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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
or
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)
Securities Registered Pursuant to Section 12(b) of the Act:
Mack-Cali Realty Corporation:
| | |
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 |
Mack-Cali Realty, L.P.:
None
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 July 27, 2021, there were 90,946,165 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.
EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2021 of Mack-Cali Realty Corporation and Mack-Cali Realty, L.P. Unless stated otherwise or the context otherwise requires, references to the “Operating Partnership” mean Mack-Cali Realty, L.P., a Delaware limited partnership, and references to the “General Partner” mean Mack-Cali Realty Corporation, a Maryland corporation and real estate investment trust (“REIT”), and its subsidiaries, including the Operating Partnership. References to the “Company,” “we,” “us” and “our” mean collectively the General Partner, the Operating Partnership and those entities/subsidiaries consolidated by the General Partner.
The Operating Partnership conducts the business of providing leasing, management, acquisition, development, construction and tenant-related services for its General Partner. The Operating Partnership, through its operating divisions and subsidiaries, including the Mack-Cali property-owning partnerships and limited liability companies is the entity through which all of the General Partner’s operations are conducted. The General Partner is the sole general partner of the Operating Partnership and has exclusive control of the Operating Partnership’s day-to-day management.
As of June 30, 2021, the General Partner owned an approximate 91.0 percent common unit interest in the Operating Partnership. The remaining approximate 9.0 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 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 revolving credit facility and 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.
MACK-CALI REALTY CORPORATION
MACK-CALI REALTY, L.P.
FORM 10-Q
INDEX
| | | |
| | Page |
Part I | Financial Information | |
| Item 1. | Financial Statements (unaudited): | |
| | Mack-Cali Realty Corporation | |
| | Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 | 6 |
| | Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 | 7 |
| | Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2021 and 2020 | 8 |
| | Consolidated Statements of Changes in Equity for the three and six months ended June30, 2021 and 2020 | 9 |
| | Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 | 11 |
| | Mack-Cali Realty, L.P. | |
| | Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 | 12 |
| | Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 | 13 |
| | Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2021 and 2020 | 14 |
| | Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2021 and 2020 | 15 |
| | Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 | 17 |
| | Mack-Cali Realty Corporation and Mack-Cali Realty, L.P. | |
| | Notes to Consolidated Financial Statements | 18 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 52 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 71 |
| Item 4. | Controls and Procedures | 71 |
Part II | Other Information | |
| | Mack-Cali Realty Corporation and Mack-Cali Realty, L.P. | |
| Item 1. | Legal Proceedings | 72 |
| Item 1A. | Risk Factors | 72 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 72 |
| Item 3. | Defaults Upon Senior Securities | 72 |
| Item 4. | Mine Safety Disclosures | 72 |
| Item 5. | Other Information | 72 |
| Item 6. | Exhibits | 72 |
Exhibit Index | | 73 |
Signatures | | 80 |
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, 2020.
The results of operations for the three and six-month period ended June 30, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (unaudited)
| | | | | |
| | | | | |
| | June 30, | | | December 31, |
ASSETS | | 2021 | | | 2020 |
Rental property | | | | | |
Land and leasehold interests | $ | 632,292 | | $ | 639,636 |
Buildings and improvements | | 3,854,494 | | | 3,743,831 |
Tenant improvements | | 166,868 | | | 171,623 |
Furniture, fixtures and equipment | | 90,082 | | | 83,553 |
| | 4,743,736 | | | 4,638,643 |
Less – accumulated depreciation and amortization | | (693,868) | | | (656,331) |
| | 4,049,868 | | | 3,982,312 |
Real estate held for sale, net | | 84,834 | | | 656,963 |
Net investment in rental property | | 4,134,702 | | | 4,639,275 |
Cash and cash equivalents | | 37,628 | | | 38,096 |
Restricted cash | | 16,147 | | | 14,207 |
Investments in unconsolidated joint ventures | | 154,914 | | | 162,382 |
Unbilled rents receivable, net | | 70,786 | | | 84,907 |
Deferred charges, goodwill and other assets, net | | 173,379 | | | 199,541 |
Accounts receivable | | 3,921 | | | 9,378 |
| | | | | |
Total assets | $ | 4,591,477 | | $ | 5,147,786 |
| | | | | |
LIABILITIES AND EQUITY | | | | | |
Senior unsecured notes, net | $ | - | | $ | 572,653 |
Revolving credit facility and term loans | | 189,000 | | | 25,000 |
Mortgages, loans payable and other obligations, net | | 2,170,284 | | | 2,204,144 |
Dividends and distributions payable | | 386 | | | 1,493 |
Accounts payable, accrued expenses and other liabilities | | 171,321 | | | 194,717 |
Rents received in advance and security deposits | | 27,406 | | | 34,101 |
Accrued interest payable | | 5,775 | | | 10,001 |
Total liabilities | | 2,564,172 | | | 3,042,109 |
| | | | | |
Commitments and contingencies | | | | | |
| | | | | |
Redeemable noncontrolling interests | | 516,972 | | | 513,297 |
| | | | | |
Equity: | | | | | |
Mack-Cali Realty Corporation stockholders’ equity: | | | | | |
Common stock, $0.01 par value, 190,000,000 shares authorized, | | | | | |
90,947,154 and 90,712,417 shares outstanding | | 909 | | | 907 |
Additional paid-in capital | | 2,529,050 | | | 2,528,187 |
Dividends in excess of net earnings | | (1,194,733) | | | (1,130,277) |
Total Mack-Cali Realty Corporation stockholders’ equity | | 1,335,226 | | | 1,398,817 |
| | | | | |
Noncontrolling interests in subsidiaries: | | | | | |
Operating Partnership | | 132,683 | | | 148,791 |
Consolidated joint ventures | | 42,424 | | | 44,772 |
Total noncontrolling interests in subsidiaries | | 175,107 | | | 193,563 |
| | | | | |
Total equity | | 1,510,333 | | | 1,592,380 |
| | | | | |
Total liabilities and equity | $ | 4,591,477 | | $ | 5,147,786 |
The accompanying notes are an integral part of these consolidated financial statements.
