B U I L D I N G F O R T H E F U T U R E
B U I L D I N G F O R T H E F U T U R E
SL Green Realty Corp.
SL Green Realty Corp.
2018 Annual Report
2018 Annual Report
B
1
Financial Highlights1
21
Years
Listed
48.3M
Total
Square Feet 4
701.7%
TRS
Since IPO
$1.8B
Combined
Revenues
108
Number of
Properties4
260.5%
SNL Office
REIT Index
Total Return to Shareholders
(Includes reinvestment of dividends)
(Based on $100 investment made. $21.00 at IPO, diluted, in dollars)
$6.78
Funds from
Operations Per Share 2
+5.1%
Funds from
Operations Per Share Growth 2, 3
$1.15B
Liquidity
$16.9B
Enterprise
Value
+4.8%
Dividend
Per Share Growth 3
1 Data as of 12 / 31 / 2018.
2 Normalized FFO per share excludes
non-recurring prepayment penalty
associated with early repayment
of the debt at One Madison Avenue.
3 2017 to 2018 year-over-year growth.
4 Includes 34 Debt and Preferred Equity
investments secured by 18.7M square feet.
SLG NYC
in 2018
$1,100
1,000
900
800
700
600
500
400
300
200
100
DEC
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SL GREEN REALTY CORP. S&P 500 NASDAQ INDEX DOW JONES INDUSTRIALS INDEX MSCI U.S. REIT INDEX
START DATE SLG IPO: 8/14/1997
Singularly focused on New York City
real estate, SL Green operates in one of
the most liquid and resilient real estate
markets in the world—and also one of
the most complex and competitive.
An active, transaction-oriented
company committed to excellence and
results, SL Green executes more trans-
actions than its competitors year after
year. Whether working independently
or collaborating with strategic partners,
we are proud of our record of acquiring,
improving, operating and monetizing
properties that bring great value to
our shareholders.
2
Dear
Shareholders,
2018 was another strong year for SL Green and for
the New York City economy that has driven our
success for the past 21 years.
Yet again, SL Green was far and away
the most active player in our market. Over the
course of the year, we signed 180 Manhattan
office leases across 2.3 million square feet, hit
major milestones and announced new world-
class development projects, closed on a number
of key leases in our high street retail portfolio,
moved swiftly on great debt and preferred equity
investment opportunities and disposed of mature
and non-core assets to fund our aggressive
share buyback program that capitalizes on the
unprecedented discount in our stock price.
This level of activity is nothing new for our
best-in-class team, consistent with the hustle and
determination we have shown over the past two
decades to make SL Green the largest and most
profitable owner of office space in New York City.
At our Investor Conference in December we
detailed an unprecedented history of ownership
and investment in an astounding 115 million
square feet of commercial real estate in Manhattan,
primarily in core Midtown. This achievement has
been mapped to show that nearly every block of
prime commercial real estate in East Midtown
has had SL Green’s fingerprints at some point.
Combining everything we currently own, with
what we previously sold, totals approximately
50 million square feet of real property. Our debt
and preferred equity and special servicing
platforms have participated in deals representing
another 65 million square feet of collateral interests.
All told, over the course of our history, SL Green’s
market penetration covers in excess of 25 percent
of the Manhattan office inventory. This unrivaled
scale and scope confirms the Company as
the focused sharp shooter in New York City,
committed to excellence year after year.
SL GREEN REALT Y COR P. ANNUAL REPOR T 2 018
Through all of this incredible work, we
remained true to our core mission of investing,
managing and developing world-class properties
in New York City, dominating the world’s most
important and valuable commercial real estate
market. We continue to take a long-term view
of our business, remaining bullish on the value
of New York, its allure as a global business
address, and the promise of its growth and
talent pool.
And 2018 brought a number of very positive
indicators to support that confidence. In addition to
continued overall and office-using job growth (and
the lowest unemployment rate in the city’s history),
two areas stood out: booming investment in
East Midtown, and the emergence of the technology
sector as one of the pillars of New York’s economy.
Last year was an exceptional one for East
Midtown, where so much of our portfolio is
concentrated. Grand Central led all Midtown
sub-districts in increased leasing volume,
reaffirming our belief that greater East Midtown
remains the most sought-after sub-market in
New York. The most obvious and visible example
of this desirability is the progress of our flagship
One Vanderbilt development project, which is on
track to top out in the second half of this year,
and open for business next year—under budget
and ahead of schedule. In fact, leasing is moving
so swiftly, SL Green had to move fast to reserve
space for our own new headquarters within this
iconic new tower before all of the space we had
targeted was leased! We look forward to relocating
to One Vanderbilt next year and joining our
esteemed roster of tenants in this highly sought
after, efficient and sustainable building.
One Vanderbilt’s early success can be
felt across the district with others following suit:
a joint venture between RXR Realty, TF
Cornerstone and MSD Capital announced a
$3 billion redevelopment of the Grand Hyatt
Hotel adjacent to Grand Central and J.P. Morgan
is moving ahead with its plan to develop a
2.5 million square foot skyscraper at the site of
its current headquarters on Park Avenue. It is an
extraordinary vote of confidence in East Midtown’s
future that two functional, but obsolete, towers
will be torn down, and billions invested, to
bring the most modern product online in what
continues to be regarded as the very best
location in Manhattan.
The city’s tech sector is also having its
moment, maturing into a true pillar of a
diversified New York economy that is no longer
solely reliant on the FIRE sector for growth.
The proof of this sea change is everywhere,
with Google, Facebook, Amazon and Netflix
dramatically expanding their presence in
order to tap into a highly skilled, educated and
Marc Holliday
Chairman &
Chief Executive Officer
Andrew W. Mathias
President
young urban workforce. It’s clear that major
companies like these want to be here because
New York continues to attract the best talent
from around the country and the world. It is
unfortunate that Amazon ultimately decided not
to pursue a headquarters in Long Island City,
and there were mistakes made by all parties that
led to that outcome. But New York’s initial
selection ahead of more than 200 other cities
illustrates that the city has all of the elements
that tech companies demand. We expect
Amazon to continue expanding in Midtown
and that an ever expanding roster of tech
tenants will increasingly look upon the city as
a top location for creative, technologically
advanced office space.
Even the retail sector is showing signs of
resiliency after several years of decline, as
new retailers are attracted to high traffic areas,
3
One Vanderbilt construction progress
despite daily doomsday prognostications.
For properties like ours, where retail rents are
at realistic levels, we have proven there is still
good demand for the best located product as
we continue to see solid performance in our
high street retail portfolio. In fact, the city added
4,000 new retail jobs in 2018 (several hundred
of which can be attributed to SL Green tenants),
reversing shrinking job numbers in 2016 and 2017.
Despite all of this positive momentum,
there is no denying that our share price
continues to display a level of underperformance
that is completely disconnected from the
performance within our operating portfolio
and the unprecedented level of growth in
New York City. In previous years this antipathy
has impacted office REITs across the country,
but in 2018 the challenges more narrowly impacted
New York City-focused REITs. Unfortunately,
some investors continue to see New York as
less attractive due to a misconception that
there is over-supply in this market. The reality
is that while there is some incremental new
supply, the job growth we’ve been experiencing
for more than 9 years has been more than
able to absorb that new inventory and, as a
result, the vacancy rate has been slowly but
steadily declining.
The public market concern stands in stark
contrast to the views and actions of private
market investors. Nearly $50 billion was invested
in New York commercial real estate last year,
targeting the exact type of product that we
invest in and know better than anyone. These
investors are typically looking to invest in
assets with global appeal and credit tenancy,
in a market with enormous depth and liquidity.
We think private investors, which make up the
vast majority of the investment market, have
the market analysis right and we trust that the
public market will eventually recalibrate and
return to a fair valuation for our highly sought-
after assets. Nonetheless, we would all much
prefer to see our efforts embraced by the
public markets and reflected in a higher share
price in the immediate term.
assets, all above Net Asset Value. This strategy
has proven to be accretive to earnings and
Net Asset Value, as well as being sensitive to our
investment grade balance sheet. We believe this
is a program that creates tremendous value for
our investors and we expect to continue this
program until our share price better reflects
the value of our holdings.
SL Green is one of the few companies
in New York — public or private — that sells as
aggressively as we buy. By shedding lower-
growth or non-core assets and replacing them
with investment in higher-quality new investments
or development assets with higher returns, we
are creating a compound benefit for shareholders
as the shares we are repurchasing are increasing
the percentage of all shareholder ownership in
a superior portfolio.
For now, our share price continues to trade
Key to our approach is supplementing our
at a sizable discount relative to the underlying
value of our portfolio. To recapture the difference
between our stock price and this underlying
value, we continued to increase the size of our
share repurchase program last year, bringing
total authorization to $2.5 billion. Since
activating this investment strategy in 2016,
we’ve executed $1.9 billion to date through the
debt neutral sale of non-core and mature
industry-leading operating assets with a steady
development pipeline that will enhance natural
growth in the portfolio by providing additional
earnings as we deliver new projects over the
next three to five years. One Vanderbilt is just
the first piece of a diversified development
pipeline of office, retail and residential projects
in development or already under construction.
We are keeping the One Vanderbilt team
4
5
together to redevelop One Madison into the
premier office building in Midtown South, while
185 Broadway is already under construction
further downtown and Armani will keep its flagship
on Madison Avenue for another generation while
we bring a unique condo product online in
partnership with them. These are all tangible
examples of embedded future earnings
growth and portfolio expansion funded with
internal cash flow, proceeds of asset sales
and third-party investment.
Yet as we’ve advanced more new
development we have also doubled-down on
credit fundamentals, displaying the fiscally
prudent approach that has always characterized
SL Green. We maintained an incredible amount
of liquidity in 2018; our debt to EBITDA ratio
remains in the low 7s, despite the nearly 20 percent
reduction in total enterprise value of the company
to support our share buyback program, and we
continue to boast an investment grade balance
sheet with a strong BBB rating.
As you can see, 2018 was a big year as we
worked tirelessly across all aspects of our company
to generate value for you, our shareholders.
Our plan is for the long-term, however, and there
is a lot to look forward to as our portfolio and
the New York City market remain strong in 2019.
NYC Outlook
The story of our success always begins with the
fundamentals of the New York City economy
and job market, and they are very strong. In
fact, the city remains in the midst of one of the
greatest and most prolonged periods of growth
in its history, with a decade of progress leading
to the current record high employment. All the
stats are pointing in the right direction, albeit
at a slower rate than we have seen in previous
years, but still among the highest rates of growth
in the country.
New York City’s unemployment rate fell
to 4.0 percent by the end of 2018, the lowest
unemployment rate on record, bolstered by an
influx of tech jobs as the city now boasts the
most tech workers in the country, even more
than Silicon Valley. TAMI leasing continues to be
a catalyst for expansion and has helped position
New York City as among the most — if not the
most — desirable locations for tech companies
both large and small. For 2018, total New York
City private-sector jobs were up by 1.9 percent,
matching the national growth rates and achieving
the city’s ninth consecutive year of job creation,
the longest sequence of job gains on record.
In addition, a record high of 65.2 million tourists
visited the city in 2018, fueling more than
37 million hotel room nights sold, a boon for
the hospitality sector and local economy.
In the real estate sector, new commercial
leasing activity in Manhattan rose 45.1 percent
(in the fourth quarter of 2018); the largest
fourth quarter increase on record. New leases
were signed at a record rate, rising to nearly
36 million square feet throughout the city and
to 23.7 million square feet in Midtown alone.
Overall, these figures underpin the city’s status
as a leading global financial center with a
healthy outlook heading into 2019, and that
Midtown continues to attract top-tier companies
looking to grow their businesses. No other
organization is better positioned than SL Green
to continue meeting this demand as we
provide premier, Class-A office space in the
most desirable locations.
2018 Highlights
2018 marked another blockbuster year of SL Green
operating performance and portfolio activity.
As always, the bedrock of our company is
industry-leading occupancy across the biggest
office portfolio in New York City. On that front
2018 was a monumental year, as we signed
more than 180 office leases, representing an
incredible 2.3 million square feet of space,
while maintaining an occupancy rate of nearly
95 percent. Reflecting the breadth of New York’s
economy, leases were executed across diverse
sectors from tech, media and financial services
to insurance, nonprofits and healthcare. These
included major deals at One Vanderbilt, where
TD Securities signed a 118,872 square foot lease,
and McDermott Will & Emery inked a 20-year
lease for 105,539 square feet and at 609 Fifth
Avenue, where WeWork signed 139,000-square-
feet for the entire office portion of the property.
This leasing success was mirrored in our
retail portfolio, where we signed several
top-tier retailers, cementing a 24,000-square-
foot retail lease at 609 Fifth Avenue with sports
brand PUMA, and a lease with Coty Inc., one of
the world’s preeminent beauty conglomerates,
for 10,040-square-feet at 719 Seventh Avenue,
now known as 30 Times Square, the retail flagship
development that SL Green completed in 2017.
In total, the Company executed 21 retail leases
for 96,000 square feet in 2018.
We continued to demonstrate our ability
to undertake complex development projects,
with over $7 billion worth of assets now in
development or redevelopment. At our East
Midtown skyscraper, One Vanderbilt, construction
progress has been just as vigorous as our leasing
activity. As of April 2019, the building superstructure
reached the 60th floor and we just signed
an expansion deal with private equity giant,
The Carlyle Group, to take an additional
33,000 square feet, bringing their total footprint
to 128,000 square feet. The end of last year saw
a flurry of leasing activity, where we secured
229,000 square feet of office commitments, nearly
two years from opening, including TD Securities,
the investment banking arm of anchor tenant
TD Bank, which signed a lease for 119,000 square
feet. A testament to the demand for modern,
transit-oriented office space, the building is
now 56.9 percent leased and well on the way
to our upsized goal of 65 percent leased by
the end of 2019. We also refinanced the
project’s construction facility, increasing its
size by $250 million to $1.75 billion and reducing
the interest rate by 75 basis points. This significant
improvement in terms was due, in large part, to the
rapid pace of leasing and construction progress.
Building on the success of One Vanderbilt,
we announced plans in December to reassemble
the same design and development team — Kohn
Pedersen Fox, Hines and Gensler — for a sweeping
redevelopment of One Madison Avenue, the
Class-A office tower across from Madison Square
Park. A modern 518,000 square foot glass
addition on top of a nine-story redeveloped
podium will add open office space, tenant
specialty floors and over one acre of outdoor
terraces, within a design that is harmonious
with the surrounding Madison Square District.
Showing the company’s versatility and
commitment to the success of New York City, in
Lower Manhattan, we closed on $225 million
of construction financing and commenced vertical
construction of 185 Broadway, a ground-up,
31-story, 260,000-square-foot, mixed-use residential
building that will be part of the Affordable New
York Housing Program.
On the dispositions front, 2018 was our
most active year ever, as we worked hard to create
liquidity and advance our share buyback program,
selling assets for large profits. With each sale,
we demonstrated a strong understanding of
the market and moved with impeccable timing.
By the end of the year, we executed dispositions
totaling $3.3 billion, which generated $1.5 billion
of cash proceeds and reduced our on-balance
sheet debt by $650 million. Some of our most
notable transactions include the sale of the
leasehold office condominium at 1745 Broadway
in Manhattan for a sale price of $633 million,
the fee interest at 635 Madison Avenue for a
sale price of $153 million and our 48.9 percent
interest in 3 Columbus Circle at a property
valuation of $851.0 million. Each opportunity
represents a strategic divestment of a mature
or non-core asset that both supported the
stock repurchase program and illustrated the
company’s ability to identify and derive value
from assets across the portfolio.
Our Debt & Preferred Equity platform
continued to be extremely active, executing
SL GREEN REALT Y COR P. ANNUAL REPOR T 2 018
approximately $1.2 billion in gross originations.
Through our deep relationships and our expertise
across all segments of the market, we are the
preferred partner for the most complex and
profitable deals in New York City. For example,
at 245 Park we now have a preferred equity
investment totaling $148.2 million and at 2 Herald
Square we were the successful bidder at
foreclosure for the leasehold interest and then
completed a joint venture with an Israeli-based
institutional investor. Through our direct
relationships, we also financed multiple off-market
investments at 460 West 34th Street, our first foray
into the Hudson Yards and Manhattan West sub-
districts, resulting in ownership of a controlling
majority, which will undoubtedly deliver value
to our shareholders in the years to come as we
look to reposition an affordable alternative to
new construction on the Westside. We continue to
hold a market-leading position in the origination of
subordinate debt positions and are frequently
the mezzanine lender of choice among borrowers
and senior debt providers.
Our industry-leading commitment to
sustainability was rewarded again this year with
a series of honors from the U.S. Environmental
Protection Agency. We received the ENERGY
STAR Partner of the Year for Sustained Excellence
award for the second consecutive year (2018 and
2019) and have been an ENERGY STAR Partner
for four years (2015, 2016, 2018, 2019). We were
also recognized by the Building Owners and
Managers Association (BOMA) with the “Earth
Award” for 1515 Broadway, the “Renovated Building
of the Year Award” for 280 Park Avenue, and
two Middle Atlantic Region Outstanding Building
View from One Vanderbilt
of the Year Award (TOBY) for 810 7th Avenue
and 635–641 6th Avenue.
Looking Ahead
As you can see, I believe deeply in the path
we have taken — leveraging the best talent and
the best office market to make SL Green the
dominant player in New York City commercial
real estate and derive extraordinary value for
our shareholders. Looking ahead to 2019 and
beyond, we remain tremendously optimistic
that this approach, in this city, will deliver
maximum value.
We are already seeing positive signs
in the first quarter of 2019, having leased over
400,000 square feet of office space while
maintaining our extraordinary level of occupancy
at roughly 96 percent leased in the Manhattan
same-store portfolio, executing $597 million
of dispositions so far, generating liquidity for
our share repurchase program and for debt
repayment and originating over $419.0 million
of new debt and preferred equity investments,
bringing the portfolio to over $2.3 billion.
When we step back and look at the bigger
picture, we see several big trends continuing
to drive this growth and support our portfolio.
On the demand side, we expect to finally
see the recalibration toward more space per
employee with the increasing realization that
densification may have gone too far. The
exponential growth of co-working companies
in New York — accounting for 18 percent of new
signings in Manhattan in 2018 — will continue
driving demand. We believe that co-working is
here to stay and that it’s actually a good thing
for our industry, but not a segment to which
SL Green will ever oversubscribe with less than
3 percent exposure to this sector. Finally,
Amazon’s flirtation with New York was a huge
positive. It was an indicator that tech companies
need to be here and will drive more growth.
And hopefully moving forward, the City and
State will use the experience with Amazon as
a springboard to ensure there is a more
transparent process for public subsidies and
that everyone who wants to grow here is on
a level playing field.
This overall increased demand — combined
with the migration of office tenants to higher-
quality buildings — has led to a tightening of
the market as there is a real shortage of big
blocks of new space that premium tenants
demand. In our portfolio, for instance, we have
no blocks of 300,000 square feet or more
available in 2019. So that demand will have to
be filled by new construction. As we have said
for years now, there simply isn’t enough new
construction in the pipeline to keep up with this
demand. Hudson Yards is officially open and
all but 4.5 million square feet of that space has
been leased or presold, which means that over
time demand will increasingly have to be met
by new construction, generally in East Midtown,
which will further benefit our portfolio.
On that front, 2019 promises to be a year
full of milestones at One Vanderbilt, which
will soon reach its full height and will become
completely cladded in its iconic terracotta
spandrels. As we advance toward opening on
August 4, 2020, we’ll continue to fill the building
with world-class tenants across a number of
foundational industries and deliver the promised
$220 million in public transit and infrastructure
upgrades, many of which are already online and
being used to the benefit of commuters today.
These trends also bode well for our next
big bet on new construction at One Madison
Avenue. With Credit Suisse’s lease coming to
an end, we have formulated an extraordinary
vision for the iconic property that is perfect for
today’s Midtown South submarket and its influx
of creative and tech tenants. And we expect to
make significant progress on our flagship retail
and luxury condominium project with Armani
in 2019, after securing necessary approvals
and, with the support of Giorgio Armani, we
look forward to moving ahead with
interior design.
When you put all of these pieces together,
you can see that we have a comprehensive plan
in place to outperform our peers and stay
at the top of our game. But that is not enough.
Our entire executive team is deeply invested
in our stock and we share your laser focus
on doing everything in our power to restore the
connection between our share price and
the underlying value of our assets. In 2019, we
will continue to monetize assets and redeploy
capital into share buybacks. Because every time
we buy a share, we’re buying more of a better
portfolio. And we know it is only a matter of time
before the public market follows the private
market in recognizing that New York real estate
remains a stable and profitable investment.
On behalf of myself, Andrew Mathias, and
the entire executive team, thank you for your
continued support and partnership. I think you
will find that we have executed on your behalf
in 2018 and are on track to do it again in 2019.
Marc Holliday
Chairman & Chief Executive Officer
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SLG NYC
Building for
the Future
The SL Green leadership team is
consistently raising the bar for commercial
office space and the tenant experience.
Through strategic investments in a variety
of projects — including new, ground-up
developments and repositioning of existing
assets — the team creates additional
value and identifies opportunities that
complement the existing portfolio.
From One Vanderbilt to One Madison,
SL Green is at the forefront of bringing
to life the most ambitious new commercial
developments across Midtown, which
today’s leading businesses will call home.
The redevelopment of 760 Madison,
set to reinforce why Madison Avenue is
the city’s premier retail corridor, and the
new 185 Broadway, a 31- story mixed-use
building in the heart of Lower Manhattan,
will bring to market two mixed-use
buildings offering prime retail and housing
opportunities. Through the developments
detailed in the following pages, SL Green
is hard at work identifying new, value-add
projects to enhance value for shareholders
and strengthen an already robust portfolio
of Class-A assets.
SL GREEN REALT Y COR P. ANNUAL REPOR T 2 018
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One Vanderbilt
Key Highlights
$1.75B
L+350
$1.5B
Construction Loan
L+275
Rate Reduction
57% 1
Pre-leased!
2020
Open for Business
TCO date accelerated by eight weeks to
August 4th, 2020.
$100M
Under budget on
construction costs
Designed by Kohn Pedersen Fox,
One Vanderbilt is paving the way in the
modernization of Manhattan’s East
Midtown business district. At 1,401 feet
tall and 1.7 million square feet of space,
this unprecedented commercial office
building will offer jaw-dropping views,
unparalleled tenant amenities and a modern
workplace experience unlike any other
in New York City and around the world.
Our progress toward its 2020 opening —
on both the leasing and the construction
fronts—has been exceptional. Currently
more than half leased, it has attracted
several global names in law and finance
and is on track for an expedited opening
next summer.
1 Percentage leased at One Vanderbilt as
of 4/18/2019.
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One Madison
Key Highlights
Large Podium Floor
Plates1/New 17-Story
Glass Tower 2/21st
Century — Class-A
Infrastructure3
/ Rooftop Terraces
for Outdoor Use4
At One Madison Avenue, SL Green has
reassembled its all-star team from
One Vanderbilt—Kohn Pedersen Fox,
Hines and Gensler — to completely
reimagine the building as a modern,
functional, Class-A office property in
the heart of Midtown South’s Madison
Square submarket. With plans to bring
the current structure down to a nine-
story podium topped by a new 17-story
glass tower, One Madison will feature a
tenant specialty floor with a sweeping
outdoor terrace overlooking Madison
Square Park. One Madison will be unlike
anything else available in the Midtown
South market and is already catching
the attention of the world’s top
technology and creative firms.
1 Large podium floor plates can accommodate
trading floors and/or high-density users.
2 New 17-story glass tower with 530,000
rentable square feet and virtually column-
free floor plates.
3 21st century, Class-A infrastructure that sits
atop the No. 6 subway line and a block from
the R and W lines.
4 Approximately one acre of roof setback
terraces are available for outdoor use.
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185 Broadway
Key Highlights
Across from
Fulton Transit
Center
Project
completion
by 2021
Targeting project completion in the
second quarter of 2021.
Over 200
units — 30%
affordable
housing
Will qualify for 35-year tax abatement under
Affordable New York housing program.
Retail
attraction for:
Tourists
Office
Users
Residents
Tremendous branding opportunity
for signage.
One of the first residential developments
built under New York State’s Affordable
New York program, 185 Broadway will be
a 31-story mixed-use building offering
more than 200 units of housing, of which
30% will be designated as affordable.
A true mixed-use development underway in
the heart of Lower Manhattan, it will feature
two floors of flagship retail and three floors
of commercial space.
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760 Madison
Key Highlights
New Flagship Giorgio
Armani Retail Boutique1
/Renowned New York
Architecture Firm
COOKFOX 2/Outdoor
Terraces Provide
Visual Connection to
Central Park3/Fifteen-
Year Lease to Armani 4
Working hand in hand with renowned Italian
fashion designer, Giorgio Armani, SL Green is
spearheading the redevelopment of 760 Madison
Avenue on Manhattan’s Upper East Side. The
reimagined property will include luxury residences
—designed by Mr. Armani himself—as well as a
new flagship Giorgio Armani boutique. With this
redevelopment, SL Green solidifies Armani’s
lasting presence along one of the city’s most
recognized retail corridors.
1 New flagship Giorgio Armani retail boutique
and 19 luxury residences designed by Giorgio Armani.
2 Renowned New York design architecture firm, COOKFOX,
will serve as architect.
3 97,000-square-foot property will include setbacks and
outdoor terraces that create definition from the street
and provide visual connection to Central Park.
4 New 15-year lease to Armani, encompassing the grade,
second floor and lower level of the building.
4
6
0
W
e
s
t
3
4
t
h
460 West 34th Street
Key Highlights
New modern
redesign for
office & retail
spaces
New lobby elevators, storefronts, double-height retail,
modernized office with enlarged windows; activation
of numerous roof setback terraces and an additional
rooftop amenity.
Best value
for money
Efficiently priced Hudson Yards location,
with proximity to Penn Station transit center.
$733psf
2021
Expected completion
in the first quarter of 2021.
$528psf
From blended acquisition
cost to redeveloped basis.
A former printing plant, 460 West 34th Street marks
SL Green’s introduction into the Hudson Yards/
Manhattan West submarkets, with plans to fully
reposition the building into a Class-A office property
at a competitive price point for tenants. The
redevelopment plan includes comprehensive upgrades,
including a new building entrance, lobby, elevators,
storefronts, windows and infrastructure. The reimagined
industrial building will serve as a creative work
environment in contrast to the surrounding glass skyscrapers.
First Republic Bank, a leading private bank and wealth
management company, will be the building’s anchor
tenant, occupying 212,000 square feet in two new retail
branches as well as five floors of corporate offices.
6
0
9
F
i
f
t
h
609 Fifth
Key Highlights
100% Leased to
PUMA, WeWork &
Vince /Full-Building
Redevelopment1
61%Stabilized NOI projected
to increase by 61% over 2017.
6.1%
cash-on-cost
yield on
incremental
capital
After unveiling the large-scale repositioning of 609 Fifth
Avenue, SL Green announced leases with PUMA, WeWork
and Vince, bringing the building to 100% leased, well
ahead of the expected leasing timeline. The repositioning,
which includes relocation of the lobby entrance and
the entire elevator core, adds substantial, high-value retail
space and creates an enhanced office environment that
is particularly attractive to creative users.
1 Comprehensive full-building redevelopment covering aesthetic
and infrastructure enhancements creating a Class-A property in
the highest value corridor of Fifth Avenue.
Submarket
Ownership
Usable Square Feet
Occupancy (%)
Map
Key
Ownership
Interest (%)
Submarket
Ownership
Usable Square Feet
Occupancy (%)
New York City Portfolio
21
20
Surburban Portfolio
Properties
(As of December 31, 2018)
OFFICE PORTFOLIO
100 Summit Lake Drive
200 Summit Lake Drive
500 Summit Lake Drive
360 Hamilton Avenue
1 Landmark Square
2 Landmark Square
3 Landmark Square
4 Landmark Square
5 Landmark Square
6 Landmark Square
7 Landmark Square
1055 Washington Boulevard
1010 Washington Boulevard
SUBURBAN GRAND TOTAL
Ownership
Interest (%)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Valhalla, New York
Valhalla, New York
Valhalla, New York
White Plains, New York
Stamford, Connecticut
Stamford, Connecticut
Stamford, Connecticut
Stamford, Connecticut
Stamford, Connecticut
Stamford, Connecticut
Stamford, Connecticut
Stamford, Connecticut
Stamford, Connecticut
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Leasehold Interest
Fee Interest
250,000
245,000
228,000
384,000
312,000
46,000
130,000
105,000
61,000
172,000
36,800
182,000
143,400
2,295,200
97.5
86.1
99.9
100.0
88.4
99.5
58.0
85.3
98.6
93.7
100.0
85.5
89.7
100.0
51.0
55.0
60.0
60.0
50.0
100.0
90.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
50.5
100.0
100.0
100.0
100.0
100.0 2
100.0
60.5
100.0
51.0
100.0
100.0
70.0
24.35
Properties
(As of December 31, 2018)
OFFICE PORTFOLIO
1 Madison Avenue
2 Herald Square
10 East 53rd Street
11 Madison Avenue
30 East 40th Street
100 Park Avenue
100 Church Street
110 Greene Street
110 East 42nd Street
125 Park Avenue
220 East 42nd Street
280 Park Avenue
304 Park Avenue South
420 Lexington Avenue (Graybar)
461 Fifth Avenue
485 Lexington Avenue
521 Fifth Avenue
555 West 57th Street
625 Madison Avenue
635 Sixth Avenue
641 Sixth Avenue
711 Third Avenue
750 Third Avenue
800 Third Avenue
810 Seventh Avenue
919 Third Avenue
1185 Avenue of the Americas
1350 Avenue of the Americas
1515 Broadway
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30 Worldwide Plaza
SUBTOTAL
RETAIL PORTFOLIO
11 West 34th Street
21 East 66th Street
115 Spring Street
121 Greene Street
131–137 Spring Street
133 Greene Street
315 West 33rd Street – “The Olivia”
650 Fifth Avenue
712 Madison Avenue
717 Fifth Avenue
719 Seventh Avenue
752–760 Madison Avenue
762 Madison Avenue
Williamsburg Terrace
1552–1560 Broadway
SUBTOTAL
DEVELOPMENT / REDEVELOPMENT PORTFOLIO
71.0
100.0
100.0
100.0
100.0
25.0
100.0
45 One Vanderbilt
46
47
48
49
50
*
30.0
32.3
100.0
50.0
20.0
100.0
100.0
50.0
100.0
10.9
75.0
100.0
90.0
100.0
50.0
31
32
33
34
35
36
37
38
39
40
41
42
43
*
44
19–21 East 65th Street
185 Broadway
562 Fifth Avenue
609 Fifth Avenue
55 West 46th Street – Tower 46
1640 Flatbush Avenue
SUBTOTAL
RESIDENTIAL PORTFOLIO
315 West 33rd Street – “The Olivia”
400 East 57th Street
400 East 58th Street
1080 Amsterdam Avenue
Stonehenge Portfolio
605 West 42nd Street – “Sky”
SUBTOTAL
NEW YORK CITY GRAND TOTAL
–
51
52
*
*
53
Park Avenue South
Herald Square
Plaza District
Park Avenue South
Grand Central South
Grand Central South
Downtown
Soho
Grand Central
Grand Central
Grand Central
Park Avenue
Midtown South
Grand Central North
Midtown
Grand Central North
Grand Central
Midtown West
Plaza District
Midtown South
Midtown South
Grand Central North
Grand Central North
Grand Central North
Times Square
Grand Central North
Rockefeller Center
Rockefeller Center
Times Square
Westside
Fee Interest
Leasehold Interest
Fee Interest
Fee Interest
Leasehold Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Leasehold Interest
Leasehold Interest 1
Fee Interest
Fee Interest
Fee Interest
Leasehold Interest
Fee Interest
Fee Interest
Leasehold Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Leasehold Interest
Fee Interest
Fee Interest
Fee Interest
Herald Square/Penn Station
Plaza District
Soho
Soho
Soho
Soho
Penn Station
Plaza District
Plaza District
Midtown/Plaza District
Times Square
Plaza District
Plaza District
Brooklyn, New York
Times Square
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Leasehold Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Grand Central
Plaza District
Lower Manhattan
Plaza District
Rockefeller Center
Midtown
Brooklyn, New York
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
100.0
41.0
90.0
92.5
Various
20.0
Penn Station
Upper East Side
Upper East Side
Upper West Side
Westside
Fee Interest
Fee Interest
Fee Interest
Leasehold Interest
Fee Interest
Fee Interest
1,176,900
369,000
354,300
2,314,000
69,446
834,000
1,047,500
223,600
215,400
604,245
1,135,000
1,219,158
215,000
1,188,000
200,000
921,000
460,000
941,000
563,000
104,000
163,000
524,000
780,000
526,000
692,000
1,454,000
1,062,000
562,000
1,750,000
2,048,725
23,716,274
17,150
13,069
5,218
7,131
68,342
6,425
270,132
69,214
6,600
119,550
10,040
21,124
6,109
52,000
57,718
729,822
1,730,989
23,610
259,856
42,635
160,000
347,000
1,000
2,565,090
222,855
290,482
140,000
82,250
938,911
927,358
2,601,856
29,613,042
100.0
73.4
83.7
100.0
94.3
90.0
99.6
77.3
79.2
99.5
88.8
89.5
100.0
95.7
79.0
81.0
94.7
99.9
98.8
100.0
100.0
93.7
98.0
93.1
97.6
100.0
85.5
89.8
98.5
96.9
100.0
100.0
100.0
100.0
96.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
88.3
—
18.0
—
100.0
96.0
72.1
—
96.1
92.8
95.2
94.8
95.2
86.0
SL GREEN REALT Y COR P. ANNUAL REPOR T 2 018
1 The Company has an option to acquire the fee interest for a fixed price on a specific date.
2 The Company owns 50% of the fee interest.
7
47
33
35
34
36
8
20
21
13
1
4
45
17
15
31
2
14TH STREET
23RD STREET
5
6
14TH STREET
23RD STREET
29
37
34TH STREET
34TH STREET
11
9
23
14
10
3
16
12
48
50
27
49
38
42ND STREET
22
24
26
50TH STREET
51
52
57TH STREET
59TH STREET
E
U
N
E
V
D A
N
O
C
E
S
E
U
N
E
V
T A
S
FIR
65TH STREET
E
U
N
E
V
D A
R
I
H
T
E
U
N
E
V
A
N
O
T
G
N
I
X
E
L
40
E
U
N
E
V
A
H
T
F
I
F
39
E
U
N
E
V
A
N
O
S
I
D
A
M
42
46
19
E
U
N
E
V
A
K
R
A
P
43
32
28
S
I
X
T
H
A
V
E
N
U
E
CENTRAL PARK SOUTH
30
41
42ND STREET
44
53
25
S
E
V
E
N
T
H
A
V
E
N
U
E
E
I
G
H
T
H
A
V
E
N
U
E
50TH STREET
N
I
N
T
H
A
V
E
N
U
E
T
E
N
T
H
A
V
E
N
U
E
57TH STREET
18
B
R
O
A
D
W
A
Y
C
E
N
T
R
A
L
P
A
R
K
W
E
S
T
66TH STREET
24
Sustainability
Key Achievements
25
This was another year of banner
operating performance by
SL Green, and we are extremely
proud of our achievements.
Our market-leading role in social
responsibility is recognized
year after year.
View from One Vanderbilt
No.1 MOST SUSTAINABLE REIT
BY THE PUBLICATION
REAL ESTATE FINANCE
AND INVESTMENT
(2017, 2018)
SL GREEN REALT Y COR P. ANNUAL REPOR T 2 018
20.5M
SQUARE FEET
connected to a real-time energy
management platform (2018)
130
COMMUNIT Y E VENTS
provided to our tenants and employees
as volunteering opportunities (2018)
$220M
INVESTED IN PUBLIC
TR ANSIT IMPROVEMENTS
around Grand Central Terminal
at our ground-up development,
One Vanderbilt (2018)
14M
SQUARE FEET
ENERGY STAR certified. Awarded
ENERGY STAR Partner of the Year —
Sustained Excellence (2017–2019)
$1M
INCRE ASE
pledged to employee charitable
contribution match program (2018)
18M
SQUARE FEET
participating in the WELL Portfolio
program (2018)
30%
PORTFOLIO -WIDE
emissions intensity reduction
goal (by 2025)
$66M
INVESTED IN ENERGY
EFFICIENCY
including HVAC, BMS & lighting
upgrades, and variable frequency
drive installations (since 2010)
63%
MANHAT TAN OPER ATING
PROPERTIES
LEED Certified (2018)
67%
GRI INDICATORS
disclosed in SL Green’s
Content Index
26
Form 10-K Table of Contents
1
4
Selected Financial Data
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
32
Quantitative and Qualitative Disclosure
About Market Risk
34 Consolidated Financial Statements
51 Notes to Consolidated Financial Statements
98 Schedules
102 Report of Independent Registered
Public Accounting Firm
106 Controls and Procedures
108 Market for Registrants’ Common Equity
and Related Stockholder Matters and
Issuer Purchases of Equity Securities
110 Reconciliation of Non-GAAP Financial Measures
111 Signatures
115 Exhibits
Table of Contents
SELECTED FINANCIAL DATA
The following table sets forth our selected financial data and should be read in conjunction with our Financial Statements
and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations in this Annual
Report.
Operating Data (in thousands, except per share data)
2018
2017
2016
2015
2014
SL GREEN REALTY CORP.
Year Ended December 31,
Total revenue
Operating expenses
Real estate taxes
Ground rent
Interest expense, net of interest income
Amortization of deferred finance costs
Depreciation and amortization
Loan loss and other investment reserves, net of
recoveries
Transaction related costs
Marketing, general and administrative
Total expenses
Equity in net income from unconsolidated joint
ventures
Equity in net gain on sale of interest in unconsolidated
joint venture/real estate
Purchase price and other fair value adjustment
Gain on sale of real estate, net
Gain (loss) on sale of investment in marketable
securities
$
1,227,392
$
1,511,473
$
1,863,981
$
1,662,829
$
1,519,978
229,347
186,351
32,965
208,669
12,408
279,507
6,839
1,099
92,631
293,364
244,323
33,231
257,045
16,498
403,320
—
(1,834)
100,498
312,859
248,388
33,261
321,199
24,564
821,041
—
7,528
99,759
301,624
232,702
32,834
323,870
27,348
560,887
—
11,430
94,873
282,283
217,843
32,307
317,400
22,377
371,610
—
8,707
92,488
1,049,816
1,346,445
1,868,599
1,585,568
1,345,015
7,311
21,892
11,874
13,028
26,537
303,967
57,385
(30,757)
16,166
—
73,241
44,009
—
238,116
15,844
40,078
175,974
—
3,262
(83)
—
123,253
67,446
—
3,895
—
Depreciable real estate reserves and impairment
(227,543)
(178,520)
(10,387)
(19,226)
Loss on early extinguishment of debt
Income from continuing operations
Discontinued operations
Net income
Net income attributable to noncontrolling interest in
the Operating Partnership
Net loss (income) attributable to noncontrolling
interests in other partnerships
Preferred unit distributions
Net income attributable to SL Green
Preferred stock redemption costs
Perpetual preferred stock dividends
Net income attributable to SL Green common
stockholders
Net income per common share—Basic
Net income per common share—Diluted
Cash dividends declared per common share
Basic weighted average common shares outstanding
Diluted weighted average common shares and common
share equivalents outstanding
—
—
(49)
(32,365)
(17,083)
270,856
—
101,069
278,911
—
—
270,856
101,069
278,911
302,910
14,549
317,459
363,729
182,134
545,863
(12,216)
(3,995)
(10,136)
(10,565)
(18,467)
6
(11,384)
247,262
—
15,701
(11,401)
101,374
—
(7,644)
(11,235)
249,896
—
(15,843)
(6,967)
284,084
—
(6,590)
(2,750)
518,056
—
(14,950)
(14,950)
(14,950)
(14,952)
(14,952)
$
$
$
$
$
$
$
$
232,312
2.67
2.67
3.2875
86,753
$
$
$
$
86,424
0.87
0.87
3.1375
98,571
234,946
2.34
2.34
2.94
$
$
$
$
269,132
2.71
2.70
2.52
$
$
$
$
503,104
5.25
5.23
2.10
100,185
99,345
95,774
91,530
103,403
104,881
103,734
99,696
SL GREEN REALT Y COR P. ANNUAL REPOR T 2 018
1
Table of Contents
Table of Contents
Balance Sheet Data (in thousands)
2018
2017
2016
2015
2014
Commercial real estate, before accumulated
depreciation
$
8,513,935
$ 10,206,122
$ 12,743,332
$ 16,681,602
$ 14,069,141
Operating Data (in thousands, except per unit data)
2018
2017
2016
2015
2014
Year Ended December 31,
As of December 31,
SL GREEN OPERATING PARTNERSHIP, L.P.
Total assets
12,751,358
13,982,904
15,857,787
19,727,646
17,096,587
Mortgages and other loans payable, revolving credit
facilities, term loans and senior unsecured notes and
trust preferred securities, net
5,541,701
5,855,132
6,481,666
10,275,453
8,178,787
Noncontrolling interests in the Operating Partnership
387,805
461,954
473,882
424,206
496,524
Total equity
5,947,855
6,589,454
7,750,911
7,719,317
7,459,216
Other Data (in thousands)
Net cash provided by operating activities(1)
Net cash provided by (used in) investing activities(1)
Net cash (used in) provided by financing activities(1)
Funds from operations available to all stockholders(2)
2018
2017
2016
2015
2014
441,537
681,662
543,001
22,014
644,010
542,691
1,973,382
(2,151,702)
(1,094,112)
(684,956)
(2,736,402)
1,713,417
605,720
667,294
869,855
661,825
496,895
(784,710)
379,784
583,036
Year Ended December 31,
(1) All periods presented in accordance with ASU2016-18
(2)
FFO is a widely recognized non-GAAP financial measure of REIT performance. The Company computes FFO in accordance with standards established
by NAREIT, which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that
interpret the NAREIT definition differently than the Company does. The revised White Paper on FFO approved by the Board of Governors of NAREIT in
April 2002, and subsequently amended, defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of
properties and real estate related impairment charges, plus real estate related depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures.
The Company presents FFO because it considers it an important supplemental measure of the Company’s operating performance and believes that it is
frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, particularly those that own and operate commercial
office properties. The Company also uses FFO as one of several criteria to determine performance-based bonuses for members of its senior management.
FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate
assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation
and amortization unique to real estate, gains and losses from property dispositions, and real estate related impairment charges, it provides a performance
measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, and interest
costs, providing perspective not immediately apparent from net income. 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 our ability to make cash distributions
A reconciliation of FFO to net income computed in accordance with GAAP is under the heading of "Management's Discussion and Analysis of Financial
Condition and Results of Operations—Funds From Operations."
Total revenue
Operating expenses
Real estate taxes
Ground rent
Interest expense, net of interest income
Amortization of deferred finance costs
Depreciation and amortization
Loan loss and other investment reserves, net of
recoveries
Transaction related costs
Marketing, general and administrative
Total expenses
Equity in net income from unconsolidated joint
ventures
Equity in net gain on sale of interest in unconsolidated
joint venture/ real estate
Purchase price and other fair value adjustment
$
1,227,392
$
1,511,473
$
1,863,981
$
1,662,829
$
1,519,978
229,347
186,351
32,965
208,669
12,408
279,507
6,839
1,099
92,631
293,364
244,323
33,231
257,045
16,498
403,320
—
(1,834)
100,498
312,859
248,388
33,261
321,199
24,564
821,041
—
7,528
99,759
301,624
232,702
32,834
323,870
27,348
560,887
—
11,430
94,873
282,283
217,843
32,307
317,400
22,377
371,610
—
8,707
92,488
1,049,816
1,346,445
1,868,599
1,585,568
1,345,015
7,311
21,892
11,874
13,028
26,537
303,967
57,385
16,166
—
44,009
—
15,844
40,078
123,253
67,446
Gain on sale of real estate, net
(30,757)
73,241
238,116
175,974
Gain (loss) on sale of investment in marketable
securities
—
3,262
(83)
—
Depreciable real estate reserves and impairment
(227,543)
(178,520)
(10,387)
(19,226)
—
3,895
—
Loss on early extinguishment of debt
Income from continuing operations
Discontinued operations
Net income
Net loss (income) attributable to noncontrolling
interests in other partnerships
Preferred unit distributions
Net income attributable to SLGOP
Preferred unit redemption costs
Perpetual preferred unit distributions
Net income attributable to SLGOP common
stockholders
Net income per common unit—Basic
Net income per common unit—Diluted
Cash dividends declared per common unit
Basic weighted average common units outstanding
Diluted weighted average common units and common
units equivalents outstanding
—
—
(49)
(32,365)
(17,083)
270,856
—
101,069
278,911
—
—
270,856
101,069
278,911
6
(11,384)
259,478
—
15,701
(11,401)
105,369
—
(7,644)
(11,235)
260,032
—
302,910
14,549
317,459
(15,843)
(6,967)
294,649
—
363,729
182,134
545,863
(6,590)
(2,750)
536,523
—
(14,950)
(14,950)
(14,950)
(14,952)
(14,952)
$
$
$
$
244,528
2.67
2.67
3.2875
91,315
$
$
$
$
90,419
0.87
0.87
3.1375
103,127
$
$
$
$
245,082
2.34
2.34
2.94
104,508
$
$
$
$
279,697
2.71
2.70
2.52
103,244
$
$
$
$
521,571
5.25
5.23
2.10
99,288
91,530
103,403
104,881
103,734
99,696
Balance Sheet Data (in thousands)
2018
2017
2016
2015
2014
Commercial real estate, before accumulated
depreciation
$
8,513,935
$ 10,206,122
$ 12,743,332
$ 16,681,602
$ 14,069,141
Total assets
12,751,358
13,982,904
15,857,787
19,727,646
17,096,587
As of December 31,
Mortgages and other loans payable, revolving credit
facilities, term loans and senior unsecured notes and
trust preferred securities, net
Total capital
5,541,701
5,947,855
5,855,132
6,589,454
6,481,666
7,750,911
10,275,453
7,719,317
8,178,787
7,459,216
2
3
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
December 31, 2018 we have repurchased a cumulative total of 18.1 million shares of our common stock under the
program at an average price of $98.72 per share.
