<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to _____.
Commission File No. 1-13199
SL GREEN REALTY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
Maryland 13-3956775
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
420 Lexington Avenue, New York, New York 10170
(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 restraint was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days Yes X No .
The number of shares outstanding of the registrant's common stock, $0.01 par
value was 24,242,162 at April 21, 2000.
<PAGE>
SL GREEN REALTY CORP.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Condensed Consolidated Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999.................. 3
Condensed Consolidated Statements of Income for the three months ended March 31, 2000 and 1999
(unaudited).................................................................................................. 5
Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2000
(unaudited).................................................................................................. 6
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999
(unaudited).................................................................................................. 7
Notes to Condensed Consolidated Financial Statements (unaudited).............................................. 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................................................ 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................................... 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.................................................................................... 20
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS............................................................ 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................................................... 20
SIGNATURES............................................................................................................. 21
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SL GREEN REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, December 31,
-------- -----------
2000 1999
---- ----
(UNAUDITED) (Note 1)
ASSETS
------
Commercial real estate properties, at cost:
<S> <C> <C>
Land and land interests................................................................... $132,081 $ 132,081
Buildings and improvements ............................................................... 637,168 632,004
Building leasehold........................................................................ 134,304 132,573
Property under capital lease.............................................................. 12,208 12,208
-------- --------
915,761 908,866
Less accumulated depreciation............................................................. (62,965) (56,983)
--------- ---------
852,796 851,883
Properties held for sale.................................................................. --- 25,835
Cash and cash equivalents ................................................................ 10,147 21,561
Restricted cash .......................................................................... 38,713 34,168
Tenant and other receivables, net of allowance of $1,333 and $938 in 2000 and 1999,
respectively ........................................................................... 5,079 5,747
Related party receivables ................................................................ 446 463
Deferred rents receivable, net of reserve for tenant credit loss of $5,322 and $5,377 in
2000 and 1999, respectively............................................................. 40,252 37,015
Investment in and advances to Service Corporation ........................................ 5,695 4,978
Mortgage loans receivable and preferred equity investment ................................ 65,680 20,000
Investments in unconsolidated joint ventures.............................................. 62,021 23,441
Deferred costs, net ...................................................................... 31,542 30,540
Other assets ............................................................................. 11,563 15,611
---------- ----------
Total assets ............................................................................. $1,123,934 $1,071,242
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
SL GREEN REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, December 31,
-------- -----------
2000 1999
---- ----
(Unaudited) (Note 1)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Mortgage notes payable ................................................................... $332,262 $ 352,693
Revolving credit facilities .............................................................. 141,752 83,000
Accrued interest payable ................................................................. 3,158 2,650
Accounts payable and accrued expenses .................................................... 15,753 17,167
Deferred revenue.......................................................................... 1,480 306
Capitalized lease obligations............................................................. 15,090 15,017
Deferred land lease payable............................................................... 12,052 11,611
Dividend and distributions payable ....................................................... 11,962 11,947
Security deposits......................................................................... 17,510 18,905
-------- ------
Total liabilities......................................................................... 551,019 513,296
Commitments and Contingencies.............................................................
Minority interests in Operating Partnership............................................... 42,430 41,494
8% Preferred Income Equity Redeemable SharesSM $0.01 par value $25.00
mandatory liquidation preference, 25,000 authorized and 4,600
outstanding at December 31, 2000 and 1999.............................................. 110,454 110,348
STOCKHOLDERS' EQUITY
--------------------
Common stock, $0.01 par value 100,000 shares
authorized, 24,239 and 24,184 issued and outstanding at March 31, 2000
and December 31, 1999, respectively.................................................... 242 242
Additional paid - in capital.............................................................. 423,032 421,958
Deferred compensation plans............................................................... (6,622) (6,610)
Officers' loans........................................................................... (39) (64)
Retained earnings/(distributions) in excess of earnings .................................. 3,418 (9,422)
----------- -------
Total stockholders' equity ............................................................... 420,031 406,104
----------- ----------
Total liabilities and stockholders' equity................................................ $1,123,934 $1,071,242
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
SL GREEN REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
------------- -------------
REVENUES
<S> <C> <C>
Rental revenue .................................................... $ 46,941 $ 40,217
Escalation and reimbursement revenues ............................. 5,981 4,932
Signage rent ...................................................... 500 210
Investment income ................................................. 1,013 837
Other income ...................................................... 324 466
-------- --------
Total Revenues ................................................. 54,759 46,662
-------- --------
EXPENSES
Operating expenses including $935 (2000) and $756
(1999) to affiliates ......................................... 13,190 11,220
Real estate taxes ................................................. 7,335 7,083
Ground rent ....................................................... 3,183 3,207
Interest .......................................................... 9,492 5,238
Depreciation and amortization ..................................... 7,816 5,438
Marketing, general and administrative ............................. 2,788 2,645
-------- --------
Total Expenses ................................................. 43,804 34,831
-------- --------
Income before equity in net income from Service
Corporation, equity in net income of unconsolidated
joint ventures, gain on sale of rental property and
minority interests ........................................... 10,955 11,831
Equity in net income from Service Corporation ..................... 170 211
Equity in net income of unconsolidated joint ventures ............. 841 --
Gain on sale of rental property ................................... 14,225 --
-------- --------
Income before minority interest ................................... 26,191 12,042
Minority interest:
Operating partnership ....................................... (2,151) (857)
Partially owned properties .................................. -- (572)
-------- --------
Net income before preferred stock dividends ....................... 24,040 10,613
