted 230,200 17.69 Exercised -- -- Lapsed or canceled (3,588) 17.25 Outstanding at December 31, 1995 851,612 17.36 Granted 809,700 23.97 Exercised (126,041) 17.25 Lapsed or canceled (7,164) 19.52 Outstanding at December 31, 1996 1,528,107 20.86 Granted 2,126,538 37.35 Exercised (337,282) 21.33 Lapsed or canceled (30,073) 22.62 Outstanding at December 31, 1997 3,287,290 31.47 Granted 1,048,620 35.90 Exercised (267,660) 20.47 Lapsed or canceled (128,268) 36.61 Outstanding at December 31, 1998 3,939,982 $ 33.22 Options exercisable at December 31, 1997 1,004,618 $ 25.22 Options exercisable at December 31, 1998 1,334,137 $ 27.84 Available for grant at December 31, 1997 1,629,575 Available for grant at December 31, 1998 709,223
The weighted average fair value of options granted during 1998, 1997 and 1996 were $5.59, $6.66 and $2.41 per option, respectively. The fair value of each significant option grant is estimated on the date of grant using the Black-Scholes model. The following weighted average assumptions are included in the Company's fair value calculations of stock options:
1998 1997 1996 Expected life (in years) 6 6 6 Risk-free interest rate 5.41% 5.84% 6.11% Volatility 23.37% 23.76% 19.14% Dividend yield 5.78% 5.29% 7.58%
STOCK WARRANTS On January 31, 1997, in conjunction with the completion of the RM Transaction, the Company granted a total of 400,000 warrants to purchase an equal number of shares of common stock ("Stock Warrants") at $33 per share (the market price at date of grant) to Timothy Jones, Brad Berger and certain other Company employees formerly with RM. Such warrants vest equally over a three-year period and have a term of ten years. The unvested warrants held by Timothy Jones and Brad Berger became immediately exercisable on December 11, 1997 as a result of provisions contained in their employment agreements, which were triggered by the Mack Transaction. 73 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Mack-Cali Realty Corporation and Subsidiaries (dollars in thousands, except per share or unit amounts) On December 12, 1997, in conjunction with the completion of the Mack Transaction, the Company granted a total of 514,976 Stock Warrants to purchase an equal number of shares of common stock at $38.75 per share (the market price at date of grant) to Mitchell Hersh, and certain Company executives formerly with the Patriot American Office Group. Such warrants vest equally over a five-year period and have a term of ten years. As of December 31, 1998, there were 914,976 Stock Warrants outstanding, of which 565,991 were exercisable. As of December 31, 1998, no vested Stock Warrants were exercised or canceled. The weighted-average fair value of warrants granted during 1997 were $6.27 per warrant. No warrants were granted in 1998 or 1996. The fair value of each warrant grant is estimated on the date of grant using the Black-Scholes model. The following weighted average assumptions are included in the Company's fair value calculation of warrants granted during 1997: Expected life (in years) 6 Risk-free interest rate 5.96% Volatility 22.77% Dividend yield 5.29%
FASB NO. 123 Under the above models, the value of stock options and warrants granted during 1998, 1997 and 1996 totaled approximately $5,281, $19,750 and $1,955, respectively, which would be amortized ratably on a pro forma basis over the appropriate vesting period. Had the Company determined compensation cost for these granted securities in accordance with FASB No. 123, the Company's pro forma net income (loss) and basic earnings (loss) per share and diluted earnings (loss) per share would have been $110,061, $1.97 and $1.72 in 1998, ($3,153), ($0.08) and ($0.08) in 1997 and $31,980, $1.73 and $1.49 in 1996, respectively. STOCK COMPENSATION In January 1997, the Company entered into employment contracts with seven of its key executives which provided for, among other things, compensation in the form of stock awards ("Restricted Stock Awards") and Company-financed stock purchase rights ("Stock Purchase Rights"), and associated tax obligation payments. In connection with the Restricted Stock Awards, the executives were to receive 199,070 shares of the Company's common stock vesting over a five-year period contingent on the Company meeting certain performance objectives. Additionally, pursuant to the terms of the Stock Purchase Rights, the Company provided fixed rate, non-recourse loans, aggregating $4,750, to such executives to finance their purchase of 152,000 shares of the Company's common stock, which the Company agreed to forgive ratably over five years, subject to continued employment. Such loans were for amounts equal to the fair market value of the associated shares at the date of grant. Subsequently, from April 18, 1997 through April 24, 1997, the Company purchased, for constructive retirement, 152,000 shares of its outstanding common stock for $4,680. The excess of the purchase price over par value was recorded as a reduction to additional paid-in capital. Concurrent with this purchase, the Company sold to the Operating Partnership 152,000 common units for $4,680. The value of the Restricted Stock Awards and the balance of the loans related to the Stock Purchase Rights at the grant date were recorded as unamortized stock compensation in stockholders' equity. As a result of provisions contained in certain of the Company's executive officers' employment agreements, which were triggered by the Mack Transaction on December 11, 1997, the loans provided by the Company under the Stock Purchase Rights were forgiven by the Company, and the vesting and issuance of the restricted stock issued under the Restricted Stock Awards was accelerated, and related tax obligation payments were made. As a result, the accelerated cost of $16,788 affecting the stock compensation described above was included in non-recurring merger-related charges for the year ended December 31, 1997. With such accelerated vestings, there was no remaining balance in unamortized stock compensation as of December 31, 1997. Included in general and administrative expense for the year ended December 31, 1997 was $2,257 relating to the normal cost of Restricted Stock Awards and Stock Purchase Rights. EARNINGS PER SHARE FASB No. 128 requires a dual presentation of basic and diluted EPS on the face of the income statement for all companies with complex capital structures even where the effect of such dilution is not material. Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. 74 The following information presents the Company's results for the years ended December 31, 1998, 1997 and 1996 in accordance with FASB No. 128.
1998 1997 1996 FOR THE YEAR ENDED DECEMBER 31, BASIC EPS DILUTED EPS BASIC EPS DILUTED EPS BASIC EPS DILUTED EPS Net income $116,578 $116,578 $ 1,405 $ 1,405 $ 31,944 $ 31,944 Add: Net income attributable to potentially dilutive securities -- 15,903 -- 143 -- 4,760 Adjusted net income $116,578 $132,481 $ 1,405 $ 1,548 $ 31,944 $ 36,704 Weighted average shares 55,840 63,893 39,266 44,156 18,461 21,436 Per Share $ 2.09 $ 2.07 $ 0.04 $ 0.04 $ 1.73 $ 1.71
The following schedule reconciles the shares used in the basic EPS calculation to the shares used in the diluted EPS calculation.
YEAR ENDED DECEMBER 31, 1998 1997 1996 Basic EPS Shares: 55,840 39,266 18,461 Add: Operating Partnership units 7,598 4,090 2,711 Stock options 411 579 264 Restricted Stock Awards -- 188 -- Stock Warrants 44 33 -- Diluted EPS Shares: 63,893 44,156 21,436
The Preferred Units issued in 1998 and 1997 and Contingent Units issued in 1997 were not included in the computation of diluted EPS as such units were anti-dilutive during the period. Pursuant to the Repurchase Program, during 1998, the Company purchased for constructive retirement, 854,700 shares of its outstanding common stock for approximately $25,058. 75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Mack-Cali Realty Corporation and Subsidiaries (dollars in thousands, except per share or unit amounts) 15) SEGMENT REPORTING The Company has adopted Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information ("FASB No. 131"), which establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and require that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. The Company operates in one business segment--real estate. The Company provides leasing, management, acquisition, development, construction and tenant-related services for its portfolio. The Company does not have any foreign operations. The accounting policies of the segment are the same as those described in Note 2, excluding straight-line rent adjustments and depreciation and amortization. The Company evaluates performance based upon net operating income from the combined properties in the segment.
