form10qcorp.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2007

or

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

For the transition period from
                                                           to

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 incorporation or organization)
 
(I.R.S. Employer 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)


Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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 ninety (90) days.  YES  X  NO ___

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 October 26, 2007, there were 67,911,903 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.




MACK-CALI REALTY CORPORATION

FORM 10-Q

INDEX
 
Part I
Financial Information
Page
     
Item 1.
Financial Statements (unaudited):
 
     
 
Consolidated Balance Sheets as of September 30, 2007
 
 
and December 31, 2006
4
     
 
Consolidated Statements of Operations for the three and nine month
 
 
periods ended September 30, 2007 and 2006
5
     
 
Consolidated Statement of Changes in Stockholders’ Equity for the
 
 
nine months ended September 30, 2007
6
     
 
Consolidated Statements of Cash Flows for the nine months ended
 
 
September 30, 2007 and 2006
7
     
 
Notes to Consolidated Financial Statements
8-41
     
Item 2.
Management’s Discussion and Analysis of Financial Condition
 
 
and Results of Operations
42-60
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
60
     
Item 4.
Controls and Procedures
60
     
Part II
Other Information
 
     
Item 1.
Legal Proceedings
61
     
Item 1A.
Risk Factors
61
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
62
     
Item 3.
Defaults Upon Senior Securities
62
     
Item 4.
Submission of Matters to a Vote of Security Holders
62
     
Item 5.
Other Information
63
     
Item 6.
Exhibits
63
     
Signatures
 
64
     
Exhibit Index
 
65-80


2



MACK-CALI REALTY CORPORATION

Part I – Financial Information


Item 1.       Financial Statements

The accompanying unaudited consolidated balance sheets, statements of operations, of changes in stockholders’ equity, and of cash flows and related notes thereto, have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”).  Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements.  The financial statements reflect all adjustments consisting only of normal, recurring adjustments, which are, in the opinion of management, necessary for a fair presentation for the interim periods.

The aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in Mack-Cali Realty Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

The results of operations for the three and nine month periods ended September 30, 2007 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.

3


MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (unaudited)

ASSETS
 
September 30,
2007
   
December 31,
2006
 
Rental property
           
Land and leasehold interests
  $
724,056
    $
659,169
 
Buildings and improvements
   
3,741,029
     
3,549,699
 
Tenant improvements
   
385,892
     
356,495
 
Furniture, fixtures and equipment
   
9,220
     
8,224
 
     
4,860,197
     
4,573,587
 
Less – accumulated depreciation and amortization
    (869,888 )     (796,793 )
Net investment in rental property
   
3,990,309
     
3,776,794
 
Cash and cash equivalents
   
29,981
     
101,223
 
Marketable securities available for sale at fair value
   
5,111
     
--
 
Investments in unconsolidated joint ventures
   
179,077
     
160,301
 
Unbilled rents receivable, net
   
106,751
     
100,847
 
Deferred charges and other assets, net
   
261,394
     
240,637
 
Restricted cash
   
13,639
     
15,448
 
Accounts receivable, net of allowance for doubtful accounts
               
of $2,761 and $1,260
   
29,573
     
27,639
 
                 
Total assets
  $
4,615,835
    $
4,422,889
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Senior unsecured notes
  $
1,632,280
    $
1,631,482
 
Revolving credit facility
   
166,000
     
145,000
 
Mortgages, loans payable and other obligations
   
332,838
     
383,477
 
Dividends and distributions payable
   
53,554
     
50,591
 
Accounts payable, accrued expenses and other liabilities
   
150,949
     
122,134
 
Rents received in advance and security deposits
   
44,841
     
45,972
 
Accrued interest payable
   
18,787
     
34,106
 
Total liabilities
   
2,399,249
     
2,412,762
 
                 
Minority interests:
               
Operating Partnership
   
470,516
     
480,103
 
Consolidated joint ventures
   
1,538
     
2,117
 
Total minority interests
   
472,054
     
482,220
 
Commitments and contingencies
               
                 
Stockholders’ equity:
               
Preferred stock, $0.01 par value, 5,000,000 shares authorized, 10,000
               
and 10,000 shares outstanding, at liquidation preference
   
25,000
     
25,000
 
Common stock, $0.01 par value, 190,000,000 shares authorized,
               
67,648,417 and 62,925,191 shares outstanding
   
676
     
629
 
Additional paid-in capital
   
1,961,984
     
1,708,053
 
Dividends in excess of net earnings
    (243,355 )     (205,775 )
Accumulated other comprehensive income
   
227
     
--
 
Total stockholders’ equity
   
1,744,532
     
1,527,907
 
                 
Total liabilities and stockholders’ equity
  $
4,615,835
    $
4,422,889
 
                 
                 
The accompanying notes are an integral part of these consolidated financial statements.
 

4


MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts) (unaudited)

   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
REVENUES
 
2007
   
2006
   
2007
   
2006
 
Base rents
  $
145,535
    $
137,270
    $
427,574
    $
398,109
 
Escalations and recoveries from tenants
   
27,491
     
24,959
     
79,477
     
69,202
 
Construction services
   
22,912
     
23,237
     
68,722
     
36,286
 
Real estate services
   
5,567
     
10,652
     
13,267
     
19,015
 
Other income
   
11,376
     
5,134
     
17,628
     
13,318
 
Total revenues
   
212,881
     
201,252
     
606,668
     
535,930
 
                                 
EXPENSES
                               
Real estate taxes
   
22,422
     
22,499
     
69,744
     
64,431
 
Utilities
   
21,944
     
18,565
     
54,818
     
46,235
 
Operating services
   
27,096
     
29,831
     
79,070
     
75,867
 
Direct construction costs
   
22,479
     
22,569
     
66,024
     
35,148
 
General and administrative
   
13,411
     
12,173
     
37,351
     
32,794
 
Depreciation and amortization
   
49,790
     
39,726
     
135,064
     
115,681
 
Total expenses
   
157,142
     
145,363
     
442,071
     
370,156
 
Operating income
   
55,739
     
55,889
     
164,597
     
165,774
 
                                 
OTHER (EXPENSE) INCOME
                               
Interest expense
    (32,163 )     (35,466 )     (94,432 )     (99,575 )
Interest and other investment income
   
985
     
514
     
4,173
     
2,359
 
Equity in earnings (loss) of unconsolidated joint ventures
    (1,559 )     (4,757 )     (5,486 )     (5,356 )
Minority interest in consolidated joint ventures
   
51
     
113
     
492
     
143
 
Gain on sale of investment in marketable securities
   
--
     
--
     
--
     
15,060
 
Total other (expense) income
    (32,686 )     (39,596 )     (95,253 )     (87,369 )
Income from continuing operations before
                               
Minority interest in Operating Partnership
   
23,053
     
16,293
     
69,344
     
78,405
 
Minority interest in Operating Partnership
    (4,146 )     (3,169 )     (12,564 )     (14,959 )
Income from continuing operations
   
18,907
     
13,124
     
56,780
     
63,446
 
Discontinued operations (net of minority interest):
                               
Income from discontinued operations
   
20
     
3,387
     
1,057
     
9,375
 
Realized gains (losses) and unrealized losses
                               
on disposition of rental property, net
   
4,533
     
--
     
36,280
     
3,921
 
Total discontinued operations, net
   
4,553
     
3,387
     
37,337
     
13,296
 
Net income
   
23,460
     
16,511
     
94,117
     
76,742
 
Preferred stock dividends
    (500 )     (500 )     (1,500 )     (1,500 )
Net income available to common shareholders
  $
22,960
    $
16,011
    $
92,617
    $
75,242
 
                                 
Basic earnings per common share:
                               
Income from continuing operations
  $
0.27
    $
0.20
    $
0.82
    $
1.00
 
Discontinued operations
  $
0.07
    $
0.06
    $
0.56
    $
0.21
 
Net income available to common shareholders
  $
0.34
    $
0.26
    $
1.38
    $
1.21
 
                                 
Diluted earnings per common share:
                               
Income from continuing operations
  $
0.27
    $
0.20
    $
0.82
    $
0.99
 
Discontinued operations
  $
0.07
    $
0.06
    $
0.55
     
0.21
 
Net income available to common shareholders
  $
0.34
    $
0.26
    $
1.37
    $
1.20
 
                                 
Dividends declared per common share
  $
0.64
    $
0.64
    $
1.92
    $
1.90
 
                                 
Basic weighted average shares outstanding
   
67,688
     
62,302
     
67,068
     
62,158
 
                                 
Diluted weighted average shares outstanding
   
83,088
     
78,258
     
82,515
     
77,664
 
                                 
                                 
The accompanying notes are an integral part of these consolidated financial statements.
 

