Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 1-13274
Mack-Cali Realty Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 22-3305147
- ---------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
11 Commerce Drive, Cranford, New Jersey 07016-3501
- --------------------------------------------------------------------------------
(Address or principal executive office)
(Zip Code)
(908) 272-8000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or such shorter period that the
Registrant was required to file such report) YES /X/ NO / / and (2) has been
subject to such filing requirements for the past ninety (90) days YES /X/
NO / /.
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 1, 2002, there were 57,673,884 shares of $0.01 par value common
stock outstanding.
MACK-CALI REALTY CORPORATION
FORM 10-Q
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 2002
and December 31, 2001 4
Consolidated Statements of Operations for the three and six month
periods ended June 30, 2002 and 2001 5
Consolidated Statement of Changes in Stockholders' Equity
for the six months ended June 30, 2002 6
Consolidated Statements of Cash Flows for the six months
ended June 30, 2002 and 2001 7
Notes to Consolidated Financial Statements 8-28
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 29-39
Item 3. Quantitative and Qualitative Disclosures about Market Risk 40
PART II OTHER INFORMATION AND SIGNATURES
Item 1. Legal Proceedings 41
Item 2. Changes in Securities and Use of Proceeds 41
Item 3. Defaults Upon Senior Securities 41
Item 4. Submission of Matters to a Vote of Security Holders 41
Item 5. Other Information 41
Item 6. Exhibits 42-45
Signatures 46
2
MACK-CALI REALTY CORPORATION
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
The accompanying unaudited consolidated balance sheets, statements of
operations, of changes in stockholders' equity, and of cash flows and
related notes, have been prepared in accordance with generally
accepted accounting principles ("GAAP") for interim financial
information and in conjunction with the rules and regulations of the
Securities and Exchange Commission ("SEC"). Accordingly, they do not
include all of the disclosures required by GAAP for complete financial
statements. The financial statements reflect all adjustments
consisting only of normal, recurring adjustments, which are in the
opinion of management, necessary for a fair presentation for the
interim periods.
The aforementioned financial statements should be read in conjunction
with the notes to the aforementioned financial statements and
Management's Discussion and Analysis of Financial Condition and
Results of Operations and the financial statements and notes thereto
included in Mack-Cali Realty Corporation's Annual Report on Form 10-K
for the fiscal year ended December 31, 2001.
The results of operations for the three and six month periods ended
June 30, 2002 are not necessarily indicative of the results to be
expected for the entire fiscal year or any other period.
3
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
================================================================================
June 30,
2002 December 31,
ASSETS (UNAUDITED) 2001
- ------------------------------------------------------------------------------------------------------------
Rental property
Land and leasehold interests $ 505,363 $ 479,358
Buildings and improvements 2,977,233 2,751,453
Tenant improvements 152,230 140,071
Furniture, fixtures and equipment 7,326 7,189
- ------------------------------------------------------------------------------------------------------------
3,642,152 3,378,071
Less - accumulated depreciation and amortization (399,041) (350,705)
- ------------------------------------------------------------------------------------------------------------
3,243,111 3,027,366
Rental property held for sale, net 120,109 384,626
- ------------------------------------------------------------------------------------------------------------
Net investment in rental property 3,363,220 3,411,992
Cash and cash equivalents 64,939 12,835
Investments in unconsolidated joint ventures 172,611 146,540
Unbilled rents receivable, net 61,526 60,829
Deferred charges and other assets, net 101,407 101,499
Restricted cash 7,358 7,914
Accounts receivable, net of allowance for doubtful accounts
of $685 and $752 4,447 5,161
- ------------------------------------------------------------------------------------------------------------
Total assets $ 3,775,508 $ 3,746,770
============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------
Senior unsecured notes $ 1,097,087 $ 1,096,843
Revolving credit facilities 66,600 59,500
Mortgages and loans payable 541,972 543,807
Dividends and distributions payable 44,493 44,069
Accounts payable and accrued expenses 61,546 64,620
Rents received in advance and security deposits 33,212 33,512
Accrued interest payable 25,639 25,587
- ------------------------------------------------------------------------------------------------------------
Total liabilities 1,870,549 1,867,938
- ------------------------------------------------------------------------------------------------------------
Minority interest in Operating Partnership 439,848 446,244
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares authorized, none issued -- --
Common stock, $0.01 par value, 190,000,000 shares authorized,
57,666,984 and 56,712,270 shares outstanding 576 567
Additional paid-in capital 1,529,424 1,501,623
Dividends in excess of net earnings (60,483) (64,906)
Unamortized stock compensation (4,406) (4,696)
- ------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,465,111 1,432,588
- ------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 3,775,508 $ 3,746,770
============================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
================================================================================
Three Months Ended Six Months Ended
June 30, June 30,
REVENUES 2002 2001 2002 2001
- --------------------------------------------------------------------------------------------------------------------------
Base rents $ 122,049 $ 129,419 $ 248,506 $ 254,795
Escalations and recoveries from tenants 14,427 13,430 27,697 28,192
Parking and other 4,536 3,060 7,600 5,406
Interest income 446 472 784 1,085
- --------------------------------------------------------------------------------------------------------------------------
Total revenues 141,458 146,381 284,587 289,478
- --------------------------------------------------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------------------------------------------------
Real estate taxes 15,369 15,510 30,702 30,797
Utilities 9,307 10,699 19,437 22,655
Operating services 16,541 17,686 32,739 35,565
General and administrative 7,903 6,856 14,608 12,866
Depreciation and amortization 27,522 21,951 51,475 45,435
Interest expense 25,596 28,555 51,955 56,920
- --------------------------------------------------------------------------------------------------------------------------
Total expenses 102,238 101,257 200,916 204,238
- --------------------------------------------------------------------------------------------------------------------------
Equity in earnings of unconsolidated joint ventures 9,374 2,037 8,069 5,446
- --------------------------------------------------------------------------------------------------------------------------
Income before realized gains (losses) and unrealized losses
on disposition of rental property and minority interest 48,594 47,161 91,740 90,686
Realized gains (losses) and unrealized losses on
disposition of rental property, net (4,840) 22,510 2,258 1,947
- --------------------------------------------------------------------------------------------------------------------------
Income before minority interest 43,754 69,671 93,998 92,633
Minority interest in Operating Partnership 8,715 11,998 18,344 18,222
- --------------------------------------------------------------------------------------------------------------------------
Net income $ 35,039 $ 57,673 $ 75,654 $ 74,411
==========================================================================================================================
Basic earnings per share $ 0.61 $ 1.02 $ 1.33 $ 1.31
Diluted earnings per share $ 0.61 $ 0.98 $ 1.31 $ 1.30
Dividends declared per common share $ 0.62 $ 0.61 $ 1.24 $ 1.22
- --------------------------------------------------------------------------------------------------------------------------
Basic weighted average shares outstanding 57,241 56,519 57,021 56,662
Diluted weighted average shares outstanding 65,606 71,044 71,702 71,198
- --------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS)
(UNAUDITED)
================================================================================
Additional Dividends in Unamortized Total
Common Stock Paid-In Excess of Stock Stockholders'
