**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549**

##### **FORM10-Q**

**(Mark One)**

x                               **QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period endedSeptember 30, 2006**

### **or**

o                                  **TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For thetransition periodfrom                                           to                                           **

**CommissionFile Number :      333-57103**

**Mack-CaliRealty, L.P.**

(Exact name of registrantas specified in its charter)

 

| **Delaware**                                                    | ** ** | **22-3315804**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |       | (I.R.S. Employer  Identification No.) |
|                                                            |       |                                  |
| **343  Thornall Street, Edison, New Jersey**                    | ** ** | **08837-2206**                        |
| (Address of  principal executive offices)                       |       | (Zip Code)                            |

 

**(732) 590-1000**

(Registrant’stelephone number, including area code)

**FormerAddress: 11 Commerce Drive Cranford, New Jersey 07016-3501**

(Former name,former address and former fiscal year, if changed since last report)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast ninety (90) days.  YES x NO o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act.  (CheckOne):

Large accelerated filer x  Acceleratedfiler o    Non-accelerated filer o

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). YES o  NO x

 

----

**MACK-CALIREALTY, L.P.**

**FORM 10-Q**

**INDEX**
| **Part I**        | **Financial  Information** |                                                                                                           |
|-------------------|----------------------------|----------------------------------------------------------------------------------------------------------------|
|              |                       |                                                                                                           |   |
|              | Item 1.                    | *Financial Statements (unaudited):*                                                                            |   |
|              |                       | * *                                                                                                       |   |
|              |                       | Consolidated Balance Sheets as of  September 30, 2006 and December 31, 2005                                    |   |
|              |                       |                                                                                                           |   |
|              |                       | Consolidated Statements of  Operations for the three and nine month periods ended September 30, 2006 and  2005 |   |
|              |                       |                                                                                                           |   |
|              |                       | Consolidated Statement of  Changes in Partners’ Capital for the nine months ended September 30, 2006      |   |
|              |                       |                                                                                                           |   |
|              |                       | Consolidated Statements of  Cash Flows for the nine months ended September 30, 2006 and 2005                   |   |
|              |                       |                                                                                                           |   |
|              |                       | Notes to Consolidated  Financial Statements                                                                    |   |
|              |                       |                                                                                                           |   |
|              | Item  2.                   | Management’s Discussion and  Analysis of Financial Condition and Results of Operations                    |   |
|              |                       |                                                                                                           |   |
|              | Item  3.                   | Quantitative and Qualitative  Disclosures About Market Risk                                                    |   |
|              |                       |                                                                                                           |   |
|              | Item  4.                   | Controls and Procedures                                                                                        |   |
|              |                       |                                                                                                           |   |
| **Part II**       | **Other  Information**     |                                                                                                           |
| ** **        | ** **                 | ** **                                                                                                     |   |
|              | Item 1.                    | Legal  Proceedings                                                                                             |   |
|              |                       |                                                                                                           |   |
|              | Item 1A.                   | Risk Factors                                                                                                   |   |
|              |                       |                                                                                                           |   |
|              | Item  2.                   | Unregistered  Sales of Equity Securities and Use of Proceeds                                                   |   |
|              |                       |                                                                                                           |   |
|              | Item  3.                   | Defaults  Upon Senior Securities                                                                               |   |
|              |                       |                                                                                                           |   |
|              | Item  4.                   | Submission  of Matters to a Vote of Security Holders                                                           |   |
|              |                       |                                                                                                           |   |
|              | Item 5.                    | Other  Information                                                                                             |   |
|              |                       |                                                                                                           |   |
|              | Item 6.                    | Exhibits                                                                                                       |   |
|              |                       |                                                                                                           |   |
| **Signatures**    |                       |
| ** **        |                       |
| **Exhibit Index** |                       |

 

2

----

**MACK-CALI REALTY, L.P.**

**Part I – Financial Information**

**Item 1.**        **Financial Statements**

The accompanyingunaudited consolidated balance sheets, statements of operations, of changes inpartners’ capital, and of cash flows and related notes thereto, have been preparedin accordance with generally accepted accounting principles (“GAAP”) forinterim financial information and in conjunction with the rules and regulationsof the Securities and Exchange Commission (“SEC”).  Accordingly, they do not include all of the disclosuresrequired by GAAP for complete financial statements.  The financial statements reflect alladjustments consisting only of normal, recurring adjustments, which are, in theopinion of management, necessary for a fair presentation for the interim periods.

The aforementionedfinancial statements should be read in conjunction with the notes to theaforementioned financial statements and Management’s Discussion and Analysis ofFinancial Condition and Results of Operations and the financial statements andnotes thereto included in Mack-Cali Realty, L.P.’s Annual Report on Form 10-Kfor the fiscal year ended December 31, 2005.

The results of operationsfor the three and nine month periods ended September 30, 2006 are notnecessarily indicative of the results to be expected for the entire fiscal yearor any other period.

3

----

**MACK-CALIREALTY, L.P. AND SUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS***(in thousands, except per unit amounts) (unaudited)*
| ** **                                                                        | ** ** | **September 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|-----------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                        |       |                         |       |                        |       |
| Rental property                                                                   |       |                         |       |                        |       |
| Land and  leasehold interests                                                     |       | $                            | 656,810    |                        | $          | 637,653 |   |
| Buildings and  improvements                                                       |       | 3,543,937                    |       | 3,539,003                   |       |
| Tenant  improvements                                                              |       | 332,775                      |       | 307,664                     |       |
| Furniture,  fixtures and equipment                                                |       | 7,812                        |       | 7,432                       |       |
|                                                                              |       | 4,541,334                    |       | 4,491,752                   |       |
| Less –  accumulated depreciation and amortization                            |       | (763,053                     | )          | (722,980                    | )          |
|                                                                              |       | 3,778,281                    |       | 3,768,772                   |       |
| Rental property held  for sale, net                                               |       | 247,207                      |       | —                      |       |
| Net investment  in rental property                                                |       | 4,025,488                    |       | 3,768,772                   |       |
| Cash and cash  equivalents                                                        |       | 20,780                       |       | 60,397                      |       |
| Marketable securities  available for sale at fair value                           |       | —                       |       | 50,847                      |       |
| Investments in  unconsolidated joint ventures                                     |       | 205,773                      |       | 62,138                      |       |
| Unbilled rents  receivable, net                                                   |       | 107,757                      |       | 92,692                      |       |
| Deferred charges and  other assets, net                                           |       | 250,884                      |       | 197,634                     |       |
| Restricted cash                                                                   |       | 15,981                       |       | 9,221                       |       |
| Accounts receivable,  net of allowance for doubtful accounts of $1,905 and $1,088 |       | 42,098                       |       | 5,801                       |       |
|                                                                              |       |                         |       |                        |       |
| Total assets                                                                      |       | $                            | 4,668,761  |                        | $          | 4,247,502 |   |
|                                                                              |       |                         |       |                        |       |
| **LIABILITIES AND PARTNERS’  CAPITAL**                                       |       |                         |       |                        |       |
| Senior unsecured notes                                                            |       | $                            | 1,631,216  |                        | $          | 1,430,509 |   |
| Revolving credit  facility                                                        |       | 412,000                      |       | 227,000                     |       |
| Mortgages, loans  payable and other obligations                                   |       | 402,621                      |       | 468,672                     |       |
| Distributions payable                                                             |       | 50,521                       |       | 48,178                      |       |
| Accounts payable,  accrued expenses and other liabilities                         |       | 133,371                      |       | 85,481                      |       |
| Rents received in  advance and security deposits                                  |       | 49,519                       |       | 47,685                      |       |
| Accrued interest  payable                                                         |       | 19,197                       |       | 27,871                      |       |
| Total liabilities                                                                 |       | 2,698,445                    |       | 2,335,396                   |       |
|                                                                              |       |                         |       |                        |       |
| Minority interest in  consolidated joint ventures                                 |       | 2,104                        |       | —                      |       |
|                                                                              |       |                         |       |                        |       |
| Commitments and  contingencies                                                    |       |                         |       |                        |       |
|                                                                              |       |                         |       |                        |       |
| **Partners’ capital:**                                                       |       |                         |       |                        |       |
| General Partner, 10,000  and 10,000 preferred units outstanding                   |       | 24,836                       |       | 24,836                      |       |
| General Partner,  62,551,206 and 62,019,646 common units outstanding              |       | 1,462,425                    |       | 1,487,241                   |       |
| Limited partners,  15,595,825 and 13,650,439 common units outstanding             |       | 480,951                      |       | 400,819                     |       |
| Accumulated other  comprehensive loss                                             |       | —                       |       | (790                        | )          |
| Total partners’  capital                                                     |       | 1,968,212                    |       | 1,912,106                   |       |
|                                                                              |       |                         |       |                        |       |
| Total liabilities and  partners’ capital                                     |       | $                            | 4,668,761  |                        | $          | 4,247,502 |   |

 

*Theaccompanying notes are an integral part of these consolidated financialstatements.*

4

----

**MACK-CALIREALTY, L.P. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS***(inthousands, except per unit amounts) (unaudited)*
| ** **                                                                            | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|---------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                            | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                                            | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| **REVENUES**                                                                          |       |                             |       |                            |       |   |   |   |   |
| Base rents                                                                            |       | $                                | 140,356    |                            | $          | 127,770 |   | $ | 406,989 |   | $ | 380,284 |   |
| Escalations and  recoveries from tenants                                              |       | 25,045                           |       | 21,163                          |       | 69,862 |   | 57,128 |   |
| Construction services                                                                 |       | 23,236                           |       | —                          |       | 36,286 |   | — |   |
| Real estate services                                                                  |       | 10,653                           |       | 636                             |       | 19,015 |   | 1,853 |   |
| Other income                                                                          |       | 3,927                            |       | 4,583                           |       | 9,985 |   | 7,517 |   |
| Total revenues                                                                        |       | 203,217                          |       | 154,152                         |       | 542,137 |   | 446,782 |   |
|                                                                                  |       |                             |       |                            |       |   |   |   |   |
| **EXPENSES**                                                                          |       |                             |       |                            |       |   |   |   |   |
| Real estate taxes                                                                     |       | 22,652                           |       | 19,885                          |       | 64,891 |   | 56,890 |   |
| Utilities                                                                             |       | 18,766                           |       | 15,867                          |       | 46,789 |   | 38,648 |   |
| Operating services                                                                    |       | 23,534                           |       | 19,544                          |       | 66,024 |   | 59,428 |   |
| Direct construction  costs                                                            |       | 22,568                           |       | —                          |       | 35,148 |   | — |   |
| Real estate services  salaries, wages and other costs                                 |       | 6,686                            |       | —                          |       | 10,820 |   | — |   |
| General and  administrative                                                           |       | 12,173                           |       | 7,952                           |       | 32,796 |   | 23,449 |   |
| Depreciation and  amortization                                                        |       | 40,132                           |       | 37,838                          |       | 116,980 |   | 106,067 |   |
| Total expenses                                                                        |       | 146,511                          |       | 101,086                         |       | 373,448 |   | 284,482 |   |
| Operating Income                                                                      |       | 56,706                           |       | 53,066                          |       | 168,689 |   | 162,300 |   |
| ** **                                                                            |       |                             |       |                            |       |   |   |   |   |
| **OTHER (EXPENSE) INCOME**                                                            |       |                             |       |                            |       |   |   |   |   |
| Interest expense                                                                      |       | (35,815                          | )          | (30,159                         | )          | (100,620 | ) | (88,919 | ) |
| Interest and other  investment income                                                 |       | 514                              |       | 308                             |       | 2,359 |   | 493 |   |
| Equity in earnings  (loss) of unconsolidated joint ventures                           |       | (4,757                           | )          | 322                             |       | (5,356 | ) | 552 |   |
| Minority interest in  consolidated joint ventures                                     |       | 113                              |       | —                          |       | 143 |   | (74 | ) |
| Gain on sale of  investment in marketable securities                                  |       | —                           |       | —                          |       | 15,060 |   | — |   |
| Gain on sale of  investment in unconsolidated joint ventures                          |       | —                           |       | —                          |       | — |   | 35 |   |
| Total other (expense)  income                                                         |       | (39,945                          | )          | (29,529                         | )          | (88,414 | ) | (87,913 | ) |
| Income from continuing  operations                                                    |       | 16,761                           |       | 23,537                          |       | 80,275 |   | 74,387 |   |
| Discontinued  operations:                                                             |       |                             |       |                            |       |   |   |   |   |
| Income from  discontinued operations                                                  |       | 3,769                            |       | 2,167                           |       | 9,798 |   | 14,557 |   |
| Realized gains  (losses) and unrealized losses on disposition of rental property, net |       | —                           |       | —                          |       | 4,905 |   | 11,078 |   |
| Total discontinued  operations, net                                                   |       | 3,769                            |       | 2,167                           |       | 14,703 |   | 25,635 |   |
| Net income                                                                            |       | 20,530                           |       | 25,704                          |       | 94,978 |   | 100,022 |   |
| Preferred unit  distributions                                                         |       | (500                             | )          | (500                            | )          | (1,500 | ) | (5,409 | ) |
| Net income available to  common unitholders                                           |       | $                                | 20,030     |                            | $          | 25,204 |   | $ | 93,478 |   | $ | 94,613 |   |
|                                                                                  |       |                             |       |                            |       |   |   |   |   |
| **Basic earnings per common unit:**                                                   |       |                             |       |                            |       |   |   |   |   |
| Income from continuing  operations                                                    |       | $                                | 0.21       |                            | $          | 0.30 |   | $ | 1.02 |   | $ | 0.94 |   |
| Discontinued operations                                                               |       | 0.05                             |       | 0.03                            |       | 0.19 |   | 0.35 |   |
| Net income available to  common unitholders                                           |       | $                                | 0.26       |                            | $          | 0.33 |   | $ | 1.21 |   | $ | 1.29 |   |
|                                                                                  |       |                             |       |                            |       |   |   |   |   |
| **Diluted earnings per common  unit:**                                                |       |                             |       |                            |       |   |   |   |   |
| Income from continuing  operations                                                    |       | $                                | 0.21       |                            | $          | 0.30 |   | $ | 1.01 |   | $ | 0.94 |   |
| Discontinued operations                                                               |       | 0.05                             |       | 0.03                            |       | 0.19 |   | 0.35 |   |
| Net income available to  common unitholders                                           |       | $                                | 0.26       |                            | $          | 0.33 |   | $ | 1.20 |   | $ | 1.29 |   |
|                                                                                  |       |                             |       |                            |       |   |   |   |   |
| Distributions declared  per common unit                                               |       | $                                | 0.64       |                            | $          | 0.63 |   | $ | 1.90 |   | $ | 1.89 |   |
|                                                                                  |       |                             |       |                            |       |   |   |   |   |
| Basic weighted average  units outstanding                                             |       | 77,945                           |       | 75,364                          |       | 77,354 |   | 73,161 |   |
|                                                                                  |       |                             |       |                            |       |   |   |   |   |
| Diluted weighted average units outstanding                                            |       | 78,258                           |       | 75,760                          |       | 77,664 |   | 73,585 |   |

 

*The accompanying notes are an integral part ofthese consolidated financial statements.*

5

----

**MACK-CALIREALTY, L.P. AND SUBSIDIARIES**

### **CONSOLIDATEDSTATEMENT OF CHANGES IN PARTNERS’ CAPITAL***(inthousands) (unaudited)*

| ** **                                                                               | ** ** | **General**   | ** ** | **General** | ** ** | **Limited**  | ** ** | **General**     | ** ** | **General**     | ** ** | **Limited**     | ** ** | **Accumulated**   | ** ** | ** **         | ** ** | ** **        | ** ** |
|------------------------------------------------------------------------------------------|------------|---------------|------------|-------------|------------|--------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|-------------------|------------|--------------------|------------|-------------------|------------|
| ** **                                                                               | ** ** | **Partner**   | ** ** | **Partner** | ** ** | **Partners** | ** ** | **Partner**     | ** ** | **Partner**     | ** ** | **Partners**    | ** ** | **Other**         | ** ** | **Total**          | ** ** | ** **        | ** ** |
| ** **                                                                               | ** ** | **Preferred** | ** ** | **Common**  | ** ** | **Common**   | ** ** | **Preferred**   | ** ** | **Common**      | ** ** | **Common**      | ** ** | **Comprehensive** | ** ** | **Partners’** | ** ** | **Comprehensive** | ** ** |
| ** **                                                                               | ** ** | **Units**     | ** ** | **Units**   | ** ** | **Units**    | ** ** | **Unitholders** | ** ** | **Unitholders** | ** ** | **Unitholders** | ** ** | **Income/(Loss)** | ** ** | **Capital**        | ** ** | **Income**        | ** ** |
| Balance at January 1,  2006                                                              |       | 10            |       | 62,020      |       | 13,650       |       | $               | 24,836     |            | $          | 1,487,241       |       | $                 | 400,819    |               | $          | (790              | )          | $ | 1,912,106 |   | — |   |
| Net  income                                                                              |       | —        |       | —      |       | —       |       | 1,500           |       | 75,242          |       | 18,236          |       | —            |       | 94,978             |       | $                 | 94,978     |   |
| Distributions                                                                            |       | —        |       | —      |       | —       |       | (1,500          | )          | (118,590        | )          | (28,766         | )          | —            |       | (148,856           | )          | —            |       |
| Redemption  of limited partners common units for shares of common stock             |       | —        |       | 222         |       | (222         | )          | —          |       | 6,855           |       | (6,855          | )          | —            |       | —             |       | —            |       |
| Issuance  of limited partner common units                                                |       | —        |       | —      |       | 2,167        |       | —          |       | —          |       | 97,517          |       | —            |       | 97,517             |       | —-           |       |
| Units  issued under Dividend Reinvestment and Stock Purchase Plan                        |       | —        |       | 4           |       | —       |       | —          |       | 184             |       | —          |       | —            |       | 184                |       | —            |       |
| Contributions  –  proceeds from stock options exercised                        |       | —        |       | 302         |       | —       |       | —          |       | 8,839           |       | —          |       | —            |       | 8,839              |       | -                 |       |
| Stock  options expense                                                                   |       | —        |       | —      |       | —       |       | —          |       | 212             |       | —          |       | —            |       | 212                |       | —            |       |
| Comprehensive  Gain: Unrealized holding gain on marketable securities available for sale |       | —        |       | —      |       | —       |       | —          |       | —          |       | —          |       | 15,850            |       | 15,850             |       | 15,850            |       |
| Directors  Deferred comp. plan                                                           |       | —        |       | —      |       | —       |       | —          |       | 226             |       | —          |       | —            |       | 226                |       | —            |       |
| Issuance  of restricted stock awards                                                     |       | —        |       | 10          |       | —       |       | —          |       | —          |       | —          |       | —            |       | —             |       | —            |       |
| Amortization  of stock comp.                                                             |       | —        |       | —      |       | —       |       | —          |       | 2,216           |       | —          |       | —            |       | 2,216              |       | —            |       |
| Cancellation  of restricted stock                                                        |       | —        |       | (7          | )          | —       |       | —          |       | —          |       | —          |       | —            |       | —             |       | —            |       |
| Reclassification  adjustment for realized gain included in net income          |       | —        |       | —      |       | —       |       | —          |       | —          |       | —          |       | (15,060           | )          | (15,060            | )          | (15,060           | )          |
|                                                                                     |       |          |       |        |       |         |       |            |       |            |       |            |       |              |       |               |       |              |       |
| Balance at September 30,  2006                                                      |       | 10            |       | 62,551      |       | 15,595       |       | $               | 24,836     |            | $          | 1,462,425       |       | $                 | 480,951    |               | $          | —            |       | $ | 1,968,212 |   | $ | 95,768 |   |

 

*Theaccompanying notes are an integral part of these consolidated financialstatements.*

6

----

**MACK-CALIREALTY, L.P. AND SUBSIDIARIES**

### **CONSOLIDATEDSTATEMENTS OF CASH FLOWS***(inthousands) (unaudited)*

| ** **                                                                         | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| **CASH FLOWS FROM OPERATING  ACTIVITIES**                                          |       |                                                |       |   |   |
| Net income                                                                         |       | $                                                   | 94,978     |   | $ | 100,022 |   |
| Adjustments to reconcile  net income to net cash provided by operating activities: |       |                                                |       |   |   |
| Depreciation and  amortization                                                     |       | 116,980                                             |       | 106,067 |   |
| Depreciation and  amortization on discontinued operations                          |       | 7,088                                               |       | 9,420 |   |
| Stock options  expense                                                             |       | 212                                                 |       | 411 |   |
| Amortization of  stock compensation                                                |       | 2,216                                               |       | 2,285 |   |
| Amortization of  deferred financing costs and debt discount                        |       | 2,171                                               |       | 2,556 |   |
| Equity in (earnings)  losses of unconsolidated joint ventures, net                 |       | 5,356                                               |       | (552 | ) |
| Gain on sale of  investment in unconsolidated joint venture                        |       | —                                              |       | (35 | ) |
| Gain on sale of  marketable securities available for sale                          |       | (15,060                                             | )          | — |   |
| Realized gains and  unrealized losses on disposition of rental property            |       | (4,905                                              | )          | (11,078 | ) |
| Minority  interest in consolidated joint venture                                   |       | (143                                                | )          | 74 |   |
| Changes in operating  assets and liabilities:                                      |       |                                                |       |   |   |
| Increase in  unbilled rents receivable, net                                        |       | (15,190                                             | )          | (9,185 | ) |
| Increase in  deferred charges and other assets, net                                |       | (41,367                                             | )          | (38,105 | ) |
| Increase in  accounts receivable, net                                              |       | (11,297                                             | )          | (1,537 | ) |
| Increase in  accounts payable, accrued expenses and other liabilities              |       | 22,786                                              |       | 24,449 |   |
| Increase  (decrease) in rents received in advance and security deposits            |       | 1,834                                               |       | (92 | ) |
| Decrease in  accrued interest payable                                              |       | (8,674                                              | )          | (6,582 | ) |
|                                                                               |       |                                                |       |   |   |
| Net cash  provided by operating activities                                         |       | $                                                   | 156,985    |   | $ | 178,118 |   |
|                                                                               |       |                                                |       |   |   |
| **CASH FLOWS FROM INVESTING  ACTIVITIES**                                          |       |                                                |       |   |   |
| Additions to rental  property and related intangibles                              |       | $                                                   | (192,137   | ) | $ | (417,305 | ) |
| Repayments of notes  receivable                                                    |       | 113                                                 |       | 47 |   |
| Investment in  unconsolidated joint ventures                                       |       | (148,991                                            | )          | (17,250 | ) |
| Purchase of marketable  securities available for sale                              |       | (11,912                                             | )          | — |   |
| Proceeds 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                                            |       | 18,912                                              |       | 97,414 |   |
| Proceeds from sale of  marketable securities available for sale                    |       | 78,609                                              |       | — |   |
| (Increase) decrease in  restricted cash                                            |       | (6,760                                              | )          | 1,179 |   |
|                                                                               |       |                                                |       |   |   |
| Net cash used in  investing activities                                             |       | $                                                   | (262,166   | ) | $ | (340,952 | ) |
|                                                                               |       |                                                |       |   |   |
| **CASH FLOWS FROM FINANCING  ACTIVITIES**                                          |       |                                                |       |   |   |
| Proceeds from senior  unsecured notes                                              |       | $                                                   | 199,914    |   | $ | 298,804 |   |
| Borrowings from  revolving credit facility                                         |       | 660,250                                             |       | 916,460 |   |
| Repayment of revolving  credit facility                                            |       | (500,180                                            | )          | (796,460 | ) |
| Repayment of mortgages,  loans payable and other obligations                       |       | (156,361                                            | )          | (159,192 | ) |
| Payment of financing  costs                                                        |       | (384                                                | )          | (4,176 | ) |
| Proceeds from mortgages                                                            |       | —                                              |       | 32,926 |   |
| Proceeds from stock  options exercised                                             |       | 8,839                                               |       | 15,545 |   |
| Payment of  distributions                                                          |       | (146,514                                            | )          | (143,772 | ) |
|                                                                               |       |                                                |       |   |   |
| Net cash  provided by financing activities                                         |       | $                                                   | 65,564     |   | $ | 160,135 |   |
|                                                                               |       |                                                |       |   |   |
| Net decrease in cash  and cash equivalents                                         |       | $                                                   | (39,617    | ) | $ | (2,699 | ) |
| Cash and cash  equivalents, beginning of period                                    |       | 60,397                                              |       | 12,270 |   |
|                                                                               |       |                                                |       |   |   |
| Cash and cash  equivalents, end of period                                          |       | $                                                   | 20,780     |   | $ | 9,571 |   |

 

*The accompanyingnotes are an integral part of these consolidated financial statements.*

7

----

**MACK-CALI REALTY, L.P. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS***(unaudited)*

**1.****              ORGANIZATION ANDBASIS OF PRESENTATION**

**ORGANIZATION**

Mack-Cali Realty,L.P., a Delaware limited partnership, together with its subsidiaries (the “OperatingPartnership”), was formed on May 31, 1994 to conduct the business of leasing,management, acquisition, development, construction and tenant-related servicesfor its sole general partner, Mack-Cali Realty Corporation and its subsidiaries(the “Corporation” or “General Partner”). The Operating Partnership, through its operating divisions andsubsidiaries, including the Mack-Cali property-owning partnerships and limitedliability companies (collectively, the “Property Partnerships”) is the entitythrough 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 OperatingPartnership as its sole general partner, and owned a 80.0 percent and 82.0percent common unit interest in the Operating Partnership as of September 30,2006 and December 31, 2005, respectively.

The General Partner’s business is the ownership ofinterests in and operation of the Operating Partnership, and all of the GeneralPartner’s expenses are incurred for the benefit of the OperatingPartnership.  The General Partner isreimbursed by the Operating Partnership for all expenses it incurs relating tothe ownership and operation of the Operating Partnership.

As of September30, 2006, the Operating Partnership owned or had interests in 321 propertiesplus developable land (collectively, the “Properties”).  The Properties aggregate approximately 36.1million square feet, which are comprised of 214 office buildings and 96office/flex buildings, totaling approximately 35.7 million square feet (whichinclude 43 office buildings and one office/flex building aggregating 5.3million square feet owned by unconsolidated joint ventures in which theOperating Partnership has investment interests), six industrial/warehousebuildings totaling approximately 387,400 square feet, two retail propertiestotaling approximately 17,300 square feet, a hotel (which is owned by anunconsolidated joint venture in which the Operating Partnership has aninvestment interest) and two parcels of land leased to others.  The Properties are located in nine states,primarily in the Northeast, plus the District of Columbia.

### **BASISOF PRESENTATION**

The accompanyingconsolidated financial statements include all accounts of the OperatingPartnership, its majority-owned and/or controlled subsidiaries and variableinterest entities for which the Operating Partnership has determined itself tobe the primary beneficiary, if any.  SeeNote 2: Significant Accounting Policies — Investments in Unconsolidated JointVentures, Net for the Operating Partnership’s treatment of unconsolidated jointventure interests.  Intercompany accountsand transactions have been eliminated.

The preparation offinancial statements in conformity with generally accepted accountingprinciples (“GAAP”) requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

**2.****              SIGNIFICANTACCOUNTING POLICIES**
| ***RentalProperty*** | *** *** | 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 $173.6 million and $118.8 million  (including land of $61.8 million and $58.4 million) as of September 30, 2006  and December 31, 2005, 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 term**                             | ** ** |
|------------------------------------|------------|----------------------------------------------------------------|------------|
| Buildings and  improvements        |       | 5 to 40 years                                                  |       |
| Tenant  improvements               |       | The shorter of the term  of the   related lease or useful life |       |
| Furniture, fixtures and  equipment |       | 5 to 10 years                                                  |       |

 
|              | *** *** | Upon acquisition  of rental property, the 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 held for use may be  impaired.  A property’s value is  impaired only if management’s estimate of the aggregate future cash flows  (undiscounted and without interest charges) to be generated by the property  is less than the carrying value of the property.  To the extent impairment has occurred, the  loss shall be measured as the excess of the carrying amount of the property  over the fair value of the property.   The 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 estimated  net sales price of the assets which have been identified as held for sale is  less than the net book value of the assets, a valuation allowance is  established.  Properties identified as  held for sale and/or sold are presented in discontinued operations for all  periods presented.  See Note 6:  Discontinued Operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| *** ***                                                     | *** *** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| *** ***                                                     | *** *** | If circumstances  arise that previously were considered unlikely and, as a result, the  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 (revised December 2003), 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, if any, should consolidate the  VIE (the “primary beneficiary”).   Generally, FIN 46 applies when either (1) the equity investors (if  any) lack one or more of the essential characteristics of a controlling  financial interest, (2) the equity investment at risk is insufficient to  finance that entity’s activities without additional subordinated financial  support or (3) the equity investors have voting rights that are not  proportionate to their economic interests and the activities of the entity  involve or are conducted on behalf of an investor with a disproportionately  small voting interest.          |
|----------------------------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *** ***                     | *** *** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| *** ***                     | *** *** | The Operating  Partnership has evaluated its joint ventures with regards to FIN 46.  As of September 30, 2006, the Operating  Partnership has identified its Meadowlands Xanadu joint venture 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| *** ***                     | *** *** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| ***Marketable  Securities***     | *** *** | The Operating  Partnership classifies its marketable securities among three categories:  Held-to-maturity, trading and available-for-sale.  Unrealized holding gains and losses  relating to available-for-sale securities are excluded from earnings and  reported as other comprehensive income (loss) in stockholders’ equity until  realized.  A decline in the market  value of any marketable security below cost that is deemed to be other than  temporary results in a reduction in the carrying amount to fair value.  Any impairment would be charged to earnings  and a new cost basis for the security established.                                                                                                                                                              |
| *** ***                     | *** *** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| *** ***                     | *** *** | The Operating  Partnership’s marketable securities at December 31, 2005 carried a value of  $50.8 million and consisted of 1,468,300 shares of common stock in  CarrAmerica Realty Corporation, which were all acquired in 2005.  The Operating Partnership’s marketable  securities at December 31, 2005 were all classified as available-for-sale and  were carried at fair value based on quoted market prices.  The Operating Partnership recorded an  unrealized holding loss of $790,000 as other comprehensive loss in 2005.  From January 1, 2006 through January 25,  2006, the Operating Partnership purchased an additional 336,500 shares of  common stock in CarrAmerica for a total purchase price of $11.9 million.                                                       |
| *** ***                     | *** *** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| *** ***                     | *** *** | The Operating  Partnership received dividend income of approximately $902,000 from its  holdings in CarrAmerica stock during the three months ended March 31, 2006,  which is recorded in interest and dividend income.  During the three months ended March 31,  2006, the Operating Partnership sold all of its 1,804,800 shares of  CarrAmerica common stock realizing a gain of approximately $15.1 million,  which is recorded in gain on sale of marketable securities.                                                                                                                                                                                                                                                                                                                                |

 

11

----

 
| ***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 $725,000 and $817,000 for  the three months ended September 30, 2006 and 2005, respectively, and  $2,171,000 and $2,556,000 for the nine months ended September 30, 2006 and  2005, 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 $908,000 and  $911,000 for the three months ended September 30, 2006 and 2005, respectively  and $2,574,000 and $2,817,000 for the nine months ended September 30, 2006  and 2005, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| *** ***                    | *** *** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| ***Revenue  Recognition***      | *** *** | Base rental  revenue is recognized on a straight-line basis over the terms of the  respective leases.****** Unbilled rents receivable represents the  amount by which straight-line rental revenue exceeds rents currently billed  in accordance with the lease agreements.   Above-market and below-market lease values for acquired properties are  recorded based on the present value (using a discount rate which reflects the  risks associated with the leases acquired) of the difference between (i) the  contractual amounts to be paid pursuant to each in-place lease and (ii)  management’s estimate of fair market lease rates for each corresponding  in-place lease, measured over a period equal to the remaining term of the  lease for above-market leases and the initial term plus the term of any  below-market fixed-rate renewal options for below-market leases.  The capitalized above-market lease values  for acquired properties are amortized as a reduction of base rental revenue  over the remaining term of the respective leases, and the capitalized  below-market lease values are amortized as an increase to base rental revenue  over the remaining initial terms plus the terms of any below-market  fixed-rate renewal options of the respective leases.  Escalations and recoveries from tenants are  received from tenants for certain costs as provided in the lease  agreements.  These costs generally  include real estate taxes, utilities, insurance, common area maintenance and  other recoverable costs.  See Note 14:  Tenant Leases.  Construction services  revenue includes fees earned and reimbursements received by the Operating  Partnership for providing construction management and general contractor  services to clients.  Construction  services revenue is recognized on the percentage of completion method.  Using this method, profits are recorded on  the basis of estimates of the overall profit and percentage of completion of  individual contracts.  A portion of the  estimated profits is accrued based upon estimates of the percentage of  completion of the construction contract.   This revenue recognition method involves inherent risks relating to  profit and cost estimates.  Real estate  services revenue includes property management, facilities management, leasing  commission fees and other |

 

12

----

 
|                                                     |   | services, and payroll and  related costs reimbursed from clients. Other income includes income from  parking spaces leased to tenants, income from tenants for additional services  arranged for by the Operating Partnership and income from tenants for early  lease terminations.                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *** ***                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| ***Allowance  for Doubtful Accounts***              |   | Management periodically performs a detailed review  of amounts due from tenants and clients to determine if accounts receivable  balances are impaired based on factors affecting the collectibility of those  balances. Management’s estimate of the allowance for doubtful accounts  requires management to exercise significant judgment about the timing,  frequency and severity of collection losses, which affects the allowance and  net income.                                                                                                                                                                                                                                                  |
| *** ***                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| ***Income  and Other Taxes***                       |   | The 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.                                                                                                                                                                                           |
| *** ***                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| ***Distributions  Payable***                        |   | The distributions payable at September 30, 2006  represents distributions payable to preferred unitholders (10,000 Series C  preferred units) and common unitholders (78,158,031 common units), for all  such holders of record as of October 4, 2006 with respect to the third  quarter 2006. The third quarter 2006 Series C preferred unit distributions of  $50.00 per preferred unit and common unit distributions of $0.64 per common  unit were approved by the Corporation’s Board of Directors on September 19,  2006. The Series C preferred unit distributions and common unit distributions  payable were paid on October 16, 2006.                                                           |
| *** ***                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| *** ***                                        |   | The distributions  payable at December 31, 2005 represents distributions payable to preferred  unitholders (10,000 Series C preferred units) and common unitholders  (75,678,745 common units) for all such holders of record as of January 5,  2006 with respect to the fourth quarter 2005.   The fourth 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 December 6,  2005.  The common unit distributions  payable were paid on January 13, 2006.   The Series C preferred unit distributions payable were paid on January  17, 2006. |
| *** ***                                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| ***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                                                                                               |

 

13

----

 
|              |   | 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, and in 2006, the Operating Partnership adopted  the provisions of FASB No. 123(R), which did not have a material effect on  the Operating Partnership’s financial position and results of  operations.  These provisions require  that the estimated fair value of restricted stock (“Restricted Stock Awards”)  and stock options at the grant date be amortized ratably into expense over  the appropriate vesting period.  For  the three months ended September 30, 2006 and 2005, the Operating Partnership  recorded restricted stock and stock options expense of $815,000 and  $1,070,000, respectively, and $2,429,000 and $2,696,000 for the nine months  ended September 30, 2006 and 2005, respectively.  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 below: |

 

The following tableillustrates the effect on net income and earnings per share if the fair valuebased method had been applied to all outstanding and unvested stock awards forthe three and nine month periods ended September 30, 2005: *(dollars inthousands)*
| ** **                                                         | ** **                                                                                      | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                         | ** **                                                                                      | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                         | ** **                                                                                      | **2005**                         | ** ** | **2005**                        | ** ** |
| Net income, as  reported                                           |                                                                                            | $                                | 25,704     |                            | $          | 100,022 |   |
| Add:                                                               | Stock-based  compensation expense included in reported net income                               |                             | 1,070      |                            | 2,696      |   |
| Deduct:                                                            | Total stock-based compensation expense determined  under fair value based method for all awards |                             | (1,195     | )                               | (3,000     | ) |
| Pro forma net  income                                              |                                                                                            | 25,579                           |       | 99,718                          |       |
| Deduct: Preferred  unit distributions                              |                                                                                            | (500                             | )          | (5,409                          | )          |
| Pro forma net  income available to common unitholders – basic |                                                                                            | $                                | 25,079     |                            | $          | 94,309 |   |
|                                                               |                                                                                            |                             |       |                            |       |
| Earnings Per  Unit:                                                |                                                                                            |                             |       |                            |       |
| Basic – as reported                                           |                                                                                            | $                                | 0.33       |                            | $          | 1.29 |   |
| Basic – pro forma                                             |                                                                                            | $                                | 0.33       |                            | $          | 1.28 |   |
|                                                               |                                                                                            |                             |       |                            |       |
| Diluted – as reported                                         |                                                                                            | $                                | 0.33       |                            | $          | 1.29 |   |
| Diluted – pro forma                                           |                                                                                            | $                                | 0.33       |                            | $          | 1.28 |   |

 

14

----

 
| ***Other Comprehensive Income*** |   | Other comprehensive income (loss) includes items  that are recorded in equity, such as unrealized holding gains or losses on  marketable securities available for sale. |
|----------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *** ***                     |   |                                                                                                                                                                    |
| ***Reclassifications***          |   | Certain reclassifications have been made to prior  period amounts in order to conform with current period presentation.                                                 |

 

**3.****              REAL ESTATETRANSACTIONS**

****Gale/Green Transactions****

On May 9, 2006, theOperating Partnership completed the acquisitions of:  (i) The Gale Company and certain of itsrelated businesses, which engage in construction, property management,facilities management, and leasing services (collectively, the “Gale Company”);(ii) three office properties; and (iii) indirect interests in a portfolio ofoffice properties, located primarily in New Jersey, which were owned indirectlyby The Gale Company and its affiliates (“Gale”) and affiliates of SL GreenRealty Corp. (“SL Green”).  Theagreements to complete the aforementioned acquisitions (collectively, the “Gale/GreenTransactions”) required that the Operating Partnership complete all of theacquisitions.