Preferred stock dividends ......................................... (2,300) (2,300)
Preferred stock accretion ......................................... (107) (99)
-------- --------
Net income available to common shareholders ....................... $ 21,633 $ 8,214
======== ========
PER SHARE DATA:
Net income per common share before gain on sale ................... $ 0.30 $ 0.34
Gain on sale ...................................................... 0.59 --
-------- --------
Net income per common share (basic and diluted) ................... $ 0.89 $ 0.34
======== ========
Dividends declared per common share ............................... $ 0.3625 $ 0.35
======== ========
Basic weighted average common shares outstanding .................. 24,220 24,192
======== ========
Diluted weighted average common shares and
common share equivalents outstanding ........................ 26,832 26,664
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
SL GREEN REALTY CORP.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED, AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Retained
Earnings/
Additional Deferred (distributions)
Common Paid In Compensation Officers' In Excess of
Stock Capital Plan Loans Earnings Total
----- ------- ---- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $242 $421,958 $(6,610) $(64) $(9,422) $406,104
Net income 24,040 24,040
Preferred dividend and accretion
requirement (2,407) (2,407)
Proceeds from options exercised 380 380
Deferred compensation plan and stock award 352 (352) ---
Amortization of deferred compensation plan 340 340
Redemption of Units 342 342
Cash distributions declared ($0.3625 per
common share) (8,793) (8,793)
Amortization of officers' loan
25 25
---- -------- -------- ------ ------ --------
BALANCE AT MARCH 31, 2000 (UNAUDITED) $242 $423,032 $(6,622) $(39) $3,418 $420,031
==== ======== ======== ====== ====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
SL GREEN REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
--------------- -------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income ............................................................... $ 24,040 $ 10,613
Adjustments to reconcile net income with net cash provided by operating
activities:
Depreciation and Amortization .......................................... 7,816 5,438
Amortization of discount on mortgage receivable ........................ (24) --
Gain on sale of rental property ........................................ (14,225) --
Equity in net income from Service Corporation .......................... (170) (211)
Equity in net (income) from unconsolidated joint ventures .............. (841) --
Minority interest ...................................................... 2,151 1,429
Deferred rents receivable .............................................. (3,470) (5,865)
Provision for deferred rents and bad debts ............................. 494 1,039
Amortization of officer loans and deferred compensation ................ 365 347
Changes in operating assets and liabilities:
Restricted cash-operations ............................................. 61 1,077
Tenant and other receivables, net....................................... 273 (2,574)
Related party receivables .............................................. 17 182
Deferred costs ......................................................... (2,629) (4,694)
Other assets ........................................................... 3,889 4,645
Accounts payable, accrued expenses and other liabilities ............... (2,301) (541)
Deferred revenue ....................................................... 1,174 1,595
Deferred land lease payable ............................................ 441 441
-------- --------
Net cash provided by operating activities .............................. 17,061 12,921
-------- --------
INVESTING ACTIVITIES:
Additions to land, buildings and improvements .......................... (6,895) (72,330)
Restricted cash-capital improvements.................................... 3,532 --
Restricted cash-investments............................................. (8,138) --
Investment in and advances to Service Corporation ...................... (547) 1,648
Investments in unconsolidated joint ventures ........................... (41,826) --
Distributions from unconsolidated joint ventures ....................... 4,077 --
Proceeds from disposition of rental property, net ...................... 40,582 --
Mortgage loans receivable, net ......................................... (45,655) --
-------- --------
Net cash used in investing activities .................................. (54,870) (70,682)
-------- --------
FINANCING ACTIVITIES:
Repayments of mortgage notes payable and loans ......................... (20,431) (1,584)
Proceeds from senior revolving credit facility ......................... 47,500 98,500
Repayment of senior revolving credit facility .......................... (26,500) (9,500)
Proceeds from PSCC Facility ............................................ 37,752 --
Capitalized lease obligation ........................................... 73 67
Dividends and distributions paid ....................................... (11,954) (11,533)
Proceeds from options exercised ........................................ 380 --
Deferred loan costs .................................................... (425) (3,014)
-------- --------
Net cash provided by financing activities............................... 26,395 72,936
-------- --------
Net (decrease) increase in cash and cash equivalents.................... (11,414) 15,175
Cash and cash equivalents at beginning of period........................ 21,561 6,236
-------- --------
Cash and cash equivalents at end of period ............................. $ 10,147 $ 21,411
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ................................................... $ 8,984 $ 4,021
======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Mortgage note payable assumed in connection with joint venture acquisition $ 45,000
========
Acquired Assets .......................................................... $ 7,714
========
Assumed Liabilities ...................................................... $ 4,861
========
Issuance of common stock as deferred officer compensation ................ $ 352 $ 5,190
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
SL GREEN REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, 2000
1. ORGANIZATION AND BASIS OF PRESENTATION
SL Green Realty Corp. (the "Company"), a Maryland corporation, and SL Green
Operating Partnership, L.P., (the "Operating Partnership"), a Delaware limited
partnership, were formed in June 1997 for the purpose of combining the
commercial real estate business of S.L. Green Properties, Inc. and its
affiliated partnerships and entities. The Operating Partnership received a
contribution of interest in the real estate properties, as well as 95% of the
economic interest in the management, leasing and construction companies (the
"Service Corporation"). The Company qualifies as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended, and operates as a
self-administered, self-managed REIT. A REIT is a legal entity that holds real
estate interests and, through payments of dividends to shareholders, is
permitted to reduce or avoid the payment of Federal income taxes at the
corporate level.
Substantially all of the Company's assets are held by, and its operations
conducted through, the Operating Partnership. The Company is the sole managing
general partner of the Operating Partnership. As of March 31, 2000, minority
investors hold, in the aggregate, a 9.1% limited partnership interest in the
Operating Partnership.
As of March 31, 2000, the Company's wholly-owned portfolio consisted of 20
class B commercial properties encompassing approximately 7.3 million rentable
square feet located primarily in midtown Manhattan, a borough of New York
City ("Manhattan") (the "Properties"). As of March 31, 2000, the weighted
average occupancy (total occupied square feet divided by total available
square feet) of the Properties was 98%. The Company's portfolio also includes
ownership interests in unconsolidated joint ventures which own three Class B
office properties in Manhattan, encompassing approximately 1.8 million
rentable square feet. In addition, the Company continues to manage six office
properties owned by third-parties and affiliated companies encompassing
approximately 1.6 million rentable square feet.
BASIS OF QUARTERLY PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by accounting principles generally accepted in the United States
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included. The 2000 operating results for the periods
presented are not necessarily indicative of the results that may be expected for
the year ending December 31, 2000. These financial statements should be read in
conjunction with the financial statements and accompanying notes included in the
Company's annual report on Form 10-K for the year ended December 31, 1999.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements.
