SECURITES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
No. 2
CURRENT REPORT
------------
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 19, 1997
SL GREEN REALTY CORP.
(Exact name of Registrant as specified in its Charter)
Maryland
(State of Incorporation)
1-13199 13-3956775
(Commission File Number) (IRS Employer Id. Number)
70 West 36th Street 10018
New York, New York (Zip Code)
(Address of principal executive offices)
(212) 594-2700
(Registrant's telephone number, including area code)
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant hereby amends the following items, financial statements, exhibits or
other portions of its Current Report on Form 8-K/A No.1, dated December 19, 1997
(filed with the Securities and Exchange Commission on January 5, 1998), as set
forth in the pages attached hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) and (b) FINANCIAL STATEMENTS OF PROPERTY ACQUIRED AND PRO FORMA
FINANCIAL INFORMATION
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Pro Forma/Combined Balance Sheet
(Unaudited) as of September 30, 1997................................ F-4
Pro Forma Combined Income Statement
(Unaudited) for the nine months ended
September 30, 1997.................................................. F-5
Pro Forma Combined Income Statement
(Unaudited) for the year ended
December 31, 1996................................................... F-6
Notes to Pro Forma Combined Financial Information...................... F-7
PROPERTY
Report of Independent Auditors......................................... F-15
Statement of Revenues and Certain Expenses
of 17 Battery Place for the year ended
December 31, 1996 and for the nine months
ended September 30, 1997 (Unaudited)................................. F-16
Notes to Statement of Revenues and Certain
Expenses of 17 Battery Place......................................... F-17
MORTGAGE
Report of Independent Auditors......................................... F-20
Statement of Revenues and Certain Expenses
of 17 Battery Place for the year ended
December 31, 1996 and for the nine months
ended September 30, 1997 (Unaudited)................................. F-21
Notes to Statement of Revenues and Certain
Expenses of 17 Battery Place......................................... F-22
(c) EXHIBITS
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SL GREEN REALTY CORP.
By: /s/ David J. Nettina
------------------------------------------
David J. Nettina
Executive Vice President, Chief Operating
Officer and Chief Financial Officer
Date: March 2, 1998
SL GREEN REALTY CORP.
PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The pro forma balance sheet of the Company as of September 30, 1997 has
been prepared as if the Company's purchase of the property located at 17
Battery Place had been consummated on September 30, 1997. The pro forma
statements of income for the nine months ended September 30, 1997 and for the
year ended December 31, 1996 are presented as if the completion of the
Offering, the Formation Transactions and the purchase of the properties
located at 110 East 42nd Street and 17 Battery Place occurred at January 1,
1996 and the effect thereof was carried foward through the nine month period
ended September 30, 1997.
The pro forma financial statements do not purport to represent what the
Company's financial position or results of operations would have been
assuming the completion of the Formation Transactions and the Offering on
such date or at the beginning of the period indicated, nor do they purport to
project the Company's financial position or results of operations at any
future date or for any future period. The pro forma combined financial
statements should be read in conjunction with the combined financial
statements of SL Green Predecessor included in the Company's registration
statement on Form S-11 (333-29329) dated August 14, 1997. The pro forma
consolidated balance sheet as of September 30, 1997 and pro forma combined
income statement for the nine months ended September 30, 1997 should be read
in conjunction with the Company's quarterly report on Form 10-Q for the
quarterly period ended September 30, 1997.
F-3
SL GREEN REALTY CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
SL GREEN PURCHASE OF
REALTY CORP. 17 BATTERY COMPANY
HISTORICAL PLACE PRO FORMA
(A) (B) AS ADJUSTED
------------ ---------- -----------
ASSETS :
Commercial real estate
property at cost............
Land.......................... $ 39,958 $ 11,645 $ 51,603
Buildings and improvements.... 215,818 46,580 262,398
Property under capital lease.. 12,208 12,208
------------ ---------- -----------
267,984 58,225 326,209
Less accumulated
depreciation............ (22,006) (22,006)
------------ ---------- -----------
245,978 58,225 304,203
Cash and cash equivalents..... 15,363 4,587 19,950
Restricted cash............... 2,902 2,902
Receivables................... 675 30 705
Related party receivables..... 1,341 1,341
Deferred rents receivable, net
of provision for doubtful
accounts of $124............ 10,824 10,824
Investment in
Service corporations........ 1,315 1,315
Deferred lease fees and loan
costs....................... 4,016 1,399 5,415
Mortgage receivable........... 15,500 15,500
Other assets.................. 7,538 (3,741) 3,797
------------ ---------- -----------
Total assets.............. $ 289,952 $ 76,000 $ 365,952
------------ ---------- -----------
------------ ---------- -----------
LIABILITIES AND EQUITY :
Mortgage loans payable........ $ 46,252 $ 46,252
Line of credit................ $ 76,000 76,000
Accrued interest payable...... 225 225
Capitalized lease
obligations................. 14,431 14,431
Deferred land lease payable... 8,188 8,188
Accounts payable and accrued
expenses.................... 2,689 2,689
Accounts payable to related
parties..................... 487 487
Security deposits............. 4,262 4,262
------------ ---------- ----------
Total liabilities......... 76,534 76,000 152,534
------------ ---------- ----------
Minority interest in Operating
Partnership................. 34,444 34,444
Common stock.................. 123 123
Additional paid-in capital.... 178,669 178,669
Retained earnings............. 182 182
------------ ---------- ----------
Total equity.............. 178,974 178,974
------------ ---------- ----------
Total liabilities and
equity.................. $ 289,952 $ 76,000 $ 365,952
------------ ---------- ----------
------------ ---------- ----------
F-4
SL GREEN REALTY CORP.