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)
| | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended |
| | | June 30, | | | June 30, |
REVENUES | | | 2021 | | | 2020 | | | 2021 | | | 2020 |
Revenue from leases | | $ | 68,936 | | $ | 66,357 | | $ | 134,707 | | $ | 138,336 |
Real estate services | | | 2,593 | | | 2,755 | | | 5,120 | | | 5,748 |
Parking income | | | 3,484 | | | 3,034 | | | 6,570 | | | 8,299 |
Hotel income | | | 2,714 | | | 772 | | | 3,767 | | | 2,397 |
Other income | | | 3,520 | | | 1,279 | | | 7,176 | | | 3,021 |
Total revenues | | | 81,247 | | | 74,197 | | | 157,340 | | | 157,801 |
| | | | | | | | | | | | |
EXPENSES | | | | | | | | | | | | |
Real estate taxes | | | 12,222 | | | 10,777 | | | 24,053 | | | 21,917 |
Utilities | | | 3,151 | | | 3,113 | | | 7,243 | | | 6,966 |
Operating services | | | 19,090 | | | 15,842 | | | 34,540 | | | 32,063 |
Real estate services expenses | | | 3,213 | | | 3,085 | | | 6,531 | | | 6,807 |
General and administrative | | | 18,067 | | | 16,966 | | | 32,056 | | | 32,784 |
Dead deal and transaction-related costs | | | 2,745 | | | 277 | | | 2,745 | | | 277 |
Depreciation and amortization | | | 28,893 | | | 27,440 | | | 57,066 | | | 61,335 |
Property impairments | | | 6,041 | | | - | | | 6,041 | | | - |
Land and other impairments | | | 7,519 | | | 16,846 | | | 7,932 | | | 22,109 |
Total expenses | | | 100,941 | | | 94,346 | | | 178,207 | | | 184,258 |
| | | | | | | | | | | | |
OTHER (EXPENSE) INCOME | | | | | | | | | | | | |
Interest expense | | | (16,554) | | | (20,611) | | | (34,164) | | | (41,529) |
Interest and other investment income (loss) | | | 95 | | | 7 | | | 112 | | | 39 |
Equity in earnings (loss) of unconsolidated joint ventures | | | 349 | | | (946) | | | (1,107) | | | (1,654) |
Realized gains (losses) and unrealized gains (losses) on disposition of | | | | | | | | | | | | |
rental property, net | | | 3,521 | | | - | | | 3,521 | | | (7,915) |
Gain on disposition of developable land | | | 111 | | | - | | | 111 | | | 4,813 |
Loss from extinguishment of debt, net | | | (46,735) | | | - | | | (46,735) | | | - |
Total other income (expense) | | | (59,213) | | | (21,550) | | | (78,262) | | | (46,246) |
Loss from continuing operations | | | (78,907) | | | (41,699) | | | (99,129) | | | (72,703) |
| | | | | | | | | | | | |
Discontinued operations: | | | | | | | | | | | | |
Income from discontinued operations | | | 2,796 | | | 20,694 | | | 13,758 | | | 41,600 |
Realized gains (losses) and unrealized gains (losses) on | | | | | | | | | | | | |
disposition of rental property and impairments, net | | | 2,080 | | | (11,929) | | | 24,861 | | | (39,675) |
Total discontinued operations, net | | | 4,876 | | | 8,765 | | | 38,619 | | | 1,925 |
Net loss | | | (74,031) | | | (32,934) | | | (60,510) | | | (70,778) |
Noncontrolling interests in consolidated joint ventures | | | 1,198 | | | 829 | | | 2,533 | | | 1,005 |
Noncontrolling interests in Operating Partnership of income from | | | | | | | | | | | | |
continuing operations | | | 7,669 | | | 4,527 | | | 9,974 | | | 8,089 |
Noncontrolling interests in Operating Partnership in discontinued operations | | | (444) | | | (838) | | | (3,511) | | | (185) |
Redeemable noncontrolling interests | | | (6,471) | | | (6,471) | | | (12,942) | | | (12,942) |
Net loss available to common shareholders | | $ | (72,079) | | $ | (34,887) | | $ | (64,456) | | $ | (74,811) |
| | | | | | | | | | | | |
Basic earnings per common share: | | | | | | | | | | | | |
Loss from continuing operations | | $ | (0.86) | | $ | (0.50) | | $ | (1.13) | | $ | (0.90) |
Discontinued operations | | | 0.05 | | | 0.09 | | | 0.38 | | | 0.02 |
Net loss available to common shareholders | | $ | (0.81) | | $ | (0.41) | | $ | (0.75) | | $ | (0.88) |
| | | | | | | | | | | | |
Diluted earnings per common share: | | | | | | | | | | | | |
Loss from continuing operations | | $ | (0.86) | | $ | (0.50) | | $ | (1.13) | | $ | (0.90) |
Discontinued operations | | | 0.05 | | | 0.09 | | | 0.38 | | | 0.02 |
Net loss available to common shareholders | | $ | (0.81) | | $ | (0.41) | | $ | (0.75) | | $ | (0.88) |
| | | | | | | | | | | | |
Basic weighted average shares outstanding | | | 90,774 | | | 90,629 | | | 90,733 | | | 90,622 |
| | | | | | | | | | | | |
Diluted weighted average shares outstanding | | | 99,873 | | | 100,213 | | | 99,817 | | | 100,198 |
The accompanying notes are an integral part of these consolidated financial statements.
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (unaudited)
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended |
| | | June 30, | | | June 30, |
| | | 2021 | | | 2020 | | | 2021 | | | 2020 |
| | | | | | | | | | | | |
Net loss | | $ | (74,031) | | $ | (32,934) | | $ | (60,510) | | $ | (70,778) |
Other comprehensive income (loss): | | | | | | | | | | | | |
Net unrealized gain (loss) on derivative instruments | | | | | | | | | | | | |
for interest rate swaps | | | - | | | - | | | - | | | (16) |
Comprehensive loss | | $ | (74,031) | | $ | (32,934) | | $ | (60,510) | | $ | (70,794) |
Comprehensive (income) loss attributable to noncontrolling | | | | | | | | | | | | |
interests in consolidated joint ventures | | | 1,198 | | | 829 | | | 2,533 | | | 1,005 |
Comprehensive (income) loss attributable to redeemable | | | | | | | | | | | | |
noncontrolling interests | | | (6,471) | | | (6,471) | | | (12,942) | | | (12,942) |
Comprehensive (income) loss attributable to noncontrolling | | | | | | | | | | | | |
interests in Operating Partnership | | | 7,225 | | | 3,689 | | | 6,463 | | | 7,938 |
Comprehensive loss attributable to common shareholders | | $ | (72,079) | | $ | (34,887) | | $ | (64,456) | | $ | (74,793) |
The accompanying notes are an integral part of these consolidated financial statements.
