UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2020

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

For the transition period from to

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

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

Mack-Cali Realty Corporation

Mack-Cali Realty, L.P.

(Exact name of registrant as specified in its charter)


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


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

(732) 590-1010

(Registrant’s telephone number, including area code)


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

Not Applicable

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

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


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

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


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

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

Mack-Cali Realty Corporation:


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

Mack-Cali Realty, L.P.:


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

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

Mack-Cali Realty Corporation 

Mack-Cali Realty, L.P. 

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


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

As of May 6, 2020, there were 90,596,547 shares of Mack-Cali Realty Corporation’s Common Stock, par value $0.01 per share, outstanding.

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

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EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended March 31, 2020 of Mack-Cali Realty Corporation and Mack-Cali Realty, L.P. Unless stated otherwise or the context otherwise requires, references to the “Operating Partnership” mean Mack-Cali Realty, L.P., a Delaware limited partnership, and references to the “General Partner” mean Mack-Cali Realty Corporation, a Maryland corporation and real estate investment trust (“REIT”), and its subsidiaries, including the Operating Partnership. References to the “Company,” “we,” “us” and “our” mean collectively the General Partner, the Operating Partnership and those entities/subsidiaries consolidated by the General Partner.

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

As of March 31, 2020, the General Partner owned an approximate 90.5 percent common unit interest in the Operating Partnership. The remaining approximate 9.5 percent common unit interest is owned by limited partners. The limited partners of the Operating Partnership are (1) persons who contributed their interests in properties to the Operating Partnership in exchange for common units (each, a “Common Unit”) or preferred units of limited partnership interest in the Operating Partnership or (2) recipients of long term incentive plan units of the Operating Partnership pursuant to the General Partner’s executive compensation plans.

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

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

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

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

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

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

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

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

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

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

Note 2. Significant Accounting Policies, where applicable;

Note 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; and

Note 18. Segment Reporting, where applicable.

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

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

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MACK-CALI REALTY CORPORATION

MACK-CALI REALTY, L.P.

FORM 10-Q

INDEX


			Page
Part I	Financial Information
	Item 1.	Financial Statements (unaudited):
		Mack-Cali Realty Corporation
		Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	6
		Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019	7
		Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2020 and 2019	8
		Consolidated Statements of Changes in Equity for the three months ended March 31, 2020 and 2019	9
		Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	10
		Mack-Cali Realty, L.P.
		Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	11
		Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019	12
		Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2020 and 2019	13
		Consolidated Statements of Changes in Equity for the three months ended March 31, 2020 and 2019	14
		Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	15
		Mack-Cali Realty Corporation and Mack-Cali Realty, L.P.
		Notes to Consolidated Financial Statements	16
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	58
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	81
	Item 4.	Controls and Procedures	81
Part II	Other Information
		Mack-Cali Realty Corporation and Mack-Cali Realty, L.P.
	Item 1.	Legal Proceedings	83
	Item 1A.	Risk Factors	83
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	84
	Item 3.	Defaults Upon Senior Securities	84
	Item 4.	Mine Safety Disclosures	84
	Item 5.	Other Information	84
	Item 6.	Exhibits	84
Exhibit Index			85
Signatures			96

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MACK-CALI REALTY CORPORATION

MACK-CALI REALTY, L.P.

Part I – Financial Information

Item 1. Financial Statements

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

The aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in Mack-Cali Realty Corporation’s and Mack-Cali Realty, L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The results of operations for the three-month period ended March 31, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.

‎

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MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

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



		March 31,		December 31,
ASSETS		2020		2019
Rental property
Land and leasehold interests	$	648,866	$	653,231
Buildings and improvements		3,474,560		3,361,435
Tenant improvements		168,089		163,299
Furniture, fixtures and equipment		81,966		78,716
		4,373,481		4,256,681
Less – accumulated depreciation and amortization		(582,829)		(558,617)
		3,790,652		3,698,064
Real estate held for sale, net		898,169		966,497
Net investment in rental property		4,688,821		4,664,561
Cash and cash equivalents		25,264		25,589
Restricted cash		15,863		15,577
Investments in unconsolidated joint ventures		202,574		209,091
Unbilled rents receivable, net		96,155		95,686
Deferred charges, goodwill and other assets, net		250,600		275,102
Accounts receivable		6,255		7,192

Total assets	$	5,285,532	$	5,292,798

LIABILITIES AND EQUITY
Senior unsecured notes, net	$	571,776	$	571,484
Unsecured revolving credit facility and term loans		277,000		329,000
Mortgages, loans payable and other obligations, net		2,028,345		1,908,034
Dividends and distributions payable		22,577		22,265
Accounts payable, accrued expenses and other liabilities		195,937		209,510
Rents received in advance and security deposits		35,598		39,463
Accrued interest payable		15,657		10,185
Total liabilities		3,146,890		3,089,941

Commitments and contingencies

Redeemable noncontrolling interests		506,482		503,382

Equity:
Mack-Cali Realty Corporation stockholders’ equity:
Common stock, $0.01 par value, 190,000,000 shares authorized,
90,596,079 and 90,595,176 shares outstanding		906		906
Additional paid-in capital		2,533,909		2,535,440
Dividends in excess of net earnings		(1,100,672)		(1,042,629)
Accumulated other comprehensive income (loss)		-		(18)
Total Mack-Cali Realty Corporation stockholders’ equity		1,434,143		1,493,699

Noncontrolling interests in subsidiaries:
Operating Partnership		150,681		158,480
Consolidated joint ventures		47,336		47,296
Total noncontrolling interests in subsidiaries		198,017		205,776

Total equity		1,632,160		1,699,475

Total liabilities and equity	$	5,285,532	$	5,292,798

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

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


		Three Months Ended
		March 31,
REVENUES		2020		2019
Revenue from leases	$	70,450	$	79,391
Real estate services		2,993		3,842
Parking income		5,265		4,866
Hotel income		1,625		283
Other income		1,724		1,884
Total revenues		82,057		90,266

EXPENSES
Real estate taxes		10,937		11,644
Utilities		3,853		6,112
Operating services		16,064		16,799
Real estate services expenses		3,721		4,266
General and administrative		15,818		13,319
Depreciation and amortization		33,796		31,534
Land and other impairments		5,263		-
Total expenses		89,452		83,674

OTHER (EXPENSE) INCOME
Interest expense		(20,918)		(23,481)
Interest and other investment income (loss)		32		823
Equity in earnings (loss) of unconsolidated joint ventures		(708)		(681)
Gain on change of control of interests		-		13,790
Realized gains (losses) and unrealized losses on disposition of
rental property, net		(7,915)		268,109
Gain on disposition of developable land		4,813		-
Gain on sale of investment in unconsolidated joint venture		-		903
Gain from extinguishment of debt, net		-		1,311
Total other income (expense)		(24,696)		260,774
Income (loss) from continuing operations		(32,091)		267,366

Discontinued operations:
Income from discontinued operations		21,993		8,228
Realized gains (losses) and unrealized losses on
disposition of rental property and impairments, net		(27,746)		-
Total discontinued operations, net		(5,753)		8,228
Net income (loss)		(37,844)		275,594
Noncontrolling interests in consolidated joint ventures		176		1,248
Noncontrolling interests in Operating Partnership of income from
continuing operations		3,666		(26,843)
Noncontrolling interests in Operating Partnership in discontinued operations		549		(837)
Redeemable noncontrolling interests		(6,471)		(4,667)
Net income (loss) available to common shareholders	$	(39,924)	$	244,495

Basic earnings per common share:
Income (loss) from continuing operations	$	(0.41)	$	2.59
Discontinued operations		(0.06)		0.08
Net income (loss) available to common unitholders	$	(0.47)	$	2.67

Diluted earnings per common share:
Income (loss) from continuing operations	$	(0.41)	$	2.58
Discontinued operations		(0.06)		0.08
Net income (loss) available to common unitholders	$	(0.47)	$	2.66