PRO FORMA COMBINED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
EQUITY
SL GREEN SL GREEN ACQUISITION OF CONVERSION
PREDECESSOR REALTY PARTNERSHIPS' SERVICE ACQUISITION FINANCING PRO
HISTORICAL CORP. INTERESTS CORPORATIONS PROPERTIES ADJUSTMENTS FORMA
(B) (A) (C) (D) (E) (F) ADJUSTMENTS
------------- ---------- --------------- --------------- ------------- ------------- -----------
REVENUES:
Rental revenue.......... $ 4,107 $ 5,415 $ 13,079 $ 12,254
Escalations and
reimbursement
revenues.............. 792 1,043 859 1,644
Management revenues..... 1,268 $ (1,268)
Leasing commissions..... 3,464 484 (1,697)
Construction revenues... 77 (77)
Investment income....... 207
Other income............ 16 89 (11) 1,582
------ ------ ------- ------ ------ ------------- ------------
Total revenues...... 9,724 7,149 14,027 (3,053) 15,480
------ ------ ------- ------ ------ ------------- ------------
Share of net income (loss)
from uncombined
joint ventures........ (770) (130) 770 269
------ ------ ------- ------ ------ ------------- ------------
EXPENSES:
Operating expenses...... 2,709 1,190 2,528 (1,000) 3,411
Ground rent............. 13 491 2,456 268
Interest................ 1,062 593 5,320 $ (3,008)
Depreciation and
amortization............ 811 846 2,457 (48) 1,390 (16) $ 4(H)
Real estate taxes....... 705 1,009 1,741 2,714
Marketing, general and
administrative........ 2,189 437 (1,521) 961(I)
------ ------ ------- ------ ------ ------------- ------------
Total expenses...... 7,489 4,566 14,502 (2,569) 7,783 (3,024) 965
------ ------ ------- ------ ------ ------------- ------------
Income (loss) before
minority interest and
extraordinary
item................ 1,465 2,453 295 (215) 7,697 3,024 (965)
Minority interest in
operating
partnership........... (397) (1,831)(J)
------ ------ ------- ------ ------ ------------- ------------
Income (loss) before
extraordinary
item................ $ 1,465 $ 2,056 $ 295 $ (215) $ 7,697 $ 3,024 $(2,796)
------ ------ ------- ------ ------ ------------- ------------
------ ------ ------- ------ ------ ------------- ------------
Income per common
share (K)..........
17
110 EAST BATTERY COMPANY PRO
COMPANY PRO 42ND STREET PLACE FORMA
FORMA (G) (L) AS ADJUSTED
----------- ----------- ----------- -----------
REVENUES:
Rental revenue...................... $ 34,855 $ 3,333 $ 10,418 $ 48,606
Escalations and reimbursement
revenues.......................... 4,338 501 696 5,535
Management revenues.................
Leasing commissions................. 2,251 2,251
Construction revenues...............
Investment income................... 207 1,395 1,602
Other income........................ 1,676 14 64 1,754
----------- ----------- ----------- -----------
Total revenues.................. 43,327 3,848 12,573 59,748
----------- ----------- ----------- -----------
Share of net income (loss) from
uncombined joint ventures......... 139 139
----------- ----------- ----------- -----------
EXPENSES:
Operating expenses.................. 8,838 1,608 3,505 13,951
Ground rent......................... 3,228 3,228
Interest............................ 3,967 4,104 8,071
Depreciation and amortization....... 5,444 426 1,273 7,143
Real estate taxes................... 6,169 1,000 1,624 8,793
Marketing, general and
administrative.................... 2,066 84 294 2,444
----------- ----------- ----------- -----------
Total expenses.................. 29,712 3,118 10,800 43,630
----------- ----------- ----------- -----------
Income (loss) before minority
interest and extraordinary
item............................ 13,754 730 1,773 16,257
Minority interest in operating
partnership....................... (2,228) (118) (287) (2,633)
----------- ----------- ----------- -----------
Income (loss) before extraordinary
item............................ $ 11,526 $ 612 $ 1,486 $ 13,624
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income per common share (K)....... $ 0.93 $ 1.10
----------- -----------
----------- -----------
F-5
SL GREEN REALTY CORP.
PRO FORMA COMBINED INCOME STATEMENT
FOR THE YEAR ENDED
DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
ACQUISITION EQUITY
SL GREEN OF CONVERION OF
PREDECESSOR PARTNERSHIPS' SERVICE ACQUISITION FINANCING PRO FORMA
HISTORICAL INTERESTS CORPORATIONS PROPERTIES ADJUSTMENTS ADJUSTMENTS
(A) (B) (C) (D) (E) (G)
------------- --------------- --------------- ----------- ------------- -------------
REVENUES:
Rental revenue........................ $ 4,199 $ 20,985 $ 19,154
Escalations and reimbursement
revenues............................ 1,051 2,304 3,274
Management revenues................... 2,336 $ (2,336)
Leasing commissions................... 2,372 (1,115)
Construction revenues................. 101 (101)
Investment income..................... 15
Other income.......................... 123 13 (92) 906
Equity in Service Corporations
income..............................
------------- ------- ------- ----------- ------------- -------------
Total revenues...................... 10,182 23,317 (3,644) 23,334
------------- ------- ------- ----------- ------------- -------------
Share of net income (loss) from
uncombined joint ventures........... (1,408) 1,408 (504)
------------- ------- ------- ----------- ------------- -------------
EXPENSES:
Operating expenses.................... 3,197 4,608 (1,522) 6,016
Ground rent........................... 3,925 379
Interest.............................. 1,357 7,743 $ (3,621)
Depreciation and amortization......... 975 3,812 (92) 2,292 (13) $ 5
Real estate taxes..................... 703 3,189 4,356
Marketing, general and
administrative...................... 3,250 (2,264) 1,657
------------- ------- ------- ----------- ------------- -------------
Total expenses...................... 9,482 23,277 (3,878) 13,043 (3,634) 1,662
------------- ------- ------- ----------- ------------- -------------
Income (loss) before minority
interest and extraordinary item... (708) 1,448 (270) 10,291 3,634 (1,662)
Minority interest
in Operating Partnership (H)........ (2,063)
------------- ------- ------- ----------- ------------- -------------
Income (loss)
before extraordinary item......... $ (708) $ 1,448 $ (270) $ 10,291 $ 3,634 $ (3,725)
------------- ------- ------- ----------- ------------- -------------
------------- ------- ------- ----------- ------------- -------------
Income per common share(I)..........
110 EAST 17 BATTERY COMPANY
COMPANY 42ND STREET PLACE PRO FORMA
PRO FORMA (F) (J) AS ADJUSTED
----------- ------------ ------------ -----------
REVENUES:
Rental revenue........................ $ 44,338 $ 4,507 $13,983 $ 62,828
Escalations and reimbursement
revenues............................ 6,629 520 1,097 8,246
Management revenues...................
Leasing commissions................... 1,257 1,257
Construction revenues.................
Investment income..................... 15 1,860 1,875
Other income.......................... 950 16 62 1,028
Equity in Service Corporations
income..............................