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands) (unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Accumulated | | | | | | |
| | | | | Additional | | | Dividends in | | | Other | | | Noncontrolling | | | |
| | Common Stock | | | Paid-In | | | Excess of | | | Comprehensive | | | Interests | | | |
For the Three Months Ended June 30, 2021 | | Shares | | | Par Value | | | Capital | | | Net Earnings | | | Income (Loss) | | | in Subsidiaries | | | Total Equity |
Balance at April 1, 2021 | | 90,729 | | $ | 907 | | $ | 2,528,570 | | $ | (1,122,654) | | $ | - | | $ | 182,693 | | $ | 1,589,516 |
Net income (loss) | | - | | | - | | | - | | | (72,079) | | | - | | | (1,952) | | | (74,031) |
Common unit distributions | | - | | | - | | | - | | | - | | | - | | | 639 | | | 639 |
Redeemable noncontrolling interests | | - | | | - | | | (1,550) | | | - | | | - | | | (6,626) | | | (8,176) |
Change in noncontrolling interests in consolidated joint ventures | | - | | | - | | | - | | | - | | | - | | | 175 | | | 175 |
Redemption of common units for common stock | | 175 | | | 2 | | | 2,714 | | | - | | | - | | | (2,716) | | | - |
Redemption of common units | | - | | | - | | | - | | | - | | | - | | | (410) | | | (410) |
Shares issued under Dividend Reinvestment and | | | | | | | | | | | | | | | | | | | | |
Stock Purchase Plan | | 1 | | | - | | | 11 | | | - | | | - | | | - | | | 11 |
Directors' deferred compensation plan | | - | | | - | | | 66 | | | - | | | - | | | - | | | 66 |
Stock compensation | | 42 | | | - | | | 1,239 | | | - | | | - | | | 1,304 | | | 2,543 |
Rebalancing of ownership percentage | | | | | | | | | | | | | | | | | | | | |
between parent and subsidiaries | | - | | | - | | | (2,000) | | | - | | | - | | | 2,000 | | | - |
Balance at June 30, 2021 | | 90,947 | | $ | 909 | | $ | 2,529,050 | | $ | (1,194,733) | | $ | - | | $ | 175,107 | | $ | 1,510,333 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Accumulated | | | | | | |
| | | | | Additional | | | Dividends in | | | Other | | | Noncontrolling | | | |
| | Common Stock | | | Paid-In | | | Excess of | | | Comprehensive | | | Interests | | | |
For the Three Months Ended June 30, 2020 | | Shares | | | Par Value | | | Capital | | | Net Earnings | | | Income (Loss) | | | in Subsidiaries | | | Total Equity |
Balance at April 1, 2020 | | 90,596 | | $ | 906 | | $ | 2,533,909 | | $ | (1,100,672) | | $ | - | | $ | 198,017 | | $ | 1,632,160 |
Net income (loss) | | - | | | - | | | - | | | (34,887) | | | - | | | 1,953 | | | (32,934) |
Common unit distributions | | - | | | - | | | - | | | - | | | - | | | 790 | | | 790 |
Redeemable noncontrolling interests | | - | | | - | | | (2,236) | | | - | | | - | | | (6,708) | | | (8,944) |
Change in noncontrolling interests in consolidated joint ventures | | - | | | - | | | - | | | - | | | - | | | (83) | | | (83) |
Redemption of common units | | - | | | - | | | - | | | - | | | - | | | - | | | - |
Shares issued under Dividend Reinvestment and | | | | | | | | | | | | | | | | | | | | |
Stock Purchase Plan | | 1 | | | - | | | 11 | | | - | | | - | | | - | | | 11 |
Directors' deferred compensation plan | | - | | | - | | | 57 | | | - | | | - | | | - | | | 57 |
Stock compensation | | - | | | - | | | 334 | | | - | | | - | | | 2,105 | | | 2,439 |
Other comprehensive income (loss) | | - | | | - | | | - | | | - | | | - | | | - | | | - |
Rebalancing of ownership percentage | | | | | | | | | | | | | | | | | | | | |
between parent and subsidiaries | | - | | | - | | | 1,611 | | | - | | | - | | | (1,611) | | | - |
Balance at June 30, 2020 | | 90,597 | | $ | 906 | | $ | 2,533,686 | | $ | (1,135,559) | | $ | - | | $ | 194,463 | | $ | 1,593,496 |
The accompanying notes are an integral part of these consolidated financial statements.
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands) (unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Accumulated | | | | | | |
| | | | | Additional | | | Dividends in | | | Other | | | Noncontrolling | | | |
| | Common Stock | | | Paid-In | | | Excess of | | | Comprehensive | | | Interests | | | |
For the Six Months Ended June 30, 2021 | | Shares | | | Par Value | | | Capital | | | Net Earnings | | | Income (Loss) | | | in Subsidiaries | | | Total Equity |
Balance at January 1, 2021 | | 90,712 | | $ | 907 | | $ | 2,528,187 | | $ | (1,130,277) | | $ | - | | $ | 193,563 | | $ | 1,592,380 |
Net income | | - | | | - | | | - | | | (64,456) | | | - | | | 3,946 | | | (60,510) |
Common stock dividends | | - | | | - | | | - | | | - | | | - | | | - | | | - |
Common unit distributions | | - | | | - | | | - | | | - | | | - | | | 643 | | | 643 |
Redeemable noncontrolling interest | | - | | | - | | | (3,341) | | | - | | | - | | | (13,276) | | | (16,617) |
Change in noncontrolling interest | | | | | | | | | | | | | | | | | | | | |
in consolidated joint ventures | | - | | | - | | | - | | | - | | | - | | | 185 | | | 185 |
Redemption of common units | | | | | | | | | | | | | | | | | | | | |
for common stock | | 175 | | | 2 | | | 2,714 | | | - | | | - | | | (2,716) | | | - |
Redemption of common units | | - | | | - | | | - | | | - | | | - | | | (10,869) | | | (10,869) |
Shares issued under Dividend | | | | | | | | | | | | | | | | | | | | |
Reinvestment and Stock Purchase Plan | | 2 | | | - | | | 29 | | | - | | | - | | | - | | | 29 |
Directors' deferred compensation plan | | - | | | - | | | 138 | | | - | | | - | | | - | | | 138 |
Stock compensation | | 58 | | | - | | | 1,885 | | | - | | | - | | | 3,187 | | | 5,072 |
Cancellation of restricted shares | | - | | | - | | | (118) | | | - | | | - | | | - | | | (118) |
Other comprehensive income | | - | | | - | | | - | | | - | | | - | | | - | | | - |
Rebalancing of ownership percentage | | | | | | | | | | | | | | | | | | | | |
between parent and subsidiaries | | - | | | - | | | (444) | | | - | | | - | | | 444 | | | - |
Balance at June 30, 2021 | | 90,947 | | $ | 909 | | $ | 2,529,050 | | $ | (1,194,733) | | $ | - | | $ | 175,107 | | $ | 1,510,333 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Accumulated | | | | | | |
| | | | | Additional | | | Dividends in | | | Other | | | Noncontrolling | | | |
| | Common Stock | | | Paid-In | | | Excess of | | | Comprehensive | | | Interests | | | |
For the Six Months Ended June 30, 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) | | - | | | - | | | - | | | (74,811) | | | - | | | 4,033 | | | (70,778) |
Common stock dividends | | - | | | - | | | - | | | (18,119) | | | - | | | - | | | (18,119) |
Common unit distributions | | - | | | - | | | - | | | - | | | - | | | (1,480) | | | (1,480) |
Redeemable noncontrolling interest | | - | | | - | | | (5,040) | | | - | | | - | | | (13,475) | | | (18,515) |
Change in noncontrolling interests in consolidated joint ventures | | - | | | - | | | - | | | - | | | - | | | 133 | | | 133 |
Redemption of common units for common stock | | - | | | - | | | - | | | - | | | - | | | - | | | - |
Redemption of common units | | - | | | - | | | - | | | - | | | - | | | (2,141) | | | (2,141) |
Shares issued under Dividend Reinvestment and | | | | | | | | | | | | | | | | | | | | |
Stock Purchase Plan | | 2 | | | - | | | 30 | | | - | | | - | | | - | | | 30 |
Directors' deferred compensation plan | | - | | | - | | | 139 | | | - | | | - | | | - | | | 139 |
Stock compensation | | - | | | - | | | 764 | | | - | | | - | | | 4,205 | | | 4,969 |
Cancellation of unvested LTIP units | | | | | - | | | - | | | | | | - | | | (201) | | | (201) |
Other comprehensive income (loss) | | - | | | - | | | - | | | - | | | 18 | | | (34) | | | (16) |
Rebalancing of ownership percentage | | | | | | | | | | | | | | | | | | | | |
between parent and subsidiaries | | - | | | - | | | 2,353 | | | - | | | - | | | (2,353) | | | - |
Balance at June 30, 2020 | | 90,597 | | $ | 906 | | $ | 2,533,686 | | $ | (1,135,559) | | $ | - | | $ | 194,463 | | $ | 1,593,496 |
The accompanying notes are an integral part of these consolidated financial statements.