5


MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands) (unaudited)

 

                 
         
Accumulated
     
     
Additional
Dividends in
Other
Total
   
 
Preferred Stock
Common Stock
Paid-In
Excess of
Comprehensive
Stockholders’
 
Comprehensive
 
Shares
Amount
Shares
Par Value
Capital
Net Earnings
Income
Equity
 
Income
Balance at January  1, 2007
10
$25,000
62,925
$629
$1,708,053
$(205,775)
--
$1,527,907
 
--
Net income
--
--
--
--
--
94,117
--
94,117
 
$94,117
Preferred stock dividends
--
--
--
--
--
(1,500)
--
(1,500)
 
--
Common stock dividends
--
--
--
--
--
(130,197)
--
(130,197)
 
--
Common stock offering
--
--
4,650
47
251,685
--
--
251,732
 
--
Redemption of common units
 
 
               
  for common stock
--
--
211
2
6,564
--
--
6,566
 
--
Shares issued under Dividend
                   
  Reinvestment and Stock
                   
  Purchase Plan
--
--
5
--
225
--
--
225
 
--
Stock options exercised
--
--
128
1
3,674
--
--
3,675
 
--
Stock options expense
--
--
--
--
99
--
--
99
 
--
Comprehensive Gain:
                   
  Unrealized holding gain
                   
  on marketable securities
                   
  available for sale
--
--
--
--
--
--
$227
227
 
227
Directors Deferred comp. plan
--
--
--
--
240
--
--
240
 
--
Issuance of restricted stock
--
--
13
--
--
--
--
--
 
--
Repurchase of Common Stock
--
--
(284)
(3)
(11,169)
--
--
(11,172)
 
--
Amortization of stock comp.
--
--
--
--
2,613
--
--
2,613
 
--
Balance at September 30, 2007
10
$25,000
67,648
$676
$1,961,984
$(243,355)
$227
$1,744,532
 
$94,344
                     
                     
The accompanying notes are an integral part of these consolidated financial statements.
   





6


MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)

   
Nine Months Ended
 
   
September 30,
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
2007
   
2006
 
Net income
  $
94,117
    $
76,742
 
Adjustments to reconcile net income to net cash provided by
               
operating activities:
               
Depreciation and amortization
   
135,064
     
115,681
 
Depreciation and amortization on discontinued operations
   
424
     
8,387
 
Stock options expense
   
99
     
212
 
Amortization of stock compensation
   
2,613
     
2,216
 
Amortization of deferred financing costs and debt discount
   
2,101
     
2,171
 
Distribution of cumulative earnings from joint ventures
   
1,875
     
--
 
Equity in (earnings) losses of unconsolidated joint ventures, net
   
5,486
     
5,356
 
Gain on sale of marketable securities available for sale
   
--
      (15,060 )
Realized (gain) losses and unrealized losses on disposition
               
      of rental property (net of minority interest)
    (36,280 )     (3,921 )
Minority interest in Operating Partnership
   
12,564
     
14,959
 
Minority interest in consolidated joint ventures
    (492 )     (143 )
Minority interest in income from discontinued operations
   
240
     
2,293
 
Changes in operating assets and liabilities:
               
Increase in unbilled rents receivable, net
    (6,480 )     (15,190 )
Increase in deferred charges and other assets, net
    (29,455 )     (41,367 )
Increase in accounts receivable, net
    (1,934 )     (11,297 )
Increase in accounts payable, accrued expenses and other liabilities
   
7,733
     
22,786
 
(Decrease) increase in rents received in advance and security deposits
    (1,131 )    
1,834
 
Decrease in accrued interest payable
    (15,319 )     (8,674 )
                 
Net cash provided by operating activities
  $
171,225
    $
156,985
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Additions to rental property and related intangibles
  $ (356,178 )   $ (192,137 )
Repayments of notes receivable
   
120
     
113
 
Investment in unconsolidated joint ventures
    (22,310 )     (148,991 )
Distribution from unconsolidated joint venture
   
992
     
--
 
Purchase of marketable securities available for sale
    (4,884 )     (11,912 )
Proceeds from sale of rental property
   
57,204
     
18,912
 
Proceeds from sale of investment in joint venture
   
575
     
--
 
Proceeds from sale of marketable securities available for sale
   
--
     
78,609
 
Decrease (increase) in restricted cash
   
1,809
      (6,760 )
                 
Net cash used in investing activities
  $ (322,672 )   $ (262,166 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from senior unsecured notes
  $
--
    $
199,914
 
Borrowings from revolving credit facility
   
395,000
     
660,250
 
Repayment of revolving credit facility
    (374,000 )     (500,180 )
Repayment of mortgages, loans payable and other obligations
    (25,433 )     (156,361 )
Payment of financing costs
    (1,801 )     (384 )
Proceeds from offering of Common Stock
   
251,732
     
--
 
Proceeds from stock options exercised
   
3,675
     
8,839
 
Payment of dividends and distributions
    (157,796 )     (146,514 )
Repurchase of common stock
    (11,172 )    
--
 
                 
Net cash provided by financing activities
  $
80,205
    $
65,564
 
                 
Net decrease in cash and cash equivalents
  $ (71,242 )   $ (39,617 )
Cash and cash equivalents, beginning of period
   
101,223
     
60,397
 
                 
Cash and cash equivalents, end of period
  $
29,981
    $
20,780
 
                 
                 
The accompanying notes are an integral part of these consolidated financial statements.
               

7


MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1.  
ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION
Mack-Cali Realty Corporation, a Maryland corporation, together with its subsidiaries (collectively, the “Company”), is a fully-integrated, self-administered, self-managed real estate investment trust (“REIT”) providing leasing, management, acquisition, development, construction and tenant-related services for its properties and third-parties.  As of September 30, 2007, the Company owned or had interests in 302 properties plus developable land (collectively, the “Properties”).  The Properties aggregate approximately 34.9 million square feet, which are comprised of 291 buildings, primarily office and office/flex buildings, totaling approximately 34.5 million square feet (which include 46 buildings, primarily office buildings, aggregating 5.7 million square feet owned by unconsolidated joint ventures in which the Company has investment interests), six industrial/warehouse buildings totaling approximately 387,400 square feet, two retail properties totaling approximately 17,300 square feet, a hotel (which is owned by an unconsolidated joint venture in which the Company has an investment interest) and two parcels of land leased to others.  The Properties are located in seven states, primarily in the Northeast, plus the District of Columbia.

BASIS OF PRESENTATION
The accompanying consolidated financial statements include all accounts of the Company, its majority-owned and/or controlled subsidiaries, which consist principally of Mack-Cali Realty, L.P. (the “Operating Partnership”) and variable interest entities for which the Company has determined itself to be the primary beneficiary, if any.  See Note 2: Significant Accounting Policies – Investments in Unconsolidated Joint Ventures for the Company’s treatment of unconsolidated joint venture interests.  Intercompany accounts and transactions have been eliminated.

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


2.  
SIGNIFICANT ACCOUNTING POLICIES

Rental
Property
Rental properties are stated at cost less accumulated depreciation and amortization.  Costs directly related to the acquisition, development and construction of rental properties are capitalized.  Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development.  Included in total rental property is construction and development in-progress of $125,773,000 and $116,151,000 (including land of $67,126,000 and $63,136,000) as of September 30, 2007 and December 31, 2006, respectively.  Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.  Fully-depreciated assets are removed from the accounts.

The Company considers a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity (as distinguished from activities such as routine maintenance and cleanup).  If portions of a rental project are substantially completed and occupied by tenants, or held available for occupancy, and other portions have not yet reached that stage, the substantially completed portions are accounted for as a separate project.  The Company allocates costs incurred between the portions under construction and the portions substantially completed and held available for occupancy, and capitalizes only those costs associated with the portion under construction.
 
 
 
8

 

 
Properties are depreciated using the straight-line method over the estimated useful lives of the assets.  The estimated useful lives are as follows:

Leasehold interests
Remaining lease term
Buildings and improvements
5 to 40 years
Tenant improvements
The shorter of the term of the
 
related lease or useful life
Furniture, fixtures and equipment
5 to 10 years

Upon acquisition of rental property, the Company estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities, generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships.  The Company allocates the purchase price to the assets acquired and liabilities assumed based on their relative fair values.  In estimating the fair value of the tangible and intangible assets acquired, the Company considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information.  The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

Above-market and below-market lease values for acquired properties are recorded based on the present value, (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases. The capitalized above-market lease values are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases.

Other intangible assets acquired include amounts for in-place lease values and tenant relationship values, which are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the respective tenant.  Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases.  In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions.  In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses.  Characteristics considered by management in valuing tenant relationships include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals.  The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases.  The value of tenant relationship intangibles are amortized to expense over the anticipated life of the relationships.

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s real estate properties held for use may be impaired.  A property’s value is impaired only if management’s estimate of the aggregate future cash flows (undiscounted and without interest charges) to be generated by the property is less than the carrying value of the property.  To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property.  The Company’s estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property.  As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved.  Management does not believe that the value of any of the Company’s rental properties is impaired.
 