----------- --------- --------- -----------
Total revenues...................... 53,189 5,043 17,002 75,234
----------- --------- --------- -----------
Share of net income/(loss) from
uncombined joint ventures........... (504) (504)
----------- --------- --------- -----------
EXPENSES:
Operating expenses.................... 12,299 2,248 4,937 19,484
Ground rent........................... 4,304 4,304
Interest.............................. 5,479 5,472 10,951
Depreciation and amortization......... 6,979 602 1,697 9,278
Real estate taxes..................... 8,248 1,422 2,519 12,189
Marketing, general and
administrative...................... 2,643 102 347 3,092
----------- --------- --------- -----------
Total expenses...................... 39,952 4,374 14,972 59,298
----------- --------- --------- -----------
Income (loss) before minority
interest and extraordinary item... 12,733 669 2,030 15,432
Minority interest
in Operating Partnership (H)........ (2,063) (108) (329) (2,500)
----------- --------- --------- -----------
Income (loss)
before extraordinary item......... $ 10,670 $ 561 $1,701 $ 12,932
----------- --------- --------- -----------
----------- --------- --------- -----------
Income per common share(I).......... $ 0.87 $ 1.05
----------- -----------
----------- -----------
F-6
SL GREEN REALTY CORP
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(A) To reflect the condensed consolidated balance sheet of SL Green
Realty Corp. as reported on form 10-Q/A for the quarterly period ended
September 30, 1997.
(B) To reflect the December 19, 1997 purchase price allocation for the
acquisition for the Company's acquired portion of the property located at 17
Battery Place as of September 30, 1997. There was no formal valuation
performed on this property. The acquisition included a $15.5 million mortgage
receivable due from a third party that purchased the remaining portion of 17
Battery Place. The mortgage bears interest at 12% and is due September 1998
and is collateralized by the holder's co-tenancy interest in 17 Battery
Place. The purchase was financed through a line of credit with an estimated
incremental borrowing rate of 7.2%.
ADJUSTMENTS TO THE PRO FORMA COMBINED INCOME STATEMENT FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
(A) To reflect the condensed consolidated statement of operations of SL
Green Realty Corp. for the period August 21, 1997 to December 31, 1997 as
reported on the Company's Form 10-Q/A for the quarterly period ended
September 30, 1997.
(B) To reflect the SL Green Predecessor historical combined statement of
operations for the period January 1, 1997 to August 20, 1997 as reported on
the Company's Form 10-Q/A for the quarterly period ended September 30, 1997.
(C) To reflect the period January 1, 1997 to August 20, 1997 operations
of 673 First Avenue, 470 Park Avenue South, 29 West 35th Street and 36 West
44th Street (the "Equity Properties") as consolidated entities rather than
equity method investees due to the acquistion of 100% of the partnership
interests for the period January 1, 1997 to August 20, 1997.
ACQUISITION OF PARTNERSHIP INTERESTS AND FAIR
MARKET VALUE ADJUSTMENTS
ELIMINATE --------------------------------------------------
HISTORICAL UNCOMBINED 673 470 29 36 TOTAL
AMOUNTS TOTAL FIRST AVE PARK AVE WEST 35TH WEST 44TH ADJUSTMENTS
----------- ----------- ----------- ----------- ----------- ----------- -----------
REVENUES:
Rental revenue(a)............. $ 12,604 $ 247 $ 152 $ 64 $ 12 $ 13,079
Escalations and reimbursement
revenues..................... 859 859
Other income.................. 89 89
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues............ 13,552 247 152 64 12 14,027
----------- ----------- ----------- ----------- ----------- ----------- -----------
Equity in net income/(loss)
of investees................. $ 770 770
----------- ----------- ----------- ----------- ----------- ----------- -----------
EXPENSES:
Operating expenses(b)......... 2,976 (221) (128) (37) (62) 2,528
Real estate taxes............. 1,741 1,741
Ground rent(c)................ 2,425 31 2,456
Interest...................... 5,320 5,320
Depreciation and
amortization(c).............. 2,510 24 (64) (11) (2) 2,457
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses............ 14,972 (166) (192) (48) (64) 14,502
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before minority
interest................ $ 770 $ (1,420) $ 413 $ 344 $ 112 $ 76 $ 295
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
- ------------------------
(a) Rental income is adjusted to reflect straight line amounts as of the
acquisition date.
(b) Operating expenses are adjusted to eliminate management fees paid to the
Service Corporations (Management fee income received by the Service
Corporations was also eliminated.)
(c) Ground rent and depreciation and amortization were adjusted to reflect the
purchase of the assets.
F-7
SL GREEN REALTY CORP.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(D) To reflect the nine months operations of the Service Corporations
pursuant to the equity method of accounting.
LEASING EXPENSES
HISTORICAL COMMISSIONS ATTRIBUTABLE EQUITY
SERVICE ATTRIBUTABLE TO REIT CONVERSION TOTAL
CORPORATIONS TO LLC (A) (B) ADJUSTMENT
------------ ------------ ------------- --------------- -----------
STATEMENT OF OPERATIONS:
Management revenue......................... $ 1,268 $ (1,268)
Leasing commissions........................ 3,464 $ (1,767) (1,697)
Construction revenues...................... 77 (77)
Equity in net income of Service
Corporations.............................. $ (269) 269
Other income............................... 11 (11)
------------ ------------ ----- ----- -----------
Total revenue............................ 4,820 (1,767) (269) (2,784)
------------ ------------ ----- ----- -----------
EXPENSES
Operating expenses......................... 1,000 (1,000)
Depreciation and amortization.............. 48 (48)
Marketing, general and administrative...... 2,189 $ (668) (1,521)
------------ ------------ ----- ----- -----------
Total expenses........................... 3,237 (668) (2,569)
------------ ------------ ----- ----- -----------
Income (loss)............................ $ 1,583 $ (1,767) $ 668 $ (269) $ (215)
------------ ------------ ----- ----- -----------
------------ ------------ ----- ----- -----------
- ------------------------
(a) Expenses are allocated to the Service Corporations and the Management LLC
based upon the job functions of the employees.
