SL Green Realty Corp. Reports Fourth Quarter and Full Year 2012 FFO of $1.16 and $5.35 Per Share bef

SL Green Realty Corp. Reports Fourth Quarter and Full Year 2012 FFO of $1.16 and $5.35 Per Share before Transaction Costs and EPS of $0.22 and $1.74 Per Share

NEW YORK--(BUSINESS WIRE)-- SL Green Realty Corp. (NYS: SLG) :


Financial and Operating Highlights

  • Fourth quarter FFO of $1.16 per diluted share before transaction related costs of $0.02 per diluted share compared to prior year FFO of $1.04 per diluted share before transaction related costs of $0.02 per diluted share. Full year FFO of $5.35 per diluted share before transaction related costs of $0.07 per diluted share compared to prior year FFO of $4.88 per diluted share before transaction related costs of $0.08 per diluted share.
  • Fourth quarter net income attributable to common stockholders of $0.22 per diluted share compared to prior year net income of $0.03 per diluted share. Full year net income attributable to common stockholders of $1.74 per diluted share compared to prior year net income of $7.33 per diluted share.
  • Combined same-store cash NOI increased 4.6 percent and 4.8 percent for the fourth quarter and full year, compared to the prior year, an increase of $6.7 million and $27.6 million, respectively.
  • Signed 54 Manhattan office leases totaling 321,622 square feet during the fourth quarter. The mark-to-market on office leases signed in Manhattan was 4.2 percent higher in the fourth quarter than the previously fully escalated rents on the same office spaces.
  • Year-end occupancy of 93.8 percent in Manhattan same-store properties compared to 93.0 percent at year-end 2011 and 93.3 percent at September 30, 2012.
  • Signed 25 Suburban office leases totaling 109,410 square feet during the fourth quarter. The mark-to-market on office leases signed in the Suburban portfolio was 6.4 percent lower in the fourth quarter than the previously fully escalated rents on the same office spaces.
  • Year-end occupancy of 81.3 percent in the Suburban portfolio compared to 82.6 percent at year-end 2011 and 81.5 percent at September 30, 2012.

Investing Highlights

  • Extended the ground lease at 673 First Avenue by 50 years to August 2087, significantly enhancing the value of the asset.
  • Formed a joint venture which entered into a 99-year triple net ground lease on 1080 Amsterdam Avenue, Manhattan. The 82,250 square foot building comprising 96 units will be redeveloped into a luxury residential building.
  • Sold a 49.5 percent interest in 521 Fifth Avenue at a gross sales price of $315.0 million. Simultaneous with the sale, refinanced the property with a new $170.0 million mortgage.
  • Acquired the 68,342 square foot retail property anchored by Burberry and Diesel at 131-137 Spring Street in Manhattan's popular SoHo neighborhood, for total consideration of $122.3 million.
  • Acquired a 35.5 percent interest in the 147,619 square foot office property at 315 West 36th Street at a gross purchase price of $45.0 million. The acquisition was financed with a $25.0 million mortgage.
  • Subsequent to the end of the year, sold a 50 percent interest in a mezzanine loan secured by a New York City office property generating $57.8 million of proceeds, inclusive of $12.9 million of income.

Financing Highlights

  • Issued $200.0 million aggregate principal amount of 4.50 percent senior notes due December 1, 2022, generating $198.2 million in net proceeds for the Company.
  • Refinanced the Company's credit facility with a new, lower cost, 5-year $1.2 billion revolving line of credit and a $400 million term loan.
  • Repurchased $22.7 million of the outstanding 5.875 percent notes due 2014 and $19.7 million of the outstanding 6.00 percent notes due 2016, pursuant to a tender offer, resulting in a charge of $3.9 million in the fourth quarter.
  • Added 673 First Avenue, 110 East 42nd Street and 609 Fifth Avenue to the unencumbered asset pool, resulting in a charge of $3.1 million in the fourth quarter.
  • Increased the quarterly common stock dividend by 32 percent to $0.33 per share.

