SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 24, 2001
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)
420 Lexington Avenue 10170
New York, New York (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(212) 594-2700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS
99.1 Press Release
ITEM 9. REGULATION FD DISCLOSURE
Following the issuance of a press release on July 23, 2001 announcing
the Company's results for the third quarter ended September 30, 2001, the
Company intends to make available supplemental information regarding the
Company's operations that is too voluminous for a press release. The Company is
attaching the press release as Exhibit 99.1 to this Current Report on Form 8-K.
Note: the information in this report (including the exhibits) is furnished
pursuant to Item 9 and shall not be deemed to be "filed" for the purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the
liabilities of that section. This report will not be deemed an admission as to
the materiality of any information in the report that is required to be
disclosed solely by Regulation FD.
2
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.
/S/ Thomas E. Wirth
-------------------------------------------------
Thomas E. Wirth
Executive Vice President, Chief Financial Officer
Date: October 24, 2001
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Exhibit 99.1
[LOGO OF SL GREEN REALTY CORP.]
420 Lexington Avenue New York City 10170
CONTACT
-------
Michael W. Reid
Chief Operating Officer
-or-
Thomas E. Wirth
Chief Financial Officer
(212) 594-2700
FOR IMMEDIATE RELEASE
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SL GREEN REALTY CORP. REPORTS THIRD QUARTER FFO OF $0.73 PER SHARE
------------------------------------------------------------------
HIGHLIGHTS
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o 15% same store portfolio cash NOI growth
o Issued five million common shares at $29.80 net per share; raised
$149 million in net proceeds
o FFO increased to $0.73 per share (diluted) versus $0.70 prior year, a
4% increase, and a 9% FFO increase excluding the $1.0 million ($0.03
per share) contribution to the Twin Towers Fund
o FFO increased $3.9 million (19%) to $24.0 million from $20.1 million
o Acquired 49.9% interest in 1250 Broadway from its JV partner for
$29.5 million and refinanced property with $85 million first mortgage
o Invested $53.5 million in a preferred equity position in The News
Building
o Originated $57.7 million in structured finance investments
FINANCIAL RESULTS
-----------------
NEW YORK, NY, OCTOBER 23, 2001 - SL Green Realty Corp. (NYSE:SLG) reported
improved operating results for the three months ended September 30, 2001. During
the period, funds from operations (FFO) before minority interests totaled $24.0
million, or $0.73 per share (diluted), compared to $20.1 million, or $0.70 per
share (diluted), for the same quarter in 2000. The 2001 quarterly results
include a $1.0 million charge, or $0.03 per share, for a one-time contribution
to the Twin Towers Fund. Excluding this contribution, third quarter earnings
would have been $0.76 per share, representing a 9% improvement over the prior
year. The FFO per share calculation is reflective of the Company's five million
common share issuance in the third quarter of 2001 which increased the weighted
average dilutive shares outstanding to 36.1
1
million, a 13% increase over the prior year. This growth was primarily
attributable to strong same store cash NOI growth of 15%.
Nine month results were also strong, reflecting a 14% FFO increase over 2000 as
FFO before minority interests totaled $68.6 million or $2.25 per share
(diluted), compared to $55.6 million or $1.97 per share (diluted) for the same
period in the previous year. This growth is also attributable to strong same
store cash NOI growth of 16%.
For the quarter, net income available to common shareholders, adjusted for
property sales, extraordinary items and the cumulative effect of an accounting
change increased 14% to $13.6 million, or $0.43 per share (diluted) as compared
to $11.9 million, or $0.43 per share (diluted), for the same period in the
previous year. For the nine months ended September 30, 2001, adjusted net income
increased 25% to $39.1 million, or $1.36 per share (diluted), as compared to
$31.4 million, or $1.16 per share (diluted), for the same period in the previous
year.
