UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the transition period from	to



Commission File Number:	333-57103

Mack-Cali Realty, L.P.

(Exact Name of Registrant as specified in its charter)

Delaware	22-3315804
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No)

343 Thornall Street, Edison, New Jersey	08837-2206
(Address of principal executive offices)	(Zip code)

	(732) 590-1000
(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES___ NO X



		MACK-CALI REALTY, L.P.

		FORM 10-Q

		INDEX

Part I	Financial Information		Page

	Item 1.	Financial Statements (unaudited):	3

		Consolidated Balance Sheets as of June 30, 2015	4
		and December 31, 2014

		Consolidated Statements of Operations for the three and six months	5
		ended June 30, 2015 and 2014

		Consolidated Statement of Changes in Equity for the six months	6
		ended June 30, 2015

		Consolidated Statements of Cash Flows for the six months	7
		ended June 30, 2015 and 2014

		Notes to Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition	36
		and Results of Operations

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54

	Item 4.	Controls and Procedures	54

Part II	Other Information

	Item 1.	Legal Proceedings	55

	Item 1A.	Risk Factors	55

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

	Item 3.	Defaults Upon Senior Securities	55

	Item 4.	Mine Safety Disclosures	55

	Item 5.	Other Information	55

	Item 6.	Exhibits	55

Signatures			56

Exhibit Index			57

MACK-CALI REALTY, L.P.

Part I – Financial Information

Item 1. Financial Statements

The accompanying unaudited consolidated balance sheets, statements of operations, of changes in equity, and of cash flows and related notes thereto, have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. The financial statements reflect all adjustments consisting only of normal, recurring adjustments, which are, in the opinion of management, necessary for a fair presentation for the interim periods.

The aforementioned financial statements should be read in conjunction with the notes to the aforementioned financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in Mack-Cali Realty, L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

The results of operations for the three and six month periods ended June 30, 2015 are not necessarily indicative of the results to be expected for the entire fiscal year or any other period.

MACK-CALI REALTY, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (in thousands, except per unit amounts) (unaudited)



		June 30,		December 31,
ASSETS		2015		2014
Rental property
Land and leasehold interests	$	749,359	$	760,855
Buildings and improvements		3,751,805		3,753,300
Tenant improvements		414,166		431,969
Furniture, fixtures and equipment		12,867		12,055
		4,928,197		4,958,179
Less – accumulated depreciation and amortization		(1,448,791)		(1,414,305)

Net investment in rental property		3,479,406		3,543,874
Cash and cash equivalents		19,813		29,549
Investments in unconsolidated joint ventures		284,507		247,468
Unbilled rents receivable, net		117,777		123,885
Deferred charges, goodwill and other assets, net		197,773		204,650
Restricted cash		42,052		34,245
Accounts receivable, net of allowance for doubtful accounts
of $1,871 and $2,584		12,137		8,576

Total assets	$	4,153,465	$	4,192,247

LIABILITIES AND EQUITY
Senior unsecured notes	$	1,268,293	$	1,267,744
Mortgages, loans payable and other obligations		766,526		820,910
Distributions payable		15,582		15,528
Accounts payable, accrued expenses and other liabilities		134,089		126,971
Rents received in advance and security deposits		49,093		52,146
Accrued interest payable		30,659		26,937
Total liabilities		2,264,242		2,310,236
Commitments and contingencies

Partners’ Capital:
General Partner, 89,195,529 and 89,076,578 common units outstanding		1,576,560		1,568,098
Limited partners, 11,012,069 and 11,083,876 common units outstanding		258,311		258,856
Total Mack-Cali Realty, L.P. partners’ capital		1,834,871		1,826,954

Noncontrolling interests in consolidated joint ventures		54,352		55,057

Total equity		1,889,223		1,882,011

Total liabilities and equity	$	4,153,465	$	4,192,247

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

MACK-CALI REALTY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per unit amounts) (unaudited)



		Three Months Ended					Six Months Ended
			June 30,					June 30,
REVENUES		2015			2014		2015			2014
Base rents	$	121,246		$	133,210	$	245,039		$	267,261
Escalations and recoveries from tenants		15,842			16,996		34,241			42,564
Real estate services		7,401			7,009		15,045			13,701
Parking income		2,850			2,236		5,392			4,350
Other income		1,228			849		2,565			2,020
Total revenues		148,567			160,300		302,282			329,896

EXPENSES
Real estate taxes		21,410			23,375		43,862			47,726
Utilities		13,399			14,573		30,974			42,854
Operating services		25,844			27,840		54,072			57,062
Real estate services expenses		6,208			6,571		12,847			13,280
General and administrative		11,988			13,673		22,999			36,554
Depreciation and amortization		42,365			44,711		83,167			89,696
Total expenses		121,214			130,743		247,921			287,172
Operating income		27,353			29,557		54,361			42,724

OTHER (EXPENSE) INCOME
Interest expense		(26,773)			(28,159)		(53,988)			(58,105)
Interest and other investment income		291			922		558			1,308
Equity in earnings (loss) of unconsolidated joint ventures		(2,329)			443		(5,858)			(792)
Realized gains (losses) on disposition of rental property, net		34,399			54,584		34,543			54,584
Gain on sale of investment in unconsolidated joint venture		6,448			-		6,448			-
Total other (expense) income		12,036			27,790		(18,297)			(3,005)
Net income		39,389			57,347		36,064			39,719
Noncontrolling interest in consolidated joint ventures		373			290		863			612
Net income available to common unitholders	$	39,762		$	57,637	$	36,927		$	40,331

Basic earnings per common unit:
Net income available to common unitholders	$	0.40		$	0.58	$	0.37		$	0.40

Diluted earnings per common unit:
Net income available to common unitholders	$	0.40		$	0.58	$	0.37		$	0.40

Basic weighted average units outstanding		100,272			99,993		100,269			99,935

Diluted weighted average units outstanding		100,314			100,023		100,313			99,964

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

MACK-CALI REALTY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (in thousands) (unaudited)



								Noncontrolling
				General Partner		Limited Partner		Interest
	General Partner	Limited Partner		Common		Common		in Consolidated
	Common Units	Common Units		Unitholders		Unitholders		Joint Ventures		Total Equity
Balance at January 1, 2015	89,077	11,084	$	1,568,098	$	258,856	$	55,057	$	1,882,011
Net income	-	-		32,858		4,069		(863)		36,064
Distributions	-	-		(26,732)		(3,308)		-		(30,040)
Increase in noncontrolling interest	-	-		-		-		158		158
Redemption of limited partner common
units for shares of general partner
common units	72	(72)		1,306		(1,306)		-		-
Shares issued under Dividend
Reinvestment and Stock
Purchase Plan	1	-		25		-		-		25
Directors deferred compensation plan	-	-		197		-		-		197
Stock compensation	46	-		808		-		-		808
Balance at June 30, 2015	89,196	11,012	$	1,576,560	$	258,311	$	54,352	$	1,889,223

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

MACK-CALI REALTY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)



		Six Months Ended
			June 30,
CASH FLOWS FROM OPERATING ACTIVITIES		2015			2014
Net income	$	36,064		$	39,719
Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and amortization, including related intangible assets		83,930			90,460
Amortization of deferred stock units		197			213
Amortization of stock compensation		805			5,563
Amortization of deferred financing costs		1,901			1,528
Amortization of debt discount and mark-to-market		2,018			3,836
Equity in (earnings) loss of unconsolidated joint ventures		5,858			792
Distributions of cumulative earnings from unconsolidated joint ventures		2,698			3,756
Realized (gains) loss on disposition of rental property, net		(34,543)			(54,584)
Realized (gains) loss on sale of investment in unconsolidated joint venture		(6,448)			-
Changes in operating assets and liabilities:
Decrease (increase) in unbilled rents receivable, net		801			(3,551)
Increase in deferred charges, goodwill and other assets		(14,802)			(15,022)
Increase in accounts receivable, net		(3,561)			(2,325)
Increase in accounts payable, accrued expenses and other liabilities		1,478			22,540
Decrease in rents received in advance and security deposits		(3,053)			(4,798)
Increase (decrease) in accrued interest payable		6,342			(3,180)

Net cash provided by operating activities	$	79,685		$	84,947

CASH FLOWS FROM INVESTING ACTIVITIES
Rental property acquisitions and related intangibles	$	(4,057)		$	(37,696)
Rental property additions and improvements		(42,881)			(41,825)
Development of rental property, other related costs and deposits		(27,869)			(7,896)
Proceeds from the sales of rental property		80,581			190,798
Proceeds from the sale of investment in unconsolidated joint venture		6,448			-
Investments in notes receivable		-			(62,276)
Repayment of notes receivable		7,750			250
Investment in unconsolidated joint ventures		(49,305)			(38,948)
Distributions in excess of cumulative earnings from unconsolidated joint ventures		1,985			837
Increase in restricted cash		(7,808)			(6,611)

Net cash used in investing activities	$	(35,156)		$	(3,367)

CASH FLOW FROM FINANCING ACTIVITIES
Borrowings from revolving credit facility	$	129,000		$	233,500
Repayment of revolving credit facility		(129,000)			(177,500)
Repayment of senior unsecured notes		-			(200,000)
Proceeds from mortgages and loans payable		2,897			28,135
Repayment of mortgages, loans payable and other obligations		(27,251)			(42,469)
Payment of contingent consideration		-			(3,936)
Payment of financing costs		(98)			(198)
Cash from noncontrolling interests		158			-
Payment of dividends and distributions		(29,971)			(59,875)

Net cash used in financing activities	$	(54,265)		$	(222,343)

Net decrease in cash and cash equivalents	$	(9,736)		$	(140,763)
Cash and cash equivalents, beginning of period		29,549			221,706

Cash and cash equivalents, end of period	$	19,813		$	80,943

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

MACK-CALI REALTY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION

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

The General Partner is a fully-integrated self-administered, self-managed real estate investment trust (“REIT”). The General Partner controls the Company as its sole general partner and owned an 89.0 percent and 88.9 percent common unit interest in the Company as of June 30, 2015 and December 31, 2014, respectively.

The General Partner’s business is the ownership of interests in and operation of the Company, and all of the General Partner’s expenses are incurred for the benefit of the Company. The General Partner is reimbursed by the Company for all expenses it incurs relating to the ownership and operation of the Company.

As of June 30, 2015, the Company owned or had interests in 279 properties, consisting of 260 commercial properties, primarily class A office and office/flex properties, totaling approximately 30.5 million square feet, leased to approximately 2,000 commercial tenants, and 19 multi-family rental properties containing 5,644 residential units, plus developable land (collectively, the “Properties”). The Properties are comprised of 245 buildings, primarily office and office/flex buildings totaling approximately 30.0 million square feet (which include 36 buildings, primarily office buildings aggregating approximately 5.6 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, 19 multi-family properties totaling 5,644 apartments (which include 13 properties aggregating 4,343 apartments owned by unconsolidated joint ventures in which the Company has investment interests), five parking/retail properties totaling approximately 121,500 square feet (which include two buildings aggregating 81,500 square feet owned by unconsolidated joint ventures in which the Company has investment interests), one hotel (which is owned by an unconsolidated joint venture in which the Company has an investment interest) and three parcels of land leased to others. The Properties are located in seven 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 and variable interest entities for which the Company has determined itself to be the primary beneficiary, if any. See Note 2: Significant Accounting Policies – Investments in Unconsolidated Joint Ventures, for the Company’s treatment of unconsolidated joint venture interests. Intercompany accounts and transactions have been eliminated.

Accounting Standards Codification (“ASC”) 810, Consolidation, provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIEs. Generally, the consideration of whether an entity is a VIE applies when either: (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest; (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined by the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the variable interest entity’s performance: and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE.

As of June 30, 2015 and December 31, 2014, the Company’s investments in consolidated real estate joint ventures in which the Company is deemed to be the primary beneficiary have total real estate assets of $247.3 million and $242.9 million, respectively, mortgages of $96.9 million and $94.3 million, respectively, and other liabilities of $16.6 million and $15.7 million, respectively.

The preparation of financial statements in conformity with 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. Certain reclassifications have been made to prior period amounts in order to conform with current period presentation.

2. SIGNIFICANT ACCOUNTING POLICIES

Rental

Property

Rental properties are stated at cost less accumulated depreciation and amortization. Costs directly related to the acquisition, development and construction of rental properties are capitalized. Acquisition-related costs are expensed as incurred. Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development. Capitalized development and construction salaries and related costs approximated $1.2 million and $0.9 million for the three months ended June 30, 2015 and 2014, respectively, and $2.5 million and $1.8 million for the six months ended June 30, 2015 and 2014, respectively. Included in total rental property is construction, tenant improvement and development in-progress of $83.2 million and $62.8 million as of June 30, 2015 and December 31, 2014, respectively. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.

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

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

Leasehold interests	Remaining lease term
Buildings and improvements	5 to 40 years
Tenant improvements	The shorter of the term of the
	related lease or useful life
Furniture, fixtures and equipment	5 to 10 years

Upon acquisition of rental property, the Company estimates the fair value of acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities assumed, generally consisting of the fair value of (i) above and below market leases, (ii) in-place leases and (iii) tenant relationships. The Company allocates the purchase price to the assets acquired and liabilities assumed based on their fair values. The Company records goodwill or a gain on bargain purchase (if any) if the net assets acquired/liabilities assumed exceed the purchase consideration of a transaction. In estimating the fair value of the tangible and intangible assets acquired, the Company considers information obtained about each property as a result of its due diligence and marketing and leasing activities, and utilizes various valuation methods, such as estimated cash flow projections utilizing appropriate discount and capitalization rates, estimates of replacement costs net of depreciation, and available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant.

Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the remaining initial term plus the term of any below-market fixed rate renewal options for below-market leases. The capitalized above-market lease values are amortized as a reduction of base rental revenue over the remaining terms of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases.