TOTAL CORPORATE & TOTAL SEGMENT OTHER(E) COMPANY Total contract revenues(a): 1998 $ 475,096 $ 4,919 $ 480,015(f) 1997 234,434 7,634 242,068(g) 1996 92,548 1,946 94,494(h) Total operating and interest expenses(b): 1998 $ 162,612 $100,707 $ 263,319 1997 81,058 49,032 130,090 1996 32,664 16,556 49,220 Net operating income(c): 1998 $ 312,484 $ (95,788) $ 216,696(f) 1997 153,376 (41,398) 111,978(g) 1996 59,884 (14,610) 45,274(h) Total assets: 1998 $ 3,430,865 $ 21,329 $3,452,194 1997 2,583,738 9,706 2,593,444 1996 822,989 203,339 1,026,328 Total long-lived assets(d): 1998 $ 3,393,313 $ 4,098 $3,397,411 1997 2,550,961 2,960 2,553,921 1996 804,139 308 804,447
(a) Total contract revenues represents all revenues during the period (including the Company's equity in earnings of unconsolidated joint ventures), excluding adjustments for straight-lining of rents and the Company's share of straight-line rent adjustments from unconsolidated joint ventures. All interest income is excluded from the segment amounts and is classified in Corporate and Other for all periods. (b) Total operating and interest expenses represents the sum of real estate taxes, utilities, operating services, general and administrative and interest expense. All interest expense (including for property-level mortgages) is excluded from the segment amounts and is classified in Corporate and Other for all periods. Amounts presented exclude depreciation and amortization of $78,916, $36,225 and $14,731 in 1998, 1997 and 1996, respectively, and non-recurring merger-related charges of $46,519 in 1997. (c) Net operating income represents total contract revenues [as defined in Note (a)] less total operating and interest expenses [as defined in Note (b)] for the period. (d) Long-lived assets is comprised of total rental property, unbilled rents receivable and investments in unconsolidated joint ventures. (e) Corporate & Other represents all corporate-level items (including interest income, interest expense and non-property general and administrative expense) as well as intercompany eliminations necessary to reconcile to consolidated Company totals. (f) Excludes $13,575 of adjustments for straight-lining of rents and $109 for the Company's share of straight-line rent adjustments from unconsolidated joint ventures. (g) Excludes $7,733 of adjustments for straight-lining of rents. (h) Excludes $978 of adjustments for straight-lining of rents. 76 16) IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FASB No. 133"). FASB No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for the Company). FASB No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Management of the Company anticipates that, due to its limited use of derivative instruments, the adoption of FASB No. 133 will not have a significant effect on the Company's results of operations or its financial position. 17) PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The following pro forma financial information for the years ended December 31, 1998 and 1997 are presented as if the RM Transaction, the Mack Transaction and all other acquisitions and common stock offerings completed in 1998 and 1997 had all occurred on January 1, 1997. The pro forma financial information excludes any deduction for the non-recurring merger-related charges and beneficial conversion feature charge included in the Company's historical information for the year ended December 31, 1997. In management's opinion, all adjustments necessary to reflect the effects of these transactions have been made. This pro forma financial information is not necessarily indicative of what the actual results of operations of the Company would have been assuming such transactions had been completed as of January 1, 1997, nor do they represent the results of operations of future periods.
YEAR ENDED DECEMBER 31, 1998 1997 Total revenues $522,661 $507,939 Operating and other expenses 157,698 153,084 General and administrative 26,901 27,789 Depreciation and amortization 83,410 74,615 Interest expense 102,828 105,709 Income before minority interest and extraordinary item 151,824 146,742 Minority interest 33,244 30,547 Income before extraordinary item $118,580 $116,195 Basic earnings per share $ 2.06 $ 2.02 Diluted earnings per share $ 2.04 $ 2.00 Basic weighted average shares outstanding 57,652 57,510 Diluted weighted average shares outstanding 66,338 65,538
77 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Mack-Cali Realty Corporation and Subsidiaries (dollars in thousands, except per share or unit amounts) 18) CONDENSED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following summarizes the condensed quarterly financial information for the Company:
QUARTER ENDED 1998 DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 Total revenues $ 134,941 $ 130,894 $ 122,041 $ 105,823 Operating and other expenses 41,444 40,595 36,598 31,067 General and administrative 6,864 6,118 6,394 6,196 Depreciation and amortization 22,379 21,213 19,093 16,231 Interest expense 23,896 23,881 21,786 18,480 Income before minority interest and extraordinary item 40,358 39,087 38,170 33,849 Minority interest 9,050 8,375 7,782 7,306 Income before extraordinary item 31,308 30,712 30,388 26,543 Extraordinary item--loss on early retirement debt (Net of minority interest's share of $297) -- -- (2,373) -- Net income $ 31,308 $ 30,712 $ 28,015 $ 26,543 BASIC EARNINGS PER SHARE: Income before extraordinary item $ 0.55 $ 0.53 $ 0.53 $ 0.52 Extraordinary item--loss on early retirement of debt -- -- (0.04) -- Net income $ 0.55 $ 0.53 $ 0.49 $ 0.52 DILUTED EARNINGS PER SHARE: Income before extraordinary item $ 0.55 $ 0.53 $ 0.53 $ 0.51 Extraordinary item--loss on early retirement of debt -- -- (0.04) -- Net income $ 0.55 $ 0.53 $ 0.49 $ 0.51 Dividends declared per common share $ 0.55 $ 0.55 $ 0.50 $ 0.50
QUARTER ENDED 1997 DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 Total revenues $ 74,495 $ 62,609 $ 60,542 $ 52,155 Operating and other expenses 22,580 18,928 18,068 15,574 General and administrative 5,260 3,675 3,754 3,173 Depreciation and amortization 11,194 9,339 8,799 7,493 Interest expense 10,680 10,694 9,884 7,820 Non-recurring merger-related charges 46,519 -- -- -- (Loss) income before minority interest and extraordinary item (21,738) 19,973 20,037 18,095 Minority interest 25,716 2,015 2,012 1,636 (Loss) income before extraordinary item (47,454) 17,958 18,025 16,459 Extraordinary item--loss on early retirement debt (Net of minority interest's share of $402) -- (3,583) -- -- Net (loss) income $(47,454) $ 14,375 $ 18,025 $ 16,459 BASIC EARNINGS PER SHARE: (Loss) income before extraordinary item $ (1.00) $ 0.49 $ 0.49 $ 0.45 Extraordinary item--loss on early retirement debt -- (0.10) -- -- Net (loss) income $ (1.00) $ 0.39 $ 0.49 $ 0.45 DILUTED EARNINGS PER SHARE: (Loss) income before extraordinary item $ (1.00) $ 0.48 $ 0.49 $ 0.44 Extraordinary item--loss on early retirement debt -- (0.09) -- -- Net (loss) income $ (1.00) $ 0.39 $ 0.49 $ 0.44 Dividends declared per common share $ 0.50 $ 0.50 $ 0.45 $ 0.45
78 EXHIBIT INDEX:
EXHIBIT NUMBER EXHIBIT TITLE - --------- -------------------------------------------------------------------------------------------------------- 10.1 Agreement of Limited Partnership of HPMC Development Partners, L.P., dated as of April 23, 1998, by and among HCG Development, L.L.C., Summit Partners I, L.L.C. and Mack-Cali California Development Associates L.P. 10.2 Supplement to Agreement of Limited Partnership of HPMC Development Partners, L.P., dated as of April 23, 1998, by and among HCG Development, L.L.C., Summit Partners I, L.L.C. and Mack-Cali California Development Associates L.P. 10.3 First Amendment to Agreement of Limited Partnership of HPMC Development Partners, L.P., dated as of October 8, 1998, by and among HCG Development, L.L.C., Summit Partners I, L.L.C. and Mack-Cali California Development Associates L.P. 10.4 Agreement of Limited Partnership of HPMC Lava Ridge Partners, L.P., dated as of July 21, 1998, by and among HCG Development L.L.C., Summit Partners I, L.L.C. and Mack-Cali California Development Associates L.P. 10.5 Amendment No. 1 to Revolving Credit Agreement dated July 20, 1998, by and among Mack-Cali Realty, L.P. and The Chase Manhattan Bank, Fleet National Bank and Other Lenders Which May Become Parties Thereto 10.6 Amendment No. 2 to Revolving Credit Agreement, dated as of December 30, 1998, among Mack-Cali Realty, L.P. and The Chase Manhattan Bank, Fleet National Bank and Other Lenders Which May Become Parties Thereto 23 Consent of PricewaterhouseCoopers LLP, independent accountants 27 Financial Data Schedule
79 MACK-CALI REALTY CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MACK-CALI REALTY CORPORATION. (REGISTRANT) Date: March 2, 1999 By: /s/ BARRY LEFKOWITZ ----------------------------------------- Barry Lefkowitz EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
NAME TITLE DATE - ------------------------------ -------------------------- ------------------- /s/ JOHN J. CALI - ------------------------------ Chairman of the Board March 2, 1999 John J. Cali /s/ THOMAS A. RIZK - ------------------------------ Chief Executive Officer March 2, 1999 Thomas A. Rizk and Director /s/ MITCHELL E. HERSH - ------------------------------ President, Chief Operating March 2, 1999 Mitchell E. Hersh Officer and Director /s/ BARRY LEFKOWITZ Executive Vice President - ------------------------------ and Chief Financial March 2, 1999 Barry Lefkowitz Officer /s/ BRENDAN T. BYRNE, ESQ. - ------------------------------ Director March 2, 1999 Brendan T. Byrne, Esq. /s/ MARTIN D. GRUSS - ------------------------------ Director March 2, 1999 Martin D. Gruss /s/ JEFFREY B. LANE - ------------------------------ Director March 2, 1999 Jeffrey B. Lane
80
NAME TITLE DATE - ------------------------------ -------------------------- ------------------- /s/ EARLE I. MACK - ------------------------------ Director March 2, 1999 Earle I. Mack /s/ WILLIAM L. MACK - ------------------------------ Director March 2, 1999 William L. Mack /s/ PAUL A. NUSSBAUM - ------------------------------ Director March 2, 1999 Paul A. Nussbaum /s/ ALAN G. PHILIBOSIAN - ------------------------------ Director March 2, 1999 Alan G. Philibosian /s/ DR. IRVIN D. REID - ------------------------------ Director March 2, 1999 Dr. Irvin D. Reid /s/ VINCENT TESE - ------------------------------ Director March 2, 1999 Vincent Tese /s/ MARTIN S. BERGER - ------------------------------ Director March 2, 1999 Martin S. Berger
81 MACK-CALI REALTY CORPORATION REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) SCHEDULE III
INITIAL COSTS COSTS YEAR ------------------------ CAPITALIZED ------------------------ RELATED BUILDING AND SUBSEQUENT TO PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - ---------------------------------------- ----- ----------- ------------- --------- ------------- ------------- ATLANTIC COUNTY, NEW JERSEY EGG HARBOR 100 Decadon Drive (O)................... 1987 1995 -- $ 300 $ 3,282 $ 130 200 Decadon Drive (O)................... 1991 1995 -- 369 3,241 162 BERGEN COUNTY, NEW JERSEY FAIR LAWN 17-17 Rte 208 North (O)................. 1987 1995 $ 17,586 3,067 19,415 394 FORT LEE 2115 Linwood Avenue (O)................. 1981 1998 -- 474 4,419 2,543 One Bridge Plaza (O).................... 1981 1996 -- 2,439 24,462 1,376 LITTLE FERRY 200 Riser Road (O)...................... 1974 1997 6,849 3,888 15,551 231 MONTVALE 135 Chestnut Ridge Road (O)............. 1981 1997 -- 2,587 10,350 27 95 Chestnut Ridge Road (O).............. 1975 1997 2,135 1,227 4,907 44 PARAMUS 140 Ridgewood Avenue (O)................ 1981 1997 15,392 7,932 31,463 150 15 East Midland Avenue (O).............. 1988 1997 24,790 10,374 41,497 25 461 From Road (O)....................... 1988 1997 29,223 13,194 52,778 54 61 South Paramus Avenue (O)............. 1985 1997 15,776 9,005 36,018 2,639 650 From Road (O)....................... 1978 1997 23,316 10,487 41,949 194 ROCHELLE PARK 120 Passaic Street (O).................. 1972 1997 -- 1,354 5,415 6 365 West Passaic Street (O)............. 1976 1997 7,468 4,148 16,592 661 SADDLE RIVER 1 Lake Street (O)....................... 1994 1997 35,789 13,952 55,812 7 UPPER SADDLE RIVER 10 Mountainview Road (O)................ 1986 1998 -- 3,683 835 20,991 WOODCLIFF LAKE 300 Tice Boulevard (O).................. 1991 1996 -- 5,424 29,688 388 400 Chestnut Ridge Road (O)............. 1982 1997 14,983 4,201 16,802 1 470 Chestnut Ridge Road (O)............. 1987 1997 4,087 2,346 9,385 2 50 Tice Boulevard (O)................... 1984 1994 -- 4,500 -- 25,703 530 Chestnut Ridge Road (O)............. 1986 1997 4,032 1,860 7,441 3 BURLINGTON COUNTY, NEW JERSEY BURLINGTON 3 Terri Lane (F)........................ 1991 1998 2,104 652 3,433 840 5 Terri Lane (F)........................ 1992 1998 2,372 564 3,792 1,265 DELRAN Tenby Chase Apartments (M).............. 1970 1994 -- 396 -- 5,208 MOORESTOWN 1 Executive Drive (F)................... 1989 1998 -- 226 1,453 95 101 Commerce Drive (F).................. 1988 1998 -- 422 3,528 237 101 Executive Drive (F)................. 1990 1998 1,200 241 2,262 46 102 Executive Drive (F)................. 1990 1998 -- 353 3,607 117 1256 North Church (F)................... 1984 1998 -- 354 3,098 227 1507 Lancer Drive (F)................... 1995 1998 -- 119 1,106 37 1510 Lancer Drive (F)................... 1998 1998 -- 732 2,928 15 201 Commerce Drive (F).................. 1986 1998 1,121 254 1,694 74 224 Strawbridge Drive (O)............... 1984 1997 -- 766 4,334 2,698 225 Executive Drive (F)................. 1990 1998 1,353 323 2,477 91 228 Strawbridge Drive (O)............... 1984 1997 -- 767 4,333 2,885 30 Twosome Drive (F).................... 1997 1998 -- 234 1,954 38 40 Twosome Drive (F).................... 1996 1998 -- 297 2,393 51 GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD(1) ----------------------------------- BUILDING AND ACCUMULATED PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION - ---------------------------------------- --------- ------------- --------- ------------ ATLANTIC COUNTY, NEW JERSEY EGG HARBOR 100 Decadon Drive (O)................... $ 300 $ 3,412 $ 3,712 $ 273 200 Decadon Drive (O)................... 369 3,403 3,772 300 BERGEN COUNTY, NEW JERSEY FAIR LAWN 17-17 Rte 208 North (O)................. 3,067 19,809 22,876 1,949 FORT LEE 2115 Linwood Avenue (O)................. 474 6,962 7,436 -- One Bridge Plaza (O).................... 2,439 25,838 28,277 1,434 LITTLE FERRY 200 Riser Road (O)...................... 3,888 15,782 19,670 408 MONTVALE 135 Chestnut Ridge Road (O)............. 2,588 10,376 12,964 270 95 Chestnut Ridge Road (O).............. 1,227 4,951 6,178 128 PARAMUS 140 Ridgewood Avenue (O)................ 7,932 31,613 39,545 526 15 East Midland Avenue (O).............. 10,374 41,522 51,896 1,083 461 From Road (O)....................... 13,194 52,832 66,026 1,378 61 South Paramus Avenue (O)............. 9,005 38,657 47,662 946 650 From Road (O)....................... 10,487 42,143 52,630 1,096 ROCHELLE PARK 120 Passaic Street (O).................. 1,354 5,421 6,775 141 365 West Passaic Street (O)............. 4,148 17,253 21,401 435 SADDLE RIVER 1 Lake Street (O)....................... 13,953 55,818 69,771 1,457 UPPER SADDLE RIVER 10 Mountainview Road (O)................ 4,240 21,269 25,509 651 WOODCLIFF LAKE 300 Tice Boulevard (O).................. 5,424 30,076 35,500 1,572 400 Chestnut Ridge Road (O)............. 