SEC Filing | SL Green Realty Corp.

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slg-20210930

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 September 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 November 5, 2021, 66,726,676 shares of SL Green Realty Corp.'s common stock, par value $0.01 per share, were outstanding. As of November 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 September 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 September 30, 2021, the Company owns 94.50% 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 September 30, 2021, noncontrolling investors held, in aggregate, a 5.50% 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 September 30, 2021 (unaudited) and December 31, 2020	7
	Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (unaudited)	9
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020 (unaudited)	10
	Consolidated Statements of Equity for the three and nine months ended September 30, 2021 and 2020 (unaudited)	11
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)	13

	FINANCIAL STATEMENTS OF SL GREEN OPERATING PARTNERSHIP, L.P.
	Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	16
	Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (unaudited)	18
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020 (unaudited)	19
	Consolidated Statements of Capital for the three and nine months ended September 30, 2021 and 2020 (unaudited)	20
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)	22
	Notes to Consolidated Financial Statements (unaudited)	24
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	66
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	82
Item 4.	Controls and Procedures (SL Green Realty Corp. and SL Green Operating Partnership, L.P.)	83
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	84
Item 1A.	Risk Factors	84
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	86
Item 4.	Mine Safety Disclosures	87
Item 5.	Other Information	88
Item 6.	Exhibits	89
	Signatures	90

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)


	September 30, 2021		December 31, 2020
	(unaudited)
Assets
Commercial real estate properties, at cost:
Land and land interests	$	1,489,101	$	1,315,832
Building and improvements	3,828,052		4,168,193
Building leasehold and improvements	1,649,796		1,448,134
Right of use asset - financing leases	27,445		55,711
Right of use asset - operating leases	498,416		367,209
	7,492,810		7,355,079
Less: accumulated depreciation	(1,904,465)		(1,956,077)
	5,588,345		5,399,002

Cash and cash equivalents	257,941		266,059
Restricted cash	87,992		106,736
Investments in marketable securities	34,428		28,570
Tenant and other receivables	44,964		44,507
Related party receivables	35,674		34,657
Deferred rents receivable	254,277		302,791
Debt and preferred equity investments, net of discounts and deferred origination fees of $6,494 and $11,232 and allowances of $6,630 and $13,213 in 2021 and 2020, respectively	1,052,110		1,076,542
Investments in unconsolidated joint ventures	3,028,084		3,823,322
Deferred costs, net	124,637		177,168
Other assets	347,407		448,213
Total assets (1)	$	10,855,859	$	11,707,567
Liabilities
Mortgages and other loans payable, net	$	1,422,287	$	1,979,972
Revolving credit facility, net	216,902		105,262
Unsecured term loans, net	1,496,583		1,495,275
Unsecured notes, net	899,118		1,248,219
Accrued interest payable	20,777		14,825
Other liabilities	157,375		302,798
Accounts payable and accrued expenses	137,946		151,309
Deferred revenue	120,567		118,572
Lease liability - financing leases	125,168		152,521
Lease liability - operating leases	437,357		339,458
Dividend and distributions payable	23,958		149,294
Security deposits	54,366		53,836

Junior subordinated deferrable interest debentures held by trusts that issued trust preferred securities	100,000		100,000
Total liabilities (1)	5,212,404		6,211,341

Table of Contents

SL Green Realty Corp.

Consolidated Balance Sheets

(in thousands)


	September 30, 2021		December 31, 2020
	(unaudited)
Commitments and contingencies
Noncontrolling interests in Operating Partnership	362,737		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 September 30, 2021 and December 31, 2020	221,932		221,932
Common stock, $0.01 par value, 160,000 shares authorized and 67,926 and 69,534 issued and outstanding at September 30, 2021 and December 31, 2020, respectively (including 1,061 and 1,026 shares held in treasury at September 30, 2021 and December 31, 2020, respectively)	680		716
Additional paid-in-capital	3,774,119		3,862,949
Treasury stock at cost	(126,160)		(124,049)
Accumulated other comprehensive loss	(60,597)		(67,247)
Retained earnings	1,258,232		1,015,462
Total SL Green stockholders' equity	5,068,206		4,909,763
Noncontrolling interests in other partnerships	14,009		26,032
Total equity	5,082,215		4,935,795
Total liabilities and equity	$	10,855,859	$	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: $316.0 million and $41.2 million of land, $341.2 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, $18.5 million and $10.3 million of accumulated depreciation, $293.8 million and $289.5 million of other assets included in other line items, $450.1 million and $94.0 million of real estate debt, net, $1.3 million and $0.7 million of accrued interest payable, $45.4 million and $29.9 million of lease liabilities, and $24.9 million and $56.6 million of other liabilities included in other line items as of September 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 September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues
Rental revenue, net	$	155,363	$	195,515	$	528,063	$	614,032
Investment income	20,072		22,988		59,452		101,464
Other income	29,766		31,341		61,895		102,350
Total revenues	205,201		249,844		649,410		817,846
Expenses
Operating expenses, including related party expenses of $3,563 and $8,827 in 2021 and $2,801 and $9,289 in 2020	40,684		45,910		126,851		140,673
Real estate taxes	32,139		43,522		121,318		131,805
Operating lease rent	6,557		6,973		20,003		22,171
Interest expense, net of interest income	14,807		23,536		57,155		91,100
Amortization of deferred financing costs	2,345		3,151		9,505		8,312
Depreciation and amortization	49,277		92,516		169,534		256,736
Loan loss and other investment reserves, net of recoveries	—		8,957		—		27,018
Transaction related costs	190		45		215		483
Marketing, general and administrative	23,477		23,602		68,426		66,682
Total expenses	169,476		248,212		573,007		744,980