SERVICE CORPORATION
In order to maintain the Company's qualification as a REIT while realizing
income from management, leasing and construction contracts from third parties,
all of the management operations with respect to properties in which the Company
does not own a 100% interest are conducted through an unconsolidated company,
the Service Corporation. The Company, through the Operating Partnership, owns
100% of the non-voting common stock (representing 95% of the total equity) of
the Service Corporation. Through dividends on its equity interest, the Operating
Partnership receives substantially all of the cash flow from the Service
Corporation's operations. All of the voting common stock of the Service
Corporation (representing 5% of the total equity) is held by a Company
affiliate. This controlling interest gives the affiliate the power to elect all
directors of the Service Corporation. The Company accounts for its investment in
the Service Corporation on the equity basis of accounting because it has
significant influence with respect to management and operations, but does not
control the entity.
All of the management, leasing and construction services with respect to the
properties wholly-owned by the Company, are conducted through Management LLC
which is 100% owned by the Operating Partnership.
8
<PAGE>
SL GREEN REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, 2000
PARTNERSHIP AGREEMENT
In accordance with the partnership agreement of the Operating Partnership (the
"Operating Partnership Agreement"), all allocations of distributions and profits
and losses are made in proportion to the percentage ownership interests of the
respective partners. As the managing general partner of the Operating
Partnership, the Company is required to take such reasonable efforts, as
determined by it in its sole discretion, to cause the Operating Partnership to
distribute sufficient amounts to enable the payment of sufficient dividends by
the Company to avoid any Federal income or excise tax at the Company level.
Under the Operating Partnership Agreement each limited partner will have the
right to redeem limited partnership units ("Units") for cash, or if the Company
so elects, shares of common stock. Under the Operating Partnership Agreement,
the Company is prohibited from selling 673 First Avenue and 470 Park Avenue
South through August 2009.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, which are wholly-owned or controlled by the Company. Entities
which are not controlled by the Company are accounted for under the equity
method. All significant intercompany balances and transactions have been
eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATION
Certain 1999 balances have been reclassified to conform with the 2000
presentation.
3. PROPERTY DISPOSITIONS
During the quarter ended March 31, 2000, the Company disposed of the following
office properties to unaffiliated parties.
<TABLE>
<CAPTION>
RENTATBLE Gross Gain
DATE SQUARE SALES ON
SOLD PROPERTY SUBMARKET FEET PRICE SALE
- ---- -------- --------- ---- ----- ----
<S> <C> <C> <C> <C> <C>
2/11/00 29 West 35th Street Garment 78 $11,700 $ 5,017
3/8/00 36 West 44th Street Rockefeller Center 165 31,500 9,208
--- -------- ---------
243 $43,200 $14,225
=== ======= =======
</TABLE>
The Comapny anticipates deferring the taxable gain on 29 West 35th Street
through the use of a 1031 tax deferral mechanism.
4. MORTGAGE LOANS RECEIVABLE AND PREFERRED INVESTMENT
On March 30, 2000, the Company acquired a $51,900 interest in an existing first
mortgage loan collateralized by 2 Grand Central Tower, Manhattan at a discount.
The discount to the face amount of $3,250 and the back-end fees of $3,440 are
being amortized into investment income over the term of the loan. This is a
subordinate participation interest in an existing first mortgage loan currently
held by Credit Suisse First Boston Mortgage Capital, LLC. The loan matures on
September 30, 2000, but can be extended until September 30, 2001. Two Grand
Central Tower, also known as 140-148 East 45th Street and 147-151 East 44th
Street, is an approximately 620,000 square foot commercial office building
located in the heart of the Grand Central submarket.
9
<PAGE>
SL GREEN REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED) (UNAUDITED, AND AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA))
MARCH 31, 2000
5. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
On February 18, 2000, the Company acquired a 49.9 percent interest in a joint
venture which purchased 100 Park Avenue ("100 Park"), an 834,000 square foot,
36-story property, located in Manhattan. The purchase price of $95,800 was
funded through a combination of cash and debt. The Company will provide
managing and leasing services for 100 Park.
On March 1, 2000, the $20,800 mortgage on 90 Broad Street was assigned to a new
lender. The new lender advanced an additional $11,200 to the joint venture. The
two loans were then consolidated, amended and restated into a consolidated
$32,000 mortgage which matures on March 1, 2002. Interest only is payable on the
loan at the rate of LIBOR plus 175 basis points.
The condensed balance sheets for the unconsolidated joint ventures are as
follows:
<TABLE>
<CAPTION>
MARCH 31, December 31,
2000 1999
---- ----
ASSETS
- ------
<S> <C> <C>
Commercial real estate property ......................... $323,682 $130,585
Other assets ............................................ 24,104 14,236
-------- --------
Total assets ............................................ $347,786 $144,821
======== ========
LIABILITIES AND MEMBERS' EQUITY
- -------------------------------
Mortgage payable ........................................ $208,650 $ 85,450
Other liabilities ....................................... 13,746 7,278
Members' equity ......................................... 125,390 52,093
-------- --------
Total liabilities and members' equity ................... $347,786 $144,821
======== ========
Company's net investment in unconsolidated joint ventures $ 62,021 $ 23,441
======== ========
</TABLE>
The condensed statement of operations for the unconsolidated joint ventures is
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 2000
-------------------
<S> <C>
Total revenues.................................... $12,013
------
Operating expense................................. 2,966
Real estate taxes................................. 1,873
Interest.......................................... 3,475
Depreciation and amortization..................... 1,644
Extraordinary item................................ 108
--------
Total expenses............................... $10,066
--------
Net income........................................ $ 1,947
========
Company's equity in earnings of
unconsolidated joint ventures............... $ 841
========
</TABLE>
6. MORTGAGE NOTES PAYABLE
On March 30, 2000, Prudential Securities Credit Corp. ("PSCC") increased the
secured PSCC Facility by $20,000 to $50,000. No other terms were changed from
the original $30,000 secured PSCC Facility. At March 31, 2000, the Company had
availability of $12,248 under its $50,000 PSCC Facility (weighted average
interest rate of 7.38 percent).
