Press Release Details
SL Green Realty Corp. Reports 21% Gain in Fourth Quarter FFO and 18% Gain in Full Year FFO
Fourth Quarter Highlights
- 21% FFO increase, $0.61 per share (diluted) versus $0.50 prior
year
- Revenues grew 37% over the prior year, to $53.9 M
- 22% same store portfolio Cash NOI growth
- 97% overall portfolio occupancy rate
- Contracted to acquire 100 Park Avenue through a joint venture
- Contracted to sell 36 West 44th Street and 29 West 35th Street
- Completed acquisition of remaining 35% minority interest in BMW
Building
- Increased annual dividend by $0.05
Financial Results
NEW YORK--(BUSINESS WIRE)--February 10, 2000--SL Green Realty Corp. (NYSE:SLG) reported a 21% increase in operating results for the three months ended December 31, 1999. During this period funds from operations (FFO) before minority interest totaled $16.9 million, or $0.61 per share, compared to $13.3 million, or $0.50 per share for the same quarter in 1998.
Full year results were also strong, reflecting an 18% improvement over 1998. FFO for the twelve months ending December 31, 1999 totaled $62.6 million or $2.29 per share, compared to $42.9 million or $1.94 per share in the previous year.
During the quarter and year ended December 31, 1999, the Company recorded extraordinary losses of $0.4 million and $1.0 million, respectively, due to the early extinguishment of debt associated with various refinancings. Comparatively, during the year ended December 31, 1998, the Company incurred an extraordinary loss of $0.6 million related to early extinguishment of debt on a bridge loan.
Revenues for the fourth quarter totaled $53.9 million compared to $39.3 million in the same period last year - an increase of 37%. Revenue growth principally resulted from 1999 acquisitions ($8.2 million), new leasing activity ($4.9 million), interest and fees earned on mortgage and high yield investments ($0.7 million), and signage income ($0.4 million).
The 1999 "same store" cash NOI in the fourth quarter increased 22% to $11.9 million over prior year. This resulted in cash margins improving year over year from 50% to 55% on 11% aggregate revenue growth of $2.1 million. Most of this improvement resulted from higher occupancy and replacement rents ($1.8 million). As occupancy increased from 93% in 1998 to 97% in 1999 rental revenue increased $1.0 million. Higher annualized rent from replacement rents, which were 22% greater than previously fully escalated rents, contributed $0.8 million.
The Company's EBITDA increased $9.5 million, which increased margins before ground rent to 62% compared to 58% in the fourth quarter of 1998. After ground rent these margins improved to 55% from 50% in the same period. This increase was driven by increases in property GAAP NOI ($9.5 million) and investment and other income ($1.2 million).
Growth in quarterly FFO ($3.6 million) increased GAAP NOI in:
- Properties owned before January 1, 1999, $4.2 million
- 1999 acquisitions $4.8 million
- Increased signage revenues $0.4 million
- Investment and high yield income $0.7 million
- Contribution from joint ventures $0.5 million
Offsetting this growth in revenues were costs associated with acquisition and new investments debt ($4.2 million), higher interest costs associated with working capital borrowing and higher interest rates ($1.4 million), and higher MG&A and non-real estate depreciation ($1.3 million).
Commenting on the positive growth in margins, the Company stated that net revenue growth resulted from the leasing of 221,000 previously vacant square feet, which increased portfolio occupancy to 97%, and an increase in replacements rents of 25% over previously in place rents. Margins were also positively impacted by incremental revenue resulting from new initiatives in signage revenue ($0.4 million), and interest and high yield investment income ($0.7 million).
At year end, debt totaled $475.2 million, reflecting a debt to market cap ratio of 40.6%.
New Investments to Date
-- The Company has entered into a contract to form a joint venture
with Prudential Real Estate Investors (PREI), who acted on behalf of PRISA, its flagship commingled fund, to acquire 100 Park Avenue. The property consists of 834,000 square feet, over 36 stories. It is located one block south of Grand Central Station on Park Avenue between 40th and 41st Streets. SL Green will purchase a 49.9% interest in the venture for $95.8 million, representing an implied overall property value of $192 million. Formation of the joint venture and closing on the property are anticipated to occur in mid-February. The Company has certain preferential rights to acquire PRISA's interests in the future, and will be responsible for managing and leasing the property. It will earn management fees for its operating responsibilities.
-- The Company announced that it has entered into contracts for the sale of two of its smaller side-street properties:
The first is located at 36 West 44th Street. Also known as the Bar Building, the contract purchase price for the property is $31.5 million. The property is approximately 178,000 square feet and the purchase price represents a sale value of $177 per square foot.
