EDGAR 10-K Filing

Company CIK: 924901
Filing Year: 2021
Filename: 924901_10-K_2021_0001562762-21-000063.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
GENERAL
Mack-Cali Realty Corporation, a Maryland corporation, together with its subsidiaries (collectively the “General Partner”), is a fully-integrated, self-administered and self-managed real estate investment trust (“REIT”). The General Partner controls Mack-Cali Realty, L.P., a Delaware limited partnership, together with its subsidiaries (collectively, the “Operating Partnership”), as its sole general partner and owned a 90.4 percent common unit interest in the Operating Partnership as of December 31, 2020 and 2019, respectively. The General Partner’s business is the ownership of interests in and operation of the Operating Partnership and all of the General Partner’s expenses are incurred for the benefit of the Operating Partnership. The General Partner is reimbursed by the Operating Partnership for all expenses it incurs relating to the ownership and operation of the Operating Partnership.
The Operating Partnership conducts the business of providing leasing, management, acquisition, development, construction and tenant-related services for its General Partner. The Operating Partnership, through its operating divisions and subsidiaries, including the Mack-Cali property-owning partnerships and limited liability companies, is the entity through which all of the General Partner’s operations are conducted. Unless stated otherwise or the context requires, the “Company” refers to the General Partner and its subsidiaries, including the Operating Partnership and its subsidiaries.
The Company owns and operates a real estate portfolio comprised predominantly of Class A office and multi-family rental properties located primarily in the Northeast. The Company performs substantially all real estate leasing, management, acquisition and development on an in-house basis. Mack-Cali Realty Corporation was incorporated on May 24, 1994. The Company’s executive offices are located at Harborside 3, 210 Hudson Street, Suite 400, Jersey City, New Jersey 07311, and its telephone number is (732) 590-1010. The Company has an internet website at www.mack-cali.com.
As of December 31, 2020, the Company owned or had interests in 52 properties, consisting of 25 office properties, totaling approximately 8.1 million square feet, leased to approximately 225 commercial tenants, 19 multi-family rental properties containing 5,825 residential units, four parking/retail properties totaling approximately 108,000 square feet, three hotels containing 723 rooms and a parcel of land leased to a third party, plus developable land (collectively, the “Properties”). The Properties are comprised of: (a) 42 wholly-owned or Company-controlled properties consisting of 23 office buildings aggregating approximately 7.9 million square feet, 13 multi-family properties totaling 4,039 apartment units, three parking/retail properties, two hotels and a parcel of land leased to a third party (collectively, the “Consolidated Properties”); and (b) two office properties totaling approximately 0.2 million square feet, six multi-family properties totaling 1,786 apartment units, a retail property totaling 51,000 square feet and a 351-room hotel, which are owned by unconsolidated joint ventures in which the Company has investment interests. Unless otherwise indicated, all references to square feet represent net rentable area. As of December 31, 2020, the Company’s stabilized office properties included in the Consolidated Properties were 78.7 percent leased. Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future, and leases that expire at the period end date. Leases that expired as of December 31, 2020 aggregate 145,404 square feet, or 1.8 percent of the net rentable square footage. The Properties are located in three states, primarily in the Northeast, and the District of Columbia. See Item 2: Properties.
The Company believes that its Properties have excellent locations and access, and are well-maintained and professionally managed. As a result, the Company believes that its Properties attract high quality tenants and residents and achieve high rental occupancy and tenant and resident retention rates within their markets. The Company also believes that its extensive market knowledge provides it with a significant competitive advantage, which is further enhanced by its strong reputation for, and emphasis on, delivering highly responsive, professional management services.
The Company’s historical strategy has been to focus its operations, acquisition and development of office and multi-family rental properties in high-barrier-to-entry markets and sub-markets where it believes it is, or can become, a significant and preferred owner and operator.
STRATEGIC DIRECTION
On December 19, 2019, the Company announced that its Board had determined to sell the Company’s entire suburban New Jersey office portfolio totaling approximately 6.6 million square feet, which excludes the Company’s office properties in Jersey City and Hoboken, New Jersey (collectively, the “Suburban Office Portfolio”). As the decision to sell the Suburban Office Portfolio represented a strategic shift in the Company’s operations, these properties’ results (other than a property not classified as held for sale) are being classified as discontinued operations for all periods presented herein.
In late 2019 and through December 31, 2020, the Company completed the sale of 20 of these suburban office properties, totaling 3.2 million square feet, for net sales proceeds of $377.4 million. As of December 31, 2020, the Company identified as held for sale 16 office properties in the Suburban Office Portfolio, totaling 3.0 million square feet (of which the Company currently has 15 properties totaling 2.8 million square feet under contract for sale for aggregate gross proceeds of $652.4 million). In January 2021, the Company completed the sale of one of the properties held for sale, which was a 149,600 square foot office property, for a gross sales price of $38 million.
The Company plans to complete the sale of substantially all of its remaining Suburban Office Portfolio properties in 2021, and plans to use the available sales proceeds to pay down its corporate-level, unsecured indebtedness. However, the Company cannot predict whether or to what extent the timing of these sales and the expected amount may be impacted by the ongoing coronavirus (“COVID-19”). After the completion of the Suburban Office Portfolio sales, the Company’s holdings will consist of its waterfront class A office portfolio and its multi-family rental portfolio, and related development projects and land holdings.
BUSINESS STRATEGIES
Operations
Reputation: The Company has established a reputation as a highly-regarded landlord with an emphasis on delivering quality customer service in buildings it owns and/or manages. The Company believes that its continued success depends in part on enhancing its reputation as an operator of choice, which will facilitate the retention of current tenants and residents and the attraction of new tenants and residents. The Company believes it provides a superior level of service to its customers that is an important factor in working to achieve positive leasing results as well as improving tenant retention.
Communication with tenants: The Company emphasizes frequent communication with its customers to ensure first-class service to the Properties. Property management personnel generally are located on site at the Properties to provide convenient access to management and to ensure that the Properties are well-maintained. Property management’s primary responsibility is to ensure that buildings are operated at peak efficiency in order to meet both the Company’s and tenants’ needs and expectations. Property management personnel additionally budget and oversee capital improvements and building system upgrades to enhance the Properties’ competitive advantages in their respective markets and to maintain the quality of the Properties.
The Company’s in-house leasing representatives for its office portfolio develop and maintain long-term relationships with the Company’s diverse tenant base and coordinate leasing, expansion, relocation and build-to-suit opportunities. This approach allows the Company to offer office space in the appropriate size and location to current or prospective tenants in any of its sub-markets.
The Company’s in-house multi-family rental management team emphasizes meticulous attention to detail and an unwavering commitment to customer service to complement the quality, design excellence and luxury living attributes of its multi-family rental properties. The Company believes this strategy will enable the Company to buttress management’s reputation with the market-leading designs, amenities and features of its multi-family rental properties to attract quality residents.
Portfolio Management: The Company plans to continue to own and operate a portfolio of office and multi-family rental properties in high-barrier-to-entry markets, with a primary focus in the Northeast. The Company also expects to continue to complement its core portfolio of office properties by pursuing acquisition and development opportunities in the multi-family rental sector. The Company’s primary objectives are to maximize operating cash flow and to enhance the value of its portfolio through effective management, acquisition, development and property sales strategies.
The Company seeks to maximize the value of its existing office and multi-family rental portfolio through implementing operating strategies designed to produce the highest effective rental and occupancy rates and lowest tenant installation costs within the markets that it operates, and further within the parameters of those markets. The Company continues to pursue internal growth through leasing vacant space, re-leasing space at the highest possible effective rents in light of current market conditions with contractual rent increases and developing or redeveloping office space for its diverse base of high credit quality tenants, including MUFG Bank Ltd; KPMG, LLP; and Bank of America Merrill Lynch. In addition, the Company seeks economies of scale through volume discounts to take advantage of its size and dominance in particular sub-markets, and operating efficiencies through the use of in-house management, leasing, marketing, financing, accounting, legal and development.
The Company continually reviews its portfolio and opportunities to divest office and multi-family rental properties that, among other things, no longer meet its long-term strategy, have reached their potential, are less efficient to operate or can be sold at attractive prices when market conditions are favorable. The Company anticipates continuing to redeploy the proceeds from sales of office and multi-
family rental properties to primarily pay down corporate-level, unsecured indebtedness, as well as develop, redevelop and acquire multi-family rental properties, and reposition certain office properties into multi-family/mixed use properties, in its core Northeast sub-markets.
The Company believes that the opportunity to invest in multi-family development properties at higher returns on cost will position the Company to potentially produce higher levels of net operating income than if the Company were to only purchase stabilized multi-family properties at market returns. The Company believes that the transition to a company with a greater proportion of its properties in the multi-family residential sector will ultimately result in the creation of greater shareholder value than remaining a primarily suburban commercial office company, in part due to the lower capitalization rates associated with the multi-family sector.
Acquisitions: The Company also believes that growth opportunities exist through acquiring operating properties or properties for redevelopment with attractive returns in its core Northeast sub-markets where, based on its expertise in leasing, managing and operating properties, it believes it is, or can become, a significant and preferred owner and operator. The Company intends either directly or through joint ventures to acquire, invest in or redevelop additional properties, that: (i) are expected to provide attractive long-term yields; (ii) are well-located, of high quality and competitive in their respective sub-markets; (iii) are located in its existing sub-markets or in sub-markets in which the Company is or can become a significant and preferred owner and operator; and (iv) it believes have been under-managed or are otherwise capable of improved performance through intensive management, capital improvements and/or leasing that should result in increased effective rental and occupancy rates.
Development: The Company seeks to selectively develop additional properties either directly or through joint ventures where it believes such development will result in a favorable risk-adjusted return on investment in coordination with the above operating strategies. The Company identifies development opportunities primarily through its local market presence. Such development primarily will occur: (i) in stable core markets where the demand for such space exceeds available supply; and (ii) where the Company is, or can become, a significant and preferred owner and operator. As part of the Company’s strategy to expand its multi-family rental portfolio, the Company may consider development opportunities with respect to improved land with existing commercial uses and seek to rezone the sites for multi-family rental use and development in its core markets. As a result of competitive market conditions for land suitable for development, the Company may be required to hold land prior to construction for extended periods while entitlements or rezoning is obtained. The Company also may undertake repositioning opportunities that may require the expenditure of significant amounts of capital.
Property Sales: While management’s principal intention is to own and operate its properties on a long-term basis, it periodically assesses the attributes of each of its properties, with a particular focus on the supply and demand fundamentals of the core markets in which they are located. The Company continually reviews its portfolio and opportunities to divest properties that, among other things, no longer meet its long-term strategy, have reached their potential, are less efficient to operate, or can be sold at attractive prices when market conditions are favorable. The Company completed the sales of rental property for aggregate gross sales proceeds of $383.3 million during 2020 and $1.1 billion during 2019 and plans to divest the remainder of substantially all of its Suburban Office Portfolio in 2021.
Financial
The Company currently intends to maintain a ratio of debt-to-undepreciated assets (total debt of the Company as a percentage of total undepreciated assets) of 50 percent or less, however there can be no assurance that the Company will be successful in maintaining this ratio. As of December 31, 2020 and 2019, the Company’s total debt constituted approximately 48 percent of total undepreciated assets of the Company. Although there is no limit in the Company’s organizational documents on the amount of indebtedness that the Company may incur, the Company has entered into certain financial agreements which contain covenants that limit the Company’s ability to incur indebtedness under certain circumstances. The Company intends to utilize the most appropriate sources of capital for future acquisitions, development, capital improvements and other investments, which may include funds from operating activities, proceeds from property and land sales, joint venture capital, and short-term and long-term borrowings (including draws on the Company’s unsecured revolving credit facility), and the issuance of additional debt or equity securities.
HUMAN CAPITAL RESOURCES
Overview
Unlike some other real estate companies, which may outsource leasing and management of their properties to third parties, the Company is a fully-integrated REIT that performs substantially all real estate leasing, management, property transactions, and development on an in-house basis.
As of December 31, 2020, the Company had approximately 256 full-time employees, 27 fewer than it had as of December 31, 2019.
The reduction in the number of employees was primarily due to the ongoing disposition of our Suburban Office Portfolio, partially offset by net increases in maintenance personnel to support the Company’s multi-family residential portfolio. The Company’s average turnover rate was 9.5 percent from 2019 to 2020. Regarding employee tenure, 25 percent of the Company’s employees have been with it for at least 10 years, with 18 percent of employees having a tenure of at least 15 years, and another 12 percent having a tenure of at least 20 years.
Approximately 74 percent of the Company’s employees are directly involved in property management, management services, and on-site leasing and maintenance of our portfolio, including property managers, maintenance engineers, technicians, HVAC technicians, project managers. 81 percent of these employees mainly serve management, on-site leasing and maintenance services for the multi-family residential portfolio, with 19 percent mainly serving the management and maintenance of the office portfolio. All of these personnel salaries and related costs are allocated to our real estate portfolio and management businesses, and recorded in Operating services or Real estate services expenses. Approximately five percent of our employees work in in the corporate development department and are directly involved in the Company’s development pipeline. When applicable, personnel salaries and related costs of such development employees are capitalized as a development expenditure. Generally, all other employee costs, are recorded as general and administrative expense, including corporate office leasing personnel.
Diversity and Inclusion
The Company fosters an inclusive work environment based on respect, empowerment and collaboration. It has carefully built a workplace where diversity thrives, spanning race, gender, ethnicity, age, sexual orientation, physical ability and experience. The Company is an equal pay, equal opportunity employer. As of December 31, 2020, 42 percent of employees were female and 43 percent of employees were persons of color or other minority groups. Currently, four of the nine members (or 44 percent) of our Board of Directors are female and/or racially diverse. In addition, the Company has a robust diversity and inclusion initiative with the overall goal of creating opportunities for all people in the commercial real estate industry in the local communities in which it operates and within its own workforce.
Employee Incentives
The Company strives to provide career opportunities in an energized, inclusive and collaborative environment tailored to retain, attract and reward highly performing employees. We do so in a culture built on the foundations of collegiality, teamwork, hard work, humility, creativity, humor, respect, acceptance, expertise and dedication to each other, our stockholders and our customers.
The Company provides a comprehensive benefits package intended to meet and exceed the needs of our employees and their families. Our competitive offerings help our employees stay healthy, balance their work and personal lives, and meet their financial and retirement goals. For employees earning less than $50,000 annually, the Company pays 100 percent of the health insurance coverage premiums for its employees and their families, and generally 75 percent of the premiums of health and dental insurance coverage for all employees, as well as 100 percent of the cost of life insurance and short-term and long-term disability insurance. In addition, it offers the following enrichment opportunities and benefits to our employees:
The Company maintains a 401(k) plan with a history of annual discretionary Company employee match or profit sharing contributions;The Company offers tuition reimbursement for education costs for employees who have been with it for at least one year; Employees receive numerous training resources, including modules on preventing unlawful harassment, phishing, hazardous communications and real estate licensing; andThe Company also promotes the philanthropic efforts of our employees by providing paid time off toward volunteerism, matching employee charitable contributions dollar for dollar (up to $1,000 per employee per year), and in total, has contributed over $2.1 million of donations to charitable causes over the three-year period ended December 31, 2020.More information regarding the Company’s human capital policies, programs and initiatives is available under the “Investors” section of its public website. Information on the website is not considered part of this Annual Report.
COMPETITION
The leasing of real estate is highly competitive. The Properties compete for tenants and residents with lessors and developers of similar
properties located in their respective markets primarily on the basis of location, the quality of properties, leasing terms (including rent and other charges and allowances for tenant improvements), services or amenities provided, the design and condition of the Properties, and reputation as an owner and operator of quality properties in the relevant markets. Additionally, the number of competitive multi-family rental properties in a particular area could have a material effect on the Company’s ability to lease residential units and on rents charged. In addition, other forms of multi-family rental properties or single family housing provide alternatives to potential residents of multi-family properties. The Company competes with other entities, some of which may have significant resources or who may be willing to accept lower returns or pay higher prices than the Company in terms of acquisition and development opportunities. The Company also experiences competition when attempting to acquire or dispose of real estate, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension trusts, trust funds, partnerships, individual investors and others.
GOVERNMENT REGULATIONS
Many laws and governmental regulations apply to the ownership and/or operation of the Properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.
Under various laws and regulations relating to the protection of the environment and human health, an owner of real estate may be held liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner was responsible for, or even knew of, the presence of such substances. The presence of such substances may adversely affect the owner’s ability to rent or sell the property or to borrow using such property as collateral and may expose it to liability resulting from any release of, or exposure to, such substances. Persons who arrange for the disposal or treatment of hazardous or toxic substances at another location may also be liable for the costs of removal or remediation of such substances at the disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain environmental laws impose liability for the release of asbestos-containing materials into the air, and third parties may also seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances.
In connection with the ownership (direct or indirect), operation, management and development of real properties, the Company may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental penalties and injuries to persons and property.
There can be no assurance that (i) future laws, ordinances or regulations will not impose any material environmental liability, (ii) the current environmental condition of the Properties will not be affected by tenants, by the condition of land or operations in the vicinity of the Properties (such as the presence of underground storage tanks), or by third parties unrelated to the Company, or (iii) the Company’s assessments reveal all environmental liabilities and that there are no material environmental liabilities of which the Company is aware. If compliance with the various laws and regulations, now existing or hereafter adopted, exceeds the Company’s budgets for such items, the Company’s ability to make expected distributions to stockholders could be adversely affected.
There are no other laws or regulations which have a material effect on the Company’s operations, other than typical federal, state and local laws affecting the development and operation of real property, such as zoning laws.
INDUSTRY SEGMENTS
The Company operates in two industry segments: (i) commercial and other real estate and (ii) multi-family real estate and services. As of December 31, 2020, the Company does not have any foreign operations and its business is not seasonal. Please see our financial statements attached hereto and incorporated by reference herein for financial information relating to our industry segments.
SIGNIFICANT TENANTS
As of December 31, 2020, no tenant accounted for more than 10 percent of the Company’s consolidated revenues.
RECENT DEVELOPMENTS
Properties Commencing Initial Operations
During the year ended December 31, 2020, the Company commenced initial operations of a multi-family property located in Malden, Massachusetts and containing 326 apartment units, which was completed for total costs of approximately $104 million.
Consolidations
On March 12, 2020, the Company, acquired its equity partner's 80 percent interest in Port Imperial North Retail L.L.C., a ground floor retail space totaling 30,745 square feet located at Port Imperial, West New York, New Jersey for $13.3 million in cash (funded through borrowing under the Company’s unsecured credit facility.) The results of the transaction increased the Company’s interest to 100 percent. Upon the acquisition, the Company consolidated the joint venture, a voting interest entity. As an acquisition of the remaining interests in the venture which owns the Port Imperial North Retail L.L.C., the Company accounted for the transaction as an asset acquisition under a cost accumulation model, and as such no gain on change of control of interest was recognized in consolidation, resulting in total consolidated net assets of $15.0 million.
Dispositions/Real Estate Held for Sale
During the year ended December 31, 2020, the Company disposed of 18 office properties, two multi-family rental properties and three developable land properties in New Jersey, New York and Maryland for net sales proceeds of approximately $389.7 million, with net gains recorded on the sales of approximately $38.2 million from the dispositions.
The Company identified 16 office properties, a retail pad leased to others and several developable land parcels as held for sale as of December 31, 2020. The total estimated sales proceeds, net of expected selling costs, from these sales are expected to be approximately $743.5 million. The Company determined that the carrying value of six of these properties and several land parcels was not expected to be recovered from estimated net sales proceeds and accordingly, during the year ended December 31, 2020, recognized an unrealized loss allowance of $15.7 million on the properties ($14 million of which are from discontinued operations), and also recorded land and other impairments of $9.5 million.
Impairments on Properties Held and Used
The Company determined that, due to the shortening of its expected period of ownership and as a result of the adverse effect the COVID-19 pandemic has had, and continues to have, on its hotel operations, the Company evaluated the recoverability of the carrying values of its two adjacent hotel properties and determined that it was necessary to reduce the carrying values of its two hotel assets located in Weehawken, New Jersey to their estimated fair values. One of these hotels has closed its rooms since March 2020. Accordingly, the Company recorded an impairment charge of $36.6 million on these hotels at September 30, 2020, which is included in property impairments on the consolidated statement of operations for the year ended December 31, 2020. The Company also evaluated the recoverability of the carrying values of its land parcels and determined that it was necessary to reduce the carrying values of three held-and-used land parcels to their estimated fair values and recorded land and other impairment charges of $7.3 million for the year ended December 31, 2020.
Unconsolidated Joint Venture Activity
On December 31, 2020, the Crystal House Apartment Investors LLC, an unconsolidated joint venture property located in Arlington, Virginia sold its sole apartment property for an aggregate sales price of $376.6 million. The Company received $62.7 million for its share of net sale proceeds from the joint venture and realized its share of the gain on the property sale from the unconsolidated joint venture of $35.1 million.
On December 17, 2020, the Company sold its interest in the Hillsborough 206 Holdings joint venture which owns a developable land located in Hillsborough, New Jersey for a sale price of $2.1 million, and realized a gain on sale from unconsolidated joint ventures of $0.1 million.
Development Activity
The Company is developing a 313-unit multi-family project known as Port Imperial South 9 at Port Imperial in Weehawken, New Jersey, which began construction in third quarter 2018. The construction project, which is estimated to cost $143.8 million, of which construction costs of $98.1 million have been incurred through December 31, 2020, is expected to be ready for occupancy in the first half of 2021. The Company has funded $51.8 million as of December 31, 2020, and the remaining construction costs are expected to be funded primarily from a $92 million construction loan (of which $46.3 million was drawn as of December 31, 2020).
The Company is developing a 198-unit multi-family project known as The Upton at Short Hills located in Short Hills, New Jersey, which began construction in fourth quarter 2018. The construction project, which is estimated to cost $99.4 million, of which $77.9 million have been incurred through December 31, 2020, is expected to be ready for occupancy in first quarter 2021. The Company
has funded $35.4 million of the construction costs, and the remaining construction costs are expected to be funded primarily from a $64 million construction loan (of which $42.5 million was drawn as of December 31, 2020).
The Company is developing a 750-unit multi-family project at 25 Christopher Columbus in Jersey City, New Jersey, which began construction in first quarter 2019. The construction project, which is estimated to cost $469.5 million, of which $331 million have been incurred through December 31, 2020, is expected to be ready for occupancy in first quarter 2022. The Company has funded $169.5 million as of December 31, 2020, and the remaining construction costs are expected to be funded from a $300 million construction loan (of which $161.5 million was drawn as of December 31, 2020).
Operations
Of the Company’s office markets, most continue to show signs of rental rate improvement while the leased percentage has declined or stabilized. The percentage leased in the Company’s stabilized core operating commercial properties included in its Consolidated Properties was 78.7 percent at December 31, 2020, as compared to 80.7 percent at December 31, 2019 and 83.2 percent at December 31, 2018 (after adjusting for properties identified as non-core at the time). Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases that expire at the period end date. Leases that expired as of December 31, 2020, 2019 and 2018 aggregate 145,404, 31,982 and 10,108 square feet, respectively, or 1.8, 0.3 and 0.1 percentage of the net rentable square footage, respectively. With the positive rental rate results the Company has achieved in most of its markets recently, the Company believes that rental rates on new leases will generally be, on average, not lower than rates currently being paid. If these recent leasing results do not prove to be sustaining during 2021, the Company may receive less revenue from the same space.
FINANCING ACTIVITY
In January 2020, the Company increased its borrowing on a mortgage loan to $265 million from $232 million, collateralized by the Company’s Liberty Towers property, a 648-unit multi-family rental property in Jersey City, New Jersey, and received net proceeds of $31.8 million. In November 2020, the Company modified its Monaco $165 million mortgage, extending the maturity date from February 2021 to November 2027. In December 2020, the Company obtained a $72 million mortgage loan collateralized by the Company’s Emery property, a 326-unit multi-family rental property in Malden, Massachusetts, that matures in January 2031 and received net loan proceeds of $10.4 million after repaying its construction loan. In January 2021, the Company exercised the option to extend the unsecured revolving credit facility maturity date for a period of six months to July 2021.
AVAILABLE INFORMATION
The Company’s internet website is www.mack-cali.com. The Company makes available free of charge on or through its website the annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished by the General Partner or the Operating Partnership pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after it electronically files or furnishes such materials to the Securities and Exchange Commission. In addition, the Company’s internet website includes other items related to corporate governance matters, including, among other things, the General Partner’s corporate governance principles, charters of various committees of the Board of Directors of the General Partner and the General Partner’s code of business conduct and ethics applicable to all employees, officers and directors. The General Partner intends to disclose on the Company’s internet website any amendments to or waivers from its code of business conduct and ethics as well as any amendments to its corporate governance principles or the charters of various committees of the Board of Directors. Copies of these documents may be obtained, free of charge, from our internet website. Any shareholder also may obtain copies of these documents, free of charge, by sending a request in writing to: Mack-Cali Investor Relations Department, Harborside 3, 210 Hudson St., Ste. 400, Jersey City, NJ 07311.
Disclosure Regarding Forward-Looking Statements
We consider portions of this report, including the documents incorporated by reference, to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of such act. Such forward-looking statements relate to, without limitation, our future economic performance, plans and objectives for future operations and projections of revenue and other financial items. Forward-looking statements can be identified by the use of words such as “may,” “will,” “plan,” “potential,” “projected,” “should,” “expect,” “anticipate,” “estimate,” “target,” “continue,” or comparable terminology. Forward-looking statements are inherently subject to certain risks, trends and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements.
