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


FORM 10-K


ý

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

For the fiscal year ended December 31, 2002

o

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

Commission File Number: 333-57103


MACK-CALI REALTY, L.P.
(Exact Name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  22-3315804
(IRS Employer
Identification No.)
     
11 Commerce Drive, Cranford, New Jersey
(Address of principal executive offices)
  07016-3599
(Zip code)

(908) 272-8000
(Registrant's telephone number, including area code)

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

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

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


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

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

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b2). Yes ý

        LOCATION OF EXHIBIT INDEX:    The index of exhibits is contained in Part IV herein on page number 72.

        DOCUMENTS INCORPORATED BY REFERENCE:    Portions of Mack-Cali Realty Corporation's definitive proxy statement for fiscal year ended December 31, 2002 to be issued in conjunction with Mack-Cali Realty Corporation's annual meeting of shareholders to be held on May 13, 2003 are incorporated by reference in Part III of this Form 10-K.





TABLE OF CONTENTS
FORM 10-K

 
 
  Page No.
PART I      
 
Item 1

Business

 

3
  Item 2 Properties   21
  Item 3 Legal Proceedings   52
  Item 4 Submission of Matters to a Vote of Security Holders   52

PART II

 

 

 
 
Item 5

Market for Registrant's Common Equity and Related Stockholder Matters

 

53
  Item 6 Selected Financial Data   54
  Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations   55
  Item 7A Quantitative and Qualitative Disclosures About Market Risk   70
  Item 8 Financial Statements and Supplementary Data   71
  Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   71

PART III

 

 

 
 
Item 10

Directors and Executive Officers of the Registrant

 

72
  Item 11 Executive Compensation   72
  Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   72
  Item 13 Certain Relationships and Related Transactions   72
  Item 14 Controls and Procedures   72

PART IV

 

 

 
 
Item 15

Exhibits, Financial Statements, Schedules and Reports on Form 8-K

 

72

2



PART I

ITEM 1.    BUSINESS

GENERAL

        Mack-Cali Realty, L.P., a Delaware limited partnership (together with its subsidiaries, the "Operating Partnership"), is a majority-owned subsidiary of Mack-Cali Realty Corporation, a Maryland corporation (the "Corporation"). The Operating Partnership owns and operates a real estate portfolio comprised predominantly of Class A office and office/flex properties located primarily in the Northeast. The Operating Partnership performs substantially all commercial real estate leasing, management, acquisition, development and construction services on an in-house basis. The Operating Partnership was formed on May 31, 1994. The Operating Partnership's executive offices are located at 11 Commerce Drive, Cranford, New Jersey 07016, and its telephone number is (908) 272-8000. The Corporation has an internet website at www.mack-cali.com.

        As of December 31, 2002, the Operating Partnership owned or had interests in 265 properties, aggregating approximately 29.3 million square feet (collectively, the "Properties"), plus developable land. The Properties are comprised of: (a) 256 wholly-owned or Operating Partnership controlled properties consisting of 150 office buildings and 95 office/flex buildings totaling approximately 26.7 million square feet, six industrial/warehouse buildings totaling approximately 387,400 square feet, two stand-alone retail properties and three land leases (collectively, the "Consolidated Properties"); and (b) six office buildings and one office/flex building aggregating 2.1 million square feet, one stand-alone retail property aggregating approximately 100,740 square feet and a 350-room hotel, which are owned by unconsolidated joint ventures in which the Operating Partnership has investment interests. Unless otherwise indicated, all references to square feet represent net rentable area. As of December 31, 2002, the office, office/flex and industrial/warehouse properties included in the Consolidated Properties (excluding in-service development properties in lease-up) were 92.3 percent leased to approximately 2,100 tenants. See Item 2: Properties. The Properties are located in eight states, primarily in the Northeast, and the District of Columbia.

        The general partner of the Operating Partnership is the Corporation, which has elected to be treated and operated so as to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended. The common stock, par value $0.01, of the Corporation (the "Common Stock") is listed on the New York Stock Exchange and the Pacific Exchange under the symbol "CLI." Substantially all of the Corporation's interests in the Properties are held through, and its operations are conducted through, the Operating Partnership, or through entities controlled by the Operating Partnership. As of February 14, 2003, 57,457,079 shares of Common Stock were outstanding. Also, as of February 14, 2003, the Corporation owned an 80.3 percent general partnership interest in the Operating Partnership, assuming conversion of all preferred limited partnership units of the Operating Partnership into common limited partnership units. Without giving effect to the preferred limited partnership units of the Operating Partnership, the Corporation would own an 88.0 percent general partnership interest in the Operating Partnership. As used herein, the term "Units" refers to common limited partnership interests in the Operating Partnership. Units are redeemable for an equal number of shares of Common Stock or cash.

        The Operating Partnership's strategy has been to focus its operations, acquisition and development of office properties in markets and sub-markets where it believes it is, or can become, a significant and preferred owner and operator. The Operating Partnership will continue this strategy by expanding, through acquisitions and/or development in Northeast markets and sub-markets where it has, or can achieve, similar status. The Operating Partnership believes that its Properties have excellent locations and access and are well-maintained and professionally managed. As a result, the Operating Partnership believes that its Properties attract high quality tenants and achieve among the highest rental, occupancy and tenant retention rates within their markets. The Operating Partnership also believes that its

3



extensive market knowledge provides it with a significant competitive advantage which is further enhanced by its strong reputation for, and emphasis on, delivering highly responsive, professional management services. See "Business Strategies".

        The Corporation's executive officers have been employed by the Corporation and/or its predecessor companies for an average of approximately 15 years.

BUSINESS STRATEGIES

Operations

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

        Communication with tenants:    The Operating Partnership emphasizes frequent communication with tenants to ensure first-class service to the Properties. Property managers 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 Operating Partnership's and tenants' needs and expectations. Property managers additionally budget and oversee capital improvements and building system upgrades to enhance the Properties' competitive advantages in their markets and to maintain the quality of the Operating Partnership's properties.

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

Growth

        The Operating Partnership plans to continue to own and operate a portfolio of properties in high-barrier-to-entry markets, with a primary focus in the Northeast. The Operating Partnership's primary objectives are to maximize funds from operations and to enhance the value of its portfolio through effective management, acquisition, development and property sales strategies, as follows:

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

        Acquisitions:    The Operating Partnership 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

4



believes it is, or can become, a significant and preferred owner and operator. The Operating Partnership intends to acquire, invest in or redevelop additional properties that: (i) provide attractive initial yields with potential for growth in cash flow from operations; (ii) are well-located, of high quality and competitive in their respective sub-markets; (iii) are located in its existing sub-markets or in sub-markets in which the Operating Partnership can become a significant and preferred owner and operator; and (iv) have been under-managed or are otherwise capable of improved performance through intensive management, capital improvements and/or leasing that should result in increased occupancy and rental revenues.

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

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

Financial

        The Operating Partnership currently intends to maintain a ratio of debt-to-undepreciated assets (total debt of the Operating Partnership as a percentage of total undepreciated assets) of approximately 50 percent or less. As of December 31, 2002, the Operating Partnership's total debt constituted approximately 41.3 percent of total undepreciated assets of the Operating Partnership. The Operating Partnership has three investment grade credit ratings. Standard & Poor's Rating Services ("S&P") and Fitch, Inc. ("Fitch") have each assigned their BBB rating to existing and prospective senior unsecured debt of the Operating Partnership. S&P and Fitch have also assigned their BBB- rating to prospective preferred stock offerings of the Corporation. Moody's Investors Service ("Moody's") has assigned its Baa3 rating to existing and prospective senior unsecured debt of the Operating Partnership and its Ba1 rating to prospective preferred stock offerings of the Corporation. Although there is no limit in the Operating Partnership's organizational documents on the amount of indebtedness that the Operating Partnership may incur or the requirement for maintenance of investment grade credit ratings, the Operating Partnership has entered into certain financial agreements which contain covenants that limit the Operating Partnership's ability to incur indebtedness under certain circumstances. The Operating Partnership intends to conduct its operations so as to best be able to maintain its investment grade rated status. The Operating Partnership 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 sales, short-term and long-term borrowings (including draws on the Operating Partnership's revolving credit facility), and the issuance of additional debt or equity securities.

EMPLOYEES

        As of December 31, 2002, the Operating Partnership had no employees. The Corporation had approximately 340 full-time employees.

5



COMPETITION

        The leasing of real estate is highly competitive. The Properties compete for tenants with lessors and developers of similar properties located in their respective markets primarily on the basis of location, rent charged, services provided, and the design and condition of the Properties. The Operating Partnership 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 and individual investors.

REGULATIONS

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

        Under various laws and regulations relating to the protection of the environment, an owner of real estate may be held liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner was responsible for, or even knew of, the presence of such substances. The presence of such substances may adversely affect the owner's ability to rent or sell the property or to borrow using such property as collateral and may expose it to liability resulting from any release of, or exposure to, such substances. Persons who arrange for the disposal or treatment of hazardous or toxic substances at another location may also be liable for the costs of 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 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 Operating Partnership 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 Operating Partnership, or (iii) the Operating Partnership's assessments reveal all environmental liabilities and that there are no material environmental liabilities of which the Operating Partnership is aware. If compliance with the various laws and regulations, now existing or hereafter adopted, exceeds the Operating Partnership's budgets for such items, the Operating Partnership'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 Operating Partnership'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 Operating Partnership operates in only one industry segment—real estate. The Operating Partnership 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 segment.

6



RECENT DEVELOPMENTS

        As a result of the economic climate in 2002, substantially all of the real estate markets the Operating Partnership operates in materially softened. Demand for office space declined significantly and vacancy rates increased in each of the Operating Partnership's core markets since the first quarter of 2001. Through February 14, 2003, the Operating Partnership's core markets continued to be weak. The percentage leased in the Operating Partnership's consolidated portfolio of stabilized operating properties decreased to 92.3 percent at December 31, 2002, as compared to 94.6 percent at December 31, 2001 and 96.8 percent at December 31, 2000. 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. Market rental rates have declined in most markets from peak levels in late 2000 and early 2001. Rental rates on the Operating Partnership's space that was re-leased during the year ended December 31, 2002 increased an average of 3.0 percent compared to rates that were in effect under expiring leases, as compared to a 9.5 percent increase in 2001 and a 12.9 percent increase in 2000. The Operating Partnership believes that vacancy rates may continue to increase in most of its markets going into 2003.

        In September 2002, the Operating Partnership announced a 1.6 percent increase in its quarterly common unit distribution, commencing with the Operating Partnership's distribution with respect to the third quarter of 2002, from $0.62 per common unit ($2.48 per common unit on an annualized basis) to $0.63 per common unit ($2.52 per common unit on an annualized basis). With respect to the fourth quarter of 2002, the Operating Partnership declared a cash distribution of $0.63 per unit on December 19, 2002 to unitholders of record as of January 6, 2003. The distributions were paid on January 17, 2003. The Operating Partnership has increased its quarterly common unit distribution for eight consecutive years representing an increase of 56.0 percent over the period.

        In 2002, the Operating Partnership:


        Additionally, in 2002, the Operating Partnership, through unconsolidated joint ventures, commenced initial operations of a 577,575 square foot office property and a 350-room hotel for a total investment cost of approximately $141.4 million and sold a 183,200 square foot, three-building office complex for approximately $31.7 million. See Note 4 to the Financial Statements for further information regarding joint venture activity.

7


Operating Property Acquisitions

        The Operating Partnership acquired the following operating properties during the year ended December 31, 2002:

Acquisition
Date

  Property/Address
  Location
  # of
Bldgs.

  Rentable
Square Feet

  Investment by
Company(a)
(in thousands)
Office:                      
08/09/02   25 Commerce Drive   Cranford, Union County, NJ   1   67,749   $ 7,706
08/09/02   3 Skyline Drive(b)   Hawthorne, Westchester County, NY   1   75,668     9,460
11/01/02   1633 Littleton Road(c)   Parsippany, Morris County, NJ   1   57,722     11,833
11/05/02   1266 East Main Street   Stamford, Fairfield County, CT   1   179,260     33,205
12/11/02   2200 Renaissance Boulevard   King of Prussia, Montgomery County, PA   1   174,124     26,800
12/31/02   16 & 18 Sentry Park West   Blue Bell, Montgomery County, PA   2   188,103     34,466
           
 
 
Total Office Property Acquisitions:   7   742,626   $ 123,470
           
 
 

(a)
Transactions were funded primarily through borrowings on the Operating Partnership's revolving credit facility, from net proceeds received in the sale or sales of rental property, and/or from the Operating Partnership's cash reserves. Amounts are as of December 31, 2002.
(b)
On August 9, 2002, the Operating Partnership acquired an undivided 68.1 percent interest (75,668 square feet) in 3 Skyline Drive, a 113,098 square-foot office property. The property was acquired as tenants-in-common with the intention that, soon after the completion of the acquisition, the individual interests would be converted into separate condominium units. On September 27, 2002, the Operating Partnership executed a condominium agreement and deed to formalize the conversion of its undivided interest in the property into a condominium interest. The Operating Partnership has accounted for its interest in the property as if the condominium was in place since the date of acquisition.
(c)
In connection with the acquisition of the 1633 Littleton Road property, the Operating Partnership assumed a mortgage loan, which was recorded at $3.5 million and bears an effective interest rate of 7.66 percent. The loan is secured by the 1633 Littleton Road property and will mature on February 10, 2006.

Land Acquisitions

        On June 12, 2002, the Operating Partnership acquired three land parcels located in Hawthorne and Yonkers, Westchester County, New York in one transaction for a total cost of approximately $2,600. The land was acquired from an entity whose principals include Timothy M. Jones, Robert F. Weinberg and Martin S. Berger, each of whom are affiliated with the Operating Partnership as the President of the Corporation, a current member of the Board of Directors and a former member of the Board of Directors of the Corporation, respectively. In connection with the Operating Partnership's acquisition of 65 Class A properties from The Robert Martin Company ("Robert Martin") on January 31, 1997, as subsequently modified, the Operating Partnership granted Robert Martin the right to designate one seat on the Corporation's Board of Directors ("RM Board Seat"), which right has since expired. Robert Martin designated Martin S. Berger and Robert F. Weinberg to jointly share the RM Board Seat, as follows: Mr. Weinberg served as a member of the Board of Directors of the Corporation from 1997 until December 1, 1998, at which time Mr. Weinberg resigned and Mr. Berger was appointed to serve in such capacity. Mr. Berger served as a member of the Board of Directors of the Corporation from December 1, 1998 until March 6, 2001, at which time Mr. Berger resigned and Mr. Weinberg was appointed to serve in such capacity until the Corporation's 2003 annual meeting of stockholders. If the Corporation elects to nominate for re-election to its Board of Directors a designee of Robert Martin at the Corporation's 2003 annual meeting of stockholders, then Mr. Berger and Mr. Weinberg have agreed that Mr. Berger will be so nominated and the seat will be rotated among Mr. Berger and Mr. Weinberg every 12 months commencing on the 12 month anniversary of the 2003 annual meeting of stockholders. Upon the death of Mr. Berger or Mr. Weinberg, the surviving person shall solely fill the remainder of the term of the RM Board Seat.

8


Properties Commencing Initial Operations

        The following properties commenced initial operations during the year ended December 31, 2002:

Acquisition
Date

  Property/Address
  Location
  # of
Bldgs.

  Rentable
Square Feet

  Investment by
Operating
Partnership(a)
(in thousands)
 
Office:                        
09/03/02   Harborside Plaza 5   Jersey City, Hudson County, NJ   1   980,000   $ 196,610 (b)

11/18/02

 

600 Horizon Drive

 

Hamilton Township, Mercer County, NJ

 

1

 

95,000

 

 

7,549

 

 

 

 

 

 

 



 



 



 

Total Office Properties Commencing Initial Operations:

 

2

 

1,075,000

 

$

204,159

 

 

 

 

 

 

 



 



 



 

Office/Flex:

 

 

 

 

 

 

 

 

 

 

04/01/02

 

125 Clearbrook Road

 

Elmsford, Westchester County, NY

 

1

 

33,000

 

 

4,985

(c)

 

 

 

 

 

 



 



 



 

Total Properties Commencing Initial Operations:

 

 

 

3

 

1,108,000

 

$

209,144

 

 

 

 

 

 

 



 



 



 

(a)
Development costs were funded primarily through draws on the Operating Partnership's revolving credit facility. Amounts are as of December 31, 2002.
(b)
Amount consists of $176,900 included in rental property and $19,710 of leasing commissions and other deferred leasing costs, which are included in deferred charges and other assets.
(c)
Amount consists of $4,731 included in rental property and $254 of leasing commissions, which is included in deferred charges and other assets.

Property Sales

        The Operating Partnership sold the following properties during the year ended December 31, 2002:

Sale
Date

  Property/Address
  Location
  # of
Bldgs.

  Rentable
Square Feet

  Net Sales
Proceeds
(in thousands)
  Net Book
Value
(in thousands)
  Realized
Gain/(Loss)
(in thousands)
 
Office:                                

05/13/02

 

Dallas Portfolio (a)

 

Metro Dallas, TX

 

4

 

488,789

 

$

33,115

 

$

34,760

 

$

(1,645

)

05/29/02

 

750 South Richfield Street

 

Aurora, Arapahoe County, CO

 

1

 

108,240

 

 

20,631

 

 

21,291

 

 

(660

)

06/06/02

 

Houston Portfolio (b)

 

Houston, Harris County, TX

 

3

 

413,107

 

 

25,482

 

 

24,393

 

 

1,089

 

07/15/02

 

501 Kennedy Boulevard

 

Tampa, Hillsborough County, FL

 

1

 

297,429

 

 

22,915

 

 

22,459

 

 

456

 

10/16/02

 

Arizona Portfolio (c)

 

Maricopa County, AZ

 

3

 

416,967

 

 

42,764

 

 

42,719

 

 

45

 

 

 

 

 

 

 



 



 



 



 



 

Total Office Property Sales:

 

12

 

1,724,532

 

$

144,907

 

$

145,622

 

$

(715

)

 

 

 

 

 

 



 



 



 



 



 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

01/30/02

 

25 Martine Avenue

 

White Plains, Westchester County, NY

 

1

 

124 units

 

 

17,559

 

 

10,461

 

 

7,098

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

04/25/02

 

Horizon Center Land

 

Hamilton Township, Mercer County, NJ

 


 

0.756 acres

 

 

758

 

 

41

 

 

717

 

 

 

 

 

 

 



 



 



 



 



 

Total Property Sales:

 

13

 

1,724,532

 

$

163,224

 

$

156,124

 

$

7,100

 

 

 

 

 

 

 



 



 



 



 



 

9



Development

        On February 12, 2003, the Meadowlands Xanadu proposal, presented by a joint venture to be formed among The Mills Corporation, the Corporation and The New York Giants, was selected by the New Jersey Sports and Exposition Authority, providing them with the exclusive right to negotiate a developer's agreement for the development of a $1.3 billion family entertainment and recreation complex with an office and hotel component at the Continental Airlines Arena site in East Rutherford, New Jersey. Meadowlands Xanadu's 4.76-million-square-foot complex is expected to feature a family entertainment destination comprising three themed zones: sports/recreation, kids' activities and fashion. The project is expected to also include office and hotel space totaling 2.2 million square feet, consisting of four 14-story, 440,000 square-foot office buildings and a 520-room hotel with conference and exhibition facilities. No definitive documentation has been entered into between The Mills Corporation and the Corporation with respect to the Xanadu Project. However, it is the current understanding between Mills and the Corporation that the retail component will be shared 80 percent to Mills and 20 percent to the Corporation and the office and hotel components will be shared 80 percent to the Corporation and 20 percent to Mills, subject to any arrangements with third parties such as The New York Giants. There can be no assurance that these will be the final economic arrangements.

FINANCING ACTIVITY

Exchange of Senior Unsecured Notes

        On December 20, 2002, the Operating Partnership exchanged $90.0 million face amount of existing 7.18 percent senior unsecured notes due December 31, 2003, with interest payable monthly in arrears, for $94.9 million face amount of 6.15 percent senior unsecured notes due December 15, 2012, with interest payable semi-annually in arrears. The exchange was completed with Teachers Insurance and Annuity Association ("TIAA").

Revolving Credit Facility

        On September 27, 2002, the Operating Partnership obtained an unsecured revolving credit facility ("2002 Unsecured Facility") with a current borrowing capacity of $600.0 million from a group of 14 lenders. The interest rate on outstanding borrowings under the credit line is currently the London Inter-Bank Offered Rate ("LIBOR") plus 70 basis points. The Operating Partnership may instead elect an interest rate representing the higher of the lender's prime rate or the Federal Funds rate plus 50 basis points. The 2002 Unsecured Facility also requires a 20 basis point facility fee on the current borrowing capacity payable quarterly in arrears. In the event of a change in the Operating Partnership's unsecured debt rating, the interest rate and facility fee will be changed on a sliding scale. Subject to certain conditions, the Operating Partnership has the ability to increase the borrowing capacity of the credit line up to $800.0 million. The 2002 Unsecured Facility matures in September 2005, with an extension option of one year, which would require upon exercise a payment of 25 basis points of the then borrowing capacity of the credit line.

Mortgage Financing

        On December 16, 2002, the Operating Partnership obtained $19.5 million in proceeds from TIAA through a mortgage loan secured by Soundview Plaza, an office property located in Stamford, Fairfield

10



County, Connecticut. The mortgage bears interest at an effective interest rate of 6.02 percent per annum and matures in January 2013. Proceeds from the financing were used to pay down outstanding borrowings on the Operating Partnership's revolving credit facility.

        On December 30, 2002, the Operating Partnership obtained $19.1 million in proceeds from TIAA through a mortgage loan secured by 2200 Renaissance Boulevard, an office property located in King of Prussia, Montgomery County, Pennsylvania. The mortgage bears interest at an effective interest rate of 5.89 percent per annum and matures in December 2012. Proceeds from the financing were used to pay down outstanding borrowings on the Operating Partnership's revolving credit facility.

Interest Rate Contract

        In November 2002, the Operating Partnership paid $1.9 million in settlement of a forward treasury rate lock agreement entered into in July 2002, which is being amortized to interest expense over a three-year period. The agreement was used to fix the index rate on $61.5 million of the Operating Partnership's Harborside Financial Center—Plaza 1 mortgage, for which the interest rate was re-set to the three-year U.S. Treasury Note plus 130 basis points for the three year period beginning November 4, 2002.

Stock Repurchases

        On September 13, 2000, the Board of Directors of the Corporation authorized an increase to the Corporation's repurchase program under which the Corporation was permitted to purchase up to an additional $150.0 million of the Corporation's outstanding common stock ("Repurchase Program"). From that date through February 14, 2003, the Corporation purchased for constructive retirement under the Repurchase Program 3.7 million shares of its outstanding common stock for an aggregate cost of approximately $104.5 million, of which 0.4 million shares were repurchased in 2002 for a total cost of $12.6 million. Concurrent with these purchases, the Corporation sold to the Operating Partnership 3.7 million common units at an aggregate cost of approximately $104.5 million. As of February 14, 2003, the Corporation has a remaining authorization to repurchase up to an additional $45.5 million of its outstanding common stock, which it may repurchase from time to time in open market transactions at prevailing prices or through privately negotiated transactions.

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 Operating Partnership. The Operating Partnership refers to itself as "we" or "our" in the following risk factors.

Declines in economic activities in the Northeastern office markets could adversely affect our operating results.

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

        The current economic downturn has resulted in a receding real estate market, the relocation of companies and an uncertain economic future for many businesses. We are uncertain how long the current downturn will last. The current economic downturn may also be having a negative economic impact on many industries, including securities, insurance services, telecommunications and computer

11



systems and other technology, businesses in which many of our tenants are involved. Such economic impact may cause our tenants to have difficulty or be unable to meet their obligations to us.

Our performance is subject to risks associated with the real estate industry.

        General:    Our ability to make distributions or payments to our investors depends on the ability of our properties to generate funds in excess of operating expenses (including scheduled principal payments on debt and capital expenditure requirements). 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:

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

        Our insurance coverage on our properties may be inadequate:    We currently carry comprehensive insurance on all of our properties, including insurance for liability, fire and flood. We cannot guarantee that the limits of our current policies will be sufficient in the event of a catastrophe to our properties. Our existing insurance policies expire in April and September 2003. 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

12



operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could adversely affect our ability to make distributions or payments to our investors.

        Illiquidity of real estate limits our ability to act quickly:    Real estate investments are relatively illiquid. Such illiquidity may limit our ability to react quickly in response to changes in economic and other conditions. If we want to sell an investment, we might not be able to dispose of that investment in the time period we desire, and the sales price of that investment might not recoup or exceed the amount of our investment. The prohibition in the Internal Revenue Code of 1986, as amended, and related regulations on a real estate investment trust holding property for sale also may restrict our ability to sell property. In addition, we acquired a significant number of our properties from individuals to whom we issued limited partnership units as part of the purchase price. In connection with the acquisition of these properties, in order to preserve such individual's 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 tax consequences of the recognition of such built-in-gains. As of December 31, 2002, 141 of our properties, with an aggregate net book value of approximately $1.8 billion, were subject to these restrictions, which expire periodically through 2008. The above limitations on our ability to sell our investments could adversely affect our ability to make distributions or payments to our investors.

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

        Environmental problems are possible and may be costly:    Various federal, state and local laws and regulations subject property owners or operators to liability for the costs of removal or remediation of certain hazardous or toxic substances located on or in the property. These laws often impose liability without regard to whether the owner or operator was responsible for or even knew of the presence of such substances. The presence of or failure to properly remediate hazardous or toxic substances (such as toxic mold) may adversely affect our ability to rent, sell or borrow against contaminated property. 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 materials into the air. As owners and operators of property and as potential arrangers for hazardous substance disposal, we may be liable under such laws and regulations for removal or remediation costs, governmental penalties, property damage, personal injuries and related expenses. Payment of such costs and expenses could adversely affect our ability to make distributions or payments to our investors.

        Competition for acquisitions may result in increased prices for properties:    We plan to acquire additional properties in New Jersey, New York and Pennsylvania and in the Northeast generally. We may be competing for investment opportunities with entities that have greater financial resources. Several office building developers and real estate companies may compete with us in seeking properties

13



for acquisition, land for development and prospective tenants. Such competition may adversely affect our ability to make distributions or payments to our investors by:

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

        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. These investments involve risks that do not exist with properties in which we own a controlling interest, including the possibility that our co-venturers or partners may, at any time, have business, economic or other objectives that are inconsistent with our objectives. Because we lack a controlling interest, our co-venturers or partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. While we seek protective rights against such company action, 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.

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:

        As of December 31, 2002, we had total outstanding indebtedness of $1.8 billion comprised of $1.1 billion of senior unsecured notes, outstanding borrowings of $73.0 million under our unsecured $600.0 million revolving credit facility and approximately $582.0 million of mortgage indebtedness. We

14



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

        Rising interest rates may adversely affect our cash flow:    As of December 31, 2002, outstanding borrowings of approximately $73.0 million under our revolving credit facility and approximately $32.2 million of our mortgage indebtedness bear interest at variable rates. We may incur additional indebtedness in the future that also bears interest at variable rates. Variable rate debt creates higher debt service requirements if market interest rates increase. Higher debt service requirements could adversely affect our ability to make distributions or payments to our investors and/or cause us to default under certain debt covenants.

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

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        We are dependent on external sources of capital for future growth:    To qualify as a real estate investment trust, Mack-Cali Realty Corporation 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.

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 our day-to-day operations. 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.

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        We are dependent on our key personnel whose continued service is not guaranteed.

        We are dependent upon the executive officers of Mack-Cali Realty Corporation for strategic business direction and real estate experience. While we believe that we could find replacements for these key personnel, loss of their services could adversely affect our operations. Mack-Cali Realty Corporation has entered into an employment agreement (including non-competition provisions) which provides for a continuous four-year employment term with each of Mitchell E. Hersh, Timothy M. Jones, Barry Lefkowitz and Roger W. Thomas. We also entered into an employment agreement (including non-competition provisions) with Michael A. Grossman in December 2000 which provides for a continuous one-year term from and after the two-year anniversary of the execution of the agreement. Mack-Cali Realty Corporation does not have key man life insurance for its executive officers.

        Certain provisions of Maryland law and the charter, bylaws and stockholder rights plan of Mack-Cali Realty Corporation could hinder, delay or prevent changes in control.

        Certain provisions of Maryland law, the charter, bylaws, and stockholder rights plan of Mack-Cali Realty Corporation have the effect of discouraging, delaying or preventing transactions that involve an actual or threatened change in control. These provisions include the following:

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

        Removal of Directors:    Under the Corporation'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 the Corporation's stockholders generally in the election of directors.

        Number of Directors, Board Vacancies, Term of Office:    The Corporation 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.

        Stockholder Requested Special Meetings:    The Corporation'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 Corporation'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 the Corporation is notified in a timely manner prior to the meeting.

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

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        Preferred Stock:    Under the Corporation's charter, the 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 the Corporation's stockholders.

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

        Ownership Limit:    In order to preserve the Corporation's status as a real estate investment trust under the Code, the Corporation's 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 the Board of Directors waives or modifies this ownership limit.

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

        Maryland Control Share Acquisition Act:    Maryland law provides that "control shares" of a corporation acquired in a "control share acquisition" shall have no voting rights except to the extent approved by a vote of two-thirds of the vote 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 or 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. The Corporation's bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any acquisitions of shares by certain affiliated individuals and entities, any directors, officers or employees of the Corporation and any person approved by the Board of Directors prior to the acquisition by such person of control

18



shares. Any control shares acquired in a control share acquisition which are not exempt under the foregoing provisions of the Corporation's bylaws will be subject to the Maryland Control Share Acquisition Act.

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

        Consequences of failure of Mack-Cali Realty Corporation to qualify as a real estate investment trust could adversely affect our financial condition.

        Failure to maintain ownership limits could cause Mack-Cali Realty Corporation to lose its qualification as a real estate investment trust:    In order for Mack-Cali Realty Corporation to maintain its qualification as a real estate investment trust, 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 Internal Revenue Code to include certain entities). Mack-Cali Realty Corporation has limited the ownership of its outstanding shares of its common stock by any single stockholder to 9.8 percent of the outstanding shares of its common stock. The Board of Directors of Mack-Cali Realty Corporation could waive this restriction if they were satisfied, based upon the advice of tax counsel or otherwise, that such action would be in the best interests of Mack-Cali Realty Corporation and would not affect its qualifications as a real estate investment trust. Common stock of Mack-Cali Realty Corporation acquired or transferred in breach of the limitation may be redeemed by Mack-Cali Realty Corporation for the lesser of the price paid and the average closing price for the 10 trading days immediately preceding redemption or sold at the direction of us. Mack-Cali Realty Corporation may elect to redeem such shares of common stock for limited partnership units, which are nontransferable except in very limited circumstances. Any transfer of shares of common stock which, as a result of such transfer, causes Mack-Cali Realty Corporation to be in violation of any ownership limit will be deemed void. Although Mack-Cali Realty Corporation currently intends to continue to operate in a manner which will enable it to continue to qualify as a real estate investment trust, it is possible that future economic, market, legal, tax or other considerations may cause Mack-Cali Realty Corporation's Board of Directors to revoke the election for Mack-Cali Realty Corporation to qualify as a real estate investment trust (see for example, the discussion below of President George W. Bush's proposed legislation to exempt corporate dividends from income taxation). Under Mack-Cali Realty Corporation's organizational documents, its Board of Directors can make such revocation without the consent of Mack-Cali Realty Corporation's stockholders.

        In addition, the consent of the holders of at least 85 percent of our partnership units is required: (i) to merge (or permit the merger of) us with another unrelated person, pursuant to a transaction in which we are not the surviving entity; (ii) to dissolve, liquidate or wind up; or (iii) to convey or otherwise transfer all or substantially all of our assets. Mack-Cali Realty Corporation, as general partner, owns approximately 80.3 percent of our outstanding partnership units (assuming conversion of all preferred limited partnership units).

        Tax liabilities as a consequence of failure of Mack-Cali Realty Corporation to qualify as a real estate investment trust: Mack-Cali Realty Corporation has elected to be treated and has operated so as to qualify as a real estate investment trust for federal income tax purposes since its taxable year ended December 31, 1994. Although Mack-Cali Realty Corporation 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 Internal Revenue Code. Because few judicial or administrative interpretations of such provisions exist and qualification determinations are fact

19



sensitive, we cannot assure you that Mack-Cali Realty Corporation will qualify as a real estate investment trust for any taxable year.

        If Mack-Cali Realty Corporation fails to qualify as a real estate investment trust in any taxable year, it will be subject to the following:

        A loss of Mack-Cali Realty Corporation'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 Mack-Cali Realty Corporation pay dividends to its stockholders.

        Other tax liabilities:    Even if Mack-Cali Realty Corporation qualifies as a real estate investment trust, it is subject to certain federal, state and local taxes on our income and property and, in some circumstances, certain other state and local taxes. Our net income from third party management and tenant improvements, if any, also may be subject to federal income tax.

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

        Recently, President Bush proposed legislation that would exempt from income taxation those dividends that shareholders receive that are out of earnings that have been subject to corporate-level taxation. Since the earnings of real estate investment trusts generally are not subject to corporate-level taxation (by reason of the dividends-paid deduction to which real estate investment trusts are entitled), the President's proposed dividend exemption would generally not apply to real estate investment trust dividends. Enactment of the President's proposed legislation may cause the Board of Directors of Mack-Cali Realty Corporation to determine to revoke the election for it to qualify as a real estate investment trust.

AVAILABLE INFORMATION

        The Corporation's internet website is www.mack-cali.com. The Operating Partnership makes available free of charge through the Corporation's website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after it electronically files or furnishes such materials to the Securities and Exchange Commission.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

        The Operating Partnership considers portions of this information to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. The Operating Partnership intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Such forward-looking statements relate to, without limitation, the Operating Partnership's future economic performance, plans and

20



objectives for future operations and projections of revenue and other financial items. Forward-looking statements can be identified by the use of words such as "may," "will," "should," "expect," "anticipate," "estimate," "continue" or comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Operating Partnership cannot predict with accuracy and some of which the Operating Partnership might not even anticipate. Although the Operating Partnership believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, it can give no assurance that its expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Among the factors about which the Operating Partnership has made assumptions are changes in the general economic climate; conditions, including those affecting industries in which the Operating Partnership's principal tenants compete; any failure of the general economy to recover from the current economic downturn; the extent of any tenant bankruptcies; the Operating Partnership's ability to lease or re-lease space at current or anticipated rents; changes in the supply of and demand for office, office/flex and industrial/warehouse properties; changes in interest rate levels; changes in operating costs; the Operating Partnership's ability to obtain adequate insurance, including coverage for terrorist acts; the availability of financing; and other risks associated with the development and acquisition of properties, including risks that the development may not be completed on schedule, that the tenants will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated. For further information on factors which could impact the Operating Partnership and the statements contained herein, see the "Risk Factors" section. The Operating Partnership assumes no obligation to update and supplement forward-looking statements that become untrue because of subsequent events.

ITEM 2. PROPERTIES

PROPERTY LIST

        As of December 31, 2002, the Operating Partnership's Consolidated Properties consisted of 251 in-service office, office/flex and industrial/warehouse properties, as well as two stand-alone retail properties and three land leases. The Consolidated Properties are located primarily in the Northeast. The Consolidated Properties are easily accessible from major thoroughfares and are in close proximity to numerous amenities. The Consolidated Properties contain a total of approximately 27.1 million square feet, with the individual properties ranging from approximately 6,200 to 980,000 square feet. The Consolidated Properties, managed by on-site employees, generally have attractively landscaped sites, atriums and covered parking in addition to quality design and construction. The Operating Partnership's tenants include many service sector employers, including a large number of professional firms and national and international businesses. The Operating Partnership believes that all of its properties are well-maintained and do not require significant capital improvements.

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Property Listing

Office Properties

Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

ATLANTIC COUNTY, NEW JERSEY                    
Egg Harbor                                    
100 Decadon Drive   1987   40,422   100.0   951   889   0.19   23.53   21.99   Computer Sciences Corp. (100%)
200 Decadon Drive   1991   39,922   100.0   798   779   0.16   19.99   19.51   Computer Sciences Corp. (100%)
BERGEN COUNTY, NEW JERSEY                    
Fair Lawn                                    
17-17 Route 208 North   1987   143,000   97.8   3,543   3,337   0.72   25.33   23.86   Lonza, Inc. (63%)
Fort Lee                                    
One Bridge Plaza   1981   200,000   97.7   4,924   4,599   1.00   25.20   23.54   Mellon HR Solutions, LLC (35%), Broadview Associates, LLP (16%), FCB Worldwide, Inc. (16%)
2115 Linwood Avenue   1981   68,000   99.7   1,711   1,320   0.35   25.24   19.47   US Depot, Inc. (23%), Ameribrom, Inc. (14%), Mack Management & Construction (12%), Morgan Stanley Dean Witter (10%)
Little Ferry                                    
200 Riser Road   1974   286,628   100.0   2,536   2,464   0.52   8.85   8.60   Ford Motor Company (34%), Casio, Inc. (33%), Dassault Falcon Jet Corp. (33%)
Montvale                                    
95 Chestnut Ridge Road   1975   47,700   100.0   566   502   0.12   11.87   10.52   Aventis Environmental Science (100%)
135 Chestnut Ridge Road   1981   66,150   100.0   1,560   1,309   0.32   23.58   19.79   Paychex, Inc. (45%), Automated Resources Group, Inc. (26%), Sys-Con Publications, Inc. (11%)
Paramus                                    
15 East Midland Avenue   1988   259,823   100.0   6,722   6,720   1.37   25.87   25.86   AT&T Wireless Services (100%)
461 From Road   1988   253,554   99.8   6,057   6,050   1.23   23.94   23.91   Toys "R' Us, Inc. (96%)
650 From Road   1978   348,510   92.9   7,749   7,304   1.58   23.93   22.56   Movado Group, Inc. (18%), Long Beach Acceptance Corp. (10%)
140 Ridgewood Avenue   1981   239,680   100.0   5,110   4,890   1.04   21.32   20.40   AT&T Wireless Services (57%), Smith Barney Shearson, Inc. (19%)
61 South Paramus Avenue   1985   269,191   100.0   6,718   6,098   1.37   24.96   22.65   Yamanouchi Pharma America, Inc. (21%)
Rochelle Park                                    
120 Passaic Street   1972   52,000   99.6   1,397   1,317   0.28   26.97   25.43   SBC Telecom, Inc. (53%), Cantor Fitzgerald, L.P. (46%)
365 West Passaic Street   1976   212,578   88.9   4,178   3,859   0.85   22.11   20.42   United Retail, Inc. (31%), Regulus, LLC (10%)

22


Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's) (b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

Upper Saddle River                                    
1 Lake Street   1973/94   474,801   100.0   7,465   7,465   1.52   15.72   15.72   Prentice-Hall, Inc. (100%)
10 Mountainview Road   1986   192,000   95.8   3,907   3,846   0.80   21.24   20.91   Thomson Minwax Company (23%), Professional Detailing, Inc. (20%), Corning Life Sciences, Inc. (15%), ITT Fluid Technology (14%), Pearson Education (14%)
Woodcliff Lake                                    
400 Chestnut Ridge Road   1982   89,200   100.0   2,124   2,124   0.43   23.81   23.81   Timeplex, Inc. (100%)
470 Chestnut Ridge Road   1987   52,500   100.0   1,192   1,192   0.24   22.70   22.70   Andermatt, LP (100%)
530 Chestnut Ridge Road   1986   57,204   100.0   1,166   1,166   0.24   20.38   20.38   KPMG Peat Marwick, LLP (100%)
50 Tice Boulevard   1984   235,000   100.0   5,631   4,961   1.15   23.96   21.11   Syncsort, Inc. (25%)
300 Tice Boulevard   1991   230,000   100.0   5,342   5,050   1.09   23.23   21.96   Chase Home Mortgage Corp. (25%), Medco Containment Services (20%), Par Pharmaceutical, Inc. (16%), BMW of North America, LLC (15%)
BURLINGTON COUNTY, NEW JERSEY                    
Moorestown                                    
224 Strawbridge Drive   1984   74,000   92.4   1,418   1,054   0.29   20.74   15.41   Allstate Insurance Company (49%), Harleysville Mutual Insurance (28%)
228 Strawbridge Drive   1984   74,000   100.0   1,434   1,077   0.29   19.38   14.55   Cendant Mortgage Corporation (100%)
ESSEX COUNTY, NEW JERSEY                    
Millburn                                    
150 J.F. Kennedy Parkway   1980   247,476   86.3   6,060   5,872   1.23   28.37   27.49   KPMG Peat Marwick, LLP (31%), Budd Larner Gross Et Al (23%)
Roseland                                    
101 Eisenhower Parkway   1980   237,000   83.2   4,656   4,285   0.95   23.61   21.73   Brach, Eichler, Rosenberg, Silver, Bernstein & Hammer (13%)
103 Eisenhower Parkway   1985   151,545   91.0   3,248   2,918   0.66   23.55   21.16   CPG Partners, L.P. (24%), Lum, Danzis, Drasco Positan & Kleinberg (16%), Salomon Smith Barney, Inc. (11%)
105 Eisenhower Parkway   2001   220,000   14.0   1,904   1,296   0.39   61.82   42.08   McDonald's Corporation (14%)