Basic weighted average shares outstanding		90,616		90,498

Diluted weighted average shares outstanding		100,183		100,943

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

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MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

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



		Three Months Ended
		March 31,
		2020		2019

Net income (loss)	$	(37,844)	$	275,594
Other comprehensive income (loss):
Net unrealized gain (loss) on derivative instruments
for interest rate swaps		(16)		(4,061)
Comprehensive income (loss)	$	(37,860)	$	271,533
Comprehensive (income) loss attributable to noncontrolling
interests in consolidated joint ventures		176		1,248
Comprehensive (income) loss attributable to redeemable
noncontrolling interests		(6,471)		(4,667)
Comprehensive (income) loss attributable to noncontrolling
interests in Operating Partnership		4,249		(27,267)
Comprehensive income (loss) attributable to common shareholders	$	(39,906)	$	240,847

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

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MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

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


									Accumulated
					Additional		Dividends in		Other		Noncontrolling
	Common Stock				Paid-In		Excess of		Comprehensive		Interests
For the Three Months Ended March 31, 2020	Shares		Par Value		Capital		Net Earnings		Income (Loss)		in Subsidiaries		Total Equity
Balance at January 1, 2020	90,595	$	906	$	2,535,440	$	(1,042,629)	$	(18)	$	205,776	$	1,699,475
Net income (loss)	-		-		-		(39,924)		-		2,080		(37,844)
Common stock dividends	-		-		-		(18,119)		-		-		(18,119)
Common unit distributions	-		-		-		-		-		(2,270)		(2,270)
Redeemable noncontrolling interests	-		-		(2,804)		-		-		(6,767)		(9,571)
Change in noncontrolling interests in consolidated joint ventures	-		-		-		-		-		216		216
Redemption of common units	-		-		-		-		-		(2,141)		(2,141)
Shares issued under Dividend Reinvestment and
Stock Purchase Plan	1		-		19		-		-		-		19
Directors' deferred compensation plan	-		-		82		-		-		-		82
Stock compensation	-		-		430		-		-		2,100		2,530
Cancellation of unvested LTIP units	-		-		-		-		-		(201)		(201)
Other comprehensive income (loss)	-		-		-		-		18		(34)		(16)
Rebalancing of ownership percentage
between parent and subsidiaries	-		-		742		-		-		(742)		-
Balance at March 31, 2020	90,596	$	906	$	2,533,909	$	(1,100,672)	$	-	$	198,017	$	1,632,160


									Accumulated
					Additional		Dividends in		Other		Noncontrolling
	Common Stock				Paid-In		Excess of		Comprehensive		Interests
For the Three Months Ended March 31, 2019	Shares		Par Value		Capital		Net Earnings		Income (Loss)		in Subsidiaries		Total Equity
Balance at January 1, 2019	90,320	$	903	$	2,561,503	$	(1,084,518)	$	8,770	$	210,523	$	1,697,181
Net income (loss)	-		-		-		244,495		-		31,099		275,594
Common stock dividends	-		-		-		(18,065)		-		-		(18,065)
Common unit distributions	-		-		-		-		-		(1,696)		(1,696)
Redeemable noncontrolling interests	-		-		(3,152)		-		-		(5,024)		(8,176)
Change in noncontrolling interests in consolidated joint ventures	-		-		(1,958)		-		-		9,418		7,460
Redemption of common units for common stock	5		-		82		-		-		(82)		-
Redemption of common units	-				(1,665)						(4,965)		(6,630)
Shares issued under Dividend Reinvestment and
Stock Purchase Plan	1		-		10		-		-		-		10
Directors' deferred compensation plan	-		-		130		-		-		-		130
Stock compensation	-		-		265		-		-		1,615		1,880
Cancellation of unvested LTIP units	-		-		-		2,819		-		(2,889)		(70)
Other comprehensive income (loss)	-		-		-		(390)		(3,648)		(413)		(4,451)
Rebalancing of ownership percentage
between parent and subsidiaries	-		-		(1,563)		-		-		1,563		-
Balance at March 31, 2019	90,326	$	903	$	2,553,652	$	(855,659)	$	5,122	$	239,149	$	1,943,167

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

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MACK-CALI REALTY CORPORATION AND SUBSIDIARIES

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


		Three Months Ended
		March 31,
CASH FLOWS FROM OPERATING ACTIVITIES		2020		2019
Net income (loss)	$	(37,844)	$	275,594
Net (income) loss from discontinued operations		5,753		(8,228)
Net income (loss) from continuing operations		(32,091)		267,366
Adjustments to reconcile net income (loss) to net cash provided by
Operating activities:
Depreciation and amortization, including related intangible assets		32,904		30,792
Depreciation and amortization on discontinued operations		1,445		16,502
Amortization of directors deferred compensation stock units		82		130
Amortization of stock compensation		2,530		1,880
Amortization of deferred financing costs		1,024		1,189
Amortization of debt discount and mark-to-market		(237)		(237)
Equity in (earnings) loss of unconsolidated joint ventures		708		681
Distributions of cumulative earnings from unconsolidated joint ventures		815		1,553
Gain on change of control of interests		-		(13,790)
Realized (gains) losses and unrealized losses on disposition of rental property, net		7,915		(268,109)
Realized (gains) losses and unrealized losses on disposition of rental property, net on discontinued operations		27,746		-
Gain on disposition of developable land		(4,813)		-
Land and other Impairments		5,263		-
Gain on sale of investments in unconsolidated joint ventures		-		(903)
(Gain)Loss from extinguishment of debt		-		(1,311)
Changes in operating assets and liabilities:
Increase in unbilled rents receivable, net		(1,392)		(1,445)
Decrease (increase) in deferred charges, goodwill and other assets		291		(4,934)
Increase in accounts receivable, net		(1,673)		(436)
Increase (decrease) in accounts payable, accrued expenses and other liabilities		4,384		17,135
Decrease in rents received in advance and security deposits		(5,132)		(7,892)
Increase in accrued interest payable		5,473		5,301
Net cash flows provided by operating activities - continuing operations		16,051		26,971
Net cash flows provided by operating activities - discontinued operations		27,612		19,066

Net cash provided by operating activities	$	43,663	$	46,037

CASH FLOWS FROM INVESTING ACTIVITIES
Rental property acquisitions and related intangibles	$	(16,019)	$	(168,056)
Rental property additions and improvements		(62,992)		(37,733)
Development of rental property and other related costs		(71,989)		(38,528)
Proceeds from the sales of rental property		6,939		330,369
Proceeds from the sale of investments in unconsolidated joint ventures		-		4,039
Repayment of notes receivable		83		125
Investment in unconsolidated joint ventures		(125)		(2,443)
Distributions in excess of cumulative earnings from unconsolidated joint ventures		4,396		1,566
Net cash used in investing activities - continuing operations		(139,707)		89,339
Net cash used in investing activities - discontinued operations		56,609		(60,451)

Net cash (used in) provided by investing activities	$	(83,098)	$	28,888

CASH FLOW FROM FINANCING ACTIVITIES
Borrowings from revolving credit facility	$	69,000	$	92,000
Repayment of revolving credit facility		(121,000)		(204,000)
Repayment of senior unsecured notes		-		(90,000)
Proceeds from mortgages and loans payable		120,658		121,537
Repayment of mortgages, loans payable and other obligations		(140)		(25,183)
Acquisition of noncontrolling interests		-		(5,017)
Issuance of redeemable noncontrolling interests, net		-		45,000
Common unit redemptions		(2,141)		-
Payment of financing costs		(656)		(1,363)
(Contributions) Distributions to noncontrolling interests		216		(99)
Payment of dividends and distributions		(26,543)		(24,732)

Net cash provided by (used in) financing activities	$	39,394	$	(91,857)

Net decrease in cash and cash equivalents	$	(41)	$	(16,932)
Cash, cash equivalents and restricted cash, beginning of period (1)		41,168		49,554

Cash, cash equivalents and restricted cash, end of period (2)	$	41,127	$	32,622

(1)Includes Restricted Cash of $15,577 and $19,921 as of December 31, 2019 and 2018, respectively.

