UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
[ ] 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:
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 (I.R.S. Employer Identification Number) |
| 11 Commerce Drive,
Cranford, New Jersey (Address of principal executive office) |
07016-3501 (Zip Code) |
(908) 272-8000
(Registrant’s
telephone number, including area code)
Not Applicable
(Former
name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days. YES X NO
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES X NO
| Part I | Financial Information | Page |
| Item 1. | Financial Statements: | |
| Consolidated Balance Sheets as of September 30, 2004 | ||
| and December 31, 2003 | 4 | |
| Consolidated Statements of Operations for the three and nine month | ||
| periods ended September 30, 2004 and 2003 | 5 | |
| Consolidated Statement of Changes in Partners' Capital for the | ||
| nine months ended September 30, 2004 | 6 | |
| Consolidated Statement of Cash Flows for nine months | ||
| ended September 30, 2004 and 2003 | 7 | |
| Notes to Consolidated Financial Statements | 8-39 | |
| Item 2. | Management's Discussion and Analysis of Financial Condition | |
| and Results of Operations | 40-58 | |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 59 |
| Item 4. | Controls and Procedures | 59 |
| Part II | Other Information | |
| Item 1. | Legal Proceedings | 60-61 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 62 |
| Item 3. | Defaults Upon Senior Securities | 62 |
| Item 4. | Submission of Matters to a Vote of Security Holders | 62 |
| Item 5. | Other Information | 62 |
| Item 6. | Exhibits | 62 |
| Signatures | 63 |
2
The accompanying unaudited consolidated balance sheets, statements of operations, of changes in partners’ capital, and of cash flows and related notes thereto, have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. The financial statements reflect all adjustments consisting only of normal, recurring adjustments, which are, in the opinion of management, necessary for a fair presentation for the interim periods.
The aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in Mack-Cali Realty, L.P.‘s Annual Report on Form 10-K for the fiscal year ended December 31, 2003.
The results of operations for the three and nine month periods ended September 30, 2004 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.
3
| ASSETS |
September 30, 2004 (unaudited) |
December 31, 2003 | |||
|---|---|---|---|---|---|
| Rental property | |||||
| Land and leasehold interests | $ 575,811 | $ 552,287 | |||
| Buildings and improvements | 3,200,612 | 3,176,236 | |||
| Tenant improvements | 248,705 | 218,493 | |||
| Furniture, fixtures and equipment | 7,628 | 7,616 | |||
| 4,032,756 | 3,954,632 | ||||
| Less - accumulated depreciation and amortization | (613,087 | ) | (546,007 | ) | |
| 3,419,669 | 3,408,625 | ||||
| Rental property held for sale, net | 92,703 | -- | |||
| Net investment in rental property | 3,512,372 | 3,408,625 | |||
| Cash and cash equivalents | 11,562 | 78,375 | |||
| Investments in unconsolidated joint ventures | 42,027 | 48,624 | |||
| Unbilled rents receivable, net | 82,604 | 74,608 | |||
| Deferred charges and other assets, net | 149,935 | 126,791 | |||
| Restricted cash | 7,921 | 8,089 | |||
| Accounts receivable, net of allowance for doubtful accounts | |||||
| of $1,618 and $1,392 | 3,685 | 4,458 | |||
| Total assets | $ 3,810,106 | $ 3,749,570 | |||
| LIABILITIES AND PARTNERS' CAPITAL | |||||
| Senior unsecured notes | $ 1,030,902 | $ 1,127,859 | |||
| Revolving credit facilities | 140,000 | -- | |||
| Mortgages, loans payable and other obligations | 524,840 | 500,725 | |||
| Distributions payable | 47,570 | 46,873 | |||
| Accounts payable, accrued expenses and other liabilities | 47,533 | 41,423 | |||
| Rents received in advance and security deposits | 42,990 | 40,099 | |||
| Accrued interest payable | 11,117 | 23,004 | |||
| Total liabilities | 1,844,952 | 1,779,983 | |||
| Commitments and contingencies | |||||
| Partners' capital: | |||||
| General Partner, 10,000 and 10,000 preferred units outstanding | 24,836 | 24,836 | |||
| Limited partners, 215,018 and 215,018 preferred units outstanding | 220,547 | 220,547 | |||
| General Partner 60,730,128 and 59,420,484 common units outstanding | 1,518,265 | 1,516,652 | |||
| Limited partners, 7,779,360 and 7,795,498 common units outstanding | 201,506 | 207,552 | |||
| Total partners' capital | 1,965,154 | 1,969,587 | |||
| Total liabilities and partners' capital | $ 3,810,106 | $ 3,749,570 | |||
The accompanying notes are an integral part of these consolidated financial statements.
