UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

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

For the transition period from to

Commission File Number: 1-13274 Mack-Cali Realty Corporation

Commission File Number: 333-57103 Mack-Cali Realty, L.P.

Mack-Cali Realty Corporation

Mack-Cali Realty, L.P.

(Exact name of registrant as specified in its charter)


Maryland (Mack-Cali Realty Corporation)		22-3305147 (Mack-Cali Realty Corporation)
Delaware (Mack-Cali Realty, L.P.)		22-3315804 (Mack-Cali Realty, L.P.)
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


Harborside 3, 210 Hudson St., Ste. 400, Jersey City, New Jersey		07311
(Address of principal executive offices)		(Zip Code)

(732) 590-1010

(Registrant’s telephone number, including area code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CLI	New York Stock Exchange

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days.


Mack-Cali Realty Corporation	YES  NO 
Mack-Cali Realty, L.P.	YES  NO 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Mack-Cali Realty Corporation	YES  NO 
Mack-Cali Realty, L.P.	YES  NO 

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

Mack-Cali Realty Corporation:


Large accelerated filer 	Accelerated filer 	Non-accelerated filer 	Smaller reporting company 	Emerging Growth Company 

Mack-Cali Realty, L.P.:


Large accelerated filer 	Accelerated filer 	Non-accelerated filer 	Smaller reporting company 	Emerging Growth Company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Mack-Cali Realty Corporation 

Mack-Cali Realty, L.P. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Mack-Cali Realty Corporation	YES  NO 
Mack-Cali Realty, L.P.	YES  NO 

As of August 5, 2019, there were 90,553,752 shares of Mack-Cali Realty Corporation’s Common Stock, par value $0.01 per share, outstanding.

Mack-Cali Realty, L.P. does not have any class of common equity that is registered pursuant to Section 12 of the Exchange Act.

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2019 of Mack-Cali Realty Corporation and Mack-Cali Realty, L.P. Unless stated otherwise or the context otherwise requires, references to the “Operating Partnership” mean Mack-Cali Realty, L.P., a Delaware limited partnership, and references to the “General Partner” mean Mack-Cali Realty Corporation, a Maryland corporation and real estate investment trust (“REIT”), and its subsidiaries, including the Operating Partnership. References to the “Company,” “we,” “us” and “our” mean collectively the General Partner, the Operating Partnership and those entities/subsidiaries consolidated by the General Partner.

The Operating Partnership conducts the business of providing leasing, management, acquisition, development, construction and tenant-related services for its General Partner. The Operating Partnership, through its operating divisions and subsidiaries, including the Mack-Cali property-owning partnerships and limited liability companies is the entity through which all of the General Partner’s operations are conducted. The General Partner is the sole general partner of the Operating Partnership and has exclusive control of the Operating Partnership’s day-to-day management.

As of June 30, 2019, the General Partner owned an approximate 90.1 percent common unit interest in the Operating Partnership. The remaining approximate 9.9 percent common unit interest is owned by limited partners. The limited partners of the Operating Partnership are (1) persons who contributed their interests in properties to the Operating Partnership in exchange for common units (each, a “Common Unit”) or preferred units of limited partnership interest in the Operating Partnership or (2) recipients of long term incentive plan units of the Operating Partnership pursuant to the General Partner’s executive compensation plans.

A Common Unit of the Operating Partnership and a share of common stock of the General Partner (the “Common Stock”) have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the Company. The General Partner owns a number of common units of the Operating Partnership equal to the number of issued and outstanding shares of the General Partner’s common stock. Common unitholders (other than the General Partner) have the right to redeem their Common Units, subject to certain restrictions under the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, as amended (the “Partnership Agreement”) and agreed upon at the time of issuance of the units that may restrict such right for a period of time, generally one year from issuance. The redemption is required to be satisfied in shares of Common Stock of the General Partner, cash, or a combination thereof, calculated as follows: one share of the General Partner’s Common Stock, or cash equal to the fair market value of a share of the General Partner’s Common Stock at the time of redemption, for each Common Unit. The General Partner, in its sole discretion, determines the form of redemption of Common Units (i.e., whether a common unitholder receives Common Stock of the General Partner, cash, or any combination thereof). If the General Partner elects to satisfy the redemption with shares of Common Stock of the General Partner as opposed to cash, the General Partner is obligated to issue shares of its Common Stock to the redeeming unitholder. Regardless of the rights described above, the common unitholders may not put their units for cash to the Company or the General Partner under any circumstances. With each such redemption, the General Partner’s percentage ownership in the Operating Partnership will increase. In addition, whenever the General Partner issues shares of its Common Stock other than to acquire Common Units, the General Partner must contribute any net proceeds it receives to the Operating Partnership and the Operating Partnership must issue to the General Partner an equivalent number of Common Units. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.

The Company believes that combining the quarterly reports on Form 10-Q of the General Partner and the Operating Partnership into this single report provides the following benefits:

enhance investors’ understanding of the General Partner and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business of the Company;

eliminate duplicative disclosure and provide a more streamlined and readable presentation because a substantial portion of the disclosure applies to both the General Partner and the Operating Partnership; and

create time and cost efficiencies through the preparation of one combined report instead of two separate reports.

The Company believes it is important to understand the few differences between the General Partner and the Operating Partnership in the context of how they operate as a consolidated company. The financial results of the Operating Partnership are consolidated into the financial statements of the General Partner. The General Partner does not have any other significant assets, liabilities or operations, other than its interests in the Operating Partnership, nor does the Operating Partnership have employees of its own. The Operating Partnership, not the General Partner, generally executes all significant business relationships other than transactions involving the securities of the General Partner. The Operating Partnership holds substantially all of the assets of the General Partner, including ownership interests in joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by the General Partner, which are contributed to the

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capital of the Operating Partnership in consideration of common or preferred units in the Operating Partnership, as applicable, the Operating Partnership generates all remaining capital required by the Company’s business. These sources include working capital, net cash provided by operating activities, borrowings under the Company’s unsecured revolving credit facility and unsecured term loan facilities, the issuance of secured and unsecured debt and equity securities and proceeds received from the disposition of properties and joint ventures.

Shareholders’ equity, partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of the General Partner and the Operating Partnership. The limited partners of the Operating Partnership are accounted for as partners’ capital in the Operating Partnership’s financial statements as is the General Partner’s interest in the Operating Partnership. The noncontrolling interests in the Operating Partnership’s financial statements comprise the interests of unaffiliated partners in various consolidated partnerships and development joint venture partners. The noncontrolling interests in the General Partner’s financial statements are the same noncontrolling interests at the Operating Partnership’s level and include limited partners of the Operating Partnership. The differences between shareholders’ equity and partners’ capital result from differences in the equity issued at the General Partner and Operating Partnership levels.

To help investors better understand the key differences between the General Partner and the Operating Partnership, certain information for the General Partner and the Operating Partnership in this report has been separated, as set forth below:

Item 1. Financial Statements (unaudited), which includes the following specific disclosures for Mack-Cali Realty Corporation and Mack-Cali Realty, L.P.:

Note 2. Significant Accounting Policies, where applicable;

Note 14. Redeemable Noncontrolling Interests;

Note 15. Mack-Cali Realty Corporation’s Stockholders’ Equity and Mack-Cali Realty, L.P.’s Partners’ Capital;

Note 16. Noncontrolling Interests in Subsidiaries; and

Note 17. Segment Reporting, where applicable.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations includes information specific to each entity, where applicable.

This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of the General Partner and the Operating Partnership in order to establish that the requisite certifications have been made and that the General Partner and Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

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MACK-CALI REALTY CORPORATION

MACK-CALI REALTY, L.P.

FORM 10-Q

INDEX


			Page
Part I	Financial Information
	Item 1.	Financial Statements (unaudited):
		Mack-Cali Realty Corporation
		Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	6
		Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018	7
		Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and 2018	8
		Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2019 and 2018	9
		Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	11
		Mack-Cali Realty, L.P.
		Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	12
		Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018	13
		Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and 2018	14
		Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2019 and 2018	15
		Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	17
		Mack-Cali Realty Corporation and Mack-Cali Realty, L.P.
		Notes to Consolidated Financial Statements	18
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
	Item 4.	Controls and Procedures	20
Part II	Other Information
		Mack-Cali Realty Corporation and Mack-Cali Realty, L.P.
	Item 1.	Legal Proceedings	20
	Item 1A.	Risk Factors	20
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
	Item 3.	Defaults Upon Senior Securities	20
	Item 4.	Mine Safety Disclosures	20
	Item 5.	Other Information	20
	Item 6.	Exhibits	20
Exhibit Index			20
Signatures			20

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MACK-CALI REALTY CORPORATION

MACK-CALI REALTY, L.P.

Part I – Financial Information

Item 1. Financial Statements

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

The aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in Mack-Cali Realty Corporation’s and Mack-Cali Realty, L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

The results of operations for the three and six-month periods ended June 30, 2019 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.