Overview
SL Green Realty Corp., which is referred to as SL Green or the Company, a Maryland corporation, and SL Green Operating
Partnership, L.P., which is referred to as SLGOP or 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 Company is a self-managed real estate investment trust, or REIT, engaged in the acquisition,
development, ownership, management and operation of commercial and residential real estate properties, principally office
properties, located in the New York metropolitan area. Unless the context requires otherwise, all references to "we," "our" and
"us" means the Company and all entities owned or controlled by the Company, including the Operating Partnership.
Reckson Associates Realty Corp., or Reckson, and Reckson Operating Partnership, L.P. or ROP, are wholly-owned
subsidiaries of the SL Green Realty Corp.
The following discussion related to our consolidated financial statements should be read in conjunction with the financial
statements appearing in this Annual Report.
Leasing and Operating
In 2018, our same-store Manhattan office property occupancy inclusive of leases signed but not commenced, was 95.7%
compared to 95.8% in the prior year. We signed office leases in Manhattan encompassing approximately 2.3 million square feet,
of which approximately 1.3 million square feet represented office leases that replaced previously occupied space. Our mark-to-
market on the signed Manhattan office leases that replaced previously occupied space was 6.5% for 2018.
According to Cushman & Wakefield, leasing activity in Manhattan in 2018 totaled approximately 35.9 million square feet.
Of the total 2018 leasing activity in Manhattan, the Midtown submarket accounted for approximately 23.7 million square feet, or
approximately 66.0%. Manhattan's overall office vacancy went from 8.9% at December 31, 2017 to 9.2% at December 31, 2018
primarily as a result of increased vacancy in the Downtown submarket partially offset by decreased vacancy in the Midtown
submarket. Overall average asking rents in Manhattan increased in 2018 by 0.04% from $72.25 per square foot at December 31,
2017 to $72.28 per square foot at December 31, 2018.
Acquisition and Disposition Activity
Overall Manhattan sales volume increased by 43.5% in 2018 to $32.4 billion as compared to $22.5 billion in 2017. Consistent
with our multi-faceted approach to property acquisitions, we were the successful bidder at the foreclosure of the leasehold interest
in 2 Herald Square, and accepted equity interests in 1231 Third Avenue, 133 Greene Street, and 712 Madison Avenue in lieu of
repayment of the respective mezzanine loans.
We also continued to take advantage of significant interest by both international and domestic institutions and individuals
seeking ownership interests in Manhattan properties to sell assets, disposing of a significant volume of properties that were non-
core or had more limited growth opportunities, raising efficiently priced capital that was used primarily for share repurchases and
debt reduction. During the year, we sold all or part of our interest in 600 Lexington Avenue, 1515 Broadway, 1745 Broadway, 3
Columbus Circle, 2 Herald Square, 115-117 Stevens Avenue, Jericho Plaza, 1-6 International Drive, 175-225 Third Street, 635
Madison Avenue, 724 Fifth Avenue, and the 72nd Street Assemblage for total gross valuations of $5.0 billion
Debt and Preferred Equity
In 2017 and 2018, in our debt and preferred equity portfolio we continued to focus on the origination of financings, typically
in the form of mezzanine debt, for owners, acquirers or developers of properties in New York City. This investment strategy
provides us with the opportunity to fill a need for additional debt financing, while achieving attractive risk adjusted returns to us
on the investments and receiving a significant amount of additional information on the New York City real estate market. The
typical investments made by us during 2017 and 2018 were to reputable owners or acquirers which have sizable equity subordinate
to our last dollar of exposure. During 2018, our debt and preferred equity activities included purchases and originations, inclusive
of advances under future funding obligations, discount and fee amortization, and paid-in-kind interest, net of premium amortization,
of $986.0 million, and sales, redemption and participations of $994.9 million.
Highlights from 2018
Our significant achievements from 2018 included:
Corporate
(cid:127) Repurchased 9.7 million shares of our common stock under our share repurchase program at an average price of
$96.22 per share and increased the size of our share repurchase program by $1 billion to $2.5 billion. Through
Leasing
(cid:127)
(cid:127)
Signed 180 Manhattan office leases covering approximately 2.3 million square feet. The mark-to-market on signed
Manhattan office leases was 6.5% higher in 2018 than the previously fully escalated rents on the same spaces.
Signed 49 Suburban office leases covering approximately 0.4 million square feet. The mark-to-market on signed
Suburban office leases was 3.7% lower in 2019 than the previously fully escalated rents on the same spaces.
(cid:127) Reached 52% leased at One Vanderbilt Avenue after signing leases with Greenberg Traurig, The Carlyle Group, TD
Securities, MFA Financial Inc. and McDermott Will & Emery
(cid:127)
(cid:127)
Signed a new lease with Coty Inc. for 10,040 square feet at the retail flagship development 719 Seventh Avenue, now
known as 30 Times Square.
Signed a new retail lease with sports brand PUMA for 24,000 square feet and a new lease with WeWork for 138,563
square feet, comprising the entire office portion of the building, at 609 Fifth Avenue.
Acquisitions
(cid:127) Took ownership of the leasehold interest at 2 Herald Square following the foreclosure of the asset and subsequently
completed a recapitalization of the asset, which included securing $150.0 million of mortgage financing and selling a
49.0% interest in the property.
(cid:127) Announced that we had entered into an agreement to purchase a majority and controlling interest in 460 West 34th Street
at a gross purchase price of $440 million.
(cid:127) Took possession of the retail co-op at 133 Greene Street in Soho. The 6,425 square foot retail space, inclusive of 3,300
square feet on grade, is located along one of SoHo's most popular shopping corridors and is currently occupied by Dior
Homme. This property previously served as collateral for a debt and preferred equity investment and was acquired
through a negotiated transaction with the sponsor of the investment.
(cid:127) Took possession of 712 Madison Avenue on Manhattan's Upper East Side. The five-story building offers 6,362 square
feet of retail space, which is currently occupied by David Yurman. This property previously served as collateral for a
debt and preferred equity investment and was acquired through a negotiated transaction with the sponsor of the
investment.
Dispositions
(cid:127) Closed on the sale of 600 Lexington Avenue for a gross asset valuation of $305.0 million.
(cid:127) Closed on the sale of an additional 13% interest in 1515 Broadway, thereby completing the previously announced sale
of interests totaling 43% at a gross asset valuation of $1.950 billion.
(cid:127) Together with our joint venture partner, closed on the sale of the multi-family property at 1274 Fifth Avenue at a gross
asset valuation of $44.1 million
(cid:127) Together with our joint venture partners, closed on the sale of Stonehenge Village, at a gross asset valuation of $287.0
million.
(cid:127) Closed on a multi-faceted retail transaction, which included the sale of substantially all of the Company's interest in
724 Fifth Avenue to its joint venture partner, redemption of its investment in 720 Fifth Avenue, and partial repayment
of another partnership loan.
(cid:127) Together with our joint venture partner, closed on the sale of the leasehold office condominium at 1745 Broadway for
a sale price of $633 million
(cid:127) Closed on the sale of the fee interest at 635 Madison Avenue for a sale price of $153.0 million.
(cid:127) Closed on the sale of Reckson Executive Park in Rye Brook, New York, 115-117 Stevens Avenue, in Valhalla, New
York and our 11.7% interest in Jericho Plaza for asset valuations totaling $184.4 million.
(cid:127) Closed on the sale of our 48.9% interest in 3 Columbus Circle to the Moinian Group, the owner of the remaining 51.1%
interest, for a gross asset valuation of $851.0 million
(cid:127) Closed on the sale of our interests in 1231 Third Avenue and an Upper East Side residential assemblage for a combined
sales price of $143.8 million.
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5
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(cid:127) Entered into an agreement to sell our 20.0% interest in 131-137 Spring Street to Invesco Real Estate, the owner of the
Critical Accounting Policies
remaining 80.0% interest.
Debt and Preferred Equity Investments
(cid:127) Originated and retained, or acquired, $1.0 billion in debt and preferred equity investments, inclusive of advances under
future funding obligations, discount and fee amortization, and paid-in-kind interest, net of premium amortization, and
recorded $1.0 billion of proceeds from sales, repayments and participations.
Finance
(cid:127)
Issued $350.0 million aggregate principal amount of floating rate notes due 2021. The notes are callable by the Company,
at par, after one year and bear interest at a floating rate of 0.98% over LIBOR.
(cid:127) Closed on a $65.6 million financing of 115 Spring Street. The new mortgage has a 5-year term and bears interest at a
floating rate of 3.40% over LIBOR.
(cid:127) Refinanced One Vanderbilt Avenue's construction facility, increasing the facility size from $1.5 billion to $1.75
billion and decreasing the interest rate by 75 basis points to 2.75% over LIBOR.
(cid:127) Closed on a $225.0 million construction facility for 185 Broadway. The floating rate facility has a term of three years,
with two one-year extension options and bears interest at an initial floating rate of 2.85% over LIBOR.
As of December 31, 2018, we owned the following interests in properties in the New York metropolitan area, primarily in
midtown Manhattan. Our investments located outside of Manhattan are referred to as the Suburban properties:
Consolidated
Unconsolidated
Total
Location
Property Type
Number of
Properties
Approximate
Square Feet
Number of
Properties
Approximate
Square Feet
Number of
Properties
Approximate
Square Feet
Weighted
Average
Occupancy(1)
Commercial:
Manhattan
Office
Retail
Development/
Redevelopment
Fee Interest
Suburban
Office
Retail
Development/
Redevelopment
Total commercial properties
Residential:
Manhattan
Residential
Suburban
Residential
Total residential properties
Total portfolio
20
7 (2)
12,387,091
325,648
5
—
32
13
1
1
15
47
2 (2)
—
2
49
486,101
—
13,198,840
2,295,200
52,000
1,000
2,348,200
15,547,040
445,105
—
445,105
15,992,145
10
9
2
1
22
—
—
—
—
22
10
—
10
32
11,329,183
352,174
347,000
—
12,028,357
—
—
—
—
12,028,357
2,156,751
—
2,156,751
14,185,108
30
16
7
1
54
13
1
1
15
69
12
—
12
81
23,716,274
677,822
833,101
—
25,227,197
2,295,200
94.5%
96.7%
54.1%
—%
93.2%
91.3%
52,000
100.0%
1,000
2,348,200
27,575,397
2,601,856
—
2,601,856
30,177,253
—%
91.4%
93.1%
91.5%
—%
91.5%
92.9%
(1)
The weighted average occupancy for commercial properties represents the total occupied square feet divided by total square footage at acquisition. The
weighted average occupancy for residential properties represents the total occupied units divided by total available units.
(2) As of December 31, 2018, we owned a building at 315 West 33rd Street, also known as The Olivia, that was comprised of approximately 270,132 square
feet of retail space and approximately 222,855 square feet of residential space. For the purpose of this report, we have included the building in the number
of retail properties we own. However, we have included only the retail square footage in the retail approximate square footage, and have listed the balance
of the square footage as residential square footage.
As of December 31, 2018, we also managed two office buildings owned by third parties encompassing approximately 2.1
million square feet, and held debt and preferred equity investments with a book value of $2.1 billion, including $0.1 billion of
debt and preferred equity investments and other financing receivables that are included in balance sheet line items other than the
Debt and Preferred Equity Investments line item.
Our discussion and analysis of financial condition and results of operations is based on our consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of
these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and
contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting
periods. We evaluate our assumptions and estimates on an ongoing basis. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect
our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Investment in Commercial Real Estate Properties
Real estate properties are presented at cost less accumulated depreciation and amortization. Costs directly related to the
development or redevelopment of properties are capitalized. Ordinary repairs and maintenance are expensed as incurred; major
replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated
useful lives.
We recognize the assets acquired, liabilities assumed (including contingencies) and any noncontrolling interests in an acquired
entity at their respective fair values on the acquisition date.
We incur a variety of costs in the development and leasing of our properties. After the determination is made to capitalize
a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project is
substantially complete and capitalization must cease involves a degree of judgment. The costs of land and building under
development include specifically identifiable costs. The capitalized costs include, but are not limited to, pre-construction costs
essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and
related costs and other costs incurred during the period of development. We consider a construction project as substantially
completed and held available for occupancy upon the completion of tenant improvements, but no later than one year after major
construction activity ceases. We cease capitalization on the portions substantially completed and occupied or held available for
occupancy, and capitalize only those costs associated with the portions under construction.
On a periodic basis, we assess whether there are any indications that the value of our real estate properties may be other
than temporarily impaired or that their carrying value may not be recoverable. A property's value is considered impaired if
management's estimate of the aggregate future cash flows (undiscounted) to be generated by the property is less than the carrying
value of the property. To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of
the property over the calculated fair value of the property.
We also evaluate our real estate properties for impairment when a property has been classified as held for sale. Real estate
assets held for sale are valued at the lower of their carrying value or fair value less costs to sell and depreciation expense is no
longer recorded. See Note 4, "Properties Held for Sale and Dispositions."
Investments in Unconsolidated Joint Ventures
We account for our investments in unconsolidated joint ventures under the equity method of accounting in cases where we
exercise significant influence over, but do not control, these entities and are not considered to be the primary beneficiary. We
consolidate those joint ventures that we control or which are variable interest entities (each, a "VIE") and where we are considered
to be the primary beneficiary. In all these joint ventures, the rights of the joint venture partner are both protective as well as
participating. Unless we are determined to be the primary beneficiary in a VIE, these participating rights preclude us from
consolidating these VIE entities. These investments are recorded initially at cost, as investments in unconsolidated joint ventures,
and subsequently adjusted for equity in net income (loss) and cash contributions and distributions. Equity in net income (loss)
from unconsolidated joint ventures is allocated based on our ownership or economic interest in each joint venture and includes
adjustments related to basis differences that were identified as part of the initial accounting for the investment. When a capital
event (as defined in each joint venture agreement) such as a refinancing occurs, if return thresholds are met, future equity income
will be allocated at our increased economic interest. We recognize incentive income from unconsolidated real estate joint ventures
as income to the extent it is earned and not subject to a clawback feature. Distributions we receive from unconsolidated real estate
joint ventures in excess of our basis in the investment are recorded as offsets to our investment balance if we remain liable for
future obligations of the joint venture or may otherwise be committed to provide future additional financial support. None of the
joint venture debt is recourse to us. The Company has performance guarantees under a master lease at one joint venture. See
Note 6, "Investments in Unconsolidated Joint Ventures."
We assess our investments in unconsolidated joint ventures for recoverability, and if it is determined that a loss in value of
the investment is other than temporary, we write down the investment to its fair value. We evaluate our equity investments for
6
7
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Any deficiency between the carrying amount of an asset and the calculated value of the collateral is charged to expense. We
continue to assess or adjust our estimates based on circumstances of a loan and the underlying collateral. If additional information
reflects increased recovery of our investment, we will adjust our reserves accordingly.
Debt and preferred equity investments that are classified as held for sale are carried at the lower of cost or fair market value
using available market information obtained through consultation with dealers or other originators of such investments as well as
discounted cash flow models based on Level 3 data pursuant to ASC 820-10. As circumstances change, management may conclude
not to sell an investment designated as held for sale. In such situations, the investment will be reclassified at its net carrying value
to debt and preferred equity investments held to maturity. For these reclassified investments, the difference between the current
carrying value and the expected cash to be collected at maturity will be accreted into income over the remaining term of the
investment.
Derivative Instruments
In the normal course of business, we use a variety of commonly used derivative instruments, such as interest rate swaps,
caps, collars and floors, to manage, or hedge, interest rate risk. Effectiveness is essential for those derivatives that we intend to
qualify for hedge accounting. Some derivative instruments are associated with an anticipated transaction. In those cases, hedge
effectiveness criteria also require that it be probable that the underlying transaction occurs. Instruments that meet these hedging
criteria are formally designated as hedges at the inception of the derivative contract.
To determine the fair values of derivative instruments, we use a variety of methods and assumptions that are based on market
conditions and risks existing at each balance sheet date. For the majority of financial instruments including most derivatives, long-
term investments and long-term debt, standard market conventions and techniques such as discounted cash flow analysis, option
pricing models, replacement cost, and termination cost are used to determine fair value. All methods of assessing fair value result
in a general approximation of value, and such value may never actually be realized.
impairment based on the joint ventures' projected discounted cash flows. We do not believe that the values of any of our equity
investments were impaired at December 31, 2018.
We may originate loans for real estate acquisition, development and construction, where we expect to receive some of the
residual profit from such projects. When the risk and rewards of these arrangements are essentially the same as an investor or joint
venture partner, we account for these arrangements as real estate investments under the equity method of accounting for investments.
Otherwise, we account for these arrangements consistent with the accounting for our debt and preferred equity investments.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the term of the lease. The excess of rents recognized over amounts
contractually due pursuant to the underlying leases are included in deferred rents receivable on the consolidated balance sheets.
We establish, on a current basis, an allowance for future potential tenant credit losses, which may occur against this account. The
balance reflected on the consolidated balance sheets is net of such allowance.
We record a gain on sale of real estate when title is conveyed to the buyer, subject to the buyer's financial commitment being
sufficient to provide economic substance to the sale and provided that we have no substantial economic involvement with the
buyer.
Interest income on debt and preferred equity investments is accrued based on the contractual terms of the instruments and
when, in the opinion of management, it is deemed collectible. Some debt and preferred equity investments provide for accrual of
interest at specified rates, which differ from current payment terms. Interest is recognized on such loans at the accrual rate subject
to management's determination that accrued interest is ultimately collectible, based on the underlying collateral and operations of
the borrower. If management cannot make this determination, interest income above the current pay rate is recognized only upon
actual receipt.
Deferred origination fees, original issue discounts and loan origination costs, if any, are recognized as an adjustment to the
interest income over the terms of the related investments using the effective interest method. Fees received in connection with
loan commitments are also deferred until the loan is funded and are then recognized over the term of the loan as an adjustment to
yield.
Debt and preferred equity investments are placed on a non-accrual status at the earlier of the date at which payments become
90 days past due or when, in the opinion of management, a full recovery of interest income becomes doubtful. Interest income
recognition on any non-accrual debt or preferred equity investment is resumed when such non-accrual debt or preferred equity
investment becomes contractually current and performance is demonstrated to be resumed. Interest is recorded as income on
impaired loans only to the extent cash is received.
We may syndicate a portion of the loans that we originate or sell the loans individually. When a transaction meets the criteria
for sale accounting, we derecognize the loan sold and recognize gain or loss based on the difference between the sales price and
the carrying value of the loan sold. Any related unamortized deferred origination fees, original issue discounts, loan origination
costs, discounts or premiums at the time of sale are recognized as an adjustment to the gain or loss on sale, which is included in
investment income on the consolidated statement of operations. Any fees received at the time of sale or syndication are recognized
as part of investment income.
Asset management fees are recognized on a straight-line basis over the term of the asset management agreement.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our tenants to make
required payments. If the financial condition of a specific tenant were to deteriorate, resulting in an impairment of its ability to
make payments, additional allowances may be required.
Allowance for loan loss and other investment reserves
The expense for loan loss and other investment reserves in connection with debt and preferred equity investments is the
charge to earnings to adjust the allowance for possible losses to the level that we estimate to be adequate, based on Level 3 data,
considering delinquencies, loss experience and collateral quality.
The Company evaluates debt and preferred equity investments that are held to maturity for possible impairment or credit
deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and
operating capability of the borrower/sponsor. Quarterly, the Company assigns each loan a risk rating. Based on a 3-point scale,
loans are rated “1” through “3,” from less risk to greater risk, which ratings are defined as follows: 1 - Low Risk Assets - Low
probability of loss, 2 - Watch List Assets - Higher potential for loss, 3 - High Risk Assets - Loss more likely than not.
When it is probable that we will be unable to collect all amounts contractually due, the investment is considered impaired.
A valuation allowance is measured based upon the excess of the recorded investment amount over the fair value of the collateral.
8
9
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Reconciliation of Net Income to Same-Store Operating Income
We present Same-Store Operating Income because we believe that this measure, when taken together with the corresponding
GAAP financial measures and our reconciliation, provides investors with meaningful information regarding the operating
performance of our properties. When operating performance is compared across multiple periods, the investor is provided with
information not immediately apparent from net income that is determined in accordance with GAAP. Same-Store Operating Income
provides information on trends in the revenue generated and expenses incurred in operating our properties, unaffected by the cost
of leverage, depreciation, amortization, and other net income components. We use this metric internally as a performance measure.
This measure is not an alternative to net income (determined in accordance with GAAP) and same-store performance should not
be considered an alternative to GAAP net income performance. This metric may be defined differently, and may not be comparable,
to similarly named metrics used by other companies.
Comparison of the year ended December 31, 2018 to the year ended December 31, 2017
For properties owned since January 1, 2017 and still owned and operated at December 31, 2018, Same-Store Operating
Income is determined as follows (in millions):
Table of Contents
Results of Operations
Comparison of the year ended December 31, 2018 to the year ended December 31, 2017
The following comparison for the year ended December 31, 2018, or 2018, to the year ended December 31, 2017, or 2017,
makes reference to the effect of the following:
i. “Same-Store Properties,” which represents all operating properties owned by us at January 1, 2017 and still owned by
us in the same manner at December 31, 2018 (Same-Store Properties totaled 40 of our 49 consolidated operating
properties),
ii. “Acquisition Properties,” which represents all properties or interests in properties acquired in 2018 and 2017 and all non-
Same-Store Properties, including properties that are under development or redevelopment,
iii. "Disposed Properties" which represents all properties or interests in properties sold in 2018 and 2017, and
iv. “Other,” which represents properties where we sold an interest resulting in deconsolidation and corporate level items not
allocable to specific properties, as well as the Service Corporation and eEmerge Inc.
(in millions)
Net income
Equity in net gain on sale of interest in unconsolidated joint venture/real estate
Purchase price and other fair value adjustment
Loss (gain) on sale of real estate, net
Depreciable real estate reserves and impairment
Gain on sale of investment in marketable securities
Depreciation and amortization
Interest expense, net of interest income
Amortization of deferred financing costs
Operating income
Less: Operating income from other properties/affiliates
Same-store operating income
Year Ended
December 31,
2018
2017
$
270.9
$
101.1
(304.0)
(57.4)
30.8
227.5
—
279.5
208.7
12.4
668.4
(16.2)
—
(73.2)
178.5
(3.3)
403.3
257.0
16.5
863.7
(131.3)
(345.9)
$
537.1
$
517.8
Comparison of the year ended December 31, 2017 to the year ended December 31, 2016
For properties owned since January 1, 2016 and still owned and operated at December 31, 2017, Same-Store Operating
Income is determined as follows (in millions):
(in millions)
Net income
Equity in net gain on sale of interest in unconsolidated joint venture/real estate
Gain on sale of real estate, net
Depreciable real estate reserves and impairment
(Gain) loss on sale of investment in marketable securities
Depreciation and amortization
Interest expense, net of interest income
Amortization of deferred financing costs
Operating income
Less: Operating income from other properties/affiliates
Same-store operating income
Year Ended
December 31,
2017
2016
$
101.1
$
278.9
(16.2)
(73.2)
178.5
(3.3)
403.3
257.0
16.5
(44.0)
(238.1)
10.4
0.1
821.0
321.2
24.6
863.7
1,174.1
(244.2)
$
619.5
$
(556.9)
617.2
(in millions)
Rental revenue
Escalation and
reimbursement
Investment income
Other income
Total revenues
Same-Store
Disposed
Other
Consolidated
2018
2017
$
Change
%
Change
2018
2017
2018
2017
2018
2017
$
Change
%
Change
$ 832.9
$ 816.7
$ 16.2
2.0% $
8.8
$ 62.0
$ 23.3
$222.3
$ 865.0
$1,101.0
$(236.0)
(21.4)%
111.9
105.3
—
11.2
—
4.8
6.6
—
6.4
6.3%
—%
133.3%
0.9
—
1.5
956.0
926.8
29.2
3.2%
11.2
5.1
0.8
62.5
— 201.5
193.9
34.6
35.1
113.6
201.5
47.3
172.9
193.9
43.7
(59.3)
(34.3)%
7.6
3.6
3.9 %
8.2 %
260.2
513.8
1,227.4
1,511.5
(284.1)
(18.8)%
Property operating expenses
418.1
408.5
Transaction related costs
Marketing, general and
administrative
0.3
—
—
—
418.4
408.5
9.6
0.3
—
9.9
2.4%
—%
—%
2.4%
5.2
—
—
5.2
Other income (expenses):
Interest expense and
amortization of deferred
financing costs, net of
interest income
Depreciation and
amortization
Equity in net income from
unconsolidated joint
ventures
Equity in net gain on sale of
interest in unconsolidated
joint venture/real estate
Purchase price and other
fair value adjustment
(Loss) gain on sale of real
estate, net
Depreciable real estate
reserves and impairment
Gain (loss) on sale of
investment in marketable
securities
Loss on early
extinguishment of debt
Loan loss and other
investment reserves, net of
recoveries
Net income
3.8
70.9
28.0
—
—
25.4
0.8
92.6
28.0
118.8
134.4
448.7
570.9
(122.2)
(21.4)%
(1.8)
1.1
(1.8)
2.9
(161.1)%
100.5
233.1
92.6
542.4
100.5
669.6
(7.9)
(7.9)%
(127.2)
(19.0)%
(221.1)
(273.6)
52.5
(19.2)%
(279.5)
(403.3)
123.8
(30.7)%
7.3
21.9
(14.6)
(66.7)%
304.0
16.2
287.8
1,776.5 %
57.4
—
57.4
— %
(30.8)
73.2
(104.0)
(142.1)%
(227.5)
(178.5)
(49.0)
27.5 %
—
(17.1)
3.3
—
(3.3)
(100.0)%
(17.1)
— %
(6.8)
—
(6.8)
— %
$ 270.9
$ 101.1
$ 169.8
168.0 %
Rental, Escalation and Reimbursement Revenues
Rental revenues decreased primarily as a result of Disposed Properties ($53.2 million), including the partial sale and
deconsolidation of 1515 Broadway, along with the deconsolidation of 919 Third Avenue ($190.6 million). The decrease was
partially offset by increased revenue at our Same-Store properties ($16.2 million).
10
11
Table of Contents
Table of Contents
Escalation and reimbursement revenue decreased primarily as a result of the partial sale and deconsolidation of 1515 Broadway
and the deconsolidation of 919 Third Avenue ($56.3 million), partially offset by higher recoveries at our Same-Store properties
($6.6 million).
The following table presents a summary of the commenced leasing activity for the year ended December 31, 2018 in our
Manhattan and Suburban portfolio:
Usable
SF
Rentable
SF
New
Cash
Rent (per
rentable
SF) (1)
Prev.
Escalated
Rent (per
rentable
SF) (2)
TI/LC
per
rentable
SF
Free
Rent (in
months)
Average
Lease
Term (in
years)
Manhattan
Space available at beginning of the year
1,502,238
Property no longer in redevelopment
Sold Vacancies
Properties placed in service
Acquired vacancies
Property in redevelopment
Space which became available during the
year(3)
(cid:127) Office
(cid:127) Retail
(cid:127) Storage
Total space available
Leased space commenced during the year:
(cid:127) Office(4)
(cid:127) Retail
(cid:127) Storage
79,192
(57,385)
67,917
51,583
1,009,099
14,692
4,744
1,028,535
2,672,080
1,220,716
1,333,727
35,125
6,227
34,865
7,810
Total leased space commenced
1,262,068
1,376,402
Total available space at end of year
1,410,012
Early renewals
(cid:127) Office
(cid:127) Retail
(cid:127) Storage
Total early renewals
Total commenced leases, including replaced
previous vacancy
(cid:127) Office
(cid:127) Retail
(cid:127) Storage
Total commenced leases
362,783
423,632
34,173
12,166
34,015
12,501
409,122
470,148
1,757,359
68,880
20,311
1,846,550
$
$
$
$
$
$
$
$
$
$
$
$
67.20
90.77
28.99
67.58
79.74
94.04
6.65
78.83
70.22
92.39
15.24
70.44
$
$
$
$
$
$
$
$
$
$
$
$
63.32
194.72
25.97
65.00
73.07
104.44
6.64
73.58
66.99
125.16
10.89
68.39
$
$
$
$
$
$
$
$
$
$
$
$
69.17
148.12
—
70.78
30.16
58.80
—
31.43
59.77
104.01
—
60.76
5.8
9.0
0.3
5.9
4.6
—
0.2
4.2
5.6
4.5
0.3
5.5
14.0
12.2
5.1
13.9
6.8
12.9
6.3
7.2
12.3
12.5
5.9
12.2
Usable
SF
Rentable
SF
New
Cash
Rent (per
rentable
SF) (1)
Prev.
Escalated
Rent (per
rentable
SF) (2)
TI/LC
per
rentable
SF
Free
Rent (in
months)
Average
Lease
Term (in
years)
Suburban
Space available at beginning of year
Sold Vacancies
Space which became available during the
year(3)
(cid:127) Office
(cid:127) Retail
(cid:127) Storage
Total space available
Leased space commenced during the year:
(cid:127) Office(5)
(cid:127) Retail
(cid:127) Storage
655,672
(502,366)
172,144
2,693
4,056
178,893
332,199
125,629
124,899
2,385
1,705
2,685
1,816
Total leased space commenced
129,719
129,400
Total available space at end of the year
461,918
Early renewals
(cid:127) Office
(cid:127) Retail
(cid:127) Storage
Total early renewals
Total commenced leases, including replaced
previous vacancy
(cid:127) Office
(cid:127) Retail
(cid:127) Storage
Total commenced leases
195,623
50,585
2,000
248,208
197,514
50,585
2,000
250,099
322,413
53,270
3,816
379,499
$
$
$
$
$
$
$
$
$
$
$
$
33.99
29.60
13.74
33.61
28.68
7.64
11.00
24.29
30.74
8.74
12.31
27.47
$
$
$
$
$
$
$
$
$
$
$
$
36.38
17.00
12.36
35.84
31.40
7.66
11.00
26.43
32.78
7.80
11.49
28.66
$
$
$
$
$
$
$
$
$
$
$
$
19.42
—
—
18.74
24.22
—
—
19.13
22.36
—
—
18.99
3.1
5
—
3.1
8.3
9.0
—
8.4
6.3
8.8
—
6.6
5.7
7.6
3.5
5.7
7.3
12.2
7.6
8.3
6.7
12.0
5.7
7.4
Escalated rent is calculated as total annual income less electric charges.
Includes expiring space, relocating tenants and move-outs where tenants vacated. Excludes lease expirations where tenants held over.
(1) Annual initial base rent.
(2)
(3)
(4) Average starting office rent excluding new tenants replacing vacancies was $72.42 per rentable square feet for 1,127,841 rentable square feet. Average
starting office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $66.29 per rentable square feet for 629,518
rentable square feet.
(5) Average starting office rent excluding new tenants replacing vacancies was $30.05 per rentable square feet for 217,842 rentable square feet. Average starting
office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $32.17 per rentable square feet for 104,571 rentable
square feet.
Investment Income
Investment income increased primarily as a result of new originations, a larger weighted average book balance, and higher
acceleration of previously unrecognized fees as a result of sales, redemptions, modifications or syndications ($1.3 million).
For the year ended December 31, 2018, the weighted average debt and preferred equity investment balance outstanding and
weighted average yield were $2.1 billion and 9.0%, respectively. Excluding our investment in Two Herald Square which was put
on non-accrual in August 2017, the weighted average debt and preferred equity investment balance outstanding and weighted
average yield for the year ended December 31, 2017 were to $1.9 billion and 9.3%, respectively. As of December 31, 2018, the
debt and preferred equity investments had a weighted average term to maturity of 1.8 years excluding extension options.
Other Income
Other income increased primarily as a result of fees recognized in connection with the recapitalization of a joint venture
property ($5.8 million), real estate tax refunds at our Same-Store Properties ($3.2 million), lease termination income ($2.9 million),
12
13
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and promote income related to the sale of 1274 Fifth Avenue ($2.1 million), partially offset by net fees recognized in connection
with the One Vanderbilt joint venture ($8.4 million).
Third Avenue ($8.8 million) which closed in 2016, but was only recognized in the second quarter of 2017 due to the sale not
meeting the criteria for sale accounting under the full accrual method in ASC 360-20 until the second quarter of 2017.
Property Operating Expenses
Depreciable Real Estate Reserves and Impairment
During the year ended December 31, 2018, we recorded a charge related to 5 suburban office properties comprised of 13
buildings ($221.9 million), which the company has stated it intends to dispose of, and a charge related to the Upper East Side
Residential Assemblage ($5.8 million). During the year ended December 31, 2017, we recorded a $178.5 million of depreciable
real estate reserves and impairment related to Reckson Executive Park, Stamford Towers, 125 Chubb Avenue in Lyndhurst, NJ,
115-117 Stevens Avenue in Valhalla, New York, 520 White Plains Road in Tarrytown, NY, and our investment in Jericho Plaza.
Loss on early extinguishment of debt
During the year ended December 31, 2018, we recognized a loss on early extinguishment of debt as a result of the early
repayment of the debt at One Madison Avenue ($14.9 million), and the mortgage at 220 East 42nd ($2.2 million).
Loan loss and other investment reserves, net of recoveries
During the year ended December 31, 2018, we recognized a loss related to two of our debt and preferred equity positions
($5.8 million) that are being marketed for sale, and the repayment of an investment pursuant to the sale of a property ($1.1 million).
Comparison of the year ended December 31, 2017 to the year ended December 31, 2016
The following comparison for the year ended December 31, 2017, or 2017, to the year ended December 31, 2016, or 2016,
makes reference to the effect of the following:
i. “Same-Store Properties,” which represents all operating properties owned by us at January 1, 2016 and still owned by
us in the same manner at December 31, 2017 (Same-Store Properties totaled 43 of our 60 consolidated operating
properties),
ii. “Acquisition Properties,” which represents all properties or interests in properties acquired in 2017 and 2016 and all non-
Same-Store Properties, including properties that are under development or redevelopment,
iii. "Disposed Properties" which represents all properties or interests in properties sold in 2017 and 2016, and
iv. “Other,” which represents properties where we sold an interest resulting in deconsolidation and corporate level items not
allocable to specific properties, as well as the Service Corporation and eEmerge Inc.
Property operating expenses decreased primarily as a result of the partial sale and deconsolidation of 1515 Broadway, the
deconsolidation of 919 Third Avenue ($103.2 million) and the Disposed Properties ($22.8 million), which was partially offset by
increased real estate taxes at our Same-Store Properties ($8.0 million).
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses decreased by $7.9 million to $92.6 million for the year ended December 31,
2018, or 5.2% of total combined revenues, including our share of joint venture revenues, compared to $100.5 million, or 5.3% of
total revenues including our share of joint venture revenues, for the year ended December 31, 2017.
Interest Expense and Amortization of Deferred Financing Costs, Net of Interest Income
Interest expense and amortization of deferred financing costs, net of interest income, decreased primarily as a result of the
partial sale and deconsolidation of 1515 Broadway ($33.0 million) and the deconsolidation of 919 Third Avenue ($26.5
million). The weighted average consolidated debt balance outstanding was $5.7 billion for the year ended December 31, 2018
as compared to $6.6 billion for the year ended December 31, 2017. The consolidated weighted average interest rate increased to
4.06% for the year ended December 31, 2018 as compared to 4.00% for the year ended December 31, 2017 as a result of an
increase in LIBOR.
Depreciation and Amortization
Depreciation and amortization decreased primarily as a result of 185 Broadway which was moved to development ($50.4
million) in the first quarter of 2018, the deconsolidation of 919 Third Avenue, the partial sale and deconsolidation of 1515 Broadway
($60.6 million) and the Disposed Properties ($22.4 million).
Equity in Net Income in Unconsolidated Joint Venture/Real Estate
Equity in net income from unconsolidated joint ventures decreased primarily as a result of the repayment and redemption
of certain debt and preferred equity positions accounted for under the equity method ($8.7 million), and the sale of 1745 Broadway
in the second quarter of 2018 ($2.9 million), partially offset by the partial sale and deconsolidation of 1515 Broadway and the
deconsolidation of 919 Third Avenue ($6.6 million).
Equity in Net Gain on Sale of Interest in Unconsolidated Joint Ventures
During the year ended December 31, 2018, we recognized a gain on sale related to our joint venture interests in 3 Columbus
Circle ($160.4 million), 724 Fifth Avenue ($64.6 million), 1745 Broadway ($52.0 million), 175-225 Third Avenue ($19.5 million),
720 Fifth Avenue ($6.3 million) and Jericho Plaza ($0.1 million), and a loss related to the sale of our interest in Stonehenge Village
($5.7 million).
Purchase price and other fair value adjustments
In January 2018, the partnership agreement for our investment in 919 Third Avenue was modified resulting in our partner
now having substantive participating rights in the venture and the Company no longer having a controlling interest in the investment.
As a result the investment in this property was deconsolidated as of January 1, 2018. The Company recorded its non-controlling
interest at fair value resulting in a $49.3 million fair value adjustment in the consolidated statement of operations. This fair value
was allocated to the assets and liabilities, including identified intangibles of the property.
In May, 2018, the Company was the successful bidder at the foreclosure of 2 Herald Square, at which time the Company's
$250.5 million outstanding principal balance on its debt and preferred equity investment and $7.7 million accrued interest balance
receivables were credited to our equity investment in the property. We recorded the assets acquired and liabilities assumed at fair
value. This resulted in the recognition of a fair value adjustment of $8.1 million, which is reflected on the Company's consolidated
statement of operations within purchase price and other fair value adjustments. This fair value was allocated to the assets and
liabilities, including identified intangibles of the property.
(Loss) Gain on Sale of Real Estate, Net
During the year ended December 31, 2018, we recognized a gain on sale related to our interests in 600 Lexington ($23.8
million) and we recognized a loss on sale related to our interest in 300-400 Summit Lake Drive ($36.2 million), 635 Madison
($14.1 million), Reckson Executive Park ($2.6 million) and 115-117 Stevens Avenue ($0.7 million). During the year ended
December 31, 2017, we recognized a gain on sale associated with the sale of the property at 16 Court Street ($64.9 million),
and the partial sale of the property at 102 Greene Street ($4.9 million). This gain was partially offset by a loss on the sale of 885
14
15
Table of Contents
(in millions)
Rental revenue
Escalation and
reimbursement
Investment income
Other income
Total revenues
Same-Store
Disposed
Other
Consolidated
2017
2016
$
Change
%
Change
2017
2016
2017
2016
2017
2016
$
Change
%
Change
$ 961.8
$ 942.6
$ 19.2
2.0 % $121.1
$360.7
$ 18.1
$ 20.5
$1,101.0
$1,323.8
$(222.8)
(16.8)%
131.4
142.0
(10.6)
(7.5)%
40.1
52.7
1.4
2.2
—
8.9
—
6.8
—
2.1
— %
30.9 %
—
0.5
— 193.9
213.0
94.3
34.3
29.2
172.9
193.9
43.7
196.9
213.0
130.3
(24.0)
(19.1)
(86.6)
1,102.1
1,091.4
10.7
1.0 % 161.7
507.7
247.7
264.9
1,511.5
1,864.0
(352.5)
(12.2)%
(9.0)%
(66.5)%
(18.9)%
Table of Contents
Usable
SF
Rentable
SF
New
Cash
Rent (per
rentable
SF) (1)
Prev.
Escalated
Rent (per
rentable
SF) (2)
TI/LC
per
rentable
SF
Free
Rent (in
months)
Average
Lease
Term (in
years)
Manhattan
Space available at beginning of the year
1,149,571
Space which became available during the
year(3)
Property operating expenses
482.6
474.2
Transaction related costs
Marketing, general and
administrative
—
—
—
—
482.6
474.2
8.4
—
—
8.4
1.8 %
— %
— %
1.8 %
65.3
—
—
98.7
—
23.0
(1.8)
21.6
7.5
570.9
594.5
(23.6)
(4.0)%
(1.8)
7.5
(9.3)
(124.0)%
— 100.5
99.8
65.3
98.7
121.7
128.9
100.5
669.6
99.8
701.8
0.7
(32.2)
0.7 %
(4.6)%
Total space available
Leased space commenced during the year:
(cid:127) Office
(cid:127) Retail
(cid:127) Storage
1,181,119
29,739
16,594
1,227,452
2,377,023
Operating income before
equity in net income from
unconsolidated joint
ventures
Other income (expenses):
Interest expense and
amortization of deferred
financing costs, net of
interest income
Depreciation and
amortization
Equity in net income from
unconsolidated joint
ventures
Equity in net gain on sale of
interest in unconsolidated
joint venture/real estate
Gain on sale of real estate,
net
Depreciable real estate
reserves and impairment
Gain (loss) on sale of
investment in marketable
securities
Net income
$ 619.5
$ 617.2
$
2.3
0.4 % $ 96.4
$409.0
$126.0
$136.0
$ 841.9
$1,162.2
$(320.3)
(27.6)%
(cid:127) Office(4)
(cid:127) Retail
(cid:127) Storage
806,688
884,513
33,257
34,840
63,710
5,560
Total leased space commenced
874,785
953,783
Total available space at end of year
1,502,238
(273.6)
(345.8)
72.2
(20.9)%
(403.3)
(821.0)
417.7
(50.9)%
Early renewals
21.9
11.9
10.0
84.0 %
(cid:127) Office
(cid:127) Retail
(cid:127) Storage
16.2
44.0
(27.8)
(63.2)%
Total early renewals
73.2
238.1
(164.9)
(69.3)%
(178.5)
(10.4)
(168.1)
1,616.3 %
3.3
(0.1)
3.4
(3,400.0)%
$ 101.1
$ 278.9
$(177.8)
(63.8)%
Total commenced leases, including replaced
previous vacancy
(cid:127) Office
(cid:127) Retail
(cid:127) Storage
Total commenced leases
281,039
285,889
45,652
2,730
35,089
2,817
329,421
323,795
1,170,402
98,799
8,377
1,277,578
$
$
$
$
$
$
$
$
$
$
$
$
73.59
297.35
36.32
88.32
79.07
73.96
29.44
78.09
74.93
218.01
34.00
85.73
$
$
$
$
$
$
$
$
$
$
$
$
62.13
251.55
48.86
82.88
73.96
50.53
30.52
71.04
66.58
176.40
38.77
78.42
$
$
$
$
$
$
$
$
$
$
$
$
56.80
37.72
1.92
55.20
11.46
2.01
—
10.34
45.72
25.04
1.27
43.83
4.6
6.5
1.9
4.7
1.9
0.1
1.3
1.7
3.9
4.2
1.7
3.9
8.2
13.1
7.4
8.5
4.5
5.5
3.2
4.6
7.3
10.4
6.0
7.5
Rental, Escalation and Reimbursement Revenues
Rental revenues decreased primarily as a result of Disposed Properties ($239.7 million), which included 388-390 Greenwich
Street and the effect of the partial sale and deconsolidation of 11 Madison Avenue in the third quarter of 2016. This decrease was
offset by increased rental revenue at Same-Store Properties ($19.1 million), and by 1515 Broadway which, in 2016, recognized
accounting write-offs ($17.4 million) related to the space previously leased to Aeropostale following the tenant's bankruptcy.
Escalation and reimbursement revenue decreased primarily as a result of Disposed Properties ($12.7 million) and lower
recoveries at our Same-Store properties ($10.6 million).
The following table presents a summary of the commenced leasing activity for the year ended December 31, 2017 in our
Manhattan and Suburban portfolio:
16
17
Table of Contents
Table of Contents
Usable
SF
Rentable
SF
New
Cash
Rent (per
rentable
SF) (1)
Prev.
