Mack-Cali Realty Corp. 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-13274

MACK-CALI REALTY CORPORATION
(Exact Name of Registrant as specified in its charter)

Maryland 
22-3305147
(State or other jurisdiction of
(IRS Employer
incorporation or organization)
Identification No.)

343 Thornall Street, Edison, New Jersey
08837-2206
(Address of principal executive offices)
(Zip code)

(732) 590-1000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

(Title of Each Class)
(Name of Each Exchange on Which Registered)

Common Stock, $0.01 par value
New York Stock Exchange
Preferred Share Purchase Rights
 

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes X No ___

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ___ No X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer X  Accelerated filer ___ Non-accelerated filer ___

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ___ No X

As of June 30, 2006, the aggregate market value of the voting stock held by non-affiliates of the registrant was $2,384,277,179. As of February 16, 2007, the aggregate market value of the voting stock held by non-affiliates of the registrant was $3,628,695,380. The aggregate market values were computed with references to the closing prices on the New York Stock Exchange on such dates. These calculations do not reflect a determination that persons are affiliates for any other purpose.

As of February 16, 2007, 67,792,367 shares of common stock, $0.01 par value, of the Company (“Common Stock”) were outstanding.

LOCATION OF EXHIBIT INDEX: The index of exhibits is contained herein on page number 126.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant’s definitive proxy statement for fiscal year ended December 31, 2006 to be issued in conjunction with the registrant’s annual meeting of shareholders expected to be held on May 23, 2007 are incorporated by reference in Part III of this Form 10-K. The definitive proxy statement will be filed by the registrant with the SEC not later than 120 days from the end of the registrant’s fiscal year ended December 31, 2006.





FORM 10-K

Table of Contents


PART I
 
Page No.
 
Item 1
Business
3
 
Item 1A
Risk Factors
10
 
Item 1B
Unresolved Staff Comments
17
 
Item 2
Properties
18
 
Item 3
Legal Proceedings
38
 
Item 4
Submission of Matters to a Vote of Security Holders
39
 
       
PART II
     
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters
   
 
and Issuer Purchases of Equity Securities
40
 
Item 6
Selected Financial Data
42
 
Item 7
Management’s Discussion and Analysis of Financial Condition and
   
 
Results of Operations
43
 
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
63
 
Item 8
Financial Statements and Supplementary Data
64
 
Item 9
Changes in and Disagreements with Accountants on Accounting and
   
 
Financial Disclosure
64
 
Item 9A
Controls and Procedures
64
 
Item 9B
Other Information
65
 
       
PART III
     
Item 10
Directors, Executive Officers and Corporate Governance
65
 
Item 11
Executive Compensation
65
 
Item 12
Security Ownership of Certain Beneficial Owners and Management
   
 
and Related Stockholder Matters
65
 
Item 13
Certain Relationships and Related Transactions, and Director Independence
65
 
Item 14
Principal Accountant Fees and Services
65
 
       
PART IV
     
Item 15
Exhibits and Financial Statement Schedules
66
 
       
SIGNATURES
 
124
 
       
EXHIBIT INDEX
 
126
 




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PART I

ITEM 1. BUSINESS

GENERAL
Mack-Cali Realty Corporation, a Maryland corporation (together with its subsidiaries, the “Company”), is a fully-integrated, self-administered and self-managed real estate investment trust (“REIT”) that owns and operates a real estate portfolio comprised predominantly of Class A office and office/flex properties located primarily in the Northeast. The Company performs substantially all commercial real estate leasing, management, acquisition, development and construction services on an in-house basis. Mack-Cali Realty Corporation was incorporated on May 24, 1994. The Company’s executive offices are located at 343 Thornall Street, Edison, New Jersey 08837-2206, and its telephone number is (732) 590-1000. The Company has an internet website at www.mack-cali.com.

As of December 31, 2006, the Company owned or had interests in 300 properties, aggregating approximately 34.3 million square feet, plus developable land (collectively, the “Properties”), which are leased to over 2,200 tenants. The Properties are comprised of: (a) 255 wholly-owned or Company-controlled properties consisting of 150 office buildings and 95 office/flex buildings aggregating approximately 28.5 million square feet, six industrial/warehouse buildings totaling approximately 387,400 square feet, two stand-alone retail properties totaling approximately 17,300 square feet, and two land leases (collectively, the “Consolidated Properties”); and (b) 44 buildings, which are primarily office properties, aggregating approximately 5.4 million square feet, and a 350-room hotel, which are owned by unconsolidated joint ventures in which the Company has investment interests. Unless otherwise indicated, all references to square feet represent net rentable area. As of December 31, 2006, the office, office/flex, industrial/warehouse and stand-alone retail properties included in the Consolidated Properties were 92.0 percent leased. Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2006, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases that expire at the period end date. Leases that expire as of December 31, 2006 aggregate 103,477 square feet, or 0.4 percent of the net rentable square footage. The Properties are located in seven states, primarily in the Northeast, and the District of Columbia. See Item 2: Properties.

The Company’s strategy has been to focus its operations, acquisition and development of office properties in high-barrier-to-entry markets and sub-markets where it believes it is, or can become, a significant and preferred owner and operator. The Company plans to continue this strategy by expanding through acquisitions and/or development in Northeast markets where it has, or can achieve, similar status. The Company believes that its Properties have excellent locations and access and are well-maintained and professionally managed. As a result, the Company believes that its Properties attract high quality tenants and achieve among the highest rental, occupancy and tenant retention rates within their markets. The Company also believes that its extensive market knowledge provides it with a significant competitive advantage, which is further enhanced by its strong reputation for, and emphasis on, delivering highly responsive, professional management services. See “Business Strategies.”

In May 2006, in conjunction with the completion of the Gale Company acquisition, the Company acquired The Gale Construction Company and its related companies, which offer a full complement of professional services in the areas of construction management, general contracting and advisory services.

As of December 31, 2006, executive officers and directors of the Company and their affiliates owned approximately 8.8 percent of the Company’s outstanding shares of Common Stock (including Units redeemable into shares of Common Stock). As used herein, the term “Units” refers to limited partnership interests in Mack-Cali Realty, L.P., a Delaware limited partnership (the “Operating Partnership”) through which the Company conducts its real estate activities. The Company’s executive officers have been employed by the Company and/or its predecessor companies for an average of approximately 19 years.


BUSINESS STRATEGIES 
Operations
Reputation: The Company has established a reputation as a highly-regarded landlord with an emphasis on delivering quality tenant services in buildings it owns and/or manages. The Company believes that its continued success depends in part on enhancing its reputation as an operator of choice, which will facilitate the retention of current tenants and the attraction of new tenants. The Company believes it provides a superior level of service to its tenants, which should in turn, allow the Company to outperform the market with respect to occupancy rates, as well as improve tenant retention.

3


 

Communication with tenants: The Company emphasizes frequent communication with tenants to ensure first-class service to the Properties. Property management personnel generally are located on site at the Properties to provide convenient access to management and to ensure that the Properties are well-maintained. Property management’s primary responsibility is to ensure that buildings are operated at peak efficiency in order to meet both the Company’s and tenants’ needs and expectations. Property management personnel additionally budget and oversee capital improvements and building system upgrades to enhance the Properties’ competitive advantages in their markets and to maintain the quality of the Company’s properties.

Additionally, the Company’s in-house leasing representatives develop and maintain long-term relationships with the Company’s diverse tenant base and coordinate leasing, expansion, relocation and build-to-suit opportunities within the Company’s portfolio. This approach allows the Company to offer office space in the appropriate size and location to current or prospective tenants in any of its sub-markets.

Growth
The Company plans to continue to own and operate a portfolio of properties in high-barrier-to-entry markets, with a primary focus in the Northeast. The Company’s primary objectives are to maximize operating cash flow and to enhance the value of its portfolio through effective management, acquisition, development and property sales strategies, as follows:

Internal Growth: The Company seeks to maximize the value of its existing portfolio through implementing operating strategies designed to produce the highest effective rental and occupancy rates and lowest tenant installation cost within the markets that it operates. The Company continues to pursue internal growth through re-leasing space at higher effective rents with contractual rent increases and developing or redeveloping space for its diverse base of high credit tenants, including New Cingular Wireless PCS LLC, Morgan Stanley and The United States of America - GSA. In addition, the Company seeks economies of scale through volume discounts to take advantage of its size and dominance in particular sub-markets, and operating efficiencies through the use of in-house management, leasing, marketing, financing, accounting, legal, development and construction services.

Acquisitions: The Company also believes that growth opportunities exist through acquiring operating properties or properties for redevelopment with attractive returns in its core Northeast sub-markets where, based on its expertise in leasing, managing and operating properties, it believes it is, or can become, a significant and preferred owner and operator. The Company intends either directly or through joint ventures to acquire, invest in or redevelop additional properties that: (i) are expected to provide attractive initial yields with potential for growth in cash flow from operations; (ii) are well-located, of high quality and competitive in their respective sub-markets; (iii) are located in its existing sub-markets or in sub-markets in which the Company can become a significant and preferred owner and operator; and (iv) it believes have been under-managed or are otherwise capable of improved performance through intensive management, capital improvements and/or leasing that should result in increased effective rental and occupancy rates.

Development: The Company seeks to selectively develop additional properties either directly or through joint ventures where it believes such development will result in a favorable risk-adjusted return on investment in coordination with the above operating strategies. Such development primarily will occur: (i) when leases have been executed prior to construction; (ii) in stable core Northeast sub-markets where the demand for such space exceeds available supply; and (iii) where the Company is, or can become, a significant and preferred owner and operator.

