S L G R E E N A N N U A L R E P O R T
S L G R E E N A N N U A L R E P O R T
2 0 1 9
2 0 1 9
Financial Highlights1
22
Years
Listed
46.5M
Total
Square Feet 3
$1.7B
Combined
Revenues
97
Number of
Properties3
$7.00
+3.2%
Funds from
Operations Per Share
Funds from Operations
Per Share Growth 2
$1.7B
Liquidity
+4.6%
Dividend
Per Share Growth 2
869.4%
TRS
Since IPO
360.5%
SNL Office
REIT Index
$17.8B
Enterprise
Value
1 Data as of 12/31/2019.
2 2018 to 2019 year-over-year
growth.
3 Includes 27 Debt and Preferred
Equity investments secured by
16.4M square feet.
Total Return to Shareholders
(Includes reinvestment of dividends)
(Based on $100 investment made. $21.00 at IPO, diluted, in dollars)
$1,100
1,000
900
800
700
600
500
400
300
200
100
DEC
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
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
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“We have built a company
and a portfolio that is in it for
the duration, with the very
best office assets, current
and future.”
Marc Holliday
Chairman &
Chief Executive Officer
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Marc Holliday
Chairman &
Chief Executive Officer
Andrew W. Mathias
President
Dear
Shareholders,
We don’t yet know whether the pandemic will be
controlled in a few months or longer, or whether
New York’s economy will rebound quickly – as it has
in other recent recessions – or face a deeper decline.
What we do know, however, is that SL Green is built
to withstand these times. In moments of crisis and
market disruption, our team shines the brightest.
What a difference a couple of months makes.
Every member of our leadership team has been with
the company for at least a dozen years, and many
If I had written this letter at the beginning of March,
of us have been together since the beginning.
only seven weeks ago, I would have told you about all
Our highly strategic approach – we are New York’s
of the great things happening in New York City and at
commercial sharpshooters – means that we are better
our company, recapping another very strong year of
prepared to not only weather difficult times but thrive
accomplishments and stock price performance relative
in the aftermath as things recover.
to our New York City peers. I would have told you
about record-low unemployment and a record-high
Our response to this new threat was swift and
leasing pipeline, near-zero vacancy across our port-
comprehensive. We were at the forefront of instituting
folio, incredible progress on the construction and
new policies to keep our buildings safe and secure,
leasing of One Vanderbilt and growing stability in the
and our tenants and their employees informed. We
retail sector. And I would have highlighted our plans
immediately formed internal committees to under-
to continue executing on our corporate strategy of
stand and address the evolving situation, and we were
dispositions and stock buybacks in 2020.
early to implement expanded cleaning systems and
to identify protocols for quickly isolating and sanitizing
But we are suddenly living in unprecedented times,
areas exposed to COVID-19. Most importantly we
experiencing a disruption to our lives and businesses
were in constant contact with our tenants and their
the extent of which most of us have never seen. The
employees, providing everyone with confidence that
COVID-19 pandemic, and the subsequent near-total
our best-in-class staff and facilities were up to the
shutdown of global economic activity, have rendered
challenge. As industry leaders, we set the standard
the best-laid plans and projections uncertain and
for managing this crisis in the days and weeks following
injected volatility into the marketplace.
the first cases in New York.
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“ SL Green is built to withstand
these times. In moments of
crisis and market disruption, our
team shines the brightest.”
While office buildings may not be inherently essential,
future of New York’s economy. Just as we did in our
many of the businesses, organizations and agencies
office portfolio, SL Green worked with our contractors
that work in our portfolio are critical to keeping this
to develop and implement best practice safety
city running – medical offices, health care companies,
precautions at our construction sites to promote the
visiting nurses, major media outlets and broadcast
safety and wellbeing of all workers. This included
studios, and governmental agencies all have offices
increases in provisioning of masks, cleaning and
in our buildings. These tenants don’t have the option
sanitizing work areas, enforcement of work distancing
of working from home; they are the people on the
and even on-site medical professionals to provide
front line who need assurances that they can operate
thermal scans to ensure workers with a fever would
in buildings that are open, operating, secure, serviced
be sent home.
and free from COVID-19.
At the end of March the guidance from the State was
So we have viewed our role these past weeks as doing
revised to limit construction to only essential projects
everything we possibly can to support the heroes
that include affordable housing, infrastructure and
who are tackling the crisis and ensure that our facilities
public works, and hospitals. We again moved quickly
are ready when they need them. We are tremendously
to secure our sites, and we expect work to continue
grateful to our own front-line employees, from property
on projects that meet these essential criteria, including
managers and building engineers to security guards
critical aspects of One Vanderbilt that support transit
and cleaning staff who continue to make our buildings
infrastructure and public improvements and
best-in-class even in this environment.
185 Broadway, our Affordable New York mixed-use
project in Lower Manhattan.
At the same time, we’ve been able to maintain some
progress and momentum on the eight important
Now that we have secured our portfolio and construction
development projects that we shared with you at our
sites, it’s time to look ahead.
Investor Conference in December. The State of
New York initially identified construction as one of the
As you can imagine, we are completely reassessing
essential industries that were able to remain in operation,
our business plan for 2020 to recognize and adapt to
reflecting the enormous economic impact of these
the current situation and to be prepared to move
projects and their importance to the thousands of
decisively as conditions continue to evolve through
women and men working on them, as well as the
the spring and beyond. Fortunately, the moves that
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“ Our highly strategic approach – we
are New York’s commercial sharpshooters
– means that we are better prepared to
not only weather difficult times but thrive
in the aftermath as things recover.”
we have made over the past four to five years now
City seek to contain this pandemic might also lead to
look prescient and put us in a position to come out
cost efficiencies as, and when, we bid the construction
of this crisis stronger than ever. By monetizing nearly
work so that we expect to maintain our projected
$10 billion of real estate since 2016, deleveraging our
development yields upon completion.
balance sheet with the proceeds and buying back
stock on an accretive basis, all of which was funded
An additional bright spot is the impending completion
by asset sales, we have created a more streamlined
and opening of One Vanderbilt. Prior to the impact of
company narrowly-focused on the very best Manhattan
COVID-19, we were preparing for an August 4 ribbon-
office assets. We couldn’t have predicted the current
cutting that would have delivered this new icon to the
moment, but we’re comfortable with where we sit
New York City skyline three months ahead of schedule,
today, with substantial liquidity, generally long-dated
with more than $100 million of cost savings and already
liabilities, and a stable base of credit tenants.
over 67 percent leased. While we don’t yet know how
the delay will impact the schedule, we do expect that
While some of the work on our development projects
this year we will open a building that represents the
has been temporarily halted, those projects – and
best of everything we have to offer a modern-day
our focus on new development to create the next
tenant, in the very best location in Manhattan. For
generation of elite assets – represent the future of
us this is the culmination of a 20-year journey and we
this company when we come out the other side of
couldn’t be more proud of the outcome. We look forward
this. The projects we profiled for investors in December
to moving our own headquarters into One Vanderbilt
along with continued growth in our core portfolio add
this year, a moment that will have special meaning
nearly $300 million of projected NOI over the next
both to our company and hopefully for New York in
five years; game-changing numbers that we believe will
coinciding with the end of this moment of uncertainty.
hold up due to the extraordinary quality and location of
these projects. Our belief in these projects remains as
That said, our portfolio and deal flow is not immune
strong as ever given our confidence in the long-term
from what’s going on out there. We had one setback,
strength and viability of New York City. Should
unfortunately, when the contract for the disposition
uncertainty in the market delay other projects from
of 220 East 42nd Street failed to close in March when
breaking ground we will benefit from less competition
the buyer’s lender walked away from the deal. We
over the next three to five years as our projects come
believe we will retain the approximately $35 million
online. The resulting market pause while the State and
deposit from the buyer and maintain full optionality
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with respect to future monetization of this terrific
standing as the financial capital of the world. We have
asset that is fully leased, but it was nonetheless a
built a company and a portfolio that is in it for the
disappointing outcome. The absence of net proceeds
duration, with the very best assets, current and future.
from that sale certainly impacts our immediate ability
to meaningfully advance our share buyback program.
Undoubtedly, COVID-19 has changed the perception
So we are no longer actively doing share buybacks
of what businesses want in a work environment. As
unless and until we re-establish new sources of liquid-
businesses reopen, and we begin the process of
ity through other asset sales or internally generated
getting back to work, we will implement new standards
cash flow. We will not move off our commitment to
in the workplace to satisfy office workers, such as:
limit our buybacks to the extent of liquidity we can
generate and we are actively working to monetize
• Lobbies – passive thermal scanning, vaccination
other assets that could become sources for additional
stations, hand sanitizers, reduced elevator occupancy
deleveraging and buybacks in future.
On the tenancy and leasing front, we are very fortunate
work schedules, larger workstations/taller partitions
to have largely credit-worthy office tenants and long-
term rent rolls, and we are therefore not expecting
• De-densification – occupancy restrictions in
significant delinquency or fallout on office collections.
communal spaces such as conference rooms,
• Office Space – electrostatic cleaning, staggered
We understand the challenges that some of our
cafes and lounges
tenants, particularly our retailers, will be facing and
are attempting to work with those smaller tenants
• HVAC Systems – antimicrobial photodynamic
that have been most impacted during this difficult
therapy, bipolar ionization, electrostatic and
time. We work for the shareholders, but tenants and
pro-biotic air filtration
their employees are our customers and we will be
there for them throughout. Pre-COVID we had a
Personal space may once again be celebrated along
robust leasing pipeline, with more than one million
with inclusion of an array of new hygienic protocols
square feet of likely deals, and while much of that is
that will be enacted to ensure tenant confidence in
temporarily on hold, we had a strong first quarter of
their physical workspace. We will be well-situated to
leasing and know we can rebuild the pipeline quickly
deliver on this to our tenants as soon as workforce
once this crisis passes. We have done so coming out
limitations are lifted.
of prior downturns and we will do so again here. In
fact, we know that in situations like this, companies
In a moment of uncertainty, you can count on SL Green.
want to work with trusted partners and will move
We will ride out this storm together! On behalf of
toward the quality, service, capabilities and experience
myself, Andrew Mathias and the entire executive team,
that SL Green best exemplifies.
thank you for your continued support and partnership.
For more than 20 years, SL Green has tied its future
-
to the success of New York City. It’s a strategy that
has benefited our shareholders tremendously, first as
we grew into New York’s largest owner of commercial
real estate, and more recently as we’ve narrowed our
focus, almost exclusively, on premier Manhattan
assets and began to build a new generation of world-
class buildings. While we don’t know what the immediate
future holds, I believe that New York will bounce back
Marc Holliday
and continue to be the best place to invest in commercial
Chairman & Chief Executive Officer
real estate due to our City’s resiliency, diversity and
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Form 10-K
Table of Contents
1
Selected
Financial Data
93
Report of Independent
Registered Public
Accounting Firm
4
Management’s Discussion
and Analysis of Financial
Condition and Results
of Operations
98
Controls and
Procedures
26
Quantitative and
Qualitative Disclosure
About Market Risk
100
Market for Registrants’
Common Equity and Related
Stockholder Matters and
Issuer Purchases of Equity
Securities
28
Consolidated
Financial Data
102
Reconciliation of Non-GAAP
Financial Measures
45
Notes to Consolidated
Financial Statements
103
Signatures
89
Schedules
107
Exhibits
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.
SL GREEN REALTY CORP.
Operating Data
(in thousands, except per share data)
Total revenue
Operating expenses
Real estate taxes
Operating lease 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 (loss) 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
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
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
2019
2018
2017
2016
2015
Year Ended December 31,
$
1,238,995
$
1,227,392
$
1,511,473
$
1,863,981
$
1,662,829
234,676
190,764
33,188
190,521
11,653
272,358
—
729
100,875
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
1,034,764
1,049,816
1,346,445
1,868,599
1,585,568
(34,518)
7,311
21,892
11,874
13,028
76,181
69,389
(16,749)
(7,047)
—
—
—
303,967
57,385
(30,757)
(227,543)
—
(17,083)
—
16,166
—
73,241
(178,520)
3,262
—
—
44,009
—
238,116
(10,387)
(83)
—
—
291,487
270,856
101,069
278,911
15,844
40,078
175,974
(19,226)
—
(49)
14,549
317,459
(13,301)
(12,216)
(3,995)
(10,136)
(10,565)
3,159
(10,911)
270,434
(14,950)
255,484
3.10
3.10
3.4350
81,733
$
$
$
$
6
(11,384)
247,262
(14,950)
232,312
2.67
2.67
3.2875
86,753
$
$
$
$
15,701
(11,401)
101,374
(14,950)
$
$
$
$
86,424
0.87
0.87
3.1375
98,571
(7,644)
(11,235)
249,896
(14,950)
234,946
2.34
2.34
2.94
$
$
$
$
(15,843)
(6,967)
284,084
(14,952)
269,132
2.71
2.70
2.52
100,185
99,345
$
$
$
$
86,562
91,530
103,403
104,881
103,734
1
As of December 31,
Balance Sheet Data (in thousands)
2019
2018
2017
2016
2015
Commercial real estate, before accumulated
depreciation
$
8,784,567
$
8,513,935
$ 10,206,122
$ 12,743,332
$ 16,681,602
Total assets
12,766,320
12,751,358
13,982,904
15,857,787
19,727,646
Mortgages and other loans payable, revolving credit
facilities, term loans and senior unsecured notes and
trust preferred securities, net
5,508,137
5,541,701
5,855,132
6,481,666
10,275,453
Noncontrolling interests in the Operating Partnership
409,862
387,805
461,954
473,882
424,206
Total equity
5,517,198
5,947,855
6,589,454
7,750,911
7,719,317
Other Data (in thousands)
2019
2018
2017
2016
2015
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash (used in) provided by financing activities
Funds from operations available to all stockholders(1)
376,473
114,494
441,537
681,662
543,001
22,014
644,010
542,691
1,973,382
(2,151,702)
(528,650)
(1,094,112)
(684,956)
(2,736,402)
1,713,417
605,701
605,720
667,294
869,855
661,825
Year Ended December 31,
(1)
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 included under the heading of "Management's Discussion and Analysis of
Financial Condition and Results of Operations—Funds From Operations."
2
SL GREEN OPERATING PARTNERSHIP, L.P.
Operating Data
(in thousands, except per unit data)
Total revenue
Operating expenses
Real estate taxes
Operating lease 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 (loss) 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
Discontinued operations
Net income
Net loss (income) attributable to noncontrolling
interests in other partnerships
Preferred unit distributions
Net income attributable to SLGOP
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
2019
2018
2017
2016
2015
Year Ended December 31,
$
1,238,995
$
1,227,392
$
1,511,473
$
1,863,981
$
1,662,829
234,676
190,764
33,188
190,521
11,653
272,358
—
729
100,875
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
1,034,764
1,049,816
1,346,445
1,868,599
1,585,568
(34,518)
7,311
21,892
11,874
13,028
76,181
69,389
(16,749)
(7,047)
—
—
—
303,967
57,385
(30,757)
(227,543)
—
(17,083)
—
16,166
—
73,241
(178,520)
3,262
—
—
44,009
—
238,116
(10,387)
(83)
—
—
291,487
270,856
101,069
278,911
3,159
(10,911)
283,735
(14,950)
268,785
3.10
3.10
3.4350
86,008
$
$
$
$
6
(11,384)
259,478
(14,950)
244,528
2.67
2.67
3.2875
91,315
$
$
$
$
15,701
(11,401)
105,369
(14,950)
90,419
0.87
0.87
3.1375
103,127
$
$
$
$
(7,644)
(11,235)
260,032
(14,950)
245,082
2.34
2.34
2.94
104,508
$
$
$
$
15,844
40,078
175,974
(19,226)
—
(49)
14,549
317,459
(15,843)
(6,967)
294,649
(14,952)
279,697
2.71
2.70
2.52
103,244
86,562
91,530
103,403
104,881
103,734
As of December 31,
Balance Sheet Data (in thousands)
2019
2018
2017
2016
2015
Commercial real estate, before accumulated
depreciation
$
8,784,567
$
8,513,935
$ 10,206,122
$ 12,743,332
$ 16,681,602
Total assets
12,766,320
12,751,358
13,982,904
15,857,787
19,727,646
Mortgages and other loans payable, revolving credit
facilities, term loans and senior unsecured notes and
trust preferred securities, net
Total capital
5,508,137
5,517,198
5,541,701
5,947,855
5,855,132
6,589,454
6,481,666
7,750,911
10,275,453
7,719,317
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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.
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
At December 31, 2019, our same-store Manhattan office property occupancy inclusive of leases signed but not commenced,
was 96.2% compared to 96.0% at December 31, 2018. We signed office leases in Manhattan encompassing approximately 2.5
million square feet, of which approximately 0.5 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 38.1% for 2019.
According to Cushman & Wakefield, leasing activity in Manhattan in 2019 totaled approximately 34.7 million square feet.
Of the total 2019 leasing activity in Manhattan, the Midtown submarket accounted for approximately 20.4 million square feet, or
approximately 58.8%. Manhattan's overall office vacancy went from 9.2% at December 31, 2018 to 11.1% at December 31, 2019.
Overall average asking rents in Manhattan increased in 2019 by 1.6% from $72.28 per square foot at December 31, 2018 to $73.41
per square foot at December 31, 2019.
Acquisition and Disposition Activity
Overall Manhattan sales volume decreased by 15.2% in 2019 to $30.2 billion as compared to $35.6 billion in 2018. Consistent
with our multi-faceted approach to property acquisitions, we selectively sourced the purchase of a majority and controlling interest
in 410 Tenth Avenue, purchased the remaining 10% interest that we did not already own in 110 Greene Street from our joint partner,
and accepted an equity interest in 106 Spring Street in lieu of repayment of the respective mezzanine loan.
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 131-137 Spring Street, 115 Spring Street, 1010 Washington
Boulevard, 1640 Flatbush Avenue, 562 Fifth Avenue, 521 Fifth Avenue, 100 Summit Lake Drive, 200 Summit Lake Drive, 500
Summit Lake, and 360 Hamilton Avenue for total gross valuations of $983.9 million.
Debt and Preferred Equity
In 2018 and 2019, in our debt and preferred equity portfolio we continued to focus on the origination of financings 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
2018 and 2019 were to reputable owners or acquirers which have sizable equity subordinate to our last dollar of exposure. During
2019, 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 $0.7 billion, and sales,
redemption and participations of $1.2 billion.
Highlights from 2019
Our significant achievements from 2019 included:
Corporate
• Repurchased 4.6 million shares of our common stock under our share repurchase program at an average price of
$83.62 per share and increased the size of our share repurchase program by $500 million to $3.0 billion. From
program inception through December 31, 2019, we have repurchased a cumulative total of 22.7 million shares of
our common stock under the program at an average price of $95.66 per share.
Leasing
4
•
Signed 163 Manhattan office leases covering approximately 2.5 million square feet. The mark-to-market on signed
Manhattan office leases was 38.1% higher in 2019 than the previously fully escalated rents on the same spaces.
• Reached 65% leased at One Vanderbilt Avenue after signing new leases with KPS Capital Partners LP; Sentinel Capital
Partners; and Oak Hill Advisors and lease expansions with The Carlyle Group and McDermott Will & Emery.
• Reached 96.2% leased at 410 Tenth Avenue after signing new leases with First Republic Bank and Amazon.
•
•
Signed a lease renewal with BMW of Manhattan for 227,000 square feet at 555 West 57th Street.
Signed a new retail lease with Ulta Beauty for 12,040 square feet at 2 Herald Square.
Acquisitions
• Entered into a contract to acquire 707 Eleventh Avenue for a gross purchase price of $90.0 million. The 160,000-square-
foot office property will be redeveloped into a modern, Class-A building. The acquisition was closed in January 2020.
