SL Green Realty Corp.


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SL Green Realty Corp. Reports Second Quarter 2012 FFO of $1.94 Per Share Before Transaction Costs and EPS of $1.14 Per Share

SL Green Realty Corp. Reports Second Quarter 2012 FFO of $1.94 Per Share Before Transaction Costs and EPS of $1.14 Per Share


Financial and Operating Highlights



  • Second quarter FFO of $1.94 per diluted share before transaction related costs of $0.02 per diluted share compares with prior year FFO of $1.10 per diluted share before transaction related costs of $0.02 per diluted share. The results reflect additional cash income of $67.9 million, or $0.73 per diluted share, equivalent to profit, from the recapitalization of 717 Fifth Avenue in the second quarter of 2012.

     
  • Second quarter net income attributable to common stockholders of $1.14 per diluted share compares with prior year net income of $6.26 per diluted share. The prior year result included a one-time purchase price fair value adjustment of $6.06 per diluted share.

     
  • Combined same-store NOI increased 1.8 percent for the quarter to $199.5 million and combined same-store cash NOI increased 5.3 percent to $178.9 million as compared to the prior year.

     
  • Signed 57 Manhattan leases totaling 2,284,079 square feet during the second quarter. The mark-to-market on office leases signed in Manhattan was 1.3 percent higher in the second quarter than the previously fully escalated rents on the same office spaces.

     
  • Signed leases included a 1.6 million square-foot lease with Viacom International Inc. at 1515 Broadway. The lease was the largest non-sale leaseback office lease in Manhattan’s history and represented the entirety of the office space at 1515 Broadway.

     
  • Quarter-end occupancy of 93.2 percent in stabilized Manhattan same-store properties as compared to 93.4 percent in the corresponding quarter in the prior year and 93.0 percent at December 31, 2011.

     
  • Signed 27 Suburban leases totaling 257,539 square feet during the second quarter. The mark-to-market on office leases signed in the Suburbs was 18.9 percent lower in the second quarter than the previously fully escalated rents on the same office spaces primarily due to the early renewal on 112,584 square feet with Fuji Film Holdings America Corp. at 200 Summit Lake Drive, Westchester, NY.

     
  • Quarter-end occupancy of 86.0 percent in the Suburban portfolio as compared to 86.4 percent in the corresponding quarter in the prior year and 86.2 percent at December 31, 2011.



Investing Highlights


  • Acquired the 215,000 square foot mixed-use office and retail building located at 304 Park Avenue South for $135.0 million, or $628 per square foot. The property was acquired with approximately $102.0 million of cash and $33.0 million in operating partnership units of SL Green operating partnership.

     
  • Sold 379 West Broadway for $48.5 million resulting in a gain of $6.5 million.

     
  • Subsequent to the end of the quarter, closed on the previously announced sale of One Court Square for $481.1 million, including the assumption by the purchaser of $315.0 million of existing debt.



Financing Highlights



  • Recapitalized the new retail condominium at 717 Fifth Avenue in a transaction that included: a refinancing with a ten-year, $300.0 million, 4.45 percent fixed-rate mortgage and a twelve-year, $290.0 million, 9.0 percent fixed-rate mezzanine loan; the reduction by SL Green of its interest to 10.92 percent; and the redemption of $31.7 million of Series E preferred units of SL Green operating partnership.

     
  • Closed on a seven-year $775.0 million mortgage at 1515 Broadway that bears interest at 285 basis points over LIBOR.

     
  • Closed on a ten-year $230.0 million mortgage at 100 Church Street that bears interest at a fixed rate of 4.675 percent.

     
  • Sold 1.0 million shares of common stock during the second quarter of 2012 for gross proceeds of $79.6 million ($78.4 million of net proceeds after related expenses) at an average price of $78.74 per share.

     
  • Subsequent to the end of the quarter, redeemed all of the $100 million, 7.875 percent Series D Cumulative Redeemable Preferred Stock.


Summary
New York, NY, July 25, 2012 – SL Green Realty Corp. (NYSE: SLG) today reported funds from operations, or FFO, of $179.0 million, or $1.92 per diluted share, for the quarter ended June 30, 2012, compared to $92.9 million, or $1.08 per diluted share, for the same quarter in 2011. The results reflect additional cash income of $67.9 million, or $0.73 per diluted share, equivalent to profit, from the recapitalization of 717 Fifth Avenue in the second quarter of 2012.
Net income attributable to common stockholders totaled $103.0 million, or $1.14 per diluted share, for the quarter ended June 30, 2012, compared to $526.5 million, or $6.26 per diluted share, for the same quarter in 2011.

