<Page> 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, 2001 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, 2001, there were 56,307,934 shares of $0.01 par value common stock outstanding. <Page> MACK-CALI REALTY CORPORATION FORM 10-Q INDEX <Table> <Caption> PART I FINANCIAL INFORMATION PAGE ---- <S> <C> <C> <C> Item 1. Financial Statements: Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000 .............................. 4 Consolidated Statements of Operations for the three and six month periods ended June 30, 2001 and 2000 . 5 Consolidated Statement of Changes in Stockholders' Equity for the six months ended June 30, 2001 ...... 6 Consolidated Statements of Cash Flows for the six months ended June 30, 2001 and 2000 ................ 7 Notes to Consolidated Financial Statements ............ 8-28 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................ 29-37 Item 3. Quantitative and Qualitative Disclosures about Market Risk ........................................ 38 PART II OTHER INFORMATION AND SIGNATURES Item 1. Legal Proceedings ..................................... 39 Item 2. Changes in Securities and Use of Proceeds ............. 39 Item 3. Defaults Upon Senior Securities ....................... 39 Item 4. Submission of Matters to a Vote of Security Holders ... 39 Item 5. Other Information ..................................... 39 Item 6. Exhibits .............................................. 40-43 Signatures ............................................ 44 </Table> 2 <Page> 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, 2000. The results of operations for the three and six month periods ended June 30, 2001 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period. 3 <Page> MACK-CALI REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ================================================================================ <Table> <Caption> June 30, 2001 December 31, ASSETS (UNAUDITED) 2000 - -------------------------------------------------------------------------------------------------------- <S> <C> <C> Rental property Land and leasehold interests $ 488,288 $ 542,841 Buildings and improvements 2,679,435 2,934,383 Tenant improvements 120,707 106,208 Furniture, fixtures and equipment 7,046 6,445 - -------------------------------------------------------------------------------------------------------- 3,295,476 3,589,877 Less - accumulated depreciation and amortization (314,239) (302,932) - -------------------------------------------------------------------------------------------------------- 2,981,237 3,286,945 Rental property held for sale, net 450,932 107,458 - -------------------------------------------------------------------------------------------------------- Net investment in rental property 3,432,169 3,394,403 Cash and cash equivalents 22,738 13,179 Investments in unconsolidated joint ventures 130,944 101,438 Unbilled rents receivable, net 58,118 50,499 Deferred charges and other assets, net 100,337 102,655 Restricted cash 7,492 6,557 Accounts receivable, net of allowance for doubtful accounts of $693 and $552 8,121 8,246 - -------------------------------------------------------------------------------------------------------- Total assets $ 3,759,919 $ 3,676,977 ======================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY - -------------------------------------------------------------------------------------------------------- Senior unsecured notes $ 1,096,599 $ 798,099 Revolving credit facilities 76,500 348,840 Mortgages and loans payable 547,701 481,573 Dividends and distributions payable 43,080 43,496 Accounts payable and accrued expenses 51,712 53,608 Rents received in advance and security deposits 31,592 31,146 Accrued interest payable 26,814 17,477 - -------------------------------------------------------------------------------------------------------- Total liabilities 1,873,998 1,774,239 - -------------------------------------------------------------------------------------------------------- MINORITY INTERESTS: Operating Partnership 448,088 447,523 Partially-owned properties -- 1,925 - -------------------------------------------------------------------------------------------------------- Total minority interests 448,088 449,448 - -------------------------------------------------------------------------------------------------------- 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, 56,299,124 and 56,980,893 shares outstanding 563 570 Additional paid-in capital 1,494,124 1,513,037 Dividends in excess of net earnings (51,837) (57,149) Unamortized stock compensation (5,017) (3,168) - -------------------------------------------------------------------------------------------------------- Total stockholders' equity 1,437,833 1,453,290 - -------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 3,759,919 $ 3,676,977 ======================================================================================================== </Table> THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 4 <Page> MACK-CALI REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) ================================================================================ <Table> <Caption> Three Months Ended Six Months Ended June 30, June 30, REVENUES 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Base rents $ 129,419 $122,072 $254,795 $243,670 Escalations and recoveries from tenants 13,430 14,627 28,192 31,295 Parking and other 3,060 6,128 5,406 9,450 Equity in earnings of unconsolidated joint ventures 2,037 1,070 5,446 2,207 Interest income 472 1,992 1,085 2,246 - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues 148,418 145,889 294,924 288,868 - ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES - ------------------------------------------------------------------------------------------------------------------------------------ Real estate taxes 15,510 14,733 30,797 29,437 Utilities 10,699 10,014 22,655 20,393 Operating services 17,686 16,822 35,565 34,564 General and administrative 6,856 5,159 12,866 11,272 Depreciation and amortization 21,951 22,945 45,435 45,127 Interest expense 28,555 26,835 56,920 53,261 Non-recurring charges -- 9,228 -- 9,228 - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses 101,257 105,736 204,238 203,282 - ------------------------------------------------------------------------------------------------------------------------------------ Income before realized gains and unrealized losses on disposition of rental property and minority interests 47,161 40,153 90,686 85,586 Realized gains and unrealized losses on disposition of rental property 22,510 73,921 1,947 76,169 - ------------------------------------------------------------------------------------------------------------------------------------ Income before minority interests 69,671 114,074 92,633 161,755 MINORITY INTERESTS: Operating partnership 11,998 16,784 18,222 25,760 Partially-owned properties -- 2,982 -- 5,072 - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 57,673 $ 94,308 $ 74,411 $ 130,923 ==================================================================================================================================== Basic earnings per share $ 1.02 $ 1.61 $ 1.31 $ 2.24 Diluted earnings per share $ 0.98 $ 1.52 $ 1.30 $ 2.14 - ------------------------------------------------------------------------------------------------------------------------------------ Dividends declared per common share $ 0.61 $ 0.58 $ 1.22 $ 1.16 - ------------------------------------------------------------------------------------------------------------------------------------ Basic weighted average shares outstanding 56,519 58,545 56,662 58,420 Diluted weighted average shares outstanding 71,044 73,284 71,198 73,237 - ------------------------------------------------------------------------------------------------------------------------------------ </Table> THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 5 <Page> MACK-CALI REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS) (UNAUDITED) ================================================================================ <Table> <Caption> Additional Dividends in Unamortized Total Common Stock Paid-In Excess of Stock Stockholders' Shares Par Value Capital Net Earnings Compensation Equity - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> Balance at January 1, 2001 56,981 $570 $1,513,037 $(57,149) $(3,168) $1,453,290 Net income -- -- -- 74,411 -- 74,411 Dividends -- -- -- (69,099) -- (69,099) Redemption of common units for shares of common stock 7 -- 192 -- -- 192 Proceeds from stock options exercised 106 1 2,388 -- -- 2,389 Deferred compensation plan for directors -- -- 76 -- -- 76 Issuance of Restricted Stock Awards 94 1 2,526 -- (2,527) -- Amortization of stock compensation -- -- -- -- 630 630 Adjustment to fair value of restricted stock -- -- 152 -- (152) -- Cancellation of Restricted Stock Awards (7) -- (200) -- 200 -- Repurchase of common stock (882) (9) (24,047) -- -- (24,056) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at June 30, 2001 56,299 $563 $1,494,124 $(51,837) $(5,017) $1,437,833 ==================================================================================================================================== </Table> THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 6 <Page> MACK-CALI REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) ================================================================================ <Table> <Caption> Six Months Ended June 30, CASH FLOWS FROM OPERATING ACTIVITIES 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> Net income $ 74,411 $ 130,923 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 45,435 45,127 Amortization of stock compensation 630 1,410 Amortization of deferred financing costs and debt discount 2,513 1,802 Stock options charge -- 1,550 Equity in earnings of unconsolidated joint ventures (5,446) (2,207) Realized gains and unrealized losses on disposition of rental property (1,947) (76,169) Minority interests 18,222 30,832 Changes in operating assets and liabilities: Increase in unbilled rents receivable, net (7,737) (5,537) Increase in deferred charges and other assets, net (1,454) (15,697) Decrease (increase) in accounts receivable, net 125 (140) (Decrease) increase in accounts payable and accrued expenses (1,896) 10,982 Increase (decrease) in rents received in advance and security deposits 829 (1,937) Increase (decrease) in accrued interest payable 9,337 (363) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities $ 133,022 $ 120,576 ==================================================================================================================================== CASH FLOWS FROM INVESTING ACTIVITIES - ------------------------------------------------------------------------------------------------------------------------------------ Additions to rental property $(148,144) $(170,062) Repayment of mortgage note receivable 5,983 -- Investments in unconsolidated joint ventures (24,462) (11,081) Distributions from unconsolidated joint ventures 19,056 7,040 Proceeds from sales of rental property 44,787 235,849 (Increase) decrease in restricted cash (935) 583 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash (used in) provided by investing activities $(103,715) $ 62,329 ==================================================================================================================================== CASH FLOWS FROM FINANCING ACTIVITIES - ------------------------------------------------------------------------------------------------------------------------------------ Proceeds from senior unsecured notes $ 298,269 $ -- Proceeds from revolving credit facilities 218,484 435,030 Proceeds from mortgages and loans payable 70,000 -- Repayments of revolving credit facilities (490,825) (396,300) Repayments of mortgages and loans payable (3,871) (41,785) Distributions to minority interest in partially-owned properties -- (88,672) Repurchase of common stock (24,055) -- Payment of financing costs (3,159) (5,979) Proceeds from stock options exercised 2,389 1,665 Payment of dividends and distributions (86,980) (85,000) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash used in financing activities $ (19,748) $(181,041) ==================================================================================================================================== Net increase in cash and cash equivalents $ 9,559 $ 1,864 Cash and cash equivalents, beginning of period 13,179 8,671 - ------------------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents, end of period $ 22,738 $ 10,535 ==================================================================================================================================== </Table> THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 7 <Page> 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, 2001, the Company owned or had interests in 269 properties, plus developable land (collectively, the "Properties"). The Properties aggregate approximately 28.5 million square feet, and are comprised of 164 office buildings and 93 office/flex buildings totaling approximately 28.1 million square feet (which includes seven office buildings and one office/flex building aggregating 1.2 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, one multi-family residential complex consisting of 124 units, two stand-alone retail properties and three land leases. The Properties are located in 11 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 $141,623 and $188,077 as of June 30, 2001 and December 31, 2000, 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: <Table> <S> <C> 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 - -------------------------------------------------------------------------------- </Table> 8 <Page> 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 its 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 7. 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. Any difference between the carrying amount of these investments on the balance sheet of the Company and the underlying equity in net assets is amortized as an adjustment to equity in earnings of unconsolidated joint ventures over 40 years. See Note 4. PARTIALLY-OWNED PROPERTIES The Company controlled operations of the partially-owned properties and has consolidated the financial position and results of operations of partially-owned properties in the financial statements of the Company. The equity interests of the other members are reflected as minority interests: partially-owned properties in the consolidated financial statements of the Company. 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 $1,161 and $901 for the three months ended June 30, 2001 and 2000, respectively, and $2,282 and $1,802 for the six months ended June 30, 2001 and 2000, respectively. DEFERRED LEASING COSTS Costs incurred in connection with leases are capitalized and amortized on a straight-line basis over the terms of the related leases and included in depreciation and amortization. Unamortized deferred leasing costs are charged to amortization expense upon early termination of the lease. Certain employees of the Company provide leasing services to the Properties and receive compensation based on space leased. The portion of such compensation, which is capitalized and amortized, approximated $863 and $896 for the three months ended June 30, 2001 and 2000, respectively, and $1,603 and $1,589 for the six months ended June 30, 2001 and 2000, respectively. 