• Closed on the acquisition of a majority and controlling interest in 410 Tenth Avenue at a gross purchase price of $440
million.
• Closed on the acquisition from our joint venture partner of the remaining 10% interest in 110 Greene Street that we
did not already own at a gross asset valuation of $256.5 million.
• Took possession of the retail co-op at 106 Spring Street in Soho. 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
• Closed on the sale of 360 Hamilton Avenue in White Plains, New York and 100, 200 and 500 Summit Lake Drive in
Valhalla, New York.
• Closed on the sale of the development site at 562 Fifth Avenue for a sale price of $52.4 million.
• Closed on the sale of the development site at 1640 Flatbush Avenue in Brooklyn for a sale price of $16.2 million.
• Closed on the sale of 1010 Washington Boulevard in Stamford, Connecticut for a sale price of $23.1 million.
• Entered into a contract to sell 220 East 42nd Street, also known as The News Building, for total consideration of $815.0
million.
•
Sold a 49% interest in the prime retail condominium at 115 Spring Street in Soho at a gross asset valuation of $66.6
million.
• Together with our joint venture partner, closed on the sale of 521 Fifth Avenue for a sale price of $381.0 million.
• Closed on the sale of our 20.0% interest in 131-137 Spring Street to the owner of the remaining 80.0% interest. The
transaction generated net cash proceeds to the Company of $15.2 million.
Debt and Preferred Equity Investments
• Originated and retained, or acquired, $0.7 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 $1.2 billion of proceeds from sales, repayments and participations.
Finance
• Together with our joint venture partner, closed on the refinancing of 55 West 46th Street, also known as Tower 46. The
new $198.0 million mortgage replaces the previous $195.0 million mortgage, has a 3-year term, with two one-year
extension options, and bears interest at a floating rate of 1.25% over LIBOR.
• Together with our joint venture partner, closed on a $75.0 million upsize of our existing financing at 2 Herald Square
to $225.0 million and reduced the interest rate on the loan by 10 basis points to a floating rate of 1.45% over LIBOR.
• Entered into an agreement to reduce the interest rate spread by 65 basis points on the Company's $200.0 million, 7-
year term loan that matures in 2024.
• Closed on a $465.0 million construction facility for the redevelopment of 410 Tenth Avenue. 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 2.225%
over LIBOR.
5
• Closed on a new $85.0 million financing of the office portion of 609 Fifth Avenue. The new mortgage has a 5-year
term and bears interest at a floating rate of 2.40% over LIBOR.
As of December 31, 2019, 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:
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)
Consolidated
Unconsolidated
Total
Commercial:
Manhattan
Office
Retail
Development/
Redevelopment
(3)
Fee Interest
Suburban
Office
Retail
Total commercial properties
Residential:
Manhattan
Residential
Total residential properties
Total portfolio
20
6 (2)
12,387,091
320,430
6
—
32
8
1
9
41
189,538
—
12,897,059
1,044,800
52,000
1,096,800
13,993,859
2 (2)
2
43
445,105
445,105
14,438,964
10
11,216,183
289,050
—
—
11,505,233
—
—
—
8
1
1
20
—
—
—
20
8
8
28
30
14
7
1
52
8
1
9
23,603,274
609,480
189,538
—
24,402,292
1,044,800
52,000
1,096,800
11,505,233
61
25,499,092
1,663,774
1,663,774
13,169,007
10
10
71
2,108,879
2,108,879
27,607,971
94.5%
98.4%
84.9%
—%
94.6%
85.7%
100.0%
86.4%
94.2%
95.7%
95.7%
94.3%
(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, 2019, 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.
Properties in Development are included in Number of Properties and have no Approximate Square Feet.
(3)
As of December 31, 2019, 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 $1.7 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.
6
Critical Accounting Policies
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.
The Company classifies those leases under which the Company is the lessee at lease commencement as finance or operating
leases. Leases qualify as finance leases if the lease transfers ownership of the asset at the end of the lease term, the lease grants
an option to purchase the asset that we are reasonably certain to exercise, the lease term is for a major part of the remaining
economic life of the asset, or the present value of the lease payments exceeds substantially all of the fair value of the asset. Leases
that do not qualify as finance leases are deemed to be operating leases. On the consolidated statements of operations, operating
leases are expensed through operating lease rent while financing leases are expensed through amortization and interest expense.
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
7
future obligations of the joint venture or may otherwise be committed to provide future additional financial support. Most of the
joint venture debt is non-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, 2019.
We may originate loans for real estate acquisition, development and construction ("ADC loans") 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.
Rental revenue is recognized if collectability is probable. If collectability of substantially all of the lease payments is assessed as
not probable, any difference between the rental revenue recognized to date and the lease payments that have been collected is
recognized as a current-period adjustment to rental revenue.
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 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.
8
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 carrying value of the investment over the fair value of the collateral.
Any deficiency between the carrying value 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.
9
Results of Operations
Comparison of the year ended December 31, 2019 to the year ended December 31, 2018
The following comparison for the year ended December 31, 2019, or 2019, to the year ended December 31, 2018, or 2018,
makes reference to the effect of the following:
i. “Same-Store Properties,” which represents all operating properties owned by us at January 1, 2018 and still owned by
us in the same manner at December 31, 2019 (Same-Store Properties totaled 34 of our 43 consolidated operating
properties),
ii. “Acquisition Properties,” which represents all properties or interests in properties acquired in 2019 and 2018 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 2019 and 2018, 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.
Same-Store
Disposed
Other
Consolidated
2019
2018
$
Change
%
Change
2019
2018
2019
2018
2019
2018
$
Change
%
Change
$ 921.0
$ 902.8
$ 18.2
2.0 % $ 37.7
$ 48.5
$ 24.9
$ 27.3
$ 983.6
$ 978.6
$
5.0
—
14.4
—
7.0
—
7.4
— %
105.7 %
—
4.4
935.4
909.8
25.6
2.8 %
42.1
411.8
399.2
12.6
3.2 %
18.2
—
—
0.3
—
411.8
399.5
(0.3)
(100.0)%
—
12.3
— %
3.1 %
—
—
— 195.6
201.5
41.0
34.6
195.6
59.8
201.5
47.3
261.5
263.4
1,239.0
1,227.4
28.7
0.7
25.8
0.8
458.7
448.7
0.7
1.1
5.7
54.2
23.7
—
— 100.9
92.6
18.2
23.7
130.3
119.2
100.9
560.3
92.6
542.4
0.5 %
(2.9)%
26.4 %
0.9 %
2.2 %
(36.4)%
9.0 %
3.3 %
(5.9)
12.5
11.6
10.0
(0.4)
8.3
17.9
$ (202.2) $ (221.1)
18.9
(8.5)%
(272.4)
(279.5)
7.1
(2.5)%
(34.5)
7.3
(41.8)
(572.6)%
76.2
304.0
(227.8)
(74.9)%
69.4
57.4
12.0
20.9 %
(16.7)
(30.8)
14.1
(45.8)%
(7.0)
(227.5)
220.5
(96.9)%
—
—
(17.1)
17.1
(100.0)%
(6.8)
6.8
(100.0)%
$ 291.5
$ 270.9
$ 20.6
7.6 %
(in millions)
Rental revenue
Investment income
Other income
Total revenues
Property operating
expenses
Transaction related costs
Marketing, general and
administrative
Other income (expenses):
Interest expense and
amortization of deferred
financing costs, net of
interest income
Depreciation and
amortization
Equity in net (loss) 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
Loss on early
extinguishment of debt
Loan loss and other
investment reserves, net of
recoveries
Net income
Rental Revenue
Rental revenues increased primarily as a result of increased revenue at our Same-Store properties ($18.2 million), partially
offset by our Disposed Properties ($10.8 million) and Acquired Properties ($4.5 million).
10
The following table presents a summary of the commenced leasing activity for the year ended December 31, 2019 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
Property no longer in redevelopment
Sold vacancies
Properties placed in service
Acquired vacancies
Property in redevelopment
Space which became available during the
year(3)
• Office
• Retail
• Storage
Total space available
Leased space commenced during the year:
• Office(4)
• Retail
• Storage
1,306,846
96,857
(16,837)
—
—
797,720
63,907
13,886
875,513
2,262,379
900,313
977,511
45,403
9,906
45,375
13,856
Total leased space commenced
955,622
1,036,742
Total available space at end of year
1,306,757
Early renewals
• Office
• Retail
• Storage
Total early renewals
Total commenced leases, including replaced
previous vacancy
• Office
• Retail
• Storage
Total commenced leases
588,899
669,008
67,394
14,137
56,576
18,434
670,430
744,018
1,646,519
101,951
32,290
1,780,760
$
$
$
$
$
$
$
$
$
$
$
$
73.44
108.97
24.96
74.35
66.43
72.00
32.00
66.00
70.59
88.45
28.98
70.86
$
$
$
$
$
$
$
$
$
$
$
$
68.82
205.72
30.67
79.56
54.26
70.42
37.20
55.06
60.33
128.63
35.75
65.21
$
$
$
$
$
$
$
$
$
$
$
$
85.14
54.15
4.60
82.71
29.32
—
—
26.36
62.46
24.10
1.98
59.16
6.7
4.5
1.4
6.5
3.2
—
8.3
3.1
5.3
2.0
5.4
5.1
13.5
10.3
14.6
13.4
7.3
1.5
14.8
7.1
11.0
5.4
14.7
10.8
11
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)
• Office
• Retail
• Storage
Total space available
Leased space commenced during the year:
• Office(5)
• Retail
• Storage
Total leased space commenced
202,480
(91,957)
102,614
1,261
1,888
105,763
216,286
58,844
3,797
1,395
64,036
58,964
3,797
2,021
64,782
Total available space at end of the year
152,250
Early renewals
• Office
• Storage
Total early renewals
Total commenced leases, including replaced
previous vacancy
• Office
• Retail
• Storage
Total commenced leases
130,280
129,932
248
248
130,528
130,180
188,896
3,797
2,269
194,962
$
$
$
$
$
$
$
$
$
$
$
33.81
11.46
14.17
31.88
36.03
18.00
36.00
35.51
11.46
14.59
34.75
$
$
$
$
$
$
$
$
$
$
$
33.87
19.74
13.95
32.51
37.01
18.00
36.97
36.62
19.74
14.49
36.23
$
$
$
$
$
$
$
$
$
$
$
11.74
—
—
10.69
11.14
—
11.12
10.95
—
—
10.59
3.0
—
—
2.7
6.0
—
5.9
4.9
—
—
4.8
4.4
10.8
3.9
4.7
6.9
10.8
6.9
6
10.8
4.7
6.1
(1) Annual initial base rent.
(2)
Escalated rent includes base rent plus all additional amounts paid by the tenant in the form of real estate taxes, operating expenses, porters wage or a
consumer price index (CPI) adjustment.
Includes expiring space, relocating tenants and move-outs where tenants vacated. Excludes lease expirations where tenants held over.
(3)
(4) Average starting office rent excluding new tenants replacing vacancies was $73.25 per rentable square feet for 478,219 rentable square feet. Average starting
office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $69.27 per rentable square feet for 1,147,227 rentable
square feet.
(5) Average starting office rent excluding new tenants replacing vacancies was $34.79 per rentable square feet for 32,126 rentable square feet. Average starting
office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $35.79 per rentable square feet for 162,058 rentable
square feet.
Investment Income
Investment income decreased primarily due to a decrease in the weighted average yield of our debt and preferred equity
investments. For the years ended December 31, 2019 and 2018, the weighted average debt and preferred equity investment balance
outstanding and weighted average yield were $2.1 billion and 8.8%, respectively, compared to $2.1 billion and 9.0%, respectively.
As of December 31, 2019, 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 due to promote income recognized from the sale of 521 Fifth Avenue ($3.4 million) in the
second quarter of 2019, higher lease termination income in 2019 as compared with 2018 ($3.2 million), a leasing commission and
fee received at 2 Herald Square ($3.0 million) in the fourth quarter of 2019, and a real estate tax refund received at 220 East 42nd
Street ($2.5 million) in the third quarter of 2019.
12
Property Operating Expenses
Property operating expenses increased primarily due to increased operating expenses and real estate taxes at our Same-Store
Properties ($3.9 million and $8.4 million, respectively), partially offset by decreased operating expenses and real estate taxes at
our Disposed Properties ($3.7 million and $1.9 million, respectively).
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses were $100.9 million for the year ended December 31, 2019, compared to
$92.6 million for the same period in 2018. Marketing, general and administrative expenses for the year ended December 31, 2019
includes $10.0 million of additional expense related to new accounting guidance for leasing costs, which requires the Company
to expense certain internal costs that were previously capitalized.
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
repayment of the debt at One Madison Avenue in the fourth quarter of 2018 ($26.2 million) and interest capitalization in connection
with a property that is under development ($8.4 million), partially offset by a higher weighted average balance of the 2017 revolving
credit facility ($14.3 million). The weighted average consolidated debt balance outstanding was $6.1 billion for the year ended
December 31, 2019 as compared to $5.7 billion for the year ended December 31, 2018. The consolidated weighted average interest
rate decreased to 4.00% for the year ended December 31, 2019 as compared to 4.06% for the year ended December 31, 2018 as
a result of a decrease in LIBOR.
Depreciation and Amortization
Depreciation and amortization decreased primarily as a result decreased depreciation at our Same Store properties ($7.9
million) and Disposed properties ($4.2 million), partially offset by increased depreciation at our Acquired properties ($5.5 million).
Equity in net (loss) income from unconsolidated joint ventures
Equity in net (loss) income from unconsolidated joint ventures decreased primarily as a result of depreciation at 650 Fifth
Avenue ($9.6 million) and 2 Herald Square ($6.6 million), the repayment and redemption of certain debt and preferred equity
positions accounted for under the equity method ($9.2 million), a tenant related charge at 280 Park Avenue ($6.8 million), and the
sale of 3 Columbus Circle in the fourth quarter of 2018 ($5.6 million).
Equity in net gain on sale of interest in unconsolidated joint venture/real estate
During the year ended December 31, 2019, we recognized gains on the sales of our joint venture interests in 521 Fifth Avenue
($57.4 million) and 131 Spring Street ($16.7 million). During the year ended December 31, 2018, we recognized gains on the
sales of 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 August 2019, the Company sold a 49% interest in 115 Spring Street, which resulted in the deconsolidation of our remaining
51% interest. We recorded our investment at fair value which resulted in the recognition of a fair value adjustment of $3.8 million.
In May 2019, the Company closed on the acquisition of a majority and controlling interest in 410 Tenth Avenue. We recorded
the assets acquired and liabilities assumed at fair value which resulted in the recognition of a fair value adjustment of $67.6
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.
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.
13
(Loss) Gain on Sale of Real Estate, Net
During the year ended December 31, 2019, we recognized a loss on sale related to our interest in 562 Fifth Avenue ($26.6
million) and gains on the sales of our interests in 1640 Flatbush Avenue ($5.5 million), 115 Spring Street ($3.3 million), and the
Suburban Properties ($1.8 million). The Suburban Properties consist of 360 Hamilton Avenue, 100 Summit Lake Drive, 200
Summit Lake Drive, and 500 Summit Lake Drive. During the year ended December 31, 2018, we recognized a gain on the sale
of our interests in 600 Lexington ($23.8 million) and we recognized losses on the sales of our interests 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).
Depreciable Real Estate Reserves and Impairment
During the year ended December 31, 2019, we recorded a charge related to 1010 Washington Boulevard in Stamford,
Connecticut ($7.0 million). During the year ended December 31, 2018, we recorded a charge related to five suburban office
properties comprised of 13 buildings ($221.9 million), which the Company stated it intends to dispose of and three of which were
sold in 2019, and a charge related to the Upper East Side Residential Assemblage ($5.8 million).
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 were being marketed for sale, one of which was sold in 2019, and the repayment of an investment pursuant to
the sale of a property ($1.1 million).
Comparison of the year ended December 31, 2018 to the year ended December 31, 2017
For a comparison of the year ended December 31, 2018 to the year ended December 31, 2017, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Form 10-K for the year ended December
31, 2018, which was filed with the SEC on February 27, 2019.
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 and for debt and
preferred equity investments will include:
(1)
(2)
(3)
(4)
(5)
(6)
Cash flow from operations;
Liquidity 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.
14
The combined aggregate principal maturities of our property mortgages and other loans payable, Master Repurchase
Agreement ("MRA") and Federal Home Loan Bank of New York ("FHLB") facilities, corporate obligations and our share of joint
venture debt, including as-of-right extension options, as of December 31, 2019 were as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total
Property mortgages and
other loans
MRA and FHLB facilities
Corporate obligations
Joint venture debt-our
share
$
26,640
$
251,546
$
538,805
$
57,301
$
278,781
$
866,626
$ 2,019,699
192,184
250,000
—
—
—
—
—
192,184
350,000
800,000
1,540,000
200,000
200,000
3,340,000
811,628
805,276
268,952
311,436
17,022
1,813,821
4,028,135
Total
$ 1,280,452
$ 1,406,822
$ 1,607,757
$ 1,908,737
$
495,803
$ 2,880,447
$ 9,580,018
As of December 31, 2019, we had liquidity of $1.5 billion, comprised of $1.3 billion of availability under our revolving
credit facility and $196.0 million of consolidated cash on hand, inclusive of $29.9 million of marketable securities and excluding
$131.5 million representing our share of cash at unconsolidated joint venture properties. 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.
Cash Flows
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 $241.4 million and $279.1 million at December 31, 2019 and 2018,
respectively, representing a decrease of $37.7 million. The decrease was a result of the following changes in cash flows (in
thousands):
Net cash provided by operating activities
Net cash provided by investing activities
Net cash used in financing activities
Year Ended December 31,
2019
2018
$
$
$
376,473
114,494
$
$
(528,650) $
441,537
681,662
$
$
(1,094,112) $
(Decrease)
Increase
(65,064)
(567,168)
565,462
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, 2019, when compared to the year ended December 31, 2018, we used cash primarily for the following
investing activities (in thousands):
15
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
$
(202,105)
1,474
(5,239)
271,747
(154,098)
(1,022,702)
543,755
$
(567,168)
Funds spent on capital expenditures, which are comprised of building and tenant improvements, decreased from $254.5
million for the year ended December 31, 2018 to $253.0 million for the year ended December 31, 2019. 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, our FHLB facility, senior unsecured notes, 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, 2019, when compared to the year ended December 31, 2018, 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
Acquisition of subsidiary interest from noncontrolling interest
Dividends and distributions paid
Increase in net cash provided by financing activities
Capitalization
$
(1,621,407)
1,628,766
12,937
755
(28,714)
13,918
595,142
(16,934)
(25,845)
6,844
$
565,462
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, 2019, 79,202,322 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 program under which we can repurchase up to $1.0
billion of shares of our common stock. The Board of Directors has since authorized four separate $500.0 million increases to the
size of the share repurchase program in the fourth quarter of 2017, second quarter of 2018, fourth quarter of 2018, and fourth
quarter of 2019 bringing the total program size to $3.0 billion.
At December 31, 2019 repurchases executed under the program were as follows:
Period
Year ended 2017
Year ended 2018
Year ended 2019
Cumulative number of
shares repurchased as
part of the repurchase
plan or programs
8,342,411
18,087,322
22,683,493
Shares repurchased
Average price paid per
share
$101.64
$96.22
$83.62
8,342,411
9,744,911
4,596,171
16
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, 2019, 2018, or 2017.
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, 2019, 2018, and 2017, respectively (dollars in thousands):
Year Ended December 31,
2019
2018
2017
Shares of common stock issued
3,867
1,399
Dividend reinvestments/stock purchases under the DRSPP
$
334
$
136
$
2,141
223
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, 2019, 4.1 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.
