UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2019

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

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

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)			(IRS 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)

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


(Title of Each Class)	Trading Symbol(s)	(Name of Each Exchange on Which Registered)
Mack-Cali Realty Corporation
Common Stock, $0.01 par value	CLI	New York Stock Exchange

Mack-Cali Realty, L.P.
None	N/A	None

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.


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

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


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. 

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 June 30, 2019, the aggregate market value of the voting stock held by non-affiliates of the Mack-Cali Realty Corporation was $2,102,611,115. The aggregate market value was computed with reference to the closing price on the New York Stock Exchange on such date. This calculation does not reflect a determination that persons are affiliates for any other purpose. The registrant has no non-voting common stock.

As of February 24, 2020, 90,595,470 shares of common stock, $0.01 par value, of Mack-Cali Realty Corporation (“Common Stock”) were 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.

LOCATION OF EXHIBIT INDEX: The index of exhibits is contained herein on page number 142.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Mack-Cali Realty Corporation’s definitive proxy statement for fiscal year ended December 31, 2019 to be issued in conjunction with the registrant’s annual meeting of shareholders expected to be held on June 10, 2020 are incorporated by reference in Part III of this Form 10-K. The definitive proxy statement will be filed by the registrant with the SEC not later than 120 days from the end of the registrant’s fiscal year ended December 31, 2019.
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EXPLANATORY NOTE

This report combines the annual reports on Form 10-K for the year ended December 31, 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.

As of December 31, 2019, the General Partner owned an approximate 90.4 percent common unit interest in the Operating Partnership. The remaining approximate 9.6 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 annual reports on Form 10-K 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 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

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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 6. Selected Financial Data;

·Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations includes information specific to each entity, where applicable;

·Item 8. Financial Statements and Supplementary Data 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 15. Redeemable Noncontrolling Interests;

Note 16. Mack-Cali Realty Corporation’s Stockholders’ Equity and Mack-Cali Realty, L.P.’s Partners’ Capital;

Note 17. Noncontrolling Interests in Subsidiaries;

Note 18. Segment Reporting, where applicable; and

Note 20. Condensed Quarterly Financial Information (unaudited).

This report also includes separate Part II, Item 9A. 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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FORM 10-K

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PART I		Page No.
Item 1	Business	5
Item 1A	Risk Factors	12
Item 1B	Unresolved Staff Comments	22
Item 2	Properties	23
Item 3	Legal Proceedings	34
Item 4	Mine Safety Disclosures	34

PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters
	and Issuer Purchases of Equity Securities	34
Item 6	Selected Financial Data	36
Item 7	Management’s Discussion and Analysis of Financial Condition and
	Results of Operations	37
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	65
Item 8	Financial Statements and Supplementary Data	66
Item 9	Changes in and Disagreements with Accountants on Accounting and
	Financial Disclosure	66
Item 9A	Controls and Procedures	66
Item 9B	Other Information	68

PART III
Item 10	Directors, Executive Officers and Corporate Governance	68
Item 11	Executive Compensation	68
Item 12	Security Ownership of Certain Beneficial Owners and Management
	and Related Stockholder Matters	68
Item 13	Certain Relationships and Related Transactions, and Director Independence	68
Item 14	Principal Accounting Fees and Services	68

PART IV
Item 15	Exhibits and Financial Statement Schedules	69
Item 16	Form 10-K Summary	69

EXHIBIT INDEX		142

SIGNATURES		153

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PART I

ITEM 1. BUSINESS

GENERAL

Mack-Cali Realty Corporation, a Maryland corporation, together with its subsidiaries (collectively the “General Partner”), is a fully-integrated, self-administered and 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 an 90.4 percent and 89.8 percent common unit interest in the Operating Partnership as of December 31, 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 Company owns and operates a real estate portfolio comprised predominantly of Class A office and multi-family rental properties located primarily in the Northeast. The Company performs substantially all real estate leasing, management, acquisition and development on an in-house basis. Mack-Cali Realty Corporation was incorporated on May 24, 1994. The Company’s executive offices are located at Harborside 3, 210 Hudson Street, Suite 400, Jersey City, New Jersey 07311, and its telephone number is (732) 590-1010. The Company has an internet website at www.mack-cali.com.

As of December 31, 2019, the Company owned or had interests in 71 properties, consisting of 42 office properties, totaling approximately 10.7 million square feet, leased to approximately 400 commercial tenants, 21 multi-family rental properties containing 6,524 residential units, four parking/retail properties totaling approximately 108,000 square feet, three hotels containing 723 rooms and a parcel of land leased to a third party, plus developable land (collectively, the “Properties”). The Properties are comprised of: (a) 59 wholly-owned or Company-controlled properties consisting of 40 office buildings aggregating approximately 10.5 million square feet, 14 multi-family properties totaling 3,913 apartment units, two parking/retail properties, two hotels and a parcel of land leased to a third party (collectively, the “Consolidated Properties”); and (b) two office properties totaling approximately 0.2 million square feet, seven multi-family properties totaling 2,611 apartment units, two retail properties totaling 81,700 square feet and a 351-room hotel, which are owned by unconsolidated joint ventures in which the Company has investment interests. Unless otherwise indicated, all references to square feet represent net rentable area. As of December 31, 2019, the Company’s core, stabilized office properties included in the Consolidated Properties were 80.7 percent leased. Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future, and leases that expire at the period end date. Leases that expired as of December 31, 2019 aggregate 31,982 square feet, or 0.3 percent of the net rentable square footage. The Properties are located in four states, primarily in the Northeast, and the District of Columbia. See Item 2: Properties.

The Company believes that its Properties have excellent locations and access, and are well-maintained and professionally managed. As a result, the Company believes that its Properties attract high quality tenants and residents and achieve high rental occupancy and tenant and resident retention rates within their markets. The Company also believes that its extensive market knowledge provides it with a significant competitive advantage, which is further enhanced by its strong reputation for, and emphasis on, delivering highly responsive, professional management services.

The Company’s historical strategy has been to focus its operations, acquisition and development of office and multi-family rental properties in high-barrier-to-entry markets and sub-markets where it believes it is, or can become, a significant and preferred owner and operator.

In September 2015, the Company announced an initiative to transform into a more concentrated owner of New Jersey Hudson River waterfront and transit-oriented office properties and a regional owner of luxury multi-family rental properties. As part of this plan, the Company has sold multiple properties, primarily commercial office and office/flex properties, which it believes do not meet its long-term goals.

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STRATEGIC DIRECTION

Following the General Partner’s 2019 Annual Meeting of Stockholders, the Board of Directors of the General Partner (the “Board”) formed a Shareholder Value Committee comprised of four independent directors to review the Company’s strategic direction and make a recommendation to the full Board. On December 19, 2019, the Company announced that, based on the recommendations of the Shareholder Value Committee, the Board had determined to sell the Company’s entire suburban New Jersey office portfolio totaling approximately 6.6 million square feet (collectively, the “Suburban Office Portfolio”). This does not include the Company’s waterfront office properties in Jersey City and Hoboken, New Jersey. As the decision to sell the Suburban Office Portfolio represented a strategic shift in the Company’s operations, the portfolio’s results are being classified as discontinued operations for all periods presented herein.

Following the December 2019 announcement, the Shareholder Value Committee was disbanded. Subsequent thereto, the Board’s Nominating and Corporate Governance Committee appointed a new committee of the Board, the Special Committee, to monitor the Company’s strategic direction and to receive and consider any offers to buy the Company that may be proffered.

During the year ended December 31, 2019, the Company completed the sale of two of these suburban office properties, totaling 497,000 square feet, for net sales proceeds of $52.2 million. As of December 31, 2019, the Company has identified as held for sale the remaining 35 office properties in the Suburban Office Portfolio, totaling 6.1 million square feet.

The Company expects to complete the sale of its remaining Suburban Office Portfolio properties in 2020, and plans to use the available sales proceeds to pay down its corporate-level, unsecured indebtedness. After the completion of the Suburban Office Portfolio sales, the Company’s holdings will consist of its waterfront class A office portfolio and its multi-family rental portfolio, and related development projects and land holdings.

BUSINESS STRATEGIES

Operations

Reputation: The Company has established a reputation as a highly-regarded landlord with an emphasis on delivering quality customer service in buildings it owns and/or manages. The Company believes that its continued success depends in part on enhancing its reputation as an operator of choice, which will facilitate the retention of current tenants and residents and the attraction of new tenants and residents. The Company believes it provides a superior level of service to its customers that is an important factor in working to achieve positive leasing results as well as improving tenant retention.

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

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

The Company’s in-house multi-family rental management team emphasizes meticulous attention to detail and an unwavering commitment to customer service to complement the quality, design excellence and luxury living attributes of its multi-family rental properties. The Company believes this strategy will enable the Company to buttress management’s reputation with the market-leading designs, amenities and features of its multi-family rental properties to attract quality residents.

Portfolio Management: The Company plans to continue to own and operate a portfolio of office and multi-family rental properties in high-barrier-to-entry markets, with a primary focus in the Northeast. The Company also expects to continue to complement its core portfolio of office properties by pursuing acquisition and development opportunities in the multi-family rental sector. The Company’s primary objectives are to maximize operating cash flow and to enhance the value of its portfolio through effective management, acquisition, development and property sales strategies.

The Company seeks to maximize the value of its existing office and multi-family rental portfolio through implementing operating strategies designed to produce the highest effective rental and occupancy rates and lowest tenant installation costs within the markets that it operates, and further within the parameters of those markets. The Company continues to pursue internal growth through leasing

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vacant space, re-leasing space at the highest possible effective rents in light of current market conditions with contractual rent increases and developing or redeveloping office space for its diverse base of high credit quality tenants, including MUFG Bank Ltd; KPMG, LLP; and Merrill Lynch Pierce Fenner. In addition, the Company seeks economies of scale through volume discounts to take advantage of its size and dominance in particular sub-markets, and operating efficiencies through the use of in-house management, leasing, marketing, financing, accounting, legal and development.

The Company continually reviews its portfolio and opportunities to divest office and multi-family rental properties that, among other things, no longer meet its long-term strategy, have reached their potential, are less efficient to operate or can be sold at attractive prices when market conditions are favorable. The Company anticipates continuing to redeploy the proceeds from sales of office and multi-family rental properties to develop, redevelop and acquire multi-family rental properties, as well as reposition certain office properties into multi-family/mixed use properties, in its core Northeast sub-markets as part of its overall strategy to reposition its portfolio from office to a mix of office and multi-family rental properties.

The Company believes that the opportunity to invest in multi-family development properties at higher returns on cost will position the Company to potentially produce higher levels of net operating income than if the Company were to only purchase stabilized multi-family properties at market returns. The Company believes that the transition to a company with a greater proportion of its properties in the multi-family residential sector will ultimately result in the creation of greater shareholder value than remaining a primarily suburban commercial office company, in part due to the lower capitalization rates associated with the multi-family sector.

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

Development: The Company seeks to selectively develop additional properties either directly or through joint ventures where it believes such development will result in a favorable risk-adjusted return on investment in coordination with the above operating strategies. The Company identifies development opportunities primarily through its local market presence. Such development primarily will occur: (i) in stable core Northeast sub-markets where the demand for such space exceeds available supply; and (ii) where the Company is, or can become, a significant and preferred owner and operator. As part of the Company’s strategy to expand its multi-family rental portfolio, the Company may consider development opportunities with respect to improved land with existing commercial uses and seek to rezone the sites for multi-family rental use and development. As a result of competitive market conditions for land suitable for development, the Company may be required to hold land prior to construction for extended periods while entitlements or rezoning is obtained. The Company also may undertake repositioning opportunities that may require the expenditure of significant amounts of capital.

Property Sales: While management’s principal intention has been to own and operate its properties on a long-term basis, it periodically assesses the attributes of each of its properties, with a particular focus on the supply and demand fundamentals of the sub-markets in which they are located. The Company continually reviews its portfolio and opportunities to divest properties that, among other things, no longer meet its long-term strategy, have reached their potential, are less efficient to operate, or can be sold at attractive prices when market conditions are favorable. The Company completed the sale of rental property for aggregate gross sales proceeds of $1.1 billion during 2019 and $385.1 million during 2018.

Financial

The Company currently intends to maintain a ratio of debt-to-undepreciated assets (total debt of the Company as a percentage of total undepreciated assets) of 50 percent or less, however there can be no assurance that the Company will be successful in maintaining this ratio. As of December 31, 2019 and 2018, the Company’s total debt constituted approximately 48 percent and 45 percent of total undepreciated assets of the Company, respectively. The increase in this ratio in 2019 was primarily the result of an increase in debt associated with its multi-family development activity during the year. Although there is no limit in the Company’s organizational documents on the amount of indebtedness that the Company may incur, the Company has entered into certain financial agreements which contain covenants that limit the Company’s ability to incur indebtedness under certain circumstances. The Company intends to utilize the most appropriate sources of capital for future acquisitions, development, capital improvements and other investments, which may include funds from operating activities, proceeds from property and land sales, joint venture capital, and short-term and long-term borrowings (including draws on the Company’s unsecured revolving credit facility), and the issuance of additional debt or equity securities.

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EMPLOYEES

As of December 31, 2019, the Company had approximately 283 full-time employees.

COMPETITION

The leasing of real estate is highly competitive. The Properties compete for tenants and residents with lessors and developers of similar properties located in their respective markets primarily on the basis of location, the quality of properties, leasing terms (including rent and other charges and allowances for tenant improvements), services or amenities provided, the design and condition of the Properties, and reputation as an owner and operator of quality properties in the relevant markets. Additionally, the number of competitive multi-family rental properties in a particular area could have a material effect on the Company’s ability to lease residential units and on rents charged. In addition, other forms of multi-family rental properties or single family housing provide alternatives to potential residents of multi-family properties. The Company competes with other entities, some of which may have significant resources or who may be willing to accept lower returns or pay higher prices than the Company in terms of acquisition and development opportunities. The Company also experiences competition when attempting to acquire or dispose of real estate, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension trusts, trust funds, partnerships, individual investors and others.

