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SL Green Realty Corp. Reports Third Quarter 2010 FFO of $1.86 Per Share before Transaction Related Costs and EPS of $1.42 Per S

^{Published on 2010-10-25 15:10:43 - Market Wire}
 

NEW YORK--([ BUSINESS WIRE ])--SL Green Realty Corp. (NYSE: SLG):

Highlights

• Third quarter FFO totaled $1.86 per share (diluted) before transaction related costs, or $1.82 per share (diluted) after transaction related costs, compared to $0.98 per share (diluted) for the third quarter of 2009. The increase related primarily to the $0.81 per share (diluted) gain realized upon the repayment of the first mortgage and senior mezzanine loan on 510 Madison Avenue.
• Net income for the third quarter of 2010 totaled $1.42 per share (diluted) compared to a net loss of $0.03 per share (diluted) in the same period in the prior year. The third quarter of 2010 included $0.44 per share (diluted) relating to a gain on the sale of 19 West 44^th Street and $0.81 per share (diluted) from the aforementioned gain on 510 Madison Avenue.
• Realized a gain of $0.81 per share (diluted) upon the repayment of the first mortgage loan and senior mezzanine loan on 510 Madison Avenue with an outstanding aggregate balance of $249.3 million, which the Company had purchased in December 2009 and February 2010 for $180.5 million. The Company realized an unleveraged internal rate of return in excess of 55% on its investment.
• Made four new structured finance investments for approximately $242.7 million, all of which are directly or indirectly collateralized by commercial office properties. This includes a $131.9 million mortgage purchased at a discount through a consolidated joint venture in which we hold an 88.2% interest. The mortgage encumbers a leasehold interest in a class A office building in Central London, U.K. The property is net leased under a long term lease to an A1 credit rated financial institution.
• Closed on the acquisition of 125 Park Avenue, located in Manhattan, for $330.0 million. In connection with the acquisition, SL Green assumed $146.25 million of in-place financing. The 5.748% interest-only loan matures in October 2014.
• Sold 19 West 44^th Street in Manhattan for $123.2 million and realized a gain on the sale of approximately $35.5 million, or $0.44 per share (diluted).
• In October 2010, issued $345.0 million of 3.00% exchangeable senior notes due 2017, inclusive of the overallotment option, with a 30% conversion premium, resulting in an initial conversion price of $85.81. Net proceeds from the offering were approximately $336.5 million.
• In October 2010, closed on a $125.0 million seven year mortgage to replace the $49.85 million mortgage encumbering 600 Lexington Avenue. The new mortgage bears interest at a rate of 200 basis points over LIBOR and is interest-only for the first 2 years.
• Combined same-store GAAP NOI decreased by 2.8% for the third quarter of 2010 when compared to the third quarter of 2009, which included $6.4 million of lease cancellation income. Excluding lease cancellation income, combined same-store GAAP NOI increased 1.0%.
• Signed 44 Manhattan office leases totaling 510,463 square feet with average starting rents of $41.22 per rentable square foot during the third quarter. Average Manhattan office starting rents increased by 1.3% on these leases over previously fully escalated rents.
• Signed 17 Suburban office leases totaling 206,666 square feet with average starting rents of $29.31 per rentable square foot during the third quarter. Average Suburban office starting rents decreased by 9.1% on these leases over previously fully escalated rents.
• Ended the quarter with a Manhattan occupancy rate of 94.4%, excluding 100 Church Street, on which the Company foreclosed in January 2010.

Summary

SL Green Realty Corp. (NYSE: SLG) today reported funds from operations, or FFO, of $145.3 million, or $1.82 per share (diluted), for the quarter ended September 30, 2010, compared to $78.1 million, or $0.98 per share (diluted), for the same quarter in 2009. The increase related primarily to the $0.81 per share (diluted) gain realized upon the repayment of the first mortgage and senior mezzanine loan on 510 Madison Avenue.

Net income attributable to common stockholders totaled $111.5 million, or $1.42 per share (diluted), for the quarter ended September 30, 2010, compared to a net loss of $2.5 million, or $0.03 per share (diluted), for the same quarter in 2009. The results for the quarter ended September 30, 2010 included $0.44 per share (diluted) relating to a gain on the sale of the 19 West 44^th Street and $0.81 per share (diluted) related to a gain on the repayment of the first mortgage and senior mezzanine loan on 510 Madison Avenue.

Operating and Leasing Activity

For the third quarter of 2010, the Company reported revenues and EBITDA of $323.3 million and $203.5 million, respectively, compared to $245.8 million and $139.3 million in the same period in 2009.

