SEC Filing | SL Green Realty Corp.

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slg-20210630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________________

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-13199 (SL Green Realty Corp.)

Commission File Number: 33-167793-02 (SL Green Operating Partnership, L.P.)

______________________________________________________________________

SL GREEN REALTY CORP.

SL GREEN OPERATING PARTNERSHIP, L.P.

(Exact name of registrant as specified in its charter)

______________________________________________________________________


SL Green Realty Corp.	Maryland	13-3956775
SL Green Operating Partnership, L.P.	Delaware	13-3960938
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Vanderbilt Avenue, New York, NY 10017

(Address of principal executive offices—Zip Code)

(212) 594-2700

(Registrant's telephone number, including area code)

______________________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

SL Green Realty Corp. Yes x No o SL Green Operating Partnership, L.P. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

SL Green Realty Corp. Yes x No o SL Green Operating Partnership, L.P. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

SL Green Realty Corp.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

SL Green Operating Partnership, L.P.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

Smaller Reporting Company

☐

Emerging Growth Company

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

SL Green Realty Corp. Yes ☐ No x SL Green Operating Partnership, L.P. Yes ☐ No x

Securities registered pursuant to Section 12(b) of the Act:

Registrant

Trading Symbol

Title of Each Class

Name of Each Exchange on Which Registered

SL Green Realty Corp.

SLG

Common Stock, $0.01 par value

New York Stock Exchange

SL Green Realty Corp.

SLG.PRI

6.500% Series I Cumulative Redeemable Preferred Stock, $0.01 par value

New York Stock Exchange

As of August 5, 2021, 67,158,759 shares of SL Green Realty Corp.'s common stock, par value $0.01 per share, were outstanding. As of August 5, 2021, 689,437 common units of limited partnership interest of SL Green Operating Partnership, L.P. were held by non-affiliates. There is no established trading market for such units.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2021 of SL Green Realty Corp. and SL Green Operating Partnership, L.P. Unless stated otherwise or the context otherwise requires, references to "SL Green Realty Corp.," the "Company" or "SL Green" mean SL Green Realty Corp. and its consolidated subsidiaries, including SL Green Operating Partnership, L.P.; and references to "SL Green Operating Partnership, L.P.," the "Operating Partnership" or "SLGOP" mean SL Green Operating Partnership, L.P. and its consolidated subsidiaries. The terms "we," "our" and "us" mean the Company and all the entities owned or controlled by the Company, including the Operating Partnership.

The Company is a Maryland corporation which operates as a self-administered and self-managed real estate investment trust, or REIT, and is the sole managing general partner of the Operating Partnership. As a general partner of the Operating Partnership, the Company has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership.

As of June 30, 2021, the Company owns 94.69% of the outstanding general and limited partnership interest in the Operating Partnership and owns 9,200,000 Series I Preferred Units of the Operating Partnership. As of June 30, 2021, noncontrolling investors held, in aggregate, a 5.31% limited partnership interest in the Operating Partnership. We refer to these interests as the noncontrolling interests in the Operating Partnership.

The Company and the Operating Partnership are managed and operated as one entity. The financial results of the Operating Partnership are consolidated into the financial statements of the Company. The Company has no significant assets other than its investment in the Operating Partnership. Substantially all of our assets are held by, and our operations are conducted through, the Operating Partnership. Therefore, the assets and liabilities of the Company and the Operating Partnership are substantially the same.

Noncontrolling interests in the Operating Partnership, stockholders' equity of the Company and partners' capital of the Operating Partnership are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The common limited partnership interests in the Operating Partnership not owned by the Company are accounted as noncontrolling interests, within mezzanine equity, in the Company's and the Operating Partnership's consolidated financial statements.

We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:

•Combined reports enhance investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

•Combined reports eliminate duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the Company's disclosure applies to both the Company and the Operating Partnership; and

•Combined reports create time and cost efficiencies through the preparation of one combined report instead of two separate reports.

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:

•consolidated financial statements; and

•the following notes to the consolidated financial statements:

◦Note 11, Noncontrolling Interests on the Company’s Consolidated Financial Statements;

◦Note 12, Stockholders' Equity of the Company; and

◦Note 13, Partners' Capital of the Operating Partnership.