23


Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

HUDSON COUNTY, NEW JERSEY                    
Jersey City                                    
Harborside Financial Center Plaza 1   1983   400,000   99.0   3,277   3,274   0.67   8.28   8.27   Bankers Trust Harborside, Inc. (96%)
Harborside Financial Center Plaza 2   1990   761,200   100.0   19,408   18,344   3.95   25.50   24.10   Dean Witter Trust Company (27%), DLJ Securities (25%), Morgan Stanley Dean Witter, Inc. (11%), Dow Jones & Company, Inc. (11%), Lewco Securities Corp. (11%)
Harborside Financial Center Plaza 3   1990   725,600   100.0   18,499   17,485   3.77   25.49   24.10   AICPA (38%), BTM Information Services, Inc. (21%), Exodus Communications (11%), DLJ Securities (10%)
Harborside Financial Center Plaza 4-A(g)   2000   207,670   94.0   7,185   6,481   1.46   36.82   33.21   TD Waterhouse Securities, Inc. (89%)
Harborside Financial Center Plaza 5 (h) (i)   2002   980,000   58.2   4,417   4,125   0.90   21.91   20.46   Forest Laboratories, Inc. (15%), Garban, LLC (14%), National Financial Services (12%)
MERCER COUNTY, NEW JERSEY                    
Hamilton Township                                    
600 Horizon Drive (h)   2002   95,000   100.0   164   164   0.03   14.32   14.32   Verizon New Jersey, Inc. (100%)
Princeton                                    
103 Carnegie Center   1984   96,000   85.1   2,049   1,894   0.42   25.08   23.18   Ronin Development Corp. (15%), Kurt Salmon Assoc. Inc. (11%)
100 Overlook Center   1988   149,600   100.0   3,751   3,489   0.76   25.07   23.32   Regus Business Centre Corp. (26%), Xerox Corporation (23%), Paine Webber, Inc. (14%)
5 Vaughn Drive   1987   98,500   80.8   1,968   1,835   0.40   24.73   23.06   Woodrow Wilson National Fellowship Foundation (17%), Floorgraphics, Inc. (14%), Villeroy & Boch Tableware, Ltd. (11%)
MIDDLESEX COUNTY, NEW JERSEY                    
East Brunswick                                    
377 Summerhill Road   1977   40,000   100.0   373   368   0.08   9.33   9.20   Greater New York Mutual Insurance Company (100%)
Plainsboro                                    
500 College Road East   1984   158,235   100.0   3,705   3,659   0.75   23.41   23.12   SSB Realty, LLC (72%), Buchanan Ingersoll, P.C. (17%)
South Brunswick                                    
3 Independence Way   1983   111,300   35.5   1,284   1,201   0.26   32.50   30.40   Merrill Lynch Pierce Fenner & Smith (13%)

24


Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's) (b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

Woodbridge                                    
581 Main Street   1991   200,000   100.0   4,890   4,777   1.00   24.45   23.89   First Investors Management Company, Inc. (38%), Cast North America, Ltd. (11%)
MONMOUTH COUNTY, NEW JERSEY                    
Neptune                                    
3600 Route 66   1989   180,000   100.0   2,410   2,410   0.49   13.39   13.39   United States Life Insurance Company (100%)
Wall Township                                    
1305 Campus Parkway   1988   23,350   92.4   398   365   0.08   18.45   16.92   Waterford Wedgewood USA, Inc. (47%), McLaughlin, Bennett, Gelson (45%)
1350 Campus Parkway   1990   79,747   99.9   1,322   1,247   0.27   16.59   15.65   Meridian Health Realty Corp. (53%), Stephen E. Gertler Law Office (17%), Amper Politzner & Mattia, PA (11%), Healthcare Software (11%)
MORRIS COUNTY, NEW JERSEY                    
Florham Park                                    
325 Columbia Turnpike   1987   168,144   100.0   4,431   3,992   0.90   26.35   23.74   Bressler Amery & Ross (24%), Salomon Smith Barney, Inc. (13%), Atlantic Health Systems (12%), Dun & Bradstreet, Inc. (12%)
Morris Plains                                    
250 Johnson Road   1977   75,000   100.0   1,594   1,433   0.32   21.25   19.11   Electronic Data Systems Corp. (100%)
201 Littleton Road   1979   88,369   76.5   1,469   1,381   0.30   21.73   20.43   Xerox Corporation (50%), CHEP USA (11%)
Morris Township                                    
340 Mt. Kemble Avenue   1985   387,000   100.0   5,530   5,530   1.13   14.29   14.29   AT&T Corporation (100%)
Parsippany                                    
4 Campus Drive   1983   147,475   91.9   3,340   3,339   0.68   24.64   24.64   Nabisco, Inc. (27%), Summit Equities, Inc. (20%)
6 Campus Drive   1983   148,291   35.4   2,188   2,173   0.45   41.68   41.39  
7 Campus Drive   1982   154,395   100.0   2,037   1,924   0.41   13.19   12.46   Nabisco, Inc. (100%)
8 Campus Drive   1987   215,265   86.2   5,186   4,951   1.06   27.95   26.68   Prudential Insurance Co. (31%), MCI Worldcom Communications Corp. (26%), Ayco Company, L.P. (13%)
9 Campus Drive   1983   156,495   94.6   4,446   4,409   0.91   30.03   29.78   GAB Business Service, Inc. (48%)
2 Dryden Way   1990   6,216   100.0   91   91   0.02   14.64   14.64   Bright Horizons Childrens Center (100%)
4 Gatehall Drive   1988   248,480   91.8   5,795   5,633   1.18   25.41   24.69   J.B. Hanauer & Company (20%), Toyota Motor Credit Corp. (10%)
2 Hilton Court   1991   181,592   100.0   4,793   4,505   0.98   26.39   24.81   Deloitte & Touche USA, LLP (47%), Sankyo Parke Davis (28%)
1633 Littleton Road (h)   1978   57,722   100.0   189   189   0.04   19.59   19.59   Sordoni Skanska, Inc. (100%)

25


Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

600 Parsippany Road   1978   96,000   44.8   1,259   1,125   0.26   29.27   26.16  
1 Sylvan Way   1989   150,557   98.6   3,499   3,096   0.71   23.57   20.86   Cendant Operations, Inc. (99%)
5 Sylvan Way   1989   151,383   100.0   4,023   3,899   0.82   26.57   25.76   Integrated Communications (41%), Experian Information Solution (15%), DRS Technologies, Inc. (13%)
7 Sylvan Way   1987   145,983   100.0   2,920   2,759   0.59   20.00   18.90   Nabisco, Inc. (100%)
PASSAIC COUNTY, NEW JERSEY                    
Clifton                                    
777 Passaic Avenue   1983   75,000   99.6   1,526   1,318   0.31   20.43   17.64   Greenwich Home Mortgage Corp. (12%)
Totowa                                    
999 Riverview Drive   1988   56,066   83.3   649   486   0.13   13.90   10.41   Telsource Corporation (19%), Dunn Group, Inc. (15%), Humana Press (15%)
Wayne                                    
201 Willowbrook Boulevard   1970   178,329   61.8   1,806   1,657   0.37   16.39   15.04   URS Corporation (26%), Meridian Benefit, Inc. (22%), Aeropostale, Inc. (11%)
SOMERSET COUNTY, NEW JERSEY                    
Basking Ridge                                    
222 Mt. Airy Road   1986   49,000   100.0   741   689   0.15   15.12   14.06   Avaya, Inc. (100%)
233 Mt. Airy Road   1987   66,000   100.0   1,315   1,103   0.27   19.92   16.71   Avaya, Inc. (100%)
Bernards                                    
106 Allen Road   2000   132,010   66.7   2,173   1,717   0.44   24.68   19.50   KPMG Consulting, LLC (59%)
Bridgewater                                    
721 Route 202/206   1989   192,741   100.0   4,605   4,398   0.94   23.89   22.82   Allstate Insurance Company (37%), Norris, McLaughlin & Marcus, PA (32%), Johnson and Johnson (15%)
UNION COUNTY, NEW JERSEY                    
Clark                                    
100 Walnut Avenue   1985   182,555   100.0   4,565   3,917   0.93   25.01   21.46   CAP Gemini America, Inc. (33%), Washington Mutual Bank, FA (15%), DFDS Transport (US), Inc. (14%)
Cranford                                    
6 Commerce Drive   1973   56,000   100.0   1,074   945   0.22   19.18   16.88   Kendle International, Inc. (50%)
11 Commerce Drive(c)   1981   90,000   100.0   1,148   933   0.23   12.76   10.37   Northeast Administrators, Inc. (10%)

26


Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

12 Commerce Drive   1967   72,260   85.8   862   740   0.18   13.90   11.94   Registrar & Transfer Company (36%), URS Corporation (28%)
20 Commerce Drive   1990   176,600   100.0   4,303   3,943   0.88   24.37   22.33   Public Service Electric & Gas Company (26%), Quintiles, Inc. (21%)
25 Commerce Drive(h)   1971   67,749   94.5   510   508   0.10   20.05   19.97   Paragon Computer Professional (33%), Wells Fargo Home Mortgage, Inc. (16%)
65 Jackson Drive   1984   82,778   86.9   1,757   1,622   0.36   24.43   22.55   PMK Group, Inc. (35%), Allstate Insurance Company (27%), Metropolitan Life Insurance Company (18%)
New Providence                                    
890 Mountain Road   1977   80,000   100.0   2,125   2,037   0.43   26.56   25.46   Aspen Technology, Inc. (52%), Dun & Bradstreet (27%), K Line America, Inc. (16%)
       
 
 
 
 
 
 
   
Total New Jersey Office       13,303,541   93.0   257,116   241,303   52.37   21.66   20.34    
       
 
 
 
 
 
 
   
DUTCHESS COUNTY, NEW YORK                    
Fishkill                                    
300 South Lake Drive   1987   118,727   93.6   2,234   2,172   0.45   20.10   19.54   Allstate Insurance Company (24%)
NASSAU COUNTY, NEW YORK                    
North Hempstead                                    
600 Community Drive   1983   237,274   100.0   5,476   5,476   1.11   23.08   23.08   CMP Media, LLC. (100%)
111 East Shore Road   1980   55,575   100.0   1,518   1,504   0.31   27.31   27.06   Administrators for the Professions, Inc. (100%)
ROCKLAND COUNTY, NEW YORK                    
Suffern                                    
400 Rella Boulevard   1988   180,000   99.8   3,915   3,718   0.80   21.79   20.70   Provident Savings Bank, F.A. (20%), Allstate Insurance Company (19%), Ferring Pharmaceuticals, Inc. (15%)
WESTCHESTER COUNTY, NEW YORK                    
Elmsford                                    
100 Clearbrook Road(c)   1975   60,000   100.0   1,081   986   0.22   18.02   16.43   MIM Corporation (18%), Pyrotek, Inc. (11%)
101 Executive Boulevard   1971   50,000   76.3   714   663   0.15   18.72   17.38   Pennysaver Group, Inc. (23%), Kyocera Mita America, Inc. (11%)
555 Taxter Road   1986   170,554   89.9   3,919   3,896   0.80   25.56   25.41   Fuji Photo Film USA, Inc. (71%)

27


Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

565 Taxter Road   1988   170,554   85.3   3,740   3,646   0.76   25.71   25.06   Nextel of New York, Inc. (29%), KLM Royal Dutch Airlines (10%)
570 Taxter Road   1972   75,000   92.4   1,673   1,522   0.34   24.14   21.96   Wilder Balter Partners, LLC (15%), New York State United Teachers Association (15%)
Hawthorne                                    
1 Skyline Drive   1980   20,400   99.0   330   307   0.07   16.34   15.20   Kidabilities, LLC & Speech (50%), Childtime Childcare, Inc. (49%)
2 Skyline Drive   1987   30,000   98.9   467   429   0.10   15.74   14.46   MW Samara (56%), Perini Construction (43%)
3 Skyline Drive(h)   1981   75,668   100.0   679   679   0.14   22.59   22.59   Coca-Cola Bottling Company (73%), Taro Pharmaceuticals USA, Inc. (15%), Intermec Technologies Corp. (12%)
7 Skyline Drive   1987   109,000   95.5   1,627   1,615   0.33   15.63   15.51   EM Industries, Inc. (31%), Cavalry Investments, LLC (19%), Traub Eglin Lieberman & Straus (14%)
17 Skyline Drive   1989   85,000   100.0   1,360   1,336   0.28   16.00   15.72   IBM Corporation (100%)
19 Skyline Drive   1982   248,400   100.0   4,519   4,005   0.92   18.19   16.12   IBM Corporation (100%)
Tarrytown                                    
200 White Plains Road   1982   89,000   93.8   1,470   1,299   0.30   17.61   15.56   Allmerica Financial (17%), Dannon Company, Inc. (17%), NYS Dept. of Environmental Services (13%)
220 White Plains Road   1984   89,000   98.6   2,117   1,988   0.43   24.12   22.65   Eagle Family Foods, Inc. (17%)
White Plains                                    
1 Barker Avenue   1975   68,000   99.0   1,672   1,609   0.34   24.84   23.90   O'Connor McGuinness Conte (19%), United Skys Realty Corp. (16%)
3 Barker Avenue   1983   65,300   100.0   1,645   1,489   0.33   25.19   22.80   Trigen Energy Corporation (56%), TNS Intersearch Corporation (10%)
50 Main Street   1985   309,000   96.8   8,652   8,119   1.76   28.93   27.14   TMP Worldwide, Inc. (15%), National Economic Research (10%)
11 Martine Avenue   1987   180,000   92.9   4,454   4,087   0.91   26.64   24.44   Salomon Smith Barney, Inc. (12%), McCarthy Fingar Donovan Et Al (11%), Morgan Stanley Dean Witter (11%)
1 Water Street   1979   45,700   83.9   774   720   0.16   20.19   18.78   AMG In-Store, Inc. (32%), Urban Dental Mgmt, Inc. (16%)
Yonkers                                    
1 Executive Boulevard   1982   112,000   100.0   2,698   2,589   0.55   24.09   23.12   Affinity Healthplan, Inc. (21%), Protective Tech International (11%), AVR Realty Company (11%)

28


Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

3 Executive Plaza   1987   58,000   94.9   1,421   1,295   0.29   25.82   23.53   Montefiore Medical Center (46%), City & Suburban Federal Savings Bank (22%), Allstate Insurance Company (20%)
       
 
 
 
 
 
 
   
Total New York Office   2,702,152   95.8   58,155   55,149   11.85   22.86   21.70    
       
 
 
 
 
 
 
   
CHESTER COUNTY, PENNSYLVANIA                    
Berwyn                                    
1000 Westlakes Drive   1989   60,696   87.3   1,495   1,449   0.30   28.21   27.35   Drinker Biddle & Reath (42%), PNC Bank, NA (38%)
1055 Westlakes Drive   1990   118,487   57.9   1,521   1,329   0.31   22.17   19.37   Regus Business Centre Corp. (35%), Eximias Pharmaceutical Corp. (18%)
1205 Westlakes Drive   1988   130,265   97.6   2,685   2,570   0.55   21.12   20.21   Turner Investment Partners (30%), Oracle Corporation (30%)
1235 Westlakes Drive   1986   134,902   61.4   2,603   2,461   0.53   31.43   29.71   Ratner & Prestia (19%), Chartwell Investment Partners (15%)
DELAWARE COUNTY, PENNSYLVANIA                    
Lester                                    
100 Stevens Drive   1986   95,000   100.0   2,541   2,339   0.52   26.75   24.62   Keystone Mercy Health Plan (100%)
200 Stevens Drive   1987   208,000   100.0   5,605   5,052   1.14   26.95   24.29   Keystone Mercy Health Plan (100%)
300 Stevens Drive   1992   68,000   53.0   891   653   0.18   24.72   18.12   Hewlett Packard Company (35%)
Media                                    
1400 Providence Road—Center I   1986   100,000   91.9   2,106   1,938   0.43   22.92   21.09   General Services Admin. (13%), Erie Indemnity Company (11%)
1400 Providence Road—Center II   1990   160,000   88.0   2,986   2,685   0.61   21.21   19.07   Barnett International (36%)
MONTGOMERY COUNTY, PENNSYLVANIA                    
Blue Bell                                    
16 Sentry Parkway(h)   1988   93,093   85.4   5   5   0.00   22.96   22.96   Pharmanet, Inc. (42%), London Life Reinsurance Co. (11%), Broadwing Communications Services (10%)
18 Sentry Parkway(h)   1988   95,010   100.0   6   6   0.00   23.05   23.05   Liberty Mutual Insurance Co. (25%), Larson Allen Weishair & Co. (24%), Executive Suites, Inc. (12%)

29


Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

King of Prussia                                    
2200 Renaissance Boulevard(h)   1985   174,124   88.9   219   219   0.04   24.59   24.59   MDS Pharma Services (27%), Henkel Corporation (20%), SmithKline Beecham Corp. (12%)
Lower Providence                                    
1000 Madison Avenue   1990   100,700   68.7   1,859   1,755   0.38   26.87   25.37   Reuters America, Inc. (42%), Seton Company (15%)
Plymouth Meeting                                    
1150 Plymouth Meeting Mall   1970   167,748   97.7   3,464   3,231   0.71   21.14   19.71   Ken-Crest Services (18%), Lincoln Technical Institute (18%), Ikea US General Partners, Inc. (14%), ECC Management Services (13%)
Five Sentry Parkway East   1984   91,600   100.0   1,900   1,842   0.39   20.74   20.11   Merck & Co., Inc. (77%), Selas Fluid Processing Corp. (23%)
Five Sentry Parkway West   1984   38,400   100.0   822   803   0.17   21.41   20.91   Merck & Co., Inc. (70%), David Cutler Group (30%)
       
 
 
 
 
 
 
   
Total Pennsylvania Office   1,836,025   86.9   30,708   28,337   6.26   24.00   22.52    
       
 
 
 
 
 
 
   
FAIRFIELD COUNTY, CONNECTICUT                    
Greenwich                                    
500 West Putnam Avenue   1973   121,250   89.0   2,911   2,753   0.59   26.98   25.51   Hachette Filipacchi Magazines (27%), McMahan Securities Co., LP (16%), Greenwich Hospital (13%), Winklevoss Consultants, Inc. (12%)
Norwalk                                    
40 Richards Avenue   1985   145,487   92.7   3,296   3,017   0.67   24.44   22.37   South Beach Beverage Co., LLC (14%), Media Horizons, Inc. (12%)
Shelton                                    
1000 Bridgeport Avenue   1986   133,000   100.0   2,662   2,545   0.54   20.02   19.14   William Carter Company (23%), Toyota Motor Credit Corporation (11%), Peabody Engineering Corp. (11%)
Stamford                                    
1266 East Main Street(h)   1984   179,260   95.5   742   741   0.15   27.75   27.72   Octagon Marketing and Athlete (18%), Chilton Investment and Company, Inc. (12%)
       
 
 
 
 
 
 
   
Total Connecticut Office   578,997   94.5   9,611   9,056   1.95   24.90   23.88    
       
 
 
 
 
 
 
   

30


Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

WASHINGTON, D.C.                    
1201 Connecticut Avenue, NW   1940   169,549   100.0   5,413   5,242   1.10   31.93   30.92   Zuckerman Spaeder Goldstein (30%), RFE/RL, Inc. (16%), Leo A. Daly Company (13%)
1400 L Street, NW   1987   159,000   100.0   6,008   5,842   1.22   37.79   36.74   Winston & Strawn (68%)
       
 
 
 
 
 
 
   
Total District of Columbia Office   328,549   100.0   11,421   11,084   2.32   34.76   33.74    
       
 
 
 
 
 
 
   
PRINCE GEORGE'S COUNTY, MARYLAND                    
Lanham                                    
4200 Parliament Place   1989   122,000   99.9   2,689   2,508   0.55   22.06   20.58   Group I Software, Inc. (56%), Infinity Broadcasting Company (19%), State Farm Mutual Auto Ins. Co. (11%)
       
 
 
 
 
 
 
   
Total Maryland Office   122,000   99.9   2,689   2,508   0.55   22.06   20.58    
       
 
 
 
 
 
 
   
BEXAR COUNTY, TEXAS                    
San Antonio                                    
84 N.E. Loop 410   1971   187,312   94.2   2,853   2,757   0.58   16.17   15.63   KBL Cable, Inc. (27%), Chase Bank and Services, Inc. (25%), Philip Morris Mgmt. Corp. (25%)
111 Soledad   1918   248,153   63.0   1,793   1,172   0.36   11.47   7.50   City of San Antonio (12%)
COLLIN COUNTY, TEXAS                    
Plano                                    
555 Republic Place(j)   1986       517   517   0.11      
DALLAS COUNTY, TEXAS                    
DALLAS                                    
3030 LBJ Freeway(c)   1984   367,018   81.0   6,006   5,316   1.22   20.20   17.88   Club Corporation of America (34%)
3100 Monticello(j)   1984       1,029   1,026   0.21      
Irving                                    
2300 Valley View(j)   1985       840   837   0.17      
Richardson                                    
1122 Alma Road   1977   82,576   100.0   607   607   0.12   7.35   7.35   MCI Worldcom Network Services (100%)
HARRIS COUNTY, TEXAS                    
Houston                                    
5300 Memorial(j)   1982       994   991   0.20      

31


Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)
(b)(c)

  2002
Effective
Rent
($000's)
(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent(%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing
10% or More
of Net Rentable
Area Per Property
as of 12/31/02(c)

1717 St. James Place(j)   1975       652   652   0.13      
1770 St. James Place   1973   103,689   77.8   1,180   941   0.24   14.63   11.66  
10497 Town & Country Way(j)   1981       784   783   0.16      
TARRANT COUNTY, TEXAS                    
Euless                                    
150 West Parkway(j)   1984       402   402   0.08      
       
 
 
 
 
 
 
   
Total Texas Office       988,748   80.2   17,657   16,001   3.58   22.26   20.17    
       
 
 
 
 
 
 
   
MARICOPA COUNTY, ARIZONA                            
Glendale                                    
5551 West Talavi Boulevard(j)   1991       1,299   1,299   0.26      
Phoenix                                    
19640 North 31st Street(j)   1990       1,227   1,227   0.25      
Scottsdale                                    
9060 E. Via Linda Boulevard(j)   1984       1,856   1,856   0.38      
       
 
 
 
 
 
 
   
Total Arizona Office           4,382   4,382   0.89        
       
 
 
 
 
 
 
   
ARAPAHOE COUNTY, COLORADO                        
Aurora                                    
750 South Richfield Street(j)   1997       1,173   1,173   0.24      
Denver                                    
400 South Colorado Boulevard   1983   125,415   99.7   2,268   1,942   0.46   18.14   15.53   Community Health Plan (36%), State of Colorado (12%), Senter Goldfarb & Rice, LLC (11%), Wells Fargo Bank West, NA (11%)
Englewood                                    
9359 East Nichols Avenue   1997   72,610   100.0   908   908   0.18   12.51   12.51   First Tennessee Bank, NA (100%)
5350 South Roslyn Street   1982   63,754   94.2   1,073   850   0.22   17.87   14.15   Alliance Metro Real Estate (22%), Bathgate Capital Partners, LLC (19%), Walker Parking Consultants (12%)
BOULDER COUNTY, COLORADO                            
Broomfield                                    
105 South Technology Court   1997   37,574   100.0   567   567   0.12   15.09   15.09   Sun Microsystems, Inc. (100%)
303 South Technology Court-A   1997   34,454   0.0   306   306   0.06      
303 South Technology Court-B   1997   40,416   0.0   360   360   0.07      

32


Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing 10%
or More of Net Rentable
Area Per Property
as of 12/31/02(c)

Louisville                                    
248 Centennial Parkway   1996   39,266   72.0   525   518   0.11   18.57   18.32   Walnut Brewery, Inc. (59%)
1172 Century Drive   1996   49,566   100.0   662   654   0.13   13.36   13.19   nCube Corporation (40%), EDS/SHL Inc. (22%), Aircell, Inc. (22%), RX Kinetix, Inc. (16%)
285 Century Place   1997   69,145   100.0   1,129   1,129   0.23   16.33   16.33   HBO & Company of Georgia (100%)
DENVER COUNTY, COLORADO                    
Denver                                    
3600 South Yosemite   1974   133,743   100.0   1,446   1,446   0.29   10.81   10.81   M.D.C. Holdings, Inc. (100%)
DOUGLAS COUNTY, COLORADO                    
Englewood                                    
8181 East Tufts Avenue   2001   185,254   74.5   3,575   2,100   0.73   25.90   15.22   URS Greiner (66%)
400 Inverness Parkway   1997   111,608   92.7   2,236   1,693   0.46   21.61   16.36   Cochlear Corporation (33%), HQ Global Workplaces, Inc. (16%), Compuware Corp. (13%)
67 Inverness Drive East   1996   54,280   49.1   69   63   0.01   2.59   2.36   Gericare Providers, Inc. (49%)
384 Inverness Parkway   1985   51,523   78.7   678   532   0.14   16.72   13.12   Quickpen International Corp. (35%)
5975 South Quebec Street(c)   1996   102,877   57.5   873   615   0.18   14.76   10.40   KB Home Colorado, Inc. (27%), Silicon Graphics, Inc. (13%)
Parker                                    
9777 Mount Pyramid Court   1995   120,281   40.4   1,032   1,032   0.21   21.24   21.24   Evolving Systems, Inc. (29%), Charter Communications, LLC (11%)
EL PASO COUNTY, COLORADO                    
Colorado Springs                                    
8415 Explorer   1998   47,368   100.0   617   581   0.13   13.03   12.27   Encoda Systems, Inc. (74%), URS Greiner Consultants, Inc. (22%)
1975 Research Parkway   1997   115,250   90.9   1,751   1,547   0.36   16.71   14.77   Bombardier Capital Florida, Inc. (52%), General Dynamics Govt. Systems (17%)
2375 Telstar Drive   1998   47,369   100.0   617   581   0.13   13.03   12.27   Narwhal Corporation (44%), Memorial Hospital (38%), Aerotek, Inc. (13%)

33


Property
Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

JEFFERSON COUNTY, COLORADO                        
Lakewood                                    
141 Union Boulevard   1985   63,600   88.9   1,112   914   0.23   19.67   16.17   Arbitration Forums, Inc. (22%), DBA Coldwell Bankers Res. Brkg. (15%)
       
 
 
 
 
 
 
   
Total Colorado Office       1,565,353   79.8   22,977   19,511   4.69   18.43   15.65    
       
 
 
 
 
 
 
   

SAN FRANCISCO COUNTY, CALIFORNIA

 

 

 

 

 

 

 

 

 

 

 

 
San Francisco                                    
795 Folsom Street   1977   183,445   100.0   6,501   5,731   1.32   35.44   31.24   Move.com Operations, Inc. (51%), AT&T Corp. (34%), Regus Business Centre Corp. (15%)
760 Market Street   1908   267,446   95.4   8,625   8,311   1.76   33.80   32.57   R.H. Macy & Company, Inc. (22%)
       
 
 
 
 
 
 
   
Total California Office       450,891   97.3   15,126   14,042   3.08   34.49   32.02    
       
 
 
 
 
 
 
   

HILLSBOROUGH COUNTY, FLORIDA

 

 

 

 

 

 

 

 

 

 

 

 
Tampa                                    
501 Kennedy Boulevard(j)   1982       2,067   2,067   0.42      
       
 
 
 
 
 
 
   
Total Florida Office           2,067   2,067   0.42            
       
 
 
 
 
 
 
   
TOTAL OFFICE PROPERTIES       21,876,256   91.5   431,909   403,440   87.96   22.75   21.30    
       
 
 
 
 
 
 
   

34


Property Listing

Office/Flex Properties

Property Location
  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per
Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per
Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

BURLINGTON COUNTY, NEW JERSEY                        
Burlington                                    
3 Terri Lane   1991   64,500   61.4   294   268   0.06   7.42   6.77   Tempel Steel Company (18%), General Service Administrators (10%)
5 Terri Lane   1992   74,555   82.2   498   467   0.10   8.13   7.62   United Rentals, Inc. (22%), Vitality Foodservice, Inc. (20%), West Electronics, Inc. (12%)

Moorestown

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
2 Commerce Drive   1986   49,000   100.0   416   390   0.08   8.49   7.96   Computer Sciences Corporation (100%)
101 Commerce Drive   1988   64,700   100.0   336   296   0.07   5.19   4.57   Beckett Corporation (100%)
102 Commerce Drive   1987   38,400   87.5   205   199   0.04   6.10   5.92   Nelson Associates (25%), D&A Eastern Fasteners, Inc. (13%), Hewlett-Packard Company (13%), Moorestown Weightlifting Club (13%), Opex Corporation (13%), Transaction Payment Systems (13%)
201 Commerce Drive   1986   38,400   75.0   173   167   0.04   6.01   5.80   Flow Thru Metals, Inc. (25%), Franchise Stores Realty Corp. (25%), Tropicana Products, Inc. (25%)
202 Commerce Drive   1988   51,200   25.3   118   113   0.02   9.11   8.72   Standard Register Co. (25%)
1 Executive Drive   1989   20,570   100.0   218   184   0.04   10.60   8.95   Bechtel Infrastructure Corp. (57%), T.T.I. (18%)
2 Executive Drive   1988   60,800   88.1   387   350   0.08   7.22   6.53   CSI Computer Specialists, Inc. (32%), Foundations, Inc. (22%)
101 Executive Drive   1990   29,355   84.7   276   226   0.06   11.10   9.09   Bayada Nurses, Inc. (56%)
102 Executive Drive   1990   64,000   100.0   358   313   0.07   5.59   4.89   Xermis Inc. (30%), Comtrex Systems Corp. (29%), Sunday O'Brien & Syscom Elec. (21%), Schermerhorn Bros. Co. (20%)
225 Executive Drive   1990   50,600   86.2   340   323   0.07   7.80   7.41   Eastern Research, Inc. (77%)
97 Foster Road   1982   43,200   100.0   136   132   0.03   3.15   3.06   Pioneer and Company, Inc. (33%), Premier Percussion, Limited (25%), Speck Industrial Controls (25%), Colornet, Inc. (17%)
1507 Lancer Drive   1995   32,700   100.0   151   140   0.03   4.62   4.28   Tad's Delivery Service, Inc. (100%)

35


Property Location
  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per
Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per
Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

1510 Lancer Drive   1998   88,000   100.0   370   370   0.08   4.20   4.20   Tad's Delivery Service, Inc. (100%)
1245 North Church Street   1998   52,810   100.0   384   384   0.08   7.27   7.27   Health Ink, LLC (38%), C&L Properties, L.L.C. (35%), C&L Packaging, Inc. (27%)
1247 North Church Street   1998   52,790   100.0   461   460   0.09   8.73   8.71   Otis Elevator Company (23%), Dilks Agency, Inc. (23%), Telesciences, Inc. (17%), Spot-Coolers, Inc. (14%)
1256 North Church Street   1984   63,495   100.0   365   301   0.07   5.75   4.74   Weiler Labeling Systems, LLC (50%), James C. Anderson Associates (30%), Ketec, Inc. (20%)
840 North Lenola Road   1995   38,300   69.0   259   216   0.05   9.80   8.17   Millar Elevator Service (31%), Payroll Associates (20%), Innovasystems, Inc. (18%)
844 North Lenola Road   1995   28,670   58.6   130   124   0.03   7.74   7.38   Curbell, Inc. (34%), James J. Martin, Inc. (25%)
915 North Lenola Road   1998   52,488   100.0   271   253   0.06   5.16   4.82   Tropicana Products,Inc. (37%), Vision Realty, LLC (23%), Riley Sales, Inc. (18%), Market Place Advertising, Inc. (13%)
2 Twosome Drive   2000   48,600   100.0   391   391   0.08   8.05   8.05   Sterling Medical Services, LLC (100%)
30 Twosome Drive   1997   39,675   100.0   212   209   0.04   5.34   5.27   Hartman Cards, Inc. (28%), Commercial Office Furniture (24%), Aramark Sports Entertainment (14%), The Closet Factory (12%), C&L Packaging, Inc. (12%), Kencomm Communications (10%)
31 Twosome Drive   1998   84,200   100.0   438   438   0.09   5.20   5.20   Cort Furniture Rental Corp. (56%), Prism Color Corp. (44%)
40 Twosome Drive   1996   40,265   93.4   267   263   0.05   7.10   6.99   Neighborcare—TCI, Inc. (49%), Marconi Communications, Inc. (30%), Bellstar, Inc. (14%)
41 Twosome Drive   1998   43,050   100.0   296   295   0.06   6.88   6.85   Kit Industries, Inc. (22%), Momentum Systems, Limited (22%), DIA—Nielsen USA, Inc. (11%), Harrington Robb Company (11%), S&S Specialty Products (11%), Williams Communications (11%), Atlantic Loose Leaf Co., Inc. (11%)
50 Twosome Drive   1997   34,075   100.0   258   248   0.05   7.57   7.28   Sussex Wine Merchants (56%), Wells Fargo Alarm Services (44%)

West Deptford

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
1451 Metropolitan Drive   1996   21,600   100.0   149   149   0.03   6.90   6.90   Garlock Bearings, Inc. (100%)

MERCER COUNTY, NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 
Hamilton Township                                    
100 Horizon Drive   1989   13,275   100.0   193   169   0.04   14.54   12.73   PSEG Energy Technologies, Inc. (100%)

36


Property Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per
Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per
Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

200 Horizon Drive   1991   45,770   100.0   584   544   0.12   12.76   11.89   Shaw Facilities, Inc. (100%)
300 Horizon Drive   1989   69,780   100.0   1,054   924   0.21   15.10   13.24   State of New Jersey/DEP (50%), Lucent Technologies, Inc. (26%), Eplus Technology of PA, Inc. (14%), Stephen Gould of Pennsylvania (10%)
500 Horizon Drive   1990   41,205   100.0   586   554   0.12   14.22   13.44   Yardville National Bank (42%), Lakeview Child Center, Inc. (19%), New Jersey Builders Assoc. (14%), Diedre Moire Corp. (11%)

MONMOUTH COUNTY, NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 
Wall Township                                    
1325 Campus Parkway   1988   35,000   100.0   466   438   0.09   13.31   12.51   Cisco Systems, Inc. (100%)
1340 Campus Parkway   1992   72,502   98.1   880   750   0.18   12.37   10.54   Groundwater & Environmental Services Inc. (33%), GEAC Computers, Inc. (22%), State Farm Mutual Auto Insurance (17%), Association For Retarded Citizens (11%)
1345 Campus Parkway   1995   76,300   96.0   608   574   0.12   8.30   7.84   Quadramed Corp. (24%), De Vine Corp. (16%), Medi-Hut Co., Inc. (15%), Woodcliff Academy (15%), System Sales Corporation (12%)
1433 Highway 34   1985   69,020   65.1   516   381   0.11   11.48   8.48   State Farm Mutual Insurance Co. (48%), Applied Image, Inc. (11%)
1320 Wyckoff Avenue   1986   20,336   100.0   176   168   0.04   8.65   8.26   The County of Monmouth (100%)
1324 Wyckoff Avenue   1987   21,168   100.0   221   191   0.04   10.44   9.02   Blackhawk Management Corp. (53%), Systems Fulfillment (25%), Supply Saver, Inc. (22%)

PASSAIC COUNTY, NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 
Totowa                                    
1 Center Court   1999   38,961   100.0   493   358   0.10   12.65   9.19   Rock-Tenn Converting Company (46%), Eizo Nanao Technologies, Inc. (38%), Onyx Waste Services, Inc. (16%)
2 Center Court   1998   30,600   99.3   348   237   0.07   11.45   7.80   Nomadic Display (36%), Electro Rent Corp. (33%), Alpine Electronics of America (30%)
11 Commerce Way   1989   47,025   100.0   540   470   0.11   11.48   9.99   Coram Alternative Site Services (56%), Gentiva Health Services (22%), D.A. Kopp & Associates, Inc. (22%)
20 Commerce Way   1992   42,540   75.9   430   415   0.09   13.32   12.85   Lodan Totowa, Inc. F/K/A Emersub (62%), Dish Network Service Corp. (14%)

37


Property Location

  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per
Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per
Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

29 Commerce Way   1990   48,930   100.0   524   425   0.11   10.71   8.69   ADT Security Services, Inc. (55%), Patterson Dental Supply, Inc. (23%), Fujitec America, Inc. (22%)
40 Commerce Way   1987   50,576   100.0   596   507   0.12   11.78   10.02   Thales Components Corporation (43%), Intertek Testing Services, Inc. (29%), Imagistics International, Inc. (14%), System 3R USA, Inc. (14%)
45 Commerce Way   1992   51,207   100.0   509   468   0.10   9.94   9.14   Ericsson, Inc. (52%), Woodward Clyde Consultants (27%), Oakwood Corporate Housing (21%)
60 Commerce Way   1988   50,333   93.1   532   471   0.11   11.35   10.05   Jen Mar Graphics, Inc. (27%), Dolan & Traynor Building Prod (16%), Prestige Telecom, Ltd. (14%), MDU Communications (USA), Inc. (14%), Bearings, Ltd. (12%)
80 Commerce Way   1996   22,500   100.0   297   217   0.06   13.20   9.64   Learning Stop, LLC (40%), Idexx Veterinary Services (37%), Inter-American Safety Council (12%), Haas Publishing Companies (11%)
100 Commerce Way   1996   24,600   100.0   324   237   0.07   13.17   9.63   Geri Script, LLC (34%), Minolta Business Systems, Inc. (34%), CCH Incorporated (32%)
120 Commerce Way   1994   9,024   100.0   106   101   0.02   11.75   11.19   Senior Care Centers of America (62%), Showa Tool USA, Inc. (19%), Telsource Corporation (19%)
140 Commerce Way   1994   26,881   99.5   313   300   0.06   11.70   11.22   Universal Hospital Services (36%), Advanced Image Systems, Inc. (25%), Holder Group, Inc. (13%), Alpha Testing Laboratories (13%), Dairygold (12%)
       
 
 
 
 
 
 
   
Total New Jersey Office/Flex   2,277,531   92.2   18,453   16,568   3.74   8.79   7.89    
       
 
 
 
 
 
 
   
WESTCHESTER COUNTY, NEW YORK                        
Elmsford                                    
11 Clearbrook Road   1974   31,800   100.0   380   367   0.08   11.95   11.54   Eastern Jungle Gym, Inc. (27%), Bright Horizons Children's Center (21%), Phd Products, Inc. (15%), Portables Unlimited, Inc. (14%), TKV Home Textiles, Inc. (14%)
75 Clearbrook Road   1990   32,720   100.0   816   816   0.17   24.94   24.94   Evening Out, Inc. (100%)
125 Clearbrook Road (h)   2002   33,000   100.0   524   434   0.11   21.08   17.46   ADT Security Services (55%), Ademco Distribution, Inc. (45%)

38


Property Location
  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per
Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per
Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

150 Clearbrook Road   1975   74,900   93.5   1,088   1,023   0.22   15.54   14.61   Sportive Ventures I, LLC (24%), Philips Medical Systems, N.A. (18%), Transwestern Publications (12%)
175 Clearbrook Road   1973   98,900   96.8   1,476   1,408   0.30   15.42   14.71   Nextel of New York, Inc. (35%), Hypres, Inc. (15%)
200 Clearbrook Road   1974   94,000   99.8   1,188   1,114   0.24   12.66   11.87   Brunschwig & Fils, Inc. (39%), Proftech Corp. (20%)
250 Clearbrook Road   1973   155,000   95.1   1,358   1,285   0.28   9.21   8.72   AFP Imaging Corp. (31%), The Artina Group, Inc. (14%), Prints Plus, Inc. (13%), Conri Services, Inc. (13%)
50 Executive Boulevard   1969   45,200   97.6   360   350   0.07   8.16   7.93   MMO Music Group (55%), Board of Cooperative Ed (22%)
77 Executive Boulevard   1977   13,000   100.0   210   200   0.04   16.15   15.38   Bright Horizons Children Center (55%), Richmonds Childrens Center, Inc. (45%)
85 Executive Boulevard   1968   31,000   99.4   463   456   0.09   15.03   14.80   VREX, Inc. (49%), Westhab, Inc. (32%), Wald Optics Laboratory, Inc. (13%)
300 Executive Boulevard   1970   60,000   100.0   552   525   0.11   9.20   8.75   Princeton Ski Outlet Corp. (69%), Publishers Circulation Fulfil (31%)
350 Executive Boulevard   1970   15,400   98.8   296   277   0.06   19.45   18.21   Fujitsu Network Communication (99%)
399 Executive Boulevard   1962   80,000   100.0   1,017   975   0.21   12.71   12.19   American Banknote Holographic (72%), Game Sportswear, Ltd (28%)
400 Executive Boulevard   1970   42,200   100.0   652   599   0.13   15.45   14.19   Baker Engineering NY, Inc. (39%), Ultra Fabrics, Inc. (30%)
500 Executive Boulevard   1970   41,600   100.0   685   624   0.14   16.47   15.00   Singer Holding Corporation (36%), Thyssen Krupp Elevator Corp. (16%), Cintas Corporation (16%), Olympia Sports, Inc. (13%), Pharmacare Resources, Inc. (13%)
525 Executive Boulevard   1972   61,700   100.0   903   862   0.18   14.64   13.97   Vie De France Yamazaki, Inc. (40%), New York Blood Center, Inc. (27%)
1 Westchester Plaza   1967   25,000   100.0   308   289   0.06   12.32   11.56   British Apparel (40%), Thin Film Concepts, Inc. (20%), RS Knapp (20%), JT Lynne Representatives (20%)
2 Westchester Plaza   1968   25,000   100.0   473   464   0.10   18.92   18.56   Board of Cooperative Education (80%), Kin-Tronics (10%), Squires Productions, Inc. (10%)
3 Westchester Plaza   1969   93,500   94.6   1,277   1,241   0.26   14.44   14.03   Reveo, Inc. (51%), Fabrication Enterprises, Inc. (22%), Aramak Uniform & Career Apparel (17%)

39


Property Location
  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per
Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per
Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

4 Westchester Plaza   1969   44,700   99.8   636   600   0.13   14.26   13.45   Metropolitan Life Insurance (38%), E2V Technologies, Inc. (34%), Infovalue Computing, Inc. (13%)
5 Westchester Plaza   1969   20,000   77.1   325   291   0.07   21.08   18.87   Apria Healthcare, Inc. (39%), Rokonet Industries USA, Inc. (14%), BBA Project, Inc. (13%), United States Beef Purveyors (12%)
6 Westchester Plaza   1968   20,000   100.0   314   292   0.06   15.70   14.60   Pinkerton Systems Integration (28%), Xerox Corporation (28%), Game Parts, Inc. (24%), Girard Rubber Co. (13%)
7 Westchester Plaza   1972   46,200   100.0   656   651   0.13   14.20   14.09   Emigrant Savings Bank (69%), Fire End Croker Corp. (27%)
8 Westchester Plaza   1971   67,200   96.6   919   805   0.19   14.16   12.40   Mamiya America Corp. (24%), Ciba Specialty Chemicals Corp. (17%), Kubra Data Transfer, Ltd. (15%)

Hawthorne

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
200 Saw Mill River Road   1965   51,100   97.8   646   621   0.13   12.93   12.43   Walter DeGruyter, Inc. (21%), Team Roselli Corporation (20%), Northeast Battery & Alternators (17%), Cablevision Lightpath, Inc. (12%)
4 Skyline Drive   1987   80,600   100.0   1,379   1,328   0.28   17.11   16.48   Alstom USA, Inc. (27%), Evonyx, Inc. (23%), All Star Marketing Group, LLC (11%)
5 Skyline Drive   1980   124,022   100.0   1,615   1,615   0.33   13.02   13.02   Taro Pharmaceuticals USA, Inc. (75%), Westco Closet Corp. (20%)
6 Skyline Drive   1980   44,155   100.0   718   718   0.15   16.26   16.26   Evonyx, Inc. (73%), Anvik Corporation (27%)
8 Skyline Drive   1985   50,000   98.7   842   683   0.17   17.06   13.84   Ameriquest Mortgage Company (51%), Evonyx, Inc. (29%), Minolta Business Solutions, Inc. (20%)
10 Skyline Drive   1985   20,000   68.5   233   212   0.05   17.01   15.47   Bi-Tronic Inc/LCA Sales Corp. (51%), ENSR Corp. (17%)
11 Skyline Drive   1989   45,000   100.0   746   696   0.15   16.58   15.47   Xand Corporation (100%)
12 Skyline Drive   1999   46,850   100.0   806   634   0.16   17.20   13.53   Creative Visual Enterprises (38%), Medelec, Inc. (32%), Savin Corporation (30%)
15 Skyline Drive   1989   55,000   100.0   1,122   938   0.23   20.40   17.05   Accorda Therapeutics, Inc. (54%), Tellabs Operations, Inc. (46%)

40


Property Location
  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage
of Total 2002
Office,
Office/Flex
and Industrial/
Warehouse
Base Rent (%)

  2002
Average
Base Rent
Per
Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per
Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

Yonkers                                    
100 Corporate Boulevard   1987   78,000   98.2   1,416   1,338   0.29   18.49   17.47   Montefiore Medical Center (28%), Sempra Energy Trading Corp. (13%), Emerging Health Information (12%), Genzyme Genetics Corp. (11%), Otis Elevator Company (11%)
200 Corporate Boulevard South   1990   84,000   92.5   1,331   1,301   0.27   17.13   16.74   Belmay, Inc. (32%), Montefiore Medical Center (23%), Advanced Viral Research Corp. (20%)
4 Executive Plaza   1986   80,000   99.0   1,253   1,124   0.26   15.82   14.19   Wise Contact US Optical Corp. (35%), E&B Giftware, Inc. (22%), TT Systems, LLC (10%)
6 Executive Plaza   1987   80,000   95.8   1,276   1,249   0.26   16.65   16.30   CSC Holdings, Inc. (52%), Atlantic Bank of NY (11%)
1 Odell Plaza   1980   106,000   99.9   1,365   1,308   0.28   12.89   12.35   Sportive Ventures 2, LLC (19%), Market Dynamics Group, LLC (11%)
5 Odell Plaza   1983   38,400   99.6   625   601   0.13   16.34   15.71   Voyetra Technologies, Inc. (44%), Photo File, Inc. (34%), The New Geri Care of Yonkers (22%)
7 Odell Plaza   1984   42,600   99.6   652   645   0.13   15.37   15.20   US Postal Service (41%), TT Systems Company (24%), Bright Horizons Childrens Center (16%)
       
 
 
 
 
 
 
   
Total New York Office/Flex   2,277,747   97.8   32,901   30,959   6.70   14.84   13.96    
       
 
 
 
 
 
 
   
FAIRFIELD COUNTY, CONNECTICUT                        
Stamford                                    
419 West Avenue   1986   88,000   100.0   1,154   1,098   0.23   13.11   12.48   Fuji Medical Systems USA, Inc. (100%)
500 West Avenue   1988   25,000   100.0   407   351   0.08   16.28   14.04   American Diagnostica, Inc. (43%), Lead Trackers, Inc. (28%), Leadmasters, Inc. (19%), M Cohen and Sons Inc. (11%)
550 West Avenue   1990   54,000   100.0   916   868   0.19   16.96   16.07   Lifecodes Corp. (68%), Davidoff of Geneva (CT), Inc. (32%)
600 West Avenue   1999   66,000   100.0   826   795   0.17   12.52   12.05   P.Kaufmann, Inc. (100%)
650 West Avenue   1998   40,000   100.0   922   792   0.19   23.05   19.80   Davidoff of Geneva (CT), Inc. (100%)
       
 
 
 
 
 
 
   
Total Connecticut Office/Flex   273,000   100.0   4,225   3,904   0.86   15.48   14.30    
       
 
 
 
 
 
 
   
TOTAL OFFICE/FLEX PROPERTIES   4,828,278   95.3   55,579   51,431   11.30   12.12   11.21    
       
 
 
 
 
 
 
   

41


Property Listing

Industrial/Warehouse Properties

Property Location
  Year
Built

  Net
Rentable
Area
(Sq. Ft.)