9 <Page> 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 properties for third parties. Rental income on residential property under operating leases having terms generally of one year or less is recognized when earned. 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 14. 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, for its taxable years beginning prior to January 1, 2001, satisfies certain organizational and operational requirements including the requirement to distribute at least 95 percent of its REIT taxable income to its shareholders. For its taxable years beginning after December 31, 2000, as a result of recent amendments to the Code, the Company is required to distribute at least 90 percent of its REIT taxable income to its shareholders. Effective January 1, 2001, the Company has elected to treat certain of its corporate subsidiaries as taxable REIT subsidiaries ("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. 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. DERIVATIVE INSTRUMENTS The Company has adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FASB No. 133") as of January 1, 2001. Due to its limited use of derivative instruments, adoption of FASB No. 133 did not have a material impact on the Company's financial statements. Interest rate contracts are utilized by the Company to reduce interest rate risks. The Company does not hold or issue derivative financial instruments for trading purposes. The differentials to be received or paid under contracts designated as hedges are recognized over the life of the contracts as adjustments to interest expense. In certain situations, the Company uses forward treasury lock agreements to mitigate the potential effects of changes in interest rates for prospective transactions. Gains and losses are deferred and amortized as adjustments to interest expense over the remaining life of the associated debt to the extent that such debt remains outstanding. EARNINGS PER SHARE In accordance with the Statement of Financial Accounting Standards No. 128 ("FASB No. 128"), 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 <Page> DIVIDENDS AND DISTRIBUTIONS PAYABLE The dividends and distributions payable at June 30, 2001 represents dividends payable to shareholders of record as of July 5, 2001 (56,308,064 shares), distributions payable to minority interest common unitholders (7,955,525 common units) on that same date and preferred distributions payable to preferred unitholders (220,340 preferred units) for the second quarter 2001. The second quarter 2001 dividends and common unit distributions of $0.61 per share and per common unit, as well as the second quarter preferred unit distribution of $17.6046 per preferred unit, were approved by the Board of Directors on June 21, 2001 and paid on July 23, 2001. The dividends and distributions payable at December 31, 2000 represents dividends payable to shareholders of record as of January 4, 2001 (56,982,893 shares), distributions payable to minority interest common unitholders (7,963,725 common units) on that same date and preferred distributions payable to preferred unitholders (220,340 preferred units) for the fourth quarter 2000. The fourth quarter 2000 dividends and common unit distributions of $0.61 per share and per common unit, as well as the fourth quarter preferred unit distribution of $17.6046 per preferred unit, were approved by the Board of Directors on December 20, 2000 and paid on January 22, 2001. UNDERWRITING COMMISSIONS AND COSTS Underwriting commissions and costs incurred in connection with the Company's stock offerings are reflected as a reduction of additional paid-in capital. 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 15. 11 <Page> 3. ACQUISITIONS, PROPERTY SALES AND OTHER TRANSACTIONS OPERATING PROPERTY ACQUISITIONS The Company acquired the following operating properties during the six months ended June 30, 2001: <Table> <Caption> - ------------------------------------------------------------------------------------------------------------------------------------ Acquisition # of Rentable Investment by Date Property/Portfolio Name Location Bldgs. Square Feet Company - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> OFFICE: - ------- 4/6/01 4 & 6 Campus Drive (a) Parsippany, Morris County, NJ 2 295,766 $48,404 - ------------------------------------------------------------------------------------------------------------------------------------ <Caption> Total Office Property Acquisitions: 2 295,766 $48,404 ==================================================================================================================================== <S> <C> <C> <C> <C> <C> OFFICE/FLEX: - ------------ 2/14/01 31 & 41 Twosome Drive (b)(c) Moorestown, Burlington County, NJ 2 127,250 $7,155 4/27/01 1245 & 1247 N. Church St, 2 Twosome Drive (b)(c) Moorestown, Burlington County, NJ 3 154,200 11,083 - ------------------------------------------------------------------------------------------------------------------------------------ Total Office/Flex Property Acquisitions: 5 281,450 $18,238 ==================================================================================================================================== Total Operating Property Acquisitions: 7 577,216 $66,642 ==================================================================================================================================== </Table> (a) Transaction was funded primarily through borrowing on the Company's revolving credit facility. (b) Transactions were funded primarily from net proceeds received in the sale of a rental property as well as the Company's cash reserves. (c) The properties were acquired through the exercise of a purchase option obtained in the initial acquisition of the McGarvey portfolio in January 1998. PROPERTIES PLACED IN SERVICE The Company placed in service the following properties during the six months ended June 30, 2001: <Table> <Caption> - ------------------------------------------------------------------------------------------------------------------------------------ Date Placed # of Rentable Investment by in Service Property/Portfolio Name Location Bldgs. Square Feet Company (a) - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> OFFICE: 1/15/01 105 Eisenhower Parkway Roseland, Essex County, NJ 1 220,000 $43,300 3/1/01 8181 East Tufts Avenue Denver, Denver County, CO 1 185,254 34,371 - ------------------------------------------------------------------------------------------------------------------------------------ Total Properties Placed in Service 2 405,254 $77,671 ==================================================================================================================================== </Table> (a) Transactions were funded primarily through draws on the Company's revolving credit facilities and amounts presented are as of June 30, 2001. LAND ACQUISITIONS On January 5, 2001, the Company acquired approximately 7.1 acres of developable land located in Littleton, Arapahoe County, Colorado. The land was acquired for approximately $2,711. When the Company had committed itself to acquire the land, the Company had intended to develop the site consistent with its then business strategy. Due to a change in the Company's strategy, this land is now being held for sale (see Note 7). 12 <Page> PROPERTY SALES The Company sold the following properties during the six months ended June 30, 2001: <Table> <Caption> - ------------------------------------------------------------------------------------------------------------------------------------ Sale # of Rentable Net Sales Net Book Realized Date Property Name Location Bldgs. Square Feet Proceeds Value Gain - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> OFFICE: - ------- 6/1/01 1777 N.E. Loop 410 San Antonio, Bexar County, TX 1 256,137 $21,313 $16,703 $ 4,610 6/15/01 14511 Falling Creek Houston, Harris County, TX 1 70,999 2,982 2,458 524 RESIDENTIAL: - ------------ 6/21/01 Tenby Chase Apartments Delran, Burlington County, NJ 1 327 units 19,336 2,399 16,937 OTHER: - ------ 4/3/01 North Pier-Harborside Jersey City, Hudson County, NJ -- n/a 3,357 2,918 439 - ------------------------------------------------------------------------------------------------------------------------------------ Totals: 3 327,136 $46,988 $24,478 $22,510 ==================================================================================================================================== </Table> 4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES 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 owns and operates 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. The Company performs management and leasing services for the property owned by the joint venture and recognized $75 and $75 in fees for such services in the six months ended June 30, 2001 and 2000, respectively. 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. 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. PACIFIC PLAZA I & II Pacific Plaza I & II is a parcel of land purchased from the city of Daly City, located in San Mateo County, California, upon which the venture has commenced construction of an office building and theater and retail complex aggregating 471,379 square feet. 13 <Page> STADIUM GATEWAY Stadium Gateway is a 1.5 acre site located in Anaheim, Orange County, California, acquired by the venture upon which it has commenced construction of a six-story 261,554 square-foot office building. 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 its 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 $110 and $104 in fees for such services in the six months ended June 30, 2001 and 2000, 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, which is currently leased to a parking operator under a 10-year agreement. Such parking facility serves a ferry service between the Company's Harborside property and Manhattan. In the fourth quarter 2000, the Company started construction of a 575,000 square-foot office building and terminated the parking agreement on certain of the land owned by the venture. The total costs of the project are currently projected to be approximately $140,000. The project, which is currently 100 percent pre-leased, is anticipated to be completed in the third quarter of 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 Company performs management, leasing and other services for the property owned by the joint venture and recognized $58 and $147 in fees for such services in the six months ended June 30, 2001 and 2000, 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. Subsequently, through June 30, 2001, the venture paid $19,907 ($3,943 representing the Company's share) in accordance with earn-out provisions in the acquisition contracts. The Company performs management and leasing services for the properties owned by the joint venture and recognized $94 and $59 in fees for such services in the six months ended June 30, 2001 and 2000, respectively. ARCAP INVESTORS, L.L.C. On March 18, 1999, the Company invested 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"). The Company has invested $20,000 in the venture. William L. Mack, Chairman of the Board of Directors of the Company and an equity holder in the Operating Partnership, is a principal of the managing member of the venture. At June 30, 2001, the venture held approximately $859,448 face value of CMBS bonds at an aggregate cost of approximately $440,951. 14 <Page> SOUTH PIER AT HARBORSIDE - HOTEL DEVELOPMENT On November 17, 1999, the Company entered into an agreement with Hyatt Corporation to develop a 350-room hotel on the Company's South Pier at Harborside Financial Center, Jersey City, Hudson County, New Jersey. In July 2000, the joint venture began development of the hotel project. NORTH PIER AT HARBORSIDE - RESIDENTIAL DEVELOPMENT On August 5, 1999, the Company entered into an agreement which provided for the sale of its North Pier at Harborside Financial Center, Jersey City, Hudson County, New Jersey to a joint venture with Lincoln Property Company Southwest, Inc., in exchange for cash and an equity interest in the venture. In April 2001, the Company sold the North Pier to the venture for net sales proceeds of approximately $3,357 and retained an equity interest. The venture intends to develop residential housing on the property for rental. MC-SJP MORRIS V REALTY, LLC AND MC-SJP MORRIS VI REALTY, LLC On August 24, 2000, the Company entered into a joint venture with SJP Properties Company ("SJP Properties") to form MC-SJP Morris V Realty, LLC and MC-SJP Morris VI Realty, LLC, which acquired approximately 47.5 acres of developable land located in Parsippany, Morris County, New Jersey. The land was acquired for approximately $16,193. 