SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

 

CURRENT REPORT

 

 

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

 

Date of Report (Date of earliest event reported):
January 27, 2004

 

 

SL GREEN REALTY CORP.

(Exact name of Registrant as specified in its Charter)

 

 

 

 

Item 7.    Financial Statements and Exhibits

 

(c)           Exhibits

 

99.1                           Press Release

99.2                           Supplemental Package

 

 

Item 12.    Results of Operations and Financial Condition

 

The information contained in this Current Report on Form 8-K (including the exhibits) is being furnished pursuant to “Item 12. Results of Operations and Financial Condition”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.  The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

 

Following the issuance of a press release on January 27, 2004 announcing the Company’s results for the fourth quarter ended December 31, 2003, 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 and the supplemental package as Exhibit 99.2  to this Current Report on Form 8-K.

 

 

NON-GAAP Supplemental Financial Measures

 

Funds from Operations (FFO)

 

FFO is a widely recognized measure of REIT performance.  Although FFO is a non-GAAP financial measure, the Company believes that information regarding FFO is helpful to shareholders and potential investors.  The Company computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than the Company.  The revised White Paper on FFO approved by the Board of Governors of NAREIT in October 1999 defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from debt restructuring and sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.  We believe that FFO is helpful to investors as a measure of the performance of an equity REIT because, along with cash flow from operating activities, financing activities and investing activities, it provides investors with an indication of our ability to incur and service debt, to make capital expenditures

 

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and to fund other cash needs.  FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.

 

Funds Available for Distribution (FAD)

 

FAD, is a non-GAAP financial measure that is not intended to represent cash flow for the period and is not indicative of cash flow provided by operating activities as determined in accordance with GAAP.  FAD is presented solely as a supplemental disclosure with respect to liquidity because the Company believes it provides useful information regarding the Company’s ability to fund its dividends.  Because all companies do not calculate FAD the same way, the presentation of FAD may not be comparable to similarly titled measures of other companies.   FAD does not represent cash flow from operating, investing and finance activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of our liquidity.

 

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

 

The Company presents earnings before interest, taxes, depreciation and amortization (EBITDA) because the Company believes that EBITDA, along with cash flow from operating activities, investing activities and financing activities, provides investors with an additional indicator of the Company’s ability to incur and service debt.  EBITDA should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of our liquidity.

 

Same-Store Net Operating Income

 

The Company presents same-store net operating income on a cash and GAAP basis because the Company believes that it provides investors with useful information regarding the operating performance of properties that are comparable for the periods presented.  For properties owned since January 1, 2002, the Company determines net operating income by subtracting property operating expenses and ground rent from recurring rental and tenant reimbursement revenues.  Same-store net operating income is not an alternative to net income (determined in accordance with GAAP) and same-store performance should not be considered an alternative to GAAP net income performance.

 

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Debt to Market Capitalization Ratio

 

The Company presents the ratio of debt to market capitalization as a measure of the Company’s leverage position relative to the Company’s estimated market value.  The Company’s estimated market value is based upon the quarter-end trading price of the Company’s common stock multiplied by all common shares and operating partnership units outstanding plus the face value of the Company’s preferred equity. This ratio is presented on a consolidated basis and a combined basis.  The combined debt to market capitalization includes the Company’s pro-rata share of off-balance sheet (unconsolidated) joint venture debt.  The Company believes this ratio may provide investors with another measure of the Company’s current leverage position.  The debt to market capitalization ratio should be used as one measure of the Company’s leverage position, and this measure is commonly used in the REIT sector; however, this may not be comparable to other REITs that do not compute in the same manner.  The debt to market capitalization ratio does not represent the Company’s borrowing capacity and should not be considered an alternative measure to the Company’s current lending arrangements.

 

Coverage Ratios

 

The Company presents fixed charge and interest coverage ratios to provide a measure of the Company’s financial flexibility to service current debt amortization, interest expense and ground rent from current cash net operating income.  These coverage ratios are provided on both a consolidated and combined basis.  The combined coverage ratios include the Company’s pro-rata share of off-balance sheet (unconsolidated) joint venture fixed charges and cash net operating income.  These coverage ratios represent a common measure of the Company’s ability to service fixed cash payments; however, these ratios are not used as an alternative to cash flow from operating, financing and investing activities (determined in accordance with GAAP).

 

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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:  January 27, 2004

 

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Exhibit 99.1

 

 

420 Lexington Avenue, New York City, NY 10170

 

CONTACT

Michael W. Reid

Chief Operating Officer

-or-

Thomas E. Wirth

Chief Financial Officer

(212) 594-2700

 

FOR IMMEDIATE RELEASE

 

SL GREEN REALTY CORP. REPORTS FOURTH QUARTER FFO OF $0.89 PER
SHARE AND 2003 FFO OF $3.48 PER SHARE

 

Release Highlights

 

•      FFO increased 2% to $0.89 per share (diluted) versus $0.87 per share (diluted) for the same quarter in 2002

•      Marc Holliday promoted to Chief Executive Officer and employment contract extended until January 2010.  Andrew Mathias promoted to Chief Investment Officer

•      Acquired 45% interest in 1221 Avenue of the Americas for $450 million, or $394 per square foot

•      Completed public offering of 1.8 million shares of common stock at $42.33 per share on January 16, 2004 with net proceeds totaling $73.9 million

•      Completed public offering of 6.3 million shares of 7.625% cumulative redeemable preferred stock on December 12, 2003 with net proceeds totaling $152.0 million

•      Obtained a $210 million 10-year mortgage on 220 East 42^nd Street at an annual rate of 5.23%

•      Completed sale of 321 West 44^th Street for $35.0 million

•      Originated or committed $138.8 million of structured finance investments

•      Announced a 7.5% increase in annual common dividend to $2.00 per share

 

Annual Highlights

 

•      FFO increased to $3.48 per share (diluted) versus $3.32 in the prior year, a 5% increase

•      Net income increased to $2.66 per share (diluted) versus $2.09 in the prior year, a 27% increase

 

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Financial Results

 

New York, NY, January 27, 2004 – SL Green Realty Corp. (NYSE:SLG) reported a $4.6 million increase in operating results for the three months ended December 31, 2003.  During this period, funds from operations (FFO) before minority interests totaled $35.2 million, or $0.89 per share (diluted), compared to $30.6 million, or $0.87 per share (diluted), for the same quarter in 2002.

 

For the year ended December 31, 2003, operating results improved 5% as FFO before minority interests totaled $128.8 million, or $3.48 per share (diluted), compared to $116.2 million, or $3.32 per share (diluted), for the same period in 2002.  The increase is primarily attributable to net external growth including the acquisitions of 220 East 42^nd Street and condominium interests in 125 Broad Street in the first quarter of 2003.

 

Net income available to common shareholders for the fourth quarter of 2003 totaled $21.7 million, or $0.58 per share (diluted), a 7% increase as compared to the same quarter in 2002 when net income totaled $16.7 million, or $0.54 per share (diluted).  The increase in net income is primarily due to the $3.1 million ($0.08 per share) gain from the sale of 321 West 44^th Street partially offset by increased depreciation expense from the first quarter 2003 acquisitions of 220 East 42^nd Street and condominium interests in 125 Broad Street.

 

Net income available to common shareholders for the year ended December 31, 2003 totaled $90.4 million, or $2.66 per share (diluted), an increase of 27% as compared to the same period in 2002 when net income totaled $64.6 million, or $2.09 per share (diluted).  The increase is primarily due to $24.4 million ($0.62 per share) in gains recognized on the sales of 50 West 23^rd Street, 1370 Broadway and 321 West 44^th Street.

 

The Company’s fourth quarter weighted average diluted shares outstanding increased 1.9 million, or 5%, to 39.7 million in 2003 from 37.8 million in 2002.  The increase is primarily attributable to (i) the issuance of units of limited partnership interest in the Company’s operating partnership in connection with the acquisitions of 220 East 42^nd Street and condominium interests in 125 Broad Street in the first quarter of 2003, (ii) the Company’s long-term outperformance plan, (iii) employee stock grants and stock option exercises and (iv) additional dilution from unexercised outstanding stock options.

 

Consolidated Results

 

Total quarterly revenues increased 43% in the fourth quarter of 2003 to $86.6 million compared to $60.7 million in the same quarter in 2002.  The $25.9 million growth in revenue resulted primarily from the following items:

 

•      $17.4 million increase from 2003 acquisitions

•      $2.3 million increase from the 2003 same-store properties

•      $1.4 million increase from affiliates that were previously unconsolidated entities

•      $3.9 million increase in preferred and investment income

•      $0.9 million increase in signage and other income

 

The Company’s EBITDA increased by $8.0 million to $45.7 million compared to $37.7 million in the same quarter in 2002.  The following items primarily drove the EBITDA increase:

 

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•      $6.0 million increase from GAAP NOI

•      $8.9 million increase from 2003 property acquisitions

•      $0.3 million increase from same-store properties

•      $1.3 million decrease in income from unconsolidated joint ventures

•      $2.2 million decrease from reduced income from discontinued operations

•      $2.2 million increase from discontinued operations which reduced GAAP NOI

•      $3.9 million increase in investment and preferred income

•      $0.4 million increase in other income net of service corporation operating expenses ($1.5 million) and reduced corporate reserves ($0.5 million)

•      $4.5 million decrease from higher MG&A expense

 

EBITDA margins (EBITDA divided by total revenue) before ground rent decreased to 67.7% compared to 78.1% for the same period last year.  After ground rent, EBITDA margins decreased to 62.5% from 72.1% in the corresponding period.  The reductions in margins were primarily due to (i) the reduction in GAAP NOI margins as the Company’s overall portfolio occupancy decreased from 96.6% to 95.8%, (ii) increased MG&A costs and (iii) lower equity in income from unconsolidated joint ventures.  These decreases were partially offset by higher investment and other income.

 

FFO improved $4.6 million primarily as a result of:

 

•      $8.0 million increase in EBITDA

•      $1.7 million increase from reduced preferred stock dividends

•      $0.4 million increase from lower amortization of finance costs

•      $0.3 million increase in FFO adjustment from unconsolidated joint ventures

•      $2.2 million decrease in FFO from discontinued operations

•      $3.7 million decrease from higher interest expense

 

The $3.7 million increase in interest expense was primarily associated with higher average debt levels associated with new investment activity ($4.1 million) and the funding of ongoing capital projects and working capital requirements ($0.1 million).  These increases were partially offset by reduced loan balances due to previous disposition activity ($0.5 million) and lower interest rates ($0.1 million).

 

The 2002 results have been restated to classify the operating results of 2003 property sales as income from discontinued operations.  The properties sold in 2003, which are included in this restatement, are 50 West 23^rd Street (March 2003), 875 Bridgeport Avenue, Shelton, Connecticut (May 2003), and 1370 Broadway (July 2003).

 

Same-Store Results

 

During the fourth quarter of 2003, same-store cash NOI increased $0.1 million to $29.7 million, as compared to $29.6 million over the same quarter in 2002.  The increase in same-store cash NOI was driven by a $2.3 million (4%) increase in cash revenue partially offset by a $2.2 million (9%) increase in operating expenses.  This increase in cash revenue was primarily due to:

 

•      $0.9 million increase from replacement rents, including early renewals, which were 7% higher than previously fully escalated rents ($0.5 million) and contractual rent steps and reduced free rent ($0.2 million)

 

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•      $2.3 million increase in escalation and reimbursement revenue primarily due to real estate tax reimbursements ($1.9 million) and, higher operating expense escalations ($0.7 million) partially off-set by reduced passthru income ($0.3 million)

•      $0.4 million decrease from lower weighted average occupancy in 2003 (96.2%) compared to 2002 (97.0%)

•      $0.5 million reduction in signage rent

 

Same store cash NOI margins (cash NOI divided by total revenue) before ground rent decreased year over year from 60.2% to 57.3%.  The decrease in same-store cash NOI margins was primarily due to the $2.2 million (9%) increase in operating expenses resulted from the following:

 

•      $1.8 million (25%) increase in real estate taxes

•      $0.2 million (20%) increase in management, professional and advertising costs

•      $0.2 million (7%) increase in utility costs

 

Approximately 90% of the quarterly electric expense was recovered through the utility clause in tenant leases and approximately 95% of the quarterly incremental real estate tax expense increase was recovered through the escalation clause in tenant leases.

 

Leasing Activity

 

For the fourth quarter of 2003, the Company signed 62 office leases totaling approximately 665,000 rentable square feet with starting office cash rents averaging $31.29 per square foot, a 1.9% increase over previously fully escalated cash rents averaging $30.71 per square foot.  Tenant concessions averaged 1.1 months of free rent with an allowance for tenant improvements of $22.43 per rentable square foot.  This leasing activity includes early renewals for 13 office leases totaling approximately 248,000 rentable square feet.  Including retail and storage, the Company’s quarterly leasing activity totaled 68 signed leases for approximately 676,000 rentable square feet.

 

For the year ended December 31, 2003, the Company signed 256 office leases totaling approximately 1,568,000 rentable square feet with starting office cash rents averaging $32.84 per square foot, a 4.2% increase over previously fully escalated cash rents averaging $31.51 per square foot.  Tenant concessions averaged 1.7 months of free rent with an allowance for tenant improvements of $20.25 per rentable square foot.  This leasing activity includes early renewals for 37 office leases totaling approximately 405,000 rentable square feet.

 

Real Estate Activity

 

The McGraw-Hill Companies Building

1221 Avenue of the Americas

New York, New York

 

On December 29, 2003, the Company purchased a 45% ownership interest in 1221 Avenue of the Americas, The McGraw-Hill Building, for $450 million, or $394 per square foot, from The McGraw-Hill Companies (NYSE: MHP).  1221 Avenue of the Americas is an approximately 2.47 million square foot, 50 story class “A” office building located in Rockefeller Center.  The property is 99% leased to tenants including The McGraw-Hill Companies, Rockefeller Group International, Inc., Morgan Stanley, Société Générale and J.P. Morgan Chase & Co.  The

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McGraw-Hill Companies has owned its interest and maintained a significant presence in the building since its construction in 1972.  Rockefeller Group International, Inc. will retain its 55% ownership interest in 1221 Avenue of the Americas and it will continue to manage the property.

 

321 West 44^th Street

New York, New York

 

On December 16, 2003, a joint venture comprised of the Company and Morgan Stanley Real Estate Fund III, L.P. (“MSREF”), sold 321 West 44^th Street to Thor Equities LLC for a sale price of $35.0 million, or approximately $172 per square foot.  321 West 44^th Street is a ten-story office building located mid-block between Eighth and Ninth Avenues on 44^th Street.  The Company purchased 321 West 44^th in March 1998 for $17.0 million.  In May 2000, the Company contributed the property into a joint venture with MSREF and retained a 35% ownership interest.

 

Structured Finance Activity

 

As of December 31, 2003, the par value of the Company’s structured finance and preferred equity investments totaled $219.0 million.  The weighted average balance outstanding for the fourth quarter of 2003 was $169.4 million.  During the fourth quarter of 2003, the weighted average yield was 11.5% and the fourth quarter end run rate was 11.9%.

 

During the fourth quarter of 2003, the Company originated $61.3 million of structured finance investments with an initial yield of 13.69% and received a redemption totaling $10.3 million that was yielding 12.4%.  In January 2004, the Company received proceeds from a redemption totaling $15.0 million and contracted or completed originations totaling $77.5 million.  Currently the structured finance portfolio totals $281.6 million with a current weighted-average yield of 11.66%.

 

During the quarter, the Company recognized a $4.5 million gain from a partial distribution from a joint venture, which owned a mortgage position in a portfolio of office and industrial properties.  In addition, the Company will recognize a gain of approximately $4.0 million in the first quarter of 2004 for additional distributions received from this joint venture investment.

 

Financing Activity

 

Common Stock Issuance

 

On January 16, 2004, the Company completed a public offering of 1.8 million shares of common stock at a gross price of $42.33 per share.  The Company used the net proceeds of approximately $73.9 million to pay down its unsecured revolving credit facility.

 

$100.0 Million Secured Non-Recourse Term Loan

 

On December 29, 2003, the Company completed a $100.0 million 5-year term loan.  The financing was led by Wells Fargo Bank and has a floating rate of 150 basis points over the current LIBOR rate.