4,201 16,803 21,004 436 470 Chestnut Ridge Road (O)............. 2,346 9,387 11,733 245 50 Tice Boulevard (O)................... 4,500 25,703 30,203 10,401 530 Chestnut Ridge Road (O)............. 1,860 7,444 9,304 194 BURLINGTON COUNTY, NEW JERSEY BURLINGTON 3 Terri Lane (F)........................ 658 4,267 4,925 151 5 Terri Lane (F)........................ 569 5,052 5,621 198 DELRAN Tenby Chase Apartments (M).............. 396 5,208 5,604 3,283 MOORESTOWN 1 Executive Drive (F)................... 228 1,546 1,774 60 101 Commerce Drive (F).................. 425 3,762 4,187 139 101 Executive Drive (F)................. 243 2,306 2,549 82 102 Executive Drive (F)................. 356 3,721 4,077 122 1256 North Church (F)................... 356 3,323 3,679 123 1507 Lancer Drive (F)................... 120 1,142 1,262 37 1510 Lancer Drive (F)................... 734 2,941 3,675 37 201 Commerce Drive (F).................. 258 1,764 2,022 70 224 Strawbridge Drive (O)............... 767 7,031 7,798 126 225 Executive Drive (F)................. 326 2,565 2,891 97 228 Strawbridge Drive (O)............... 767 7,218 7,985 170 30 Twosome Drive (F).................... 235 1,991 2,226 89 40 Twosome Drive (F).................... 300 2,441 2,741 89
82 MACK-CALI REALTY CORPORATION REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) SCHEDULE III
INITIAL COSTS COSTS YEAR ------------------------ CAPITALIZED ------------------------ RELATED BUILDING AND SUBSEQUENT TO PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - ---------------------------------------- ----- ----------- ------------- --------- ------------- ------------- 50 Twosome Drive (F).................... 1997 1998 -- 301 2,330 35 MOORESTOWN 840 North Lenola Road (F)............... 1995 1998 -- 329 2,366 39 844 North Lenola Road (F)............... 1995 1998 -- 239 1,714 29 97 Foster Road (F)...................... 1982 1998 -- 208 1,382 44 WEST DEPTFORD 1451 Metropolitan Drive (F)............. 1996 1998 -- 203 1,189 23 ESSEX COUNTY, NEW JERSEY MILLBURN 150 J.F.K. Parkway (O).................. 1980 1997 27,696 12,606 50,425 55 ROSELAND 101 Eisenhower Parkway (O).............. 1980 1994 -- 228 -- 14,149 103 Eisenhower Parkway (O).............. 1985 1994 -- -- -- 14,113 HUDSON COUNTY, NEW JERSEY JERSEY CITY 95 Christopher Columbus Drive (O)....... 1989 1994 -- 6,205 -- 80,392 Harborside Financial Center Plaza I (O)................................... 1983 1996 48,148 3,923 51,013 -- Harborside Financial Center Plaza II (O)................................... 1990 1996 54,001 17,655 101,546 987 Harborside Financial Center Plaza III (O)................................... 1990 1996 54,001 17,655 101,878 993 MERCER COUNTY, NEW JERSEY HAMILTON TOWNSHIP 100 Horizon Drive (F)................... 1989 1995 -- 205 1,676 -- 200 Horizon Drive (F)................... 1991 1995 -- 205 3,027 -- 300 Horizon Drive (F)................... 1989 1995 -- 379 4,355 8 500 Horizon Drive (F)................... 1990 1995 -- 379 3,395 100 PRINCETON 5 Vaughn Drive (O)...................... 1987 1995 -- 657 9,800 371 400 Alexander Road (O).................. 1987 1995 -- 344 3,917 2,413 103 Carnegie Center (O)................. 1984 1996 -- 2,566 7,868 498 100 Overlook Center (O)................. 1988 1997 -- 2,378 21,754 52 MIDDLESEX COUNTY, NEW JERSEY EAST BRUNSWICK 377 Summerhill Road (O)................. 1977 1997 -- 649 2,594 143 PLAINSBORO 500 College Road East (O)............... 1984 1998 -- 614 20,626 148 SOUTH BRUNSWICK 3 Independence Way (O).................. 1983 1997 -- 1,997 11,391 79 WOODBRIDGE 581 Main Street (O)..................... 1991 1997 17,500 3,237 12,949 12,406 MONMOUTH COUNTY, NEW JERSEY NEPTUNE 3600 Route 66 (O)....................... 1989 1995 -- 1,098 18,146 40 WALL TOWNSHIP 1305 Campus Parkway (O)................. 1988 1995 -- 335 2,560 79 1320 Wykoff Avenue (F).................. 1986 1995 -- 255 1,285 19 1324 Wykoff Avenue (F).................. 1987 1995 -- 230 1,439 109 1325 Campus Parkway (F)................. 1988 1995 -- 270 2,928 61 1340 Campus Parkway (F)................. 1992 1995 -- 489 4,621 279 1350 Campus Parkway (O)................. 1990 1995 -- 454 7,134 407 1433 Highway 34 (F)..................... 1985 1995 -- 889 4,321 303 1345 Campus Parkway (F)................. 1995 1997 -- 1,023 5,703 21 MORRIS COUNTY, NEW JERSEY FLORHAM PARK 325 Columbia Parkway (O)................ 1987 1994 -- 1,564 -- 15,596 GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD(1) ----------------------------------- BUILDING AND ACCUMULATED PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION - ---------------------------------------- --------- ------------- --------- ------------ 50 Twosome Drive (F).................... 304 2,362 2,666 99 MOORESTOWN 840 North Lenola Road (F)............... 333 2,401 2,734 94 844 North Lenola Road (F)............... 241 1,741 1,982 68 97 Foster Road (F)...................... 211 1,423 1,634 47 WEST DEPTFORD 1451 Metropolitan Drive (F)............. 206 1,209 1,415 51 ESSEX COUNTY, NEW JERSEY MILLBURN 150 J.F.K. Parkway (O).................. 12,606 50,480 63,086 1,317 ROSELAND 101 Eisenhower Parkway (O).............. 228 14,149 14,377 7,363 103 Eisenhower Parkway (O).............. 2,300 11,813 14,113 5,033 HUDSON COUNTY, NEW JERSEY JERSEY CITY 95 Christopher Columbus Drive (O)....... 6,205 80,392 86,597 21,666 Harborside Financial Center Plaza I (O)................................... 3,923 51,013 54,936 2,763 Harborside Financial Center Plaza II (O)................................... 17,841 102,347 120,188 5,570 Harborside Financial Center Plaza III (O)................................... 17,821 102,705 120,526 5,569 MERCER COUNTY, NEW JERSEY HAMILTON TOWNSHIP 100 Horizon Drive (F)................... 205 1,676 1,881 133 200 Horizon Drive (F)................... 205 3,027 3,232 240 300 Horizon Drive (F)................... 379 4,363 4,742 348 500 Horizon Drive (F)................... 379 3,495 3,874 306 PRINCETON 5 Vaughn Drive (O)...................... 657 10,171 10,828 886 400 Alexander Road (O).................. 344 6,330 6,674 665 103 Carnegie Center (O)................. 2,566 8,366 10,932 656 100 Overlook Center (O)................. 2,378 21,806 24,184 635 MIDDLESEX COUNTY, NEW JERSEY EAST BRUNSWICK 377 Summerhill Road (O)................. 649 2,737 3,386 69 PLAINSBORO 500 College Road East (O)............... 614 20,774 21,388 376 SOUTH BRUNSWICK 3 Independence Way (O).................. 1,997 11,470 13,467 381 WOODBRIDGE 581 Main Street (O)..................... 8,115 20,477 28,592 381 MONMOUTH COUNTY, NEW JERSEY NEPTUNE 3600 Route 66 (O)....................... 1,098 18,186 19,284 1,443 WALL TOWNSHIP 1305 Campus Parkway (O)................. 335 2,639 2,974 242 1320 Wykoff Avenue (F).................. 255 1,304 1,559 103 1324 Wykoff Avenue (F).................. 230 1,548 1,778 141 1325 Campus Parkway (F)................. 270 2,989 3,259 248 1340 Campus Parkway (F)................. 489 4,900 5,389 411 1350 Campus Parkway (O)................. 454 7,541 7,995 677 1433 Highway 34 (F)..................... 889 4,624 5,513 458 1345 Campus Parkway (F)................. 1,024 5,723 6,747 274 MORRIS COUNTY, NEW JERSEY FLORHAM PARK 325 Columbia Parkway (O)................ 1,564 15,596 17,160 5,558
83 MACK-CALI REALTY CORPORATION REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) SCHEDULE III