 
9

 
 

 
Rental Property
 
Held for Sale and
 
Discontinued
 
Operations
When assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets.  If, in management’s opinion, the estimated net sales price of the assets which have been identified as held for sale is less than the net book value of the assets, a valuation allowance is established.  Properties identified as held for sale and/or sold are presented in discontinued operations for all periods presented.  See Note 6: Discontinued Operations.

If circumstances arise that previously were considered unlikely and, as a result, the Company decides not to sell a property previously classified as held for sale, the property is reclassified as held and used.  A property that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the property was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the property been continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell.

Investments in
Unconsolidated
Joint Ventures
The Company accounts for its investments in unconsolidated joint ventures for which Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46”) does not apply under the equity method of accounting as the Company exercises significant influence, but does not control these entities.  These investments are recorded initially at cost, as Investments in Unconsolidated Joint Ventures, and subsequently adjusted for equity in earnings and cash contributions and distributions.

 
FIN 46 provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIE (the “primary beneficiary”).  Generally, FIN 46 applies when either (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest, (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest.

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in unconsolidated joint ventures may be impaired.  An investment is impaired only if management’s estimate of the value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary.  To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the value of the investment.  Management does not believe that the value of any of the Company’s investments in unconsolidated joint ventures is impaired.  See Note 4: Investments in Unconsolidated Joint Ventures.
 
 
 
10

 

 
Cash and Cash
 
Equivalents
All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.

Marketable
 
Securities
The Company classifies its marketable securities among three categories: held-to-maturity, trading and available-for-sale.  Unrealized holding gains and losses relating to available-for-sale securities are excluded from earnings and reported as other comprehensive income (loss) in stockholders’ equity until realized.  A decline in the market value of any marketable security below cost that is deemed to be other than temporary results in a reduction in the carrying amount to fair value.  Any impairment would be charged to earnings and a new cost basis for the security established.

 
The Company’s marketable securities at September 30, 2007 carried a value of $5.1 million and consisted of common equity securities which were all acquired during the third quarter 2007.  The Company’s marketable securities at September 30, 2007 are all classified as available-for-sale and are carried at fair value based on quoted market prices.  The Company recorded an unrealized holding gain of $227,000 as other comprehensive gain in the third quarter 2007.

Deferred
Financing Costs
Costs incurred in obtaining financing are capitalized and amortized on a straight-line basis, which approximates the effective interest method, over the term of the related indebtedness.  Amortization of such costs is included in interest expense and was $680,000 and $725,000 for the three months ended September 30, 2007 and 2006, respectively, and $2,101,000 and $2,171,000 for the nine months ended September 30, 2007 and 2006, respectively.

Deferred
Leasing Costs
Costs incurred in connection with leases are capitalized and amortized on a straight-line basis over the terms of the related leases and included in depreciation and amortization.  Unamortized deferred leasing costs are charged to amortization expense upon early termination of the lease.  Certain employees of the Company are compensated for providing leasing services to the Properties.  The portion of such compensation, which is capitalized and amortized, approximated $929,000 and $908,000 for the three months ended September 30, 2007 and 2006, respectively, and $2,993,000 and $2,574,000 for the nine months ended September 30, 2007 and 2006, respectively.

Derivative
Instruments
The Company measures derivative instruments, including certain derivative instruments embedded in other contracts, at fair value and records them as an asset or liability, depending on the Company’s rights or obligations under the applicable derivative contract.  For derivatives designated and qualifying as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged item are recorded in earnings.  For derivatives designated as cash flow hedges, the effective portions of the derivative are reported in other comprehensive income (“OCI”) and are subsequently reclassified into earnings when the hedged item affects earnings.  Changes in fair value of derivative instruments not designated as hedging and ineffective portions of hedges are recognized in earnings in the affected period.

Revenue
Recognition
Base rental revenue is recognized on a straight-line basis over the terms of the respective leases.  Unbilled rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with the lease agreements.  Above-market and below-market lease values for acquired properties are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed-rate renewal options for below-market leases.  The capitalized above-market lease values for acquired properties are amortized as a reduction of base rental revenue over the remaining term of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed-rate renewal options of the respective leases.  Escalations and recoveries from tenants are received from tenants for certain costs as provided in the lease agreements.  These costs generally include real estate taxes, utilities, insurance, common area maintenance and other recoverable costs.  See Note 13: Tenant Leases.  Construction services revenue includes fees earned and reimbursements received by the Company for providing construction management and general contractor services to clients.  Construction services revenue is recognized on the percentage of completion method.  Using this method, profits are recorded on the basis of estimates of the overall profit and percentage of completion of individual contracts.  A portion of the estimated profits is accrued based upon estimates of the percentage of completion of the construction contract.  This revenue recognition method involves inherent risks relating to profit and cost estimates.  Real estate services revenue includes property management, facilities management, leasing commission fees and other services, and payroll and related costs reimbursed from clients.  Other income includes income from parking spaces leased to tenants, income from tenants for additional services arranged for by the Company and income from tenants for early lease terminations.
 
 
 
11


 
Allowance for
Doubtful Accounts
Management periodically performs a detailed review of amounts due from tenants and clients to determine if accounts receivable balances are impaired based on factors affecting the collectibility of those balances.  Management’s estimate of the allowance for doubtful accounts requires management to exercise significant judgment about the timing, frequency and severity of collection losses, which affects the allowance and net income.

Income and
Other Taxes
The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”).  As a REIT, the Company generally will not be subject to corporate federal income tax (including alternative minimum tax) on net income that it currently distributes to its shareholders, provided that the Company satisfies certain organizational and operational requirements including the requirement to distribute at least 90 percent of its REIT taxable income to its shareholders.  The Company has elected to treat certain of its corporate subsidiaries as taxable REIT subsidiaries (each a “TRS”).  In general, a TRS of the Company may perform additional services for tenants of the Company and generally may engage in any real estate or non-real estate related business (except for the operation or management of health care facilities or lodging facilities or the providing to any person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated).  A TRS is subject to corporate federal income tax.  If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates.  The Company is subject to certain state and local taxes.

The Company adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FAS No. 109”) on January 1, 2007.  As a result of the implementation of FIN 48, the Company recognized no material adjustments regarding its tax accounting treatment.  The Company expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which is included in general and administrative expense.
 
 
 
12

 

 
Earnings
Per Share
The Company presents both basic and diluted earnings per share (“EPS”).  Basic EPS excludes dilution and is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS amount.

Dividends and
 
Distributions
Payable
The dividends and distributions payable at September 30, 2007 represents dividends payable to preferred shareholders (10,000 shares) and common shareholders (67,649,757 shares), and distributions payable to minority interest common unitholders of the Operating Partnership (15,246,628 common units) for all such holders of record as of October 3, 2007 with respect to the third quarter 2007.  The third quarter 2007 preferred stock dividends of $50.00 per share, common stock dividends and common unit distributions of $0.64 per common share and unit were approved by the Board of Directors on September 12, 2007.  The preferred stock dividends, common stock dividends and common unit distributions payable were paid on October 15, 2007.

The dividends and distributions payable at December 31, 2006 represents dividends payable to preferred shareholders (10,000 shares) and common shareholders (62,925,271 shares), and distributions payable to minority interest common unitholders of the Operating Partnership (15,342,283 common units) for all such holders of record as of January 4, 2007 with respect to the fourth quarter 2006.  The fourth quarter 2006 preferred stock dividends of $50.00 per share, common stock dividends and common unit distributions of $0.64 per common share and unit were approved by the Board of Directors on December 5, 2006.  The common stock dividends and common unit distributions payable were paid on January 12, 2007.  The preferred stock dividends payable were paid on January 16, 2007.
 
Costs Incurred For 
Stock Issuances
Costs incurred in connection with the Company’s stock issuances are reflected as a reduction of additional paid-in capital.

Stock
 
Compensation
The Company accounts for stock options and restricted stock awards granted prior to 2002 using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,  “Accounting for Stock Issued to Employees,” and related Interpretations (“APB No. 25”).  Under APB No. 25, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of grant over the exercise price of the option granted.  Compensation cost for stock options is recognized ratably over the vesting period.  The Company’s policy is to grant options with an exercise price equal to the quoted closing market price of the Company’s stock on the business day preceding the grant date.  Accordingly, no compensation cost has been recognized under the Company’s stock option plans for the granting of stock options made prior to 2002.  Restricted stock awards granted prior to 2002 are valued at the vesting dates of such awards with compensation cost for such awards recognized ratably over the vesting period.

In 2002, the Company adopted the provisions of FASB No. 123, and in 2006, the Company adopted the provisions of FASB No. 123(R), which did not have a material effect on the Company’s financial position and results of operations.  These provisions require that the estimated fair value of restricted stock (“Restricted Stock Awards”) and stock options at the grant date be amortized ratably into expense over the appropriate vesting period.  For the three months ended September 30, 2007 and 2006, the Company recorded restricted stock and stock options expense of $907,000 and $815,000, respectively, and $2,711,000 and $2,429,000 for the nine months ended September 30, 2007 and 2006, respectively.
 