In addition, the extent to which the ongoing COVID-19 pandemic impacts us and our tenants and residents will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in this Annual Report on Form 10-K for the year ended December 31, 2020, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.
Among the factors about which we have made assumptions are:
risks and uncertainties affecting the general economic climate and conditions, which in turn may have a negative effect on the fundamentals of our business and the financial condition of our tenants and residents;
the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our properties or on an unsecured basis;
the extent of any tenant bankruptcies or of any early lease terminations;
our ability to lease or re-lease space at current or anticipated rents;
changes in the supply of and demand for our properties;
changes in interest rate levels and volatility in the securities markets;
our ability to complete construction and development activities on time and within budget, including without limitation obtaining regulatory permits and the availability and cost of materials, labor and equipment;
forward-looking financial and operational information, including information relating to future development projects, potential acquisitions or dispositions, leasing activities, capitalization rates, and projected revenue and income;
changes in operating costs;
our ability to obtain adequate insurance, including coverage for terrorist acts;
our credit worthiness and the availability of financing on attractive terms or at all, which may adversely impact our ability to pursue acquisition and development opportunities and refinance existing debt and our future interest expense;
changes in governmental regulation, tax rates and similar matters; and
other risks associated with the development and acquisition of properties, including risks that the development may not be completed on schedule, that the tenants or residents will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated.
For further information on factors which could impact us and the statements contained herein, see Item 1A: Risk Factors. We assume no obligation to update and supplement forward-looking statements that become untrue because of subsequent events, new information or otherwise.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Our results from operations and ability to make distributions on our equity and debt service on our indebtedness may be affected by the risk factors set forth below. All investors should consider the following risk factors before deciding to purchase securities of the Company. The Company refers to itself as “we” or “our” in the following risk factors.
OPERATING RISKS
The ongoing coronavirus ("COVID-19") pandemic and measures intended to prevent its spread present material uncertainty and risk and could have a material adverse effect on our business, results of operations, cash flows and financial condition.
The global outbreak of COVID-19 across many countries around the globe, including the United States, has significantly slowed global economic activity, caused significant volatility in financial markets, and resulted in unprecedented job losses causing many to fear an imminent global recession. Certain states and cities, including all of the jurisdictions in which our properties are located, have taken measures to prevent or slow the spread of COVID-19, including by instituting quarantines, restrictions on travel, "stay-at-home" rules, restrictions on types of business that may continue to operate and/or restrictions on the types of construction projects that may continue. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including industries in which we and our customers operate. We have modified, and might further modify, our business practices as a result of the COVID-19 pandemic, the economic and social ramification of the disease, and the societal and governmental responses in the communities in which we operate. In addition, we have adapted our operations to protect our employees, including by implementing a work from home policy. As a result, many of our employees are currently working remotely. An extended period of remote work arrangements could
strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business.
The COVID-19 pandemic presents material uncertainty and risk with respect to our financial condition, results of operations, cash flows and performance. The COVID-19 pandemic could negatively impact our business in a number of ways, including:
a complete or partial closure of, or other operational issues at, one or more of our properties resulting from government or customer action;
deterioration in the financial condition or liquidity of our tenants, customers or other counterparties, which could result in their inability to pay rents or failure to meet their contractual obligations to us;
the potential negative impact on our ability to complete planned acquisitions or dispositions of assets on expected terms or timelines, or at all;
reduced demand for space at our office properties and units at our multifamily residential properties, which could have a negative impact on our prospects for leasing current or additional space and/or renewing leases with existing tenants;
difficulty accessing debt and equity capital on attractive terms, or at all, which could result in reduced availability and increased cost of capital necessary to fund business operations, finance our development pipeline or address maturing liabilities on a timely basis;
costs associated with construction delays and cost overruns at our development and redevelopment projects;
unanticipated costs and operating expenses associated with remote work arrangements, sanitation measures performed at each of our properties, and other measures to protect the welfare of our employees and tenants; and
the potential negative impact on the health of our employees, particularly if a significant number of them are impacted, which could result in a deterioration in our ability to ensure business continuity during this disruption.
The extent to which the COVID-19 pandemic may adversely affect our business will depend on future developments, including, among others, the severity and duration of the pandemic, the roll-out of COVID-19 vaccines and their effectiveness in curbing the spread of the virus, the nature and duration of other measures taken to contain the pandemic or mitigate its impact, and the direct and indirect economic impact of the pandemic and containment measures on the industries in which we and our customers operate. Among other things COVID-19 and government and our responses to the virus could (1) adversely affect the ability of our suppliers and vendors to provide products and services to us; (2) make it more difficult for us to serve our tenants, including as a result of delays or suspensions in the issuance of permits or other authorizations needed to conduct our business; and (3) increase our cost of capital and adversely impact our access to capital. Due to factors beyond our knowledge or control, including the duration and severity of COVID-19, as well as third-party actions taken to contain its spread and mitigate its public health effects, at this time we cannot estimate or predict with certainty the impact of COVID-19 or the measures the government and we take in response thereto on our financial position, results of operations and cash flows.
Adverse economic and geopolitical conditions in general and the Northeastern office markets in particular could have a material adverse effect on our results of operations, financial condition and our ability to pay distributions to you.
Our business may be affected by the continuing volatility in the financial and credit markets, the general global economic conditions, continuing high unemployment, and other market or economic challenges experienced by the U.S. economy or the real estate industry as a whole. Our business also may be adversely affected by local economic conditions, as substantially all of our revenues are derived from our properties located in New Jersey, New York and Massachusetts. Because our portfolio currently consists primarily of office and multi-family rental buildings (as compared to a more diversified real estate portfolio) located in the Northeast, if economic conditions persist or deteriorate, then our results of operations, financial condition and ability to service current debt and to pay distributions to our shareholders may be adversely affected by the following, among other potential conditions:
significant job losses in the financial and professional services industries may occur, which may decrease demand for our office space, causing market rental rates and property values to be negatively impacted;
our ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and development opportunities and refinance existing debt, reduce our returns from both our existing operations and our acquisition and development activities and increase our future interest expense;
reduced values of our properties may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans;
the value and liquidity of our short-term investments and cash deposits could be reduced as a result of a deterioration of the financial condition of the institutions that hold our cash deposits or the institutions or assets in which we have made short-term investments, the dislocation of the markets for our short-term investments, increased volatility in market rates for such investments or other factors;
reduced liquidity in debt markets and increased credit risk premiums for certain market participants may impair our ability to access capital; and
one or more lenders under our line of credit could refuse or be unable to fund their financing commitment to us and we may not be able to replace the financing commitment of any such lenders on favorable terms, or at all.
These conditions, which could have a material adverse effect on our results of operations, financial condition and ability to pay distributions, may continue or worsen in the future.
Our performance is subject to risks associated with the real estate industry.
General: Our business and our ability to make distributions or payments to our investors depend on the ability of our properties to generate funds in excess of operating expenses (including scheduled principal payments on debt and capital expenditures). Events or conditions that are beyond our control may adversely affect our operations and the value of our properties. Such events or conditions could include:
changes in the general economic climate and conditions;
changes in local conditions, such as an oversupply of office space, a reduction in demand for office space, or reductions in office market rental rates;
an oversupply or reduced demand for multi-family apartments caused by a decline in household formation, decline in employment or otherwise;
decreased attractiveness of our properties to tenants and residents;
competition from other office and multi-family properties;
development by competitors of competing multi-family communities;
unwillingness of tenants to pay rent increases;
rent control or rent stabilization laws, or other housing laws and regulations that could prevent us from raising multi-family rents to offset increases in operating costs;
our inability to provide adequate maintenance;
increased operating costs, including insurance premiums, utilities and real estate taxes, due to inflation and other factors which may not necessarily be offset by increased rents;
changes in laws and regulations (including tax, environmental, zoning and building codes, landlord/tenant and other housing laws and regulations) and agency or court interpretations of such laws and regulations and the related costs of compliance;
changes in interest rate levels and the availability of financing;
the inability of a significant number of tenants or residents to pay rent;
our inability to rent office or multi-family rental space on favorable terms; and
civil unrest, earthquakes, acts of terrorism and other natural disasters or acts of God that may result in uninsured losses.
We may suffer adverse consequences if our revenues decline since our operating costs do not necessarily decline in proportion to our revenue: We earn a significant portion of our income from renting our properties. Our operating costs, however, do not necessarily fluctuate in relation to changes in our rental revenue. This means that our costs will not necessarily decline even if our revenues do. Our operating costs could also increase while our revenues do not. If our operating costs increase but our rental revenues do not, we may be forced to borrow to cover our costs and we may incur losses. Such losses may adversely affect our ability to make distributions or payments to our investors.
Financially distressed tenants may be unable to pay rent: If a tenant defaults, we may experience delays and incur substantial costs in enforcing our rights as landlord and protecting our investments. If a tenant files for bankruptcy, we cannot evict the tenant solely because of the bankruptcy and a potential court judgment rejecting and terminating such tenant’s lease (which would subject all future unpaid rent to a statutory cap) could adversely affect our ability to make distributions or payments to our investors as we may be unable to replace the defaulting tenant with a new tenant at a comparable rental rate without incurring significant expenses or a reduction in rental income.
Renewing leases or re-letting space could be costly: If a tenant does not renew its lease upon expiration or terminates its lease early, we may not be able to re-lease the space on favorable terms or at all. If a tenant does renew its lease or we re-lease the space, the terms of the renewal or new lease, including the cost of required renovations or concessions to the tenant, may be less favorable than the current lease terms, which could adversely affect our ability to make distributions or payments to our investors.
Adverse developments concerning some of our major tenants and industry concentrations could have a negative impact on our revenue: We have tenants concentrated in various industries that may be experiencing adverse effects of current economic conditions. For instance, 27.5 percent of our revenue is derived from tenants in the Securities, Commodity Contracts and Other Financial industry, 15.1 percent from tenants in the Credit Intermediation and Related Activities industry and 11.3 percent from tenants in the Insurance Carriers and Related Activities industry. Our business could be adversely affected if any of these industries suffered a downturn and/or these tenants or any other tenants became insolvent, declared bankruptcy or otherwise refused to pay rent in a timely manner or at all.
Our insurance coverage on our properties may be inadequate or our insurance providers may default on their obligations to pay claims: We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire and flood. We cannot guarantee that the limits of our current policies will be sufficient in the event of a catastrophe to our properties. We cannot guarantee that we will be able to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, while our current insurance policies insure us against loss from terrorist acts and toxic mold, in the future, insurance companies may no longer offer coverage against these types of losses, or, if offered, these types of insurance may be prohibitively expensive. If any or all of the foregoing should occur, we may not have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. Should an uninsured loss or a loss in excess of our insured limits occur, we could lose all or a portion of the capital we have invested in a property or properties, as well as the anticipated future revenue from the property or properties. Nevertheless, we might remain obligated for any mortgage debt or other financial obligations related to the property or properties. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could adversely affect our ability to make distributions or payments to our investors. If one or more of our insurance providers were to fail to pay a claim as a result of insolvency, bankruptcy or otherwise, the nonpayment of such claims could have an adverse effect on our financial condition and results of operations. In addition, if one or more of our insurance providers were to become subject to insolvency, bankruptcy or other proceedings and our insurance policies with the provider were terminated or
canceled as a result of those proceedings, we cannot guarantee that we would be able to find alternative coverage in adequate amounts or at reasonable prices. In such case, we could experience a lapse in any or adequate insurance coverage with respect to one or more properties and be exposed to potential losses relating to any claims that may arise during such period of lapsed or inadequate coverage.
Illiquidity of real estate limits our ability to act quickly: Real estate investments are relatively illiquid. Such illiquidity may limit our ability to react quickly in response to changes in economic and other conditions. If we want to sell an investment, we might not be able to dispose of that investment in the time period we desire, and the sales price of that investment might not recoup or exceed the amount of our investment. The prohibition in the Internal Revenue Code of 1986, as amended (the “IRS Code”), and related regulations on a real estate investment trust holding property for sale also may restrict our ability to sell property. In addition, we acquired a significant number of our properties from individuals to whom the Operating Partnership issued Units as part of the purchase price. In connection with the acquisition of these properties, in order to preserve such individual’s income tax deferral, we contractually agreed not to sell or otherwise transfer the properties for a specified period of time, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate individuals for the income tax consequences of the recognition of such built-in-gains. These restrictions expired in February 2016. Upon the expiration of such restrictions we are generally required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the appropriate individuals. After the effects of tax-free exchanges on certain of the originally contributed properties, either wholly or partially, over time, 16 of our properties, as well as certain land and development projects, including properties classified as held for sale as of December 31, 2020, with an aggregate carrying value of approximately $1.5 billion, are subject to these conditions. The above limitations on our ability to sell our investments could adversely affect our ability to make distributions or payments to our investors.
We may not be able to dispose of non-core office assets within our anticipated timeframe or at favorable prices: The Company has determined to sell over time properties at total estimated sales proceeds of up to $800 million, comprised primarily from the sale of the Suburban Office Portfolio. While we intend to dispose of these properties opportunistically over time, there can be no assurance that these dispositions will be completed during the period of our strategic initiative. In addition, market conditions will impact our ability to dispose of these properties, and there can be no assurance that we will be successful in disposing of these properties for their estimated sales prices. A failure to dispose of these properties for their estimated market values as planned, or unfavorable tax consequences of the disposition of these properties could have a material adverse effect on our ability to finance our acquisition and development plans and could adversely affect our ability to make distributions or payments to our investors.
New acquisitions, including acquisitions of multi-family rental properties, may fail to perform as expected and will subject us to additional new risks and could adversely affect our ability to make distributions or payments to our investors: We intend to and may acquire new properties, primarily in the multi-family rental sector, assuming that we are able to obtain capital on favorable terms. Such newly acquired properties may not perform as expected and may subject us to unknown liability with respect to liabilities relating to such properties for clean-up of undisclosed environmental contamination or claims by tenants, residents, vendors or other persons against the former owners of the properties. Inaccurate assumptions regarding future rental or occupancy rates could result in overly optimistic estimates of future revenues. In addition, future operating expenses or the costs necessary to bring an acquired property up to standards established for its intended market position may be underestimated. The search for and process of acquiring such properties will also require a substantial amount of management’s time and attention. As our portfolio shifts from primarily commercial office properties to increasingly more multi-family rental properties we will face additional and new risks such as:
shorter-term leases of one-year on average for multi-family rental communities, which allow residents to leave after the term of the lease without penalty;
increased competition from other housing sources such as other multi-family rental communities, condominiums and single-family houses that are available for rent as well as for sale;
dependency on the convenience and attractiveness of the communities or neighborhoods in which our multi-family rental properties are located and the quality of local schools and other amenities;
dependency on the financial condition of Fannie Mae or Freddie Mac which provide a major source of financing to the multi-family rental sector; and
compliance with housing and other new regulations.
The above factors could adversely affect our ability to make distributions or payments to our investors.
Americans with Disabilities Act compliance could be costly: Under the Americans with Disabilities Act of 1990 (“ADA”), all public accommodations and commercial facilities must meet certain federal requirements related to access and use by disabled persons. Compliance with the ADA requirements could involve removal of structural barriers from certain disabled persons’ entrances. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such accesses.
Although we believe that our properties are substantially in compliance with present requirements, noncompliance with the ADA or related laws or regulations could result in the United States government imposing fines or private litigants being awarded damages against us. Such costs may adversely affect our ability to make distributions or payments to our investors.
Environmental problems are possible and may be costly: Various federal, state and local laws and regulations subject property owners or operators to liability for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner or operator was responsible for or even knew of the presence of such substances. The presence of or failure to properly remediate hazardous or toxic substances (such as toxic mold, lead paint and asbestos) may adversely affect our ability to rent, sell or borrow against contaminated property and may impose liability upon us for personal injury to persons exposed to such substances. Various laws and regulations also impose liability on persons who arrange for the disposal or treatment of hazardous or toxic substances at another location for the costs of removal or remediation of such substances at the disposal or treatment facility. These laws often impose liability whether or not the person arranging for such disposal ever owned or operated the disposal facility. Certain other environmental laws and regulations impose liability on owners or operators of property for injuries relating to the release of asbestos-containing or other materials into the air, water or otherwise into the environment. As owners and operators of property and as potential arrangers for hazardous substance disposal, we may be liable under such laws and regulations for removal or remediation costs, governmental penalties, property damage, personal injuries and related expenses. Payment of such costs and expenses could adversely affect our ability to make distributions or payments to our investors.
We face risks associated with property acquisitions: We have acquired in the past, and our long-term strategy is to continue to pursue the acquisition of rental properties, primarily in New Jersey, particularly multi-family rental properties. We may be competing for investment opportunities with entities that have greater financial resources. Several developers and real estate companies may compete with us in seeking properties for acquisition, land for development and prospective tenants. Such competition may adversely affect our ability to make distributions or payments to our investors by:
reducing the number of suitable investment opportunities offered to us;
increasing the bargaining power of property owners;
interfering with our ability to attract and retain tenants;
increasing vacancies which lowers market rental rates and limits our ability to negotiate rental rates; and/or
adversely affecting our ability to minimize expenses of operation.
Our acquisition activities and their success are subject to the following risks:
adequate financing to complete acquisitions may not be available on favorable terms or at all as a result of the continuing volatility in the financial and credit markets;
even if we enter into an acquisition agreement for a property, we may be unable to complete that acquisition and risk the loss of certain non-refundable deposits and incurring certain other acquisition-related costs;
the actual costs of repositioning or redeveloping acquired properties may be greater than our estimates;
any acquisition agreement will likely contain conditions to closing, including completion of due diligence investigations to our satisfaction or other conditions that are not within our control, which may not be satisfied; and
we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations, and acquired properties may fail to perform as expected; which may adversely affect our results of operations and financial condition.
Development of real estate, including the development of multi-family rental real estate could be costly: As part of our operating strategy, we may acquire land for development or construct on owned land, under certain conditions. Included among the risks of the real estate development business are the following, which may adversely affect our ability to make distributions or payments to our investors:
financing for development projects may not be available on favorable terms;
long-term financing may not be available upon completion of construction;
failure to complete construction and lease-up on schedule or within budget may increase debt service expense and construction and other costs; and
failure to rent the development at all or at rent levels originally contemplated.
Property ownership through joint ventures could subject us to the contrary business objectives of our co-venturers: We, from time to time, invest in joint ventures or partnerships in which we do not hold a controlling interest in the assets underlying the entities in which we invest, including joint ventures in which (i) we own a direct interest in an entity which controls such assets, or (ii) we own a direct interest in an entity which owns indirect interests, through one or more intermediaries, of such assets. These investments involve risks
that do not exist with properties in which we own a controlling interest with respect to the underlying assets, including the possibility that (i) our co-venturers or partners may, at any time, become insolvent or otherwise refuse to make capital contributions when due, (ii) we may be responsible to our co-venturers or partners for indemnifiable losses, (iii) we may become liable with respect to guarantees of payment or performance by the joint ventures, (iv) we may become subject to buy-sell arrangements which could cause us to sell our interests or acquire our co-venturer’s or partner’s interests in a joint venture, or (v) our co-venturers or partners may, at any time, have business, economic or other objectives that are inconsistent with our objectives. Because we lack a controlling interest, our co-venturers or partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. While we seek protective rights against such contrary actions, there can be no assurance that we will be successful in procuring any such protective rights, or if procured, that the rights will be sufficient to fully protect us against contrary actions. Our organizational documents do not limit the amount of available funds that we may invest in joint ventures or partnerships. If the objectives of our co-venturers or partners are inconsistent with ours, it may adversely affect our ability to make distributions or payments to our investors.
CAPITAL AND FINANCING RISKS
Our performance is subject to risks associated with repositioning a significant portion of the Company’s portfolio from office to multi-family rental properties, including the sale of the Suburban Office Portfolio.
Repositioning the Company’s office portfolio may result in impairment charges or less than expected returns on office properties and could adversely affect our ability to make distributions or payments to our investors: There can be no assurance that the Company, as it seeks to reposition a portion of its portfolio from office to the multi-family rental sector, including the sale of the Suburban Office Portfolio, will be able to sell office properties and purchase multi-family rental properties at prices that in the aggregate are profitable for the Company or are efficient uses of its capital or that would not result in a reduction of the Company’s cash flow, and such transactions could adversely affect our ability to make distributions or payments to our investors. Because real estate investments are relatively illiquid, it also may be difficult for the Company to promptly sell its office properties that are held or may be designated for sale promptly or on favorable terms, which could have a material adverse effect on the Company’s financial condition. In addition, as the Company identifies non-core office properties that may be held for sale or that it intends to hold for a shorter period of time than previously, it may determine that the carrying value of a property is not recoverable over the anticipated holding period of the property. As a result, the Company may incur impairment charges for certain of these properties to reduce their carrying values to the estimated fair market values. Moreover, as the Company seeks to reposition a portion of its portfolio from office to the multi-family rental sector, the Company may be subject to a Federal income tax on gain from sales of properties due to limitations in the IRS Code and related regulations on a real estate investment trust’s ability to sell properties. The Company intends to structure its property dispositions in a tax-efficient manner and avoid the prohibition in the IRS Code against a real estate investment trust holding properties for sale. There is no guaranty, however, that such dispositions can be achieved without the imposition of federal income tax on any gain recognized.
Unfavorable changes in market and economic conditions could adversely affect multi-family rental occupancy, rental rates, operating expenses, and the overall market value of our assets, including joint ventures. Local conditions that may adversely affect conditions in multi-family residential markets include the following:
plant closings, industry slowdowns and other factors that adversely affect the local economy;
an oversupply of, or a reduced demand for, apartment units;
a decline in household formation or employment or lack of employment growth;
the inability or unwillingness of residents to pay rent increases;
rent control or rent stabilization laws, or other laws regulating housing, that could prevent us from raising rents to offset increases in operating costs; and
economic conditions that could cause an increase in our operating expenses, such as increases in property taxes, utilities, compensation of on-site associates and routine maintenance.
Changes in applicable laws, or noncompliance with applicable laws, could adversely affect our operations or expose us to liability: We must develop, construct and operate our communities in compliance with numerous federal, state and local laws and regulations, some of which may conflict with one another or be subject to limited judicial or regulatory interpretations. These laws and regulations may include zoning laws, building codes, landlord tenant laws and other laws generally applicable to business operations. Noncompliance with applicable laws could expose us to liability. Lower revenue growth or significant unanticipated expenditures may result from our need to comply with changes in (i) laws imposing remediation requirements and the potential liability for environmental conditions existing on properties or the restrictions on discharges or other conditions, (ii) rent control or rent stabilization laws or other residential landlord/tenant laws, or (iii) other governmental rules and regulations or enforcement policies affecting the development, use and operation of our communities, including changes to building codes and fire and life-safety codes.
Failure to succeed in new markets, or with new brands and community formats, or in activities other than the development, ownership and operation of residential rental communities may have adverse consequences: We are actively engaged in development and acquisition activity in new submarkets within our core, Northeast markets where we have owned and operated our historical portfolio of office properties. Our historical experience with properties in our core, Northeast markets in developing, owning and operating properties does not ensure that we will be able to operate successfully in the new multi-family submarkets. We will be exposed to a variety of risks in the multi-family submarkets, including:
an inability to accurately evaluate local apartment market conditions;
an inability to obtain land for development or to identify appropriate acquisition opportunities;
an acquired property may fail to perform as we expected in analyzing our investment;
our estimate of the costs of repositioning or developing an acquired property may prove inaccurate; and
lack of familiarity with local governmental and permitting procedures.
Debt financing could adversely affect our economic performance.
Scheduled debt payments and refinancing could adversely affect our financial condition: We are subject to the risks normally associated with debt financing. These risks, including the following, may adversely affect our ability to make distributions or payments to our investors:
our cash flow may be insufficient to meet required payments of principal and interest;
payments of principal and interest on borrowings may leave us with insufficient cash resources to pay operating expenses;
we may not be able to refinance indebtedness on our properties at maturity; and
if refinanced, the terms of refinancing may not be as favorable as the original terms of the related indebtedness.
As of December 31, 2020, we had total outstanding indebtedness of $2.8 billion comprised of $573 million of senior unsecured notes, outstanding borrowings of $25 million under our unsecured revolving credit facility, and approximately $2.2 billion of mortgages, loans payable and other obligations. We may have to refinance the principal due on our current or future indebtedness at maturity, and we may not be able to do so.
If we are unable to refinance our indebtedness on acceptable terms, or at all, events or conditions that may adversely affect our ability to make distributions or payments to our investors include the following:
we may need to dispose of one or more of our properties upon disadvantageous terms or adjust our capital expenditures in general or with respect to our strategy of acquiring multi-family residential properties and development opportunities in particular;
prevailing interest rates or other factors at the time of refinancing could increase interest rates and, therefore, our interest expense;
we may be subject to an event of default pursuant to covenants for our indebtedness;
if we mortgage property to secure payment of indebtedness and are unable to meet mortgage payments, the mortgagee could foreclose upon such property or appoint a receiver to receive an assignment of our rents and leases; and
foreclosures upon mortgaged property could create taxable income without accompanying cash proceeds and, therefore, hinder our ability to meet the real estate investment trust distribution requirements of the IRS Code.