15 <Page> 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, 2001 and December 31, 2000: <Table> <Caption> June 30, 2001 - -------------------------------------------------------------------------------------------------------------------------- American G&G Financial Ramland Ashford Pru-Beta 3 HPMC Martco Exchange Realty Loop - -------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> ASSETS: Rental property, net $20,330 $ 92,224 $ 10,027 $42,446 $18,491 $37,637 Other assets 2,540 33,240 3,098 694 4,686 560 - -------------------------------------------------------------------------------------------------------------------------- Total assets $22,870 $125,464 $ 13,125 $43,140 $23,177 $38,197 ========================================================================================================================== LIABILITIES AND PARTNERS'/ MEMBERS' CAPITAL: Mortgages and loans payable $ -- $ 67,782 $ 50,000 $ -- $16,319 $ -- Other liabilities 101 3,124 1,642 10,980 130 538 Partners'/members' capital 22,769 54,558 (38,517) 32,160 6,728 37,659 - -------------------------------------------------------------------------------------------------------------------------- Total liabilities and partners'/members' capital $22,870 $125,464 $ 13,125 $43,140 $23,177 $38,197 ========================================================================================================================== Company's net investment in unconsolidated joint ventures $15,747 $ 37,647 $ 3,549 $33,405 $ 2,936 $ 7,880 - -------------------------------------------------------------------------------------------------------------------------- <Caption> June 30, 2001 - ----------------------------------------------------------------------------------------------- MC-SJP Morris Harborside Combined ARCap Realty South Pier Total - ----------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> ASSETS: Rental property, net $ -- $17,271 $33,441 $271,867 Other assets 482,329 96 -- 527,243 - ----------------------------------------------------------------------------------------------- Total assets $482,329 $17,367 $33,441 $799,110 =============================================================================================== LIABILITIES AND PARTNERS'/ MEMBERS' CAPITAL: Mortgages and loans payable $266,030 $16,028 $10,000 $426,159 Other liabilities 5,111 -- 4,425 26,051 Partners'/members' capital 211,188 1,339 19,016 346,900 - ----------------------------------------------------------------------------------------------- Total liabilities and partners'/members' capital $482,329 $17,367 $33,441 $799,110 =============================================================================================== Company's net investment in unconsolidated joint ventures $ 19,745 $ 176 $ 9,859 $130,944 - ----------------------------------------------------------------------------------------------- </Table> <Table> <Caption> December 31, 2000 - ------------------------------------------------------------------------------------------------------------------------- American G&G Financial Ramland Ashford Pru-Beta 3 HPMC Martco Exchange Realty Loop - ------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> ASSETS: Rental property, net $20,810 $ 78,119 $ 10,589 $12,546 $18,947 $37,665 Other assets 2,737 27,082 2,508 11,851 4,755 849 - ------------------------------------------------------------------------------------------------------------------------- Total assets $23,547 $105,201 $ 13,097 $24,397 $23,702 $38,514 ========================================================================================================================= LIABILITIES AND PARTNERS'/ MEMBERS' CAPITAL: Mortgages and loans payable $ -- $ 63,486 $ 50,000 $ -- $16,666 $ -- Other liabilities 160 5,035 1,368 9,400 522 1,005 Partners'/members' capital 23,387 36,680 (38,271) 14,997 6,514 37,509 - ------------------------------------------------------------------------------------------------------------------------- Total liabilities and partners'/members' capital $23,547 $105,201 $ 13,097 $24,397 $23,702 $38,514 ========================================================================================================================= Company's net investment in unconsolidated joint ventures $16,110 $ 35,079 $ 3,973 $15,809 $ 2,782 $ 7,874 - ------------------------------------------------------------------------------------------------------------------------- <Caption> December 31, 2000 - ----------------------------------------------------------------------------------------------- MC-SJP Morris Harborside Combined ARCap Realty South Pier Total - ----------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> ASSETS: Rental property, net $ -- -- -- $178,676 Other assets 310,342 -- -- 360,124 - ----------------------------------------------------------------------------------------------- Total assets $310,342 -- -- $538,800 =============================================================================================== LIABILITIES AND PARTNERS'/ MEMBERS' CAPITAL: Mortgages and loans payable $129,562 -- -- $259,714 Other liabilities 3,750 -- -- 21,240 Partners'/members' capital 177,030 -- -- 257,846 - ----------------------------------------------------------------------------------------------- Total liabilities and partners'/members' capital $310,342 -- -- $538,800 =============================================================================================== Company's net investment in unconsolidated joint ventures $ 19,811 -- -- $101,438 - ----------------------------------------------------------------------------------------------- </Table> 16 <Page> 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 and six month periods ended June 30, 2001 and 2000: <Table> <Caption> Three Months Ended June 30, 2001 - ---------------------------------------------------------------------------------------------------------------------------- American G&G Financial Ramland Ashford Pru-Beta 3 HPMC Martco Exchange Realty Loop - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Total revenues $1,235 $13,936 $3,084 $ 158 $ 989 $1,491 Operating and other expenses (369) (774) (845) (7) (264) (699) Depreciation and amortization (299) (592) (387) (5) (236) (232) Interest expense -- (929) (808) -- (299) -- - ---------------------------------------------------------------------------------------------------------------------------- Net income $ 567 $11,641 $1,044 $ 146 $ 190 $ 560 ============================================================================================================================ Company's equity in earnings of unconsolidated joint ventures $ 245 $ 1,311 $ 366 $(617) $ 95 $ 112 - ---------------------------------------------------------------------------------------------------------------------------- <Caption> Three Months Ended June 30, 2001 - ------------------------------------------------------------------------------------------- MC-SJP Morris Harborside Combined ARCap Realty South Pier Total - ------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Total revenues $ 8,504 -- -- $29,397 Operating and other expenses (2,179) -- -- (5,137) Depreciation and amortization -- -- -- (1,751) Interest expense (4,903) -- -- (6,939) - ------------------------------------------------------------------------------------------- Net income $ 1,422 -- -- $15,570 =========================================================================================== Company's equity in earnings of unconsolidated joint ventures $ 525 -- -- $ 2,037 - ------------------------------------------------------------------------------------------- </Table> <Table> <Caption> Three Months Ended June 30, 2000 - ---------------------------------------------------------------------------------------------------------------------------- American G&G Financial Ramland Ashford Pru-Beta 3 HPMC Martco Exchange Realty Loop - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Total revenues $1,234 $ 2,504 $ 2,569 $254 $ 969 $1,469 Operating and other expenses (401) (813) (793) (51) (273) (641) Depreciation and amortization (305) (1,065) (336) (7) (241) (210) Interest expense -- (793) (1,039) -- (377) -- - ---------------------------------------------------------------------------------------------------------------------------- Net income $ 528 $ (167) $ 401 $196 $ 78 $ 618 ============================================================================================================================ Company's equity in earnings of unconsolidated joint ventures $ 225 $ 102 $ 43 $139 $ 37 $ 124 - ---------------------------------------------------------------------------------------------------------------------------- <Caption> Three Months Ended June 30, 2000 - ---------------------------------------------------------------------------------------------- MC-SJP Morris Harborside Combined ARCap Realty South Pier Total - ---------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Total revenues $4,606 -- -- $13,605 Operating and other expenses (721) -- -- (3,693) Depreciation and amortization -- -- -- (2,164) Interest expense (932) -- -- (3,141) - ---------------------------------------------------------------------------------------------- Net income $2,953 -- -- $ 4,607 ============================================================================================== Company's equity in earnings of unconsolidated joint ventures $ 400 -- -- $ 1,070 - ---------------------------------------------------------------------------------------------- </Table> 17 <Page> <Table> <Caption> Six Months Ended June 30, 2001 - --------------------------------------------------------------------------------------------------------------------------- American G&G Financial Ramland Ashford Pru-Beta 3 HPMC Martco Exchange Realty Loop - --------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Total revenues $2,488 $14,992 $ 5,807 $ 379 $1,958 $ 3,064 Operating and other expenses (782) (948) (1,650) (41) (607) (1,416) Depreciation and amortization (592) (933) (777) (20) (483) (462) Interest expense -- (1,256) (1,793) -- (654) -- - --------------------------------------------------------------------------------------------------------------------------- Net income $1,114 $11,855 $ 1,587 $ 318 $ 214 $ 1,186 =========================================================================================================================== Company's equity in earnings of unconsolidated joint ventures $ 503 $ 3,464 $ 536 $(445) $ 154 $ 209 - --------------------------------------------------------------------------------------------------------------------------- <Caption> Six Months Ended June 30, 2001 - ----------------------------------------------------------------------------------------------- MC-SJP Morris Harborside Combined ARCap Realty South Pier Total - ----------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Total revenues $27,830 -- -- $ 56,518 Operating and other expenses (4,003) -- -- (9,447) Depreciation and amortization -- -- -- (3,267) Interest expense (7,890) -- -- (11,593) - ----------------------------------------------------------------------------------------------- Net income $15,937 -- -- $ 32,211 =============================================================================================== Company's equity in earnings of unconsolidated joint ventures $ 1,025 -- -- $ 5,446 - ----------------------------------------------------------------------------------------------- </Table> <Table> <Caption> Six Months Ended June 30, 2000 - ---------------------------------------------------------------------------------------------------------------------------- American G&G Financial Ramland Ashford Pru-Beta 3 HPMC Martco Exchange Realty Loop - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Total revenues $2,468 $ 3,560 $ 5,281 $504 $1,947 $ 2,832 Operating and other expenses (819) (987) (1,553) (82) (590) (1,271) Depreciation and amortization (611) (1,406) (762) (20) (482) (403) Interest expense -- (1,120) (1,914) -- (746) -- - ---------------------------------------------------------------------------------------------------------------------------- Net income $1,038 $ 47 $ 1,052 $402 $ 129 $ 1,158 ============================================================================================================================ Company's equity in earnings of unconsolidated joint ventures $ 441 $ 102 $ 212 $345 $ 62 $ 245 - ---------------------------------------------------------------------------------------------------------------------------- <Caption> Six Months Ended June 30, 2000 - ----------------------------------------------------------------------------------------------- MC-SJP Morris Harborside Combined ARCap Realty South Pier Total - ----------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Total revenues $11,150 -- -- $27,742 Operating and other expenses (1,292) -- -- (6,594) Depreciation and amortization -- -- -- (3,684) Interest expense (1,701) -- -- (5,481) - ----------------------------------------------------------------------------------------------- Net income $ 8,157 -- -- $11,983 =============================================================================================== Company's equity in earnings of unconsolidated joint ventures $ 800 -- -- $ 2,207 - ----------------------------------------------------------------------------------------------- </Table> 18 <Page> 5. DEFERRED CHARGES AND OTHER ASSETS <Table> <Caption> June 30, December 31, 2001 2000 - -------------------------------------------------------------------------------- <S> <C> <C> Deferred leasing costs $ 84,963 $ 80,667 Deferred financing costs 26,443 23,085 - -------------------------------------------------------------------------------- 111,406 103,752 Accumulated amortization (29,673) (26,303) - -------------------------------------------------------------------------------- Deferred charges, net 81,733 77,449 Prepaid expenses and other assets 18,604 25,206 - -------------------------------------------------------------------------------- Total deferred charges and other assets, net $100,337 $102,655 ================================================================================ </Table> 6. RESTRICTED CASH Restricted cash includes security deposits for the Company's residential properties and certain commercial properties, and escrow and reserve funds for debt service, real estate taxes, property insurance, capital improvements, tenant improvements, and leasing costs established pursuant to certain mortgage financing arrangements, and is comprised of the following: <Table> <Caption> June 30, December 31, 2001 2000 - -------------------------------------------------------------------------------- <S> <C> <C> Security deposits $7,409 $6,477 Escrow and other reserve funds 83 80 - -------------------------------------------------------------------------------- Total restricted cash $7,492 $6,557 ================================================================================ </Table> 7. RENTAL PROPERTY HELD FOR SALE As of June 30, 2001, the Company has identified 41 office properties, aggregating approximately 4.8 million square feet, and two land parcels as held for sale. These properties are located in Texas, Arizona, Colorado, Iowa and Florida. Such properties carried an aggregate book value of $450,932, net of accumulated depreciation of $34,926 and a valuation allowance of $20,563. As of December 31, 2000, the Company had identified 10 office properties, aggregating approximately 1.6 million square feet, and a land parcel as held for sale, all located in San Antonio and Houston, Texas. Such properties carried an aggregate book value of $107,458, net of accumulated depreciation of $7,019. The following is a summary of the condensed results of operations of the rental properties held for sale at June 30, 2001 for the six month periods ended June 30, 2001 and 2000: <Table> <Caption> Six Months Ended June 30, 2001 2000 - ------------------------------------------------------------------------------- <S> <C> <C> Total revenues $ 41,528 $ 40,125 Operating and other expenses (16,939) (15,838) Depreciation (2,474) (5,781) - ------------------------------------------------------------------------------- Net income $ 22,115 $ 18,506 =============================================================================== </Table> There can be no assurance if and when sales of the Company's rental properties held for sale will occur. 