The Gale Company wasacquired by the Operating Partnership for initial purchase consideration ofapproximately $22.3 million consisting of the issuance by the OperatingPartnership of 224,719 common units of the Operating Partnership and thepayment of approximately $12 million in cash, which was primarily fundedthrough borrowing under the Operating Partnership’s revolving credit facility.  Additionally, the agreement to acquire theGale Company  (“Gale Agreement”) containsearn-out provisions providing for the payment of contingent purchaseconsideration  of up to $18 million incash based upon the achievement of Gross Income and NOI (as such terms aredefined in the Gale Agreement) targets and other events for the three yearsfollowing the closing date.

In connection with theOperating Partnership’s acquisition of the Gale Company, Mr. Stanley C. Galeand certain other affiliates of Gale are restricted from competing with theOperating Partnership or hiring the Operating Partnership’s employees for aperiod of four years expiring on May 9, 2010.

In addition, the GaleAgreement provides for the Operating Partnership to acquire certain otherownership interests in up to 11 real estate projects (the “Non-PortfolioProperties”), subject to obtaining certain third party consents and thesatisfaction of various project-related and/or other conditions.  Each of the Operating Partnership’s acquiredinterests in the Non-Portfolio Properties will provide for the initialdistributions of net cash flow solely to the Operating Partnership, andthereafter an affiliate of Gale controlled by Stanley C. Gale (“Gale Affiliate”)has participation rights (“Gale Participation Rights”) in 50 percent of theexcess net cash flow remaining after the distribution to the OperatingPartnership of the aggregate amount equal to the sum of: (a) the OperatingPartnership’s capital contributions, plus (b) an internal rate of return (“IRR”)of 10 percent per annum, accruing on the date or dates of the OperatingPartnership’s investments.  Mr. Gale hascaused the Gale Affiliate to transfer certain of his interests in theNon-Portfolio Properties to several former employees of Gale, some of whom arecurrent employees of the Operating Partnership, including Mark Yeager, one ofthe Corporation’s executive officers.

Through September 30,2006, the Operating Partnership completed seven of the acquisitions ofinterests in the Non-Portfolio Properties, which included the acquisitionsof:  a 530,000 square foot, mixed-useoffice/retail complex; a 139,750 square-foot fully-leased office property; anoffice property in development; two vacant land parcels and two pre-developedprojects.  The aggregate cost of thecompleted acquisitions was approximately $24.7 million.

In connection with theexecution of the Gale Agreement, the Operating Partnership entered intoagreements to acquire three office properties directly and indirect ownership interestsin entities which own a portfolio of office properties (collectively, the “Gale/GreenAgreements”).  Under the Gale/GreenAgreements, the Operating Partnership acquired 100 percent of the ownershipinterests in three office properties located in New Jersey, aggregating 516,162square feet, (the “Wholly-Owned Properties”). The Wholly-Owned Properties were acquired for approximately $106million, consisting of the assumption of $39.9 million in existing mortgageindebtedness 

15

----

and the payment of $66.1million in cash, which was funded primarily through borrowing under theOperating Partnership’s revolving credit facility.

Also, as part of theGale/Green Agreements, the Operating Partnership entered into a joint venturewith SL Green, known as Mack-Green-Gale LLC (“Mack-Green”), to hold anapproximate 96 percent interest and act as general partner of Gale SLG NJOperating Partnership, L.P. (the “OP LP”). The Operating Partnership acquired its interest in Mack-Green forapproximately $116 million, which was funded primarily through borrowing underthe Operating Partnership’s revolving credit facility.  The OP LP owns 100 percent of entities whichown 25 office properties (collectively, the “OP LP Properties”) which aggregate3.5 million square feet (consisting of 17 office properties aggregating 2.3million square feet located in New Jersey and eight properties aggregating 1.2million square feet located in Troy, Michigan), as well as a minor,non-controlling interest in four office properties aggregating 419,000 squarefeet located in Naperville, Illinois. For a discussion of the ownership interests in Mack-Green, see Note4:  Investments in Unconsolidated JointVentures – Mack-Green-Gale LLC.

The OperatingPartnership has not yet obtained all the information necessary to finalize itsestimates to complete the purchase price allocations related to the Gale/GreenTransactions.  The purchase priceallocations will be finalized once the information identified by the OperatingPartnership has been received, which should not be longer than one year fromthe date of acquisition.

### **PropertyAcquisitions**

The Operating Partnership acquired the following office propertiesduring the nine months ended September 30, 2006:  *(dollars in thousands)*
| **Acquisition**               | ** ** | ** **                      | ** ** | ** **                   | ** ** | **# of** | ** ** | **Rentable**         | ** ** | **Acquisition** | ** ** |
|-------------------------------|------------|---------------------------------|------------|------------------------------|------------|---------------|------------|----------------------|------------|-----------------|------------|
| **Date**                      | ** ** | **Property/Address**            | ** ** | **Location**                 | ** ** | **Bldgs.**    | ** ** | **Square Feet** | ** ** | **Cost**        | ** ** |
| 02/28/06                      |       | Capital  Office Park (a)        |       | Greenbelt,  Maryland         |       | 7             |       | 842,258              |       | $               | 166,011    |   |
| 05/09/06                      |       | 35  Waterview Boulevard (b) (c) |       | Parsippany,  New Jersey      |       | 1             |       | 172,498              |       | 32,600          |       |
| 05/09/06                      |       | 105  Challenger Road (b) (d)    |       | Ridgefield  Park, New Jersey |       | 1             |       | 150,050              |       | 31,792          |       |
| 05/09/06                      |       | 343  Thornall Street (b) (e)    |       | Edison,  New Jersey          |       | 1             |       | 195,709              |       | 41,113          |       |
| 07/31/06                      |       | 395  W. Passaic Street (f)      |       | Rochelle  Park, New Jersey   |       | 1             |       | 100,589              |       | 22,219          |       |
|                          |       |                            |       |                         |       |          |       |                 |       |            |       |
| Total Property  Acquisitions: |       |                            |       | 11                           |       | 1,461,104     |       | $                    | 293,735    |            |

 

----

(a)          This transaction wasfunded primarily through the assumption of $63.2 million of mortgage debt andthe issuance of 1.9 million common operating partnership units valued at $87.2million.

(b)   Theproperty was acquired as part of the Gale/Green Transactions.

(c)          Transaction was fundedprimarily through borrowing on the Operating Partnership’s revolving creditfacility and the assumption of $20.4 million of mortgage debt.

(d)         Transaction was fundedprimarily through borrowing on the Operating Partnership’s revolving creditfacility and the assumption of $19.5 million of mortgage debt.

(e)          Transaction was fundedprimarily through borrowing on the Operating Partnership’s revolving credit facility.

(f)            Transaction was fundedprimarily through borrowing on the Operating Partnership’s revolving creditfacility and the assumption of $13.1 million of mortgage debt.

**PropertySales**

The Operating Partnership sold the following office properties duringthe nine months ended September 30, 2006:*(dollars in thousands)*

 
| ** **                    | ** ** | ** **               | ** ** | ** **              | ** ** | ** **    | ** ** | **Rentable** | ** ** | **Net**      | ** ** | **Net**   | ** ** | **Realized** | ** ** |
|-------------------------------|------------|--------------------------|------------|-------------------------|------------|---------------|------------|--------------|------------|--------------|------------|-----------|------------|--------------|------------|
| **Sale**                      | ** ** | ** **               | ** ** | ** **              | ** ** | **# of** | ** ** | **Square**   | ** ** | **Sales**    | ** ** | **Book**  | ** ** | **Gain/**    | ** ** |
| **Date**                      | ** ** | **Property/Address**     | ** ** | **Location**            | ** ** | **Bldgs.**    | ** ** | **Feet**     | ** ** | **Proceeds** | ** ** | **Value** | ** ** | **(Loss)**   | ** ** |
|                          |       |                     |       |                    |       |          |       |         |       |         |       |      |       |         |       |
| 06/28/06                      |       | Westage  Business Center |       | Fishkill,  New York     |       | 1             |       | 118,727      |       | $            | 14,765     |      | $          | 10,872       |       | $ | 3,893 |   |
| 06/30/06                      |       | 1510  Lancer Drive       |       | Moorestown,  New Jersey |       | 1             |       | 88,000       |       | 4,146        |       | 3,134     |       | 1,012        |       |
|                          |       |                     |       |                    |       |          |       |         |       |         |       |      |       |         |       |
| Total  Office Property Sales: |       |                     |       | 2                       |       | 206,727       |       | $            | 18,911     |         | $          | 14,006    |       | $            | 4,905      |   |

 

16

----

**4.****              INVESTMENTS INUNCONSOLIDATED JOINT VENTURES**

The debt of the OperatingPartnership’s unconsolidated joint ventures aggregating $571.0 million as ofSeptember 30, 2006 is non-recourse to the Operating Partnership, except forcustomary exceptions pertaining to such matters as intentional misuse of funds,environmental conditions and material misrepresentations, and except asotherwise indicated below.

##### **MEADOWLANDSXANADU**

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

OnDecember 3, 2003, the Meadowlands Venture entered into a redevelopmentagreement (the “Redevelopment Agreement”) with the New Jersey Sports andExposition Authority (“NJSEA”) for the redevelopment of the area surroundingthe Continental Airlines Arena in East Rutherford, New Jersey and theconstruction of the Meadowlands Xanadu project. The Redevelopment Agreement provides for a 75-year ground lease andrequires the Meadowlands Venture to pay the NJSEA a $160 million developmentrights fee and fixed rent over the term. Fixed rent will be in the amount of $1,000 per year for the first 15years, increasing to $7.5 million from the 16th to the 18th years, increasing to $8.4 million in the 19th year,increasing to $8.7 million in the 20th year, increasing to $9.0 million in the 21st year, then to$9.2 million in the 23rd to26th years, with additional increases over theremainder of the term, as set forth in the ground lease.  The ground lease also allows for thepotential for participation rent payments by the Meadowlands Venture, asdescribed 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 approvalsfrom the NJSEA and U.S. Army Corps of Engineers in March 2005 and commencedconstruction in the same month.  As acondition to fill wetlands pursuant to the permit issued by the U.S. Army Corpsof Engineers and pursuant to the Redevelopment Agreement, as amended, Millsconveyed certain vacant land, known as the Empire Tract, to a conservancytrust.  On June 30, 2005, the $160million development rights fee was deposited into an escrow account by theMeadowlands Venture in accordance with the terms of the First Amendment to theRedevelopment Agreement.  On such date,the following amounts were paid from escrow: (i) approximately $37.2 million to defease certain debt obligations ofthe NJSEA; and (ii) $26.8 million to the NJSEA, which, in turn, paid suchamount to the Meadowlands Venture for the Empire Tract.  Subsequently, the remainder of the monieswere released from the escrow account to the NJSEA.

TheOperating 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 NewYork Giants, which were subsequently terminated in April 2004.  The Meadowlands Xanadu Venture Agreementrequired the Operating Partnership to make an equity contribution up to amaximum of $32.5 million, which it fulfilled in April 2005.  Pursuant to the Meadowlands Xanadu VentureAgreement, Mills has received subordinated capital credit in the venture ofapproximately $118.0 million, which represents certain costs incurred by Millsin connection with the Empire Tract prior to the creation of the MeadowlandsVenture.  However, under the FirstAmendment to the Meadowlands Xanadu Venture Agreement, the OperatingPartnership and Mills agreed that due to the expected receipt by theMeadowlands Venture of certain other sums and certain development costs savingsin connection with Meadowlands Xanadu, Mills’ subordinated capital credit inthe venture for the Empire Tract should be reduced to $60.0 million as of thedate of the First Amendment to the Meadowlands Xanadu Venture Agreement.  The Meadowlands Xanadu Venture Agreementrequires Mills to contribute the balance of the capital required to completethe entertainment phase, subject to certain limitations.  The Operating Partnership will receive a 9percent preferred return on its equity investment, only after Mills receives a9 percent preferred return on its equity investment.  Residual returns, subject to participation byother parties, will be in proportion to each partner’s respective percentageinterest.

17

----

Millswill develop, lease and operate the entertainment phase of the MeadowlandsXanadu project.  The Meadowlands Venturehas formed and owns, directly and indirectly, all of the partnership interestsin and to the component ventures which were formed for the future developmentof the office and hotel phases, which the Operating Partnership will develop,lease and operate.  Upon the OperatingPartnership’s exercise of its rights under the Meadowlands Xanadu VentureAgreement to develop the office and hotel phases, the Meadowlands Venture willconvey ownership of the component ventures to the Operating Partnership andMills or its affiliate, and the Operating Partnership or its affiliate will ownan 80 percent interest and Mills or its affiliate will own a 20 percentinterest in such component ventures. However, under the First Amendment to the Meadowlands Xanadu VentureAgreement, if the Meadowlands Venture develops a hotel that has video lotteryterminals (or “slots”), or any other legalized form of gaming on or in itspremises, then the Operating Partnership or its affiliate will own a 50 percentinterest in such component venture and Mills or its affiliate will own a 50percent interest.  The Meadowlands XanaduVenture Agreement requires that the Operating Partnership must exercise itsrights with respect to the first office and hotel phase no later than fouryears after the grand opening of the entertainment phase, and requires that theOperating Partnership exercise all of its rights with respect to the office andhotel phases no later than 10 years from such date, but does not require thatany or all components be developed. However, under the Meadowlands Xanadu Venture Agreement, Mills has theright to accelerate such exercise schedule, subject to certain conditions.  Should the Operating Partnership fail to meetthe time schedule described above for the exercise of its rights with respectto the office and hotel phases, the Operating Partnership will forfeit its rightsto control future development.  If thisoccurs, Mills will have the right to develop the additional phases, subject tothe Operating Partnership’s right to participate, or to cause the MeadowlandsVenture to sell such components to a third party, subject to a sales pricelimitation of 95 percent of the value that would have been required to formsuch component ventures.

Commencing threeyears after the grand opening of the entertainment phase of the MeadowlandsXanadu project, either Mills or the Operating Partnership may sell itspartnership interest to a third party subject to the following provisions:

·                  Mills hascertain “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 aright of first refusal with respect of a sale by the Operating Partnership ofits partnership interests.

In addition,commencing on the sixth anniversary of the opening, the Operating Partnershipmay cause Mills to purchase, and Mills may cause the Operating Partnership tosell to Mills, all of the Operating Partnership’s partnership interests at aprice based on the then fair market value of the project.  Notwithstanding the exercise by Mills or theOperating Partnership of any of the foregoing rights with respect to the saleof the Operating Partnership’s partnership interest to Mills or a third party,the Operating Partnership will retain its right to component ventures for thefuture development of the office and hotel phases.

On August 21, 2006, The Mills Corporation (“TMC”)announced that it had signed a non-binding letter of intent with Colony CapitalAcquisitions, LLC (“Colony”) and Kan Am USA Management XXII Limited Partnership(“Kan Am”) under which Colony would arrange for construction financing forMeadowlands Xanadu and make a significant equity infusion into the MeadowlandsVenture, and TMC would not have any financial obligations post closing (“ColonyTransaction”).  Kan Am has been a partnerwith Mills in the Meadowlands Venture.

The Operating Partnership has reached an agreement inprinciple with Colony, TMC and Kan Am whereby the Operating Partnership willrelinquish its participation in the entertainment/retail component ofMeadowlands Xanadu in exchange for $25 million; $22.5 million payable at closingand the remaining $2.5 million due when the Operating Partnership exercises itsrights to develop any of the office or hotel phases.  Concurrently with the payment of the $2.5million, the Operating Partnership’s ownership interest in the office and hotelcomponent ventures will be reduced from 80 percent to 75 percent.  It is expected that the agreement inprinciple will be consummated simultaneous with the completion of the ColonyTransaction.

In October 2006, Mills, the manager of the MeadowlandsVenture, provided the Operating Partnership information regarding therestatements of financial information it had previously presented to theOperating Partnership for the period from November 25, 2003 (the inception ofthe Meadowlands Venture) through December 31, 2005.  Included in the Operating Partnership’sequity in loss of unconsolidated joint ventures from the Meadowlands Venture of$1.8

18

----

million for the three and nine months ended September30, 2006 is $1.4 million related to the Operating Partnership’s allocated shareof the loss arising from the restatement for the period referenced above.

OnFebruary 12, 2003, the NJSEA selected The Mills Corporation and the OperatingPartnership to redevelop the Continental Airlines Arena site (“Arena Site”) formixed uses, including retail.  InMarch 2003, Hartz Mountain Industries, Inc., (“Hartz”), filed a lawsuit in theSuperior Court of New Jersey, Law Division, for Bergen County, seeking toenjoin NJSEA from entering into a contract with the Meadowlands Venture for theredevelopment of the Continental Airlines Arena site.  In May 2003, the court denied Hartz’s requestfor an injunction and dismissed its suit for failure to exhaust administrativeremedies.  In June 2003, the NJSEA heldhearings on Hartz’s protest, and on a parallel protest filed by anotherrejected developer, Westfield, Inc. (“Westfield”).  On September 10, 2003, the NJSEA ruledagainst Hartz’s and Westfield’s protests. Hartz and Westfield, as well as Elliot Braha and three other taxpayers(collectively “Braha”), thereafter filed appeals from the NJSEA’s finaldecision.  By decision dated May 14,2004, the Appellate Division of the Superior Court of New Jersey rejected theappellants’ contention that the NJSEA lacks statutory authority to allow retaildevelopment of its property.  TheAppellate Division also remanded Hart’s claim under the Open Public RecordsActs, seeking disclosure of additional documents from NJSEA, to the LawDivision for further proceedings.  TheSupreme Court of New Jersey declined to review the Appellate Division’sdecision.  On August 19, 2004, the LawDivision issued a decision resolving Hartz’s Open Public Records Act claim andordered NJSEA to disclose some, but not all, of the documents Hartz wasseeking.  The Appellate Division, in adecision rendered on November 24, 2004, upheld the findings of the Law Divisionin the remand proceeding.  The SupremeCourt of New Jersey declined to review the Appellate Division’s decision.  At Hartz’s request, the NJSEA thereafter heldfurther hearings on December 15 and 16, 2004, to review certain additionalfacts in support of Hartz’s and Westfield’s bid protest.  Braha, as a taxpayer, did not have standingto participate in the supplemental protest hearing.  On March 4, 2005, the Hearing Officerrendered his Supplemental Report and Recommendation to the NJSEA, finding nomerit in the protests presented by Hartz and Westfield.  The NJSEA accepted the Hearing Officer’sSupplemental Report and Recommendation on March 30, 2005 and Hartz and Brahahave appealed that decision to the Appellate Division.

In January 2004, Hartzand Westfield also appealed to the Appellate Division of the Superior Court ofNew Jersey from the NJSEA’s December 2003 approval and execution of theRedevelopment Agreement with the Meadowlands Venture.

In November 2004, Hartzand Westfield filed additional appeals in the Appellate Division challengingNJSEA’s resolution authorizing the execution of the First Amendment to theRedevelopment Agreement with Meadowlands Venture and the ground lease with theMeadowlands Venture.

All of the above appealshave been consolidated by the Appellate Division.  On August 17, 2006, the Appellate Divisionissued an opinion affirming NJSEA’s selection of the Meadowlands Venture andrejecting the appellants’ arguments in all respects.  On August 28, 2006, Hartz made a motionbefore the Appellate Division for reconsideration of this decision and forsupplementation of the record.  Thatmotion is pending.

On September 30, 2004,the Borough of Carlstadt filed an action in the Superior Court of New JerseyLaw Division, challenging Meadowlands Xanadu, which asserted claims that aresubstantially the same as claims asserted by Hartz and Braha in the aboveappeals.  By Order dated November 19,2004, the Law Division transferred that matter to the Superior Court of NewJersey, Appellate Division.  This matterwas voluntarily dismissed by Carlstadt in accordance with a March 22, 2006,Settlement Agreement and Release between Carlstadt and the Meadowlands Venture.

Several appeals filed byHartz, the Sierra Club and others, including certain environmental groups, thatchallenge certain approvals received by the Meadowlands Venture from the NJSEA,the New Jersey Meadowlands Commission (“NJMC”) and the New Jersey Department ofEnvironmental Protection (“NJDEP”) remain pending before the AppellateDivision.  Some of these appealschallenge NJDEP’s issuance of a stream encroachment permit, waterfrontdevelopment permit, and coastal zone consistency determination for MeadowlandsXanadu.  Other of these appeals are fromNJDEP’s and NJMC’s issuance of reports in connection with a consultationprocess the NJSEA was statutorily required to undertake in connection with anyNJSEA-development project.

19

----

A Hartz affiliate and atrade association have filed an appeal from an advisory opinion favorable tothe Meadowlands Venture issued by the Director of the Division of AlcoholicBeverage Control concerning the availability of special concessionaire permits.  That appeal is also pending in the AppellateDivision of the Superior Court of New Jersey.

Three separate lawsuitshave been filed in the United States District Court for the District of NewJersey, challenging a permit issued by the U.S. Army Corps of Engineers (“USACE”)in connection with the project.  Thefirst suit was filed on March 30, 2005, by the Sierra Club, the New JerseyPublic Interest Research Group, Citizen Lobby, Inc. and the New JerseyEnvironmental Federation.  Additionalsuits were filed on May 16 and May 31, 2005, respectively, by Hartz (togetherwith one of its officers as an individually-named plaintiff) and the Borough ofCarlstadt.  The Sierra Club also filed amotion for a preliminary injunction to stop certain construction activities onthe project, which the Court denied on July 6, 2005.  On October 26, 2005, the court granted themotions of the Meadowlands Venture and the USACE to dismiss the Hartz complaintfor lack of standing.  The deadline forappealing that decision has passed, so the Hartz action is ended.  On October 31, 2005, the USACE filed a motionto dismiss the complaint filed by the Borough of Carlstadt for lack ofstanding.  On February 7, 2006, the Courtgranted the motion and dismissed the Borough of Carlstadt’s complaint in itsentirety.  On March 9, 2006, Carlstadtfiled a notice of appeal of this decision to the United States Court of Appealsfor the Third Circuit.  This appeal hasbeen dismissed pursuant to the Settlement Agreement and Release executed byCarlstadt and the Meadowlands Venture.

On April 5, 2005, the NewYork Football Giants (“Giants”) filed an emergent application with the SupremeCourt of New Jersey, Chancery Division, seeking an injunction stopping all workon the Meadowlands Xanadu project as being in violation of its existing leasewith the NJSEA.  After hearing oralargument on the application on August 5, 2005, the court denied the Giants’motion for preliminary injunctive relief. On June 22, 2006, the court entered a Stipulation and Consent Order thatdismissed without prejudice the parties’ respective claims.

The New Jersey Builders’Association (“NJBA”) has commenced an action, which is pending in the AppellateDivision, alleging that the NJSEA has failed to meet a purported obligation toprovide affordable housing at the Meadowlands Complex and seeking, among otherrelief, an order enjoining the construction of Meadowlands Xanadu.  NJBA filed an application for preliminaryinjunctive relief seeking to enjoin further construction of Meadowlands Xanadu,which the Appellate Division denied on July 28, 2005.  The Meadowlands Venture is not a party tothat action.

On January 25, 2006, theBergen Cliff Hawks Baseball Club, LLC (the “Cliff Hawks”), filed a complaintagainst the Operating Partnership and Mills, alleging that the OperatingPartnership and Mills breached an agreement to provide the Cliff Hawks with aminor league baseball park as part of the Xanadu Project.  This matter is pending.

The Operating Partnershipbelieves that the Meadowlands Venture’s proposal and the planned project complywith applicable laws, and the Meadowlands Venture intends to continue itsvigorous defense of its rights under the Redevelopment Agreement and GroundLease.  Although there can be no assurance,the Operating Partnership does not believe that the pending lawsuits will haveany material affect on its ability to develop the Meadowlands Xanadu project.

###### **G&G MARTCO(Convention Plaza)**

The OperatingPartnership holds a 50 percent interest in G&G Martco, which ownsConvention Plaza, a 305,618 square foot office building, located in SanFrancisco, California.  The venture has amortgage loan with a $47.3 million balance at September 30, 2006 collateralizedby its office property.  The loan alsoprovides the venture the ability to increase the balance of the loan up to anadditional $266,000 for the funding of qualified leasing costs.  The loan bears interest at a rate of theLondon Inter-Bank Offered Rate (“LIBOR”) (5.322 percent at September 30, 2006)plus 162.5 basis points and was scheduled to mature in August 2006.  The Operating Partnership has agreed inprinciple to sell its joint venture interest to an affiliate of its currentjoint venture partner.  The maturity dateof the mortgage loan was extended to November 15, 2006.  The Operating Partnership performs managementand leasing services for the property owned by the joint venture and recognized$36,000 and $30,000 in fees for such services in the three months endedSeptember 30, 2006 and 2005, respectively, and $119,000 and $99,000 for thenine months ended September 30, 2006 and 2005, respectively.

20

----

**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 ColumbiaDevelopment Company, L.L.C. (“Columbia”) to form American Financial ExchangeL.L.C. (“AFE”).  The venture was formedto acquire land for future development, located on the Hudson River waterfrontin Jersey City, New Jersey, adjacent to the Operating Partnership’s HarborsideFinancial Center office complex.  Amongother things, the partnership agreement provides for a preferred return on theOperating Partnership’s invested capital in the venture, in addition to theOperating Partnership’s proportionate share of the venture’s profit, as definedin the agreement.

AFE distributed itsinterests in Plaza VIII and IX Associates, L.L.C., which owned the undevelopedland currently used as a parking facility, to its then partners, the OperatingPartnership and Columbia.  The OperatingPartnership and Columbia subsequently entered into a new joint venture to ownand manage the undeveloped land and related parking operations through PlazaVIII and IX Associates, L.L.C.  TheOperating Partnership and Columbia each hold a 50 percent interest in the newventure.

###### **RAMLAND REALTYASSOCIATES L.L.C. (One Ramland Road)**

On August 20,1998, the Operating Partnership entered into a joint venture with S.B. New YorkRealty Corp. to form Ramland Realty Associates L.L.C.  The venture was formed to own, manage andoperate One Ramland Road, a 232,000 square foot office/flex building andadjacent developable land, located in Orangeburg, New York.  In August 1999, the joint venture completedredevelopment of the property and placed the office/flex building in service.  The Operating Partnership holds a 50 percentinterest in the joint venture.  Theventure has a mortgage loan with a $14.9 million balance at September 30, 2006secured by its office/flex property.  Themortgage bears interest at a rate of LIBOR plus 175 basis points and matures inJanuary 2007, with one two-year extension option, subject to certainconditions.  The venture has providednotice and the required extension fee to the lender of its intention to extendthe term of the loan until January 2009.

TheOperating Partnership performs management, leasing and other services for theproperty owned by the joint venture and recognized $35,000 and $8,000 in feesfor such services in the three months ended September 30, 2006 and 2005,respectively, and $82,000 and $63,000 for the nine months ended September 30,2006 and 2005, respectively.

###### **ASHFORDLOOP 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 toform Ashford Loop Associates L.P.  Theventure was formed to own, manage and operate 1001 South Dairy Ashford, a130,000 square foot office building acquired on September 18, 1998, and 2100West 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 jointventure.  On February 25, 2005, theOperating Partnership sold its interest in the venture to Prudential for $2.7million.

**SOUTH PIER AT HARBORSIDE – HOTELDEVELOPMENT**

On November 17, 1999, the Operating Partnership entered into a jointventure with Hyatt Corporation (“Hyatt”) to develop a 350-room hotel on theSouth Pier at Harborside Financial Center, Jersey City, New Jersey, which wascompleted and commenced initial operations in July 2002.  The Operating Partnership owns a 50 percentinterest in the venture.

 

The venture had amortgage loan with a commercial bank with a $62.9 million balance at December31, 2003 collateralized by its hotel property. The debt bore interest at a rate of LIBOR plus 275 basis points, whichwas scheduled to mature in December 2003, and was extended through January 29,2004.  On that date, the venture repaidthe mortgage loan using the proceeds from a new $40.0 million mortgage loan,(with a balance as of September 30, 2006 of $38.9 million) collateralized bythe hotel property, as well as capital contributions from the OperatingPartnership and Hyatt of $10.8 million each. The new loan carried an interest rate of LIBOR plus 200 basis points andwas scheduled to mature in February 2007. On October 12, 2006, the venture repaid the mortgage loan using proceedsfrom a new $70.0 million mortgage loan collateralized by the hotelproperty.  The new loan carries aninterest rate of 6.15 percent and matures in November 2016.  On May 25, 2004, the venture obtained asecond mortgage loan with a commercial bank for $20.0 million.  The loan carried an interest rate of LIBORplus 175 basis points and was scheduled to mature in February 2007.  The proceeds from this loan were used to makedistributions to the Operating Partnership and Hyatt in the amount of $10.0million each.  This loan was repaid in

21

----

full during thequarter from operating cash. Additionally, the venture has a loan with a balance as of September 30,2006 of $7.3 million with the City of Jersey City, provided by the U.S.Department of Housing and Urban Development. The loan currently bears interest at fixed rates ranging from 6.09percent to 6.62 percent and matures in August 2020.  The Operating Partnership has posted a $7.3million letter of credit in support of this loan, $3.6 million of which isindemnified by Hyatt.