Other intangible assets acquired include amounts for in-place lease values and tenant relationship values, which are based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the respective tenant. Factors to be considered by management in its analysis of in-place lease values include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, depending on local market conditions. In estimating costs to execute similar leases, management considers leasing commissions, legal and other related expenses. Characteristics considered by management in valuing tenant relationships include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals. The value of in-place leases are amortized to expense over the remaining initial terms of the respective leases. The value of tenant relationship intangibles are amortized to expense over the anticipated life of the relationships.

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s rental properties held for use may be impaired. In addition to identifying any specific circumstances which may affect a property or properties, management considers other criteria for determining which properties may require assessment for potential impairment. The criteria considered by management include reviewing low leased percentages, significant near-term lease expirations, recently acquired properties, current and historical operating and/or cash flow losses, near-term mortgage debt maturities or other factors that might impact the Company’s intent and ability to hold the property. 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 is less than the carrying value of the property. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the property over the fair value of the property. The Company’s estimates of aggregate future cash flows expected to be generated by each property are based on a number of assumptions. These assumptions are generally based on management’s experience in its local real estate markets and the effects of current market conditions. The assumptions are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and costs to operate each property. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analyses may not be achieved, and actual losses or impairments may be realized in the future.

Rental Property

Held for Sale

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 estimated net sales price of the assets which have been identified as held for sale is less than the net book value of the assets, a valuation allowance is established.

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

Investments in

Unconsolidated

Joint Ventures

The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting. The Company applies the equity method by initially recording these investments at cost, as Investments in Unconsolidated Joint Ventures, subsequently adjusted for equity in earnings and cash contributions and distributions. The outside basis portion of the Company’s joint ventures is amortized over the anticipated useful lives of the underlying ventures’ tangible and intangible assets acquired and liabilities assumed. Generally, the Company would discontinue applying the equity method when the investment (and any advances) is reduced to zero and would not provide for additional losses unless the Company has guaranteed obligations of the venture or is otherwise committed to providing further financial support for the investee. If the venture subsequently generates income, the Company only recognizes its share of such income to the extent it exceeds its share of previously unrecognized losses.

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in unconsolidated joint ventures may be impaired. An investment is impaired only if management’s estimate of the value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the value of the investment. The Company’s estimates of value for each investment (particularly in real estate joint ventures) are based on a number of assumptions that are subject to economic and market uncertainties including, among others, demand for space, competition for tenants, changes in market rental rates, and operating costs. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the values estimated by management in its impairment analyses may not be realized, and actual losses or impairment may be realized in the future. See Note 4: Investments in Unconsolidated Joint Ventures.

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 over the term of the related indebtedness. Amortization of such costs is included in interest expense and was $948,000 and $759,000 for the three months ended June 30, 2015 and 2014, respectively, and $1,901,000 and $1,528,000 for the six months ended June 30, 2015 and 2014, respectively. If a financing obligation is extinguished early, any unamortized deferred financing costs are written off and included in gains (loss) from early extinguishment of debt. No such unamortized costs were written off for the six months ended June 30, 2015 and 2014.

Deferred

Leasing Costs

Costs incurred in connection with commercial 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 Corporation are compensated for providing leasing services to the Properties. The portion of such compensation related to commercial leases, which is capitalized and amortized, approximated $846,000 and $845,000 for the three months ended June 30, 2015 and 2014, respectively, and $1,816,000 and $1,876,000 for the six months ended June 30, 2015 and 2014, respectively.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is allocated to various reporting units, as applicable. Each of the Company’s segments consists of a reporting unit. Goodwill is not amortized. Management performs an annual impairment test for goodwill during the fourth quarter and between annual tests, management evaluates the recoverability of goodwill whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be fully recoverable. In its impairment tests of goodwill, management first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If based on this assessment, management determines that the fair value of the reporting unit is not less than its carrying amount, then performing the additional two-step impairment test is unnecessary. If the carrying amount of goodwill exceeds its fair value, an impairment charge is recognized.

Derivative

Instruments

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

Revenue

Recognition

Base rental revenue is recognized on a straight-line basis over the terms of the respective leases. Unbilled rents receivable represents the cumulative amount by which straight-line rental revenue exceeds rents currently billed in accordance with the lease agreements.

Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining term of the lease for above-market leases and the remaining initial term plus the term of any below-market fixed-rate renewal options for below-market leases. The capitalized above-market lease values for acquired properties are amortized as a reduction of base rental revenue over the remaining terms of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed-rate renewal options of the respective leases.

Escalations and recoveries from tenants 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 15: Tenant Leases.

Real estate services revenue includes property management, development, construction and leasing commission fees and other services, and payroll and related costs reimbursed from clients. Fee income derived from the Company’s unconsolidated joint ventures (which are capitalized by such ventures) are recognized to the extent attributable to the unaffiliated ownership interests.

Parking income includes income from parking spaces leased to tenants and others.

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

Allowance for

Doubtful Accounts

Management performs a detailed review of amounts due from tenants to determine if an allowance for doubtful accounts is required based on factors affecting the collectability of the accounts receivable balances. The factors considered by management in determining which individual tenant receivable balances, or aggregate receivable balances, require a collectability allowance include the age of the receivable, the tenant’s payment history, the nature of the charges, any communications regarding the charges and other related information. Management’s estimate of the allowance for doubtful accounts requires management to exercise significant judgment about the timing, frequency and severity of collection losses, which affects the allowance and net income.

Income and

Other Taxes

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

Certain of the Company’s corporate subsidiaries are taxable REIT subsidiaries (each a “TRS”). In general, a TRS may perform additional services for tenants of the Company and generally may engage in any real estate or non-real estate related business (except for the operation or management of health care facilities or lodging facilities or the providing to any person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated). A TRS is subject to corporate federal income tax. The Company has conducted business through its TRS entities for certain property management, development, construction and other related services, as well as to hold a joint venture interest in a hotel and other matters.

As of June 30, 2015, the Company had a deferred tax asset related to its TRS activity with a balance of approximately $15.3 million which has been fully reserved for through a valuation allowance. If the Corporation fails to qualify as a REIT in any taxable year, the Corporation will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates. The Corporation is subject to certain state and local taxes.

Pursuant to the amended provisions related to uncertain tax provisions of ASC 740, Income Taxes, the Company recognized no material adjustments regarding its tax accounting treatment. The Company expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which is included in general and administrative expense.

In the normal course of business, the Company or one of its subsidiaries is subject to examination by federal, state and local jurisdictions in which it operates, where applicable. As of June 30, 2015, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are generally from the year 2010 forward.

Earnings

Per Unit

The Company presents both basic and diluted earnings per unit (“EPU”). Basic EPU excludes dilution and is computed by dividing net income available to common unitholders by the weighted average number of units outstanding for the period. Diluted EPU reflects the potential dilution that could occur if securities or other contracts to issue common units were exercised or converted into common units, where such exercise or conversion would result in a lower EPU amount from continuing operations amount. Units whose issuance is contingent upon the satisfaction of certain conditions shall be considered outstanding and included in the computation of diluted EPU as follows (i) if all necessary conditions have been satisfied by the end of the period (the events have occurred), those units shall be included as of the beginning of the period in which the conditions were satisfied (or as of the date of the grant, if later) or (ii) if all necessary conditions have not been satisfied by the end of the period, the number of contingently issuable units included in diluted EPU shall be based on the number of units, if any, that would be issuable if the end of the reporting period were the end of the contingency period (for example, the number of units that would be issuable based on current period earnings or period-end market price) and if the result would be dilutive. Those contingently issuable units shall be included in the denominator of diluted EPU as of the beginning of the period (or as of the date of the grant, if later).

Distributions

Payable

The distributions payable at June 30, 2015 represents distributions payable to common unitholders (100,101,735 units) for all such holders of record as of July 6, 2015 with respect to the second quarter 2015. The second quarter 2015 common unit distributions of $0.15 per common unit were approved by the Corporation’s Board of Directors on May 11, 2015 and paid on July 14, 2015.

The distributions payable at December 31, 2014 represents distributions payable to common unitholders (99,950,528 units), for all such holders of record as of January 6, 2015 with respect to the fourth quarter 2014. The fourth quarter 2014 common unit distributions of $0.15 per common unit were approved by the Corporation’s Board of Directors on December 9, 2014 and paid on January 14, 2015.

Costs Incurred

For Stock

Issuances

Costs incurred in connection with the Corporation’s stock issuances are reflected as a reduction of General Partner’s capital.

Stock

Compensation

The Company accounts for stock compensation in accordance with the provisions of ASC 718, Compensation-Stock Compensation. These provisions require that the estimated fair value of restricted stock (“Restricted Stock Awards”), restricted stock units (“RSUs”), performance share units (“PSUs”), total stockholder return based performance shares (“TSR”) and stock options at the grant date be amortized ratably into expense over the appropriate vesting period. The Company recorded stock compensation expense of $492,000 and $877,000 for the three months ended June 30, 2015 and 2014, respectively, and $805,000 and $4,264,000 for the six months ended June 30, 2015 and 2014, respectively. The amount for the six months ended June 30, 2014 included $3,203,000 related to the departure of certain executive officers.

Other

Comprehensive

Income

Other comprehensive income (loss), if any, includes items that are recorded in equity, such as unrealized holding gains or losses on marketable securities available for sale. There was no difference in other comprehensive income to net income for the three and six months ended June 30, 2015 and 2014, and no accumulated other comprehensive income as of June 30, 2015 and December 31, 2014.

Fair Value

Hierarchy

The standard Fair Value Measurements specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). The following summarizes the fair value hierarchy:

·	Level 1: Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices for identical assets and liabilities in markets that are inactive, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly, such as interest rates and yield curves that are observable at commonly quoted intervals and

·	Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Discontinued

Operations

In April 2014, the Financial Accounting Standards Board (“FASB”) issued guidance related to the reporting of discontinued operation and disclosures of disposals of components of an entity. This guidance defines a discontinued operation as a component or group of components disposed or classified as held for sale and represents a strategic shift that has (or will have) a major effect on an entity’s operations and final result; the guidance states that a strategic shift could include a disposal of a major geographical area of operations, a major line of business, a major equity method investment or other major parts of an entity. The guidance also provides for additional disclosure requirements in connection with both discontinued operations and other dispositions not qualifying as discontinued operations. The guidance is effective for all companies for annual and interim periods beginning on or after December 15, 2014. The guidance applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date. All entities could early adopt the guidance for new disposals (or new classifications as held for sale) that had not been reported in financial statements previously issued or available for issuance. The Company elected to early adopt this standard effective with the interim period beginning January 1, 2014. Prior to January 1, 2014, properties identified as held for sale and/or disposed of were presented in discontinued operations for all periods presented.

Impact Of

Recently-Issued

Accounting

Standards

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2017, and early adoption is permitted for periods beginning after December 15, 2016. The Company is currently in the process of evaluating the impact the adoption of ASU 2014-09 will have on the Company’s financial position or results of operations.

In June 2014, the FASB issued ASU 2014-12 Compensation—Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (“ASU 2014-12”). The amendments in ASU 2014-12 apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. That is, the employee would be eligible to vest in the award regardless of whether the employee is rendering service on the date the performance target is achieved. Current GAAP does not contain explicit guidance on how to account for those share-based payments. ASU 2014-12 is intended to resolve the accounting treatment of such awards. The amendments in ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015 with early adoption permitted. The Company is currently in the process of evaluating the impact the adoption of ASU 2014-12 will have on the Company’s financial position or results of operations.

In August 2014, the FASB issued ASU 2014-15, which requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU 2014-15 is effective for the annual period ended December 31, 2016 and for annual periods and interim periods thereafter with early adoption permitted. The adoption of ASU 2014-15 is not expected to materially impact the Company’s consolidated financial statements.

In February 2015, the FASB issued ASU 2015-02, Consolidation–Amendments to the Consolidation Analysis (Topic 810) (“ASU 2015-02”). ASU 2015-02 updates guidance related to accounting for consolidation of certain limited partnerships. ASU 2015-02 does not add or remove any of the five characteristics that determine if an entity is a VIE; however, it changes the manner in which a reporting entity assesses its ability to make decisions about the entity's activities. Additionally, ASU 2015-02 removes three of the six criteria that must be met for a fee arrangement to not be a VIE and modifies how an entity assesses interests held through related parties. ASU 2015-02 is effective for fiscal years and interim periods within those years beginning after December 15, 2015, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements when adopted.

In April 2015, the FASB issued ASU 2015-03, Interest–Imputation of Interest-Simplifying the Presentation of Debt Issuance Costs (Subtopic 835-30) (“ASU 2015-03”). ASU 2015-03 requires debt issuance costs related to a recognized debt liability paid to third parties other than the lender to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of this guidance is permitted for financial statements that have not been previously issued, and an entity should apply the new guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements when adopted.