19 <Page> During the six months ended June 30, 2001, the Company determined that the carrying amounts of certain properties identified as held for sale are not expected to be recovered from estimated net sale proceeds from these property sales and, accordingly, recognized a valuation allowance of $20,563. The following table summarizes realized gains and unrealized losses on disposition of rental property: <Table> <Caption> Six Months Ended June 30, 2001 2000 - ------------------------------------------------------------------------------- <S> <C> <C> Realized gain on sale of rental property and land $ 22,510 $76,169 Valuation allowance on rental property held for sale (20,563) -- - ------------------------------------------------------------------------------- Total realized gains and unrealized losses $ 1,947 $76,169 =============================================================================== </Table> 8. SENIOR UNSECURED NOTES On January 29, 2001, the Operating Partnership issued $300,000 face amount of 7.75 percent senior unsecured notes with interest payable semi-annually in arrears. The total proceeds from the issuance (net of selling commissions and discount) of approximately $296,300 were used primarily to pay down outstanding borrowings under the 2000 Unsecured Facility, as defined in Note 9. The senior unsecured notes were issued at a discount of approximately $1,731, which is being amortized over the term as an adjustment to interest expense. The Operating Partnership's senior unsecured notes are redeemable at any time at the option of the Company, subject to certain conditions including yield maintenance. A summary of the terms of the senior unsecured notes (collectively, "Senior Unsecured Notes") outstanding as of June 30, 2001 and December 31, 2000 is as follows: <Table> <Caption> June 30, December 31, Effective 2001 2000 Rate (1) - ------------------------------------------------------------------------------------------------ <S> <C> <C> <C> 7.180% Senior Unsecured Notes, due December 31, 2003 $ 185,283 $185,283 7.23% 7.000% Senior Unsecured Notes, due March 15, 2004 299,784 299,744 7.27% 7.250% Senior Unsecured Notes, due March 15, 2009 298,189 298,072 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 298,343 -- 7.93% - ------------------------------------------------------------------------------------------------ Total Senior Unsecured Notes $1,096,599 $798,099 7.51% ================================================================================================ </Table> (1) Includes the cost of terminated treasury lock agreements (if any), offering and other transaction costs and the discount on the notes, as applicable. The terms of the Senior Unsecured Notes include certain restrictions and covenants which require compliance with financial ratios relating to the maximum amount of debt leverage, the maximum amount of secured indebtedness, the minimum amount of debt service coverage and the maximum amount of unsecured debt as a percent of unsecured assets. 9. REVOLVING CREDIT FACILITIES 2000 UNSECURED FACILITY On June 22, 2000, the Company obtained an unsecured revolving credit facility ("2000 Unsecured Facility") with a current borrowing capacity of $800,000 from a group of 24 lenders. The interest rate on outstanding borrowings under the credit line is currently the London Inter-Bank Offered Rate ("LIBOR") (3.86 percent at June 30, 2001) 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 20 <Page> borrowing capacity payable quarterly in arrears. In the event of a change in the Company's unsecured debt rating, the interest rate and facility fee will be changed on a sliding scale. Subject to certain conditions, the Company has the ability to increase the borrowing capacity of the credit line up to $1,000,000. The 2000 Unsecured Facility matures in June 2003, with an extension option of one year, which would require a payment of 25 basis points of the then borrowing capacity of the credit line upon exercise. The terms of the 2000 Unsecured Facility include certain restrictions and covenants which limit, among other things, the payment of dividends (as discussed below), the incurrence of additional indebtedness, the incurrence of liens and the disposition of assets, and which require compliance with financial ratios relating to the maximum leverage ratio, the maximum amount of secured indebtedness, the minimum amount of tangible net worth, the minimum amount of debt service coverage, the minimum amount of fixed charge coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property debt service coverage and certain investment limitations. The dividend restriction referred to above provides that, except to enable the Company to continue to qualify as a REIT under the Code, the Company will not during any four consecutive fiscal quarters make distributions with respect to common stock or other equity interests in an aggregate amount in excess of 90 percent of funds from operations (as defined) for such period, subject to certain other adjustments. PRUDENTIAL FACILITY The Company had a revolving credit facility ("Prudential Facility") with Prudential Securities Corp. ("PSC") in the amount of $100,000, which bore interest at 110 basis points over one-month LIBOR, with a maturity date of June 29, 2001. The Prudential Facility was a recourse liability of the Operating Partnership and was secured by the Company's equity interest in Harborside Plazas 2 and 3. The Prudential Facility limited the ability of the Operating Partnership to make any distributions during any fiscal quarter in an amount in excess of 100 percent of the Operating Partnership's available funds from operations (as defined) for the immediately preceding fiscal quarter (except to the extent such excess distributions or dividends are attributable to gains from the sale of the Operating Partnership's assets or are required for the Company to maintain its status as a REIT under the Code); provided, however, that the Operating Partnership may make distributions and pay dividends in excess of 100 percent of available funds from operations (as defined) for the preceding fiscal quarter for not more than three consecutive quarters. In addition to the foregoing, the Prudential Facility limited the liens placed upon the subject property and certain collateral, the use of proceeds from the Prudential Facility, and the maintenance of ownership of the subject property and assets derived from said ownership. The Company repaid in full and terminated the Prudential Facility on June 29, 2001. SUMMARY As of June 30, 2001 and December 31, 2000, the Company had outstanding borrowings of $76,500 and $348,840, respectively, under its revolving credit facilities. The total outstanding borrowings were from the 2000 Unsecured Facility, with no outstanding borrowings under the Prudential Facility. 21 <Page> 10. 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, 2001 and December 31, 2000 is as follows: <Table> <Caption> EFFECTIVE PRINCIPAL BALANCE AT INTEREST JUNE 30, DECEMBER 31, PROPERTY NAME LENDER RATE 2001 2000 MATURITY - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> 101 & 225 Executive Drive Sun Life Assurance Co. 6.27% $ -- $ 2,198 06/01/01 Mack-Cali Morris Plains Corestates Bank 7.51% 2,133 2,169 12/31/01 Mack-Cali Willowbrook CIGNA 8.67% 9,038 9,460 10/01/03 400 Chestnut Ridge Prudential Insurance Co. 9.44% 13,128 13,588 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% 25,571 25,911 10/01/05 500 West Putnam Avenue New York Life Ins. Co. 6.52% 9,679 10,069 10/10/05 Harborside - Plaza 1 U.S. West Pension Trust 5.61% 56,141 54,370 01/01/06 Harborside - Plazas 2 and 3 Northwestern/Principal 7.36% 163,859 95,630 01/01/06 Mack-Cali Airport Allstate Life Insurance Co. 7.05% 10,474 10,500 04/01/07 Kemble Plaza I Mitsubishi Tr & Bk Co. LIBOR+0.65% 32,178 32,178 01/31/09 - ----------------------------------------------------------------------------------------------------------------------------------- Total Property Mortgages $547,701 $481,573 ==================================================================================================================================== </Table> (a) The Company has the option to convert the mortgage loan, which is secured by 12 properties, to unsecured debt. SCHEDULED PRINCIPAL PAYMENTS Scheduled principal payments and related weighted average annual interest rates for the Company's Senior Unsecured Notes (see Note 8), revolving credit facilities (see Note 9) and mortgages and loans payable as of June 30, 2001 are as follows: <Table> <Caption> WEIGHTED AVG. SCHEDULED PRINCIPAL INTEREST RATE OF PERIOD AMORTIZATION MATURITIES TOTAL FUTURE REPAYMENTS (A) - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> July through December 2001 $ 1,554 $ 2,096 $ 3,650 9.08% 2002 3,260 -- 3,260 10.25% 2003 3,407 268,594 272,001 6.61% 2004 2,247 309,863 312,110 7.34% 2005 1,420 253,178 254,598 7.14% Thereafter (1,361) 876,542 875,181 7.46% - ------------------------------------------------------------------------------------------------------------------------------------ Totals/Weighted Average $10,527 $1,710,273 $1,720,800 7.27% ==================================================================================================================================== </Table> (a) Assumes weighted average LIBOR at June 30, 2001 of 4.04 percent in calculating revolving credit facility and other variable rate debt interest rates. CASH PAID FOR INTEREST AND INTEREST CAPITALIZED Cash paid for interest for the six months ended June 30, 2001 and 2000 was $52,530 and $56,035, respectively. Interest capitalized by the Company for the six months ended June 30, 2001 and 2000 was $7,315 and $4,189, respectively. 22 <Page> SUMMARY OF INDEBTEDNESS As of June 30, 2001, the Company's total indebtedness of $1,720,800 (weighted average interest rate of 7.27 percent) was comprised of $108,678 of revolving credit facility borrowings and other variable rate mortgage debt (weighted average rate of 5.07 percent) and fixed rate debt of $1,612,122 (weighted average rate of 7.42 percent). As of December 31, 2000, the Company's total indebtedness of $1,628,512 (weighted average interest rate of 7.29 percent) was comprised of $381,018 of revolving credit facility borrowings and other variable rate mortgage debt (weighted average rate of 7.53 percent) and fixed rate debt of $1,247,494 (weighted average rate of 7.25 percent). 11. MINORITY INTERESTS Minority interests in the accompanying consolidated financial statements relate to (i) preferred units in the Operating Partnership ("Preferred Units"), common units in the Operating Partnership and warrants to purchase common units ("Unit Warrants"), held by parties other than the Company, and (ii) interests in consolidated partially-owned properties for the portion of such properties not owned by the Company. The following table sets forth the changes in minority interests which relate to Preferred Units, common units and Unit Warrants in the Operating Partnership for the six months ended June 30, 2001: <Table> <Caption> Preferred Common Unit Preferred Common Unit Units Units Warrants Unitholders Unitholders Warrants Total - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> Balance at January 1, 2001 220,340 7,963,725 2,000,000 $226,005 $212,994 $8,524 $447,523 Net income -- -- -- 7,758 10,464 -- 18,222 Distributions -- -- -- (7,758) (9,707) -- (17,465) Redemption of common units for shares of common stock -- (7,200) -- -- (192) -- (192) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at June 30, 2001 220,340 7,956,525 2,000,000 $226,005 $213,559 $8,524 $448,088 ==================================================================================================================================== </Table> MINORITY INTEREST OWNERSHIP As of June 30, 2001 and December 31, 2000, the minority interest common unitholders owned 12.3 percent (20.1 percent, including the effect of the conversion of Preferred Units into common units) and 12.3 percent (20.1 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). 12. EMPLOYEE BENEFIT PLAN All employees of the Company who meet certain minimum age and period of service requirements are eligible to participate in a 401(k) defined contribution plan (the "401(k) Plan"). The 401(k) Plan allows eligible employees to defer up to 15 percent of their annual compensation, subject to certain limitations imposed by federal law. The amounts contributed by employees are immediately vested and non-forfeitable. The Company, at management's discretion, may match employee contributions and/or make discretionary contributions. Management has approved, for the year ended December 31, 2001, a Company matching contribution to be paid under the 401(k) Plan equal to 50 percent of the first 3.5 percent of annual salary, as defined in the 401(k) Plan, contributed to the plan for 2001. Total expense recognized by the Company for both the six month periods ended June 30, 2001 and 2000 was $200. 23 <Page> 13. COMMITMENTS AND CONTINGENCIES GROUND LEASE AGREEMENTS Future minimum rental payments under the terms of all non-cancelable ground leases under which the Company is the lessee, as of June 30, 2001, are as follows: <Table> <Caption> Period Amount - -------------------------------------------------------------------------------- <S> <C> July through December 2001 $ 266 2002 531 2003 531 2004 534 2005 534 Thereafter 21,997 - -------------------------------------------------------------------------------- Total $24,393 ================================================================================ </Table> Ground lease expense incurred during the six months ended June 30, 2001 and 2000 amounted to $284 and $285, respectively. OTHER On June 27, 2000, both Brant Cali and John R. Cali resigned their positions as officers of the Company and Brant Cali resigned as a director of the Company. John R. Cali was appointed to the Board of Directors of the Company to take the seat previously held by Brant Cali. As required by Brant Cali and John R. Cali's employment agreements with the Company: (i) the Company paid $2,820 and $2,806 (less applicable withholding) to Brant Cali and John R. Cali, respectively; (ii) all options to acquire shares of the Company's common stock and Restricted Stock Awards (as hereinafter defined) held by Brant Cali and John R. Cali became fully vested on the effective date of their resignations from the Company. All costs associated with Brant Cali and John R. Cali's resignations, which totaled approximately $9,228, are included in non-recurring charges for the six months ended June 30, 2000. The Company is a defendant in certain litigation arising in the normal course of business activities. Management does not believe that the resolution of these matters will have a materially adverse effect upon the Company. 14. TENANT LEASES The Properties are leased to tenants under operating leases with various expiration dates through 2016. 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. 15. 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 September 13, 2000, the Board of Directors authorized the Company to purchase up to $150,000 of the Company's outstanding common stock ("Repurchase Program"). The Company purchased for constructive retirement 2,026,300 shares of its outstanding common stock for an aggregate cost of approximately $55,514 from September 13, 2000 through December 31, 2000. Under the Repurchase Program, the Company purchased for constructive retirement 881,500 shares of its outstanding common stock for an aggregate cost of approximately $24,056 for the six months ended June 30, 2001. 