Operating and Leasing Activity
For the second quarter of 2012, the Company reported revenues and operating income of $349.0 million and $266.8 million, respectively, compared to $298.7 million and $162.7 million, respectively, for the same period in 2011.

Same-store NOI on a combined basis increased by 1.8 percent to $199.5 million for 2012, after giving consideration to 1515 Broadway and 521 Fifth Avenue as consolidated properties, as compared to 2011. Consolidated property same-store NOI increased by 1.0 percent to $169.2 million and unconsolidated joint venture property same-store NOI increased 6.9 percent to $30.3 million.

Same-store cash NOI on a combined basis increased by 5.3 percent to $178.9 million for 2012, after giving consideration to 1515 Broadway and 521 Fifth Avenue as consolidated properties, as compared to 2011. Consolidated property same-store cash NOI increased by 4.8 percent to $151.3 million and unconsolidated joint venture property same-store cash NOI increased 8.3 percent to $27.6 million.

Occupancy for the Company’s stabilized, same-store Manhattan portfolio at June 30, 2012 was 93.2 percent as compared to 93.4 percent at June 30, 2011. During the quarter, the Company signed 50 office leases in its Manhattan portfolio totaling 2,251,230 square feet. Eleven leases totaling 42,174 square feet represented office leases that replaced previous vacancy, and 39 office leases comprising 2,209,056 square feet had average starting rents of $52.63 per rentable square foot, representing a 1.3 percent increase over the previously fully escalated rents on the same office spaces, which was largely driven by the 1.6 million square foot lease with Viacom International Inc. at 1515 Broadway and the renewal of the City of New York for 372,521 square feet at 100 Church. The average lease term on the Manhattan office leases signed in the second quarter was 15.1 years and average tenant concessions were 8.2 months of free rent with a tenant improvement allowance of $49.29 per rentable square foot.

During the quarter, 1,955,729 square feet of office leases commenced in the Manhattan portfolio, 70,537 square feet of which represented office leases that replaced previous vacancy, and 1,885,192 square feet of which represented office leases that had average starting rents of $50.18 per rentable square foot, representing a 0.1 percent increase over the previously fully escalated rents on the same office spaces.

Occupancy for the Company’s Suburban portfolio was 86.0 percent at June 30, 2012, as compared to 86.4 percent at June 30, 2011. Excluding One Court Square, which was sold subsequent to the end of the quarter, the Company’s Suburban portfolio occupancy would be 82.4 percent at June 30, 2012, as compared to 82.9 percent at June 30, 2011.

During the quarter, the Company signed 23 office leases in the Suburban portfolio totaling 239,110 square feet. Six leases totaling 22,388 square feet represented office leases that replaced previous vacancy, and 17 office leases comprising 216,722 square feet had average starting rents of $25.69 per rentable square foot, representing a 18.9 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 second quarter was 5.1 years and average tenant concessions were 8.4 months of free rent with a tenant improvement allowance of $12.87 per rentable square foot.

During the quarter 216,559 square feet of office leases commenced in the Suburban portfolio, 7,450 square feet of which represented office leases that replaced previous vacancy, and 209,109 square feet of which represented office leases that had average starting rents of $25.25 per rentable square foot, representing a 20.1 percent decrease over the previously fully escalated rents on the same office spaces.

Significant leases that were signed during the second quarter included:

  • Early renewal and expansion on 1.6 million square feet with Viacom International Inc. for 15.3 years at 1515 Broadway bringing the total remaining lease term to 19 years;
  • Early renewal on 372,521 square feet with The City of New York Law and Business for 20.4 years at 100 Church Street;
  • Early renewal and expansion on 87,677 square feet with Cohen & Steers, Inc. for 10 years at 280 Park Avenue;
  • New lease on 36,823 square feet with Yext, Inc. for 7.7 years at One Madison Avenue;
  • Early renewal on 112,584 square feet with Fuji Film Holdings America Corp. for 6.3 years at 200 Summit Lake Drive, Westchester, NY; and
  • Early renewal on 46,032 square feet with Nomura Holdings for 5.8 years at 1100 King Street, Westchester, NY.

Marketing, general and administrative, or MG&A, expenses for the quarter ended June 30, 2012 were $20.7 million, or 5.1 percent of total revenues including the Company’s share of joint venture revenue compared to $22.5 million, or 6.4 percent for the quarter ended June 30, 2011.