**RED BANK CORPORATE PLAZA L.L.C./RED BANK CORPORATEPLAZA II, L.L.C.**

On March 23, 2006, theOperating Partnership entered into a joint venture with the PRC Group (“PRC”)to form Red Bank Corporate Plaza L.L.C. The venture was formed to develop Red Bank Corporate Plaza, a 92,878square foot office building located in Red Bank, New Jersey, which has beenfully pre-leased to Hovnanian Enterprises, Inc. for a 10-year term.  The Operating Partnership holds a 50 percentinterest in the venture.  PRC contributedthe vacant land for the development of the office building as its initialcapital in the venture.  The OperatingPartnership funded the costs of development up to the value of the landcontributed by PRC of $3.5 million as its initial capital.  PRC and the Operating Partnership each fundeddevelopment costs of the venture of $1.1 million in excess of their initialcapital contributed.

On October 20,2006, the venture entered into a $22.0 million construction loan with acommercial bank collateralized by the land and development project.  The loan carries an interest rate of LIBORplus 130 basis points and matures in April 2008.  The loan currently has three one-yearextension options subject to certain conditions, each of which require paymentof a fee.

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

**MACK-GREEN-GALE LLC**

On May 9, 2006, as part of the Gale/GreenTransactions, the Operating Partnership entered into a joint venture,Mack-Green-Gale LLC (“Mack-Green”), with SL Green, pursuant to which Mack-Greenholds a 96 percent interest and acts as general partner of Gale SLG NJOperating Partnership, L.P. (the “OP LP”). The Operating Partnership acquired its interest in Mack-Green forapproximately $116 million, which was funded primarily through borrowing underthe Operating Partnership’s revolving credit facility.  The OP LP owns 100 percent of entities whichown 25 office properties (the “OP LP Properties”) which aggregate 3.5 millionsquare feet (consisting of 17 office properties aggregating 2.3 million squarefeet located in New Jersey and eight properties aggregating 1.2 million squarefeet located in Troy, Michigan), as well as a minor, non-controlling interestin four office properties aggregating 419,000 square feet located inNaperville, Illinois.

As defined in theMack-Green operating agreement, the Operating Partnership sharesdecision-making equally with SL Green regarding:  (i) all major decisions involving theoperations of Mack-Green; and (ii) overall general partner responsibilities inoperating the OP LP.

The Mack-Greenoperating agreement generally provides for profits and losses to be allocatedas follows:

(i)                         99percent of Mack-Green’s share of the profits and losses from 10 specific OP LPProperties allocable to the Operating Partnership and one percent allocable toSL Green;

(ii)                      onepercent of Mack-Green’s share of the profits and losses from eight specific OPLP Properties and its minor interest in four office properties allocable to theOperating Partnership and 99 percent allocable to SL Green; and

(iii)                   50 percent ofall other profits and losses allocable to the Operating Partnership and 50percent allocable to SL Green.

Substantially allof the OP LP Properties are encumbered by mortgage loans with an aggregateoutstanding principal balance of $358.5 million.  $190.2 million of the mortgage loans bearinterest at a weighted average fixed interest rate of 6.32 percent per annumand mature at various times through May 2016. $168.3 million of the mortgage loans bear interest at a floating rateranging from LIBOR plus 185 basis points to LIBOR plus 275 basis points per

22

----

annum and matureat various times through August 2008. Included in the floating rate mortgage loans are $90.3 million providedby an affiliate of SL Green.

On August 9, 2006,$69.7 million of mortgage loans were refinanced.  The new loan has a maximum principal amountof $90.0 million with $78.0 million drawn at September 30, 2006.  The loan provides the ability to draw fundsfor qualified leasing and capital improvement costs.  The loan bears interest at a rate of LIBORplus 185 basis points and matures on August 8, 2008 with a two-year extensionoption.

The OperatingPartnership performs management, leasing, and construction services for theproperties owned by the joint venture and recognized $900,000 in income (net of$310,000 in direct costs), and $1.7 million in income (net of $737,000 in directcosts) for such services in the three and nine months ended September 30, 2006.

**GE/GALE FUNDING LLC (PFV)**

On May 9, 2006, aspart of the Gale/Green Transactions, the Operating Partnership acquired from aGale Affiliate for $1.8 million a 50 percent controlling interest in GMWVillage Associates, LLC (“GMW Village”). GMW Village holds a 20 percent interest in GE/Gale Funding LLC (“GE Gale”).  GE Gale owns a 100 percent interest in theentity owning Princeton Forrestal Village, a mixed-use, office/retail complexaggregating 530,000 square feet and located in Plainsboro, New Jersey (“PrincetonForrestal Village” or “PFV”).

In addition to thecash consideration paid to acquire the interest, the Operating Partnershipprovided a Gale Affiliate with the Gale Participation Rights.

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

GE Gale has amortgage loan in an amount not to exceed $52.8 million, which has a balance atSeptember 30, 2006, of $39.3 million. The loan provides the venture the ability to draw funds for qualifiedleasing and capital improvement costs. The loan bears interest at a rate of LIBOR plus 275 basis points andmatures on January 9, 2009, with an extension option through January 9, 2011.

The Operating Partnership performs management, leasing,and construction services for PFV and recognized $402,000 in income (net of$3.2 million in direct costs) for such services in the three and nine monthsended September 30, 2006.

###### **ROUTE 93 MASTER LLC (“Route93 Participant”)/ROUTE 93 BEDFORD MASTER LLC (with the Route 93 Participant,collectively, the “Route 93 Venture”)**

On June 1, 2006,the Route 93 Venture was formed between the Route 93 Participant, amajority-owned subsidiary of the Operating Partnership, having a 30 percentinterest and the Commingled Pension Trust Fund (Special Situation Property) ofJPMorgan Chase Bank having a 70 percent interest, for the purpose of acquiringseven office buildings, aggregating 670,000 square feet, located in the townsof Andover, Bedford and Billerica, Massachusetts.  Profits and losses are shared by the partnersin proportion to their respective interests until the investment yields an 11percent IRR, then sharing will shift to 40/60, and when the IRR reaches 15percent, then sharing will shift to 50/50.

The Route93 Participant is a joint venture between the Operating Partnership and a Galeaffiliate.  Profits and losses are sharedby the partners under this venture in proportion to their respective interestsuntil the investment yields an 11 percent IRR, then sharing will shift to50/50.

TheRoute 93 Ventures have mortgage loans with an amount not to exceed $58.6million, with a $39.4 million balance at September 30, 2006 collateralized byits office properties.  The loan providesthe venture the ability to draw additional monies for qualified leasing andcapital improvement costs.  The loanbears interest at a rate of LIBOR plus 220 basis points and matures on July 11,2008, with three one-year extension options.

The OperatingPartnership performs management and construction services for the propertiesowned by the Route 93 Ventures and recognized $0 for such services in the threeand nine months ended September 30, 2006.

23

----

**GALE KIMBALL, L.L.C.**

On June 15,****2006, the Operating Partnership entered into a joint venturewith a Gale Affiliate to form M-C Kimball, LLC (“M-C Kimball”).  M-C Kimball was formed for the sole purposeof acquiring a Gale Affiliate’s 33.33 percent membership interest in GaleKimball, L.L.C. (“Gale Kimball”), an entity holding a 25 percent interest in100 Kimball Drive LLC (“100 Kimball”), which is developing a 175,000 squarefoot office property located at 100 Kimball Drive, Parsippany, New Jersey (the “KimballProperty”).

The operatingagreement of M-C Kimball provides, among other things, for the GaleParticipation Rights.

Gale Kimball isowned 33.33 percent by M-C Kimball and 66.67 percent by the HampshireGenerational Fund, L.L.C. (“Hampshire”). The operating agreement of Gale Kimball provides, among other things,for the distribution of net cash flow, initially, in accordance with itsmembers’ respective membership interests and, upon achievement of certainfinancial conditions, 50 percent to each of the Operating Partnership andHampshire.

100 Kimball isowned 25 percent by Gale Kimball and 75 percent by 100 Kimball Drive RealtyMember LLC, an affiliate of JP Morgan****(“JPM”).** **The operatingagreement of 100 Kimball provides, among other things, for the distributions tobe made in the following order:

(i)                         first, toJPM, such that JPM is provided with an annual 12 percent compound preferredreturn on Preferred Equity Capital Contributions (as such term is defined inthe operating agreement of 100 Kimball and largely comprised of development andconstruction costs);

(ii)                      second, toJPM, as return of Preferred Equity Capital Contributions until completerepayment of such Preferred Equity Capital Contributions;

(iii)                   third, to eachof JPM and Gale Kimball in proportion to their respective membership interestsuntil each member is provided, as a result of such distributions, with anannual twelve percent compound return on the Member’s Capital Contributions (asdefined in the operating agreement of 100 Kimball, and excluding PreferredEquity Capital Contributions, if any); and

(iv)                  fourth, 50percent to each of JPM and Gale Kimball.

100 Kimball has aconstruction loan in an amount not to exceed $29 million, with a balance atSeptember 30, 2006 of $12.5 million.  Theloan bears interest at a rate of LIBOR plus 195 basis points and matures onDecember 8, 2008 with a one-year extension option.

The OperatingPartnership performs construction and development services for the propertyowned by 100 Kimball for which it recognized $130,000 in income (net of $2.4million in direct costs) and $276,000 in income (net of $5.7 million in directcosts) in the three and nine months ended September 30, 2006.

**55 CORPORATE PARTNERS, LLC**

On June 9,****2006, the Operating Partnership entered into a jointventure with a Gale Affiliate to form 55 Corporate Partners, LLC (“55 Corporate”).  55 Corporate was formed for the sole purposeof acquiring from a Gale Affiliate a 50 percent interest in SLG 55 CorporateDrive II, LLC (“SLG 55”), an entity indirectly holding a condominium interestin a vacant land parcel located in Bridgewater, New Jersey, which canaccommodate development of an approximately 200,000 square foot officebuilding.  Sanofi-Aventis, which occupiesneighboring buildings, has an option to cause the venture to construct the building,which it would lease on a long-term basis. Sanofi-Aventis is required to pay a penalty of $7 million, subject tocertain conditions, in the event it fails to exercise the option.  The remaining 50 percent in SLG 55 is ownedby SLG Gale 55 Corporate LLC, an affiliate of SL****GreenRealty Corp****(“SLG Gale 55”).

The operatingagreement of 55 Corporate provides, among other things, for the GaleParticipation Rights.

The operatingagreement of SLG 55 provides, among other things, for the distribution of theavailable net cash flow

24

----

to each of 55Corporate and SLG Gale 55 in proportion to their respective membershipinterests in SLG 55 (50 percent each).

**12VREELAND ASSOCIATES, L.L.C.**

On September 8,****2006, the Operating Partnership enteredinto a joint venture with a Gale Affiliate to form M-C Vreeland, LLC (“M-CVreeland”).  M-C Vreeland was formed forthe sole purpose of acquiring a Gale Affiliate’s 50 percent membership interestin 12 Vreeland Associates, L.L.C., an entity owning an office property locatedat 12 Vreeland Road, Florham Park, New Jersey.

The operatingagreement of M-C Vreeland provides, among other things, for the GaleParticipation Rights.

The officeproperty at 12 Vreeland is a 139,750 square foot office building that is fullyleased to a single tenant through June 15, 2012.  The property is subject to a mortgage loan,which matures on July 1, 2012, in the initial amount of $18.1 million bearinginterest at 6.9 percent per annum.  As ofSeptember 30, 2006 the outstanding balance on the mortgage note was $10.6million.

Under the operatingagreement of 12 Vreeland Associates, L.L.C., M-C Vreeland has a 50 percentinterest, with S/K Florham Park Associates, L.L.C. (the managing member) andits affiliate holding the other 50 percent.

25

----

 

**SUMMARIES OF UNCONSOLIDATED JOINTVENTURES**

The following is asummary of the financial position of the unconsolidated joint ventures in whichthe Operating Partnership had investment interests as of September 30, 2006 andDecember 31, 2005:  *(dollars inthousands)*

 
| ** **  | ** ** | **September 30, 2006** | ** ** |
|-------------|------------|----------------------------------|------------|
| ** **  | ** ** | ** **                       | ** ** | ** ** | ** ** | **Plaza** | ** ** | ** ** | ** ** | ** ** | ** ** | **Red Bank** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **  | ** ** | **Meadowlands**                  | ** ** | **G&G** | ** ** | **VIII & IX** | ** ** | **Ramland** | ** ** | **Harborside** | ** ** | **Corporate** | ** ** | **Mack** | ** ** | **Route 93** | ** ** | **Gale** | ** ** | **55** | ** ** | **Combined** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **  | ** ** | **Xanadu**                       | ** ** | **Martco** | ** ** | **Associates** | ** ** | **Realty** | ** ** | **South Pier** | ** ** | **Plaza** | ** ** | **Green** | ** ** | **PFV** | ** ** | **Portfolio** | ** ** | **Kimball** | ** ** | **Corporate** | ** ** | **Vreeland** | ** ** | **Total** | ** ** |
| **Assets:** |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rental  property, net                                                          |   | $       | 425,431 |    | $      | 9,860  |   | $      | 11,558 |   | $      | 12,189 |   | $       | 70,462 |   | $      | 9,446   |   | $      | 503,696 |   | $      | 31,356 |   | $       | 54,292 |   | $      | 23,780 |   | — |   | $      | 8,287   |   | $      | 1,160,357 |    |
|--------------------------------------------------------------------------------|--------|---------|---------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|---------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|-----------|---------|
| Other  assets                                                                  |   | 178,253 |    | 7,155   |   | 1,177  |   | 1,234  |   | 12,074 |   | 936    |   | 35,499  |   | 26,060 |   | 7,274   |   | 653    |    | — |   | 920    |   | 271,235 |   |
| Total  assets                                                                  |   | $       | 603,684 |    | $      | 17,015 |   | $      | 12,735 |   | $      | 13,423 |   | $       | 82,536 |   | $      | 10,382  |   | $      | 539,195 |   | $      | 57,416 |   | $       | 61,566 |   | $      | 24,433 |   | — |   | $      | 9,207   |   | $      | 1,431,592 |    |
| **Liabilities and partners’/members’ capital  (deficit):**           |   |    |    |    |   |   |   |   |   |   |   |   |   |    |   |   |   |    |   |   |    |   |   |   |   |    |   |
| Mortgages,  loans payable and other obligations                                |   | —  |    | $       | 47,363 |   | — |   | $      | 14,936 |   | $      | 48,170 |    | — |   | $      | 358,495 |   | $      | 39,344  |   | $      | 39,435 |   | $       | 12,529 |   | — |   | $      | 10,684 |   | $      | 570,956 |   |
| Other  liabilities                                                             |   | $       | 40,682  |    | 1,027  |   | 530    |   | 355    |   | 6,059  |   | $      | 1,350   |   | 18,937 |   | 7,072   |   | 956    |    | — |   | — |   | —  |   | 76,968 |   |
| Partners’/members’  capital (deficit)                                |   | 563,002 |    | (31,375 | )      | 12,205 |   | (1,868 | )      | 28,307 |   | 9,032  |   | 161,763 |   | 11,000 |   | 21,175  |   | 11,904 |    | — |   | (1,477 | )      | 783,668 |   |
| Total liabilities and partners’/members’ capital  (deficit)          |   | $       | 603,684 |    | $      | 17,015 |   | $      | 12,735 |   | $      | 13,423 |   | $       | 82,536 |   | $      | 10,382  |   | $      | 539,195 |   | $      | 57,416 |   | $       | 61,566 |   | $      | 24,433 |   | — |   | $      | 9,207   |   | $      | 1,431,592 |    |
| Operating Partnership’s  investment in unconsolidated joint ventures, net |   | $       | 34,420  |    | $      | 5,708  |   | $      | 6,022  |   | $      | — |   | $       | 16,716 |   | $      | 4,744   |   | $      | 112,463 |   | $      | 2,718  |   | $       | 6,524  |   | $      | 1,006  |   | $      | 8,500  |   | $       | 6,952  |   | $         | 205,773 |   |
|                                                                                |        |         |         |         |        |        |        |        |        |        |        |        |        |         |        |        |        |         |        |        |         |        |        |        |        |         |        |        |        |        |        |        |        |        |         |        |        |           |         |  |

 

 
| ** **                                                                     | ** ** | **December 31, 2005** | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                     | ** ** | ** **                      | ** ** | ** ** | ** ** | **Plaza** | ** ** | ** ** | ** ** | ** ** | ** ** | **Red Bank** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **Meadowlands**                 | ** ** | **G&G** | ** ** | **VIII & IX** | ** ** | **Ramland** | ** ** | **Harborside** | ** ** | **Corporate** | ** ** | **Mack** | ** ** | **Route 93** | ** ** | **Gale** | ** ** | **55** | ** ** | **Combined** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **Xanadu**                      | ** ** | **Martco** | ** ** | **Associates** | ** ** | **Realty** | ** ** | **South Pier** | ** ** | **Plaza** | ** ** | **Green** | ** ** | **PFV** | ** ** | **Portfolio** | ** ** | **Kimball** | ** ** | **Corporate** | ** ** | **Vreeland** | ** ** | **Total** | ** ** |
| **Assets:**                                                                    |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rental  property, net                                                          |       | $                               | 390,488    |   | $ | 10,628 |   | $ | 12,024 |   | $ | 12,511 |   | $ | 74,466 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | $ | 500,117 |   |
| Other  assets                                                                  |       | 171,029                         |       | 6,427 |   | 1,661 |   | 1,188 |   | 11,393 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 191,698 |   |
| Total  assets                                                                  |       | $                               | 561,517    |   | $ | 17,055 |   | $ | 13,685 |   | $ | 13,699 |   | $ | 85,859 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 691,815 |   |
| **Liabilities and partners’/members’ capital  (deficit):**           |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgages,  loans payable and other obligations                                |       | —                          |       | $ | 46,588 |   | — |   | $ | 14,936 |   | $ | 56,970 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | $ | 118,494 |   |
| Other  liabilities                                                             |       | $                               | 60,447     |   | 876 |   | $ | 1,358 |   | 220 |   | 4,341 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 67,242 |   |
| Partners’/members’  capital (deficit)                                |       | 501,070                         |       | (30,409 | ) | 12,327 |   | (1,457 | ) | 24,548 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 506,079 |   |
| Total  liabilities and partners’/members’ capital (deficit)          |       | $                               | 561,517    |   | $ | 17,055 |   | $ | 13,685 |   | $ | 13,699 |   | $ | 85,859 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | $ | 691,815 |   |
| Operating Partnership’s investment  in unconsolidated joint ventures, net |       | $                               | 34,640     |   | $ | 6,438 |   | $ | 6,084 |   | $ | — |   | $ | 14,976 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | $ | 62,138 |   |

 

26

----

 

**SUMMARIES OF UNCONSOLIDATED JOINT VENTURES**

The following is asummary of the results of operations of the unconsolidated joint ventures forthe period in which the Operating Partnership had investment interests duringthe three months ended September 30, 2006 and 2005:  *(dollars in thousands)*
| ** ** | ** ** | **Three Months Ended September 30, 2006** | ** ** |
|------------|------------|--------------------------------------------------------------------|------------|
| ** ** | ** ** | ** **                                                         | ** ** | ** ** | ** ** | **Plaza** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Red Bank** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** ** | ** ** | **Meadowlands**                                                    | ** ** | **G&G** | ** ** | **VIII & IX** | ** ** | **Ramland** | ** ** | **Ashford** | ** ** | **Harborside** | ** ** | **Corporate** | ** ** | **Mack** | ** ** | **Route 93** | ** ** | **Gale** | ** ** | **55** | ** ** | **Combined** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** ** | ** ** | **Xanadu**                                                         | ** ** | **Martco** | ** ** | **Associates** | ** ** | **Realty** | ** ** | **Loop** | ** ** | **South Pier** | ** ** | **Plaza** | ** ** | **Green** | ** ** | **PFV** | ** ** | **Portfolio** | ** ** | **Kimball** | ** ** | **Corporate** | ** ** | **Vreeland** | ** ** | **Total** | ** ** |
| Total  revenues                                                                          |   | $      | 110    |   | $      | 1,703  |   | $      | 167    |   | $      | 518    |   | — |   | $      | 9,926  |   | — |   | $      | 15,002 |   | $      | 2,194  |   | $      | 1,970   |   | $      | 3      |   | — |   | $  | 156    |   | $      | 31,749 |   |
|------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|----|--------|--------|--------|--------|--------|
| Operating  and other expenses                                                            |   | (2,578 | )      | (999   | )      | (62    | )      | (391   | )      | — |   | (6,015 | )      | — |   | (7,578 | )      | (1,694 | )      | (590   | )      | (1     | )      | — |   | (64    | )      | (19,972 | )      |
| Depreciation  and amortization                                                           |   | — |   | (363   | )      | (154   | )      | (167   | )      | — |   | (1,460 | )      | — |   | (5,841 | )      | (695   | )      | (349   | )      | — |   | — |   | (29    | )      | (9,058  | )      |
| Interest  expense                                                                        |   | — |   | (845   | )      | — |   | (267   | )      | — |   | (893   | )      | — |   | (6,629 | )      | (795   | )      | (761   | )      | — |   | — |   | — |   | (10,190 | )      |
| ** **                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |
| Net  income                                                                              |   | $      | (2,468 | )      | $      | (504   | )      | $      | (49    | )      | $      | (307   | )      | — |   | $      | 1,558  |   | — |   | $      | (5,046 | )      | $      | (990   | )      | $      | 270     |   | $      | 2      |   | — |   | $  | 63     |   | $      | (7,471 | )      |
| Operating Partnership’s equity  in earnings (loss) of unconsolidated joint ventures |   | $      | (1,876 | )      | $      | (409   | )      | $      | (24    | )      | $      | (225   | )      | — |   | $      | 639    |   | — |   | $      | (2,749 | )      | $      | (211   | )      | $      | 67      |   | — |   | — |   | $      | 31 |   | $      | (4,757 | )      |

 
| ** **                                                                               | ** ** | **Three Months  Ended September 30, 2005** | ** ** |
|------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                               | ** ** | ** **                                 | ** ** | ** ** | ** ** | **Plaza** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Red Bank** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                               | ** ** | **Meadowlands**                            | ** ** | **G&G** | ** ** | **VIII & IX** | ** ** | **Ramland** | ** ** | **Ashford** | ** ** | **Harborside** | ** ** | **Corporate** | ** ** | **Mack** | ** ** | **Route 93** | ** ** | **Gale** | ** ** | **55** | ** ** | **Combined** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                               | ** ** | **Xanadu**                                 | ** ** | **Martco** | ** ** | **Associates** | ** ** | **Realty** | ** ** | **Loop** | ** ** | **South Pier** | ** ** | **Plaza** | ** ** | **Green** | ** ** | **PFV** | ** ** | **Portfolio** | ** ** | **Kimball** | ** ** | **Corporate** | ** ** | **Vreeland** | ** ** | **Total** | ** ** |
| Total revenues                                                                           |       | —                                     |       | $ | 1,796 |   | $ | 94 |   | $ | 486 |   | — |   | $ | 9,045 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | $ | 11,421 |   |
| Operating and other  expenses                                                            |       | —                                     |       | (948 | ) | (37 | ) | (381 | ) |  — |   | — (5,848 | ) | — |   | — |   | — |   | — |   | — |   | — |   | — |   | (7,214 | ) |
| Depreciation and amortization                                                            |       | —                                     |       | (315 | ) | (154 | ) | (160 | ) | — |   | (1,300 | ) | — |   | — |   | — |   | — |   | — |   | — |   | — |   | (1,929 | ) |
| Interest expense                                                                         |       | —                                     |       | (604 | ) | — |   | (198 | ) | — |   | (1,084 | ) | — |   | — |   | — |   | — |   | — |   | — |   | — |   | (1,886 | ) |
| ** **                                                                               |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                               |       | —                                     |       | $ | (71 | ) | $ | (97 | ) | $ | (253 | ) | — |   | $ | 813 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | $ | 392 |   |
| Operating Partnership’s equity  in earnings (loss) of unconsolidated joint ventures |       | —                                     |       | $ | (35 | ) | $ | (49 | ) | $ | — |   | — |   | $ | 406 |   | $ | 0 |   | — |   | — |   | — |   | — |   | — |   | — |   | $ | 322 |   |
|                                                                                          |            |                                            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

27

----

 

**SUMMARIES OF UNCONSOLIDATED JOINT VENTURES**

The following is asummary of the results of operations of the unconsolidated joint ventures forthe period in which the Operating Partnership had investment interests duringthe nine months ended September 30, 2006 and 2005:  *(dollars in thousands)*
| ** ** | ** ** | **Nine Months Ended September 30, 2006** | ** ** |
|------------|------------|-------------------------------------------------------------------|------------|
| ** ** | ** ** | ** **                                                        | ** ** | ** ** | ** ** | **Plaza** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Red Bank** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** ** | ** ** | **Meadowlands**                                                   | ** ** | **G&G** | ** ** | **VIII & IX** | ** ** | **Ramland** | ** ** | **Ashford** | ** ** | **Harborside** | ** ** | **Corporate** | ** ** | **Mack** | ** ** | **Route 93** | ** ** | **Gale** | ** ** | **55** | ** ** | **Combined** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** ** | ** ** | **Xanadu**                                                        | ** ** | **Martco** | ** ** | **Associates** | ** ** | **Realty** | ** ** | **Loop** | ** ** | **South Pier** | ** ** | **Plaza** | ** ** | **Green** | ** ** | **PFV** | ** ** | **Portfolio** | ** ** | **Kimball** | ** ** | **Corporate** | ** ** | **Vreeland** | ** ** | **Total** | ** ** |
| Total  revenues                                                                          |   | $       | 409    |   | $       | 5,351  |   | $       | 489    |   | $       | 1,533   |   | — |   | $       | 27,529 |   | — |   | $       | 24,469 |   | $       | 6,585  |   | $       | 2,528   |   | $      | 3      |   | — |    | $  | 156    |    | $      | 69,052 |   |
|------------------------------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|---------|---------|--------|--------|--------|---------|--------|--------|--------|--------|---------|--------|--------|---------|--------|--------|---------|---------|--------|--------|--------|--------|--------|---------|----|--------|---------|--------|--------|--------|
| Operating  and other expenses                                                            |   | (2,729  | )      | (2,880 | )       | (150   | )      | (1,095  | )      | — |    | (16,651 | )      | — |   | (11,354 | )      | (4,410 | )      | (847   | )       | (1     | )      | —  |   | (64    | )       | (40,181 | )      |
| Depreciation  and amortization                                                           |   | —  |   | (1,075 | )       | (462   | )      | (543    | )      | — |    | (4,369  | )      | — |   | (9,219  | )      | (2,116 | )      | (465   | )       | — |   | —  |   | (29    | )       | (18,278 | )      |
| Interest  expense                                                                        |   | —  |   | (2,362 | )       | — |   | (756    | )      | — |    | (2,750  | )      | — |   | (10,219 | )      | (2,178 | )      | (1,002 | )       | — |   | —  |   | — |    | (19,267 | )      |
| ** **                                                                               |   |    |   |   |    |   |   |    |   |   |    |    |   |   |   |    |   |   |   |   |    |   |   |    |   |   |    |    |   |
| Net  income                                                                              |   | $       | (2,320 | )      | $       | (966   | )      | $       | (123   | )      | $       | (861    | )      | — |   | $       | 3,759  |   | — |   | $       | (6,323 | )      | $       | (2,119 | )      | $       | 214     |   | $      | 2      |   | — |    | $  | 63     |    | $      | (8,674 | )      |
| Operating Partnership’s equity  in earnings (loss) of unconsolidated joint ventures |   | $  | (1,876 | )      | $  | (731   | )      | $  | (61    | )      | $  | (225    | )      | — |   | $  | 1,740  |   | — |   | $  | (4,009 | )      | $  | (278   | )      | $  | 53      |   | — |   | — |   | $  | 31 |   | $  | (5,356 | )      |

 
| ** **                                                                               | ** ** | **Nine Months Ended September 30, 2005** | ** ** |
|------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                                                               | ** ** | ** **                                                        | ** ** | ** ** | ** ** | **Plaza** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Red Bank** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                               | ** ** | **Meadowlands**                                                   | ** ** | **G&G** | ** ** | **VIII & IX** | ** ** | **Ramland** | ** ** | **Ashford** | ** ** | **Harborside** | ** ** | **Corporate** | ** ** | **Mack** | ** ** | **Route 93** | ** ** | **Gale** | ** ** | **55** | ** ** | **Combined** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                               | ** ** | **Xanadu**                                                        | ** ** | **Martco** | ** ** | **Associates** | ** ** | **Realty** | ** ** | **Loop** | ** ** | **South Pier** | ** ** | **Plaza** | ** ** | **Green** | ** ** | **PFV** | ** ** | **Portfolio** | ** ** | **Kimball** | ** ** | **Corporate** | ** ** | **Vreeland** | ** ** | **Total** | ** ** |
| Total  revenues                                                                          |       | —                                                            |       | $ | 4,945 |   | $ | 222 |   | $ | 1,519 |   | $ | 405 |   | $ | 24,932 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | $ | 32,023 |   |
| Operating  and other expenses                                                            |       | —                                                            |       | (2,685 | ) | (133 | ) | (1,047 | ) | (397 | ) | (15,673 | ) | — |   | — |   | — |   | — |   | — |   | — |   | — |   | (19,935 | ) |
| Depreciation  and amortization                                                           |       | —                                                            |       | (861 | ) | (462 | ) | (478 | ) | (160 | ) | (4,184 | ) | — |   | — |   | — |   | — |   | — |   | — |   | — |   | (6,145 | ) |
| Interest  expense                                                                        |       | —                                                            |       | (1,592 | ) | — |   | (540 | ) | — |   | (3,091 | ) | — |   | — |   | — |   | — |   | — |   | — |   | — |   | (5,223 | ) |
| ** **                                                                               |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net  income                                                                              |       | —                                                            |       | $ | (193 | ) | $ | (373 | ) | $ | (546 | ) | $ | (152 | ) | $ | 1,984 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | $ | 720 |   |
| Operating Partnership’s equity  in earnings (loss) of unconsolidated joint ventures |       | —                                                            |       | $  | (280 | ) | $  | (187 | ) | $  | — |   | $  | (30 | ) | $  | 1,049 |   | — |   | — |   | — |   | — |   | — |   | — |   | — |   | $  | 552 |   |

 

28

----

 

**5.****              DEFERRED CHARGESAND OTHER ASSETS**
| ** **                                                       | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| **(dollars in thousands)**                             | ** ** | **2006**               | ** ** | **2005**              | ** ** |
| Deferred leasing costs                                           |       | $                      | 186,425    |                  | $          | 182,975 |   |
| Deferred financing  costs                                        |       | 21,379                 |       | 21,764                |       |
|                                                             |       | 207,804                |       | 204,739               |       |
| Accumulated  amortization                                        |       | (75,083                | )          | (73,410               | )          |
| Deferred charges, net                                            |       | 132,721                |       | 131,329               |       |
| Notes receivable                                                 |       | 11,806                 |       | 11,919                |       |
| In-place lease values,  related intangible and other assets, net |       | 71,859                 |       | 37,028                |       |
| Prepaid expenses and  other assets, net                          |       | 34,498                 |       | 17,358                |       |
|                                                             |       |                   |       |                  |       |
| Total deferred charges and other assets, net                     |       | $                      | 250,884    |                  | $          | 197,634 |   |

 

**6.****              DISCONTINUEDOPERATIONS**

On March 23, 2006,the Operating Partnership entered into an agreement to sell its 118,727square-foot office building located at 300 Westage Business Center Drive inFishkill, New York.  On June 28, 2006,the Operating Partnership completed the sale of the building, received netsales proceeds of approximately $14.8 million, and recognized a gain ofapproximately $3.9 million on the sale.

On June 30, 2006,the Operating Partnership sold 1510 Lancer Drive, an 88,000 square-footoffice/flex building located in Moorestown, New Jersey, for $4.2 million, andrecognized a gain of approximately $1.0 million on the sale.

On August 9, 2006,the Operating Partnership entered into an agreement to sell its entire Coloradoportfolio, which consists of 19 office buildings totaling approximately 1.4million square feet, plus 7.1 acres of vacant land and a 1.6 acre site beingdeveloped for additional parking at one of the office buildings, for approximately$195.3 million.

On September 25,2006, the Operating Partnership entered into an agreement to sell itsCalifornia portfolio, which consists of two office buildings totalingapproximately 450,891 square feet, for approximately $126 million.

The above referencedportfolios are identified as held for sale as of September 30, 2006 and carriedan aggregate book value of $247.2 million, net of accumulated depreciation of$50 million.  The Operating Partnershiphas presented these assets as discontinued operations in its statements ofoperations for all periods presented.

When the OperatingPartnership identified its 178,329 square foot office building located at 201Willowbrook Boulevard in Wayne, New Jersey as held for sale on March 31, 2005,it determined that the carrying amount of this property was not expected to berecovered from estimated net sales proceeds and recognized a valuationallowance of $1.6 million during the three months ended March 31, 2005.