Shares Par Value Capital Net Earnings Compensation Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2002 56,712 $ 567 $ 1,501,623 $ (64,906) $ (4,696) $ 1,432,588
Net income -- -- -- 75,654 -- 75,654
Dividends -- -- -- (71,231) -- (71,231)
Redemption of common units for
shares of common stock 225 2 7,130 -- -- 7,132
Proceeds from stock options exercised 630 6 16,566 -- -- 16,572
Proceeds from Stock Warrants exercised 105 1 3,464 -- -- 3,465
Deferred compensation plan for directors -- -- 82 -- -- 82
Amortization of stock compensation -- -- -- -- 1,001 1,001
Adjustment to fair value of restricted stock -- -- 711 -- (711) --
Repurchase of common stock (5) -- (152) -- -- (152)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2002 57,667 $ 576 $ 1,529,424 $ (60,483) $ (4,406) $ 1,465,111
===================================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
MACK-CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
================================================================================
Six Months Ended
June 30,
CASH FLOWS FROM OPERATING ACTIVITIES 2002 2001
- --------------------------------------------------------------------------------------------------------
Net income $ 75,654 $ 74,411
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 51,475 45,435
Amortization of stock compensation 1,001 630
Amortization of deferred financing costs and debt discount 2,353 2,513
Equity in earnings of unconsolidated joint ventures (8,069) (5,446)
Realized (gains) losses and unrealized losses on disposition
of rental property, net (2,258) (1,947)
Minority interest 18,344 18,222
Changes in operating assets and liabilities:
Increase in unbilled rents receivable, net (3,996) (7,737)
Decrease (increase) in deferred charges and other assets, net (12,200) (1,454)
Decrease in accounts receivable, net 714 125
Decrease in accounts payable and accrued expenses (3,074) (1,896)
(Increase) decrease in rents received in advance and security deposits (300) 829
Decrease in accrued interest payable 52 9,337
- --------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 119,696 $ 133,022
========================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES
- --------------------------------------------------------------------------------------------------------
Additions to rental property $ (81,895) $ (148,144)
Repayment of notes receivable 3,240 5,983
Investments in unconsolidated joint ventures (35,260) (24,462)
Distributions from unconsolidated joint ventures 17,272 19,056
Proceeds from sales of rental property 92,503 44,787
Increase in restricted cash (556) (935)
- --------------------------------------------------------------------------------------------------------
Net cash used in investing activities $ (4,696) $ (103,715)
========================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES
- --------------------------------------------------------------------------------------------------------
Proceeds from senior unsecured notes -- $ 298,269
Proceeds from revolving credit facilities $ 204,400 218,484
Repayments of revolving credit facilities (197,300) (490,825)
Proceeds from mortgages and loans payable -- 70,000
Repayments of mortgages and loans payable (1,466) (3,871)
Repurchase of common stock (152) (24,055)
Payment of financing costs -- (3,159)
Proceeds from stock options exercised 16,572 2,389
Proceeds from Stock Warrants exercised 3,465 --
Payment of dividends and distributions (88,415) (86,980)
- --------------------------------------------------------------------------------------------------------
Net cash used in financing activities $ (62,896) $ (19,748)
========================================================================================================
Net increase in cash and cash equivalents $ 52,104 $ 9,559
Cash and cash equivalents, beginning of period $ 12,835 $ 13,179
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 64,939 $ 22,738
========================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
7
MACK-CALI REALTY CORPORATION 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 Corporation, a Maryland corporation, and subsidiaries (the
"Company") is a fully-integrated, self-administered, self-managed real estate
investment trust ("REIT") providing leasing, management, acquisition,
development, construction and tenant-related services for its properties. As
of June 30, 2002, the Company owned or had interests in 258 properties plus
developable land (collectively, the "Properties"). The Properties aggregate
approximately 27.6 million square feet, which are comprised of 150 office
buildings and 96 office/flex buildings, totaling approximately 27.1 million
square feet (which include five office buildings and one office/flex building
aggregating 1.5 million square feet, owned by unconsolidated joint ventures
in which the Company has investment interests), six industrial/warehouse
buildings totaling approximately 387,400 square feet, three stand-alone
retail properties totaling approximately 118,040 square feet (which includes
one retail property totaling approximately 100,740 square feet, owned by an
unconsolidated joint venture in which the Company has an investment interest)
and three land leases. The Properties are located in 10 states, primarily in
the Northeast, plus the District of Columbia.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include all accounts of the
Company, its majority-owned and/or controlled subsidiaries, which consist
principally of Mack-Cali Realty, L.P. ("Operating Partnership"). See Investments
in Unconsolidated Joint Ventures in Note 2 for the Company'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
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 and development of rental properties are
capitalized. Capitalized development costs include interest,
property taxes, insurance and other project costs incurred
during the period of development. Included in total rental
property is construction-in-progress of $270,134 and
$210,463 as of June 30, 2002 and December 31, 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.
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
--------------------------------------------------------------------------
8
On a periodic basis, management assesses whether there are
any indicators that the value of the 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. Management
does not believe that the value of any of the Company's
rental properties is impaired.
When assets are identified by management as held for sale,
the Company discontinues depreciating the assets and
estimates the sales price, net of selling costs, of such
assets. If, in management's opinion, the 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 6.
If circumstances arise that previously were considered
unlikely and, as a result, the Company decides not to sell a
property previously classified as held for sale, the
property is reclassified as held and used. A property that
is reclassified is measured individually at the lower of its
(a) 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 6.
Effective January 1, 2002, the Company 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 Company 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 in the six months ended June 30, 2002, the Company did
not report any discontinued operations for the presented
periods.
INVESTMENTS IN
UNCONSOLIDATED
JOINT VENTURES The Company accounts for its investments in unconsolidated
joint ventures under the equity method of accounting as the
Company exercises significant influence, but does not
control these entities. These investments are recorded
initially at cost, as Investments in Unconsolidated Joint
Ventures, and subsequently adjusted for equity in earnings
and cash contributions and distributions. 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 $1,176 and $1,161 for the three
months ended June 30, 2002 and 2001, respectively, and
$2,353 and $2,282 for the six months ended June 30, 2002 and
2001, respectively.
9
DEFERRED
LEASING COSTS Costs incurred in connection with leases are capitalized and
amortized on a straight-line basis over the terms of the
related leases and included in depreciation and
amortization. Unamortized deferred leasing costs are charged
to amortization expense upon early termination of the lease.
Certain employees of the Company are compensated for
providing leasing services to the Properties. The portion of
such compensation, which is capitalized and amortized,
approximated $706 and $863 for the three months ended June
30, 2002 and 2001, respectively, and $1,696 and $1,603 for
the six months ended June 30, 2002 and 2001, 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.
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
Company, 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 12.