10
<PAGE>
SL GREEN REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, 2000
7. INCOME TAXES
The Company is taxed as a REIT under Section 856 through Section 860 of the
Internal Revenue Code of 1986, as amended. As a REIT, the Company is generally
not subject to Federal income tax. The Service Corporation is a taxable
C-corporation and thus may be subject to Federal, state and local corporate
income taxes.
8. STOCKHOLDERS' EQUITY
COMMON SHARES
The following table presents the changes in the Company's issued and outstanding
common shares since December 31, 1999 (excluding 2,408 and 2,428 Units
outstanding at March 31, 2000 and December 31, 1999, respectively, which are
convertible into common shares on a one-for-one basis, or the cash equivalent
thereof, subject to certain restrictions):
<TABLE>
<S> <C>
Outstanding at December 31, 1999................................................ 24,184
Issued through exercise of options.............................................. 18
Issued through redemption of Units.............................................. 20
Issued through deferred compensation plan....................................... 17
------
Outstanding at March 31, 2000................................................... 24,239
======
</TABLE>
OWNERSHIP OF OPERATING PARTNERSHIP
The Company's ownership in the Operating Partnership was approximately 90.9% as
of both March 31, 2000 and December 31, 1999.
RIGHTS PLAN
On February 16, 2000, the Board of Directors of the Company authorized a
dividend distribution of one preferred share purchase right ("Right") for each
outstanding share of common stock which was distributed to all holders of record
of the common stock on March 31, 2000. Each Right entitles the registered holder
to purchase from the Company one one-hundredth of a share of Series B junior
participating preferred stock, par value $0.01 per share ("Preferred Shares"),
at a price of $60.00 per one one-hundredth of a Preferred Share ("Purchase
Price"), subject to adjustment as provided in the rights agreement. The Rights
expire on March 5, 2010, unless the expiration date is extended or the Right is
redeemed or exchanged earlier by the Company.
The Rights are attached to each share of common stock. The rights are generally
exercisable only if a person or group becomes the beneficial owner of 17% or
more of the outstanding common stock or announces a tender offer for 17% or more
of the outstanding stock ("Acquiring Person"). In the event that a person or
group becomes an Acquiring Person, each holder of a Right, excluding the
Acquiring Person, will have the right to receive, upon exercise, common stock
having a market value equal to two times the Purchase Price of the Right.
EARNINGS PER SHARE
Earnings per share is computed as follows:
11
<PAGE>
SL GREEN REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, 2000
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED MARCH 31, 2000 FOR THE QUARTER ENDED MARCH 31, 1999
------------------------------------ ------------------------------------
INCOME SHARES PER SHARE Income Shares Per Share
(NUMERATOR) (DENOMINATOR) AMOUNT (Numerator) (Denominator) Amount
- ------------------------------------- --------------- ------------------ -------------- -------------- ----------------- -----------
Basic Earnings:
<S> <C> <C> <C> <C> <C> <C>
Income available to common
shareholders $21,633 24,220 $0.89 $8,214 24,192 $0.34
Effect of Dilutive Securities:
Redemption of Units to
common shares 2,151 2,419 857 2,428
Stock Options --- 193 --- 44
- ------------------------------------- --------------- ------------------ -------------- -------------- ----------------- -----------
Diluted Earnings:
Income available to common
shareholders $23,784 26,832 $0.89 $9,071 26,664 $0.34
- ------------------------------------- --------------- ------------------ -------------- -------------- ----------------- -----------
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
The Company and the Operating Partnership are not presently involved in any
material litigation nor, to their knowledge, is any material litigation
threatened against them or their properties, other than routine litigation
arising in the ordinary course of business. Management believes the costs, if
any, incurred by the Company and the Operating Partnership related to the
routine litigation will not materially affect the financial position, operating
results or liquidity of the Company and the Operating Partnership.
10. RELATED PARTY TRANSACTIONS
There are business relationships with related parties which involve maintenance
expenses in the ordinary course of business. The Company's transactions with the
related parties amounted to $935 for the three-month period ended March 31,
2000. The Company's transactions with the related parties amounted to $756 for
the three-month period ended March 31, 1999.
11. SEGMENT INFORMATION
The Company is a REIT engaged in owning, managing, leasing and repositioning
class B office properties in Manhattan and has one reportable segment, office
real estate. The Company evaluates real estate performance and allocates
resources based on net income.
The Company's real estate portfolio is located in one geographical market,
namely, Manhattan. The primary sources of revenue are generated from tenant
rents and escalations and reimbursement revenue. Real estate property operating
expenses consist primarily of security, maintenance, utility costs, real estate
taxes and ground rent expense (at certain applicable properties). The single
office real estate business segment meets the quantitative threshold for
determining reportable segments. Additionally, the Company has no tenant with
rental revenue greater than 10% of the Company's annual revenues.
12. PRO FORMA FINANCIAL INFORMATION
The following table summarizes, on an unaudited pro forma basis, the combined
results of operations of the Company for the three months ended March 31, 1999
as though the 1999 acquisitions, including the Tower properties (May 1999) and
the minority interest in 555 West 57th Street (November 1999), were made on
January 1, 1999. There were no material acquisitions during 2000.
<TABLE>
<CAPTION>
1999
----
<S> <C>
Pro forma revenues.................................................... $51,374
Pro forma net income.................................................. $8,241
Pro forma basic earnings per common share............................. $0.34
Pro forma diluted earnings per common share........................... $0.34
Common and common equivalent share - basic............................ 24,184
Common and common equivalent share - diluted.......................... 26,612
</TABLE>
12
<PAGE>
SL GREEN REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, 2000
13. SUBSEQUENT EVENTS
In April 2000, the Company made a $1,000 limited partnership investment in
Internet Realty Partners, L.P. ("IRP"). The Company is committed to fund an
additional $1,000. IRP will invest in real estate-related internet, technology
and e-commerce companies.
