Press Release Details
SL Green Realty Corp. Reports Second Quarter 2018 EPS of $1.19 Per Share; and FFO of $1.69 Per Share
Financial and Operating Highlights
- Net income attributable to common stockholders of
$1.19 per share for the second quarter as compared to$0.08 per share for the same period in 2017. - Funds from operations, or FFO, of
$1.69 per share for the second quarter as compared to$1.78 per share for the same period in 2017. FFO for the second quarter of the prior year included$19.7 million , or$0.19 per share, of non-comparable items. - Same-store cash NOI, including our share of same-store cash NOI from unconsolidated joint ventures, increased 7.8% for the first six months of 2018, or 6.9%, excluding lease termination income, as compared to the same period in the prior year.
- Signed 58 Manhattan office leases covering 565,914 square feet in
the second quarter and 86 Manhattan office leases covering 941,727
square feet in the first six months of 2018. The mark-to-market on
signed
Manhattan office leases was 5.2% higher for the second quarter and 7.1% higher for the first six months over the previously fully escalated rents on the same spaces. Manhattan same-store occupancy, inclusive of leases signed but not yet commenced, increased by 40 basis points to 95.9% as of June 30, 2018.- Signed a 20-year lease for 105,539 square feet with
McDermott Will & Emery LLP to relocate itsNew York operations toOne Vanderbilt Avenue . - Signed long term retail leases at
609 Fifth Avenue with sports brand PUMA and719 Seventh Avenue , now known as 30Times Square , with beauty conglomerateCoty, Inc. for multilevel flagship stores. - Signed 13 Suburban office leases covering 45,224 square feet in the second quarter and 32 Suburban office leases covering 202,709 square feet in the first six months of 2018. The mark-to-market on signed Suburban office leases was 4.9% lower for the second quarter and 2.6% lower for the first six months over the previously fully escalated rents on the same spaces.
Investing Highlights
- The Company announced an increase to the size of its share
repurchase program by an additional
$500 million , bringing the program to a total of$2.0 billion . To date, the Company has acquired 15.6 million shares of its common stock under the program at an average price of$99.58 per share. - Took ownership of the leasehold interest at 2
Herald Square following the foreclosure of the asset. The Company also reached an agreement to joint venture the asset. - Closed on a multi-faceted retail transaction, which includes the
sale of substantially all of the Company's interest in
724 Fifth Avenue to its joint venture partner, redemption of its investment in 720 Fifth Avenue, and partial repayment of another partnership loan. The transactions generated net proceeds of$85.6 million . - Together with our joint venture partner, closed on the sale of the
leasehold office condominium at 1745
Broadway for a sale price of$633 million , or $939 per square foot. The transaction generated net proceeds of$126.9 million and the Company recognized a gain on sale of$52.0 million . - Closed on the sale of the fee interest at
635 Madison Avenue for a sale price of$153.0 million . The sale generated net proceeds of$141.7 million . - Closed on the sale of
Reckson Executive Park inRye Brook, New York ,115-117 Stevens Avenue , inValhalla, New York and our 11.7% interest inJericho Plaza for asset valuations totaling$184.4 million . The sales generated net proceeds of$68.3 million .
Summary
The Company also reported net income attributable to common stockholders
for the six months ended June 30, 2018 of
The Company reported FFO for the quarter ended June 30, 2018 of
The Company also reported FFO for the six months ended June 30, 2018 of
All per share amounts in this press release are presented on a diluted basis.
Operating and Leasing Activity
For the quarter ended June 30, 2018, the Company reported consolidated
revenues and operating income of
Same-store cash NOI, including our share of same-store cash NOI from
unconsolidated joint ventures, increased by 8.0% for the quarter ended
June 30, 2018, or 8.1%, excluding lease termination income. For the
quarter, consolidated property same-store cash NOI increased by 4.0% to
Same-store cash NOI, including our share of same-store cash NOI from
unconsolidated joint ventures, increased by 7.8% for the six months
ended June 30, 2018, or 6.9%, excluding lease termination income, as
compared to the same period in 2017. For the six months ended June 30,
2018, consolidated property same-store cash NOI increased by 4.3% to
In the second quarter, the Company signed 58 office leases in its
During the first six months of 2018, the Company signed 86 office leases
in its
Occupancy in the Company's
In the second quarter, the Company signed 13 office leases in its
Suburban portfolio totaling 45,224 square feet. Ten leases comprising
35,832 square feet, representing office leases on space that had been
occupied within the prior twelve months, are considered replacement
leases on which mark-to-market is calculated. Those replacement leases
had average starting rents of
During the first six months of 2018, the Company signed 32 office leases
in its Suburban portfolio totaling 202,709 square feet. Twenty-one
leases comprising 61,376 square feet, representing office leases on
space that had been occupied within the prior twelve months, are
considered replacement leases on which mark-to-market is calculated.