  Percentage
Leased
as of
12/31/02
(%)(a)

  2002
Base
Rent
($000's)(b)(c)

  2002
Effective
Rent
($000's)(c)(d)

  Percentage of Total 2002 Office, Office/Flex and Industrial/Warehouse Base Rent (%)
  2002
Average
Base Rent
Per
Sq. Ft.
($)(c)(e)

  2002
Average
Effective
Rent
Per
Sq. Ft.
($)(c)(f)

  Tenants Leasing 10% or
More of Net Rentable
Area Per Property
as of 12/31/02(c)

WESTCHESTER COUNTY, NEW YORK                        
Elmsford                                    
1 Warehouse Lane   1957   6,600   100.0   72   72   0.01   10.91   10.91   JP Trucking Service Center, Inc. (100%)
2 Warehouse Lane   1957   10,900   96.3   64   53   0.01   6.10   5.05   Fit Snacks, LLC. (55%), Teleport Communications Group (41%)
3 Warehouse Lane   1957   77,200   100.0   290   279   0.06   3.76   3.61   United Parcel Service (100%)
4 Warehouse Lane   1957   195,500   100.0   1,988   1,936   0.40   10.17   9.90   San Mar Laboratories, Inc. (63%), Westinghouse Air Brake Co., Inc. (14%), Bombardier Mass Transit Corp. (11%)
5 Warehouse Lane   1957   75,100   89.3   810   712   0.16   12.08   10.62   Nestle Waters North America (48%), Chamart Exclusives, Inc. (16%), Mallory Kotzen Tire Company (11%)
6 Warehouse Lane   1982   22,100   100.0   512   510   0.10   23.17   23.08   Conway Central Express (100%)
       
 
 
 
 
 
 
   
Total Industrial/Warehouse Properties   387,400   97.8   3,736   3,562   0.74   9.86   9.40    
       
 
 
 
 
 
 
   
TOTAL OFFICE, OFFICE/FLEX, AND INDUSTRIAL/WAREHOUSE PROPERTIES   27,091,934   92.3   491,224   458,433   100.00   20.59   19.26    
       
 
 
 
 
 
 
   

(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, 2002 aggregating 41,438 square feet for which no new leases were signed.

(b)
Total base rent for 2002, determined in accordance with generally accepted accounting principles ("GAAP"). Substantially all of the leases provide for annual base rents plus recoveries and escalation charges based upon the tenant's proportionate share of and/or increases in real estate taxes and certain operating costs, as defined, and the pass through of charges for electrical usage.

(c)
Excludes space leased by the Operating Partnership.

(d)
Total base rent for 2002 minus total 2002 amortization of tenant improvements, leasing commissions and other concessions and costs, determined in accordance with GAAP.

(e)
Base rent for 2002 divided by net rentable square feet leased at December 31, 2002. For those properties acquired or placed in service during 2002, amounts are annualized, as per Note h.

(f)
Effective rent for 2002 divided by net rentable square feet leased at December 31, 2002. For those properties acquired or placed in service during 2002, amounts are annualized, as per Note h.

(g)
Calculation based on square feet in service as of December 31, 2002.

(h)
As this property was acquired or placed in service by the Operating Partnership during 2002, the amounts represented in 2002 base rent and 2002 effective rent reflect only that portion of the year during which the Operating Partnership owned or placed the property in service. Accordingly, these amounts may not be indicative of the property's full year results. For comparison purposes, the amounts represented in 2002 average base rent per sq. ft. and 2002 average effective rent per sq. ft. for this property have been calculated by taking 2002 base rent and 2002 effective rent for such property and annualizing these partial-year results, dividing such annualized amounts by the net rentable square feet leased at December 31, 2002. These annualized per square foot amounts may not be indicative of the property's results had the Operating Partnership owned or placed such property in service for the entirety of 2002.

(i)
Property is excluded from weighted average percentage leased as it was an in-service development property as of December 31, 2002. Had these properties been included, weighted average percentage leased for total office, office/flex, and industrial/warehouse properties would be 90.7 percent.

(j)
The property was sold by the Operating Partnership in 2002.

42


Retail Properties

        The Operating Partnership owned two stand-alone retail properties as of December 31, 2002, as described below:

        The Operating Partnership owns an 8,000 square foot restaurant, constructed in 1986, located at 2 Executive Plaza in the South Westchester Executive Park in Yonkers, Westchester County, New York. The restaurant is 100 percent leased to Benni's I LLC for use as a Bennigan's restaurant under a 16-year lease. The lease currently provides for fixed annual base rent of $175,000, with fully-reimbursed real estate taxes, and operating expenses escalated based on the consumer price index ("CPI") over a base year CPI. The lease, which commenced in December 2001 and expires in December 2017, includes scheduled rent increases in January 2003 to approximately $205,000 annually, in January 2006 to approximately $225,000 annually, in January 2010 to approximately $248,000 annually, and in January 2014 to approximately $273,000 annually. The lease also provides for additional rent calculated as a percentage of sales over a specified sales amount, as well as for two five-year renewal options. 2002 total base rent for the property, calculated in accordance with GAAP, was approximately $232,101.

        The Operating Partnership also owns a 9,300 square foot restaurant, constructed in 1984, located at 230 White Plains Road, Tarrytown, Westchester County, New York. The restaurant is 100 percent leased to TGI Friday's under a 10-year lease which provides for fixed annual base rent of approximately $195,000, with fully-reimbursed real estate taxes, and operating expenses escalated based on CPI over a base year CPI. The lease, which expires in August 2004, also provides for additional rent calculated as a percentage of sales over a specified sales amount, as well as for four five-year renewal options. 2002 total base rent for the property, calculated in accordance with GAAP, was approximately $195,000.

Land Leases

        The Operating Partnership owned three land parcels, which were leased as of December 31, 2002, as described below:

        The Operating Partnership leases land to Star Enterprises, on which a 2,264 square-foot Texaco gas station was constructed, located at 1 Enterprise Boulevard in Yonkers, Westchester County, New York. The 15-year, triple-net land lease provides for annual rent of approximately $145,000 and expires in April 2005. The lease also provides for two five-year renewal options. 2002 total base rent under this lease, calculated in accordance with GAAP, was approximately $143,972.

        The Operating Partnership also leases five acres of land to Rake Realty, on which a 103,500 square-foot office building exists, located at 700 Executive Boulevard, Elmsford, Westchester County, New York. The 22-year, triple-net land lease provides for fixed annual rent plus a CPI adjustment every five years, and expires in November 2018. 2002 total base rent under this lease, calculated in accordance with GAAP, was approximately $114,276. The lease also provides for several renewal options which could extend the lease term for an additional 30 years.

        The Operating Partnership also leases 27.7 acres of land to Home Depot, on which a 134,000 square-foot retail store was constructed, located at the Operating Partnership's Horizon Center Business Park, Hamilton Township, Mercer County, New Jersey. The net lease, which began on February 1, 1999, provides for annual rent of approximately $298,000 through the fifth year of the lease and fixed annual rent plus a CPI adjustment every five years for the years thereafter and expires in January 2094. 2002 total base rent under this lease, calculated in accordance with GAAP, was approximately $294,896.

43



Multi-Family Residential Property

        In 2002, the Operating Partnership sold a multi-family residential property, as described below:

        25 Martine Avenue, White Plains, Westchester County, New York:    During 2002, the Operating Partnership owned 25 Martine Avenue, a 124-unit multi-family residential property located in White Plains, Westchester County, New York, which was sold on January 30, 2002. During 2002, the Operating Partnership recognized approximately $213,161 in total base rent from the property.

OCCUPANCY

        The following table sets forth the year-end percentages of square feet leased in the Operating Partnership's stabilized operating Consolidated Properties for the last five years:

Year ended December 31,

  Percentage of
Square Feet Leased (%) (a)

2002   92.3
2001   94.6
2000   96.8
1999   96.5
1998   96.6

(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.

44


SIGNIFICANT TENANTS

        The following table sets forth a schedule of the Operating Partnership's 20 largest tenants for the Consolidated Properties as of December 31, 2002, based upon annualized base rents:

 
  Number of
Properties

  Annualized
Base Rental
Revenue ($) (a)

  Percentage Of
Operating
Partnership
Annualized Base
Rental Revenue (%)

  Square
Feet
Leased

  Percentage
Total Operating
Partnership
Leased Sq. Ft. (%)

  Year Of
Lease
Expiration

 
AT&T Wireless Services   2   9,856,447   2.0   395,955   1.6   2007 (b)
Donaldson, Lufkin & Jenrette                          
Securities Corp.   1   8,382,273   1.7   271,953   1.1   2012 (c)
AT&T Corporation   3   7,395,575   1.5   455,064   1.9   2009 (d)
Keystone Mercy Health Plan   2   7,124,001   1.4   303,149   1.2   2015  
Prentice-Hall Inc.   1   6,744,495   1.4   474,801   2.0   2014  
IBM Corporation   3   6,250,705   1.3   353,617   1.5   2007 (e)
Nabisco Inc.   3   6,066,357   1.2   340,746   1.4   2006 (f)
American Institute of Certified Public Accountants   1   5,817,181   1.2   249,768   1.0   2012  
Forest Laboratories Inc.   2   5,733,035   1.2   166,405   0.7   2017 (g)
Waterhouse Securities, Inc.   1   5,379,282   1.1   184,222   0.8   2015  
Toys "R' Us — NJ, Inc.   1   5,342,672   1.1   242,518   1.0   2012  
Allstate Insurance Company   9   5,247,116   1.1   233,858   1.0   2009 (h)
CMP Media Inc.   1   4,817,298   1.0   237,274   1.0   2014  
Winston & Strawn   1   4,564,799   0.9   108,100   0.4   2005  
National Financial Services   1   4,346,765   0.9   112,964   0.5   2012  
Dean Witter Trust Company   1   4,319,508   0.9   221,019   0.9   2008  
Morgan Stanley Dean Witter, Inc.   5   4,124,719   0.8   163,253   0.7   2010 (i)
Move.com Operations, Inc.   1   3,986,514   0.8   94,917   0.4   2006  
Garban LLC   1   3,848,834   0.8   135,077   0.5   2017  
KPMG, LLP   2   3,604,132   0.7   134,585   0.6   2012 (j)
       
 
 
 
     
Totals       112,951,708   23.0   4,879,245   20.2      
       
     
         
Total Operating Partnership       491,216,575       24,165,483          
       
     
         

(a)
Annualized base rental revenue is based on actual December 2002 billings times 12. For leases whose rent commences after January 1, 2003, 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)
12,150 square feet expire September 2004; 345,799 square feet expire March 2007; 38,006 square feet expire June 2007.

(c)
190,000 square feet expire October 2011; 81,953 square feet expire January 2012.

(d)
63,278 square feet expire May 2004; 4,786 square feet expire October 2007; 387,000 square feet expire January 2009.

(e)
20,218 square feet expire January 2005; 85,000 square feet expire December 2005; 248,399 square feet expire December 2007.

(f)
300,378 square feet expire December 2005; 40,368 square feet expire March 2006.

(g)
22,785 square feet expire August 2010; 143,620 square feet expire August 2017.

(h)
4,398 square feet expire January 2004; 36,305 square feet expire January 2005; 23,024 square feet expire October 2005; 22,444 square feet expire July 2006; 6,108 square feet expire August 2006; 70,517 square feet expire June 2007; 59,562 square feet expire April 2008; 11,500 square feet expire April 2009.

(i)
7,500 square feet expire September 2003; 18,539 square feet expire April 2005; 85,151 square feet expire February 2008; 19,500 square feet expire June 2008; 7,000 square feet expire October 2009; 25,563 square feet expire January 2010.

(j)
57,204 square feet expire July 2007; 77,381 square feet expire September 2012.

45


SCHEDULE OF LEASE EXPIRATIONS

        The following table sets forth a schedule of lease expirations for the total of the Operating Partnership's office, office/flex, industrial/warehouse and stand-alone retail properties, included in the Consolidated Properties, beginning January 1, 2003, assuming that none of the tenants exercise renewal options:

Year Of
Expiration

  Number Of
Leases
Expiring (a)

  Net Rentable
Area Subject
To Expiring
Leases
(Sq. Ft.)

  Percentage Of
Total Leased
Square Feet
Represented By
Expiring
Leases(%)(b)

  Annualized
Base Rental
Revenue Under
Expiring
Leases($)(c)(d)

  Average Annual
Rent Per Net
Rentable
Square Foot
Represented
By Expiring
Leases ($)

  Percentage Of
Annual Base
Rent Under
Expiring
Leases (%)

2003   389   2,008,423   8.3   37,447,334   18.65   7.6
2004   373   2,450,789   10.1   47,324,713   19.31   9.6
2005   428   3,355,492   13.9   63,241,145   18.85   12.9
2006   342   2,880,818   11.9   59,335,987   20.60   12.1
2007   304   2,512,953   10.4   54,323,870   21.62   11.0
2008   182   2,304,298   9.5   42,402,909   18.40   8.6
2009   94   1,561,127   6.5   29,037,436   18.60   5.9
2010   103   1,293,024   5.4   26,285,928   20.33   5.4
2011   77   1,496,992   6.2   35,714,480   23.86   7.3
2012   59   1,549,113   6.4   35,863,612   23.15   7.3
2013   41   769,718   3.2   15,477,689   20.11   3.2
2014 and thereafter   37   1,982,736   8.2   44,761,472   22.58   9.1
   
 
 
 
 
 
Totals/Weighted Average   2,429   24,165,483 (e) 100.0   491,216,575   20.33   100.0
   
 
 
 
 
 

(a)
Includes office, office/flex, industrial/warehouse and stand-alone retail property tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.

(b)
Excludes all unleased space as of December 31, 2002.

(c)
Annualized base rental revenue is based on actual December 2002 billings times 12. For leases whose rent commences after January 1, 2003, 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.

(d)
Includes leases expiring December 31, 2002 aggregating 41,438 square feet and representing annualized rent of $915,033 for which no new leases were signed.

(e)
Reconciliation to Operating Partnership's total net rentable square footage is as follows:

 
  Square Feet
Square footage leased to commercial tenants   24,165,483
Square footage used for corporate offices, management offices, building use, retail tenants, food services, other ancillary service tenants and occupancy adjustments   526,817
Square footage unleased   2,416,934
   
Total net rentable square footage (does not include residential, land lease, retail or not-in-service properties)   27,109,234
   

46


SCHEDULE OF LEASE EXPIRATIONS: OFFICE PROPERTIES

        The following table sets forth a schedule of lease expirations for the office properties beginning January 1, 2003, assuming that none of the tenants exercise renewal options:

Year Of
Expiration

  Number Of
Leases
Expiring(a)

  Net Rentable
Area Subject
To Expiring
Leases
(Sq. Ft.)

  Percentage Of
Total Leased
Square Feet
Represented By
Expiring
Leases (%)(b)

  Annualized
Base Rental
Revenue Under
Expiring
Leases ($)(c)(d)

  Average Annual
Rent Per Net
Rentable
Square Foot
Represented
By Expiring
Leases ($)

  Percentage Of
Annual Base
Rent Under
Expiring
Leases (%)

2003   323   1,503,824   7.8   32,301,485   21.48   7.5
2004   306   1,842,692   9.6   40,207,888   21.82   9.3
2005   323   2,496,059   13.0   53,271,114   21.34   12.4
2006   290   2,388,191   12.4   52,842,357   22.13   12.3
2007   241   1,906,566   9.9   46,669,470   24.48   10.8
2008   141   1,729,372   9.0   37,080,717   21.44   8.6
2009   69   1,280,374   6.7   25,618,284   20.01   5.9
2010   78   935,810   4.9   20,671,863   22.09   4.8
2011   63   1,288,363   6.7   32,785,685   25.45   7.6
2012   45   1,373,146   7.2   33,363,903   24.30   7.7
2013   28   637,458   3.3   13,824,173   21.69   3.2
2014 and thereafter   26   1,810,223   9.5   42,226,056   23.33   9.9
   
 
 
 
 
 
Totals/Weighted Average   1,933   19,192,078   100.0   430,862,995   22.45   100.0
   
 
 
 
 
 

(a)
Includes office tenants only. Excludes leases for amenity, retail, parking and month-to-month office tenants. Some tenants have multiple leases.

(b)
Excludes all unleased space as of December 31, 2002.

(c)
Annualized base rental revenue is based on actual December 2002 billings times 12. For leases whose rent commences after January 1, 2003, 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.

(d)
Includes leases expiring December 31, 2002 aggregating 41,438 square feet and representing annualized rent of $915,033 for which no new leases were signed.

47


SCHEDULE OF LEASE EXPIRATIONS: OFFICE/FLEX PROPERTIES

        The following table sets forth a schedule of lease expirations for the office/flex properties beginning January 1, 2003, assuming that none of the tenants exercise renewal options:

Year Of
Expiration

  Number Of
Leases
Expiring(a)

  Net Rentable
Area Subject
To Expiring
Leases
(Sq. Ft.)

  Percentage Of
Total Leased
Square Feet
Represented By
Expiring
Leases (%)(b)

  Annualized
Base Rental
Revenue Under
Expiring
Leases ($)(c)

  Average Annual
Rent Per Net
Rentable
Square Foot
Represented
By Expiring
Leases ($)

  Percentage Of
Annual Base
Rent Under
Expiring
Leases (%)

2003   65   496,323   10.8   5,069,710   10.21   9.0
2004   59   415,277   9.1   4,789,505   11.53   8.5
2005   102   837,505   18.3   9,762,248   11.66   17.4
2006   52   492,627   10.8   6,493,630   13.18   11.6
2007   59   591,087   12.9   7,447,650   12.60   13.3
2008   40   497,723   10.9   5,032,529   10.11   9.0
2009   23   262,958   5.7   3,241,012   12.33   5.8
2010   25   357,214   7.8   5,614,065   15.72   10.0
2011   14   208,629   4.6   2,928,795   14.04   5.2
2012   14   175,967   3.8   2,499,709   14.21   4.4
2013   6   77,024   1.7   994,845   12.92   1.8
2014 and thereafter   10   164,513   3.6   2,330,416   14.17   4.0
   
 
 
 
 
 
Totals/Weighted
Average
  469   4,576,847   100.0   56,204,114   12.28   100.0
   
 
 
 
 
 

(a)
Includes office/flex tenants only. Excludes leases for amenity, retail, parking and month-to-month office/flex tenants. Some tenants have multiple leases.

(b)
Excludes all unleased space as of December 31, 2002.

(c)
Annualized base rental revenue is based on actual December 2002 billings times 12. For leases whose rent commences after January 1, 2003, 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.

48


SCHEDULE OF LEASE EXPIRATIONS: INDUSTRIAL/WAREHOUSE PROPERTIES

        The following table sets forth a schedule of lease expirations for the industrial/warehouse properties beginning January 1, 2003, assuming that none of the tenants exercise renewal options:

Year Of
Expiration

  Number Of
Leases
Expiring (a)

  Net Rentable
Area Subject
To Expiring
Leases
(Sq. Ft.)

  Percentage Of
Total Leased
Square Feet
Represented By
Expiring
Leases(%)(b)

  Annualized
Base Rental
Revenue Under
Expiring
Leases($)(c)

  Average Annual
Rent Per Net
Rentable
Square Foot
Represented
By Expiring
Leases ($)

  Percentage Of
Annual Base
Rent Under
Expiring
Leases (%)

2003   1   8,276   2.2   76,139   9.20   2.0
2004   7   183,520   48.4   2,132,320   11.62   56.9
2005   3   21,928   5.8   207,783   9.48   5.5
2007   4   15,300   4.0   206,750   13.51   5.5
2008   1   77,203   20.3   289,663   3.75   7.7
2009   2   17,795   4.7   178,140   10.01   4.8
2013   7   55,236   14.6   658,671   11.92   17.6
   
 
 
 
 
 
Totals/Weighted Average   25   379,258   100.0   3,749,466   9.89   100.0
   
 
 
 
 
 

SCHEDULE OF LEASE EXPIRATIONS: STAND-ALONE RETAIL PROPERTIES

        The following table sets forth a schedule of lease expirations for the stand-alone retail properties beginning January 1, 2003, assuming that none of the tenants exercise renewal options:

Year Of
Expiration

  Number Of
Leases
Expiring (a)

  Net Rentable
Area Subject
To Expiring
Leases
(Sq. Ft.)

  Percentage Of
Total Leased
Square Feet
Represented By
Expiring
Leases(%)

  Annualized
Base Rental
Revenue Under
Expiring
Leases($)(c)

  Average Annual
Rent Per Net
Rentable
Square Foot
Represented
By Expiring
Leases ($)

  Percentage Of
Annual Base
Rent Under
Expiring
Leases (%)

2004   1   9,300   53.8   195,000   20.97   48.8
2014 & thereafter   1   8,000   46.2   205,000   25.63   51.2
   
 
 
 
 
 
Totals/Weighted Average   2   17,300   100.0   400,000   23.12   100.0
   
 
 
 
 
 

49


INDUSTRY DIVERSIFICATION

        The following table lists the Operating Partnership's 30 largest industry classifications based on annualized contractual base rent of the Consolidated Properties:

Industry Classification(a)

  Annualized
Base Rental
Revenue
($)(b)(c)(d)

  Percentage Of
Operating Partnership
Annualized Base
Rental Revenue (%)

  Square
Feet
Leased(e)

  Percentage Of
Total Operating
Partnership
Leased
Sq. Ft. (%)

Securities, Commodity Contracts & Other Financial   68,648,661   14.0   2,555,849   10.6
Manufacturing   47,598,029   9.7   2,499,835   10.3
Computer System Design Svcs.   30,790,207   6.3   1,526,204   6.3
Telecommunications   30,345,121   6.2   1,536,055   6.4
Insurance Carriers & Related Activities   27,747,481   5.6   1,347,771   5.6
Legal Services   26,253,751   5.3   1,043,419   4.3
Health Care & Social Assistance   20,117,768   4.1   1,058,695   4.4
Credit Intermediation & Related Activities   20,087,514   4.1   1,131,879   4.7
Wholesale Trade   18,492,396   3.8   1,242,666   5.1
Scientific Research/Development   17,506,370   3.6   897,357   3.7
Other Professional   16,890,644   3.4   858,040   3.6
Accounting/Tax Prep.   16,175,416   3.3   677,695   2.8
Retail Trade   14,064,664   2.9   812,090   3.4
Publishing Industries   13,393,055   2.7   584,432   2.4
Architectural/Engineering   10,277,397   2.1   475,445   2.0
Arts, Entertainment & Recreation   10,114,652   2.0   685,427   2.8
Information Services   9,251,411   1.9   393,958   1.6
Advertising/Related Services   9,248,443   1.9   409,911   1.7
Other Services (except Public Administration)   9,140,019   1.9   598,975   2.5
Management of Companies & Finance   8,410,140   1.7   359,296   1.5
Real Estate & Rental & Leasing   7,671,320   1.6   429,273   1.8
Transportation   6,733,916   1.4   437,583   1.8
Management/Scientific   5,898,400   1.2   258,984   1.1
Construction   5,754,526   1.2   300,149   1.2
Data Processing Services   5,614,418   1.1   240,571   1.0
Utilities   5,295,530   1.1   277,680   1.1
Admin. & Support, Waste Mgt. & Remediation Svc.   4,633,490   0.9   304,111   1.3
Educational Services   4,212,218   0.9   223,160   0.9
Public Administration   3,903,462   0.8   189,692   0.8
Specialized Design Services   3,662,374   0.7   173,699   0.7
Other   13,283,782   2.6   635,582   2.6
   
 
 
 
Totals   491,216,575   100.0   24,165,483   100.0
   
 
 
 

(a)
The Operating Partnership's tenants are classified according to the U.S. Government's new North American Industrial Classification System (NAICS) which has replaced the Standard Industrial Code (SIC) system.
(b)
Annualized base rental revenue is based on actual December 2002 billings times 12. For leases whose rent commences after January 1, 2003, 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, 2002 aggregating 41,438 square feet and representing annualized rent of $915,033 for which no new leases were signed.
(d)
Includes office, office/flex, industrial/warehouse and stand-alone retail tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.
(e)
Excludes all unleased space as of December 31, 2002.

50


MARKET DIVERSIFICATION

        The following table lists the Operating Partnership's markets (MSAs), based on annualized contractual base rent of the Consolidated Properties:

Market (MSA)

  Annualized
Base Rental
Revenue
($)(a)(b)(c)

  Percentage Of
Operating Partnership
Annualized Base
Rental Revenue (%)

  Total
Property Size
Rentable Area

  Percentage Of
Rentable Area (%)

New York, NY (Westchester-Rockland Counties)   88,521,961   18.0   4,973,023   18.3
Bergen-Passaic, NJ   87,434,564   17.8   4,530,091   16.7
Newark, NJ (Essex-Morris-Union Counties)   81,988,124   16.7   4,242,330   15.7
Jersey City, NJ   63,623,449   12.9   3,074,470   11.3
Philadelphia, PA-NJ   47,912,140   9.8   3,354,023   12.4
Trenton, NJ (Mercer County)   15,008,575   3.1   767,365   2.8
Middlesex-Somerset-Hunterdon, NJ   14,737,455   3.0   791,051   2.9
Denver, CO   13,955,447   2.8   1,084,945   4.0
Stamford-Norwalk, CT   13,191,782   2.7   706,510   2.6
Washington, DC-MD-VA   12,999,141   2.6   450,549   1.7
San Francisco, CA   12,320,464   2.5   450,891   1.7
Monmouth-Ocean, NJ   7,445,520   1.5   577,423   2.1
Dallas, TX   6,518,408   1.3   449,594   1.7
Nassau-Suffolk, NY   6,373,398   1.3   292,849   1.1
San Antonio, TX   5,095,656   1.0   435,465   1.6
Bridgeport, CT   3,257,621   0.7   145,487   0.5
Colorado Springs, CO   2,737,806   0.6   209,987   0.8
Boulder-Longmont, CO   2,634,540   0.5   270,421   1.0
Dutchess County, NY   2,318,687   0.5   118,727   0.4
Atlantic-Cape May, NJ   1,831,576   0.4   80,344   0.3
Houston, TX   1,310,261   0.3   103,689   0.4
   
 
 
 
Totals   491,216,575   100.0   27,109,234   100.0
   
 
 
 

(a)
Annualized base rental revenue is based on actual December 2002 billings times 12. For leases whose rent commences after January 1, 2003, 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 expiring December 31, 2002 aggregating 41,438 square feet and representing annualized rent of $915,033 for which no new leases were signed.

(c)
Includes office, office/flex, industrial/warehouse and stand-alone retail tenants only. Excludes leases for amenity, retail, parking and month-to-month tenants. Some tenants have multiple leases.

51



ITEM 3. LEGAL PROCEEDINGS

        Pursuant to an agreement with the City of Jersey City, New Jersey, the Operating Partnership is required to make payments in lieu of property taxes ("PILOT") on its Harborside Plaza 2 and 3 properties. The agreement, which commenced in 1990, is for a term of 15 years. Such PILOT is equal to two percent of Total Project Costs, as defined, in year one and increases by $75,000 per annum through year 15. Total Project Costs, as defined, are $145.6 million. The PILOT totaled $3.8 million, $3.7 million and $3.6 million for the years ended December 31, 2002, 2001 and 2000, respectively. The PILOT on these two properties has been challenged as part of a larger effort by several neighboring towns to question past practices of the City of Jersey City in attracting large development. If this challenge is successful, the properties will be placed back on the regular tax roles for tax years beginning with 1998. While the Operating Partnership cannot at this time determine the likely outcome of this challenge, the effect, if successful, of the challenge on the tax assessments against the properties, or the amount of the increase, if any, in taxes assessed resulting from a successful challenge, the Operating Partnership does not believe that the outcome will result in a material adverse impact to the Operating Partnership as there is the potential that the majority of any increase in the expense at the properties may be passed along to the properties' tenants. See Note 16 to the Financial Statements.

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


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Not applicable.

52



PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The Operating Partnership currently has no securities listed on any securities exchange.

MARKET INFORMATION

        Not applicable.

HOLDERS

        On February 14, 2003, the Operating Partnership had 101 owners of limited partnership units.

RECENT SALES OF UNREGISTERED SECURITIES

        The Operating Partnership did not issue any unregistered securities in the years ended December 31, 2002, 2001 or 2000.

DIVIDENDS AND DISTRIBUTIONS

        During the year ended December 31, 2002, the Corporation and Operating Partnership declared four quarterly common stock dividends and common unit distributions in the amounts of $0.62, $0.62, $0.63 and $0.63 per share and common unit from the first to the fourth quarter, respectively.

        During the year ended December 31, 2001, the Corporation and Operating Partnership declared four quarterly common stock dividends and common unit distributions in the amounts of $0.61, $0.61, $0.62 and $0.62 per share and common unit from the first to the fourth quarter, respectively.

        The declaration and payment of dividends and distributions will continue to be determined by the Board of Directors of the Corporation in light of conditions then existing, including the Operating Partnership's earnings, financial condition, capital requirements, applicable legal restrictions and other factors.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

        The information is incorporated by reference from the Corporation's definitive proxy statement for its annual meeting of shareholders to be held on May 13, 2003.

53


ITEM 6.    SELECTED FINANCIAL DATA

        The following table sets forth selected financial data on a consolidated basis for the Operating Partnership. The consolidated selected operating, balance sheet and cash flow data of the Operating Partnership as of December 31, 2002, 2001, 2000, 1999 and 1998, and for the years then ended have been derived from financial statements audited by PricewaterhouseCoopers LLP, independent accountants.

 
  Year Ended December 31,
Operating Data
In thousands, except per unit data

  2002
  2001
  2000
  1999
  1998
Total revenues   $ 569,614   $ 584,348   $ 576,153   $ 551,484   $ 493,699
Operating and other expenses   $ 168,129   $ 174,686   $ 172,146   $ 168,651   $ 150,448
General and administrative   $ 27,054   $ 28,490   $ 23,276   $ 25,480   $ 24,828
Depreciation and amortization   $ 109,513   $ 91,471   $ 92,088   $ 87,209   $ 78,916
Interest expense   $ 107,823   $ 112,003   $ 105,394   $ 102,960   $ 88,043
Non-recurring charges   $   $   $ 37,139   $ 16,458   $
Realized gains (losses) and unrealized losses on disposition of rental property, net   $ 2,759   $ (11,864 ) $ 85,353   $ 1,957   $
Income before minority interest and extraordinary item   $ 174,647   $ 165,834   $ 231,463   $ 152,683   $ 151,464
Income before extraordinary item   $ 174,647   $ 165,834   $ 226,391   $ 152,604   $ 151,464
Net income   $ 174,647   $ 165,834   $ 226,391   $ 152,604   $ 148,794
Net income available to common unitholders   $ 158,991   $ 150,190   $ 210,950   $ 137,128   $ 132,481
Basic earnings per unit—before extraordinary item   $ 2.44   $ 2.33   $ 3.18   $ 2.05   $ 2.13
Diluted earnings per unit—before extraordinary item   $ 2.43   $ 2.32   $ 3.10   $ 2.04   $ 2.11
Distributions declared per common unit   $ 2.50   $ 2.46   $ 2.38   $ 2.26   $ 2.10
Basic weighted average units outstanding     65,109     64,495     66,392     66,885     63,438
Diluted weighted average units outstanding     65,427     64,775     73,070     67,133     63,893
 
  December 31,
Balance Sheet Data
In thousands

  2002
  2001
  2000
  1999
  1998
Rental property, before accumulated depreciation and amortization   $ 3,857,657   $ 3,378,071   $ 3,589,877   $ 3,654,845   $ 3,467,799
Rental property held for sale, net   $   $ 384,626   $ 107,458   $   $
Total assets   $ 3,796,429   $ 3,746,770   $ 3,676,977   $ 3,629,601   $ 3,452,194
Total debt   $ 1,752,372   $ 1,700,150   $ 1,628,512   $ 1,490,175   $ 1,420,931
Total liabilities   $ 1,912,199   $ 1,867,938   $ 1,774,239   $ 1,648,844   $ 1,526,974
Minority interest   $   $   $ 1,925   $ 83,600   $
Partners' capital   $ 1,884,230   $ 1,878,832   $ 1,900,813   $ 1,897,157   $ 1,925,220
 
  Year Ended December 31,
 
Other Data
In thousands

 
  2002
  2001
  2000
  1999
  1998
 
Cash flows provided by operating activities   $ 220,137   $ 265,883   $ 180,529   $ 243,638   $ 208,761  
Cash flows (used in) provided by investing activities   $ (106,349 ) $ (145,586 ) $ 6,189   $ (195,178 ) $ (749,067 )
Cash flows (used in) provided by financing activities   $ (125,456 ) $ (120,641 ) $ (182,210 ) $ (45,598 ) $ 543,411  
Funds from operations (1), before distributions to preferred unitholders   $ 272,288   $ 260,497   $ 262,071   $ 244,240   $ 216,949  
Funds from operations (1), after distributions to preferred unitholders   $ 256,632   $ 244,853   $ 246,630   $ 228,764   $ 200,636  

(1)
The Operating Partnership considers funds from operations (after adjustment for straight-lining of rents and non-recurring charges) one measure of REIT performance. Funds from operations ("FFO") is defined as net income (loss) before minority interest of unitholders (preferred and common) computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from debt restructuring, other extraordinary items, and sales of depreciable rental property, plus real estate-related depreciation and amortization. FFO should not be considered as an alternative for net income as an indication of the Operating Partnership'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 Operating Partnership'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"), with the exception that it deviates as a result of adjustments made to the Operating Partnership's FFO for straight-lining of rents and non-recurring charges. The Operating Partnership adjusts its FFO calculation to remove the effects of straight-lining of rents because it believes that such adjustment more accurately reflects proper recognition of the Operating Partnership's revenue that is contractually due for the respective periods presented. The Operating Partnership also adjusts its FFO calculation for non-recurring charges because it believes that the inclusion of these costs, which are incurred specific to significant non-recurring events, can impact the comparative measurement of the Operating Partnership's performance. Refer to "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations," contained elsewhere in this Report, for the calculation of FFO for the periods presented.

54


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, L.P. and subsidiaries and the notes thereto (collectively, the "Financial Statements"). Certain defined terms used herein have the meaning ascribed to them in the Financial Statements.

Critical Accounting Policies

Rental Property

        Rental properties are stated at cost less accumulated depreciation and amortization. Costs directly related to the acquisition, development and construction of rental properties are capitalized. Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development. Interest capitalized by the Operating Partnership for the years ended December 31, 2002, 2001 and 2000 was $4.1 million, $4.0 and $3.7 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 Operating Partnership considers a construction project as substantially completed and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity (as distinguished from activities such as routine maintenance and cleanup). If portions of a rental project are substantially completed and occupied by tenants, or held available for occupancy, and other portions have not yet reached that stage, the substantially completed portions are accounted for as a separate project. The Operating Partnership allocates costs incurred between the portions under construction and the portions substantially completed and held available for occupancy and capitalizes only those costs associated with the portion under construction.

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

Rental Property Held for Sale

        When assets are identified by management as held for sale, the Operating Partnership discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. If, in management's opinion, the net sales price of the assets which have been identified for sale is less than the net book value of the assets, a valuation allowance is established.

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

55



continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell. See Note 7 to the Financial Statements.

        Effective January 1, 2002, the Operating Partnership adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supercedes SFAS No. 121. SFAS No. 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. SFAS No. 144 retains the requirements of SFAS No. 121 regarding impairment loss recognition and measurement. In addition, it requires that one accounting model be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions. As the statement requires implementation on a prospective basis, properties which were identified as held for sale by the Operating Partnership prior to January 1, 2002 are presented in the accompanying financial statements in a manner consistent with the prior year's presentation. As there were no additional properties identified as held for sale during the year ended December 31, 2002, the Operating Partnership did not report any discontinued operations for the periods presented.

Investments in Unconsolidated Joint Ventures

        The Operating Partnership accounts for its investments in unconsolidated joint ventures under the equity method of accounting as the Operating Partnership exercises significant influence, but does not control these entities. These investments are recorded initially at cost, as Investments in Unconsolidated Joint Ventures, and subsequently adjusted for equity in earnings and cash contributions and distributions.

        On a periodic basis, management assesses whether there are any indicators that the value of the Operating Partnership's investments in unconsolidated joint ventures may be impaired. An investment is impaired only if management's estimate of the value of the investment is less than the carrying value of the investment. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the value of the investment. See Note 4 to the Financial Statements.

Deferred Leasing Costs

        Costs incurred in connection with leases are capitalized and amortized on a straight-line basis over the terms of the related leases and included in depreciation and amortization. Unamortized deferred leasing costs are charged to amortization expense upon early termination of the lease. Certain employees of the Operating Partnership provide leasing services to the Properties and receive compensation based on space leased. The portion of such compensation, which is capitalized and amortized, approximated $4.1 million, $4.0 million and $3.7 million for the years ended December 31, 2002, 2001 and 2000, respectively.

Derivative Instruments

        The Operating Partnership measures derivative instruments, including certain derivative instruments embedded in other contracts, at fair value and records them as an asset or liability, depending on the Operating Partnership's rights or obligations under the applicable derivative contract. For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of the derivative are reported in other comprehensive income ("OCI") and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedging and ineffective portions of hedges are recognized in earnings in the affected period. See Note 10 to the Financial Statements—Interest Rate Contract.

56



Revenue Recognition

        Base rental revenue is recognized on a straight-line basis over the terms of the respective leases. Unbilled rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with the lease agreements. Parking and other revenue includes income from parking spaces leased to tenants, income from tenants for additional services provided by the Operating Partnership, income from tenants for early lease terminations and income from managing properties for third parties. Escalations and recoveries are received from tenants for certain costs as provided in the lease agreements. These costs generally include real estate taxes, utilities, insurance, common area maintenance and other recoverable costs. See Note 17 to the Financial Statements.