Same-store GAAP NOI on a combined basis decreased by 2.8% for the third quarter of 2010 when compared to the same quarter in 2009, with the consolidated properties decreasing by 4.8% to $124.6 million and the unconsolidated joint venture properties increasing 3.5% to $43.9 million.

Occupancy for the Manhattan portfolio at September 30, 2010 was 94.4% when excluding 100 Church Street, on which the Company foreclosed in January 2010. Including 100 Church Street, occupancy for the Manhattan portfolio was 92.0% at September 30, 2010. During the quarter, the Company signed or commenced 55 leases in the Manhattan portfolio totaling 586,593 square feet, of which 44 leases and 510,463 square feet represented office leases. Average starting Manhattan office rents of $41.22 per rentable square foot on the 510,463 square feet of office leases signed or commenced during the third quarter represented a 1.3% increase over the previously fully escalated rents on the same office spaces. The average lease term was 10.8 years and average tenant concessions were 3.2 months of free rent with a tenant improvement allowance of $18.78 per rentable square foot.

Occupancy for the Suburban portfolio was 87.0% at September 30, 2010. During the quarter, the Company signed or commenced 18 leases in the Suburban portfolio totaling 206,866 square feet, of which 17 leases and 206,666 square feet represented office leases. Average starting Suburban office rents of $29.31 per rentable square foot for the third quarter represented a 9.1% decrease over the previously fully escalated rents on the same office spaces.

Significant leases that were signed or commenced during the third quarter included:

• Early renewal with CBS Broadcasting, Inc. for approximately 281,896 square feet at 555 West 57^th Street;
• New lease with Matinee 52 LLC for approximately 44,201 square feet at 810 Seventh Avenue;
• Early renewal with DeWitt Stern Group, Inc. for approximately 25,880 square feet at 420 Lexington Avenue;
• New lease with Urban Outfitters Inc. for approximately 25,866 square feet at 521 Fifth Avenue;
• New lease with Cohen & Gressler LLP for approximately 22,600 square feet at 800 Third Avenue;
• New lease with RD Management for 22,437 square feet at 810 Seventh Avenue;
• Early renewal with Citibank, N.A. for approximately 82,383 square feet at 750 Washington Boulevard, Connecticut; and
• Early renewal with Pepsico Inc. for approximately 75,090 square feet at 100 Summit Lake Drive, Valhalla, Westchester County, New York.

Marketing, general and administrative, or MG&A, expenses for the quarter ended September 30, 2010 were approximately $18.5 million, compared to approximately $18.9 million for the quarter ended September 30, 2009.

Results for the quarter ended September 30, 2010 included approximately $3.3 million of transaction-related costs which are required to be expensed under accounting guidelines that took effect in 2009. These charges resulted in a $0.04 per share (diluted) charge to earnings.

Real Estate Investment Activity

In August 2010, the Company closed on the acquisition of 125 Park Avenue in Manhattan for $330.0 million. In connection with the acquisition, SL Green assumed $146.25 million of in-place financing. The 5.748% interest-only loan matures in October 2014.

In September 2010, the Company sold the property located at 19 West 44^th Street in Manhattan for $123.2 million and realized a gain on the sale of approximately $35.5 million, or $0.44 per share (diluted). The sale generated approximately $114.6 million of proceeds for the Company.

Financing and Capital Activity

In October 2010, the Company issued $345.0 million of 3.00% exchangeable senior notes due 2017, inclusive of the $45.0 million overallotment option, with a 30% conversion premium, resulting in an initial conversion price of $85.81. The Company received net proceeds from the offering of approximately $336.5 million.

In October 2010, the joint venture that owns 600 Lexington Avenue closed on a $125.0 million seven year mortgage to replace the $49.85 million mortgage assumed upon acquisition of the property. The new mortgage bears interest at a rate of 200 basis points over LIBOR and is interest-only for the first 2 years.

In September 2010, the Company repaid a $104.0 million term loan which had been secured by the Companya™s interest in a structured finance investment.

The Company repurchased approximately $28.7 million of its 3.00% Exchangeable Senior Debentures during the third quarter of 2010. Following the repurchases, approximately $126.9 million aggregate principal amount of these debentures remain outstanding.

Structured Finance Activity

The Companya™s structured finance investments totaled approximately $907.9 million at September 30, 2010, an increase of approximately $122.3 million from the balance at December 31, 2009. The increase resulted from new investments exceeding positions sold, reserved or foreclosed. During the third quarter, the Company made four new structured finance investments for approximately $242.7 million, all of which are directly or indirectly collateralized by commercial office properties, and received paydowns and repayments totaling approximately $273.5 million. In connection with the sale in September 2010, of 510 Madison Avenue by the owner, the first mortgage loan and senior mezzanine loan, which the Company purchased in December 2009 and February 2010 for $180.5 million in the aggregate, was repaid at par. In connection with that repayment the Company realized a gain of approximately $64.8 million, or $0.81 per share (diluted). During the third quarter, the Company also recorded approximately $5.0 million in additional reserves against its structured finance investments which were offset by approximately $3.7 million of recoveries. The structured finance investments currently have a weighted average maturity of 3.8 years and had a weighted average yield for the quarter ended September 30, 2010 of 10.6%, exclusive of loans totaling $126.6 million which are on non-accrual status.

