Press Release Details
SL Green Realty Corp. Reports 15% Gain in Fourth Quarter FFO
Fourth Quarter Highlights
15% FFO increase, $0.70 per share (diluted) versus $0.61 prior year
27% same store portfolio cash NOI growth
Completed sales of 17 Battery South and 90 Broad Street
Completed purchase of 180 Madison Avenue
Completed January purchases of One Park Ave., 1370 Broadway, and 469 Seventh Ave.
Financial Results
SL Green Realty Corp. (NYSE:SLG) reported a 15% increase in operating results for the three months ended December 31, 2000. During this period funds from operations (FFO) before minority interest totaled $20.1 million, or $0.70 per share (diluted), compared to $16.9 million, or $0.61 per share for the same quarter in 1999.
Full year results were also strong, reflecting a 17% FFO increase from 1999. FFO for the year ended December 31, 2000 totaled $75.6 million or $2.67 per share (diluted) compared to $62.6 million or $2.29 per share in the previous year. This growth was mainly attributable to strong full-year same store cash NOI growth of 23%.
Total quarterly revenues increased 8% in the fourth quarter to $58.2 million compared to $53.9 million last year. The $4.3 million growth in revenue resulted from:
2000 same store portfolio ($4.8 million)
Investment and other income ($1.8 million)
1999 acquisitions ($0.5 million)
These revenue increases were partially offset by reduced revenues of properties sold ($1.8 million) or contributed to unconsolidated joint ventures ($1.1 million).
During the quarter and year ended December 31, 2000, the Company recorded extraordinary losses of $0.5 million and $0.9 million, respectively, due to the early extinguishments of debt associated with various refinancings. Comparatively, during the year ended December 31, 1999, the Company incurred extraordinary losses for similar refinancings of $0.4 million and $1.0 million for the quarter and year, respectively. These items were excluded from the Company's 2000 and 1999 results.
The 2000 results of the Company also exclude gains on sales of properties and an equity investment which totaled $16.8 and $41.4 million for the quarter and year, respectively.
Same store cash NOI increased $5.1 million, or 27%, to $23.7 million over the same period in the prior year. Cash NOI margins before ground rent improved year over year from 56.0% to 62.3%. The improvement in cash NOI was driven primarily by a $5.6 million increase in cash revenue due to:
A 49% increase in replacement rents over previously fully-escalated rents ($2.5 million)
Reduced free rent as many properties reached stabilization ($1.2 million)
Rent steps from current in-place tenants ($0.8 million)
$1.0 million increase in escalation and reimbursement income primarily from increased electric recoveries ($0.8 million)
The increase in revenue was partially offset by a $0.4 million or 2% increase in operating costs, the increase was related to higher utility costs ($0.7 million) that was partially offset by lower repairs and maintenance ($0.1 million) and lower advertising and professional costs ($0.1 million). Excluding third quarter recovery adjustments for electric inclusion tenants, approximately 85% of the electric increase was recovered through the utility clause in the tenants' lease. In addition, real estate taxes increased due to higher assessed values at several properties ($0.1 million).
The Company's EBITDA increased $4.1 million, resulting in increased margins before ground rent of 66.0% compared to 61.6% for the same period last year and after ground rent margin improved to
60.2% from 55.5% in the corresponding period. Margin improvement was driven by each of the Company's real estate investment themes:
GAAP NOI of $2.6 million;
$3.9 million increase from same store portfolio (19% improvement)
$0.7 million increase from joint ventures
$1.9 decrease from properties sold or contributed to a joint venture
Income from structured finance, ($1.8 million), and interest ($0.2 million)
These increases in EBITDA were offset by increased MG&A ($0.5 million) primarily due to increased personnel costs and a loss from the equity in service corporations and affiliate due to increased costs associated with e.Emerge.
FFO improved $3.2 million primarily as a result of:
$4.1 million increase in EBITDA
$0.5 million increased FFO contribution from unconsolidated joint ventures
These improvements were offset in part by higher interest costs ($1.3 million) associated with: higher average debt levels due to acquisition and structured finance debt ($0.6 million), the higher average debt levels due to the funding of ongoing capital projects and working capital requirements ($0.2 million), and higher interest rates ($0.5 million).
At the end of the quarter, consolidated debt totaled $460.7 million, reflecting a debt to market capitalization ratio of 34.7%.
New Investment Activity
In January 2001, the Company acquired 469 Seventh Avenue with Morgan Stanley Real Estate Fund III, L.P. ("MSREF") for $45.7 million. With a total of 253,000 sf, the building traded at $180 psf. Located two blocks north of Penn Station, in-place rents are $28.50 psf, approximately 35% below current market levels. The Company holds an interest of 35% in the property. SL Green has assumed managing and leasing responsibilities for the property.
On September 21, 2000, the Company entered into an agreement to purchase 1370 Broadway for $50.5 million. This 16-story, 255,000 square foot office building is located across the street from 1372 Broadway, an SL Green property in the Times Square submarket. In-place rents are approximately $27.72 per square foot, approximately 38% below current market levels. The acquisition closed in January 2001. Proceeds from the sale of 17 Battery South funded the acquisition to complete a 1031 tax-free exchange and defer the capital gain resulting from the sale.
On September 22, 2000, the Company, via a joint venture with MSREF, entered into an agreement to purchase 180 Madison Avenue for $41.25 million. The property consists of 265,000 square feet over 23 floors. Located at the corner of 34th Street and Madison Avenue, SL Green purchased a 49.9% interest in the property in December 2000. The property was acquired as part of a Section 1031 tax-free exchange in order to partially defer the capital gain resulting from the sale of 90 Broad Street. SL Green assumed managing and leasing responsibilities for the property.
On September 28, 2000, the Company entered into an agreement to purchase various ownership and mortgage interests in One Park Avenue for $233.9 million. This 913,000 square foot, 20-story office building is located between 32nd and 33rd Streets. The property has full block exposure on Park Avenue. The Company also acquired an option to purchase the ground lease position. The acquisition was financed with a $150 million mortgage loan from Lehman Brothers Holdings, Inc. and the Company's unsecured line of credit. This transaction closed on January 10, 2001.
During the quarter, the Company sold two entities:
The office building at 90 Broad Street sold at $60 million, or $177 psf. This property is owned through a joint venture partnership with MSREF. The Company owned a 35% interest in the 339,000 square foot building. The sale was completed in November 2000 and resulted in a gain of $6.0 million.
The last sale was a wholly-owned property located at 17 Battery Place South. This property is approximately 400,000 square feet with a contracted sales price of $53 million or $135 per square foot. The sale was completed in December 2000 and resulted in a gain of $10.8 million.
In January 2001, the Company also sold their retail condominium interests in 633 Third Avenue for $13.25 million. Their interest represented 40,623 sf leased to Chase Manhattan and an affiliate of the New York Sports Club.
Today, SL Green's portfolio consists of interests in 25 properties, aggregating 10.1 million square feet.
SL Green Realty is a self-administered and self-managed real estate investment trust ("REIT") that acquires, owns and manages a Class B Manhattan office portfolio. The Company is the only publicly held REIT which exclusively specializes in this niche.
Financial Tables attached
To receive SL Green's latest news release and other corporate documents, including the Second Quarter Supplemental Data, via FAX at no cost, please contact the Investor Relations office at 212-216-1601. All releases and supplemental data can also be downloaded directly from the SL Green website at:
www.slgreen.com.
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 and industrial real estate markets in New York, competitive market conditions, unanticipated administrative costs, timing of leasing income, general and local economic growth, interest rates and capital market conditions. For further information, please refer to the Company's filings with the Securities and Exchange Commission.
SL GREEN REALTY CORP.
STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data) Three Months Ended Twelve Months Ended
December 31, December 31,
2000 1999 2000 1999
------------------- -----------------------
Revenue:
Rental revenue, net $48,051 $45,672 $189,048 $174,939
Escalations &
reimbursement
revenues 5,791 5,429 24,732 21,902
Signage Rent 544 548 2,137 1,660
Investment income 3,367 1,535 13,271 5,266
Other income 442 706 1,135 2,250
---------- ----------- ---------- -----------
Total revenues 58,195 53,890 230,323 206,017
---------- ----------- ---------- -----------
Expenses:
Operating expenses 12,751 12,636 54,644 49,414
Ground rent 3,155 3,183 12,660 12,754
Interest 10,188 8,889 40,431 28,610
Depreciation and
amortization 7,992 7,555 32,511 27,260
Real estate taxes 7,163 7,294 28,850 29,198
Marketing, general
and administrative 3,043 2,534 11,561 10,922
----------- ---------- ---------- -----------
Total expenses 44,292 42,091 180,657 158,158
----------- ---------- ---------- -----------
Income before minority
interests, preferred
stock dividends, gain
on sales, extraordinary
item, service
corporation and joint
venture income 13,903 11,799 49,666 47,859
Equity in net income
(loss) from affiliates (231) 179 378 730
Equity in net income
from unconsolidated
joint ventures 899 226 3,108 377
Minority interests (2,467) (859) (7,430) (5,121)
Extraordinary losses
from early
extinguishment of
debt (491) (361) (921) (989)
Gain on sale of rental
properties/equity
investments 16,770 -- 41,416 --
Preferred stock
dividends and
accretion (2,407) (2,399) (9,626) (9,598)
---------- --------- --------- ---------
Net income available
to common
shareholders $25,976 $8,585 $76,591 $33,258
========== ======== ========= =========
Basic earnings
per share $1.06 $0.35 $3.14 $1.37
Diluted earnings
per share $1.04 $0.35 $3.10 $1.37
Funds From Operations
(FFO)
FFO per share (Basic) $0.75 $0.63 $2.83 $2.35
FFO per share (Diluted) $0.70 $0.61 $2.67 $2.29
FFO Calculation:
Income before minority
interests, extraordinary
items, preferred stock
dividends and gains
on sales $14,571 $12,204 $53,152 $48,966
Less:
Preferred stock
dividend (2,300) (2,300) (9,200) (9,200)
Minority interest in
commercial property - - - (1,765)
Add:
Joint venture FFO
adjustment 788 313 3,258 433
Depreciation and
amortization 7,992 7,555 32,511 27,260
Amortization of deferred
financing costs and
depreciation of
non-real estate assets (998) (909) (4,102) (3,049)
-------- -------- --------- ---------
FFO - BASIC 20,053 16,863 75,619 62,645
Add: Preferred stock
dividends 2,300 2,300 9,200 9,200
-------- -------- --------- ---------
FFO - DILUTED $22,353 $19,163 $84,819 $71,845
========== ========== ========= ==========
Basic ownership interests
Weighted average
REIT common shares 24,505 24,184 24,373 24,192
Weighted average
partnership units
held by minority
interest 2,308 2,428 2,365 2,428
-------- -------- --------- ---------
Basic weighted average
shares and units
outstanding 26,824 26,612 26,738 26,620
========= ======== ========= =========
Diluted ownership
interest
Weighted average
REIT common and
common share
equivalent share 24,992 24,234 24,754 24,252
Weighted average
partnership units
held by minority
interests 2,308 2,428 2,365 2,428
Common share
equivalents for
preferred stock 4,699 4,699 4,699 4,699
--------- --------- --------- ---------
Diluted weighted
average equivalent
shares and units
outstanding 31,999 31,361 31,818 31,379
========= ========= ======== ========
SL Green Realty Corp.
Consolidated Balance Sheets
(Amounts in Thousands, except per share data)
December 31, December 31,
2000 1999
------------ ------------
Assets
Commercial real estate properties, at cost:
Land and land interests $125,572 $132,081
Buildings and improvements 618,637 632,004
Building leasehold 139,393 132,573
Property under capital lease 12,208 12,208
------------ ------------
895,810 908,866
Less accumulated depreciation (78,432) (56,983)
------------ ------------
817,378 851,883
Properties held for sale 10,895 25,835
Cash and cash equivalents 10,793 21,561
Restricted cash 86,823 34,168
Tenant and other receivables,
net of $1,723 and $938 reserve in
2000 and 1999, respectively 7,580 5,747
Related party receivables 917 463
Deferred rents receivable net of provision
for doubtful accounts of $4,860 and
$5,337 in 2000 and 1999, respectively 45,816 37,015
Investment in and advances to affiliates 6,373 4,978
Investment in unconsolidated joint ventures 65,031 23,441
Mortgage loans and preferred investments 51,293 20,000
Deferred costs, net 40,113 30,540
Other assets 18,142 15,611
----------- -----------
Total assets $1,161,154 $1,071,242
=========== ============
Liabilities and Stockholders' Equity
Mortgage notes payable $414,342 $352,693
Revolving credit facility 46,374 83,000
Accrued interest payable 2,349 2,650
Accounts payable and accrued expenses 27,651 17,167
Deferred revenue 1,112 306
Capitalized lease obligations 15,303 15,017
Deferred land lease payable 13,158 11,611
Dividend and distributions payable 12,678 11,947
Security deposits 19,014 18,905
---------- -----------
Total liabilities 551,981 513,296
---------- -----------
Minority interests 43,326 41,494
8% Preferred Income Equity Redeemable
Stock $0.01 par value, $25.00 mandatory
liquidation preference 25,000 shares
authorized, 4,600 outstanding
in 2000 and 1999 110,774 110,348
Stockholders' Equity
Common stock, $.01 par value 100,000 shares
authorized, 24,516 and 24,184 issued and
outstanding in 2000 and 1999, respectively 246 242
Additional paid - in capital 428,698 421,958
Deferred compensation plan (5,037) (6,674)
Distributions in excess of earnings 31,166 (9,422)
---------- -----------
Total stockholders' equity 455,073 406,104
---------- -----------
Total liabilities and
stockholders' equity $1,161,154 $1,071,242
=========== ============
SL GREEN REALTY CORP.
SELECTED OPERATING DATA-UNAUDITED
December 31, 2000 December 31, 1999
Operating Data:
Net rentable area at end of
period (in 000's)(1) 8,655 8,540
Portfolio occupancy percentage
at end of period 98% 97%
Same Store occupancy percentage
at end of period 98% 97%
Number of properties in operation 23 24
(1) Includes wholly-owned and minority owned properties.
--30--sds/ny* rm/ny
| CONTACT: | SL Green Realty Corp., New York |
|---|---|
| David Nettina, President & Chief Operating Officer | |
| Thomas E. Wirth, Chief Financial Officer | |
| 212/594-2700 | |