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MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

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



		June 30,		December 31,
ASSETS		2019		2018
Rental property
Land and leasehold interests	$	916,807	$	807,236
Buildings and improvements		4,358,948		4,109,797
Tenant improvements		297,240		335,266
Furniture, fixtures and equipment		67,004		53,718
		5,639,999		5,306,017
Less – accumulated depreciation and amortization		(968,237)		(1,097,868)
		4,671,762		4,208,149
Rental property held for sale, net		-		108,848
Net investment in rental property		4,671,762		4,316,997
Cash and cash equivalents		60,638		29,633
Restricted cash		17,892		19,921
Investments in unconsolidated joint ventures		215,957		232,750
Unbilled rents receivable, net		93,324		100,737
Deferred charges, goodwill and other assets, net		258,663		355,234
Accounts receivable, net of allowance for doubtful accounts
of $1,319 and $1,108		9,476		5,372

Total assets	$	5,327,712	$	5,060,644

LIABILITIES AND EQUITY
Senior unsecured notes, net	$	570,899	$	570,314
Unsecured revolving credit facility and term loans		424,180		790,939
Mortgages, loans payable and other obligations, net		1,692,563		1,431,398
Dividends and distributions payable		21,722		21,877
Accounts payable, accrued expenses and other liabilities		202,830		168,115
Rents received in advance and security deposits		34,467		41,244
Accrued interest payable		8,631		9,117
Total liabilities		2,955,292		3,033,004
Commitments and contingencies

Redeemable noncontrolling interests		496,372		330,459

Equity:
Mack-Cali Realty Corporation stockholders’ equity:
Common stock, $0.01 par value, 190,000,000 shares authorized,
90,553,357 and 90,320,306 shares outstanding		906		903
Additional paid-in capital		2,539,547		2,561,503
Dividends in excess of net earnings		(895,824)		(1,084,518)
Accumulated other comprehensive income (loss)		958		8,770
Total Mack-Cali Realty Corporation stockholders’ equity		1,645,587		1,486,658

Noncontrolling interests in subsidiaries:
Operating Partnership		181,296		168,373
Consolidated joint ventures		49,165		42,150
Total noncontrolling interests in subsidiaries		230,461		210,523

Total equity		1,876,048		1,697,181

Total liabilities and equity	$	5,327,712	$	5,060,644

The accompanying notes are an integral part of these consolidated financial statements.
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MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

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



		Three Months Ended				Six Months Ended
		June 30,				June 30,
REVENUES		2019		2018		2019		2018
Revenue from leases	$	116,784	$	113,885	$	239,799	$	239,578
Real estate services		3,530		4,074		7,372		8,735
Parking income		5,563		5,757		10,504		11,084
Hotel income		2,094		-		2,377		-
Other income		2,490		2,873		4,658		6,159
Total revenues		130,461		126,589		264,710		265,556

EXPENSES
Real estate taxes		16,597		17,966		33,674		36,327
Utilities		7,456		7,555		17,907		20,059
Operating services		26,161		22,939		51,123		48,557
Real estate services expenses		3,979		4,360		8,245		9,296
Leasing personnel costs		542		-		1,284		-
General and administrative		16,427		13,455		29,020		29,540
Depreciation and amortization		49,352		41,413		97,398		82,710
Property impairments		5,802		-		5,802		-
Land impairments		2,499		-		2,499		-
Total expenses		128,815		107,688		246,952		226,489

OTHER (EXPENSE) INCOME
Interest expense		(23,515)		(18,999)		(48,289)		(39,074)
Interest and other investment income (loss)		515		641		1,339		1,769
Equity in earnings (loss) of unconsolidated joint ventures		(88)		(52)		(769)		1,520
Gain on change of control of interests		-		-		13,790		-
Realized gains (losses) and unrealized losses on disposition of
rental property, net		255		1,010		268,364		59,196
Gain on disposition of developable land		270		-		270		-
Gain on sale of investment in unconsolidated joint venture		-		-		903		-
Gain (loss) from extinguishment of debt, net		588		-		1,899		(10,289)
Total other income (expense)		(21,975)		(17,400)		237,507		13,122
Net income (loss)		(20,329)		1,501		255,265		52,189
Noncontrolling interests in consolidated joint ventures		847		95		2,095		125
Noncontrolling interests in Operating Partnership		2,434		142		(25,246)		(4,741)
Redeemable noncontrolling interests		(5,006)		(2,989)		(9,673)		(5,788)
Net income (loss) available to common shareholders	$	(22,054)	$	(1,251)	$	222,441	$	41,785

Basic earnings per common share:
Net income (loss) available to common shareholders	$	(0.43)	$	(0.05)	$	2.24	$	0.39

Diluted earnings per common share:
Net income (loss) available to common shareholders	$	(0.43)	$	(0.05)	$	2.24	$	0.39

Basic weighted average shares outstanding		90,533		90,330		90,516		90,297

Diluted weighted average shares outstanding		100,523		100,598		100,825		100,607

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

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MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (unaudited)



		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2019		2018		2019		2018

Net income (loss)	$	(20,329)	$	1,501	$	255,265	$	52,189
Other comprehensive income (loss):
Net unrealized gain (loss) on derivative instruments
for interest rate swaps		(4,624)		1,788		(9,075)		6,933
Comprehensive income (loss)	$	(24,953)	$	3,289	$	246,190	$	59,122
Comprehensive (income) loss attributable to noncontrolling
interests in consolidated joint ventures		847		95		2,095		125
Comprehensive (income) loss attributable to redeemable
noncontrolling interests		(5,006)		(2,989)		(9,673)		(5,788)
Comprehensive (income) loss attributable to noncontrolling
interests in Operating Partnership		2,894		(40)		(24,373)		(5,447)
Comprehensive income (loss) attributable to common shareholders	$	(26,218)	$	355	$	214,239	$	48,012

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

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MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

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


									Accumulated
					Additional		Dividends in		Other		Noncontrolling
	Common Stock				Paid-In		Excess of		Comprehensive		Interests
For the Three Months Ended June 30, 2019	Shares		Par Value		Capital		Net Earnings		Income (Loss)		in Subsidiaries		Total Equity
Balance at April 1, 2019	90,326	$	903	$	2,553,652	$	(855,659)	$	5,122	$	239,149	$	1,943,167
Net income (loss)	-		-		-		(22,054)		-		1,725		(20,329)
Common stock dividends	-		-		-		(18,111)		-		-		(18,111)
Common unit distributions	-		-		-		-		-		(2,361)		(2,361)
Redeemable noncontrolling interests	-		-		(16,759)		-		-		(6,856)		(23,615)
Change in noncontrolling interests in consolidated joint ventures	-		-		-		-		-		(308)		(308)
Redemption of common units for common stock	33		1		622		-		-		(623)		-
Shares issued under Dividend Reinvestment and
Stock Purchase Plan	-		-		11		-		-		-		11
Directors' deferred compensation plan	194		2		25		-		-		-		27
Stock compensation	-		-		218		-		-		1,973		2,191
Other comprehensive income (loss)	-		-		-		-		(4,164)		(460)		(4,624)
Rebalancing of ownership percentage
between parent and subsidiaries	-		-		1,778		-		-		(1,778)		-
Balance at June 30, 2019	90,553	$	906	$	2,539,547	$	(895,824)	$	958	$	230,461	$	1,876,048


									Accumulated
					Additional		Dividends in		Other		Noncontrolling
	Common Stock				Paid-In		Excess of		Comprehensive		Interests
For the Three Months Ended June 30, 2018	Shares		Par Value		Capital		Net Earnings		Income (Loss)		in Subsidiaries		Total Equity
Balance at April 1, 2018	90,136	$	901	$	2,567,300	$	(1,071,420)	$	11,310	$	192,820	$	1,700,911
Net income (loss)	-		-		-		(1,251)		-		2,752		1,501
Common stock dividends	-		-		-		(18,053)		-		-		(18,053)
Common unit distributions	-		-		-		-		-		(2,136)		(2,136)
Redeemable noncontrolling interest	-		-		(3,379)		-		-		(3,373)		(6,752)
Increase in noncontrolling interest	-		-		-		-		-		51		51
Redemption of common units for common stock	3		-		51		-		-		(51)		-
Shares issued under Dividend Reinvestment and
Stock Purchase Plan	1		-		(82)		-		-		-		(82)
Directors' deferred compensation plan	-		-		126		-		-		-		126
Stock compensation	147		1		433		-		-		223		657
Cancellation of restricted shares	(1)		-		(583)		-		-		(112)		(695)
Other comprehensive income (loss)	-		-		-		-		1,606		182		1,788
Rebalancing of ownership percentage
between parent and subsidiaries	-		-		287		-		-		(287)		-
Balance at June 30, 2018	90,286	$	902	$	2,564,153	$	(1,090,724)	$	12,916	$	190,069	$	1,677,316

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

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MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

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



									Accumulated
					Additional		Dividends in		Other		Noncontrolling
	Common Stock				Paid-In		Excess of		Comprehensive		Interests
For the Six Months Ended June 30, 2019	Shares		Par Value		Capital		Net Earnings		Income (Loss)		in Subsidiaries		Total Equity
Balance at January 1, 2019	90,320	$	903	$	2,561,503	$	(1,084,518)	$	8,770	$	210,523	$	1,697,181
Net income (loss)	-		-		-		222,441		-		32,824		255,265
Common stock dividends	-		-		-		(36,176)		-		-		(36,176)
Common unit distributions	-		-		-		-		-		(4,057)		(4,057)
Redeemable noncontrolling interests	-		-		(19,911)		-		-		(11,880)		(31,791)
Change in noncontrolling interests in consolidated joint ventures	-		-		(1,958)		-		-		9,110		7,152
Redemption of common units for common stock	38		1		704		-		-		(705)		-
Redemption of common units	-		-		(1,665)		-		-		(4,965)		(6,630)
Shares issued under Dividend Reinvestment and
Stock Purchase Plan	1		-		21		-		-		-		21
Directors' deferred compensation plan	194		2		155		-		-		-		157
Stock compensation	-		-		483		-		-		3,588		4,071
Cancellation of unvested LTIP units	-		-		-		2,819		-		(2,889)		(70)
Other comprehensive income (loss)	-		-		-		(390)		(7,812)		(873)		(9,075)
Rebalancing of ownership percentage
between parent and subsidiaries	-		-		215		-		-		(215)		-
Balance at June 30, 2019	90,553	$	906	$	2,539,547	$	(895,824)	$	958	$	230,461	$	1,876,048


