MACK CALI REALTY : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q) – marketscreener.com

The following discussion should be read in conjunction with the ConsolidatedFinancial Statements of Mack-Cali Realty Corporation and Mack-Cali Realty, L.P.and the notes thereto (collectively, the "Financial Statements"). Certaindefined terms used herein have the meaning ascribed to them in the FinancialStatements. Executive OverviewMack-Cali Realty Corporation, together with its subsidiaries, (collectively, the"General Partner"), including Mack-Cali Realty, L.P. (the "OperatingPartnership"), has been involved in all aspects of commercial real estatedevelopment, management and ownership for over 60 years and the General Partnerhas been a publicly traded real estate investment trust ("REIT") since 1994.The Operating Partnership conducts the business of providing leasing,management, acquisition, development, construction and tenant-related servicesfor its General Partner. The Operating Partnership, through its operatingdivisions and subsidiaries, including the Mack-Cali property-owning partnershipsand limited liability companies, is the entity through which all of the GeneralPartner's operations are conducted. Unless stated otherwise or the contextrequires, the "Company" refers to the General Partner and its subsidiaries,including the Operating Partnership and its subsidiaries.As of September 30, 2020, the Company owned or had interests in 59 properties(collectively, the "Properties"), consisting of 29 office properties, totalingapproximately 8.7 million square feet leased to approximately 225 commercialtenants, 22 multi-family rental properties containing 6,850 apartment units,four parking/retail properties, totaling approximately 108,000 square feet,three hotels containing 723 rooms and a parcel of land leased to a third party.The Properties are located in the Northeast, some with adjacent,Company-controlled developable land sites able to accommodate up toapproximately 2.0 million square feet of additional commercial space andapproximately 9,500 apartment units.The Company's historical strategy has been to focus its operations, acquisitionand development of office and multi-family rental properties inhigh-barrier-to-entry markets and sub-markets where it believes it is, or canbecome, a significant and preferred owner and operator. In September 2015, theCompany announced an initiative to transform into a more concentrated owner ofNew Jersey Hudson 65

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STRATEGIC DIRECTION

?the general economic climate;

?the occupancy rates of the Properties;

?rental rates on new or renewed leases;

?tenant improvement and leasing costs incurred to obtain and retain tenants;

?the extent of early lease terminations;

?the value of our office properties and the cash flow from the sale of suchproperties;

?operating expenses;

?anticipated acquisition and development costs for office and multi-familyrental properties and the revenues and earnings from these properties;

?cost of capital; and

?the extent of acquisitions, development and sales of real estate, including theexecution of the Company's current strategic initiative.

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The remaining portion of this Management's Discussion and Analysis of FinancialCondition and Results of Operations should help the reader understand our:

?recent transactions;

?critical accounting policies and estimates;

?results from operations for the three and nine months ended September 30, 2020,as compared to the three and nine months ended September 30, 2019, and

?liquidity and capital resources.

Properties Commencing Initial Operations

The following property commenced initial operations during the nine months endedSeptember 30, 2020 (dollars in thousands):

Development

(a)The Emery at Overlook Ridge property consists of a total of 326 multi-familyunits. Of this amount, the remaining 55 multi-family units were placed inservice in October 2020.

Consolidations

On March 12, 2020, the Company, acquired its equity partner's 80 percentinterest in Port Imperial North Retail L.L.C. a ground floor

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4,305

8,912

1,503

313

15,033

(a) In-place and below market lease values are being amortized over aweighted-average term of 7.5 years.

Real Estate Held for Sale/Discontinued Operations/Dispositions

The Company disposed of the following office properties during the nine monthsended September 30, 2020 (dollars in thousands):

Type Proceeds Value Losses, net Losses, net03/17/20One Bridge PlazaFort Lee, New Jersey 1 200,000

07/22/20 3 Giralda Farms (a) Madison, New Jersey 1 141,000

09/15/20Morris portfolio (b) Madison, New Jersey 10 1,448,420

(a) The Company recorded valuation allowances of $2.0 million on the held for sale

property during the nine months ended September 30, 2020 and of $16.7 million

during the year ended December 31, 2019.(b) The Company recorded valuation allowances of $21.6 million on the held for

sale properties during the nine months ended September 30, 2020 and of

$32.5 million during the year ended December 31, 2019.(c) The Company recorded a valuation allowance of $3.5 million on this property

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The Company disposed of the following developable land holdings during the ninemonths ended September 30, 2020 (dollars in thousands):

01/03/20Mile RoadMiddletown, New Jersey$ 7,018$ 2,969$ 4,049

Impairments on Properties Held and Used

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financial results. Judgments and uncertainties affecting the application ofthese policies and estimates may result in materially different amounts beingreported under different conditions and circumstances.

Rental Property

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

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Real Estate Held for Sale and Discontinued Operations

Investments in Unconsolidated Joint Ventures

If the venture subsequently makes distributions and the Company does not have animplied or actual commitment to support the operations of the venture, theCompany will not record a basis less than zero, rather such amounts will berecorded as equity in earnings of unconsolidated joint ventures.

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Revenue Recognition

Parking income is comprised of income from parking spaces leased to tenants andothers.

Hotel income includes all revenue generated from hotel properties.

Other income includes income from tenants for additional services arranged forby the Company and income from tenants for early lease terminations.

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Redeemable Noncontrolling Interests

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Change

Total revenues from rental operations 74,774 83,979 (9,205)

(15.5)

130.3

(98.4)

1,315.0

-

100.0

129.1

256.8

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Parking income. Parking income for the Same-Store Properties decreased$1.8 million, or 30.7 percent, for 2020 as compared to 2019, due primarily to adecrease in usage at commercial properties, due to the COVID-19 pandemic in2020.

Utilities. Utilities for the Same-Store Properties decreased $0.2 million, or4.5 percent, for 2020 as compared to 2019, due primarily to decreasedelectricity rates in 2020 as compared to 2019.

Real estate services revenue. Real estate services revenue (primarilyreimbursement of property personnel costs) decreased $0.5 million, or 15.7percent, for 2020 as compared to 2019, due primarily to decreased third partydevelopment and management activity in multi-family services in 2020, ascompared to 2019.

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compared to 2019.

Property impairments. In 2020, the Company recorded impairment charges of$36.6 million on its hotel properties in Weehawken, New Jersey.

Land and other impairments. In 2020, the Company recorded $1.3 million ofimpairments of developable land parcels. In 2019, the Company incurred avaluation impairment charge of $2.6 million on a developable land parcel. SeeNote 12: Disclosure of Fair Value of Assets and Liabilities.

Interest expense. Interest expense decreased $1.9 million, or 8.4 percent, for2020 as compared to 2019. This decrease was primarily the result of loweraverage interest rates in 2020 as compared to 2019.

Interest and other investment income. Interest and other investment incomedecreased $0.2 million, or 98.4 percent for 2020 as compared to 2019, dueprimarily to lower average notes receivable balances outstanding in 2020 ascompared to 2019.

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Total revenues from rental operations 223,733 253,478 (29,745)

(16.8)

44.7

(97.2)

68.1

(100.0)

(103.4)

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MACK CALI REALTY : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q) - marketscreener.com