REGULATIONS

Many laws and governmental regulations apply to the ownership and/or operation of the Properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.

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

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

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

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

INDUSTRY SEGMENTS

The Company operates in two industry segments: (i) commercial and other real estate and (ii) multi-family real estate and services. As of December 31, 2019, the Company does not have any foreign operations and its business is not seasonal. Please see our financial statements attached hereto and incorporated by reference herein for financial information relating to our industry segments.

SIGNIFICANT TENANTS

As of December 31, 2019, no tenant accounted for more than 10 percent of the Company’s consolidated revenues.

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RECENT DEVELOPMENTS

Acquisitions

During the year ended December 31, 2019, the Company acquired an office property, two multi-family rental properties and three unimproved developable land parcels for a total of approximately $804.1 million, which was funded using funds available with the Company’s qualified intermediary from property sales proceeds, a new mortgage loan and borrowings under the Company’s unsecured revolving credit facility.

Consolidations

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 a 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 rental 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 year ended December 31, 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.

Properties Commencing Initial Operations

During the year ended December 31, 2019, the Company commenced initial operations of a hotel with 208 rooms, which was completed for total development costs of approximately $105.5 million.

Dispositions/Real Estate Held for Sale

During the year ended December 31, 2019, the Company disposed of 64 office properties, four multi-family rental properties and four developable land properties in New Jersey, Massachusetts and New York for net sales proceeds of approximately $1.1 billion, with net gains of approximately $390 million from the dispositions.

The Company identified 35 office properties, a retail pad leased to others and several developable land parcels as held for sale as of December 31, 2019. The total estimated sales proceeds, net of expected selling costs, from these sales are expected to be approximately $1.2 billion. The Company determined that the carrying value of 20 of the properties and several land parcels was not expected to be recovered from estimated net sales proceeds and accordingly during the year ended December 31, 2019, recognized an unrealized loss allowance of $174.1 million ($137.9 million of which are from discontinued operations), and land and other impairments of $32.4 million.

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.

Development Activity

The Company is developing a 313-unit multi-family project known as Port Imperial South 9 at Port Imperial in Weehawken, New Jersey, which began construction in third quarter 2018. The construction project, which is estimated to cost $142.9 million, of which construction costs of $67.8 million have been incurred through December 31, 2019, is expected to be ready for occupancy in fourth quarter 2020. The Company has funded $50.9 million as of December 31, 2019, and the remaining construction costs are expected to

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be funded primarily from a $92 million construction loan.

The Company is developing a 326-unit multi-family project known as Chase III at Overlook Ridge in Malden, Massachusetts, which began construction in third quarter 2018. The construction project, which is estimated to cost $100.7 million, of which $64.3 million have been incurred through December 31, 2019, is expected to be ready for initial occupancy in first quarter 2020. The Company has funded $38.7 million as of December 31, 2019, and the remaining construction costs are expected to be funded primarily from a $62 million construction loan.

The Company is developing a 198-unit multi-family project known as The Upton at Short Hills located in Short Hills, New Jersey, which began construction in fourth quarter 2018. The construction project, which is estimated to cost $99.4 million, of which $50.4 million have been incurred through December 31, 2019, is expected to be ready for occupancy in fourth quarter 2020. The Company has funded $35.4 million of the construction costs, and the remaining construction costs are expected to be funded primarily from a $64 million construction loan.

The Company is developing a 750-unit multi-family project at 25 Christopher Columbus in Jersey City, New Jersey, which began construction in first quarter 2019. The construction project, which is estimated to cost $469.5 million, of which $151.9 million have been incurred through December 31, 2019, is expected to be ready for occupancy in first quarter 2022. The Company is expected to fund $169.5 million of the construction costs of which the Company has funded $122.5 million as of December 31, 2019, and the remaining construction costs are expected to be funded primarily from a newly obtained $300 million construction loan.

Operations

Of the Company’s office markets, most continue to show signs of rental rate improvement while the leased percentage has declined or stabilized. The percentage leased in the Company’s stabilized core operating commercial properties included in its Consolidated Properties was 80.7 percent at December 31, 2019, as compared to 83.2 percent at December 31, 2018 and 87.6 percent at December 31, 2017 (after adjusting for properties identified as non-core at the time). Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases that expire at the period end date. Leases that expired as of December 31, 2019, 2018 and 2017 aggregate 31,982, 10,108 and 343,217 square feet, respectively, or 0.3, 0.1 and 2.3 percentage of the net rentable square footage, respectively. With the positive rental rate results the Company has achieved in most of its markets recently, the Company believes that rental rates on new leases will generally be, on average, not lower than rates currently being paid. If these recent leasing results do not prove to be sustaining during 2020, the Company may receive less revenue from the same space.

FINANCING ACTIVITY

During the year ended December 31, 2019, the Company prepaid its unsecured term loans totaling $675 million, using funds from property sales proceeds, proceeds from mortgage loan financing and borrowings under the Company’s unsecured revolving credit facility.

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.

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on June 28, 2019. Pursuant to the Add On Investment Agreement, Rockpoint invested an additional $100 million in Preferred Units and the Company 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 15: Redeemable Noncontrolling Interests – to the Financial Statements for additional information about the Add On Investment Agreement and the related transactions with Rockpoint.

AVAILABLE INFORMATION

The Company’s internet website is www.mack-cali.com. The Company makes available free of charge on or through its website the annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished by the General Partner or the Operating Partnership pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after it electronically files or furnishes such materials to the Securities and Exchange Commission. In addition, the Company’s internet website includes other items related to corporate governance matters, including, among other things, the General Partner’s corporate governance principles, charters of various committees of the Board of Directors of the General Partner and the General Partner’s code of business conduct and ethics applicable to all employees, officers and directors. The General Partner intends to disclose on the Company’s internet website any amendments to or waivers from its code of business conduct and ethics as well as any amendments to its corporate governance principles or the charters of various committees of the Board of Directors. Copies of these documents may be obtained, free of charge, from our internet website. Any shareholder also may obtain copies of these documents, free of charge, by sending a request in writing to: Mack-Cali Investor Relations Department, Harborside 3, 210 Hudson St., Ste. 400, Jersey City, NJ 07311.

Disclosure Regarding Forward-Looking Statements

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

Among the factors about which we have made assumptions are:

risks and uncertainties affecting the general economic climate and conditions, which in turn may have a negative effect on the fundamentals of our business and the financial condition of our tenants and residents;

the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our properties or on an unsecured basis;

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

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

changes in the supply of and demand for our properties;

changes in interest rate levels and volatility in the securities markets;

our ability to complete construction and development activities on time and within budget, including without limitation obtaining regulatory permits and the availability and cost of materials, labor and equipment;

forward-looking financial and operational information, including information relating to future development projects, potential acquisitions or dispositions, leasing activities, capitalization rates, and projected revenue and income;

changes in operating costs;

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

our credit worthiness and the availability of financing on attractive terms or at all, which may adversely impact our ability to pursue acquisition and development opportunities and refinance existing debt and our future interest expense;

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

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

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

ITEM 1A. RISK FACTORS

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

Adverse economic and geopolitical conditions in general and the Northeastern office markets in particular could have a material adverse effect on our results of operations, financial condition and our ability to pay distributions to you.

Our business may be affected by the continuing volatility in the financial and credit markets, the general global economic conditions, continuing high unemployment, and other market or economic challenges experienced by the U.S. economy or the real estate industry as a whole. Our business also may be adversely affected by local economic conditions, as substantially all of our revenues are derived from our properties located in the Northeast, particularly in New Jersey and New York. Because our portfolio currently consists primarily of office and multi-family rental buildings (as compared to a more diversified real estate portfolio) located in the Northeast, if economic conditions persist or deteriorate, then our results of operations, financial condition and ability to service current debt and to pay distributions to our shareholders may be adversely affected by the following, among other potential conditions:

significant job losses in the financial and professional services industries may occur, which may decrease demand for our office space, causing market rental rates and property values to be negatively impacted;

our ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and development opportunities and refinance existing debt, reduce our returns from both our existing operations and our acquisition and development activities and increase our future interest expense;

reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans;

the value and liquidity of our short-term investments and cash deposits could be reduced as a result of a deterioration of the financial condition of the institutions that hold our cash deposits or the institutions or assets in which we have made short-term investments, the dislocation of the markets for our short-term investments, increased volatility in market rates for such investments or other factors;

reduced liquidity in debt markets and increased credit risk premiums for certain market participants may impair our ability to access capital; and

one or more lenders under our line of credit could refuse or be unable to fund their financing commitment to us and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.

These conditions, which could have a material adverse effect on our results of operations, financial condition and ability to pay distributions, may continue or worsen in the future.

Our performance is subject to risks associated with the real estate industry.

General: Our business and our ability to make distributions or payments to our investors depend on the ability of our properties to generate funds in excess of operating expenses (including scheduled principal payments on debt and capital expenditures). Events or conditions that are beyond our control may adversely affect our operations and the value of our properties. Such events or conditions could include:

changes in the general economic climate and conditions;

changes in local conditions, such as an oversupply of office space, a reduction in demand for office space, or reductions in office market rental rates;

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an oversupply or reduced demand for multi-family apartments caused by a decline in household formation, decline in employment or otherwise;

decreased attractiveness of our properties to tenants and residents;

competition from other office and multi-family properties;

development by competitors of competing multi-family communities;

unwillingness of tenants to pay rent increases;

rent control or rent stabilization laws, or other housing laws and regulations that could prevent us from raising multi-family rents to offset increases in operating costs;

our inability to provide adequate maintenance;

increased operating costs, including insurance premiums, utilities and real estate taxes, due to inflation and other factors which may not necessarily be offset by increased rents;

changes in laws and regulations (including tax, environmental, zoning and building codes, landlord/tenant and other housing laws and regulations) and agency or court interpretations of such laws and regulations and the related costs of compliance;

changes in interest rate levels and the availability of financing;

the inability of a significant number of tenants or residents to pay rent;

our inability to rent office or multi-family rental space on favorable terms; and

civil unrest, earthquakes, acts of terrorism and other natural disasters or acts of God that may result in uninsured losses.

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

Financially distressed tenants may be unable to pay rent: If a tenant defaults, we may experience delays and incur substantial costs in enforcing our rights as landlord and protecting our investments. If a tenant files for bankruptcy, we cannot evict the tenant solely because of the bankruptcy and a potential court judgment rejecting and terminating such tenant’s lease (which would subject all future unpaid rent to a statutory cap) could adversely affect our ability to make distributions or payments to our investors as we may be unable to replace the defaulting tenant with a new tenant at a comparable rental rate without incurring significant expenses or a reduction in rental income.

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

Adverse developments concerning some of our major tenants and industry concentrations could have a negative impact on our revenue: We have tenants concentrated in various industries that may be experiencing adverse effects of current economic conditions. For instance, 24.9 percent of our revenue is derived from tenants in the Securities, Commodity Contracts and Other Financial industry, 12.3 percent from tenants in the Credit Intermediation and Related Activities industry and 11.5 percent from tenants in the Insurance Carriers and Related Activities industry. Our business could be adversely affected if any of these industries suffered a downturn and/or these tenants or any other tenants became insolvent, declared bankruptcy or otherwise refused to pay rent in a timely manner or at all.

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

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experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could adversely affect our ability to make distributions or payments to our investors. If one or more of our insurance providers were to fail to pay a claim as a result of insolvency, bankruptcy or otherwise, the nonpayment of such claims could have an adverse effect on our financial condition and results of operations. In addition, if one or more of our insurance providers were to become subject to insolvency, bankruptcy or other proceedings and our insurance policies with the provider were terminated or canceled as a result of those proceedings, we cannot guarantee that we would be able to find alternative coverage in adequate amounts or at reasonable prices. In such case, we could experience a lapse in any or adequate insurance coverage with respect to one or more properties and be exposed to potential losses relating to any claims that may arise during such period of lapsed or inadequate coverage.

Illiquidity of real estate limits our ability to act quickly: Real estate investments are relatively illiquid. Such illiquidity may limit our ability to react quickly in response to changes in economic and other conditions. If we want to sell an investment, we might not be able to dispose of that investment in the time period we desire, and the sales price of that investment might not recoup or exceed the amount of our investment. The prohibition in the Internal Revenue Code of 1986, as amended (the “IRS Code”), and related regulations on a real estate investment trust holding property for sale also may restrict our ability to sell property. In addition, we acquired a significant number of our properties from individuals to whom the Operating Partnership issued Units as part of the purchase price. In connection with the acquisition of these properties, in order to preserve such individual’s income tax deferral, we contractually agreed not to sell or otherwise transfer the properties for a specified period of time, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate individuals for the income tax consequences of the recognition of such built-in-gains. These restrictions expired in February 2016. Upon the expiration of such restrictions we are generally required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the appropriate individuals. After the effects of tax-free exchanges on certain of the originally contributed properties, either wholly or partially, over time, 27 of our properties, as well as certain land and development projects, including properties classified as held for sale as of December 31, 2019, with an aggregate carrying value of approximately $1.9 billion, are subject to these conditions. The above limitations on our ability to sell our investments could adversely affect our ability to make distributions or payments to our investors.

We may not be able to dispose of non-core office assets within our anticipated timeframe or at favorable prices: The Company has determined to sell over time properties at total estimated sales proceeds of up to $1.2 billion, including the sale of the Suburban Office Portfolio. This does not include the Company’s waterfront office properties in Jersey City and Hoboken, New Jersey. While we intend to dispose of these properties opportunistically over time, there can be no assurance that these dispositions will be completed during the period of our strategic initiative. In addition, market conditions will impact our ability to dispose of these properties, and there can be no assurance that we will be successful in disposing of these properties for their estimated sales prices. A failure to dispose of these properties for their estimated market values as planned, or unfavorable tax consequences of the disposition of these properties could have a material adverse effect on our ability to finance our acquisition and development plans and could adversely affect our ability to make distributions or payments to our investors.