As the OperatingPartnership sold 111 East Shore Road and 600 Community Drive in NorthHempstead, New York; 210 South 16th Street in Omaha, Nebraska; 3600 South Yosemitein Denver, Colorado; 201 Willowbrook Boulevard in Wayne, New Jersey; 1122 AlmaRoad in Richardson, Texas; and 3 Skyline Drive in Hawthorne, New York duringthe year ended December 31, 2005; the Operating Partnership has also presentedthese assets as discontinued operations in the statements of operations for allperiods presented.

29

----

The followingtables summarize income from discontinued operations and the related realizedgains (losses) and unrealized losses on disposition of rental property, net forthe three and nine month periods ended September 30, 2006 and 2005:  *(dollars in thousands)*
| ** **                                 | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                 | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                 | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Total revenues                             |       | $                                | 9,683      |                            | $          | 9,858 |   | $ | 29,840 |   | $ | 38,483 |   |
| Operating and  other expenses              |       | (4,252                           | )          | (4,781                          | )          | (12,958 | ) | (14,548 | ) |
| Depreciation and  amortization             |       | (1,662                           | )          | (2,910                          | )          | (7,088 | ) | (9,420 | ) |
| Interest expense  (net of interest income) |       | —                           |       | —                          |       | 4 |   | 42 |   |
|                                       |       |                             |       |                            |       |   |   |   |   |
| Income from  discontinued operations       |       | $                                | 3,769      |                            | $          | 2,167 |   | $ | 9,798 |   | $ | 14,557 |   |

 
| ** **                                                                            | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|---------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                            | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                                            | ** ** | **2006**                         | ** ** | **2005**                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| Realized gains  on disposition of rental property                                     |       | —                           |       | —                          |       | $ | 4,905 |   | $ | 12,691 |   |
| Unrealized  losses on disposition of rental property                                  |       | —                           |       | —                          |       | — |   | (1,613) |   |
|                                                                                  |       |                             |       |                            |       |   |   |   |   |
| Realized gains (losses)  and unrealized losses on disposition of rental property, net |       | —                           |       | —                          |       | $ | 4,905 |   | $ | 11,078 |   |

 

**7.****              SENIOR UNSECUREDNOTES**

A summary of theOperating Partnership’s senior unsecured notes as of September 30, 2006 andDecember 31, 2005 is as follows:  *(dollars in thousands)*
| ** **                                            | ** ** | **September 30,** | ** ** | **December 31,** | ** ** | **Effective**     | ** ** |
|-------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|-------------------|------------|
| ** **                                            | ** ** | **2006**               | ** ** | **2005**              | ** ** | **Rate (1)** | ** ** |
| 7.250% Senior  Unsecured Notes, due March 15, 2009    |       | $                      | 299,423    |                  | $          | 299,246           |       | 7.49 | % |
| 5.050% Senior  Unsecured Notes, due April 15, 2010    |       | 149,806                |       | 149,765               |       | 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 |       | 299,251                |       | 299,122               |       | 7.93              | %          |
| 5.250% Senior  Unsecured Notes, due January 15, 2012  |       | 98,966                 |       | —                |       | 5.46              | %          |
| 6.150% Senior  Unsecured Notes, due December 15, 2012 |       | 91,858                 |       | 91,488                |       | 6.89              | %          |
| 5.820% Senior  Unsecured Notes, due March 15, 2013    |       | 25,392                 |       | 25,309                |       | 6.45              | %          |
| 4.600% Senior  Unsecured Notes, due June 15, 2013     |       | 99,808                 |       | 99,787                |       | 4.74              | %          |
| 5.125% Senior  Unsecured Notes, due February 15, 2014 |       | 201,768                |       | 201,948               |       | 5.11              | %          |
| 5.125% Senior  Unsecured Notes, due January 15, 2015  |       | 149,233                |       | 149,164               |       | 5.30              | %          |
| 5.800% Senior  Unsecured Notes, due January 15, 2016  |       | 200,711                |       | 99,680                |       | 5.81              | %          |
|                                                  |       |                   |       |                  |       |              |       |
| Total Senior Unsecured  Notes                         |       | $                      | 1,631,216  |                  | $          | 1,430,509         |       |   |   |

 

----

(1)          Includes the cost ofterminated treasury lock agreements (if any), offering and other transactioncosts and the discount on the notes, as applicable.

 

On January 24,2006, the Operating Partnership issued $100.0 million face amount of 5.80percent senior unsecured notes due January 15, 2016 with interest payablesemi-annually in arrears, and $100.0 million face amount of 5.25 percent seniorunsecured notes due January 15, 2012 with interest payable semi-annually inarrears.  The total proceeds from theissuances, including accrued interest on the 5.80 percent notes, ofapproximately $200.8 million were used to reduce outstanding borrowings underthe Operating Partnership’s unsecured facility.

30

----

**8.****              UNSECUREDREVOLVING CREDIT FACILITY**

**2004Unsecured Facility**

On November 23, 2004, theOperating Partnership obtained an unsecured revolving credit facility (“2004 UnsecuredFacility”) with a borrowing capacity of $600.0 million (expandable to $800.0million).  The interest rate onoutstanding borrowings (not electing the Operating Partnership’s competitivebid feature) under the 2004 Unsecured Facility is currently LIBOR plus 65 basispoints.  The facility has a competitivebid feature, which allows the Operating Partnership to solicit bids fromlenders under the facility to borrow up to $300.0 million at interest ratesless than the current LIBOR plus 65 basis point spread.  As of September 30, 2006, the OperatingPartnership’s outstanding borrowings carried a weighted average interest rateof LIBOR plus 46 points.  The OperatingPartnership may also elect an interest rate representing the higher of thelender’s prime rate or the Federal Funds rate plus 50 basis points.  The 2004 Unsecured Facility, which alsorequired a 20 basis point facility fee on the current borrowing capacitypayable quarterly in arrears, was scheduled to mature in November 2007.

On September 16,2005, the Operating Partnership extended and modified the 2004 UnsecuredFacility with a group of 23 lenders (reduced from 27).  The facility was extended for an additionaltwo years and now matures in November 2009, with an extension option of oneyear, which would require a payment of 25 basis points of the then borrowingcapacity of the facility upon exercise. In addition, the facility fee was reduced by five basis points to 15basis points at the BBB/Baa2 pricing level.

The interest rate and the facility fee are subject toadjustment, on a sliding scale, based upon the operating partnership’sunsecured debt ratings.  In the event ofa change in the Operating Partnership’s unsecured debt rating, the interest andfacility fee rates will be adjusted in accordance with the following table:
| **Operating Partnership’s**        | ** ** | **Interest Rate –**    | ** ** | ** **            | ** ** |
|----------------------------------------------|------------|---------------------------------------|------------|-----------------------|------------|
| **Unsecured Debt Ratings:**        | ** ** | **Applicable Basis Points** | ** ** | **Facility Fee** | ** ** |
| **S&P Moody’s/Fitch (a)** | ** ** | **Above LIBOR**                  | ** ** | **Basis Points** | ** ** |
| No ratings or  less than BBB-/Baa3/BBB-      |       | 112.5                                 |       | 25.0                  |       |
| BBB-/Baa3/BBB-                               |       | 80.0                                  |       | 20.0                  |       |
| BBB/Baa2/BBB  (current)                      |       | 65.0                                  |       | 15.0                  |       |
| BBB+/Baa1/BBB+                               |       | 55.0                                  |       | 15.0                  |       |
| A-/A3/A- or higher                           |       | 50.0                                  |       | 15.0                  |       |

 

----

(a)          If the OperatingPartnership 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 suchratings.  If the Operating Partnershiphas debt ratings from three rating agencies, one of which is S&P orMoody’s, the rates per the above table shall be based on the lower of the twohighest ratings.  If the OperatingPartnership has debt ratings from only one agency, it will be considered tohave no rating or less than BBB-/Baa3/BBB- per the above table.

 

The terms of the 2004 Unsecured Facility include certain restrictionsand covenants which limit, among other things, the payment of dividends (asdiscussed below), the incurrence of additional indebtedness, the incurrence ofliens and the disposition of real estate properties (to the extent that: (i)such property dispositions cause the Operating Partnership to default on any ofthe financial ratios of the facility described below, or (ii) the propertydispositions are completed while the Operating Partnership is under an event ofdefault under the facility, unless, under certain circumstances, suchdisposition is being carried out to cure such default), and which requirecompliance with financial ratios relating to the maximum leverage ratio, themaximum amount of secured indebtedness, the minimum amount of tangible networth, the minimum amount of fixed charge coverage, the maximum amount ofunsecured indebtedness, the minimum amount of unencumbered property interestcoverage and certain investment limitations. The dividend restriction referred to above provides that, except toenable the Corporation to continue to qualify as a REIT under the Code, theCorporation will not during any four consecutive fiscal quarters makedistributions with respect to common stock or other common equity interests inan aggregate amount in excess of 90 percent of funds from operations (asdefined in the facility agreement) for such period, subject to certain otheradjustments.

 

The lending groupfor the 2004 Unsecured Facility consists of: JPMorgan Chase Bank, N.A., asadministrative agent; Bank of America, N.A., as syndication agent; The Bank ofNova Scotia, New York Agency; Wachovia Bank, National Association; and WellsFargo Bank, National Association, as documentation agents; SunTrust Bank, assenior managing agent; US Bank National Association; Citicorp North America,Inc.; and PNC Bank National

31

----

Association, asmanaging agents; and Bank of China, New York Branch; The Bank of New York;Chevy Chase Bank, F.S.B.; The Royal Bank of Scotland, plc; Mizuho Corporate Bank,Ltd.; The Bank of Toyko – Mitsubishi UFJ, Ltd. (successor by merger to UFJ BankLimited), New York Branch; The Governor and Company of the Bank of Ireland;Bank Hapoalim B.M.; Comerica Bank; Chang Hwa Commercial Bank, Ltd., New YorkBranch; First Commercial Bank, New York Agency; Chiao Tung Bank Co., Ltd., NewYork Agency; Deutsche Bank Trust Company Americas; and Hua Nan Commercial Bank,New York Agency.

###### **SUMMARY**

As of September30, 2006 and December 31, 2005, the Operating Partnership had outstanding borrowingsof $412.0 million and $227.0 million respectively, under the 2004 UnsecuredFacility.

**9.****              MORTGAGES, LOANSPAYABLE AND OTHER OBLIGATIONS**

The OperatingPartnership has mortgages, loans payable and other obligations which primarilyconsist of various loans collateralized by certain of the Operating Partnership’srental properties.  Payments onmortgages, loans payable and other obligations are generally due in monthlyinstallments of principal and interest, or interest only.

A summary of the OperatingPartnership’s mortgages, loans payable and other obligations as of September30, 2006 and December 31, 2005 is as follows: *(dollars in thousands)*

 
| ** **                                            | ** ** | ** **                           | ** ** | **Effective**     | ** ** | **Principal Balance at** | ** ** | ** **            | ** ** |
|-------------------------------------------------------|------------|--------------------------------------|------------|-------------------|------------|------------------------------------|------------|-----------------------|------------|
| ** **                                            | ** ** | ** **                           | ** ** | **Interest**      | ** ** | **September 30,**             | ** ** | **December 31,** | ** ** | ** ** | ** ** |
| **Property Name**                                | ** ** | **Lender**                           | ** ** | **Rate (a)** | ** ** | **2006**                           | ** ** | **2005**              | ** ** | **Maturity** | ** ** |
| Monmouth  Executive Center                            |       | LaSalle  Brothers CMBS               |       | 4.98              | %          | —                             |       | $                     | 16,044     |   | 08/01/06 | (b) |
| Mack-Cali Airport                                     |       | Allstate  Life Insurance Co.         |       | 7.05              | %          | $                                  | 9,479      |                  | 9,644      |   | 04/01/07 |   |
| 6406 Ivy Lane                                         |       | Morgan  Stanley Guaranty Trust Co.   |       | 5.57              | %          | 14,840                             |       | —                |       | 06/01/07 |   |
| 6303 Ivy Lane                                         |       | State  Farm Life Insurance Co.       |       | 5.57              | %          | 6,114                              |       | —                |       | 07/01/07 |   |
| 6404 Ivy Lane                                         |       | TIAA                                 |       | 5.58              | %          | 13,819                             |       | —                |       | 08/01/08 |   |
| Assumed  obligations                                  |       | Various                              |       | 4.90              | %          | 42,227                             |       | 53,241                |       | 05/01/09 | (c) |
| Various                                               |       | Prudential  Insurance                |       | 4.84              | %          | 150,000                            |       | 150,000               |       | 01/15/10 | (d) |
| 105 Challenger  Road                                  |       | Archon  Financial CMBS               |       | 6.24              | %          | 18,693                             |       | —                |       | 06/06/10 |   |
| 2200 Renaissance  Boulevard                           |       | TIAA                                 |       | 5.89              | %          | 17,909                             |       | 18,174                |       | 12/01/12 |   |
| Soundview Plaza                                       |       | TIAA                                 |       | 6.02              | %          | 18,119                             |       | 18,427                |       | 01/01/13 |   |
| 9200 Edmonston  Road                                  |       | Principal  Commercial Funding L.L.C. |       | 5.53              | %          | 5,265                              |       | —                |       | 05/01/13 |   |
| 6305 Ivy Lane                                         |       | John  Hancock Life Insurance Co.     |       | 5.53              | %          | 7,331                              |       | —                |       | 01/01/14 |   |
| 395 West Passaic                                      |       | State  Farm Life Insurance Co.       |       | 6.00              | %          | 13,093                             |       | —                |       | 05/01/14 |   |
| 6301 Ivy Lane                                         |       | John  Hancock Life Insurance Co.     |       | 5.52              | %          | 6,860                              |       | —                |       | 07/01/14 |   |
| 35 Waterview  Blvd.                                   |       | Wachovia  CMBS                       |       | 6.35              | %          | 20,372                             |       | —                |       | 08/11/14 |   |
| 500 West Putnam  Avenue                               |       | New  York Life Insurance Co.         |       | 5.57              | %          | 25,000                             |       | 25,000                |       | 01/10/16 |   |
| 23 Main Street                                        |       | JP  Morgan CMBS                      |       | 5.59              | %          | 33,500                             |       | 33,500                |       | 09/01/18 |   |
| Harborside –  Plaza 2 and 3                      |       | Northwestern/Principal               |       | —            |       | —                             |       | 144,642               |       | — | (e) |
|                                                  |       |                                 |       |              |       |                               |       |                  |       |   |   |
| Total mortgages, loans  payable and other obligations |       |                                 |       |              |       | $                                  | 402,621    |                  | $          | 468,672 |   |   |   |

 

----

(a)          Reflects effective rateof debt, including deferred financing costs, comprised of the cost ofterminated treasury lock agreements (if any), debt initiation costs and othertransaction costs, as applicable.

(b)         Mortgage iscollateralized by three properties.  OnAugust 1, 2006, the Operating Partnership repaid this mortgage loan at par, usingborrowings under the 2004 Unsecured Facility.

(c)          The obligations matureat various times through May 2009.

(d)         Mortgage iscollateralized by seven properties.

(e)          On January 3, 2006, theOperating Partnership repaid this mortgage loan at par, using borrowings underthe 2004 Unsecured Facility.

 

###### **CASHPAID FOR INTEREST AND INTEREST CAPITALIZED**

Cash paid forinterest for the nine months ended September 30, 2006 and 2005 was $112,134,000and $96,593,000 respectively.  Interestcapitalized by the Operating Partnership for the nine months ended September30, 2006 and 2005 was $4,777,000 and $4,059,000, respectively.

###### **SUMMARYOF INDEBTEDNESS**

As of September 30, 2006,the Operating Partnership’s total indebtedness of $2,445,837,000 (weightedaverage

32

----

interest rate of 6.07percent) was comprised of $412,000,000 of revolving credit facility borrowings(weighted average rate of 5.79 percent) and fixed rate debt and otherobligations of $2,033,837,000 (weighted average rate of 6.13 percent).

As of December 31,2005, the Operating Partnership’s total indebtedness of $2,126,181,000(weighted average interest rate of 6.15 percent) was comprised of $227,000,000of revolving credit facility borrowings (weighted average rate of 4.84 percent)and fixed rate debt of $1,899,181,000 (weighted average rate of 6.30 percent).

**10.****       PARTNERS’ CAPITAL**

Partners’ capitalin the accompanying consolidated financial statements relates to: (a) GeneralPartner’s capital, consisting of common units and Series C preferred units heldby the Corporation in the Operating Partnership, and (b) Limited Partners’capital, consisting of common units held by the limited partners.

Any transactionsresulting in the issuance of additional common and preferred stock of theCorporation result in a corresponding issuance by the Operating Partnership ofan equivalent amount of common and preferred units to the Corporation.

**GENERALPARTNER:**

**PREFERREDSTOCK**

On March 14, 2003, in a publicly registered transaction with a singleinstitutional buyer, the Corporation completed the sale and issuance of 10,000shares of eight-percent Series C cumulative redeemable perpetual preferredstock (“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 CPreferred Stock.  The Corporationreceived net proceeds of approximately $24.8 million from the sale.

The Series CPreferred Stock has preference rights with respect to liquidation anddistributions over the common stock. Holders of the Series C Preferred Stock, except under certain limitedconditions, will not be entitled to vote on any matters.  In the event of a cumulative arrearage equalto six quarterly dividends, holders of the Series C Preferred Stock will havethe right to elect two additional members to serve on the Corporation’s Boardof Directors until dividends have been paid in full.  At September 30, 2006, there were nodividends in arrears.  The Corporationmay issue unlimited additional preferred stock ranking on a parity with theSeries C Preferred Stock but may not issue any preferred stock senior to theSeries C Preferred Stock without the consent of two-thirds of its holders.  The Series C Preferred Stock is essentiallyon an equivalent basis in priority with the Preferred Units.

Except undercertain conditions relating to the Corporation’s qualification as a REIT, theSeries C Preferred Stock is not redeemable prior to March 14, 2008.  On and after such date, the Series CPreferred Stock will be redeemable at the option of the Corporation, in wholeor in part, at $25 per depositary share, plus accrued and unpaid dividends.

In connection withthe Corporation’s issuance of $25 million of Series C cumulative redeemableperpetual preferred stock, the Corporation acquired from the OperatingPartnership $25 million of Series C Preferred Units (the “Series C PreferredUnits”), which have terms essentially identical to the Series C Preferred Stock.

**REPURCHASEOF GENERAL PARTNER UNITS**

On September 13, 2000,the Board of Directors authorized an increase to the Corporation’s repurchaseprogram under which the Corporation was permitted to purchase up to anadditional $150 million of the Corporation’s outstanding common stock (“RepurchaseProgram”).  From that date through itslast purchases on January 10, 2003, the Corporation purchased and retired,under the Repurchase Program, 3,746,400 shares of its outstanding common stockfor an aggregate cost of approximately $104.5 million.  Concurrent with these purchases, theCorporation sold to the Operating Partnership 3,746,400 of its outstandingcommon units for an aggregate cost of approximately $104.5 million.  The Corporation has a remaining authorizationto repurchase up to an additional $45.5 million of its outstanding commonstock, which it may repurchase from time to time in open market transactions atprevailing prices or through privately negotiated transactions.

33

----

###### **STOCKOPTION PLANS**

In May 2004, the Corporation established the 2004 Incentive Stock Planunder which a total of 2,500,000 shares have been reserved for issuance.  No options have been granted throughSeptember 30, 2006 under this plan.  InSeptember 2000, the Corporation established the 2000 Employee Stock Option Plan(“2000 Employee Plan”) and the Amended and Restated 2000 Director Stock OptionPlan (“2000 Director Plan”).  In May2002, shareholders of the Corporation approved amendments to both plans toincrease the total shares reserved for issuance under both of the 2000 plansfrom 2,700,000 to 4,350,000 shares of the Corporation’s common stock (from2,500,000 to 4,000,000 shares under the 2000 Employee Plan and from 200,000 to350,000 shares under the 2000 Director Plan). In 1994, and as subsequently amended, the Corporation established the Mack-CaliEmployee Stock Option Plan (“Employee Plan”) and the Mack-Cali Director StockOption Plan (“Director Plan”) under which a total of 5,380,188 shares (subjectto adjustment) of the Corporation’s common stock had been reserved for issuance(4,980,188 shares under the Employee Plan and 400,000 shares under the DirectorPlan).  As the Employee Plan and DirectorPlan expired in 2004, stock options may no longer be issued under those plans.  Stock options granted under the Employee Planin 1994 and 1995 became exercisable over a three-year period.  Stock options granted under the 2000 EmployeePlan and those options granted subsequent to 1995 under the Employee Planbecome exercisable over a five-year period. All stock options granted under both the 2000 Director Plan and DirectorPlan become exercisable in one year.  Alloptions were granted at the fair market value at the dates of grant and haveterms of ten years.  As of September 30,2006 and December 31, 2005, the stock options outstanding had a weightedaverage remaining contractual life of approximately 4.9 and 5.7 years,respectively.  Stock options exercisableat September 30, 2006 and December 31, 2005 had a weighted average remainingcontractual life of approximately 4.4 and 5.2 years, respectively.

 

Informationregarding the Corporation’s stock option plans for the nine months endedSeptember 30, 2006 is summarized below:

 
| ** **                                                | ** ** | **Shares**  | ** ** | **Weighted**            | ** ** | ** **                   | ** ** |
|-----------------------------------------------------------|------------|-------------|------------|-------------------------|------------|------------------------------|------------|
| ** **                                                | ** ** | **Under**   | ** ** | **Average**             | ** ** | **Aggregate Intrinsic** | ** ** |
| ** **                                                | ** ** | **Options** | ** ** | **Exercise Price** | ** ** | **Value $(000’s)** | ** ** |
| Outstanding at  January 1, 2006                           |       | 1,083,585   |       | $                       | 29.63      |                         |       |   |
| Exercised                                                 |       | (302,619    | )          | $                       | 29.21      |                         |       |   |
| Lapsed or  canceled                                       |       | (39,360     | )          | $                       | 28.47      |                         |       |   |
| Outstanding at  September 30, 2006 ($24.63 – $45.47) |       | 741,606     |       | $                       | 29.86      |                         | $          | 16,271 |   |
| Options  exercisable at September 30, 2006                |       | 491,286     |       | $                       | 30.57      |                         | $          | 10,430 |   |
| Available for grant at  September 30, 2006                |       | 4,616,448   |       | —                  |       | —                       |       |

 

Theweighted average fair value at grant date of options granted during 2005 was$3.62 per option.  The fair value of eachsignificant option grant is estimated on the date of grant using theBlack-Scholes model.  The followingweighted average assumptions, based on the analysis of historical Corporationand market data, are included in the Corporation’s fair value calculations ofstock options granted in 2005:
| ** **                | ** ** | **2005** | ** ** |
|---------------------------|------------|----------|------------|
| Expected life (in  years) |       | 6        |       |
| Risk-free  interest rate  |       | 3.97     | %          |
| Volatility                |       | 15.00    | %          |
| Dividend yield            |       | 5.54     | %          |

 

No stock options weregranted during the nine months ended September 30, 2006.

Cash received fromoptions exercised under all stock option plans was $3.1 million and $1.4million for the three months ended September 30, 2006 and 2005, respectively,and $8.8 million and $15.5 million for the nine months ended September 30, 2006and 2005, respectively.  The totalintrinsic value of options exercised during the three months ended September30, 2006 and 2005 was $2.1 million and $0.7 million, respectively, and $5.2million and $8.6 million for the nine months ended September 30, 2006 and 2005,respectively.  The Corporation has apolicy of issuing new shares to satisfy stock option exercises.

The Operating Partnershiprecognized stock options expense of $36,000 and $329,000 for the three monthsended September 30, 2006 and 2005, respectively, and $212,000 and $410,000 forthe nine months ended September 30,

34

----

2006 and 2005,respectively.  Included in stock optionsexpense for the nine months ended September 30, 2006 was a stock option chargeof $0.1 million, which resulted from the accelerated vesting of 6,000 unvestedoptions related to the resignation of a non-executive officer of theCorporation.  As of September 30, 2006,the Operating Partnership had $4.3 million of total unrecognized compensationcost related to unvested stock compensation granted under the Corporation’sstock compensation plans.  That cost isexpected to be recognized over a weighted average period of 2.2 years.

**STOCK COMPENSATION**

The Corporationhas granted stock awards (“Restricted Stock Awards”) to officers, certain otheremployees, 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 theCorporation’s common stock generally over a one to five-year vesting period andgenerally based on time and service, of which 194,946 shares were outstandingat September 30, 2006.  Of theoutstanding Restricted Stock Awards granted to executive officers and seniormanagement, 93,746 are contingent upon the Corporation meeting certainperformance and/or stock price appreciation objectives.  All Restricted Stock Awards provided to theofficers and certain other employees were granted under the 2000 Employee Planand the Employee Plan.  Restricted StockAwards granted to directors were granted under the 2000 Director Plan.

Informationregarding the Restricted Stock Awards for the nine months ended September 30,2006 is summarized below:
| ** **                         | ** ** | ** ** | ** ** | **Weighted-Average** | ** ** |
|------------------------------------|------------|------------|------------|----------------------|------------|
| ** **                         | ** ** | ** ** | ** ** | **Grant-Date**       | ** ** |
| ** **                         | ** ** | **Shares** | ** ** | **Fair Value**  | ** ** |
| Outstanding at  January 1, 2006    |       | 246,944    |       | $                    | 37.17      |   |
| Granted (a)                        |       | 10,000     |       | $                    | 44.84      |   |
| Vested                             |       | (55,248    | )          | $                    | 35.66      |   |
| Forfeited                          |       | (6,750     | )          | $                    | 43.59      |   |
|                               |       |       |       |                 |       |
| Outstanding at  September 30, 2006 |       | 194,946    |       | $                    | 37.76      |   |

 

----

(a)          On May 9, 2006, theCorporation granted 10,000 shares of Restricted Stock Awards to Mark Yeager, anexecutive officer of the Corporation.

 

###### **DEFERREDSTOCK COMPENSATION PLAN FOR DIRECTORS**

The DeferredCompensation Plan for Directors, which commenced January 1, 1999, allowsnon-employee directors of the Corporation to elect to defer up to 100 percentof their annual retainer fee into deferred stock units.  The deferred stock units are convertible intoan equal number of shares of common stock upon the directors’ termination ofservice from the Board of Directors or a change in control of the Corporation,as defined in the plan.  Deferred stockunits are credited to each director quarterly using the closing price of theCorporation’s common stock on the applicable dividend record date for therespective quarter.  Each participatingdirector’s account is also credited for an equivalent amount of deferred stockunits based on the dividend rate for each quarter.

During the ninemonths ended September 30, 2006 and 2005, 4,730 and 5,024 deferred stock unitswere earned, respectively.  As ofSeptember 30, 2006 and December 31, 2005, there were 35,802 and 30,903 deferredstock units outstanding, respectively.

**LIMITEDPARTNERS’ CAPITAL**

##### **SERIESB PREFERRED UNITS**

The Series B Preferred Units had a stated value of $1,000 per unit andwere preferred as to assets over any class of common units or other class ofpreferred units of the Operating Partnership, based on circumstances per theapplicable unit certificates.  Thequarterly distribution on each Series B Preferred Unit was an amount equal tothe greater of (i) $16.875 (representing 6.75 percent of the Series B PreferredUnit stated value of an annualized basis) or (ii) the quarterly distributionattributable to a Series B Preferred Unit determined as if such unit had beenconverted into common units, subject to adjustment for customary anti-dilutionrights.

 

On June 13, 2005, the Operating Partnership caused the mandatory conversion (the “Conversion”) of all 215,018 outstandingSeries B Preferred Units into 6,205,425.72 Common Units.  Each Series B Preferred Unit was converted

35

----

into whole and fractional Common Units equal to (x) the $1,000 statedvalue, divided by (y) the conversion price of $34.65.  A description of the rights, preferences andprivileges of the Common Units is set forth below.

 

###### **COMMONUNITS**

Certainindividuals and entities own common units in the Operating Partnership.  A common unit and a share of common stock ofthe Corporation have substantially the same economic characteristics in as muchas they effectively share equally in the net income or loss of the OperatingPartnership.  Common units are redeemableby the common unitholders at their option, subject to certain restrictions, onthe basis of one common unit for either one share of common stock or cash equalto the fair market value of a share at the time of the redemption.  The Corporation has the option to delivershares of common stock in exchange for all or any portion of the cashrequested.  The common unitholders maynot put the units for cash to the Corporation or the OperatingPartnership.  When a unitholder redeems acommon unit for a share of common stock of the Corporation, limited partners’capital is reduced and the General Partner’s capital is increased.

##### On February28, 2006, in connection with the acquisition of Capital Office Park, theOperating Partnership issued 1,942,334 common units in the OperatingPartnership, valued at approximately $87.2 million.

On May 9, 2006, inconnection with the Gale/Green Transactions, the Operating Partnership issued224,719 common units in the Operating Partnership, valued at approximately$10.3 million.

As of September 30, 2006and December 31, 2005, the Operating Partnership had 15,595,825 and 13,650,439common units outstanding, respectively.

###### **EARNINGSPER UNIT**

Basic EPU excludesdilution and is computed by dividing net income available to common unitholdersby the weighted average number of units outstanding for the period.  Diluted EPU reflects the potential dilutionthat could occur if securities or other contracts to issue common units wereexercised or converted into common units.

Thefollowing information presents the Operating Partnership’s results for thethree months ended September 30, 2006 and 2005 in accordance with FASB No.128:  *(dollars in thousands)*
| ** **                                                         | ** ** | **Three Months Ended  September 30,** | ** ** |
|--------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| **Computation of Basic EPU**                        | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| Income from  continuing operations                                 |       | $                                                    | 16,761     |   | $ | 23,537 |   |
| Deduct:  Preferred unit distributions                         |       | (500                                                 | )          | (500 | ) |
| Income from  continuing operations available to common unitholders |       | 16,261                                               |       | 23,037 |   |
| Income from  discontinued operations                               |       | 3,769                                                |       | 2,167 |   |
| Net income  available to common unitholders                        |       | $                                                    | 20,030     |   | $ | 25,204 |   |
|                                                               |       |                                                 |       |   |   |
| Weighted average  common units                                     |       | 77,945                                               |       | 75,364 |   |
|                                                               |       |                                                 |       |   |   |
| **Basic  EPU:**                                                    | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Income from  continuing operations                                 |       | $                                                    | 0.21       |   | $ | 0.30 |   |
| Income from  discontinued operations                               |       | 0.05                                                 |       | 0.03 |   |
| Net income available to  common unitholders                        |       | $                                                    | 0.26       |   | $ | 0.33 |   |

 

36

----

 
| ** **                                                         | ** ** | **Three Months Ended  September 30,** | ** ** |
|--------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| **Computation of Diluted EPU**                      | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| Income from  continuing operations available to common unitholders |       | $                                                    | 16,261     |   | $ | 23,037 |   |
| Income from  discontinued operations for diluted earnings per unit |       | 3,769                                                |       | 2,167 |   |
| Net income available  to common unitholders                        |       | $                                                    | 20,030     |   | $ | 25,204 |   |
|                                                               |       |                                                 |       |   |   |
| Weighted average  common units                                     |       | 78,258                                               |       | 75,760 |   |
|                                                               |       |                                                 |       |   |   |
| **Diluted  EPU:**                                                  | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Income from  continuing operations                                 |       | $                                                    | 0.21       |   | $ | 0.30 |   |
| Income from  discontinued operations                               |       | 0.05                                                 |       | 0.03 |   |
| Net income available to  common unitholders                        |       | $                                                    | 0.26       |   | $ | 0.33 |   |

 

The followinginformation presents the Operating Partnership’s results for the nine monthsended September 30, 2006 and 2005 in accordance with FASB No. 128:  *(dollars in thousands)*
| ** **                                                         | ** ** | **Nine Months Ended  September 30,** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| **Computation of Basic EPU**                        | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| Income from  continuing operations                                 |       | $                                                   | 80,275     |   | $ | 74,387 |   |
| Deduct:  Preferred unit distributions                         |       | (1,500                                              | )          | (5,409 | ) |
| Income from  continuing operations available to common unitholders |       | 78,775                                              |       | 68,978 |   |
| Income from discontinued  operations                               |       | 14,703                                              |       | 25,635 |   |
| Net income  available to common unitholders                        |       | $                                                   | 93,478     |   | $ | 94,613 |   |
|                                                               |       |                                                |       |   |   |
| Weighted average  common units                                     |       | 77,354                                              |       | 73,161 |   |
|                                                               |       |                                                |       |   |   |
| **Basic  EPU:**                                                    | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Income from  continuing operations                                 |       | $                                                   | 1.02       |   | $ | 0.94 |   |
| Income from  discontinued operations                               |       | 0.19                                                |       | 0.35 |   |
| Net income available to  common unitholders                        |       | $                                                   | 1.21       |   | $ | 1.29 |   |

 
| ** **                                                         | ** ** | **Nine Months Ended  September 30,** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| **Computation of Diluted EPU**                      | ** ** | **2006**                                            | ** ** | **2005** | ** ** |
| Income from  continuing operations available to common unitholders |       | $                                                   | 78,775     |   | $ | 68,978 |   |
| Income from  discontinued operations for diluted earnings per unit |       | 14,703                                              |       | 25,635 |   |
| Net income  available to common unitholders                        |       | $                                                   | 93,478     |   | $ | 94,613 |   |
|                                                               |       |                                                |       |   |   |
| Weighted average  common units                                     |       | 77,664                                              |       | 73,585 |   |
|                                                               |       |                                                |       |   |   |
| **Diluted  EPU:**                                                  | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Income from  continuing operations                                 |       | $                                                   | 1.01       |   | $ | 0.94 |   |
| Income from  discontinued operations                               |       | 0.19                                                |       | 0.35 |   |
| Net income available to  common unitholders                        |       | $                                                   | 1.20       |   | $ | 1.29 |   |

 

37

----

 

The following schedulereconciles the units used in the basic EPU calculation to the units used in thediluted EPU calculation:

 
| ** **         | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|--------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **         | ** ** | **2006**                                             | ** ** | **2005**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
| Basic EPU units    |       | 77,945                                               |       | 75,364                                              |       | 77,354 |   | 73,161 |   |
| Add:Stock  options |       | 313                                                  |       | 396                                                 |       | 310 |   | 424 |   |
| Diluted EPU Units  |       | 78,258                                               |       | 75,760                                              |       | 77,664 |   | 73,585 |   |

 

Not included in thecomputations of diluted EPU were 330 stock options and 2,045,745 Series BPreferred Units on an as converted basis into common units, as such securitieswere anti-dilutive during the nine months ended September 30, 2005.  Unvested shares of restricted stockoutstanding as of September 30, 2006 and 2005 were 194,946 and 233,744,respectively.