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
| | | | | | |
| | | Six Months Ended |
| | | June 30, |
CASH FLOWS FROM OPERATING ACTIVITIES | | | 2021 | | | 2020 |
Net loss | | $ | (60,510) | | $ | (70,778) |
Net loss from discontinued operations | | | (38,619) | | | (1,925) |
Net loss from continuing operations | | | (99,129) | | | (72,703) |
Adjustments to reconcile net income (loss) to net cash provided by | | | | | | |
Operating activities: | | | | | | |
Depreciation and amortization, including related intangible assets | | | 55,397 | | | 59,642 |
Amortization of directors deferred compensation stock units | | | 138 | | | 139 |
Amortization of stock compensation | | | 5,072 | | | 4,969 |
Amortization of deferred financing costs | | | 2,190 | | | 2,084 |
Amortization of debt discount and mark-to-market | | | 232 | | | (474) |
Equity in (earnings) loss of unconsolidated joint ventures | | | 1,107 | | | 1,654 |
Distributions of cumulative earnings from unconsolidated joint ventures | | | 117 | | | 3,018 |
Realized (gains) losses and unrealized (gains) losses on disposition of rental property, net | | | (3,521) | | | 7,915 |
Gain on disposition of developable land | | | (111) | | | (4,813) |
Land and other impairments | | | 7,932 | | | 22,109 |
Property impairments | | | 6,041 | | | - |
Loss from extinguishment of debt | | | 46,735 | | | - |
Changes in operating assets and liabilities: | | | | | | |
(Increase) decrease in unbilled rents receivable, net | | | (3,403) | | | 586 |
Decrease (increase) in deferred charges, goodwill and other assets | | | 779 | | | (98) |
Decrease (increase) in accounts receivable, net | | | 4,242 | | | (5,255) |
Increase (decrease) in accounts payable, accrued expenses and other liabilities | | | (3,333) | | | 7,053 |
(Decrease) Increase in rents received in advance and security deposits | | | 784 | | | (2,311) |
Increase (decrease) in accrued interest payable | | | 273 | | | (67) |
Net cash flows provided by operating activities - continuing operations | | | 21,542 | | | 23,448 |
Net cash flows provided by operating activities - discontinued operations | | | 6,405 | | | 44,806 |
| | | | | | |
Net cash provided by operating activities | | $ | 27,947 | | $ | 68,254 |
| | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Rental property acquisitions and related intangibles | | $ | - | | $ | (16,159) |
Rental property additions and improvements | | | (32,077) | | | (104,411) |
Development of rental property and other related costs | | | (120,023) | | | (146,810) |
Proceeds from the sales of rental property | | | 42,702 | | | 16,455 |
Proceeds from the sale of investments in joint ventures | | | 1,975 | | | - |
Repayment of notes receivable | | | 381 | | | 208 |
Investment in unconsolidated joint ventures | | | (398) | | | (1,553) |
Distributions in excess of cumulative earnings from unconsolidated joint ventures | | | 4,949 | | | 5,875 |
Net cash used in investing activities - continuing operations | | | (102,491) | | | (246,395) |
Net cash provided by investing activities - discontinued operations | | | 592,590 | | | 52,215 |
| | | | | | |
Net cash provided by (used in) investing activities | | $ | 490,099 | | $ | (194,180) |
| | | | | | |
CASH FLOW FROM FINANCING ACTIVITIES | | | | | | |
Borrowings from revolving credit facility | | $ | 170,000 | | $ | 140,000 |
Repayment of revolving credit facility | | | (33,000) | | | (140,000) |
Borrowings from term loans | | | 150,000 | | | - |
Repayments of term loans | | | (123,000) | | | - |
Repayments of senior unsecured notes | | | (573,727) | | | - |
Proceeds from mortgages and loans payable | | | 93,772 | | | 181,358 |
Repayment of mortgages, loans payable and other obligations | | | (129,770) | | | (281) |
Payment of early debt extinguishment costs | | | (49,874) | | | - |
Common unit redemptions | | | (410) | | | (2,141) |
Payment of financing costs | | | (7,339) | | | (656) |
Contributions from noncontrolling interests | | | 185 | | | 133 |
Distributions to redeemable noncontrolling interests | | | (12,942) | | | (12,942) |
Payment of common dividends and distributions | | | (468) | | | (40,274) |
| | | | | | |
Net cash (used in) provided by financing activities | | $ | (516,573) | | $ | 125,197 |
| | | | | | |
Net increase (decrease) in cash and cash equivalents | | $ | 1,473 | | $ | (729) |
Cash, cash equivalents and restricted cash, beginning of period (1) | | | 52,302 | | | 41,168 |
| | | | | | |
Cash, cash equivalents and restricted cash, end of period (2) | | $ | 53,775 | | $ | 40,439 |
(1)
(2)
The accompanying notes are an integral part of these consolidated financial statements.