New acquisitions, including acquisitions of multi-family rental real estate, may fail to perform as expected and will subject us to additional new risks and could adversely affect our ability to make distributions or payments to our investors: We intend to and may acquire new properties, primarily in the multi-family rental sector, assuming that we are able to obtain capital on favorable terms. Such newly acquired properties may not perform as expected and may subject us to unknown liability with respect to liabilities relating to such properties for clean-up of undisclosed environmental contamination or claims by tenants, residents, vendors or other persons against the former owners of the properties. Inaccurate assumptions regarding future rental or occupancy rates could result in overly optimistic estimates of future revenues. In addition, future operating expenses or the costs necessary to bring an acquired property up to standards established for its intended market position may be underestimated. The search for and process of acquiring such properties will also require a substantial amount of management’s time and attention. As our portfolio shifts from primarily commercial office properties to increasingly more multi-family rental properties we will face additional and new risks such as:

shorter-term leases of one-year on average for multi-family rental communities, which allow residents to leave after the term of the lease without penalty;

increased competition from other housing sources such as other multi-family rental communities, condominiums and single-family houses that are available for rent as well as for sale;

dependency on the convenience and attractiveness of the communities or neighborhoods in which our multi-family rental properties are located and the quality of local schools and other amenities;

dependency on the financial condition of Fannie Mae or Freddie Mac which provide a major source of financing to the multi-family rental sector; and

compliance with housing and other new regulations.

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The above factors could adversely affect our ability to make distributions or payments to our investors.

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

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

We face risks associated with property acquisitions: We have acquired in the past, and our long-term strategy is to continue to pursue the acquisition of rental properties, primarily in New Jersey, particularly multi-family rental properties. We may be competing for investment opportunities with entities that have greater financial resources. Several developers and real estate companies may compete with us in seeking properties for acquisition, land for development and prospective tenants. Such competition may adversely affect our ability to make distributions or payments to our investors by:

reducing the number of suitable investment opportunities offered to us;

increasing the bargaining power of property owners;

interfering with our ability to attract and retain tenants;

increasing vacancies which lowers market rental rates and limits our ability to negotiate rental rates; and/or

adversely affecting our ability to minimize expenses of operation.

Our acquisition activities and their success are subject to the following risks:

adequate financing to complete acquisitions may not be available on favorable terms or at all as a result of the continuing volatility in the financial and credit markets;

even if we enter into an acquisition agreement for a property, we may be unable to complete that acquisition and risk the loss of certain non-refundable deposits and incurring certain other acquisition-related costs;

the actual costs of repositioning or redeveloping acquired properties may be greater than our estimates;

any acquisition agreement will likely contain conditions to closing, including completion of due diligence investigations to our satisfaction or other conditions that are not within our control, which may not be satisfied; and

we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations, and acquired properties may fail to perform as expected; which may adversely affect our results of operations and financial condition.

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

financing for development projects may not be available on favorable terms;

long-term financing may not be available upon completion of construction;

failure to complete construction and lease-up on schedule or within budget may increase debt service expense and construction and other costs; and

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failure to rent the development at all or at rent levels originally contemplated.

Property ownership through joint ventures could subject us to the contrary business objectives of our co-venturers: We, from time to time, invest in joint ventures or partnerships in which we do not hold a controlling interest in the assets underlying the entities in which we invest, including joint ventures in which (i) we own a direct interest in an entity which controls such assets, or (ii) we own a direct interest in an entity which owns indirect interests, through one or more intermediaries, of such assets. These investments involve risks that do not exist with properties in which we own a controlling interest with respect to the underlying assets, including the possibility that (i) our co-venturers or partners may, at any time, become insolvent or otherwise refuse to make capital contributions when due, (ii) we may be responsible to our co-venturers or partners for indemnifiable losses, (iii) we may become liable with respect to guarantees of payment or performance by the joint ventures, (iv) we may become subject to buy-sell arrangements which could cause us to sell our interests or acquire our co-venturer’s or partner’s interests in a joint venture, or (v) our co-venturers or partners may, at any time, have business, economic or other objectives that are inconsistent with our objectives. Because we lack a controlling interest, our co-venturers or partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. While we seek protective rights against such contrary actions, there can be no assurance that we will be successful in procuring any such protective rights, or if procured, that the rights will be sufficient to fully protect us against contrary actions. Our organizational documents do not limit the amount of available funds that we may invest in joint ventures or partnerships. If the objectives of our co-venturers or partners are inconsistent with ours, it may adversely affect our ability to make distributions or payments to our investors.

Our performance is subject to risks associated with repositioning a significant portion of the Company’s portfolio from office to multi-family rental properties, including the sale of the Suburban Office Portfolio.

Repositioning the Company’s office portfolio may result in impairment charges or less than expected returns on office properties and could adversely affect our ability to make distributions or payments to our investors: There can be no assurance that the Company, as it seeks to reposition a portion of its portfolio from office to the multi-family rental sector, including the sale of the Suburban Office Portfolio, will be able to sell office properties and purchase multi-family rental properties at prices that in the aggregate are profitable for the Company or are efficient uses of its capital or that would not result in a reduction of the Company’s cash flow, and such transactions could adversely affect our ability to make distributions or payments to our investors. Because real estate investments are relatively illiquid, it also may be difficult for the Company to promptly sell its office properties that are held or may be designated for sale promptly or on favorable terms, which could have a material adverse effect on the Company’s financial condition. In addition, as the Company identifies non-core office properties that may be held for sale or that it intends to hold for a shorter period of time than previously, it may determine that the carrying value of a property is not recoverable over the anticipated holding period of the property. As a result, the Company may incur impairment charges for certain of these properties to reduce their carrying values to the estimated fair market values. Moreover, as the Company seeks to reposition a portion of its portfolio from office to the multi-family rental sector, the Company may be subject to a Federal income tax on gain from sales of properties due to limitations in the IRS Code and related regulations on a real estate investment trust’s ability to sell properties. The Company intends to structure its property dispositions in a tax-efficient manner and avoid the prohibition in the IRS Code against a real estate investment trust holding properties for sale. There is no guaranty, however, that such dispositions can be achieved without the imposition of federal income tax on any gain recognized.

Unfavorable changes in market and economic conditions could adversely affect multi-family rental occupancy, rental rates, operating expenses, and the overall market value of our assets, including joint ventures. Local conditions that may adversely affect conditions in multi-family residential markets include the following:

plant closings, industry slowdowns and other factors that adversely affect the local economy;

an oversupply of, or a reduced demand for, apartment units;

a decline in household formation or employment or lack of employment growth;

the inability or unwillingness of residents to pay rent increases;

rent control or rent stabilization laws, or other laws regulating housing, that could prevent us from raising rents to offset increases in operating costs; and

economic conditions that could cause an increase in our operating expenses, such as increases in property taxes, utilities, compensation of on-site associates and routine maintenance.

Changes in applicable laws, or noncompliance with applicable laws, could adversely affect our operations or expose us to liability: We must develop, construct and operate our communities in compliance with numerous federal, state and local laws and regulations, some of which may conflict with one another or be subject to limited judicial or regulatory interpretations. These laws and regulations may include zoning laws, building codes, landlord tenant laws and other laws generally applicable to business operations. Noncompliance with applicable laws could expose us to liability. Lower revenue growth or significant unanticipated expenditures may result from our

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need to comply with changes in (i) laws imposing remediation requirements and the potential liability for environmental conditions existing on properties or the restrictions on discharges or other conditions, (ii) rent control or rent stabilization laws or other residential landlord/tenant laws, or (iii) other governmental rules and regulations or enforcement policies affecting the development, use and operation of our communities, including changes to building codes and fire and life-safety codes.

Failure to succeed in new markets, or with new brands and community formats, or in activities other than the development, ownership and operation of residential rental communities may have adverse consequences: We are actively engaged in development and acquisition activity in new submarkets within our core, Northeast markets where we have owned and operated our historical portfolio of office properties. Our historical experience with properties in our core, Northeast markets in developing, owning and operating properties does not ensure that we will be able to operate successfully in the new multi-family submarkets. We will be exposed to a variety of risks in the multi-family submarkets, including:

an inability to accurately evaluate local apartment market conditions;

an inability to obtain land for development or to identify appropriate acquisition opportunities;

an acquired property may fail to perform as we expected in analyzing our investment;

our estimate of the costs of repositioning or developing an acquired property may prove inaccurate; and

lack of familiarity with local governmental and permitting procedures.

Our real estate construction management activities are subject to risks particular to third-party construction projects.

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

Debt financing could adversely affect our economic performance.

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

our cash flow may be insufficient to meet required payments of principal and interest;

payments of principal and interest on borrowings may leave us with insufficient cash resources to pay operating expenses;

we may not be able to refinance indebtedness on our properties at maturity; and

if refinanced, the terms of refinancing may not be as favorable as the original terms of the related indebtedness.

As of December 31, 2019, we had total outstanding indebtedness of $2.8 billion comprised of $575 million of senior unsecured notes, outstanding borrowings of $329 million under our unsecured revolving credit facility, and approximately $1.9 billion of mortgages, loans payable and other obligations. We may have to refinance the principal due on our current or future indebtedness at maturity, and we may not be able to do so.

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

we may need to dispose of one or more of our properties upon disadvantageous terms or adjust our capital expenditures in general or with respect to our strategy of acquiring multi-family residential properties and development opportunities in particular;

prevailing interest rates or other factors at the time of refinancing could increase interest rates and, therefore, our interest expense;

we may be subject to an event of default pursuant to covenants for our indebtedness;

if we mortgage property to secure payment of indebtedness and are unable to meet mortgage payments, the mortgagee could foreclose upon such property or appoint a receiver to receive an assignment of our rents and leases; and

foreclosures upon mortgaged property could create taxable income without accompanying cash proceeds and, therefore, hinder our ability to meet the real estate investment trust distribution requirements of the IRS Code.

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We are obligated to comply with financial covenants in our indebtedness that could restrict our range of operating activities: The mortgages on our properties contain customary negative covenants, including limitations on our ability, without the prior consent of the lender, to further mortgage the property, to enter into new leases outside of stipulated guidelines or to materially modify existing leases. In addition, our unsecured revolving credit facility and term loans each contains customary requirements, including restrictions and other limitations on our ability to incur debt, debt to assets ratios, secured debt to total assets ratios, interest coverage ratios and minimum ratios of unencumbered assets to unsecured debt. The indentures under which our senior unsecured debt have been issued contain financial and operating covenants including coverage ratios and limitations on our ability to incur secured and unsecured debt. These covenants limit our flexibility in conducting our operations and create a risk of default on our indebtedness if we cannot continue to satisfy them. Some of our debt instruments are cross-collateralized and contain cross default provisions with other debt instruments. Due to this cross-collateralization, a failure or default with respect to certain debt instruments or properties could have an adverse impact on us or our properties that are subject to the cross-collateralization under the applicable debt instrument. Failure to comply with these covenants could cause a default under the agreements and, in certain circumstances, our lenders may be entitled to accelerate our debt obligations. Defaults under our debt agreements could materially and adversely affect our financial condition and results of operations.

Rising interest rates may adversely affect our cash flow: As of December 31, 2019, outstanding borrowings of approximately $329 million under our unsecured revolving credit facility and approximately $187 million of our mortgage indebtedness bear interest at variable rates. We may incur additional indebtedness in the future that bears interest at variable rates. Variable rate debt creates higher debt service requirements if market interest rates increase. Higher debt service requirements could adversely affect our ability to make distributions or payments to our investors and/or cause us to default under certain debt covenants.

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

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

Adverse changes in our credit ratings could adversely affect our business and financial condition: The credit ratings assigned to our senior unsecured notes by nationally recognized statistical rating organizations (the “NRSROs”) are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the NRSROs in their rating analyses of us. These ratings and similar ratings of us and any debt or preferred securities we may issue are subject to ongoing evaluation by the NRSROs, and we cannot assure you that any such ratings will not be changed by the NRSROs if, in their judgment, circumstances warrant. Our credit ratings can affect the amount of capital we can access, as well as the terms of any financings we may obtain. There can be no assurance that we will be able to maintain our current credit ratings, and in the event our current credit ratings are downgraded, we would likely incur higher borrowing costs and may encounter difficulty in obtaining additional financing. See “Item 7. Management’s Discussion & Analysis of Financial Condition and Results of Operations - Executive Overview” for a discussion of the Company’s current credit ratings.”

Competition for skilled personnel could increase our labor costs.

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

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and skilled personnel, our business and operating results could be harmed.

We are dependent on our key personnel whose continued service is not guaranteed.

We are dependent upon key personnel for strategic business direction and real estate experience, including our chief executive officer, chief financial officer, chief investment officer, chief accounting officer, general counsel, executive vice president of leasing and chairman of RRT. While we believe that we could find replacements for these key personnel, loss of their services could adversely affect our operations. We do not have key man life insurance for our key personnel. In addition, as the Company seeks to reposition a portion of its portfolio from office to the multi-family rental sector, the Company may become increasingly dependent on non-executive personnel with residential development and leasing expertise to effectively execute the Company’s long-term strategy.

Certain provisions of Maryland law and the General Partner’s charter and bylaws could hinder, delay or prevent changes in control.

Certain provisions of Maryland law and General Partner's charter and bylaws have the effect of discouraging, delaying or preventing transactions that involve an actual or threatened change in control. These provisions include the following:

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

Number of Directors, Board Vacancies, Terms of Office: The General Partner has, in its bylaws, elected to be subject to certain provisions of Maryland law which vest in the Board of Directors the exclusive right to determine the number of directors and the exclusive right, by the affirmative vote of a majority of the remaining directors, even if the remaining directors do not constitute a quorum, to fill vacancies on the board. These provisions of Maryland law, which are applicable even if other provisions of Maryland law or the charter or bylaws provide to the contrary, also provide that any director elected to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, rather than the next annual meeting of stockholders as would otherwise be the case, and until his or her successor is elected and qualifies. The General Partner has, in its corporate governance principles, adopted a mandatory retirement age of 80 years old for directors.

