SLG SL Green Realty Corporation

SL Green Realty Corp. (the "Company") (NYSE: SLG) today reported a net loss attributable to common stockholders for the quarter ended December 31, 2023 of $155.6 million, or $2.45 per share, as compared to a net loss of $64.3 million, or $1.01 per share, for the same quarter in 2022. Net loss for the fourth quarter of 2023 included $105.8 million, or $1.53 per share, of non-recurring charges comprised of depreciable real estate reserves, non-cash fair value adjustments on mark-to-market derivatives and general and administrative charges and was net of $49.1 million, or $0.71 per share, of depreciation and amortization.

The Company also reported a net loss attributable to common stockholders for the year ended December 31, 2023 of $579.5 million, or $9.12 per share, as compared to a net loss of $93.0 million, or $1.49 per share, for the same period in 2022. Net loss attributable to common stockholders for the year ended December 31, 2023 included $464.0 million, or $6.72 per share, of net losses from the sale of real estate interests, depreciable real estate reserves, non-cash fair value adjustments on mark-to-market derivatives and non-recurring general and administrative charges related to the non-renewal of the Company's former President, and was net of $247.8 million, or $3.59 per share, of depreciation and amortization. Net loss attributable to common stockholders for the year ended December 31, 2022 included $99.0 million, or $1.43 per share, of net losses recognized from the sale of real estate interests, depreciable real estate reserves, non-cash fair value adjustments on mark-to-market derivatives, and was net of $216.2 million, or $3.13 per share, of depreciation and amortization.

The Company reported FFO for the quarter ended December 31, 2023 of $49.7 million, or $0.72 per share, or $78.7 million, or $1.14 per share, before giving effect to $10.3 million, or $0.15 per share, of non-cash fair value adjustments on mark-to-market derivatives and $18.7 million, or $0.27 per share, of non-recurring general and administrative charges related to the non-renewal of the Company's former President, which includes severance and the acceleration of stock-based compensation expense related to previously granted awards. The Company reported FFO for the same period in 2022 of $100.0 million, or $1.46 per share.

The Company also reported FFO for the year ended December 31, 2023 of $341.3 million, or $4.94 per share, or $351.8 million, or $5.09 per share, before giving effect to $10.5 million, or $0.15 per share, of non-cash fair value adjustments on mark-to-market derivatives, as compared to FFO for the same period in 2022 of $458.8 million, or $6.64 per share. As previously reported, FFO for the year ended December 31, 2023 is net of $6.9 million, or $0.10 per share, of reserves on one debt and preferred equity investment and $18.7 million, or $0.27 per share, of non-recurring general and administrative charges related to the non-renewal of the Company's former President.

All per share amounts are presented on a diluted basis.

Operating and Leasing Activity

Same-store cash NOI, including our share of same-store cash NOI from unconsolidated joint ventures, increased by 4.8% for the fourth quarter of 2023, or 3.9% excluding lease termination income, as compared to the same period in 2022.

Same-store cash NOI, including our share of same-store cash NOI from unconsolidated joint ventures, increased by 5.1% for the year ended December 31, 2023, or 5.8% excluding lease termination income, as compared to the same period in 2022.

During the fourth quarter of 2023, the Company signed 26 office leases in its Manhattan office portfolio totaling 505,152 square feet. The average rent on the Manhattan office leases signed in the fourth quarter of 2023, excluding leases signed at One Madison, was $105.01 per rentable square foot with an average lease term of 14.7 years and average tenant concessions of 14.9 months of free rent with a tenant improvement allowance of $120.56 per rentable square foot. Sixteen leases comprising 323,947 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 $115.61 per rentable square foot, representing a 3.2% increase over the previous fully escalated rents on the same office spaces.

During the year ended December 31, 2023, the Company signed 160 office leases in its Manhattan office portfolio totaling 1,776,414 square feet. The average rent on the Manhattan office leases signed in 2023, excluding leases signed at One Vanderbilt and One Madison, was $87.46 per rentable square foot with an average lease term of 9.3 years and average tenant concessions of 9.1 months of free rent with a tenant improvement allowance of $79.26 per rentable square foot. Ninety-six leases comprising 1,247,143 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 $89.87 per rentable square foot, representing a 0.8% increase over the previous fully escalated rents on the same office spaces.

Occupancy in the Company's Manhattan same-store office portfolio increased to 90.0% as of December 31, 2023, inclusive of 177,836 square feet of leases signed but not yet commenced, as compared to 89.9% at the end of the previous quarter.