This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Company and the Operating Partnership, respectively, in order to establish that the Chief Executive Officer and the Chief Financial Officer of the Company, in both their capacity as the principal executive officer and principal financial officer of the Company and the principal executive officer and principal financial officer of the general partner of the Operating Partnership, have made the requisite certifications and that the Company and the Operating Partnership are compliant with Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

On December 4, 2020, our Board of Directors declared an ordinary dividend and a special dividend (together, "the Total Dividend"). The Total Dividend was paid on January 15, 2021 to shareholders of record at the close of business on December 15, 2020 ("the Record Date"). Shareholders had the opportunity to elect to receive the Total Dividend in the form of all cash or all stock, subject to proration if either option was oversubscribed. As a result of the elections made, the cash option was oversubscribed and was prorated. Shareholders who elected to receive cash received, for each share of common stock they owned as of the Record Date, approximately $0.3735 in cash and 0.0279 shares of common stock. Shareholders who elected to receive shares received, for each share of common stock they owned as of the Record Date, approximately 0.0343 shares of common stock. The number of shares issued was calculated based on the volume weighted average trading price of SLG's common stock between January 5-7, 2021, of $58.15 per share.

To mitigate the dilutive impact of the common stock issued in the special dividend, the Board of Directors also authorized a reverse stock split, which was effective after markets closed on January 20, 2021. On January 8, 2021, a committee of the Board of Directors calculated the ratio for the reverse stock split of our issued and outstanding shares of common stock as 1.02918-for-1. After the issuance of the dividend and the completion of the reverse stock split, the number of shares of our common stock outstanding was equivalent to the number of total shares outstanding on the Record Date (not including any issuances or repurchases that occurred following the Record Date, as well as any fractional shares that would have been issued but for which cash-in-lieu was paid). However, on a relative basis, some individual shareholders may have more shares of SLG’s common stock, and some individual shareholders may have fewer shares of our common stock, depending on their individual elections to receive cash or stock and as a result of the cash option being oversubscribed.

All share-related references and measurements including the number of shares outstanding, share prices, number of shares repurchased, earnings per share, dividends per share, and share-based compensation awards, have been retroactively adjusted to reflect the reverse stock split for all periods presented in this Quarterly Report on Form 10-Q.

SL GREEN REALTY CORP. AND SL GREEN OPERATING PARTNERSHIP, L.P.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS	7

	FINANCIAL STATEMENTS OF SL GREEN REALTY CORP.
	Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020	7
	Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (unaudited)	9
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020 (unaudited)	10
	Consolidated Statements of Equity for the three and six months ended June 30, 2021 and 2020 (unaudited)	11
	Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)	13

	FINANCIAL STATEMENTS OF SL GREEN OPERATING PARTNERSHIP, L.P.
	Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020	16
	Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (unaudited)	18
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020 (unaudited)	19
	Consolidated Statements of Capital for the three and six months ended June 30, 2021 and 2020 (unaudited)	20
	Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)	22
	Notes to Consolidated Financial Statements (unaudited)	23
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	64
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	80
Item 4.	Controls and Procedures (SL Green Realty Corp. and SL Green Operating Partnership, L.P.)	81
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	82
Item 1A.	Risk Factors	82
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	83
Item 3.	Defaults Upon Senior Securities	84
Item 4.	Mine Safety Disclosures	85
Item 5.	Other Information	86
Item 6.	Exhibits	87
	Signatures	88

Table of Contents

SL GREEN REALTY CORP. AND SL GREEN OPERATING PARTNERSHIP, L.P.

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Table of Contents

SL Green Realty Corp.

Consolidated Balance Sheets

(in thousands)


	June 30, 2021		December 31, 2020
	(unaudited)
Assets
Commercial real estate properties, at cost:
Land and land interests	$	1,403,399	$	1,315,832
Building and improvements	4,088,659		4,168,193
Building leasehold and improvements	1,642,595		1,448,134
Right of use asset - financing leases	27,445		55,711
Right of use asset - operating leases	502,316		367,209
	7,664,414		7,355,079
Less: accumulated depreciation	(2,008,438)		(1,956,077)
	5,655,976		5,399,002

Cash and cash equivalents	218,337		266,059
Restricted cash	98,164		106,736
Investments in marketable securities	32,339		28,570
Tenant and other receivables	40,147		44,507
Related party receivables	36,430		34,657
Deferred rents receivable	304,140		302,791
Debt and preferred equity investments, net of discounts and deferred origination fees of $7,922 and $11,232 and allowances of $13,213 and $13,213 in 2021 and 2020, respectively	1,072,711		1,076,542
Investments in unconsolidated joint ventures	3,209,151		3,823,322
Deferred costs, net	161,962		177,168
Other assets	336,807		448,213
Total assets (1)	$	11,166,164	$	11,707,567
Liabilities
Mortgages and other loans payable, net	$	1,857,829	$	1,979,972
Revolving credit facility, net	—		105,262
Unsecured term loans, net	1,496,062		1,495,275
Unsecured notes, net	1,248,930		1,248,219
Accrued interest payable	13,771		14,825
Other liabilities	193,321		302,798
Accounts payable and accrued expenses	126,929		151,309
Deferred revenue	114,536		118,572
Lease liability - financing leases	124,808		152,521
Lease liability - operating leases	443,313		339,458
Dividend and distributions payable	24,407		149,294
Security deposits	54,797		53,836

Junior subordinated deferrable interest debentures held by trusts that issued trust preferred securities	100,000		100,000
Total liabilities (1)	5,798,703		6,211,341

Table of Contents

SL Green Realty Corp.