**11.  CONSOLIDATEDJOINT VENTURES**

The OperatingPartnership has ownership interests in certain joint ventures which itconsolidates.  Various entities and/orindividuals hold minority interests in many of these ventures.

**12.****       EMPLOYEE BENEFIT 401(k)PLAN**

Employees of theCorporation, other than those assigned to the Gale Company and affiliatedemployers, who meet certain minimum age and period of service requirements areeligible to participate in a 401(k) defined contribution plan (the “401(k) Plan”).  The 401(k) Plan allows eligible employees todefer from 1 to 30 percent of their annual compensation, subject to certainlimitations imposed by federal law.  Theamounts contributed by employees are immediately vested andnon-forfeitable.  The Corporation, atmanagement’s discretion, may match employee contributions and/or makediscretionary contributions.  Totalexpense recognized by the Operating Partnership for the three months endedSeptember 30, 2006 and 2005 was $100,000 and $100,000, respectively, and forthe nine months ended September 30, 2006 and 2005 was $300,000 and $300,000,respectively.

All employees ofthe Gale Company and other affiliated participating employers, other thancertain employees who are represented for collective bargaining purposes by alabor organization, who meet certain minimum age and period of servicerequirements are eligible to participate in a 401(k) defined contribution plan(the “Gale Plan”).  The Gale Plan allowseligible employees to defer from their annual compensation, the maximum amountpermitted under federal law.  The amountscontributed by employees are immediately vested and non-forfeitable.  The Gale Company or the participant’semployer matches the employee’s deferral at the rate of 50 percent on the firstsix percent of the employee’s annual compensation for employees who have atleast 1,000 hours of service and are employed on the last day of the plan year.  In addition, the Corporation, at management’sdiscretion, may make discretionary contributions.  Participants become 50 percent vested inemployer contributions after two years of service and become 100 percent vestedafter three years of service.  Totalexpense recognized after the completion of the Gale/Green Transactions by theOperating Partnership for the three and nine months ended September 30, 2006was $146,000 and $242,000, respectively.

**13.****       COMMITMENTS ANDCONTINGENCIES**

###### **TAXABATEMENT AGREEMENTS**

Pursuant to agreementswith the City of Jersey City, New Jersey, the Operating Partnership is requiredto make payments in lieu of property taxes (“PILOT”) on certain of itsproperties located in Jersey City, as follows:

The Harborside Plaza 5 agreement, as amended, whichcommenced in 2002 upon substantial completion of the property, as defined, isfor a term of 20 years.  The PILOT isequal to two percent of Total Project Costs. Total Project Costs, as defined, are $159.6 million.  The PILOT totaled $798,000 and $798,000 forthe three months ended September 30, 2006 and 2005, respectively, and $2.4million and $2.4 million for the nine months ended

38

----

September 30, 2006 and 2005, respectively.

The Harborside Plaza 4-A agreement, which commenced in2000, is for a term of 20 years.  ThePILOT is equal to two percent of Total Project costs, as defined, and increasesby 10 percent in years 7, 10 and 13 and by 50 percent in year 16.  Total Project costs, as defined, are $45.5million.  The PILOT totaled $227,000 and$227,000 for the three months ended September 30, 2006 and 2005, respectively,and $682,000 and $682,000 for the nine months ended September 30, 2006 and2005, respectively.

The 101 Hudson Street agreement commenced in 1991 fora term of 15 years and expires on December 25, 2006.  The PILOT currently provides for the paymentof a minimum annual service charge of approximately $4.2 million, subject tocertain adjustments as provided in the PILOT agreement.  The PILOT totaled $1.0 million and $1.0million for the three months ended September 30, 2006 and 2005,respectively.  The PILOT totaled $3.1million for the nine months ended September 30, 2006 and $2.5 million for theperiod of time during the nine months ended September 30, 2005 for which the OperatingPartnership owned the property.

At the conclusionof the above-referenced PILOT agreements, it is expected that the propertieswill be assessed by the municipality and be subject to real estate taxes at thethen prevailing rates.

##### **LITIGATION**

The OperatingPartnership is a defendant in litigation arising in the normal course of itsbusiness activities.  Management does notbelieve that the ultimate resolution of these matters will have a materiallyadverse effect upon the Operating Partnership’s financial condition taken aswhole.

**OPERATINGLEASE AGREEMENTS**

Future minimumrental payments under the terms of all non-cancelable operating leases underwhich the Operating Partnership is the lessee, as of September 30, 2006, are asfollows:  *(dollars inthousands)*
| **Year** | ** ** | **Amount** | ** ** |
|----------|------------|------------|------------|
| 2006     |       | $          | 291        |   |
| 2007     |       | 412        |       |
| 2008     |       | 68         |       |
| 2009     |       | 16         |       |
| 2010     |       | 3          |       |
|     |       |       |       |
| Total    |       | $          | 790        |   |

 

**GROUNDLEASE AGREEMENTS**

Future minimum rental payments under the terms of all non-cancelableground leases under which the Operating Partnership is the lessee, as ofSeptember 30, 2006, are as follows:  *(dollars in thousands)*
| **Year**           | ** ** | **Amount** | ** ** |
|--------------------|------------|------------|------------|
| 2006               |       | $          | 173        |   |
| 2007               |       | 690        |       |
| 2008               |       | 645        |       |
| 2009               |       | 660        |       |
| 2010               |       | 660        |       |
| 2011 through  2084 |       | 37,107     |       |
|               |       |       |       |
| Total              |       | $          | 39,935     |   |

 

Ground leaseexpense incurred by the Operating Partnership during the three months endedSeptember 30, 2006 and 2005 amounted to $203,000 and $172,000, respectively,and was $519,000 and $454,000 for the nine months ended September 30, 2006 and2005, respectively.

39

----

 

###### **OTHER**

The Operating Partnershipmay not dispose of or distribute certain of its properties, currentlycomprising 50 properties with an aggregate net book value of approximately $1.3billion, which were originally contributed by members of either the Mack Group(which includes William L. Mack, Chairman of the Corporation’s Board ofDirectors; David S. Mack, a director of the Corporation; Earle I. Mack, aformer director of the Corporation; and Mitchell E. Hersh, president, chiefexecutive officer and a director of the Corporation), the Robert Martin Group(which includes Robert F. Weinberg, a director of the Corporation; Martin S.Berger, a former director of the Corporation; and Timothy M. Jones, formerpresident of the Corporation), the Cali Group (which includes John R. Cali, a directorof the Corporation, and John J. Cali, a former director of the Corporation) orcertain other common unitholders without the express written consent of arepresentative of the Mack Group, the Robert Martin Group, the Cali Group orthe specific certain other common unitholders, as applicable, except in amanner which does not result in recognition of any built-in-gain (which mayresult in an income tax liability) or which reimburses the appropriate MackGroup, Robert Martin Group, Cali Group members or the specific certain othercommon unitholders for the tax consequences of the recognition of suchbuilt-in-gains (collectively, the “Property Lock-Ups”).  The aforementioned restrictions do not applyin the event that the Operating Partnership sells all of its properties or inconnection with a sale transaction which the Corporation’s Board of Directorsdetermines is reasonably necessary to satisfy a material monetary default onany unsecured debt, judgment or liability of the Operating Partnership or theCorporation or to cure any material monetary default on any mortgage secured bya property.  The Property Lock-Ups expireperiodically through 2016.  Upon theexpiration of the Property Lock-Ups, the Operating Partnership is generallyrequired to use commercially reasonable efforts to prevent any sale, transferor other disposition of the subject properties from resulting in therecognition of built-in gain to the appropriate Mack Group, Robert MartinGroup, Cali Group members or the specific certain other commonunitholders.  88 of our properties, withan aggregate net book value of approximately $868.4 million, have lapsedrestrictions and are subject to these conditions.

**14.****       TENANT LEASES**

The Properties areleased to tenants under operating leases with various expiration dates through2021.  Substantially all of the leasesprovide for annual base rents plus recoveries and escalation charges based uponthe tenant’s proportionate share of and/or increases in real estate taxes andcertain operating costs, as defined, and the pass-through of charges forelectrical usage.

Future minimumrentals to be received under non-cancelable operating leases at September 30,2006 are as follows:  *(dollars in thousands)*
| **Year**             | ** ** | **Amount** | ** ** |
|----------------------|------------|------------|------------|
| 2006                 |       | $          | 110,092    |   |
| 2007                 |       | 540,675    |       |
| 2008                 |       | 496,174    |       |
| 2009                 |       | 447,419    |       |
| 2010                 |       | 392,641    |       |
| 2011 and  thereafter |       | 1,209,526  |       |
|                 |       |       |       |
| Total                |       | $          | 3,196,527  |   |

 

40

----

 

**15.****       SEGMENT REPORTING**

The OperatingPartnership operates in one business segment - real estate.  The Operating Partnership provides leasing,property and facilities management, acquisition, development, construction andtenant-related services for its portfolio. The Operating Partnership recognized revenues from foreign operations of$1,196,000 and $1,829,000 for the three and nine month periods ended September30, 2006, respectively.  The OperatingPartnership had no long lived assets in foreign locations as of September 30,2006 and December 31, 2005.  Theaccounting policies of the segment are the same as those described in Note 2:Significant Accounting Policies, excluding depreciation and amortization.

The Operating Partnership evaluates performance based upon net operatingincome from the combined properties in the segment.

Selected results ofoperations for the three and nine month periods ended September 30, 2006 and2005 and selected asset information as of September 30, 2006 and December 31,2005 regarding the Operating Partnership’s operating segment are as follows:  *(dollars in thousands)*
| ** **                                                       | ** ** | **Total Segment** | ** ** | **Corporate & Other (d)** | ** ** | **Total Operating   Partnership** | ** ** |
|------------------------------------------------------------------|------------|------------------------|------------|----------------------------------------------|------------|---------------------------------------------|------------|
| **Total  revenues:**                                             |       |                   |       |                                         |       |                                        |       |
| Three months ended:                                              |       |                   |       |                                         |       |                                        |       |
| September 30, 2006                                               |       | $                      | 201,428    |                                         | $          | 1,789                                       |       | $ | 203,217 |   |
| September 30, 2005                                               |       | 153,473                |       | 679                                          |       | 154,152                                     |       |
| Nine months ended:                                               |       |                   |       |                                         |       |                                        |       |
| September 30, 2006                                               |       | $                      | 537,049    |                                         | $          | 5,088                                       |       | $ | 542,137 |   |
| September 30, 2005                                               |       | 446,137                |       | 645                                          |       | 446,782                                     |       |
|                                                             |       |                   |       |                                         |       |                                        |       |
| **Total  operating and interest expenses(a):**                   |       |                   |       |                                         |       |                                        |       |
| Three months ended:                                              |       |                   |       |                                         |       |                                        |       |
| September 30, 2006                                               |       | $                      | 96,809     |                                         | $          | 44,871                                      |       | $ | 141,680 | (e) |
| September 30, 2005                                               |       | 55,167                 |       | 37,932                                       |       | 93,099                                      | (f)        |
| Nine months ended:                                               |       |                   |       |                                         |       |                                        |       |
| September 30, 2006                                               |       | $                      | 225,407    |                                         | $          | 129,322                                     |       | $ | 354,729 | (g) |
| September 30, 2005                                               |       | 153,326                |       | 113,515                                      |       | 266,841                                     | (h)        |
|                                                             |       |                   |       |                                         |       |                                        |       |
| **Equity  in earnings (loss) of unconsolidated joint ventures:** |       |                   |       |                                         |       |                                        |       |
| Three months ended:                                              |       |                   |       |                                         |       |                                        |       |
| September 30, 2006                                               |       | $                      | (4,757     | )                                            | —     |                                        | $          | (4,757 | ) |
| September 30, 2005                                               |       | 322                    |       | —                                       |       | 322                                         |       |
| Nine months ended:                                               |       |                   |       |                                         |       |                                        |       |
| September 30, 2006                                               |       | $                      | (5,356     | )                                            | —     |                                        | $          | (5,356 | ) |
| September 30, 2005                                               |       | 552                    |       | —                                       |       | 552                                         |       |
|                                                             |       |                   |       |                                         |       |                                        |       |
| **Net  operating income (b):**                                   |       |                   |       |                                         |       |                                        |       |
| Three months ended:                                              |       |                   |       |                                         |       |                                        |       |
| September 30, 2006                                               |       | $                      | 99,862     |                                         | $          | (43,082                                     | )          | $ | 56,780 | (e) |
| September 30, 2005                                               |       | 98,628                 |       | (37,253                                      | )          | 61,375                                      | (f)        |
| Nine months ended:                                               |       |                   |       |                                         |       |                                        |       |
| September 30, 2006                                               |       | $                      | 306,286    |                                         | $          | (124,234                                    | )          | $ | 182,052 | (g) |
| September 30, 2005                                               |       | 293,363                |       | (112,870                                     | )          | 180,493                                     | (h)        |
|                                                             |       |                   |       |                                         |       |                                        |       |
| **Total  assets:**                                               |       |                   |       |                                         |       |                                        |       |
| September 30, 2006                                               |       | $                      | 4,572,467  |                                         | $          | 96,294                                      |       | $ | 4,668,761 |   |
| December 31, 2005                                                |       | 4,097,098              |       | 150,404                                      |       | 4,247,502                                   |       |
|                                                             |       |                   |       |                                         |       |                                        |       |
| **Total  long-lived assets (c):**                                |       |                   |       |                                         |       |                                        |       |
| September 30, 2006                                               |       | $                      | 4,337,317  |                                         | $          | 1,701                                       |       | $ | 4,339,018 |   |
| December 31, 2005                                                |       | 3,921,536              |       | 2,066                                        |       | 3,923,602                                   |       |

 

41

----

 

----

(a)          Totaloperating and interest expenses represent the sum of:   real estate taxes; utilities; operatingservices; direct construction costs; real estate services salaries, wages andother costs; general and administrative and interest expense (net of interestincome).  All interest expense, net ofinterest income, (including for property-level mortgages) is excluded fromsegment amounts and classified in Corporate & Other for all periods.

(b)         Netoperating income represents total revenues less total operating and interestexpenses [as defined in Note (a)], plus equity in earnings (loss) ofunconsolidated joint ventures, for the period.

(c)          Long-livedassets are comprised of net investment in rental property, unbilled rentsreceivable and investments in unconsolidated joint ventures.

(d)         Corporate& Other represents all corporate-level items (including interest and otherinvestment income, interest expense and non-property general and administrativeexpense) as well as intercompany eliminations necessary to reconcile toconsolidated Operating Partnership totals.

(e)          Excludes$40,132 of depreciation and amortization.

(f)            Excludes$37,838 of depreciation and amortization.

(g)         Excludes $116,980 ofdepreciation and amortization.

(h)         Excludes$106,067 of depreciation and amortization.

**16.****       IMPACT OFRECENTLY-ISSUED ACCOUNTING STANDARDS**

**FASB INTERPRETATION No. 48 (“FIN 48”),***Accounting for Uncertainty in Income Taxes — aninterpretation of FASB Statement No. 109*

FIN 48 clarifies the accounting for uncertainty inincome taxes recognized in an enterprise’s financial statements in accordancewith FASB Statement No. 109, Accounting for Income Taxes.  FIN 48 prescribes a recognition threshold andmeasurement attribute for the financial statement recognition and measurementof a tax position taken or expected to be taken in a tax return.  FIN 48 also provides guidance onderecognition, classification, interest and penalties, accounting in interimperiods, disclosure and transition.  FIN48 is effective for fiscal years beginning after December 15, 2006.  The Operating Partnership does not expectthat the implementation of FIN 48 will have a material effect on the OperatingPartnership’s consolidated financial position or results of operations.

**FINANCIAL ACCOUNTING STANDARDS BOARD (FASB)STATEMENT NO. 157 (“FASB No. 157”),***Fair ValueMeasurements*

FASB No. 157defines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles (GAAP), and expands disclosures aboutfair value measurements. FASB No. 157 applies under other accounting pronouncementsthat require or permit fair value measurements, FASB having previouslyconcluded in those accounting pronouncements that fair value is their relevantmeasurement attribute.  Accordingly, thisstatement does not require any new fair value measurements.  However, for some entities, the applicationof this statement will change current practice. This statement is effective for financial statements for fiscal yearsbeginning after November 15, 2007.  The OperatingPartnership does not expect that the implementation of FASB No. 157 will have amaterial effect on the Operating Partnership’s consolidated financial positionor results of operations.

**FASB STATEMENT NO. 158 (“FASB No. 158”),***Employers’ Accounting for Defined Benefit Pensionand Other Post Retirement Plans – an amendment of FASB No.’s 87, 88, 106 and132(R)*

FASB No. 158improves financial reporting by requiring an employer to recognize theoverfunded or underfunded status of a defined benefit postretirement plan(other than a multi-employer plan) as an asset or liability in its statement offinancial position and to recognize changes in that funded status in the yearin which the changes occur through comprehensive income of a business entity orchanges in unrestricted net assets of a not-for-profit organization.  This statement also improves financialreporting by requiring an employer to measure the funded status of a plan as ofthe date of its year-end statement of financial position, with limitedexceptions.  This statement is effectivefor fiscal years ending after December 15, 2006.  The Operating Partnership does not expectthat the implementation of FASB No. 158 will have a material effect on the OperatingPartnership’s consolidated financial position or results of operations.

42

----

**STAFFACCOUNTING BULLETIN NO. 108 (“SAB No. 108”)**

Theinterpretations in SAB 108 express the staff’s views regarding the process ofquantifying financial statement misstatements. The SEC staff is aware of diversity in practice.  For example, certain registrants do notconsider the effects of prior year errors on current year financial statements,thereby allowing improper assets or liabilities to remain unadjusted.  While these errors may not be material ifconsidered only in relation to the balance sheet, correcting the errors couldbe material to the current year income statement.  Certain registrants have proposed to thestaff that allowing these errors to remain on the balance sheet as assets orliabilities in perpetuity is an appropriate application of generally acceptedaccounting principles.  The staffbelieves that approach is not in the best interest of the users of financialstatements.  The interpretations in thisSAB 108 are being issued to address diversity in practice in quantifyingfinancial statement misstatements and the potential under current practice forthe build up of improper amounts on the balance sheet.  There have been two widely-recognized methodsfor quantifying the effects of financial statement errors: the “roll-over”method and the “iron curtain” method.  The roll-over method focuses primarily on theimpact of a misstatement on the income statement—including the reversing effectof prior year misstatements—but its use can lead to the accumulation ofmisstatements in the balance sheet.  Theiron-curtain method, on the other hand, focuses primarily on the effect ofcorrecting the period-end balance sheet with less emphasis on the reversingeffects of prior year errors on the income statement.  In SAB 108, the SEC staff establishes anapproach that requires quantification of financial statement errors based onthe effects of the error on each of the company’s financial statements and therelated financial statement disclosures.  This model is commonly referred to as a “dualapproach” because it essentially requires quantification of errors under boththe iron-curtain and the roll-over methods. SAB 108 is effective for financial statements for fiscal years endingafter November 15, 2006.  The OperatingPartnership does not expect that SAB 108 will have a material effect on the OperatingPartnership’s consolidated financial position or results of operations.

43

----

**Item 2.        Management’s Discussion and Analysis of  Financial Condition and Results of Operations**

**GENERAL**

The followingdiscussion should be read in conjunction with the Consolidated FinancialStatements of Mack-Cali Realty, L.P. and the notes thereto (collectively, the “FinancialStatements”).  Certain defined terms usedherein have the meaning ascribed to them in the Financial Statements.

***Executive Overview***

Mack-Cali RealtyCorporation (the “Corporation”) is one of the largest real estate investmenttrusts (REITs) in the United States, with a total market capitalization ofapproximately $6.5 billion at September 30, 2006.  Mack-Cali Realty, L.P. (the “OperatingPartnership”) has been involved in all aspects of commercial real estatedevelopment, management and ownership for over 50 years and the Corporation hasbeen a publicly-traded REIT since 1994. The Operating Partnership owns or has interests in 321 properties(collectively, the “Properties”), primarily class A office and office/flexbuildings, totaling approximately 36.1 million square feet, leased toapproximately 2,600 tenants.  Theproperties are located primarily in suburban markets of the Northeast, somewith adjacent, Operating Partnership-controlled developable land sites able toaccommodate up to 11.3 million square feet of additional commercial space.

The OperatingPartnership’s strategy is to be a significant real estate owner and operator inits core, high-barriers-to-entry markets, primarily in the Northeast.

As an owner of realestate, almost all of the Operating Partnership’s earnings and cash flow isderived from rental revenue received pursuant to leased space at theProperties.  Key factors that affect the OperatingPartnership’s business and financial results include the following:

·      thegeneral economic climate;

·      theoccupancy rates of the Properties;

·      rentalrates on new or renewed leases;

·      tenantimprovement and leasing costs incurred to obtain and retain tenants;

·      theextent of early lease terminations;

·      operatingexpenses;

·      costof capital; and

·      theextent of acquisitions, development and sales of real estate.

Any negativeeffects of the above key factors could potentially cause a deterioration in theOperating 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 torenew or execute new leases with rental terms at or above the terms of in-placeleases; and (3) tenant defaults.

A failure to renewor execute new leases as current leases expire or to execute new leases withrental terms at or above the terms of in-place leases may be affected byseveral factors such as: (1) the local economic climate, which may be adverselyimpacted by business layoffs or downsizing, industry slowdowns, changingdemographics and other factors; and (2) local real estate conditions, such asoversupply of office and office/flex space or competition within the market.

The OperatingPartnership’s core markets continue to be weak. The percentage leased in the Operating Partnership’s consolidatedportfolio of stabilized operating properties was 91.4 percent at September 30,2006 as compared to 90.7 percent at June 30, 2006 and 91.0 percent at December31, 2005.  Percentage leased includes allleases in effect as of the period end date, some of which have commencementdates in the future (including, at September 30, 2006, a lease with a commencementdate substantially in the future consisting of 15,125 square feet scheduled tocommence in 2009), and leases that expire at the period end date.  Leases that expired as of September 30, 2006,June 30, 2006 and December 31, 2005 aggregate 62,981, 100,121 and 311,623square feet, respectively, or

44

----

0.2, 0.3 and 1.1percentage of the net rentable square footage, respectively.  Rental rates on the Operating Partnership’sspace that was re-leased (based on first rents payable) during the three monthsended September 30, 2006 decreased an average of 1.1 percent compared to ratesthat were in effect under the prior leases, as compared to a 5.4 percentdecrease for the three months ended September 30, 2005.  The Operating Partnership believes thatvacancy rates may continue to increase in some of its markets in 2006.  As a result, the Operating Partnership’sfuture earnings and cash flow may continue to be negatively impacted by currentmarket conditions.

The remainingportion of this Management’s Discussion and Analysis of Financial Condition andResults of Operations should help the reader understand:

·      property transactions during theperiod;

·      critical accounting policies andestimates;

·      results of operations for thecurrent periods as compared to the same periods last year; and

·      liquidityand capital resources.

***Property Transact***ions in 2006

****Gale/Green Transactions****

On May 9, 2006, the OperatingPartnership completed the acquisitions of: (i) The Gale Company and certain of its related businesses, which engagein construction, property management, facilities management, and leasingservices (collectively, the “Gale Company”); (ii) three office properties; and(iii) indirect interests in a portfolio of office properties, located primarilyin New Jersey, which were owned indirectly by The Gale Company and itsaffiliates (“Gale”) and affiliates of SL Green Realty Corp. (“SL Green”).  The agreements to complete the aforementionedacquisitions (collectively, the “Gale/Green Transactions”) required that the OperatingPartnership complete all of the acquisitions.

The Gale Company wasacquired by the Operating Partnership for initial purchase consideration ofapproximately $22.3 million consisting of the issuance by the OperatingPartnership of 224,719 common units of the Operating Partnership and thepayment of approximately $12 million in cash, which was primarily fundedthrough borrowing under the Operating Partnership’s revolving creditfacility.  Additionally, the agreement toacquire the Gale Company (“Gale Agreement”) contains earn-out provisionsproviding for the payment of contingent purchase consideration of up to $18million in cash based upon the achievement of Gross Income and NOI (as suchterms are defined in the Gale Agreement) targets and other events for the threeyears following the closing date.

In connection with the OperatingPartnership’s acquisition of the Gale Company, Mr. Stanley C. Gale and certainother affiliates of Gale are restricted from competing with the OperatingPartnership or hiring the Operating Partnership’s employees for a period offour years expiring on May 9, 2010.

In addition, the GaleAgreement provides for the Operating Partnership to acquire certain otherownership interests in up to 11 real estate projects (the “Non-PortfolioProperties”), subject to obtaining certain third party consents and thesatisfaction of various project-related and/or other conditions.  Each of the Operating Partnership’s acquiredinterests in the Non-Portfolio Properties will provide for the initialdistributions of net cash flow solely to the Operating Partnership, andthereafter an affiliate of Gale controlled by Stanley C. Gale (“Gale Affiliate”)has participation rights (“Gale Participation Rights”) in 50 percent of theexcess net cash flow remaining after the distribution to the OperatingPartnership of the aggregate amount equal to the sum of: (a) the OperatingPartnership’s capital contributions, plus (b) an internal rate of return of 10percent per annum, accruing on the date or dates of the Operating Partnership’sinvestments.  Mr. Gale has caused theGale Affiliate to transfer certain of his interests in the Non-PortfolioProperties to several former employees of Gale, some of whom are currentemployees of the Operating Partnership, including Mark Yeager, one of the Corporation’sofficers.

Through September 30,2006, the Operating Partnership completed seven of the acquisitions ofinterests in the Non-Portfolio Properties, which included the acquisitionsof:  a 530,000 square foot, mixed-useoffice/retail complex; a 139,750 square-foot, fully-leased office property; anoffice property in development; two vacant land parcels and two pre-developedprojects.  The aggregate cost of thecompleted acquisitions was approximately $24.7 million.

45

----

In connection with theexecution of the Gale Agreement, the Operating Partnership entered intoagreements to acquire three office properties directly and indirect ownershipinterests in entities which own a portfolio of office properties (collectively,the “Gale/Green Agreements”).  Under theGale/Green Agreements, the Operating Partnership acquired 100 percent of theownership interests in three office properties located in New Jersey,aggregating 516,162 square feet, (the “Wholly-Owned Properties”).  The Wholly-Owned Properties were acquired forapproximately $106 million, consisting of the assumption of $39.9 million inexisting mortgage indebtedness and the payment of $66.1 million in cash, whichwas funded primarily through borrowing under the Operating Partnership’srevolving credit facility.

Also, as part of theGale/Green Agreements, the Operating Partnership entered into a joint venturewith SL Green, known as Mack-Green-Gale LLC (“Mack-Green”), to hold an approximate96 percent interest and act as general partner of Gale SLG NJ OperatingPartnership, L.P. (the “OP LP”).  The OperatingPartnership acquired its interest in Mack-Green for approximately $116million, which was funded primarily through borrowing under the OperatingPartnership’s revolving credit facility. The OP LP owns 100 percent of entities which own 25 office properties(collectively, the “OP LP Properties”) which aggregate 3.5 million square feet(consisting of 17 office properties aggregating 2.3 million square feet locatedin New Jersey and eight properties aggregating 1.2 million square feet locatedin Troy, Michigan), as well as a minor, non-controlling interest in four officeproperties aggregating 419,000 square feet located in Naperville,Illinois.  For a discussion of theownership interests in Mack-Green, see Note 4: Investments in Unconsolidated Joint Ventures – Mack-Green-Gale LLC.

### **PropertyAcquisitions**

The Operating Partnership acquired the following office propertiesduring the nine months ended September 30, 2006:  *(dollars in thousands)*
| **Acquisition   Date**   | ** ** | **Property/Address**            | ** ** | **Location**                 | ** ** | **# of  Bldgs.** | ** ** | **Rentable  Square Feet** | ** ** | **Acquisition  Cost** | ** ** |
|-------------------------------|------------|---------------------------------|------------|------------------------------|------------|-----------------------|------------|--------------------------------|------------|-----------------------|------------|
| 02/28/06                      |       | Capital Office  Park (a)        |       | Greenbelt,  Maryland         |       | 7                     |       | 842,258                        |       | $                     | 166,011    |   |
| 05/09/06                      |       | 35 Waterview  Boulevard (b) (c) |       | Parsippany,  New Jersey      |       | 1                     |       | 172,498                        |       | 32,600                |       |
| 05/09/06                      |       | 105 Challenger  Road (b) (d)    |       | Ridgefield  Park, New Jersey |       | 1                     |       | 150,050                        |       | 31,792                |       |
| 05/09/06                      |       | 343 Thornall  Street (b) (e)    |       | Edison,  New Jersey          |       | 1                     |       | 195,709                        |       | 41,113                |       |
| 07/31/06                      |       | 395 W. Passaic  Street (f)      |       | Rochelle  Park, New Jersey   |       | 1                     |       | 100,589                        |       | 22,219                |       |
|                          |       |                            |       |                         |       |                  |       |                           |       |                  |       |
| Total Property  Acquisitions: |       |                            |       | 11                           |       | 1,461,104             |       | $                              | 293,735    |                  |

 

----

(a)          This transaction wasfunded primarily through the assumption of $63.2 million of mortgage debt andthe issuance of 1.9 million common operating partnership units valued at $87.2million.

(b)   Theproperty was acquired as part of the Gale/Green Transactions.

(c)          Transaction was fundedprimarily through borrowing on the Operating Partnership’s revolving creditfacility and the assumption of $20.4 million of mortgage debt.

(d)         Transaction was fundedprimarily through borrowing on the Operating Partnership’s revolving creditfacility and the assumption of $19.5 million of mortgage debt.

(e)          Transaction was fundedprimarily through borrowing on the Operating Partnership’s revolving creditfacility.

(f)            Transaction was fundedprimarily through borrowing on the Operating Partnership’s revolving creditfacility and the assumption of $13.1 million of mortgage debt.

**PropertySales**

The OperatingPartnership sold the following office properties during the nine months endedSeptember 30, 2006:  *(dollars inthousands)*
| **Sale Date**            | ** ** | **Property/Address**     | ** ** | **Location**            | ** ** | **# of  Bldgs.** | ** ** | **Rentable  Square   Feet** | ** ** | **Net  Sales  Proceeds** | ** ** | **Net  Book  Value** | ** ** | **Realized  Gain/  (Loss)** | ** ** |
|-------------------------------|------------|--------------------------|------------|-------------------------|------------|-----------------------|------------|----------------------------------|------------|--------------------------|------------|----------------------|------------|-----------------------------|------------|
| 06/28/06                      |       | Westage Business  Center |       | Fishkill,  New York     |       | 1                     |       | 118,727                          |       | $                        | 14,765     |                 | $          | 10,872                      |       | $ | 3,893 |   |
| 06/30/06                      |       | 1510 Lancer Drive        |       | Moorestown,  New Jersey |       | 1                     |       | 88,000                           |       | 4,146                    |       | 3,134                |       | 1,012                       |       |
|                          |       |                     |       |                    |       |                  |       |                             |       |                     |       |                 |       |                        |       |
| Total Office Property  Sales: |       |                     |       | 2                       |       | 206,727               |       | $                                | 18,911     |                     | $          | 14,006               |       | $                           | 4,905      |   |

 

46

----

***CriticalAccounting Policies and Estimates***

The FinancialStatements have been prepared in conformity with generally accepted accountingprinciples.  The preparation of theFinancial Statements requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the Financial Statements, andthe reported amounts of revenues and expenses during the reported period.  These estimates and assumptions are based onmanagement’s historical experience that are believed to be reasonable at thetime.  However, because future events andtheir effects cannot be determined with certainty, the determination ofestimates requires the exercise of judgment. The Operating Partnership’s critical accounting policies are those whichrequire assumptions to be made about matters that are highly uncertain.  Different estimates could have a materialeffect on the Operating Partnership’s financial results.  Judgments and uncertainties affecting theapplication of these policies and estimates may result in materially different amountsbeing reported under different conditions and circumstances.