Property Sales: While management’s principal intention is to own and operate its properties on a long-term basis, it periodically assesses the attributes of each of its properties, with a particular focus on the supply and demand fundamentals of the sub-markets in which they are located. Based on these ongoing assessments, the Company may, from time to time, decide to sell any of its properties.

Financial
The Company currently intends to maintain a ratio of debt-to-undepreciated assets (total debt of the Company as a percentage of total undepreciated assets) of 50 percent or less. As of December 31, 2006, the Company’s total debt constituted

4


approximately 41.4 percent of total undepreciated assets of the Company. The Company has three investment grade credit ratings. Standard & Poor’s Rating Services (“S&P”) and Fitch, Inc. (“Fitch”) have each assigned their BBB rating to existing and prospective senior unsecured debt of the Operating Partnership. S&P and Fitch have also assigned their BBB- rating to existing and prospective preferred stock offerings of the Company. Moody’s Investors Service (“Moody’s”) has assigned its Baa2 rating to existing and prospective senior unsecured debt of the Operating Partnership and its Baa3 rating to existing and prospective preferred stock offerings of the Company. Although there is no limit in the Company’s organizational documents on the amount of indebtedness that the Company may incur or a requirement for the maintenance of investment grade credit ratings, the Company has entered into certain financial agreements which contain covenants that limit the Company’s ability to incur indebtedness under certain circumstances. The Company intends to conduct its operations so as to best be able to maintain its investment grade rated status. The Company intends to utilize the most appropriate sources of capital for future acquisitions, development, capital improvements and other investments, which may include funds from operating activities, proceeds from property and land sales, short-term and long-term borrowings (including draws on the Company’s revolving credit facility), and the issuance of additional debt or equity securities.

EMPLOYEES

As of December 31, 2006, the Company had approximately 540 full-time employees.

COMPETITION

The leasing of real estate is highly competitive. The Properties compete for tenants with lessors and developers of similar properties located in their respective markets primarily on the basis of location, rent charged, services provided, and the design and condition of the Properties. The Company also experiences competition when attempting to acquire or dispose of real estate, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension trusts, trust funds, partnerships, individual investors and others.

REGULATIONS

Many laws and governmental regulations are applicable to the Properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.

Under various laws and regulations relating to the protection of the environment, an owner of real estate may be held liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner was responsible for, or even knew of, the presence of such substances. The presence of such substances may adversely affect the owner’s ability to rent or sell the property or to borrow using such property as collateral and may expose it to liability resulting from any release of, or exposure to, such substances. Persons who arrange for the disposal or treatment of hazardous or toxic substances at another location may also be liable for the costs of re-moval or remediation of such substances at the disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain environmental laws impose liability for the release of asbestos-containing materials into the air, and third parties may also seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances.

In connection with the ownership (direct or indirect), operation, management and development of real properties, the Company may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental penalties and injuries to persons and property.

There can be no assurance that (i) future laws, ordinances or regulations will not impose any material environmental liability, (ii) the current environmental condition of the Properties will not be affected by tenants, by the condition of land or operations in the vicinity of the Properties (such as the presence of underground storage tanks), or by third parties unrelated to the Company, or (iii) the Company’s assessments reveal all environmental liabilities and that there are no material environmental liabilities of which the Company is aware. If compliance with the various laws and regulations, now existing or hereafter adopted, exceeds the Company’s budgets for such items, the Company’s ability to make expected distributions to stockholders could be adversely affected.

There are no other laws or regulations which have a material effect on the Company’s operations, other than typical federal, state and local laws affecting the development and operation of real property, such as zoning laws.

5


 

INDUSTRY SEGMENTS

The Company operates in two industry segments: (i) real estate; and (ii) construction services. As of December 31, 2006, the Company does not have any foreign operations and its business is not seasonal. In May 2006, in conjunction with the Company’s acquisition of the Gale Company and related businesses, the Company acquired a business specializing solely in construction and related services whose operations comprise the Company’s construction services segment. Please see our financial statements attached hereto and incorporated by reference herein for financial information relating to our industry segments.

RECENT DEVELOPMENTS

The Company’s core markets continue to be weak. The percentage leased in the Company’s consolidated portfolio of stabilized operating properties increased to 92.0 percent at December 31, 2006 as compared to 91.0 percent at December 31, 2005 and 91.2 percent at December 31, 2004. Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future (including, at December 31, 2006, a lease with a commencement date substantially in the future consisting of 8,590 square feet scheduled to commence in 2009), and leases that expire at the period end date. Leases that expire as of the period end date aggregate 103,477 square feet, or 0.4 percent of the net rentable square footage. Excluded from percentage leased at December 31, 2004 was a non-strategic, non-core 318,224 square foot property acquired through a deed in lieu of foreclosure, which was 12.7 percent leased at December 31, 2004 and subsequently sold on February 4, 2005. Market rental rates have declined in most markets from peak levels in late 2000 and early 2001. Rental rates on the Company’s space that was re-leased (based on first rents payable) during the year ended December 31, 2006 decreased an average of 0.2 percent compared to rates that were in effect under expiring leases, as compared to a 8.2 percent decrease in 2005 and a 8.7 percent decrease in 2004. The Company believes that vacancy rates may continue to increase in most of its markets in 2007. As a result, the Company’s future earnings and cash flow may continue to be negatively impacted by current market conditions.

Gale/Green Transactions
On May 9, 2006, the Company completed the acquisitions of: (i) The Gale Company and certain of its related businesses, which engage in construction, property management, facilities management, and leasing services (collectively, the “Gale Company”); (ii) three office properties; and (iii) indirect interests in a portfolio of office properties, located primarily in New Jersey, which were owned indirectly by The Gale Company and its affiliates (“Gale”) and affiliates of SL Green Realty Corp. (“SL Green”). The agreements (“Gale/Green Agreements”) to complete the aforementioned acquisitions (collectively, the “Gale/Green Transactions”) required that the Company complete all of the acquisitions. Simultaneous with the completion of the Gale/Green Transactions, The Gale Company’s President, Mark Yeager, was named an executive vice president of the Company.

Under the Gale/Green Agreements, the Company acquired 100 percent of the ownership interests in three office properties located in New Jersey, aggregating 518,257 square feet (the “Wholly-Owned Properties”).

Also, as part of the Gale/Green Agreements, the Company entered into a joint venture with an entity controlled by SL Green (in which Stanley C. Gale has an interest), known as Mack-Green-Gale LLC (“Mack-Green”), to hold an approximate 96 percent interest and act as general partner of Gale SLG NJ Operating Partnership, L.P. (the “OP LP”). The OP LP owns 100 percent of entities which own 25 office properties (collectively, the“OP LP Properties”) which aggregate 3.5 million square feet (consisting of 17 office properties aggregating 2.3 million square feet located in New Jersey and eight properties aggregating 1.2 million square feet located in Troy, Michigan), as well as a minor, non-controlling interest in four office properties aggregating 419,000 square feet located in Naperville, Illinois.

Mr. Gale has agreed to pay Mark Yeager, an executive officer of the Company, 49 percent of any payments he receives on account of Mr. Gale’s interest with SL Green in Mack-Green.

The Gale Company, the Wholly-Owned Properties, and the interest in Mack-Green were acquired by the Company for a total initial acquisition cost of approximately $245 million consisting of: (i) the issuance by the Company of 224,719 common units of the Operating Partnership; (ii) the payment of a total of approximately $194 million in cash, which was primarily funded through borrowing under the Company’s revolving credit facility; and (iii) the assumption of $39.9 million in existing mortgage indebtedness on two of the Wholly-Owned Properties. Mr. Gale has agreed to transfer to Mark Yeager 33,700 of his common units of the Operating Partnership on April 30, 2009, provided that Mr. Yeager’s employment with the Company has not been terminated involuntarily without cause (“Employment Continuation”) prior to such date. Additionally, the agreement to acquire the Gale Company (“Gale Agreement”) contains earn-out provisions providing for the payment of contingent purchase consideration of up to $18 million in cash based upon the achievement of Gross Income and NOI (as such terms are defined in the Gale Agreement) targets and other events for The Gale Company for the three years following the closing date.

6


 

Mr. Gale has agreed to pay to Mr. Yeager 49 percent of all amounts he receives pursuant to the Gale Agreement earn-out provisions, subject to certain conditions including Mr. Yeager’s Employment Continuation.

The Company has not yet obtained all the information necessary to finalize its estimates to complete the purchase price allocations related to the Gale/Green Transactions. The purchase price allocations will be finalized once the information identified by the Company has been received, which should not be longer than one year from the date of acquisition.

In addition, the Gale Agreement provides for the Company to acquire certain other ownership interests in up to 11 real estate projects (the “Non-Portfolio Properties”), subject to obtaining certain third party consents and the satisfaction of various project-related and/or other conditions. Each of the Company’s acquired interests in the Non-Portfolio Properties will provide for the initial distributions of net cash flow solely to the Company, and thereafter an affiliate of Mr. Gale (“Gale Affiliate”) has participation rights (“Gale 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 internal rate of return (“IRR”) of 10 percent per annum, accruing on the date or dates of the Company’s investments.

Mr. Gale has agreed to pay to Mr. Yeager 49 percent of any payments he receives with respect to the Gale Participation Rights, subject to adjustments for payments Mr. Yeager receives from his direct interests in such rights and subject to, in certain cases, Mr. Yeager’s Employment Continuation. Mr. Gale has also agreed to pay to Mr. Yeager 49 percent of the distributions he receives with respect to Mr. Gale’s interest in certain land located in Florham Park, New Jersey, which is one of the Non-Portfolio Properties not yet acquired by the Company. Such distribution may include the amounts Mr. Gale receives from the conveyance of his interest in the Florham Park land to the Company.