Those replacement leases had average starting rents of
Occupancy in the Company's Suburban same-store portfolio was 87.2% as of
June 30, 2018, inclusive of 5,732 square feet of leases signed but not
yet commenced, as compared to 87.6% at
Significant leases that were signed in the second quarter included:
-
New lease with
McDermott Will & Emery LLP for 105,539 square feet atOne Vanderbilt Avenue , for 20.0 years; -
New lease with
Syska Hennessy Group, Inc. for 55,016 square feet at 1185 Avenue of theAmericas , for 10.3 years; -
Renewal with
Canon Solutions America, Inc. for 33,766 square feet at125 Park Avenue , for 10.6 years; -
New lease with
Puma North America, Inc. for 24,000 square feet at609 Fifth Avenue , for 16.0 years; -
New lease with
Milburn Ridgefield Corporation for 22,523 square feet at55 West 46th Street , known as Tower 46, for 10.5 years; -
New lease with
TravelClick, Inc. for 22,518 square feet at55 West 46th Street , known as Tower 46, for 10.3 years; -
New lease with
United Refining, Inc. for 20,010 square feet at800 Third Avenue , for 10.3 years; -
New lease with
Coty, Inc. for 10,040 square feet at719 Seventh Avenue , known as30 Times Square , for 10.4 years.
Marketing, general and administrative, or MG&A, expense for the three
months ended June 30, 2018 was
Investment Activity
During the quarter, the Company announced that its Board of Directors
had authorized a
In July, the Company closed on the sale of substantially all of its
interest in
In July, the Company closed on the previously announced sale of
In June, the Company closed on the previously announced sale of
In June, the Company closed on the previously announced sale of its
11.7% interest in
In May, the Company took ownership of the leasehold interest at 2
In May, the Company, along with our joint venture partner,
In May, the Company closed on the previously announced sale of
Debt and Preferred Equity Investment Activity
The carrying value of the Company’s debt and preferred equity investment
portfolio increased to
During the second quarter, the Company originated or acquired new debt
and preferred equity investments totaling
Dividends
In the second quarter of 2018, the Company declared quarterly dividends on its outstanding common and preferred stock as follows:
$0.8125 per share of common stock, which was paid onJuly 16, 2018 to shareholders of record on the close of business onJune 29, 2018 ; and$0.40625 per share on the Company's 6.50% Series I Cumulative Redeemable Preferred Stock for the periodApril 15, 2018 through and includingJuly 14, 2018 , which was paid onJuly 16, 2018 to shareholders of record on the close of business onJune 29, 2018 , and reflects the regular quarterly dividend, which is the equivalent of an annualized dividend of$1.625 per share.
Conference Call and Audio Webcast
The Company's executive management team, led by
The supplemental data will be available prior to the quarterly
conference call in the Investors section of the
The live conference call will be webcast in listen-only mode in the
Investors section of the
A replay of the call will be available 7 days after the call by dialing
(855) 859-2056 using passcode 8887486. A webcast replay will also be
available in the Investors section of the
Company Profile
To be added to the Company's distribution list or to obtain the latest news releases and other Company information, please visit our website at www.slgreen.com or contact Investor Relations at (212) 594-2700.
Disclaimers
Non-GAAP Financial Measures
During the quarterly 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 can be found in this release and in the Company’s Supplemental Package.
Forward-looking Statements
This press release includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be covered by the safe harbor provisions thereof. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, are forward-looking statements. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate. Forward-looking statements are not guarantees of future performance and actual results or developments may differ materially, and we caution you not to place undue reliance on such statements. Forward-looking statements are generally identifiable by the use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," "project," "continue," or the negative of these words, or other similar words or terms.