24 <Page> 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") under which a total of 2,700,000 shares (subject to adjustment) of the Company's common stock have been reserved for issuance (2,500,000 shares under the 2000 Employee Plan and 200,000 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 in 1996, 1997, 1998, 1999 and 2000 become exercisable over a five-year period. All stock options granted under both the 2000 Director Plan and Director Plan become exercisable in one year. All options were granted at the fair market value at the dates of grant and have terms of ten years. There were 60,000 stock options granted for the six months ended June 30, 2001. As of June 30, 2001, stock options outstanding had a weighted average remaining contractual life of approximately 6.9 years. Information regarding the Company's stock option plans is summarized below: <Table> <Caption> Weighted Shares Average Under Exercise Options Price - -------------------------------------------------------------------------------- <S> <C> <C> Outstanding at January 1, 2001 4,633,319 $30.14 Granted 60,000 $26.31 Exercised (106,340) $22.51 Lapsed or canceled (122,412) $29.81 - -------------------------------------------------------------------------------- Outstanding at June 30, 2001 4,464,567 $30.28 ================================================================================ Options exercisable at June 30, 2001 2,630,748 $31.28 Available for grant at June 30, 2001 2,320,978 - -------------------------------------------------------------------------------- </Table> STOCK WARRANTS The Company has 360,000 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 grant). 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 grant). Such warrants vest equally over a five-year period through December 31, 2001 and expire on December 12, 2007. As of June 30, 2001, there were a total of 749,976 Stock Warrants outstanding. As of June 30, 2001, there were 671,980 Stock Warrants exercisable. For the six months ended June 30, 2001, no Stock Warrants were canceled. No Stock Warrants have been exercised through June 30, 2001. STOCK COMPENSATION In connection with stock awards granted to officers and certain other employees of the Company (collectively, "Restricted Stock Awards"), officers and certain other employees are to receive up to a total of 198,279 shares of the Company's common stock generally vesting over a three or five-year period. Certain Restricted Stock Awards are contingent upon the Company meeting certain performance and/or stock price appreciation objectives. The Restricted Stock Awards provided to the officers and certain other employees were granted under the 2000 Employee Plan and Employee Plan. Effective January 1, 2001, 24,019 Restricted Stock Awards vested and therefore were released to the officers and certain other employees. For the six months ended June 30, 2001, 7,408 unvested Restricted Stock Awards were canceled. 25 <Page> EARNINGS PER SHARE FASB No. 128 requires a dual presentation of basic and diluted EPS on the face of the income statement for all companies with complex capital structures even where the effect of such dilution is not material. 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 results for the three and six month periods ended June 30, 2001 and 2000 in accordance with FASB No. 128: <Table> <Caption> Three Months Ended June 30, 2001 2000 ------------------------------------------------------------------- Basic EPS Diluted EPS Basic EPS Diluted EPS - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Net income $57,673 $57,673 $94,308 $ 94,308 Add: Net income attributable to Operating Partnership - common units -- 8,119 -- 13,019 Net income attributable to Operating Partnership - preferred units -- 3,879 -- 3,765 - ------------------------------------------------------------------------------------------------------------------------------------ Adjusted net income $57,673 $69,671 $94,308 $111,092 ==================================================================================================================================== Weighted average shares 56,519 71,044 58,545 73,284 - ------------------------------------------------------------------------------------------------------------------------------------ Per Share $ 1.02 $ $ 0.98 $ 1.61 $ 1.52 ==================================================================================================================================== </Table> <Table> <Caption> Six Months Ended June 30, 2001 2000 ------------------------------------------------------------------- Basic EPS Diluted EPS Basic EPS Diluted EPS - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Net income $74,411 $74,411 $130,923 $130,923 Add: Net income attributable to Operating Partnership - common units -- 10,464 -- 18,126 Net income attributable to Operating Partnership - preferred units -- 7,758 -- 7,634 - ------------------------------------------------------------------------------------------------------------------------------------ Adjusted net income $74,411 $92,633 $130,923 $156,683 ==================================================================================================================================== Weighted average shares 56,662 71,198 58,420 73,237 - ------------------------------------------------------------------------------------------------------------------------------------ Per Share $ 1.31 $ 1.30 $ 2.24 $ 2.14 ==================================================================================================================================== </Table> 26 <Page> The following schedule reconciles the shares used in the basic EPS calculation to the shares used in the diluted EPS calculation: <Table> <Caption> Three Months Six Months Ended June 30, Ended June 30, 2001 2000 2001 2000 - ----------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Basic EPS Shares: 56,519 58,545 56,662 58,420 Add: Operating Partnership - common units 7,957 8,082 7,959 8,107 Operating Partnership - preferred units 6,359 6,457 6,359 6,537 (after conversion to common units) Stock options 209 200 218 173 - ----------------------------------------------------------------------------------------------------- Diluted EPS Shares: 71,044 73,284 71,198 73,237 ===================================================================================================== </Table> Through June 30, 2001, under the Repurchase Program, the Company purchased for constructive retirement, a total of 4,777,000 shares of its outstanding common stock for an aggregate cost of approximately $132,131. 16. 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. 27 <Page> Selected results of operations for the three and six month periods ended June 30, 2001 and 2000 and selected asset information as of June 30, 2001 and December 31, 2000 regarding the Company's operating segment are as follows: <Table> <Caption> Total Corporate & Total Segment Other (e) Company - --------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> TOTAL CONTRACT REVENUES (a): Three months ended: June 30, 2001 $ 143,252 $ 1,109 $ 144,361 (f) June 30, 2000 140,117 2,372 142,489 (g) Six months ended: June 30, 2001 $ 284,556 $ 2,505 $ 287,061 (h) June 30, 2000 280,258 3,020 283,278 (i) TOTAL OPERATING AND INTEREST EXPENSES (b): Three months ended: June 30, 2001 $ 43,617 $ 35,689 $ 79,306 (j) June 30, 2000 42,044 31,519 73,563 (k) Six months ended: June 30, 2001 $ 88,893 $ 69,910 $ 158,803 (l) June 30, 2000 84,808 64,119 148,927 (m) NET OPERATING INCOME (c): Three months ended: June 30, 2001 $ 99,635 $(34,580) $ 65,055 (f) (j) June 30, 2000 98,073 (29,147) 68,926 (g) (k) Six months ended: June 30, 2001 $ 195,663 $(67,405) $ 128,258 (h) (l) June 30, 2000 195,450 (61,099) 134,351 (i) (m) TOTAL ASSETS: June 30, 2001 $3,711,992 $ 47,927 $3,759,919 December 31, 2000 3,623,107 53,870 3,676,977 TOTAL LONG-LIVED ASSETS (d): June 30, 2001 $3,592,243 $ 28,987 $3,621,230 December 31, 2000 3,522,766 23,574 3,546,340 - --------------------------------------------------------------------------------------------------------------------- </Table> (a) Total contract revenues represent all revenues during the period (including the Company's share of net income from unconsolidated joint ventures), excluding adjustments for straight-lining of rents and the Company's share of straight-line rent adjustments from unconsolidated joint ventures. All interest income is excluded from segment amounts and is classified in Corporate and Other for all periods. (b) Total operating and interest expenses represent the sum of real estate taxes, utilities, operating services, general and administrative and interest expense. All interest expense (including for property-level mortgages) is excluded from segment amounts and classified in Corporate and Other for all periods. (c) Net operating income represents total contract revenues [as defined in Note (a)] less total operating and interest expenses [as defined in Note (b)] for the period. (d) Long-lived assets are comprised of total rental property, unbilled rents receivable and investments in unconsolidated joint ventures. (e) Corporate & Other represents all corporate-level items (including interest and other investment income, interest expense and non-property general and administrative expense) as well as intercompany eliminations necessary to reconcile to consolidated Company totals. (f) Excludes $3,967 of adjustments for straight-lining of rents and $90 for the Company's share of straight-line rent adjustments from unconsolidated joint ventures. (g) Excludes $3,403 of adjustments for straight-lining of rents and ($3) for the Company's share of straight-line rent adjustments from unconsolidated joint ventures. (h) Excludes $7,737 of adjustments for straight-lining of rents and $126 for the Company's share of straight-line rent adjustments from unconsolidated joint ventures. (i) Excludes $5,536 of adjustments for straight-lining of rents and $54 for the Company's share of straight-line rent adjustments from unconsolidated joint ventures. (j) Excludes $21,951 of depreciation and amortization. (k) Excludes $22,945 of depreciation and amortization and non-recurring charges of $9,228. (l) Excludes $45,435 of depreciation and amortization. (m) Excludes $45,127 of depreciation and amortization and non-recurring charges of $9,228. 28 <Page> ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Consolidated Financial Statements of Mack-Cali Realty Corporation and the notes thereto. Certain defined terms used herein have the meaning ascribed to them in the Consolidated Financial Statements. The following comparisons for the three and six month periods ended June 30, 2001 ("2001"), as compared to the three and six month periods ended June 30, 2000 ("2000"), make reference to the following: (i) the effect of the "Same-Store Properties," which represents all in-service properties owned by the Company at March 31, 2000 (for the three-month period comparisons), and which represent all in-service properties owned by the Company at December 31, 1999 (for the six-month period comparisons), excluding Dispositions as defined below, (ii) the effect of the "Acquired Properties," which represent all properties acquired or placed in service by the Company from April 1, 2000 through June 30, 2001 (for the three-month period comparisons), and which represent all properties acquired or placed in service by the Company from January 1, 2000 through June 30, 2001 (for the six-month period comparisons), and (iii) the effect of the "Dispositions", which represent results for each period for those rental properties sold by the Company during the same periods. THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000 <Table> <Caption> Quarter Ended June 30, Dollar Percent (DOLLARS IN THOUSANDS) 2001 2000 Change Change - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> REVENUE FROM RENTAL OPERATIONS: Base rents $129,419 $122,072 $ 7,347 6.0% Escalations and recoveries from tenants 13,430 14,627 (1,197) (8.2) Parking and other 3,060 6,128 (3,068) (50.1) - ------------------------------------------------------------------------------------------------------------------------------------ Sub-total 145,909 142,827 3,082 2.2 Equity in earnings of unconsolidated joint ventures 2,037 1,070 967 90.4 Interest income 472 1,992 (1,520) (76.3) - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues 148,418 145,889 2,529 1.7 - ------------------------------------------------------------------------------------------------------------------------------------ PROPERTY EXPENSES: Real estate taxes 15,510 14,733 777 5.3 Utilities 10,699 10,014 685 6.8 Operating services 17,686 16,822 864 5.1 - ------------------------------------------------------------------------------------------------------------------------------------ Sub-total 43,895 41,569 2,326 5.6 General and administrative 6,856 5,159 1,697 32.9 Depreciation and amortization 21,951 22,945 (994) (4.3) Interest expense 28,555 26,835 1,720 6.4 Non-recurring charges -- 9,228 (9,228) (100.0) - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses 101,257 105,736 (4,479) (4.2) - ------------------------------------------------------------------------------------------------------------------------------------ Income before realized gains and unrealized losses on disposition of rental property and minority interests 47,161 40,153 7,008 17.5 Realized gains and unrealized losses on disposition of rental property 22,510 73,921 (51,411) (69.5) - ------------------------------------------------------------------------------------------------------------------------------------ Income before minority interests 69,671 114,074 (44,403) (38.9) MINORITY INTERESTS: Operating partnership 11,998 16,784 (4,786) (28.5) Partially-owned properties -- 2,982 (2,982) (100.0) - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 57,673 $ 94,308 $(36,635) (38.8)% ==================================================================================================================================== </Table> 29 <Page> The following is a summary of the changes in revenue from rental operations and property expenses divided into Same-Store Properties, Acquired Properties and Dispositions (dollars in thousands): <Table> <Caption> TOTAL COMPANY SAME-STORE PROPERTIES ACQUIRED PROPERTIES DISPOSITIONS ------------- --------------------- ------------------- ------------ Dollar Percent Dollar Percent Dollar Percent Dollar Percent Change Change Change Change Change Change Change Change - ------------------------------------------------------------------------------------------------------------------------------------ REVENUE FROM RENTAL OPERATIONS: <S> <C> <C> <C> <C> <C> <C> <C> <C> Base rents $ 7,347 6.0% $ 3,963 3.2% $8,043 6.6% $(4,659) (3.8)% Escalations and recoveries from tenants (1,197) (8.2) (1,141) (7.8) 566 3.9 (622) (4.3) Parking and other (3,068) (50.1) (3,014) (49.2) 142 2.3 (196) (3.2) - ------------------------------------------------------------------------------------------------------------------------------------ Total $ 3,082 2.2% $ (192) (0.1)% $8,751 