With respect to the arrangements between Mr. Gale and Mr. Yeager regarding the Gale Agreement earn-out provisions and the Florham Park land, they have agreed to consider offering payments to certain persons that have been employed by certain subsidiaries of The Gale Company, which may include current employees of the Company.

Through December 31, 2006, the Company has completed acquisitions of eight of the interests in the Non-Portfolio Properties, which included the acquisitions of interests in: a 527,015 square foot, mixed-use office/retail complex; a 416,429 square-foot multi-tenanted office property; a 139,750 square-foot fully-leased office property; an office property in development; two vacant land parcels (one of which Mr. Yeager has a 16.49 percent interest in the Participation Rights) and two pre-developed projects. The aggregate cost of the completed acquisitions was approximately $25.6 million.

Pursuant to Mr. Gale’s agreements with Mr. Yeager, as described herein, Mr. Yeager received approximately $5.6 million during the year ended December 31, 2006.

In connection with the Company’s acquisition of the Gale Company, Mr. Gale and certain other affiliates of Gale are restricted from competing with the Company or hiring the Company’s employees for a period of four years expiring on May 9, 2010.

7



Property Acquisitions
The Company acquired the following office properties during the year ended December 31, 2006: (dollars in thousands)

Acquisition
   
# of
Rentable
Acquisition
Date
Property/Address
Location
Bldgs.
Square Feet
Cost
02/28/06
Capital Office Park (a)
Greenbelt, Maryland
7
842,258
$166,011
05/09/06
35 Waterview Boulevard (b) (c)
Parsippany, New Jersey
1
172,498
33,586
05/09/06
105 Challenger Road (b) (d)
Ridgefield Park, New Jersey
1
150,050
34,960
05/09/06
343 Thornall Street (b) (e)
Edison, New Jersey
1
195,709
46,193
07/31/06
395 W. Passaic Street (f)
Rochelle Park, New Jersey
1
100,589
22,219
         
Total Property Acquisitions:
 
11
1,461,104
$302,969
 
(a)  This transaction was funded primarily through the assumption of $63.2 million of mortgage debt and the issuance of 1.9 million common operating partnership units valued at $87.2 million.
(b) The property was acquired as part of the Gale/Green Transactions.
(c) Transaction was funded primarily through borrowing on the Company’s revolving credit facility and the assumption of $20.4 million of mortgage debt.
(d) Transaction was funded primarily through borrowing on the Company’s revolving credit facility and the assumption of $19.5 million of mortgage debt.
(e) Transaction was funded primarily through borrowing on the Company’s revolving credit facility.
(f) Transaction was funded primarily through borrowing on the Company’s revolving credit facility and the assumption of $13.1 million of mortgage debt.

For a discussion of the ownership interests in Mack-Green, see Note 4: Investments in Unconsolidated Joint Ventures - Mack-Green-Gale LLC - to our financial statements included within this annual report on Form 10-K.

Sales
The Company sold the following office properties during the year ended December 31, 2006: (dollars in thousands)
       
Rentable
Net
Net
Realized
Sale
   
# of
Square
Sales
Book
Gain/
Date
Property/Address
Location
Bldgs.
Feet
Proceeds
Value
(Loss)
06/28/06
Westage Business Center
Fishkill, New York
1
118,727
$ 14,765
$ 10,872
$ 3,893
06/30/06
1510 Lancer Drive
Moorestown, New Jersey
1
88,000
4,146
3,134
1,012
11/10/06
Colorado portfolio
Various cities, Colorado
19
1,431,610
193,404
165,072
28,332
12/21/06
California portfolio
San Francisco, California
2
450,891
124,182
97,814
26,368
             
Total Office Property Sales:
 
23
2,089,228
$336,497
$276,892
$59,605

On November 6, 2006, the Company sold substantially all of its 50-percent interest in G&G Martco, a joint venture which owned a 305,618 square foot office building located in San Francisco, California for approximately $16.3 million, realizing a gain on the sale of approximately $10.8 million.

On November 7, 2006, the Company sold 10.1 acres of developable land adjacent to its Horizon Center properties in Hamilton Township, New Jersey, for net sales proceeds of approximately $1.5 million, realizing a gain of approximately $1.1 million from the sale.

Investments in Marketable Securities
In 2005, the Company purchased approximately 1.5 million shares of common stock in CarrAmerica Realty Corporation. From January 1, 2006 through January 25, 2006, the Company purchased an additional 336,500 shares in CarrAmerica for a total purchase price of approximately $11.9 million. During the three months ended March 31, 2006, the Company sold all of its 1,804,800 shares of CarrAmerica common stock, realizing a gain of approximately $15.1 million.

8



FINANCING ACTIVITY

On January 24, 2006, the Company issued $100 million face amount of 5.80 percent senior unsecured notes due January 15, 2016 with interest payable semi-annually in arrears, and $100 million face amount of 5.25 percent senior unsecured notes due January 15, 2012 with interest payable semi-annually in arrears. The total proceeds from the issuances, including accrued interest on the 5.80 percent notes of approximately $200.8 million, were used to reduce outstanding borrowings under the Company’s unsecured facility.

On February 7, 2007, the Company completed an underwritten offer and sale of 4,650,000 shares of its common stock and used the net proceeds, which totaled approximately $252 million (after offering costs), primarily to pay down its outstanding borrowings under the Company’s revolving credit facility and for general corporate purposes.

AVAILABLE INFORMATION

The Company’s internet website is www.mack-cali.com. The Company makes available free of charge on or through its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after it electronically files or furnishes such materials to the Securities and Exchange Commission. In addition, the Company’s internet website includes other items related to corporate governance matters, including, among other things, the Company’s corporate governance guidelines, charters of various committees of the Board of Directors, and the Company’s code of business conduct and ethics applicable to all employees, officers and directors. The Company intends to disclose on its internet website any amendments to or waivers from its code of business conduct and ethics as well as any amendments to its corporate governance principles or the charters of various committees of the Board of Directors. Copies of these documents may be obtained, free of charge, from our internet website. Any shareholder also may obtain copies of these documents, free of charge, by sending a request in writing to: Mack-Cali Investor Relations Department, 343 Thornall Street, Edison, NJ 08837-2206.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

We consider portions of this report, including the documents incorporated by reference, to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of such act. Such forward-looking statements relate to, without limitation, our future economic performance, plans and objectives for future operations and projections of revenue and other financial items. Forward-looking statements can be identified by the use of words such as “may,” “will,” “plan,” “should,” “expect,” “anticipate,” “estimate,” “continue” or comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.

Among the factors about which we have made assumptions are:

·  
changes in the general economic climate and conditions, including those affecting industries in which our principal tenants operate;

·  
the extent of any tenant bankruptcies or of any early lease terminations;

·  
our ability to lease or re-lease space at current or anticipated rents;

·  
changes in the supply of and demand for office, office/flex and industrial/warehouse properties;

·  
changes in interest rate levels;
    
·  
changes in operating costs;
 
·  
our ability to obtain adequate insurance, including coverage for terrorist acts;

·  
the availability of financing;

·  
changes in governmental regulation, tax rates and similar matters; and

·  
other risks associated with the development and acquisition of properties, including risks that the development may not be completed on schedule, that the tenants will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated.
 
 
9

 

 
For further information on factors which could impact us and the statements contained herein, see Item 1A: Risk Factors. We assume no obligation to update and supplement forward-looking statements that become untrue because of subsequent events.

ITEM 1A. RISK FACTORS

Our results from operations and ability to make distributions on our equity and debt service on our indebtedness may be affected by the risk factors set forth below. All investors should consider the following risk factors before deciding to purchase securities of the Company. The Company refers to itself as “we” or “our” in the following risk factors.

Declines in economic activities in the Northeastern office markets could adversely affect our operating results.
A majority of our revenues are derived from our properties located in the Northeast, particularly in New Jersey, New York and Pennsylvania. Adverse economic developments in this region could adversely impact the operations of our properties and, therefore, our profitability. Because our portfolio consists primarily of office and office/flex buildings (as compared to a more diversified real estate portfolio), a decline in the economy and/or a decline in the demand for office space may adversely affect our ability to make distributions or payments to our investors.

Our performance is subject to risks associated with the real estate industry.
General: Our business and our ability to make distributions or payments to our investors depend on the ability of our properties to generate funds in excess of operating expenses (including scheduled principal payments on debt and capital expenditures). Events or conditions that are beyond our control may adversely affect our operations and the value of our properties. Such events or conditions could include:

·  
changes in the general economic climate;
·  
changes in local conditions such as an oversupply of office space, a reduction in demand for office space, or reductions in office market rental rates;
·  
decreased attractiveness of our properties to tenants;
·  
competition from other office and office/flex properties;
·  
our inability to provide adequate maintenance;
·  
increased operating costs, including insurance premiums, utilities and real estate taxes, due to inflation and other factors which may not necessarily be offset by increased rents;
·  
changes in laws and regulations (including tax, environmental, zoning and building codes, and housing laws and regulations) and agency or court interpretations of such laws and regulations and the related costs of compliance;
·  
changes in interest rate levels and the availability of financing;
·  
the inability of a significant number of tenants to pay rent;
·  
our inability to rent office space on favorable terms; and
·  
civil unrest, earthquakes, acts of terrorism and other natural disasters or acts of God that may result in uninsured losses.