									Accumulated
					Additional		Dividends in		Other		Noncontrolling
	Common Stock				Paid-In		Excess of		Comprehensive		Interests
For the Six Months Ended June 30, 2018	Shares		Par Value		Capital		Net Earnings		Income (Loss)		in Subsidiaries		Total Equity
Balance at January 1, 2018	89,914	$	899	$	2,565,136	$	(1,096,429)	$	6,689	$	192,428	$	1,668,723
Net income (loss)	-		-		-		41,785		-		10,404		52,189
Common stock dividends	-		-		-		(36,080)		-		-		(36,080)
Common unit distributions	-		-		-		-		-		(4,396)		(4,396)
Redeemable noncontrolling interest	-		-		(6,133)		-		-		(6,485)		(12,618)
Increase in noncontrolling interest	-		-		-		-		-		51		51
Redemption of common units for common stock	227		2		3,739		-		-		(3,741)		-
Shares issued under Dividend Reinvestment and
Stock Purchase Plan	2		-		(54)		-		-		-		(54)
Directors' deferred compensation plan	-		-		251		-		-		-		251
Stock compensation	147		1		950		-		-		2,238		3,189
Cancellation of restricted shares	(4)		-		(583)		-		-		(289)		(872)
Other comprehensive income (loss)	-		-		-		-		6,227		706		6,933
Rebalancing of ownership percentage
between parent and subsidiaries	-		-		847		-		-		(847)		-
Balance at June 30, 2018	90,286	$	902	$	2,564,153	$	(1,090,724)	$	12,916	$	190,069	$	1,677,316

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

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MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

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



		Six Months Ended
		June 30,
CASH FLOWS FROM OPERATING ACTIVITIES		2019		2018
Net income	$	255,265	$	52,189
Adjustments to reconcile net income (loss) to net cash provided by
Operating activities:
Depreciation and amortization, including related intangible assets		95,824		79,827
Amortization of directors deferred compensation stock units		157		251
Amortization of stock compensation		4,071		3,189
Amortization of deferred financing costs		2,357		2,241
Amortization of debt discount and mark-to-market		(474)		(474)
Write-off of unamortized deferred finance costs related to early extinguishment		-		105
Equity in (earnings) loss of unconsolidated joint ventures		769		(1,520)
Distributions of cumulative earnings from unconsolidated joint ventures		3,367		3,469
Gain on change of control of interests		(13,790)		-
Realized (gains) losses and unrealized losses on disposition of rental property, net		(268,364)		(59,196)
Gain on disposition of developable land		(270)		-
Property impairments		5,802		-
Land Impairments		2,499		-
Gain on sale of investments in unconsolidated joint ventures		(903)		-
(Gain)Loss from extinguishment of debt		(1,899)		10,289
Changes in operating assets and liabilities:
Increase in unbilled rents receivable, net		(6,744)		(3,497)
Increase in deferred charges, goodwill and other assets		(14,646)		(8,510)
(Increase) decrease in accounts receivable, net		(4,103)		396
Increase in accounts payable, accrued expenses and other liabilities		16,845		7,033
Decrease in rents received in advance and security deposits		(6,457)		(2,855)
Decrease in accrued interest payable		(486)		(1,001)

Net cash provided by operating activities	$	68,820	$	81,936

CASH FLOWS FROM INVESTING ACTIVITIES
Rental property acquisitions and related intangibles	$	(545,462)	$	(4,854)
Rental property additions and improvements		(70,577)		(97,085)
Development of rental property and other related costs		(89,152)		(105,749)
Proceeds from the sales of rental property		636,161		244,754
Proceeds from the sale of investments in unconsolidated joint ventures		4,039		-
Repayment of notes receivable		46,305		6,366
Investment in unconsolidated joint ventures		(8,238)		(3,352)
Distributions in excess of cumulative earnings from unconsolidated joint ventures		3,602		7,806

Net cash (used in) provided by investing activities	$	(23,322)	$	47,886

CASH FLOW FROM FINANCING ACTIVITIES
Borrowings from revolving credit facility	$	281,000	$	371,000
Repayment of revolving credit facility		(398,000)		(338,000)
Repayment of unsecured term loan		(250,000)		-
Proceeds from mortgages and loans payable		321,508		79,748
Repayment of mortgages, loans payable and other obligations		(55,199)		(277,637)
Acquisition of noncontrolling interests		(5,017)		-
Issuance of redeemable noncontrolling interests, net		145,000		65,000
Payment of financing costs		(5,637)		(255)
(Contributions) Distributions to noncontrolling interests		(407)		51
Payment of dividends and distributions		(49,770)		(45,916)

Net cash used in financing activities	$	(16,522)	$	(146,009)

Net increase (decrease) in cash and cash equivalents	$	28,976	$	(16,187)
Cash, cash equivalents and restricted cash, beginning of period (1)		49,554		67,972

Cash, cash equivalents and restricted cash, end of period (2)	$	78,530	$	51,785

(1)Includes Restricted Cash of $19,921 and $39,792 as of December 31, 2018 and 2017, respectively.

(2)Includes Restricted Cash of $17,892 and $22,121 as of June 30, 2019 and 2018, respectively.

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

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MACK-CALI REALTY, L.P. AND SUBSIDIARIES

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



		June 30,		December 31,
ASSETS		2019		2018
Rental property
Land and leasehold interests	$	916,807	$	807,236
Buildings and improvements		4,358,948		4,109,797
Tenant improvements		297,240		335,266
Furniture, fixtures and equipment		67,004		53,718
		5,639,999		5,306,017
Less – accumulated depreciation and amortization		(968,237)		(1,097,868)
		4,671,762		4,208,149
Rental property held for sale, net		-		108,848
Net investment in rental property		4,671,762		4,316,997
Cash and cash equivalents		60,638		29,633
Restricted cash		17,892		19,921
Investments in unconsolidated joint ventures		215,957		232,750
Unbilled rents receivable, net		93,324		100,737
Deferred charges, goodwill and other assets, net		258,663		355,234
Accounts receivable, net of allowance for doubtful accounts
of $1,319 and $1,108		9,476		5,372

Total assets	$	5,327,712	$	5,060,644

LIABILITIES AND EQUITY
Senior unsecured notes, net	$	570,899	$	570,314
Unsecured revolving credit facility and term loans		424,180		790,939
Mortgages, loans payable and other obligations, net		1,692,563		1,431,398
Distributions payable		21,722		21,877
Accounts payable, accrued expenses and other liabilities		202,830		168,115
Rents received in advance and security deposits		34,467		41,244
Accrued interest payable		8,631		9,117
Total liabilities		2,955,292		3,033,004
Commitments and contingencies

Redeemable noncontrolling interests		496,372		330,459

Partners’ Capital:
General Partner, 90,553,357 and 90,320,306 common units outstanding		1,580,023		1,413,497
Limited partners, 9,976,344 and 10,229,349 common units/LTIPs outstanding		245,902		232,764
Accumulated other comprehensive income (loss)		958		8,770
Total Mack-Cali Realty, L.P. partners’ capital		1,826,883		1,655,031

Noncontrolling interests in consolidated joint ventures		49,165		42,150

Total equity		1,876,048		1,697,181

Total liabilities and equity	$	5,327,712	$	5,060,644

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

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MACK-CALI REALTY, L.P. AND SUBSIDIARIES

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



		Three Months Ended				Six Months Ended
		June 30,				June 30,
REVENUES		2019		2018		2019		2018
Revenue from leases	$	116,784	$	113,885	$	239,799	$	239,578
Real estate services		3,530		4,074		7,372		8,735
Parking income		5,563		5,757		10,504		11,084
Hotel income		2,094		-		2,377		-
Other income		2,490		2,873		4,658		6,159
Total revenues		130,461		126,589		264,710		265,556

EXPENSES
Real estate taxes		16,597		17,966		33,674		36,327
Utilities		7,456		7,555		17,907		20,059
Operating services		26,161		22,939		51,123		48,557
Real estate services expenses		3,979		4,360		8,245		9,296
Leasing personnel costs		542		-		1,284		-
General and administrative		16,427		13,455		29,020		29,540
Depreciation and amortization		49,352		41,413		97,398		82,710
Property impairments		5,802		-		5,802		-
Land impairments		2,499		-		2,499		-
Total expenses		128,815		107,688		246,952		226,489

OTHER (EXPENSE) INCOME
Interest expense		(23,515)		(18,999)		(48,289)		(39,074)
Interest and other investment income (loss)		515		641		1,339		1,769
Equity in earnings (loss) of unconsolidated joint ventures		(88)		(52)		(769)		1,520
Gain on change of control of interests		-		-		13,790		-
Realized gains (losses) and unrealized losses on disposition of
rental property, net		255		1,010		268,364		59,196
Gain on disposition of developable land		270		-		270		-
Gain on sale of investment in unconsolidated joint venture		-		-		903		-
Gain (loss) from extinguishment of debt, net		588		-		1,899		(10,289)
Total other income (expense)		(21,975)		(17,400)		237,507		13,122
Net income (loss)		(20,329)		1,501		255,265		52,189
Noncontrolling interests in consolidated joint ventures		847		95		2,095		125
Redeemable noncontrolling interests		(5,006)		(2,989)		(9,673)		(5,788)
Net income (loss) available to common unitholders	$	(24,488)	$	(1,393)	$	247,687	$	46,526

Basic earnings per common unit:
Net income (loss) available to common unitholders	$	(0.43)	$	(0.05)	$	2.24	$	0.39

Diluted earnings per common unit:
Net income (loss) available to common unitholders	$	(0.43)	$	(0.05)	$	2.24	$	0.39

Basic weighted average units outstanding		100,523		100,598		100,631		100,552

Diluted weighted average units outstanding		100,523		100,598		100,825		100,607

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

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MACK-CALI REALTY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (unaudited)



		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2019		2018		2019		2018

Net income (loss)	$	(20,329)	$	1,501	$	255,265	$	52,189
Other comprehensive income (loss):
Net unrealized gain (loss) on derivative instruments
for interest rate swaps		(4,624)		1,788		(9,075)		6,933
Comprehensive income (loss)	$	(24,953)	$	3,289	$	246,190	$	59,122
Comprehensive (income) loss attributable to noncontrolling
interests in consolidated joint ventures		847		95		2,095		125
Comprehensive (income) loss attributable to redeemable
noncontrolling interests		(5,006)		(2,989)		(9,673)		(5,788)
Comprehensive income (loss) attributable to common unitholders	$	(29,112)	$	395	$	238,612	$	53,459

