Press Release Details
SL Green Realty Corp. Reports 7% Gain in First Quarter FFO
NEW YORK--(BUSINESS WIRE)--April 22, 2002--SL Green Realty Corp. (NYSE: SLG)
First Quarter Highlights
- 7% FFO increase, $0.78 per share (diluted) versus $0.73 (diluted) in the prior year
- Announced an agreement to acquire 1515 Broadway for $480 million through a joint venture with SITQ
- 19% increase in GAAP operating income per share (diluted), $0.50 per share versus $0.42 in the prior year
- 4.4% same store portfolio cash NOI growth
Financial Results
SL Green Realty Corp. (NYSE: SLG) reported a 7% increase in operating results for the three months ended March 31, 2002. During this period, funds from operations (FFO) before minority interest totaled $27.0 million, or $0.78 per share diluted, compared to $21.2 million, or $0.73 per share diluted for the same quarter in 2001. This growth was mainly attributable to same store cash NOI growth of 4.4%, increased contributions from the Company's joint venture and structured finance programs and lower interest rates.
As a result of property dispositions and the joint venture of One Park Avenue in the second quarter of 2001, total quarterly revenues decreased 8% in the first quarter to $61.7 million compared to $67.0 million last year. The $5.3 million decrease in revenue resulted from:
- $12.5 million decrease from 2001 dispositions/contributions to a joint venture
- $4.3 million increase from 2001 acquisitions
- $3.1 million increase from investment and other income
- $0.2 million decrease from 2002 same store portfolio
Same store cash NOI increased $1.1 million, or 4.4% to $25.9 million over the same period in the prior year. Cash NOI margins before ground rent improved year over year from 56.7% to 59.5%. The improvement in cash NOI was driven primarily by a $0.8 million increase in cash revenue and a decrease in operating expenses. The net increase in cash revenue is due to:
- $0.9 million increase from rent steps and reduced free rent
- $1.2 million increase as replacement rents were 37% over previously fully-escalated rents
- $1.1 million decrease due to lower occupancy in 2002 (96.6%) compared to 2001 (98.5%) and additional reserves
- $0.1 million decrease in escalation and reimbursement income primarily from decreased electric recoveries ($0.9 million) partially offset by higher operating expense escalations ($0.8 million).
The overall decrease in operating expenses totaled $0.5 million (3%) and was primarily due to:
- $0.8 million decrease in electric costs, primarily due to a decrease in electric rates
- $0.5 million decrease in fuel and steam heating costs
- $0.2 million increase in security costs
- $0.3 million increase in real estate taxes
- $0.2 million increase in advertising and insurance
The 2002 first quarter electric recovery was 90% as compared to 84% in the prior year and the improvement was based on more favorable recovery terms in new tenant leases.
During the quarter, the Company signed 62 leases totaling approximately 169,000 square feet with starting cash rents averaging $38.42 per square foot, a 29.7% increase on previously escalated cash rents averaging $29.63 per square foot. Tenant concessions averaged one month of free rent and an allowance for tenant improvements of $12.96 per square foot.
The Company's EBITDA was $37.5 million and was unchanged over the prior year. However, margins before ground rent increased to 74.0% compared to 64.1% for the same period last year and after ground rent margins improved to 68.2% from 59.3% in the corresponding period. This improvement in margins was primarily due to the increased net income from joint ventures and the increase in high-margin structured finance income. While EBITDA remained flat, the components of EBITDA changed as follows:
Improvements:
- $2.3 million increase from structured finance investments
- $0.8 million increase in other income, primarily due to on-going joint venture asset management fees
- $0.3 million increase due to signage income and the service corporations
- $0.3 million increase due to reduced MG&A expense from lower personnel and severance costs
The improvements were offset by a $3.7 million decrease in GAAP NOI primarily due to a $7.9 million decrease from properties sold or contributed to joint venture. This decrease was partially offset by the following improvements:
- $0.4 million increase from same store portfolio
- $1.8 million increase from joint venture net income
- $2.2 million increase from properties acquired
Despite the reduction in GAAP NOI and EBITDA from property sales, FFO improvement of $5.8 million resulted from the increased contribution from unconsolidated joint ventures ($2.7 million), structured finance ($2.4 million) and a decrease in interest expense ($4.8 million).
The lower interest costs were associated with: lower average debt levels due to dispositions ($6.3 million) partially offset by acquisition and structured finance debt ($2.3 million), the funding of ongoing capital projects and working capital requirements ($0.2 million), and lower interest rates ($1.0 million).
At the end of the quarter, consolidated debt totaled $495.1 million, reflecting a debt to market capitalization ratio of 29.2%.
During the quarter ended March 31, 2001, the Company recorded an extraordinary loss of $0.1 million due to the early extinguishment of debt, which was excluded from the Company's 2001 results. The results of the Company also excluded gains on sales of properties which totaled $1.5 million.
New Property Activity
1515 Broadway
On March 27, 2002 the Company announced that it entered into a contribution agreement to acquire 1515 Broadway, New York, New York in a transaction valued at approximately $480 million, or $274 per square foot. The property is 98.2% leased, with current market rents for office space at a 34% premium to fully escalated in-place rents. The initial cash NOI yield of the transaction is approximately 8.2%.
The property is currently owned by 1515 Broadway Associates, L.P., whose general partner is an affiliate of The Equitable Life Assurance Society of the United States. The transaction is anticipated to close during the second quarter 2002. It will be accomplished through a prepackaged bankruptcy reorganization by the 1515 Broadway partnership, to which the parties have consented. The property is being acquired in a joint venture with SITQ Immobilier, with SL Green retaining an approximate 55% interest in the asset.
Located in the heart of New York's Times Square and within walking distance of Manhattan's main transportation hubs, 1515 Broadway is a 1.75 million square foot, 54-story office tower located on Broadway between 44th and 45th Streets. It is the headquarters of Viacom, Inc., one of the world's leading media and entertainment companies, whose holdings include franchise brands CBS, MTV Networks (Nickelodeon, MTV and VH1), Paramount Pictures, Showtime Networks and Infinity Broadcasting.
The property is being acquired with $335 million of financing committed by Lehman Brothers and Bear Stearns. The balance of the proceeds are being funded from the Company's unsecured line of credit and from the proceeds of the sale of the joint venture interest to SITQ.
Structured Finance Activity
Subsequent to quarter-end, the Company sold a $15 million junior mortgage participation to PRISA and a $5.3 million junior mortgage participation was repaid. After this activity, the structured finance portfolio, including preferred equity interests, totals $168.8 million.
Other
Today, SL Green's portfolio consists of interest in 25 properties, aggregating 10.0 million square feet.
SL Green Realty Corp. is a self-administered and self-managed real estate investment trust ("REIT") that acquires, owns and manages commercial office properties in Manhattan. 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 First 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:
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,
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, and other factors, many of
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 filing with the
Securities and Exchange Commission.
SL GREEN REALTY CORP.
STATEMENTS OF OPERATIONS-UNAUDITED
(Amounts in thousands, except per share data)
Three Months Ended
March 31,
2002 2001
------------ ------------
Revenue:
Rental revenue, net $ 47,784 $ 55,003
Escalations & reimbursement revenues 6,726 8,057
Signage Rent 466 350
Preferred equity investment income 1,911 --
Investment income 3,720 3,274
Other income 1,076 310
------------ ------------
Total revenues 61,683 66,994
------------ ------------
Expenses:
Operating expenses 13,719 15,826
Ground rent 3,159 3,159
Interest 9,112 13,897
Depreciation and amortization 9,597 9,720
Real estate taxes 7,355 8,180
Marketing, general and administrative 3,202 3,547
------------ ------------
Total expenses 46,144 54,329
------------ ------------
Income before minority interests,
preferred stock dividends, gain
on sales, extraordinary item,
affiliates, joint venture and
change to accounting principle 15,539 12,665
Equity in net loss from affiliates (84) (269)
Equity in net income from
unconsolidated joint ventures 3,333 1,513
Gain on sale of rental property -- 1,514
Minority interests (1,152) (1,081)
------------ ------------
17,636 14,342
Extraordinary loss, net of
minority interest -- (98)
Cumulative effect of change in
accounting principle -- (532)
Preferred stock dividends and accretion (2,423) (2,414)
------------ ------------
Net income available to
common shareholders $ 15,213 $ 11,298
============ ============
Net income per share (Basic) $ 0.51 $ 0.46
Net income per share (Diluted) $ 0.50 $ 0.45
Funds From Operations (FFO)
FFO per share (Basic) $ 0.84 $ 0.79
FFO per share (Diluted) $ 0.78 $ 0.73
FFO Calculation:
Income before minority interests,
preferred stock dividends and accretion,
extraordinary loss and gain on sales 18,788 $ 13,909
Less:
Preferred stock dividend (2,300) (2,300)
Add:
Joint venture FFO adjustment 1,881 996
Depreciation and amortization 9,597 9,720
Amortization of deferred financing costs
and depreciation of non-real estate assets (987) (1,155)
------------- ------------
FFO - BASIC $ 26,979 $ 21,170
Add: Preferred stock dividends 2,300 2,300
------------- ------------
FFO - DILUTED $ 29,279 $ 23,470
Basic ownership interests
Weighted average REIT common shares 29,992 24,639
Weighted average partnership
units held by minority interest 2,271 2,296
------------- ------------
Basic weighted average shares
and units outstanding 32,263 26,935
============= ============
Diluted ownership interest
Weighted average REIT common and
common share equivalent shares 30,634 25,107
Weighted average partnership units
held by minority interests 2,271 2,296
Common share equivalents for
preferred stock 4,699 4,699
------------- ------------
Diluted weighted average equivalent
shares and units outstanding 37,604 32,102
============= ============
SL GREEN REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31, December 31,
2002 2001
(unaudited)
------------- ------------
Assets
Commercial real estate properties, at cost:
Land and land interests $ 138,337 $ 138,337
Buildings and improvements 699,610 689,094
Building leasehold 145,012 144,736
Property under capital lease 12,208 12,208
------------- ------------
995,167 984,375
Less accumulated depreciation (108,034) (100,776)
------------- ------------
887,133 883,599
Cash and cash equivalents 12,429 13,193
Restricted cash 37,126 38,424
Tenant and other receivables, net
of allowance of $4,229 and $3,629
in 2002 and 2001, respectively 7,754 8,793
Related party receivables 3,417 3,498
Deferred rents receivable, net
of allowance of $5,492 and $5,264
in 2002 and 2001, respectively 53,816 51,855
Investment in and advances to affiliates 2,811 8,211
Mortgage loans receivable, net of $593
and $3,321 discount in 2002 and
2001 respectively 127,669 127,166
Preferred equity investments 61,451 61,472
Investment in unconsolidated joint ventures 124,958 123,469
Deferred costs, net 34,416 34,901
Other assets 15,005 16,996
------------ ------------
Total assets $ 1,367,985 $ 1,371,577
============ ============
Liabilities and Stockholders' Equity
Mortgage notes payable $ 408,186 $ 409,900
Revolving credit 86,931 94,931
Derivative instruments at fair value 2,002 3,205
Accrued interest payable 1,617 1,875
Accounts payable and accrued expenses 24,386 22,819
Deferred compensation awards 671 1,838
Deferred revenue 1,676 1,381
Capitalized lease obligations 15,644 15,574
Deferred land lease payable 14,246 14,086
Dividend and distributions payable 16,596 16,570
Security deposits 19,019 18,829
------------- ------------
Total liabilities 590,974 601,008
------------- ------------
Commitments and contingencies
Minority interest in Operating Partnership 47,295 46,430
8% Preferred Income Equity Redeemable
Shares $0.01 par value, $25.00 mandatory
liquidation preference, 25,000 authorized
and 4,600 outstanding in 2002 and
2001, respectively 111,353 111,231
Stockholders' Equity
Common stock, $0.01 par value 100,000
shares authorized, 30,042 and 29,978
issued and outstanding in 2002
and 2001, respectively 301 300
Additional paid - in capital 585,509 583,350
Deferred compensation plan (7,336) (7,515)
Accumulated and other comprehensive loss (1,709) (2,911)
Retained earnings 41,598 39,684
------------- ------------
Total stockholders' equity 618,363 612,908
------------- ------------
Total Liabilities and
stockholders' equity $ 1,367,985 $ 1,371,577
============= ============
SL GREEN REALTY CORP.
SELECTED OPERATING DATA-UNAUDITED
March 31,
2002 2001
---- ----
Operating Data:
Net rentable area at end
of period (in 000's)(1) 10,036 10,045
Portfolio occupancy percentage
at end of period 97.0 98.1
Same Store occupancy percentage
at end of period 96.6 98.5
Number of properties in operation 25 25
Rentable square feet leased during quarter 168,798 121,944
Average mark-to-market percentage 29.7 48.5
Average rent per rentable square foot $ 38.42 $ 41.63
(1) Includes wholly-owned and majority and minority owned properties.
Contact:
SL Green Realty Corp.
Michael W. Reid, Chief Operating Officer
Thomas E. Wirth, Chief Financial Officer
212/594-2700