Financially distressed tenants may be unable to pay rent: If a tenant defaults, we may experience delays and incur substantial costs in enforcing our rights as landlord and protecting our investments. If a tenant files for bankruptcy, a potential court judgment rejecting and terminating such tenant’s lease could adversely affect our ability to make distributions or payments to our investors.

10


 

Renewing leases or re-letting space could be costly: If a tenant does not renew its lease upon expiration or terminates its lease early, we may not be able to re-lease the space. If a tenant does renew its lease or we re-lease the space, the terms of the renewal or new lease, including the cost of required renovations or concessions to the tenant, may be less favorable than the current lease terms which could adversely affect our ability to make distributions or payments to our investors.

Our insurance coverage on our properties may be inadequate: We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire and flood. We cannot guarantee that the limits of our current policies will be sufficient in the event of a catastrophe to our properties. We cannot guarantee that we will be able to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, while our current insurance policies insure us against loss from terrorist acts and toxic mold, in the future insurance companies may no longer offer coverage against these types of losses, or, if offered, these types of insurance may be prohibitively expensive. If any or all of the foregoing should occur, we may not have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. Should an uninsured loss or a loss in excess of our insured limits occur, we could lose all or a portion of the capital we have invested in a property or properties, as well as the anticipated future revenue from the property or properties. Nevertheless, we might remain obligated for any mortgage debt or other financial obligations related to the property or properties. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could adversely affect our ability to make distributions or payments to our investors.

Illiquidity of real estate limits our ability to act quickly: Real estate investments are relatively illiquid. Such illiquidity may limit our ability to react quickly in response to changes in economic and other conditions. If we want to sell an investment, we might not be able to dispose of that investment in the time period we desire, and the sales price of that investment might not recoup or exceed the amount of our investment. The prohibition in the Internal Revenue Code of 1986, as amended (the “Code”), and related regulations on a real estate investment trust holding property for sale also may restrict our ability to sell property. In addition, we acquired a significant number of our properties from individuals to whom we issued Units as part of the purchase price. In connection with the acquisition of these properties, in order to preserve such individual’s income tax deferral, we contractually agreed not to sell or otherwise transfer the properties for a specified period of time, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate individuals for the income tax consequences of the recognition of such built-in-gains. As of December 31, 2006, 50 of our properties, with an aggregate net book value of approximately $1.3 billion, were subject to these restrictions, which expire periodically through 2016. For those properties where such restrictions have lapsed, we are generally required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the appropriate individuals. 88 of our properties, with an aggregate net book value of approximately $809.0 million, have lapsed restrictions and are subject to these conditions. The above limitations on our ability to sell our investments could adversely affect our ability to make distributions or payments to our investors.

Americans with Disabilities Act compliance could be costly: Under the Americans with Disabilities Act of 1990 (“ADA”), all public accommodations and commercial facilities must meet certain federal requirements related to access and use by disabled persons. Compliance with the ADA requirements could involve removal of structural barriers from certain disabled persons’ entrances. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such accesses. Although we believe that our properties are substantially in compliance with present requirements, noncompliance with the ADA or related laws or regulations could result in the United States government imposing fines or private litigants being awarded damages against us. Such costs may adversely affect our ability to make distributions or payments to our investors.

Environmental problems are possible and may be costly: Various federal, state and local laws and regulations subject property owners or operators to liability for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner or operator was responsible for or even knew of the presence of such substances. The presence of or failure to properly remediate hazardous or toxic substances (such as toxic mold) may adversely affect our ability to rent, sell or borrow against contaminated property and may impose liability upon us for personal injury to persons exposed to such substances. Various laws and regulations

11


also impose liability on persons who arrange for the disposal or treatment of hazardous or toxic substances at another location for the costs of removal or remediation of such substances at the disposal or treatment facility. These laws often impose liability whether or not the person arranging for such disposal ever owned or operated the disposal facility. Certain other environmental laws and regulations impose liability on owners or operators of property for injuries relating to the release of asbestos-containing or other materials into the air, water or otherwise into the environment. As owners and operators of property and as potential arrangers for hazardous substance disposal, we may be liable under such laws and regulations for removal or remediation costs, governmental penalties, property damage, personal injuries and related expenses. Payment of such costs and expenses could adversely affect our ability to make distributions or payments to our investors.

Competition for acquisitions may result in increased prices for properties: We plan to acquire additional properties in New Jersey, New York and Pennsylvania and in the Northeast generally. We may be competing for investment opportunities with entities that have greater financial resources. Several office building developers and real estate companies may compete with us in seeking properties for acquisition, land for development and prospective tenants. Such competition may adversely affect our ability to make distributions or payments to our investors by:

·  
reducing the number of suitable investment opportunities offered to us;
·  
increasing the bargaining power of property owners;
·  
interfering with our ability to attract and retain tenants;
·  
increasing vacancies which lowers market rental rates and limits our ability to negotiate rental rates; and/or
·  
adversely affecting our ability to minimize expenses of operation.

Development of real estate could be costly: As part of our operating strategy, we may acquire land for development or construct on owned land, under certain conditions. Included among the risks of the real estate development business are the following, which may adversely affect our ability to make distributions or payments to our investors:

·  
financing for development projects may not be available on favorable terms;
·  
long-term financing may not be available upon completion of construction; and
·  
failure to complete construction on schedule or within budget may increase debt service expense and construction costs.

Property ownership through joint ventures could subject us to the contrary business objectives of our co-venturers: We, from time to time, invest in joint ventures or partnerships in which we do not hold a controlling interest in the assets underlying the entities in which we invest, including joint ventures in which (i) we own a direct interest in an entity which controls such assets, or (ii) we own a direct interest in an equity which owns indirect interests, through one or more intermediaries, of such assets. These investments involve risks that do not exist with properties in which we own a controlling interest with respect to the underlying assets, including the possibility that our co-venturers or partners may, at any time, have business, economic or other objectives that are inconsistent with our objectives. Because we lack a controlling interest, our co-venturers or partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. While we seek protective rights against such contrary actions, there can be no assurance that we will be successful in procuring any such protective rights, or if procured, that the rights will be sufficient to fully protect us against contrary actions. Our organizational documents do not limit the amount of available funds that we may invest in joint ventures or partnerships. If the objectives of our co-venturers or partners are inconsistent with ours, it may adversely affect our ability to make distributions or payments to our investors.

Our real estate construction management activities are subject to risks particular to third-party construction projects.
As a result of the Gale/Green Transactions, we now perform fixed price construction services for third parties and we are subject to a variety of risks unique to these activities. If construction costs of a project exceed original estimates, such costs may have to be absorbed by us, thereby making the project less profitable than originally estimated, or possibly not profitable at all. In addition, a construction project may be delayed due to government or regulatory approvals, supply shortages, or other events and circumstances beyond our control, or the time required to complete a construction project may be greater than originally anticipated. If any such excess costs or project delays were to be material, such events may adversely effect our cash flow and liquidity and thereby impact our ability to pay dividends or make distributions to our investors.

12


Debt financing could adversely affect our economic performance.
Scheduled debt payments and refinancing could adversely affect our financial condition: We are subject to the risks normally associated with debt financing. These risks, including the following, may adversely affect our ability to make distributions or payments to our investors:

·  
our cash flow may be insufficient to meet required payments of principal and interest;
·  
payments of principal and interest on borrowings may leave us with insufficient cash resources to pay operating expenses;
·  
we may not be able to refinance indebtedness on our properties at maturity; and
·  
if refinanced, the terms of refinancing may not be as favorable as the original terms of the related indebtedness.

As of December 31, 2006, we had total outstanding indebtedness of $2.2 billion comprised of $1.6 billion of senior unsecured notes, outstanding borrowings of $145.0 million under our $600.0 million revolving credit facility and approximately $383.5 million of mortgage loans payable and other obligations indebtedness. We may have to refinance the principal due on our current or future indebtedness at maturity, and we may not be able to do so.

If we are unable to refinance our indebtedness on acceptable terms, or at all, events or conditions that may adversely affect our ability to make distributions or payments to our investors include the following:

·  
we may need to dispose of one or more of our properties upon disadvantageous terms;
·  
prevailing interest rates or other factors at the time of refinancing could increase interest rates and, therefore, our interest expense;
·  
if we mortgage property to secure payment of indebtedness and are unable to meet mortgage payments, the mortgagee could foreclose upon such property or appoint a receiver to receive an assignment of our rents and leases; and
·  
foreclosures upon mortgaged property could create taxable income without accompanying cash proceeds and, therefore, hinder our ability to meet the real estate investment trust distribution requirements of the Internal Revenue Code.

We are obligated to comply with financial covenants in our indebtedness that could restrict our range of operating activities: The mortgages on our properties contain customary negative covenants, including limitations on our ability, without the prior consent of the lender, to further mortgage the property, to enter into new leases outside of stipulated guidelines or to materially modify existing leases. In addition, our credit facility contains customary requirements, including restrictions and other limitations on our ability to incur debt, debt to assets ratios, secured debt to total assets ratios, interest coverage ratios and minimum ratios of unencumbered assets to unsecured debt. The indentures under which our senior unsecured debt have been issued contain financial and operating covenants including coverage ratios and limitations on our ability to incur secured and unsecured debt. These covenants limit our flexibility in conducting our operations and create a risk of default on our indebtedness if we cannot continue to satisfy them.