INITIAL COSTS COSTS YEAR ------------------------ CAPITALIZED ------------------------ RELATED BUILDING AND SUBSEQUENT TO PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - ---------------------------------------- ----- ----------- ------------- --------- ------------- ------------- MORRIS PLAINS 201 Littleton Road (O).................. 1979 1997 -- 2,407 9,627 94 250 Johnson Road (O).................... 1977 1997 2,292 2,004 8,016 155 MORRIS TOWNSHIP 340 Mt. Kemble Avenue (O)............... 1985 1997 32,178 13,624 54,496 39 412 Mt. Kemble Avenue (O)............... 1986 1997 40,025 15,737 62,954 30 PARSIPPANY 2 Dryden Way (O)........................ 1990 1998 -- 778 420 13 2 Hilton Court (O)...................... 1991 1998 -- 1,971 32,007 83 600 Parsippany Road (O)................. 1978 1994 -- 1,257 5,594 569 7 Campus Drive (O)...................... 1982 1998 -- 1,932 27,788 106 7 Sylvan Way (O)........................ 1987 1998 -- 2,084 26,083 35 8 Campus Drive (O)...................... 1987 1998 -- 1,865 35,456 142 5 Sylvan Way (O)........................ 1989 1998 -- 1,160 25,214 169 1 Sylvan Way (O)........................ 1989 1998 -- 1,689 24,699 681 PASSAIC COUNTY, NEW JERSEY CLIFTON 777 Passaic Avenue (O).................. 1983 1994 -- -- -- 7,135 TOTOWA 11 Commerce Way (F)..................... 1989 1995 -- 586 2,986 67 120 Commerce Way (F).................... 1994 1995 -- 228 -- 1,197 140 Commerce Way (F).................... 1994 1995 -- 229 -- 1,197 2 Center Court (F)...................... 1998 1998 -- 191 -- 2,537 20 Commerce Way (F)..................... 1992 1995 -- 516 3,108 28 29 Commerce Way (F)..................... 1990 1995 -- 586 3,092 227 40 Commerce Way (F)..................... 1987 1995 -- 516 3,260 379 45 Commerce Way (F)..................... 1992 1995 -- 536 3,379 138 60 Commerce Way (F)..................... 1988 1995 -- 526 3,257 232 80 Commerce Way (F)..................... 1996 1996 -- 227 -- 1,648 100 Commerce Way (F).................... 1996 1996 -- 226 -- 1,647 999 Riverview Drive (O)................. 1988 1995 -- 476 6,024 132 WAYNE 201 Willowbrook Boulevard (O)........... 1970 1997 10,918 3,103 12,410 418 SOMERSET COUNTY, NEW JERSEY BASKING RIDGE 222 Mt. Airy Road (O)................... 1986 1996 -- 775 3,636 17 233 Mt. Airy Road (O)................... 1987 1996 -- 1,034 5,033 16 BRIDGEWATER 721 Route 202/206 (O)................... 1989 1997 23,000 6,730 26,919 101 UNION COUNTY, NEW JERSEY CLARK 100 Walnut Avenue (O)................... 1985 1994 -- -- -- 17,608 CRANFORD 11 Commerce Drive (O)................... 1981 1994 -- 470 -- 6,088 12 Commerce Drive (O)................... 1967 1997 -- 887 3,549 26 20 Commerce Drive (O)................... 1990 1994 -- 2,346 -- 21,991 6 Commerce Drive (O).................... 1973 1994 -- 250 -- 2,704 65 Jackson Drive (O).................... 1984 1994 -- 541 -- 7,006 NEW PROVIDENCE 890 Mountain Road (O)................... 1977 1997 8,027 2,796 11,185 4,037 DUTCHESS COUNTY, NEW YORK FISHKILL 300 South Lake Drive (O)................ 1987 1997 -- 2,258 9,031 86 GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD(1) ----------------------------------- BUILDING AND ACCUMULATED PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION - ---------------------------------------- --------- ------------- --------- ------------ MORRIS PLAINS 201 Littleton Road (O).................. 2,407 9,721 12,128 252 250 Johnson Road (O).................... 2,004 8,171 10,175 210 MORRIS TOWNSHIP 340 Mt. Kemble Avenue (O)............... 13,624 54,535 68,159 1,423 412 Mt. Kemble Avenue (O)............... 15,738 62,983 78,721 1,644 PARSIPPANY 2 Dryden Way (O)........................ 778 433 1,211 18 2 Hilton Court (O)...................... 1,971 32,090 34.061 741 600 Parsippany Road (O)................. 1,257 6,163 7,420 685 7 Campus Drive (O)...................... 1,932 27,894 29,826 617 7 Sylvan Way (O)........................ 2,084 26,118 28,202 616 8 Campus Drive (O)...................... 1,865 35,598 37,463 784 5 Sylvan Way (O)........................ 1,160 25,383 26,543 541 1 Sylvan Way (O)........................ 1,689 25,380 27,069 554 PASSAIC COUNTY, NEW JERSEY CLIFTON 777 Passaic Avenue (O).................. 1,100 6,035 7,135 2,449 TOTOWA 11 Commerce Way (F)..................... 586 3,053 3,639 248 120 Commerce Way (F).................... 228 1,197 1,425 95 140 Commerce Way (F).................... 229 1,197 1,426 96 2 Center Court (F)...................... 191 2,537 2,728 56 20 Commerce Way (F)..................... 516 3,136 3,652 248 29 Commerce Way (F)..................... 586 3,319 3,905 324 40 Commerce Way (F)..................... 516 3,639 4,155 362 45 Commerce Way (F)..................... 536 3,517 4,053 327 60 Commerce Way (F)..................... 526 3,489 4,015 346 80 Commerce Way (F)..................... 227 1,648 1,875 203 100 Commerce Way (F).................... 226 1,647 1,873 202 999 Riverview Drive (O)................. 476 6,156 6,632 515 WAYNE 201 Willowbrook Boulevard (O)........... 3,103 12,828 15,931 325 SOMERSET COUNTY, NEW JERSEY BASKING RIDGE 222 Mt. Airy Road (O)................... 775 3,653 4,428 228 233 Mt. Airy Road (O)................... 1,034 5,049 6,083 305 BRIDGEWATER 721 Route 202/206 (O)................... 6,730 27,020 33,750 703 UNION COUNTY, NEW JERSEY CLARK 100 Walnut Avenue (O)................... 1,822 15,786 17,608 6,395 CRANFORD 11 Commerce Drive (O)................... 470 6,088 6,558 3,021 12 Commerce Drive (O)................... 887 3,575 4,462 93 20 Commerce Drive (O)................... 2,346 21,991 24,337 5,727 6 Commerce Drive (O).................... 250 2,704 2,954 1,545 65 Jackson Drive (O).................... 542 7,005 7,547 2,919 NEW PROVIDENCE 890 Mountain Road (O)................... 3,600 14,418 18,018 361 DUTCHESS COUNTY, NEW YORK FISHKILL 300 South Lake Drive (O)................ 2,258 9,117 11,375 245
84 MACK-CALI REALTY CORPORATION REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) SCHEDULE III
INITIAL COSTS COSTS YEAR ------------------------ CAPITALIZED ------------------------ RELATED BUILDING AND SUBSEQUENT TO PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - ---------------------------------------- ----- ----------- ------------- --------- ------------- ------------- NASSAU COUNTY, NEW YORK NORTH HEMPSTEAD 111 East Shore Road (O)................. 1980 1997 8,000 2,093 8,370 94 600 Community Drive (O)................. 1983 1997 -- 11,018 44,070 12 ROCKLAND COUNTY, NEW YORK SUFFERN 400 Rella Boulevard (O)................. 1988 1995 -- 1,090 13,412 975 WESTCHESTER COUNTY, NEW YORK ELMSFORD 1 Warehouse Lane (I).................... 1957 1997 161 3 268 100 1 Westchester Plaza (F)................. 1967 1997 1,320 199 2,023 29 100 Clearbrook Road (O)................. 1975 1997 1,281 220 5,366 463 101 Executive Boulevard (O)............. 1971 1997 3,600 267 5,838 73 11 Clearbrook Road (F).................. 1974 1997 1,367 149 2,159 5 150 Clearbrook Road (F)................. 1975 1997 4,464 497 7,030 51 175 Clearbrook Road (F)................. 1973 1997 4,826 655 7,473 210 2 Warehouse Lane (I).................... 1957 1997 402 4 672 5 2 Westchester Plaza (F)................. 1968 1997 1,760 234 2,726 1 200 Clearbrook Road (F)................. 1974 1997 4,263 579 6,620 85 250 Clearbrook Road (F)................. 1973 1997 5,630 867 8,647 229 3 Warehouse Lane (I).................... 1957 1997 1,166 21 1,948 1 3 Westchester Plaza (F)................. 1969 1997 5,080 655 7,936 -- 300 Executive Boulevard (F)............. 1970 1997 2,403 460 3,609 -- 350 Executive Boulevard (F)............. 1970 1997 -- 100 1,793 -- 399 Executive Boulevard (F)............. 1962 1997 4,560 531 7,191 12 4 Warehouse Lane (I).................... 1957 1997 8,044 84 13,393 63 4 Westchester Plaza (F)................. 1969 1997 2,400 320 3,729 59 400 Executive Boulevard (F)............. 1970 1997 2,403 2,202 1,846 118 5 Warehouse Lane (I).................... 1957 1997 2,855 19 4,804 4 5 Westchester Plaza (F)................. 1969 1997 1,200 118 1,949 -- 50 Executive Boulevard (F).............. 1969 1997 1,680 237 2,617 -- 500 Executive Boulevard (F)............. 