We are obligated to comply with financial covenants in our indebtedness that could restrict our range of operating activities: The mortgages on our properties contain customary negative covenants, including limitations on our ability, without the prior consent of the lender, to further mortgage the property, to enter into new leases outside of stipulated guidelines or to materially modify existing leases. In addition, our unsecured revolving credit facility and term loans each contains customary requirements, including restrictions and other limitations on our ability to incur debt, debt to assets ratios, secured debt to total assets ratios, interest coverage ratios and minimum ratios of unencumbered assets to unsecured debt. The indentures under which our senior unsecured debt have been issued contain financial and operating covenants including coverage ratios and limitations on our ability to incur secured and unsecured debt. These covenants limit our flexibility in conducting our operations and create a risk of default on our indebtedness if we cannot continue to satisfy them. Some of our debt instruments are cross-collateralized and contain cross default provisions with other debt instruments. Due to this cross-collateralization, a failure or default with respect to certain debt instruments or properties could have an adverse impact on us or our properties that are subject to the cross-collateralization under the applicable debt instrument. Failure to comply with these covenants could cause a default under the agreements and, in certain circumstances, our lenders may be entitled to accelerate our debt obligations. Defaults under our debt agreements could materially and adversely affect our financial condition and results of operations.
Rising interest rates may adversely affect our cash flow: As of December 31, 2020, outstanding borrowings of approximately $25 million under our unsecured revolving credit facility and approximately $402 million of our mortgage indebtedness bear interest at variable rates. We may incur additional indebtedness in the future that bears interest at variable rates. Variable rate debt creates higher debt service requirements if market interest rates increase. Higher debt service requirements could adversely affect our ability to make distributions or payments to our investors and/or cause us to default under certain debt covenants.
Our degree of leverage could adversely affect our cash flow: We fund acquisition opportunities and development partially through short-term borrowings (including our unsecured revolving credit facility), as well as from proceeds from property sales and undistributed cash. We expect to refinance projects purchased with short-term debt either with long-term indebtedness or equity financing depending upon the economic conditions at the time of refinancing. The Board of Directors has a general policy of limiting the ratio of our indebtedness to total undepreciated assets (total debt as a percentage of total undepreciated assets) to 50 percent or less, although there is no limit in our organizational documents on the amount of indebtedness that we may incur. However, we have entered into certain financial agreements which contain financial and operating covenants that limit our ability under certain circumstances to incur additional secured and unsecured indebtedness. The Board of Directors could alter or eliminate its current policy on borrowing at any time at its discretion. If this policy were changed, we could become more highly leveraged, resulting in an increase in debt service that could adversely affect our cash flow and our ability to make distributions or payments to our investors and/or could cause an increased risk of default on our obligations.
We are dependent on external sources of capital for future growth: To qualify as a real estate investment trust under the IRS Code, the General Partner must distribute to its shareholders each year at least 90 percent of its net taxable income, excluding any net capital gain. Because of this distribution requirement, it is not likely that we will be able to fund all future capital needs, including for acquisitions and developments, from income from operations. Therefore, we will have to rely on third-party sources of capital, which may or may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of things, including the market’s perception of our growth potential and our current and potential future earnings. Moreover, additional equity offerings may result in substantial dilution of our shareholders’ interests, and additional debt financing may substantially increase our leverage.
Adverse changes in our credit ratings could adversely affect our business and financial condition: The credit ratings assigned to our senior unsecured notes by nationally recognized statistical rating organizations (the “NRSROs”) are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the NRSROs in their rating analyses of us. These ratings and similar ratings of us and any debt or preferred securities we may issue are subject to ongoing evaluation by the NRSROs, and we cannot assure you that any such ratings will not be changed by the NRSROs if, in their judgment, circumstances warrant. Our credit ratings can affect the amount of capital we can access, as well as the terms of any financings we may obtain. There can be no assurance that we will be able to maintain our current credit ratings, and in the event our current credit ratings are downgraded, we would likely incur higher borrowing costs and may encounter difficulty in obtaining additional financing. See “Item 7. Management’s Discussion & Analysis of Financial Condition and Results of Operations - Executive Overview” for a discussion of the Company’s current credit ratings.”
MANAGEMENT RISKS
Competition for skilled personnel could increase our labor costs.
We compete with various other companies in attracting and retaining qualified and skilled personnel. We depend on our ability to attract and retain skilled management personnel who are responsible for the day-to-day operations of our company. Competitive pressures may require that we enhance our pay and benefits package to compete effectively for such personnel. We may not be able to offset such added costs by increasing the rates we charge our tenants. If there is an increase in these costs or if we fail to attract and retain qualified and skilled personnel, our business and operating results could be harmed.
We are dependent on our key personnel whose continued service is not guaranteed.
We are dependent upon key personnel for strategic business direction and real estate experience, including our interim chief executive officer, chief financial officer, chief investments officer, chief accounting officer, general counsel, and chairman of Roseland Residential Trust. While we believe that we could find replacements for these key personnel, loss of their services could adversely affect our operations. We do not have key man life insurance for our key personnel. In addition, as the Company seeks to reposition a portion of its portfolio from office to the multi-family rental sector, the Company may become increasingly dependent on non-executive personnel with residential development and leasing expertise to effectively execute the Company’s long-term strategy.
Our real estate construction management activities are subject to risks particular to third-party construction projects.
As we may perform fixed price construction services for third parties, we are subject to a variety of risks unique to these activities. If construction costs of a project exceed original estimates, such costs may have to be absorbed by us. In addition, a construction project may be delayed due to circumstances beyond our control, or the time required to complete a construction project may be greater than originally anticipated. If any such excess costs or project delays were to be material, such events may adversely affect our cash flow and liquidity and thereby impact our ability to make distributions or payments to our investors.
INVESTMENT RISKS
Certain provisions of Maryland law and the General Partner’s charter and bylaws could hinder, delay or prevent changes in control.
Certain provisions of Maryland law and General Partner's charter and bylaws have the effect of discouraging, delaying or preventing transactions that involve an actual or threatened change in control. These provisions include the following:
Removal of Directors: Under the General Partner's charter, subject to the rights of one or more classes or series of preferred stock to elect one or more directors, a director may be removed only for cause and only by the affirmative vote of at least two-thirds of all votes entitled to be cast by our stockholders generally in the election of directors. Neither the Maryland General Corporation Law nor the General Partner's charter define the term “cause.” As a result, removal for “cause” is subject to Maryland common law and to judicial interpretation and review in the context of the facts and circumstances of any particular situation.
Number of Directors, Board Vacancies, Terms of Office: The General Partner has, in its bylaws, elected to be subject to certain provisions of Maryland law which vest in the Board of Directors the exclusive right to determine the number of directors and the exclusive right, by the affirmative vote of a majority of the remaining directors, even if the remaining directors do not constitute a quorum, to fill vacancies on the board. These provisions of Maryland law, which are applicable even if other provisions of Maryland law or the charter or bylaws provide to the contrary, also provide that any director elected to fill a vacancy shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, rather than the next annual meeting of stockholders as would otherwise be the case, and until his or her successor is elected and qualifies. The General Partner has, in its corporate governance principles, adopted a mandatory retirement age of 80 years old for directors.
Stockholder Requested Special Meetings: The General Partner’s bylaws provide that its stockholders have the right to call a special meeting only upon the written request of the stockholders entitled to cast not less than a majority of all the votes entitled to be cast by the stockholders at such meeting.
Advance Notice Provisions for Stockholder Nominations and Proposals: The General Partner's bylaws require advance written notice for stockholders to nominate persons for election as directors at, or to bring other business before, any meeting of stockholders. This bylaw provision limits the ability of stockholders to make nominations of persons for election as directors or to introduce other proposals unless we are notified in a timely manner prior to the meeting.
Preferred Stock: Under the General Partner's charter, its Board of Directors has authority to issue preferred stock from time to time in one or more series and to establish the terms, preferences and rights of any such series of preferred stock, all without approval of its stockholders. As a result, its Board of Directors may establish a series of preferred stock that could delay or prevent a transaction or a change in control.
Duties of Directors with Respect to Unsolicited Takeovers: Maryland law provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the directors in unsolicited takeover situations. The duties of directors of Maryland corporations do not require them to (a) accept, recommend or respond to any proposal by a person seeking to acquire control of the corporation, (b) authorize the corporation to redeem any rights under, or modify or render inapplicable, any stockholders rights plan, (c) make a determination under the Maryland Business Combination Act or the Maryland Control Share Acquisition Act, or (d) act or fail to act solely because of the effect the act or failure to act may have on an acquisition or potential acquisition of control of the corporation or the amount or type of consideration that may be offered or paid to the stockholders in an acquisition. Maryland law also contains a statutory presumption that an act of a director of a Maryland corporation satisfies the applicable standards of conduct for directors under Maryland law.
Ownership Limit: In order to preserve the General Partner's status as a real estate investment trust under the IRS Code, its charter generally prohibits any single stockholder, or any group of affiliated stockholders, from beneficially owning more than 9.8 percent of its outstanding capital stock unless its Board of Directors waives or modifies this ownership limit.
Maryland Business Combination Act: The Maryland Business Combination Act provides that unless exempted, a Maryland corporation may not engage in certain business combinations, including mergers, consolidations, share exchanges or, in circumstances specified in the statute, asset transfers, issuances or reclassifications of shares of stock and other specified transactions, with an “interested stockholder” or an affiliate of an interested stockholder, for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter unless specified criteria are met. An interested stockholder is generally a person owning or controlling, directly or indirectly, 10 percent or more of the voting power of the outstanding stock of the Maryland corporation. The General Partner's board of directors has exempted from this statute business combinations between the Company and certain affiliated individuals and entities. However, unless its board adopts other exemptions, the provisions of the Maryland Business Combination Act will be applicable to business combinations with other persons.
Maryland Control Share Acquisition Act: Maryland law provides that holders of “control shares” of a corporation acquired in a “control share acquisition” shall have no voting rights with respect to the control shares except to the extent approved by a vote of two-thirds of the votes eligible to cast on the matter under the Maryland Control Share Acquisition Act. “Control shares” means shares of stock that, if aggregated with all other shares of stock previously acquired by the acquirer, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of the voting power: one-tenth or more but less than one-third, one-third or more but less than a majority or a majority or more of all voting power. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions.
If voting rights of control shares acquired in a control share acquisition are not approved at a stockholder’s meeting, then subject to certain conditions and limitations, the issuer may redeem any or all of the control shares for fair value. If voting rights of such control shares are approved at a stockholder’s meeting and the acquirer becomes entitled to vote a majority of the shares of stock entitled to vote, all other stockholders may exercise appraisal rights. In 2018, the General Partner's bylaws were amended to exempt any acquisition of the General Partner’s shares from the Maryland Control Share Acquisition Act. If the General Partner’s bylaws are amended to repeal or limit the exemption from the Maryland Control Share Acquisition Act, it may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating a change in control.
Changes in market conditions could adversely affect the market price of the General Partner’s common stock.
As with other publicly traded equity securities, the value of the General Partner's common stock depends on various market conditions, which may change from time to time. The market price of the General Partner's common stock could change in ways that may or may not be related to our business, the General Partner's industry or our operating performance and financial condition. Among the market conditions that may affect the value of the General Partner's common stock are the following:
the general reputation of REITs and the attractiveness of the General Partner's equity securities in comparison to other equity securities, including securities issued by other real estate-based companies;
our financial performance; and
general stock and bond market conditions.
The market value of the General Partner's common stock is based primarily upon the market’s perception of our growth potential and our current and potential future earnings and cash dividends. Consequently, the General Partner's common stock may trade at prices that are higher or lower than its net asset value per share of common stock.
REIT STATUS RISKS
The enactment of significant new tax legislation, generally effective for tax years beginning after December 31, 2017, could have a material and adverse effect on us and the market price of our shares.
On December 22, 2017, Pub. L. No. 15-97 (informally known as the Tax Cuts and Jobs Act (the “Act”)) was enacted into law. The Act made major changes to the Code, including a number of provisions of the Code that affect the taxation of REITs and their stockholders. The long-term effect of the significant changes made by the Act remains uncertain, and additional administrative guidance will be required in order to fully evaluate the effect of many provisions. The effect of any technical corrections with respect to the Act could have an adverse effect on us or our stockholders or holders of our debt securities.”
Consequences of the General Partner's failure to qualify as a real estate investment trust could adversely affect our financial condition.
Failure to maintain ownership limits could cause the General Partner to lose its qualification as a real estate investment trust: In order for the General Partner to maintain its qualification as a real estate investment trust under the IRS Code, not more than 50 percent in value of its outstanding stock may be actually and/or constructively owned by five or fewer individuals (as defined in the IRS Code to include certain entities). The General Partner has limited the ownership of its outstanding shares of common stock by any single stockholder to 9.8 percent of the outstanding shares of its common stock. Its Board of Directors could waive this restriction if it was satisfied, based upon the advice of tax counsel or otherwise, that such action would be in the best interests of the General Partner and its stockholders and would not affect its qualification as a real estate investment trust under the IRS Code. Common stock acquired or transferred in breach of the limitation may be redeemed by us for the lesser of the price paid and the average closing price for the 10 trading days immediately preceding redemption or sold at the direction of the General Partner. The General Partner may elect to redeem such shares of common stock for Units, which are nontransferable except in very limited circumstances. Any transfer of shares of common stock which, as a result of such transfer, causes the General Partner to be in violation of any ownership limit, will be deemed void. Although the General Partner currently intends to continue to operate in a manner which will enable it to continue to qualify as a real estate investment trust under the IRS Code, it is possible that future economic, market, legal, tax or other considerations may cause its Board of Directors to revoke the election for the General Partner's to qualify as a real estate investment trust. Under the General Partner's organizational documents, its Board of Directors can make such revocation without the consent of its stockholders.
In addition, the consent of the holders of at least 85 percent of the Operating Partnership’s partnership units is required: (i) to merge (or permit the merger of) the Operating Partnership with another unrelated person, pursuant to a transaction in which the Operating Partnership is not the surviving entity; (ii) to dissolve, liquidate or wind up the Operating Partnership; or (iii) to convey or otherwise transfer all or substantially all of the Operating Partnership’s assets. As of February 23, 2021, the General Partner owned approximately 91 percent of the Operating Partnership’s outstanding common partnership units.
Tax liabilities as a consequence of failure to qualify as a real estate investment trust: The General Partner has elected to be treated and has operated so as to qualify as a real estate investment trust for federal income tax purposes since the General Partner's taxable year ended December 31, 1994. Although the General Partner believes it will continue to operate in such manner, it cannot guarantee that it will do so. Qualification as a real estate investment trust involves the satisfaction of various requirements (some on an annual and some on a quarterly basis) established under highly technical and complex tax provisions of the IRS Code. Because few judicial or administrative interpretations of such provisions exist and qualification determinations are fact sensitive, the General Partner cannot assure you that it will qualify as a real estate investment trust for any taxable year.
If the General Partner fails to qualify as a real estate investment trust in any taxable year, it will be subject to the following:
it will not be allowed a deduction for dividends paid to shareholders;
it will be subject to federal income tax at regular corporate rates, including any alternative minimum tax, if applicable; and
unless it is entitled to relief under certain statutory provisions, it will not be permitted to qualify as a real estate investment trust for the four taxable years following the year during which was disqualified.
A loss the General Partner's status as a real estate investment trust could have an adverse effect on us. Failure to qualify as a real estate investment trust also would eliminate the requirement that the General Partner pay dividends to its stockholders. In addition, any such dividends that the General Partner does pay to its stockholders would not constitute qualified REIT dividends and would accordingly not qualify for a deduction of up to 20 percent.
Other tax liabilities: Even if the General Partner qualifies as a real estate investment trust under the IRS Code, its subject to certain federal, state and local taxes on our income and property and, in some circumstances, certain other state and local taxes. From time to time changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and amount of such increase. These actions could adversely affect our financial condition and results of operations. In addition, our taxable REIT subsidiaries will be subject to federal, state and local income tax for income received in connection with certain non-customary services performed for tenants and/or third parties.
Risk of changes in the tax law applicable to real estate investment trusts: Since the Internal Revenue Service, the United States Treasury Department and Congress frequently review federal income tax legislation, we cannot predict whether, when or to what extent new federal tax laws, regulations, interpretations or rulings will be adopted. Any such legislative action may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect taxation of us, and/or our investors.
OTHER RISKS
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our tenants and business partners, including personally identifiable information of our tenants and employees, in our data centers and on our networks. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation, which could adversely affect our business.
We face possible risks associated with the physical effects of climate change.
We cannot predict with certainty whether climate change is occurring and, if so, at what rate. However, the physical effects of climate change could have a material adverse effect on our properties, operations and business. For example, all of our properties are located along the East coast, particularly those in New Jersey and Massachusetts. To the extent climate change causes changes in weather patterns, our markets could experience increases in storm intensity and rising sea-levels. Over time, these conditions could result in declining demand for office space in our buildings or the inability of us to operate the buildings at all. Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy and increasing the cost of snow removal or related costs at our properties. Proposed legislation to address climate change could increase utility and other costs of operating our properties which, if not offset by rising rental income, would reduce our net income. There can be no assurance that climate change will not have a material adverse effect on our properties, operations or business.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
‎

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
PROPERTY LIST
As of December 31, 2020, the Company’s Consolidated Properties consisted of 27 in-service commercial properties, as well as 13 multi-family rental properties and two hotels. The Consolidated Properties are located primarily in the Northeast. The Consolidated Properties are easily accessible from major thoroughfares and are in close proximity to numerous amenities. The Consolidated Properties contain a total of approximately 7.9 million square feet of commercial space and 4,039 apartment units with the individual commercial properties ranging from 8,400 to 1,246,283 square feet. The Consolidated Properties, managed by on-site employees, generally have attractively landscaped sites and atriums in addition to quality design and construction. The Company’s commercial tenants include many service sector employers, including a large number of professional firms and national and international businesses. The Company believes that all of its in-service properties are well-maintained and do not require significant capital improvements.
Office Properties
Percentage
Net
Leased
Base
Average
Average
Rentable
as of
Rent
Percentage
Base Rent
Effective Rent
Year
Area
12/31/20
($000’s)
of Total 2020
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
(b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
NEW JERSEY
ESSEX COUNTY
Millburn (Short Hills)
150 J.F. Kennedy Parkway (h)
247,476
54.6
5,489
1.64
40.62
38.76
51 J.F. Kennedy Parkway (h)
260,741
86.9
11,868
3.54
52.38
52.23
101 J.F. Kennedy Parkway (h)
197,196
98.4
8,279
2.47
42.67
41.69
103 J.F. Kennedy Parkway (h)
123,000
100.0
5,111
1.52
41.55
41.55
HUDSON COUNTY
Hoboken
111 River Street
566,215
81.9
20,397
6.08
43.98
39.70
Jersey City
Harborside Plaza 2
761,200
80.7
22,794
6.80
37.11
30.61
Harborside Plaza 3 (c)
726,022
83.3
21,726
6.48
35.92
29.64
Harborside Plaza 4-A
231,856
100.0
4,765
1.42
20.55
15.66
Harborside Plaza 5
977,225
55.8
20,933
6.25
38.39
33.48
101 Hudson Street (c)
1,246,283
82.2
31,921
9.52
31.16
23.38
MERCER COUNTY
Princeton
100 Overlook Center (h)
149,600
94.0
4,116
1.23
29.27
27.48
MIDDLESEX COUNTY
Edison
333 Thornall Street (h)
196,128
88.9
5,730
1.71
32.86
31.11
343 Thornall Street (h)
195,709
92.3
6,431
1.92
35.60
33.67
Iselin
99 Wood Avenue South (h)
271,988
81.7
8,161
2.43
36.73
36.29
101 Wood Avenue South (h)
262,841
100.0
9,443
2.82
35.93
35.09
‎
Office Properties
(Continued)
Percentage
Net
Leased
Base
Average
Average
Rentable
as of
Rent
Percentage
Base Rent
Effective Rent
Year
Area
12/31/20
($000’s)
of Total 2020
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
(b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
MONMOUTH COUNTY
Holmdel
23 Main Street
350,000
100.0
4,566
1.36
13.05
10.31
Middletown
One River Centre Bldg 1 (h)
122,594
91.3
3,101
0.92
27.71
26.49
One River Centre Bldg 2 (h)
120,360
100.0
3,092
0.92
25.69
24.54
One River Centre Bldg 3 (h)
194,518
39.4
2,056
0.61
26.83
24.67
Red Bank
100 Schultz Drive (h)
100,000
28.5
0.27
31.33
29.12
200 Schultz Drive (h)
102,018
85.8
2,538
0.76
29.00
27.64
MORRIS COUNTY
Madison
7 Giralda Farms (h)
236,674
60.1
4,706
1.40
33.08
32.30
Parsippany
4 Gatehall Drive (h)
248,480
59.5
4,668
1.39
31.57
30.21
Total New Jersey Office
7,888,124
78.7
(j)
212,784
63.46
34.27
30.22
TOTAL OFFICE PROPERTIES
7,888,124
78.7
(j)
212,784
63.46
34.27
30.22
‎
Retail/Garage Properties, and Land Leases
Percentage
Net
Leased
Base
Average
Average
Rentable
as of
Rent
Percentage
Base Rent
Effective Rent
Year
Area
12/31/20
($000’s)
of Total 2020
Per Sq. Ft.
Per Sq. Ft.
Property Location
Built
(Sq. Ft.)
(%) (a)
(b) (c)
Base Rent (%)
($) (c) (d)
($) (c) (e)
NEW JERSEY
HUDSON COUNTY
Weehawken
100 Avenue at Port Imperial (m)
8,400
100.0
0.10
38.45
37.26
500 Avenue at Port Imperial (n)
18,064
88.1
0.16
32.86
28.02
West New York
Port Imperial North Retail (g)
30,745
52.3
0.02
6.23
1.39
Total Retail/Garage Properties
57,209
70.6
0.28
23.42
19.34
NEW JERSEY
MORRIS COUNTY
Hanover
Wegmans Land Lease
-
-
-
2,135
0.64
-
-
Total Land Leases
-
-
2,135
0.64
-
-
TOTAL COMMERCIAL PROPERTIES
7,945,333
78.7
(j)
215,846
64.38
34.54
30.39
Multi-Family Rental and Hotel Properties
Net
Percentage
Percentage
Rentable
Leased
Base
of Total
Average
Commercial
as of
Rent
Base Rent
Year
Area
Number
12/31/20
($000’s)
Base Rent
Per Home
Built
(Sq. Ft.)
of Units/Rooms
(%) (a)
(b) (c)
(%)
($) (c) (i)
NEW JERSEY
HUDSON COUNTY
Jersey City
Monaco North
-
77.4
8,219
2.45
3,643
Monaco South
-
77.1
7,318
2.18
2,823
Marbella I
-
74.8
11,969
3.57
3,238
Marbella II (g)
-
78.2
10,036
2.99
3,442
Liberty Towers (g)
-
83.2
22,648
6.76
3,502
Soho Lofts (g)
-
85.9
14,877
4.44
3,826
Weehawken
Riverhouse11 at Port Imperial
-
94.0
10,167
3.03
3,059
MORRIS COUNTY
Morris Plains
Signature Place
-
94.9
5,386
1.61
2,400
Total New Jersey Multi-Family Rental
-
2,763
82.6
90,620
27.03
3,309
NEW YORK
WESTCHESTER COUNTY
Eastchester
Quarry Place at Tuckahoe
-
92.7
4,239
1.26
3,533
Total New York Multi-Family Rental
-
92.7
4,239
1.26
3,533
MASSACHUSETTS
MIDDLESEX COUNTY
Malden
The Emery at Overlook Ridge (g)
-
90.0
2,802
0.84
SUFFOLK COUNTY
East Boston
Portside at Pier One
-
91.3
5,434
1.62
2,744
Portside 5/6
-
90.5
8,750
2.61
2,721
WORCESTER COUNTY
Worcester
145 Front at City Square
-
94.0
7,584
2.26
1,843
Total Massachusetts Multi-Family Rental
-
1,168
91.5
24,570
7.33
1,957
Total Multi-Family Rental Properties
-
4,039
85.4
119,429
35.62
2,795
HUDSON COUNTY
Weehawken
Envue Autograph Collection
-
-
(o)
-
-
Residence Inn at Port Imperial
-
-
(p)
-
-
Total Hotel Properties
-
-
-
-
-
TOTAL PROPERTIES
7,945,333
4,411
N/A
335,275
(k)(l)
100.00
Footnotes to Property List (dollars in thousands, except per square foot amounts):
(a)
Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases expiring December 31, 2020 aggregating 145,404 square feet (representing 1.8 percent of the Company’s total net rentable square footage) for which no new leases were signed.
(b)
Total base rent for the year ended December 31, 2020, determined in accordance with generally accepted accounting principles (“GAAP”). Substantially all of the commercial leases provide for annual base rents plus recoveries and escalation charges based upon the tenant’s proportionate share of and/or increases in real estate taxes and certain operating costs, as defined, and the pass through of charges for electrical usage. For the 12 months ended December 31, 2020, total escalations and recoveries from tenants were: $20,617, or $4.05 per leased square foot, for office properties.
(c)
Excludes space leased by the Company.
(d)
Base rent for the 12 months ended December 31, 2020 divided by net rentable commercial square feet leased at December 31, 2020.
(e)
Total base rent, determined in accordance with GAAP, for 2020 minus 2020 amortization of tenant improvements, leasing commissions and other concessions and costs, determined in accordance with GAAP, divided by net rentable square feet leased at December 31, 2020.
(f)
This property is located on land leased by the Company.
(g)
As this property was acquired, commenced initial operations or initially consolidated by the Company during the 12 months ended December 31, 2020, the amounts represented in 2020 base rent reflect only that portion of those 12 months during which the Company owned or consolidated the property. Accordingly, these amounts may not be indicative of the property’s full year results. For comparison purposes, the amounts represented in 2020 average base rent per sq. ft. and per unit for this property have been calculated by taking the 12 months ended December 31, 2020 base rent for such property and annualizing these partial-year results, dividing such annualized amounts by the net rentable square feet leased or occupied units at December 31, 2020. These annualized per square foot and per unit amounts may not be indicative of the property’s results had the Company owned or consolidated the property for the entirety of the 12 months ended December 31, 2020.