(b) The Equity in net income of the Service Corporations is computed as follows:
Historical Service Corporations income..................... $ 1,583
Adjustment for management fees eliminated in the combined
historical financial statements due to acquisition of
partnerships interests................................... (201)
Leasing commissions attributable to Management LLC......... (1,767)
Expenses attributable to REIT.............................. 668
---------
Income..................................................... $ 283
---------
---------
Equity in net income of Service Corporations at 95
percent.................................................. $ 269
---------
---------
(E) To reflect the operations of 1372 Broadway, 1140 Avenue of the
Americas and 50 West 23rd Street for the nine months ended September 30,
1997. Historical rental revenue was adjusted for straight line rents as of
the acquisition date, historical operating expenses were reduced for
management fees, the land
F-8
SL GREEN REALTY CORP.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
lease on 1140 Avenue of the Americas was recorded, and depreciation and
amortization based on cost was recorded.
1372 BROADWAY 1140 AVENUE OF THE AMERICAS 50 WEST 23RD STREET
--------------------------------------- --------------------------------------- --------------------------
HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT
----------- ------------- ----------- ----------- ------------- ----------- ----------- -------------
Revenues:
Rental revenue.. $ 5,154 $ 578 $ 5,732 $ 2,768 $ 230 $ 2,998 $ 3,303 $ 221
Escalations &
reimbursement
revenue....... 713 713 440 440 491
Other income.... 1,520 1,520 61 61 1
----------- ----- ----------- ----------- ----- ----------- ----------- -----
Total
revenue..... 7,387 578 7,965 3,269 230 3,499 3,795 221
----------- ----- ----------- ----------- ----- ----------- ----------- -----
Expenses:
Operating
expenses...... 1,701 (181) 1,520 1,261 (130) 1,131 876 (116)
Ground rent..... 268 268
Depreciation &
amortization.. 658 658 271 271 461
Real estate
taxes......... 1,396 1,396 660 660 658
----------- ----- ----------- ----------- ----- ----------- ----------- -----
Total
expenses.... 3,097 477 3,574 1,921 409 2,330 1,534 345
----------- ----- ----------- ----------- ----- ----------- ----------- -----
Income before
minority
interest...... $ 4,290 $ 101 $ 4,391 $ 1,348 $ (179) $ 1,169 $ 2,261 $ (124)
----------- ----- ----------- ----------- ----- ----------- ----------- -----
----------- ----- ----------- ----------- ----- ----------- ----------- -----
TOTAL
PRO FORMA PRO FORMA
----------- -----------
Revenues:
Rental revenue.. $ 3,524 $ 12,254
Escalations &
reimbursement
revenue....... 491 1,644
Other income.... 1 1,582
----------- -----------
Total
revenue..... 4,016 15,480
----------- -----------
Expenses:
Operating
expenses...... 760 3,411
Ground rent..... 268
Depreciation &
amortization.. 461 1,390
Real estate
taxes......... 658 2,714
----------- -----------
Total
expenses.... 1,879 7,783
----------- -----------
Income before
minority
interest...... $ 2,137 $ 7,697
----------- -----------
----------- -----------
(F) To reflect the changes in interest expense as the result of financing
transactions and the related adjustments to deferred financing expense.
NEW
470 29 36 70 1414 MORTGAGE
673 1ST AVE PAS W 35TH W 44TH W 36TH AVE. AMERICAS LOAN
----------- --------- ----------- ----------- ----------- --------------- -----------
Interest....................... $ (1,123) $ (1,025) $ (593) $ (339) $ (591) $ 663
Depreciation and
amortization................. 30 9 $ 3 (47) (29) 18
----- --------- -- ----- ----- ----- -----
Total expenses............. (1,093) (1,016) 3 (593) (386) (620) 681
----- --------- -- ----- ----- ----- -----
Income before minority
interest................. $ 1,093 $ 1,016 $ (3) $ 593 $ 386 $ 620 $ (681)
----- --------- -- ----- ----- ----- -----
----- --------- -- ----- ----- ----- -----
TOTAL
---------
Interest....................... $ (3,008)
Depreciation and
amortization................. (16)
---------
Total expenses............. (3,024)
---------
Income before minority
interest................. $ 3,024
---------
---------
(G) To reflect the operations of 110 East 42nd Street for the period
January 1, 1997 to September 15, 1997. Historical rental revenue was adjusted
for straight line rents, historical operations expenses were reduced for
management fees, and depreciation was calculated based on the building cost
that was recorded. The acquisition was funded by proceeds from the stock
offering.
HISTORICAL ADJUSTMENT PRO FORMA
---------- ---------- ---------
Revenues:
Rental revenue $3,499 $(166) $3,333
Escalation 501 501
Other income 14 14
------ ----- ------
Total revenue 4,014 (166) 3,848
------ ----- ------
Expenses:
Operating expenses 1,608 1,608
Depreciation and amortization 0 426 426
Real estate taxes 1,000 1,000
MG&A 231 (147) 84
------ ----- ------
Total expenses 2,839 279 3,118
------ ----- ------
Income before minority interest $1,175 $(445) $ 730
------ ----- ------
------ ----- ------
(H) To reflect for 70 West 36th Street and 1414 Avenue of the Americas,
depreciation expense adjustments for real property transfer taxes capitalized
which are amortized over the remaining life of the commercial property.
F-9
SL GREEN REALTY CORP.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(I) To reflect the net increase in marketing, general and administrative
expenses related to operations of a public company which include the following:
Officers' compensation and related costs..................... $ 446
Professional fees............................................ 203
Directors' fees and insurance................................ 174
Printing and distribution costs.............................. 87
Other........................................................ 51
---------
$ 961
---------
---------
The additional officers' compensation and related costs are attributable
primarily to Employment Agreements with the officers as further described under
the caption "Employment and Non Competition Agreement."
(J) Represents the 16.2% interest of the minority in the Operating
Partnership.
(K) Pro Forma net income per common share is based upon 12,417,000
weighted average shares of common stock outstanding as of September 30, 1997.
As each Operating Partnership Unit is redeemable for cash, or at the
company's election, for one share of common stock, the calculation of
earnings per share upon redemption will be unaffected as unitholders and
stockholders share equally on a per unit and per share basis in the net
income of the Company. In February 1997, the Financial Accounting Standards
Board issued Statement No. 128, Earnings per Share, which is required to be
adopted on December 31, 1997. At that time the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements for calculating primary
earnings per share, the dilutive effect of stock options will be excluded.
Management does not believe the adoption of Statement No. 128 will have a
material impact on earnings per share.