Significant leasing activity in the fourth quarter includes:

• Early renewal of 141,589 square feet and expansion by 128,316 square feet with a premier financial services tenant at 280 Park Avenue;
• New lease with Stonepeak Partners L.P. for 76,716 square feet at 245 Park Avenue;
• New lease with Uncommon Schools, Inc. for 27,833 square feet at 100 Church Street;
• Three new leases for a total of 41,959 square feet at 1185 Avenue of the Americas;
• New lease of 19,820 square feet and new retail lease of 11,741 square feet with Partially Important Productions and IMEX Exploit NYC LLC at 555 West 57th Street;
• New retail lease with Carnegie Diner for 14,309 square feet at 1185 Avenue of the Americas; and
• New lease with National CineMedia, LLC for 14,206 square feet at 485 Lexington Avenue.

Investment Activity

In January 2024, together with our joint venture partner, the Company closed on the sale of the retail condominium at 717 Fifth Avenue for total consideration of $963.0 million. The transaction is expected to generate net proceeds to the Company of $27.6 million, which will be used for corporate debt repayment.

In January 2024, the Company closed on the acquisition of interests in the joint venture that owns the leasehold interest at 2 Herald Square for no consideration, which increases the Company's interest in the joint venture to 95%. In addition, the joint venture entered into an agreement to satisfy the existing $182.5 million mortgage on the property for a net payment of $7.0 million. The payoff is expected to close in the first quarter of 2024.

The Company expects to launch fundraising for its $1.0 billion New York City Opportunity debt fund in January 2024.

In December, together with our joint venture partners, the Company closed on the previously announced sale of the equity interests in the condominium units at 21 East 66th Street for total consideration of $40.6 million. The transaction generated net proceeds to the Company of $9.6 million, which was used for corporate debt repayment.

In December, together with our joint venture partner, the Company entered into an agreement to sell the fee ownership interest in 625 Madison Avenue for a gross sales price of $634.6 million, which reflects an increased price due to the exercise of an extended closing option, to a global real estate investor. In connection with the sale, the Company, together with its joint venture partner, will originate a $235.5 million preferred equity investment in the property. The transaction is expected to close in the first quarter of 2024.

Debt and Preferred Equity Investment Activity

The carrying value of the Company’s debt and preferred equity ("DPE") portfolio was $346.7 million at December 31, 2023. The portfolio had a weighted average current yield of 7.9%, or 9.6% excluding the effect of a $50.0 million investment that is on non-accrual. During the fourth quarter, no investments were sold or repaid and the Company did not originate or acquire any new investments. As previously reported, in October, the Company closed on a $20.0 million upsize and three-year extension of an existing $39.1 million debt and preferred equity investment that was scheduled to mature in October 2023.

Financing Activity

In December, the Company closed on a modification of the mortgage at 185 Broadway to extend the maturity date to November 2026, as fully extended. The modification also converted the previous floating rate of 2.85% over Term SOFR to a fixed rate of 6.65% per annum through November 2025 and 2.55% over Term SOFR thereafter. The Company made a $20.0 million principal payment at closing resulting in an outstanding loan amount of $190.1 million as of December 31, 2023.

As of December 31, 2023, the value of the Company's derivatives, at share, net of the mark-to-market derivatives that negatively impacted reported FFO, was $32.9 million.

Earnings Guidance

The Company is increasing its earnings guidance ranges for the year ending December 31, 2024 to FFO per share of $5.90 to $6.20, and net income per share of $2.73 to $3.03, as compared to the previous guidance ranges of FFO per share of $4.90 to $5.20 and net income per share of $1.35 to $1.65 primarily to reflect incremental gains on discounted debt extinguishment.

Dividends

In the fourth quarter of 2023, the Company declared:

• Two monthly ordinary dividends on its outstanding common stock of $0.2708 per share, which were paid in cash on November 15 and December 15, 2023, and one monthly dividend on its outstanding common stock of $0.25 per share, which was paid on January 16, 2024. The monthly ordinary dividend paid in January 2024 equates to an annualized dividend of $3.00 per share of common stock; and
• A quarterly dividend on its outstanding 6.50% Series I Cumulative Redeemable Preferred Stock of $0.40625 per share for the period October 15, 2023 through and including January 14, 2024, which was paid in cash on January 16, 2024 and 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 25, 2024, at 2:00 pm ET to discuss the financial results.

Supplemental data will be available prior to the quarterly conference call in the Investors section of the SL Green Realty Corp. website at www.slgreen.com under “Financial Reports.”

The live conference call will be webcast in listen-only mode and a replay will be available in the Investors section of the SL Green Realty Corp. website at www.slgreen.com under “Presentations & Webcasts.”

Research analysts who wish to participate in the conference call must first register at https://register.vevent.com/register/BI3a0c30ce6c6e475994a2c328b1f04e01.

Company Profile

SL Green Realty Corp., Manhattan'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, 2023, SL Green held interests in 58 buildings totaling 32.5 million square feet. This included ownership interests in 28.8 million square feet of Manhattan buildings and 2.8 million square feet securing debt and preferred equity investments.

To obtain the latest news releases and other Company information, please visit our website at www.slgreen.com or contact Investor Relations at investor.relations@slgreen.com.

Disclaimers

Non-GAAP Financial MeasuresDuring 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, including such matters as future capital expenditures, dividends and acquisitions (including the amount and nature thereof), development trends of the real estate industry and the New York metropolitan area markets, business strategies, expansion and growth of our operations and other similar matters, 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 include risks and uncertainties described in our filings with the Securities and Exchange Commission. Except to the extent required by law, 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,
Revenues:		2023				2022				2023				2022
Rental revenue, net	$	131,927			$	172,892			$	603,694			$	588,824
Escalation and reimbursement revenues		19,430				24,393				79,641				82,676
SUMMIT Operator revenue		35,240				28,237				118,260				89,048
Investment income		6,856				11,305				34,705				81,113
Other income		18,271				13,839				77,410				77,793
Total revenues		211,724				250,666				913,710				919,454
Expenses:
Operating expenses, including related party expenses of $2 and $5 in 2023 and $6 and $5,701 in 2022		48,090				46,912				196,696				174,063
Real estate taxes		31,294				41,551				143,757				138,228
Operating lease rent		7,083				6,514				27,292				26,943
SUMMIT Operator expenses		24,887				24,503				101,211				89,207
Interest expense, net of interest income		27,400				37,619				137,114				89,473
Amortization of deferred financing costs		1,510				1,909				7,837				7,817
SUMMIT Operator tax expense		2,320				1,078				9,201				2,647
Depreciation and amortization		49,050				73,158				247,810				216,167
Loan loss and other investment reserves, net of recoveries		—				—				6,890				—
Transaction related costs		16				88				1,099				409
Marketing, general and administrative		42,257				24,224				111,389				93,798
Total expenses		233,907				257,556				990,296				838,752
Equity in net loss from unconsolidated joint ventures		(32,039	)			(26,696	)			(76,509	)			(57,958	)
Equity in net loss on sale of interest in unconsolidated joint venture/real estate		(13,289	)			—				(13,368	)			(131	)
Purchase price and other fair value adjustments		(10,273	)			(770	)			(17,260	)			(8,118	)
Loss on sale of real estate, net		(4,557	)			(23,381	)			(32,370	)			(84,485	)
Depreciable real estate reserves		(76,847	)			(6,313	)			(382,374	)			(6,313	)
Loss on early extinguishment of debt		(870	)			—				(870	)			—
Net loss		(160,058	)			(64,050	)			(599,337	)			(76,303	)
Net loss (income) attributable to noncontrolling interests:
Noncontrolling interests in the Operating Partnership		9,972				3,963				37,465				5,794
Noncontrolling interests in other partnerships		109				1,147				4,568				(1,122	)
Preferred units distributions		(1,903	)			(1,599	)			(7,255	)			(6,443	)
Net loss attributable to SL Green		(151,880	)			(60,539	)			(564,559	)			(78,074	)
Perpetual preferred stock dividends		(3,737	)			(3,737	)			(14,950	)			(14,950	)
Net loss attributable to SL Green common stockholders	$	(155,617	)		$	(64,276	)		$	(579,509	)		$	(93,024	)
Earnings Per Share (EPS)
Basic loss per share	$	(2.45	)		$	(1.01	)		$	(9.12	)		$	(1.49	)
Diluted loss per share	$	(2.45	)		$	(1.01	)		$	(9.12	)		$	(1.49	)
Funds From Operations (FFO)
Basic FFO per share	$	0.72			$	1.47			$	4.98			$	6.71
Diluted FFO per share	$	0.72			$	1.46			$	4.94			$	6.64
Basic ownership interest
Weighted average REIT common shares for net income per share		63,885				63,919				63,809				63,917
Weighted average partnership units held by noncontrolling interests		4,129				3,740				4,163				4,012
Basic weighted average shares and units outstanding		68,014				67,659				67,972				67,929
Diluted ownership interest
Weighted average REIT common share and common share equivalents		65,171				64,910				64,869				65,041
Weighted average partnership units held by noncontrolling interests		4,129				3,740				4,163				4,012
Diluted weighted average shares and units outstanding		69,300				68,650				69,032				69,053

SL GREEN REALTY CORP.CONSOLIDATED BALANCE SHEETS(in thousands, except per share data)

	December 31,				December 31,
		2023				2022
Assets	(Unaudited)
Commercial real estate properties, at cost:
Land and land interests	$	1,092,671			$	1,576,927
Building and improvements		3,655,624				4,903,776
Building leasehold and improvements		1,354,569				1,691,831
Right of use asset - operating leases		953,236				1,026,265
		7,056,100				9,198,799
Less: accumulated depreciation		(2,035,311	)			(2,039,554	)
		5,020,789				7,159,245
Cash and cash equivalents		221,823				203,273
Restricted cash		113,696				180,781
Investment in marketable securities		9,591				11,240
Tenant and other receivables		33,270				34,497
Related party receivables		12,168				27,352
Deferred rents receivable		264,653				257,887
Debt and preferred equity investments, net of discounts and deferred origination fees of $1,630 and $1,811 in 2023 and 2022, respectively, and allowances of $13,520 and $6,630 in 2023 and 2022, respectively		346,745				623,280
Investments in unconsolidated joint ventures		2,983,313				3,190,137
Deferred costs, net		111,463				121,157
Other assets		413,670				546,945
Total assets	$	9,531,181			$	12,355,794
Liabilities
Mortgages and other loans payable	$	1,497,386			$	3,235,962
Revolving credit facility		560,000				450,000
Unsecured term loan		1,250,000				1,650,000
Unsecured notes		100,000				100,000
Deferred financing costs, net		(16,639	)			(23,938	)
Total debt, net of deferred financing costs		3,390,747				5,412,024
Accrued interest payable		17,930				14,227
Accounts payable and accrued expenses		153,164				154,867
Deferred revenue		134,053				272,248
Lease liability - financing leases		105,531				104,218
Lease liability - operating leases		827,692				895,100
Dividend and distributions payable		20,280				21,569
Security deposits		49,906				50,472
Junior subordinate deferrable interest debentures held by trusts that issued trust preferred securities		100,000				100,000
Other liabilities		471,401				236,211
Total liabilities		5,270,704				7,260,936
Commitments and contingencies		—				—
Noncontrolling interests in Operating Partnership		238,051				269,993
Preferred units		166,501				177,943
Equity
SL Green stockholders' equity:
Series I Preferred Stock, $0.01 par value, $25.00 liquidation preference, 9,200 issued and outstanding at both December 31, 2023 and December 31, 2022		221,932				221,932
Common stock, $0.01 par value 160,000 shares authorized, 65,786 and 65,440 issued and outstanding (including 1,060 and 1,060 held in Treasury) at December 31, 2023 and December 31, 2022, respectively		660				656
Additional paid-in capital		3,826,452				3,790,358
Treasury stock at cost		(128,655	)			(128,655	)
Accumulated other comprehensive income		17,477				49,604
Retained (deficit) earnings		(151,551	)			651,138
Total SL Green Realty Corp. stockholders’ equity		3,786,315				4,585,033
Noncontrolling interests in other partnerships		69,610				61,889
Total equity		3,855,925				4,646,922
Total liabilities and equity	$	9,531,181			$	12,355,794

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:		2023				2022				2023				2022
Net loss attributable to SL Green common stockholders	$	(155,617	)		$	(64,276	)		$	(579,509	)		$	(93,024	)
Add:
Depreciation and amortization		49,050				73,158				247,810				216,167
Joint venture depreciation and noncontrolling interest adjustments		73,062				67,541				284,284				252,893
Net loss attributable to noncontrolling interests		(10,081	)			(5,110	)			(42,033	)			(4,672	)
Less:
Equity in net loss on sale of interest in unconsolidated joint venture/real estate		(13,289	)			—				(13,368	)			(131	)
Purchase price and other fair value adjustments		—				—				(6,813	)			—
Loss on sale of real estate, net		(4,557	)			(23,381	)			(32,370	)			(84,485	)
Depreciable real estate reserves		(76,847	)			(6,313	)			(382,374	)			(6,313	)
Depreciation on non-rental real estate assets		1,414				971				4,136				3,466
FFO attributable to SL Green common stockholders and unit holders	$	49,693			$	100,036			$	341,341			$	458,827

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,
Operating income and Same-store NOI Reconciliation:		2023				2022				2023				2022
Net loss	$	(160,058	)		$	(64,050	)		$	(599,337	)		$	(76,303	)
Depreciable real estate reserves		76,847				6,313				382,374				6,313
Loss on sale of real estate, net		4,557				23,381				32,370				84,485
Purchase price and other fair value adjustments		10,273				770				17,260				8,118
Equity in net loss on sale of interest in unconsolidated joint venture/real estate		13,289				—				13,368				131
Depreciation and amortization		49,050				73,158				247,810				216,167
SUMMIT Operator tax expense		2,320				1,078				9,201				2,647
Amortization of deferred financing costs		1,510				1,909				7,837				7,817
Interest expense, net of interest income		27,400				37,619				137,114				89,473
Operating income		25,188				80,178				247,997				338,848
Equity in net loss from unconsolidated joint ventures		32,039				26,696				76,509				57,958
Marketing, general and administrative expense		42,257				24,224				111,389				93,798
Transaction related costs		16				88				1,099				409
Loan loss and other investment reserves, net of recoveries		—				—				6,890				—
SUMMIT Operator expenses		24,887				24,503				101,211				89,207
Loss on early extinguishment of debt		870				—				870				—
Investment income		(6,856	)			(11,305	)			(34,705	)			(81,113	)
SUMMIT Operator revenue		(35,240	)			(28,237	)			(118,260	)			(89,048	)
Non-building revenue		(10,935	)			(11,575	)			(44,568	)			(47,161	)
Net operating income (NOI)		72,226				104,572				348,432				362,898
Equity in net loss from unconsolidated joint ventures		(32,039	)			(26,696	)			(76,509	)			(57,958	)
SLG share of unconsolidated JV depreciation and amortization		69,588				63,219				266,340				241,127
SLG share of unconsolidated JV amortization of deferred financing costs		2,876				3,127				12,005				12,031
SLG share of unconsolidated JV interest expense, net of interest income		73,012				61,362				272,217				209,182
SLG share of unconsolidated JV loss on early extinguishment of debt		—				—				—				325
SLG share of unconsolidated JV investment income		(320	)			(424	)			(1,271	)			(1,420	)
SLG share of unconsolidated JV non-building revenue		106				(2,972	)			(14,336	)			(7,232	)
NOI including SLG share of unconsolidated JVs		185,449				202,188				806,878				758,953
NOI from other properties/affiliates		(12,836	)			(32,077	)			(110,012	)			(69,939	)
Same-Store NOI		172,613				170,111				696,866				689,014
Straight-line and free rent		(1,154	)			(1,267	)			(10,049	)			(5,933	)
Amortization of acquired above and below-market leases, net		13				13				53				(22	)
Operating lease straight-line adjustment		204				204				815				815
SLG share of unconsolidated JV straight-line and free rent		(2,333	)			(7,368	)			(20,087	)			(48,207	)
SLG share of unconsolidated JV amortization of acquired above and below-market leases, net		(4,555	)			(4,433	)			(17,938	)			(17,598	)
SLG share of unconsolidated JV operating lease straight-line adjustment		143				192				678				770
Same-store cash NOI	$	164,931			$	157,452			$	650,338			$	618,839
Lease termination income		(1,023	)			(5	)			(3,622	)			(1,199	)
SLG share of unconsolidated JV lease termination income		(355	)			(70	)			(2,265	)			(8,515	)
Same-store cash NOI excluding lease termination income	$	163,553			$	157,377			$	644,451			$	609,125

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 in December 2018, defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of properties, 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 compensation 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 real estate related impairment charges, 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 the Company's 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 operating lease rent, non-cash deferred compensation, and pro-rata adjustments for these items from the Company's unconsolidated JVs, less straight line rental income, free rent net of amortization, second cycle tenant improvement and leasing costs, and recurring capital expenditures.

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 the amortization of acquired above and below-market leases from NOI, while adding operating 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 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 the Company's 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 operating lease 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).

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