(2)Includes Restricted Cash of $15,863 and $20,561 as of March 31, 2020 and 2019, respectively.

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

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MACK-CALI REALTY, L.P. AND SUBSIDIARIES

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



		March 31,		December 31,
ASSETS		2020		2019
Rental property
Land and leasehold interests	$	648,866	$	653,231
Buildings and improvements		3,474,560		3,361,435
Tenant improvements		168,089		163,299
Furniture, fixtures and equipment		81,966		78,716
		4,373,481		4,256,681
Less – accumulated depreciation and amortization		(582,829)		(558,617)
		3,790,652		3,698,064
Real estate held for sale, net		898,169		966,497
Net investment in rental property		4,688,821		4,664,561
Cash and cash equivalents		25,264		25,589
Restricted cash		15,863		15,577
Investments in unconsolidated joint ventures		202,574		209,091
Unbilled rents receivable, net		96,155		95,686
Deferred charges, goodwill and other assets, net		250,600		275,102
Accounts receivable		6,255		7,192

Total assets	$	5,285,532	$	5,292,798

LIABILITIES AND EQUITY
Senior unsecured notes, net	$	571,776	$	571,484
Unsecured revolving credit facility and term loans		277,000		329,000
Mortgages, loans payable and other obligations, net		2,028,345		1,908,034
Distributions payable		22,577		22,265
Accounts payable, accrued expenses and other liabilities		195,937		209,510
Rents received in advance and security deposits		35,598		39,463
Accrued interest payable		15,657		10,185
Total liabilities		3,146,890		3,089,941

Commitments and contingencies

Redeemable noncontrolling interests		506,482		503,382

Partners’ Capital:
General Partner, 90,596,079 and 90,595,176 common units outstanding		1,367,252		1,427,568
Limited partners, 9,518,638 and 9,612,064 common units/LTIPs outstanding		217,572		224,629
Accumulated other comprehensive income (loss)		-		(18)
Total Mack-Cali Realty, L.P. partners’ capital		1,584,824		1,652,179

Noncontrolling interests in consolidated joint ventures		47,336		47,296

Total equity		1,632,160		1,699,475

Total liabilities and equity	$	5,285,532	$	5,292,798

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

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MACK-CALI REALTY, L.P. AND SUBSIDIARIES

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


		Three Months Ended
		March 31,
REVENUES		2020		2019
Revenue from leases	$	70,450	$	79,391
Real estate services		2,993		3,842
Parking income		5,265		4,866
Hotel income		1,625		283
Other income		1,724		1,884
Total revenues		82,057		90,266

EXPENSES
Real estate taxes		10,937		11,644
Utilities		3,853		6,112
Operating services		16,064		16,799
Real estate services expenses		3,721		4,266
General and administrative		15,818		13,319
Depreciation and amortization		33,796		31,534
Land and other impairments		5,263		-
Total expenses		89,452		83,674

OTHER (EXPENSE) INCOME
Interest expense		(20,918)		(23,481)
Interest and other investment income (loss)		32		823
Equity in earnings (loss) of unconsolidated joint ventures		(708)		(681)
Gain on change of control of interests		-		13,790
Realized gains (losses) and unrealized losses on disposition of
rental property, net		(7,915)		268,109
Gain on disposition of developable land		4,813		-
Gain on sale of investment in unconsolidated joint venture		-		903
Gain from extinguishment of debt, net		-		1,311
Total other income (expense)		(24,696)		260,774
Income (loss) from continuing operations		(32,091)		267,366

Discontinued operations:
Income from discontinued operations		21,993		8,228
Realized gains (losses) and unrealized losses on
disposition of rental property and impairments, net		(27,746)		-
Total discontinued operations, net		(5,753)		8,228
Net income (loss)		(37,844)		275,594
Noncontrolling interests in consolidated joint ventures		176		1,248
Redeemable noncontrolling interests		(6,471)		(4,667)
Net income (loss) available to common unitholders	$	(44,139)	$	272,175

Basic earnings per common unit:
Income (loss) from continuing operations	$	(0.41)	$	2.59
Discontinued operations		(0.06)		0.08
Net income (loss) available to common unitholders	$	(0.47)	$	2.67

Diluted earnings per common unit:
Income (loss) from continuing operations	$	(0.41)	$	2.58
Discontinued operations		(0.06)		0.08
Net income (loss) available to common unitholders	$	(0.47)	$	2.66

Basic weighted average units outstanding		100,183		100,740

Diluted weighted average units outstanding		100,183		100,943

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

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MACK-CALI REALTY, L.P. AND SUBSIDIARIES

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



		Three Months Ended
		March 31,
		2020		2019

Net income (loss)	$	(37,844)	$	275,594
Other comprehensive income (loss):
Net unrealized gain (loss) on derivative instruments
for interest rate swaps		(16)		(4,061)
Comprehensive income (loss)	$	(37,860)	$	271,533
Comprehensive (income) loss attributable to noncontrolling
interests in consolidated joint ventures		176		1,248
Comprehensive (income) loss attributable to redeemable
noncontrolling interests		(6,471)		(4,667)
Comprehensive income (loss) attributable to common unitholders	$	(44,155)	$	268,114

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

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MACK-CALI REALTY, L.P. AND SUBSIDIARIES

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


								Accumulated		Noncontrolling
		Limited Partner		General Partner		Limited Partner		Other		Interest
	General Partner	Common Units/		Common		Common		Comprehensive		in Consolidated
For the Three Months Ended March 31, 2020	Common Units	Vested LTIP Units		Unitholders		Unitholders		Income (Loss)		Joint Ventures		Total Equity
Balance at January 1, 2020	90,595	9,612	$	1,427,568	$	224,629	$	(18)	$	47,296	$	1,699,475
Net income (loss)	-	-		(39,924)		(4,215)		-		6,295		(37,844)
Distributions	-	-		(18,119)		(2,270)		-		-		(20,389)
Redeemable noncontrolling interests	-	-		(2,804)		(296)		-		(6,471)		(9,571)
Change in noncontrolling interests in consolidated joint ventures	-	-		-		-		-		216		216
Vested LTIP units	-	4		-		-		-		-		-
Redemption of limited partner common units	-	(98)		-		(2,141)		-		-		(2,141)
Shares issued under Dividend Reinvestment and
Stock Purchase Plan	1	-		19		-		-		-		19
Directors' deferred compensation plan	-	-		82		-		-		-		82
Other comprehensive income (loss)	-	-		-		(34)		18		-		(16)
Stock compensation	-	-		430		2,100		-		-		2,530
Cancellation of unvested LTIIP units	-	-		-		(201)		-		-		(201)
Balance at March 31, 2020	90,596	9,518	$	1,367,252	$	217,572	$	-	$	47,336	$	1,632,160


								Accumulated		Noncontrolling
		Limited Partner		General Partner		Limited Partner		Other		Interest
	General Partner	Common Units/		Common		Common		Comprehensive		in Consolidated
For the Three Months Ended March 31, 2019	Common Units	Vested LTIP Units		Unitholders		Unitholders		Income (Loss)		Joint Ventures		Total Equity
Balance at January 1, 2019	90,320	10,229	$	1,413,497	$	232,764	$	8,770	$	42,150	$	1,697,181
Net income (loss)	-	-		244,495		27,680		-		3,419		275,594
Distributions	-	-		(18,065)		(1,696)		-		-		(19,761)
Redeemable noncontrolling interests	-	-		(3,152)		(357)		-		(4,667)		(8,176)
Change in noncontrolling interests in consolidated joint ventures	-			(1,958)		-		-		9,418		7,460
Redemption of limited partner common units for
shares of general partner common units	5	4		82		(82)		-		-		-
Vested LTIP units	-	77		-		-		-		-		-
Redemption of limited partners common units	-	(301)		(1,665)		(4,965)		-		-		(6,630)
Shares issued under Dividend Reinvestment and
Stock Purchase Plan	1	-		10		-		-		-		10
Directors' deferred compensation plan	-	-		130		-		-		-		130
Other comprehensive income (loss)	-	-		(390)		(413)		(3,648)		-		(4,451)
Stock compensation	-	-		265		1,615		-		-		1,880
Cancellation of unvested LTIP units	-	-		2,819		(2,889)		-		-		(70)
Balance at March 31, 2019	90,326	10,009	$	1,636,068	$	251,657	$	5,122	$	50,320	$	1,943,167