Escalated
Rent (per
rentable
SF) (2)
TI/LC
per
rentable
SF
Free
Rent (in
months)
Average
Lease
Term (in
years)
Suburban
Space available at beginning of year
Sold Vacancies
Properties placed in service
Space which became available during the
year(3)
(cid:127) Office
(cid:127) Retail
(cid:127) Storage
Total space available
Leased space commenced during the year:
(cid:127) Office(5)
(cid:127) Retail
(cid:127) Storage
965,021
(222,250)
—
246,565
1,338
2,866
250,769
993,540
334,739
345,633
338
2,791
338
2,858
Total leased space commenced
337,868
348,829
Total available space at end of the year
655,672
Early renewals
(cid:127) Office
(cid:127) Storage
Total early renewals
Total commenced leases, including replaced
previous vacancy
(cid:127) Office
(cid:127) Retail
(cid:127) Storage
Total commenced leases
181,288
2,213
183,501
183,331
2,213
185,544
528,964
338
5,071
534,373
$
$
$
$
$
$
$
$
$
$
$
31.62
33.00
17.42
31.51
32.21
17.01
32.03
31.83
33.00
17.24
31.69
$
$
$
$
$
$
$
$
$
$
$
35.13
33.00
13.92
34.79
32.86
16.52
32.67
33.76
33.00
15.31
33.51
$
$
$
$
$
$
$
$
$
$
$
34.99
—
10.13
34.75
8.05
—
7.96
25.65
—
5.71
25.45
6.2
—
0.9
6.2
4.1
—
4.0
5.5
—
0.5
5.4
7.5
5.0
4.7
7.5
4.2
4.8
4.2
6.3
5.0
4.7
6.3
Escalated rent is calculated as total annual income less electric charges.
Includes expiring space, relocating tenants and move-outs where tenants vacated. Excludes lease expirations where tenants held over.
(1) Annual initial base rent.
(2)
(3)
(4) Average starting office rent excluding new tenants replacing vacancies was $70.21 per rentable square feet for 120,566 rentable square feet. Average starting
office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $72.83 per rentable square feet for 217,384 rentable
square feet.
(5) Average starting office rent excluding new tenants replacing vacancies was $37.88 per rentable square feet for 25,866 rentable square feet. Average starting
office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $35.19 per rentable square feet for 96,688 rentable
square feet.
Investment Income
Investment income decreased primarily as a result of additional income recognized from the recapitalization of a debt
investment ($41.0 million) in the third quarter of 2016, partially offset by income related to our preferred equity investment in
885 Third Avenue ($16.9 million) and a larger weighted average book balance. For the twelve months ended December 31, 2017,
the weighted average debt and preferred equity investment balance outstanding and weighted average yield were $1.9 billion and
9.3% excluding our investment in Two Herald Square which was put on non-accrual in August 2017, respectively, compared to
$1.5 billion and 9.7%, respectively, for the same period in 2016. As of December 31, 2017, the debt and preferred equity investments
had a weighted average term to maturity of 2.2 years excluding extension options and our investment in Two Herald Square.
Other Income
Other income decreased primarily as a result of the termination fee earned in connection with the termination of the lease
with Citigroup, Inc. at 388-390 Greenwich in 2016 ($94.0 million) and promote income earned in connection with the sale of 33
Beekman in the second quarter of 2016 ($10.8 million). The decrease was partially offset by net fees recognized in connection
with the One Vanderbilt venture in 2017 ($13.3 million).
Property Operating Expenses
Property operating expenses decreased primarily as a result of Disposed Properties ($33.4 million) partially offset by increased
real estate taxes at our Same-Store Properties ($8.2 million).
Transaction Related Costs
The decrease in transaction related costs in 2017 is primarily due to the adoption of ASU No. 2017-01 in 2017, which clarified
the definition of a business and provided guidance to assist in determining whether transactions should be accounted for as
acquisitions of assets or businesses. Following the adoption of the guidance, most of our real estate acquisitions are considered
asset acquisitions and transaction costs are therefore capitalized to the investment basis when they would have previously been
expensed under the previous guidance. Transaction costs expensed in 2017 relate primarily to transactions that are not moving
forward for which any costs incurred are expensed.
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses for the year ended December 31, 2017 were $100.5 million, including a
$4.1 million charge related to forfeiture of the Company's 2014 Outperformance Plan awards, or 5.3% of total combined revenues,
including our share of joint venture revenues, and 53 basis points of total combined assets, including our share of joint venture
assets compared to $99.8 million, or 4.7% of total revenues including our share of joint venture revenues, and 53 basis points of
total combined assets including our share of joint venture assets for 2016.
Interest Expense and Amortization of Deferred Financing Costs, Net of Interest Income
Interest expense and amortization of deferred financing costs, net of interest income, decreased primarily as a result of
the Disposed Properties ($72.2 million). The weighted average consolidated debt balance outstanding was $6.6 billion for the
year ended December 31, 2017 from $8.5 billion for the year ended December 31, 2016. The consolidated weighted average
interest rate was 4.00% for the year ended December 31, 2017 as compared to 3.82% for the year ended December 31, 2016.
Depreciation and Amortization
Depreciation and amortization decreased primarily as a result of the Disposed Properties ($448.9 million), partially offset
by accelerated amortization at 5-7 Dey Street, 183 & 187 Broadway upon the commencement of demolition of the properties
($32.0 million).
Equity in Net Income in Unconsolidated Joint Venture/Real Estate
Equity in net income from unconsolidated joint ventures increased primarily as a result of the sale of a 40% interest in 11
Madison in the third quarter of 2016 ($13.0 million), as well as higher net income contributions from 1745 Broadway ($7.3 million)
and 605 West 42nd Street ($3.5 million) in 2017. These increases were partially offset by lower net income contributions from
280 Park Avenue ($5.7 million) as a result of the write off of deferred financing costs in conjunction with the refinancing of the
debt on the property, reduced occupancy at 3 Columbus Circle ($3.9 million), and revenues from a debt and preferred equity
investment that was contributed to a joint venture in the first quarter of 2016, and repaid in the second quarter of 2017 ($2.7
million).
Equity in Net Gain on Sale of Interest in Unconsolidated Joint Ventures
During the year ended December 31, 2016 we recognized a gain on the sale related to our interests in 747 Madison Avenue
($13.0 million), 102 Greene Street ($0.3 million) and part of our interest in the Stonehenge Portfolio ($0.9 million). The sale of
747 Madison, which occurred in 2014, did not meet the criteria for sale accounting at that time and, therefore, remained on our
consolidated financial statement until the criteria was met in the second quarter of 2017. During the year ended December 31,
2016, in which we recognized a gain on the sale of our interests in 33 Beekman Street ($33.0 million), 7 Renaissance Square ($4.2
million), 1 Jericho ($3.3 million) and EOP Denver ($3.1 million).
Gain on Sale of Real Estate, Net
During the year ended December 31, 2017, we recognized a gain on sale associated with the sale of the property at 16
Court Street ($64.9 million), and the partial sale of the property at 102 Greene Street ($4.9 million). This gain was partially
offset by a loss on the sale of 885 Third Avenue ($8.8 million) which closed in 2016, but was only recognized in the second
quarter of 2017 due to the sale not meeting the criteria for sale accounting under the full accrual method in ASC 360-20 until
the second quarter of 2017. During the year ended December 31, 2016 we recognized a gain on sale associated with the sales of
388-390 Greenwich ($206.5 million), a 49% interest in 400 East 57th Street ($23.9 million), 248-252 Bedford Avenue in
Brooklyn, New York ($15.3 million), and a 40% interest in 11 Madison Avenue ($3.6 million), partially offset by the loss on the
sale of 7 International Drive, Westchester County, NY ($6.9 million).
18
19
Table of Contents
Table of Contents
Depreciable Real Estate Reserves and Impairment
During the year ended December 31, 2017, we recorded a $178.5 million of depreciable real estate reserves and
impairment related to Reckson Executive Park, Stamford Towers, 125 Chubb Avenue in Lyndhurst, NJ, 115-117 Stevens
Avenue in Valhalla, New York, 520 White Plains Road in Tarrytown, NY, and our investment in Jericho Plaza. During the year
ended December 31, 2016, we recognized depreciable real estate reserves and impairment related to 500 West Putnam ($10.4
million).
Liquidity and Capital Resources
We currently expect that our principal sources of funds to meet our short-term and long-term liquidity requirements for
working capital, acquisitions, development or redevelopment of properties, tenant improvements, leasing costs, share repurchases,
dividends to shareholders, distributions to unitholders, repurchases or repayments of outstanding indebtedness (which may include
exchangeable debt) and for debt and preferred equity investments will include:
(1)
(2)
(3)
(4)
(5)
(6)
Cash flow from operations;
Cash on hand;
Net proceeds from divestitures of properties and redemptions, participations and dispositions of debt and
preferred equity investments;
Borrowings under the 2017 credit facility;
Other forms of secured or unsecured financing; and
Proceeds from common or preferred equity or debt offerings by the Company or the Operating Partnership
(including issuances of units of limited partnership interest in the Operating Partnership and Trust preferred
securities).
Cash flow from operations is primarily dependent upon the occupancy level of our portfolio, the net effective rental rates
achieved on our leases, the collectability of rent, operating escalations and recoveries from our tenants and the level of operating
and other costs. Additionally, we believe that our debt and preferred equity investment program will continue to serve as a source
of operating cash flow.
The combined aggregate principal maturities of our property mortgages and other loans payable, corporate obligations and
our share of joint venture debt, including as-of-right extension options, as of December 31, 2018 were as follows (in thousands):
Property mortgages and
other loans
$
6,241
$
26,640
$
151,505
$
208,017
$
122,851
$
1,145,405
$
1,660,659
2019
2020
2021
2022
2023
Thereafter
Total
MRA and FHLB facilities
27,500
300,000
250,000
—
—
—
—
327,500
350,000
800,000
1,800,000
400,000
3,600,000
—
115,295
278,791
518,371
220,810
277,996
2,430,198
3,841,461
Total
$
149,036
$
855,431
$ 1,019,876
$ 1,228,827
$
2,200,847
$
3,975,603
$
9,429,620
As of December 31, 2018, we had $158.1 million of consolidated cash on hand, inclusive of $28.6 million of marketable
securities. We expect to generate positive cash flow from operations for the foreseeable future. We may seek to divest of properties
or interests in properties or access private and public debt and equity capital when the opportunity presents itself, although there
is no guarantee that this capital will be made available to us at efficient levels or at all. Management believes that these sources
of liquidity, if we are able to access them, along with potential refinancing opportunities for secured and unsecured debt, will allow
us to satisfy our debt obligations, as described above, upon maturity, if not before.
We also have investments in several real estate joint ventures with various partners who we consider to be financially stable
and who have the ability to fund a capital call when needed. Most of our joint ventures are financed with non-recourse debt. We
believe that property level cash flows along with unfunded committed indebtedness and proceeds from the refinancing of
outstanding secured indebtedness will be sufficient to fund the capital needs of our joint venture properties.
Corporate obligations
Joint venture debt-our
share
Net cash provided by operating activities
Net cash provided by investing activities
Net cash used in by financing activities
Year Ended December 31,
2018
2017
(Decrease)
Increase
$
$
$
441,537
681,662
$
$
(1,094,112) $
543,001
22,014
$
$
(684,956) $
(101,464)
659,648
(409,156)
Our principal source of operating cash flow is related to the leasing and operating of the properties in our portfolio. Our
properties provide a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt
service, and fund quarterly dividend and distribution requirements. Our debt and preferred equity investments and joint venture
investments also provide a steady stream of operating cash flow to us.
Cash is used in investing activities to fund acquisitions, development or redevelopment projects and recurring and
nonrecurring capital expenditures. We selectively invest in new projects that enable us to take advantage of our development,
leasing, financing and property management skills, and invest in existing buildings that meet our investment criteria. During the
year ended December 31, 2018, when compared to the year ended December 31, 2017, we used cash primarily for the following
investing activities (in thousands):
Acquisitions of real estate
Capital expenditures and capitalized interest
Escrow cash-capital improvements/acquisition deposits/deferred purchase price
Joint venture investments
Distributions from joint ventures
Proceeds from sales of real estate/partial interest in property
Debt and preferred equity and other investments
Increase in net cash used in investing activities
$
$
(31,806)
81,541
—
(11,180)
(86,627)
538,208
169,512
659,648
Funds spent on capital expenditures, which are comprised of building and tenant improvements, decreased from $336.0
million for the year ended December 31, 2017 to $254.5 million for the year ended December 31, 2018. The decrease in capital
expenditures relates primarily to lower costs incurred in connection with the redevelopment of properties.
We generally fund our investment activity through the sale of real estate, property-level financing, our credit facilities, our
MRA facilities, senior unsecured notes, convertible or exchangeable securities, and construction loans. From time to time, the
Company may issue common or preferred stock, or the Operating Partnership may issue common or preferred units of limited
partnership interest. During the year ended December 31, 2018, when compared to the year ended December 31, 2017, we used
cash for the following financing activities (in thousands):
Proceeds from our debt obligations
Repayments of our debt obligations
Net distribution to noncontrolling interests
Other financing activities
Proceeds from stock options exercised and DRSPP issuance
Payment of debt extinguishment costs
Repurchase of common stock
Redemption of preferred stock
Dividends and distributions paid
$
29,333
(249,600)
12,532
(39,155)
5,511
(13,918)
(173,239)
(933)
20,313
Increase in net cash provided by financing activities
$
(409,156)
Cash Flows
Capitalization
The following summary discussion of our cash flows is based on our consolidated statements of cash flows in the Financial
Statements and is not meant to be an all-inclusive discussion of the changes in our cash flows for the years presented below.
Cash, restricted cash, and cash equivalents were $279.1 million and $250.0 million at December 31, 2018 and 2017,
respectively, representing a increase of $29.1 million. The increase was a result of the following changes in cash flows (in thousands):
Our authorized capital stock consists of 260,000,000 shares, $0.01 par value per share, consisting of 160,000,000 shares of
common stock, $0.01 par value per share, 75,000,000 shares of excess stock, at $0.01 par value per share, and 25,000,000 shares
of preferred stock, $0.01 par value per share. As of December 31, 2018, 83,683,847 shares of common stock and no shares of
excess stock were issued and outstanding.
20
21
Table of Contents
Share Repurchase Program
Table of Contents
2014 Outperformance Plan
In August 2016, our Board of Directors approved a share repurchase plan under which we can repurchase up to $1.0 billion
of shares of our common stock. The Board of Directors has since authorized three separate $500.0 million increases to the size of
the share repurchase program in the fourth quarter of 2017, second quarter of 2018, and fourth quarter of 2018, bringing the total
program size to $2.5 billion.
At December 31, 2018 repurchases executed under the plan were as follows:
Period
Year ended 2017
First quarter 2018
Second quarter 2018
Third quarter 2018
Fourth quarter 2018
Shares repurchased
Average price paid per
share
Cumulative number of
shares repurchased as
part of the repurchase
plan or programs
8,342,411
3,653,928
3,479,552
252,947
2,358,484
$101.64
$97.07
$97.22
$99.75
$93.04
8,342,411
11,996,339
15,475,891
15,728,838
18,087,322
At-The-Market Equity Offering Program
In March 2015, the Company, along with the Operating Partnership, entered into an "at-the-market" equity offering program,
or ATM Program, to sell an aggregate of $300.0 million of our common stock. The Company did not make any sales of its common
stock under the ATM program in the years ended December 31, 2018, 2017, or 2016.
Dividend Reinvestment and Stock Purchase Plan ("DRSPP")
In February 2018, the Company filed a registration statement with the SEC for our dividend reinvestment and stock purchase
plan, or DRSPP, which automatically became effective upon filing. The Company registered 3,500,000 shares of our common
stock under the DRSPP. The DRSPP commenced on September 24, 2001.
The following table summarizes SL Green common stock issued, and proceeds received from dividend reinvestments and/
or stock purchases under the DRSPP for the years ended December 31, 2018, 2017, and 2016, respectively (in thousands):
Year Ended December 31,
2018
2017
2016
Shares of common stock issued
1,399
2,141
Dividend reinvestments/stock purchases under the DRSPP
$
136
$
223
$
2,687
277
Fourth Amended and Restated 2005 Stock Option and Incentive Plan
The Fourth Amended and Restated 2005 Stock Option and Incentive Plan, or the 2005 Plan, was approved by the Company's
board of directors in April 2016 and its stockholders in June 2016 at the Company's annual meeting of stockholders. Subject to
adjustments upon certain corporate transactions or events, awards with respect to up to a maximum of 27,030,000 fungible units
may be granted as options, restricted stock, phantom shares, dividend equivalent rights and other equity-based awards under the
2005 Plan. As of December 31, 2018, 6.7 million fungible units were available for issuance under the 2005 Plan after reserving
for shares underlying outstanding restricted stock units, phantom stock units granted pursuant to our Non-Employee Directors'
Deferral Program and LTIP Units.
In August 2014, the compensation committee of the Company's board of directors approved the general terms of the SL
Green Realty Corp. 2014 Outperformance Plan, or the 2014 Outperformance Plan. Participants in the 2014 Outperformance Plan
could earn, in the aggregate, up to 610,000 LTIP Units in our Operating Partnership based on our total return to stockholders for
the three-year period beginning September 1, 2014. Under the 2014 Outperformance Plan, two-thirds of the LTIP Units were
subject to performance based vesting based on the Company’s absolute total return to stockholders and one-third of the LTIP Units
were subject to performance based vesting based on relative total return to stockholders compared to the constituents of the MSCI
REIT Index. LTIP Units earned under the 2014 Outperformance Plan were to be subject to continued vesting requirements, with
50% of any awards earned vesting on August 31, 2017 and the remaining 50% vesting on August 31, 2018, subject to continued
employment with us through such dates. Participants were not entitled to distributions with respect to LTIP Units granted under
the 2014 Outperformance Plan unless and until they are earned. If LTIP Units were earned, each participant would have been
entitled to the distributions that would have been paid had the number of earned LTIP Units been issued at the beginning of the
performance period, with such distributions being paid in the form of cash or additional LTIP Units. Thereafter, distributions were
to be paid currently with respect to all earned LTIP Units, whether vested or unvested.
Based on our performance, none of the LTIP Units granted under the 2014 Outperformance Plan were earned pursuant to
the terms of the 2014 Outperformance Plan, and all units issued were forfeited in 2017.
The cost of the 2014 Outperformance Plan ($27.9 million subject to forfeitures), based on the portion of the 2014
Outperformance Plan granted prior to termination, was amortized into earnings through December 31, 2017. We recorded zero
compensation expense during the year ended December 31, 2018, and compensation expense of $13.6 million and $8.4 million
during the years ended December 31, 2017 and 2016, respectively, related to the 2014 Outperformance Plan.
Deferred Compensation Plan for Directors
Under our Non-Employee Director's Deferral Program, which commenced July 2004, the Company's non-employee directors
may elect to defer up to 100% of their annual retainer fee, chairman fees, meeting fees and annual stock grant. Unless otherwise
elected by a participant, fees deferred under the program shall be credited in the form of phantom stock units. The program provides
that a director's phantom stock units generally will be settled in an equal number of shares of common stock upon the earlier of
(i) the January 1 coincident with or the next following such director's termination of service from the Board of Directors or (ii) a
change in control by us, as defined by the program. Phantom stock units are credited to each non-employee director quarterly
using the closing price of our common stock on the first business day of the respective quarter. Each participating non-employee
director is also credited with dividend equivalents or phantom stock units based on the dividend rate for each quarter, which are
either paid in cash currently or credited to the director’s account as additional phantom stock units.
During the year ended December 31, 2018, 13,638 phantom stock units were earned and 9,459 shares of common stock
were issued to our board of directors. We recorded compensation expense of $2.4 million during the year ended December 31,
2018 related to the Deferred Compensation Plan. As of December 31, 2018, there were 113,492 phantom stock units outstanding
pursuant to our Non-Employee Director's Deferral Program.
Employee Stock Purchase Plan
In 2007, the Company's board of directors adopted the 2008 Employee Stock Purchase Plan, or ESPP, to encourage our
employees to increase their efforts to make our business more successful by providing equity-based incentives to eligible employees.
The ESPP is intended to qualify as an "employee stock purchase plan" under Section 423 of the Code, and has been adopted by
the board to enable our eligible employees to purchase the Company's shares of common stock through payroll deductions. The
ESPP became effective on January 1, 2008 with a maximum of 500,000 shares of the common stock available for issuance, subject
to adjustment upon a merger, reorganization, stock split or other similar corporate change. The Company filed a registration
statement on Form S-8 with the SEC with respect to the ESPP. The common stock is offered for purchase through a series of
successive offering periods. Each offering period will be three months in duration and will begin on the first day of each calendar
quarter, with the first offering period having commenced on January 1, 2008. The ESPP provides for eligible employees to purchase
the common stock at a purchase price equal to 85% of the lesser of (1) the market value of the common stock on the first day of
the offering period or (2) the market value of the common stock on the last day of the offering period. The ESPP was approved
by our stockholders at our 2008 annual meeting of stockholders. As of December 31, 2018, 116,368 shares of our common stock
had been issued under the ESPP.
22
23
Table of Contents
the total commitments under the revolving credit facility based on the credit rating assigned to the senior unsecured long term
indebtedness of the Company. As of December 31, 2018, the facility fee was 20 basis points.
As of December 31, 2018, we had $11.8 million of outstanding letters of credit, $500.0 million drawn under the revolving
credit facility and $1.5 billion outstanding under the term loan facilities, with total undrawn capacity of $1.0 billion under the
2017 credit facility. At December 31, 2018 and December 31, 2017, the revolving credit facility had a carrying value of $492.2
million and $30.3 million, respectively, net of deferred financing costs. At December 31, 2018 and December 31, 2017, the term
loan facilities had a carrying value of $1.5 billion and $1.5 billion, respectively, net of deferred financing costs.
The Company and the Operating Partnership are borrowers jointly and severally obligated under the 2017 credit facility.
The 2017 credit facility includes certain restrictions and covenants (see Restrictive Covenants below).
Federal Home Loan Bank of New York Facility
The Company’s wholly-owned subsidiary, Ticonderoga Insurance Company, or Ticonderoga, a Vermont licensed captive
insurance company, is a member of the Federal Home Loan Bank of New York, or FHLBNY. As a member, Ticonderoga may
borrow funds from the FHLBNY in the form of secured advances. As of December 31, 2018, we had $13.0 million and $14.5
million in outstanding secured advances with a borrowing rate of 30-day LIBOR over 27 basis points and 30-day LIBOR over 18
basis points, respectively.
Master Repurchase Agreements
The Company has entered into two Master Repurchase Agreements, or MRAs, known as the 2016 MRA and 2017 MRA,
which provide us with the ability to sell certain debt investments with a simultaneous agreement to repurchase the same at a certain
date or on demand. We seek to mitigate risks associated with our repurchase agreement by managing the credit quality of our
assets, early repayments, interest rate volatility, liquidity, and market value. The margin call provisions under our repurchase
facilities permit valuation adjustments based on capital markets activity, and are not limited to collateral-specific credit marks. To
monitor credit risk associated with our debt investments, our asset management team regularly reviews our investment portfolio
and is in contact with our borrowers in order to monitor the collateral and enforce our rights as necessary. The risk associated with
potential margin calls is further mitigated by our ability to recollateralize the facility with additional assets from our portfolio of
debt investments, our ability to satisfy margin calls with cash or cash equivalents and our access to additional liquidity through
the 2017 credit facility, as defined above.
In June 2017, we entered into the 2017 MRA, with a maximum facility capacity of $300.0 million. In April 2018, we increased
the maximum facility capacity to $400.0 million. The facility bears interest on a floating rate basis at a spread to 30-day LIBOR
based on the pledged collateral and advance rate and has an initial one year term, with two one year extension options. In June
2018, we exercised a one year extension option. At December 31, 2018, the facility had a carrying value of $299.6 million, net of
deferred financing costs.
In July 2016, we entered into a restated 2016 MRA, with a maximum facility capacity of $300.0 million. In June 2018, we
terminated the restated 2016 MRA. The facility bore interest ranging from 225 and 400 basis points over 30-day LIBOR depending
on the pledged collateral and had an initial two-year term, with a one year extension option. Since December 6, 2015, we had been
required to pay monthly in arrears a 25 basis point fee on the excess of $150.0 million over the average daily balance during the
period when the average daily balance was less than $150.0 million.
Table of Contents
Indebtedness
The table below summarizes our consolidated mortgages and other loans payable, 2017 credit facility, senior unsecured
notes and trust preferred securities outstanding at December 31, 2018 and 2017, (amounts in thousands).
Debt Summary:
Balance
Fixed rate
Variable rate—hedged
Total fixed rate
Total variable rate
Total debt
Debt, preferred equity, and other investments subject to variable rate
Net exposure to variable rate debt
Percent of Total Debt:
Fixed rate
Variable rate
Total
Effective Interest Rate for the Year:
Fixed rate
Variable rate
Effective interest rate
December 31,
2018
2017
$
$
2,543,476
$
1,000,000
3,543,476
2,048,442
5,591,918
$
1,299,390
749,052
63.4%
36.6%
100.0%
4.34%
3.57%
4.06%
3,805,165
500,000
4,305,165
1,605,431
5,910,596
1,325,166
280,265
72.8%
27.2%
100.0%
4.31%
2.76%
4.00%
The variable rate debt shown above generally bears interest at an interest rate based on 30-day LIBOR (2.50% and 1.56%
at December 31, 2018 and 2017, respectively). Our consolidated debt at December 31, 2018 had a weighted average term to
maturity of 4.66 years.
Certain of our debt and preferred equity investments, with a carrying value of $1.3 billion at December 31, 2018, are variable
rate investments, which mitigate our exposure to interest rate changes on our unhedged variable rate debt.
Mortgage Financing
As of December 31, 2018, our total mortgage debt (excluding our share of joint venture mortgage debt of $3.8 billion)
consisted of $1.4 billion of fixed rate debt, including swapped variable rate debt, with an effective weighted average interest rate
of 4.26% and $0.6 billion of variable rate debt with an effective weighted average interest rate of 4.87%.
Corporate Indebtedness
2017 Credit Facility
In November 2017, we entered into an amendment to the credit facility, referred to as the 2017 credit facility, that was
originally entered into by the Company in November 2012, or the 2012 credit facility. As of December 31, 2018, the 2017 credit
facility consisted of a $1.5 billion revolving credit facility, a $1.3 billion term loan (or "Term Loan A"), and a $200.0 million term
loan (or "Term Loan B") with maturity dates of March 31, 2022, March 31, 2023, and November 21, 2024, respectively. The
revolving credit facility has two six-month as-of-right extension options to March 31, 2023. We also have an option, subject to
customary conditions, to increase the capacity of the credit facility to $4.5 billion at any time prior to the maturity dates for the
revolving credit facility and term loans without the consent of existing lenders, by obtaining additional commitments from our
existing lenders and other financial institutions.
As of December 31, 2018, the 2017 credit facility bore interest at a spread over 30-day LIBOR ranging from (i) 82.5 basis
points to 155 basis points for loans under the revolving credit facility, (ii) 90 basis points to 175 basis points for loans under Term
Loan A, and (iii) 150 basis points to 245 basis points for loans under Term Loan B, in each case based on the credit rating assigned
to the senior unsecured long term indebtedness of the Company.
At December 31, 2018, the applicable spread was 100 basis points for the revolving credit facility, 110 basis points for Term
Loan A, and 165 basis points for Term Loan B. We are required to pay quarterly in arrears a 12.5 to 30 basis point facility fee on
24
25
Table of Contents
Senior Unsecured Notes
The following table sets forth our senior unsecured notes and other related disclosures as of December 31, 2018 and 2017,
respectively, by scheduled maturity date (amounts in thousands):
Issuance
March 16, 2010 (2)
August 7, 2018 (3) (4)
October 5, 2017 (3)
November 15, 2012 (5)
December 17, 2015 (2)
August 5, 2011 (2) (6)
Deferred financing costs, net
December
31,
2018
Unpaid
Principal
Balance
December
31,
2018
Accreted
Balance
December
31,
2017
Accreted
Balance
Interest
Rate (1)
Initial Term
(in Years) Maturity Date
$
250,000
$
250,000
$
250,000
7.75%
10 March 2020
350,000
500,000
300,000
100,000
—
1,500,000
1,500,000
$
$
350,000
499,591
304,168
100,000
—
—
L+ 0.98%
499,489
305,163
100,000
249,953
3.25%
4.50%
4.27%
3 August 2021
5 October 2022
10 December 2022
10 December 2025
$
$
1,503,759
(8,545)
1,495,214
$
$
1,404,605
(8,666)
1,395,939
(1)
(2)
(3)
(4)
(5)
(6)
Interest rate as of December 31, 2018, taking into account interest rate hedges in effect during the period. Floating rate notes are presented with the stated
spread over 3-month LIBOR, unless otherwise specified. Interest on the senior unsecured notes is payable semi-annually with principal and unpaid interest
due on the scheduled maturity dates.
Issued by the Company and the Operating Partnership as co-obligors.
Issued by the Operating Partnership with the Company as the guarantor.
Beginning on August 8, 2019 and at any time thereafter, the notes are subject to redemption at the Company's option, in whole but not in part, at a redemption
price equal to 100% of the principal amount of the notes, plus unpaid accrued interest thereon to the redemption date.
In October 2017, the Company and the Operating Partnership as co-obligors issued an additional $100.0 million of 4.50% senior unsecured notes due
December 2022. The notes were priced at 105.334%.
The balance was repaid in August 2018.
Restrictive Covenants
The terms of the 2017 credit facility and certain of our senior unsecured notes include certain restrictions and covenants
which may limit, among other things, our ability to pay dividends, make certain types of investments, incur additional indebtedness,
incur liens and enter into negative pledge agreements and dispose of assets, and which require compliance with financial ratios
relating to the maximum ratio of total indebtedness to total asset value, a minimum ratio of EBITDA to fixed charges, a maximum
ratio of secured indebtedness to total asset value and a maximum ratio of unsecured indebtedness to unencumbered asset value.
The dividend restriction referred to above provides that, we will not during any time when a default is continuing, make distributions
with respect to common stock or other equity interests, except to enable the Company to continue to qualify as a REIT for Federal
income tax purposes. As of December 31, 2018 and 2017, we were in compliance with all such covenants.
Junior Subordinated Deferrable Interest Debentures
In June 2005, the Company and the Operating Partnership issued $100.0 million in unsecured trust preferred securities
through a newly formed trust, SL Green Capital Trust I, or the Trust, which is a wholly-owned subsidiary of the Operating
Partnership. The securities mature in 2035 and bear interest at a floating rate of 125 basis points over the three-month LIBOR.
Interest payments may be deferred for a period of up to eight consecutive quarters if the Operating Partnership exercises its right
to defer such payments. The Trust preferred securities are redeemable at the option of the Operating Partnership, in whole or in
part, with no prepayment premium. We do not consolidate the Trust even though it is a variable interest entity as we are not the
primary beneficiary. Because the Trust is not consolidated, we have recorded the debt on our consolidated balance sheets and the
related payments are classified as interest expense.
Interest Rate Risk
We are exposed to changes in interest rates primarily from our variable rate debt. Our exposure to interest rate fluctuations
are managed through either the use of interest rate derivative instruments and/or through our variable rate debt and preferred equity
investments. Based on the debt outstanding as of December 31, 2018, a hypothetical 100 basis point increase in the floating rate
interest rate curve would increase our consolidated annual interest cost, net of interest income from variable rate debt and preferred
equity investments, by $7.1 million and would increase our share of joint venture annual interest cost by $14.3 million. At
December 31, 2018, 61.9% of our $2.1 billion debt and preferred equity portfolio is indexed to LIBOR.
Table of Contents
We recognize most derivatives on the balance sheet at fair value. Derivatives that are not hedges are adjusted to fair value
through income. If a derivative is considered a hedge, depending on the nature of the hedge, changes in the fair value of the
derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings,
or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's
change in fair value is immediately recognized in earnings.
Our long-term debt of $3.5 billion bears interest at fixed rates, and therefore the fair value of these instruments is affected
by changes in the market interest rates. Our variable rate debt and variable rate joint venture debt as of December 31, 2018 bore
interest at rates between LIBOR plus 18 basis points and LIBOR plus 340 basis points.
Contractual Obligations
The combined aggregate principal maturities of mortgages and other loans payable, the 2017 credit facility, senior unsecured
notes (net of discount), trust preferred securities, our share of joint venture debt, including as-of-right extension options and put
options, estimated interest expense, and our obligations under our capital lease and ground leases, as of December 31, 2018 are
as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
Total
$
6,241
$
26,640
$
151,505
$
208,017
$
122,851
$
1,145,405
$
1,660,659
Property mortgages
and other loans
MRA and FHLB
facilities
Revolving credit
facility
Unsecured term loans
Senior unsecured
notes
Trust preferred
securities
Capital lease
Ground leases
Estimated interest
expense
Joint venture debt
—
—
—
—
2,411
31,066
222,554
115,295
27,500
300,000
—
—
—
—
—
—
—
—
250,000
350,000
800,000
—
2,620
31,436
196,142
278,791
—
2,794
31,628
185,017
518,371
—
2,794
29,472
150,712
220,810
—
500,000
1,300,000
—
—
2,794
27,166
81,781
277,996
—
—
200,000
327,500
500,000
1,500,000
100,000
1,500,000
100,000
817,100
676,090
193,794
2,430,198
100,000
830,513
826,858
1,030,000
3,841,461
Total
$
405,067
$ 1,085,629
$ 1,239,315
$
1,411,805
$
2,312,588
$
5,662,587
$
12,116,991
Off-Balance Sheet Arrangements
We have off-balance sheet investments, including joint ventures and debt and preferred equity investments. These investments
all have varying ownership structures. Substantially all of our joint venture arrangements are accounted for under the equity method
of accounting as we have the ability to exercise significant influence, but not control, over the operating and financial decisions
of these joint venture arrangements. Our off-balance sheet arrangements are discussed in Note 5, "Debt and Preferred Equity
Investments" and Note 6, "Investments in Unconsolidated Joint Ventures" in the accompanying consolidated financial statements.
Capital Expenditures
We estimate that for the year ending December 31, 2019, we expect to incur $151.1 million of recurring capital expenditures
and $65.2 million of development or redevelopment expenditures on existing consolidated properties, and our share of capital
expenditures at our joint venture properties will be $449.6 million. Future property acquisitions may require substantial capital
investments for refurbishment and leasing costs. We expect to fund these capital expenditures with operating cash flow, existing
liquidity, or incremental borrowings. We expect our capital needs over the next twelve months and thereafter will be met through
a combination of cash on hand, net cash provided by operations, potential asset sales, borrowings or additional equity or debt
issuances.
Dividends/Distributions
We expect to pay dividends to our stockholders based on the distributions we receive from our Operating Partnership primarily
from property revenues net of operating expenses or, if necessary, from working capital.
To maintain our qualification as a REIT, we must pay annual dividends to our stockholders of at least 90% of our REIT
taxable income, determined before taking into consideration the dividends paid deduction and net capital gains. We intend to
continue to pay regular quarterly dividends to our stockholders. Based on our current annual dividend rate of $3.40 per share, we
would pay $298.6 million in dividends to our common stockholders on an annual basis. Before we pay any dividend, whether for
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27
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Federal income tax purposes or otherwise, which would only be paid out of available cash to the extent permitted under the 2017
credit facility and senior unsecured notes, we must first meet both our operating requirements and scheduled debt service on our
mortgages and loans payable.
Related Party Transactions
Cleaning/ Security/ Messenger and Restoration Services
Alliance Building Services, or Alliance, and its affiliates are partially owned by Gary Green, a son of Stephen L. Green,
who serves as a member and as the chairman emeritus of our board of directors, and provide services to certain properties owned
by us. Alliance’s affiliates include First Quality Maintenance, L.P., or First Quality, Classic Security LLC, Bright Star Couriers LLC
and Onyx Restoration Works, and provide cleaning, extermination, security, messenger, and restoration services, respectively. In
addition, First Quality has the non-exclusive opportunity to provide cleaning and related services to individual tenants at our
properties on a basis separately negotiated with any tenant seeking such additional services. The Service Corporation has entered
into an arrangement with Alliance whereby it will receive a profit participation above a certain threshold for services provided by
Alliance to certain tenants at certain buildings above the base services specified in their lease agreements.
Income earned from the profit participation, which is included in other income on the consolidated statements of operations,
was $3.9 million, $3.9 million and $3.5 million for the years ended December 31, 2018, 2017 and 2016, respectively.
We also recorded expenses, inclusive of capitalized expenses, of $18.8 million, $22.6 million and $23.4 million the years
ended December 31, 2018, 2017 and 2016, respectively, for these services (excluding services provided directly to tenants).
Management Fees
S.L. Green Management Corp., a consolidated entity, receives property management fees from an entity in which Stephen
L. Green owns an interest. We received management fees from this entity of $0.6 million, $0.5 million and $0.7 million for the
years ended December 31, 2018, 2017, and 2016 respectively.
One Vanderbilt Investment
In December 2016, we entered into agreements with entities owned and controlled by Marc Holliday and Andrew Mathias,
pursuant to which they agreed to make an investment in our One Vanderbilt project at the appraised fair market value for the
interests acquired. This investment entitles these entities to receive approximately 1.50% - 1.80% and 1.00% - 1.20%, respectively,
of any profits realized by the Company from its One Vanderbilt project in excess of the Company’s capital contributions. The
entities have no right to any return of capital. Accordingly, subject to previously disclosed repurchase rights, these interests will
have no value and will not entitle these entities to any amounts (other than limited distributions to cover tax liabilities incurred)
unless and until the Company has received distributions from the One Vanderbilt project in excess of the Company’s aggregate
investment in the project. In the event that the Company does not realize a profit on its investment in the project (or would not
realize a profit based on the value at the time the interests are repurchased), the entities owned and controlled by Messrs. Holliday
and Mathias will lose the entire amount of their investment. The entities owned and controlled by Messrs. Holliday and Mathias
paid $1.4 million and $1.0 million, respectively, which equal the fair market value of the interests acquired as of the date the
investment agreements were entered into as determined by an independent third party appraisal that we obtained.
Messrs. Holliday and Mathias cannot monetize their interests until after stabilization of the property (50% within three years
after stabilization and 100% three years or more after stabilization). In addition, the agreement calls for us to repurchase these
interests in the event of a sale of One Vanderbilt or a transactional change of control of the Company. We also have the right to
repurchase these interests on the seven-year anniversary of the stabilization of the project or upon the occurrence of certain
separation events prior to the stabilization of the project relating to each of Messrs. Holliday’s and Mathias’s continued service
with us. The price paid upon monetization of the interests will equal the liquidation value of the interests at the time, with the
value of One Vanderbilt being based on its sale price, if applicable, or fair market value as determined by an independent third
party appraiser.
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Insurance
We maintain “all-risk” property and rental value coverage (including coverage regarding the perils of flood, earthquake and
terrorism, excluding nuclear, biological, chemical, and radiological terrorism ("NBCR")), within three property insurance programs
and liability insurance. Separate property and liability coverage may be purchased on a stand-alone basis for certain assets, such
as the development of One Vanderbilt. Additionally, one of our captive insurance companies, Belmont Insurance Company, or
Belmont, provides coverage for NBCR terrorist acts above a specified trigger. Belmont's retention is reinsured by our other captive
insurance company, Ticonderoga Insurance Company ("Ticonderoga"). If Belmont or Ticonderoga are required to pay a claim
under our insurance policies, we would ultimately record the loss to the extent of required payments. However, there is no assurance
that in the future we will be able to procure coverage at a reasonable cost. Further, if we experience losses that are uninsured or
that exceed policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows
from those properties. Additionally, our debt instruments contain customary covenants requiring us to maintain insurance and we
could default under debt our instruments if the cost and/or availability of certain types of insurance make it impractical or impossible
to comply with such covenants relating to insurance. Belmont and Ticonderoga provide coverage solely on properties owned by
the Company or its affiliates.
Furthermore, with respect to certain of our properties, including properties held by joint ventures, or subject to triple net
leases, insurance coverage is obtained by a third-party and we do not control the coverage. While we may have agreements with
such third parties to maintain adequate coverage and we monitor these policies, such coverage ultimately may not be maintained
or adequately cover our risk of loss.
Funds from Operations
FFO is a widely recognized non-GAAP financial measure of REIT performance. The Company computes FFO in accordance
with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not compute FFO
in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than the Company does. The revised
White Paper on FFO approved by the Board of Governors of NAREIT in April 2002, and subsequently amended, defines FFO as
net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of properties and real estate related
impairment charges, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships
and joint ventures.
The Company presents FFO because it considers it an important supplemental measure of the Company’s operating
performance and believes that it is frequently used by securities analysts, investors and other interested parties in the evaluation
of REITs, particularly those that own and operate commercial office properties. The Company also uses FFO as one of several
criteria to determine performance-based bonuses for members of its senior management. FFO is intended to exclude GAAP
historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets
diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO
excludes depreciation and amortization unique to real estate, gains and losses from property dispositions, and real estate related
impairment charges, it provides a performance measure that, when compared year over year, reflects the impact to operations from
trends in occupancy rates, rental rates, operating costs, and interest costs, providing perspective not immediately apparent from
net income. 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 our ability to make cash distributions.
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(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
risks relating to debt and preferred equity investments;
availability and creditworthiness of prospective tenants and borrowers;
bankruptcy or insolvency of a major tenant or a significant number of smaller tenants or borrowers;
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 threat of terrorist attacks;
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 other sections of this report
and in our other filings with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements,
whether as a result of future events, new information or otherwise.
FFO for the years ended December 31, 2018, 2017, and 2016 are as follows (in thousands):
Net income attributable to SL Green common stockholders
$
232,312
$
86,424
$
234,946
Year Ended December 31,
2018
2017
2016
Add:
Depreciation and amortization
Joint venture depreciation and noncontrolling interest adjustments
Net income (loss) attributable to noncontrolling interests
Less:
(Loss) gain on sale of real estate and discontinued operations
Equity in net gain on sale of interest in unconsolidated joint venture/real
estate
Purchase price and other fair value adjustment
Depreciable real estate reserves and impairment
Depreciation on non-rental real estate assets
Funds from Operations attributable to SL Green common stockholders and
noncontrolling interests
Cash flows provided by operating activities
Cash flows provided by investing activities
Cash flows used in by financing activities
Inflation
279,507
187,147
12,210
(30,757)
303,967
57,385
(227,543)
2,404
403,320
102,334
(11,706)
73,241
16,166
—
(178,520)
2,191
821,041
69,853
17,780
238,116
44,009
—
(10,387)
2,027
$
$
$
$
605,720
441,537
681,662
$
$
$
667,294
543,001
22,014
$
$
$
869,855
644,010
1,973,382
(1,094,112) $
(684,956) $
(2,736,402)
Substantially all of our office leases provide for separate real estate tax and operating expense escalations as well as operating
expense recoveries based on increases in the Consumer Price Index or other measures such as porters' wage. In addition, many of
the leases provide for fixed base rent increases. We believe that inflationary increases will be at least partially offset by the
contractual rent increases and expense escalations described above.
Accounting Standards Updates
The Accounting Standards Updates are discussed in Note 2, "Significant Accounting Policies - Accounting Standards
Updates" in the accompanying consolidated financial statements.
Forward-Looking Information
This report 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 report 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 New York metropolitan area
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 differ
materially, 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 report are subject to a number of risks and uncertainties that 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:
(cid:127)
(cid:127)
(cid:127)
the effect of general economic, business and financial conditions, and their effect on the New York City real
estate market in particular;
dependence upon certain geographic markets;
risks of real estate acquisitions, dispositions, development and redevelopment, including the cost of construction
delays and cost overruns;
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QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The table below lists our consolidated derivative instruments, which are hedging variable rate debt, and their related fair
See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Rate Risk" for
additional information regarding our exposure to interest rate fluctuations.
The table below presents the principal cash flows based upon maturity dates of our debt obligations and debt and preferred
equity investments and the weighted-average interest rates by expected maturity dates, including as-of-right extension options, as
of December 31, 2018 (in thousands):
Long-Term Debt
Variable
Rate
Average
Interest
Rate
Debt and Preferred
Equity Investments (1)
Amount
Weighted
Yield
4.04% $
442,557
10.31%
2019
2020
2021
2022
2023
Thereafter
Total
Fair Value
Fixed
Rate
6,241
261,117
11,636
1,008,017
1,007,301
1,245,405
3,539,717
3,230,127
$
$
$
Average
Interest
Rate
4.08% $
3.87%
3.83%
3.82%
4.08%
4.29%
27,500
315,523
489,869
—
915,550
300,000
3.79%
3.73%
4.00%
4.38%
4.45%
1,273,679
26,471
204,790
42,706
109,190
8.21%
9.54%
11.46%
8.55%
8.46%
9.01%
3.92% $
2,048,442
3.92% $
2,099,393
$
2,057,966
values as of December 31, 2018 (in thousands):
Asset
Hedged
Benchmark
Rate
Notional
Value
Strike
Rate
Effective
Date
Expiration
Date
Fair
Value
Interest Rate Swap
Interest Rate Swap
Interest Rate Cap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Total Consolidated Hedges
Credit Facility
Credit Facility
Mortgage
Credit Facility
Credit Facility
Credit Facility
Credit Facility
Credit Facility
LIBOR
LIBOR
LIBOR
LIBOR
LIBOR
LIBOR
LIBOR
LIBOR
$ 200,000
100,000
137,500
100,000
100,000
150,000
150,000
200,000
1.131%
1.161%
July 2016
July 2016
July 2023
$ 11,148
July 2023
4.000% September 2017
September 2019
1.928% December 2017
November 2020
1.934% December 2017
November 2020
2.696%
2.721%
2.740%
January 2019
January 2019
January 2019
January 2024
January 2026
January 2026
5,447
—
1,045
1,035
(1,858)
(2,450)
(3,354)
$ 11,013
In addition to these derivative instruments, some of our joint venture loan agreements require the joint venture to purchase
interest rate caps on its debt. All such interest rate caps represented in aggregate an asset of $7.0 million at December 31, 2018.