Allowance for Doubtful Accounts

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

Results from Operations

As a result of the economic climate in 2002, substantially all of the real estate markets the Operating Partnership operates in materially softened. Demand for office space declined significantly and vacancy rates increased in each of the Operating Partnership's core markets since the first quarter of 2001. Through February 14, 2003, the Operating Partnership's core markets continued to be weak. The percentage leased in the Operating Partnership's consolidated portfolio of stabilized operating properties decreased to 92.3 percent at December 31, 2002, as compared to 94.6 percent at December 31, 2001 and 96.8 percent at December 31, 2000. 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. Market rental rates have declined in most markets from peak levels in late 2000 and early 2001. Rental rates on the Operating Partnership's space that was re-leased during the year ended December 31, 2002 increased an average of 3.0 percent compared to rates that were in effect under expiring leases, as compared to a 9.5 percent increase in 2001 and a 12.9 percent increase in 2000. The Operating Partnership believes that vacancy rates may continue to increase in most of its markets going into 2003.

        The Operating Partnership has a focused strategy geared to attractive opportunities in high-barrier-to-entry markets, primarily predicated on the Operating Partnership's strong presence in the Northeast region.

        Consistent with its strategy, in the fourth quarter 2000, the Operating Partnership started construction of a 980,000 square-foot office property, known as Plaza 5, at its Harborside Financial Center office complex in Jersey City, Hudson County, New Jersey. The project, which commenced initial operations in September 2002, is currently projected to cost approximately $260 million, of which $196.6 million has been incurred by the Operating Partnership through December 31, 2002. Plaza 5 was approximately 58 percent leased as of December 31, 2002 (which includes a lease with a tenant for 68,000 square feet, or seven percent of the property, for which the tenant has informed the Operating Partnership that it is experiencing financial difficulties and has failed to meet certain monetary obligations under the lease, including the payment of rent). Additionally, in the fourth quarter 2000, the Operating Partnership, through a joint venture, started construction of a 577,575 square-foot office property, known as Plaza 10, on land owned by the joint venture located adjacent to the Operating Partnership's Harborside complex. The Operating Partnership holds a 50 percent interest in the joint venture. Among other things, the joint venture agreement provides for a preferred return on the Operating Partnership's invested capital in the venture in addition to the Operating Partnership's

57


proportionate share of the venture's profit, as defined in the agreement. Plaza 10 is currently projected to cost the Operating Partnership approximately $145 million, of which $124.8 million has been incurred by the Operating Partnership through December 31, 2002. The project, which is 100 percent leased to Charles Schwab & Co. Inc. ("Schwab") for a 15-year term, commenced initial operations in September 2002. The lease agreement with Schwab obligates the venture, among other things, to deliver space to the tenant by required timelines and offers expansion options at the tenant's election. Such options may obligate the venture to construct an additional building or, at the Operating Partnership's option, to make space available in any of its existing Harborside properties. Should the venture be unable to, or choose not to, provide such expansion space, the venture would be liable to Schwab for its actual damages, in no event to exceed $15 million. The amount of Schwab's actual damages, up to $15 million, has been guaranteed by the Operating Partnership. The Operating Partnership anticipates expending an additional approximately $83.6 million for the completion of Plaza 5 and Plaza 10. The Operating Partnership expects to finance its funding requirements primarily through drawing on its revolving credit facility.

        On June 6, 2002, the Operating Partnership determined that 20 of its office properties and a land parcel, which are located in Colorado, aggregating 1.6 million square feet, were no longer being held for sale. The Operating Partnership decided that it would continue to own and operate these properties until market conditions in Colorado improve. The reclassified properties carried an aggregate book value of $175.6 million, net of accumulated depreciation of $15.8 million and a valuation allowance of $27.0 million at the date of the subsequent decision not to sell (including an unrealized loss of $3.0 million and catch-up depreciation and amortization expense of $3.9 million for certain properties reflecting expense for the period from the date the properties were originally held for sale through the date they were no longer held for sale, which was recorded at that date).

        On September 30, 2002, the Operating Partnership determined that its five remaining properties located in Texas were no longer being held for sale. The Operating Partnership decided that it would continue to own and operate these properties until market conditions in Texas improve and certain leasing uncertainties at the properties are resolved. The reclassified properties had an aggregate book value of $56.3 million, net of accumulated depreciation of $7.1 million and a valuation allowance of $2.0 million, at the date of the subsequent decision not to sell (including catch-up depreciation and amortization expense of $3.4 million for certain properties reflecting expense for the period from the date the properties were originally held for sale through the date they were no longer held for sale, which was recorded at that date).

        The following comparisons for the year ended December 31, 2002 ("2002"), as compared to the year ended December 31, 2001 ("2001"), and for 2001, as compared to the year ended December 31, 2000 ("2000"), make reference to the following: (i) the effect of the "Same-Store Properties," which represents all in-service properties owned by the Operating Partnership at December 31, 2000, excluding Dispositions as defined below (for the 2002 versus 2001 comparison) and which represents all in-service properties owned by the Operating Partnership at December 31, 1999, excluding Dispositions as defined below (for the 2001 versus 2000 comparison); (ii) the effect of the "Acquired Properties," which represents all properties acquired by the Operating Partnership or commencing initial operations from January 1, 2001 through December 31, 2002 (for the 2002 versus 2001 comparison) and which represents all properties acquired by the Operating Partnership or commencing initial operations from January 1, 2000 through December 31, 2001 (for the 2001 versus 2000 comparison) and; (iii) the effect of the "Dispositions", which represents results for each period for those rental properties sold by the Operating Partnership during the respective periods.

58




Year Ended December 31, 2002
Compared to Year Ended December 31, 2001

 
  Year Ended
December 31

   
   
 
(dollars in thousands)

  Dollar
Change

  Percent
Change

 
  2002
  2001
 
Revenue from rental operations:                        
Base rents   $ 492,417   $ 506,557   $ (14,140 ) (2.8 )%
Escalations and recoveries from tenants     57,057     56,083     974   1.7  
Parking and other     17,838     10,518     7,320   69.6  
   
 
 
 
 
  Sub-total     567,312     573,158     (5,846 ) (1.0 )
Interest income     2,302     2,186     116   5.3  
   
 
 
 
 
  Total revenues     569,614     575,344     (5,730 ) (1.0 )
   
 
 
 
 
Property expenses:                        
Real estate taxes     60,836     62,015     (1,179 ) (1.9 )
Utilities     38,844     43,892     (5,048 ) (11.5 )
Operating services     68,449     68,779     (330 ) (0.5 )
   
 
 
 
 
  Sub-total     168,129     174,686     (6,557 ) (3.8 )
General and administrative     27,054     28,490     (1,436 ) (5.0 )
Depreciation and amortization     109,513     91,471     18,042   19.7  
Interest expense     107,823     112,003     (4,180 ) (3.7 )
   
 
 
 
 
  Total expenses     412,519     406,650     5,869   1.4  
   
 
 
 
 
Equity in earnings of unconsolidated joint ventures     14,793     9,004     5,789   64.3  
   
 
 
 
 
Income before realized gains (losses) and unrealized losses on disposition of rental property     171,888     177,698     (5,810 ) (3.3 )
Realized gains (losses) and unrealized losses on disposition of rental property, net     2,759     (11,864 )   14,623   123.3  
   
 
 
 
 
Net income     174,647     165,834     8,813   5.3  
Preferred unit distributions     (15,656 )   (15,644 )   (12 ) 0.1  
   
 
 
 
 
Net income available to common unitholders   $ 158,991   $ 150,190   $ 8,801   5.9 %
   
 
 
 
 

59


        The following is a summary of the changes in revenue from rental operations and property expenses divided into Same-Store Properties, Acquired Properties and Dispositions (dollars in thousands):

 
  Total Operating
Partnership

  Same-Store Properties
  Acquired Properties
  Dispositions
 
 
  Dollar
Change

  Percent
Change

  Dollar
Change

  Percent
Change

  Dollar
Change

  Percent
Change

  Dollar
Change

  Perce
Change

 
Revenue from rental operations:                                          
Base rents   $ (14,140 ) (2.8) % $ 3,466   0.7 % $ 12,787   2.5 % $ (30,393 ) (6.0) %
Escalations and recoveries from tenants     974   1.7     2,038   3.6     1,119   2.0     (2,183 ) (3.9 )
Parking and other     7,320   69.6     4,232   40.2     3,373   32.1     (285 ) (2.7 )
   
 
 
 
 
 
 
 
 
Total   $ (5,846 ) (1.0) % $ 9,736   1.7 % $ 17,279   3.0 % $ (32,861 ) (5.7) %
   
 
 
 
 
 
 
 
 
Property expenses:                                          
Real estate taxes   $ (1,179 ) (1.9) % $ 1,905   3.1 % $ 1,625   2.6 % $ (4,709 ) (7.6) %
Utilities     (5,048 ) (11.5 )   (2,227 ) (5.1 )   813   1.9     (3,634 ) (8.3 )
Operating services     (330 ) (0.5 )   3,729   5.4     2,582   3.8     (6,641 ) (9.7 )
   
 
 
 
 
 
 
 
 
Total   $ (6,557 ) (3.8) % $ 3,407   2.0 % $ 5,020   2.9 % $ (14,984 ) (8.7) %
   
 
 
 
 
 
 
 
 
OTHER DATA:                                          
Number of Consolidated Properties     256         234         22         28      
Square feet (in thousands)     27,109         23,920         3,189         4,695      

        Base rents for the Same-Store Properties increased $3.5 million, or 0.7 percent, for 2002 as compared to 2001, due primarily to rental rate increases in 2002, partially offset by decreases in space leased at the properties in 2002. Escalations and recoveries from tenants for the Same-Store Properties increased $2.0 million, or 3.6 percent, for 2002 over 2001, due primarily to the recovery of an increased amount of total property expenses in 2002. Parking and other income for the Same-Store Properties increased $4.2 million, or 40.2 percent, due primarily to increased lease termination fees in 2002, primarily as a result of the Operating Partnership receiving $2.9 million in August 2002 from a lease termination agreement with Arthur Andersen, LLP.

        Real estate taxes on the Same-Store Properties increased $1.9 million, or 3.1 percent, for 2002 as compared to 2001, due primarily to property tax rate increases in certain municipalities in 2002, partially offset by lower assessments on certain properties in 2002. Utilities for the Same-Store Properties decreased $2.2 million, or 5.1 percent, for 2002 as compared to 2001, due primarily to decreased rates in 2002. Operating services for the Same-Store Properties increased $3.7 million, or 5.4 percent, due primarily to increased insurance costs in 2002.

        Equity in earnings of unconsolidated joint ventures increased $5.8 million, or 64.3 percent, for 2002 as compared to 2001. This is due primarily to properties developed by joint ventures commencing initial operations in 2001 and 2002, higher occupancies at certain properties and net gain on sales of certain joint venture office properties, partially offset by a net loss of $1.8 million from the initial operations of the Harborside South Pier hotel venture in 2002. See Note 4 to the Financial Statements.

        Interest income increased $0.1 million, or 5.3 percent, for 2002 as compared to 2001. This increase was due primarily to the effect of net proceeds from property sales being invested in cash and cash equivalents for the period of time prior to which such proceeds were reinvested, partially offset by lower interest rates in 2002.

60



        General and administrative decreased by $1.4 million, or 5.0 percent, for 2002 as compared to 2001. This increase is due primarily to a decrease in bad debt expense of approximately $2.9 million from 2001 to 2002, partially offset by an increase in state tax expense of $1.6 million in 2002.

        Depreciation and amortization increased by $18.0 million, or 19.7 percent, for 2002 over 2001. Of this increase, $12.9 million, or 14.2 percent, is attributable to the Same-Store Properties (including catch-up depreciation and amortization of $7.3 million in connection with the Operating Partnership's change of plan to sell 20 of its office properties and a land parcel located in Colorado and its 5 remaining properties located in Texas), and $7.2 million, or 7.9 percent, is due to the Acquired Properties, partially offset by a decrease of $2.1 million, or 2.4 percent, due to the Dispositions.

        Interest expense decreased $4.2 million, or 3.7 percent, for 2002 as compared to 2001. This decrease is due primarily to lower interest rates on variable rate borrowings.

        Income before realized gains (losses) and unrealized losses on disposition of rental property and minority interests decreased to $171.9 million in 2002 from $177.7 million in 2001. The decrease of approximately $5.8 million is due to the factors discussed above.

        Net income available to common unitholders increased by $8.8 million, from $150.2 million in 2001 to $159.0 million in 2002. This increase was a result of realized gains (losses) and unrealized losses on disposition of rental property, net, of $11.9 million in 2001 and realized gains (losses) and unrealized losses on disposition of rental property, net, of $2.7 million in 2002. This was partially offset by a decrease in 2002 in income before realized gains (losses) and unrealized losses on dispositions of rental property of $5.8 million.

61




Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

 
  Year Ended
December 31

   
   
 
(dollars in thousands)

  Dollar
Change

  Percent
Change

 
  2002
  2001
 
Revenue from rental operations:                        
Base rents   $ 506,557   $ 491,193   $ 15,364   3.1 %
Escalations and recoveries from tenants     56,083     58,488     (2,405 ) (4.1 )
Parking and other     10,518     15,325     (4,807 ) (31.4 )
   
 
 
 
 
  Sub-total     573,158     565,006     8,152   1.4  
Interest income     2,186     3,092     (906 ) (29.3 )
   
 
 
 
 
  Total revenues     575,344     568,098     7,246   1.3  
   
 
 
 
 
Property expenses:                        
Real estate taxes     62,015     59,400     2,615   4.4  
Utilities     43,892     42,035     1,857   4.4  
Operating services     68,779     70,711     (1,932 ) (2.7 )
   
 
 
 
 
  Sub-total     174,686     172,146     2,540   1.5  
General and administrative     28,490     23,276     5,214   22.4  
Depreciation and amortization     91,471     92,088     (617 ) (0.7 )
Interest expense     112,003     105,394     6,609   6.3  
Non-recurring charges         37,139     (37,139 ) (100.0 )
   
 
 
 
 
  Total expenses     406,650     430,043     (23,393 ) (5.4 )
   
 
 
 
 
Equity in earnings of unconsolidated joint ventures     9,004     8,055     949   11.8  
   
 
 
 
 
Income before realized gains (losses) and unrealized losses on disposition of rental property and minority interest     177,698     146,110     31,588   21.6  
Realized gains (losses) and unrealized losses on disposition of rental property, net     (11,864 )   85,353     (97,217 ) (113.9 )
   
 
 
 
 
Income before minority interest     165,834     231,463     (65,629 ) (28.4 )
Minority interest in consolidated partially-owned properties         5,072     (5,072 ) (100.0 )
   
 
 
 
 
Net income     165,834     226,391     (60,557 ) (26.7 )
Preferred unit distributions     (15,644 )   (15,441 )   (203 ) 1.3  
   
 
 
 
 
Net income available to common unitholders   $ 150,190   $ 210,950   $ (60,750 ) (28.8) %
   
 
 
 
 

62


        The following is a summary of the changes in revenue from rental operations and property expenses divided into Same-Store Properties, Acquired Properties and Dispositions (dollars in thousands):

 
  Total Operating
Partnership

  Same-Store Properties
  Acquired Properties
  Dispositions
 
 
  Dollar
Change

  Percent
Change

  Dollar
Change

  Percent
Change

  Dollar
Change

  Percent
Change

  Dollar
Change

  Perce
Change

 
Revenue from rental operations:                                          
Base rents   $ 15,364   3.1 % $ 10,039   2.0 % $ 26,940   5.5 % $ (21,615 ) (4.4) %
Escalations and recoveries from tenants     (2,405 ) (4.1 )   (1,804 ) (3.1 )   2,556   4.4     (3,157 ) (5.4 )
Parking and other     (4,807 ) (31.4 )   (4,432 ) (28.9 )   399   2.6     (774 ) (5.1 )
   
 
 
 
 
 
 
 
 
Total   $ 8,152   1.4 % $ 3,803   0.6 % $ 29,895   5.3 % $ (25,546 ) (4.5) %
   
 
 
 
 
 
 
 
 
Property expenses:                                          
Real estate taxes   $ 2,615   4.4 % $ 938   1.6 % $ 3,945   6.6 % $ (2,268 ) (3.8) %
Utilities     1,857   4.4     1,696   4.0     2,227   5.3     (2,066 ) (4.9 )
Operating services     (1,932 ) (2.7 )   (1,279 ) (1.8 )   3,942   5.6     (4,595 ) (6.5 )
   
 
 
 
 
 
 
 
 
Total   $ 2,540   1.5 % $ 1,355   0.8 % $ 10,114   5.9 % $ (8,929 ) (5.2) %
   
 
 
 
 
 
 
 
 
OTHER DATA:                                          
Number of Consolidated Properties     259         240         19         15      
Square feet (in thousands)     26,983         24,602         2,381         2,971      

        Base rents for the Same-Store Properties increased $10.0 million, or 2.0 percent, for 2001 as compared to 2000, due primarily to rental rate increases in 2001. Escalations and recoveries from tenants for the Same-Store Properties decreased $1.8 million, or 3.1 percent, for 2001 over 2000, due to the recovery of a decreased amount of total property expenses partially as a result of new base years established from 2001 leasing activity. Parking and other income for the Same-Store Properties decreased $4.4 million, or 28.9 percent, due primarily to fewer lease termination fees in 2001.

        Real estate taxes on the Same-Store Properties increased $0.9 million, or 1.6 percent, for 2001 as compared to 2000, due primarily to property tax rate increases in certain municipalities in 2001, partially offset by lower assessments on certain properties in 2001. Utilities for the Same-Store Properties increased $1.7 million, or 4.0 percent, for 2001 as compared to 2000, due primarily to increased rates. Operating services for the Same-Store Properties decreased $1.3 million, or 1.8 percent, due primarily to decreased maintenance and snow removal costs in 2001.

        Equity in earnings of unconsolidated joint ventures increased $0.9 million, or 11.8 percent, for 2001 as compared to 2000. This is due primarily to properties developed by joint ventures being placed in service in 2001 and higher occupancies at certain properties, partially offset by the sale of joint venture office properties in 2001 (see Note 4 to the Financial Statements).

        Interest income decreased $0.9 million, or 29.3 percent, for 2001 as compared to 2000. This decrease was due primarily to additional interest income in 2000 on investment of proceeds from the 2000 Dispositions in cash and cash equivalents for longer periods of time.

        General and administrative increased by $5.2 million, or 22.4 percent, for 2001 as compared to 2000. This increase is due primarily to increased bad debt expense of approximately $2.5 million in 2001, related to a lease termination fee receivable due from a former tenant deemed uncollectible, increased professional fees, mostly on account of costs for transactions not consummated, and increased payroll and payroll-related costs in 2001.

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        Depreciation and amortization decreased by $0.6 million, or 0.7 percent, for 2001 over 2000. Of this decrease, $2.1 million, or 2.2 percent, is attributable to the Same-Store Properties, and $3.3 million, or 3.7 percent, is due to the Dispositions, partially offset by an increase of $4.8 million, or 5.2 percent, due to the Acquired Properties.

        Interest expense increased $6.6 million, or 6.3 percent, for 2001 as compared to 2000. This increase is due primarily to higher average outstanding debt balances in 2001 versus 2000, primarily as a result of Common Stock repurchases in late 2000 and early 2001 and, to a lesser extent, the replacement in early 2001 of short-term credit facility borrowings with long-term, higher fixed rate debt.

        Non-recurring charges of $37.1 million were incurred in 2000 as a result of costs associated with the termination of the Prentiss merger agreement in September 2000 (see Note 20 to the Financial Statements) and costs associated with the resignations of certain officers of the Corporation in June 2000 (see Note 16 to the Financial Statements).

        Income before realized gains (losses) and unrealized losses on disposition of rental property and minority interests increased to $177.7 million in 2001 from $146.1 million in 2000. The increase of approximately $31.6 million is due to the factors discussed above.

        Net income available to common unitholders decreased by $60.8 million, from $211.0 million in 2000 to $150.2 million in 2001. This decrease was a result of realized gains on disposition of rental property of $85.4 million in 2000, realized gains (losses) and unrealized losses on disposition of rental property, net, of $11.9 million in 2001 and an increase in preferred unit distributions of $0.2 million. This was partially offset by an increase in 2001 in income before realized gains (losses) and unrealized losses on dispositions of rental property and minority interest of $31.6 million and a decrease in minority interest in consolidated partially-owned properties of $5.1 million in 2001.


Liquidity and Capital Resources

        Historically, rental revenue has been the principal source of funds to pay operating expenses, debt service and capital expenditures, excluding non-recurring capital expenditures. To the extent that the Operating Partnership's cash flow from operating activities is insufficient to finance its non-recurring capital expenditures such as property acquisition and development and construction costs and other capital expenditures, the Operating Partnership has and expects to continue to finance such activities through borrowings under its revolving credit facility and other debt and equity financings.

        The Operating Partnership believes that with the current downturn in the economy in general, and the softening of the Operating Partnership's markets specifically, it is reasonably likely that vacancy rates may continue to increase, effective rental rates on new and renewed leases may continue to decrease and tenant installation costs may continue to increase in most or all of its markets during 2003. As a result of the potential negative effects on the Operating Partnership's rental revenue from the overall reduced demand for office space, the Operating Partnership's cash flow may be insufficient to cover increased tenant installation costs over the short-term. If this situation were to occur, the Operating Partnership expects to finance any shortfall through borrowings under its revolving credit facility and other debt and equity financings.

        The Operating Partnership expects to meet its short-term liquidity requirements generally through its working capital, net cash provided by operating activities and from its revolving credit facility. The Operating Partnership frequently examines potential property acquisitions and development projects and, at any given time, one or more of such acquisitions or development projects may be under consideration. Accordingly, the ability to fund property acquisitions and development projects is a major part of the Operating Partnership's financing requirements. The Operating Partnership expects to meet its financing requirements through funds generated from operating activities, proceeds from

64



property sales, long-term and short-term borrowings (including draws on the Operating Partnership's revolving credit facility) and the issuance of additional debt and/or equity securities.

        As of December 31, 2002, the Operating Partnership's total indebtedness of $1.8 billion (weighted average interest rate of 7.03 percent) was comprised of $105.2 million of revolving credit facility borrowings and other variable rate mortgage debt (weighted average rate of 2.41 percent) and fixed rate debt of $1.6 billion (weighted average rate of 7.33 percent).

        The Operating Partnership has three investment grade credit ratings. Standard & Poor's Rating Services ("S&P") and Fitch, Inc. ("Fitch") have each assigned their BBB rating to existing and prospective senior unsecured debt of the Operating Partnership. S&P and Fitch have also assigned their BBB-rating to prospective preferred stock offerings of the Corporation. Moody's Investors Service ("Moody's") has assigned its Baa3 rating to the existing and prospective senior unsecured debt of the Operating Partnership and its Ba1 rating to prospective preferred stock offerings of the Corporation.

        On September 27, 2002, the Operating Partnership obtained an unsecured revolving credit facility with a current borrowing capacity of $600.0 million from a group of 14 lenders, as described in Note 9 to the Financial Statements. As of December 31, 2002, the Operating Partnership had outstanding borrowings of $73.0 million under its unsecured revolving credit facility.

        The interest rate on outstanding borrowings under the unsecured facility is currently LIBOR plus 70 basis points. The Operating Partnership may instead elect an interest rate representing the higher of the lender's prime rate or the Federal Funds rate plus 50 basis points. The unsecured facility also currently requires a 20 basis point facility fee on the current borrowing capacity payable quarterly in arrears.

        In the event of a change in the Operating Partnership's unsecured debt rating, the interest and facility fee rates will be adjusted in accordance with the following table:

Operating Partnership's
Unsecured Debt Ratings:
S&P/Moody's/Fitch(a)

  Interest Rate —
Applicable Basis Points
Above LIBOR

  Facility Fee
Basis Points

No rating or less than BBB-/Baa3/BBB-   120.0   30.0
BBB-/Baa3/BBB-   95.0   20.0
BBB/Baa2/BBB (current)   70.0   20.0
BBB+/Baa1/BBB+   65.0   15.0
A-/A3/A- or higher   60.0   15.0

(a)
If the Operating Partnership has debt ratings from two rating agencies, one of which is Standard & Poor's Rating Services ("S&P") or Moody's Investors Service ("Moody's"), the rates per the above table shall be based on the lower of such ratings. If the Operating Partnership has debt ratings from three rating agencies, one of which is S&P or Moody's, the rates per the above table shall be based on the lower of the two highest ratings. If the Operating Partnership has debt ratings from only one agency, it will be considered to have no rating or less than BBB-/Baa3/BBB- per the above table.

65


        The unsecured facility matures in September 2005, with an extension option of one year, which would require a payment of 25 basis points of the then borrowing capacity of the credit line upon exercise. The Operating Partnership believes that the unsecured facility is sufficient to meet its revolving credit facility needs.

        The terms of the unsecured facility include certain restrictions and covenants which limit, among other things, the payment of dividends (as discussed below), the incurrence of additional indebtedness, the incurrence of liens and the disposition of assets, and which require compliance with financial ratios relating to the maximum leverage ratio, the maximum amount of secured indebtedness, the minimum amount of tangible net worth, the minimum amount of debt service coverage, the minimum amount of fixed charge coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property debt service coverage and certain investment limitations. The dividend restriction referred to above provides that, except to enable the Corporation to continue to qualify as a REIT under the Code, the Corporation will not during any four consecutive fiscal quarters make distributions with respect to common stock or other equity interests in an aggregate amount in excess of 90 percent of funds from operations (as defined) for such period, subject to certain other adjustments.

        The terms of the Operating Partnership's Senior Unsecured Notes, as defined in Note 8 to the Financial Statements (which totaled approximately $1.1 billion as of December 31, 2002), 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.

        As of December 31, 2002, the Operating Partnership had 231 unencumbered properties, totaling 20.8 million square feet, representing 76.9 percent of the Operating Partnership's total portfolio on a square footage basis.

        The debt of the Operating Partnership's unconsolidated joint ventures aggregating $152.7 million are non-recourse to the Operating Partnership except for (i) customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions and material misrepresentations and (ii) approximately $11.1 million of debt on the Harborside South Pier joint venture with Hyatt Corporation ("Hyatt"). Additionally, the Operating Partnership has posted an $8.0 million letter of credit in support of another loan to that joint venture, $4.0 million of which is indemnified by Hyatt, and a $1.8 million letter of credit as a reserve for re-leasing costs on a mortgage loan with the G&G Martco joint venture.

        The following table outlines the timing of payment requirements related to the Operating Partnership's debt, PILOT agreements, and ground lease agreements (in thousands):

 
  Payments Due by Period

 
  Total
  Less than 1
year

  1—3
years

  4—5
years

  6—10
years

  After 10
years

Senior unsecured notes   $ 1,104,634   $   $ 395,267   $   $ 709,367   $
Revolving credit facility     73,000         73,000            
Mortgages and loans payable     582,026     12,889     274,274     227,669     52,255     14,940
Payments in lieu of taxes (PILOT)     64,501     7,444     14,630     7,294     20,649     14,484
Ground lease payments     24,231     574     1,733     1,129     2,692     18,103

        As of December 31, 2002, the Operating Partnership's total debt had a weighted average term to maturity of approximately 4.5 years. The Operating Partnership has a total of $402.1 million of senior unsecured notes and mortgage debt scheduled to mature through March 2004. The Operating

66



Partnership does not intend to reserve funds to retire the Operating Partnership's Senior Unsecured Notes or its mortgages and loans payable upon maturity. Instead, the Operating Partnership will seek to refinance such debt at maturity or retire such debt through the issuance of additional equity or debt securities on or before the applicable maturity dates. If it cannot timely raise such proceeds, the Operating Partnership may draw on its revolving credit facility to retire the maturing indebtedness, which would reduce the future availability of funds under such facility. The Operating Partnership is reviewing various refinancing options, including the issuance of additional, or exchange of current, unsecured debt, preferred stock, and/or obtaining additional mortgage debt, some or all of which may be completed during 2003. The Operating Partnership anticipates that its available cash and cash equivalents and cash flows from operating activities, together with cash available from borrowings and other sources, will be adequate to meet the Operating Partnership's capital and liquidity needs both in the short and long-term. However, if these sources of funds are insufficient or unavailable, the Operating Partnership's ability to make the expected distributions discussed below may be adversely affected.

        The Corporation has an effective shelf registration statement with the SEC for an aggregate amount of $2.0 billion in equity securities of the Corporation. The Corporation and Operating Partnership also have an effective shelf registration statement with the SEC for an aggregate of $2.0 billion in debt securities, preferred stock and preferred stock represented by depositary shares, under which the Operating Partnership has issued an aggregate of $1.2 billion of senior unsecured notes.

        On September 13, 2000, the Board of Directors of the Corporation authorized an increase to the Corporation's repurchase program under which the Corporation was permitted to purchase up to an additional $150.0 million of the Corporation's outstanding common stock ("Repurchase Program"). From that date through February 14, 2003, the Corporation purchased for constructive retirement under the Repurchase Program 3.7 million shares of its outstanding common stock for an aggregate cost of approximately $104.5 million. Concurrent with these purchases, the Corporation sold to the Operating Partnership 3.7 million common units for an aggregate cost of approximately $104.5 million. The Corporation has a remaining authorization to repurchase up to an additional $45.5 million of its outstanding common stock, which it may repurchase from time to time in open market transactions at prevailing prices or through privately negotiated transactions.

        The Operating Partnership may not dispose of or distribute certain of its properties, currently comprising 141 properties with an aggregate net book value of approximately $1.8 billion, which were originally contributed by members of either the Mack Group (which includes William L. Mack, Chairman of the Corporation's Board of Directors; Earle I. Mack, director; and Mitchell E. Hersh, chief executive officer and director), the Robert Martin Group (which includes Robert F. Weinberg, director; Martin S. Berger, a former director; and Timothy M. Jones, president), or the Cali Group (which includes John J. Cali, director and John R. Cali, director) without the express written consent of a representative of the Mack Group, the Robert Martin Group or the Cali Group, as applicable, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate Mack Group, Robert Martin Group or Cali Group members for the tax consequences of the recognition of such built-in-gains (collectively, the "Property Lock-Ups"). The aforementioned restrictions do not apply in the event that the Operating Partnership sells all of its properties or in connection with a sale transaction which the Corporation's Board of Directors determines is reasonably necessary to satisfy a material monetary default on any unsecured debt, judgment or liability of the Operating Partnership or to cure any material monetary default on any mortgage secured by a property. The Property Lock-Ups expire periodically through 2008. Upon the expiration of the Property Lock-Ups, the Operating Partnership is required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from

67



resulting in the recognition of built-in gain to the appropriate Mack Group, Robert Martin Group or Cali Group members.

        To maintain its qualification as a REIT, the Corporation must make annual distributions to its stockholders of at least 90 percent of its REIT taxable income, determined without regard to the dividends paid deduction and by excluding net capital gains. Moreover, the Corporation intends to continue to make regular quarterly distributions to its stockholders which, based upon current policy, in the aggregate would equal approximately $164.1 million on an annualized basis. However, any such distribution, whether for federal income tax purposes or otherwise, would only be paid out of available cash after meeting both operating requirements and scheduled debt service on the Operating Partnership's debt.

Funds from Operations

        The Operating Partnership considers funds from operations ("FFO"), after adjustment for straight-lining of rents and non-recurring charges, one measure of REIT performance. FFO is defined as net income (loss) before minority interest of unitholders, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from debt restructuring, other extraordinary items, and sales of depreciable rental property, plus real estate-related depreciation and amortization. FFO should not be considered as an alternative to net income as an indication of the Operating Partnership'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 Operating Partnership'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"), with the exception that it deviates as a result of adjustments made to the Operating Partnership's FFO for straight-lining of rents and non-recurring charges. The Operating Partnership adjusts its FFO calculation to remove the effects of straight-lining of rents because it believes that such adjustment more accurately reflects proper recognition of the Operating Partnership's revenue that is contractually due for the respective periods presented. The Operating Partnership also adjusts its FFO calculation for non-recurring charges because it believes that the inclusion of these costs, which are incurred specific to significant non-recurring events, can impact the comparative measurement of the Operating Partnership's performance.

68


        FFO for the years ended December 31, 2002, 2001 and 2000, as calculated in accordance with NAREIT's definition as published in October 1999, after adjustment for straight-lining of rents and non-recurring charges, are summarized in the following table (in thousands):

 
  Year Ended December 31,
 
 
  2002
  2001
  2000
 
Net income   $ 174,647   $ 165,834   $ 226,391  
(Deduct)/Add:    Realized (gains) losses and unrealized losses on
                            disposition of rental property, net
    (2,759 )   11,864     (85,353 )
Add:Real estate-related depreciation and amortization (1)     112,718     94,198     94,250  
  Gain on sale of land     717         2,248  
  Non-recurring charges             37,139  
Deduct:Rental income adjustment for straight-lining of rents (2)     (9,529 )   (11,399 )   (12,604 )
                Equity in earnings from gain on sale of rental property     (3,506 )        
   
 
 
 
Funds from operations, after adjustment for straight-lining                    
of rents and non-recurring charges   $ 272,288   $ 260,497   $ 262,071  
Deduct:    Distributions to preferred unitholders     (15,656 )   (15,644 )   (15,441 )
   
 
 
 
Funds from operations, after adjustment for straight-lining of rents and non-recurring charges, after distributions to preferred unitholders   $ 256,632   $ 244,853   $ 246,630  
   
 
 
 
Cash flows provided by operating activities   $ 220,137   $ 265,883   $ 180,529  
Cash flows (used in) provided by investing activities   $ (106,349 ) $ (145,586 ) $ 6,189  
Cash flows used in financing activities   $ (125,456 ) $ (120,641 ) $ (182,210 )
   
 
 
 
Basic weighted average units outstanding (3)     65,109     64,495     66,392  
   
 
 
 
Diluted weighted average units outstanding (3)     71,715     71,134     73,070  
   
 
 
 

(1)
Includes the Operating Partnership's share from unconsolidated joint ventures of $4,054, $3,567 and $2,928 for the years ended December 31, 2002, 2001 and 2000.

(2)
Includes the Operating Partnership's share from unconsolidated joint ventures of $52, $83 and $24 for the years ended December 31, 2002, 2001 and 2000.

(3)
See calculations for the amounts presented in the following reconciliation.

        The following schedule reconciles the Operating Partnership's basic weighted average units outstanding to the basic and diluted weighted average units outstanding presented above (in thousands):

 
  Year Ended December 31,
 
  2002
  2001
  2000
Basic weighted average units outstanding:   65,109   64,495   66,392
Add: Weighted average preferred units
            (after conversion to common units)
  6,288   6,359   6,485
            Stock options   302   270   188
            Restricted Stock Awards   14   10   5
Stock warrants   2    
   
 
 
Diluted weighted average units outstanding:   71,715   71,134   73,070
   
 
 

Inflation

        The Operating Partnership's leases with the majority of its tenants provide for recoveries and escalation charges based upon the tenant's proportionate share of, and/or increases in, real estate taxes

69



and certain operating costs, which reduce the Operating Partnership's exposure to increases in operating costs resulting from inflation.

Disclosure Regarding Forward-Looking Statements

        The Operating Partnership considers portions of this information to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. The Operating Partnership intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Exchange Act. Such forward-looking statements relate to, without limitation, the Operating Partnership's 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," "should," "expect," "anticipate," "estimate," "continue" or comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Operating Partnership cannot predict with accuracy and some of which the Operating Partnership might not even anticipate. Although the Operating Partnership believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, it can give no assurance that its expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Among the factors about which the Operating Partnership has made assumptions are changes in the general economic climate; conditions, including those affecting industries in which the Operating Partnership's principal tenants compete; any failure of the general economy to recover from the current economic downturn; the extent of any tenant bankruptcies; the Operating Partnership's ability to lease or re-lease space at current or anticipated rents; changes in the supply of and demand for office, office/flex and industrial/warehouse properties; changes in interest rate levels; changes in operating costs; the Operating Partnership's ability to obtain adequate insurance, including coverage for terrorist acts; the availability of financing; and other risks associated with the development and acquisition of properties, including risks that the development may not be completed on schedule, that the tenants will not take occupancy or pay rent, or that development or operating costs may be greater than anticipated. For further information on factors which could impact the Operating Partnership and the statements contained herein, see the "Risk Factors" section. The Operating Partnership assumes no obligation to update and supplement forward-looking statements that become untrue because of subsequent events.

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 Operating Partnership is exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between the Operating Partnership's yield on invested assets and cost of funds and, in turn, its ability to make distributions or payments to its investors.

        Approximately $1.6 billion of the Operating Partnership's long-term debt 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

70



debt. The interest rate on the variable rate debt as of December 31, 2002 ranged from LIBOR plus 65 basis points to LIBOR plus 70 basis points.

December 31, 2002
Debt, including current portion

  2003
  2004
  2005
  2006
  2007
  Thereafter
  Total
  Fair Value
Fixed Rate   $ 107,668   $ 314,599   $ 257,392   $ 216,532   $ 9,338   $ 741,665   $ 1,647,194   $ 1,766,179
Average Interest Rate     7.35 %   7.33 %   7.13 %   7.06 %   6.96 %   7.41 %   7.33 %    
Variable Rate               $ 73,000         $ 32,178   $ 105,178   $ 105,178      

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The information required to be furnished pursuant to this item is contained in the Consolidated Financial Statements, together with the notes to the Consolidated Financial Statements and the report of independent accountants.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                AND FINANCIAL DISCLOSURE

        None.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The information required by Item 10 is incorporated by reference to the Corporation's definitive proxy statement for its annual meeting of shareholders to be held on May 13, 2003.


ITEM 11. EXECUTIVE COMPENSATION

        The information required by Item 11 is incorporated by reference to the Corporation's definitive proxy statement for its annual meeting of shareholders to be held on May 13, 2003.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                AND RELATED STOCKHOLDER MATTERS

        The information required by Item 12 is incorporated by reference to the Corporation's definitive proxy statement for its annual meeting of shareholders to be held on May 13, 2003.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information required by Item 13 is incorporated by reference to the Corporation's definitive proxy statement for its annual meeting of shareholders to be held on May 13, 2003.


ITEM 14. CONTROLS AND PROCEDURES

(a)
Within the 90 days prior to the date of this report, the Operating Partnership carried out an evaluation, under the supervision and with the participation of the Corporation's management, including the Corporation's chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Operating Partnership's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Corporation's chief executive officer and chief financial officer concluded that the Operating Partnership's disclosure controls and procedures are effective in timely alerting them to material information relating to the Operating Partnership (including its consolidated subsidiaries) required to be included in the Operating Partnership's periodic filings with the Securities and Exchange Commission.

(b)
There have been no significant changes in the Operating Partnership's internal controls or in other factors that could significantly affect the Operating Partnership's internal controls subsequent to the date the Operating Partnership carried out the evaluation set forth above.


PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. Financial Statements and Report of PricewaterhouseCoopers LLP, Independent Accountants

(a) 2. Financial Statement Schedules

        Schedule III—Real Estate Investments and Accumulated Depreciation as of December 31, 2002

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        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 following exhibits are filed herewith or are incorporated by reference to exhibits previously filed:

Exhibit
Number

  Exhibit Title

3.1

 

Restated Charter of Mack-Cali Realty Corporation dated June 11, 2001 (filed as Exhibit 3.1 to the Operating Partnership's Form 10-Q dated June 30, 2001 and incorporated herein by reference).

3.2

 

Amended and Restated Bylaws of Mack-Cali Realty Corporation dated June 10, 1999 (filed as Exhibit 3.2 to the Corporation's Form 8-K dated June 10, 1999 and incorporated herein by reference).

3.3

 

Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated December 11, 1997 (filed as Exhibit 10.110 to the Corporation's Form 8-K dated December 11, 1997 and incorporated herein by reference).

3.4

 

Amendment No. 1 to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated August 21, 1998 (filed as Exhibit 3.1 to the Corporation's and the Operating Partnership's Registration Statement on Form S-3, Registration No. 333-57103, and incorporated herein by reference).

3.5

 

Second Amendment to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated July 6, 1999 (filed as Exhibit 10.1 to the Operating Partnership's Form 8-K dated July 6, 1999 and incorporated herein by reference).

3.6

 

Certificate of Designation of Series B Preferred Operating Partnership Units of Limited Partnership Interest of Mack-Cali Realty, L.P. (filed as Exhibit 10.101 to the Corporation's Form 8-K dated December 11, 1997 and incorporated herein by reference).

4.1

 

Amended and Restated Shareholder Rights Agreement, dated as of March 7, 2000, between Mack-Cali Realty Corporation and EquiServe Trust Company, N.A., as Rights Agent (filed as Exhibit 4.1 to the Operating Partnership's Form 8-K dated March 7, 2000 and incorporated herein by reference).

4.2

 

Amendment No. 1 to the Amended and Restated Shareholder Rights Agreement, dated as of June 27, 2000, by and among Mack-Cali Realty Corporation and EquiServe Trust Company, N.A. (filed as Exhibit 4.1 to the Operating Partnership's Form 8-K dated June 27, 2000 and incorporated herein by reference).

4.3

 

Indenture dated as of March 16, 1999, by and among Mack-Cali Realty, L.P., as issuer, Mack-Cali Realty Corporation, as guarantor, and Wilmington Trust Company, as trustee (filed as Exhibit 4.1 to the Operating Partnership's Form 8-K dated March 16, 1999 and incorporated herein by reference).

4.4

 

Supplemental Indenture No. 1 dated as of March 16, 1999, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership's Form 8-K dated March 16, 1999 and incorporated herein by reference).

 

 

 

73



4.5

 

Supplemental Indenture No. 2 dated as of August 2, 1999, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.4 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

4.6

 

Supplemental Indenture No. 3 dated as of December 21, 2000, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership's Form 8-K dated December 21, 2000 and incorporated herein by reference).

4.7

 

Supplemental Indenture No. 4 dated as of January 29, 2001, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership's Form 8-K dated January 29, 2001 and incorporated herein by reference).

4.8

 

Supplemental Indenture No. 5 dated as of December 20, 2002, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership's Form 8-K dated December 20, 2002 and incorporated herein by reference).

10.1

 

Amended and Restated Employment Agreement dated as of July 1, 1999 between Mitchell E. Hersh and Mack-Cali Realty Corporation (filed as Exhibit 10.2 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.2

 

Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Timothy M. Jones and Mack-Cali Realty Corporation (filed as Exhibit 10.3 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.3

 

Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Barry Lefkowitz and Mack-Cali Realty Corporation (filed as Exhibit 10.6 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.4

 

Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.7 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.5

 

Employment Agreement dated as of December 5, 2000 between Michael Grossman and Mack-Cali Realty Corporation (filed as Exhibit 10.5 to the Operating Partnership's Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).