On April 5, 2000, SL Green Realty Corp. announced an agreement to co-develop the
repositioning of the Company's property at 321 West 44th Street with Morgan
Stanley Real Estate Fund III. The property, a 203,000 square foot building
located in the burgeoning Times Square submarket of Manhattan, was acquired by
the Company in March 1998. The property was contributed to the joint venture on
a basis that values the property at $28.4 million. Simultaneous with the
initiation of this joint venture, the venture has received a financing
commitment from Lehman Brothers for the acquisition and capital improvement
program. In addition to retaining a 35% economic interest in the property, SL
Green will also act as the operating partner for the venture, responsible for
redevelopment, construction, leasing and management of the property. This is
consistent with SL Green's value added strategy. The joint venture will focus on
the rehabilitation and the repositioning of the property, continuing the
redevelopment program initiated by SL Green.
On April 14, 2000, the Company made a loan in the amount of $10,000 to DPSW West
14 LLC. The loan, which can be increased to $14,000, is secured by the property
located at 17-29 West 14th Street, Manhattan. The initial term of the loan ends
on April 13, 2001, but a one-year extension is available. Interest, payable
monthly, is based on the 30-day LIBOR plus 400 basis points. The loan is
prepayable subject to yield maintenance. The Company will receive a fee for
servicing the loan.
In April, 2000, the Company extended the maturity date of the $26,950 mortgage
encumbering the Madison properties by one year to May 31, 2001.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
This report includes certain statements that may be deemed to be
"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 report that address activities, events or developments that the Company
expects, believes or anticipates will or may occur in the future, including such
matters as future capital expenditures, dividends and acquisitions (including
the amount and nature thereof), expansion and other development trends of the
real estate industry, business strategies, expansion and growth of the Company's
operations and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the Company in
light of its experience and its perception of historical trends, current
conditions, expected future developments and other factors it believes are
appropriate. Such statements are subject to a number of assumptions, risks and
uncertainties, general economic and business conditions, the business
opportunities that may be presented to and pursued by the Company, changes in
laws or regulations and other factors, many of which are beyond the control of
the Company. Any such statements are not guarantees of future performance and
actual results or developments may differ materially from those anticipated in
the forward-looking statements.
The following discussion related to the consolidated financial statements of the
Company should be read in conjunction with the financial statements appearing
elsewhere in this report and the financial statements included in the Company's
1999 annual report on Form 10-K.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 TO THE THREE MONTHS ENDED
MARCH 31, 1999
The following comparison for the three months ended March 31, 2000 ("2000")
compared to the three months ended March 31, 1999 ("1999") makes reference to
the following: (i) the effect of the "Same-Store Properties," which represents
all properties owned by the Company at January 1, 1999, (ii) the effect of the
"1999 Acquisitions," which represents all properties acquired in 1999, namely,
the Madison properties and 555 West 57th Street, and (iii) the effect of the
"2000 Dispositions," which represents all properties disposed of in 2000,
namely, 29 West 35th Street and 36 West 44th Street.
Rental revenue for the three months ended March 31, 2000 totaled $46.9
million representing an increase of $6.7 million compared to $40.2 million
for the three months ended March 31, 1999. The increase is primarily
attributable to the revenue associated with the following: (i) Same-Store
Properties which increased rental revenue $4.2 million, and (ii) the 1999
Acquisitions which increased rental revenue by $2.6 million. This was
partially offset by the 2000 Dispositions which decreased rental revenue by
$0.1 million. These increases at Same-Store Properties were primarily due to
an overall increase in occupancy from 96% in 1999 to 97% in 2000. In
addition, annualized rents from replacement rents on previously occupied
space at Same-Store Properties were 28% higher than previous fully escalated
rents.
Escalation and reimbursement revenue for the three months ended March 31, 2000
totaled $6.0 million representing an increase of $1.1 million compared to $4.9
million for the three months ended March 31, 1999. The increase is primarily
attributable to the revenue associated with the following: (i) Same-Store
Properties which increased revenue by $0.6 million, and (ii) the 1999
Acquisitions which increased revenue by $0.5 million. The 2000 Dispositions had
no impact on escalation and reimbursement revenue. The increase in Same-Store
escalation and reimbursement expense was primarily due to the recovery of
higher utility costs.
Signage revenue for the three months ended March 31, 2000 totaled $0.5 million,
representing an increase of $0.3 million compared to $0.2 million for the three
months ended March 31, 1999. The increase is primarily attributable to 1466
Broadway ($0.3 million).
Investment income totaled $1.0 million for the three months ended March 31, 2000
representing an increase of $0.2 million compared to $0.8 million for the three
months ended March 31, 1999. The investment income for 2000 primarily represents
interest income from 1370 Avenue of the Americas ($0.7 million) and interest
from excess cash on hand ($0.3 million).
Operating expenses for the three months ended March 31, 2000 totaled $13.2
million representing an increase of $2.0 million compared to $11.2 million
for the three months ended March 31, 1999. The increase was primarily
attributable to: (i) Same-Store Properties which increased operating expenses
by $1.0 million, and (ii) the 1999 Acquisitions which increased operating
expenses by $1.1 million. This was partially offset by the 2000 Dispositions
which decreased operating expenses by $0.1 million. The increase in operating
expenses at Same-Store Properties were primarily due to higher utility costs
and repairs and maintenance throughout the portfolio.
14
<PAGE>
Interest expense for the three months ended March 31, 2000 totaled $9.5 million
representing an increase of $4.3 million compared to $5.2 million for the three
months ended March 31, 1999. This increase is primarily attributable to: (i)
Same-Store Properties ($3.8 million) as new secured mortgage financing was
placed on assets in this portfolio, (ii) the 1999 Acquisitions ($1.2 million)
due to mortgage financing associated with these purchases, and (iii) the 2000
Dispositions ($0.3 million) due to the April 1999 mortgage financing associated
with 36 West 44th Street. These increases were partially offset by a $1.0
million decrease in interest expense at the corporate level.
Depreciation and amortization for the three months ended March 31, 2000 totaled
$7.8 million representing an increase of $2.4 million compared to $5.4 million
for the three months ended March 31, 1999. The increase is primarily
attributable to: (i) Same-Store Properties which increased depreciation by $1.7
million, (ii) the 1999 Acquisitions which increased depreciation by $0.7
million, and (iii), an increase in the amortization of deferred finance costs
totaling $0.1 million associated with fees incurred on the Company's 1999
secured mortgage financings. This was partially offset by a reduction in
depreciation and amortization by $0.1 million due to the 2000 Dispositions.