3. RECENT TRANSACTIONS

Appointment of executive officers

On June 3, 2015, the Company announced the appointments of Mitchell E. Rudin as chief executive officer and Michael J. DeMarco as president and chief operating officer of the Corporation, effective immediately. The Corporation entered into employment agreements dated June 3, 2015 with each of Messrs. Rudin and DeMarco (together, the “Executive Employment Agreements”) that each provide as follows:

·	A term that ends on December 31, 2018 (the “Employment Term”) unless earlier terminated;

·	An annual base salary for each of Messrs. Rudin and DeMarco of $700,000, subject to potential merit increases (but not decreases) each year;

A target annual bonus opportunity of one hundred percent (100%) of base salary, or $700,000, for each of Messrs. Rudin and DeMarco, with a threshold bonus of fifty percent (50%) of base salary, or $350,000, and a maximum bonus of two hundred percent (200%) of base salary, or $1,400,000, a pro rata bonus opportunity for 2015 based on the assessment of the Executive Compensation and Option Committee of the Board of Directors (“Committee”) of each executive’s development of a strategic plan for the Corporation and bonuses for 2016 and subsequent years to be based on objective performance goals to be established annually by the Committee;

2015 long-term incentive (“LTI”) awards under the Corporation’s 2013 Incentive Stock Plan (the “2015 LTI Awards”), consisting of the granting to each of Messrs. Rudin and DeMarco on June 5, 2015 of 18,775.27 restricted stock units subject to time-based vesting over three years, and of 56,325.82 performance share units (“PSUs”) which will vest from 0 to 150 percent of the number of PSUs granted based on the Corporation’s total shareholder return relative to a peer group of equity office REITs over a three-year performance period; and

The grant on June 5, 2015 (the “Grant Date”) to each of Messrs. Rudin and DeMarco of options to purchase 400,000 shares of the Corporation’s common stock, exercisable for a period of ten years with an exercise price equal to the closing price of the Corporation’s common stock on the NYSE on the Grant Date (which price was $17.31 per share), with 200,000 of such options vesting in three equal annual installments commencing on the first anniversary of the Grant Date, and 200,000 of such options vesting if the Corporation’s common stock trades at or above $25.00 per share for 30 consecutive trading days while Mr. Rudin and Mr. DeMarco is employed, as applicable, or on or before June 30, 2019 if Mr. Rudin and Mr. DeMarco is employed for the entire Employment Term (except if the executive’s employment has been terminated by the Corporation for cause following expiration of the Employment Term).

Acquisition

On April 1, 2015, the Company acquired vacant land to accommodate the development of 365 multi-family residential units located in Worcester, Massachusetts (the “CitySquare Project”) for a purchase price of $3.1 million with an additional $1.25 million to be paid (which is accrued as of June 30, 2015), subject to certain conditions, in accordance with the terms of the purchase and sale agreement. The purchase price for the acquisition was funded primarily through borrowing under the Company’s unsecured revolving credit facility. The Company is required to begin construction of the CitySquare Project within 12 months of closing. The Company plans to start construction in the third quarter 2015 and the total development costs are estimated to be approximately $91.4 million.

Dispositions

On June 26, 2015, the Company sold its 203,506 square foot office property located at 14 Sylvan Way in Parsippany, New Jersey for net sales proceeds of approximately $80 million, with a gain of approximately $24.7 million from the sale.

On June 1, 2015, the Company sold its 25 percent equity interest in Rosewood Lafayette Holdings L.L.C., a joint venture which owns the Highlands at Morristown Station, a 217-unit multi-family property located in Morristown, New Jersey, to its joint venture partner and realized a gain on the sale of $6.4 million.

On January 15, 2015, the Company sold its 21,600 square foot office/flex property located at 1451 Metropolitan Drive in West Deptford, New Jersey for net sales proceeds of approximately $1.1 million, with a gain of approximately $0.1 million from the sale.

During the quarter ended June 30, 2015, the Company transferred the deeds for two of its office properties to the lender in satisfaction of its mortgage loan obligations. The properties transferred consisted of 4 Sylvan Way in Parsippany, New Jersey, aggregating 105,135 square feet, which was collateral for a $14.6 million mortgage loan that matured on August 11, 2014, and 10 Independence Boulevard in Warren, New Jersey, aggregating 120,528 square feet, which was collateral for a $16.9 million mortgage loan that matured on August 11, 2014. The Company had previously recorded impairment charges on the properties totaling $12.2 million at September 30, 2013. As a result, the Company recorded a gain on the disposal of the two office properties for a total of $9.7 million during the quarter.

On January 1, 2014, the Company early adopted the new discontinued operations accounting standard and as the properties disposed of during the six months ended June 30, 2015 will not represent a strategic shift (as the Company is not entirely exiting markets or property types), they have not been reflected as part of discontinued operations.

The following table summarizes income for the three and six month periods ended June 30, 2015 and 2014 from the properties disposed of during the six months ended June 30, 2015 and the 16 properties sold during the year ended December 31, 2014: (dollars in thousands)



		Three Months Ended					Six Months Ended
			June 30,					June 30,
		2015			2014		2015			2014
Total revenues	$	2,728		$	14,424	$	5,647		$	32,797
Operating and other expenses		(688)			(7,025)		(1,544)			(17,320)
Depreciation and amortization		(912)			(3,045)		(2,034)			(7,035)
Interest income		(557)			(880)		(1,355)			(1,767)

Income from properties disposed of	$	571		$	3,474	$	714		$	6,675

Realized gains on dispositions		34,399			54,584		34,543			54,584

Total income from properties disposed of	$	34,970		$	58,058	$	35,257		$	61,259

4. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

As of June 30, 2015, the Company had an aggregate investment of approximately $284.5 million in its equity method joint ventures. The Company formed these ventures with unaffiliated third parties, or acquired interests in them, to develop or manage primarily office and multi-family rental properties, or to acquire land in anticipation of possible development of office and multi-family rental properties. As of June 30, 2015, the unconsolidated joint ventures owned: 36 office and two retail properties aggregating approximately 5.7 million square feet, 13 multi-family properties totaling 4,343 apartments, a 350-room hotel, development projects for up to approximately 1,074 apartments; and interests and/or rights to developable land parcels able to accommodate up to 2,910 apartments and 1.4 million square feet of office space. The Company’s unconsolidated interests range from 7.5 percent to 85 percent subject to specified priority allocations in certain of the joint ventures.

On October 23, 2012, the Company acquired the real estate development and management businesses (the “Roseland Business”) of Roseland Partners, L.L.C. (“Roseland Partners”), a premier multi-family rental community developer and manager based in Short Hills, New Jersey, and the Roseland Partners’ interests (the “Roseland Transaction”), principally through unconsolidated joint venture interests in various entities which, directly or indirectly, own or have rights with respect to various residential and/or commercial properties or vacant land (collectively, the “Roseland Assets”). The locations of the properties extend from New Jersey to Massachusetts, with the majority of the properties located in New Jersey. Certain of the entities which own the Roseland Assets are controlled by the Company upon acquisition and are therefore consolidated. However, many of the entities are not controlled by the Company and, therefore, are accounted for under the equity method as investments in unconsolidated joint ventures.

The amounts reflected in the following tables (except for the Company’s share of equity in earnings) are based on the historical financial information of the individual joint ventures. The Company does not record losses of the joint ventures in excess of its investment balances unless the Company is liable for the obligations of the joint venture or is otherwise committed to provide financial support to the joint venture. The outside basis portion of the Company’s investments in joint ventures is amortized over the anticipated useful lives of the underlying ventures’ tangible and intangible assets acquired and liabilities assumed. Unless otherwise noted below, the debt of the Company’s unconsolidated joint ventures generally is non-recourse to the Company, except for customary exceptions pertaining to such matters as intentional misuse of funds, environmental conditions, and material misrepresentations.

The Company has agreed to guarantee repayment of a portion of the debt of its unconsolidated joint ventures. As of June 30, 2015, such debt had a total facility amount of $477 million of which the Company agreed to guarantee up to $67.8 million. As of June 30, 2015, the outstanding balance of such debt totaled $263.6 million of which $36.9 million was guaranteed by the Company. The Company also posted a $4.1 million letter of credit in support of the South Pier at Harborside joint venture, half of which is indemnified by Hyatt Corporation, the Company’s joint venture partner. The Company performed management, leasing, development and other services for the properties owned by the unconsolidated joint ventures and recognized $1.4 million and $1.4 million for such services in the three months ended June 30, 2015 and 2014, respectively, and $3.1 million and $2.8 million for the six months ended June 30, 2015 and 2014, respectively, which are included in real estate services revenue for the periods presented. The Company had $0.8 million and $1.0 million in accounts receivable due from its unconsolidated joint ventures as of June 30, 2015 and December 31, 2014.

Included in the Company’s investments in unconsolidated joint ventures as of June 30, 2015 are nine unconsolidated development joint ventures, which are VIEs for which the Company is not the primary beneficiary. These joint ventures are primarily established to develop real estate property for long-term investment and were deemed VIEs primarily based on the fact that the equity investment at risk was not sufficient to permit the entities to finance their activities without additional financial support. The initial equity contributed to these entities was not sufficient to fully finance the real estate construction as development costs are funded by the partners throughout the construction period. The Company determined that it was not the primary beneficiary of these VIEs based on the fact that the Company has shared control of these entities along with the entity’s partners and therefore does not have controlling financial interests in these VIEs. The Company’s aggregate investment in these VIEs was approximately $154.3 million as of June 30, 2015. The Company’s maximum exposure to loss as a result of its involvement with these VIEs is estimated to be approximately $206.1 million, which includes the Company’s current investment and estimated future funding commitments/guarantees of approximately $51.8 million. The Company has not provided financial support to these VIEs that it was not previously contractually required to provide. In general, future costs of development not financed through third party will be funded with capital contributions from the Company and its outside partners in accordance with their respective ownership percentages.

The following is a summary of the Company's unconsolidated joint ventures as of June 30, 2015 and December 31, 2014: (dollars in thousands)


										Property Debt
	Number of		Company's			Carrying Amount				As of June 30, 2015
	Apartment Units		Effective			June 30,		December 31,			Maturity	Interest
Entity / Property Name	or Square Feet (sf)		Ownership % (a)			2015		2014		Balance	Date	Rate
Multi-family
Marbella RoseGarden, L.L.C./ Marbella (b)	412	units	24.27	%	$	15,721	$	15,779	$	95,000	05/01/18	4.99	%
RoseGarden Monaco Holdings, L.L.C./ Monaco (b)	523	units	15.00	%		1,532		2,161		165,000	02/01/21	4.19	%
Rosewood Lafayette Holdings, L.L.C./ Highlands at Morristown Station (c)	217	units	25.00	%		-		62		-	-	-
PruRose Port Imperial South 15, LLC /RiversEdge at Port Imperial (b)	236	units	50.00	%		-		-		57,500	09/01/20	4.32	%
Rosewood Morristown, L.L.C. / Metropolitan at 40 Park (d) (e)	130	units	12.50	%		5,806		6,029		46,217	(f)	(f)
Overlook Ridge JV 2C/3B, L.L.C./The Chase at Overlook Ridge (b)	371	units	50.00	%		2,277		2,524		52,662	12/26/15	L+2.50	%	(g)
PruRose Riverwalk G, L.L.C./ RiverTrace at Port Imperial (b)	316	units	25.00	%		425		955		79,380	07/15/21	6.00	%	(h)
Elmajo Urban Renewal Associates, LLC / Lincoln Harbor (Bldg A&C) (b)	355	units	7.50	%		-		-		128,100	03/01/30	4.00	%	(i)
Crystal House Apartments Investors LLC / Crystal House (j)	798	units	25.00	%		28,018		27,051		165,000	04/01/20	3.17	%
Portside Master Company, L.L.C./ Portside at Pier One - Bldg 7 (b)	176	units	38.25	%		379		1,747		42,108	12/04/15	L+2.50	%	(k)
PruRose Port Imperial South 13, LLC / RiverParc at Port Imperial (b)	280	units	20.00	%		274		1,087		64,927	06/27/16	L+2.15	%	(l)
Roseland/Port Imperial Partners, L.P./ Riverwalk C (b) (m)	363	units	20.00	%		1,678		1,800		-	-	-
RoseGarden Marbella South, L.L.C./ Marbella II	311	units	24.27	%		14,149		11,282		51,206	03/30/17	L+2.25	%	(n)
Estuary Urban Renewal Unit B, LLC / Lincoln Harbor (Bldg B) (b)	227	units	7.50	%		-		-		81,900	03/01/30	4.00	%	(o)
Riverpark at Harrison I, L.L.C./ Riverpark at Harrison	141	units	36.00	%		4,420		4,744		23,400	06/27/16	L+2.35	%	(p)
Capitol Place Mezz LLC / Station Townhouses	378	units	50.00	%		48,610		49,327		91,434	07/01/33	4.82	%	(q)
Harborside Unit A Urban Renewal, L.L.C. / URL Harborside	763	units	85.00	%		77,564		34,954		-	08/01/29	5.197	%	(r)
RoseGarden Monaco, L.L.C./ San Remo Land	250	potential units	41.67	%		1,310		1,283		-	-	-
Grand Jersey Waterfront URA, L.L.C./ Liberty Landing	850	potential units	50.00	%		337		337		-	-	-

Office
Red Bank Corporate Plaza, L.L.C./ Red Bank	92,878	sf	50.00	%		4,201		3,963		15,496	05/17/16	L+3.00	%	(s)
12 Vreeland Associates, L.L.C./ 12 Vreeland Road	139,750	sf	50.00	%		5,692		5,620		13,278	07/01/23	2.87	%
BNES Associates III / Offices at Crystal Lake	106,345	sf	31.25	%		2,114		1,993		6,448	11/01/23	4.76	%
Hillsborough 206 Holdings, L.L.C./ Hillsborough 206	160,000	sf	50.00	%		1,962		1,962		-	-	-
KPG-P 100 IMW JV, LLC / 100 Independence Mall West	339,615	sf	33.33	%		37		-		61,500	09/09/16	L+7.00	%	(t)
Keystone-Penn	1,842,820	sf	(u)			-		-		207,345	(v)	(v)
Keystone-TriState	1,266,384	sf	(w)			4,549		6,140		206,272	(x)	(x)
KPG-MCG Curtis JV, L.L.C./ Curtis Center (y)	885,000	sf	50.00	%		57,382		59,911		(z)	(z)	(z)

