Quarterly report pursuant to Section 13 or 15(d)

Noncontrolling Interests In Subsidiaries

v3.10.0.1
Noncontrolling Interests In Subsidiaries
9 Months Ended
Sep. 30, 2018
Noncontrolling Interest [Line Items]  
Noncontrolling Interests In Subsidiaries

16.   NONCONTROLLING INTERESTS IN SUBSIDIARIES



Noncontrolling interests in subsidiaries in the accompanying consolidated financial statements relate to (i) common units and LTIP units in the Operating Partnership, held by parties other than the General Partner (“Limited Partners”), and (ii) interests in consolidated joint ventures for the portion of such ventures not owned by the Company.



The following table reflects the activity of noncontrolling interests for the nine months ended September 30, 2018 and 2017, respectively (dollars in thousands):







 

 

 

 

 



 

Nine Months Ended



 

September 30,

 

 

2018

 

 

2017

Balance at January 1

$

192,428 

 

$

199,516 

Net income

 

13,571 

 

 

7,704 

Issuance of limited partner common units

 

 -

 

 

2,793 

Unit distributions

 

(6,760)

 

 

(6,295)

Redeemable noncontrolling interest

 

(10,572)

 

 

(7,905)

Increase (decrease) in noncontrolling interests in consolidated joint ventures

 

22,786 

 

 

(1,082)

Redemption of common units

 

 

 

 

 

  for common stock

 

(4,141)

 

 

(2,531)

Stock compensation

 

3,806 

 

 

3,302 

Cancellation of restricted shares

 

(454)

 

 

 -

Other comprehensive income (loss)

 

742 

 

 

63 

 Rebalancing of ownership percentage between parent and subsidiaries

 

(1,784)

 

 

(3,757)

Balance at September 30

$

209,622 

 

$

191,808 

 

Pursuant to ASC 810, Consolidation, on the accounting and reporting for noncontrolling interests and changes in ownership interests of a subsidiary, changes in a parent’s ownership interest (and transactions with noncontrolling interest unitholders in the subsidiary) while the parent retains its controlling interest in its subsidiary should be accounted for as equity transactions.  The carrying value of the noncontrolling interest shall be adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the parent.  Accordingly, as a result of equity transactions which caused changes in ownership percentages between Mack-Cali Realty Corporation stockholders’ equity and noncontrolling interests in the Operating Partnership that occurred during the nine months ended September 30, 2018, the Company has decreased noncontrolling interests in the Operating Partnership and increased additional paid-in capital in Mack-Cali Realty Corporation stockholders’ equity by approximately $1.8 million as of September 30, 2018.



NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP (applicable only to General Partner)



Common Units

Certain individuals and entities own common units in the Operating Partnership.  A common unit and a share of Common Stock of the General Partner have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the Operating Partnership.  Common unitholders have the right to redeem their common units, subject to certain restrictions.  The redemption is required to be satisfied in shares of Common Stock, 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, cash, or any combination thereof).  If the General Partner elects to satisfy the redemption with shares of Common Stock as opposed to cash, it 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 General Partner or the Operating Partnership under any circumstances.  When a unitholder redeems a common unit, noncontrolling interest in the Operating Partnership is reduced and Mack-Cali Realty Corporation Stockholders’ equity is increased.



LTIP Units

On March 8, 2016, the Company granted 2016 LTIP Awards to senior management of the Company, including the General Partner’s executive officers. On April 4, 2017, the Company granted 2017 LTIP Awards to senior management of the Company, including the General Partner’s executive officers. On April 20, 2018, the Company granted 2018 LTIP Awards to senior management of the Company, including the General Partner’s executive officers.  All of the 2016 LTIP Awards, 2017 LTIP Awards and 2018 LTIP Awards are in the form of units in the Operating Partnership. See Note 15: Mack-Cali Realty Corporation Stockholders’ Equity and Mack-Cali Realty, L.P.’s Partners’ Capital – Long-Term Incentive Plan Awards.



