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 THESECURITIES EXCHANGE ACT OF 1934  For the quarterly period ended June 30, 2005  or  o
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934  For the transition period from
        to  Commission File Number :
        333-57103   Mack-Cali Realty, L.P.(Exact name of registrant as specified in its charter)   Delaware
        
        22-3315804(State or other jurisdiction of incorporation or organization)
        
        (I.R.S. Employer Identification No.)   11 Commerce Drive, Cranford, New Jersey
        
        07016-3501(Address of principal executive offices)
        
        (Zip Code)   (908) 272-8000(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.  YESXNO ___  Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)  YESXNO ___


MACK-CALI REALTY, L.P.  FORM 10-Q  INDEX  Part I
        Financial Information
        Page  Item 1.
        Financial Statements:  Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004
        4  Consolidated Statements of Operations for the three and six month periods ended June 30, 2005 and 2004
        5  Consolidated Statement of Changes in Partners Capital for the six months ended June 30, 2005
        6  Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004
        7  Notes to Consolidated Financial Statements
        8-37  Item 2.
        Managements Discussion and Analysis of Financial Conditionand Results of Operations
        38-56  Item 3.
        Quantitative and Qualitative Disclosures About Market Risk
        57  Item 4.
        Controls and Procedures
        57  Part II
        Other Information  Item 1.
        Legal Proceedings
        58-59  Item 2.
        Unregistered Sales of Equity Securities and Use of Proceeds
        60  Item 3.
        Defaults Upon Senior Securities
        60  Item 4.
        Submission of Matters to a Vote of Security Holders
        60  Item 5.
        Other Information
        60  Item 6.
        Exhibits
        60  Signatures
        61   2


MACK-CALI REALTY, L.P.  Part I  Financial Information   Item 1.
        Financial Statements  The accompanying unaudited consolidated balance sheets, statements of operations, of changes in partners capital, 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, L.P.s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.  The results of operations for the three and six month periods ended June 30, 2005 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.  3


MACK-CALI REALTY, L.P, AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS(in thousands, except per unit amounts)  ASSETS
        June 30,
2005
(unaudited)
        December 31,
2004Rental propertyLand and leasehold interests
        $    629,471
        $    593,606Buildings and improvements
        3,509,941
        3,296,789Tenant improvements
        270,642
        262,626Furniture, fixtures and equipment
        7,389
        7,9384,417,443
        4,160,959Less  accumulated depreciation and amortization
        (660,346)
        (641,626)3,757,097
        3,519,333Rental property held for sale, net
        --
        19,132Net investment in rental property
        3,757,097
        3,538,465Cash and cash equivalents
        15,710
        12,270Investments in unconsolidated joint ventures
        60,613
        46,743Unbilled rents receivable, net
        85,821
        82,586Deferred charges and other assets, net
        186,964
        155,060Restricted cash
        9,261
        10,477Accounts receivable, net of allowance for doubtful accountsof $1,482 and $1,235
        5,750
        4,564Total assets
        $4,121,216
        $3,850,165LIABILITIES AND PARTNERS CAPITALSenior unsecured notes
        $1,330,356
        $1,031,102Revolving credit facility
        163,000
        107,000Mortgages, loans payable and other obligations
        472,913
        564,198Distributions payable
        48,091
        47,712Accounts payable, accrued expenses and other liabilities
        74,054
        57,002Rents received in advance and security deposits
        46,556
        47,938Accrued interest payable
        27,132
        22,144Total liabilities
        2,162,102
        1,877,096Minority interest in consolidated joint ventures
        --
        11,103Commitments and contingencies:Partners capital:General Partner, 10,000 and 10,000 preferred units outstanding
        24,836
        24,836Limited partners, 0 and 215,018 preferred units outstanding
        --
        220,547General Partner 61,704,554 and 61,038,875 common units outstanding
        1,518,655
        1,520,275Limited partners, 13,829,254 and 7,657,428 common units outstanding
        415,623
        196,308Total partners capital
        1,959,114
        1,961,966Total liabilities and partners capital
        $4,121,216
        $3,850,165The accompanying notes are an integral part of these consolidated financial statements.   4


MACK-CALI REALTY, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per unit amounts) (unaudited)  Three Months Ended
        Six Months EndedJune 30,
        June 30,REVENUES
        2005
        2004
        2005
        2004Base rents
        $137,171
        $123,730
        $270,312
        $244,798Escalations and recoveries from tenants
        20,730
        15,822
        39,142
        31,019Parking and other
        5,565
        2,480
        7,461
        5,953Total revenues
        163,466
        142,032
        316,915
        281,770EXPENSESReal estate taxes
        20,474
        16,565
        39,591
        32,923Utilities
        12,413
        9,490
        24,362
        20,523Operating services
        22,602
        19,020
        43,980
        36,356General and administrative
        8,347
        8,685
        15,774
        15,082Depreciation and amortization
        38,532
        31,568
        74,339
        61,282Interest expense
        30,363
        26,512
        58,761
        55,549Interest income
        (120)
        (220)
        (184)
        (940)Total expenses
        132,611
        111,620
        256,623
        220,775Income from continuing operations beforeminority interest and equity in earnings ofunconsolidated joint ventures
        30,855
        30,412
        60,292
        60,995Minority interest in consolidated joint ventures
        --
        --
        (74)
        --Equity in earnings of unconsolidated joint, net
        542
        1,090
        230
        1,267Gain on sale of investment in unconsolidatedjoint ventures
        --
        --
        35
        720Income from continuing operations
        31,397
        31,502
        60,483
        62,982Discontinued operations:Income from discontinued operations
        1,297
        2,547
        2,757
        5,229Realized gains (losses) and unrealized losseson disposition of rental property, net
        11,975
        (11,856)
        11,078
        (11,856)Total discontinued operations, net
        13,272
        (9,309)
        13,835
        (6,627)Net income
        44,669
        22,193
        74,318
        56,355Preferred unit distributions
        (500)
        (4,409)
        (4,909)
        (8,818)Net income available to common unitholders
        $  44,169
        $  17,784
        $  69,409
        $  47,537Basic earnings per common unit:Income from continuing operations
        $      0.41
        $       0.40
        $      0.77
        $      0.80Discontinued operations
        0.18
        (0.14)
        0.19
        (0.10)Net income available to common unitholders
        $      0.59
        $       0.26
        $      0.96
        $      0.70Diluted earnings per common unit:Income from continuing operations
        $      0.41
        $       0.39
        $      0.77
        $      0.79Discontinued operations
        0.17
        (0.13)
        0.19
        (0.10)Net income available to common unitholders
        $      0.58
        $       0.26
        $      0.96
        $      0.69Distributions declared per common unit
        $      0.63
        $       0.63
        $      1.26
        $      1.26Basic weighted average units outstanding
        75,240
        68,177
        72,041
        67,886Diluted weighted average units outstanding
        75,649
        68,620
        72,478
        68,448The accompanying notes are an integral part of these consolidated financial statements   5


MACK-CALI REALTY, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS CAPITAL For the Six Months Ended June 30, 2005(in thousands) (unaudited)   General
        Limited
        General
        Limited
        General
        Limited
        General
        LimitedPartner
        Partners
        Partner
        Partners
        Partner
        Partners
        Partner
        PartnersPreferred
        Preferred
        Common
        Common
        Preferred
        Preferred
        Common
        CommonUnits
        Units
        Units
        Units
        Unitholders
        Unitholders
        Unitholders
        Unitholders
        TotalBalance at January 1, 2005
        10
        215
        61,039
        7,616
        $24,836
        $220,547
        $1,520,275
        $196,308
        $1,961,966Net income
        --
        --
        --
        --
        1,000
        3,909
        58,483
        10,926
        74,318Distributions
        --
        --
        --
        --
        (1,000)
        (3,909)
        (77,644)
        (13,505)
        (96,058)Conversion of limitedpartners preferredunits into limitedpartners commonunits
        --
        (215)
        --
        6,206
        --
        (220,547)
        --
        220,547
        --Redemption of limitedpartner common units forshares of common      stock
        --
        --
        56
        (56)
        --
        --
        1,439
        (1,439)
        --Issuance of limitedpartner common units
        --
        --
        --
        63
        --
        --
        --
        2,786
        2,786Units issued underDividend Reinvestment      andStock Purchase Plan
        --
        --
        4
        --
        --
        --
        196
        --
        196Contributions       proceedsfrom stockoptions exercised
        --
        --
        493
        --
        --
        --
        14,134
        --
        14,134Stock options expense
        --
        --
        --
        --
        --
        --
        71
        --
        71Deferred compensationplan for directors
        --
        --
        --
        --
        --
        --
        147
        --
        147Issuance of RestrictedStock Awards
        --
        --
        114
        --
        --
        --
        --
        --
        --Amortization of stockcompensation
        --
        --
        --
        --
        --
        --
        1,554
        --
        1,554Cancellation ofRestricted Stock
        --
        --
        (1)
        --
        --
        --
        --
        --
        --Balance at June 30, 2005
        10
        --
        61,705
        13,829
        $24,836
        $     --
        $1,518,655
        $415,623
        $1,959,114The accompanying notes are an integral part of these consolidated financial statements.   6


MACK-CALI REALTY, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) (unaudited)  Six Months Ended
June 30,CASH FLOWS FROM OPERATING ACTIVITIES
        2005
        2004Net income
        $   74,318
        $  56,355Adjustments to reconcile net income to net cash provided byoperating activities:Depreciation and amortization
        74,339
        61,282Depreciation and amortization on discontinued operations
        400
        2,927Stock options expense
        71
        334Amortization of stock compensation
        1,554
        2,010Amortization of deferred financing costs and debt discount
        1,739
        2,049Equity in earnings of unconsolidated joint venturesEquity in earnings of unconsolidated joint ventures, net
        (230)
        (1,267)Gain on sale of investment in unconsolidated joint venture
        (35)
        (720)Realized gains (losses) and unrealized losses on dispositionof rental property
        (11,078)
        11,856Minority interest in consolidated joint venture
        74
        --Changes in operating assets and liabilities:Increase in unbilled rents receivable, net
        (6,412)
        (5,974)Increase in deferred charges and other assets, net
        (16,336)
        (24,853)(Increase) decrease in accounts receivable, net
        (1,186)
        1,299Increase in accounts payable, accrued expenses and otherliabilities
        3,815
        1,846(Decrease) increase in rents received in advance and security deposits
        (1,382)
        952Decrease in accrued interest payable
        4,988
        (423)Net cash provided by operating activities
        $ 124,639
        $ 107,673CASH FLOWS FROM INVESTING ACTIVITIESAdditions to rental property and related intangibles
        $(377,841)
        $ (95,958)Repayments of notes receivable
        13
        850Investment in unconsolidated joint ventures
        (16,281)
        (15,806)Distributions from unconsolidated joint ventures
        --
        12,455Proceeds from sale of investment in unconsolidated joint venture
        2,676
        --Acquisition of minority interest in consolidated joint venture
        (7,713)
        --Proceeds from sales of rental property
        97,414
        720Funding of note receivable
        --
        (9,665)Decrease in restricted cash
        1,216
        249Net cash used in investing activities
        $(300,516)
        $(107,155)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from senior unsecured notes
        $298,804
        $ 202,363Borrowings from revolving credit facility
        539,326
        310,475Repayment of senior unsecured notes
        --
        (300,000)Repayment of revolving credit facility
        (483,326)
        (211,500)Repayment of mortgages, loans payable and other obligations
        (91,160)
        (14,126)Payment of financing costs
        (2,780)
        (2,058)Proceeds from stock options exercised
        14,134
        33,287Proceeds from stock warrants exercised
        --
        4,925Payment of distributions
        (95,681)
        (94,326)Net cash provided by (used in) financing activities
        $ 179,317
        $ (70,960)Net increase (decrease)  in cash and cash equivalents
        $     3,440
        $ (70,442)Cash and cash equivalents, beginning of period
        12,270
        78,375Cash and cash equivalents, end of period
        $   15,710
        $    7,933The accompanying notes are an integral part of these consolidated financial statements.   7


MACK-CALI REALTY, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share/unit amounts)  1.
        ORGANIZATION AND BASIS OF PRESENTATION  ORGANIZATION Mack-Cali Realty, L.P., a Delaware limited partnership, together with its subsidiaries (the Operating Partnership,) was formed on May 31, 1994 to conduct the business of leasing, management, acquisition, development, construction and tenant-related services for its sole general partner, Mack-Cali Realty Corporation and its subsidiaries (the Corporation or General Partner).  The Operating Partnership, through its operating divisions and subsidiaries, including the Mack-Cali property-owning partnerships and limited liability companies (collectively, the Property Partnerships) is the entity through which all of the General Partners operations are conducted.  The General Partner is a fully integrated, self-administered, self-managed real estate investment trust (REIT).  The General Partner controls the Operating Partnership as its sole general partner, and owned an 81.7 percent and 88.9 percent common unit interest in the Operating Partnership as of June 30, 2005 and December 31, 2004, respectively.  The General Partners business is the ownership of interests in and operation of the Operating Partnership, and all of the General Partners expenses are incurred for the benefit of the Operating Partnership.  The General Partner is reimbursed by the Operating Partnership for all expenses it incurs relating to the ownership and operation of the Operating Partnership.  As of June 30, 2005, the Operating Partnership owned or had interests in 267 properties plus developable land (collectively, the Properties).  The Properties aggregate approximately 29.9 million square feet, which are comprised of 159 office buildings and 97 office/flex buildings, totaling approximately 29.5 million square feet (which include one office building and one office/flex building aggregating 538,000 square feet owned by unconsolidated joint ventures in which the Operating Partnership has investment interests), six industrial/warehouse buildings totaling approximately 387,400 square feet, two retail properties totaling approximately 17,300 square feet, one hotel (which is owned by an unconsolidated joint venture in which the Operating Partnership 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 Operating Partnership.  See Investments in Unconsolidated Joint Ventures in Note 2 for the Operating Partnership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.  Certain reclassifications have been made to prior period amounts in order to conform with current period presentation.   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   8


development.  Included in total rental property is construction and development in-progress of $92,966 and $86,916 (including land of $56,291 and $53,705) as of June 30, 2005 and December 31, 2004, 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 Operating Partnership 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 Operating Partnership 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.  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 termBuildings and improvements
        5 to 40 yearsTenant improvements
        The shorter of the term of therelated lease or useful lifeFurniture, fixtures and equipment
        5 to 10 years  Upon acquisition of rental property, the Operating Partnership 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 Operating Partnership 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 Operating Partnership 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 Operating Partnership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  9


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 Operating Partnership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 Operating Partnerships real estate properties 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 Operating Partnership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 Operating Partnerships rental properties is impaired.  Rental Property Held for Sale and Discontinued Operations
        When assets are identified by management as held for sale, the Operating Partnership discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets.  If, in managements opinion, the 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 Operating Partnership 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, Net
        The Operating Partnership accounts for its investments in unconsolidated joint ventures for which Financial Accounting Standards Board (FASB) Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46) does not apply, under the equity method of accounting as the Operating Partnership 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  10


through means other than voting rights (variable interest entities or VIEs) and the determination of which business enterprise 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.  The Operating Partnership has identified its Meadowlands Xanadu joint venture with the Mills Corporation as a VIE, but is not consolidating such venture as the Operating Partnership is not the Primary Beneficiary.  Disclosure about this VIE is included in Note 4  Investments in Unconsolidated Joint Ventures.  On a periodic basis, management assesses whether there are any indicators that the value of the Operating Partnership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 Operating Partnerships investments in unconsolidated joint ventures is impaired.  See Note 4  Investments in Unconsolidated Joint Ventures.  Cash and Cash Equivalents
        All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents.  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 $847 and $989 for the three months ended June 30, 2005 and 2004, respectively, and $1,739 and $2,094 for the six months ended June 30, 2005 and 2004, 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 Operating Partnership are compensated for providing leasing services to the Properties.  The portion of such compensation, which is capitalized and amortized, approximated $949 and $1,481 for the three months ended June 30, 2005 and 2004, respectively, and $1,906 and $2,956 for the six months ended June 30, 2005 and 2004, respectively.  Derivative Instruments
        The Operating Partnership 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 Operating Partnership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.   11


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.  Parking and other revenue includes income from parking spaces leased to tenants, income from tenants for additional services arranged for the Operating Partnership, income from tenants for early lease terminations and income from managing and/or leasing properties for third parties.  Escalations and recoveries 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 14  Tenant Leases.  Allowance for Doubtful Accounts
        Management periodically performs a detailed review of amounts due from tenants 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 Operating Partnership is a partnership and, as a result, all income and losses of the partnership are allocated to the partners for inclusion in their respective income tax returns.  Accordingly, no provision or benefit for income taxes has been made in the accompanying financial statements.  Earnings Per Unit
        The Operating Partnership presents both basic and diluted earnings per unit (EPU).  Basic EPU excludes dilution and is computed by dividing net income available to common unitholders by the weighted average number of units outstanding for the period.  Diluted EPU reflects the potential dilution that could occur if securities or other contracts to issue common units were exercised or converted into common units, where such exercise or conversion would result in a lower EPU amount.  Dividends and Distributions Payable
        The distributions payable at June 30, 2005 represents distributions payable to preferred unitholders (10,000 Series C Preferred units) and common unitholders (75,542,386 common units), for all such holders of record as of July 6, 2005 with respect to the second quarter 2005.  The second quarter 2005 Series C preferred unit distributions of $50.00 per preferred unit, and common unit distributions of $0.63 per common unit were approved by the Corporations Board of Directors on June 23, 2005.  The Series C preferred unit distributions payable were paid on July 15, 2005.  The common unit distributions payable were paid on July 18, 2005.   12


The distributions payable at December 31, 2004 represents distributions payable to preferred unitholders (10,000 Series C preferred units) common unitholders (68,734,472 common units) and preferred distributions payable to preferred unitholders (215,018 Series B preferred units) for all such holders of record as of January 5, 2005 with respect to the fourth quarter 2004.  The fourth quarter 2004 Series C preferred unit distributions of $50.00 per preferred unit, common unit distributions of $0.63 per common unit, as well as the fourth quarter 2004 Series B preferred unit distributions of $18.1818 per preferred unit, were approved by the Corporations Board of Directors on December 7, 2004.  The Series C preferred unit distribution and common and Series B preferred unit distributions payable were paid on January 18, 2005.  Costs Incurred For Preferred Stock Issuances
        Costs incurred in connection with the Corporations preferred stock issuances are reflected as a reduction of General Partners capital.  Stock Compensation
        The Operating Partnership 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 Corporation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 Corporations policy is to grant options with an exercise price equal to the quoted closing market price of the Corporations stock on the business day preceding the grant date.  Accordingly, no compensation cost has been recognized under the
Corporation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 Operating Partnership adopted the provisions of FASB No. 123, which requires, on a prospective basis, 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 June 30, 2005 and 2004, the Operating Partnership recorded restricted stock and stock options expense of $828 and $1,573, respectively, and $1,625 and $2,344 for the six month periods ended June 30, 2005 and 2004.  FASB No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, was issued in December 2002 and amends FASB No. 123, Accounting for Stock Based Compensation.  FASB No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock based compensation.  In
addition, this Statement amends the disclosure requirements of FASB No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  FASB No. 148 disclosure requirements are presented as follows:  13


The following table illustrates the effect on net income and earnings per unit if the fair value based method had been applied to all outstanding and unvested stock awards in each period:  Three Months Ended
        Six Months EndedJune 30,
        June 30,2005
        2004
        2005
        2004Net income, as reported
        $44,669
        $22,193
        $74,318
        $56,355Add:       Stock-based compensation                  expenseincluded in reported net income
        828
        1,573
        1,625
        2,344Deduct:  Total stock-based compensationexpense determined under fair                  valuebased method for all awards
        (873)
        (1,838)
        (1,804)
        (2,837)Pro forma net income
        44,624
        21,928
        74,139
        55,862Deduct:  Preferred unit distributions
        (500)
        (4,409)
        (4,909)
        (8,818)Pro forma net income available tocommon unitholders  basic
        $44,124
        $17,519
        $69,230
        $47,044Earnings Per Unit:Basic  as reported
        $    0.59
        $    0.26
        $    0.96
        $    0.70Basic  pro forma
        $    0.59
        $    0.26
        $    0.96
        $    0.69Diluted  as reported
        $    0.58
        $    0.26
        $    0.96
        $    0.69Diluted  pro forma
        $    0.58
        $    0.26
        $    0.96
        $    0.69   3.
        REAL ESTATE PROPERTY TRANSACTIONS  Property Acquisitions The Operating Partnership acquired the following office properties during the six months ended June 30, 2005:  AcquisitionAcquisition
        