Other
Plaza VIII & IX Associates, L.L.C./ Vacant land (parking operations)	1,225,000	sf	50.00	%		3,867		4,022		-	-	-
Roseland/North Retail, L.L.C./ Riverwalk at Port Imperial (b)	30,745	sf	20.00	%		1,793		1,828		-	-	-
South Pier at Harborside / Hyatt Regency Jersey City on the Hudson	350	rooms	50.00	%		(aa)		(aa)		64,968	(ab)	(ab)
Stamford SM LLC / Senior Mezzanine Loan (ac)	n/a	n/a	80.00	%		-		-		-	-	-
Other (ad)						410		907		-	-	-
Totals:					$	284,507	$	247,468	$	1,719,141



(a)	Company's effective ownership % represents the Company's entitlement to residual distributions after payments of priority returns, where applicable.
(b)	The Company's ownership interests in this venture are subordinate to its partner's preferred capital balance and the Company is not expected to meaningfully participate in the venture's cash flows in the near term.
(c)	See discussion in Recent Transactions following in this footnote for disposition of Company's interest in the unconsolidated joint ventures.
(d)	Through the joint venture, the Company also owns a 12.5 percent interest in a 50,973 square feet retail building ("Shops at 40 Park") and a 25 percent interest in a to-be-built 59-unit, five story multi-family rental development property ("Lofts at 40 Park").
(e)	The Company's ownership interests in this venture are subordinate to its partner's preferred capital balance and the payment of the outstanding balance remaining on a note ($975 as of June 30, 2015), and is not expected to meaningfully participate in the venture's cash flows in the near term.
(f)	Property debt balance consists of: (i) a loan, collateralized by the Metropolitan at 40 Park, with a balance of $38,600, bears interest at 3.25 percent, matures in September 2020 and is interest only through September 2015; (ii) a loan, collateralized by the Shops at 40 Park, with a balance of $6,500, bears interest at 3.63 percent, matures in August 2018 and is interest-only through July 2015; and (iii) a loan, collateralized by the Lofts at 40 Park, with a balance of $1,117, bears interest at LIBOR plus 250 basis points and matures in September 2015. The Shops at 40 Park mortgage loan also provides for additional borrowing proceeds of $1 million based on certain preferred thresholds being achieved.
(g)	The construction loan has a maximum borrowing amount of $55,500 and provides, subject to certain conditions, two one-year extension options with a fee of 25 basis points each. The joint venture has a swap agreement that fixes the all-in rate to 3.0875 percent per annum on an initial notional amount of $1,840, increasing to $52,000, for the period from September 3, 2013 to November 2, 2015.
(h)	The permanent loan has a maximum borrowing amount of $80,249.
(i)	The construction loan with a maximum borrowing amount of $91,000 converted to a permanent loan on February 27, 2015.
(j)	The Company also owns a 50 percent interest in a vacant land to accommodate the development of approximately 295 additional units of which 252 are currently approved.
(k)	The construction loan has a maximum borrowing amount of $42,500 and provides, subject to certain conditions, two two-year extension options with a fee of 12.5 basis points for the first two-year extension and 25 basis points for the second two-year extension.
(l)	The construction loan has a maximum borrowing amount of $73,350 and provides, subject to certain conditions, one-year extension option followed by a six-month extension option with a fee of 25 basis points each. The joint venture has a swap agreement that fixes the all-in rate to 2.79 percent per annum on an initial notional amount of $1,620, increasing to $69,500 for the period from July 1, 2013 to January 1, 2016.
(m)	The Company also owns a 20 percent residual interest in undeveloped land parcels: parcels 6, I, and J ("Port Imperial North Land") that can accommodate the development of 836 apartment units.
(n)	The construction loan has a maximum borrowing amount of $77,400 and provides, subject to certain conditions, two one-year extension options with a fee of 25 basis points for each year.
(o)	The construction loan with a maximum borrowing amount of $57,000 converted to a permanent loan on February 27, 2015.
(p)	The construction loan has a maximum borrowing amount of $23,400 and provides, subject to certain conditions, two one-year extension options with a fee of 20 basis points for each year.
(q)	The construction/permanent loan has a maximum borrowing amount of $100,700 with amortization starting in August 2017.
(r)	The construction/permanent loan has a maximum borrowing amount of $192,000.
(s)	The joint venture has a swap agreement that fixes the all-in rate to 3.99375 percent per annum on an initial notional amount of $13,650 and then adjusting in accordance with an amortization schedule, which is effective from October 17, 2011 through loan maturity.
(t)	The mortgage loan has two one-year extension options, subject to certain conditions, and includes a $25 million construction escrow with a balance of $5.7 million to be drawn at June 30, 2015.
(u)	The Company’s equity interests in the joint ventures will be subordinated to Keystone Entities receiving a 15 percent internal rate of return (“IRR”) after which the Company will receive a 10 percent IRR on its subordinate equity and then all profit will be split equally.
(v)	Principal balance of $127,600 bears interest at 5.114 percent and matures in August 27, 2023; principal balance of $69,320 bears interest at rates ranging from LIBOR+5.0 percent to LIBOR+5.75 percent and matures in August 27, 2016; principal balance of $10,425 bears interest at LIBOR+6.0 percent matures in August 27, 2015.
(w)	Includes the Company’s pari-passu interests of $4.5 million in five properties and Company’s subordinated equity interests to Keystone Entities receiving a 15 percent internal rate of return (“IRR”) after which the Company will receive a 10 percent IRR on its subordinate equity and then all profit will be split equally.
(x)	Principal balance of $41,848 bears interest at 4.95 percent and matures on July 1, 2017; principal balance of $71,724 bears interest at rates ranging from 5.65 percent to 6.75 percent and matures on September 9, 2017; principal balance of $14,250 bears interest at 4.88 percent and matures on July 6, 2024; principal balance of $63,400 bears interest at 4.93 percent and matures on July 6, 2044; principal balance of $15,050 bears interest at 4.71 percent and matures on August 6, 2044.
(y)	Includes undivided interests in the same manner as investments in noncontrolling partnership, pursuant to ASC 970-323-25-12.
(z)	See Note 9: Mortgages, Loans Payable and Other Obligations for debt secured by interests in these assets.
(aa)	The negative carrying amount for this venture of $2,570 and $1,854 as of June 30, 2015 and December 31, 2014, respectively, were included in accounts payable, accrued expenses and other liabilities.
(ab)	Balance includes: (i) mortgage loan, collateralized by the hotel property, with a balance of $60,844, bears interest at 6.15 percent and matures in November 2016, and (ii) loan with a balance of $4,124, bears interest at fixed rates ranging from 6.09 percent to 6.62 percent and matures in August 1, 2020. The Company posted a $4.1 million letter of credit in support of this loan, half of which is indemnified by the partner.
(ac)	The joint venture collected net proceeds of $47.2 million at maturity, of which the Company received its share of $37.8 million on August 6, 2014.
(ad)	The Company owns other interests in various unconsolidated joint ventures, including interests in assets previously owned and interest in ventures whose businesses are related to its core operations. These ventures are not expected to significantly impact the Company's operations in the near term.

The following is a summary of the Company’s equity in earnings (loss) of unconsolidated joint ventures for the three and six months ended June 30, 2015 and 2014: (dollars in thousands)



		Three Months Ended					Six Months Ended
			June 30,					June 30,
Entity / Property Name		2015			2014		2015			2014
Multi-family
Marbella RoseGarden, L.L.C./ Marbella	$	61		$	(9)	$	122		$	(15)
RoseGarden Monaco Holdings, L.L.C./ Monaco		(313)			(238)		(629)			(515)
Rosewood Lafayette Holdings, L.L.C./ Highlands at Morristown Station		-			(203)		(62)			(419)
PruRose Port Imperial South 15, LLC /RiversEdge at Port Imperial		-			-		-			-
Rosewood Morristown, L.L.C. / Metropolitan at 40 Park		(91)			(76)		(185)			(174)
Overlook Ridge JV 2C/3B, L.L.C./The Chase at Overlook Ridge		(27)			-		(247)			62
PruRose Riverwalk G, L.L.C./ RiverTrace at Port Imperial		(276)			(613)		(530)			(1,151)
Elmajo Urban Renewal Associates, LLC / Lincoln Harbor (Bldg A&C)		-			(91)		-			(203)
Crystal House Apartments Investors LLC / Crystal House		13			53		3			(274)
Portside Master Company, L.L.C./ Portside at Pier One - Bldg 7		(637)			(220)		(1,357)			(434)
PruRose Port Imperial South 13, LLC / RiverParc at Port Imperial		(506)			(213)		(731)			(418)
Roseland/Port Imperial Partners, L.P./ Riverwalk C		(125)			(180)		(309)			(345)
RoseGarden Marbella South, L.L.C./ Marbella II		-			-		-			-
Estuary Urban Renewal Unit B, LLC / Lincoln Harbor (Bldg B)		-			-		-			(15)
Riverpark at Harrison I, L.L.C./ Riverpark at Harrison		(150)			-		(324)			-
Capitol Place Mezz LLC / Station Townhouses		(1,263)			-		(1,188)			-
Harborside Unit A Urban Renewal, L.L.C. / URL Harborside		-			(212)		-			(212)
RoseGarden Monaco, L.L.C./ San Remo Land		-			-		-			-
Grand Jersey Waterfront URA, L.L.C./ Liberty Landing		-			(16)		(19)			(54)
Office
Red Bank Corporate Plaza, L.L.C./ Red Bank		112			106		222			205
12 Vreeland Associates, L.L.C./ 12 Vreeland Road		86			54		72			144
BNES Associates III / Offices at Crystal Lake		52			110		121			147
Hillsborough 206 Holdings, L.L.C./ Hillsborough 206		(5)			-		(5)			(5)
KPG-P 100 IMW JV, LLC / 100 Independence Mall West		(379)			(483)		(763)			(1,136)
Keystone-Penn		-			-		-			-
Keystone-TriState		(242)			-		(1,590)			-
KPG-MCG Curtis JV, L.L.C./ Curtis Center		232			251		428			251
Other
Plaza VIII & IX Associates, L.L.C./ Vacant land (parking operations)		70			44		156			146
Roseland/North Retail, L.L.C./ Riverwalk at Port Imperial		(18)			(23)		(36)			(47)
South Pier at Harborside / Hyatt Regency Jersey City on the Hudson		868			892		784			1,290
Stamford SM LLC / Senior Mezzanine Loan		-			928		-			1,844
Other		209			582		209			536
Company's equity in earnings (loss) of unconsolidated joint ventures	$	(2,329)		$	443	$	(5,858)		$	(792)

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, 2015 and December 31, 2014: (dollars in thousands)



		June 30,		December 31,
		2015		2014
Assets:
Rental property, net	$	1,597,359	$	1,534,812
Other assets		421,753		398,222
Total assets	$	2,019,112	$	1,933,034
Liabilities and partners'/
members' capital:
Mortgages and loans payable	$	1,193,461	$	1,060,020
Other liabilities		215,077		211,340
Partners'/members' capital		610,574		661,674
Total liabilities and
partners'/members' capital	$	2,019,112	$	1,933,034

The following is a summary of the results from operations of the unconsolidated joint ventures for the period in which the Company had investment interests during the three and six months ended June 30, 2015 and 2014: (dollars in thousands)



		Three Months Ended					Six Months Ended
			June 30,					June 30,
		2015			2014		2015			2014
Total revenues	$	81,075		$	113,118	$	155,552		$	144,111
Operating and other expenses		(55,953)			(96,605)		(113,309)			(114,958)
Depreciation and amortization		(17,816)			(8,213)		(34,809)			(16,581)
Interest expense		(13,324)			(8,786)		(24,658)			(15,127)
Net loss	$	(6,018)		$	(486)	$	(17,224)		$	(2,555)

Recent Transactions

OVERLOOK RIDGE JV, LLC/QUARRYSTONE AT OVERLOOK RIDGE

On May 13, 2015, LR Overlook Phase II, LLC, of which the Company held a 50 percent interest, sold its 251-unit multi-family rental property located in Malden, Massachusetts (“Quarrystone Property”) for approximately $74.6 million. The Company received no share of the distributable cash from the sale as the Company’s equity interest in the venture is subordinated to its joint venture partner, and realized no gain or loss from the sale.

ROSEWOOD LAFAYETTE HOLDINGS, L.L.C./HIGHLANDS AT MORRISTOWN STATION

5. DEFERRED CHARGES, GOODWILL AND OTHER ASSETS, NET



		June 30,		December 31,
(dollars in thousands)		2015		2014
Deferred leasing costs	$	229,989	$	239,138
Deferred financing costs		20,823		24,042
		250,812		263,180
Accumulated amortization		(113,469)		(122,358)
Deferred charges, net		137,343		140,822
Notes receivable (a)		13,619		21,491
In-place lease values, related intangibles and other assets, net		5,458		6,565
Goodwill		2,945		2,945
Prepaid expenses and other assets, net		38,408		32,827

Total deferred charges, goodwill and other assets, net	$	197,773	$	204,650

(a)

Includes as of June 30, 2015: a mortgage receivable for $10.4 million which bears interest at LIBOR plus six percent and matures in August 2016; and an interest-free note receivable with a net present value of $3.2 million and matures in April 2023. The Company believes these balances are fully collectible.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company does not have any derivative instruments designated as cash flow hedges. The following table summarizes the notional and fair value of the Company’s derivative financial instruments, designated as fair value hedges, as of June 30, 2015 and December 31, 2014 (dollars in thousands):



								Fair Value
		Notional		Strike		Effective	Expiration		June 30,		December 31,
		Value	(a)	Rate		Date	Date		2015		2014
LIBOR Cap	$	51,000		1.5	%	September 2014	October 2015	$	-	$	1
LIBOR Cap		24,000		1.5	%	September 2014	October 2015		-		1
LIBOR Cap		51,000		1.75	%	October 2015	October 2016		10		64
LIBOR Cap		24,000		1.75	%	October 2015	October 2016		5		29
								$	15	$	95

(a)	The notional value is an indication of the extent of our involvement in these instruments at that time, but does not represent exposure to credit, interest rate or market risks.