Summary

SL Green Realty Corp. (NYS: SLG) today reported funds from operations, or FFO, of $107.2 million, or $1.14 per diluted share, for the quarter ended December 31, 2012, compared to $90.3 million, or $1.02 per diluted share, for the same quarter in 2011. The Company also reported funds from operations, or FFO, of $490.3 million, or $5.28 per diluted share, for the year ended December 31, 2012, compared to $413.8 million, or $4.80 per diluted share, for the year ended December 31, 2011.

Net income attributable to common stockholders totaled $20.0 million, or $0.22 per diluted share, for the quarter ended December 31, 2012, compared to $2.8 million, or $0.03 per diluted share, for the same quarter in 2011. Full year net income attributable to common stockholders totaled $156.0 million, or $1.74 per diluted share, for the year ended December 31, 2012, compared to $617.2 million, or $7.33 per diluted share, for the year ended December 31, 2011.

Operating and Leasing Activity

For the fourth quarter of 2012, the Company reported revenues and operating income of $350.7 million and $180.2 million, respectively, compared to $328.9 million and $167.5 million, respectively, for the same period in 2011. For the year ended December 31, 2012, the Company reported revenues and operating income of $1.4 billion and $834.0 million, respectively, compared to $1.3 billion and $702.4 million, respectively, for the same period in 2011.

Same-store cash NOI on a combined basis increased by 3.8 percent to $173.6 million for the quarter ended December 31, 2012 as compared to the same period in 2011, after giving consideration to 1515 Broadway as a consolidated property and 521 Fifth Avenue as an unconsolidated joint venture. After giving effect to these same adjustments, consolidated property same-store NOI increased by 3.8 percent to $147.7 million and unconsolidated joint venture property same-store NOI increased 3.4 percent to $25.9 million.

Same-store cash NOI on a combined basis increased by 4.8 percent to $684.2 million for the year ended December 31, 2012 as compared to the same period in 2011, after giving consideration to 1515 Broadway as a consolidated property and 521 Fifth Avenue as an unconsolidated joint venture. After giving effect to these same adjustments, consolidated property same-store cash NOI increased by 4.7 percent to $580.9 million and unconsolidated joint venture property same-store cash NOI increased 4.9 percent to $103.4 million.

Occupancy for the Company's stabilized, same-store Manhattan portfolio at December 31, 2012 was 93.8 percent compared to 93.0 percent at December 31, 2011 and 93.3 percent at September 30, 2012.

During the quarter, the Company signed 54 office leases in its Manhattan portfolio totaling 321,622 square feet. Fourteen leases totaling 131,746 square feet represented office leases that replaced previous vacancy, and 40 office leases comprising 189,876 square feet had average starting rents of $57.99 per rentable square foot, representing a 4.2 percent increase over the previously fully escalated rents on the same office spaces. The average lease term on the Manhattan office leases signed in the fourth quarter was 8.3 years and average tenant concessions were 4.4 months of free rent with a tenant improvement allowance of $36.96 per rentable square foot.

During the quarter, 290,108 square feet of office leases commenced in the Manhattan portfolio, 83,819 square feet of which represented office leases that replaced previous vacancy, and 206,289 square feet of which represented office leases that had average starting rents of $56.96 per rentable square foot, representing a 2.4 percent increase over the previously fully escalated rents on the same office spaces.

Occupancy for the Company's Suburban portfolio was 81.3 percent at December 31, 2012, compared to 82.6 percent at December 31, 2011, prior to the sale of One Court Square in Long Island City, and 81.5 percent at September 30, 2012.

During the quarter, the Company signed 25 office leases in the Suburban portfolio totaling 109,410 square feet. Eleven leases totaling 30,470 square feet represented office leases that replaced previous vacancy, and 14 office leases comprising 78,940 square feet had average starting rents of $31.74 per rentable square foot, representing a 6.4 percent decrease over the previously fully escalated rents on the same office spaces. The average lease term on the Suburban office leases signed in the fourth quarter was 5.2 years and average tenant concessions were 3.2 months of free rent with a tenant improvement allowance of $16.48 per rentable square foot.

