SL Green Realty Corp. Reports Second Quarter 2013 FFO of $1.42 Per Share before Transaction Costs an

SL Green Realty Corp. Reports Second Quarter 2013 FFO of $1.42 Per Share before Transaction Costs and Non-Recurring Charges; and EPS of $0.09 Per Share

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


Financial and Operating Highlights

  • Second quarter FFO of $1.42 per diluted share before transaction related costs of $0.02 per diluted share and non-recurring charges related to the redemption of the Series C Cumulative Redeemable Preferred Stock of $0.13 per diluted share, compares with prior year second quarter FFO of $1.94 per diluted share before transaction related costs of $0.02. The prior year results reflect additional income of $67.9 million, or $0.73 per diluted share, relating to profit from the recapitalization of 717 Fifth Avenue.
  • Second quarter net income attributable to common stockholders of $0.09 per diluted share compares with prior year net income of $1.14 per diluted share.
  • Combined same-store cash NOI increased 2.2 percent for the second quarter, an increase of $4.0 million over the second quarter of 2012. Combined same-store cash NOI increased 3.3 percent for the first six months of 2013, an increase of $11.7 million over the first six months of 2012.
  • Signed 69 Manhattan office leases totaling 768,682 square feet during the second quarter. The mark-to-market on replacement office leases signed in Manhattan was 11.7 percent higher in the second quarter than the previously fully escalated rents on the same office spaces.
  • Signed 44 Suburban office leases totaling 269,955 square feet during the second quarter. The mark-to-market on replacement office leases signed in the Suburban portfolio was 10.6 percent lower in the second quarter than the previously fully escalated rents on the same office spaces.

Investing Highlights

  • Entered into an agreement to sell 333 West 34thStreet in Manhattan for $220.3 million, or approximately $630 per square foot. The sale is expected to close during the third quarter of 2013, subject to customary closing conditions.
  • Entered into an agreement to sell 300 Main Street in Stamford, Connecticut for $13.5 million. The sale is expected to close during the third quarter of 2013, subject to customary closing conditions.
  • Recorded additional income of $6.4 million in connection with the repayment at par of a first mortgage secured by interests in 315 Park Avenue South, Manhattan.
  • Acquired interests from the Company's joint venture partner in 16 Court Street, which valued the Property at $96.2 million, inclusive of the $84.6 million mortgage encumbering the property.

Financing Highlights

  • Redeemed all 7,700,000 outstanding shares of 7.625% Series C Cumulative Redeemable Preferred Stock.
  • Closed on a three-year construction financing facility at 1552-1560 Broadway totaling $200.0 million, inclusive of future funding. The new floating rate facility replaces the previous $119.6 million mortgage.
  • Closed on a $53.2 million mortgage refinancing of 29 West 34thStreet. The new five-year, floating rate loan replaces the previous $53.2 million mortgage.

Summary

SL Green Realty Corp. (NYS: SLG) today reported funds from operations, or FFO, of $120.5 million, or $1.27 per diluted share, for the quarter ended June 30, 2013 inclusive of charges related to the redemption of the Series C Cumulative Redeemable Preferred Stock of $12.2 million, or $0.13 per diluted share, and transaction costs of $1.7 million, or $0.02 per diluted share, compared to $179.0 million, or $1.92 per diluted share, for the same quarter in 2012 after giving consideration to transaction costs of $2.0 million, or $0.02 per diluted share. The prior year results reflect additional income of $67.9 million, or $0.73 per diluted share, related to profit, from the recapitalization of 717 Fifth Avenue.

Net income attributable to common stockholders totaled $8.3 million, or $0.09 per diluted share, for the quarter ended June 30, 2013, compared to $103.0 million, or $1.14 per diluted share, for the same quarter in 2012.

Operating and Leasing Activity

For the second quarter of 2013, the Company reported revenues and operating income of $365.1 million and $207.4 million, respectively, compared to $344.5 million and $264.2 million, respectively, for the same period in 2012.

Same-store cash NOI on a combined basis increased by 2.2 percent to $184.8 million for the quarter ended June 30, 2013 as compared to the same period in 2012. Consolidated property same-store cash NOI increased by 2.4 percent to $160.8 million and unconsolidated joint venture property same-store cash NOI increased 0.9 percent to $24.0 million.

Same-store cash NOI on a combined basis increased by 3.3 percent to $366.0 million for the six months ended June 30, 2013 as compared to the same period in 2012. Consolidated property same-store cash NOI increased by 3.6 percent to $318.4 million and unconsolidated joint venture property same-store cash NOI increased 1.4 percent to $47.7 million.

Occupancy for the Company's stabilized, same-store Manhattan portfolio at June 30, 2013 increased to 94.4 percent compared to 93.8 percent at June 30, 2012 and 94.3 percent at March 31, 2013.

During the quarter, the Company signed 69 office leases in its Manhattan portfolio totaling 768,682 square feet. Twenty-nine leases totaling 228,159 square feet represented office leases that replaced previous vacancy. Forty office leases comprising 540,523 square feet, which had been occupied within the prior twelve months, had average starting rents of $65.32 per rentable square foot, representing an 11.7 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 second quarter was 7.1 years and average tenant concessions were 3.3 months of free rent with a tenant improvement allowance of $32.17 per rentable square foot.

During the quarter, 641,012 square feet of office leases commenced in the Manhattan portfolio. Office leases totaling 131,210 square feet replaced previous vacancy. Office leases comprising the remaining 509,802 square feet, which had been occupied within the prior twelve months, had average starting rents of $56.60 per rentable square foot, representing a 5.0 percent increase over the previously fully escalated rents on the same office spaces.

Occupancy for the Company's Suburban portfolio increased to 80.5 percent at June 30, 2013, compared to 80.2 percent at March 31, 2013.

During the quarter, the Company signed 44 office leases in the Suburban portfolio totaling 269,955 square feet. Twenty leases totaling 99,582 square feet represented office leases that replaced previous vacancy. Twenty-four office leases comprising the remaining 170,373 square feet, which had been occupied within the prior twelve months, had average starting rents of $30.46 per rentable square foot, representing a 10.6 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 second quarter was 6.2 years and average tenant concessions were 4.8 months of free rent with a tenant improvement allowance of $17.49 per rentable square foot.

During the quarter, 211,056 square feet of office leases commenced in the Suburban portfolio. Leases totaling 59,648 square feet represented office leases that replaced previous vacancy. Office leases comprising 151,408 square feet had been occupied within the prior twelve months and had average starting rents of $34.25 per rentable square foot, representing a 10.3 percent decrease over the previously fully escalated rents on the same office spaces.

Significant leases that were signed during the second quarter included:

  • Early renewal on 178,024 square feet with The Travelers Indemnity Company for 5.0 years at 485 Lexington Avenue bringing the remaining lease term to 8.2 years;
  • Early renewal and expansion on 72,080 square feet with IMG Worldwide, Inc. for a weighted average term of 10.1 years at 304 Park Avenue South bringing the remaining lease term to 14.8 years;
  • New lease on 52,450 square feet with Pandora Media, Inc. for 10.0 years at 125 Park Avenue;
  • New lease on 49,541 square feet with Blue Mountain Realty, LLC for 10.0 years at 280 Park Avenue;
  • New lease on 49,541 square feet with Promontory Financial Group, LLC for 10.0 years at 280 Park Avenue;
  • Early renewal on 37,224 square feet with Deloitte LLP for 10.0 years at Jericho Plaza bringing the remaining lease term to 11.1 years;
  • Early renewal on 36,920 square feet with SGS North America, Inc. for 11.0 years at The Meadows bringing the remaining lease term to 11.8 years; and
  • Early renewal on 35,113 square feet with Beth Israel Medical Center for 15.6 years at 555 West 57th Street bringing the remaining lease term to 16.6 years.

Marketing, general and administrative, or MG&A, expenses for the quarter ended June 30, 2013 were $21.5 million, or 5.0 percent of total revenues including the Company's share of joint venture revenue compared to $20.7 million, or 5.2 percent for the quarter ended June 30, 2012.

Real Estate Investment Activity

In March 2013, the Company entered into an agreement to sell its 130,000 square foot property located at 300 Main Street in Stamford, Connecticut for $13.5 million. The property, which was acquired by the Company in January 2007, is encumbered by an $11.5 million first mortgage. The sale is expected to close during the third quarter of 2013, subject to customary closing conditions.

In April 2013, the Company acquired interests from its joint venture partner, City Investment Fund, in 16 Court Street in Brooklyn, in a transaction which valued the Property at $96.2 million, inclusive of the $84.6 million mortgage encumbering the property. This property, which was originally acquired by the joint venture in July 2007, was previously accounted for as an investment in unconsolidated joint ventures.

In June 2013, the Company entered into an agreement to sell its 345,400 square foot property located at 333 West 34th Street in Manhattan for $220.3 million, or approximately $630 per square foot. The building which was acquired by SL Green in June 2007, is 100 percent occupied and is unencumbered by debt. The sale is expected to close during the third quarter of 2013, subject to customary closing conditions.

Debt and Preferred Equity Investment Activity

The Company's debt and preferred equity investment portfolio totaled $1.2 billion at June 30, 2013. During the second quarter, the Company purchased and originated new debt and preferred equity investments totaling $79.0 million, all of which are collateralized by New York City commercial office properties, and recorded $297.1 million of principal reductions from investments that were sold or repaid. The debt and preferred equity investment portfolio had a weighted average maturity of 2.37 years as of June 30, 2013 and had a weighted average yield during the quarter ended June 30, 2013 of 10.96 percent.

During the second quarter, the Company recorded additional income of $6.4 million in connection with the repayment at par of the first mortgage secured by interests in 315 Park Avenue South, Manhattan. The Company acquired this non-performing loan with an original balance of $219.0 million in November 2012.

Financing and Capital Activity

In April 2013, the Company refinanced the previous $119.6 million first mortgage at 1552-1560 Broadway with a new three-year construction financing facility totaling $200.0 million, which carries a weighted average floating rate of interest of 317 basis points over the 30-day LIBOR.

In April 2013, the Company refinanced the maturing $12.0 million mortgage at 21 East 66th Street with a new $12.0 million 10-year mortgage which bears interest at a fixed rate of 3.6 percent.

In May 2013, the Company refinanced the maturing $53.2 million mortgage at 29 West 34th Street with a new $53.2 million five-year mortgage which carries a floating rate of interest of 190 basis points over the 30-day LIBOR.

During the second quarter, the Company redeemed all 7,700,000 outstanding shares of its 7.625% Series C Cumulative Redeemable Preferred Stock at a redemption price of $25.00 per share, plus $0.3495 per share in accumulated and unpaid dividends on such shares through the redemption date.

Dividends

During the second quarter of 2013, the Company declared quarterly dividends on its outstanding common and preferred stock as follows:

  • $0.33 per share of common stock, which was paid on July 15, 2013 to stockholders of record on the close of business on July 1, 2013; and
  • $0.40625 per share on the Company's 6.50% Series I Cumulative Redeemable Preferred Stock for the period April 15, 2013 through and including July 14, 2013, which was paid on July 15, 2013 to stockholders of record on the close of business on July 1, 2013, and reflects the regular quarterly dividend which is the equivalent of annualized dividend of $1.625 per share.

Annual Institutional Investor Conference

The Company will host its Annual Institutional Investor Conference on Monday, December 9, 2013 in New York City. To be added to the Conference's email distribution list or to pre-register, please email SLG2013@slgreen.com. Details of the event will be provided October 9, 2013 to those on the Conference's email distribution list.

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, July 25, 2013 at 2:00 pm ET 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 866-318-8620 Domestic or 617-399-5139 International, using pass-code "SL Green."

A replay of the call will be available through August 1, 2013 by dialing 888-286-8010 Domestic or 617-801-6888 International, using pass-code 74246184.

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 June 30, 2013, SL Green owned interests in 87 Manhattan properties totaling 42.8 million square feet. This included ownership interests in 24.3 million square feet of commercial properties and debt and preferred equity investments secured by 14.7 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 three development properties in the suburbs encompassing approximately 0.4 million square feet. The Company also has ownership interests in 30 properties totaling 4.1 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 and amounts in thousands, except per share data)

 
Three Months Ended

June 30,

Six Months Ended

June 30,

2013  2012 2013  2012 
Revenues:
Rental revenue, net$273,307$263,838$539,755$520,595
Escalation and reimbursement39,38140,96779,92682,080
Investment and preferred equity income46,73133,44899,43959,786
Other income5,726 6,282 11,493 16,659 
Total revenues365,145 344,535 730,613 679,120 
Expenses:

Operating expenses (including approximately $4,319 and $8,469 (2013)
and $4,773 and $8,244 (2012) paid to related parties)

69,43267,434141,630139,319
Real estate taxes52,71052,256106,114103,453
Ground rent8,6498,89019,64017,696
Interest expense, net of interest income83,27682,159164,447162,130
Amortization of deferred financing costs4,2403,5538,7037,133
Depreciation and amortization82,02076,207161,114151,739
Loan loss and other investment reserves, net of recoveries564
Transaction related costs1,7111,9703,0683,026
Marketing, general and administrative21,514 20,721 42,582 40,917 
Total expenses323,552 

313,190

 647,298 625,977 

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

41,59331,34583,31553,143
Equity in net (loss) income from unconsolidated joint ventures(3,761)70,8901,31369,330

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

(3,583)9,534(3,583)16,794
Loss on sale of investment in marketable securities(8)(65)
Purchase price fair value adjustment(2,305)(2,305)
Depreciable real estate reserves, net of recoveries5,7895,789
Loss on early extinguishment of debt(10) (18,523) 
Income from continuing operations31,926117,55860,152145,056
Net (loss) income from discontinued operations(678)8993201,931
Gain on sale of discontinued operations  1,113 6,627 
Net income31,248118,45761,585153,614
Net income attributable to noncontrolling interests in the Operating Partnership(244)(3,421)(799)(4,309)
Net income attributable to noncontrolling interests in other partnerships(3,004)(3,887)(5,905)(4,958)
Preferred unit distributions(565)(565)(1,130)(962)
Net income attributable to SL Green27,435110,58453,751143,385
Preferred stock redemption costs(12,160)(12,160)
Perpetual preferred stock dividends(6,999)(7,544)(14,406)(15,089)
Net income attributable to SL Green common stockholders$8,276 $103,040 $27,185 $128,296 
 
Earnings Per Share (EPS)
Net income per share (Basic)$0.09$1.15$0.30$1.45
Net income per share (Diluted)$0.09 $1.14 $0.30 $1.45 
 
Funds From Operations (FFO)
FFO per share (Basic)$1.28$1.93$2.44$3.05
FFO per share (Diluted)$1.27 $1.92 $2.43 $3.03 
 
Basic ownership interest
Weighted average REIT common shares for net income per share91,66089,78991,53088,265
Weighted average partnership units held by noncontrolling interests2,652 3,193 2,694 3,121 
Basic weighted average shares and units outstanding for FFO per share94,312  Read Full Story

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