The second property, 29 West 35th Street, is 78,000 square feet and has a contract purchase price of $11.7 million or $150 per square foot.
Both sales are expected to close in the first quarter of 2000.
-- The Company completed the acquisition for the remaining 35% interest in the BMW Building located at 555 West 57th Street, New York, New York for $34.1 million. This acquisition was completed for cash in the amount of $18.7 million. Consolidation of the minority interest brings the total acquisition cost to $100.8 million, or $102 per square foot.
Simultaneous with the closing of this transaction, the Company obtained a new $70 million first mortgage loan from The Bank of New York. The proceeds of the refinancing were used to repay the prior first mortgage loan of $44 million, acquire the outstanding minority interests and fund escrows to meet capital needs at the property.
Looking back over the year, Stephen L. Green, Chairman and Chief Executive Officer, noted, "We are enormously proud of our Company's achievements throughout this past year. It was one in which we brought our entire investment and business strategy full circle. We extended our capital base through harvesting the value added in some of our smaller side street properties, while developing strategic relationships with Blue Chip joint venture partners. We established our leadership position in the prime mid-town Manhattan sub markets through our acquisitions of larger avenue properties within a ten minute walking distance to key mid-town commuter hubs."
"Internally, we refined our public and internal financial reporting systems to improve investor communications and management decision making. We also capitalized on our brand name position in the market through a branding strategy targeted at the brokerage community."
"All of these achievements, we believe, will result in SL Green having the most compelling mid-town New York office real estate portfolio, placing it and the Company in a class of its own. Having built this momentum over the past two and one half years, I am confident that 1999 will be remembered not simply as a very good year, but one of many yet to come."
At December 31, 1999, SL Green's portfolio consisted of 24 properties, 22 of which are wholly owned, comprising approximately 8.5 million rentable square feet. This portfolio has grown by 2.3 million square feet (37%) since December 31, 1998.
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 Fourth 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 filing with the Securities and Exchange Commission.
SL GREEN REALTY CORP.
STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data) Three Months Ended Year Ended
December 31 December 31
1999 1998 1999 1998
------------------- --------------------
(unaudited)
Revenue:
Rental revenue, net $45,672 $33,452 $174,939 $114,762
Escalations &
reimbursement revenues 5,429 4,490 21,902 15,923
Signage Rent 548 78 1,660 123
Investment income 1,535 849 5,266 3,267
Other income 706 459 2,250 478
------- ------- -------- ---------
Total revenues 53,890 39,328 206,017 134,553
------- ------- -------- ---------
Expenses:
Operating expenses 12,636 9,540 49,414 34,125
Ground rent 3,183 2,930 12,754 11,082
Interest 8,889 3,296 28,610 13,086
Depreciation and
amortization 7,555 4,690 27,260 15,404
Real estate taxes 7,294 6,336 29,198 21,224
Marketing, general
and administrative 2,534 1,807 10,922 5,761
Loss on terminated project --- 1,065 --- 1,065
Loss on hedge transaction --- 176 --- 176
------- ------- -------- ---------
Total expenses 42,091 29,840 158,158 101,923
------- ------- -------- ---------
Income before minority
interests, preferred
stock dividends,
extraordinary 11,799 9,488 47,859 32,630
Losses, service corporation
and joint venture income
Equity in income from
Service Corporation 179 457 730 387
Equity in income from
Joint Ventures 226 --- 377 ---
Minority interests (859) (689) (5,121) (3,043)
------- ------- -------- ---------
11,345 9,256 43,845 29,974
------- ------- -------- ---------
Extraordinary loss,
net of minority interest (361) --- (989) (522)
Preferred stock dividends
and accretion (2,399) (2,346) (9,598) (5,970)
------- ------- -------- ---------
============= ===========
Net income available
to common shareholders $8,585 $6,910 $33,258 $23,482
======= ======= ======== =========
Net income per share
(Basic) $0.35 $0.29 $1.37 $1.19
Net income per share
(Diluted) $0.35 $0.29 $1.37 $1.19
Funds From Operations
(FFO)
FFO per share (Basic) $0.63 $0.50 $2.35 $1.94
FFO per share (Diluted) $0.61 $0.50 $2.29 $1.94
FFO Calculation:
Income before minority
interests, preferred
stock dividends
and extraordinary loss $12,204 $9,945 $48,966 $33,017
Less:
Preferred stock dividend (2,300) (2,300) (9,200) (5,720)
Minority interest in
commercial property --- --- (1,765) ---