Total quarterly revenues increased in the third quarter to $61.9 million (1.7%)
compared to last year's $60.9 million. The $1.0 million growth in revenue
resulted primarily from:
o 2001 acquisitions ($6.0 million)
o 2001 same store portfolio ($1.7 million).
These revenue increases were partially offset by reduced revenues of properties
sold ($6.0 million) and investment and preferred equity income ($1.0 million).
The $1.0 million decrease in investment and preferred equity income is due to
the following: (i) $0.7 million from yield maintenance received from the early
redemption of a preferred equity investment on 1370 Avenue of the Americas in
third quarter 2000 and (ii) lower yields primarily from reduced interest rates
($0.5 million) and investment spreads ($0.9 million) and the decrease is
partially offset by the higher weighted average structured finance investment
balance outstanding ($1.3 million).
During the third quarter, same store cash NOI increased $3.3 million to $25.6
million, as compared to $22.3 million over the same period in the prior year.
Cash NOI margins before ground rent improved year over year from 55.2% to 60.2%.
The improvement in cash NOI was driven primarily by a $3.4 million increase in
cash revenue due to:
o A 45% increase in replacement rents over previous fully-escalated
rents ($1.3 million)
o Reduced free and straight-line rents ($1.7 million)
o Rent steps from current in-place tenants ($0.5 million)
o $0.9 million increase in escalation and reimbursement income
primarily from increased electric reimbursement, operating expense
reimbursements and percentage rent escalations
o Decrease in revenue due to lower occupancy primarily due to planned
vacancy at 1466 Broadway ($0.4 million)
o Decrease in revenue due to higher reserves for tenant allowance ($0.6
million).
2
The net increase in revenue was partially offset by $0.2 million increase in
real estate taxes with operating expenses remaining flat. Approximately 90.0% of
the quarterly electric expense was recovered through the utility clause in the
tenants' leases.
The Company's third quarter EBITDA increased $1.6 million resulting in increased
margins before ground rent of 66.0% in 2001 as compared to 65.4% for the same
period last year. After ground rent, margins improved to 60.6% in 2001 from
59.7% in the corresponding prior year period. Margin improvement was driven by
the Company's primary real estate investment themes:
o GAAP NOI of $4.4 million
o $3.4 million increase from 2001 acquisitions
o $1.8 million increase from same store (7% improvement)
o $2.2 million increase from net income from unconsolidated joint
ventures
o $3.3 million decrease from properties sold or contributed to
joint ventures.
These increases in EBITDA were partially offset by (i) an increase in MG&A ($1.6
million) primarily due to a $1.0 million contribution to the Twin Towers fund
and increased personnel costs, (ii) a decrease in investments and other income
($0.7 million) and (iii) a loss from equity in affiliates as compared to net
income in the prior year ($0.1 million).
FFO for the quarter ended September 30, 2001 improved $3.9 million primarily as
a result of a $1.6 million increase in EBITDA, increased FFO adjustment from
joint ventures ($1.4 million) and lower interest costs ($0.9 million). Lower
interest costs ($0.9 million) were associated with: higher average debt levels
due to net acquisition and new investment debt activity ($1.5 million), the
higher average debt levels due to the funding of ongoing capital projects and
working capital requirements ($0.2 million), and the proceeds from the Company's
July common stock offering ($1.6 million) offset by lower interest rates from
floating rate debt ($0.9 million).
During the quarter ended September 30, 2001, the Company recorded an
extraordinary loss of $0.3 million due to the early extinguishment of debt that
was excluded from the Company's FFO results. The 2001 quarterly results of the
Company exclude a gain on sale of property interest that totaled $0.6 million
and the 2000 quarterly results exclude a gain on redemption of a preferred
equity investment totaling ($5.6 million).
At the end of the quarter, consolidated debt totaled $484.1 million, reflecting
a debt to market capitalization ratio of 30.0%.