 
13

 
 
Other
 
Comprehensive
 
Income
Other comprehensive income (loss) includes items that are recorded in equity, such as unrealized holding gains or losses on marketable securities available for sale.  For the nine months ended September 30, 2007, other comprehensive income was $227,000.

Reclassifications
Certain reclassifications have been made to prior period amounts in order to conform with current period presentation.


3.  
REAL ESTATE TRANSACTIONS

Property Acquisitions
The Company acquired the following office properties during the nine months ended September 30, 2007 (dollars in thousands)

Acquisition
   
# of
Rentable
Acquisition
Date
Property/Address
Location
Bldgs.
Square Feet
Cost
05/08/07
AAA Properties (a)
Hamilton Township, New Jersey
2
69,232
$    9,048
06/11/07
125 Broad Street (b) (c)
New York, New York
1
524,476
274,091
         
         
Total Property Acquisitions:
 
3
593,708
$283,139
         
(a)  Included in this transaction was the acquisition of two parcels of developable land aggregating approximately 13 acres.
(b)      Acquisition represented two units of office condominium interests, which collectively comprise floors 2 through 16, or 39.6 percent, of the 40-story, 1.2 million square-foot building.
(c)      Transaction was funded primarily through borrowing on the Company’s revolving credit facility.

Properties Commencing Initial Operations
The following property commenced initial operations during the nine months ended September 30, 2007 (dollars in thousands)

     
# of
Rentable
Investment by
Date
Property/Address
Location
Bldgs.
Square Feet
Company (a)
05/08/07
700 Horizon Drive
Hamilton Township, New Jersey
1
120,000
$16,699
         
Total Properties Commencing Initial Operations:
 
1
120,000
$16,699
         
(a)  Development costs were funded primarily through draws on the Company’s revolving credit facility.  Amounts are as of September 30, 2007.

Land Acquisition
In February 2007, the Company exercised its option to acquire approximately 43 acres of land sites within its Capital Office Park complex in Greenbelt, Maryland, which is able to accommodate the development of up to 600,000 square feet of office space, for $13 million.  The option was acquired as part of the acquisition of the office complex in February 2006.  On May 25, 2007, the Company completed the purchase of the land for approximately $13 million, which consisted of 114,911 common operating partnership units valued at $5.2 million, and the remainder in cash.

14



Property Sales
The Company sold the following office properties during the nine months ended September 30, 2007 (dollars in thousands)

       
Rentable
Net
Net
 
Sale
   
# of
Square
Sales
Book
Realized
Date
Property/Address
Location
Bldgs.
 Feet
Proceeds
Value
Gain
05/10/07
1000 Bridgeport Avenue
Shelton, Connecticut
1
133,000
$16,411
$13,782
$  2,629
06/11/07
500 W. Putnam Avenue
Greenwich, Connecticut
1
121,250
54,344
18,113
36,231
07/13/07
100& 200 Decadon Drive
Egg Harbor, New Jersey
2
80,344
11,448
5,894
5,554
             
Total Office Property Sales:
 
4
334,594
$82,203
$37,789
$44,414

Gale Earn-Out and Agreement
The agreement to acquire the Gale Company (“Gale Agreement”), which was completed as part of the Gale/Green transactions on May 9, 2006, contained earn-out provisions (“Earn-Out”) 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 were defined in the Gale Agreement) targets and other events for the three years following the closing date.

On May 23, 2007, the Company entered into an amendment (the “Amendment”) to the Gale Agreement.  The Amendment eliminated the Earn-Out and substituted an aggregate of $14 million in payments by the Company consisting of the following:  (1) $8 million, which was paid on May 31, 2007; (2) $3 million on May 9, 2008; and (3) $3 million on May 9, 2009.

In October 2007, the Company reached an agreement with Stanley C. Gale, the seller of the Gale Company, Mark Yeager, an executive officer of the Company, and certain affiliates of Messrs. Gale and Yeager, which are parties to certain non-portfolio interest joint ventures with the Company, to provide primarily for the following:

 
(1)
The Company agreed to satisfy the requirements for the $3 million payment due on May 9, 2008 and the $3 million payment due on May 9, 2009 as of October 31, 2007 by:

 
(a)
paying $4 million in cash; and
 
(b)
transferring to an entity whose beneficial owners includes Messrs. Gale and Yeager a 49.8 percent interest in an entity that owns one of the non-portfolio interests in a development project located in Belmar, New Jersey, which it acquired in June 2006 pursuant to the Gale Agreement for $1.6 million.  On September 30, 2007, the Company wrote off $2.1 million of costs related to this project, as it believes the project is no longer viable, which is included in general and administrative expense for the three and nine months ended September 30, 2007.

(2)      
Under the Gale Agreement, the Company is obligated to acquire from an entity whose beneficial owners include Messrs. Gale and Yeager (the “Florham Entity”), a 50 percent interest in a venture which owns a developable land parcel in Florham Park, New Jersey (the “Florham Park Land”) for a maximum purchase price of up to $10.5 million, subject to reduction based on developable square feet approved and other conditions, with the completion of such acquisition subject to the Florham Entity obtaining final development permits and approvals and related conditions necessary to allow for office development expected to be 600,000 square feet.  The Company has agreed to waive its contractual rights for reimbursement from the Florham Entity for certain costs incurred by the Company securing approvals for the development of the Florham Park Land and to defer collection of other costs.  Such deferred other costs, including a carrying charge of six percent per annum,  will be credited against the purchase price of the Florham Park Land at closing.  In the event the acquisition of the Florham Park Land does not close by May 9, 2009, subject to certain conditions, the Florham Entity will be obligated to pay the deferred other costs and an additional $1 million to the Company at that time.

 
(3)
The Company has agreed to settle a dispute and treat the right to receive certain commission payments in the approximate amount of $2.3 million as an excluded asset under the Gale Agreement, which commissions may become payable in the event that Sanofi-Aventis exercises its option to cause the 55 Corporate venture (see Note 4: Investment in Unconsolidated Joint Ventures) to construct a building which Sanofi-Aventis would lease on a long-term basis, as well as the completion of certain related events. The Company has agreed to pay directly to an entity whose beneficial owners include Messrs. Gale and Yeager up to $769,000 of these commissions when and if due.  In the event that Sanofi-Aventis does not exercise its option and the 55 Corporate venture receives the $7 million penalty, no amounts would be due to Messrs. Gale and Yeager or any of their affiliates.

 
 
15

 

 
4.  
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

The debt of the Company’s unconsolidated joint ventures aggregating $607.8 million as of September 30, 2007 is non-recourse to the Company, except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions and material misrepresentations, and except as otherwise indicated below.

MEADOWLANDS XANADU
On November 25, 2003, the Company and affiliates of The Mills Corporation (“Mills”) entered into a joint venture agreement (“Meadowlands Xanadu Venture Agreement”) to form Meadowlands Mills/Mack-Cali Limited Partnership (“Meadowlands Venture”) for the purpose of developing a $1.3 billion family entertainment, recreation and retail complex with an office and hotel component to be built at the Meadowlands sports complex in East Rutherford, New Jersey (“Meadowlands Xanadu”).  The First Amendment to the Meadowlands Xanadu Venture Agreement was entered into as of June 30, 2005.  Meadowlands Xanadu’s approximately 4.76 million-square-foot complex is expected to feature a family entertainment, recreation and retail destination comprising five themed zones: sports; entertainment; children’s education; fashion; and food and home, in addition to four office buildings, aggregating approximately 1.8 million square feet, and a 520-room hotel.

The Company and Mills owned a 20 percent and 80 percent interest, respectively, in the Meadowlands Venture.  The Meadowlands Xanadu Venture Agreement required the Company to make an equity contribution up to a maximum of $32.5 million, which it fulfilled in April 2005.

Mills was to develop, lease and operate the entertainment phase of the Meadowlands Xanadu project (“ERC”).  Upon the Company’s exercise of its rights under the Meadowlands Xanadu Venture Agreement to develop the office and hotel phases, the Meadowlands Venture was to convey ownership of the component ventures to the Company and Mills or its affiliate, and the Company or its affiliate was to own an 80 percent interest and Mills or its affiliate was to own a 20 percent interest in such component ventures.

On August 21, 2006, Mills announced that it had signed a non-binding letter of intent with Colony Capital Acquisitions, LLC (“Colony”) and Kan Am USA Management XXII Limited Partnership (“Kan Am”) under which Colony would arrange for construction financing for Meadowlands Xanadu and make a significant equity infusion into the Meadowlands Venture, and Mills would not have any financial obligations post closing (“Colony Transaction”).  Kan Am had been a partner with Mills in the Meadowlands Venture since the formation of the venture.