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

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MACK-CALI REALTY, L.P. AND SUBSIDIARIES

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


								Accumulated		Noncontrolling
		Limited Partner		General Partner		Limited Partner		Other		Interest
	General Partner	Common Units/		Common		Common		Comprehensive		in Consolidated
For the Three Months Ended June 30, 2019	Common Units	Vested LTIP Units		Unitholders		Unitholders		Income (Loss)		Joint Ventures		Total Equity
Balance at April 1, 2019	90,326	10,009	$	1,636,068	$	251,657	$	5,122	$	50,320	$	1,943,167
Net income (loss)	-	-		(22,054)		(2,434)		-		4,159		(20,329)
Distributions	-	-		(18,111)		(2,361)		-		-		(20,472)
Redeemable noncontrolling interests	-	-		(16,759)		(1,850)		-		(5,006)		(23,615)
Change in noncontrolling interests in consolidated joint ventures	-	-		-		-		-		(308)		(308)
Redemption of limited partner common units for
shares of general partner common units	33	(24)		623		(623)		-		-		-
Vested LTIP units	-	(9)		-		-		-		-		-
Shares issued under Dividend Reinvestment and
Stock Purchase Plan	-	-		11		-		-		-		11
Directors' deferred compensation plan	194	-		27		-		-		-		27
Other comprehensive income (loss)	-	-		-		(460)		(4,164)		-		(4,624)
Stock compensation	-	-		218		1,973		-		-		2,191
Balance at June 30, 2019	90,553	9,976	$	1,580,023	$	245,902	$	958	$	49,165	$	1,876,048


								Accumulated		Noncontrolling
		Limited Partner		General Partner		Limited Partner		Other		Interest
	General Partner	Common Units/		Common		Common		Comprehensive		in Consolidated
For the Three Months Ended June 30, 2018	Common Units	Vested LTIP Units		Unitholders		Unitholders		Income (Loss)		Joint Ventures		Total Equity
Balance at April 1, 2018	90,136	10,269	$	1,433,981	$	234,617	$	11,310	$	21,003	$	1,700,911
Net income (loss)	-	-		(1,251)		(142)		-		2,894		1,501
Distributions	-	-		(18,053)		(2,136)		-		-		(20,189)
Redeemable noncontrolling interest	-	-		(3,379)		(384)		-		(2,989)		(6,752)
Increase in noncontrolling interest	-			-		-		-		51		51
Redemption of limited partner common units for
shares of general partner common units	3	(3)		51		(51)		-		-		-
Shares issued under Dividend Reinvestment and
Stock Purchase Plan	1	-		(82)		-		-		-		(82)
Directors' deferred compensation plan	-	-		126		-		-		-		126
Other comprehensive income (loss)	-	-		-		182		1,606		-		1,788
Stock compensation	147	-		434		223		-		-		657
Cancellation of restricted shares	(1)	-		(583)		(112)		-		-		(695)
Balance at June 30, 2018	90,286	10,266	$	1,411,244	$	232,197	$	12,916	$	20,959	$	1,677,316

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

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MACK-CALI REALTY, L.P. AND SUBSIDIARIES

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



								Accumulated		Noncontrolling
		Limited Partner		General Partner		Limited Partner		Other		Interest
	General Partner	Common Units/		Common		Common		Comprehensive		in Consolidated
For the Six Months Ended June 30, 2019	Common Units	Vested LTIP Units		Unitholders		Unitholders		Income (Loss)		Joint Ventures		Total Equity
Balance at January 1, 2019	90,320	10,229	$	1,413,497	$	232,764	$	8,770	$	42,150	$	1,697,181
Net income (loss)	-	-		222,441		25,246		-		7,578		255,265
Distributions	-	-		(36,176)		(4,057)		-		-		(40,233)
Redeemable noncontrolling interests	-	-		(19,911)		(2,207)		-		(9,673)		(31,791)
Change in noncontrolling interests in consolidated joint ventures	-	-		(1,958)		-		-		9,110		7,152
Redemption of limited partner common units for
shares of general partner common units	38	(20)		705		(705)		-		-		-
Vested LTIP units	-	68		-		-		-		-		-
Redemption of limited partners common units	-	(301)		(1,665)		(4,965)		-		-		(6,630)
Shares issued under Dividend Reinvestment and
Stock Purchase Plan	1	-		21		-		-		-		21
Directors' deferred compensation plan	194	-		157		-		-		-		157
Other comprehensive income (loss)	-	-		(390)		(873)		(7,812)		-		(9,075)
Stock compensation	-	-		483		3,588		-		-		4,071
Cancellation of unvested LTIP units	-	-		2,819		(2,889)		-		-		(70)
Balance at June 30, 2019	90,553	9,976	$	1,580,023	$	245,902	$	958	$	49,165	$	1,876,048


								Accumulated		Noncontrolling
		Limited Partner		General Partner		Limited Partner		Other		Interest
	General Partner	Common Units/		Common		Common		Comprehensive		in Consolidated
For the Six Months Ended June 30, 2018	Common Units	Vested LTIP Units		Unitholders		Unitholders		Income (Loss)		Joint Ventures		Total Equity
Balance at January 1, 2018	89,914	10,438	$	1,407,366	$	233,635	$	6,689	$	21,033	$	1,668,723
Net income (loss)	-	-		41,785		4,741		-		5,663		52,189
Distributions	-	-		(36,080)		(4,396)		-		-		(40,476)
Redeemable noncontrolling interest	-	-		(6,133)		(697)		-		(5,788)		(12,618)
Increase in noncontrolling interest	-			-		-		-		51		51
Redemption of limited partner common units for
shares of general partner common units	227	(227)		3,741		(3,741)		-		-		-
Vested LTIP units	-	55		-		-		-		-		-
Shares issued under Dividend Reinvestment and
Stock Purchase Plan	2	-		(54)		-		-		-		(54)
Directors' deferred compensation plan	-	-		251		-		-		-		251
Other comprehensive income (loss)	-	-		-		706		6,227		-		6,933
Stock compensation	147	-		951		2,238		-		-		3,189
Cancellation of restricted shares	(4)	-		(583)		(289)		-		-		(872)
Balance at June 30, 2018	90,286	10,266	$	1,411,244	$	232,197	$	12,916	$	20,959	$	1,677,316

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

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MACK-CALI REALTY, L.P. AND SUBSIDIARIES

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


		Six Months Ended
		June 30,
CASH FLOWS FROM OPERATING ACTIVITIES		2019		2018
Net income	$	255,265	$	52,189
Adjustments to reconcile net income (loss) to net cash provided by
Operating activities:
Depreciation and amortization, including related intangible assets		95,824		79,827
Amortization of directors deferred compensation stock units		157		251
Amortization of stock compensation		4,071		3,189
Amortization of deferred financing costs		2,357		2,241
Amortization of debt discount and mark-to-market		(474)		(474)
Write-off of unamortized deferred finance costs related to early extinguishment		-		105
Equity in (earnings) loss of unconsolidated joint ventures		769		(1,520)
Distributions of cumulative earnings from unconsolidated joint ventures		3,367		3,469
Gain on change of control of interests		(13,790)		-
Realized (gains) losses and unrealized losses on disposition of rental property, net		(268,364)		(59,196)
Gain on disposition of developable land		(270)		-
Property impairments		5,802		-
Land Impairments		2,499		-
Gain on sale of investments in unconsolidated joint ventures		(903)		-
(Gain)Loss from extinguishment of debt		(1,899)		10,289
Changes in operating assets and liabilities:
Increase in unbilled rents receivable, net		(6,744)		(3,497)
Increase in deferred charges, goodwill and other assets		(14,646)		(8,510)
(Increase) decrease in accounts receivable, net		(4,103)		396
Increase in accounts payable, accrued expenses and other liabilities		16,845		7,033
Decrease in rents received in advance and security deposits		(6,457)		(2,855)
Decrease in accrued interest payable		(486)		(1,001)

Net cash provided by operating activities	$	68,820	$	81,936

CASH FLOWS FROM INVESTING ACTIVITIES
Rental property acquisitions and related intangibles	$	(545,462)	$	(4,854)
Rental property additions and improvements		(70,577)		(97,085)
Development of rental property and other related costs		(89,152)		(105,749)
Proceeds from the sales of rental property		636,161		244,754
Proceeds from the sale of investments in unconsolidated joint ventures		4,039		-
Repayment of notes receivable		46,305		6,366
Investment in unconsolidated joint ventures		(8,238)		(3,352)
Distributions in excess of cumulative earnings from unconsolidated joint ventures		3,602		7,806
Net cash (used in) provided by investing activities	$	(23,322)	$	47,886

CASH FLOW FROM FINANCING ACTIVITIES
Borrowings from revolving credit facility	$	281,000	$	371,000
Repayment of revolving credit facility		(398,000)		(338,000)
Repayment of unsecured term loan		(250,000)		-
Proceeds from mortgages and loans payable		321,508		79,748
Repayment of mortgages, loans payable and other obligations		(55,199)		(277,637)
Acquisition of noncontrolling interests		(5,017)		-
Issuance of redeemable noncontrolling interests, net		145,000		65,000
Payment of financing costs		(5,637)		(255)
(Contributions) Distributions to noncontrolling interests		(407)		51
Payment of distributions		(49,770)		(45,916)

Net cash used in financing activities	$	(16,522)	$	(146,009)

Net increase (decrease) in cash and cash equivalents	$	28,976	$	(16,187)
Cash, cash equivalents and restricted cash, beginning of period (1)		49,554		67,972

Cash, cash equivalents and restricted cash, end of period (2)	$	78,530	$	51,785

(1)Includes Restricted Cash of $19,921 and $39,792 as of December 31, 2018 and 2017, respectively.

(2)Includes Restricted Cash of $17,892 and $22,121 as of June 30, 2019 and 2018, respectively.