 

Preferred Stock Issuance

 

On December 12, 2003, the Company completed a public offering of 6.3 million shares of its 7.625% Series C Cumulative Redeemable Preferred Stock with net proceeds totaling $152.0

 

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million. The shares of Series C preferred stock have a liquidation preference of $25 per share and will be redeemable at par at the option of the Company on or after December 12, 2008.  The Company used the proceeds to partially fund the year-end acquisition of 1221 Avenue of the Americas, The McGraw-Hill Building.

 

Mortgage Financing

 

In December 2003, the Company completed a $210.0 million 10-year mortgage refinancing of the property located at 220 East 42^nd Street, the News Building.  The mortgage bears interest at a fixed rate of 5.23% per annum.  The financing proceeds were used to pay off the existing $158.0 million first mortgage on the property.  Excess proceeds were used to reduce the outstanding balance on the Company’s unsecured revolving credit facility.

 

Unsecured Term Loan

 

On December 5, 2003, the Company borrowed $35.0 million on its unsecured term loan, increasing the balance to the $200.0 million capacity.  The Company executed a serial swap with a first year all-in rate of 2.95% through December 4, 2004, and a blended all-in rate of 5.01% through a final maturity date in June 2008.

 

Forward Swap Contract

 

During January 2004, the Company entered into a $65 million serial swap commencing August 2005 with an initial 12-month all-in rate of 4.80% and a blended all-in rate of 5.45% with a final maturity date in June 2008.

 

Management

 

Marc Holliday Named Chief Executive Officer

Andrew Mathias Named Chief Investment Officer

 

On January 5, 2004, the Company announced the promotion of Marc Holliday to Chief Executive Officer. Mr. Holliday, 37, will also remain President, a post he has held since 2001.  Stephen L. Green, the Company’s founder and former CEO, will continue in his position as Chairman of the Board of Directors and he will remain a full time executive officer of the Company with responsibility for developing key market relationships and real estate opportunities while overseeing the firm’s long-term strategic direction.

 

In connection with Mr. Holliday’s promotion to CEO, the Company has amended his employment agreement to extend it through January 2010.  Pursuant to the amended employment agreement, Mr. Holliday will receive an additional 270,000 restricted shares of SL Green common stock plus a 40% gross-up for income taxes. 95,000 of the shares were vested upon signing and are non-transferable for a period of two years.  The balance of the restricted shares will vest over the remaining term of the employment agreement subject to achieving certain time and performance criteria.

 

Andrew Mathias has been promoted to Chief Investment Officer to take over the position vacated by Mr. Holliday.  The Company has employed Mr. Mathias since 1999, most recently in the position of Director of Investments.  In his new position, Mr. Mathias will oversee all real estate investment activity including structured finance.

 

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Other

 

Amendment To Company’s Long-Term Outperformance Compensation Plan

 

The Company announced in December 2003 that its Board of Directors had ratified an amendment to the Company’s long-term outperformance compensation plan to place a $25.5 million ceiling on the plan’s maximum value. Based on the year-end stock price, the ceiling approximates 635,000 common shares that would be issued in the fourth year of the plan and vest over a total seven-year period. Any common share awards to be issued under the program will be allocated from the Company’s stock option plan.

 

Accounting Changes for Stock Based Compensation

 

In December 2003, the Company adopted SFAS 123, “Accounting for stock-based compensation.”  The adoption of this standard, effective as of January 1, 2003, will not require a restatement of the Company’s previously issued quarterly results and the adoption will be reflected in the Company’s 2003 year-end financial statements.

 

Dividend Increase

 

On December 8, 2003, the Company declared a dividend distribution of $0.50 per common share for the fourth quarter 2003, representing an annual increase of $0.14 per common share, or a 7.5% increase on an annualized basis. This distribution reflects the regular quarterly dividend, which is the equivalent of an annualized distribution of $2.00 per common share.

 

Today, the Company’s portfolio consists of interests in 26 properties, aggregating 15.1 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 commercial office properties in Manhattan.  The Company is the only publicly traded REIT, which exclusively specializes in this niche.

 

Conference Call

 

The company will host a conference call and audio web cast on Wednesday, January 28, 2004, at 2 pm ET to discuss the financial results. The conference call can be accessed by dialing (913) 981-5520. A replay of the call will be available through February 4, 2004, by dialing 888-203-1112 or 719-457-0820, pass code 509209. The call will be simultaneously broadcast via the Internet and individuals who wish to access the conference call should go to www.slgreen.com to log onto the call or to listen to a replay following the call.

 

Non-GAAP Financial Measures

 

During the January 28, 2004 conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. In addition, the Company has used non-GAAP financial measures in this press release.  A reconciliation of each non-GAAP financial measure and the comparable GAAP financial measure (net income) can be found on pages nine and eleven of this release and in our fourth quarter supplemental data package.

 

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* Financial Tables attached

 

To receive the Company’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.

 

Forward-looking Information

 

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 real estate markets in New York, competitive market conditions, unanticipated administrative costs, timing of leasing income, general and local economic conditions, interest rates, capital market conditions, tenant bankruptcies and defaults, the availability and cost of comprehensive insurance, including coverage for terrorist acts, and other factors, many of which are beyond the Company’s control.  We undertake no obligation to publicly update or revise any of the forward-looking information.  For further information, please refer to the Company’s filing with the Securities and Exchange Commission.

 

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SL GREEN REALTY CORP.

STATEMENTS OF OPERATIONS-UNAUDITED

(Amounts in thousands, except share and per share data)

 

		Three Months Ended December 31,						Twelve Months Ended December 31,
		2003			2002			2003			2002
Revenue:
Rental revenue, net		$	62,358		$	45,429		$	233,188		$	179,520
SFAS 141 Revenue Adjustment		(58		)	—			(155		)	—
Escalations & reimbursement revenues		10,636			6,405			42,223			27,203
Signage rent		137			564			968			1,488
Preferred equity investment income		1,153			1,975			4,098			7,780
Investment income		8,708			3,977			17,988			15,396
Other income		3,668			2,303			10,647			5,570
Total revenues		86,602			60,653			308,957			236,957
Equity in net (loss) income from affiliates		—			47			(196		)	292
Equity in net income from unconsolidated joint ventures		4,007			5,270			14,870			18,383
Expenses:
Operating expenses		20,929			14,136			80,460			56,172
Ground rent		3,766			3,159			13,562			12,637
Real estate taxes		12,126			7,348			44,524			28,287
Marketing, general and administrative		8,048			3,563			17,131			13,282
Total expenses		44,869			28,206			155,677			110,378
Earnings Before Interest, Depreciation and Amortization (EBITDA)		45,740			37,764			167,954			145,254
Interest		12,839			9,112			45,950			35,421
FAS141 interest adjustment		(156		)	0			(457		)	0
Depreciation and amortization		12,437			10,040			47,282			37,600
Net income from Continuing Operations		20,620			18,612			75,179			72,233
Income from Discontinued Operations, net of minority interests		—			1,721			3,182			6,384
Gain on sale of Discontinued Operations, net of minority interests		3,096			—			24,422			—
Minority interests		(1,424		)	(1,167		)	(4,624		)	(4,286		)
Preferred stock dividends and accretion		(625		)	(2,423		)	(7,712		)	(9,690		)
Net income available to common shareholders		$	21,667		$	16,743		$	90,447		$	64,641
Net income per share (Basic)		$	0.60		$	0.55		$	2.80		$	2.14
Net income per share (Diluted)		$	0.58		$	0.54		$	2.66		$	2.09
Funds From Operations (FFO)
FFO per share (Basic)		$	0.92		$	0.94		$	3.73		$	3.58
FFO per share (Diluted)		$	0.89		$	0.87		$	3.48		$	3.32
FFO Calculation:
Income before minority interests, preferred stock dividends and accretion and discontinued operations		$	20,620		$	18,612		$	75,179		$	72,233
Less:
Preferred stock dividend on convertible preferred		—			(2,300		)	(6,693		)	(9,200		)
Dividend on perpetual preferred		(625		)	—			(625		)	—
Add:
Depreciation and amortization		12,437			10,040			47,282			37,600
FFO from Discontinued Operations		—			2,149			4,134			8,884
Joint venture FFO adjustment		3,680			3,359			13,982			11,025
Amortization of deferred financing costs and depreciation of non-real estate assets		(870		)	(1,234		)	(4,478		)	(4,313		)
FFO before minority interests – BASIC		35,242			30,626			128,781			116,229
Add:  Preferred stock dividends		—			2,300			6,693			9,200
FFO before minority interests – DILUTED		$	35,242		$	32,926		$	135,474		$	125,429
Basic ownership interest
Weighted average REIT common shares for net income per share		35,957			30,387			32,265			30,236
Weighted average partnership units held by minority interests		2,306			2,161			2,305			2,208
Basic weighted average shares and units outstanding for FFO per share		38,263			32,548			34,570			32,444
Diluted ownership interest
Weighted average REIT common share and common share equivalents		37,458			30,904			33,174			30,879
Weighted average partnership units held by minority interests		2,306			2,161			2,305			2,208
Common share equivalents for preferred stock		—			4,699			3,491			4,699
Diluted weighted average shares and units outstanding		39,764			37,764			38,970			37,786

 

9

 

SL GREEN REALTY CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands)

 

		December 31, 2003			December 31, 2002
		(Unaudited)
Assets
Commercial real estate properties, at cost:
Land and land interests		$	168,032		$	131,078
Buildings and improvements		849,013			683,165
Building leasehold and improvements		317,178			149,326
Property under capital lease		12,208			12,208
		1,346,431			975,777
Less accumulated depreciation		(156,768		)	(126,669		)
		1,189,663			849,108
Assets held for sale		—			41,536
Cash and cash equivalents		38,546			58,020
Restricted cash		59,542			29,082
Tenant and other receivables, net of allowance of $7,533 and $5,927 in 2003 and 2002, respectively		13,165			6,587
Related party receivables		6,610			4,868
Deferred rents receivable, net of allowance of  $7,017 and $6,575 in 2003 and 2002, respectively		63,131			55,731
Investment in and advances to affiliates		—			3,979
Structured finance investments, net of discount of $44 and $205 in 2003 and 2002, respectively		218,989			145,640
Investments in unconsolidated joint ventures		590,064			214,644
Deferred costs, net		39,277			35,511
Other assets		42,854			28,464
Total assets		$	2,261,841		$	1,473,170
Liabilities and Stockholders’ Equity
Mortgage notes payable		$	583,449		$	367,503
Revolving credit facilities		236,000			74,000
Unsecured term loan		300,000			100,000
Derivative instruments at fair value		9,009			10,962
Accrued interest payable		3,500			1,806
Accounts payable and accrued expenses		44,320			41,197
Deferred compensation awards		—			1,329
Deferred revenue/gain		8,526			3,096
Capitalized lease obligations		16,168			15,862
Deferred land lease payable		15,166			14,626
Dividend and distributions payable		18,647			17,436
Security deposits		21,968			20,948
Liabilities related to assets held for sale		—			21,321
Total liabilities		1,256,753			690,086
Commitments and contingencies
Minority interests		54,281			44,039
Minority interest in partially owned entities		510			679
8% Preferred Income Equity Redeemable Shares $0.01 par value, $25.00 mandatory liquidation preference, none and 4,600 outstanding at December 31, 2003 and 2002, respectively		—			111,721
Stockholders’ Equity
7.625% Series C perpetual preferred shares		151,981			—
Common stock, $0.01 par value 100,000 shares authorized, 36,016 and 30,422 issued and outstanding at December 31, 2003 and 2002, respectively		360			304
Additional paid - in capital		728,397			592,585
Deferred compensation plan		(8,446		)	(5,562		)
Accumulated other comprehensive loss		(961		)	(10,740		)
Retained earnings		78,966			50,058
Total stockholders’ equity		950,297			626,645
Total liabilities and stockholders’ equity		$	2,261,841		$	1,473,170

 

10

 

SL GREEN REALTY CORP.

SELECTED OPERATING DATA-UNAUDITED

 

		December 31,
		2003			2002
Operating Data:
Net rentable area at end of period (in 000’s)(1)		15,072			11,533
Portfolio percentage leased at end of period		95.8		%	96.9		%
Same-Store percentage leased at end of period		95.8		%	97.1		%
Number of properties in operation		26			25
Office square feet leased during quarter (rentable)		665,000			165,000
Average mark-to-market percentage-office		2		%	23		%
Average starting cash rent per rentable square foot-office		$	31.29		$	33.09

 

 

(1)   Includes wholly owned and joint venture properties.

 

 

SL GREEN REALTY CORP.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES*

(Amounts in thousands, except per share data)

 

 

		Three Months Ended December 31,
		2003			2002
Earnings before interest, depreciation and amortization (EBITDA):		$	45,740		$	37,764
Add:
Marketing, general & administrative expense		8,048			3,563
Operating income from discontinued operations		—			2,149
Depreciation adjustment for JV		3,680			3,359
Less:
Non-building revenue		15,370			10,755
GAAP net operating income (GAAP NOI)		$	42,098		$	36,080
Less:
Operating income from discontinued operations		—			2,149
GAAP NOI from other consolidated properties		11,873			4,042
2003 Same-Store GAAP NOI		$	30,225		$	29,889
Less:
Free Rent		65			(281		)
Straight-line rent		1,227			1,118
Add:
Ground lease straight-line rent expense		160			160
Credit loss		602			426
2003 Same-Store cash NOI		$	29,695		$	29,638

 

*  See page 9 for a reconciliation of FFO and EBITDA to net income.

 

11

 

 

SL Green Realty Corp. is a fully integrated, self-administered and self-managed Real Estate Investment Trust (REIT) that primarily owns, manages, leases, acquires and repositions office properties in emerging, high-growth submarkets of Manhattan.

 

•                  SL Green’s common stock is listed on the New York Stock Exchange, and trades under the symbol SLG.

•                  SL Green maintains an internet site at www.slgreen.com at which most key investor relations data pertaining to dividend declaration, payout, current and historic share price, etc. can be found.  Such information is not reiterated in this supplemental financial package.  This supplemental financial package is available through the Company’s Internet site.

•                  This data is presented to supplement audited and unaudited regulatory filings of the Company and should be read in conjunction with those filings.  The financial data herein is unaudited and is provided from the prospective of timeliness to assist readers of quarterly and annual financial filings.  As such, data otherwise contained in future regulatory filings covering the same period may be restated from the data presented herein.

 

Questions pertaining to the information contained herein should be referred to Michael W. Reid or Thomas E. Wirth at michael.reid@slgreen.com or tom.wirth@slgreen.com or at 212-594-2700.

 

This report includes certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  All statements, other than statements of historical facts, included in this report that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future, including such matters as future capital expenditures, dividends and acquisitions (including the amount and nature thereof), expansion and other development trends of the real estate industry, business strategies, expansion and growth of the Company’s operations and other such matters are forward-looking statements.  These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate.  Such statements are subject to a number of assumptions, risks and uncertainties, general economic and business conditions, the business opportunities that may be presented to and pursued by the Company, changes in laws or regulations and other factors, many of which are beyond the control of the Company.  Any such statements are not guarantees of future performance and actual results or developments may differ materially from those anticipated in the forward-looking statements.

 

The following discussion related to the consolidated financial statements of the Company should be read in conjunction with the financial statements for the year ended December 31, 2003 that will subsequently be released on Form 10-K to be filed on or before March 15, 2004.

 

2

 

 

Highlights of Current Period Financial Performance
Unaudited Financial Statements
Corporate Profile
Financial Highlights
Balance Sheets
Statements of Operations
Joint Venture Statements
Statement of Stockholders’ Equity
Funds From Operations
Selected Financial Data
Summary of Debt and Ground Lease Arrangements
Mortgage Investments and Preferred Equity
Property Data
Composition of Property Portfolio
Top Tenants
Leasing Activity Summary
Lease Expiration Schedule
Summary of Acquisition/Disposition Activity
Supplemental Definitions
Corporate Information

 

3

 

 

SL Green Realty Corp. (the “Company”) was formed on August 20, 1997 to continue the commercial real estate business of S.L. Green Properties Inc. founded in 1980 by Stephen L. Green, our current Chairman.  For more than 20 years SL Green has been engaged in the business of owning, managing, leasing, acquiring and repositioning office properties in Manhattan.  The Company’s investment focus is to create value through the acquisition, redevelopment and repositioning of Manhattan office properties and releasing and managing these properties for maximum cash flow.

 

Looking forward, SL Green Realty Corp. will continue its opportunistic investment philosophy through three established business lines:  investment in long-term core properties, investment in opportunistic assets and structured finance investments.  This three-legged investment strategy will allow SL Green to balance the components of its portfolio to take advantage of each stage in the business cycle.