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

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MACK-CALI REALTY, L.P. AND SUBSIDIARIES

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


		Three Months Ended
		March 31,
CASH FLOWS FROM OPERATING ACTIVITIES		2020		2019
Net income (loss)	$	(37,844)	$	275,594
Net (income) loss from discontinued operations		5,753		(8,228)
Net income (loss) from continuing operations		(32,091)		267,366
Adjustments to reconcile net income (loss) to net cash provided by
Operating activities:
Depreciation and amortization, including related intangible assets		32,904		30,792
Depreciation and amortization on discontinued operations		1,445		16,502
Amortization of directors deferred compensation stock units		82		130
Amortization of stock compensation		2,530		1,880
Amortization of deferred financing costs		1,024		1,189
Amortization of debt discount and mark-to-market		(237)		(237)
Equity in (earnings) loss of unconsolidated joint ventures		708		681
Distributions of cumulative earnings from unconsolidated joint ventures		815		1,553
Gain on change of control of interests		-		(13,790)
Realized (gains) losses and unrealized losses on disposition of rental property, net		7,915		(268,109)
Realized (gains) losses and unrealized losses on disposition of rental property, net on discontinued operations		27,746		-
Gain on disposition of developable land		(4,813)		-
Land and other Impairments		5,263		-
Gain on sale of investments in unconsolidated joint ventures		-		(903)
(Gain)Loss from extinguishment of debt		-		(1,311)
Changes in operating assets and liabilities:
Increase in unbilled rents receivable, net		(1,392)		(1,445)
Decrease (increase) in deferred charges, goodwill and other assets		291		(4,934)
Increase in accounts receivable, net		(1,673)		(436)
Increase (decrease) in accounts payable, accrued expenses and other liabilities		4,384		17,135
Decrease in rents received in advance and security deposits		(5,132)		(7,892)
Increase in accrued interest payable		5,473		5,301
Net cash flows provided by operating activities - continuing operations		16,051		26,971
Net cash flows provided by operating activities - discontinued operations		27,612		19,066

Net cash provided by operating activities	$	43,663	$	46,037

CASH FLOWS FROM INVESTING ACTIVITIES
Rental property acquisitions and related intangibles	$	(16,019)	$	(168,056)
Rental property additions and improvements		(62,992)		(37,733)
Development of rental property and other related costs		(71,989)		(38,528)
Proceeds from the sales of rental property		6,939		330,369
Proceeds from the sale of investments in unconsolidated joint ventures		-		4,039
Repayment of notes receivable		83		125
Investment in unconsolidated joint ventures		(125)		(2,443)
Distributions in excess of cumulative earnings from unconsolidated joint ventures		4,396		1,566
Net cash used in investing activities - continuing operations		(139,707)		89,339
Net cash used in investing activities - discontinued operations		56,609		(60,451)

Net cash (used in) provided by investing activities	$	(83,098)	$	28,888

CASH FLOW FROM FINANCING ACTIVITIES
Borrowings from revolving credit facility	$	69,000	$	92,000
Repayment of revolving credit facility		(121,000)		(204,000)
Repayment of senior unsecured notes		-		(90,000)
Proceeds from mortgages and loans payable		120,658		121,537
Repayment of mortgages, loans payable and other obligations		(140)		(25,183)
Acquisition of noncontrolling interests		-		(5,017)
Issuance of redeemable noncontrolling interests, net		-		45,000
Common unit redemptions		(2,141)		-
Payment of financing costs		(656)		(1,363)
(Contributions) Distributions to noncontrolling interests		216		(99)
Payment of distributions		(26,543)		(24,732)

Net cash provided by (used in) financing activities	$	39,394	$	(91,857)

Net decrease in cash and cash equivalents	$	(41)	$	(16,932)
Cash, cash equivalents and restricted cash, beginning of period (1)		41,168		49,554

Cash, cash equivalents and restricted cash, end of period (2)	$	41,127	$	32,622

(1)Includes Restricted Cash of $15,577 and $19,921 as of December 31, 2019 and 2018, respectively.

(2)Includes Restricted Cash of $15,863 and $20,561 as of March 31, 2020 and 2019, respectively.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

Mack-Cali Realty Corporation, a Maryland corporation, together with its subsidiaries (collectively, the “General Partner”) is a fully-integrated self-administered, self-managed real estate investment trust (“REIT”). The General Partner controls Mack-Cali Realty, L.P., a Delaware limited partnership, together with its subsidiaries (collectively, the “Operating Partnership”), as its sole general partner and owned a 90.5 and 90.4 percent common unit interest in the Operating Partnership as of March 31, 2020 and December 31, 2019, respectively. The General Partner’s business is the ownership of interests in and operation of the Operating Partnership and all of the General Partner’s expenses are incurred for the benefit of the Operating Partnership. The General Partner is reimbursed by the Operating Partnership for all expenses it incurs relating to the ownership and operation of the Operating Partnership.

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

As of March 31, 2020, the Company owned or had interests in 71 real estate properties (the “Properties”). The Properties are comprised of 41 office buildings totaling approximately 10.5 million square feet and leased to approximately 325 tenants (which include two buildings, aggregating approximately 0.2 million square feet owned by unconsolidated joint ventures in which the Company has investment interests), 22 multi-family properties, totaling 6,850 apartment units (which include seven properties aggregating 2,611 apartment units owned by unconsolidated joint ventures in which the Company has investment interests), four parking/retail properties totaling approximately 108,000 square feet (which include a building aggregating 51,000 square feet owned by unconsolidated joint ventures in which the Company has investment interests), three hotels containing 723 rooms (one of which is owned by an unconsolidated joint venture in which the Company has an investment interest) and a parcel of land leased to a third party. The Properties are located in four states in the Northeast, plus the District of Columbia.

On December 19, 2019, the Company announced that its 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”). 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. See Note 7: Discontinued Operations.

BASIS OF PRESENTATION

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

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

On January 1, 2016, the Company adopted accounting guidance under ASC 810, Consolidation, modifying the analysis it must perform to determine whether it should consolidate certain types of legal entities. The guidance does not amend the existing disclosure requirements for variable interest entities or voting interest model entities. The guidance, however, modified the requirements to qualify under the voting interest model. Under the revised guidance, the Operating Partnership will be a variable interest entity of the parent

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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.

As of March 31, 2020 and December 31, 2019, the Company’s investments in consolidated real estate joint ventures, which are variable interest entities in which the Company is deemed to be the primary beneficiary, other than Roseland Residential, L.P. (See Note 15: Redeemable Noncontrolling Interests – Rockpoint Transaction), have total real estate assets of $503.4 million and $503.1 million, respectively, mortgages of $283.7 million and $283.7 million, respectively, and other liabilities of $19.6 million and $18.9 million, respectively.

The financial statements have been prepared in conformity with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on management’s historical experience that are believed to be reasonable at the time. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates. Certain reclassifications have been made to prior period amounts in order to conform with current period presentation, primarily related to classification of certain properties as discontinued operations.

2. SIGNIFICANT ACCOUNTING POLICIES

Rental Property

Rental properties are stated at cost less accumulated depreciation and amortization. Costs directly related to the acquisition, development and construction of rental properties are capitalized. The Company adopted FASB guidance Accounting Standards Update (“ASU”) 2017-01 on January 1, 2017, which revises the definition of a business and is expected to result in more transactions to be accounted for as asset acquisitions and significantly limit transactions that would be accounted for as business combinations. Where an acquisition has been determined to be an asset acquisition, acquisition-related costs are capitalized. Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development. Capitalized development and construction salaries and related costs approximated $0.5 million and $0.6 million for the three months ended March 31, 2020 and 2019, respectively. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.

