SEC Filing | SL Green Realty Corp.

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slg-20220930

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, 2022

☐ 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 3, 2022, 64,316,051 shares of SL Green Realty Corp.'s common stock, par value $0.01 per share, were outstanding. As of November 3, 2022, 306,987 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, 2022 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 the 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, 2022, the Company owns 94.48% 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, 2022, noncontrolling investors held, in aggregate, a 5.52% 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 2, 2021, our Board of Directors declared an ordinary dividend of $0.3108 per share and a special dividend of $2.4392 per share (together, "the Total Dividend"). The Total Dividend was paid on January 18, 2022 to shareholders of record at the close of business on December 15, 2021 ("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 $0.3976 in cash and 0.0295 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 0.0345 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, 2022 of $79.71 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 21, 2022. On January 10, 2022, 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 1.03060-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	6

	FINANCIAL STATEMENTS OF SL GREEN REALTY CORP.
	Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	6
	Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)	8
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021 (unaudited)	9
	Consolidated Statements of Equity for the three and nine months ended September 30, 2022 and 2021 (unaudited)	10
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)	12

	FINANCIAL STATEMENTS OF SL GREEN OPERATING PARTNERSHIP, L.P.
	Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	15
	Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)	17
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021 (unaudited)	18
	Consolidated Statements of Capital for the three and nine months ended September 30, 2022 and 2021 (unaudited)	19
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)	21
	Notes to Consolidated Financial Statements (unaudited)	24
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	61
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	77
Item 4.	Controls and Procedures (SL Green Realty Corp. and SL Green Operating Partnership, L.P.)	78
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	79
Item 1A.	Risk Factors	79
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	81
Item 4.	Mine Safety Disclosures	82
Item 5.	Other Information	83
Item 6.	Exhibits	84
	Signatures	85

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, 2022		December 31, 2021
	(unaudited)
Assets
Commercial real estate properties, at cost:
Land and land interests	$	1,715,371	$	1,350,701
Building and improvements	5,028,486		3,671,402
Building leasehold and improvements	1,676,811		1,645,081

Right of use asset - operating leases	1,041,661		983,723
	9,462,329		7,650,907
Less: accumulated depreciation	(2,005,922)		(1,896,199)
	7,456,407		5,754,708
Assets held for sale	—		140,855
Cash and cash equivalents	201,267		251,417
Restricted cash	183,811		85,567
Investments in marketable securities	16,535		34,752
Tenant and other receivables	41,334		47,616
Related party receivables	27,287		29,408
Deferred rents receivable	252,555		248,313
Debt and preferred equity investments, net of discounts and deferred origination fees of $1,994 and $5,057 and allowances of $6,630 and $6,630 in 2022 and 2021, respectively	663,985		1,088,723
Investments in unconsolidated joint ventures	3,185,800		2,997,934
Deferred costs, net	115,952		124,495
Other assets	571,117		262,841
Total assets (1)	$	12,716,050	$	11,066,629
Liabilities
Mortgages and other loans payable, net	$	3,229,016	$	1,394,386
Revolving credit facility, net	442,816		381,334
Unsecured term loans, net	1,242,994		1,242,002
Unsecured notes, net	599,662		899,308
Accrued interest payable	18,705		12,698
Other liabilities	312,564		195,390
Accounts payable and accrued expenses	175,203		157,571
Deferred revenue	280,251		107,275
Lease liability - financing leases	103,888		102,914
Lease liability - operating leases	911,756		851,370
Dividend and distributions payable	24,362		187,372
Security deposits	50,926		52,309
Liabilities related to assets held for sale	—		64,120
Junior subordinated deferrable interest debentures held by trusts that issued trust preferred securities	100,000		100,000
Total liabilities (1)	7,492,143		5,748,049

Table of Contents

SL Green Realty Corp.

Consolidated Balance Sheets

(in thousands)


	September 30, 2022		December 31, 2021
	(unaudited)
Commitments and contingencies
Noncontrolling interests in Operating Partnership	293,743		344,252
Preferred units	177,943		196,075

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, 2022 and December 31, 2021	221,932		221,932
Common stock, $0.01 par value, 160,000 shares authorized and 65,376 and 65,132 issued and outstanding at September 30, 2022 and December 31, 2021, respectively (including 1,060 and 1,027 shares held in treasury at September 30, 2022 and December 31, 2021, respectively)	655		672
Additional paid-in-capital	3,780,286		3,739,409
Treasury stock at cost	(128,655)		(126,160)
Accumulated other comprehensive income (loss)	57,574		(46,758)
Retained earnings	755,862		975,781
Total SL Green stockholders' equity	4,687,654		4,764,876
Noncontrolling interests in other partnerships	64,567		13,377
Total equity	4,752,221		4,778,253
Total liabilities and equity	$	12,716,050	$	11,066,629

(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 $193.4 million of land, $321.0 million and $336.9 million of building and improvements, $— million and $— million of building and leasehold improvements, $15.4 million and $15.4 million of right of use assets, $13.5 million and $11.7 million of accumulated depreciation, $615.0 million and $574.4 million of other assets included in other line items, $326.4 million and $418.9 million of real estate debt, net, $0.1 million and $0.8 million of accrued interest payable, $15.3 million and $15.3 million of lease liabilities, and $152.0 million and $145.2 million of other liabilities included in other line items as of September 30, 2022 and December 31, 2021, 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,
	2022		2021		2022		2021
Revenues
Rental revenue, net	$	162,952	$	155,363	$	474,215	$	528,063
Investment income	29,513		20,072		69,808		59,452
Other income	19,991		29,766		57,842		61,895
Total revenues	212,456		205,201		601,865		649,410
Expenses
Operating expenses, including related party expenses of $— and $5,695 in 2022, and $3,563 and $8,827 in 2021	45,011		40,684		127,151		126,851
Real estate taxes	35,111		32,139		96,677		121,318
Operating lease rent	7,388		6,557		20,429		20,003
Interest expense, net of interest income	21,824		14,807		51,854		57,155
Amortization of deferred financing costs	2,043		2,345		5,908		9,505
Depreciation and amortization	48,462		49,277		142,359		169,534

