Quarterly report pursuant to Section 13 or 15(d)

Deferred Charges, Goodwill And Other Assets, Net

v3.10.0.1
Deferred Charges, Goodwill And Other Assets, Net
 6 Months Ended
Jun. 30, 2018
Deferred Charges, Goodwill And Other Assets [Line Items]  
Deferred Charges, Goodwill And Other Assets, Net

5.    DEFERRED CHARGES, GOODWILL AND OTHER ASSETS, NET



 

 

 

 

 



 

 

 

 

 



 

June 30,

 

 

December 31,

(dollars in thousands)

 

2018

 

 

2017

Deferred leasing costs

$

 154,093 

 

$

 199,515 

Deferred financing costs - unsecured revolving credit facility (a)

 

 4,945 

 

 

 4,945 



 

 159,038 

 

 

 204,460 

Accumulated amortization

 

 (63,837)

 

 

 (98,956)

Deferred charges, net

 

 95,201 

 

 

 105,504 

Notes receivable (b)

 

 51,898 

 

 

 50,167 

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

 

 93,818 

 

 

 102,757 

Goodwill (c)

 

 2,945 

 

 

 2,945 

Prepaid expenses and other assets, net (d)

 

 66,256 

 

 

 80,947 



 

 

 

 

 

Total deferred charges, goodwill and other assets, net

$

 310,118 

 

$

 342,320 



(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 June 30, 2018: a mortgage receivable with a balance of $44.0 million (acquired in August 2017)  which bears interest at 5.85 percent and matures in July 2019 with a three-month extension option; a note receivable for $4.0 million (provided to an affiliate of the buyers in connection with a property sale in March 2018)  which bears interest at 3.0 percent and matures in April 2028; and an interest-free note receivable with a net present value of $2.4 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 Real Estate and Services segment.

(d)

The balance as of June 30, 2018 reflects the receipt by the Company of $26.9 million of proceeds from 2017 property sales held by a qualified intermediary as of December 31, 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 June 30, 2018, 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 six months ending June 30, 2018, 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. The Company recorded ineffectiveness gain (loss) of $(100,000) and $11,000 during the three months ended June 30, 2018 and 2017, respectively, and $(174,000) and $(32,000) during the six months ended June 30, 2018 and 2017, 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 $5.7 million will be reclassified as a decrease to interest expense. 



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 June 30, 2018 and December 31, 2017.  (dollars in thousands)





 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



 

 

Fair Value

 

 

 

 

Asset  Derivatives designated

 

 

June 30,

 

 

December 31,

 

 

 

 

as hedging instruments

 

 

2018

 

 

2017

 

 

Balance sheet location

 

Interest rate swaps

 

$

 14,820 

 

$

 8,060 

 

 

Deferred charges, goodwill and other assets

 



 

 

 

 

 

 

 

 

 

 



The table below presents the effect of the Company’s derivative financial instruments on the Statement of Operations for the three and six months ending June 30, 2018 and 2017.  (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)



 

2018

 

 

2017

 

 

 

 

2018

 

 

2017

 

 

 

 

2018

 

 

2017

Three months ended June 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 2,428 

 

$

 (2,129)

 

Interest expense

 

$

 640 

 

$

 (776)

 

Interest and other

 

$

 (100)

 

$

 11 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment income (loss)

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 7,654 

 

$

 (1,494)

 

Interest expense

 

$

 720 

 

$

 (1,368)

 

Interest and other

 

$

 (174)

 

$

 (32)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 June 30, 2018, 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 June 30, 2018, the Company has not posted any collateral related to these agreements.   

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



 

 

 

 

 



 

 

 

 

 



 

June 30,

 

 

December 31,

(dollars in thousands)

 

2018

 

 

2017

Deferred leasing costs

$

 154,093 

 

$

 199,515 

Deferred financing costs - unsecured revolving credit facility (a)

 

 4,945 

 

 

 4,945 



 

 159,038 

 

 

 204,460 

Accumulated amortization

 

 (63,837)

 

 

 (98,956)

Deferred charges, net

 

 95,201 

 

 

 105,504 

Notes receivable (b)

 

 51,898 

 

 

 50,167 

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

 

 93,818 

 

 

 102,757 

Goodwill (c)

 

 2,945 

 

 

 2,945 

Prepaid expenses and other assets, net (d)

 

 66,256 

 

 

 80,947 



 

 

 

 

 

Total deferred charges, goodwill and other assets, net

$

 310,118 

 

$

 342,320 



(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 June 30, 2018: a mortgage receivable with a balance of $44.0 million (acquired in August 2017)  which bears interest at 5.85 percent and matures in July 2019 with a three-month extension option; a note receivable for $4.0 million (provided to an affiliate of the buyers in connection with a property sale in March 2018)  which bears interest at 3.0 percent and matures in April 2028; and an interest-free note receivable with a net present value of $2.4 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 Real Estate and Services segment.

(d)

The balance as of June 30, 2018 reflects the receipt by the Company of $26.9 million of proceeds from 2017 property sales held by a qualified intermediary as of December 31, 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 June 30, 2018, 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 six months ending June 30, 2018, 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. The Company recorded ineffectiveness gain (loss) of $(100,000) and $11,000 during the three months ended June 30, 2018 and 2017, respectively, and $(174,000) and $(32,000) during the six months ended June 30, 2018 and 2017, 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 $5.7 million will be reclassified as a decrease to interest expense. 



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 June 30, 2018 and December 31, 2017.  (dollars in thousands)





 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



 

 

Fair Value

 

 

 

 

Asset  Derivatives designated

 

 

June 30,

 

 

December 31,

 

 

 

 

as hedging instruments

 

 

2018

 

 

2017

 

 

Balance sheet location

 

Interest rate swaps

 

$

 14,820 

 

$

 8,060 

 

 

Deferred charges, goodwill and other assets

 



 

 

 

 

 

 

 

 

 

 



The table below presents the effect of the Company’s derivative financial instruments on the Statement of Operations for the three and six months ending June 30, 2018 and 2017.  (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)



 

2018

 

 

2017

 

 

 

 

2018

 

 

2017

 

 

 

 

2018

 

 

2017

Three months ended June 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 2,428 

 

$

 (2,129)

 

Interest expense

 

$

 640 

 

$

 (776)

 

Interest and other

 

$

 (100)

 

$

 11 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

investment income (loss)

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 7,654 

 

$

 (1,494)

 

Interest expense

 

$

 720 

 

$

 (1,368)

 

Interest and other

 

$

 (174)

 

$

 (32)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 June 30, 2018, 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 June 30, 2018, the Company has not posted any collateral related to these agreements.