Included in net investment in rental property as of March 31, 2020 and December 31, 2019 is real estate and building and tenant improvements not in service, as follows (dollars in thousands):



		March 31,		December 31,
		2020		2019
Land held for development (including pre-development costs, if any) (a)(c)	$	385,682	$	388,702
Development and construction in progress, including land (b)(d)		529,651		464,110
Total	$	915,333	$	852,812

(a)Includes predevelopment and infrastructure costs included in buildings and improvements of $166.6 million and $156.5 million as of March 31, 2020 and December 31, 2019, respectively.

(b)Includes land of $85.5 million and $96.6 million as of March 31, 2020 and December 31, 2019, respectively.

(c)Includes $46.3 million of land and $39.5 million of building and improvements pertaining to assets held for sale at March 31, 2020.

(d)Includes $0.5 million of land and $5.6 million of building and improvements pertaining to assets held for sale.

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. For asset acquisitions, 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 combination 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 holdings, 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 management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be

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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, 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.

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.

Cash and Cash Equivalents

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

Deferred Financing Costs

Costs incurred in obtaining financing are capitalized and amortized over the term of the related indebtedness. Deferred financing costs are presented in the balance sheet as a direct deduction from the carrying value of the debt liability to which they relate, except deferred financing costs related to the revolving credit facility, which are presented in deferred charges, goodwill and other assets. In all cases,

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amortization of such costs is included in interest expense and was $1,024,000 and $1,189,000 for the three months ended March 31, 2020 and 2019, respectively. If a financing obligation is extinguished early, any unamortized deferred financing costs are written off and included in gains (losses) from extinguishment of debt.

Deferred Leasing Costs/Leasing Personnel Costs

Costs incurred in connection with successfully executed commercial and residential leases were capitalized and amortized on a straight-line basis over the terms of the related leases and included in depreciation and amortization. Unamortized deferred leasing costs were charged to amortization expense upon early termination of the lease. Certain employees of the Company are compensated for providing leasing services to the Properties. Upon the adoption of ASC 842 on January 1, 2019, the Company no longer capitalizes such costs, and includes such leasing personnel costs in General and administrative expense in the Company’s Consolidated Statements of Operations, which amounted to $1,038,000 and $742,000 for the three months ended and March 31, 2020 and 2019, respectively.

Goodwill

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

Derivative Instruments

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

Revenue Recognition

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

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

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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 14: Tenant Leases.

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

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

Hotel income includes all revenue earned from hotel properties.

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

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.

Income and Other Taxes

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

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

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

The deferred tax asset balance at March 31, 2020 amounted to $10.1 million which has been fully reserved through a valuation allowance. New tax reform legislation enacted in late 2017 reduced the corporate tax rate to 21 percent, effective January 1, 2018. Consequently, the Company’s deferred tax assets were re-measured to reflect the reduction in the future U.S. corporate income tax rate as of the enactment date. As a result, the Company recorded a decrease related to its deferred tax assets of $5.3 million and a decrease to the associated valuation allowance of $5.3 million at December 31, 2017. If the General Partner fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate tax rates. The Company is subject to certain state and local taxes.

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

In the normal course of business, the Company or one of its subsidiaries is subject to examination by federal, state and local jurisdictions in which it operates, where applicable. As of March 31, 2020, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are generally from the year 2015 forward.

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Earnings Per Share or Unit

The Company presents both basic and diluted earnings per share or unit (“EPS or EPU”). Basic EPS or EPU excludes dilution and is computed by dividing net income available to common shareholders or unitholders by the weighted average number of shares or units outstanding for the period. Diluted EPS or EPU reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS or EPU from continuing operations amount. Shares or units whose issuance is contingent upon the satisfaction of certain conditions shall be considered outstanding and included in the computation of diluted EPS or EPU as follows (i) if all necessary conditions have been satisfied by the end of the period (the events have occurred), those shares or units shall be included as of the beginning of the period in which the conditions were satisfied (or as of the date of the grant, if later) or (ii) if all necessary conditions have not been satisfied by the end of the period, the number of contingently issuable shares or units included in diluted EPS or EPU shall be based on the number of shares or units, if any, that would be issuable if the end of the reporting period were the end of the contingency period (for example, the number of shares or units that would be issuable based on current period earnings or period-end market price) and if the result would be dilutive. Those contingently issuable shares or units shall be included in the denominator of diluted EPS or EPU as of the beginning of the period (or as of the date of the grant, if later).

Dividends and Distributions Payable

The dividends and distributions payable at March 31, 2020 represents dividends payable to common shareholders (90,596,168 shares) and distributions payable to noncontrolling interests unitholders of the Operating Partnership (9,394,754 common units and 3,218,208 vested and unvested LTIP units), for all such holders of record as of April 2, 2020 with respect to the first quarter 2020. The first quarter 2020 common stock dividends and unit distributions of $0.20 per common share (total of $18.1 million), common unit (total of $1.9 million) and LTIP unit (total of $0.4 million) were approved by the General Partner’s Board of Directors on March 23, 2020 and paid on April 14, 2020.

The dividends and distributions payable at December 31, 2019 represents dividends payable to common shareholders (90,595,197 shares) and distributions payable to noncontrolling interests unitholders of the Operating Partnership (9,488,794 common units and 1,949,601 vested and unvested LTIP units) for all such holders of record as of January 3, 2020 with respect to the fourth quarter 2019. The fourth quarter 2019 common stock dividends and unit distributions of $0.20 per common share (total of $18.1 million), common unit (total of $1.9 million) and LTIP unit (total of $0.4 million) were approved by the General Partner’s Board of Directors on December 17, 2019 and paid on January 10, 2020.

Costs Incurred For Stock Issuances

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

Stock Compensation

The Company accounts for stock compensation in accordance with the provisions of ASC 718, Compensation-Stock Compensation. These provisions require that the estimated fair value of restricted stock (“Restricted Stock Awards”), performance share units, long-term incentive plan awards and stock options at the grant date be amortized ratably into expense over the appropriate vesting period. The Company recorded stock compensation expense of $2,530,000 and $1,880,000 for the three months ended March 31, 2020 and 2019, respectively.

Other Comprehensive Income (Loss)

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

Redeemable Noncontrolling Interests

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

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Fair Value Hierarchy

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

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

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

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

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

Impact of Recently-Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”). The guidance introduces a new model for estimating credit losses for certain types of financial instruments, including trade and lease receivables, loans receivable, held-to-maturity debt securities, and net investments in direct financing leases, amongst other financial instruments. ASU 2016-13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements.

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

3. RECENT TRANSACTIONS

Properties Commencing Initial Operations

The following property commenced initial operations during the three months ended March 31, 2020 (dollars in thousands):


						Total
In Service			Property	# of		Development
Date	Property	Location	Type	Apartment Units		Costs Incurred
03/01/20	Emery at Overlook Ridge (a)	Malden, MA	Multi-Family	101	$	29,755
Totals				101	$	29,755

(a)The Emery at Overlook Ridge property consists of a total of 326 multi-family units. The remaining 225 multi-family units are currently in construction and are expected to be placed in service in mid- 2020.