        
        # of
        Rentable
        Cost (a)Date
        Property/Address
        Location
        Bldgs.
        Square Feet
        (in thousands)03/02/05
        101 Hudson Street (b)
        Jersey City, Hudson County, NJ
        1
        1,246,283
        $330,34203/29/05
        23 Main Street (b) (c)
        Holmdel, Monmouth County, NJ
        1
        350,000
        23,947Total Property Acquisitions:
        
        2
        1,596,283
        $354,289(a)    Amounts are as of June 30, 2005.(b)   Transaction was funded primarily through borrowing on the Operating Partnerships revolving credit facility.(c)    In addition to its initial investment, the Operating Partnership presently intends to make additional investments related to the property of approximately $11,702.   14


Property Sales The Operating Partnership sold the following office properties during the six months ended June 30, 2005:  Rentable
        Net
        Net
        RealizedSale
        
        
        # of
        Square
        Sales
        Book
        Gain/Date
        Property/Address
        Location
        Bldgs.
        Feet
        Proceeds
        Value
        (Loss)02/04/05
        210 South 16th Street
        Omaha, Douglas County, Nebraska
        1
        318,224
        $    8,464
        $  8,210
        $     25402/11/05
        1122 Alma Road
        Richardson, Dallas County, Texas
        1
        82,576
        2,075
        2,344
        (269)02/15/05
        3 Skyline Drive
        Hawthorne, Westchester County, New York
        1
        75,668
        9,587
        8,856
        73105/11/05
        201 Willowbrook  Blvd.
        Wayne, Passaic County, New Jersey (a)
        1
        178,329
        17,696
        17,705
        (9)06/03/05
        600 Community Drive/111 East Shore Road
        North Hempstead, Nassau County, New York
        2
        292,849
        71,593
        59,609
        11,984Total Office Property Sales:
        
        6
        947,646
        $109,415
        $96,724
        $12,691(a)    In connection with the sale, the Operating Partnership provided a mortgage loan to the buyer of $12,000 which bears interest at 5.74 percent, matures in five years with a five year renewal option, and requires monthly payments of principal and interest.  Subsequent Events On July 12, 2005, the Operating Partnership acquired Monmouth Executive Center, a four-building, 236,338 square-foot class A office complex in Freehold, New Jersey, for approximately $33,000.   4.
        INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES  The debt of the Operating Partnerships unconsolidated joint ventures aggregating $123,460 as of June 30, 2005 is non-recourse to the Operating Partnership, 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 Operating Partnership 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.  On December 3, 2003, the Meadowlands Venture entered into a redevelopment agreement (the Redevelopment Agreement) with the New Jersey Sports and Exposition Authority (NJSEA) for the redevelopment of the area surrounding the Continental Airlines Arena in East Rutherford, New Jersey and the construction of the Meadowlands Xanadu project.  The Redevelopment Agreement provides for a 75-year ground lease and requires the Meadowlands Venture to pay the NJSEA a $160,000 development rights fee and fixed rent over the term.  Fixed rent will be in the amount of $1 per year for the first 15 years, increasing to $7,500 from the 16th to the 18th years, increasing to $8,447 in the 19th year, increasing to $8,700 in the 20th
year, increasing to $8,961 in the 21st year, then to $9,200 in the 23rd to 26th years, with additional increases over the remainder of the term, as set forth in the ground lease.  The ground lease also allows for the potential for participation rent payments by the Meadowlands Venture, as described in the ground lease agreement.  The First Amendment to the Redevelopment Agreement and the ground lease, itself, were signed on October 5, 2004.  The Meadowlands Venture received all necessary permits and approvals from the NJSEA and U.S. Army Corps of Engineers in March 2005 and commenced construction in the same month.  As a condition to the commencement of work to fill wetlands pursuant to the permit issued by the U.S. Army Corps of Engineers and pursuant to the Redevelopment Agreement, as amended, the
Meadowlands Venture conveyed certain vacant land, known as the Empire Tract, to a conservancy trust.  On June 30, 2005, the $160,000 development rights fees was deposited into an escrow account by the Meadowlands Venture in accordance with the  15


terms of the First Amendment to the Redevelopment Agreement.  On such date, the following amounts were paid from escrow:  (i) approximately $36,000 to defease certain debt obligations of the NJSEA; and (ii) $26,800 to the NJSEA, which, in turn, paid such amount to the Meadowlands Venture for the Empire Tract.  The balance of the escrow is to be released and paid in accordance with the terms of the First Amendment to the Redevelopment Agreement.  The Operating Partnership and Mills own a 20 percent and 80 percent interest, respectively, in the Meadowlands Venture.  These interests were subject to certain participation rights by The New York Giants, which were subsequently terminated in April 2004.  The Meadowlands Xanadu Venture Agreement required the Operating Partnership to make an equity contribution up to a maximum of $32,500, which it fulfilled in April 2005.  Pursuant to the Meadowlands Xanadu Venture Agreement, Mills has received subordinated capital credit in the venture of approximately $118,000, which represents certain costs incurred by Mills in connection with the Empire Tract prior to the creation of the Meadowlands Venture.  However, under the First Amendment to the Meadowlands Xanadu Venture Agreement, the Operating Partnership and Mills agreed that due to the expected receipt by the Meadowlands Venture of certain other sums and
certain development costs savings in connection with Meadowlands Xanadu, Mills subordinated capital credit in the venture for the Empire Tract should be reduced to $60,000 as of the date of the First Amendment to the Meadowlands Xanadu Venture Agreement.  The Meadowlands Xanadu Venture Agreement requires Mills to contribute the balance of the capital required to complete the entertainment phase, subject to certain limitations.  The Operating Partnership will receive a 9 percent preferred return on its equity investment, only after Mills receives a 9 percent preferred return on its equity investment.  Residual returns, subject to participation by other parties, will be in proportion to each partners respective percentage interest.  Mills will develop, lease and operate the entertainment phase of the Meadowlands Xanadu project.  The Meadowlands Venture has formed and owns, directly and indirectly, all of the partnership interests in and to the component ventures which were formed for the future development of the office and hotel phases, which the Operating Partnership will develop, lease and operate.  Upon the Operating Partnerships exercise of its rights under the Meadowlands Xanadu Venture Agreement to develop the office and hotel phases, the Meadowlands Venture will convey ownership of the component ventures to the Operating Partnership and Mills or its affiliate, and the Operating Partnership or its affiliate will own an 80 percent interest and Mills or its affiliate will own a 20 percent interest in such component ventures.  However, under the First amendment to the Meadowlands Xanadu Venture Agreement, if the Meadowlands
Venture develops a hotel that has video lottery terminals (or slots), or any other legalized form of gaming on or in its premises, then the Operating Partnership or its affiliate will own a 50 percent interest in such component venture and Mills or its affiliate will own a 50 percent interest.  The Meadowlands Xanadu Venture Agreement requires that the Operating Partnership must exercise its rights with respect to the first office and hotel phase no later than four years after the grand opening of the entertainment phase, and requires that the Operating Partnership exercise all of its rights with respect to the office and hotel phases no later than 10 years from such date, but does not require that any or all components be developed.  However, under the Meadowlands Xanadu Venture Agreement, Mills has the right to accelerate such exercise schedule, subject to certain conditions.  Should the Operating Partnership fail to meet the time schedule described above for the
exercise of its rights with respect to the office and hotel phases, the Operating Partnership will forfeit its rights to participate in future development.  If this occurs, Mills will have the right to develop the additional phases, subject to the Operating Partnerships right to participate, or to cause the Meadowlands Venture to sell such components to a third party, subject to a sales price limitation of 95 percent of the value that would have been required to form such component ventures.  Commencing three years after the grand opening of the entertainment phase of the Meadowlands Xanadu project, either Mills or the Operating Partnership may sell its partnership interest to a third party subject to the following provisions:  
        Mills has certain drag-along rights and the Operating Partnership has certain tag-along rights in connection with such sale of interest to a third party; and
        Mills has a right of first refusal with respect of a sale by the Operating Partnership of its partnership interests.   16


In addition, commencing on the sixth anniversary of the opening, the Operating Partnership may cause Mills to purchase, and Mills may cause the Operating Partnership to sell to Mills, all of the Operating Partnerships partnership interests at a price based on the then fair market value of the project.  Notwithstanding the exercise by Mills or the Operating Partnership of any of the foregoing rights with respect to the sale of the Operating Partnerships partnership interest to Mills or a third party, the Operating Partnership will retain its right to component ventures for the future development of the office and hotel phases.  On February 12, 2003, the New Jersey Sports and Exposition Authority selected The Mills Corporation and the Operating Partnership to redevelop the Continental Airlines Arena site (Arena Site) for mixed uses, including retail.  In March 2003, Hartz Mountain Industries, Inc., or Hartz, filed a lawsuit in the Superior Court of New Jersey, Law Division, for Bergen County, seeking to enjoin the New Jersey Sports and Exposition Authority, or NJSEA, from entering into a contract with Mills and the Operating Partnership for the redevelopment of the Continental Arena site.  In May 2003, the court denied Hartzs request for an injunction and dismissed its suit for failure to exhaust administrative remedies.  In June 2003, the NJSEA held hearings on Hartzs protest, and on a parallel protest filed by another rejected developer, Westfield, Inc. (Westfield).  On September 10, 2003, the
NJSEA ruled against Hartzs and Westfields protests, and on May 14, 2004, the Appellate Division of the Superior Court of New Jersey rejected Hartzs contention that the NJSEA lacks statutory authority to allow retail development of its property.  The Supreme Court of New Jersey has declined to review the Appellate Divisions decision.  Hartz, Westfield and four taxpayers (the Braha Appellants) have also filed appeals from the NJSEAs final decision based on other grounds.  In a separate action commenced in January 2004, Hartz and Westfield also appealed the NJSEAs approval and execution of the formal redevelopment agreement with the Meadowlands Venture.  Several appeals filed by Hartz, Westfield and others, including certain environmental groups, that challenge certain approvals received by the Meadowlands Venture from the NJSEA, the New Jersey Meadowlands Commission and the New Jersey Department of Environmental Protection remain pending
before the Appellate Division.  The Appellate Division, in a decision rendered on November 24, 2004, completed its review of Hartzs Open Public Records Act appeal and the remand proceeding it earlier ordered and upheld the findings of the Law Division in the remand proceeding.  The Supreme Court of New Jersey has declined to review the Appellate Divisions decision.  The NJSEA held further hearings on December 15 and 16, 2004, at Hartzs request to review certain additional facts in support of its bid protest.  The Hearing Officer rendered his Supplemental Report and Recommendation to the NJSEA on March 4, 2005, finding no merit in the protests presented by Hartz and Westfield.  The NJSEA accepted the Supplemental Report and Recommendation on March 30, 2005 and Hartz appealed that decision to the Appellate Division.  Hartz also filed an application with the Appellate Division seeking an Order staying the construction of the Meadowlands Xanadu project, which officially
commenced on March 24, 2005, and on April 27, 2005, the Braha Appellants filed a separate appeal with the Appellate Division also challenging the NJSEAs decision to allow construction to begin and seeking an Order staying the construction of the Meadowlands Xanadu project.  The Appellate Division denied Hartzs application for a stay of construction by Order dated May 5, 2005.  The Appellate Division has not made any determinations with respect to these appeals.  On April 5, 2005 the New York Football Giants filed a Verified Complaint seeking an emergency order halting construction pending a final decision on its contention that construction of the Meadowlands Xanadu project violates its lease agreements with the NJSEA.  The Superior Court of New Jersey, Chancery Division, has scheduled a hearing on that application for August 5, 2005.  On March 18, 2005, the U.S. Army Corps of Engineers issued a permit to the Meadowlands Venture to authorize the filling of 7.69 acres of
wetlands and other waters of the United States in connection with the Meadowlands Xanadu project.  Three separate lawsuits have been filed in the United States District Court for the District of New Jersey, challenging the Corps decision to issue the permit to the Meadowlands Venture and seeking to set aside the permit and remand the matter to the Corps for further proceedings consistent with the National Environmental Policy Act and the Clean Water Act.  The first suit was filed on March 30, 2005, by the Sierra Club, the New Jersey Public Interest Research Group, Citizen Lobby, Inc. and the New Jersey Environmental Federation.  Additional suits were filed on May 16 and May 31, 2005, respectively, by Hartz Mountain Industries, Inc., (together with one of its officers as an individual named plaintiff) and the Borough of Carlstadt.  The Meadowlands Venture is named as a defendant, along with the Corps, in all three of these suits.  On May 3, 2005, the Sierra Club filed a
motion for a preliminary injunction to stop certain construction activities on the project.  The Court denied that motion on July 6, 2005.  The Meadowlands Venture and the Corps have filed motions to dismiss the Hartz complaint for lack of standing.  Similar motions may be filed to dismiss the Carlstadt complaint.  Once these standing issues are resolved, the court will address the merits of the claims through motions for summary judgment.  The New Jersey Builders Association has commenced an action, which is pending in the Appellate Division, alleging that NJSEA has failed to meet a purported obligation to provide affordable housing at the Meadowlands Complex.  The Builders Association  17


has filed an application for injunctive relief seeking to enjoin further construction of the project.  That application is pending.  The Operating Partnership is not a party to that action.  The Operating Partnership believes that the Meadowlands Ventures proposal and the planned project comply with applicable laws, and the Meadowlands Venture intends to continue its vigorous defense of its rights under the executed Redevelopment Agreement and recently executed Ground Lease.  Although there can be no assurance, the Operating Partnership does not believe that the pending lawsuits will have any material affect on its ability to develop the Meadowlands Xanadu project.  HPMC On July 21, 1998, the Operating Partnership entered into a joint venture with HCG Development, L.L.C. and Summit Partners I, L.L.C. to form HPMC Development Partners II, L.P. (formerly known as HPMC Lava Ridge Partners, L.P.).  HPMC Development Partners II, L.P.s efforts focused on three development projects, commonly referred to as Lava Ridge, Stadium Gateway, Pacific Plaza I & II.  Lava Ridge was sold in 2002.  The Operating Partnership has a 50 percent ownership interest and HCG Development, L.L.C. and Summit Partners I, L.L.C. (both of which are not affiliated with the Operating Partnership) collectively have a 50 percent ownership interest in HPMC Development Partners II, L.P.  Significant terms of the applicable partnership agreements, among other things, call for the Operating Partnership to provide 80 percent and HCG Development, L.L.C. and Summit Partners I, L.L.C. to collectively provide 20 percent of the development equity capital.  As the Operating Partnership agreed to fund development equity capital disproportionate to its ownership interest, it was granted a preferred return of 10 percent on its invested capital as a priority.  Profits and losses are allocated to the partners based upon the priority of distributions specified in the respective agreements and entitle the Operating Partnership to a
preferred return, as well as 50 percent of residual profits above the preferred returns.  Equity in earnings recognized by the Operating Partnership consists of preferred returns and the Operating Partnerships equity in earnings (loss) after giving effect to the payment of such preferred returns.  Stadium Gateway Stadium Gateway was a development joint venture project, located in Anaheim, California between HPMC Development Partners II, L.P. and a third-party entity.  The venture constructed a six-story, 273,194 square foot office building, which commenced initial operations in January 2002.  On April 1, 2003, the venture sold the office property for approximately $52,500.  Pacific Plaza I & II Pacific Plaza I & II is a two-phase development joint venture project, located in Daly City, California between, HPMC Development Partners II, L.P. and a third-party entity.  Phase I of the project, which commenced initial operations in August 2001, consists of a nine-story office building, aggregating 364,384 square feet.  Phase II, which comprises a three-story retail and theater complex, commenced initial operations in June 2002.  On August 27, 2004, the venture sold the Pacific Plaza I & II complex for approximately $143,000.  The Operating Partnership performed management services for the property while it was owned by the venture and recognized $0 and $87 in fees for such services in the three months ended June 30, 2005 and 2004, respectively, and $0 and $176 for the six months ended June 30, 2005 and 2004, respectively.  G&G MARTCO (Convention Plaza) The Operating Partnership holds a 50 percent interest in G&G Martco, which owns Convention Plaza, a 305,618 square foot office building, located in San Francisco, California.  The venture has a mortgage loan with a $45,501 balance at June 30, 2005 collateralized by its office property.  The loan also provides the venture the ability to increase the balance of the loan up to an additional $2,183 for the funding of qualified leasing costs.  The loan bears interest at a rate of the London Inter-Bank Offered Rate (LIBOR) (3.34 percent at June 30, 2005) plus 162.5 basis points and matures in August 2006.  The Operating Partnership performs management and leasing services for the property owned by the joint venture and recognized $34 and $36 in fees for such services in the three months ended June 30, 2005 and 2004, respectively, and $69 and $72 for the six months ended June 30, 2005 and 2004, respectively.   18


PLAZA VIII AND IX ASSOCIATES, L.L.C./AMERICAN FINANCIAL EXCHANGE L.L.C. On May 20, 1998, the Operating Partnership entered into a joint venture with Columbia Development Company, L.L.C. (Columbia) to form American Financial Exchange L.L.C.  The venture was formed to acquire land for future development, located on the Hudson River waterfront in Jersey City, New Jersey, adjacent to the Operating Partnerships Harborside Financial Center office complex.  Among other things, the partnership agreement provides for a preferred return on the Operating Partnerships invested capital in the venture, in addition to the Operating Partnerships proportionate share of the ventures profit, as defined in the agreement.  The joint venture acquired land on which it initially constructed a parking facility.  In the fourth quarter 2000, the joint venture started construction of Plaza 10, a 577,575 square foot office building, which was 100 percent pre-leased to
Charles Schwab & Co. Inc. (Schwab) for a 15-year term, on certain of the land owned by the venture.  The lease agreement with Schwab obligated the venture, among other things, to deliver space to the tenant by required timelines and offers expansion options, at the tenants election.  On September 29, 2003, the Operating Partnership sold its interest in AFE, in which it held a 50 percent interest, and received approximately $162,145 in net sales proceeds from the transaction, which the Operating Partnership used primarily to repay outstanding borrowings under its revolving credit facility.  Following completion of the sale of its interest, the Operating Partnership no longer has any remaining obligations to Schwab.  In advance of the transaction, AFE distributed its interests in Plaza VIII and IX Associates, L.L.C., which owned the undeveloped land currently used as a parking facility, to its then partners, the Operating Partnership and Columbia.  The Operating Partnership and Columbia subsequently entered into a new joint venture to own and manage the undeveloped land and related parking operations through Plaza VIII and IX Associates, L.L.C.  The Operating Partnership and Columbia each hold a 50 percent interest in the new venture.  RAMLAND REALTY ASSOCIATES L.L.C. (One Ramland Road) On August 20, 1998, the Operating Partnership 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 Operating Partnership holds a 50 percent interest in the joint venture.  The venture has a mortgage loan with a $14,936 balance at June 30, 2005 secured by its office/flex property.  The mortgage bears interest at a rate of LIBOR plus 175 basis points and matures in January 2007, with two one-year extension options, subject to certain conditions.  The Operating Partnership performs management, leasing and other services for the property owned by the joint venture and recognized $46 and $15 in fees for such services in the three months ended June 30, 2005 and 2004, respectively, and $55 and $18 for the six months ended June 30, 2005 and 2004, respectively.  ASHFORD LOOP ASSOCIATES L.P. (1001 South Dairy Ashford/2100 West Loop South) On September 18, 1998, the Operating Partnership entered into a joint venture with Prudential to form Ashford Loop Associates L.P. The venture was formed to own, manage and operate 1001 South Dairy Ashford, a 130,000 square foot office building acquired on September 18, 1998, and 2100 West Loop South, a 168,000 square foot office building acquired on November 25, 1998, both located in Houston, Texas.  The Operating Partnership held a 20 percent interest in the joint venture.  Included in depreciation and amortization in the results of operations for the fourth quarter 2004 for the joint venture was a valuation allowance of $24,575 on account of the carrying value of the ventures assets exceeding the net realizable value as of December 31, 2004.  Included in the Operating Partnerships equity in earnings (loss) of unconsolidated joint venture for the fourth quarter 2004 was a $4,915 loss
representing the Operating Partnerships share of the valuation allowance.  On February 25, 2005, the Operating Partnership sold its interest in the venture to Prudential for $2,664 and recognized a gain on the sale of $35.  SOUTH PIER AT HARBORSIDE HOTEL On November 17, 1999, the Operating Partnership 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, known as the Hyatt Regency Jersey City on the Hudson, New Jersey, which was completed and commenced initial operations in July 2002.  The Operating Partnership owns a 50 percent interest in the venture.   19