Transaction related costs	292		190		321		215
Marketing, general and administrative	21,276		23,477		69,574		68,426
Total expenses	181,407		169,476		514,273		573,007

Equity in net loss from unconsolidated joint ventures	(21,997)		(15,487)		(31,262)		(31,321)
Equity in net loss on sale of interest in unconsolidated joint venture/real estate	—		(1,280)		(131)		(5,438)
Purchase price and other fair value adjustments	(1,117)		208,810		(7,348)		209,527
Gain (loss) on sale of real estate, net	4,276		187,766		(61,104)		285,338
Depreciable real estate reserves and impairment	—		—		—		(5,696)





Net income (loss)	12,211		415,534		(12,253)		528,813
Net loss (income) attributable to noncontrolling interests:
Noncontrolling interests in the Operating Partnership	(491)		(22,683)		1,831		(28,489)
Noncontrolling interests in other partnerships	993		915		(2,269)		2,454
Preferred units distributions	(1,598)		(1,823)		(4,844)		(5,492)
Net income (loss) attributable to SL Green	11,115		391,943		(17,535)		497,286
Perpetual preferred stock dividends	(3,738)		(3,738)		(11,213)		(11,213)
Net income (loss) attributable to SL Green common stockholders	$	7,377	$	388,205	$	(28,748)	$	486,073






















Basic earnings (loss) per share	$	0.11	$	5.95	$	(0.47)	$	7.29










Diluted earnings (loss) per share	$	0.11	$	5.91	$	(0.47)	$	7.24

Basic weighted average common shares outstanding	63,949		64,856		63,971		66,248
Diluted weighted average common shares and common share equivalents outstanding	68,897		69,496		69,249		71,049

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,
	2022		2021		2022		2021
Net income (loss)	$	12,211	$	415,534	$	(12,253)	$	528,813
Other comprehensive income:
Increase in unrealized value of derivative instruments, including SL Green's share of joint venture derivative instruments	50,488		6,615		111,378		6,565
Increase (decrease) in unrealized value of marketable securities	1,605		66		(642)		314
Other comprehensive income	52,093		6,681		110,736		6,879
Comprehensive income	64,304		422,215		98,483		535,692
Net income attributable to noncontrolling interests and preferred units distributions	(1,096)		(23,591)		(5,282)		(31,527)
Other comprehensive income attributable to noncontrolling interests	(3,114)		(415)		(6,404)		(229)
Comprehensive income attributable to SL Green	$	60,094	$	398,209	$	86,797	$	503,936

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 Income		Retained Earnings		Noncontrolling Interests		Total
Balance at June 30, 2022		$	221,932	64,302	$	655	$	3,801,272	$	(128,655)	$	8,595	$	779,999	$	64,966	$	4,748,764
Net income													11,115		(993)		10,122
Acquisition of subsidiary interest from noncontrolling interest							(29,742)								(75)		(29,817)
Other comprehensive income											48,979						48,979
Preferred dividends													(3,738)				(3,738)
DRSPP proceeds				3			140										140

Reallocation of noncontrolling interest in the Operating Partnership													28,624				28,624

Deferred compensation plan and stock awards, net of forfeitures and tax withholdings				11			8,616										8,616




Contributions to consolidated joint venture interests															817		817

Cash distributions to noncontrolling interests															(148)		(148)

Cash distributions declared ($0.932 per common share, none of which represented a return of capital for federal income tax purposes)													(60,138)				(60,138)
Balance at September 30, 2022		$	221,932	64,316	$	655	$	3,780,286	$	(128,655)	$	57,574	$	755,862	$	64,567	$	4,752,221

	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 June 30, 2021		$	221,932	65,866	$	690	$	3,823,290	$	(124,049)	$	(66,863)	$	934,132	$	24,625	$	4,813,757
Net income													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				(986)	(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 ($0.938 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	64,881	$	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 Income		Retained Earnings		Noncontrolling Interests		Total
Balance at December 31, 2021		$	221,932	64,105	$	672	$	3,739,409	$	(126,160)	$	(46,758)	$	975,781	$	13,377	$	4,778,253


Net loss													(17,535)		2,269		(15,266)
Acquisition of subsidiary interest from noncontrolling interest							(29,742)								(75)		(29,817)
Other comprehensive income											104,332						104,332
Preferred dividends													(11,213)				(11,213)
DRSPP proceeds				6			339										339

Reallocation of noncontrolling interest in the Operating Partnership													23,539				23,539

Deferred compensation plan and stock awards, net of forfeitures and tax withholdings				215	3		22,144										22,147


Repurchases of common stock				(1,971)	(20)		(114,979)						(36,198)				(151,197)

Contributions to consolidated joint venture interests															52,164		52,164

Cash distributions to noncontrolling interests															(3,168)		(3,168)
Issuance of special dividend paid primarily in stock				1,961			163,115		(2,495)								160,620
Cash distributions declared ($2.797 per common share, none of which represented a return of capital for federal income tax purposes)													(178,512)				(178,512)
Balance at September 30, 2022		$	221,932	64,316	$	655	$	3,780,286	$	(128,655)	$	57,574	$	755,862	$	64,567	$	4,752,221