10.6

 

Restricted Share Award Agreement dated as of July 1, 1999 between Mitchell E. Hersh and Mack-Cali Realty Corporation (filed as Exhibit 10.8 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.7

 

Restricted Share Award Agreement dated as of July 1, 1999 between Timothy M. Jones and Mack-Cali Realty Corporation (filed as Exhibit 10.9 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.8

 

Restricted Share Award Agreement dated as of July 1, 1999 between Barry Lefkowitz and Mack-Cali Realty Corporation (filed as Exhibit 10.12 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.9

 

Restricted Share Award Agreement dated as of July 1, 1999 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.13 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

 

 

 

74



10.10

 

Restricted Share Award Agreement dated as of March 12, 2001 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.10 to the Operating Partnership's Form 10-Q dated March 31, 2001 and incorporated herein by reference).

10.11

 

Restricted Share Award Agreement dated as of March 12, 2001 between Michael Grossman and Mack-Cali Realty Corporation (filed as Exhibit 10.11 to the Operating Partnership's Form 10-Q dated March 31, 2001 and incorporated herein by reference).

10.12

 

Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.1 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.13

 

Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.14

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.3 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.15

 

Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Timothy M. Jones (filed as Exhibit 10.4 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.16

 

Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Timothy M. Jones (filed as Exhibit 10.5 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.17

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Timothy M. Jones (filed as Exhibit 10.6 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.18

 

Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.7 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.19

 

Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.8 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.20

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.9 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.21

 

Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.10 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.22

 

Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.11 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

 

 

 

75



10.23

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.12 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.24

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated March 12, 2001 between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.13 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.25

 

Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.14 to the Corporation Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.26

 

Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.15 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.27

 

Restricted Share Award Agreement dated December 6, 1999 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.16 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.28

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated December 6, 1999 between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.17 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.29

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated March 12, 2001 between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.18 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.30

 

Amended and Restated Revolving Credit Agreement dated as of September 27, 2002, among Mack-Cali Realty, L.P. and JPMorgan Chase Bank, Fleet National Bank and Other Lenders Which May Become Parties Thereto with JPMorgan Chase Bank, as administrative agent, swing lender and fronting bank, Fleet National Bank and Commerzbank AG, New York and Grand Cayman branches as syndication agents, Bank of America, N.A. and Wells Fargo Bank, National Association, as documentation agents, and J.P. Morgan Securities Inc. and Fleet Securities, Inc, as arrangers (filed as Exhibit 10.1 to the Operating Partnership's Form 8-K dated September 27, 2002 and incorporated herein by reference).

10.31

 

Contribution and Exchange Agreement among The MK Contributors, The MK Entities, The Patriot Contributors, The Patriot Entities, Patriot American Management and Leasing Corp., Cali Realty, L.P. and Cali Realty Corporation, dated September 18, 1997 (filed as Exhibit 10.98 to the Corporation's Form 8-K dated September 19, 1997 and incorporated herein by reference).

10.32

 

First Amendment to Contribution and Exchange Agreement, dated as of December 11, 1997, by and among the Company and the Mack Group (filed as Exhibit 10.99 to the Corporation's Form 8-K dated December 11, 1997 and incorporated herein by reference).

10.33

 

Employee Stock Option Plan of Mack-Cali Realty Corporation (filed as Exhibit 10.1 to the Corporation's Post-Effective Amendment No. 1 to Form S-8, Registration No. 333-44443, and incorporated herein by reference).

 

 

 

76



10.34

 

Director Stock Option Plan of Mack-Cali Realty Corporation (filed as Exhibit 10.2 to the Corporation's Post-Effective Amendment No. 1 to Form S-8, Registration No. 333-44443, and incorporated herein by reference).

10.35

 

2000 Employee Stock Option Plan (filed as Exhibit 10.1 to the Corporation's Registration Statement on Form S-8, Registration No. 333-52478, and incorporated herein by reference), as amended by the First Amendment to the 2000 Employee Stock Option Plan (filed as Exhibit 10.17 to the Operating Partnership's Form 10-Q dated June 30, 2002 and incorporated herein by reference).

10.36

 

2000 Director Stock Option Plan (filed as Exhibit 10.2 to the Corporation's Registration Statement on Form S-8, Registration No. 333-52478, and incorporated herein by reference), as amended by the First Amendment to the 2000 Director Stock Option Plan (filed as Exhibit 10.18 to the Operating Partnership's Form 10-Q dated June 30, 2002 and incorporated herein by reference).

10.37

 

Deferred Compensation Plan for Directors (filed as Exhibit 10.1 to the Corporation's Registration Statement on Form S-8, Registration No. 333-80081, and incorporated herein by reference).

10.38

 

Form of Indemnification Agreement dated October 22, 2002 by and between Mack-Cali Realty Corporation and each of William L. Mack, John J. Cali, Mitchell E. Hersh, Earle I. Mack, John R. Cali, Brendan T. Byrne, Martin D. Gruss, Nathan Gantcher, Vincent Tese, Roy J. Zuckerberg, Alan G. Philibosian, Irvin D. Reid, Robert F. Weinberg, Timothy M. Jones, Barry Lefkowitz, Roger W. Thomas, Michael A. Grossman, James Clabby, Anthony Krug, Dean Cingolani, Anthony DeCaro Jr., Mark Durno, William Fitzpatrick, John Kropke, Nicholas Mitarotonda, Jr., Michael Nevins, Virginia Sobol, Albert Spring and Daniel Wagner (filed as Exhibit 10.28 to the Operating Partnership's Form 10-Q dated September 30, 2002 and incorporated herein by reference).

10.39

 

Indemnification Agreement dated October 22, 2002 by and between Mack-Cali Realty Corporation and John Crandall (filed as Exhibit 10.29 to the Operating Partnership's Form 10-Q dated September 30, 2002 and incorporated herein by reference).

10.40

 

Warrant Agreement, dated December 12, 1997, executed in favor of Mitchell E. Hersh to purchase shares of common stock, par value $.01 per share, of the Company (filed as Exhibit 10.106 to the Corporation's Form 8-K dated December 11, 1997 and incorporated herein by reference).

10.41

 

Warrant issued by Cali Realty Corporation to Brad W. Berger, dated January 31, 1997 (filed as Exhibit 10.84 to the Corporation's Form 10-K dated December 31, 1996 and incorporated herein by reference).

10.42

 

Warrant issued by Cali Realty Corporation to Timothy M. Jones, dated January 31, 1997 (filed as Exhibit 10.86 to the Corporation's Form 10-K dated December 31, 1996 and incorporated herein by reference).

10.43

 

Warrant issued by Cali Realty Corporation to Michael Grossman, dated January 31, 1997 (filed as Exhibit 10.89 to the Corporation's Form 10-K dated December 31, 1996 and incorporated herein by reference).

*10.44

 

Second Amendment to Contribution and Exchange Agreement, dated as of June 27, 2000, between RMC Development Company, LLC f/k/a Robert Martin Company, LLC, Robert Martin Eastview North Company, L.P., the Corporation and the Operating Partnership.

 

 

 

77



*21

 

Subsidiaries of the Operating Partnership.

*23

 

Consent of PricewaterhouseCoopers LLP, independent accountants.

(b)
Reports on Form 8-K

        During the fourth quarter of 2002, the Operating Partnership filed the following reports on Form 8-K:


*
filed herewith

78



REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of
Mack-Cali Realty, L.P.:

        In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) on page 72 present fairly, in all material respects, the financial position of Mack-Cali Realty, L.P. and its subsidiaries (the "Operating Partnership") at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) on page 72 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Operating Partnership's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 
   
/s/  PRICEWATERHOUSECOOPERS LLP      
PricewaterhouseCoopers LLP
New York, New York
February 21, 2003
   

79



MACK-CALI REALTY, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per unit amounts)

 
  December 31,
 
 
  2002
  2001
 
ASSETS              
Rental property              
  Land and leasehold interests   $ 544,176   $ 479,358  
  Buildings and improvements     3,141,003     2,751,453  
  Tenant improvements     164,945     140,071  
  Furniture, fixtures and equipment     7,533     7,189  
   
 
 
      3,857,657     3,378,071  
  Less—accumulated depreciation and amortization     (445,569 )   (350,705 )
   
 
 
      3,412,088     3,027,366  
  Rental property held for sale, net         384,626  
   
 
 
    Net investment in rental property     3,412,088     3,411,992  
Cash and cash equivalents     1,167     12,835  
Investments in unconsolidated joint ventures     176,797     146,540  
Unbilled rents receivable, net     64,759     60,829  
Deferred charges and other assets, net     127,551     101,499  
Restricted cash     7,777     7,914  
Accounts receivable, net of allowance for doubtful accounts
of $1,856 and $752
    6,290     5,161  
   
 
 
Total assets   $ 3,796,429   $ 3,746,770  
   
 
 
LIABILITIES AND PARTNERS' CAPITAL              
Senior unsecured notes   $ 1,097,346   $ 1,096,843  
Revolving credit facilities     73,000     59,500  
Mortgages and loans payable     582,026     543,807  
Distributions payable     45,067     44,069  
Accounts payable and accrued expenses     50,774     64,620  
Rents received in advance and security deposits     39,038     33,512  
Accrued interest payable     24,948     25,587  
   
 
 
    Total liabilities     1,912,199     1,867,938  
   
 
 
Commitments and contingencies              

Partners' Capital:

 

 

 

 

 

 

 
Preferred units, 215,894 and 220,340 units outstanding     221,445     226,005  
General partner, 57,318,478 and 56,712,270 common units outstanding     1,454,194     1,432,588  
Limited partners, 7,813,806 and 7,954,775 common units outstanding     208,591     211,715  
Unit warrants, 0 and 2,000,000 outstanding         8,524  
   
 
 
    Total partners' capital     1,884,230     1,878,832  
   
 
 
Total liabilities and partners' capital   $ 3,796,429   $ 3,746,770  
   
 
 

        The accompanying notes are an integral part of these consolidated financial statements.

80



MACK-CALI REALTY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit amounts)

 
  Year Ended December 31,
 
 
  2002
  2001
  2000
 
REVENUES                    
Base rents   $ 492,417   $ 506,557   $ 491,193  
Escalations and recoveries from tenants     57,057     56,083     58,488  
Parking and other     17,838     10,518     15,325  
Interest income     2,302     2,186     3,092  
   
 
 
 
  Total revenues     569,614     575,344     568,098  
   
 
 
 

EXPENSES

 

 

 

 

 

 

 

 

 

 
Real estate taxes     60,836     62,015     59,400  
Utilities     38,844     43,892     42,035  
Operating services     68,449     68,779     70,711  
General and administrative     27,054     28,490     23,276  
Depreciation and amortization     109,513     91,471     92,088  
Interest expense     107,823     112,003     105,394  
Non-recurring charges             37,139  
   
 
 
 
  Total expenses     412,519     406,650     430,043  

Equity in earnings of unconsolidated joint ventures

 

 

14,793

 

 

9,004

 

 

8,055

 
   
 
 
 
Income before realized gains (losses) and unrealized losses on disposition of rental property and minority interest     171,888     177,698     146,110  
Realized gains (losses) and unrealized losses on disposition of rental property, net     2,759     (11,864 )   85,353  
   
 
 
 
Income before minority interest     174,647     165,834     231,463  
Minority interest in consolidated partially-owned properties             5,072  
   
 
 
 
Net income     174,647     165,834     226,391  
Preferred unit distributions     (15,656 )   (15,644 )   (15,441 )
   
 
 
 

Net income available to common unitholders

 

$

158,991

 

$

150,190

 

$

210,950

 
   
 
 
 

Basic earnings per unit

 

$

2.44

 

$

2.33

 

$

3.18

 

Diluted earnings per unit

 

$

2.43

 

$

2.32

 

$

3.10

 

Distributions declared per common unit

 

$

2.50

 

$

2.46

 

$

2.38

 
   
 
 
 

Basic weighted average units outstanding

 

 

65,109

 

 

64,495

 

 

66,392

 
   
 
 
 

Diluted weighted average units outstanding

 

 

65,427

 

 

64,775

 

 

73,070

 
   
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.

81



MACK-CALI REALTY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL

(in thousands)

 
  Preferred
Units

  General
Partner
Units

  Limited
Partner
Units

  Preferred
Unitholders

  General
Partner

  Limited
Partners

  Unit
Warrants

  Total
 
Balance at January 1, 2000   229   58,447   8,154   $ 235,200   $ 1,441,882   $ 211,551   $ 8,524   $ 1,897,157  
  Net income           15,441     185,338     25,612         226,391  
  Distributions           (15,441 )   (138,585 )   (19,125 )       (173,151 )
  Conversion of preferred units to limited partner units   (9 )   258     (9,195 )       9,195          
  Redemption of limited partner units for shares of common stock     448   (448 )       14,239     (14,239 )        
  Contributions—proceeds from stock options exercised     117           2,500             2,500  
  Deferred compensation plan for directors               111             111  
  Amortization of stock compensation               1,672             1,672  
  Adjustment to fair value of restricted stock               97             97  
  Cancellation of Restricted Stock Awards     (5 )                      
  Repurchase of general partner units     (2,026 )         (55,514 )           (55,514 )
  Stock option charge               1,550             1,550  
   
 
 
 
 
 
 
 
 
Balance at December 31, 2000   220   56,981   7,964     226,005     1,453,290     212,994     8,524     1,900,813  
  Net income           15,644     131,659     18,531         165,834  
  Distributions           (15,644 )   (139,416 )   (19,571 )       (174,631 )
  Redemption of limited partner units for shares of common stock     9   (9 )       239     (239 )        
  Contributions—proceeds from stock options exercised     904           20,675             20,675  
  Deferred compensation plan for directors               156             156  
  Issuance of Restricted Stock Awards     95           41             41  
  Amortization of stock compensation               1,356             1,356  
  Cancellation of Restricted Stock Awards     (7 )                      
  Repurchase of general partner units     (1,270 )         (35,412 )           (35,412 )
   
 
 
 
 
 
 
 
 
Balance at December 31, 2001   220   56,712   7,955     226,005     1,432,588     211,715     8,524     1,878,832  
  Net income           15,656     139,722     19,269         174,647  
  Distributions           (15,656 )   (143,782 )   (19,648 )       (179,086 )
  Redemption of Preferred Units for limited partner units   (4 )   128     (4,560 )       4,560          
  Redemption of limited partner units for shares of common stock     269   (269 )       8,299     (8,299 )        
  Redemption of limited partner units for cash       (1 )           (29 )       (29 )
  Expiration of Unit Warrants               7,501     1,023     (8,524 )    
  Contributions—proceeds from stock options exercised     646           17,007             17,007  
  Proceeds from stock warrants exercised     107           3,547             3,547  
  Deferred compensation plan for directors               170             170  
  Amortization of stock compensation               1,699             1,699  
  Repurchase of general partner units     (416 )         (12,557 )           (12,557 )
   
 
 
 
 
 
 
 
 
Balance at December 31, 2002   216   57,318   7,813   $ 221,445   $ 1,454,194   $ 208,591   $ — -   $ 1,884,230  
   
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.

82



MACK-CALI REALTY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 
  Year Ended December 31,
 
 
  2002
  2001
  2000
 
CASH FLOWS FROM OPERATING ACTIVITIES                    
Net income   $ 174,647   $ 165,834   $ 226,391  
Adjustments to reconcile net income to net cash provided by operating activities:                    
    Depreciation and amortization     109,513     91,471     92,088  
    Amortization of stock compensation     1,699     1,356     1,769  
    Amortization of deferred financing costs and debt discount     4,739     5,113     4,257  
    Stock options charge             1,550  
    Equity in earnings of unconsolidated joint ventures     (14,793 )   (9,004 )   (8,055 )
    Realized (gains) losses and unrealized losses on disposition of rental property, net     (2,759 )   11,864     (85,353 )
    Minority interest in consolidated partially-owned properties             5,072  
Changes in operating assets and liabilities:                    
    Increase in unbilled rents receivable, net     (7,171 )   (11,318 )   (12,591 )
    Increase in deferred charges and other assets, net     (35,650 )   (14,006 )   (31,332 )
    (Increase) decrease in accounts receivable, net     (1,129 )   3,085     (1,436 )
    (Decrease) increase in accounts payable and accrued expenses     (13,846 )   11,012     (9,786 )
    Increase (decrease) in rents received in advance and security deposits     5,526     2,366     (2,896 )
    (Decrease) increase in accrued interest payable     (639 )   8,110     851  
   
 
 
 
  Net cash provided by operating activities   $ 220,137   $ 265,883   $ 180,529  
   
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES                    
Additions to rental property   $ (253,023 ) $ (279,686 ) $ (268,243 )
Issuance of mortgage note receivable             (14,733 )
Repayment of mortgage note receivable     3,813     5,983      
Investments in unconsolidated joint ventures     (57,106 )   (71,272 )   (17,587 )
Distributions from unconsolidated joint ventures     41,642     38,689     13,338  
Proceeds from sales of rental property     158,188     162,057     292,890  
Decrease (increase) in restricted cash     137     (1,357 )   524  
   
 
 
 
  Net cash (used in) provided by investing activities   $ (106,349 ) $ (145,586 ) $ 6,189  
   
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES                    
Proceeds from senior unsecured notes       $ 298,269   $ 15,000  
Proceeds from revolving credit facilities   $ 495,575     412,240     708,004  
Repayments of revolving credit facilities     (482,075 )   (701,581 )   (536,164 )
Proceeds from mortgages and loans payable     41,749     70,000      
Repayments of mortgages and loans payable     (3,635 )   (7,290 )   (48,817 )
Repurchase of general partner units     (12,557 )   (35,412 )   (55,514 )
Payment of financing costs     (6,971 )   (3,484 )   (6,394 )
Proceeds from stock options exercised     17,001     20,675     2,500  
Proceeds from stock warrants exercised     3,546          
Payment of distributions     (178,089 )   (174,058 )   (172,153 )
Distributions to minority interest in partially-owned properties             (88,672 )
   
 
 
 
  Net cash used in financing activities   $ (125,456 ) $ (120,641 ) $ (182,210 )
   
 
 
 
Net (decrease) increase in cash and cash equivalents   $ (11,668 ) $ (344 ) $ 4,508  
Cash and cash equivalents, beginning of period   $ 12,835   $ 13,179   $ 8,671  
   
 
 
 
Cash and cash equivalents, end of period   $ 1,167   $ 12,835   $ 13,179  
   
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.

83



MACK-CALI REALTY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share/unit amounts)

1. ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION

        Mack-Cali Realty, L.P., a Delaware limited partnership, and its subsidiaries (the "Operating Partnership") was formed on May 31, 1994 to conduct the business of leasing, management, acquisition, development, construction and tenant-related services for its sole general partner, Mack-Cali Realty Corporation and its subsidiaries (the "Corporation" or "General Partner"). The Operating Partnership, through its operating divisions and subsidiaries, including the Mack-Cali property-owning partnerships and limited liability companies (collectively, the "Property Partnerships"), as described below, is the entity through which all of the General Partner's operations are conducted.

        The General Partner is a fully integrated, self-administered, self-managed real estate investment trust ("REIT"). The General Partner controls the Operating Partnership as its sole general partner, and owned an 88.0 percent and 87.7 percent common unit interest in the Operating Partnership as of December 31, 2002 and 2001, 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 earns a management fee of between three percent and five percent of revenues, as defined, for its management of the Property Partnerships.

        As of December 31, 2002, the Operating Partnership owned or had interests in 265 properties plus developable land (collectively, the "Properties"). The Properties aggregate approximately 29.3 million square feet, which are comprised of 156 office buildings and 96 office/flex buildings totaling approximately 28.8 million square feet (which include six office buildings and one office/flex building aggregating 2.1 million square feet owned by unconsolidated joint ventures in which the Operating Partnership has investment interests), six industrial/warehouse buildings totaling approximately 387,400 square feet, three stand-alone retail properties totaling approximately 118,040 square feet (which include one retail property totaling approximately 100,740 square feet owned by an unconsolidated joint venture in which the Operating Partnership has an investment interest), one hotel (which is owned by an unconsolidated joint venture in which the Operating Partnership has an investment interest) and three land leases. The Properties are located in eight states, primarily in the Northeast, plus the District of Columbia.

BASIS OF PRESENTATION

        The accompanying consolidated financial statements include all accounts of the Operating Partnership, its majority-owned and/or controlled subsidiaries, which consist principally of Mack-Cali Realty, L.P. See Investments in Unconsolidated Joint Ventures in Note 2 for the Operating Partnership's treatment of unconsolidated joint venture interests. All significant intercompany accounts and transactions have been eliminated.

        The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

84



statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2. SIGNIFICANT ACCOUNTING POLICIES


Rental Property

 

Rental properties are stated at cost less accumulated depreciation and amortization. Costs directly related to the acquisition, development and construction of rental properties are capitalized. Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development. Included in total rental property is construction and development in-progress of $168,700 and $210,463 (including land of $50,481 and $54,169) as of December 31, 2002 and 2001, respectively. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.

 

 

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

 

 

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

 

 

Leasehold interests

 

Remaining lease term

 

 

Buildings and improvements

 

5 to 40 years

 

 

Tenant improvements

 

The shorter of the term of
the related lease or useful life

 

 

Furniture, fixtures and equipment

 

5 to 10 years

85



 

 

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

Rental Property Held for Sale

 

When assets are identified by management as held for sale, the Operating Partnership discontinues depreciating the assets and estimates the sales price, net of selling costs, of such assets. If, in management's opinion, the net sales price of the assets which have been identified for sale is less than the net book value of the assets, a valuation allowance is established. See Note 7.

 

 

If circumstances arise that previously were considered unlikely and, as a result, the Operating Partnership decides not to sell a property previously classified as held for sale, the property is reclassified as held and used. A property that is reclassified is measured and recorded individually at the lower of (a) its carrying amount before the property was classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had the property been continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell. See Note 7.

 

 

Effective January 1, 2002, the Operating Partnership adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supercedes SFAS No. 121. SFAS No. 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. SFAS No. 144 retains the requirements of SFAS No. 121 regarding impairment loss recognition and measurement. In addition, it requires that one accounting model be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions. As the statement requires implementation on a prospective basis, properties which were identified as held for sale by the Operating Partnership prior to January 1, 2002 are presented in the accompanying financial statements in a manner consistent with the prior year's presentation. As there were no additional properties identified as held for sale during the year ended December 31, 2002, the Operating Partnership did not report any discontinued operations for the periods presented.

 

 

 

86



Investments in Unconsolidated Joint Ventures

 

The Operating Partnership accounts for its investments in unconsolidated joint ventures under the equity method of accounting as the Operating Partnership exercises significant influence, but does not control these entities. These investments are recorded initially at cost, as Investments in Unconsolidated Joint Ventures, and subsequently adjusted for equity in earnings and cash contributions and distributions.

 

 

On a periodic basis, management assesses whether there are any indicators that the value of the Operating Partnership's investments in unconsolidated joint ventures may be impaired. An investment is impaired only if management's estimate of the value of the investment is less than the carrying value of the investment. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the value of the investment. Management does not believe that the value of any of the Operating Partnership's investments in unconsolidated joint ventures is impaired. See Note 4.

Cash and Cash Equivalents

 

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

Deferred Financing Costs

 

Costs incurred in obtaining financing are capitalized and amortized on a straight-line basis, which approximates the effective interest method, over the term of the related indebtedness. Amortization of such costs is included in interest expense and was $4,739, $4,638 and $3,943 for the years ended December 31, 2002, 2001 and 2000, respectively.

Deferred Leasing Costs

 

Costs incurred in connection with leases are capitalized and amortized on a straight-line basis over the terms of the related leases and included in depreciation and amortization. Unamortized deferred leasing costs are charged to amortization expense upon early termination of the lease. Certain employees of the Operating Partnership are compensated for providing leasing services to the Properties. The portion of such compensation, which is capitalized and amortized, approximated $4,083, $4,013 and $3,704 for the years ended December 31, 2002, 2001 and 2000, respectively.

Restricted Cash

 

Restricted cash includes tenant security deposits and escrow and reserve funds for debt service, real estate taxes, property insurance, capital improvements, tenant improvements, and leasing costs established pursuant to certain mortgage financing arrangements.

 

 

 

87



Derivative Instruments

 

The Operating Partnership measures derivative instruments, including certain derivative instruments embedded in other contracts, at fair value and records them as an asset or liability, depending on the Operating Partnership's rights or obligations under the applicable derivative contract. For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of the derivative are reported in other comprehensive income ("OCI") and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedging and ineffective portions of hedges are recognized in earnings in the affected period. See Note 10—Interest Rate Contract.

Revenue Recognition

 

Base rental revenue is recognized on a straight-line basis over the terms of the respective leases. Unbilled rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with the lease agreements. Parking and other revenue includes income from parking spaces leased to tenants, income from tenants for additional services provided by the Operating Partnership, income from tenants for early lease terminations and income from managing and/or leasing properties for third parties.

 

 

Reimbursements are received from tenants for certain costs as provided in the lease agreements. These costs generally include real estate taxes, utilities, insurance, common area maintenance and other recoverable costs. See Note 17.

Allowance for Doubtful Accounts

 

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

Income and Other Taxes

 

The Operating Partnership is a partnership and, as a result, all income and losses of the partnership are allocated to the partners for inclusion in their respective income tax returns. Accordingly, no provisions of benefits for income taxes has been made in the accompanying financial statements.

 

 

As of December 31, 2002, the net basis of the rental property for Federal income tax purposes was lower than the net assets as reported in the Operating Partnership's financial statements by approximately $926,991. The Operating Partnership's taxable income for the years ended December 31, 2002, 2001 and 2000 was approximately $184,783, $179,067 and $163,084, respectively. The differences between book income and taxable income primarily result from differences in depreciation expense, the recording of rental income, differences in the deductibility of certain expenses for tax purposes, differences in revenue recognition and the rules for tax purposes of a property exchange.

 

 

 

88



Earnings Per Unit

 

The Operating Partnership presents both basic and diluted earnings per unit ("EPU"). Basic EPU excludes dilution and is computed by dividing net income available to common unitholders by the weighted average number of units outstanding for the period. Diluted EPU reflects the potential dilution that could occur if securities or other contracts to issue common units were exercised or converted into common units, where such exercise or conversion would result in a lower EPU amount.

Distributions Payable

 

The distributions payable at December 31, 2002 represents distributions payable to minority interest common unitholders of record as of January 6, 2003 (65,304,223 common units) and preferred distributions payable to preferred unitholders (215,894 preferred units) for the fourth quarter 2002. The fourth quarter 2002 common unit distributions of $0.63 per common unit, as well as the fourth quarter preferred unit distribution of $18.1818 per preferred unit, were approved by the Board of Directors of the Corporation on December 19, 2002 and paid on January 17, 2003.

 

 

The distributions payable at December 31, 2001 represents distributions payable to minority interest common unitholders of record as of January 4, 2002 (64,720,615 common units) and preferred distributions payable to preferred unitholders (220,340 preferred units) for the fourth quarter 2001. The fourth quarter 2001 common unit distributions of $0.62 per common unit, as well as the fourth quarter preferred unit distribution of $17.8932 per preferred unit, were approved by the Board of Directors of the Corporation on December 18, 2001 and paid on January 22, 2002.

 

 

 

89



Stock Options

 

With respect to the Corporation's stock options which were granted prior to 2002, the Operating Partnership accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations ("APB No. 25"). Under APB No. 25, compensation cost is measured as the excess, if any, of the quoted market price of the Corporation's stock at the date of grant over the exercise price of the option granted. Compensation cost for stock options, if any, is recognized ratably over the vesting period. The Corporation's policy is to grant options with an exercise price equal to the quoted closing market price of the Corporation's stock on the business day preceding the grant date. Accordingly, no compensation cost has been recognized under the Corporation's stock option plans for the granting of stock options made prior to 2002. In 2002, the Operating Partnership adopted the provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock Based Compensation ("SFAS No. 123"), which requires, on a prospective basis, that the value of stock options at the grant date be amortized ratably into expense over the appropriate vesting period. As the Corporation did not grant any stock options in 2002, there was no impact of this adoption to the financial statements. SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, was issued in December 2002 and amends SFAS No. 123, Accounting for Stock Based Compensation. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock based compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition and disclosure amendments of SFAS No. 148 are effective for fiscal years ending after December 31, 2002. SFAS No. 148 disclosure requirements are presented as follows:

90


        The following table illustrates the effect on net income and earnings per unit if the fair value based method had been applied to all outstanding and unvested stock awards in each period:

 
  Year Ended December 31,
 
 
  2002
Basic EPU

  2001
Basic EPU

  2000
Basic EPU

 
Net income available to common unitholders, as reported   $ 158,991   $ 150,190   $ 210,950  
Deduct: Total stock based employee compensation expense determined under fair value based method for all awards, net of related tax effects     (2,734 )   (6,235 )   (6,207 )
   
 
 
 

Pro forma net income available to common unitholders

 

$

156,257

 

$

143,955

 

$

204,743

 
   
 
 
 
Earnings Per Unit:                    
  Basic — as reported   $ 2.44   $ 2.33   $ 3.18  
  Basic — pro forma   $ 2.40   $ 2.23   $ 3.08  
 
Diluted — as reported

 

$

2.43

 

$

2.32

 

$

3.10

 
  Diluted — pro forma   $ 2.39   $ 2.22   $ 3.01  
Non-Recurring Charges     
The Operating Partnership considers non-recurring charges as costs incurred specific to significant non-recurring events that impact the comparative measurement of the Operating Partnership's performance. See Note 20.

Reclassifications

 

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

91


3. REAL ESTATE PROPERTY TRANSACTIONS

2002 TRANSACTIONS

Property Acquisitions

        The Operating Partnership acquired the following operating properties during the year ended December 31, 2002:

Acquisition
Date

  Property/Address
  Location
  # of
Bldgs.

  Rentable
Square Feet

  Investment by
Operating
Partnership (a)

Office:                      
08/09/02   25 Commerce Drive   Cranford, Union County, NJ   1   67,749   $ 7,706
08/09/02   3 Skyline Drive (b)   Hawthorne, Westchester County, NY   1   75,668     9,460
11/01/02   1633 Littleton Road (c)   Parsippany, Morris County, NJ   1   57,722     11,833
11/05/02   1266 East Main Street   Stamford, Fairfield County, CT   1   179,260     33,205
12/11/02   2200 Renaissance Boulevard   King of Prussia, Montgomery County, PA   1   174,124     26,800
12/31/02   16 & 18 Sentry Park West   Blue Bell, Montgomery County, PA   2   188,103     34,466
   
 
 
 
 

Total Office Property Acquisitions:

 

 

 

7

 

742,626

 

$

123,470
           
 
 

(a)
Transactions were funded primarily through borrowings on the Operating Partnership's revolving credit facility, from net proceeds received in the sale or sales of rental property, and/or from the Operating Partnership's cash reserves. Amounts are as of December 31, 2002.

(b)
On August 9, 2002, the Operating Partnership acquired an undivided 68.1 percent interest (75,668 square feet) in 3 Skyline Drive, a 113,098 square-foot office property. The property was acquired as tenants-in-common with the intention that, soon after the completion of the acquisition, the individual interests would be converted into separate condominium units. On September 27, 2002, the Operating Partnership executed a condominium agreement and deed to formalize the conversion of its undivided interest in the property into a condominium interest. The Operating Partnership has accounted for its interest in the property as if the condominium was in place since the date of acquisition.

(c)
In connection with the acquisition of the 1633 Littleton Road property, the Operating Partnership assumed a mortgage loan, which was recorded at $3,504 and bears interest at an effective interest rate of 7.66 percent. The loan is secured by the 1633 Littleton Road property and matures on February 10, 2006.

Land Acquisitions

        On June 12, 2002, the Operating Partnership acquired three land parcels located in Hawthorne and Yonkers, Westchester County, New York in one transaction for a total cost of approximately $2,600. The land was acquired from an entity whose principals include Timothy M. Jones, Robert F. Weinberg and Martin S. Berger, each of whom are affiliated with the Operating Partnership as the President of the Corporation, a current member of the Board of Directors and a former member of the Board of Directors of the Corporation, respectively. See Note 19 for further discussion of related party transactions.

92



Properties Commencing Initial Operations

        The following properties commenced initial operations during the year ended December 31, 2002:

Acquisition
Date

  Property/Address
  Location
  # of
Bldgs.

  Rentable
Square Feet

  Investment by
Operating
Partnership (a)

 
Office:                        
09/03/02   Harborside Plaza 5   Jersey City, Hudson County, NJ   1   980,000   $ 196,610 (b )
11/18/02   600 Horizon Drive   Hamilton Township, Mercer County, NJ   1   95,000     7,549  
   
 
 
 
 
 

Total Office Properties Commencing Operations:

 

2

 

1,075,000

 

$

204,159

 
           
 
 
 
Office/Flex:                        
04/01/02   125 Clearbrook Road   Elmsford, Westchester County, NY   1   33,000     4,985 (c )
   
 
 
 
 
 

Total Properties Commencing Initial Operations:

 

3

 

1,108,000

 

$

209,144

 
           
 
 
 

(a)
Development costs were funded primarily through draws on the Operating Partnership's revolving credit facility. Amounts are as of December 31, 2002.

(b)
Amount consists of $176,900 included in rental property, and $19,710 of leasing commissions and other deferred leasing costs, which are included in deferred charges and other assets.

(c)
Amount consists of $4,731 included in rental property, and $254 of leasing commissions, which is included in deferred charges and other assets.

93


Property Sales

        The Operating Partnership sold the following properties during the year ended December 31, 2002:

Sale
Date

  Property/Address
  Location
  # of
Bldgs.

  Rentable
Square Feet

  Net Sales
Proceeds

  Net Book
Value

  Realized
Gain/(Loss)

 
Office:                                    
05/13/02   Dallas Portfolio (a)   Metro Dallas, TX   4   488,789   $ 33,115   $ 34,760   $ (1,645 )
05/29/02   750 South Richfield Street   Aurora, Arapahoe County, CO   1   108,240     20,631     21,291     (660 )
06/06/02   Houston Portfolio (b)   Houston, Harris County, TX   3   413,107     25,482     24,393     1,089  
07/15/02   501 Kennedy Boulevard   Tampa, Hillsborough County, FL   1   297,429     22,915     22,459     456  
10/16/02   Arizona Portfolio (c)   Maricopa County, AZ   3   416,967     42,764     42,719     45  
   
 
 
 
 
 
 
 

Total Office Property Sales:

 

 

 

12

 

1,724,532

 

$

144,907

 

$

145,622

 

$

(715

)
           
 
 
 
 
 
Residential:                                    
01/30/02   25 Martine Avenue   White Plains, Westchester County, NY   1   124 units     17,559     10,461     7,098  

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
04/25/02   Horizon Center Land   Hamilton Township, Mercer County, NJ     0.756 acres     758     41     717  
   
 
 
 
 
 
 
 

Total Property Sales:

 

 

 

13

 

1,724,532

 

$

163,224

 

$

156,124

 

$

7,100

 
           
 
 
 
 
 

(a)
On May 13, 2002, the Operating Partnership sold 3100 Monticello, 2300 Valley View, 150 West Parkway and 555 Republic Place in a single transaction with one buyer, Brookview Properties, L.P., an entity that includes a partner, whose principals include Paul A. Nussbaum, a former member of the Board of Directors of the Corporation The Operating Partnership provided the purchaser with a $5,000 subordinated loan that bears interest at 15 percent with a current pay rate of 11 percent. The entire principal of the loan is payable at maturity in November 2007.
(b)
On June 6, 2002, the Operating Partnership sold 1717 St. James Place, 5300 Memorial Drive and 10497 Town & Country Way in a single transaction with one buyer, Parkway Properties LP.

(c)
On October 16, 2002, the Operating Partnership sold 9060 East Via Linda Boulevard, 19640 North 31st Street and 5551 West Talavi Boulevard in a single transaction with one buyer, Summit Commercial Properties, Inc.

94


2001 TRANSACTIONS

Property Acquisitions

        The Operating Partnership acquired the following operating properties during the year ended December 31, 2001:

Acquisition
Date

  Property/Address
  Location
  # of
Bldgs.

  Rentable
Square Feet

  Investment by
Operating
Partnership(a)
(in thousands)
Office:                      
04/06/01   4 & 6 Campus Drive   Parsippany, Morris County, NJ   2   295,766   $ 48,404
11/06/01   9 Campus Drive (b)   Parsippany, Morris County, NJ   1   156,495     15,073
   
 
 
 
 
Total Office Property Acquisitions:   3   452,261   $ 63,477
   
 
 
 
 
Office/Flex:              
02/14/01   31 & 41 Twosome Drive   Moorestown, Burlington County, NJ   2   127,250   $ 7,155
04/27/01   1245 & 1247 N. Church St, 2 Twosome Drive   Moorestown, Burlington County, NJ   3   154,200     11,083
08/03/01   5 & 6 Skyline Drive (c)   Hawthorne, Westchester County, NY   2   168,177     14,846
   
 
 
 
 
Total Office/Flex Property Acquisitions:   7   449,627   $ 33,084
   
 
 
 
 
Total Property Acquisitions:   10   901,888   $ 96,561
   
 
 
 
 

(a)
Transactions were funded primarily through borrowings on the Operating Partnership's revolving credit facility, from net proceeds received in the sale or sales of rental property, and/or from the Operating Partnership's cash reserves.

(b)
The Operating Partnership acquired the remaining 50 percent interest in this property from an unconsolidated joint venture. Investment by Operating Partnership represents the net cost of acquiring the remaining interest.

(c)
The property was acquired from an entity whose principals include Timothy M. Jones, Robert F. Weinberg and Martin S. Berger, each of whom are affiliated with the Operating Partnership as the President of the Corporation, a current member of the Board of Directors and a former member of the Board of Directors of the Corporation, respectively. See Note 19 for further discussion of related party transactions.

Land Acquisitions

        On January 5, 2001, the Operating Partnership acquired approximately 7.1 acres of developable land located in Littleton, Arapahoe County, Colorado. The land was acquired for approximately $2,711.

        On September 13, 2001, the Operating Partnership acquired approximately 5.0 acres of developable land located in Elmsford, Westchester County, New York. The land was acquired for approximately $1,000 from an entity whose principals include Timothy M. Jones, Robert F. Weinberg and Martin S. Berger, each of whom are affiliated with the Operating Partnership as the President of the Corporation, a current member of the Board of Directors and a former member of the Board of Directors of the Corporation, respectively. See Note 19. The Operating Partnership completed construction of a fully pre-leased 33,000 square-foot office/flex building on the acquired land, which commenced initial operations on April 1, 2002.

95



Properties Commencing Initial Operations

        The following properties commenced initial operations during the year ended December 31, 2001:

Acquisition
Date

  Property/Address
  Location
  # of
Bldgs.

  Rentable
Square Feet

  Investment by
Operating
Partnership(a)
(in thousands)
Office:                      
01/15/01   105 Eisenhower Parkway   Roseland, Essex County, NJ   1   220,000   $ 47,328
03/01/01   8181 East Tufts Avenue   Denver, Denver County, CO   1   185,254     34,993
   
 
 
 
 
Total Office Properties Commencing Initial Operations:   2   405,254   $ 82,321
   
 
 
 
 

(a)
Development costs were funded primarily through draws on the Operating Partnership's revolving credit facilities.

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Property Sales

        The Operating Partnership sold the following properties during the year ended December 31, 2001:

Sale
Date

  Property/Address
  Location
  # of
Bldgs.

  Rentable
Square
Feet

  Net Sales
Proceeds

  Net Book
Value

  Realized
Gain/(Loss)

 
Office:                                    
06/01/01   1777 N.E. Loop 410   San Antonio, Bexar County, TX   1   256,137   $ 21,313   $ 16,703   $ 4,610  
06/15/01   14511 Falling Creek   Houston, Harris County, TX   1   70,999     2,982     2,458     524  
07/17/01   8214 Westchester   Dallas, Dallas County, TX   1   95,509     8,966     8,465     501  
08/01/01   2600 Westown Parkway   West Des Moines, Polk County, IA   1   72,265     5,165     5,570     (405 )
09/26/01   1709 New York Ave, NW   Washington, DC   1   166,000     65,151     50,640     14,511  
11/14/01   200 Concord Plaza Drive   San Antonio, Bexar County, TX   1   248,700     30,927     32,609     (1,682 )
12/21/01   5225 Katy Freeway   Houston, Harris County, TX   1   112,213     6,887     7,393     (506 )
   
 
 
 
 
 
 
 
Total Office Property Sales:       7   1,021,823   $ 141,391   $ 123,838   $ 17,553  
   
 
 
 
 
 
 
 
Residential:                                
06/21/01   Tenby Chase Apartments   Delran, Burlington County, NJ   1   327 units     19,336     2,399     16,937  
Other:                                
04/03/01   North Pier-Harborside (a)   Jersey City, Hudson County, NJ     n/a     3,357     2,918     439  
   
 
 
 
 
 
 
 
Total Property Sales:       8   1,021,823   $ 164,084   $ 129,155   $ 34,929  
   
 
 
 
 
 
 
 

(a)
Net sales proceeds consisted of $1,330 in cash and $2,027 of a note receivable which was repaid in April 2002.

4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

      The debt of the Operating Partnership's unconsolidated joint ventures aggregating $152,672 as of December 31, 2002 is non-recourse to the Operating Partnership, except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions and material misrepresentations, and except as otherwise indicated below.

PRU-BETA 3 (Nine Campus Drive)

        On March 27, 1998, the Operating Partnership acquired a 50 percent interest in an existing joint venture with The Prudential Insurance Company of America ("Prudential"), known as Pru-Beta 3, which owned and operated Nine Campus Drive, a 156,495 square-foot office building, located in the Mack-Cali Business Campus office complex in Parsippany, Morris County, New Jersey. On November 5, 2001, the Operating Partnership acquired the remaining interest in the property for approximately $15,073. The property has been consolidated in the Operating Partnership's financial statements subsequent to the acquisition of the remaining interest. The Operating Partnership performed management and leasing services for the property when it was owned by the joint venture and recognized $162 and $140 in fees for such services in the years ended December 31, 2001 and 2000, respectively.