Consolidation

On March 12, 2020, the Company, acquired its equity partner's 80 percent interest in Port Imperial North Retail L.L.C., a ground floor retail space totaling 30,745 square feet located at Port Imperial, West New York, New Jersey for $13.3 million in cash (funded through borrowing under the Company’s unsecured credit facility.) The results of the transaction increased the Company’s interest to 100 percent. Upon the acquisition, the Company consolidated the MC Roseland North Retail L.L.C. joint venture, a voting interest entity. As an acquisition of the remaining interests in the venture which owns the Port Imperial North Retail L.L.C., the Company accounted for the transaction as an asset acquisition under a cost accumulation model, no gain on change of control of interest was recognized in consolidation, resulting in total consolidated net assets of $15.0 million, which are allocated as follows:

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		Port Imperial North Retail L.L.C.
Land and leasehold interests	$	4,305
Buildings and improvements and other assets, net		8,912
In-place lease values (a)		1,503
Above/Below market lease value, net (a)		313

Net assets recorded upon consolidation	$	15,033

(a) In-place and below market lease values are being amortized over a weighted-average term of 7.5 years.

Real Estate Held for Sale/Discontinued Operations/Dispositions

In late 2019 through March 31, 2020, the Company completed the sale of three of these suburban office properties, totaling 697,000 square feet, for net sales proceeds of $87.2 million. As of March 31, 2020, the Company has identified as held for sale the remaining 34 office properties (comprised of 12 identified disposal groups) in the Suburban Office Portfolio, totaling 5.9 million square feet (of which the Company currently has 17 properties totaling 2.5 million square feet under contract for sale for aggregate gross proceeds of $335.5 million). See Note 7: Discontinued Operations.

The Company plans to complete the sale of its remaining Suburban Office Portfolio properties in 2020 and early 2021, and to use the available sales proceeds to pay down its corporate-level, unsecured indebtedness. However, the Company cannot predict whether or to what extent the timing of these sales and the expected amount and use of proceeds may be impacted by the ongoing coronavirus (“COVID-19”). 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.

Additionally, the Company also identified a retail pad leased to others and several developable land parcels as held for sale as of March 31, 2020. The properties are located in Parsippany, Madison, Short Hills, Edison, Red Bank and Florham Park. As a result of recent sales contract amendments and after considering the current market conditions as a result of the challenging economic climate with the current worldwide COVID-19 pandemic, the Company determined that the carrying value of 20 of the properties (comprised of four disposal groups) and several land parcels held for sale was not expected to be recovered from estimated net sales proceeds, and accordingly, during the three months ended March 31, 2020, recognized an unrealized loss allowance of $53.0 million ($45.1 million of which are from discontinued operations), for the properties and land impairments of $5.3 million.

The following table summarizes the real estate held for sale, net, and other assets and liabilities (dollars in thousands):


		Suburban		Other
		Office		Assets
		Portfolio (a)		Held for Sale		Total
Land	$	145,151	$	85,472	$	230,623
Building & Other		1,217,867		47,571		1,265,438
Less: Accumulated depreciation		(375,769)		(7,991)		(383,760)
Less: Cumulative unrealized losses on property held for sale		(169,992)		(44,140)		(214,132)
Real estate held for sale, net	$	817,257	$	80,912	$	898,169

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		Suburban		Other
		Office		Assets
Other assets and liabilities		Portfolio (a)		Held for Sale		Total
Unbilled rents receivable, net (b)	$	29,402	$	2,043	$	31,445
Deferred charges, net (b)		33,176		1,316		34,492
Total intangibles, net (b)		32,724		-		32,724
Total deferred charges & other assets, net		68,691		1,326		70,017
Mortgages & loans payable, net (b)		123,679		-		123,679
Total below market liability (b)		8,235		-		8,235
Accounts payable, accrued exp & other liability		22,200		174		22,374
Unearned rents/deferred rental income (b)		4,849		203		5,052

(a) Classified as discontinued operations at March 31, 2020 for all periods presented. See Note 7: Discontinued Operations.
(b) Expected to be removed with the completion of the sales.

The Company disposed of the following office property during the three months ended March 31, 2020 (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
03/17/20	One Bridge Plaza	Fort Lee, New Jersey	1	200,000	Office	$	35,065	$	17,743	$	-	$	17,322

Sub-total			1	200,000			35,065		17,743		-		17,322

Unrealized losses on real estate held for sale											(7,915)		(45,068)
Totals			1	200,000		$	35,065	$	17,743	$	(7,915)	$	(27,746)

The Company disposed of the following developable land holdings during the three months ended March 31, 2020 (dollars in thousands):


								Realized
								Gains
				Net		Net		(losses)/
Disposition				Sales		Carrying		Unrealized
Date	Property Address	Location		Proceeds		Value		Losses, net
01/03/20	230 & 250 Half Mile Road	Middletown, New Jersey	$	7,018	$	2,969	$	4,049
03/27/20	Capital Office Park land	Greenbelt, Maryland		8,974		8,210		764

Totals			$	15,992	$	11,179	$	4,813

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

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execution of the Original Investment Agreement resulted in RRT being issued approximately $46 million of Preferred Units and Common Units in RRLP prior to June 26, 2019.

On June 26, 2019, the Company, RRT, RRLP, certain other affiliates of the Company and Rockpoint entered into an additional preferred equity investment agreement (the “Add On Investment Agreement”). The closing under the Add On Investment Agreement occurred on June 28, 2019. Pursuant to the Add On Investment Agreement, Rockpoint invested an additional $100 million in Preferred Units and 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 for additional information about the Add On Investment Agreement and the related transactions with Rockpoint.

4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

As of March 31, 2020, the Company had an aggregate investment of approximately $202.6 million in its equity method joint ventures. The Company formed these ventures with unaffiliated third parties, or acquired interests in them, to develop or manage primarily office and multi-family rental properties, or to acquire land in anticipation of possible development of office and multi-family rental properties. As of March 31, 2020, the unconsolidated joint ventures owned: two office properties aggregating approximately 0.2 million square feet, seven multi-family properties totaling 2,611 apartments units, a retail property aggregating approximately 51,000 square feet, a 351-room hotel, a development project for up to approximately 360 apartments units; and interests and/or rights to developable land parcels able to accommodate up to 3,220 apartments units. The Company’s unconsolidated interests range from 20 percent to 85 percent subject to specified priority allocations in certain of the joint ventures.

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

The Company has agreed to guarantee repayment of a portion of the debt of its unconsolidated joint ventures. As of March 31, 2020, such debt had a total borrowing capacity of up to $322.2 million of which the Company agreed to guarantee up to $35 million. As of March 31, 2020, the outstanding balance of such debt totaled $252 million of which $28 million was guaranteed by the Company. The Company performed management, leasing, development and other services for the properties owned by the unconsolidated joint ventures and recognized $0.6 million and $0.3 million for such services in the three months ended March 31, 2020 and 2019, respectively. The Company had $0.4 million and $0.6 million in accounts receivable due from its unconsolidated joint ventures as of March 31, 2020 and December 31, 2019, respectively.

Included in the Company’s investments in unconsolidated joint ventures as of March 31, 2020 are three unconsolidated development joint ventures, which are VIEs for which the Company is not the primary beneficiary. These joint ventures are primarily established to develop real estate property for long-term investment and were deemed VIEs primarily based on the fact that the equity investment at risk was not sufficient to permit the entities to finance their activities without additional financial support. The initial equity contributed to these entities was not sufficient to fully finance the real estate construction as development costs are funded by the partners throughout the construction period. The Company determined that it was not the primary beneficiary of these VIEs based on the fact that the Company has shared control of these entities along with the entity’s partners and therefore does not have controlling financial interests in these VIEs. The Company’s aggregate investment in these VIEs was approximately $113.8 million as of March 31, 2020. The Company’s maximum exposure to loss as a result of its involvement with these VIEs is estimated to be approximately $148.8 million, which includes the Company’s current investment and estimated future funding commitments/guarantees of approximately $35.0 million. The Company has not provided financial support to these VIEs that it was not previously contractually required to provide. In general, future costs of development not financed through third parties will be funded with capital contributions from the Company and its outside partners in accordance with their respective ownership percentages.