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

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

Preferred Stock: Under the General Partner's charter, its Board of Directors has authority to issue preferred stock from time to time in one or more series and to establish the terms, preferences and rights of any such series of preferred stock, all without approval of its stockholders. As a result, its Board of Directors may establish a series of preferred stock that could delay or prevent a transaction or a change in control.

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

Ownership Limit: In order to preserve the General Partner's status as a real estate investment trust under the IRS Code, its charter generally prohibits any single stockholder, or any group of affiliated stockholders, from beneficially owning more than 9.8 percent of

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its outstanding capital stock unless its Board of Directors waives or modifies this ownership limit.

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

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

If voting rights of control shares acquired in a control share acquisition are not approved at a stockholder’s meeting, then subject to certain conditions and limitations, the issuer may redeem any or all of the control shares for fair value. If voting rights of such control shares are approved at a stockholder’s meeting and the acquirer becomes entitled to vote a majority of the shares of stock entitled to vote, all other stockholders may exercise appraisal rights. In 2018, the General Partner's bylaws were amended to exempt any acquisition of the General Partner’s shares from the Maryland Control Share Acquisition Act. If the General Partner’s bylaws are amended to repeal or limit the exemption from the Maryland Control Share Acquisition Act, it may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating a change in control.

The enactment of significant new tax legislation, generally effective for tax years beginning after December 31, 2017, could have a material and adverse effect on us and the market price of our shares.

On December 22, 2017, Pub. L. No. 15-97 (informally known as the Tax Cuts and Jobs Act (the “Act”)) was enacted into law. The Act made major changes to the Code, including a number of provisions of the Code that affect the taxation of REITs and their stockholders. The long-term effect of the significant changes made by the Act remains uncertain, and additional administrative guidance will be required in order to fully evaluate the effect of many provisions. The effect of any technical corrections with respect to the Act could have an adverse effect on us or our stockholders or holders of our debt securities.”

Consequences of the General Partner's failure to qualify as a real estate investment trust could adversely affect our financial condition.

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

In addition, the consent of the holders of at least 85 percent of the Operating Partnership’s partnership units is required: (i) to merge (or permit the merger of) the Operating Partnership with another unrelated person, pursuant to a transaction in which the Operating

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Partnership is not the surviving entity; (ii) to dissolve, liquidate or wind up the Operating Partnership; or (iii) to convey or otherwise transfer all or substantially all of the Operating Partnership’s assets. As of February 24, 2020, the General Partner owned approximately 90.5 percent of the Operating Partnership’s outstanding common partnership units.

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

If the General Partner fails to qualify as a real estate investment trust in any taxable year, it will be subject to the following:

it will not be allowed a deduction for dividends paid to shareholders;

it will be subject to federal income tax at regular corporate rates, including any alternative minimum tax, if applicable; and

unless it is entitled to relief under certain statutory provisions, it will not be permitted to qualify as a real estate investment trust for the four taxable years following the year during which was disqualified.

A loss the General Partner's status as a real estate investment trust could have an adverse effect on us. Failure to qualify as a real estate investment trust also would eliminate the requirement that the General Partner pay dividends to its stockholders. In addition, any such dividends that the General Partner does pay to its stockholders would not constitute qualified REIT dividends and would accordingly not qualify for a deduction of up to 20 percent.

Other tax liabilities: Even if the General Partner qualifies as a real estate investment trust under the IRS Code, its subject to certain federal, state and local taxes on our income and property and, in some circumstances, certain other state and local taxes. From time to time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and amount of such increase. These actions could adversely affect our financial condition and results of operations. In addition, our taxable REIT subsidiaries will be subject to federal, state and local income tax for income received in connection with certain non-customary services performed for tenants and/or third parties.

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

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our tenants and business partners, including personally identifiable information of our tenants and employees, in our data centers and on our networks. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation, which could adversely affect our business.

We face possible risks associated with the physical effects of climate change.

We cannot predict with certainty whether climate change is occurring and, if so, at what rate. However, the physical effects of climate change could have a material adverse effect on our properties, operations and business. For example, all of our properties are located along the East coast, particularly those in New Jersey and Massachusetts. To the extent climate change causes changes in weather patterns, our markets could experience increases in storm intensity and rising sea-levels. Over time, these conditions could result in declining demand for office space in our buildings or the inability of us to operate the buildings at all. Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy and increasing the cost of snow removal or related costs at our properties. Proposed legislation to address climate change could increase utility and other costs of operating our properties which, if not offset by rising rental income, would

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reduce our net income. There can be no assurance that climate change will not have a material adverse effect on our properties, operations or business.

Changes in market conditions could adversely affect the market price of the General Partner’s common stock.

As with other publicly traded equity securities, the value of the General Partner's common stock depends on various market conditions, which may change from time to time. The market price of the General Partner's common stock could change in ways that may or may not be related to our business, the General Partner's industry or our operating performance and financial condition. Among the market conditions that may affect the value of the General Partner's common stock are the following:

the extent of your interest in us;

the general reputation of REITs and the attractiveness of the General Partner's equity securities in comparison to other equity securities, including securities issued by other real estate-based companies;

our financial performance; and

general stock and bond market conditions.

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

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

PROPERTY LIST

As of December 31, 2019, the Company’s Consolidated Properties consisted of 43 in-service commercial properties, as well as 14 multi-family rental properties and two hotels. The Consolidated Properties are located primarily in the Northeast. The Consolidated Properties are easily accessible from major thoroughfares and are in close proximity to numerous amenities. The Consolidated Properties contain a total of approximately 10.5 million square feet of commercial space and 3,913 apartment units with the individual commercial properties ranging from 6,216 to 1,246,283 square feet. The Consolidated Properties, managed by on-site employees, generally have attractively landscaped sites and atriums in addition to quality design and construction. The Company’s commercial tenants include many service sector employers, including a large number of professional firms and national and international businesses. The Company believes that all of its in-service properties are well-maintained and do not require significant capital improvements.



Office Properties

			Percentage	2019		2019	2019
		Net	Leased	Base		Average	Average
		Rentable	as of	Rent	Percentage	Base Rent	Effective Rent
	Year	Area	12/31/19	($000’s)	of Total 2019	Per Sq. Ft.	Per Sq. Ft.
Property Location	Built	(Sq. Ft.)	(%) (a)	(b) (c)	Base Rent (%)	($) (c) (d)	($) (c) (e)

NEW JERSEY

BERGEN COUNTY
Fort Lee
One Bridge Plaza (h)	1981	200,000	73.9	4,450	1.19	30.09	27.80

ESSEX COUNTY
Millburn (Short Hills)
150 J.F. Kennedy Parkway (h)	1980	247,476	64.9	5,660	1.50	35.23	29.39
51 J.F. Kennedy Parkway (h)	1988	260,741	97.7	13,526	3.62	53.10	47.11
101 J.F. Kennedy Parkway (h)	1981	197,196	97.1	8,785	2.35	45.88	42.06
103 J.F. Kennedy Parkway (h)	1981	123,000	100.0	5,109	1.37	41.54	36.11

HUDSON COUNTY
Hoboken
111 River Street	2002	566,215	79.2	20,008	5.35	44.61	40.87
Jersey City
Harborside Plaza 2	1990	761,200	80.7	22,636	6.05	36.85	30.32
Harborside Plaza 3 (c)	1990	726,022	85.4	20,915	5.59	33.73	27.57
Harborside Plaza 4-A	2000	231,856	100.0	6,505	1.74	28.06	23.15
Harborside Plaza 5	2002	977,225	56.4	19,921	5.33	36.13	31.21
101 Hudson Street (c)	1992	1,246,283	83.4	31,104	8.32	29.94	24.11

MERCER COUNTY
Princeton
100 Overlook Center (h)	1988	149,600	94.0	4,702	1.26	33.45	27.61
5 Vaughn Drive (h)	1987	98,500	44.0	1,189	0.32	27.45	23.27

MIDDLESEX COUNTY
Edison
333 Thornall Street (h)	1984	196,128	88.9	5,772	1.54	33.10	28.63
343 Thornall Street (h)	1991	195,709	100.0	6,565	1.75	33.54	29.56
Iselin
99 Wood Avenue South (g) (h)	1987	271,988	81.7	7,303	1.95	36.45	31.28
101 Wood Avenue South (h)	1990	262,841	100.0	9,422	2.52	35.85	31.93
Plainsboro
500 College Road East (f)(h)	1984	158,235	70.3	2,849	0.76	25.60	21.33
Woodbridge
581 Main Street (h)	1991	200,000	100.0	6,195	1.66	30.98	24.79

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Office Properties
(Continued)
			Percentage		2019		2019	2019
		Net	Leased		Base		Average	Average
		Rentable	as of		Rent	Percentage	Base Rent	Effective Rent
	Year	Area	12/31/19		($000’s)	of Total 2019	Per Sq. Ft.	Per Sq. Ft.
Property Location	Built	(Sq. Ft.)	(%) (a)		(b) (c)	Base Rent (%)	($) (c) (d)	($) (c) (e)

MONMOUTH COUNTY
Holmdel
23 Main Street (h)	1977	350,000	100.0		4,566	1.22	13.05	10.31
Middletown
One River Centre Bldg 1 (h)	1983	122,594	97.6		3,129	0.84	26.16	23.05
One River Centre Bldg 2 (h)	1983	120,360	100.0		3,086	0.83	25.64	22.29
One River Centre Bldg 3 (h)	1984	194,518	38.4		1,593	0.43	21.35	16.27
Red Bank
100 Schultz Drive (h)	1989	100,000	28.5		608	0.15	28.31	26.35
200 Schultz Drive (h)	1988	102,018	85.8		2,385	0.64	27.23	21.93

MORRIS COUNTY
Florham Park
325 Columbia Turnpike (h)	1987	168,144	96.9		3,547	0.95	21.76	18.19
Madison
1 Giralda Farms (h)	1982	154,417	97.0		4,980	1.33	33.26	29.55
7 Giralda Farms (h)	1997	236,674	60.1		4,295	1.15	30.22	25.41
Parsippany
4 Campus Drive (h)	1983	147,475	81.2		2,677	0.72	22.34	17.50
6 Campus Drive (h)	1983	148,291	68.2		2,702	0.72	26.74	21.89
7 Campus Drive (h)	1982	154,395	69.2		2,948	0.79	27.58	24.50
8 Campus Drive (h)	1987	215,265	76.8		4,399	1.18	26.62	21.39
9 Campus Drive (h)	1983	156,495	91.6		3,025	0.81	21.10	17.52
2 Dryden Way (h)	1990	6,216	100.0		104	0.03	16.73	15.44
4 Gatehall Drive (h)	1988	248,480	68.3		4,791	1.28	28.23	24.45
2 Hilton Court (h)	1991	181,592	100.0		6,521	1.74	35.91	32.89
1 Sylvan Way (h)	1989	150,557	81.7		3,681	0.98	29.94	26.89
3 Sylvan Way (h)	2018	147,241	62.4		2,762	0.74	30.07	25.28
5 Sylvan Way (h)	1989	151,383	98.6		3,690	0.99	24.72	22.36
7 Sylvan Way (c) (h)	1987	145,983	72.1		1,865	0.50	17.73	13.37

Total New Jersey Office		10,472,313	80.5	(j)	269,970	72.19	32.14	27.38


TOTAL OFFICE PROPERTIES		10,472,313	80.5	(j)	269,970	72.19	32.14	27.38

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Retail/Garage Properties, and Land Leases

			Percentage		2019		2019	2019
		Net	Leased		Base		Average	Average
		Rentable	as of		Rent	Percentage	Base Rent	Effective Rent
	Year	Area	12/31/19		($000’s)	of Total 2019	Per Sq. Ft.	Per Sq. Ft.
Property Location	Built	(Sq. Ft.)	(%) (a)		(b) (c)	Base Rent (%)	($) (c) (d)	($) (c) (e)


NEW JERSEY

HUDSON COUNTY
Weehawken
100 Avenue at Port Imperial (m)	2016	8,400	100.0		311	0.08	37.02	35.71
500 Avenue at Port Imperial (n)	2013	18,064	69.2		566	0.15	45.28	39.12

Total Retail/Garage Properties		26,464	79.5		877	0.23	41.96	37.75

NEW JERSEY

MORRIS COUNTY
Hanover
Wegmans Land Lease	-	-	-		2,389	0.64	-	-

Total Land Leases		-	-		2,389	0.64	-	-

TOTAL COMMERCIAL PROPERTIES		10,498,777	80.7	(j)	273,236	73.06	32.37	27.62

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Multi-Family and Hotel Properties

		Net		Percentage	2019		Percentage	2019
		Rentable		Leased	Base		of Total	Average
		Commercial		as of	Rent		2019	Base Rent
	Year	Area	Number	12/31/19	($000’s)		Base Rent	Per Home
	Built	(Sq. Ft.)	of Units/Rooms	(%) (a)	(b) (c)		(%)	($) (c) (i)
NEW JERSEY

HUDSON COUNTY
Jersey City
Monaco North	2011	-	243	86.0	9,443		2.52	3,765
Monaco South	2011	-	280	80.7	9,483		2.54	3,497
Marbella I	2003	-	412	86.4	13,519		3.61	3,165
Marbella II (g)	2016	-	311	89.7	10,790		2.89	3,511
Liberty Towers (g)	2003	-	648	96.0	6,693		1.79	3,374
Soho Lofts (g)	2017	-	377	90.7	8,271		2.21	2,675
Weehawken
Riverhouse11 at Port Imperial	2018	-	295	96.3	9,347		2.50	2,743

MIDDLESEX COUNTY
New Brunswick
Richmond Court	1997	-	82	90.2	1,603		0.43	1,805
Riverwatch Commons	1995	-	118	95.8	2,332		0.62	1,720

MORRIS COUNTY
Morris Plains
Signature Place	2018	-	197	95.4	5,119		1.37	2,269

Total New Jersey Multi-Family		-	2,963	90.9	76,600		20.48	3,056

NEW YORK

WESTCHESTER COUNTY
Eastchester
Quarry Place at Tuckahoe	2016	-	108	97.2	4,240		1.13	3,365