We also swapped certain floating rate debt at some of our joint ventures. These swaps represented in aggregate an asset of $11.1
million at December 31, 2018.
(1) Our debt and preferred equity investments had an estimated fair value ranging between $2.1 billion and $2.3 billion at December 31, 2018.
The table below presents the principal cash flows based upon maturity dates of our share of our joint venture debt obligations
and the weighted-average interest rates by expected maturity dates as of December 31, 2018 (in thousands):
Long Term Debt
Fixed
Rate
Average
Interest
Rate
Variable
Rate
Average
Interest
Rate
2019
2020
2021
2022
2023
Thereafter
Total
Fair Value
$
106,255
4.16% $
11,236
11,730
220,779
271,064
1,719,845
2,340,909
2,327,716
$
$
4.16%
4.16%
4.12%
3.95%
3.91%
9,040
267,555
506,641
31
6,932
710,353
4.12% $
1,500,552
$
1,510,470
4.47%
4.45%
4.41%
4.70%
5.13%
5.27%
4.55%
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SL Green Realty Corp.
Consolidated Balance Sheets
(in thousands, except per share data)
SL Green Realty Corp.
Consolidated Balance Sheets
(in thousands, except per share data)
December 31, 2018
December 31, 2017
December 31, 2018
December 31, 2017
Equity
SL Green stockholders' equity:
Series I Preferred Stock, $0.01 par value, $25.00 liquidation preference, 9,200 issued and
outstanding at both December 31, 2018 and 2017
Common stock, $0.01 par value, 160,000 shares authorized and 84,739 and 93,858 issued
and outstanding at December 31, 2018 and 2017, respectively (including 1,055 and 1,055
shares held in treasury at December 31, 2018 and 2017, respectively)
Additional paid-in-capital
Treasury stock at cost
Accumulated other comprehensive income
Retained earnings
Total SL Green stockholders' equity
Noncontrolling interests in other partnerships
Total equity
Total liabilities and equity
221,932
221,932
847
4,508,685
(124,049)
15,108
1,278,998
5,901,521
46,334
5,947,855
939
4,968,338
(124,049)
18,604
1,139,329
6,225,093
364,361
6,589,454
$
12,751,358
$
13,982,904
(1) The Company's consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs"). See Note 2. The consolidated
balance sheets include the following amounts related to our consolidated VIEs, excluding the Operating Partnership: $110.0 million and $398.0 million of land,
$0.3 billion and $1.4 billion of building and improvements, $2.0 million and $2.0 million of building and leasehold improvements, $47.4 million and $47.4
million of properties under capital lease, $42.2 million and $330.9 million of accumulated depreciation, $721.3 million and $221.0 million of other assets included
in other line items, $140.8 million and $628.9 million of real estate debt, net, $0.4 million and $2.5 million of accrued interest payable, $43.6 million and $42.8
million of capital lease obligations, and $18.4 million and $56.8 million of other liabilities included in other line items as of December 31, 2018 and December
31, 2017, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
Assets
Commercial real estate properties, at cost:
Land and land interests
Building and improvements
Building leasehold and improvements
Properties under capital lease
Less: accumulated depreciation
Assets held for sale
Cash and cash equivalents
Restricted cash
Investments in marketable securities
Tenant and other receivables, net of allowance of $15,702 and $18,637 in 2018 and 2017,
respectively
Related party receivables
Deferred rents receivable, net of allowance of $15,457 and $17,207 in 2018 and 2017,
respectively
Debt and preferred equity investments, net of discounts and deferred origination fees of
$22,379 and $25,507 in 2018 and 2017, respectively, and allowance of $5,750 in 2018
Investments in unconsolidated joint ventures
Deferred costs, net
Other assets
Total assets (1)
Liabilities
Mortgages and other loans payable, net
Revolving credit facility, net
Unsecured term loans, net
Unsecured notes, net
Accrued interest payable
Other liabilities
Accounts payable and accrued expenses
Deferred revenue
Capital lease obligations
Deferred land leases payable
Dividend and distributions payable
Security deposits
Liabilities related to assets held for sale
Junior subordinated deferrable interest debentures held by trusts that issued trust preferred
securities
Total liabilities (1)
Commitments and contingencies
Noncontrolling interests in Operating Partnership
Preferred units
$
1,774,899
$
5,268,484
1,423,107
47,445
8,513,935
(2,099,137)
6,414,798
—
129,475
149,638
28,638
41,589
28,033
335,985
2,357,051
6,351,012
1,450,614
47,445
10,206,122
(2,300,116)
7,906,006
338,354
127,888
122,138
28,579
57,644
23,039
365,337
2,099,393
2,114,041
$
$
$
$
3,019,020
209,110
295,679
12,751,358
1,961,240
492,196
1,493,051
1,495,214
23,154
116,566
147,060
94,453
43,616
3,603
80,430
64,688
—
100,000
6,115,271
387,805
300,427
2,362,989
226,201
310,688
13,982,904
2,837,282
30,336
1,491,575
1,395,939
38,142
188,005
137,142
208,119
42,843
3,239
85,138
67,927
4,074
100,000
6,629,761
461,954
301,735
34
35
Table of Contents
Table of Contents
SL Green Realty Corp.
Consolidated Statements of Operations
(in thousands, except per share data)
SL Green Realty Corp.
Consolidated Statements of Comprehensive Income
(in thousands)
Net income
Other comprehensive income:
Change in net unrealized (loss) gain on derivative instruments, including SL
Green's share of joint venture net unrealized (loss) gain on derivative
instruments
Change in unrealized gain (loss) on marketable securities
Other comprehensive (loss) income
Comprehensive income
Net (income) loss attributable to noncontrolling interests and preferred units
distributions
Other comprehensive income (loss) attributable to noncontrolling interests
Year Ended December 31,
2017
2018
2016
$
270,856
$
101,069
$
278,911
(3,622)
60
(3,562)
267,294
(23,594)
66
1,040
(4,667)
(3,627)
97,442
305
94
28,508
3,677
32,185
311,096
(29,015)
(1,299)
280,782
Comprehensive income attributable to SL Green
$
243,766
$
97,841
$
The accompanying notes are an integral part of these consolidated financial statements.
Revenues
Rental revenue, net
Escalation and reimbursement
Investment income
Other income
Total revenues
Expenses
Year Ended December 31,
2018
2017
2016
$
864,978
$
1,100,993
$
1,323,767
113,596
201,492
47,326
172,939
193,871
43,670
196,858
213,008
130,348
1,227,392
1,511,473
1,863,981
Operating expenses, including $17,823 in 2018, $21,400 in 2017, $21,890 in
2016 of related party expenses
229,347
293,364
Real estate taxes
Ground rent
Interest expense, net of interest income
Amortization of deferred financing costs
Depreciation and amortization
Loan loss and other investment reserves, net of recoveries
Transaction related costs
Marketing, general and administrative
Total expenses
Equity in net income from unconsolidated joint ventures
Equity in net gain on sale of interest in unconsolidated joint venture/real
estate
Purchase price and other fair value adjustment
(Loss) gain on sale of real estate, net
Depreciable real estate reserves and impairment
Gain (loss) on sale of investment in marketable securities
Loss on early extinguishment of debt
Net income
Net (income) loss attributable to noncontrolling interests:
Noncontrolling interests in the Operating Partnership
Noncontrolling interests in other partnerships
Preferred units distributions
Net income attributable to SL Green
Preferred stock redemption costs
Perpetual preferred stock dividends
Net income attributable to SL Green common stockholders
Basic earnings per share:
Diluted earnings per share:
Basic weighted average common shares outstanding
Diluted weighted average common shares and common share equivalents
outstanding
186,351
32,965
208,669
12,408
279,507
6,839
1,099
92,631
1,049,816
7,311
303,967
57,385
(30,757)
(227,543)
—
(17,083)
270,856
(12,216)
6
(11,384)
247,262
—
(14,950)
232,312
2.67
2.67
86,753
91,530
$
$
$
244,323
33,231
257,045
16,498
403,320
—
(1,834)
100,498
1,346,445
21,892
16,166
—
73,241
(178,520)
3,262
—
101,069
(3,995)
15,701
(11,401)
101,374
—
(14,950)
86,424
0.87
0.87
98,571
103,403
$
$
$
$
$
$
312,859
248,388
33,261
321,199
24,564
821,041
—
7,528
99,759
1,868,599
11,874
44,009
—
238,116
(10,387)
(83)
—
278,911
(10,136)
(7,644)
(11,235)
249,896
—
(14,950)
234,946
2.34
2.34
100,185
104,881
The accompanying notes are an integral part of these consolidated financial statements.
36
37
Table of Contents
Table of Contents
SL Green Realty Corp.
Consolidated Statements of Equity
(in thousands, except per share data)
SL Green Realty Corp. Stockholders
Common Stock
SL Green Realty Corp.
Consolidated Statements of Equity
(in thousands, except per share data)
SL Green Realty Corp. Stockholders
Common Stock
Series I
Preferred
Stock
Shares
Par
Value
Additional
Paid-
In-Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Noncontrolling
Interests
Total
Series I
Preferred
Stock
Shares
Par
Value
Additional
Paid-
In-Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Noncontrolling
Interests
Total
Balance at December 31, 2015
$ 221,932
99,976
$1,001
$5,439,735
$ (10,000)
$
(8,749)
$1,643,546
$
431,852
$7,719,317
Balance at January 1, 2018
221,932
92,803
939
4,968,338
(124,049)
18,604
1,709,853
364,361
7,159,978
Net income (loss)
Other comprehensive loss
Preferred dividends
DRSPP proceeds
Conversion of units in the
Operating Partnership to
common stock
Reallocation of noncontrolling
interest in the Operating
Partnership
Deferred compensation
plan and stock awards, net of
forfeitures and tax withholdings
1
136
160
2
16,301
149
1
17,483
316
3
28,909
Proceeds from stock options
exercised
Contributions to consolidated
joint venture interests
Deconsolidation of partially
owned entity
Cash distributions to
noncontrolling interests
Cash distributions declared
($3.2875 per common share,
none of which represented a
return of capital for federal
income tax purposes)
247,262
(6)
247,256
(3,496)
(14,950)
34,236
(3,496)
(14,950)
136
16,303
34,236
17,484
(937,795)
28,912
5,459
5,459
(315,116)
(315,116)
(8,364)
(8,364)
(282,188)
(282,188)
Repurchases of common stock
(9,745)
(98)
(522,482)
(415,215)
Balance at December 31, 2018
$ 221,932
83,684
$ 847
$4,508,685
$ (124,049)
$
15,108
$1,278,998
$
46,334
$5,947,855
The accompanying notes are an integral part of these consolidated financial statements.
Net income
Other comprehensive income
Preferred dividends
DRSPP proceeds
Conversion of units in the
Operating Partnership to
common stock
Reallocation of noncontrolling
interest in the Operating
Partnership
Deferred compensation
plan and stock awards, net of
forfeitures and tax withholdings
Issuance of common stock
Proceeds from stock options
exercised
Contributions to consolidated
joint venture interests
Cash distributions to
noncontrolling interests
Cash distributions declared
($2.94 per common share, none
of which represented a return of
capital for federal income tax
purposes)
249,896
7,644
257,540
30,886
(14,950)
(4,222)
2
277
295
3
31,803
96
193
1
10
2
23,901
113,999
(114,049)
14,830
30,886
(14,950)
277
31,806
(4,222)
23,902
(40)
14,832
2,359
2,359
(15,419)
(15,419)
(295,377)
(295,377)
Balance at December 31, 2016
221,932
100,562
1,017
5,624,545
(124,049)
22,137
1,578,893
426,436
7,750,911
Net income (loss)
Other comprehensive loss
Preferred dividends
DRSPP proceeds
Conversion of units in the
Operating Partnership to
common stock
Reallocation of noncontrolling
interest in the Operating
Partnership
Equity component of
repurchased exchangeable
senior notes
Deferred compensation
plan and stock awards, net of
forfeitures and tax withholdings
2
223
202
2
21,572
(109,776)
87
1
29,786
101,374
(15,701)
(3,533)
(14,950)
5,712
Repurchases of common stock
(8,342)
(83)
(621,324)
(226,641)
85,673
(3,533)
(14,950)
223
21,574
5,712
(109,776)
29,787
(848,048)
23,314
292
2
23,312
Proceeds from stock options
exercised
Contributions to consolidated
joint venture interests
Deconsolidation of partially
owned entity
Cash distributions to
noncontrolling interests
Cash distributions declared
($3.1375 per common share,
none of which represented a
return of capital for federal
income tax purposes)
36,275
36,275
(30,203)
(30,203)
(52,446)
(52,446)
(305,059)
(305,059)
Balance at December 31, 2017
221,932
92,803
939
4,968,338
(124,049)
18,604
1,139,329
364,361
6,589,454
Cumulative adjustment upon
adoption of ASC 610-20
570,524
570,524
38
39
Table of Contents
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SL Green Realty Corp.
Consolidated Statements of Cash Flows
(in thousands, except per share data)
SL Green Realty Corp.
Consolidated Statements of Cash Flows
(in thousands, except per share data)
Year Ended December 31,
2018
2017
2016
$
270,856
$
101,069
$
278,911
Financing Activities
Proceeds from mortgages and other loans payable
Repayments of mortgages and other loans payable
Year Ended December 31,
2018
2017
2016
$
564,391
$
870,459
$
408,293
(868,842)
(902,460)
(1,822,303)
Proceeds from revolving credit facility, term loans and senior unsecured notes
3,120,000
2,784,599
1,325,300
Repayments of revolving credit facility, term loans and senior unsecured notes
(2,560,000)
(2,276,782)
(2,334,604)
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Equity in net income from unconsolidated joint ventures
Distributions of cumulative earnings from unconsolidated joint ventures
Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate
Purchase price and other fair value adjustment
Depreciable real estate reserves and impairment
Loss (gain) on sale of real estate, net
Loan loss reserves and other investment reserves, net of recoveries
(Gain) loss on sale of investments in marketable securities
Loss on early extinguishment of debt
Deferred rents receivable
Other non-cash adjustments (1)
Changes in operating assets and liabilities:
Tenant and other receivables
Related party receivables
Deferred lease costs
Other assets
Accounts payable, accrued expenses and other liabilities and security deposits
Deferred revenue and land leases payable
Net cash provided by operating activities
Investing Activities
Acquisitions of real estate property
Additions to land, buildings and improvements
Investments in unconsolidated joint ventures
Distributions in excess of cumulative earnings from unconsolidated joint ventures
Proceeds from disposition of real estate/joint venture interest
Proceeds from sale of marketable securities
Purchases of marketable securities
Other investments
291,915
(7,311)
10,277
(303,967)
(57,385)
227,543
30,757
6,839
—
17,083
(18,216)
2,932
6,968
(1,044)
(44,158)
(8,310)
4,410
12,348
441,537
(60,486)
(254,460)
(400,429)
233,118
1,231,004
—
—
(38,912)
419,818
(21,892)
20,309
(16,166)
—
178,520
(73,241)
—
(3,262)
—
(38,009)
19,621
(5,717)
(7,209)
(41,939)
(23,068)
(12,440)
46,607
543,001
(28,680)
(336,001)
(389,249)
319,745
692,796
55,129
—
25,330
845,605
(11,874)
24,337
(44,009)
—
10,387
(238,116)
—
83
—
26,716
(152,428)
4,780
(5,183)
(70,707)
9,899
(35,628)
1,237
644,010
(39,890)
(411,950)
(145,375)
196,211
2,475,954
6,965
(43,341)
7,704
(977,413)
904,517
1,973,382
Origination of debt and preferred equity investments
Repayments or redemption of debt and preferred equity investments
Net cash provided by investing activities
(731,216)
(1,129,970)
703,043
681,662
812,914
22,014
Payment of debt extinguishment costs
Proceeds from stock options exercised and DRSPP issuance
Repurchase of common stock
Redemption of preferred stock
Redemption of OP units
Distributions to noncontrolling interests in other partnerships
Contributions from noncontrolling interests in other partnerships
Distributions to noncontrolling interests in the Operating Partnership
Dividends paid on common and preferred stock
Other obligations related to mortgage loan participations
Payment of tax witholdings for restricted share awards
Deferred loan costs and capitalized lease obligation
Net cash used in by financing activities
Net increase (decrease) in cash and cash equivalents
Cash, restricted cash, and cash equivalents at beginning of year
(13,918)
29,048
—
23,537
(979,541)
(806,302)
(1,208)
(33,972)
(8,364)
5,459
(15,000)
(313,230)
16
(3,842)
(15,109)
(1,094,112)
29,087
250,026
(275)
—
(52,446)
36,275
(14,266)
(333,543)
17,227
(3,879)
(684,956)
(119,941)
369,967
—
15,109
—
(3,299)
—
(15,419)
2,359
(12,671)
(314,079)
59,150
(3,162)
(2,736,402)
(119,010)
488,977
369,967
(27,100) $
(41,076)
Cash, restricted cash, and cash equivalents at end of period
$
279,113
$
250,026
$
(1) Included in Other non-cash adjustments is $172.4 million for the year ended December 31, 2016 for the amortization of the below-market lease at 388-390
Greenwich Street as a result of the tenant exercising their option to purchase the property and entering into an agreement to accelerate the sale.
Supplemental cash flow disclosures:
Interest paid
Income taxes paid
$
$
259,776
1,418
$
$
273,819
2,448
$
$
344,295
2,009
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Issuance of units in the operating partnership
Redemption of units in the operating partnership
Redemption of units in the operating partnership for a joint venture sale
Exchange of debt investment for real estate or equity in joint venture
Issuance of preferred units relating to the real estate acquisition
Tenant improvements and capital expenditures payable
Fair value adjustment to noncontrolling interest in operating partnership
Deconsolidation of a subsidiary (1)
Transfer of assets to assets held for sale
Transfer of liabilities related to assets held for sale
Removal of fully depreciated commercial real estate properties
Issuance of SLG's common stock to a consolidated joint venture
—
16,303
10,445
298,956
—
—
34,236
298,404
—
—
124,249
—
25,723
21,574
—
—
—
6,667
5,712
695,204
611,809
5,364
15,488
—
78,495
31,806
—
68,581
22,793
15,972
4,222
1,226,425
2,048,376
1,677,528
31,474
114,049
Share repurchase payable
(1) $366.6 million of the 2017 amount relates to 1515 Broadway. In November 2017, the Company sold a 30.13% interest in 1515 Broadway to affiliates of
Allianz Real Estate. The sale did not meet the criteria for sale accounting and as a result the property was accounted for under the profit sharing method. The
Company achieved sale accounting upon adoption of ASC 610-20 in January 2018 and closed on the sale of an additional 12.87% interest in the property to
Allianz in February 2018. See Note 6, "Investments in Unconsolidated Joint Ventures.".
41,746
—
—
40
41
In December 2018, 2017 and 2016, the Company declared quarterly distributions per share of $0.85, $0.8125 and $0.775, respectively. These
distributions were paid in January 2019, 2018 and 2017, respectively.
Table of Contents
Table of Contents
SL Green Realty Corp.
Consolidated Statements of Cash Flows
(in thousands, except per share data)
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated
balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows.
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents, and restricted cash
Year Ended
2018
2017
2016
$
$
129,475
149,638
279,113
$
$
127,888
122,138
279,443
90,524
250,026
$
369,967
The accompanying notes are an integral part of these consolidated financial statements.
SL Green Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands, except per unit data)
December 31, 2018
December 31, 2017
Assets
Commercial real estate properties, at cost:
Land and land interests
Building and improvements
Building leasehold and improvements
Property under capital lease
Less: accumulated depreciation
Assets held for sale
Cash and cash equivalents
Restricted cash
Investments in marketable securities
Tenant and other receivables, net of allowance of $15,702 and $18,637 in 2018 and 2017,
respectively
Related party receivables
Deferred rents receivable, net of allowance of $15,457 and $17,207 in 2018 and 2017,
respectively
Debt and preferred equity investments, net of discounts and deferred origination fees of
$22,379 and $25,507 in 2018 and 2017, respectively, and allowance of $5,750 in 2018
Investments in unconsolidated joint ventures
Deferred costs, net
Other assets
Total assets (1)
Liabilities
Mortgages and other loans payable, net
Revolving credit facility, net
Unsecured term loans, net
Unsecured notes, net
Accrued interest payable
Other liabilities
Accounts payable and accrued expenses
Deferred revenue
Capital lease obligations
Deferred land leases payable
Dividend and distributions payable
Security deposits
Liabilities related to assets held for sale
Junior subordinated deferrable interest debentures held by trusts that issued trust preferred
securities
Total liabilities (1)
Commitments and contingencies
Limited partner interests in SLGOP (4,131 and 4,453 limited partner common units
outstanding at December 31, 2018 and 2017, respectively)
Preferred units
$
1,774,899
$
$
$
5,268,484
1,423,107
47,445
8,513,935
(2,099,137)
6,414,798
—
129,475
149,638
28,638
41,589
28,033
335,985
2,099,393
3,019,020
209,110
295,679
12,751,358
1,961,240
492,196
1,493,051
1,495,214
23,154
116,566
147,060
94,453
43,616
3,603
80,430
64,688
—
100,000
6,115,271
387,805
300,427
$
$
2,357,051
6,351,012
1,450,614
47,445
10,206,122
(2,300,116)
7,906,006
338,354
127,888
122,138
28,579
57,644
23,039
365,337
2,114,041
2,362,989
226,201
310,688
13,982,904
2,837,282
30,336
1,491,575
1,395,939
38,142
188,005
137,142
208,119
42,843
3,239
85,138
67,927
4,074
100,000
6,629,761
461,954
301,735
42
43
Table of Contents
Table of Contents
SL Green Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands, except per unit data)
SL Green Operating Partnership, L.P.
Consolidated Statements of Operations
(in thousands, except per unit data)
December 31, 2018
December 31, 2017
Capital
SLGOP partners' capital:
Series I Preferred Units, $25.00 liquidation preference, 9,200 issued and outstanding at both
December 31, 2018 and 2017
221,932
221,932
SL Green partners' capital (878 and 973 general partner common units, and 82,806 and
91,831 limited partner common units outstanding at December 31, 2018 and 2017,
respectively)
Accumulated other comprehensive income
Total SLGOP partners' capital
Noncontrolling interests in other partnerships
Total capital
Total liabilities and capital
5,664,481
15,108
5,901,521
46,334
5,947,855
5,984,557
18,604
6,225,093
364,361
6,589,454
$
12,751,358
$
13,982,904
(1) The Operating Partnership's consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs"). See Note 2. The
consolidated balance sheets include the following amounts related to our consolidated VIEs: $110.0 million and $398.0 million of land, $0.3 billion and $1.4
billion of building and improvements, $2.0 million and $2.0 million of building and leasehold improvements, $47.4 million and $47.4 million of properties
under capital lease, $42.2 million and $330.9 million of accumulated depreciation, $721.3 million and $221.0 million of other assets included in other line
items, $140.8 million and $628.9 million of real estate debt, net, $0.4 million and $2.5 million of accrued interest payable, $43.6 million and $42.8 million of
capital lease obligations, and $18.4 million and $56.8 million of other liabilities included in other line items as of December 31, 2018 and December 31,
2017, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
Revenues
Rental revenue, net
Escalation and reimbursement
Investment income
Other income
Total revenues
Expenses
Year Ended December 31,
2018
2017
2016
$
864,978
$
1,100,993
$
1,323,767
113,596
201,492
47,326
172,939
193,871
43,670
196,858
213,008
130,348
1,227,392
1,511,473
1,863,981
Operating expenses, including $17,823 in 2018, $21,400 in 2017, $21,890 in
2016 of related party expenses
Real estate taxes
Ground rent
Interest expense, net of interest income
Amortization of deferred financing costs
Depreciation and amortization
Loan loss and other investment reserves, net of recoveries
Transaction related costs
Marketing, general and administrative
Total expenses
Equity in net income from unconsolidated joint ventures
Equity in net gain on sale of interest in unconsolidated joint venture/real
estate
Purchase price and other fair value adjustment
(Loss) gain on sale of real estate, net
Depreciable real estate reserves and impairment
Gain (loss) on sale of investment in marketable securities
Loss on early extinguishment of debt
Net income
Net (income) loss attributable to noncontrolling interests in other partnerships
Preferred unit distributions
Net income attributable to SLGOP
Preferred stock redemption costs
Perpetual preferred stock dividends
Net income attributable to SLGOP common unitholders
Basic earnings per unit:
Diluted earnings per unit:
$
$
$
Basic weighted average common units outstanding
Diluted weighted average common units and common unit equivalents
outstanding
229,347
186,351
32,965
208,669
12,408
279,507
6,839
1,099
92,631
1,049,816
7,311
303,967
57,385
(30,757)
(227,543)
—
(17,083)
270,856
6
(11,384)
259,478
—
(14,950)
244,528
2.67
2.67
91,315
91,530
$
$
$
293,364
244,323
33,231
257,045
16,498
403,320
—
(1,834)
100,498
1,346,445
21,892
16,166
—
73,241
(178,520)
3,262
—
101,069
15,701
(11,401)
105,369
—
(14,950)
90,419
0.87
0.87
103,127
103,403
$
$
$
312,859
248,388
33,261
321,199
24,564
821,041
—
7,528
99,759
1,868,599
11,874
44,009
—
238,116
(10,387)
(83)
—
278,911
(7,644)
(11,235)
260,032
—
(14,950)
245,082
2.34
2.34
104,508
104,881
The accompanying notes are an integral part of these consolidated financial statements.
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45
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SL Green Operating Partnership, L.P.
Consolidated Statements of Comprehensive Income
(in thousands)
Net income
Other comprehensive income:
Change in net unrealized (loss) gain on derivative instruments, including
SLGOP's share of joint venture net unrealized (loss) gain on derivative
instruments
Change in unrealized gain (loss) on marketable securities
Other comprehensive (loss) income
Comprehensive income
Net loss (income) attributable to noncontrolling interests
Other comprehensive income (loss) attributable noncontrolling interests
Year Ended December 31,
2017
2016
2018
$
270,856
$
101,069
$
278,911
(3,622)
60
(3,562)
267,294
6
66
1,040
(4,667)
(3,627)
97,442
15,701
94
28,508
3,677
32,185
311,096
(7,644)
(1,299)
Comprehensive income attributable to SLGOP
$
267,366
$
113,237
$
302,153
The accompanying notes are an integral part of these consolidated financial statements.
SL Green Operating Partnership, L.P.
Consolidated Statements of Capital
(in thousands, except per unit data)
Balance at December 31, 2015
Net income
Other comprehensive income
Preferred dividends
DRSPP proceeds
Conversion of common units
Reallocation of noncontrolling interests in the operating partnership
Deferred compensation plan and stock awards, net of forfeitures and tax
withholdings
Issuance of stock
Contributions to consolidated joint venture interests
Proceeds from stock options exercised
Cash distributions to noncontrolling interests
Cash distributions declared ($2.94 per common unit, none of which represented
a return of capital for federal income tax purposes)
Balance at December 31, 2016
Net income (loss)
Other comprehensive loss
Preferred dividends
DRSPP proceeds
Conversion of common units
Reallocation of noncontrolling interests in the operating partnership
Equity component of repurchased exchangeable senior notes
Deferred compensation plan and stock awards, net of forfeitures and tax
withholdings
Repurchases of common units
Proceeds from stock options exercised
Contributions to consolidated joint venture interests
Deconsolidation of partially owned entity
Cash distributions to noncontrolling interests
SL Green Operating Partnership Unitholders
Partners' Interest
Series I
Preferred
Units
Common
Units
Common
Unitholders
Accumulated
Other
Comprehensive
(Loss) Income
Noncontrolling
Interests
Total
$ 221,932
99,976
$ 7,074,282
$
(8,749)
$
431,852
$ 7,719,317
7,644
30,886
249,896
(14,950)
277
31,806
(4,222)
23,902
(40)
2
295
96
193
14,832
2,359
257,540
30,886
(14,950)
277
31,806
(4,222)
23,902
(40)
2,359
14,832
221,932
100,562
7,080,406
22,137
426,436
7,750,911
(295,377)
(295,377)
(15,419)
(15,419)
101,374
(14,950)
223
21,574
5,712
(109,776)
2
202
87
29,787
(8,342)
(848,048)
292
$
23,314
(15,701)
(3,533)
36,275
(30,203)
(52,446)
85,673
(3,533)
(14,950)
223
21,574
5,712
(109,776)
29,787
(848,048)
23,314
36,275
(30,203)
(52,446)
(305,059)
Cash distributions declared ($3.1375 per common unit, none of which
represented a return of capital for federal income tax purposes)
(305,059)
Balance at December 31, 2017
221,932
92,803
5,984,557
18,604
364,361
6,589,454
Cumulative adjustment upon adoption of ASC 610-20
570,524
570,524
Balance at January 1, 2018
Net income (loss)
Other comprehensive loss
Preferred dividends
DRSPP proceeds
Conversion of common units
Reallocation of noncontrolling interest in the Operating Partnership
Deferred compensation plan and stock awards, net of forfeitures and tax
withholdings
Repurchases of common units
Proceeds from stock options exercised
Contributions to consolidated joint venture interests
Deconsolidation of partially owned entity
Cash distributions to noncontrolling interests
221,932
92,803
6,555,081
18,604
364,361
7,159,978
(3,496)
247,262
(14,950)
136
16,303
34,236
1
160
149
17,484
(9,745)
(937,795)
316
28,912
(6)
247,256
(3,496)
(14,950)
136
16,303
34,236
17,484
(937,795)
28,912
5,459
5,459
(315,116)
(315,116)
(8,364)
(8,364)
Cash distributions declared ($3.2875 per common unit, none of which
represented a return of capital for federal income tax purposes)
(282,188)
(282,188)
Balance at December 31, 2018
$ 221,932
83,684
$ 5,664,481
$
15,108
$
46,334
$ 5,947,855
46
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SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(in thousands)
SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
2018
2017
2016
$
270,856
$
101,069
$
278,911
Financing Activities
Proceeds from mortgages and other loans payable
Repayments of mortgages and other loans payable
Year Ended December 31,
2018
2017
2016
$
564,391
$
870,459
$
408,293
(868,842)
(902,460)
(1,822,303)
Proceeds from revolving credit facility, term loans and senior unsecured notes
3,120,000
2,784,599
1,325,300
Repayments of revolving credit facility, term loans and senior unsecured notes
(2,560,000)
(2,276,782)
(2,334,604)
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Equity in net income from unconsolidated joint ventures
Distributions of cumulative earnings from unconsolidated joint ventures
Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate
Purchase price and other fair value adjustment
Depreciable real estate reserves and impairment
Loss (gain) on sale of real estate, net
Loan loss reserves and other investment reserves, net of recoveries
(Gain) loss on sale of investments in marketable securities
Loss on early extinguishment of debt
Deferred rents receivable
Other non-cash adjustments (1)
Changes in operating assets and liabilities:
Tenant and other receivables
Related party receivables
Deferred lease costs
Other assets
Accounts payable, accrued expenses and other liabilities and security deposits
Deferred revenue and land leases payable
Net cash provided by operating activities
Investing Activities
Acquisitions of real estate property
Additions to land, buildings and improvements
Investments in unconsolidated joint ventures
Distributions in excess of cumulative earnings from unconsolidated joint ventures
Net proceeds from disposition of real estate/joint venture interest
Proceeds from sale of marketable securities
Purchases of marketable securities
Other investments
291,915
(7,311)
10,277
(303,967)
(57,385)
227,543
30,757
6,839
—
17,083
(18,216)
2,932
6,968
(1,044)
(44,158)
(8,310)
4,410
12,348
441,537
(60,486)
(254,460)
(400,429)
233,118
1,231,004
—
—
(38,912)
Origination of debt and preferred equity investments
Repayments or redemption of debt and preferred equity investments
Net cash provided by investing activities
(731,216)
(1,129,970)
703,043
681,662
812,914
22,014
419,818
(21,892)
20,309
(16,166)
—
178,520
(73,241)
—
(3,262)
—
(38,009)
19,621
(5,717)
(7,209)
(41,939)
(23,068)
(12,440)
46,607
845,605
(11,874)
24,337
(44,009)
—
10,387
(238,116)
—
83
—
26,716
(152,428)
4,780
(5,183)
(70,707)
9,899
(35,628)
1,237
543,001
644,010
(28,680)
(336,001)
(389,249)
319,745
692,796
55,129
—
25,330
(39,890)
(411,950)
(145,375)
196,211
2,475,954
6,965
(43,341)
7,704
(977,413)
904,517
1,973,382
Payments of debt extinguishment costs
Proceeds from stock options exercised and DRSPP issuance
Repurchase of common stock
Redemption of preferred units
Redemption of OP units
Distributions to noncontrolling interests in other partnerships
Contributions from noncontrolling interests in other partnerships
Distributions paid on common and preferred units
Other obligations related to mortgage loan participations
Payment of tax witholdings for restricted share awards
Deferred loan costs and capitalized lease obligation
Net cash used in by financing activities
Net increase (decrease) in cash and cash equivalents
Cash, restricted cash, and cash equivalents at beginning of year
(13,918)
29,048
—
23,537
(979,541)
(806,302)
(1,208)
(33,972)
(8,364)
5,459
(275)
—
(52,446)
36,275
—
15,109
—
(3,299)
—
(15,419)
2,359
(328,230)
(347,809)
(326,750)
16
(3,842)
(15,109)
(1,094,112)
29,087
250,026
17,227
(3,879)
(27,100)
(684,956)
(119,941)
369,967
59,150
(3,162)
(41,076)
(2,736,402)
(119,010)
488,977
369,967
Cash, restricted cash, and cash equivalents at end of period
$
279,113
$
250,026
$
(1) Included in Other non-cash adjustments is $172.4 million for the year ended December 31, 2016 for the amortization of the below-market lease at 388-390
Greenwich Street as a result of the tenant exercising their option to purchase the property and entering into an agreement to accelerate the sale.
Supplemental cash flow disclosures:
Interest paid
Income taxes paid
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Issuance of units in the operating partnership
Redemption of units in the operating partnership
Redemption of units in the operating partnership for a joint venture sale
Exchange of debt investment for equity in joint venture
Issuance of preferred units relating to the real estate acquisition
Tenant improvements and capital expenditures payable
Fair value adjustment to noncontrolling interest in the operating partnership
Deconsolidation of a subsidiary (1)
Transfer of assets to assets held for sale
Transfer of liabilities related to assets held for sale
Removal of fully depreciated commercial real estate properties
Issuance of SLG's common stock to a consolidated joint venture
Share repurchase payable
$
$
259,776
1,418
$
$
273,819
2,448
$
$
344,295
2,009
—
16,303
10,445
298,956
—
—
34,236
298,404
—
—
124,249
—
—
25,723
21,574
—
—
—
6,667
5,712
695,204
611,809
5,364
15,488
—
41,746
78,495
31,806
—
68,581
22,793
15,972
4,222
1,226,425
2,048,376
1,677,528
31,474
114,049
—
(1) $366.6 million of the 2017 amount relates to 1515 Broadway. In November 2017, the Company sold a 30.13% interest in 1515 Broadway to affiliates of
Allianz Real Estate. The sale did not meet the criteria for sale accounting and as a result the property was accounted for under the profit sharing method. The
Company achieved sale accounting upon adoption of ASC 610-20 in January 2018 and closed on the sale of an additional 12.87% interest in the property to
Allianz in February 2018. See Note 6, "Investments in Unconsolidated Joint Ventures.".
In December 2018, 2017 and 2016, SLGOP declared quarterly distributions per common unit of $0.85, $0.8125 and $0.775, respectively. These
distributions were paid in January 2019, 2018 and 2017, respectively.
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49
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SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(in thousands)
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated
balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows.
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents, and restricted cash
Year Ended
2018
2017
2016
$
$
129,475
149,638
279,113
$
$
127,888
122,138
279,443
90,524
250,026
$
369,967
The accompanying notes are an integral part of these consolidated financial statements.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements
December 31, 2018
1. Organization and Basis of Presentation
SL Green Realty Corp., which is referred to as the Company or SL Green, a Maryland corporation, and SL Green Operating
Partnership, L.P., which is referred to as SLGOP or 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 which are referred to as the Service Corporation.
All of the management, leasing and construction services that are provided to the properties that are wholly-owned by us and that
are provided to certain joint ventures are conducted through SL Green Management LLC which is 100% owned by the Operating
Partnership. The Company has qualified, and expects to qualify in the current fiscal year, as a real estate investment trust, or REIT,
under the Internal Revenue Code of 1986, as amended, or the Code, 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 stockholders, is permitted to minimize
the payment of Federal income taxes at the corporate level. Unless the context requires otherwise, all references to "we," "our"
and "us" means the Company and all entities owned or controlled by the Company, including the Operating Partnership.
Substantially all of our assets are held by, and all of our operations are conducted through, the Operating Partnership. The
Company is the sole managing general partner of the Operating Partnership. As of December 31, 2018, noncontrolling investors
held, in the aggregate, a 4.70% limited partnership interest in the Operating Partnership. We refer to these interests as the
noncontrolling interests in the Operating Partnership. The Operating Partnership is considered a variable interest entity, or VIE,
in which we are the primary beneficiary. See Note 11, "Noncontrolling Interests on the Company's Consolidated Financial
Statements."
Reckson Associates Realty Corp., or Reckson, and Reckson Operating Partnership, L.P., or ROP, are wholly-owned
subsidiaries of SL Green Realty Corp.
As of December 31, 2018, we owned the following interests in properties in the New York metropolitan area, primarily in
midtown Manhattan. Our investments located outside of Manhattan are referred to as the Suburban properties:
Consolidated
Unconsolidated
Total
Property
Type
Number of
Properties
Approximate
Square Feet
(unaudited)
Number of
Properties
Approximate
Square Feet
(unaudited)
Number of
Properties
Approximate
Square Feet
(unaudited)
Weighted
Average
Occupancy(1)
(unaudited)
Location
Commercial:
Manhattan
Office
Retail
Development/
Redevelopment
Fee Interest
Suburban
Office
Retail
Development/
Redevelopment
Total commercial properties
Residential:
Manhattan
Residential
Suburban
Residential
Total residential properties
Total portfolio
20
7 (2)
12,387,091
325,648
5
—
32
13
1
1
15
47
2 (2)
—
2
49
486,101
—
13,198,840
2,295,200
52,000
1,000
2,348,200
15,547,040
445,105
—
445,105
15,992,145
10
9
2
1
22
—
—
—
—
22
10
—
10
32
11,329,183
352,174
347,000
—
12,028,357
—
—
—
—
12,028,357
2,156,751
—
2,156,751
14,185,108
30
16
7
1
54
13
1
1
15
69
12
—
12
81
23,716,274
677,822
833,101
—
25,227,197
2,295,200
94.5%
96.7%
54.1%
—%
93.2%
91.3%
52,000
100.0%
1,000
2,348,200
27,575,397
2,601,856
—
2,601,856
30,177,253
—%
91.4%
93.1%
91.5%
—%
91.5%
92.9%
50
51
(1)
The weighted average occupancy for commercial properties represents the total occupied square feet divided by total square footage at acquisition. The
weighted average occupancy for residential properties represents the total occupied units divided by total available units.
Table of Contents
Table of Contents
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
(2) As of December 31, 2018, we owned a building at 315 West 33rd Street, also known as The Olivia, that was comprised of approximately 270,132 square
feet (unaudited) of retail space and approximately 222,855 square feet (unaudited) of residential space. For the purpose of this report, we have included
this building in the number of retail properties we own. However, we have included only the retail square footage in the retail approximate square footage,
and have listed the balance of the square footage as residential square footage.
As of December 31, 2018, we also managed two office buildings owned by third parties encompassing approximately 2.1
million square feet (unaudited) and held debt and preferred equity investments with a book value of $2.1 billion, including $0.1
billion of debt and preferred equity investments and other financing receivables that are included in balance sheet line items other
than the Debt and Preferred Equity Investments line item.
Partnership Agreement
In accordance with the partnership agreement of the Operating Partnership, or the Operating Partnership Agreement, we
allocate all distributions and profits and losses in proportion to the percentage of ownership interests of the respective partners.
As the managing general partner of the Operating Partnership, we are required to take such reasonable efforts, as determined by
us in our sole discretion, to cause the Operating Partnership to distribute sufficient amounts to enable the payment of sufficient
dividends by us to minimize any Federal income or excise tax at the Company level. Under the Operating Partnership Agreement,
each limited partner has the right to redeem units of limited partnership interests for cash, or if we so elect, shares of SL Green's
common stock on a one-for-one basis.
2. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include our accounts and those of our subsidiaries, which are wholly-owned or
controlled by us. Entities which we do not control through our voting interest and entities which are variable interest entities, but
where we are not the primary beneficiary, are accounted for under the equity method. See Note 5, "Debt and Preferred Equity
Investments" and Note 6, "Investments in Unconsolidated Joint Ventures." All significant intercompany balances and transactions
have been eliminated.
We consolidate a VIE in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i)
the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb
losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.
A noncontrolling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not
attributable, directly or indirectly, to us. Noncontrolling interests are required to be presented as a separate component of equity
in the consolidated balance sheet and the presentation of net income is modified to present earnings and other comprehensive
income attributed to controlling and noncontrolling interests.
We assess the accounting treatment for each joint venture and debt and preferred equity investment. This assessment includes
a review of each joint venture or limited liability company agreement to determine the rights provided to each party and whether
those rights are protective or participating. For all VIEs, we review such agreements in order to determine which party has the
power to direct the activities that most significantly impact the entity's economic performance. In situations where we and our
partner approve, among other things, the annual budget, receive a detailed monthly reporting package, meet on a quarterly basis
to review the results of the joint venture, review and approve the joint venture's tax return before filing, and approve all leases that
cover more than a nominal amount of space relative to the total rentable space at each property, we do not consolidate the joint
venture as we consider these to be substantive participation rights that result in shared power of the activities that most significantly
impact the performance of the joint venture. Our joint venture agreements typically contain certain protective rights such as
requiring partner approval to sell, finance or refinance the property and the payment of capital expenditures and operating
expenditures outside of the approved budget or operating plan.
Investment in Commercial Real Estate Properties
Real estate properties are presented at cost less accumulated depreciation and amortization. Costs directly related to the
development or redevelopment of properties are capitalized. Ordinary repairs and maintenance are expensed as incurred; major
replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated
useful lives.
We recognize the assets acquired, liabilities assumed (including contingencies) and any noncontrolling interests in an acquired
entity at their respective fair values on the acquisition date. When we acquire our partner's equity interest in an existing
unconsolidated joint venture and gain control over the investment, we record the consolidated investment at fair value. The difference
between the book value of our equity investment on the purchase date and our share of the fair value of the investment's purchase
price is recorded as a purchase price fair value adjustment in our consolidated statements of operations. See Note 3, "Property
Acquisitions."
We allocate the purchase price of real estate to land and building (inclusive of tenant improvements) and, if determined to
be material, intangibles, such as the value of above- and below-market leases and origination costs associated with the in-place
leases. We depreciate the amount allocated to building (inclusive of tenant improvements) over their estimated useful lives, which
generally range from three to 40 years. We amortize the amount allocated to the above- and below-market leases over the remaining
term of the associated lease, which generally range from one to 14 years, and record it as either an increase (in the case of below-
market leases) or a decrease (in the case of above-market leases) to rental income. We amortize the amount allocated to the values
associated with in-place leases over the expected term of the associated lease, which generally ranges from one to 14 years. If a
tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any
unamortized balance of the related intangible will be written off. The tenant improvements and origination costs are amortized as
an expense over the remaining life of the lease (or charged against earnings if the lease is terminated prior to its contractual
expiration date). We assess fair value of the leases based on estimated cash flow projections that utilize appropriate discount and
capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including
the historical operating results, known trends, and market/economic conditions that may affect the property. To the extent acquired
leases contain fixed rate renewal options that are below-market and determined to be material, we amortize such below-market
lease value into rental income over the renewal period. As of December 31, 2018, the weighted average amortization period for
above-market leases, below-market leases, and in-place lease costs is 1.8 years, 4.6 years, and 5.8 years, respectively.