Real estate taxes for the three months ended March 31, 2000 totaled $7.3 million
representing an increase of $0.2 million compared to $7.1 million for the three
months ended March 31, 1999. The increase is primarily attributable to the 1999
Acquisitions which increased real estate taxes by $0.4 million, but was
partially offset by a decrease in real estate taxes at Same-Store Properties
($0.2 million) due to reduced tax assessment rates.
Marketing, general and administrative expense for the three months ended March
31, 2000 totaled $2.8 million representing an increase of $0.2 million compared
to $2.6 million for the three months ended March 31, 1999. The increase is
primarily due to increased annual report and proxy costs ($0.1 million).
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Net cash provided by operating activities increased $4.2 million to $17.1
million for the three months ended March 31, 2000 compared to $12.9 million for
the three months ended March 31, 1999. Net cash used in investing activities
decreased $15.8 million to $54.9 million for the three months ended March 31,
2000 compared to $70.7 million for the three months ended March 31, 1999. The
decrease was due primarily to the lower dollar volume of acquisitions and
capital improvements in 2000 (none and $6.9 million, respectively) as
compared to 1999 ($61.9 million and $10.4 million, respectively). The net
investment in unconsolidated joint ventures ($37.7 million) and mortgage
loans ($45.7 million) was partially offset by the proceeds from the
dispositions of 29 West 35th Street and 36 West 44th Street totaling $40.6
million. Net cash provided by financing activities decreased $46.5 million to
$26.4 million for the three months ended March 31, 2000 compared to $72.9
million for the three months ended March 31, 1999. The decrease was primarily
due to lower borrowing requirements due to lower volume of acquisitions and
higher debt repayments ($46.9 million).
CAPITALIZATION
On February 16, 2000, the Board of Directors of the Company authorized a
dividend distribution of one preferred share purchase right ("Right") for each
outstanding share of common stock under a shareholder rights plan. This
dividend was distributed to all holders of record of the common stock on
March 31, 2000. Each Right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series B junior participating
preferred stock, par value $0.01 per share ("Preferred Shares"), at a price
of $60.00 per one one-hundredth of a Preferred Share ("Purchase Price"),
subject to adjustment as provided in the rights agreement. The Rights expire
on March 5, 2010, unless the expiration date is extended or the Right is
redeemed or exchanged earlier by the Company.
The Rights are attached to each share of common stock. The rights are generally
exercisable only if a person or group becomes the beneficial owner of 17%or more
of the outstanding common stock or announces a tender offer for 17%or more of
the outstanding stock ("Acquiring Person"). In the event that a person or group
becomes an Acquiring Person, each holder of a Right, excluding the Acquiring
Person, will have the right to receive, upon exercise, common stock having a
market value equal to two times the Purchase Price of the Right.
At March 31, 2000, borrowings under the mortgage loans and credit facilities
represented 38.8% of the Company's market capitalization based on a total market
capitalization (debt and equity including preferred stock), assuming conversion
of all operating partnership units, of $1.3 billion (based on a common stock
price of $23 3/4 per share, the closing price of the Company's common stock on
the New York Stock Exchange on March 31, 2000).
15
<PAGE>
The tables below summarize the Company's mortgage debt and line of credit
indebtedness outstanding at March 31, 2000 and December 31, 1999, respectively
(in thousands).
<TABLE>
<CAPTION>
MARCH 31, December 31,
2000 1999
---- ----
DEBT SUMMARY:
BALANCE
<S> <C> <C>
Fixed rate .......................... $250,312 $270,743
Variable rate ....................... 223,702 164,950
======== ========
Total .................................. $474,014 $435,693
======== ========
PERCENT OF TOTAL DEBT:
Fixed rate .......................... 53% 62%
Variable rate ....................... 47% 38%
======== ========
Total .................................. 100% 100%
======== ========
EFFECTIVE INTEREST RATE AT END OF PERIOD
Fixed rate .......................... 7.98% 7.97%
Variable rate ....................... 7.52% 8.08%
======== ========
Effective interest rate ......... 7.79% 8.01%
======== ========
</TABLE>
A majority of the variable rate debt shown above bears interest at an interest
rate based on LIBOR.
MORTGAGE FINANCING
As of March 31, 2000, the Company's total mortgage debt (excluding the Company's
share of unconsolidated debt of approximately $99.4 million) consisted of
approximately $250.3 million of fixed rate debt with an effective interest rate
of approximately 7.98% and $81.9 million of variable rate debt with an effective
interest rate of 7.78%. The Company's mortgage debt at March 31, 2000,
encumbering 13 properties, will mature as follows (in thousands):
<TABLE>
<S> <C>
2000................................................................. $ 29,783
2001................................................................. 60,157
2002................................................................. 6,158
2003................................................................. 8,917
2004................................................................. 78,321
Thereafter........................................................... 148,926
-------
Total....................................................... $ 332,262
---------
</TABLE>
CREDIT FACILITY
At March 31, 2000, the Company had availability of $36.0 million under its
$140.0 million unsecured credit facility (weighted average interest rate of 7.37
percent).
PSCC FACILITY
On March 30, 2000, Prudential Securities Credit Corp. increased the secured PSCC
Facility by $20.0 million to $50.0 million. No other terms were changed from the
original $30.0 million secured PSCC Facility. At March 31, 2000, the Company had
availability of $12.3 million under its $50.0 PSCC Facility (weighted average
interest rate of 7.38 percent).
OTHER
The Company received a commitment for a $250.0 million unsecured credit
facility. The Company expects to close on the credit facility in the second
quarter. However, there can be no assurance that the facility will close in
the timeframe specified.
The Company expects to make distributions to its stockholders primarily based on
its distributions received from the Operating Partnership primarily from
property revenues or, if necessary, from working capital or borrowings.
