Quarterly report pursuant to Section 13 or 15(d)

Noncontrolling Interests In Subsidiaries

v3.20.2
Noncontrolling Interests In Subsidiaries
9 Months Ended
Sep. 30, 2020
Noncontrolling Interest [Line Items]  
Noncontrolling Interests In Subsidiaries 17.    NONCONTROLLING INTERESTS IN SUBSIDIARIES

Noncontrolling interests in subsidiaries in the accompanying consolidated financial statements relate to (i) common units (“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 three and nine months ended September 30, 2020 and 2019, respectively (dollars in thousands):

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Opening Balance

$

194,463

$

230,461

$

205,776

$

210,523 

Net income

1,090

(93)

5,123

32,731

Unit distributions

(2,029)

(2,360)

(3,509)

(6,417)

Redeemable noncontrolling interests

(6,701)

(6,805)

(20,176)

(18,685)

Change in noncontrolling interests in consolidated joint ventures

-

-

133

9,110 

Redemption of common units for common stock

-

-

-

(705)

Redemption of common units

(29)

(65)

(2,170)

(5,030)

Stock compensation

329

1,973 

4,534

5,561

Cancellation of unvested LTIP units

-

-

(201)

(2,889)

Other comprehensive income (loss)

-

(87)

(34)

(960)

Rebalancing of ownership percentage between parent and subsidiaries

875

(1,426)

(1,478)

(1,641)

Balance at September 30

$

187,998

$

221,598

$

187,998

$

221,598

 

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 interests 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 interests 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, 2020, 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 $1.5 million as of September 30, 2020.

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

Common Units

During the nine months ended September 30, 2020, the Company redeemed for cash 99,952 common units at their fair market value of $2.2 million.

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 interests 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. On March 22, 2019, the Company granted 2019 LTIP Awards to senior management of the Company, including the General Partner’s executive officers. On March 24, 2020, the Company granted 2020 LTIP Awards to senior management of the Company, including the General Partner’s executive officers. All of the 2016 LTIP Awards, 2017 LTIP Awards, 2018 LTIP Awards, 2019 LTIP Awards and 2020 LTIP Awards are in the form of units in the Operating Partnership. See Note 16: 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.

AO LTIP Units (Appreciation-Only LTIP Units)

On March 13, 2019, the Company granted 625,000 AO LTIP Units to Mr. DeMarco pursuant to the AO Long Term Incentive Plan Award Agreement. See Note 16: Mack-Cali Realty Corporation Stockholders’ Equity and Mack-Cali Realty, L.P.’s Partners’ Capital – AO LTIP Units (Appreciation-Only LTIP Units).

AO LTIP Units are a class of partnership interests in the Operating Partnership that are intended to qualify as “profit interests” for federal income tax purposes and generally only allow the recipient to realize value to the extent the fair market value of a share of Common Stock exceeds the threshold level set at the time the AO LTIP Units are granted, subject to any vesting conditions applicable to the award. The value of vested AO LTIP Units is realized through conversion of the AO LTIP Units into Common Units. The number of Common Units into which vested AO LTIP Units may be converted is determined based on the quotient of (i) the excess of the fair market value of the Common Stock on the conversion date over the threshold level designated at the time the AO LTIP Unit was granted, divided by (ii) the fair market value of the Common Stock on the conversion date. AO LTIP Units, once vested, have a finite term during which they may be converted into Common Units, not in excess of ten years from the grant date of the AO LTIP Units.

Unit Transactions

The following tables set forth the changes in noncontrolling interests in subsidiaries which relate to the Common Units and LTIP Units in the Operating Partnership for the three months ended September 30, 2020 and 2019, respectively.

Common Units/

Unvested LTIP

Vested LTIP Units

Units

Outstanding at July 1, 2020

9,586,528

2,659,518

Issuance of LTIP units

-

-

Redemption of common units

(2,225)

-

Conversion of LTIP units for common units

2,225

-

Vested LTIP units

86,030

(88,255)

Cancellation of units

-

(833,198)

Outstanding at September 30, 2020

9,672,558

1,738,065

Common Units/

Unvested LTIP

Vested LTIP Units

Units

Balance at July 1, 2019

9,976,344

1,826,331

Issuance of LTIP units

-

-

Redemption of common units for shares of common stock

-

-

Redemption of common units

(3,000)

-

Conversion of vested LTIP units to common units

-

-

Vested LTIP units

-

-

Cancellation of units

-

-

Outstanding at September 30, 2019

9,973,344

1,826,331

The following tables set 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, 2020 and 2019, respectively.

Common Units/

Unvested LTIP

Vested LTIP Units

Units

Balance at January 1, 2020

9,612,064

1,826,331

Redemption of common units for shares of common stock

-

-

Redemption of common units

(99,952)

Conversion of vested LTIP units to common units

6,655

Vested LTIP units

153,792

(160,447)

Issuance of units

-

1,287,568

Cancellation of units

(1)

(1,215,387)

Balance at September 30, 2020

9,672,558

1,738,065

Common Units/

Unvested LTIP

Vested LTIP Units

Units

Balance at January 1, 2019

10,229,349

1,707,106

Issuance of LTIP units

-

565,623

Redemption of common units for shares of common stock

(38,011)

-

Redemption of common units

(304,638)

-

Conversion of vested LTIP units to common units

18,438

-

Vested LTIP units

68,206

(86,644)

Cancellation of unvested LTIP units

-

(359,754)

Balance at September 30, 2019

9,973,344

1,826,331

Noncontrolling Interests Ownership in Operating Partnership

As of September 30, 2020 and December 31, 2019, the noncontrolling interests common unitholders owned 9.6 percent and 9.6 percent of the Operating Partnership, respectively.