 

Today, the Company is the only fully integrated, self-managed, self-administered Real Estate Investment Trust (REIT) exclusively focused on owning and operating office buildings in Manhattan. SL Green is a pure play for investors to own a piece of New York.

 

4

 

 

FINANCIAL RESULTS

 

Funds From Operations (FFO) before minority interests, for the fourth quarter 2003 totaled $35.2 million, or $0.89 per share (diluted), a 2% increase compared to the same quarter in 2002 when FFO totaled $30.6 million, or $0.87 per share (diluted).

 

For the year ended December 31, 2003, operating results improved 5% as FFO before minority interests totaled $128.8 million, or $3.48 per share (diluted), compared to $116.2 million, or $3.32 per share (diluted), for the same period in 2002.  The increase is primarily attributable to net external growth including the acquisitions of 220 East 42^nd Street and condominium interests in 125 Broad Street in the first quarter of 2003.

 

Net income available for common shareholders for the fourth quarter 2003 totaled $21.7 million, or $0.58 per share (diluted), an increase of 7% as compared to the same quarter in 2002 when net income totaled $16.7 million, or $0.54 per share (diluted).  The increase is primarily due to the $3.1 million ($0.08 per share) gain from the sale of 321 West 44^th Street partially offset by increased depreciation from the first quarter acquisitions of 220 East 42^nd Street and 125 Broad Street.

 

Net income available to common shareholders for the year ended December 31, 2003 totaled $90.4 million, or $2.66 per share (diluted), an increase of 27% as compared to the same period in 2002 when net income totaled $64.6 million, or $2.09 per share (diluted).  The increase is primarily due to $24.4 million ($0.62 per share) in gains recognized on the sales of 50 West 23^rd Street, 1370 Broadway and 321 West 44^th Street.

 

Funds available for distribution (FAD) for the fourth quarter 2003 decreased to $0.53 share per share (diluted) versus $0.72 per share (diluted) in the prior year, a 26% decrease.  The decrease is primarily due to the $6.8 million increase in tenant improvements and leasing commissions due to increased leasing volume.  Leasing volume, including early renewals, increased from 165,000 square feet in 2002 to 665,000 square feet in 2003.

 

The Company’s dividend payout ratio was 56.4% of FFO and 95.1% of FAD before first cycle leasing costs.

 

CONSOLIDATED RESULTS

 

Total quarterly revenues increased 43% in the fourth quarter to $86.6 million, compared to $60.7 million last year.  The $25.9 million growth in revenue resulted from the following items:

 

•                  $17.4 million increase from 2003 acquisitions

•                  $2.3 million increase from the 2003 same-store portfolio

•                  $1.4 million increase from affiliate revenue that was previously unconsolidated

•                  $3.9 million increase in preferred equity and investment income

•                  $0.9 million increase in signage and other income

 

5

 

The Company’s EBITDA increased $8.0 million to $45.7 million; however, margins before ground rent decreased to 67.7% compared to 78.1% for the same period last year.  The decrease in margins is primarily due to a reduction (i) in GAAP NOI margins, (ii) increased MG&A costs and (iii) lower equity income from unconsolidated joint ventures, partially offset by higher investment and other income.  After ground rent, margins decreased in 2003 to 62.6% from 72.1% in the corresponding period in 2002.  The following items drove EBITDA improvements:

 

(1)          Consolidated GAAP NOI increased $6.0 million:

 

•      $8.9 million increase from 2003 property acquisitions of 220 East 42^nd Street (February 2003), 125 Broad Street (March 2003) and 461 Fifth Avenue (October 2003).

 

•      $0.3 million increase from the 2003 same-store properties mainly due to (i) rental revenue increases of $0.5 million as GAAP replacement rents were 15% higher than previously fully-escalated rents and (ii) higher reimbursement revenues ($2.3 million) largely due to higher real estate tax escalation income ($2.0 million).  These increases were partially offset by lower signage and other income ($0.7 million) and higher credit loss reserves ($0.2 million).

 

The increased revenues were partially offset by $2.2 million of increased operating costs resulting from (i) increased real estate taxes ($1.8 million) due to higher assessed values and tax rates, (ii) higher advertising, professional fees and management costs ($0.2 million) and (iii) increased utility expense due to higher oil prices ($0.2 million).

 

•      $1.3 million decrease from the equity in income from unconsolidated joint ventures primarily due to (i) reduced rental revenue as occupancy decreased to 94.1% at December 31, 2003 (excluding 1221 Avenue of the Americas) as compared to 97.3% in 2002, (ii) increased real estate tax expense ($1.0 million) and (iii) higher operating costs ($0.2 million).  These decreases were partially offset by higher escalation income ($0.5 million) primarily from higher real estate tax reimbursement income.

 

•      $2.2 million decrease from reduced income from discontinued operations from the sales of 50 West 23^rd Street (March 2003), 875 Bridgeport Avenue, Shelton, Connecticut (April 2003) and 1370 Broadway (July 2003).

 

(2)  $3.9 million increase in investment and preferred equity income primarily due to the recognition of a one-time gain on a mortgage investment, ($3.1 million).  The gain was partially offset by a decrease in the weighted-average asset balance from $194.7 million to $169.4 million.  The weighted-average yield decreased from 12.51% to 11.53% due mainly to lower LIBOR.

 

6

 

(3)  $0.4 million increase in other income net of service corporation operating expenses ($1.5 million) and reduced corporate reserves ($0.5 million)

 

(4)  $4.5 million decrease from higher MG&A expense.  The increase is primarily due to higher year-end compensation awards.

 

FFO improved $4.6 million primarily as a result of:

 

•                  $8.0 million increase in EBITDA

•                  $1.7 million increase from reduced preferred stock dividends

•                  $0.4 million increase from lower amortization of finance costs

•                  $0.3 million increase in FFO adjustment from unconsolidated joint ventures primarily due to increased depreciation expense

•                  $2.2 million decrease in FFO from discontinued operations

•                  $3.7 million decrease from higher interest expense.

 

The $3.7 million increase in interest expense was primarily due to higher average debt levels associated with new investment activity ($4.1 million) and the funding of ongoing capital projects and working capital requirements ($0.1 million).  These increases were partially offset by reduced loan balances due to previous disposition activity ($0.5 million) and lower interest rates ($0.1 million).

 

SAME-STORE CASH RESULTS

 

Same-store fourth quarter cash NOI increased $0.1 million to $29.7 million in 2003 due to a $2.3 million increase in cash revenue partially offset by a $2.2 million increase in operating costs.  Cash operating margins before ground rent decreased from 60.2% to 57.3%.

 

The $2.3 million increase in cash revenue was due to:

 

1.               $0.9 million increase in cash rental revenue due to (i) a $0.5 million increase resulting from higher replacement rents, including early renewals, on approximately 975,000 rentable square feet that were 7% higher than previously fully escalated rents and (ii) $0.2 million from increased cash revenue from rent-steps.

 

2.               $2.3 million increase in escalation and reimbursement revenue due to (i) the increased escalation revenue from real estate taxes ($1.9 million), and higher operating expense escalations ($0.7 million).  These increases were partially offset by reduced reimbursement revenue ($0.3 million).

 

3.               $0.4 million decrease from reduced weighted-average occupancy in 2003 (96.2%) compared to 2002 (97.0%).

 

4.               $0.5 million reduction in signage rent.

 

7

 

The $2.2 million increase in same-store operating expenses resulted from:

 

•                  $1.8 million (25%) increase in real estate taxes due to higher property value assessments (7%) and an increase in the New York City tax rate (18%)

 

•                  $0.2 million (16%) increase in management, professional and advertising costs

 

•                  $0.2 million (7%) increase in utility costs primarily due to higher oil prices

 

The electric recovery rate for the quarter was approximately 90%.

 

QUARTERLY LEASING HIGHLIGHTS

 

Vacancy at September 30, 2003 was 559,147 useable square feet net of holdover tenants.  During the quarter, 420,734 additional useable office retail and storage square feet became available at an average escalated cash rent of $29.98 per rentable square foot.  The company sold 321 West 44^th Street, which included 19,117 usable square feet.  The Company acquired 461 Fifth Avenue and 1221 Avenue of the Americas, which included a total of 41,089 usable square feet.  Space available before holdovers to lease during the quarter totaled 1,001,853 useable square feet, or 6.6% of the total portfolio.

 

During the fourth quarter, 55 leases were signed totaling 323,929 useable square feet.  New cash rents averaged $30.69 per rentable square foot.  Replacement rents were 11% greater than rents on previously occupied space, which had fully escalated cash rents averaging $27.88 per rentable square foot.  The average lease term was 9.1 years and average tenant concessions were 1.7 months of free rent with a tenant improvement allowance of $28.41 per rentable square foot.  Including early renewals and excluding holdover tenants, the tenant renewal rate was 71.5% based on square feet expiring.  Twenty-nine leases have expired comprising 51,646 useable square feet that are in a holdover status.  This results in 626,278 useable square feet (net of holdovers) remaining available as of December 31, 2003.

 

The Company signed 13 office leases for 189,974 useable square feet that were for early renewals.  The early renewals for space were not scheduled to become available until after the first quarter of 2004.  The Company was able to renew current office tenants at an average cash rent of $31.61 per rentable square foot, representing a decrease of 10% below the previously fully escalated rents of $35.12.  The average lease term extension on the office early renewals was 10.8 years with a tenant improvement allowance of $11.26 per rentable square foot.

 

8

 

PROPERTY ACTIVITY

 

The McGraw-Hill Companies Building

1221 Avenue of the Americas

New York, New York

 

On December 29, 2003, the Company purchased a 45% ownership interest in 1221 Avenue of the Americas, The McGraw-Hill Building, for $450 million, or $394 per square foot, from The McGraw-Hill Companies (NYSE: MHP).  1221 Avenue of the Americas is an approximately 2.47 million square foot, 50 story class “A” office building located in Rockefeller Center.  The property is 99% leased to tenants including The McGraw-Hill Companies, Rockefeller Group International, Inc., Morgan Stanley, Société Générale and J.P. Morgan Chase & Co.  The McGraw-Hill Companies has owned its interest and maintained a significant presence in the building since its construction in 1972.  Rockefeller Group International, Inc. will retain its 55% ownership interest in 1221 Avenue of the Americas and it will continue to manage the property.

 

321 West 44^th Street

New York, New York

 

On December 16, 2003, a joint venture comprised of the Company and Morgan Stanley Real Estate Fund III, L.P. (“MSREF”), sold 321 West 44^th Street to Thor Equities LLC for a sale price of $35.0 million, or approximately $172 per square foot.  321 West 44^th Street is a ten-story office building located mid-block between Eighth and Ninth Avenues on 44^th Street.  The Company purchased 321 West 44^th in March 1998 for $17.0 million.  In May 2000, the Company contributed the property into a joint venture with MSREF and retained a 35% ownership interest.

 

Structured Finance Activity

 

As of December 31, 2003, the par value of the Company’s structured finance and preferred equity investments totaled $219.0 million.  The weighted average balance outstanding for the fourth quarter of 2003 was $169.4 million.  During the fourth quarter of 2003, the weighted average yield was 11.5% and the fourth quarter end run rate was 11.9%.

 

During the fourth quarter of 2003, the Company originated $61.3 million of structured finance investments with an initial yield of 13.69% and received a redemption totaling $10.3 million that was yielding 12.4%. In January 2004, the Company received proceeds from a redemption totaling $15.0 million and contracted or completed originations totaling $77.5 million.  Currently the structured finance portfolio totals $281.6 million with a current weighted-average yield of 11.66%.

 

During the quarter, the Company recognized a $4.5 million gain from a partial distribution from a joint venture, which owned a mortgage position in a portfolio of office and industrial properties.  In addition, the Company will recognize a gain of approximately $4.0 million in the first quarter of 2004

 

9

 

for additional distributions received from this joint venture investment.

 

Financing Activity

 

Common Stock Issuance

 

On January 16, 2004, the Company completed a public offering of 1.8 million shares of common stock at a gross price of $42.33 per share.  The Company used the net proceeds of approximately $73.9 million, to pay down its unsecured revolving credit facility.

 

$100.0 Million  Secured Non-Recourse Term Loan

 

On December 29, 2003, the Company completed a $100.0 million 5-year term loan.  The financing was led by Wells Fargo Bank and has a floating rate of 150 basis points over the current LIBOR rate.

 

Preferred Stock Issuance

 

On December 12, 2003, the Company completed a public offering of 6.3 million shares of its 7.625% Series C Cumulative Redeemable Preferred Stock with net proceeds totaling $152.0 million. The shares of Series C preferred stock have a liquidation preference of $25 per share and will be redeemable at par at the option of the Company on or after December 12, 2008.  The Company used the proceeds to partially fund the year-end acquisition of 1221 Avenue of the Americas, The McGraw-Hill Building.

 

Mortgage Financing

 

In December 2003, the Company completed a $210.0 million 10-year mortgage refinancing of the property located at 220 East 42^nd Street, the News Building.  The mortgage bears interest at a fixed rate of 5.23% per annum.  The financing proceeds were used to pay off the existing $158.0 million first mortgage on the property.  Excess proceeds were used to reduce the outstanding balance on the Company’s unsecured revolving credit facility.

 

Unsecured Term Loan

 

On December 5, 2003, the Company borrowed $35.0 million on its unsecured term loan, increasing the balance to the $200.0 million capacity.  The Company executed a serial swap with a first year all-in rate of 2.95% through December 4, 2004, and a blended all-in rate of 5.01% through a final maturity date in June 2008.

 

Forward Swap Contract

 

During January 2004, the Company entered into a $65 million serial swap commencing August 2005 with an initial 12-month all-in rate of 4.80% and a blended all-in rate of 5.45% with a final maturity date in June 2008.

 

10

 

Management

 

Marc Holliday Named Chief Executive Officer

Andrew Mathias Named Chief Investment Officer

 

On January 5, 2004, the Company announced the promotion of Marc Holliday to Chief Executive Officer. Mr. Holliday, 37, will also remain President, a post he has held since 2001.  Stephen L. Green, the Company’s founder and former CEO, will continue in his position as Chairman of the Board of Directors and he will remain a full time executive officer of the Company with responsibility for developing key market relationships and real estate opportunities while overseeing the firm’s long-term strategic direction.

 

In connection with Mr. Holliday’s promotion to CEO, the Company has amended his employment agreement to extend it through January 2010.  Pursuant to the amended employment agreement, Mr. Holliday will receive an additional 270,000 restricted shares of SL Green common stock plus a 40% gross-up for income taxes. 95,000 of the shares were vested upon signing and are non-transferable for a period of two years.  The balance of the restricted shares will vest over the remaining term of the employment agreement subject to achieving certain time and performance criteria.

 

Andrew Mathias has been promoted to Chief Investment Officer to take over the position vacated by Mr. Holliday.  The Company has employed Mr. Mathias since 1999, most recently in the position of Director of Investments.  In his new position, Mr. Mathias will oversee all real estate investment activity including structured finance.

 

Other

 

Amendment To Company’s Long-Term Outperformance Compensation Plan

 

The Company announced in December 2003 that its Board of Directors had ratified an amendment to the Company’s long-term outperformance compensation plan to place a $25.5 million ceiling on the plan’s maximum value. Based on the year-end stock price, the ceiling approximates 635,000 common shares that would be issued in the fourth year of the plan and vest over a total seven-year period. Any common share awards to be issued under the program will be allocated from the Company’s stock option plan.

 

Accounting Changes for Stock Based Compensation

 

In December 2003, the Company adopted SFAS 123, “Accounting for stock-based compensation.”  The adoption of this standard, effective as of January 1, 2003, will not require a restatement of the Company’s previously issued quarterly results and the adoption will be reflected in the Company’s 2003 year-end financial statements.

 

11

 

Dividend Increase

 

On December 8, 2003, the Company declared a dividend distribution of $0.50 per common share for the fourth quarter 2003, representing an annual increase of $0.14 per common share, or a 7.5% increase on an annualized basis. This distribution reflects the regular quarterly dividend, which is the equivalent of an annualized distribution of $2.00 per common share.

 

Today, the Company’s portfolio consists of interests in 26 properties, aggregating 15.1 million square feet.