HPMC

        On April 23, 1998, the Operating Partnership entered into a joint venture agreement with HCG Development, L.L.C. and Summit Partners I, L.L.C. to form HPMC Development Partners, L.P. and, on July 21, 1998, entered into a second joint venture, HPMC Development Partners II, L.P. (formerly known as HPMC Lava Ridge Partners, L.P.), with these same parties. HPMC Development Partners, L.P.'s efforts focused on two development projects, commonly referred to as Continental Grand II and Summit Ridge. HPMC Development Partners II, L.P.'s efforts have focused on three development projects, commonly referred to as Lava Ridge, Pacific Plaza I & II and Stadium Gateway.

        The Operating Partnership has a 50 percent ownership interest and HCG Development, L.L.C. and Summit Partners I, L.L.C. (both of which are not affiliated with the Operating Partnership)

97



collectively have a 50 percent ownership interest in HPMC Development Partners, L.P. and HPMC Development Partners II, L.P. (the "HPMC Joint Ventures"). Significant terms of the applicable partnership agreements, among other things, call for the Operating Partnership to provide 80 percent and HCG Development, L.L.C. and Summit Partners I, L.L.C. to collectively provide 20 percent of the development equity capital to the HPMC Joint Ventures. As the Operating Partnership has agreed to fund development equity capital disproportionate to its ownership interest, it was granted a preferred return of 10 percent on its invested capital as a priority. Profits and losses of each of the HPMC Joint Ventures are allocated to the partners based upon the priority of distributions specified in the respective agreements and entitle the Operating Partnership to a preferred return, as well as 50 percent of each of the HPMC Joint Ventures' residual profits above the preferred returns. Equity in earnings recognized by the Operating Partnership consists of preferred returns and the Operating Partnership's equity in the HPMC Joint Ventures' earnings (loss) after giving effect to the HPMC Joint Ventures' payment of such preferred returns.

98


G&G MARTCO (Convention Plaza)

        On April 30, 1998, the Operating Partnership acquired a 49.9 percent interest in an existing joint venture, G&G Martco, which owns Convention Plaza, a 305,618 square-foot office building, located in San Francisco, San Francisco County, California. A portion of the Operating Partnership's initial investment was financed through the issuance of common units, as well as funds drawn from the Operating Partnership's credit facilities. On June 4, 1999, the Operating Partnership acquired an additional 0.1 percent interest in G&G Martco through the issuance of common units. The venture has a mortgage loan with a $50,000 balance at December 31, 2002 secured by its office property. The mortgage bears interest at a rate of the London Inter-Bank Offered Rate ("LIBOR") (1.38 percent at December 31, 2002) plus 162.5 basis points and matures in August 2003. The loan provides for a one-year extension option upon payment of a fee and subject to certain conditions. The Operating Partnership has posted a $1,816 letter of credit with the lender as a reserve for re-leasing costs. The Operating Partnership performs management and leasing services for the property owned by the joint venture and recognized $254, $235 and $231 in fees for such services in the years ended December 31, 2002, 2001 and 2000, respectively.

AMERICAN FINANCIAL EXCHANGE L.L.C.

        On May 20, 1998, the Operating Partnership entered into a joint venture agreement with Columbia Development Company, L.L.C. to form American Financial Exchange L.L.C. The venture was formed to acquire land for future development, located on the Hudson River waterfront in Jersey City, Hudson County, New Jersey, adjacent to the Operating Partnership's Harborside Financial Center office complex. The Operating Partnership holds a 50 percent interest in the joint venture. Among other things, the partnership agreement provides for a preferred return on the Operating Partnership's invested capital in the venture, in addition to the Operating Partnership's proportionate share of the venture's profit, as defined in the agreement. The joint venture acquired land on which it constructed a parking facility, a portion of which is currently licensed to a parking operator. Such parking facility serves a ferry service between the Operating Partnership's Harborside property and Manhattan. In the fourth quarter 2000, the joint venture started construction of Plaza 10, a 577,575 square-foot office building, on certain of the land owned by the venture. Plaza 10 is 100 percent pre-leased to Charles Schwab & Co. Inc. ("Schwab") for a 15-year term. The lease agreement obligates the venture, among other things, to deliver space to the tenant by required timelines and offers expansion options, at the tenant's election. Such options may obligate the venture to construct an additional building or, at the Operating Partnership's option, to make space available in any of its existing Harborside properties. Should the venture be unable to or choose not to provide such expansion space, the venture would be liable to Schwab for its actual damages, in no event to exceed $15,000. The amount of Schwab's actual damages, up to $15,000, has been guaranteed by the Operating Partnership. The project, which commenced initial operations in September 2002, is currently projected to cost the Operating Partnership approximately $145,000, of which $124,837 has been incurred by the Operating Partnership through December 31, 2002. The venture has an agreement with the City of Jersey City, New Jersey, in which it is required to make payments in lieu of property taxes ("PILOT"). The agreement, which commences upon substantial completion of the property, as defined, is for a term of 20 years. The PILOT is equal to two percent of Total Project Costs, as defined, with periodic increases, as defined. Total Project Costs, per the agreement, are the greater of $78,821 or actual Total Project Costs, as defined.

99



RAMLAND REALTY ASSOCIATES L.L.C. (One Ramland Road)

        On August 20, 1998, the Operating Partnership entered into a joint venture agreement with S.B. New York Realty Corp. to form Ramland Realty Associates L.L.C. The venture was formed to own, manage and operate One Ramland Road, a 232,000 square-foot office/flex building and adjacent developable land, located in Orangeburg, Rockland County, New York. In August 1999, the joint venture completed redevelopment of the property and placed the office/flex building in service. The Operating Partnership holds a 50 percent interest in the joint venture. The venture has a mortgage loan with a $15,282 balance at December 31, 2002 secured by its office/flex property. The mortgage bears interest at a rate of LIBOR plus 175 basis points and matures in January 2004. The loan provides for a one-year extension option upon payment of a fee and subject to certain conditions. In 2001, the property's then principal tenant, Superior Bank was closed by the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. The tenant continued to meet its rental payment obligations through June 2002. In July 2002, the tenant vacated the premises and the FDIC notified the joint venture that it was rejecting the lease as of July 16, 2002. As a result of the uncertainty regarding the tenant's ability to meet its obligations through the remainder of the term of its lease, the joint venture wrote off unbilled rents receivable of $1,573 and deferred lease costs of $705, which is included in the Operating Partnership's equity in earnings for the years ended December 31, 2002. The Operating Partnership performs management, leasing and other services for the property owned by the joint venture and recognized $56, $102 and $198 in fees for such services in the years ended December 31, 2002, 2001 and 2000, respectively.

ASHFORD LOOP ASSOCIATES L.P. (1001 South Dairy Ashford/2100 West Loop South)

        On September 18, 1998, the Operating Partnership entered into a joint venture agreement with Prudential to form Ashford Loop Associates L.P. The venture was formed to own, manage and operate 1001 South Dairy Ashford, a 130,000 square-foot office building acquired on September 18, 1998, and 2100 West Loop South, a 168,000 square-foot office building acquired on November 25, 1998, both located in Houston, Harris County, Texas. The Operating Partnership holds a 20 percent interest in the joint venture. The Operating Partnership performed management and leasing services through March 2002 for the properties owned by the joint venture and recognized $45, $170 and $172 in fees for such services in the years ended December 31, 2002, 2001 and 2000, respectively. Under certain circumstances, Prudential has the right to convert its interest in the venture into common stock of the Corporation at a discount to the stock's fair market value, based on the underlying fair value of Prudential's interest in the venture at the time of conversion. The Operating Partnership, at its option, can elect to exchange cash in lieu of stock in an amount equal to the fair value of Prudential's interest.

        In May 2002, the Operating Partnership sent a notice to Prudential electing to exercise its option under the buy-sell provisions of the joint venture agreement. Subsequently, Prudential sent notice to the Operating Partnership that it was exercising its option to put its interest in the joint venture to the Operating Partnership in exchange for common stock of the Corporation as described above. In November 2002, the Operating Partnership and Prudential entered into a first amendment to their joint venture agreement pursuant to which: (i) the Operating Partnership retracted its notice of exercise of the buy-sell provisions of the joint venture agreement, (ii) Prudential retracted its notice of exercise of its option to put its interest in the joint venture to the Operating Partnership in exchange for common stock of the Corporation, as described above, (iii) the mechanics of the exercise by either party of their respective buy-sell, sale and exchange rights ("Exit Rights") were clarified and confirmed, and (iv) each party agreed to a one-year moratorium on the exercise of their respective Exit Rights while the parties attempt to reposition the assets of the joint venture.

100



ARCAP INVESTORS, L.L.C.

        In 1999, the Operating Partnership invested $20,000 in ARCap Investors, L.L.C., a joint venture with several participants, which was formed to invest in sub-investment grade tranches of commercial mortgage-backed securities ("CMBS"). William L. Mack, Chairman of the Board of Directors of the Corporation, is a principal of an entity that owns approximately 28 percent of the venture and has nominated a member of its board of directors. As of December 31, 2001, the Operating Partnership held a 20.1 percent interest in the common equity of ARCap Investors, L.L.C. On December 12, 2002, the Operating Partnership sold its interest in the venture for $20,200.

MC-SJP MORRIS V REALTY, LLC AND MC-SJP MORRIS VI REALTY, LLC

        The Operating Partnership has an agreement with SJP Properties, which provides for a cooperative effort in seeking approvals to develop up to approximately 1.8 million square feet of office development on certain vacant land owned by the Operating Partnership and SJP Properties, located in Hanover and Parsippany, Morris County, New Jersey. The agreement provides that the parties share equally in the costs associated with seeking such requisite approvals. Upon mutual consent, the Operating Partnership and SJP Properties may enter into one or more joint ventures to construct on the vacant land, or seek to dispose of their respective vacant land parcels subject to the agreement. Pursuant to the agreement with SJP Properties, on August 24, 2000, the Operating Partnership entered into a joint venture with SJP Properties to form MC-SJP Morris V Realty, LLC and MC-SJP Morris VI Realty, LLC, which acquired developable land for approximately $16,193. The acquired land is able to accommodate approximately 650,000 square feet of office space and is located in Parsippany, Morris County, New Jersey. The venture entered into an agreement pertaining to the acquired land and two other land parcels in Parsippany with an insurance company to provide for a guarantee on the funding of the development of four office properties, aggregating 850,000 square feet. Such agreement provides, if the venture elects to develop, that the insurance company will be admitted to the joint venture and provide all the equity required to fund the development, subject to certain conditions. The venture has a mortgage loan with a $17,983 balance at December 31, 2002 secured by its land, which is guaranteed by the insurance company. The mortgage bears interest at a rate of LIBOR plus 125 basis points and matures in March 2004.

SOUTH PIER AT HARBORSIDE—HOTEL DEVELOPMENT

        On November 17, 1999, the Operating Partnership entered into an agreement with Hyatt Corporation ("Hyatt") to develop a 350-room hotel on the Operating Partnership's South Pier at Harborside Financial Center, Jersey City, Hudson County, New Jersey, which was completed and commenced initial operations in July 2002. The Operating Partnership owns a 50 percent interest in the venture. The venture has a mortgage loan with a commercial bank with a $61,320 balance at December 31, 2002 secured by its hotel property, which each partner, including the Operating Partnership, has severally guaranteed repayment of approximately $11,148. The debt bears interest at a rate of LIBOR plus 275 basis points and matures in December 2003. The loan provides for two one-year extension options upon payment of a fee and subject to certain conditions. Additionally, the venture has an $8,000 loan with the City of Jersey City, provided by the U.S. Department of Housing and Urban Development. The loan currently bears interest at fixed rates ranging from 6.09 percent to 6.62 percent and matures in August 2020. The Operating Partnership has posted an $8,000 letter of credit in support of this loan, $4,000 of which is indemnified by Hyatt.

101



SUMMARIES OF UNCONSOLIDATED JOINT VENTURES

        The following is a summary of the financial position of the unconsolidated joint ventures in which the Operating Partnership had investment interests as of December 31, 2002 and 2001:

 
  December 31, 2002
 
  Pru-Beta 3
  HPMC
  G&G
Martco

  American
Financial
Exchange

  Ramland
Realty

  Ashford
Loop

  ARCap
  MC-SJP
Morris
Realty

  Harborside
South Pier

  Combined
Total

Assets:                                                            
  Rental property, net   $   $   $ 8,329   $ 101,752   $ 17,034   $ 36,520   $   $ 17,364   $ 92,361   $ 273,360
  Other assets         16,242     4,072     25,543     1,662     730         1,211     5,576     55,036
   
 
 
 
 
 
 
 
 
 
  Total assets   $   $ 16,242   $ 12,401   $ 127,295   $ 18,696   $ 37,250   $   $ 18,575   $ 97,937   $ 328,396
   
 
 
 
 
 
 
 
 
 
Liabilities and partners'/members' capital:                                                            
  Mortgages and loans payable   $   $   $ 50,000   $   $ 15,282   $ 87   $   $ 17,983   $ 69,320   $ 152,672
  Other liabilities         18     1,801     1,709     95     942         48     5,164     9,777
  Partners'/members' capital         16,224     (39,400 )   125,586     3,319     36,221         544     23,453     165,947
   
 
 
 
 
 
 
 
 
 
  Total liabilities and partners'/members' capital   $   $ 16,242   $ 12,401   $ 127,295   $ 18,696   $ 37,250   $   $ 18,575   $ 97,937   $ 328,396
   
 
 
 
 
 
 
 
 
 
Operating Partnership's net investment in unconsolidated joint ventures   $   $ 15,900   $ 2,794   $ 134,158   $ 1,232   $ 7,652   $   $ 289   $ 14,772   $ 176,797
   
 
 
 
 
 
 
 
 
 
 
  December 31, 2001
 
  Pru-Beta 3
  HPMC
  G&G
Martco

  American
Financial
Exchange

  Ramland
Realty

  Ashford
Loop

  ARCap
  MC-SJP
Morris
Realty

  Harborside
South Pier

  Combined
Total

Assets:                                                            
  Rental property, net   $   $ 19,556   $ 9,598   $ 81,070   $ 17,933   $ 37,157   $   $ 16,607   $ 63,236   $ 245,157
  Other assets     732     20,267     2,163     120     2,396     1,150     595,937     107     100     622,972
   
 
 
 
 
 
 
 
 
 
  Total assets   $ 732   $ 39,823   $ 11,761   $ 81,190   $ 20,329   $ 38,307   $ 595,937   $ 16,714   $ 63,336   $ 868,129
   
 
 
 
 
 
 
 
 
 
Liabilities and partners'/members' capital:                                                            
  Mortgages and loans payable   $   $ 13,976   $ 50,000   $   $ 15,974   $   $ 324,819   $ 16,795   $ 34,107   $ 455,671
  Other liabilities         897     1,196     9,667     83     949     3,736     103     2,927     19,558
  Partners'/members' capital     732     24,950     (39,435 )   71,523     4,272     37,358     267,382     (184 )   26,302     392,900
   
 
 
 
 
 
 
 
 
 
  Total liabilities and partners'/members' capital   $ 732   $ 39,823   $ 11,761   $ 81,190   $ 20,329   $ 38,307   $ 595,937   $ 16,714   $ 63,336   $ 868,129
   
 
 
 
 
 
 
 
 
 
Operating Partnership's net investment in unconsolidated joint ventures   $ 350   $ 24,545   $ 2,795   $ 74,651   $ 3,014   $ 7,809   $ 17,897   $ 183   $ 15,296   $ 146,540
   
 
 
 
 
 
 
 
 
 

102


        The following is a summary of the results of operations of the unconsolidated joint ventures for the period in which the Operating Partnership had investment interests during the years ended December 31, 2002, 2001 and 2000:

 
  Year Ended December 31, 2002
 
 
  Pru-Beta 3
  HPMC
  G&G
Martco

  American
Financial
Exchange

  Ramland
Realty

  Ashford
Loop

  ARCap
  MC-SJP
Morris
Realty

  Harborside
South Pier

  Combined
Total

 
Total revenues   $   $ 11,622   $ 13,638   $ 7,104   $ 1,765   $ 4,329   $ 84,552   $   $ 10,325   $ 133,335  
Operating and other expenses         (861 )   (4,021 )   (1,052 )   (1,068 )   (2,788 )   (24,408 )       (9,327 )   (43,525 )
Depreciation and amortization         (641 )   (1,631 )   (1,008 )   (905 )   (974 )           (2,769 )   (7,928 )
Interest expense         (233 )   (1,951 )       (745 )       (28,995 )       (1,598 )   (33,522 )
   
 
 
 
 
 
 
 
 
 
 
Net income (loss)   $   $ 9,887   $ 6,035   $ 5,044   $ (953 ) $ 567   $ 31,149   $   $ (3,369 ) $ 48,360  
   
 
 
 
 
 
 
 
 
 
 
Operating Partnership's equity in earnings (loss) of unconsolidated joint ventures   $   $ 5,789   $ 2,999   $ 5,037   $ (1,782 ) $ 159   $ 4,390   $   $ (1,799 ) $ 14,793  
   
 
 
 
 
 
 
 
 
 
 
 
  Year Ended December 31, 2001
 
 
  Pru-Beta 3
  HPMC
  G&G
Martco

  American
Financial
Exchange

  Ramland
Realty

  Ashford
Loop

  ARCap
  MC-SJP
Morris
Realty

  Harborside
South Pier

  Combined
Total

 
Total revenues   $ 11,337   $ 22,826   $ 12,509   $ 543   $ 3,743   $ 5,685   $ 64,791   $   $   $ 121,434  
Operating and other expenses     (1,322 )   (2,839 )   (3,568 )   (63 )   (3,470 )   (2,594 )   (32,200 )           (46,056 )
Depreciation and amortization     (992 )   (3,530 )   (1,557 )   (39 )   (1,389 )   (957 )               (8,464 )
Interest expense         (2,995 )   (3,115 )       (1,126 )       (19,231 )           (26,467 )
   
 
 
 
 
 
 
 
 
 
 
Net income (loss)   $ 9,023   $ 13,462   $ 4,269   $ 441   $ (2,242 ) $ 2,134   $ 13,360   $   $   $ 40,447  
   
 
 
 
 
 
 
 
 
 
 
Operating Partnership's equity in earnings (loss) of unconsolidated joint ventures   $ 785   $ 6,064   $ 1,582   $ (322 ) $ 232   $ 388   $ 275   $   $   $ 9,004  
   
 
 
 
 
 
 
 
 
 
 
 
  Year Ended December 31, 2000
 
 
  Pru-Beta 3
  HPMC
  G&G
Martco

  American
Financial
Exchange

  Ramland
Realty

  Ashford
Loop

  ARCap
  MC-SJP
Morris
Realty

  Harborside
South Pier

  Combined
Total

 
Total revenues   $ 5,075   $ 9,254   $ 10,785   $ 1,009   $ 4,011   $ 5,776   $ 19,931   $   $   $ 55,841  
Operating and other expenses     (1,619 )   (2,628 )   (3,312 )   (155 )   (1,030 )   (2,773 )   (3,060 )           (14,577 )
Depreciation and amortization     (1,226 )   (5,908 )   (1,532 )   (825 )   (975 )   (839 )               (11,305 )
Interest expense         (4,535 )   (4,060 )       (1,547 )       (5,045 )           (15,187 )
   
 
 
 
 
 
 
 
 
 
 
Net income (loss)   $ 2,230   $ (3,817 ) $ 1,881   $ 29   $ 459   $ 2,164   $ 11,826   $   $   $ 14,772  
   
 
 
 
 
 
 
 
 
 
 
Operating Partnership's equity in earnings of unconsolidated joint ventures   $ 935   $ 3,248   $ 483   $ 735   $ 180   $ 474   $ 2,000   $   $   $ 8,055  
   
 
 
 
 
 
 
 
 
 
 

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5. DEFERRED CHARGES AND OTHER ASSETS

 
  December 31,
 
 
  2002
  2001
 
Deferred leasing costs   $ 119,520   $ 93,677  
Deferred financing costs     23,927     26,569  
   
 
 
      143,447     120,246  
Accumulated amortization     (40,477 )   (36,746 )
   
 
 
Deferred charges, net     102,970     83,500  
Notes receivable     12,292     10,777  
Prepaid expenses and other assets     12,289     7,222  
   
 
 
Total deferred charges and other assets, net   $ 127,551   $ 101,499  
   
 
 

6. RESTRICTED CASH

        Restricted cash includes security deposits for the Operating Partnership's residential property and certain commercial properties, and escrow and reserve funds for debt service, real estate taxes, property insurance, capital improvements, tenant improvements, and leasing costs established pursuant to certain mortgage financing arrangements, and is comprised of the following:

 
  December 31,
 
  2002
  2001
Security deposits   $ 7,301   $ 7,839
Escrow and other reserve funds     476     75
   
 
Total restricted cash   $ 7,777   $ 7,914
   
 

7. RENTAL PROPERTY HELD FOR SALE

        As of December 31, 2001, the Operating Partnership had identified 37 office properties, aggregating approximately 4.3 million square feet, a multi-family residential property and a land parcel as held for sale. These properties were located in Texas, Colorado, Arizona, Florida and New York. The properties carried an aggregate book value of $384,626, net of accumulated depreciation of $28,379 and a valuation allowance of $40,464 at December 31, 2001. During the year ended December 31, 2002, the Operating Partnership sold 13 of these properties for total net sales proceeds of approximately $162,466.

        On June 6, 2002, the Operating Partnership determined that 20 of its office properties and a land parcel, which are located in Colorado, aggregating 1.6 million square feet, were no longer being held for sale. The Operating Partnership decided that it would continue to own and operate these properties until market conditions in Colorado improve. The reclassified properties had an aggregate book value of $175,550, net of accumulated depreciation of $15,178 and a valuation allowance of $27,049 at the date of the subsequent decision not to sell (including an unrealized loss of $3,000, and catch-up depreciation and amortization expense of $3,900 for certain properties reflecting expense for the period from the date the properties were originally held for sale through the date they were no longer held for sale, which was recorded at that date).

        On September 30, 2002, the Operating Partnership determined that its five remaining properties located in Texas were no longer being held for sale. The Operating Partnership decided that it would continue to own and operate these properties until market conditions in Texas improve and certain

104



leasing uncertainties at the properties are resolved. The reclassified properties had an aggregate book value of $56,342, net of accumulated depreciation of $7,089 and a valuation allowance of $1,998, at the date of the subsequent decision not to sell (including catch-up depreciation and amortization expense of $3,413 for certain properties reflecting expense for the period from the date the properties were originally held for sale through the date they were no longer held for sale, which was recorded at that date).

        As of December 31, 2002, the Operating Partnership did not have any properties identified as held for sale.

        During the years ended December 31, 2002 and 2001, the Operating Partnership determined that the carrying amounts of certain properties identified as held for sale during those periods were not expected to be recovered from estimated net sale proceeds from such property sales. The Operating Partnership recognized a valuation allowance of $4,341 and $46,793 for the years ended December 31, 2002 and 2001, respectively.

        The following table summarizes realized gains (losses) and unrealized losses on disposition of rental property, net, for the years ended December 31, 2002, 2001 and 2000:

 
  Year Ended December 31,
 
  2002
  2001
  2000
Realized gains (losses) on sale of rental property and land, net   $ 7,100   $ 34,929   $ 85,353
Valuation allowance on rental property held for sale     (4,341 )   (46,793 )  
   
 
 
Realized gains (losses) and unrealized losses, net   $ 2,759   $ (11,864 ) $ 85,353
   
 
 

8. SENIOR UNSECURED NOTES

        A summary of the Operating Partnership's senior unsecured notes as of December 31, 2002 and 2001 is as follows:

 
  December 31,
   
 
 
  Effective
Rate (1)

 
 
  2002
  2001
 
7.180% Senior Unsecured Notes, due December 31, 2003   $ 95,283   $ 185,283   7.23 %
7.000% Senior Unsecured Notes, due March 15, 2004     299,904     299,824   7.27 %
7.250% Senior Unsecured Notes, due March 15, 2009     298,542     298,307   7.49 %
7.835% Senior Unsecured Notes, due December 15, 2010     15,000     15,000   7.95 %
7.750% Senior Unsecured Notes, due February 15, 2011     298,602     298,429   7.93 %
6.150% Senior Unsecured Notes, due December 15, 2012     90,015       6.89 %
   
 
 
 
Total Senior Unsecured Notes   $ 1,097,346   $ 1,096,843   7.48 %
   
 
 
 

(1)
Includes the cost of terminated treasury lock agreements (if any), offering and other transaction costs and the discount on the notes, as applicable.

        On December 20, 2002, the Operating Partnership exchanged $90,000 face amount of existing 7.18 percent senior unsecured notes due December 31, 2003, with interest payable monthly in arrears, for $94,919 face amount of 6.15 percent senior unsecured notes due December 15, 2012, with interest payable semi-annually in arrears. The exchange was completed with Teachers Insurance and Annuity Association ("TIAA").

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        On January 29, 2001, the Operating Partnership issued $300,000 face amount of 7.75 percent senior unsecured notes due February 15, 2011 with interest payable semi-annually in arrears. The total proceeds from the issuance (net of selling commissions and discount) of approximately $296,300 were used to pay down outstanding borrowings under the 2000 Unsecured Facility, as defined in Note 9. The senior unsecured notes were issued at a discount of approximately $1,731, which will be amortized over the term as an adjustment to interest expense.

9. REVOLVING CREDIT FACILITIES

2002 UNSECURED FACILITY

        On September 27, 2002, the Operating Partnership obtained an unsecured revolving credit facility ("2002 Unsecured Facility") with a current borrowing capacity of $600,000 from a group of 14 lenders. The interest rate on outstanding borrowings under the credit line is currently LIBOR plus 70 basis points. The Operating Partnership may instead elect an interest rate representing the higher of the lender's prime rate or the Federal Funds rate plus 50 basis points. The 2002 Unsecured Facility also requires a 20 basis point facility fee on the current borrowing capacity payable quarterly in arrears. The 2002 Unsecured Facility matures in September 2005, with an extension option of one year, which would require upon exercise a payment of 25 basis points of the then borrowing capacity of the credit line.

        In the event of a change in the Operating Partnership's unsecured debt rating, the interest and facility fee rates will be adjusted in accordance with the following table:

Operating Partnership's
Unsecured Debt Ratings:
S&P/Moody's/Fitch (a)

  Interest Rate—
Applicable Basis Points
Above LIBOR

  Facility Fee
Basis Points

No rating or less than BBB-/Baa3/BBB-   120.0   30.0
BBB-/Baa3/BBB-   95.0   20.0
BBB/Baa2/BBB (current)   70.0   20.0
BBB+/Baa1/BBB+   65.0   15.0
A-/A3/A- or higher   60.0   15.0

(a)
If the Operating Partnership has debt ratings from two rating agencies, one of which is Standard & Poor's Rating Services ("S&P") or Moody's Investors Service ("Moody's"), the rates per the above table shall be based on the lower of such ratings. If the Operating Partnership has debt ratings from three rating agencies, one of which is S&P or Moody's, the rates per the above table shall be based on the lower of the two highest ratings. If the Operating Partnership has debt ratings from only one agency, it will be considered to have no rating or less than BBB-/Baa3/BBB- per the above table.

        The terms of the 2002 Unsecured Facility include certain restrictions and covenants which limit, among other things, the payment of distributions (as discussed below), the incurrence of additional indebtedness, the incurrence of liens and the disposition of assets, and which require compliance with financial ratios relating to the maximum leverage ratio, the maximum amount of secured indebtedness, the minimum amount of tangible net worth, the minimum amount of debt service coverage, the minimum amount of fixed charge coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property debt service coverage and certain investment limitations. The distributions restriction referred to above provides that, except to enable the Operating Partnership to continue to qualify as a REIT under the Code, the Operating Partnership will not during any four consecutive fiscal quarters make distributions with respect to common units or other equity interests in

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an aggregate amount in excess of 90 percent of funds from operations (as defined) for such period, subject to certain other adjustments.

        The lending group for the 2002 Unsecured Facility consists of: JPMorgan Chase Bank, as administrative agent; Fleet National Bank, as syndication agent; Bank of America and Wells Fargo Bank, National Association, as co-documentation agents; Commerzbank AG, as co-syndication agent; Bank of Nova Scotia, Bank One, N.A., Citicorp North America, Inc., and Wachovia Bank, National Association, as managing agents, PNC Bank, National Association, and Sun Trust Bank, as co-agents; Bayerische Landesbank Girozentrale, Deutsche Bank Trust Company Americas, Chevy Chase Bank, and Israel Discount Bank of New York, as participants.

2000 UNSECURED FACILITY

        On June 22, 2000, the Operating Partnership obtained an unsecured revolving credit facility ("2000 Unsecured Facility") with a current borrowing capacity of $800,000 from a group of 24 lenders. The interest rate on outstanding borrowings under the credit line is currently LIBOR plus 80 basis points. The Operating Partnership may instead elect an interest rate representing the higher of the lender's prime rate or the Federal Funds rate plus 50 basis points. The 2000 Unsecured Facility also requires a 20 basis point facility fee on the current borrowing capacity payable quarterly in arrears. Subject to certain conditions, the Operating Partnership has the ability through June 22, 2002 to increase the borrowing capacity of the credit line up to $1,000,000. The 2000 Unsecured Facility matures in June 2003, with an extension option of one year, which would require a payment of 25 basis points of the then borrowing capacity of the credit line upon exercise. In conjunction with obtaining the 2002 Unsecured Facility, the Operating Partnership repaid in full and terminated the 2000 Unsecured Facility on September 27, 2002.

        In conjunction with obtaining the 2002 Unsecured Facility, the Operating Partnership drew funds on the new facility to repay in full and terminate the 2000 Unsecured Facility on September 27, 2002.

UNSECURED FACILITY

        The Operating Partnership had an unsecured revolving credit facility ("Unsecured Facility") with a borrowing capacity of $1,000,000 from a group of 28 lenders. The interest rate was based on the Operating Partnership's achievement of investment grade unsecured debt ratings and, at the Operating Partnership's election, bore interest at either 90 basis points over LIBOR or the higher of the lender's prime rate or the Federal Funds rate plus 50 basis points. In conjunction with obtaining the 2000 Unsecured Facility, the Operating Partnership repaid in full and terminated the Unsecured Facility on June 22, 2000.

PRUDENTIAL FACILITY

        The Operating Partnership had a revolving credit facility ("Prudential Facility") with Prudential Securities Corp. ("PSC") in the amount of $100,000, which bore interest at 110 basis points over one-month LIBOR, with a maturity date of June 29, 2001. The Prudential Facility was a recourse liability of the Operating Partnership and was secured by the Operating Partnership's equity interest in Harborside Plazas 2 and 3. The Prudential Facility was repaid in full and terminated at maturity on June 29, 2001.

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SUMMARY

        As of December 31, 2002 and 2001, the Operating Partnership had outstanding borrowings of $73,000 and $59,500, respectively, under its revolving credit facilities (with an aggregate borrowing capacity of $600,000 and $800,000, respectively). The total outstanding borrowings as of December 31, 2002 were from the 2002 Unsecured Facility and the total outstanding borrowings as of December 31, 2001 were from the 2000 Unsecured Facility.

9. MORTGAGES AND LOANS PAYABLE

        The Operating Partnership has mortgages and loans payable which consist of various loans collateralized by certain of the Operating Partnership's rental properties. Payments on mortgages and loans payable are generally due in monthly installments of principal and interest, or interest only.

        A summary of the Operating Partnership's mortgages and loans payable as of December 31, 2002 and 2001 is as follows:

 
   
   
  Principal Balance at
   
Property Name

  Lender
  Effective
Interest
Rate (a)

  December 31,
2002

  December 31,
2001

  Maturity
Mack-Cali Willowbrook   CIGNA   8.67 % $ 7,658   $ 8,598   10/01/03
400 Chestnut Ridge   Prudential Insurance Co.   9.44 %   11,611     12,646   07/01/04
Mack-Cali Centre VI   Principal Life Insurance Co.   6.87 %   35,000     35,000   04/01/05
Various (b)   Prudential Insurance Co.   7.10 %   150,000     150,000   05/15/05
Mack-Cali Bridgewater I   New York Life Ins. Co.   7.00 %   23,000     23,000   09/10/05
Mack-Cali Woodbridge II   New York Life Ins. Co.   7.50 %   17,500     17,500   09/10/05
Mack-Cali Short Hills   Prudential Insurance Co.   7.74 %   24,470     25,218   10/01/05
500 West Putnam Avenue   New York Life Ins. Co.   6.52 %   8,417     9,273   10/10/05
Harborside—Plaza 1   U.S. West Pension Trust   4.36 %   61,722     57,978   01/01/06
Harborside—Plazas 2 and 3   Northwestern/Principal   7.36 %   158,140     162,022   01/01/06
1633 Littleton Road   First Union/Maher Partners   7.66 %   3,504       02/10/06
Mack-Cali Airport   Allstate Life Insurance Co.   7.05 %   10,226     10,394   04/01/07
Kemble Plaza I   Mitsubishi Tr & Bk Co.   LIBOR+0.65 %   32,178     32,178   01/31/09
2200 Renaissance Boulevard   TIAA   5.89 %   19,100       12/01/12
Soundview Plaza   TIAA   6.02 %   19,500       01/01/13
       
 
 
   
Total Mortgages and Loans Payable       $ 582,026   $ 543,807    
       
 
 
   

(a)
Effective interest rate for mortgages and loans payable reflects effective rate of debt, including deferred financing costs, comprised of the cost of terminated treasury lock agreements (if any), debt initiation costs and other transaction costs, as applicable.

(b)
The Operating Partnership has the option to convert the mortgage loan, which is secured by 10 properties, to unsecured debt, subject to, amongst other things, the Operating Partnership having investment grade ratings from two rating agencies (at least one of which must be from S&P or Moody's) at the time of conversion.

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INTEREST RATE CONTRACT

        On July 18, 2002, the Operating Partnership entered into a forward treasury rate lock agreement with a commercial bank. The agreement was used to fix the index rate on $61,525 of the Harborside-Plaza 1 mortgage at 3.285 percent per annum, for which the interest rate was re-set to the three-year U.S. Treasury Note plus 130 basis points for the three years beginning November 4, 2002 (see "Property Mortgages: Harborside-Plaza 1" above). On November 4, 2002, the Operating Partnership paid $1,888 in settlement of the forward treasury rate lock agreement entered into in July 2002, which is being amortized to interest expense over a three-year period.

SCHEDULED PRINCIPAL PAYMENTS

        Scheduled principal payments and related weighted average annual interest rates for the Operating Partnership's Senior Unsecured Notes (see Note 8), revolving credit facilities (see Note 9) and mortgages and loans payable as of December 31, 2002 are as follows:

Period

  Scheduled
Amortization

  Principal
Maturities

  Total
  Weighted Avg.
Interest Rate of
Future Repayments (a)

 
2003   $ 6,916   $ 102,093   $ 109,009   7.35 %
2004     6,014     309,863     315,877   7.33 %
2005     5,420     326,178     331,598   6.09 %
2006     1,028     216,422     217,450   7.06 %
2007     873     9,364     10,237   6.96 %
Thereafter     4,936     772,173     777,109   7.32 %
   
 
 
 
 
Sub-total     25,187     1,736,093     1,761,280   7.03 %
Adjustment for unamortized debt discount/premium, net, as of December 31, 2002     (8,908 )       (8,908 )  
   
 
 
 
 
Totals/Weighted Average   $ 16,279   $ 1,736,093   $ 1,752,372   7.03 %
   
 
 
 
 

(a)
Actual weighted average LIBOR contract rates relating to the Operating Partnership's outstanding debt as of December 31, 2002 of 1.72 percent was used in calculating revolving credit facility and other variable rate debt interest rates.

CASH PAID FOR INTEREST AND INTEREST CAPITALIZED

        Cash paid for interest for the years ended December 31, 2002, 2001 and 2000 was $123,148, $115,722 and $112,157, respectively. Interest capitalized by the Operating Partnership for the years ended December 31, 2002, 2001 and 2000 was $19,664, $16,722 and $11,524, respectively.

SUMMARY OF INDEBTEDNESS

        As of December 31, 2002, the Operating Partnership's total indebtedness of $1,752,372 (weighted average interest rate of 7.03 percent) was comprised of $105,178 of revolving credit facility borrowings and other variable rate mortgage debt (weighted average rate of 2.41 percent) and fixed rate debt of $1,647,194 (weighted average rate of 7.33 percent).

        As of December 31, 2001, the Operating Partnership's total indebtedness of $1,700,150 (weighted average interest rate of 7.17 percent) was comprised of $91,678 of revolving credit facility borrowings and other variable rate mortgage debt (weighted average rate of 3.38 percent) and fixed rate debt of $1,608,472 (weighted average rate of 7.38 percent).

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11. PARTNERS' CAPITAL

        Partners' capital in the accompanying consolidated financial statements relates to common units held by the Corporation in the Operating Partnership, common units help by the limited partners, preferred units ("Preferred Units") held by the preferred unitholders of the Operating Partnership and warrants to purchase common units ("Unit Warrants") in the Operating Partnership.

        Net income allocated to the preferred unitholders and limited partners reflects their pro-rata share of net income and distributions.

REPURCHASE OF GENERAL PARTNER UNITS

        On September 13, 2000, the Board of Directors of the Corporation authorized an increase to the Corporation's share repurchase program ("Repurchase Program") under which the Corporation was permitted to purchase up to an additional $150,000 of the Corporation's outstanding common stock. The Corporation purchased for constructive retirement 3,711,400 shares of its outstanding common stock for an aggregate cost of approximately $103,482 from September 13, 2000 through December 31, 2002. Concurrent with these purchases, the Corporation sold to the Operating Partnership 3,711,400 common units for approximately $103,482. From January 1, 2003 through February 14, 2003, the Corporation purchased an additional 35,000 shares of its common stock for an aggregate cost of approximately $1,030. Concurrent with these purchases, the Corporation sold to the Operating Partnership 35,000 common units for approximately $1,030.

DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN

        The Corporation filed a registration statement with the SEC for the Corporation's dividend reinvestment and stock purchase plan ("Plan") which was declared effective in February 1999. The Plan commenced on March 1, 1999.

SHAREHOLDER RIGHTS PLAN

        On June 10, 1999, the Board of Directors of the Corporation authorized a dividend distribution of one preferred share purchase right ("Right") for each outstanding share of common stock which were distributed to all holders of record of the common stock on July 6, 1999. Each Right entitles the registered holder to purchase from the Corporation one one-thousandth of a share of Series A junior participating preferred stock, par value $0.01 per share ("Preferred Shares"), at a price of $100.00 per one one-thousandth of a Preferred Share ("Purchase Price"), subject to adjustment as provided in the rights agreement. The Rights expire on July 6, 2009, unless the expiration date is extended or the Right is redeemed or exchanged earlier by the Corporation.

        The Rights are attached to each share of common stock. The Rights are generally exercisable only if a person or group becomes the beneficial owner of 15 percent or more of the outstanding common stock or announces a tender offer for 15 percent or more of the outstanding common stock ("Acquiring Person"). In the event that a person or group becomes an Acquiring Person, each holder of a Right will have the right to receive, upon exercise, common stock having a market value equal to two times the Purchase Price of the Right.

STOCK OPTION PLANS

        In September 2000, the Corporation established the 2000 Employee Stock Option Plan ("2000 Employee Plan") and the 2000 Director Stock Option Plan ("2000 Director Plan"). In May 2002, shareholders of the Corporation approved amendments to both plans to increase the total shares reserved for issuance under both plans from 2,700,000 to 4,350,000 shares (subject to adjustment) of

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the Corporation's common stock (from 2,500,000 to 4,000,000 shares under the 2000 Employee Plan and from 200,000 to 350,000 shares under the 2000 Director Plan). In 1994, and as subsequently amended, the Corporation established the Mack-Cali Employee Stock Option Plan ("Employee Plan") and the Mack-Cali Director Stock Option Plan ("Director Plan") under which a total of 5,380,188 shares (subject to adjustment) of the Corporation's common stock have been reserved for issuance (4,980,188 shares under the Employee Plan and 400,000 shares under the Director Plan). Stock options granted under the Employee Plan in 1994 and 1995 have become exercisable over a three-year period and those options granted under both the 2000 Employee Plan and Employee Plan subsequent to 1995 become exercisable over a five-year period. All stock options granted under both the 2000 Director Plan and Director Plan become exercisable in one year. All options were granted at the fair market value at the dates of grant and have terms of ten years. As of December 31, 2002 and December 31, 2001, the stock options outstanding had a weighted average remaining contractual life of approximately 6.4 and 7.5 years, respectively.

        Information regarding the Corporation's stock option plans is summarized below:

 
  Shares
Under
Options

  Weighted
Average
Exercise
Price

Outstanding at January 1, 2000   3,727,151   $ 31.86
Granted   1,523,900   $ 26.75
Exercised   (117,053 ) $ 21.45
Lapsed or canceled   (500,679 ) $ 34.64
   
 
Outstanding at December 31, 2000   4,633,319   $ 30.14
Granted   1,045,300   $ 28.85
Exercised   (904,401 ) $ 22.87
Lapsed or canceled   (262,332 ) $ 30.47
   
 
Outstanding at December 31, 2001   4,511,886   $ 31.28
Granted      
Exercised   (646,027 ) $ 26.37
Lapsed or canceled   (279,929 ) $ 31.22
   
 
Outstanding at December 31, 2002   3,585,930   $ 32.19
   
 
Options Exercisable at December 31, 2001   1,842,951   $ 34.63
Options Exercisable at December 31, 2002   2,553,710   $ 33.97
   
 
Available for grant at December 31, 2001   1,474,263      
Available for grant at December 31, 2002   3,402,853      
   
 

        The weighted average fair value of options granted during 2001 and 2000 were $2.53 and $3.40 per option, respectively. The fair value of each significant option grant is estimated on the date of grant using the Black-Scholes model. The following weighted average assumptions are included in the Corporation's fair value calculations of stock options:

 
  2001
  2000
 
Expected life (in years)   6   6  
Risk-free interest rate   4.99 % 5.67 %
Volatility   17.26 % 22.66 %
Dividend yield   8.46 % 8.82 %
   
 
 

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        There were no stock options granted during 2002.

        On January 22, 2003, the Corporation granted 894,800 employee stock options at an exercise price of $28.47 per share.