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The following is a summary of the Company's unconsolidated joint ventures as of March 31, 2020 and December 31, 2019 (dollars in thousands):


											Property Debt
	Number of		Company's			Carrying Value					As of March 31, 2020
	Apartment Units		Effective			March 31,		December 31,				Maturity	Interest
Entity / Property Name	or Rentable SF		Ownership % (a)			2020		2019			Balance	Date	Rate
Multi-family
Metropolitan at 40 Park (b) (c)	189	units	25.00	%	$	4,368	$	7,257		$	59,210	(d)	(d)
RiverTrace at Port Imperial	316	units	22.50	%		7,190		7,463			82,000	11/10/26	3.21	%
Crystal House (e)	825	units	25.00	%		28,662		28,823			158,635	06/01/20	3.50	%
PI North - Riverwalk C (f)	360	units	40.00	%		35,653		35,527			41,773	12/06/21	L+2.75	%
Riverpark at Harrison	141	units	45.00	%		956		1,015			29,117	08/01/25	3.70	%
Station House	378	units	50.00	%		35,209		35,676			96,438	07/01/33	4.82	%
Urby at Harborside (g)	762	units	85.00	%		78,532		79,790			192,000	08/01/29	5.197	%
PI North - Land (b) (h)	836	potential units	20.00	%		1,678		1,678			-	-	-
Liberty Landing	850	potential units	50.00	%		337		337			-	-	-
Hillsborough 206	160,000	sf	50.00	%		1,962		1,962			-	-	-
Office
12 Vreeland Road	139,750	sf	50.00	%		3,957		3,846	(i)		5,850	07/01/23	2.87	%
Offices at Crystal Lake	106,345	sf	31.25	%		3,541		3,521			3,128	11/01/23	4.76	%
Other
Riverwalk Retail (k)	30,745	sf	20.00	%		-		1,467			-	-	-
Hyatt Regency Hotel Jersey City	351	rooms	50.00	%		-		-			100,000	10/01/26	3.668	%
Other (j)						529		729			-	-	-
Totals:					$	202,574	$	209,091		$	768,151


(a)	Company's effective ownership % represents the Company's entitlement to residual distributions after payments of priority returns, where applicable.
(b)	The Company's ownership interests in this venture are subordinate to its partner's preferred capital balance and the Company is not expected to meaningfully participate in the venture's cash flows in the near term.
(c)	Through the joint venture, the Company also owns a 25 percent interest in a 50,973 square feet retail building ("Shops at 40 Park") and a 50 percent interest in a 59-unit, five story multi-family rental property ("Lofts at 40 Park").
(d)	Property debt balance consists of: (i) an amortizable loan, collateralized by the Metropolitan at 40 Park, with a balance of $34,943, bears interest at 3.25 percent, matures in September 2020; (ii) an amortizable loan, collateralized by the Shops at 40 Park, with a balance of $6,067, bore interest at LIBOR +2.25%, matured in October 2019. In October 2019, the loan was refinanced with a maturity date of October 2021, which bears interest at LIBOR +2.25%; (iii) a loan with a maximum borrowing amount of $18,200, which bears interest at LIBOR plus 150 basis points and matures in January 2023.
(e)	Included in this is the Company's unconsolidated 50 percent interest in a vacant land to accommodate the development of approximately 738 additional approved units. The joint venture is currently in discussions regarding a refinancing of the property debt.
(f)	The venture has a construction loan with a maximum borrowing amount of $112,000.
(g)	The Company owns an 85 percent interest with shared control over major decisions such as, approval of budgets, property financings and leasing guidelines.
(h)	The Company owns a 20 percent residual interest in undeveloped land parcels: parcels 6, I, and J that can accommodate the development of 836 apartment units.
(i)	At December 31, 2019, the Company evaluated the recoverability of the carrying value of certain investments in unconsolidated joint venture, being considered for sale in the short or medium term. The Company determined that due to tenant turnover, lease-up assumptions, along with the Company's plans to exit its investment, it was necessary to reduce the carrying value of the investment to its estimated fair value. Accordingly, the Company recorded an impairment charge of $3.7 million at December 31, 2019.
(j)	The Company owns other interests in various unconsolidated joint ventures, including interests in assets previously owned and interest in ventures whose businesses are related to its core operations. These ventures are not expected to significantly impact the Company's operations in the near term.
(k)	On March 12, 2020, the Company acquired its equity partner's 80 percent interest and increased ownership to 100 percent. See Note 3: Recent Transactions - Consolidation.

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The following is a summary of the Company’s equity in earnings (loss) of unconsolidated joint ventures for the three months ended March 31, 2020 and 2019 (dollars in thousands):



		Three Months Ended
		March 31,
Entity / Property Name		2020		2019
Multi-family
Metropolitan at 40 Park	$	(140)	$	(77)
RiverTrace at Port Imperial		98		38
Crystal House		(159)		(226)
PI North - Riverwalk C / Land		(119)		(70)
Marbella II (b)		-		(15)
Riverpark at Harrison		(58)		(60)
Station House		(467)		(556)
Urby at Harborside		17		(458)
Liberty Landing		-		-
Hillsborough 206		-		-
Office
Red Bank (c)		-		8
12 Vreeland Road		111		45
Offices at Crystal Lake		20		45
Other
Riverwalk Retail (d)		(11)		(21)
Hyatt Regency Hotel Jersey City		-		638
Other		-		28

Company's equity in earnings (loss) of unconsolidated joint ventures (a)	$	(708)	$	(681)


(a)	Amounts are net of amortization of basis differences of $152 and $172 for the three months ended March 31, 2020 and 2019, respectively.
(b)	On January 31, 2019, the Company acquired one of its equity partner's 50 percent interest and as a result, increased its ownership from 24.27 percent subordinated interest to 74.27 percent controlling interest, and ceased applying the equity method of accounting at such time.
(c)	On February 28, 2019, the Company sold its 50 percent interest to its partner and realized a gain of $0.9 million.
(d)	On March 12, 2020, the Company acquired its equity partner's 80 percent interest and increased ownership to 100 percent. See Note 3: Recent Transactions - Consolidation.

5. DEFERRED CHARGES, GOODWILL AND OTHER ASSETS, NET


		March 31,		December 31,
(dollars in thousands)		2020		2019
Deferred leasing costs	$	144,168	$	142,424
Deferred financing costs - unsecured revolving credit facility (a)		5,559		5,559
		149,727		147,983
Accumulated amortization		(61,216)		(59,522)
Deferred charges, net		88,511		88,461
Notes receivable (b)		1,542		1,625
In-place lease values, related intangibles and other assets, net		80,747		86,092
Goodwill (c)		2,945		2,945
Right of use assets (d)		22,604		22,604
Prepaid expenses and other assets, net (e)		54,251		73,375

Total deferred charges, goodwill and other assets, net (f)	$	250,600	$	275,102

(a)Deferred financing costs related to all other debt liabilities (other than for the unsecured revolving credit facility) are netted against those debt liabilities for all periods presented. See Note 2: Significant Accounting Policies – Deferred Financing Costs.

(b)Includes as of March 31, 2020 and December 31, 2019, respectively, an interest-free note receivable with a net present value of $1.5 million and $1.6 million which matures in April 2023. The Company believes this balance is fully collectible.

(c)All goodwill is attributable to the Company’s Multi-family Real Estate and Services segment.

(d)Balance recorded starting in 2019, pursuant to the Company’s adoption of ASU 2016-02 (Topic 842). This amount has a corresponding liability of $23.8 million, which is included in Accounts payable, accrued expense and other liabilities. See Note 13: Commitments and Contingencies – Ground Lease agreements for further details.

(e)Includes as of March 31, 2020 and December 31, 2019, $9.1 million and $28.1 million, respectively, of funds available with the Company’s qualified intermediary.

