Quarterly report pursuant to Section 13 or 15(d)

Deferred Charges, Goodwill And Other Assets, Net

v3.19.1
Deferred Charges, Goodwill And Other Assets, Net
 3 Months Ended
Mar. 31, 2019
Deferred Charges, Goodwill And Other Assets [Line Items]  
Deferred Charges, Goodwill And Other Assets, Net

5.    DEFERRED CHARGES, GOODWILL AND OTHER ASSETS, NET



 

 

 

 

 



 

 

 

 

 



 

March 31,

 

 

December 31,

(dollars in thousands)

 

2019

 

 

2018

Deferred leasing costs

$

 144,273 

 

$

 173,822 

Deferred financing costs - unsecured revolving credit facility (a)

 

 5,328 

 

 

 5,356 



 

 149,601 

 

 

 179,178 

Accumulated amortization

 

 (52,910)

 

 

 (71,326)

Deferred charges, net

 

 96,691 

 

 

 107,852 

Notes receivable (b)

 

 47,893 

 

 

 47,409 

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

 

 95,331 

 

 

 89,860 

Goodwill (c)

 

 2,945 

 

 

 2,945 

Right of use assets (d)

 

 22,477 

 

 

 -

Prepaid expenses and other assets, net (e)

 

 329,287 

 

 

 107,168 



 

 

 

 

 

Total deferred charges, goodwill and other assets, net

$

 594,624 

 

$

 355,234 



(a)

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

(b)

Includes as of March 31, 2019 and December 31, 2018, respectively: a mortgage receivable with a balance of $45.9 million and $45.2 million (acquired in August 2017) which bears interest at 5.85 percent and matures in July 2019 with a three-month extension option; and an interest-free note receivable with a net present value of $2.0 million and $2.2 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)

Balance recorded starting in 2019, pursuant to the Company’s adoption of ASU 2016-02 (Topic 842).  This amount has a corresponding liability of $23.7 million, which is included in Accounts payable, accrued expense and other liabilities.  See Note 12: Commitments and Contingencies – Ground Lease agreements for further details.

(e)

Includes as of March 31, 2019 and December 31, 2018, $267.9 million and $49.2 million, respectively, of proceeds from property sales held by a qualified intermediary.  The Company utilized $217.4 million of the March 31, 2019 proceeds on April 1, 2019 to acquire a 377-unit multi-family property located in Jersey City, New Jersey.



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 March 31, 2019, the Company had outstanding interest rate swaps with a combined notional value of $585 million that were designated as cash flow hedges of interest rate risk.  During the three months ending March 31, 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.  During March 2019, in connection with a partial paydown of the Company’s outstanding term loan, the Company terminated interest rate swaps with an aggregate notional amount of $90 million.  This resulted in the Company accelerating the reclassification of a $1.3 million gain from other comprehensive income to earnings as a result of the hedged forecasted transactions no longer being probable to occur.



The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.  The Company recorded ineffectiveness gain of zero and $74,000 during the three months ended March 31, 2019 and 2018, 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 $4.5 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 March 31, 2019 and December 31, 2018 (dollars in thousands):





 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



 

 

Fair Value

 

 

 

 

Asset Derivatives designated

 

 

March 31,

 

 

December 31,

 

 

 

 

as hedging instruments

 

 

2019

 

 

2018

 

 

Balance sheet location

 

Interest rate swaps

 

$

 5,723 

 

$

 10,175 

 

 

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 months ending March 31, 2019 and 2018 (dollars in thousands):





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives in Cash Flow Hedging Relationships

 

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

 

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

 

 

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

 

Location of Gain or (Loss) Recognized in Income on Derivative

 

 

Amount of Gain or (Loss) Recognized in Income on Derivative (Reclassification for Forecasted Transactions No Longer Probable of Occurring)

 

 

Total Amount of Interest Expense presented in the consolidated statements

Three months ended March 31,

2019

 

 

2018

 

 

 

 

2019

 

 

2018

 

 

 

 

2019

 

 

2018

 

 

 

2019

 

 

2018



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 (1,601)

 

$

 5,226 

 

Interest expense

 

$

 1,571 

 

$

 80 

 