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 no
compensation expense during the years ended December 31, 2019 and 2018, and compensation expense of $13.6 million during
the year ended December 31, 2017 related to the 2014 Outperformance Plan.
17
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, 2019, 18,669 phantom stock units and 9,949 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, 2019 related to
the Deferred Compensation Plan. As of December 31, 2019, there were 128,946 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
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, 2019, 131,440 shares of our common stock had been issued under
the ESPP.
18
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, 2019 and 2018, (dollars 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 (1)
Total
Effective Interest Rate for the Year:
Fixed rate
Variable rate
Effective interest rate
December 31,
2019
2018
$
$
2,536,286
$
1,000,000
3,536,286
2,018,434
5,554,720
$
618,885
1,399,549
63.7%
36.3%
100.0%
4.05%
3.93%
3.85%
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%
(1)
Inclusive of the mitigating effect of our debt, preferred equity, and other investments subject to variable rates, the percent of total debt of our net exposure
to variable rate debt was 28.4% and 17.5% as of December 31, 2019 and December 31, 2018, respectively.
The variable rate debt shown above generally bears interest at an interest rate based on 30-day LIBOR (1.76% and 2.50%
at December 31, 2019 and 2018, respectively). Our consolidated debt at December 31, 2019 had a weighted average term to
maturity of 3.72 years.
Certain of our debt and equity investments and other investments, with carrying values of $0.6 billion at December 31, 2019
and $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. Inclusive of the mitigating effect of these investments, the net percent of our variable rate debt to
total debt was 28.4% and 17.5%, respectively.
Mortgage Financing
As of December 31, 2019, our total mortgage debt (excluding our share of joint venture mortgage debt of $4.0 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 $0.8 billion of variable rate debt with an effective weighted average interest rate of 4.52%.
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, 2019, 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, 2019, 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
19
Loan A, and (iii) 85 basis points to 165 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.
In May 2019, we entered into an agreement to reduce the interest rate spread under Term Loan B by 65 basis points to a
spread over 30-day LIBOR ranging from 85 basis points to 165 basis points. This reduction was effective in November 2019.
At December 31, 2019, the applicable spread was 100 basis points for the revolving credit facility, 110 basis points for Term
Loan A, and 100 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, 2019, the facility fee was 20 basis points.
As of December 31, 2019, we had $11.8 million of outstanding letters of credit, $240.0 million drawn under the revolving
credit facility and $1.5 billion outstanding under the term loan facilities, with total undrawn capacity of $1.3 billion under the
2017 credit facility. At December 31, 2019 and December 31, 2018, the revolving credit facility had a carrying value of $234.0
million and $492.2 million, respectively, net of deferred financing costs. At December 31, 2019 and December 31, 2018, 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 ("FHLB") 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 that bear interest at a floating rate. As of December 31, 2019,
we had a total of $39.5 million in outstanding secured advances with an average spread of 0.0025 basis points over 30-day LIBOR.
Master Repurchase Agreement
The Company entered into a Master Repurchase Agreement, or MRA, known as the 2017 MRA, which provides us with the
ability to sell certain mortgage 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 facility 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.
The 2017 MRA has 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. In June 2018, we exercised a 1 year extension option and in June 2019, we exercised another 1 year extension
option. In August 2019, we amended our agreement to include two additional 1 year extension options. At December 31, 2019,
the facility had a carrying value of $152.4 million, net of deferred financing costs.
20
Senior Unsecured Notes
The following table sets forth our senior unsecured notes and other related disclosures as of December 31, 2019 and 2018,
respectively, by scheduled maturity date (dollars in thousands):
Issuance
March 16, 2010 (2)
August 7, 2018 (3) (4)
October 5, 2017 (3)
November 15, 2012 (5)
December 17, 2015 (2)
Deferred financing costs, net
December
31,
2019
Unpaid
Principal
Balance
December
31,
2019
Accreted
Balance
December
31,
2018
Accreted
Balance
$
250,000
$
250,000
$
350,000
500,000
300,000
100,000
1,500,000
1,500,000
$
$
$
$
1,502,837
(5,990)
1,496,847
$
$
1,503,759
(8,545)
1,495,214
Interest
Rate (1)
7.75%
L+ 0.98%
3.25%
4.50%
4.27%
Initial Term
(in Years) Maturity
10 March 2020
3 August 2021
5 October 2022
10 December 2022
10 December 2025
250,000
350,000
499,591
304,168
100,000
350,000
499,695
303,142
100,000
(1)
(2)
(3)
(4)
(5)
Interest rate as of December 31, 2019, 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.
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% of par.
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, 2019 and 2018, 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, 2019, 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 $13.3 million and would increase our share of joint venture annual interest cost by $17.0 million. At
December 31, 2019, 39.2% of our $1.6 billion debt and preferred equity portfolio is indexed to LIBOR.
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 (loss) until the hedged item is recognized in earnings.
21
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, 2019 bore
interest at rates between LIBOR plus 17 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 financing and operating leases, as of December 31, 2019 are as
follows (in thousands):
Property mortgages and
other loans
$
26,640
$
251,546
$
538,805
$
57,301
$
278,781
$
866,626
$ 2,019,699
2020
2021
2022
2023
2024
Thereafter
Total
MRA and FHLB facilities
192,184
Revolving credit facility
Unsecured term loans
—
—
—
—
—
—
—
—
Senior unsecured notes
250,000
350,000
800,000
Trust preferred securities
Financing leases
Operating leases
Estimated interest expense
Joint venture debt
Total
—
2,619
31,508
195,571
811,628
—
2,794
31,702
176,335
805,276
—
2,794
29,548
144,098
268,952
—
240,000
1,300,000
—
—
2,794
27,243
76,664
311,436
—
—
200,000
—
—
2,819
27,263
59,834
17,022
—
—
—
100,000
100,000
814,283
649,289
121,233
192,184
240,000
1,500,000
1,500,000
100,000
828,103
796,553
773,735
1,813,821
4,028,135
$ 1,510,150
$ 1,617,653
$ 1,784,197
$ 2,015,438
$
585,719
$ 4,465,252
$ 11,978,409
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, 2020, we expect to incur $145.3 million of recurring capital expenditures
and $298.5 million of development or redevelopment expenditures on existing consolidated properties, and our share of capital
expenditures at our joint venture properties will be $485.5 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 $3.54 per share, we
would pay $280.4 million in dividends to our common stockholders on an annual basis. Before we pay any dividend, whether for
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
22
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 $3.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.
We also recorded expenses, inclusive of capitalized expenses, of $18.8 million, $18.8 million and $22.6 million the years
ended December 31, 2019, 2018 and 2017, 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, $0.6 million and $0.5 million for the
years ended December 31, 2019, 2018, and 2017 respectively.
One Vanderbilt Investment
In December 2016, we entered into agreements with entities owned and controlled by our Chairman and CEO, Marc Holliday,
and our President, 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.
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 our debt 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.
23
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 in December
2018, 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 compensation 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.
FFO for the years ended December 31, 2019, 2018, and 2017 are as follows (in thousands):
Net income attributable to SL Green common stockholders
$
255,484
$
232,312
$
86,424
Year Ended December 31,
2019
2018
2017
Add:
Depreciation and amortization
Joint venture depreciation and noncontrolling interest adjustments
Net income (loss) attributable to noncontrolling interests
Less:
Equity in net gain on sale of interest in unconsolidated joint venture/real
estate
Depreciable real estate reserves and impairment
(Loss) gain on sale of real estate, net
Purchase price and other fair value adjustment
Depreciation on non-rental real estate assets
Funds from Operations attributable to SL Green common stockholders
Cash flows provided by operating activities
Cash flows provided by investing activities
Cash flows used in financing activities
Inflation
272,358
192,426
10,142
279,507
187,147
12,210
403,320
102,334
(11,706)
76,181
303,967
16,166
(7,047)
(16,749)
69,389
2,935
605,701
376,473
114,494
$
$
$
(227,543)
(30,757)
57,385
2,404
605,720
441,537
681,662
$
$
$
(178,520)
73,241
—
2,191
667,294
543,001
22,014
(528,650) $
(1,094,112) $
(684,956)
$
$
$
$
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.
24
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:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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;
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.
25
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
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, 2019 (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total
Fair Value
Fixed
Rate
261,118
11,638
1,007,985
1,007,301
278,781
966,626
3,533,449
3,642,770
$
$
$
Long-Term Debt
Average
Interest
Rate
3.93% $
3.85%
3.86%
4.17%
4.25%
4.31%
Variable
Rate
207,706
589,908
330,820
590,000
200,000
100,000
Average
Interest
Rate
3.16% $
2.95%
2.97%
3.13%
3.37%
3.64%
Debt and Preferred
Equity Investments (1)
Amount
Weighted
Yield
769,661
258,325
226,448
207,672
12,950
105,250
8.26%
8.09%
11.23%
8.02%
9.41%
7.77%
8.60%
3.95% $
2,018,434
3.08% $
1,580,306
$
2,018,714
(1) Our debt and preferred equity investments had an estimated fair value ranging between $1.6 billion and $1.7 billion at December 31, 2019.
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, 2019 (in thousands):
Long Term Debt
Average
Interest
Rate
4.15% $
4.16%
4.11%
3.94%
3.88%
3.93%
Variable
Rate
Average
Interest
Rate
800,448
793,561
48,146
40,346
16
110,154
3.52%
3.39%
3.58%
4.21%
4.31%
4.37%
3.66%
4.07% $
1,792,671
$
1,796,808
2020
2021
2022
2023
2024
Thereafter
Total
Fair Value
Fixed
Rate
11,180
11,715
220,806
271,090
17,006
1,703,667
2,235,464
2,304,813
$
$
$
26
The table below lists our consolidated derivative instruments, which are hedging variable rate debt, and their related fair
values as of December 31, 2019 (in thousands):
Interest Rate Cap
Interest Rate Swap
Interest Rate Swap
Interest Rate Cap
Interest Rate Cap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Total Consolidated Hedges
Asset
Hedged
Mortgage
Credit Facility
Mortgage
Mortgage
Mortgage
Credit Facility
Credit Facility
Credit Facility
Credit Facility
Credit Facility
LIBOR
LIBOR
LIBOR
LIBOR
LIBOR
LIBOR
LIBOR
LIBOR
LIBOR
LIBOR
Benchmark
Rate
Notional
Value
Strike
Rate
Effective
Date
Expiration
Date
Fair
Value
$ 300,000
3.750%
May 2019
May 2020
$
100,000
100,000
111,869
85,000
200,000
100,000
150,000
150,000
200,000
4.000%
1.131%
1.161%
2.696%
2.721%
2.740%
1.928% December 2017
November 2020
1.934% December 2017
November 2020
3.500% December 2019
December 2020
March 2019
March 2021
July 2016
July 2016
January 2019
January 2019
January 2019
July 2023
July 2023
January 2024
January 2026
January 2026
(12,629)
$ (24,691)
—
(281)
(286)
—
—
3,015
1,404
(6,570)
(9,344)
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 an asset of $0.1 million in the aggregate at December 31, 2019.
We also swapped certain floating rate debt at some of our joint ventures. These swaps represented a liability of $0.2 million in the
aggregate at December 31, 2019.
27
SL Green Realty Corp.
Consolidated Balance Sheets
(in thousands, except per share data)
Assets
Commercial real estate properties, at cost:
Land and land interests
Building and improvements
Building leasehold and improvements
Right of use asset - financing leases
Right of use asset - operating leases
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 $12,369 and $15,702 in 2019 and 2018,
respectively
Related party receivables
Deferred rents receivable, net of allowance of $12,477 and $15,457 in 2019 and 2018,
respectively
Debt and preferred equity investments, net of discounts and deferred origination fees of
$14,562 and $22,379 and allowances of $1,750 and $5,750 in 2019 and 2018, respectively
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
Lease liability - financing leases
Lease liability - operating leases
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
28
December 31, 2019
December 31, 2018
$
1,751,544
$
5,154,990
1,433,793
47,445
396,795
8,784,567
(2,060,560)
6,724,007
391,664
166,070
75,360
29,887
43,968
21,121
283,011
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
1,580,306
2,099,393
$
$
$
$
2,912,842
205,283
332,801
12,766,320
2,183,253
234,013
1,494,024
1,496,847
22,148
177,080
166,905
114,052
44,448
381,671
79,282
62,252
—
100,000
6,555,975
409,862
283,285
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
SL Green Realty Corp.
Consolidated Balance Sheets
(in thousands, except per share data)
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, 2019 and 2018
Common stock, $0.01 par value, 160,000 shares authorized and 80,257 and 84,739 issued
and outstanding at December 31, 2019 and 2018, respectively (including 1,055 and 1,055
shares held in treasury at December 31, 2019 and 2018, respectively)
Additional paid-in-capital
Treasury stock at cost
Accumulated other comprehensive (loss) income
Retained earnings
Total SL Green stockholders' equity
Noncontrolling interests in other partnerships
Total equity
Total liabilities and equity
December 31, 2019
December 31, 2018
221,932
221,932
803
4,286,395
(124,049)
(28,485)
1,084,719
5,441,315
75,883
5,517,198
$
12,766,320
$
847
4,508,685
(124,049)
15,108
1,278,998
5,901,521
46,334
5,947,855
12,751,358
(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: $205.2 million and $110.0 million of land,
$481.9 million and $346.7 million of building and improvements, $2.0 million and $2.0 million of building and leasehold improvements, $61.7 million and
$47.4 million of right of use assets, $17.6 million and $42.2 million of accumulated depreciation, $169.5 million and $112.6 million of other assets included in
other line items, $457.1 million and $140.8 million of real estate debt, net, $1.2 million and $0.4 million of accrued interest payable, $57.7 million and $43.6
million of lease liabilities, and $43.7 million and $18.3 million of other liabilities included in other line items as of December 31, 2019 and December 31, 2018,
respectively.
The accompanying notes are an integral part of these consolidated financial statements.
29
SL Green Realty Corp.
Consolidated Statements of Operations
(in thousands, except per share data)
Revenues
Rental revenue, net
Investment income
Other income
Total revenues
Expenses
Operating expenses, including $18,106 in 2019, $17,823 in 2018, $21,400 in
2017 of related party expenses
Real estate taxes
Operating lease 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 (loss) 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 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
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
Year Ended December 31,
2019
2018
2017
$
983,557
$
978,574
$
1,273,932
195,590
59,848
1,238,995
234,676
190,764
33,188
190,521
11,653
272,358
—
729
100,875
1,034,764
(34,518)
76,181
69,389
(16,749)
(7,047)
—
—
291,487
(13,301)
3,159
(10,911)
270,434
(14,950)
255,484
3.10
3.10
81,733
86,562
$
$
$
201,492
47,326
1,227,392
193,871
43,670
1,511,473
229,347
293,364
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
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
30
SL Green Realty Corp.
SL Green Realty Corp.
Consolidated Statements of Comprehensive Income
Consolidated Statements of Comprehensive Income
(in thousands)
(in thousands)
Net income
Net income
Other comprehensive (loss) income:
Other comprehensive (loss) income:
(Decrease) increase in unrealized value of derivative instruments, including SL
(Decrease) increase in unrealized value of derivative instruments, including SL
Green's share of joint venture derivative instruments
Green's share of joint venture derivative instruments
Increase (decrease) in unrealized value of marketable securities
Increase (decrease) in unrealized value of marketable securities
Other comprehensive loss
Other comprehensive loss
Comprehensive income
Comprehensive income
Net (income) loss attributable to noncontrolling interests and preferred units
Net (income) loss attributable to noncontrolling interests and preferred units
distributions
distributions
Other comprehensive loss attributable to noncontrolling interests
Other comprehensive loss attributable to noncontrolling interests
Comprehensive income attributable to SL Green
Comprehensive income attributable to SL Green
$
$
Year Ended December 31,
Year Ended December 31,
2018
2018
2019
2019
2017
2017
$
$
291,487
291,487
$
$
270,856
270,856
$
$
101,069
101,069
(47,118)
(47,118)
1,249
1,249
(45,869)
(45,869)
245,618
245,618
(21,053)
(21,053)
2,276
2,276
226,841
226,841
$
$
(3,622)
(3,622)
60
60
(3,562)
(3,562)
267,294
267,294
(23,594)
(23,594)
66
66
243,766
243,766
$
$
1,040
1,040
(4,667)
(4,667)
(3,627)
(3,627)
97,442
97,442
305
305
94
94
97,841
97,841
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
31
31
SL Green Realty Corp.
Consolidated Statements of Equity
(in thousands, except per share data)
SL Green Realty Corp.
Consolidated Statements of Equity
SL Green Realty Corp. Stockholders
(in thousands, except per share data)
Common Stock
Balance at December 31, 2016
Net income (loss)
Other comprehensive loss
Balance at December 31, 2016
Preferred dividends
Net income (loss)
DRSPP proceeds
Other comprehensive loss
Conversion of units in the
Preferred dividends
Operating Partnership to
common stock
DRSPP proceeds
Reallocation of noncontrolling
Conversion of units in the
interest in the Operating
Operating Partnership to
Partnership
common stock
Equity component of
Reallocation of noncontrolling
repurchased exchangeable
interest in the Operating
senior notes
Partnership
Deferred compensation
Equity component of
plan and stock awards, net of
repurchased exchangeable
forfeitures and tax withholdings
senior notes
Repurchases of common stock
Deferred compensation
plan and stock awards, net of
Proceeds from stock options
forfeitures and tax withholdings
exercised
Repurchases of common stock
Contributions to consolidated
joint venture interests
Proceeds from stock options
exercised
Deconsolidation of partially
owned entity
Contributions to consolidated
joint venture interests
Cash distributions to
noncontrolling interests
Deconsolidation of partially
owned entity
Cash distributions declared
($3.1375 per common share,
Cash distributions to
none of which represented a
noncontrolling interests
return of capital for federal
Cash distributions declared
income tax purposes)
($3.1375 per common share,
Balance at December 31, 2017
none of which represented a
return of capital for federal
Cumulative adjustment upon
income tax purposes)
adoption of ASC 610-20
Balance at December 31, 2017
Balance at January 1, 2018
Cumulative adjustment upon
Net income (loss)
adoption of ASC 610-20
Other comprehensive loss
Balance at January 1, 2018
Preferred dividends
Net income (loss)
DRSPP proceeds
Other comprehensive loss
Conversion of units in the
Preferred dividends
Operating Partnership to
common stock
DRSPP proceeds
Reallocation of noncontrolling
Conversion of units in the
interest in the Operating
Operating Partnership to
Partnership
common stock
Deferred compensation
Reallocation of noncontrolling
plan and stock awards, net of
interest in the Operating
forfeitures and tax withholdings
Partnership
Repurchases of common stock
Deferred compensation
plan and stock awards, net of
Proceeds from stock options
forfeitures and tax withholdings
exercised
Repurchases of common stock
Contributions to consolidated
joint venture interests
Proceeds from stock options
exercised
Deconsolidation of partially
owned entity
Contributions to consolidated
joint venture interests
Cash distributions to
noncontrolling interests
Deconsolidation of partially
owned entity
Cash distributions to
noncontrolling interests
Series I
Preferred
Stock
$ 221,932
Series I
Preferred
Stock
SL Green Realty Corp. Stockholders
Par
Common Stock
Shares
Value
Additional
Paid-
In-Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Noncontrolling
Interests
100,562
Shares
$1,017
Par
Value
$5,624,545
Additional
Paid-
In-Capital
$ (124,049)
Treasury
Stock
Accumulated
22,137
$
Other
Comprehensive
Income (Loss)
$1,578,893
Retained
Earnings
101,374
426,436
$
Noncontrolling
Interests
(15,701)
$ 221,932
100,562
$1,017
$5,624,545
$ (124,049)
$
2
202
2
202
87
(8,342)
87
292
(8,342)
223
21,572
223
21,572
(109,776)
29,786
(109,776)
(621,324)
29,786
23,312
(621,324)
2
2
1
(83)
1
2
(83)
292
2
23,312
(3,533)
22,137
(3,533)
$1,578,893
(14,950)
101,374
$
426,436
(15,701)
(14,950)
5,712
5,712
(226,641)
(226,641)
36,275
(30,203)
36,275
(52,446)
(30,203)
Total
$7,750,911
85,673
Total
(3,533)
$7,750,911
(14,950)
85,673
223
(3,533)
(14,950)
21,574
223
5,712
21,574
(109,776)
5,712
29,787
(109,776)
(848,048)
29,787
23,314
(848,048)
36,275
23,314
(30,203)
36,275
(52,446)
(30,203)
221,932
92,803
939
4,968,338
(124,049)
18,604
1,139,329
364,361
6,589,454
(52,446)
(52,446)
(305,059)
(305,059)
221,932
221,932
92,803
92,803
939
939
4,968,338
4,968,338
(124,049)
(124,049)
18,604
18,604
(3,496)
18,604
(3,496)
221,932
92,803
939
4,968,338
(124,049)
1
160
1
160
149
(9,745)
149
316
(9,745)
136
16,301
136
16,301
17,483
(522,482)
17,483
28,909
(522,482)
2
2
1
(98)
1
3
(98)
316
3
28,909
32
32
(305,059)
570,524
1,139,329
1,709,853
247,262
570,524
1,709,853
(14,950)
247,262
(14,950)
34,236
34,236
(415,215)
(415,215)
364,361
364,361
(6)
364,361
(6)
5,459
(315,116)
5,459
(8,364)
(315,116)
(305,059)
570,524
6,589,454
7,159,978
247,256
570,524
(3,496)
7,159,978
(14,950)
247,256
136
(3,496)
(14,950)
16,303
136
34,236
16,303
17,484
34,236
(937,795)
17,484
28,912
(937,795)
5,459
28,912
(315,116)
5,459
(8,364)
(315,116)
(8,364)
(8,364)
SL Green Realty Corp.
