Quarterly report pursuant to Section 13 or 15(d)

Deferred Charges, Goodwill And Other Assets, Net

v3.8.0.1
Deferred Charges, Goodwill And Other Assets, Net
 9 Months Ended
Sep. 30, 2017
Deferred Charges, Goodwill And Other Assets [Line Items]  
Deferred Charges, Goodwill And Other Assets, Net

5.    DEFERRED CHARGES, GOODWILL AND OTHER ASSETS, NET



 

 

 

 

 



 

 

 

 

 



 

September 30,

 

 

December 31,

(dollars in thousands)

 

2017

 

 

2016

Deferred leasing costs

$

 200,486 

 

$

 220,947 

Deferred financing costs - unsecured revolving credit facility (a)

 

 4,945 

 

 

 5,400 



 

 205,431 

 

 

 226,347 

Accumulated amortization

 

 (95,819)

 

 

 (107,359)

Deferred charges, net

 

 109,612 

 

 

 118,988 

Notes receivable (b)

 

 114,760 

 

 

 13,251 

In-place lease values, related intangibles and other assets, net

 

 110,163 

 

 

 72,046 

Goodwill (c)

 

 2,945 

 

 

 2,945 

Prepaid expenses and other assets, net (d)

 

 102,384 

 

 

 60,720 



 

 

 

 

 

Total deferred charges, goodwill and other assets, net

$

 439,864 

 

$

 267,950 



(a)

Pursuant to recently issued accounting standards, 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 September 30, 2017,  a mortgage receivable with a balance of $45.1 million (acquired in August 2017)  which bears interest at 5.85 percent and matures in July 2019 with a three-month extension option; mortgages receivable for $40.2 million (provided to buyers in connection with property sales in August 2017) which bear interest at 4.0 percent and mature in November 2017; mortgages receivable for $24.8 million (provided to buyers in connection with property sales in August 2017) which bear interest at rates of 5.0 and 7.0 percent and mature in November 2017, with three 30-day extension options; and an interest-free note receivable with a net present value of $2.6 million which matures in April 2023.  The Company believes these balances are fully collectible.

(c)

All goodwill is attributable to the Company’s Multi-family Services segment.

(d)

Includes $45.3 million of proceeds from property sales held by a qualified intermediary as of September 30, 2017.



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.  As of September 30, 2017, the Company had outstanding interest rate swaps with a combined notional value of $675 million that were designated as cash flow hedges of interest rate risk.  During the nine months ending September 30, 2017, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.



The effective portion of 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.  The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three months ended September 30, 2017 and 2016, respectively, the company recorded ineffectiveness gain (loss) of $6,000 and $1,012,000 and during the nine months ended September 30, 2017 and 2016, respectively, the Company recorded ineffectiveness gain (loss) of $(26,000) and $1,012,000, respectively, which is included in interest and other investment income (loss) in the consolidated statements of operations, attributable to a floor mismatch in the underlying indices of the derivatives and the hedged interest payments made on its variable-rate debt.  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 that an additional $0.6 million will be reclassified as an increase to interest expense. 



Undesignated Cash Flow Hedges of Interest Rate Risk

Interest rate caps not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements but do not meet the strict hedge accounting requirements. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.  The Company recognized no expenses for the three months ended September 30, 2017 and 2016, respectively, and zero and $2,000 for the nine months ended September 30, 2017 and 2016, respectively, which is included in interest and other investment income (loss) in the consolidated statements of operations.



The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Balance Sheet as of September 30, 2017 and December 31, 2016.  (dollars in thousands)





 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



 

 

Fair Value

 

 

 

 

Asset  Derivatives designated

 

 

September 30,

 

 

December 31,

 

 

 

 

as hedging instruments

 

 

2017

 

 

2016

 

 

Balance sheet location

 

Interest rate swaps

 

$

 3,426 

 

$

 2,847 

 

 

Deferred charges, goodwill and other assets

 



 

 

 

 

 

 

 

 

 

 

Liability Derivatives designated

 

 

 

 

 

 

 

 

 

 

as hedging instruments

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

 1 

 

$

 -

 

 

Accounts payable, accrued expenses and other liabilities

 



The table below presents the effect of the Company’s derivative financial instruments on the Income Statement for the three and nine months ending September 30, 2017 and 2016.  (dollars in thousands)





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives in Cash Flow Hedging Relationships

 

Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)

 

Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)

 

 

Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)

 

Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)

 

 

Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion, Reclassification for Forecasted Transactions No Longer Probable of Occurring and Amount Excluded from Effectiveness Testing)



 

2017

 

 

2016

 

 

 

 

2017

 

 

2016

 

 

 

 

2017

 

 

2016

Three months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 172 

 

$

 866 

 

Interest expense

 

$

 (558)

 

$

 (860)

 

Interest and other

 

$

 6 

 

$

 1,012 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment income (loss)

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 (1,322)

 

$

 (10,128)

 

Interest expense

 

$

 (1,926)

 

$

 (2,600)

 

Interest and other

 

$

 (26)

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment income (loss)

 

 

 

 

 

 



Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness.  As of September 30, 2017, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $4,000.  As of September 30, 2017, the Company has not posted any collateral related to these agreements.  If the Company had breached any of these provisions at September 30, 2017, it could have been required to settle its obligations under the agreements at their termination value of $4,000.   