 

Consolidation of Affiliate

 

In connection with recently enacted accounting pronouncements (FIN 46) the Company has consolidated the results of its previously unconsolidated affiliate.  The consolidation is effective July 1, 2003 and is not retroactive for the three and six months ended December 31, 2003.  The consolidated affiliate revenue totaled $1.78 million and $3.2 million and consolidated expenses totaled $3.1 million and $4.6 million for the three and six months ended December 31, 2003.

 

OTHER

 

Annually, the Company adjusts the same-store pool to include all properties owned for a minimum of twelve months (since January 1, 2003).  The 2004 same-store pool will include the following wholly owned properties:

 

12

 

2004 SAME-STORE

 

673 First Avenue		1140 Avenue of the Americas		420 Lexington Avenue
470 Park Avenue South		1466 Broadway		70 West 36th Street
555 West 57th Street		440 Ninth Avenue		1414 Avenue of the Americas
711 Third Avenue		1372 Broadway		292 Madison Avenue
286 Madison Avenue		290 Madison Avenue		17 Battery Place North
110 East 42nd Street		317 Madison Avenue

 

 

Beginning in 2004, the Company will also disclose a 2004 same-store pool for the joint venture properties.  The same-store will consist of all properties owned as of January 1, 2003.  The 2004 joint venture same-store pool will include the following properties:

 

2004 JOINT VENTURE SAME-STORE

 

180 Madison Avenue (50%)			1250 Broadway (55%)		1515 Broadway (55%)
One Park Avenue (55%)			100 Park Avenue (50%)

 

 

(% of SL Green Realty Corp. Ownership)

 

13

 

	FINANCIAL HIGHLIGHTS Fourth Quarter Unaudited

 

		December 31,
		2003			2002
Operational Information
Total Revenues ($000’s)		$	86,602		$	60,653
Funds from Operations
FFO per share- diluted		$	0.89		$	0.87
FFO Payout		56.42		%	53.05		%
Funds Available for Distribution
FAD per share- diluted		$	0.53		$	0.72
FAD Payout		95.08		%	64.67		%
Net Income Available to Common Shareholders - Basic		$	0.60		$	0.55
Net Income Available to Common Shareholders - Diluted		$	0.58		$	0.54
Dividends per Common share		$	0.5000		$	0.4650
Weighted Average Shares Outstanding - Diluted		39,764			37,764
Same-store Cash NOI		$	29,695		$	29,638
Total Book Assets		$	2,261,841		$	1,473,170
Total Consolidated Debt		$	1,119,449		$	541,503
Minority Interest		$	54,791		$	44,718
Preferred Stock		$	151,981		$	111,721
Quarter End Closing Price - SLG Common Stock		$	41.05		$	31.60
Equity Market Capitalization		$	1,573,093		$	1,029,101
Total Market Capitalization		$	3,323,600		$	2,102,866
Ratios
Consolidated Debt to Total Market Capitalization		39.28		%	32.96		%
Combined Debt to Total Market Capitalization		47.93		%	45.59		%
Consolidated Fixed Charge		2.82			2.76
Combined Fixed Charge		2.59			2.79
Portfolio
Total Buildings
Directly Owned		20			19
Joint Ventures		6			6
		26			25
Total SF		15,072,000			11,533,000
End of Quarter Occupancy - Total		95.8		%	96.9		%
End of Quarter Occupancy - 2003 Same-Store		95.8		%	97.1		%

 

14

 

COMPARATIVE BALANCE SHEETS Unaudited (000’s omitted)

 

		12/31/2003		12/31/2002		+/-		9/30/2003		+/-		6/30/2003		+/-
Assets
Commercial real estate properties, at cost:
Land & land interests		168,032		131,078		36,955		167,816		216		167,793		239
Buildings & improvements fee interest		849,013		683,165		165,848		841,716		7,297		839,139		9,874
Buildings & improvements leasehold		317,178		149,326		167,852		251,866		65,312		247,336		69,842
Buildings & improvements under capital lease		12,208		12,208		—		12,208		—		12,208		—
		1,346,431		975,777		370,654		1,273,606		72,825		1,266,476		79,955
Less accumulated depreciation		(156,768	)	(126,669	)	(30,099	)	(147,083	)	(9,685	)	(136,836	)	(19,932	)
		1,189,663		849,108		340,555		1,126,523		63,140		1,129,640		60,023
Other Real Estate Investments:
Investment in unconsolidated joint ventures		590,064		214,644		375,420		205,821		384,243		216,620		373,444
Mortgage loans receivable		127,328		78,245		49,083		146,642		(19,314	)	104,185		23,143
Preferred equity investments		91,661		67,395		24,266		21,312		70,350		21,332		70,329
Assets held for sale		—		41,536		(41,536	)	—		—		50,088		(50,088	)
Cash and cash equivalents		38,546		58,020		(19,474	)	14,171		24,374		16,810		21,736
Restricted cash:
Tenant security		21,584		20,656		928		20,643		941		20,654		930
Escrows & other		37,958		8,426		29,532		89,996		(52,038	)	41,181		(3,223	)
Tenant and other receivables, net of $7,533 reserve at 12/31/03		13,165		6,587		6,578		14,022		(857	)	10,448		2,717
Related party receivables		6,610		4,868		1,742		7,068		(459	)	3,945		2,665
Deferred rents receivable, net of reserve for tenant credit loss of $7,017 at 12/31/03		63,131		55,731		7,400		61,361		1,770		58,834		4,297
Investment in and advances to affiliates		—		3,979		(3,979	)	—		—		3,133		(3,133	)
Deferred costs, net		39,277		35,511		3,766		36,969		2,308		37,694		1,583
Other assets		42,854		28,464		14,390		20,619		22,235		11,019		31,835
Total Assets		2,261,841		1,473,170		788,671		1,765,147		496,694		1,725,583		536,258

 

15

 

		12/31/2003		12/31/2002		+/-		9/30/2003		+/-		6/30/2003		+/-
Liabilities and Stockholders’ Equity
Mortgage notes payable		583,449		367,503		215,946		532,426		51,023		620,530		(37,081	)
Unsecured & Secured term loans		300,000		100,000		200,000		165,000		135,000		100,000		200,000
Revolving credit facilities		236,000		74,000		162,000		95,000		141,000		42,000		194,000
Derivative Instruments-fair value		9,009		10,962		(1,953	)	5,390		3,619		12,829		(3,820	)
Accrued interest payable		3,500		1,806		1,694		2,553		947		3,158		342
Accounts payable and accrued expenses		44,320		41,197		3,123		46,935		(2,615	)	44,951		(631	)
Deferred compensation awards		—		1,329		(1,329	)	—		—		—		—
Deferred revenue		8,526		3,096		5,430		9,267		(741	)	6,464		2,062
Capitalized lease obligations		16,168		15,862		306		16,090		78		16,012		156
Deferred land lease payable		15,166		14,626		540		15,106		60		14,946		220
Dividend and distributions payable		18,647		17,436		1,211		17,914		733		17,923		724
Liabilities related to assets held for sale		—		21,321		(21,321	)	—		—		748		(748	)
Security deposits		21,968		20,948		1,020		21,110		858		20,872		1,096
Total Liabilities		1,256,753		690,086		566,667		926,791		329,962		900,433		356,320
Minority interest (2,306 units outstanding) at 12/31/03		54,791		44,718		10,073		54,472		319		54,164		627
8% Preferred Income Equity Redeemable Shares $0.01 par value, $25.00 mandatory liquidation preference		—		111,721		(111,721	)	—		—		111,984		(111,984	)
Stockholders’ Equity
7.625% Series C Perpetual Preferred Shares		151,981		—		151,981		—		151,981		—		151,981
Common stock, $.01 par value 100,000 shares authorized, 36,016 issued and outstanding at 12/31/03		360		304		56		358		2		311		49
Additional paid - in capital		728,397		592,585		135,812		722,565		5,832		609,321		119,076
Deferred compensation plans		(8,446	)	(5,562	)	(2,884	)	(9,062	)	616		(8,608	)	162
Accumulated other comprehensive loss		(961	)	(10,740	)	9,779		(5,382	)	4,421		(12,702	)	11,741
Retained earnings		78,966		50,058		28,910		75,405		3,561		70,680		8,286
Total Stockholders’ Equity		950,297		626,645		323,652		783,885		166,412		659,002		291,295
Total Liabilities and Stockholders’ Equity		2,261,841		1,473,170		788,671		1,765,148		496,693		1,725,583		536,258

 

16

 

COMPARATIVE STATEMENTS OF OPERATIONS Unaudited ($000’s omitted)

 

		Three Months Ended								Three Months Ended		Twelve Months Ended
		Dec-03		Dec-02		+/-		%		Sep-03		Dec-03		Dec-02
Revenues
Rental revenue, net		60,666		45,186		15,480		34	%	57,537		225,231		174,648
Free rent		1,336		826		510		62	%	1,676		6,033		5,384
Amortization of free rent		(1,044	)	(1,107	)	63		-6	%	(1,103	)	(4,054	)	(3,632	)
Net free rent		292		(281	)	573		-204	%	573		1,979		1,752
Straight-line rent		2,050		1,150		900		78	%	2,066		7,672		5,710
FAS 141 Revenue Adjustment		(58	)	—		(58	)	0	%	(42	)	(155	)	—
Allowance for S/L tenant credit loss		(650	)	(626	)	(24	)	4	%	(268	)	(1,694	)	(2,590	)
Escalation and reimbursement revenues		10,636		6,405		4,231		66	%	13,387		42,223		27,203
Signage rent		137		564		(427	)	-76	%	99		968		1,488
Preferred equity investment income		1,153		1,975		(822	)	-42	%	658		4,098		7,780
Investment income		8,708		3,977		4,731		119	%	3,201		17,988		15,396
Other income		3,668		2,303		1,365		59	%	4,113		10,647		5,570
Total Revenues, net		86,602		60,653		25,949		43	%	81,324		308,957		236,957
Equity in income/(loss) from affiliates		—		47		(47	)	-100	%	—		(196	)	292
Equity in income from unconsolidated joint ventures		4,007		5,270		(1,263	)	-24	%	3,036		14,870		18,383
Operating expenses		20,929		14,136		6,793		48	%	23,534		80,460		56,172
Ground rent		3,766		3,159		607		19	%	3,366		13,562		12,637
Real estate taxes		12,126		7,348		4,778		65	%	11,814		44,524		28,287
Marketing, general and administrative		8,048		3,563		4,485		126	%	2,994		17,131		13,282
Total Operating Expenses		44,869		28,206		16,663		59	%	41,708		155,677		110,378
EBITDA		45,740		37,764		7,976		21	%	42,652		167,954		145,254
Interest		12,839		9,112		3,727		41	%	11,736		45,950		35,421
FAS 141 Interest Adjustment		(156	)	—		(156	)	0	%	(152	)	(457	)	—
Depreciation and amortization		12,437		10,040		2,397		24	%	12,682		47,282		37,600
Income Before Minority Interest and Items		20,620		18,612		2,008		11	%	18,386		75,179		72,233
Income from Discontinued Operations		—		1,721		(1,721	)	-100	%	482		3,182		6,384
Gain/(Loss) on sale of Discontinued Operations		—		—		—		0	%	3,745		21,326		—
Equity in net gain on sale of joint venture property		3,096		—		3,096		0	%			3,096		—
Minority interest - OP		(1,424	)	(1,167	)	(257	)	22	%	(972	)	(4,624	)	(4,286	)
Net Income		22,292		19,166		3,126		16	%	21,641		98,159		74,331
Dividends on convertible preferred shares		—		2,300		(2,300	)	-100	%	2,093		6,693		9,200
Dividends on convertible perpetual preferred shares		625		—		625		0	%	—		625		—
Preferred stock accretion		—		123		(123	)	-100	%	131		394		490
Net Income Available For Common Shareholders		21,667		16,743		4,924		29	%	19,417		90,447		64,641
Ratios
MG&A to Real Estate Revenue, net		11.00	%	6.80	%					4.08	%	6.20	%	6.38	%
MG&A to Total Revenue, net		9.29	%	5.87	%					3.68	%	5.54	%	5.61	%
Operating Expense to Real Estate Revenue, net		28.62	%	26.98	%					32.07	%	29.11	%	26.98	%
EBITDA to Real Estate Revenue, net		62.54	%	72.07	%					58.11	%	60.77	%	69.76	%
EBITDA before Ground Rent to Real Estate Revenue, net		67.69	%	78.10	%					62.70	%	65.68	%	75.83	%

 

17

 

		Three Months Ended								Three Months Ended		Twelve Months Ended
		Dec-03		Dec-02		+/-		%		Sep-03		Dec-03		Dec-02
Per share data:
Earnings per Share
Net income per share (basic)		0.60		0.55		0.05		9	%	0.62		2.80		2.14
Net income per share (diluted)		0.58		0.54		0.04		7	%	0.59		2.66		2.09
Taxable Income
Net Income Available For Common Shareholders		21,667		16,743		4,925		29	%	19,417		90,447		64,645
Book/Tax Depreciation Adjustment		1,589		2,349		(760	)	-32	%	1,756		7,938		7,991
Book/Tax Gain Recognition Adjustment		(3,396	)	0		(3,396	)	0	%	(622	)	(16,845	)	1,680
Other Operating Adjustments		(7,074	)	(1,058	)	(6,016	)	569	%	(234	)	(13,708	)	(10,717	)
C-corp Earnings		170		(49	)	219		-447	%	131		497		(292	)
Taxable Income		12,956		17,985		(5,029	)	-28	%	20,448		68,329		63,307
Dividend per share		0.500		0.465		0.035		8	%	0.465		1.90		1.79
Estimated payout of taxable income		167	%	91	%	76	%	84	%	92	%	116	%	100	%
Basic weighted average common shares		35,957		30,236		5,721		19	%	31,269		32,265		30,376
Diluted weighted average common shares and common share equivalents outstanding		39,764		37,764		2,000		5	%	39,186		38,970		37,786

 

Payout of Taxable Income Analysis:

Estimated taxable income is derived from net income less straightline rent, free rent net of amortization of free rent, plus tax gain on sale of properties, credit loss, straightline ground rent and the difference between tax and GAAP depreciation.  The Company has deferred the taxable gain on the sales 29 West 35th Street, 17 Battery Place South, 90 Broad Street, 50 West 23rd Street, 1370 Broadway, and 1412 Broadway through 1031 exchanges.

 

18

 

JOINT VENTURE STATEMENTS Balance sheet for unconsolidated joint ventures Unaudited (000’s omitted)

 

		December 31, 2003						December 31, 2002
		Total Property		SLG Property Interest				Total Property		SLG Property Interest
Land & land interests		211,209		113,781				217,312		115,980
Buildings & improvements		1,135,704		589,937				909,023		486,047
		1,346,913		703,719				1,126,335		602,027
Less accumulated depreciation		(176,124	)	(84,330	)			(38,937	)	(20,328	)
Net Real Estate		1,170,789		619,389				1,087,398		581,699
Cash and cash equivalents		33,047		17,304				26,168		13,597
Restricted cash		23,584		12,760				24,514		13,186
Tenant receivables, net of $1,635 reserve		6,516		3,299				4,039		2,163
Deferred rents receivable, net of reserve for tenant credit loss of $953 at 12/31/03		21,965		11,819				13,346		6,921
Deferred costs, net		12,345		6,572				13,146		7,035
Other assets		183,101		84,076				20,030		11,083
Total Assets		1,451,347		755,219				1,188,641		635,684
Mortgage loan payable		907,943		473,558		references pages 22 & 25		742,621		396,361
Derivative Instruments-fair value		—		—				(47	)	(26	)
Accrued interest payable		2,044		1,074				2,243		1,167
Accounts payable and accrued expenses		75,104		35,811				20,653		12,690
Security deposits		5,357		2,779				5,167		2,566
Contributed Capital (1)		460,899		241,997			references page 14	418,004		222,926
Total Liabilities and Equity		1,451,347		755,219				1,188,641		635,684

 

As of December 31, 2003 the Company has six joint venture interests representing a 50% interest in 180 Madison Avenue acquired in December 2000, a 55% interest in1250 Broadway acquired in September 2001, a 50% interest in 100 Park Avenue acquired in February 2000, a 55% interest in 1 Park Avenue contributed in June 2001, a 55% interest in 1515 Broadway acquired in May 2002, and 45% interest in Avenue of the Americas acquired in December 2003.  These interests are accounted for on the equity method of accounting and, therefore, are not consolidated into the company’s financial statements.  Additional detail is available on page 39.

 

(1) Contributed capital excludes approximately $348mm of capital which has been recorded in the Investment in unconsolidated joint ventures acount on the company’s balance sheet.