1970 1997 2,643 258 4,183 1 525 Executive Boulevard (F)............. 1972 1997 -- 345 5,499 8 570 Taxter Road (O)..................... 1972 1997 3,847 438 6,078 40 6 Warehouse Lane (I).................... 1982 1997 2,654 10 4,419 6 6 Westchester Plaza (F)................. 1968 1997 1,280 164 1,998 21 7 Westchester Plaza (F)................. 1972 1997 2,720 286 4,321 9 700 Executive Boulevard (L)............. N/A 1997 -- 970 -- -- 75 Clearbrook Road (F).................. 1990 1997 -- 2,314 4,716 -- 77 Executive Boulevard (F).............. 1977 1997 3,982 34 1,104 6 8 Westchester Plaza (F)................. 1971 1997 3,378 447 5,262 634 85 Executive Boulevard (F).............. 1968 1997 1,562 155 2,507 12 HAWTHORNE 1 Skyline Drive (O)..................... 1980 1997 -- 66 1,711 11 10 Skyline Drive (F).................... 1985 1997 1,729 134 2,799 78 11 Skyline Drive (F).................... 1989 1997 -- -- 4,788 66 15 Skyline Drive (F).................... 1989 1997 -- -- 7,449 305 17 Skyline Drive (O).................... 1989 1997 -- -- 7,269 65 2 Skyline Drive (O)..................... 1987 1997 -- 109 3,128 10 200 Saw Mill River Road (F)............. 1965 1997 2,172 353 3,353 68 30 Saw Mill River Road (O).............. 1982 1997 21,553 2,355 34,254 2,802 4 Skyline Drive (F)..................... 1987 1997 -- 363 7,513 371 7 Skyline Drive (O)..................... 1987 1998 -- 330 13,013 36 8 Skyline Drive (F)..................... 1985 1997 2,734 212 4,410 85 TARRYTOWN 200 White Plains Road (O)............... 1982 1997 5,150 378 8,367 557 220 White Plains Road (O)............... 1984 1997 5,030 367 8,112 156 GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD(1) ----------------------------------- BUILDING AND ACCUMULATED PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION - ---------------------------------------- --------- ------------- --------- ------------ NASSAU COUNTY, NEW YORK NORTH HEMPSTEAD 111 East Shore Road (O)................. 2,093 8,464 10,557 228 600 Community Drive (O)................. 11,018 44,082 55,100 1,194 ROCKLAND COUNTY, NEW YORK SUFFERN 400 Rella Boulevard (O)................. 1,090 14,387 15,477 1,397 WESTCHESTER COUNTY, NEW YORK ELMSFORD 1 Warehouse Lane (I).................... 3 368 371 13 1 Westchester Plaza (F)................. 199 2,052 2,251 101 100 Clearbrook Road (O)................. 220 5,829 6,049 273 101 Executive Boulevard (O)............. 267 5,911 6,178 290 11 Clearbrook Road (F).................. 149 2,164 2,313 104 150 Clearbrook Road (F)................. 497 7,081 7,578 338 175 Clearbrook Road (F)................. 655 7,683 8,338 396 2 Warehouse Lane (I).................... 4 677 681 32 2 Westchester Plaza (F)................. 234 2,727 2,961 131 200 Clearbrook Road (F)................. 579 6,705 7,284 324 250 Clearbrook Road (F)................. 867 8,876 9,743 424 3 Warehouse Lane (I).................... 21 1,949 1,970 93 3 Westchester Plaza (F)................. 655 7,936 8,591 380 300 Executive Boulevard (F)............. 460 3,609 4,069 173 350 Executive Boulevard (F)............. 100 1,793 1,893 86 399 Executive Boulevard (F)............. 531 7,203 7,734 345 4 Warehouse Lane (I).................... 85 13,455 13,540 651 4 Westchester Plaza (F)................. 320 3,788 4,108 188 400 Executive Boulevard (F)............. 2,202 1,964 4,166 88 5 Warehouse Lane (I).................... 19 4,808 4,827 232 5 Westchester Plaza (F)................. 118 1,949 2,067 93 50 Executive Boulevard (F).............. 237 2,617 2,854 125 500 Executive Boulevard (F)............. 258 4,184 4,442 200 525 Executive Boulevard (F)............. 345 5,507 5,852 265 570 Taxter Road (O)..................... 438 6,118 6,556 301 6 Warehouse Lane (I).................... 10 4,425 4,435 212 6 Westchester Plaza (F)................. 164 2,019 2,183 99 7 Westchester Plaza (F)................. 286 4,330 4,616 211 700 Executive Boulevard (L)............. 970 -- 970 -- 75 Clearbrook Road (F).................. 2,314 4,716 7,030 226 77 Executive Boulevard (F).............. 34 1,110 1,144 53 8 Westchester Plaza (F)................. 447 5,896 6,343 321 85 Executive Boulevard (F).............. 155 2,519 2,674 120 HAWTHORNE 1 Skyline Drive (O)..................... 66 1,722 1,788 82 10 Skyline Drive (F).................... 134 2,877 3,011 148 11 Skyline Drive (F).................... -- 4,854 4,854 239 15 Skyline Drive (F).................... -- 7,754 7,754 454 17 Skyline Drive (O).................... -- 7,334 7,334 348 2 Skyline Drive (O)..................... 109 3,138 3,247 150 200 Saw Mill River Road (F)............. 353 3,421 3,774 168 30 Saw Mill River Road (O).............. 2,356 37,055 39,411 1,921 4 Skyline Drive (F)..................... 363 7,884 8,247 460 7 Skyline Drive (O)..................... 330 13,049 13,379 108 8 Skyline Drive (F)..................... 212 4,495 4,707 229 TARRYTOWN 200 White Plains Road (O)............... 378 8,924 9,302 492 220 White Plains Road (O)............... 367 8,268 8,635 418
85 MACK-CALI REALTY CORPORATION REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) SCHEDULE III
INITIAL COSTS COSTS YEAR ------------------------ CAPITALIZED ------------------------ RELATED BUILDING AND SUBSEQUENT TO PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - ---------------------------------------- ----- ----------- ------------- --------- ------------- ------------- 230 White Plains Road (R)............... 1984 1997 1,158 124 1,845 -- WHITE PLAINS 1 Barker Avenue (O)..................... 1975 1997 -- 207 9,629 143 1 Water Street (O)...................... 1979 1997 3,298 211 5,382 107 11 Martine Avenue (O)................... 1987 1997 15,465 127 26,833 1,900 25 Martine Avenue (M)................... 1987 1997 -- 120 11,366 129 3 Barker Avenue (O)..................... 1983 1997 -- 122 7,864 337 50 Main Street (O)...................... 1985 1997 27,918 564 48,105 1,425 YONKERS 1 Enterprise Boulevard (L).............. N/A 1997 -- 1,380 -- -- 1 Executive Boulevard (O)............... 1982 1997 684 1,104 11,904 386 1 Odell Plaza (F)....................... 1980 1997 -- 1,206 6,815 47 100 Corporate Boulevard (F)............. 1987 1997 6,211 602 9,910 62 2 Executive Plaza (R)................... 1986 1997 7,722 89 2,439 -- 200 Corporate Boulevard South (F)....... 1990 1997 -- 502 7,575 137 3 Executive Plaza (O)................... 1987 1997 -- 385 6,256 -- 4 Executive Plaza (F)................... 1986 1997 1,528 584 6,134 275 5 Odell Plaza (F)....................... 1983 1997 -- 331 2,988 -- 6 Executive Plaza (F)................... 1987 1997 -- 546 7,246 -- 7 Odell Plaza (F)....................... 1984 1997 -- 419 4,418 59 CHESTER COUNTY, PENNSYLVANIA BERWYN 1000 Westlakes Drive (O)................ 1989 1997 -- 619 9,016 97 1055 Westlakes Drive (O)................ 1990 1997 -- 1,951 19,046 200 1205 Westlakes Drive (O)................ 1988 1997 -- 1,323 20,098 287 1235 Westlakes Drive (O)................ 1986 1997 -- 1,417 21,215 332 DELAWARE COUNTY, PENNSYLVANIA LESTER 100 Stevens Drive (O)................... 1986 1996 -- 1,349 10,018 114 200 Stevens Drive (O)................... 1987 1996 -- 1,644 20,186 296 300 Stevens Drive (O)................... 1992 1996 -- 491 9,490 76 MEDIA 1400 Providence Rd--Center I (O)........ 1986 1996 -- 1,042 9,054 616 1400 Providence Rd.--Center II(O)....... 1990 1996 -- 1,543 16,464 797 MONTGOMERY COUNTY, PENNSYLVANIA LOWER PROVIDENCE 1000 Madison Avenue (O)................. 1990 1997 -- 1,713 12,559 88 PLYMOUTH MEETING Five Sentry East (O).................... 1984 1996 -- 642 7,992 403 Five Sentry West (O).................... 1984 1996 -- 268 3,334 34 1150 Plymouth Meeting Mall (O).......... 1970 1997 -- 125 499 20,355 FAIRFIELD COUNTY, CONNECTICUT GREENWICH 500 West Putnam Avenue (O).............. 