Mack-Cali Realty LP [Member]  
Deferred Charges, Goodwill And Other Assets [Line Items]  
Deferred Charges, Goodwill And Other Assets, Net

5.    DEFERRED CHARGES, GOODWILL AND OTHER ASSETS, NET



 

 

 

 

 



 

 

 

 

 



 

September 30,

 

 

December 31,

(dollars in thousands)

 

2017

 

 

2016

Deferred leasing costs

$

 200,486 

 

$

 220,947 

Deferred financing costs - unsecured revolving credit facility (a)

 

 4,945 

 

 

 5,400 



 

 205,431 

 

 

 226,347 

Accumulated amortization

 

 (95,819)

 

 

 (107,359)

Deferred charges, net

 

 109,612 

 

 

 118,988 

Notes receivable (b)

 

 114,760 

 

 

 13,251 

In-place lease values, related intangibles and other assets, net

 

 110,163 

 

 

 72,046 

Goodwill (c)

 

 2,945 

 

 

 2,945 

Prepaid expenses and other assets, net (d)

 

 102,384 

 

 

 60,720 



 

 

 

 

 

Total deferred charges, goodwill and other assets, net

$

 439,864 

 

$

 267,950 



(a)

Pursuant to recently issued accounting standards, 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 September 30, 2017,  a mortgage receivable with a balance of $45.1 million (acquired in August 2017)  which bears interest at 5.85 percent and matures in July 2019 with a three-month extension option; mortgages receivable for $40.2 million (provided to buyers in connection with property sales in August 2017) which bear interest at 4.0 percent and mature in November 2017; mortgages receivable for $24.8 million (provided to buyers in connection with property sales in August 2017) which bear interest at rates of 5.0 and 7.0 percent and mature in November 2017, with three 30-day extension options; and an interest-free note receivable with a net present value of $2.6 million which matures in April 2023.  The Company believes these balances are fully collectible.

(c)

All goodwill is attributable to the Company’s Multi-family Services segment.

(d)

Includes $45.3 million of proceeds from property sales held by a qualified intermediary as of September 30, 2017.



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.  As of September 30, 2017, the Company had outstanding interest rate swaps with a combined notional value of $675 million that were designated as cash flow hedges of interest rate risk.  During the nine months ending September 30, 2017, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.



The effective portion of 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.  The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three months ended September 30, 2017 and 2016, respectively, the company recorded ineffectiveness gain (loss) of $6,000 and $1,012,000 and during the nine months ended September 30, 2017 and 2016, respectively, the Company recorded ineffectiveness gain (loss) of $(26,000) and $1,012,000, respectively, which is included in interest and other investment income (loss) in the consolidated statements of operations, attributable to a floor mismatch in the underlying indices of the derivatives and the hedged interest payments made on its variable-rate debt.  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 that an additional $0.6 million will be reclassified as an increase to interest expense. 



Undesignated Cash Flow Hedges of Interest Rate Risk

Interest rate caps not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements but do not meet the strict hedge accounting requirements. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.  The Company recognized no expenses for the three months ended September 30, 2017 and 2016, respectively, and zero and $2,000 for the nine months ended September 30, 2017 and 2016, respectively, which is included in interest and other investment income (loss) in the consolidated statements of operations.



The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Balance Sheet as of September 30, 2017 and December 31, 2016.  (dollars in thousands)





 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



 

 

Fair Value

 

 

 

 

Asset  Derivatives designated

 

 

September 30,

 

 

December 31,

 

 

 

 

as hedging instruments

 

 

2017

 

 

2016

 

 

Balance sheet location

 

Interest rate swaps

 

$

 3,426 

 

$

 2,847 

 

 

Deferred charges, goodwill and other assets

 



 

 

 

 

 

 

 

 

 

 

Liability Derivatives designated

 

 

 

 

 

 

 

 

 

 

as hedging instruments

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

 1 

 

$

 -

 

 

Accounts payable, accrued expenses and other liabilities

 



The table below presents the effect of the Company’s derivative financial instruments on the Income Statement for the three and nine months ending September 30, 2017 and 2016.  (dollars in thousands)





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives in Cash Flow Hedging Relationships

 

Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)

 

Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)

 

 

Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)

 

Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)

 

 

Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion, Reclassification for Forecasted Transactions No Longer Probable of Occurring and Amount Excluded from Effectiveness Testing)



 

2017

 

 

2016

 

 

 

 

2017

 

 

2016

 

 

 

 

2017

 

 

2016

Three months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 172 

 

$

 866 

 

Interest expense

 

$

 (558)

 

$

 (860)

 

Interest and other

 

$

 6 

 

$

 1,012 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment income (loss)

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 (1,322)

 

$

 (10,128)

 

Interest expense

 

$

 (1,926)

 

$

 (2,600)

 

Interest and other

 

$

 (26)

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment income (loss)

 

 

 

 

 

 



Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness.  As of September 30, 2017, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $4,000.  As of September 30, 2017, the Company has not posted any collateral related to these agreements.  If the Company had breached any of these provisions at September 30, 2017, it could have been required to settle its obligations under the agreements at their termination value of $4,000.