The Company includes these derivative financial instruments in deferred charges, goodwill and other assets, net. As changes in the fair value of these derivative financial instruments are recorded in earnings, the Company recorded a loss on the change in fair value of $17,000 and $80,000 during the three and six months ended June 30, 2015, respectively, which is included in interest and other investment income in the consolidated statements of operations.

6. RESTRICTED CASH

Restricted cash generally includes tenant and resident security deposits for certain of the Company’s 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: (dollars in thousands)



		June 30,		December 31,
		2015		2014
Security deposits	$	7,690	$	7,795
Escrow and other reserve funds		34,362		26,450

Total restricted cash	$	42,052	$	34,245

7. SENIOR UNSECURED NOTES

A summary of the Company’s senior unsecured notes as of June 30, 2015 and December 31, 2014 is as follows: (dollars in thousands)



		June 30,		December 31,	Effective
		2015		2014	Rate (1)
5.800% Senior Unsecured Notes, due January 15, 2016	$	200,047	$	200,086	5.806	%
2.500% Senior Unsecured Notes, due December 15, 2017		249,298		249,150	2.803	%
7.750% Senior Unsecured Notes, due August 15, 2019		249,120		249,013	8.017	%
4.500% Senior Unsecured Notes, due April 18, 2022		299,595		299,565	4.612	%
3.150% Senior Unsecured Notes, due May 15, 2023		270,233		269,930	3.517	%

Total senior unsecured notes	$	1,268,293	$	1,267,744

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

The terms of the Company’s 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. The Company was in compliance with its debt covenants under the indenture relating to its senior unsecured notes as of June 30, 2015.

8. UNSECURED REVOLVING CREDIT FACILITY

On July 16, 2013, the Company amended and restated its unsecured revolving credit facility with a group of 17 lenders. The $600 million facility is expandable to $1 billion and matures in July 2017. It has two six-month extension options each requiring the payment of a 7.5 basis point fee. The interest rate on outstanding borrowings (not electing the Company’s competitive bid feature) and the facility fee on the current borrowing capacity payable quarterly in arrears are based upon the Operating Partnership’s unsecured debt ratings, as follows:



Operating Partnership's	Interest Rate -
Unsecured Debt Ratings:	Applicable Basis Points	Facility Fee
Higher of S&P or Moody's	Above LIBOR	Basis Points
No ratings or less than BBB-/Baa3	170.0	35.0
BBB- or Baa3 (current)	130.0	30.0
BBB or Baa2	110.0	20.0
BBB+ or Baa1	100.0	15.0
A- or A3 or higher	92.5	12.5

The facility has a competitive bid feature, which allows the Company to solicit bids from lenders under the facility to borrow up to $300 million at interest rates less than those above.

The terms of the unsecured facility include certain restrictions and covenants which limit, among other things the incurrence of additional indebtedness, the incurrence of liens and the disposition of real estate properties (to the extent that: (i) such property dispositions cause the Company to default on any of the financial ratios of the facility described below, or (ii) the property dispositions are completed while the Company is under an event of default under the facility, unless, under certain circumstances, such disposition is being carried out to cure such default), and which require compliance with financial ratios relating to the maximum leverage ratio (60 percent), the maximum amount of secured indebtedness (40 percent), the minimum amount of fixed charge coverage (1.5 times), the maximum amount of unsecured indebtedness (60 percent), the minimum amount of unencumbered property interest coverage (2.0 times) and certain investment limitations (generally 15 percent of total capitalization). If an event of default has occurred and is continuing, the Corporation will not make any excess distributions except to enable the Corporation to continue to qualify as a REIT under the Code. The Company was in compliance with its debt covenants under its revolving credit facility as of June 30, 2015.

As of June 30, 2015 and December 31, 2014, the Company had no outstanding borrowings under its unsecured revolving credit facility.

9. MORTGAGES, LOANS PAYABLE AND OTHER OBLIGATIONS

The Company has mortgages, loans payable and other obligations which primarily consist of various loans collateralized by certain of the Company’s rental properties. As of June 30, 2015, 26 of the Company’s properties, with a total book value of approximately $932 million, are encumbered by the Company’s mortgages and loans payable. Payments on mortgages, loans payable and other obligations are generally due in monthly installments of principal and interest, or interest only. Except as noted below, the Company was in compliance with its debt covenants under its mortgages and loans payable as of June 30, 2015.

A summary of the Company’s mortgages, loans payable and other obligations as of June 30, 2015 and December 31, 2014 is as follows: (dollars in thousands)



			Effective				June 30,		December 31,
Property Name	Lender		Rate (a)				2015		2014		Maturity
Overlook - Site IIID,IIIC, IIIA (b)	Wells Fargo Bank N.A.	LIBOR+3.50		%			-	$	17,260
Overlook - Site IIB (Quarrystone I) (b)	Wells Fargo Bank N.A.	LIBOR+2.50		%			-		5,787
4 Sylvan (c)	Wells Fargo CMBS		10.260	%			-		14,575
10 Independence (d)	Wells Fargo CMBS		10.260	%			-		16,924
6 Becker, 85 Livingston,	Wells Fargo CMBS		10.260	%		$	65,035		65,035		08/11/14	(f)
75 Livingston &
20 Waterview (e)
9200 Edmonston Road	Principal Commercial Funding L.L.C.		5.534	%			3,857		3,951		05/01/15	(g)
Port Imperial South	Wells Fargo Bank N.A.	LIBOR+1.75		%			44,550		44,119		09/19/15
4 Becker	Wells Fargo CMBS		9.550	%			39,739		39,421		05/11/16
5 Becker (h)	Wells Fargo CMBS		19.450	%			14,288		13,867		05/11/16
210 Clay (i)	Wells Fargo CMBS		18.100	%			13,770		13,330		05/11/16
Curtis Center (j)	CCRE & PREFG	LIBOR+5.912		%	(m)		64,000		64,000		10/09/16
Various (k)	Prudential Insurance		6.332	%			144,551		145,557		01/15/17
150 Main St.	Webster Bank	LIBOR+2.35		%			3,493		1,193	(o)	03/30/17
23 Main Street	JPMorgan CMBS		5.587	%			28,878		29,210		09/01/18
Harborside Plaza 5	The Northwestern Mutual Life		6.842	%			219,682		221,563		11/01/18
	Insurance Co. & New York Life
	Insurance Co.
100 Walnut Avenue	Guardian Life Insurance Co.		7.311	%			18,410		18,542		02/01/19
One River Center (l)	Guardian Life Insurance Co.		7.311	%			42,173		42,476		02/01/19
Park Square	Wells Fargo Bank N.A.	LIBOR+1.872		%	(n)		27,500		27,500		04/10/19
Port Imperial South 4/5 Retail	American General Life & A/G PC		4.559	%			4,000		4,000		12/01/21
Port Imperial South 4/5 Garage	American General Life & A/G PC		4.853	%			32,600		32,600		12/01/29

Total mortgages, loans payable and other obligations						$	766,526	$	820,910



(a)	Reflects effective rate of debt, including deferred financing costs, comprised of the cost of terminated treasury lock agreements (if any), debt initiation costs, mark-to-market adjustment of acquired debt and other transaction costs, as applicable.
(b)	On March 27, 2015, the Company repaid these loans at par, using borrowings on the Company's unsecured revolving credit facility.
(c)	On June 11, 2015, the Company transferred the deed for 4 Sylvan Way to the lender in satsfactions of its obligations. See Note 3: Recent Transactions.
(d)	On May 27, 2015, the Company transferred the deed for 10 Independence Boulevard to the lender in satisfaction of its obligations. See Note 3: Recent Transactions.
(e)	Mortgage is cross collateralized by the four properties.
(f)	The loan was not repaid at maturity and the Company has begun discussions with the lender regarding potential options in satisfaction of the obligation.
(g)	The mortgage loan originally matured on May 1, 2013. The maturity date was extended until May 1, 2015 with the same interest rate. Excess cash flow, as defined, is being held by the lender for re-leasing costs. The deed for the property was placed in escrow and is available to the lender in the event of default or non-payment at maturity. The mortgage loan was not repaid on May 1, 2015. The Company is in discussions with the lender regarding a further extension of the loan.
(h)	The cash flow from this property is insufficient to cover operating costs and debt service. Consequently, the Company notified the lender and suspended debt service payments in August 2013. The Company has begun discussions with the lender regarding a deed-in-lieu of foreclosure and began remitting available cash flow to the lender effective August 2013.
(i)	The cash flow from this property is insufficient to cover operating costs and debt service. Consequently, the Company notified the lender and suspended debt service payments in January 2015.
(j)	The Company owns a 50 percent tenants-in-common interest in the Curtis Center property. The Company’s $64.0 million loan consists of its 50 percent interest in a $102 million senior loan with a current rate of 3.480 percent at June 30, 2015 and its 50 percent interest in a $26 million mezzanine loan (with a maximum borrowing capacity of $48 million) with a current rate of 9.686 percent at June 30, 2015. The senior loan rate is based on a floating rate of one-month LIBOR plus 329 basis points and the mezzanine loan rate is based on a floating rate of one-month LIBOR plus 950 basis points. The Company has entered into LIBOR caps for the periods of the loans. The loans provide for three one-year extension options.
(k)	Mortgage is cross collateralized by seven properties. The Company has agreed, subject to certain conditions, to guarantee repayment of $61.1 million of the loan.
(l)	Mortgage is collateralized by the three properties comprising One River Center.
(m)	The effective interest rate includes amortization of deferred financing costs of 1.362 percent.
(n)	The effective interest rate includes amortization of deferred financing costs of 0.122 percent.
(o)	This construction loan has a maximum borrowing capacity of $28.8 million.

CASH PAID FOR INTEREST AND INTEREST CAPITALIZED

Cash paid for interest for the six months ended June 30, 2015 and 2014 was $53,353,000 and $61,999,000, respectively. Interest capitalized by the Company for the six months ended June 30, 2015 and 2014 was $7,388,000 and $6,493,000, respectively (of which these amounts included $2,314,000 and $1,953,000 for the six months ended June 30, 2015 and 2014, respectively, for interest capitalized on the Company’s investments in unconsolidated joint ventures which were substantially in development).

SUMMARY OF INDEBTEDNESS

As of June 30, 2015, the Company’s total indebtedness of $2,034,819,000 (weighted average interest rate of 5.67 percent) was comprised of $139,543,000 of variable rate mortgage debt (weighted average rate of 3.89 percent) and fixed rate debt and other obligations of $1,895,276,000 (weighted average rate of 5.80 percent).

As of December 31, 2014, the Company’s total indebtedness of $2,088,654,000 (weighted average interest rate of 5.64 percent) was comprised of $159,860,000 of variable rate mortgage debt (weighted average rate of 3.83 percent) and fixed rate debt and other obligations of $1,928,794,000 (weighted average rate of 5.79 percent).

10. MACK-CALI REALTY, L.P.’S PARTNERS’ CAPITAL

Partners’ Capital in the accompanying consolidated financial statements relates to (a) General Partners’ capital consisting of common units in the Company held by the General Partner, and (b) Limited Partners’ capital consisting of common units held by the limited partners.

Any transactions resulting in the issuance of additional common and preferred stock of the Corporation result in a corresponding issuance by the Company of an equivalent amount of common and preferred units to the Corporation.

GENERAL PARTNERS’ CAPITAL

REPURCHASE OF GENERAL PARTNER UNITS

In September 2012, the Corporation’s Board of Directors renewed and authorized an increase to the Corporation’s repurchase program (“Repurchase Program”). The Corporation has authorization to repurchase up to $150 million of its outstanding common stock under the renewed Repurchase Program, which it may repurchase from time to time in open market transactions at prevailing prices or through privately negotiated transactions. The Corporation has purchased and retired 394,625 shares of its outstanding common stock for an aggregate cost of approximately $11 million (all of which occurred in the year ended December 31, 2012), with a remaining authorization under the Repurchase Program of $139 million. Concurrent with these purchases, the Corporation sold to the Company 394,625 common units for approximately $11 million.

DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN

The Corporation has a Dividend Reinvestment and Stock Purchase Plan (the “DRIP”) which commenced in March 1999 under which approximately 5.5 million shares of the Corporation’s common stock have been reserved for future issuance. The DRIP provides for automatic reinvestment of all or a portion of a participant’s dividends from the Corporation’s shares of common stock. The DRIP also permits participants to make optional cash investments up to $5,000 a month without restriction and, if the Corporation waives this limit, for additional amounts subject to certain restrictions and other conditions set forth in the DRIP prospectus filed as part of the Corporation’s effective registration statement on Form S-3 filed with the SEC for the approximately 5.5 million shares of the Corporation’s common stock reserved for issuance under the DRIP.

STOCK OPTION PLANS

In May 2013, the Corporation established the 2013 Incentive Stock Plan (the “2013 Plan”) under which a total of 4,600,000 shares have been reserved for issuance. In May 2004, the Corporation established the 2004 Incentive Stock Plan (the “2004 Plan”) under which a total of 2,500,000 shares had been reserved for issuance. The 2004 Plan was terminated upon establishment of the 2013 Plan. No options were granted under the 2004 Plan. In September 2000, the Corporation established the 2000 Employee Stock Option Plan (“2000 Employee Plan”) and the Amended and Restated 2000 Director Stock Option Plan (“2000 Director Plan” and together with the 2000 Employee Plan, the “2000 Plans”). In May 2002, shareholders of the Corporation approved amendments to both of the 2000 Plans to increase the total shares reserved for issuance under both of the 2000 Plans from 2,700,000 to 4,350,000 shares of the Corporation’s common stock (from 2,500,000 to 4,000,000 shares under the 2000 Employee Plan and from 200,000 to 350,000 shares under the 2000 Director Plan). As the 2000 Plans expired in 2010, stock options may no longer be issued under those plans. Stock options granted under the 2000 Employee Plan became exercisable over a five-year period. All stock options granted under the 2000 Director Plan became exercisable in one year. All options were granted at the fair market value at the dates of grant and have terms of 10 years. As of June 30, 2015 and December 31, 2014, the stock options outstanding had a weighted average remaining contractual life of approximately 9.8 and 4.9 years, respectively.