We incur a variety of costs in the development and leasing of our properties. After the determination is made to capitalize a
cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project is
substantially complete and capitalization must cease involves a degree of judgment. The costs of land and building under
development include specifically identifiable costs. The capitalized costs include, but are not limited to, pre-construction costs
essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and
related costs and other costs incurred during the period of development. We consider a construction project as substantially
completed and held available for occupancy upon the completion of tenant improvements, but no later than one year after major
construction activity ceases. We cease capitalization on the portions substantially completed and occupied or held available for
occupancy, and capitalize only those costs associated with the portions under construction.
Properties are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful
lives are as follows:
Category
Building (fee ownership)
Building improvements
Building (leasehold interest)
Property under capital lease
Furniture and fixtures
Tenant improvements
Term
40 years
shorter of remaining life of the building or useful life
lesser of 40 years or remaining term of the lease
remaining lease term
four to seven years
shorter of remaining term of the lease or useful life
Depreciation expense (including amortization of capital lease assets) totaled $242.8 million, $365.3 million, and $783.5
million for the years ended December 31, 2018, 2017 and 2016, respectively.
On a periodic basis, we assess whether there are any indications that the value of our real estate properties may be impaired
or that their carrying value may not be recoverable. A property's value is considered impaired if management's estimate of the
aggregate future cash flows (undiscounted) to be generated by the property is less than the carrying value of the property. To the
extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the calculated
fair value of the property.
We also evaluate our real estate properties for impairment when a property has been classified as held for sale. Real estate
assets held for sale are valued at the lower of their carrying value or fair value less costs to sell and depreciation expense is no
longer recorded.
We recognized $6.8 million, $20.3 million, and $196.2 million of rental revenue for the years ended December 31, 2018,
2017, and 2016 respectively, for the amortization of aggregate below-market leases in excess of above-market leases and a reduction
in lease origination costs, resulting from the allocation of the purchase price of the applicable properties. Included in rental revenue
52
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Table of Contents
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
for the year ended December 31, 2016 is $172.4 million related to the amortization of below-market leases at 388-390 Greenwich
Street as a result of the tenant exercising their option to purchase the property and entering into an agreement to accelerate the
sale.
We recognized as a reduction to interest expense the amortization of the above-market rate mortgages assumed of $0.0
million, $0.8 million, and $2.8 million for the years ended December 31, 2018, 2017 and 2016, respectively.
The following summarizes our identified intangible assets (acquired above-market leases and in-place leases) and intangible
liabilities (acquired below-market leases) as of December 31, 2018 and 2017 (in thousands):
Identified intangible assets (included in other assets):
Gross amount
Accumulated amortization
Net(1)
Identified intangible liabilities (included in deferred revenue):
Gross amount
Accumulated amortization
Net(1)
December 31,
2018
2017
$
$
$
$
266,540
(241,040)
25,500
276,245
(253,767)
22,478
$
$
$
$
325,880
(277,038)
48,842
540,283
(402,583)
137,700
(1) As of December 31, 2018, no net intangible assets and no net intangible liabilities were reclassified to assets held for sale and liabilities related to assets
held for sale. As of December 31, 2017, $13.9 million net intangible assets and $4.1 million net intangible liabilities were reclassified to assets held for
sale and liabilities related to assets held for sale.
The estimated annual amortization of acquired above-market leases, net of acquired (below-market) leases (a component of
rental revenue), for each of the five succeeding years is as follows (in thousands):
2019
2020
2021
2022
2023
$
(5,227)
(3,655)
(1,631)
(1,328)
(749)
The estimated annual amortization of all other identifiable assets (a component of depreciation and amortization expense)
including tenant improvements for each of the five succeeding years is as follows (in thousands):
2019
2020
2021
2022
2023
Cash and Cash Equivalents
$
9,825
4,817
3,454
1,892
1,507
We consider all highly liquid investments with maturity of three months or less when purchased to be cash equivalents.
Restricted Cash
Restricted cash primarily consists of security deposits held on behalf of our tenants, interest reserves, as well as capital
improvement and real estate tax escrows required under certain loan agreements.
Fair Value Measurements
See Note 16, "Fair Value Measurements."
Investment in Marketable Securities
At acquisition, we designate a security as held-to-maturity, available-for-sale, or trading. As of December 31, 2018, we did
not have any securities designated as held-to-maturity or trading. We account for our available-for-sale securities at fair value
pursuant to Accounting Standards Codification, or ASC, 820-10, with the net unrealized gains or losses reported as a component
of accumulated other comprehensive income or loss. The cost of marketable securities sold and the amount reclassified out of
accumulated other comprehensive income into earnings is determined using the specific identification method. Any unrealized
losses that are determined to be other-than-temporary are recognized in earnings up to their credit component.
The Company adopted ASU 2016-01 effective January 1, 2018 which required entities to measure investments in equity
securities at fair value and recognize any changes in fair value in net income. Upon adoption we did not hold investments in equity
securities and therefore did not record a cumulative-effect adjustment. We did not hold investments in equity securities as of
December 31, 2018.
At December 31, 2018 and 2017, we held the following marketable securities (in thousands):
Commercial mortgage-backed securities
Total marketable securities available-for-sale
December 31,
2018
2017
$
$
28,638
28,638
$
$
28,579
28,579
The cost basis of the commercial mortgage-backed securities was $27.5 million and $27.5 million at December 31, 2018
and 2017, respectively. These securities mature at various times through 2035. We held no equity marketable securities at
December 31, 2018 and 2017.
During the year ended December 31, 2018, we did not dispose of any marketable securities.
During the year ended December 31, 2017, we disposed of marketable securities for aggregate net proceeds of $55.1 million
and realized a loss of $3.3 million, which is included in gain (loss) on sale of investment in marketable securities on the consolidated
statements of operations.
During the year ended December 31, 2016, we disposed of marketable securities for aggregate net proceeds of $7.0 million
and realized a loss of $0.1 million, which is included in gain (loss) on sale of investment in marketable securities on the consolidated
statements of operations.
Investments in Unconsolidated Joint Ventures
We account for our investments in unconsolidated joint ventures under the equity method of accounting in cases where we
exercise significant influence over, but do not control, these entities and are not considered to be the primary beneficiary. We
consolidate those joint ventures that we control or which are VIEs and where we are considered to be the primary beneficiary. In
all these joint ventures, the rights of the joint venture partner are both protective as well as participating. Unless we are determined
to be the primary beneficiary in a VIE, these participating rights preclude us from consolidating these VIE entities. These investments
are recorded initially at cost, as investments in unconsolidated joint ventures, and subsequently adjusted for equity in net income
(loss) and cash contributions and distributions. Equity in net income (loss) from unconsolidated joint ventures is allocated based
on our ownership or economic interest in each joint venture and includes adjustments related to basis differences that were identified
as part of the initial accounting for the investment. When a capital event (as defined in each joint venture agreement) such as a
refinancing occurs, if return thresholds are met, future equity income will be allocated at our increased economic interest. We
recognize incentive income from unconsolidated real estate joint ventures as income to the extent it is earned and not subject to a
clawback feature. Distributions we receive from unconsolidated real estate joint ventures in excess of our basis in the investment
are recorded as offsets to our investment balance if we remain liable for future obligations of the joint venture or may otherwise
be committed to provide future additional financial support. None of the joint venture debt is recourse to us. The Company has
performance guarantees under a master lease at one joint venture. See Note 6, "Investments in Unconsolidated Joint Ventures."
We assess our investments in unconsolidated joint ventures for recoverability, and if it is determined that a loss in value of
the investment is other than temporary, we write down the investment to its fair value. We evaluate our equity investments for
impairment based on the joint ventures' projected discounted cash flows. We do not believe that the values of any of our equity
investments were impaired at December 31, 2018.
We may originate loans for real estate acquisition, development and construction, where we expect to receive some of the
residual profit from such projects. When the risk and rewards of these arrangements are essentially the same as an investor or joint
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
venture partner, we account for these arrangements as real estate investments under the equity method of accounting for investments.
Otherwise, we account for these arrangements consistent with the accounting for our debt and preferred equity investments.
Deferred Lease Costs
Deferred lease costs consist of fees and direct costs incurred to execute operating leases and are amortized on a straight-line
basis over the related lease term. Certain of our employees provide leasing services to the wholly-owned properties. For the years
ended December 31, 2018, 2017 and 2016, $15.7 million, $16.4 million, and $15.4 million of their compensation, respectively,
was capitalized and is amortized over an estimated average lease term of seven years.
Deferred Financing Costs
Deferred financing costs represent commitment fees, legal, title and other third party costs associated with obtaining
commitments for financing which result in a closing of such financing. These costs are amortized over the terms of the respective
agreements. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity.
Costs incurred in seeking financing transactions, which do not close, are expensed in the period in which it is determined that the
financing will not close. Deferred financing costs related to a recognized debt liability are presented in the balance sheet as a direct
deduction from the carrying amount of that debt liability.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the term of the lease. Rental revenue recognition commences when
the tenant takes possession or controls the physical use of the leased space. In order for the tenant to take possession, the leased
space must be substantially ready for its intended use. To determine whether the leased space is substantially ready for its intended
use, management evaluates whether we are or the tenant is the owner of tenant improvements for accounting purposes. When
management concludes that we are the owner of tenant improvements, rental revenue recognition begins when the tenant takes
possession of the finished space, which is when such tenant improvements are substantially complete. In certain instances, when
management concludes that we are not the owner (the tenant is the owner) of tenant improvements, rental revenue recognition
begins when the tenant takes possession of or controls the space. When management concludes that we are the owner of tenant
improvements for accounting purposes, we record amounts funded to construct the tenant improvements as a capital asset. For
these tenant improvements, we record amounts reimbursed by tenants as a reduction of the capital asset. When management
concludes that the tenant is the owner of tenant improvements for accounting purposes, we record our contribution towards those
improvements as a lease incentive, which is included in deferred costs, net on our consolidated balance sheets and amortized as a
reduction to rental revenue on a straight-line basis over the term of the lease. The excess of rents recognized over amounts
contractually due pursuant to the underlying leases are included in deferred rents receivable on the consolidated balance sheets.
We establish, on a current basis, an allowance for future potential tenant credit losses, which may occur against this account. The
balance reflected on the consolidated balance sheets is net of such allowance.
In addition to base rent, our tenants also generally will pay their pro rata share of increases in real estate taxes and operating
expenses for the building over a base year. In some leases, in lieu of paying additional rent based upon increases in building
operating expenses, the tenant will pay additional rent based upon increases in the wage rate paid to porters over the porters' wage
rate in effect during a base year or increases in the consumer price index over the index value in effect during a base year. In
addition, many of our leases contain fixed percentage increases over the base rent to cover escalations. Electricity is most often
supplied by the landlord either on a sub-metered basis, or rent inclusion basis (i.e., a fixed fee is included in the rent for electricity,
which amount may increase based upon increases in electricity rates or increases in electrical usage by the tenant). Base building
services other than electricity (such as heat, air conditioning and freight elevator service during business hours, and base building
cleaning) are typically provided at no additional cost, with the tenant paying additional rent only for services which exceed base
building services or for services which are provided outside normal business hours. These escalations are based on actual expenses
incurred in the prior calendar year. If the expenses in the current year are different from those in the prior year, then during the
current year, the escalations will be adjusted to reflect the actual expenses for the current year.
We record a gain on sale of real estate assets when we no longer hold a controlling financial interest in the entity holding
the real estate, a contract exists with a third party and that third party has control of the assets acquired.
Investment income on debt and preferred equity investments is accrued based on the contractual terms of the instruments
and when, in the opinion of management, it is deemed collectible. Some debt and preferred equity investments provide for accrual
of interest at specified rates, which differ from current payment terms. Interest is recognized on such loans at the accrual rate
subject to management's determination that accrued interest is ultimately collectible, based on the underlying collateral and
operations of the borrower. If management cannot make this determination, interest income above the current pay rate is recognized
only upon actual receipt.
Deferred origination fees, original issue discounts and loan origination costs, if any, are recognized as an adjustment to
interest income over the terms of the related investments using the effective interest method. Fees received in connection with
loan commitments are also deferred until the loan is funded and are then recognized over the term of the loan as an adjustment to
yield. Discounts or premiums associated with the purchase of loans are amortized or accreted into interest income as a yield
adjustment on the effective interest method based on expected cash flows through the expected maturity date of the related
investment. If we purchase a debt or preferred equity investment at a discount, intend to hold it until maturity and expect to recover
the full value of the investment, we accrete the discount into income as an adjustment to yield over the term of the investment. If
we purchase a debt or preferred equity investment at a discount with the intention of foreclosing on the collateral, we do not accrete
the discount. For debt investments acquired at a discount for credit quality, the difference between contractual cash flows and
expected cash flows at acquisition is not accreted. Anticipated exit fees, the collection of which is expected, are also recognized
over the term of the loan as an adjustment to yield.
Debt and preferred equity investments are placed on a non-accrual status at the earlier of the date at which payments become
90 days past due or when, in the opinion of management, a full recovery of interest income becomes doubtful. Interest income
recognition on any non-accrual debt or preferred equity investment is resumed when such non-accrual debt or preferred equity
investment becomes contractually current and performance is demonstrated to be resumed. Interest is recorded as income on
impaired loans only to the extent cash is received.
We may syndicate a portion of the loans that we originate or sell the loans individually. When a transaction meets the criteria
for sale accounting, we derecognize the loan sold and recognize gain or loss based on the difference between the sales price and
the carrying value of the loan sold. Any related unamortized deferred origination fees, original issue discounts, loan origination
costs, discounts or premiums at the time of sale are recognized as an adjustment to the gain or loss on sale, which is included in
investment income on the consolidated statement of operations. Any fees received at the time of sale or syndication are recognized
as part of investment income.
Asset management fees are recognized on a straight-line basis over the term of the asset management agreement.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our tenants to make
required payments. If the financial condition of a specific tenant were to deteriorate, resulting in an impairment of its ability to
make payments, additional allowances may be required.
Allowance for Loan Loss and Other Investment Reserves
The expense for loan loss and other investment reserves in connection with debt and preferred equity investments is the
charge to earnings to adjust the allowance for possible losses to the level that we estimate to be adequate, based on Level 3 data,
considering delinquencies, loss experience and collateral quality.
The Company evaluates debt and preferred equity investments that are classified as held to maturity for possible impairment
or credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial
and operating capability of the borrower/sponsor. Quarterly, the Company assigns each loan a risk rating. Based on a 3-point scale,
loans are rated “1” through “3,” from less risk to greater risk, which ratings are defined as follows: 1 - Low Risk Assets - Low
probability of loss, 2 - Watch List Assets - Higher potential for loss, 3 - High Risk Assets - Loss more likely than not.
When it is probable that we will be unable to collect all amounts contractually due, the investment is considered impaired.
A valuation allowance is measured based upon the excess of the recorded investment amount over the fair value of the collateral.
Any deficiency between the carrying amount of an asset and the calculated value of the collateral is charged to expense. We
continue to assess or adjust our estimates based on circumstances of a loan and the underlying collateral. If additional information
reflects increased recovery of our investment, we will adjust our reserves accordingly.
Debt and preferred equity investments that are classified as held for sale are carried at the lower of cost or fair market value
using available market information obtained through consultation with dealers or other originators of such investments as well as
discounted cash flow models based on Level 3 data pursuant to ASC 820-10. As circumstances change, management may conclude
not to sell an investment designated as held for sale. In such situations, the investment will be reclassified at its net carrying value
to debt and preferred equity investments held to maturity. For these reclassified investments, the difference between the current
carrying value and the expected cash to be collected at maturity will be accreted into income over the remaining term of the
investment.
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Rent Expense
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
Table of Contents
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
Rent expense is recognized on a straight-line basis over the initial term of the lease. The excess of the rent expense recognized
over the amounts contractually due pursuant to the underlying lease is included in the deferred lease payable on the consolidated
balance sheets.
Underwriting Commissions and Costs
Underwriting commissions and costs incurred in connection with our stock offerings are reflected as a reduction of additional
paid-in-capital.
Exchangeable Debt Instruments
The initial proceeds from exchangeable debt that may be settled in cash, including partial cash settlements, are bifurcated
between a liability component and an equity component associated with the embedded conversion option. The objective of the
accounting guidance is to require the liability and equity components of exchangeable debt to be separately accounted for in a
manner such that the interest expense on the exchangeable debt is not recorded at the stated rate of interest but rather at an effective
rate that reflects the issuer's conventional debt borrowing rate at the date of issuance. We calculate the liability component of
exchangeable debt based on the present value of the contractual cash flows discounted at our comparable market conventional
debt borrowing rate at the date of issuance. The difference between the principal amount and the fair value of the liability component
is reported as a discount on the exchangeable debt that is accreted as additional interest expense from the issuance date through
the contractual maturity date using the effective interest method. A portion of this additional interest expense may be capitalized
to the development and redevelopment balances qualifying for interest capitalization each period. The liability component of the
exchangeable debt is reported net of discounts on our consolidated balance sheets. We calculate the equity component of
exchangeable debt based on the difference between the initial proceeds received from the issuance of the exchangeable debt and
the fair value of the liability component at the issuance date. The equity component is included in additional paid-in-capital, net
of issuance costs, on our consolidated balance sheets. We allocate issuance costs for exchangeable debt between the liability and
the equity components based on their relative values.
Transaction Costs
In January 2017, we adopted ASU No. 2017-01, Business Combinations: Clarifying the Definition of a Business, which
changed how we account for transaction costs. Prior to January 2017, transaction costs were expensed as incurred. Starting in
January 2017, transaction costs for asset acquisitions are capitalized to the investment basis which is then subject to a purchase
price allocation based on relative fair value and transaction costs for business combinations or costs incurred on potential transactions
which are not consummated are expensed as incurred.
Income Taxes
SL Green is taxed as a REIT under Section 856(c) of the Code. As a REIT, SL Green generally is not subject to Federal
income tax. To maintain its qualification as a REIT, SL Green must distribute at least 90% of its REIT taxable income to its
stockholders and meet certain other requirements. If SL Green fails to qualify as a REIT in any taxable year, SL Green will be
subject to Federal income tax on its taxable income at regular corporate rates. SL Green may also be subject to certain state, local
and franchise taxes. Under certain circumstances, Federal income and excise taxes may be due on its undistributed taxable income.
The Operating Partnership is a partnership and, as a result, all income and losses of the partnership are allocated to the partners
for inclusion in their respective income tax returns. The only provision for income taxes included in the consolidated statements
of operations relates to the Operating Partnership’s consolidated taxable REIT subsidiaries. The Operating Partnership may also
be subject to certain state, local and franchise taxes.
We have elected, and may elect in the future, to treat certain of our corporate subsidiaries as taxable REIT subsidiaries, or
TRSs. In general, TRSs may perform non-customary services for the tenants of the Company, hold assets that we cannot hold
directly and generally may engage in any real estate or non-real estate related business. The TRSs generate income, resulting in
Federal and state income tax liability for these entities.
During the years ended December 31, 2018, 2017 and 2016, we recorded Federal, state and local tax provisions of $2.8
million, $4.3 million, and $2.8 million, respectively. For the year ended December 31, 2018, the Company paid distributions on
its common stock of $3.25 per share which represented $1.46 per share of ordinary income and $1.79 per share of capital gains.
For the year ended December 31, 2017, the Company paid distributions on its common stock of $3.10 per share which represented
$1.24 per share of ordinary income, and $1.86 per share of capital gains. For the year ended December 31, 2016, the Company
paid distributions on its common stock of $2.88 per share which represented $2.48 per share of ordinary income and $0.40 per
share of capital gains.
We follow a two-step approach for evaluating uncertain tax positions. Recognition (step one) occurs when an enterprise
concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination.
Measurement (step two) determines the amount of benefit that is more-likely-than-not to be realized upon settlement. Derecognition
of a tax position that was previously recognized would occur when a company subsequently determines that a tax position no
longer meets the more-likely-than-not threshold of being sustained. The use of a valuation allowance as a substitute for derecognition
of tax positions is prohibited.
On December 22, 2017, the Tax Cuts and Jobs Act (the ‘‘Tax Act’’) was signed into law and makes substantial changes to
the Code. The Tax Act has not had a material impact on our financial statements for the years ended December 31, 2018 or
December 31, 2017.
Stock-Based Employee Compensation Plans
We have a stock-based employee compensation plan, described more fully in Note 14, "Share-based Compensation."
The Company's stock options are recorded at fair value at the time of issuance. Fair value of the stock options is determined
using the Black-Scholes option pricing model. The Black-Scholes model was developed for use in estimating the fair value of
traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price volatility. Because our plan has characteristics significantly
different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value
estimate, in our opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the employee
stock options.
Compensation cost for stock options, if any, is recognized over the vesting period of the award. Our policy is to grant options
with an exercise price equal to the quoted closing market price of the Company's common stock on either the grant date or the
date immediately preceding the grant date. Awards of stock or restricted stock are expensed as compensation over the benefit
period based on the fair value of the stock on the grant date.
For share-based awards with a performance or market measure, we recognize compensation cost over the requisite service
period, using the accelerated attribution expense method. The requisite service period begins on the date the compensation
committee of our board of directors authorizes the award, adopts any relevant performance measures and communicates the award
to the employees. For programs with awards that vest based on the achievement of a performance condition or market condition,
we determine whether it is probable that the performance condition will be met, and estimate compensation cost based on the fair
value of the award at the applicable award date estimated using a binomial model or market quotes. For share-based awards for
which there is no pre-established performance measure, we recognize compensation cost over the service vesting period, which
represents the requisite service period, on a straight-line basis. In accordance with the provisions of our share-based incentive
compensation plans, we accept the return of shares of the Company's common stock, at the current quoted market price, from
certain key employees to satisfy minimum statutory tax-withholding requirements related to shares that vested during the period.
Awards can also be made in the form of a separate series of units of limited partnership interest in the Operating Partnership
called long-term incentive plan units, or LTIP units. LTIP units, which can be granted either as free-standing awards or in tandem
with other awards under our stock incentive plan, are valued by reference to the value of the Company's common stock at the time
of grant, and are subject to such conditions and restrictions as the compensation committee of the Company's board of directors
may determine, including continued employment or service, computation of financial metrics and/or achievement of pre-established
performance goals and objectives.
Derivative Instruments
In the normal course of business, we use a variety of commonly used derivative instruments, such as interest rate swaps,
caps, collars and floors, to manage, or hedge, interest rate risk. Effectiveness is essential for those derivatives that we intend to
qualify for hedge accounting. Some derivative instruments are associated with an anticipated transaction. In those cases, hedge
effectiveness criteria also require that it be probable that the underlying transaction occurs. Instruments that meet these hedging
criteria are formally designated as hedges at the inception of the derivative contract.
To determine the fair values of derivative instruments, we use a variety of methods and assumptions that are based on market
conditions and risks existing at each balance sheet date. For the majority of financial instruments including most derivatives, long-
term investments and long-term debt, standard market conventions and techniques such as discounted cash flow analysis, option
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
pricing models, replacement cost, and termination cost are used to determine fair value. All methods of assessing fair value result
in a general approximation of value, and such value may never actually be realized.
In the normal course of business, we are exposed to the effect of interest rate changes and limit these risks by following
established risk management policies and procedures including the use of derivatives. To address exposure to interest rates,
derivatives are used primarily to fix the rate on debt based on floating-rate indices and manage the cost of borrowing obligations.
We use a variety of conventional derivative products. These derivatives typically include interest rate swaps, caps, collars
and floors. We expressly prohibit the use of unconventional derivative instruments and using derivative instruments for trading or
speculative purposes. Further, we have a policy of only entering into contracts with major financial institutions based upon their
credit ratings and other factors.
We may employ swaps, forwards or purchased options to hedge qualifying forecasted transactions. Gains and losses related
to these transactions are deferred and recognized in net income as interest expense in the same period or periods that the underlying
transaction occurs, expires or is otherwise terminated.
Hedges that are reported at fair value and presented on the balance sheet could be characterized as cash flow hedges or fair
value hedges. Interest rate caps and collars are examples of cash flow hedges. Cash flow hedges address the risk associated with
future cash flows of interest payments. For all hedges held by us and which were deemed to be fully effective in meeting the
hedging objectives established by our corporate policy governing interest rate risk management, no net gains or losses were reported
in earnings. The changes in fair value of hedge instruments are reflected in accumulated other comprehensive income. For derivative
instruments not designated as hedging instruments, the gain or loss, resulting from the change in the estimated fair value of the
derivative instruments, is recognized in current earnings during the period of change.
Earnings per Share of the Company
The Company presents both basic and diluted earnings per share, or EPS, using the two-class method, which is an earnings
allocation formula that determines EPS for common stock and any participating securities according to dividends declared (whether
paid or unpaid). Under the two-class method, basic EPS is computed by dividing the income available to common stockholders
by the weighted-average number of common stock shares outstanding for the period. Basic EPS includes participating securities,
consisting of unvested restricted stock that receive nonforfeitable dividends similar to shares of common stock. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into
common stock, where such exercise or conversion would result in a lower EPS amount. Diluted EPS also includes units of limited
partnership interest. The dilutive effect of stock options is reflected in the weighted average diluted outstanding shares calculation
by application of the treasury stock method. There was no dilutive effect for the exchangeable senior notes as the conversion
premium was to be paid in cash.
Earnings per Unit of the Operating Partnership
The Operating Partnership presents both basic and diluted earnings per unit, or EPU, using the two-class method, which is
an earnings allocation formula that determines EPU for common units and any participating securities according to dividends
declared (whether paid or unpaid). Under the two-class method, basic EPU is computed by dividing the income available to
common unitholders by the weighted-average number of common units outstanding for the period. Basic EPU includes participating
securities, consisting of unvested restricted units that receive nonforfeitable dividends similar to shares of common units. Diluted
EPU reflects the potential dilution that could occur if securities or other contracts to issue common units were exercised or converted
into common units, where such exercise or conversion would result in a lower EPU amount. The dilutive effect of unit options is
reflected in the weighted average diluted outstanding units calculation by application of the treasury stock method. There was no
dilutive effect for the exchangeable senior notes as the conversion premium was to be paid in cash.
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.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash investments, debt
and preferred equity investments and accounts receivable. We place our cash investments with high quality financial institutions.
The collateral securing our debt and preferred equity investments is located in the New York metropolitan area. See Note 5, "Debt
and Preferred Equity Investments."
We perform ongoing credit evaluations of our tenants and require most tenants to provide security deposits or letters of
credit. Though these security deposits and letters of credit are insufficient to meet the total value of a tenant's lease obligation,
they are a measure of good faith and a source of funds to offset the economic costs associated with lost revenue and the costs
associated with re-tenanting a space. The properties in our real estate portfolio are located in the New York metropolitan area. The
tenants located in our buildings operate in various industries. Other than one tenant, Credit Suisse Securities (USA), Inc., who
accounts for 8.2% of our share of annualized cash rent, no other tenant in our portfolio accounted for more than 5.0% of our share
of annualized cash rent, including our share of joint venture annualized cash rent, at December 31, 2018.
For the years ended December 31, 2018, 2017, and 2016, the following properties contributed more than 5.0% of our
annualized cash rent, including our share of joint venture annualized cash rent:
Property
2018
Property
2017
Property
11 Madison Avenue
7.4% 11 Madison Avenue
7.1% 1515 Broadway
1185 Avenue of the Americas
6.7% 1185 Avenue of the Americas
7.1% 1185 Avenue of the Americas
420 Lexington Avenue
6.5% 1515 Broadway
7.0% 11 Madison Avenue
1515 Broadway
6.0% 420 Lexington Avenue
6.0% 420 Lexington Avenue
One Madison Avenue
5.8% One Madison Avenue
5.6% One Madison Avenue
2016
8.8%
6.9%
6.1%
5.9%
5.6%
As of December 31, 2018, 68.7% of our work force is covered by six collective bargaining agreements and 56.0% of our
work force, which services substantially all of our properties, is covered by collective bargaining agreements that expire in December
2019. See Note 19, "Benefits Plans."
Reclassification
Certain prior year balances have been reclassified to conform to our current year presentation.
Accounting Standards Updates
In October 2018, the FASB issued Accounting Standard Update (ASU) No. 2018-17, Consolidation (Topic 810), Targeted
Improvements to Related Party Guidance for Variable Interest Entities. Under this amendment reporting entities, when determining
if the decision-making fees are variable interests, are to consider indirect interests held through related parties under common
control on a proportional basis rather than as a direct interest in its entirety. The guidance is effective for the Company for fiscal
years beginning after December 15, 2019. Early adoption is permitted. The Company has adopted this guidance and it had no
impact on the Company’s consolidated financial statements.
In August 2018, The Securities and Exchange Commission adopted a final rule that eliminated or amended disclosure
requirements that were redundant or outdated in light of changes in its requirements, generally accepted accounting principles, or
changes in the business environment. The commission also referred certain disclosure requirements to the Financial Accounting
Standards Board for potential incorporation into generally accepted accounting principles. The rule is effective for filings after
November 5, 2018. The Company assessed the impact of this rule and determined that the changes resulted in clarification or
expansion of existing requirements. The Company early adopted the rule upon publication to the federal register on October 5,
2018 and it did not have a material impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued Accounting Standard Update (ASU) No. 2018-15, Intangibles - Goodwill and Other-
Internal-Use Software (Topic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That is a Service Contract. The amendments provide guidance on accounting for fees paid when the arrangement
includes a software license and align the requirements for capitalizing implementation costs incurred in a hosting arrangement
that is a service contract with the requirements for capitalizing costs to develop or obtain internal-use software. The guidance is
effective for the Company for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company has
not yet adopted this new guidance and does not expect it to have a material impact on the Company’s consolidated financial
statements when the new standard is implemented.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes
to the Disclosure Requirements for Fair Value Measurement. This amendment removed, modified and added the disclosure
requirements under Topic 820. The changes are effective for the Company for fiscal years beginning after December 15, 2019.
Early adoption is permitted for the removed or modified disclosures with adoption of the additional disclosures upon the effective
date. The Company has not yet adopted this new guidance and does not expect it to have a material impact on the Company’s
consolidated financial statements when the new standard is implemented.
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718), Improvements to
Nonemployee Share-Based Payment Accounting. This amendment provides additional guidance related to share-based payment
transactions for acquiring goods or services from nonemployees. The guidance is effective for the Company for fiscal years
beginning after December 15, 2018, including the interim periods within that fiscal year. The Company will adopt this guidance
January 1, 2019 and does not expect it to have a material impact on the Company’s consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments-
Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. These amendments provide
additional guidance related to equity securities without a readily determinable fair value, forward contracts and options purchased
on those equity securities and fair value option liabilities. The Company adopted the guidance on July 1, 2018, and it did not have
a material impact on the Company’s consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to
Accounting for Hedging Activities, and in July 2018, the FASB issued ASU No. 2018-16, Derivatives and Hedging (Topic 815):
Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for
Hedge Accounting Purposes. The amendments in the new standards will permit more flexibility in hedging interest rate risk for
both variable rate and fixed rate financial instruments. The standards will also enhance the presentation of hedge results in the
financial statements. The guidance is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted.
The Company will adopt this guidance January 1, 2019, and does not expect a material impact on the Company’s consolidated
financial statements when the new standards are implemented.
In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718), Scope of Modification
Accounting. The guidance clarifies the changes to the terms or conditions of a share-based payment award that require an entity
to apply modification accounting in Topic 718. The Company adopted the guidance on January 1, 2018 and it had no impact on
the Company's consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance
requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts
generally described as restricted cash. As a result, entities will no longer present transfers between these items on the statement
of cash flows. The Company adopted the guidance on January 1, 2018 and has included the changes in restricted cash when
reconciling the beginning-of-period and end-of-period total amounts on the statement of cash flows.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments and in November 2018 issued ASU No. 2018-19, Codification Improvements to Topic 326,
Financial Instruments - Credit Losses. . The guidance changes how entities will measure credit losses for most financial assets and
certain other instruments that are not measured at fair value through net income. The guidance replaces the current ‘incurred loss’
model with an ‘expected loss’ approach. The guidance is effective for fiscal years beginning after December 15, 2019, including
interim periods within those fiscal years. Early adoption is permitted after December 15, 2018. The Company’s DPE portfolio and
capital lease assets will be subject to this guidance once the Company adopts it. ASU No. 2018-19 excludes operating lease
receivables from the scope of this guidance. The Company continues to evaluate the impact of adopting this new accounting
standard on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases. In July 2018, the FASB issued ASU No. 2018-10 - Codification
Improvements to Topic 842, Leases and ASU No. 2018-11 - Targeted Improvements. In December 2018, the FASB issued ASU
No. 2018-20 - Narrow-Scope Improvements for Lessors. This guidance requires lessees to recognize lease assets and lease liabilities
for those leases classified as operating leases under the previous standard. Depending on the lease classification, lessees will
recognize expense based on the effective interest method for finance leases or on a straight-line basis for operating leases. The
Company will apply this guidance to the ground leases under which the Company is lessee. The Company is required to record
a liability for the obligation to make payments under the lease and an asset for the right to use the underlying asset during the lease
term and will also apply the new expense recognition requirements given the lease classification. While the Company is continuing
to assess all potential impacts of the standard, we expect total liabilities and total assets to increase by $0.4 to $0.5 billion as of
the date of adoption. The accounting applied by a lessor is largely unchanged from that applied under the previous standard. The
Company does expect to adopt the practical expedient offered in ASU No. 2018-11 that allows lessors to not separate non-lease
components from the related lease components under certain conditions, which the Company expects most of its leases to qualify
for. Additionally, for future leases, the Company will no longer capitalize internal leasing costs as these costs are not considered
to be incremental under the new guidance. The Company is assessing all potential impacts of the standard and currently estimates
a decrease in net income of approximately $10.0 million related to this change based on its initial assessment. This guidance in
this standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early
adoption is permitted. The Company will adopt this guidance January 1, 2019 and will apply the modified retrospective approach.
The Company will elect the package of practical expedients that allows an entity to not reassess (i) whether any expired or existing
contracts are or contain leases, (ii) lease classification for any expired or existing leases and (iii) initial direct costs for any expired
or existing leases.
In January 2016, the FASB issued ASU 2016-01 (Subtopic 825-10), Recognition and Measurement of Financial Assets and
Financial Liabilities. The guidance requires entities to measure equity investments that do not result in consolidation and are not
accounted for under the equity method at fair value through earnings, to record changes in instrument-specific credit risk for
financial liabilities measured under the fair value option in other comprehensive income, use the exit price notion when measuring
an instrument’s fair value for disclosure and to separately present financial assets and liabilities by measurement category and
form of instrument on the balance sheet or in the notes to the financial statements. The Company adopted the guidance effective
January 1, 2018, and it had no impact on the Company’s consolidated financial statements.
In May 2014, the FASB issued a new comprehensive revenue recognition guidance which requires us to recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect
to be entitled in exchange for those goods and services (ASU 2014-09). The FASB also issued implementation guidance in March
2016, April 2016 and May 2016 - ASU’s 2016-08, 2016-10 and 2016-12, respectively. The Company adopted this guidance on
January 1, 2018. Since the Company’s revenue is related to leasing activities, the adoption of this guidance did not have a material
impact on the consolidated financial statements. The new guidance is applicable to service contracts with joint ventures for which
the Company earns property management fees, leasing commissions and development and construction fees. The adoption of this
new guidance did not change the accounting for these fees as the pattern of recognition of revenue does not change with the new
guidance. We will continue to recognize revenue over time on these contracts because the customer simultaneously receives and
consumes the benefits provided by our performance.
In February 2017, the FASB issued ASU No. 2017-05 to clarify the scope of asset derecognition guidance in Subtopic 610-20,
which also provided guidance on accounting for partial sales of nonfinancial assets. Subtopic 610-20 was issued in May 2014 as
part of ASU 2014-09. The Company adopted this guidance on January 1, 2018, and applied the modified retrospective approach. The
Company elected to adopt the practical expedient under ASC 606, Revenue from Contracts with Customers, which allows an entity
to apply the guidance only to contracts with non-customers that are open based on ASU 360-20, Real Estate Sales, (i.e. failed
sales) as of the adoption date. The Company had one open contract in 2017 with a non-customer that was evaluated under ASC
610-20. The Company entered into an agreement to sell a portion of their interest in an entity that held a controlling interest in
the property at 1515 Broadway. Upon execution of the agreement in 2017, the transaction was evaluated under ASC 360-20, Real
Estate Sales, and did not meet the criteria for sale accounting. Upon adoption of ASC 606, this contract met the criteria for sale
accounting under ASC 610-20. Through the sale, the Company no longer retains a controlling interest, as defined in ASC 810,
Consolidation, and the impact of this adjustment is a gain of $0.6 billion from the sale of the partial interest and related step-up
in basis to fair value of the non-controlling interest retained. This was recorded in the first quarter of 2018 as an adjustment to
beginning retained earnings.
3. Property Acquisitions
2018 Acquisitions
During the year ended December 31, 2018, the properties listed below were acquired from third parties.
Property
2 Herald Square(1)
1231 Third Avenue(2)(3)
Upper East Side Residential(3)(4)
133 Greene Street(2)
712 Madison Avenue(2)
Acquisition Date
Property Type
Approximate
Square Feet
Acquisition
Price
(in millions)
May 2018
July 2018
August 2018
October 2018
December 2018
Leasehold Interest
369,000
$
Fee Interest
Fee Interest
Fee Interest
Fee Interest
39,000
0.2 acres
6,425
6,600
266.0
55.4
30.2
31.0
58.0
(1)
In May 2018, the Company was the successful bidder for the leasehold interest in 2 Herald Square, at the foreclosure of the asset. In April and May 2017,
the Company had purchased, at par, loans in maturity default that were secured by the leasehold interest in 2 Herald Square. At the time the loans were
purchased, the Company expected to collect all contractually required payments, including interest. In August 2017, the Company determined that it was
probable that the loans would not be repaid in full and therefore, the loans were put on non-accrual status. No impairment was recorded as the Company
believed that the fair value of the leasehold exceeded the carrying amount of the loans. In May 2018, the Company was the successful bidder at the foreclosure
of the asset. We recorded the assets acquired and liabilities assumed at fair value. This resulted in the recognition of a fair value adjustment of $8.1 million,
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
which is reflected in the Company's consolidated statement of operations within purchase price and other fair value adjustments. See Note 16, "Fair Value
Measurements." The Company subsequently sold a 49% interest in the property in November 2018. See Note 4, "Properties Held for Sale and Dispositions."
and Note 6, "Investments in Unconsolidated Joint Ventures."
The Company accepted an assignment of the equity interests in the property in lieu of repayment of the Company's debt investment, and recorded the assets
received and liabilities assumed at fair value.
This property was subsequently sold in October 2018. See Note 4, "Properties Held for Sale and Dispositions."
In August 2018, the Company acquired the fee interest in three additional land parcels at the Upper East Side Residential Assemblage.
(2)
(3)
(4)
2017 Acquisitions
During the year ended December 31, 2017, we did not acquire any properties from a third party.
2016 Acquisitions
During the year ended December 31, 2016, the property listed below was acquired from a third party. The following
summarizes our final allocation of the purchase price of the assets acquired and liabilities assumed upon the closing of this
acquisition (in thousands):
Acquisition Date
Ownership Type
Property Type
Purchase Price Allocation:
Land
Building and building leasehold
Above-market lease value
Acquired in-place leases
Other assets, net of other liabilities
Assets acquired
Mark-to-market assumed debt
Below-market lease value
Derivatives
Liabilities assumed
Purchase price
Net consideration funded by us at closing, excluding consideration financed by debt
Equity and/or debt investment held
Debt assumed
183 Broadway
March 2016
Fee Interest
Retail/Residential
$
$
$
$
$
5,799
23,431
—
773
20
30,023
—
(1,523)
—
(1,523)
28,500
28,500
—
—
4. Properties Held for Sale and Property Dispositions
Properties Held for Sale
As of December 31, 2018, no properties were classified as held for sale.
Property Dispositions
The following table summarizes the properties sold during the years ended December 31, 2018, 2017, and 2016:
Disposition
Date
Property Type
Unaudited
Approximate
Usable Square
Feet
Sales Price(1)
(in millions)
Gain (Loss) on
Sale(2)
(in millions)
November 2018
Office/Retail
369,000
$
265.0
$
November 2018
Land
39.5 acres
October 2018
Development
Property
2 Herald Square(3)
400 Summit Lake Drive
Upper East Side Assemblage(4)(5)
1-6 International Drive
635 Madison Avenue
115-117 Stevens Avenue
600 Lexington Avenue
1515 Broadway (6)
125 Chubb Way
16 Court Street
680-750 Washington Boulevard
520 White Plains Road
102 Greene Street (7)
400 East 57th Street
11 Madison Avenue (8)
500 West Putnam
388 Greenwich
7 International Drive
July 2018
June 2018
May 2018
January 2018
December 2017
October 2017
October 2017
July 2017
April 2017
April 2017
October 2016
August 2016
July 2016
June 2016
May 2016
Office
Retail
Office
Office
Office
Office
Office
Office
Office
Retail
Residential
Office
Office
Office
Land
Residential
Leased Fee
Interest
70,142
540,000
176,530
178,000
303,515
1,750,000
278,000
317,600
325,000
180,000
9,200
290,482
2,314,000
121,500
2,635,000
31 Acres
66,611
607,000
3.0
143.8
55.0
153.0
12.0
305.0
1,950.0
29.5
171.0
97.0
21.0
43.5
83.3
2,605.0
41.0
2,002.3
20.0
55.0
453.0
—
(36.2)
(6.3)
(2.6)
(14.1)
(0.7)
23.8
—
(26.1)
64.9
(44.2)
(14.6)
4.9
23.9
3.6
(10.4)
206.5
(6.9)
15.3
(8.8)
248-252 Bedford Avenue
February 2016
885 Third Avenue (9)
February 2016
(1)
(2)
(3)
Sales price represents the actual sales price for an entire property or the gross asset valuation for interests in a property.
The gain on sale for 600 Lexington, 16 Court Street, 102 Greene Street, 400 East 57th Street, 11 Madison Avenue, 388 Greenwich, and 248-252 Bedford
Avenue are net of $1.3 million, $2.5 million, $0.9 million, $1.0 million, $0.6 million, $1.6 million, and $1.3 million in employee compensation accrued in
connection with the realization of these investment gains. Additionally, amounts do not include adjustments for expenses recorded in subsequent periods.
In November 2018, the company sold a 49% interest in 2 Herald Square to an Israeli institutional investor. See Note 6, "Investments in Unconsolidated
Joint Ventures."
(4) Upper East Side Assemblage consists of 260 East 72nd Street, 31,076 square feet of development rights, 252-254 East 72nd Street, 257 East 71st Street,
(5)
(6)
(7)
(8)
(9)
259 East 71st Street, and 1231 Third Avenue.
The Company recorded a $5.8 million charge in 2018 that is included in depreciable real estate reserves and impairment in the consolidated statement of
operations.
In November 2017, the Company sold a 30.13% interest in 1515 Broadway to affiliates of Allianz Real Estate. At that time, the sale did not meet the criteria
for sale accounting and as a result the property was accounted for under the profit sharing method. The Company achieved sale accounting upon adoption
of ASC 610-20 in January 2018 and closed on the sale of an additional 12.87% interest in the property to Allianz in February 2018. See Note 6, "Investments
in Unconsolidated Joint Ventures."
In April 2017, we closed on the sale of a 90% interest 102 Greene Street and had subsequently accounted for our interest in the property as an investment
in unconsolidated joint ventures. We sold the remaining 10% interest in September 2017. See Note 6, "Investments in Unconsolidated Joint Ventures."
In August 2016, we sold a 40% interest in 11 Madison Avenue. At that time, the sale did not meet the criteria for sale accounting and, as a result, the property
was accounted for under the profit sharing method. In November 2016, the Company obtained consent to the modifications to the mortgage on the property,
which resulted in the Company achieving sale accounting on the transaction. See Note 6, "Investments in Unconsolidated Joint Ventures."
In February 2016, we closed on the sale of 885 Third Avenue. At that time, the sale did not meet the criteria for sale accounting and as a result the property
remained on our consolidated financial statements until the criteria was met in April 2017.
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
5. Debt and Preferred Equity Investments
Below is a summary of the activity relating to our debt and preferred equity investments as of December 31, 2018 and 2017
(in thousands):
Balance at beginning of period (1)
Debt investment originations/accretion (2)
Preferred equity investment originations/accretion (2)
Redemptions/sales/syndications/amortization (3)
Net change in loan loss reserves
Balance at end of period (1)
December 31, 2018
December 31, 2017
$
$
2,114,041
$
834,304
151,704
(994,906)
(5,750)
1,640,412
1,142,591
144,456
(813,418)
—
2,099,393
$
2,114,041
(1) Net of unamortized fees, discounts, and premiums.
(2) Accretion includes amortization of fees and discounts and paid-in-kind investment income.
(3)
Certain participations in debt investments that were sold or syndicated did not meet the conditions for sale accounting and are included in other assets and
other liabilities on the consolidated balance sheets.