 

19

 

JOINT VENTURE STATEMENTS Statements of operations for unconsolidated joint ventures Unaudited (000’s omitted)

 

		Three Months Ended December 31, 2003						Three Months Ended December 31, 2002
		Total Property		SLG Property Interest		SLG Subsidiary		Total Property		SLG Property Interest		SLG Subsidiary
Revenues
Rental Revenue, net		32,948		17,495				35,115		18,894
Free rent		1,535		832				125		46
Amortization of free rent		(318	)	(167	)			19		20
Net free rent		1,217		665				144		66
Straight-line rent		1,638		891				2,054		1,096
FAS 141 Adjustment		214		118
Allowance for S/L tenant credit loss		(418	)	(223	)			(65	)	(28	)
Escalation and reimbursement revenues		7,978		4,237				7,077		3,766
Investment income		113		60				182		97
Other income		338		306				182		95
Total Revenues, net		44,028		23,549				44,691		23,986
Expenses
Operating expenses		11,484		6,083				11,842		6,278
Real estate taxes		8,609		4,580				6,834		3,630
Total Operating Expenses		20,093		10,663				18,676		9,908
GAAP NOI		23,935		12,886				26,080		14,106
Cash NOI		21,080		11,330				23,882		12,944
Interest		8,867		4,683				9,332		4,930
Depreciation and amortization		7,768		4,196				7,296		3,877
Net Income		7,300		4,007		references page 16		9,386		5,270
Plus:  Real Estate Depreciation		6,825		3,680		references page 21		6,343		3,359
Plus:  Management & Leasing Fees		—		—		88		—		—		4
Funds From Operations		14,125		7,687				15,729		8,629
FAD Adjustments:
Plus: Non Real Estate Depreciation		943		516				953		518
Plus: 2% Allowance for S/L Tenant Credit Loss		418		223				65		28
Plus: Net FAS 141 Adjustment		(214	)	(118	)			—		—
Less: Free and S/L Rent		(2,761	)	(1,510	)			(2,199	)	(1,162	)
Less: Second Cycle Tenant Improvement,		(7,936	)	(4,349	)			(416	)	(214	)
Less: Second Cycle Leasing Commissions		(1,760	)	(915	)			(179	)	(88	)
Less: Recurring Capex		(310	)	(168	)			(268	)	(136	)
FAD Adjustment		(11,620	)	(6,321	)			(2,043	)	(1,054	)
Operating Expense to Real Estate Revenue, net		26.23	%	26.12	%			26.68	%	26.35	%
GAAP NOI to Real Estate Revenue, net		54.67	%	55.33	%			58.75	%	59.21	%
Cash NOI to Real Estate Revenue, net		48.15	%	48.65	%			53.80	%	54.34	%

 

20

 

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY ($000’s omitted)

 

		Common Stock		Additional Paid-In Capital		Retained Earnings		Deferred Compensation Plan		Accumulated Other Comprehensive Loss		TOTAL
Balance at December 31, 2001		300		583,350		39,684		(7,515	)	(2,911	)	612,908
Net Income						74,331						74,331
Preferred Dividend and Accretion						(9,690	)					(9,690	)
Exercise of employee stock options		3		6,644								6,647
Cash distributions declared ($1.7925 per common share)						(54,267	)					(54,267	)
Comprehensive Income - Unrealized loss of derivative instruments										(7,829	)	(7,829	)
Redemption of operating partnership units		1		3,128								3,129
Deferred compensation plan				(537	)			534				(3	)
Amortization of deferred compensation								1,419				1,419
Balance at December 31, 2002		304		592,585		50,058		(5,562	)	(10,740	)	626,645
Net Income						98,159						98,159
Preferred Dividend and Accretion						(7,712	)					(7,712	)
Exercise of employee stock options		3		7,589								7,592
Stock Options-fair value				147								147
Cash distributions declared ($1.895 per common share)						(61,539	)					(61,539	)
Comprehensive Income - Unrealized gain of derivative instruments										9,779		9,779
Dividend reinvestment plan		1		3,650								3,651
Redemption of operating partnership units		3		5,699								5,702
Conversion of preferred stock		47		112,059								112,106
Deferred compensation plan		2		6,668				(6,670	)			—
Amortization of deferred compensation								3,786				3,786
Balance at December 31, 2003		360		728,397		78,966		(8,446	)	(961	)	798,316

 

RECONCILIATION OF SHARES AND UNITS OUTSTANDING, AND DILUTION COMPUTATION

 

		Common Stock		OP Units		Stock Based Compensation		Sub-total		Preferred Stock		Diluted Shares
Balance at December 31, 2002		30,421,693		2,145,190		—		32,566,883		4,698,900		37,265,783
YTD share activity		5,594,098		160,765				5,754,863		(4,698,900	)	1,055,963
Balance at December 31, 2003- Basic		36,015,791		2,305,955		—		38,321,746		—		38,321,746
Dilution Factor		(3,750,654	)	(1,381	)	909,092		(2,842,943	)	3,491,396		648,453
Balance at December 31, 2003 - Diluted		32,265,137		2,304,574		909,092		35,478,803		3,491,396		38,970,199

 

21

 

COMPARATIVE COMPUTATION OF FFO AND FAD
Unaudited
($000’s omitted - except per share data)

 

			Three Months Ended						Three Months Ended				Twelve Months Ended December 31,
			Dec-03		Dec-02		%		Sep-03		%		2003		2002		%
Funds from operations
Net Income before Minority Interests and Items			20,620		18,612		11	%	18,386		12	%	75,179		72,233		4	%
Add:	Depreciation and Amortization		12,437		10,040		24	%	12,682		-2	%	47,282		37,600		26	%
	FFO from Discontinued Operations		—		2,149		-100	%	617		-100	%	4,134		8,884		-53	%
	FFO adjustment for Joint Ventures		3,680		3,359		10	%	3,477		6	%	13,982		11,025		27	%
Less:	Dividends on Convertible Preferred Shares		—		2,300		-100	%	2,093		-100	%	6,693		9,200		-27	%
	Dividends on Perpetual Preferred Shares		625		—		0	%	—		0	%	625		—		0	%
	Non Real Estate Depreciation/Amortization of Finance Costs		870		1,234		-29	%	1,237		-30	%	4,478		4,313		4	%
	Funds From Operations - Basic		35,242		30,626		15	%	31,832		11	%	128,781		116,229		11	%
	Funds From Operations - Basic per Share		0.92		0.94		-2	%	0.95		-3	%	3.73		3.58		4	%
Add:	Dividends on Convertible Preferred Shares		—		2,300		-100	%	2,093		-100	%	6,693		9,200		-27	%
	Funds From Operations - Diluted		35,242		32,926		7	%	33,925		4	%	135,474		125,429		8	%
	Funds From Operations - Diluted per Share		0.89		0.87		2	%	0.87		2	%	3.48		3.32		5	%
Funds Available for Distribution
FFO			35,242		32,926		7	%	33,925		4	%	135,474		125,429		8	%
Add:	Non Real Estate Depreciation		870		1,234		-29	%	1,237		-30	%	4,478		4,313		4	%
	Allowance for S/L tenant credit loss		650		626		4	%	268		142	%	1,694		2,590		-35	%
	Straight-line Ground Rent		60		60		0	%	160		-63	%	540		440		23	%
	Non-cash Deferred Compensation		615		425		45	%	454		36	%	2,301		1,419		62	%
Less:	FAD adjustment for Joint Ventures		6,321		1,054		500	%	1,640		285	%	12,647		4,994		153	%
	FAD adjustment for Discontinued Operations		—		46		-100	%	21		-100	%	301		461		-35	%
	Straight-line Rental Income		2,050		1,150		78	%	2,066		-1	%	7,672		5,710		34	%
	Net FAS 141 Adjustment		98		—		0	%	111		-11	%	301		—		0	%
	Free Rent - Occupied (Net of Amortization, incl. First Cycle)		292		(281	)	-204	%	573		-49	%	1,979		1,751		13	%
	Amortization of Mortgage Investment Discount		41		98		-58	%	41		1	%	204		388		-47	%
	Second Cycle Tenant Improvements		5,027		3,134		60	%	2,877		75	%	15,068		14,857		1	%
	Second Cycle Leasing Commissions		685		730		-6	%	1,025		-33	%	4,863		5,046		-4	%
	Revenue Enhancing Recurring CAPEX		390		5		8378	%	352		11	%	1,055		5		0	%
	Non- Revenue Enhancing Recurring CAPEX		1,622		2,324		-30	%	779		108	%	3,650		2,745		33	%
Funds Available for Distribution			20,911		27,009		-23	%	26,559		-21	%	96,747		98,234		-2	%
	Diluted per Share		0.53		0.72		-26	%	0.68		-22	%	2.48		2.60		-5	%
First Cycle Leasing Costs
	Tenant Improvement		28		—		0	%	106		-73	%	2,438		92		2561	%
	Leasing Commissions		20		—		0	%	25		-21	%	305		279		10	%
Funds Available for Distribution after First Cycle Leasing Costs			20,863		27,009		-23	%	26,428		-21	%	94,004		97,864		-4	%
Funds Available for Distribution per Diluted Weighted Average Unit and Common Share			0.52		0.72		-27	%	0.67		-22	%	2.41		2.59		-7	%
Redevelopment Costs			2,209		3,318		-33	%	2,850		-22	%	9,406		9,099		3	%
Payout Ratio of Funds From Operations			56.42	%	53.05	%			53.71	%			54.51	%	54.00	%
Payout Ratio of Funds Available for Distribution Before First Cycle Leasing Costs			95.08	%	64.67	%			68.61	%			76.33	%	68.95	%

 

22

 

SELECTED FINANCIAL DATA
Capitalization Analysis
Unaudited
($000’s omitted)

 

			December 31,				September 30,		June 30,
			2003		2002		2003		2003
Market Capitalization
Common Equity:
	Common Shares Outstanding		36,016		30,422		35,876		31,173
	OP Units Outstanding		2,306		2,145		2,306		2,306
	Total Common Equity (Shares and Units)		38,321		32,567		38,182		33,479
	Share Price (End of Period)		41.05		31.60		36.11		34.89
	Equity Market Value		1,573,093		1,029,101		1,378,753		1,168,094
Preferred Equity at Liquidation Value:			157,500		115,000		—		115,000
Real Estate Debt
	Property Level Mortgage Debt		515,870		388,404		532,426		620,530
	Company’s portion of Joint Venture Mortgages		473,558		396,361		402,635		396,047
	Outstanding Balance on - Term Loans		367,579		100,000		165,000		100,000
	Outstanding Balance on – Secured Credit Line		66,000		—		14,000		7,000
	Outstanding Balance on – Unsecured Credit Line		170,000		74,000		81,000		35,000
	Total Combined Debt		1,593,007		958,765		1,195,061		1,158,577
	Total Market Cap (Debt & Equity)		3,323,600		2,102,866		2,573,814		2,441,671
Availability
Senior Unsecured Line of Credit
	Maximum Line Available		300,000		300,000		300,000		300,000
	Letters of Credit issued		4,000		15,000		11,500		5,000
	Outstanding Balance		170,000		74,000		81,000		35,000
	Net Line Availability		126,000		211,000		207,500		260,000
Term Loans
	Maximum Available		367,579		150,000		200,000		200,000
	Outstanding Balance		367,579		100,000		165,000		100,000
	Net  Availability		—		50,000		35,000		100,000
Secured Line of Credit
	Maximum Line Available		75,000		75,000		75,000		75,000
	Outstanding Balance		66,000		—		14,000		7,000
	Net Line Availability		9,000		75,000		61,000		68,000
	Total Availability under Lines of Credit & Term Loans		135,000		336,000		303,500		428,000
Ratio Analysis
Consolidated Basis
	Debt to Market Cap Ratio		39.28	%	32.96	%	36.50	%	37.28	%
	Debt to Gross Real Estate Book Ratio (1)		81.21	%	58.37	%	61.71	%	57.92	%
	Secured Real Estate Debt to Secured Assets Gross Book (1)		76.59	%	66.18	%	70.56	%	69.89	%
	Unsecured Debt to Unencumbered Assets-Gross Book Value (1)		28.01	%	20.30	%	16.63	%	8.26	%
	Secured Line of Credit to Structured Finance Assets (1, 2)		30.14	%	0.00	%	8.34	%	5.58	%
Joint Ventures Allocated
	Combined Debt to Market Cap Ratio		47.93	%	45.59	%	46.43	%	47.45	%
	Debt to Gross Real Estate Book Ratio (1)		74.93	%	61.41	%	63.41	%	60.48	%
	Secured Debt to Secured Assets Gross Book (1, 2)		71.84	%	66.24	%	68.97	%	68.34	%

 

(1)  Excludes property level capital obligations.

(2) Secured debt ratio includes only property level secured debt.

 

23

 

SELECTED FINANCIAL DATA
Property NOI and Coverage Ratios
Unaudited
($000’s omitted)

 

			Three Months Ended December 31,								Three Months Ended September 30,				Twelve  Months Ended December 31,
			Dec-03		Dec-02		+/-		%		2003		%		2003		2002
Funds from operations			35,242		30,626		4,616		15	%	31,832		11	%	128,876		116,233
Less:	Non – Building Revenue		15,151		11,452		3,699		32	%	9,598		58	%	42,069		39,671
Plus:	Interest Expense (incl. Capital Lease Int.)		12,464		9,809		2,655		27	%	11,143		12	%	45,877		38,215
	Non Real Estate Depreciation		870		1,235		(365	)	-30	%	1,237		-30	%	4,456		4,325
	MG&A Expense		8,048		3,563		4,485		126	%	2,994		169	%	17,032		13,282
	Preferred Dividend		625		2,300		(1,675	)	-73	%	2,093		-70	%	7,318		9,200
	GAAP NOI		42,098		36,080		6,018		17	%	39,700		6	%	161,490		141,584
Non-cash adjustments
Less:	Free Rent (Net of Amortization)		957		(215	)	1,172		-545	%	1,233		-22	%	4,137		2,654
	Net FAS 141 Adjustment		98		—		98		0	%	111		-11	%	301		—
	Straightline Revenue Adjustment		2,941		2,246		695		31	%	2,976		-1	%	11,593		9,691
Plus:	Allowance for S/L tenant credit loss		650		626		24		4	%	270		141	%	1,696		2,659
	Ground Lease Straight-line Adjustment		60		60		—		0	%	160		-63	%	540		440
	Cash NOI		38,812		34,735		4,077		12	%	35,810		8	%	147,695		132,338
	Real Estate Revenue, net		73,781		57,136		16,645		29	%	74,249		-1	%	284,702		227,151
Operating margins
	GAAP NOI/Real Estate Revenue, net		57.06	%	63.15	%					53.47	%			56.72	%	62.33	%
	Cash NOI/Real Estate Revenue, net		52.60	%	60.79	%					48.23	%			51.88	%	58.26	%
	GAAP NOI before Ground Rent/Real Estate Revenue, net		62.16	%	68.68	%					58.00	%			61.49	%	67.89	%
	Cash NOI before Ground Rent/Real Estate Revenue, net		57.63	%	66.22	%					52.55	%			56.45	%	63.63	%
Components of debt and fixed charges
	Interest on Fixed Rate Loans		9,076		5,921		3,155		53	%	7,372		23	%	30,342		22,776
	Interest on Floating Rate Loans		3,388		3,888		(500	)	-13	%	3,771		-10	%	15,536		15,438
	Fixed Amortization Principal Payments		1,009		1,659		(650	)	-39	%	927		9	%	3,871		6,417
	Total Debt Service		13,473		11,468		2,005		17	%	12,070		12	%	49,749		44,631
	Payments under Ground Lease Arrangements		3,706		3,099		607		20	%	3,206		16	%	13,022		12,197
	Dividends on convertible preferred shares		—		2,300		(2,300	)	-100	%	2,093		-100	%	6,693		9,200
	Dividends on convertible perpetual preferred shares		625		—		625		0	%	—		0	%	625		—
	Total Fixed Charges		17,804		16,867		937		6	%	17,370		3	%	70,089		66,028
Adjusted EBITDA			50,236		46,601						46,288				187,245		173,709
Interest Coverage Ratio			4.03		4.75						4.15				4.08		4.55
Debt Service Coverage ratio			3.73		4.06						3.83				3.76		3.89
Fixed Charge Coverage ratio			2.82		2.76						2.66				2.67		2.63