On June 5, 2015, in connection with the Executive Employment Agreements, the Corporation granted options to purchase a total of 800,000 shares of the Corporation’s common stock, exercisable for a period of ten years with an exercise price equal to the closing price of the Corporation’s common stock on the grant date of $17.31 per share, with 400,000 of such options vesting in three equal annual installments commencing on the first anniversary of the grant date (“Time Vesting Options”), and 400,000 of such options vesting if the Corporation’s common stock trades at or above $25.00 per share for 30 consecutive trading days while the executive is employed (“Price Vesting Options”), or on or before June 30, 2019, subject to certain conditions.

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



			Weighted		Aggregate
			Average		Intrinsic
	Shares		Exercise		Value
	Under Options		Price		$(000’s)
Outstanding at January 1, 2015	10,000	$	33.36		-
Granted	800,000		17.31
Outstanding at June 30, 2015 ($17.31 – $45.47)	810,000	$	17.51	$	746
Options exercisable at June 30, 2015	5,000
Available for grant at June 30, 2015	3,413,699

The weighted average fair value of options granted during the three and six months ended June 30, 2015 was $3.06 per option. The fair value of each option grant is estimated on the date of grant using the Black-Scholes model for Time Vesting Options and the Monte Carlo method for Price Vesting Options. The following weighted average assumptions are included in the Company’s fair value calculations of stock options granted during the three and six months ended June 30, 2015:



	Time Vesting		Price Vesting
	Options		Options
Expected life (in years)	6.0		5.8
Risk-free interest rate	2.04	%	1.96	%
Volatility	29.0	%	29.0	%
Dividend yield	3.5	%	3.5	%

There were no stock options exercised under all stock option plans for the six months ended June 30, 2015 and 2014, respectively. The Corporation has a policy of issuing new shares to satisfy stock option exercises.

The Company recognized stock options expense of $62,000 and $1,000 for the three months ended June 30, 2015 and 2014, respectively, and $63,000 and $2,000 for the six months ended June 30, 2015 and 2014, respectively.

RESTRICTED STOCK AWARDS

The Corporation has issued stock awards (“Restricted Stock Awards”) to officers, certain other employees, and nonemployee members of the Board of Directors of the Corporation, which allow the holders to each receive a certain amount of shares of the Corporation’s common stock generally over a one to seven-year vesting period, of which 313,337 unvested shares were legally outstanding at June 30, 2015. Of the Restricted Stock Awards issued to executive officers and certain other employees, 210,000 were contingent upon the Corporation meeting certain performance goals to be set by the Committee of the Corporation each year (“Performance Shares”), with the remaining based on time and service.

On September 12, 2012, the Board of Directors of the Corporation granted Restricted Stock Awards totaling 319,667 shares for those executive officers in place on such date. The Restricted Stock Awards were to vest commencing January 1, 2014 and with the number of Restricted Stock Awards scheduled to be vested and earned on each vesting date on an annual basis over a five to seven year vesting schedule, with each annual vesting of each tranche of Restricted Stock Awards being subject to the attainment of annual performance targets to be set by the Committee for each year. In connection with the departure of two executive officers effective March 31, 2014, the Corporation agreed to grant and accelerate vesting of 109,667 shares of Restricted Stock Awards on April 1, 2014. In connection with the departure of the Corporation’s former president and chief executive officer effective June 30, 2015, the Corporation agreed to vest 84,000 Performance Shares and to grant and accelerate the vesting of 126,000 Performance Shares on the Separation Date. See Note 14: Commitments and Contingencies – Departure of Executive Officer.

On June 5, 2015, in connection with the Executive Employment Agreements, the Corporation granted a total of 37,550.54 Restricted Stock Awards, which were valued in accordance with ASC 718 – Stock Compensation, at their fair value. These awards are scheduled to vest equally over a three-year period on each annual anniversary date of the grant date.

All currently outstanding and unvested Restricted Stock Awards provided to the officers and certain other employees were issued under the 2013 Plan and 2004 Plan. Currently outstanding and unvested Restricted Stock Awards provided to directors were issued under the 2013 Plan.

Information regarding the Restricted Stock Awards grant activity is summarized below:



			Weighted-Average
			Grant – Date
	Shares		Fair Value
Outstanding at January 1, 2015	346,946	$	21.09
Granted	41,337		17.51
Vested	(37,392)		21.59
Forfeited	(3)		26.36
Outstanding at June 30, 2015	350,888	$	20.61

As of June 30, 2015, the Company had $3.1 million of total unrecognized compensation cost related to unvested Restricted Stock Awards granted under the Corporation’s stock compensation plans. That cost is expected to be recognized over a weighted average period of 2.0 years.

PERFORMANCE SHARE UNITS/ TSR-BASED AWARDS

On September 12, 2012, the Board of Directors of the Corporation approved the recommendations and ratified the determinations of the Committee with respect to new multi-year TSR based awards (the “TSR-Based Awards”) totaling 5,160 performance shares (the “TSR Performance Shares”) for those executive officers in place on such date, each TSR Performance Share evidencing the right to receive $1,000 in the Corporation’s common stock upon vesting. In accordance with the amended and restated TSR-Based Awards agreements entered into between the Corporation and those executive officers in June 2013, the TSR Performance Shares were to vest commencing December 31, 2014, with the number of TSR Performance Shares scheduled to be granted annually over the next four years. The Corporation granted 1,032 TSR Performance Shares in the year ended December 31, 2013, which were valued in accordance with ASC 718, Compensation - Stock Compensation, at their fair value, utilizing a Monte-Carlo simulation to estimate the probability of the vesting conditions being satisfied. In connection with the departure of two executive officers effective March 31, 2014, the Corporation agreed to vest 357 TSR Performance Shares and to grant and accelerate the vesting of 528 TSR Performance Shares, for which the Corporation issued 45,062 shares of Common Stock on April 2, 2014. In connection with the departure of the Corporation’s former president and chief executive officer effective June 30, 2015, the Corporation agreed to vest 675 TSR Performance Shares on the Separation Date, for which it issued 41,811 shares of common stock. See Note 14: Commitments and Contingencies – Departure of Executive Officer.

On June 5, 2015, in connection with the Executive Employment Agreements, the Corporation granted a total of 112,651.64 performance share units (“PSUs”) which will vest from 0 to 150 percent of the number of PSUs granted based on the Corporation’s total shareholder return relative to a peer group of equity office REITs over a three-year performance period starting from the grant date, each PSU evidencing the right to receive a share of the Corporation’s common stock upon vesting. The PSUs are also entitled to the payment of dividend equivalents in respect of vested PSUs in the form of additional PSUs. The PSUs were valued in accordance with ASC 718, Compensation - Stock Compensation, at their fair value on the grant date, utilizing a Monte-Carlo simulation to estimate the probability of the vesting conditions being satisfied.

The Corporation has reserved shares of common stock under the 2004 Plan and 2013 Plan for issuance upon vesting of the TSR Performance Shares and PSUs in accordance with the terms and conditions of the TSR-Based Awards and PSUs.

DEFERRED STOCK COMPENSATION PLAN FOR DIRECTORS

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

During the six months ended June 30, 2015 and 2014, 10,264 and 10,245 deferred stock units were earned, respectively. As of June 30, 2015 and December 31, 2014, there were 167,763 and 157,730 deferred stock units outstanding, respectively.

LIMITED PARTNERS’ CAPITAL

Common Units

Certain individuals and entities own common units in the Company. A common unit and a share of Common Stock of the Corporation have substantially the same economic characteristics in as much as they effectively share equally in the net income or loss of the Company. Common unitholders (other than the General Partner) have the right to redeem their common units, subject to certain restrictions. The redemption is required to be satisfied in shares of Common Stock of the General Partner, cash, or a combination thereof, calculated as follows: one share of the General Partner’s Common Stock, or cash equal to the fair market value of a share of the General Partner’s Common Stock at the time of redemption, for each common unit. The Company, in its sole discretion, determines the form of redemption of common units (i.e., whether a common unitholder receives Common Stock of the General Partner, cash, or any combination thereof). If the Company elects to satisfy the redemption with shares of Common Stock of the General Partner as opposed to cash, the General Partner is obligated to issue shares of its Common Stock to the redeeming unitholder. Regardless of the rights described above, the common unitholders may not put their units for cash to the Company or the General Partner under any circumstances.

EARNINGS PER UNIT

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

The following information presents the Company’s results for the three and six months ended June 30, 2015 and 2014 in accordance with ASC 260, Earnings Per Share: (dollars in thousands, except per unit amounts)


		Three Months Ended					Six Months Ended
			June 30,					June 30,
Computation of Basic EPU		2015			2014		2015			2014
Net income	$	39,389		$	57,347	$	36,064		$	39,719
Add: Noncontrolling interest in consolidated joint ventures		373			290		863			612
Net income available to common unitholders	$	39,762		$	57,637	$	36,927		$	40,331

Weighted average common units		100,272			99,993		100,269			99,935

Basic EPU:
Net income available to common unitholders	$	0.40		$	0.58	$	0.37		$	0.40


		Three Months Ended					Six Months Ended
			June 30,					June 30,
Computation of Diluted EPU		2015			2014		2015			2014
Net income available to common unitholders	$	39,762		$	57,637	$	36,927		$	40,331

Weighted average common unit		100,314			100,023		100,313			99,964

Diluted EPU:
Net income available to common unitholders	$	0.40		$	0.58	$	0.37		$	0.40

The following schedule reconciles the units used in the basic EPU calculation to the units used in the diluted EPU calculation: (in thousands)


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2015	2014	2015	2014
Basic EPU units	100,272	99,993	100,269	99,935
Add: Restricted Stock Awards	42	30	44	29
Diluted EPU units	100,314	100,023	100,313	99,964

Contingently issuable shares under the PSU awards and Price Vesting Options were excluded from the denominator in 2015 because the criteria had not been met for the period ended June 30, 2015. Contingently issuable shares under the TSR Performance Shares were excluded from the denominator in 2014 because the criteria had not been met for the period ended June 30, 2014. Not included in the computations of diluted EPU were 410,000 and 10,000 stock options as such securities were anti-dilutive during the periods ended June 30, 2015 and 2014, respectively. Unvested restricted stock outstanding as of June 30, 2015 and 2014 were 103,337 and 304,816 shares, respectively.

Distributions declared per common unit for each of the three month periods ended June 30, 2015 and 2014 was $0.15 per unit. Distributions declared per common unit for the six month periods ended June 30, 2015 and 2014 was $0.30 and $0.45 per unit, respectively.

11. NONCONTROLLING INTERESTS IN CONSOLIDATED JOINT VENTURES

The Company consolidates certain joint ventures in which it has ownership interests. Various entities and/or individuals hold noncontrolling interests in these ventures.

The following table reflects the activity of noncontrolling interests in consolidated joint ventures for the six months ended June 30, 2015 and 2014, respectively (dollars in thousands):


		Six Months Ended
			June 30,
		2015			2014
Balance at January 1	$	55,057		$	55,283
Net income		(863)			(612)
Increase in noncontrolling interests		158			35
Balance at June 30	$	54,352		$	54,706

PARTICIPATION RIGHTS

The Company’s interests in certain real estate projects (three properties and a future development) each provide for the initial distributions of net cash flow solely to the Company, and thereafter, other parties have participation rights (“Participation Rights”) in 50 percent of the excess net cash flow remaining after the distribution to the Company of the aggregate amount equal to the sum of: (a) the Company’s capital contributions, plus (b) an IRR of 10 percent per annum.

12.	EMPLOYEE BENEFIT 401(k) PLANS AND DEFERRED RETIREMENT COMPENSATION AGREEMENTS

Employees of the Corporation, who meet certain minimum age and service requirements, are eligible to participate in the Mack-Cali Realty Corporation 401(k) Savings/Retirement Plan (the “401(k) Plan”). Eligible employees may elect to defer from one percent up to 60 percent of their annual compensation on a pre-tax basis to the 401(k) Plan, subject to certain limitations imposed by federal law. The amounts contributed by employees are immediately vested and non-forfeitable. The Corporation may make discretionary matching or profit sharing contributions to the 401(k) Plan on behalf of eligible participants in any plan year. The Corporation did not make any contributions to the 401(k) plan in the six months ended June 30, 2015. Participants are always 100 percent vested in their pre-tax contributions and will begin vesting in any matching or profit sharing contributions made on their behalf after two years of service with the Corporation at a rate of 20 percent per year, becoming 100 percent vested after a total of six years of service with the Corporation. All contributions are allocated as a percentage of compensation of the eligible participants for the Plan year. The assets of the 401(k) Plan are held in trust and a separate account is established for each participant. A participant may receive a distribution of his or her vested account balance in the 401(k) Plan in a single sum or in installment payments upon his or her termination of service with the Corporation. Total expense recognized by the Company for the 401(k) Plan for the three months ended June 30, 2015 and 2014 was zero and $27,000, respectively, and zero and $53,000 for the six months ended June 30, 2015 and 2014, respectively.