Forward-looking statements contained in this press release are
subject to a number of risks and uncertainties, many of which are beyond
our control, that may cause our actual results, performance or
achievements to be materially different from future results, performance
or achievements expressed or implied by forward-looking statements made
by us. Factors and risks to our business that could cause actual results
to differ from those contained in the forward-looking statements are
described in our filings with the
SL GREEN REALTY CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in thousands, except per share data) |
|||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Rental revenue, net | $ | 211,369 | $ | 279,407 | $ | 426,738 | $ | 560,736 | |||||||
Escalation and reimbursement | 27,052 | 42,620 | 53,451 | 86,812 | |||||||||||
Investment income | 49,273 | 60,622 | 94,563 | 100,921 | |||||||||||
Other income | 13,422 | 15,501 | 28,059 | 27,062 | |||||||||||
Total revenues | 301,116 | 398,150 | 602,811 | 775,531 | |||||||||||
Expenses: | |||||||||||||||
Operating expenses, including related party expenses $4,665 and $8,499 in 2018 and $5,262 and $9,436 in 2017. | 56,237 | 70,852 | 116,019 | 145,358 | |||||||||||
Real estate taxes | 45,322 | 60,945 | 90,983 | 122,013 | |||||||||||
Ground rent | 8,846 | 8,308 | 17,154 | 16,616 | |||||||||||
Interest expense, net of interest income | 53,611 | 64,856 | 101,527 | 130,478 | |||||||||||
Amortization of deferred financing costs | 3,546 | 3,432 | 7,083 | 8,193 | |||||||||||
Depreciation and amortization | 67,914 | 133,054 | 137,302 | 227,188 | |||||||||||
Transaction related costs | 348 | 46 | 510 | 179 | |||||||||||
Marketing, general and administrative | 22,479 | 24,256 | 46,007 | 48,399 | |||||||||||
Total expenses | 258,303 | 365,749 | 516,585 | 698,424 | |||||||||||
Net income before equity in net income from unconsolidated joint ventures, equity in net gain on sale of interest in unconsolidated joint venture/real estate, purchase price and other fair value adjustments, (loss) gain on sale of real estate net, depreciable real estate reserves, and gain on sale of marketable securities | 42,813 | 32,401 | 86,226 | 77,107 | |||||||||||
Equity in net income from unconsolidated joint ventures | 4,702 | 3,412 | 8,738 | 10,026 | |||||||||||
Equity in net gain on sale of interest in unconsolidated joint venture/real estate | 72,025 | 13,089 | 65,585 | 15,136 | |||||||||||
Purchase price and other fair value adjustment | 11,149 | — | 60,442 | — | |||||||||||
(Loss) gain on sale of real estate, net | (14,790 | ) | (3,823 | ) | 8,731 | (3,256 | ) | ||||||||
Depreciable real estate reserves | — | (29,064 | ) | — | (85,336 | ) | |||||||||
Gain on sale of marketable securities | — | — | — | 3,262 | |||||||||||
Net income | 115,899 | 16,015 | 229,722 | 16,939 | |||||||||||
Net income attributable to noncontrolling interests in the Operating Partnership | (5,586 | ) | (419 | ) | (10,858 | ) | (895 | ) | |||||||
Net (income) loss attributable to noncontrolling interests in other partnerships | (173 | ) | (786 | ) | (371 | ) | 16,705 | ||||||||
Preferred unit distributions | (2,847 | ) | (2,851 | ) | (5,696 | ) | (5,701 | ) | |||||||
Net income attributable to SL Green | 107,293 | 11,959 | 212,797 | 27,048 | |||||||||||
Perpetual preferred stock dividends | (3,737 | ) | (3,737 | ) | (7,475 | ) | (7,475 | ) | |||||||
Net income attributable to SL Green common stockholders | $ | 103,556 | $ | 8,222 | $ | 205,322 | $ | 19,573 | |||||||
Earnings Per Share (EPS) | |||||||||||||||
Net income per share (Basic) | $ | 1.19 | $ | 0.08 | $ | 2.31 | $ | 0.20 | |||||||
Net income per share (Diluted) | $ | 1.19 | $ | 0.08 | $ | 2.31 | $ | 0.19 | |||||||
Funds From Operations (FFO) | |||||||||||||||
FFO per share (Basic) | $ | 1.69 | $ | 1.79 | $ | 3.35 | $ | 3.36 | |||||||
FFO per share (Diluted) | $ | 1.69 | $ | 1.78 | $ | 3.34 | $ | 3.36 | |||||||
Basic ownership interest |
|||||||||||||||
Weighted average REIT common shares for net income per share | 87,176 | 99,900 | 88,772 | 100,268 | |||||||||||
Weighted average partnership units held by noncontrolling interests | 4,706 | 4,562 | 4,695 | 4,584 | |||||||||||
Basic weighted average shares and units outstanding | 91,882 | 104,462 | 93,467 | 104,852 | |||||||||||
Diluted ownership interest |