On November 22, 2006, the Company entered into and consummated a Redemption Agreement (the “Redemption Agreement”) with the Meadowlands Venture, Meadowlands Developer Holding Corp., a limited partner in the Meadowlands Venture, and the Meadowlands Limited Partnership (f/k/a Meadowlands/Mills Limited Partnership, and hereafter “MLP”), a general partner and a limited partner in the Meadowlands Venture.  Immediately prior to entering into the Redemption Agreement, the investors in MLP undertook a restructuring of MLP whereby Colony became an indirect owner of MLP.

16


In connection with the Colony Transaction and pursuant to the Redemption Agreement, the Meadowlands Venture redeemed (the “Redemption”) the Company’s entire interest in the Meadowlands Venture and its right to participate in the development of the ERC component in exchange for (i) $22.5 million in cash and (ii) a non-economic partner interest in each of the office and hotel components of Meadowlands Xanadu.  In connection with the Redemption, the Operating Partnership also received a non-interest bearing promissory note for an additional $2.5 million, which note is payable in full by MLP only at such time as the Operating Partnership exercises one of its options to develop the first of the office and hotel components of Meadowlands Xanadu.  The Company’s remaining investment of approximately $11.9 million is included in deferred charges and other assets, net, as of September 30, 2007 and December 31, 2006.

Concurrent with the execution of the Redemption Agreement, the Company also entered into the Mack-Cali Rights, Obligations and Option Agreement (the “Rights Agreement”) by and among the Meadowlands Venture, MLP, Meadowlands Mack-Cali GP, L.L.C., Mack-Cali, Baseball Meadowlands Limited Partnership, A-B Office Meadowlands Mack-Cali Limited Partnership, C-D Office Meadowlands Limited Partnership, Hotel Meadowlands Mack-Cali Limited Partnership and ERC Meadowlands Mills/Mack-Cali Limited Partnership.  Pursuant to the Rights Agreement, the Operating Partnership retained certain rights and obligations it held under the Meadowlands Xanadu Venture Agreement with respect to the development of the office and hotel components of Meadowlands Xanadu, including an option to develop any of the office or hotel components of Meadowlands Xanadu (each, a “Take Down Option”).  Upon the exercise of an initial Take Down Option, the Operating Partnership will receive economic interests in each of the office or hotel component partnerships as both a general partner and a limited partner in the applicable office or hotel component, and following receipt of $2.5 million in full payment of the note from MLP, the Operating Partnership’s ownership interest in each of the office or hotel component partnerships will be reduced from 80 percent (as provided in the Meadowlands Xanadu Venture Agreement) to 75 percent.

G&G MARTCO (Convention Plaza)
The Company held a 50 percent interest in G&G Martco, which owns Convention Plaza, a 305,618 square foot office building, located in San Francisco, California.  On November 6, 2006, the Company sold substantially all of its interest in the venture to an affiliate of its joint venture partner for approximately $16.3 million, realizing a gain on the sale of approximately $10.8 million.  The Company performed management and leasing services for the property owned by the joint venture through the date of sale and recognized $36,000 and $119,000 in fees for such services in the three and nine months ended September 30, 2006.

PLAZA VIII AND IX ASSOCIATES, L.L.C.
Plaza VIII and IX Associates, L.L.C. is a joint venture between the Company and Columbia Development Company, L.L.C. (“Columbia”).  The venture was formed to acquire land for future development, located on the Hudson River waterfront in Jersey City, New Jersey, adjacent to the Company’s Harborside Financial Center office complex.  The Company and Columbia each hold a 50 percent interest in the venture.  Among other things, the partnership agreement provides for a preferred return on the Company’s invested capital in the venture, in addition to the Company’s proportionate share of the venture’s profit, as defined in the agreement.  The venture owns undeveloped land currently used as a parking facility.

RAMLAND REALTY ASSOCIATES L.L.C. (One Ramland Road)
On August 20, 1998, the Company entered into a joint venture with S.B. New York Realty Corp. to form Ramland Realty Associates L.L.C.  The venture was formed to own, manage and operate One Ramland Road, a 232,000 square foot office/flex building and adjacent developable land, located in Orangeburg, New York.  In August 1999, the joint venture completed redevelopment of the property and placed the office/flex building in service.  The Company holds a 50 percent interest in the joint venture.  The venture has a mortgage loan with a $14.8 million balance at September 30, 2007 secured by its office/flex property.  The mortgage bears interest at a rate of LIBOR plus 175 basis points and was scheduled to mature in January 2007, with one two-year extension option, subject to certain conditions.  In November 2006, the venture exercised its option to extend the term of the loan until January 2009.

The Company performs management, leasing and other services for the property owned by the joint venture and recognized $16,000 and $35,000 in fees for such services in the three months ended September 30, 2007 and 2006, respectively, and $48,000 and $82,000 for the nine months ended September 30, 2007 and 2006, respectively.
 
 
 
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SOUTH PIER AT HARBORSIDE – HOTEL DEVELOPMENT
On November 17, 1999, the Company entered into a joint venture with Hyatt Corporation (“Hyatt”) to develop a 350-room hotel on the South Pier at Harborside Financial Center, Jersey City, New Jersey, which was completed and commenced initial operations in July 2002.  The Company owns a 50 percent interest in the venture.

On October 12, 2006, the venture obtained a $70.0 million mortgage loan (with a balance as of September 30, 2007 of $69.3 million) collateralized by the hotel property using the proceeds principally to retire $38.9 million of floating-rate debt and to make distributions to partners.  The loan carries an interest rate of 6.15 percent and matures in November 2016.  The venture has a loan with a balance as of September 30, 2007 of $7.0 million with the City of Jersey City, provided by the U.S. Department of Housing and Urban Development.  The loan currently bears interest at fixed rates ranging from 6.09 percent to 6.62 percent and matures in August 2020.  The Company has posted a $7.0 million letter of credit in support of this loan, $3.5 million of which is indemnified by Hyatt.

RED BANK CORPORATE PLAZA L.L.C./RED BANK CORPORATE PLAZA II, L.L.C.
On March 23, 2006, the Company entered into a joint venture with The PRC Group (“PRC”) to form Red Bank Corporate Plaza L.L.C.  The venture was formed to develop Red Bank Corporate Plaza, a 92,878 square foot office building located in Red Bank, New Jersey, which has been fully pre-leased to Hovnanian Enterprises, Inc. for a 10-year term.  The Company holds a 50 percent interest in the venture.  PRC contributed the vacant land for the development of the office building as its initial capital in the venture.  The Company funded the costs of development up to the value of the land contributed by PRC of $3.5 million as its initial capital.

On October 20, 2006, the venture entered into a $22.0 million construction loan with a commercial bank collateralized by the land and development project.  The loan (with a balance as of September 30, 2007 of $18.1 million), carries an interest rate of LIBOR plus 130 basis points and matures in April 2008.  The loan currently has three one-year extension options subject to certain conditions, each of which requires payment of a fee.

In September 2007, the joint venture completed development of the property and placed the office building in service.

On July 20, 2006, the Company entered into a second joint venture agreement with PRC to form Red Bank Corporate Plaza II L.L.C.  The venture was formed to hold land on which it plans to develop Red Bank Corporate Plaza II, an 18,561 square foot office building located in Red Bank, New Jersey.  The Company holds a 50 percent interest in the venture.  The terms of the venture are similar to Red Bank Corporate Plaza L.L.C.  PRC contributed the vacant land as its initial capital in the venture.

MACK-GREEN-GALE LLC
On May 9, 2006, as part of the Gale/Green transactions completed in May 2006, the Company entered into a joint venture, Mack-Green-Gale LLC (“Mack-Green”), with SL Green, pursuant to which Mack-Green holds a 96 percent interest in and acts as general partner of Gale SLG NJ Operating Partnership, L.P. (the “OP LP”).  The Company’s acquisition cost for its interest in Mack-Green was approximately $125 million, which was funded primarily through borrowing under the Company’s revolving credit facility.  The OP LP owns 100 percent of entities which own 25 office properties (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, which was subsequently sold.  In September, 2007, the OP LP entered into a contract to sell all of its eight properties located in Troy, Michigan for $86.1 million subject to due diligence and other conditions.

As defined in the Mack-Green operating agreement, the Company shares decision-making equally with SL Green regarding:  (i) all major decisions involving the operations of Mack-Green; and (ii) overall general partner responsibilities in operating the OP LP.

The Mack-Green operating agreement generally provides for profits and losses to be allocated as follows:

(i)  
99 percent of Mack-Green’s share of the profits and losses from 10 specific OP LP Properties allocable to the Company and one percent allocable to SL Green;
(ii)  
one percent of Mack-Green’s share of the profits and losses from eight specific OP LP Properties and its minor interest in four office properties allocable to the Company and 99 percent allocable to SL Green; and
(iii)  
50 percent of all other profits and losses allocable to the Company and 50 percent allocable to SL Green.
 