1973 1998 11,471 3,300 16,734 200 NORWARK 40 Richards Avenue (O).................. 1985 1998 -- 1,087 18,399 143 SHELTON 1000 Bridgeport Avenue (O).............. 1986 1997 -- 773 14,934 12 STAMFORD 419 West Avenue (F)..................... 1986 1997 -- 4,538 9,246 5 500 West Avenue (F)..................... 1988 1997 -- 415 1,679 -- 550 West Avenue (F)..................... 1990 1997 -- 1,975 3,856 4 650 West Avenue (F)..................... 1998 1998 -- 1,328 -- 3,624 GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD(1) ----------------------------------- BUILDING AND ACCUMULATED PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION - ---------------------------------------- --------- ------------- --------- ------------ 230 White Plains Road (R)............... 124 1,845 1,969 88 WHITE PLAINS 1 Barker Avenue (O)..................... 207 9,772 9,979 477 1 Water Street (O)...................... 211 5,489 5,700 263 11 Martine Avenue (O)................... 127 28,733 28,860 1,295 25 Martine Avenue (M)................... 120 11,495 11,615 545 3 Barker Avenue (O)..................... 122 8,201 8,323 413 50 Main Street (O)...................... 564 49,530 50,094 2,401 YONKERS 1 Enterprise Boulevard (L).............. 1,380 -- 1,380 -- 1 Executive Boulevard (O)............... 1,105 12,289 13,394 635 1 Odell Plaza (F)....................... 1,206 6,862 8,068 328 100 Corporate Boulevard (F)............. 602 9,972 10,574 477 2 Executive Plaza (R)................... 89 2,439 2,528 117 200 Corporate Boulevard South (F)....... 502 7,712 8,214 283 3 Executive Plaza (O)................... 385 6,256 6,641 301 4 Executive Plaza (F)................... 584 6,409 6,993 342 5 Odell Plaza (F)....................... 331 2,988 3,319 143 6 Executive Plaza (F)................... 546 7,246 7,792 347 7 Odell Plaza (F)....................... 419 4,477 4,896 236 CHESTER COUNTY, PENNSYLVANIA BERWYN 1000 Westlakes Drive (O)................ 619 9,113 9,732 425 1055 Westlakes Drive (O)................ 1,951 19,246 21,197 904 1205 Westlakes Drive (O)................ 1,323 20,385 21,708 947 1235 Westlakes Drive (O)................ 1,418 21,546 22,964 979 DELAWARE COUNTY, PENNSYLVANIA LESTER 100 Stevens Drive (O)................... 1,349 10,132 11,481 507 200 Stevens Drive (O)................... 1,644 20,482 22,126 1,016 300 Stevens Drive (O)................... 491 9,566 10,057 479 MEDIA 1400 Providence Rd--Center I (O)........ 1,042 9,670 10,712 676 1400 Providence Rd.--Center II(O)....... 1,544 17,260 18,804 1,258 MONTGOMERY COUNTY, PENNSYLVANIA LOWER PROVIDENCE 1000 Madison Avenue (O)................. 1,714 12,646 14,360 418 PLYMOUTH MEETING Five Sentry East (O).................... 642 8,395 9,037 445 Five Sentry West (O).................... 268 3,368 3,636 184 1150 Plymouth Meeting Mall (O).......... 125 20,854 20,979 407 FAIRFIELD COUNTY, CONNECTICUT GREENWICH 500 West Putnam Avenue (O).............. 3,300 16,934 20,234 352 NORWARK 40 Richards Avenue (O).................. 1,087 18,542 19,629 157 SHELTON 1000 Bridgeport Avenue (O).............. 773 14,946 15,719 505 STAMFORD 419 West Avenue (F)..................... 4,538 9,251 13,789 445 500 West Avenue (F)..................... 415 1,679 2,094 80 550 West Avenue (F)..................... 1,975 3,860 5,835 185 650 West Avenue (F)..................... 1,328 3,624 4,952 30
86 MACK-CALI REALTY CORPORATION REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) SCHEDULE III
INITIAL COSTS COSTS YEAR ------------------------ CAPITALIZED ------------------------ RELATED BUILDING AND SUBSEQUENT TO PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - ---------------------------------------- ----- ----------- ------------- --------- ------------- ------------- BEXAR COUNTY, TEXAS SAN ANTONIO 111 Soledad (O)......................... 1918 1997 -- 2,004 8,017 58 1777 N.E. Loop 410 (O).................. 1986 1997 -- 3,119 12,477 364 84 N.E. Loop 410 (O).................... 1971 1997 -- 2,295 10,382 97 200 Concord Plaza Drive (O)............. 1986 1997 -- 2,387 31,825 318 COLLIN COUNTY, TEXAS PLANO 555 Republic Place (O).................. 1986 1997 -- 942 3,767 2 DALLAS COUNTY, TEXAS DALLAS 3030 LBJ Freeway (O).................... 1984 1997 -- 6,098 24,366 734 3100 Monticello (O)..................... 1984 1997 -- 1,940 7,762 4,084 8214 Westchester (O).................... 1983 1997 -- 1,705 6,819 67 IRVING 2300 Valley View (O).................... 1985 1997 -- 1,913 7,651 342 RICHARDSON 1122 Alma Road (O)...................... 1977 1997 -- 754 3,015 100 HARRIS COUNTY, TEXAS HOUSTON 10497 Town & Country Way (O)............ 1981 1997 -- 1,619 6,476 79 14511 Falling Creek (O)................. 1982 1997 -- 434 1,738 99 1717 St. James Place (O)................ 1975 1997 -- 909 3,636 116 1770 St. James Place (O)................ 1973 1997 -- 730 2,920 173 5225 Katy Freeway (O)................... 1983 1997 -- 1,403 5,610 156 5300 Memorial (O)....................... 1982 1997 -- 1,283 7,269 81 POTTER COUNTY, TEXAS AMARILLO 6900 IH--40 West (O).................... 1986 1997 -- 287 1,147 48 TARRANT COUNTY, TEXAS EULESS 150 West Park Way (O)................... 1984 1997 -- 852 3,410 56 TRAVIS COUNTY, TEXAS AUSTIN 1250 Capital of Texas Hwy. South (O).... 1985 1998 -- 4,121 32,935 345 ARAPAHOE COUNTY, COLORADO AURORA 750 South Richfield Street (O).......... 1997 1998 -- 2,680 23,125 27 DENVER 400 South Colorado Boulevard (O)........ 1983 1998 -- 1,461 10,620 133 ENGLEWOOD 5350 South Roslyn Street (O)............ 1982 1998 -- 862 6,831 30 9359 East Nichols Avenue (O)............ 1997 1998 -- 1,155 8,171 19 BOULDER COUNTY, COLORADO BROOMFIELD 105 South Technology Court (O).......... 1997 1998 -- 653 4,936 14 303 South Technology Court-A (O)........ 1997 1998 -- 623 3,892 4 303 South Technology Court-B (O)........ 1997 1998 -- 623 3,892 4 LOUISVILLE 1172 Century Drive (O).................. 1996 1998 -- 707 4,647 16 248 Centennial Parkway (O).............. 1996 1998 -- 708 4,647 16 285 Century Place (O)................... 1997 1998 -- 889 10,133 13 GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD(1) ----------------------------------- BUILDING AND ACCUMULATED PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION - ---------------------------------------- --------- ------------- --------- ------------ BEXAR COUNTY, TEXAS SAN ANTONIO 111 Soledad (O)......................... 2,004 8,075 10,079 212 1777 N.E. Loop 410 (O).................. 3,119 12,841 15,960 346 84 N.E. Loop 410 (O).................... 2,296 10,478 12,774 271 200 Concord Plaza Drive (O)............. 2,393 32,137 34,530 840 COLLIN COUNTY, TEXAS PLANO 555 Republic Place (O).................. 942 3,769 4,711 98 DALLAS COUNTY, TEXAS DALLAS 3030 LBJ Freeway (O).................... 6,098 25,100 31,198 685 3100 Monticello (O)..................... 2,511 11,275 13,786 257 8214 Westchester (O).................... 1,705 6,886 8,591 178 IRVING 2300 Valley View (O).................... 1,913 7,993 9,906 200 RICHARDSON 1122 Alma Road (O)...................... 754 3,115 3,869 80 HARRIS COUNTY, TEXAS HOUSTON 10497 Town & Country Way (O)............ 1,619 6,555 8,174 181 14511 Falling Creek (O)................. 434 1,837 2,271 45 1717 St. James Place (O)................ 909 3,752 4,661 112 1770 St. James Place (O)................ 730 3,093 3,823 88 5225 Katy Freeway (O)................... 1,403 5,766 7,169 148 5300 Memorial (O)....................... 1,710 6,923 8,633 179 POTTER COUNTY, TEXAS AMARILLO 6900 IH--40 West (O).................... 287 1,195 1,482 34 TARRANT COUNTY, TEXAS EULESS 150 West Park Way (O)................... 852 3,466 4,318 89 TRAVIS COUNTY, TEXAS AUSTIN 1250 Capital of Texas Hwy. South (O).... 4,121 33,280 37,401 760 ARAPAHOE COUNTY, COLORADO AURORA 750 South Richfield Street (O).......... 2,682 23,150 25,832 444 DENVER 400 South Colorado Boulevard (O)........ 1,461 10,753 12,214 176 ENGLEWOOD 5350 South Roslyn Street (O)............ 862 6,861 7,723 169 9359 East Nichols Avenue (O)............ 1,155 8,190 9,345 154 BOULDER COUNTY, COLORADO BROOMFIELD 105 South Technology Court (O).......... 653 4,950 5,603 101 303 South Technology Court-A (O)........ 623 3,896 4,519 98 303 South Technology Court-B (O)........ 623 3,896 4,519 98 LOUISVILLE 1172 Century Drive (O).................. 707 4,663 5,370 122 248 Centennial Parkway (O).............. 708 4,663 5,371 122 285 Century Place (O)................... 891 10,144 11,035 176