The venture had a mortgage loan with a commercial bank with a $62,902 balance at December 31, 2003 collateralized by its hotel property.  The debt bore interest at a rate of LIBOR plus 275 basis points, which was scheduled to mature in December 2003, and was extended through January 29, 2004.  On that date, the venture repaid the mortgage loan using the proceeds from a new $40,000 mortgage loan, (with a balance as of June 30, 2005 or $39,767), collateralized by the hotel property, as well as capital contributions from the Operating Partnership and Hyatt of $10,750 each.  The new loan carries an interest rate of LIBOR plus 200 basis points and matures in February 2006.  The loan provides for three one-year extension options subject to certain conditions.  The final two one-year extension options require payment of a fee.  On May 25, 2004, the venture obtained a second mortgage loan with a commercial bank for
$20,000 (with a balance as of June 30, 2005 of $13,000) collateralized by the hotel property, in which each partner, including the Operating Partnership, has severally guaranteed repayment of approximately $8,000.  The loan carries an interest rate of LIBOR plus 175 basis points and matures in February 2006.  The loan provides for three one-year extension options subject to certain conditions.  The final two one-year extension options require payment of a fee.  The proceeds from this loan were used to make distributions to the Operating Partnership and Hyatt in the amount of $10,000 each.  Additionally, the venture has an $8,000 loan (with a balance as of June 30, 2005 of $7,835) 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 Operating Partnership has posted an $8,000 letter of credit in support of this loan,
$4,000 of which is indemnified by Hyatt.  NORTH PIER AT HARBORSIDE  RESIDENTIAL DEVELOPMENT On April 3, 2001, the Operating Partnership sold its North Pier at Harborside Financial Center, Jersey City, New Jersey to an entity which planned on developing residential housing on the site.  At the time, the Operating Partnership received net sales proceeds of approximately $3,357 (which included a note receivable of $2,027 subsequently repaid in 2002), and recognized a gain of $439 from the transaction.  On March 31, 2004, the Operating Partnership received additional purchase consideration of $720, for which the Operating Partnership recorded a gain of $720 in gain on sale of investment in unconsolidated joint ventures for the three months ended March 31, 2004.  20


SUMMARIES OF UNCONSOLIDATED JOINT VENTURES The following is a summary of the financial position of the unconsolidated joint ventures in which the Operating Partnership had investment interests as of June 30, 2005 and December 31, 2004:  June 30, 2005PlazaMeadowlands
        
        G&G
        VIII & IX
        Ramland
        Ashford
        Harborside
        CombinedXanadu
        HPMC
        Martco
        Associates
        Realty
        Loop
        South Pier
        TotalAssets:Rental property, net
        $255,308
        --
        $10,072
        $12,320
        $12,777
        --
        $76,903
        $367,380Other  assets
        205,568
        --
        5,484
        1,482
        1,518
        --
        12,526
        226,578Total assets
        $460,876
        --
        $15,556
        $13,802
        $14,295
        --
        $89,429
        $593,958Liabilities and partners/ members capital (deficit):Mortgages, loans payable and other obligations
        --
        --
        $45,501
        --
        $14,936
        --
        $63,023
        $123,460Other liabilities
        $    6,405
        --
        1,216
        $ 1,362
        333
        --
        3,677
        12,993Partners/members capital (deficit)
        454,471
        --
        (31,161)
        12,440
        (974)
        --
        22,729
        457,505Total liabilities and partners/memberscapital (deficit)
        $460,876
        --
        $15,556
        $13,802
        $14,295
        --
        $89,429
        $593,958Operating Partnerships investment in unconsolidatedjoint ventures, net
        $  33,633
        --
        $  6,913
        $  6,141
        $        --
        --
        $13,926
        $  60,613   December 31, 2004PlazaMeadowlands
        
        G&G
        VIII & IX
        Ramland
        Ashford
        Harborside
        CombinedXanadu
        HPMC
        Martco
        Associates
        Realty
        Loop
        South Pier
        TotalAssets:Rental property, net
        $235,254
        --
        $   8,571
        $12,629
        $13,030
        $11,256
        $79,721
        $360,461Other  assets
        1,420
        --
        4,589
        1,463
        1,559
        539
        12,034
        21,604Total assets
        $236,674
        --
        $ 13,160
        $14,092
        $14,589
        $11,795
        $91,755
        $382,065Liabilities and partners/ members capital (deficit):Mortgages, loans payable and other obligations
        $           --
        --
        $ 43,236
        $         --
        $14,936
        $         --
        $66,191
        $124,363Other liabilities
        8,205
        --
        963
        1,376
        334
        670
        4,009
        15,557Partners/members capital (deficit)
        228,469
        --
        (31,039)
        12,716
        (681)
        11,125
        21,555
        242,145Total liabilities and partners/memberscapital (deficit)
        $236,674
        --
        $ 13,160
        $14,092
        $14,589
        $11,795
        $91,755
        $382,065Operating Partnerships investment in unconsolidatedjoint ventures, net
        $  17,359
        --
        $   7,157
        $  6,279
        $        --
        $  2,664
        $13,284
        $  46,743   21


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 Operating Partnership had investment interests during the three months ended June 30, 2005 and 2004:   Three Months Ended June 30, 2005PlazaMeadowlands
        
        G&G
        VIII & IX
        Ramland
        Ashford
        Harborside
        CombinedXanadu
        HPMC
        Martco
        Associates
        Realty
        Loop
        South Pier
        TotalTotal revenues
        --
        --
        $1,568
        $   52
        $ 664
        --
        $  9,158
        $11,442Operating and other expenses
        --
        --
        (908)
        (62)
        (348)
        --
        (5,294)
        (6,612)Depreciation and amortization
        --
        --
        (290)
        (154)
        (162)
        --
        (1,289)
        (1,895)Interest expense
        --
        --
        (525)
        --
        (179)
        --
        (1,292)
        (1,996)Net income
        --
        --
        $ (155)
        $(164)
        $ (25)
        --
        $  1,283
        $     939Operating Partnerships equity inearnings (loss)of unconsolidated joint ventures
        --
        --
        $   (77)
        $  (79)
        --
        --
        $     698
        $     542    Three Months Ended June 30, 2004PlazaMeadowlands
        
        G&G
        VIII & IX
        Ramland
        Ashford
        Harborside
        CombinedXanadu
        HPMC
        Martco
        Associates
        Realty
        Loop
        South Pier
        TotalTotal revenues
        --
        $    4
        $1,913
        $   16
        $ 394
        $ 809
        $ 7,950
        $11,086Operating and other expenses
        --
        (87)
        (865)
        (14)
        (322)
        (817)
        (4,950)
        (7,055)Depreciation and amortization
        --
        --
        (260)
        (154)
        (153)
        (242)
        (1,646)
        (2,455)Interest expense
        --
        --
        (287)
        --
        (106)
        --
        (515)
        (908)Net income
        --
        $ (83)
        $   501
        $(152)
        $(187)
        $(250)
        $     839
        $     668Operating Partnerships equity inearnings (loss)of unconsolidated joint ventures
        --
        $526
        $   250
        $  (76)
        $     --
        $  (50)
        $     440
        $  1,090   22


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 Operating Partnership had investment interests during the six months ended June 30, 2005 and 2004:   Six Months Ended June 30, 2005PlazaMeadowlands
        
        G&G
        VIII & IX
        Ramland
        Ashford
        Harborside
        CombinedXanadu
        HPMC
        Martco
        Associates
        Realty
        Loop
        South Pier
        TotalTotal revenues
        --
        --
        $ 3,149
        $ 128
        $1,032
        $ 405
        $15,887
        $  20,601Operating and other expenses
        --
        --
        (1,738)
        (96)
        (666)
        (397)
        (9,825)
        (12,722)Depreciation and amortization
        --
        --
        (545)
        (308)
        (317)
        (160)
        (2,884)
        (4,214)Interest expense
        --
        --
        (988)
        --
        (342)
        --
        (2,007)
        (3,337)Net income
        --
        --
        $  (122)
        $(276)
        $ (293)
        $(152)
        $  1,171
        $       328Operating Partnerships equity inearnings (loss)of unconsolidated joint ventures
        --
        --
        $  (244)
        $(138)
        $      --
        $  (30)
        $     642
        $       230    Six Months Ended June 30, 2004PlazaMeadowlands
        
        G&G
        VIII & IX
        Ramland
        Ashford
        Harborside
        CombinedXanadu
        HPMC
        Martco
        Associates
        Realty
        Loop
        South Pier
        TotalTotal revenues
        --
        $     79
        $ 3,839
        $   81
        $ 497
        $ 1,585
        $13,661
        $ 19,742Operating and other expenses
        --
        (253)
        (1,766)
        (62)
        (572)
        (1,394)
        (9,104)
        (13,151)Depreciation and amortization
        --
        --
        (540)
        (308)
        (291)
        (486)
        (3,192)
        (4,817)Interest expense
        --
        --
        (574)
        --
        (213)
        --
        (1,067)
        (1,854)Net income
        --
        $  (174)
        $    959
        $(289)
        $(579)
        $   (295)
        $     298
        $       (80)Operating Partnerships equity inearnings (loss)of unconsolidated joint ventures
        --
        $1,047
        $    479
        $(144)
        $(225)
        $     (59)
        $     169
        $  1,267   23


5.
        DEFERRED CHARGES AND OTHER ASSETS  June 30,
        December 31,2005
        2004Deferred leasing costs
        $163,730
        $152,525Deferred financing costs
        19,571
        17,137183,301
        169,662Accumulated amortization
        (61,849)
        (58,170)Deferred charges, net
        121,452
        111,492Notes receivable
        11,988
        --In-place lease values and related intangible assets, net
        40,238
        17,560Prepaid expenses and other assets, net
        13,286
        26,008Total deferred charges and other assets, net
        $186,964
        $155,060   6.
        DISCONTINUED OPERATIONS  On February 3, 2005, the Operating Partnership entered into agreements to sell its office building located at 600 Community Drive in North Hempstead, New York and its office building located at 111 East Shore Road in North Hempstead, New York, which aggregate 292,849 square feet.  On June 3, 2005, the Operating Partnership completed the sale of the two buildings and received net sales proceeds of approximately $71,593.  On March 31, 2005, the Operating Partnership identified its 178,329 square foot office building located at 201 Willowbrook Boulevard in Wayne, New Jersey as held for sale.  The Operating Partnership determined that the carrying amount of this property identified as held for sale was not expected to be recovered from estimated net sales proceeds and, accordingly, recognized a valuation allowance of $1,613 during the three months ended March 31, 2005.  On May 11, 2005, the Operating Partnership sold the building for net sales proceeds of approximately $17,696.  As the Operating Partnership sold 3030 L.B.J. Freeway, Dallas, Texas; 84 N. E. Loop 410, San Antonio, Texas; and 340 Mt. Kemble Avenue, Morris Township, New Jersey during the year ended December 31, 2004 and 210 South 16th Street, Omaha, Nebraska; 1122 Alma Road, Richardson, Texas; and 3 Skyline Drive, Hawthorne, New York during the six months ended June 30, 2005, the Operating Partnership has also presented these assets as discontinued operations in its statements of operations for the periods presented.  There are no properties identified as held for sale as of June 30, 2005.  The following tables summarize income from discontinued operations and the related realized gains (losses) and unrealized losses on disposition of rental property, net for the three and six month periods ended June 30, 2005 and 2004:  Three Months Ended
        Six Months EndedJune 30,
        June 302005
        2004
        2005
        2004Total revenues
        $1,627
        $6,511
        $4,341
        $12,668Operating and other expenses
        (357)
        (2,288)
        (1,226)
        (4,194)Depreciation and amortization
        (7)
        (1,517)
        (400)
        (2,927)Interest expense (net of interest income)
        34
        (159)
        42
        (318)Income from discontinued operations
        $1,297
        $2,547
        $2,757
        $  5,229   24


Three Months Ended
        Six Months EndedJune 30,
        June 30,2005
        2004
        2005
        2004Realized gains on disposition of rental  property
        $11,975
        --
        $12,691
        --Unrealized losses on disposition of rental  property
        --
        $(11,856)
        (1,613)
        $(11,856)Realized gains (losses) and unrealized losseson disposition of rental property, net
        $ 11,975
        $(11,856)
        $11,078
        $(11,856)   7.
        SENIOR UNSECURED NOTES  A summary of the Operating Partnerships senior unsecured notes as of June 30, 2005 and December 31, 2004 is as follows:  June 30,
        December 31,
        Effective2005
        2004
        Rate (1)7.250% Senior Unsecured Notes, due  March 15, 2009
        $   299,129
        $   299,012
        7.49%5.050% Senior Unsecured Notes due  April 15, 2010
        149,737
        --
        5.27%7.835% Senior Unsecured Notes, due  December 15, 2010
        15,000
        15,000
        7.95%7.750% Senior Unsecured Notes, due  February 15, 2011
        299,035
        298,948
        7.93%6.150% Senior Unsecured Notes, due  December 15, 2012
        91,243
        90,998
        6.89%5.820% Senior Unsecured Notes, due  March 15, 2013
        25,254
        25,199
        6.45%4.600% Senior Unsecured Notes, due  June 15, 2013
        99,772
        99,758
        4.74%5.125% Senior Unsecured Notes, due  February 15, 2014
        202,068
        202,187
        5.11%5.125% Senior Unsecured Notes, due  January 15, 2015
        149,118
        --
        5.30%Total Senior Unsecured Notes
        $1,330,356
        $1,031,102
        6.46%(1)   Includes the cost of terminated treasury lock agreements (if any), offering and other transaction costs and the discount on the notes, as applicable. On January 25, 2005, the Operating Partnership issued $150,000 face amount of 5.125 percent senior unsecured notes due January 15, 2015 with interest payable semi-annually in arrears.  The proceeds from the issuance (net of selling commissions and discount) of approximately $148,103 were used primarily to reduce outstanding borrowings under the 2004 unsecured facility.  On April 15, 2005, the Operating Partnership issued $150,000 face amount of 5.05 percent senior unsecured notes due April 15, 2010 with interest payable semi-annually in arrears.  The proceeds from the issuance (net of selling commissions and discount) of approximately $148,826 were used to reduce outstanding borrowings under the 2004 unsecured facility.   8.
        UNSECURED REVOLVING CREDIT FACILITY  2004 Unsecured Facility On November 23, 2004, the Operating Partnership obtained an unsecured revolving credit facility (the 2004 Unsecured Facility) with a current borrowing capacity of $600.0 million from a group of 27 lenders.  The interest rate on outstanding borrowings (not electing the Operating Partnerships competitive bid feature) under the 2004 Unsecured Facility is currently LIBOR plus 65 basis points.  The facility has a competitive bid feature, which allows the Operating Partnership to solicit bids from lenders under the facility to borrow up to $300,000 at interest rates less than the current LIBOR plus 65 basis point spread.  As of June 30, 2005, the Operating Partnerships outstanding borrowings carried a weighted average interest rate of LIBOR plus 41 points.  The Operating Partnership may also elect an interest rate representing the higher of the lenders prime rate or the Federal Funds
rate plus 50 basis points.  The 2004 Unsecured Facility also currently requires a 20 basis point facility fee on the current  25


borrowing capacity payable quarterly in arrears.  The 2004 Unsecured Facility matures in November 2007, with an extension option of one year, which would require a payment of 25 basis points of the then borrowing capacity of the facility upon exercise.  In the event of a change in the Operating Partnerships unsecured debt rating, the interest and facility fee rates will be adjusted in accordance with the following table:  Operating Partnerships
        Interest Rate Unsecured Debt Ratings:
        Applicable Basis Points
        Facility FeeS&P Moodys/Fitch (a)
        Above LIBOR
        Basis PointsNo ratings or less than BBB-/Baa3/BBB-
        112.5
        25.0BBB-/Baa3/BBB-
        80.0
        20.0BBB/Baa2/BBB (current)
        65.0
        20.0BBB+/Baa1/BBB+
        55.0
        15.0A-/A3/A- or higher
        50.0
        15.0(a)    If the Operating Partnership has debt ratings from two rating agencies, one of which is Standard & Poors Rating Services (S&P) or Moodys Investors Service (Moodys), the rates per the above table shall be based on the lower of such ratings. If the Operating Partnership has debt ratings from three rating agencies, one of which is S&P or Moodys, the rates per the above table shall be based on the lower of the two highest ratings.  If the Operating Partnership has debt ratings from only one agency, it will be considered to have no rating or less than BBB-/Baa3/BBB- per the above table.  The terms of the 2004 Unsecured Facility include certain restrictions and covenants which limit, among other things, the payment of dividends (as discussed below), the incurrence of additional indebtedness, the incurrence of liens and the disposition of real estate properties (to the extent that: (i) such property dispositions cause the Operating Partnership to default on any of the financial ratios of the facility described below, or (ii) the property dispositions are completed while the Operating Partnership is under an event of default under the facility, unless, under certain circumstances, such disposition is being carried out to cure such default), and which require compliance with financial ratios relating to the maximum leverage ratio, the maximum amount of secured indebtedness, the minimum amount of tangible net worth, the minimum amount of interest coverage, the minimum amount of fixed charge
coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property interest coverage and certain investment limitations.  The dividend restriction referred to above provides that, except to enable the Corporation to continue to qualify as a REIT under the Code, the Corporation will not during any four consecutive fiscal quarters make distributions with respect to common stock or other common equity interests in an aggregate amount in excess of 90 percent of funds from operations (as defined in the facility agreement) for such period, subject to certain other adjustments.  The lending group for the 2004 Unsecured Facility consists of: JPMorgan Chase Bank, N.A., as administrative agent; Bank of America, N.A., as syndication agent; The Bank of Nova Scotia, New York Agency, as documentation agent; Wachovia Bank, National Association, as documentation agent; Wells Fargo Bank, National Association, as documentation agent; SunTrust Bank, as senior managing agent; PNC Bank, National Association, as managing agent; Citicorp North America, Inc., as managing agent; US Bank National Association, as managing agent; Allied Irish Bank; Amsouth Bank; Bank of China, New York Branch; The Bank of New York; Chevy Chase Bank, F.S.B.; Deutsche Bank Trust Company Americas; Bank Hapoalim B.M.; Mizuho Corporate Bank, Ltd.; UFJ Bank Limited, New York Branch; Bank of Ireland; Comerica Bank; Chang HWA Commercial Bank, Ltd., New York Branch; First Commercial Bank, New York Agency; First Horizon Bank, A
Division of First Tennessee Bank, N.A.; Bank of Taiwan; Chiao Tung Bank, Ltd.; Citizens Bank; Hua Nan Commercial Bank, New York Agency; and Taipei Bank, New York Agency.  2002 Unsecured Facility On September 27, 2002, the Operating Partnership obtained an unsecured revolving credit facility (the 2002 Unsecured Facility) with a borrowing capacity of $600,000 from a group of 15 lenders.  The interest rate on borrowings under the 2002 Unsecured Facility was LIBOR plus 70 basis points.  The Operating Partnership could have instead elected an interest rate representing the higher of the lenders prime rate or the Federal Funds rate plus 50 basis points.  The 2002 Unsecured Facility also required a 20 basis point facility fee on the borrowing capacity payable quarterly in arrears.  26


Although the 2002 Unsecured Facility was scheduled to mature in September 2005, in conjunction with obtaining the 2004 Unsecured Facility, the Operating Partnership drew funds on the new facility to repay in full and terminate the 2002 Unsecured Facility on November 23, 2004.  SUMMARY As of June 30, 2005 and December 31, 2004, the Operating Partnership had outstanding borrowings of $163,000 and $107,000, respectively, under the 2004 Unsecured Facility.   9.
        MORTGAGES, LOANS PAYABLE AND OTHER OBLIGATIONS  The Operating Partnership has mortgages, loans payable and other obligations which primarily consist of various loans collateralized by certain of the Operating Partnerships rental properties.  Payments on mortgages, loans payable and other obligations are generally due in monthly installments of principal and interest, or interest only.  A summary of the Operating Partnerships mortgages, loans payable and other obligations as of June 30, 2005 and December 31, 2004 is as follows:  Effective
        Principal Balance atInterest
        June 30,
        December 31,Property Name
        Lender
        Rate (a)
        2005
        2004
        MaturityMack-Cali Centre VI
        Principal Life Insurance  Co.
        6.87%
        $          --
        $  35,000
        (b)One River Centre
        New York Life Ins. Co.
        5.50%
        --
        45,490
        (c)Mack-Cali Bridgewater  I
        New York Life Ins. Co.
        7.00%
        23,000
        23,000
        09/10/05Mack-Cali Woodbridge  II
        New York Life Ins. Co.
        7.50%
        17,500
        17,500
        09/10/05Mack-Cali Short Hills
        Prudential Insurance Co.
        7.74%
        22,327
        22,789
        10/01/05500 West Putnam  Avenue
        New York Life Ins. Co.
        6.52%
        5,973
        6,500
        10/10/05Harborside  Plaza 2 and  3
        Northwestern/Principal
        7.37%
        147,102
        149,473
        01/01/06Mack-Cali Airport
        Allstate Life Insurance Co.
        7.05%
        9,750
        9,852
        04/01/07Various
        Prudential Insurance
        4.84%
        150,000
        150,000
        01/15/10 (d)2200 Renaissance  Boulevard
        TIAA
        5.89%
        18,344
        18,509
        12/01/12Soundview Plaza
        TIAA
        6.02%
        18,624
        18,816
        01/01/13Assumed obligations
        various
        4.85%
        60,293
        67,269
        05/01/09 (e)Total mortgages, loans payable and other obligations
        