Total New York Multi-Family		-	108	97.2	4,240		1.13	3,365


SUFFOLK COUNTY
East Boston
Portside at Pier One	2014	-	181	94.5	5,673		1.52	2,765
Portside 5/6	2018	-	296	96.6	8,366		2.24	2,438


WORCESTER COUNTY
Worcester
145 Front at City Square	2018	-	365	95.3	5,869		1.57	1,405

Total Massachusetts Multi-Family		-	842	95.6	19,908		5.33	2,061

Total Multi-Family Properties		-	3,913	92.1	100,748		26.94	2,745

HUDSON COUNTY
Weehawken
Envue Autograph Collection	2019	-	208	-	(o)		-	-
Residence Inn at Port Imperial	2018	-	164	-	(p)		-	-

Total Hotel Properties		-	372	-	-		-	-

TOTAL PROPERTIES		10,498,777	4,285	N/A	373,984	(k)(l)	100.00

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Footnotes to Property List (dollars in thousands, except per square foot amounts):



(a)	Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases expiring December 31, 2019 aggregating 31,982 square feet (representing 0.3 percent of the Company’s total net rentable square footage) for which no new leases were signed.
(b)	Total base rent for the year ended December 31, 2019, determined in accordance with generally accepted accounting principles (“GAAP”). Substantially all of the commercial leases provide for annual base rents plus recoveries and escalation charges based upon the tenant’s proportionate share of and/or increases in real estate taxes and certain operating costs, as defined, and the pass through of charges for electrical usage. For the 12 months ended December 31, 2019, total escalations and recoveries from tenants were: $28,486, or $4.11 per leased square foot, for office properties.
(c)	Excludes space leased by the Company.
(d)	Base rent for the 12 months ended December 31, 2019 divided by net rentable commercial square feet leased at December 31, 2019.
(e)	Total base rent, determined in accordance with GAAP, for 2019 minus 2019 amortization of tenant improvements, leasing commissions and other concessions and costs, determined in accordance with GAAP, divided by net rentable square feet leased at December 31, 2019.
(f)	This property is located on land leased by the Company.
(g)	As this property was acquired, commenced initial operations or initially consolidated by the Company during the 12 months ended December 31, 2019, the amounts represented in 2019 base rent reflect only that portion of those 12 months during which the Company owned or consolidated the property. Accordingly, these amounts may not be indicative of the property’s full year results. For comparison purposes, the amounts represented in 2019 average base rent per sq. ft. and per unit for this property have been calculated by taking the 12 months ended December 31, 2019 base rent for such property and annualizing these partial-year results, dividing such annualized amounts by the net rentable square feet leased or occupied units at December 31, 2019. These annualized per square foot and per unit amounts may not be indicative of the property’s results had the Company owned or consolidated the property for the entirety of the 12 months ended December 31, 2019.
(h)	Property is held for sale by the Company and classified as discontinued operations as of December 31, 2019.
(i)	Annualized base rent for the 12 months ended December 31, 2019 divided by units occupied at December 31, 2019, divided by 12.
(j)	Excludes properties being considered for repositioning, redevelopment, potential sale, or being prepared for lease up.
(k)	Excludes approximately $57.6 million from properties which were disposed of or removed from service during the year ended December 31, 2019.
(l)	Includes $148.9 million from properties held for sale and classified as discontinued operations as of December 31, 2019.
(m)	This property had Parking Income of $1,714 in 2019.
(n)	This property had Parking Income of $3,364 in 2019.
(o)	This property had Hotel Income of $3,680 in 2019.
(p)	This property had Hotel Income of $6,162 in 2019.

PERCENTAGE LEASED

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


	Percentage of
December 31,	Square Feet Leased (%) (a)
2019	80.7	(b)

2018	83.2	(b)

2017	87.6	(b)

2016	90.6	(b)

2015	86.2

(a)Percentage of square-feet leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases that expire at the period end date. For all years, excludes properties being prepared for lease up.

(b)Excludes properties being considered for repositioning or redevelopment. Inclusive of such properties, percentage of square feet leased as of 2019, 2018 2017 and 2016 was 80.6, 81.7, 85.6 and 89.6 percent, respectively.

‎

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Significant Tenants

The following table sets forth a schedule of the Company’s 50 largest commercial tenants for the Consolidated Properties as of December 31, 2019 based upon annualized base rental revenue:


			Percentage of
		Annualized	Company	Square	Percentage	Year of
	Number of	Base Rental	Annualized Base	Feet	Total Company	Lease
	Properties	Revenue ($) (a)	Rental Revenue (%)	Leased	Leased Sq. Ft. (%)	Expiration


Merrill Lynch Pierce Fenner	2	10,898,022	4.0	421,570	5.2	(b)
John Wiley & Sons, Inc.	1	10,888,237	4.0	290,353	3.6	2033
MUFG Bank Ltd.	2	10,189,469	3.8	242,354	3.0	(c)
Dun & Bradstreet Corporation	2	7,516,240	2.8	192,280	2.4	2023
Daiichi Sankyo, Inc.	1	6,909,661	2.6	171,900	2.1	2023 (d)
TD Ameritrade Services Company, Inc.	1	6,894,300	2.5	193,873	2.4	2021 (e)
E*Trade Financial Corporation	1	5,290,600	2.0	132,265	1.6	2031
KPMG, LLP	2	5,224,111	1.9	120,947	1.5	(f)
Investors Bank	3	5,161,708	1.9	144,552	1.8	(g)
Vonage America, Inc.	1	4,826,500	1.8	350,000	4.3	2023
Plymouth Rock Management Company of New Jersey	1	4,351,725	1.6	129,786	1.6	2031
ARCH Insurance Company	1	4,326,008	1.6	106,815	1.3	2024
Alacer Corporation	1	4,306,008	1.6	113,316	1.4	2025 (h)
Sumitomo Mitsui Banking Corp.	1	4,156,989	1.5	111,105	1.4	2037 (i)
HQ Global Workplaces, LLC	5	4,125,006	1.5	122,222	1.5	(j)
TP ICAP Securities USA, LLC	2	4,079,450	1.5	121,871	1.5	(k)
Brown Brothers Harriman & Co.	1	3,673,536	1.4	114,798	1.4	2026
First Data Corporation	1	3,651,042	1.3	88,374	1.1	(l)
Ferrero U.S.A. Inc.	1	3,122,288	1.2	105,194	1.3	2029
Cardinia Real Estate LLC	1	3,112,664	1.1	79,771	1.0	2032
Natixis North America, Inc.	1	3,093,290	1.1	89,907	1.1	2021
Ernst & Young U.S. LLP	2	2,937,821	1.1	74,557	0.9	2020
Zurich American Insurance Company	1	2,774,955	1.0	64,414	0.8	2032
Leo Pharma Inc.	1	2,748,330	1.0	78,479	1.0	2027
Hackensack Meridian Health, Inc.	1	2,555,917	1.0	69,841	0.8	2027
AMTrust Financial Services, Inc.	1	2,460,544	0.9	76,892	0.9	2023
Tradeweb Markets, LLC	1	2,413,954	0.9	65,242	0.8	2028 (m)
New Jersey City University	1	2,256,453	0.8	68,348	0.8	2035
Wells Fargo Advisors, LLC	2	2,217,342	0.8	57,870	0.7	(n)
Torre Lazur Healthcare Group, Inc.	1	2,168,867	0.8	70,878	0.9	2030
Jeffries, LLC	1	2,133,942	0.8	62,763	0.8	2023
Trustees of Princeton Univ.	1	2,099,241	0.8	67,478	0.8	2027
The Prudential Insurance Company of America	1	2,086,629	0.8	60,482	0.7	2023
GBT US LLC	1	1,970,129	0.7	49,563	0.6	2026
B&G Foods, Inc.	1	1,949,848	0.7	66,934	0.8	2026
PBF Holding Company, LLC	1	1,948,084	0.7	57,721	0.7	2022
SunAmerica Asset Management, LLC	1	1,890,199	0.7	36,336	0.4	2023
UBS Financial Services, Inc.	3	1,887,880	0.7	53,987	0.7	(o)
Bressler, Amery & Ross, P.C.	1	1,766,850	0.7	70,674	0.9	2023
Whole Foods Market Services	1	1,753,726	0.6	47,398	0.6	2032
Sumitomo Mitsui Trust Bank (U.S.A.) Limited	1	1,745,775	0.6	38,134	0.5	2024
Savvis Communications, LLC	1	1,715,376	0.6	71,474	0.9	2025
Securitas Security Services	1	1,697,401	0.6	87,561	1.1	(p)
Amerigroup New Jersey Inc.	1	1,682,658	0.6	46,740	0.6	(q)
Pacira Biosciences Inc.	1	1,575,934	0.6	53,141	0.6	2028
Global Aerospace Inc.	1	1,556,457	0.6	47,891	0.6	2021
Morgan Stanley Smith Barney	1	1,420,233	0.5	42,395	0.5	2026
Greenbaum Rowe Smith & Davis	1	1,405,223	0.5	39,362	0.5	2025 (r)
Maser Consulting P.A.	1	1,404,341	0.5	54,538	0.7	2023
World Business Lenders LLC	1	1,384,080	0.5	35,040	0.4	2027

Totals		173,405,043	63.8	5,159,386	63.5

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(a)	Annualized base rental revenue is based on actual December 2019 billings times 12. For leases whose rent commences after January 1, 2020, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(b)	33,363 square feet expire in 2021; 388,207 square feet expire in 2027.
(c)	5,004 square feet expire in 2021; 237,350 square feet expire in 2029.
(d)	Expires 12/31/22.
(e)	Expires 12/31/20.
(f)	66,606 square feet expire in 2024; 54,341 square feet expire in 2026.
(g)	5,256 square feet expire in 2022; 82,936 square feet expire in 2026; 56,360 square feet expires in 2030.
(h)	Expires 12/31/24.
(i)	Expires 12/31/36.
(j)	17,855 square feet expire in 2021; 38,930 square feet expire in 2024 (expires 12/31/23); 45,042 square feet expire in 2024; 20,395 square feet expire in 2026.
(k)	63,372 square feet expire in 2023; 21,112 square feet expire in 2025; 37,387 square feet expire in 2033.
(l)	8,014 square feet expire in 2027 (expires 12/31/26); 80,360 square feet expire in 2029.
(m)	Expires 12/31/27.
(n)	25,762 square feet expire in 2022; 32,108 square feet expire in 2024.
(o)	27,274 square feet expire in 2022; 26,713 square feet expire in 2024.
(p)	6,279 square feet expire in 2021; 81,282 square feet expire in 2031.
(q)	6,890 square feet expire in 2023; 39,850 square feet expire in 2025.
(r)	Expires 12/31/24.

The following table sets forth a schedule of the 20 largest commercial tenants for the consolidated properties, excluding the assets classified as discontinued operations as of December 31, 2019, based upon annualized base rental revenue:


			Percentage of
		Annualized	Company	Square	Percentage	Year of
	Number of	Base Rental	Annualized Base	Feet	Total Company	Lease
	Properties	Revenue ($) (a)	Rental Revenue (%)	Leased	Leased Sq. Ft. (%)	Expiration


John Wiley & Sons Inc.	1	10,888,238	9.1	290,353	6.4	2033
Merrill Lynch Pierce Fenner	1	9,029,695	7.5	388,207	8.6	2027
MUFG Bank Ltd.	2	10,189,469	8.5	242,354	5.4	(b)
TD Ameritrade Services Co.	1	6,894,300	5.8	193,873	4.3	2020
E*Trade Financial Corporation	1	5,290,600	4.4	132,265	2.9	2031
Arch Insurance Company	1	4,326,008	3.6	106,815	2.4	2024
Sumitomo Mitsui Banking Corp.	1	4,156,989	3.5	111,105	2.5	2036
HQ Global Workplaces LLC	2	1,210,041	1.0	43,412	1.0	(c)
TP ICAP Americas Holdings Inc.	1	4,079,450	3.4	100,759	2.2	(d)
Brown Brothers Harriman & Co.	1	3,673,536	3.1	114,798	2.5	2026
First Data Corporation	1	3,651,042	3.1	88,374	2.0	(d)
Cardinia Real Estate LLC	1	3,112,664	2.6	79,771	1.8	2032
Natixis North America LLC	1	3,093,290	2.6	89,907	2.0	2021
Zurich American Ins. Co.	1	2,774,955	2.3	64,414	1.4	2032
Amtrust Financial Services	1	2,460,544	2.1	76,892	1.7	2023
Tradeweb Markets LLC	1	2,413,954	2.0	65,242	1.4	2027
New Jersey City University	1	2,256,453	1.9	68,348	1.5	2035
Jefferies LLC	1	2,133,942	1.8	62,763	1.4	2023
GBT US LLC	1	1,970,129	1.6	49,563	1.1	2026
Sunamerica Asset Management	1	1,890,199	1.5	36,336	0.9	2023

Totals		85,495,498	71.4	2,405,551	53.4


(a)	Annualized base rental revenue is based on actual December 2019 billings times 12. For leases whose rent commences after January 1, 2020, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(b)	5,004 square feet expire in 2021; 237,350 square feet expire in 2029.
(c)	17,855 square feet expire in 2021; 25,557 square feet expire in 2024.
(d)	63,372 square feet expire in 2023; 37,387 square feet expire in 2033.