LTIP Units are designed to qualify as “profits interests” in the Operating Partnership for federal income tax purposes.  As a general matter, the profits interests characteristics of the LTIP Units mean that initially they will not be economically equivalent in value to a common unit.  If and when events specified by applicable tax regulations occur, LTIP Units can over time increase in value up to the point where they are equivalent to common units on a one-for-one basis.  After LTIP Units are fully vested, and to the extent the special tax rules applicable to profits interests have allowed them to become equivalent in value to common units, LTIP Units may be converted on a one-for-one basis into common units. Common units in turn have a one-for-one relationship in value with shares of the General Partner’s common stock, and are redeemable on a one-for-one basis for cash or, at the election of the Company, shares of the General Partner’s common stock.



Unit Transactions

The following table sets forth the changes in noncontrolling interests in subsidiaries which relate to the common units and LTIP Units in the Operating Partnership for the nine months ended September 30, 2018:





 

 



 

 



Common

LTIP



Units

Units

Balance at January 1, 2018

10,438,855  1,230,877 

Issuance of units

 -

864,024 

Redemption of common units for shares of common stock

(252,070)

 -

Cancellation of units

 -

(273,517)



 

 

Balance at September 30, 2018

10,186,785  1,821,384 

 

Noncontrolling Interest Ownership in Operating Partnership

As of September 30, 2018 and December 31, 2017, the noncontrolling interest common unitholders owned 10.2 percent and 10.4 percent of the Operating Partnership, respectively.



NONCONTROLLING INTEREST IN CONSOLIDATED JOINT VENTURES (applicable to General Partner and Operating Partnership) 

The Company consolidates certain joint ventures in which it has ownership interests.  Various entities and/or individuals hold noncontrolling interests in these ventures.



PARTICIPATION RIGHTS

The Company’s interests in certain real estate projects (two properties and a future development) each provide for the initial distributions of net cash flow solely to the Company, and thereafter, other parties have participation rights in 50 percent of the excess net cash flow remaining after the distribution to the Company of the aggregate amount equal to the sum of: (a) the Company’s capital contributions, plus (b) an IRR of 10 percent per annum. 

Mack-Cali Realty LP [Member]  
Noncontrolling Interest [Line Items]  
Noncontrolling Interests In Subsidiaries

16.   NONCONTROLLING INTERESTS IN SUBSIDIARIES



Noncontrolling interests in subsidiaries in the accompanying consolidated financial statements relate to (i) common units and LTIP units in the Operating Partnership, held by parties other than the General Partner (“Limited Partners”), and (ii) interests in consolidated joint ventures for the portion of such ventures not owned by the Company.



The following table reflects the activity of noncontrolling interests for the nine months ended September 30, 2018 and 2017, respectively (dollars in thousands):







 

 

 

 

 



 

Nine Months Ended



 

September 30,

 

 

2018

 

 

2017

Balance at January 1

$

192,428 

 

$

199,516 

Net income

 

13,571 

 

 

7,704 

Issuance of limited partner common units

 

 -

 

 

2,793 

Unit distributions

 

(6,760)

 

 

(6,295)

Redeemable noncontrolling interest

 

(10,572)

 

 

(7,905)

Increase (decrease) in noncontrolling interests in consolidated joint ventures

 

22,786 

 

 

(1,082)

Redemption of common units

 

 

 

 

 

  for common stock

 

(4,141)

 

 

(2,531)

Stock compensation

 

3,806 

 

 

3,302 

Cancellation of restricted shares

 

(454)

 

 

 -

Other comprehensive income (loss)

 

742 

 

 

63 

 Rebalancing of ownership percentage between parent and subsidiaries

 

(1,784)

 

 

(3,757)

Balance at September 30

$

209,622 

 

$

191,808 

 

Pursuant to ASC 810, Consolidation, on the accounting and reporting for noncontrolling interests and changes in ownership interests of a subsidiary, changes in a parent’s ownership interest (and transactions with noncontrolling interest unitholders in the subsidiary) while the parent retains its controlling interest in its subsidiary should be accounted for as equity transactions.  The carrying value of the noncontrolling interest shall be adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the parent.  Accordingly, as a result of equity transactions which caused changes in ownership percentages between Mack-Cali Realty Corporation stockholders’ equity and noncontrolling interests in the Operating Partnership that occurred during the nine months ended September 30, 2018, the Company has decreased noncontrolling interests in the Operating Partnership and increased additional paid-in capital in Mack-Cali Realty Corporation stockholders’ equity by approximately $1.8 million as of September 30, 2018.