4
| Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| REVENUES |
2004 |
2003 |
2004 |
2003 | |||||||||
| Base rents | $ 131,076 | $ 122,006 | $ 381,427 | $ 367,636 | |||||||||
| Escalations and recoveries from tenants | 17,278 | 15,999 | 48,849 | 45,381 | |||||||||
| Parking and other | 3,417 | 4,933 | 9,382 | 14,004 | |||||||||
| Total revenues | 151,771 | 142,938 | 439,658 | 427,021 | |||||||||
| EXPENSES | |||||||||||||
| Real estate taxes | 18,520 | 16,196 | 51,953 | 47,290 | |||||||||
| Utilities | 11,441 | 11,253 | 32,395 | 30,871 | |||||||||
| Operating services | 18,623 | 16,437 | 55,711 | 53,005 | |||||||||
| General and administrative | 7,568 | 8,615 | 22,664 | 22,220 | |||||||||
| Depreciation and amortization | 33,115 | 28,588 | 95,665 | 85,203 | |||||||||
| Interest expense | 27,321 | 28,734 | 82,870 | 86,598 | |||||||||
| Interest income | (99 | ) | (244 | ) | (1,039 | ) | (836 | ) | |||||
| Loss on early retirement of debt, net | -- | -- | -- | 2,372 | |||||||||
| Total expenses | 116,489 | 109,579 | 340,219 | 326,723 | |||||||||
| Income from continuing operations before equity | |||||||||||||
| in earnings of unconsolidated joint ventures | 35,282 | 33,359 | 99,439 | 100,298 | |||||||||
| Equity in earnings of unconsolidated | |||||||||||||
| joint ventures, net | (690 | ) | 3,575 | 577 | 12,774 | ||||||||
| Gain on sale of investment in unconsolidated | |||||||||||||
| joint ventures | -- | 23,140 | 720 | 23,140 | |||||||||
| Income from continuing operations | 34,592 | 60,074 | 100,736 | 136,212 | |||||||||
| Discontinued operations: | |||||||||||||
| Income from discontinued operations | 1,553 | 1,525 | 3,620 | 4,794 | |||||||||
| Realized gains (unrealized losses) | |||||||||||||
| on disposition of rental property, net | -- | -- | (11,856 | ) | 1,324 | ||||||||
| Total discontinued operations, net | 1,553 | 1,525 | (8,236 | ) | 6,118 | ||||||||
| Net income | 36,145 | 61,599 | 92,500 | 142,330 | |||||||||
| Preferred unit distributions and allocation | |||||||||||||
| of undistributed earnings | (4,409 | ) | (5,763 | ) | (13,227 | ) | (13,372 | ) | |||||
| Net income available to common unitholders | $ 31,736 | $ 55,836 | $ 79,273 | $ 128,958 | |||||||||
| Basic earnings per common unit: | |||||||||||||
| Income from continuing operations | $ 0.44 | $ 0.83 | $ 1.29 | $ 1.88 | |||||||||
| Discontinued operations | 0.02 | 0.02 | (0.12 | ) | 0.09 | ||||||||
| Net income available to common unitholders | $ 0.46 | $ 0.85 | $ 1.17 | $ 1.97 | |||||||||
| Diluted earnings per common unit: | |||||||||||||
| Income from continuing operations | $ 0.44 | $ 0.82 | $ 1.28 | $ 1.87 | |||||||||
| Discontinued operations | 0.02 | 0.02 | (0.12 | ) | 0.09 | ||||||||
| Net income available to common unitholders | $ 0.46 | $ 0.84 | $ 1.16 | $ 1.96 | |||||||||
| Distributions declared per common unit | $ 0.63 | $ 0.63 | $ 1.89 | $ 1.89 | |||||||||
| Basic weighted average units outstanding | 68,280 | 65,668 | 68,019 | 65,349 | |||||||||
| Diluted weighted average units outstanding | 68,851 | 66,247 | 68,596 | 65,720 | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
| General Partner Preferred Units |
Limited Partners Preferred Units |
General Partner Common Units |
Limited Partners Common Units |
General Partner Preferred Unitholders |
Limited Partners Preferred Unitholders |
General Partner Common Unitholders |
Limited Partners Common Unitholders |
Total | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at January 1, 2004 | 10 | 215 | 59,420 | 7,795 | $ 24,836 | $ 220,547 | $ 1,516,652 | $ 207,552 | $ 1,969,587 | ||||||||||
| Net income | -- | -- | -- | -- | 1,500 | 11,727 | 70,192 | 9,081 | 92,500 | ||||||||||
| Distributions | -- | -- | -- | -- | (1,500 | ) | (11,727 | ) | (114,593 | ) | (14,702 | ) | (142,522 | ) | |||||
| Redemption of limited | |||||||||||||||||||
| partner common units for | |||||||||||||||||||
| shares of common stock | -- | -- | 16 | (16 | ) | -- | -- | 425 | (425 | ) | -- | ||||||||
| Units issued under | |||||||||||||||||||
| Dividend Reinvestment and | |||||||||||||||||||