**RentalProperty:**

Rental propertiesare 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 constructioncosts include pre-construction costs essential to the development of theproperty, development and construction costs, interest, property taxes, insurance,salaries and other project costs incurred during the period ofdevelopment.  Interest capitalized by theOperating Partnership for the three months ended September 30, 2006 and 2005was $1.7 million and $1.4 million, respectively, and $4.8 million and $4.1million for the nine months ended September 30, 2006 and 2005,respectively.  Ordinary repairs andmaintenance are expensed as incurred; major replacements and betterments, whichimprove or extend the life of the asset, are capitalized and depreciated overtheir estimated useful lives.  Fully-depreciated assets are removed from theaccounts.

The Operating Partnershipconsiders a construction project as substantially completed and held availablefor occupancy upon the completion of tenant improvements, but no later than oneyear from cessation of major construction activity (as distinguished fromactivities such as routine maintenance and cleanup).  If portions of a rental project aresubstantially completed and occupied by tenants, or held available foroccupancy, and other portions have not yet reached that stage, thesubstantially completed portions are accounted for as a separate project.  The Operating Partnership allocates costsincurred between the portions under construction and the portions substantiallycompleted and held available for occupancy and capitalizes only those costsassociated with the portion under construction.

Properties aredepreciated using the straight-line method over the estimated useful lives ofthe assets.  The estimated useful livesare as follows:

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

 

Upon acquisition of rentalproperty, the Operating Partnership estimates the fair value of acquiredtangible assets, consisting of land, building and improvements, and identifiedintangible assets and liabilities generally consisting of the fair value of (i)above and below market leases, (ii) in-place leases and (iii) tenantrelationships.  The Operating Partnershipallocates the purchase price to the assets acquired and liabilities assumedbased on their relative fair values.  Inestimating the fair value of the tangible and intangible assets acquired, the OperatingPartnership considers information obtained about each property as a result ofits due diligence and marketing and leasing activities, and utilizes variousvaluation methods, such as estimated cash flow projections utilizingappropriate discount and capitalization rates, estimates of replacement costsnet of depreciation, and available market information.  The fair value of the tangible assets of anacquired property considers the value of the property as if it were vacant.

Above-market andbelow-market lease values for acquired properties are recorded based on thepresent value (using 

47

----

a discount ratewhich reflects the risks associated with the leases acquired) of the differencebetween (i) the contractual amounts to be paid pursuant to each in-place leaseand (ii) management’s estimate of fair market lease rates for eachcorresponding in-place lease, measured over a period equal to the remainingterm of the lease for above-market leases and the remaining initial term plusthe term of any below-market fixed rate renewal options for below-marketleases.  The capitalized above-marketlease values are amortized as a reduction of base rental revenue over theremaining term of the respective leases, and the capitalized below-market leasevalues are amortized as an increase to base rental revenue over the remaininginitial terms plus the terms of any below-market fixed rate renewal options ofthe respective leases.

Other intangibleassets acquired include amounts for in-place lease values and tenantrelationship values which are based on management’s evaluation of the specificcharacteristics of each tenant’s lease and the Operating Partnership’s overallrelationship with the respective tenant. Factors to be considered by management in its analysis of in-place leasevalues include an estimate of carrying costs during hypothetical expectedlease-up periods considering current market conditions, and costs to executesimilar leases.  In estimating carryingcosts, management includes real estate taxes, insurance and other operatingexpenses and estimates of lost rentals at market rates during the expectedlease-up periods, depending on local market conditions.  In estimating costs to execute similarleases, management considers leasing commissions, legal and other relatedexpenses.  Characteristics considered bymanagement in valuing tenant relationships include the nature and extent of theOperating Partnership’s existing business relationships with the tenant, growthprospects for developing new business with the tenant, the tenant’s creditquality and expectations of lease renewals. The value of in-place leases are amortized to expense over the remaininginitial terms of the respective leases. The value of tenant relationship intangibles will be amortized toexpense over the anticipated life of the relationships.

On a periodicbasis, management assesses whether there are any indicators that the value ofthe Operating Partnership’s rental properties may be impaired.  A property’s value is impaired only ifmanagement’s estimate of the aggregate future cash flows (undiscounted andwithout interest charges) to be generated by the property is less than thecarrying value of the property.  To theextent impairment has occurred, the loss shall be measured as the excess of thecarrying amount of the property over the fair value of the property.  The Operating Partnership’s estimates ofaggregate future cash flows expected to be generated by each property are basedon a number of assumptions that are subject to economic and marketuncertainties including, among others, demand for space, competition fortenants, changes in market rental rates, and costs to operate eachproperty.  As these factors are difficultto predict and are subject to future events that may alter management’sassumptions, the future cash flows estimated by management in its impairmentanalyses may not be achieved.  Managementdoes not believe that the value of any of the Operating Partnership’s rentalproperties is impaired.

**RentalProperty Held for Sale and Discontinued Operations:**

When assets areidentified by management as held for sale, the Operating Partnershipdiscontinues depreciating the assets and estimates the sales price, net ofselling costs, of such assets.  If, inmanagement’s opinion, the net sales price of the assets which have beenidentified as held for sale is less than the net book value of the assets, avaluation allowance is established. Properties identified as held for sale and/or sold are presented indiscontinued operations for all periods presented.

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

**RevenueRecognition:**

Base rentalrevenue is recognized on a straight-line basis over the terms of the respectiveleases.****** Unbilled rents receivable represents theamount by which straight-line rental revenue exceeds rents currently billed inaccordance with the lease agreements. Above-market and below-market lease values for acquired properties arerecorded based on the present value (using a discount rate which reflects therisks associated with the leases acquired) of the difference between (i) thecontractual amounts to be paid pursuant to each in-place lease and (ii)management’s estimate of fair market lease rates for each correspondingin-place lease, measured over a period equal to the

48

----

remaining term ofthe lease for above-market leases and the initial term plus the term of anybelow-market fixed-rate renewal options for below-market leases.  The capitalized above-market lease values foracquired properties are amortized as a reduction of base rental revenue overthe remaining term of the respective leases, and the capitalized below-marketlease values are amortized as an increase to base rental revenue over theremaining initial terms plus the terms of any below-market fixed-rate renewaloptions of the respective leases. Escalations and recoveries from tenants are received from tenants forcertain costs as provided in the lease agreements.  These costs generally include real estatetaxes, utilities, insurance, common area maintenance and other recoverablecosts.

Constructionservices revenue includes fees earned and reimbursements received by theOperating Partnership for providing construction management and generalcontractor services to clients. Construction services revenue is recognized on the percentage ofcompletion method.  Using this method,profits are recorded on the basis of our estimates of the overall profit andpercentage of completion of individual contracts.  A portion of the estimated profits is accruedbased upon estimates of the percentage of completion of the constructioncontract.  This revenue recognitionmethod involves inherent risks relating to profit and cost estimates.  Real estate services revenue includesproperty management, facilities management, leasing commission fees and otherservices, and payroll and related costs reimbursed from clients.  Other income includes income from parkingspaces leased to tenants, income from tenants for additional services arrangedfor the Operating Partnership and income from tenants for early leaseterminations.

**Allowancefor Doubtful Accounts:**

Management periodicallyperforms a detailed review of amounts due from tenants to determine if accountsreceivable balances are impaired based on factors affecting the collectibilityof those balances.  Management’s estimateof the allowance for doubtful accounts requires management to exercisesignificant judgment about the timing, frequency and severity of collectionlosses, which affects the allowance and net income.

***ResultsFrom Operations***

The followingcomparisons for the three and nine months ended September 30, 2006 (“2006”), ascompared to the three and nine months ended September 30, 2005 (“2005”), makereference to the following:  (i) theeffect of the “Same-Store Properties,” which represent all in-serviceproperties owned by the Operating Partnership at June 30, 2005 (for thethree-month period comparisons), and which represent all in-service propertiesowned by the Operating Partnership at December 31, 2004 (for the nine-monthperiod comparisons), excluding properties sold or held for sale throughSeptember 30, 2006, and (ii) the effect of the “Acquired Properties,” whichrepresent all properties acquired by the Operating Partnership or commencinginitial operations from July 1, 2005 through September 30, 2006 (forthree-month period comparisons), and which represents all properties acquiredby the Operating Partnership or commencing initial operations from January 1,2005 through September 30, 2006 (for the nine-month period comparisons).

49

----

***ThreeMonths Ended September 30, 2006 Compared to Three Months Ended September 30,2005***
| ** **                                                                            | ** ** | **Three Months Ended** | ** ** | ** ** | ** ** | ** **  | ** ** |
|---------------------------------------------------------------------------------------|------------|----------------------------------|------------|------------|------------|-------------|------------|
| ** **                                                                            | ** ** | **September 30,**           | ** ** | **Dollar** | ** ** | **Percent** | ** ** |
| **(dollars in thousands)**                                                  | ** ** | **2006**                         | ** ** | **2005**   | ** ** | **Change**  | ** ** | **Change** | ** ** |
| **Revenue  from rental operations and other:**                                        |       |                             |       |       |       |        |       |   |   |
| Base rents                                                                            |       | $                                | 140,356    |       | $          | 127,770     |       | $ | 12,586 |   | 9.9 | % |
| Escalations and  recoveries from tenants                                              |       | 25,045                           |       | 21,163     |       | 3,882       |       | 18.3 |   |
| Other income                                                                          |       | 3,927                            |       | 4,583      |       | (656        | )          | (14.3 | ) |
| Total revenues from rental operations                                                 |       | 169,328                          |       | 153,516    |       | 15,812      |       | 10.3 |   |
|                                                                                  |       |                             |       |       |       |        |       |   |   |
| **Property  expenses:**                                                               |       |                             |       |       |       |        |       |   |   |
| Real estate  taxes                                                                    |       | 22,652                           |       | 19,885     |       | 2,767       |       | 13.9 |   |
| Utilities                                                                             |       | 18,766                           |       | 15,867     |       | 2,899       |       | 18.3 |   |
| Operating  services                                                                   |       | 23,534                           |       | 19,544     |       | 3,990       |       | 20.4 |   |
| Total property expenses                                                               |       | 64,952                           |       | 55,296     |       | 9,656       |       | 17.5 |   |
|                                                                                  |       |                             |       |       |       |        |       |   |   |
| **Non-property  revenues:**                                                           |       |                             |       |       |       |        |       |   |   |
| Construction  services                                                                |       | 23,236                           |       | —     |       | 23,236      |       | — |   |
| Real estate  services                                                                 |       | 10,653                           |       | 636        |       | 10,017      |       | 1,575.0 |   |
| Total  non-property revenues                                                          |       | 33,889                           |       | 636        |       | 33,253      |       | 5,228.5 |   |
|                                                                                  |       |                             |       |       |       |        |       |   |   |
| **Non-property  expenses:**                                                           |       |                             |       |       |       |        |       |   |   |
| Direct  construction costs                                                            |       | 22,568                           |       | —     |       | 22,568      |       | — |   |
| Real estate  services salaries, wages and other costs                                 |       | 6,686                            |       | —     |       | 6,686       |       | — |   |
| General and  administrative                                                           |       | 12,173                           |       | 7,952      |       | 4,221       |       | 53.1 |   |
| Depreciation and  amortization                                                        |       | 40,132                           |       | 37,838     |       | 2,294       |       | 6.1 |   |
| Total  non-property expenses                                                          |       | 81,559                           |       | 45,790     |       | 35,769      |       | 78.1 |   |
| Operating income                                                                      |       | 56,706                           |       | 53,066     |       | 3,640       |       | 6.9 |   |
| **Other  (expense) income:**                                                          |       |                             |       |       |       |        |       |   |   |
| Interest expense                                                                      |       | (35,815                          | )          | (30,159    | )          | (5,656      | )          | (18.8 | ) |
| Interest and  other investment income                                                 |       | 514                              |       | 308        |       | 206         |       | 66.9 |   |
| Equity in  earnings (loss) of unconsolidated joint ventures                           |       | (4,757                           | )          | 322        |       | (5,079      | )          | (1,577.3 | ) |
| Minority  interest in consolidated joint ventures                                     |       | 113                              |       | —     |       | 113         |       | — |   |
| Gain on sale of  investment in marketable securities                                  |       | —                           |       | —     |       | —      |       | — |   |
| Gain on sale of  investment in unconsolidated joint ventures                          |       | —                           |       | —     |       | —      |       | — |   |
| Total other  (expense) income                                                         |       | (39,945                          | )          | (29,529    | )          | (10,416     | )          | (35.3 | ) |
| Income from  continuing operations                                                    |       | 16,761                           |       | 23,537     |       | (6,776      | )          | (28.8 | ) |
| Discontinued  operations:                                                             |       |                             |       |       |       |        |       |   |   |
| Income from discontinued operations                                                   |       | 3,769                            |       | 2,167      |       | 1,602       |       | 73.9 |   |
| Realized gains (losses) and unrealized losses on disposition  of rental property, net |       | —                           |       | —     |       | —      |       | — |   |
| Total  discontinued operations, net                                                   |       | 3,769                            |       | 2,167      |       | 1,602       |       | 73.9 |   |
| Net income                                                                            |       | 20,530                           |       | 25,704     |       | (5,174      | )          | (20.1 | ) |
| Preferred unit  distributions                                                         |       | (500                             | )          | (500       | )          | —      |       | — |   |
| Net income available to  common unitholders                                           |       | $                                | 20,030     |       | $          | 25,204      |       | $ | (5,174 | ) | (20.5 | )% |

 

50

----

The following is asummary of the changes in revenue from rental operations and other, andproperty expenses divided into Same-Store Properties and Acquired Properties:
| ** **                                                                | ** ** | **Total**                      | ** ** | **Same-Store** | ** ** | **Acquired**   | ** ** |
|---------------------------------------------------------------------------|------------|--------------------------------|------------|----------------|------------|----------------|------------|
| ** **                                                                | ** ** | **Operating Partnership** | ** ** | **Properties** | ** ** | **Properties** | ** ** |
| ** **                                                                | ** ** | **Dollar**                     | ** ** | **Percent**    | ** ** | **Dollar**     | ** ** | **Percent** | ** ** | **Dollar** | ** ** | **Percent** | ** ** |
| **(dollars in thousands)**                                      | ** ** | **Change**                     | ** ** | **Change**     | ** ** | **Change**     | ** ** | **Change** | ** ** | **Change** | ** ** | **Change** | ** ** |
| **Revenue  from rental operations  and other:**                      |       |                           |       |           |       |           |       |   |   |   |   |   |   |
| Base rents                                                                |       | $                              | 12,586     |           | 9.9        | %              | $          | 5,579 |   | 4.4 | % | $ | 7,007 |   | 5.5 | % |
| Escalations and  recoveries from tenants                                  |       | 3,882                          |       | 18.3           |       | 3,301          |       | 15.6 |   | 581 |   | 2.7 |   |
| Other income                                                              |       | (656                           | )          | (14.3          | )          | (1,006         | )          | (21.9 | ) | 350 |   | 7.6 |   |
| Total                                                                     |       | $                              | 15,812     |           | 10.3       | %              | $          | 7,874 |   | 5.1 | % | $ | 7,938 |   | 5.2 | % |
|                                                                      |       |                           |       |           |       |           |       |   |   |   |   |   |   |
| **Property  expenses:**                                                   |       |                           |       |           |       |           |       |   |   |   |   |   |   |
| Real estate  taxes                                                        |       | $                              | 2,767      |           | 13.9       | %              | $          | 1,714 |   | 8.6 | % | $ | 1,053 |   | 5.3 | % |
| Utilities                                                                 |       | 2,899                          |       | 18.3           |       | 1,984          |       | 12.5 |   | 915 |   | 5.8 |   |
| Operating  services                                                       |       | 3,990                          |       | 20.4           |       | 1,743          |       | 8.9 |   | 2,247 |   | 11.5 |   |
| Total                                                                     |       | $                              | 9,656      |           | 17.5       | %              | $          | 5,441 |   | 9.8 | % | $ | 4,215 |   | 7.7 | % |
|                                                                      |       |                           |       |           |       |           |       |   |   |   |   |   |   |
| **OTHER  DATA:**                                                          |       |                           |       |           |       |           |       |   |   |   |   |   |   |
| Number of  Consolidated Properties  (excluding properties held for sale): |       | 255                            |       |           |       | 240            |       |   |   | 15 |   |   |   |
| Square feet*(in thousands)*                                               |       | 28,866                         |       |           |       | 27,169         |       |   |   | 1,697 |   |   |   |

 

Base rents for theSame-Store Properties increased $5.6 million, or 4.4 percent, for 2006 ascompared to 2005, due primarily to an increase in the percentage of spaceleased at the properties in 2006 from 2005. Escalations and recoveries from tenants for the Same-Store Propertiesincreased $3.3 million, or 15.6 percent, for 2006 over 2005, due primarily toan increased amount of total property expenses in 2006.  Other income for the Same-Store Propertiesdecreased $1.0 million, or 21.9 percent, due primarily to a decrease in leasetermination fees in 2006, partially offset by $1.4 million recognized in 2006for additional purchase consideration earned from a past sale of a jointventure interest.

Real estate taxes on the Same-Store Properties increased $1.7 million,or 8.6 percent, for 2006 as compared to 2005, due primarily to property taxrate increases in certain municipalities in 2006.  Utilities for the Same-Store Propertiesincreased $2.0 million, or 12.5 percent, for 2006 as compared to 2005, dueprimarily to increased electric rates in 2006 as compared to 2005.  Operating services for the Same-StoreProperties increased $1.7 million, or 8.9 percent due primarily to increasedinsurance costs of $1.0 million and increased maintenance costs of $0.9million, partially offset by a decrease in salaries and related expenses of$0.2 million, for 2006 as compared to 2005.

Construction services amounted to $23.2 million in 2006, due to theeffect of the Operating Partnership’s acquisitions of The Gale Company and itsrelated businesses (the “Gale/Green Transactions”).  Real estate services increased by $10.7million, for 2006 as compared to 2005, due primarily to the effect of theGale/Green Transactions.

Direct construction costs totaled $22.6 million in 2006, due primarilyto the effect of the Gale/Green Transactions. Real estate service salaries, wages and other costs equaled $6.7 millionin 2006 due primarily to the effect of the Gale/Green Transactions.  General and administrative increased by $4.2million, or 53.1 percent, for 2006 as compared to 2005 due primarily to theeffect of the Gale/Green Transactions.

Depreciation andamortization increased by $2.3 million, or 6.1 percent, for 2006 over2005.  Of this increase, $2.8 million, or7.3 percent, is attributable to the Acquired Properties, partially offset by adecrease of $0.5 million, or 1.2 percent, which is attributable to theSame-Store Properties.

51

----

Interest expenseincreased $5.7 million, or 18.8 percent, for 2006 as compared to 2005.  This increase was due primarily to higheraverage debt balances in 2006 as compared to 2005.

Interest and other investment income increased $0.2 million, or 66.9percent, for 2006 as compared to 2005. This increase was due primarily to higher cash balances invested duringthe period as well as an overall increase in interest rates.

Equity in earningsof unconsolidated joint ventures decreased $5.1 million, or 1,577.3 percent,for 2006 as compared to 2005.  Thedecrease was due primarily to a loss of $2.7 million in the Mack-Green jointventure, a loss of $1.9 million in the Meadowlands Xanadu joint venture, and anincreased loss of $0.4 million due to the G&G Martco joint venture.

Income fromcontinuing operations decreased to approximately $16.7 million in 2006 from$23.5 million in 2005.  The decrease ofapproximately $6.8 million is due to the factors discussed above.

Net income available tocommon unitholders decreased by approximately $5.2 million, from $25.2 millionin 2005 to $20.0 million in 2006.  Thisdecrease was the result of a decrease in income from continuing operations of$6.8 million, partially offset by an increase in income from discontinuedoperations of $1.6 million.

52

----

***NineMonths Ended September 30, 2006 Compared to Nine Months Ended September 30,2005***
| ** **                                                                            | ** ** | **Nine Months Ended** | ** ** | ** ** | ** ** | ** **  | ** ** |
|---------------------------------------------------------------------------------------|------------|---------------------------------|------------|------------|------------|-------------|------------|
| ** **                                                                            | ** ** | **September 30,**          | ** ** | **Dollar** | ** ** | **Percent** | ** ** |
| **(dollars in thousands)**                                                  | ** ** | **2006**                        | ** ** | **2005**   | ** ** | **Change**  | ** ** | **Change** | ** ** |
| **Revenue  from rental operations and other:**                                        |       |                            |       |       |       |        |       |   |   |
| Base rents                                                                            |       | $                               | 406,989    |       | $          | 380,284     |       | $ | 26,705 |   | 7.0 | % |
| Escalations and  recoveries from tenants                                              |       | 69,862                          |       | 57,128     |       | 12,734      |       | 22.3 |   |
| Other income                                                                          |       | 9,985                           |       | 7,517      |       | 2,468       |       | 32.8 |   |
| Total revenues from rental operations                                                 |       | 486,836                         |       | 444,929    |       | 41,907      |       | 9.4 |   |
|                                                                                  |       |                            |       |       |       |        |       |   |   |
| **Property  expenses:**                                                               |       |                            |       |       |       |        |       |   |   |
| Real estate  taxes                                                                    |       | 64,891                          |       | 56,890     |       | 8,001       |       | 14.1 |   |
| Utilities                                                                             |       | 46,789                          |       | 38,648     |       | 8,141       |       | 21.1 |   |
| Operating  services                                                                   |       | 66,024                          |       | 59,428     |       | 6,596       |       | 11.1 |   |
| Total property expenses                                                               |       | 177,704                         |       | 154,966    |       | 22,738      |       | 14.7 |   |
|                                                                                  |       |                            |       |       |       |        |       |   |   |
| **Non-property  revenues:**                                                           |       |                            |       |       |       |        |       |   |   |
| Construction  services                                                                |       | 36,286                          |       | —     |       | 36,286      |       | — |   |
| Real estate  services                                                                 |       | 19,015                          |       | 1,853      |       | 17,162      |       | 926.4 |   |
| Total  non-property revenues                                                          |       | 55,301                          |       | 1,853      |       | 53,448      |       | 2,884.4 |   |
|                                                                                  |       |                            |       |       |       |        |       |   |   |
| **Non-property  expenses:**                                                           |       |                            |       |       |       |        |       |   |   |
| Direct  construction costs                                                            |       | 35,148                          |       | —     |       | 35,148      |       | — |   |
| Real estate  services salaries, wages and other costs                                 |       | 10,820                          |       | —     |       | 10,820      |       | — |   |
| General and administrative                                                            |       | 32,796                          |       | 23,449     |       | 9,347       |       | 39.9 |   |
| Depreciation and  amortization                                                        |       | 116,980                         |       | 106,067    |       | 10,913      |       | 10.3 |   |
| Total  non-property expenses                                                          |       | 195,744                         |       | 129,516    |       | 66,228      |       | 51.1 |   |
| Operating income                                                                      |       | 168,689                         |       | 162,300    |       | 6,389       |       | 3.9 |   |
| **Other  (expense) income:**                                                          |       |                            |       |       |       |        |       |   |   |
| Interest expense                                                                      |       | (100,620                        | )          | (88,919    | )          | (11,701     | )          | (13.2 | ) |
| Interest and  other investment income                                                 |       | 2,359                           |       | 493        |       | 1,866       |       | 378.5 |   |
| Equity in  earnings (loss) of unconsolidated joint ventures                           |       | (5,356                          | )          | 552        |       | (5,908      | )          | (1,070.3 | ) |
| Minority  interest in consolidated joint ventures                                     |       | 143                             |       | (74        | )          | 217         |       | 293.2 |   |
| Gain on sale of  investment in marketable securities                                  |       | 15,060                          |       | —     |       | 15,060      |       | — |   |
| Gain on sale of  investment in unconsolidated joint ventures                          |       | —                          |       | 35         |       | (35         | )          | (100.0 | ) |
| Total other  (expense) income                                                         |       | (88,414                         | )          | (87,913    | )          | (501        | )          | (0.6 | ) |
| Income from  continuing operations                                                    |       | 80,275                          |       | 74,387     |       | 5,888       |       | 7.9 |   |
| Discontinued  operations:                                                             |       |                            |       |       |       |        |       |   |   |
| Income from discontinued operations                                                   |       | 9,798                           |       | 14,557     |       | (4,759      | )          | (32.7 | ) |
| Realized gains (losses) and unrealized losses on disposition  of rental property, net |       | 4,905                           |       | 11,078     |       | (6,173      | )          | (55.7 | ) |
| Total  discontinued operations, net                                                   |       | 14,703                          |       | 25,635     |       | (10,932     | )          | (42.6 | ) |
| Net income                                                                            |       | 94,978                          |       | 100,022    |       | (5,044      | )          | (5.0 | ) |
| Preferred unit  distributions                                                         |       | (1,500                          | )          | (5,409     | )          | 3,909       |       | 72.3 |   |
| Net income available to  common unitholders                                           |       | $                               | 93,478     |       | $          | 94,613      |       | $ | (1,135 | ) | (1.2 | )% |

 

53

----

The following is asummary of the changes in revenue from rental operations and other, andproperty expenses divided into Same-Store Properties and Acquired Properties:
| ** **                                                                | ** ** | **Total**                      | ** ** | **Same-Store** | ** ** | **Acquired**   | ** ** |
|---------------------------------------------------------------------------|------------|--------------------------------|------------|----------------|------------|----------------|------------|
| ** **                                                                | ** ** | **Operating Partnership** | ** ** | **Properties** | ** ** | **Properties** | ** ** |
| ** **                                                                | ** ** | **Dollar**                     | ** ** | **Percent**    | ** ** | **Dollar**     | ** ** | **Percent** | ** ** | **Dollar** | ** ** | **Percent** | ** ** |
| **(dollars in thousands)**                                      | ** ** | **Change**                     | ** ** | **Change**     | ** ** | **Change**     | ** ** | **Change** | ** ** | **Change** | ** ** | **Change** | ** ** |
| **Revenue  from rental operations  and other:**                      |       |                           |       |           |       |           |       |   |   |   |   |   |   |
| Base rents                                                                |       | $                              | 26,705     |           | 7.0        | %              | $          | 5,242 |   | 1.4 | % | $ | 21,463 |   | 5.6 | % |
| Escalations and  recoveries  from tenants                            |       | 12,734                         |       | 22.3           |       | 7,396          |       | 12.9 |   | 5,338 |   | 9.4 |   |
| Other income                                                              |       | 2,468                          |       | 32.8           |       | 2,962          |       | 39.4 |   | (494 | ) | (6.6 | ) |
| Total                                                                     |       | $                              | 41,907     |           | 9.4        | %              | $          | 15,600 |   | 3.5 | % | $ | 26,307 |   | 5.9 | % |
|                                                                      |       |                           |       |           |       |           |       |   |   |   |   |   |   |
| **Property  expenses:**                                                   |       |                           |       |           |       |           |       |   |   |   |   |   |   |
| Real estate  taxes                                                        |       | $                              | 8,001      |           | 14.1       | %              | $          | 4,993 |   | 8.8 | % | $ | 3,008 |   | 5.3 | % |
| Utilities                                                                 |       | 8,141                          |       | 21.1           |       | 4,806          |       | 12.4 |   | 3,335 |   | 8.7 |   |
| Operating  services                                                       |       | 6,596                          |       | 11.1           |       | 1,262          |       | 2.1 |   | 5,334 |   | 9.0 |   |
| Total                                                                     |       | $                              | 22,738     |           | 14.7       | %              | $          | 11,061 |   | 7.1 | % | $ | 11,677 |   | 7.6 | % |
|                                                                      |       |                           |       |           |       |           |       |   |   |   |   |   |   |
| **OTHER  DATA:**                                                          |       |                           |       |           |       |           |       |   |   |   |   |   |   |
| Number of  Consolidated Properties  (excluding properties held for sale): |       | 255                            |       |           |       | 238            |       |   |   | 17 |   |   |   |
| Square feet*(in thousands)*                                               |       | 28,866                         |       |           |       | 25,573         |       |   |   | 3,293 |   |   |   |

 

Base rents for theSame-Store Properties increased $5.2 million, or 1.4 percent, for 2006 ascompared to 2005, due primarily to an increase in the percentage of spaceleased at the properties in 2006 from 2005. Escalations and recoveries from tenants for the Same-Store Propertiesincreased $7.4 million, or 12.9 percent, for 2006 over 2005, due primarily toan increased amount of total property expenses in 2006.  Other income for the Same-Store Propertiesincreased $3.0 million, or 39.4 percent, due primarily to the receipt of alegal settlement by the Operating Partnership of $2.0 million in 2006 and $1.4million recognized in 2006 for additional purchase consideration earned from apast sale of a joint venture interest.

Real estate taxes on the Same-Store Properties increased $5.0 million,or 8.8 percent, for 2006 as compared to 2005, due primarily to property taxrate increases in certain municipalities in 2006.  Utilities for the Same-Store Propertiesincreased $4.8 million, or 12.4 percent, for 2006 as compared to 2005, due primarilyto increased electric rates in 2006 as compared to 2005.  Operating services for the Same-StoreProperties increased $1.3 million, or 2.1 percent, due primarily to increasedmaintenance and related labor costs of $3.0 million for 2006 as compared to2005, partially offset by a decrease in snow removal costs of $1.9 million.

Construction services amounted to $36.3 million in 2006, due to theeffect of the Gale/Green Transactions. Real estate services increased by $17.2 million, or 926.2 percent, forthe 2006 as compared to 2005, due primarily to the effect of the Gale/GreenTransactions.

Direct construction costs totaled $35.1 million in 2006, due primarilyto the effect of the Gale/Green Transactions. Real estate service salaries, wages and other costs equaled $10.8million in 2006, due primarily to the effect of the Gale/GreenTransactions.  General and administrativeincreased by $9.3 million, or 39.9 percent, for 2006 as compared to 2005 dueprimarily to the effect of the Gale/Green Transactions.

Depreciation andamortization increased by $10.9 million, or 10.3 percent, for 2006 over2005.  Of this increase, approximately$9.2 million, or 8.7 percent, is attributable to the Acquired Properties, and$1.7 million, or 1.6 percent is attributable to the Same-Store Properties.

54

----

Interest expenseincreased $11.7 million, or 13.2 percent, for 2006 as compared to 2005.  This increase was due primarily to higheraverage debt balances in 2006 as compared to 2005.

Interest and other investment income increased $1.9 million, or 378.5percent, for 2006 as compared to 2005. This increase was due primarily to the receipt of approximately $1.1million of dividends on the OperatingPartnership’s investment in marketable securities, as well as higher cashbalances invested in 2006 as compared to 2005.

Equity in earningsof unconsolidated joint ventures decreased $5.9 million, or 1,070.3 percent,for 2006 as compared to 2005.  Thedecrease was due primarily to a loss of $4.0 million in 2006 in the Mack-Greenjoint venture and a loss of $1.9 million in 2006 in the Meadowlands Xanadujoint venture.

The OperatingPartnership recognized a gain on sale of investment in marketable securities of$15.1 million in 2006.

Income fromcontinuing operations increased to approximately $80.3 million in 2006 from$74.4 million in 2005.  The increase ofapproximately $5.9 million is due to the factors discussed above.

Net income available tocommon unitholders decreased by approximately $1.1 million, from $94.6 millionin 2005 to $93.5 million in 2006.  Thisdecrease was the result of realized gains (losses) and unrealized losses ondisposition of rental property of $11.1 million in 2005, and a decrease inincome from discontinued operations of $4.7 million.  These were partially offset by an increase inincome from continuing operations of $5.9 million for 2006 as compared to 2005,realized gains (losses) and unrealized losses on disposition of rental propertyof $4.9 million in 2006, and a decrease in Preferred Unit Distributions of $3.9million for 2006 as compared to 2005.

## **LIQUIDITYAND CAPITAL RESOURCES**

## ***Liquidity***

**Overview:**

Historically, rentalrevenue has been the principal source of funds to pay operating expenses, debtservice, capital expenditures and dividends, excluding non-recurring capitalexpenditures.  To the extent that theOperating Partnership’s cash flow from operating activities is insufficient tofinance its non-recurring capital expenditures such as property acquisitions,development and construction costs and other capital expenditures, theOperating Partnership has and expects to continue to finance such activitiesthrough borrowings under its revolving credit facility and other debt andequity financings.

The Operating Partnershipbelieves that with the general downturn in the economy in recent years, and thesoftening of the Operating Partnership’s markets specifically, it is reasonablylikely that vacancy rates may continue to increase, effective rental rates onnew and renewed leases may continue to decrease and tenant installation costs,including concessions, may continue to increase in most or all of its marketsin 2006.  As a result of the potentialnegative effects on the Operating Partnership’s revenue from the overallreduced demand for office space, the Operating Partnership’s cash flow could beinsufficient to cover increased tenant installation costs over theshort-term.  If this situation were tooccur, the Operating Partnership expects that it would finance any shortfallsthrough borrowings under its revolving credit facility and other debt andequity financings.

The OperatingPartnership expects to meet its short-term liquidity requirements generallythrough its working capital, net cash provided by operating activities and fromits revolving credit facility.  TheOperating Partnership frequently examines potential property acquisitions anddevelopment projects and, at any given time, one or more of such acquisitionsor development projects may be under consideration.  Accordingly, the ability to fund propertyacquisitions and development projects is a major part of the OperatingPartnership’s financing requirements. The Operating Partnership expects to meet its financing requirementsthrough funds generated from operating activities, proceeds from propertysales, long-term and short-term borrowings (including draws on the OperatingPartnership’s revolving credit facility) and the issuance of additional debtand/or equity securities.