 
 
18


 
Substantially all of the OP LP Properties are encumbered by mortgage loans with an aggregate outstanding principal balance of $361 million at September 30, 2007.  $188.5 million of the mortgage loans bear interest at a weighted average fixed interest rate of 6.32 percent per annum and mature at various times through May 2016.  $172.5 million of the mortgage loans bear interest at a floating rate ranging from LIBOR plus 185 basis points to LIBOR plus 400 basis points per annum and mature at various times through January 2009.  Included in the floating rate mortgage loans are $90.3 million provided by an affiliate of SL Green.

On August 9, 2006, $69.7 million of mortgage loans were refinanced.  The new loan has a maximum principal amount of $90 million with $78.9 million drawn at September 30, 2007.  The loan provides the ability to draw funds for qualified leasing and capital improvement costs.  The loan bears interest at a rate of LIBOR plus 185 basis points and matures on August 8, 2008 with a two-year extension option.

The Company performs management, leasing, and construction services for the properties owned by the joint venture and recognized $1.5 million and $900,000 in income (net of $100,000 and $310,000 in direct costs) for such services in the three months ended September 30, 2007, and 2006, respectively, and $2.7 million and $1.7 million in income (net of $896,000 and $737,000 in direct costs) for such services in the nine months ended September 30, 2007 and 2006, respectively.

GE/GALE FUNDING LLC (PFV)
The Gale agreement signed as part of the Gale/Green transactions in May 2006 provides for the Company to acquire certain ownership interests in 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 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.

On May 9, 2006, as part of the Gale/Green transactions, the Company acquired from a Gale Affiliate for $1.8 million a 50 percent controlling interest in GMW Village Associates, LLC (“GMW Village”).  GMW Village holds a 20 percent interest in GE/Gale Funding LLC (“GE Gale”).  GE Gale owns a 100 percent interest in the entity owning Princeton Forrestal Village, a mixed-use, office/retail complex aggregating 527,015 square feet and located in Plainsboro, New Jersey (“Princeton Forrestal Village” or “PFV”).

In addition to the cash consideration paid to acquire the interest, the Company provided a Gale affiliate with the Gale Participation Rights.

The operating agreement of GE Gale, which is owned 80 percent by GEBAM, Inc., provides for, among other things, distributions of net cash flow, initially, in proportion to each member’s interest and subject to adjustment upon achievement of certain financial goals, as defined in the operating agreement.

GE Gale has a mortgage loan with a balance of $52.8 million at September 30, 2007.  The loan bears interest at a rate of LIBOR plus 275 basis points and matures on January 9, 2009, with an extension option through January 9, 2011.

The Company performs management, leasing, and construction services for PFV and recognized $356,000 and $402,000 in income (net of $157,000 and $3.2 million in direct costs) for such services in the three months ended September 30, 2007 and 2006, respectively, and $741,000 and $628,000 in income (net of $1.4 million and $3.6 million in direct costs) for such services in the nine months ended September 30, 2007 and 2006, respectively.

19


ROUTE 93 MASTER LLC (“Route 93 Participant”)/ROUTE 93 BEDFORD MASTER LLC (with the Route 93 Participant, collectively, the “Route 93 Venture”)
On June 1, 2006, the Route 93 Venture was formed between the Route 93 Participant, a majority-owned subsidiary of the Company, having a 30 percent interest and the Commingled Pension Trust Fund (Special Situation Property) of JPMorgan Chase Bank having a 70 percent interest, for the purpose of acquiring seven office buildings, aggregating 666,697 square feet, located in the towns of Andover, Bedford and Billerica, Massachusetts.  Profits and losses are shared by the partners in proportion to their respective interests until the investment yields an 11 percent IRR, then sharing will shift to 40/60, and when the IRR reaches 15 percent, then sharing will shift to 50/50.

The Route 93 Participant is a joint venture between the Company and a Gale affiliate.  Profits and losses are shared by the partners under this venture in proportion to their respective interests (83.3/16.7) until the investment yields an 11 percent IRR, then sharing will shift to 50/50.

The Route 93 Ventures have mortgage loans with an amount not to exceed $58.6 million, with a $42.5 million balance at September 30, 2007 collateralized by its office properties.  The loan provides the venture the ability to draw additional monies for qualified leasing and capital improvement costs.  The loan bears interest at a rate of LIBOR plus 220 basis points and matures on July 11, 2008, with three one-year extension options.

GALE KIMBALL, L.L.C.
On June 15, 2006, the Company entered into a joint venture with a Gale Affiliate to form M-C Kimball, LLC (“M-C Kimball”).  M-C Kimball was formed for the sole purpose of acquiring a Gale Affiliate’s 33.33 percent membership interest in Gale Kimball, L.L.C. (“Gale Kimball”), an entity holding a 25 percent interest in 100 Kimball Drive LLC (“100 Kimball”), which developed and placed in service a 175,000 square foot office property that has been substantially pre-leased to a single tenant, located at 100 Kimball Drive, Parsippany, New Jersey (the “Kimball Property”).

The operating agreement of M-C Kimball provides, among other things, for the Gale Participation Rights (of which Mark Yeager, an Executive Vice President of the Company, has a direct 26 percent interest).

Gale Kimball is owned 33.33 percent by M-C Kimball and 66.67 percent by the Hampshire Generational Fund, L.L.C. (“Hampshire”).  The operating agreement of Gale Kimball provides, among other things, for the distribution of net cash flow, initially, in accordance with its members’ respective membership interests and, upon achievement of certain financial conditions, 50 percent to each of the Company and Hampshire.

100 Kimball is owned 25 percent by Gale Kimball and 75 percent by 100 Kimball Drive Realty Member LLC, an affiliate of JPMorgan (“JPM”). The operating agreement of 100 Kimball provides, among other things, for the distributions to be made in the following order:

(i)  
first, to JPM, such that JPM is provided with an annual 12 percent compound preferred return on Preferred Equity Capital Contributions (as such term is defined in the operating agreement of 100 Kimball and largely comprised of development and construction costs);
(ii)  
second, to JPM, as return of Preferred Equity Capital Contributions until complete repayment of such Preferred Equity Capital Contributions;
(iii)  
third, to each of JPM and Gale Kimball in proportion to their respective membership interests until each member is provided, as a result of such distributions, with an annual twelve percent compound return on the Member’s Capital Contributions (as defined in the operating agreement of 100 Kimball, and excluding Preferred Equity Capital Contributions, if any); and
(iv)  
fourth, 50 percent to each of JPM and Gale Kimball.

On September 21, 2007, the venture obtained a mortgage loan which allows a maximum principal amount of $47 million (with a balance of $32.9 million at September 30, 2007).   The loan provides the ability to draw funds for qualified leasing and capital improvement costs.  The loan bears interest at a rate of 5.95 percent and matures in September 2012.

The Company performs construction and development services for the property owned by 100 Kimball for which it recognized $38,500 and $136,000 in income (net of $324,000 and $2.4 million in direct costs) in the three months ended September 30, 2007, and 2006, respectively, and $866,500 and $282,000 in income (net of $2.5 million and $5.7 million in direct costs) in the nine months ended September 30, 2007 and 2006, respectively.
 
 
 
20

 

 
55 CORPORATE PARTNERS, LLC
On June 9, 2006, the Company entered into a joint venture with a Gale Affiliate to form 55 Corporate Partners, LLC (“55 Corporate”).  55 Corporate was formed for the sole purpose of acquiring from a Gale Affiliate a 50 percent interest in SLG 55 Corporate Drive II, LLC (“SLG 55”), an entity indirectly holding a condominium interest in a vacant land parcel located in Bridgewater, New Jersey, which can accommodate development of an approximately 200,000 square foot office building.  Sanofi-Aventis, which occupies neighboring buildings, has an option to cause the venture to construct the building, which it would lease on a long-term basis.  Sanofi-Aventis is required to pay a penalty of $7 million, subject to certain conditions, in the event it fails to exercise the option by November 21, 2007.  The remaining 50 percent in SLG 55 is owned by SLG Gale 55 Corporate LLC, an affiliate of SL Green Realty Corp (“SLG Gale 55”).

The operating agreement of 55 Corporate provides, among other things, for the Gale Participation Rights (of which Mr. Yeager has a direct 26 percent interest).  If Mr. Gale receives any commission payments with respect to a Sanofi lease on the development property, Mr. Gale has agreed to pay to Mr. Yeager 26 percent of such payments.

The operating agreement of SLG 55 provides, among other things, for the distribution of the available net cash flow to each of 55 Corporate and SLG Gale 55 in proportion to their respective membership interests in SLG 55 (50 percent each).

12 VREELAND ASSOCIATES, L.L.C.
On September 8, 2006, the Company entered into a joint venture with a Gale Affiliate to form M-C Vreeland, LLC (“M-C Vreeland”).  M-C Vreeland was formed for the sole purpose of acquiring a Gale Affiliate’s 50 percent membership interest in 12 Vreeland Associates, L.L.C., an entity owning an office property located at 12 Vreeland Road, Florham Park, New Jersey.

The operating agreement of M-C Vreeland provides, among other things, for the Gale Participation Rights (of which Mr. Yeager has a direct 15 percent interest).