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

Table of Contents

MACK-CALI REALTY CORPORATION, MACK-CALI REALTY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

Mack-Cali Realty Corporation, a Maryland corporation, together with its subsidiaries (collectively, the “General Partner”) is a fully-integrated self-administered, self-managed real estate investment trust (“REIT”). The General Partner controls Mack-Cali Realty, L.P., a Delaware limited partnership, together with its subsidiaries (collectively, the “Operating Partnership”), as its sole general partner and owned a 90.1 and 89.8 percent common unit interest in the Operating Partnership as of June 30, 2019 and December 31, 2018, respectively. The General Partner’s business is the ownership of interests in and operation of the Operating Partnership and all of the General Partner’s expenses are incurred for the benefit of the Operating Partnership. The General Partner is reimbursed by the Operating Partnership for all expenses it incurs relating to the ownership and operation of the Operating Partnership.

The Operating Partnership conducts the business of providing leasing, management, acquisition, development and tenant-related services for its General Partner. The Operating Partnership, through its operating divisions and subsidiaries, including the Mack-Cali property-owning partnerships and limited liability companies, is the entity through which all of the General Partner’s operations are conducted. Unless stated otherwise or the context requires, the “Company” refers to the General Partner and its subsidiaries, including the Operating Partnership and its subsidiaries.

As of June 30, 2019, the Company owned or had interests in 75 real estate properties (the “Properties”). The Properties are comprised of 45 office buildings totaling approximately 11.6 million square feet and leased to approximately 400 tenants (which include two buildings, aggregating approximately 0.2 million square feet owned by unconsolidated joint ventures in which the Company has investment interests), 23 multi-family properties, totaling 7,256 apartment units (which include seven properties aggregating 2,611 apartment units owned by unconsolidated joint ventures in which the Company has investment interests), four parking/retail properties totaling approximately 115,000 square feet (which include two buildings aggregating 81,700 square feet owned by unconsolidated joint ventures in which the Company has investment interests), two hotels (one of which is owned by an unconsolidated joint venture in which the Company has an investment interest) and a parcel of land leased to a third party. The Properties are located in four states in the Northeast, plus the District of Columbia.

BASIS OF PRESENTATION

The accompanying consolidated financial statements include all accounts of the Company, its majority-owned and/or controlled subsidiaries, which consist principally of the Operating Partnership and variable interest entities for which the Company has determined itself to be the primary beneficiary, if any. See Note 2: Significant Accounting Policies – Investments in Unconsolidated Joint Ventures, for the Company’s treatment of unconsolidated joint venture interests. Intercompany accounts and transactions have been eliminated.

Accounting Standards Codification (“ASC”) 810, Consolidation, provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIEs. Generally, the consideration of whether an entity is a VIE applies when either: (1) the equity investors (if any) lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and substantially all of the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the variable interest entity’s performance: and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE.

On January 1, 2016, the Company adopted accounting guidance under ASC 810, Consolidation, modifying the analysis it must perform to determine whether it should consolidate certain types of legal entities. The guidance does not amend the existing disclosure requirements for variable interest entities or voting interest model entities. The guidance, however, modified the requirements to qualify under the voting interest model. Under the revised guidance, the Operating Partnership will be a variable interest entity of the parent company, Mack-Cali Realty Corporation. As the Operating Partnership is already consolidated in the balance sheets of Mack-Cali Realty Corporation, the identification of this entity as a variable interest entity has no impact on the consolidated financial statements of Mack-Cali Realty Corporation. There were no other legal entities qualifying under the scope of the revised guidance that were consolidated as a result of the adoption.

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As of June 30, 2019 and December 31, 2018, the Company’s investments in consolidated real estate joint ventures, which are variable interest entities in which the Company is deemed to be the primary beneficiary, other than Roseland Residential, L.P. (See Note 14: Rockpoint Transaction), have total real estate assets of $518.7 million and $480.4 million, respectively, mortgages of $283.3 million and $241.5 million, respectively, and other liabilities of $15.3 million and $23 million, respectively.

The financial statements have been prepared in conformity with GAAP. The preparation of financial statements in conformity with 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. These estimates and assumptions are based on management’s historical experience that are believed to be reasonable at the time. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates. Certain reclassifications have been made to prior period amounts in order to conform with current period presentation.

2. SIGNIFICANT ACCOUNTING POLICIES

Rental Property

Rental properties are stated at cost less accumulated depreciation and amortization. Costs directly related to the acquisition, development and construction of rental properties are capitalized. Acquisition–related costs were expensed as incurred for all real estate acquisitions classified as business combinations, which were substantially all of our operating property acquisitions through December 31, 2016. The Company adopted FASB guidance Accounting Standards Update (“ASU”) 2017-01 on January 1, 2017, which revises the definition of a business and is expected to result in more transactions to be accounted for as asset acquisitions and significantly limit transactions that would be accounted for as business combinations. Where an acquisition has been determined to be an asset acquisition, acquisition-related costs are capitalized. Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development. Capitalized development and construction salaries and related costs approximated $0.6 million and $0.6 million for the three months ended June 30, 2019 and 2018, respectively, and $1.1 million and $1.2 million for the six months ended June 30, 2019 and 2018, respectively. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.

Included in net investment in rental property as of June 30, 2019 and December 31, 2018 is real estate and building and tenant improvements not in service, as follows (dollars in thousands):



		June 30,		December 31,
		2019		2018
Land held for development (including pre-development costs, if any) (a)	$	452,057	$	465,930
Development and construction in progress, including land (b)		465,779		327,039
Total	$	917,836	$	792,969

(a)Includes predevelopment and infrastructure costs included in buildings and improvements of $163.6 million and $204.9 million as of June 30, 2019 and December 31, 2018, respectively.

(b)Includes land of $108.8 million and $49.6 million as of June 30, 2019 and December 31, 2018, respectively.

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

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Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:

Leasehold interests	Remaining lease term
Buildings and improvements	5 to 40 years
Tenant improvements	The shorter of the term of the
	related lease or useful life
Furniture, fixtures and equipment	5 to 10 years

Upon acquisition of rental property, the Company estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities assumed, generally consisting of the fair value of (i) above and below-market leases, (ii) in-place leases and (iii) tenant relationships. The Company allocates the purchase price to the assets acquired and liabilities assumed based on their relative fair values. The Company records goodwill or a gain on bargain purchase (if any) if the net assets acquired/liabilities assumed differ from the purchase consideration of a business transaction.

In estimating the fair value of the tangible and intangible assets acquired, the Company considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

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

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

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s rental properties held for use may be impaired. In addition to identifying any specific circumstances which may affect a property or properties, management considers other criteria for determining which properties may require assessment for potential impairment. The criteria considered by management include reviewing low leased percentages, significant near-term lease expirations, current and historical operating and/or cash flow losses, construction costs overruns and/or other factors, including those that might impact the Company’s intent and ability to hold the property. A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, the impairment loss shall be measured as the excess of the carrying value of the property over the fair value of the property. The Company’s estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions. These assumptions are generally based on management’s experience in its local real estate markets and the effects of current market conditions. The assumptions are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved, and actual losses or impairments may be realized in the future.

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Rental Property Held for Sale

When assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. The Company generally considers assets to be held for sale when the transaction has received appropriate corporate authority, and there are no significant contingencies relating to the sale. If, in management’s opinion, the estimated net sales price, net of selling costs, of the assets which have been identified as held for sale is less than the carrying value of the assets, a valuation allowance (which is recorded as unrealized losses on disposition of rental property) is established.

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

Investments in Unconsolidated Joint Ventures

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

If the venture subsequently makes distributions and the Company does not have an implied or actual commitment to support the operations of the venture, including a general partner interest in the investee, the Company will not record a basis less than zero, rather such amounts will be recorded as equity in earnings of unconsolidated joint ventures.

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in unconsolidated joint ventures may be impaired. An investment is impaired only if management’s estimate of the value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying value of the investment over the value of the investment. The Company’s estimates of value for each investment (particularly in real estate joint ventures) are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and operating costs. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the values estimated by management in its impairment analyses may not be realized, and actual losses or impairment may be realized in the future. See Note 4: Investments in Unconsolidated Joint Ventures.

Cash and Cash Equivalents

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

Deferred Financing Costs

Costs incurred in obtaining financing are capitalized and amortized over the term of the related indebtedness. Deferred financing costs are presented in the balance sheet as a direct deduction from the carrying value of the debt liability to which they relate, except deferred financing costs related to the revolving credit facility, which are presented in deferred charges, goodwill and other assets. In all cases, amortization of such costs is included in interest expense and was $1,168,000 and $1,145,000 for the three months ended June 30, 2019 and 2018, respectively, and $2,357,000 and $2,241,000 for the six months ended June 30, 2019 and 2018, respectively. If a financing obligation is extinguished early, any unamortized deferred financing costs are written off and included in gains (losses) from extinguishment of debt. The gains (losses) from extinguishment of debt, net, of $0.6 million and zero for the three months ended June 30, 2019 and 2018, respectively, contained no write off of unamortized deferred financing costs. Included in gain (loss) from extinguishment of debt, net, of $1.9 million and ($10.3) million for the six months ended June 30, 2019 and 2018, respectively, were unamortized deferred financing costs which were written off (as non-cash transactions) amounting to zero and $105,000, respectively.

Deferred Leasing Costs/Leasing Personnel Costs

Costs incurred in connection with successfully executed commercial and residential leases were 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 were

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charged to amortization expense upon early termination of the lease. Certain employees of the Company are compensated for providing leasing services to the Properties. The portion of such compensation related to commercial leases, which was capitalized and amortized, and included in deferred charges, goodwill and other assets, net, was approximately $935,000 and $1,628,000 for the three and six months ended June 30, 2018, respectively. Upon the adoption of ASC 842 on January 1, 2019, the Company no longer capitalizes such costs, and includes such costs in Leasing personnel costs in the Company’s Consolidated Statements of Operations, which amounted to $542,000 and $1,284,000 for the three and six months ended June 30, 2019, respectively.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is allocated to various reporting units, as applicable. Each of the Company’s segments consists of a reporting unit. Goodwill is not amortized. Management performs an annual impairment test for goodwill during the fourth quarter and between annual tests, management evaluates the recoverability of goodwill whenever events or changes in circumstances indicate that the carrying value of goodwill may not be fully recoverable. In its impairment tests of goodwill, management first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If, based on this assessment, management determines that the fair value of the reporting unit is not less than its carrying value, then performing the additional two-step impairment test is unnecessary. If the carrying value of goodwill exceeds its fair value, an impairment charge is recognized.