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Schedule of Lease Expirations

The following table sets forth a schedule of lease expirations for the total of the Company’s office and stand-alone retail properties included in the Consolidated Commercial Properties beginning January 1, 2020, assuming that none of the tenants exercise renewal or termination options:


						Average
						Annual Base
				Percentage Of		Rent Per Net
		Net Rentable		Total Leased	Annualized	Rentable	Percentage Of
		Area Subject		Square Feet	Base Rental	Square Foot	Annual Base
	Number Of	To Expiring		Represented	Revenue Under	Represented	Rent Under
Year Of	Leases	Leases		By Expiring	Expiring	By Expiring	Expiring
Expiration	Expiring (a)	(Sq. Ft.)		Leases (%)	Leases ($) (b)	Leases ($)	Leases (%)

2020 (c)	50	470,324		5.8	16,035,519	34.09	5.9

2021	64	798,400		9.8	27,535,201	34.49	10.1

2022	63	618,005		7.6	19,560,187	31.65	7.2

2023	63	1,467,018		18.0	43,930,350	29.95	16.2

2024	61	809,606		10.0	29,134,278	35.99	10.7

2025	43	564,990		6.9	19,309,879	34.18	7.1

2026	39	608,159		7.5	20,485,666	33.68	7.6

2027	22	728,541		9.0	21,007,601	28.84	7.7

2028	11	178,764		2.2	6,060,397	33.90	2.2

2029	16	529,110		6.5	19,958,526	37.72	7.3

2030	6	166,264		2.0	6,281,491	37.78	2.3

2031 and thereafter	24	1,191,027		14.7	42,687,177	35.84	15.7
Totals/Weighted
Average	462	8,130,208	(d)	100.0	271,986,272	33.45	100.0


(a)	Includes office and stand-alone retail property tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.
(b)	Annualized base rental revenue is based on actual December 2019 billings times 12. For leases whose rent commences after January 1, 2020 annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(c)	Includes leases expiring December 31, 2019 aggregating 31,982 square feet and representing annualized rent of $1,499,990 for which no new leases were signed.
(d)	Reconciliation to Company’s total net rentable square footage is as follows:


		Square Feet
Square footage leased to commercial tenants		8,130,208
Square footage used for corporate offices, management offices, building use, retail tenants, food services, other ancillary service tenants and occupancy adjustments		306,737
Square footage unleased		2,035,368
Total net rentable commercial square footage (does not include land leases)		10,472,313

Table of Contents

The following table sets forth a schedule of lease expirations for the Company’s office and stand-alone retail properties included in the Consolidated Commercial properties, excluding the properties classified as discontinued operations, beginning January 1, 2020, assuming that none of the tenants exercise renewal or termination options:



					Average
					Annual Base
			Percentage Of		Rent Per Net
		Net Rentable	Total Leased	Annualized	Rentable	Percentage Of
		Area Subject	Square Feet	Base Rental	Square Foot	Annual Base
	Number Of	To Expiring	Represented	Revenue Under	Represented	Rent Under
Year Of	Leases	Leases	By Expiring	Expiring	By Expiring	Expiring
Expiration	Expiring (a)	(Sq. Ft.)	Leases (%)	Leases ($) (b)	Leases ($)	Leases (%)

2020 (c)	7	61,144	1.9	2,165,375	35.41	1.8

2021	18	392,953	11.9	14,441,401	36.75	12.1

2022	12	102,307	3.1	3,951,557	38.62	3.3

2023	11	324,360	9.8	11,929,205	36.78	10.0

2024	12	230,182	7.0	9,196,390	39.95	7.7

2025	9	123,680	3.7	4,065,936	32.87	3.4

2026	10	243,288	7.4	8,646,843	35.54	7.2

2027	8	457,415	13.9	11,846,892	25.90	9.9

2028	5	88,842	2.7	3,480,965	39.18	2.9

2029	6	335,773	10.2	14,102,459	42.00	11.8

2030	3	29,211	0.9	1,313,797	44.98	1.1

2031 and thereafter	18	911,004	27.5	34,538,731	37.91	28.8
Totals/Weighted
Average	119	3,300,159	100.0	119,679,550	36.26	100.0


(a)	Includes office and stand-alone retail property tenants only. Excludes leases for amenity, retail, parking and month‑to‑month tenants. Some tenants have multiple leases.
(b)	Annualized base rental revenue is based on actual December 2019 billings times 12. For leases whose rent commences after January 1, 2020 annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(c)	Includes leases expiring December 31, 2019 aggregating 12,191 square feet and representing annualized rent of $0.5 million for which no new leases were signed.

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Industry Diversification

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


	Annualized	Percentage of		Percentage of
	Base Rental	Company	Square	Total Company
	Revenue	Annualized Base	Feet Leased	Leased
Industry Classification (a)	($) (b) (c) (d)	Rental Revenue (%)	(c) (d)	Sq. Ft. (%)
Securities, Commodity Contracts & Other Financial	67,332,354	24.9	1,986,393	24.5
Credit Intermediation & Related Activities	33,561,392	12.3	866,009	10.7
Insurance Carriers & Related Activities	31,209,554	11.5	886,294	10.9
Manufacturing	24,946,622	9.2	745,084	9.2
Other Professional	15,417,922	5.7	393,608	4.8
Publishing Industries	10,953,328	4.0	292,138	3.6
Accounting/Tax Prep.	9,420,539	3.5	293,236	3.6
Computer System Design Svcs.	9,206,613	3.4	291,864	3.6
Legal Services	8,865,017	3.3	267,520	3.3
Management/Scientific	8,564,703	3.1	253,767	3.1
Advertising/Related Services	7,370,270	2.7	219,554	2.7
Real Estate & Rental & Leasing	6,664,083	2.5	195,400	2.4
Educational Services	6,064,633	2.2	188,947	2.3
Telecommunications	5,654,420	2.1	370,698	4.6
Admin & Support, Waste Mgt. & Remediation Svcs.	4,310,943	1.6	171,771	2.1
Architectural/Engineering	3,886,888	1.4	148,902	1.8
Health Care & Social Assistance	2,807,563	1.0	80,744	1.0
Data Processing Services	2,459,383	0.9	89,551	1.1
Mining	1,948,084	0.7	57,721	0.7
Other Services (except Public Administration)	1,853,213	0.7	62,867	0.8
Specialized Design Services	1,468,362	0.5	42,913	0.5
Scientific Research/Development	1,453,501	0.5	42,052	0.5
Wholesale Trade	1,441,285	0.5	38,462	0.5
Public Administration	1,242,197	0.5	43,783	0.5
Transportation	1,196,067	0.4	31,217	0.4
Funds, Trusts & Other Financial Vehicles	1,136,914	0.4	25,947	0.3
Information Services	802,800	0.3	22,300	0.3
Construction	424,491	0.2	11,626	0.1
Retail Trade	124,875	0.0	4,995	0.1
Motion Picture/Sound Recording	105,302	0.0	2,846	0.0
Other	92,954	0.0	1,999	0.0

TOTAL	271,986,272	100.0	8,130,208	100.0

(a)The Company’s tenants are classified according to the U.S. Government’s North American Industrial Classification System (NAICS).

(b)Annualized base rental revenue is based on actual December 2019 billings times 12. For leases whose rent commences after January 1, 2020, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.

(c)Includes leases in effect as of the period end date, some of which have commencement dates in the future, and leases expiring December 31, 2019 aggregating 31,982 square feet and representing annualized base rent of $1,499,990 for which no new leases were signed.

(d)Includes office and stand-alone retail tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.

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The following table lists the Company’s 20 largest commercial tenant industry classifications based on annualized contractual base rent of the Consolidated Properties, excluding properties classified as discontinued operations, as of December 31, 2019:


	Annualized	Percentage of		Percentage of
	Base Rental	Company	Square	Total Company
	Revenue	Annualized Base	Feet Leased	Leased
Industry Classification (a)	($) (b) (c) (d)	Rental Revenue (%)	(c) (d)	Sq. Ft. (%)
Securities, Commodity Contracts & Other Financial	50,162,658	41.9	1,512,701	45.8
Credit Intermediation & Related Activities	17,848,370	14.9	434,556	13.2
Insurance Carriers & Related Activities	14,422,317	12.1	373,150	11.3
Publishing Industries	10,888,238	9.1	290,353	8.8
Other Professional	4,865,800	4.1	112,654	3.4
Advertising/Related Services	3,350,564	2.8	86,115	2.6
Educational Services	2,751,128	2.3	78,873	2.4
Computer System Design Svcs.	2,536,571	2.1	61,936	1.9
Data Processing Services	2,340,424	2.0	85,062	2.6
Management/Scientific	2,071,736	1.7	45,705	1.4
Real Estate & Rental & Leasing	2,038,357	1.7	61,257	1.9
Specialized Design Services	1,200,745	1.0	34,307	1.0
Wholesale Trade	875,740	0.7	17,102	0.5
Telecommunications	827,920	0.7	20,698	0.6
Information Services	802,800	0.7	22,300	0.7
Legal Services	591,974	0.5	17,411	0.5
Scientific Research/Development	584,733	0.5	11,987	0.4
Transportation	534,365	0.4	11,514	0.3
Admin & Support, Waste Mgt. & Remediation Svcs.	369,424	0.3	8,510	0.3
Construction	225,408	0.2	4,696	0.1
Other	390,278	0.3	9,272	0.3

TOTAL	119,679,551	100.0	3,300,159	100.0


(a)	The Company’s tenants are classified according to the U.S. Government’s North American Industrial Classification System (NAICS).
(b)	Annualized base rental revenue is based on actual December 2019 billings times 12. For leases whose rent commences after January 1, 2020, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(c)	Includes leases in effect as of the period end date, some of which have commencement dates in the future, and leases expiring December 31, 2019 aggregating 12,191 square feet and representing annualized base rent of $0.5 million for which no new leases were signed.
(d)	Includes office and stand-alone retail tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.

Market Diversification

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


		Percentage Of
		Company
	Annualized Base	Annualized	Total Property
	Rental Revenue	Base Rental	Size Rentable	Percentage Of
Market	($) (a) (b) (c)	Revenue (%)	Area (b) (c)	Rentable Area (%)
Jersey City, NJ	119,679,551	44.0	4,508,801	43.1
Newark, NJ (Essex-Morris-Union Counties)	86,995,735	32.0	3,241,021	30.9
Middlesex-Somerset-Hunterdon, NJ	35,857,438	13.2	1,126,666	10.8
Monmouth-Ocean, NJ	16,608,496	6.1	989,490	9.4
Trenton, NJ	8,526,262	3.1	406,335	3.9
Bergen-Passaic, NJ	4,318,790	1.6	200,000	1.9

Totals	271,986,272	100.0	10,472,313	100.0

(a)Annualized base rental revenue is based on actual December 31, 2019 billings times 12. For leases whose rent commences after January 1, 2020, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.

(b)Includes leases in effect as of the period end date, some of which have commencement dates in the future, and leases expiring December 31, 2019 aggregating 31,982 square feet and representing annualized base rent of $1,499,990 for which no new leases were signed.

(c)Includes office and stand-alone retail tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.

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The following table lists the Company’s markets, based on annualized commercial contractual base rent of the Consolidated Properties, excluding the properties classified as discontinued operations, as of December 31, 2019:


		Percentage Of
		Company
	Annualized Base	Annualized	Total Property
	Rental Revenue	Base Rental	Size Rentable	Percentage Of
Market	($) (a) (b) (c)	Revenue (%)	Area (b) (c)	Rentable Area (%)
Jersey City, NJ	119,679,551	100.0	4,508,801	100.0

Totals	119,679,551	100.0	4,508,801	100.0


(a)	Annualized base rental revenue is based on actual December 31, 2019 billings times 12. For leases whose rent commences after January 1, 2020, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(b)	Includes leases in effect as of the period end date, some of which have commencement dates in the future, and leases expiring December 31, 2019 aggregating 12,191 square feet and representing annualized base rent of $0.5 million for which no new leases were signed.
(c)	Includes office and stand-alone retail tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

The shares of the General Partner's common stock are traded on the New York Stock Exchange (“NYSE”) under the symbol “CLI.” There is no established public trading market for the Operating Partnership’s common units.

The following table sets forth the quarterly high, low, and closing price per share of the General Partner's Common Stock reported on the NYSE for the years ended December 31, 2019 and 2018, respectively:


For the Year Ended December 31, 2019

		High		Low		Close
First Quarter	$	22.55	$	18.74	$	22.20
Second Quarter	$	24.88	$	21.68	$	23.29
Third Quarter	$	24.09	$	19.97	$	21.66
Fourth Quarter	$	23.40	$	19.96	$	23.13

For the Year Ended December 31, 2018

		High		Low		Close
First Quarter	$	21.98	$	15.86	$	16.71
Second Quarter	$	20.86	$	16.23	$	20.28
Third Quarter	$	21.92	$	18.92	$	21.26
Fourth Quarter	$	22.26	$	19.02	$	19.59

On February 24, 2020, the closing Common Stock price reported on the NYSE was $21.15 per share.

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On July 9, 2019, the General Partner filed with the NYSE its annual CEO Certification and Annual Written Affirmation pursuant to Section 303A.12 of the NYSE Listed Company Manual, each certifying that the General Partner was in compliance with all of the listing standards of the NYSE.

HOLDERS

On February 24, 2020, the General Partner had 283 common shareholders of record (this does not include beneficial owners for whom Cede & Co. or others act as nominee) and the Operating Partnership had 83 owners of limited partnership units and one owner of General Partnership units.

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

None.

DIVIDENDS AND DISTRIBUTIONS

The declaration and payment of dividends and distributions will continue to be determined by the Board of Directors of the General Partner in light of conditions then existing, including the Company’s earnings, cash flows, financial condition, capital requirements, debt maturities, the availability of debt and equity capital, applicable REIT and legal restrictions and the general overall economic conditions and other factors.

PERFORMANCE GRAPH

The following graph compares total stockholder returns from the last five fiscal years to the Standard & Poor’s 500 Index (“S&P 500”) and to the National Association of Real Estate Investment Trusts, Inc.’s FTSE NAREIT Equity REIT Index (“NAREIT”). The graph assumes that the value of the investment in the General Partner's Common Stock and in the S&P 500 and NAREIT indices was $100 at December 31, 2014 and that all dividends were reinvested. The price of the General Partner's Common Stock on December 31, 2014 (on which the graph is based) was $19.06. The past stockholder return shown on the following graph is not necessarily indicative of future performance.