The office property at 12 Vreeland is a 139,750 square foot office building that is fully leased to a single tenant through June 15, 2012.  The property is subject to a mortgage loan, which matures on July 1, 2012, in the initial amount of $18.1 million bearing interest at 6.9 percent per annum.  As of September 30, 2007 the outstanding balance on the mortgage note was $9.3 million.

Under the operating agreement of 12 Vreeland Associates, L.L.C., M-C Vreeland has a 50 percent interest, with S/K Florham Park Associates, L.L.C. (the managing member) and its affiliate holding the other 50 percent.

BOSTON-FILENES
On October 20, 2006, the Company formed a joint venture (the “MC/Gale JV LLC”) with Gale International/426 Washington St. LLC (“Gale/426”), which, in turn, entered into a joint venture (the “Vornado JV LLC”) with VNO 426 Washington Street JV LLC (“Vornado”), an affiliate of Vornado Realty LP, which was formed to acquire and redevelop the Filenes property located in the Downtown Crossing district of Boston, Massachusetts (the “Filenes Property”).

On January 25, 2007, (i) each of M-C/Gale JV LLC, Gale and Washington Street Realty Member LLC (“JPM”) formed a joint venture (“JPM JV LLC”), (ii) M-C/Gale JV LLC assigned its entire 50 percent ownership interest in the Vornado JV LLC to JPM JV LLC, (iii) the Limited Liability Company Agreement of Vornado JV LLC was amended to reflect, among other things, the change in the ownership structure described in subsection (ii) above, and (iv) the Limited Liability Company Agreement of MC/Gale JV LLC was amended and restated to reflect, among other things, the change in the ownership structure described in subsection (ii) above.  The Vornado JV LLC acquired the Filenes Property on January 29, 2007, for approximately $100 million.

As a result of the foregoing transactions, as of January 29, 2007, (i) the Filenes Property is owned by Vornado JV LLC, (ii) Vornado JV LLC is owned 50 percent by each of Vornado and JPM JV LLC, (iii) JPM JV LLC is owned 30 percent by M-C/Gale JV LLC, 70 percent by JPM and managed by Gale/426, which has no ownership interest in JPM JV LLC, and (iv) M-C/Gale JV LLC is owned 99.99 percent by the Company and 0.01 percent by Gale/426.  Thus, the Company holds approximately a 15 percent indirect ownership interest in the Vornado JV LLC and the Filenes Property.
 
 
 
21

 

 
Distributions are made (i) by Vornado JV LLC in proportion to its members’ respective ownership interests, (ii) by JPM JV LLC (a) initially, in proportion to its members’ respective ownership interests until JPM’s investment yields an 11 percent IRR, (b) thereafter, 60/40 to JPM and MC/Gale JV LLC, respectively, until JPM’s investment yields a 15 percent IRR and (c) thereafter, 50/50 to JPM and MC/Gale JV LLC, respectively, and (iii) by MC/Gale JV LLC (w) initially, in proportion to its members’ respective ownership interests until each member has received a 10 percent IRR on its investment, (x) thereafter, 65/35 to the Company and Gale/426, respectively, until the Company’s investment yields a 15 percent IRR, (y) if by the time the Company receives a 15 percent IRR on its investment, Gale/426 has not done so, 100 percent to Gale/426 until Gale/426’s investment yields a 15 percent IRR, and (z) thereafter,  50/50 to each of the Company and Gale/426.

The joint venture’s current plans for the development of the Filenes Property include approximately 1.2 million square feet consisting of office, retail, condominium apartments, hotel and a garage.  The project is subject to governmental approvals.

NKFGMS OWNERS, LLC
On December 28, 2006, the Company contributed its facilities management business, which was acquired on May 9, 2006 as part of the Gale/Green transactions, to a newly-formed joint venture called NKFGMS Owners, LLC.  With the contribution, the Company received $600,000 in cash and a 40 percent interest in the joint venture.  In connection with the Contribution, the Company recognized a loss of approximately $1.5 million.  The Company and a joint venture partner agreed to loan up to $3 million in total to the venture from time to time until December 28, 2009, which would be funded by each of the Company and the joint venture partner on a pro-rata basis in an amount not to exceed $1.5 million, respectively.  The joint venture operating agreement provided for, among other things, profits and losses generally to be allocated in proportion to each member’s interest.

On September 21, 2007, the Company sold its 40 percent interest in NKFGMS to its joint venture partner for net proceeds of $575,000, and recorded a gain of $19,000 on the sale.

GALE JEFFERSON, L.L.C.
On August 22, 2007, the Company entered into a joint venture with a Gale Affiliate to form M-C Jefferson, L.L.C. (“M-C Jefferson”).  M-C Jefferson was formed for the sole purpose of acquiring a Gale Affiliate’s 33.33 percent membership interest in Gale Jefferson, L.L.C. (“Gale Jefferson”), an entity holding a 25 percent interest in One Jefferson Road LLC (“One Jefferson”), which is developing a 100,000 square foot office property located at 1 Jefferson Road, Parsippany, New Jersey (the “Jefferson Property”).

The operating agreement of M-C Jefferson provides, among other things, for the Gale Participation Rights (of which Mark Yeager, an Executive Vice President of the Company, has a direct 26 percent interest).  Gale Jefferson is owned 33.33 percent by M-C Jefferson and 66.67 percent by the Hampshire Generational Fund, L.L.C. (“Hampshire”).  The operating agreements of Gale Jefferson provides, among other things, for the distribution of net cash flow, first, in accordance with its member’s respective interests until each member is provided, as a result of such distributions, with an annual twelve percent compound return on the Member’s Capital Contributions, as defined in the operating agreement and secondly, 50 percent to each of the Company and Hampshire.

One Jefferson is owned 25 percent by Gale Jefferson and 75 percent by One Jefferson Road Realty Member LLC, an affiliate of JPMorgan (“JPM”).  The operating agreement of One Jefferson provides, among other things, for the distribution of net cash flow, first, in accordance with its member’s respective interests until each member is provided, as a result of such distributions, with an annual 12 percent compound return on the Member’s Capital Contributions, as defined in the operating agreement and secondly, 50 percent to JPM and Gale Jefferson.  One Jefferson has a construction loan in an amount not to exceed $21 million bearing interest at a rate of LIBOR plus 160 basis points and maturing on October 24, 2010 with a one-year extension option.

The Company performs management, leasing and construction services for Gale Jefferson and recognized $16,500 in income (net of $593,000 in direct costs) for such services in the three and nine months ended September 30, 2007.

22


SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
The following is a summary of the financial position of the unconsolidated joint ventures in which the Company had investment interests as of September 30, 2007 and December 31, 2006:  (dollars in thousands)

 
September 30, 2007
 
Plaza
   
Red Bank
Mack-
Princeton
         
NKFGMS
   
 
VIII & IX
Ramland
Harborside
Corporate
Green-
Forrestal
Route 93
Gale
55
12
Boston-
Owners
One
Combined
 
Associates
Realty
South Pier
Plaza I & II
Gale
Village
Portfolio
Kimball
Corporate
Vreeland
Filenes
LLC
Jefferson
Total
Assets:
                           
Rental property, net
$ 10,941
$ 11,695
$ 65,982
$ 23,240
$ 467,437
$  43,199
$ 56,757
$ 31,250
$ 17,000
$ 8,021
--
--
$ 5,303
$ 740,825
Other assets
2,008
1,095
12,790
3,593
62,781
25,528
2,904
416
--
858
$ 54,725
--
293
166,991
Total assets
$ 12,949
$ 12,790
$ 78,772
$ 26,833
$ 530,218
$  68,727
$ 59,661
$ 31,666
$ 17,000
$ 8,879
$ 54,725
--
$ 5,596
$ 907,816
Liabilities and partners’/
                           
  members’ capital (deficit):
                           
Mortgages, loans payable
                           
  and other obligations
--
$ 14,816
$ 76,287
$ 18,116
$ 361,032
$  52,800
$ 42,495
$ 32,916
--
$ 9,314
--
--
--
$ 607,776
Other liabilities
$      532
393
3,984
700
27,062
6,930
1,077
--
--
--
$      179
--
$      63
40,920
Partners’/
                           
  members’ capital (deficit)
12,417
(2,419)
(1,499)
8,017
142,124
8,997
16,089
(1,250)
17,000
(435)
54,546
--
5,533
259,120
Total liabilities and partners’/
                           
  members’ capital (deficit)
$ 12,949
$ 12,790
$ 78,772
$ 26,833
$ 530,218
$  68,727
$ 59,661
$ 31,666
$ 17,000
$ 8,879
$ 54,725
--
$ 5,596
$ 907,816
                             
Company’s investment
                           
  in unconsolidated
                           
  joint ventures, net
$   6,131
--
--
$   3,763
$ 128,839
$    2,144
$   5,012
--
$   8,511
$ 7,512
$ 16,617
--
$    548
$ 179,077