|||||||||||||||
Weighted average REIT common share and common share equivalents | 87,377 | 100,170 | 88,972 | 100,556 | |||||||||||
Weighted average partnership units held by noncontrolling interests | 4,706 | 4,562 | 4,695 | 4,584 | |||||||||||
Diluted weighted average shares and units outstanding | 92,083 | 104,732 | 93,667 | 105,140 | |||||||||||
SL GREEN REALTY CORP. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) |
|||||||
June 30, | December 31, | ||||||
2018 | 2017 | ||||||
Assets | (Unaudited) | ||||||
Commercial real estate properties, at cost: | |||||||
Land and land interests | $ | 1,893,047 | $ | 2,357,051 | |||
Building and improvements | 5,225,431 | 6,351,012 | |||||
Building leasehold and improvements | 1,423,994 | 1,450,614 | |||||
Properties under capital lease | 47,445 | 47,445 | |||||
8,589,917 | 10,206,122 | ||||||
Less accumulated depreciation | (1,994,696 | ) | (2,300,116 | ) | |||
6,595,221 | 7,906,006 | ||||||
Assets held for sale | 593,995 | 338,354 | |||||
Cash and cash equivalents | 287,240 | 127,888 | |||||
Restricted cash | 92,740 | 122,138 | |||||
Investment in marketable securities | 28,570 | 28,579 | |||||
Tenant and other receivables, net of allowance of $16,558 and $18,637 in 2018 and 2017, respectively | 47,482 | 57,644 | |||||
Related party receivables | 27,854 | 23,039 | |||||
Deferred rents receivable, net of allowance of $15,776 and $17,207 in 2018 and 2017, respectively | 322,656 | 365,337 | |||||
Debt and preferred equity investments, net of discounts and deferred origination fees of $23,216 and $25,507 in 2018 and 2017, respectively | 2,168,515 | 2,114,041 | |||||
Investments in unconsolidated joint ventures | 3,059,985 | 2,362,989 | |||||
Deferred costs, net | 198,941 | 226,201 | |||||
Other assets | 290,729 | 310,688 | |||||
Total assets | $ | 13,713,928 | $ | 13,982,904 | |||
Liabilities | |||||||
Mortgages and other loans payable | $ | 2,538,696 | $ | 2,865,991 | |||
Revolving credit facility | 360,000 | 40,000 | |||||
Unsecured term loan | 1,500,000 | 1,500,000 | |||||
Unsecured notes | 1,404,203 | 1,404,605 | |||||
Deferred financing costs, net | (45,488 | ) | (56,690 | ) | |||
Total debt, net of deferred financing costs | 5,757,411 | 5,753,906 | |||||
Accrued interest payable | 26,104 | 38,142 | |||||
Accounts payable and accrued expenses | 140,739 | 137,142 | |||||
Deferred revenue | 95,756 | 208,119 | |||||
Capitalized lease obligations | 43,221 | 42,843 | |||||
Deferred land leases payable | 3,567 | 3,239 | |||||
Dividend and distributions payable | 79,518 | 85,138 | |||||
Security deposits | 63,872 | 67,927 | |||||
Liabilities related to assets held for sale | 265,538 | 4,074 | |||||
Junior subordinate deferrable interest debentures held by trusts that issued trust preferred securities | 100,000 | 100,000 | |||||
Other liabilities | 108,151 | 189,231 | |||||
Total liabilities | 6,683,877 | 6,629,761 | |||||
Commitments and contingencies | — | — | |||||
Noncontrolling interest in the Operating Partnership | 486,610 | 461,954 | |||||
Preferred units | 301,385 | 301,735 | |||||
Equity | |||||||
Stockholders’ equity: | |||||||
Series I Preferred Stock, $0.01 par value, $25.00 liquidation preference, 9,200 issued and outstanding at both June 30, 2018 and December 31, 2017 | 221,932 | 221,932 | |||||
Common stock, $0.01 par value 160,000 shares authorized, 86,780 and 93,858 issued and outstanding at June 30, 2018 and December 31, 2017, respectively (including 1,055 held in Treasury at June 30, 2018 and December 31, 2017) | 868 | 939 | |||||
Additional paid-in capital | 4,601,608 | 4,968,338 | |||||
Treasury stock at cost | (124,049 | ) | (124,049 | ) | |||
Accumulated other comprehensive income | 32,622 | 18,604 | |||||
Retained earnings | 1,457,835 | 1,139,329 | |||||
Total SL Green Realty Corp. stockholders’ equity | 6,190,816 | 6,225,093 | |||||
Noncontrolling interests in other partnerships | 51,240 | 364,361 | |||||
Total equity | 6,242,056 | 6,589,454 | |||||
Total liabilities and equity | $ | 13,713,928 | $ | 13,982,904 | |||
SL GREEN REALTY CORP. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited and in thousands, except per share data) |
|||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