NEW PROPERTY ACTIVITY
---------------------
1250 BROADWAY ACQUISITION
On September 24, 2001, the Company acquired a 49.9% interest in 1250 Broadway
from its joint venture partner, The Carlyle Group, for approximately $29.5
million. In conjunction with this transaction, Salomon Smith Barney provided $85
million of first mortgage financing. 1250 Broadway is a 39-story building with
approximately 685,000 square feet, and occupies the block
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front between 31st and 32nd Streets on Broadway. It is currently 99.6% leased.
The going-in cash NOI yield on the investment is approximately 9.5% per annum.
The Company is currently implementing a $5 million capital improvement program
to significantly renovate and upgrade the property. During the quarter, Visiting
Nurse Services of New York, a current tenant in the building, expanded into
80,000 square feet at an average rent over $40.00 per square foot and
simultaneously replaced 25,000 square feet previously occupied by technology
tenants. The acquisition is the first step in transitioning the property to a
long-term ownership position with a new capital partner.
110 EAST 42ND STREET SALE
The Company sold a 69,700 square foot condominium interest in its property
located at 110 East 42nd Street for $14.5 million, or approximately $208 per
square foot. In connection with the sale, the Company recognized a gain of
approximately $0.6 million. The Company will manage the condominium and
continues to own the remaining 181,000 square feet of the property through a
condominium interest.
THE NEWS BUILDING PREFERRED EQUITY INVESTMENT
On September 10, 2001 the Company announced the purchase of a $53.5 million
preferred equity investment in The News Building, a 1.1 million square foot
office building located at 220 East 42nd Street, New York. The investment was
made into an entity affiliated with The Witkoff Group and DRA Advisors, Inc. who
continue to own a majority interest in the property. In connection with the
transaction, SL Green has assumed leasing responsibilities at the property.
NEW STRUCTURED FINANCE ACTIVITY
-------------------------------
The Company has completed the following transactions:
o Originated $57.7 million of structured finance assets at a retained
yield after seller financing of 14.6%, including $30 million in
October
o PREI funded $25 million of a structured finance asset under the
established investment program.
OTHER
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COMMON SHARE ISSUANCE
On July 25th, the Company sold 5 million common shares at a gross price of
$30.66 per share. After the underwriter's discount, net proceeds to the Company
totaled $149.0 million, or $29.80 per share. The immediate use of proceeds was
to pay down the Company's unsecured revolving credit facility.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company filed a registration statement with the SEC to register a dividend
reinvestment and stock purchase plan ("DRIP") which was declared effective on
September 24, 2001. The Company registered 3 million shares of common stock
under the DRIP.
4
As of September 30, 2001, the Company's portfolio consists of interests in 25
properties, aggregating 10.0 million square feet.
SL Green Realty Corp. is a self-administered and self-managed real estate
investment trust ("REIT") that acquires, owns, repositions and manages a
portfolio of Manhattan office properties. The Company is the only publicly held
REIT who specializes exclusively in this niche.
Financial Tables attached.
To receive SL Green's latest news release and other corporate documents,
including the Third Quarter Supplemental Data, via FAX at no cost, please
contact the Investor Relations office at 212-216-1601. All releases and
supplemental data can also be downloaded directly from the SL Green website at:
www.slgreen.com
THIS PRESS RELEASE CONTAINS FORWARD-LOOKING INFORMATION BASED UPON THE COMPANY'S
CURRENT BEST JUDGMENT AND EXPECTATIONS. ACTUAL RESULTS COULD VARY FROM THOSE
PRESENTED HEREIN. THE RISKS AND UNCERTAINTIES ASSOCIATED WITH FORWARD-LOOKING
INFORMATION IN THIS RELEASE INCLUDE THE STRENGTH OF THE COMMERCIAL OFFICE AND
INDUSTRIAL REAL ESTATE MARKETS IN NEW YORK, COMPETITIVE MARKET CONDITIONS,
UNANTICIPATED ADMINISTRATIVE COSTS, TIMING OF LEASING INCOME, GENERAL AND LOCAL
ECONOMIC GROWTH, INTEREST RATES AND CAPITAL MARKET CONDITIONS. FOR FURTHER
INFORMATION, PLEASE REFER TO THE COMPANY'S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION.