Consolidated Statements of Equity
(in thousands, except per share data)
Consolidated Statements of Equity
SL Green Realty Corp. Stockholders
(in thousands, except per share data)
SL Green Realty Corp.
Common Stock
SL Green Realty Corp. Stockholders
Series I
Preferred
Stock
Series I
Preferred
Stock
Par
Common Stock
Shares
Value
Additional
Paid-
In-Capital
Shares
Par
Value
Additional
Paid-
In-Capital
Treasury
Stock
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Noncontrolling
Interests
Total
Retained
Earnings
Noncontrolling
Interests
(282,188)
Total
(282,188)
221,932
83,684
847
4,508,685
(124,049)
15,108
1,278,998
46,334
5,947,855
221,932
83,684
847
4,508,685
(124,049)
15,108
1,278,998
46,334
5,947,855
270,434
(282,188)
(3,159)
267,275
(282,188)
(569)
(569)
334
471
334
471
4
5
4
5
105
2
25,761
(4,596)
(46)
(248,287)
105
2
25,761
(4,596)
(46)
(248,287)
270,434
(25,276)
(3,159)
(14,950)
(25,276)
(43,593)
(43,593)
(14,950)
(34,320)
(34,320)
(136,066)
(136,066)
58,462
(478)
58,462
(25,845)
267,275
(43,593)
(14,950)
(25,845)
334
(43,593)
(14,950)
471
334
(34,320)
471
25,763
(34,320)
(384,399)
25,763
58,462
(384,399)
(478)
58,462
(478)
(478)
(279,377)
(279,377)
$ 221,932
79,202
$ 803
$4,286,395
$ (124,049)
$
(28,485)
$1,084,719
$
75,883
$5,517,198
(279,377)
(279,377)
Cash distributions declared
($3.2875 per common share,
none of which represented a
return of capital for federal
Cash distributions declared
income tax purposes)
($3.2875 per common share,
Balance at December 31, 2018
none of which represented a
return of capital for federal
Net income (loss)
income tax purposes)
Acquisition of subsidiary
Balance at December 31, 2018
interest from noncontrolling
interest
Net income (loss)
Other comprehensive loss
Acquisition of subsidiary
interest from noncontrolling
Preferred dividends
interest
DRSPP proceeds
Other comprehensive loss
Conversion of units in the
Preferred dividends
Operating Partnership to
common stock
DRSPP proceeds
Reallocation of noncontrolling
Conversion of units in the
interest in the Operating
Operating Partnership to
Partnership
common stock
Deferred compensation
Reallocation of noncontrolling
plan and stock awards, net of
interest in the Operating
forfeitures and tax withholdings
Partnership
Repurchases of common stock
Deferred compensation
plan and stock awards, net of
Contributions to consolidated
forfeitures and tax withholdings
joint venture interests
Repurchases of common stock
Cash distributions to
noncontrolling interests
Contributions to consolidated
joint venture interests
Cash distributions declared
($3.435 per common share,
Cash distributions to
none of which represented a
noncontrolling interests
return of capital for federal
Cash distributions declared
income tax purposes)
($3.435 per common share,
Balance at December 31, 2019
none of which represented a
return of capital for federal
income tax purposes)
Balance at December 31, 2019
$ 221,932
79,202
$ 803
$4,286,395
$ (124,049)
$
(28,485)
$1,084,719
$
75,883
$5,517,198
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
33
33
SL Green Realty Corp.
Consolidated Statements of Cash Flows
SL Green Realty Corp.
(in thousands, except per share data)
Consolidated Statements of Cash Flows
(in thousands, except per share data)
Operating Activities
Net income
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Depreciation and amortization
Equity in net loss (income) from unconsolidated joint ventures
Equity in net loss (income) from unconsolidated joint ventures
Distributions of cumulative earnings 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
Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate
Purchase price and other fair value adjustments
$
$
Purchase price and other fair value adjustments
Depreciable real estate reserves and impairment
Depreciable real estate reserves and impairment
Loss (gain) on sale of real estate, net
Loss (gain) on sale of real estate, net
Loan loss reserves and other investment reserves, net of recoveries
Loan loss reserves and other investment reserves, net of recoveries
Gain on sale of investments in marketable securities
Gain on sale of investments in marketable securities
Loss on early extinguishment of debt
Loss on early extinguishment of debt
Deferred rents receivable
Deferred rents receivable
Non-cash lease expense
Non-cash lease expense
Other non-cash adjustments
Changes in operating assets and liabilities:
Other non-cash adjustments
Changes in operating assets and liabilities:
Tenant and other receivables
Tenant and other receivables
Related party receivables
Related party receivables
Deferred lease costs
Deferred lease costs
Other assets
Other assets
Accounts payable, accrued expenses, other liabilities and security deposits
Accounts payable, accrued expenses, other liabilities and security deposits
Deferred revenue
Deferred revenue
Change in lease liability - operating leases
Net cash provided by operating activities
Change in lease liability - operating leases
Net cash provided by operating activities
Investing Activities
Acquisitions of real estate property
Investing Activities
Acquisitions of real estate property
Additions to land, buildings and improvements
Additions to land, buildings and improvements
Acquisition deposits and deferred purchase price
Acquisition deposits and deferred purchase price
Investments in unconsolidated joint ventures
Investments in unconsolidated joint ventures
Distributions in excess of cumulative earnings from unconsolidated joint ventures
Distributions in excess of cumulative earnings from unconsolidated joint ventures
Net proceeds from disposition of real estate/joint venture interest
Net proceeds from disposition of real estate/joint venture interest
Proceeds from sale of marketable securities
Proceeds from sale of marketable securities
Other investments
Other investments
Origination of debt and preferred equity investments
Origination of debt and preferred equity investments
Repayments or redemption of debt and preferred equity investments
Repayments or redemption of debt and preferred equity investments
Net cash provided by investing activities
Net cash provided by investing activities
Year Ended December 31,
2019
Year Ended December 31,
2018
2017
2019
2018
2017
$
$
291,487
291,487
284,011
284,011
34,518
34,518
864
864
(76,181)
(76,181)
(69,389)
(69,389)
7,047
7,047
16,749
16,749
—
—
—
—
—
—
(13,941)
(13,941)
13,744
13,744
271
271
(4,968)
(4,968)
7,802
7,802
(70,938)
(70,938)
(18,630)
(18,630)
(25,597)
(25,597)
10,824
10,824
(11,200)
(11,200)
376,473
376,473
(262,591)
(262,591)
(252,986)
(252,986)
(5,239)
(5,239)
(128,682)
(128,682)
79,020
79,020
208,302
208,302
—
—
(7,869)
(7,869)
(607,844)
(607,844)
1,092,383
1,092,383
114,494
114,494
$
$
270,856
270,856
289,899
289,899
(7,311)
(7,311)
10,277
10,277
(303,967)
(303,967)
(57,385)
(57,385)
227,543
227,543
30,757
30,757
6,839
6,839
—
—
17,083
17,083
(18,216)
(18,216)
2,016
2,016
2,932
2,932
6,968
6,968
(1,044)
(1,044)
(44,158)
(44,158)
(8,310)
(8,310)
4,410
4,410
12,348
12,348
—
—
441,537
441,537
(60,486)
(60,486)
(254,460)
(254,460)
—
—
(400,429)
(400,429)
233,118
233,118
1,231,004
1,231,004
—
—
(38,912)
(38,912)
(731,216)
(731,216)
703,043
703,043
681,662
681,662
101,069
101,069
418,798
418,798
(21,892)
(21,892)
20,309
20,309
(16,166)
(16,166)
—
—
178,520
178,520
(73,241)
(73,241)
—
—
(3,262)
(3,262)
—
—
(38,009)
(38,009)
1,020
1,020
19,621
19,621
(5,717)
(5,717)
(7,209)
(7,209)
(41,939)
(41,939)
(23,068)
(23,068)
(12,440)
(12,440)
46,607
46,607
—
—
543,001
543,001
(28,680)
(28,680)
(336,001)
(336,001)
—
—
(389,249)
(389,249)
319,745
319,745
692,796
692,796
55,129
55,129
25,330
25,330
(1,129,970)
(1,129,970)
812,914
812,914
22,014
22,014
34
34
SL Green Realty Corp.
Consolidated Statements of Cash Flows
SL Green Realty Corp.
(in thousands, except per share data)
Consolidated Statements of Cash Flows
(in thousands, except per share data)
Financing Activities
Financing Activities
Proceeds from mortgages and other loans payable
Proceeds from mortgages and other loans payable
Repayments of mortgages and other loans payable
Repayments of mortgages and other loans payable
Proceeds from revolving credit facility and senior unsecured notes
Proceeds from revolving credit facility and senior unsecured notes
Repayments of revolving credit facility and senior unsecured notes
Repayments of revolving credit facility and senior unsecured notes
Payment of debt extinguishment costs
Payment of debt extinguishment costs
Proceeds from stock options exercised and DRSPP issuance
Proceeds from stock options exercised and DRSPP issuance
Repurchase of common stock
Repurchase of common stock
Redemption of preferred stock
Redemption of preferred stock
Redemption of OP units
Redemption of OP units
Distributions to noncontrolling interests in other partnerships
Distributions to noncontrolling interests in other partnerships
Contributions from noncontrolling interests in other partnerships
Contributions from noncontrolling interests in other partnerships
Acquisition of subsidiary interest from noncontrolling interest
Acquisition of subsidiary interest from noncontrolling interest
Distributions to noncontrolling interests in the Operating Partnership
Distributions to noncontrolling interests in the Operating Partnership
Dividends paid on common and preferred stock
Dividends paid on common and preferred stock
Other obligations related to loan participations
Other obligations related to loan participations
Tax withholdings related to restricted share awards
Tax withholdings related to restricted share awards
Deferred loan costs
Deferred loan costs
Net cash used in financing activities
Net cash used in financing activities
Net (decrease) increase in cash, cash equivalents, and restricted cash
Net (decrease) increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of year
Cash, cash equivalents, and restricted cash at beginning of year
Cash, cash equivalents, and restricted cash at end of period
Cash, cash equivalents, and restricted cash at end of period
Supplemental cash flow disclosures:
Supplemental cash flow disclosures:
Interest paid
Interest paid
Income taxes paid
Income taxes paid
Year Ended December 31,
Year Ended December 31,
2018
2018
2017
2017
2019
2019
$
$
$
$
$
$
$
$
752,984
752,984
(230,076)
(230,076)
1,310,000
1,310,000
(1,570,000)
(1,570,000)
—
—
334
334
(384,399)
(384,399)
(18,142)
(18,142)
(27,495)
(27,495)
(478)
(478)
10,239
10,239
(25,845)
(25,845)
(14,729)
(14,729)
(306,386)
(306,386)
—
—
(3,495)
(3,495)
(21,162)
(21,162)
(528,650)
(528,650)
(37,683)
(37,683)
279,113
279,113
241,430
241,430
248,684
248,684
1,489
1,489
$
$
$
$
$
$
$
$
564,391
564,391
(868,842)
(868,842)
3,120,000
3,120,000
(2,560,000)
(2,560,000)
(13,918)
(13,918)
29,048
29,048
(979,541)
(979,541)
(1,208)
(1,208)
(33,972)
(33,972)
(8,364)
(8,364)
5,459
5,459
—
—
(15,000)
(15,000)
(313,230)
(313,230)
16
16
(3,842)
(3,842)
(15,109)
(15,109)
(1,094,112)
(1,094,112)
29,087
29,087
250,026
250,026
279,113
279,113
259,776
259,776
1,418
1,418
$
$
$
$
$
$
$
$
870,459
870,459
(902,460)
(902,460)
2,784,599
2,784,599
(2,276,782)
(2,276,782)
—
—
23,537
23,537
(806,302)
(806,302)
(275)
(275)
—
—
(52,446)
(52,446)
36,275
36,275
—
—
(14,266)
(14,266)
(333,543)
(333,543)
17,227
17,227
(3,879)
(3,879)
(27,100)
(27,100)
(684,956)
(684,956)
(119,941)
(119,941)
369,967
369,967
250,026
250,026
273,819
273,819
2,448
2,448
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Issuance of units in the operating partnership
Issuance of units in the operating partnership
Conversion of units in the operating partnership
Conversion of units in the operating partnership
Redemption of units in the operating partnership for a joint venture sale
Redemption of units in the operating partnership for a joint venture sale
Exchange of debt investment for real estate or equity in joint venture
Exchange of debt investment for real estate or equity in joint venture
Issuance of preferred units relating to the real estate acquisition
Issuance of preferred units relating to the real estate acquisition
Tenant improvements and capital expenditures payable
Tenant improvements and capital expenditures payable
Fair value adjustment to noncontrolling interest in the operating partnership
Deconsolidation of a subsidiary (1)
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 assets to assets held for sale
Transfer of liabilities related to assets held for sale
Transfer of liabilities related to assets held for sale
Removal of fully depreciated commercial real estate properties
Removal of fully depreciated commercial real estate properties
Contribution to consolidated joint venture by noncontrolling interest
Contribution to consolidated joint venture by noncontrolling interest
Share repurchase payable
Share repurchase payable
Recognition of right of use assets and related lease liabilities
(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
Recognition of right of use assets and related lease liabilities
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
(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
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 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
Allianz in February 2018.
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.
—
—
16,303
16,303
10,445
10,445
298,956
298,956
—
—
—
—
34,236
34,236
298,404
298,404
—
—
—
—
124,249
124,249
—
—
—
—
—
—
—
—
471
471
—
—
34,498
34,498
1,000
1,000
6,056
6,056
34,320
34,320
395
395
391,664
391,664
—
—
19,577
19,577
48,223
48,223
—
—
389,120
389,120
25,723
25,723
21,574
21,574
—
—
—
—
—
—
6,667
6,667
5,712
5,712
695,204
695,204
611,809
611,809
5,364
5,364
15,488
15,488
—
—
41,746
41,746
—
—
35
35
SL Green Realty Corp.
Consolidated Statements of Cash Flows
SL Green Realty Corp.
(in thousands, except per share data)
Consolidated Statements of Cash Flows
(in thousands, except per share data)
In December 2019, 2018 and 2017, the Company declared quarterly distributions per share of $0.885, $0.85 and $0.8125,
In December 2019, 2018 and 2017, the Company declared quarterly distributions per share of $0.885, $0.85 and $0.8125,
respectively. These distributions were paid in January 2020, 2019 and 2018, respectively.
respectively. These distributions were paid in January 2020, 2019 and 2018, respectively.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated
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.
balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows.
Cash and cash equivalents
Cash and cash equivalents
Restricted cash
Restricted cash
Total cash, cash equivalents, and restricted cash
2019
2019
166,070
166,070
75,360
75,360
241,430
$
$
$
Year Ended
Year Ended
2018
$
$
$
2018
129,475
129,475
149,638
149,638
279,113
Total cash, cash equivalents, and restricted cash
$
241,430
$
279,113
The accompanying notes are an integral part of these consolidated financial statements.
2017
2017
127,888
127,888
122,138
122,138
250,026
250,026
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
36
36
SL Green Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands, except per unit data)
December 31, 2019
December 31, 2018
Assets
Commercial real estate properties, at cost:
Land and land interests
Building and improvements
Building leasehold and improvements
Right of use asset - financing leases
Right of use asset - operating leases
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 $12,369 and $15,702 in 2019 and 2018,
respectively
Related party receivables
Deferred rents receivable, net of allowance of $12,477 and $15,457 in 2019 and 2018,
respectively
Debt and preferred equity investments, net of discounts and deferred origination fees of
$14,562 and $22,379 and allowances of $1,750 and $5,750 in 2019 and 2018, respectively
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
Lease liability - financing leases
Lease liability - operating leases
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 (4,196 and 4,131 limited partner common units
outstanding at December 31, 2019 and 2018, respectively)
Preferred units
37
$
1,751,544
$
5,154,990
1,433,793
47,445
396,795
8,784,567
(2,060,560)
6,724,007
391,664
166,070
75,360
29,887
43,968
21,121
283,011
1,580,306
2,912,842
205,283
332,801
12,766,320
2,183,253
234,013
1,494,024
1,496,847
22,148
177,080
166,905
114,052
44,448
381,671
79,282
62,252
—
100,000
6,555,975
409,862
283,285
$
$
$
$
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
SL Green Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands, except per unit data)
December 31, 2019
December 31, 2018
Capital
SLGOP partners' capital:
Series I Preferred Units, $25.00 liquidation preference, 9,200 issued and outstanding at both
December 31, 2019 and 2018
221,932
221,932
SL Green partners' capital (834 and 878 general partner common units, and 78,368 and
82,806 limited partner common units outstanding at December 31, 2019 and 2018,
respectively)
Accumulated other comprehensive (loss) income
Total SLGOP partners' capital
Noncontrolling interests in other partnerships
Total capital
Total liabilities and capital
5,247,868
(28,485)
5,441,315
75,883
5,517,198
$
12,766,320
$
5,664,481
15,108
5,901,521
46,334
5,947,855
12,751,358
(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, excluding the Operating Partnership: $205.2 million and $110.0
million of land, $481.9 million and $346.7 million of building and improvements, $2.0 million and $2.0 million of building and leasehold improvements,
$61.7 million and $47.4 million of right of use assets, $17.6 million and $42.2 million of accumulated depreciation, $169.5 million and $112.6 million of
other assets included in other line items, $457.1 million and $140.8 million of real estate debt, net, $1.2 million and $0.4 million of accrued interest payable,
$57.7 million and $43.6 million of lease liabilities, and $43.7 million and $18.3 million of other liabilities included in other line items as of December 31,
2019 and December 31, 2018, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
38
SL Green Operating Partnership, L.P.