The following table is a rollforward of our total loan loss reserves at December 31, 2018, 2017 and 2016 (in thousands):
Balance at beginning of year
Expensed
Recoveries
Charge-offs and reclassifications
Balance at end of period
2018
December 31,
2017
2016
— $
— $
6,839
—
(1,089)
—
—
—
5,750
$
— $
—
—
—
—
—
$
$
At December 31, 2018, all debt and preferred equity investments were performing in accordance with the terms of the relevant
investments. At December 31, 2018 the Company's loan loss reserves of $5.8 million were attributable to two investments with
an unpaid principal balance of $159.9 million that are being marketed for sale, are performing in accordance with their respective
terms, and were not put on nonaccrual.
At December 31, 2017, all debt and preferred equity investments were performing in accordance with the terms of the relevant
investments, with the exception of our investment in 2 Herald Square which was purchased in maturity default in May 2017 and
April 2017, respectively, for which we subsequently were the successful bidder for the leasehold interest at the foreclosure of the
asset as discussed in Note 3, "Property Acquisitions," and a junior mortgage participation acquired in September 2014, which was
acquired for zero, had a carrying value of zero and was canceled in 2018.
We have determined that we have one portfolio segment of financing receivables at December 31, 2018 and 2017 comprising
commercial real estate which is primarily recorded in debt and preferred equity investments. Included in other assets is an additional
amount of financing receivables totaling $88.8 million and $65.5 million at December 31, 2018 and 2017, respectively. No financing
receivables were 90 days past due at December 31, 2018 with the exception of a $28.4 million financing receivable which was
put on nonaccrual in August as a result of interest default. The loan was evaluated in accordance with our loan review procedures
and the Company concluded that the fair value of the collateral exceeded the carrying amount of the loan.
As of December 31, 2018, Management estimated the weighted average risk rating for our debt and preferred equity
investments to be 1.2.
Debt Investments
As of December 31, 2018 and 2017, we held the following debt investments with an aggregate weighted average current
yield of 8.99%, at December 31, 2018 (in thousands):
66
Loan Type
Fixed Rate Investments:
Mezzanine Loan(3a)
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan(3b)
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mortgage/Jr. Mortgage Loan(4)
Mortgage Loan(5)
Mortgage Loan(5)
Total fixed rate
Floating Rate Investments:
Mezzanine Loan(6)
Mezzanine Loan(3c)(7)
Mezzanine Loan(3d)(7)
Mezzanine Loan(8)
Mezzanine Loan(7)
Mezzanine Loan
Mortgage/Jr. Mortgage
Participation Loan
Mezzanine Loan(7)(8)
Mortgage/Mezzanine Loan(7)
Mortgage/Mezzanine Loan
Mezzanine Loan
Mortgage/Mezzanine Loan(9)
Mezzanine Loan(9)
Mortgage Loan
Mezzanine Loan
Mortgage/Mezzanine Loan
Mortgage/Mezzanine Loan(7)
Mezzanine Loan
Mortgage/Mezzanine Loan
Mezzanine Loan
Mortgage/Mezzanine Loan
Mortgage/Mezzanine Loan
Jr. Mortgage Participation/
Mezzanine Loan
Mezzanine Loan(8)
Mortgage/Mezzanine Loan (5)
Mortgage/Mezzanine Loan (5)
Mortgage/Mezzanine Loan (10)
December 31,
2018
Future Funding
Obligations
December 31,
2018
Senior
Financing
December 31,
2018
Carrying Value (1)
December 31,
2017
Carrying Value (1)
Maturity
Date (2)
$
— $
1,160,000
$
213,185
$
204,005
March 2020
$
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
15,000
147,000
280,000
85,097
180,000
115,000
95,000
340,000
1,712,750
—
—
—
— $
4,129,847
— $
—
—
—
—
—
40,530
—
—
1,027
—
7,243
559
11,204
1,277
14,860
—
7,887
—
38,575
33,131
—
—
—
—
—
—
45,025
85,000
65,000
38,000
40,000
265,000
233,086
65,000
—
—
350,000
—
575,955
—
322,300
—
—
38,167
—
362,908
—
—
60,000
38,596
—
—
—
67
$
$
3,500
24,932
36,585
12,706
30,000
12,941
30,000
11,000
55,250
—
—
—
430,099
37,499
15,333
14,822
21,990
19,986
24,961
84,012
14,998
19,999
154,070
34,886
62,493
79,164
88,501
53,402
277,694
37,094
12,627
83,449
88,817
98,804
35,266
15,665
7,305
—
—
—
3,500
September 2021
24,913
34,600
April 2022
August 2022
12,699 November 2023
— December 2023
12,932
30,000
June 2024
January 2025
15,000 November 2026
55,250
250,464
26,366
239
669,968
34,879
15,381
14,869
21,939
19,982
24,830
71,832
14,955
19,940
June 2027
January 2019
March 2019
March 2019
March 2019
April 2019
April 2019
August 2019
August 2019
August 2019
143,919
September 2019
34,737
43,845
75,834
October 2019
January 2020
January 2020
— February 2020
—
—
—
11,259
March 2020
April 2020
June 2020
July 2020
—
October 2020
75,428 November 2020
88,989 December 2020
35,152 December 2020
15,635
July 2021
34,947 December 2021
162,553
74,755
23,609
Table of Contents
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
December 31,
2018
Future Funding
Obligations
December 31,
2018
Senior
Financing
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
December 31,
2018
Carrying Value (1)
—
December 31,
2017
Carrying Value (1)
16,969
Maturity
Date (2)
—
—
—
—
—
—
—
—
—
59,723
37,851
14,855
12,174
10,934
37,250
15,148
8,550
26,927
$
$
156,293
156,293
$
$
2,584,037
6,713,884
$
$
1,382,837
1,812,936
$
$
1,299,650
1,969,618
Loan Type
Mortgage/Mezzanine Loan(5)
Mezzanine Loan(5)
Mezzanine Loan(5)
Mezzanine Loan(5)
Mezzanine Loan(11)
Mezzanine Loan(11)
Mezzanine Loan(5)
Mezzanine Loan(5)
Mezzanine Loan(5)
Mezzanine Loan(11)
Total floating rate
Total
(1)
(2)
(3)
(4)
Carrying value is net of discounts, premiums, original issue discounts and deferred origination fees.
Represents contractual maturity, excluding any unexercised extension options.
Carrying value is net of the following amounts that were sold or syndicated, which are included in other assets and other liabilities on the consolidated
balance sheets as a result of the transfers not meeting the conditions for sale accounting: (a) $1.3 million, (b) $12.0 million, (c) $14.6 million, and (d) $14.1
million.
These loans were purchased at par in April and May 2017 and were in maturity default at the time of acquisition. At the time the loans were purchased, the
Company expected to collect all contractually required payments, including interest. In August 2017, the Company determined that it was probable that
the loans would not be repaid in full and therefore, the loans were put on non-accrual status. No impairment was recorded as the Company believed that
the fair value of the property exceeded the carrying amount of the loans. In May 2018, the Company was the successful bidder at the foreclosure of the
asset, at which time the loans were credited to our equity investment in the property.
This loan was repaid in 2018.
(5)
(6) As of January 2019, this loan is in maturity default. No impairment was recorded as the Company believes that the fair value of the property exceeded the
carrying amount of the loans.
This loan was extended in 2018.
This loan was repaid in 2019.
This loan was modified in 2019.
(7)
(8)
(9)
(10) This loan was sold in 2018.
(11)
In 2018, the Company accepted an assignment of the equity interests in the property in lieu of repayment of the loan, and recorded the assets received and
liabilities assumed at fair value.
Preferred Equity Investments
As of December 31, 2018 and 2017, we held the following preferred equity investments with an aggregate weighted average
current yield of 9.12% at December 31, 2018 (in thousands):
Type
Preferred Equity(3)
Preferred Equity
December 31,
2018
Future Funding
Obligations
December 31,
2018
Senior
Financing
$
$
— $
—
272,000
1,768,000
— $
2,040,000
$
December 31, 2018
Carrying Value (1)
143,183
$
December 31, 2017
Carrying Value (1)
144,423
$
143,274
286,457
$
—
144,423
Mandatory
Redemption (2)
April 2021
June 2022
(1)
(2)
(3)
Carrying value is net of deferred origination fees.
Represents contractual maturity, excluding any unexercised extension options.
In February 2016, we closed on the sale of 885 Third Avenue and retained a preferred equity position in the property. The sale did not meet the criteria for
sale accounting under the full accrual method in ASC 360-20, Property, Plant and Equipment - Real Estate Sales. As a result the property remained on our
consolidated balance sheet until the criteria was met in April 2017 at which time the property was deconsolidated and the preferred equity investment was
recognized.
6. Investments in Unconsolidated Joint Ventures
We have investments in several real estate joint ventures with various partners. As of December 31, 2018, the book value
of these investments was $3.0 billion, net of investments with negative book values totaling $85.8 million for which we have an
implicit commitment to fund future capital needs.
As of December 31, 2018 and December 31, 2017, 800 Third Avenue, 21 East 66th Street, 605 West 42nd Street, 333 East
22nd Street, One Vanderbilt and certain properties within the Stonehenge Portfolio are VIEs in which we are not the primary
beneficiary. Our net equity investment in these VIEs was $808.3 million as of December 31, 2018 and $606.2 million as of
December 31, 2017. Our maximum loss is limited to the amount of our equity investment in these VIEs. See the "Principles of
Consolidation" section of Note 2, "Significant Accounting Policies". All other investments below are voting interest entities. As
we do not control the joint ventures listed below, we account for them under the equity method of accounting.
The table below provides general information on each of our joint ventures as of December 31, 2018:
Property
Partner
Ownership
Interest (1)
Economic
Interest (1)
Unaudited
Approximate
Square Feet
Acquisition Date (2)
Acquisition
Price(2)
(in thousands)
100 Park Avenue
717 Fifth Avenue
800 Third Avenue
919 Third Avenue(3)
11 West 34th Street
280 Park Avenue
1552-1560 Broadway(4)
10 East 53rd Street
521 Fifth Avenue
21 East 66th Street(5)
650 Fifth Avenue(6)
121 Greene Street
Prudential Real Estate
Investors
Jeff Sutton/Private
Investor
Private Investors
New York State Teacher's
Retirement System
Private Investor/
Jeff Sutton
Vornado Realty Trust
Jeff Sutton
Canadian Pension Plan
Investment Board
Plaza Global
Real Estate Partners LP
Private Investors
Jeff Sutton
Jeff Sutton
Prudential Real Estate
55 West 46th Street
Investors
Stonehenge Portfolio(7) Various
131-137 Spring Street(8)
605 West 42nd Street
The Moinian Group
Invesco Real Estate
11 Madison Avenue
PGIM Real Estate
333 East 22nd Street
400 East 57th Street(9)
Private Investors
BlackRock, Inc and
Stonehenge Partners
One Vanderbilt(10)
Worldwide Plaza
1515 Broadway(11)
2 Herald Square
National Pension Service
of Korea/Hines Interest LP
RXR Realty / New York
REIT / Private Investor
Allianz Real Estate of
America
Israeli Institutional
Investor
49.90%
49.90%
834,000
February 2000
$
95,800
10.92%
60.52%
10.92%
60.52%
119,500
526,000
September 2006
December 2006
251,900
285,000
51.00%
51.00%
1,454,000
January 2007
1,256,727
30.00%
50.00%
50.00%
30.00%
50.00%
50.00%
17,150
December 2010
1,219,158
March 2011
57,718
August 2011
55.00%
55.00%
354,300
February 2012
50.50%
32.28%
50.00%
50.00%
25.00%
Various
20.00%
20.00%
60.00%
33.33%
50.50%
32.28%
50.00%
50.00%
25.00%
Various
20.00%
20.00%
60.00%
33.33%
460,000
November 2012
13,069
69,214
December 2012
November 2013
7,131
September 2014
347,000
November 2014
1,439,016
February 2015
68,342
927,358
August 2015
April 2016
2,314,000
August 2016
26,926
August 2016
10,800
400,000
136,550
252,500
315,000
75,000
—
27,400
295,000
36,668
277,750
759,000
2,605,000
—
51.00%
41.00%
290,482
October 2016
170,000
71.01%
71.01%
—
January 2017
24.35%
24.35%
2,048,725
October 2017
56.87%
56.87%
1,750,000
November 2017
51.00%
51.00%
369,000
November 2018
3,310,000
1,725,000
1,950,000
266,000
(1) Ownership interest and economic interest represent the Company's interests in the joint venture as of December 31, 2018. Changes in ownership or economic
interests within the current year are disclosed in the notes below.
(2) Acquisition date and price represent the date on which the Company initially acquired an interest in the joint venture and the actual or implied gross purchase
(3)
price for the joint venture on that date. Acquisition date and price are not adjusted for subsequent acquisitions or dispositions of interest.
In January 2018, the partnership agreement for our investment was modified resulting in the Company no longer having a controlling interest in this
investment. As a result the investment was deconsolidated as of January 1, 2018. The Company recorded its non-controlling interest at fair value resulting
68
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
(4)
in a $49.3 million fair value adjustment in the consolidated statement of operations. This fair value was allocated to the assets and liabilities, including
identified intangibles of the property.
The purchase price represents only the purchase of the 1552 Broadway interest which comprised approximately 13,045 square feet. The joint venture also
owns a long-term leasehold interest in the retail space and certain other spaces at 1560 Broadway, which is adjacent to 1552 Broadway.
(5) We hold a 32.28% interest in three retail and two residential units at the property and a 16.14% interest in three residential units at the property.
(6)
The joint venture owns a long-term leasehold interest in the retail space at 650 Fifth Avenue. In connection with the ground lease obligation, SLG provided
a performance guaranty and our joint venture partner executed a contribution agreement to reflect its pro rata obligation. In the event the property is converted
into a condominium unit and the landlord elects the purchase option, the joint venture shall be obligated to acquire the unit at the then fair value.
In February and March 2018, the Company, together with its joint venture partner, closed on the sale of two properties from the Stonehenge Portfolio. These
sales are further described under Sale of Joint Venture Interest of Properties below.
In January 2019, we closed on the sale of our interest in this property to our joint venture partner. The transaction generated net cash proceeds to the Company
of $15.2 million.
In October 2016, the Company sold a 49% interest in this property to an investment account managed by BlackRock, Inc. The Company's interest in the
property was sold within a consolidated joint venture owned 90% by the Company and 10% by Stonehenge. The transaction resulted in the deconsolidation
of the venture's remaining 51% interest in the property. The Company's joint venture with Stonehenge remains consolidated resulting in the combined 51%
interest being shown within investments in unconsolidated joint ventures on the Company's balance sheet.
(7)
(8)
(9)
(11)
(10) The partners have committed aggregate equity to the project totaling no less than $525 million and their ownership interest in the joint venture is based on
their capital contributions, up to an aggregate maximum of 29.0%. At December 31, 2018 the total of the two partners' ownership interests based on equity
contributed was 23.4%.
In November 2017, the Company sold a 30% interest in 1515 Broadway to affiliates of Allianz Real Estate. The sale did not meet the criteria for sale
accounting and as a result the property was accounted for under the profit sharing method at December 31, 2017. The Company achieved sale accounting
upon adoption of ASC 610-20 in January 2018 and recorded a $0.6 billion gain from the sale of the partial interest and related step-up in basis to fair value
of the retained non-controlling interest as an adjustment to beginning retained earnings based on the application of the modified retrospective adoption
approach. The Company closed on the sale of an additional 13% interest in the property to Allianz in February 2018.
Acquisition, Development and Construction Arrangements
Based on the characteristics of the following arrangements, which are similar to those of an investment, combined with the
expected residual profit of not greater than 50%, we have accounted for these debt and preferred equity investments under the
equity method. As of December 31, 2018 and 2017, the carrying value for acquisition, development and construction arrangements
were as follows (in thousands):
Loan Type
Mezzanine Loan(1)
Mezzanine Loan and Preferred Equity (2)
Mezzanine Loan(3)
December 31, 2018
December 31, 2017
Maturity Date
$
$
44,357
—
—
44,357
$
44,823
100,000
26,716
171,539
February 2022
(1) We have an option to convert our loan to an equity interest subject to certain conditions. We have determined that our option to convert the loan to equity
is not a derivative financial instrument pursuant to GAAP.
The mezzanine loan was repaid and the preferred equity interest was redeemed in March 2018.
The Company was redeemed on this investment in July 2018.
(2)
(3)
Disposition of Joint Venture Interests or Properties
The following table summarizes the investments in unconsolidated joint ventures sold during the years ended December 31,
2018, 2017, and 2016:
Property
3 Columbus Circle
Mezzanine Loan(3)
724 Fifth Avenue
Jericho Plaza(4)
1745 Broadway
175-225 Third Street Brooklyn,
New York
Stonehenge Village(5)
1515 Broadway(6)
1274 Fifth Avenue(5)
102 Greene Street
76 11th Avenue(7)
Stonehenge Portfolio (partial)(6)
EOP Denver
33 Beekman (8)
EOP Denver
7 Renaissance Square
Jericho Plaza (4)
Ownership
Interest Sold
48.90%
33.33%
49.90%
11.67%
56.87%
95.00%
0.50%
13.00%
9.83%
10.00%
33.33%
Various
0.48%
45.90%
4.79%
50.00%
66.11%
Disposition Date
Type of Sale
November 2018
Ownership Interest
August 2018
Repayment
July 2018
June 2018
May 2018
April 2018
March 2018
Ownership Interest
Ownership Interest
Property
Property
Property
February 2018
Ownership Interest
February 2018
Property
September 2017
Ownership Interest
May 2017
Repayment
March 2017
Ownership Interest
September 2016
Ownership Interest
May 2016
Property
March 2016
Ownership Interest
March 2016
Property
February 2016
Ownership Interest
Gross Asset
Valuation
(in thousands)(1)
851,000
$
Gain (Loss)
on Sale
(in thousands)(2)
160,368
$
15,000
365,000
117,400
633,000
115,000
287,000
1,950,000
44,100
43,500
138,240
300,000
180,700
196,000
180,700
20,700
95,200
N/A
64,587
147
52,038
19,483
(5,701)
—
(362)
283
N/A
871
300
33,000
2,800
4,200
3,300
(1)
(2)
Represents implied gross valuation for the joint venture or sales price of the property.
Represents the Company's share of the gain or loss. The gain on sale is net of $11.7 million, $0, and $1.1 million of employee compensation accrued in
connection with the realization of these investment gains in the years ended December 31, 2018, 2017, and 2016, respectively. Additionally, gain (loss)
amounts do not include adjustments for expenses recorded in subsequent periods.
(3) Our investment in a joint venture that owned a mezzanine loan secured by a commercial property in midtown Manhattan was repaid after the joint venture
received repayment of the underlying loan.
(4) We sold our 11.67% interest in June 2018. In the first quarter of 2016, our ownership percentage was reduced from 77.78% to 11.67%, upon completion
of a restructuring of the joint venture.
Properties were part of the Stonehenge Portfolio.
(5)
(6) Our investment in 1515 Broadway was marked to fair value on January 1, 2018 upon adoption of ASC 610-20.
(7) Our investment in a joint venture that owned two mezzanine notes secured by interests in the entity that owns 76 11th Avenue was repaid after the joint
venture received repayment of the underlying loans.
In connection with the sale of the property, we also recognized a promote of $10.8 million.
(8)
In May 2017, we recognized a gain of $13.0 million related to the sale in May 2014 of our ownership interest in 747 Madison
Avenue. The sale did not meet the criteria for sale accounting at that time and, therefore, remained on our consolidated financial
statements. The sale criteria was met in May of 2017 resulting in recognition of the deferred gain on the sale.
Joint Venture Mortgages and Other Loans Payable
We generally finance our joint ventures with non-recourse debt. In certain cases we may provide guarantees or master leases
for tenant space, which terminate upon the satisfaction of specified circumstances or repayment of the underlying loans. The first
mortgage notes and other loans payable collateralized by the respective joint venture properties and assignment of leases at
December 31, 2018 and 2017, respectively, are as follows (amounts in thousands):
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
Property
Fixed Rate Debt:
521 Fifth Avenue
717 Fifth Avenue (3)
717 Fifth Avenue (3)
650 Fifth Avenue (4)
650 Fifth Avenue (4)
21 East 66th Street
919 Third Avenue
1515 Broadway
11 Madison Avenue
800 Third Avenue
400 East 57th Street
Worldwide Plaza
Stonehenge Portfolio (5)
3 Columbus Circle (6)
Total fixed rate debt
Floating Rate Debt:
280 Park Avenue
121 Greene Street
10 East 53rd Street
131-137 Spring Street (7)
1552 Broadway
55 West 46th Street (8)
11 West 34th Street
103 East 86th Street (9)
100 Park Avenue
One Vanderbilt (10)
2 Herald Square (11)
605 West 42nd Street
21 East 66th Street
175-225 Third Street Brooklyn, New York (12)
1745 Broadway (12)
Jericho Plaza (13)
724 Fifth Avenue (14)
Total floating rate debt
Economic
Interest (1) Maturity Date
Interest
Rate (2)
December 31,
2018
December 31,
2017
50.50% November 2019
3.73% $
170,000
$
10.92%
10.92%
50.00%
50.00%
32.28%
51.00%
56.87%
July 2022
July 2022
October 2022
October 2022
April 2023
June 2023
March 2025
60.00% September 2025
60.52%
February 2026
41.00% November 2026
24.35% November 2027
Various
Various
4.45%
5.50%
4.46%
5.45%
3.60%
5.12%
3.93%
3.84%
3.37%
3.00%
3.98%
4.20%
300,000
355,328
210,000
65,000
12,000
500,000
855,876
1,400,000
177,000
99,828
1,200,000
321,076
—
$
5,666,108
50.00% September 2019
L+ 1.73% $
1,200,000
50.00% November 2019
55.00%
20.00%
50.00%
February 2020
August 2020
October 2020
25.00% November 2020
30.00%
1.00%
January 2021
January 2021
49.90%
February 2021
71.01% September 2021
51.00% November 2021
20.00%
August 2027
L+ 1.50%
L+ 2.25%
L+ 1.55%
L+ 2.65%
L+ 2.13%
L+ 1.45%
L+ 1.40%
L+ 1.75%
L+ 2.75%
L+ 1.55%
L+ 1.44%
15,000
170,000
141,000
195,000
185,569
23,000
38,000
360,000
375,000
133,565
550,000
32.28%
June 2033
Treasury+ 2.75%
1,571
1 Year
$
$
—
—
—
—
170,000
300,000
355,328
210,000
65,000
12,000
—
872,528
1,400,000
177,000
100,000
1,200,000
357,282
350,000
5,569,138
1,200,000
15,000
170,000
141,000
195,000
171,444
23,000
55,340
360,000
355,535
—
550,000
1,648
40,000
345,000
81,099
275,000
In January 2019, we closed on the sale of our interest in this property to our joint venture partner.
This loan has a committed amount of $195.0 million, of which $9.4 million was unfunded as of December 31, 2018.
In February 2019, along with our joint venture partner, we closed on the sale of the property.
(7)
(8)
(9)
(10) This loan is a $1.75 billion construction facility, with reductions in interest cost based on meeting certain conditions, and has an initial five-year term with
two one-year extension options. Advances under the loan are subject to incurred costs, funded equity, loan to value thresholds, and entering into construction
contracts.
(11) This loan has a committed amount of $150.0 million.
(12)
(13)
(14)
In 2018, along with our joint venture partner, we closed on the sale of the property.
In 2018, we closed on the sale of our interest in the property.
In 2018, we closed on the sale of substantially all of our interest in the property to our joint venture partner.
We act as the operating partner and day-to-day manager for all our joint ventures, except for Worldwide Plaza, 800 Third
Avenue, 280 Park Avenue, 21 East 66th Street, 605 West 42nd Street, 400 East 57th Street, and the Stonehenge Portfolio. We are
entitled to receive fees for providing management, leasing, construction supervision and asset management services to certain of
our joint ventures. We earned $14.2 million, $22.6 million and $4.0 million from these services, net of our ownership share of the
joint ventures, for the years ended December 31, 2018, 2017, and 2016, respectively. In addition, we have the ability to earn
incentive fees based on the ultimate financial performance of certain of the joint venture properties.
The combined balance sheets for the unconsolidated joint ventures, at December 31, 2018 and 2017, are as follows (in
thousands):
Assets (1)
Commercial real estate property, net
Cash and restricted cash
Tenant and other receivables, related party receivables, and deferred rents receivable, net
of allowance
Debt and preferred equity investments, net
Other assets
Total assets
Liabilities and equity (1)
Mortgages and other loans payable, net
Deferred revenue/gain
Other liabilities
Equity
Total liabilities and equity
Company's investments in unconsolidated joint ventures
December 31, 2018
December 31, 2017
$
$
$
$
$
14,347,673
$
381,301
273,141
44,357
2,187,166
17,233,638
8,950,622
1,660,838
946,313
5,675,865
17,233,638
3,019,020
$
$
$
$
12,822,133
494,909
349,944
202,539
1,407,806
15,277,331
9,412,101
985,648
411,053
4,468,529
15,277,331
2,362,989
(1)
The combined assets, liabilities and equity for the unconsolidated joint ventures reflects the effect of step ups in basis on the retained non-controlling
interests in deconsolidated investments as a result of the adoption of ASC 610-20 in January 2018.
Total joint venture mortgages and other loans payable
Deferred financing costs, net
Total joint venture mortgages and other loans payable, net
$
$
$
3,387,705
9,053,813
(103,191)
8,950,622
$
$
$
3,979,066
9,548,204
(136,103)
9,412,101
(1)
(2)
(3)
Economic interest represents the Company's interests in the joint venture as of December 31, 2018. Changes in ownership or economic interests, if any,
within the current year are disclosed in the notes to the investment in unconsolidated joint ventures table above.
Interest rate as of December 31, 2018, taking into account interest rate hedges in effect during the period. Floating rate debt is presented with the stated
interest rate spread over 30-day LIBOR, unless otherwise specified.
These loans are comprised of a $300.0 million fixed rate mortgage loan and $355.3 million mezzanine loan. The mezzanine loan is subject to accretion
based on the difference between contractual interest rate and contractual pay rate.
These loans are comprised of a $210.0 million fixed rate mortgage loan and $65.0 million fixed rate mezzanine loan.
(4)
(5) Amount is comprised of $134.3 million, $54.1 million, and $132.6 million in fixed-rated mortgages that mature in August 2019, June 2024, and April 2028,
respectively.
In November 2018, we closed on the sale of our interest in the property to our joint venture partner.
(6)
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
The combined statements of operations for the unconsolidated joint ventures, from acquisition date through the years ended
8. Mortgages and Other Loans Payable
December 31, 2018, 2017, and 2016 are as follows (in thousands):
Total revenues
Operating expenses
Real estate taxes
Ground rent
Interest expense, net of interest income
Amortization of deferred financing costs
Transaction related costs
Depreciation and amortization
Total expenses
Loss on early extinguishment of debt
Net (loss) income before gain on sale (1)
Company's equity in net income from unconsolidated joint ventures (1)
Year Ended December 31,
2018
2017
2016
$
1,244,804
$
904,230
$
219,440
226,961
18,697
363,055
21,634
—
421,458
$
$
$
1,271,245
$
—
(26,441) $
7,311
$
157,610
142,774
16,794
250,063
23,026
146
279,419
869,832
(7,899)
26,499
21,892
$
$
$
712,689
126,913
111,673
14,924
197,741
24,829
5,566
199,011
680,657
(1,606)
30,426
11,874
(1)
The combined statements of operations and the Company's equity in net income for the unconsolidated joint ventures reflects the effect of step ups in basis
on the retained non-controlling interests in deconsolidated investments as a result of the adoption of ASC 610-20 in January 2018.
7. Deferred Costs
Deferred costs at December 31, 2018 and 2017 consisted of the following (in thousands):
Deferred leasing costs
Less: accumulated amortization
Deferred costs, net
December 31,
2018
2017
$
$
453,833
(244,723)
209,110
$
$
443,341
(217,140)
226,201
The first mortgages and other loans payable collateralized by the respective properties and assignment of leases or debt
investments at December 31, 2018 and 2017, respectively, were as follows (amounts in thousands):
Property
Fixed Rate Debt:
762 Madison Avenue
100 Church Street
420 Lexington Avenue
400 East 58th Street (2)
Landmark Square
485 Lexington Avenue
1080 Amsterdam (3)
315 West 33rd Street
919 Third Avenue (4)
Unsecured Loan (5)
Series J Preferred Units (6)
One Madison Avenue (7)
Total fixed rate debt
Floating Rate Debt:
FHLB Facility
2017 Master Repurchase Agreement
FHLB Facility
133 Greene Street
185 Broadway (8)
712 Madison
115 Spring Street
719 Seventh Avenue
220 East 42nd Street (9)
Total floating rate debt
Total fixed rate and floating rate debt
Mortgages reclassed to liabilities related to assets held for
sale
Total mortgages and other loans payable
Deferred financing costs, net of amortization
Total mortgages and other loans payable, net
Maturity
Date
Interest
Rate (1)
December 31, 2018 December 31, 2017
February 2022
July 2022
October 2024
November 2026
January 2027
February 2027
February 2027
February 2027
5.00%
4.68%
3.99%
3.00%
4.90%
4.25%
3.58%
4.17%
771
213,208
300,000
39,931
100,000
450,000
35,807
250,000
—
—
—
—
$
1,389,717
May 2019
L+ 0.27% $
June 2019
L+ 2.34%
December 2019
L+ 0.18%
August 2020
L+ 2.00%
November 2021
L+ 2.85%
December 2021
L+ 2.50%
September 2023
L+ 3.40%
September 2023
L+ 1.20%
$
$
$
$
13,000
300,000
14,500
15,523
111,869
28,000
65,550
50,000
—
598,442
1,988,159
—
1,988,159
(26,919)
1,961,240
$
$
$
$
$
$
771
217,273
300,000
40,000
100,000
450,000
36,363
250,000
500,000
16,000
4,000
486,153
2,400,560
—
90,809
—
—
58,000
—
—
41,622
275,000
465,431
2,865,991
—
2,865,991
(28,709)
2,837,282
(1)
(2)
(3)
Interest rate as of December 31, 2018, taking into account interest rate hedges in effect during the period. Floating rate debt is presented with the stated
interest rate spread over 30-day LIBOR, unless otherwise specified.
The loan carries a fixed interest rate of 300 basis points for the first five years and is prepayable without penalty at the end of year five.
The loan is comprised of a $35.5 million mortgage loan and $0.9 million subordinate loan with a fixed interest rate of 350 basis points and 700 basis points,
respectively, for the first five years and is prepayable without penalty at the end of year five.
(4) Our investment in the property was deconsolidated as of January 1, 2018. See Note 6, "Investments in Unconsolidated Joint Ventures".
(5)
(6)
(7)
(8)
In May 2018, the loan was repaid in connection with the sale of the property.
In June 2018, the Series J Preferred Units were redeemed in connection with the sale of the property.
In 2018, the Company recognized a $14.9 million loss on extinguishment of debt related to the early repayment of this loan.
This loan is a $225.0 million construction facility, with reductions in interest cost based on meeting certain conditions, and has an initial three-year term
with two one-year extension options. Advances under the loan are subject to incurred costs and funded equity requirements.
In 2018, the mortgage was repaid.
(9)
74
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
At December 31, 2018 and 2017, the gross book value of the properties and debt and preferred equity investments
collateralizing the mortgages and other loans payable, not including assets held for sale, was approximately $3.9 billion and $4.8
billion, respectively.
Federal Home Loan Bank of New York Facility
The Company’s wholly-owned subsidiary, Ticonderoga Insurance Company, or Ticonderoga, a Vermont licensed captive
insurance company, is a member of the Federal Home Loan Bank of New York, or FHLBNY. As a member, Ticonderoga may
borrow funds from the FHLBNY in the form of secured advances. As of December 31, 2018, we had $13.0 million and $14.5
million in outstanding secured advances with a borrowing rate of 30-day LIBOR over 27 basis points and 30-day LIBOR over 18
basis points, respectively.
Master Repurchase Agreements
The Company has entered into two Master Repurchase Agreements, or MRAs, known as the 2016 MRA and 2017 MRA,
which provide us with the ability to sell certain debt investments with a simultaneous agreement to repurchase the same at a certain
date or on demand. We seek to mitigate risks associated with our repurchase agreement by managing the credit quality of our
assets, early repayments, interest rate volatility, liquidity, and market value. The margin call provisions under our repurchase
facilities permit valuation adjustments based on capital markets activity, and are not limited to collateral-specific credit marks. To
monitor credit risk associated with our debt investments, our asset management team regularly reviews our investment portfolio
and is in contact with our borrowers in order to monitor the collateral and enforce our rights as necessary. The risk associated with
potential margin calls is further mitigated by our ability to recollateralize the facility with additional assets from our portfolio of
debt investments, our ability to satisfy margin calls with cash or cash equivalents and our access to additional liquidity through
the 2017 credit facility, as defined below.
In June 2017, we entered into the 2017 MRA, with a maximum facility capacity of $300.0 million. In April 2018, we increased
the maximum facility capacity to $400.0 million. The facility bears interest on a floating rate basis at a spread to 30-day LIBOR
based on the pledged collateral and advance rate and has an initial one year term, with two one year extension options. In June
2018, we exercised a one year extension option. At December 31, 2018, the facility had a carrying value of $299.6 million, net of
deferred financing costs.
In July 2016, we entered into a restated 2016 MRA, with a maximum facility capacity of $300.0 million. In June 2018, we
terminated the restated 2016 MRA. The facility bore interest ranging from 225 and 400 basis points over 30-day LIBOR depending
on the pledged collateral and had an initial two-year term, with a one year extension option. Since December 6, 2015, we had been
required to pay monthly in arrears a 25 basis point fee on the excess of $150.0 million over the average daily balance during the
period when the average daily balance was less than $150.0 million.
9. Corporate Indebtedness
2017 Credit Facility
In November 2017, we entered into an amendment to the credit facility, referred to as the 2017 credit facility, that was
originally entered into by the Company in November 2012, or the 2012 credit facility. As of December 31, 2018, the 2017 credit
facility consisted of a $1.5 billion revolving credit facility, a $1.3 billion term loan (or "Term Loan A"), and a $200.0 million term
loan (or "Term Loan B") with maturity dates of March 31, 2022, March 31, 2023, and November 21, 2024, respectively. The
revolving credit facility has two six-month as-of-right extension options to March 31, 2023. We also have an option, subject to
customary conditions, to increase the capacity of the credit facility to $4.5 billion at any time prior to the maturity dates for the
revolving credit facility and term loans without the consent of existing lenders, by obtaining additional commitments from our
existing lenders and other financial institutions.
As of December 31, 2018, the 2017 credit facility bore interest at a spread over 30-day LIBOR ranging from (i) 82.5 basis
points to 155 basis points for loans under the revolving credit facility, (ii) 90 basis points to 175 basis points for loans under Term
Loan A, and (iii) 150 basis points to 245 basis points for loans under Term Loan B, in each case based on the credit rating assigned
to the senior unsecured long term indebtedness of the Company.
At December 31, 2018, the applicable spread was 100 basis points for the revolving credit facility, 110 basis points for Term
Loan A, and 165 basis points for Term Loan B. We are required to pay quarterly in arrears a 12.5 to 30 basis point facility fee on
the total commitments under the revolving credit facility based on the credit rating assigned to the senior unsecured long term
indebtedness of the Company. As of December 31, 2018, the facility fee was 20 basis points.
As of December 31, 2018, we had $11.8 million of outstanding letters of credit, $500.0 million drawn under the revolving
credit facility and $1.5 billion outstanding under the term loan facilities, with total undrawn capacity of $1.0 billion under the 2017
credit facility. At December 31, 2018 and December 31, 2017, the revolving credit facility had a carrying value of $492.2 million
and $30.3 million, respectively, net of deferred financing costs. At December 31, 2018 and December 31, 2017, the term loan
facilities had a carrying value of $1.5 billion and $1.5 billion, respectively, net of deferred financing costs.
The Company and the Operating Partnership are borrowers jointly and severally obligated under the 2017 credit facility.
The 2017 credit facility includes certain restrictions and covenants (see Restrictive Covenants below).
Senior Unsecured Notes
The following table sets forth our senior unsecured notes and other related disclosures as of December 31, 2018 and 2017,
respectively, by scheduled maturity date (amounts in thousands):
Issuance
March 16, 2010 (2)
August 7, 2018 (3) (4)
October 5, 2017 (3)
November 15, 2012 (5)
December 17, 2015 (2)
August 5, 2011 (2) (6)
Deferred financing costs, net
December
31,
2018
Unpaid
Principal
Balance
December
31,
2018
Accreted
Balance
December
31,
2017
Accreted
Balance
Interest
Rate (1)
Initial Term
(in Years) Maturity Date
$
250,000
$
250,000
$
250,000
7.75%
350,000
500,000
300,000
100,000
—
1,500,000
1,500,000
$
$
350,000
499,591
304,168
100,000
—
—
L+ 0.98%
499,489
305,163
100,000
249,953
3.25%
4.50%
4.27%
$
$
1,503,759
(8,545)
1,495,214
$
$
1,404,605
(8,666)
1,395,939
10
3
5
March 2020
August 2021
October 2022
10 December 2022
10 December 2025
(1)
(2)
(3)
(4)
(5)
(6)
Interest rate as of December 31, 2018, taking into account interest rate hedges in effect during the period. Floating rate notes are presented with the stated
spread over 3-month LIBOR, unless otherwise specified. Interest on the senior unsecured notes is payable semi-annually with principal and unpaid interest
due on the scheduled maturity dates.
Issued by the Company and the Operating Partnership as co-obligors.
Issued by the Operating Partnership with the Company as the guarantor.
Beginning on August 8, 2019 and at any time thereafter, the notes are subject to redemption at the Company's option, in whole but not in part, at a redemption
price equal to 100% of the principal amount of the notes, plus unpaid accrued interest thereon to the redemption date.
In October 2017, the Company and the Operating Partnership as co-obligors issued an additional $100.0 million of 4.50% senior unsecured notes due
December 2022. The notes were priced at 105.334%.
The balance was repaid in August 2018.
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
Restrictive Covenants
The terms of the 2017 credit facility and certain of our senior unsecured notes include certain restrictions and covenants
which may limit, among other things, our ability to pay dividends, make certain types of investments, incur additional indebtedness,
incur liens and enter into negative pledge agreements and dispose of assets, and which require compliance with financial ratios
relating to the maximum ratio of total indebtedness to total asset value, a minimum ratio of EBITDA to fixed charges, a maximum
ratio of secured indebtedness to total asset value and a maximum ratio of unsecured indebtedness to unencumbered asset value.
The dividend restriction referred to above provides that, we will not during any time when a default is continuing, make distributions
with respect to common stock or other equity interests, except to enable the Company to continue to qualify as a REIT for Federal
income tax purposes. As of December 31, 2018 and 2017, we were in compliance with all such covenants.
Junior Subordinated Deferrable Interest Debentures
In June 2005, the Company and the Operating Partnership issued $100.0 million in unsecured trust preferred securities
through a newly formed trust, SL Green Capital Trust I, or the Trust, which is a wholly-owned subsidiary of the Operating
Partnership. The securities mature in 2035 and bear interest at a floating rate of 125 basis points over the three-month LIBOR.
Interest payments may be deferred for a period of up to eight consecutive quarters if the Operating Partnership exercises its right
to defer such payments. The Trust preferred securities are redeemable at the option of the Operating Partnership, in whole or in
part, with no prepayment premium. We do not consolidate the Trust even though it is a variable interest entity as we are not the
primary beneficiary. Because the Trust is not consolidated, we have recorded the debt on our consolidated balance sheets and the
related payments are classified as interest expense.
Principal Maturities
Combined aggregate principal maturities of mortgages and other loans payable, 2017 credit facility, trust preferred securities,
senior unsecured notes and our share of joint venture debt as of December 31, 2018, including as-of-right extension options and
put options, were as follows (in thousands):
Scheduled
Amortization
Principal
Revolving
Credit
Facility
Unsecured
Term Loans
Trust
Preferred
Securities
Senior
Unsecured
Notes
Total
Joint
Venture
Debt
$
6,241
$
27,500
$
— $
— $
— $
— $
33,741
$
115,295
11,117
11,636
9,429
7,301
9,290
315,523
139,869
198,588
115,550
—
—
—
—
—
—
500,000
1,300,000
—
—
—
—
250,000
350,000
800,000
576,640
501,505
1,008,017
—
1,922,851
278,791
518,371
220,810
277,996
1,136,115
—
200,000
100,000
100,000
1,545,405
2,430,198
2019
2020
2021
2022
2023
Thereafter
into an arrangement with Alliance whereby it will receive a profit participation above a certain threshold for services provided by
Alliance to certain tenants at certain buildings above the base services specified in their lease agreements.
Income earned from the profit participation, which is included in other income on the consolidated statements of operations,
was $3.9 million, $3.9 million and $3.5 million for the years ended December 31, 2018, 2017 and 2016, respectively.
We also recorded expenses, inclusive of capitalized expenses, of $18.8 million, $22.6 million and $23.4 million the years
ended December 31, 2018, 2017 and 2016, respectively, for these services (excluding services provided directly to tenants).
Management Fees
S.L. Green Management Corp., a consolidated entity, receives property management fees from an entity in which Stephen
L. Green owns an interest. We received management fees from this entity of $0.6 million, $0.5 million and $0.7 million for the
years ended December 31, 2018, 2017, and 2016 respectively.
One Vanderbilt Investment
In December 2016, we entered into agreements with entities owned and controlled by Marc Holliday and Andrew Mathias,
pursuant to which they agreed to make an investment in our One Vanderbilt project at the appraised fair market value for the
interests acquired. This investment entitles these entities to receive approximately 1.50% - 1.80% and 1.00% - 1.20%, respectively,
of any profits realized by the Company from its One Vanderbilt project in excess of the Company’s capital contributions. The
entities have no right to any return of capital. Accordingly, subject to previously disclosed repurchase rights, these interests will
have no value and will not entitle these entities to any amounts (other than limited distributions to cover tax liabilities incurred)
unless and until the Company has received distributions from the One Vanderbilt project in excess of the Company’s aggregate
investment in the project. In the event that the Company does not realize a profit on its investment in the project (or would not
realize a profit based on the value at the time the interests are repurchased), the entities owned and controlled by Messrs. Holliday
and Mathias will lose the entire amount of their investment. The entities owned and controlled by Messrs. Holliday and Mathias
paid $1.4 million and $1.0 million, respectively, which equal the fair market value of the interests acquired as of the date the
investment agreements were entered into as determined by an independent third party appraisal that we obtained.
Messrs. Holliday and Mathias cannot monetize their interests until after stabilization of the property (50% within three years
after stabilization and 100% three years or more after stabilization). In addition, the agreement calls for us to repurchase these
interests in the event of a sale of One Vanderbilt or a transactional change of control of the Company. We also have the right to
repurchase these interests on the seven-year anniversary of the stabilization of the project or upon the occurrence of certain
separation events prior to the stabilization of the project relating to each of Messrs. Holliday’s and Mathias’s continued service
with us. The price paid upon monetization of the interests will equal the liquidation value of the interests at the time, with the value
of One Vanderbilt being based on its sale price, if applicable, or fair market value as determined by an independent third party
appraiser.
$
55,014
$ 1,933,145
$
500,000
$ 1,500,000
$
100,000
$ 1,500,000
$ 5,588,159
$ 3,841,461
Other
Consolidated interest expense, excluding capitalized interest, was comprised of the following (in thousands):
Interest expense before capitalized interest
Interest capitalized
Interest income
Interest expense, net
10. Related Party Transactions
Cleaning/ Security/ Messenger and Restoration Services
Year Ended December 31,
2017
2016
2018
$
$
244,788
$
284,649
$
348,062
(34,162)
(1,957)
(26,020)
(1,584)
(24,067)
(2,796)
208,669
$
257,045
$
321,199
Alliance Building Services, or Alliance, and its affiliates are partially owned by Gary Green, a son of Stephen L. Green, who
serves as a member and as the chairman emeritus of our board of directors, and provide services to certain properties owned by
us. Alliance’s affiliates include First Quality Maintenance, L.P., or First Quality, Classic Security LLC, Bright Star Couriers LLC
and Onyx Restoration Works, and provide cleaning, extermination, security, messenger, and restoration services, respectively. In
addition, First Quality has the non-exclusive opportunity to provide cleaning and related services to individual tenants at our
properties on a basis separately negotiated with any tenant seeking such additional services. The Service Corporation has entered
78
We are entitled to receive fees for providing management, leasing, construction supervision, and asset management services
to certain of our joint ventures as further described in Note 6, "Investments in Unconsolidated Joint Ventures." Amounts due from
joint ventures and related parties at December 31, 2018 and 2017 consisted of the following (in thousands):
Due from joint ventures
Other
Related party receivables
December 31,
2018
2017
$
$
18,655
9,378
28,033
$
$
15,025
8,014
23,039
11. Noncontrolling Interests on the Company's Consolidated Financial Statements
Noncontrolling interests represent the common and preferred units of limited partnership interest in the Operating Partnership
not held by the Company as well as third party equity interests in our other consolidated subsidiaries. Noncontrolling interests in
the Operating Partnership are shown in the mezzanine equity while the noncontrolling interests in our other consolidated subsidiaries
are shown in the equity section of the Company’s consolidated financial statements.