# # #
5
SL GREEN REALTY CORP.
STATEMENTS OF OPERATIONS--UNAUDITED
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
--------- --------- --------- ---------
REVENUE:
Rental revenue, net $ 47,971 $ 47,647 $ 156,379 $ 140,998
Escalations & reimbursement revenues 9,114 7,593 24,467 18,941
Signage rent 424 496 953 1,593
Investment income 3,306 3,696 11,626 7,324
Preferred equity income 630 1,272 630 2,579
Other income 479 170 1,339 693
--------- --------- --------- ---------
Total revenues 61,924 60,874 195,394 172,128
--------- --------- --------- ---------
EXPENSES:
Operating expenses 15,076 15,260 44,983 41,893
Ground rent 3,101 3,164 9,419 9,505
Interest 9,785 10,698 36,853 30,243
Depreciation and amortization 9,047 8,300 27,956 24,519
Real estate taxes 7,452 7,299 23,590 21,688
Marketing, general and administrative 4,116 2,540 11,331 8,517
--------- --------- --------- ---------
Total expenses 48,577 47,261 154,132 136,365
--------- --------- --------- ---------
13,347 13,613 41,262 35,763
Equity in net income (loss) from affiliates (57) 71 (984) 609
Equity in net income from unconsolidated joint ventures 2,752 586 6,020 2,209
--------- --------- --------- ---------
Income before minority interest, extraordinary items, property sales,
cumulative effect adjustment and preferred stock dividends and accretion 16,042 14,270 46,298 38,581
Minority interests (1,010) (1,496) (3,496) (4,964)
Extraordinary loss, net of minority interest (332) -- (430) (430)
Gain on sale of rental properties 647 5,624 5,164 24,646
Cumulative effect of accounting change -- -- (532) --
Preferred stock dividends and accretion (2,414) (2,407) (7,243) (7,220)
--------- --------- --------- ---------
Net income available to common shareholders $ 12,933 $ 15,991 $ 39,761 $ 50,613
========= ========= ========= =========
Net income per share (Basic) $ 0.45 $ 0.65 $ 1.53 $ 2.08
Net income per share (Diluted) $ 0.44 $ 0.62 $ 1.50 $ 1.98
FUNDS FROM OPERATIONS (FFO)
FFO per share (Basic) $ 0.78 $ 0.75 $ 2.42 $ 2.08
FFO per share (Diluted) $ 0.73 $ 0.70 $ 2.25 $ 1.97
FFO CALCULATION:
---------------
Income before minority interests, preferred stock dividends,
extraordinary loss, property sales and cumulative effect adjustment $ 16,042 $ 14,270 $ 46,298 $ 38,581
LESS:
Preferred stock dividend (2,300) (2,300) (6,900) (6,900)
Add:
Joint venture FFO adjustment 2,225 842 4,579 2,468
Depreciation and amortization 9,047 8,300 27,956 24,519
Amortization of deferred financing costs and depreciation of non-real
estate assets (1,059) (1,042) (3,371) (3,105)
--------- --------- --------- ---------
FFO - BASIC 23,955 20,070 68,562 55,563
Add: Preferred stock dividends 2,300 2,300 6,900 6,900
--------- --------- --------- ---------
FFO - DILUTED $ 26,255 $ 22,370 $ 75,462 $ 62,463
========= ========= ========= =========
Basic ownership interests
Weighted average REIT common shares 28,511 24,458 25,988 24,329
Weighted average partnership units held by minority interest 2,280 2,346 2,286 2,385
--------- --------- --------- ---------
Basic weighted average shares and units outstanding 30,791 26,804 28,274 26,714
========= ========= ========= =========
Diluted ownership interest
Weighted average REIT common and common share equivalent shares 29,093 24,954 26,506 24,678
Weighted average partnership units held by minority interests 2,280 2,346 2,286 2,385
Common share equivalents for preferred stock 4,699 4,699 4,699 4,699
--------- --------- --------- ---------
Diluted weighted average equivalent shares and units outstanding 36,072 31,999 33,491 31,762
========= ========= ========= =========
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SL GREEN REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
September 30, December 31,
2001 2000
------------------- ----------------
ASSETS (unaudited)
Commercial real estate properties, at cost:
Land and land interests ...................................................... $ 138,337 $ 125,572
Buildings and improvements ................................................... 679,821 618,637
Building leasehold ........................................................... 143,198 139,393
Property under capital lease ................................................. 12,208 12,208