(L) To reflect the operations of 17 Battery Place for the nine months
ended September 30, 1997. Historical rental revenue was adjusted for straight
line rents, historical operating expenses were reduced for management fees,
depreciation was calculated based on the building cost that was recorded,
amortization was calculated based on the deferred financing costs that were
recorded, and interest expense was calculated using an estimated effective
interest rate of 7.2%.
HISTORICAL ADJUSTMENT PRO FORMA
---------- ---------- ---------
Revenues:
Rental Revenue $ 9,750 $ 668 $ 10,418
Escalation 696 696
Investment Income 1,395 1,395
Other Income 64 64
--------- --------- ---------
Total Revenue 10,510 2,063 12,573
--------- --------- ---------
Expenses:
Operating Expenses 3,505 3,505
Interest Expense 4,104 4,104
Depreciation and Amortization 1,273 1,273
Real Estate Taxes 1,624 1,624
MG&A 615 (321) 294
--------- --------- ---------
Total Expenses 5,744 5,056 10,800
--------- --------- ---------
Income Before Minority
Interest $ 4,766 $ (2,993) $ 1,773
--------- --------- ---------
--------- --------- ---------
F-10
SL GREEN REALTY CORP.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
ADJUSTMENTS TO THE PRO FORMA COMBINED INCOME STATEMENT FOR THE YEAR ENDED
DECEMBER 31, 1996
(A) To reflect the SL Green Predecessor historical combined statement of
operations for the year ended December 31, 1996.
(B) To reflect 673 First Avenue, 470 Park Avenue South, 29 West 35th Street
and 36 West 44th Street (the "Equity Properties") as consolidated entities
rather than as uncombined joint ventures due to the acquisition of 100% of the
partnerships' interests.
ELIMINATE
HISTORICAL UNCOMBINED 673 470 29 36
AMOUNTS TOTAL FIRST AVE PARK AVE WEST 35TH WEST 44TH
----------- ----------- ----------- ----------- ----------- -----------
Revenues
Rental revenue................................. $ 17,386 $ 334 $ 183 $ 146 $ 2,936
Escalations and reimbursement revenues......... 1,488 816
Investment income.............................. 15
Other income................................... 13
----------- ----------- ----------- ----- ----- -----------
Total revenues............................. 18,902 334 183 146 3,752
----------- ----------- ----------- ----- ----- -----------
Equity in net income/(loss) of
uncombined joint ventures..................... $ 1,408
----------- ----------- ----------- ----- ----- -----------
Expenses
Operating expenses............................. 3,964 (316) (206) (68) 1,234
Real estate taxes.............................. 2,316 873
Ground rent.................................... 3,756 100 69
Interest....................................... 7,743
Depreciation and amortization.................. 3,580 40 (99) (22) 313
----------- ----------- ----------- ----- ----- -----------
Total expenses............................. 21,359 (176) (305) (90) 2,489
----------- ----------- ----------- ----- ----- -----------
Income (loss).............................. $ (2,457) $ 1,408 $ 510 $ 488 $ 236 $ 1,263
----------- ----------- ----------- ----- ----- -----------
----------- ----------- ----------- ----- ----- -----------
TOTAL
ADJUSTMENTS
-------------
Revenues
Rental revenue................................. $ 20,985
Escalations and reimbursement revenues......... 2,304
Investment income.............................. 15
Other income................................... 13
-------------
Total revenues............................. 23,317
-------------
Equity in net income/(loss) of uncombined
joint ventures................................ 1,408
-------------
Expenses
Operating expenses............................. 4,608
Real estate taxes.............................. 3,189
Ground rent.................................... 3,925
Interest....................................... 7,743
Depreciation and amortization.................. 3,812
-------------
Total expenses............................. 23,277
-------------
Income (loss).............................. $ 1,448
-------------
-------------
(C) To reflect adjustments to record the Company's share in the net income
of the Service Corporations pursuant to the equity method of accounting for the
year ended December 31, 1996. As a result of the Formation Transactions the
Company will not own any voting stock of the Service Corporations but will
continue to exercise significant influence due to the following:
- Substantially all of the economic benefits flow to the Company (who will
own 100% of the non-voting common stock representing 95% of the total
equity)
- The Company and the Service Corporations have common officers and
employees
- The owners of a majority of the voting stock of the Service Corporations
have not contributed substantial equity to the Service Corporations
- The views of the Company's management influence the operations of the
Service Corporations
F-11
SL GREEN REALTY CORP.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The adjustment is as follows:
LEASING
COMMISSIONS EXPENSES
HISTORICAL ATTRIBUTABLE ATTRIBUTABLE EQUITY
SERVICE TO TO CONVERSION TOTAL
CORPORATIONS LLC REIT (A) ADJUSTMENTS
------------- ------------- --------------- ----------- -----------
REVENUE:
Management revenue........................ $ 2,336 $ (2,336)
Leasing commissions....................... 2,372 $ (1,257) (1,115)
Construction revenue...................... 101 (101)
Other income.............................. 92 (92)
------------- ------------- ------ ----------- -----------
Total revenue......................... 4,901 (1,257) (3,644)
Equity in net income (loss)of Service
Corporations............................. $ 504 (504)
------------- ------------- ------ ----------- -----------
EXPENSES:
Operating expenses........................ 1,522 (1,522)
Depreciation and amortization............. 92 (92)
Marketing, general and administration..... 3,250 $ (986) (2,264)
------------- ------------- ------ ----------- -----------
Total expenses........................ 4,864 (986) (3,878)
------------- ------------- ------ ----------- -----------
Income (loss)......................... $ 37 $ (1,257) $ 986 $ 504 $ (270)
------------- ------------- ------ ----------- -----------
------------- ------------- ------ ----------- -----------
(a) The equity in net loss of Service Corporations is computed as follows:
Historical Service Corporations income............................. $ 37
Adjustment for management fees eliminated in the combined
historical financial statements due to acquisition of
partnerships' interests........................................... (297)
Leasing commissions attributable to Management LLC................. (1,257)
Expenses attributable to REIT...................................... 986
---------
Loss............................................................. $ (531)
---------
---------
Equity in net loss of investees at 95 percent...................... $ (504)
---------
---------
(D) To reflect the operations of 1372 Broadway, 1140 Avenue of the
Americas and 50 West 23rd Street for the year ended December 31, 1996.
Historical rental revenue was adjusted for straight line rents as of the
acquisition date, historical operating expenses were reduced for management
fees, the land lease on 1140 Avenue of the Americas and depreciation and
amortization are based on cost.