INCOME AND
OTHER TAXES The Company has elected to be taxed as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986, as
amended (the "Code"). As a REIT, the Company generally will
not be subject to corporate federal income tax on net income
that it currently distributes to its shareholders, provided
that the Company satisfies certain organizational and
operational requirements including the requirement to
distribute at least 90 percent of its REIT taxable income to
its shareholders. The Company may elect to treat one or more
of its corporate subsidiaries as a taxable REIT subsidiary
("TRS"). In general, a TRS of the Company may perform
additional services for tenants of the Company and generally
may engage in any real estate or non-real estate related
business (except for the operation or management of health
care facilities or lodging facilities or the providing to
any person, under a franchise, license or otherwise, rights
to any brand name under which any lodging facility or health
care facility is operated). A TRS is subject to corporate
federal income tax. The Company has elected to treat certain
of its existing and newly created corporate subsidiaries as
a TRS. If the Company fails to qualify as a REIT in any
taxable year, the Company will be subject to federal income
tax (including any applicable alternative minimum tax) on
its taxable income at regular corporate tax rates. The
Company is subject to certain state and local taxes.
EARNINGS
PER SHARE The Company presents both basic and diluted earnings per
share ("EPS"). Basic EPS excludes dilution and is computed
by dividing net income available to common stockholders by
the weighted average number of shares outstanding for the
period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common
stock were exercised or converted into common stock, where
such exercise or conversion would result in a lower EPS
amount.
10
DIVIDENDS AND
DISTRIBUTIONS
PAYABLE The dividends and distributions payable at June 30, 2002
represents dividends payable to shareholders of record as of
July 3, 2002 (57,673,684 shares), distributions payable to
minority interest common unitholders (7,858,490 common
units) on that same date and preferred distributions payable
to preferred unitholders (215,894 preferred units) for the
second quarter 2002. The second quarter 2002 dividends and
common unit distributions of $0.62 per share and per common
unit, as well as the second quarter preferred unit
distribution of $17.8932 per preferred unit, were approved
by the Board of Directors on June 19, 2002 and paid on July
22, 2002.
The dividends and distributions payable at December 31, 2001
represents dividends payable to shareholders of record as of
January 4, 2002 (56,765,840 shares), distributions payable
to minority interest common unitholders (7,954,775 common
units) on that same date and preferred distributions payable
to preferred unitholders (220,340 preferred units) for the
fourth quarter 2001. The fourth quarter 2001 dividends and
common unit distributions of $0.62 per share and 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 on December 18, 2001 and paid on
January 22, 2002.
STOCK OPTIONS The Company accounts 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 Company'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 Company's
policy is to grant options with an exercise price equal to
the quoted closing market price of the Company's stock on
the business day preceding the grant date. Accordingly, no
compensation cost has been recognized under the Company's
stock option plans for the granting of stock options. See
Note 13.
RECLASSIFICATIONS Certain reclassifications have been made to prior period
amounts in order to conform with current period
presentation.
3. ACQUISITIONS, PROPERTIES PLACED IN SERVICE AND PROPERTY SALES
LAND ACQUISITIONS
On June 12, 2002, the Company 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 Company as the President of the Company, a current
member of the Board of Directors and a former member of the Board of Directors
of the Company, respectively. In connection with the Company's acquisition of 65
Class A properties from The Robert Martin Company ("Robert Martin") in January
1997, as subsequently modified, the Company granted Robert Martin the right to
designate one seat on the Company's Board of Directors ("RM Board Seat"). 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 the
Directors of the Company 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 Company 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 Company's 2003 annual meeting
of stockholders. If the Company elects to nominate for re-election to its Board
of Directors a designee of Robert Martin at the Company'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.
11
PROPERTY PLACED IN SERVICE
The Company placed in service the following property during the six months ended
June 30, 2002:
- ----------------------------------------------------------------------------------------------------------
Date Placed # of Rentable Investment
in Service Property Name Location Bldgs. Square Feet by Company
- ----------------------------------------------------------------------------------------------------------
OFFICE/FLEX:
4/01/02 125 Clearbrook Road Elmsford, Westchester County, NY 1 33,000 $ 4,638
- ----------------------------------------------------------------------------------------------------------
PROPERTY SALES
The Company sold the following properties during the six months ended June 30,
2002:
- ----------------------------------------------------------------------------------------------------------------------------------
Sale # of Net Sales Net Book Realized
Date Property/Portfolio Name Location Bldgs. Sq. Ft. Proceeds Value 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
RESIDENTIAL:
1/30/02 25 Martine Avenue White Plains, Westchester County, NY 1 124 units 17,559 10,461 7,098
LAND:
04/25/02 Horizon Center Land Hamilton Township, Mercer County, NJ n/a 0.8 acres 758 41 717
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL PROPERTY SALES: 9 1,010,136 $ 97,545 $ 90,946 $ 6,599
==================================================================================================================================
(a) On May 13, 2002, the Company 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 Company. The Company 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. In conjunction with the Purchaser's subsequent sale of one
of its acquired properties, the purchaser repaid $953 of the loan principal
through June 30, 2002. In July 2002, the purchaser repaid an additional
$564 of the loan principal.
(b) On June 6, 2002, the Company sold 1717 St. James Place, 5300 Memorial Drive
and 10497 Town & Country Way in a single transaction with one buyer,
Parkway Properties LP.
4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The debt of the Company's unconsolidated joint ventures aggregating $467,435 are
non-recourse to the Company, except for customary exceptions pertaining to such
matters as intentional misuse of funds, environmental conditions and material
misrepresentations and except as otherwise indicated below.
PRU-BETA 3 (NINE CAMPUS DRIVE)
On March 27, 1998, the Company 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
Company acquired the remaining interest in the property for approximately
$15,073. The property has been consolidated in the Company's financial
statements subsequent to the acquisition of the remaining interest. The Company
performed management and leasing services for the property when it was owned by
the joint venture and recognized $75 in fees for such services in the six months
ended June 30, 2001.
HPMC
On April 23, 1998, the Company 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.
12
HPMC Development Partners, L.P.'s efforts have 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. Among other things, the partnership agreements provide for a preferred
return on the Company's invested capital in each venture, in addition to 50
percent of such venture's profit above the preferred returns, as defined in each
agreement.
CONTINENTAL GRAND II
Continental Grand II is a 239,085 square-foot office building located in El
Segundo, Los Angeles County, California, which was constructed and placed in
service by the venture. On June 29, 2001, the venture sold the office
property for approximately $67,000.
SUMMIT RIDGE
Summit Ridge is an office complex of three one-story buildings aggregating
133,841 square feet located in San Diego, San Diego County, California, which
was constructed and placed in service by the venture. On January 29, 2001,
the venture sold the office complex for approximately $17,450.
LAVA RIDGE
Lava Ridge is an office complex of three two-story buildings aggregating
183,200 square feet located in Roseville, Placer County, California, which
was constructed and placed in service by the venture. On May 30, 2002, the
venture sold the office complex for approximately $31,700.