----------- -----------
973,564 895,810
Less accumulated depreciation ................................................ (93,339) (78,432)
----------- -----------
880,225 817,378
Properties held for sale ..................................................... -- 10,895
Cash and cash equivalents .................................................... 5,991 10,793
Restricted cash .............................................................. 37,104 86,823
Tenant receivables, net $3,905 and $1,723 reserve in 2001 and 2000,
respectively .............................................................. 12,229 7,580
Related party receivables .................................................... 1,883 917
Deferred rents receivable net of provision for doubtful accounts of $4,813 and 50,060 45,816
$4,860 in 2001 and 2000, respectively
Investment in and advances to affiliates ..................................... 8,570 6,373
Investment in unconsolidated joint ventures .................................. 143,049 65,031
Structured finance investments ............................................... 157,901 51,293
Deferred costs, net .......................................................... 36,066 40,113
Other assets ................................................................. 13,093 18,142
----------- -----------
Total assets ................................................................. $ 1,346,171 $ 1,161,154
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable ....................................................... $ 411,393 $ 414,342
Revolving credit facility .................................................... 72,738 46,374
Accrued interest payable ..................................................... 1,935 2,349
Accounts payable and accrued expenses ........................................ 20,827 24,818
Deferred revenue ............................................................. 1,363 1,112
Deferred compensation awards ................................................. 1,838 2,833
Derivative instruments--fair value ........................................... 4,987 --
Capitalized lease obligations ................................................ 15,505 15,303
Deferred land lease payable .................................................. 13,926 13,158
Dividend and distributions payable ........................................... 14,775 12,678
Security deposits ............................................................ 18,903 19,014
----------- -----------
Total liabilities ............................................................ 578,190 551,981
----------- -----------
Minority interest ............................................................ 46,474 43,326
8% Preferred Income Equity Redeemable Stock $0.01 par
value, $25.00 mandatory liquidation preference 25,000 shares
authorized, 4,600 outstanding in 2001 and 2000 ............................. 111,117 110,774
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value 100,000 shares
authorized, 29,944 and 24,516 issued and
outstanding in 2001 and 2000, respectively ......................... 300 246
Additional paid - in capital ........................................ 582,874 428,698
Deferred compensation plan .......................................... (8,400) (5,037)
Accumulated other comprehensive loss ................................ (4,500) --
Retained earnings ................................................... 40,116 31,166
----------- -----------
Total stockholders' equity ................................................... 610,390 455,073
----------- -----------
Total liabilities and stockholders' equity ................................... $ 1,346,171 $ 1,161,154
=========== ===========
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SL GREEN REALTY CORP.
SELECTED OPERATING DATA-UNAUDITED
September 30,
2001 2000
---- ----
OPERATING DATA:
Net rentable area at end of period (in 000's)(1) 10,036 9,131
Portfolio occupancy percentage at end of period 98% 98%
Same store occupancy percentage at end of period 98% 98%
Number of properties in operation 25 23
(1) Includes wholly-owned and majority and minority owned properties.
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