Press Release Details
SL Green Realty Corp. Reports 21% Gain in Third Quarter FFO
Third Quarter Highlights
-- 21% FFO increase, $0.70 per share (diluted) versus $0.58 prior
year
-- 14% same store portfolio cash NOI growth
-- Announced sales of 17 Battery South and 90 Broad Street
-- Announced the purchases of One Park Avenue, 1370 Broadway, and 180
Madison Avenue
-- Refinanced 420 Lexington Avenue; generating $70 million in net
liquidity
Financial Results
NEW YORK--(BUSINESS WIRE)--October 25, 2000--SL Green Realty Corp. (NYSE:SLG - news) reported a 21% increase in operating results for the three months ended September 30, 2000.
During this period funds from operations (FFO) before minority interest totaled $20.1 million, or $0.70 per share (diluted), compared to $15.9 million, or $0.58 per share for the same quarter in 1999.
Total revenues increased 11% in the third quarter to $60.9 million compared to $54.7 million last year. The $6.2 million growth in revenue resulted from:
-- 2000 same store portfolio ($5.5 million)
-- Investment income ($3.4 million)
-- 1999 acquisitions ($1.0 million)
These revenue increases were partially offset by reduced revenues of properties sold ($1.8 million) or contributed to unconsolidated joint ventures ($1.9 million).
During the quarter, the Company received $8.7 million and, after transaction costs and deferred compensation awards, recorded a gain of $5.6 million, resulting from the early redemption of a preferred equity investment in 1370 Avenue of Americas and sale of the property. The gain on the redemption is not reflected in the Company's FFO results, as it is excluded from the definition of FFO. In connection with this transaction, the Company received $0.7 million in accelerated investment income that is included in the Company's FFO results.
Same store cash NOI increased $2.9 million, or 14%, to $23.5 million over the same period in the prior year. Cash NOI margins before ground rent improved year over year from 54.9% to 55.6%. The improvement in cash NOI was driven primarily by a $4.8 million increase in cash revenue due to:
-- A 30% increase in replacement rents over previously
fully-escalated rents ($1.7 million)
-- Reduced free rent as many properties reached stabilization ($0.3
million)
-- Increased occupancy from 95% to 98% ($1.0 million)
-- Rent steps from current in-place tenants ($0.5 million)
-- $1.5 million increase in escalation and reimbursement income
primarily from increased electric recoveries ($1.1 million)
The increase in revenue was partially offset by a $2.0 million or 20% increase in operating costs, over half of which was related to higher utility costs ($1.2 million) and the remainder from increased payroll and cleaning costs ($0.6 million). The increased payroll and cleaning costs relate to increased overtime payroll ($0.2 million) charged back to tenants, lower prior year costs related to benefit refunds ($0.2 million), and 5% higher labor costs ($0.2 million). Approximately 75% of the electric increase was recovered from tenants under the utility clause of their lease. In addition, real estate taxes increased due to higher assessed values at several properties ($0.2 million).
The Company's EBITDA increased $6.2 million, resulting in increased margins before ground rent of 65.4% compared to 57.7% for the same period last year and after ground rent margin improvement of 59.7% from 51.6% in the corresponding period. Margin improvement was driven by each of the Company's real estate investment themes:
-- GAAP NOI of $2.9 million;
- $2.8 million increase from same store portfolio (12% improvement)
- $1.7 million increase from 1999 acquisitions
- $0.4 million increase from joint ventures
- $2.0 decrease from properties sold or contributed to a joint venture
-- Income from structured finance, $3.5 million, and other $0.1
million
-- Reduced MG&A, $0.4 million primarily due to increased allocation
of costs to the service corporation and joint ventures
These increases in EBITDA were offset by ($0.7 million) from minority interest in joint ventures.
FFO improved $4.2 million as a result of:
-- $6.2 million increase in EBITDA
-- $0.7 million increase in income from unconsolidated joint
ventures, and
-- $0.4 million from the acquisition of the minority interest in the
BMW building.
These improvements were offset in part by higher interest costs ($2.9 million) associated with: higher average debt levels due to acquisition and new investment debt ($1.6 million), the higher average debt levels due to the funding of ongoing capital projects and working capital requirements ($0.5 million), and higher interest rates from floating rate debt ($0.8 million).