PACIFIC PLAZA I & II
Pacific Plaza I & II is a two-phase development joint venture project,
located in the city of Daly City, San Mateo County, California between HPMC
Development Partners II, L.P. and a third-party entity. Phase I of the
project, which was placed in service in August 2001, consists of a nine-story
office building, aggregating 369,682 square feet. Phase II, which is
currently under construction, will comprise a three-story retail and theater
complex. The theater portion of Phase II was placed in service in June 2002.
The Company performs management services for this property owned by the joint
venture and recognized $50 and zero in fees for such services in the three
months ended June 30, 2002 and 2001, respectively.
STADIUM GATEWAY
Stadium Gateway is a development joint venture project located in Anaheim,
Orange County, California between HPMC Development Partners II, L.P. and a
third-party entity. The venture has constructed a six-story, 261,554
square-foot office building, which was placed in service in January 2002.
G&G MARTCO (CONVENTION PLAZA)
On April 30, 1998, the Company acquired a 49.9 percent interest in an existing
joint venture, known as 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 Company's initial investment was financed through
the issuance of common units, as well as funds drawn from the Company's credit
facilities. Subsequently, on June 4, 1999, the Company acquired an additional
0.1 percent interest in G&G Martco through the issuance of common units. The
Company performs management and leasing services for the property owned by the
joint venture and recognized $126 and $110 in fees for such services in the six
months ended June 30, 2002 and 2001, respectively.
AMERICAN FINANCIAL EXCHANGE L.L.C.
On May 20, 1998, the Company entered into a joint venture agreement with
Columbia Development Company, L.L.C. to form American Financial Exchange L.L.C.
The venture was initially formed to acquire land for future development, located
on the Hudson River waterfront in Jersey City, Hudson County, New Jersey,
adjacent to the Company's Harborside Financial Center office complex. The
Company holds a 50 percent interest in the joint venture. Among other things,
the partnership agreement provides for a preferred return on the Company's
invested capital in the venture, in addition to the Company's proportionate
share of the venture's profit, as defined in the agreement. The 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 Company's Harborside property and Manhattan. In the fourth
quarter 2000, the joint venture started construction of Plaza 10, a 575,000
square-foot office building, on certain of the
13
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
Company'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 Company. The project under construction,
which is anticipated to be completed in late 2002, is currently projected to
cost the Company approximately $145,000, of which $101,394 has been incurred by
the Company through June 30, 2002.
RAMLAND REALTY ASSOCIATES L.L.C. (ONE RAMLAND ROAD)
On August 20, 1998, the Company 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 plus 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 Company holds a 50 percent interest in the joint venture. The property's
principal tenant, Superior Bank has been declared insolvent and taken over by
the Federal Deposit Insurance Corporation (FDIC). The tenant continued to meet
its rental payment obligation through June 2002. In July 2002, the tenant
vacated the premises and the FDIC notified the joint venture that they are
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 Company's
equity in earnings for the six months ended June 30, 2002. The Company performs
management, leasing and other services for the property owned by the joint
venture and recognized $49 and $58 in fees for such services in the six months
ended June 30, 2002 and 2001, respectively.
ASHFORD LOOP ASSOCIATES L.P. (1001 SOUTH DAIRY ASHFORD/2100 WEST LOOP SOUTH)
On September 18, 1998, the Company 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 Company holds a 20 percent interest in the
joint venture. The Company performed management and leasing services through
March 2002 for the properties owned by the joint venture and recognized $57 and
$94 in fees for such services in the six months ended June 30, 2002 and 2001,
respectively. Under certain circumstances, Prudential has the right to convert
its interest in the venture into common stock of the Company 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.
In May 2002, the Company 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 Company that it was exercising its
option to put its interest in the joint venture to the Company in exchange for
common stock of the Company as described above. Pursuant to the provisions of
the joint venture agreement, the Company, at its option, can elect to exchange
cash in lieu of stock for Prudential's interest. The Company believes its prior
exercise of the buy-sell provisions acts to foreclose Prudential's subsequent
election to exchange its interest for stock, a position being disputed by
Prudential. The partners are currently in discussions about the relevant
provisions of the agreement. However, the ultimate resolution of the dispute is
not yet determinable.
ARCAP INVESTORS, L.L.C.
In 1999, the Company 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 Company, is a principal of an
entity that owns approximately 28 percent of the venture and has nominated a
member of its board of directors. At June 30, 2002, the venture held
approximately $645,469 of assets, comprised principally of subordinated CMBS
recorded at market value.
MC-SJP MORRIS V REALTY, LLC AND MC-SJP MORRIS VI REALTY, LLC
The Company has an agreement with SJP Properties, which provides for a
cooperative effort in seeking approvals to
14
develop up to approximately 1.8 million square feet of office development on
certain vacant land owned by the Company and SJP Properties, in Hanover and
Parsippany, Morris County, New Jersey. The agreement provides that the parties
shall share equally in the costs associated with seeking such requisite
approvals. Upon mutual consent, the Company 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 Company 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 able to
accommodate approximately 650,000 square feet of office space located in
Parsippany, Morris County, New Jersey. The land was acquired for approximately
$16,193. 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. In addition, the venture obtained a loan on the acquired land from a
bank, which is guaranteed by the insurance company.
SOUTH PIER AT HARBORSIDE - HOTEL DEVELOPMENT
On November 17, 1999, the Company entered into an agreement with Hyatt
Corporation ("Hyatt") to develop a 350-room hotel on the Company's South Pier at
Harborside Financial Center, Jersey City, Hudson County, New Jersey, which
commenced operations in July 2002. The total cost of the project is estimated to
be approximately $103,000. The venture has obtained a construction loan of
$63,700, of which each partner, including the Company, has severally guaranteed
repayment of approximately $11,148. Additionally, the Company has posted an
$8,000 letter of credit in support of another loan to the joint venture, $4,000
of which is indemnified by Hyatt. In addition, the Company and Hyatt have
guaranteed completion of the hotel project to the joint venture's construction
lender. If the joint venture fails to complete the hotel project as required
under the construction loan documents and the construction loan proceeds
remaining to be advanced together with the capital contributed by the partners
to such date are insufficient to complete the hotel project, the Company and/or
Hyatt may be required to provide additional funds sufficient to complete the
hotel project.