STOCK WARRANTS

        The Corporation has 252,500 warrants outstanding which enable the holders to purchase an equal number of shares of common stock of the Corporation ("Stock Warrants") at $33 per share (the market price at date of issuance). Such warrants are all currently exercisable and expire on January 31, 2007.

        The Corporation also has 389,976 Stock Warrants outstanding which enable the holders to purchase an equal number of shares of common stock of the Corporation at $38.75 per share (the market price at date of issuance). Such warrants are all currently exercisable and expire on December 12, 2007.

        Information regarding the Corporation's Stock Warrants is summarized below:

 
  Warrants
 
Outstanding at January 1, 2002   749,976  
Exercised   (107,500 )
Lapsed or canceled    
   
 
Outstanding at December 31, 2002   642,476  
   
 
Exercisable at December 31, 2002   642,476  
   
 

STOCK COMPENSATION

        The Corporation has granted stock awards to officers and certain other employees of the Corporation (collectively, "Restricted Stock Awards"), which allow the employees to each receive a certain amount of shares of the Corporation's common stock generally over a five-year vesting period. Certain Restricted Stock Awards are contingent upon the Corporation meeting certain performance and/or stock price appreciation objectives. All Restricted Stock Awards provided to the officers and certain other employees were granted under the 2000 Employee Plan and Employee Plan.

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        Information regarding the Restricted Stock Awards is summarized below:

 
  Shares
 
Outstanding at January 1, 2000   211,593  
Granted    
Vested   (70,386 )
Canceled   (5,100 )
   
 
Outstanding at December 31, 2000   136,107  
Granted   94,934  
Vested   (25,354 )
Canceled   (7,408 )
   
 
Outstanding at December 31, 2001   198,279  
Granted    
Vested   (44,543 )
Canceled    
   
 
Outstanding at December 31, 2002   153,736  
   
 

        On January 2, 2003, the Corporation issued 168,000 shares of Restricted Stock Awards to its five executive officers (Mitchell E. Hersh, Timothy M. Jones, Barry Lefkowitz, Roger W. Thomas and Michael Grossman) and entered into certain other agreements in connection therewith, as well as certain agreements amending the terms of the restricted share award agreements with such executive officers originally entered into in 1999 and 2001.

DEFERRED STOCK COMPENSATION PLAN FOR DIRECTORS

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

        During the years ended December 31, 2002, 2001 and 2000, 5,324, 5,446 and 4,227 deferred stock units were earned, respectively. As of December 31, 2002 and 2001, there were 18,315 and 12,991 director stock units outstanding, respectively.

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EARNINGS PER UNIT

        Basic EPU excludes dilution and is computed by dividing net income available to common unitholders by the weighted average number of units outstanding for the period. Diluted EPU reflects the potential dilution that could occur if securities or other contracts to issue common units were exercised or converted into common units.

        The following information presents the Operating Partnership's results for the years ended December 31, 2002, 2001 and 2000 in accordance with FASB No. 128:

 
  Year Ended December 31,
 
  2002
  2001
  2000
 
  Basic EPU
  Diluted EPU
  Basic EPU
  Diluted EPU
  Basic EPU
  Diluted EPU
Net income available to common unitholders   $ 158,991   $ 158,991   $ 150,190   $ 150,190   $ 210,950   $ 210,950
Add: Net income attributable to Operating Partnership—preferred units                           15,441
   
 
 
 
 
 
Adjusted net income   $ 158,991   $ 158,991   $ 150,190   $ 150,190   $ 210,950   $ 226,391
   
 
 
 
 
 
Weighted average units     65,109     65,427     64,495     64,775     66,392     73,070
   
 
 
 
 
 
Per Unit   $ 2.44   $ 2.43   $ 2.33   $ 2.32   $ 3.18   $ 3.10
   
 
 
 
 
 

        The following schedule reconciles the shares used in the basic EPU calculation to the units used in the diluted EPU calculation:

 
  Year Ended December 31,
 
  2002
  2001
  2000
Basic EPU Units   65,109   64,495   66,392
Add: Operating Partnership—Preferred Units (after conversion to common units)       6,485
  Stock options   302   270   188
  Restricted Stock Awards   14   10   5
  Stock Warrants   2    
   
 
 
Diluted EPU Units   65,427   64,775   73,070
   
 
 

        Preferred Units outstanding in 2002 and 2001 were not included in the 2002 and 2001 computations of diluted EPU as such units were anti-dilutive during the periods.

        Through December 31, 2002, under the Repurchase Program, the Corporation purchased for constructive retirement, a total of 5,580,600 shares of its outstanding common stock for an aggregate cost of approximately $156,044. Concurrent with these purchases, the Corporation sold an equal number of common units to the Operating Partnership.

12. REDEEMABLE PARTNERSHIP UNITS

Preferred Units

        The Preferred Units have a stated value of $1,000 per unit and are preferred as to assets over any class of common units or other class of preferred units of the Operating Partnership based on circumstances per the applicable unit certificates. The quarterly distribution on each Preferred Unit is an amount equal to the greater of (i) $16.875 (representing 6.75 percent of the Preferred Unit stated value of an annualized basis) or (ii) the quarterly distribution attributable to a Preferred Unit determined as if such unit had been converted into common units, subject to adjustment for customary anti-dilution rights. Each of the Preferred Units may be converted at any time into common units at a

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conversion price of $34.65 per unit. Common units received pursuant to such conversion may be redeemed for an equal number of shares of common stock. At any time after June 11, 2005, the Operating Partnership may cause the mandatory conversion of the Preferred Units into common units at the conversion price of $34.65 per unit if, for at least 20 of the prior consecutive 30 days, the closing price of the Corporation's common stock equals or exceeds $34.65. The Operating Partnership is prohibited from taking certain actions that would adversely affect the rights of the holders of Preferred Units without the consent of at least 662/3 percent of the outstanding Preferred Units, including authorizing, creating or issuing any additional preferred units ranking senior to or equal with the Preferred Units; provided, however, that such consent is not required if the Corporation issues preferred units ranking equal (but not senior) to the Preferred Units in an aggregate amount up to the greater of (a) $200,000 in stated value and (b) 10 percent of the sum of (1) the combined market capitalization of the Corporation's common stock and the Operating Partnership's common and Preferred Units, as converted into common stock, and (2) the aggregate liquidation preference on any of the Corporation's non-convertible preferred stock or the Operating Partnership's Preferred Units. As of December 31, 2002, the calculation in the above clause (b) was $216,230.

        As of December 31, 2001, the Operating Partnership had 220,340 Series B Preferred Units outstanding (convertible into 6,359,019 common units).

        During the year ended December 31, 2002, 4,446 Series B Preferred Units were converted into 128,312 common units.

        As of December 31, 2002, there were 215,894 Series B Preferred Units outstanding (convertible into 6,230,707 common units).

Common Units

        At January 1, 2001, the Operating Partnership had 7,963,725 common units outstanding.

        Certain individuals and entities own common units in the Operating Partnership. A common unit and a share of common stock of the General Partner have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the Operating Partnership. Common units are redeemable by the common unitholders at their option, subject to certain restrictions, on the basis of one common unit for either one share of common stock or cash equal to the fair market value of a share at the time of the redemption. The General Partner has the option to deliver shares of common stock in exchange for all or any portion of the cash requested. The common unitholders may not put the units for cash to the General Partner or the Operating Partnership. When a unitholder redeems a common unit for common stock of the Corporation, limited partners' capital is reduced and the General Partners' capital is increased.

        During the year ended December 31, 2001, 8,950 common units were redeemed for an equivalent number of shares of common stock of the Corporation.

        As of December 31, 2001, there were 7,954,775 common units outstanding.

        During the year ended December 31, 2002, the Operating Partnership issued 128,312 common units in connection with the conversion of 4,446 Preferred Units, redeemed an aggregate of 268,281 common units for an equivalent number of shares of common stock of the Corporation, and redeemed 1,000 common units for cash.

        As of December 31, 2002, there were 7,813,806 common units outstanding.

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Unit Warrants

        The Operating Partnership had 2,000,000 Unit Warrants outstanding which enabled the holders to purchase an equal number of common units at $37.80 per unit, all of which expired unexercised on December 11, 2002. Upon expiration, the carrying value of the Unit Warrants was allocated on a prorata basis to the general partner and limited partners.

13. MINORITY INTEREST IN CONSOLIDATED PARTIALLY-OWNED PROPERTIES

        On December 28, 1999, the Operating Partnership sold an interest in six office properties located in Parsippany, Morris County, New Jersey for $83,600. Amongst other things, the operating agreements provided for a preferred return to the joint venture members. On June 29, 2000 the Operating Partnership acquired a 100 percent interest in these properties and the Operating Partnership paid an additional $836 to the minority interest member in excess of its investment.

        On August 24, 2000, MC-SJP Morris V Realty, LLC and MC-SJP Morris VI Realty, LLC acquired land in which SJP Properties has a minority interest amounting to $1,925.

        The Operating Partnership controlled these operations and has consolidated the financial position and results of operations of partially-owned properties in the financial statements of the Operating Partnership. The equity interests of the other members are reflected as minority interests: partially-owned properties in the consolidated financial statements of the Operating Partnership.

14. EMPLOYEE BENEFIT PLAN

        All employees of the Operating Partnership who meet certain minimum age and period of service requirements are eligible to participate in a 401(k) defined contribution plan (the "401(k) Plan"). The 401(k) Plan allows eligible employees to defer up to 15 percent of their annual compensation, subject to certain limitations imposed by federal law. The amounts contributed by employees are immediately vested and non-forfeitable. The Operating Partnership, at management's discretion, may match employee contributions and/or make discretionary contributions. Management has approved, for the year ended December 31, 2002, a Operating Partnership matching contribution to be paid under the 401(k) Plan equal to 50 percent of the first 3.5 percent of annual salary, as defined in the 401(k) Plan, contributed to the plan in 2002. Total expense recognized by the Operating Partnership for the years ended December 31, 2002, 2001 and 2000 was $313, $400 and $0, respectively.

15. DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS

        The following disclosure of estimated fair value was determined by management using available market information and appropriate valuation methodologies. However, considerable judgement is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Operating Partnership could realize on disposition of the financial instruments at December 31, 2002 and 2001. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

        Cash equivalents, receivables, accounts payable, and accrued expenses and other liabilities are carried at amounts which reasonably approximate their fair values as of December 31, 2002 and 2001.

        The estimated fair value (excluding prepayment penalties) of the Senior Unsecured Notes and mortgages and loans payable as of December 31, 2002 approximated the carrying values of $1,205,607 and $560,572, respectively, and as of December 31, 2001 approximated the carrying values of $1,126,759

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and $518,555, respectively, based upon then current interest rates for debt with similar terms and remaining maturities. Revolving credit facility borrowings as of December 31, 2002 and 2001 approximated the carrying values of $73,000 and $59,500, respectively.

        Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 2002 and 2001. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since December 31, 2002 and current estimates of fair value may differ significantly from the amounts presented herein.

16. COMMITMENTS AND CONTINGENCIES

TAX ABATEMENT AGREEMENTS

Harborside Financial Center

        Pursuant to an agreement with the City of Jersey City, New Jersey, the Operating Partnership is required to make payments in lieu of property taxes ("PILOT") on its Harborside Plaza 2 and 3 properties. The agreement, which commenced in 1990, is for a term of 15 years. Such PILOT is equal to two percent of Total Project Costs, as defined, in year one and increases by $75 per annum through year 15. Total Project Costs, as defined, are $145,644. The PILOT totaled $3,763, $3,688 and $3,613 for the years ended December 31, 2002, 2001 and 2000, respectively. The PILOT on these two properties has been challenged as part of a larger effort by several neighboring towns to question past practices of the City of Jersey City in attracting large development. If this challenge is successful, the properties will be placed back on the regular tax roles for tax years beginning with 1998. While the Operating Partnership cannot at this time determine the likely outcome of this challenge, the effect, if successful, of the challenge on the tax assessments against the properties, or the amount of the increase, if any, in taxes assessed resulting from a successful challenge, the Operating Partnership does not believe that the outcome will result in a material adverse impact to the Operating Partnership as there is the potential that the majority of any increase in the expense at the properties may be passed along to the properties' tenants.

        The Operating Partnership entered into a similar PILOT agreement with the City of Jersey City, New Jersey on its Harborside Plaza 4-A property. The agreement, which commenced in 2000, is for a term of 20 years. The PILOT is equal to two percent of Total Project costs, as defined, and increases by 10 percent in years 7, 10 and 13 and by 50 percent in year 16. Total Project costs, as defined, are $45,497. The PILOT totaled $910, $891 and $86 for the years ended December 31, 2002, 2001 and 2000, respectively.

        Additionally, the Operating Partnership entered into a similar PILOT agreement with the City of Jersey City, New Jersey on its Harborside Plaza 5 property. The agreement, which commences upon substantial completion of the property, as defined, is for a term of 20 years. The PILOT is equal to two percent of Total Project Costs, as defined, and increases by 10 percent in years 7, 10 and 13, and by 50 percent in year 16. Total Project Costs, per the agreement, are the greater of $132,294 or actual Total Project Costs, as defined. The PILOT totaled $867, $0 and $0 for the years ended December 31, 2002, 2001 and 2000, respectively.

        The Operating Partnership is a defendant in other litigation arising in the normal course of business activities. Management does not believe that the ultimate resolution of these matters will have a materially adverse effect upon the Operating Partnership.

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GROUND LEASE AGREEMENTS

        Future minimum rental payments under the terms of all non-cancelable ground leases under which the Operating Partnership is the lessee, as of December 31, 2002, are as follows:

Year

  Amount
2003   $ 574
2004     578
2005     578
2006     578
2007     576
2008 through 2080     21,347
   
Total   $ 24,231
   

        Ground lease expense incurred during the years ended December 31, 2002, 2001 and 2000 amounted to $591, $569 and $570, respectively.

OTHER

        The Operating Partnership may not dispose of or distribute certain of its properties, currently comprising 141 properties with an aggregate net book value of approximately $1,845,004, which were originally contributed by members of either the Mack Group (which includes William L. Mack, Chairman of the Corporation's Board of Directors; Earle I. Mack, director; and Mitchell E. Hersh, chief executive officer and director), the Robert Martin Group (which includes Robert F. Weinberg, director; Martin W. Berger, a former director; and Timothy M. Jones, president) or the Cali Group (which includes John J. Cali, director and John R. Cali, director) without the express written consent of a representative of the Mack Group, the Robert Martin Group or the Cali Group, as applicable, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate Mack Group, Robert Martin Group or Cali Group members for the tax consequences of the recognition of such built-in-gains (collectively, the "Property Lock-Ups"). The aforementioned restrictions do not apply in the event that the Operating Partnership sells all of its properties or in connection with a sale transaction which the Corporation's Board of Directors determines is reasonably necessary to satisfy a material monetary default on any unsecured debt, judgment or liability of the Operating Partnership or to cure any material monetary default on any mortgage secured by a property. The Property Lock-Ups expire periodically through 2008. Upon the expiration of the Property Lock-Ups, the Operating Partnership is required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the appropriate Mack Group, Robert Martin Group or Cali Group members.

17. TENANT LEASES

        The Properties are leased to tenants under operating leases with various expiration dates through 2018. Substantially all of the leases provide for annual base rents plus recoveries and escalation charges based upon the tenant's proportionate share of and/or increases in real estate taxes and certain operating costs, as defined, and the pass through of charges for electrical usage.

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        Future minimum rentals to be received under non-cancelable operating leases at December 31, 2002 are as follows:

Year

  Amount
2003   $ 471,659
2004     432,267
2005     377,838
2006     320,744
2007     262,722
Thereafter     840,491
   
Total   $ 2,705,721
   

18. SEGMENT REPORTING

        The Operating Partnership operates in one business segment—real estate. The Operating Partnership provides leasing, management, acquisition, development, construction and tenant-related services for its portfolio. The Operating Partnership does not have any foreign operations. The accounting policies of the segments are the same as those described in Note 2, excluding straight-line rent adjustments, depreciation and amortization and non-recurring charges.

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

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        Selected results of operations for the years ended December 31, 2002, 2001 and 2000 and selected asset information as of December 31, 2002 and 2001 regarding the Operating Partnership's operating segment are as follows:

 
  Total Segment
  Corporate & Other (e)
  Total Operating
Partnership

   
Total contract revenues (a)                      
  2002   $ 558,809   $ 1,276   $ 560,085   (f)
  2001     560,680     3,265     563,945   (g)
  2000     551,687     3,807     555,494   (h)

Total operating and interest expenses (b):

 

 

 

 

 

 

 

 

 

 

 
  2002   $ 220,148   $ 82,858   $ 303,006   (i)
  2001     179,210     135,969     315,179   (j)
  2000     174,116     126,700     300,816   (k)

Equity in earnings:

 

 

 

 

 

 

 

 

 

 

 
  2002   $ 10,403   $ 4,390   $ 14,793    
  2001     8,729     275     9,004    
  2000     6,055     2,000     8,055    

Net operating income (c):

 

 

 

 

 

 

 

 

 

 

 
  2002   $ 349,064   $ (77,192 ) $ 271,872   (f) (i)
  2001     390,199     (132,429 )   257,770   (g) (j)
  2000     383,626     (120,893 )   262,733   (h) (k)

Total assets:

 

 

 

 

 

 

 

 

 

 

 
  2002   $ 3,761,665   $ 34,764   $ 3,796,429    
  2001     3,710,411     36,359     3,746,770    

Total long-lived assets (d):

 

 

 

 

 

 

 

 

 

 

 
  2002   $ 3,648,390   $ 5,254   $ 3,653,644    
  2001     3,595,012     24,349     3,619,361    

(a)
Total contract revenues represent all revenues during the period (including the Operating Partnership's share of net income from unconsolidated joint ventures), excluding adjustments for straight-lining of rents and the Operating Partnership's share of straight-line rent adjustments from unconsolidated joint ventures. All interest income is excluded from segment amounts and is classified in Corporate & Other for all periods.

(b)
Total operating and interest expenses represent the sum of real estate taxes, utilities, operating services, general and administrative and interest expense. All interest expense (including for property-level mortgages) is excluded from segment amounts and classified in Corporate & Other for all periods.

(c)
Net operating income represents total contract revenues [as defined in Note (a)] less total operating and interest expenses [as defined in Note (b)] for the period.

(d)
Long-lived assets are comprised of total rental property, unbilled rents receivable and investments in unconsolidated joint ventures.

(e)
Corporate & Other represents all corporate-level items (including interest and other investment income, interest expense and non-property general and administrative expense) as well as intercompany eliminations necessary to reconcile to consolidated Operating Partnership totals.

(f)
Excludes $9,477 of adjustments for straight-lining of rents and $52 for the Operating Partnership's share of straight-line rent adjustments from unconsolidated joint ventures.

(g)
Excludes $11,316 of adjustments for straight-lining of rents and $83 for the Operating Partnership's share of straight-line rent adjustments from unconsolidated joint ventures.

(h)
Excludes $12,580 of adjustments for straight-lining of rents and $24 for the Operating Partnership's share of straight-line rent adjustments from unconsolidated joint ventures.

(i)
Excludes $109,513 of depreciation and amortization.

(j)
Excludes $91,471 of depreciation and amortization.

(k)
Excludes $92,088 of depreciation and amortization and non-recurring charges of $37,139.

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19.  RELATED PARTY TRANSACTIONS

        William L. Mack, Chairman of the Board of Directors of the Corporation ("W. Mack"), is a principal in the Apollo real estate funds, which owns approximately a 7.5 percent interest in Insignia/ESG, Inc. ("Insignia"), a publicly-traded commercial leasing and real estate services company. The Operating Partnership has paid Insignia commissions on numerous leasing transactions, as well as for the sale of five of its properties. The Operating Partnership paid commissions to Insignia amounting to approximately $1,975, $2,750 and $4,801 for the years ended December 31, 2002, 2001 and 2000, respectively. In addition, American Financial Exchange, an unconsolidated joint venture in which the Operating Partnership has a 50 percent interest, paid Insignia approximately $0, $1,305 and $3,027 in commissions for the years ended December 31, 2002, 2001 and 2000, respectively. The Operating Partnership had engaged Insignia as its exclusive leasing agent at Harborside Financial Center through late 2002. Additionally, an affiliate of Insignia leased 40,504 square feet at one of the Operating Partnership's office properties, which was sold by the Operating Partnership in May 2002. The Operating Partnership recognized $386, $836 and $880, respectively, in revenue under this lease for the years ended December 31, 2002, 2001 and 2000, and had no accounts receivable as of December 31, 2002 and 2001.

        W. Mack and Earle I. Mack, a director of the Corporation ("E. Mack"), are the executive officers, directors and stockholders of a corporation that entered into a lease in 2000 at one of the Operating Partnership's office properties for approximately 7,801 square feet, which is scheduled to expire in November 2005. The Operating Partnership has recognized $220, $217 and $29 in revenue under this lease for the years ended December 31, 2002, 2001 and 2000, respectively, and had accounts receivable of $1 and $0, respectively, from the corporation as of December 31, 2002 and 2001.

        In connection with the Mack transaction in December 1997, the Operating Partnership agreed to provide certain services through December 2000 to an entity, whose principals include W. Mack and E. Mack. The Operating Partnership recognized revenue of $0, $0 and $958 for the years ended December 31, 2002, 2001 and 2000, respectively, under this agreement.

        The Operating Partnership has conducted business with certain entities ("RMC Entity" or "RMC Entities"), whose principals include Timothy M. Jones, Robert F. Weinberg and Martin S. Berger, each of whom are affiliated with the Operating Partnership as the president of the Corporation, a current member of the Board of Directors and a former director of the Board of Directors of the Corporation. In connection with the Operating Partnership's acquisition of 65 Class A properties from The Robert Martin Company ("Robert Martin") on January 31, 1997, as subsequently modified, the Operating Partnership granted Robert Martin the right to designate one seat on the Corporation's Board of Directors ("RM Board Seat"), which right has since expired. Robert Martin designated Martin S. Berger and Robert F. Weinberg to jointly share the RM Board Seat, as follows: Mr. Weinberg served as a member of the Board of Directors of the Corporation from 1997 until December 1, 1998, at which time Mr. Weinberg resigned and Mr. Berger was appointed to serve in such capacity. Mr. Berger served as a member of the Board of Directors of the Corporation from December 1, 1998 until March 6, 2001, at which time Mr. Berger resigned and Mr. Weinberg was appointed to serve in such capacity until the Corporation's 2003 annual meeting of stockholders. If the Corporation elects to nominate for re-election to its Board of Directors a designee of Robert Martin at the Corporation's 2003 annual meeting of stockholders, then Mr. Berger and Mr. Weinberg have agreed that Mr. Berger will be so nominated and the seat will be rotated among Mr. Berger and Mr. Weinberg every 12 months commencing on the 12 month anniversary of the 2003 annual meeting of stockholders. Upon the death of Mr. Berger or Mr. Weinberg, the surviving person shall solely fill the remainder of the term of the RM Board Seat. Such business was as follows:

121


        Mr. Berger holds a 24 percent interest, acts as chairman and chief executive officer, Mr. Weinberg also holds a 24 percent interest and is a director, and W. Mack holds a nine percent interest and is director of City and Suburban Federal Savings Bank and/or one of its affiliates, which leases a total of 15,879 square feet of space at two of the Operating Partnership's office properties, comprised of 3,037 square feet scheduled to expire in June 2008 and 12,842 square feet scheduled to expire in April 2013. The Operating Partnership has recognized $306, $295 and $283 in revenue under the leases for the years ended December 31, 2002, 2001 and 2000, respectively, and had no accounts receivable from the company as of December 31, 2002 and 2001.

        Vincent Tese, a director of the Corporation, is also currently a director of Cablevision, Inc. who, through its affiliates, leases an aggregate of 58,885 square feet of office space, as well as has several telecom licensing agreements at the Operating Partnership's properties. The Operating Partnership recognized approximately $1,464, $1,101 and $596 in total revenue from affiliates of Cablevision for the years ended December 31, 2002, 2001 and 2000, respectively, and had accounts receivable of $0 and $7, respectively, as of December 31, 2002 and 2001.

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        W. Mack and Vincent Tese are both currently members of the Board of Directors of Bear Stearns & Co. Inc. Roy Zuckerberg, a director of the Corporation, is also currently on the Board of Directors of Goldman Sachs & Co. Bear Stearns and Goldman Sachs have both acted as underwriters on several of the Operating Partnership's previously-completed public debt offerings.

        The son of a former director of the Corporation, who was also a former officer of the Operating Partnership, served as an officer and continues to have a financial interest in a company which provides cleaning and other related services to certain of the Operating Partnership's properties. The Operating Partnership has incurred costs from this company of approximately $5,648, $4,674 and $3,164 for the years ended December 31, 2002, 2001 and 2000, respectively. As of December 31, 2002 and 2001, respectively, the Operating Partnership had accounts payable of approximately $0 and $4 to this company.

        Pursuant to an agreement between the Operating Partnership and certain members and associates of the Cali family executed June 27, 2000, John J. Cali is to serve as the Chairman Emeritus and a Board member of the Corporation, and as a consultant to the Operating Partnership and is paid an annual salary of $150 from June 27, 2000 through June 27, 2003. Additionally, the Operating Partnership provides office space and administrative support to John J. Cali, Angelo Cali, his brother, and Ed Leshowitz, his business partner. Such services are in effect from June 27, 2000 through June 27, 2004.

20.  NON-RECURRING CHARGES

        On June 27, 2000, both Brant Cali and John R. Cali resigned their positions as officers of the Corporation and Brant Cali resigned as a director of the Corporation. John R. Cali was appointed to the Board of Directors of the Corporation to take the seat previously held by Brant Cali. As required by Brant Cali and John R. Cali's employment agreements with the Operating Partnership: (i) the Operating Partnership paid $2,820 and $2,806 (less applicable withholding) to Brant Cali and John R. Cali, respectively; (ii) all options to acquire shares of the Corporation's common stock and Restricted Stock Awards (as hereinafter defined) held by Brant Cali and John R. Cali became fully vested on the effective date of their resignations from the Operating Partnership. All costs associated with Brant Cali and John R. Cali's resignations, which totaled approximately $9,228, are included in non-recurring charges for the year ended December 31, 2000.

        On September 21, 2000, the Operating Partnership and Prentiss Properties Trust, a Maryland REIT ("Prentiss"), mutually agreed to terminate the agreement and plan of merger ("Merger Agreement") dated as of June 27, 2000, among the Corporation, the Operating Partnership, Prentiss and Prentiss Properties Acquisition Partners, L.P., a Delaware limited partnership of which Prentiss (through a wholly-owned direct subsidiary) is the sole general partner ("Prentiss Partnership"). In connection with such termination, the Operating Partnership deposited $25,000 into escrow for the benefit of Prentiss and Prentiss Partnership. This cost and approximately $2,911 of other costs associated with the termination of the Merger Agreement are included in non-recurring charges for the year ended December 31, 2000. Simultaneous with the termination, the Operating Partnership sold to Prentiss its 270,703 square-foot Cielo Center property located in Austin, Travis County, Texas, and recognized a gain of approximately $10,036.

123



        The Operating Partnership had no non-recurring charges for the years ended December 31, 2002 and 2001. The components of the Operating Partnership's non-recurring charges for the year ended December 31, 2000 is as follows:

Amount deposited into escrow for the benefit of Prentiss and Prentiss Partnership in connection with the termination of the Prentiss Merger Agreement   $ 25,000      
Legal and other costs associated with the termination of the Prentiss Merger Agreement     2,911      
   
     
Total non-recurring charges in connection with termination of the Prentiss Merger Agreement         $ 27,911
Payment per Employment Agreement to Brant Cali in connection with his resignation     2,820      
Payment per Employment Agreement to John R. Cali in connection with his resignation     2,806      
Stock options charge in connection with change to Brant Cali's options outstanding in connection with his resignation     1,550      
Restricted stock accelerated vesting in connection with resignations of Brant Cali and John R. Cali     1,097      
Legal and other costs associated with Brant Cali and John R. Cali's resignations     955      
   
     
Total non-recurring charges in connection with resignations of Brant Cali and John R. Cali     9,228      
         
Total non-recurring charges for the year ended December 31, 2000         $ 37,139
         

21.  IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS

SFAS No. 145

        In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 145, Rescission of SFAS No. 4, 44, and 64, Amendment of FASB No. 13 and Technical Corrections. This statement eliminates the requirement to report gains and losses from extinguishment of debt as extraordinary unless they meet the criteria of APB Opinion 30. Debt extinguishments that were classified as extraordinary in prior periods presented that do not meet the criteria of APB Opinion 30 shall be reclassified. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002. The impact of the adoption of SFAS No. 145 is not expected to have a material impact on the Operating Partnership's financial position or results of operations.

SFAS No. 146

        SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, was recently issued in July 2002 and nullifies EITF 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).

        The principal difference between SFAS No. 146 and EITF 94-3 relates to its requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost as defined in EITF 94-3 was recognized at the date of an entity's commitment to an exit plan. A fundamental conclusion reached by the Board in FAS 146 is that an entity's commitment to a plan, by itself, does not create a present obligation to others that meets the definition of a liability. Therefore, SFAS 146 eliminates the definition and requirements for recognition of exit costs in EITF 94-3 and also establishes that fair value is the objective for initial measurement of the liability.

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        The provisions of SFAS No. 146 shall be effective for exit or disposal activities initiated after December 31, 2002. Previously issued financial statements shall not be restated. For purposes of SFAS No. 146, an exit or disposal activity is initiated when management, having the authority to approve the action, commits to an exit or disposal plan or otherwise disposes of a long-lived asset (disposal group) and, if the activity involves the termination of employees, the criteria for a plan of termination in SFAS No. 146. The Operating Partnership is evaluating the potential impact of the adoption of FASB No. 146 on the Operating Partnership's financial position or results of operations.

FASB Interpretation No. 45

        In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, which changes the accounting for, and disclosure of certain guarantees. Beginning with transactions entered into after December 31, 2002, certain guarantees are to be recorded at fair value, which is different from prior practice, under which a liability was recorded only when a loss was probable and reasonably estimable. In general, the change applies to contracts or indemnification agreements that contingently require the Operating Partnership to make payments to a guaranteed third-party based on changes in an underlying asset, liability, or an equity security of the guaranteed party.

        While the accounting provisions only apply for new transactions entered into after December 31, 2002, the Interpretation requires the Operating Partnership to include, and the Operating Partnership has included, new disclosures in these financial statements.

FASB Interpretation No. 46

        On January 17, 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"), the primary objective of which is to provide guidance on the identification of entities for which control is achieved through means other than voting rights ("variable interest entities" or "VIEs") and to determine when and which business enterprise should consolidate the VIE (the "primary beneficiary"). This new model applies when either (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity's activities without additional financial support. In addition, FIN 46 requires additional disclosures. The Operating Partnership is assessing the impact of this interpretation on its accounting for investments in unconsolidated joint ventures (see Note 4).

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22.  CONDENSED QUARTERLY FINANCIAL INFORMATION (unaudited)

The following summarizes the condensed quarterly financial information for the Operating Partnership:

Quarter Ended 2002:

  December 31
  September 30
  June 30
  March 31
 
Total revenues   $ 141,619   $ 143,408   $ 141,458   $ 143,129  
   
 
 
 
 
Operating and other expenses     43,257     41,994     41,217     41,661  
General and administrative     6,921     5,525     7,903     6,705  
Depreciation and amortization     28,738     29,300     27,522     23,953  
Interest expense     29,439     26,429     25,596     26,359  
   
 
 
 
 
  Total expenses     108,355     103,248     102,238     98,678  
   
 
 
 
 
Equity in earnings of unconsolidated joint ventures     4,519     2,205     9,374     (1,305 )
   
 
 
 
 
Income before realized gains (losses) and unrealized losses on disposition of rental property     37,783     42,365     48,594     43,146  
Realized gains (losses) and unrealized losses on disposition of rental property     45     456     (4,840 )   7,098  
   
 
 
 
 
Net income     37,828     42,821     43,754     50,244  
Preferred unit distributions     (3,925 )   (3,925 )   (3,863 )   (3,943 )
   
 
 
 
 
Net income available to common unitholders   $ 33,903   $ 38,896   $ 39,891   $ 46,301  
   
 
 
 
 
Basic earning per unit:                          
Net income   $ 0.52   $ 0.60   $ 0.61   $ 0.72  
Diluted earnings per unit:                          
Net income   $ 0.52   $ 0.59   $ 0.61   $ 0.70  
Distributions declared per common unit   $ 0.63   $ 0.63   $ 0.62   $ 0.62  
   
 
 
 
 
Quarter Ended 2001:

  December 31
  September 30
  June 30
  March 31
 
Total revenues   $ 141,838   $ 144,028   $ 146,381   $ 143,097  
Operating and other expenses     41,804     43,865     43,895     45,122  
General and administrative     6,857     8,767     6,856     6,010  
Depreciation and amortization     23,507     22,529     21,951     23,484  
Interest expense     27,311     27,772     28,555     28,365  
   
 
 
 
 
  Total expenses     99,479     102,933     101,257     102,981  
   
 
 
 
 
Equity in earnings of unconsolidated joint ventures     1,674     1,884     2,037     3,409  
   
 
 
 
 
Income before realized gains (losses) and unrealized losses on disposition of rental property     44,033     42,979     47,161     43,525  
Realized gains (losses) and unrealized losses on disposition of rental property     (2,187 )   (11,624 )   22,510     (20,563 )
   
 
 
 
 
Net income     41,846     31,355     69,671     22,962  
Preferred unit distributions     (3,943 )   (3,943 )   (3,879 )   (3,879 )
   
 
 
 
 
Net income available to common unitholders   $ 37,903   $ 27,412   $ 65,792   $ 19,083  
   
 
 
 
 
Basic earning per unit:                          
Net income   $ 0.59   $ 0.43   $ 1.02   $ 0.29  
Diluted earnings per unit:                          
Net income   $ 0.58   $ 0.43   $ 0.98   $ 0.29  
Distributions declared per common unit   $ 0.62   $ 0.62   $ 0.61   $ 0.61  
   
 
 
 
 

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MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2002
(dollars in thousands)

        SCHEDULE III

 
   
   
   
   
   
   
  Gross Amount at Which
Carried at Close of Period(1)

   
 
   
   
   
  Initial Costs
   
   
 
  Year
   
  Costs
Capitalized
Subsequent
to Acquisition

   
Property Location(2)

  Related
Encumbrances

   
  Building and
Improvements

   
  Building and
Improvements

   
  Accumulated
Depreciation

  Built
  Acquired
  Land
  Land
  Total
ATLANTIC COUNTY, NEW JERSEY                                                

Egg Harbor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
100 Decadon Drive (O)   1987   1995   $   $ 300   $ 3,282   $ 392   $ 300   $ 3,674   $ 3,974   $ 663
200 Decadon Drive (O)   1991   1995         369     3,241     233     369     3,474     3,843     681

BERGEN COUNTY, NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Fair Lawn                                                        
17-17 Rte 208 North (O)   1987   1995         3,067     19,415     2,273     3,067     21,688     24,755     4,139
Fort Lee                                                        
One Bridge Plaza (O)   1981   1996         2,439     24,462     2,087     2,439     26,549     28,988     4,492
2115 Linwood Avenue (O)   1981   1998         474     4,419     4,922     474     9,341     9,815     1,332
Little Ferry                                                        
200 Riser Road (O)   1974   1997     10,226     3,888     15,551     246     3,888     15,797     19,685     1,987
Montvale                                                        
95 Chestnut Ridge Road (O)   1975   1997     2,135     1,227     4,907     623     1,227     5,530     6,757     691
135 Chestnut Ridge Road (O)   1981   1997         2,587     10,350     2,302     2,588     12,651     15,239     1,692
Paramus                                                        
15 East Midland Avenue (O)   1988   1997     24,790     10,375     41,497     71     10,375     41,568     51,943     5,239
461 From Road (O)   1988   1997     35,000     13,194     52,778     243     13,194     53,021     66,215     6,668
650 From Road (O)   1978   1997     23,316     10,487     41,949     4,060     10,487     46,009     56,496     5,633
140 Ridgewood Avenue (O)   1981   1997     15,392     7,932     31,463     1,249     7,932     32,712     40,644     3,806
61 South Paramus Avenue (O)   1985   1997     15,776     9,005     36,018     4,805     9,005     40,823     49,828     5,753
Rochelle Park                                                        
120 Passaic Street (O)   1972   1997         1,354     5,415     102     1,357     5,514     6,871     690
365 West Passaic Street (O)   1976   1997     7,468     4,148     16,592     1,916     4,148     18,508     22,656     2,598
Upper Saddle River                                                        
1 Lake Street (O)   1994   1997     35,789     13,952     55,812     7     13,953     55,818     69,771     7,039
10 Mountainview Road (O)   1986   1998         4,240     20,485     377     4,240     20,862     25,102     2,871
Woodcliff Lake                                                        
400 Chestnut Ridge Road (O)   1982   1997     11,611     4,201     16,802     23     4,201     16,825     21,026     2,117
470 Chestnut Ridge Road (O)   1987   1997     4,087     2,346     9,385     2     2,346     9,387     11,733     1,184
530 Chestnut Ridge Road (O)   1986   1997     4,032     1,860     7,441     3     1,860     7,444     9,304     939
300 Tice Boulevard (O)   1991   1996         5,424     29,688     2,000     5,424     31,688     37,112     4,772
50 Tice Boulevard (O)   1984   1994         4,500         26,884     4,500     26,884     31,384     13,110

BURLINGTON COUNTY, NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Burlington                                                        
3 Terri Lane (F)   1991   1998         652     3,433     962     658     4,389     5,047     612
5 Terri Lane (F)   1992   1998         564     3,792     1,716     569     5,503     6,072     717
Moorestown                                                        
2 Commerce Drive (F)   1986   1999         723     2,893     59     723     2,952     3,675     220
101 Commerce Drive (F)   1988   1998         422     3,528     253     426     3,777     4,203     633
102 Commerce Drive (F)   1987   1999         389     1,554     45     389     1,599     1,988     120
201 Commerce Drive (F)   1986   1998         254     1,694     91     258     1,781     2,039     250
202 Commerce Drive (F)   1988   1999         490     1,963     52     490     2,015     2,505     151
1 Executive Drive (F)   1989   1998         226     1,453     209     228     1,660     1,888     300
2 Executive Drive (F)   1988   2000         801     3,206     233     801     3,439     4,240     249
101 Executive Drive (F)   1990   1998         241     2,262     300     244     2,559     2,803     413
102 Executive Drive (F)   1990   1998         353     3,607     254     357     3,857     4,214     593
225 Executive Drive (F)   1990   1998         323     2,477     110     326     2,584     2,910     380
97 Foster Road (F)   1982   1998         208     1,382     81     211     1,460     1,671     190
1507 Lancer Drive (F)   1995   1998         119     1,106     44     120     1,149     1,269     152

127


MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2002
(dollars in thousands)

        SCHEDULE III

 
   
   
   
   
   
   
  Gross Amount at Which
Carried at Close of Period(1)

   
 
   
   
   
  Initial Costs
   
   
 
  Year
   
  Costs
Capitalized
Subsequent
to Acquisition

   
Property Location(2)

  Related
Encumbrances

   
  Building and
Improvements

   
  Building and
Improvements

   
  Accumulated
Depreciation

  Built
  Acquired
  Land
  Land
  Total
1510 Lancer Drive (F)   1998   1998     732   2,928   41   735   2,966   3,701   333
840 North Lenola Road (F)   1995   1998     329   2,366   200   333   2,562   2,895   370
844 North Lenola Road (F)   1995   1998     239   1,714   38   241   1,750   1,991   243
915 North Lenola Road (F)   1998   2000     508   2,034   163   508   2,197   2,705   144
1245 North Church Street (F)   1998   2001     691   2,810   17   691   2,827   3,518   116
1247 North Church Street (F)   1998   2001     805   3,269   17   805   3,286   4,091   135
1256 North Church Street (F)   1984   1998     354   3,098   366   357   3,461   3,818   547
224 Strawbridge Drive (O)   1984   1997     766   4,335   3,165   766   7,500   8,266   1,693
228 Strawbridge Drive (O)   1984   1997     766   4,334   2,901   766   7,235   8,001   1,804
2 Twosome Drive (F)   2000   2001     701   2,807   18   701   2,825   3,526   117
30 Twosome Drive (F)   1997   1998     234   1,954   49   236   2,001   2,237   289
31 Twosome Drive (F)   1998   2001     815   3,276   102   815   3,378   4,193   158
40 Twosome Drive (F)   1996   1998     297   2,393   76   301   2,465   2,766   333
41 Twosome Drive (F)   1998   2001     605   2,459   12   605   2,471   3,076   118
50 Twosome Drive (F)   1997   1998     301   2,330   88   304   2,415   2,719   341
West Deptford                                        
1451 Metropolitan Drive (F)   1996   1998     203   1,189   30   206   1,216   1,422   173

ESSEX COUNTY, NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Millburn                                        
150 J.F. Kennedy Parkway (O)   1980   1997   24,470   12,606   50,425   4,656   12,606   55,081   67,687   6,645
Roseland                                        
101 Eisenhower Parkway (O)   1980   1994     228     14,603   228   14,603   14,831   8,001
103 Eisenhower Parkway (O)   1985   1994         13,555   2,300   11,255   13,555   5,213
105 Eisenhower Parkway (O)   2001   2001     4,430   42,898   (64 ) 3,835   43,429   47,264   2,051

HUDSON COUNTY, NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Jersey City                                        
Harborside Financial Center Plaza 1 (O)   1983   1996   61,722   3,923   51,013     3,923   51,013   54,936   7,865
Harborside Financial Center Plaza 2 (O)   1990   1996   79,070   17,655   101,546   4,390   15,585   108,006   123,591   16,982
Harborside Financial Center Plaza 3 (O)   1990   1996   79,070   17,655   101,878   4,058   15,585   108,006   123,591   16,981
Harborside Financial Center Plaza 4A (O)   2000   2000     1,244   56,144   7,054   1,244   63,198   64,442   3,652
Harborside Financial Center Plaza 5 (O)   2002   2002     6,218   170,682     6,218   170,682   176,900   2,078