        $472,913
        $564,198  (a)    Effective interest rate for mortgages, loans payable and other obligations reflects effective rate of debt, including deferred financing costs, comprised of the cost of terminated treasury lock agreements (if any), debt initiation costs and other transaction costs, as applicable.(b)   On April 29, 2005, the Operating Partnership repaid this mortgage loan at par, using borrowings under the 2004 Unsecured Facility.(c)    On April 1, 2005, the Operating Partnership repaid this mortgage loan at par, using borrowings under the 2004 Unsecured Facility.(d)   Mortgage is collateralized by seven properties.(e)    The obligations mature at various times between May 2006 and May 2009.  CASH PAID FOR INTEREST AND INTEREST CAPITALIZED Cash paid for interest for the six months ended June 30, 2005 and 2004 was $54,329 and $55,685, respectively.  Interest capitalized by the Operating Partnership for the six months ended June 30, 2005 and 2004 was $2,622 and $1,844, respectively.  SUMMARY OF INDEBTEDNESS As of June 30, 2005, the Operating Partnerships total indebtedness of $1,966,269 (weighted average interest rate of 6.14 percent) was comprised of $163,000 of revolving credit facility borrowings (weighted average rate of 3.65 percent) and fixed rate debt and other obligations of $1,803,269 (weighted average rate of 6.37 percent).   27


As of December 31, 2004, the Operating Partnerships total indebtedness of $1,702,300 (weighted average interest rate of 6.32 percent) was comprised of $107,000 of revolving credit facility borrowings (weighted average rate of 2.77 percent) and fixed rate debt of $1,595,300 (weighted average rate of 6.55 percent).   10.
        PARTNERS CAPITAL  Partners capital in the accompanying consolidated financial statements relates to: (a) General Partners capital, consisting of common units and Series C preferred units held by the Corporation in the Operating Partnership, and (b) Limited Partners capital, consisting of common units held by the limited partners and Series B preferred units.  Any transactions resulting in the issuance of additional common and preferred stock of the Corporation result in a corresponding issuance by the Operating Partnership of an equivalent amount of common and preferred units to the Corporation.  GENERAL PARTNER:  PREFERRED STOCK On March 14, 2003, in a publicly registered transaction with a single institutional buyer, the Corporation completed the sale and issuance of 10,000 shares of eight-percent Series C cumulative redeemable perpetual preferred stock (Series C Preferred Stock) in the form of 1,000,000 depositary shares ($25 stated value per depositary share).  Each depositary share represents 1/100th of a share of Series C Preferred Stock.  The Corporation received net proceeds of approximately $24,836 from the sale.  The Series C Preferred Stock has preference rights with respect to liquidation and distributions over the common stock.  Holders of the Series C Preferred Stock, except under certain limited conditions, will not be entitled to vote on any matters.  In the event of a cumulative arrearage equal to six quarterly dividends, holders of the Series C Preferred Stock will have the right to elect two additional members to serve on the Corporations Board of Directors until dividends have been paid in full.  At June 30, 2005, there were no dividends in arrears.  The Corporation may issue unlimited additional preferred stock ranking on a parity with the Series C Preferred Stock but may not issue any preferred stock senior to the Series C Preferred Stock without the consent of two-thirds of its holders.  The Series C Preferred Stock is essentially on an equivalent basis in priority with the Preferred Units.  Except under certain conditions relating to the Corporations qualification as a REIT, the Series C Preferred Stock is not redeemable prior to March 14, 2008.  On and after such date, the Series C Preferred Stock will be redeemable at the option of the Corporation, in whole or in part, at $25 per depositary share, plus accrued and unpaid dividends.  In connection with the Corporations issuance of $25,000 of Series C cumulative redeemable perpetual preferred stock, the Corporation acquired from the Operating Partnership $25,000 of Series C Preferred Units (the Series C Preferred Units), which have terms essentially identical to the Series C preferred stock.  REPURCHASE GENERAL PARTNER UNITS On September 13, 2000, the Board of Directors of the Corporation authorized an increase to the Corporations repurchase program under which the Corporation was permitted to purchase up to an additional $150,000 of the Corporations outstanding common stock (Repurchase Program).  From that date through its last purchases on January 10, 2003, the Corporation purchased and retired, under the Repurchase Program, 3,746,400 shares of its outstanding common stock for an aggregate cost of approximately $104,512.  Concurrent with these purchases, the Corporation sold to the Operating Partnership 3,746,400 of its common units for an aggregate cost of approximately $104,512.  The Corporation has a remaining authorization to repurchase up to an additional $45,488 of its outstanding common stock, which it may repurchase from time to time in open market transactions at prevailing prices or through
privately negotiated transactions.  STOCK OPTION PLANS In May 2004, the Corporation established the 2004 Incentive Stock Plan under which a total of 2,500,000 shares have been reserved for issuance.  No options have been granted through June 30, 2005 under this plan.  In September 2000, the Corporation established the 2000 Employee Stock Option Plan (2000 Employee Plan) and  28


the 2000 Director Stock Option Plan (2000 Director Plan).  In May 2002, shareholders of the Corporation approved amendments to both plans to increase the total shares reserved for issuance under both of the 2000 plans from 2,700,000 to 4,350,000 shares of the Corporations common stock (from 2,500,000 to 4,000,000 shares under the 2000 Employee Plan and from 200,000 to 350,000 shares under the 2000 Director Plan).  In 1994, and as subsequently amended, the Corporation established the Mack-Cali Employee Stock Option Plan (Employee Plan) and the Mack-Cali Director Stock Option Plan (Director Plan) under which a total of 5,380,188 shares (subject to adjustment) of the Corporations common stock have been reserved for issuance (4,980,188 shares under the Employee Plan and 400,000 shares under the Director Plan).  Stock options granted under the Employee Plan in 1994
and 1995 became exercisable over a three-year period.  Stock options granted under the 2000 Employee Plan and those options granted subsequent to 1995 under the Employee Plan become exercisable over a five-year period.  All stock options granted under both the 2000 Director Plan and Director Plan become exercisable in one year.  All options were granted at the fair market value at the dates of grant and have terms of ten years.  As of June 30, 2005 and December 31, 2004, the stock options outstanding had a weighted average remaining contractual life of approximately 6.2 and 6.5 years, respectively.  Information regarding the Corporations stock option plans for the six months ended June 30, 2005 is summarized below:  Weighted AverageShares Under Options
        Exercise PriceOutstanding at January 1, 2005
        1,703,631
        $29.31Granted
        --
        --Exercised
        (492,736)
        $28.70Lapsed or canceled
        (27,040)
        $28.59Outstanding at June 30, 2005
        1,183,855
        $29.58Options exercisable at June 30, 2005
        566,595
        $30.66Available for grant at June 30, 2005
        4,633,558
        --  The Operating Partnership recognized stock options expense of $35 and $285 for the three months ended June 30, 2005 and 2004, respectively, and $71 and $334 for the six months ended June 30, 2005 and 2004, respectively.  STOCK COMPENSATION The Corporation has granted stock awards to officers, certain other employees, and non-employee members of the Board of Directors of the Corporation, which allow the holders to each receive a certain amount of shares of the Corporations common stock generally over a one to five-year vesting period.  Certain Restricted Stock Awards are contingent upon the Corporation meeting certain performance and/or stock price appreciation objectives.  All Restricted Stock Awards provided to the officers and certain other employees were granted under the 2000 Employee Plan and the Employee Plan.  Restricted Stock Awards granted to directors were granted under the 2000 Director Plan.  29


Information regarding the Restricted Stock Awards for the six months ended June 30, 2005 is summarized below:  SharesOutstanding at January 1, 2005
        198,703Granted
        113,500Vested
        (70,459)Cancelled
        (1,000)Outstanding at June 30, 2005
        240,744  DEFERRED STOCK COMPENSATION PLAN FOR DIRECTORS The Deferred Compensation Plan for Directors, which commenced January 1, 1999, allows non-employee directors of the Corporation to elect to defer up to 100 percent of their annual retainer fee into deferred stock units.  The deferred stock units are convertible into an equal number of shares of common stock upon the directors termination of service from the Corporations Board of Directors or a change in control of the Corporation, as defined in the plan.  Deferred stock units are credited to each director quarterly using the closing price of the Corporations common stock on the applicable dividend record date for the respective quarter.  Each participating directors account is also credited for an equivalent amount of deferred stock units based on the dividend rate for each quarter.  During the six months ended June 30, 2005 and 2004, 3,388 and 3,128 deferred stock units were earned, respectively.  As of June 30, 2005 and December 31, 2004, there were 32,690 and 29,222 director stock units outstanding, respectively.  LIMITED PARTNERS CAPITAL:  SERIES B PREFERRED UNITS The Series B Preferred Units had a stated value of $1,000 per unit and were preferred as to assets over any class of common units or other class of preferred units of the Operating Partnership, based on circumstances per the applicable unit certificates.  The quarterly distribution on each Series B Preferred Unit was an amount equal to the greater of (i) $16.875 (representing 6.75 percent of the Series B Preferred Unit stated value of an annualized basis) or (ii) the quarterly distribution attributable to a Series B Preferred Unit determined as if such unit had been converted into common units, subject to adjustment for customary anti-dilution rights.  On June 13, 2005, the Operating Partnership caused the mandatory conversion (the Conversion) of all 215,018 outstanding Series B Preferred Units into 6,205,425.72 Common Units.  Each Series B Preferred Unit was converted into whole and fractional Common Units equal to (x) the $1,000 stated value, divided by (y) the conversion price of $34.65.  A description of the rights, preferences and privileges of the Common Units is set forth below.  COMMON UNITS Certain individuals and entities own common units in the Operating Partnership.  A common unit and a share of common stock of the Corporation have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the Operating Partnership.  Common units are redeemable by the common unitholders at their option, subject to certain restrictions, on the basis of one common unit for either one share of common stock or cash equal to the fair market value of a share at the time of the redemption.  The Corporation has the option to deliver shares of common stock in exchange for all or any portion of the cash requested.  The common unitholders may not put the units for cash to the Corporation or the Operating Partnership.  When a unitholder redeems a common unit for common stock of the Corporation, limited partners capital is reduced and the General
Partners capital is increased.  As of June 30, 2005 and December 31, 2004, the Operating Partnership had 13,829,254 and 7,616,447 common units outstanding, respectively.  EARNINGS PER UNIT Basic EPU excludes dilution and is computed by dividing net income available to common unitholders by the weighted average number of units outstanding for the period.  Diluted EPU reflects the potential dilution that could occur if securities or other contracts to issue common units were exercised or converted into common units.  30


The following information presents the Operating Partnerships results for the three months ended June 30, 2005 and 2004 in accordance with FASB No. 128:  Three Months Ended
June 30,Computation of Basic EPU
        2005
        2004Income from continuing operations
        $31,397
        $31,502Deduct:  Preferred unit distributions
        (500)
        (4,409)Income from continuing operations available to common unitholders
        30,897
        27,093Income from discontinued operations
        13,272
        (9,309)Net income available to common unitholders
        $44,169
        $17,784Weighted average common units
        75,240
        68,177Basic EPU:Income from continuing operations
        $     0.41
        $    0.40Income from discontinued operations
        0.18
        (0.14)Net income available to common unitholders
        $     0.59
        $    0.26  Three Months Ended
June 30,Computation of Diluted EPU
        2005
        2004Income from continuing operations available to common unitholdersfor diluted earnings per unit
        $30,897
        $27,093Income from discontinued operations for diluted earnings per unit
        13,272
        (9,309)Net income available to common unitholders
        $44,169
        $17,784Weighted average common units
        75,649
        68,620Diluted EPU:Income from continuing operations
        $     0.41
        $    0.39Income from discontinued operations
        0.17
        (0.13)Net income available to common unitholders
        $     0.58
        $    0.26  The following information presents the Operating Partnerships results for the six months ended June 30, 2005 and 2004 in accordance with FASB No. 128:  Six Months Ended
June 30,Computation of Basic EPU
        2005
        2004Income from continuing operations
        $60,483
        $62,982Deduct:  Preferred unit distributions
        (4,909)
        (8,818)Income from continuing operations available to common unitholders
        55,574
        54,164Income from discontinued operations
        13,835
        (6,627)Net income available to common unitholders
        $69,409
        $47,537Weighted average common units
        72,041
        67,886Basic EPU:Income from continuing operations
        $     0.77
        $    0.80Income from discontinued operations
        0.19
        (0.10)Net income available to common unitholders
        $     0.96
        $    0.70   31


Six Months Ended
June 30,Computation of Diluted EPU
        2005
        2004Income from continuing operations available to common unitholdersfor diluted earnings per unit
        $55,574
        $54,164Income from discontinued operations for diluted earnings per unit
        13,835
        (6,627)Net income available to common unitholders
        $69,409
        $47,537Weighted average common units
        72,478
        68,448Diluted EPU:Income from continuing operations
        $   0.77
        $    0.79Income from discontinued operations
        0.19
        (0.10)Net income available to common unitholders
        $   0.96
        $    0.69  The following schedule reconciles the shares used in the basic EPU calculation to the units used in the diluted EPU calculation:  Three Months Ended
June 30,
        Six Months Ended
June 30,2005
        2004
        2005
        2004Basic EPU units
        75,240
        68,177
        72,041
        67,886Add:   Stock options
        409
        442
        437
        551Stock Warrants
        --
        1
        --
        11Diluted EPU Units
        75,649
        68,620
        72,478
        68,448  Not included in the computations of diluted EPU were 0 and 5,000 stock options and 0 and 6,205,426 Series B Preferred Units on an as converted basis into Common Units, as such securities were anti-dilutive during the three months ended June 30, 2005 and 2004, respectively.  Also excluded from diluted EPU computations were 0 and 4,615 stock options and 3,085,570 and 6,205,426 Series B Preferred Units, on an as converted basis into common units, as such securities were anti-dilutive during the six months ended June 30, 2005 and 2004, respectively.  Unvested restricted stock outstanding as of June 30, 2005 and 2004 were 240,744 and 187,703, respectively.   11.
        MINORITY INTEREST IN CONSOLIDATED JOINT VENTURES On November 23, 2004, the Operating Partnership acquired a 62.5 percent interest in One River Centre, a three-building 457,472 square-foot office complex located in Middletown, New Jersey, through the Operating Partnerships conversion of its note receivable into a controlling equity interest.  Minority interests: Consolidated joint ventures as of December 31, 2004 consisted of the 37.5 percent non-controlling interest owned by the third party.  In March 2005, the Operating Partnership acquired the remaining 37.5 percent non-controlling interest in One River Centre for $10,499, comprised of $7,713 in cash and the issuance of 63,328 common units in the Operating Partnership.   12.
        EMPLOYEE BENEFIT 401(k) PLAN  All employees of the Corporation who meet certain minimum age and period of service requirements are eligible to participate in a 401(k) defined contribution plan (the 401(k) Plan).  The 401(k) Plan allows eligible employees to defer up to 15 percent of their annual compensation, subject to certain limitations imposed by federal law.  The amounts contributed by employees are immediately vested and non-forfeitable.  The Corporation, at managements discretion, may match employee contributions and/or make discretionary contributions.  Total expense recognized by the Operating Partnership for the three months ended June 30, 3005 and 2004 was $100 and $100, respectively, and for the six months ended June 30, 2005 and 2004 was $200 and $200, respectively.   32


and for the six months ended June 30, 2005 and 2004 was $200 and $200, respectively.   13.
        COMMITMENTS AND CONTINGENCIES  TAX ABATEMENT AGREEMENTS Pursuant to agreements with the City of Jersey City, New Jersey, the Operating Partnership is required to make payments in lieu of property taxes (PILOT) on certain of its properties located in Jersey City, as follows:  The Harborside Plaza 5 agreement, as amended, which commenced in 2002 upon substantial completion of the property, as defined, is for a term of 20 years.  The PILOT is equal to two percent of Total Project Costs.  Total Project Costs, as defined are $159,625.  The PILOT totaled $798 and $798 for the three months ended June 30, 2005 and 2004, respectively, and $1,596 and $1,596 for the six months ended June 30, 2005 and 2004, respectively.  The Harborside Plaza 4-A agreement, which commenced in 2000, is for a term of 20 years.  The PILOT is equal to two percent of Total Project costs, as defined, and increases by 10 percent in years 7, 10 and 13 and by 50 percent in year 16.  Total Project costs, as defined, are $45,497.  The PILOT totaled $227 and $227 for the three months ended June 30, 2005 and 2004, respectively, and $455 and $455 for the six months ended June 30, 2005 and 2004, respectively.  The 101 Hudson Street agreement commenced in 1991 for a term of 15 years and expires in 2006.  The PILOT currently provides for the payment of a minimum annual service charge of approximately $4,193, subject to certain adjustments as provided in the PILOT agreement.   The PILOT totaled $1,048 for the three months ended June 30, 2005, and $1,421 for the period of time during the six months ended June 30, 2005 for which the Operating Partnership owned the property.  The Harborside Plaza 2 and 3 agreement, commenced in 1990 and expires August 31, 2005.  Such PILOT is equal to two percent of Total Project Costs, as defined, in year one and increases by $75 per annum through year 15.  Total Project Costs, as defined, are $145,644.  The PILOT totaled $991 and $972 for the three months ended June 30, 2005 and 2004, respectively, and $1,981 and $1,944 for the six months ended June 30, 2005 and 2004, respectively.  At the conclusion of the above-referenced PILOT agreements, it is expected that the properties will be assessed by the municipality and be subject to real estate taxes at the then prevailing rates.  LITIGATION The Operating Partnership is a defendant in litigation arising in the normal course of its business activities.  Management does not believe that the ultimate resolution of these matters will have a materially adverse effect upon the Operating Partnerships financial condition taken as whole.  GROUND LEASE AGREEMENTS Future minimum rental payments under the terms of all non-cancelable ground leases under which the Operating Partnership is the lessee, as of June 30, 2005, are as follows:  Year
        Amount2005
        $     2652006
        5302007
        5282008
        5072009
        5102010 through 2080
        20,142Total
        $22,482   33


Ground lease expense incurred by the Operating Partnership during the three months ended June 30, 2005 and 2004 amounted to $141 and $42, respectively, and was $283 and $300 for the six months ended June 30, 2005 and 2004, respectively.  OTHER The Operating Partnership may not dispose of or distribute certain of its properties, currently comprising 59 properties with an aggregate net book value of approximately $1,450,182, which were originally contributed by members of either the Mack Group (which includes William L. Mack, Chairman of the Corporations Board of Directors; David S. Mack, a director of the Corporation; Earle I. Mack, a former director of the Corporation; and Mitchell E. Hersh, president, chief executive officer and a director of the Corporation), the Robert Martin Group (which includes Martin S. Berger, a director of the Corporation; Robert F. Weinberg, a former director of the Corporation; and Timothy M. Jones, former president of the Corporation), the Cali Group (which includes John R. Cali, a director of the Corporation and John J. Cali, a former director of the Corporation) or certain other common unitholders without the
express written consent of a representative of the Mack Group, the Robert Martin Group, the Cali Group or the specific certain other common unitholders, as applicable, 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 Mack Group, Robert Martin Group, Cali Group members or the specific certain other common unitholders for the tax consequences of the recognition of such built-in-gains (collectively, the Property Lock-Ups).  The aforementioned restrictions do not apply in the event that the Operating Partnership sells all of its properties or in connection with a sale transaction which the Corporations Board of Directors determines is reasonably necessary to satisfy a material monetary default on any unsecured debt, judgment or liability of the Operating Partnership or the Corporation or to cure any material monetary default on any mortgage secured by a property.
 The Property Lock-Ups expire periodically through 2010.  Upon the expiration of the Property Lock-Ups, the Operating Partnership is 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 Mack Group, Robert Martin Group, Cali Group members or the specific certain other common unitholders.   14.
        TENANT LEASES  The Properties are leased to tenants under operating leases with various expiration dates through 2021.  Substantially all of the leases provide for annual base rents plus recoveries and escalation charges based upon the tenants proportionate share of and/or increases in real estate taxes and certain operating costs, as defined, and the pass-through of charges for electrical usage.  Future minimum rentals to be received under non-cancelable operating leases at June 30, 2005 are as follows:  Year
        AmountJuly 1 through December 31, 2005
        $   253,9882006
        502,2132007
        458,4152008
        402,6952009
        353,6982010 and thereafter
        1,143,842Total
        $3,114,851   15.
        SEGMENT REPORTING  The Operating Partnership operates in one business segment - real estate.  The Operating Partnership provides leasing, management, acquisition, development, construction and tenant-related services for its portfolio.  The Operating Partnership does not have any foreign operations.  The accounting policies of the segments are the same as those described in Note 2  Significant Accounting Policies, excluding straight-line rent adjustments, rent adjustments on above/below market leases, and depreciation and amortization.   34


