SL Green Realty Corp. Reports Third Quarter 2012 FFO of $1.14 Per Share before Transaction Costs and

SL Green Realty Corp. Reports Third Quarter 2012 FFO of $1.14 Per Share before Transaction Costs and EPS of $0.09 Per Share

NEW YORK--(BUSINESS WIRE)-- SL Green Realty Corp. (NYS: SLG) :

Financial and Operating Highlights

  • Third quarter FFO of $1.14 per diluted share before transaction related costs of $0.02 per diluted share compared to prior year FFO of $1.01 per diluted share before transaction related costs of $0.01 per diluted share.

  • Third quarter net income attributable to common stockholders of $0.09 per diluted share compared to prior year net income of $0.08 per diluted share.

  • Combined same-store cash NOI increased 4.7 percent for the quarter compared to the prior year, an increase of $7.7 million.

  • Signed 60 Manhattan leases totaling 471,267 square feet during the third quarter. The mark-to-market on office leases signed in Manhattan was 2.7 percent higher in the third quarter than the previously fully escalated rents on the same office spaces.

  • Completed the lease-up and repositioning of 100 Church Street, which is now 97.0 percent leased. The Company obtained ownership in the 1.0 million square foot building located in downtown Manhattan which was 58.7 percent vacant in January 2010. The latest lease was for 131,946 square feet to The City of New York.

  • Quarter-end occupancy of 93.3 percent in stabilized Manhattan same-store properties compared to 93.5 percent in the corresponding quarter in the prior year and 93.0 percent at December 31, 2011.

  • Signed 31 Suburban leases totaling 160,255 square feet during the third quarter. The mark-to-market on office leases signed in the Suburbs was 2.4 percent lower in the third quarter than the previously fully escalated rents on the same office spaces.

  • Quarter-end occupancy of 81.5 percent in the Suburban portfolio compared to 82.2 percent in the corresponding quarter in the prior year and 82.4 percent at June 30, 2012.


Investing Highlights

  • Acquired the 267,000 square foot office buildings located at 635-641 Sixth Avenue for $173.0 million, or $648 per square foot. Office occupancy at 641 Sixth Avenue is 100 percent and the 635 Sixth Avenue office space will be redeveloped in order to reposition it for high quality tenancy.

  • The Company, together with an affiliate of Blackstone Real Estate Partners VII, Gramercy Capital Corp. (NYSE: GKK) and Square Mile Capital Management LLC, formed a joint venture to recapitalize a 31-property, 4.5-million-square-foot office portfolio in southern California.

  • Formed a joint venture with Harel Insurance and Finance and the Naftali Group to develop a dormitory tower for Pace University at 33 Beekman Street in downtown Manhattan. The joint venture, in which the Company holds a 45.9 percent interest, acquired the development site for $31.2 million.

  • Closed on the sale of a 214,372 square foot office condominium at 3 Columbus Circle to Young & Rubicam for $143.6 million. This transaction was part of a 340,000 square foot commitment by Young & Rubicam, which included a lease for 124,760 square feet and which was subsequently expanded by 34,634 square feet.

Financing Highlights

  • Issued 6.50 percent Series I Cumulative Redeemable Preferred Stock generating net proceeds to the Company of $222.2 million, redeemed the entire $100.0 million, 7.875 percent Series D Cumulative Redeemable Preferred Stock and redeemed $100.0 million of the 7.625 percent Series C Cumulative Redeemable Preferred Stock.

  • Closed on a $175.0 million financing with a 1-year term and a 1-year extension option. This facility, which is secured by select assets in the Company's debt portfolio, bears interest at 300 basis points over LIBOR and was unfunded as of September 30, 2012.

  • Recapitalized the Meadows, a New Jersey office complex. This recapitalization resulted in the Company having a 50 percent ownership in the complex and recognizing $10.8 million of additional income.

Summary

SL Green Realty Corp. (NYS: SLG) today reported funds from operations, or FFO, of $104.8 million, or $1.12 per diluted share, for the quarter ended September 30, 2012, compared to $87.9 million, or $1.00 per diluted share, for the same quarter in 2011.

Net income attributable to common stockholders totaled $7.7 million, or $0.09 per diluted share, for the quarter ended September 30, 2012, compared to $7.1 million, or $0.08 per diluted share, for the same quarter in 2011.

Operating and Leasing Activity

For the third quarter of 2012, the Company reported revenues and operating income of $361.4 million and $204.7 million, respectively, compared to $306.6 million and $162.3 million, respectively, for the same period in 2011. For the nine months ended September 30, 2012, the Company reported revenues and operating income of $1.0 billion and $653.7 million, respectively, compared to $934.6 million and $534.9 million, respectively, for the same period in 2011.

Same-store NOI on a combined basis increased by 0.4 percent to $575.3 million for the nine months ended September 30, 2012, after giving consideration to 1515 Broadway and 521 Fifth Avenue as consolidated properties, as compared to the same period in 2011. Consolidated property same-store NOI increased by 0.2 percent to $499.7 million and unconsolidated joint venture property same-store NOI increased 1.7 percent to $75.7 million.

Same-store cash NOI on a combined basis increased by 5.4 percent to $516.1 million for the nine months ended September 30, 2012, after giving consideration to 1515 Broadway and 521 Fifth Avenue as consolidated properties, as compared to the same period in 2011. Consolidated property same-store cash NOI increased by 5.7 percent to $443.9 million and unconsolidated joint venture property same-store cash NOI increased 3.7 percent to $72.3 million.

Occupancy for the Company's stabilized, same-store Manhattan portfolio at September 30, 2012 was 93.3 percent as compared to 93.5 percent at September 30, 2011 and 93.2 percent at June 30, 2012. During the quarter, the Company signed 47 office leases in its Manhattan portfolio totaling 412,407 square feet. Eighteen leases totaling 306,837 square feet represented office leases that replaced previous vacancy, and 29 office leases comprising 105,570 square feet had average starting rents of $50.07 per rentable square foot, representing a 2.7 percent increase over the previously fully escalated rents on the same office spaces. The average lease term on the Manhattan office leases signed in the third quarter was 12.0 years and average tenant concessions were 4.8 months of free rent with a tenant improvement allowance of $41.53 per rentable square foot.

During the quarter, 215,337 square feet of office leases commenced in the Manhattan portfolio, 97,524 square feet of which represented office leases that replaced previous vacancy, and 117,813 square feet of which represented office leases that had average starting rents of $48.73 per rentable square foot, representing a 7.4 percent decrease over the previously fully escalated rents on the same office spaces.

Occupancy for the Company's Suburban portfolio was 81.5 percent at September 30, 2012, as compared to 82.2 percent at September 30, 2011 and 82.4 percent at June 30, 2012.

During the quarter, the Company signed 27 office leases in the Suburban portfolio totaling 158,614 square feet. Ten leases totaling 41,753 square feet represented office leases that replaced previous vacancy, and 17 office leases comprising 116,861 square feet had average starting rents of $30.98 per rentable square foot, representing a 2.4 percent decrease over the previously fully escalated rents on the same office spaces. The average lease term on the Suburban office leases signed in the third quarter was 6.4 years and average tenant concessions were 3.8 months of free rent with a tenant improvement allowance of $14.46 per rentable square foot.

During the quarter, 134,737 square feet of office leases commenced in the Suburban portfolio, 52,998 square feet of which represented office leases that replaced previous vacancy, and 81,739 square feet of which represented office leases that had average starting rents of $31.89 per rentable square foot, representing a 1.8 percent decrease over the previously fully escalated rents on the same office spaces.

Significant leases that were signed during the third quarter included:

  • New lease on 131,946 square feet with The City of New York for 20.8 years at 100 Church Street;

  • New lease on 37,901 square feet with Capital One, N.A for 4.5 years at 280 Park Avenue;

  • New lease on 34,634 square feet with Young & Rubicam, Inc. for 20.1 years at 3 Columbus Circle;

  • New lease on 27,342 square feet with Alterra Insurance USA for 7.3 years at 1185 Avenue of the Americas;

  • New lease on 20,512 square feet with San Ash New York Megastores LLC for 15.8 years at 333 West 34th Street; and

  • New lease on 22,798 square feet with Merit Direct for 10.9 years at 1100 King Street, Westchester County, NY.

Marketing, general and administrative, or MG&A, expenses for the quarter ended September 30, 2012 were $20.6 million, or 5.0 percent of total revenues including the Company's share of joint venture revenue compared to $18.9 million, or 5.3 percent for the quarter ended September 30, 2011.

Real Estate Investment Activity

In September 2012, the Company acquired the 267,000 square foot office buildings located at 635-641 Sixth Avenue for $173.0 million, or $648 per square foot. Office occupancy at 641 Sixth Avenue is 100 percent and the 635 Sixth Avenue office space will be redeveloped in order to reposition it for high quality tenancy.

In September 2012, the Company, together with an affiliate of Blackstone Real Estate Partners VII, Gramercy Capital Corp. and Square Mile Capital Management LLC, formed a joint venture to recapitalize a 31-property, 4.5-million-square-foot office portfolio in southern California. Following the recapitalization, Blackstone became the majority owner of the joint venture, with Equity Office Properties, a Blackstone affiliate, being responsible for the portfolio's management and leasing. Prior to the recapitalization, the Company held $26.7 million in mezzanine and preferred equity positions in the entity that owned the portfolio. The new joint venture extended the $678.8 million mortgage secured by the portfolio for a term of 2 years with a 1-year extension option.

In August 2012, the Company formed a joint venture with Harel Insurance and Finance and the Naftali Group to develop a dormitory tower for Pace University at 33 Beekman Street in downtown Manhattan. Pace University will lease the entire building under a long-term net lease agreement. The joint venture, in which the Company holds a 45.9 percent interest, acquired the development site for $31.2 million. Simultaneous with the closing, the joint venture also closed on a 5-year $75.0 million construction loan which bears interest at 275 basis points over LIBOR.

In September 2012, the Company, along with the Moinian Group, its joint venture partner, closed on the sale of a 214,372 square foot office condominium at 3 Columbus Circle to Young and Rubicam for a gross sale price of $143.6 million. This transaction was part of a 340,000 square foot commitment by Young & Rubicam, which included a lease for 124,760 square feet.

In July 2012, the Company, along with its joint venture partner, sold One Court Square for a gross sale price of $481.1 million. The transaction included the assumption by the purchaser of $315.0 million of existing debt. The Company, a 30 percent owner in the joint venture, received approximately $44.3 million of net proceeds from the sale.

Debt and Preferred Equity Investment Activity

The Company's debt and preferred equity investment portfolio totaled $1.1 billion at September 30, 2012. During the third quarter, the Company purchased and originated new debt and preferred equity investments totaling $203.3 million, all of which are collateralized by New York City commercial office properties, and recorded $125.0 million of principal reductions from investments that were sold, repaid or otherwise resolved. The debt and preferred equity investment portfolio had a weighted average maturity of 2.6 years as of September 30, 2012 and had a weighted average yield during the quarter ended September 30, 2012 of 9.6 percent.

Financing and Capital Activity

In July 2012, the Company redeemed the entire $100.0 million, 7.875 percent Series D Cumulative Redeemable Preferred Stock at a redemption price of $25.00 per share of preferred stock plus $0.4922 in accumulated and unpaid dividends through July 14, 2012.

In August 2012, the Company issued 6.50 percent Series I Cumulative Redeemable Preferred Stock generating net proceeds to the Company of $222.2 million.

In September 2012, the Company redeemed $100.0 million of its outstanding shares of 7.625 percent Series C Cumulative Redeemable Preferred Stock at a redemption price of $25.00 per share of preferred stock plus $0.3707 in accumulated and unpaid dividends through September 24, 2012. Following the redemption, the Company has 7.7 million shares of Series C Preferred Stock outstanding.

In September 2012, the Company closed on a $175.0 million financing with a 1-year term and a 1-year extension option. This facility,which is secured by select assets in the Company's debt portfolio, bears interest at 300 basis points over LIBOR and was unfunded as of September 30, 2012.

In August 2012, the Company, along with its joint venture partner, recapitalized the Meadows, a New Jersey office complex. The recapitalization resulted in the Company having a 50 percent ownership in the complex and recognizing $10.8 million of additional income. As part of the recapitalization the property was encumbered by a new $60.0 million mortgage with a 3-year term and a 1-year extension option, which bears interest at 575 basis point over LIBOR, subject to a 2 percent floor.

Dividends

During the third quarter of 2012, the Company declared quarterly dividends on its outstanding common and preferred stock as follows:

  • $0.25 per share of common stock, which was paid on October 15, 2012 to stockholders of record on the close of business on September 28, 2012;

  • $0.4766 per share on the Company's Series C Preferred Stock for the period July 15, 2012 through and including October 14, 2012, which was paid on October 15, 2012 to stockholders of record on the close of business on September 28, 2012, and reflects the regular quarterly dividend which is the equivalent of annualized dividend of $1.9064 per share; and

  • $0.2934 per share on the Company's Series I Preferred Stock for the period August 10, 2012 through and including October 14, 2012, which was paid on October 15, 2012 to stockholders of record on the close of business on September 28, 2012, and reflects the regular pro-rated quarterly dividend which is the equivalent of annualized dividend of $1.625 per share.

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 webcast on Thursday, October 25, 2012 at 2:00 pm EDT to discuss the financial results.

The Supplemental Package will be available prior to the quarterly conference call on the Company's website, www.slgreen.com, under "Financial Reports" in the Investors section.

The live conference will be webcast in listen-only mode on the Company's website under "Event Calendar & Webcasts" in the Investors section and on Thomson's StreetEvents Network. The conference may also be accessed by dialing 866.543.6408 Domestic or 617.213.8899 International, using pass-code "SL Green."

A replay of the call will be available through November 1, 2012 by dialing 888.286.8010 Domestic or 617.801.6888 International, using pass-code 51675606.

Annual Institutional Investor Conference

The Company will host its Annual Institutional Investor Conference on Monday, December 3, 2012. Details of the event will be provided via email the week of October 29, 2012. To be added to the Conference's email distribution list or to pre-register, please email SLG2012@slgreen.com.

Company Profile

SL Green Realty Corp., New York City's largest office landlord, is the only fully integrated real estate investment trust, or REIT, that is focused primarily on acquiring, managing and maximizing value of Manhattan commercial properties. As of September 30, 2012, SL Green owned interests in 77 Manhattan properties totaling 39.3 million square feet. This included ownership interests in 27.5 million square feet of commercial properties and debt and preferred equity investments secured by 11.8 million square feet of properties. In addition to its Manhattan investments, SL Green holds ownership interests in 31 suburban assets totaling 5.4 million square feet in Brooklyn, Long Island, Westchester County, Connecticut and New Jersey, along with four development properties in the suburbs encompassing approximately 0.5 million square feet. The Company also has ownership interests in 31 properties totaling 4.5 million square feet in southern California.

To be added to the Company's distribution list or to obtain the latest news releases and other Company information, please visit our website at www.slgreen.com or contact Investor Relations at 212.594.2700.

Disclaimers

Non-GAAP Financial Measures

During the quarterly conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. In addition, the Company has used non-GAAP financial measures in this press release. A reconciliation of each non-GAAP financial measure and the comparable GAAP financial measure can be found on pages 11 and 12 of this release and in the Company's Supplemental Package.

Forward-looking Statement

This press release contains "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 press release are forward-looking statements.All forward-looking statements speak only as of the date of this press release.Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance, achievements or transactions of the Company to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements.Such risks, uncertainties and other factors relate to, among others, the strength of the commercial office real estate markets in the New York Metropolitan area, reduced demand for office space, unanticipated increases in financing and other costs, competitive market conditions, unanticipated administrative costs, divergent interests from or the financial condition of our joint venture partners, 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, all of which are beyond the Company's control.Additional information or factors that could affect the Company and the forward-looking statements contained herein are included in the Company's filings with the Securities and Exchange Commission.The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

SL GREEN REALTY CORP.

CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED

(Amounts in thousands, except per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2012

2011

2012

2011

Revenues:

Rental revenue, net

$

281,496

$

242,938

$

810,001

$

708,593

Escalation and reimbursement

42,804

39,176

126,050

104,446

Investment and preferred equity income

27,869

18,433

87,655

98,256

Other income

9,272

6,076

25,932

23,256

Total revenues

361,441

306,623

1,049,638

934,551

Expenses:

Operating expenses (including approximately $4,668 and $12,856 (2012) and $4,335 and $10,948 (2011) paid to affiliates)

83,980

69,093

226,168

191,792

Real estate taxes

53,595

44,915

157,662

128,957

Ground rent

8,874

8,463

26,570

24,110

Interest expense, net of interest income

85,828

74,603

248,292

207,042

Amortization of deferred financing costs

4,493

2,986

11,626

9,469

Depreciation and amortization

83,429

73,358

238,324

202,394

Loan loss and other investment reserves, net of recoveries

---

---

564

(1,870

)

Transaction related costs

1,372

169

4,493

3,820

Marketing, general and administrative

20,551

18,900

61,469

61,375

Total expenses

342,122

292,487

975,168

827,089

Income from continuing operations before equity in net income of unconsolidated joint ventures, noncontrolling interests and discontinued operations

19,319

14,136

74,470

107,462

Equity in net income (loss) from unconsolidated joint ventures

11,658

(2,728

)

80,988

7,663

Equity in net gain (loss) on sale of interest in unconsolidated joint venture/ real estate

(4,807

)

3,032

11,987

3,032

Purchase price fair value adjustment

---

999

---

489,889

Gain (loss) on investment in marketable securities

2,237

---

2,237

(133

)

Depreciable real estate reserves

---

---

5,789

---

Gain (loss) on early extinguishment of debt

---

(67

)

---

904

Income from continuing operations

28,407

15,372

175,471

608,817

Net income from discontinued operations

223

1,116

145

4,665

Gain on sale of discontinued operations

---

---

6,627

46,085

Net income

28,630

16,488

182,243

659,567

Net income attributable to noncontrolling interests in the operating partnership

(567

)

(169

)

(4,876

)

(13,946

)

Preferred unit distributions

(571

)

---

(1,533

)

---

Net income attributable to noncontrolling interests in other partnerships

(1,835

)

(1,695

)

(6,792

)

(8,564

)

Net income attributable to SL Green

25,657

14,624

169,042

637,057

Preferred stock redemption costs

(10,010

)

---

(10,010

)

---

Preferred stock dividends

(7,915

)

(7,545

)

(23,004

)

(22,634

)

Net income attributable to SL Green common stockholders

$

7,732

$

7,079

$

136,028

$

614,423

Earnings Per Share (EPS)

Net income per share (Basic)

$

0.09

$

0.08

$

1.53

$

7.40

Net income per share (Diluted)

$

0.09

$

0.08

$

1.52

$

7.36

Funds From Operations (FFO)

FFO per share (Basic)

$

1.12

$

1.00

$

4.16

$

3.81

FFO per share (Diluted)

$

1.12

$

1.00

$

4.14

$

3.79

Basic ownership interest

Weighted average REIT common shares for net income per share

90,241

85,696

88,929

83,001

Weighted average partnership units held by noncontrolling interests

3,320

1,912

3,188

1,876

Basic weighted average shares and units outstanding for FFO per share

93,561

87,608

92,117

84,877

Diluted ownership interest

Weighted average REIT common share and common share equivalents

90,571

86,169

89,297

83,508

Weighted average partnership units held by noncontrolling interests

3,320

1,912