16
<PAGE>
The Company estimates that for the nine months ending December 31, 2000 and the
year ending December 31, 2001, it will incur approximately $28.7 million and
$18.2 million, respectively, of capital expenditures (including tenant
improvements) on properties currently owned. For the remainder of 2000 and for
2001, over $12.5 million and $9.1 million, respectively, of the capital
investments are dedicated to redevelopment costs associated with properties
acquired at or after the Company's IPO. The Company expects to fund these
capital expenditures with the Credit Facility, additional property level
mortgage financings, operating cash flow and cash on hand. Future property
acquisitions may require substantial capital investments in such properties for
refurbishment and leasing costs. The Company expects that these financing
requirements will be met in a similar fashion. The Company believes that it will
have sufficient capital resources to satisfy its obligations during the next 12
month period. Thereafter, the Company expects that capital needs will be met
through a combination of net cash provided by operations, borrowings, potential
asset sales or additional equity issuances.
To maintain its qualification as a REIT, the Company must make annual
distributions to its stockholders of at least 95 percent of its REIT taxable
income, determined without regard to the dividends paid deduction and by
excluding net capital gains. Moreover, the Company intends to continue to make
regular quarterly distributions to its stockholders which, based upon current
policy, in the aggregate would equal approximately $35.1 million on an
annualized basis. However, any such distribution, whether for Federal income tax
purposes or otherwise, would only be paid out of available cash after meeting
both operating requirements and scheduled debt service on mortgages and loans
payable.
FUNDS FROM OPERATIONS
The revised White Paper on Funds from Operations ("FFO") approved by the Board
of Governors of NAREIT in October 1999 defines FFO as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. The Company believes that FFO is helpful to investors as a measure of
the performance of an equity REIT because, along with cash flow from operating
activities, financing activities and investing activities, it provides investors
with an indication of the ability of the Company to incur and service debt, to
make capital expenditures and to fund other cash needs. The Company computes FFO
in accordance with the current standards established by NAREIT which may not be
comparable to FFO reported by other REIT's that do not define the term in
accordance with the current NAREIT definition or that interpret the current
NAREIT definition differently than the Company. FFO does not represent cash
generated from operating activities in accordance with GAAP and should not be
considered as an alternative to net income (determined in accordance with GAAP)
as an indication of the Company's financial performance or to cash flow from
operating activities (determined in accordance with GAAP) as a measure of the
Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make cash distributions.
FFO for the three months ended March 31, 2000 and 1999, respectively, are as
follows (in thousands):
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Income before minority interest, extraordinary
item, gain on sale and preferred stock dividend $ 11,966 $ 12,042
Add:
Depreciation and amortization .................. 7,816 5,438
FFO adjustment for unconsolidated joint ventures 709 --
Less:
Dividends on preferred shares .................. (2,300) (2,300)
Minority interest in the BMW Building .......... -- (572)
Amortization of deferred financing costs and
depreciation of non-rental real estate assets (1,023) (569)
-------- --------
Funds From Operations - basic .................... $ 17,168 $ 14,039
Dividends on preferred shares .................. 2,300 2,300
-------- --------
Funds From Operations - diluted .................. $ 19,468 $ 16,339
======== ========
Cash flows provided by operating activities ...... $ 17,061 $ 12,921
Cash flows used in investing activities .......... $(54,870) $(70,682)
Cash flows provided by financing activities ...... $ 26,395 $ 72,936
</TABLE>
17
<PAGE>
INFLATION
Substantially all of the office leases provide for separate real estate tax and
operating expense escalations over a base amount. In addition, many of the
leases provide for fixed base rent increases or indexed escalations. The Company
believes that inflationary increases may be at least partially offset by the
contractual rent increases and expense escalations described above.
RECENT DEVELOPMENTS
In April 2000, the Company made a $1.0 million limited partnership investment in
Internet Realty Partners, L.P. ("IRP"). The Company is committed to fund an
additional $1.0 million. IRP will invest in real estate-related internet,
technology and e-commerce companies.
On April 5, 2000, SL Green Realty Corp. announced an agreement to co-develop the
repositioning of the Company's property at 321 West 44th Street with Morgan
Stanley Real Estate Fund III. The property, a 203,000 square foot building
located in the burgeoning Times Square submarket of Manhattan, was acquired by
the Company in March 1998. The property was contributed to the joint venture on
a basis that values the property at $28.4 million. Simultaneous with the
initiation of this joint venture, the venture has received a financing
commitment from Lehman Brothers for the acquisition and capital improvement
program. In addition to retaining a 35% economic interest in the property, SL
Green will also act as the operating partner for the venture, responsible for
redevelopment, construction, leasing and management of the property. This is
consistent with SL Green's value added strategy. The joint venture will focus on
the rehabilitation and the repositioning of the property, continuing the
redevelopment program initiated by SL Green.
On April 14, 2000, the Company made a loan in the amount of $10.0 million to
DPSW West 14 LLC. The loan, which can be increased to $14.0 million, is secured
by the property located at 17-29 West 14th Street, Manhattan. The initial term
of the loan ends on April 13, 2001, but a one-year extension is available.
Interest, payable monthly, is based on the 30-day LIBOR plus 400 basis points.
The loan is prepayable subject to yield maintenance. The Company will receive a
fee for servicing the loan.
In April, 2000, the Company extended the maturity date of the $26.9 million
mortgage encumbering the Madison properties by one year to May 31, 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in interest rates primarily from its floating
rate debt arrangements. The Company currently does not use interest rate
derivative instruments to manage exposure to interest rate changes. A
hypothetical 100 basis point adverse move (increase) in interest rates along the
entire interest rate curve would adversely affect the Company's interest cost by
approximately $2.6 million annually.
The Company may enter into derivative financial instruments such as interest
rate swaps and interest rate collars in order to mitigate its interest rate risk
on a related financial instrument. The Company may designate these derivative
financial instruments as hedges and apply deferral accounting. Gains and losses
related to the termination of such derivative financial instruments are deferred
and amortized to interest expense over the term of the debt instrument. The
Company may also utilize interest rate contracts to hedge interest rate risk on
anticipated debt offerings. These anticipatory hedges are designated, as
effective hedges for identified debt issuances which have a high probability of
occurring. Gains and losses resulting from changes in the market value of these
contracts are deferred and amortized into interest expense over the life of the
related debt instrument. The cost of hedges determined to be ineffective and
hedges not correlated to financings are charged to operations.