55

----

**GaleCompany Earn-Out**

The agreement toacquire the Gale Company (“Gale Agreement”), which was acquired for initialpurchase consideration of approximately $22.3 million on May 9, 2006, containsearn-out provisions providing for the payment of contingent purchaseconsideration of up to $18 million in cash based upon the achievement of GrossIncome and NOI (as such terms are defined in the Gale Agreement) targets andother events for the three years following the closing date.

**Construction Projects:**

The Operating Partnership entered into a 15-year leasewith AAA Mid-Atlantic (“AAA”) for a 120,000 square foot office building to beconstructed by the Operating Partnership in its Horizon Center Business Parklocated in Hamilton Township, New Jersey. The building is expected to be completed during the latter part of 2006at an estimated cost of approximately $19.2 million (of which the OperatingPartnership has incurred $12.9 million through September 30, 2006), which isexpected to be funded through borrowings on the Operating Partnership’sunsecured credit facility.  Concurrentwith the signing of the lease, the Operating Partnership executed a purchaseand sale agreement with AAA pursuant to which the Operating Partnership, uponthe commencement of the 120,000 square foot lease, will acquire AAA’s threeoffice and office/flex buildings, totaling approximately 84,000, square feetand certain vacant, developable land, all located in Hamilton Township, NewJersey, for a total purchase price of approximately $10 million, subject tocertain conditions.

Additionally, theOperating Partnership, through a joint venture with the PRC Group, isconstructing a 92,878 square-foot office property, to be known as Red BankCorporate Plaza, located in Red Bank, New Jersey, on land contributed by itsjoint venture partner.  The project isfully leased to Hovnanian Enterprise, Inc. for a 10-year term.  The total cost of the project, which isexpected to be completed in the third quarter 2007, is estimated to beapproximately $27 million, of which the Operating Partnership currently expectsto fund approximately $3 million.  OnOctober 20, 2006, the venture entered into a $22.0 million construction loanwith a commercial bank.  The loan carriesan interest rate of LIBOR plus 130 basis points and matures in April 2008.  The loan currently has three one-year extensionoptions subject to certain conditions, each of which require payment of a fee.

**PropertySales**

In the thirdquarter 2006, the Operating Partnership entered into agreements to sell its 19remaining office buildings, aggregating 1.4 million square feet, and landholdings in Denver and Colorado Springs, Colorado; and its remaining holdingsin San Francisco, California, comprised of two office properties, aggregating451,000 square feet, and a joint venture interest in a 306,000 square footoffice property.  The OperatingPartnership is anticipating to receive total proceeds of approximately $337million from the sales, which are expected to be completed in three separatetransactions by the end of 2006.  TheOperating Partnership intends to use the sales proceeds to repay approximately$250 million of outstanding borrowings on its revolving credit facility, forinvestments in property acquisitions and for general corporate purposes.

**REIT Restrictions:**

To maintain its qualification as a REIT, the Corporationmust make annual distributions to its stockholders of at least 90 percent ofits REIT taxable income, determined without regard to the dividends paiddeduction and by excluding net capital gains. Moreover, the Corporation intends to continue to make regular quarterlydistributions to its common stockholders which, based upon current policy, inthe aggregate would equal approximately $160.3 million on an annualizedbasis.  However, any such distribution,whether for federal income tax purposes or otherwise, would only be paid out ofavailable cash, including borrowings and other sources, after meeting operatingrequirements, preferred stock dividends and distributions, and scheduled debtservice on the Operating Partnership’s debt.

**Property Lock-Ups:**

The Operating Partnershipmay not dispose of or distribute certain of its properties, currentlycomprising 50 properties with an aggregate net book value of approximately $1.3billion, which were originally contributed by members of either the Mack Group(which includes William L. Mack, Chairman of the Corporation’s Board ofDirectors; David S. Mack, a director of the Corporation; Earle I. Mack, aformer director of the Corporation; and Mitchell E. Hersh, president, chiefexecutive officer and a director of the Corporation), the Robert Martin Group(which includes Robert F. Weinberg, a director of the Corporation; Martin S.Berger, a former director of the Corporation; and Timothy M. Jones, formerpresident of the Corporation), the Cali Group (which includes John R. Cali,

56

----

a director of theCorporation, and John J. Cali, a former director of the Corporation) or certainother common unitholders, without the express written consent of arepresentative of the Mack Group, the Robert Martin Group, the Cali Group or thespecific certain other common unitholders, as applicable, except in a mannerwhich does not result in recognition of any built-in-gain (which may result inan income tax liability) or which reimburses the appropriate Mack Group, RobertMartin Group, Cali Group members or the specific certain other commonunitholders 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 theOperating Partnership sells all of its properties or in connection with a saletransaction which the Corporation’s Board of Directors determines is reasonablynecessary to satisfy a material monetary default on any unsecured debt,judgment or liability of the Operating Partnership or the Corporation or tocure any material monetary default on any mortgage secured by a property.  The Property Lock-Ups expire periodicallythrough 2016.  Upon the expiration of theProperty Lock-Ups, the Operating Partnership generally is required to usecommercially reasonable efforts to prevent any sale, transfer or otherdisposition of the subject properties from resulting in the recognition ofbuilt-in gain to the appropriate Mack Group, Robert Martin Group, Cali Groupmembers or the specific certain other common unitholders.  88 of our properties, with an aggregate netbook value of approximately $868.4 million, have lapsed restrictions and aresubject to these conditions.

**Unencumbered Properties:**

As of September 30, 2006,the Operating Partnership had 256 unencumbered properties, totaling 26.5million square feet, representing 86.1 percent of the Operating Partnership’stotal portfolio on a square footage basis.

**Credit Ratings:**

The Operating Partnershiphas 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 seniorunsecured debt of the Operating Partnership. S&P and Fitch have also assigned their BBB- rating to existing andprospective preferred stock offerings of the Corporation.  Moody’s Investors Service (“Moody’s”) hasassigned its Baa2 rating to existing and prospective senior unsecured debt ofthe Operating Partnership and its Baa3 rating to its existing and prospectivepreferred stock offerings of the Corporation.

## ***Cash Flows***

Cash and cash equivalents decreased by $39.6million to $20.8million at September 30, 2006, compared to $60.4 million at December 31,2005.  The decrease is comprised of thefollowing net cash flow items:

(1)                                  $157.0million provided by operating activities.

(2)                                  $262.2million used in investing activities, consisting primarily of the following:

(a)                                     $192.1million used for additions to rental property and related intangibles; plus

(b)                                    $149.0million used in investing in unconsolidated joint ventures; plus

(c)                                     $11.9million used for the purchase of marketable securities; minus

(d)                                    $78.6million received from proceeds from the sale of marketable securities; minus

(e)                                     $18.9million received from proceeds from the sales of rental property.

(3)                                  $65.6million provided by financing activities, consisting primarily of thefollowing:

(a)                                  $660.3million from borrowings under the Operating Partnership’s unsecured creditfacility; plus

(b)                                 $199.9million from proceeds from the sale of senior unsecured notes; minus

(c)                                  $550.2million used for the repayment of borrowings under the Operating Partnership’sunsecured credit facility; minus

(d)                                 $156.4million used for the repayment of mortgages, loans payable and otherobligations; minus

(e)                                  $146.5million used for the payment of distributions.

57

----

***Debt Financing***

##### **Summaryof Debt:**

The following is abreakdown of the Operating Partnership’s debt between fixed and variable-ratefinancing as of September 30, 2006:
| ** **                                     | ** ** | **Balance  ($000’s)** | ** ** | **% of  Total** | ** ** | **Weighted Average  Interest Rate (a)** | ** ** | **Weighted Average  Maturity  in Years** | ** ** |
|------------------------------------------------|------------|----------------------------|------------|----------------------|------------|--------------------------------------------------------|------------|----------------------------------------------------|------------|
| Fixed Rate  Unsecured Debt                     |       | $                          | 1,673,443  |                 | 68.43      | %                                                      | 6.28       | %                                                  | 5.53       |   |
| Fixed Rate  Secured Debt and Other Obligations |       | 360,394                    |       | 14.73                | %          | 5.44                                                   | %          | 5.17                                               |       |
| Variable Rate  Unsecured Debt                  |       | 412,000                    |       | 16.84                | %          | 5.79                                                   | %          | 3.15                                               |       |
|                                           |       |                       |       |                 |       |                                                   |       |                                               |       |
| **Totals/Weighted Average:**                   |       | $                          | 2,445,837  |                 | 100.00     | %                                                      | 6.07       | %                                                  | 5.08       |   |

 

**Debt Maturities:**

Scheduledprincipal payments and related weighted average annual interest rates for theOperating Partnership’s debt as of September 30, 2006 are as follows:
| **Period**                                                                       | ** ** | **Scheduled  Amortization  ($000’s)** | ** ** | **Principal  Maturities  ($000’s)** | ** ** | **Total  ($000’s)** | ** ** | **Weighted Average  Interest Rate of  Future Repayments (a)** | ** ** |
|----------------------------------------------------------------------------------|------------|--------------------------------------------|------------|------------------------------------------|------------|--------------------------|------------|----------------------------------------------------------------------------------------|------------|
| 2006                                                                             |       | $                                          | 6,849      |                                     | —     |                     | $          | 6,849                                                                                  |       | 5.00 | % |
| 2007                                                                             |       | 19,691                                     |       | $                                        | 29,441     |                     | 49,132     |                                                                                   | 5.64       | % |
| 2008                                                                             |       | 17,993                                     |       | 12,563                                   |       | 30,556                   |       | 5.25                                                                                   | %          |
| 2009                                                                             |       | 9,752                                      |       | 712,000                                  |       | 721,752                  |       | 6.49                                                                                   | %          |
| 2010                                                                             |       | 2,794                                      |       | 334,500                                  |       | 337,294                  |       | 5.26                                                                                   | %          |
| Thereafter                                                                       |       | 15,267                                     |       | 1,293,091                                |       | 1,308,358                |       | 6.11                                                                                   | %          |
| Sub-total                                                                        |       | 72,346                                     |       | 2,381,595                                |       | 2,453,941                |       | 6.07                                                                                   | %          |
| Adjustment for  unamortized debt discount/premium, net, as of September 30, 2006 |       | (8,104                                     | )          | —                                   |       | (8,104                   | )          |                                                                                   |       |
|                                                                             |       |                                       |       |                                     |       |                     |       |                                                                                   |       |
| Totals/Weighted  Average                                                         |       | $                                          | 64,242     |                                     | $          | 2,381,595                |       | $                                                                                      | 2,445,837  |   | 6.07 | % |

 

----

(a)          Actual weighted averageLIBOR contract rates relating to the Operating Partnership’s outstanding debtas of September 30, 2006 of 5.33 percent was used in calculating revolvingcredit facility.

**Senior Unsecured Notes:**

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

The terms of theOperating Partnership’s senior unsecured notes (which totaled approximately$1.6 billion as of September 30, 2006) include certain restrictions andcovenants which require compliance with financial ratios relating to themaximum amount of debt leverage, the maximum amount of secured indebtedness,the minimum amount of debt service coverage and the maximum amount of unsecureddebt as a percent of unsecured assets.

**Unsecured Revolving CreditFacility:**

The Operating Partnershiphas an unsecured revolving credit facility with a current borrowing capacity of$600 million from a group of 23 lenders, which is expandable to $800 million (“2004Unsecured Facility”).  As of October 25,2006, the Operating Partnership had $428 million of outstanding borrowingsunder the 2004 Unsecured Facility.

58

----

The interest rate onoutstanding borrowings (not electing the Operating Partnership’s competitivebid feature) under the 2004 Unsecured Facility is currently LIBOR plus 65 basispoints.  The facility has a competitivebid feature, which allows the Operating Partnership to solicit bids fromlenders under the facility to borrow up to $300 million at interest rates lessthan the current LIBOR plus 65 basis point spread.  As of September 30, 2006, the OperatingPartnership’s outstanding borrowings carried a weighted average interest rateof LIBOR plus 46 points.  The OperatingPartnership may also elect an interest rate representing the higher of thelender’s prime rate or the Federal Funds rate plus 50 basis points.  The 2004 Unsecured Facility also currently requiresa 15 basis point facility fee on the current borrowing capacity payablequarterly in arrears.  The 2004 UnsecuredFacility matures in November 2009, with an extension option of one year, whichwould require a payment of 25 basis points of the then borrowing capacity ofthe facility upon exercise.

The interest rateand the facility fee are subject to adjustment, on a sliding scale, based uponthe operating partnership’s unsecured debt ratings.  In the event of a change in the OperatingPartnership’s unsecured debt rating, the interest and facility fee rates willbe adjusted in accordance with the following table:
| **Operating Partnership’s**        | ** ** | **Interest Rate –**    | ** ** | ** **            | ** ** |
|----------------------------------------------|------------|---------------------------------------|------------|-----------------------|------------|
| **Unsecured Debt Ratings:**        | ** ** | **Applicable Basis Points** | ** ** | **Facility Fee** | ** ** |
| **S&P Moody’s/Fitch (a)** | ** ** | **Above LIBOR**                  | ** ** | **Basis Points** | ** ** |
| No ratings or less than  BBB-/Baa3/BBB-      |       | 112.5                                 |       | 25.0                  |       |
| BBB-/Baa3/BBB-                               |       | 80.0                                  |       | 20.0                  |       |
| BBB/Baa2/BBB (current)                       |       | 65.0                                  |       | 15.0                  |       |
| BBB+/Baa1/BBB+                               |       | 55.0                                  |       | 15.0                  |       |
| A-/A3/A- or higher                           |       | 50.0                                  |       | 15.0                  |       |

 

----

(a)          If the OperatingPartnership 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 suchratings.  If the Operating Partnershiphas debt ratings from three rating agencies, one of which is S&P orMoody’s, the rates per the above table shall be based on the lower of the twohighest ratings.  If the OperatingPartnership has debt ratings from only one agency, it will be considered tohave no rating or less than BBB-/Baa3/BBB- per the above table.

The OperatingPartnership believes that the 2004 Unsecured Facility is sufficient to meet itsrevolving credit facility needs.

The terms of the 2004Unsecured Facility include certain restrictions and covenants which limit,among other things, the payment of dividends (as discussed below), theincurrence of additional indebtedness, the incurrence of liens and thedisposition of real estate properties (to the extent that: (i) such propertydispositions cause the Operating Partnership to default on any of the financialratios of the facility described below, or (ii) the property dispositions arecompleted while the Operating Partnership is under an event of default underthe facility, unless, under certain circumstances, such disposition is beingcarried out to cure such default), and which require compliance with financialratios relating to the maximum leverage ratio, the maximum amount of securedindebtedness, the minimum amount of tangible net worth, the minimum amount offixed charge coverage, the maximum amount of unsecured indebtedness, theminimum amount of unencumbered property interest coverage and certaininvestment limitations.  The dividendrestriction referred to above provides that, except to enable the Corporationto continue to qualify as a REIT under the Code, the Corporation will notduring any four consecutive fiscal quarters make distributions with respect tocommon stock or other common equity interests in an aggregate amount in excessof 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 Partnershiphas mortgages, loans payable and other obligations which consist of variousloans collateralized by certain of the Operating Partnership’s rentalproperties.  Payments on mortgages, loanspayable and other obligations are generally due in monthly installments ofprincipal and interest, or interest only.

On January 3, 2006,the Operating Partnership repaid its $144.6 million loan with NorthwesternMutual Life/Principal Life Insurance companies collateralized by HarborsideFinancial Center Plazas 2 and 3, which were scheduled to mature on that date,using borrowings under the 2004 Unsecured Facility.

59

----

On July 3, 2006,the Operating Partnership repaid its $9.4 million loan with MassachusettsMutual Life Insurance Operating Partnership collateralized by 6411 Ivy Lane,which was scheduled to mature on October 1, 2006, at par, using borrowingsunder the 2004 Unsecured Facility.

On August 1, 2006,the Operating Partnership repaid its $15.6 million loan with LaSalle BankNational Banking Association collateralized by 2 Paragon Way, 3 Paragon Way and100 Willowbrook Road, which was scheduled to mature on September 1, 2006, atpar, using borrowings under the 2004 Unsecured Facility.

**DebtStrategy:**

The Operating Partnershipdoes not intend to reserve funds to retire the Operating Partnership’s seniorunsecured notes or its mortgages, loans payable and other obligations uponmaturity.  Instead, the OperatingPartnership will seek to refinance such debt at maturity or retire such debtthrough the issuance of additional equity or debt securities on or before theapplicable maturity dates.  If it cannotraise sufficient proceeds to retire the maturing debt, the OperatingPartnership may draw on its revolving credit facility to retire the maturingindebtedness, which would reduce the future availability of funds under suchfacility.  As of October 23, 2006, theOperating Partnership had $428 million of outstanding borrowings under its $600million unsecured revolving credit facility. The Operating Partnership has approximately $30.4 million of mortgageindebtedness maturing from October 1, 2006 through September 30, 2007.  The Operating Partnership is reviewingvarious refinancing options, including the public issuance of additionalunsecured debt, the issuance in public or private transactions of preferredequity instruments and/or obtaining additional mortgage debt, some or all ofwhich may be completed during 2006.  TheOperating Partnership anticipates that its available cash and cash equivalentsand cash flows from operating activities, together with cash available fromborrowings and other sources, will be adequate to meet the OperatingPartnership’s capital and liquidity needs both in the short and long-term.  However, if these sources of funds areinsufficient or unavailable, the Operating Partnership’s ability to make theexpected distributions discussed below may be adversely affected.

***EquityFinancing and Registration Statements***

**EquityActivity:**

The followingtable presents the changes in the Corporation’s issued and outstanding sharesof Common Stock and the Operating Partnership’s common units since December 31,2005:
| ** **                                                         | ** ** | **Common** | ** ** | **Common** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                                         | ** ** | **Stock**  | ** ** | **Units**  | ** ** | **Total**  | ** ** |
| Outstanding at  January 1, 2006                                    |       | 62,019,646 |       | 13,650,439 |       | 75,670,085 |       |
| Stock options exercised                                            |       | 302,619    |       | —     |       | 302,619    |       |
| Common units redeemed for Common Stock                             |       | 221,666    |       | (221,666   | )          | —     |       |
| Common units redeemed for cash                                     |       | —     |       | (1         | )          | (1         | )          |
| Common units issued                                                |       | —     |       | 2,167,053  |       | 2,167,053  |       |
| Shares issued under Dividend Reinvestment and Stock  Purchase Plan |       | 4,025      |       | —     |       | 4,025      |       |
| Restricted shares issued, net of cancellations                     |       | 3,250      |       | —     |       | 3,250      |       |
|                                                               |       |       |       |       |       |       |       |
| Outstanding at  September 30, 2006                                 |       | 62,551,206 |       | 15,595,825 |       | 78,147,031 |       |

 

**ShareRepurchase Program:**

On September 13, 2000,the Board of Directors authorized an increase to the Corporation’s repurchaseprogram under which the Corporation was permitted to purchase up to anadditional $150.0 million of the Corporation’s outstanding common stock (“RepurchaseProgram”).  From that date through itslast purchases on January 10, 2003, the Corporation purchased and retired,under the Repurchase Program, 3.7 million shares of its outstanding commonstock for an aggregate cost of approximately $104.5 million.  Concurrent with these purchases, theCorporation sold to the Operating Partnership 3.7 million of its outstandingcommon units for an aggregate cost of approximately $104.5 million. TheCorporation has a remaining authorization to repurchase up to an additional$45.5 million of its outstanding common stock, which it may repurchase fromtime to time in open market transactions at prevailing prices or throughprivately negotiated transactions.

60

----

**Shelf Registration Statements:**

The Corporation has aneffective shelf registration statement on Form S-3 filed with the Securitiesand Exchange Commission (“SEC”) for an aggregate amount of $2.0 billion incommon stock, preferred stock, depositary shares, and/or warrants of theCorporation, under which no securities have been sold.

The Corporation and theOperating Partnership also have an effective shelf registration statement onForm S-3 filed with the SEC for an aggregate amount of $2.5 billion in commonstock, preferred stock, depositary shares and guarantees of the Corporation anddebt securities of the Operating Partnership, under which $600 million ofsecurities have been sold through October 23, 2006 and $1.9 billion remainsavailable for future issuances.

***Off-BalanceSheet Arrangements***

**UnconsolidatedJoint Venture Debt:**

The debt of the OperatingPartnership’s unconsolidated joint ventures aggregating $571 million atSeptember 30, 2006, is non-recourse to the Operating Partnership except forcustomary exceptions pertaining to such matters as intentional misuse of funds,environmental conditions and material misrepresentations.  The Operating Partnership has also posted a $7.3million letter of credit in support of the Harborside South Pier joint venture,$3.6 million of which is indemnified by Hyatt.

The OperatingPartnership’s off-balance sheet arrangements are further discussed in Note 4:Investments in Unconsolidated Joint Ventures to the Financial Statements.

***Contractual Obligations***

The following tableoutlines the timing of payment requirements related to the OperatingPartnership’s debt (principal and interest), PILOT agreements, and ground leaseagreements as of September 30, 2006:
| ** **                                      | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                      | ** ** | ** **                                | ** ** | **Less than 1** | ** ** | **1 – 3** | ** ** | **4 – 5** | ** ** | **6 – 10** | ** ** | **After 10** | ** ** |
| **(dollars in thousands)**            | ** ** | **Total**                                 | ** ** | **year** | ** ** | **Years** | ** ** | **years** | ** ** | **Years** | ** ** | **years** | ** ** |
| Senior unsecured  notes                         |       | $                                         | 1,992,000  |   | $ | 100,494 |   | $ | 490,114 |   | $ | 602,701 |   | $ | 798,691 |   | — |   |
| Revolving credit  facility (1)                  |       | 487,539                                   |       | 23,854 |   | 47,709 |   | 415,976 |   | — |   | — |   |
| Mortgages, loans  payable and other obligations |       | 506,721                                   |       | 76,756 |   | 77,057 |   | 192,308 |   | 129,513 |   | $ | 31,087 |   |
| Payments in lieu  of taxes (PILOT)              |       | 72,160                                    |       | 5,202 |   | 12,655 |   | 8,587 |   | 23,051 |   | 22,665 |   |
| Operating lease  payments                       |       | 790                                       |       | 291 |   | 496 |   | 3 |   | — |   | — |   |
| Ground lease  payments                          |       | 39,935                                    |       | 690 |   | 1,972 |   | 1,320 |   | 3,339 |   | 32,614 |   |
| Total                                           |       | $                                         | 3,099,145  |   | $ | 207,287 |   | $ | 630,003 |   | $ | 1,220,895 |   | $ | 954,594 |   | $ | 86,366 |   |

 

----

(1)          Interest payments assumecurrent credit facility borrowings and interest rates remain at the September30, 2006 level until maturity.

***OtherCommitments and Contingencies***

**LegalProceedings:**

On February 12, 2003, theNJSEA selected The Mills Corporation and the Operating Partnership to redevelopthe Continental Airlines Arena site (“Arena Site”) for mixed uses, includingretail.  In March 2003, Hartz MountainIndustries, Inc., (“Hartz”), filed a lawsuit in the Superior Court of NewJersey, Law Division, for Bergen County, seeking to enjoin NJSEA from enteringinto a contract with the Meadowlands Venture for the redevelopment of theContinental Airlines Arena site.  In May2003, the court denied Hartz’s request for an injunction and dismissed its suitfor failure to exhaust administrative remedies. In June 2003, the NJSEA held hearings on Hartz’s protest, and on aparallel protest filed by another rejected developer, Westfield, Inc. (“Westfield”).  On September 10, 2003, the

61

----

NJSEA ruled against Hartz’sand Westfield’s protests.  Hartz andWestfield, as well as Elliot Braha and three other taxpayers (collectively “Braha”),thereafter filed appeals from the NJSEA’s final decision.  By decision dated May 14, 2004, the AppellateDivision of the Superior Court of New Jersey rejected the appellants’contention that the NJSEA lacks statutory authority to allow retail developmentof its property.  The Appellate Divisionalso remanded Hart’s claim under the Open Public Records Acts, seekingdisclosure of additional documents from NJSEA, to the Law Division for furtherproceedings.  The Supreme Court of NewJersey declined to review the Appellate Division’s decision.  On August 19, 2004, the Law Division issued adecision resolving Hartz’s Open Public Records Act claim and ordered NJSEA todisclose some, but not all, of the documents Hartz was seeking.  The Appellate Division, in a decisionrendered on November 24, 2004, upheld the findings of the Law Division in theremand proceeding.  The Supreme Court ofNew Jersey declined to review the Appellate Division’s decision.  At Hartz’s request, the NJSEA thereafter heldfurther hearings on December 15 and 16, 2004, to review certain additionalfacts in support of Hartz’s and Westfield’s bid protest.  Braha, as a taxpayer, did not have standingto participate in the supplemental protest hearing.  On March 4, 2005, the Hearing Officerrendered his Supplemental Report and Recommendation to the NJSEA, finding nomerit in the protests presented by Hartz and Westfield.  The NJSEA accepted the Hearing Officer’sSupplemental Report and Recommendation on March 30, 2005 and Hartz and Brahahave appealed that decision to the Appellate Division.

In January 2004, Hartzand Westfield also appealed to the Appellate Division of the Superior Court ofNew Jersey from the NJSEA’s December 2003 approval and execution of the RedevelopmentAgreement with the Meadowlands Venture.

In November 2004, Hartzand Westfield filed additional appeals in the Appellate Division challengingNJSEA’s resolution authorizing the execution of the First Amendment to theRedevelopment Agreement with Meadowlands Venture and the ground lease with theMeadowlands Venture.

All of the above appealshave been consolidated by the Appellate Division.  On August 17, 2006, the Appellate Divisionissued an opinion affirming NJSEA’s selection of the Meadowlands Venture andrejecting the appellants’ arguments in all respects.  On August 28, 2006, Hartz made a motionbefore the Appellate Division for reconsideration of this decision and forsupplementation of the record.  Thatmotion is pending.

On September 30, 2004,the Borough of Carlstadt filed an action in the Superior Court of New JerseyLaw Division, challenging Meadowlands Xanadu, which asserted claims that aresubstantially the same as claims asserted by Hartz and Braha in the aboveappeals.  By Order dated November 19,2004, the Law Division transferred that matter to the Superior Court of NewJersey, Appellate Division.  This matterwas voluntarily dismissed by Carlstadt in accordance with a March 22, 2006Settlement Agreement and Release between Carlstadt and the Meadowlands Venture.

Several appeals filed byHartz, the Sierra Club and others, including certain environmental groups, thatchallenge certain approvals received by the Meadowlands Venture from the NJSEA,the New Jersey Meadowlands Commission (“NJMC”) and the New Jersey Department ofEnvironmental Protection (“NJDEP”) remain pending before the AppellateDivision.  Some of these appealschallenge NJDEP’s issuance of a stream encroachment permit, waterfrontdevelopment permit, and coastal zone consistency determination for MeadowlandsXanadu.  Other of these appeals are fromNJDEP’s and NJMC’s issuance of reports in connection with a consultationprocess the NJSEA was statutorily required to undertake in connection with anyNJSEA-development project.

A Hartz affiliate and atrade association have filed an appeal from an advisory opinion favorable tothe Meadowlands Venture issued by the Director of the Division of AlcoholicBeverage Control concerning the availability of special concessionaire permits.  That appeal is also pending in the AppellateDivision of the Superior Court of New Jersey.

Three separate lawsuitshave been filed in the United States District Court for the District of NewJersey, challenging a permit issued by the U.S. Army Corps of Engineers (“USACE”)in connection with the project.  Thefirst suit was filed on March 30, 2005, by the Sierra Club, the New JerseyPublic Interest Research Group, Citizen Lobby, Inc. and the New JerseyEnvironmental Federation.  Additionalsuits were filed on May 16 and May 31, 2005, respectively, by Hartz (togetherwith one of its officers as an individually-named plaintiff) and the Borough ofCarlstadt.  The Sierra Club also filed amotion for a preliminary injunction to stop certain construction activities on

62

----

the project, which theCourt denied on July 6, 2005.  On October26, 2005, the court granted the motions of the Meadowlands Venture and theUSACE to dismiss the Hartz complaint for lack of standing.  The deadline for appealing that decision haspassed, so the Hartz action is ended.  OnOctober 31, 2005, the USACE filed a motion to dismiss the complaint filed bythe Borough of Carlstadt for lack of standing. On February 7, 2006, the Court granted the motion and dismissed theBorough of Carlstadt’s complaint in its entirety.  On March 9, 2006, Carlstadt filed a notice ofappeal of this decision to the United States Court of Appeals for the ThirdCircuit.  This appeal has been dismissedpursuant to the Settlement Agreement and Release executed by Carlstadt and theMeadowlands Venture.

On April 5, 2005, the NewYork Football Giants (“Giants”) filed an emergent application with the SupremeCourt of New Jersey, Chancery Division, seeking an injunction stopping all workon the Meadowlands Xanadu project as being in violation of its existing leasewith the NJSEA.  After hearing oralargument on the application on August 5, 2005, the court denied the Giants’motion for preliminary injunctive relief. On June 22, 2006, the court entered a Stipulation and Consent Order thatdismissed without prejudice the parties’ respective claims.

The New Jersey Builders’Association (“NJBA”) has commenced an action, which is pending in the AppellateDivision, alleging that the NJSEA has failed to meet a purported obligation to provideaffordable housing at the Meadowlands Complex and seeking, among other relief,an order enjoining the construction of Meadowlands Xanadu.  NJBA filed an application for preliminaryinjunctive relief seeking to enjoin further construction of Meadowlands Xanadu,which the Appellate Division denied on July 28, 2005.  The Meadowlands Venture is not a party tothat action.

On January 25, 2006, theBergen Cliff Hawks Baseball Club, LLC (the “Cliff Hawks”), filed a complaintagainst the Operating Partnership and Mills, alleging that the OperatingPartnership and Mills breached an agreement to provide the Cliff Hawks with aminor league baseball park as part of the Xanadu Project.  This matter is pending.

The Operating Partnershipbelieves that the Meadowlands Venture’s proposal and the planned project complywith applicable laws, and the Meadowlands Venture intends to continue itsvigorous defense of its rights under the Redevelopment Agreement and GroundLease.  Although there can be noassurance, the Operating Partnership does not believe that the pending lawsuitswill have any material affect on its ability to develop the Meadowlands Xanaduproject.

There are no othermaterial pending legal proceedings, other than ordinary routine litigationincidental to its business, to which the Operating Partnership is a party or towhich any of the Properties is subject.

***Inflation***

The OperatingPartnership’s leases with the majority of its tenants provide for recoveriesand escalation charges based upon the tenant’s proportionate share of, and/orincreases in, real estate taxes and certain operating costs, which reduce theOperating Partnership’s exposure to increases in operating costs resulting frominflation.

##### **DISCLOSUREREGARDING FORWARD-LOOKING STATEMENTS**

We consider portions of this information, including the documentsincorporated by reference, to be forward-looking statements within themeaning of Section 21E of the Securities Exchange Act of 1934, asamended.  We intend such forward-lookingstatements to be covered by the safe harbor provisions for forward-lookingstatements contained in Section 21E of such act.  Such forward-looking statements relate to,without limitation, our future economic performance, plans and objectives forfuture operations and projections of revenue and other financial items.  Forward-looking statements can be identifiedby the use of words such as “may,” “will,” “plan,” “should,” “expect,” “anticipate,”“estimate,” “continue” or comparable terminology.  Forward-looking statements are inherentlysubject to risks and uncertainties, many of which we cannot predict withaccuracy and some of which we might not even anticipate.  Although we believe that the expectationsreflected in such forward-looking statements are based upon reasonable assumptionsat the time made, we can give no assurance that such expectations will beachieved.  Future events and actualresults, financial and otherwise, may differ materially from the resultsdiscussed in the forward-looking statements. Readers are cautioned not to place undue reliance on theseforward-looking statements.

63

----

Amongthe factors about which we have made assumptions are:

·                                          changesin the general economic climate and conditions, including those affectingindustries in which our principal tenants compete;

 

·                                          anyfailure of the general economy to recover from the current economic downturn;

 

·                                          theextent of any tenant bankruptcies or of any early lease terminations;

 

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

 

·                                          changesin the supply of and demand for office, office/flex and industrial/warehouseproperties;

 

·                                          changesin interest rate levels;

 

·                                          changesin operating costs;

 

·                                          ourability to obtain adequate insurance, including coverage for terrorist acts;

 

·                                          theavailability of financing;

 

·                                          changesin governmental regulation, tax rates and similar matters; and

 

·                                          otherrisks associated with the development and acquisition of properties, includingrisks that the development may not be completed on schedule, that the tenantswill not take occupancy or pay rent, or that development or operating costs maybe greater than anticipated.

**Item 3.****                       Quantitativeand Qualitative Disclosures About Market Risk**

Market risk is theexposure to loss resulting from changes in interest rates, foreign currencyexchange rates, commodity prices and equity prices.  In pursuing its business plan, the primarymarket risk to which the Operating Partnership is exposed is interest raterisk.  Changes in the general level ofinterest rates prevailing in the financial markets may affect the spreadbetween the Operating Partnership’s yield on invested assets and cost of fundsand, in turn, its ability to make distributions or payments to its investors.

