"In a year of milestones, we increased our property portfolio by 82%,
expanded into new markets, and surpased the $1 billion
level in market capitalization."


We're proud to report that 1996 was a year of tremendous accomplishments for Cali Realty Corporation. In a year of milestones, we increased our property portfolio by 82%, expanded into new markets, and surpassed the $1 billion level in market capitalization. In addition, our January 1997 acquisition of the Robert Martin Company established Cali as the premier super-regional REIT in the northeast.

This dynamic growth was the result of a calculated, focused strategy which we envisioned at the time of Cali's initial public offering in 1994. This strategy concentrates on the acquisition and development of high-quality properties in promising markets where we are or can become the dominant player. Whether implementing this strategy in our core New Jersey market, throughout the northeast region, or potentially in new markets in the future, Cali is confident that this strategy will continue to prove successful for the Company and its shareholders. Look at the accomplishments Cali made this past year:

Acquisitions

In 1996, we purchased 15 office properties totaling almost 3.3 million square feet, for over $450 million. The most notable of our acquisitions last year was Harborside Financial Center, a 1.9 million square-foot office complex in Jersey City, New Jersey. Heralded as one of the largest commercial real estate transactions in New Jersey history, this purchase solidified Cali as the dominant force in the Jersey City office market.

Cali took several initiatives to expand to adjacent markets. Most notable was the Company's purchase of seven properties totaling 761,000 square feet in suburban Philadelphia, giving the Company a strong presence in this favorable market.

Our acquisition of Westchester County, New York-based Robert Martin Company was the first time Cali combined forces with a long-standing company. Previously, our transactions centered on acquiring, then managing, high-quality assets. We viewed the Robert Martin transaction as a unique opportunity to enhance the growth and success of our Company. It extends Cali's geographic reach from suburban Philadelphia to Fairfield County, Connecticut, and provides us with a superb management team with a similar business philosophy and almost 40 years of expertise in the Westchester and Fairfield markets. We're very excited to have Robert Martin join forces with Cali, and a smooth integration of operations is well underway.

Capital Market Performance

With the completion of two successful public offerings -including the largest post-IPO offering in REIT history, raising $467 million -Cali's total capitalization grew to $1.5 billion at year-end. The 179% increase from last year-end demonstrated our ability to successfully access the capital markets. The transactions completed in 1996 demonstrated our plans and accomplishments to the financial marketplace, and helped to ensure future growth for the Company.

Our acceptance by investors is evident in the steady appreciation in our stock price, which traded at $21 7/8 in the beginning of 1996 and ended the year at $30 7/8, an increase of over 41%. Total return on your Cali stock -for the second year in a row -was approximately 50%, making Cali one of the country's top-performing REITs over the past two years.

Financial Performance

The Company's financial performance was again an impressive one, offering tangible benefits to our shareholders and contributing to our long-term value. Highlights for the year included:

• Revenues rose 53% to $95 million, from $62 million reported for last year.
• Income before the gain on sale of rental property, minority interest and extraordinary items increased over 80% to $32 million, from $17 million for the year ended December 31, 1995.
• Funds from operations, after adjustment for straight-lining of rents, increased 65% to $45 million, from $27 million, for 1995.
• Cash available for distribution was $41 million, up 64% from 1995's $25 million.

Cali Realty: 1997 and Beyond

For 1997 and beyond, we're confident about Cali's ability to continue to grow and enhance profitability. We look forward to developing the opportunities presented to us through the Robert Martin transaction, and to considering attractive acquisition targets in the northeast and other markets. As importantly, Cali will continue to build on our 48 years of real estate expertise and seek to maximize the performance of each of our properties through effective management, so we can better serve our tenants and ensure internal growth and positive yields for the Company and our shareholders. We want to extend our gratitude to our employees for their superb contributions to the Company's health and prosperity, and to our loyal shareholders, whose continued support is essential in the transformation of strategy into reality.

Sincerely,

John J. Cali

Chairman of the Board

Thomas A. Rizk

President and Chief Executive Officer