F-12
SL GREEN REALTY CORP.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1372 BROADWAY 1140 AVENUE OF THE AMERICAS 50 WEST 23RD STREET
--------------------------------------- --------------------------------------- --------------------------
HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT PRO FORMA HISTORICAL ADJUSTMENT
----------- ------------- ----------- ----------- ------------- ----------- ----------- -------------
REVENUES:
Rental revenue..... $ 8,580 $ 656 $ 9,236 $ 4,265 $ 286 $ 4,551 $ 5,357 $ 10
Escalations &
reimbursement
revenue........... 1,842 1,842 716 716 716
Other income....... 690 690 204 204 12
----------- ------ ----------- ----------- ----- ----------- ----------- -----
Total revenue.. 11,112 656 11,768 5,185 286 5,471 6,085 10
----------- ------ ----------- ----------- ----- ----------- ----------- -----
EXPENSES:
Operating
expenses.......... 3,257 (459) 2,798 2,177 (275) 1,902 1,511 (195)
Ground rent........ 379 379
Depreciation &
amortization...... 1,082 1,082 490 490 720
Real estate taxes.. 2,343 2,343 1,007 1,007 1,006
----------- ------ ----------- ----------- ----- ----------- ----------- -----
Total
expenses..... 5,600 623 6,223 3,184 594 3,778 2,517 525
----------- ------ ----------- ----------- ----- ----------- ----------- -----
Income before
minority
interest.......... $ 5,512 $ 33 $ 5,545 $ 2,001 $ (308) $ 1,693 $ 3,568 $ (515)
----------- ------ ----------- ----------- ----- ----------- ----------- -----
----------- ------ ----------- ----------- ----- ----------- ----------- -----
TOTAL PRO
PRO FORMA FORMA
----------- -----------
REVENUES:
Rental revenue..... $ 5,367 $ 19,154
Escalations &
reimbursement
revenue........... 716 3,274
Other income....... 12 906
----------- -----------
Total revenue.. 6,095 23,334
----------- -----------
EXPENSES:
Operating
expenses.......... 1,316 6,016
Ground rent........ 379
Depreciation &
amortization...... 720 2,292
Real estate taxes.. 1,006 4,356
----------- -----------
Total
expenses..... 3,042 13,043
----------- -----------
Income before
minority
interest.......... $ 3,053 $ 10,291
----------- -----------
----------- -----------
(E) To eliminate interest expense and amortization of deferred financing
costs related to mortgage loans paid off or forgiven, to reflect amortization of
deferred financing cost related to the transfer of mortgage debt to the Company
and to record interest and amortization of deferred finance costs related to the
new mortgage.
AMORTIZATION OF
INTEREST DEFERRED
EXPENSE FINANCING COSTS
--------- -----------------
673 First Avenue................................................... $ (1,571) $ 49
470 Park Avenue South.............................................. (1,537) 13
29 West 35th Street................................................ 8
36 West 44th Street................................................ (234)
70 West 36th Street................................................ (911) (62)
1414 Avenue of the Americas........................................ (446) (28)
New mortgage interest.............................................. 1,078 7
--------- ---
$ (3,621) $ (13)
--------- ---
--------- ---
(F) To reflect the operations of 110 East 42nd Street for the year ended
December 31, 1996. Historical rental revenue was adjusted for straight line
rents. Historical operating, expenses were reduced for management fees, and
depreciation that was calculated based on the recorded building cost.
HISTORICAL ADJUSTMENT PRO FORMA
---------- ---------- ---------
Revenues:
Rental revenue $4,306 $ 201 $4,507
Escalation 520 520
Other income 16 16
------ ----- ------
Total revenue 4,842 201 5,043
------ ----- ------
Expenses:
Operating expenses 2,248 2,248
Depreciation and amortization 602 602
Real estate taxes 1,422 1,422
MG&A 274 (172) 102
------ ----- ------
Total expenses 3,944 430 4,374
------ ----- ------
Income before minority interest $ 898 $(229) $ 669
------ ----- ------
------ ----- ------
(G) To reflect depreciation and amortization expense related to the real
property transfer taxes incurred to transfer title of 70 West 36th Street and
1414 Avenue of the Americas to the Company and to reflect the net increase in
marketing, general and administrative expenses related to operations of a public
company.
F-13
SL GREEN REALTY CORP.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The additional marketing, general and adminsitrative expenses consist of the
following:
Officers' compensation and related costs............................ $ 768
Professional fees................................................... 350
Directors' fees and insurance....................................... 300
Printing and distribution costs..................................... 150
Other............................................................... 89
---------
$ 1,657
---------
---------
The additional officers' compensation and related costs are attributable
primarilty to employment agreements with the officers as further described under
the caption "Employment and Non-Competition Agreement."
(H) Represents the 16.2% interest of the minority in the Operating
Partnership.
(I) Pro Forma net income per common share is based upon 12,292,311 shares
of common stock outstanding after the Offering. As each Operating Partnership
unit is redeemable for cash, or at the company's election, for one share of
common stock, the calculation of earnings per share upon redemption will be
unaffected as unitholders and stockholders share equally on a per unit and
per share basis in the net income of the Company. In February 1997, the
Financial Accounting Standards Board issued Statement No. 128, Earnings per
Share, which is required to be adopted on December 31, 1997. At that time the
Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. Management does not believe the adoption
of Statement No. 128 will have a material impact on earnings per share.
(J) To reflect the operations of 17 Battery Place for the year ended
December 31, 1996. Historical rental revenue was adjusted for straight line
rents. Historical operating expenses were reduced for management fees,
depreciation was calculated based on recorded building cost, amortization was
calculated based on the deferred financing costs that were recorded, and
interest expense was calculated using an estimated effective interest rate of
7.2%.
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- -----------
REVENUES:
Rental revenue.......... $13,231 $ 752 $13,983
Escalations &
reimbursement revenue.. 1,097 1,097
Investment Income....... 1,860 1,860
Other income............ 62 62
------- ------ -------
Total revenue....... 14,390 2,612 17,002
EXPENSES:
Operating
expenses............... 4,937 4,937
Interest Expense........ 5,472 5,472
Depreciation &
amortization........... 1,697 1,697
Real estate taxes....... 2,519 2,519
MG & A.................. 722 (375) 347
------- ------ -------
Total expenses...... 8,178 6,794 14,972
------- ------ -------
Income before minority
interest............... $ 6,212 $(4,182) $ 2,030
------- ------ -------
------- ------ -------
F-14
Report of Independent Auditors
To the Board of Directors of
SL Green Realty Corp.