Comparison of Five-Year Cumulative Total Return

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ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial data on a consolidated basis for the General Partner. The consolidated selected operating and balance sheet data of the General Partner as of December 31, 2019, 2018, 2017, 2016 and 2015, and for the years then ended have been derived from the General Partner's financial statements for the respective periods.


Operating Data (a)		Year Ended December 31,
In thousands, except per share data		2019		2018		2017		2016		2015
Total revenues	$	350,935	$	365,714	$	459,030	$	499,045	$	498,494
Property expenses (b)	$	131,520	$	138,262	$	169,162	$	193,002	$	202,896
Real estate services expenses	$	15,918	$	17,919	$	23,394	$	26,260	$	25,583
General and administrative	$	57,535	$	53,865	$	50,475	$	51,548	$	48,655
Property Impairments	$	-	$	-	$	-	$	-	$	197,919
Land and other impairments	$	32,444	$	24,566	$	-	$	-	$	-
Interest expense	$	90,569	$	77,346	$	84,523	$	90,251	$	98,333
Gain on change of control of interests	$	13,790	$	14,217	$	-	$	15,347	$	-
Realized gains (losses) and unrealized losses on
disposition of rental property, net,
of continuing operations	$	345,926	$	99,436	$	2,364	$	109,666	$	53,261
Gain on disposition of developable land	$	522	$	30,939	$	-	$	-	$	-
Gain on sale of investment in unconsolidated joint venture	$	903	$	-	$	23,131	$	5,670	$	6,448
Gain (loss) from extinguishment of debt, net	$	1,648	$	(8,929)	$	(421)	$	(30,540)	$	-
Income (loss) from continuing operations	$	252,554	$	80,267	$	10,840	$	107,638	$	(157,648)
Income from discontinued operations	$	27,456	$	26,134	$	22,878	$	22,656	$	15,596
Realized gains (losses) and unrealized losses on
disposition of rental property and impairments, net,
on discontinued operations	$	(136,174)	$	-	$	-	$	-	$	-
Net income (loss) available to common shareholders	$	111,861	$	84,111	$	23,185	$	117,224	$	(125,752)
Income (loss) from continuing operations
per share – basic	$	2.03	$	0.54	$	(0.17)	$	1.08	$	(1.56)
Income (loss) from continuing operations
per share – diluted	$	2.03	$	0.54	$	(0.17)	$	1.08	$	(1.56)
Net income (loss) per share – basic	$	0.95	$	0.80	$	0.06	$	1.31	$	(1.41)
Net income (loss) per share – diluted	$	0.95	$	0.80	$	0.06	$	1.30	$	(1.41)
Dividends declared per common share	$	0.80	$	0.80	$	0.75	$	0.60	$	0.60
Basic weighted average shares outstanding		90,557		90,388		90,005		89,746		89,291
Diluted weighted average shares outstanding		100,689		100,724		100,703		100,498		100,222

Balance Sheet Data (a)				December 31,
In thousands		2019		2018		2017		2016		2015
Rental property, before accumulated
depreciation and amortization	$	4,256,681	$	5,306,017	$	5,102,844	$	4,804,867	$	4,807,718
Total assets	$	5,292,798	$	5,060,644	$	4,957,885	$	4,296,766	$	4,053,963
Total debt (c)	$	2,808,518	$	2,792,651	$	2,809,568	$	2,340,009	$	2,145,393
Total liabilities	$	3,089,941	$	3,033,004	$	3,076,954	$	2,570,079	$	2,370,255
Redeemable noncontrolling interests	$	503,382	$	330,459	$	212,208	$	-	$	-
Total Mack-Cali Realty Corporation
stockholders’ equity	$	1,493,699	$	1,486,658	$	1,476,295	$	1,527,171	$	1,455,676
Total noncontrolling interests in subsidiaries	$	205,776	$	210,523	$	192,428	$	199,516	$	228,032

(a)Certain reclassifications have been made to prior period amounts in order to conform with current period presentation, primarily related to classification of certain properties as discontinued operations.

(b)Property expenses is calculated by taking the sum of real estate taxes, utilities and operating services for each of the periods presented.

(c)Total debt is calculated by taking the sum of senior unsecured notes, unsecured revolving credit facility and term loans, and mortgages, loans payable and other obligations, net.

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The following table sets forth selected financial data on a consolidated basis for the Operating Partnership. The consolidated selected operating and balance sheet data of the Operating Partnership as of December 31, 2019, 2018, 2017, 2016 and 2015, and for the years then ended have been derived from the Operating Partnership’s financial statements for the respective periods.


Operating Data (a)		Year Ended December 31,
In thousands, except per unit data		2019		2018		2017		2016		2015
Total revenues	$	350,935	$	365,714	$	459,030	$	499,045	$	498,494
Property expenses (b)	$	131,520	$	138,262	$	169,162	$	193,002	$	202,896
Real estate services expenses	$	15,918	$	17,919	$	23,394	$	26,260	$	25,583
General and administrative	$	57,535	$	53,865	$	50,475	$	51,548	$	48,655
Property Impairments	$	-	$	-	$	-	$	-	$	197,919
Land and other impairments	$	32,444	$	24,566	$	-	$	-	$	-
Interest expense	$	90,569	$	77,346	$	84,523	$	90,251	$	98,333
Gain on change of control of interests	$	13,790	$	14,217	$	-	$	15,347	$	-
Realized gains (losses) and unrealized losses on								-
disposition of rental property, net,
of continuing operations	$	345,926	$	99,436	$	2,364	$	109,666	$	53,261
Gain on disposition of developable land	$	522	$	30,939	$	-	$	-	$	-
Gain on sale of investment in unconsolidated joint venture	$	903	$	-	$	23,131	$	5,670	$	6,448
Gain (loss) from extinguishment of debt, net	$	1,648	$	(8,929)	$	(421)	$	(30,540)	$	-
Income (loss) from continuing operations	$	252,554	$	80,267	$	10,840	$	107,638	$	(157,648)
Income from discontinued operations	$	27,456	$	26,134	$	22,878	$	22,656	$	15,596
Realized gains (losses) and unrealized losses on
disposition of rental property and impairments, net,
on discontinued operations	$	(136,174)	$	-	$	-	$	-	$	-
Net income (loss) available to common unitholders	$	125,125	$	93,638	$	25,896	$	130,945	$	(141,008)
Income (loss) from continuing operations
per unit – basic	$	2.03	$	0.54	$	(0.17)	$	1.08	$	(1.56)
Income (loss) from continuing operations
per unit – diluted	$	2.03	$	0.54	$	(0.17)	$	1.08	$	(1.56)
Net income (loss) per unit – basic	$	0.95	$	0.80	$	0.06	$	1.31	$	(1.41)
Net income (loss) per unit – diluted	$	0.95	$	0.80	$	0.06	$	1.30	$	(1.41)
Distributions declared per common unit	$	0.80	$	0.80	$	0.75	$	0.60	$	0.60
Basic weighted average units outstanding		100,520		100,634		100,410		100,245		100,222
Diluted weighted average units outstanding		100,689		100,724		100,703		100,498		100,222

Balance Sheet Data (a)				December 31,
In thousands		2019		2018		2017		2016		2015
Rental property, before accumulated
depreciation and amortization	$	4,256,681	$	5,306,017	$	5,102,844	$	4,804,867	$	4,807,718
Total assets	$	5,292,798	$	5,060,644	$	4,957,885	$	4,296,766	$	4,053,963
Total debt (c)	$	2,808,518	$	2,792,651	$	2,809,568	$	2,340,009	$	2,145,393
Total liabilities	$	3,089,941	$	3,033,004	$	3,076,954	$	2,570,079	$	2,370,255
Redeemable noncontrolling interests	$	503,382	$	330,459	$	212,208	$	-	$	-
Total equity	$	1,699,475	$	1,697,181	$	1,668,723	$	1,726,687	$	1,683,708

(b)Property expenses is calculated by taking the sum of real estate taxes, utilities and operating services for each of the periods presented.

(c)Total debt is calculated by taking the sum of senior unsecured notes, unsecured revolving credit facility and term loans, and mortgages, loans payable and other obligations, net.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated Financial Statements of Mack-Cali Realty Corporation and Mack-Cali Realty, L.P. and the notes thereto (collectively, the “Financial Statements”). Certain defined terms used herein have the meaning ascribed to them in the Financial Statements.

Executive Overview

Mack-Cali Realty Corporation together with its subsidiaries, (collectively, the “General Partner”), including Mack-Cali Realty, L.P. (the “Operating Partnership”), has been involved in all aspects of commercial real estate development, management and ownership for over 60 years and the General Partner has been a publicly traded real estate investment trust (REIT) since 1994.

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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. Unless stated otherwise or the context requires, the “Company” refers to the General Partner and its subsidiaries, including the Operating Partnership and its subsidiaries. The Company owns or has interests in 71 properties (collectively, the “Properties”), consisting of 42 office properties, totaling approximately 10.7 million square feet leased to approximately 400 commercial tenants, 21 multi-family rental properties containing 6,524 apartment units, four parking/retail properties totaling approximately 108,000 square feet, three hotels containing 723 rooms and a parcel of land leased to a third party. The Properties are located in the Northeast, some with adjacent, Company-controlled developable land sites able to accommodate up to approximately 2.0 million square feet of additional commercial space and approximately 9,500 apartment units.

STRATEGIC DIRECTION

During the year ended December 31, 2019, the Company completed the sale of two of these suburban office properties, totaling 497,000 square feet, for net sales proceeds of $52.2 million. As of December 31, 2019, the Company has identified as held for sale the remaining 35 office properties (comprised of 12 disposal groups) in the Suburban Office Portfolio, totaling 6.1 million square feet.

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

the general economic climate;

the occupancy rates of the Properties;

rental rates on new or renewed leases;

tenant improvement and leasing costs incurred to obtain and retain tenants;

the extent of early lease terminations;

the value of our office properties and the cash flow from the sale of such properties;

operating expenses;

anticipated acquisition and development costs for office and multi-family rental properties and the revenues and earnings from these properties;

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cost of capital; and

the extent of acquisitions, development and sales of real estate, including the execution of the Company’s current strategic initiative.

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

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

Of the Company’s core office markets, most continue to show signs of rental rate improvement, while the lease percentage has declined or stabilized. The percentage leased in the Company’s stabilized core operating commercial properties included in its Consolidated Properties aggregating 10.3 million, 14.1 million and 14.7 million square feet at December 31, 2019, 2018 and 2017, respectively, was 80.7 percent leased at December 31, 2019, as compared to 83.2 percent leased at December 31, 2018 and 87.6 percent leased at December 31, 2017 (after adjusting for properties identified as non-core at the time). Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases that expire at the period end date. Leases that expired as of December 31, 2019, 2018 and 2017 aggregate 31,982, 10,108 and 343,217 square feet, respectively, or 0.3, 0.1 and 2.3 percentage of the net rentable square footage, respectively. Rental rates (including escalations) on the Company’s commercial space that was renewed (based on first rents payable) during the year ended December 31, 2019 (on 229,429 square feet of renewals) increased an average of 16.9 percent compared to rates that were in effect under the prior leases, as compared to a 21.7 percent increase during 2018 (on 950,548 square feet of renewals) and a 1.7 percent increase in 2017 (on 1,680,687 square feet of renewals). Estimated lease costs for the renewed leases in 2019 averaged $4.34 per square foot per year for a weighted average lease term of 3.9 years, estimated lease costs for the renewed leases in 2018 averaged $3.46 per square foot per year for a weighted average lease term of 4.7 years and estimated lease costs for the renewed leases in 2017 averaged $2.16 per square foot per year for a weighted average lease term of 7.2 years. The Company believes that vacancy rates at its commercial properties have begun to bottom by the end of 2019 as the majority of the known move-outs at its waterfront portfolio have already occurred, and commercial rental rates may increase in some of its markets in 2020. As of December 31, 2019, commercial leases which comprise approximately 5.9 and 10.1 percent of the Company’s annualized base rent are scheduled to expire during the years ended December 31, 2020 and 2021, respectively. With the positive rental rate results the Company has achieved in most of its markets recently, the Company believes that rental rates on new leases will generally be, on average, not lower than rates currently being paid. If these recent leasing results do not prove to be sustaining in 2020, the Company may receive less revenue from the same space.

During 2017, Moody’s downgraded its investment grade rating on the Company’s senior unsecured debt to sub-investment grade and during 2018, Standard & Poor’s lowered its investment grade rating on the Company’s senior unsecured debt to sub-investment grade. Amongst other things, such downgrade would have increased the interest rate on outstanding borrowings under the Company’s current $600 million unsecured revolving credit facility (which was amended in January 2017) from the London Inter-Bank Offered Rate (“LIBOR”) plus 120 basis points to LIBOR plus 155 basis points and the annual credit facility fee it pays would have increased from 25 to 30 basis points. Additionally, any such downgrade would have increased the current interest rate on each of the Company’s 2016 Term Loan and 2017 Term Loan from LIBOR plus 140 basis points to LIBOR plus 185 points. Effective March 6, 2018, the Company elected to utilize the leverage grid pricing available under the unsecured revolving credit facility and both unsecured term loans. This resulted in an interest rate of LIBOR plus 130 basis points for the Company’s unsecured revolving credit facility and 25 basis points for the facility fee and LIBOR plus 155 basis points for both unsecured term loans at the Company’s then total leverage ratio. In addition, a downgrade in its ratings to sub-investment grade would result in higher interest rates on senior unsecured debt that the Company may issue in the future as compared to issuing such debt with investment grade ratings.

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

recent transactions;

critical accounting policies and estimates;

results of operations for the year ended December 31, 2019 as compared to the year ended December 31, 2018;

results of operations for the year ended December 31, 2018 as compared to the year ended December 31, 2017; and

liquidity and capital resources.