MERCER COUNTY, NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Hamilton Township                                        
100 Horizon Drive (F)   1989   1995     205   1,676   24   172   1,733   1,905   323
200 Horizon Drive (F)   1991   1995     205   3,027   213   205   3,240   3,445   565
300 Horizon Drive (F)   1989   1995     379   4,355   912   379   5,267   5,646   896
500 Horizon Drive (F)   1990   1995     379   3,395   729   344   4,159   4,503   724
600 Horizon Drive (O)   2002   2002       7,549   (15 )   7,534   7,534   16
Zero Horizon Drive (L)   n/a   1999     498     1,799   498   1,799   2,297   89
Princeton                                        
103 Carnegie Center (O)   1984   1996     2,566   7,868   709   2,566   8,577   11,143   1,730
100 Overlook Center (O)   1988   1997     2,378   21,754   1,606   2,378   23,360   25,738   2,956
5 Vaughn Drive (O)   1987   1995     657   9,800   524   657   10,324   10,981   2,061

MIDDLESEX COUNTY, NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
East Brunswick                                        
377 Summerhill Road (O)   1977   1997     649   2,594   252   649   2,846   3,495   357
Plainsboro                                        
500 College Road East (O)   1984   1998     614   20,626   399   614   21,025   21,639   2,546
South Brunswick                                        
3 Independence Way (O)   1983   1997     1,997   11,391   372   1,997   11,763   13,760   1,651
Woodbridge                                        
581 Main Street (O)   1991   1997   17,500   3,237   12,949   19,808   8,115   27,879   35,994   3,204

128


MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2002
(dollars in thousands)

        SCHEDULE III

 
   
   
   
   
   
   
  Gross Amount at Which
Carried at Close of Period(1)

   
 
   
   
   
  Initial Costs
   
   
 
  Year
   
  Costs
Capitalized
Subsequent
to Acquisition

   
 
  Related
Encumbrances

   
  Building and
Improvements

   
  Building and
Improvements

   
  Accumulated
Depreciation

Property Location(2)
  Built
  Acquired
  Land
  Land
  Total
MONMOUTH COUNTY, NEW JERSEY                                

Neptune

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
3600 Route 66 (O)   1989   1995     1,098   18,146   53   1,098   18,199   19,297   3,269
Wall Township                                        
1305 Campus Parkway (O)   1988   1995     335   2,560   123   335   2,683   3,018   518
1325 Campus Parkway (F)   1988   1995     270   2,928   567   270   3,495   3,765   535
1340 Campus Parkway (F)   1992   1995     489   4,621   462   489   5,083   5,572   1,137
1345 Campus Parkway (F)   1995   1997     1,023   5,703   638   1,024   6,340   7,364   881
1350 Campus Parkway (O)   1990   1995     454   7,134   1,153   454   8,287   8,741   1,613
1433 Highway 34 (F)   1985   1995     889   4,321   986   889   5,307   6,196   1,221
1320 Wyckoff Avenue (F)   1986   1995     255   1,285   6   255   1,291   1,546   231
1324 Wyckoff Avenue (F)   1987   1995     230   1,439   126   230   1,565   1,795   306

MORRIS COUNTY, NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Florham Park                                        
325 Columbia Parkway (O)   1987   1994     1,564     15,172   1,564   15,172   16,736   6,915
Morris Plains                                        
250 Johnson Road (O)   1977   1997     2,004   8,016   574   2,004   8,590   10,594   1,183
201 Littleton Road (O)   1979   1997     2,407   9,627   276   2,407   9,903   12,310   1,238
Morris Township                                        
340 Mt. Kemble Avenue (O)   1985   1997   32,178   13,624   54,496   40   13,624   54,536   68,160   6,876
Parsippany                                        
4 Campus Drive (O)   1983   2001     5,213   20,984   330   5,213   21,314   26,527   924
6 Campus Drive (O)   1983   2001     4,411   17,796   264   4,411   18,060   22,471   783
7 Campus Drive (O)   1982   1998     1,932   27,788   107   1,932   27,895   29,827   3,406
8 Campus Drive (O)   1987   1998     1,865   35,456   1,510   1,865   36,966   38,831   4,760
9 Campus Drive (O)   1983   2001     3,277   11,796   15,727   5,842   24,958   30,800   697
2 Dryden Way (O)   1990   1998     778   420   13   778   433   1,211   62
4 Gatehall Drive (O)   1988   2000     8,452   33,929   465   8,452   34,394   42,846   2,226
2 Hilton Court (O)   1991   1998     1,971   32,007   1,546   1,971   33,553   35,524   3,988
1633 Littleton Road (O)   1978   2002   3,504   2,283   9,550     2,283   9,550   11,833   38
600 Parsippany Road (O)   1978   1994     1,257   5,594   1,233   1,257   6,827   8,084   1,561
1 Sylvan Way (O)   1989   1998     1,689   24,699   394   1,021   25,761   26,782   3,751
5 Sylvan Way (O)   1989   1998     1,160   25,214   714   1,160   25,928   27,088   3,239
7 Sylvan Way (O)   1987   1998     2,084   26,083   667   2,084   26,750   28,834   3,228

PASSAIC COUNTY, NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Clifton                                        
777 Passaic Avenue (O)   1983   1994         7,198   1,100   6,098   7,198   2,795
Totowa                                        
1 Center Court (F)   1999   1999     270   1,824   713   270   2,537   2,807   381
2 Center Court (F)   1998   1998     191     2,592   191   2,592   2,783   593
11 Commerce Way (F) '   1989   1995     586   2,986   267   586   3,253   3,839   655
20 Commerce Way (F)   1992   1995     516   3,108   67   516   3,175   3,691   574
29 Commerce Way (F)   1990   1995     586   3,092   725   586   3,817   4,403   796
40 Commerce Way (F)   1987   1995     516   3,260   438   516   3,698   4,214   952
45 Commerce Way (F)   1992   1995     536   3,379   197   536   3,576   4,112   747
60 Commerce Way (F)   1988   1995     526   3,257   274   526   3,531   4,057   702
80 Commerce Way (F)   1996   1996     227     1,678   227   1,678   1,905   654
100 Commerce Way (F)   1996   1996     226     1,677   226   1,677   1,903   654
120 Commerce Way (F)   1994   1995     228     1,212   228   1,212   1,440   219
140 Commerce Way (F)   1994   1995     229     1,211   229   1,211   1,440   219
999 Riverview Drive (O)   1988   1995     476   6,024   462   476   6,486   6,962   1,240
Wayne                                        
201 Willowbrook Boulevard (O)   1970   1997   7,658   3,103   12,410   4,567   3,103   16,977   20,080   1,756

129


MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2002
(dollars in thousands)

        SCHEDULE III

 
   
   
   
   
   
   
  Gross Amount at Which
Carried at Close of Period(1)

   
 
   
   
   
  Initial Costs
   
   
 
  Year
   
  Costs
Capitalized
Subsequent
to Acquisition

   
 
  Related
Encumbrances

   
  Building and
Improvements

   
  Building and
Improvements

   
  Accumulated
Depreciation

Property Location(2)
  Built
  Acquired
  Land
  Land
  Total
SOMERSET COUNTY, NEW JERSEY                                
Basking Ridge                                        
106 Allen Road (O)   2000   2000     3,853   14,465   2,327   3,457   17,188   20,645   1,379
222 Mt. Airy Road (O)   1986   1996   3,386   775   3,636   17   775   3,653   4,428   586
233 Mt. Airy Road (O)   1987   1996     1,034   5,033   1,646   1,034   6,679   7,713   969
Bridgewater                                        
721 Route 202/206 (O)   1989   1997   23,000   6,730   26,919   563   6,730   27,482   34,212   3,548

UNION COUNTY, NEW JERSEY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Clark                                        
100 Walnut Avenue (O)   1985   1994         18,600   1,822   16,778   18,600   8,232
Cranford                                        
6 Commerce Drive (O)   1973   1994     250     2,742   250   2,742   2,992   1,747
11 Commerce Drive (O)   1981   1994     470     5,906   470   5,906   6,376   3,313
12 Commerce Drive (O)   1967   1997     887   3,549   1,303   887   4,852   5,739   545
20 Commerce Drive (O)   1990   1994     2,346     22,250   2,346   22,250   24,596   8,223
25 Commerce Drive (O)   1971   2002     1,520   6,186     1,520   6,186   7,706   64
65 Jackson Drive (O)   1984   1994     541     7,090   542   7,089   7,631   3,446
New Providence                                        
890 Mountain Road (O)   1977   1997     2,796   11,185   4,397   3,765   14,613   18,378   1,831

DUTCHESS COUNTY, NEW YORK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Fishkill                                        
300 South Lake Drive (O)   1987   1997     2,258   9,031   624   2,258   9,655   11,913   1,205

NASSAU COUNTY, NEW YORK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
North Hempstead                                        
600 Community Drive (O)   1983   1997     11,018   44,070   540   11,018   44,610   55,628   5,617
111 East Shore Road (O)   1980   1997     2,093   8,370   365   2,093   8,735   10,828   1,091

ROCKLAND COUNTY, NEW YORK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Suffern                                        
400 Rella Boulevard (O)   1988   1995     1,090   13,412   2,687   1,090   16,099   17,189   3,178

WESTCHESTER COUNTY, NEW YORK

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Elmsford                                        
11 Clearbrook Road (F)   1974   1997     149   2,159   153   149   2,312   2,461   333
75 Clearbrook Road (F)   1990   1997     2,314   4,716   5   2,314   4,721   7,035   698
100 Clearbrook Road (O)   1975   1997     220   5,366   312   220   5,678   5,898   1,048
125 Clearbrook Road (F)   2002   2002     1,055   3,676   (63 ) 1,055   3,613   4,668   122
150 Clearbrook Road (F)   1975   1997     497   7,030   520   497   7,550   8,047   1,134
175 Clearbrook Road (F)   1973   1997     655   7,473   676   655   8,149   8,804   1,255
200 Clearbrook Road (F)   1974   1997     579   6,620   581   579   7,201   7,780   1,140
250 Clearbrook Road (F)   1973   1997     867   8,647   751   867   9,398   10,265   1,417
50 Executive Boulevard (F)   1969   1997     237   2,617   78   237   2,695   2,932   393
77 Executive Boulevard (F)   1977   1997     34   1,104   79   34   1,183   1,217   179
85 Executive Boulevard (F)   1968   1997     155   2,507   38   155   2,545   2,700   386
101 Executive Boulevard (O)   1971   1997     267   5,838   620   267   6,458   6,725   975
300 Executive Boulevard (F)   1970   1997     460   3,609   140   460   3,749   4,209   537
350 Executive Boulevard (F)   1970   1997     100   1,793   140   100   1,933   2,033   282
399 Executive Boulevard (F)   1962   1997     531   7,191   133   531   7,324   7,855   1,167
400 Executive Boulevard (F)   1970   1997     2,202   1,846   270   2,201   2,117   4,318   441
500 Executive Boulevard (F)   1970   1997     258   4,183   576   257   4,760   5,017   757
525 Executive Boulevard (F)   1972   1997     345   5,499   351   345   5,850   6,195   862
700 Executive Boulevard (L)   n/a   1997     970       970     970  

130


MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2002
(dollars in thousands)

        SCHEDULE III

 
   
   
   
   
   
   
  Gross Amount at Which
Carried at Close of
Period(1)

   
 
   
   
   
  Initial Costs
   
   
 
   
   
   
  Costs
Capitalized
Subsequent
to Acquisition

   
Property Location(2)

  Year

  Related
Encumbrances

   
  Building and
Improvements

   
  Building and
Improvements

   
  Accumulated
Depreciation

  Built
  Acquired
  Land
  Land
  Total
5 Skyline Drive (F)   1980   2001     2,219   8,916   9   2,219   8,925   11,144   316
6 Skyline Drive (F)   1980   2001     740   2,971   6   740   2,977   3,717   105
555 Taxter Road (O)   1986   2000     4,285   17,205   499   4,285   17,704   21,989   1,140
565 Taxter Road (O)   1988   2000     4,285   17,205   728   4,233   17,985   22,218   1,173
570 Taxter Road (O)   1972   1997     438   6,078   769   438   6,847   7,285   1,148
1 Warehouse Lane (I)   1957   1997     3   268   205   3   473   476   59
2 Warehouse Lane (I)   1957   1997     4   672   202   4   874   878   126
3 Warehouse Lane (I)   1957   1997     21   1,948   468   21   2,416   2,437   376
4 Warehouse Lane (I)   1957   1997     84   13,393   382   85   13,774   13,859   2,087
5 Warehouse Lane (I)   1957   1997     19   4,804   299   19   5,103   5,122   881
6 Warehouse Lane (I)   1982   1997     10   4,419   238   10   4,657   4,667   662
1 Westchester Plaza (F)   1967   1997     199   2,023   52   199   2,075   2,274   328
2 Westchester Plaza (F)   1968   1997     234   2,726   77   234   2,803   3,037   413
3 Westchester Plaza (F)   1969   1997     655   7,936   196   655   8,132   8,787   1,212
4 Westchester Plaza (F)   1969   1997     320   3,729   112   320   3,841   4,161   637
5 Westchester Plaza (F)   1969   1997     118   1,949   175   118   2,124   2,242   312
6 Westchester Plaza (F)   1968   1997     164   1,998   144   164   2,142   2,306   365
7 Westchester Plaza (F)   1972   1997     286   4,321   83   286   4,404   4,690   657
8 Westchester Plaza (F)   1971   1997     447   5,262   726   447   5,988   6,435   1,155
Hawthorne                                        
200 Saw Mill River Road (F)   1965   1997     353   3,353   251   353   3,604   3,957   561
1 Skyline Drive (O)   1980   1997     66   1,711   205   66   1,916   1,982   273
2 Skyline Drive (O)   1987   1997     109   3,128   325   109   3,453   3,562   584
3 Skyline Drive (O)   1981   2002     1,882   7,578   63   1,882   7,641   9,523   79
4 Skyline Drive (F)   1987   1997     363   7,513   726   363   8,239   8,602   1,520
7 Skyline Drive (O)   1987   1998     330   13,013   537   330   13,550   13,880   1,437
8 Skyline Drive (F)   1985   1997     212   4,410   1,405   212   5,815   6,027   1,074
10 Skyline Drive (F)   1985   1997     134   2,799   105   134   2,904   3,038   470
11 Skyline Drive (F)   1989   1997       4,788   444     5,232   5,232   843
12 Skyline Drive (F)   1999   1999     1,562   3,254   1,499   1,320   4,995   6,315   673
14 Skyline Drive (L)   n/a   2002     964       964     964  
15 Skyline Drive (F)   1989   1997       7,449   782     8,231   8,231   1,514
16 Skyline Drive (L)   n/a   2002     850       850     850  
17 Skyline Drive (O)   1989   1997       7,269   130     7,399   7,399   1,093
19 Skyline Drive (O)   1982   1997     2,355   34,254   4,332   2,356   38,585   40,941   7,928
Tarrytown                                        
200 White Plains Road (O)   1982   1997     378   8,367   876   378   9,243   9,621   1,750
220 White Plains Road (O)   1984   1997     367   8,112   786   367   8,898   9,265   1,372
230 White Plains Road (R)   1984   1997     124   1,845     124   1,845   1,969   273
White Plains                                        
1 Barker Avenue (O)   1975   1997     208   9,629   653   207   10,283   10,490   1,585
3 Barker Avenue (O)   1983   1997     122   7,864   1,630   122   9,494   9,616   1,460
50 Main Street (O)   1985   1997     564   48,105   4,511   564   52,616   53,180   8,631
11 Martine Avenue (O)   1987   1997     127   26,833   3,983   127   30,816   30,943   4,989
1 Water Street (O)   1979   1997     211   5,382   563   211   5,945   6,156   882
Yonkers                                        
100 Corporate Boulevard (F)   1987   1997     602   9,910   711   602   10,621   11,223   1,631
200 Corporate Boulevard South (F)   1990   1997     502   7,575   243   502   7,818   8,320   1,120
250 Corporate Boulevard South (L)   n/a   2002     1,028       1,028     1,028  
1 Enterprise Boulevard (L)   n/a   1997     1,379       1,379     1,379  
1 Executive Boulevard (O)   1982   1997     1,104   11,904   971   1,105   12,874   13,979   2,149
2 Executive Plaza (R)   1986   1997     89   2,439     89   2,439   2,528   361
3 Executive Plaza (O)   1987   1997     385   6,256   1,031   385   7,287   7,672   1,179
4 Executive Plaza (F)   1986   1997     584   6,134   1,049   584   7,183   7,767   1,129

131


MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2002
(dollars in thousands)

        SCHEDULE III

 
   
   
   
   
   
   
  Gross Amount at Which
Carried at Close of Period(1)

   
 
   
   
   
  Initial Costs
   
   
 
  Year
   
  Costs
Capitalized
Subsequent
to Acquisition

   
Property Location(2)

  Related
Encumbrances

   
  Building and
Improvements

   
  Building and
Improvements

   
  Accumulated
Depreciation

  Built
  Acquired
  Land
  Land
  Total
6 Executive Plaza (F)   1987   1997     546   7,246   81   546   7,327   7,873   1,099
1 Odell Plaza (F)   1980   1997     1,206   6,815   609   1,206   7,424   8,630   1,135
5 Odell Plaza (F)   1983   1997     331   2,988   158   331   3,146   3,477   456
7 Odell Plaza (F)   1984   1997     419   4,418   219   419   4,637   5,056   724

CHESTER COUNTY, PENNSYLVANIA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Berwyn                                        
1000 Westlakes Drive (O)   1989   1997     619   9,016   457   618   9,474   10,092   1,392
1055 Westlakes Drive (O)   1990   1997     1,951   19,046   2,194   1,951   21,240   23,191   2,961
1205 Westlakes Drive (O)   1988   1997     1,323   20,098   841   1,323   20,939   22,262   3,113
1235 Westlakes Drive (O)   1986   1997     1,417   21,215   996   1,418   22,210   23,628   3,343

DELAWARE COUNTY, PENNSYLVANIA

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Lester                                        
100 Stevens Drive (O)   1986   1996     1,349   10,018   2,791   1,349   12,809   14,158   1,949
200 Stevens Drive (O)   1987   1996     1,644   20,186   4,536   1,644   24,722   26,366   3,756
300 Stevens Drive (O)   1992   1996     491   9,490   735   491   10,225   10,716   1,657
Media                                        
1400 Providence Rd—Center I (O)   1986   1996     1,042   9,054   1,528   1,042   10,582   11,624   1,890
1400 Providence Rd.—Center II(O)   1990   1996     1,543   16,464   1,837   1,544   18,300   19,844   3,326

MONTGOMERY COUNTY, PENNSYLVANIA

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Blue Bell                                        
16 Sentry Parkway (O)   1988   2002     3,378   13,511     3,378   13,511   16,888  
18 Sentry Parkway (O)   1988   2002     3,515   14,062     3,515   14,062   17,577  
King of Prussia                                        
2200 Renaissance Blvd (O)   1985   2002   19,100   5,347   21,453     5,347   21,453   26,800   45
Lower Providence                                        
1000 Madison Avenue (O)   1990   1997     1,713   12,559   685   1,714   13,243   14,957   1,736
Plymouth Meeting                                        
1150 Plymouth Meeting Mall (O)   1970   1997     125   499   21,373   125   21,872   21,997   2,740
Five Sentry Parkway East (O)   1984   1996     642   7,992   478   642   8,470   9,112   1,313
Five Sentry Parkway West (O)   1984   1996     268   3,334   73   268   3,407   3,675   524

FAIRFIELD COUNTY, CONNECTICUT

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Greenwich                                        
500 West Putnam Avenue (O)   1973   1998   8,417   3,300   16,734   1,175   3,300   17,909   21,209   2,408
Norwalk                                        
40 Richards Avenue (O)   1985   1998     1,087   18,399   1,990   1,087   20,389   21,476   2,507
Shelton                                        
1000 Bridgeport Avenue (O)   1986   1997     773   14,934   33   744   14,996   15,740   2,289
Stamford                                        
1266 East Main Street (O)   1984   2002   19,500   6,638   26,567     6,638   26,567   33,205   111
419 West Avenue (F)   1986   1997     4,538   9,246   934   4,538   10,180   14,718   1,410
500 West Avenue (F)   1988   1997     415   1,679   214   415   1,893   2,308   360
550 West Avenue (F)   1990   1997     1,975   3,856   334   1,975   4,190   6,165   889
600 West Avenue (F)   1999   1999     2,305   2,863   833   2,305   3,696   6,001   276
650 West Avenue (F)   1998   1998     1,328     3,913   1,328   3,913   5,241   779

WASHINGTON, D.C.

 

 

 

 

 

 

 

 

 

 

 

 

 

 
1201 Connecticut Avenue, NW (O)   1940   1999     14,228   18,571   1,222   14,228   19,793   34,021   1,858
1400 L Street, NW (O)   1987   1998     13,054   27,423   926   13,054   28,349   41,403   3,459

132


MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2002
(dollars in thousands)

        SCHEDULE III

 
   
   
   
   
   
   
  Gross Amount at Which
Carried at Close of Period(1)

   
 
   
   
   
  Initial Costs
   
   
 
  Year
   
  Costs
Capitalized
Subsequent
to Acquisition

   
Property Location(2)

  Related
Encumbrances

   
  Building and
Improvements

   
  Building and
Improvements

   
  Accumulated
Depreciation

  Built
  Acquired
  Land
  Land
  Total
PRINCE GEORGE'S COUNTY, MARYLAND                                    
Lanham                                        
4200 Parliament Place (O)   1989   1998     2,114   13,546   605   1,393   14,872   16,265   2,039

BEXAR COUNTY, TEXAS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
San Antonio                                        
84 N.E. Loop 410 (O)   1971   1997     2,295   10,382   (1,771 ) 2,295   8,611   10,906   91
111 Soledad (O)   1918   1997     2,004   8,017   1,156   2,004   9,173   11,177   1,450

DALLAS COUNTY, TEXAS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Dallas                                        
3030 LBJ Freeway (O)   1984   1997     6,098   24,366   1,867   6,098   26,233   32,331   3,813
Richardson                                        
1122 Alma Road (O)   1977   1997     754   3,015   347   754   3,362   4,116   413

HARRIS COUNTY, TEXAS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Houston                                        
1770 St. James Place (O)   1973   1997     730   2,920   783   730   3,703   4,433   589

ARAPAHOE COUNTY, COLORADO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Denver                                        
400 South Colorado Boulevard (O)   1983   1998     1,461   10,620   776   1,461   11,396   12,857   1,462
Englewood                                        
9359 East Nichols Avenue (O)   1997   1998     1,155   8,171   (410 ) 1,155   7,761   8,916   940
5350 South Roslyn Street (O)   1982   1998     862   6,831   (2,607 ) 559   4,527   5,086   155

BOULDER COUNTY, COLORADO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Broomfield                                        
105 South Technology Court (O)   1997   1998     653   4,936   (2,968 ) 653   1,968   2,621   32
303 South Technology Court-A (O)   1997   1998     623   3,892   (1,894 ) 623   1,998   2,621   32
303 South Technology Court-B (O)   1997   1998     623   3,892   (1,895 ) 623   1,997   2,620   32
Louisville                                        
1172 Century Drive (O)   1996   1998     707   4,647   (789 ) 707   3,858   4,565   60
248 Centennial Parkway (O)   1996   1998     708   4,647   (789 ) 708   3,858   4,566   61
285 Century Place (O)   1997   1998     889   10,133   (4,102 ) 891   6,029   6,920   98

DENVER COUNTY, COLORADO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Denver                                        
8181 East Tufts Avenue (O)   2001   2001     2,342   32,029   837   2,342   32,866   35,208   1,952
3600 South Yosemite (O)   1974   1998     556   12,980   28   556   13,008   13,564   1,526

DOUGLAS COUNTY, COLORADO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Englewood                                        
67 Inverness Drive East (O)   1996   1998     1,034   5,516   (2,976 ) 1,035   2,539   3,574   39
384 Inverness Drive South (O)   1985   1998     703   5,653   (2,512 ) 703   3,141   3,844   105
400 Inverness Drive (O)   1997   1998     1,584   19,878   (4,953 ) 1,584   14,925   16,509   307
5975 South Quebec Street (O)   1996   1998     855   11,551   1,482   857   13,031   13,888   1,493
Parker                                        
9777 Pyramid Court (O)   1995   1998     1,304   13,189   245   1,306   13,432   14,738   1,641

EL PASO COUNTY, COLORADO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Colorado Springs                                        
8415 Explorer (O)   1998   1999     347   2,507   2,483   347   4,990   5,337   78
1975 Research Parkway (O)   1997   1998     1,397   13,221   (1,388 ) 1,611   11,619   13,230   251
2375 Telstar Drive (O)   1998   1999     348   2,507   2,483   348   4,990   5,338   79

133


 
   
   
   
   
   
   
  Gross Amount at Which
Carried at Close of Period(1)

   
 
   
   
   
  Initial Costs
   
   
 
  Year
   
  Costs
Capitalized
Subsequent
to Acquisition

   
Property Location(2)

  Related
Encumbrances

   
  Building and
Improvements

   
  Building and
Improvements

   
  Accumulated
Depreciation

  Built
  Acquired
  Land
  Land
  Total

JEFFERSON COUNTY, COLORADO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Lakewood                                                        
141 Union Boulevard (O)   1985   1998         774     6,891     (1,277 )   775     5,613     6,388     145

SAN FRANCISCO COUNTY, CALIFORNIA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
San Francisco                                                        
795 Folsom Street (O)   1977   1999         9,348     24,934     6,839     9,350     31,771     41,121     4,093
760 Market Street (O)   1908   1997         5,588     22,352     39,636     13,499     54,077     67,576     6,747

Projects Under Development

 

 

 

 

 

 


 

 

53,713

 

 


 

 

21,566

 

 

53,713

 

 

21,566

 

 

75,280

 

 


Furniture, Fixtures & Equipment

 

 

 

 

 

 


 

 


 

 


 

 

7,533

 

 


 

 

7,533

 

 

7,533

 

 

4,430
           
 
 
 
 
 
 
 
TOTALS           $ 568,197   $ 529,553   $ 2,900,486   $ 427,618   $ 544,176   $ 3,313,481   $ 3,857,657   $ 445,569
           
 
 
 
 
 
 
 

(1)
The aggregate cost for federal income tax purposes at December 31, 2002 was approximately $3.0 billion.

(2)
Legend of Property Codes:

(O) = Office Property   (M) = Multi-family Residential Property    
(F) = Office/Flex Property   (R) = Stand-alone Retail Property    
(I) = Industrial/Warehouse Property   (L) = Land Lease    

134


MACK-CALI REALTY CORPORATION
NOTE TO SCHEDULE III

        Changes in rental properties and accumulated depreciation for the periods ended December 31, 2002, 2001 and 2000, are as follows (in thousands):

 
  2002
  2001
  2000
 
Rental Properties                    
Balance at beginning of year   $ 3,378,071   $ 3,589,877   $ 3,654,845  
  Additions     202,082     382,382     268,900  
  Rental property held for sale—before accumulated depreciation     453,469     (453,469 )   (114,477 )
  Properties sold     (168,245 )   (140,719 )   (219,391 )
  Retirements/disposals     (7,720 )        
   
 
 
 
Balance at end of year   $ 3,857,657   $ 3,378,071   $ 3,589,877  
   
 
 
 

Accumulated Depreciation

 

 

 

 

 

 

 

 

 

 
Balance at beginning of year   $ 350,705   $ 302,932   $ 256,629  
  Depreciation expense     98,050     87,716     82,574  
  Rental property held for sale     16,455     (28,379 )   (7,019 )
  Properties sold     (12,121 )   (11,564 )   (29,252 )
  Retirements/disposals     (7,520 )        
   
 
 
 
Balance at end of year   $ 445,569   $ 350,705   $ 302,932  
   
 
 
 

134


MACK-CALI REALTY, L.P.

Signatures

        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

    MACK-CALI REALTY, L.P.
    (Registrant)

 

 

By: Mack-Cali Realty Corporation,
       its General Partner

Date: March 6, 2003

 

By:

/s/  
BARRY LEFKOWITZ      
Barry Lefkowitz
Executive Vice President &
    Chief Financial Officer

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Name
  Title
  Date

 

 

 

 

 
/s/  WILLIAM L. MACK      
William L. Mack
  Chairman of the Board   March 6, 2003

/s/  
MITCHELL E. HERSH      
Mitchell E. Hersh

 

Chief Executive Officer and Director

 

March 6, 2003

/s/  
BARRY LEFKOWITZ      
Barry Lefkowitz

 

Executive Vice President and Chief Financial Officer

 

March 6, 2003

/s/  
JOHN J. CALI      
John J. Cali

 

Director

 

March 6, 2003

/s/  
BRENDAN T. BYRNE      
Brendan T. Byrne

 

Director

 

March 6, 2003

/s/  
JOHN R. CALI      
John R. Cali

 

Director

 

March 6, 2003

/s/  
NATHAN GANTCHER      
Nathan Gantcher

 

Director

 

March 6, 2003

/s/  
MARTIN D. GRUSS      
Martin D. Gruss

 

Director

 

March 6, 2003

/s/  
EARLE I. MACK      
Earle I. Mack

 

Director

 

March 6, 2003

 

 

 

 

 

135



/s/  
ALAN G. PHILIBOSIAN      
Alan G. Philibosian

 

Director

 

March 6, 2003

/s/  
IRVIN D. REID      
Irvin D. Reid

 

Director

 

March 6, 2003

/s/  
VINCENT TESE      
Vincent Tese

 

Director

 

March 6, 2003

/s/  
ROBERT F. WEINBERG      
Robert F. Weinberg

 

Director

 

March 6, 2003

/s/  
ROY J. ZUCKERBERG      
Roy J. Zuckerberg

 

Director

 

March 6, 2003

136


MACK-CALI REALTY, L.P.

Certification

        I, Mitchell E. Hersh, Chief Executive Officer of Mack-Cali Realty Corporation, the general partner of Mack-Cali Realty, L.P., certify that:

1.
I have reviewed this annual report on Form 10-K of Mack-Cali Realty, L.P.;

2.
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c)
presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6.
The registrant's other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: March 6, 2003

 

By:

/s/  
MITCHELL E. HERSH      
Chief Executive Officer
of Mack-Cali Realty Corporation,
the general partner of
Mack-Cali Realty, L.P.

137


MACK-CALI REALTY, L.P.

Certification

        I, Barry Lefkowitz, Chief Financial Officer of Mack-Cali Realty Corporation, the general partner of Mack-Cali Realty, L.P., certify that:

1.
I have reviewed this annual report on Form 10-K of Mack-Cali Realty, L.P.;

2.
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c)
presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6.
The registrant's other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: March 6, 2003

 

By:

/s/  
BARRY LEFKOWITZ      
Barry Lefkowitz
Executive Vice President &
    Chief Financial Officer

138



MACK-CALI REALTY, L.P.

EXHIBIT INDEX

Exhibit
Number

  Exhibit Title


3.1

 

Restated Charter of Mack-Cali Realty Corporation dated June 11, 2001 (filed as Exhibit 3.1 to the Operating Partnership's Form 10-Q dated June 30, 2001 and incorporated herein by reference).

3.2

 

Amended and Restated Bylaws of Mack-Cali Realty Corporation dated June 10, 1999 (filed as Exhibit 3.2 to the Corporation's Form 8-K dated June 10, 1999 and incorporated herein by reference).

3.3

 

Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated December 11, 1997 (filed as Exhibit 10.110 to the Corporation's Form 8-K dated December 11, 1997 and incorporated herein by reference).

3.4

 

Amendment No. 1 to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated August 21, 1998 (filed as Exhibit 3.1 to the Corporation's and the Operating Partnership's Registration Statement on Form S-3, Registration No. 333-57103, and incorporated herein by reference).

3.5

 

Second Amendment to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated July 6, 1999 (filed as Exhibit 10.1 to the Operating Partnership's Form 8-K dated July 6, 1999 and incorporated herein by reference).

3.6

 

Certificate of Designation of Series B Preferred Operating Partnership Units of Limited Partnership Interest of Mack-Cali Realty, L.P. (filed as Exhibit 10.101 to the Corporation's Form 8-K dated December 11, 1997 and incorporated herein by reference).

4.1

 

Amended and Restated Shareholder Rights Agreement, dated as of March 7, 2000, between Mack-Cali Realty Corporation and EquiServe Trust Company, N.A., as Rights Agent (filed as Exhibit 4.1 to the Operating Partnership's Form 8-K dated March 7, 2000 and incorporated herein by reference).

4.2

 

Amendment No. 1 to the Amended and Restated Shareholder Rights Agreement, dated as of June 27, 2000, by and among Mack-Cali Realty Corporation and EquiServe Trust Company, N.A. (filed as Exhibit 4.1 to the Operating Partnership's Form 8-K dated June 27, 2000 and incorporated herein by reference).

4.3

 

Indenture dated as of March 16, 1999, by and among Mack-Cali Realty, L.P., as issuer, Mack-Cali Realty Corporation, as guarantor, and Wilmington Trust Company, as trustee (filed as Exhibit 4.1 to the Operating Partnership's Form 8-K dated March 16, 1999 and incorporated herein by reference).

4.4

 

Supplemental Indenture No. 1 dated as of March 16, 1999, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership's Form 8-K dated March 16, 1999 and incorporated herein by reference).

4.5

 

Supplemental Indenture No. 2 dated as of August 2, 1999, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.4 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

 

 

 

139



4.6

 

Supplemental Indenture No. 3 dated as of December 21, 2000, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership's Form 8-K dated December 21, 2000 and incorporated herein by reference).

4.7

 

Supplemental Indenture No. 4 dated as of January 29, 2001, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership's Form 8-K dated January 29, 2001 and incorporated herein by reference).

4.8

 

Supplemental Indenture No. 5 dated as of December 20, 2002, by and between Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership's Form 8-K dated December 20, 2002 and incorporated herein by reference).

10.1

 

Amended and Restated Employment Agreement dated as of July 1, 1999 between Mitchell E. Hersh and Mack-Cali Realty Corporation (filed as Exhibit 10.2 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.2

 

Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Timothy M. Jones and Mack-Cali Realty Corporation (filed as Exhibit 10.3 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.3

 

Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Barry Lefkowitz and Mack-Cali Realty Corporation (filed as Exhibit 10.6 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.4

 

Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.7 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.5

 

Employment Agreement dated as of December 5, 2000 between Michael Grossman and Mack-Cali Realty Corporation (filed as Exhibit 10.5 to the Operating Partnership's Form 10-K for the year ended December 31, 2000 and incorporated herein by reference).

10.6

 

Restricted Share Award Agreement dated as of July 1, 1999 between Mitchell E. Hersh and Mack-Cali Realty Corporation (filed as Exhibit 10.8 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.7

 

Restricted Share Award Agreement dated as of July 1, 1999 between Timothy M. Jones and Mack-Cali Realty Corporation (filed as Exhibit 10.9 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.8

 

Restricted Share Award Agreement dated as of July 1, 1999 between Barry Lefkowitz and Mack-Cali Realty Corporation (filed as Exhibit 10.12 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.9

 

Restricted Share Award Agreement dated as of July 1, 1999 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.13 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference).

10.10

 

Restricted Share Award Agreement dated as of March 12, 2001 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.10 to the Operating Partnership's Form 10-Q dated March 31, 2001 and incorporated herein by reference).

10.11

 

Restricted Share Award Agreement dated as of March 12, 2001 between Michael Grossman and Mack-Cali Realty Corporation (filed as Exhibit 10.11 to the Operating Partnership's Form 10-Q dated March 31, 2001 and incorporated herein by reference).

 

 

 

140



10.12

 

Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.1 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.13

 

Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.2 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.14

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Mitchell E. Hersh (filed as Exhibit 10.3 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.15

 

Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Timothy M. Jones (filed as Exhibit 10.4 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.16

 

Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Timothy M. Jones (filed as Exhibit 10.5 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.17

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Timothy M. Jones (filed as Exhibit 10.6 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference)

10.18

 

Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.7 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.19

 

Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.8 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.20

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Barry Lefkowitz (filed as Exhibit 10.9 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.21

 

Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.10 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.22

 

Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.11 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.23

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated July 1, 1999 between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.12 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.24

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated March 12, 2001 between Mack-Cali Realty Corporation and Roger W. Thomas (filed as Exhibit 10.13 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

 

 

 

141



10.25

 

Restricted Share Award Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.14 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.26

 

Tax Gross Up Agreement effective as of January 2, 2003 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.15 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.27

 

Restricted Share Award Agreement dated December 6, 1999 by and between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.16 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.28

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated December 6, 1999 between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.17 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.29

 

First Amendment effective as of January 2, 2003 to the Restricted Share Award Agreement dated March 12, 2001 between Mack-Cali Realty Corporation and Michael A. Grossman (filed as Exhibit 10.18 to the Corporation's Form 8-K dated January 2, 2003 and incorporated herein by reference).

10.30

 

Amended and Restated Revolving Credit Agreement dated as of September 27, 2002, among Mack-Cali Realty, L.P. and JPMorgan Chase Bank, Fleet National Bank and Other Lenders Which May Become Parties Thereto with JPMorgan Chase Bank, as administrative agent, swing lender and fronting bank, Fleet National Bank and Commerzbank AG, New York and Grand Cayman branches as syndication agents, Bank of America, N.A. and Wells Fargo Bank, National Association, as documentation agents, and J.P. Morgan Securities Inc. and Fleet Securities, Inc, as arrangers (filed as Exhibit 10.1 to the Operating Partnership's Form 8-K dated September 27, 2002 and incorporated herein by reference).

10.31

 

Contribution and Exchange Agreement among The MK Contributors, The MK Entities, The Patriot Contributors, The Patriot Entities, Patriot American Management and Leasing Corp., Cali Realty, L.P. and Cali Realty Corporation, dated September 18, 1997 (filed as Exhibit 10.98 to the Corporation's Form 8-K dated September 19, 1997 and incorporated herein by reference).

10.32

 

First Amendment to Contribution and Exchange Agreement, dated as of December 11, 1997, by and among the Company and the Mack Group (filed as Exhibit 10.99 to the Corporation's Form 8-K dated December 11, 1997 and incorporated herein by reference).

10.33

 

Employee Stock Option Plan of Mack-Cali Realty Corporation (filed as Exhibit 10.1 to the Corporation's Post-Effective Amendment No. 1 to Form S-8, Registration No. 333-44443, and incorporated herein by reference).

10.34

 

Director Stock Option Plan of Mack-Cali Realty Corporation (filed as Exhibit 10.2 to the Corporation's Post-Effective Amendment No. 1 to Form S-8, Registration No. 333-44443, and incorporated herein by reference).

10.35

 

2000 Employee Stock Option Plan (filed as Exhibit 10.1 to the Corporation's Registration Statement on Form S-8, Registration No. 333-52478, and incorporated herein by reference), as amended by the First Amendment to the 2000 Employee Stock Option Plan (filed as Exhibit 10.17 to the Operating Partnership's Form 10-Q dated June 30, 2002 and incorporated herein by reference).

 

 

 

142



10.36

 

2000 Director Stock Option Plan (filed as Exhibit 10.2 to the Corporation's Registration Statement on Form S-8, Registration No. 333-52478, and incorporated herein by reference), as amended by the First Amendment to the 2000 Director Stock Option Plan (filed as Exhibit 10.18 to the Operating Partnership's Form 10-Q dated June 30, 2002 and incorporated herein by reference).

10.37

 

Deferred Compensation Plan for Directors (filed as Exhibit 10.1 to the Corporation's Registration Statement on Form S-8, Registration No. 333-80081, and incorporated herein by reference).

10.38

 

Form of Indemnification Agreement dated October 22, 2002 by and between Mack-Cali Realty Corporation and each of William L. Mack, John J. Cali, Mitchell E. Hersh, Earle I. Mack, John R. Cali, Brendan T. Byrne, Martin D. Gruss, Nathan Gantcher, Vincent Tese, Roy J. Zuckerberg, Alan G. Philibosian, Irvin D. Reid, Robert F. Weinberg, Timothy M. Jones, Barry Lefkowitz, Roger W. Thomas, Michael A. Grossman, James Clabby, Anthony Krug, Dean Cingolani, Anthony DeCaro Jr., Mark Durno, William Fitzpatrick, John Kropke, Nicholas Mitarotonda, Jr., Michael Nevins, Virginia Sobol, Albert Spring and Daniel Wagner (filed as Exhibit 10.28 to the Operating Partnership's Form 10-Q dated September 30, 2002 and incorporated herein by reference).

10.39

 

Indemnification Agreement dated October 22, 2002 by and between Mack-Cali Realty Corporation and John Crandall (filed as Exhibit 10.29 to the Operating Partnership's Form 10-Q dated September 30, 2002 and incorporated herein by reference).

10.40

 

Warrant Agreement, dated December 12, 1997, executed in favor Mitchell E. Hersh to purchase shares of common stock, par value $.01 per share, of the Company (filed as Exhibit 10.106 to the Corporation's Form 8-K dated December 11, 1997 and incorporated herein by reference).

10.41

 

Warrant issued by Cali Realty Corporation to Brad W. Berger, dated January 31, 1997 (filed as Exhibit 10.84 to the Corporation's Form 10-K dated December 31, 1996 and incorporated herein by reference).

10.42

 

Warrant issued by Cali Realty Corporation to Timothy M. Jones, dated January 31, 1997 (filed as Exhibit 10.86 to the Corporation's Form 10-K dated December 31, 1996 and incorporated herein by reference).

10.43

 

Warrant issued by Cali Realty Corporation to Michael Grossman, dated January 31, 1997 (filed as Exhibit 10.89 to the Corporation's Form 10-K dated December 31, 1996 and incorporated herein by reference).

*10.44

 

Second Amendment to Contribution and Exchange Agreement, dated as of June 27, 2000, between RMC Development Company, LLC f/k/a Robert Martin Company, LLC, Robert Martin Eastview North Company, L.P., the Corporation and the Operating Partnership.

*21

 

Subsidiaries of the Operating Partnership.

*23

 

Consent of PricewaterhouseCoopers LLP, independent accountants.

*
filed herewith

143




QuickLinks

TABLE OF CONTENTS FORM 10-K
PART I
PART II
Year Ended December 31, 2002 Compared to Year Ended December 31, 2001
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
Liquidity and Capital Resources
PART III
PART IV
REPORT OF INDEPENDENT ACCOUNTANTS
MACK-CALI REALTY, L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per unit amounts)
MACK-CALI REALTY, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per unit amounts)
MACK-CALI REALTY, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (in thousands)
MACK-CALI REALTY, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
MACK-CALI REALTY, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share/unit amounts)
SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
MACK-CALI REALTY, L.P. EXHIBIT INDEX