Add:
Loss on terminated project --- 1,065 --- 1,065
Loss on hedge transaction --- 176 --- 176
Joint venture FFO adjustment 313 --- 433 ---
Depreciation and
amortization 7,555 4,690 27,260 15,404
Amortization of deferred
financing costs and
depreciation of
non-real (909) (273) (3,049) (1,084)
estate assets
------- ------- -------- ---------
FFO - BASIC $16,863 $13,303 $62,645 $42,858
Add: Preferred stock
dividends 2,300 --- 9,200 ---
======= ======= ======== =========
FFO - DILUTED $19,163 --- $71,845 ---
======= ======= ======== =========
Basic ownership interests
Weighted average
REIT common shares 24,184 23,952 24,192 19,675
Weighted average
partnership units
held by minority 2,428 2,428 2,428 2,406
interest
======= ======= ======== =========
Basic weighted average
shares and units
outstanding 26,612 26,380 26,620 22,081
======= ======= ======== =========
Diluted ownership interest
Weighted average REIT
common and common share
equivalent 24,234 23,993 24,252 19,739
shares
Weighted average
partnership units held
by minority 2,428 2,428 2,428 2,406
interests
Common share equivalents
for preferred stock 4,699 --- 4,699 ---
======= ======= ======== =========
Diluted weighted average
equivalent shares and
units 31,361 26,421 31,379 22,145
outstanding
======= ======= ======== =========
SL Green Realty Corp.
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
December 31, December 31,
1999 1998
------------ ------------
Assets
Commercial real estate properties,
at cost:
Land and land interests............. $136,342 $112,123
Buildings and improvements.......... 627,743 488,914
Building leasehold.................. 132,573 83,816
Property under capital 12,208 12,208
lease...............................
908,866 697,061
Less accumulated (56,983) (37,317)
depreciation........................
--------- --------
908,866 697,061
851,883 659,744
Properties held for sale............ 25,835 ---
Cash and cash 21,561 6,236
equivalents.........................
Restricted 34,168 18,635
cash................................
Tenant receivables, net $938 and
$374 reserve in 1999 and 1998, 5,398 3,951
respectively.
Related party 812 182
receivables.........................
Deferred rents receivable net of
provision for doubtful accounts of
$5,337 and 37,015 20,891
$2,369 in 1999 and 1998, respectively
Investment in and advances to Service 4,978 10,694
Corporation.........................
Investment in joint ventures........ 23,441 ---
Mortgage loans receivable........... 20,000 26,401
Deferred costs, 30,540 15,282
net.................................
Other 15,611 15,717
assets..............................
--------- --------
908,866 697,061
Total $1,071,242 $777,733
assets..............................
========== =========
Liabilities and Stockholders'
Equity
Mortgage notes payable.............. 352,693 $50,862
Secured bridge facilities........... --- 87,500
Revolving credit facility........... 83,000 23,800
Accrued interest 2,650 494
payable.............................
Accounts payable and accrued 17,167 5,588
expenses............................
Capitalized lease 15,017 14,741
obligations.........................
Deferred land lease payable......... 11,611 9,947
Dividend and distributions payable.. 11,947 11,585
Security 18,905 16,949
deposits............................
--------- --------
908,866 697,061
Total 512,990 221,466
liabilities.........................
--------- --------
908,866 697,061
Minority 41,494 41,491
interests...........................
8% Preferred Income Equity Redeemable
Stock $0.01 par value, $25.00
mandatory liquidation preference
25 million shares authorized,
4.6 million outstanding in 1999
and 1998........................... 110,348 109,950
Stockholders' Equity
Common stock, $.01 par value
100,000 shares authorized,
24,184 and 23,952 issued and
outstanding in 1999 and 1998, 242 240
respectively.......................
Additional paid - in 421,958 416,939
capital............................
Deferred compensation plan......... (6,610) (3,266)
Officers' loans.................... (64) (528)
Distributions in excess of earnings (9,422) (8,559)
Accumulated other comprehensive income 306 ---
--------- --------
908,866 697,061
Total stockholders' 406,410 404,826
equity..............................
--------- --------
908,866 697,061
Total liabilities and
stockholders' equity............... $1,071,242 $777,733
========== =========
SL GREEN REALTY CORP.
SELECTED OPERATING DATA-UNAUDITED
December 31, December 31,
1999 1998
Operating Data:
Net rentable area at end of period
(in 000's)(1) 8,540 6,254
Portfolio occupancy percentage at
end of period 97% 93%
Same Store occupancy percentage at
end of period 97% 93%
Number of properties in operation 24 18
(1) Includes wholly-owned and majority and minority owned properties.