6.1% $(5,477) (3.8)% ==================================================================================================================================== PROPERTY EXPENSES: Real estate taxes $ 777 5.3% $ 149 1.0% $1,029 7.0% $ (401) (2.7)% Utilities 685 6.8 624 6.2 469 4.7 (408) (4.1) Operating services 864 5.1 453 2.7 1,282 7.6 (871) (5.2) - ------------------------------------------------------------------------------------------------------------------------------------ Total $ 2,326 5.6% $ 1,226 2.9% $2,780 6.7% $(1,680) (4.0)% ==================================================================================================================================== OTHER DATA: Number of Consolidated Properties 261 246 15 10 Square feet (in thousands) 27,353 25,358 1,995 2,276 </Table> Base rents for the Same-Store Properties increased $4.0 million, or 3.2 percent, for 2001 as compared to 2000, due primarily to rental rate increases in 2001. Escalations and recoveries from tenants for the Same-Store Properties decreased $1.1 million, or 7.8 percent, for 2001 over 2000, due to the recovery of a decreased amount of total property expenses in 2001, as well as increased settle-up billings during the second quarter 2000. Parking and other income for the Same-Store Properties decreased $3.0 million, or 49.2 percent, due primarily to fewer lease termination fees in 2001. Real estate taxes on the Same-Store Properties increased $0.1 million, or 1.0 percent, for 2001 as compared to 2000, due primarily to property tax rate increases in certain municipalities in 2001. Utilities for the Same-Store Properties increased $0.6 million, or 6.2 percent, for 2001 as compared to 2000, due primarily to increased gas rates. Operating services for the Same-Store Properties increased $0.5 million, or 2.7 percent, due primarily to an increase in maintenance costs in 2001. Equity in earnings of unconsolidated joint ventures increased $1.0 million, or 90.4 percent, for 2001 as compared to 2000. This is due primarily to properties developed by joint ventures being placed in service during 2000 and higher occupancies at certain properties in 2001 (see Note 4 to the Financial Statements). Interest income decreased $1.5 million, or 76.3 percent, for 2001 as compared to 2000. This decrease was due primarily to additional interest income in 2000 on investment of proceeds from the Dispositions in cash and cash equivalents. General and administrative increased by $1.7 million, or 32.9 percent, for 2001 as compared to 2000. This increase is due primarily to increased professional fees, mostly on account of costs for transactions not consummated, and increased payroll and related costs in 2001. Depreciation and amortization decreased by $1.0 million, or 4.3 percent, for 2001 over 2000. Of this decrease, $1.7 million, or 7.4 percent, is attributable to the Same-Store Properties, and $0.7 million, or 3.1 percent, is due to the Dispositions, partially offset by an increase of $1.4 million, or 6.2 percent, due to the Acquired Properties. Interest expense increased $1.7 million, or 6.4 percent, for 2001 as compared to 2000. This increase is due primarily to the replacement in early 2001 of short-term credit facility borrowings with higher, long-term fixed rate unsecured debt. 30 <Page> Income before realized and unrealized gain on disposition of rental property and minority interests increased to $47.2 million in 2001 from $40.2 million in 2000. The increase of approximately $7.0 million is due to the factors discussed above. Net income decreased by $36.6 million, from $94.3 million in 2000 to $57.7 million in 2001. This decrease was a result of a gain on sale of rental property in 2000 of $73.9 million, which was partially offset by a gain on sale of rental property in 2001 of $22.5 million, an increase in income before realized and unrealized gain on disposition of rental property and minority interests of $7.0 million in 2001 as compared to 2000, and a decrease in minority interests of $7.8 million in 2001. SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000 <Table> <Caption> Six Months Ended June 30, Dollar Percent (DOLLARS IN THOUSANDS) 2001 2000 Change Change - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> REVENUE FROM RENTAL OPERATIONS: Base rents $254,795 $243,670 $ 11,125 4.6% Escalations and recoveries from tenants 28,192 31,295 (3,103) (9.9) Parking and other 5,406 9,450 (4,044) (42.8) - ------------------------------------------------------------------------------------------------------------------------------------ Sub-total 288,393 284,415 3,978 1.4 Equity in earnings of unconsolidated joint ventures 5,446 2,207 3,239 146.8 Interest income 1,085 2,246 (1,161) (51.7) - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues 294,924 288,868 6,056 2.1 - ------------------------------------------------------------------------------------------------------------------------------------ PROPERTY EXPENSES: Real estate taxes 30,797 29,437 1,360 4.6 Utilities 22,655 20,393 2,262 11.1 Operating services 35,565 34,564 1,001 2.9 - ------------------------------------------------------------------------------------------------------------------------------------ Sub-total 89,017 84,394 4,623 5.5 General and administrative 12,866 11,272 1,594 14.1 Depreciation and amortization 45,435 45,127 308 0.7 Interest expense 56,920 53,261 3,659 6.9 Non-recurring charges -- 9,228 (9,228) (100.0) - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses 204,238 203,282 956 0.5 - ------------------------------------------------------------------------------------------------------------------------------------ Income before realized gains and unrealized losses on disposition of rental property and minority interests 90,686 85,586 5,100 6.0 Realized gains and unrealized losses on disposition of rental property 1,947 76,169 (74,222) (97.4) - ------------------------------------------------------------------------------------------------------------------------------------ Income before minority interests 92,633 161,755 (69,122) (42.7) MINORITY INTERESTS: Operating partnership 18,222 25,760 (7,538) (29.3) Partially-owned properties -- 5,072 (5,072) (100.0) - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 74,411 $130,923 $(56,512) (43.2)% ==================================================================================================================================== </Table> 31 <Page> The following is a summary of the changes in revenue from rental operations and property expenses divided into Same-Store Properties, Acquired Properties and Dispositions (dollars in thousands): <Table> <Caption> TOTAL COMPANY SAME-STORE PROPERTIES ACQUIRED PROPERTIES DISPOSITIONS ------------- --------------------- ------------------- ------------ Dollar Percent Dollar Percent Dollar Percent Dollar Percent Change Change Change Change Change Change Change Change - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> <C> REVENUE FROM RENTAL OPERATIONS: Base rents $ 11,125 4.6% $ 9,273 3.8% $14,055 5.8% $(12,203) (5.0)% Escalations and recoveries from tenants (3,103) (9.9) (1,835) (5.9) 1,081 3.5 (2,349) (7.5) Parking and other (4,044) (42.8) (3,683) (39.0) 171 1.8 (532) (5.6) - ------------------------------------------------------------------------------------------------------------------------------------ Total $ 3,978 1.4% $ 3,755 1.3% $15,307 5.4% $(15,084) (5.3)% ==================================================================================================================================== PROPERTY EXPENSES: Real estate taxes $ 1,360 4.6% $ 461 1.6% $ 1,952 6.6% $ (1,053) (3.6)% Utilities 2,262 11.1 1,910 9.4 1,236 6.1 (884) (4.4) Operating services 1,001 2.9 1,024 3.0 2,140 6.2 (2,163) (6.3) - ------------------------------------------------------------------------------------------------------------------------------------ Total $ 4,623 5.5% $ 3,395 4.0% $ 5,328 6.3% $ (4,100) (4.8) ==================================================================================================================================== OTHER DATA: Number of Consolidated Properties 261 245 16 10 Square feet (in thousands) 27,353 25,297 2,056 2,276 </Table> Base rents for the Same-Store Properties increased $9.3 million, or 3.8 percent, for 2001 as compared to 2000, due primarily to rental rate increases in 2001. Escalations and recoveries from tenants for the Same-Store Properties decreased $1.8 million, or 5.9 percent, for 2001 over 2000, due to the recovery of a decreased amount of total property expenses in 2001, as well as increased settle-up billings in 2000. Parking and other income for the Same-Store Properties decreased $3.7 million, or 39.0 percent, due primarily to fewer lease termination fees in 2001. Real estate taxes on the Same-Store Properties increased $0.5 million, or 1.6 percent, for 2001 as compared to 2000, due primarily to property tax rate increases in certain municipalities in 2001. Utilities for the Same-Store Properties increased $1.9 million, or 9.4 percent, for 2001 as compared to 2000, due primarily to increased gas rates. Operating services for the Same-Store Properties increased $1.0 million, or 3.0 percent, due primarily to an increase in maintenance costs in 2001. Equity in earnings of unconsolidated joint ventures increased $3.2 million, or 146.8 percent, for 2001 as compared to 2000. This is due primarily to properties developed by joint ventures being placed in service during 2000 and higher occupancies at certain properties (see Note 4 to the Financial Statements). Interest income decreased $1.2 million, or 51.7 percent, for 2001 as compared to 2000. This decrease was due primarily to additional interest income in 2000 on investment of proceeds from the Dispositions in cash and cash equivalents. General and administrative increased by $1.6 million, or 14.1 percent, for 2001 as compared to 2000. This increase is due primarily to increased professional fees, mostly on account of costs for transactions not consummated, and increased payroll and related costs in 2001. Depreciation and amortization decreased by $0.3 million, or 0.7 percent, for 2001 over 2000. Of this increase, $2.6 million, or 5.9 percent, is due to the Acquired Properties, partially offset by a decrease of $1.4 million, or 3.2 percent, due to the Dispositions and $0.9 million, or 2.0 percent, attributable to the Same-Store Properties. Interest expense increased $3.7 million, or 6.9 percent, for 2001 as compared to 2000. This increase is due primarily to the replacement in 2001 of short-term credit facility borrowings with higher, long-term fixed rate unsecured debt. 32 <Page> Income before realized gains and unrealized losses on disposition of rental property and minority interests increased to $90.7 million in 2001 from $85.6 million in 2000. The increase of approximately $5.1 million is due to the factors discussed above. Net income decreased by $56.5 million, from $130.9 million in 2000 to $74.4 million in 2001. This decrease was a result of a gain on sale of rental property of $76.2 million. This was partially offset by a gain on sale of rental property of $2.0 million in 2001, an increase in income before realized gains and unrealized losses on disposition of rental property and minority interests of $5.1 million, and a decrease in minority interests of $12.6 million in 2001. LIQUIDITY AND CAPITAL RESOURCES STATEMENT OF CASH FLOWS During the six months ended June 30, 2001, the Company generated $133.0 million in cash flows from operating activities, and together with $586.8 million in borrowings from the Company's senior unsecured notes, revolving credit facilities and additional mortgage financing, $44.8 million in proceeds from sales of rental property, $19.1 million in distributions received from unconsolidated joint ventures, $6.0 million in proceeds from repayment of a mortgage note receivable and $2.4 million in proceeds from stock options exercised used an aggregate of approximately $792.1 million to acquire properties and land parcels and pay for other tenant and building improvements totaling $148.1 million, repay outstanding borrowings on its revolving credit facilities and other mortgage debt of $494.7 million, pay quarterly dividends and distributions of $87.0 million, invest $24.5 million in unconsolidated joint ventures, pay financing costs of $3.2 million, repurchase 881,500 shares of its outstanding common stock for $24.1 million, add $0.9 million to restricted cash and add $9.6 million to cash and cash equivalents. CAPITALIZATION The Company has a focused strategy geared to attractive opportunities in high-barrier-to-entry markets, primarily predicated on the Company's strong presence in the Northeast region and, to a lesser extent, certain markets in California. The Company plans to sell substantially all of its properties located in the Southwestern and Western regions, using such proceeds to invest in property acquisitions and development projects in its core Northeast markets, as well as to repay debt and fund stock repurchases. Consistent with its strategy, in the fourth quarter 2000, the Company started construction of a 980,000 square-foot office property, to be known as Plaza 5, at its Harborside Financial Center office complex in Jersey City, Hudson County, New Jersey. The total cost of the project is currently projected to be approximately $260 million and is anticipated to be completed in late 2002. Additionally, in the fourth quarter 2000, the Company, through a joint venture, started construction of a 575,000 square-foot office property, to be known as Plaza 10, on land owned by the joint venture located adjacent to the Company's Harborside complex. The total cost of this project is currently projected to be approximately $140 million and is anticipated to be completed in late 2002. Plaza 10 is 100 percent pre-leased to Charles Schwab & Co. Inc. for a 15-year term. The lease agreement obligates the Company, among other things, to deliver space to the tenant by required timelines and offers expansion options, at the tenant's election, to additional space in any adjacent Harborside projects. Such options may obligate the Company to construct an additional building at Harborside if vacant space is not available in any of its existing Harborside properties. Should the Company be unable to or choose not to provide such expansion space, the Company could be liable to Schwab for its actual damages, in no event to exceed $15.0 million. The Company expects to finance its funding requirements under both Plazas 5 and 10 projects through drawing on its revolving credit facilities, construction financing, or through joint venture arrangements. On August 6, 1998, the Board of Directors of the Company authorized a Repurchase Program under which the Company was permitted to purchase up to $100.0 million of the Company's outstanding common stock. 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 $52.6 million through September 12, 2000. 