15
SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
The following is a summary of the financial position of the unconsolidated joint
ventures in which the Company had investment interests as of June 30, 2002 and
December 31, 2001:
June 30, 2002
-------------------------------------------------------
American
G&G Financial Ramland
Pru-Beta 3 HPMC Martco Exchange Realty
- ----------------------------------------------------------------------------------------
ASSETS:
Rental property, net $ -- $ -- $ 8,901 $ 108,416 $ 17,467
Other assets -- 16,883 3,648 189 2,814
- ----------------------------------------------------------------------------------------
Total assets -- $ 16,883 $ 12,549 $ 108,605 $ 20,281
========================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $ -- $ 50,000 $ -- $ 15,628
Other liabilities -- 25 1,766 6,158 73
Partners'/members' capital -- 16,858 (39,217) 102,447 4,580
- ----------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $ -- $ 16,883 $ 12,549 $ 108,605 $ 20,281
========================================================================================
Company's net investment
in unconsolidated
joint ventures $ -- $ 16,337 $ 2,921 $ 109,127 $ 1,862
- ----------------------------------------------------------------------------------------
June 30, 2002
-------------------------------------------------------
MC-SJP
Ashford Morris Harborside Combined
Loop ARCap Realty South Pier Total
- ----------------------------------------------------------------------------------------
ASSETS:
Rental property, net $ 36,871 $ -- $ 17,173 $ 89,841 $278,669
Other assets 1,416 645,469 1,010 100 $671,529
- ----------------------------------------------------------------------------------------
Total assets $ 38,287 $645,469 $ 18,183 $ 89,941 $950,198
========================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $324,422 $ 17,710 $ 59,675 $467,435
Other liabilities 708 3,935 146 3,434 16,245
Partners'/members' capital 37,579 317,112 327 26,832 466,518
- ----------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $ 38,287 $645,469 $ 18,183 $ 89,941 $950,198
========================================================================================
Company's net investment
in unconsolidated
joint ventures $ 7,956 $ 18,085 $ 186 $ 16,137 $172,611
- ----------------------------------------------------------------------------------------
December 31, 2001
-------------------------------------------------------
American
G&G Financial Ramland
Pru-Beta 3 HPMC Martco Exchange Realty
- ----------------------------------------------------------------------------------------
ASSETS:
Rental property, net $ -- $ 19,556 $ 9,598 $ 81,070 $ 18,119
Other assets 732 20,267 2,163 13,120 4,822
- ----------------------------------------------------------------------------------------
Total assets $ 732 $ 39,823 $ 11,761 $ 81,190 $ 22,941
========================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $ 13,976 $ 50,000 $ -- $ 15,974
Other liabilities -- 897 1,196 9,667 83
Partners'/members' capital 732 24,950 (39,435) 71,523 6,884
- ----------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $ 732 $ 39,823 $ 11,761 $ 81,190 $ 22,941
========================================================================================
Company's net investment
in unconsolidated
joint ventures $ 350 $ 24,545 $ 2,795 $ 74,651 $ 3,014
- ----------------------------------------------------------------------------------------
December 31, 2001
-------------------------------------------------------
MC-SJP
Ashford Morris Harborside Combined
Loop ARCap Realty South Pier Total
- ----------------------------------------------------------------------------------------
ASSETS:
Rental property, net $ 37,157 $ -- $ 16,607 $ 63,236 $245,343
Other assets 1,150 595,937 107 100 625,398
- ----------------------------------------------------------------------------------------
Total assets $ 38,307 $595,937 $ 16,714 $ 63,336 $870,741
========================================================================================
LIABILITIES AND PARTNERS'/
MEMBERS' CAPITAL:
Mortgages and loans payable $ -- $324,819 $ 16,795 $ 34,107 $455,671
Other liabilities 949 3,736 103 2,927 19,558
Partners'/members' capital 37,358 267,382 (184) 26,302 395,512
- ----------------------------------------------------------------------------------------
Total liabilities and
partners'/members' capital $ 38,307 $595,937 $ 16,714 $ 63,336 $870,741
========================================================================================
Company's net investment
in unconsolidated
joint ventures $ 7,809 $ 17,897 $ 183 $ 15,296 $146,540
- ----------------------------------------------------------------------------------------
16
The following is a summary of the results of operations of the unconsolidated
joint ventures for the period in which the Company had investment interests
during the three months ended June 30, 2002 and 2001:
Three Months Ended June 30, 2002
-------------------------------------------------------
American
G&G Financial Ramland
Pru-Beta 3 HPMC Martco Exchange Realty
- ----------------------------------------------------------------------------------------
Total revenues $ -- $ 10,779 $ 3,354 $ 176 $ 767
Operating and other expenses -- (268) (883) (10) (263)
Depreciation and amortization -- (256) (406) (10) (223)
Interest expense -- (82) (488) -- (208)
- ----------------------------------------------------------------------------------------
Net income $ -- $ 10,173 $ 1,577 $ 156 $ 73
========================================================================================
Company's equity in
earnings of unconsolidated
joint ventures $ 13 $ 4,705 $ 945 $ 156 $ 36
- ----------------------------------------------------------------------------------------
Three Months Ended June 30, 2002
-------------------------------------------------------
MC-SJP
Ashford Morris Harborside Combined
Loop ARCap Realty South Pier Total
- ----------------------------------------------------------------------------------------
Total revenues $ 1,254 $ 40,282 $ -- $ -- $ 56,612
Operating and other expenses (841) (5,275) -- (10) (7,550)
Depreciation and amortization (325) -- -- -- (1,220)
Interest expense -- (6,490) -- -- (7,268)
- ----------------------------------------------------------------------------------------
Net income $ 88 $ 28,517 $ -- $ (10) $ 40,574
========================================================================================
Company's equity in
earnings of unconsolidated
joint ventures $ 16 $ 3,503 $ -- $ -- $ 9,374
- ----------------------------------------------------------------------------------------
Three Months Ended June 30, 2001
-------------------------------------------------------
American
G&G Financial Ramland
Pru-Beta 3 HPMC Martco Exchange Realty
- ----------------------------------------------------------------------------------------
Total revenues $ 1,235 $ 13,936 $ 3,084 $ 158 $ 989
Operating and other expenses (369) (774) (845) (7) (264)
Depreciation and amortization (299) (592) (387) (5) (236)
Interest expense -- (929) (808) -- (299)
- ----------------------------------------------------------------------------------------
Net income $ 567 $ 11,641 $ 1,044 $ 146 $ 190
========================================================================================
Company's equity in
earnings (loss) of
unconsolidated joint ventures $ 245 $ 1,311 $ 366 $ (617) $ 95
- ----------------------------------------------------------------------------------------
Three Months Ended June 30, 2001
-------------------------------------------------------
MC-SJP
Ashford Morris Harborside Combined
Loop ARCap Realty South Pier Total
- ----------------------------------------------------------------------------------------
Total revenues $ 1,491 $ 8,504 $ -- $ -- $ 29,397
Operating and other expenses (699) (2,179) -- -- (5,137)
Depreciation and amortization (232) -- -- -- (1,751)
Interest expense -- (4,903) -- -- (6,939)
- ----------------------------------------------------------------------------------------
Net income $ 560 $ 1,422 $ -- $ -- $ 15,570
========================================================================================
Company's equity in
earnings (loss) of
unconsolidated joint ventures $ 112 $ 525 $ -- $ -- $ 2,037
- ----------------------------------------------------------------------------------------
17
The following is a summary of the results of operations of the unconsolidated
joint ventures for the period in which the Company had investment interests
during the six months ended June 30, 2002 and 2001:
Six Months Ended June 30, 2002