During the quarter, 140,803 square feet of office leases commenced in the Suburban portfolio, 32,545 square feet of which represented office leases that replaced previous vacancy, and 108,258 square feet of which represented office leases that had average starting rents of $30.04 per rentable square foot, representing a 7.0 percent decrease over the previously fully escalated rents on the same office spaces.

Significant leases that were signed during the fourth quarter included:

  • New lease on 57,359 square feet with Emerge212 3CC LLC for 15 years at 3 Columbus Circle;
  • Early renewal on 44,646 square feet with Seven Eleven Car Park LLC for 10 years at 711 Third Avenue;
  • New lease on 38,026 square feet with Robert Half International, Inc. for 11 years at 125 Park Avenue;
  • Renewal and expansion on 29,397 square feet with Everest Reinsurance Company for 10 years at 461 Fifth Avenue;
  • New lease on 22,047 square feet with Microsoft Corporation for 10.3 years at 641 Sixth Avenue; and
  • Early renewal on 17,000 square feet with Blaire Corporation for 10.4 years at 6 Landmark Square, Stamford, CT.

Marketing, general and administrative, or MG&A, expenses for the quarter ended December 31, 2012 were $21.4 million, or 5.2 percent of total revenues including the Company's share of joint venture revenue compared to $18.7 million, or 4.9 percent for the quarter ended December 31, 2011. MG&A expenses for the fourth quarter of 2012 included contributions totaling $430,000 to Hurricane Sandy-related charities. MG&A for the year ended December 31, 2012 was $82.8 million, or 5.1 percent of total revenues including the Company's share of joint venture revenue compared to $80.1 million, or 5.4 percent for the year ended December 31, 2011.

Real Estate Investment Activity

In October 2012, the Company extended the ground lease at 673 First Avenue to August 2087, an additional 50 years past its scheduled 2037 expiration date, ensuring the Company's ability to control the property and significantly enhancing its value.

In October 2012, the Company, formed a joint venture which entered into a 99-year triple net ground lease on 1080 Amsterdam Avenue, Manhattan, an 82,250 square foot, 96 unit residential building. The joint venture intends to embark on an extensive capital improvement program over the next two years to convert the property into a luxury Upper West Side residential address.

In November 2012, the Company sold a 49.5 percent interest in 521 Fifth Avenue at a gross sales price of $315.0 million and refinanced the property with a new $170.0 million, 7-year mortgage which bears interest at 220 basis points over the 30-day LIBOR for the first 2 years and at a fixed rate of 3.725 percent thereafter. This transaction generated $84.8 million in proceeds for the Company and resulted in a gain on sale of $19.4 million.

In December 2012, the Company acquired a 35.5 percent interest in the 147,619 square foot office property at 315 West 36th Street at a gross purchase price of $45.0 million. Simultaneously, the Company closed on a $25.0 million 5-year loan that bears a fixed rate of interest of 3.16 percent.

In December 2012, the Company acquired the 68,342 square foot retail property anchored by Burberry and Diesel located at 131-137 Spring Street in the popular SoHo neighborhood of Manhattan for total consideration of $122.3 million. The property includes prime retail space, office space, 6 residential rental units and 100 feet of ground floor frontage.

Debt and Preferred Equity Investment Activity

The Company's debt and preferred equity investment portfolio totaled $1.4 billion at December 31, 2012. During the fourth quarter, the Company purchased and originated new debt and preferred equity investments totaling $291.6 million, all of which are collateralized by New York City commercial office properties, and recorded $13.0 million of principal reductions from investments that were sold, repaid or otherwise resolved. The debt and preferred equity investment portfolio had a weighted average maturity of 2.2 years as of December 31, 2012 and had a weighted average yield during the quarter ended December 31, 2012 of 9.88 percent.