Consolidated Statements of Operations
(in thousands, except per unit data)
Year Ended December 31,
2019
2018
2017
$
983,557
$
978,574
$
1,273,932
Revenues
Rental revenue, net
Investment income
Other income
Total revenues
Expenses
Operating expenses, including $18,106 in 2019, $17,823 in 2018, $21,400 in
2017 of related party expenses
Real estate taxes
Operating lease 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 (loss) 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 on sale of investment in marketable securities
Loss on early extinguishment of debt
Net income
Net loss attributable to noncontrolling interests in other partnerships
Preferred unit distributions
Net income attributable to SLGOP
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
$
$
$
195,590
59,848
1,238,995
234,676
190,764
33,188
190,521
11,653
272,358
—
729
100,875
1,034,764
(34,518)
76,181
69,389
(16,749)
(7,047)
—
—
291,487
3,159
(10,911)
283,735
(14,950)
268,785
3.10
3.10
86,008
86,562
$
$
$
201,492
47,326
1,227,392
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
$
$
$
193,871
43,670
1,511,473
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
The accompanying notes are an integral part of these consolidated financial statements.
39
SL Green Operating Partnership, L.P.
Consolidated Statements of Comprehensive Income
(in thousands)
Net income
Other comprehensive (loss) income:
(Decrease) increase in unrealized value of derivative instruments, including
SLGOP's share of joint venture derivative instruments
Increase (decrease) in unrealized value of marketable securities
Other comprehensive loss
Comprehensive income
Net loss attributable to noncontrolling interests
Other comprehensive loss attributable to noncontrolling interests
Year Ended December 31,
2018
2017
2019
$
291,487
$
270,856
$
101,069
(47,118)
1,249
(45,869)
245,618
3,159
2,276
(3,622)
60
(3,562)
267,294
6
66
1,040
(4,667)
(3,627)
97,442
15,701
94
Comprehensive income attributable to SLGOP
$
251,053
$
267,366
$
113,237
The accompanying notes are an integral part of these consolidated financial statements.
40
SL Green Operating Partnership, L.P.
Consolidated Statements of Capital
(in thousands, except per unit data)
Balance at December 31, 2016
Net income
Other comprehensive income
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
100,562
$ 7,080,406
$
22,137
$
426,436
$ 7,750,911
2
202
101,374
(14,950)
223
21,574
5,712
(109,776)
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 interests 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
Cash distributions declared ($3.2875 per common unit, none of which
represented a return of capital for federal income tax purposes)
Balance at December 31, 2018
Net income (loss)
Acquisition of subsidiary interest from noncontrolling interest
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
Contributions to consolidated joint venture interests
Cash distributions to noncontrolling interests
Cash distributions declared ($3.435 per common unit, none of which
represented a return of capital for federal income tax purposes)
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)
221,932
83,684
5,664,481
15,108
46,334
5,947,855
(282,188)
(282,188)
270,434
(569)
(14,950)
334
471
(34,320)
4
5
105
25,763
(4,596)
(384,399)
(3,159)
267,275
(25,276)
(43,593)
(25,845)
(43,593)
(14,950)
334
471
(34,320)
25,763
(384,399)
58,462
58,462
(478)
(478)
(279,377)
(279,377)
Balance at December 31, 2019
$ 221,932
79,202
$ 5,247,868
$
(28,485)
$
75,883
$ 5,517,198
41
SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(in thousands)
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Equity in net loss (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 adjustments
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 on sale of investments in marketable securities
Loss on early extinguishment of debt
Deferred rents receivable
Non-cash lease expense
Other non-cash adjustments
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
Change in lease liability - operating leases
Net cash provided by operating activities
Investing Activities
Acquisitions of real estate property
Additions to land, buildings and improvements
Acquisition deposits and deferred purchase price
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
Other investments
Origination of debt and preferred equity investments
Repayments or redemption of debt and preferred equity investments
Net cash provided by investing activities
Year Ended December 31,
2019
2018
2017
$
291,487
$
270,856
$
101,069
284,011
34,518
864
(76,181)
(69,389)
7,047
16,749
—
—
—
(13,941)
13,744
271
(4,968)
7,802
(70,938)
(18,630)
(25,597)
10,824
(11,200)
289,899
(7,311)
10,277
(303,967)
(57,385)
227,543
30,757
6,839
—
17,083
(18,216)
2,016
2,932
6,968
(1,044)
(44,158)
(8,310)
4,410
12,348
—
418,798
(21,892)
20,309
(16,166)
—
178,520
(73,241)
—
(3,262)
—
(38,009)
1,020
19,621
(5,717)
(7,209)
(41,939)
(23,068)
(12,440)
46,607
—
376,473
441,537
543,001
(262,591)
(252,986)
(5,239)
(128,682)
79,020
208,302
—
(7,869)
(607,844)
1,092,383
114,494
(60,486)
(254,460)
—
(400,429)
233,118
1,231,004
—
(38,912)
(28,680)
(336,001)
—
(389,249)
319,745
692,796
55,129
25,330
(731,216)
(1,129,970)
703,043
681,662
812,914
22,014
42
SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(in thousands)
Financing Activities
Proceeds from mortgages and other loans payable
Repayments of mortgages and other loans payable
Proceeds from revolving credit facility and senior unsecured notes
Year Ended December 31,
2019
2018
2017
$
752,984
$
564,391
$
870,459
(230,076)
(868,842)
(902,460)
1,310,000
3,120,000
2,784,599
Repayments of revolving credit facility and senior unsecured notes
(1,570,000)
(2,560,000)
(2,276,782)
Payment of debt extinguishment costs
Proceeds from stock options exercised and DRSPP issuance
Repurchase of common units
Redemption of preferred units
Redemption of OP units
Distributions to noncontrolling interests in other partnerships
Contributions from noncontrolling interests in other partnerships
Acquisition of subsidiary interest from noncontrolling interest
Distributions paid on common and preferred units
Other obligations related to mortgage loan participations
Tax withholdings related to restricted share awards
Deferred loan costs
Net cash used in financing activities
Net (decrease) increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of year
Cash, cash equivalents, and restricted cash at end of period
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
Conversion 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 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
Contribution to consolidated joint venture by noncontrolling interest
Share repurchase payable
Recognition of right of use assets and related lease liabilities
—
334
(13,918)
29,048
—
23,537
(384,399)
(979,541)
(806,302)
(18,142)
(27,495)
(478)
10,239
(25,845)
(1,208)
(33,972)
(8,364)
5,459
—
(275)
—
(52,446)
36,275
—
(321,115)
(328,230)
(347,809)
—
(3,495)
(21,162)
16
(3,842)
(15,109)
(528,650)
(1,094,112)
(37,683)
279,113
29,087
250,026
241,430
$
279,113
$
17,227
(3,879)
(27,100)
(684,956)
(119,941)
369,967
250,026
248,684
1,489
$
$
259,776
1,418
$
$
273,819
2,448
$
$
$
—
471
—
34,498
1,000
6,056
34,320
395
391,664
—
19,577
48,223
—
389,120
—
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
—
(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.
43
SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(in thousands)
In December 2019, 2018 and 2017, SLGOP declared quarterly distributions per common unit of $0.885, $0.85 and
$0.8125, respectively. These distributions were paid in January 2020, 2019 and 2018, respectively.
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
2019
2018
2017
$
$
166,070
75,360
241,430
$
$
129,475
149,638
279,113
$
$
127,888
122,138
250,026
The accompanying notes are an integral part of these consolidated financial statements.
44
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements
December 31, 2019
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, 2019, noncontrolling investors
held, in the aggregate, a 5.03% 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."
As of December 31, 2019, 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
(3)
Fee Interest
Suburban
Office
Retail
Total commercial properties
Residential:
Manhattan
Residential
Total residential properties
Total portfolio
20
6 (2)
12,387,091
320,430
6
—
32
8
1
9
41
189,538
—
12,897,059
1,044,800
52,000
1,096,800
13,993,859
2 (2)
2
43
445,105
445,105
14,438,964
10
11,216,183
289,050
—
—
11,505,233
—
—
—
8
1
1
20
—
—
—
20
8
8
28
30
14
7
1
52
8
1
9
23,603,274
609,480
189,538
—
24,402,292
1,044,800
52,000
1,096,800
11,505,233
61
25,499,092
1,663,774
1,663,774
13,169,007
10
10
71
2,108,879
2,108,879
27,607,971
94.5%
98.4%
84.9%
—%
94.6%
85.7%
100.0%
86.4%
94.2%
95.7%
95.7%
94.3%
(1)
The weighted average occupancy for commercial properties represents the total occupied square footage divided by the total square footage at acquisition.
The weighted average occupancy for residential properties represents the total occupied units divided by the total available units.
(2) As of December 31, 2019, 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.
Properties in Development are included in Number of Properties with no Approximate Square Feet.
(3)
45
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
As of December 31, 2019, 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 $1.7 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,
subject to the priority distributions with respect to preferred units and special provisions that apply to LTIP Units. 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.
Subsequent Event
In February 2020, The Company entered into contract to sell 315 West 33rd Street and an adjacent undeveloped parcel of
land for a gross asset valuation of $446.5 million. This transaction is expected to close in the second quarter of 2020. At December 31,
2019, we determined that the held for sale criteria was not met for this property as it was not probable that the sale of the asset
would be completed within one year.
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.
46
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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
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, 2019, the weighted average amortization period for above-market leases,
below-market leases, and in-place lease costs is 1.7 years, 2.8 years, and 3.5 years, respectively.
The Company classifies those leases under which the Company is the lessee at lease commencement as finance or operating
leases. Leases qualify as finance leases if the lease transfers ownership of the asset at the end of the lease term, the lease grants
an option to purchase the asset that we are reasonably certain to exercise, the lease term is for a major part of the remaining
economic life of the asset, or the present value of the lease payments exceeds substantially all of the fair value of the asset. Leases
that do not qualify as finance leases are deemed to be operating leases. At lease commencement the Company records a lease
liability which is measured as the present value of the lease payments and a right of use asset which is measured as the amount of
the lease liability and any initial direct costs incurred. The Company applies a discount rate to determine the present value of the
lease payments. If the rate implicit in the lease is known, the Company uses that rate. If the rate implicit in the lease is not known,
the Company uses a discount rate reflective of the Company’s collateralized borrowing rate given the term of the lease. To determine
the discount rate, the Company employs a third party specialist to develop an analysis based primarily on the observable borrowing
rates of the Company, other REITs, and other corporate borrowers with long-term borrowings. On the consolidated statements of
operations, operating leases are expensed through operating lease rent while financing leases are expensed through amortization
and interest expense. On the consolidated balance sheet, financing leases include the amounts previously captioned "Properties
under capital lease." When applicable, the Company combines the consideration for lease and non-lease components in the
calculation of the value of the lease obligation and right-of-use asset.
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.
47
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
Properties other than Right of use assets - operating leases 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
40 years
shorter of remaining life of the building or useful life
Term
Building (leasehold interest)
lesser of 40 years or remaining term of the lease
Right of use assets - financing leases
lesser of 40 years or remaining lease term
Furniture and fixtures
Tenant improvements
four to seven years
shorter of remaining term of the lease or useful life
Right of use assets - operating leases are amortized over the remaining lease term. The amortization is made up of the
principal amortization under the lease liability plus or minus the straight line adjustment of the operating lease rent under ASC
840.
Depreciation expense (including amortization of right of use assets - financing leases) totaled $233.5 million, $242.8 million,
and $365.3 million for the years ended December 31, 2019, 2018 and 2017, 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 $4.5 million, $6.8 million, and $20.3 million of rental revenue for the years ended December 31, 2019, 2018,
and 2017, respectively, for the amortization of aggregate below-market leases in excess of above-market leases, resulting from
the allocation of the purchase price of the applicable properties.
We recognized no reduction to interest expense from the amortization of above-market rate mortgages assumed for the years
ended December 31, 2019 and 2018. We recognized $0.8 million as a reduction to interest expense from the amortization of above-
market rate mortgages for the year ended December 31, 2017.
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, 2019 and 2018 (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,
2019
2018
$
$
$
$
255,198
(228,223)
26,975
282,048
(249,514)
32,534
$
$
$
$
266,540
(241,040)
25,500
276,245
(253,767)
22,478
(1) As of December 31, 2019, 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, 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.
48
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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):
2020
2021
2022
2023
2024
$
(4,320)
(2,748)
(2,224)
(1,301)
(834)
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):
2020
2021
2022
2023
2024
Cash and Cash Equivalents
$
5,183
3,638
2,064
1,435
1,040
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, 2019, 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.
At December 31, 2019 and 2018, we held the following marketable securities (in thousands):
Commercial mortgage-backed securities
Total marketable securities available-for-sale
December 31,
2019
2018
$
$
29,887
29,887
$
$
28,638
28,638
The cost basis of the commercial mortgage-backed securities was $27.5 million at both December 31, 2019 and 2018. These
securities mature at various times through 2035. We held no equity marketable securities at December 31, 2019 and 2018.
During the years ended December 31, 2019 and 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 gain of $3.3 million, which is included in gain on sale of investment in marketable securities on the consolidated
statements of operations.
49
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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 in 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, 2019.
We may originate loans for real estate acquisition, development and construction ("ADC loans"), 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.
Deferred Lease Costs
Deferred lease costs consist of incremental fees and direct costs that would not have been incurred if the lease had not been
obtained 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, 2019, 2018 and 2017, $6.3 million, $15.7 million, and $16.4
million of their compensation, respectively, was capitalized and is amortized over an estimated average lease term of eight 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 consolidated balance
sheet as a direct deduction from the carrying amount of that debt liability.
Revenue Recognition
Rental revenue for operating leases is recognized on a straight-line basis over the term of the lease. Rental revenue recognition
commences when the leased space is 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
of tenant improvements, rental revenue recognition begins when the tenant takes possession of or controls the space.
50
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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.
In addition to base rent, our tenants also generally will pay variable rent which represents 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.
Rental revenue is recognized if collectability is probable. If collectability of substantially all of the lease payments is assessed
as not probable, any difference between the rental revenue recognized to date and the lease payments that have been collected is
recognized as a current-period adjustment to rental revenue. A subsequent change in the assessment of collectability to probable
may result in a current-period adjustment to rental revenue for any difference between the rental revenue that would have been
recognized if collectability had always been assessed as probable and the rental revenue recognized to date.
The Company provides its tenants with certain customary services for lease contracts such as common area maintenance
and general security. We have elected to combine the nonlease components with the lease components of our operating lease
agreements and account for them as a single lease component in accordance with ASC 842.
We record a gain or loss 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 collectible. 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.
51
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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 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 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 carrying value of the investment over the fair value of the collateral.
Any deficiency between the carrying value 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.
Rent Expense
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 lease liability - operating leases 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
52
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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
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. Transaction costs for business combinations or costs incurred on potential transactions that
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, 2019, 2018 and 2017, we recorded Federal, state and local tax provisions of $1.5
million, $2.8 million, and $4.3 million, respectively. For the year ended December 31, 2019, the Company paid distributions on
its common stock of $3.40 per share which represented $2.59 per share of ordinary income and $0.81 per share of capital gains.
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.
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 made substantial changes to
the Code. The Tax Act did not have a material impact on our financial statements for the years ended December 31, 2019 or
December 31, 2018.
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.
53
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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
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 that meet 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
derivative instruments designated as hedge instruments are reflected in accumulated other comprehensive income (loss). 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.
54
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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
accounted 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, 2019. In January 2020,
Credit Suisse entered into a lease termination agreement with the Company and vacated its space at the property, thereby reducing
its share of annualized cash rent to approximately 3.3%.
For the years ended December 31, 2019, 2018, and 2017, the following properties contributed more than 5.0% of our
annualized cash rent from office properties, including our share of annualized cash rent from joint venture office properties:
Property
2019
Property
2018
Property
1185 Avenue of the Americas
7.6% 11 Madison Avenue
7.4% 11 Madison Avenue
11 Madison Avenue
420 Lexington Avenue
1515 Broadway
One Madison Avenue
220 East 42nd Street
7.4% 1185 Avenue of the Americas
6.7% 1185 Avenue of the Americas
6.6% 420 Lexington Avenue
6.5% 1515 Broadway
6.1% 1515 Broadway
6.0% 420 Lexington Avenue
6.0% One Madison Avenue
5.8% One Madison Avenue
5.5%
2017
7.1%
7.1%
7.0%
6.0%
5.6%
55
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
As of December 31, 2019, 70.1% of our work force is covered by six collective bargaining agreement. 2.1% of our work
force is covered by collective bargaining agreements that expire in December 2020. See Note 19, "Benefits Plans."
Reclassification
Certain prior year balances have been reclassified to conform to our current year presentation.
Accounting Standards Updates
In August 2018, the FASB issued Accounting Standard Update, or 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.
In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718), Improvements to
Nonemployee Share-Based Payment Accounting and in November 2019, issued ASU No. 2019-08, Compensation Stock
Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). These amendments provide additional
guidance related to share-based payment transactions for acquiring goods or services from nonemployees. The Company has
adopted this guidance in 2019 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; 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; and in May 2019, issued ASU No. 2019-05, Codification Improvements. 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 Company adopted this guidance
on January 1, 2019, and it did not have a material impact on the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments; in November 2018 issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial
Instruments - Credit Losses, in April, May and November 2019, issued ASU No. 2019-04, 2019-05 and 2019-11, which provide
codification improvements and targeted transition relief. 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. The Company’s DPE portfolio and financing 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 will adopt this guidance January 1, 2020 and does not expect it to have a material impact 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 and in March 2019 issued ASU No. 2019-01 - Codification Improvements.
The Company adopted this guidance on January 1, 2019 using the modified retrospective approach which allows the Company to
apply the guidance for the current year presentation and not adjust the prior year numbers. The Company elected 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. The new
guidance applies to the ground leases under which the Company is a lessee. The Company has recognized a new asset and liability
- “Right of use asset - operating leases” and “Lease liability - operating leases” - for those leases classified as operating leases
under the previous standard. The Company will continue to recognize expense on a straight-line basis for these operating leases.
56
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
The ground leases that the Company historically reported as “Properties under capital leases” and “Capitalized lease obligations”
are now labeled “Right of use asset - financing leases” and “Lease liability - financing leases”. The expense recognition of these
leases has not changed. The Company adopted 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. In doing so, the Company has collapsed
the line “Escalation and reimbursement revenues” into the “Rental revenue, net” line to reflect adopting this practical expedient.
The Company also collapsed the prior year balances to conform to the current year presentation. For future leases, the Company
no longer capitalizes internal leasing costs that are not incremental and direct as defined under the new guidance. The Company
has recorded additional expense of approximately $10.0 million related to this change for the year ended December 31, 2019.
3. Property Acquisitions
2019 Acquisitions
The following table summarizes the properties acquired during the year ended December 31, 2019:
Property
106 Spring Street(1)
410 Tenth Avenue(2)
110 Greene Street(3)
Acquisition Date
Property Type
April 2019
May 2019
May 2019
Fee Interest
Fee Interest
Fee Interest
Approximate
Square Feet
Gross Asset
Valuation
(in millions)
5,928
$
638,000
223,600
80.2
440.0
256.5
(1)
(2)
(3)
In April 2019, the Company accepted an assignment of the equity interests in the property in lieu of repayment of the Company's debt investment and
marked the assets received and liabilities assumed to fair value.
In May 2019, the Company closed on the acquisition of a majority and controlling 70.87% interest in 410 Tenth Avenue. We recorded the assets acquired
and liabilities assumed at fair value, which resulted in the recognition of a fair value adjustment of $67.6 million, which is reflected in the Company's
consolidated statement of operations within purchase price and other fair value adjustments, and $18.3 million of net intangible lease liabilities.
In May 2019, the Company acquired from our joint venture partner the remaining 10% interest in this property that the Company did not already own.
2018 Acquisitions
The following table summarizes the properties acquired during the year ended December 31, 2018:
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)
(2)
(3)
(4)
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, 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.