On September 12, 2012, the Board of Directors of the Corporation approved multi-year deferred retirement compensation agreements for those executive officers in place on such date (the “Deferred Retirement Compensation Agreements”). Pursuant to the Deferred Retirement Compensation Agreements, the Corporation was to make annual contributions of stock units (“Stock Units”) representing shares of the Corporation’s common stock on January 1 of each year from 2013 through 2017 into a deferred compensation account maintained on behalf of each participating executive. Vesting of each annual contribution of Stock Units was to occur on December 31 of each year, subject to continued employment. In connection with the separation from service to the Corporation of certain executive officers effective March 31, 2014, the Company agreed to make cash payments totaling $1.2 million for all vested and unvested Stock Units and future cash contributions pursuant to the Deferred Retirement Compensation Agreements. In connection with the separation from service to the Corporation of its former president and chief executive officer effective June 30, 2015, the Company agreed to make cash payments of $2.3 million on the separation date for all vested and unvested Stock Units and future cash contributions pursuant to his Deferred Retirement Compensation Agreement. Total expense recognized by the Company under the Deferred Retirement Compensation Agreements for the three months ended June 30, 2015 and 2014 was zero and $142,000, respectively, and zero and $1.3 million for the six months ended June 30, 2015 and 2014, respectively.

13. DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of estimated fair value was determined by management using available market information and appropriate valuation methodologies. However, considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments at June 30, 2015 and December 31, 2014. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash equivalents, receivables, notes receivables, accounts payable, and accrued expenses and other liabilities are carried at amounts which reasonably approximate their fair values as of June 30, 2015 and December 31, 2014.

The fair value of the Company’s long-term debt, consisting of senior unsecured notes and mortgages, loans payable and other obligations aggregated approximately $2,046,116,000 and $2,133,214,000 as compared to the book value of approximately $2,034,819,000 and $2,088,654,000 as of June 30, 2015 and December 31, 2014, respectively. The fair value of the Company’s long-term debt was categorized as a level 3 basis (as provided by ASC 820, Fair Value Measurements and Disclosures). The fair value was estimated using a discounted cash flow analysis valuation based on the borrowing rates currently available to the Company for loans with similar terms and maturities. The fair value of the mortgage debt and the unsecured notes was determined by discounting the future contractual interest and principal payments by a market rate. Although the Company has determined that the majority of the inputs used to value its derivative financial instruments fall within level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivative financial instruments utilize level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative financial instruments. As a result, the Company has determined that its derivative financial instruments valuations in their entirety are classified in level 2 of the fair value hierarchy.

Disclosure about fair value of financial instruments is based on pertinent information available to management as of June 30, 2015 and December 31, 2014. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since June 30, 2015 and current estimates of fair value may differ significantly from the amounts presented herein.

14. COMMITMENTS AND CONTINGENCIES

TAX ABATEMENT AGREEMENTS

Pursuant to agreements with certain municipalities, the Company is required to make payments in lieu of property taxes (“PILOT”) on certain of its properties and has tax abatement agreements on other properties, as follows:

The Harborside Plaza 4-A agreement with the City of Jersey City, as amended, which commenced in 2002, is for a term of 20 years. The annual PILOT is equal to two percent of Total Project Costs, as defined. Total Project Costs are $49.5 million. The PILOT totaled $247,000 and $247,000 for the three months ended June 30, 2015 and 2014, respectively, and $495,000 and $495,000 for the six months ended June 30, 2015 and 2014, respectively.

The Harborside Plaza 5 agreement, also with the City of Jersey City, as amended, which commenced in 2002, is for a term of 20 years. The annual PILOT is equal to two percent of Total Project Costs, as defined. Total Project Costs are $170.9 million. The PILOT totaled $854,000 and $854,000 for the three months ended June 30, 2015 and 2014, respectively, and $1.7 million and $1.7 million for the six months ended June 30, 2015 and 2014, respectively.

The agreement with the City of Weehawken for its Port Imperial 4/5 garage development project has a term of five years beginning when the project is substantially complete, which occurred in the third quarter of 2013. The agreement provides that real estate taxes be paid initially on the land value of the project only and allows for a phase in of real estate taxes on the value of the improvements over a five year period.

The agreement with the City of Rahway for its Park Square multi-family rental property provides that real estate taxes will be partially abated, on a declining scale, for four years through 2015.

At the conclusion of the above-referenced agreements, it is expected that the properties will be assessed by the municipality and be subject to real estate taxes at the then prevailing rates.

LITIGATION

The Company is a defendant in litigation arising in the normal course of its business activities. Management does not believe that the ultimate resolution of these matters will have a materially adverse effect upon the Company’s financial condition taken as whole.

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, 2015, are as follows: (dollars in thousands)



Year		Amount
July 1 through December 31, 2015	$	198
2016		387
2017		267
2018		232
2019		235
2020 through 2084		15,583

Total	$	16,902

Ground lease expense incurred by the Company during the three months ended June 30, 2015 and 2014 amounted to $102,000 and $102,000, respectively, and $203,000 and $203,000 for the six months ended June 30, 2015 and 2014, respectively.

ROSELAND CONTINGENT CONSIDERATION

The purchase price for the Roseland Transaction included the fair value of contingent consideration pursuant to an earn-out (“Earn Out”) agreement of approximately $10 million. Since the acquisition, the Company recognized benefits related to a decline in fair value in the Earn Out liability and, as a result of the achievement of certain of the defined criteria, paid certain amounts such that the balance of the Earn Out as of June 30, 2015 was $0.9 million. Prospectively, the Earn Out liability will be remeasured at fair value quarterly until the contingency has been resolved, with any changes in fair value representing a charge or benefit directly to earnings (with no adjustment to purchase accounting). The measures of the Earn Out are based on significant inputs that are not observable in the market, which ASC 820 refers to as level 3 inputs. In addition to an appropriate discount rate, the key assumption affecting the valuation for the Roseland Assets component was the probability of occurrence of the payment events under the relevant provisions (management assumed between 92 and 99 percent for completion/start criteria and 50 percent for the tax credit/grant criteria in its initial valuation). The valuation of the TRS component includes assumptions for the risk-free rate and various other factors (i.e., stock price, dividend levels and volatility) for the Company and the relevant peer group, as defined in the Earn Out agreement.

DEPARTURE OF EXECUTIVE OFFICER

On November 4, 2014, the Company announced that Mitchell E. Hersh would step down as president and chief executive officer of the Corporation effective May 11, 2015 and would not stand for re-election to the Corporation’s Board of Directors (the “Board of Directors”) at the 2015 annual meeting of the Corporation’s stockholders. Pursuant to the terms of the Separation Agreement, the Company elected to extend the separation date to June 30, 2015 (the “Separation Date”). In connection with Mr. Hersh’s departure from the Corporation, the Corporation and Mr. Hersh entered into a Separation and General Release Agreement (the “Separation Agreement”) dated November 4, 2014 (the “Effective Date”). The Separation Agreement provided that Mr. Hersh’s employment with the Corporation was being terminated without cause, and further provided, pursuant to the terms of Mr. Hersh’s employment agreement, multi-year performance award agreement, TSR-based performance award agreement and deferred retirement compensation agreement, for (i) a cash payment to Mr. Hersh of $8 million, (ii) payment of the premiums for the continuation of Mr. Hersh’s health, dental and vision insurance for 48 months following the Separation Date, (iii) vesting of 210,000 shares of restricted common stock pursuant to Mr. Hersh’s multi-year performance award agreement, (iv) a cash payment equal to the sum of (X) $504,000, plus (Y) the product of (1) 210,000 multiplied by (2) the aggregate amount of dividends on the Corporation’s common stock that were declared and paid between the Effective Date and the Separation Date in payment of accrued but unpaid dividend equivalents pursuant to his multi-year performance award agreement, (v) issuance of 41,811 shares of common stock of the Corporation (the “Deferred Shares”) pursuant to the acceleration of vesting of 675 performance shares pursuant to Mr. Hersh’s TSR-based performance award agreement, and (vi) a cash payment of $2,311,792 pursuant to Mr. Hersh’s deferred retirement compensation award agreement. All such cash amounts and Deferred Shares will be paid to Mr. Hersh on the date that is six months and one day from the Separation Date, except in the event of death or if the payment event is due to Mr. Hersh’s disability, in which case the payments will occur shortly after such death or disability. Under the terms of the Separation Agreement, Mr. Hersh continued to receive his base salary in accordance with his employment agreement and to be eligible to participate in the Corporation’s executive incentive compensation and bonus programs. In addition, upon departure Mr. Hersh was entitled to receive his accrued but unpaid base salary and to have his expenses reimbursed.

The Company’s total estimated costs for the departure of the Corporation’s former president and chief executive officer and of the departure of certain of the Corporation’s executive officers of approximately $23.8 million during the year ended December 31, 2014, of which approximately $11 million was recognized during the six months ended June 30, 2014, was included in general and administrative expense (approximately $11.6 million was included in accounts payable, accrued expenses and other liabilities as of June 30, 2015 and December 31, 2014).

OTHER

The Company may not dispose of or distribute certain of its properties, currently comprised of seven properties with an aggregate net book value of approximately $124.3 million, which were originally contributed by certain unrelated common unitholders, without the express written consent of such common unitholders, as applicable, except in a manner which does not result in recognition of any built-in-gain (which may result in an income tax liability) or which reimburses the appropriate specific common unitholders for the tax consequences of the recognition of such built-in-gains (collectively, the “Property Lock-Ups”). The aforementioned restrictions do not apply in the event that the Company sells all of its properties or in connection with a sale transaction which the Corporation’s Board of Directors determines is reasonably necessary to satisfy a material monetary default on any unsecured debt, judgment or liability of the Company or to cure any material monetary default on any mortgage secured by a property. The Property Lock-Ups expire periodically through 2016. Upon the expiration of the Property Lock-Ups, the Company is generally required to use commercially reasonable efforts to prevent any sale, transfer or other disposition of the subject properties from resulting in the recognition of built-in gain to the specific common unitholders, which include members of the Mack Group (which includes William L. Mack, Chairman of the Corporation’s Board of Directors; David S. Mack, director of the Corporation; Earle I. Mack, a former director of the Corporation; and Mitchell E. Hersh, former president, chief executive officer and director of the Corporation), the Robert Martin Group (which includes Robert F. Weinberg, a former director of the Corporation and current member of its Advisory Board), and the Cali Group (which includes John R. Cali, a former director of the Corporation and current member of its Advisory Board). 110 of the Company’s properties, with an aggregate net book value of approximately $1.3 billion, have lapsed restrictions and are subject to these conditions.

On May 21, 2014, the Company entered into a joint venture agreement with Ironstate Harborside-A LLC (“ISA”) to form Harborside Unit A Urban Renewal, L.L.C. (“URL-Harborside”), a newly-formed joint venture that will develop, own and operate a high-rise tower of approximately 763 multi-family apartment units above a parking pedestal to be located on land contributed by the Company at its Harborside complex in Jersey City, New Jersey (the “URL Project”). The Company owns an 85 percent interest in URL-Harborside and the remaining interest is owned by ISA, with shared control over major decisions such as approval of budgets, property financings and leasing guidelines. The construction of the URL Project is estimated to cost a total of approximately $320 million (of which development costs of $128.4 million have been incurred by URL-Harborside through June 30, 2015). The URL Project is projected to be ready for occupancy by the fourth quarter of 2016. The venture has a construction/permanent loan with a maximum borrowing amount of $192 million (with no balance currently outstanding as of June 30, 2015), which bears interest at a rate of 5.197 percent and matures in August 2029. The Company currently expects that it will fund approximately $17.4 million of the remaining development costs of the project, net of the loan financing.

In July 2012, the Company entered into a ground lease with Wegmans Food Markets, Inc. (“Wegmans”) at the Company’s undeveloped site located at Sylvan Way and Ridgedale Avenue in Hanover Township, New Jersey. Subject to receiving all necessary governmental approvals, Wegmans intends to construct a store of approximately 140,000 square feet on a finished pad scheduled to be completed in the first quarter of 2017. The Company expects to incur costs of approximately $28.7 million for the development of the site (of which the Company has incurred $11.5 million through June 30, 2015).

The Company owns a 76.25 percent interest in a consolidated joint venture which is constructing a 108-unit multi-family development rental property located in Eastchester, New York (the “Eastchester Project”). The project is expected to be ready for occupancy by the second quarter of 2016. The Eastchester Project is estimated to cost a total of $50 million (of which development costs of $18.4 million have been incurred through June 30, 2015). The venture has a $28.8 million construction loan (with $3.5 million outstanding as of June 30, 2015). The Company expects to fund $8.2 million of the remaining development costs balance.

On April 1, 2015, the Company acquired vacant land to accommodate the development of the CitySquare Project for a purchase price of $3.1 million with an additional $1.25 million to be paid, subject to certain conditions, in accordance with the terms of the purchase and sale agreement. The purchase price for the acquisition was funded primarily through borrowing under the Company’s unsecured revolving credit facility. The Company is required to begin construction of the CitySquare Project within 12 months of closing. The Company plans to start construction in the third quarter 2015 and the total development costs are estimated to be approximately $91.4 million.

15. TENANT LEASES

The Properties are leased to tenants under operating leases with various expiration dates through 2035. Substantially all of the commercial 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.

Future minimum rentals to be received under non-cancelable commercial operating leases at June 30, 2015 are as follows (dollars in thousands):



Year		Amount
July 1 through December 31, 2015	$	223,162
2016		441,825
2017		392,032
2018		308,731
2019		250,839
2020 and thereafter		997,712

Total	$	2,614,301

Multi-family rental property residential leases are excluded from the above table as they generally expire within one year.

16. SEGMENT REPORTING

The Company operates in three business segments: (i) commercial and other real estate, (ii) multi-family real estate, and (iii) multi-family services. The Company provides leasing, property management, acquisition, development, construction and tenant-related services for its commercial and other real estate and multi-family real estate portfolio. The Company’s multi-family services business also provides similar services for third parties. The Company no longer considers construction services as a reportable segment as it phased out this line of business in 2014. The Company had no revenues from foreign countries recorded for the six months ended June 30, 2015 and 2014. The Company had no long lived assets in foreign locations as of June 30, 2015 and December 31, 2014. The accounting policies of the segments are the same as those described in Note 2: Significant Accounting Policies, excluding depreciation and amortization.