(f)Includes as of March 31, 2020 and December 31, 2019 $68.7 million and $68.6 million, respectively, for properties classified as discontinued operations

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DERIVATIVE FINANCIAL INSTRUMENTS

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. During the year ended December 31, 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. As of March 31, 2020, the Company did not have any outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk

During 2019, in connection with the paydown of the Company’s outstanding term loans, the Company terminated interest rate swaps with the corresponding notional amount. These paydowns resulted in the Company accelerating the reclassification of gains from other comprehensive income to earnings as a result of the hedged forecasted transactions no longer being probable to occur, amounting to $1.3 million for the three months ended March 31, 2019. No additional amounts were recorded for the three months ended March 31, 2020.

The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates no additional amount to be reclassified to interest expense.

The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statement of Operations for the three months ending March 31, 2020 and 2019 (dollars in thousands):


Derivatives in Cash Flow Hedging Relationships		Amount of Gain or (Loss) Recognized in OCI on Derivative			Location of Gain or (Loss) Reclassified from Accumulated OCI into Income		Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income			Location of Gain or (Loss) Recognized in Income on Derivative		Amount of Gain or (Loss) Recognized in Income on Derivative and Reclassification for Forecasted Transactions No Longer Probable of Occurring)					Total Amount of Interest Expense presented in the consolidated statements
Three months ended March 31,		2020		2019			2020		2019			2020		2019			2020		2019

Interest rate swaps	$	-	$	(1,601)	Interest expense	$	16	$	1,571	Interest and other investment income (loss)	$	-	$	1,279	$	$	(20,918)	$	(23,481)

Credit-risk-related Contingent Features

The Company had agreements with each of its derivative counterparties that contained a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness was accelerated by the lender due to the Company's default on the indebtedness. As of March 31, 2020, the Company did not have derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements. As of March 31, 2020, the Company has not posted any collateral related to these agreements.

6. RESTRICTED CASH

Restricted cash generally includes tenant and resident security deposits for certain of the Company’s properties, and escrow and reserve funds for debt service, real estate taxes, property insurance, capital improvements, tenant improvements, and leasing costs established pursuant to certain mortgage financing arrangements, and is comprised of the following (dollars in thousands):


		March 31,		December 31,
		2020		2019
Security deposits	$	5,857	$	5,677
Escrow and other reserve funds		10,006		9,900

Total restricted cash	$	15,863	$	15,577

7. DISCONTINUED OPERATIONS

On December 19, 2019, the Company announced that its Board had determined to sell the Company’s entire suburban office portfolio totaling approximately 6.6 million square feet. 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.

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In late 2019 through March 31, 2020, the Company completed the sale of three of these suburban office properties, totaling 697,000 square feet, for net sales proceeds of $87.2 million. As of March 31, 2020, the Company has identified as held for sale the remaining 34 office properties (comprised of 12 disposal groups) in the Suburban Office Portfolio, totaling 5.9 million square feet (of which the Company currently has 17 properties totaling 2.5 million square feet under contract for sale for aggregate gross proceeds of $335.5 million).

As a result of recent sales contract amendments and after considering the current market conditions as a result of the challenging economic climate with the current worldwide COVID-19 pandemic, the Company determined that the carrying value of 19 of the properties (comprised of four disposal groups) was not expected to be recovered from estimated net sales proceeds, and accordingly recognized an unrealized loss allowance of $45.1 million during the three months ended March 31, 2020.

The following table summarizes income from discontinued operations and the related realized gains (losses) and unrealized losses on disposition of rental property and impairments, net, for the three months ended March 31, 2020 and 2019 (dollars in thousands):




	Three Months Ended March 31,
		2020		2019
Total revenues	$	41,609	$	43,983
Operating and other expenses		(16,857)		(17,951)
Depreciation and amortization		(1,453)		(16,511)
Interest expense		(1,306)		(1,293)

Income from discontinued operations		21,993		8,228

Unrealized losses on disposition of rental property (a)		(45,068)		-
Realized gains on disposition of rental property (b)		17,322		-
Realized gains (losses) and unrealized losses on
disposition of rental property and impairments, net		(27,746)		-

Total discontinued operations, net	$	(5,753)	$	8,228

(a)Represents valuation allowances and impairment charges on properties classified as discontinued operations in 2020.

(b)See Note 3: Real Estate Transactions – Dispositions for further information regarding properties sold and related gains (losses).

8. SENIOR UNSECURED NOTES

A summary of the Company’s senior unsecured notes as of March 31, 2020 and December 31, 2019 is as follows (dollars in thousands):


		March 31,		December 31,	Effective
		2020		2019	Rate (1)
4.500% Senior Unsecured Notes, due April 18, 2022	$	300,000	$	300,000	4.612	%
3.150% Senior Unsecured Notes, due May 15, 2023		275,000		275,000	3.517	%
Principal balance outstanding		575,000		575,000
Adjustment for unamortized debt discount		(2,004)		(2,170)
Unamortized deferred financing costs		(1,220)		(1,346)

Total senior unsecured notes, net	$	571,776	$	571,484

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

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

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its debt covenants under the indenture relating to its senior unsecured notes as of March 31, 2020.

9. UNSECURED REVOLVING CREDIT FACILITY AND TERM LOANS

On January 25, 2017, the Company entered into an amended revolving credit facility and new term loan agreement (“2017 Credit Agreement”) with a group of 13 lenders. Pursuant to the 2017 Credit Agreement, the Company refinanced its existing $600 million unsecured revolving credit facility (“2017 Credit Facility”) and entered into a new $325 million unsecured, delayed-draw term loan facility (“2017 Term Loan”). Effective March 6, 2018, the Company elected to determine its interest rate under the 2017 Credit Agreement and under the 2017 Term Loan using the defined leverage ratio option, resulting in an interest rate of London Inter-Bank Offered Rate (“LIBOR”) plus 130 basis points and LIBOR plus 155 basis points, respectively.

The terms of the 2017 Credit Facility include: (1) a four year term ending in January 2021, with two six month extension options; , subject to the Company not being in default on the facility and with the payment of a fee of 7.5 basis points for each extension; (2) revolving credit loans may be made to the Company in an aggregate principal amount of up to $600 million (subject to increase as discussed below), with a sublimit under the 2017 Credit Facility for the issuance of letters of credit in an amount not to exceed $60 million (subject to increase as discussed below); (3) an interest rate, based on the Operating Partnership’s unsecured debt ratings from Moody’s or S&P, or, at the Operating Partnership’s option, if it no longer maintains a debt rating from Moody’s or S&P, or such debt ratings fall below Baa3 and BBB-, based on a defined leverage ratio; and (4) a facility fee, currently 25 basis points, payable quarterly based on the Operating Partnership’s unsecured debt ratings from Moody’s or S&P, or, at the Operating Partnership’s option, if it no longer maintains a debt rating from Moody’s or S&P or such debt ratings fall below Baa3 and BBB-, based on a defined leverage ratio.

After electing to use the defined leverage ratio to determine the interest rate, the interest rates on outstanding borrowings, alternate base rate loans and the facility fee on the current borrowing capacity, payable quarterly in arrears, on the 2017 Credit Facility are currently based on the following total leverage ratio grid:


		Interest Rate -
		Applicable
	Interest Rate -	Basis Points
	Applicable	Above LIBOR for
	Basis Points	Alternate Base	Facility Fee
Total Leverage Ratio	Above LIBOR	Rate Loans	Basis Points
<45%	125.0	25.0	20.0
≥45% and <50% (current ratio)	130.0	30.0	25.0
≥50% and <55%	135.0	35.0	30.0
≥55%	160.0	60.0	35.0

Prior to the election to use the defined leverage ratio option, the interest rates on outstanding borrowings, alternate base rate loans and the facility fee on the current borrowing capacity, payable quarterly in arrears, on the 2017 Credit Facility were based upon the Operating Partnership’s unsecured debt ratings, as follows:


		Interest Rate -
		Applicable
	Interest Rate -	Basis Points
Operating Partnership's	Applicable	Above LIBOR for
Unsecured Debt Ratings:	Basis Points	Alternate Base	Facility Fee
Higher of S&P or Moody's	Above LIBOR	Rate Loans	Basis Points
No ratings or less than BBB-/Baa3	155.0