(h)
Property is held for sale by the Company and classified as discontinued operations as of December 31, 2020.
(i)
Annualized base rent for the 12 months ended December 31, 2020 divided by units occupied at December 31, 2020, divided by 12.
(j)
Excludes properties being considered for repositioning, redevelopment, potential sale, or being prepared for lease up.
(k)
Excludes approximately $43.2 million from properties which were disposed of or removed from service during the year ended December 31, 2020.
(l)
Includes $125.2 million from properties held for sale and classified as discontinued operations as of December 31, 2020.
(m)
This property had Parking Income of $527 in 2020.
(n)
This property had Parking Income of $1,717 in 2020.
(o)
This property had Hotel Income of $1,264 in 2020. This hotel has closed its rooms since March 2020.
(p)
This property had Hotel Income of $3,023 in 2020.
PERCENTAGE LEASED
The following table sets forth the year-end percentages of commercial square feet leased in the Company’s stabilized operating Consolidated Properties for the last five years:
Percentage of
December 31,
Square Feet Leased (%) (a)
78.7
80.7
(b)
83.2
(b)
87.6
(b)
90.6
(b)
(a)Percentage of square-feet leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases that expire at the period end date. For all years, excludes properties being prepared for lease up.
(b)Excludes properties being considered for repositioning or redevelopment. Inclusive of such properties, percentage of square feet leased as of 2019, 2018, 2017 and 2016 was 80.6, 81.7, 85.6 and 89.6 percent, respectively.
‎
Significant Tenants
The following table sets forth a schedule of the Company’s 50 largest commercial tenants for the Consolidated Properties as of December 31, 2020 based upon annualized base rental revenue:
Percentage of
Annualized
Company
Square
Percentage
Year of
Number of
Base Rental
Annualized Base
Feet
Total Company
Lease
Properties
Revenue ($) (a)
Rental Revenue (%)
Leased
Leased Sq. Ft. (%)
Expiration
Bank of America Merrill Lynch
11,125,489
5.3
421,570
7.0
(b)
John Wiley & Sons, Inc.
10,888,238
5.1
290,353
4.9
MUFG Bank Ltd.
10,195,724
4.8
242,354
4.1
(c)
Dun & Bradstreet Corporation
7,568,200
3.6
192,280
3.2
Investors Bank
5,300,455
2.5
144,552
2.4
(d)
E*Trade Financial Corporation
5,290,600
2.5
132,265
2.2
KPMG, LLP
5,266,324
2.5
120,947
2.0
(e)
Vonage America, Inc.
4,924,500
2.3
350,000
5.9
ARCH Insurance Company
4,326,008
2.0
106,815
1.8
TP ICAP Securities USA, LLC
4,163,898
2.0
121,871
2.0
(f)
Sumitomo Mitsui Banking Corp.
4,156,989
2.0
111,105
1.9
2037 (g)
First Data Corporation
3,684,106
1.7
88,374
1.5
(h)
Brown Brothers Harriman & Co.
3,673,536
1.7
114,798
1.9
HQ Global Workplaces, LLC
3,460,735
1.6
102,737
1.7
(i)
Cardinia Real Estate LLC
3,112,664
1.5
79,771
1.3
Natixis North America, Inc.
3,093,290
1.5
89,907
1.5
Zurich American Insurance Company
2,844,522
1.3
64,414
1.1
Leo Pharma Inc.
2,803,279
1.3
78,479
1.3
AMTrust Financial Services, Inc.
2,614,328
1.2
76,892
1.3
Ernst & Young U.S. LLP
2,594,053
1.2
62,029
1.0
Hackensack Meridian Health, Inc.
2,589,505
1.2
69,841
1.2
American Wagering Inc.
2,547,927
1.2
54,907
0.9
(j)
Tradeweb Markets, LLC
2,413,954
1.1
65,242
1.1
2028 (k)
Jeffries, LLC
2,322,231
1.1
62,763
1.0
New Jersey City University
2,301,582
1.1
68,348
1.1
Wells Fargo Advisors, LLC
2,217,342
1.0
57,870
1.0
(l)
Trustees of Princeton Univ.
2,099,241
1.0
67,478
1.1
The Prudential Insurance Company of America
2,086,629
1.0
60,482
1.0
GBT US LLC
1,970,129
0.9
49,563
0.8
B&G Foods, Inc.
1,949,848
0.9
66,934
1.1
SunAmerica Asset Management, LLC
1,928,003
0.9
36,336
0.6
UBS Financial Services, Inc.
1,887,880
0.9
53,987
0.9
(m)
TD Ameritrade Services Company, Inc.
1,879,435
0.9
44,222
0.7
Sumitomo Mitsui Trust Bank (U.S.A.) Limited
1,780,476
0.8
38,134
0.6
Whole Foods Market Services
1,753,726
0.8
47,398
0.8
Amerigroup New Jersey Inc.
1,749,856
0.8
46,740
0.8
(n)
Savvis Communications, LLC
1,572,428
0.7
71,474
1.2
Morgan Stanley Smith Barney
1,420,233
0.7
42,395
0.7
Maser Consulting P.A.
1,417,976
0.7
54,538
0.9
Greenbaum Rowe Smith & Davis
1,405,223
0.7
39,362
0.7
2025 (o)
United States of America-GSA
1,400,015
0.7
43,783
0.7
(p)
United States Fire Insurance
1,384,080
0.7
35,040
0.6
Franklin Mutual Advisors LLC
1,359,090
0.6
30,202
0.5
FIS Financial Systems LLC
1,355,013
0.6
41,061
0.7
C2 Imaging LLC
1,217,898
0.6
34,307
0.6
Mizuho Securitiees USA LLC
1,112,452
0.5
30,832
0.5
DLA Piper LLP (US)
1,079,364
0.5
21,164
0.4
Innocor Inc.
993,750
0.5
37,500
0.6
Dentons US LLP
971,280
0.5
21,584
0.4
Achieve3000 Inc.
954,800
0.5
30,800
0.5
Totals
152,208,305
71.7
4,415,800
73.7
(a)
Annualized base rental revenue is based on actual December 2020 billings times 12. For leases whose rent commences after January 1, 2021, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(b)
1,016 square feet expire in 2021; 420,554 expire in 2027.
(c)
5,004 square feet expire in 2021; 237,350 square feet expire in 2029.
(d)
5,256 square feet expire in 2022; 82,936 square feet expire in 2026; 56,360 square feet expire in 2030.
(e)
66,606 square feet expire in 2024; 54,341 square feet expire in 2026.
(f)
63,372 square feet expire in 2023; 21,112 square feet expire in 2025; 37,387 square feet expire in 2033.
(g)
Expires 12/31/36.
(h)
8,014 square feet expire in 2027 (expires 12/31/26); 80,360 square feet expire in 2029.
(i)
17,855 square feet expire in 2021; 25,557 square feet expire in 2024; 38,930 square feet expire in 2031; 20,395 square feet expire in 2032 (expires 12/31/31).
(j)
19,309 square feet expire in 2021; 35,598 square feet expire in 2031.
(k)
Expires 12/31/27.
(l)
25,762 square feet expire in 2022; 32,108 square feet expire in 2024.
(m)
27,274 square feet expire in 2022; 26,713 square feet expire in 2024.
(n)
6,890 square feet expire in 2023; 39,850 square feet expire in 2025.
(o)
Expires 12/31/24.
(p)
41,957 square feet expire in 2022; 1,826 square feet expire in 2025.
The following table sets forth a schedule of the 20 largest commercial tenants for the consolidated properties, excluding the assets classified as discontinued operations as of December 31, 2020, based upon annualized base rental revenue:
Percentage of
Annualized
Company
Square
Percentage
Year of
Number of
Base Rental
Annualized Base
Feet
Total Company
Lease
Properties
Revenue ($) (a)
Rental Revenue (%)
Leased
Leased Sq. Ft. (%)
Expiration
John Wiley & Sons Inc.
290,353
8.0
10,888,238
8.5
MUFG Bank Ltd.
242,354
6.7
10,195,724
8.0
(b)
Merrill Lynch Pierce Fenner
388,207
10.7
9,223,798
7.2
E*Trade Financial Corporation
132,265
3.6
5,290,600
4.2
Vonage America Inc.
350,000
9.7
4,924,500
3.9
Arch Insurance Company
106,815
2.9
4,326,008
3.4
Sumitomo Mitsui Banking Corp
111,105
3.1
4,156,989
3.3
2037 (c)
First Data Corporation
88,374
2.4
3,684,106
2.9
(d)
Brown Brothers Harriman & Co.
114,798
3.2
3,673,536
2.9
TP ICAP Americas Holdings Inc.
100,759
2.8
3,446,090
2.7
(e)
Cardinia Real Estate LLC
79,771
2.2
3,112,664
2.4
Natixis North America LLC
89,907
2.5
3,093,290
2.4
Zurich American Ins. Co.
64,414
1.8
2,844,522
2.2
Amtrust Financial Services
76,892
2.1
2,614,328
2.1
American Wagering Inc.
54,907
1.5
2,547,927
2.0
(f)
Tradeweb Markets LLC
65,242
1.8
2,413,954
1.9
2028 (g)
Jefferies LLC
62,763
1.7
2,322,231
1.8
New Jersey City University
68,348
1.9
2,301,582
1.8
GBT US LLC
49,563
1.4
1,970,129
1.5
Sunamerica Asset Management
36,336
1.0
1,928,003
1.5
Totals
2,573,173
71.0
84,958,220
66.6
(a)
Annualized base rental revenue is based on actual December 2020 billings times 12. For leases whose rent commences after January 1, 2021, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(b)
5,004 square feet expire in 2021; 237,350 square feet expire in 2029.
(c)
Expires 12/31/36.
(d)
8,674 square feet expire in 2026; 80,360 square feet expire in 2029.
(e)
63,372 square feet expire in 2023; 37,387 square feet expire in 2033.
(f)
19,309 square feet expire in 2021; 35,598 square feet expire in 2031.
(g)
Expires 12/31/27.
Schedule of Lease Expirations
The following table sets forth a schedule of lease expirations for the total of the Company’s office and stand-alone retail properties included in the Consolidated Properties beginning January 1, 2021, assuming that none of the tenants exercise renewal or termination options:
Average
Annual Base
Percentage Of
Rent Per Net
Net Rentable
Total Leased
Annualized
Rentable
Percentage Of
Area Subject
Square Feet
Base Rental
Square Foot
Annual Base
Number Of
To Expiring
Represented
Revenue Under
Represented
Rent Under
Year Of
Leases
Leases
By Expiring
Expiring
By Expiring
Expiring
Expiration
Expiring (a)
(Sq. Ft.)
Leases (%)
Leases ($) (b)
Leases ($)
Leases (%)
515,802
8.6
20,571,197
39.88
9.7
317,511
5.3
11,096,478
34.95
5.2
1,225,072
20.5
37,055,215
30.25
17.5
574,686
9.6
22,883,470
39.82
10.8
363,920
6.1
12,429,905
34.16
5.9
567,971
9.5
19,246,366
33.89
9.1
713,722
11.9
21,482,070
30.10
10.1
136,330
2.3
5,361,373
39.33
2.5
374,408
6.3
15,344,598
40.98
7.3
70,022
1.2
3,212,537
45.88
1.5
263,056
4.4
10,582,977
40.23
5.0
2032 and thereafter
857,330
14.3
32,556,384
37.97
15.4
Totals/Weighted
Average
5,979,830
(d)
100.0
211,822,570
35.42
100.0
(a)
Includes office and stand-alone retail property tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.
(b)
Annualized base rental revenue is based on actual December 2020 billings times 12. For leases whose rent commences after January 1, 2021 annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(c)
Includes leases expiring December 31, 2020 aggregating 145,404 square feet and representing annualized rent of $6.7 million for which no new leases were signed.
(d)
Reconciliation to Company’s total net rentable square footage is as follows:
Square Feet
Square footage leased to commercial tenants
5,979,830
Square footage used for corporate offices, management offices, building use, retail tenants, food services, other ancillary service tenants and occupancy adjustments
229,996
Square footage unleased
1,678,298
Total net rentable commercial square footage (does not include land leases)
7,888,124
The following table sets forth a schedule of lease expirations for the Company’s office and stand-alone retail properties included in the Consolidated Properties, excluding the properties classified as discontinued operations as of December 31, 2020, beginning January 1, 2021, assuming that none of the tenants exercise renewal or termination options:
Average
Annual Base
Percentage Of
Rent Per Net
Net Rentable
Total Leased
Annualized
Rentable
Percentage Of
Area Subject
Square Feet
Base Rental
Square Foot
Annual Base
Number Of
To Expiring
Represented
Revenue Under
Represented
Rent Under
Year Of
Leases
Leases
By Expiring
Expiring
By Expiring
Expiring
Expiration
Expiring (a)
(Sq. Ft.)
Leases (%)
Leases ($) (b)
Leases ($)
Leases (%)
407,572
11.2
17,224,734
42.26
13.5
102,307
2.8
4,002,238
39.12
3.1
674,360
18.6
17,255,794
25.59
13.5
234,673
6.5
9,483,792
40.41
7.4
116,923
3.2
3,653,424
31.25
2.9
249,982
6.9
9,030,388
36.12
7.1
422,375
11.7
10,658,658
25.24
8.4
88,842
2.5
3,493,643
39.32
2.7
335,773
9.3
14,151,843
42.15
11.1
13,662
0.4
683,100
50.00
0.5
2031 and thereafter
977,342
27.0
37,726,367
38.60
29.6
Totals/Weighted
Average
3,623,811
100.0
127,363,980
35.15
100.0
(a)
Includes office and stand-alone retail property tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.
(b)
Annualized base rental revenue is based on actual December 2020 billings times 12. For leases whose rent commences after January 1, 2021 annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
Industry Diversification
The following table lists the Company’s 20 largest commercial tenants industry classifications based on annualized contractual base rent of the Consolidated Properties:
Annualized
Percentage of
Percentage of
Base Rental
Commercial
Square
Total Company
Revenue
Annualized Base
Feet Leased
Leased
Industry Classification (a)
($) (b) (c) (d)
Rental Revenue (%)
(c) (d)
Sq. Ft. (%)
Securities, Commodity Contracts & Other Financial
62,498,943
29.5
1,754,801
29.3
Credit Intermediation & Related Activities
30,809,447
14.5
776,769
13.0
Insurance Carriers & Related Activities
22,919,011
10.8
604,937
10.1
Other Professional
16,428,204
7.8
409,801
6.9
Publishing Industries
10,953,328
5.2
292,138
4.9
Management/Scientific
7,174,527
3.4
188,123
3.1
Accounting/Tax Prep.
6,697,601
3.2
188,629
3.2
Manufacturing
6,548,658
3.1
204,507
3.4
Computer System Design Svcs.
6,129,100
2.9
175,422
2.9
Legal Services
5,904,591
2.8
155,660
2.6
Telecommunications
5,752,420
2.7
370,698
6.2
Educational Services
5,144,459
2.4
154,382
2.6
Real Estate & Rental & Leasing
4,904,992
2.3
138,744
2.3
Advertising/Related Services
3,350,564
1.6
86,115
1.4
Health Care & Social Assistance
2,734,218
1.3
73,728
1.2
Data Processing Services
2,213,102
1.0
85,062
1.4
Admin & Support, Waste Mgt. & Remediation Svcs.
1,898,751
0.9
52,685
0.9
Architectural/Engineering
1,747,523
0.8
64,873
1.1
Specialized Design Services
1,695,355
0.8
47,388
0.8
Public Administration
1,612,115
0.8
48,025
0.8
Other
4,705,659
2.2
107,343
1.8
TOTAL
211,822,570
100.0
5,979,830
100.0
(a)The Company’s tenants are classified according to the U.S. Government’s North American Industrial Classification System (NAICS).
(b)Annualized base rental revenue is based on actual December 2020 billings times 12. For leases whose rent commences after January 1, 2021, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(c)Includes leases in effect as of the period end date, some of which have commencement dates in the future, and leases expiring December 31, 2020 aggregating 145,404 square feet and representing annualized base rent of $6.7 million for which no new leases were signed.
(d)Includes office and stand-alone retail tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.
The following table lists the Company’s 20 largest commercial tenant industry classifications based on annualized contractual base rent of the Consolidated Properties, excluding properties classified as discontinued operations, as of December 31, 2020:
Annualized
Percentage of
Percentage of
Base Rental
Commercial
Square
Total Company
Revenue
Annualized Base
Feet Leased
Leased
Industry Classification (a)
($) (b) (c) (d)
Rental Revenue (%)
(c) (d)
Sq. Ft. (%)
Securities, Commodity Contracts & Other Financial
51,251,293
40.2
1,474,729
40.8
Credit Intermediation & Related Activities
16,561,285
13.0
399,516
11.0
Insurance Carriers & Related Activities
14,795,946
11.6
373,150
10.3
Publishing Industries
10,888,238
8.5
290,353
8.0
Other Professional
6,566,471
5.2
148,252
4.1
Telecommunications
5,752,420
4.5
370,698
10.2
Management/Scientific
3,663,298
2.9
83,196
2.3
Advertising/Related Services
3,350,564
2.6
86,115
2.4
Educational Services
2,796,257
2.2
78,873
2.2
Computer System Design Svcs.
2,365,275
1.9
53,569
1.5
Data Processing Services
2,213,102
1.7
85,062
2.3
Real Estate & Rental & Leasing
2,045,280
1.6
61,257
1.7
Specialized Design Services
1,217,898
1.0
34,307
0.9
Wholesale Trade
879,592
0.7
17,102
0.5
Legal Services
644,207
0.5
17,411
0.5
Scientific Research/Development
594,915
0.5
11,987
0.3
Transportation
545,073
0.4
11,514
0.3
Admin & Support, Waste Mgt. & Remediation Svcs.
374,357
0.3
8,510
0.2
Public Administration
300,661
0.2
6,068
0.2
Construction
225,408
0.2
4,696
0.1
Other
332,440
0.3
7,446
0.2
TOTAL
127,363,980
100.0
3,623,811
100.0
(a)
The Company’s tenants are classified according to the U.S. Government’s North American Industrial Classification System (NAICS).
(b)
Annualized base rental revenue is based on actual December 2020 billings times 12. For leases whose rent commences after January 1, 2021, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(c)
Includes leases in effect as of the period end date, some of which have commencement dates in the future, and leases expiring December 31, 2020 aggregating 140,000 square feet and representing annualized base rent of $6.6 million for which no new leases were signed.
(d)
Includes office and stand-alone retail tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.
Market Diversification
The following table lists the Company’s markets, based on annualized commercial contractual base rent of the Consolidated Properties:
Percentage Of
Commercial
Annualized Base
Annualized
Total Property
Rental Revenue
Base Rental
Size Rentable
Percentage Of
Market
($) (a) (b) (c)
Revenue (%)
Area (b) (c)
Rentable Area (%)
Jersey City, NJ
122,439,480
57.8
4,508,801
57.2
Newark, NJ (Essex-Morris-Union Counties)
38,692,314
18.3
1,313,567
16.7
Middlesex-Somerset-Hunterdon, NJ
29,572,277
14.0
926,666
11.7
Monmouth-Ocean, NJ
16,809,877
7.9
989,490
12.5
Trenton, NJ
4,308,622
2.0
149,600
1.9
Totals
211,822,570
100.0
7,888,124
100.0
(a)Annualized base rental revenue is based on actual December 2020 billings times 12. For leases whose rent commences after January 1, 2021, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(b)Includes leases in effect as of the period end date, some of which have commencement dates in the future, and leases expiring December 31, 2020 aggregating 145,404 square feet and representing annualized base rent of $6.7 million for which no new leases were signed.
(c)Includes office and stand-alone retail tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.
The following table lists the Company’s markets, based on annualized commercial contractual base rent of the Consolidated Properties, excluding the properties classified as discontinued operations, as of December 31, 2020:
Percentage Of
Commercial
Annualized Base
Annualized
Total Property
Rental Revenue
Base Rental
Size Rentable
Percentage Of
Market
($) (a) (b) (c)
Revenue (%)
Area (b) (c)
Rentable Area (%)
Jersey City, NJ
122,439,480
96.1
4,508,801
92.8
Monmouth-Ocean, NJ
4,924,500
3.9
350,000
7.2
Totals
127,363,980
100.0
4,858,801
100.0
(a)
Annualized base rental revenue is based on actual December 31, 2020 billings times 12. For leases whose rent commences after January 1, 2021, annualized base rental revenue is based on the first full month’s billing times 12. As annualized base rental revenue is not derived from historical GAAP results, historical results may differ from those set forth above.
(b)
Includes leases in effect as of the period end date, some of which have commencement dates in the future, and leases expiring December 31, 2020 aggregating 140,000 square feet and representing annualized base rent of $6.6 million for which no new leases were signed.
(c)
Includes office and stand-alone retail tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company is a party or to which any of the Properties is subject.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
The shares of the General Partner's common stock are traded on the New York Stock Exchange (“NYSE”) under the symbol “CLI.” There is no established public trading market for the Operating Partnership’s common units.
The following table sets forth the quarterly high, low, and closing price per share of the General Partner's Common Stock reported on the NYSE for the years ended December 31, 2020 and 2019, respectively:
For the Year Ended December 31, 2020
High
Low
Close
First Quarter
$
23.89
$
13.83
$
15.23
Second Quarter
$
18.83
$
12.90
$
15.29
Third Quarter
$
15.85
$
12.14
$
12.62
Fourth Quarter
$
15.06
$
10.35
$
12.46
For the Year Ended December 31, 2019
High
Low
Close
First Quarter
$
22.55
$
18.74
$
22.20
Second Quarter
$
24.88
$
21.68
$
23.29
Third Quarter
$
24.09
$
19.97
$
21.66
Fourth Quarter
$
23.40
$
19.96
$
23.13
On February 23, 2021, the closing Common Stock price reported on the NYSE was $14.96 per share.
On July 7, 2020, the General Partner filed with the NYSE its annual CEO Certification and Annual Written Affirmation pursuant to Section 303A.12 of the NYSE Listed Company Manual, each certifying that the General Partner was in compliance with all of the listing standards of the NYSE.
HOLDERS
On February 23, 2021, the General Partner had 269 common shareholders of record (this does not include beneficial owners for whom Cede & Co. or others act as nominee) and the Operating Partnership had 68 owners of limited partnership units and one owner of General Partnership units.
RECENT SALES OF UNREGISTERED SECURITIES; USES OF PROCEEDS FROM REGISTERED SECURITIES
None.
DIVIDENDS AND DISTRIBUTIONS
On September 30, 2020, the Company announced that its Board of Directors was suspending its common dividends and distributions attributable to the third and fourth quarters 2020. As the Company’s management estimated that as of September 2020 it had satisfied its dividends obligations as a REIT on taxable income expected for 2020, the Board made the strategic decision to suspend its common dividends and distributions for the remainder of 2020 in an effort to provide greater financial flexibility during the pandemic and to retain incremental capital to support leasing initiatives at its Harborside commercial office properties on the Jersey City waterfront.
The declaration and payment of dividends and distributions will continue to be determined by the Board of Directors of the General Partner in light of conditions then existing, including the Company’s earnings, cash flows, financial condition, capital requirements, debt maturities, the availability of debt and equity capital, applicable REIT and legal restrictions and the general overall economic conditions and other factors.
PERFORMANCE GRAPH
The following graph compares total stockholder returns from the last five fiscal years to the Standard & Poor’s 500 Index (“S&P 500”) and to the National Association of Real Estate Investment Trusts, Inc.’s FTSE NAREIT Equity REIT Index (“NAREIT”). The graph assumes that the value of the investment in the General Partner's Common Stock and in the S&P 500 and NAREIT indices was $100 at December 31, 2015 and that all dividends were reinvested. The price of the General Partner's Common Stock on December 31, 2015 (on which the graph is based) was $23.35. The past stockholder return shown on the following graph is not necessarily indicative of future performance.
Comparison of Five-Year Cumulative Total Return
‎

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data on a consolidated basis for the General Partner. The consolidated selected operating and balance sheet data of the General Partner as of December 31, 2020, 2019, 2018, 2017 and 2016, and for the years then ended have been derived from the General Partner's financial statements for the respective periods.