Consolidated Balance Sheets

(in thousands)


	June 30, 2021		December 31, 2020
	(unaudited)
Commitments and contingencies
Noncontrolling interests in Operating Partnership	355,201		358,262
Preferred units	198,503		202,169

Equity
SL Green stockholders' equity:
Series I Preferred Stock, $0.01 par value, $25.00 liquidation preference, 9,200 issued and outstanding at both June 30, 2021 and December 31, 2020	221,932		221,932
Common stock, $0.01 par value, 160,000 shares authorized and 68,906 and 69,534 issued and outstanding at June 30, 2021 and December 31, 2020, respectively (including 1,026 and 1,026 shares held in treasury at June 30, 2021 and December 31, 2020, respectively)	690		716
Additional paid-in-capital	3,823,290		3,862,949
Treasury stock at cost	(124,049)		(124,049)
Accumulated other comprehensive loss	(66,863)		(67,247)
Retained earnings	934,132		1,015,462
Total SL Green stockholders' equity	4,789,132		4,909,763
Noncontrolling interests in other partnerships	24,625		26,032
Total equity	4,813,757		4,935,795
Total liabilities and equity	$	11,166,164	$	11,707,567

(1) The Company's consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs"). See Note 2. The consolidated balance sheets include the following amounts related to our consolidated VIEs, excluding the Operating Partnership: $179.6 million and $41.2 million of land, $281.0 million and $57.9 million of building and improvements, $2.0 million and $2.0 million of building and leasehold improvements, $53.2 million and $37.8 million of right of use assets, $17.3 million and $10.3 million of accumulated depreciation, $291.4 million and $289.5 million of other assets included in other line items, $377.1 million and $94.0 million of real estate debt, net, $1.1 million and $0.7 million of accrued interest payable, $45.4 million and $29.9 million of lease liabilities, and $23.6 million and $56.6 million of other liabilities included in other line items as of June 30, 2021 and December 31, 2020, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

SL Green Realty Corp.

Consolidated Statements of Operations

(unaudited, in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues
Rental revenue, net	$	184,611	$	195,886	$	372,700	$	418,517
Investment income	20,107		39,943		39,380		78,476
Other income	13,389		17,870		32,129		71,009
Total revenues	218,107		253,699		444,209		568,002
Expenses
Operating expenses, including related party expenses of $3,039 and $5,264 in 2021 and $2,739 and $6,488 in 2020	43,883		40,897		86,167		94,763
Real estate taxes	43,768		41,661		89,179		88,283
Operating lease rent	6,707		7,831		13,446		15,198
Interest expense, net of interest income	18,960		30,070		42,348		67,564
Amortization of deferred financing costs	3,386		2,661		7,160		5,161
Depreciation and amortization	57,261		95,941		120,257		164,220
Loan loss and other investment reserves, net of recoveries	—		6,813		—		18,061
Transaction related costs	3		373		25		438
Marketing, general and administrative	22,064		23,510		44,949		43,080
Total expenses	196,032		249,757		403,531		496,768

Equity in net loss from unconsolidated joint ventures	(12,970)		(2,199)		(15,834)		(15,013)
Equity in net gain (loss) on sale of interest in unconsolidated joint venture/real estate	8,471		—		(4,158)		—
Purchase price and other fair value adjustments	(1,947)		—		717		—
Gain on sale of real estate, net	98,960		64,884		97,572		137,520
Depreciable real estate reserves and impairment	2,545		—		(5,696)		—





Net income	117,134		66,627		113,279		193,741
Net income attributable to noncontrolling interests:
Noncontrolling interests in the Operating Partnership	(6,282)		(3,070)		(5,806)		(9,272)
Noncontrolling interests in other partnerships	40		(1,023)		1,539		(730)
Preferred units distributions	(1,823)		(2,353)		(3,669)		(5,019)
Net income attributable to SL Green	109,069		60,181		105,343		178,720
Perpetual preferred stock dividends	(3,737)		(3,737)		(7,475)		(7,475)
Net income attributable to SL Green common stockholders	$	105,332	$	56,444	$	97,868	$	171,245






















Basic earnings per share	$	1.52	$	0.76	$	1.41	$	2.28










Diluted earnings per share	$	1.51	$	0.76	$	1.40	$	2.28

Basic weighted average common shares outstanding	68,980		73,538		68,996		74,598
Diluted weighted average common shares and common share equivalents outstanding	73,727		78,066		73,899		79,208

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

SL Green Realty Corp.