 

24

 

SELECTED FINANCIAL DATA
2003 Same Store
Unaudited
($000’s omitted)

 

			Three Months Ended December 31,								Three Months Ended September 30,
			2003		2002		+/-		%		2003		+/-		%
Revenues
	Rental Revenue		47,260		46,134		1,128		2	%	47,172		88		0	%
	Credit Loss		(602	)	(426	)	(176	)	41	%	(131	)	(471	)	359	%
	Signage Rent		33		564		(531	)	-94	%	50		(17	)	-34	%
	Escalation & Reimbursement Revenues		9,569		7,295		2,274		31	%	10,567		(998	)	-9	%
	Investment & Other Income		616		1,036		(420	)	-41	%	1,754		(1,138	)	-65	%
	Total Revenues		56,876		54,603		2,273		4	%	59,412		(2,536	)	-4	%
Expenses
	Operating Expense		13,834		13,383		451		3	%	16,476		(2,642	)	-16	%
	Ground Rent		3,059		3,159		(100	)	-3	%	3,259		(200	)	-6	%
	Real Estate Taxes		9,154		7,348		1,806		25	%	9,470		(316	)	-3	%
			26,047		23,890		2,157		9	%	29,205		(3,158	)	-11	%
	EBITDA		30,829		30,713		116		0	%	30,207		622		2	%
	Interest		6,364		7,274		(910	)	-13	%	6,661		(297	)	-4	%
	Depreciation & Amortization		8,914		8,847		67		1	%	9,707		(793	)	-8	%
	Income Before Minority Interest		15,551		14,592		959		7	%	13,839		1,712		12	%
Plus:	Real Estate Depreciation & Amortization		8,610		8,394		216		3	%	9,069		(459	)	-5	%
	FFO		24,161		22,986		1,175		5	%	22,908		1,253		5	%
Less:	Non – Building Revenue		604		824		(220	)	-27	%	1,491		(887	)	-59	%
Plus:	Interest Expense		6,364		7,274		(911	)	-13	%	6,661		(297	)	-4	%
	Non Real Estate Depreciation		304		453		(149	)	-33	%	638		(334	)	-52	%
	GAAP NOI		30,225		29,889		337		1.1	%	28,716		1,509		5	%
Cash Adjustments
Less:	Free Rent (Net of Amortization)		65		(281	)	346		-123	%	411		(346	)	-84	%
	Straightline Revenue Adjustment		1,227		1,118		109		10	%	1,314		(87	)	-7	%
Plus:	Allowance for S/L tenant credit loss		602		426		176		41	%	131		471		360	%
	Ground Lease Straight-line Adjustment		160		160		—		0	%	160		—		0	%
	Cash NOI		29,695		29,638		57		0.2	%	27,282		2,413		9	%
Operating Margins
	GAAP NOI to Real Estate Revenue, net		53.14	%	55.14	%					49.47	%
	Cash NOI to Real Estate Revenue, net		52.21	%	54.68	%					46.99	%
	GAAP NOI before Ground Rent/Real Estate Revenue, net		58.52	%	60.97	%					55.08	%
	Cash NOI before Ground Rent/Real Estate Revenue, net		57.31	%	60.21	%					52.33	%

 

25

 

DEBT SUMMARY SCHEDULE
Unaudited
($000’s omitted)

 

		Principal O/S Outstanding 12/31/2003		Coupon		Fixed Annual Payment		2004 Principal Repayment		Maturity Date		Due at Maturity		As-Of Right Extension		Earliest Prepayment
Fixed rate debt
Secured fixed Rate Debt
125 Broad Street		76,187		8.29	%	7,058		717		10/11/2007		72,320		—		Oct-03
673 First Avenue		35,000		5.67	%	1,985		—		2/20/2013		29,863		—		Feb-06
CIBC (against 1414 Ave. of Americas and 70 W. 36th St.)		25,323		7.90	%	2,453		387		5/1/2009		12,196		—		Apr-03
711 Third Avenue		48,036		8.13	%	4,444		434		9/10/2005		47,247		—		Jun-04
220 E 42nd Street		210,000		5.23	%	11,360		—		11/1/2013		175,299		—		Dec-06
420 Lexington Avenue		121,324		8.44	%	12,563		1,871		11/1/2010		104,406		—		Open
		515,870		6.87	%	39,863		3,409
Unsecured fixed rate debt
Fleet Term Loan		67,579		8.10	%	5,562		—		11/4/2004		66,959		—		May-04
Wells Fargo Unsecured Term Loan (Libor swap + 150bps) (1)		200,000		4.01	%	8,017		—		6/1/2008		200,000		—		Nov-05
		267,579		5.04	%	13,579		—
Total Fixed Rate Debt/Wtd Avg		783,449		6.24	%	53,442		3,409
Floating rate Debt
Secured floating rate debt
Wells Fargo Unsecured Term Loan (Libor + 150 bps)		100,000		2.62	%	—		—		12/29/2008		100,000		—		Dec-04
Secured Line of Credit (Libor + 150bps)		66,000		2.67	%	—		—		12/22/2004		—		—		Open
Total Floating Rate Secured Debt/Wtd Avg		166,000		2.64	%	—		—
Unsecured floating rate debt
Senior Unsecured Line of Credit (Libor + 150 bps)		170,000		2.76	%	—		—		3/20/2006		170,000		—		Open
Total Floating Rate Unsecured Debt/Wtd Avg		170,000		2.76	%	—		—
Total Floating Rate Debt Outstanding		336,000		2.70	%
Total Debt/Wtd Avg		1,119,449		5.18	%
Weighted Average Balance & Interest Rate		801,217		5.61	%

 

SUMMARY OF JOINT VENTURE DEBT

 

		Principal O/S
		Gross Principal		SLG Share
Joint Venture Debt
180 Madison JV		45,000		22,455		4.57	%	—		—		7/9/2008		21,297		—		Open
1250 Broadway (Libor Swap of 4.03% + 250bps) (2)		85,000		46,750		6.53	%	5,551		—		10/1/2004		46,750		10/1/2006		Open
1221 Avenue of Americas  (Eurodollar + 95bps)		175,000		78,750		2.09	%	—		—		12/29/2006		78,750		—		Dec-04
1515 Broadway (Libor + 191 bps) (3)		335,000		184,250		4.04	%	—		—		5/14/2004		184,250		5/14/2006		Open
1 Park Avenue (Libor + 150 bps)		150,000		82,500		2.74	%	—		—		1/10/2005		82,500		—		Open
100 Park Avenue JV		117,943		58,853		8.00	%	10,743		1,010		9/1/2010		53,637		—		Open
Total Joint Venture Debt/Wtd Avg		907,943		473,558		4.25	%	16,294		1,010
Weighted Average Balance  & Interest Rate with SLG JV debt				1,206,670		5.29	%

 

(1) WF term loan consists of three trauches all of which mature in June 2008. The blended rates on the step -up swaps for this loan are as follows: 3.57% on $100mm, 3.51% on $35mm, and 3.95% on $65mm.

(2) Swap on 1250 mortgage executed on SLG portion only through January 11, 2005.

(3) Spread on 1515 is weighted for first mortgage and mezzanine pieces. In August 2002 a swap at a Libor of 2.29% was placed on $100mm of SL Green’s share of debt.

 

26

 

SUMMARY OF GROUND LEASE ARRANGEMENTS
Consolidated Statement  (REIT)
($000’s omitted)

 

Property		2004 Scheduled Cash Payment		2005 Scheduled Cash Payment		2006 Scheduled Cash Payment		2007 Scheduled Cash Payment		Deferred Land Lease Obligations (1)		Year of Maturity
Operating Leases
673 First Avenue		3,010		3,108		3,304		3,304		13,825		2037
1140 Avenue of Americas (2)		348		348		348		348		—		2016	(3)
420 Lexington Avenue (2)		7,074		7,074		7,074		7,074		—		2008	(4)
711 Third Avenue (2) (5)		1,550		1,550		1,550		1,550		1,341		2032
461 Fifth Avenue		1,787		1,787		894		—		—		2006	(6)
125 Broad Street  (2)		1,075		1,075		1,075		1,075		—		2067	(7)
Total		14,844		14,942		14,245		13,351		15,166
Capitalized Lease
673 First Avenue		1,290		1,322		1,416		1,416		16,168		2037

 

(1) Per the balance sheet at December 31, 2003.

(2) These ground leases are classified as operating leases and, therefore, do not appear on the balance sheet as an obligation.

(3) The Company has a unilateral option to extend the ground lease for an additional 50 years to 2066.

(4) Subject to renewal at the Company’s option through 2029.

(5) Excludes portion payable to SL Green as owner of 50% leasehold.

(6) The Company has an option to extend the ground lease for 3 successive periods of twenty-one years each followed by a fourth period of fifteen years. The Company also has an option to purchase the ground lease for a fixed price on a specific date.

(7) The Company has an option to extend the ground lease for five years and six months starting January 1, 2068. The Condo Association has given notice that it will purchase the ground lease for $15 million during the third quarter of 2004.

 

27

 

STRUCTURED FINANCE
($000’s omitted)

 

		Assets Outstanding		Wtd Average Assets during quarter		Wtd Average Yield during quarter		Current Yield		Libor Rate
12/31/2002		145,639		194,693		12.51	%	12.68	%	1.35	%
Originations/Accretion  (1)		23,040
Preferred Equity		(53,500	)
Redemptions		(683	)
3/31/2003		114,496		125,180		12.38	%	12.73	%	1.24	%
Originations/Accretion  (1)		11,022
Preferred Equity		—
Redemptions		—
6/30/2003		125,518		120,010		12.40	%	12.01	%	1.08	%
Originations/Accretion  (1)		70,021
Preferred Equity		—
Redemptions		(27,584	)
9/30/2003		167,954		128,030		11.27	%	11.35	%	1.05	%
Originations/Accretion  (1)		1,955
Preferred Equity		59,380
Redemptions		(10,300	)
12/31/2003		218,989		169,393		11.53	%	11.91	%	1.12	%(2)

 

(1) Accretion includes original issue discounts and compounding investment income.

(2) At quarter end $100mm of assets have fixed index rates. The weighted average base rate libor is 3.18%.

 

28

 

STRUCTURED FINANCE
($000’s omitted)

 

Type of Investment		Quarter End Balance(1)			Senior Financing			Exposure Psf			Wtd Average Yield during quarter			Current Yield
Junior Mortgage		$	71,426		$	519,000		$	125		10.86		%	10.29		%
Mezzanine Debt (2)		$	55,902		$	418,000		$	308		12.12		%	12.32		%
Preferred Equity		$	91,661		$	236,500		$	51		12.94		%	12.92		%
Balance as of 12/31/03		$	218,989		$	1,173,500		$	141		11.53		%	11.91		%
Maturing Balance		$	99,763		$	78,000		$	15,809		$	5,479		$	19,938

 

(1) 54% investments are indexed to Libor and are prepayable at dates prior to maturity subject to certain prepayment penalties or fees.

(2) Mezzanine debt includes mezzanine investment in retail real estate.

 

29

 

SELECTED PROPERTY DATA

 

						Rentable		% of Total		Occupancy (%)										Annualized			Annualized Rent				Total
Properties		Submarket		Ownership		Sq. Feet		Sq. Feet		Dec-03		Sep-03		Jun-03		Mar-03		Dec-02		Rent ($’s)			100%		SLG		Tenants
PROPERTIES 100% OWNED
“Same Store”
1140 Avenue of the Americas		Rockefeller Center		Leasehold Interest		191,000		1		96.0		96.0		97.8		97.1		97.8		7,915,764			3		2		23
110 East 42nd Street		Grand Central		Fee Interest		181,000		1		85.8		91.8		94.7		98.6		98.6		6,055,260			2		1		26
1372 Broadway		Times Square South		Fee Interest		508,000		3		99.5		99.6		99.6		99.6		97.9		16,112,808			6		4		27
1414 Avenue of the Americas		Rockefeller Center		Fee Interest		111,000		1		94.3		94.3		94.3		93.0		94.3		4,486,728			2		1		21
1466 Broadway		Times Square		Fee Interest		289,000		2		89.4		91.3		90.0		89.3		88.6		10,301,472			4		3		97
17 Battery Place - North		World Trade/ Battery		Fee Interest		419,000		3		100.0		100.0		100.0		100.0		100.0		9,463,248			4		2		7
286 Madison Avenue		Grand Central South		Fee Interest		112,000		1		89.1		89.7		91.3		94.8		93.0		3,267,768			1		1		37
290 Madison Avenue		Grand Central South		Fee Interest		37,000		0		100.0		100.0		100.0		100.0		100.0		1,456,164			1		0		4
292 Madison Avenue		Grand Central South		Fee Interest		187,000		1		88.7		93.0		91.0		95.4		99.7		6,559,740			2		2		17
317 Madison Avenue		Grand Central		Fee Interest		450,000		3		90.4		94.9		94.9		96.1		93.4		13,318,236			5		3		98
420 Lexington Ave (Graybar)		Grand Central North		Operating Sublease		1,188,000		8		94.1		97.5		96.2		95.4		95.0		48,469,512			18		11		266
440 Ninth Avenue		Times Square South		Fee Interest		339,000		2		100.0		100.0		98.9		92.5		92.3		10,197,972			4		2		15
470 Park Avenue South		Park Avenue South/ Flatiron		Fee Interest		260,000		2		85.7		94.7		94.5		92.7		99.7		7,859,160			3		2		25
555 West 57th		Midtown West		Fee Interest		941,000		6		99.8		99.9		100.0		100.0		100.0		22,365,768			8		6		20
673 First Avenue		Grand Central South		Leasehold Interest		422,000		2		99.8		99.8		99.8		99.8		99.8		14,162,244			5		4		16
70 West 36th  Street		Times Square South		Fee Interest		151,000		1		96.8		96.8		96.3		90.4		92.3		4,079,484			2		1		31
711 Third Avenue		Grand Central North		Operating Sublease (1)		524,000		3		99.8		99.8		99.8		99.8		99.1		20,685,396			7		5		19
Subtotal / Weighted Average						6,310,000		40		95.8		97.5		97.3		96.9		96.9		$	206,756,724		77		50		749
Adjustments
125 Broad Street		Downtown		Leasehold Interest		525,000		3		100.0		100.0		100.0		100.0		—		16,185,024			6		3		5
220 East 42nd Street		Grand Central East		Fee Interest		1,135,000		8		94.5		94.5		94.5		91.9		—		35,572,822			13		9		42
461 Fifth Avenue		Grand Central		Leasehold Interest		200,000		1		93.9		—		—		—		—		11,261,760			4		3		19
Subtotal / Weighted Average						1,860,000		12		96.0		96.2		85.9		84.3				$	63,019,606		23		15		66
Total/ Weighted Average Properties 100% Owned						8,170,000		52		95.8		97.3		97.0		96.3		96.6		$	269,776,330		100		65		815
PROPERTIES <100% OWNED
Unconsolidated
180 Madison Avenue - 50%		Grand Central South		Fee Interest		265,000		2		85.6		87.0		85.7		83.8		82.0		7,621,008					1		50
1 Park Avenue - 55%		Grand Central South		Various Interests		913,000		6		91.1		86.0		85.9		85.9		98.6		32,935,152					4		16
1250 Broadway -55%		Penn Station		Fee Interest		670,000		5		91.9		91.8		92.6		98.2		98.5		19,459,632					3		28
100 Park Avenue - 50%		Grand Central South		Fee Interest		834,000		6		97.6		95.8		95.8		98.3		99.0		31,866,474					4		39
1515 Broadway - 55%		Times Square		Fee Interest		1,750,000		12		96.2		95.8		97.0		96.7		98.5		64,986,516					8		15
1221 Avenue of the Americas - 45%		Rockefeller Center		Fee Interest		2,470,000		17		98.8		—		—		—		—		123,568,632					15		24
Subtotal / Weighted Average						6,902,000		48		95.8		92.6		93.0		95.5		97.3		$	280,437,414				35		172
Grand Total/ Weighted Average						15,072,000		100		95.8		95.5		95.5		95.5		96.9		$	550,213,744						987
Grand Total - SLG share of Annualized Rent																				$	409,646,183				100

 

(1)  Including Ownership of 50% in Building Fee

 

30

 

LARGEST TENANTS BY SQUARE FEET LEASED

 

Wholly Owned Portfolio + Allocated JV Properties (1)

 