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
Common Units of Limited Partnership Interest in the Operating Partnership
As of December 31, 2018 and 2017, the noncontrolling interest unit holders owned 4.70%, or 4,130,579 units, and 4.58%,
or 4,452,979 units, of the Operating Partnership, respectively. As of December 31, 2018, 4,130,579 shares of our common stock
were reserved for issuance upon the redemption of units of limited partnership interest of the Operating Partnership.
Noncontrolling interests in the Operating Partnership is recorded at the greater of its cost basis or fair market value based
on the closing stock price of our common stock at the end of the reporting period.
Below is a summary of the activity relating to the noncontrolling interests in the Operating Partnership as of December 31,
2018 and 2017 (in thousands):
Balance at beginning of period
Distributions
Issuance of common units
Redemption of common units
Net income
Accumulated other comprehensive income allocation
Fair value adjustment
Balance at end of period
December 31,
2018
2017
$
461,954
$
(15,000)
23,655
(60,718)
12,216
(66)
(34,236)
473,882
(14,266)
25,723
(21,574)
3,995
(94)
(5,712)
$
387,805
$
461,954
Preferred Units of Limited Partnership Interest in the Operating Partnership
The Operating Partnership has 1,902,000 4.50% Series G Preferred Units of limited partnership interest, or the Series G
Preferred Units outstanding, with a liquidation preference of $25.00 per unit, which were issued in January 2012 in conjunction
with an acquisition. The Series G Preferred unitholders receive annual dividends of $1.125 per unit paid on a quarterly basis and
dividends are cumulative, subject to certain provisions. The Series G Preferred Units are convertible into a number of common
units of limited partnership interest in the Operating Partnership equal to (i) the liquidation preference plus accumulated and unpaid
distributions on the conversion date divided by (ii) $88.50. The common units of limited partnership interest in the Operating
Partnership may be redeemed in exchange for our common stock on a 1-to-1 basis. The Series G Preferred Units also provide the
holder with the right to require the Operating Partnership to repurchase the Series G Preferred Units for cash before January 31,
2022.
The Operating Partnership has 60 Series F Preferred Units outstanding with a mandatory liquidation preference of $1,000.00
per unit.
The Operating Partnership has authorized up to 700,000 3.50% Series K Preferred Units of limited partnership interest, or
the Series K Preferred Units, with a liquidation preference of $25.00 per unit. In August 2014, the Company issued 563,954 Series
K Preferred Units in conjunction with an acquisition. The Series K Preferred unitholders receive annual dividends of $0.875 per
unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series K Preferred Units can be
redeemed at any time, at the option of the unitholder, either for cash or are convertible into a number of common units of limited
partnership interest in the Operating Partnership equal to (i) the liquidation preference plus accumulated and unpaid distributions
on the conversion date divided by (ii) $134.67.
The Operating Partnership has authorized up to 500,000 4.00% Series L Preferred Units of limited partnership interest, or
the Series L Preferred Units, with a liquidation preference of $25.00 per unit. In August 2014, the Company issued 378,634 Series
L Preferred Units in conjunction with an acquisition. The Series L Preferred unitholders receive annual dividends of $1.00 per unit
paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series L Preferred Units can be redeemed
at any time at par for cash at the option of the unitholder.
The Operating Partnership has authorized up to 1,600,000 3.75% Series M Preferred Units of limited partnership interest,
or the Series M Preferred Units, with a liquidation preference of $25.00 per unit. In February 2015, the Company issued 1,600,000
Series M Preferred Units in conjunction with the acquisition of ownership interests in and relating to certain residential and retail
real estate properties. The Series M Preferred unitholders receive annual dividends of $0.9375 per unit paid on a quarterly basis
and dividends are cumulative, subject to certain provisions. The Series M Preferred Units can be redeemed at any time at par for
cash at the option of the unitholder.
The Operating Partnership has authorized up to 552,303 3.00% Series N Preferred Units of limited partnership interest, or
the Series N Preferred Units, with a liquidation preference of $25.00 per unit. In June 2015, the Company issued 552,303 Series
N Preferred Units in conjunction with an acquisition. The Series N Preferred unitholders receive annual dividends of $0.75 per
unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series N Preferred Units can be
redeemed at any time at par for cash at the option of the unitholder.
The Operating Partnership has authorized an aggregate of one 6.25% Series O Preferred Unit of limited partnership interest,
or the Series O Preferred Unit. In June 2015, the Company issued the Series O Preferred Unit in connection with an acquisition.
The Operating Partnership has authorized up to 200,000 4.00% Series P Preferred Units of limited partnership interest, or
the Series P Preferred Units, with a liquidation preference of $25.00 per unit. In July 2015, the Company issued 200,000 Series P
Preferred Units in conjunction with an acquisition. The Series P Preferred unitholders receive annual dividends of $1.00 per unit
paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series P Preferred Units can be redeemed
at any time at par for cash at the option of the unitholder.
The Operating Partnership has authorized up to 268,000 3.50% Series Q Preferred Units of limited partnership interest, or
the Series Q Preferred Units, with a liquidation preference of $25.00 per unit. In July 2015, the Company issued 268,000 Series
Q Preferred Units in conjunction with an acquisition. The Series Q Preferred unitholders receive annual dividends of $0.875 per
unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series Q Preferred Units can be
redeemed at any time, at the option of the unitholder, either for cash or are convertible into a number of common units of limited
partnership interest in the Operating Partnership equal to (i) the liquidation preference plus accumulated and unpaid distributions
on the conversion date divided by (ii) $148.95.
The Operating Partnership has authorized up to 400,000 3.50% Series R Preferred Units of limited partnership interest, or
the Series R Preferred Units, with a liquidation preference of $25.00 per unit. In August 2015, the Company issued 400,000 Series
R Preferred Units in conjunction with an acquisition. The Series R Preferred unitholders receive annual dividends of $0.875 per
unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series R Preferred Units can be
redeemed at any time, at the option of the unitholder, either for cash or are convertible into a number of common units of limited
partnership interest in the Operating Partnership equal to (i) the liquidation preference plus accumulated and unpaid distributions
on the conversion date divided by (ii) $154.89.
The Operating Partnership has authorized up to 1,077,280 4.00% Series S Preferred Units of limited partnership interest, or
the Series S Preferred Units, with a liquidation preference of $25.00 per unit. In August 2015, the Company issued 1,077,280
Series S Preferred Units in conjunction with an acquisition. The Series S Preferred unitholders receive annual dividends of $1.00
per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series S Preferred Units can be
redeemed at any time at par for cash at the option of the unitholder.
The Operating Partnership has authorized up to 230,000 2.75% Series T Preferred Units of limited partnership interest, or
the Series T Preferred Units, with a liquidation preference of $25.00 per unit. In March 2016, the Company issued 230,000 Series
T Preferred Units in conjunction with an acquisition. The Series T Preferred unitholders receive annual dividends of $0.6875 per
unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series T Preferred Units can be
redeemed at any time at par, at the option of the unitholder, either for cash or are convertible into a number of common units of
limited partnership interest in the Operating Partnership equal to (i) the liquidation preference plus accumulated and unpaid
distributions on the conversion date divided by (ii) $119.02.
The Operating Partnership has authorized up to 680,000 4.50% Series U Preferred Units of limited partnership interest, or
the Series U Preferred Units, with a liquidation preference of $25.00 per unit. In March 2016, the Company issued 680,000 Series
U Preferred Units in conjunction with an acquisition. The Series U Preferred unitholders initially receive annual dividends of
$1.125 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The annual dividend is subject
to reduction upon the occurrence of certain circumstances set forth in the terms of the Series U Preferred Units. The minimum
annual dividend is $0.75 per unit. The Series U Preferred Units can be redeemed at any time at par for cash at the option of the
unitholder.
Through a consolidated subsidiary, we have authorized up to 109,161 3.50% Series A Preferred Units of limited partnership
interest, or the Subsidiary Series A Preferred Units, with a liquidation preference of $1,000.00 per unit. In August 2015, the
Company issued 109,161 Subsidiary Series A Preferred Units in conjunction with an acquisition. The Subsidiary Series A Preferred
unitholders receive annual dividends of $35.00 per unit paid on a quarterly basis and dividends are cumulative, subject to certain
provisions. The Subsidiary Series A Preferred Units can be redeemed at any time, at the option of the unitholder, either for cash
or are convertible on a one-for-one basis, into the Series B Preferred Units of limited partnership interest, or the Subsidiary Series
80
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Table of Contents
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
B Preferred Units. The Subsidiary Series B Preferred Units can be converted at any time, at the option of the unitholder, into a
number of common stock equal to 6.71348 shares of common stock for each Subsidiary Series B Preferred Unit. As of December 31,
2018, no Subsidiary Series B Preferred Units have been issued.
Below is a summary of the activity relating to the preferred units in the Operating Partnership as of December 31, 2018 and
2017 (in thousands):
Balance at beginning of period
Issuance of preferred units
Redemption of preferred units
Balance at end of period
12. Stockholders’ Equity of the Company
Common Stock
December 31,
2018
2017
301,735
$
302,010
—
(1,308)
—
(275)
300,427
$
301,735
$
$
Our authorized capital stock consists of 260,000,000 shares, $0.01 par value per share, consisting of 160,000,000 shares of
common stock, $0.01 par value per share, 75,000,000 shares of excess stock, at $0.01 par value per share, and 25,000,000 shares
of preferred stock, par value $0.01 per share. As of December 31, 2018, 83,683,847 shares of common stock and no shares of
excess stock were issued and outstanding.
Share Repurchase Program
In August 2016, our Board of Directors approved a share repurchase plan under which we can buy up to $1.0 billion of shares
of our common stock. The Board of Directors has since authorized three separate $500.0 million increases to the size of the share
repurchase program in the fourth quarter of 2017, second quarter of 2018, and fourth quarter of 2018, bringing the program total
to $2.5 billion.
At December 31, 2018 repurchases executed under the plan were as follows:
Period
Year ended 2017
First quarter 2018
Second quarter 2018
Third quarter 2018
Fourth quarter 2018
Shares repurchased
Average price paid per
share
Cumulative number of
shares repurchased as
part of the repurchase
plan or programs
8,342,411
3,653,928
3,479,552
252,947
2,358,484
$101.64
$97.07
$97.22
$99.75
$93.04
8,342,411
11,996,339
15,475,891
15,728,838
18,087,322
At-The-Market Equity Offering Program
In March 2015, the Company, along with the Operating Partnership, entered into an "at-the-market" equity offering program,
or ATM Program, to sell an aggregate of $300.0 million of our common stock. The Company did not make any sales of its common
stock under the ATM program in the years ended December 31, 2018, 2017, or 2016.
Perpetual Preferred Stock
We have 9,200,000 shares of our 6.50% Series I Cumulative Redeemable Preferred Stock, or the Series I Preferred Stock,
outstanding with a mandatory liquidation preference of $25.00 per share. The Series I Preferred stockholders receive annual
dividends of $1.625 per share paid on a quarterly basis and dividends are cumulative, subject to certain provisions. We are entitled
to redeem the Series I Preferred Stock at par for cash at our option. In August 2012, we received $221.9 million in net proceeds
from the issuance of the Series I Preferred Stock, which were recorded net of underwriters' discount and issuance costs, and
contributed the net proceeds to the Operating Partnership in exchange for 9,200,000 units of 6.50% Series I Cumulative Redeemable
Preferred Units of limited partnership interest, or the Series I Preferred Units.
Dividend Reinvestment and Stock Purchase Plan ("DRSPP")
In February 2018, the Company filed a registration statement with the SEC for our dividend reinvestment and stock purchase
plan, or DRSPP, which automatically became effective upon filing. The Company registered 3,500,000 shares of our common
stock under the DRSPP. The DRSPP commenced on September 24, 2001.
The following table summarizes SL Green common stock issued, and proceeds received from dividend reinvestments and/
or stock purchases under the DRSPP for the years ended December 31, 2018, 2017, and 2016, respectively (dollars in thousands):
Year Ended December 31,
2018
2017
2016
Shares of common stock issued
1,399
2,141
Dividend reinvestments/stock purchases under the DRSPP
$
136
$
223
$
2,687
277
Earnings per Share
We use the two-class method of computing earnings per share (“EPS”), which is an earnings allocation formula that determines
EPS for common stock and any participating securities according to dividends declared (whether paid or unpaid). Under the two-
class method, basic EPS is computed by dividing the income available to common stockholders by the weighted-average number
of common stock shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from share equivalent
activity.
SL Green's earnings per share for the years ended December 31, 2018, 2017, and 2016 are computed as follows (in thousands):
Numerator
Basic Earnings:
Year Ended December 31,
2018
2017
2016
Income attributable to SL Green common stockholders
Less: distributed earnings allocated to participating securities
Net income attributable to SL Green common stockholders (numerator for basic
earnings per share)
Add back: undistributed earnings allocated to participating securities
Add back: Effect of dilutive securities (redemption of units to common shares)
Income attributable to SL Green common stockholders (numerator for diluted
earnings per share)
$
$
$
232,312
$
86,424
$
234,946
(552) $
(471) $
(634)
231,760
$
85,953
$
234,312
552
12,216
471
3,995
634
10,136
244,528
$
90,419
$
245,082
Denominator
Basic Shares:
Weighted average common stock outstanding
Effect of Dilutive Securities:
Operating Partnership units redeemable for common shares
Stock-based compensation plans
Diluted weighted average common stock outstanding
Year Ended December 31,
2018
2017
2016
86,753
98,571
100,185
4,562
215
91,530
4,556
276
4,323
373
103,403
104,881
SL Green has excluded 1,138,647, 774,782 and 263,991 common stock equivalents from the diluted shares outstanding for
the years ended December 31, 2018, 2017, and 2016 respectively, as they were anti-dilutive.
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
13. Partners' Capital of the Operating Partnership
14. Share-based Compensation
The Company is the sole managing general partner of the Operating Partnership and at December 31, 2018 owned 83,683,847
general and limited partnership interests in the Operating Partnership and 9,200,000 Series I Preferred Units. Partnership interests
in the Operating Partnership are denominated as “common units of limited partnership interest” (also referred to as “OP Units”)
or “preferred units of limited partnership interest” (also referred to as “Preferred Units”). All references to OP Units and Preferred
Units outstanding exclude such units held by the Company. A holder of an OP Unit may present such OP Unit to the Operating
Partnership for redemption at any time (subject to restrictions agreed upon at the issuance of OP Units to particular holders that
may restrict such right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption,
the Operating Partnership must redeem such OP Unit in exchange for the cash equal to the then value of a share of common stock
of the Company, except that the Company may, at its election, in lieu of cash redemption, acquire such OP Unit for one share of
common stock. Because the number of shares of common stock outstanding at all times equals the number of OP Units that the
Company owns, one share of common stock is generally the economic equivalent of one OP Unit, and the quarterly distribution
that may be paid to the holder of an OP Unit equals the quarterly dividend that may be paid to the holder of a share of common
stock. Each series of Preferred Units makes a distribution that is set in accordance with an amendment to the partnership agreement
of the Operating Partnership. Preferred Units may also be convertible into OP Units at the election of the holder thereof or the
Company, subject to the terms of such Preferred Units.
Net income (loss) allocated to the preferred unitholders and common unitholders reflects their pro rata share of net income
(loss) and distributions.
Limited Partner Units
As of December 31, 2018, limited partners other than SL Green owned 4.70%, or 4,130,579 common units, of the Operating
Partnership.
Preferred Units
Preferred units not owned by SL Green are further described in Note 11, “Noncontrolling Interests on the Company’s
Consolidated Financial Statements - Preferred Units of Limited Partnership Interest in the Operating Partnership.”
Earnings per Unit
The Operating Partnership's earnings per unit for the years ended December 31, 2018, 2017, and 2016 respectively are
computed as follows (in thousands):
Numerator
Basic Earnings:
Year Ended December 31,
2018
2017
2016
Income attributable to SLGOP common unitholders
Less: distributed earnings allocated to participating securities
Net Income attributable to SLGOP common unitholders (numerator for basic
earnings per unit)
Add back: undistributed earnings allocated to participating securities
Income attributable to SLGOP common unitholders
$
$
$
244,528
$
90,419
$
245,082
(552) $
(471) $
(634)
243,976
552
244,528
$
$
89,948
471
90,419
$
$
244,448
634
245,082
We have stock-based employee and director compensation plans. Our employees are compensated through the Operating
Partnership. Under each plan, whenever the Company issues common or preferred stock, the Operating Partnership issues an
equivalent number of units of limited partnership interest of a corresponding class to the Company.
Fourth Amended and Restated 2005 Stock Option and Incentive Plan
The Fourth Amended and Restated 2005 Stock Option and Incentive Plan, or the 2005 Plan, was approved by the Company's
board of directors in April 2016 and its stockholders in June 2016 at the Company's annual meeting of stockholders. The 2005
Plan authorizes the issuance of stock options, stock appreciation rights, unrestricted and restricted stock, phantom shares, dividend
equivalent rights, cash-based awards and other equity-based awards. Subject to adjustments upon certain corporate transactions
or events, awards with respect to up to a maximum of 27,030,000 fungible units may be granted under the 2005 Plan. Currently,
different types of awards count against the limit on the number of fungible units differently, with (1) full-value awards (i.e., those
that deliver the full value of the award upon vesting, such as restricted stock) counting as 3.74 Fungible Units per share subject to
such awards, (2) stock options, stock appreciation rights and other awards that do not deliver full value and expire five years from
the date of grant counting as 0.73 fungible units per share subject to such awards, and (3) all other awards (e.g., ten-year stock
options) counting as 1.0 fungible units per share subject to such awards. Awards granted under the 2005 Plan prior to the approval
of the fourth amendment and restatement in June 2016 continue to count against the fungible unit limit based on the ratios that
were in effect at the time such awards were granted, which may be different than the current ratios. As a result, depending on the
types of awards issued, the 2005 Plan may result in the issuance of more or less than 27,030,000 shares. If a stock option or other
award granted under the 2005 Plan expires or terminates, the common stock subject to any portion of the award that expires or
terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional
awards. Shares of our common stock distributed under the 2005 Plan may be treasury shares or authorized but unissued shares.
Currently, unless the 2005 Plan has been previously terminated by the Company's board of directors, new awards may be granted
under the 2005 Plan until June 2, 2026, which is the tenth anniversary of the date that the 2005 Plan was most recently approved
by the Company's stockholders. As of December 31, 2018, 6.7 million fungible units were available for issuance under the 2005
Plan after reserving for shares underlying outstanding restricted stock units, phantom stock units granted pursuant to our Non-
Employee Directors' Deferral Program and LTIP Units.
Options are granted under the plan with an exercise price at the fair market value of the Company's common stock on the
date of grant and, subject to employment, generally expire five or ten years from the date of grant, are not transferable other than
on death, and generally vest in one to five years commencing one year from the date of grant. We have also granted Class O LTIP
Units, which are a class of LTIP Units in the Operating Partnership structured to provide economics similar to those of stock
options. Class O LTIP Units, once vested, may be converted, at the election of the holder, into a number of common units of the
Operating Partnership per Class O LTIP Unit determined by the increase in value of a share of the Company’s common stock at
the time of conversion over a participation threshold, which equals the fair market value of a share of the Company’s common
stock at the time of grant. Class O LTIP Units are entitled to distributions, subject to vesting, equal per unit to 10% of the per unit
distributions paid with respect to the common units of the Operating Partnership.
The fair value of each stock option or LTIP Unit granted is estimated on the date of grant using the Black-Scholes option
pricing model based on historical information with the following weighted average assumptions for grants during the years ended
December 31, 2018, 2017, and 2016.
Denominator
Basic units:
Year Ended December 31,
2018
2017
2016
Dividend yield
Expected life
Risk-free interest rate
Expected stock price volatility
Weighted average common units outstanding
91,315
103,127
104,508
Effect of Dilutive Securities:
Stock-based compensation plans
Diluted weighted average common units outstanding
215
91,530
276
103,403
373
104,881
The Operating Partnership has excluded 1,138,647, 774,782, and 263,991 common unit equivalents from the diluted units
outstanding for the years ended December 31, 2018, 2017, and 2016 respectively, as they were anti-dilutive.
84
85
2018
2017
2016
2.85%
2.51%
2.37%
3.5 years
4.4 years
3.7 years
2.48%
22.00%
1.73%
28.10%
1.57%
26.76%
Table of Contents
Table of Contents
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
A summary of the status of the Company's stock options as of December 31, 2018, 2017, and 2016 and changes during the
years ended December 31, 2018, 2017, and 2016 are as follows:
2018
2017
2016
Options
Outstanding
Weighted
Average
Exercise
Price
Options
Outstanding
Weighted
Average
Exercise
Price
Options
Outstanding
Weighted
Average
Exercise
Price
Balance at beginning of year
$
1,548,719
$
101.48
$
1,737,213
$
98.44
$
1,595,007
$
95.52
Granted
Exercised
Lapsed or canceled
Balance at end of year
6,000
(316,302)
(101,400)
97.91
90.22
113.22
174,000
(292,193)
(70,301)
105.66
81.07
121.68
445,100
(192,875)
(110,019)
$
1,137,017
$
$
135.54
$
1,548,719
101.28
800,902
$
$
101.48
$
1,737,213
94.33
748,617
105.86
76.90
123.86
98.44
87.72
$
$
Options exercisable at end of year
783,035
Weighted average fair value of options
granted during the year
$
84,068
$
3,816,652
$
8,363,036
All options were granted with strike prices ranging from $20.67 to $137.18. The remaining weighted average contractual
life of the options outstanding was 3.5 years and the remaining weighted average contractual life of the options exercisable was
3.7 years.
During the years ended December 31, 2018, 2017, and 2016, we recognized compensation expense for these options of $5.4
million, $7.8 million, and $8.9 million, respectively. As of December 31, 2018, there was $2.6 million of total unrecognized
compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 1.0
years.
Stock-based Compensation
Effective January 1, 1999, the Company implemented a stock-based compensation plan where shares are granted to certain
employees, including our executives, and vesting will occur annually upon the completion of a service period or our meeting
established financial performance criteria. Annual vesting occurs at rates ranging from 15% to 35% once performance criteria are
reached.
A summary of the Company's restricted stock as of December 31, 2018, 2017, and 2016 and charges during the years ended
December 31, 2018, 2017, and 2016 are as follows:
2018
2017
2016
Balance at beginning of year
Granted
Canceled
Balance at end of year
Vested during the year
Compensation expense recorded
Weighted average fair value of restricted stock granted during the year
3,202,031
3,137,881
3,298,216
162,900
(9,100)
3,452,016
92,114
96,185
—
3,298,216
95,736
$
$
12,757,704
13,440,503
$
$
9,809,749
9,905,986
$
$
98,800
(34,650)
3,202,031
83,822
7,153,966
10,650,077
The fair value of restricted stock that vested during the years ended December 31, 2018, 2017, and 2016 was $9.8 million,
$9.4 million and $7.6 million, respectively. As of December 31, 2018, there was $22.7 million of total unrecognized compensation
cost related to restricted stock, which is expected to be recognized over a weighted average period of 2.3 years.
For the years ended December 31, 2018, 2017, and 2016, $6.3 million, $7.2 million, and $6.0 million, respectively, was
capitalized to assets associated with compensation expense related to our long-term compensation plans, restricted stock and stock
options.
We granted LTIP Units, which include bonus, time-based and performance based awards, with a fair value of $22.0 million
and $20.5 million during the years ended December 31, 2018 and 2017, respectively. The grant date fair value of the LTIP Unit
awards was calculated in accordance with ASC 718. A third party consultant determined the fair value of the LTIP Units to have
a discount from our common stock price. The discount was calculated by considering the inherent uncertainty that the LTIP Units
will reach parity with other common partnership units and the illiquidity due to transfer restrictions. As of December 31, 2018,
there was $2.9 million of total unrecognized compensation expense related to the time-based and performance based LTIP Unit
awards, which is expected to be recognized over a weighted average period of 1.3 years.
During the years ended December 31, 2018, 2017, and 2016, we recorded compensation expense related to bonus, time-
based and performance based LTIP Unit awards of $24.4 million, $26.1 million, and $26.5 million, respectively.
2014 Outperformance Plan
In August 2014, the compensation committee of the Company's board of directors approved the general terms of the SL
Green Realty Corp. 2014 Outperformance Plan, or the 2014 Outperformance Plan. Participants in the 2014 Outperformance Plan
could earn, in the aggregate, up to 610,000 LTIP Units in our Operating Partnership based on our total return to stockholders for
the three-year period beginning September 1, 2014. Under the 2014 Outperformance Plan, two-thirds of the LTIP Units were
subject to performance based vesting based on the Company’s absolute total return to stockholders and one-third of the LTIP Units
were subject to performance based vesting based on relative total return to stockholders compared to the constituents of the MSCI
REIT Index. LTIP Units earned under the 2014 Outperformance Plan were to be subject to continued vesting requirements, with
50% of any awards earned vesting on August 31, 2017 and the remaining 50% vesting on August 31, 2018, subject to continued
employment with us through such dates. Participants were not entitled to distributions with respect to LTIP Units granted under
the 2014 Outperformance Plan unless and until they are earned. If LTIP Units were earned, each participant would have been
entitled to the distributions that would have been paid had the number of earned LTIP Units been issued at the beginning of the
performance period, with such distributions being paid in the form of cash or additional LTIP Units. Thereafter, distributions were
to be paid currently with respect to all earned LTIP Units, whether vested or unvested.
Based on our performance, none of the LTIP Units granted under the 2014 Outperformance Plan were earned pursuant to
the terms of the 2014 Outperformance Plan, and all units issued were forfeited in 2017.
The cost of the 2014 Outperformance Plan ($27.9 million subject to forfeitures), based on the portion of the 2014
Outperformance Plan granted prior to termination, was amortized into earnings through December 31, 2017. We recorded zero
compensation expense during the year ended December 31, 2018, and compensation expense of $13.6 million and $8.4 million
during the years ended December 31, 2017 and 2016, respectively, related to the 2014 Outperformance Plan.
Deferred Compensation Plan for Directors
Under our Non-Employee Director's Deferral Program, which commenced July 2004, the Company's non-employee directors
may elect to defer up to 100% of their annual retainer fee, chairman fees, meeting fees and annual stock grant. Unless otherwise
elected by a participant, fees deferred under the program shall be credited in the form of phantom stock units. The program provides
that a director's phantom stock units generally will be settled in an equal number of shares of common stock upon the earlier of
(i) the January 1 coincident with or the next following such director's termination of service from the Board of Directors or (ii) a
change in control by us, as defined by the program. Phantom stock units are credited to each non-employee director quarterly
using the closing price of our common stock on the first business day of the respective quarter. Each participating non-employee
director is also credited with dividend equivalents or phantom stock units based on the dividend rate for each quarter, which are
either paid in cash currently or credited to the director’s account as additional phantom stock units.
During the year ended December 31, 2018, 13,638 phantom stock units were earned and 9,459 shares of common stock were
issued to our board of directors. We recorded compensation expense of $2.4 million during the year ended December 31, 2018
related to the Deferred Compensation Plan. As of December 31, 2018, there were 113,492 phantom stock units outstanding pursuant
to our Non-Employee Director's Deferral Program.
Employee Stock Purchase Plan
In 2007, the Company's board of directors adopted the 2008 Employee Stock Purchase Plan, or ESPP, to encourage our
employees to make our business more successful by providing equity-based incentives to eligible employees. The ESPP is intended
to qualify as an "employee stock purchase plan" under Section 423 of the Code, and has been adopted by the board to enable our
eligible employees to purchase the Company's shares of common stock through payroll deductions. The ESPP became effective
on January 1, 2008 with a maximum of 500,000 shares of the common stock available for issuance, subject to adjustment upon a
merger, reorganization, stock split or other similar corporate change. The Company filed a registration statement on Form S-8 with
the SEC with respect to the ESPP. The common stock is offered for purchase through a series of successive offering periods. Each
offering period will be three months in duration and will begin on the first day of each calendar quarter, with the first offering
period having commenced on January 1, 2008. The ESPP provides for eligible employees to purchase the common stock at a
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
purchase price equal to 85% of the lesser of (1) the market value of the common stock on the first day of the offering period or
(2) the market value of the common stock on the last day of the offering period. The ESPP was approved by our stockholders at
our 2008 annual meeting of stockholders. As of December 31, 2018, 116,368 shares of our common stock had been issued under
the ESPP.
15. Accumulated Other Comprehensive Income
The following tables set forth the changes in accumulated other comprehensive income (loss) by component as of
December 31, 2018, 2017 and 2016 (in thousands):
Net unrealized
gain on derivative
instruments (1)
SL Green’s share
of joint venture
net unrealized
gain on derivative
instruments (2)
Net unrealized
gain on
marketable
securities
Total
Balance at December 31, 2015
$
(10,160) $
(592) $
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other
comprehensive income
Balance at December 31, 2016
Other comprehensive (loss) income before reclassifications
Amounts reclassified from accumulated other
comprehensive income
Balance at December 31, 2017
Other comprehensive (loss) income before reclassifications
Amounts reclassified from accumulated other
comprehensive income
Balance at December 31, 2018
13,534
9,222
12,596
(1,618)
1,564
12,542
(2,252)
1,160
3,453
4,021
233
766
5,020
(103)
$
(574)
9,716
$
(618)
4,299
$
2,003
$
3,517
—
5,520
(1,348)
(3,130)
1,042
51
—
1,093
$
(8,749)
18,211
12,675
22,137
(2,733)
(800)
18,604
(2,304)
(1,192)
15,108
(1) Amount reclassified from accumulated other comprehensive income (loss) is included in interest expense in the respective consolidated statements of
operations. As of December 31, 2018 and 2017, the deferred net losses from these terminated hedges, which is included in accumulated other comprehensive
loss relating to net unrealized loss on derivative instrument, was $1.3 million and $3.2 million, respectively.
(2) Amount reclassified from accumulated other comprehensive income (loss) is included in equity in net income from unconsolidated joint ventures in the
respective consolidated statements of operations.
16. Fair Value Measurements
We are required to disclose fair value information with regard to our financial instruments, whether or not recognized in the
consolidated balance sheets, for which it is practical to estimate fair value. The FASB guidance defines fair value as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the
measurement date. We measure and/or disclose the estimated fair value of financial assets and liabilities based on a hierarchy that
distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting
entity and the reporting entity’s own assumptions about market participant assumptions. This hierarchy consists of three broad
levels: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access
at the measurement date; Level 2 - inputs other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly; and Level 3 - unobservable inputs for the asset or liability that are used when little or no
market data is available. We follow this hierarchy for our assets and liabilities measured at fair value on a recurring and nonrecurring
basis. In instances in which the determination of the fair value measurement is based on inputs from different levels of the fair
value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest
level of input that is significant to the fair value measurement in its entirety. Our assessment of the significance of the particular
input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The following tables set forth the assets and liabilities that we measure at fair value on a recurring and non-recurring basis
by their levels in the fair value hierarchy at December 31, 2018 and 2017 (in thousands):
Assets:
Marketable securities
Interest rate cap and swap agreements (included in other
assets)
Liabilities:
Interest rate cap and swap agreements (included in other
liabilities)
Assets:
Marketable securities
Interest rate cap and swap agreements (included in other
assets)
December 31, 2018
Total
Level 1
Level 2
Level 3
28,638
18,676
$
$
— $
28,638
— $
18,676
$
$
7,663
$
— $
7,663
$
December 31, 2017
Total
Level 1
Level 2
Level 3
28,579
16,692
$
$
— $
28,579
— $
16,692
$
$
—
—
—
—
—
$
$
$
$
$
We determine impairment in real estate investments and debt and preferred equity investments, including intangibles primarily
utilizing cash flow projections that apply, among other things, estimated revenue and expense growth rates, discount rates and
capitalization rates, as well as sales comparison approach, which utilizes comparable sales, listings and sales contracts. All of
which are classified as Level 3 inputs.
In December 2018, the Company determined that it was more likely than not that its suburban properties would be sold or
otherwise disposed of significantly before the end of their previously estimated useful life. The Company tested the recoverability
of the assets and, as a result of the carrying amount of the assets not being deemed recoverable and exceeding their fair value as
measured on a asset by asset basis, recorded a $221.9 million impairment loss. These charges are included in depreciable real
estate reserves and impairment in the consolidated statement of operations. The fair value of the assets were determined primarily
utilizing cash flow projections that apply, among other things, estimated revenue and expense growth rates, discount rates and
capitalization rates, as well as sales comparison approach, which utilizes comparable sales, listings and sales contracts. All of
which are classified as Level 3 inputs.
In May 2018, the Company was the successful bidder at the foreclosure of 2 Herald Square, at which time the Company's
$250.5 million outstanding principal balance and $7.7 million accrued interest balance receivables were credited to our equity
investment in the property. We recorded the assets acquired and liabilities assumed at fair value. This resulted in the recognition
of a fair value adjustment of $8.1 million, which is reflected on the Company's consolidated statement of operations within purchase
price and other fair value adjustments. This fair value was determined by utilizing our successful bid at the foreclosure of the asset,
the agreement to sell a partial interest in the property, and cash flow projections that apply, among other things, estimated revenue
and expense growth rates, discount rates and capitalization rates, as well as a sales comparison approach, which utilizes comparable
sales, listings and sales contracts, all of which are classified as Level 3 inputs.
In January 2018, the partnership agreement for our investment in 919 Third Avenue was modified resulting in the Company
no longer having a controlling interest in this investment. As a result the investment was deconsolidated as of January 1, 2018.
The Company recorded its non-controlling interest at fair value resulting in a $49.3 million fair value adjustment in the consolidated
statement of operations. This fair value was determined using a third party valuation which primarily utilized cash flow projections
that apply, among other things, estimated revenue and expense growth rates, discount rates and capitalization rates, as well as sales
comparison approach, which utilizes comparable sales, listings and sales contracts. All of which are classified as Level 3 inputs.
Marketable securities classified as Level 1 are derived from quoted prices in active markets. The valuation technique used
to measure the fair value of marketable securities classified as Level 2 were valued based on quoted market prices or model driven
valuations using the significant inputs derived from or corroborated by observable market data. Marketable securities in an
unrealized loss position are not considered to be other than temporarily impaired. We do not intend to sell these securities and it
is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases.
The fair value of derivative instruments is based on current market data received from financial sources that trade such
instruments and are based on prevailing market data and derived from third party proprietary models based on well-recognized
financial principles and reasonable estimates about relevant future market conditions, which are classified as Level 2 inputs.
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
The financial assets and liabilities that are not measured at fair value on our consolidated balance sheets include cash and
cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses, debt and preferred equity
investments, mortgages and other loans payable and other secured and unsecured debt. The carrying amount of cash and cash
equivalents, restricted cash, accounts receivable, and accounts payable and accrued expenses reported in our consolidated balance
sheets approximates fair value due to the short term nature of these instruments. The fair value of debt and preferred equity
investments, which is classified as Level 3, is estimated by discounting the future cash flows using current interest rates at which
similar loans with the same maturities would be made to borrowers with similar credit ratings. The fair value of borrowings, which
is classified as Level 3, is estimated by discounting the contractual cash flows of each debt instrument to their present value using
adjusted market interest rates, which is provided by a third-party specialist.
The following table provides the carrying value and fair value of these financial instruments as of December 31, 2018 and
December 31, 2017 (in thousands):
December 31, 2018
December 31, 2017
Carrying Value (1)
Fair Value
Carrying Value (1)
Fair Value
Debt and preferred equity investments
Fixed rate debt
Variable rate debt
$
$
$
2,099,393
(2)
3,543,476
2,048,442
5,591,918
$
$
3,230,127
2,057,966
5,288,093
$
$
$
2,114,041
(2)
4,305,165
1,605,431
5,910,596
$
$
4,421,866
1,612,224
6,034,090
(1) Amounts exclude net deferred financing costs.
(2) At December 31, 2018, debt and preferred equity investments had an estimated fair value ranging between $2.1 billion and $2.3 billion. At December 31,
2017, debt and preferred equity investments had an estimated fair value ranging between $2.1 billion and $2.3 billion.
Disclosure about fair value of financial instruments was based on pertinent information available to us as of December 31,
2018 and 2017. Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, such
amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates
of fair value may differ significantly from the amounts presented herein.
17. Financial Instruments: Derivatives and Hedging
In the normal course of business, we use a variety of commonly used derivative instruments, such as interest rate swaps,
caps, collar and floors, to manage, or hedge interest rate risk. We hedge our exposure to variability in future cash flows for forecasted
transactions in addition to anticipated future interest payments on existing debt. We recognize all derivatives on the balance sheet
at fair value. Derivatives that are not hedges are adjusted to fair value through earnings. If a derivative is a hedge, depending on
the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedge
asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings.
Reported net income and equity may increase or decrease prospectively, depending on future levels of interest rates and other
variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows. Currently, all
of our designated derivative instruments are effective hedging instruments.
The following table summarizes the notional value at inception and fair value of our consolidated derivative financial
instruments at December 31, 2018 based on Level 2 information. The notional value is an indication of the extent of our involvement
in these instruments at that time, but does not represent exposure to credit, interest rate or market risks (amounts in thousands).
Interest Rate Swap
Interest Rate Swap
Interest Rate Cap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
$
Notional
Value
200,000
100,000
137,500
100,000
100,000
150,000
150,000
200,000
Strike
Rate
1.131%
1.161%
Effective
Date
July 2016
July 2016
Expiration
Date
Balance Sheet
Location
Fair
Value
July 2023 Other Assets
$
July 2023 Other Assets
4.000% September 2017
September 2019 Other Assets
1.928% December 2017
November 2020 Other Assets
1.934% December 2017
November 2020 Other Assets
2.696%
2.721%
2.740%
January 2019
January 2024 Other Liabilities
January 2019
January 2026 Other Liabilities
January 2019
January 2026 Other Liabilities
11,148
5,447
—
1,045
1,035
(1,858)
(2,450)
(3,354)
$
11,013
During the years ended December 31, 2018, 2017, and 2016, we recorded a $0.2 million loss, a $0.5 million loss, and a $0.5
million gain, respectively, on the changes in the fair value, which is included in interest expense in the consolidated statements of
operations.
The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either
defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default
on its derivative obligations. As of December 31, 2018, the fair value of derivatives in a net liability position, including accrued
interest but excluding any adjustment for nonperformance risk related to these agreements, was $7.7 million. As of December 31,
2018, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions.
If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at
their aggregate termination value of $7.7 million at December 31, 2018.
Gains and losses on terminated hedges are included in accumulated other comprehensive income, and are recognized into
earnings over the term of the related mortgage obligation. Over time, the realized and unrealized gains and losses held in accumulated
other comprehensive income will be reclassified into earnings as an adjustment to interest expense in the same periods in which
the hedged interest payments affect earnings. We estimate that $2.5 million of the current balance held in accumulated other
comprehensive income will be reclassified into interest expense and $0.6 million of the portion related to our share of joint venture
accumulated other comprehensive income will be reclassified into equity in net income from unconsolidated joint ventures within
the next 12 months.
The following table presents the effect of our derivative financial instruments and our share of our joint ventures' derivative
financial instruments that are designated and qualify as hedging instruments on the consolidated statements of operations for the
years ended December 31, 2018, 2017, and 2016, respectively (in thousands):
Amount of (Loss) Gain
Recognized in
Other Comprehensive Loss
(Effective Portion)
Year Ended
December 31,
Derivative
2018
2017
2016
Interest Rate
Swaps/Caps
Share of
unconsolidated
joint ventures'
derivative
instruments
$ (2,284) $ (2,282) $ 14,616
(1,788)
(200)
2,012
$ (4,072) $ (2,482) $ 16,628
Location of
Loss
Reclassified
from
Accumulated
Other
Comprehensive
Loss into
Income
Interest
expense
Equity in net
income from
unconsolidated
joint ventures
Amount of Loss
Reclassified from
Accumulated Other
Comprehensive Loss into Income
(Effective Portion)
Year Ended
December 31,
2018
2017
2016
$
609
$ 1,821
$ 9,521
726
1,035
1,981
$ 1,335
$ 2,856
$ 11,502
Location of
(Loss) Gain
Recognized in
Income on
Derivative
Interest
expense
Equity in net
income from
unconsolidated
joint ventures
Amount of (Loss) Gain
Recognized into Income
(Ineffective Portion)
Year Ended
December 31,
2018
2017
2016
$ (559) $
5
$ (28)
(371)
$ (930) $
55
60
785
$ 757
90
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18. Rental Income
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
The Operating Partnership is the lessor and the sublessor to tenants under operating leases with expiration dates ranging
from January 1, 2019 to 2064. The minimum rental amounts due under the leases are generally either subject to scheduled fixed
increases or adjustments. The leases generally also require that the tenants reimburse us for increases in certain operating costs
and real estate taxes above their base year costs. Approximate future minimum rents to be received over the next five years and
thereafter for non-cancelable operating leases in effect at December 31, 2018 for the consolidated properties, including consolidated
joint venture properties, and our share of unconsolidated joint venture properties are as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
19. Benefit Plans
Consolidated
Properties
Unconsolidated
Properties
$
830,336
$
765,610
625,956
562,250
500,499
348,060
375,228
380,886
348,222
333,501
3,272,014
2,098,995
$
6,556,665
$
3,884,892
The building employees are covered by multi-employer defined benefit pension plans and post-retirement health and welfare
plans. We participate in the Building Service 32BJ, or Union, Pension Plan and Health Plan. The Pension Plan is a multi-employer,
non-contributory defined benefit pension plan that was established under the terms of collective bargaining agreements between
the Service Employees International Union, Local 32BJ, the Realty Advisory Board on Labor Relations, Inc. and certain other
employees. This Pension Plan is administered by a joint board of trustees consisting of union trustees and employer trustees and
operates under employer identification number 13-1879376. The Pension Plan year runs from July 1 to June 30. Employers
contribute to the Pension Plan at a fixed rate on behalf of each covered employee. Separate actuarial information regarding such
pension plans is not made available to the contributing employers by the union administrators or trustees, since the plans do not
maintain separate records for each reporting unit. However, on September 28, 2016, September 28, 2017, and September 28, 2018,
the actuary certified that for the plan years beginning July 1, 2016, July 1, 2017, and July 1, 2018, the Pension Plan was in critical
status under the Pension Protection Act of 2006. The Pension Plan trustees adopted a rehabilitation plan consistent with this
requirement. No surcharges have been paid to the Pension Plan as of December 31, 2018. For the Pension Plan years ended June 30,
2018, 2017, and 2016, the plan received contributions from employers totaling $272.3 million, $257.8 million, and $249.5 million.
Our contributions to the Pension Plan represent less than 5.0% of total contributions to the plan.
The Health Plan was established under the terms of collective bargaining agreements between the Union, the Realty Advisory
Contributions we made to the multi-employer plans for the years ended December 31, 2018, 2017 and 2016 are included in
the table below (in thousands):
Benefit Plan
Pension Plan
Health Plan
Other plans
Total plan contributions
401(K) Plan
2018
2017
2016
$
$
3,017
$
3,856
$
9,310
1,106
11,426
1,463
13,433
$
16,745
$
3,979
11,530
1,583
17,092
In August 1997, we implemented a 401(K) Savings/Retirement Plan, or the 401(K) Plan, to cover eligible employees of
ours, and any designated affiliate. The 401(K) Plan permits eligible employees to defer up to 15% of their annual compensation,
Table of Contents
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
subject to certain limitations imposed by the Code. The employees' elective deferrals are immediately vested and non-forfeitable
upon contribution to the 401(K) Plan. During 2003, we amended our 401(K) Plan to provide for discretionary matching contributions
only. For 2018, a matching contribution equal to 100% of the first 4% of annual compensation was made. For 2017 and 2016, a
matching contribution equal to 50% of the first 6% of annual compensation was made. For the year ended December 31, 2018,
we made a matching contribution of $1,075,267. For the years ended December 31, 2017 and 2016, we made matching contributions
of $1,011,830 and $906,875, respectively.
20. Commitments and Contingencies
Legal Proceedings
As of December 31, 2018, the Company and the Operating Partnership were not involved in any material litigation nor, to
management's knowledge, was any material litigation threatened against us or our portfolio which if adversely determined could
have a material adverse impact on us.
Environmental Matters
Our management believes that the properties are in compliance in all material respects with applicable Federal, state and
local ordinances and regulations regarding environmental issues. Management is not aware of any environmental liability that it
believes would have a materially adverse impact on our financial position, results of operations or cash flows. Management is
unaware of any instances in which it would incur significant environmental cost if any of our properties were sold.
Employment Agreements
We have entered into employment agreements with certain executives, which expire between February 2020 and January
2022. The minimum cash-based compensation, including base salary and guaranteed bonus payments, associated with these
employment agreements total $3.3 million for 2019.