Rising interest rates may adversely affect our cash flow: As of December 31, 2006, outstanding borrowings of approximately $145.0 million under our revolving credit facility bear interest at variable rates. We may incur additional indebtedness in the future that also bears interest at variable rates. Variable rate debt creates higher debt service requirements if market interest rates increase. Higher debt service requirements could adversely affect our ability to make distributions or payments to our investors and/or cause us to default under certain debt covenants.

Our degree of leverage could adversely affect our cash flow: We fund acquisition opportunities and development partially through short-term borrowings (including our revolving credit facility), as well as from proceeds from property sales and undistributed cash. We expect to refinance projects purchased with short-term debt either with long-term indebtedness or equity financing depending upon the economic conditions at the time of refinancing. Our Board of Directors has a general policy of limiting the ratio of our indebtedness to total undepreciated assets (total debt as a percentage of total undepreciated assets) to 50 percent or less, although there is no limit in Mack-Cali Realty, L.P.’s or our organizational documents on the amount of indebtedness that we may incur. However, we have entered into certain financial agreements which contain financial and operating covenants that limit our ability under certain circumstances to incur additional secured and unsecured indebtedness. The Board of Directors could alter or eliminate its current policy on borrowing at any time at its discretion. If this policy were changed, we could become more highly leveraged, resulting in an increase in debt service that could adversely affect our cash flow and our ability to make distributions or payments to our investors and/or could cause an increased risk of default on our obligations.

13


 

We are dependent on external sources of capital for future growth: To qualify as a real estate investment trust, we must distribute to our shareholders each year at least 90 percent of our net taxable income, excluding any net capital gain. Because of this distribution requirement, it is not likely that we will be able to fund all future capital needs, including for acquisitions and developments, from income from operations. Therefore, we will have to rely on third-party sources of capital, which may or may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of things, including the market’s perception of our growth potential and our current and potential future earnings. Moreover, additional equity offerings may result in substantial dilution of our shareholders’ interests, and additional debt financing may substantially increase our leverage.

Competition for skilled personnel could increase our labor costs. 
We compete with various other companies in attracting and retaining qualified and skilled personnel. We depend on our ability to attract and retain skilled management personnel who are responsible for the day-to-day operations of our company. Competitive pressures may require that we enhance our pay and benefits package to compete effectively for such personnel. We may not be able to offset such added costs by increasing the rates we charge our tenants. If there is an increase in these costs or if we fail to attract and retain qualified and skilled personnel, our business and operating results could be harmed.

We are dependent on our key personnel whose continued service is not guaranteed.
We are dependent upon our executive officers for strategic business direction and real estate experience. While we believe that we could find replacements for these key personnel, loss of their services could adversely affect our operations. We have entered into an employment agreement (including non-competition provisions) which provides for a continuous four-year employment term with each of Mitchell E. Hersh, Barry Lefkowitz and Roger W. Thomas, a continuous one-year employment term with Michael A. Grossman, and a three-year employment term with Mark Yeager which, as of May 9, 2009, shall convert to a continuous one-year employment term. We do not have key man life insurance for our executive officers.

Certain provisions of Maryland law and our charter and bylaws as well as our stockholder rights plan could hinder, delay or prevent changes in control.
Certain provisions of Maryland law, our charter and our bylaws, as well as our stockholder rights plan have the effect of discouraging, delaying or preventing transactions that involve an actual or threatened change in control. These provisions include the following:

Classified Board of Directors: Our Board of Directors is divided into three classes with staggered terms of office of three years each. The classification and staggered terms of office of our directors make it more difficult for a third party to gain control of our board of directors. At least two annual meetings of stockholders, instead of one, generally would be required to affect a change in a majority of the board of directors.

Removal of Directors: Under our charter, subject to the rights of one or more classes or series of preferred stock to elect one or more directors, a director may be removed only for cause and only by the affirmative vote of at least two-thirds of all votes entitled to be cast by our stockholders generally in the election of directors. Neither the Maryland General Corporation Law nor our charter define the term “cause.” As a result, removal for “cause” is subject to Maryland common law and to judicial interpretation and review in the context of the facts and circumstances of any particular situation.

Number of Directors, Board Vacancies, Term of Office: We have, in our bylaws, elected to be subject to certain provisions of Maryland law which vest in the Board of Directors the exclusive right to determine the number of directors and the exclusive right, by the affirmative vote of a majority of the remaining directors, even if the remaining directors do not constitute a quorum, to fill vacancies on the board. These provisions of Maryland law, which are applicable even if other provisions of Maryland law or the charter or bylaws provide to the contrary, also provide that any director elected to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, rather than the next annual meeting of stockholders as would otherwise be the case, and until his or her successor is elected and qualifies.

Stockholder Requested Special Meetings: Our bylaws provide that our stockholders have the right to call a special meeting only upon the written request of the stockholders entitled to cast not less than a majority of all the votes entitled to be cast by the stockholders at such meeting.

14



Advance Notice Provisions for Stockholder Nominations and Proposals: Our bylaws require advance written notice for stockholders to nominate persons for election as directors at, or to bring other business before, any meeting of stockholders. This bylaw provision limits the ability of stockholders to make nominations of persons for election as directors or to introduce other proposals unless we are notified in a timely manner prior to the meeting.

Exclusive Authority of the Board to Amend the Bylaws: Our bylaws provide that our board of directors has the exclusive power to adopt, alter or repeal any provision of the bylaws or to make new bylaws. Thus, our stockholders may not effect any changes to our bylaws.

Preferred Stock: Under our charter, our Board of Directors has authority to issue preferred stock from time to time in one or more series and to establish the terms, preferences and rights of any such series of preferred stock, all without approval of our stockholders.

Duties of Directors with Respect to Unsolicited Takeovers: Maryland law provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the directors in unsolicited takeover situations. The duties of directors of Maryland corporations do not require them to (a) accept, recommend or respond to any proposal by a person seeking to acquire control of the corporation, (b) authorize the corporation to redeem any rights under, or modify or render inapplicable, any stockholders rights plan, (c) make a determination under the Maryland Business Combination Act or the Maryland Control Share Acquisition Act, or (d) act or fail to act solely because of the effect of the act or failure to act may have on an acquisition or potential acquisition of control of the corporation or the amount or type of consideration that may be offered or paid to the stockholders in an acquisition. Moreover, under Maryland law the act of a director of a Maryland corporation relating to or affecting an acquisition or potential acquisition of control is not subject to any higher duty or greater scrutiny than is applied to any other act of a director. Maryland law also contains a statutory presumption that an act of a director of a Maryland corporation satisfies the applicable standards of conduct for directors under Maryland law.

Ownership Limit: In order to preserve our status as a real estate investment trust under the Code, our charter generally prohibits any single stockholder, or any group of affiliated stockholders, from beneficially owning more than 9.8 percent of our outstanding capital stock unless our Board of Directors waives or modifies this ownership limit.

Maryland Business Combination Act: The Maryland Business Combination Act provides that unless exempted, a Maryland corporation may not engage in business combinations, including mergers, dispositions of 10 percent or more of its assets, certain issuances of shares of stock and other specified transactions, with an “interested stockholder” or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter unless specified criteria are met. An interested stockholder is generally a person owning or controlling, directly or indirectly, 10 percent or more of the voting power of the outstanding stock of the Maryland corporation. Our board of directors has exempted from this statute business combinations between the Company and certain affiliated individuals and entities. However, unless our board adopts other exemptions, the provisions of the Maryland Business Combination Act will be applicable to business combinations with other persons.

Maryland Control Share Acquisition Act: Maryland law provides that “control shares” of a corporation acquired in a “control share acquisition” shall have no voting rights except to the extent approved by a vote of two-thirds of the votes eligible to cast on the matter under the Maryland Control Share Acquisition Act. “Control Shares” means shares of stock that, if aggregated with all other shares of stock previously acquired by the acquirer, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of the voting power: one-tenth or more but less than one-third, one-third or more but less than a majority or a majority or more of all voting power. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions.

If voting rights of control shares acquired in a control share acquisition are not approved at a stockholder’s meeting, then subject to certain conditions and limitations, the issuer may redeem any or all of the control shares for fair value. If voting rights of such control shares are approved at a stockholder’s meeting and the acquirer becomes entitled to vote a majority of the shares of stock entitled to vote, all other stockholders may exercise appraisal rights. Our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any acquisitions of shares by certain affiliated individuals and entities, any directors, officers or employees of the Company and any person approved by the board of directors prior to the acquisition by such person of control shares. Any control shares acquired in a control share acquisition which are not exempt under the foregoing provisions of our bylaws will be subject to the Maryland Control Share Acquisition Act.

15



Stockholder Rights Plan: We have adopted a stockholder rights plan that may discourage any potential acquirer from acquiring more than 15 percent of our outstanding common stock since, upon this type of acquisition without approval of our board of directors, all other common stockholders will have the right to purchase a specified amount of common stock at a substantial discount from market price.

Consequences of failure to qualify as a real estate investment trust could adversely affect our financial condition. Failure to maintain ownership limits could cause us to lose our qualification as a real estate investment trust: In order for us to maintain our qualification as a real estate investment trust, not more than 50 percent in value of our outstanding stock may be actually and/or constructively owned by five or fewer individuals (as defined in the Code to include certain entities). We have limited the ownership of our outstanding shares of our common stock by any single stockholder to 9.8 percent of the outstanding shares of our common stock. Our Board of Directors could waive this restriction if they were satisfied, based upon the advice of tax counsel or otherwise, that such action would be in our best interests and would not affect our qualification as a real estate investment trust. Common stock acquired or transferred in breach of the limitation may be redeemed by us for the lesser of the price paid and the average closing price for the 10 trading days immediately preceding redemption or sold at the direction of us. We may elect to redeem such shares of common stock for Units, which are nontransferable except in very limited circumstances. Any transfer of shares of common stock which, as a result of such transfer, causes us to be in violation of any ownership limit will be deemed void. Although we currently intend to continue to operate in a manner which will enable us to continue to qualify as a real estate investment trust, it is possible that future economic, market, legal, tax or other considerations may cause our Board of Directors to revoke the election for us to qualify as a real estate investment trust. Under our organizational documents, our Board of Directors can make such revocation without the consent of our stockholders.