Tenant Name		Property		Lease Expiration		Total Leased Square Feet		Annualized Rent ($)			PSF Annualized			% of Annualized Rent		SLG Share of Annualized Rent($)			% of SLG Share of Annualized Rent
Viacom International, Inc.		1515 Broadway		2004, 2006, 2008, 2009, 2013		1,277,895		$	57,967,860		$	45.36		10.5	%	$	31,882,323		7.8	%
Omnicom Group		220 East 42nd Street		2008, 2009, 2010, 2017		419,111		$	12,951,060		$	30.90		2.4	%	$	12,951,060		3.2	%
Salomon Smith Barney		125 Broad Street		2010		330,900		$	10,175,208		$	30.75		1.8	%	$	10,175,208		2.5	%
Visting Nurse Services		1250 Broadway		2005, 2006 & 2011		264,331		$	7,207,380		$	27.27		1.3	%	$	3,964,059		1.0	%
The City of New York		17 Battery Place		2012		249,854		$	5,711,832		$	22.86		1.0	%	$	5,711,832		1.4	%
BMW of Manhattan, Inc.		555 West 57th Street		2012		227,782		$	3,683,988		$	16.17		0.7	%	$	3,683,988		0.9	%
CBS, Inc.		555 West 57th Street		2013		188,583		$	3,912,480		$	20.75		0.7	%	$	3,912,480		1.0	%
Philip Morris Managament Corp		100 Park Avenue		2007		175,887		$	7,456,032		$	42.39		1.4	%	$	3,720,560		0.9	%
City University of New York - CUNY		555 West 57th Street		2010, 2011, & 2015		171,733		$	5,116,524		$	29.79		0.9	%	$	5,116,524		1.2	%
J&W Seligman & Co., Inc.		100 Park Avenue		2009		168,390		$	5,750,424		$	34.15		1.0	%	$	2,869,462		0.7	%
Segal Company		1  Park Avenue		2009		157,947		$	6,080,736		$	38.50		1.1	%	$	3,344,405		0.8	%
The Mt. Sinai & NYU Hospital Centers		1  Park Avenue		2013 & 2015		140,600		$	5,170,608		$	36.78		0.9	%	$	2,843,834		0.7	%
Metro North Commuter Railroad Co.		420 Lexington Avenue		2008 & 2016		134,687		$	4,098,912		$	30.43		0.7	%	$	4,098,912		1.0	%
Tribune Newspaper		220 East 42nd Street		2010		134,208		$	3,940,920		$	29.36		0.7	%	$	3,940,920		1.0	%
St. Luke’s Roosevelt Hospital		555 West 57th Street		2014		134,150		$	3,466,056		$	25.84		0.6	%	$	3,466,056		0.8	%
Ross Stores		1372 Broadway		2010		126,001		$	3,579,288		$	28.41		0.7	%	$	3,579,288		0.9	%
Fahenstock & Co., Inc.		125 Broad Street		2004 & 2013		103,566		$	3,058,656		$	29.53		0.6	%	$	3,058,656		0.7	%
Minskoff/Nederlander JV (2)		1515 Broadway		2024		102,452		$	210,000		$	2.05		0.0	%	$	115,500		0.0	%
Ketchum, Inc.		711 Third Avenue		2015		100,876		$	4,403,520		$	43.65		0.8	%	$	4,403,520		1.1	%
Coty Inc.		1 Park Avenue		2015		100,629		$	3,998,916		$	39.74		0.7	%	$	2,199,404		0.5	%
CHF Industries		1 Park Avenue		2005		100,000		$	3,678,360		$	36.78		0.7	%	$	2,023,098		0.5	%
New York Presbyterian Hospital		555 West 57th Street & 673 First Avenue		2006 & 2009		99,650		$	3,953,932		$	39.68		0.7	%	$	3,953,932		1.0	%
Ann Taylor, Inc.		1372 Broadway		2010		93,020		$	2,834,208		$	30.47		0.5	%	$	2,834,208		0.7	%
United Nations Population Fund		220 East 42nd Street		2010		91,021		$	4,042,200		$	44.41		0.7	%	$	4,042,200		1.0	%
Crain Communications		711 Third Avenue		2009		90,531		$	3,648,612		$	40.30		0.7	%	$	3,648,612		0.9	%
TOTAL						5,183,804		$	176,097,712		$	33.97		32.0	%	$	131,540,041		32.1	%
Wholly Owned Portfolio + Allocated JV Properties						15,072,000		$	550,213,744		$	36.51				$	409,646,183

 

(1) Excludes minority owned property not managed by SL Green.

(2) Minskoff/Nederlander JV pays percentage rent.

 

31

 

 

1221 AVENUE of the AMERICAS TOP 5 TENANTS BY SQUARE FEET LEASED

 

Tenant Name		Total Leased Square Feet		% of SLG Share of Annualized Rent
Morgan Stanley		496,249		3.4	%
Societe Generale		286,662		2.6	%
The McGraw Hill Companies, Inc.		443,399		2.1	%
The Columbia House Company		175,312		0.9	%
Sonnenschein, Nath & Rosenthal		147,997		0.8	%
		1,549,619		9.8	%

 

32

 

FOURTH QUARTER 2003 - LEASING ACTIVITY Available Space

 

Activity Type		Building Address			# of Leases		Usable SF		Rentable SF		Rent/Rentable SF ($’s)*
Vacancy at 9/30/03							559,147
Acquired Vacancies
		Office
			1221 Avenue of the Americas				28,739
			461 Fifth Avenue				12,350
							41,089
Sold Vacancies
		Office
			321 West 44th Street				(19,117	)
Expiring Space
		Office
			317 Madison Avenue		11		31,842		41,399		24.18
			220 East 42nd Street		2		3,758		4,621		35.90
			180 Madison Avenue		4		18,147		22,637		27.52
			100 Park Avenue		2		22,570		28,710		38.69
			1250 Broadway		1		2,644		3,617		28.30
			286 Madison		2		3,046		3,766		28.36
			292 Madison		1		8,113		10,113		28.00
			555 W 57th Street		2		96,246		107,144		17.12
			470 Park Ave South		2		8,792		12,135		28.21
			673 First Avenue		1		32,820		40,000		29.54
			1140 Sixth Avenue		3		6,080		8,030		26.59
			1372 Broadway		2		643		878		26.50
			110 East 42nd Street		4		15,433		20,685		44.97
			1466 Broadway		11		12,440		17,208		38.14
			420 Lexington Avenue		16		19,978		24,451		36.73
			Total/Weighted Average		64		282,552		345,394		27.43
		Retail
			1515 Broadway		1		4,000		4,000		217.11
			292 Madison Avenue		1		2,560		2,560		84.21
			1140 Sixth Avenue		1		1,737		2,412		32.39
			1466 Broadway		1		756		1,437		61.81
			Total/Weighted Average		4		9,053		10,409		120.18
		Storage
			317 Madison		1		51		51		12.00
			1515 Broadway		2		713		719		20.00
			1 Park Avenue		1		2,079		2,654		22.00
			1250 Broadway		1		216		216		5.00
			1466 Broadway		1		359		359		6.69
			420 Lexington Avenue		1		254		254		25.00
			555 West 57th Street		1		2,897		3,972		9.50
			Total/Weighted Average		8		6,569		8,225		14.70
Move Outs
		Office
			317 Madison Avenue		4		21,064		26,606		30.64
			180 Madison Avenue		2		4,443		4,443		35.03
			286 Madison		2		4,802		6,000		30.16
			1372 Broadway		1		18,474		22,192		24.45
			1466 Broadway		2		2,807		3,961		37.96
			420 Lexington Avenue		3		44,879		52,493		30.67
			Total/Weighted Average		14		96,469		115,695		29.86

 

33

 

Activity Type		Building Address			# of Leases		Usable SF		Rentable SF		Rent/Rentable SF ($’s)*
		Retail
			470 Park Avenue South		1		22,000		22,000		22.73
			420 Lexington Avenue		1		2,969		2,969		106.38
			Total/Weighted Average		2		24,969		24,969		32.68
Evicted Tenants
		Office
			Total/Weighted Average		—		—		—
		Retail
			Total/Weighted Average		—		—		—		—
Relocating Tenants
		Office
			420 Lexington Avenue		1		1,122		1,723		39.96
			Total/Weighted Average		1		1,122		1,723		39.96
Available Space
		Office			79		380,143		462,812		28.08
		Retail			6		34,022		35,378		58.42
		Storage			8		6,569		8,225		14.70
			Total		93		420,734		506,415		29.98
		Available Space					1,001,853

 

* Escalated Rent is calculated as Total Annual Income less Electric Charges.

 

34

 

FOURTH QUARTER - 2003 LEASING ACTIVITY Leased Space

 

Activity Type		Building Address			# of Leases		Term (Yrs)		Usable SF		Rentable SF		New Cash Rent / Rentable SF*		Prev. Escalated Rent/ Rentable SF**		T.I / Rentable SF		Free Rent # of Months
Available Space as 12/31/03									1,001,853
Renewing Tenants
Office
		220 East 42nd Street			1		5.0		1,947		2,810		37.00		33.21		14.00		—
		317 Madison Avenue			6		3.9		12,343		18,250		30.70		29.92		4.11		1.0
		100 Park Avenue			2		2.8		22,570		28,710		29.56		38.69		—		1.0
		286 Madison Avenue			1		1.0		1,674		2,391		27.00		27.70		—		—
		555 West 57th Street			1		10.0		95,550		125,872		28.50		13.76		20.18		—
		1140 Sixth Avenue			1		0.5		1,756		2,618		28.65		22.54		—		—
		110 East 42nd Street			1		1.0		1,448		2,003		36.00		45.62		—		—
		1466 Broadway			2		2.4		1,894		2,797		37.60		38.44		—		2.0
		420 Lexington Avenue			3		2.8		3,404		4,142		32.52		35.14		—		0.5
		Total/Weighted Average			18		7.6		142,586		189,593		29.28		20.85		14.00		0.3
Storage
		555 West 57th Street			1		10.0		2,897		4,141		15.00		9.11		—		—
		Total/Weighted Average			1		10.0		2,897		4,141		15.00		9.11		—		—
Relocating Tenants
Office
		420 Lexington Avenue			1		5.0		2,441		3,775		36.72		39.96		3.48		1.4
		Total/Weighted Average			1		5.0		2,441		3,775		36.72		39.96		3.48		1.4
New Tenants Replacing Old Tenants
Office
		317 Madison Avenue			4		11.6		19,268		24,977		34.65		25.58		40.97		12.0
		1 Park Avenue			2		9.8		49,392		64,115		34.86		44.14		63.32		6.0
		180 Madison Avenue			1		3.0		808		806		40.00		29.74		10.00		4.0
		100 Park Avenue			3		8.6		14,996		20,787		41.71		38.52		60.23		19.0
		1250 Broadway			1		10.0		3,830		5,471		30.06		27.19		8.98		5.0
		286 Madison Avenue			1		10.3		4,122		5,353		27.00		28.26		48.27		—
		470 Park Avenue South			1		5.0		7,432		9,735		28.00		28.11		49.00		3.0
		673 First Avenue			1		17.7		32,820		41,311		26.00		29.54		25.00		—
		1372 Broadway			1		8.7		18,474		24,260		28.50		22.37		25.00		8.5
		110 East 42nd St			2		4.3		1,840		2,628		33.32		43.63		31.31		2.0
		1466 Broadway			2		4.0		2,545		3,743		33.56		35.73		21.01		4.0
		420 Lexington Avenue			9		5.7		11,561		16,907		35.36		37.24		29.51		18.5
		Total/Weighted Average			28		10.5		167,086		220,093		32.52		34.11		42.83		2.9
Retail
		420 Lexington Avenue			1		5.3		530		530		25.00		15.00		—		—
		Total/Weighted Average			1		5.3		530		530		82.05		15.00		—		—

 

35

 

Activity Type		Building Address			# of Leases		Term (Yrs)		Usable SF		Rentable SF		New Cash Rent / Rentable SF*		Prev. Escalated Rent/ Rentable SF**		T.I / Rentable SF		Free Rent # of Months
Storage
		555 West 57th Street			1		10.0		2,897		4,141		15.00		9.11		—		—
		Total/Weighted Average			1		10.0		2,897		4,141		15.00		9.11		—		—
Total/Weighted Average Office					47		9.2		312,113		413,461		31.07		28.08		29.25		1.9
Total/Weighted Average Retail					1		5.3		530		530		25.00		15.00		—		—
Total/Weighted Average Storage					1		10.0		2,897		4,141		15.00		9.11		—		—
New Tenants Replacing Vacancies
Office
		1466 Broadway			2		2.6		1,970		2,883		35.17		—		6.43		2.0
		Total/Weighted Average			2		2.6		1,970		2,883		35.17		—		6.43		1.0
Storage
		1515 Broadway			3		6.4		6,389		6,389		14.56		—		4.70		2.0
		286 Madison Avenue			1		5.0		30		43		20.00		—		—		—
		Total/Weighted Average			4		6.4		6,419		6,432		14.60		—		4.67		0.5
Leased Space
Office					49		9.1		314,083		416,344		31.10		28.08		29.09		1.8
Retail					1		5.3		530		530		25.00		15.00		—		—
Storage					5		7.8		9,316		10,573		14.75		9.11		2.84		0.4
		Total			55		9.1		323,929		427,447		30.69		27.88		28.41		1.7
Sold Vacancies
Sub-Total Available Space @ 12/31/03									677,924
Holdover Tenants
Office
		317 Madison			1		0.0		1,534		1,942		26.06		26.06		—		—
		180 Madison			4		0.0		18,147		22,637		27.52		27.52		—		—
		286 Madison Avenue			1		0.0		1,372		1,375		29.51		29.51		—		—
		1140 Sixth Avenue			2		0.0		4,324		5,760		28.19		28.19		—		—
		1372 Broadway			1		0.0		369		504		26.19		26.19		—		—
		110 East 42nd Street			1		0.0		1,390		1,936		47.74		47.74		—		—
		1466 Broadway			6		0.0		3,389		4,049		40.47		40.47		—		—
		420 Lexington Avenue			6		0.0		10,996		13,179		32.08		32.08		—		—
					22		0.0		41,521		51,382		30.53		30.53		—		—
Retail
		1140 Sixth Avenue			1		0.0		1,737		2,412		32.39		32.39		—		—
		292 Madison Avenue			1		0.0		2,560		2,560		84.21		84.21		—		—
		1466 Broadway			1		0.0		756		1,437		61.81		61.81		—		—
		1515 Broadway			1		0.0		4,000		4,000		217.11		217.11		—		—
					4		0.0		9,053		10,409		120.18		120.18		—		—

 

36

 

Activity Type		Building Address			# of Leases		Term (Yrs)		Usable SF		Rentable SF		New Cash Rent / Rentable SF*		Prev. Escalated Rent/ Rentable SF**		T.I / Rentable SF		Free Rent # of Months
Storage
		1515 Broadway			2		0.0		713		719		20.00		20.00		—		—
		1466 Broadway			1		0.0		359		359		6.69		6.69		—		—
					3		0.0		1,072		1,078		15.57		15.57		—		—
Total Available Space @12/31/03									626,278
Early Renewals
Office
		317 Madison Avenue			1		5.0		1,006		1,462		28.96		21.63		—		—
		1 Park Avenue			2		10.0		61,323		80,000		36.50		40.20		10.00		—
		180 Madison Avenue			1		1.0		465		683		42.44		42.44		—		—
		555 W 57th Street			3		5.6		45,371		58,570		29.38		37.54		—		—
		673 First Avenue			2		15.0		62,314		78,464		29.00		29.98		25.00		—
		1466 Broadway			1		1.0		838		1,207		39.00		41.47		—		—
		420 Lexington			3		13.3		18,657		27,986		29.19		30.20		1.26		—
					13		10.8		189,974		248,372		31.61		35.12		11.26		—
Renewals
		Expired/Renewed Office			18		7.6		142,586		189,593		29.28		20.85		14.00		0.3
		Early Renewals Office			13		10.8		189,974		248,372		31.61		35.12		11.26		—
		Early Renewals Retail			0		0.0		—		—		—		—		—		—
		Early Renewals Storage			0		0.0		—		—		—		—		—		—
		Total			31		9.4		332,560		437,965		30.60		28.94		12.45		0.1

 

*  Annual Base Rent

** Escalated Rent is calculated as Total Annual Income less Electric Charges.

 

37

 

ANNUAL LEASE EXPIRATIONS
Consolidated Properties

 

Year of Lease Expiration		Number of Expiring Leases**		Square Footage of Expiring Leases		Percentage of Total Leased Sq. Ft.		Annualized Rent of Expiring Leases ($ ’s)			Annualized Rent Per Leased Square Foot of Expiring Leases $/psf ***			Year 2003 Weighted Average Asking Rent $/psf
In 1st Quarter 2003*		11		5,799		0.07	%	$	194,448		$	33.53		$	37.10
In 2nd Quarter 2003*		3		6,169		0.08	%	$	172,704		$	28.00		$	38.26
In 3rd Quarter 2003*		2		1,871		0.02	%	$	65,796		$	35.17		$	39.43
In 4th Quarter 2003*		16		91,152		1.13	%	$	3,348,024		$	36.73		$	32.44
Total 2003		32		104,991		1.31	%	$	3,780,972		$	36.01		$	33.16
In 1st Quarter 2004		32		81,860		1.02	%	$	3,404,376		$	41.59		$	38.45
In 2nd Quarter 2004		26		199,957		2.49	%	$	7,439,328		$	37.20		$	30.66
In 3rd Quarter 2004		39		121,635		1.51	%	$	4,243,788		$	34.89		$	35.58
In 4th Quarter 2004		35		122,152		1.52	%	$	4,189,380		$	34.30		$	33.96
Total 2004		132		525,604		6.54	%	$	19,276,872		$	36.68		$	33.78
2005		140		559,916		6.96	%	$	20,343,768		$	36.33		$	34.86
2006		105		598,253		7.44	%	$	19,566,372		$	32.71		$	33.71
2007		84		356,838		4.44	%	$	13,117,620		$	36.76		$	36.62
2008		99		629,605		7.83	%	$	22,246,872		$	35.33		$	34.26
2009		41		611,281		7.60	%	$	21,559,608		$	35.27		$	33.70
2010		65		1,521,466		18.92	%	$	50,836,704		$	33.41		$	34.18
2011		25		316,272		3.93	%	$	14,187,228		$	44.86		$	36.08
2012		26		753,243		9.37	%	$	18,623,076		$	24.72		$	28.56
Thereafter		83		2,063,201		25.66	%	$	66,237,238		$	32.10		$	34.35
		832		8,040,670		100.00	%	$	269,776,330		$	33.55		$	33.82

 

* Includes month to month holdover tenants that expired prior to 12/31/03.