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 $150.0 million of the Company's outstanding common stock above the $52.6 million that had previously been purchased. From that date through July 31, 2001, the Company purchased for constructive retirement 2.9 million shares of its outstanding common stock for an aggregate cost of approximately $79.7 million under the Repurchase Program. The Company has authorization to repurchase up to an additional $70.3 33 <Page> million of its outstanding common stock which it may repurchase from time to time in open market transactions at prevailing prices or through privately negotiated transactions. As of June 30, 2001, the Company's total indebtedness of $1.7 billion (weighted average interest rate of 7.27 percent) was comprised of $108.7 million of revolving credit facility borrowings and other variable rate mortgage debt (weighted average rate of 5.07 percent) and fixed rate debt of $1.6 billion (weighted average rate of 7.42 percent). As of June 30, 2001, the Company had outstanding borrowings of $76.5 million under its 2000 Unsecured Facility (with aggregate borrowing capacity of $800.0 million). The interest rate on outstanding borrowings under the 2000 Unsecured Facility is currently LIBOR 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. In the event of a change in the Company's unsecured debt rating, the interest and facility fee rate will be changed on a sliding scale. Subject to certain conditions, the Company has the ability to increase the borrowing capacity of the 2000 Unsecured Facility up to $1.0 billion. 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. The Company believes that the 2000 Unsecured Facility is sufficient to meet its revolving credit facility needs. The terms of the 2000 Unsecured Facility include certain restrictions and covenants which limit, among other things, the payment of dividends (as discussed below), the incurrence of additional indebtedness, the incurrence of liens and the disposition of assets, and which require compliance with financial ratios relating to the maximum leverage ratio, the maximum amount of secured indebtedness, the minimum amount of tangible net worth, the minimum amount of debt service coverage, the minimum amount of fixed charge coverage, the maximum amount of unsecured indebtedness, the minimum amount of unencumbered property debt service coverage and certain investment limitations. The dividend restriction referred to above provides that, except to enable the Company to continue to qualify as a REIT under the Code, the Company will not during any four consecutive fiscal quarters make distributions with respect to common stock or other equity interests in an aggregate amount in excess of 90 percent of funds from operations (as defined) for such period, subject to certain other adjustments. On January 29, 2001, the Operating Partnership issued $300.0 million face amount of 7.75 percent senior unsecured notes due February 15, 2011 with interest payable semi-annually in arrears. The total proceeds from the issuance (net of selling commissions and discount) of approximately $296.3 million were used to pay down outstanding borrowings under the 2000 Unsecured Facility, as defined in Note 9 to the Financial Statements. The senior unsecured notes were issued at a discount of approximately $1.7 million. The terms of the Operating Partnership's unsecured debt include certain restrictions and covenants which require compliance with financial ratios relating to the maximum amount of debt leverage, the maximum amount of secured indebtedness, the minimum amount of debt service coverage and the maximum amount of unsecured debt as a percent of unsecured assets. The Company has three investment grade credit ratings. Standard & Poor's Rating Services ("S&P") and Fitch, Inc. ("Fitch") have each assigned their BBB rating to existing and prospective senior unsecured debt of the Operating Partnership. S&P and Fitch have also assigned their BBB- rating to prospective preferred stock offerings of the Company. Moody's Investors Service has assigned its Baa3 rating to the existing and prospective senior unsecured debt of the Operating Partnership and its Ba1 rating to prospective preferred stock offerings of the Company. On May 18, 2001, the Company obtained $70.0 million in additional mortgage financing secured by Harborside Financial Center Plazas II and III from the existing lender. The 7.42 percent interest only financing matures concurrent with the existing financing on January 1, 2006. The total financing secured by Harborside Financial Center Plazas II and III of $163.9 million at June 30, 2001, has a weighted average interest rate of 7.36 percent. Proceeds from the financing were used to pay down the outstanding borrowings on the 2000 Unsecured Facility. As of June 30, 2001, the Company had 236 unencumbered properties, totaling 21.3 million square feet, representing 77.3 percent of the Company's total portfolio on a square footage basis. 34 <Page> The Company has an effective shelf registration statement with the SEC for an aggregate amount of $2.0 billion in equity securities of the Company. The Company and Operating Partnership also have an effective shelf registration statement with the SEC for an aggregate of $2.0 billion in debt securities, preferred stock and preferred stock represented by depositary shares, under which the Operating Partnership has issued an aggregate of $1.1 billion of unsecured debt. Historically, rental revenue has been the principal source of funds to pay operating expenses, debt service and capital expenditures, excluding non-recurring capital expenditures. Management believes that the Company will have access to the capital resources necessary to expand and develop its business. To the extent that the Company's cash flow from operating activities is insufficient to finance its non-recurring capital expenditures such as property acquisition and construction project costs and other capital expenditures, the Company expects to finance such activities through borrowings under its revolving credit facilities and other debt and equity financing. The Company expects to meet its short-term liquidity requirements generally through its working capital, net cash provided by operating activities and from the 2000 Unsecured Facility. The Company is frequently examining potential property acquisitions and construction projects and, at any given time, one or more of such acquisitions or construction projects may be under consideration. Accordingly, the ability to fund property acquisitions and construction projects is a major part of the Company's financing requirements. The Company expects to meet its financing requirements through funds generated from operating activities, proceeds from property sales, long-term or short-term borrowings (including draws on the Company's revolving credit facilities) and the issuance of additional debt or equity securities. As of June 30, 2001, the Company's total debt had a weighted average term to maturity of approximately 5.3 years. The Company does not intend to reserve funds to retire the Company's unsecured corporate debt or its mortgages and loans payable upon maturity. Instead, the Company will seek to refinance such debt at maturity or retire such debt through the issuance of additional equity or debt securities. The Company is reviewing various refinancing options, including the issuance of additional unsecured debt, preferred stock, and/or obtaining additional mortgage debt, some or all of which may be completed during 2001. The Company anticipates that its available cash and cash equivalents and cash flows from operating activities, together with cash available from borrowings and other sources, will be adequate to meet the Company's capital and liquidity needs both in the short and long-term. However, if these sources of funds are insufficient or unavailable, the Company's ability to make the expected distributions discussed below may be adversely affected. To maintain its qualification as a REIT, the Company must make annual distributions to its stockholders of at least 90 percent of its REIT taxable income, determined without regard to the dividends paid deduction and by excluding net capital gains. Moreover, the Company intends to continue to make regular quarterly distributions to its stockholders which, based upon current policy, in the aggregate would equal approximately $139.1 million on an annualized basis. However, any such distribution, whether for federal income tax purposes or otherwise, would only be paid out of available cash after meeting both operating requirements and scheduled debt service on mortgages and loans payable. FUNDS FROM OPERATIONS The Company considers funds from operations ("FFO"), after adjustment for straight-lining of rents and non-recurring charges, one measure of REIT performance. Funds from operations is defined as net income (loss) before minority interest of unitholders, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains (or losses) from debt restructuring, other extraordinary items, and realized gains and unrealized losses on disposition of depreciable rental property, plus real estate-related depreciation and amortization. Funds from operations should not be considered as an alternative to net income as an indication of the Company's performance or to cash flows as a measure of liquidity. Funds from operations presented herein is not necessarily comparable to funds from operations presented by other real estate companies due to the fact that not all real estate companies use the same definition. However, the Company's funds from operations is comparable to the funds from operations of real estate companies that use the current definition of the National Association of Real Estate Investment Trusts ("NAREIT"), after the adjustment for straight-lining of rents and non-recurring charges. 35 <Page> Funds from operations for the three and six month periods ended June 30, 2001 and 2000, as calculated in accordance with NAREIT's definition as published in October 1999, after adjustment for straight-lining of rents and non-recurring charges, are summarized in the following table (IN THOUSANDS): <Table> <Caption> Three Months Six Months Ended June 30, Ended June 30, 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Income before realized gains and unrealized losses on disposition of rental property and minority interests $47,161 $40,153 $ 90,686 $ 85,586 Add: Real estate-related depreciation and amortization (1) 23,068 23,434 47,071 46,152 Gain on sale of land -- -- -- 2,248 Non-recurring charges -- 9,228 -- 9,228 Deduct: Rental income adjustment for straight-lining of rents (2) (4,057) (3,400) (7,862) (5,590) Minority interests: partially-owned properties -- (2,982) -- (5,072) - ------------------------------------------------------------------------------------------------------------------------------------ Funds from operations, after adjustment for straight-lining of rents and non-recurring charges $66,172 $66,433 $ 129,895 $ 132,552 Deduct: Distributions to preferred unitholders (3,879) (3,765) (7,758) (7,634) - ------------------------------------------------------------------------------------------------------------------------------------ Funds from operations, after adjustment for straight-lining of rents and non-recurring charges, after distributions to preferred unitholders $62,293 $62,668 $ 122,137 $ 124,918 ==================================================================================================================================== Cash flows provided by operating activities $ 133,022 $ 120,576 Cash flows used in investing activities $(103,715) $ 62,329 Cash flows used in financing activities $ (19,748) $(181,041) - ------------------------------------------------------------------------------------------------------------------------------------ Basic weighted averages shares/units outstanding (3) 64,476 66,627 64,621 66,527 - ------------------------------------------------------------------------------------------------------------------------------------ Diluted weighted average shares/units outstanding (3) 71,044 73,284 71,198 73,237 - ------------------------------------------------------------------------------------------------------------------------------------ </Table> (1) Includes the Company's share from unconsolidated joint ventures of $1,471 and $686 for the three months ended June 30, 2001 and 2000, respectively, and $2,193 and $1,420 for the six months ended June 30, 2001 and 2000, respectively. (2) Includes the Company's share from unconsolidated joint ventures of $90 and $(3) for the three months ended June 30, 2001 and 2000, respectively, and $126 and $54 for six months ended June 30, 2001 and 2000, respectively. (3) See calculations for the amounts presented in the following reconciliation. 36 <Page> The following schedule reconciles the Company's basic weighted average shares to the basic and diluted weighted average shares/units presented above: <Table> <Caption> Three Months Six Months Ended June 30, Ended June 30, 2001 2000 2001 2000 - -------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Basic weighted average shares: 56,519 58,545 56,662 58,420 Add: Weighted average common units 7,957 8,082 7,959 8,107 - -------------------------------------------------------------------------------- Basic weighted average shares/units: 64,476 66,627 64,621 66,527 Add: Weighted average preferred units (after conversion to common units) 6,359 6,457 6,359 6,537 Stock options 209 200 218 173 - -------------------------------------------------------------------------------- Diluted weighted average shares/units: 71,044 73,284 71,198 73,237 ================================================================================ </Table> INFLATION The Company's leases with the majority of its tenants provide for recoveries and escalation charges based upon the tenant's proportionate share of, and/or increases in, real estate taxes and certain operating costs, which reduce the Company's exposure to increases in operating costs resulting from inflation. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS The Company considers portions of this information to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements relate to, without limitation, the Company's future economic performance, plans and objectives for future operations and projections of revenue and other financial items. Forward-looking statements can be identified by the use of words such as "may," "will," "should," "expect," "anticipate," "estimate" or "continue" or comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. 