SL Green Realty Corp.
SL GREEN REALTY CORP (Form: 8-K, Received: 10/23/2007 14:01:54)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

October 22, 2007

SL GREEN REALTY CORP.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MARYLAND

(STATE OF INCORPORATION)

1-13199

 

13-3956775

(COMMISSION FILE NUMBER)

 

(IRS EMPLOYER ID. NUMBER)

 

420 Lexington Avenue

 

10170

New York, New York

 

(ZIP CODE)

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

 

 

 

(212) 594-2700

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 




Item 2.02.              Results of Operations and Financial Condition

Following the issuance of a press release on October 22, 2007 announcing the Company’s results for the third quarter ended September 30, 2007, the Company intends to make available supplemental information regarding the Company’s operations that is too voluminous for a press release.  The Company is attaching the press release as Exhibit 99.1 and the supplemental package as Exhibit 99.2 to this Current Report on Form 8-K.

The information (including exhibits 99.1 and 99.2) being furnished pursuant to this “Item 2.02 Results of Operations and Financial Condition” shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

Item 7.01.              Regulation FD Disclosure

As discussed in Item 2.02 above, on October 22, 2007, the Company issued a press release announcing its results for the third quarter ended September 30, 2007.

The information being furnished pursuant to this “Item 7.01 Regulation FD Disclosure” shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.  This information will not be deemed an admission as to the materiality of such information that is required to be disclosed solely by Regulation FD.

Item 8.01.              Other Events

In October 2007, the Company announced that it had entered into an agreement to sell the property located at 470 Park Avenue South for a gross sales price of $157.0 million. The sale, which is subject to customary closing conditions, is expected to close during the fourth quarter of 2007. The Company is attaching the press release as Exhibit 99.3 to this Current Report on Form 8-K.

Item 9.01.              Financial Statements and Exhibits

(c)           Exhibits

99.1                            Press Release regarding third quarter earnings.

99.2                            Supplemental package.

99.3                            Press release regarding sale of 470 Park Avenue South.

NON-GAAP Supplemental Financial Measures

Funds from Operations (FFO)

FFO is a widely recognized measure of REIT performance.  We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or 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 we do.  The revised White Paper on FFO approved by the Board of Governors of NAREIT in April 2002 defines FFO as net income (loss) (computed in accordance with

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GAAP), excluding gains (or losses) from debt restructuring and sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.  We present FFO because we consider it an important supplemental measure of our operating performance and believe 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.  We also use FFO as one of several criteria to determine performance-based bonuses for members of our 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, 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 our financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.

Funds Available for Distribution (FAD)

FAD is a non-GAAP financial measure that 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 our financial performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of our liquidity.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

The Company presents earnings before interest, taxes, depreciation and amortization (EBITDA) because the Company believes that EBITDA, 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.  EBITDA should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of our liquidity.

Same-Store Net Operating Income

The Company presents same-store net operating income on a cash and GAAP basis because the Company believes that it provides investors with useful information regarding the operating performance of properties that are comparable for the periods presented.  For properties owned since January 1, 2006 and still owned at the end of the quarter, the Company determines net operating income by subtracting property operating expenses and ground rent from recurring rental and tenant reimbursement revenues.  Same-store net operating income is not 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.

Debt to Market Capitalization Ratio

The Company presents the ratio of debt to market capitalization as a measure of the Company’s leverage position relative to the Company’s estimated market value.  The Company’s estimated market value is based upon the quarter-end trading price of the Company’s common stock multiplied by all common shares and operating partnership units outstanding plus the face value of the Company’s preferred equity. This ratio is presented on a

3




consolidated basis and a combined basis.  The combined debt to market capitalization includes the Company’s pro-rata share of off-balance sheet (unconsolidated) joint venture debt.  The Company believes this ratio may provide investors with another measure of the Company’s current leverage position.  The debt to market capitalization ratio should be used as one measure of the Company’s leverage position, and this measure is commonly used in the REIT sector; however, this may not be comparable to other REITs that do not compute in the same manner.  The debt to market capitalization ratio does not represent the Company’s borrowing capacity and should not be considered an alternative measure to the Company’s current lending arrangements.

Coverage Ratios

The Company presents fixed charge and interest 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 are provided on both a consolidated and combined basis.  The combined coverage ratios include the Company’s pro-rata share of off-balance sheet (unconsolidated) joint venture fixed charges and 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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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

SL GREEN REALTY CORP.

 

 

 

/S/ Gregory F. Hughes

 

 

Gregory F. Hughes

 

Chief Financial Officer

 

Date:  October 23, 2007

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Exhibit 99.1

FOR IMMEDIATE RELEASE

CONTACT

Gregory F. Hughes

Chief Operating Officer and

Chief Financial Officer

(212) 594-2700

or

Heidi Gillette

Investor Relations

(212) 216-1601

SL GREEN REALTY CORP. REPORTS

THIRD QUARTER FFO OF $1.25 PER SHARE

AND INCREASES 2007 GUIDANCE TO FFO OF $5.75 PER SHARE


 

Third Quarter Highlights

·                   Increased third quarter FFO to $1.25 per share (diluted) from $1.13 per share (diluted) during the third quarter of 2006, an increase of 10.6%.  FFO for the nine months ended September 30, 2007 increased 32.7% over the same period in the prior year to $4.54 per share (diluted).

·                   Net income available to common stockholders for the third quarter of 2007 totaled $1.64 per share (diluted). Net income available to common stockholders for the nine months ended September 30, 2007 totaled $8.62 per share (diluted).

·                   Increased average Manhattan office starting rents by 59.5% over previously fully escalated rents reflecting continued growth in rents for Manhattan office leases signed during the third quarter.  Increased average Suburban office rents by 15.0% over previously fully escalated rents for Suburban office leases signed during the third quarter.

·                   Signed 62 Manhattan office leases totaling 347,062 square feet during the third quarter, finishing the quarter at 97.0% occupancy for the Manhattan portfolio.

·                   Recognized consolidated same-store GAAP NOI growth of 9.0% during the third quarter.

·                   Closed on the previously announced sales of 292 Madison Avenue and 1372 Broadway for a gross price of $475.0 million generating gains of approximately $354.2 million.

·                   Closed on previously announced acquisition of Gramercy Capital Corp. (NYSE: GKK), or Gramercy’s, 45% interest in One Madison Avenue for approximately $147.2 million and the assumption of approximately $305.3 million of debt.

·                   Received $32.8 million in dividends and fees from our investment in, and management arrangements with, Gramercy, including a $22.9 million

1




 

incentive fee earned during the quarter.  $3.9 million of the incentive fee was included in FFO.  $19.0 million of incentive fee associated with the One Madison Avenue transaction was excluded from FFO.

·                   Invested approximately $31.7 million in Gramercy in connection with its $125.4 million common stock offering in September 2007.

·                   Acquired $59.7 million of the Company’s common stock since July 1, 2007 at an average share price of $115.94 pursuant to its previously announced $300.0 million stock repurchase program.  The Company has now acquired $100.1 million of its common stock at an average share price of $120.98.

·                   Closed on the previously announced fee and leasehold interest in 885 Third Avenue, the Lipstick building, subject to a long-term operating lease, for $317.0 million, in July 2007. SL Green owns a 55% tenancy-in-common interest in the fee and leasehold and Gramercy owns the remaining 45% interest.

·                   Originated $69.9 million of structured finance investments during the quarter.  There were also $53.5 million in redemptions during the quarter, which generated exit fees of approximately $0.3 million.

·                   Exercised the accordion feature under the Company’s existing unsecured revolving credit facility, increasing total capacity from $1.25 billion to $1.5 billion.

·                   Acquired 16 Court Street, Brooklyn for $107.5 million in a joint venture with The City Investment Fund which owns a 65% interest.

·                   Closed on the acquisitions of 180 Broadway, and 150 Grand Street, Westchester for approximately $20.4 million.

·                   Increased management’s guidance for the third time this year from $5.50 per share to $5.75 per share of FFO for the year ending December 31, 2007.

Summary

New York, NY, October 22, 2007 - SL Green Realty Corp. (NYSE:  SLG) today reported funds from operations available to common stockholders, or FFO, of $77.8 million, or $1.25 per share (diluted), for the third quarter ended September 30, 2007, a 10.6% increase over the same quarter in 2006, which was $1.13 per share (diluted).  The Company also reported FFO of $4.54 per share (diluted) for the nine months ended September 30, 2007, a 32.7% increase over the same period in 2006, which was $3.42 per share (diluted).

Net income available to common stockholders totaled $98.6 million, or $1.64 per share (diluted), for the third quarter and $511.9 million, or $8.62 per share (diluted) for the nine months ended September 30, 2007, a decrease of $20.1 million and an increase of $340.4 million over the respective periods in 2006.  The three and nine months ended September 30, 2007 results include gains on sale of $1.34 per share (diluted) and $6.69 per share (diluted), respectively, compared to gains on sale of $2.01 per share (diluted) and $2.08 per share (diluted) for the same periods in 2006.

All per share amounts are presented on a diluted basis.

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Operating and Leasing Activity

For the third quarter of 2007, the Company reported revenues and EBITDA of $259.2 million and $148.8 million, respectively, increases of $129.6 million, or 100.0%, and $77.7 million, or 109.3%, respectively, over the same period in 2006, largely due to strong leasing activity at 420 Lexington Avenue and 750 Third Avenue as well as 2007 acquisitions, including the Reckson acquisition.  Same-store GAAP NOI on a combined basis increased by 4.3% for the third quarter when compared to the same quarter in 2006, with the wholly-owned properties increasing 9.0% to $45.2 million during the third quarter and the joint venture properties decreasing 3.8% to $23.0 million.  The joint venture same-store properties included $1.6 million of lease cancellation income in the third quarter of 2006.  Excluding this amount, the joint venture same-store GAAP NOI would have increased 2.9%.

Average starting Manhattan office rents of $61.63 per rentable square foot for the third quarter represented a 59.5% increase over the previously fully escalated rents.

Occupancy for the Manhattan portfolio decreased from 97.6% at June 30, 2007 to 97.0% at September 30, 2007.  During the quarter, the Company signed 62 leases for the Manhattan portfolio totaling 347,062 square feet, with 53 leases and 340,246 square feet representing office leases.

Average starting Suburban office rents of $33.64 per rentable square foot for the third quarter represented a 15% increase over the previously fully escalated rents.

Occupancy for the Suburban portfolio decreased from 93.8% at June 30, 2007 to 92.2% at September 30, 2007.  During the quarter, the Company signed 23 leases for the Suburban portfolio totaling 91,525 square feet, all of which represented office leases.

Significant leasing activities during the third quarter included:

-                     Early renewal with Bank Leumi USA, Inc. for approximately 55,253 square feet at 420 Lexington Avenue.

-                     New lease with Wal-Mart Stores East, L.P. for approximately 46,103 square feet at 1372 Broadway.

-                     Early renewal with MD Sass Associates Inc. for approximately 33,793 square feet at 1185 Avenue of the Americas.

-                     Early renewal with Serino Coyne, Inc. for approximately 27,036 square feet at 1515 Broadway.

-                     Early renewal and expansion with The Schonbraun McCann Group for approximately 23,216 square feet at 750 Third Avenue.

-                     Early renewal with McMahan Securities Company L.P. for approximately 20,617 square feet at 500 West Putnam Avenue, Greenwich, CT.

Real Estate Investment Activity

During the third quarter of 2007, the Company funded its share of new investments totaling approximately $527.3 million.

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Investment activity announced during the third quarter included:

-                     In July 2007, the Company, along with Gramercy, acquired a 79% fee interest and a 21% leasehold interest in the Lipstick building, a 607,000 square foot class A office building located at 885 Third Avenue in New York City for approximately $317.0 million. Simultaneously, Gramercy and SL Green entered into a 70-year leasehold/sub-leasehold arrangement for the improvements. The Company owns 55% of the investment and Gramercy owns the remaining 45% interest.

-                     In July 2007, the Company, in a joint venture with The City Investment Fund, or CIF, closed on the acquisition of 16 Court Street, Brooklyn for approximately $107.5 million. SL Green owns a 35% interest in the venture. CIF owns the remaining 65% interest. The property is a 38-story, 317,625-square-foot office building.

-                     In August 2007, the Company, in a joint venture with Jeff Sutton, acquired the office/retail property located at 180 Broadway for approximately $13.7 million.  The building is 12 stories encompassing 24,307 square feet.  The Company has a 50% interest in the joint venture with Jeff Sutton.

-                     In August 2007, the Company acquired Gramercy’s 45% equity interest in the joint venture that owns One Madison Avenue for approximately $147.2 million (and the assumption of Gramercy’s proportionate share of the debt encumbering the property of approximately $305.3 million). As a result of the acquisition the Company owns 100% of One Madison Avenue.

-                     In July 2007, the Company sold 1372 Broadway to a joint venture for an imputed gross value of approximately $335.0 million, excluding closing costs. The Company has a 15% interest in the joint venture.  The property is approximately 525,000 square feet. The Company deferred recognition of the gain on sale of approximately $254.4 million as a result of an option it retained to reacquire the asset only upon the occurrence of limited circumstances.

-                     In July 2007, the Company sold its property located at 292 Madison Avenue for approximately $140.0 million, excluding closing costs. The property encompasses approximately 187,000 square feet. The sale generated a gain of approximately $99.8 million.

Financing and Capital Activity

In October 2007, the Company exercised the accordion feature under its existing unsecured revolving credit facility, increasing total capacity from $1.25 billion to $1.5 billion.

The Company acquired $59.7 million of its common stock at an average share price of $115.94 since July 1, 2007 pursuant to its previously announced $300.0 million stock repurchase program.  The Company has now acquired $100.1 million of its common stock at an average share price of $120.98.

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In July 2007, the joint venture that now owns 1372 Broadway closed on a $235.2 million, five-year, floating rate mortgage.  The mortgage carries an interest rate of 125 basis points over the 30-day LIBOR.

In July 2007, the joint venture that acquired 885 Third Avenue financed the acquisition with a $267.7 million, ten-year loan provided by Goldman Sachs Commercial Mortgage Capital.  The loan carries a fixed interest rate of 6.26%.

In October 2007, the 16 Court Street joint venture closed on a $94.7 million loan.  The loan, which carries an interest rate of 160 basis points over LIBOR, matures in October 2010.  The loan has two one-year extension options.  Approximately $81.6 million was funded at closing.

Structured Finance Activity

The Company’s structured finance investments totaled $683.1 million on September 30, 2007, an increase of approximately $21.4 million from the balance at June 30, 2007. The structured finance investments currently have a weighted average maturity of seven years.  The weighted average yield for the quarter ended September 30, 2007 was 10.54%, compared to a yield of 10.32% for the quarter ended September 30, 2006.

During the third quarter of 2007, the Company originated $69.9 million of structured finance investments which yield approximately 11.4%.  There were also $53.5 million of redemptions during the third quarter of 2007.

Investment In Gramercy Capital Corp.

In September 2007, the Company purchased 1,206,250 shares of common stock of Gramercy for approximately $31.7 million in connection with Gramercy’s $125.4 million common stock offering.

At September 30, 2007, the book value of the Company’s investment in Gramercy totaled $172.0 million. Fees earned from various arrangements between the Company and Gramercy totaled approximately $28.8 million for the quarter ended September 30, 2007, including an incentive fee of $22.9 million earned as a result of Gramercy’s FFO (as defined in Gramercy’s management agreement) exceeding the 9.5% annual return on equity performance threshold.  Of the $22.9 million incentive fee, $3.9 million of incentive fees were included in FFO and $19.0 million was excluded from FFO.  The Company accounted for its share of the incentive fee as a reduction of its basis in One Madison Avenue.  For the nine months ended September 30, 2007, the Company earned $45.6 million in fees from Gramercy.  The Company’s share of FFO generated from its investment in Gramercy totaled approximately $5.7 million and $16.3 million for the three and nine months ended September 30, 2007, respectively, compared to $4.1 million and $11.0 million for the same periods in the prior year.

The Company’s marketing, general and administrative, or MG&A, expenses include the consolidation of the expenses of its subsidiary GKK Manager LLC, the entity which manages and advises Gramercy.  For the quarter ended September 30, 2007, the Company’s MG&A includes approximately $3.7 million of costs associated with Gramercy.

 

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Dividends

During the third quarter of 2007, the Company declared quarterly dividends on its outstanding common and preferred stock as follows:

-                     $0.70 per share of common stock. Dividends were paid on October 15, 2007 to stockholders of record on the close of business on September 28, 2007.

-                     $0.4766 and $0.4922 per share on the Company’s Series C and D Preferred Stock, respectively, for the period July 15, 2007 through and including October 14, 2007. Distributions were made on October 15, 2007 to stockholders of record on the close of business on September 28, 2007. Distributions reflect regular quarterly distributions, which are the equivalent of an annualized distribution of $1.90625 and $1.96875, respectively.

Effective with the third quarter 2007 dividend payment, the Company will no longer be offering a discount under its dividend reinvestment and stock purchase plan.

Conference Call and Audio Webcast

The Company’s executive management team, led by Marc Holliday, Chief Executive Officer, will host a conference call and audio web cast on Tuesday, October 23, 2007 at 2:00 p.m. EDT to discuss third quarter financial results. The conference call may be accessed by dialing 866.700.5192 Domestic or 617.213.8833 International, SL Green is the passcode. The live conference will be simultaneously broadcast in a listen-only mode on the Company’s web site at www.slgreen.com. The Supplemental Package outlining third quarter 2007 financial results will be available prior to the quarterly conference call on the Company’s web site.

A replay of the call will be available through October 30, 2007 by dialing 888-286-8010 Domestic or (617) 801-6888 International, using pass code 34150711.

Supplemental Information

The Supplemental Package outlining third quarter 2007 financial results will be available prior to the quarterly conference call on the Company’s website.

Company Profile

SL Green Realty Corp. is a self-administered and self-managed real estate investment trust, or REIT, that predominantly acquires, owns, repositions and manages Manhattan office properties. The Company is the only publicly held REIT that specializes in this niche.  As of September 30, 2007, the Company owned 31 New York City office properties totaling approximately 22,353,200 square feet, making it New York’s largest office landlord. In addition, SL Green holds investment interests in, among other things, retail properties (10) encompassing approximately 393,789 square feet, development property (one) encompassing approximately 85,000 square feet and land interests (two), along with ownership of 36 suburban assets totaling 7,867,500 square feet in Brooklyn, Queens, Long Island, Westchester County, Connecticut and New Jersey.

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 212-216-1601.

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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 (net income) can be found on page 8 and 10 of this release and in the Company’s Supplemental Package.

Forward-looking Information

This press release contains forward-looking information based upon the Company’s current best judgment and expectations. Actual results could vary from those presented herein. The risks and uncertainties associated with forward-looking information in this release include the strength of the commercial office real estate markets in New York, reduced demand for office space, unanticipated increases in financing and other costs, competitive market conditions, unanticipated administrative costs, timing of leasing income, general and local economic conditions, interest rates, capital market conditions, tenant bankruptcies and defaults, the availability and cost of comprehensive insurance, including coverage for terrorist acts, environmental, regulatory and/or safety requirements, and other factors, which are beyond the Company’s control. We undertake no obligation to publicly update or revise any of the forward-looking information. For further information, please refer to the Company’s filings with the Securities and Exchange Commission.

 

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SL GREEN REALTY CORP.

STATEMENTS OF OPERATIONS-UNAUDITED

(Amounts in thousands, except per share data)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2007

 

2006

 

2007

 

2006

 

Revenue:

 

 

 

 

 

 

 

 

 

Rental revenue, net

 

$

190,525

 

$

85,944

 

$

519,206

 

$

242,031

 

Escalations & reimbursement revenues

 

31,785

 

18,225

 

90,119

 

46,022

 

Preferred equity and investment income

 

21,856

 

15,978

 

71,008

 

46,762

 

Other income

 

15,040

 

9,441

 

128,129

 

30,631

 

Total revenues

 

259,206

 

129,588

 

808,462

 

365,446

 

 

 

 

 

 

 

 

 

 

 

Equity in net income from unconsolidated joint ventures

 

11,302

 

9,679

 

32,715

 

30,243

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Operating expenses

 

58,245

 

31,597

 

160,815

 

84,264

 

Ground rent

 

8,674

 

4,846

 

23,705

 

14,687

 

Real estate taxes

 

32,580

 

17,922

 

97,782

 

52,643

 

Marketing, general and administrative

 

22,224

 

13,829

 

80,602

 

40,072

 

Total expenses

 

121,723

 

68,194

 

362,904

 

191,666

 

 

 

 

 

 

 

 

 

 

 

Earnings Before Interest, Depreciation and Amortization (EBITDA)

 

148,785

 

71,073

 

478,273

 

204,023

 

Interest expense

 

69,366

 

23,386

 

189,552

 

62,405

 

Amortization of deferred financing costs

 

1,994

 

1,140

 

14,537

 

3,096

 

Depreciation and amortization

 

49,957

 

18,020

 

131,938

 

49,813

 

Net income from Continuing Operations

 

27,468

 

28,527

 

142,246

 

88,709

 

Income from Discontinued Operations, net of minority interest

 

268

 

3,138

 

4,572

 

10,074

 

Gain on sale of Discontinued Operations, net of minority interest

 

80,214

 

94,631

 

367,007

 

94,410

 

Equity in net gain on sale of interest in unconsolidated joint venture

 

 

 

31,509

 

 

Minority interests

 

(4,413

)

(2,638

)

(18,551

)

(6,806

)

Preferred stock dividends

 

(4,969

)

(4,969

)

(14,907

)

(14,906

)

Net income available to common stockholders

 

$

98,568

 

$

118,689

 

$

511,876

 

$

171,481

 

 

 

 

 

 

 

 

 

 

 

Net income per share (Basic)

 

$

1.66

 

$

2.62

 

$

8.73

 

$

3.92

 

Net income per share (Diluted)

 

$

1.64

 

$

2.53

 

$

8.62

 

$

3.78

 

 

 

 

 

 

 

 

 

 

 

Funds From Operations (FFO)

 

 

 

 

 

 

 

 

 

FFO per share (Basic)

 

$

1.26

 

$

1.17

 

$

4.60

 

$

3.54

 

FFO per share (Diluted)

 

$

1.25

 

$

1.13

 

$

4.54

 

$

3.42

 

 

 

 

 

 

 

 

 

 

 

FFO Calculation:

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

$

27,468

 

$

28,527

 

$

142,246

 

$

88,709

 

Add:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

49,957

 

18,020

 

131,938

 

49,813

 

FFO from Discontinued Operations

 

280

 

4,559

 

6,267

 

14,987

 

FFO adjustment for Joint Ventures

 

5,299

 

9,648

 

16,198

 

25,241

 

Less:

 

 

 

 

 

 

 

 

 

Dividend on perpetual preferred stock

 

(4,969

)

(4,969

)

(14,907

)

(14,906

)

Depreciation of non-real estate assets

 

(215

)

(238

)

(693

)

(744

)

FFO before minority interests – BASIC and DILUTED

 

$

77,820

 

$

55,547

 

$

281,049

 

$

163,100

 

 

 

 

 

 

 

 

 

 

 

Basic ownership interest

 

 

 

 

 

 

 

 

 

Weighted average REIT common shares for net income per share

 

59,432

 

45,277

 

58,649

 

43,784

 

Weighted average partnership units held by minority interests

 

2,352

 

2,218

 

2,487

 

2,253

 

Basic weighted average shares and units outstanding for FFO per share

 

61,784

 

47,495

 

61,136

 

46,037

 

Diluted ownership interest

 

 

 

 

 

 

 

 

 

Weighted average REIT common share and common share equivalents

 

60,059

 

46,997

 

59,428

 

45,465

 

Weighted average partnership units held by minority interests

 

2,352

 

2,218

 

2,487

 

2,253

 

Diluted weighted average shares and units outstanding

 

62,411

 

49,215

 

61,915

 

47,718

 

 

8




 

SL GREEN REALTY CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands)

 

 

September 30,
2007

 

December 31,
2006

 

Assets

 

(Unaudited)

 

 

 

Commercial real estate properties, at cost:

 

 

 

 

 

Land and land interests

 

$

1,447,297

 

$

439,986

 

Buildings and improvements

 

5,799,995

 

2,111,970

 

Building leasehold and improvements

 

1,237,758

 

490,995

 

Property under capital lease

 

12,208

 

12,208

 

 

 

8,497,258

 

3,055,159

 

Less accumulated depreciation

 

(406,958

)

(279,436

)

 

 

8,090,300

 

2,775,723

 

Assets held for sale

 

 

 

Cash and cash equivalents

 

98,099

 

117,178

 

Restricted cash

 

119,553

 

252,272

 

Tenant and other receivables, net of allowance of $12,915 and $11,079 in 2007 and 2006, respectively

 

48,815

 

34,483

 

Related party receivables

 

32,950

 

7,195

 

Deferred rents receivable, net of allowance of $12,646 and $10,925 in 2007 and 2006, respectively

 

134,580

 

96,624

 

Structured finance investments, net of discount of $18,613 and $14,804 in 2007 and 2006, respectively

 

683,084

 

445,026

 

Investments in unconsolidated joint ventures

 

886,672

 

686,069

 

Deferred costs, net

 

127,353

 

97,850

 

Other assets

 

294,783

 

119,807

 

Total assets

 

$

10,516,189

 

$

4,632,227

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Mortgage notes payable

 

$

2,846,529

 

$

1,190,379

 

Revolving credit facility

 

590,000

 

 

Term loans and unsecured notes

 

1,793,100

 

525,000

 

Accrued interest and other liabilities

 

50,257

 

10,008

 

Accounts payable and accrued expenses

 

169,288

 

138,181

 

Deferred revenue/gain

 

385,840

 

43,721

 

Capitalized lease obligation

 

16,504

 

16,394

 

Deferred land lease payable

 

16,873

 

16,938

 

Dividend and distributions payable

 

47,238

 

40,917

 

Security deposits

 

35,789

 

27,913

 

Junior subordinate deferrable interest debentures held by trusts that issued trust preferred securities

 

100,000

 

100,000

 

Total liabilities

 

6,051,418

 

2,109,451

 

Commitments and contingencies

 

 

 

Minority interest in other partnerships

 

595,782

 

56,162

 

Minority interest in operating partnership

 

78,878

 

71,731

 

Stockholders’ Equity

 

 

 

 

 

7.625% Series C perpetual preferred shares, $0.01 per value, $25.00 liquidation preference, 6,300 issued and outstanding at September 30, 2007 and December 31, 2006, respectively

 

151,981

 

151,981

 

7.875% Series D perpetual preferred shares, $0.01 per value, $25.00 liquidation preference, 4,000 issued and outstanding at September 30, 2007 and December 31, 2006, respectively

 

96,321

 

96,321

 

Common stock, $0.01 par value 160,000 shares authorized, 59,989 and 49,840 issued and outstanding at September 30, 2007 and December 31, 2006, respectively (inclusive of 776 shares held in Treasury at September 30, 2007)

 

598

 

498

 

Additional paid - in capital

 

2,918,847

 

1,809,893

 

Treasury stock-at cost

 

(94,071

)

 

Accumulated other comprehensive income

 

6,961

 

13,971

 

Retained earnings

 

709,474

 

322,219

 

Total stockholders’ equity

 

3,790,111

 

2,394,883

 

Total liabilities and stockholders’ equity

 

$

10,516,189

 

$

4,632,227

 

 

9




 

SL GREEN REALTY CORP.

SELECTED OPERATING DATA-UNAUDITED

 

 

September 30,

 

 

 

2007

 

2006

 

Manhattan Operating Data: (1)

 

 

 

 

 

Net rentable area at end of period (in 000’s)

 

22,353

 

18,440

 

Portfolio percentage leased at end of period

 

97.0%

 

96.1%

 

Same-Store percentage leased at end of period

 

96.7%

 

97.2%

 

Number of properties in operation

 

31

 

27

 

 

 

 

 

 

 

Office square feet leased during quarter (rentable)

 

340,000

 

586,000

 

Average mark-to-market percentage-office

 

59.5%

 

25.8%

 

Average starting cash rent per rentable square foot-office

 

$

61.63

 

$

62.67

 


(1)   Includes wholly owned and joint venture properties.

SL GREEN REALTY CORP.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES *

(Amounts in thousands, except per share data)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2007

 

2006

 

2007

 

2006

 

Earnings before interest, depreciation and amortization (EBITDA):

 

$

148,785

 

$

71,073

 

$

478,273

 

$

204,023

 

Add:

 

 

 

 

 

 

 

 

 

Marketing, general & administrative expense

 

22,224

 

13,829

 

80,602

 

40,072

 

Operating income from discontinued operations

 

280

 

5,939

 

8,802

 

19,098

 

Less:

 

 

 

 

 

 

 

 

 

Non-building revenue

 

(31,653

)

(22,153

)

(184,485

)

(67,790

)

Equity in net income from joint ventures

 

(11,302

)

(9,679

)

(32,715

)

(30,243

)

GAAP net operating income (GAAP NOI)

 

128,334

 

59,009

 

350,477

 

165,160

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

Operating income from discontinued operations

 

(280

)

(5,939

)

(8,802

)

(19,098

)

GAAP NOI from other properties/affiliates

 

(82,812

)

(11,565

)

(205,514

)

(23,271

)

Same-Store GAAP NOI

 

$

45,242

 

$

41,505

 

$

136,161

 

$

122,791

 


*    See page 8 for a reconciliation of FFO and EBITDA to net income.

10




Exhibit 99.2






 

SL Green Realty Corp. is a fully integrated, self-administered and self-managed Real Estate Investment Trust, or REIT, that primarily acquires, owns, manages, leases and repositions office properties in emerging, high-growth submarkets of Manhattan.

·                   SL Green’s common stock is listed on the New York Stock Exchange, and trades under the symbol SLG.

·                   SL Green maintains an internet site at www.slgreen.com at which most key investor relations data pertaining to dividend declaration, payout, current and historic share price, etc. can be found.  Such information is not reiterated in this supplemental financial package.  This supplemental financial package is available through the Company’s internet site.

·                   This data is presented to supplement audited and unaudited regulatory filings of the Company and should be read in conjunction with those filings.  The financial data herein is unaudited and is provided from the prospective of timeliness to assist readers of quarterly and annual financial filings.  As such, data otherwise contained in future regulatory filings covering the same period may be restated from the data presented herein.

Questions pertaining to the information contained herein should be referred to Investor Relations at investor.relations@slgreen.com or at 212-216-1601.

This report includes certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  All statements, other than statements of historical facts, included in this report that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future, including such matters as future capital expenditures, dividends and acquisitions (including the amount and nature thereof), expansion and other development trends of the real estate industry, business strategies, expansion and growth of the Company’s operations and other such matters are forward-looking statements.  These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate.  Such statements are subject to a number of assumptions, risks and uncertainties, general economic and business conditions, the business opportunities that may be presented to and pursued by the Company, changes in laws or regulations and other factors, many of which are beyond the control of the Company.  Any such statements are not guarantees of future performance and actual results or developments may differ materially from those anticipated in the forward-looking statements.

The following discussion related to the consolidated financial statements of the Company should be read in conjunction with the financial statements for the quarter ended September 30, 2007 that will subsequently be released on Form 10-Q to be filed on or before November 9, 2007.

2




 

TABLE OF CONTENTS



 

Highlights of Current Period Financial Performance

 

 

 

Unaudited Financial Statements

 

Corporate Profile

4

Financial Highlights

5-13

Balance Sheets

14-15

Statements of Operations

16

Funds From Operations

17

Statement of Stockholders’ Equity

18

Taxable Income

19

Joint Venture Statements

20-23

 

 

Selected Financial Data

24-27

 

 

Summary of Debt and Ground Lease Arrangements

28-30

 

 

Mortgage Investments and Preferred Equity

31-32

 

 

Property Data

 

Composition of Property Portfolio

33-34

Top Tenants

35

Tenant Diversification

36

Leasing Activity Summary

37-40

Lease Expiration Schedule

41-42

 

 

Summary of Acquisition/Disposition Activity

43-45

Supplemental Definitions

46

Corporate Information

47

 

 

 

3




 

CORPORATE PROFILE



 

SL Green Realty Corp., or the Company, is New York City’s largest commercial office landlord and is the only fully integrated, self-managed, self-administered Real Estate Investment Trust, or REIT, primarily focused on owning and operating office buildings in Manhattan.

The Company was formed on August 20, 1997 to continue the commercial real estate business of S.L. Green Properties Inc., a company that was founded in 1980 by Stephen L. Green, our current Chairman.  For more than 25 years SL Green has been engaged in the business of owning, managing, leasing, acquiring and repositioning office properties in Manhattan.  The Company’s investment focus is to create value through strategically acquiring, redeveloping and repositioning office properties primarily located in Manhattan, and re-leasing and managing these properties for maximum cash flow.

In 2007, SL Green acquired Reckson Associates Realty Corp. and added over 9 million square feet to its portfolio. Included in this total is over 3 million square feet of Class A office space located in Westchester, New York and Stamford, Connecticut.  These suburban portfolios serve as natural extensions of SL Green’s core ownership in the Grand Central submarket of Midtown Manhattan. The Company has since made selective additions to the holdings in these areas.

Looking forward, SL Green will continue its opportunistic investment philosophy through three established business lines: investment in long-term core properties, investment in opportunistic assets, and structured finance investments. Structured finance investments include SL Green’s interest in Gramercy Capital Corp., or Gramercy, (NYSE: GKK) since 2004. SL Green owns approximately 25% of Gramercy. This three-legged investment strategy allows SL Green to balance the components of its portfolio to take advantage of each stage in the business cycle.

4




 

FINANCIAL HIGHLIGHTS

THIRD QUARTER 2007
UNAUDITED



 

FINANCIAL RESULTS

Funds From Operations, or FFO, available to common stockholders totaled $77.8 million, or $1.25 per share (diluted) for the third quarter ended September 30, 2007, a 10.6% increase over the same quarter in 2006 when FFO totaled $55.5 million, or $1.13 per share (diluted).

Net income available for common stockholders totaled $98.6 million, or $1.64 per share (diluted) for the third quarter ended September 30, 2007. Net income available to common stockholders totaled $118.7 million or $2.53 per share (diluted) in the same quarter in 2006.  Third quarter 2007 results include gains on sale of $1.34 per share (diluted) compared to gains on sale of $2.02 per share (diluted) for the same period in 2006.

Funds available for distribution, or FAD, for the third quarter 2007 increased to $0.84 per share (diluted) versus $0.81 per share (diluted) in the prior year, a 3.7% increase.

The Company’s dividend payout ratio was 56.1% of FFO and 83.7% of FAD before first cycle leasing costs.

All per share amounts are presented on a diluted basis.

CONSOLIDATED RESULTS

Total quarterly revenues increased 100.0% in the third quarter to $259.2 million compared to $129.6 million in the prior year.  The $129.6 million growth in revenue resulted primarily from the following items:

·                   $113.8 million increase from 2007 and 2006 acquisitions, including the Reckson properties,

·                   $4.2 million increase from same-store properties,

·                   $5.9 million increase in preferred equity and investment income, and

·                   $5.7 million increase in other revenue, which was primarily due to incentive and asset management fees earned in 2007 ($1.6 million), as well as from fees earned from Gramercy ($2.9 million), and the Service Corporation ($1.1 million).

The Company’s earnings before interest, taxes, depreciation and amortization, or EBITDA, increased by $77.7 million (109.3%) to $148.8 million.  The following items drove EBITDA improvements:

·                   $68.5 million increase from 2007 and 2006 acquisitions, including the Reckson properties,

·                   $4.0 million increase from same-store properties.

·                   $5.9 million increase in preferred equity and investment income.  The weighted-average structured finance investment balance for the quarter increased to $714.9 million from $351.3 million in the prior year third quarter.  The weighted-average yield for the quarter was 10.54% compared to 10.32% in the prior year.

·                   $1.6 million increase from increased contributions to equity in net income from unconsolidated joint ventures primarily from Gramercy ($1.8 million), 800 Third Avenue ($0.7

5




 

FINANCIAL HIGHLIGHTS

THIRD QUARTER 2007
UNAUDITED



 

million), 2 Herald Square ($1.3 million), 885 Third Avenue ($1.6 million) and the Mack-Green joint venture ($0.8 million). This was partially offset by reductions in contributions primarily from 521 Fifth Avenue, which is under redevelopment ($0.6 million), 485 Lexington Avenue which is wholly-owned since December 2006 ($0.8 million), 100 Park ($1.7 million), 1745 Broadway ($0.9 million), and 1221 Avenue of the Americas ($1.0 million).

·                   $8.4 million decrease from higher MG&A expense.

·                   $6.1 million increase in non-real estate revenues net of expenses, primarily due to increased incentive and asset management  fees earned in 2007 ($1.6 million) in addition to fee income from Gramercy ($2.9 million).

FFO before minority interests improved $22.3 million primarily as a result of:

·                   $77.7 million increase in EBITDA,

·                   $8.6 million decrease in FFO from unconsolidated joint ventures, discontinued operations and non-real estate depreciation, and

·                   $46.8 million decrease from higher interest expense.

SAME-STORE RESULTS

Consolidated Properties

Same-store t hird quarter 2007 GAAP NOI increased $3.7 million (9.0%) to $45.2 million compared to the prior year.  Operating margins before ground rent increased from 53.18% to 56.60%.

The $3.7 million increase in GAAP NOI was primarily due to:

·                   $5.1 million (7.3%) increase in rental revenue primarily due to increasing rental rates,

·                   $1.0 million (6.6%) decrease in escalation and reimbursement revenue,

·                   $0.2 million (21.8%) decrease in investment and other income,

·                   $0.3 million (1.1%) decrease in operating expenses, primarily driven by increases in payroll and utility costs, but was offset by reductions in insurance costs,

·                   $1.4 million (28.8%) increase in ground rent expense, and

·                   $0.9 million (5.8%) decrease in real estate taxes.

Joint Venture Properties

The Joint Venture same-store properties t hird quarter 2007 GAAP NOI decreased $0.9 million (3.8%) to $23.0 million compared to the prior year.  Operating margins before ground rent decreased from 55.18% to 53.69%.

The $0.9 million decrease in GAAP NOI was primarily due to:

·                   $0.7 million (2.2%) increase in rental revenue primarily due to improved leasing,

·                   $0.4 million (5.2%) increase in escalation and reimbursement revenue,

·                   $1.6 million (99.3%) decrease in investment and other income, primarily due to reduced lease buy-out income,

6




 

FINANCIAL HIGHLIGHTS

THIRD QUARTER 2007
UNAUDITED



 

 

·                   $0.6 million (5.5%) increase in operating expenses primarily driven by increases in payroll, utilities and repairs and maintenance which were partially offset by a reduction in insurance, and

·                   $0.1 million (1.7%) decrease in real estate taxes.

STRUCTURED FINANCE ACTIVITY

As of September 30, 2007, our structured finance and preferred equity investments totaled $683.1 million.  The weighted average balance outstanding for the third quarter of 2007 was $714.9 million.  During the third quarter of 2007 the weighted average yield was 10.54%.

During the third quarter 2007, the Company originated $69.9 million of structured finance investments, which yield approximately 11.4%.  There were also $53.5 million of redemptions during the third quarter of 2007.

QUARTERLY LEASING HIGHLIGHTS

Manhattan vacancy at June 30, 2007 was 536,324 useable square feet net of holdover tenants.  During the quarter, 312,182 additional useable office, retail and storage square feet became available at an average escalated cash rent of $42.61 per rentable square foot.  The Company sold 531 of available usable square feet in connection with the sale of 292 Madison Avenue.  Space available to lease during the quarter totaled 847,975 useable square feet, or 3.8% of the total Manhattan portfolio.

During the t hird quarter , 53 Manhattan office leases, including early renewals, were signed totaling 340,246 rentable square feet.  New cash rents averaged $61.63 per rentable square foot.  Replacement rents were 59.5% higher than rents on previously occupied space, which had fully escalated cash rents averaging $38.64 per rentable square foot.  The average lease term was 7.2 years and average tenant concessions were 1.5 months of free rent with a tenant improvement allowance of $17.14 per rentable square foot.

Suburban vacancy at June 30, 2007 was 430,781 usable square feet net of holdover tenants.  During the quarter, 69,561 additional useable office square feet became available at an average escalated cash rent of $26.18 per rentable square foot.  The Company acquired 170,083 of available usable square feet connection with the acquisitions of 16 Court Street, Brooklyn and the Meadows, NJ.  Space available to lease during the quarter totaled 670,425 useable square feet, or 8.5% of the total Suburban portfolio.

During the third quarter, 23 Suburban office leases, including early renewals, were signed totaling 91,525 rentable square feet.  New cash rents averaged $33.64 per rentable square foot.  Replacement rents were 15.0% higher than rents on previously occupied space, which had fully escalated cash rents averaging $29.26 per rentable square foot.  The average lease term was 4.8 years and average tenant concessions were 0.1 months of free rent with a tenant improvement allowance of $11.06 per rentable square foot.

7




 

FINANCIAL HIGHLIGHTS

THIRD QUARTER 2007
UNAUDITED



 

The Company also signed a total of 9 retail and storage leases, including early renewals, for 6,816 rentable square feet.  The average lease term was 1.1 years and the average tenant concessions were 0.6 months of free rent with a tenant improvement allowance of $0.45 per rentable square foot.

REAL ESTATE ACTIVITY

The Company’s share of real estate investment transactions entered into during the third quarter totaled approximately $527.3 million and included:

-                     In July 2007, the Company, along with Gramercy, acquired a 79% fee interest and a 21% leasehold interest in the Lipstick building, a 607,000 square foot class A office building located at 885 Third Avenue in New York City for approximately $317.0 million. Simultaneously, Gramercy and SL Green entered into a 70-year leasehold/sub-leasehold arrangement for the improvements. The Company owns 55% of the investment and Gramercy owns the remaining 45% interest.

-                     In July 2007, the Company, in a joint venture with The City Investment Fund, or CIF, closed on the acquisition of 16 Court Street, Brooklyn for approximately $107.5 million. SL Green owns a 35% interest in the venture. CIF owns the remaining 65% interest. The property is a 38-story, 317,625-square-foot office building.

-                     In August 2007, the Company, in a joint venture with Jeff Sutton, acquired the office/retail property located at 180 Broadway for approximately $13.7 million.  The building is 12 stories encompassing 24,307 square feet.  The Company has a 50% interest in the joint venture with Jeff Sutton.

-                     In August 2007, the Company acquired Gramercy’s 45% equity interest in the joint venture that owns One Madison Avenue for approximately $147.2 million (and the assumption of Gramercy’s proportionate share of the debt encumbering the property of approximately $305.3 million). As a result of the acquisition the Company owns 100% of One Madison Avenue.

-                     In July 2007, the Company sold 1372 Broadway to a joint venture for an imputed value of approximately $335.0 million, excluding closing costs. The Company has a 15% interest in the joint venture.  The property is approximately 525,000 square feet. The Company deferred recognition of the gain on sale of approximately $254.4 million as a result of an option it retained to reacquire the asset only upon the occurrence of limited circumstances.

-                     In July 2007, the Company sold its property located at 292 Madison Avenue for approximately $140.0 million, excluding closing costs. The property encompasses approximately 187,000 square feet. The sale generated a gain of approximately $99.8 million.

8




 

FINANCIAL HIGHLIGHTS

THIRD QUARTER 2007
UNAUDITED



 

Investment In Gramercy Capital Corp.

In September 2007, the Company purchased 1,206,250 shares of common stock of Gramercy for approximately $31.7 million in connection with Gramercy’s $125.4 million common stock offering.

At September 30, 2007, the book value of the Company’s investment in Gramercy totaled $172.0 million. Fees earned from various arrangements between the Company and Gramercy totaled approximately $28.8 million for the quarter ended September 30, 2007, including an incentive fee of $22.9 million earned as a result of Gramercy’s FFO (as defined in Gramercy’s management agreement) exceeding the 9.5% annual return on equity performance threshold.  Of the $22.9 million incentive fee, $3.9 million of incentive fees were included in FFO and $19.0 million was excluded from FFO.  The Company accounted for its share of the incentive fee as a reduction of its basis in One Madison Avenue.  For the nine months ended September 30, 2007, the Company earned $45.6 million in fees from Gramercy.  The Company’s share of FFO generated from its investment in Gramercy totaled approximately $5.7 million and $16.3 million for the three and nine months ended September 30, 2007, respectively, compared to $4.1 million and $11.0 million for the same periods in the prior year.

The Company’s marketing, general and administrative, or MG&A, expenses include the consolidation of the expenses of its subsidiary GKK Manager LLC, the entity which manages and advises Gramercy.  For the quarter ended September 30, 2007, the Company’s MG&A includes approximately $3.7 million of costs associated with Gramercy.

Financing/ Capital Activity

In October 2007, the Company exercised the accordion feature under the unsecured revolving credit facility, increasing total capacity from $1.25 billion to $1.5 billion.

The Company acquired $59.7 million of its common stock at an average share price of $115.94 since July 1, 2007 pursuant to its previously announced $300.0 million stock repurchase program.  The Company has now acquired $100.1 million of its common stock at an average share price of $120.98.

In July 2007, the joint venture that now owns 1372 Broadway closed on a $235.2 million, five-year, floating rate mortgage.  The mortgage carries an interest rate of 125 basis points over the 30-day LIBOR.

In July 2007, the joint venture that acquired 885 Third Avenue financed the acquisition with a $267.7 million, ten-year loan provided by Goldman Sachs Commercial Mortgage Capital.  The loan carries a fixed interest rate of 6.26%.

In October 2007, the 16 Court Street joint venture closed on a $94.7 million loan.  The loan, which carries an interest rate of 160 basis points over LIBOR, matures in October 2010.  The

9




 

FINANCIAL HIGHLIGHTS

THIRD QUARTER 2007
UNAUDITED



 

loan has two one-year extension options.  Approximately $81.6 million was funded at closing.

Dividends

On September 13, 2007, the Company declared a dividend of $0.70 per common share for the third quarter 2007.  The dividend was payable October 15, 2007 to stockholders of record on the close of business on September 28, 2007.  This distribution reflects the regular quarterly dividend, which is the equivalent of an annualized distribution of $2.80 per common share.

On September 13, 2007, the Company also approved a distribution on its Series C preferred stock for the period July 15, 2007 through and including October 14, 2007, of $0.4766 per share, payable October 15, 2007 to stockholders of record on the close of business on September 28, 2007. The distribution reflects the regular quarterly distribution, which is the equivalent of an annualized distribution of $1.90625 per Series C preferred stock.

On September 13, 2007, the Company also approved a distribution on its Series D preferred stock for the period July 15, 2007 through and including October 14, 2007, of $0.4922 per share, payable October 15, 2007 to stockholders of record on the close of business on September 28, 2007. The distribution reflects the regular quarterly distribution, which is the equivalent of an annualized distribution of $1.96875 per Series D preferred stock.

Effective with the third quarter 2007 dividend payment, the Company will no longer be offering a discount under its dividend reinvestment and stock purchase plan.

10




 

SL Green Realty Corp.

 

Key Financial Data

 

September 30, 2007

 

(Dollars in Thousands Except Per Share and Sq. Ft.)

 

 

 

As of or for the three months ended

 

 

 

9/30/2007

 

6/30/2007

 

3/31/2007

 

12/31/2006

 

9/30/2006

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings Per Share

 

 

 

 

 

 

 

 

 

 

 

Net income available to common shareholders - diluted

 

$

1.64

 

$

4.38

 

$

2.53

 

$

0.62

 

$

2.53

 

Funds from operations available to common shareholders - diluted

 

$

1.25

 

$

1.26

 

$

2.03

 

$

1.18

 

$

1.13

 

Funds available for distribution to common shareholders - diluted

 

$

0.84

 

$

0.97

 

$

1.93

 

$

0.78

 

$

0.81

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Share Price & Dividends

 

 

 

 

 

 

 

 

 

 

 

At the end of the period

 

$

116.77

 

$

123.89

 

$

137.18

 

$

132.78

 

$

111.70

 

High during period

 

$

133.35

 

$

143.47

 

$

156.10

 

$

139.50

 

$

115.90

 

Low during period

 

$

101.61

 

$

122.78

 

$

131.81

 

$

112.37

 

$

107.17

 

Common dividends per share

 

$

0.70

 

$

0.70

 

$

0.70

 

$

0.70

 

$

0.60

 

FFO Payout Ratio

 

56.14%

 

55.70%

 

34.47%

 

59.16%

 

53.16%

 

FAD Payout Ratio

 

83.72%

 

72.09%

 

36.21%

 

90.23%

 

73.75%

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares & Units

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

59,213

 

59,626

 

59,182

 

49,840

 

45,774

 

Units outstanding

 

2,350

 

2,365

 

2,619

 

2,694

 

2,219

 

Total shares and units outstanding

 

61,563

 

61,991

 

61,801

 

52,534

 

47,993

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares and units outstanding - basic

 

61,784

 

61,984

 

59,301

 

49,689

 

47,495

 

Weighted average common shares and units outstanding - diluted

 

62,411

 

63,275

 

60,930

 

51,160

 

49,215

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Capitalization

 

 

 

 

 

 

 

 

 

 

 

Market value of common equity

 

$

7,188,712

 

$

7,680,065

 

$

8,477,861

 

$

6,975,465

 

$

5,360,818

 

Liquidation value of preferred equity

 

257,500

 

257,500

 

257,500

 

257,500

 

257,500

 

Consolidated debt

 

5,329,629

 

4,653,374

 

5,023,057

 

1,815,379

 

1,975,325

 

Consolidated market capitalization

 

$

12,775,841

 

$

12,590,939

 

$

13,758,418

 

$

9,048,344

 

$

7,593,643

 

SLG portion JV debt

 

1,281,344

 

1,483,534

 

1,264,200

 

1,209,281

 

1,181,397

 

Combined market capitalization

 

$

14,057,185

 

$

14,074,473

 

$

15,022,618

 

$

10,257,625

 

$

8,775,040

 

Consolidated debt to market capitalization

 

41.72%

 

36.96%

 

36.51%

 

20.06%

 

26.01%

 

Combined debt to market capitalization

 

47.03%

 

43.60%

 

41.85%

 

29.49%

 

35.97%

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated debt service coverage

 

2.23

 

2.35

 

3.00

 

3.12

 

3.38

 

Consolidated fixed charge coverage

 

1.88

 

2.00

 

2.53

 

2.36

 

2.47

 

Combined fixed charge coverage

 

1.67

 

1.76

 

2.18

 

1.89

 

1.93

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio Statistics (Manhattan)

 

 

 

 

 

 

 

 

 

 

 

Consolidated office buildings

 

24

 

24

 

24

 

20

 

20

 

Unconsolidated office buildings

 

7

 

8

 

7

 

8

 

7

 

 

 

31

 

32

 

31

 

28

 

27

 

Consolidated office buildings square footage

 

14,889,200

 

13,899,300

 

14,145,000

 

10,086,000

 

9,625,000

 

Unconsolidated office buildings square footage

 

7,464,000

 

8,640,900

 

7,966,900

 

8,879,900

 

8,814,900

 

 

 

22,353,200

 

22,540,200

 

22,111,900

 

18,965,900

 

18,439,900

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter end occupancy - portfolio

 

97.0%

 

97.6%

 

97.3%

 

97.0%

 

96.1%

 

Quarter end occupancy - same store - wholly owned

 

97.5%

 

97.9%

 

98.7%

 

97.5%

 

97.0%

 

Quarter end occupancy - same store - combined (wholly owned + joint venture)

 

96.7%

 

97.3%

 

97.6%

 

97.4%

 

97.2%

 

 

11




SL Green Realty Corp.
Key Financial Data
September 30, 2007
(Dollars in Thousands Except Per Share and Sq. Ft.)

 

 

 

 

As of or for the three months ended

 

 

 

9/30/2007

 

6/30/2007

 

3/31/2007

 

12/31/2006

 

9/30/2006

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

Real estate assets before depreciation

 

$

8,497,258

 

$

7,619,487

 

$

7,375,047

 

$

3,055,159

 

$

2,824,688

 

Investments in unconsolidated joint ventures

 

$

886,672

 

$

839,087

 

$

743,978

 

$

686,069

 

$

549,040

 

Structured finance investments

 

$

683,084

 

$

661,720

 

$

688,303

 

$

445,026

 

$

347,558

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

10,516,189

 

$

9,452,345

 

$

9,625,785

 

$

4,632,227

 

$

4,226,806

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate & hedged debt

 

$

4,496,670

 

$

3,823,513

 

$

4,015,996

 

$

1,511,714

 

$

1,418,106

 

Variable rate debt

 

832,959

 

829,861

 

933,309

 

303,665

 

462,219

 

Total consolidated debt

 

$

5,329,629

 

$

4,653,374

 

$

4,949,305

 

$

1,815,379

 

$

1,880,325

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

$

6,051,418

 

$

5,006,527

 

$

5,394,598

 

$

2,109,451

 

$

2,239,912

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate & hedged debt-including SLG portion of JV debt

 

$

5,170,857

 

$

4,723,635

 

$

4,657,260

 

$

2,099,716

 

$

1,957,206

 

Variable rate debt - including SLG portion of JV debt

 

1,440,116

 

1,413,273

 

1,556,245

 

924,944

 

1,104,516

 

Total combined debt

 

$

6,610,973

 

$

6,136,908

 

$

6,213,505

 

$

3,024,660

 

$

3,061,722

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Operating Data

 

 

 

 

 

 

 

 

 

 

 

Property operating revenues

 

$

222,310

 

$

207,059

 

$

179,956

 

$

109,450

 

$

104,169

 

Property operating expenses

 

99,499

 

96,999

 

85,804

 

52,070

 

54,365

 

Property operating NOI

 

$

122,811

 

$

110,060

 

$

94,152

 

$

57,380

 

$

49,804

 

NOI from discontinued operations

 

280

 

4,057

 

4,465

 

4,481

 

5,939

 

Total property operating NOI

 

$

123,091

 

$

114,117

 

$

98,617

 

$

61,861

 

$

55,743

 

 

 

 

 

 

 

 

 

 

 

 

 

SLG share of Property NOI from JVs

 

$

43,944

 

$

44,194

 

$

37,364

 

$

37,419

 

$

36,587

 

SLG share of FFO from Gramercy Capital

 

$

5,734

 

$

5,623

 

$

4,894

 

$

5,083

 

$

4,125

 

Structured finance income

 

$

21,856

 

$

27,443

 

$

21,709

 

$

15,202

 

$

15,978

 

Other income

 

$

15,040

 

$

23,204

 

$

89,885

 

$

26,164

 

$

9,441

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing general & administrative expenses

 

$

22,224

 

$

24,131

 

$

34,247

 

$

25,669

 

$

13,830

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated interest

 

$

69,366

 

$

63,803

 

$

58,917

 

$

29,834

 

$

24,764

 

Combined interest

 

$

93,826

 

$

87,234

 

$

79,239

 

$

50,154

 

$

43,990

 

Preferred Dividend

 

$

4,969

 

$

4,969

 

$

4,969

 

$

4,969

 

$

4,969

 

 

 

 

 

 

 

 

 

 

 

 

 

Office Leasing Statistics (Manhattan)

 

 

 

 

 

 

 

 

 

 

 

Total office leases signed

 

53

 

66

 

45

 

38

 

56

 

Total office square footage leased

 

340,246

 

677,807

 

330,972

 

452,497

 

586,223

 

 

 

 

 

 

 

 

 

 

 

 

 

Average rent psf

 

$

61.63

 

$

52.96

 

$

57.84

 

$

61.99

 

$

62.67

 

Escalated rents psf

 

$

38.64

 

$

37.70

 

$

42.21

 

$

48.18

 

$

49.81

 

Percentage of rent over escalated

 

59.5%

 

40.5%

 

37.0%

 

28.7%

 

25.8%

 

Tenant concession packages psf

 

$

17.14

 

$

13.62

 

$

24.93

 

$

32.49

 

$

14.90

 

Free rent months

 

1.5

 

1.5

 

2.7

 

3.3

 

1.9

 

 

12




SL Green Realty Corp.
Key Financial Data
September 30, 2007
(Dollars in Thousands Except Per Share and Sq. Ft.)

 

Suburban Properties

 

 

As of or for the three months ended

 

 

 

9/30/2007

 

6/30/2007

 

3/31/2007 (1)

 

12/31/2006

 

9/30/2006

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Operating Data (Suburban)

 

 

 

 

 

 

 

 

 

 

 

Property operating revenues

 

$

32,598

 

$

30,973

 

$

22,641

 

$

 

$

 

Property operating expenses

 

13,750

 

12,894

 

9,228

 

 

 

Property operating NOI

 

$

18,848

 

$

18,079

 

$

13,413

 

$

 

$

 

SLG share of Property NOI from JV

 

$

3,625

 

$

2,826

 

$

1,768

 

 

 

Consolidated interest

 

$

5,079

 

$

4,416

 

$

3,580

 

 

 

Combined interest

 

$

7,182

 

$

5,967

 

$

4,482

 

 

 

Portfolio Statistics (Suburban)

 

 

 

 

 

 

 

 

 

 

 

Consolidated office buildings

 

30

 

30

 

28

 

 

 

Unconsolidated office buildings

 

6

 

3

 

1

 

 

 

 

 

36

 

33

 

29

 

 

 

 

 

Consolidated office buildings square footage

 

4,925,800

 

4,925,800

 

4,660,900

 

 

 

Unconsolidated office buildings square footage

 

2,941,700

 

2,042,000

 

1,402,000

 

 

 

 

 

7,867,500

 

6,967,800

 

6,062,900

 

 

 

 

 

Quarter end occupancy-portfolio

 

92.2

%

93.8

%

92.7

%

 

 

Office Leasing Statistics (Suburban)

 

 

 

 

 

 

 

 

 

 

 

Total office leases signed

 

23

 

19

 

22

 

 

 

Total office square footage leased

 

91,525

 

60,581

 

139,503

 

 

 

Average rent psf

 

$

33.64

 

$

29.88

 

$

30.44

 

 

 

Escalated rents psf

 

$

29.26

 

$

29.75

 

$

27.36

 

 

 

Percentage of rent over escalated

 

15.0

%

0.4

%

11.2

%

 

 

Tenant concession packages psf

 

$

11.06

 

$

22.83

 

$

17.82

 

 

 

Free rent months

 

0.1

 

0.1

 

1.1

 

 

 


(1)                                   Includes operations since January 25th, 2007.

13




COMPARATIVE BALANCE SHEETS

Unaudited
($000’s omitted)



 

 

 

9/30/2007

 

6/30/2007

 

3/31/2007

 

12/31/2006

 

9/30/2006

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate properties, at cost:

 

 

 

 

 

 

 

 

 

 

 

Land & land interests

 

$

1,447,297

 

$

1,285,915

 

$

1,235,607

 

$

439,986

 

$

349,073

 

Buildings & improvements fee interest

 

5,799,995

 

5,082,758

 

4,930,419

 

2,111,970

 

1,671,234

 

Buildings & improvements leasehold

 

1,237,758

 

1,201,786

 

1,093,514

 

490,995

 

705,900

 

Buildings & improvements under capital lease

 

12,208

 

12,208

 

12,208

 

12,208

 

12,208

 

 

 

$

8,497,258

 

$

7,582,667

 

$

7,271,748

 

$

3,055,159

 

$

2,738,415

 

Less accumulated depreciation

 

(406,958

)

(324,756

)

(297,365

)

(279,436

)

(253,136

)

 

 

$

8,090,300

 

$

7,257,911

 

$

6,974,383

 

$

2,775,723

 

$

2,485,279

 

Other Real Estate Investments:

 

 

 

 

 

 

 

 

 

 

 

Investment in unconsolidated joint ventures

 

886,672

 

839,087

 

743,978

 

686,069

 

549,040

 

Structured finance investments

 

683,084

 

661,720

 

688,303

 

445,026

 

347,558

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets held for sale

 

 

21,040

 

96,101

 

 

121,962

 

Cash and cash equivalents

 

98,099

 

80,300

 

499,728

 

117,178

 

176,444

 

Restricted cash

 

119,553

 

131,247

 

128,223

 

252,272

 

227,482

 

Tenant and other receivables, net of $ 12,915 reserve at 9/30/07

 

48,815

 

41,657

 

53,040

 

34,483

 

32,037

 

Related party receivables

 

32,950

 

10,943

 

14,938

 

7,195

 

9,563

 

Deferred rents receivable, net of reserve for tenant credit loss of $12,646 at 9/30/07

 

134,580

 

111,740

 

103,267

 

96,624

 

85,242

 

Deferred costs, net

 

127,353

 

113,885

 

116,760

 

97,850

 

74,223

 

Other assets

 

294,783

 

182,815

 

207,064

 

119,807

 

117,976

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

10,516,189

 

$

9,452,345

 

$

9,625,785

 

$

4,632,227

 

$

4,226,806

 

 

14




 

 

 

COMPARATIVE BALANCE SHEETS

 

 

 

Unaudited
($000’s omitted)

 

 

 

 

 

 

 

 

9/30/2007

 

6/30/2007

 

3/31/2007

 

12/31/2006

 

9/30/2006

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Mortgage notes payable

 

$

2,846,529

 

$

2,173,460

 

$

2,156,575

 

$

1,190,379

 

$

1,255,325

 

Term loans and unsecured notes

 

1,793,100

 

1,792,914

 

2,692,730

 

525,000

 

525,000

 

Revolving credit facilities

 

590,000

 

587,000

 

 

 

 

Accrued interest and other liabilities

 

50,257

 

42,286

 

36,784

 

10,008

 

9,353

 

Accounts payable and accrued expenses

 

169,288

 

148,158

 

169,736

 

138,181

 

96,741

 

Deferred revenue

 

385,840

 

42,382

 

44,082

 

43,721

 

63,358

 

Capitalized lease obligations

 

16,504

 

16,466

 

16,430

 

16,394

 

16,359

 

Deferred land lease payable

 

16,873

 

16,829

 

17,095

 

16,938

 

16,782

 

Dividend and distributions payable

 

47,238

 

47,557

 

47,427

 

40,917

 

33,247

 

Security deposits

 

35,789