-------------------------------------------------------
American
G&G Financial Ramland
Pru-Beta 3 HPMC Martco Exchange Realty
- ----------------------------------------------------------------------------------------
Total revenues $ -- $ 12,087 $ 6,760 $ 180 $ 1,740
Operating and other expenses -- (660) (1,736) (20) (2,119)
Depreciation and amortization -- (641) (813) (20) (1,526)
Interest expense -- (233) (993) -- (398)
- ----------------------------------------------------------------------------------------
Net income $ -- $ 10,553 $ 3,218 $ 140 $ (2,303)
========================================================================================
Company's equity in
earnings (loss) of
unconsolidated joint ventures $ -- $ 6,020 $ 1,627 $ 140 $ (1,152)
- ----------------------------------------------------------------------------------------
Six Months Ended June 30, 2002
-------------------------------------------------------
MC-SJP
Ashford Morris Harborside Combined
Loop ARCap Realty South Pier Total
- ----------------------------------------------------------------------------------------
Total revenues $ 2,285 $ 39,498 $ -- $ -- $ 62,550
Operating and other expenses (1,289) (9,160) -- (10) (14,994)
Depreciation and amortization (487) -- -- -- (3,487)
Interest expense -- (12,968) -- -- (14,592)
- ----------------------------------------------------------------------------------------
Net income $ 509 $ 17,370 $ -- $ (10) $ 29,477
========================================================================================
Company's equity in
earnings (loss) of
unconsolidated joint ventures $ 148 $ 1,286 $ -- $ -- $ 8,069
- ----------------------------------------------------------------------------------------
Six Months Ended June 30, 2001
-------------------------------------------------------
American
G&G Financial Ramland
Pru-Beta 3 HPMC Martco Exchange Realty
- ----------------------------------------------------------------------------------------
Total revenues $ 2,488 $ 14,992 $ 5,807 $ 379 $ 1,958
Operating and other expenses (782) (948) (1,650) (41) (607)
Depreciation and amortization (592) (933) (777) (20) (483)
Interest expense -- (1,256) (1,793) -- (654)
- ----------------------------------------------------------------------------------------
Net income $ 1,114 $ 11,855 $ 1,587 $ 318 $ 214
========================================================================================
Company's equity in
earnings (loss) of
unconsolidated joint ventures $ 503 $ 3,464 $ 536 $ (445) $ 154
- ----------------------------------------------------------------------------------------
Six Months Ended June 30, 2001
-------------------------------------------------------
MC-SJP
Ashford Morris Harborside Combined
Loop ARCap Realty South Pier Total
- ----------------------------------------------------------------------------------------
Total revenues $ 3,064 $ 27,830 $ -- $ -- $ 56,518
Operating and other expenses (1,416) (4,003) -- -- (9,447)
Depreciation and amortization (462) -- -- -- (3,267)
Interest expense -- (7,890) -- -- (11,593)
- ----------------------------------------------------------------------------------------
Net income $ 1,186 $ 15,937 $ -- $ -- $ 32,211
========================================================================================
Company's equity in
earnings (loss) of unconsol
joint ventures $ 209 $ 1,025 $ -- $ -- $ 5,446
- ----------------------------------------------------------------------------------------
18
5. DEFERRED CHARGES AND OTHER ASSETS
June 30, December 31,
2002 2001
- ---------------------------------------------------------------------------------
Deferred leasing costs $ 97,921 $ 93,677
Deferred financing costs 26,569 26,569
- ---------------------------------------------------------------------------------
124,490 120,246
Accumulated amortization (44,374) (36,746)
- ---------------------------------------------------------------------------------
Deferred charges, net 80,116 83,500
Notes receivable 12,797 10,777
Prepaid expenses and other assets 8,494 7,222
- ---------------------------------------------------------------------------------
Total deferred charges and other assets, net $ 101,407 $ 101,499
=================================================================================
6. RENTAL PROPERTY HELD FOR SALE
PROPERTIES HELD FOR SALE
As of June 30, 2002, the Company has identified nine office properties,
aggregating approximately 1.7 million square feet, as held for sale. These
properties are located in Texas, Arizona and Florida. The properties carried an
aggregate book value of $120,109, net of accumulated depreciation of $9,257 and
a valuation allowance of $12,553, at June 30, 2002. On July 15, 2002, the
Company sold one of these properties, One Mack-Cali Center, its sole property in
Florida, for approximately $23,700.
On June 6, 2002, the Company 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 Company 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 $172,281, net of
accumulated depreciation of $17,063 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 $4,042 for certain
properties reflecting expense from 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, 2001, the Company 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 are 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. For the six months ended
June 30, 2002, the Company sold eight of these properties for total net sales
proceeds of approximately $79,228.
The following is a summary of the condensed results of operations of the rental
properties held for sale at June 30, 2002 for the six months ended June 30, 2002
and 2001:
Six Months Ended
June 30,
2002 2001
- ----------------------------------------------------------------------------
Total revenues $ 12,347 $ 13,410
Operating and other expenses (6,076) (6,020)
Depreciation and amortization (9) (735)
- ----------------------------------------------------------------------------
Net income $ 6,262 $ 6,655
============================================================================
While considered probable, there can be no assurance if and when sales of the
Company's rental properties held for sale will occur.
19
During the six months ended June 30, 2002 and 2001, the Company 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 these property sales. The Company recognized a valuation allowance of
$4,341 and none for the three months ended June 30, 2002 and 2001, respectively,
and $4,341 and $20,563 for the six months ended June 30, 2002, and 2001,
respectively.
REALIZED GAINS (LOSSES) AND UNREALIZED LOSSES, NET
The following table summarizes realized gains (losses) and unrealized losses on
disposition of rental property, net, for the three and six month periods ended
June 30, 2002 and 2001:
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
- -----------------------------------------------------------------------------------------------------
Realized gains (losses) on sale of rental property, net $ (499) $ 22,510 $ 6,599 $ 22,510
Valuation allowance on rental property held for sale (4,341) -- (4,341) (20,563)
- -----------------------------------------------------------------------------------------------------
Realized gains (losses) and unrealized losses, net $ (4,840) $ 22,510 $ 2,258 $ 1,947
=====================================================================================================
7. SENIOR UNSECURED NOTES
A summary of the terms of the Senior Unsecured Notes outstanding as of June 30,
2002 and December 31, 2001 is as follows:
June 30, December 31, Effective
2002 2001 Rate (1)
- ----------------------------------------------------------------------------------------------------
7.180% Senior Unsecured Notes, due December 31, 2003 $ 185,283 $ 185,283 7.23%
7.000% Senior Unsecured Notes, due March 15, 2004 299,864 299,824 7.27%
7.250% Senior Unsecured Notes, due March 15, 2009 298,424 298,307 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 298,516 298,429 7.93%
- ----------------------------------------------------------------------------------------------------
Total Senior Unsecured Notes $ 1,097,087 $ 1,096,843 7.51%
====================================================================================================
(1) Includes the cost of terminated treasury lock agreements (if any), offering
and other transaction costs and the discount on the notes, as applicable.
8. REVOLVING CREDIT FACILITY
The Company has 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 the London Inter-Bank Offered Rate ("LIBOR") (1.84 percent at June 30,
2002) plus 80 basis points. The Company 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. 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.