Derivative Instruments

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

Revenue Recognition

Revenue from leases includes fixed base rents under leases, which are recognized on a straight-line basis over the terms of the respective leases. Unbilled rents receivable represents the cumulative amount by which straight-line rental revenue exceeds rents currently billed in accordance with the lease agreements.

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

Revenue from leases also includes reimbursements and recoveries from tenants 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: Tenant Leases.

Real estate services revenue includes property management, development, construction and leasing commission fees and other services, and payroll and related costs reimbursed from clients. Fee income derived from the Company’s unconsolidated joint ventures (which are capitalized by such ventures) are recognized to the extent attributable to the unaffiliated ownership interests.

Parking income includes income from parking spaces leased to tenants and others.

Hotel income includes all revenue earned from hotel properties.

Other income includes income from tenants for additional services arranged for by the Company and income from tenants for early lease terminations.

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Allowance for Doubtful Accounts

All bad debt expense is being recorded as a reduction of the corresponding revenue account starting on January 1, 2019. Management performs a detailed review of amounts due from tenants to determine if an allowance for doubtful accounts is required based on factors affecting the collectability of the accounts receivable balances. The factors considered by management in determining which individual tenant receivable balances, require a collectability allowance include the age of the receivable, the tenant’s payment history, the nature of the charges, any communications regarding the charges and other related information. Management’s estimate of the allowance for doubtful accounts requires management to exercise significant judgment about the timing, frequency and severity of collection losses, which affects the allowance and net income.

Income and Other Taxes

The General Partner has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “IRS Code”). As a REIT, the General Partner generally will not be subject to corporate federal income tax on net income that it currently distributes to its shareholders, provided that the General Partner satisfies certain organizational and operational requirements including the requirement to distribute at least 90 percent of its REIT taxable income (determined by excluding any net capital gains) to its shareholders. If and to the extent the General Partner retains and does not distribute any net capital gains, the General Partner will be required to pay federal, state and local taxes, as applicable, on such net capital gains at the rate applicable to capital gains of a corporation.

The Operating Partnership is a partnership, and, as a result, all income and losses of the partnership are allocated to the partners for inclusion in their respective tax returns. Accordingly, no provision or benefit for income taxes has been made in the accompanying financial statements.

The General Partner has elected to treat certain of its corporate subsidiaries as taxable REIT subsidiaries (each a “TRS”). In general, a TRS of the General Partner may perform additional services for tenants of the Company and generally may engage in any real estate or non-real estate related business (except for the operation or management of health care facilities or lodging facilities or the providing to any person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated). A TRS is subject to corporate federal income tax. The General Partner has conducted business through its TRS entities for certain property management, development, construction and other related services, as well as to hold a joint venture interest in a hotel and other matters.

The deferred tax asset balance at June 30, 2019 amounted to $11.1 million which has been fully reserved through a valuation allowance. New tax reform legislation enacted in late 2017 reduced the corporate tax rate to 21 percent, effective January 1, 2018. Consequently, the Company’s deferred tax assets were re-measured to reflect the reduction in the future U.S. corporate income tax rate as of the enactment date. As a result, the Company recorded a decrease related to its deferred tax assets of $5.3 million and a decrease to the associated valuation allowance of $5.3 million at December 31, 2017. If the General Partner fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate tax rates. The Company is subject to certain state and local taxes.

Pursuant to the amended provisions related to uncertain tax provisions of ASC 740, Income Taxes, the Company recognized no material adjustments regarding its tax accounting treatment. The Company expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which is included in general and administrative expense.

In the normal course of business, the Company or one of its subsidiaries is subject to examination by federal, state and local jurisdictions in which it operates, where applicable. As of June 30, 2019, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are generally from the year 2014 forward.

Earnings Per Share or Unit

The Company presents both basic and diluted earnings per share or unit (“EPS or EPU”). Basic EPS or EPU excludes dilution and is computed by dividing net income available to common shareholders or unitholders by the weighted average number of shares or units outstanding for the period. Diluted EPS or EPU 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 or EPU from continuing operations amount. Shares or units whose issuance is contingent upon the satisfaction of certain conditions shall be considered outstanding and included in the computation of diluted EPS or EPU as follows (i) if all necessary conditions have been satisfied by the end of the period (the events have occurred), those shares or units shall be included as of the beginning of the period in which the conditions were satisfied (or as of the date of the grant, if later) or (ii) if all necessary conditions have not been satisfied by the end of the period, the number of contingently issuable shares or units included in diluted EPS or EPU shall be based on the number of shares or units, if any, that would be issuable if the end of the reporting period were the end of the contingency period (for example,

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the number of shares or units that would be issuable based on current period earnings or period-end market price) and if the result would be dilutive. Those contingently issuable shares or units shall be included in the denominator of diluted EPS or EPU as of the beginning of the period (or as of the date of the grant, if later).

Dividends and Distributions Payable

The dividends and distributions payable at June 30, 2019 represents dividends payable to common shareholders (90,553,484 shares) and distributions payable to noncontrolling interests unitholders of the Operating Partnership (9,853,074 common units and 1,949,601 vested and unvested LTIP units), for all such holders of record as of July 2, 2019 with respect to the second quarter 2019. The second quarter 2019 common stock dividends and unit distributions of $0.20 per common share (total of $18.1 million), common unit (total of $2.0 million) and LTIP unit (total of $0.4 million) were approved by the General Partner’s Board of Directors on June 12, 2019 and paid on July 12, 2019.

The dividends and distributions payable at December 31, 2018 represents dividends payable to common shareholders (90,320,408 shares) and distributions payable to noncontrolling interests unitholders of the Operating Partnership (10,174,285 common units and 1,762,170 LTIP units) for all such holders of record as of January 3, 2019 with respect to the fourth quarter 2018. The fourth quarter 2018 common stock dividends and unit distributions of $0.20 per common share (total of $18.1 million), common unit (total of $2.0 million) and LTIP unit (total of $0.4 million) were approved by the General Partner’s Board of Directors on December 11, 2018 and paid on January 11, 2019.

Costs Incurred For Stock Issuances

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

Stock Compensation

The Company accounts for stock compensation in accordance with the provisions of ASC 718, Compensation-Stock Compensation. These provisions require that the estimated fair value of restricted stock (“Restricted Stock Awards”), performance share units, long-term incentive plan awards and stock options at the grant date be amortized ratably into expense over the appropriate vesting period. The Company recorded stock compensation expense of $2,191,000 and $657,000 for the three months ended June 30, 2019 and 2018, respectively, and $4,071,000 and $3,189,000 for the six months ended June 30, 2019 and 2018, respectively.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) includes items that are recorded in equity, such as effective portions of derivatives designated as cash flow hedges or unrealized holding gains or losses on marketable securities available for sale.

Redeemable Noncontrolling Interests

The Company evaluates the terms of the partnership units issued in accordance with the FASB’s Distinguishing Liabilities from Equity guidance. Units which embody an unconditional obligation requiring the Company to redeem the units for cash after a specified or determinable date (or dates) or upon the occurrence of an event that is not solely within the control of the issuer are determined to be contingently redeemable under this guidance and are included as Redeemable noncontrolling interests and classified within the mezzanine section between Total liabilities and Stockholders’ equity on the Company’s Consolidated Balance Sheets. The carrying amount of the redeemable noncontrolling interests will be changed by periodic accretions, so that the carrying amount will equal the estimated future redemption value at the redemption date.

Fair Value Hierarchy

The standard Fair Value Measurements specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). The following summarizes the fair value hierarchy:

Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices for identical assets and liabilities in markets that are inactive, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly, such as interest rates and yield curves that are observable at commonly quoted intervals and

Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

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In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Impact of Recently-Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), modifying the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). ASU 2016-02 provides new guidelines that change the accounting for leasing arrangements for lessees, whereby their rights and obligations under substantially all leases, existing and new, would be capitalized and recorded on the balance sheet. For lessors, however, the accounting remains largely equivalent to the current model, with the distinction between operating, sales-type, and direct financing leases retained, but updated to align with certain changes to the lessee model and the new revenue recognition standard.

ASU 2016-02 provides two transition methods. The first transition method allows for application of the new model at the beginning of the earliest comparative period presented. Under the second transition method, comparative periods would not be restated, with any cumulative effect adjustments recognized in the opening balance of retained earnings in the period of adoption. In addition, a practical expedient was recently issued by the FASB that allows lessors to combine non-lease components with related lease components if certain conditions are met. The Company has adopted this guidance for its interim and annual periods beginning January 1, 2019 using the second transition method.

Under ASU 2016-02, lessors will only capitalize incremental direct leasing costs and will expense internal leasing costs that were previously capitalized prior to the adoption of ASU 2016-02. For leases where the Company is a lessee, primarily its ground leases, the Company is recognizing a right-of-use asset and a corresponding lease liability.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”). The guidance introduces a new model for estimating credit losses for certain types of financial instruments, including trade and lease receivables, loans receivable, held-to-maturity debt securities, and net investments in direct financing leases, amongst other financial instruments. ASU 2016-13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company is currently in the process of evaluating the impact the adoption of ASU 2016-13 will have on the Company’s consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The purpose of ASU 2017-12 is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The Company has adopted ASU 2017-12 on January 1, 2019. ASU 2017-12 requires a modified retrospective transition method which requires a cumulative effect of the change on the opening balance of each affected component of equity in the Company’s consolidated financial statements as of the date of adoption. Upon adoption the Company recorded a cumulative adjustment specifically related to the elimination of the requirement to for separate measurement of hedge ineffectiveness. As a result, the Company recorded an opening balance adjustment as of January 1, 2019 to retained earnings of $0.4 million with a corresponding change to other comprehensive income.