In January 2013, the Company sold a 50 percent interest in a mezzanine loan secured by a New York City office property at 97 percent of par value, generating $57.8 million of proceeds to the Company, inclusive of $12.9 million of income.

Financing and Capital Activity

In November 2012, the Company closed on a new $1.6 billion credit facility, which refinanced, extended and upsized the Company's previous $1.5 billion revolving credit facility that was put in place in November 2011. The new facility consists of a $1.2 billion revolving line of credit and a $400 million term loan, which currently bear interest at 145 basis points over LIBOR and 165 basis points over LIBOR, respectively. The facility now has an extended maturity date of March 2018, inclusive of the Company's aggregate one-year as of right extension option on the revolving line of credit.

In November 2012, the Company closed an offering of $200.0 million aggregate principal amount of 4.50 percent senior notes due December 1, 2022. This offering generated $198.2 million in net proceeds for the Company.

In December 2012, the Company repurchased $22,680,000 of Reckson's outstanding 5.875 percent notes due 2014 and $19,692,000 of Reckson's outstanding 6.00 percent notes due 2016, pursuant to a tender offer, resulting in a charge of $3.9 million in the fourth quarter.

In the fourth quarter, the Company also added 673 First Avenue, 110 East 42nd Street and 609 Fifth Avenue to the unencumbered asset pool, resulting in a charge of $3.1 million in the fourth quarter.

Dividends

During the fourth quarter of 2012, the Company declared quarterly dividends on its outstanding common and preferred stock as follows:

  • $0.33 per share of common stock, which was paid on January 15, 2013 to stockholders of record on the close of business on January 2, 2013;
  • $0.4766 per share on the Company's Series C Preferred Stock for the period October 15, 2012 through and including January 14, 2013, which was paid on January 15, 2013 to stockholders of record on the close of business on January 2, 2013, and reflects the regular quarterly dividend which is the equivalent of annualized dividend of $1.9064 per share; and
  • $0.40625 per share on the Company's Series I Preferred Stock for the period October 15, 2012 through and including January 14, 2013, which was paid on January 15, 2013 to stockholders of record on the close of business on January 2, 2013, and reflects the regular quarterly dividend which is the equivalent of annualized dividend of $1.625 per share.

Conference Call and Audio Webcast

The Company's executive management team, led by Marc Holliday, Chief Executive Officer, will host a conference call and audio webcast on Thursday, January 31, 2013 at 2:00 pm EST to discuss the financial results.

The Supplemental Package will be available prior to the quarterly conference call on the Company's website, www.slgreen.com, under "Financial Reports" in the Investors section.

The live conference will be webcast in listen-only mode on the Company's web site under "Event Calendar & Webcasts" in the Investors section and on Thomson's StreetEvents Network. The conference may also be accessed by dialing 866.271.0675 Domestic or 617.213.8892 International, using pass-code "SL Green."

A replay of the call will be available through February 7, 2013 by dialing 888.286.8010 Domestic or 617.801.6888 International, using pass-code 66429574.

Company Profile

SL Green Realty Corp., New York City's largest office landlord, is the only fully integrated real estate investment trust, or REIT, that is focused primarily on acquiring, managing and maximizing value of Manhattan commercial properties. As of December 31, 2012, SL Green owned interests in 85 Manhattan properties totaling 40.8 million square feet. This included ownership interests in 27.8 million square feet of commercial properties and debt and preferred equity investments secured by 13.0 million square feet of properties. In addition to its Manhattan investments, SL Green holds ownership interests in 31 suburban assets totaling 5.4 million square feet in Brooklyn, Long Island, Westchester County, Connecticut and New Jersey, along with four development properties in the suburbs encompassing approximately 0.5 million square feet. The Company also has ownership interests in 31 properties totaling 4.5 million square feet in southern California.

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 on pages 11 and 12 of this release and in the Company's Supplemental Package.