20
9. MORTGAGES AND LOANS PAYABLE
The Company has mortgages and loans payable which are comprised of various loans
collateralized by certain of the Company'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 Company's mortgages and loans payable as of June 30, 2002 and
December 31, 2001 is as follows:
EFFECTIVE PRINCIPAL BALANCE AT
INTEREST JUNE 30, DECEMBER 31,
PROPERTY NAME LENDER RATE 2002 2001 MATURITY
- -------------------------------------------------------------------------------------------------------------------------
Mack-Cali Willowbrook CIGNA 8.67% $ 8,139 $ 8,598 10/01/03
400 Chestnut Ridge Prudential Insurance Co. 9.44% 12,141 12,646 07/01/04
Mack-Cali Centre VI Principal Life Insurance Co. 6.87% 35,000 35,000 04/01/05
Various (a) 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% 24,851 25,218 10/01/05
500 West Putnam Avenue New York Life Ins. Co. 6.52% 8,852 9,273 10/10/05
Harborside - Plaza 1 U.S. West Pension Trust 5.61% 59,883 57,978 01/01/06
Harborside - Plazas 2 and 3 Northwestern/Principal 7.36% 160,117 162,022 01/01/06
Mack-Cali Airport Allstate Life Insurance Co. 7.05% 10,311 10,394 04/01/07
Kemble Plaza I Mitsubishi Tr & Bk Co. LIBOR+0.65% 32,178 32,178 01/31/09
- -------------------------------------------------------------------------------------------------------------------------
Total Property Mortgages $ 541,972 $ 543,807
=========================================================================================================================
(a) The Company has the option to convert the mortgage loan, which is secured
by 12 properties, to unsecured debt, subject to, amongst other things, the
Company 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.
INTEREST RATE SWAP
On July 18, 2002, the Company entered into a forward treasury rate lock
agreement with a commercial bank. The agreement locked an interest rate of 3.285
percent per annum for the three-year U.S. Treasury Note effective November 4,
2002, on a notional amount of $61,525. The agreement will be used to fix the
index rate on $61,525 of the Harborside-Plaza 1 mortgage, for which the interest
rate will be 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).
CASH PAID FOR INTEREST AND INTEREST CAPITALIZED
Cash paid for interest for the six months ended June 30, 2002 and 2001 was
$61,080 and $52,530, respectively. Interest capitalized by the Company for the
six months ended June 30, 2002 and 2001 was $11,647 and $7,315, respectively.
SUMMARY OF INDEBTEDNESS
As of June 30, 2002, the Company's total indebtedness of $1,705,659 (weighted
average interest rate of 7.11 percent) was comprised of $98,778 of revolving
credit facility borrowings and other variable rate mortgage debt (weighted
average rate of 2.77 percent) and fixed rate debt of $1,606,881 (weighted
average rate of 7.38 percent).
As of December 31, 2001, the Company'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).
21
10. MINORITY INTEREST
Minority interest in the accompanying consolidated financial statements relate
to preferred units in the Operating Partnership ("Preferred Units"), common
units in the Operating Partnership and warrants to purchase common units ("Unit
Warrants"), all of which are held by parties other than the Company.
The following table sets forth the changes in minority interest which relate to
Preferred Units, common units and Unit Warrants in the Operating Partnership for
the six months ended June 30, 2002:
Preferred Common Unit Preferred Common Unit
Units Units Warrants Unitholders Unitholders Warrants Total
- ----------------------------------------------------------------------------------------------------------------------
Balance at January 1, 2002 220,340 7,954,775 2,000,000 $ 226,005 $ 211,715 $ 8,524 $ 446,244
Net income -- -- -- 7,806 10,538 -- 18,344
Distributions -- -- -- (7,806) (9,802) -- (17,608)
Redemption of Preferred
units for common units (4,446) 128,312 -- (4,560) 4,560 -- --
Redemption of common
units for shares of
common stock -- (224,597) -- -- (7,132) -- (7,132)
- ----------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2002 215,894 7,858,490 2,000,000 $ 221,445 $ 209,879 $ 8,524 $ 439,848
======================================================================================================================
As of June 30, 2002 and December 31, 2001, the minority interest common
unitholders owned 12.0 percent (19.6 percent, including the effect of the
conversion of Preferred Units into common units) and 12.3 percent (20.2 percent
including the effect of the conversion of Preferred Units into common units) of
the Operating Partnership, respectively (excluding any effect for the exercise
of Unit Warrants).
11. COMMITMENTS AND CONTINGENCIES
TAX ABATEMENT AGREEMENTS
HARBORSIDE FINANCIAL CENTER
Pursuant to an agreement with the City of Jersey City, New Jersey, the Company
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 $934 and
$904 for the three months ended June 30, 2002 and 2001, respectively, and $1,869
and $1,820 for the six months ended June 30, 2002 and 2001, 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 Company 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 Company does not believe that the
outcome will result in a material adverse impact to the Company 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 Company has entered into a similar 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 increase 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 $252 and $228 for the three months ended June 30, 2002 and 2001,
respectively, and $497 and $438 for the six months ended June 30, 2002 and 2001,
respectively.
Additionally, the Company has entered into a similar agreement with the City of
Jersey City, New Jersey on its Harborside Plaza 5 property. The agreement, which
will commence 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
22
10 percent in years 7, 10 and 13, and by 50 percent in year 16. Total Project
Costs, as defined, are $132,294. The Company incurred no costs pursuant to the
PILOT for the years ended December 31, 2001, 2000 and 1999.
The Company 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 Company.
12. TENANT LEASES
The Properties are leased to tenants under operating leases with various
expiration dates through 2017. 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.
13. STOCKHOLDERS' EQUITY
To maintain its qualification as a REIT, not more than 50 percent in value of
the outstanding shares of the Company may be owned, directly or indirectly, by
five or fewer individuals at any time during the last half of any taxable year
of the Company, other than its initial taxable year (defined to include certain
entities), applying certain constructive ownership rules. To help ensure that
the Company will not fail this test, the Company's Articles of Incorporation
provide for, among other things, certain restrictions on the transfer of the
common stock to prevent further concentration of stock ownership. Moreover, to
evidence compliance with these requirements, the Company must maintain records
that disclose the actual ownership of its outstanding common stock and will
demand written statements each year from the holders of record of designated
percentages of its common stock requesting the disclosure of the beneficial
owners of such common stock.
COMMON STOCK REPURCHASES
On August 6, 1998, the Board of Directors of the Company authorized a share
repurchase program ("Repurchase Program") under which the Company was permitted
to purchase up to $100,000 of the Company's outstanding common stock. Purchases
could be made from time to time in open market transactions at prevailing prices
or through privately negotiated transactions. Under the Repurchase Program, the
Company purchased for constructive retirement 1,869,200 shares of its
outstanding common stock for an aggregate cost of approximately $52,562 from
August 1998 through December 1999.