Operating Data (a)
Year Ended December 31,
In thousands, except per share data
Total revenues
$
313,562
$
357,202
$
371,724
$
465,111
$
504,914
Property expenses (b)
$
127,855
$
133,107
$
139,826
$
170,663
$
194,477
Real estate services expenses
$
13,555
$
15,918
$
17,919
$
23,394
$
26,260
General and administrative
$
73,641
$
59,805
$
53,869
$
50,481
$
51,616
Property Impairments
$
36,582
$
-
$
-
$
-
$
-
Land and other impairments
$
16,817
$
32,444
$
24,566
$
-
$
-
Interest expense
$
80,991
$
90,569
$
77,594
$
86,082
$
91,855
Gain on change of control of interests
$
-
$
13,790
$
14,217
$
-
$
15,347
Realized gains (losses) and unrealized losses on
disposition of rental property, net,
of continuing operations
$
5,481
$
343,102
$
99,436
$
2,364
$
109,666
Gain on disposition of developable land
$
5,787
$
$
30,939
$
-
$
-
Gain on sale from unconsolidated joint ventures
$
35,184
$
$
-
$
23,131
$
5,670
Gain (loss) from extinguishment of debt, net
$
(272)
$
1,648
$
(8,994)
$
(421)
$
(30,540)
Income (loss) from continuing operations
$
(115,523)
$
252,820
$
82,824
$
12,085
$
108,856
Income from discontinued operations
$
70,724
$
24,366
$
23,577
$
21,633
$
21,438
Realized gains (losses) and unrealized losses on
disposition of rental property and impairments, net,
on discontinued operations
$
11,201
$
(133,350)
$
-
$
-
$
-
Net income (loss) available to common shareholders
$
(51,387)
$
111,861
$
84,111
$
23,185
$
117,224
Income (loss) from continuing operations
per share - basic
$
(1.51)
$
2.04
$
0.57
$
(0.16)
$
1.09
Income (loss) from continuing operations
per share - diluted
$
(1.51)
$
2.04
$
0.57
$
(0.16)
$
1.09
Net income (loss) per share - basic
$
(0.70)
$
0.95
$
0.80
$
0.06
$
1.31
Net income (loss) per share - diluted
$
(0.70)
$
0.95
$
0.80
$
0.06
$
1.30
Dividends declared per common share
$
0.40
$
0.80
$
0.80
$
0.75
$
0.60
Basic weighted average shares outstanding
90,648
90,557
90,388
90,005
89,746
Diluted weighted average shares outstanding
100,260
100,689
100,724
100,703
100,498
Balance Sheet Data (a)
December 31,
In thousands
Rental property, before accumulated
depreciation and amortization
$
4,638,643
$
4,256,681
$
5,306,017
$
5,102,844
$
4,804,867
Total assets
$
5,147,786
$
5,292,798
$
5,060,644
$
4,957,885
$
4,296,766
Total debt (c)
$
2,801,797
$
2,808,518
$
2,792,651
$
2,809,568
$
2,340,009
Total liabilities
$
3,042,109
$
3,089,941
$
3,033,004
$
3,076,954
$
2,570,079
Redeemable noncontrolling interests
$
513,297
$
503,382
$
330,459
$
212,208
$
-
Total Mack-Cali Realty Corporation
stockholders’ equity
$
1,398,817
$
1,493,699
$
1,486,658
$
1,476,295
$
1,527,171
Total noncontrolling interests in subsidiaries
$
193,563
$
205,776
$
210,523
$
192,428
$
199,516
(a)Certain reclassifications have been made to prior period amounts in order to conform with current period presentation, primarily related to classification of certain properties as discontinued operations.
(b)Property expenses is calculated by taking the sum of real estate taxes, utilities and operating services for each of the periods presented.
(c)Total debt is calculated by taking the sum of senior unsecured notes, unsecured revolving credit facility and term loans, and mortgages, loans payable and other obligations, net.
‎
The following table sets forth selected financial data on a consolidated basis for the Operating Partnership. The consolidated selected operating and balance sheet data of the Operating Partnership as of December 31, 2020, 2019, 2018, 2017 and 2016, and for the years then ended have been derived from the Operating Partnership’s financial statements for the respective periods.
Operating Data (a)
Year Ended December 31,
In thousands, except per unit data
Total revenues
$
313,562
$
357,202
$
371,724
$
465,111
$
504,914
Property expenses (b)
$
127,855
$
133,107
$
139,826
$
170,663
$
194,477
Real estate services expenses
$
13,555
$
15,918
$
17,919
$
23,394
$
26,260
General and administrative
$
73,641
$
59,805
$
53,869
$
50,481
$
51,616
Property Impairments
$
36,582
$
-
$
-
$
-
$
-
Land and other impairments
$
16,817
$
32,444
$
24,566
$
-
$
-
Interest expense
$
80,991
$
90,569
$
77,594
$
86,082
$
91,855
Gain on change of control of interests
$
-
$
13,790
$
14,217
$
-
$
15,347
Realized gains (losses) and unrealized losses on
-
disposition of rental property, net,
of continuing operations
$
5,481
$
343,102
$
99,436
$
2,364
$
109,666
Gain on disposition of developable land
$
5,787
$
$
30,939
$
-
$
-
Gain on sale from unconsolidated joint ventures
$
35,184
$
$
-
$
23,131
$
5,670
Gain (loss) from extinguishment of debt, net
$
(272)
$
1,648
$
(8,994)
$
(421)
$
(30,540)
Income (loss) from continuing operations
$
(115,523)
$
252,820
$
82,824
$
12,085
$
108,856
Income from discontinued operations
$
70,724
$
24,366
$
23,577
$
21,633
$
21,438
Realized gains (losses) and unrealized losses on
disposition of rental property and impairments, net,
on discontinued operations
$
11,201
$
(133,350)
$
-
$
-
$
-
Net income (loss) available to common unitholders
$
(56,786)
$
125,125
$
93,638
$
25,896
$
130,945
Income (loss) from continuing operations
per unit - basic
$
(1.51)
$
2.04
$
0.57
$
(0.16)
$
1.09
Income (loss) from continuing operations
per unit - diluted
$
(1.51)
$
2.04
$
0.57
$
(0.16)
$
1.09
Net income (loss) per unit - basic
$
(0.70)
$
0.95
$
0.80
$
0.06
$
1.31
Net income (loss) per unit - diluted
$
(0.70)
$
0.95
$
0.80
$
0.06
$
1.30
Distributions declared per common unit
$
0.40
$
0.80
$
0.80
$
0.75
$
0.60
Basic weighted average units outstanding
100,260
100,520
100,634
100,410
100,245
Diluted weighted average units outstanding
100,260
100,689
100,724
100,703
100,498
Balance Sheet Data (a)
December 31,
In thousands
Rental property, before accumulated
depreciation and amortization
$
4,638,643
$
4,256,681
$
5,306,017
$
5,102,844
$
4,804,867
Total assets
$
5,147,786
$
5,292,798
$
5,060,644
$
4,957,885
$
4,296,766
Total debt (c)
$
2,801,797
$
2,808,518
$
2,792,651
$
2,809,568
$
2,340,009
Total liabilities
$
3,042,109
$
3,089,941
$
3,033,004
$
3,076,954
$
2,570,079
Redeemable noncontrolling interests
$
513,297
$
503,382
$
330,459
$
212,208
$
-
Total equity
$
1,592,380
$
1,699,475
$
1,697,181
$
1,668,723
$
1,726,687
(a)Certain reclassifications have been made to prior period amounts in order to conform with current period presentation, primarily related to classification of certain properties as discontinued operations.
(b)Property expenses is calculated by taking the sum of real estate taxes, utilities and operating services for each of the periods presented.
(c)Total debt is calculated by taking the sum of senior unsecured notes, unsecured revolving credit facility and term loans, and mortgages, loans payable and other obligations, net.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated Financial Statements of Mack-Cali Realty Corporation and Mack-Cali Realty, L.P. and the notes thereto (collectively, the “Financial Statements”). Certain defined terms used herein have the meaning ascribed to them in the Financial Statements.
Executive Overview
Mack-Cali Realty Corporation together with its subsidiaries, (collectively, the “General Partner”), including Mack-Cali Realty, L.P. (the “Operating Partnership”), has been involved in all aspects of commercial real estate development, management and ownership for over 60 years and the General Partner has been a publicly traded real estate investment trust (REIT) since 1994.
The Operating Partnership conducts the business of providing leasing, management, acquisition, development, construction and tenant-related services for its General Partner. The Operating Partnership, through its operating divisions and subsidiaries, including the Mack-Cali property-owning partnerships and limited liability companies, is the entity through which all of the General Partner’s operations are conducted. Unless stated otherwise or the context requires, the “Company” refers to the General Partner and its subsidiaries, including the Operating Partnership and its subsidiaries. The Company owns or has interests in 52 properties (collectively, the “Properties”), consisting of 25 office properties, totaling approximately 8.1 million square feet leased to approximately 225 commercial tenants, 19 multi-family rental properties containing 5,825 apartment units, four parking/retail properties totaling approximately 108,000 square feet, three hotels containing 723 rooms and a parcel of land leased to a third party. The Properties are located in the Northeast, some with adjacent, Company-controlled developable land sites able to accommodate up to approximately 1.7 million square feet of additional commercial space and approximately 9,500 apartment units.
The Company’s historical strategy has been to focus its operations, acquisition and development of office and multi-family rental properties in high-barrier-to-entry markets and sub-markets where it believes it is, or can become, a significant and preferred owner and operator.
STRATEGIC DIRECTION
On December 19, 2019, the Company announced that its Board had determined to sell the Company’s entire suburban New Jersey office portfolio totaling approximately 6.6 million square feet (collectively, the “Suburban Office Portfolio”). This does not include the Company’s waterfront office properties in Jersey City and Hoboken, New Jersey. As the decision to sell the Suburban Office Portfolio represented a strategic shift in the Company’s operations, these properties’ results (other than a property classified as held for sale) are being classified as discontinued operations for all periods presented herein. As of December 31, 2020, the Company determined that a 350,000 square foot office property in the Suburban Office Portfolio, located in Holmdel, New Jersey no longer met the held for sale criteria. The property had originally been classified as held for sale as of December 31, 2019. The reclassified property has an aggregate book value of $19.8 million as of December 31, 2020, net of accumulated depreciation of $10.5 million (including catch-up depreciation). $2.8 million of previously recorded valuation allowance was reversed upon the reclassification of the asset from held for sale at December 31, 2020, and the corresponding property’s results and valuation allowance are also reclassified out of discontinued operations to continuing operations for all periods presented. See Note 7: Discontinued Operations - to the Financial Statements.
In late 2019 through December 31, 2020, the Company completed the sale of 20 of these suburban office properties, totaling 3.2 million square feet, for net sales proceeds of $377.4 million. As of December 31, 2020, the Company has identified as held for sale 16 office properties (comprised of six disposal groups) in the Suburban Office Portfolio, totaling 3.0 million square feet (of which the Company currently has 15 properties totaling 2.8 million square feet under contract for sale for aggregate gross proceeds of $652.4 million). In January 2021, the Company completed the sale of one of the properties held for sale, which was a 149,600 square foot office property, for a gross sales price of $38 million.
The Company plans to complete the sale of substantially all of its remaining Suburban Office Portfolio properties in 2021 and to use the available sales proceeds to pay down its corporate-level, unsecured indebtedness. However, the Company cannot predict whether or to what extent the timing of these sales and the expected amount may be impacted by the ongoing coronavirus (“COVID-19”). After the completion of the Suburban Office Portfolio sales, the Company’s holdings will consist of its waterfront class A office portfolio and its multi-family rental portfolio, and related development projects and land holdings.
As an owner of real estate, almost all of the Company’s earnings and cash flow are derived from rental revenue received pursuant to leased space at the Properties. Key factors that affect the Company’s business and financial results include the following:
the general economic climate;
the occupancy rates of the Properties;
rental rates on new or renewed leases;
tenant improvement and leasing costs incurred to obtain and retain tenants;
the extent of early lease terminations;
the value of our office properties and the cash flow from the sale of such properties;
operating expenses;
anticipated acquisition and development costs for office and multi-family rental properties and the revenues and earnings from these properties;
cost of capital; and
the extent of acquisitions, development and sales of real estate, including the execution of the Company’s current strategic initiative.
Any negative effects of the above key factors could potentially cause a continued deterioration in the Company’s revenue and/or earnings. Such negative effects could include: (1) failure to renew or execute new leases as current leases expire; (2) failure to renew or execute new leases with rental terms at or above the terms of in-place leases; and (3) tenant defaults.
The Company’s ability to renew or execute new leases as current leases expire or to execute new leases with rental terms at or above the terms of in-place leases may be affected by several factors such as: (1) the local economic climate, which may be adversely impacted by business layoffs or downsizing, industry slowdowns, changing demographics and other factors; and (2) local real estate conditions, such as oversupply of the Company’s product types or competition within the market.
In addition, the COVID-19 pandemic could potentially cause deterioration in the financial condition or liquidity of the Company’s tenants, which could impair their ability to pay rents. A number of the Company’s tenants have requested rent relief during this pandemic. The COVID-19 pandemic could also potentially cause reduced demand for space at the Company’s office properties and/or units at its multi-family residential properties, parking facilities and hotel properties, which could have a negative impact on the Company’s prospects for leasing current or additional space and/or renewing leases with existing tenants.
Of the Company’s core office markets, most continue to show signs of rental rate improvement, while the lease percentage has declined or stabilized. The percentage leased in the Company’s stabilized core operating commercial properties included in its Consolidated Properties aggregating 7.9 million, 10.3 million and 14.1 million square feet at December 31, 2020, 2019 and 2018, respectively, was 78.7 percent leased at December 31, 2020, as compared to 80.7 percent leased at December 31, 2019 and 83.2 percent leased at December 31, 2018 (after adjusting for properties identified as non-core at the time). Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases that expire at the period end date. Leases that expired as of December 31, 2020, 2019 and 2018 aggregate 145,404, 31,982 and 10,108 square feet, respectively, or 1.8, 0.3 and 0.1 percentage of the net rentable square footage, respectively. Rental rates (including escalations) on the Company’s core commercial space that was renewed (based on first rents payable) during the year ended December 31, 2020 (on 489,280 square feet of renewals) increased an average of 7.9 percent compared to rates that were in effect under the prior leases, as compared to a 16.9 percent increase during 2019 (on 229,429 square feet of renewals) and a 21.7 percent increase in 2018 (on 950,548 square feet of renewals). Estimated lease costs for the renewed leases in 2020 averaged $8.61 per square foot per year for a weighted average lease term of 5.7 years, estimated lease costs for the renewed leases in 2019 averaged $4.34 per square foot per year for a weighted average lease term of 3.9 years and estimated lease costs for the renewed leases in 2018 averaged $3.46 per square foot per year for a weighted average lease term of 4.7 years. The Company believes, although there can be no assurance, that vacancy rates at most of its commercial properties have begun to bottom as the majority of the known move-outs at its waterfront portfolio have already occurred. As of December 31, 2020, commercial leases which comprise approximately 9.7 and 5.2 percent of the Company’s annualized base rent are scheduled to expire during the years ending December 31, 2021 and 2022, respectively. With the positive rental rate results the Company has achieved in most of its markets recently, the Company believes, although there can be no assurance, that rental rates on new leases will generally be, on average, not lower than rates currently being paid. If these recent leasing results do not prove to be sustaining in 2021, the Company may receive less revenue from the same space.
During 2017, Moody’s downgraded its investment grade rating on the Company’s senior unsecured debt to sub-investment grade and during 2018, Standard & Poor’s lowered its investment grade rating on the Company’s senior unsecured debt to sub-investment grade (current ratings are B1 and B+ by Moody’s and S&P, respectively). Amongst other things, such downgrade would have increased the interest rate on outstanding borrowings under the Company’s current $600 million unsecured revolving credit facility (which was amended in January 2017) from the London Inter-Bank Offered Rate (“LIBOR”) plus 120 basis points to LIBOR plus 155 basis points and the annual credit facility fee it pays would have increased from 25 to 30 basis points. Additionally, any such downgrade would have increased the current interest rate on each of the Company’s 2016 Term Loan and 2017 Term Loan from LIBOR plus 140 basis points to LIBOR plus 185 points. Effective March 6, 2018, the Company elected to utilize the leverage grid pricing available under the unsecured revolving credit facility and both unsecured term loans. This resulted in an interest rate of LIBOR plus 130 basis points for the Company’s unsecured revolving credit facility and 25 basis points for the facility fee and LIBOR plus 155 basis points for both unsecured term loans at the Company’s then total leverage ratio. In addition, the downgrade in its ratings to sub-investment grade could
result in higher interest rates on senior unsecured debt that the Company may issue in the future as compared to issuing such debt with investment grade ratings.
The remaining portion of this Management’s Discussion and Analysis of Financial Condition and Results of Operations should help the reader understand our:
recent transactions;
critical accounting policies and estimates;
results of operations for the year ended December 31, 2020 as compared to the year ended December 31, 2019;
results of operations for the year ended December 31, 2019 as compared to the year ended December 31, 2018; and
liquidity and capital resources.
Recent Transactions
Properties Commencing Initial Operations
The following property commenced initial operations during the year ended December 31, 2020 (dollars in thousands):
Total
In Service
Property
# of
Development
Date
Property
Location
Type
Apartment Units
Costs Incurred
03/01/20
Emery at Overlook Ridge
Malden, MA
Multi-Family
$
103,993
Totals
$
103,993
Consolidations
On March 12, 2020, the Company, acquired its equity partner's 80 percent interest in Port Imperial North Retail L.L.C. a ground floor retail space totaling 30,745 square feet located at Port Imperial, West New York, New Jersey for $13.3 million in cash (funded through borrowing under the Company’s unsecured credit facility.) The results of the transaction increased the Company’s interest to 100 percent. Upon the acquisition, the Company consolidated the joint venture, a voting interest entity. As an acquisition of the remaining interests in the venture which owns the Port Imperial North Retail L.L.C., the Company accounted for the transaction as an asset acquisition under a cost accumulation model, and as such no gain on change of control of interest was recognized in consolidation, resulting in total consolidated net assets of $15.0 million, which are allocated as follows:
Port Imperial North Retail L.L.C.
Land and leasehold interests
$
4,305
Buildings and improvements and other assets, net
8,912
In-place lease values (a)
1,503
Above/Below market lease value, net (a)
Net assets recorded upon consolidation
$
15,033
(a) In-place and below market lease values are being amortized over a weighted-average term of 7.5 years.
Real Estate Held for Sale/Discontinued Operations/Dispositions
The Company identified 16 office properties (comprised of six disposal groups) totaling 3.0 million square feet (See Note 7: Discontinued Operations - to the Financial Statements), a retail pad leased to others and several developable land parcels as held for sale as of December 31, 2020. The total estimated sales proceeds, net of expected selling costs, from the sales of all the remaining assets held for sale are expected to be approximately $743.5 million, however there can be no assurance of the amount and timing of any such sales proceeds. As a result of recent sales contract amendments and after considering the current market conditions as a result of the challenging economic climate with the current worldwide COVID-19 pandemic the Company determined that the carrying value of six of the remaining held for sale properties (comprised of three disposal groups), and several land parcels held for sale was not expected to be recovered from estimated net sales proceeds, and accordingly, during the year ended December 31, 2020, recognized an unrealized held-for-sale loss allowance of $15.7 million for the properties ($14 million of which are from discontinued operations) and also recorded
land and other impairments of $9.5 million. As of December 31, 2020, the Company determined that two developable land parcels located in Parsippany, New Jersey were no longer being held for sale. The properties had originally been classified as held for sale as of December 31, 2019. The reclassified properties had an aggregate book value of $11.3 million.
The Company disposed of the following rental properties during the year ended December 31, 2020 (dollars in thousands):
Discontinued
Operations:
Realized
Realized
Gains
Gains
Rentable
Net
Net
(losses)/
(losses)/
Disposition
# of
Square
Property
Sales
Carrying
Unrealized
Unrealized
Date
Property/Address
Location
Bldgs.
Feet/Units
Type
Proceeds
Value
Losses, net
Losses, net
03/17/20
One Bridge Plaza
Fort Lee, New Jersey
200,000
Office
$
35,065
$
17,743
$
-
$
17,322
07/22/20
3 Giralda Farms (a)
Madison, New Jersey
141,000
Office
7,510
9,534
-
(2,024)
09/15/20
Morris portfolio (b)
Parsippany and Madison, New Jersey
1,448,420
Office
155,116
175,772
-
(20,656)
09/18/20
325 Columbia Turnpike
Florham Park, New Jersey
168,144
Office
24,276
8,020
-
16,256
09/24/20
9 Campus Drive (c)
Parsippany, New Jersey
156,945
Office
20,678
22,162
-
(1,484)
10/21/20
3&5 Vaughn Drive
Princeton, New Jersey
98,500
Office
7,282
5,754
-
1,528
11/18/20
7 Campus Drive (d)
Parsippany, New Jersey
154,395
Office
12,278
11,804
-
12/03/20
581 Main Street
Woodbridge, New Jersey
200,000
Office
58,400
43,113
-
15,287
12/22/20
500 College Road (e)
Princeton, New Jersey
158,235
Office
4,582
6,044
-
(1,462)
12/23/20
5/10 Dennis St and
and 100 Hiram Sq
New Brunswick, New Jersey
200 units
Multi-Family
45,567
38,404
7,163
-
Sub-total
2,725,639
370,754
338,350
7,163
25,241
Unrealized losses on real estate held for sale
(1,682)
(14,040)
Totals
2,725,639
$
370,754
$
338,350
$
5,481
$
11,201
(a)
The Company recorded valuation allowances of $2.0 million on the held for sale property during the year ended December 31, 2020 and of $16.7 million during the year ended December 31, 2019.
(b)
The Company recorded valuation allowances of $21.6 million on the held for sale properties during the year ended December 31, 2020 and of $32.5 million during the year ended December 31, 2019.
(c)
The Company recorded a valuation allowance of $3.5 million on this property during the year ended December 31, 2019.
(d)
The Company recorded valuation allowance of $6.0 million on the held for sale property during the year ended December 31, 2019.
(e)
The Company recorded valuation allowance of $1.9 million on the held for sale property during the year ended December 31, 2020.
The Company disposed of the following developable land holdings during the year ended December 31, 2020 (dollars in thousands):
Realized
Gains
Net
Net
(losses)/
Disposition
Sales
Carrying
Unrealized
Date
Property Address
Location
Proceeds
Value
Losses, net
01/03/20
230 & 250 Half Mile Road
Middletown, New Jersey
$
7,018
$
2,969
$
4,049
03/27/20
Capital Office Park land
Greenbelt, Maryland
8,974
8,210
12/18/20
14 & 16 Skyline Drive
Mount Pleasant, New York
2,925
1,951
Totals
$
18,917
$
13,130
$
5,787
Impairments on Properties Held and Used
The Company determined that, due to the shortening of its expected period of ownership and as a result of the adverse effect the COVID-19 pandemic has had, and continues to have, on its hotel operations, the Company evaluated the recoverability of the carrying values of its two adjacent hotel properties and determined that it was necessary to reduce the carrying values of its two hotel assets located in Weehawken, New Jersey to their estimated fair values. One of these hotels has closed its rooms since March 2020. Accordingly, the Company recorded an impairment charge of $36.6 million on these hotels at September 30, 2020 which is included in property impairments on the consolidated statement of operations for the year ended December 31, 2020. The Company also evaluated the recoverability of the carrying values of its land parcels and determined that it was necessary to reduce the carrying values of three held-and-used land parcels to their estimated fair values and recorded land and other impairment charges of $7.3 million for the year ended December 31, 2020.
Unconsolidated Joint Venture Activity
On December 31, 2020, the Crystal House Apartment Investors LLC, an unconsolidated joint venture property located in Arlington, Virginia sold its sole apartment property for an aggregate sales price of $376.6 million. The Company received $62.7 million for its share of net sale proceeds from the joint venture and realized its share of the gain on the property sale from the unconsolidated joint venture of $35.1 million.
On December 17, 2020, the Company sold its interest in the Hillsborough 206 Holdings joint venture which owns a developable land located in Hillsborough, New Jersey for a sale price of $2.1 million, and realized a gain on sale from unconsolidated joint ventures of $0.1 million.
Critical Accounting Policies and Estimates
The accompanying consolidated financial statements include all accounts of the Company, its majority-owned and/or controlled subsidiaries, which consist principally of the Operating Partnership and variable interest entities for which the Company has determined itself to be the primary beneficiary, if any. See Note 2: Significant Accounting Policies - to the Financial Statements, for the Company’s treatment of unconsolidated joint venture interests. Intercompany accounts and transactions have been eliminated.
Accounting Standards Codification (“ASC”) 810, Consolidation, provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIEs. Generally, the consideration of whether an entity is a VIE applies when either: (1) the equity investors (if any) lack (i) the ability to make decisions about the entity's activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; (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 substantially all of the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the variable interest entity’s performance: and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE.
On January 1, 2016, the Company adopted accounting guidance under ASC 810, Consolidation, modifying the analysis it must perform to determine whether it should consolidate certain types of legal entities. The guidance does not amend the existing disclosure requirements for variable interest entities or voting interest model entities. The guidance, however, modified the requirements to qualify under the voting interest model. Under the revised guidance, the Operating Partnership will be a variable interest entity of the parent company, Mack-Cali Realty Corporation. As the Operating Partnership is already consolidated in the balance sheets of Mack-Cali Realty Corporation, the identification of this entity as a variable interest entity has no impact on the consolidated financial statements of Mack-Cali Realty Corporation. There were no other legal entities qualifying under the scope of the revised guidance that were consolidated as a result of the adoption.
The financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on management’s historical experience that are believed to be reasonable at the time. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates. Certain reclassifications have been made to prior period amounts in order to conform with current period presentation, primarily related to classification of certain properties as discontinued operations. The Company’s critical accounting policies are those which require assumptions to be made about matters that are highly uncertain. Different estimates could have a material effect on the Company’s financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances.
Rental Property
Rental properties are stated at cost less accumulated depreciation and amortization. Costs directly related to the acquisition, development and construction of rental properties are capitalized. The Company adopted Financial Accounting Standards Board (“FASB”) guidance Accounting Standards Update (“ASU”) 2017-01 on January 1, 2017, which revises the definition of a business and is expected to result in more transactions to be accounted for as asset acquisitions and significantly limit transactions that would be accounted for as business
combinations. Where an acquisition has been determined to be an asset acquisition, acquisition-related costs are capitalized. Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development. Interest capitalized by the Company for the years ended December 31, 2020, 2019 and 2018 was $26.4 million, $19.3 million and $27.0 million, respectively. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.