Dividends

During the third quarter of 2010, the Company declared quarterly dividends on its outstanding common and preferred stock as follows:

• $0.10 per share of common stock, which was paid on October 15, 2010 to stockholders of record on the close of business on September 30, 2010; and
• $0.4766 and $0.4922 per share on the Company's Series C and D Preferred Stock, respectively, for the period July 15, 2010 through and including October 14, 2010, which were paid on October 15, 2010 to stockholders of record on the close of business on September 30, 2010, and reflect regular quarterly dividends, which are the equivalent of annualized dividend of $1.9064 and $1.9688, respectively.

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 Tuesday, October 26, 2010 at 2:00 p.m. 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 afinancial reportsa in the investors section.

The live conference will be webcast in listen-only mode on the Company's website under aevent calendar & webcastsa 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 aSL Green.a

A replay of the call will be available through October 31, 2010 by dialing 888.286.8010 Domestic or 617.801.6888 International, using pass-code 59297680.

Supplemental Information

The Supplemental Package outlining the Companya™s third quarter 2010 financial results will be available prior to the quarterly conference call on the Company's website.

Company Profile

SL Green Realty Corp. is a self-administered and self-managed real estate investment trust, or REIT, that predominantly acquires, owns, repositions and manages Manhattan office properties. The Company is the only publicly held REIT that specializes in this niche. As of September 30, 2010, the Company owned interests in 30 New York City office properties totaling approximately 22,324,460 square feet, making it New York's largest office landlord. In addition, at September 30, 2010, SL Green held investment interests in, among other things, eight retail properties encompassing approximately 366,312 square feet, three development properties encompassing approximately 399,800 square feet and two land interests, along with ownership interests in 31 suburban assets totaling 6,804,700 square feet in Brooklyn, Queens, Long Island, Westchester County, Connecticut and New Jersey.

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 212.216.1601.

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 page 10 of this release and in the Companya™s Supplemental Package.

Forward-looking Statement

This press release includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be covered by the safe harbor provisions thereof.All statements, other than statements of historical facts, included in this press release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including such matters as future capital expenditures, dividends and acquisitions (including the amount and nature thereof), development trends of the real estate industry and the Manhattan, Brooklyn, Queens, Westchester County, Connecticut, Long Island and New Jersey office markets, business strategies, expansion and growth of our operations and other similar matters, are forward-looking statements. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate.

Forward-looking statements are not guarantees of future performance and actual results or developments may materially differ, and we caution you not to place undue reliance on such statements.Forward-looking statements are generally identifiable by the use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," "project," "continue," or the negative of these words, or other similar words or terms.

Forward-looking statements contained in this press release are subject to a number of risks and uncertainties which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by forward-looking statements made by us.These risks and uncertainties include the effect of the credit crisis on general economic, business and financial conditions, and on the New York Metro real estate market in particular; dependence upon certain geographic markets; risks of real estate acquisitions, dispositions and developments, including the cost of construction delays and cost overruns; risks relating to structured finance investments; availability and creditworthiness of prospective tenants and borrowers; bankruptcy or insolvency of a major tenant or a significant number of smaller tenants; adverse changes in the real estate markets, including reduced demand for office space, increasing vacancy, and increasing availability of sublease space; availability of capital (debt and equity); unanticipated increases in financing and other costs, including a rise in interest rates; our ability to comply with financial covenants in our debt instruments; our ability to maintain our status as a REIT; risks of investing through joint venture structures, including the fulfillment by our partners of their financial obligations; the continuing threat of terrorist attacks, in particular in the New York Metro area and on our tenants; our ability to obtain adequate insurance coverage at a reasonable cost and the potential for losses in excess of our insurance coverage, including as a result of environmental contamination; and legislative, regulatory and/or safety requirements adversely affecting REITs and the real estate business, including costs of compliance with the Americans with Disabilities Act, the Fair Housing Act and other similar laws and regulations.

Other factors and risks to our business, many of which are beyond our control, are described in our filings with the Securities and Exchange Commission.We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise.

⁽¹⁾ Includes the Companya™s share of joint venture transaction related costs.

⁽¹⁾ Includes wholly owned and joint venture properties.