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3. RECENT TRANSACTIONS

Acquisitions

The Company acquired the following rental properties (which were determined to be asset acquisitions in accordance with ASU 2017-01) during the six months ended June 30, 2019 (dollars in thousands):


				Rentable
Acquisition			# of	Square Feet/		Acquisition
Date	Property Address	Location	Bldgs.	Apartment Units		Cost
02/06/19	99 Wood Avenue (a)	Iselin, New Jersey	1	271,988	$	61,858
04/01/19	Soho Lofts Apartments (a)	Jersey City, New Jersey	1	377		264,578

Total Acquisitions			2		$	326,436


(a)	This acquisition was funded using funds available with the Company's qualified intermediary and through borrowing under the Company's unsecured revolving credit facility.

The purchase prices were allocated to the net assets acquired, as follows (in thousands):


		99 Wood Avenue			Soho Lofts Apartments			Total
Land and leasehold interest	$	9,261		$	27,601		$	36,862
Buildings and improvements and other assets		45,576			231,663			277,239
Above market lease values		431	(a)		-			431
In-place lease values		8,264	(a)		5,480	(b)		13,744
		63,532			264,744			328,276
Less: Below market lease values		(1,674)	(a)		(166)	(b)		(1,840)
Net assets recorded upon acquisition	$	61,858		$	264,578		$	326,436

(a) Above market, in-place and below market lease values are being amortized over a weighted-average term of 4.3 years.
(b) In-place and below market lease values are being amortized over a weighted term of 0.8 years.

On May 10, 2019, the Company completed the acquisition of three unimproved land parcels (“107 Morgan”) located in Jersey City, New Jersey for approximately $67.2 million. The 107 Morgan acquisition was funded using funds available with the Company’s qualified intermediary from prior property sales proceeds, and through borrowing under the Company’s unsecured revolving credit facility. The Company’s mortgage receivable of $46.1 million with the seller was repaid in full to the Company at closing.

On June 28, 2019, the Company signed an agreement to acquire Liberty Towers, a 648-unit multi-family rental property located in Jersey City, New Jersey, for approximately $409 million, subject to certain conditions. The acquisition is expected to be completed in late 2019, using sales proceeds from the completion of future planned dispositions.

Consolidation

On January 31, 2019, the Company, which held a 24.27 percent subordinated interest in the unconsolidated joint venture, Marbella Tower Urban Renewal Associates South LLC, a 311-unit multi-family operating property located in Jersey City, New Jersey, acquired its equity partner’s 50 percent preferred controlling interest for $77.5 million in cash. The property was subject to a mortgage loan that had a principal balance of $74.7 million. The acquisition was funded primarily using available cash. Concurrently with the closing, the joint venture repaid in full the property’s $74.7 million mortgage loan and obtained a new loan collateralized by the property in the amount of $117 million, which bears interest at 4.2 percent and matures in August 2026. The Company received $43.3 million in distribution from the loan proceeds which was used to acquire the equity partner’s 50 percent interest. As the result of the acquisition, the Company increased its ownership of the property from a 24.27 percent subordinated interest to a 74.27 percent controlling interest. In accordance with ASC 810, Consolidation, the Company evaluated the acquisition and determined that the entity meets the criteria of a VIE. As such, the Company consolidated the asset upon acquisition and accordingly, remeasured its equity interests, as required by the FASB’s consolidation guidance, at fair value (based upon the income approach using current rates and market cap rates and discount rates). As a result, the Company recorded a gain on change of control of interests of $13.8 million (a non-cash item) in the six months ended June 30, 2019, in which the Company accounted for the transaction as a VIE that is not a business in accordance with ASC 810-10-30-4. Additional non-cash items included in the acquisition were the Company’s carrying value of its interest in the joint venture of $15.3 million and the noncontrolling interest’s fair value of $13.7 million. See Note 9: Mortgages, Loans Payable and Other Obligations.

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Net assets recorded upon consolidation were as follows (in thousands):


		Marbella II
Land and leasehold interest	$	36,595
Buildings and improvements and other assets, net		153,974
In-place lease values (a)		4,611
Less: Below market lease values (a)		(80)
		195,100
Less: Debt		(117,000)
Net assets		78,100
Less: Noncontrolling interests		(13,722)
Net assets recorded upon consolidation	$	64,378

(a) In-place and below market lease values are being amortized over a weighted-average term of 6.2 months.

Dispositions

The Company disposed of the following office and multi-family properties during the six months ended June 30, 2019 (dollars in thousands):


											Realized
											Gains
				Rentable			Net		Net		(losses)/
Disposition			# of	Square			Sales		Carrying		Unrealized
Date	Property/Address	Location	Bldgs.	Feet			Proceeds		Value		Losses, net
01/11/19	721 Route 202-206 South (a)	Bridgewater, New Jersey	1	192,741		$	5,651	$	5,410	$	241
01/16/19	Park Square Apartments (b)	Rahway, New Jersey	1	159	units		34,045		34,032		13
01/22/19	2115 Linwood Avenue	Fort Lee, New Jersey	1	68,000			15,197		7,433		7,764
02/27/19	201 Littleton Road (c)	Morris Plains, New Jersey	1	88,369			4,842		4,937		(95)
03/13/19	320 & 321 University Avenue	Newark, New Jersey	2	147,406			25,552		18,456		7,096
03/29/19	Flex portfolio (d)	New York and Connecticut	56	3,148,512			470,348		214,758		255,590
06/18/19	650 From Road (e)	Paramus, New Jersey	1	348,510			37,801		40,046		(2,245)

Totals			63	3,993,538		$	593,436	$	325,072	$	268,364


(a)	The Company recorded a valuation allowance of $9.3 million on this property during the year ended December 31, 2018.
(b)	The Company recorded a valuation allowance of $6.3 million on this property during the year ended December 31, 2018.
(c)	The Company recorded a valuation allowance of $3.6 million on this property during the year ended December 31, 2018.
(d)	301,638 Common Units were redeemed by the Company at fair market value of $6.6 million as purchase consideration received for two of the properties disposed of in this transaction, which was a non-cash portion of this sales transaction. The Company used the net cash received at closing to repay approximately $119.9 million of borrowings under the unsecured revolving credit facility and to repay $90 million of its $350 million unsecured term loan. The Company also utilized $217.4 million of these proceeds on April 1, 2019 to acquire a 377-unit multi-family property located in Jersey City, New Jersey.
(e)	The Company recorded a valuation allowance of $0.9 million on this property during the year ended December 31, 2018.

On April 30, 2019, the Company disposed of developable land holding located in Malden, Massachusetts for net sales proceeds of approximately $685,000. The Company recorded a gain of approximately $270,000 on the disposition. The net sales proceeds were held by a qualified intermediary at June 30, 2019 for future reinvestment in real estate.

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Impairments

As part of its ongoing portfolio assessment process, the Company made the decision in the second quarter 2019 to pursue selling a 317,040 square foot office property located in Parsippany, New Jersey. The Company evaluated the recoverability of the carrying value of this property and determined that due to the shortening of the expected period of ownership, it was necessary to reduce the carrying value of the property to its estimated fair value. Accordingly, the Company recorded a valuation impairment charge of $5.8 million at June 30, 2019.

The Company owns two separate developable land parcels in Conshohocken and Bala Cynwyd, Pennsylvania, that were being considered for development into multi-family rental properties. During the fourth quarter 2018, the Company made the decision to pursue selling the land parcels as opposed to development. Due to the shortening of the expected periods of ownership, the Company determined that it was necessary to reduce the carrying value of the land parcels to their estimated fair value and recorded land impairments charges of $24.6 million at December 31, 2018. As a result of its periodic evaluation of the recoverability of the carrying value, the Company recorded an additional land impairment charge of $2.5 million at June 30, 2019.

Rockpoint Transaction

On February 27, 2017, the Company, Roseland Residential Trust (“RRT”), the Company’s subsidiary through which the Company conducts its multi-family residential real estate operations, Roseland Residential, L.P. (“RRLP”), the operating partnership through which RRT conducts all of its operations, and certain other affiliates of the Company entered into a preferred equity investment agreement (the “Original Investment Agreement”) with certain affiliates of Rockpoint Group, L.L.C. (Rockpoint Group, L.L.C. and its affiliates, collectively, “Rockpoint”). The Original Investment Agreement provided for RRT to contribute property to RRLP in exchange for common units of limited partnership interests in RRLP (the “Common Units”) and for multiple equity investments by Rockpoint in RRLP from time to time for up to an aggregate of $300 million of preferred units of limited partnership interests in RRLP (the “Preferred Units”). The initial closing under the Original Investment Agreement occurred on March 10, 2017 for $150 million of Preferred Units and the parties agreed that the Company’s contributed equity value (“RRT Contributed Equity Value”), was $1.23 billion at closing. During the year ended December 31, 2018, a total additional amount of $105 million of Preferred Units were issued and sold to Rockpoint pursuant to the Original Investment Agreement. During the three months ended March 31, 2019, a total additional amount of $45 million of Preferred Units were issued and sold to Rockpoint pursuant to the Original Investment Agreement, which brought the Preferred Units to the full balance of $300 million. In addition, certain contributions of property to RRLP by RRT subsequent to the execution of the Original Investment Agreement resulted in RRT being issued approximately $46 million of Preferred Units and Common Units in RRLP prior to June 26, 2019.

On June 26, 2019, the Company, RRT, RRLP, certain other affiliates of the Company and Rockpoint entered into an additional preferred equity investment agreement (the “Add On Investment Agreement”). The closing under the Add On Investment Agreement occurred on June 28, 2019. Pursuant to the Add On Investment Agreement, Rockpoint invested an additional $100 million in Preferred Units and RRT agreed to contribute to RRLP two additional properties located in Jersey City, New Jersey. The Company used the $100 million in proceeds received to repay outstanding borrowings under its unsecured revolving credit facility and other debt by June 30, 2019. In addition, Rockpoint has a right of first refusal to invest another $100 million in Preferred Units in the event RRT determines that RRLP requires additional capital prior to March 1, 2023 and, subject thereto, RRLP may issue up to approximately $154 million in Preferred Units to RRT or an affiliate so long as at the time of such funding RRT determines in good faith that RRLP has a valid business purpose to use such proceeds. See Note 14: Redeemable Noncontrolling Interests for additional information about the Add On Investment Agreement and the related transactions with Rockpoint.