We have audited the statement of revenues and certain expenses of the
property at 17 Battery Place as described in Note 1, for the year ended
December 31, 1996. This financial statement is the responsibility of
management of the property. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying statement of revenues and certain expenses was prepared
for the purposes of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in Form 8-K of SL Green
Realty Corp., and is not intended to be a complete presentation of 17 Battery
Place as described in Note 1, revenues and expenses.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the revenues and certain expenses of 17
Battery Place as described in Note 1, for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.
/S/ Ernst & Young LLP
December 16, 1997
New York, New York
F-15
17 Battery Place
Statements of Revenues and Certain Expenses
(Dollars in thousands)
Note 1
(Unaudited)
Nine Months
Year Ended Ended
December 31, September 30,
1996 1997
----------- -----------
Revenues
Rental revenue, net.................................... $ 13,231 $ 9,750
Escalations and reimbursement revenue.................. 1,097 696
Other income........................................... 62 64
---------- ----------
Total revenues........................................... 14,390 10,510
---------- ----------
Certain Expenses
Property taxes......................................... 2,519 1,624
Utilities.............................................. 1,487 1,189
Cleaning and service contracts......................... 2,175 1,569
Payroll and expenses................................... 959 716
Management fees........................................ 375 321
Repairs and maintenance................................ 192 168
Professional fees...................................... 261 59
Insurance.............................................. 86 67
Other operating expenses............................... 124 31
---------- -----------
Total certain expenses................................... 8,178 5,744
---------- -----------
Revenues in excess of certain expenses................... $ 6,212 $ 4,766
---------- -----------
---------- -----------
See accompanying notes.
F-16
17 Battery Place
Notes to Statements of Revenues and Certain Expenses
(Dollars in thousands)
December 31, 1996
1. Basis of Presentation
Presented herein are the statements of revenues and certain expenses
related to the operations of 17 Battery Place, located in the World Trade
Center sub-market, in the borough of Manhattan in New York City. The property
is comprised of interconnected office buildings (North and South) containing
a total of approximately 1,221,481 square feet (which space is currently
rented or available for use on a commercial basis). Through its interest in a
cotenancy, SLG 17 Battery LLC, ("Green LLC") a New York limited liability
company wholly-owned by SL Green Operating Partnership, L.P. ("SL Green"),
purchased the entire North Building and portions of the ground floor and
floors one through thirteen of the South Building, encompassing approximately
806,927 square feet (the "Office Space"). An unrelated third party ("Third
Party") has through its interest in the cotenancy purchased portions of the
ground floor and floors fourteen through thirty-one of the South Building
which represents the remaining 414,554 square feet of the property. The Third
Party plans to convert its space into a hotel and residential units, (the
"Hotel/ Residential Space"). Green LLC has entered into a cotenancy agreement
with the Third Party and SL Green has financed the Third Party's purchase
through the issuance of a mortgage. The cotenancy agreement provides for the
allocation of revenue and expenses substantially consistent with the Third
Party's and Green LLC's ownership interest. It is the intention of the
parties to convert the property to condominium ownership. The statement of
revenues and certain expenses presents the activity of the Office Space
purchased by SL Green.
All revenues and expenses have been allocated between the Office and
Hotel/Residential Space. The allocation method used for base rent and
escalations were based on specific identification of the tenants located in
the specific floors being purchased. Expenses were allocated based on an
agreed upon allocation between Green LLC and the Third Party.
The accompanying financial statement has been prepared in accordance with
the applicable rules and regulations of the Securities and Exchange
Commission for the acquisition of real estate properties. Accordingly, the
financial statements exclude certain expenses that may not be comparable to
those expected to be incurred by SL Green in its proposed future operations.
Items excluded consist of interest, amortization and depreciation.
F-17
17 Battery Place
Notes to Statements of Revenues and Certain Expenses (Continued)
(Dollars in thousands)
December 31, 1996
2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. Revenue Recognition
The Office Space is leased to tenants under operating leases. Minimum
rental income is generally recognized on a straight-line basis over the term
of the lease. The excess of amounts recognized over amounts due pursuant to
the underlying leases amounted to approximately $507 and $270 (unaudited) for
the year ended December 31, 1996 and the nine months ended September 30,
1997, respectively.
4. Concentration of Revenue
Approximately 62% of the Office Space's revenue for the year ended
December 31, 1996 and the nine months ended September 30, 1997, respectively
was derived from two tenants.
5. Management Agreements
During 1996 and the period ended September 30, 1997 the property manager
was SL Green Management, Inc. During the period from January 1, 1996 to
September 30, 1997 the management fees were based on two percent (2%) of
gross collections. In addition, a $15,000 monthly asset management fee was
paid to Victor Capital Group.
6. Lease Agreements
The Office Space is being leased to tenants under operating leases with
term expiration dates ranging from 1997 to 2009. The minimum rental amounts
due under the leases are generally subject to scheduled fixed increases. The
leases generally also require that the tenants reimburse for increases in
certain operating costs and real estate taxes above their base year costs.
Approximate future minimum rents to be received over the next five years and
thereafter for non-cancelable operating leases as of December 31, 1996
(exclusive of renewal option periods) are as follows:
1997 $ 12,638
1998 12,688
1999 12,371
2000 11,847
2001 11,531
Thereafter 47,464
----------
$ 108,539
----------
----------
F-18
17 Battery Place
Notes to Statements of Revenues and Certain Expenses (Continued)
(Dollars in thousands)
December 31, 1996
7. Lease Restrictions
In connection with the cotenancy agreement (Note 1), prior to January 1,
1999, Green LLC is required to make available up to 153,000 rentable square
feet of vacant Office Space to tenants of 17 Battery Place, who currently
occupy portions of the Hotel/Residential Space. In order to convert the upper
floors of the South Building, the Third Party will exercise relocation
options to relocate tenants from the Hotel/Residential Space to Office Space.
8. Interim Unaudited Financial Information
The financial statement for the nine months ended September 30, 1997 is
unaudited, however, in the opinion of management all adjustments, (consisting
solely of normal recurring adjustments), necessary for a fair presentation of
the financial statement for the interim period have been included. The
results of the interim period is not necessarily indicative of the results to
be obtained for a full fiscal year.
F-19
Report of Independent Auditors
To the Board of Directors of
SL Green Realty Corp.