The Operating Partnership evaluates performance based upon net operating income from the combined properties in the segment.  Selected results of operations for the three and six month periods ended June 30, 2005 and 2004 and selected asset information as of June 30, 2005 and December 31, 2004 regarding the Operating Partnerships operating segment are as follows:  Total Segment
        Corporate & Other (e)
        Total Operating PartnershipTotal contract revenues (a):Three months ended:June 30,2005
        $   158,662
        $       482
        $   159,144
        (f)June 30,2004
        138,601
        436
        139,037
        (g)Six months ended:June 30,2005
        $    308,143
        $       629
        $   308,772
        (h)June 30,2004
        274,089
        1,867
        275,956
        (i)Total operating and interest (b):Three months ended:June 30,2005
        $     55,190
        $ 38,889
        $     94,079
        (j)June 30,2004
        43,943
        36,109
        80,052
        (k)Six months ended:June 30,2005
        $    107,481
        $ 74,803
        $   182,284
        (l)June 30,2004
        88,610
        70,883
        159,493
        (m)Equity in earnings of unconsolidatedjoint ventures:Three months ended:June 30,2005
        $           542
        $          --
        $           542June 30,2004
        1,090
        --
        1,090Six months ended:June 30,2005
        $           230
        $          --
        $           230June 30,2004
        1,267
        --
        1,267Net operating income (c):Three months ended:June 30,2005
        $    104,014
        $(38,407)
        $     65,607
        (f) (j)June 30,2004
        95,748
        (35,673)
        60,075
        (g) (k)Six months ended:June 30,2005
        $    200,892
        $(74,174)
        $   126,718
        (h) (l)June 30,2004
        186,746
        (69,016)
        117,730
        (i) (m)Total assets:June 30,2005
        $4,079,937
        $ 41,279
        $4,121,216December 31, 2004
        3,809,320
        40,845
        3,850,165Total long-lived assets (d):June 30,2005
        $3,900,166
        $   3,365
        $3,903,531December 31, 2004
        3,663,618
        4,176
        3,667,794(a)Total contract revenues represent all revenues during the period (including the Operating Partnerships share of net income from unconsolidated joint ventures), excluding adjustments for straight-lining of rents, the Operating Partnerships share of straight-line rent adjustments from unconsolidated joint ventures and rent adjustments on above/below market leases.   35


(b)Total operating and interest expenses represent the sum of real estate taxes, utilities, operating services, general and administrative and interest expense.  All interest expense (including for property-level mortgages) is excluded from segment amounts and classified in Corporate & Other for all periods.(c)Net operating income represents total contract revenues [as defined in Note (a)] less total operating and interest expenses [as defined in Note (b)] for the period.(d)Long-lived assets are comprised of total rental property, unbilled rents receivable and investments in unconsolidated joint ventures.(e)Corporate & Other represents all corporate-level items (including interest and other investment income, interest expense and non-property general and administrative expense) as well as intercompany eliminations necessary to reconcile to consolidated Operating Partnership totals.(f)Excludes $3,302 of adjustments for straight-lining of rents, $977 for rent adjustments on above/below market leases, and $43 for the Operating Partnerships share of straight-line rent adjustments from unconsolidated joint ventures.(g)Excludes $2,415 of adjustments for straight-lining of rents, $434 for rent adjustments on above/below market leases, and $146 for the Operating Partnerships share of straight-line rent adjustments from unconsolidated joint ventures.(h)   Excludes $6,520 of adjustments for straight-lining of rents, $1,533 for rent adjustments on above/below market leases, and $90 for the Operating Partnerships share of straight-line rent adjustments from unconsolidated joint ventures.(i)    Excludes $5,079 of adjustments for straight-lining of rents, $446 for rent adjustments on above/below market leases, and $289 for the Operating Partnerships share of straight-line rent adjustments from unconsolidated joint ventures.(j)    Excludes $38,532 of depreciation and amortization(k)   Excludes $31,568 of depreciation and amortization.(l)Excludes $74,339 of depreciation and amortization.(m)Excludes $61,282 of depreciation and amortization.   36


16.
        IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS  SFAS No. 123 (revised 2004),Share-Based Payment In October 2004, the FASB issued SFAS No. 123R (revised 2004),Share-Based Payment(SFAS 123R).  SFAS 123R requires companies to categorize share-based payments as either liability or equity awards.  For liability awards, companies will remeasure the award at fair value at each balance sheet date until the award is settled.  Equity classified awards are measured at the grant-date fair value and are not remeasured.  SFAS 123R will be effective for annual periods beginning after June 15, 2005.  Awards issued, modified, or settled after the effective date will be measured and recorded in accordance with SFAS 123R.  The Operating Partnership believes that the implementation of this standard will not have a material effect on the Operating Partnerships consolidated financial position or results of operations.  SFAS No. 153,Accounting for Non-monetary Transactions In December 2004, the FASB issued SFAS No. 153,Accounting for Non-monetary Transactions(SFAS 153).  SFAS 153 requires non-monetary exchanges to be accounted for at fair value, recognizing any gain or loss, if the transactions meet a commercial-substance criterion and fair value is determinable.  SFAS No. 153 is effective for non-monetary transactions occurring in fiscal years beginning after June 15, 2005.  The Operating Partnership believes that the implementation of this standard will not have a material effect on the Operating Partnerships consolidated financial position or results of operations.   37


Item 2.
        Managements Discussion and Analysis of
        Financial Condition and Results of Operations  GENERAL  The following discussion should be read in conjunction with the Consolidated Financial Statements of Mack-Cali Realty, L.P. and the notes thereto (collectively, the Financial Statements).  Certain defined terms used herein have the meaning ascribed to them in the Financial Statements.  Executive Overview  Mack-Cali Realty Corporation (the Corporation) is one of the largest real estate investment trusts (REITs) in the United States, with a total market capitalization of approximately $5.4 billion at June 30, 2005.  Mack-Cali Realty, L.P. (the Operating Partnership) has been involved in all aspects of commercial real estate development, management and ownership for over 50 years and the Corporation has been a publicly-traded REIT since 1994.  The Operating Partnership owns or has interests in 267 properties (collectively, the Properties), primarily class A office and office/flex buildings, totaling approximately 29.9 million square feet, leased to approximately 2,100 tenants.  The properties are located primarily in suburban markets of the Northeast, some with adjacent, Operating Partnership-controlled developable land sites able to accommodate up to 8.5 million square feet
of additional commercial space.  The Operating Partnerships strategy is to be a significant real estate owner and operator in its core, high-barriers-to-entry markets, primarily in the Northeast.  As an owner of real estate, almost all of the Operating Partnerships earnings and cash flow is derived from rental revenue received pursuant to leased space at the Properties.  Key factors that affect the Operating Partnerships business and financial results include the following:  
        the general economic climate;
        the occupancy rates of the Properties;
        rental rates on new or renewed leases;
        tenant improvement and leasing costs incurred to obtain and retain tenants;
        the extent of early lease terminations;
        operating expenses;
        cost of capital; and
        the extent of acquisitions, development and sales of real estate.  Any negative effects of the above key factors could potentially cause a deterioration in the Operating Partnerships revenue and/or earnings.  Such negative effects could include: (1) failure to renew or execute new leases as current leases expire; (2) failure to renew or execute new leases with rental terms at or above the terms of in-place leases; and (3) tenant defaults.  A failure to renew or execute new leases as current leases expire or to execute new leases with rental terms at or above the terms of in-place leases may be affected by several factors such as: (1) the local economic climate, which may be adversely impacted by business layoffs or downsizing, industry slowdowns, changing demographics and other factors; and (2) local real estate conditions, such as oversupply of office and office/flex space or competition within the market.  As a result of the economic climate since 2001, substantially all of the real estate markets the Operating Partnership operates in materially softened.  Demand for office space declined significantly and vacancy rates increased in each of the Operating Partnerships core markets over the period.  Through August 1, 2005, the Operating Partnerships core markets continued to be weak.  The percentage leased in the Operating Partnerships consolidated portfolio of stabilized operating properties decreased to 90.0 percent at June 30, 2005 as compared to 91.1 percent at March 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, and leases that expire at the period end date.  Excluded  38


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.  Leases that expired as of June 30, 2005, March 31, 2005 and December 31, 2004 aggregate 243,492, 117,183 and 439,697 square feet, respectively, or 0.8, 0.4 and 1.5 percentage of the net rentable square footage, respectively.  Market rental rates have declined in most markets from peak levels in late 2000 and early 2001.  Rental rates on the Operating Partnerships space that was re-leased (based on first rents payable) during the three months ended June 30, 2005 decreased an average of 18.5 percent compared to rates that were in effect under the prior leases, as compared to a 7.9 percent decrease for the same period in 2004.  The Operating Partnership believes
that vacancy rates may continue to increase in most of its markets in 2005.  As a result, the Operating Partnerships future earnings and cash flow may continue to be negatively impacted by current market conditions.  The remaining portion of this Managements Discussion and Analysis of Financial Condition and Results of Operations should help the reader understand:  
        property transactions during the period;
        critical accounting policies and estimates;
        results of operations for the current quarter as compared to the same period last year;
        results of operations for the three and six month periods ended June 30, 2005, as compared to the same periods last year; and
        liquidity and capital resources.   Property Transactions in 2005  Property Acquisitions The Operating Partnership acquired the following office properties during the six months ended June 30, 2005:  AcquisitionAcquisition
        
        
        # of
        Rentable
        Cost (a)Date
        Property/Address
        Location
        Bldgs.
        Square Feet
        (in thousands)03/02/05
        101 Hudson Street (b)
        Jersey City,  Hudson County, NJ
        1
        1,246,283
        $330,34203/29/05
        23 Main Street (b) (c)
        Holmdel, Monmouth  County, NJ
        1
        350,000
        23,947Total Property Acquisitions:
        
        2
        1,596,283
        $354,289(a)   Amounts are as of June 30, 2005.(b)   Transaction was funded primarily through borrowing on the Operating Partnerships revolving credit facility.(c)   In addition to its initial investment, the Operating Partnership presently intends to make additional investments related to the property of approximately $11,702.  Property Sales The Operating Partnership sold the following office properties during the six months ended June 30, 2005:  Net
        Net
        RealizedRentable
        Sales
        Book
        Gain/Sale
        
        
        # of
        Square
        Proceeds
        Value
        (Loss)Date
        Property/Address
        Location
        Bldgs.
        Feet
        (in thousands)
        (in thousands)
        (in thousands)02/04/05
        210 South 16th Street
        Omaha, Douglas County, Nebraska
        1
        318,224
        $    8,464
        $  8,210
        $     25402/11/05
        1122 Alma Road
        Richardson, Dallas County, Texas
        1
        82,576
        2,075
        2,344
        (269)02/15/05
        3 Skyline Drive
        Hawthorne, Westchester County, New  York
        1
        75,668
        9,587
        8,856
        73105/11/05
        201 Willowbrook Blvd.
        Wayne, Passaic County, New Jersey (a)
        1
        178,329
        17,696
        17,705
        (9)06/03/05
        600 Community Drive/111 East Shore Road
        North Hempstead, Nassau County, New  York
        2
        292,849
        71,593
        59,609
        11,984Total Office Property Sales:
        
        6
        947,646
        $109,415
        $96,724
        $12,691(a)    In connection with the sale, the Operating Partnership provided a mortgage loan to the buyer of $12,000 which bears interest at 5.74 percent, matures in fives years with a five year renewal option, and requires monthly payments of principal and interest.   39


Subsequent Events On July 12, 2005, the Operating Partnership acquired Monmouth Executive Center, a four-building, 236,338 square-foot class A office complex in Freehold, New Jersey, for approximately $33 million.  Critical Accounting Policies and Estimates  The Financial Statements have been prepared in conformity with generally accepted accounting principles.  The preparation of the Financial Statements 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 reported period.  These estimates and assumptions are based on managements historical experience that are believed to be reasonable at the time.  However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment.  The Operating Partnerships critical accounting policies are those which require assumptions to be made about matters that are highly uncertain.  Different estimates could have a material
effect on the Operating Partnerships financial results.  Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances.  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.  Interest capitalized by the Operating Partnership for the three months ended June 30, 2005 and 2004 was $1.4 million and $0.9 million, respectively, and $2.6 million and $1.8 million for the six months ended June 30, 2005 and 2004, 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 Operating Partnership 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 Operating Partnership 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.  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 termBuildings and improvements
        5 to 40 yearsTenant improvements
        The shorter of the term of therelated lease or useful lifeFurniture, fixtures and equipment
        5 to 10 years  Upon acquisition of rental property, the Operating Partnership 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 Operating Partnership 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 Operating Partnership 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  40


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 Operating Partnership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 Operating Partnership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 will be 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 Operating Partnerships rental properties 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 Operating Partnership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 Operating Partnerships rental properties is impaired.  Rental Property Held for Sale and Discontinued Operations: When assets are identified by management as held for sale, the Operating Partnership discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets.  If, in managements opinion, the 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.  If circumstances arise that previously were considered unlikely and, as a result, the Operating Partnership 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.  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  41


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 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.  Parking and other revenue includes income from parking spaces leased to tenants, income from tenants for additional services provided by the Operating Partnership, income from tenants for early lease terminations and income from managing and/or leasing  properties for third parties.  Escalations and recoveries 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.  Allowance for Doubtful Accounts: Management periodically performs a detailed review of amounts due from tenants 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.  42


Results From Operations  The following comparisons for the three and six months ended June 30, 2005 (2005), as compared to the three and six months ended June 30, 2004 (2004), make reference to the following:  (i) the effect of the Same-Store Properties, which represents all in-service properties owned by the Operating Partnership at March 31, 2004 (for the three-month period comparisons), and which represents all in-service properties owned by the Operating Partnership at December 31, 2003 (for the six-month period comparisons), excluding properties sold or held for sale through June 30, 2005, and (ii) the effect of the Acquired Properties, which represents all properties acquired by the Operating Partnership or commencing initial operations from April 1, 2004 through June 30, 2005, (for the three-month period comparisons), and which represents all properties acquired by the
Operating Partnership or commencing initial operations from January 1, 2004 through June 30, 2005 (for the six-month period comparisons).  Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004  Three Months EndedJune 30,
        Dollar
        Percent(dollars in thousands)
        2005
        2004
        Change
        ChangeRevenue from rental operations:Base rents
        $137,171
        $123,730
        $13,441
        10.9%Escalations and recoveries from tenants
        20,730
        15,822
        4,908
        31.0Parking and other
        5,565
        2,480
        3,085
        124.4Total revenues
        163,466
        142,032
        21,434
        15.1Property expenses:Real estate taxes
        20,474
        16,565
        3,909
        23.6Utilities
        12,413
        9,490
        2,923
        30.8Operating services
        22,602
        19,020
        3,582
        18.8Sub-total
        55,489
        45,075
        10,414
        23.1General and administrative
        8,347
        8,685
        (338)
        (3.9)Depreciation and amortization
        38,532
        31,568
        6,964
        22.1Interest expense
        30,363
        26,512
        3,851
        14.5Interest income
        (120)
        (220)
        100
        45.5Total expenses
        132,611
        111,620
        20,991
        18.8Income from continuing operations before minority   interestand equity in earnings of unconsolidated joint ventures
        30,855
        30,412
        443
        1.5Minority interest in consolidated joint ventures
        --
        --
        --
        --Equity in earnings of unconsolidated joint ventures, net
        542
        1,090
        (548)
        (50.3)Gain on sale of investment in unconsolidated joint ventures
        --
        --
        --
        --Income from continuing operations
        31,397
        31,502
        (105)
        (0.3)Discontinued operations:Income from discontinued operations
        1,297
        2,547
        (1,250)
        (49.1)Realized gains (losses) and unrealized losses ondisposition of rental property, net
        11,975
        (11,856)
        23,831
        201.0Total discontinued operations, net
        13,272
        (9,309)
        22,581
        242.6Net income
        44,669
        22,193
        22,476
        101.3Preferred unit distributions
        (500)
        (4,409)
        3,909
        88.7Net income available to common unitholders
        $ 44,169
        $ 17,784
        $26,385
        148.4%   43


The following is a summary of the changes in revenue from rental operations and property expenses divided into Same-Store Properties and Acquired Properties (dollars in thousands):  TotalOperating Partnership
        Same-Store
Properties
        Acquired
PropertiesDollar
        Percent
        Dollar
        Percent
        Dollar
        PercentChange
        Change
        Change
        Change
        Change
        ChangeRevenue from rental operations:Base rents
        $13,441
        10.9%
        $   325
        0.3%
        $13,116
        546.3%Escalations and recoveriesfrom tenants
        4,908
        31.0
        1,831
        11.7
        3,077
        1,728.7Parking and other
        3,085
        124.4
        3,141
        126.7
        (56)
        --Total
        $21,434
        15.1%
        $5,297
        3.8%
        $16,137
        625.7%Property expenses:Real estate taxes
        $  3,909
        23.6%
        $1,051
        6.4%
        $  2,858
        1,387.4%Utilities
        2,923
        30.8
        1,718
        18.1
        1,205
        --Operating services
        3,582
        18.8
        1,222
        6.4
        2,360
        9,440.0Total
        $10,414
        23.1%
        $3,991
        8.9%
        $  6,423
        2,780.5%OTHER DATA:Number of Consolidated  Properties(excluding properties held for  sale):
        264
        
        248
        
        16Square feet(in thousands)
        29,392
        
        25,386
        
        4,006  Base rents for the Same-Store Properties increased $0.3 million, or 0.3 percent, for 2005 as compared to 2004, due primarily to increases in the percentage of space leased at the properties in 2005 from 2004.  Escalations and recoveries from tenants for the Same-Store Properties increased $1.8 million, or 11.7 percent, for 2005 over 2004, due primarily to an increased amount of total property expenses in 2005.  Parking and other income for the Same-Store Properties increased $3.1 million, or 126.7 percent, due primarily to an increase in lease termination fees in 2005.  Real estate taxes on the Same-Store Properties increased $1.1 million, or 6.4 percent, for 2005 as compared to 2004, due primarily to property tax rate increases in certain municipalities in 2005, partially offset by lower assessments on certain properties in 2004.  Utilities for the Same-Store Properties increased $1.7 million, or 18.1 percent, for 2005 as compared to 2004, due primarily to increased rates in 2005 as compared to 2004.  Operating services for the Same-Store Properties increased $1.2 million, or 6.4 percent, due primarily to increased insurance costs of $1.1 million.  General and administrative decreased by $0.3 million, or 3.9 percent, for 2005 as compared to 2004.  This decrease was due primarily to compensation costs incurred in connection with the resignation of the Corporations president in 2004.  Depreciation and amortization increased by $7.0 million, or 22.1 percent, for 2005 over 2004.  Of this increase, $1.2 million, or 3.9 percent, is attributable to the Same-Store Properties, and $5.8 million is due to the Acquired Properties.  Interest expense increased $3.9 million, or 14.5 percent, for 2005 as compared to 2004.  This increase was due primarily to higher average debt balances, partially offset by an overall decrease in interest rates on the Operating Partnerships debt in 2005.  Interest income decreased $0.1 million, or 45.5 percent, for 2005 as compared to 2004.  This decrease was due primarily to lower interest income from mortgage notes receivable in 2005 and lower average cash balances in 2005.   44