In addition, the consent of the holders of at least 85 percent of Mack-Cali Realty, L.P.’s partnership units is required: (i) to merge (or permit the merger of) us with another unrelated person, pursuant to a transaction in which Mack-Cali Realty, L.P. is not the surviving entity; (ii) to dissolve, liquidate or wind up Mack-Cali Realty, L.P.; or (iii) to convey or otherwise transfer all or substantially all of Mack-Cali Realty, L.P.’s assets. As of February 16, 2007, as general partner, we own approximately 81.6 percent of Mack-Cali Realty, L.P.’s outstanding common partnership units.

Tax liabilities as a consequence of failure to qualify as a real estate investment trust: We have elected to be treated and have operated so as to qualify as a real estate investment trust for federal income tax purposes since our taxable year ended December 31, 1994. Although we believe we will continue to operate in such manner, we cannot guarantee that we will do so. Qualification as a real estate investment trust involves the satisfaction of various requirements (some on an annual and some on a quarterly basis) established under highly technical and complex tax provisions of the Internal Revenue Code. Because few judicial or administrative interpretations of such provisions exist and qualification determinations are fact sensitive, we cannot assure you that we will qualify as a real estate investment trust for any taxable year.

If we fail to qualify as a real estate investment trust in any taxable year, we will be subject to the following:

·  
we will not be allowed a deduction for dividends paid to shareholders;
·  
we will be subject to federal income tax at regular corporate rates, including any alternative minimum tax, if applicable; and
·  
unless we are entitled to relief under certain statutory provisions, we will not be permitted to qualify as a real estate investment trust for the four taxable years following the year during which we were disqualified.

A loss of our status as a real estate investment trust could have an adverse effect on us. Failure to qualify as a real estate investment trust also would eliminate the requirement that we pay dividends to our stockholders.

16



Other tax liabilities: Even if we qualify as a real estate investment trust, we are subject to certain federal, state and local taxes on our income and property and, in some circumstances, certain other state and local taxes. In addition, our taxable REIT subsidiaries will be subject to federal, state and local income tax for income received in connection with certain non-customary services performed for tenants and/or third parties.

Risk of changes in the tax law applicable to real estate investment trusts: Since the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any of such legislative action may prospectively or retroactively modify our and Mack-Cali Realty, L.P.’s tax treatment and, therefore, may adversely affect taxation of us, Mack-Cali Realty, L.P., and/or our investors.


ITEM 1B. UNRESOLVED STAFF COMMENTS

None.



17




ITEM 2. PROPERTIES

PROPERTY LIST

As of December 31, 2006, the Company’s Consolidated Properties consisted of 251 in-service office, office/flex and industrial/warehouse properties, as well as two stand-alone retail properties and two land leases. The Consolidated Properties are located primarily in the Northeast. The Consolidated Properties are easily accessible from major thoroughfares and are in close proximity to numerous amenities. The Consolidated Properties contain a total of approximately 28.9 million square feet, with the individual properties ranging from 6,216 to 1,246,283 square feet. The Consolidated Properties, managed by on-site employees, generally have attractively landscaped sites and atriums in addition to quality design and construction. The Company’s tenants include many service sector employers, including a large number of professional firms and national and international businesses. The Company believes that all of its properties are well-maintained and do not require significant capital improvements.


18




 
Office Properties
 
               
2006
     
Percentage
2006
2006
 
2006
Average
   
Net
Leased
Base
Effective
 
Average
Effective
   
Rentable
as of
Rent
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/06
($000’s)
($000’s)
of Total 2006
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
(b) (c)
(c) (d)
Base Rent (%)
($) (c) (e)
($) (c) (f)
                 
NEW JERSEY
               
                 
Atlantic County
               
Egg Harbor
               
100 Decadon Drive
1987
40,422
100.0
954
907
0.18
23.60
22.44
200 Decadon Drive
1991
39,922
100.0
936
872
0.17
23.45
21.84
                 
Bergen County
               
Fair Lawn
               
17-17 Route 208 North
1987
143,000
100.0
3,463
2,960
0.64
24.22
20.70
Fort Lee
               
One Bridge Plaza
1981
200,000
54.4
2,549
2,371
0.47
23.43
21.79
2115 Linwood Avenue
1981
68,000
62.6
1,253
1,017
0.23
29.44
23.89
Little Ferry
               
200 Riser Road
1974
286,628
100.0
2,066
1,916
0.38
7.21
6.68
Montvale
               
95 Chestnut Ridge Road
1975
47,700
100.0
796
729
0.15
16.69
15.28
135 Chestnut Ridge Road
1981
66,150
88.9
1,440
1,173
0.26
24.49
19.95
Paramus
               
15 East Midland Avenue
1988
259,823
100.0
5,597
5,440
1.03
21.54
20.94
140 East Ridgewood Avenue
1981
239,680
92.1
4,844
4,218
0.89
21.94
19.11
461 From Road
1988
253,554
98.6
6,064
6,044
1.11
24.26
24.18
650 From Road
1978
348,510
93.8
7,884
6,894
1.45
24.12
21.09
61 South Paramus Avenue
1985
269,191
99.0
6,649
5,906
1.22
24.95
22.16
Ridgefield Park
               
105 Challenger Road (g)
1992
150,050
87.5
2,759
2,527
0.51
32.36
29.64
Rochelle Park
               
120 Passaic Street
1972
52,000
99.6
1,402
1,322
0.26
27.07
25.53
365 West Passaic Street
1976
212,578
97.6
4,177
3,742
0.77
20.13
18.04
395 West Passaic Street (g)
1979
100,589
90.2
918
794
0.17
23.98
20.74
Upper Saddle River
               
1 Lake Street
1973/94
474,801
100.0
7,465
7,465
1.37
15.72
15.72
10 Mountainview Road
1986
192,000
100.0
4,352
4,045
0.80
22.67
21.07
Woodcliff Lake
               
400 Chestnut Ridge Road
1982
89,200
100.0
1,950
1,456
0.36
21.86
16.32
470 Chestnut Ridge Road
1987
52,500
81.2
479
455
0.09
11.24
10.67
530 Chestnut Ridge Road
1986
57,204
100.0
1,166
1,166
0.21
20.38
20.38
50 Tice Boulevard
1984
235,000
100.0
6,155
5,570
1.13
26.19
23.70
300 Tice Boulevard
1991
230,000
100.0
6,155
5,504
1.13
26.76
23.93
                 
Burlington County
               
Moorestown
               
224 Strawbridge Drive
1984
74,000
98.4
1,309
1,218
0.24
17.98
16.73
228 Strawbridge Drive
1984
74,000
100.0
1,043
896
0.19
14.09
12.11
232 Strawbridge Drive
1986
74,258
98.8
1,446
1,400
0.27
19.71
19.08
                 
Essex County
               
Millburn
               
150 J.F. Kennedy Parkway
1980
247,476
100.0
7,454
6,462
1.37
30.12
26.11


19




Office Properties
(Continued)
 
               
2006
     
Percentage
2006
2006
 
2006
Average
   
Net
Leased
Base
Effective
 
Average
Effective
   
Rentable
as of
Rent
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/06
($000’s)
($000’s)
of Total 2006
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
(b) (c)
(c) (d)
Base Rent (%)
($) (c) (e)
($) (c) (f)
                 
Roseland
               
101 Eisenhower Parkway
1980
237,000
93.9
5,522
5,014
1.01
24.81
22.53
103 Eisenhower Parkway
1985
151,545
87.5
3,026
2,629
0.56
22.82
19.83
105 Eisenhower Parkway
2001
220,000
85.8
4,126
3,088
0.76
21.86
16.36
                 
Hudson County
               
Jersey City
               
Harborside Financial Center Plaza 1
1983
400,000
92.8
3,930
3,475
0.72
10.59
9.36
Harborside Financial Center Plaza 2
1990
761,200
100.0
17,838
16,694
3.27
23.43
21.93
Harborside Financial Center Plaza 3
1990
725,600
98.5
17,870
16,780
3.28
25.00
23.48
Harborside Financial Center Plaza 4-A
2000
207,670
99.1
6,749
5,903
1.24
32.79
28.68
Harborside Financial Center Plaza 5
2002
977,225
97.5
35,570
29,406
6.53
37.33
30.86
101 Hudson Street
1992
1,246,283
100.0
29,822
26,212
5.47
23.93
21.03
                 
Mercer County
               
Hamilton Township
               
600 Horizon Drive
2002
95,000
100.0
1,373
1,373
0.25
14.45
14.45
Princeton
               
103 Carnegie Center
1984
96,000
84.9
2,311
2,029
0.42
28.35
24.89
3 Independence Way
1983
111,300
49.9
884
702
0.16
15.92
12.64
100 Overlook Center
1988
149,600
100.0
3,975
3,431
0.73
26.57
22.93
5 Vaughn Drive
1987
98,500
94.0
2,431
2,120
0.45
26.26
22.90
                 
