Press Release Details
SL Green Realty Corp. Reports Second Quarter FFO Of $0.81 Per Share
SL Green Realty Corp. Reports Second Quarter FFO Of $0.81 Per Share
Jul 23, 2002 at 12:00 AM EDT
- FFO increased to $0.81 per share (diluted) versus $0.80 (diluted) in the prior year
- Acquired 1515 Broadway for $480.0 million in a joint venture with SITQ Immobilier
- Sold 469 Seventh Avenue for $53.1 million
- Originated $26.3 million of structured finance investments
- GAAP operating income per share (diluted) is $0.51, unchanged from the prior year
New York, NY, July 23, 2002 - SL Green Realty Corp. (NYSE:SLG) reported a 1.3% improvement in operating results for the three months ended June 30, 2002 as funds from operations (FFO) before minority interest totaled $28.4 million, or $0.81 per share diluted, compared to $23.4 million, or $0.80 per share diluted for the same quarter in 2001. The prior year included income related to an early redemption of a structured finance investment totaling $1.0 million, or $0.03 per share.
For the six months ended June 30, 2002, operating results improved 3.9% as FFO before minority interest totaled $55.3 million, or $1.59 per share diluted, compared to $44.6 million, or $1.53 per share diluted for the same period in 2001.
The Company's weighted average diluted shares outstanding increased 5.7 million, or 17.7%, to 37.9 million in 2002 from 32.2 million in 2001. The increase is primarily attributable to the Company's July 2001 offering of 5.0 million common shares.
As a result of property dispositions and the contribution of One Park Avenue to a joint venture in the second quarter of 2001, second quarter 2002 revenues decreased 6.3% to $62.3 million compared to $66.5 million last year. The $4.2 million net decrease in revenue resulted from:
- $9.9 million decrease from 2001 dispositions/contributions to a joint venture
- $3.5 million increase from 2001 acquisitions
- $1.4 million increase from investment and other income
- $0.7 million increase from 2002 same store portfolio
- $1.5 million increase from replacement rents being 39% higher than previously fully-escalated rents
- $0.9 million decrease due to lower occupancy in 2002 (96.8%) compared to 2001 (98.6%) and additional reserves
- $0.2 million increase from rent steps partially offset by free rent
- $0.2 million increase in reimbursement and escalation income primarily due to increased operating escalation income
- $0.3 million (5.3%) increase in real estate taxes
- $0.2 million (4.3%) increase in operating payroll costs
- $0.1 million (3.6%) increase in electric costs
- $0.2 million (37.3%) increase in security costs
- $0.3 million (52.0%) decrease in professional fees and advertising
During the quarter, the Company signed 61 leases totaling approximately 184,000 rentable square feet with starting office cash rents averaging $37.38 per square foot, a 46.8% increase over previously escalated cash rents averaging $25.47 per square foot. Tenant concessions averaged one month of free rent and an allowance for tenant improvements of $11.24 per square foot.
The Company's EBITDA decreased $0.2 million to $38.5 million in 2002 compared to $38.7 million in the prior year. However, margins before ground rent increased to 75.8% compared to 68.8% for the same period last year and after ground rent margins improved to 70.1% from 63.6% in the corresponding period. This improvement in margins was primarily due to the increased net income from joint ventures and the increase in structured finance income. The components of EBITDA changed as follows:
Improvements:
- $0.8 million increase in non-operating other income, primarily due to on-going joint venture asset management fees
- $1.0 million increase due to signage revenue and income from affiliates
- $0.7 million increase from structured finance investments
- $0.3 million increase from lower MG&A expenses, primarily due to lower personnel costs
- $2.2 million increase from joint venture net income
- $1.6 million increase from properties acquired
- $0.3 million increase from same store portfolio
The lower interest costs were associated with: lower average debt levels due to dispositions ($3.4 million) and lower interest rates ($1.4 million), partially offset by acquisition and structured finance debt ($0.9 million), the costs associated with the early repayment of the 470 Park Avenue South mortgage ($0.2 million), the funding of ongoing capital projects and working capital requirements ($0.1 million).
At the end of the quarter, consolidated debt totaled $595.3 million, reflecting a debt to market capitalization ratio of 32.0%.
The Company recorded a $3.0 million gain on the sale of property that was excluded from the Company's 2001 second quarter results. The following recorded transactions were excluded from the Company's 2001 six month results: (i) an extraordinary loss of $0.1 million from the early extinguishment of debt, (ii) a $4.5 million gain on sale of properties and (iii) a $0.5 million charge for a cumulative effect of change in accounting principle.
New Property Activity
1515 Broadway Acquisition
On May 15, 2002, SL Green acquired 1515 Broadway, New York, New York in a transaction valued at approximately $480.0 million, or $274 per square foot. The property was acquired in a joint venture with SITQ Immobilier, with SL Green retaining an approximate 55% interest in the asset. The property was 98.2% occupied, 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%. SL Green will perform all management and leasing services for the property.
469 Seventh Avenue Sale
On June 24, 2002, the joint venture comprised of SL Green and Morgan Stanley Real Estate Fund III, L.P. sold 469 Seventh Avenue for $53.1 million, or $222 per square foot. The joint venture purchased the asset in January 2001 for $45.7 million. This sale resulted in the joint venture recognizing a gain totaling $4.8 million. As part of the transaction, SL Green made a preferred equity investment of $6.0 million in the entity acquiring the asset. As a result of the continuing $6.0 million preferred investment, the Company will defer recognition of its share ($1.7 million) of the joint venture gain.
New Structured Finance Activity
During the second quarter of 2002, the Company completed the following transactions:
- Originated $26.3 million of structured finance investments at a current yield of 13.0%
- Participated a $15.0 million junior mortgage to PRISA
- Received full repayment of a $5.2 million junior mortgage participation
Other
Today, SL Green's portfolio consists of interests in 25 properties, aggregating 11.5 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.
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:
www.slgreen.com.
This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in such forward looking statements are based on reasonable assumptions, actual results could vary from those presented herein. The risks and uncertainties associated with forward-looking statements in this release include general economic and business (particularly real estate) conditions, the business opportunities that may be presented to and pursued by the Company, changes in laws or regulations (including changes to laws governing the taxation of REITs), availability of capital (debt and equity), interest rate fluctuations, competition, supply and demand for properties in our current and any proposed market areas, tenants' ability to pay rent at current or increased levels, accounting principles, policies and guidelines applicable to REITs, environmental risks, 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 control of the Company. We undertake no obligation to publicly update or revise any of the information in this press release that becomes untrue. For further information on factors that could impact the Company, please refer to the Company's filings with the Securities and Exchange Commission.
SL GREEN REALTY CORP.
STATEMENTS OF OPERATIONS-UNAUDITED
(Amounts in thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
2002 2001 2002 2001
------ ------ ------ ------
Revenue:
Rental revenue, net $ 48,184 $ 53,405 $ 95,968 $ 108,408
Escalations & reimbursement
revenues 6,536 7,296 13,262 15,353
Signage rent 267 179 733 529
Preferred equity investment
income 1,934 -- 3,845
Investment income 3,828 5,046 7,548 8,320
Other income 1,528 550 2,604 860
------ ------ ------- -------
Total revenues 62,277 66,476 123,960 133,470
------ ------ ------- -------
Expenses:
Operating expenses 14,195 14,081 27,914 29,907
Ground rent 3,159 3,159 6,318 6,318
Interest 9,519 13,171 18,631 27,068
Depreciation and
amortization 9,753 9,189 19,350 18,909
Real estate taxes 7,348 7,958 14,703 16,138
Marketing, general and
administrative 3,357 3,668 6,559 7,215
------ ------ ------ ------
Total expenses 47,331 51,226 93,475 105,555
------ ------ ------ ------
Income before minority interests,
preferred stock dividends,
gain on sales, extraordinary item,
affiliates, joint venture and
change in accounting principle 14,946 15,250 30,485 27,915
Equity in net income/(loss)
from affiliates 307 (658) 223 (927)
Equity in net income from
unconsolidated joint ventures 3,998 1,756 7,331 3,269
Gain on sale of rental property -- 3,002 -- 4,516
Minority interests (1,153) (1,405) (2,305) (2,486)
Extraordinary loss, net of
minority interest -- -- -- (98)
Cumulative effect of change in
accounting principle -- -- -- (532)
Preferred stock dividends and
accretion (2,423) (2,415) (4,846) (4,829)
------ ------ ------ ------
Net income available to
common shareholders $ 15,675 $ 15,530 $ 30,888 $ 26,828
====== ====== ====== ======
Net income per share (Basic) $ 0.52 $ 0.63 $ 1.03 $ 1.09
Net income per share (Diluted) $ 0.51 $ 0.60 $ 1.00 $ 1.06
Funds From Operations (FFO)
FFO per share (Basic) $ 0.87 $ 0.87 $ 1.77 $ 1.65
FFO per share (Diluted) $ 0.81 $ 0.80 $ 1.59 $ 1.53
FFO Calculation:
Income before minority interests,
preferred stock dividends and
accretion, extraordinary loss
and gain on sales $ 19,251 $ 16,348 $ 38,039 $ 30,257
Less:
Preferred stock dividend (2,300) (2,300) (4,600) (4,600)
Add:
Joint venture FFO adjustment 2,713 1,358 4,594 2,354
Depreciation and amortization 9,753 9,189 19,350 18,909
Amortization of deferred financing
costs and depreciation of
non-real estate assets (1,057) (1,157) (2,044) (2,312)
------ ------ ------ ------
FFO - BASIC 28,360 23,438 55,339 44,608
Add: Preferred stock dividends 2,300 2,300 4,600 4,600
------ ------ ------ ------
FFO - DILUTED $ 30,660 $ 25,738 $ 59,939 $ 49,208
Basic ownership interests
Weighted average REIT
common shares 30,200 24,706 30,097 24,706
Weighted average partnership
units held by minority interest 2,222 2,295 1,147 2,289
------ ------ ------ ------
Basic weighted average shares
and units outstanding 32,422 27,001 31,244 26,995
====== ====== ====== ======
Diluted ownership interest
Weighted average REIT common
and common share equivalent
shares 30,961 25,189 30,804 25,182
Weighted average partnership
units held by minority
interests 2,222 2,295 2,247 2,289
Common share equivalents for
preferred stock 4,699 4,699 4,699 4,699
------ ------ ------ ------
Diluted weighted average
equivalent shares and units
outstanding 37,882 32,183 37,750 32,170
====== ====== ====== ======
SL Green Realty Corp.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except per share data)
June 30, 2002 December 31, 2001
------------- -----------------
Assets (unaudited)
Commercial real estate properties,
at cost:
Land and land interests $ 138,337 $ 138,337
Buildings and improvements 701,721 689,094
Building leasehold 145,264 144,736
Property under capital lease 12,208 12,208
-------------- --------------
997,530 984,375
Less accumulated depreciation (115,555) (100,776)
-------------- --------------
881,975 883,599
Cash and cash equivalents 20,486 13,193
Restricted cash 34,491 38,424
Tenant and other receivables, net
of allowance of $5,081 and $3,629
in 2002 and 2001, respectively 8,619 8,793
Related party receivables 3,515 3,498
Deferred rents receivable, net of
allowance of $5,406 and $5,264 in
2002 and 2001, respectively 55,975 51,855
Investment in and advances to affiliates 2,949 8,211
Mortgage loans receivable, net of $400
and $593 discount in 2002 and 2001
respectively 127,814 127,166
Preferred equity investments 67,434 61,472
Investment in unconsolidated joint
ventures 223,354 123,469
Deferred costs, net 34,571 34,901
Other assets 18,691 16,996
------- -------
Total assets $ 1,479,874 $ 1,371,577
========= =========
Liabilities and Stockholders' Equity
Mortgage notes payable $ 397,371 $ 409,900
Revolving credit 197,931 94,931
Derivative instruments at fair value 4,991 3,205
Accrued interest payable 1,951 1,875
Accounts payable and accrued expenses 27,259 22,819
Deferred compensation awards 671 1,838
Deferred revenue/gain 2,920 1,381
Capitalized lease obligations 15,802 15,574
Deferred land lease payable 14,406 14,086
Dividend and distributions payable 16,706 16,570
Security deposits 19,261 18,829
--------- --------
Total liabilities 699,269 601,008
--------- --------
Commitments and contingencies
Minority interest in Operating Partnership 45,644 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 111,474 111,231
Stockckholders' Equity
Common stock, $0.01 par value 100,000 shares
authorized, 30,307 and 29,978 issued and
outstanding in 2002 and 2001, respectively 303 300
Additional paid - in capital 590,197 583,350
Deferred compensation plan (6,165) (7,515)
Accumulated other comprehensive loss (4,709) (2,911)
Retained earnings 43,861 39,684
--------- --------
Total stockholders' equity 623,487 612,908
--------- --------
Total Liabilities and stockholders'
equity $ 1,479,874 $ 1,371,577
========= =========
SL GREEN REALTY CORP.
SELECTED OPERATING DATA-UNAUDITED
June 30,
2002 2001
---- ----
Operating Data:
Net rentable area at end
of period (in 000's)(1) 11,533 10,106
Portfolio occupancy
percentage at end of period 97.2% 98.0%
Same Store occupancy
percentage at end of period 96.8% 98.6%
Number of properties
in operation 25 25
Rentable square feet leased
during quarter 183,955 59,384
Average mark-to-market
percentage-office 46.8% 46.8%
Average rent per rentable
square foot-office $37.38 $42.52
(1) Includes wholly-owned and majority/minority owned properties.
Contact:
SL Green Realty Corp.
Michael W. Reid or Thomas E. Wirth
212/594-2700