Consolidated Joint Venture Activity

On March 26, 2019, the Company, which held a 90 percent controlling interest in the joint venture, XS Hotel Urban Renewal LLC, which owns a 372-key hotel (164 keys in-service Residence Inn and 208 keys in-development Marriott Envue) located in Weehawken, New Jersey, acquired its partner’s 10 percent interest for $5 million in cash. As a result of the acquisition, the Company increased its ownership of the property to 100 percent.

Unconsolidated Joint Venture Activity

On February 28, 2019, the Company sold its interest in the Red Bank Corporate Plaza joint venture which owns an operating property located in Red Bank, New Jersey for a sales price of $4.2 million, and realized a gain on the sale of the unconsolidated joint venture of $0.9 million.

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4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

As of June 30, 2019, the Company had an aggregate investment of approximately $216 million in its equity method joint ventures. The Company formed these ventures with unaffiliated third parties, or acquired interests in them, to develop or manage primarily office and multi-family rental properties, or to acquire land in anticipation of possible development of office and multi-family rental properties. As of June 30, 2019, the unconsolidated joint ventures owned: two office properties aggregating approximately 0.2 million square feet, seven multi-family properties totaling 2,611 apartments units, two retail properties aggregating approximately 81,700 square feet, a 351-room hotel, a development project for up to approximately 360 apartments units; and interests and/or rights to developable land parcels able to accommodate up to 3,738 apartments units. The Company’s unconsolidated interests range from 20 percent to 85 percent subject to specified priority allocations in certain of the joint ventures.

The amounts reflected in the following tables (except for the Company’s share of equity in earnings) are based on the historical financial information of the individual joint ventures. The Company does not record losses of the joint ventures in excess of its investment balances unless the Company is liable for the obligations of the joint venture or is otherwise committed to provide financial support to the joint venture. The outside basis portion of the Company’s investments in joint ventures is amortized over the anticipated useful lives of the underlying ventures’ tangible and intangible assets acquired and liabilities assumed. Unless otherwise noted below, the debt of the Company’s unconsolidated joint ventures generally is non-recourse to the Company, except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions, and material misrepresentations.

The Company has agreed to guarantee repayment of a portion of the debt of its unconsolidated joint ventures. As of June 30, 2019, such debt had a total borrowing capacity of up to $317.1 million of which the Company agreed to guarantee up to $35.8 million. As of June 30, 2019, the outstanding balance of such debt totaled $211.2 million of which $25.2 million was guaranteed by the Company. The Company performed management, leasing, development and other services for the properties owned by the unconsolidated joint ventures and recognized $0.5 million and $0.6 million for such services in the three months ended June 30, 2019 and 2018, respectively. The Company had $0.2 million in accounts receivable due from its unconsolidated joint ventures as of both June 30, 2019 and December 31, 2018.

Included in the Company’s investments in unconsolidated joint ventures as of June 30, 2019 are four unconsolidated development joint ventures, which are VIEs for which the Company is not the primary beneficiary. These joint ventures are primarily established to develop real estate property for long-term investment and were deemed VIEs primarily based on the fact that the equity investment at risk was not sufficient to permit the entities to finance their activities without additional financial support. The initial equity contributed to these entities was not sufficient to fully finance the real estate construction as development costs are funded by the partners throughout the construction period. The Company determined that it was not the primary beneficiary of these VIEs based on the fact that the Company has shared control of these entities along with the entity’s partners and therefore does not have controlling financial interests in these VIEs. The Company’s aggregate investment in these VIEs was approximately $119.7 million as of June 30, 2019. The Company’s maximum exposure to loss as a result of its involvement with these VIEs is estimated to be approximately $155.5 million, which includes the Company’s current investment and estimated future funding commitments/guarantees of approximately $35.8 million. The Company has not provided financial support to these VIEs that it was not previously contractually required to provide. In general, future costs of development not financed through third parties will be funded with capital contributions from the Company and its outside partners in accordance with their respective ownership percentages.
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The following is a summary of the Company's unconsolidated joint ventures as of June 30, 2019 and December 31, 2018 (dollars in thousands):


										Property Debt
	Number of		Company's			Carrying Value				As of June 30, 2019
	Apartment Units		Effective			June 30,		December 31,			Maturity	Interest
Entity / Property Name	or Rentable SF		Ownership % (a)			2019		2018		Balance	Date	Rate
Multi-family
Metropolitan at 40 Park (b) (c)	189	units	25.00	%	$	7,481	$	7,679	$	54,802	(d)	(d)
RiverTrace at Port Imperial	316	units	22.50	%		7,732		8,112		82,000	11/10/26	3.21	%
Crystal House (e)	825	units	25.00	%		28,738		29,570		161,171	04/01/20	3.17	%
PI North - Riverwalk C	360	units	40.00	%		35,314		27,175		6,051	12/06/21	L+2.75	%	(f)
Marbella II (g)	311	units	24.27	%		-		15,414		-	-	-
Riverpark at Harrison	141	units	45.00	%		1,075		1,272		29,541	08/01/25	3.70	%
Station House	378	units	50.00	%		36,581		37,675		97,692	07/01/33	4.82	%
Urby at Harborside (h)	762	units	85.00	%		82,018		85,317		192,000	08/01/29	5.197	%
PI North -Land (i)	836	potential units	20.00	%		1,678		1,678		-	-	-
Liberty Landing	850	potential units	50.00	%		337		337		-	-	-
Hillsborough 206	160,000	sf	50.00	%		1,962		1,962		-	-	-
Office
Red Bank (j)	92,878	sf	50.00	%		-		3,127		-	-	-
12 Vreeland Road	139,750	sf	50.00	%		7,176		7,019		7,091	07/01/23	2.87	%
Offices at Crystal Lake	106,345	sf	31.25	%		3,471		3,442		3,703	11/01/23	4.76	%
Other
Riverwalk Retail (b)	30,745	sf	20.00	%		1,497		1,539		-	-	-
Hyatt Regency Jersey City	351	rooms	50.00	%		-		112		100,000	10/01/26	3.668	%
Other (k)						897		1,320		-	-	-
Totals:					$	215,957	$	232,750	$	734,051



(a)	Company's effective ownership % represents the Company's entitlement to residual distributions after payments of priority returns, where applicable.
(b)	The Company's ownership interests in this venture are subordinate to its partner's preferred capital balance and the Company is not expected to meaningfully participate in the venture's cash flows in the near term.
(c)	Through the joint venture, the Company also owns a 25 percent interest in a 50,973 square feet retail building ("Shops at 40 Park") and a 50 percent interest in a 59-unit, five story multi-family rental property ("Lofts at 40 Park").
(d)	Property debt balance consists of: (i) an amortizable loan, collateralized by the Metropolitan at 40 Park, with a balance of $35,590, bears interest at 3.25 percent, matures in September 2020; (ii) an amortizable loan, collateralized by the Shops at 40 Park, with a balance of $6,067, bears interest at LIBOR +2.25%, matures in September 2019; (iii) a construction loan with a maximum borrowing amount of $13,950 for the Lofts at 40 Park with a balance of $13,145, which bears interest at LIBOR plus 250 basis points and matures in February 2020.
(e)	Included in this is the Company's unconsolidated 50 percent interest in a vacant land to accommodate the development of approximately 295 additional units of which 252 are currently approved.
(f)	The venture has a construction loan with a maximum borrowing amount of $112,000.
(g)	On January 31, 2019, the Company, which held a 24.27 percent subordinated interest in the unconsolidated joint venture, Marbella Tower Urban Renewal Associates South LLC, a 311-unit multi-family operating property located in Jersey City, New Jersey, acquired the majority equity partner’s 50 percent preferred and controlling interest in the venture for $77.5 million in cash and the Company consolidated the asset. See Note 3: Recent Transactions - Consolidation. The acquisition was funded primarily using available cash and proceeds from the refinancing. Concurrently with the closing, the joint venture repaid in full the property’s $74.7 million mortgage loan and obtained a new loan in the amount of $117 million.
(h)	The Company owns an 85 percent interest with shared control over major decisions such as, approval of budgets, property financings and leasing guidelines.
(i)	The Company owns a 20 percent residual interest in undeveloped land parcels: parcels 6, I, and J that can accommodate the development of 836 apartment units.
(j)	On February 28, 2019, the Company sold its 50 percent interest to its partner and recorded a gain of $0.9 million.
(k)	The Company owns other interests in various unconsolidated joint ventures, including interests in assets previously owned and interest in ventures whose businesses are related to its core operations. These ventures are not expected to significantly impact the Company's operations in the near term.

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The following is a summary of the Company’s equity in earnings (loss) of unconsolidated joint ventures for the three and six months ended June 30, 2019 and 2018 (dollars in thousands):


		Three Months Ended				Six Months Ended
		June 30,				June 30,
Entity / Property Name		2019		2018		2019		2018
Multi-family
Marbella	$	-	$	93	$	-	$	184
Metropolitan at 40 Park		(121)		(156)		(198)		(231)
RiverTrace at Port Imperial		52		45		90		89
Crystal House		(184)		(263)		(409)		(425)
PI North - Riverwalk C / Land		(62)		(37)		(132)		(37)
Marbella II (b)		-		8		(15)		30
Riverpark at Harrison		(65)		(85)		(125)		(148)
Station House		(538)		(484)		(1,094)		(912)
Urby at Harborside		(290)		(574)		(749)		1,147	(c)
Liberty Landing		-		-		-		-
Hillsborough 206		-		-		-		15
Office
Red Bank (d)		-		(55)		8