Forward-looking Statement

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this press release are forward-looking statements. All forward-looking statements speak only as of the date of this press release. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance, achievements or transactions of the Company to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors relate to, among others, the strength of the commercial office real estate markets in the New York Metropolitan area, reduced demand for office space, unanticipated increases in financing and other costs, competitive market conditions, unanticipated administrative costs, divergent interests from or the financial condition of our joint venture partners, timing of leasing income, general and local economic conditions, interest rates, capital market conditions, tenant bankruptcies and defaults, the availability and cost of comprehensive insurance, including coverage for terrorist acts, environmental, regulatory and/or safety requirements, and other factors, all of which are beyond the Company's control. Additional information or factors that could affect the Company and the forward-looking statements contained herein are included in the Company's filings with the Securities and Exchange Commission. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.


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SL GREEN REALTY CORP.

CONSOLIDATED STATEMENTS OF INCOME-UNAUDITED

(Amounts in thousands, except per share data)

 
Three Months Ended

December 31,

Twelve Months Ended

December 31,

2012         2011 2012         2011
Revenues:
Rental revenue, net $ 268,067 $ 253,343 $ 1,077,976 $ 961,935
Escalation and reimbursement 41,362 41,152 167,388 145,596
Investment and preferred equity income 31,500 22,162 119,155 120,418
Other income 9,805   12,222   35,736   35,479  
Total revenues 350,734   328,879   1,400,255   1,263,428  
Expenses:
Operating expenses (including approximately $5,187 and $18,101 (2012) and $5,252 and $16,266 (2011) paid to related parties) 72,198 71,916 298,322 263,709
Real estate taxes 52,874 45,497 210,467 174,454
Ground rent 11,296 8,810 37,866 32,919
Interest expense, net of interest income 82,277 78,876 330,569 285,917
Amortization of deferred financing costs 7,824 4,649 19,450 14,118
Depreciation and amortization 93,765 74,951 332,028 277,345
Loan loss and other investment reserves, net of recoveries --- 8,592 564 6,722
Transaction related costs 1,227 1,741 5,625 5,561
Marketing, general and administrative 21,372   18,728   82,840   80,103  
Total expenses 342,833   313,760   1,317,731   1,140,848  
Income from continuing operations before equity in net income of unconsolidated joint ventures, noncontrolling interests and discontinued operations 7,901 15,119 82,524 122,580
Equity in net income (loss) from unconsolidated joint ventures (4,570 ) (6,080 ) 76,418 1,583
Equity in net gain (loss) on sale of interest in unconsolidated joint venture/ real estate 19,277 (114 ) 37,053 2,918
Purchase price fair value adjustment --- 8,306 --- 498,195
Gain (loss) on investment in marketable securities 2,703 4,999 4,940 4,866
Depreciable real estate reserves --- (5,789 ) --- (5,789 )
Gain (loss) on early extinguishment of debt (6,978 ) ---   (6,978 ) 904  
Income from continuing operations 18,333 16,441 193,957 625,257
Net income from discontinued operations 9,127 1,115 9,116 5,780
Gain on sale of discontinued operations ---   ---   6,627   46,085  
Net income 27,460 17,556 209,700 677,122
Net income attributable to noncontrolling interests in the operating partnership (721 ) (683 ) (5,597 ) (14,629 )
Preferred unit distributions (574 ) --- (2,107 ) ---
Net (income) loss attributable to noncontrolling interests in other partnerships 1,202   (6,519 ) (5,591 ) (15,083 )
Net income attributable to SL Green 27,367 10,354 196,405 647,410
Preferred stock redemption costs --- --- (10,010 ) ---
Preferred stock dividends (7,407 ) (7,545 ) (30,411 ) (30,178 )
Net income attributable to SL Green common stockholders $ 19,960   $ 2,809   $ 155,984   $ 617,232  
 
Earnings Per Share (EPS)
Net income per share (Basic) $ 0.22 $ 0.03 $ 1.75 $ 7.37
Net income per share (Diluted) $ 0.22   $
TWX +0.08 77.03

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