The Company considers a construction project as substantially completed and held available for occupancy upon the substantial completion of 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 residents, or held available for occupancy, and other portions have not yet reached that stage, the substantially completed portions are accounted for as a separate project. The Company allocates costs incurred between the portions under construction and the portions substantially completed and held available for occupancy, primarily based on a percentage of the relative commercial square footage or multi-family units of each portion, 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 Company estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities assumed, generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships. For asset acquisitions, the Company allocates the purchase price to the assets acquired and liabilities assumed based on their relative fair values. The Company records goodwill or a gain on bargain purchase (if any) if the net assets acquired/liabilities assumed differ from the purchase consideration of a business combination transaction. In estimating the fair value of the tangible and intangible assets acquired, the Company considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.
Above-market and below-market lease values for acquired properties are initially 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 remaining 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 terms of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases.
Other intangible assets acquired include amounts for in-place lease values and tenant relationship values, which are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the respective tenant. Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses. Characteristics considered by management in valuing tenant relationships include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals. The values of in-place leases are amortized to expense over the remaining initial terms of the respective leases. The values of tenant relationship intangibles are amortized to expense over the anticipated life of the relationships or leases.
On a periodic basis, management assesses whether there are any indicators that the value of the Company’s rental properties held for use may be impaired. In addition to identifying any specific circumstances which may affect a property or properties, management considers other criteria for determining which properties may require assessment for potential impairment. The criteria considered by management, depending on the type of property, may include reviewing low leased percentages, significant near-term lease expirations, current and historical operating and/or cash flow losses, construction cost overruns and/or other factors, including those that might impact the Company’s intent and ability to hold the property. 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 over its estimated holding period is less than the carrying value of the property. If there are different possible scenarios for a property, the Company will take a probability-weighted approach to estimating future cash flow scenarios. To the extent impairment has occurred, the impairment loss is measured as the excess of the carrying value of the property over the fair value of the property. The Company’s estimates of aggregate future cash flows expected to be generated and estimated fair values for each property are based on a number of assumptions, including but not limited to estimated holding periods, market capitalization rates and discount rates, if applicable. For developable land holdings, an estimated per-unit market value assumption is also considered based on development rights for the land. These assumptions are generally based on management’s experience in its local real estate markets and the effects of current market conditions. The assumptions 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, and actual losses or impairments may be realized in the future.
Real Estate Held for Sale and Discontinued Operations
When assets are identified by management as held for sale, the Company discontinues depreciating the assets and estimates the sales price, net of expected selling costs, of such assets. The Company generally considers assets (as identified by their disposal groups) to be held for sale when the transaction has received appropriate corporate authority, it is probable to be sold within the following 12 months, and there are no significant contingencies relating to a sale. If, in management’s opinion, the estimated net sales price, net of expected selling costs, of the disposal groups which have been identified as held for sale is less than the carrying value of the assets, a valuation allowance (which is recorded as unrealized losses on disposition of rental property) is established. In the absence of an executed sales agreement with a set sales price, management’s estimate of the net sales price may be based on a number of assumptions, including but not limited to the Company’s estimates of future cash flows, market capitalization rates and discount rates, if applicable. For developable land holdings, an estimated per-unit market value assumption is also considered based on development rights for the land. In addition, the Company classifies assets held for sale or sold as discontinued operations if the disposal groups represent a strategic shift that will have a major effect on the Company’s operations and financial results. For any disposals qualifying as discontinued operations, the assets and their results are presented in discontinued operations in the financial statements for all periods presented. See Note 7: Discontinued Operations - to the Financial Statements.
If circumstances arise that previously were considered unlikely and, as a result, the Company has determined that an asset previously classified as held for sale no longer meets the held for sale criteria, the asset is reclassified as held and used. An asset that is reclassified is measured and recorded individually at the lower of (a) its carrying value before the asset was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the asset been continuously classified as held and used, or (b) the fair value at the date the asset, qualified as held for sale.
Investments in Unconsolidated Joint Ventures
The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting. The Company applies the equity method by initially recording these investments at cost, as Investments in Unconsolidated Joint Ventures, subsequently adjusted for equity in earnings and cash contributions and distributions. The outside basis portion of the Company’s joint ventures is amortized over the anticipated useful lives of the underlying ventures’ tangible and intangible assets acquired and liabilities assumed. Generally, the Company would discontinue applying the equity method when the investment (and any advances) is reduced to zero and would not provide for additional losses unless the Company has guaranteed obligations of the venture or is otherwise committed to providing further financial support for the investee. If the venture subsequently generates income, the Company only recognizes its share of such income to the extent it exceeds its share of previously unrecognized losses.
If the venture subsequently makes distributions and the Company does not have an implied or actual commitment to support the operations of the venture, the Company will not record a basis less than zero, rather such amounts will be recorded as equity in earnings of unconsolidated joint ventures.
On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in unconsolidated joint ventures may be impaired. An investment is impaired only if management’s estimate of the value of the investment
is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying value of the investment over the value of the investment. The Company’s estimates of value for each investment (particularly in real estate joint ventures) are based on a number of assumptions including but not limited to estimates of future and stabilized cash flows, market capitalization rates and discount rates, if applicable. These assumptions are based on management's experience in its local real estate markets and the effects of current market conditions. The assumptions are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and operating costs. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the values estimated by management in its impairment analyses may not be realized, and actual losses or impairment may be realized in the future. See Note 4: Investments in Unconsolidated Joint Ventures - to the Financial Statements.
Revenue Recognition
Revenue from leases includes fixed base rents under leases, which are recognized on a straight-line basis over the terms of the respective leases. Unbilled rents receivable represents the cumulative 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 initially 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 remaining 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 revenue from leases over the remaining terms of the respective leases, and the capitalized below-market lease values are amortized as an increase to revenue from leases over the remaining initial terms plus the terms of any below-market fixed-rate renewal options of the respective leases.
The Company elected a practical expedient for its rental properties (as lessor) to avoid separating non-lease components that otherwise would need to be accounted for under the recently-adopted revenue accounting guidance (such as tenant reimbursements of property operating expenses) from the associated lease component since (1) the non-lease components have the same timing and pattern of transfer as the associated lease component and (2) the lease component, if accounted for separately, would be classified as an operating lease; this enables the Company to account for the combination of the lease component and non-lease components as an operating lease since the lease component is the predominant component of the combined components.
Due to the Company’s adoption of the practical expedient discussed above to not separate non-lease component revenue from the associated lease component, the Company is aggregating revenue from its lease components and non-lease components (comprised predominantly of tenant operating expense reimbursements) into the line entitled “Revenue from leases.”
Revenue from leases also includes reimbursements and recoveries from tenants 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 - to the Financial Statements.
Real estate services revenue includes property management, development, construction and leasing commission fees and other services, and payroll and related costs reimbursed from clients. Fee income derived from the Company’s unconsolidated joint ventures (which are capitalized by such ventures) are recognized to the extent attributable to the unaffiliated ownership interests.
Parking income is comprised of income from parking spaces leased to tenants and others.
Hotel income includes all revenue generated from hotel properties.
Other income includes income from tenants for additional services arranged for by the Company and income from tenants for early lease terminations.
All bad debt expense is being recorded as a reduction of the corresponding revenue account starting on January 1, 2019. Management performs a detailed review of amounts due from tenants for collectability based on factors affecting the billings and status of individual tenants. The factors considered by management in determining which individual tenant’s revenues are affected include the age of the receivable, the tenant’s payment history, the nature of the charges, any communications regarding the charges and other related information. Management’s estimate of bad debt write-off’s requires management to exercise judgment about the timing, frequency and severity of collection losses, which affects the revenue recorded.
Redeemable Noncontrolling Interests
The Company evaluates the terms of the partnership units issued in accordance with the FASB’s Distinguishing Liabilities from Equity guidance. Units which embody an unconditional obligation requiring the Company to redeem the units for cash after a specified or determinable date (or dates) or upon the occurrence of an event that is not solely within the control of the issuer are determined to be contingently redeemable under this guidance and are included as Redeemable noncontrolling interests and classified within the mezzanine section between Total liabilities and Stockholders’ equity on the Company’s Consolidated Balance Sheets. The carrying amount of the redeemable noncontrolling interests will be changed by periodic accretions, so that the carrying amount will equal the estimated future redemption value at the redemption date.
Results From Operations
The following comparisons for the year ended December 31, 2020 (“2020”), as compared to the year ended December 31, 2019 (“2019”), and for 2019 as compared to the year ended December 31, 2018 (“2018”) make reference to the following: (i) the effect of the “Same-Store Properties,” which represent all in-service properties owned by the Company at December 31, 2018, (for the 2020 versus 2019 comparisons), and which represent all in-service properties owned by the Company at December 31, 2017 (for the 2019 versus 2018 comparisons), excluding properties sold, disposed of, removed from service, or being redeveloped or repositioned from January 1, 2018 through December 31, 2020; (ii) the effect of the “Acquired Properties,” which represent all properties acquired by the Company or commencing initial operation from January 1, 2019 through December 31, 2020 (for the 2020 versus 2019 comparisons), and which represents all properties acquired by the Company or commencing initial operations from January 1, 2018 through December 31, 2019 (for the 2019 versus 2018 comparisons), and (iii) the effect of “Properties Sold” which represent properties sold, disposed of, or removed from service (including properties being redeveloped or repositioned) by the Company from January 1, 2018 through December 31, 2020.
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Years Ended
December 31,
Dollar
Percent
(dollars in thousands)
Change
Change
Revenue from rental operations and other:
Revenue from leases
$
272,970
$
302,409
$
(29,439)
(9.7)
%
Parking income
15,604
21,857
(6,253)
(28.6)
Hotel income
4,287
9,841
(5,554)
(56.4)
Other income
9,311
9,222
1.0
Total revenues from rental operations
302,172
343,329
(41,157)
(12.0)
Property expenses:
Real estate taxes
45,825
44,817
1,008
2.2
Utilities
13,717
17,881
(4,164)
(23.3)
Operating services
68,313
70,409
(2,096)
(3.0)
Total property expenses
127,855
133,107
(5,252)
(3.9)
Non-property revenues:
Real estate services
11,390
13,873
(2,483)
(17.9)
Total non-property revenues
11,390
13,873
(2,483)
(17.9)
Non-property expenses:
Real estate services expenses
13,555
15,918
(2,363)
(14.8)
General and administrative
73,641
59,805
13,836
23.1
Depreciation and amortization
122,035
133,597
(11,562)
(8.7)
Property impairments
36,582
-
36,582
-
Land and other impairments
16,817
32,444
(15,627)
(48.2)
Total non-property expenses
262,630
241,764
20,866
8.6
Operating income (loss)
(76,923)
(17,669)
(59,254)
(335.4)
Other (expense) income:
Interest expense
(80,991)
(90,569)
9,578
10.6
Interest and other investment income (loss)
2,412
(2,369)
(98.2)
Equity in earnings (loss) of unconsolidated joint ventures
(3,832)
(1,319)
(2,513)
(190.5)
Gain on change of control of interests
-
13,790
(13,790)
(100.0)
Realized gains (losses) and unrealized losses on disposition
of rental property, net
5,481
343,102
(337,621)
(98.4)
Gain on disposition of developable land
5,787
5,265
1,008.6
Gain on sale from unconsolidated joint ventures
35,184
34,281
3,796.3
Gain (loss) from extinguishment of debt, net
(272)
1,648
(1,920)
(116.5)
Total other (expense) income
(38,600)
270,489
(309,089)
(114.3)
Income (loss) from continuing operations
(115,523)
252,820
(368,343)
(145.7)
Discontinued operations:
Income from discontinued operations
70,724
24,366
46,358
190.3
Realized gains (losses) and unrealized losses on
disposition of rental property and impairments, net
11,201
(133,350)
144,551
108.4
Total discontinued operations
81,925
(108,984)
190,909
175.2
Net income (loss)
$
(33,598)
$
143,836
$
(177,434)
(123.4)
%
The following is a summary of the changes in revenue from rental operations and other, and property expenses, in 2020 as compared to 2019 divided into Same-Store Properties, Acquired Properties and Properties Sold in 2019 and 2020 (excluding properties classified as discontinued operations):
Total
Same-Store
Acquired
Properties
Company
Properties
Properties
Sold in 2019 and 2020
Dollar
Percent
Dollar
Percent
Dollar
Percent
Dollar
Percent
(dollars in thousands)
Change
Change
Change
Change
Change
Change
Change
Change
Revenue from rental
operations and other:
Revenue from leases
$
(29,439)
(9.7)
%
$
(8,595)
(2.8)
%
$
28,928
9.6
%
$
(49,772)
(16.5)
%
Parking income
(6,253)
(28.6)
(6,666)
(30.5)
1,446
6.6
(1,033)
(4.7)
Hotel income
(5,554)
(56.4)
(3,138)
(31.8)
(2,416)
(24.6)
-
-
Other income
1.0
1,963
21.3
7.5
(2,568)
(27.8)
Total
$
(41,157)
(12.0)
%
$
(16,436)
(4.8)
%
$
28,652
8.3
%
$
(53,373)
(15.5)
%
Property expenses:
Real estate taxes
$
1,008
2.2
%
$
1,401
3.1
%
$
7,354
16.4
%
$
(7,747)
(17.3)
%
Utilities
(4,164)
(23.3)
(1,236)
(6.9)
1,289
7.2
(4,217)
(23.6)
Operating services
(2,096)
(3.0)
(4,794)
(6.8)
11,429
16.2
(8,731)
(12.4)
Total
$
(5,252)
(3.9)
%
$
(4,629)
(3.5)
%
$
20,072
15.1
%
$
(20,695)
(15.5)
%
OTHER DATA:
Number of Consolidated Properties
Commercial Square feet (in thousands)
4,916
4,885
10,916
Multi-family portfolio (number of units)
4,039
2,377
1,662
1,745
Revenue from leases. Revenue from leases for the Same-Store Properties decreased $8.6 million, or 2.8 percent, for 2020 as compared to 2019, due primarily to a decrease in average same store percent leased from 93.9 to 89.4 percent at the multifamily residential portfolio in 2020, as compared to 2019, primarily as a result of the impacts from the COVID-19 pandemic in 2020.
Parking income. Parking income for the Same-Store Properties decreased $6.7 million, or 30.5 percent for 2020 as compared to 2019 due primarily to a decrease in usage at the commercial properties, due to the COVID-19 pandemic in 2020.
Hotel income. Hotel income for the Same-Store properties decreased $3.1 million, or 31.8 percent, for 2020 as compared to 2019 due to the partial shutdown of hotel operations due to the COVID-19 pandemic in 2020.
Other income. Other income for the Same-Store Properties increased $2.0 million, or 21.3 percent for 2020 as compared to 2019 due primarily to an increase in lease breakage fees for both, multi-family and commercial properties recognized in 2020, as compared to 2019.
Real estate taxes. Real estate taxes on the Same-Store Properties increased $1.4 million, or 3.1 percent, for 2020 as compared to 2019 due primarily to a decrease in tax appeal proceeds received 2020 as compared to 2019.
Utilities. Utilities for the Same-Store Properties decreased $1.2 million, or 6.9 percent, for 2020 as compared to 2019, due primarily to decreased usage in 2020 as compared to 2019 as a result of decreased occupancy.
Operating services. Operating services for the Same-Store properties decreased $4.8 million, or 6.8 percent, for 2020 as compared to 2019, due primarily to a decrease in property maintenance and other services expense in 2020 as compared to 2019.
Real estate services revenue. Real estate services revenue (primarily reimbursement of property personnel costs) decreased $2.5 million, or 17.9 percent, for 2020 as compared to 2019, due primarily to decreased third party development and property management activity in multi-family services in 2020 as compared to 2019.
Real estate services expenses. Real estate services expenses decreased $2.4 million, or 14.8 percent, for 2020 as compared to 2019, due primarily to decreased salaries and related expenses from lower third party services activities in 2019.
General and administrative. General and administrative expenses increased $13.8 million, or 23.1 percent in 2020 as compared to 2019. This increase is due primarily to an increase in management restructuring costs, including severance, separation and related costs of
$8.8 million ($10.1 million in 2020 versus $1.3 million in 2019), an increase in costs incurred in connection with contested elections of the Board of Directors of $8.7 million ($12.8 million in 2020 versus $4.1 million in 2019) and an increase in dead deal costs incurred of $2.3 million ($2.6 million in 2020 versus $0.3 million in 2019). These were partially offset by a decrease in salaries and related expenses and leasing personnel costs of $2.8 million for 2020 as compared to 2019 and a decrease in travel, office and public relations events costs of $2.7 million for 2020 as compared to 2019 due to the COVID-19 pandemic.
Depreciation and amortization. Depreciation and amortization decreased $11.6 million, or 8.7 percent, for 2020 over 2019. This decrease was due primarily to lower depreciation of approximately $14.1 million for properties sold or removed from service during 2019 and 2020, partially offset by an increase in depreciation of $2.5 million for 2020 as compared to 2019 from the Acquired Properties.
Property impairments. In 2020, the Company recorded impairment charges of $36.6 million on its hotel properties in Weehawken, New Jersey.
Land and other impairments. In 2020, the Company recorded $16.8 million of impairments on developable land parcels. See Note 3: Recent Transactions - Real Estate Held For Sale - to the Financial Statements. In 2019, the Company recorded valuation impairment charges of $32.4 million on developable land parcels. See Note 12: Disclosure of Fair Value of Assets and Liabilities - to the Financial Statements.
Interest expense. Interest expense decreased $9.6 million, or 10.6 percent, for 2020 as compared to 2019. This decrease was primarily the result of lower average interest rates in 2020, as compared to 2019.
Interest and other investment income. Interest and other investment income decreased $2.4 million, or 98.2 percent, for 2020 as compared to 2019 primarily due to lower average notes receivable balances outstanding in 2020 as compared to 2019.
Equity in earnings (loss) of unconsolidated joint ventures. Equity in earnings of unconsolidated joint ventures decreased $2.5 million, or 190.6 percent, for 2020 as compared to 2019. The decrease is primarily due to a decrease of $2.8 million for 2020 as compared to 2019 from the Hyatt Regency Hotel Jersey City venture, due to the hotel being shut down since March 2020 on account of the COVID-19 pandemic, and a decrease of $0.5 million for 2020 as compared to 2019 from the Urby at Harborside venture. These were partially offset by an increase of $1.1 million for 2020 as compared to 2019 from the 12 Vreeland Road venture, due to impairment charges recorded of $2.6 million in 2020 and $3.7 million in 2019.
Gain on change of control of interests. The Company recorded a gain on change of control of interests of $13.8 million in 2019 as a result of its acquisition of the controlling interest of its equity partners in a joint venture owns a multi-family property located in Jersey City, New Jersey.
Realized gains (losses) and unrealized losses on disposition of rental property, net. The Company had realized gains (unrealized losses) on disposition of rental property of $5.5 million in 2020 and $343.1 million in 2019. See Note 3: Recent Transactions - Dispositions - to the Financial Statements.
Gain on disposition of developable land. In 2020, the Company recorded a gain of $5.8 million on the sale of land holdings located in Mount Pleasant, New York; Middletown, New Jersey; and Greenbelt, Maryland. The Company recorded a gain of $0.5 million in 2019 on the sale of land holdings located in Malden and Revere, Massachusetts. See Note 3: Recent Transactions - Dispositions to the Financial Statements.
Gain on sale from unconsolidated joint ventures. In 2020, the Company recorded a $35.2 million gain on the sale of its interests in joint ventures which owned property in Arlington, Virginia and land in Hillsborough, New Jersey. In 2019, the Company recorded a $0.9 million gain on the sale of its interests in a joint venture, which owned a property in Red Bank, New Jersey. See Note 4: Investments in Unconsolidated Joint Ventures - to the Financial Statements.
Gain/(loss) from extinguishment of debt, net. In 2020, the Company recorded a loss on early retirement of debt of $0.3 million in connection with the repayment of a construction loan on a multifamily property located in Malden, Massachusetts. In 2019, the Company recognized a gain from early retirement of debt of $1.6 million in connection with the early termination of part of interest rate swap agreements, which resulted from the prepayment of unsecured term loan balances in 2019.
Discontinued operations. In 2019, the Company classified 37 office properties totaling 6.6 million square feet as discontinued operations, some of which were sold during 2019 and 2020. In 2020, the Company reclassified one of the discontinued properties as held for use. The income from these properties increased $46.4 million for 2020 as compared to 2019, due primarily to a decrease in depreciation and amortization costs. Upon classifying these properties as held for sale in December 2019, the Company ceased recording
depreciation and amortization on the long lived assets, thereby resulting in a decrease of depreciation and amortization in 2020 compared to 2019. The Company recognized realized gains (losses) and unrealized losses on disposition of rental property and impairments, net, of a gain of $11.2 million in 2020 and a loss of $133.4 million in 2019.
Net income (loss). Net income (loss) decreased to a loss of $33.6 million in 2020 from net income of $143.8 million in 2019. The decrease of $177.4 million was due to the factors discussed above.
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
Years Ended
December 31,
Dollar
Percent
(dollars in thousands)
Change
Change
Revenue from rental operations and other:
Revenues from leases
$
302,409
$
323,793
$
(21,384)
(6.6)
%
Parking income
21,857
21,907
(50)
(0.2)
Hotel income
9,841
9,841
-
Other income
9,222
8,930
3.3
Total revenues from rental operations
343,329
354,630
(11,301)
(3.2)
Property expenses:
Real estate taxes
44,817
45,178
(361)
(0.8)
Utilities
17,881
23,799
(5,918)
(24.9)
Operating services
70,409
70,849
(440)
(0.6)
Total property expenses
133,107
139,826
(6,719)
(4.8)
Non-property revenues:
Real estate services
13,873
17,094
(3,221)
(18.8)
Total non-property revenues
13,873
17,094
(3,221)
(18.8)
Non-property expenses:
Real estate services expenses
15,918
17,919
(2,001)
(11.2)
General and administrative
59,805
53,869
5,936
11.0
Depreciation and amortization
133,597
113,817
19,780
17.4
Land and other impairments
32,444
24,566
7,878
32.1
Total non-property expenses
241,764
210,171
31,593
15.0
Operating income
(17,669)
21,727
(39,396)
(181.3)
Other (expense) income:
Interest expense
(90,569)
(77,594)
(12,975)
(16.7)
Interest and other investment income
2,412
3,220
(808)
(25.1)
Equity in earnings (loss) of unconsolidated joint ventures
(1,319)
(127)
(1,192)
(938.6)
Gain on change of control of interests
13,790
14,217
(427)
(3.0)
Realized gains (losses) and unrealized losses on disposition
of rental property, net
343,102
99,436
243,666
245.0
Gain on disposition of developable land
30,939
(30,417)
(98.3)
Gain on sale from unconsolidated joint ventures
-
-
Gain (loss) from extinguishment of debt, net
1,648
(8,994)
10,642
118.3
Total other (expense) income
270,489
61,097
209,392
342.7
Income (loss) from continuing operations
252,820
82,824
169,996
205.2
Discontinued operations:
Income from discontinued operations
24,366
23,577
3.3
Realized gains (losses) and unrealized losses on
disposition of rental property and impairments, net
(133,350)
-
(133,350)
-
Total discontinued operations, net
(108,984)
23,577
(132,561)
(562.2)
Net income (loss)
$
143,836
$
106,401
$
37,435
35.2
%
The following is a summary of the changes in revenue from rental operations and other, and property expenses, in 2019 as compared to 2018 divided into Same-Store Properties, Acquired Properties and Properties Sold in 2018 and 2019:
Total
Same-Store
Acquired
Properties
Company
Properties
Properties
Sold in 2018 and 2019
Dollar
Percent
Dollar
Percent
Dollar
Percent
Dollar
Percent
(dollars in thousands)
Change
Change
Change
Change
Change
Change
Change
Change
Revenue from rental
operations and other:
Revenue from leases
$
(21,384)
(6.6)
%
$
(5,999)
(1.8)
%
$
59,958
18.9
%
$
(75,343)
(23.7)
%
Parking income
(50)
(0.2)
(1,686)
(7.6)
2,305
10.5
(669)
(3.1)
Hotel Income
9,841
-
-
-
9,841
-
-
-
Other income
3.3
(528)
(5.9)
1,257
14.1
(437)
(4.9)
Total
$
(11,301)
(3.2)
%
$
(8,213)
(2.3)
%
$
73,361
21.0
%
$
(76,449)
(21.9)
%
Property expenses:
Real estate taxes
$
(361)
(0.8)
%
$
(169)
(0.3)
%
$
10,409
23.4
%
$
(10,601)
(23.9)
%
Utilities
(5,918)
(24.9)
(1,107)
(4.7)
1,876
7.9
(6,687)
(28.1)
Operating services
(440)
(0.6)
(3)
-
13,197
18.9
(13,634)
(19.5)
Total
$
(6,719)
(4.8)
%
$
(1,279)
(0.8)
%
$
25,482
18.4
%
$
(30,922)
(22.4)
%
OTHER DATA:
Number of Consolidated Properties
Commercial Square feet (in thousands)
4,889
4,889
-
13,190
Multi-family portfolio (number of units)
3,907
1,006
2,901
1,545
Revenue from leases. Revenue from leases for the Same-Store Properties decreased $6.0 million, or 1.8 percent, for 2019 as compared to 2018, due primarily to a 610 basis point decrease in the average same store percent leased of the office portfolio from 82.2 percent in 2018 to 76.1 percent in 2019.
Parking income. Parking income for the Same-Store Properties decreased $1.7 million, or 7.6 percent for 2019 as compared to 2018 due primarily to less tenant usage in 2019 due to higher vacancies, as well as catch-up billings in 2018 for third party fees not recurring in 2019.