Insurance
We maintain “all-risk” property and rental value coverage (including coverage regarding the perils of flood, earthquake and
terrorism, excluding nuclear, biological, chemical, and radiological terrorism ("NBCR")), within three property insurance programs
and liability insurance. Separate property and liability coverage may be purchased on a stand-alone basis for certain assets, such
as the development of One Vanderbilt. Additionally, one of our captive insurance companies, Belmont Insurance Company, or
Belmont, provides coverage for NBCR terrorist acts above a specified trigger. Belmont's retention is reinsured by our other captive
insurance company, Ticonderoga Insurance Company ("Ticonderoga"). If Belmont or Ticonderoga are required to pay a claim
under our insurance policies, we would ultimately record the loss to the extent of required payments. However, there is no assurance
that in the future we will be able to procure coverage at a reasonable cost. Further, if we experience losses that are uninsured or
that exceed policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows
from those properties. Additionally, our debt instruments contain customary covenants requiring us to maintain insurance and we
could default under debt our instruments if the cost and/or availability of certain types of insurance make it impractical or impossible
to comply with such covenants relating to insurance. Belmont and Ticonderoga provide coverage solely on properties owned by
the Company or its affiliates.
Furthermore, with respect to certain of our properties, including properties held by joint ventures, or subject to triple net
leases, insurance coverage is obtained by a third-party and we do not control the coverage. While we may have agreements with
such third parties to maintain adequate coverage and we monitor these policies, such coverage ultimately may not be maintained
or adequately cover our risk of loss.
Belmont had loss reserves of $4.0 million and $5.5 million as of December 31, 2018 and 2017, respectively. Ticonderoga
had no loss reserves as of December 31, 2018.
Capital and Ground Leases Arrangements
In 2015, we entered into a ground lease for the land and building located at 30 East 40th Street with a lease term ending in
August 2114. Based on our evaluation of the arrangement under ASC 840, land was estimated to be approximately 63.6% of the
fair market value of the property. The portion attributable to land was classified as operating lease with an expiration date of 2114
($76.0 million total over the lease term attributed to ground rent) and the remainder as a capital lease in the amount of $20.0
million. The ground rent will reset in 2035.
The property located at 420 Lexington Avenue operates under a ground lease ($10.9 million of ground rent annually through
December 2019, $11.2 million of ground rent annually through December 2029, and $12.3 million annually afterwards, subject
Board on Labor Relations, Inc. and certain other employers. The Health Plan provides health and other benefits to eligible
participants employed in the building service industry who are covered under collective bargaining agreements, or other written
agreements, with the Union. The Health Plan is administered by a Board of Trustees with equal representation by the employers
and the Union and operates under employer identification number 13-2928869. The Health Plan receives contributions in
accordance with collective bargaining agreements or participation agreements. Generally, these agreements provide that the
employers contribute to the Health Plan at a fixed rate on behalf of each covered employee. For the Health Plan years ended,
June 30, 2018, 2017, and 2016, the plan received contributions from employers totaling $1.4 billion, $1.3 billion and $1.2 billion,
respectively. Our contributions to the Health Plan represent less than 5.0% of total contributions to the plan.
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
to a one-time adjustment based on 6% of the fair value of the land) with an expiration date of 2050 and two options to renew for
an additional 30 years.
Selected consolidated results of operations for the years ended December 31, 2018, 2017, and 2016, and selected asset
information as of December 31, 2018 and 2017, regarding our operating segments are as follows (in thousands):
The property located at 1080 Amsterdam Avenue operates under a ground and capital lease with an expiration date of 2111
($41.6 million total over the lease term attributed to ground rent). Land was estimated to be 40.0% of the fair market value of the
property, which was classified as an operating lease. The remainder was classified as a capital lease. The ground rent will reset in
2038.
The property located at 711 Third Avenue operates under an operating sub-lease with an expiration date of 2033 and five
options to renew for an additional 10 years each. The ground rent was reset in July 2011. Following the reset, we were responsible
for ground rent payments of $5.25 million annually through July 2016 and then $5.5 million annually thereafter on the 50% portion
of the fee that we do not own. The ground rent will reset in July 2021 to the greater of $5.5 million or 7.75% of the fair value of
the land.
The property located at 461 Fifth Avenue operates under a ground lease ($2.1 million of ground rent annually) with an
expiration date of 2027 and two options to renew for an additional 21 years each, followed by a third option for 15 years. We also
have an option to purchase the fee position for a fixed price on a specific date.
The property located at 625 Madison Avenue operates under a ground lease ($4.6 million of ground rent annually) with an
expiration date of 2022 and two options to renew for an additional 32 years.
The property located at 1185 Avenue of the Americas operates under a ground lease ($6.9 million of ground rent annually)
with an expiration date of 2043.
The property located at 1055 Washington Boulevard operates under a ground lease ($0.6 million of ground rent annually)
with an expiration date of 2090.
The following is a schedule of future minimum lease payments under capital leases and non-cancellable operating leases
with initial terms in excess of one year as of December 31, 2018 (in thousands):
2019
2020
2021
2022
2023
Thereafter
Total minimum lease payments
Amount representing interest
Capital lease obligations
Capital lease
Non-cancellable
operating leases (1)
$
$
$
2,411
$
2,620
2,794
2,794
2,794
817,100
830,513
$
(786,897)
43,616
31,066
31,436
31,628
29,472
27,166
676,090
826,858
(1) As of December 31, 2018, the total minimum sublease rentals to be received in the future under non-cancellable subleases is $1.7 billion.
21. Segment Information
The Company has two reportable segments, real estate and debt and preferred equity investments. We evaluate real estate
performance and allocate resources based on earnings contributions.
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, insurance, real estate taxes and ground rent
expense (at certain applicable properties). See Note 5, "Debt and Preferred Equity Investments," for additional details on our debt
and preferred equity investments.
Total revenues
Years ended:
December 31, 2018
December 31, 2017
December 31, 2016
Net Income
Years ended:
December 31, 2018
December 31, 2017
December 31, 2016
Total assets
As of:
December 31, 2018
December 31, 2017
Real Estate
Segment
Debt and
Preferred Equity
Segment
Total Company
$
$
1,025,900
$
201,492
$
1,317,602
1,650,973
193,871
213,008
1,227,392
1,511,473
1,863,981
129,253
$
141,603
$
(69,294)
74,655
170,363
204,256
270,856
101,069
278,911
$
10,481,594
$
2,269,764
$
11,598,438
2,384,466
12,751,358
13,982,904
Interest costs for the debt and preferred equity segment include actual costs incurred for borrowings on the 2016 MRA and
2017 MRA. Interest is imputed on the investments that do not collateralize the 2016 MRA or 2017 MRA using our weighted
average corporate borrowing cost. We also allocate loan loss reserves, net of recoveries, and transaction related costs to the debt
and preferred equity segment. We do not allocate marketing, general and administrative expenses to the debt and preferred equity
segment since the use of personnel and resources is dependent on transaction volume between the two segments and varies period
over period. In addition, we base performance on the individual segments prior to allocating marketing, general and administrative
expenses. For the years ended, December 31, 2018, 2017, and 2016 marketing, general and administrative expenses totaled $92.6
million, $100.5 million, and $99.8 million respectively. All other expenses, except interest, relate entirely to the real estate assets.
There were no transactions between the above two segments.
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2018
22. Quarterly Financial Data of the Company (unaudited)
23. Quarterly Financial Data of the Operating Partnership (unaudited)
Summarized quarterly financial data for the years ended December 31, 2018 and 2017 was as follows (in thousands, except
Summarized quarterly financial data for the years ended December 31, 2018 and 2017 was as follows (in thousands, except
December 31
September 30
June 30
March 31
$
317,036
$
307,545
$
301,116
$
301,695
(265,553)
(258,303)
(258,282)
971
4,702
4,036
Equity in net (loss) income from unconsolidated joint ventures
for per share amounts):
2018 Quarter Ended
Total revenues
Total expenses
Equity in net income from unconsolidated joint ventures
Equity in net gain (loss) on sale of interest in unconsolidated joint
venture/real estate
Gain (loss) on sale of real estate, net
Purchase price and other fair value adjustments
Depreciable real estate reserves and impairment
Loss on early extinguishment of debt
Noncontrolling interests and preferred unit distributions
Net income attributable to SL Green
Perpetual preferred stock dividends
(267,678)
(2,398)
167,445
(36,984)
—
(220,852)
(14,889)
838
(57,482)
(3,737)
Net (loss) income attributable to SL Green common stockholders
Net (loss) income attributable to common stockholders per
common share—basic
Net (loss) income attributable to common stockholders per
common share—diluted
$
$
$
(61,219) $
(0.73) $
(0.73) $
70,937
(2,504)
(3,057)
(6,691)
(2,194)
(7,507)
91,947
(3,738)
88,209
1.03
1.03
$
$
$
72,025
(14,790)
11,149
—
—
(8,606)
107,293
(3,737)
103,556
1.19
1.19
$
$
$
(6,440)
23,521
49,293
—
—
(8,319)
105,504
(3,738)
101,766
1.12
1.12
for per share amounts):
2018 Quarter Ended
Total revenues
Total expenses
Equity in net gain (loss) on sale of interest in unconsolidated joint
venture/real estate
(Loss) gain on sale of real estate, net
Purchase price and other fair value adjustments
Depreciable real estate reserves and impairment
Loss on early extinguishment of debt
Noncontrolling interests and preferred unit distributions
Net income attributable to SLOP
Perpetual preferred units distributions
Net (loss) income attributable to SLGOP common unitholders
Net (loss) income attributable to common unitholders per
common share—basic
Net (loss) income attributable to common unitholders per
common share—diluted
$
$
$
(64,658) $
(0.73) $
(0.73) $
December 31
September 30
June 30
March 31
$
317,036
$
307,545
$
301,116
$
301,695
(267,678)
(2,398)
167,445
(36,984)
—
(220,852)
(14,889)
(2,601)
(60,921)
(3,737)
(265,553)
(258,303)
(258,282)
971
4,702
4,036
70,937
(2,504)
(3,057)
(6,691)
(2,194)
(2,710)
96,744
(3,738)
93,006
1.03
1.03
$
$
$
72,025
(14,790)
11,149
—
—
(3,020)
112,879
(3,737)
109,142
1.19
1.19
$
$
$
(6,440)
23,521
49,293
—
—
(3,047)
110,776
(3,738)
107,038
1.12
1.12
2017 Quarter Ended
Total revenues
Total expenses
December 31
September 30
June 30
March 31
$
361,342
$
374,600
$
398,150
$
377,381
(314,108)
(333,913)
(365,749)
(332,675)
2017 Quarter Ended
Total revenues
Total expenses
December 31
September 30
June 30
March 31
$
361,342
$
374,600
$
398,150
$
377,381
(314,108)
(333,913)
(365,749)
(332,675)
Equity in net income from unconsolidated joint ventures
Equity in net gain on sale of interest in unconsolidated joint
venture/real estate
Gain (loss) on sale of real estate, net
Depreciable real estate reserves and impairment
Gain on the sale of investment in marketable securities
Noncontrolling interests and preferred unit distributions
Net income attributable to SL Green
Perpetual preferred stock dividends
Net income attributable to SL Green common stockholders
Net income attributable to common stockholders per common
share—basic
Net income attributable to common stockholders per common
share—diluted
$
$
$
7,788
—
76,497
(93,184)
—
(6,616)
31,719
(3,737)
27,982
0.29
0.29
$
$
$
4,078
1,030
—
—
—
(3,188)
42,607
(3,738)
38,869
0.40
0.40
$
$
$
3,412
13,089
(3,823)
(29,064)
—
(4,056)
11,959
(3,737)
8,222
0.08
0.08
$
$
$
6,614
2,047
567
(56,272)
3,262
14,165
15,089
(3,738)
11,351
0.11
0.11
Equity in net income from unconsolidated joint ventures
Equity in net gain on sale of interest in unconsolidated joint
venture/real estate
Gain (loss) on sale of real estate, net
Depreciable real estate reserves and impairment
Gain on the sale of investment in marketable securities
Noncontrolling interests and preferred unit distributions
Net income attributable to SLOP
Perpetual preferred units distributions
Net income attributable to SLGOP common unitholders
Net income attributable to common unitholders per common
share—basic
Net income attributable to common unitholders per common
share—diluted
$
$
$
7,788
—
76,497
(93,184)
—
(5,328)
33,007
(3,737)
29,270
0.29
0.29
$
$
$
4,078
1,030
—
—
—
(1,376)
44,419
(3,738)
40,681
0.40
0.40
$
$
$
3,412
13,089
(3,823)
(29,064)
—
(3,637)
12,378
(3,737)
8,641
0.08
0.08
$
$
$
6,614
2,047
567
(56,272)
3,262
14,641
15,565
(3,738)
11,827
0.11
0.11
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Schedule II - Valuation and Qualifying Accounts
December 31, 2018
(in thousands)
Column A
Column B
Column C
Balance at
Beginning of
Year
Additions
Charged Against
Operations
Column D
Uncollectible
Accounts
Written-off/
Recovery (1)
Column E
Balance at
End of Year
Description
Year Ended December 31, 2018
Tenant and other receivables—allowance
Deferred rent receivable—allowance
Year Ended December 31, 2017
Tenant and other receivables—allowance
Deferred rent receivable—allowance
Year Ended December 31, 2016
Tenant receivables—allowance
Deferred rent receivable—allowance
$
$
$
$
$
$
18,637
17,207
16,592
25,203
17,618
21,730
$
$
$
$
$
$
3,726
491
6,106
2,321
10,630
13,620
$
$
$
$
$
$
(6,661) $
(2,241) $
(4,061) $
(10,317) $
(11,656) $
(10,147) $
15,702
15,457
18,637
17,207
16,592
25,203
(1) Includes the effect of properties that were sold and/or deconsolidated within the period.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2018
(in thousands)
Column A
Column B
Column C
Initial Cost
Column D Cost
Capitalized
Subsequent To
Acquisition
Column E Gross Amount at Which
Carried at Close of Period
Column F
Column G
Column H
Column I
Description
Encumbrances
Land
Building &
Improvements
Land
Building &
Improvements
Land
Building &
Improvements
Total
Accumulated
Depreciation
Date of
Construction
Date
Acquired
Life on
Which
Depreciation is
Computed
420 Lexington
Ave(1)
711 Third
Avenue(1)
555 W.
57th Street(1)
220 East
42nd Street(1)
461 Fifth
Avenue(1)
750 Third
Avenue(1)
625 Madison
Avenue(1)
485 Lexington
Avenue(1)
609 Fifth
Avenue(1)
810 Seventh
Avenue(1)
1185 Avenue of
the Americas(1)
1350 Avenue of
the Americas(1)
100 Summit Lake
Drive(2)
200 Summit Lake
Drive(2)
500 Summit Lake
Drive(2)
360 Hamilton
Avenue(2)
1-6 Landmark
Square(3)
7 Landmark
Square(3)
1010 Washington
Boulevard(3)
1055 Washington
Boulevard(3)
1 Madison
Avenue(1)
100 Church
Street(1)
125 Park
Avenue(1)
Williamsburg(4)
110 East
42nd Street(1)
400 East
58th Street(1)(5)
752 Madison
Avenue(1)
762 Madison
Avenue(1)(5)
19-21 East
65th Street(1)
304 Park
Avenue(1)
635 Sixth
Avenue(1)
641 Sixth
Avenue(1)
1080
Amsterdam(1)(6)
315 West 33rd
Street(1)
562 Fifth
Avenue(1)
$
300,000
$
— $
107,832
$
— $
225,667
$
— $
333,499
$
333,499
$
133,978
1927
3/1998
Various
—
—
—
—
—
—
19,844
18,846
42,499
78,704
—
—
73,270
19,844
115,769
135,613
45,066
1955
5/1998
Various
62,242
18,846
140,946
159,792
69,817
1971
1/1999
Various
50,373
203,727
635
161,705
51,008
365,432
416,440
108,450
1929
2/2003
Various
—
62,695
51,093
205,972
—
246,673
—
—
—
25,581
—
88,276
88,276
29,680
1988
10/2003
Various
45,551
51,093
251,523
302,616
101,854
1958
7/2004
Various
44,646
—
291,319
291,319
118,380
1956
10/2004
Various
450,000
77,517
326,825
765
125,806
78,282
452,631
530,913
183,003
1956
12/2004
Various
—
—
—
—
—
—
—
—
36,677
145,954
114,077
476,386
—
728,213
—
—
—
49,527
36,677
195,481
232,158
43,777
1925
6/2006
Various
74,433
114,077
550,819
664,896
176,354
1970
1/2007
Various
62,893
—
791,106
791,106
265,896
1969
1/2007
Various
91,038
380,744
(97)
50,773
90,941
431,517
522,458
136,853
1966
1/2007
Various
10,526
11,183
43,109
(3,337)
(94)
7,189
43,015
50,204
18,936
1988
1/2007
Various
47,906
(5,321)
(9,102)
5,862
38,804
44,666
21,203
1990
1/2007
Various
9,777
39,048
(3,601)
(7,875)
6,176
31,173
37,349
14,523
1986
1/2007
Various
29,497
118,250
(2,625)
8,005
26,872
126,255
153,127
43,901
2000
1/2007
Various
100,000
50,947
195,167
(23,095)
(33,824)
27,852
161,343
189,195
79,012
1973-1984
1/2007
Various
—
—
—
—
2,088
7,747
7,748
(367)
669
1,721
8,417
10,138
1,539
2007
1/2007
Various
30,423
(1,259)
2,928
6,488
33,351
39,839
12,489
1988
1/2007
Various
13,516
53,228
(5,130)
(9,986)
8,386
43,242
51,628
20,382
1987
6/2007
Various
172,641
654,394
905
18,411
173,546
672,805
846,351
193,033
1960
8/2007
Various
213,208
32,494
79,996
2,500
103,936
34,994
183,932
218,926
53,269
1959
1/2010
Various
—
—
—
120,900
3,677
189,714
14,708
—
2,523
80,884
(4,550)
120,900
6,200
270,598
10,158
391,498
16,358
77,542
2,127
1923
2010
10/2010
12/2010
Various
Various
34,000
46,411
2,196
31,942
36,196
78,353
114,549
17,400
1921
5/2011
Various
39,931
17,549
30,916
—
7,833
17,549
38,749
56,298
6,119
1929
1/2012
Various
—
282,415
7,131
1,871
1,183
284,286
8,314
292,600
1,380
1996/2012
1/2012
Various
771
6,153
10,461
—
—
—
—
—
54,189
24,180
45,668
35,807
—
7,389
75,619
37,158
67,316
27,445
250,000
195,834
164,429
—
57,052
10,487
—
—
300
163
308
—
—
—
109
6,153
10,570
16,723
1,884
1910
1/2012
Various
1,100
—
8,489
8,489
1,228
1928-1940
1/2012
Various
15,024
54,489
90,643
145,132
19,315
1930
6/2012
Various
51,103
24,343
88,261
112,604
10,931
1902
9/2012
Various
9,760
45,976
77,076
123,052
15,891
1902
9/2012
Various
20,503
—
47,948
47,948
5,441
1932
10/2012
Various
15,133
195,834
179,562
375,396
25,397
2000-2001
11/2013
Various
1,213
57,052
11,700
68,752
4,458
1909/1920/19
21
11/2013
Various
98
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SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2018
(in thousands)
Column A
Column B
Column C
Initial Cost
Column D Cost
Capitalized
Subsequent To
Acquisition
Column E Gross Amount at Which
Carried at Close of Period
Column F
Column G
Column H
Column I
Description
Encumbrances
Land
Building &
Improvements
Land
Building &
Improvements
Land
Building &
Improvements
Total
Accumulated
Depreciation
Date of
Construction
Date
Acquired
Life on
Which
Depreciation is
Computed
719 Seventh
Avenue(1)(7)
115 Spring
Street(1)
1640 Flatbush
Avenue(4)
110 Greene
Street(1)(5)
185 Broadway(1)
(8)
30 East 40th
Street(1)(9)
133 Greene
Street(1)
712 Madison
Avenue(1)
Other(10)
Total
50,000
41,850
—
(670)
46,232
41,180
46,232
87,412
65,550
11,078
—
—
6,226
45,120
44,799
501
215,470
—
—
—
1,850
11,078
46,649
57,727
503
6,226
1,004
7,230
12,923
45,120
228,393
273,513
23,683
111,869
13,400
34,175
32,022
(6,310)
45,422
27,865
73,287
—
4,650
15,523
3,446
28,000
—
7,207
1,738
20,000
27,542
47,397
16,225
2
—
—
(2)
6,654
4,652
26,654
31,306
—
—
(1)
3,446
7,207
1,736
27,542
30,988
47,397
16,224
54,604
17,960
$
1,660,659
$ 1,776,213
$
5,370,786
$
(1,314)
$
1,368,250
$ 1,774,899
$
6,739,036
$ 8,513,935
$
2,099,137
3,025
5,248
50
419
2,017
119
1927
7/2014
Various
1900
1966
1910
1921
1927
7/2014
3/2015
7/2015
8/2015
8/2015
Various
Various
Various
Various
Various
1900
10/2018
Various
—
1900/1980
12/2018
Various
4,068
Property located in New York, New York.
(1)
Property located in Westchester County, New York.
(2)
Property located in Connecticut.
(3)
(4)
Property located in Brooklyn, New York.
(5) We own a 90.0% interest in this property.
(6) We own a 92.5% interest in this property.
(7) We own a 75.0% interest in this property.
(8)
(9) We own a 60.0% interest in this property.
(10) Other includes tenant improvements of eEmerge, capitalized interest and corporate improvements.
Properties at 5-7 Dey Street, 183 Broadway, and 185 Broadway were demolished in preparation of the development site for the 185 Broadway project.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2018
(in thousands)
The changes in real estate for the years ended December 31, 2018, 2017 and 2016 are as follows (in thousands):
Balance at beginning of year
Property acquisitions
Improvements
Retirements/disposals/deconsolidation
Balance at end of year
2018
2017
2016
$
10,206,122
$
12,743,332
$
16,681,602
52,939
267,726
13,323
342,014
29,230
426,060
(2,012,852)
(2,892,547)
(4,393,560)
$
8,513,935
$
10,206,122
$
12,743,332
The aggregate cost of land, buildings and improvements, before depreciation, for Federal income tax purposes at
December 31, 2018 was $9.9 billion (unaudited).
The changes in accumulated depreciation, exclusive of amounts relating to equipment, autos, and furniture and fixtures,
for the years ended December 31, 2018, 2017 and 2016 are as follows (in thousands):
Balance at beginning of year
Depreciation for year
Retirements/disposals/deconsolidation
Balance at end of year
2018
2017
2016
$
2,300,116
$
2,264,694
$
2,060,706
245,033
(446,012)
347,015
(311,593)
353,502
(149,514)
$
2,099,137
$
2,300,116
$
2,264,694
100
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Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of SL Green Realty Corp.
To the Shareholders and the Board of Directors of SL Green Realty Corp.
Opinion on the Financial Statements
Opinion on Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of SL Green Realty Corp. (the Company) as of December 31,
2018 and 2017, the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the
three years in the period ended December 31, 2018, and the related notes and financial statement schedules listed in the Index at
Item 15(a)(2) (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) and our report dated February 26, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company‘s auditor since 1997.
New York, New York
February 26, 2019
We have audited SL Green Realty Corp.'s internal control over financial reporting as of December 31, 2018, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, SL Green Realty Corp. (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the 2018 consolidated financial statements of the Company and our report dated February 26, 2019 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
New York, New York
February 26, 2019
102
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Report of Independent Registered Public Accounting Firm
.
Report of Independent Registered Public Accounting Firm
To the Partners of SL Green Operating Partnership, L.P.
Opinion on the Financial Statements
To the Partners of SL Green Operating Partnership, L.P.
Opinion on Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of SL Green Operating Partnership, L.P. (the Operating
Partnership) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, capital
and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and financial statement
schedules listed in the Index at Item 15(a)(2) (collectively referred to as the "consolidated financial statements"). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Operating Partnership at
December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2018, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Operating Partnership's internal control over financial reporting as of December 31, 2018, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) and our report dated February 26, 2019 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Operating Partnership's management. Our responsibility is to express
an opinion on the Operating Partnership's financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Operating Partnership's auditor since 2010.
New York, New York
February 26, 2019
We have audited SL Green Operating Partnership L.P.'s internal control over financial reporting as of December 31, 2018,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, SL Green Operating Partnership, L.P. (the
Operating Partnership) maintained, in all material respects, effective internal control over financial reporting as of December 31,
2018, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the 2018 consolidated financial statements of the Operating Partnership and our report dated February 26, 2019
expressed an unqualified opinion thereon.
Basis for Opinion
The Operating Partnership's management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Operating Partnership's
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
New York, New York
February 26, 2019
104
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As of the end of the period covered by this report, the Operating Partnership carried out an evaluation, under the supervision
and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of the Operating
Partnership's general partner, of the effectiveness of the design and operation of the Operating Partnership's disclosure controls
and procedures. Based upon that evaluation as of the end of the period covered by this report, the Chief Executive Officer and
Chief Financial Officer of the Operating Partnership's general partner concluded that the Operating Partnership's disclosure controls
and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information
relating to the Operating Partnership that would potentially be subject to disclosure under the Exchange Act and the rules and
regulations promulgated thereunder.
Management’s Report on Internal Control over Financial Reporting
The Operating Partnership is responsible for establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Exchange Act Rules 13a-15 (f) and 15d-15 (f). Under the supervision and with the participation of our
management, including the Chief Executive Officer and Chief Financial Officer of the Operating Partnership's general partner,
the Operating Partnership conducted an evaluation of the effectiveness of its internal control over financial reporting as of
December 31, 2018 based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 Framework) (COSO). Based on that evaluation, the Operating Partnership
concluded that its internal control over financial reporting was effective as of December 31, 2018.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
The effectiveness of the Operating Partnership's internal control over financial reporting as of December 31, 2018 has been
audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control over Financial Reporting
There have been no significant changes in the Operating Partnership's internal control over financial reporting during the
year ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, its internal control over
financial reporting.
CONTROLS AND PROCEDURES
SL GREEN REALTY CORP.
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be
disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including
the Company's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e) of the Exchange Act.
Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required
to be set forth in our periodic reports. Also, the Company has investments in certain unconsolidated entities. As the Company does
not control these entities, its disclosure controls and procedures with respect to such entities are necessarily substantially more
limited than those the Company maintains with respect to its consolidated subsidiaries.
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with
the participation of the Company's management, including our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation as of the end of
the period covered by this report, the Company's Chief Executive Officer and Chief Financial Officer concluded that its disclosure
controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of
information relating to the Company that would potentially be subject to disclosure under the Exchange Act and the rules and
regulations promulgated thereunder.
Management's Report on Internal Control over Financial Reporting
The Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of the Company's
management, including our Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the
effectiveness of our internal control over financial reporting as of December 31, 2018 based on the framework in Internal Control
—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework)
(COSO). Based on that evaluation, the Company concluded that its internal control over financial reporting was effective as of
December 31, 2018.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2018 has been audited by
Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control over Financial Reporting
There have been no significant changes in the Company's internal control over financial reporting during the year ended
December 31, 2018 that has materially affected, or is reasonably likely to materially affect, its internal control over financial
reporting.
SL GREEN OPERATING PARTNERSHIP, L.P.
Evaluation of Disclosure Controls and Procedures
The Operating Partnership maintains disclosure controls and procedures that are designed to ensure that information required
to be disclosed in the Operating Partnership's Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Operating
Partnership's management, including the Chief Executive Officer and Chief Financial Officer of the Operating Partnership's general
partner, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure
controls and procedures” in Rule 13a-15(e) of the Exchange Act. Notwithstanding the foregoing, a control system, no matter how
well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the
Operating Partnership to disclose material information otherwise required to be set forth in the Operating Partnership's periodic
reports. Also, the Operating Partnership has investments in certain unconsolidated entities. As the Operating Partnership does not
control these entities, the Operating Partnership's disclosure controls and procedures with respect to such entities are necessarily
substantially more limited than those it maintains with respect to its consolidated subsidiaries.
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MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
The following table summarizes information, as of December 31, 2018, relating to our equity compensation plans pursuant
to which shares of our common stock or other equity securities may be granted from time to time.
Plan category
Number of securities
to be issued
upon exercise
of outstanding
options, warrants
and rights
(a)
Weighted
average
exercise
price of
outstanding
options,
warrants and
rights
(b)
Number of securities
remaining available
for future
issuance under
equity compensation
plans (excluding
securities reflected
in column (a))
(c)
Equity compensation plans approved by security holders (1)
3,655,400 (2) $
101.28 (3)
7,086,746 (4)
Equity compensation plans not approved by security
holders
Total
—
3,655,400
$
—
101.28
—
7,086,746
(1)
(2)
(3)
(4)
Includes our Fourth Amended and Restated 2005 Stock Option and Incentive Plan, Amended 1997 Stock Option and Incentive Plan, as amended, and 2008
Employee Stock Purchase Plan.
Includes (i) 1,137,017 shares of common stock issuable upon the exercise of outstanding options (783,035 of which are vested and exercisable), (ii) 32,250
restricted stock units and 113,492 phantom stock units that may be settled in shares of common stock (113,492 of which are vested), (iii) 2,328,675 LTIP
units that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to us for redemption and acquired by us
for shares of our common stock (1,800,827 of which are vested).
Because there is no exercise price associated with restricted stock units, phantom stock units or LTIP units, these awards are not included in the weighted-
average exercise price calculation.
Balance is after reserving for shares underlying outstanding restricted stock units, phantom stock units granted pursuant to our Non-Employee Directors'
Deferral Program and LTIP Units. The number of securities remaining available consists of shares remaining available for issuance under our 2008 Employee
Stock Purchase Plan and Third Amended and Restated 2005 Stock Option and Incentive Plan.
SL GREEN REALTY CORP.
Our common stock trades on the New York Stock Exchange, or the NYSE, under the symbol "SLG." On February 25, 2019,
the reported closing sale price per share of common stock on the NYSE was $91.18 and there were 391 holders of record of our
common stock.
SL GREEN OPERATING PARTNERSHIP, L.P.
At December 31, 2018, there were 4,130,579 units of limited partnership interest of the Operating Partnership outstanding
and held by persons other than the Company, which received distributions per unit of the same amount and in the same manner
as dividends per share were distributed to common stockholders.
There is no established public trading market for the common units of the Operating Partnership. On February 25, 2019,
there were 35 holders of record and 88,489,537 common units outstanding, 84,325,436 of which were held by SL Green.
In order for SL Green to maintain its qualification as a REIT, it must make annual distributions to its stockholders of at least
90% of its taxable income (not including net capital gains). SL Green has adopted a policy of paying regular quarterly dividends
on its common stock, and the Operating Partnership has adopted a policy of paying regular quarterly distributions to its common
units in the same amount as dividends paid by SL Green. Cash distributions have been paid on the common stock of SL Green
and the common units of the Operating Partnership since the initial public offering of SL Green. Distributions are declared at the
discretion of the board of directors of SL Green and depend on actual and anticipated cash from operations, financial condition,
capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code and other
factors SL Green’s board of directors may consider relevant.
Each time SL Green issues shares of stock (other than in exchange for common units of limited partnership interest of the
Operating Partnership, or OP Units, when such OP Units are presented for redemption), it contributes the proceeds of such issuance
to the Operating Partnership in return for an equivalent number of units of limited partnership interest with rights and preferences
analogous to the shares issued.
ISSUER PURCHASES OF EQUITY SECURITIES
In August 2016, our Board of Directors approved a share repurchase plan under which we can buy up to $1.0 billion of shares
of our common stock. The Board of Directors has since authorized three separate $500.0 million increases to the size of the share
repurchase program in the fourth quarter of 2017, second quarter of 2018, and fourth quarter of 2018, bringing the total program
size to $2.5 billion.
At December 31, 2018 repurchases executed under the plan were as follows:
Period
Year ended 2017
First quarter 2018
Second quarter 2018
Third quarter 2018
Fourth quarter 2018
Shares repurchased
Average price paid per
share
Cumulative number of
shares repurchased as
part of the repurchase
plan or programs
8,342,411
3,653,928
3,479,552
252,947
2,358,484
$101.64
$97.07
$97.22
$99.75
$93.04
8,342,411
11,996,339
15,475,891
15,728,838
18,087,322
SALE OF UNREGISTERED AND REGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED
SECURITIES
During the year ended December 31, 2018, we issued 160,466 shares of our common stock to holders of units of limited
partnership interest in the Operating Partnership upon the redemption of such units pursuant to the partnership agreement of the
Operating Partnership. During the years ended December 31, 2017 and 2016, we issued 201,696, and 292,291 shares of our
common stock, respectively, to holders of units of limited partnership interest in the Operating Partnership upon the redemption
of such units pursuant to the partnership agreement of the Operating Partnership. The issuance of such shares was exempt from
registration under the Securities Act, pursuant to the exemption contemplated by Section 4(a)(2) thereof for transactions not
involving a public offering. The units were exchanged for an equal number of shares of our common stock.
108
109
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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by
indicated:
following persons on behalf of
the capacities and on
registrant and
the dates
the
in
the
Signatures
Title
Date
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has
thereunto duly authorized.
the undersigned,
its behalf by
signed on
to be
report
this
duly caused
SIGNATURES
/s/ Marc Holliday
Marc Holliday
/s/ Andrew W. Mathias
Andrew W. Mathias
and
Chairman of the Board of Directors and Chief
Executive Officer of SL Green, the sole general
partner of the Operating Partnership (Principal
Executive Officer)
February 26, 2019
President and Director of SL Green, the sole general
partner of the Operating Partnership
$
February 26, 2019
$
Dated: February 26, 2019
SL GREEN REALTY CORP.
By:
/s/ Matthew J. DiLiberto
Matthew J. DiLiberto
Chief Financial Officer
/s/ Matthew J. DiLiberto
Matthew J. DiLiberto
Chief Financial Officer of
SL Green, the sole general partner of
the Operating Partnership (Principal Financial and
Accounting Officer)
/s/ Stephen L. Green
Stephen L. Green
Director of SL Green, the sole general
partner of the Operating Partnership
net
/s/ John H. Alschuler, Jr.
John H. Alschuler, Jr.
Director of SL Green, the sole general
partner of the Operating Partnership
February 26, 2019
)
February 26, 2019
February 26, 2019
/s/ Edwin T. Burton, III
Edwin T. Burton, III
Director of SL Green, the sole general
partner of the Operating Partnership
$
February 26, 2019
$
________________________________________________________________________________________________________________________
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of SL Green Realty Corp. hereby
severally constitute Marc Holliday and Matthew J. DiLiberto, and each of them singly, our true and lawful attorneys and with full
power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the Annual Report on
Form 10-K filed herewith and any and all amendments to said Annual Report on Form 10-K, and generally to do all such things
in our names and in our capacities as officers and directors to enable SL Green Realty Corp. to comply with the provisions of the
Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, hereby ratifying
and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Annual Report on Form 10-K
and any and all amendments thereto.
to
/s/ John S. Levy
John S. Levy
/s/ Craig M. Hatkoff
Craig M. Hatkoff
/s/ Betsy S. Atkins
of
Director of SL Green, the sole general
partner of the Operating Partnership
February 26, 2019
Director of SL Green, the sole general
partner of the Operating Partnership
February 26, 2019
$
$
TOTAL RETURN TO SHAREHOLDERS
Betsy S. Atkins
Director of SL Green, the sole general
partner of the Operating Partnership
/s/ Lauren B. Dillard
(Based on $100 investment made)
(Includes reinvestment of dividends)
Lauren B. Dillard
Director of SL Green, the sole general
partner of the Operating Partnership
February 26, 2019
February 26, 2019
110
111
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Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has
thereunto duly authorized.
the undersigned,
its behalf by
signed on
to be
report
this
duly caused
SIGNATURES
Dated: February 26, 2019
SL GREEN OPERATING PARTNERSHIP, L.P.
By:
SL Green Realty Corp.
By:
/s/ Matthew J. DiLiberto
Matthew J. DiLiberto
Chief Financial Officer
________________________________________________________________________________________________________________________
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of SL Green Realty Corp., the
sole general partner of SL Green Operating Partnership, L.P., hereby severally constitute Marc Holliday and Matthew J. DiLiberto,
and each of them singly, our true and lawful attorneys and with full power to them, and each of them singly, to sign for us and in
our names in the capacities indicated below, the Annual Report on Form 10-K filed herewith and any and all amendments to said
Annual Report on Form 10-K, and generally to do all such things in our names and in our capacities as officers and directors to
enable SL Green Operating Partnership, L.P. to comply with the provisions of the Securities Exchange Act of 1934, as amended,
and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be
signed by our said attorneys, or any of them, to said Annual Report on Form 10-K and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by
indicated:
following persons on behalf of
the capacities and on
registrant and
the dates
the
in
the
Signatures
Title
Date
/s/ Marc Holliday
Marc Holliday
/s/ Andrew W. Mathias
Andrew W. Mathias
Chairman of the Board of Directors and Chief
Executive Officer (Principal Executive Officer)
February 26, 2019
President and Director
February 26, 2019
/s/ Matthew J. DiLiberto
Matthew J. DiLiberto
Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Stephen L. Green
Stephen L. Green
/s/ John H. Alschuler Jr.
John H. Alschuler, Jr.
/s/ Edwin T. Burton, III
Edwin T. Burton, III
/s/ John S. Levy
John S. Levy
/s/ Craig M. Hatkoff
Craig M. Hatkoff
/s/ Betsy S. Atkins
Betsy S. Atkins
/s/ Lauren B. Dillard
Lauren B. Dillard
Director
Director
Director
Director
Director
Director
Director
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
112
113
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(i)
(ii)
(iii)
Registration Statement (Form S-3 Nos. 333-70111, 333-30394, 333 62434, 333-126058, 333-211945, 333-228887
and 333-223209) of SL Green Realty Corp. and the related Prospectuses;
Registration Statement (Form S-8 Nos. 333-61555, 333-87485, 333-89964, 333-127014, 333-143721, 333-189362
and 333-212108) pertaining to the Stock Option and Incentive Plans of SL Green Realty Corp., and
Registration Statement (Form S-8 No. 333-148973) pertaining to the 2008 Employee Stock Purchase Plan of SL Green
Realty Corp.,
of our reports dated February 26, 2019, with respect to the consolidated financial statements of SL Green Realty Corp and the
effectiveness of internal control over financial reporting of SL Green Realty Corp., included in this Annual Report (Form 10-K)
for the year ended December 31, 2018.
New York, New York
February 26, 2019
/s/ Ernst & Young LLP
Table of Contents
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by
indicated:
following persons on behalf of
the capacities and on
registrant and
the dates
the
in
the
Signatures
Title
Date
/s/ Marc Holliday
Marc Holliday
/s/ Andrew W. Mathias
Andrew W. Mathias
Chairman of the Board of Directors and Chief
Executive Officer of SL Green, the sole general
partner of the Operating Partnership (Principal
Executive Officer)
February 26, 2019
President and Director of SL Green, the sole general
partner of the Operating Partnership
February 26, 2019
/s/ Matthew J. DiLiberto
Matthew J. DiLiberto
Chief Financial Officer of
SL Green, the sole general partner of
the Operating Partnership (Principal Financial and
Accounting Officer)
/s/ Stephen L. Green
Stephen L. Green
Director of SL Green, the sole general
partner of the Operating Partnership
/s/ John H. Alschuler, Jr.
John H. Alschuler, Jr.
Director of SL Green, the sole general
partner of the Operating Partnership
/s/ Edwin T. Burton, III
Edwin T. Burton, III
Director of SL Green, the sole general
partner of the Operating Partnership
/s/ John S. Levy
John S. Levy
/s/ Craig M. Hatkoff
Craig M. Hatkoff
/s/ Betsy S. Atkins
Betsy S. Atkins
Director of SL Green, the sole general
partner of the Operating Partnership
Director of SL Green, the sole general
partner of the Operating Partnership
Director of SL Green, the sole general
partner of the Operating Partnership
/s/ Lauren B. Dillard
Lauren B. Dillard
Director of SL Green, the sole general
partner of the Operating Partnership
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
February 26, 2019
114
Consent of Independent Registered Public Accounting Firm
CERTIFICATION
Exhibit 23.2
Exhibit 31.1
We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-228887) of SL Green
Operating Partnership, L.P. and in the related Prospectus of our reports dated February 26, 2019, with respect to the consolidated
financial statements of SL Green Operating Partnership, L.P., and the effectiveness of internal control over financial reporting of
SL Green Operating Partnership, L.P., included in this Annual Report (Form 10-K) for the year ended December 31, 2018.
New York, New York
February 26, 2019
/s/ Ernst & Young LLP
I, Marc Holliday, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of SL Green Realty Corp. (the “registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 26, 2019
/s/ Marc Holliday
Name: Marc Holliday
Title:
Chairman and Chief Executive Officer
I, Matthew J. DiLiberto, certify that:
I, Marc Holliday, certify that:
CERTIFICATION
CERTIFICATION
Exhibit 31.2
Exhibit 31.3
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of SL Green Realty Corp. (the “registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of SL Green Operating Partnership, L.P. (the “registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 26, 2019
/s/ Matthew J. DiLiberto
Name: Matthew J. DiLiberto
Title:
Chief Financial Officer
Date: February 26, 2019
/s/ Marc Holliday
Name: Marc Holliday
Title:
Chairman and Chief Executive Officer
of SL Green Realty Corp., the
general partner of the registrant
Exhibit 31.4
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of SL Green Realty Corp. (the “Company”) on Form 10-K as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Marc Holliday, Chairman and Chief Executive Officer of the Company,
hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act
of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Marc Holliday
Name: Marc Holliday
Title:
Chairman and Chief Executive Officer
February 26, 2019
I, Matthew J. DiLiberto, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of SL Green Operating Partnership, L.P. (the “registrant”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: February 26, 2019
/s/ Matthew J. DiLiberto
Name: Matthew J. DiLiberto
Title:
Chief Financial Officer
of SL Green Realty Corp., the
general partner of the registrant
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
Exhibit 32.3
In connection with the Annual Report of SL Green Realty Corp. (the “Company”) on Form 10-K as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Matthew J. DiLiberto, Chief Financial Officer of the Company, hereby
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act
of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
In connection with the Annual Report of SL Green Operating Partnership, L.P. (the “Operating Partnership”) on Form 10-K as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Marc Holliday, Chairman and Chief
Executive Officer of SL Green Realty Corp, the sole general partner of the Operating Partnership, hereby certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act
of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Operating Partnership.
/s/ Matthew J. DiLiberto
Name: Matthew J. DiLiberto
Title:
Chief Financial Officer
February 26, 2019
/s/ Marc Holliday
Name: Marc Holliday
Title:
Chairman and Chief Executive Officer
of SL Green Realty Corp., the
general partner of the Operating Partnership
February 26, 2019
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.4
In connection with the Annual Report of SL Green Operating Partnership, L.P. (the “Operating Partnership”) on Form 10-K as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew J. DiLiberto, Chief Financial
Officer of SL Green Realty Corp, the sole general partner of the Operating Partnership, hereby certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act
of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Operating Partnership.
/s/ Matthew J. DiLiberto
Name: Matthew J. DiLiberto
Title:
Chief Financial Officer
of SL Green Realty Corp., the
general partner of the Operating Partnership
February 26, 2019
Corporate Directory
Board of Directors
Executive Officers
Registrar & Transfer Agent
Marc Holliday
Chairman & Chief Executive Officer
Marc Holliday
Chairman & Chief Executive Officer
Andrew W. Mathias
President
Matthew J. DiLiberto
Chief Financial Officer
Andrew S. Levine
Chief Legal Officer,
General Counsel
Counsel
Skadden, Arps, Slate,
Meagher & Flom LLP
New York, NY
Auditors
Ernst & Young LLP
New York, NY
Andrew W. Mathias
President
Stephen L. Green
Chairman Emeritus
John H. Alschuler, Jr.
Lead Independent Director;
President, HR&A Advisors Inc.
Edwin T. Burton, III
Professor of Economics,
University of Virginia
John S. Levy
Chairman, Private Investor
Craig M. Hatkoff
Co-founder, Tribeca Film Festival;
Chairman, Turtle Pond Publications, LLC
Betsy Atkins
President and CEO, Baja LLC
Lauren B. Dillard
Managing Director and
Head of Investment Solutions,
The Carlyle Group
Computershare Investor Services
P.O. Box 505000
Louisville, KY 40233-5000
Tel: 866-230-9138
www.computershare.com/investor
Stock Listing
NYSE Symbol:
SLG, SLG PrI
Investor Relations
420 Lexington Avenue
New York, NY 10170
Tel: 212-216-1654
E-mail:
investor.relations@slgreen.com
www.slgreen.com
Annual Meeting
Thursday, May 30, 2019,
10:00 a.m. ET at
Convene
237 Park Avenue
New York, NY 10017
Executive Offices
420 Lexington Avenue
New York, NY 10170
Tel: 212-594-2700
Fax: 212-216-1785
www.slgreen.com
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S L G R E E N R E A LT Y C O R P.
420 Lexington Avenue
New York, NY 10170
212.594.2700
www.slgreen.com