Real Estate Investment Activity
In June 2012, SL Green acquired the 215,000 square-foot mixed-use office and retail building located at 304 Park Avenue South for $135.0 million, or $628 per square foot. The property was acquired with approximately $102.0 million of cash and $33.0 million in operating partnership units of SL Green operating partnership.

In April 2012, SL Green, along with its joint venture partner Jeff Sutton, sold 379 West Broadway for $48.5 million, resulting in a gain of $6.5 million.

In July 2012, SL Green, along with its joint venture partner, sold One Court Square for a gross sale price of $481.1 million. The transaction included the assumption by the purchaser of $315.0 million of existing debt.

Debt and Preferred Equity Investment Activity
The Company’s debt and preferred equity investment portfolio totaled $982.2 million at June 30, 2012. During the second quarter, the Company purchased and originated new debt and preferred equity investments totaling $71.3 million, all of which are directly collateralized by New York City commercial office properties, and received $7.1 million of principal reductions from investments that were sold or repaid. In addition, the Company reclassified a first mortgage position, which is collateralized by an office property in London, into real estate held-for-sale as the property is being marketed for sale through a receiver controlled by the Company. The Company recognized additional income of $4.7 million in the quarter as a result of this reclassification. The debt and preferred equity investment portfolio had a weighted average maturity of 2.8 years as of June 30, 2012 and had a weighted average yield for the quarter ended June 30, 2012 of 9.3 percent, exclusive of loans with a net carrying value of $25.1 million, which are on non-accrual status.

Financing and Capital Activity
In June 2012, SL Green, along with its joint venture partner Jeff Sutton, recapitalized the retail condominium at 717 Fifth Avenue in a transaction that included: a refinancing with a ten-year, $300.0 million, 4.45 percent fixed-rate mortgage and a twelve-year, $290.0 million, 9.0 percent fixed-rate mezzanine loan; the reduction by SL Green of its interest to 10.92 percent; and the redemption of $31.7 million of Series E preferred units of SL Green operating partnership.

In April 2012, SL Green closed on a seven-year $775.0 million mortgage at 1515 Broadway. This mortgage bears interest at 285 basis points over the 90-day LIBOR and replaces the previous $447.2 million mortgage that was scheduled to mature in 2014.

In June 2012, SL Green closed on a ten-year $230.0 million mortgage at 100 Church Street. This mortgage bears a fixed rate of interest of 4.675 percent.

In July 2012, SL Green redeemed all 4,000,000 outstanding shares of its 7.875 percent Series D Cumulative Redeemable Preferred Stock on July 13, 2012 at a redemption price of $25.00 per share of preferred stock plus $0.4922 in accumulated and unpaid dividends on such preferred stock through July 14, 2012.

In the second quarter of 2012, SL Green sold 1.0 million shares of common stock for aggregate gross proceeds of $79.6 million ($78.4 million of net proceeds after related expenses). In 2012 to date, SL Green sold 3.9 million shares of common stock for gross proceeds of $304.6 million ($301.1 million of net proceeds after related expenses). The Company’s existing at-the-market equity offering program has $45.4 million of remaining sales capacity.

Dividends

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


  • $0.25 per share of common stock, which was paid on July 13, 2012 to stockholders of record on the close of business on July 2, 2012; and

  • $0.4766 per share on the Company’s Series C Preferred Stock for the period April 15, 2012 through and including July 14, 2012, which was paid on July 13, 2012 to stockholders of record on the close of business on June 30, 2012, and reflects the regular quarterly dividend which is the equivalent of annualized dividend of $1.9064 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, July 26, 2012 at 2:00 pm ET 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 website under “Event Calendar & Webcasts” in the Investors section and on Thomson’s StreetEvents Network. The conference may also be accessed by dialing 800.291.5365 Domestic or 617.614.3922 International, using pass-code “SL Green.”

A replay of the call will be available through August 2, 2012 by dialing 888.286.8010 Domestic or 617.801.6888 International, using pass-code 26568216.

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 June 30, 2012, SL Green owned interests in 71 Manhattan properties totaling more than 39.2 million square feet. This included ownership interests in 27.4 million square feet of commercial properties and debt and preferred equity investments secured by 11.8 million square feet of properties. In addition to its Manhattan investments, SL Green holds ownership interests in 32 suburban assets totaling 6.9 million square feet in Brooklyn, Queens, Long Island, Westchester County, Connecticut and New Jersey, along with four development properties in the suburbs encompassing approximately 0.5 million square feet.

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.

CONTACT
James Mead
Chief Financial Officer
-and-
Heidi Gillette
Investor Relations
(212) 594-2700