Hotel income. The Company recognized hotel income of $9.8 million in 2019 from hotel properties, which commenced operations at the end of 2018 and mid 2019.
Other income. Other income for the Same-Store Properties decreased $0.5 million, or 5.9 percent for 2019 as compared to 2018 due primarily to a decrease in lease breakage fees recognized in 2019, as compared to 2018.
Real estate taxes. Real estate taxes on the Same-Store Properties decreased $0.2 million, or 0.3 percent, for 2019 as compared to 2018 due primarily to lower tax assessment values for the Company’s office properties in 2019 as compared to 2018.
Utilities. Utilities for the Same-Store Properties decreased $1.1 million, or 4.7 percent, for 2019 as compared to 2018, due primarily to lower electricity rates in 2019 as compared to 2018.
Operating services. Operating services for the Same-Store Properties were relatively unchanged for 2019 as compared to 2018. Increases in operations and maintenance costs were offset by a decrease in salaries and related expenses for 2019 as compared to 2018.
Real estate services revenue. Real estate services revenue (primarily reimbursement of property personnel costs) decreased $3.2 million, or 18.8 percent, for 2019 as compared to 2018, due primarily to decreased third party development and property management activity in multi-family services in 2019 as compared to 2018.
Real estate services expenses. Real estate services expenses decreased $2.0 million, or 11.2 percent, for 2019 as compared to 2018 due primarily to decreased salaries and related expenses from lower third party services activities in 2019.
General and administrative. General and administrative expenses increased $5.9 million, or 11.0 percent, in 2019 as compared to 2018 due primarily to $4.6 million in costs incurred in 2019 due to consulting and related fees and costs from strategic planning activities of the Company, $4.1 million in costs incurred in 2019 in connection with the contested election of the Board of Directors at the General
Partners’ 2019 annual meeting of stockholders and leasing personnel costs of $2.3 million were expensed in 2019 while none of these costs were expensed in 2018. These costs were partially offset by a decrease in severance, separation and related costs from management restructurings which amounted to $1.3 million in 2019, as compared to $6.6 million in 2018 (resulting from the departure of certain of the Company’s executive officers and other management restructuring).
Depreciation and amortization. Depreciation and amortization increased $19.8 million, or 17.4 percent, for 2019 over 2018. This decrease was due primarily to an increase in depreciation of $40.7 million for 2019 as compared to 2018 from the Acquired Properties and an increase of $1.8 million for 2019 as compared to 2018 on the Same-Store Properties. These were partially offset by lower depreciation of approximately $22.7 million for properties sold or removed from service during 2018 and 2019.
Land and other impairments. In 2019, the Company recorded valuation impairment charges of $32.4 million on developable land parcels. The Company recorded land impairment charges of $24.6 million in 2018 on two developable land parcels in Pennsylvania. See Note 3: Impairments - to the Financial Statements.
Interest expense. Interest expense increased $13.0 million, or 16.7 percent, for 2019 as compared to 2018. This increase was primarily the result of higher average debt balances in 2019, as compared to 2018.
Interest and other investment income. Interest and other investment income decreased $0.8 million, or 25.1 percent, for 2019 as compared to 2018 primarily due to lower average notes receivable balances outstanding in 2019 as compared to 2018.
Equity in earnings (loss) of unconsolidated joint ventures. Equity in earnings of unconsolidated joint ventures decreased $1.2 million, or 938.6 percent, for 2019 as compared to 2018. The decrease was due primarily to the recording in 2019 of a $3.7 million writedown of an investment in a joint venture that owns a property in Florham Park, New Jersey. This was partially offset by an increase of $2.6 million for 2019 as compared to 2018 from the Urby at Harborside venture, due to increased residential rents in 2019 as compared to 2018, a reduction in leasing expense in 2019 due to the amortization of initial broker commissions in 2018, and lower real estate taxes in 2019 as a result of a true-up credit from the town.
Gain on change of control of interests. The Company recorded a gain on change of control of interests of $13.8 million in 2019 as a result of its acquisition of the controlling interest of its equity partners in a joint venture owns a multi-family property located in Jersey City, New Jersey. The Company recorded a gain on change of control of interests of $14.2 million in 2018 as a result of its acquisition of its equity partners’ interest in a multi-family property located in Jersey City, New Jersey. See Note 3: Recent Transactions - Consolidations - to the Financial Statements.
Realized gains (losses) and unrealized losses on disposition of rental property, net. The Company had realized gains (unrealized losses) on disposition of rental property of $343.1 million in 2019 and $99.4 million in 2018. See Note 3: Recent Transactions - Dispositions - to the Financial Statements.
Gain on disposition of developable land. The Company recorded a gain of $0.5 million in 2019 on the sale of land holdings located in Malden and Revere, Massachusetts and a gain of $30.9 million 2018 on the disposal of land in Upper Saddle River, New Jersey. See Note 3: Recent Transactions - Dispositions - to the Financial Statements.
Gain on sale from unconsolidated joint ventures. In 2019, the Company recorded a $0.9 million gain on the sale of its interests in a joint venture, which owned a property in Red Bank, New Jersey. See Note 4: Investments in Unconsolidated Joint Ventures - to the Financial Statements.
Gain/(loss) from extinguishment of debt, net. In 2019, the Company recognized a gain from extinguishment of debt of $1.6 million in connection with the early termination of part of interest rate swap agreements, which resulted from the prepayment of unsecured term loan balances in 2019. In 2018, the Company recognized a loss from extinguishment of debt of $10.8 million in connection with the early prepayment of certain mortgage payables. See Note 9: Unsecured Revolving Credit Facility and Term Loans - to the Financial Statements and Note 10: Mortgages, Loans Payable and Other Obligations - to the Financial Statements.
Discontinued operations. In 2019, the Company classified 37 office properties totaling 6.6 million square feet as discontinued operations. The income from these properties increased $0.8 million for 2019 as compared to 2018. The Company recognized realized gains (losses) and unrealized losses on disposition of rental property and impairments, net, of a loss of $133.4 million on these properties in 2019.
Net income. Net income increased to $143.8 million in 2019 from $106.4 million in 2018. The increase of $37.4 million was due to the factors discussed above.
Liquidity and Capital Resources
Liquidity
Overview
Historically, rental revenue has been the Company’s principal source of funds to pay operating expenses, debt service, capital expenditures and dividends, excluding non-recurring capital expenditures. To the extent that the Company’s cash flow from operating activities is insufficient to finance its non-recurring capital expenditures such as property acquisitions, development and construction costs and other capital expenditures, the Company has and expects to continue to finance such activities through borrowings under its unsecured revolving credit facility, other debt and equity financings, proceeds from the sale of properties and joint venture capital.
The Company expects to meet its short-term liquidity requirements generally through its working capital, which may include proceeds from the sales of office properties, (primarily from the disposition of the Suburban Office Portfolio, of which $652.4 million of properties are under contract for sale) net cash provided by operating activities and draw from its unsecured revolving credit facility. The Company frequently examines potential property acquisitions and development projects and, at any given time, one or more of such acquisitions or development projects may be under consideration. Accordingly, the ability to fund property acquisitions and development projects is a major part of the Company’s financing requirements. The Company expects to meet its financing requirements through funds generated from operating activities, to the extent available, proceeds from property sales, joint venture capital, long-term and short-term borrowings (including draws on the Company’s unsecured revolving credit facility) and the issuance of additional debt and/or equity securities.
The recent outbreak of COVID-19 across many countries around the globe, including the U.S., has significantly slowed global economic activity, caused significant volatility in financial markets, and resulted in unprecedented job losses causing many to fear an imminent global recession. The global impact of the outbreak has been rapidly evolving the responses of many countries, including the U.S., have included quarantines, restrictions on business activities, including construction activities, restrictions on group gatherings, and restrictions on travel. These actions are creating disruption in the global economy and supply chains and adversely impacting many industries, including owners and developers of office and mixed-use buildings. Moreover, there is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. economy and consumer confidence. Demand for space at the Company’s properties is dependent on a variety of macroeconomic factors, such as employment levels, interest rates, changes in stock market valuations, rent levels and availability of competing space. These factors can be significantly adversely affected by a variety of factors beyond the Company’s control. The extent to which COVID-19 impacts the Company’s results will depend on future developments, many of which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact. If the outbreak continues, there will likely be continued negative economic impacts, market volatility, and business disruption which could negatively impact the Company’s tenants’ ability to pay rent, the Company’s ability to lease vacant space, the Company’s ability to complete development and redevelopment projects and the Company’s ability to dispose of the assets held for sale and these consequences, in turn, could materially impact the Company’s results of operations.
Construction Projects
The Company is developing a 313-unit multi-family project known as Port Imperial South 9 at Port Imperial in Weehawken, New Jersey, which began construction in third quarter 2018. The construction project, which is estimated to cost $143.8 million, of which construction costs of $98.1 million have been incurred through December 31, 2020, is expected to be ready for occupancy early 2021. The Company has funded $51.8 million as of December 31, 2020, and the remaining construction costs are expected to be funded from a $92 million construction loan (of which $46.3 million was drawn as of December 31, 2020).
The Company is developing a 198-unit multi-family project known as The Upton at Short Hills located in Short Hills, New Jersey, which began construction in fourth quarter 2018. The construction project, which is estimated to cost $99.4 million, of which $77.9 million have been incurred through December 31, 2020, is expected to be ready for occupancy in first quarter 2021. The Company has funded $35.4 million of the construction costs, and the remaining construction costs are expected to be funded from a $64 million construction loan (of which $42.5 million was drawn as of December 31, 2020).
The Company is developing a 750-unit multi-family project at 25 Christopher Columbus in Jersey City, New Jersey, which began construction in first quarter 2019. The construction project, which is estimated to cost $469.5 million, of which $331 million have been
incurred through December 31, 2020, is expected to be ready for occupancy in first quarter 2022. The Company has funded $169.5 million of the construction costs and the remaining construction costs are expected to be funded from a $300 million construction loan (of which $161.5 million was drawn as of December 31, 2020).
REIT Restrictions
To maintain its qualification as a REIT under the IRS Code, the General Partner must make annual distributions to its stockholders of at least 90 percent of its REIT taxable income, determined without regard to the dividends paid deduction and by excluding net capital gains. However, any such distributions, whether for federal income tax purposes or otherwise, would be paid out of available cash, including borrowings and other sources, after meeting operating requirements, preferred stock dividends and distributions, and scheduled debt service on the Company’s debt. If and to the extent the Company retains and does not distribute any net capital gains, the General Partner will be required to pay federal, state and local taxes on such net capital gains at the rate applicable to capital gains of a corporation. The dividends paid to date for 2020 are expected to fully satisfy the above minimum distribution requirement.
On September 30, 2020, the Company announced that its Board of Directors was suspending its common dividends and distributions attributable to the third and fourth quarters 2020. As the Company’s management estimated that as of September 2020 it had satisfied its dividends obligations as a REIT on taxable income expected for 2020, the Board made the strategic decision to suspend its common dividends and distributions for the remainder of 2020 in an effort to provide greater financial flexibility during the pandemic and to retain incremental capital to support leasing initiatives at its Harborside commercial office properties on the Jersey City waterfront.
Property Lock-Ups
Through February 2016, the Company could not dispose of or distribute certain of its properties which were originally contributed by certain unrelated common unitholders of the Operating Partnership, without the express written consent of such common unitholders, as applicable, except in a manner which did not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimbursed the appropriate specific common unitholders for the tax consequences of the recognition of such built-in-gains (collectively, the “Property Lock-Ups”). Upon the expiration in February 2016 of the Property Lock-Ups, the Company is generally required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the specific common unitholders, which include members of the Mack Group (which includes William L. Mack, a former director; David S. Mack, a former director; and Earle I. Mack, a former director), the Robert Martin Group, and the Cali Group (which includes John R. Cali, a former director). As of December 31, 2020, after the effects of tax-free exchanges on certain of the originally contributed properties, either wholly or partially, over time, 16 of the Company’s properties, as well as certain land and development projects, including properties classified as held for sale as of December 31, 2020, with an aggregate carrying value of approximately $1.5 billion, are subject to these conditions.
Unencumbered Properties
As of December 31, 2020, the Company had 18 unencumbered properties with a carrying value of $1.1 billion representing 40.9 percent of the Company’s total consolidated property count.
Cash Flows
Cash, cash equivalents and restricted cash increased by $11.1 million to $52.3 million at December 31, 2020, compared to $41.2 million at December 31, 2019. This increase is comprised of the following net cash flow items:
(1)
$85.4 million provided by operating activities.
(2)
$28.5 million provided by investing activities, consisting primarily of the following:
(a)
$338.8 million net cash from investing activities - discontinued operations; plus
(b)
$64.9 million from proceeds from the sales of rental property; plus
(c)
$0.5 million received from repayments of notes receivables; plus
(d)
$13.8 million received from distributions in excess of cumulative earnings from unconsolidated joint ventures; plus
(e)
$64.8 million received from proceeds from the sale of investments in unconsolidated joint ventures; minus
(f)
$3 million used for investments in unconsolidated joint ventures; minus
(g)
$16.8 million used for rental property acquisitions and related intangibles; minus
(h)
$138.7 million used for additions to rental property and improvements; minus
(i)
$295.9 million used for the development of rental property, other related costs and deposits.
(3)
$102.7 million used in financing activities, consisting primarily of the following:
(a)
$516 million used for repayments of unsecured revolving credit facility; plus
(b)
$86.6 million used for repayments of mortgages, loans payable and other obligations; plus
(c)
$60.5 million used for payments of common dividends and distributions; plus
(d)
$1.7 million used for payment of finance cost; plus
(e)
$2.7 million used for common unit redemptions; plus
(f)
$3.2 million used for redemption of redeemable noncontrolling interests; plus
(g)
$25.9 million used for distribution to redeemable noncontrolling interests; minus
(h)
$212 million from borrowings under the unsecured revolving credit facility; minus
(i)
$381.6 million from proceeds received from mortgages and loans payable; minus
(j)
$0.2 million from distribution to noncontrolling interests.
Debt Financing
Summary of Debt
The following is a breakdown of the Company’s debt between fixed and variable-rate financing as of December 31, 2020:
Balance
Weighted Average
Weighted Average
($000’s)
% of Total
Interest Rate (a)
Maturity in Years
Fixed Rate Unsecured Debt and
Other Obligations
$
575,000
20.40
%
4.09
%
1.81
Fixed Rate Secured Debt (b)
1,811,502
64.26
%
3.75
%
6.23
Variable Rate Secured Debt
407,360
14.45
%
3.50
%
3.23
Variable Rate Unsecured Debt (c)
25,000
0.89
%
1.50
%
0.57
Totals/Weighted Average:
$
2,818,862
100.00
%
3.76
%
(b)
4.85
Adjustment for unamortized debt discount
(1,504)
Unamortized deferred financing costs
(15,561)
Total Debt, Net
$
2,801,797
(a)The actual weighted average LIBOR rate for the Company’s outstanding variable rate debt was 0.16 percent as of December 31, 2020, plus the applicable spread.
(b)Balance includes two ten-year mortgage loans obtained by the Company which have fixed rates for the first five years only.
(c)Excludes amortized deferred financing costs primarily pertaining to the Company’s unsecured revolving credit facility which amounted to $3.9 million for the year ended December 31, 2020. Weighted average maturity includes extension of maturity of unsecured revolving credit facility to July 2021 based on Company’s payment of extension fee in January 2021
Debt Maturities
Scheduled principal payments and related weighted average annual effective interest rates for the Company’s debt as of December 31, 2020 are as follows:
Scheduled
Principal
Weighted Avg.
Amortization
Maturities
Total
Effective Interest Rate of
Period
($000’s)
($000’s)
($000’s)
Future Repayments (a)
2021 (b)
$
$
28,800
$
29,390
1.96
%
440,357
440,907
4.15
%
2,047
376,457
378,504
3.39
%
3,403
469,545
472,948
3.86
%
3,300
-
3,300
3.98
%
12,822
658,000
670,822
3.68
%
Thereafter
-
822,991
822,991
3.79
%
Sub-total
22,712
2,796,150
2,818,862
3.76
%
Adjustment for unamortized debt discount/premium, net
as of December 31, 2020
(1,504)
-
(1,504)
Unamortized deferred financing costs
(15,561)
-
(15,561)
Totals/Weighted Average
$
5,647
$
2,796,150
$
2,801,797
3.76
%
(c)
(a)The actual weighted average LIBOR rate for the Company’s outstanding variable rate debt was 0.16 percent as of December 31, 2020, plus the applicable spread.
(b)Includes outstanding borrowings of the Company’s unsecured revolving credit facility of $25 million.
(c)Excludes amortized deferred financing costs primarily pertaining to the Company’s unsecured revolving credit facility which amounted to $3.9 million for the year ended December 31, 2020.
Senior Unsecured Notes
The terms of the Company’s senior unsecured notes (which totaled approximately $575 million as of December 31, 2020) include certain restrictions and covenants which require compliance with financial ratios relating to the maximum amount of debt leverage, the maximum amount of secured indebtedness, the minimum amount of debt service coverage and the maximum amount of unsecured debt as a percent of unsecured assets.
Unsecured Revolving Credit Facility and Term Loans
On January 25, 2017, the Company entered into an amended revolving credit facility and new term loan agreement (“2017 Credit Agreement”) with a group of 13 lenders. Pursuant to the 2017 Credit Agreement, the Company refinanced its existing $600 million unsecured revolving credit facility (“2017 Credit Facility”) and entered into a new $325 million unsecured term loan facility (“2017 Term Loan”). Effective March 6, 2018, the Company elected to determine its interest rate under the 2017 Credit Agreement and under the 2017 Term Loan using the defined leverage ratio option, resulting in an interest rate of LIBOR plus 130 basis points and LIBOR plus 155 basis points, respectively.
The terms of the 2017 Credit Facility include: (1) a four-year term ending in January 2021, with two six-month extension options, subject to the Company not being in default on the facility and with the payment of a fee of 7.5 basis points for each extension; (2) revolving credit loans may be made to the Company in an aggregate principal amount of up to $600 million (subject to increase as discussed below), with a sublimit under the 2017 Credit Facility for the issuance of letters of credit in an amount not to exceed $60 million (subject to increase as discussed below), of which $10.6 million of letters of credit had been issued as of December 31, 2020; (3) an interest rate based on the Operating Partnership’s unsecured debt ratings from Moody’s or S&P, or, at the Operating Partnership’s option, if it no longer maintains a debt rating from Moody’s or S&P or such debt ratings fall below Baa3 and BBB-, based on a defined leverage ratio; and (4) a facility fee, currently 25 basis points, payable quarterly based on the Operating Partnership’s unsecured debt ratings from Moody’s or S&P, or, at the Operating Partnership’s option, if it no longer maintains a debt rating from Moody’s or S&P or such debt ratings fall below Baa3 and BBB-, based on a defined leverage ratio. The Company’s unsecured debt is currently rated B1 by Moody’s and B+ by S&P. In January 2021, the Company elected to exercise the first option to extend the 2017 Credit Facility maturity date for a period of six months. Accordingly, the term of the 2017 Credit Facility was extended to July 2021, with the Company’s payment of the 7.5 basis point extension fee.
After electing to use the defined leverage ratio to determine the interest rate, the interest rate under the 2017 Credit Facility is currently based on the following total leverage ratio grid:
Interest Rate -
Applicable
Interest Rate -
Basis Points
Applicable
Above LIBOR for
Basis Points
Alternate Base
Facility Fee
Total Leverage Ratio
Above LIBOR
Rate Loans
Basis Points
<45%
125.0
25.0
20.0
≥45% and <50%
130.0
30.0
25.0
≥50% and <55% (current ratio)
135.0
35.0
30.0
≥55%
160.0
60.0
35.0
Prior to the election to use the defined leverage ratio option, the interest rates on outstanding borrowings, alternate base rate loans and the facility fee on the current borrowing capacity, payable quarterly in arrears, on the 2017 Credit Facility were based upon the Operating Partnership’s unsecured debt ratings, as follows:
Interest Rate -
Applicable
Interest Rate -
Basis Points
Operating Partnership's
Applicable
Above LIBOR for
Unsecured Debt Ratings:
Basis Points
Alternate Base
Facility Fee
Higher of S&P or Moody's
Above LIBOR
Rate Loans
Basis Points
No ratings or less than BBB-/Baa3
155.0
55.0
30.0
BBB- or Baa3 (interest rate based on Company's election through March 5, 2018)
120.0
20.0
25.0
BBB or Baa2
100.0
0.0
20.0
BBB+ or Baa1
90.0
0.0
15.0
A- or A3 or higher
87.5
0.0
12.5
The terms of the 2017 Term Loan included: (1) a three-year term ending in January 2020, with two one-year extension options; (2) multiple draws of the term loan commitments may be made within 12 months of the effective date of the 2017 Credit Agreement up to an aggregate principal amount of $325 million (subject to increase as discussed below), with no requirement to be drawn in full; provided, that, if the Company does not borrow at least 50 percent of the initial term commitment from the term lenders (i.e. 50 percent of $325 million) on or before July 25, 2017, the amount of unused term loan commitments shall be reduced on such date so that, after giving effect to such reduction, the amount of unused term loan commitments is not greater than the outstanding term loans on such date; (3) an interest rate, based on the Operating Partnership’s unsecured debt ratings from Moody’s or S&P or, at the Operating Partnership’s option if it no longer maintains a debt rating from Moody’s or S&P or such debt ratings fall below Baa3 and BBB-, based on a defined leverage ratio; and (4) a term commitment fee on any unused term loan commitment during the first 12 months after the effective date of the 2017 Credit Agreement at a rate of 0.25 percent per annum on the sum of the average daily unused portion of the aggregate term loan commitments.
On March 29, 2017, the Company executed interest rate swap arrangements to fix LIBOR with an aggregate average rate of 1.6473% for the swaps and a current aggregate fixed rate of 3.0473% for borrowings under the 2017 Term Loan.
During the year ended December 31, 2019, the Company prepaid the 2017 Term Loan (using a portion of the proceeds from a new mortgage loan collateralized by an office building located at 111 River Street and using borrowings under the Company’s unsecured revolving credit facility) and recorded a net loss of $173,000 from extinguishment of debt, as a result of a gain of $80,000 due to the early termination of part of the interest rate swap arrangements and the write off of unamortized deferred financing costs and fees of $253,000 due to the early debt prepayment.
After electing to use the defined leverage ratio to determine the interest rate, the interest rate under the 2017 Term Loan was based on the following total leverage ratio grid:
Interest Rate -
Applicable
Interest Rate -
Basis Points
Applicable
Above LIBOR for
Basis Points
Alternate Base Rate
Total Leverage Ratio
above LIBOR
Loans
<45%
145.0
45.0
≥45% and <50%
155.0
55.0
≥50% and <55% (current ratio)
165.0
65.0
≥55%
195.0
95.0
Prior to the election to use the defined leverage ratio option, the interest rate on the 2017 Term Loan was based upon the Operating Partnership's unsecured debt ratings, as follows:
Interest Rate -
Applicable
Interest Rate -
Basis Points
Operating Partnership's
Applicable
Above LIBOR for
Unsecured Debt Ratings:
Basis Points
Alternate Base Rate
Higher of S&P or Moody's
Above LIBOR
Loans
No ratings or less than BBB-/Baa3
185.0
85.0
BBB- or Baa3 (interest rate based on Company's election through March 5, 2018)
140.0
40.0
BBB or Baa2
115.0
15.0
BBB+ or Baa1
100.0
0.0
A- or A3 or higher
90.0
0.0
On up to four occasions at any time after the effective date of the 2017 Credit Agreement, the Company may elect to request (1) an increase to the existing revolving credit commitments (any such increase, the “New Revolving Credit Commitments”) and/or (2) the establishment of one or more new term loan commitments (the “New Term Commitments”, together with the 2017 Credit Commitments, the “Incremental Commitments”), by up to an aggregate amount not to exceed $350 million for all Incremental Commitments. The Company may also request that the sublimit for letters of credit available under the 2017 Credit Facility be increased to $100 million (without arranging any New Revolving Credit Commitments). No lender or letter of credit issued has any obligation to accept any Incremental Commitment or any increase to the letter of credit subfacility. There is no premium or penalty associated with full or partial prepayment of borrowings under the 2017 Credit Agreement.
The 2017 Credit Agreement, which applies to both the 2017 Credit Facility and 2017 Term Loan, includes certain restrictions and covenants which limit, among other things the incurrence of additional indebtedness, the incurrence of liens and the disposition of real estate properties (to the extent that: (i) such property dispositions cause the Company to default on any of the financial ratios of the 2017 Credit Agreement (described below), or (ii) the property dispositions are completed while the Company is under an event of default under the 2017 Credit Agreement, unless, under certain circumstances, such disposition is being carried out to cure such default), and which require compliance with financial ratios relating to the maximum leverage ratio (60 percent), the maximum amount of secured indebtedness (40 percent), the minimum amount of fixed charge coverage (1.5 times), the maximum amount of unsecured indebtedness (60 percent), the minimum amount of unencumbered property interest coverage (2.0 times) and certain investment limitations (generally 15 percent of total capitalization). The 2017 Credit Agreement contains “change of control” provisions that permit the lenders to declare a default and require the immediate repayment of all outstanding borrowings under the 2017 Credit Facility. These change of control provisions, which have been included as an event of default under the agreements governing the Company’s revolving credit facilities since June 2000, are triggered if, among other things, a majority of the seats on the Board of Directors (other than vacant seats) become occupied by directors who were neither nominated by the Board Directors nor appointed by a majority of directors nominated by the Board of Directors. Furthermore, the agreements governing the Company's Senior Unsecured Notes include cross-acceleration provisions that would constitute an event of default requiring immediate repayment of the Notes if the change of control provisions under the 2017 Credit Facility are triggered and the lenders declare a default and exercise their rights under the 2017 Credit Facility and accelerate repayment of the outstanding borrowings thereunder. In addition, construction loans secured by two multi-family residential property development projects contain cross-acceleration provisions similar to those in the agreements governing the Notes for defaults by the Company. If these change of control provisions were triggered, the Company could seek a forbearance, waiver or amendment of the change of control provisions from the lenders, however there can be no assurance that the Company would be able to obtain such
forbearance, waiver or amendment on acceptable terms or at all. If an event of default has occurred and is continuing, the entire outstanding balance under the 2017 Credit Agreement may (or, in the case of any bankruptcy event of default, shall) become immediately due and payable, and the Company will not make any excess distributions except to enable the General Partner to continue to qualify as a REIT under the IRS Code.