 
December 31, 2006
 
Plaza
   
Red Bank
Mack-
Princeton
         
NKFGMS
   
 
VIII & IX
Ramland
Harborside
Corporate
Green-
Forrestal
Route 93
Gale
55
12
Boston-
Owners
One
Combined
 
Associates
Realty
South Pier
Plaza I & II
Gale
Village
Portfolio
Kimball
Corporate
Vreeland
Filenes
LLC
Jefferson
Total
Assets:
                           
Rental property, net
$ 11,404
$ 12,141
$ 69,303
$ 13,205
$ 480,867
$ 39,538
$ 54,684
$ 26,601
$ 17,000
$  8,221
--
$    239
--
$ 733,203
Other assets
1,408
851
11,170
3,320
76,897
24,830
7,177
654
--
909
$ 10,500
2,638
--
140,354
Total assets
$ 12,812
$ 12,992
$ 80,473
$ 16,525
$ 557,764
$ 64,368
$ 61,861
$ 27,255
$ 17,000
$  9,130
$ 10,500
$ 2,877
--
$ 873,557
Liabilities and partners’/
                           
  members’ capital (deficit):
                           
Mortgages, loans payable
                           
  and other obligations
--
$ 14,936
$ 77,217
$  8,673
$ 358,063
$ 47,761
$ 39,435
$ 15,350
--
$10,253
--
--
--
$ 571,688
Other liabilities
$     532
259
4,944
13
39,497
5,972
846
--
--
--
--
$ 1,329
--
53,392
Partners’/
                           
  members’ capital (deficit)
12,280
(2,203)
(1,688)
7,839
160,204
10,635
21,580
11,905
$ 17,000
(1,123)
$ 10,500
1,548
--
248,477
Total liabilities and partners’/
                           
  members’ capital (deficit)
$ 12,812
$ 12,992
$ 80,473
$ 16,525
$ 557,764
$ 64,368
$ 61,861
$ 27,255
$ 17,000
$  9,130
$ 10,500
$ 2,877
--
$ 873,557
Company’s investment
                           
  in unconsolidated
                           
  joint ventures, net
$   6,060
--
--
$   3,647
$ 119,061
$   2,560
$   6,669
$   1,024
$   8,500
$  7,130
$   5,250
$    400
--
$ 160,301


23



SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
The following is a summary of the results of operations of the unconsolidated joint ventures for the period in which the Company had investment interests during the three months ended September 30, 2007 and 2006:  (dollars in thousands)


 
Three Months Ended September 30, 2007
 
     
Plaza
   
Red Bank
Mack-
Princeton
         
NKFGMS
   
 
Meadowlands
G&G
VIII & IX
Ramland
Harborside
Corporate
Green-
Forrestal
Route 93
Gale
55
12
Boston-
Owners
One
Combined
 
Xanadu
Martco
Associates
Realty
South Pier
Plaza I & II
Gale
Village
Portfolio
Kimball
Corporate
Vreeland
Filenes
LLC
Jefferson
Total
Total revenues
--
--
$ 257
$  478
$ 10,640
$ 180
$ 17,065
$ 3,905
$  722
$       1
--
$ 440
$ 141
--
--
$  33,829
Operating and
                               
  other expenses
--
--
(49)
(402)
(6,441)
(3)
(7,983)
(1,899)
(948)
(93)
--
(17)
 (7)
--
--
(17,842)
Depreciation and
                               
  amortization
--
--
(154)
(176)
(1,496)
(50)
(6,581)
(790)
181
(146)
--
(88)
--
--
--
(9,300)
Interest expense
--
--
--
(267)
(1,194)
(50)
(6,870)
(1,248)
(904)
(382)
--
(110)
--
--
--
(11,025)
                                 
Net income
--
--
$ 54
$ (367)
$   1,509
$  77
$ (4,369)
$    (32)
$ (949)
$ (620)
--
$ 225
$ 134
--
--
$    (4,338)
Company’s equity
                               
  in earnings (loss)
                               
  of unconsolidated
                               
  joint ventures
--
--
$ 27
$ (200)
$      755
$  69
$ (2,012)
$    (14)
$ (285)
$   (52)
--
$ 113
$    40
--
--
$    (1,559)




 
Three Months Ended September 30,2006
 
     
Plaza
   
Red Bank
Mack-
Princeton
         
NKFGMS
   
 
Meadowlands
G&G
VIII & IX
Ramland
Harborside
Corporate
Green-
Forrestal
Route 93
Gale
55
12
Boston-
Owners
One
Combined
 
Xanadu
Martco
Associates
Realty
South Pier
Plaza I & II
Gale
Village
Portfolio
Kimball
Corporate
Vreeland
Filenes
LLC
Jefferson
Total
Total revenues
$     110
$1,703
$ 167
$ 518
$  9,926
--
$ 15,002
$ 2,194
$ 1,970
$  3
--
$ 156
--
--
--
$  31,749
Operating and
                               
  other expenses
(2,578)
(999)
(62)
(391)
(6,015)
--
(7,578)
(1,694)
(590)
(1)
--
(64)
--
--
--
$ (19,972)
Depreciation and
                               
  amortization
--
(363)
(154)
(167)
(1,460)
--
(5,841)
(695)
(349)
--
--
(29)
--
   
$   (9,058)
Interest expense
--
(845)
--
 (267)
(893)
--
(6,629)
(795)
(761)
--
--
--
--
--
--
$ (10,190)
                           
--
   
Net income
$ (2,468)
$   (504)
$ (49)
$ (307)
$    1,558
--
$  (5,046)
$  (990)
$    270
$  2
--
$   63
--
--
--
$   (7,471)
Company’s equity
                               
  in earnings (loss)
                               
  of unconsolidated
                               
  joint ventures
$ (1,876)
$   (409)
$ (24)
$ (225)
$     639
--
$  (2,749)
$  (211)
$      67
--
--
$   31
--
--
--
$   (4,757)


24




SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
The following is a summary of the results of operations of the unconsolidated joint ventures for the period in which the Company had investment interests during the nine months ended September 30, 2007 and 2006:  (dollars in thousands)

 
Nine Months Ended September 30, 2007
 
     
Plaza
   
Red Bank
Mack-
Princeton
         
NKFGMS
   
 
Meadowlands
G&G
VIII & IX
Ramland
Harborside
Corporate
Green-
Forrestal
Route 93
Gale
55
12
Boston-
Owners
One
Combined
 
Xanadu
Martco
Associates
Realty
South Pier
Plaza I & II
Gale
Village
Portfolio
Kimball
Corporate
Vreeland
Filenes
LLC
Jefferson
Total
Total revenues
--
--
$ 731
$ 1,523
$ 30,944
$ 242
$  50,757
$ 9,157
$ 1,785
$         3
--
$ 1,488
$  672
--
--
$  97,302
Operating and
                               
  other expenses
--
--
(132)
(1,166)
(18,947)
(5)
(23,141)
(4,889)
(2,812)
(133)
--
(50)
(668)
--
--
(51,943)
Depreciation and
                               
  amortization
--
--
(462)
(526)
(4,462)
(49)
(20,745)
(2,327)
(1,846)
(329)
--
(264)
--
--
--
(31,010)
Interest expense
--
--
--
(796)
(3,596)
(50)
(20,299)
(3,579)
(2,547)
(796)
--
(454)
--
--
--
(32,117)
                                 
Net income
--
--
$ 137
$ (965)
$  3,939
$ 138
$ (13,428)
$ (1,638)
$ (5,420)
$ (1,255)
--
$   720
$      4
--
--
$ (17,768)
Company’s equity
                               
  in earnings (loss)
                               
  of unconsolidated
                               
  joint ventures
--
--
$   69
$ (375)
$  1,863
$   69
$  (5,351)
$   (416)
$ (1,655)
$    (104)
--
$   360
$      1
$ 53
--
$   (5,486)




 
Nine Months Ended September 30,2006
 
     
Plaza
   
Red Bank
Mack-
Princeton
         
NKFGMS
   
 
Meadowlands
G&G
VIII & IX
Ramland
Harborside
Corporate
Green-
Forrestal
Route 93
Gale
55
12
Boston-
Owners
One
Combined
 
Xanadu
Martco
Associates
Realty
South Pier
Plaza I &II
Gale
Village
Portfolio
Kimball
Corporate
Vreeland
Filenes
LLC
Jefferson
Total
Total revenues
$    409
$ 5,351
$   489
$ 1,533
$ 27,529
--
$  24,469
$  6,585
$  2,528
$  3
--
$156
--
--
--
$  69,052
Operating and
                               
  other expenses
(2,729)
(2,880)
(150)
(1,095)
(16,651)
--
(11,354)
(4,410)
(847)
(1)
--
(64)
--
--
--
(40,181)
Depreciation and
                               
  amortization
--
(1,075)
(462)
(543)
(4,369)
--
(9,219)
(2,116)
(465)
--
--
(29)
--
--
--
(18,278)
Interest expense
--
(2,362)