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands, except per unit amounts) (unaudited)
| | | | | |
| | | | | |
| | June 30, | | | December 31, |
ASSETS | | 2021 | | | 2020 |
Rental property | | | | | |
Land and leasehold interests | $ | 632,292 | | $ | 639,636 |
Buildings and improvements | | 3,854,494 | | | 3,743,831 |
Tenant improvements | | 166,868 | | | 171,623 |
Furniture, fixtures and equipment | | 90,082 | | | 83,553 |
| | 4,743,736 | | | 4,638,643 |
Less – accumulated depreciation and amortization | | (693,868) | | | (656,331) |
| | 4,049,868 | | | 3,982,312 |
Real estate held for sale, net | | 84,834 | | | 656,963 |
Net investment in rental property | | 4,134,702 | | | 4,639,275 |
Cash and cash equivalents | | 37,628 | | | 38,096 |
Restricted cash | | 16,147 | | | 14,207 |
Investments in unconsolidated joint ventures | | 154,914 | | | 162,382 |
Unbilled rents receivable, net | | 70,786 | | | 84,907 |
Deferred charges, goodwill and other assets, net | | 173,379 | | | 199,541 |
Accounts receivable | | 3,921 | | | 9,378 |
| | | | | |
Total assets | $ | 4,591,477 | | $ | 5,147,786 |
| | | | | |
LIABILITIES AND EQUITY | | | | | |
Senior unsecured notes, net | $ | - | | $ | 572,653 |
Revolving credit facility and term loans | | 189,000 | | | 25,000 |
Mortgages, loans payable and other obligations, net | | 2,170,284 | | | 2,204,144 |
Distributions payable | | 386 | | | 1,493 |
Accounts payable, accrued expenses and other liabilities | | 171,321 | | | 194,717 |
Rents received in advance and security deposits | | 27,406 | | | 34,101 |
Accrued interest payable | | 5,775 | | | 10,001 |
Total liabilities | | 2,564,172 | | | 3,042,109 |
| | | | | |
Commitments and contingencies | | | | | |
| | | | | |
Redeemable noncontrolling interests | | 516,972 | | | 513,297 |
| | | | | |
Partners’ Capital: | | | | | |
General Partner, 90,947,154 and 90,712,417 common units outstanding | | 1,266,901 | | | 1,330,048 |
Limited partners, 9,037,532 and 9,649,031 common units/LTIPs outstanding | | 201,008 | | | 217,560 |
Total Mack-Cali Realty, L.P. partners’ capital | | 1,467,909 | | | 1,547,608 |
| | | | | |
Noncontrolling interests in consolidated joint ventures | | 42,424 | | | 44,772 |
| | | | | |
Total equity | | 1,510,333 | | | 1,592,380 |
| | | | | |
Total liabilities and equity | $ | 4,591,477 | | $ | 5,147,786 |
The accompanying notes are an integral part of these consolidated financial statements.
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per unit amounts) (unaudited)
| | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended |
| | | June 30, | | | June 30, |
REVENUES | | | 2021 | | | 2020 | | | 2021 | | | 2020 |
Revenue from leases | | $ | 68,936 | | $ | 66,357 | | $ | 134,707 | | $ | 138,336 |
Real estate services | | | 2,593 | | | 2,755 | | | 5,120 | | | 5,748 |
Parking income | | | 3,484 | | | 3,034 | | | 6,570 | | | 8,299 |
Hotel income | | | 2,714 | | | 772 | | | 3,767 | | | 2,397 |
Other income | | | 3,520 | | | 1,279 | | | 7,176 | | | 3,021 |
Total revenues | | | 81,247 | | | 74,197 | | | 157,340 | | | 157,801 |
| | | | | | | | | | | | |
EXPENSES | | | | | | | | | | | | |
Real estate taxes | | | 12,222 | | | 10,777 | | | 24,053 | | | 21,917 |
Utilities | | | 3,151 | | | 3,113 | | | 7,243 | | | 6,966 |
Operating services | | | 19,090 | | | 15,842 | | | 34,540 | | | 32,063 |
Real estate services expenses | | | 3,213 | | | 3,085 | | | 6,531 | | | 6,807 |
General and administrative | | | 18,067 | | | 16,966 | | | 32,056 | | | 32,784 |
Dead deal and transaction-related costs | | | 2,745 | | | 277 | | | 2,745 | | | 277 |
Depreciation and amortization | | | 28,893 | | | 27,440 | | | 57,066 | | | 61,335 |
Property impairments | | | 6,041 | | | - | | | 6,041 | | | - |
Land and other impairments | | | 7,519 | | | 16,846 | | | 7,932 | | | 22,109 |
Total expenses | | | 100,941 | | | 94,346 | | | 178,207 | | | 184,258 |
| | | | | | | | | | | | |
OTHER (EXPENSE) INCOME | | | | | | | | | | | | |
Interest expense | | | (16,554) | | | (20,611) | | | (34,164) | | | (41,529) |
Interest and other investment income (loss) | | | 95 | | | 7 | | | 112 | | | 39 |
Equity in earnings (loss) of unconsolidated joint ventures | | | 349 | | | (946) | | | (1,107) | | | (1,654) |
Realized gains (losses) and unrealized gains (losses) on disposition of | | | | | | | | | | | | |
rental property, net | | | 3,521 | | | - | | | 3,521 | | | (7,915) |
Gain on disposition of developable land | | | 111 | | | - | | | 111 | | | 4,813 |
Loss from extinguishment of debt, net | | | (46,735) | | | - | | | (46,735) | | | - |
Total other income (expense) | | | (59,213) | | | (21,550) | | | (78,262) | | | (46,246) |
Loss from continuing operations | | | (78,907) | | | (41,699) | | | (99,129) | | | (72,703) |
| | | | | | | | | | | | |
Discontinued operations: | | | | | | | | | | | | |
Income from discontinued operations | | | 2,796 | | | 20,694 | | | 13,758 | | | 41,600 |
Realized gains (losses) and unrealized gains (losses) on | | | | | | | | | | | | |
disposition of rental property and impairments, net | | | 2,080 | | | (11,929) | | | 24,861 | | | (39,675) |
Total discontinued operations, net | | | 4,876 | | | 8,765 | | | 38,619 | | | 1,925 |
Net loss | | | (74,031) | | | (32,934) | | | (60,510) | | | (70,778) |
Noncontrolling interests in consolidated joint ventures | | | 1,198 | | | 829 | | | 2,533 | | | 1,005 |
Redeemable noncontrolling interests | | | (6,471) | | | (6,471) | | | (12,942) | | | (12,942) |
Net loss available to common unitholders | | $ | (79,304) | | $ | (38,576) | | $ | (70,919) | | $ | (82,715) |
| | | | | | | | | | | | |
Basic earnings per common unit: | | | | | | | | | | | | |
Loss from continuing operations | | $ | (0.86) | | $ | (0.50) | | $ | (1.13) | | $ | (0.90) |
Discontinued operations | | | 0.05 | | | 0.09 | | | 0.38 | | | 0.02 |
Net loss available to common unitholders | | $ | (0.81) | | $ | (0.41) | | $ | (0.75) | | $ | (0.88) |
| | | | | | | | | | | | |
Diluted earnings per common unit: | | | | | | | | | | | | |
Loss from continuing operations | | $ | (0.86) | | $ | (0.50) | | $ | (1.13) | | $ | (0.90) |
Discontinued operations | | | 0.05 | | | 0.09 | | | 0.38 | | | 0.02 |
Net loss available to common unitholders | | $ | (0.81) | | $ | (0.41) | | $ | (0.75) | | $ | (0.88) |
| | | | | | | | | | | | |
Basic weighted average units outstanding | | | 99,873 | | | 100,213 | | | 99,817 | | | 100,198 |
| | | | | | | | | | | | |
Diluted weighted average units outstanding | | | 99,873 | | | 100,213 | | | 99,817 | | | 100,198 |
The accompanying notes are an integral part of these consolidated financial statements.