The Company evaluates performance based upon net operating income from the combined properties in each of its real estate segments (commercial and other, and multi-family) and from its multi-family services segment.

Selected results of operations for the three and six months ended June 30, 2015 and 2014 and selected asset information as of June 30, 2015 and December 31, 2014 regarding the Company’s operating segments are as follows. Amounts for prior periods have been restated to conform to the current period segment reporting presentation: (dollars in thousands)



		Real Estate
		Commercial				Multi-family			Corporate		Total
		& Other		Multi-family		Services			& Other (d)		Company
Total revenues:
Three months ended:
June 30, 2015	$	134,613	$	6,842	$	8,269	(e)	$	(1,157)	$	148,567
June 30, 2014		150,877		6,329		7,403	(f)		(4,309)		160,300
Six months ended:
June 30, 2015		274,217		13,579		16,501	(g)		(2,015)		302,282
June 30, 2014		311,450		12,132		14,351	(h)		(8,037)		329,896

Total operating and
interest expenses (a):
Three months ended:
June 30, 2015	$	64,158	$	4,872	$	9,051		$	27,250	$	105,331
June 30, 2014		72,303		3,006		8,382			29,578		113,269
Six months ended:
June 30, 2015		136,008		8,541		18,706			54,929		218,184
June 30, 2014		159,236		5,705		18,541			70,791		254,273

Equity in earnings (loss) of
unconsolidated joint ventures:
Three months ended:
June 30, 2015	$	798	$	(3,336)	$	209		$	-	$	(2,329)
June 30, 2014		1,829		(2,255)		869			-		443
Six months ended:
June 30, 2015		(570)		(5,497)		209			-		(5,858)
June 30, 2014		2,817		(4,478)		869			-		(792)

Net operating income (loss) (b):
Three months ended:
June 30, 2015	$	71,253	$	(1,366)	$	(573)		$	(28,407)	$	40,907
June 30, 2014		80,403		1,068		(110)			(33,887)		47,474
Six months ended:
June 30, 2015		137,639		(459)		(1,996)			(56,944)		78,240
June 30, 2014		155,031		1,949		(3,321)			(78,828)		74,831

Total assets:
June 30, 2015	$	3,384,979	$	718,470	$	9,773		$	40,243	$	4,153,465
December 31, 2014		3,636,126		492,362		11,158			52,601		4,192,247

Total long-lived assets (c):
June 30, 2015	$	3,100,539	$	497,095	$	3,764		$	(1,270)	$	3,600,128
December 31, 2014		3,344,840		318,524		3,858			3,482		3,670,704

Total investments in
unconsolidated joint ventures:
June 30, 2015	$	77,841	$	206,256	$	410		$	-	$	284,507
December 31, 2014		81,649		164,912		907			-		247,468

(a)

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

(b)	Net operating income represents total revenues less total operating and interest expenses (as defined in Note “a”), plus equity in earnings (loss) of unconsolidated joint ventures, for the period.

(c)	Long-lived assets are comprised of net investment in rental property, unbilled rents receivable and goodwill.

(d)

Corporate & Other represents all corporate-level items (including interest and other investment income, interest expense, non-property general and administrative expense, construction services revenue and direct construction costs) as well as intercompany eliminations necessary to reconcile to consolidated Company totals.

(e)	Includes $1,556 of fees earned for this period from the multi-family real estate segment, which are eliminated in consolidation.

(f)	Includes $935 of fees earned for this period from the multi-family real estate segment, which are eliminated in consolidation.

(g)	Includes $2,831 of fees earned for this period from the multi-family real estate segment, which are eliminated in consolidation.

(h)	Includes $1,800 of fees earned for this period from the multi-family real estate segment, which are eliminated in consolidation.

The following schedule reconciles net operating income to net income available to common unitholders: (dollars in thousands)



		Three Months Ended					Six Months Ended
			June 30,					June 30,
		2015			2014		2015			2014
Net operating income	$	40,907		$	47,474	$	78,240		$	74,831
Add (deduct):
Depreciation and amortization		(42,365)			(44,711)		(83,167)			(89,696)
Realized gains on disposition of
rental property, net		34,399			54,584		34,543			54,584
Gain on sale of investment in unconsolidated joint venture		6,448			-		6,448			-
Net income		39,389			57,347		36,064			39,719
Noncontrolling interest in consolidated joint ventures		373			290		863			612
Net income available to common unitholders	$	39,762		$	57,637	$	36,927		$	40,331

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

Executive Overview

Mack-Cali Realty Corporation together with its subsidiaries, (the “Corporation” or the “General Partner”) has been involved in all aspects of commercial real estate development, management and ownership for over 60 years and the Corporation has been a publicly-traded real estate investment trust (REIT) since 1994. As of June 30, 2015, the Company owns or has interests in 279 properties (collectively, the “Properties”), consisting of 260 commercial properties, primarily class A office and office/flex buildings, totaling approximately 30.5 million square feet, leased to approximately 2,000 commercial tenants and 19 multi-family rental properties containing approximately 5,644 residential units. The Properties are located primarily in the Northeast, some with adjacent, Company-controlled developable land sites able to accommodate up to 5.7 million square feet of additional commercial space and up to 9,042 apartment units.

The Company’s historical strategy has been to focus its operations, acquisition and development of office properties in high-barrier-to-entry markets and sub-markets where it believes it is, or can become, a significant and preferred owner and operator. With changing work force demographics and reduced demand for suburban office properties in its current markets, the Company intends to continue to leverage its experience and expertise in its core Northeast markets to pursue a strategy of rebalancing its portfolio to only include assets it believes will offer above market returns. This strategy includes selectively disposing of office and office/flex assets and re-deploying proceeds to other office assets and to multi-family rental properties, as well as the repositioning of a portion of its office properties and land held for development to multi-family rental properties.

As an owner of real estate, almost all of the Company’s earnings and cash flow is derived from rental revenue received pursuant to leased space at the Properties. Key factors that affect the Company’s business and financial results include the following:


·	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 such properties;
·	operating expenses;
·	anticipated acquisition and development costs for multi-family rental properties and the revenues and earnings from these properties;
·	cost of capital; and
·	the extent of acquisitions, development and sales of real estate.

Any negative effects of the above key factors could potentially cause a deterioration in the Company’s revenue and/or earnings. Such negative effects could include: (1) failure to renew or execute new leases as current leases expire; (2) failure to renew or execute new leases with rental terms at or above the terms of in-place leases; and (3) tenant defaults.

A failure to renew or execute new leases as current leases expire or to execute new leases with rental terms at or above the terms of in-place leases may be affected by several factors such as: (1) the local economic climate, which may be adversely impacted by business layoffs or downsizing, industry slowdowns, changing demographics and other factors; and (2) local real estate conditions, such as oversupply of the Company’s product types or competition within the market.

Of the Company’s 10 core office markets, several continue to be weak while others have stabilized. The percentage leased in the Company’s consolidated portfolio of stabilized operating commercial properties aggregating 25 million, 25 million and 26 million square feet at June 30, 2015, March 31, 2015 and June 30, 2014, respectively was 82.3 percent leased at June 30, 2015 as compared to 84.3 percent leased at March 31, 2015 and 83.7 percent leased at June 30, 2014. Percentage leased includes all leases in effect as of the period end date, some of which have commencement dates in the future and leases that expire at the period end date. Leases that expired as of June 30, 2015, March 31, 2015 and June 30, 2014 aggregate 74,128, 558,288 and 101,880 square feet, respectively, or 0.3, 2.2 and 0.4 percentage of the net rentable square footage, respectively. Rental rates (including escalations) on the Company’s commercial space that was renewed (based on first rents payable) during the three months ended June 30, 2015 (on 1,007,487 square feet of renewals) increased an average of 0.7 percent compared to rates that were in effect under the prior leases, as compared to a 6.3 percent decrease during the three months ended June 30, 2014 (on 466,046 square feet of renewals). Estimated lease costs for the renewed leases during the three months ended June 30, 2015 averaged $2.23 per square foot per year for a weighted average lease term of 2.9 years and estimated lease costs for the renewed leases during the three months ended June 30, 2014 averaged $1.83 per square foot per year for a weighted average lease term of 4.0 years. The Company believes that commercial vacancy rates may continue to increase and commercial rental rates may continue to decline in some of its markets in 2015 and possibly beyond. For example, a significant tenant aggregating 474,801 square feet and approximately $8.6 million in annualized base rent, whose lease expired on March 31, 2015, did not renew its lease. As of June 30, 2015, commercial leases which comprise approximately 3.2 percent of the Company’s annualized base rent are scheduled to expire during the six months ended December 31, 2015. With the decline of rental rates in the Company’s office markets over the past few years, as leases expire in 2015, assuming no further changes in current market rental rates, the Company expects in many cases that the rental rates it is likely to achieve on new leases will generally be lower than the rates currently being paid, thereby resulting in less revenue from the same space. As a result of the above factors, the Company’s future earnings and cash flow may continue to be negatively impacted by current market conditions affecting its commercial portfolio.

The Company expects that the continued impact of the current state of the economy, including historically weak employment in certain of its markets will continue to have a negative effect on the fundamentals of its business, including in particular lower occupancy and reduced effective rents in respect of the Company’s commercial properties. These conditions would negatively affect the Company’s future earnings and cash flow and could have a material adverse effect on the Company’s financial condition.

Several of the Company’s core office markets continue to be weak. The Company intends to sell its weakest assets or actively asset manage them in a different way. The Company will selectively purchase assets in markets that it believes will offer above market returns. The Company believes that the opportunity to invest in multi-family development properties at higher returns on cost will position the Company to potentially produce higher levels of net operating income than if the Company were to only purchase stabilized multi-family rental properties at market returns. The Company anticipates that it will be several years before many of its multi-family development projects are income-producing. The long-term nature of the Company’s multi-family strategy coupled with the continued weakness in the Company’s core office markets and the disposition of income producing non-core office properties, to fund the Company’s multi-family rental acquisitions and development will likely result in declining net operating income and cash flow relative to historical returns. As the Company continues to execute its multi-family residential strategy, the Company believes that over the long-term its net operating income and cash flow will stabilize at levels less than historical or current returns.

As a result of the factors described above, the Company believes that there is a potential for one or more of the three nationally recognized statistical rating organizations to lower their current investment grade ratings on the Company’s senior unsecured debt to sub-investment grade in 2015. Amongst other things, any such downgrade will increase the interest rate on outstanding borrowings under the Company’s $600 million unsecured revolving credit facility from LIBOR plus 130 basis points to LIBOR plus 170 basis points and the annual credit facility fee it pays will increase from 30 to 35 basis points. In addition, a downgrade in its ratings to sub-investment grade would result in higher interest rates on senior unsecured debt that the Company may issue in the future as compared to issuing such debt with investment grade ratings.

The remaining portion of this Management’s Discussion and Analysis of Financial Condition and Results of Operations should help the reader understand our:

·	recent transactions;

·	critical accounting policies and estimates;

·	results from operations for the three and six months ended June 30, 2015, as compared to the three and six months ended June 30, 2014 and

·	liquidity and capital resources.

Recent Transactions

Acquisition

On April 1, 2015, the Company acquired vacant land to accommodate the development of the CitySquare Project for a purchase price of $3.1 million with an additional $1.25 million to be paid (which is accrued as of June 30, 2015), subject to certain conditions, in accordance with the terms of the purchase and sale agreement. The purchase price for the acquisition was funded primarily through borrowing under the Company’s unsecured revolving credit facility. The Company is required to begin construction of the CitySquare Project within 12 months of closing. The Company plans to start construction in the third quarter 2015 and the total development costs are estimated to be approximately $91.4 million.

Dispositions

Unconsolidated Joint Venture Activity

ROSEWOOD LAFAYETTE HOLDINGS, L.L.C./HIGHLANDS AT MORRISTOWN STATION

On June 1, 2015, the Company sold its 25 percent equity interest in Rosewood Lafayette Holdings L.L.C., a joint venture which owns the Highlands at Morristown Station, a 217-unit multi-family property located in Morristown, New Jersey to its joint venture partner and realized a gain on the sale of $6.4 million.

Critical Accounting Policies and Estimates

The accompanying consolidated financial statements include all accounts of the Company, its majority-owned and/or controlled subsidiaries and variable interest entities for which the Company has determined itself to be the primary beneficiary, if any. See Note 2: Significant Accounting Policies – Investments in Unconsolidated Joint Ventures – to the Financial Statements, for the Company’s treatment of unconsolidated joint venture interests. Intercompany accounts and transactions have been eliminated.

The Financial Statements have been prepared in conformity with generally accepted accounting principles. The preparation of the Financial Statements 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 reported period. These estimates and assumptions are based on management’s historical experience that are believed to be reasonable at the time. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the exercise of judgment. The Company’s critical accounting policies are those which require assumptions to be made about matters that are highly uncertain. Different estimates could have a material effect on the Company’s financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions and circumstances.

Rental Property:

Rental properties are stated at cost less accumulated depreciation and amortization. Costs directly related to the acquisition, development and construction of rental properties are capitalized. Acquisition-related costs are expensed as incurred. Capitalized development and construction costs include pre-construction costs essential to the development of the property, development and construction costs, interest, property taxes, insurance, salaries and other project costs incurred during the period of development. Interest capitalized by the Company for the six months ended June 30, 2015 and 2014 was $7.4 million and $6.5 million, respectively. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. Fully-depreciated assets are removed from the accounts.

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


Leasehold interests	Remaining lease term
Buildings and improvements	5 to 40 years
Tenant improvements	The shorter of the term of the
	related lease or useful life
Furniture, fixtures and equipment	5 to 10 years

Rental Property Held for Sale:

Investments in Unconsolidated Joint Ventures:

MACK CALI REALTY L P 10-Q