Before it amended and restated its unsecured revolving credit facility in January 2017, the Company had a $600 million unsecured revolving credit facility with a group of 17 lenders that was scheduled to mature in July 2017. The interest rate on outstanding borrowings (not electing the Company’s competitive bid feature) and the facility fee on the current borrowing capacity, payable quarterly in arrears was based upon the Operating Partnership’s unsecured debt ratings at the time, as follows:
Operating Partnership's
Interest Rate -
Unsecured Debt Ratings:
Applicable Basis Points
Facility Fee
Higher of S&P or Moody's
Above LIBOR
Basis Points
No ratings or less than BBB-/Baa3
170.0
35.0
BBB- or Baa3 (since January 2017 amendment)
130.0
30.0
BBB or Baa2
110.0
20.0
BBB+ or Baa1
100.0
15.0
A- or A3 or higher
92.5
12.5
In January 2016, the Company obtained a $350 million unsecured term loan (“2016 Term Loan”), which had been scheduled to mature in January 2019 with two one-year extension options. On January 7, 2019, the Company exercised the first one-year extension option with the payment of an extension fee of $0.5 million, which extended the maturity of the 2016 Term Loan to January 2020. The interest rate for the term loan is based on the Operating Partnership’s unsecured debt ratings, or, at the Company's option, a defined leverage ratio. Effective March 6, 2018, the Company elected to determine its interest rate under the 2016 Term Loan using the defined leverage ratio option, resulting in an interest rate of LIBOR plus 155 basis points. The Company entered into interest rate swap arrangements to fix LIBOR for the duration of the term loan. Including costs, the current all-in fixed rate is 3.13 percent. The proceeds from the loan were used primarily to repay outstanding borrowings on the Company’s then existing unsecured revolving credit facility and to repay $200 million senior unsecured notes that matured on January 15, 2016.
During the year ended December 31, 2019, the Company prepaid the 2016 Term Loan (using a portion of the cash sales proceeds from the Flex portfolio sale, using the proceeds from a mortgage loan financing obtained on Soho Lofts Apartments and using a portion of the proceeds from a new mortgage loan collateralized by an office building located at 111 River Street), and recorded a gain of $2.1 million due to the early termination of part of the interest rate swap arrangements and the write off of unamortized deferred financing costs and fees of $242,000 due to the early debt prepayments.
In summary, the Company recorded a net gain(loss) from extinguishment of debt of $1.6 million during the year ended December 31, 2019, as described above.
After electing to use the defined leverage ratio to determine interest rate, the interest rate under the 2016 Term Loan was based on the following total leverage ratio grid:
Interest Rate -
Applicable Basis
Total Leverage Ratio
Points above LIBOR
<45%
145.0
≥45% and <50%
155.0
≥50% and <55% (current ratio)
165.0
≥55%
195.0
Prior to the election to use the defined leverage ratio option, the interest rate on the 2016 Term Loan was based upon the Operating Partnership’s unsecured debt ratings, as follows:
Operating Partnership's
Interest Rate -
Unsecured Debt Ratings:
Applicable Basis Points
Higher of S&P or Moody's
Above LIBOR
No ratings or less than BBB-/Baa3
185.0
BBB- or Baa3 (interest rate based on Company's election through March 5, 2018)
140.0
BBB or Baa2
115.0
BBB+ or Baa1
100.0
A- or A3 or higher
90.0
The terms of the 2016 Term Loan include certain restrictions and covenants which limit, among other things the incurrence of additional indebtedness, the incurrence of liens and the disposition of real estate properties (to the extent that: (i) such property dispositions cause the Company to default on any of the financial ratios of the term loan described below, or (ii) the property dispositions are completed while the Company is under an event of default under the term loan, unless, under certain circumstances, such disposition is being carried out to cure such default), and which require compliance with financial ratios relating to the maximum leverage ratio (60 percent), the maximum amount of secured indebtedness (40 percent), the minimum amount of fixed charge coverage (1.5 times), the maximum amount of unsecured indebtedness (60 percent), the minimum amount of unencumbered property interest coverage (2.0 times) and certain investment limitations (generally 15 percent of total capitalization). If an event of default has occurred and is continuing, the Company will not make any excess distributions except to enable the General Partner to continue to qualify as a REIT under the IRS Code.
On August 30, 2018, the Company entered into an amendment to the 2017 Credit Agreement (the “2017 Credit Agreement Amendment”) and an amendment to the 2016 Term Loan (the “2016 Term Loan Agreement Amendment”).
Each of the 2017 Credit Agreement Amendment and the 2016 Term Loan Amendment was effective as of June 30, 2018 and provided for the following material amendments to the terms of both the 2017 Credit Agreement and 2016 Term Loan):
1.The unsecured debt ratio covenant has been modified with respect to the measurement of the unencumbered collateral pool of assets in the calculation of such ratio for the period commencing July 1, 2018 and continuing until December 31, 2019 to allow the Operating Partnership to utilize the “as-is” appraised value of the properties known as ‘Harborside Plaza I’ and ‘Harborside Plaza V’ properties located in Jersey City, NJ in such calculation; and
2.A new covenant has been added that prohibits the Company from making any optional or voluntary payment, repayment, repurchase or redemption of any unsecured indebtedness of the Company (or any subsidiaries) that matures after January 25, 2022, at any time when any of the Total Leverage Ratio or the unsecured debt ratio covenants exceeds 60 percent (all as defined in the 2017 Credit Agreement and the 2016 Term Loan) or an appraisal is being used to determine the value of Harborside Plaza I and Harborside Plaza V for the unsecured debt ratio covenant.
All other terms and conditions of the 2017 Credit Agreement remained unchanged.
Mortgages, Loans Payable and Other Obligations
The Company has other mortgages, loans payable and other obligations which consist of various loans collateralized by certain of the Company’s rental properties. Payments on mortgages, loans payable and other obligations are generally due in monthly installments of principal and interest, or interest only.
Debt Strategy
The Company does not intend to reserve funds to retire the Company’s senior unsecured notes, outstanding borrowings under its unsecured revolving credit facility, or its mortgages, loans payable and other obligations upon maturity. Instead, the Company will seek to retire such debt primarily with available proceeds to be received from the Company’s planned sales of its Suburban Office Portfolio assets over time, as well as obtaining additional mortgage financings on or before the applicable maturity dates. If it cannot raise sufficient proceeds to retire the maturing debt, the Company may draw on its revolving credit facility to retire the maturing indebtedness, which would reduce the future availability of funds under such facility. As of February 23, 2021, the Company had outstanding borrowings of $8 million under its unsecured revolving credit facility. The Company is reviewing various financing and refinancing options, including the redemption or purchase of the senior unsecured notes in public tender offers or privately-negotiated transactions,
the issuance of additional, or exchange of current, unsecured debt of the Operating Partnership or common and preferred stock of the General Partner, and/or obtaining additional mortgage debt of the Operating Partnership, some or all of which may be completed in 2020. The Company currently anticipates that its available cash and cash equivalents, cash flows from operating activities and proceeds from the sale of real estate assets and joint ventures investments, together with cash available from borrowings and other sources, will be adequate to meet the Company’s capital and liquidity needs in the short term. However, if these sources of funds are insufficient or unavailable, due to current economic conditions or otherwise, or if capital needs to fund acquisition and development opportunities in the multi-family rental sector arise, the Company’s ability to make the expected distributions discussed in “REIT Restrictions” above may be adversely affected.
Equity Financing and Registration Statements
Common Equity
The following table presents the changes in the General Partner’s issued and outstanding shares of common stock and the Operating Partnership’s common units for the years ended December 31, 2020 and 2019, respectively.
Common
Common
Units/Vested
Stock
LTIP Units
Total
Outstanding at January 1, 2020
90,595,176
9,612,064
100,207,240
Restricted stock issued
52,974
-
52,974
Conversion of deferred stock units for common stock
61,277
-
61,277
Common units redeemed for common stock
-
-
-
Conversion of LTIP units for common units
-
38,626
38,626
Vested LTIP units
-
136,957
136,957
Cancellation of common unit
-
(1)
(1)
Shares issued under Dividend Reinvestment and Stock Purchase Plan
2,990
-
2,990
Redemption of common units
-
(138,615)
(138,615)
Outstanding at December 31, 2020
90,712,417
9,649,031
100,361,448
Common
Common
Units/Vested
Stock
LTIP Units
Total
Outstanding at January 1, 2019
90,320,306
10,229,349
100,549,655
Common units redeemed for common stock
38,011
(38,011)
-
Conversion of LTIP units for common units
-
18,438
18,438
Conversion of deferred stock units for common stock
193,949
-
193,949
Vested LTIP Units
-
68,206
68,206
Cancellation of restricted stock
(1,936)
-
(1,936)
Restricted stock issued
42,690
-
42,690
Shares issued under Dividend Reinvestment and Stock Purchase Plan
2,156
-
2,156
Redemption of common units
-
(665,918)
(665,918)
Outstanding at December 31, 2019
90,595,176
9,612,064
100,207,240
Share/Unit Repurchase Program
The General Partner has a share repurchase program which was renewed and authorized by its Board of Directors in September 2012 to purchase up to $150 million of the General Partner’s outstanding common stock (“Repurchase Program”), which it may repurchase from time to time in open market transactions at prevailing prices or through privately negotiated transactions. As of December 31, 2020, the General Partner has a remaining authorization under the Repurchase Program of $139 million. There were no common stock repurchases in the years ended December 31, 2019 and 2020, and through February 23, 2021.
Dividend Reinvestment and Stock Purchase Plan
The Company has a Dividend Reinvestment and Stock Purchase Plan (the “DRIP”) which commenced in March 1999 under which approximately 5.5 million shares of the General Partner’s common stock have been reserved for future issuance. The DRIP provides for automatic reinvestment of all or a portion of a participant’s dividends from the General Partner’s shares of common stock. The DRIP also permits participants to make optional cash investments up to $5,000 a month without restriction and, if the Company waives this limit, for additional amounts subject to certain restrictions and other conditions set forth in the DRIP prospectus filed as part of the Company’s effective registration statement on Form S-3 filed with the Securities and Exchange Commission (“SEC”) for the approximately 5.5 million shares of the General Partner’s common stock reserved for issuance under the DRIP.
Shelf Registration Statements
The General Partner has an effective shelf registration statement on Form S-3 filed with the SEC for an aggregate amount of $2.0 billion in common stock, preferred stock, depositary shares, and/or warrants of the General Partner, under which no securities have been sold as of February 23, 2021.
The General Partner and the Operating Partnership also have an effective shelf registration statement on Form S-3 filed with the SEC for an aggregate amount of $2.5 billion in common stock, preferred stock, depositary shares and guarantees of the General Partner and debt securities of the Operating Partnership, under which no securities have been sold as of February 23, 2021.
Off-Balance Sheet Arrangements
Unconsolidated Joint Venture Debt
The debt of the Company’s unconsolidated joint ventures generally provides for recourse to the Company for customary matters such as intentional misuse of funds, environmental conditions and material misrepresentations. The Company has agreed to guarantee repayment of a portion of the debt of its unconsolidated joint ventures. Such guaranteed debt has a total facility amount of $304.0 million of which the Company has agreed to guarantee up to $33.2 million. As of December 31, 2020, the outstanding balance of such guaranteed debt totaled $267.6 million of which $29.6 million was guaranteed by the Company.
The Company’s off-balance sheet arrangements are further discussed in Note 4: Investments in Unconsolidated Joint Ventures to the Financial Statements.
Contractual Obligations
The following table outlines the timing of payment requirements related to the Company’s debt (principal and interest), PILOT agreements, ground lease agreements and other obligations, as of December 31, 2020:
Payments Due by Period
Less than 1
2 - 3
4 - 5
6 - 10
After 10
(dollars in thousands)
Total
Year
Years
Years
Years
Years
Senior unsecured notes
$
616,907
$
22,163
$
594,744
$
-
$
-
$
-
Unsecured revolving credit
facility and term loans
25,219
25,219
(a)
-
-
-
-
Mortgages, loans payable
and other obligations (b)
2,675,613
73,162
390,317
(c)
625,939
(d)
1,521,524
64,671
Payments in lieu of taxes
(PILOT)
9,267
6,711
2,556
-
-
-
Ground lease payments
161,754
1,750
3,506
3,518
8,757
144,223
Total
$
3,488,760
$
129,005
$
991,123
$
629,457
$
1,530,281
$
208,894
(a)Interest payments assume LIBOR rate of 0.16 percent, which is the weighted average rate on this outstanding variable rate debt at December 31, 2020, plus the applicable spread.
(b)Interest payments assume LIBOR rate of 0.17 percent, which is the weighted average rate on its outstanding variable rate mortgage debt at December 31, 2020, plus the applicable spread.
(c)Includes $183 million pertaining to various mortgages with one-year extension options.
(d)Includes $161 million pertaining to various mortgages with one-year extension options.
Funds from Operations
Funds from operations (“FFO”) (available to common stock and unit holders) is defined as net income (loss) before noncontrolling interests in Operating Partnership, computed in accordance with GAAP, excluding gains or losses from depreciable rental property transactions (including both acquisitions and dispositions), and impairments related to depreciable rental property, plus real estate-related depreciation and amortization. The Company believes that FFO is helpful to investors as one of several measures of the performance of an equity REIT. The Company further believes that as FFO excludes the effect of depreciation, gains (or losses) from property transactions and impairments related to depreciable rental property (all of which are based on historical costs which may be of limited relevance in evaluating current performance), FFO can facilitate comparison of operating performance between equity REITs.
FFO should not be considered as an alternative to net income available to common shareholders as an indication of the Company’s performance or to cash flows as a measure of liquidity. FFO presented herein is not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, the Company’s FFO is comparable to the FFO of real estate companies that use the current definition of the National Association of Real Estate Investment Trusts (“NAREIT”).
As the Company considers its primary earnings measure, net income available to common shareholders, as defined by GAAP, to be the most comparable earnings measure to FFO, the following table presents a reconciliation of net income available to common shareholders to FFO, as calculated in accordance with NAREIT’s current definition, for the years ended December 31, 2020, 2019 and 2018 (in thousands):
Year Ended December 31,
Net income (loss) available to common shareholders
$
(51,387)
$
111,861
$
84,111
Add (deduct): Noncontrolling interests in Operating Partnership
(13,279)
23,720
7,127
Noncontrolling interests in discontinued operations
7,880
(10,456)
2,400
Real estate-related depreciation and amortization on
continuing operations (a)
132,816
144,932
129,908
Real estate-related depreciation and amortization
on discontinued operations
4,806
70,614
60,486
Property impairments on continuing operations
36,582
-
-
Property impairments on discontinued operations
-
11,696
-
Impairment of unconsolidated joint venture investment
(included in Equity in earnings)
2,562
3,661
Gain on change of control of interests
-
(13,790)
(14,217)
Gain on sale from unconsolidated joint ventures
(35,184)
(903)
-
Continuing operations: Realized (gains) losses and unrealized losses
on disposition of rental property, net
(5,481)
(343,102)
(99,436)
Discontinued operations: Realized (gains) losses and unrealized losses
on disposition of rental property, net
(11,201)
117,898
-
Funds from operations available to common stock
and Operating Partnership unitholders (b)
$
68,114
$
116,131
$
170,379
(a)Includes the Company’s share from unconsolidated joint ventures, and adjustments for noncontrolling interests, of $12.4 million, $13.0 million and $17.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. Excludes non-real estate-related depreciation and amortization of $1,610, $2,092 and $2,139 for the years ended December 31, 2020, 2019 and 2018, respectively.
(b)Net income available to common shareholders in 2020, 2019 and 2018 included $16.8 million, $36.2 million and $24.6 million, respectively, of land impairment charges and $5.8 million, $0.5 million and $30.9 million, respectively, from a gain (loss) on sale of developable land, which are included in the calculation to arrive at funds from operations as such gains and charges relate to non-depreciable assets.
Inflation
The Company’s leases with the majority of its commercial tenants provide for recoveries and escalation charges based upon the tenant’s proportionate share of, and/or increases in, real estate taxes and certain operating costs, which reduce the Company’s exposure to increases in operating costs resulting from inflation. The Company believes that inflation did not materially impact the Company’s results of operations and financial condition for the periods presented.
Disclosure Regarding Forward-Looking Statements
We consider portions of this information, including the documents incorporated by reference, to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered
by the safe harbor provisions for forward-looking statements contained in Section 21E of such act. Such forward-looking statements relate to, without limitation, our future economic performance, plans and objectives for future operations and projections of revenue and other financial items. Forward-looking statements can be identified by the use of words such as “may,” “will,” “plan,” “potential,” “projected,” “should,” “expect,” “anticipate,” “estimate,” “target,” “continue” or comparable terminology. Forward-looking statements are inherently subject to certain risks, trends and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.
In addition, the extent to which the ongoing COVID-19 pandemic impacts us and our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in this Annual Report on Form 10-K for the year ended December 31, 2020, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.
Among the factors about which we have made assumptions are:
risks and uncertainties affecting the general economic climate and conditions, which in turn may have a negative effect on the fundamentals of our business and the financial condition of our tenants and residents;
the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing collateralized by our properties or on an unsecured basis;
the extent of any tenant bankruptcies or of any early lease terminations;
our ability to lease or re-lease space at current or anticipated rents;
changes in the supply of and demand for our properties;
changes in interest rate levels and volatility in the securities markets;
our ability to complete construction and development activities on time and within budget, including without limitation obtaining regulatory permits and the availability and cost of materials, labor and equipment;
forward-looking financial and operational information, including information relating to future development projects, potential acquisitions or dispositions, leasing activities, capitalization rates, and projected revenue and income;
changes in operating costs;
our ability to obtain adequate insurance, including coverage for terrorist acts;
our credit worthiness and the availability of financing on attractive terms or at all, which may adversely impact our ability to pursue acquisition and development opportunities and refinance existing debt and our future interest expense;
changes in governmental regulation, tax rates and similar matters; and
other risks associated with the development and acquisition of properties, including risks that the development may not be completed on schedule, that the tenants or residents will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated.
For further information on factors which could impact us and the statements contained herein, see Item 1A: Risk Factors. We assume no obligation to update and supplement forward-looking statements that become untrue because of subsequent events, new information or otherwise.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. In pursuing its business plan, the primary market risk to which the Company is exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between the Company’s yield on invested assets and cost of funds and, in turn, its ability to make distributions or payments to its investors.
Approximately $2.4 billion of the Company’s long-term debt as of December 31, 2020 bears interest at fixed rates and therefore the fair value of these instruments is affected by changes in market interest rates. The following table presents principal cash flows (in thousands) based upon maturity dates of the debt obligations and the related weighted-average interest rates by expected maturity dates for the fixed rate debt. The interest rates on the Company’s variable rate debt as of December 31, 2020 ranged from LIBOR plus 184 basis points to LIBOR plus 340 basis points. Assuming interest-rate swaps and caps are not in effect, if market rates of interest on the Company’s variable rate debt increased or decreased by 100 basis points, then the increase or decrease in interest costs on the Company’s variable rate debt would be approximately $4.3 million annually and the increase or decrease in the fair value of the Company’s fixed rate debt as of December 31, 2020 would be approximately $112.5 million.
December 31, 2020
Debt,
including current portion
Fair
($s in thousands)
Thereafter
Sub-total
Other (a)
Total
Value
Fixed Rate
$
4,390
$
300,550
$
336,045
$
311,403
$
3,300
$
607,822
$
822,991
$
2,386,501
$
(12,123)
$
2,374,378
$
2,451,583
Average Interest Rate
4.59
%
4.61
%
3.53
%
3.43
%
3.98
%
3.85
%
3.79
%
3.83
%
Variable Rate
$
25,000
$
140,357
$
42,459
$
161,545
$
-
$
63,000
$
-
$
432,361
$
(4,942)
$
427,419
$
427,419
(a) Adjustment for unamortized debt discount/premium, net, unamortized deferred financing costs, net, and unamortized mark-to-market, net as of December 31, 2020.
While the Company has not experienced any significant credit losses, in the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in losses to the Company which could adversely affect its operating results and liquidity.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company and the Report of PricewaterhouseCoopers LLP, together with the notes to the Consolidated Financial Statements of the Company, as set forth in the index in Item 15: Exhibits and Financial Statements, are filed under this Item 8: Financial Statements and Supplementary Data and are incorporated herein by reference.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Mack-Cali Realty Corporation
Disclosure Controls and Procedures. The General Partner’s management, with the participation of the General Partner’s chief executive officer and chief financial officer, has evaluated the effectiveness of the General Partner’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the General Partner’s chief executive officer and chief financial officer have concluded that, as of the end of such period, the General Partner’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the General Partner in the reports that it files or submits under the Exchange Act.
Management’s Report on Internal Control Over Financial Reporting. Internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, is a process designed by, or under the supervision of, the General Partner’s chief executive officer and chief financial officer, or persons performing similar functions, and effected by the General Partner’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The General Partner’s management, with the participation of the General Partner’s chief executive officer and chief financial officer, has established and maintained policies and procedures designed to maintain the adequacy of the General Partner’s internal control over financial reporting, and includes those policies and procedures that:
(1)Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the General Partner;
(2)Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the General Partner are being made only in accordance with authorizations of management and directors of the General Partner; and
(3)Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the General Partner’s assets that could have a material effect on the financial statements.
The General Partner’s management has evaluated the effectiveness of the General Partner’s internal control over financial reporting as of December 31, 2020 based on the criteria established in a report entitled Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on our assessment and those criteria, the General Partner’s management has concluded that the General Partner’s internal control over financial reporting was effective as of December 31, 2020.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
The effectiveness of the General Partner’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes In Internal Control Over Financial Reporting. In January 2020, the Company implemented Company-wide a new accounting and reporting software system and accordingly has updated its internal controls over financial reporting, as necessary, to accommodate changes to its accounting and reporting processes related to the implementation of this system. Other than this change, there have not been any changes in the General Partner’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the General Partner’s internal control over financial reporting.
Mack-Cali Realty, L.P.
Disclosure Controls and Procedures. The General Partner’s management, with the participation of the General Partner’s chief executive officer and chief financial officer, has evaluated the effectiveness of the Operating Partnership’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, the General Partner’s chief executive officer and chief financial officer have concluded that, as of the end of such period, the Operating Partnership’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Operating Partnership in the reports that it files or submits under the Exchange Act.
Management’s Report on Internal Control Over Financial Reporting. Internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, is a process designed by, or under the supervision of, the General Partner’s chief executive officer and chief financial officer, or persons performing similar functions, and effected by the General Partner’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The General Partner’s management, with the participation of the General Partner’s chief executive officer and chief financial officer, has established and maintained policies and procedures designed to maintain the adequacy of the Operating Partnership’s internal control over financial reporting, and includes those policies and procedures that:
(1)Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Operating Partnership;
(2)Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Operating Partnership are being made only in accordance with authorizations of management and directors of the General Partner; and
(3)Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Operating Partnership’s assets that could have a material effect on the financial statements.
The General Partner’s management has evaluated the effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2020 based on the criteria established in a report entitled Internal Control-Integrated Framework, issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on our assessment and those criteria, the General Partner’s management has concluded that the Operating Partnership’s internal control over financial reporting was effective as of December 31, 2020.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
The effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes In Internal Control Over Financial Reporting. In January 2020, the Company implemented Company-wide a new accounting and reporting software system and accordingly has updated its internal controls over financial reporting, as necessary, to accommodate changes to its accounting and reporting processes related to the implementation of this system. Other than this change, there have not been any changes in the Operating Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
Not Applicable.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by Item 10 will be set forth in the General Partner’s definitive proxy statement for its annual meeting of shareholders expected to be held on June 9, 2021, and is incorporated herein by reference.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 will be set forth in the General Partner’s definitive proxy statement for its annual meeting of shareholders expected to be held on June 9, 2021, and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 will be set forth in the General Partner’s definitive proxy statement for its annual meeting of shareholders expected to be held on June 9, 2021, and is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 will be set forth in the General Partner’s definitive proxy statement for its annual meeting of shareholders expected to be held on June 9, 2021, and is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 will be set forth in the General Partner’s definitive proxy statement for its annual meeting of shareholders expected to be held on June 9, 2021, and is incorporated herein by reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. All Financial Statements
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the Years Ended December 31, 2020, 2019, and 2018.
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules
(i)Mack-Cali Realty Corporation and Mack-Cali Realty, L.P.:
Schedule III - Real Estate Investments and Accumulated Depreciation as of December 31, 2020 with reconciliations for the years ended December 31, 2020, 2019 and 2018.
All other schedules are omitted because they are not required or the required information is shown in the financial statements or notes thereto.
(a) 3. Exhibits
The exhibits required by this item are set forth on the Exhibit Index attached hereto.