87 MACK-CALI REALTY CORPORATION REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) SCHEDULE III
INITIAL COSTS COSTS YEAR ------------------------ CAPITALIZED ------------------------ RELATED BUILDING AND SUBSEQUENT TO PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - ---------------------------------------- ----- ----------- ------------- --------- ------------- ------------- DENVER COUNTY, COLORADO DENVER 3600 South Yosemite (O)................. 1974 1998 -- 556 12,980 28 DOUGLAS COUNTY, COLORADO ENGLEWOOD 384 Inverness Drive South (O)........... 1985 1998 -- 703 5,653 50 400 Inverness Drive (O)................. 1997 1998 -- 1,584 19,878 24 5975 South Quebec Street (O)............ 1996 1998 -- 855 11,551 39 67 Inverness Drive East (O)............. 1996 1998 -- 1,034 5,516 10 PARKER 9777 Pyramid Court (O).................. 1995 1998 -- 1,304 13,189 25 EL PASO COUNTY, COLORADO COLORADO SPRINGS 1975 Research Parkway (O)............... 1997 1998 -- 1,397 13,221 -- JEFFERSON COUNTY, COLORADO LAKEWOOD 141 Union Boulevard (O)................. 1985 1998 -- 774 6,891 276 MARICOPA COUNTY, ARIZONA GLENDALE 5551 West Talavi Boulevard (O).......... 1991 1997 6,717 2,732 10,927 5,743 PHOENIX 19640 North 31st Street (O)............. 1990 1997 7,112 3,437 13,747 4 20002 North 19th Avenue (O)............. 1986 1997 3,386 1,843 7,371 15 SCOTTSDALE 9060 E. Via Linda Boulevard (O)......... 1984 1997 -- 3,720 14,879 -- SAN FRANCISCO COUNTY, CALIFORNIA SAN FRANCISCO 760 Market Street (O)................... 1908 1997 -- 5,588 22,352 36,844 HILLSBOROUGH COUNTY, FLORIDA TAMPA 501 Kennedy Boulevard (O)............... 1982 1997 -- 3,959 15,837 127 POLK COUNTY, IOWA WEST DES MOINES 2600 Westown Parkway (O)................ 1988 1997 -- 1,708 6,833 39 DOUGLAS COUNTY, NEBRASKA OMAHA 210 South 16th Street (O)............... 1894 1997 -- 2,559 10,236 81 DISTRICT OF COLUMBIA WASHINGTON 1400 L Street, NW (O)................... 1987 1998 -- 13,054 27,423 166 1709 New York Avenue, NW (O)............ 1972 1998 -- 19,898 29,686 158 GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD(1) ----------------------------------- BUILDING AND ACCUMULATED PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION - ---------------------------------------- --------- ------------- --------- ------------ DENVER COUNTY, COLORADO DENVER 3600 South Yosemite (O)................. 556 13,008 13,564 225 DOUGLAS COUNTY, COLORADO ENGLEWOOD 384 Inverness Drive South (O)........... 703 5,703 6,406 129 400 Inverness Drive (O)................. 1,584 19,902 21,486 352 5975 South Quebec Street (O)............ 856 11,589 12,445 253 67 Inverness Drive East (O)............. 1,035 5,525 6,560 139 PARKER 9777 Pyramid Court (O).................. 1,305 13,213 14,518 320 EL PASO COUNTY, COLORADO COLORADO SPRINGS 1975 Research Parkway (O)............... 1,397 13,221 14,618 256 JEFFERSON COUNTY, COLORADO LAKEWOOD 141 Union Boulevard (O)................. 775 7,166 7,941 163 MARICOPA COUNTY, ARIZONA GLENDALE 5551 West Talavi Boulevard (O).......... 3,593 15,809 19,402 336 PHOENIX 19640 North 31st Street (O)............. 3,437 13,751 17,188 359 20002 North 19th Avenue (O)............. 1,843 7,386 9,229 192 SCOTTSDALE 9060 E. Via Linda Boulevard (O)......... 3,720 14,879 18,599 388 SAN FRANCISCO COUNTY, CALIFORNIA SAN FRANCISCO 760 Market Street (O)................... 13,499 51,285 64,784 852 HILLSBOROUGH COUNTY, FLORIDA TAMPA 501 Kennedy Boulevard (O)............... 3,959 15,964 19,923 415 POLK COUNTY, IOWA WEST DES MOINES 2600 Westown Parkway (O)................ 1,708 6,872 8,580 183 DOUGLAS COUNTY, NEBRASKA OMAHA 210 South 16th Street (O)............... 2,559 10,317 12,876 271 DISTRICT OF COLUMBIA WASHINGTON 1400 L Street, NW (O)................... 13,054 27,589 40,643 406 1709 New York Avenue, NW (O)............ 19,898 29,844 49,742 444
88 MACK-CALI REALTY CORPORATION REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) SCHEDULE III
INITIAL COSTS COSTS YEAR ------------------------ CAPITALIZED ------------------------ RELATED BUILDING AND SUBSEQUENT TO PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION - ---------------------------------------- ----- ----------- ------------- --------- ------------- ------------- PRINCE GEORGE'S COUNTY, MARYLAND LANHAM 4200 Parliament Place (O)............... 1989 1998 -- 2,114 13,546 198 PROJECTS UNDER DEVELOPMENT.............. -- 40,200 -- 4,418 FURNITURE, FIXTURES & EQUIPMENT......... -- -- -- 5,686 ------------- --------- ------------- ------------- TOTALS.................................. $ 749,331 $ 488,872 $ 2,584,351 $ 394,576 ------------- --------- ------------- ------------- ------------- --------- ------------- ------------- GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD(1) ----------------------------------- BUILDING AND ACCUMULATED PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION - ---------------------------------------- --------- ------------- --------- ------------ PRINCE GEORGE'S COUNTY, MARYLAND LANHAM 4200 Parliament Place (O)............... 2,114 13,744 15,858 164 PROJECTS UNDER DEVELOPMENT.............. 40,200 4,418 44,618 4 FURNITURE, FIXTURES & EQUIPMENT......... -- 5,686 5,686 1,716 --------- ------------- --------- ------------ TOTALS.................................. $ 510,534 $ 2,957,265 $3,467,799 $ 177,934 --------- ------------- --------- ------------ --------- ------------- --------- ------------
- ---------------------------------------- (1) The aggregate cost for federal income tax purposes at December 31, 1998 was approximately $2.31 billion. (2) Legend of Property Codes: (O) = Office Property (M)= Multi-family Residential Property (F) = Office/Flex Property (R) = Stand-alone Retail Property (I) = Industrial/Warehouse (L) = Land Lease Property
89 MACK-CALI REALTY CORPORATION NOTE TO SCHEDULE III Changes in rental properties and accumulated depreciation for the periods ended December 31, 1998, 1997 and 1996 are as follows:
1998 1997 1996 ------------ ------------ ---------- RENTAL PROPERTIES: Balance at beginning of year.............................................. $ 2,629,616 $ 853,352 $ 387,675 Additions............................................................... 838,183 1,776,264 473,371 Retirements/Disposals................................................... -- -- (7,694) ------------ ------------ ---------- Balance at end of year.................................................... $ 3,467,799 $ 2,629,616 $ 853,352 ------------ ------------ ---------- ------------ ------------ ---------- Accumulated Depreciation: Balance at beginning of year.............................................. $ 103,133 $ 68,610 $ 59,095 Depreciation expense.................................................... 74,801 34,523 12,810 Retirements/Disposals................................................... -- -- (3,295) ------------ ------------ ---------- Balance at end of year.................................................... $ 177,934 $ 103,133 $ 68,610 ------------ ------------ ---------- ------------ ------------ ----------
90