Interest and other

 

$

 1,279 

 

$

 (74)

 

 

$

 (24,774)

 

$

 (20,075)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 March 31, 2019, the Company did not have derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements.  As of March 31, 2019, 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



 

 

 

 

 



 

 

 

 

 



 

March 31,

 

 

December 31,

(dollars in thousands)

 

2019

 

 

2018

Deferred leasing costs

$

 144,273 

 

$

 173,822 

Deferred financing costs - unsecured revolving credit facility (a)

 

 5,328 

 

 

 5,356 



 

 149,601 

 

 

 179,178 

Accumulated amortization

 

 (52,910)

 

 

 (71,326)

Deferred charges, net

 

 96,691 

 

 

 107,852 

Notes receivable (b)

 

 47,893 

 

 

 47,409 

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

 

 95,331 

 

 

 89,860 

Goodwill (c)

 

 2,945 

 

 

 2,945 

Right of use assets (d)

 

 22,477 

 

 

 -

Prepaid expenses and other assets, net (e)

 

 329,287 

 

 

 107,168 



 

 

 

 

 

Total deferred charges, goodwill and other assets, net

$

 594,624 

 

$

 355,234 



(a)

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

(b)

Includes as of March 31, 2019 and December 31, 2018, respectively: a mortgage receivable with a balance of $45.9 million and $45.2 million (acquired in August 2017) which bears interest at 5.85 percent and matures in July 2019 with a three-month extension option; and an interest-free note receivable with a net present value of $2.0 million and $2.2 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)

Balance recorded starting in 2019, pursuant to the Company’s adoption of ASU 2016-02 (Topic 842).  This amount has a corresponding liability of $23.7 million, which is included in Accounts payable, accrued expense and other liabilities.  See Note 12: Commitments and Contingencies – Ground Lease agreements for further details.

(e)

Includes as of March 31, 2019 and December 31, 2018, $267.9 million and $49.2 million, respectively, of proceeds from property sales held by a qualified intermediary.  The Company utilized $217.4 million of the March 31, 2019 proceeds on April 1, 2019 to acquire a 377-unit multi-family property located in Jersey City, New Jersey.



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 March 31, 2019, the Company had outstanding interest rate swaps with a combined notional value of $585 million that were designated as cash flow hedges of interest rate risk.  During the three months ending March 31, 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.  During March 2019, in connection with a partial paydown of the Company’s outstanding term loan, the Company terminated interest rate swaps with an aggregate notional amount of $90 million.  This resulted in the Company accelerating the reclassification of a $1.3 million gain from other comprehensive income to earnings as a result of the hedged forecasted transactions no longer being probable to occur.



The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.  The Company recorded ineffectiveness gain of zero and $74,000 during the three months ended March 31, 2019 and 2018, 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 $4.5 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 March 31, 2019 and December 31, 2018 (dollars in thousands):





 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 



 

 

Fair Value

 

 

 

 

Asset Derivatives designated

 

 

March 31,

 

 

December 31,

 

 

 

 

as hedging instruments

 

 

2019

 

 

2018

 

 

Balance sheet location

 

Interest rate swaps

 

$

 5,723 

 

$

 10,175 

 

 

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 months ending March 31, 2019 and 2018 (dollars in thousands):





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives in Cash Flow Hedging Relationships

 

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

 

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

 

 

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

 

Location of Gain or (Loss) Recognized in Income on Derivative

 

 

Amount of Gain or (Loss) Recognized in Income on Derivative (Reclassification for Forecasted Transactions No Longer Probable of Occurring)

 

 

Total Amount of Interest Expense presented in the consolidated statements

Three months ended March 31,

2019

 

 

2018

 

 

 

 

2019

 

 

2018

 

 

 

 

2019

 

 

2018

 

 

 

2019

 

 

2018



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

$

 (1,601)

 

$

 5,226 

 

Interest expense

 

$

 1,571 

 

$

 80 

 

Interest and other

 

$

 1,279 

 

$

 (74)

 

 

$

 (24,774)

 

$

 (20,075)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 March 31, 2019, the Company did not have derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements.  As of March 31, 2019, the Company has not posted any collateral related to these agreements.