Funds From Operations (FFO) Reconciliation: | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net income attributable to SL Green common stockholders | $ | 103,556 | $ | 8,222 | $ | 205,322 | $ | 19,573 | |||||||
Add: | |||||||||||||||
Depreciation and amortization | 67,914 | 133,054 | 137,302 | 227,188 | |||||||||||
Joint venture depreciation and noncontrolling interest adjustments | 47,308 | 25,086 | 95,314 | 49,419 | |||||||||||
Net income (loss) attributable to noncontrolling interests | 5,759 | 1,205 | 11,229 | (15,810 | ) | ||||||||||
Less: | |||||||||||||||
(Loss) gain on sale of real estate, net | (14,790 | ) | (3,823 | ) | 8,731 | (3,256 | ) | ||||||||
Equity in net gain on sale of interest in unconsolidated joint venture/real estate | 72,025 | 13,089 | 65,585 | 15,136 | |||||||||||
Purchase price and other fair value adjustments | 11,149 | — | 60,442 | — | |||||||||||
Depreciable real estate reserve | — | (29,064 | ) | — | (85,336 | ) | |||||||||
Depreciation on non-rental real estate assets | 584 | 564 | 1,150 | 1,080 | |||||||||||
FFO attributable to SL Green common stockholders | $ | 155,569 | $ | 186,801 | $ | 313,259 | $ | 352,746 | |||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
Operating income and Same-store NOI Reconciliation: | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net income | $ | 115,899 | $ | 16,015 | $ | 229,722 | $ | 16,939 | |||||||
Equity in net gain on sale of interest in unconsolidated joint venture/real estate | (72,025 | ) | (13,089 | ) | (65,585 | ) | (15,136 | ) | |||||||
Purchase price and other fair value adjustments | (11,149 | ) | — | (60,442 | ) | — | |||||||||
Loss (gain) on sale of real estate, net | 14,790 | 3,823 | (8,731 | ) | 3,256 | ||||||||||
Depreciable real estate reserves | — | 29,064 | — | 85,336 | |||||||||||
Gain on sale of marketable securities | — | — | — | (3,262 | ) | ||||||||||
Depreciation and amortization | 67,914 | 133,054 | 137,302 | 227,188 | |||||||||||
Interest expense, net of interest income | 53,611 | 64,856 | 101,527 | 130,478 | |||||||||||
Amortization of deferred financing costs | 3,546 | 3,432 | 7,083 | 8,193 | |||||||||||
Operating income | 172,586 | 237,155 | 340,876 | 452,992 | |||||||||||
Equity in net income from unconsolidated joint ventures | (4,702 | ) | (3,412 | ) | (8,738 | ) | (10,026 | ) | |||||||
Marketing, general and administrative expense | 22,479 | 24,256 | 46,007 | 48,399 | |||||||||||
Transaction related costs, net | 348 | 46 | 510 | 179 | |||||||||||
Investment income | (49,273 | ) | (60,622 | ) | (94,563 | ) | (100,921 | ) | |||||||
Non-building revenue | (9,397 | ) | (6,571 | ) | (14,176 | ) | (4,937 | ) | |||||||
Net operating income (NOI) | 132,041 | 190,852 | 269,916 | 385,686 | |||||||||||
Equity in net income from unconsolidated joint ventures | 4,702 | 3,412 | 8,738 | 10,026 | |||||||||||
SLG share of unconsolidated JV depreciation and amortization | 47,565 | 31,286 | 95,184 | 62,501 | |||||||||||
SLG share of unconsolidated JV interest expense, net of interest income | 36,670 | 22,876 | 72,450 | 43,969 | |||||||||||
SLG share of unconsolidated JV amortization of deferred financing costs | 1,752 | 2,314 | 3,425 | 4,935 | |||||||||||
SLG share of unconsolidated JV loss on early extinguishment of debt | — | — | — | — | |||||||||||
SLG share of unconsolidated JV transaction related costs | — | 56 | — | 110 | |||||||||||
SLG share of unconsolidated JV investment income | (1,708 | ) | (3,916 | ) | (4,794 | ) | (8,746 | ) | |||||||
SLG share of unconsolidated JV non-building revenue | (1,147 | ) | (950 | ) | (2,148 | ) | (7,179 | ) | |||||||
NOI including SLG share of unconsolidated JVs | 219,875 | 245,930 | 442,771 | 491,302 | |||||||||||
NOI from other properties/affiliates | (26,009 | ) | (57,631 | ) | (57,138 | ) | (114,927 | ) | |||||||
Same-Store NOI | 193,866 | 188,299 | 385,633 | 376,375 | |||||||||||
Ground lease straight-line adjustment | 524 | 524 | 1,048 | 1,048 | |||||||||||
Joint Venture ground lease straight-line adjustment | 258 | 277 | 640 | 562 | |||||||||||
Straight-line and free rent |
(1,474 |
) | (6,625 | ) | (3,563 | ) | (14,673 | ) | |||||||
Rental income - FAS 141 | (1,238 | ) | (1,121 | ) | (2,921 | ) | (2,315 | ) | |||||||
Joint Venture straight-line and free rent | (4,052 | ) | (5,163 | ) | (8,411 | ) | (10,672 | ) | |||||||
Joint Venture rental income - FAS 141 |
(1,261 |