Approximately $2.0billion of the Operating Partnership’s long-term debt and other obligationsbears interest at fixed rates and therefore the fair value of these instrumentsis affected by changes in market interest rates.  The following table presents principal cashflows**based upon maturity dates of the debtobligations and the related weighted-average interest rates by expected maturitydates for the fixed rate debt.  Theinterest rates on the variable rate debt as of September 30, 2006 was LIBORplus 65 basis points.
| **(dollars in thousands)**    | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** ** | ** ** | ** **          | ** ** |
|-----------------------------------------|------------|-------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|----------------|------------|------------|------------|---------------------|------------|
| **September 30, 2006**        | ** ** | **Maturity Date**  | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Debt,**                               | ** ** | **10/1/06 –** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** | ** ** | ** ** | ** **          | ** ** |
| **including current portion** | ** ** | **12/31/06**            | ** ** | **2007**   | ** ** | **2008**   | ** ** | **2009**   | ** ** | **2010**   | ** ** | **Thereafter** | ** ** | **Total**  | ** ** | **Fair Value** | ** ** |
|                                    |       |                    |       |       |       |       |       |       |       |       |       |           |       |       |       |                |       |
| Fixed Rate                              |       | $                       | 4,557      |       | $          | 47,612     |       | $          | 29,399     |       | $          | 308,898        |       | $          | 336,398    |                | $          | 1,306,973 |   | $ | 2,033,837 |   | $ | 2,055,497 |   |
| Average Interest  Rate                  |       | 5.00                    | %          | 5.64       | %          | 5.25       | %          | 7.41       | %          | 5.26       | %          | 6.11           | %          | 6.13       | %          |                |       |
|                                    |       |                    |       |       |       |       |       |       |       |       |       |           |       |       |       |                |       |
| Variable Rate                           |       |                    |       |       |       |       |       | $          | 412,000    |       |       |           |       |       | $          | 412,000             |       | $ | 412,000 |   |
|                                         |            |                         |            |            |            |            |            |            |            |            |            |                |            |            |            |                     |            |  |  |  |  |  |  |  |  |

 

While the OperatingPartnership has not experienced any significant credit losses, in the event ofa significant rising interest rate environment and/or economic downturn,defaults could increase and result in losses to the Operating Partnership whichcould adversely affect its operating results and liquidity.

64

----

 

# **Item 4.        Controls and Procedures**

*Disclosure Controls and Procedures*.  The Operating Partnership’s management, withthe participation of the Corporation’s president and chief executive officerand chief financial officer, has evaluated the effectiveness of the OperatingPartnership’s disclosure controls and procedures (as such term is defined inRules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of theperiod covered by this report.  Based onsuch evaluation, the Corporation’s president and chief executive officer andchief financial officer have concluded that, as of the end of such period, theOperating Partnership’s disclosure controls and procedures are effective inrecording, processing, summarizing and reporting, on a timely basis,information required to be disclosed by the Operating Partnership in thereports that it files or submits under the Exchange Act.

*Internal Control Over Financial Reporting*.  There have not been any changes in theOperating Partnership’s internal control over financial reporting (as such termis defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during thefiscal quarter to which this report relates that have materially affected, orare reasonably likely to materially affect, the Operating Partnership’sinternal control over financial reporting.

65

----

**MACK-CALI REALTY, L.P. AND SUBSIDIARIES**

**Part II –Other Information**

##### **Item 1.        LegalProceedings**

OnFebruary 12, 2003, the NJSEA selected The Mills Corporation and the OperatingPartnership to redevelop the Continental Airlines Arena site (“Arena Site”) formixed uses, including retail.  InMarch 2003, Hartz Mountain Industries, Inc., (“Hartz”), filed a lawsuit in theSuperior Court of New Jersey, Law Division, for Bergen County, seeking toenjoin NJSEA from entering into a contract with the Meadowlands Venture for theredevelopment of the Continental Airlines Arena site.  In May 2003, the court denied Hartz’s requestfor an injunction and dismissed its suit for failure to exhaust administrativeremedies.  In June 2003, the NJSEA heldhearings on Hartz’s protest, and on a parallel protest filed by anotherrejected developer, Westfield, Inc. (“Westfield”).  On September 10, 2003, the NJSEA ruledagainst Hartz’s and Westfield’s protests. Hartz and Westfield, as well as Elliot Braha and three other taxpayers(collectively “Braha”), thereafter filed appeals from the NJSEA’s finaldecision.  By decision dated May 14,2004, the Appellate Division of the Superior Court of New Jersey rejected theappellants’ contention that the NJSEA lacks statutory authority to allow retaildevelopment of its property.  TheAppellate Division also remanded Hart’s claim under the Open Public RecordsActs, seeking disclosure of additional documents from NJSEA, to the LawDivision for further proceedings.  TheSupreme Court of New Jersey declined to review the Appellate Division’sdecision.  On August 19, 2004, the LawDivision issued a decision resolving Hartz’s Open Public Records Act claim andordered NJSEA to disclose some, but not all, of the documents Hartz wasseeking.  The Appellate Division, in adecision rendered on November 24, 2004, upheld the findings of the Law Divisionin the remand proceeding.  The SupremeCourt of New Jersey declined to review the Appellate Division’s decision.  At Hartz’s request, the NJSEA thereafter heldfurther hearings on December 15 and 16, 2004, to review certain additionalfacts in support of Hartz’s and Westfield’s bid protest.  Braha, as a taxpayer, did not have standingto participate in the supplemental protest hearing.  On March 4, 2005, the Hearing Officerrendered his Supplemental Report and Recommendation to the NJSEA, finding nomerit in the protests presented by Hartz and Westfield.  The NJSEA accepted the Hearing Officer’sSupplemental Report and Recommendation on March 30, 2005 and Hartz and Brahahave appealed that decision to the Appellate Division.

In January 2004, Hartzand Westfield also appealed to the Appellate Division of the Superior Court ofNew Jersey from the NJSEA’s December 2003 approval and execution of theRedevelopment Agreement with the Meadowlands Venture.

In November 2004, Hartzand Westfield filed additional appeals in the Appellate Division challengingNJSEA’s resolution authorizing the execution of the First Amendment to theRedevelopment Agreement with Meadowlands Venture and the ground lease with theMeadowlands Venture.

All of the above appealshave been consolidated by the Appellate Division.  On August 17, 2006, the Appellate Divisionissued an opinion affirming NJSEA’s selection of the Meadowlands Venture andrejecting the appellants’ arguments in all respects.  On August 28, 2006, Hartz made a motionbefore the Appellate Division for reconsideration of this decision and forsupplementation of the record.  Thatmotion is pending.

On September 30, 2004,the Borough of Carlstadt filed an action in the Superior Court of New JerseyLaw Division, challenging Meadowlands Xanadu, which asserted claims that aresubstantially the same as claims asserted by Hartz and Braha in the aboveappeals.  By Order dated November 19, 2004,the Law Division transferred that matter to the Superior Court of New Jersey,Appellate Division.  This matter wasvoluntarily dismissed by Carlstadt in accordance with a March 22, 2006,Settlement Agreement and Release between Carlstadt and the Meadowlands Venture.

Several appeals filed byHartz, the Sierra Club and others, including certain environmental groups, thatchallenge certain approvals received by the Meadowlands Venture from the NJSEA,the New Jersey Meadowlands Commission (“NJMC”) and the New Jersey Department ofEnvironmental Protection (“NJDEP”) remain pending before the AppellateDivision.  Some of these appealschallenge NJDEP’s issuance of a stream encroachment permit, waterfrontdevelopment permit, and coastal zone consistency determination for MeadowlandsXanadu.

66

----

Other of these appealsare from NJDEP’s and NJMC’s issuance of reports in connection with aconsultation process the NJSEA was statutorily required to undertake inconnection with any NJSEA-development project.

A Hartz affiliate and atrade association have filed an appeal from an advisory opinion favorable tothe Meadowlands Venture issued by the Director of the Division of AlcoholicBeverage Control concerning the availability of special concessionaire permits.  That appeal is also pending in the AppellateDivision of the Superior Court of New Jersey.

Three separate lawsuitshave been filed in the United States District Court for the District of NewJersey, challenging a permit issued by the U.S. Army Corps of Engineers (“USACE”)in connection with the project.  Thefirst suit was filed on March 30, 2005, by the Sierra Club, the New JerseyPublic Interest Research Group, Citizen Lobby, Inc. and the New JerseyEnvironmental Federation.  Additionalsuits were filed on May 16 and May 31, 2005, respectively, by Hartz (togetherwith one of its officers as an individually-named plaintiff) and the Borough ofCarlstadt.  The Sierra Club also filed amotion for a preliminary injunction to stop certain construction activities onthe project, which the Court denied on July 6, 2005.  On October 26, 2005, the court granted themotions of the Meadowlands Venture and the USACE to dismiss the Hartz complaintfor lack of standing.  The deadline forappealing that decision has passed, so the Hartz action is ended.  On October 31, 2005, the USACE filed a motionto dismiss the complaint filed by the Borough of Carlstadt for lack ofstanding.  On February 7, 2006, the Courtgranted the motion and dismissed the Borough of Carlstadt’s complaint in its entirety.  On March 9, 2006, Carlstadt filed a notice ofappeal of this decision to the United States Court of Appeals for the ThirdCircuit.  This appeal has been dismissedpursuant to the Settlement Agreement and Release executed by Carlstadt and theMeadowlands Venture.

On April 5, 2005, the NewYork Football Giants (“Giants”) filed an emergent application with the SupremeCourt of New Jersey, Chancery Division, seeking an injunction stopping all workon the Meadowlands Xanadu project as being in violation of its existing leasewith the NJSEA.  After hearing oralargument on the application on August 5, 2005, the court denied the Giants’motion for preliminary injunctive relief. On June 22, 2006, the court entered a Stipulation and Consent Order thatdismissed without prejudice the parties’ respective claims.

The New Jersey Builders’Association (“NJBA”) has commenced an action, which is pending in the AppellateDivision, alleging that the NJSEA has failed to meet a purported obligation toprovide affordable housing at the Meadowlands Complex and seeking, among otherrelief, an order enjoining the construction of Meadowlands Xanadu.  NJBA filed an application for preliminaryinjunctive relief seeking to enjoin further construction of Meadowlands Xanadu,which the Appellate Division denied on July 28, 2005.  The Meadowlands Venture is not a party tothat action.

On January 25, 2006, theBergen Cliff Hawks Baseball Club, LLC (the “Cliff Hawks”), filed a complaintagainst the Operating Partnership and Mills, alleging that the OperatingPartnership and Mills breached an agreement to provide the Cliff Hawks with aminor league baseball park as part of the Xanadu Project.  This matter is pending.

The Operating Partnershipbelieves that the Meadowlands Venture’s proposal and the planned project complywith applicable laws, and the Meadowlands Venture intends to continue itsvigorous defense of its rights under the Redevelopment Agreement and GroundLease.  Although there can be noassurance, the Operating Partnership does not believe that the pending lawsuitswill have any material affect on its ability to develop the Meadowlands Xanaduproject.

There are no othermaterial pending legal proceedings, other than ordinary routine litigationincidental to its business, to which the Operating Partnership is a party or towhich any of the Properties is subject.

## **Item 1A.     RiskFactors**

Not Applicable.

67

----

 

**MACK-CALI REALTY, L.P. AND SUBSIDIARIES**

**Part II –Other Information**

##### **Item 2.    UnregisteredSales of Equity Securities and Use of Proceeds**

(a)           **COMMON UNITS**

During the three monthsended September 30, 2006, the Corporation issued 85,800 shares of common stockto holders of common units in the Operating Partnership upon the redemption ofsuch common units in private offerings pursuant to Section 4(2) of theSecurities Act.  The holders of thecommon units were limited partners of the Operating Partnership and accreditedinvestors under Rule 501 of the Securities Act. The common units were converted into an equal number of shares of commonstock.  The Corporation has registeredthe resale of such shares under the Securities Act.

(b)           Not Applicable.

(c)           None.

##### **Item 3.    DefaultsUpon Senior Securities**

Not Applicable.

##### **Item 4.    Submissionof Matters to a Vote of Security Holders**

Not Applicable.

##### **Item 5.    OtherInformation**

(a)                                  None.

(b)                                 None.

### **Item 6.    Exhibits**

The exhibitsrequired by this item are set forth on the Exhibit Index attached hereto.

68

----

**MACK-CALI REALTY, L.P. AND SUBSIDIARIES**

**Signatures**

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.
|                        |   | Mack-Cali Realty, L.P. |
|------------------------|--------|------------------------|
|                   |   | (Registrant)           |
|                   |   | By:                    |   Mack-Cali Realty Corporation |
|                   |   |                   | Its General  Partner |
|                   |   |                   |   |
| Date:November 1,  2006 |   | By:                    |   /s/ Mitchell E. Hersh |
|                   |   |                   |   Mitchell E. Hersh |
|                   |   |                   |   President and |
|                   |   |                   | Chief Executive  Officer |
|                   |   |                   |   |
|                   |   |                   |   |
| Date:November 1,  2006 |   | By:                    |   /s/ Barry Lefkowitz |
|                   |   |                   |   Barry Lefkowitz |
|                   |   |                   |   Executive Vice President and |
|                   |   |                   | Chief Financial  Officer |
|                   |   |                   |   |
|                   |   |                   |   |

 

69

----

 

**Exhibit Index**
| Exhibit  Number | ** ** | **Exhibit Title**                                                                                                                                                                                                                                                                                                                                       |
|-----------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                                                                                                         |
| 3.1             |       | 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             |       | Amendment No. 2 to the Mack-Cali Realty Corporation  Amended and Restated Bylaws dated May 24, 2006 (filed as Exhibit 3.1 to the  Corporation’s Form 8-K dated May 24, 2006 and incorporated herein by  reference).                                                                                                                                     |
|            |       |                                                                                                                                                                                                                                                                                                                                                         |
| 3.5             |       | 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).                                                                                             |
|            |       |                                                                                                                                                                                                                                                                                                                                                         |
| 3.6             |       | 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). |
|            |       |                                                                                                                                                                                                                                                                                                                                                         |
| 3.7             |       | 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).                                                                       |
|            |       |                                                                                                                                                                                                                                                                                                                                                         |
| 3.8             |       | 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).                                                           |
|            |       |                                                                                                                                                                                                                                                                                                                                                         |
| 3.9             |       | 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).                                                                    |
|            |       |                                                                                                                                                                                                                                                                                                                                                         |
| 3.10            |       | 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).                                                                                             |
|            |       |                                                                                                                                                                                                                                                                                                                                                         |
| 3.11            |       | 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).                                                        |

 

70

----

 
| Exhibit  Number | ** ** | **Exhibit Title**                                                                                                                                                                                                                                                                                                                      |
|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                                                                                        |
| 4.1             |       | 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).                               |
|            |       |                                                                                                                                                                                                                                                                                                                                        |
| 4.11            |       | 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).                         |

 

71

----

 
| Exhibit  Number | ** ** | **Exhibit Title**                                                                                                                                                                                                                                                                                                                       |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                                                                                         |
| 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            |       | Supplemental Indenture No. 12 dated as of  November 30, 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 November 30, 2005 and  incorporated herein by reference).                       |
|            |       |                                                                                                                                                                                                                                                                                                                                         |
| 4.16            |       | Supplemental Indenture No. 13 dated as of  January 24, 2006, 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 18, 2006 and  incorporated herein by reference).                         |
|            | ** ** | ** **                                                                                                                                                                                                                                                                                                                                   |
| 4.17            |       | 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 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).                                                   |
|            |       |                                                                                                                                                                                                                                                                                                                                         |
| 10.3            |       | 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).                                                   |
|            |       |                                                                                                                                                                                                                                                                                                                                         |
| 10.4            |       | 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).                                                          |
|            |       |                                                                                                                                                                                                                                                                                                                                         |
| 10.5            |       | Employment Agreement dated as of May 9, 2006 by  and between Mark Yeager and Mack-Cali Realty Corporation (filed as Exhibit  10.15 to the Operating Partnership’s Form 8-K dated May 9, 2006 and  incorporated herein by reference).                                                                                               |

 

72

----

 
| Exhibit  Number | ** ** | **Exhibit Title**                                                                                                                                                                                                                                                                                                    |
|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                                                                      |
| 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).                                               |
|            |       |                                                                                                                                                                                                                                                                                                                      |
| 10.7            |       | 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).                                                |
|            |       |                                                                                                                                                                                                                                                                                                                      |
| 10.8            |       | 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).                                                |
|            |       |                                                                                                                                                                                                                                                                                                                      |
| 10.9            |       | 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).                                             |
|            |       |                                                                                                                                                                                                                                                                                                                      |
| 10.10           |       | 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).                                            |
|            |       |                                                                                                                                                                                                                                                                                                                      |
| 10.11           |       | 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).                                          |
|            | ** ** | ** **                                                                                                                                                                                                                                                                                                                |
| 10.12           |       | 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).                                                    |
|            |       |                                                                                                                                                                                                                                                                                                                      |
| 10.13           |       | 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). |
|            |       |                                                                                                                                                                                                                                                                                                                      |
| 10.14           |       | 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).                                            |
|            |       |                                                                                                                                                                                                                                                                                                                      |
| 10.15           |       | 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).                                                      |
|            |       |                                                                                                                                                                                                                                                                                                                      |
| 10.16           |       | 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).   |

 

73

----

 
| Exhibit  Number | ** ** | **Exhibit Title**                                                                                                                                                                                                                                                                                                           |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                                                                             |
| 10.17           |       | 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).                                                  |
|            |       |                                                                                                                                                                                                                                                                                                                             |
| 10.18           |       | 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).                                                            |
|            |       |                                                                                                                                                                                                                                                                                                                             |
| 10.19           |       | 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).         |
|            |       |                                                                                                                                                                                                                                                                                                                             |
| 10.20           |       | 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).       |
|            |       |                                                                                                                                                                                                                                                                                                                             |
| 10.21           |       | 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).                                              |
|            |       |                                                                                                                                                                                                                                                                                                                             |
| 10.22           |       | 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).                                                        |
|            |       |                                                                                                                                                                                                                                                                                                                             |
| 10.23           |       | 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).                                                       |
|            |       |                                                                                                                                                                                                                                                                                                                             |
| 10.24           |       | 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). |
|            |       |                                                                                                                                                                                                                                                                                                                             |
| 10.25           |       | 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).   |
|            |       |                                                                                                                                                                                                                                                                                                                             |
| 10.26           |       | 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).                                              |

 

74

----

 
| Exhibit  Number | ** ** | **Exhibit Title**                                                                                                                                                                                                                                                            |
|-----------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                              |
| 10.27           |       | 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).         |
|            |       |                                                                                                                                                                                                                                                                              |
| 10.28           |       | 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).  |
|            |       |                                                                                                                                                                                                                                                                              |
| 10.29           |       | 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).            |
|            |       |                                                                                                                                                                                                                                                                              |
| 10.30           |       | 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).  |
|            |       |                                                                                                                                                                                                                                                                              |
| 10.31           |       | 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).            |
|            |       |                                                                                                                                                                                                                                                                              |
| 10.32           |       | 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). |
|            |       |                                                                                                                                                                                                                                                                              |
| 10.33           |       | 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).          |
|            |       |                                                                                                                                                                                                                                                                              |
| 10.34           |       | 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).      |
|            |       |                                                                                                                                                                                                                                                                              |
| 10.35           |       | 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).                |
|            |       |                                                                                                                                                                                                                                                                              |
| 10.36           |       | 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).        |
|            |       |                                                                                                                                                                                                                                                                              |
| 10.37           |       | 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).                  |
|            |       |                                                                                                                                                                                                                                                                              |
| 10.38           |       | 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).        |
|            |       |                                                                                                                                                                                                                                                                              |
| 10.39           |       | 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).                  |

 

75

----

 
| Exhibit  Number | ** ** | **Exhibit Title**                                                                                                                                                                                                                                                                    |
|-----------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                                      |
| 10.40           |       | 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).            |
|            |       |                                                                                                                                                                                                                                                                                      |
| 10.41           |       | 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).                      |
|            |       |                                                                                                                                                                                                                                                                                      |
| 10.42           |       | Restricted Share Award Agreement effective  December 6, 2005 by and between Mack-Cali Realty Corporation and  Mitchell E. Hersh (filed as Exhibit 10.2 to the Operating Partnership’s  Form 8-K dated December 6, 2005 and incorporated herein by  reference).   |
|            |       |                                                                                                                                                                                                                                                                                      |
| 10.43           |       | Tax Gross Up Agreement effective December 6,  2005 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed  as Exhibit 10.3 to the Operating Partnership’s Form 8-K dated  December 6, 2005 and incorporated herein by reference).              |
|            |       |                                                                                                                                                                                                                                                                                      |
| 10.44           |       | Restricted Share Award Agreement effective  December 6, 2005 by and between Mack-Cali Realty Corporation and Barry  Lefkowitz (filed as Exhibit 10.4 to the Operating Partnership’s  Form 8-K dated December 6, 2005 and incorporated herein by  reference).     |
|            |       |                                                                                                                                                                                                                                                                                      |
| 10.45           |       | Tax Gross Up Agreement effective December 6,  2005 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed  as Exhibit 10.5 to the Operating Partnership’s Form 8-K dated  December 6, 2005 and incorporated herein by reference).                |
|            |       |                                                                                                                                                                                                                                                                                      |
| 10.46           |       | Restricted Share Award Agreement effective  December 6, 2005 by and between Mack-Cali Realty Corporation and Roger  W. Thomas (filed as Exhibit 10.6 to the Operating Partnership’s  Form 8-K dated December 6, 2005 and incorporated herein by  reference).     |
|            |       |                                                                                                                                                                                                                                                                                      |
| 10.47           |       | Tax Gross Up Agreement effective December 6,  2005 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed  as Exhibit 10.7 to the Operating Partnership’s Form 8-K dated  December 6, 2005 and incorporated herein by reference).                |
|            |       |                                                                                                                                                                                                                                                                                      |
| 10.48           |       | Restricted Share Award Agreement effective  December 6, 2005 by and between Mack-Cali Realty Corporation and Michael  A. Grossman (filed as Exhibit 10.8 to the Operating Partnership’s  Form 8-K dated December 6, 2005 and incorporated herein by  reference). |
|            |       |                                                                                                                                                                                                                                                                                      |
| 10.49           |       | Tax Gross Up Agreement effective December 6, 2005  by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as  Exhibit 10.9 to the Operating Partnership’s Form 8-K dated  December 6, 2005 and incorporated herein by reference).            |
|            |       |                                                                                                                                                                                                                                                                                      |
| 10.50           |       | Restricted Share Award Agreement by and between  Mack-Cali Realty Corporation and Mark Yeager (filed as Exhibit 10.16 to the  Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by  reference).                                                             |

 

76

----

 
| Exhibit  Number | ** ** | **Exhibit Title**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.51           |       | 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). |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.52           |       | 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).                                                                                                                                                                                                                                                                               |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.53           |       | Extension and Modification Agreement dated as of  September 16, 2005 by and among Mack-Cali Realty, L.P., JPMorgan Chase  Bank, N.A., as administrative agent, and the several Lenders Party thereto  (filed as Exhibit 10.1 to the Operating Partnership’s Form 8-K  dated September 16, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                              |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.54           |       | Second Modification Agreement dated as of July 14,  2006 by and among Mack-Cali Realty, L.P., JPMorgan Chase Bank, N.A., as  administrative agent, and the several Lenders party thereto (filed as Exhibit  10.1 to the Operating Partnership’s Form 8-K dated July 14, 2006 and  incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                   |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.55           |       | 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).                                                                                                                                                                                                                                               |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.56           |       | 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).                                                                                                                                                                                                                                                                                                                                  |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.57           |       | First Amendment to Contribution and Exchange  Agreement, dated as of December 11, 1997, by and among 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.58           |       | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

77

----

 
| Exhibit  Number | ** ** | **Exhibit Title**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|-----------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.59           |       | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.60           |       | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.61           |       | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.62           |       | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.63           |       | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.64           |       | Form of Indemnification Agreement by and  between Mack-Cali Realty Corporation and each of William L. Mack, John J.  Cali, Mitchell E. Hersh, John R. Cali, David S. Mack, Martin S. Berger, Alan  S. Bernikow, Kenneth M. Duberstein, Martin D. Gruss, Nathan Gantcher, Vincent  Tese, Roy J. Zuckerberg, Alan G. Philibosian, Irvin D. Reid, Robert F.  Weinberg, Barry Lefkowitz, Roger W. Thomas, Michael A. Grossman, Anthony  Krug, Dean Cingolani, Anthony DeCaro Jr., Mark Durno, William Fitzpatrick,  John Kropke, Nicholas Mitarotonda, Jr., Michael Nevins, Virginia Sobol,  Albert Spring, Daniel Wagner, Deborah Franklin, John Marazzo, Christopher  DeLorenzo, Jeffrey Warner, Diane Chayes and James Corrigan (filed as Exhibit 10.28  to the Operating Partnership’s Form 10-Q dated September 30, 2002  and incorporated herein by reference). |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.65           |       | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.66           |       | 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.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.67           |       | 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

 

78

----

 
| Exhibit  Number | ** ** | **Exhibit Title**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.68           |       | 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).                                                                                                                                                                                                                                                                                                                                                                                          |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.69           |       | 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 Corporation’s Form 10-Q dated  September 30, 2004 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                    |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.70           |       | Letter Agreement by and between Mack-Cali Realty  Corporation and The Mills Corporation dated October 5, 2004 (filed as  Exhibit 10.55 to the Corporation’s Form 10-Q dated  September 30, 2004 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.71           |       | 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 (filed as  Exhibit 10.66 to the Operating Partnership’s Form 10-Q dated  June 30, 2005 and incorporated herein by reference).                                                                                                                                                                                                                                                                         |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.72           |       | Contribution and Exchange Agreement by and between  Mack-Cali Realty, L.P. and Tenth Springhill Lake Associates L.L.L.P.,  Eleventh Springhill Lake Associates L.L.L.P., Twelfth Springhill Lake  Associates L.L.L.P., Fourteenth Springhill Lake Associates L.L.L.P., each a  Maryland limited liability limited partnership, Greenbelt Associates, a  Maryland general partnership, and Sixteenth Springhill Lake Associates  L.L.L.P., a Maryland limited liability limited partnership, and certain other  natural persons, dated as of November 21, 2005 (filed as Exhibit 10.69  to the Operating Partnership’s Form 10-K dated December 31, 2005 and  incorporated herein by reference). |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.73           |       | Membership Interest Purchase and Contribution  Agreement by and among Mr. Stanley C. Gale, SCG Holding Corp., Mack-Cali  Realty Acquisition Corp. and Mack-Cali Realty, L.P. dated as of March 7, 2006  (filed as Exhibit 10.1 to the Operating Partnership’s Form 8-K dated March 7,  2006 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                   |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.74           |       | Amendment No. 1 to Membership Interest Purchase and  Contribution Agreement dated as of March 31, 2006 (filed as Exhibit 10.1 to  the Operating Partnership’s Form 8-K dated March 28, 2006 and incorporated  herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.75           |       | Amendment No. 2 to Membership Interest Purchase  and Contribution Agreement dated as of May 9, 2006 (filed as Exhibit  10.1 to the Operating Partnership’s Form 8-K dated May 9, 2006 and  incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

 

79

----

 
| Exhibit  Number | ** ** | **Exhibit Title**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-----------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **      | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.76           |       | Contribution and Sale Agreement by and among Gale  SLG NJ LLC, a Delaware limited liability company, Gale SLG NJ MEZZ LLC, a  Delaware limited liability company, and Gale SLG RIDGEFIELD MEZZ LLC, a  Delaware limited liability company and Mack-Cali Ventures L.L.C. dated as of  March 7, 2006 (filed as Exhibit 10.2 to the Operating Partnership’s Form 8-K  dated March 7, 2006 and incorporated herein by reference).                                                                           |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.77           |       | First Amendment to Contribution and Sale Agreement  by and among GALE SLG NJ LLC, a Delaware limited liability company, GALE SLG  NJ MEZZ LLC, a Delaware limited liability company, and GALE SLG RIDGEFIELD  MEZZ LLC, a Delaware limited liability company, and Mack-Cali Ventures  L.L.C., a Delaware limited liability company, dated as of May 9, 2006  (filed as Exhibit 10.4 to the Operating Partnership’s Form 8-K dated May 9,  2006 and incorporated herein by reference).              |
| ** **      | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.78           |       | Non-Portfolio Property Interest Contribution  Agreement by and among Mr. Stanley C. Gale, Mr. Mark Yeager, GCF II  Investor LLC, The Gale Investments Company, LLC, Gale & Wentworth  Vreeland, LLC, Gale Urban Solutions LLC, MSGW-ONE Campus Investors, LLC,  Mack-Cali Realty Acquisition Corp. and Mack-Cali Realty, L.P. dated as of  May 9, 2006 (filed as Exhibit 10.2 to the Operating Partnership’s Form  8-K dated May 9, 2006 and incorporated herein by reference). |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.79           |       | Loan Agreement by and among the entities set forth  on Exhibit A, collectively, as Borrowers, and Gramercy Warehouse Funding  I LLC, as Lender, dated May 9, 2006 (filed as Exhibit 10.5 to the  Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by  reference).                                                                                                                                                                                                   |
| ** **      | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.80           |       | Promissory Note of One Grande SPE LLC, 1280 Wall SPE  LLC, 10 Sylvan SPE LLC, 5 Independence SPE LLC, 1 Independence SPE LLC, and 3  Becker SPE LLC, as Borrowers, in favor of Gramercy Warehouse Funding I, LLC,  as Lender, in the principal amount of $90,286,551 dated May 9, 2006 (filed  as Exhibit 10.6 to the Operating Partnership’s Form 8-K dated May 9, 2006 and  incorporated herein by reference).                                                                                   |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.81           |       | Mortgage, Security Agreement and Fixture Filing by  and between 4 Becker SPE LLC, as Borrower, and Wachovia Bank, National Association,  as Lender, dated May 9, 2006 (filed as Exhibit 10.7 to the Operating  Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by  reference).                                                                                                                                                                                                    |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.82           |       | Promissory Note of 4 Becker SPE LLC, as Borrower, in  favor of Wachovia Bank, National Association, as Lender, in the principal  amount of $43,000,000 dated May 9, 2006 (filed as Exhibit 10.8 to the  Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by  reference).                                                                                                                                                                                                 |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.83           |       | Mortgage, Security Agreement and Fixture Filing by  and between 210 Clay SPE LLC, as Borrower, and Wachovia Bank, National  Association, as Lender, dated May 9, 2006 (filed as Exhibit 10.9 to the  Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by  reference).                                                                                                                                                                                                    |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.84           |       | Promissory Note of 210 Clay SPE LLC, as Borrower, in  favor of Wachovia Bank, National Association, as Lender, in the principal  amount of $16,000,000 dated May 9, 2006 (filed as Exhibit 10.10 to the  Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by  reference).                                                                                                                                                                                                |

 

80

----

 
| Exhibit  Number | ** ** | **Exhibit Title** |
|-----------------|------------|------------------------|
|            |       |                   |
| 10.85           |       |                   | Mortgage, Security Agreement and Fixture Filing by  and between 5 Becker SPE LLC, as Borrower, and Wachovia Bank, National  Association, as Lender, dated May 9, 2006 (filed as Exhibit 10.11 to the  Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by  reference). |
|            |       |                   |   |
| 10.86           |       |                   | Promissory Note of 5 Becker SPE LLC, as Borrower, in  favor of Wachovia Bank, National Association, as Lender, in the principal  amount of $15,500,000 dated May 9, 2006 (filed as Exhibit 10.12 to the  Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by  reference). |
|            |       |                   |   |
| 10.87           |       |                   | Mortgage, Security Agreement and Fixture Filing by  and between 51 CHUBB SPE LLC, as Borrower, and Wachovia Bank, National  Association, as Lender, dated May 9, 2006 (filed as Exhibit 10.13 to the  Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by  reference). |
|            |       |                   |   |
| 10.88           |       |                   | Promissory Note of 51 CHUBB SPE LLC, as Borrower, in  favor of Wachovia Bank, National Association, as Lender, in the principal  amount of $4,500,000 dated May 9, 2006 (filed as Exhibit 10.14 to the  Operating Partnership’s Form 8-K dated May 9, 2006 and incorporated herein by  reference). |
|            |       |                   |   |
| 10.89           |       |                   | Form of Amended and Restated Limited Liability  Company Agreement of Mack-Green-Gale LLC dated                  ,  2006 (filed as Exhibit 10.3 to the Operating Partnership’s Form 8-K dated  March 7, 2006 and incorporated herein by reference). |
|            |       |                   |   |
| 10.90           |       |                   | Form of Limited Liability Company Operating  Agreement (filed as Exhibit 10.3 to the Operating Partnership’s Form 8-K  dated May 9, 2006 and incorporated herein by reference). |
|            |       |                   |   |
| 10.91*          |       |                   | Agreement of Sale and Purchase dated August 9, 2006  by and between Mack-Cali Realty, L.P. and Westcore Properties AC, LLC. |
|            |       |                   |   |
| 10.92*          |       |                   | First Amendment to Agreement of Sale and Purchase  dated September 6, 2006 by and between Mack-Cali Realty, L.P. and Westcore  Properties AC, LLC. |
|            |       |                   |   |
| 10.93*          |       |                   | Second Amendment to Agreement of Sale and Purchase  dated September 15, 2006 by and between Mack-Cali Realty, L.P. and Westcore  Properties AC, LLC. |
|            |       |                   |   |
| 10.94*          |       |                   | Agreement of Sale and Purchase dated September 25,  2006 by and between Phelan Realty Associates L.P., 795 Folsom Realty  Associates L.P. and Westcore Properties AC, LLC. |
|            |       |                   |   |
| 31.1*           |       |                   | 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

81

----