Approximately $250.3 million of the Company's long-term debt bears interest at
fixed rates, and therefore the fair value of these instruments is affected by
changes in the market interest rates. The following table presents principal
cash flows (in thousands) based upon maturity dates of the debt obligations and
the related weighted-average interest rates by expected maturity dates for the
fixed rate debt. The interest rates on the variable rate debt as of March 31,
2000 ranged from LIBOR plus 125 basis points to LIBOR plus 275 basis points.
18
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM DEBT,
INCLUDING CURRENT FAIR
PORTION (IN THOUSANDS) 2000 2001 2002 2003 2004 THEREAFTER TOTAL VALUE
- ---------------------------- ---- ---- ---- ---- ---- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate................ $2,833 $5,157 $6,158 $8,917 $78,228 $149,019 $250,312 $250,413
Average Interest Rate..... 7.96% 7.95% 7.94% 7.91% 7.90%
Variable Rate............. $141,752 $81,950 --- --- --- --- $223,702 $223,702
</TABLE>
19
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations Capitalization" above for a discussion of Rights attached
to shares of the Company's Common Stock.
SALE OF UNREGISTERED SECURITIES
The Company's issuance of securities in the transactions referenced
below were not registered under the Securities Act of 1933, pursuant to the
exemption contemplated by Section 4(2) thereof for transactions not involving a
public offering.
The Company issued 16,300 shares of its Common Stock in January 2000
for deferred stock-based compensation.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.1 Form of Purchase and Sale Agreement between The Prudential
Insurance Company of America, as Seller, and SL Green 100 Park
LLC, as Buyer*
2.2 Form of Second Amended and Restated Operating Agreement of SLG
100 Park LLC between The Prudential Insurance Company of
America and SL Green 100 Park LLC*
2.3 Form of Agreement of Spreader, Consolidation and Modification
of Mortgage by SLG 100 Park LLC, as Borrower, to The
Prudential Insurance Company of America, as Lender*
2.4 Form of Amended, Restated and Consolidated Mortgage Note by
SLG 100 Park LLC, as Borrower, to The Prudential Insurance
Company of America, as Lender*
4 Rights Agreement, dated as of March 6, 2000, between SL Green
Realty Corp. and American Stock Transfer & Trust Company,
which includes as Exhibit B thereto, the Form of Rights
Certificates**
12.1 Calculation of Ratios of Combined Fixed Charges and Preferred
Stock Dividends
27.1 Financial Data Schedule
* Incorporated by reference to the Company's Form 8-K dated February 18,
2000, filed with the Commission on March 3, 2000
** Incorporated by reference to the Company's Form 8-K dated February 16,
2000, filed with the Commission on March 16, 2000.
(b) Reports on Form 8-K:
1. Form 8-K dated February 18, 2000, Items 2 and 7
2. Form 8-K dated February 16, 2000, Item 5
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SL GREEN REALTY CORP.
By: /s/ Thomas E. Wirth
-------------------------------
Thomas E. Wirth
Executive Vice President,
Chief Financial Officer
Date: April 28, 2000
<PAGE>
Exhibit 12.1
SL GREEN REALTY CORP.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
SL GREEN REALTY CORP. SL GREEN COMPANY PREDECESSOR
(CONSOLIDATED) (COMBINED)
----------------------------------------------------------------- ----------------------------------------
THREE MONTHS JANUARY 1,
ENDED AUGUST 21, 1997 1997
MARCH 31, YEAR ENDED DECEMBER 31, TO DECEMBER 31, TO AUGUST 20, YEARS ENDED DECEMBER 31,
----------------------------------------------- --------------- ------------- ------------------------
2000 1999 1998 1997 1997 1996 1995
-------------------------------- ------------ --------------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS
Income (loss) from
continuing
operations......... $ 7,408 $33,258 $23,482 $ 6,633 $ (100) $(3,470) $(6,923)
Interest............. 9,135 27,191 11,699 1,637 4,874 7,252 7,338
Portion of rent
expense
representative of
interest........... 2,572 10,300 9,903 497 867 1,344 1,323
Amortization of loan
costs.............. 864 2,278 1,084 110 143 192 200
------- ------- ------- ------- ------ ------- -------
Total earnings..... $19,979 $73,027 $46,168 $ 8,877 $5,784 $ 5,318 $ 1,938
======= ======= ======= ======= ====== ======= =======
FIXED CHARGES AND
PREFERRED STOCK
DIVIDENDS (1)
Interest............. 9,135 27,191 11,699 $ 1,637 4,874 7,252 7,338
Preferred stock
dividends.......... 2,300 9,200 5,720 -- -- -- --
Interest
capitalized........ -- -- -- -- -- -- --
Portion of rent
expense
representative of
interest........... 2,572 10,300 9,903 497 867 1,344 1,323
Amortization of loan
costs expensed..... 864 2,278 1,084 110 143 192 200
------- ------- ------- ------- ------ ------- -------
Total Fixed Charges
and Preferred
Stock
Dividends........ $14,871 $48,969 $28,406 $ 2,244 $5,884 $ 8,788 $ 8,861
======= ======= ======= ======= ====== ======= =======
Ratio of earnings to
combined fixed
charges and
preferred stock
dividends.......... 1.34X 1.49x 1.63x 3.96x (2) (2) (2)
------- ------- ------- ------- ------ ------- -------
</TABLE>
- ------------------------------
(1) Prior to May 18, 1998, no preferred stock had been issued or was
outstanding.
(2) For the period January 1, 1997 to August 20, 1997 and the years ended
December 31, 1996, and 1995, SL Green Predecessor's fixed charge ratios
were deficits of $100, $3,470, and $6,923 respectively.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 10,147
<SECURITIES> 0
<RECEIVABLES> 5,079
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 915,761
<DEPRECIATION> 62,965
<TOTAL-ASSETS> 1,123,934
<CURRENT-LIABILITIES> 0
<BONDS> 332,262
110,454
0
<COMMON> 242
<OTHER-SE> 419,789
<TOTAL-LIABILITY-AND-EQUITY> 1,123,934
<SALES> 0
<TOTAL-REVENUES> 54,759
<CGS> 0
<TOTAL-COSTS> 34,312
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,492
<INCOME-PRETAX> 21,633
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,633
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,633
<EPS-BASIC> 0.89
<EPS-DILUTED> 0.89
</TABLE>