**Tenants may have multiple leases.

***Represents current in place annualized rent allocated by year of maturity.

 

38

 

ANNUAL LEASE EXPIRATIONS
Joint Venture Properties

 

Year of Lease Expiration		Number of Expiring Leases**		Square Footage of Expiring Leases		Percentage of Total Leased Sq. Ft.		Annualized Rent of Expiring Leases ($ ’s)			Annualized Rent Per Leased Square Foot of Expiring Leases $/psf ***			Year 2003 Weighted Average Asking Rent $/psf
In 1st Quarter 2003*		1		640		0.01	%	$	12,804		$	20.01		$	47.00
In 2nd Quarter 2003*		0		0		0.00	%	$	0		$	0.00		$	0.00
In 3rd Quarter 2003*		3		42,037		0.64	%	$	863,784		$	20.55		$	47.00
In 4th Quarter 2003*		7		31,018		0.47	%	$	1,760,064		$	56.74		$	40.36
Total 2003		11		73,695		1.11	%	$	2,636,652		$	35.78		$	44.21
In 1st Quarter 2004		2		—		0.00	%	$	0		$	0.00		$	0.00
In 2nd Quarter 2004		8		62,612		0.95	%	$	2,178,624		$	34.80		$	48.16
In 3rd Quarter 2004		7		103,111		1.56	%	$	4,003,866		$	38.83		$	40.04
In 4th Quarter 2004		3		8,027		0.12	%	$	695,616		$	86.66		$	49.72
Total 2004		20		173,750		2.63	%	$	6,878,106		$	39.59		$	43.41
2005		27		486,973		7.37	%	$	16,591,548		$	34.07		$	45.15
2006		26		388,081		5.87	%	$	11,488,392		$	29.60		$	38.55
2007		13		460,271		6.96	%	$	24,269,328		$	52.73		$	49.97
2008		20		540,364		8.17	%	$	21,185,940		$	39.21		$	48.36
2009		21		631,217		9.55	%	$	26,949,480		$	42.69		$	44.72
2010		16		1,297,951		19.63	%	$	54,573,132		$	42.05		$	45.70
2011		6		165,256		2.50	%	$	6,782,352		$	41.04		$	47.08
2012		8		358,561		5.42	%	$	5,386,008		$	15.02		$	43.49
Thereafter		23		2,035,256		30.78	%	$	103,696,476		$	50.95		$	55.54
		191		6,611,375		100.00	%	$	280,437,414		$	42.42		$	48.53

 

* Includes month to month holdover tenants that expired prior to 12/31/03

**Tenants may have multiple leases.

***Represents in place annualized rent allocated by year of maturity.

 

39

 

SUMMARY OF REAL ESTATE ACQUISITION ACTIVITY POST 1997

 

										% Leased				Acquisition
		Property		Type of Ownership		Submarket		Net Rentable sf		at acquisition		12/31/2003		Price ($’s) (1)
1998 Acquisitions
Mar-98		420 Lexington		Operating Sublease		Grand Central North		1,188,000		83		94		$	78,000,000
Mar-98		1466 Broadway		Fee Interest		Times Square		289,000		87		89		$	64,000,000
Mar-98		321 West 44th		Fee Interest		Times Square		203,000		96		N/A		$	17,000,000
May-98		711 3rd Avenue		Operating Sublease		Grand Central North		524,000		79		100		$	65,600,000
Jun-98		440 9th Avenue		Fee Interest		Times Square South		339,000		76		100		$	32,000,000
Aug-98		1412 Broadway		Fee Interest		Times Square South		389,000		90		N/A		$	82,000,000
								2,932,000						$	338,600,000
1999 Acquisitions
Jan-99		420 Lexington Leasehold		Sub-leasehold		Grand Central North						—		$	27,300,000
Jan-99		555 West 57th - 65% JV		Fee Interest		Midtown West		941,000		100		100		$	66,700,000
May-99		90 Broad Street - 35% JV		Fee Interest		Financial		339,000		82		N/A		$	34,500,000
May-99		The Madison Properties:		Fee Interest		Grand Central South								$	50,000,000
		286 Madison Avenue						112,000		99		89
		290 Madison Avenue						36,800		86		100
		292 Madison Avenue						187,000		97		89
Aug-99		1250 Broadway - 50% JV		Fee Interest		Penn Station		670,000		97		N/A		$	93,000,000
Nov-99		555 West 57th - remaining 35%		Fee Interest		Midtown West		—				100		$	34,100,000
								2,285,800						$	305,600,000
2000 Acquisitions
Feb-00		100 Park Avenue		Fee Interest		Grand Central South		834,000		97		98		$	192,000,000
Dec-00		180 Madison Avenue		Fee Interest		Grand Central South		265,000		90		86		$	41,250,000
Contribution to JV
May-00		321 West 44th		Fee Interest		Times Square		203,000		98		N/A		$	28,400,000
								1,302,000						$	261,650,000
2001 Acquisitions
Jan-01		1370 Broadway		Fee Interest		Times Square South		255,000		97		N/A		$	50,500,000
Jan-01		1 Park Avenue		Various Interests		Grand Central South		913,000		97		91		$	233,900,000
Jan-01		469 7th Avenue - 35% JV		Fee Interest		Penn Station		253,000		98		N/A		$	45,700,000
Jun-01		317 Madison		Fee Interest		Grand Central		450,000		95		90		$	105,600,000
Acquisition of JV Interest
Sep-01		1250 Broadway- 49.9% JV (2)		Fee Interest		Penn Station		670,000		98		92		$	126,500,000
								2,541,000						$	562,200,000
2002 Acquisitions
May-02		1515 Broadway - 55% JV		Fee Interest		Times Square		1,750,000		98		96		$	483,500,000
														$	483,500,000
2003 Acquisitions
Feb-03		220 East 42nd Street		Fee Interest		United Nations		1,135,000		92		95		$	265,000,000
Mar-03		125 Broad Street		Fee Interest		Downtown		525,000		100		100		$	92,000,000
Oct-03		461 Fifth Avenue		Fee Interest		Grand Central		200,000		94		94		$	60,900,000
Dec-03		1221 Ave of Americas -45% JV		Fee Interest		Rockefeller Center		2,470,000		99		99		$	1,000,000,000
								4,330,000						$	1,417,900,000

 

(1) Acquisition price represents gross price for consolidated acquisitions as well as joint venture properties.

(2) Current ownership interest is 55%. (From 9/1/01-10/31/01the company owned 99.8% of this property.)

 

40

 

SUMMARY OF REAL ESTATE SALES ACTIVITY POST 1999

 

		Property		Type of Ownership		Submarket		Net Rentable sf		Sales Price ($’s)			Sales Price ($’s/SF)
2000 Sales
Feb-00		29 West 35th Street		Fee Interest		Penn Station		78,000		$	11,700,000		$	150
Mar-00		36 West 44th Street		Fee Interest		Grand Central		178,000		$	31,500,000		$	177
May-00		321 West 44th Street - 35% JV		Fee Interest		Times Square		203,000		$	28,400,000		$	140
Nov-00		90 Broad Street		Fee Interest		Financial		339,000		$	60,000,000		$	177
Dec-00		17 Battery South		Fee Interest		Financial		392,000		$	53,000,000		$	135
								1,190,000		$	184,600,000		$	156
2001 Sales
Jan-01		633 Third Ave		Fee Interest		Grand Central North		40,623		$	13,250,000		$	326
May-01		1 Park Ave - 45 JV		Fee Interest		Grand Central South		913,000		$	233,900,000		$	256
Jun-01		1412 Broadway		Fee Interest		Times Square South		389,000		$	90,700,000		$	233
Jul-01		110 E. 42nd Street		Fee Interest		Grand Central		69,700		$	14,500,000		$	208
Sep-01		1250 Broadway (1)		Fee Interest		Penn Station		670,000		$	126,500,000		$	189
								2,082,323		$	478,850,000		$	242
2002 Sales
Jun-02		469 Seventh Avenue		Fee Interest		Penn Station		253,000		$	53,100,000		$	210
								253,000		$	53,100,000		$	210
2003 Sales
Mar-03		50 West 23rd Street		Fee Interest		Chelsea		333,000		$	66,000,000		$	198
Jul-03		1370 Broadway		Fee Interest		Times Square South		255,000		$	58,500,000		$	229
Dec-03		321 W 44th Street		Fee Interest		Times Square		203,000		$	35,000,000		$	172
								791,000		$	159,500,000		$	202

 

(1) Company sold a 45% JV interest in the property at an implied $126.5mm sales price.

 

41

 

SUPPLEMENTAL DEFINITIONS

 

Annualized rent is calculated as monthly base rent and escalations per the lease, as of a certain date, multiplied by 12.

 

Debt service coverage is adjusted EBITDA divided by total interest and principal payments.

 

Equity income/ (loss) from affiliates are generally accounted for on a cost basis and realized gains and losses are included in current earnings.  For its investments in private companies, the Company periodically reviews its investments and management determines if the value of such investments have been permanently impaired.  Permanent impairment losses for investments in public and private companies are included in current earnings.

 

Fixed charge is adjusted EBITDA divided by the total payments for ground leases and preferred stock.

 

Fixed charge coverage is adjusted EBITDA divided by total interest expense (including capitalized interest and debt premium amortization, but excluding finance cost amortization) plus preferred dividends and distributions.

 

Funds available for distribution (FAD) is defined as FFO plus non-real estate depreciation, 2% allowance for straight line credit loss, adjustment for straight line ground rent, non-cash deferred compensation, a pro-rata adjustment for FAD for SLG’s unconsolidated JV; less straight line rental income, free rent net of amortization, second cycle tenant improvement and leasing cost, and recurring building improvements.

 

Funds from operations (FFO) is defined as income from operations before minority interests, gains or losses from sales of real estate and extraordinary items plus real estate depreciation, an adjustment to derive SLG’s pro rata share of the FFO of unconsolidated joint ventures, and perpetual preferred stock dividends.  In accordance with NAREIT White Paper on FFO, SLG includes the effects of straight-line rents in FFO.

 

Interest coverage is adjusted EBITDA divided by total interest expense.

 

Junior Mortgage Participations are subordinate interests in first mortgages.

 

Mezzanine Debt Loans are loans secured by ownership interests.

 

Operating earnings per share reflects income before minority interests and gains (losses) from dispositions of real estate and impairment reserves on assets held for sale and operating properties less minority interests’ share of income and preferred stock dividends if anti-dilutive.

 

Percentage leased represents the total percentage of total rentable square feet owned, which is leased, including month-to-month leases, as of the date reported.  Space is considered leased when the tenant has either taken physical or economic occupancy.

 

Preferred Equity Investments are equity investments entitled to preferential returns that are senior to common equity.

 

Recurring capital expenditures represents non-incremental building improvements and leasing costs required to maintain current revenues.  Recurring capital expenditures do not include immediate building improvements that were taken into consideration when underwriting the purchase of a building or which are incurred to bring a building up to “operating standard.”

 

Redevelopment costs are non-recurring capital expenditures incurred in order to improve buildings to SLG’s “operating standards.”  These building costs are taken into consideration during the underwriting for a given property’s acquisition.

 

Same-store NOI growth is the change in the NOI (excluding straight-line rents) of the same-store properties from the prior year reporting period to the current year reporting period.

 

Same-store properties include all properties that were owned during both the current and prior year reporting periods and excludes development properties prior to being stabilized for both the current and prior reporting period.

 

Second generation TI’s and LC’s are tenant improvements, lease commissions, and other leasing costs incurred during leasing of second generations space.  Costs incurred prior to leasing available square feet are not included until such space is leased.  Second generation space excludes square footage vacant at acquisition.

 

SLG’s share of total debt to market capitalization is calculated as SLG’s share of total debt divided by the sum of total debt plus market equity and preferred stock equity income redeemable shares.  SLG’s share of total debt includes total consolidated debt plus SLG’s pro rata share of the debt of unconsolidated joint ventures less than JV partners’ share of debt.  Market equity assumes conversion of all OP units into common stock.

 

Total square feet owned represents 100% of the square footage of properties either owned directly by SLG or in which SLG has a controlling interest (e.g. consolidated joint ventures).

 

42

 

CORPORATE GOVERNANCE

 

Stephen L. Green	Thomas E. Wirth
Chairman of the Board	Chief Financial Officer
Marc Holliday	Gerard Nocera
CEO and President	Executive VP, Director of Real Estate
Michael W. Reid	Andrew S. Levine
Chief Operating Officer	General Counsel and Secretary

 

ANALYST COVERAGE

 

Firm		Analyst		Phone		Email
AG Edwards		Dave Aubuchon		(314) 955-5452		aubuchond@agedwards.com
Corinthian Partners, LLC		Claus Hirsch		(212) 287-1565		chirsch@corinthianpartners.com
Credit Suisse First Boston		Jay Haberman		(212) 538-5250		Jay.haberman@csfb.com
Deutsche Banc Alex. Brown		Louis W. Taylor		(212) 469-4912		louis.taylor@db.com
Goldman Sachs		Carey Callaghan		(212) 902-4351		carey.callaghan@gs.com
Legg Mason Wood Walker, Inc.		David Fick		(410) 454-5018		dmfick@leggmason.com
Lehman Brothers, Inc.		David Shulman		(212) 526-3413		dshulman@lehman.com
J.P. Morgan Securities Inc.		Anthony Paolone		(212) 622-6682		anthony.paolone@jpmorgan.com
McDonald & Company		Anatole Pevnev		(216) 263-4783		apevnev@mcdinvest.com
Prudential Securities		James W. Sullivan		(212) 778-2515		jim_sullivan@prusec.com
Raymond James & Associates		Paul Puryear		(727) 567-2253		ppuryear@ecm.rjf.com
Salomon Smith Barney		Jonathan Litt		(212) 816-0231		jonathan.litt@ssmb.com
Wachovia Securities		Christopher Haley		(443) 263-6773		christopher.haley@wachovia.com

 

SL Green Realty Corp. is followed by the analyst(s) listed above. Please note that any opinions, estimates or forecasts regarding SL Green Realty Corp.’s performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of SL Green Realty Corp. or its management. SL Green Realty Corp. does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations.

 

43