NONCONTROLLING INTEREST IN OPERATING PARTNERSHIP (applicable only to General Partner)



Common Units

Certain individuals and entities own common units in the Operating Partnership.  A common unit and a share of Common Stock of the General Partner have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the Operating Partnership.  Common unitholders have the right to redeem their common units, subject to certain restrictions.  The redemption is required to be satisfied in shares of Common Stock, 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, cash, or any combination thereof).  If the General Partner elects to satisfy the redemption with shares of Common Stock as opposed to cash, it 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 General Partner or the Operating Partnership under any circumstances.  When a unitholder redeems a common unit, noncontrolling interest in the Operating Partnership is reduced and Mack-Cali Realty Corporation Stockholders’ equity is increased.



LTIP Units

On March 8, 2016, the Company granted 2016 LTIP Awards to senior management of the Company, including the General Partner’s executive officers. On April 4, 2017, the Company granted 2017 LTIP Awards to senior management of the Company, including the General Partner’s executive officers. On April 20, 2018, the Company granted 2018 LTIP Awards to senior management of the Company, including the General Partner’s executive officers.  All of the 2016 LTIP Awards, 2017 LTIP Awards and 2018 LTIP Awards are in the form of units in the Operating Partnership. See Note 15: Mack-Cali Realty Corporation Stockholders’ Equity and Mack-Cali Realty, L.P.’s Partners’ Capital – Long-Term Incentive Plan Awards.



LTIP Units are designed to qualify as “profits interests” in the Operating Partnership for federal income tax purposes.  As a general matter, the profits interests characteristics of the LTIP Units mean that initially they will not be economically equivalent in value to a common unit.  If and when events specified by applicable tax regulations occur, LTIP Units can over time increase in value up to the point where they are equivalent to common units on a one-for-one basis.  After LTIP Units are fully vested, and to the extent the special tax rules applicable to profits interests have allowed them to become equivalent in value to common units, LTIP Units may be converted on a one-for-one basis into common units. Common units in turn have a one-for-one relationship in value with shares of the General Partner’s common stock, and are redeemable on a one-for-one basis for cash or, at the election of the Company, shares of the General Partner’s common stock.



Unit Transactions

The following table sets forth the changes in noncontrolling interests in subsidiaries which relate to the common units and LTIP Units in the Operating Partnership for the nine months ended September 30, 2018:





 

 



 

 



Common

LTIP



Units

Units

Balance at January 1, 2018

10,438,855  1,230,877 

Issuance of units

 -

864,024 

Redemption of common units for shares of common stock

(252,070)

 -

Cancellation of units

 -

(273,517)



 

 

Balance at September 30, 2018

10,186,785  1,821,384 

 

Noncontrolling Interest Ownership in Operating Partnership

As of September 30, 2018 and December 31, 2017, the noncontrolling interest common unitholders owned 10.2 percent and 10.4 percent of the Operating Partnership, respectively.



NONCONTROLLING INTEREST IN CONSOLIDATED JOINT VENTURES (applicable to General Partner and Operating Partnership) 

The Company consolidates certain joint ventures in which it has ownership interests.  Various entities and/or individuals hold noncontrolling interests in these ventures.



PARTICIPATION RIGHTS

The Company’s interests in certain real estate projects (two properties and a future development) each provide for the initial distributions of net cash flow solely to the Company, and thereafter, other parties have participation rights in 50 percent of the excess net cash flow remaining after the distribution to the Company of the aggregate amount equal to the sum of: (a) the Company’s capital contributions, plus (b) an IRR of 10 percent per annum.