NONCONTROLLING INTERESTS 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 (one property and one potential 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 17.    NONCONTROLLING INTERESTS IN SUBSIDIARIES

Noncontrolling interests in subsidiaries in the accompanying consolidated financial statements relate to (i) common units (“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 three and nine months ended September 30, 2020 and 2019, respectively (dollars in thousands):

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Opening Balance

$

194,463

$

230,461

$

205,776

$

210,523 

Net income

1,090

(93)

5,123

32,731

Unit distributions

(2,029)

(2,360)

(3,509)

(6,417)

Redeemable noncontrolling interests

(6,701)

(6,805)

(20,176)

(18,685)

Change in noncontrolling interests in consolidated joint ventures

-

-

133

9,110 

Redemption of common units for common stock

-

-

-

(705)

Redemption of common units

(29)

(65)

(2,170)

(5,030)

Stock compensation

329

1,973 

4,534

5,561

Cancellation of unvested LTIP units

-

-

(201)

(2,889)

Other comprehensive income (loss)

-

(87)

(34)

(960)

Rebalancing of ownership percentage between parent and subsidiaries

875

(1,426)

(1,478)

(1,641)

Balance at September 30

$

187,998

$

221,598

$

187,998

$

221,598

 

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 interests 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 interests 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, 2020, 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 $1.5 million as of September 30, 2020.

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

Common Units

During the nine months ended September 30, 2020, the Company redeemed for cash 99,952 common units at their fair market value of $2.2 million.

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 interests 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. On March 22, 2019, the Company granted 2019 LTIP Awards to senior management of the Company, including the General Partner’s executive officers. On March 24, 2020, the Company granted 2020 LTIP Awards to senior management of the Company, including the General Partner’s executive officers. All of the 2016 LTIP Awards, 2017 LTIP Awards, 2018 LTIP Awards, 2019 LTIP Awards and 2020 LTIP Awards are in the form of units in the Operating Partnership. See Note 16: 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.

AO LTIP Units (Appreciation-Only LTIP Units)

On March 13, 2019, the Company granted 625,000 AO LTIP Units to Mr. DeMarco pursuant to the AO Long Term Incentive Plan Award Agreement. See Note 16: Mack-Cali Realty Corporation Stockholders’ Equity and Mack-Cali Realty, L.P.’s Partners’ Capital – AO LTIP Units (Appreciation-Only LTIP Units).

AO LTIP Units are a class of partnership interests in the Operating Partnership that are intended to qualify as “profit interests” for federal income tax purposes and generally only allow the recipient to realize value to the extent the fair market value of a share of Common Stock exceeds the threshold level set at the time the AO LTIP Units are granted, subject to any vesting conditions applicable to the award. The value of vested AO LTIP Units is realized through conversion of the AO LTIP Units into Common Units. The number of Common Units into which vested AO LTIP Units may be converted is determined based on the quotient of (i) the excess of the fair market value of the Common Stock on the conversion date over the threshold level designated at the time the AO LTIP Unit was granted, divided by (ii) the fair market value of the Common Stock on the conversion date. AO LTIP Units, once vested, have a finite term during which they may be converted into Common Units, not in excess of ten years from the grant date of the AO LTIP Units.

Unit Transactions

The following tables set forth the changes in noncontrolling interests in subsidiaries which relate to the Common Units and LTIP Units in the Operating Partnership for the three months ended September 30, 2020 and 2019, respectively.

Common Units/

Unvested LTIP

Vested LTIP Units

Units

Outstanding at July 1, 2020

9,586,528

2,659,518

Issuance of LTIP units

-

-

Redemption of common units

(2,225)

-

Conversion of LTIP units for common units

2,225

-

Vested LTIP units

86,030

(88,255)

Cancellation of units

-

(833,198)

Outstanding at September 30, 2020

9,672,558

1,738,065

Common Units/

Unvested LTIP

Vested LTIP Units

Units

Balance at July 1, 2019

9,976,344

1,826,331

Issuance of LTIP units

-

-

Redemption of common units for shares of common stock

-

-

Redemption of common units

(3,000)

-

Conversion of vested LTIP units to common units

-

-

Vested LTIP units

-

-

Cancellation of units

-

-

Outstanding at September 30, 2019

9,973,344

1,826,331

The following tables set 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, 2020 and 2019, respectively.

Common Units/

Unvested LTIP

Vested LTIP Units

Units

Balance at January 1, 2020

9,612,064

1,826,331

Redemption of common units for shares of common stock

-

-

Redemption of common units

(99,952)

Conversion of vested LTIP units to common units

6,655

Vested LTIP units

153,792

(160,447)

Issuance of units

-

1,287,568

Cancellation of units

(1)

(1,215,387)

Balance at September 30, 2020

9,672,558

1,738,065

Common Units/

Unvested LTIP

Vested LTIP Units

Units

Balance at January 1, 2019

10,229,349

1,707,106

Issuance of LTIP units

-

565,623

Redemption of common units for shares of common stock

(38,011)

-

Redemption of common units

(304,638)

-

Conversion of vested LTIP units to common units

18,438

-

Vested LTIP units

68,206

(86,644)

Cancellation of unvested LTIP units

-

(359,754)

Balance at September 30, 2019

9,973,344

1,826,331

Noncontrolling Interests Ownership in Operating Partnership

As of September 30, 2020 and December 31, 2019, the noncontrolling interests common unitholders owned 9.6 percent and 9.6 percent of the Operating Partnership, respectively.

NONCONTROLLING INTERESTS 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 (one property and one potential 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.