Middlesex County
               
East Brunswick
               
377 Summerhill Road
1977
40,000
100.0
353
346
0.06
8.83
8.65
Edison
               
343 Thornall Street (c) (g)
1991
195,709
100.0
1,953
1,608
0.36
15.37
12.65
Piscataway
               
30 Knightsbridge Road, Bldg 3
1977
160,000
100.0
2,465
2,465
0.45
15.41
15.41
30 Knightsbridge Road, Bldg 4
1977
115,000
100.0
1,771
1,771
0.33
15.40
15.40
30 Knightsbridge Road, Bldg 5
1977
332,607
43.6
1,275
1,080
0.23
8.79
7.45
30 Knightsbridge Road, Bldg 6
1977
72,743
62.9
--
--
--
--
--
Plainsboro
               
500 College Road East
1984
158,235
95.7
4,031
3,807
0.74
26.62
25.14
Woodbridge
               
581 Main Street
1991
200,000
100.0
4,586
4,346
0.84
22.93
21.73
                 
Monmouth County
               
Freehold
               
2 Paragon Way
1989
44,524
64.8
648
502
0.12
22.46
17.40
3 Paragon Way
1991
66,898
58.4
770
699
0.14
19.71
17.89
4 Paragon Way
2002
63,989
100.0
1,168
900
0.21
18.25
14.06
100 Willbowbrook
1988
60,557
74.8
812
721
0.15
17.93
15.92
Holmdel
               
23 Main Street
1977
350,000
100.0
4,039
3,187
0.74
11.54
9.11
                 


20



Office Properties
(Continued)
 
               
2006
     
Percentage
2006
2006
 
2006
Average
   
Net
Leased
Base
Effective
 
Average
Effective
   
Rentable
as of
Rent
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/06
($000’s)
($000’s)
of Total 2006
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
(b) (c)
(c) (d)
Base Rent (%)
($) (c) (e)
($) (c) (f)
                 
Middletown
               
One River Center Bldg 1
1983
122,594
100.0
3,064
2,633
0.56
24.99
21.48
One River Center Bldg 2
1983
120,360
100.0
2,775
2,738
0.51
23.06
22.75
One River Center Bldg 3
1984
214,518
93.6
4,374
4,329
0.80
21.78
21.56
Neptune
               
3600 Route 66
1989
180,000
100.0
2,400
2,171
0.44
13.33
12.06
Wall Township
               
1305 Campus Parkway
1988
23,350
92.4
393
368
0.07
18.22
17.06
1350 Campus Parkway
1990
79,747
99.9
1,564
1,423
0.29
19.63
17.86
                 
Morris County
               
Florham Park
               
325 Columbia Turnpike
1987
168,144
99.4
4,093
3,652
0.75
24.49
21.85
Morris Plains
               
250 Johnson Road
1977
75,000
100.0
1,579
1,385
0.29
21.05
18.47
201 Littleton Road
1979
88,369
88.9
1,783
1,582
0.33
22.70
20.14
Morris Township
               
412 Mt. Kemble Avenue
1986
475,100
33.5
81
81
0.01
0.51
0.51
Parsippany
               
4 Campus Drive
1983
147,475
96.9
2,634
2,308
0.48
18.43
16.15
6 Campus Drive
1983
148,291
87.2
2,376
1,906
0.44
18.37
14.74
7 Campus Drive
1982
154,395
--
--
--
--
--
--
8 Campus Drive
1987
215,265
100.0
6,306
5,534
1.16
29.29
25.71
9 Campus Drive
1983
156,495
86.9
3,720
3,149
0.68
27.35
23.16
4 Century Drive
1981
100,036
71.9
1,592
1,444
0.29
22.13
20.08
5 Century Drive
1981
79,739
67.2
1,951
1,950
0.36
36.41
36.39
6 Century Drive
1981
100,036
69.9
28
22
0.01
0.40
0.31
2 Dryden Way
1990
6,216
100.0
93
93
0.02
14.96
14.96
4 Gatehall Drive
1988
248,480
85.4
5,190
4,707
0.95
24.46
22.18
2 Hilton Court
1991
181,592
100.0
5,089
4,600
0.93
28.02
25.33
1633 Littleton Road
1978
57,722
100.0
1,131
1,131
0.21
19.59
19.59
600 Parsippany Road
1978
96,000
94.7
1,235
1,020
0.23
13.58
11.22
1 Sylvan Way
1989
150,557
100.0
3,499
3,103
0.64
23.24
20.61
5 Sylvan Way
1989
151,383
100.0
3,929
3,592
0.72
25.95
23.73
7 Sylvan Way
1987
145,983
100.0
3,219
2,803
0.59
22.05
19.20
35 Waterview Boulevard (g)
1990
172,498
92.2
2,774
2,491
0.51
26.86
24.12
5 Wood Hollow Road
1979
317,040
96.7
5,758
4,963
1.06
18.78
16.19
                 
Passaic County
               
Clifton
               
777 Passaic Avenue
1983
75,000
100.0
1,517
1,375
0.28
20.23
18.33
Totowa
               
999 Riverview Drive
1988
56,066
100.0
1,079
962
0.20
19.25
17.16
                 
Somerset County
               
Basking Ridge
               
222 Mt. Airy Road
1986
49,000
60.7
615
462
0.11
20.68
15.53
233 Mt. Airy Road
1987
66,000
100.0
1,315
1,103
0.24
19.92
16.71


21



Office Properties
(Continued)
 
               
2006
     
Percentage
2006
2006
 
2006
Average
   
Net
Leased
Base
Effective
 
Average
Effective
   
Rentable
as of
Rent
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/06
($000’s)
($000’s)
of Total 2006
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
(b) (c)
(c) (d)
Base Rent (%)
($) (c) (e)
($) (c) (f)
                 
Bernards
               
106 Allen Road
2000
132,010
97.0
3,027
2,273
0.56
23.64
17.75
Bridgewater
               
721 Route 202/206
1989
192,741
97.0
3,984
3,757
0.73
21.31
20.10
                 
Union County
               
Clark
               
100 Walnut Avenue
1985
182,555
99.8
4,737
4,145
0.87
26.00
22.75
Cranford
               
6 Commerce Drive
1973
56,000
88.1
1,116
988
0.20
22.62
20.03
11 Commerce Drive (c)
1981
90,000
92.7
1,020
860
0.19
12.23
10.31
12 Commerce Drive
1967
72,260
95.1
991
817
0.18
14.42
11.89
14 Commerce Drive
1971
67,189
87.3
1,232
1,190
0.23
21.00
20.29
20 Commerce Drive
1990
176,600
100.0
4,332
3,806
0.80
24.53
21.55
25 Commerce Drive
1971
67,749
100.0
1,436
1,351
0.26
21.20
19.94
65 Jackson Drive
1984
82,778
95.5
1,918
1,706
0.35
24.26
21.58
New Providence
               
890 Mountain Avenue
1977
80,000
87.1
1,775
1,672
0.33
25.47
24.00
                 
Total New Jersey Office
 
17,537,754
91.7
354,747
316,402
65.13
22.40
19.97
                 
NEW YORK
               
                 
Rockland County
               
Suffern
               
400 Rella Boulevard
1988
180,000
100.0
4,296
3,826
0.79
23.87
21.26
                 
Westchester County
               
Elmsford
               
100 Clearbrook Road (c)
1975
60,000
99.5
1,131
1,040
0.21
18.94
17.42
101 Executive Boulevard
1971
50,000
45.3
511
462
0.09
22.56
20.40
555 Taxter Road
1986
170,554
100.0
4,173
3,499
0.77
24.47
20.52
565 Taxter Road
1988
170,554
100.0
4,052
3,511
0.74
23.76
20.59
570 Taxter Road
1972
75,000
95.9
1,843
1,708
0.34
25.62
23.75
Hawthorne
               
1 Skyline Drive
1980
20,400
99.0
388
365
0.07
19.21
18.07
2 Skyline Drive
1987
30,000
98.9
475
412
0.09
16.01
13.89
7 Skyline Drive
1987
109,000
95.3
2,532
2,324
0.46
24.37
22.37
17 Skyline Drive
1989
85,000
51.7
719
713
0.13
16.36
16.22
19 Skyline Drive
1982
248,400
100.0
4,471
4,174
0.82
18.00
16.80
                 
                 


22



Office Properties
(Continued)
 
               
2006
     
Percentage
2006
2006
 
2006
Average
   
Net
Leased
Base
Effective
 
Average
Effective
   
Rentable
as of
Rent
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/06
($000’s)
($000’s)
of Total 2006
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
(b) (c)
(c) (d)
Base Rent (%)
($) (c) (e)
($) (c) (f)
                 
Tarrytown
               
200 White Plains Road
1982
89,000
97.9
1,824
1,655
0.33
20.93
18.99
220 White Plains Road
1984
89,000
92.0
1,819
1,670
0.33
22.22
20.40
White Plains
               
1 Barker Avenue
1975
68,000
97.3
1,743
1,621
0.32
26.34
24.50
3 Barker Avenue
1983
65,300
91.0
1,631
1,494
0.30
27.45
25.14
50 Main Street
1985
309,000
98.0
9,249
8,496
1.70
30.54
28.06
11 Martine Avenue
1987
180,000
90.8
4,889
4,368
0.90
29.91
26.73
1 Water Street
1979
45,700
100.0
1,011
878
0.19
22.12
19.21
Yonkers
               
