Press Release Details
SL Green Realty Corp. Reports Third Quarter FFO Of $0.73 Per Share
NEW YORK--(BUSINESS WIRE)--Oct. 23, 2001-- - 15% same store portfolio cash NOI growth
- Issued five million common shares at $29.80 net per share; raised $149 million in net proceeds
- FFO increased to $0.73 per share (diluted) versus $0.70 prior year, a 4% increase, and a 9% FFO increase excluding the $1.0 million ($0.03 per share) contribution to the Twin Towers Fund
- FFO increased $3.9 million (19%) to $24.0 million from $20.1 million
- Acquired 49.9% interest in 1250 Broadway from its JV partner for $29.5 million and refinanced property with $85 million first mortgage
- Invested $53.5 million in a preferred equity position in The News Building
- Originated $57.7 million in structured finance investments
Financial Results
SL Green Realty Corp. (NYSE:SLG) reported improved operating results for the three months ended September 30, 2001.
During the period, funds from operations (FFO) before minority interests totaled $24.0 million, or $0.73 per share (diluted), compared to $20.1 million, or $0.70 per share (diluted), for the same quarter in 2000. The 2001 quarterly results include a $1.0 million charge, or $0.03 per share, for a one-time contribution to the Twin Towers Fund. Excluding this contribution, third quarter earnings would have been $0.76 per share, representing a 9% improvement over the prior year. The FFO per share calculation is reflective of the Company's five million common share issuance in the third quarter of 2001 which increased the weighted average dilutive shares outstanding to 36.1 million, a 13% increase over the prior year. This growth was primarily attributable to strong same store cash NOI growth of 15%.
Nine month results were also strong, reflecting a 14% FFO increase over 2000 as FFO before minority interests totaled $68.6 million or $2.25 per share (diluted), compared to $55.6 million or $1.97 per share (diluted) for the same period in the previous year. This growth is also attributable to strong same store cash NOI growth of 16%.
For the quarter, net income available to common shareholders, adjusted for property sales, extraordinary items and the cumulative effect of an accounting change increased 14% to $13.6 million, or $0.43 per share (diluted) as compared to $11.9 million, or $0.43 per share (diluted), for the same period in the previous year. For the nine months ended September 30, 2001, adjusted net income increased 25% to $39.1 million, or $1.36 per share (diluted), as compared to $31.4 million, or $1.16 per share (diluted), for the same period in the previous year.
Total quarterly revenues increased in the third quarter to $61.9 million (1.7%) compared to last year's $60.9 million. The $1.0 million growth in revenue resulted primarily from:
- 2001 acquisitions ($6.0 million)
- 2001 same store portfolio ($1.7 million).
These revenue increases were partially offset by reduced revenues of properties sold ($6.0 million) and investment and preferred equity income ($1.0 million). The $1.0 million decrease in investment and preferred equity income is due to the following: (i) $0.7 million from yield maintenance received from the early redemption of a preferred equity investment on 1370 Avenue of the Americas in third quarter 2000 and (ii) lower yields primarily from reduced interest rates ($0.5 million) and investment spreads ($0.9 million) and the decrease is partially offset by the higher weighted average structured finance investment balance outstanding ($1.3 million).
During the third quarter, same store cash NOI increased $3.3 million to $25.6 million, as compared to $22.3 million over the same period in the prior year. Cash NOI margins before ground rent improved year over year from 55.2% to 60.2%. The improvement in cash NOI was driven primarily by a $3.4 million increase in cash revenue due to:
- A 45% increase in replacement rents over previous fully-escalated rents ($1.3 million)
- Reduced free and straight-line rents ($1.7 million)
- Rent steps from current in-place tenants ($0.5 million)
- $0.9 million increase in escalation and reimbursement income primarily from increased electric reimbursement, operating expense reimbursements and percentage rent escalations
- Decrease in revenue due to lower occupancy primarily due to planned vacancy at 1466 Broadway ($0.4 million)
- Decrease in revenue due to higher reserves for tenant allowance ($0.6 million).
The net increase in revenue was partially offset by $0.2 million increase in real estate taxes with operating expenses remaining flat. Approximately 90.0% of the quarterly electric expense was recovered through the utility clause in the tenants' leases.
The Company's third quarter EBITDA increased $1.6 million resulting in increased margins before ground rent of 66.0% in 2001 as compared to 65.4% for the same period last year. After ground rent, margins improved to 60.6% in 2001 from 59.7% in the corresponding prior year period. Margin improvement was driven by the Company's primary real estate investment themes:
- GAAP NOI of $4.4 million
- $3.4 million increase from 2001 acquisitions
- $1.8 million increase from same store (7% improvement)
- $2.2 million increase from net income from unconsolidated joint ventures
- $3.3 million decrease from properties sold or contributed to joint ventures.
These increases in EBITDA were partially offset by (i) an increase in MG&A ($1.6 million) primarily due to a $1.0 million contribution to the Twin Towers fund and increased personnel costs, (ii) a decrease in investments and other income ($0.7 million) and (iii) a loss from equity in affiliates as compared to net income in the prior year ($0.1 million).
FFO for the quarter ended September 30, 2001 improved $3.9 million primarily as a result of a $1.6 million increase in EBITDA, increased FFO adjustment from joint ventures ($1.4 million) and lower interest costs ($0.9 million). Lower interest costs ($0.9 million) were associated with: higher average debt levels due to net acquisition and new investment debt activity ($1.5 million), the higher average debt levels due to the funding of ongoing capital projects and working capital requirements ($0.2 million), and the proceeds from the Company's July common stock offering ($1.6 million) offset by lower interest rates from floating rate debt ($0.9 million).
During the quarter ended September 30, 2001, the Company recorded an extraordinary loss of $0.3 million due to the early extinguishment of debt that was excluded from the Company's FFO results. The 2001 quarterly results of the Company exclude a gain on sale of property interest that totaled $0.6 million and the 2000 quarterly results exclude a gain on redemption of a preferred equity investment totaling ($5.6 million).
At the end of the quarter, consolidated debt totaled $484.1 million, reflecting a debt to market capitalization ratio of 30.0%.
New Property Activity
1250 Broadway Acquisition
On September 24, 2001, the Company acquired a 49.9% interest in 1250 Broadway from its joint venture partner, The Carlyle Group, for approximately $29.5 million. In conjunction with this transaction, Salomon Smith Barney provided $85 million of first mortgage financing. 1250 Broadway is a 39-story building with approximately 685,000 square feet, and occupies the block front between 31st and 32nd Streets on Broadway. It is currently 99.6% leased. The going-in cash NOI yield on the investment is approximately 9.5% per annum. The Company is currently implementing a $5 million capital improvement program to significantly renovate and upgrade the property. During the quarter, Visiting Nurse Services of New York, a current tenant in the building, expanded into 80,000 square feet at an average rent over $40.00 per square foot and simultaneously replaced 25,000 square feet previously occupied by technology tenants. The acquisition is the first step in transitioning the property to a long-term ownership position with a new capital partner.
110 East 42nd Street Sale
The Company sold a 69,700 square foot condominium interest in its property located at 110 East 42nd Street for $14.5 million, or approximately $208 per square foot. In connection with the sale, the Company recognized a gain of approximately $0.6 million. The Company will manage the condominium and continues to own the remaining 181,000 square feet of the property through a condominium interest.
The News Building Preferred Equity Investment
On September 10, 2001 the Company announced the purchase of a $53.5 million preferred equity investment in The News Building, a 1.1 million square foot office building located at 220 East 42nd Street, New York. The investment was made into an entity affiliated with The Witkoff Group and DRA Advisors, Inc. who continue to own a majority interest in the property. In connection with the transaction, SL Green has assumed leasing responsibilities at the property.
New Structured Finance Activity
The Company has completed the following transactions:
- Originated $57.7 million of structured finance assets at a retained yield after seller financing of 14.6%, including $30 million in October
- PREI funded $25 million of a structured finance asset under the established investment program.
Other
Common Share Issuance
On July 25th, the Company sold 5 million common shares at a gross price of $30.66 per share. After the underwriter's discount, net proceeds to the Company totaled $149.0 million, or $29.80 per share. The immediate use of proceeds was to pay down the Company's unsecured revolving credit facility.
Dividend Reinvestment and Stock Purchase Plan
The Company filed a registration statement with the SEC to register a dividend reinvestment and stock purchase plan ("DRIP") which was declared effective on September 24, 2001. The Company registered 3 million shares of common stock under the DRIP.
As of September 30, 2001, the Company's portfolio consists of interests 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, repositions and manages a portfolio of Manhattan office properties. The Company is the only publicly held REIT who specializes exclusively in this niche.
Financial Tables attached.
To receive SL Green's latest news release and other corporate documents, including the Third 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--UNAUDITED
(Amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Revenue:
Rental revenue, net $ 47,971 $ 47,647 $ 156,379 $ 140,998
Escalations &
reimbursement revenues 9,114 7,593 24,467 18,941
Signage rent 424 496 953 1,593
Investment income 3,306 3,696 11,626 7,324
Preferred equity income 630 1,272 630 2,579
Other income 479 170 1,339 693
Total revenues 61,924 60,874 195,394 172,128
Expenses:
Operating expenses 15,076 15,260 44,983 41,893
Ground rent 3,101 3,164 9,419 9,505
Interest 9,785 10,698 36,853 30,243
Depreciation and
amortization 9,047 8,300 27,956 24,519
Real estate taxes 7,452 7,299 23,590 21,688
Marketing, general and
administrative 4,116 2,540 11,331 8,517
Total expenses 48,577 47,261 154,132 136,365
13,347 13,613 41,262 35,763
Equity in net income
(loss) from affiliates (57) 71 (984) 609
Equity in net income from
unconsolidated
joint ventures 2,752 586 6,020 2,209
Income before minority
interest, extraordinary
items, property sales,
cumulative effect
adjustment and preferred
stock dividends and
accretion 16,042 14,270 46,298 38,581
Minority interests (1,010) (1,496) (3,496) (4,964)
Extraordinary loss,
net of minority interest (332) -- (430) (430)
Gain on sale of
rental properties 647 5,624 5,164 24,646
Cumulative effect of
accounting change -- -- (532) --
Preferred stock dividends
and accretion (2,414) (2,407) (7,243) (7,220)
Net income available
to common
shareholders $ 12,933 $ 15,991 $ 39,761 $ 50,613
Net income
per share (Basic) $ 0.45 $ 0.65 $ 1.53 $ 2.08
Net income
per share (Diluted) $ 0.44 $ 0.62 $ 1.50 $ 1.98
Funds From Operations (FFO)
FFO per share (Basic) $ 0.78 $ 0.75 $ 2.42 $ 2.08
FFO per share (Diluted) $ 0.73 $ 0.70 $ 2.25 $ 1.97
FFO Calculation:
Income before minority
interests, preferred
stock dividends,
extraordinary loss,
property sales and
cumulative effect
adjustment $ 16,042 $ 14,270 $ 46,298 $ 38,581
Less:
Preferred stock
dividend (2,300) (2,300) (6,900) (6,900)
Add:
Joint venture
FFO adjustment 2,225 842 4,579 2,468
Depreciation and
amortization 9,047 8,300 27,956 24,519
Amortization of
deferred financing
costs and depreciation
of non-real
estate assets (1,059) (1,042) (3,371) (3,105)
FFO - BASIC 23,955 20,070 68,562 55,563
Add: Preferred
stock dividends 2,300 2,300 6,900 6,900
FFO - DILUTED $ 26,255 $ 22,370 $ 75,462 $ 62,463
Basic ownership interests
Weighted average
REIT common shares 28,511 24,458 25,988 24,329
Weighted average
partnership units held
by minority interest 2,280 2,346 2,286 2,385
Basic weighted average
shares and units
outstanding 30,791 26,804 28,274 26,714
Diluted ownership interest
Weighted average REIT
common and common share
equivalent shares 29,093 24,954 26,506 24,678
Weighted average
partnership units held
by minority interests 2,280 2,346 2,286 2,385
Common share equivalents
for preferred stock 4,699 4,699 4,699 4,699
Diluted weighted average
equivalent shares and
units outstanding 36,072 31,999 33,491 31,762
SL Green Realty Corp.
Condensed Consolidated Balance Sheets
(Amounts in Thousands)
September 30, December 31,
2001 2000
Assets (unaudited)
Commercial real estate properties, at cost:
Land and land interests $ 138,337 $ 125,572
Buildings and improvements 679,821 618,637
Building leasehold 143,198 139,393
Property under capital lease 12,208 12,208
973,564 895,810
Less accumulated depreciation (93,339) (78,432)
880,225 817,378
Properties held for sale -- 10,895
Cash and cash equivalents 5,991 10,793
Restricted cash 37,104 86,823
Tenant receivables, net $3,905 and $1,723
reserve in 2001 and 2000, respectively 12,229 7,580
Related party receivables 1,883 917
Deferred rents receivable net of provision
for doubtful accounts of $4,813 and
$4,860 in 2001 and 2000, respectively 50,060 45,816
Investment in and advances to affiliates 8,570 6,373
Investment in unconsolidated joint ventures 143,049 65,031
Structured finance investments 157,901 51,293
Deferred costs, net 36,066 40,113
Other assets 13,093 18,142
Total assets $ 1,346,171 $ 1,161,154
Liabilities and Stockholders' Equity
Mortgage notes payable $ 411,393 $ 414,342
Revolving credit facility 72,738 46,374
Accrued interest payable 1,935 2,349
Accounts payable and accrued expenses 20,827 24,818
Deferred revenue 1,363 1,112
Deferred compensation awards 1,838 2,833
Derivative instruments -- fair value 4,987 --
Capitalized lease obligations 15,505 15,303
Deferred land lease payable 13,926 13,158
Dividend and distributions payable 14,775 12,678
Security deposits 18,903 19,014
Total liabilities 578,190 551,981
Minority interests 46,474 43,326
8% Preferred Income Equity Redeemable Stock
$0.01 par value, $25.00 mandatory liquidation
preference 25,000 shares authorized, 4,600
outstanding in 2001 and 2000 111,117 110,774
Stockholders' Equity
Common stock, $0.01 par value 100,000 shares
authorized, 29,944 and 24,516 issued and
outstanding in 2001 and 2000, respectively 300 246
Additional paid - in capital 582,874 428,698
Deferred compensation plan (8,400) (5,037)
Accumulated other comprehensive loss (4,500) --
Retained earnings 40,116 31,166
Total stockholders' equity 610,390 455,073
Total liabilities and
stockholders' equity $ 1,346,171 $ 1,161,154
SL GREEN REALTY CORP.
SELECTED OPERATING DATA-UNAUDITED
September 30,
2001 2000
Operating Data:
Net rentable area at end of period (in 000's)(1) 10,036 9,131
Portfolio occupancy percentage at end of period 98% 98%
Same store occupancy percentage at end of period 98% 98%
Number of properties in operation 25 23
(1) Includes wholly-owned and majority and minority owned properties.