Consolidated Statements of Comprehensive Income

(unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	117,134	$	66,627	$	113,279	$	193,741
Other comprehensive (loss) income:
Decrease in unrealized value of derivative instruments, including SL Green's share of joint venture derivative instruments	(51,313)		(3,590)		(50)		(54,325)
Increase (decrease) in unrealized value of marketable securities	506		1,992		248		(2,542)
Other comprehensive (loss) income	(50,807)		(1,598)		198		(56,867)
Comprehensive income	66,327		65,029		113,477		136,874
Net income attributable to noncontrolling interests and preferred units distributions	(8,065)		(6,446)		(7,936)		(15,021)
Other comprehensive loss attributable to noncontrolling interests	2,841		95		186		2,981
Comprehensive income attributable to SL Green	$	61,103	$	58,678	$	105,727	$	124,834

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

SL Green Realty Corp.

Consolidated Statements of Equity

(unaudited, in thousands, except per share data)


	SL Green Realty Corp. Stockholders
				Common Stock
		Series I Preferred Stock		Shares	Par Value		Additional Paid- In-Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling Interests		Total
Balance at December 31, 2020		$	221,932	68,508	$	716	$	3,862,949	$	(124,049)	$	(67,247)	$	1,015,462	$	26,032	$	4,935,795


Net loss													(3,726)		(1,499)		(5,225)

Other comprehensive income											48,350						48,350
Preferred dividends													(3,738)				(3,738)
DRSPP proceeds				5			351										351

Reallocation of noncontrolling interest in the Operating Partnership													(26,609)				(26,609)

Deferred compensation plan and stock awards, net of forfeitures and tax withholdings				113	2		6,726										6,728


Repurchases of common stock				(1,306)	(13)		(80,297)						—				(80,310)

Contributions to consolidated joint venture interests															171		171

Cash distributions to noncontrolling interests															(110)		(110)
Issuance of special dividend paid primarily in stock				2,034			123,529										123,529
Cash distributions declared ($0.910 per common share, none of which represented a return of capital for federal income tax purposes)													(63,312)				(63,312)
Balance at March 31, 2021		$	221,932	69,354	$	705	$	3,913,258	$	(124,049)	$	(18,897)	$	918,077	$	24,594	$	4,935,620
Net income (loss)													109,069		(40)		109,029

Other comprehensive loss											(47,966)						(47,966)
Preferred dividends													(3,737)				(3,737)
DRSPP proceeds				2			116										116

Reallocation of noncontrolling interest in the Operating Partnership													(5,866)				(5,866)

Deferred compensation plan and stock awards, net of forfeitures and tax withholdings				(1)			7,591										7,591


Repurchases of common stock				(1,475)	(15)		(97,675)						(20,887)				(118,577)

Contributions to consolidated joint venture interests															134		134

Cash distributions to noncontrolling interests															(63)		(63)
Cash distributions declared ($0.910 per common share, none of which represented a return of capital for federal income tax purposes)													(62,524)				(62,524)
Balance at June 30, 2021		$	221,932	67,880	$	690	$	3,823,290	$	(124,049)	$	(66,863)	$	934,132	$	24,625	$	4,813,757

Table of Contents

SL Green Realty Corp.

Consolidated Statements of Equity

(unaudited, in thousands, except per share data)


	SL Green Realty Corp. Stockholders
				Common Stock
		Series I Preferred Stock		Shares	Par Value		Additional Paid- In-Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling Interests		Total
Balance at December 31, 2019		$	221,932	76,956	$	803	$	4,286,395	$	(124,049)	$	(28,485)	$	1,084,719	$	75,883	$	5,517,198
Cumulative adjustment upon adoption of ASC 326													(39,184)				(39,184)
Balance at January 1, 2020		$	221,932	76,956	$	803	$	4,286,395	$	(124,049)	$	(28,485)	$	1,045,535	$	75,883	$	5,478,014
Net income (loss)													118,539		(293)		118,246
Acquisition of subsidiary interest from noncontrolling interest							(3,123)								1,587		(1,536)
Other comprehensive loss											(52,383)						(52,383)
Preferred dividends													(3,738)				(3,738)
DRSPP proceeds				2			166										166
Conversion of units in the Operating Partnership for common stock				1			84										84
Reallocation of noncontrolling interest in the Operating Partnership													38,529				38,529

Deferred compensation plan and stock awards, net of forfeitures and tax withholdings				(32)	(1)		5,503										5,502


Repurchases of common stock				(2,562)	(26)		(142,719)						(76,831)				(219,576)

Contributions to consolidated joint venture interests															3,814		3,814

Cash distributions to noncontrolling interests