At the end of the quarter, consolidated debt totaled $472.1 million, reflecting a debt to market capitalization ratio of 35.2%.
New Investments to Date
On September 21, 2000, the Company entered into an agreement to purchase 1370 Broadway for $50.4 million. This 16-story, 255,000 square foot office building is located in the heart of Times Square, directly across the street from 1372 Broadway, another SL Green building. In-place rents are approximately $27.72, approximately 38% below current market levels. The acquisition will be funded through the Company's unsecured line of credit. This transaction is scheduled to close January 2001.
On September 22, 2000, the Company, via a joint venture with Morgan Stanley Real Estate Fund III ("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. It is located at the corner of 34th Street and Madison Avenue. SL Green will purchase a 49.9% interest in the property. The Company intends to use the acquisition to effect a Section 1031 tax-free exchange in order to partially defer the capital gain resulting from the sale of 90 Broad Street. SL Green will assume managing and leasing responsibilities for the property. This transaction is scheduled to close December 2000.
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 with full block prominence on Park Avenue. The Company also acquired an option to purchase the ground lease position. The acquisition will be financed with a mortgage loan from Lehman Brothers Holdings, Inc. and the Company's unsecured line of credit. This transaction is scheduled to close in January 2001.
The Company announced that it has entered into contracts for the sale of two downtown properties:
The first is located at 90 Broad Street. This property is owned through a joint venture partnership with MSREF, and the Company owns a 35% interest in this partnership. The property is approximately 339,000 square feet with a contracted sales price of $60 million, or $177 per square foot. The sale is scheduled to close in November 2000.
The second is 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 $132 per square foot. The sale is expected to occur in December 2000.
At September 30, 2000, SL Green's portfolio consisted of interests in 23 properties, aggregating 9.1 million square feet. Since September 30, 1999, the portfolio has grown by a net 0.6 million square feet, or 7%.
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 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:
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 Nine Months Ended
Sept 30 Sept 30
2000 1999 2000 1999
------------------ -----------------
(unaudited) (unaudited)
Revenue:
Rental revenue, net $47,647 $45,080 $140,998 $129,267
Escalations & reimbursement
revenues 7,593 6,856 18,941 16,473
Signage Rent 496 559 1,593 1,112
Investment income 4,968 1,469 9,903 3,731
Other income 170 688 693 1,545
------ ------- ------ ------
Total revenues 60,874 54,652 172,128 152,128
------ ------- ------- -------
Expenses:
Operating expenses 15,260 14,293 41,893 36,778
Ground rent 3,164 3,183 9,505 9,572
Interest 10,698 7,772 30,243 19,722
Depreciation and amortization 8,300 7,677 24,519 19,705
Real estate taxes 7,299 7,481 21,688 21,904
Marketing, general and
administrative 2,540 2,979 8,517 8,387
----- ------ ------ ------
Total expenses 47,261 43,385 136,365 116,068
------ ------ ------- -------
Income before minority interests,
preferred stock dividends, gain
on sales, extraordinary item, service corporation
and joint venture income 13,613 11,267 35,763 36,060
Equity in net income from
affiliates 71 223 609 551
Equity in net income from unconsolidated
joint ventures 586 151 2,209 151
Minority interests (1,496) (1,169) (4,964) (4,262)
Extraordinary losses -- -- (430) (628)
Gain on sale of rental
properties/investments 5,624 -- 24,646 --
Preferred stock dividends and
accretion (2,407) (2,399) (7,220) (7,198)
--------- ---------- -------- --------
Net income available to common
shareholders $15,991 $8,073 $50,613 $24,674
========= ========== ======== ========
Basic earnings per share $0.65 $0.33 $2.08 $1.02
Diluted earnings per share $0.64 $0.33 $2.05 $1.02
Funds From Operations (FFO)
FFO per share (Basic) $0.74 $0.60 $2.05 $1.72
FFO per share (Diluted) $0.70 $0.58 $1.97 $1.68
FFO Calculation:
Income before minority interests,
extraordinary items, preferred
stock dividends and gains on
sales $14,270 $11,641 $38,581 $36,762
Less:
Preferred stock dividend (2,300) (2,300) (6,900) (6,900)