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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 year ended December 31, 2019 (dollars in thousands):


					Rentable
Acquisition			Property	# of	Square Feet/		Acquisition
Date	Property Address	Location	Type	Bldgs.	Apartment Units		Cost
02/06/19	99 Wood Avenue (a)	Iselin, New Jersey	Office	1	271,988	$	61,858
04/01/19	Soho Lofts (a)	Jersey City, New Jersey	Multi-family	1	377		264,578
09/26/19	Liberty Towers (b)	Jersey City, New Jersey	Multi-family	1	648		410,483

Total Acquisitions				3		$	736,919


(a)	This 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.
(b)	This acquisition was funded through borrowings under the Company's unsecured revolving credit facility and a new $232 million mortgage loan collateralized by the property.

On May 10, 2019, the Company completed the acquisition of developable land parcels for future development (“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.

Consolidations

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 rental 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 year ended December 31, 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 – to the Financial Statements.


		Marbella II
Land and leasehold interests	$	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.

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Properties Commencing Initial Operations

The following property commenced initial operations during the year ended December 31, 2019 (dollars in thousands):


				# of		Total
In Service			Property	Apartment Units/		Development
Date	Property	Location	Type	Rooms		Costs Incurred
07/09/19	Autograph Collection By Marriott (Phase II)	Weehawken, NJ	Hotel	208	$	105,477
Totals				208	$	105,477

Real Estate Held for Sale/Discontinued Operations/Dispositions

The Company identified 35 office properties (comprised of 12 disposal groups) totaling 6.1 million square feet (See Note 7: Discontinued Operations – to the Financial Statements), a retail pad leased to others and several developable land parcels as held for sale as of December 31, 2019. The total estimated sales proceeds, net of expected selling costs, from the sales of all the assets held for sale are expected to be approximately $1.2 billion. The Company determined that the carrying value of 21 of the properties (comprised of six disposal groups) and several land parcels held for sale was not expected to be recovered from estimated net sales proceeds, and accordingly, during the year ended December 31, 2019, recognized an unrealized loss allowance of $174.1 million for the properties ($137.9 million of which are from discontinued operations), and land and other impairments of $32.4 million.

The Company disposed of the following rental properties during the year ended December 31, 2019 (dollars in thousands):


														Discontinued
														Operations:
												Realized		Realized
												Gains		Gains
				Rentable				Net		Net		(losses)/		(losses)/
Disposition			# of	Square		Property		Sales		Carrying		Unrealized		Unrealized
Date	Property/Address	Location	Bldgs.	Feet/Units		Type		Proceeds		Value		Losses, net		Losses, net
01/11/19	721 Route 202-206 South (a)	Bridgewater, New Jersey	1	192,741		Office	$	5,651	$	5,410	$	241	$	-
01/16/19	Park Square Apartments (b)	Rahway, New Jersey	1	159	units	Multi-family		34,045		34,032		13		-
01/22/19	2115 Linwood Avenue	Fort Lee, New Jersey	1	68,000		Office		15,197		7,433		7,764		-
02/27/19	201 Littleton Road (c)	Morris Plains, New Jersey	1	88,369		Office		4,842		4,937		(95)		-
03/13/19	320 & 321 University Avenue	Newark, New Jersey	2	147,406		Office		25,552		18,456		7,096		-
03/29/19	Flex portfolio (d)	New York and Connecticut	56	3,148,512		Office/Flex		470,348		214,758		255,590		-
06/18/19	650 From Road (e)	Paramus, New Jersey	1	348,510		Office		37,801		40,046		(2,245)		-
10/18/19	3600 Route 66 (h)	Neptune, New Jersey	1	180,000		Office		25,237		17,246		-		7,991
10/23/19	Chase & Alterra Portfolio (f)	Revere and Malden, Massachusetts	3	1,386	units	Multi-family		406,817		293,030		113,787		-
12/06/19	5 Wood Hollow Road (g) (h)	Parsippany, New Jersey	1	317,040		Office		26,937		33,226		-		(6,289)	(i)
Sub-total			68	4,490,578				1,052,427		668,574		382,151		1,702

Unrealized losses on real estate held for sale												(36,225)		(137,876)	(i)
Totals			68	4,490,578			$	1,052,427	$	668,574	$	345,926	$	(136,174)



(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)	As part of the consideration from the buyer, who sis a noncontrolling interest unitholder of the Operating Partnership, 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.
(f)	Proceeds from the sale, which were net of $235.8 million of in-place mortgages assumed by the buyer, were used primarily to repay outstanding borrowings under the Company's revolving credit facility that were drawn to fund a portion of the Company's purchase of Liberty Towers. The assumed mortgages were a non-cash portion of this sales transaction.
(g)	The net sale proceeds were held by a qualified intermediary, which is noncash and recorded in deferred charges, goodwill and other assets as of December 31, 2019. See Note 5: Deferred Charges, Goodwill and Other Assets, Net – to the Financial Statements. The Company recorded an impairment charge of $5.8 million at June 30, 2019 before the property was identified as held for sale on September 30, 2019.
(h)	These pertain to properties classified as discontinued operations. (See Note 7: Discontinued Operations – to the Financial Statements)
(i)	These include impairments recorded on three properties before they were classified as discontinued operations.

‎

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The Company disposed of the following developable land holdings during the year ended December 31, 2019 (dollars in thousands):


									Realized
									Gains
					Net		Net		(losses)/
Disposition					Sales		Carrying		Unrealized
Date	Property Address	Location			Proceeds		Value		Losses, net
04/30/19	Overlook Ridge	Revere, Massachusetts		$	685	$	415	$	270
09/20/19	Overlook Ridge	Revere, Massachusetts			1,135		839		296
11/08/19	150 Monument Street	Bala Cynwd, Pennsylvania	(a)		8,374		7,874		500
12/19/19	51 Washington Street	Conshohocken, Pennsylvania	(b)		8,189		8,732	$	(543)

Totals				$	18,383	$	17,860	$	523

(a) The Company recorded a land impairment charge of $10.9 million on this land parcel during the year ended December 31, 2018.
(b) The Company recorded a land impairment charge of $13.6 million on this land parcel during the year ended December 31, 2018. The Company recorded
additional land impairment charges of $2.7 million on this land parcel during the year ended December 31, 2019 prior to its disposition.

Unconsolidated Joint Venture Activity

Rockpoint Transaction

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 the Company 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 15: Redeemable Noncontrolling Interests – to the Financial Statements for additional information about the Add On Investment Agreement and the related transactions with Rockpoint.

Critical Accounting Policies and Estimates

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 – to the Financial Statements, for the Company’s treatment of unconsolidated joint venture interests. Intercompany accounts and transactions have been eliminated.

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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.

The financial statements have been prepared in conformity with generally accepted accounting principles (“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, primarily related to classification of certain properties as discontinued operations. The Company’s critical accounting policies are those which require assumptions to be made about matters that are highly uncertain. Different estimates could have a material effect on the Company’s financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances.

Rental Property

Rental properties are stated at cost less accumulated depreciation and amortization. Costs directly related to the acquisition, development and construction of rental properties are capitalized. 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. Interest capitalized by the Company for the years ended December 31, 2019, 2018 and 2017 was $19.3 million, $27.0 million and $20.2 million, respectively. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.

The Company considers a construction project as substantially completed and held available for occupancy upon the 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 depending on the type of property, may include reviewing low leased percentages, significant near-term lease expirations, current and historical operating and/or cash flow losses, construction cost 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 over its estimated holding period is less than the carrying value of the property. If there are different possible scenarios for a property, the Company will take a probability-weighted approach to estimating future cash flow scenarios. To the extent impairment has occurred, the impairment loss is 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 and estimated fair values for each property are based on a number of assumptions, including but not limited to estimated holding periods, market capitalization rates and discount rates, if applicable. For developable land, an estimated per-unit market value assumption is also considered based on development rights for the land. 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

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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.

Real Estate Held for Sale and Discontinued Operations

When assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. The Company generally considers assets (as identified by their disposal groups) to be held for sale when the transaction has received appropriate corporate authority, it is probable to be sold within the following 12 months, and there are no significant contingencies relating to a sale. If, in management’s opinion, the estimated net sales price, net of selling costs, of the disposal groups 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. In the absence of an executed sales agreement with a set sales price, management’s estimate of the net sales price may be based on a number of assumptions, including but not limited to the Company’s estimates of future and stabilized cash flows, market capitalization rates and discount rates, if applicable. For developable land holdings, an estimated per-unit market value assumption is also considered based on development rights for the land. In addition, the Company classifies assets held for sale or sold as discontinued operations if the disposal groups represent a strategic shift that will have a major effect on the Company’s operations and financial results. For any disposals qualifying as discontinued operations, the assets and their results are presented in discontinued operations in the financial statements for all periods presented. See Note 7: Discontinued Operations – to the Financial Statements.

If circumstances arise that previously were considered unlikely and, as a result, the Company decides not to sell an asset previously classified as held for sale, the asset is reclassified as held and used. An asset that is reclassified is measured and recorded individually at the lower of (a) its carrying value before the asset was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the asset 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, 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 including but not limited to estimates of future and stabilized cash flows, market capitalization rates and discount rates, if applicable. These assumptions are 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 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 – to the Financial Statements.

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.

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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 revenue from leases 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.

The Company elected a practical expedient for its rental properties (as lessor) to avoid separating non-lease components that otherwise would need to be accounted for under the recently-adopted revenue accounting guidance (such as tenant reimbursements of property operating expenses) from the associated lease component since (1) the non-lease components have the same timing and pattern of transfer as the associated lease component and (2) the lease component, if accounted for separately, would be classified as an operating lease; this enables the Company to account for the combination of the lease component and non-lease components as an operating lease since the lease component is the predominant component of the combined components.

Due to the Company’s adoption of the practical expedient discussed above to not separate non-lease component revenue from the associated lease component, the Company is aggregating revenue from its lease components and non-lease components (comprised predominantly of tenant operating expense reimbursements) into the line entitled “Revenue from 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 – to the Financial Statements.

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.

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 for collectability, based on factors affecting the billings and status of individual tenants. The factors considered by management in determining which individual tenant’s revenues are affected 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 bad debt write-off’s requires management to exercise judgment about the timing, frequency and severity of collection losses, which affects the revenue recorded.

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.

Results From Operations

The following comparisons for the year ended December 31, 2019 (“2019”), as compared to the year ended December 31, 2018 (“2018”), and for 2018 as compared to the year ended December 31, 2017 (“2017”) make reference to the following: (i) the effect of the “Same-Store Properties,” which represent all in-service properties owned by the Company at December 31, 2017, (for the 2019 versus 2018 comparisons), and which represent all in-service properties owned by the Company at December 31, 2016 (for the 2018 versus 2017

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comparisons), excluding properties sold, disposed of, removed from service, or being redeveloped or repositioned from January 1, 2017 through December 31, 2019; (ii) the effect of the “Acquired Properties,” which represent all properties acquired by the Company or commencing initial operation from January 1, 2018 through December 31, 2019 (for the 2019 versus 2018 comparisons), and which represents all properties acquired by the Company or commencing initial operations from January 1, 2017 through December 31, 2018 (for the 2018 versus 2017 comparisons), and (iii) the effect of “Properties Sold” which represent properties sold, disposed of, or removed from service (including properties being redeveloped or repositioned) by the Company from January 1, 2017 through December 31, 2019.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018


		Years Ended
		December 31,				Dollar	Percent
(dollars in thousands)		2019		2018		Change	Change
Revenue from rental operations and other:
Revenue from leases	$	296,142	$	317,783	$	(21,641)	(6.8)	%
Parking income		21,857		21,907		(50)	(0.2)
Hotel income		9,841		-		9,841	-
Other income		9,222		8,930		292	3.3
Total revenues from rental operations		337,062		348,620		(11,558)	(3.3)

Property expenses:
Real estate taxes		43,998		44,389		(391)	(0.9)
Utilities		17,881		23,799		(5,918)	(24.9)
Operating services		69,641		70,074		(433)	(0.6)
Total property expenses		131,520		138,262		(6,742)	(4.9)

Non-property revenues:
Real estate services		13,873		17,094		(3,221)	(18.8)
Total non-property revenues		13,873		17,094		(3,221)	(18.8)

Non-property expenses:
Real estate services expenses		15,918		17,919		(2,001)	(11.2)
Leasing personnel costs		2,261		-		2,261	-
General and administrative		57,535		53,865		3,670	6.8
Depreciation and amortization		132,016		112,244		19,772	17.6
Land and other impairments		32,444		24,566		7,878	32.1
Total non-property expenses		240,174		208,594		31,580	15.1
Operating income		(20,759)		18,858		(39,617)	(210.1)
Other (expense) income:
Interest expense		(90,569)		(77,346)		(13,223)	(17.1)
Interest and other investment income (loss)		2,412		3,219		(807)	(25.1)
Equity in earnings (loss) of unconsolidated joint ventures		(1,319)		(127)		(1,192)	(938.6)
Gain on change of control of interests		13,790		14,217		(427)	(3.0)
Realized gains (losses) and unrealized losses on disposition
of rental property, net		345,926		99,436		246,490	247.9
Gain on disposition of developable land		522		30,939		(30,417)	(98.3)
Gain on sale of investment in unconsolidated joint ventures		903		-		903	-
Gain (loss) from extinguishment of debt, net		1,648		(8,929)		10,577	118.5
Total other (expense) income		273,313		61,409		211,904	345.1
Income from continuing operations		252,554		80,267		172,287	214.6
Discontinued operations:
Income from discontinued operations		27,456		26,134		1,322	5.1
Realized gains (losses) and unrealized losses on
disposition of rental property and impairments, net		(136,174)		-		(136,174)	-
Total discontinued operations		(108,718)		26,134		(134,852)	(516.0)
Net income	$	143,836	$	106,401	$	37,435	35.2	%

Table of Contents

The following is a summary of the changes in revenue from rental operations and other, and property expenses, in 2019 as compared to 2018 divided into Same-Store Properties, Acquired Properties and Properties Sold in 2018 and 2019 (excluding properties classified as discontinued operations):

Total

Same-Store

Acquired

Properties

Company

Properties

Sold in 2018 and 2019

Dollar

Percent

Dollar

Percent

Dollar

Percent

Dollar

Percent

(dollars in thousands)

Change

Revenue from rental

operations and other: