SL Green Realty Corp. (NYSE: SLG):
Financial and Operating
Highlights
- Net loss attributable to common
stockholders of $0.73 per share for the fourth quarter of 2018 as
compared to net income of $0.29 per share for the same period in
the prior year. Net loss attributable to common stockholders for
the fourth quarter of 2018 included $1.48 per share of net gains
from the sale of real estate offset by $2.50 per share of
depreciable real estate reserves.
- Funds from operations, or FFO, of
$1.61 per share for the fourth quarter and $6.62 per share for the
year ended December 31, 2018, net of $14.9 million, or $0.16 per
share, related to the early repayment of the debt at One Madison
Avenue, as compared to $1.60 and $6.45 per share for the same
periods in the prior year.
- Same-store cash net operating
income, or NOI, including our share of same-store cash NOI from
unconsolidated joint ventures, increased 4.9% for the full year, or
4.5%, excluding lease termination income, as compared to the prior
year.
- Signed 44 Manhattan office leases
covering 837,881 square feet in the fourth quarter and 180
Manhattan office leases covering 2,271,049 square feet for the full
year. The mark-to-market on signed Manhattan office leases was 8.6%
higher for the fourth quarter and 6.5% higher for the full year
over the previous fully escalated rents on the same
spaces.
- Reached 52% leased at One Vanderbilt
Avenue after signing leases with TD Securities, MFA Financial Inc.
and McDermott Will & Emery during the fourth quarter.
- Manhattan same-store occupancy was
95.7% as of December 31, 2018, inclusive of leases signed but
not yet commenced.
- Increased the quarterly dividend by
4.6%, to $0.85 per share, resulting in a new annual
dividend of $3.40 per share.
Investing Highlights
- Announced an increase to the size of
the Company's share repurchase program by an additional $500
million, bringing the program to a total of $2.5 billion. To date,
the Company has acquired 18.4 million shares of its common stock
and redeemed 0.4 million common units of its Operating Partnership,
or OP units, under the program at an average price of $98.51 per
share/unit.
- Entered into an agreement to
purchase a majority and controlling interest in 460 West
34th Street at a gross purchase price of $440 million
resulting in the Company having a blended average basis in the
property of $528 per square foot. The transaction is expected to
close in the first half of 2019.
- Completed the second phase of the
Company's preferred equity investment in 245 Park Avenue. The
Company's investment now totals $148.2 million and the Company will
serve as the building’s property manager, overseeing all leasing
and operations.
- Closed on the sale of its 48.9%
interest in 3 Columbus Circle to the Moinian Group, the owner of
the remaining 51.1% interest. The transaction generated net cash
proceeds to the Company of $223.0 million.
- Closed on the sale of its interests
in 1231 Third Avenue and an Upper East Side residential assemblage
for a combined sales price of $143.8 million.
- Closed on the sale of its 20.0%
interest in 131-137 Spring Street to Invesco Real Estate, the owner
of the remaining 80.0% interest. The transaction generated net cash
proceeds to the Company of $15.2 million.
- Completed the recapitalization of 2
Herald Square, which included securing $150.0 million of mortgage
financing and selling a 49.0% interest in the property. The new
mortgage has a 3-year term, with two one-year extension options and
bears interest at a floating rate of 1.55% over LIBOR.
- Acquired the retail co-op at 133
Greene Street in Soho. The 6,425 square foot retail space,
inclusive of 3,300 square feet on grade, is located along one of
SoHo's most popular shopping corridors and is currently occupied by
Dior Homme.
- Acquired 712 Madison Avenue on
Manhattan's Upper East Side. The five-story building offers 6,362
square feet of retail space, which is currently occupied by David
Yurman.
Financing Highlights
- Refinanced One Vanderbilt Avenue's
construction facility, increasing the facility size from $1.5
billion to $1.75 billion and decreasing the interest rate by
75 basis points.
- Closed on a $225.0 million
construction facility for 185 Broadway. The floating rate facility
has a term of three years, with two one-year extension options and
bears interest at an initial floating rate of 2.85% over
LIBOR.
Summary
SL Green Realty Corp. (the "Company") (NYSE: SLG) today reported
net loss attributable to common stockholders for the quarter ended
December 31, 2018 of $61.2 million, or $0.73 per share, as
compared to net income attributable to common stockholders of $28.0
million, or $0.29 per share, for the same quarter in 2017. Net loss
attributable to common stockholders for the fourth quarter of 2018
included $130.5 million, or $1.48 per share, of net gains
recognized from the sale of real estate, offset by $220.9 million,
or $2.50 per share, of depreciable real estate reserves related to
the Company's suburban portfolio, which the Company has stated it
intends to dispose of.
The Company also reported net income attributable to common
stockholders for the year ended December 31, 2018 of $232.3
million, or $2.67 per share, as compared to net income attributable
to common stockholders of $86.4 million, or $0.87 per share, for
2017. Net income attributable to common stockholders for the year
ended December 31, 2018 includes $273.2 million, or $2.98 per
share, of net gains recognized from the sale of real estate offset
by $227.5 million, or $2.49 per share, of depreciable real estate
reserves, as compared to net gains recognized from the sale of real
estate of $89.4 million, or $0.86 per share, for 2017.
The Company reported FFO for the quarter ended December 31,
2018 of $142.7 million, or $1.61 per share, net of $14.9 million,
or $0.17 per share, related to the early repayment of the debt at
One Madison Avenue, as compared to FFO for the same period in 2017
of $161.7 million, or $1.60 per share.
The Company also reported FFO for the year ended
December 31, 2018 of $605.7 million, or $6.62 per share, net
of $14.9 million, or $0.16 per share, related to the early
repayment of the debt at One Madison Avenue, as compared to FFO for
2017 of $667.3 million, or $6.45 per share.
All per share amounts in this press release are presented on a
diluted basis.
Operating and Leasing
Activity
For the quarter ended December 31, 2018, the Company
reported consolidated revenues and operating income of $317.0
million and $158.2 million, respectively, compared to $361.3
million and $204.7 million, respectively, for the same period in
2017.
Same-store cash NOI, including our share of same-store cash NOI
from unconsolidated joint ventures, increased by 2.7% for the
quarter ended December 31, 2018, or 2.8%, excluding lease
termination income. For the quarter, consolidated property
same-store cash NOI increased by 4.4% to $131.7 million, or 4.3% to
$131.4 million, excluding lease termination income, while
unconsolidated joint venture property same-store cash NOI decreased
by (1.3)% to $51.8 million. No lease termination income was
recognized in unconsolidated joint venture property same-store cash
NOI during the quarter.
Same-store cash NOI, including our share of same-store cash NOI
from unconsolidated joint ventures, increased by 4.9% for the year
ended December 31, 2018, or 4.5%, excluding lease termination
income, as compared to 2017. For the year ended December 31,
2018, consolidated property same-store cash NOI increased by 4.8%
to $514.5 million, or 4.2% to $509.3 million, excluding lease
termination income, while unconsolidated joint venture property
same-store cash NOI increased by 5.1% to $204.2 million. No lease
termination income was recognized in unconsolidated joint venture
property same-store cash NOI in 2018.
During the fourth quarter, the Company signed 44 office leases
in its Manhattan portfolio totaling 837,881 square feet. Thirty
leases comprising 486,066 square feet, representing office leases
on space that had been occupied within the prior twelve months, are
considered replacement leases on which mark-to-market is
calculated. Those replacement leases had average starting rents of
$80.31 per rentable square foot, representing an 8.6% increase over
the previous fully escalated rents on the same office spaces. The
average lease term on the Manhattan office leases signed in the
fourth quarter was 14.9 years, or 15.6 years including the office
leases signed at One Vanderbilt, and average tenant concessions
were 8.8 months of free rent with a tenant improvement allowance of
$53.85 per rentable square foot.
During 2018, the Company signed 180 office leases in its
Manhattan portfolio totaling 2,271,049 square feet. One hundred
twenty-four leases comprising 1,217,689 square feet, representing
office leases on space that had been occupied within the prior
twelve months, are considered replacement leases on which
mark-to-market is calculated. Those replacement leases had average
starting rents of $75.69 per rentable square foot, representing a
6.5% increase over the previous fully escalated rents on the same
office spaces. The average lease term on the Manhattan office
leases signed in 2018 was 11.6 years, or 13.0 years including the
office leases signed at One Vanderbilt, and average tenant
concessions were 6.9 months of free rent with a tenant improvement
allowance of $63.36 per rentable square foot.
Occupancy in the Company's Manhattan same-store portfolio was
95.7% as of December 31, 2018, inclusive of 307,416 square feet of
leases signed but not yet commenced, as compared to 95.7% at
September 30, 2018 and 95.8% at December 31, 2017.
During the fourth quarter, the Company signed 9 office leases in
its Suburban portfolio totaling 137,882 square feet. Five leases
comprising 124,362 square feet, representing office leases on space
that had been occupied within the prior twelve months, are
considered replacement leases on which mark-to-market is
calculated. Those replacement leases had average starting rents of
$26.60 per rentable square foot, representing a 4.9% decrease over
the previous fully escalated rents on the same office
spaces. The average lease term on the Suburban office leases
signed in the fourth quarter was 7.5 years and average tenant
concessions were 6.8 months of free rent with a tenant improvement
allowance of $24.26 per rentable square foot.
During 2018, the Company signed 49 office leases in its Suburban
portfolio totaling 374,097 square feet. Thirty-three leases
comprising 211,716 square feet, representing office leases on space
that had been occupied within the prior twelve months, are
considered replacement leases on which mark-to-market is
calculated. Those replacement leases had average starting rents of
$30.34 per rentable square foot, representing a 3.7% decrease over
the previous fully escalated rents on the same office spaces. The
average lease term on the Suburban office leases signed in 2018 was
7.5 years and average tenant concessions were 7.5 months of free
rent with a tenant improvement allowance of $23.71 per rentable
square foot.
Occupancy in the Company's Suburban same-store portfolio was
91.8% as of December 31, 2018, inclusive of 12,606 square feet
of leases signed but not yet commenced, as compared to 92.1% at
September 30, 2018 and 92.7% at December 31, 2017.
Significant leases that were signed in the fourth quarter
included:
- New lease with WeWork for 138,563
square feet at 609 Fifth Avenue, for 16.4 years;
- New lease with TD Securities for
118,872 square feet at One Vanderbilt Avenue, for 21.5 years;
- Renewal with FujiFilm Holdings America
Corporation for 124,119 square feet at 200 Summit Lake Drive in
Valhalla, New York, for 7.6 years;
- Renewal and expansion with Mercy
College for 95,370 square feet at 2 Herald Square, for 30.0
years;
- New lease with TD Securities for 52,450
square feet at 125 Park Avenue, for 22.6 years;
- Renewal and expansion with Teneo
Holding LLC for 46,199 square feet at 280 Park Avenue, for 3.6
years;
- New lease with MFA Financial Inc. for
30,169 square feet at One Vanderbilt Avenue, for 15.0 years;
and
- New lease with WeWork for 60,268 square
feet at 2 Herald Square, for 17.0 years.
Marketing, general and administrative, or MG&A, expense for
the year ended December 31, 2018 was $92.6 million, or 5.2% of
total combined revenues as compared to $100.5 million for the prior
year.
Investment Activity
In November, the Company announced that its Board of Directors
had authorized a $500 million increase to the size of its share
repurchase program, bringing the program total to $2.5 billion. To
date, the Company has acquired 18.4 million shares of its common
stock and redeemed 0.4 million common units of its Operating
Partnership, or OP units, under the program at an average price of
$98.51 per share/unit, allowing the Company to save approximately
$64.1 million of common dividends and distributions on an
annualized basis.
In December, the Company announced that it had entered into an
agreement to purchase a majority and controlling interest in 460
West 34th Street. The transaction values the 20-story Class-A
office building at a gross purchase price of $440 million.
After taking into account earlier structured investments made
through our debt and preferred equity platform, the Company's
blended average basis in the property will be $528 per
square foot. The transaction is expected to close in the first half
of 2019.
In November, the Company entered into an agreement to sell its
20.0% interest in 131-137 Spring Street to Invesco Real Estate, the
current owner of the remaining 80.0% interest. The transaction
closed in January 2019 and generated net cash proceeds to the
Company of $15.2 million.
In November, the Company completed the recapitalization of 2
Herald Square, which included securing $150.0 million of new
mortgage financing and closing on the previously announced sale of
a 49.0% interest in the property to an Israeli institutional
investor.
In November, the Company acquired 66,186 zoning square feet of
development rights for its planned 31-Story Mixed-Use Affordable
New York residential project at 185 Broadway in lower Manhattan.
Through this transaction, SL Green also obtained a light and air
easement and cantilever right over 189 Broadway for the
purpose of permitting lot line windows and maximizing efficient
residential floor plates.
In November, the Company closed on the previously announced sale
of its 48.9% interest in 3 Columbus Circle to the Moinian Group,
the owner of the remaining 51.1% interest. The transaction
generated net cash proceeds to the Company of $223.0 million.
In October, the Company closed on the previously announced sale
of its interests in 1231 Third Avenue and an Upper East Side
residential assemblage, which consists of 260 East 72nd Street,
31,076 square feet of development rights, 252-254 East 72nd Street,
257 East 71st Street and 259 East 71st Street, for a combined sales
price of $143.8 million.
In December, the Company acquired 712 Madison Avenue. The
five-story building is located on Madison Avenue between 63rd and
64th Streets on Manhattan's Upper East Side and offers 6,362 square
feet of retail space. The property is currently 100% occupied
by David Yurman.
In September, the Company acquired the retail co-op at 133
Greene Street in Soho. The 6,425 square foot retail space,
inclusive of 3,300 square feet on grade, is located along one of
SoHo's most popular shopping corridors, across from Paul Smith and
close proximity to Apple's local flagship. The property is
currently 100% occupied by Dior Homme.
The properties at 712 Madison Avenue and 133 Greene Street
previously served as collateral for debt and preferred equity
investments and were acquired through negotiated transactions with
the respective sponsors of each investment.
Debt and Preferred Equity Investment
Activity
The carrying value of the Company’s debt and preferred equity
investment portfolio decreased to $2.13 billion at
December 31, 2018, including $2.10 billion of investments at a
weighted average current yield of 9.0% that are classified in the
debt and preferred equity line item on the balance sheet, and
investments aggregating $0.03 billion at a weighted average current
yield of 6.6% that are included in other balance sheet line items
for accounting purposes.
During the fourth quarter, the Company originated or acquired
new debt and preferred equity investments totaling $156.5 million,
all of which was retained and $129.0 million of which was funded.
New mortgage investments totaled $55.0 million, all of which was
retained and $30.0 million of which was funded, at a weighted
average current yield of 6.6%. New subordinate debt and preferred
equity investments totaled $101.5 million, all of which was
retained and $99.0 million of which was funded, at a weighted
average yield of 7.4%.
During the fourth quarter, the Company recorded reserves of $5.8
million, or $0.07 per share, against two debt and preferred
investments totaling $159.9 million that are being marketed for
sale.
In November, the Company completed the second phase of its
preferred equity investment at in 245 Park Avenue. The Company’s
investment now totals $148.2 million and the Company will serve as
the building’s property manager, overseeing all leasing and
operations.
Financing Activity
In December, the Company closed on a $150 million mortgage
financing of 2 Herald Square. The new mortgage has a 3-year term,
with two one year extension options and bears interest at a
floating rate of 1.55% per annum over LIBOR.
In November, the Company closed on a $225.0 million construction
facility for 185 Broadway. The floating rate facility has a term of
three years, with two one year extension options and bears interest
at an initial floating rate of 2.85% over LIBOR.
In November, the Company, along with its joint venture partners,
refinanced One Vanderbilt Avenue's construction facility,
increasing the facility size from $1.5 billion to $1.75
billion and decreasing the interest rate by 75 basis points.
The significant improvement in terms was due, in large part, to the
rapid pace of leasing and construction progress.
Dividends
In the fourth quarter of 2018, the Company declared quarterly
dividends on its outstanding common and preferred stock as
follows:
- $0.85 per share of common stock, which
was paid on January 15, 2019 to shareholders of record on the close
of business on January 2, 2019; and
- $0.40625 per share on the Company's
6.50% Series I Cumulative Redeemable Preferred Stock for the period
October 15, 2018 through and including January 14, 2019, which was
paid on January 15, 2019 to shareholders of record on the close of
business on January 2, 2019, and reflects the regular quarterly
dividend, which is the equivalent of an annualized dividend of
$1.625 per share.
Conference Call and Audio
Webcast
The Company's executive management team, led by Marc Holliday,
Chairman and Chief Executive Officer, will host a conference call
and audio webcast on Thursday, January 24, 2019 at 2:00 pm ET to
discuss the financial results.
The supplemental data will be available prior to the quarterly
conference call in the Investors section of the SL Green Realty
Corp. website at https://slgreen.com/ under “Financial
Reports.”
The live conference call will be webcast in listen-only mode in
the Investors section of the SL Green Realty Corp. website at
https://slgreen.com/ under “Presentations & Webcasts”. The
conference may also be accessed by dialing toll-free (877) 312-8765
or international (419) 386-0002, and using passcode 9675583.
A replay of the call will be available 7 days after the call by
dialing (855) 859-2056 using passcode 9675583. A webcast replay
will also be available in the Investors section of the SL Green
Realty Corp. website at https://slgreen.com/ under “Presentations
& Webcasts”.
Company Profile
SL Green Realty Corp., an S&P 500 company and New York
City's largest office landlord, is a fully integrated real estate
investment trust, or REIT, that is focused primarily on acquiring,
managing and maximizing value of Manhattan commercial properties.
As of December 31, 2018, SL Green held interests in 101
Manhattan buildings totaling 46.0 million square feet. This
included ownership interests in 27.8 million square feet of
Manhattan buildings and 18.2 million square feet of buildings
securing debt and preferred equity investments. In addition, SL
Green held ownership interests in 7 suburban properties comprised
of 15 suburban buildings totaling 2.3 million square feet in
Brooklyn, Westchester County, and Connecticut.
To be added to the Company's distribution list or to obtain the
latest news releases and other Company information, please visit
our website at www.slgreen.com or contact Investor Relations at
(212) 594-2700.
Disclaimers
Non-GAAP Financial Measures
During the quarterly conference call, the Company may discuss
non-GAAP financial measures as defined by SEC Regulation G. In
addition, the Company has used non-GAAP financial measures in this
press release. A reconciliation of each non-GAAP financial measure
and the comparable GAAP financial measure can be found in this
release and in the Company’s Supplemental Package.
Forward-looking Statements
This press release includes certain statements that may be
deemed to be "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 and are intended
to be covered by the safe harbor provisions thereof. All
statements, other than statements of historical facts, included in
this press release that address activities, events or developments
that we expect, believe or anticipate will or may occur in the
future, are forward-looking statements. These forward-looking
statements are based on certain assumptions and analyses made by us
in light of our experience and our perception of historical trends,
current conditions, expected future developments and other factors
we believe are appropriate. Forward-looking statements are not
guarantees of future performance and actual results or developments
may differ materially, and we caution you not to place undue
reliance on such statements. Forward-looking statements are
generally identifiable by the use of the words "may," "will,"
"should," "expect," "anticipate," "estimate," "believe," "intend,"
"project," "continue," or the negative of these words, or other
similar words or terms.
Forward-looking statements contained in this press release are
subject to a number of risks and uncertainties, many of which are
beyond our control, that may cause our actual results, performance
or achievements to be materially different from future results,
performance or achievements expressed or implied by forward-looking
statements made by us. Factors and risks to our business that could
cause actual results to differ from those contained in the
forward-looking statements are described in our filings with the
Securities and Exchange Commission. We undertake no obligation to
publicly update or revise any forward-looking statements, whether
as a result of future events, new information or otherwise.
SL GREEN REALTY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per
share data)
Three Months Ended Twelve Months Ended
December 31, December 31, 2018
2017 2018 2017 Revenues: Rental
revenue, net
$ 216,477 $ 265,492
$
864,978 $ 1,100,993 Escalation and reimbursement
31,042 41,378
113,596 172,939 Investment income
57,952 45,130
201,492 193,871 Other income
11,565 9,342
47,326 43,670
Total revenues
317,036 361,342
1,227,392
1,511,473
Expenses: Operating expenses, including related
party expenses $4,534 and $17,823 in 2018 and $6,459 and $21,400 in
2017
56,476 72,079
229,347 293,364 Real estate taxes
46,563 58,150
186,351 244,323 Ground rent
6,304 8,308
32,965 33,231 Interest expense, net of
interest income
51,974 60,933
208,669 257,045
Amortization of deferred financing costs
2,695 4,297
12,408 16,498 Depreciation and amortization
71,458
84,404
279,507 403,320 Loan loss and other investment
reserves, net of recoveries
5,752 —
6,839 —
Transaction related costs
426 (2,199 )
1,099 (1,834 )
Marketing, general and administrative
26,030 28,136
92,631 100,498 Total expenses
267,678 314,108
1,049,816
1,346,445 Equity in net (loss) income from
unconsolidated joint ventures
(2,398 ) 7,788
7,311 21,892 Equity in net gain on sale of interest in
unconsolidated joint venture/real estate
167,445 —
303,967 16,166 Purchase price and other fair value
adjustment
— —
57,385 — (Loss) gain on sale of real
estate, net
(36,984 ) 76,497
(30,757 )
73,241 Depreciable real estate reserves
(220,852 )
(93,184 )
(227,543 ) (178,520 ) Gain on sale of
marketable securities
— —
— 3,262 Loss on early
extinguishment of debt
(14,889 ) —
(17,083 ) — Net (loss) income
(58,320
) 38,335
270,856 101,069 Net loss (income)
attributable to noncontrolling interests in the Operating
Partnership
3,439 (1,288 )
(12,216 ) (3,995 )
Net loss (income) attributable to noncontrolling interests in other
partnerships
241 (2,478 )
6 15,701 Preferred unit
distributions
(2,842 ) (2,850 )
(11,384
) (11,401 ) Net (loss) income attributable to SL Green
(57,482 ) 31,719
247,262 101,374 Perpetual
preferred stock dividends
(3,737 ) (3,737 )
(14,950 ) (14,950 ) Net (loss) income attributable to
SL Green common stockholders
$ (61,219 ) $
27,982
$ 232,312 $ 86,424
Earnings Per Share (EPS) Net (loss) income per share (Basic)
$ (0.73 ) $ 0.29
$ 2.67
$ 0.88 Net (loss) income per share (Diluted)
$
(0.73 ) $ 0.29
$ 2.67 $
0.87
Funds From Operations (FFO) FFO per share
(Basic)
$ 1.62 $ 1.61
$
6.63 $ 6.47 FFO per share (Diluted)
$
1.61 $ 1.60
$ 6.62 $ 6.45
Basic ownership
interest
Weighted average REIT common shares for net income per share
83,967 96,018
86,753 98,571 Weighted average
partnership units held by noncontrolling interests
4,220
4,514
4,562 4,556 Basic weighted
average shares and units outstanding
88,187 100,532
91,315 103,127
Diluted ownership
interest
Weighted average REIT common share and common share equivalents
84,156 96,265
86,968 98,847 Weighted average
partnership units held by noncontrolling interests
4,220
4,514
4,562 4,556 Diluted
weighted average shares and units outstanding
88,376
100,779
91,530 103,403
SL GREEN REALTY CORP. CONSOLIDATED BALANCE
SHEETS
(in thousands, except per share data)
December 31, December 31, 2018
2017 Assets (Unaudited) Commercial real estate
properties, at cost: Land and land interests $ 1,774,899 $
2,357,051 Building and improvements 5,268,484 6,351,012 Building
leasehold and improvements 1,423,107 1,450,614 Properties under
capital lease 47,445 47,445 8,513,935 10,206,122 Less
accumulated depreciation (2,099,137 ) (2,300,116 ) 6,414,798
7,906,006 Assets held for sale — 338,354 Cash and cash equivalents
129,475 127,888 Restricted cash 149,638 122,138 Investment in
marketable securities 28,638 28,579 Tenant and other receivables,
net of allowance of $15,702 and $18,637 in 2018 and 2017,
respectively 41,589 57,644 Related party receivables 28,033 23,039
Deferred rents receivable, net of allowance of $15,457 and $17,207
in 2018 and 2017, respectively 335,985 365,337 Debt and preferred
equity investments, net of discounts and deferred origination fees
of $22,379 and $25,507 in 2018 and 2017, respectively 2,099,393
2,114,041 Investments in unconsolidated joint ventures 3,019,020
2,362,989 Deferred costs, net 209,110 226,201 Other assets 295,679
310,688
Total assets $
12,751,358 $ 13,982,904
Liabilities Mortgages and other loans payable $ 1,988,160 $
2,865,991 Revolving credit facility 500,000 40,000 Unsecured term
loan 1,500,000 1,500,000 Unsecured notes 1,503,758 1,404,605
Deferred financing costs, net (50,218 ) (56,690 ) Total debt, net
of deferred financing costs 5,441,700 5,753,906 Accrued interest
payable 23,154 38,142 Accounts payable and accrued expenses 147,061
137,142 Deferred revenue 94,453 208,119 Capitalized lease
obligations 43,616 42,843 Deferred land leases payable 3,603 3,239
Dividend and distributions payable 80,430 85,138 Security deposits
64,688 67,927 Liabilities related to assets held for sale — 4,074
Junior subordinate deferrable interest debentures held by trusts
that issued trust preferred securities 100,000 100,000 Other
liabilities 116,566 189,231
Total liabilities
6,115,271 6,629,761 Commitments and contingencies — —
Noncontrolling interest in the Operating Partnership 387,805
461,954 Preferred units 300,427 301,735
Equity
Stockholders’ equity:
Series I Preferred Stock, $0.01 par value,
$25.00 liquidation preference, 9,200 issued and outstanding at both
December 31, 2018 and December 31, 2017
221,932 221,932
Common stock, $0.01 par value 160,000
shares authorized, 84,739 and 93,858 issued and outstanding at
December 31, 2018and December 31, 2017, respectively (including
1,055 held in Treasury at both December 31, 2018 and December 31,
2017)
847 939 Additional paid-in capital 4,508,685 4,968,338 Treasury
stock at cost (124,049 ) (124,049 ) Accumulated other comprehensive
income 15,108 18,604 Retained earnings 1,278,998 1,139,329
Total SL Green Realty Corp. stockholders’ equity 5,901,521
6,225,093 Noncontrolling interests in other partnerships 46,334
364,361 Total equity 5,947,855 6,589,454
Total liabilities and equity $
12,751,358 $ 13,982,904
SL GREEN REALTY CORP. RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(unaudited and in thousands, except per
share data)
Three Months Ended Twelve Months Ended
December 31, December 31, Funds From
Operations (FFO) Reconciliation: 2018
2017 2018 2017 Net (loss) income
attributable to SL Green common stockholders $ (61,219 ) $ 27,982 $
232,312 $ 86,424
Add: Depreciation and amortization
71,458 84,404 279,507 403,320 Joint venture depreciation and
noncontrolling interest adjustments 46,348 29,397 187,147 102,334
Net (loss) income attributable to noncontrolling interests (3,680 )
3,766 12,210 (11,706 )
Less: (Loss) gain on sale of
real estate, net (36,984 ) 76,497 (30,757 ) 73,241 Equity in net
gain on sale of interest in unconsolidated joint venture/real
estate 167,445 — 303,967 16,166 Purchase price and other fair value
adjustments — — 57,385 — Depreciable real estate reserve (220,852 )
(93,184 ) (227,543 ) (178,520 ) Depreciation on non-rental real
estate assets 638 554 2,404 2,191
FFO attributable to SL Green common stockholders $
142,660 $ 161,682
$ 605,720
$ 667,294
Three Months Ended Twelve Months Ended
December 31, December 31, Operating income
and Same-store NOI Reconciliation: 2018
2017 2018 2017 Net (loss)
income $ (58,320 ) $ 38,335
$
270,856 $ 101,069 Equity in net gain on sale of interest in
unconsolidated joint venture/real estate (167,445 ) — (303,967 )
(16,166 ) Purchase price and other fair value adjustments — —
(57,385 ) — Loss (gain) on sale of real estate, net 36,984 (76,497
) 30,757 (73,241 ) Depreciable real estate reserves 220,852 93,184
227,543 178,520 Gain on sale of marketable securities — — — (3,262
) Depreciation and amortization 71,458 84,404 279,507 403,320
Interest expense, net of interest income 51,974 60,933 208,669
257,045 Amortization of deferred financing costs 2,695 4,297
12,408 16,498
Operating income
158,198 204,656
668,388 863,783
Equity in net (loss) income from unconsolidated joint
ventures 2,398 (7,788 ) (7,311 ) (21,892 ) Marketing, general and
administrative expense 26,030 28,136 92,631 100,498 Transaction
related costs, net 426 (2,199 ) 1,099 (1,834 ) Investment income
(57,952 ) (45,130 ) (201,492 ) (193,871 ) Loan loss and other
investment reserves, net of recoveries 5,752 — 6,839 — Non-building
revenue
(6,391
)
(4,522
)
(22,099
)
(23,781
) Loss on early extinguishment of debt 14,889 —
17,083 —
Net operating income (NOI)
143,350
173,153
555,138
722,903
Equity in net (loss) income from unconsolidated joint
ventures (2,398 ) 7,788 7,311 21,892 SLG share of unconsolidated JV
depreciation and amortization 46,939 35,136 187,962 126,456 SLG
share of unconsolidated JV interest expense, net of interest income
37,266 28,692 144,663 96,554 SLG share of unconsolidated JV
amortization of deferred financing costs 1,500 1,696 6,315 8,220
SLG share of unconsolidated JV loss on early extinguishment of debt
— 131 — 3,950 SLG share of unconsolidated JV transaction related
costs — — — 110 SLG share of unconsolidated JV investment income
(2,751 ) (4,438 ) (12,014 ) (16,777 ) SLG share of unconsolidated
JV non-building revenue
(725
)
(2005
)
(3,636
)
(4,989
)
NOI including SLG share of unconsolidated JVs
223,181
240,153
885,739
958,319
NOI from other properties/affiliates
(29,350
)
(52,616
)
(132,124
)
(222,715
)
Same-Store NOI 193,831 187,537
753,615 735,604 Ground lease
straight-line adjustment 231 524 1,803 2,096 Joint Venture ground
lease straight-line adjustment 258 258 1,031 1,078 Straight-line
and free rent (5,626 ) (2,186 ) (14,747 ) (21,701 ) Amortization of
acquired above and below-market leases, net (1,184 ) (1,266 )
(5,425 ) (4,702 ) Joint Venture straight-line and free rent (2,574
) (3,418 ) (12,134 ) (14,117 ) Joint Venture amortization of
acquired above and below-market leases, net (1,488 ) (2,910 )
(5,401 ) (13,141 )
Same-store cash NOI $
183,448 $ 178,539
$ 718,742
$ 685,117
SL GREEN REALTY CORP. NON-GAAP
FINANCIAL MEASURES - DISCLOSURES
Funds from Operations
(FFO)
FFO is a widely recognized non-GAAP financial measure of REIT
performance. The Company computes FFO in accordance with standards
established by NAREIT, which may not be comparable to FFO reported
by other REITs that do not compute FFO in accordance with the
NAREIT definition, or that interpret the NAREIT definition
differently than the Company does. The revised White Paper on FFO
approved by the Board of Governors of NAREIT in April 2002, and
subsequently amended, defines FFO as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from sales of
properties, debt restructurings and real estate related impairment
charges, plus real estate related depreciation and amortization and
after adjustments for unconsolidated partnerships and joint
ventures.
The Company presents FFO because it considers it an important
supplemental measure of the Company’s operating performance and
believes that it is frequently used by securities analysts,
investors and other interested parties in the evaluation of REITs,
particularly those that own and operate commercial office
properties. The Company also uses FFO as one of several criteria to
determine performance-based bonuses for members of its senior
management. FFO is intended to exclude GAAP historical cost
depreciation and amortization of real estate and related assets,
which assumes that the value of real estate assets diminishes
ratably over time. Historically, however, real estate values have
risen or fallen with market conditions. Because FFO excludes
depreciation and amortization unique to real estate, gains and
losses from property dispositions, and extraordinary items, it
provides a performance measure that, when compared year over year,
reflects the impact to operations from trends in occupancy rates,
rental rates, operating costs, and interest costs, providing
perspective not immediately apparent from net income. FFO does not
represent cash generated from operating activities in accordance
with GAAP and should not be considered as an alternative to net
income (determined in accordance with GAAP), as an indication of
the Company’s financial performance or to cash flow from operating
activities (determined in accordance with GAAP) as a measure of the
Company’s liquidity, nor is it indicative of funds available to
fund the Company’s cash needs, including our ability to make cash
distributions.
Funds Available for Distribution
(FAD)
FAD is a non-GAAP financial measure that is calculated as FFO
plus non-real estate depreciation, allowance for straight line
credit loss, adjustment for straight line ground rent, non-cash
deferred compensation, and a pro-rata adjustment for FAD for SLG’s
unconsolidated JV, less straight line rental income, free rent net
of amortization, second cycle tenant improvement and leasing costs,
and recurring building improvements.
FAD is not intended to represent cash flow for the period and is
not indicative of cash flow provided by operating activities as
determined in accordance with GAAP. FAD is presented solely as a
supplemental disclosure with respect to liquidity because the
Company believes it provides useful information regarding the
Company’s ability to fund its dividends. Because all companies do
not calculate FAD the same way, the presentation of FAD may not be
comparable to similarly titled measures of other companies. FAD
does not represent cash flow from operating, investing and finance
activities in accordance with GAAP and should not be considered as
an alternative to net income (determined in accordance with GAAP),
as an indication of the Company’s financial performance, as an
alternative to net cash flows from operating activities (determined
in accordance with GAAP), or as a measure of the Company’s
liquidity.
Earnings Before Interest, Taxes,
Depreciation and Amortization for Real Estate
(EBITDAre)
EBITDAre is a non-GAAP financial measure. The Company computes
EBITDAre in accordance with standards established by the National
Association of Real Estate Investment Trusts, or NAREIT, which may
not be comparable to EBITDAre reported by other REITs that do not
compute EBITDAre in accordance with the NAREIT definition, or that
interpret the NAREIT definition differently than the Company does.
The White Paper on EBITDAre approved by the Board of Governors of
NAREIT in September 2017 defines EBITDAre as net income (loss)
(computed in accordance with Generally Accepted Accounting
Principles, or GAAP), plus interest expense, plus income tax
expense, plus depreciation and amortization, plus (minus) losses
and gains on the disposition of depreciated property, plus
impairment write-downs of depreciated property and investments in
unconsolidated joint ventures, plus adjustments to reflect the
entity's share of EBITDAre of unconsolidated joint ventures.
The Company presents EBITDAre because the Company believes that
EBITDAre, along with cash flow from operating activities, investing
activities and financing activities, provides investors with an
additional indicator of the Company’s ability to incur and service
debt. EBITDAre should not be considered as an alternative to net
income (determined in accordance with GAAP), as an indication of
the Company’s financial performance, as an alternative to net cash
flows from operating activities (determined in accordance with
GAAP), or as a measure of the Company’s liquidity.
Net Operating Income (NOI) and Cash
NOI
NOI is a non-GAAP financial measure that is calculated as
operating income before transaction related costs, gains/losses on
early extinguishment of debt, marketing general and administrative
expenses and non-real estate revenue. Cash NOI is also a non-GAAP
financial measure that is calculated by subtracting free rent (net
of amortization), straight-line rent, and amortization of acquired
above and below-market leases, net from NOI, while adding ground
lease straight-line adjustment and the allowance for straight-line
tenant credit loss.
The Company presents NOI and Cash NOI because the Company
believes that these measures, when taken together with the
corresponding GAAP financial measures and our reconciliations,
provide investors with meaningful information regarding the
operating performance of properties. When operating performance is
compared across multiple periods, the investor is provided with
information not immediately apparent from net income that is
determined in accordance with GAAP. NOI and Cash NOI provide
information on trends in the revenue generated and expenses
incurred in operating our properties, unaffected by the cost of
leverage, straight-line adjustments, depreciation, amortization,
and other net income components. The Company uses these metrics
internally as performance measures. None of these measures is an
alternative to net income (determined in accordance with GAAP) and
same-store performance should not be considered an alternative to
GAAP net income performance.
Coverage Ratios
The Company presents fixed charge and debt service coverage
ratios to provide a measure of the Company’s financial flexibility
to service current debt amortization, interest expense and ground
rent from current cash net operating income. These coverage ratios
represent a common measure of the Company’s ability to service
fixed cash payments; however, these ratios are not used as an
alternative to cash flow from operating, financing and investing
activities (determined in accordance with GAAP).
SLG-EARN
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version on businesswire.com: https://www.businesswire.com/news/home/20190123005809/en/
Matt DiLibertoChief Financial Officer(212) 594-2700
SL Green Realty (NYSE:SLG)
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