1 Executive Boulevard
1982
112,000
100.0
2,779
2,484
0.51
24.81
22.18
3 Executive Plaza
1987
58,000
100.0
1,472
1,281
0.27
25.38
22.09
                 
Total New York Office
 
2,214,908
94.7
51,008
45,981
9.36
24.31
21.92
                 
PENNSYLVANIA
               
                 
Chester County
               
Berwyn
               
1000 Westlakes Drive
1989
60,696
95.7
1,592
1,515
0.29
27.41
26.08
1055 Westlakes Drive
1990
118,487
90.2
2,885
2,334
0.53
26.99
21.84
1205 Westlakes Drive
1988
130,265
63.8
2,234
1,954
0.41
26.88
23.51
1235 Westlakes Drive
1986
134,902
97.7
2,789
2,436
0.51
21.16
18.48
                 
Delaware County
               
Lester
               
100 Stevens Drive
1986
95,000
100.0
2,551
2,358
0.47
26.85
24.82
200 Stevens Drive
1987
208,000
100.0
5,598
5,252
1.03
26.91
25.25
300 Stevens Drive
1992
68,000
100.0
1,592
1,254
0.29
23.41
18.44
Media
               
1400 Providence Road - Center I
1986
100,000
96.8
2,038
1,838
0.37
21.05
18.99
1400 Providence Road - Center II
1990
160,000
95.8
3,346
2,921
0.61
21.83
19.06
                 
Montgomery County
               
Bala Cynwyd
               
150 Monument Road
1981
125,783
98.4
2,387
2,286
0.44
19.29
18.47
Blue Bell
               
4 Sentry Parkway
1982
63,930
94.1
1,373
1,368
0.25
22.82
22.74
5 Sentry Parkway East
1984
91,600
30.5
1,185
1,152
0.22
42.42
41.23
5 Sentry Parkway West
1984
38,400
100.0
590
572
0.11
15.36
14.90
16 Sentry Parkway
1988
93,093
100.0
2,268
2,156
0.42
24.36
23.16
18 Sentry Parkway
1988
95,010
97.6
2,040
1,900
0.37
22.00
20.49
King of Prussia
               
2200 Renaissance Boulevard
1985
174,124
74.9
3,329
3,052
0.61
25.53
23.40
Lower Providence
               
1000 Madison Avenue
1990
100,700
75.8
768
622
0.14
10.06
8.15
Plymouth Meeting
               
1150 Plymouth Meeting Mall
1970
167,748
92.9
2,981
2,446
0.55
19.13
15.70
                 
Total Pennsylvania Office
 
2,025,738
88.8
41,546
37,416
7.62
23.09
20.79
                 


23



Office Properties
(Continued)
 
               
2006
     
Percentage
2006
2006
 
2006
Average
   
Net
Leased
Base
Effective
 
Average
Effective
   
Rentable
as of
Rent
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/06
($000’s)
($000’s)
of Total 2006
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
(b) (c)
(c) (d)
Base Rent (%)
($) (c) (e)
($) (c) (f)
                 
CONNECTICUT
               
                 
Fairfield County
               
Greenwich
               
500 West Putnam Avenue
1973
121,250
96.3
3,337
3,153
0.61
28.58
27.00
Norwalk
               
40 Richards Avenue
1985
145,487
80.6
2,544
2,239
0.47
21.69
19.09
Shelton
               
1000 Bridgeport Avenue
1986
133,000
93.6
2,188
1,775
0.40
17.58
14.26
Stamford
               
1266 East Main Street
1984
179,260
76.2
3,627
3,453
0.67
26.55
25.28
                 
Total Connecticut Office
 
578,997
85.5
11,696
10,620
2.15
23.62
21.45
                 
DISTRICT OF COLUMBIA
               
                 
Washington
               
1201 Connecticut Avenue, NW
1940
169,549
100.0
5,090
4,758
0.93
30.02
28.06
1400 L Street, NW
1987
159,000
90.6
4,839
4,667
0.89
33.59
32.40
                 
Total District of Columbia Office
 
328,549
95.5
9,929
9,425
1.82
31.66
30.05
                 
MARYLAND
               
                 
Prince George’s County
               
Greenbelt
               
9200 Edmonston Road (g)
1973
38,690
100.0
774
699
0.14
23.78
21.48
6301 Ivy Lane (g)
1979
112,003
86.1
1,564
1,335
0.29
19.28
16.46
6303 Ivy Lane (g)
1980
112,047
87.4
2,040
1,826
0.37
24.77
22.17
6305 Ivy Lane (g)
1982
112,022
73.6
1,387
1,127
0.25
20.00
16.25
6404 Ivy Lane (g)
1987
165,234
77.9
2,274
1,815
0.42
21.00
16.76
6406 Ivy Lane (g)
1991
163,857
100.0
2,275
2,066
0.42
16.51
14.99
6411 Ivy Lane (g)
1984
138,405
90.8
2,359
2,067
0.43
22.32
19.55
Lanham
               
4200 Parliament Place
1989
122,000
91.2
2,832
2,627
0.52
25.45
23.61
                 
Total Maryland Office
 
964,258
87.6
15,505
13,562
2.84
21.18
18.49
                 
TOTAL OFFICE PROPERTIES
 
23,650,204
91.4
484,431
433,406
88.92
22.76
20.35
                 
                 


24



Office/Flex Properties
 
 
               
2006
     
Percentage
2006
2006
 
2006
Average
   
Net
Leased
Base
Effective
 
Average
Effective
   
Rentable
as of
Rent
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/06
($000’s)
($000’s)
of Total 2006
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
(b) (c)
(c) (d)
Base Rent (%)
($) (c) (e)
($) (c) (f)
                 
NEW JERSEY
               
                 
Burlington County
               
Burlington
               
3 Terri Lane
1991
64,500
90.4
452
369
0.08
7.75
6.33
5 Terri Lane
1992
74,555
91.7
608
516
0.11
8.89
7.55
Moorestown
               
2 Commerce Drive
1986
49,000
76.3
330
301
0.06
8.83
8.05
101 Commerce Drive
1988
64,700
100.0
275
249
0.05
4.25
3.85
102 Commerce Drive
1987
38,400
87.5
232
184
0.04
6.90
5.48
201 Commerce Drive
1986
38,400
75.0
163
112
0.03
5.66
3.89
202 Commerce Drive
1988
51,200
100.0
307
237
0.06
6.00
4.63
1 Executive Drive
1989
20,570
81.1
156
101
0.03
9.35
6.05
2 Executive Drive
1988
60,800
84.7
384
364
0.07
7.46
7.07
101 Executive Drive
1990
29,355
99.7
274
258
0.05
9.36
8.82
102 Executive Drive
1990
64,000
100.0
273
229
0.05
4.27
3.58
225 Executive Drive
1990
50,600
48.6
116
112
0.02
4.72
4.55
97 Foster Road
1982
43,200
75.5
152
137
0.03
4.66
4.20
1507 Lancer Drive
1995
32,700
100.0
117
108
0.02
3.58
3.30
1245 North Church Street
1998
52,810
62.1
362
349
0.07
11.04
10.64
1247 North Church Street
1998
52,790
77.5
398
360
0.07
9.73
8.80
1256 North Church Street
1984
63,495
100.0
435
360
0.08
6.85
5.67
840 North Lenola Road
1995
38,300
100.0
367
300
0.07
9.58
7.83
844 North Lenola Road
1995
28,670
100.0
180
133
0.03
6.28
4.64
915 North Lenola Road
1998
52,488
100.0
296
224
0.05
5.64
4.27
2 Twosome Drive
2000
48,600
100.0
408
378
0.07
8.40
7.78
30 Twosome Drive
1997
39,675
100.0
144
125
0.03
3.63
3.15
31 Twosome Drive
1998
84,200
100.0
471
470
0.09
5.59
5.58
40 Twosome Drive
1996
40,265
100.0
278
229
0.05
6.90
5.69
41 Twosome Drive
1998
43,050
77.7
224
220
0.04
6.70
6.58
50 Twosome Drive
1997
34,075
100.0
245
228
0.04
7.19
6.69
                 
Gloucester County
               
West Deptford
               
1451 Metropolitan Drive
1996
21,600
100.0
148
148
0.03
6.85
6.85
                 
Mercer County
               
Hamilton Township
               
100 Horizon Center Boulevard
1989
13,275
100.0
192
166
0.04
14.46
12.50
200 Horizon Drive
1991
45,770
100.0
591
537
0.11
12.91
11.73
300 Horizon Drive
1989
69,780
100.0
1,123
1,029
0.21
16.09
14.75
500 Horizon Drive
1990
41,205
100.0
613
584
0.11
14.88
14.17
                 


25




Office/Flex Properties
(Continued)
 
               
2006
     
Percentage
2006
2006
 
2006
Average
   
Net
Leased
Base
Effective
 
Average
Effective
   
Rentable
as of
Rent
Rent
Percentage
Base Rent
Rent
 
Year
Area
12/31/06
($000’s)
($000’s)
of Total 2006
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
(b) (c)
(c) (d)
Base Rent (%)
($) (c) (e)
($) (c) (f)
                 
Monmouth County
               
Wall Township
               
1325 Campus Parkway
1988
35,000
100.0
655
476
0.12
18.71
13.60
1340 Campus Parkway
1992
72,502
100.0
917
684
0.17
12.65
9.43
1345 Campus Parkway
1995
76,300
100.0
933
685
0.17
12.23
8.98
1433 Highway 34
1985
69,020
68.3
373
317
0.07
7.91
6.72
1320 Wyckoff Avenue
1986
20,336
100.0
178