Income from continuing operations before minority interest and equity in earnings of unconsolidated joint ventures increased to approximately $30.8 million in 2005 from $30.4 million in 2004.  The increase of approximately $0.4 million is due to the factors discussed above.  Equity in earnings of unconsolidated joint ventures decreased $0.5 million, or 50.3 percent, for 2005 as compared to 2004.  The decrease was due primarily to the sale of the Pacifica Plaza Phase I and II in Daly City, California, in late 2004 resulting in a reduction of $0.5 million in 2005 and a reduction in 2005 of $0.3 million as a result of operations at the G&G Martco joint venture, partially offset by an increase from operations of the Harborside South Pier of Hyatt Hotel Venture $0.3 million.  Net income available to common unitholders increased by approximately $26.4 million, from $17.8 million in 2004 to $44.2 million in 2005.  This increase was the result of realized gains and unrealized losses on disposition of rental property of approximately $12.0 million in 2005, realized gains and unrealized losses on disposition of rental property of $11.9 million in 2004, a decrease in preferred units distributions of $3.9 million, and an increase in income from continuing operations before minority interest and equity in earnings of unconsolidated joint ventures of $0.4 million.  These were partially offset by a decrease in income from discontinued operations of $1.3 million and a decrease in equity of earnings of unconsolidated joint ventures of $0.5 million.   45


Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004  Six Months EndedJune 30,
        Dollar
        Percent(dollars in thousands)
        2005
        2004
        Change
        ChangeRevenue from rental operations:Base rents
        $270,312
        $244,798
        $25,514
        10.4%Escalations and recoveries from tenants
        39,142
        31,019
        8,123
        26.2Parking and other
        7,461
        5,953
        1,508
        25.3Total revenues
        316,915
        281,770
        35,145
        12.5Property expenses:Real estate taxes
        39,591
        32,923
        6,668
        20.3Utilities
        24,362
        20,523
        3,839
        18.7Operating services
        43,980
        36,356
        7,624
        21.0Sub-total
        107,933
        89,802
        18,131
        20.2General and administrative
        15,774
        15,082
        692
        4.6Depreciation and amortization
        74,339
        61,282
        13,057
        21.3Interest expense
        58,761
        55,549
        3,212
        5.8Interest income
        (184)
        (940)
        756
        80.4Total expenses
        256,623
        220,775
        35,848
        16.2Income from continuing operations before minority  interestand equity in earnings of unconsolidated joint ventures
        60,292
        60,995
        (703)
        (1.2)Minority interest in consolidated joint ventures
        (74)
        --
        (74)
        --Equity in earnings of unconsolidated joint ventures,  net
        230
        1,267
        (1,037)
        (81.8)Gain on sale of investment in unconsolidated joint  ventures
        35
        720
        (685)
        (95.1)Income from continuing operations
        60,483
        62,982
        (2,499)
        (4.0)Discontinued operations:Income from discontinued operations
        2,757
        5,229
        (2,472)
        (47.3)Realized gains (losses) and unrealized losses ondisposition of rental property, net
        11,078
        (11,856)
        22,934
        193.4Total discontinued operations, net
        13,835
        (6,627)
        20,462
        308.8Net income
        74,318
        56,355
        17,963
        31.9Preferred unit distributions
        (4,909)
        (8,818)
        3,909
        44.3Net income available to common unitholders
        $   69,409
        $ 47,537
        $21,872
        46.0%   46


The following is a summary of the changes in revenue from rental operations and property expenses divided into Same-Store Properties and Acquired Properties (dollars in thousands):  TotalOperating Partnership
        Same-Store
Properties
        Acquired
PropertiesDollar
        Percent
        Dollar
        Percent
        Dollar
        PercentChange
        Change
        Change
        Change
        Change
        ChangeRevenue from rental operations:Base rents
        $25,514
        10.4%
        $2,047
        0.8%
        $23,467
        977.4%Escalations and recoveriesfrom tenants
        8,123
        26.2
        3,483
        11.3
        4,640
        2,606.7Parking and other
        1,508
        25.3
        1,611
        27.1
        (103)
        --Total
        $35,145
        12.5%
        $7,141
        2.6%
        $28,004
        1,085.8%Property expenses:Real estate taxes
        $  6,668
        20.3%
        $2,224
        6.8%
        $  4,444
        1,784.7%Utilities
        3,839
        18.7
        2,044
        10.0
        1,795
        --Operating services
        7,624
        21.0
        3,584
        9.9
        4,040
        9,395.3Total
        $18,131
        20.2%
        $7,852
        8.8%
        $10,279
        3,520.2%OTHER DATA:Number of Consolidated  Properties(excluding properties held for  sale):
        264
        
        248
        
        16Square feet(in thousands)
        29,392
        
        25,386
        
        4,006  Base rents for the Same-Store Properties increased $2.0 million, or 0.8 percent, for 2005 as compared to 2004, due primarily to increases in the percentage of space leased at the properties in 2005 from 2004.  Escalations and recoveries from tenants for the Same-Store Properties increased $3.5 million, or 11.3 percent, for 2005 over 2004, due primarily to an increased amount of total property expenses in 2005.  Parking and other income for the Same-Store Properties increased $1.6 million, or 27.1 percent, due primarily to an increase in lease termination fees in 2005.  Real estate taxes on the Same-Store Properties increased $2.2 million, or 6.8 percent, for 2005 as compared to 2004, due primarily to property tax rate increases in certain municipalities in 2005, partially offset by lower assessments on certain properties in 2004.  Utilities for the Same-Store Properties increased $2.0 million, or 10.0 percent, for 2005 as compared to 2004, due primarily to more severe weather in 2005 as compared to 2004.  Operating services for the Same-Store Properties increased $3.6 million, or 9.9 percent, due primarily to 2005 increases in insurance costs of $1.4 million, snow removal costs of $1.3 million, property operations salaries and related expenses of $0.4 million, and property maintenance costs of $0.4 million as compared to 2004.  General and administrative increased by $0.7 million, or 4.6 percent, for 2005 as compared to 2004.  This increase was due primarily to increases in professional fees and state income taxes aggregating $1.5 million in 2005 as compared to 2004, partially offset by compensation costs incurred in connection with the resignation of the Corporations president in 2004.  Depreciation and amortization increased by $13.1 million, or 21.3 percent, for 2005 over 2004.  Of this increase, $3.2 million, or 5.3 percent, is attributable to the Same-Store Properties, and $9.9 million is due to the Acquired Properties.  Interest expense increased $3.2 million, or 5.8 percent, for 2005 as compared to 2004.  This increase was due primarily to higher average debt balances, partially offset by an overall increase in interest rates on the Operating Partnerships debt in 2005.  47


Interest income decreased $0.8 million, or 80.4 percent, for 2005 as compared to 2004.  This decrease was due primarily to lower interest income from mortgage notes receivable in 2005 and lower average cash balances in 2005.  Income from continuing operations before minority interest and equity in earnings of unconsolidated joint ventures decreased to $60.3 million in 2005 from $61.0 million in 2004.  The decrease of approximately $0.7 million is due to the factors discussed above.  Equity in earnings of unconsolidated joint ventures decreased $1.0 million, or 81.8 percent, for 2005 as compared to 2004.  The decrease was due primarily to the sale of the Pacifica Plaza Phase I and II in Daly City, California, in late 2004 resulting in a reduction of $1.0 million in 2005 and a reduction in 2005 of $0.7 million as a result of operations at the G&G Martco joint venture, partially offset by an increase from operations of the Harborside South Pier Hyatt Hotel Venture of $0.5 million.  Gain on sale of investment in unconsolidated joint ventures amounted to $0.7 million in 2004 on account of the receipt of additional contingent purchase consideration from the Harborside North Pier Sale.  Gain on sale of investment in unconsolidated joint ventures amounted to $35,000 in 2005 due to the sale of the Operating Partnerships interest in the Ashford Loop joint venture.  Net income available to common unitholders increased by $21.9 million, from approximately $47.5 million in 2004 to $69.4 million in 2005.  This increase was the result of realized gains and unrealized losses on disposition of rental property of $11.9 million in 2004, realized gains and unrealized losses on disposition of rental property of $11.1 million in 2005, and a decrease in preferred unit distributions of $3.9 million.  These were partially offset by a decrease in income from discontinued operations of $2.5 million, a decrease in equity in earnings of unconsolidated joint ventures of $1.0 million, a decrease in income from continuing operations before minority interest and equity in earnings of unconsolidated joint ventures of $0.7 million, gain on sale of investment in unconsolidated joint venture of $0.7 million in 2004, and minority interest in consolidated joint ventures of $0.1 million in 2005.  LIQUIDITY AND CAPITAL RESOURCES  Liquidity  Overview: Historically, rental revenue has been the principal source of funds to pay operating expenses, debt service, capital expenditures and dividends, excluding non-recurring capital expenditures.  To the extent that the Operating Partnerships cash flow from operating activities is insufficient to finance its non-recurring capital expenditures such as property acquisitions, development and construction costs and other capital expenditures, the Operating Partnership has and expects to continue to finance such activities through borrowings under its revolving credit facility and other debt and equity financings.  The Operating Partnership believes that with the general downturn in the economy in recent years, and the softening of the Operating Partnerships markets specifically, it is reasonably likely that vacancy rates may continue to increase, effective rental rates on new and renewed leases may continue to decrease and tenant installation costs, including concessions, may continue to increase in most or all of its markets in 2005.  As a result of the potential negative effects on the Operating Partnerships revenue from the overall reduced demand for office space, the Operating Partnerships cash flow could be insufficient to cover increased tenant installation costs over the short-term.  If this situation were to occur, the Operating Partnership expects that it would finance any shortfalls through borrowings under its revolving credit facility and other debt and equity financings.  The Operating Partnership expects to meet its short-term liquidity requirements generally through its working capital, net cash provided by operating activities and from its revolving credit facility.  The Operating Partnership frequently examines potential property acquisitions and development projects and, at any given time, one or more of such acquisitions or development projects may be under consideration.  Accordingly, the ability to fund property acquisitions and development projects is a major part of the Operating Partnerships financing requirements.  The  48


Operating Partnership expects to meet its financing requirements through funds generated from operating activities, proceeds from property sales, long-term and short-term borrowings (including draws on the Operating Partnerships revolving credit facility) and the issuance of additional debt and/or equity securities.  REIT Restrictions: To maintain its qualification as a REIT, the Corporation must make annual distributions to its stockholders of at least 90 percent of its REIT taxable income, determined without regard to the dividends paid deduction and by excluding net capital gains.  Moreover, the Corporation intends to continue to make regular quarterly distributions to its common stockholders which, based upon current policy, in the aggregate would equal approximately $155.8 million on an annualized basis.  However, any such distribution, whether for federal income tax purposes or otherwise, would only be paid out of available cash, including borrowings and other sources, after meeting operating requirements, preferred stock dividends and distributions, and scheduled debt service on the Operating Partnerships debt.  Property Lock-Ups: The Operating Partnership may not dispose of or distribute certain of its properties, currently comprising 59 properties with an aggregate net book value of approximately $1.5 billion, which were originally contributed by members of either the Mack Group (which includes William L. Mack, Chairman of the Corporations Board of Directors; David S. Mack, a director of the Corporation; Earle I. Mack, a former director of the Corporation; and Mitchell E. Hersh, president, chief executive officer and a director of the Corporation), the Robert Martin Group (which includes Martin S. Berger, a director of the Corporation; Robert F. Weinberg, a former director of the Corporation; and Timothy M. Jones, former president of the Corporation), the Cali Group (which includes John R. Cali,  a director of the Corporation and John J. Cali, a former director of the Corporation) or certain other common unitholders without
the express written consent of a representative of the Mack Group, the Robert Martin Group, the Cali Group or the specific certain other common unitholders, as applicable, 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 Mack Group, Robert Martin Group, Cali Group members or the specific certain other common unitholders for the tax consequences of the recognition of such built-in-gains (collectively, the Property Lock-Ups).  The aforementioned restrictions do not apply in the event that the Operating Partnership sells all of its properties or in connection with a sale transaction which the Corporations Board of Directors determines is reasonably necessary to satisfy a material monetary default on any unsecured debt, judgment or liability of the Operating Partnership or the Corporation or to cure any material monetary default on any mortgage secured by a
property.  The Property Lock-Ups expire periodically through 2010.  Upon the expiration of the Property Lock-Ups, the Operating Partnership is 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 Mack Group, Robert Martin Group, Cali Group members or the specific certain other common unitholders.  Unencumbered Properties: As of June 30, 2005, the Operating Partnership had 248 unencumbered properties, totaling 24.5 million square feet, representing 83.2 percent of the Operating Partnerships total portfolio on a square footage basis.  Credit Ratings: The Operating Partnership 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 Corporation.  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 its existing and prospective preferred stock offerings of the Corporation.  Cash Flows  Cash and cash equivalents increased by $3.4 million to $15.7 million at June 30, 2005, compared to $12.3 million at December 31, 2004.  The increase is comprised of the following net cash flow items:  (1)
        $124.6 million provided by operating activities.   49


(2)
        $300.5 million used in investing activities, consisting primarily of the following:(a)
        $377.8 million used for additions to rental property and related intangibles; plus(b)
        $16.3 million used for investments in unconsolidated joint ventures; minus(c)
        $97.4 million received from proceeds from sale of rental properties.(3)
        $179.3 million provided by financing activities, consisting primarily of the following:(a)
        $539.3 million from borrowings under the unsecured credit facility; minus(b)
        $483.3 million used for the repayment of borrowings under the Operating Partnerships unsecured credit facility; minus(c)
        $95.6 million used for the payment of dividends and distributions.   Debt Financing  Summary of Debt: The following is a breakdown of the Operating Partnerships debt between fixed and variable-rate financing as of June 30, 2005:  Balance
($000s)
        % of Total
        Weighted Average
Interest Rate (a)
        Weighted Average
Maturity
in YearsFixed Rate Unsecured Debt
        $1,330,356
        67.66%
        6.46%
        6.33Fixed Rate Secured Debt andOther Obligations
        472,913
        24.05%
        6.12%
        2.70Variable Rate Unsecured Debt
        163,000
        8.29%
        3.65%
        2.40Totals/Weighted Average:
        $1,966,269
        100.00%
        6.14%
        5.13  Debt Maturities: Scheduled principal payments and related weighted average annual interest rates for the Operating Partnerships debt as of June 30, 2005 are as follows:  Period
        Scheduled
Amortization
($000s)
        Principal
Maturities
($000s)
        Total
($000s)
        Weighted Average
Interest Rate of
Future Repayments (a)2005
        $12,653
        $     68,249
        $     80,902
        6.87%2006
        17,259
        144,642
        161,901
        7.10%2007
        16,699
        172,364
        189,063
        3.93%2008
        15,889
        --
        15,889
        4.96%2009
        5,571
        300,000
        305,571
        7.44%Thereafter
        3,111
        1,216,141
        1,219,252
        6.01%Sub-total
        71,182
        1,901,396
        1,972,578
        6.14%Adjustment for unamortizeddebt discount/premium, net,as of June 30, 2005
        (6,309)
        --
        (6,309)
        --Totals/Weighted Average
        $64,873
        $1,901,396
        $1,966,269
        6.14%(a)    Actual weighted average LIBOR contract rates relating to the Operating Partnerships outstanding debt as of June 30, 2005 of 3.24percent was used in calculating revolving credit facility.  Senior Unsecured Notes: On January 25, 2005, the Operating Partnership issued $150.0 million face amount of 5.125 percent senior unsecured notes due January 15, 2015 with interest payable semi-annually in arrears.  The proceeds from the issuance (net of selling commissions and discount) of approximately $148.1 million were used primarily to reduce outstanding borrowings under the 2004 unsecured facility.   50


On April 15, 2005, the Operating Partnership issued $150.0 million face amount of 5.05 percent senior unsecured notes due April 15, 2010 with interest payable semi-annually in arrears.  The proceeds from the issuance (net of selling commissions and discount) of approximately $148.8 million were used to reduce outstanding borrowings under the 2004 unsecured facility.  The terms of the Operating Partnerships senior unsecured notes (which totaled approximately $1.3 billion as of June 30, 2005) include certain restrictions and covenants which require compliance with financial ratios relating to the maximum amount of debt leverage, the maximum amount of secured indebtedness, the minimum amount of debt service coverage and the maximum amount of unsecured debt as a percent of unsecured assets.  Unsecured Revolving Credit Facility: 2004 Unsecured Facility On November 23, 2004, the Operating Partnership obtained an unsecured revolving credit facility (the 2004 Unsecured Facility) with a current borrowing capacity of $600.0 million from a group of 27 lenders.  As of August 1, 2005, the Operating Partnership had $202.0 million of outstanding borrowings under the 2004 Unsecured Facility.  The interest rate on outstanding borrowings (not electing the Operating Partnerships competitive bid feature) under the 2004 Unsecured Facility is currently LIBOR plus 65 basis points.  The facility has a competitive bid feature, which allows the Operating Partnership to solicit bids from lenders under the facility to borrow up to $300,000 at interest rates less than the current LIBOR plus 65 basis point spread.  As of June 30, 2005, the Operating Partnerships outstanding borrowings carried a weighted average interest rate of LIBOR plus 41 points.  The Operating Partnership may also elect an interest rate representing the higher of the lenders prime rate or the Federal Funds rate plus 50 basis points.  The 2004 Unsecured Facility also currently requires a 20 basis point facility fee on the current borrowing capacity payable quarterly in arrears.  The 2004 Unsecured Facility matures in
November 2007, with an extension option of one year, which would require a payment of 25 basis points of the then borrowing capacity of the facility upon exercise.  In the event of a change in the Operating Partnerships unsecured debt rating, the interest and facility fee rates will be adjusted in accordance with the following table:  Operating Partnerships
        Interest Rate Unsecured Debt Ratings:
        Applicable Basis Points
        Facility FeeS&P Moodys/Fitch (a)
        Above LIBOR
        Basis PointsNo ratings or less than BBB-/Baa3/BBB-
        112.5
        25.0BBB-/Baa3/BBB-
        80.0
        20.0BBB/Baa2/BBB (current)
        65.0
        20.0BBB+/Baa1/BBB+
        55.0
        15.0A-/A3/A- or higher
        50.0
        15.0(a)    If the Operating Partnership has debt ratings from two rating agencies, one of which is Standard & Poors Rating Services (S&P) or Moodys Investors Service (Moodys), the rates per the above table shall be based on the lower of such ratings.  If the Operating Partnership has debt ratings from three rating agencies, one of which is S&P or Moodys, the rates per the above table shall be based on the lower of the two highest ratings.  If the Operating Partnership has debt ratings from only one agency, it will be considered to have no rating or less than BBB-/Baa3/BBB- per the above table.  The 2004 Unsecured Facility matures in November 2007, with an extension option of one year, which would require a payment of 25 basis points of the then borrowing capacity of the facility upon exercise.  The Operating Partnership believes that the 2004 Unsecured Facility is sufficient to meet its revolving credit facility needs.  The terms of the 2004 Unsecured Facility include certain restrictions and covenants which limit, among other things, the payment of dividends (as discussed below), the incurrence of additional indebtedness, the incurrence of liens and the disposition of real estate properties (to the extent that: (i) such property dispositions cause the Operating Partnership to default on any of the financial ratios of the facility described below, or (ii) the property dispositions are completed while the Operating Partnership is under an event of default under the facility, unless, under certain circumstances, such disposition is being carried out to cure such default), and which require compliance with financial ratios relating to the maximum leverage ratio, the maximum amount of secured indebtedness, the minimum amount of tangible net worth, the minimum amount of interest coverage, the minimum amount of fixed charge  51


coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property interest coverage and certain investment limitations.  The dividend restriction referred to above provides that, except to enable the Corporation to continue to qualify as a REIT under the Code, the Corporation will not during any four consecutive fiscal quarters make distributions with respect to common stock or other common equity interests in an aggregate amount in excess of 90 percent of funds from operations (as defined in the facility agreement) for such period, subject to certain other adjustments.  Mortgages, Loans Payable and Other Obligations: The Operating Partnership has mortgages, loans payable and other obligations which consist of various loans collateralized by certain of the Operating Partnerships rental properties.  Payments on mortgages, loans payable and other obligations are generally due in monthly installments of principal and interest, or interest only.  On April 1, 2005, the Operating Partnership repaid the $45.5 million mortgage loan with New York Life Insurance Company collateralized by One River Centre, which was scheduled to mature on May 10, 2005, using borrowings under the unsecured credit facility.  On April 29, 2005, the Operating Partnership repaid the $35.0 million loan with Principal Life Insurance Company collateralized by Mack-Cali Centre VI, which was scheduled to mature on May 1, 2005, using borrowings under the unsecured credit facility.  Debt Strategy: The Operating Partnership does not intend to reserve funds to retire the Operating Partnerships senior unsecured notes or its mortgages, loans payable and other obligations upon maturity.  Instead, the Operating Partnership will seek to refinance such debt at maturity or retire such debt through the issuance of additional equity or debt securities on or before the applicable maturity dates.  If it cannot raise sufficient proceeds to retire the maturing debt, the Operating Partnership may draw on its revolving credit facility to retire the maturing indebtedness, which would reduce the future availability of funds under such facility.  As of August 1, 2005, the Operating Partnership had $202.0 million of outstanding borrowings under its $600 million unsecured revolving credit facility.  The Operating Partnership has approximately $215.9 million of mortgage indebtedness maturing from August 1, 2005
through January 1, 2006.  The Operating Partnership is reviewing various refinancing options, including the public issuance of additional unsecured debt, the issuance in public or private transactions of preferred equity instruments and/or obtaining additional mortgage debt, some or all of which may be completed during 2005.  The Operating Partnership anticipates that its available cash and cash equivalents and cash flows from operating activities, together with cash available from borrowings and other sources, will be adequate to meet the Operating Partnerships capital and liquidity needs both in the short and long-term.  However, if these sources of funds are insufficient or unavailable, the Operating Partnerships ability to make the expected distributions discussed below may be adversely affected.  52