Equity in net loss from unconsolidated joint ventures	(15,487)		(432)		(31,321)		(15,445)
Equity in net loss on sale of interest in unconsolidated joint venture/real estate	(1,280)		—		(5,438)		—
Purchase price and other fair value adjustments	208,810		—		209,527		—
Gain on sale of real estate, net	187,766		26,104		285,338		163,624
Depreciable real estate reserves and impairment	—		(6,627)		(5,696)		(6,627)





Net income	415,534		20,677		528,813		214,418
Net income attributable to noncontrolling interests:
Noncontrolling interests in the Operating Partnership	(22,683)		(802)		(28,489)		(10,073)
Noncontrolling interests in other partnerships	915		(414)		2,454		(1,145)
Preferred units distributions	(1,823)		(1,864)		(5,492)		(6,883)
Net income attributable to SL Green	391,943		17,597		497,286		196,317
Perpetual preferred stock dividends	(3,738)		(3,738)		(11,213)		(11,213)
Net income attributable to SL Green common stockholders	$	388,205	$	13,859	$	486,073	$	185,104






















Basic earnings per share	$	5.77	$	0.19	$	7.08	$	2.51










Diluted earnings per share	$	5.75	$	0.19	$	7.04	$	2.50

Basic weighted average common shares outstanding	66,840		70,943		68,275		73,373
Diluted weighted average common shares and common share equivalents outstanding	71,487		75,414		73,087		77,937

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 September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	415,534	$	20,677	$	528,813	$	214,418
Other comprehensive income (loss):
Increase (decrease) in unrealized value of derivative instruments, including SL Green's share of joint venture derivative instruments	6,615		6,099		6,565		(48,227)
Increase (decrease) in unrealized value of marketable securities	66		389		314		(2,152)
Other comprehensive income (loss)	6,681		6,488		6,879		(50,379)
Comprehensive income	422,215		27,165		535,692		164,039
Net income attributable to noncontrolling interests and preferred units distributions	(23,591)		(3,080)		(31,527)		(18,101)
Other comprehensive (income) loss attributable to noncontrolling interests	(415)		(317)		(229)		2,664
Comprehensive income attributable to SL Green	$	398,209	$	23,768	$	503,936	$	148,602

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 income (loss)													105,343		(1,539)		103,804

Other comprehensive income											384						384
Preferred dividends													(7,475)				(7,475)
DRSPP proceeds				7			467										467

Reallocation of noncontrolling interest in the Operating Partnership													(32,475)				(32,475)

Deferred compensation plan and stock awards, net of forfeitures and tax withholdings				112	2		14,317										14,319


Repurchases of common stock				(2,781)	(28)		(177,972)						(20,887)				(198,887)

Contributions to consolidated joint venture interests															305		305

Cash distributions to noncontrolling interests															(173)		(173)
Issuance of special dividend paid primarily in stock				2,034			123,529										123,529
Cash distributions declared ($1.820 per common share, none of which represented a return of capital for federal income tax purposes)													(125,836)				(125,836)
Balance at June 30, 2021		$	221,932	67,880	$	690	$	3,823,290	$	(124,049)	$	(66,863)	$	934,132	$	24,625	$	4,813,757
Net income (loss)													391,943		(915)		391,028

Other comprehensive income											6,266						6,266
Preferred dividends													(3,738)				(3,738)
DRSPP proceeds				2			146										146

Reallocation of noncontrolling interest in the Operating Partnership													15,230				15,230

Deferred compensation plan and stock awards, net of forfeitures and tax withholdings				(1)			7,932										7,932


Repurchases of common stock				(1,016)	(10)		(57,249)						(20,698)				(77,957)

Contributions to consolidated joint venture interests															5		5
Sale of interest in partially owned entity															(4,476)		(4,476)

Cash distributions to noncontrolling interests															(5,230)		(5,230)
Issuance of special dividend paid primarily in stock									(2,111)				2,111				—
Cash distributions declared ($0.910 per common share, none of which represented a return of capital for federal income tax purposes)													(60,748)				(60,748)
Balance at September 30, 2021		$	221,932	66,865	$	680	$	3,774,119	$	(126,160)	$	(60,597)	$	1,258,232	$	14,009	$	5,082,215

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													178,720		730		179,450
Acquisition of subsidiary interest from noncontrolling interest							(3,123)								1,587		(1,536)
Other comprehensive loss											(53,886)						(53,886)
Preferred dividends													(7,475)				(7,475)
DRSPP proceeds				6			364										364
Conversion of units in the Operating Partnership for common stock				98	1		8,743										8,744
Reallocation of noncontrolling interest in the Operating Partnership