We have audited the statement of revenues and certain expenses of the
property at 17 Battery Place as described in Note 1, for the year ended
December 31, 1996. This financial statement is the responsibility of
management of the property. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying statement of revenues and certain expenses was prepared
for the purposes of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in Form 8-K of SL Green
Realty Corp., and is not intended to be a complete presentation of 17 Battery
Place as described in Note 1, revenues and expenses.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the revenues and certain expenses of 17
Battery Place as described in Note 1, for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.
/S/ Ernst & Young LLP
December 16, 1997
New York, New York
F-20
17 Battery Place
Statements of Revenues and Certain Expenses
(Dollars in thousands)
Note 1
(Unaudited)
Nine Months
Year Ended Ended
December 31, September 30,
1996 1997
----------- -----------
Revenues
Rental revenue, net....................................... $ 2,967 $ 2,717
Escalations and reimbursement revenue..................... 857 654
Other income.............................................. 21 19
---------- ----------
Total revenues.............................................. 3,845 3,390
---------- ----------
---------- ----------
Certain Expenses
Property taxes............................................ 781 504
Utilities................................................. 714 570
Cleaning and service contracts............................ 1,044 752
Payroll and expenses...................................... 460 343
Management fees........................................... 134 115
Repairs and maintenance................................... 92 81
Professional fees......................................... 125 28
Insurance................................................. 41 32
Other operating expenses.................................. 60 15
----------- -----------
Total certain expenses...................................... 3,451 2,440
----------- -----------
Revenues in excess of certain expenses...................... $ 394 $ 950
----------- -----------
----------- -----------
See accompanying notes.
F-21
17 Battery Place
Notes to Statements of Revenues and Certain Expenses
(Dollars in thousands)
December 31, 1996
1. Basis of Presentation
Presented herein are the statements of revenues and certain expenses
related to the operations of 17 Battery Place, located in the World Trade
Center sub-market, in the borough of Manhattan in New York City. The property
is comprised of interconnected office buildings (North and South) containing
a total of approximately 1,221,481 square feet (which space is currently
rented or available for use on a commercial basis). Through its interest in a
cotenancy, SLG 17 Battery LLC, ("Green LLC") a New York limited liability
company wholly-owned by SL Green Operating Partnership, L.P. ("SL Green"),
purchased the entire North Building and portions of the ground floor and
floors one through thirteen of the South Building, encompassing approximately
806,927 square feet (the "Office Space"). An unrelated third party ("Third
Party") has through its interest in the cotenancy purchased a portion of the
ground floor and floors fourteen through thirty-one of the South Building
which represents the remaining 414,554 square feet of the property. The Third
Party plans to convert its space into a hotel and residential units, (the
"Hotel/ Residential Space"). Green LLC has entered into a cotenancy agreement
with the Third Party and has financed the Third Party's purchase of its
property through the issuance of a mortgage. The cotenancy agreement provides
for the allocation of revenue and expenses substantially consistent with the
Third Party's and Green LLC's ownership interest. The statement of revenues
and certain expenses presents the activity of the Hotel/Residential Space
which is the collateral for the mortgage issued by SL Green.
All revenues and expenses have been allocated between the Office and
Hotel/Residential Space. The allocation method used for base rent and
escalations were based on specific identification of the tenants located in
the specific floors purchased. Expenses were allocated based on an agreed
upon allocation between Green LLC and the Third Party.
The accompanying financial statement has been prepared in accordance with
the applicable rules and regulations of the Securities and Exchange
Commission for a mortgage collateralized by real estate properties. Since it
is intended that the Hotel/Residential Space is to be converted to a
hotel/residential units, future operations will be substantially different
from those presented in these statements of revenues and certain expenses.
The financial statements exclude certain expenses that may not be comparable
to those expected to be incurred by the Third Party in its proposed future
operations. Items excluded consist of interest, amortization and depreciation.
F-22
17 Battery Place
Notes to Statements of Revenues and Certain Expenses (Continued)
(Dollars in thousands)
December 31, 1996
2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. Revenue Recognition
The Third Party's interest currently is leased to tenants under operating
leases. Minimum rental income is generally recognized on a straight-line
basis over the term of the lease. The excess of amounts recognized over
amounts due pursuant to the underlying leases amounted to approximately $114
and $154 (unaudited) for the year ended December 31, 1996 and the nine months
ended September 30, 1997, respectively.
4. Concentration of Revenue
Approximately 40% and 25% of the revenue for the year ended December 31,
1996 and the nine months ended September 30, 1997, were derived from three
and two tenants, respectively.
5. Management Agreements
During 1996 and the period ended September 30, 1997 the property manager
was SL Green Management, Inc. During the period from January 1, 1996 to
September 30, 1997 the management fees were based on two percent (2%) of
gross collections. In addition, a $15,000 monthly asset management fee was
paid to Victor Capital Group.
6. Lease Agreements
The Third Party's interest is being leased to tenants under operating
leases with term expiration dates ranging from 1997 to 2005. The minimum
rental amounts due under the leases are generally subject to scheduled fixed
increases. The leases generally also require that the tenants reimburse
increases in certain operating costs and real estate taxes above their base
year costs. Approximate future minimum rents to be received over the next
five years and thereafter for non-cancelable operating leases as of December
31, 1996 (exclusive of renewal option periods) are as follows:
1997 $ 3,619
1998 2,534
1999 1,755
2000 1,575
2001 1,357
Thereafter 1,943
----------
$ 12,783
----------
----------
F-23
17 Battery Place
Notes to Statements of Revenues and Certain Expenses (Continued)
(Dollars in thousands)
December 31, 1996
7. Lease Restrictions
In connection with the cotenancy agreement and the conversion of the
Hotel/Residential Space, the Third Party will exercise relocation options, as
outlined in the lease agreements and relocate tenants to the Office Space.
Green LLC is required to make available up to 153,000 rentable square feet of
vacant Office Space to tenants of 17 Battery Place who currently occupy
portions of the Hotel/Residential Space, from its purchase date through
December 31, 1998.
8. Interim Unaudited Financial Information
The financial statement for the nine months ended September 30, 1997 is
unaudited, however, in the opinion of management all adjustments, (consisting
solely of normal recurring adjustments), necessary for a fair presentation of
the financial statement for the interim period have been included. The
results of the interim period is not necessarily indicative of the results to
be obtained for a full fiscal year.
F-24