2017 Acquisitions
During the year ended December 31, 2017, we did not acquire any properties from a third party.
57
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
4. Properties Held for Sale and Property Dispositions
Properties Held for Sale
During the third quarter of 2019, we entered into an agreement to sell 220 East 42nd Street in Manhattan for a total consideration
of $815.0 million. The sale is expected to close in the first quarter of 2020.
As of December 31, 2019, 220 East 42nd Street was classified as held for sale.
Property Dispositions
The following table summarizes the properties sold during the years ended December 31, 2019, 2018, and 2017:
Unaudited
Approximate
Usable Square
Feet
Sales Price(1)
(in millions)
Gain (Loss) on
Sale(2)
(in millions)
1,107,000
$
229.2
$
Property
Suburban Properties (3)
1640 Flatbush Avenue
562 Fifth Avenue
1010 Washington Boulevard
115 Spring Street (4)
2 Herald Square(5)
400 Summit Lake Drive
Upper East Side Assemblage(6)(7)
1-6 International Drive
635 Madison Avenue
115-117 Stevens Avenue
600 Lexington Avenue
1515 Broadway (8)
125 Chubb Way
16 Court Street
680-750 Washington Boulevard
520 White Plains Road
102 Greene Street (9)
Disposition
Date
December 2019
December 2019
December 2019
November 2019
August 2019
Property Type
Fee Interest
Fee Interest
Fee Interest
Fee Interest
Fee Interest
November 2018
Office/Retail
1,000
42,635
143,400
5,218
369,000
November 2018
Land
39.5 acres
October 2018
Development
July 2018
June 2018
May 2018
January 2018
December 2017
October 2017
October 2017
July 2017
April 2017
April 2017
Office
Retail
Office
Office
Office
Office
Office
Office
Office
Retail
70,142
540,000
176,530
178,000
303,515
1,750,000
278,000
317,600
325,000
180,000
9,200
16.2
52.4
23.1
66.6
265.0
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
1.8
5.5
(26.6)
(7.1)
3.6
—
(36.2)
(6.3)
(2.6)
(14.1)
(0.7)
23.8
—
(26.1)
64.9
(44.2)
(14.6)
4.9
(1)
(2)
(3)
(4)
(5)
Sales price represents the gross sales price for a property or the gross asset valuation for interests in a property.
The gain on sale for 1640 Flatbush Avenue, 600 Lexington Avenue, 16 Court Street, and 102 Greene Street are net of $2.0 million, $1.3 million, $2.5 million,
and $0.9 million, respectively, 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.
Suburban Properties consists of 360 Hamilton Avenue, 100 Summit Lake Drive, 200 Summit Lake Drive, and 500 Summit Lake Drive.
The Company sold a 49% interest, which resulted in the deconsolidation of our remaining 51% interest. We recorded our investment at fair value which
resulted in the recognition of a fair value adjustment of $3.8 million, which is reflected in the Company's consolidated statements of operations within
purchase price and other fair value adjustments. See Note 6, "Investments in Unconsolidated Joint Ventures."
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."
(6) 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,
(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 in 102 Greene Street and accounted for our retained 10% 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."
58
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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, 2019 and 2018
(in thousands):
Balance at beginning of year (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, 2019
December 31, 2018
2,099,393
$
2,114,041
652,866
14,736
(1,190,689)
4,000
834,304
151,704
(994,906)
(5,750)
1,580,306
$
2,099,393
$
$
(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, but did not meet the conditions for sale accounting, are included in other assets and
other liabilities on the consolidated balance sheets.
Below is a summary of the balances relating to our debt and preferred equity investments as of December 31, 2019 (dollars
in thousands):
Type
Senior Mortgage
Debt
Junior Mortgage
Debt
Floating Rate
Fixed Rate
Carrying
Value
Face
Value
Interest Rate
Carrying
Value
Face
Value
Interest Rate
Total
Carrying
Value
Senior
Financing Maturity
$ 341,513 $342,861
31,960
32,000
Mezzanine Debt
245,412
247,385
Preferred Equity
Balance at end of
period
—
—
$ 618,885 $ 622,246
L + 2.75 -
5.50%
L + 6.00 -
7.25%
L + 4.60 -
12.36%
—
—
$
1,010
$1,250
3.00%
$ 342,523 $
— 2020-2022
—
—
—
$
31,960
100,000
2020-2021
721,175
728,138
2.90 - 10.00% $ 966,587
5,188,939
2020-2029
239,236
244,983
7.00 - 11.00% $ 239,236
272,000
2020-2023
$ 961,421 $ 974,371
—
$1,580,306 $ 5,560,939
—
The following table is a rollforward of our total loan loss reserves at December 31, 2019, 2018 and 2017 (in thousands):
Balance at beginning of year
Expensed
Recoveries
Charge-offs and reclassifications
Balance at end of period
2019
December 31,
2018
2017
5,750
$
— $
—
—
(4,000)
6,839
—
(1,089)
1,750
$
5,750
$
—
—
—
—
—
$
$
At December 31, 2019, all debt and preferred equity investments were performing in accordance with their respective terms.
At December 31, 2019, the Company's loan loss reserves of 1.8 million were attributable to one investment with an unpaid principal
balance of $142.9 million that is being marketed for sale, but is otherwise performing in accordance with its respective terms, and
was not put on nonaccrual.
At December 31, 2018, all debt and preferred equity investments were performing in accordance with their respective terms.
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 were being marketed for sale, were performing in accordance with their respective terms,
and were not put on nonaccrual.
59
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
We have determined that we have one portfolio segment of financing receivables at December 31, 2019 and 2018 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 $131.1 million and $124.5 million at December 31, 2019 and 2018, respectively. No
financing receivables were 90 days past due at December 31, 2019 with the exception of a $28.4 million financing receivable
which was put on nonaccrual in August 2018 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, 2019, management estimated the weighted average risk rating for our debt and preferred equity
investments to be 1.2.
Debt Investments
As of December 31, 2019 and 2018, we held the following debt investments with an aggregate weighted average current
yield of 8.42%, at December 31, 2019 (in thousands):
Loan Type
Fixed Rate Investments:
Mezzanine Loan(3a)
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan(3b)
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Total fixed rate
Floating Rate Investments:
Mortgage/Mezzanine Loan(4)
Mortgage/Mezzanine Loan
Junior Mortgage Loan
Mezzanine Loan
Mortgage/Mezzanine Loan
Mortgage Loan
Mortgage/Mezzanine Loan
Mezzanine Loan
Mortgage/Mezzanine Loan
Mortgage/Mezzanine Loan(3c)
Mezzanine Loan
Junior Mortgage Participation/
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
December 31,
2019
Future Funding
Obligations
December 31,
2019
Senior
Financing
December 31,
2019
Carrying Value (1)
December 31,
2018
Carrying Value (1)
Maturity
Date (2)
$
— $
1,160,000
$
222,775
$
213,185
March 2020
$
$
$
$
—
—
—
—
—
—
—
—
—
—
15,000
147,000
280,000
326,574
83,790
180,000
115,000
95,000
1,712,750
—
— $
4,115,114
2,509
$
—
—
4,831
—
44,737
—
19,212
—
10,384
—
—
12,999
44,000
—
—
—
—
29,420
—
40,000
47,302
—
—
63,990
421,938
—
—
275,000
60,000
151,175
—
85,000
—
—
—
60
$
$
3,500
24,952
38,734
215,737
12,714
30,000
12,950
30,000
55,250
—
646,612
82,696
69,839
20,000
15,743
19,971
106,473
55,573
51,387
35,386
96,570
49,809
15,698
41,395
13,918
20,000
—
—
—
3,500
September 2021
24,932
36,585
—
April 2022
August 2022
June 2023
12,706 November 2023
30,000 December 2023
June 2024
January 2025
June 2027
12,941
30,000
55,250
11,000
430,099
62,493
January 2020
—
March 2020
19,986
12,627
19,999
April 2020
July 2020
August 2020
88,501
September 2020
83,449
October 2020
88,817 December 2021
35,266 December 2020
277,694
24,961
15,665
—
April 2021
April 2021
July 2021
July 2021
— December 2022
— December 2029
53,402
79,164
15,333
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
Loan Type
Mezzanine Loan
Mortgage/Mezzanine Loan
Mezzanine Loan
Mortgage/Junior Mortgage
Participation Loan
Mortgage/Mezzanine Loan
Mortgage/Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan
Mezzanine Loan(5)
Total floating rate
Total
December 31,
2019
Future Funding
Obligations
December 31,
2019
Senior
Financing
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
December 31,
2019
Carrying Value (1)
—
December 31,
2018
Carrying Value (1)
14,822
Maturity
Date (2)
—
—
—
—
—
—
—
—
—
154,070
34,886
84,012
37,094
98,804
7,305
14,998
21,990
37,499
$
$
138,672
138,672
$
$
1,173,825
5,288,939
$
$
694,458
1,341,070
$
$
1,382,837
1,812,936
(1)
(2)
(3)
(4)
(5)
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 and (c) $96.4 million
This loan was extended in January 2020.
In 2019, the Company accepted an assignment of the equity interests in the property in-lieu of repayment and marked the assets received and liabilities
assumed to fair value.
Preferred Equity Investments
As of December 31, 2019 and 2018, we held the following preferred equity investments with an aggregate weighted average
current yield of 9.63% at December 31, 2019 (in thousands):
December 31,
2019
Future Funding
Obligations
December 31,
2019
Senior
Financing
Type
Preferred Equity
Preferred Equity
Total
$
$
December 31, 2019
Carrying Value (1)
141,171
$
December 31, 2018
Carrying Value (1)
143,183
$
— $
—
272,000
1,763,529
— $
2,035,529
$
239,236
$
98,065
143,274
286,457
Mandatory
Redemption (2)
April 2021
June 2022
(1)
(2)
Carrying value is net of deferred origination fees.
Represents contractual maturity, excluding any unexercised extension options.
6. Investments in Unconsolidated Joint Ventures
We have investments in several real estate joint ventures with various partners. As of December 31, 2019, the book value
of these investments was 2.9 billion, net of investments with negative book values totaling $80.9 million for which we have an
implicit commitment to fund future capital needs.
As of December 31, 2019, 800 Third Avenue, 21 East 66th Street, 605 West 42nd Street, 333 East 22nd Street, and certain
properties within the Stonehenge Portfolio are VIEs in which we are not the primary beneficiary. As of December 31, 2018, 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 $145.9
million as of December 31, 2019 and $808.3 million as of December 31, 2018. 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.
61
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
The table below provides general information on each of our joint ventures as of December 31, 2019:
Property
Partner
100 Park Avenue
Prudential Real Estate Investors
717 Fifth Avenue
Jeff Sutton/Private Investor
800 Third Avenue
919 Third Avenue(2)
11 West 34th Street
280 Park Avenue
1552-1560 Broadway(3)
10 East 53rd Street
21 East 66th Street(4)
650 Fifth Avenue(5)
121 Greene Street
Private Investors
New York State Teacher's Retirement System
Private Investor/Jeff Sutton
Vornado Realty Trust
Jeff Sutton
Canadian Pension Plan Investment Board
Private Investors
Jeff Sutton
Jeff Sutton
55 West 46th Street
Stonehenge Portfolio(6) Various
605 West 42nd Street
The Moinian Group
Prudential Real Estate Investors
11 Madison Avenue
PGIM Real Estate
333 East 22nd Street
400 East 57th Street(7)
One Vanderbilt
Worldwide Plaza
1515 Broadway
2 Herald Square
115 Spring Street
Private Investors
BlackRock, Inc and Stonehenge Partners
National Pension Service of Korea/Hines Interest LP
RXR Realty / New York REIT / Private Investor
Allianz Real Estate of America
Israeli Institutional Investor
Private Investor
Ownership
Interest (1)
49.90%
Economic
Interest (1)
49.90%
10.92%
60.52%
51.00%
30.00%
50.00%
50.00%
55.00%
32.28%
50.00%
50.00%
25.00%
Various
20.00%
60.00%
33.33%
51.00%
71.01%
24.35%
56.87%
51.00%
51.00%
10.92%
60.52%
51.00%
30.00%
50.00%
50.00%
55.00%
32.28%
50.00%
50.00%
25.00%
Various
20.00%
60.00%
33.33%
41.00%
71.01%
24.35%
56.87%
51.00%
51.00%
Unaudited
Approximate
Square Feet
834,000
119,500
526,000
1,454,000
17,150
1,219,158
57,718
354,300
13,069
69,214
7,131
347,000
1,439,016
927,358
2,314,000
26,926
290,482
—
2,048,725
1,750,000
369,000
5,218
(1) Ownership interest and economic interest represent the Company's interests in the joint venture as of December 31, 2019. Changes in ownership or economic
(2)
(3)
interests within the current year are disclosed in the notes below.
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. We recorded our 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 joint venture.
The acquisition 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.
(4) We hold a 32.28% interest in three retail and one residential units at the property and a 16.14% interest in three residential units at the property.
(5)
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.
(6) We, together with our joint venture partner, closed on the sale of one property from the Stonehenge Portfolio in February 2019 and another property in May
(7)
2019. These sales are further described under Sale of Joint Venture Interest of Properties below.
In October 2016, we sold a 49% interest in this property. Our 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. Our joint venture
with Stonehenge remains consolidated resulting in the combined 51% interest being shown within investments in unconsolidated joint ventures on our
balance sheet.
62
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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, 2019 and 2018, the carrying value for acquisition, development and construction arrangements
were as follows (dollars in thousands):
Loan Type
Mezzanine Loan
December 31, 2019
December 31, 2018
Maturity Date
$
$
—
— $
44,357
44,357
Disposition of Joint Venture Interests or Properties
The following table summarizes the investments in unconsolidated joint ventures sold during the years ended December 31,
2019, 2018, and 2017:
Property
21 East 66th Street(3)
521 Fifth Avenue
131-137 Spring Street
Stonehenge Portfolio (partial)
3 Columbus Circle
Mezzanine Loan(4)
724 Fifth Avenue
Jericho Plaza
1745 Broadway
175-225 Third Street Brooklyn, New York
1515 Broadway(5)
Stonehenge Portfolio (partial)
102 Greene Street
76 11th Avenue(6)
Stonehenge Portfolio (partial)
Ownership
Interest Sold
Disposition Date
1 residential unit
December 2019
Gross Asset
Valuation
(in thousands)(1)
2,900
$
Gain (Loss)
on Sale
(in thousands)(2)
279
$
50.50%
20.00%
Various
48.90%
33.33%
49.90%
11.67%
56.87%
95.00%
13.00%
Various
10.00%
33.33%
Various
May 2019
January 2019
Various - 2019
November 2018
August 2018
July 2018
June 2018
May 2018
April 2018
February 2018
Various - 2018
September 2017
May 2017
March 2017
381,000
216,000
468,800
851,000
15,000
365,000
117,400
633,000
115,000
1,950,000
331,100
43,500
138,240
300,000
57,874
17,660
(2,408)
160,368
N/A
64,587
147
52,038
19,483
—
(6,063)
283
N/A
871
(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 $4.0 million, $11.7 million, and $0 of employee compensation accrued in
connection with the realization of these investment gains in the years ended December 31, 2019, 2018, and 2017, respectively. Additionally, gain (loss)
amounts do not include adjustments for expenses recorded in subsequent periods.
(3) We, together with our joint venture partner, closed on the sale of one residential unit at the property.
(4) 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.
(5) Our investment in 1515 Broadway was marked to fair value on January 1, 2018 upon adoption of ASC 610-20.
(6) 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 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 in May of 2014 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
mortgage notes and other loans payable collateralized by the respective joint venture properties and assignment of leases at
December 31, 2019 and 2018, respectively, are as follows (dollars in thousands):
63
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
Economic
Interest (1) Maturity Date
Interest
Rate (2)
December 31,
2019
December 31,
2018
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% $
300,000
$
5.50%
4.46%
5.45%
3.60%
5.12%
3.93%
3.84%
3.37%
3.00%
3.98%
3.50%
355,328
210,000
65,000
12,000
500,000
838,546
177,000
97,735
1,200,000
196,112
—
$
5,351,721
1,400,000
1,400,000
300,000
355,328
210,000
65,000
12,000
500,000
855,876
$
$
177,000
99,828
1,200,000
321,076
170,000
5,666,108
170,000
1,200,000
195,000
15,000
23,000
360,000
375,000
133,565
185,569
—
550,000
1,571
141,000
38,000
55.00%
February 2020
L+ 2.25% $
50.00% September 2020
50.00%
October 2020
50.00% November 2020
30.00%
49.90%
January 2021
February 2021
71.01% September 2021
51.00% November 2021
25.00%
August 2022
51.00% September 2023
20.00%
August 2027
L+ 1.73%
L+ 2.65%
L+ 1.50%
L+ 1.45%
L+ 1.75%
L+ 2.50%
L+ 1.45%
L+ 1.25%
L+ 3.40%
L+ 1.44%
32.28%
June 2033
Treasury+ 2.75%
1 Year
170,000
1,200,000
195,000
15,000
23,000
356,972
732,928
190,000
192,524
65,550
550,000
712
—
—
Property
Fixed Rate Debt:
717 Fifth Avenue (mortgage)
717 Fifth Avenue (mezzanine)
650 Fifth Avenue (mortgage)
650 Fifth Avenue (mezzanine)
21 East 66th Street
919 Third Avenue
1515 Broadway
11 Madison Avenue
800 Third Avenue
400 East 57th Street
Worldwide Plaza
Stonehenge Portfolio (3)
521 Fifth Avenue (4)
Total fixed rate debt
Floating Rate Debt:
10 East 53rd Street (5)
280 Park Avenue
1552 Broadway
121 Greene Street
11 West 34th Street
100 Park Avenue
One Vanderbilt (6)
2 Herald Square
55 West 46th Street (7)
115 Spring Street
605 West 42nd Street
21 East 66th Street
131-137 Spring Street (8)
103 East 86th Street (9)
Total floating rate debt
Total joint venture mortgages and other loans payable
Deferred financing costs, net
Total joint venture mortgages and other loans payable, net
$
$
$
3,691,686
9,043,407
(91,538)
8,951,869
$
$
$
3,387,705
9,053,813
(103,191)
8,950,622
(1)
(2)
Economic interest represents the Company's interests in the joint venture as of December 31, 2019. 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 rates as of December 31, 2019, 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.
(3) Amount is comprised of $132.6 million and $63.5 million in fixed-rate mortgages that mature in April 2028 and July 2029, respectively.
(4)
(5)
(6)
In May 2019, we, together with our joint venture partner, closed on the sale of the property.
This loan was refinanced in February 2020.
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.
In August 2019, this loan was refinanced with a new $192.5 million mortgage loan. This loan has a committed amount of $198.0 million, of which $5.5
million was unfunded as of December 31, 2019.
In January 2019, we closed on the sale of our interest in the property.
In February 2019, we, together with our joint venture partner, closed on the sale of the property.
(7)
(8)
(9)
64
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
We are entitled to receive fees for providing management, leasing, construction supervision and asset management services
to certain of our joint ventures. We earned $13.0 million, $14.2 million and $22.6 million from these services, net of our ownership
share of the joint ventures, for the years ended December 31, 2019, 2018, and 2017, 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, 2019 and 2018, are as follows (unaudited,
in thousands):
Assets (1)
Commercial real estate property, net
Cash and restricted cash
Tenant and other receivables and deferred rents receivable
Debt and preferred equity investments, net
Other assets
Total assets
Liabilities and equity (1)
Mortgages and other loans payable, net
Deferred revenue/gain
Lease liabilities
Other liabilities
Equity
Total liabilities and equity
Company's investments in unconsolidated joint ventures
December 31, 2019
December 31, 2018
$
$
$
$
$
14,349,628
$
14,347,673
336,189
371,065
—
2,039,429
17,096,311
8,951,869
1,501,616
897,380
308,304
5,437,142
$
$
17,096,311
2,912,842
$
$
381,301
273,141
44,357
2,187,166
17,233,638
8,950,622
1,660,838
637,168
309,145
5,675,865
17,233,638
3,019,020
(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. In addition, at December 31, 2019, $133.1 million of
net unamortized basis differences between the amount at which our investments are carried and our share of equity in net assets of the underlying property
will be amortized through equity in net income (loss) from unconsolidated joint ventures over the remaining life of the underlying items having given rise
to the differences.