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (unaudited)
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended |
| | | June 30, | | | June 30, |
| | | 2021 | | | 2020 | | | 2021 | | | 2020 |
| | | | | | | | | | | | |
Net loss | | $ | (74,031) | | $ | (32,934) | | $ | (60,510) | | $ | (70,778) |
Other comprehensive income (loss): | | | | | | | | | | | | |
Net unrealized gain (loss) on derivative instruments | | | | | | | | | | | | |
for interest rate swaps | | | - | | | - | | | - | | | (16) |
Comprehensive loss | | $ | (74,031) | | $ | (32,934) | | $ | (60,510) | | $ | (70,794) |
Comprehensive (income) loss attributable to noncontrolling | | | | | | | | | | | | |
interests in consolidated joint ventures | | | 1,198 | | | 829 | | | 2,533 | | | 1,005 |
Comprehensive (income) loss attributable to redeemable | | | | | | | | | | | | |
noncontrolling interests | | | (6,471) | | | (6,471) | | | (12,942) | | | (12,942) |
Comprehensive loss attributable to common unitholders | | $ | (79,304) | | $ | (38,576) | | $ | (70,919) | | $ | (82,731) |
The accompanying notes are an integral part of these consolidated financial statements.
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands) (unaudited)
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | Noncontrolling | | | |
| | | | Limited Partner | | | General Partner | | | Limited Partner | | | Other | | | Interest | | | |
| | General Partner | | Common Units/ | | | Common | | | Common | | | Comprehensive | | | in Consolidated | | | |
For the Three Months Ended June 30, 2021 | | Common Units | | Vested LTIP Units | | | Unitholders | | | Unitholders | | | Income (Loss) | | | Joint Ventures | | | Total Equity |
Balance at April 1, 2021 | | 90,729 | | 8,980 | | $ | 1,336,498 | | $ | 209,571 | | $ | - | | $ | 43,447 | | $ | 1,589,516 |
Net income (loss) | | - | | - | | | (72,079) | | | (7,225) | | | - | | | 5,273 | | | (74,031) |
Distributions | | - | | - | | | - | | | 639 | | | - | | | - | | | 639 |
Redeemable noncontrolling interests | | - | | - | | | (1,550) | | | (155) | | | - | | | (6,471) | | | (8,176) |
Change in noncontrolling interests in consolidated joint ventures | | - | | - | | | - | | | - | | | - | | | 175 | | | 175 |
Vested LTIP units | | - | | 258 | | | - | | | - | | | - | | | - | | | - |
Redemption of limited partner common units for common stock | | 175 | | (175) | | | 2,716 | | | (2,716) | | | - | | | - | | | - |
Redemption of limited partner common units | | - | | (25) | | | - | | | (410) | | | - | | | - | | | (410) |
Shares issued under Dividend Reinvestment and | | | | | | | | | | | | | | | | | | | |
Stock Purchase Plan | | 1 | | - | | | 11 | | | - | | | - | | | - | | | 11 |
Directors' deferred compensation plan | | - | | - | | | 66 | | | - | | | - | | | - | | | 66 |
Stock compensation | | 42 | | - | | | 1,239 | | | 1,304 | | | - | | | - | | | 2,543 |
Cancellation of common stock | | - | | - | | | - | | | - | | | - | | | - | | | - |
Cancellation of unvested LTIP units | | - | | - | | | - | | | - | | | - | | | - | | | - |
Balance at June 30, 2021 | | 90,947 | | 9,038 | | $ | 1,266,901 | | $ | 201,008 | | $ | - | | $ | 42,424 | | $ | 1,510,333 |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | Noncontrolling | | | |
| | | | Limited Partner | | | General Partner | | | Limited Partner | | | Other | | | Interest | | | |
| | General Partner | | Common Units/ | | | Common | | | Common | | | Comprehensive | | | in Consolidated | | | |
For the Three Months Ended June 30, 2020 | | Common Units | | Vested LTIP Units | | | Unitholders | | | Unitholders | | | Income (Loss) | | | Joint Ventures | | | Total Equity |
Balance at April 1, 2020 | | 90,596 | | 9,518 | | $ | 1,367,252 | | $ | 217,572 | | $ | - | | $ | 47,336 | | $ | 1,632,160 |
Net income (loss) | | - | | - | | | (34,887) | | | (3,689) | | | - | | | 5,642 | | | (32,934) |
Distributions | | - | | - | | | - | | | 790 | | | - | | | - | | | 790 |
Redeemable noncontrolling interests | | - | | - | | | (2,236) | | | (237) | | | - | | | (6,471) | | | (8,944) |
Change in noncontrolling interests in consolidated joint ventures | | - | | - | | | - | | | - | | | - | | | (83) | | | (83) |
Vested LTIP units | | - | | 68 | | | - | | | - | | | - | | | - | | | - |
Redemption of limited partners common units | | - | | - | | | - | | | - | | | - | | | - | | | - |
Shares issued under Dividend Reinvestment and | | | | | | | | | | | | | | | | | | | |
Stock Purchase Plan | | 1 | | - | | | 11 | | | - | | | - | | | - | | | 11 |
Directors' deferred compensation plan | | - | | - | | | 57 | | | - | | | - | | | - | | | 57 |
Other comprehensive income (loss) | | - | | - | | | - | | | - | | | - | | | - | | | - |
Stock compensation | | - | | - | | | 334 | | | 2,105 | | | - | | | - | | | 2,439 |
Cancellation of unvested LTIP units | | - | | - | | | - | | | - | | | - | | | - | | | - |
Balance at June 30, 2020 | | 90,597 | | 9,586 | | $ | 1,330,531 | | $ | 216,541 | | $ | - | | $ | 46,424 | | $ | 1,593,496 |
The accompanying notes are an integral part of these consolidated financial statements.