Minority interest in commercial
property -- (354) -- (1,765)
Add:
Joint venture FFO adjustment 842 120 2,468 120
Depreciation and amortization 8,300 7,677 24,519 19,705
Amortization of deferred financing
costs and depreciation of non-real
estate assets (1,042) (878) (3,105) (2,140)
---------- --------- ------- --------
FFO - BASIC 20,070 15,906 55,563 45,782
Add: Preferred stock dividends 2,300 2,300 6,900 6,900
---------- --------- -------- --------
FFO - DILUTED $22,370 $18,206 $62,463 $52,682
========== ========= ======== ========
Basic ownership interests
Weighted average REIT common
shares 24,458 24,200 24,329 24,195
Weighted average partnership units held by
minority interest 2,346 2,428 2,385 2,428
--------- ---------- ------- -------
Basic weighted average shares and units
outstanding 26,804 26,628 26,714 26,623
=========== =========== ======= =======
Diluted ownership interest
Weighted average REIT common and common
share equivalent share 24,954 24,278 24,678 24,258
Weighted average partnership units
held by minority interests 2,346 2,428 2,385 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 31,405 31,762 31,385
========== ========== ======== ========
SL Green Realty Corp.
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
Sept 30, December 31,
2000 1999
------- ------------
(unaudited)
Assets
Commercial real estate properties, at cost:
Land and land interests.......................$125,572 $132,081
Buildings and improvements.................... 609,089 632,004
Building leasehold............................ 137,441 132,573
Property under capital 12,208 12,208
lease......................................... 884,310 908,866
Less accumulated (72,179) (56,983)
depreciation................................. 812,131 851,883
Properties held for sale...................... 49,890 25,835
Cash and cash
equivalents................................... 14,064 21,561
Restricted
cash.......................................... 34,583 34,168
Tenant and other receivables, net $1,930 and $938
reserve in 2000 and
1999, respectively............................ 9,132 5,747
Related party
receivables................................... 964 463
Deferred rents receivable net of provision for
doubtful accounts of $5,002 and
$5,337 in 2000 and 1999, respectively...... 43,452 37,015
Investment in and advances to affiliates..... 7,943 4,978
Investment in unconsolidated joint ventures... 59,632 23,441
Mortgage loans and preferred investments...... 49,903 20,000
Deferred costs, net........................... 37,924 30,540
Other assets.................................. 34,100 15,611
---------------- -------------
Total assets............................... $1,153,718 $1,071,242
================ =============
Liabilities and Stockholders' Equity
Mortgage notes payable....................... $345,351 $352,693
Revolving credit facility.................... 126,752 83,000
Accrued interest payable..................... 3,069 2,650
Accounts payable and accrued expenses........ 28,045 17,167
Deferred revenue............................. 1,444 306
Capitalized lease obligations................ 15,242 15,017
Deferred land lease payable.................. 12,805 11,611
Dividend and distributions payable........... 12,065 11,947
Security deposits............................ 18,951 18,905
Total liabilities............................ 563,724 513,296
------------------- --------------
Minority interests........................... 41,753 41,494
8%Preferred Income Equity Redeemable Stock $0.01 par value, $25.00
mandatory liquidation preference 25 million shares
authorized, 4.6 million outstanding in
2000 and 1999.............................. 110,667 110,348
Stockholders' Equity
Common stock, $.01 par value 100,000 shares
authorized, 24,516 and 24,184 issued and
outstanding in 2000 and 1999, respectively.... 245 242
Additional paid - in
capital................................... 428,635 421,958
Deferred compensation plan........... (5,939) (6,674)
Distributions in excess of earnings.. 14,633 (9,422)
--------- ----------
Total stockholders'
equity........................................ 437,574 406,104
--------- ---------
Total liabilities and stockholders'
equity................................... $1,153,718 $1,071,242
========== ==========
SL GREEN REALTY CORP.
SELECTED OPERATING DATA-UNAUDITED
September 30, 2000 December 31, 1999
Operating Data:
Net rentable area at end of
period (in 000's)(1) 9,130 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.