37 <Page> ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. In pursuing its business plan, the primary market risk to which the Company is exposed is interest rate risk. Changes in the general level of interest rates prevailing in the financial markets may affect the spread between the Company's yield on invested assets and cost of funds and, in turn, our ability to make distributions or payments to our investors. Approximately $1.6 billion of the Company's long-term debt bears interest at fixed rates and therefore the fair value of these instruments is affected by changes in market interest rates. The following table presents principal cash flows (in thousands) based upon maturity dates of the debt obligations and the related weighted-average interest rates by expected maturity dates for the fixed rate debt. The interest rate on the variable rate debt as of June 30, 2001 ranged from LIBOR plus 65 basis points to LIBOR plus 80 basis points. JUNE 30, 2001 <Table> <Caption> DEBT, 7/1/01 - INCLUDING CURRENT PORTION 12/31/01 2002 2003 2004 2005 THEREAFTER TOTAL FAIR VALUE - ------------------------- -------- ---- ---- ---- ---- ---------- ----- ---------- <S> <C> <C> <C> <C> <C> <C> <C> <C> Fixed Rate $3,650 $3,260 $195,500 $312,110 $254,598 $843,004 $1,612,122 $1,619,032 Average Interest Rate 9.08% 10.25% 7.31% 7.34% 7.14% 7.53% 7.42% Variable Rate $ 76,500 $ 32,178 $ 108,678 $ 108,678 </Table> While the Company has not experienced any significant credit losses, in the event of a significant rising interest rate environment and/or economic downturn, defaults could increase and result in losses to the Company which adversely affect its operating results and liquidity. 38 <Page> MACK-CALI REALTY CORPORATION PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to "Other" in Note 13 (Commitments and Contingencies) to the Consolidated Financial Statements, which is specifically incorporated by reference herein. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not Applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 15, 2000, the Company held its Annual Meeting of Stockholders to elect five directors to the Board of Directors of the Company, among other things. At the Annual Meeting, the Company's stockholders elected the following Class I directors to serve until the Annual Meeting of Stockholders to be held in 2004: Brendan T. Byrne (Number of shares for: 47,392,598, Number of shares against: 1,143,853), Martin D. Gruss (Number of shares for: 47,422,540, Number of shares against: 1,113,911), Vincent Tese (Number of shares for: 47,426,848, Number of shares against: 1,109,603), and Roy J. Zuckerberg (Number of shares for: 47,425,081, Number of shares against: 1,111,370). The remaining members of the 13 member Board of Directors and their respective terms of offices are as follows: Class II directors, Nathan Gantcher, Earle I. Mack, William L. Mack and Alan G. Philibosian, whose terms expire at the Annual Meeting of Stockholders to be held in 2002 and Class III directors, John J. Cali, John R. Cali, Mitchell E. Hersh, Irvin D. Reid and Robert F. Weinberg, whose terms expire at the Annual Meeting of Stockholders to be held in 2003. At the Annual Meeting, the Company's stockholders also voted upon and approved the ratification of the appointment of PricewaterhouseCoopers LLP, independent accountants, as the Company's independent accountants for the ensuing year (Number of shares for: 48,335,671, Number of shares against: 68,785, Number of shares abstained: 131,995, Number of broker non-votes: 0). In addition, at the Annual Meeting the Company's stockholders voted upon and approved, by the vote of at least a majority of all outstanding shares that is required for charter amendments, the adoption of an amendment to the charter of the Company to decrease the affirmative stockholder vote required to approve any extraordinary corporate action, such as a merger, consolidation, sale of all or substantially all of the assets or dissolution of the Company, from two-thirds to a majority of all votes entitled to be cast on the action by the holders of the outstanding shares of stock of the Company (Number of shares for: 32,458,044, Number of shares against: 8,972,767, Number of shares abstained: 103,363, Number of broker non-votes: 7,002,277). Accordingly, the proposal passed by a vote of 56.98% of the Company's outstanding shares. ITEM 5. OTHER INFORMATION Not Applicable. 39 <Page> MACK-CALI REALTY CORPORATION PART II - OTHER INFORMATION (CONTINUED) ITEM 6 - EXHIBITS (a) Exhibits The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed: <Table> <Caption> EXHIBIT NUMBER EXHIBIT TITLE ------ ------------- <S> <C> *3.1 Restated Charter of Mack-Cali Realty Corporation dated June 11, 2001. 3.2 Amended and Restated Bylaws of Mack-Cali Realty Corporation dated June 10, 1999 (filed as Exhibit 3.2 to the Company's Form 8-K dated June 10, 1999 and incorporated herein by reference). 3.3 Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated December 11, 1997 (filed as Exhibit 10.110 to the Company's Form 8-K dated December 11, 1997 and incorporated herein by reference). 3.4 Amendment No. 1 to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated August 21, 1998 (filed as Exhibit 3.1 to the Company's and the Operating Partnership's Registration Statement on Form S-3, Registration No. 333-57103, and incorporated herein by reference). 3.5 Second Amendment to the Second Amended and Restated Agreement of Limited Partnership of Mack-Cali Realty, L.P. dated July 6, 1999 (filed as Exhibit 10.1 to the Company's Form 8-K dated July 6, 1999 and incorporated herein by reference). 4.1 Amended and Restated Shareholder Rights Agreement, dated as of March 7, 2000, between Mack-Cali Realty Corporation and EquiServe Trust Company, N.A., as Rights Agent (filed as Exhibit 4.1 to the Company's Form 8-K dated March 7, 2000 and incorporated herein by reference). 4.2 Amendment No. 1 to the Amended and Restated Shareholder Rights Agreement, dated as of June 27, 2000, by and among Mack-Cali Realty Corporation and Equiserve Trust Company, N.A. (filed as Exhibit 4.1 to the Company's Form 8-K dated June 27, 2000). 4.3 Indenture dated as of March 16, 1999, by and among Mack-Cali Realty, L.P., as issuer, Mack-Cali Realty Corporation, as guarantor, and Wilmington Trust Company, as trustee (filed as Exhibit 4.1 to the Operating Partnership's Form 8-K dated March 16, 1999 and incorporated herein by reference). 4.4 Supplemental Indenture No. 1 dated as of March 16, 1999, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership's Form 8-K dated March 16, 1999 and incorporated herein by reference). </Table> 40 <Page> <Table> <Caption> EXHIBIT NUMBER EXHIBIT TITLE ------ ------------- <S> <C> 4.5 Supplemental Indenture No. 2 dated as of August 2, 1999, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.4 to the Operating Partnership's Form 10-Q dated June 30, 1999 and incorporated herein by reference). 4.6 Supplemental Indenture No. 3 dated as of December 21, 2000, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership's Form 8-K dated December 21, 2000 and incorporated herein by reference). 4.7 Supplemental Indenture No. 4 dated as of January 29, 2001, by and among Mack-Cali Realty, L.P., as issuer, and Wilmington Trust Company, as trustee (filed as Exhibit 4.2 to the Operating Partnership's Form 8-K dated January 29, 2001 and incorporated herein by reference). 10.1 Amended and Restated Employment Agreement dated as of July 1, 1999 between Mitchell E. Hersh and Mack-Cali Realty Corporation (filed as Exhibit 10.2 to the Company's Form 10-Q dated June 30, 1999 and incorporated herein by reference). 10.2 Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Timothy M. Jones and Mack-Cali Realty Corporation (filed as Exhibit 10.3 to the Company's Form 10-Q dated June 30, 1999 and incorporated herein by reference). 10.3 Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Barry Lefkowitz and Mack-Cali Realty Corporation (filed as Exhibit 10.6 to the Company's Form 10-Q dated June 30, 1999 and incorporated herein by reference). 10.4 Second Amended and Restated Employment Agreement dated as of July 1, 1999 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.7 to the Company's Form 10-Q dated June 30, 1999 and incorporated herein by reference). 10.5 Employment Agreement dated as of December 5, 2000 between Michael Grossman and Mack-Cali Realty Corporation (filed as Exhibit 10.5 to the Company's Form 10-K for the year ended December 31, 2000 and incorporated herein by reference). 10.6 Restricted Share Award Agreement dated as of July 1, 1999 between Mitchell E. Hersh and Mack-Cali Realty Corporation (filed as Exhibit 10.8 to the Company's Form 10-Q dated June 30, 1999 and incorporated herein by reference). 10.7 Restricted Share Award Agreement dated as of July 1, 1999 between Timothy M. Jones and Mack-Cali Realty Corporation (filed as Exhibit 10.9 to the Company's Form 10-Q dated June 30, 1999 and incorporated herein by reference). 10.8 Restricted Share Award Agreement dated as of July 1, 1999 between Barry Lefkowitz and Mack-Cali Realty Corporation (filed as Exhibit 10.12 to the Company's Form 10-Q dated June 30, 1999 and incorporated herein by reference). </Table> 41 <Page> <Table> <Caption> EXHIBIT NUMBER EXHIBIT TITLE ------ ------------- <S> <C> 10.9 Restricted Share Award Agreement dated as of July 1, 1999 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.13 to the Company's Form 10-Q dated June 30, 1999 and incorporated herein by reference). 10.10 Restricted Share Award Agreement dated as of March 12, 2001 between Roger W. Thomas and Mack-Cali Realty Corporation (filed as Exhibit 10.10 to the Company's Form 10-Q dated March 31, 2001 and incorporated herein by reference). 10.11 Restricted Share Award Agreement dated as of March 12, 2001 between Michael Grossman and Mack-Cali Realty Corporation (filed as Exhibit 10.11 to the Company's Form 10-Q dated March 31, 2001 and incorporated herein by reference). 10.12 Amendment No. 3 to and Restatement of Revolving Credit Agreement dated as of June 22, 2000, by and among Mack-Cali Realty, L.P. and The Chase Manhattan Bank, Fleet National Bank and Other Lenders Which May Become Parties Thereto with The Chase Manhattan Bank, as administrative agent, Fleet National Bank, as syndication agent, Bank of America, N.A., as documentation agent, Chase Securities Inc. and FleetBoston Robertson Stephens Inc., as arrangers, Bank One, N.A., First Union National Bank and Commerzbank Aktiengesellschaft, as senior managing agents, PNC Bank National Association, as managing agent, and Societe Generale, Dresdner Bank AG, Wells Fargo Bank, National Association, Bank Austria Creditanstalt Corporate Finance, Inc., Bayerische Hypo-und Vereinsbank and Summit Bank, as co-agents (filed as Exhibit 10.10 to the Company's Form 10-K for the year ended December 31, 2000 and incorporated herein by reference). 10.13 Contribution and Exchange Agreement among The MK Contributors, The MK Entities, The Patriot Contributors, The Patriot Entities, Patriot American Management and Leasing Corp., Cali Realty, L.P. and Cali Realty Corporation, dated September 18, 1997 (filed as Exhibit 10.98 to the Company's Form 8-K dated September 19, 1997 and incorporated herein by reference). 10.14 First Amendment to Contribution and Exchange Agreement, dated as of December 11, 1997, by and among the Company and the Mack Group (filed as Exhibit 10.99 to the Company's Form 8-K dated December 11, 1997 and incorporated herein by reference). 10.15 Employee Stock Option Plan of Mack-Cali Realty Corporation (filed as Exhibit 10.1 to the Company's Post-Effective Amendment No. 1 to Form S-8, Registration No. 333-44443, and incorporated herein by reference). 10.16 Director Stock Option Plan of Mack-Cali Realty Corporation (filed as Exhibit 10.2 to the Company's Post-Effective Amendment No. 1 to Form S-8, Registration No. 333-44443, and incorporated herein by reference). 10.17 2000 Employee Stock Option Plan (filed as Exhibit 10.1 to the Company's Registration Statement on Form S-8, Registration No. 333-52478, and incorporated herein by reference). 10.18 2000 Director Stock Option Plan (filed as Exhibit 10.2 to the Company's Registration Statement on Form S-8, Registration No. 333-52478, and incorporated herein by reference). </Table> 42 <Page> <Table> <Caption> EXHIBIT NUMBER EXHIBIT TITLE ------ ------------- <S> <C> *10.19 Amended and Restated Mortgage and Security made as of May 18, 2001 between Cali Harborside (Fee) Associates L.P., a New Jersey limited partnership, Cal-Harbor II & III Urban Renewal Associates L.P., a New Jersey limited partnership, Cal-Harbor IV Urban Renewal Associates L.P., a New Jersey limited partnership and Cal-Harbor VI Urban Renewal Associates L.P., a New Jersey limited partnership, and The Northwestern Mutual Life Insurance Company, a Wisconsin corporation, and Principal Life Insurance Company, an Iowa corporation, formerly known as Principal Mutual Life Insurance Company. *10.20 Promissory Note of Cali Harborside (Fee) Associates L.P., a New Jersey limited partnership, Cal-Harbor II & III Urban Renewal Associates L.P., a New Jersey limited partnership, Cal-Harbor IV Urban Renewal Associates L.P., a New Jersey limited partnership and Cal-Harbor VI Urban Renewal Associates L.P., a New Jersey limited partnership, dated as of May 18, 2001 in the amount of $35,000,000.00 payable to the order of Principal Life Insurance Company, an Iowa corporation. *10.21 Promissory Note of Cali Harborside (Fee) Associates L.P., a New Jersey limited partnership, Cal-Harbor II & III Urban Renewal Associates L.P., a New Jersey limited partnership, Cal-Harbor IV Urban Renewal Associates L.P., a New Jersey limited partnership and Cal-Harbor VI Urban Renewal Associates L.P., a New Jersey limited partnership, dated as of May 18, 2001 in the amount of $35,000,000.00 payable to the order of The Northwestern Mutual Life Insurance Company, a Wisconsin corporation. *10.22 Purchase and Sale Agreement dated August 3, 2001, between Robert Martin Company, LLC, a New York limited liability company, and 5/6 Skyline Realty L.L.C., a New York limited liability company. *10.23 Partnership Interest Purchase Agreement dated August 3, 2001, by and between Madeira-RMC L.P., a New York limited partnership, Madeira Management Company, Inc., a Delaware corporation, Merlot Management Company, Inc., a Delaware corporation, Robert Martin Company, LLC, a New York limited liability company, and Robert Martin Company, LLC, as agent for 5/6 Skyline Realty L.L.C., a New York limited liability company. *10.24 Nominee Agreement dated as of August 3, 2001, by and between Robert Martin Company, LLC, a New York limited liability company, and 5/6 Skyline Realty L.L.C., a New York limited liability company. </Table> (b) Reports on Form 8-K During the second quarter of 2001, the Company filed a report on Form 8-K dated May 10, 2001, furnishing under Items 7 and 9 certain supplemental data regarding its operations. The Company also filed a report on Form 8-K dated May 15, 2001, furnishing under Items 5 and 7 the voting results of the proposals presented to stockholders at the Company's Annual Meeting of Stockholders held on May 15, 2001, and the Company's charter amendment. - ---------- *filed herewith 43 <Page> MACK-CALI REALTY CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MACK-CALI REALTY CORPORATION ---------------------------- (Registrant) Date: August 8, 2001 By: /s/ MITCHELL E. HERSH --------------------------- Mitchell E. Hersh Chief Executive Officer Date: August 8, 2001 By: /s/ BARRY LEFKOWITZ --------------------------- Barry Lefkowitz Executive Vice President & Chief Financial Officer 44