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in thousands) (unaudited)
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | Noncontrolling | | | |
| | | | Limited Partner | | | General Partner | | | Limited Partner | | | Other | | | Interest | | | |
| | General Partner | | Common Units/ | | | Common | | | Common | | | Comprehensive | | | in Consolidated | | | |
For the Six Months Ended June 30, 2021 | | Common Units | | Vested LTIP Units | | | Unitholders | | | Unitholders | | | Income (Loss) | | | Joint Ventures | | | Total Equity |
Balance at January 1, 2021 | | 90,712 | | 9,649 | | $ | 1,330,048 | | $ | 217,560 | | $ | - | | $ | 44,772 | | $ | 1,592,380 |
Net income (loss) | | - | | - | | | (64,456) | | | (6,463) | | | - | | | 10,409 | | | (60,510) |
Distributions | | - | | - | | | - | | | 643 | | | - | | | - | | | 643 |
Redeemable noncontrolling interest | | - | | - | | | (3,341) | | | (334) | | | - | | | (12,942) | | | (16,617) |
Change in noncontrolling interest | | - | | - | | | - | | | - | | | - | | | 185 | | | 185 |
Redemption of limited partner common | | | | | | | | | | | | | | | | | | | |
units for shares of general partner | | | | | | | | | | | | | | | | | | | |
common units | | 175 | | (175) | | | 2,716 | | | (2,716) | | | - | | | - | | | - |
Vested LTIP units | | - | | 267 | | | - | | | - | | | - | | | - | | | - |
Redemption of limited partner common units | | - | | (703) | | | - | | | (10,869) | | | - | | | - | | | (10,869) |
Shares issued under Dividend | | | | | | | | | | | | | | | | | | | - |
Reinvestment and Stock | | | | | | | | | | | | | | | | | | | |
Purchase Plan | | 2 | | - | | | 29 | | | - | | | - | | | - | | | 29 |
Directors' deferred compensation plan | | - | | - | | | 138 | | | - | | | - | | | - | | | 138 |
Other comprehensive income | | - | | - | | | - | | | - | | | - | | | - | | | - |
Stock compensation | | 58 | | - | | | 1,885 | | | 3,187 | | | - | | | - | | | 5,072 |
Cancellation of restricted shares | | - | | - | | | (118) | | | - | | | - | | | - | | | (118) |
Balance at June 30, 2021 | | 90,947 | | 9,038 | | $ | 1,266,901 | | $ | 201,008 | | $ | - | | $ | 42,424 | | $ | 1,510,333 |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | Noncontrolling | | | |
| | | | Limited Partner | | | General Partner | | | Limited Partner | | | Other | | | Interest | | | |
| | General Partner | | Common Units/ | | | Common | | | Common | | | Comprehensive | | | in Consolidated | | | |
For the Six Months Ended June 30, 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) | | - | | - | | | (74,811) | | | (7,904) | | | - | | | 11,937 | | | (70,778) |
Distributions | | - | | - | | | (18,119) | | | (1,480) | | | - | | | - | | | (19,599) |
Redeemable noncontrolling interest | | - | | - | | | (5,040) | | | (533) | | | - | | | (12,942) | | | (18,515) |
Change in noncontrolling interest in consolidated joint ventures | | - | | - | | | - | | | - | | | - | | | 133 | | | 133 |
Redemption of limited partner common units for | | | | | | | | | | | | | | | | | | | |
shares of general partner common units | | | | | | | | | | | | | - | | | - | | | - |
Vested LTIP units | | - | | 72 | | | - | | | - | | | - | | | - | | | - |
Redemption of limited partner common units | | - | | (98) | | | - | | | (2,141) | | | - | | | - | | | (2,141) |
Shares issued under Dividend Reinvestment and | | | | | | | | | | | | | | | | | | | |
Stock Purchase Plan | | 2 | | - | | | 30 | | | - | | | - | | | - | | | 30 |
Directors' deferred compensation plan | | - | | - | | | 139 | | | - | | | - | | | - | | | 139 |
Other comprehensive income (loss) | | - | | - | | | - | | | (34) | | | 18 | | | - | | | (16) |
Stock compensation | | - | | - | | | 764 | | | 4,205 | | | - | | | - | | | 4,969 |
Cancellation of unvested LTIP units | | - | | - | | | - | | | (201) | | | - | | | - | | | (201) |
Balance at June 30, 2020 | | 90,597 | | 9,586 | | $ | 1,330,531 | | $ | 216,541 | | $ | - | | $ | 46,424 | | $ | 1,593,496 |
The accompanying notes are an integral part of these consolidated financial statements.
MACK-CALI REALTY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
| | | | | | |
| | | Six Months Ended |
| | | June 30, |
CASH FLOWS FROM OPERATING ACTIVITIES | | | 2021 | | | 2020 |
Net loss | | $ | (60,510) | | $ | (70,778) |
Net loss from discontinued operations | | | (38,619) | | | (1,925) |
Net loss from continuing operations | | | (99,129) | | | (72,703) |
Adjustments to reconcile net income (loss) to net cash provided by | | | | | | |
Operating activities: | | | | | | |
Depreciation and amortization, including related intangible assets | | | 55,397 | | | 59,642 |
Amortization of directors deferred compensation stock units | | | 138 | | | 139 |
Amortization of stock compensation | | | 5,072 | | | 4,969 |
Amortization of deferred financing costs | | | 2,190 | | | 2,084 |
Amortization of debt discount and mark-to-market | | | 232 | | | (474) |
Equity in (earnings) loss of unconsolidated joint ventures | | | 1,107 | | | 1,654 |
Distributions of cumulative earnings from unconsolidated joint ventures | | | 117 | | | 3,018 |
Realized (gains) losses and unrealized (gains) losses on disposition of rental property, net | | | (3,521) | | | 7,915 |
Gain on disposition of developable land | | | (111) | | | (4,813) |
Land and other impairments | | | 7,932 | | | 22,109 |
Property impairments | | | 6,041 | | | - |
Loss from extinguishment of debt | | | 46,735 | | | - |
Changes in operating assets and liabilities: | | | | | | |
(Increase) decrease in unbilled rents receivable, net | | | (3,403) | | | 586 |
Decrease (increase) in deferred charges, goodwill and other assets | | | 779 | | | (98) |
Decrease (increase) in accounts receivable, net | | | 4,242 | | | (5,255) |
Increase (decrease) in accounts payable, accrued expenses and other liabilities | | | (3,333) | | | 7,053 |
(Decrease) Increase in rents received in advance and security deposits | | | 784 | | | (2,311) |
Increase (decrease) in accrued interest payable | | | 273 | | | (67) |
Net cash flows provided by operating activities - continuing operations | | | 21,542 | | | 23,448 |
Net cash flows provided by operating activities - discontinued operations | | | 6,405 | | | 44,806 |
| | | | | | |
Net cash provided by operating activities | | $ | 27,947 | | $ | 68,254 |
| | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Rental property acquisitions and related intangibles | | $ | - | | $ | (16,159) |
Rental property additions and improvements | | | (32,077) | | | (104,411) |
Development of rental property and other related costs | | | (120,023) | | | (146,810) |
Proceeds from the sales of rental property | | | 42,702 | | | 16,455 |
Proceeds from the sale of investments in joint ventures | | | 1,975 | | | - |
Repayment of notes receivable | | | 381 | | | 208 |
Investment in unconsolidated joint ventures | | | (398) | | | (1,553) |
Distributions in excess of cumulative earnings from unconsolidated joint ventures | | | 4,949 | | | 5,875 |
Net cash used in investing activities - continuing operations | | | (102,491) | | | (246,395) |
Net cash provided by investing activities - discontinued operations | | | 592,590 | | | 52,215 |
| | | | | | |
Net cash provided by (used in) investing activities | | $ | 490,099 | | $ | (194,180) |
| | | | | | |
CASH FLOW FROM FINANCING ACTIVITIES | | | | | | |
Borrowings from revolving credit facility | | $ | 170,000 | | $ | 140,000 |
Repayment of revolving credit facility | | | (33,000) | | | (140,000) |
Borrowings from term loans | | | 150,000 | | | - |
Repayments of term loans | | | (123,000) | | | - |
Repayment of unsecured term loan | | | (573,727) | | | - |
Proceeds from mortgages and loans payable | | | 93,772 | | | 181,358 |
Repayment of mortgages, loans payable and other obligations | | | (129,770) | | | (281) |
Payment of early debt extinguishment costs | | | (49,874) | | | - |
Common unit redemptions | | | (410) | | | (2,141) |
Payment of financing costs | | | (7,339) | | | (656) |
Contributions from noncontrolling interests | | | 185 | | | 133 |
Distributions to redeemable noncontrolling interests | | | (12,942) | | | (12,942) |
Payment of distributions | | | (468) | | | (40,274) |
| | | | | | |
Net cash (used in) provided by financing activities | | $ | (516,573) | | $ | 125,197 |
| | | | | | |
Net increase (decrease) in cash and cash equivalents | | $ | 1,473 | | $ | (729) |
Cash, cash equivalents and restricted cash, beginning of period (1) | | | 52,302 | | | 41,168 |
| | | | | | |
Cash, cash equivalents and restricted cash, end of period (2) | | $ | 53,775 | | $ | 40,439 |
(1)Includes Restricted Cash of $14,207 and $15,577 as of December 31, 2020 and 2019, respectively.