The combined statements of operations for the unconsolidated joint ventures, from acquisition date through the years ended
December 31, 2019, 2018, and 2017 are as follows (unaudited, in thousands):
Total revenues
Operating expenses
Real estate taxes
Operating lease 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 (loss) income from unconsolidated joint ventures (1)
Year Ended December 31,
2019
2018
2017
$
1,163,534
$
1,244,804
$
202,881
212,355
24,816
372,408
19,336
—
407,697
219,440
226,961
18,697
363,055
21,634
—
421,458
$
$
$
1,239,493
$
1,271,245
$
(1,031)
(76,990) $
(34,518) $
—
(26,441) $
7,311
$
904,230
157,610
142,774
16,794
250,063
23,026
146
279,419
869,832
(7,899)
26,499
21,892
(1)
The combined statements of operations and the Company's equity in net income (loss) 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.
65
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
7. Deferred Costs
Deferred costs at December 31, 2019 and 2018 consisted of the following (in thousands):
Deferred leasing costs
Less: accumulated amortization
Deferred costs, net
8. Mortgages and Other Loans Payable
December 31,
2019
2018
$
$
466,136
(260,853)
205,283
$
$
453,833
(244,723)
209,110
The first mortgages and other loans payable collateralized by the respective properties and assignment of leases or debt
investments at December 31, 2019 and 2018, respectively, were as follows (dollars 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
Total fixed rate debt
Floating Rate Debt:
FHLB Facility (4)
FHLB Facility (5)
FHLB Facility
2017 Master Repurchase Agreement
133 Greene Street
106 Spring Street
609 Fifth Avenue
185 Broadway (6)
712 Madison Avenue
410 Tenth Avenue (7)
719 Seventh Avenue
FHLB Facility (8)
115 Spring Street (9)
FHLB Facility (10)
Total floating rate debt
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, 2019 December 31, 2018
February 2022
5.00% $
771
$
$
$
July 2022
October 2024
November 2026
January 2027
February 2027
February 2027
February 2027
4.68%
3.99%
3.00%
4.90%
4.25%
3.59%
4.17%
209,296
299,165
39,094
100,000
450,000
35,123
250,000
$
1,383,449
January 2020
L+ 0.26% $
February 2020
L+ 0.32%
June 2020
L+ 0.17%
June 2020
L+ 2.19%
August 2020
L+ 2.00%
January 2021
L+ 2.50%
March 2021
L+ 2.40%
November 2021
L+ 2.85%
December 2021
L+ 1.85%
May 2022
L+ 2.23%
September 2023
L+ 1.20%
10,000
15,000
14,500
152,684
15,523
38,025
53,773
120,110
28,000
330,819
50,000
—
—
—
771
213,208
300,000
39,931
100,000
450,000
35,807
250,000
1,389,717
—
—
—
300,000
15,523
—
—
111,869
28,000
—
50,000
13,000
65,550
14,500
$
$
$
828,434
2,211,883
(28,630)
2,183,253
$
$
$
598,442
1,988,159
(26,919)
1,961,240
(1)
(2)
(3)
(4)
Interest rate as of December 31, 2019, 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 $34.2 million mortgage loan and $0.9 million mezzanine 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.
In January 2020, the loan was repaid and a new advance was drawn in the amount of $10.0 million with a spread of 16.5 basis points.
66
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
(5)
(6)
(7)
(8)
(9)
(10)
In February 2020, the loan was repaid and a new advance was drawn in the amount of $15.0 million with a spread of 26.0 basis points.
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.
This loan is a $465.0 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 August 2019, the loan was repaid.
In August 2019, the Company sold a 49% interest in the property to a private investor. The transaction resulted in the deconsolidation of our remaining
51% interest. See Note 6, "Investments in Unconsolidated Joint Ventures."
In December 2019, the loan was repaid.
At December 31, 2019 and 2018, the gross book value of the properties and debt and preferred equity investments
collateralizing the mortgages and other loans payable was approximately $3.3 billion and $2.6 billion, respectively.
Federal Home Loan Bank of New York ("FHLB") 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 that bear interest at a floating rate. As of December 31, 2019,
we had a total of $39.5 million in outstanding secured advances with an average spread of 25 basis points over 30-day LIBOR.
Master Repurchase Agreement
The Company entered into a Master Repurchase Agreement, or MRA, known as the 2017 MRA, which provides us with the
ability to sell certain mortgage 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 facility 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.
The 2017 MRA has 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. In June 2018, we exercised a one year extension option and in June 2019, we exercised another one year extension
option. In August 2019, we amended our agreement to include two additional one year extension options. At December 31, 2019,
the facility had a carrying value of $152.4 million, net of deferred financing costs.
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, 2019, 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, 2019, 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) 85 basis points to 165 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.
In May 2019, we entered into an agreement to reduce the interest rate spread under Term Loan B by 65 basis points to a
spread over 30-day LIBOR ranging from 85 basis points to 165 basis points. This reduction was effective in November 2019.
At December 31, 2019, the applicable spread was 100 basis points for the revolving credit facility, 110 basis points for Term
Loan A, and 100 basis points for Term Loan B. We are required to pay quarterly in arrears a 12.5 to 30 basis point facility fee on
67
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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, 2019, the facility fee was 20 basis points.
As of December 31, 2019, we had $11.8 million of outstanding letters of credit, $240.0 million drawn under the revolving
credit facility and $1.5 billion outstanding under the term loan facilities, with total undrawn capacity of $1.3 billion under the 2017
credit facility. At December 31, 2019 and December 31, 2018, the revolving credit facility had a carrying value of $234.0 million
and $492.2 million, respectively, net of deferred financing costs. At December 31, 2019 and December 31, 2018, 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, 2019 and 2018,
respectively, by scheduled maturity date (dollars in thousands):
Issuance
March 16, 2010 (2)
August 7, 2018 (3) (4)
October 5, 2017 (3)
November 15, 2012 (5)
December 17, 2015 (2)
Deferred financing costs, net
December
31,
2019
Unpaid
Principal
Balance
December
31,
2019
Accreted
Balance
December
31,
2018
Accreted
Balance
$
250,000
$
250,000
$
350,000
500,000
300,000
100,000
1,500,000
1,500,000
$
$
$
$
1,502,837
(5,990)
1,496,847
$
$
1,503,759
(8,545)
1,495,214
Interest
Rate (1)
7.75%
L+ 0.98%
3.25%
4.50%
4.27%
Initial Term
(in Years) Maturity Date
10
3
5
March 2020
August 2021
October 2022
10 December 2022
10 December 2025
250,000
350,000
499,591
304,168
100,000
350,000
499,695
303,142
100,000
(1)
(2)
(3)
(4)
(5)
Interest rate as of December 31, 2019, 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.
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% of par.
68
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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, 2019 and 2018, 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, 2019, including as-of-right extension options and
put options, were as follows (dollars in thousands):
Scheduled
Amortization
Principal
Revolving
Credit
Facility
Unsecured
Term Loans
Trust
Preferred
Securities
Senior
Unsecured
Notes
Total
Joint
Venture
Debt
$
11,118
$
207,706
$
— $
— $
— $
250,000
$
468,824
$
811,628
11,638
9,430
7,301
6,032
3,258
239,908
529,375
50,000
272,749
863,368
—
—
—
—
240,000
1,300,000
200,000
—
—
—
—
—
—
350,000
800,000
—
—
601,546
1,338,805
1,597,301
478,781
805,276
268,952
311,436
17,022
—
100,000
100,000
1,066,626
1,813,821
2020
2021
2022
2023
2024
Thereafter
$
48,777
$ 2,163,106
$
240,000
$ 1,500,000
$
100,000
$ 1,500,000
$ 5,551,883
$ 4,028,135
Consolidated interest expense, excluding capitalized interest, was comprised of the following (dollars in thousands):
Interest expense before capitalized interest
Interest on financing leases
Interest capitalized
Interest income
Interest expense, net
10. Related Party Transactions
Cleaning/ Security/ Messenger and Restoration Services
Year Ended December 31,
2018
2017
2019
$
246,848
$
236,719
$
281,551
3,243
(55,446)
(4,124)
8,069
(34,162)
(1,957)
3,098
(26,020)
(1,584)
$
190,521
$
208,669
$
257,045
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
69
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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 $3.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.
We also recorded expenses, inclusive of capitalized expenses, of $18.8 million, $18.8 million and $22.6 million for the years
ended December 31, 2019, 2018 and 2017, 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, $0.6 million and $0.5 million for the
years ended December 31, 2019, 2018, and 2017 respectively.
One Vanderbilt Investment
In December 2016, we entered into agreements with entities owned and controlled by our Chairman and CEO, Marc Holliday,
and our President, 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.
Other
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, 2019 and 2018 consisted of the following (in thousands):
Due from joint ventures
Other
Related party receivables
December 31,
2019
2018
$
$
9,352
11,769
21,121
$
$
18,655
9,378
28,033
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.
70
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
Common Units of Limited Partnership Interest in the Operating Partnership
As of December 31, 2019 and 2018, the noncontrolling interest unit holders owned 5.03%, or 4,195,875 units, and 4.70%,
or 4,130,579 units, of the Operating Partnership, respectively. As of December 31, 2019, 4,195,875 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,
2019 and 2018 (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,
2019
2018
$
387,805
$
(14,729)
19,403
(27,962)
13,301
(2,276)
34,320
$
409,862
$
461,954
(15,000)
23,655
(60,718)
12,216
(66)
(34,236)
387,805
Preferred Units of Limited Partnership Interest in the Operating Partnership
Below is a summary of the preferred units of limited partnership interest in the Operating Partnership as of December 31,
2019:
Issuance
4.50% Series G (4)
7.00% Series F
3.50% Series K
4.00% Series L
3.75% Series M
3.00% Series N (5)
Series O (6)
4.00% Series P
3.50% Series Q
3.50% Series R
4.00% Series S
2.75% Series T
4.50% Series U (7)
3.50% Series A (8)
3.50% Series V
Number of
Units
Authorized
Number of
Units Issued
1,902,000
1,902,000
Dividends
Per Unit(1)
1.1250
$
Liquidation
Preference
Per Unit(2)
25.00
$
60
700,000
500,000
60
563,954
378,634
1,600,000
1,600,000
552,303
552,303
1
200,000
268,000
400,000
1
200,000
268,000
400,000
1,077,280
1,077,280
230,000
680,000
109,161
40,000
230,000
680,000
109,161
40,000
$
$
$
$
$
$
$
$
$
$
$
$
$
70.0000
0.8750
1.0000
0.9375
0.7500
(6)
1.0000
0.8750
0.8750
1.0000
0.6875
1.1250
35.0000
0.8750
$
$
$
$
$
$
$
$
$
$
$
$
$
1,000.00
25.00
25.00
25.00
25.00
(6)
25.00
25.00
25.00
25.00
25.00
25.00
1,000.00
25.00
Conversion
Price Per
Unit(3)
Date of
Issuance
$
$
$
$
$
$
88.50
29.12
January 2012
January 2007
134.67
August 2014
—
August 2014
— February 2015
—
—
—
148.95
154.89
June 2015
June 2015
July 2015
July 2015
August 2015
—
August 2015
119.02
—
—
—
March 2016
March 2016
August 2015
May 2019
(1) Dividends are cumulative, subject to certain provisions.
(2) Units are redeemable at any time at par for cash at the option of the unitholder unless otherwise specified.
(3)
(4)
If applicable, 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) the amount shown in the table.
Common units of limited partnership interest in the Operating Partnership issued in a conversion 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.
(5) All of the outstanding units were redeemed at par for cash by the unitholder during the twelve months ended December 31, 2019.
71
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
(6)
(7)
(8)
The holder of the Series O preferred unit is entitled to quarterly dividends in an amount calculated as (i) 1,350 multiplied by (ii) the current distribution per
common unit of limited partnership in SL Green Operating Partnership. The holder has the right to require the Operating Partnership to repurchase the
Series O unit for cash at a price that is determined based on the closing price of the Company's common stock at the time such right is exercised. The unit's
liquidation preference is the fair market value of the unit at the time of a liquidation event.
The annual dividend is subject to reduction upon the occurrence of certain circumstances. The minimum annual dividend is $0.75 per unit.
Issued through a consolidated subsidiary. The units are convertible on a one-for-one basis, into the Series B Preferred Units of limited partnership interest,
or the Subsidiary Series 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, 2019, 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, 2019 and
2018 (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,
2019
2018
$
$
300,427
$
301,735
1,000
(18,142)
—
(1,308)
283,285
$
300,427
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, 2019, 79,202,322 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 program under which we can buy up to $1.0 billion of
shares of our common stock. The Board of Directors has since authorized four separate $500.0 million increases to the size of the
share repurchase program in the fourth quarter of 2017, second quarter of 2018, fourth quarter of 2018, and fourth quarter of 2019
bringing the total program size to $3.0 billion.
At December 31, 2019 repurchases executed under the program were as follows:
Period
Year ended 2017
Year ended 2018
Year ended 2019
Shares repurchased
Average price paid per
share
8,342,411
9,744,911
4,596,171
$101.64
$96.22
$83.62
Cumulative number of
shares repurchased as
part of the repurchase
plan or programs
8,342,411
18,087,322
22,683,493
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, 2019, 2018, or 2017.
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.
72
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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, 2019, 2018, and 2017, respectively (dollars in thousands):
Year Ended December 31,
2019
2018
2017
Shares of common stock issued
3,867
1,399
Dividend reinvestments/stock purchases under the DRSPP
$
334
$
136
$
2,141
223
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, 2019, 2018, and 2017 are computed as follows (in thousands):
Numerator
Basic Earnings:
Year Ended December 31,
2019
2018
2017
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: Dilutive effect of 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)
$
$
$
255,484
$
232,312
$
86,424
(1,739) $
(552) $
(471)
253,745
$
231,760
$
1,719
13,301
552
12,216
85,953
471
3,995
268,765
$
244,528
$
90,419
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,
2019
2018
2017
81,733
86,753
98,571
4,275
554
86,562
4,562
215
91,530
4,556
276
103,403
SL Green has excluded 1,252,670, 1,138,647 and 774,782 common stock equivalents from the diluted shares outstanding
for the years ended December 31, 2019, 2018, and 2017 respectively, as they were anti-dilutive.
73
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
13. Partners' Capital of the Operating Partnership
The Company is the sole managing general partner of the Operating Partnership and at December 31, 2019 owned 79,202,322
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, 2019, limited partners other than SL Green owned 5.03%, or 4,195,875 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, 2019, 2018, and 2017 respectively are
computed as follows (in thousands):
Numerator
Basic Earnings:
Year Ended December 31,
2019
2018
2017
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: Dilutive effect of earnings allocated to participating securities
Income attributable to SLGOP common unitholders
$
$
$
268,785
$
244,528
$
90,419
(1,739) $
(552) $
(471)
267,046
1,719
268,765
$
$
243,976
552
244,528
$
$
89,948
471
90,419
Denominator
Basic units:
Year Ended December 31,
2019
2018
2017
Weighted average common units outstanding
86,008
91,315
103,127
Effect of Dilutive Securities:
Stock-based compensation plans
Diluted weighted average common units outstanding
554
86,562
215
91,530
276
103,403
The Operating Partnership has excluded 1,252,670, 1,138,647, and 774,782 common unit equivalents from the diluted units
outstanding for the years ended December 31, 2019, 2018, and 2017 respectively, as they were anti-dilutive.
74
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
14. Share-based Compensation
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.
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, 2019, 4.1 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.
Stock Options and Class O LTIP Units
Options are granted 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 and 2017. There were no grants during the year ended December 31, 2019.
Dividend yield
Expected life
Risk-free interest rate
Expected stock price volatility
2019
2018
2017
none
2.85%
2.51%
zero years
3.5 years
4.4 years
none
none
2.48%
22.00%
1.73%
28.10%
75
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
A summary of the status of the Company's stock options as of December 31, 2019, 2018, and 2017 and changes during the
years ended December 31, 2019, 2018, and 2017 are as follows:
2019
2018
2017
Options
Outstanding
Weighted
Average
Exercise
Price
Options
Outstanding
Weighted
Average
Exercise
Price
Options
Outstanding
Weighted
Average
Exercise
Price
Balance at beginning of year
$
1,137,017
$
103.54
$
1,548,719
$
101.48
$
1,737,213
$
98.44
Granted
Exercised
Lapsed or canceled
Balance at end of year
—
—
—
—
(99,949)
115.81
6,000
(316,302)
(101,400)
97.91
90.22
113.22
174,000
(292,193)
(70,301)
$
1,037,068
$
$
102.36
$
1,137,017
101.69
783,035
$
$
103.54
$
1,548,719
101.28
800,902
105.66
81.07
121.68
101.48
94.33
$
$
Options exercisable at end of year
914,929
Weighted average fair value of options
granted during the year
$
—
$
84,068
$
3,816,652
The remaining weighted average contractual life of the options outstanding was 2.7 years and the remaining weighted average
contractual life of the options exercisable was 2.7 years.
During the years ended December 31, 2019, 2018, and 2017, we recognized compensation expense for these options of $2.5
million, $5.4 million, and $7.8 million, respectively. As of December 31, 2019, there was $0.1 million of total unrecognized
compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 0.2
years.
Restricted Shares
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, 2019, 2018, and 2017 and charges during the years ended
December 31, 2019, 2018, and 2017 are as follows:
Balance at beginning of year
Granted
Canceled
Balance at end of year
Vested during the year
Compensation expense recorded
Total fair value of restricted stock granted during the year
2019
2018
3,452,016
126,350
(11,900)
3,566,466
113,259
3,298,216
162,900
(9,100)
3,452,016
92,114
$
$
12,892,249
11,131,181
$
$
12,757,704
13,440,503
$
$
2017
3,202,031
96,185
—
3,298,216
95,736
9,809,749
9,905,986
The fair value of restricted stock that vested during the years ended December 31, 2019, 2018, and 2017 was $12.1 million,
$9.8 million and $9.4 million, respectively. As of December 31, 2019, there was $20.8 million of total unrecognized compensation
cost related to restricted stock, which is expected to be recognized over a weighted average period of 2.0 years.
For the years ended December 31, 2019, 2018, and 2017, $2.1 million, $6.3 million, and $7.2 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 $58.3 million
and $22.0 million during the years ended December 31, 2019 and 2018, 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, 2019,
76
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
there was $31.2 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 2.3 years.
During the years ended December 31, 2019, 2018, and 2017, we recorded compensation expense related to bonus, time-
based and performance based LTIP Unit awards of $22.2 million, $24.4 million, and $26.1 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 no
compensation expense during the years ended December 31, 2019 and 2018, and compensation expense of $13.6 million during
the year ended December 31, 2017 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, 2019, 18,669 phantom stock units and 9,949 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, 2019 related to
the Deferred Compensation Plan. As of December 31, 2019, there were 128,946 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
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
77
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
our 2008 annual meeting of stockholders. As of December 31, 2019, 131,440 shares of our common stock had been issued under
the ESPP.