) | (3,320 | ) | (2,443 | ) | (7,013 | ) | |||||||
Same-store cash NOI | $ |
186,623 |
$ | 172,871 | $ | 369,983 | $ | 343,312 | |||||||
SL GREEN REALTY CORP.
NON-GAAP FINANCIAL MEASURES -
DISCLOSURES
Funds from Operations (FFO)
FFO is a widely recognized non-GAAP measure of REIT performance. The
Company computes FFO in accordance with standards established by the
The Company presents FFO because it considers it an important supplemental measure of the Company’s operating performance and believes that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, particularly those that own and operate commercial office properties. The Company also uses FFO as one of several criteria to determine performance-based bonuses for members of its senior management. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions, and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, and interest costs, providing perspective not immediately apparent from net income. 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 the Company’s financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company’s liquidity, nor is it indicative of funds available to fund the Company’s cash needs, including our ability to make cash distributions.
Funds Available for Distribution (FAD)
FAD is a non-GAAP financial measure that is calculated as FFO plus non-real estate depreciation, allowance for straight line credit loss, adjustment for straight line ground rent, non-cash deferred compensation, and 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 costs, and recurring building improvements.
FAD 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 the Company’s financial performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of the Company’s liquidity.
Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre)
EBITDAre is a non-GAAP financial measure. The Company computes EBITDAre
in accordance with standards established by the
The Company presents EBITDAre, because the Company believes that EBITDAre, 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. EBITDAre should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of the Company’s financial performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of the Company’s liquidity.
Net Operating Income (NOI) and Cash NOI
NOI is a non-GAAP financial measure that is calculated as operating income before transaction related costs, gains/losses on early extinguishment of debt, marketing general and administrative expenses and non-real estate revenue. Cash NOI is calculated by subtracting free rent (net of amortization), straight-line rent, FAS 141 rental income from NOI, while adding ground lease straight-line adjustment and the allowance for straight-line tenant credit loss.
The Company presents NOI and Cash NOI because the Company believes that these measures, when taken together with the corresponding GAAP financial measures and our reconciliations, provide investors with meaningful information regarding the operating performance of properties. When operating performance is compared across multiple periods, the investor is provided with information not immediately apparent from net income that is determined in accordance with GAAP. NOI and Cash NOI provide information on trends in the revenue generated and expenses incurred in operating our properties, unaffected by the cost of leverage, straight-line adjustments, depreciation, amortization, and other net income components. The Company uses these metrics internally as performance measures. None of these measures is 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.
Debt to Market Capitalization Ratio
Debt to Market Capitalization is a non-GAAP measure that is calculated as the Company’s consolidated debt divided by the Company's estimated market value 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.
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 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, such measure may not be comparable to those used by other REITs that do not compute such measure 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 debt service 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 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).
SLG - EARN
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Source:
Matt DiLiberto
Chief Financial Officer
(212) 594-2700