Equity Financing and Registration Statements  Equity Activity: The following table presents the changes in the Corporations issued and outstanding shares of Common Stock and the Operating Partnerships common units and preferred units (as converted) since December 31, 2004:  Common
        Common
        Preferred Units,Stock
        Units
        as Converted (a)
        TotalOutstanding at December 31, 2004
        61,038,875
        7,616,447
        6,205,426
        74,860,748Stock options exercised
        492,736
        --
        --
        492,736Preferred units convertedinto common units
        --
        6,205,426
        (6,205,426)
        --Common units redeemed for CommonStock
        55,947
        (55,947)
        --
        --Common units issued
        --
        63,328
        --
        63,328Shares issued under DividendReinvestment and Stock PurchasePlan
        4,496
        --
        --
        4,496Restricted shares issued,net of cancellations
        112,500
        --
        --
        112,500Outstanding at June 30, 2005
        61,704,554
        13,829,254
        --
        75,533,808(a)   On June 13, 2005, 215,018 Series B preferred units were converted into 6,205,426 common units.  Share Repurchase Program: On September 13, 2000, the Board of Directors of the Corporation authorized an increase to the Corporations repurchase program under which the Corporation was permitted to purchase up to an additional $150.0 million of the Corporations outstanding common stock (Repurchase Program).  From that date through its last purchases on January 10, 2003, the Corporation purchased and retired, under the Repurchase Program, 3.7 million shares of its outstanding common stock for an aggregate cost of approximately $104.5 million.  Concurrent with these purchases, the Corporation sold to the Operating Partnership 3.7 million of its outstanding common units for an aggregate cost of approximately $104.5 million.  The Corporation has a remaining authorization to repurchase up to an additional $45.5 million of its outstanding common stock, which it may repurchase from time to time in open market
transactions at prevailing prices or through privately negotiated transactions.  Shelf Registration Statements: The Corporation has an effective shelf registration statement on Form S-3 filed with the Securities and Exchange Commission (SEC) for an aggregate amount of $2.0 billion in common stock, preferred stock and warrants of the Corporation.  On July 1, 2004, the Corporation filed post-effective amendment number 1 to this shelf registration statement, adding depositary shares and otherwise updating the disclosures contained therein.  Such post-effective amendment was declared effective by the SEC on July 12, 2004.  No securities have been sold under this registration statement.  The Corporation and the Operating Partnership also have an effective shelf registration statement on Form S-3 (the Original Joint Shelf) filed with the SEC for an aggregate amount of $2.0 billion in common stock, preferred stock, depositary shares and guarantees of the Corporation and debt securities of the Operating Partnership, under which $1,700,283,478 of securities have been sold.  On July 1, 2004, the Corporation and the Operating Partnership filed a new shelf registration statement on Form S-3 (the New Joint Shelf) with the SEC for an aggregate amount of $2.5 billion in common stock, preferred stock, warrants, depositary shares and guarantees of the Corporation and debt securities of the Operating Partnership.  Pursuant to Rule 429 under the Securities Act of 1933, as amended (the Securities Act), the New Joint Shelf is a combined registration statement which
constitutes post-effective amendment no. 1 to the Original Joint Shelf, and the $2.5 billion available for issuance under the New Joint Shelf included the $574,716,522 of remaining availability under the Original Joint Shelf.  The New Joint Shelf was declared effective by the SEC on July 22, 2004.  As of August 1, 2005, $2.20 billion remained available for issuance under the New Joint Shelf.  53


Off-Balance Sheet Arrangements  Unconsolidated Joint Venture Debt: The debt of the Operating Partnerships unconsolidated joint ventures aggregating $123.5 million, at June 30, 2005, is non-recourse to the Operating Partnership except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions and material misrepresentations.  The Operating Partnership has severally guaranteed repayment of approximately $7.5 million on a mortgage at the Harborside South Pier Hyatt hotel joint venture.  The Operating Partnership has also posted an $8.0 million letter of credit in support of the Harborside South Pier Hyatt hotel joint venture, $4.0 million of which is indemnified by Hyatt.  The Operating Partnerships off-balance sheet arrangements are further discussed in Note 4  Investments in Unconsolidated Joint Ventures to the Financial Statements.  Contractual Obligations  The following table outlines the timing of payment requirements related to the Operating Partnerships debt (principal and interest), PILOT agreements, and ground lease agreements as of June 30, 2005(dollars in thousands):  Payments Due by PeriodLess than 1
        1  3
        4  5
        6  10
        After 10Total
        year
        years
        years
        years
        yearsSenior unsecured notes
        $1,883,567
        $  83,644
        $167,289
        $595,539
        $1,037,095
        --Revolving credit facility (1)
        177,384
        5,952
        171,432
        --
        --
        --Mortgages, loans  payableand other obligations
        534,450
        253,696
        63,958
        179,303
        37,493
        --Payments in lieu of taxes(PILOT)
        74,875
        7,924
        14,598
        8,537
        22,156
        21,660Ground lease payments
        22,482
        530
        1,555
        1,020
        2,596
        16,781Total
        $2,692,758
        $351,746
        $418,832
        $784,399
        $1,099,340
        $38,441  (1)
        Interest payments assume current credit facility borrowings and interest rates remain at the June 30, 2005 level until maturity.   Other Commitments and Contingencies  Legal Proceedings: On February 12, 2003, the New Jersey Sports and Exposition Authority selected The Mills Corporation and the Operating Partnership to redevelop the Continental Airlines Arena site (Arena Site) for mixed uses, including retail.  In March 2003, Hartz Mountain Industries, Inc., or Hartz, filed a lawsuit in the Superior Court of New Jersey, Law Division, for Bergen County, seeking to enjoin the New Jersey Sports and Exposition Authority, or NJSEA, from entering into a contract with Mills and the Operating Partnership for the redevelopment of the Continental Arena site.  In May 2003, the court denied Hartzs request for an injunction and dismissed its suit for failure to exhaust administrative remedies.  In June 2003, the NJSEA held hearings on Hartzs protest, and on a parallel protest filed by another rejected developer, Westfield, Inc. (Westfield).  On September 10, 2003, the
NJSEA ruled against Hartzs and Westfields protests, and on May 14, 2004, the Appellate Division of the Superior Court of New Jersey rejected Hartzs contention that the NJSEA lacks statutory authority to allow retail development of its property.  The Supreme Court of New Jersey has declined to review the Appellate Divisions decision.  Hartz, Westfield and four taxpayers (the Braha Appellants) have also filed appeals from the NJSEAs final decision based on other grounds.  In a separate action commenced in January 2004, Hartz and Westfield also appealed the NJSEAs approval and execution of the formal redevelopment agreement with the Meadowlands Venture.  Several appeals filed by Hartz, Westfield and others, including certain environmental groups, that challenge certain approvals received by the Meadowlands Venture from the NJSEA, the New Jersey Meadowlands Commission and the New Jersey Department of Environmental Protection remain pending
before the Appellate Division.  The Appellate Division, in a decision rendered on November 24, 2004, completed its review of Hartzs Open Public  54


Records Act appeal and the remand proceeding it earlier ordered and upheld the findings of the Law Division in the remand proceeding.  The Supreme Court of New Jersey has declined to review the Appellate Divisions decision.  The NJSEA held further hearings on December 15 and 16, 2004, at Hartzs request to review certain additional facts in support of its bid protest.  The Hearing Officer rendered his Supplemental Report and Recommendation to the NJSEA on March 4, 2005, finding no merit in the protests presented by Hartz and Westfield.  The NJSEA accepted the Supplemental Report and Recommendation on March 30, 2005 and Hartz appealed that decision to the Appellate Division.  Hartz also filed an application with the Appellate Division seeking an Order staying the construction of the Meadowlands Xanadu project, which officially commenced on March 24, 2005, and on April 27, 2005, the Braha
Appellants filed a separate appeal with the Appellate Division also challenging the NJSEAs decision to allow construction to begin and seeking an Order staying the construction of the Meadowlands Xanadu project.  The Appellate Division denied Hartzs application for a stay of construction by Order dated May 5, 2005.  The Appellate Division has not made any determinations with respect to these appeals.  On April 5, 2005 the New York Football Giants filed a Verified Complaint seeking an emergency order halting construction pending a final decision on its contention that construction of the Meadowlands Xanadu project violates its lease agreements with the NJSEA.  The Superior Court of New Jersey, Chancery Division, has scheduled a hearing on that application for August 5, 2005.  On March 18, 2005, the U.S. Army Corps of Engineers issued a permit to the Meadowlands Venture to authorize the filling of 7.69 acres of wetlands and other waters of the United States in connection
with the Meadowlands Xanadu project.  Three separate lawsuits have been filed in the United States District Court for the District of New Jersey, challenging the Corps decision to issue the permit to the Meadowlands Venture and seeking to set aside the permit and remand the matter to the Corps for further proceedings consistent with the National Environmental Policy Act and the Clean Water Act.  The first suit was filed on March 30, 2005, by the Sierra Club, the New Jersey Public Interest Research Group, Citizen Lobby, Inc. and the New Jersey Environmental Federation.  Additional suits were filed on May 16 and May 31, 2005, respectively, by Hartz Mountain Industries, Inc., (together with one of its officers as an individual named plaintiff) and the Borough of Carlstadt.  The Meadowlands Venture is named as a defendant, along with the Corps, in all three of these suits.  On May 3, 2005, the Sierra Club filed a motion for a preliminary injunction to stop certain construction
activities on the project.  The Court denied that motion on July 6, 2005.  The Meadowlands Venture and the Corps have filed motions to dismiss the Hartz complaint for lack of standing.  Similar motions may be filed to dismiss the Carlstadt complaint.  Once these standing issues are resolved, the court will address the merits of the claims through motions for summary judgment.  The New Jersey Builders Association has commenced an action, which is pending in the Appellate Division, alleging that NJSEA has failed to meet a purported obligation to provide affordable housing at the Meadowlands Complex.  The Builders Association has filed an application for injunctive relief seeking to enjoin further construction of the project.  That application is pending.  The Operating Partnership is not a party to that action.  The Operating Partnership believes that the Meadowlands Ventures proposal and the planned project comply with applicable laws, and the Meadowlands Venture intends to continue its vigorous defense of its rights under the executed Redevelopment Agreement and recently executed Ground Lease.  Although there can be no assurance, the Operating Partnership does not believe that the pending lawsuits will have any material affect on its ability to develop the Meadowlands Xanadu project.  The Operating Partnership does not believe that the ultimate resolution of this matter will have a material adverse effect on the Operating Partnership's financial condition taken as a whole.  Inflation  The Operating Partnerships leases with the majority of its tenants provide for recoveries and escalation charges based upon the tenants proportionate share of, and/or increases in, real estate taxes and certain operating costs, which reduce the Operating Partnerships exposure to increases in operating costs resulting from inflation.  DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS  We consider portions of this information, 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  55


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, 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; conditions, including those affecting industries in which our principal tenants compete;
        any failure of the general economy to recover from the current economic downturn;
        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.   56


Item 3.
        Quantitative and Qualitative Disclosures About Market Risk  Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices.  In pursuing its business plan, the primary market risk to which the Operating Partnership is exposed is interest rate risk.  Changes in the general level of interest rates prevailing in the financial markets may affect the spread between the Operating Partnerships yield on invested assets and cost of funds and, in turn, its ability to make distributions or payments to its investors.  Approximately $1.8 billion of the Operating Partnerships long-term debt and other obligations bears interest at fixed rates and therefore the fair value of these instruments is affected by changes in market interest rates.  The following table presents principal cash flows (in thousands) based upon maturity dates of the debt obligations and the related weighted-average interest rates by expected maturity dates for the fixed rate debt.  The interest rates on the variable rate debt as of June 30, 2005 was LIBOR plus 65 basis points.  Maturity DateJune 30, 2005Debtincluding current portion
        7/1/05 12/31/05
        2006
        2007
        2008
        2008
        Thereafter
        Total
        Fair ValueFixed Rate
        $79,783
        $160,955
        $  25,117
        $14,943
        $304,811
        $1,217,660
        $1,803,269
        $1,899,720Average Interest Rate
        6.87%
        7.10%
        5.69%
        4.96%
        7.44%
        5.93%
        6.37%Variable Rate
        
        
        $163,000
        
        
        
        $   163,000
        $   163,000  While the Operating Partnership has not experienced any significant credit losses, in the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in losses to the Operating Partnership which could adversely affect its operating results and liquidity.   Item 4.
        Controls and Procedures  Disclosure Controls and Procedures.  The Operating Partnerships management, with the participation of the Corporations president and chief executive officer and chief financial officer, has evaluated the effectiveness of the Operating Partnerships disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.  Based on such evaluation, the Corporations president and chief executive officer and chief financial officer have concluded that, as of the end of such period, the Operating Partnerships disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Operating Partnership in the reports that it files or submits under the Exchange Act.  Internal Control Over Financial Reporting.  There have not been any changes in the Operating Partnerships internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Operating Partnerships internal control over financial reporting.   57


MACK-CALI REALTY, L.P.  Part II  Other Information   Item 1.
        Legal Proceedings  On February 12, 2003, the New Jersey Sports and Exposition Authority selected The Mills Corporation and the Operating Partnership to redevelop the Continental Airlines Arena site (Arena Site) for mixed uses, including retail.  In March 2003, Hartz Mountain Industries, Inc., or Hartz, filed a lawsuit in the Superior Court of New Jersey, Law Division, for Bergen County, seeking to enjoin the New Jersey Sports and Exposition Authority, or NJSEA, from entering into a contract with Mills and the Operating Partnership for the redevelopment of the Continental Arena site.  In May 2003, the court denied Hartzs request for an injunction and dismissed its suit for failure to exhaust administrative remedies.  In June 2003, the NJSEA held hearings on Hartzs protest, and on a parallel protest filed by another rejected developer, Westfield, Inc. (Westfield).  On September 10, 2003, the
NJSEA ruled against Hartzs and Westfields protests, and on May 14, 2004, the Appellate Division of the Superior Court of New Jersey rejected Hartzs contention that the NJSEA lacks statutory authority to allow retail development of its property.  The Supreme Court of New Jersey has declined to review the Appellate Divisions decision.  Hartz, Westfield and four taxpayers (the Braha Appellants) have also filed appeals from the NJSEAs final decision based on other grounds.  In a separate action commenced in January 2004, Hartz and Westfield also appealed the NJSEAs approval and execution of the formal redevelopment agreement with the Meadowlands Venture.  Several appeals filed by Hartz, Westfield and others, including certain environmental groups, that challenge certain approvals received by the Meadowlands Venture from the NJSEA, the New Jersey Meadowlands Commission and the New Jersey Department of Environmental Protection remain pending
before the Appellate Division.  The Appellate Division, in a decision rendered on November 24, 2004, completed its review of Hartzs Open Public Records Act appeal and the remand proceeding it earlier ordered and upheld the findings of the Law Division in the remand proceeding.  The Supreme Court of New Jersey has declined to review the Appellate Divisions decision.  The NJSEA held further hearings on December 15 and 16, 2004, at Hartzs request to review certain additional facts in support of its bid protest.  The Hearing Officer rendered his Supplemental Report and Recommendation to the NJSEA on March 4, 2005, finding no merit in the protests presented by Hartz and Westfield.  The NJSEA accepted the Supplemental Report and Recommendation on March 30, 2005 and Hartz appealed that decision to the Appellate Division.  Hartz also filed an application with the Appellate Division seeking an Order staying the construction of the Meadowlands Xanadu project, which officially
commenced on March 24, 2005, and on April 27, 2005, the Braha Appellants filed a separate appeal with the Appellate Division also challenging the NJSEAs decision to allow construction to begin and seeking an Order staying the construction of the Meadowlands Xanadu project.  The Appellate Division denied Hartzs application for a stay of construction by Order dated May 5, 2005.  The Appellate Division has not made any determinations with respect to these appeals.  On April 5, 2005 the New York Football Giants filed a Verified Complaint seeking an emergency order halting construction pending a final decision on its contention that construction of the Meadowlands Xanadu project violates its lease agreements with the NJSEA.  The Superior Court of New Jersey, Chancery Division, has scheduled a hearing on that application for August 5, 2005.  On March 18, 2005, the U.S. Army Corps of Engineers issued a permit to the Meadowlands Venture to authorize the filling of 7.69 acres of
wetlands and other waters of the United States in connection with the Meadowlands Xanadu project.  Three separate lawsuits have been filed in the United States District Court for the District of New Jersey, challenging the Corps decision to issue the permit to the Meadowlands Venture and seeking to set aside the permit and remand the matter to the Corps for further proceedings consistent with the National Environmental Policy Act and the Clean Water Act.  The first suit was filed on March 30, 2005, by the Sierra Club, the New Jersey Public Interest Research Group, Citizen Lobby, Inc. and the New Jersey Environmental Federation.  Additional suits were filed on May 16 and May 31, 2005, respectively, by Hartz Mountain Industries, Inc., (together with one of its officers as an individual named plaintiff) and the Borough of Carlstadt.  The Meadowlands Venture is named as a defendant, along with the Corps, in all three of these suits.  On May 3, 2005, the Sierra Club filed a
motion for a preliminary injunction to stop certain construction activities on the project.  The Court denied that motion on July 6, 2005.  The Meadowlands Venture and the Corps have filed motions to dismiss the Hartz complaint for lack of standing.  Similar motions may be filed to dismiss the Carlstadt complaint.  Once these standing issues are resolved, the court will address the merits of the claims through motions for summary judgment.  The New Jersey Builders Association has commenced an action, which is pending in the Appellate Division, alleging that NJSEA has failed to meet a purported obligation to provide affordable housing at the Meadowlands Complex.  The Builders Association  58


has filed an application for injunctive relief seeking to enjoin further construction of the project.  That application is pending.  The Operating Partnership is not a party to that action.  The Operating Partnership believes that the Meadowlands Ventures proposal and the planned project comply with applicable laws, and the Meadowlands Venture intends to continue its vigorous defense of its rights under the executed Redevelopment Agreement and recently executed Ground Lease.  Although there can be no assurance, the Operating Partnership does not believe that the pending lawsuits will have any material affect on its ability to develop the Meadowlands Xanadu project.  The Operating Partnership does not believe that the ultimate resolution of this matter will have a material adverse effect on the Operating Partnership's financial condition taken as a whole.  There are no other material pending legal proceedings, other than ordinary routine litigation incidental to its business, to which the Operating Partnership is a party or to which any of the Properties is subject.  59