| Stock Purchase Plan | -- | -- | 9 | -- | -- | -- | 364 | -- | 364 | ||||||||||
| Contributions - proceeds | |||||||||||||||||||
| from stock | |||||||||||||||||||
| options exercised | -- | -- | 1,153 | -- | -- | -- | 36,997 | -- | 36,997 | ||||||||||
| Contributions - proceeds | |||||||||||||||||||
| from Stock Warrants | |||||||||||||||||||
| exercised | -- | -- | 149 | -- | -- | -- | 4,925 | -- | 4,925 | ||||||||||
| Stock options expense | -- | -- | -- | -- | -- | -- | 374 | -- | 374 | ||||||||||
| Deferred compensation | |||||||||||||||||||
| plan for directors | -- | -- | -- | -- | -- | -- | 197 | -- | 197 | ||||||||||
| Issuance of Restricted | |||||||||||||||||||
| Stock Awards | -- | -- | 2 | -- | -- | -- | -- | -- | -- | ||||||||||
| Amortization of stock | |||||||||||||||||||
| compensation | -- | -- | -- | -- | -- | -- | 2,732 | -- | 2,732 | ||||||||||
| Cancellation of | |||||||||||||||||||
| Restricted Stock Awards | -- | -- | (19 | ) | -- | -- | -- | -- | -- | -- | |||||||||
| Balance at September 30, 2004 | 10 | 215 | 60,730 | 7,779 | $ 24,836 | $ 220,547 | $ 1,518,265 | $ 201,506 | $ 1,965,154 | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
| Nine Months Ended September 30, |
|||||||
|---|---|---|---|---|---|---|---|
| CASH FLOWS FROM OPERATING ACTIVITIES |
2004 |
2003 | |||||
| Net income | $ 92,500 | $ 142,330 | |||||
| Adjustments to reconcile net income to net cash provided by | |||||||
| operating activities: | |||||||
| Depreciation and amortization | 95,665 | 85,203 | |||||
| Depreciation and amortization on discontinued operations | 1,783 | 2,919 | |||||
| Stock options expense | 374 | 139 | |||||
| Amortization of stock compensation | 2,732 | 1,583 | |||||
| Amortization of deferred financing costs and debt discount | 3,249 | 3,603 | |||||
| Write-off of unamortized interest rate contract | -- | 1,540 | |||||
| Discount on early retirement of debt | -- | (2,008 | ) | ||||
| Equity in earnings of unconsolidated joint venture, net | (577 | ) | (12,774 | ) | |||
| Gain on sale of investment in unconsolidated joint venture | (720 | ) | (23,140 | ) | |||
| Realized gains (unrealized losses) on disposition of rental property | 11,856 | (1,324 | ) | ||||
| Changes in operating assets and liabilities: | |||||||
| Increase in unbilled rents receivable, net | (7,996 | ) | (5,904 | ) | |||
| Increase in deferred charges and other assets, net | (37,674 | ) | (18,030 | ) | |||
| Decrease in accounts receivable, net | 773 | 1,322 | |||||
| Increase (decrease) in accounts payable, accrued expenses and other liabilities | 6,110 | (2,627 | ) | ||||
| Increase in rents received in advance and security deposits | 2,891 | 2,159 | |||||
| Decrease in accrued interest payable | (11,887 | ) | (14,241 | ) | |||
| Net cash provided by operating activities | $ 159,079 | $ 160,750 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
| Additions to rental property | $(110,190 | ) | $(88,689 | ) | |||
| Repayment of mortgage note receivable | 850 | 3,542 | |||||
| Investment in unconsolidated joint ventures | (18,042 | ) | (12,851 | ) | |||
| Distributions from unconsolidated joint ventures | 25,217 | 14,339 | |||||
| Proceeds from sale of investment in unconsolidated joint venture | 720 | 164,867 | |||||
| Proceeds from sales of rental property | -- | 5,469 | |||||
| Funding of note receivable | (11,516 | ) | -- | ||||
| Decrease (increase) in restricted cash | 168 | (3 | ) | ||||
| Net cash (used in) provided by investing activities | $(112,793 | ) | $ 86,674 | ||||
| CASH FLOW FROM FINANCING ACTIVITIES | |||||||
| Proceeds from senior unsecured notes | $ 202,363 | $ 124,714 | |||||
| Borrowings from revolving credit facility | 425,475 | 297,852 | |||||
| Repayment of senior unsecured notes | (300,000 | ) | (95,284 | ) | |||
| Repayment of revolving credit facility | (285,475 | ) | (370,852 | ) | |||
| Repayment of mortgages, loans payable and other obligations | (53,349 | ) | (76,124 | ) | |||
| Net proceeds from preferred stock issuance | -- | 24,836 | |||||
| R | |||||||