(2)Includes Restricted Cash of $16,147 and $14,144 as of June 30, 2021 and 2020, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
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 91.0 and 90.4 percent common unit interest in the Operating Partnership as of June 30, 2021 and December 31, 2020, respectively. The General Partner’s business is the ownership of interests in and operation of the Operating Partnership and all of the General Partner’s expenses are incurred for the benefit of the Operating Partnership. The General Partner is reimbursed by the Operating Partnership for all expenses it incurs relating to the ownership and operation of the Operating Partnership.
The Operating Partnership conducts the business of providing leasing, management, acquisition, development and tenant-related services for its General Partner. The Operating Partnership, through its operating divisions and subsidiaries, including the Mack-Cali property-owning partnerships and limited liability companies, is the entity through which all of the General Partner’s operations are conducted. Unless stated otherwise or the context requires, the “Company” refers to the General Partner and its subsidiaries, including the Operating Partnership and its subsidiaries.
As of June 30, 2021, the Company owned or had interests in 38 real estate properties (the “Properties”). The Properties are comprised of 10 office buildings totaling approximately 5.5 million square feet and leased to approximately 110 tenants (which include one building, aggregating approximately 106,000 square feet owned by an unconsolidated joint venture in which the Company has an investment interest), 20 multi-family properties, totaling 6,018 apartment units (which include six properties aggregating 1,786 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 one parcel of land leased to a third party. The Properties are located in three 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, these properties’ results (other than a property not qualified to be classified as held for sale) 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 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 June 30, 2021 and December 31, 2020, 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 $481.7 million and $486.1 million, respectively, other assets of $4.7 million and $4.5 million, respectively, mortgages of $285.8 million and $284.8 million, respectively, and other liabilities of $21.3 million and $21 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
These financial statements should be read in conjunction with the Company’s audited Annual Report on Form 10-K for the year ended December 31, 2020, as certain disclosures in this Quarterly Report on Form 10-Q that would duplicate those included in the 10-K are not included in these financial statements.
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 Financial Accounting Standards Board (“FASB”) guidance Accounting Standards Update (“ASU”) 2017-01 on January 1, 2017, which revises the definition of a business and is expected to result in more transactions to be accounted for as asset acquisitions and significantly limit transactions that would be accounted for as business combinations. Where an acquisition has been determined to be an asset acquisition, acquisition-related costs are capitalized. Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development. Capitalized development and construction salaries and related costs approximated $0.6 million and $0.4 million for the three months ended June 30, 2021 and 2020, respectively, and $1.2 million and $0.9 million for the six months ended June 30, 2021 and 2020, respectively. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.
Included in net investment in rental property as of June 30, 2021 and December 31, 2020 is real estate and building and tenant improvements not in service, as follows (dollars in thousands):
| | | | | |
| | | | | |
| | June 30, | | | December 31, |
| | 2021 | | | 2020 |
Land held for development (including pre-development costs, if any) (a)(c) | $ | 355,199 | | $ | 364,946 |
Development and construction in progress, including land (b) | | 794,268 | | | 733,560 |
Total | $ | 1,149,467 | | $ | 1,098,506 |
(a)Includes predevelopment and infrastructure costs included in buildings and improvements of $162.1 million and $160.3 million as of June 30, 2021 and December 31, 2020, respectively.
(b)Includes land of $74.3 million and $74.9 million as of June 30, 2021 and December 31, 2020, respectively.
(c)Includes $27.3 million of land and $6.7 million of building and improvements pertaining to assets held for sale at June 30, 2021.
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.
Dividends and Distributions Payable
On September 30, 2020, the Company announced that its Board of Directors was suspending its common dividends and distributions attributable to the third and fourth quarters 2020. As the Company’s management estimated that as of September 2020 it had satisfied its dividends obligations as a REIT on taxable income expected for 2020, the Board made the strategic decision to suspend its common dividends and distributions for the remainder of 2020 in an effort to provide greater financial flexibility during the pandemic and to retain incremental capital to support leasing initiatives at its Harborside commercial office properties on the Jersey City waterfront. On March 19, 2021, the Company announced that its Board of Directors would continue to suspend its common dividend for the remainder of 2021 in order to conserve capital and allow for greater financial flexibility during this period of heightened economic uncertainty and based on the Company’s projected 2021 taxable income estimates. The Company believes that with this suspension, it will still satisfy its dividends obligation as a REIT on taxable income estimated for 2021.
The dividends and distributions payable at June 30, 2021 and December 31, 2020 represent amounts payable on unvested LTIP units.
Impact of Recently-Issued Accounting Standards
In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and is effective between March 12, 2020 and December 31, 2022. The guidance may be elected over time as reference rate reform activities occur. The Company is currently in the process of evaluating the impact the adoption of ASU 2020-04 will have on the Company’s consolidated financial statements.
3. RECENT TRANSACTIONS
Properties Commencing Initial Operations
The following property commenced initial operations during the six months ended June 30, 2021 (dollars in thousands):