MACK-CALI REALTY, L.P.  Part II  Other Information (continued)   Item 2.
        Unregistered Sales of Equity Securities and Use of Proceeds  (a)
        COMMON UNITS During the three months ended June 30, 2005, the Corporation issued 33,600 shares of common stock to holders of common units in the Operating Partnership upon the redemption of such common units in private offerings pursuant to Section 4(2) of the Securities Act.  The holders of the common units were limited partners of the Operating Partnership and accredited investors under Rule 501 of the Securities Act.  The common units were converted into an equal number of shares of common stock.  The Corporation has registered the resale of such shares under the Securities Act.  (b)
        Not Applicable.  (c)
        None.  Item 3.
        Defaults Upon Senior Securities  Not Applicable.  Item 4.
        Submission of Matters to a Vote of Security Holders  On June 23, 2005, the Corporation held its Annual Meeting of Stockholders (the Annual Meeting) to elect four members to the Board of Directors of the Corporation, among other things.  At the Annual Meeting, the Corporations stockholders elected the following four Class II directors to serve until the Corporations annual meeting of Stockholders to be held in 2008: Nathan Gantcher (Number of shares for: 56,658,829, Number of shares against: 442,932), David S. Mack (Number of shares for: 55,314,635, Number of shares against: 1,787,126), William L. Mack (Number of shares for: 56,276,074, Number of shares against: 825,687) and Alan G. Philibosian (Number of shares for: 56,657,023, Number of shares against: 444,738).  Pursuant to an agreement between Martin S. Berger and Robert F. Weinberg and effective immediately following the Annual Meeting, Mr. Weinberg resigned from
the Board of Directors of the Corporation and Mr. Berger assumed Mr. Weinbergs seat on the Board of Directors, having been qualified and appointed by the Board of Directors.  At the Annual Meeting, the Corporations stockholders also voted upon and approved the ratification of the appointment of PricewaterhouseCoopers LLP as the Corporations independent registered public accounting firm for the ensuing year (Number of shares for: 56,031,029, Number of shares against: 1,031,260, Number of shares abstained: 39,472).  In addition, at the Annual Meeting stockholders voted upon and approved the shareholder proposal requesting that the Board of Directors adopt a majority vote standard for elections of persons to the Board of Directors of the Corporation (Number of shares for: 29,593,672, Number of shares against: 19,091,770, Number of shares abstained: 261,692, Number of broker non-votes: 8,154,627).  None.  Item 5.
        Other Information  (a)
        None.  (b)
        None.  Item 6.
        Exhibits  The exhibits required by this item are set forth on the Exhibit Index attached hereto.  60


MACK-CALI REALTY, L.P.  Signatures  Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.    Mack-Cali Realty, L.P.(Registrant)By:
        Mack-Cali Realty Corporationits General PartnerDate:     August 3, 2005
        By:
        /s/ Mitchell E. HershMitchell E. HershPresident andChief Executive OfficerDate:     August 3, 2005
        By:
        /s/ Barry LefkowitzBarry LefkowitzExecutive Vice President andChief Financial Officer   61


Exhibit Index   ExhibitNumber
        
        Exhibit Title3.1
        
        Restated Charter of Mack-Cali Realty Corporation dated June 11, 2001 (filed as Exhibit 3.1 to the Operating Partnerships Form 10-Q dated June 30, 2001 and incorporated herein by reference).3.2
        
        Amended and Restated Bylaws of Mack-Cali Realty Corporation dated June 10, 1999 (filed as Exhibit 3.2 to the Corporations Form 8-K dated June 10, 1999 and incorporated herein by reference).3.3
        
        Amendment No. 1 to the Amended and Restated Bylaws of Mack-Cali Realty Corporation dated March 4, 2003, (filed as Exhibit 3.3 to the Operating Partnerships Form 10-Q dated March 31, 2003 and incorporated herein by reference).3.4
        
        Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated December 11, 1997 (filed as Exhibit 10.110 to the Corporations Form 8-K dated December 11, 1997 and incorporated herein by reference).3.5
        
        Amendment No. 1 to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated August 21, 1998 (filed as Exhibit 3.1 to the Corporations and the Operating Partnerships Registration Statement on Form S-3, Registration No. 333-57103, and incorporated herein by reference).3.6
        
        Second Amendment to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated July 6, 1999 (filed as Exhibit 10.1 to the Operating Partnerships Form 8-K dated July 6, 1999 and incorporated herein by reference).3.7
        
        Third Amendment to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated September 30, 2003 (filed as Exhibit 3.7 to the Operating Partnerships Form 10-Q dated September 30, 2003 and incorporated herein by reference).3.8
        
        Certificate of Designation of Series B Preferred Operating Partnership Units of Limited Partnership Interest of Mack-Cali Realty, L.P. (filed as Exhibit 10.101 to the Corporations Form 8-K dated December 11, 1997 and incorporated herein by reference).3.9
        
        Articles Supplementary for the 8% Series C Cumulative Redeemable Perpetual Preferred Stock dated March 11, 2003 (filed as Exhibit 3.1 to the Corporations Form 8-K dated March 14, 2003 and incorporated herein by reference).3.10
        
        Certificate of Designation for the 8% Series C Cumulative Redeemable Perpetual Preferred Operating Partnership Units dated March 14, 2003 (filed as Exhibit 3.2 to the Operating Partnerships Form 8-K dated March 14, 2003 and incorporated herein by reference).   62


ExhibitNumber
        
        Exhibit Title4.1
        
        Amended and Restated Shareholder Rights Agreement, dated as of March 7, 2000, between Mack-Cali Realty Corporation and EquiServe Trust Company, N.A., as Rights Agent (filed as Exhibit 4.1 to the Operating Partnerships Form 8-K dated March 7, 2000 and incorporated herein by reference).4.2
        
        Amendment No. 1 to the Amended and Restated Shareholder Rights Agreement, dated as of June 27, 2000, by and among Mack-Cali Realty Corporation and EquiServe Trust Company, N.A. (filed as Exhibit 4.1 to the Operating Partnerships Form 8-K dated June 27, 2000 and incorporated herein by reference).4.3
        
        Indenture dated as of March 16, 1999, by and among Mack-Cali Realty, L.P., as issuer, Mack-Cali Realty Corporation, as guarantor, and Wilmington Trust Company, as trustee (filed as Exhibit 4.1 to the Operating Partnerships Form 8-K dated March 16, 1999 and incorporated herein by reference).4.4
        
        Supplemental Indenture No. 1 dated as of March 16, 1999, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnerships Form 8-K dated March 16, 1999 and incorporated herein by reference).4.5
        
        Supplemental Indenture No. 2 dated as of August 2, 1999, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.4 to the Operating Partnerships Form 10-Q dated June 30, 1999 and incorporated herein by reference).4.6
        
        Supplemental Indenture No. 3 dated as of December 21, 2000, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnerships Form 8-K dated December 21, 2000 and incorporated herein by reference).4.7
        
        Supplemental Indenture No. 4 dated as of January 29, 2001, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnerships Form 8-K dated January 29, 2001 and incorporated herein by reference).4.8
        
        Supplemental Indenture No. 5 dated as of December 20, 2002, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnerships Form 8-K dated December 20, 2002 and incorporated herein by reference).4.9
        
        Supplemental Indenture No. 6 dated as of March 14, 2003, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnerships Form 8-K dated March 14, 2003 and incorporated herein by reference).4.10
        
        Supplemental Indenture No. 7 dated as of June 12, 2003, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnerships Form 8-K dated June 12, 2003 and incorporated herein by reference).   63


ExhibitNumber
        
        Exhibit Title4.11
        
        Supplemental Indenture No. 8 dated as of February 9, 2004, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnerships Form 8-K dated February 9, 2004 and incorporated herein by reference).4.12
        
        Supplemental Indenture No. 9 dated as of March 22, 2004, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnerships Form 8-K dated March 22, 2004 and incorporated herein by reference).4.13
        
        Supplemental Indenture No. 10 dated as of January 25, 2005, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnerships Form 8-K dated January 25, 2005 and incorporated herein by reference).4.14
        
        Supplemental Indenture No. 11 dated as of April 15, 2005, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnerships Form 8-K dated April 15, 2005 and incorporated herein by reference).4.15
        
        Deposit Agreement dated March 14, 2003 by and among Mack-Cali Realty Corporation, EquiServe Trust Company, N.A., and the holders from time to time of the Depositary Receipts described therein (filed as Exhibit 4.1 to the Corporations Form 8-K dated March 14, 2003 and incorporated herein by reference).10.1
        
        Amended and Restated Employment Agreement dated as of July 1, 1999 between Mitchell E. Hersh and Mack-Cali Realty Corporation (filed as Exhibit 10.2 to the Operating Partnerships Form 10-Q dated June 30, 1999 and incorporated herein by reference).10.2
        
        Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Timothy M. Jones and Mack-Cali Realty Corporation (filed as Exhibit 10.3 to the Operating Partnerships Form 10-Q dated June 30, 1999 and incorporated herein by reference).10.3
        
        Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Barry Lefkowitz and Mack-Cali Realty Corporation (filed as Exhibit 10.6 to the Operating Partnerships Form 10-Q dated June 30, 1999 and incorporated herein by reference).10.4
        
        Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.7 to the Operating Partnerships Form 10-Q dated June 30, 1999 and incorporated herein by reference).10.5
        
        Employment Agreement dated as of December 5, 2000 between Michael Grossman and Mack-Cali Realty Corporation (filed as Exhibit 10.5 to the Operating Partnerships Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).10.6
        
        Restricted Share Award Agreement dated as of July 1, 1999 between Mitchell E. Hersh and Mack-Cali Realty Corporation (filed as Exhibit 10.8 to the Operating Partnerships Form 10-Q dated June 30, 1999 and incorporated herein by reference).   64


ExhibitNumber
        
        Exhibit Title10.7
        
        Restricted Share Award Agreement dated as of July 1, 1999 between Timothy M. Jones and Mack-Cali Realty Corporation (filed as Exhibit 10.9 to the Operating Partnerships Form 10-Q dated June 30, 1999 and incorporated herein by reference).10.8
        
        Restricted Share Award Agreement dated as of July 1, 1999 between Barry Lefkowitz and Mack-Cali Realty Corporation (filed as Exhibit 10.12 to the Operating Partnerships Form 10-Q dated June 30, 1999 and incorporated herein by reference).10.9
        
        Restricted Share Award Agreement dated as of July 1, 1999 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.13 to the Operating Partnerships Form 10-Q dated June 30, 1999 and incorporated herein by reference).10.10
        
        Restricted Share Award Agreement dated as of March 12, 2001 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.10 to the Operating Partnerships Form 10-Q dated March 31, 2001 and incorporated herein by reference).10.11
        
        Restricted Share Award Agreement dated as of March 12, 2001 between Michael Grossman and Mack-Cali Realty Corporation (filed as Exhibit 10.11 to the Operating Partnerships Form 10-Q dated March 31, 2001 and incorporated herein by reference).10.12
        
        Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.1 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.13
        
        Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.14
        
        First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.3 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.15
        
        Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Timothy M. Jones (filed as Exhibit 10.4 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.16
        
        Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Timothy M. Jones (filed as Exhibit 10.5 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.17
        
        First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Timothy M. Jones (filed as Exhibit 10.6 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).   65


ExhibitNumber
        
        Exhibit Title10.18
        
        Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.7 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.19
        
        Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.8 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.20
        
        First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.9 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.21
        
        Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.10 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.22
        
        Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.11 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.23
        
        First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.12 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.24
        
        First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated March 12, 2001 between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.13 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.25
        
        Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.14 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.26
        
        Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.15 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.27
        
        Restricted Share Award Agreement dated December 6, 1999 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.16 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).   66


ExhibitNumber
        
        Exhibit Title10.28
        
        First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated December 6, 1999 between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.17 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.29
        
        First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated March 12, 2001 between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.18 to the Corporations Form 8-K dated January 2, 2003 and incorporated herein by reference).10.30
        
        Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.1 to the Corporations Form 8-K dated December 2, 2003 and incorporated herein by reference).10.31
        
        Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Corporations Form 8-K dated December 2, 2003 and incorporated herein by reference).10.32
        
        Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Timothy M. Jones (filed as Exhibit 10.3 to the Corporations Form 8-K dated December 2, 2003 and incorporated herein by reference).10.33
        
        Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Timothy M. Jones (filed as Exhibit 10.4 to the Corporations Form 8-K dated December 2, 2003 and incorporated herein by reference).10.34
        
        Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.5 to the Corporations Form 8-K dated December 2, 2003 and incorporated herein by reference).10.35
        
        Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.6 to the Corporations Form 8-K dated December 2, 2003 and incorporated herein by reference).10.36
        
        Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.7 to the Corporations Form 8-K dated December 2, 2003 and incorporated herein by reference).10.37
        
        Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.8 to the Corporations Form 8-K dated December 2, 2003 and incorporated herein by reference).10.38
        
        Restricted Share Award Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Michael Grossman (filed as Exhibit 10.9 to the Corporations Form 8-K dated December 2, 2003 and incorporated herein by reference).   67


ExhibitNumber
        
        Exhibit Title10.39
        
        Tax Gross Up Agreement effective as of December 2, 2003 by and between Mack-Cali Realty Corporation and Michael Grossman (filed as Exhibit 10.10 to the Corporations Form 8-K dated December 2, 2003 and incorporated herein by reference).10.40
        
        Restricted Share Award Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Corporations Form 8-K dated December 7, 2004 and incorporated herein by reference).10.41
        
        Tax Gross Up Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.3 to the Corporations Form 8-K dated December 7, 2004 and incorporated herein by reference).10.42
        
        Restricted Share Award Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.4 to the Corporations Form 8-K dated December 7, 2004 and incorporated herein by reference).10.43
        
        Tax Gross Up Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.5 to the Corporations Form 8-K dated December 7, 2004 and incorporated herein by reference).10.44
        
        Restricted Share Award Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.6 to the Corporations Form 8-K dated December 7, 2004 and incorporated herein by reference).10.45
        
        Tax Gross Up Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.7 to the Corporations Form 8-K dated December 7, 2004 and incorporated herein by reference).10.46
        
        Restricted Share Award Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.8 to the Corporations Form 8-K dated December 7, 2004 and incorporated herein by reference).10.47
        
        Tax Gross Up Agreement effective December 7, 2004 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.9 to the Corporations Form 8-K dated December 7, 2004 and incorporated herein by reference).10.48
        
        Amended and Restated Revolving Credit Agreement dated as of September 27, 2002, among Mack-Cali Realty, L.P. and JPMorgan Chase Bank, Fleet National Bank and Other Lenders Which May Become Parties Thereto with JPMorgan Chase Bank, as administrative agent, swing lender and fronting bank, Fleet National Bank and Commerzbank AG, New York and Grand Cayman branches as syndication agents, Bank of America, N.A. and Wells Fargo Bank, National Association, as documentation agents, and J.P. Morgan Securities Inc. and Fleet Securities, Inc, as arrangers (filed as Exhibit 10.1 to the Operating Partnerships Form 8-K dated September 27, 2002 and incorporated herein by reference).   68


ExhibitNumber
        
        Exhibit Title10.49
        
        Second Amended and Restated Revolving Credit Agreement among Mack-Cali Realty, L.P., JPMorgan Chase Bank, N.A., Bank of America, N.A., and other lending institutions that are or may become a party to the Second Amended and Restated Revolving Credit Agreement dated as of November 23, 2004 (filed as Exhibit 10.1 to the Operating Partnerships Form 8-K dated November 23, 2004 and incorporated herein by reference).10.50
        
        Amended and Restated Master Loan Agreement dated as of November 12, 2004 among Mack-Cali Realty, L.P., and Affiliates of Mack-Cali Realty Corporation and Mack-Cali Realty, L.P., as Borrowers, Mack-Cali Realty Corporation and Mack-Cali Realty L.P., as Guarantors and The Prudential Insurance Company of America, as Lender (filed as Exhibit 10.1 to the Operating Partnerships Form 8-K dated November 12, 2004 and incorporated herein by reference).10.51
        
        Contribution and Exchange Agreement among The MK Contributors, The MK Entities, The Patriot Contributors, The Patriot Entities, Patriot American Management and Leasing Corp., Cali Realty, L.P. and Cali Realty Corporation, dated September 18, 1997 (filed as Exhibit 10.98 to the Corporations Form 8-K dated September 19, 1997 and incorporated herein by reference).10.52
        
        First Amendment to Contribution and Exchange Agreement, dated as of December 11, 1997, by and among the Operating Partnership, the Corporation and the Mack Group (filed as Exhibit 10.99 to the Corporations Form 8-K dated December 11, 1997 and incorporated herein by reference).10.53
        
        Employee Stock Option Plan of Mack-Cali Realty Corporation (filed as Exhibit 10.1 to the Corporations Post-Effective Amendment No. 1 to Form S-8, Registration No. 333-44443, and incorporated herein by reference).10.54
        
        Director Stock Option Plan of Mack-Cali Realty Corporation (filed as Exhibit 10.2 to the Corporations Post-Effective Amendment No. 1 to Form S-8, Registration No. 333-44443, and incorporated herein by reference).10.55
        
        2000 Employee Stock Option Plan (filed as Exhibit 10.1 to the Corporations Registration Statement on Form S-8, Registration No. 333-52478, and incorporated herein by reference), as amended by the First Amendment to the 2000 Employee Stock Option Plan (filed as Exhibit 10.17 to the Corporations Form 10-Q dated June 30, 2002 and incorporated herein by reference).10.56
        
        Amended and Restated 2000 Director Stock Option Plan (filed as Exhibit 10.2 to the Corporations Post-Effective Amendment No. 1 to Registration Statement on Form S-8, Registration No. 333-100244, and incorporated herein by reference).10.57
        
        Mack-Cali Realty Corporation 2004 Incentive Stock Plan (filed as Exhibit 10.1 to the Corporations Registration Statement on Form S-8, Registration No. 333-116437, and incorporated herein by reference).   69


ExhibitNumber
        
        Exhibit Title10.58
        
        Deferred Compensation Plan for Directors (filed as Exhibit 10.1 to the Corporations Registration Statement on Form S-8, Registration No. 333-80081, and incorporated herein by reference).10.59
        
        Form of Indemnification Agreement by and between Mack-Cali Realty Corporation and each of William L. Mack, John J. Cali, Mitchell E. Hersh, David S. Mack, John R. Cali, Alan S. Bernikow, Brendan T. Byrne, Martin D. Gruss, Nathan Gantcher, Vincent Tese, Roy J. Zuckerberg, Alan G. Philibosian, Irvin D. Reid, Robert F. Weinberg, Timothy M. Jones, Barry Lefkowitz, Roger W. Thomas, Michael A. Grossman, James Clabby, Anthony Krug, Dean Cingolani, Anthony DeCaro Jr., Mark Durno, William Fitzpatrick, John Kropke, Nicholas Mitarotonda, Jr., Michael Nevins, Virginia Sobol, Albert Spring and Daniel Wagner (filed as Exhibit 10.28 to the Operating Partnerships Form 10-Q dated September 30, 2002 and incorporated herein by reference).10.60
        
        Indemnification Agreement dated October 22, 2002 by and between Mack-Cali Realty Corporation and John Crandall (filed as Exhibit 10.29 to the Operating Partnerships Form 10-Q dated September 30, 2002 and incorporated herein by reference).10.61
        
        Second Amendment to Contribution and Exchange Agreement, dated as of June 27, 2000, between RMC Development Company, LLC f/k/a Robert Martin Company, LLC, Robert Martin Eastview North Company, L.P., the Corporation and the Operating Partnership (filed as Exhibit 10.44 to the Operating Partnerships Form 10-K dated December 31, 2002 and incorporated herein by reference.)10.62
        
        Limited Partnership Agreement of Meadowlands Mills/Mack-Cali Limited Partnership by and between Meadowlands Mills Limited Partnership, Mack-Cali Meadowlands Entertainment L.L.C. and Mack-Cali Meadowlands Special L.L.C. dated November 25, 2003 (filed as Exhibit 10.1 to the Corporations Form 8-K dated December 3, 2003 and incorporated herein by reference).10.63
        
        Redevelopment Agreement by and between the New Jersey Sports and Exposition Authority and Meadowlands Mills/Mack-Cali Limited Partnership dated December 3, 2003 (filed as Exhibit 10.2 to the Corporations Form 8-K dated December 3, 2003 and incorporated herein by reference).10.64
        
        First Amendment to Redevelopment Agreement by and between the New Jersey Sports and Exposition Authority and Meadowlands Mills/Mack-Cali Limited Partnership dated October 5, 2004 (filed as Exhibit 10.54 to the Operating Partnerships Form 10-Q dated September 30, 2004 and incorporated herein by reference).10.65
        
        Letter Agreement by and between Mack-Cali Realty Corporation and The Mills Corporation dated October 5, 2004 (filed as Exhibit 10.55 to the Operating Partnerships Form 10-Q dated September 30, 2004 and incorporated herein by reference).10.66*
        
        First Amendment to Limited Partnership Agreement of Meadowlands Mills/Mack-Cali Limited Partnership by and between Meadowlands Mills Limited Partnership, Mack-Cali Meadowlands Entertainment L.L.C. and Mack-Cali Meadowlands Special L.L.C. dated as of June 30, 2005.   70


ExhibitNumber
        
        Exhibit Title31.1*
        
        Certification of the Corporations President and Chief Executive Officer, Mitchell E. Hersh, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
        
        Certification of the Corporations Chief Financial Officer, Barry Lefkowitz, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
        
        Certification of the Corporations President and Chief Executive Officer, Mitchell E. Hersh, and the Corporations Chief Financial Officer, Barry Lefkowitz, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  ______________ *filed herewith   71