On September 13, 2000, the Board of Directors authorized an increase to the
Repurchase Program under which the Company is permitted to purchase up to an
additional $150,000 of the Company's outstanding common stock above the $52,562
that had previously been purchased. The Company purchased for constructive
retirement 3,300,800 shares of its outstanding common stock for an aggregate
cost of approximately $91,077 from September 13, 2000 through June 30, 2002.
STOCK OPTION PLANS
In September 2000, the Company 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 Company 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 the Company'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 Company 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 Company'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
23
at the dates of grant and have terms of ten years. As of June 30, 2002, the
stock options outstanding had a weighted average remaining contractual life of
approximately 6.8 years.
Information regarding the Company's stock option plans is summarized below:
Weighted
Shares Average
Under Exercise
Options Price
- -----------------------------------------------------------------------------------------
Outstanding at January 1, 2002 4,511,886 $ 31.28
Exercised (630,117) $ 26.34
Lapsed or canceled (97,967) $ 29.72
- -----------------------------------------------------------------------------------------
Outstanding at June 30, 2002 3,783,802 $ 32.16
=========================================================================================
Options exercisable at June 30, 2002 2,078,381 $ 35.43
Available for grant at June 30, 2002 3,222,230
- -----------------------------------------------------------------------------------------
STOCK WARRANTS
The Company has 255,000 warrants outstanding which enable the holders to
purchase an equal number of shares of its common stock ("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 Company also has 389,976 Stock Warrants outstanding which enable the holders
to purchase an equal number of its shares of common stock 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 Company's Stock Warrants is summarized below:
Warrants
- ----------------------------------------------------------------------------------------
Outstanding at January 1, 2002 749,976
Exercised (105,000)
Lapsed or canceled --
- ----------------------------------------------------------------------------------------
Outstanding at June 30, 2002 644,976
========================================================================================
Warrants exercisable at June 30, 2002 644,976
- ----------------------------------------------------------------------------------------
STOCK COMPENSATION
The company has granted stock awards to officers and certain other employees of
the Company (collectively, "Restricted Stock Awards"), which allows the
employees to each receive a certain amount of shares of the Company's common
stock generally over a five-year vesting period. Certain Restricted Stock Awards
are contingent upon the Company 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.
Information regarding the Restricted Stock Awards is summarized below:
Shares
- ---------------------------------------------------------------------------------------
Outstanding at January 1, 2002 198,279
Granted --
Vested (44,545)
Canceled --
- ---------------------------------------------------------------------------------------
Outstanding at June 30, 2002 153,734
=======================================================================================
24
DEFERRED STOCK COMPENSATION PLAN FOR DIRECTORS
The Deferred Compensation Plan for Directors, which commenced January 1, 1999,
allows non-employee directors of the Company 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 Company, as defined in the plan. Deferred stock units are
credited to each director quarterly using the closing price of the Company's
common stock on the applicable dividend record date for the respective quarter.
Each participating director's account is also credited for an equivalent amount
of deferred stock units based on the dividend rate for each quarter.
During the six months ended June 30, 2002 and 2001, 1,191 and 1,378 deferred
stock units were earned, respectively.
EARNINGS PER SHARE
Basic EPS excludes dilution and is computed by dividing net income available to
common stockholders by the weighted average number of shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock.
The following information presents the Company's EPS results for the three and
six months ended June 30, 2002 and 2001:
Three Months Ended June 30,
2002 2001
------------------------------------------------------------
Basic EPS Diluted EPS Basic EPS Diluted EPS
- -----------------------------------------------------------------------------------------------------------------
Net income $ 35,039 $ 35,039 $ 57,673 $ 57,673
Add: Net income attributable to
Operating Partnership - common units -- 4,852 -- 8,119
Net income attributable to
Operating Partnership - Preferred units -- -- -- 3,879
- -----------------------------------------------------------------------------------------------------------------
Adjusted net income $ 35,039 $ 39,891 $ 57,673 $ 69,671
=================================================================================================================
Weighted average shares 57,241 65,606 56,519 71,044
- -----------------------------------------------------------------------------------------------------------------
Per Share $ 0.61 $ 0.61 $ 1.02 $ 0.98
=================================================================================================================
Six Months Ended June 30,
2002 2001
------------------------------------------------------------
Basic EPS Diluted EPS Basic EPS Diluted EPS
- -----------------------------------------------------------------------------------------------------------------
Net income $ 75,654 $ 75,654 $ 74,411 $ 74,411
Add: Net income attributable to
Operating Partnership - common units -- 10,538 -- 10,464
Net income attributable to
Operating Partnership - Preferred units -- 7,806 -- 7,758
- -----------------------------------------------------------------------------------------------------------------
Adjusted net income $ 75,654 $ 93,998 $ 74,411 $ 92,633
=================================================================================================================
Weighted average shares 57,021 71,702 56,662 71,198
- -----------------------------------------------------------------------------------------------------------------
Per Share $ 1.33 $ 1.31 $ 1.31 $ 1.30
=================================================================================================================
25
The following schedule reconciles the shares used in the basic EPS calculation
to the shares used in the diluted EPS calculation:
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------------
Basic EPS Shares 57,241 56,519 57,021 56,662
Add: Operating Partnership - common units 7,927 7,957 7,940 7,959
Operating Partnership - preferred units
(after conversion to common units) -- 6,359 6,346 6,359
Stock options 429 209 390 218
Stock Warrants 9 -- 5 --
- ---------------------------------------------------------------------------------------------------------------
Diluted EPS Shares 65,606 71,044 71,702 71,198
===============================================================================================================
Preferred Units outstanding during the three months ended June 30, 2002 were not
included in the three months ended June 30, 2002 computation of diluted EPS as
such units were anti-dilutive during the period.
Through June 30, 2002, under the Repurchase Program, the Company purchased for
constructive retirement, a total of 5,170,000 shares of its outstanding common
stock for an aggregate cost of approximately $143,639.
14. SEGMENT REPORTING
The Company operates in one business segment - real estate. The Company provides
leasing, management, acquisition, development, construction and tenant-related
services for its portfolio. The Company 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 Company evaluates performance based upon net operating income from the
combined properties in the segment.
26
Selected results of operations for the three and six months ended June 30, 2002
and 2001 and selected asset information as of June 30, 2002 and December 31,
2001 regarding the Company's operating segment are as follows:
Total Segment Corporate & Other (e) Total Company
- ---------------------------------------------------------------------------------------------------------
TOTAL CONTRACT REVENUES (a)
Three months ended:
June 30, 2002 $ 139,854 $ 394 $ 140,248 (f)
June 30, 2001 141,739 584 142,323 (g)
Six months ended:
June 30, 2002 $ 280,953 $ 712 $ 281,665 (h)
June 30, 2001 280,134 1,480 281,614 (i)
TOTAL OPERATING AND INTEREST EXPENSES (b):
Three months ended:
June 30, 2002 $ 41,578 $ 33,138 $ 74,716 (j)
June 30, 2001 43,616 35,689 79,305 (k)
Six months ended:
June 30, 2002 $ 83,065 $ 66,377 $ 149,442 (l)
June 30, 2001 88,893