15. Accumulated Other Comprehensive (Loss) Income
The following tables set forth the changes in accumulated other comprehensive (loss) income by component as of
December 31, 2019, 2018 and 2017 (in thousands):
Net unrealized
gain (loss) on
derivative
instruments (1)
SL Green’s share
of joint venture
net unrealized
gain (loss) on
derivative
instruments (2)
Net unrealized
gain on
marketable
securities
Balance at December 31, 2016
$
12,596
$
4,021
$
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
Other comprehensive (loss) income before reclassifications
Amounts reclassified from accumulated other
comprehensive loss
(1,618)
1,564
12,542
(2,252)
(574)
9,716
(32,723)
233
766
5,020
(103)
(618)
4,299
(11,956)
227
(325)
5,520
$
(1,348)
(3,130)
1,042
51
—
1,093
1,184
—
Total
22,137
(2,733)
(800)
18,604
(2,304)
(1,192)
15,108
(43,495)
(98)
Balance at December 31, 2019
$
(22,780) $
(7,982) $
2,277
$
(28,485)
(1) Amount reclassified from accumulated other comprehensive (loss) income is included in interest expense in the respective consolidated statements of
operations. As of December 31, 2019 and 2018, the deferred net (gains) losses from these terminated hedges, which is included in accumulated other
comprehensive loss relating to net unrealized gain (loss) on derivative instrument, was $(0.7) million and $1.3 million, respectively.
(2) Amount reclassified from accumulated other comprehensive (loss) income is included in equity in net (loss) 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, 2019 and 2018 (in thousands):
78
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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)
Liabilities:
Interest rate cap and swap agreements (included in other
liabilities)
December 31, 2019
Total
Level 1
Level 2
Level 3
29,887
4,419
$
$
— $
29,887
— $
4,419
$
$
29,110
$
— $
29,110
$
December 31, 2018
Total
Level 1
Level 2
Level 3
28,638
18,676
$
$
— $
28,638
— $
18,676
$
$
7,663
$
— $
7,663
$
—
—
—
—
—
—
$
$
$
$
$
$
We evaluate for potential 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 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 statements 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
statements 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.
79
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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.
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, 2019 and
December 31, 2018 (in thousands):
December 31, 2019
December 31, 2018
Carrying Value (1)
Fair Value
Carrying Value (1)
Fair Value
Debt and preferred equity investments
Fixed rate debt
Variable rate debt
$
$
$
1,580,306
(2)
3,536,286
2,018,434
5,554,720
$
$
3,642,770
2,018,714
5,661,484
$
$
$
2,099,393
(2)
3,543,476
2,048,442
5,591,918
$
$
3,230,127
2,057,966
5,288,093
(1) Amounts exclude net deferred financing costs.
(2) At December 31, 2019, debt and preferred equity investments had an estimated fair value ranging between $1.6 billion and $1.7 billion. At December 31,
2018, 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,
2019 and 2018. 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 (loss) until the hedged item
is 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, 2019 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 (dollars in thousands).
80
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
Interest Rate Cap
Interest Rate Swap
Interest Rate Swap
Interest Rate Cap
Interest Rate Cap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
Interest Rate Swap
$
Notional
Value
300,000
100,000
100,000
111,869
85,000
200,000
100,000
150,000
150,000
200,000
Strike
Rate
3.750%
Effective
Date
May 2019
Expiration
Date
Balance Sheet
Location
Fair
Value
May 2020 Other Assets
$
1.928% December 2017
November 2020 Other Liabilities
1.934% December 2017
November 2020 Other Liabilities
3.500% December 2019
December 2020 Other Assets
4.000%
1.131%
1.161%
2.696%
2.721%
2.740%
March 2019
March 2021 Other Assets
July 2016
July 2016
July 2023 Other Assets
July 2023 Other Assets
January 2019
January 2024 Other Liabilities
January 2019
January 2026 Other Liabilities
January 2019
January 2026 Other Liabilities
—
(281)
(286)
—
—
3,015
1,404
(6,570)
(9,344)
(12,629)
$
(24,691)
During the years ended December 31, 2019, 2018, and 2017, we recorded a $0.1 million loss, a $0.2 million loss, and a $0.5
million loss, 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
defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. As of
December 31, 2019, 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 $29.5 million. As of December 31, 2019, 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 $30.1 million at December 31, 2019.
Gains and losses on terminated hedges are included in accumulated other comprehensive income (loss), 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 loss 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 $0.4 million of the current balance held in accumulated
other comprehensive loss will be reclassified into interest expense and $(0.1) million of the portion related to our share of joint
venture accumulated other comprehensive loss 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, 2019, 2018, and 2017, respectively (in thousands):
Amount of Loss
Recognized in
Other Comprehensive Loss
Year Ended
December 31,
Derivative
2019
2018
2017
Location of Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive Loss into
Income
Interest Rate Swaps/Caps
$
(33,907) $
(2,284) $
(2,282)
Interest expense
Share of unconsolidated
joint ventures' derivative
instruments
(10,322)
(1,788)
(200)
$
(44,229) $
(4,072) $
(2,482)
Equity in net income
from unconsolidated joint
ventures
Amount of (Loss) Gain
Reclassified from
Accumulated Other Comprehensive Loss
into Income
Year Ended
December 31,
2019
2018
2017
$
$
(261) $
1,168
$
1,816
256
1,097
980
(5) $
2,265
$
2,796
81
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, 2020 to 2052. 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, 2019 for the consolidated properties, including consolidated
joint venture properties, and our share of unconsolidated joint venture properties are as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
Consolidated
Properties
Unconsolidated
Properties
$
799,001
$
651,815
600,912
536,835
496,476
390,725
397,524
380,598
354,621
325,459
2,938,340
1,986,928
$
6,023,379
$
3,835,855
As of December 31, 2018, under ASC 840, approximate future minimum rents to be received over the next five years
and thereafter for non-cancelable operating leases 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
The components of lease revenues were as follows (in thousands):
Fixed lease payments
Variable lease payments
Total lease payments
Amortization of acquired above and below-market leases
Total rental revenue
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
Twelve Months
Ended
December 31,
2019
Twelve Months
Ended
December 31,
2018
$
$
$
858,587
$
120,496
979,083
$
4,474
858,160
113,596
971,756
6,818
983,557
$
978,574
82
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
19. Benefit Plans
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, 2017, September 28, 2018, and September 27, 2019,
the actuary certified that for the plan years beginning July 1, 2017, July 1, 2018, and July 1, 2019, 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, 2019. For the Pension Plan years ended June 30,
2019, 2018, and 2017, the plan received contributions from employers totaling $290.1 million, $272.3 million, and $257.8 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
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, 2019, 2018, and 2017, the plan received contributions from employers totaling $1.5 billion, $1.4 billion and $1.3 billion,
respectively. Our contributions to the Health Plan represent less than 5.0% of total contributions to the plan.
Contributions we made to the multi-employer plans for the years ended December 31, 2019, 2018 and 2017 are included in
the table below (in thousands):
Benefit Plan
Pension Plan
Health Plan
Other plans
Total plan contributions
401(K) Plan
2019
2018
2017
$
$
3,103
$
3,017
$
9,949
1,108
9,310
1,106
14,160
$
13,433
$
3,856
11,426
1,463
16,745
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,
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 2019 and 2018, a matching contribution equal to 100% of the first 4% of annual compensation was made. For 2017, a
matching contribution equal to 50% of the first 6% of annual compensation was made. For the years ended December 31, 2019
and December 31, 2018, we made matching contributions of $1.6 million and $1.1 million, respectively. For the year ended
December 31, 2017, we made a matching contribution of $1.0 million.
20. Commitments and Contingencies
Legal Proceedings
As of December 31, 2019, 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.
83
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
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 January 2021 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 2020.
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 our debt 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 $2.9 million and $4.0 million as of December 31, 2019 and 2018, respectively. Ticonderoga
had no loss reserves as of December 31, 2019.
84
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
Ground Lease Arrangements
We are a tenant under ground leases for certain properties. These leases have expirations from 2022 to 2114, or 2043 to 2114
as fully extended. Certain leases offer extension options which we assess against relevant economic factors to determine whether
we are reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods that we are
reasonably certain will be exercised, if any, are included in the measurement of the corresponding lease liability and right of use
asset.
Certain of our ground leases are subject to rent resets, generally based on a percentage of the then fair market value, a fixed
amount, or a percentage of the preceding rent at specified future dates. Rent resets will be recognized in the periods in which they
are incurred.
The table below summarizes our current ground lease arrangements as of December 31, 2019:
Property (1)
1185 Avenue of the Americas
625 Madison Avenue
420 Lexington Avenue
711 Third Avenue (3)
461 Fifth Avenue (4)
1055 Washington Blvd, Stamford, Connecticut
1080 Amsterdam Avenue (5)
30 East 40th Street (5)
Other
Year of Current
Expiration
Year of Final
Expiration (2)
2043
2022
2050
2033
2027
2090
2111
2114
2043
2054
2080
2083
2084
2090
2111
2114
Various
Various
(1) All leases are classified as operating leases unless otherwise specified.
(2)
(3)
(4)
(5) A portion of the lease is classified as a financing lease.
Reflects exercise of all available renewal options.
The Company owns 50% of the fee interest.
The Company has an option to purchase the ground lease for a fixed price on a specific date.
The following is a schedule of future minimum lease payments under financing leases and operating leases with initial terms
in excess of one year as of December 31, 2019 (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total minimum lease payments
Amount representing interest
Amount discounted using incremental borrowing rate
Lease liabilities
Financing leases
Operating leases (1)
$
$
$
2,619
$
2,794
2,794
2,794
2,819
814,283
828,103
$
(783,655)
44,448
$
31,508
31,702
29,548
27,243
27,263
649,289
796,553
(414,882)
381,671
(1) As of December 31, 2019, the total minimum sublease rentals to be received in the future under non-cancelable subleases is $1.6 billion.
During the twelve months ended December 31, 2019, we recognized $4.5 million of financing lease costs, of which $3.2
million represented interest and $1.2 million represented amortization of the right-of-use assets. These amounts are included in
interest expense, net of interest income and depreciation and amortization in our consolidated statements of operations, respectively.
85
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
During the twelve months ended December 31, 2019, we recognized 33.2 million of operating lease costs, which is calculated
on a straight-line basis over the remaining lease terms. This amount is included in operating lease rent in our consolidated statements
of operations.
As of December 31, 2019, the weighted-average discount rate used to calculate the lease liabilities was 8.49%. As of
December 31, 2019, the weighted-average remaining lease term was 67 years.
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.
Selected consolidated results of operations for the years ended December 31, 2019, 2018, and 2017, and selected asset
information as of December 31, 2019 and 2018, regarding our operating segments are as follows (in thousands):
Total revenues
Years ended:
December 31, 2019
December 31, 2018
December 31, 2017
Net Income
Years ended:
December 31, 2019
December 31, 2018
December 31, 2017
Total assets
As of:
December 31, 2019
December 31, 2018
Real Estate
Segment
Debt and
Preferred Equity
Segment
Total Company
$
$
1,043,405
$
195,590
$
1,025,900
1,317,602
201,492
193,871
1,238,995
1,227,392
1,511,473
158,972
$
132,515
$
129,253
(69,294)
141,603
170,363
291,487
270,856
101,069
$
11,063,155
$
1,703,165
$
10,481,594
2,269,764
12,766,320
12,751,358
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, 2019, 2018, and 2017 marketing, general and administrative expenses totaled $100.9
million, $92.6 million, and $100.5 million respectively. All other expenses, except interest, relate entirely to the real estate assets.
There were no transactions between the above two segments.
86
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
22. Quarterly Financial Data of the Company (unaudited)
Summarized quarterly financial data for the years ended December 31, 2019 and 2018 was as follows (in thousands, except
for per share amounts):
2019 Quarter Ended
Total revenues
Total expenses
Equity in net loss from unconsolidated joint ventures
Equity in net gain on sale of interest in unconsolidated joint
venture/real estate
Purchase price and other fair value adjustments
(Loss) gain on sale of real estate, net
Depreciable real estate reserves and impairment
Noncontrolling interests and preferred unit distributions
Net income attributable to SL Green
Perpetual preferred stock dividends
Net income (loss) 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
$
$
December 31
September 30
June 30
March 31
$
308,082
$
313,634
$
313,024
$
304,255
(252,712)
(11,874)
(263,341)
(9,864)
(258,383)
(7,546)
(260,328)
(5,234)
—
—
(19,241)
—
(3,086)
21,169
(3,737)
17,432
0.21
0.21
$
$
$
—
3,799
3,541
(7,047)
(3,827)
36,895
(3,738)
33,157
0.40
0.40
$
$
$
59,015
67,631
—
—
(8,901)
164,840
(3,737)
161,103
1.94
1.94
$
$
$
17,166
(2,041)
(1,049)
—
(5,239)
47,530
(3,738)
43,792
0.52
0.52
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
70,937
(3,057)
(2,504)
(6,691)
(2,194)
(7,507)
91,947
(3,738)
88,209
1.03
1.03
$
$
$
72,025
11,149
(14,790)
—
—
(8,606)
107,293
(3,737)
103,556
1.19
1.19
$
$
$
(6,440)
49,293
23,521
—
—
(8,319)
105,504
(3,738)
101,766
1.12
1.12
2018 Quarter Ended
Total revenues
Total expenses
Equity in net (loss) income from unconsolidated joint ventures
Equity in net gain (loss) on sale of interest in unconsolidated
joint venture/real estate
Purchase price and other fair value adjustments
(Loss) gain on sale of real estate, net
Depreciable real estate reserves and impairment
Loss on early extinguishment of debt
Noncontrolling interests and preferred unit distributions
Net (loss) 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 $
(61,219) $
Net (loss) income attributable to common stockholders per
common share—basic
Net (loss) income attributable to common stockholders per
common share—diluted
$
$
(0.73) $
(0.73) $
87
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
December 31, 2019
23. Quarterly Financial Data of the Operating Partnership (unaudited)
Summarized quarterly financial data for the years ended December 31, 2019 and 2018 was as follows (in thousands, except
for per share amounts):
2019 Quarter Ended
Total revenues
Total expenses
Equity in net loss from unconsolidated joint ventures
Equity in net gain on sale of interest in unconsolidated joint
venture/real estate
Purchase price and other fair value adjustments
(Loss) gain on sale of real estate, net
Depreciable real estate reserves and impairment
Noncontrolling interests and preferred unit distributions
Net income attributable to SLGOP
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
$
$
$
December 31
September 30
June 30
March 31
$
308,082
$
313,634
$
313,024
$
304,255
(252,713)
(11,874)
(263,341)
(9,864)
(258,383)
(7,546)
(260,328)
(5,234)
—
—
(19,241)
—
(2,091)
22,163
(3,737)
18,426
0.21
0.21
$
$
$
—
3,799
3,541
(7,047)
(2,108)
38,614
(3,738)
34,876
0.40
0.40
$
$
$
59,015
67,631
—
—
(591)
173,150
(3,737)
169,413
1.94
1.94
$
$
$
17,166
(2,041)
(1,049)
—
(2,961)
49,808
(3,738)
46,070
0.52
0.52
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
70,937
(3,057)
(2,504)
(6,691)
(2,194)
(2,710)
96,744
(3,738)
93,006
1.03
1.03
$
$
$
72,025
11,149
(14,790)
—
—
(3,020)
112,879
(3,737)
109,142
1.19
1.19
$
$
$
(6,440)
49,293
23,521
—
—
(3,047)
110,776
(3,738)
107,038
1.12
1.12
2018 Quarter Ended
Total revenues
Total expenses
Equity in net (loss) income from unconsolidated joint ventures
Equity in net gain (loss) on sale of interest in unconsolidated
joint venture/real estate
Purchase price and other fair value adjustments
(Loss) gain on sale of real estate, net
Depreciable real estate reserves and impairment
Loss on early extinguishment of debt
Noncontrolling interests and preferred unit distributions
Net (loss) income attributable to SLGOP
Perpetual preferred units distributions
(267,678)
(2,398)
167,445
—
(36,984)
(220,852)
(14,889)
(2,601)
(60,921)
(3,737)
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) $
88
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Schedule II - Valuation and Qualifying Accounts
December 31, 2019
(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, 2019
Tenant and other receivables—allowance
Deferred rent receivable—allowance
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
$
$
$
$
$
$
15,702
15,457
18,637
17,207
16,592
25,203
$
$
$
$
$
$
2,760
4,227
3,726
491
6,106
2,321
$
$
$
$
$
$
(6,093) $
(7,207) $
(6,661) $
(2,241) $
(4,061) $
(10,317) $
12,369
12,477
15,702
15,457
18,637
17,207
(1) Includes the effect of properties that were sold and/or deconsolidated within the period.
89
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2019
(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
$
299,165
$
— $
333,499
$
— $
192,729
$
— $
526,228
$
526,228
$
151,898
1927
3/1998
Various
—
—
—
—
—
19,844
115,769
18,846
140,946
—
88,276
51,093
251,523
—
291,319
450,000
78,282
452,631
53,773
36,677
195,481
—
—
—
114,077
550,819
—
791,106
90,941
431,517
—
—
—
—
—
—
—
—
—
—
59,685
19,844
175,454
195,298
52,265
1955
5/1998
Various
544
18,846
141,490
160,336
75,340
1971
1/1999
Various
19,670
—
107,946
107,946
34,535
1988
10/2003
Various
3,449
51,093
254,972
306,065
109,685
1958
7/2004
Various
14,908
—
306,227
306,227
132,531
1956
10/2004
Various
6,933
78,282
459,564
537,846
197,431
1956
12/2004
Various
41,197
36,677
236,678
273,355
44,728
1925
6/2006
Various
(83)
114,077
550,736
664,813
190,457
1970
1/2007
Various
116,573
—
907,679
907,679
292,739
1969
1/2007
Various
(3,792)
90,941
427,725
518,666
142,533
1966
1/2007
Various
100,000
27,852
161,343
985
8,319
28,837
169,662
198,499
84,164
1973-1984
1/2007
Various
8,417
(985)
(3,939)
736
4,478
5,214
1,657
2007
1/2007
Various
10,545
8,386
53,787
62,173
21,723
1987
6/2007
Various
22,977
173,546
695,782
869,328
210,128
1960
8/2007
Various
9,181
34,994
193,113
228,107
60,198
1959
1/2010
Various
6,869
120,900
—
6,200
277,467
10,158
398,367
16,358
88,975
2,388
1923
2010
10/2010
12/2010
Various
Various
3,247
36,196
81,600
117,796
21,124
1921
5/2011
Various
373
17,549
39,122
56,671
(35)
6,153
10,535
16,688
7,091
2,151
1929
1/2012
Various
1910
1/2012
Various
630
166
141
54,489
24,343
45,976
91,273
145,762
22,172
1930
6/2012
Various
88,427
112,770
14,361
1902
9/2012
Various
77,217
123,193
18,564
1902
9/2012
Various
10,316
—
58,264
58,264
6,694
1932
10/2012
Various
2,220
195,834
181,782
377,616
30,853
2000-2001
11/2013
Various
12,660
284,286
20,974
305,260
2,752
1996/2012
7/2014
Various
420 Lexington
Ave(1)
711 Third
Avenue(1)
555 W.
57th 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)
1-6 Landmark
Square(2)
7 Landmark
Square(2)
1055 Washington
Boulevard(2)
1 Madison
Avenue(1)
100 Church
Street(1)
125 Park
Avenue(1)
Williamsburg(3)
110 East
42nd Street(1)
400 East
58th Street(1)(4)
762 Madison
Avenue(1)(4)
304 Park
Avenue(1)
635 Sixth
Avenue(1)
641 Sixth
Avenue(1)
1080
Amsterdam(1)(5)
315 West 33rd
Street(1)
752-760 Madison
Avenue(1)
719 Seventh
Avenue(1)(6)
110 Greene
Street(1)
185 Broadway(1)
(7)
30 East 40th
Street(1)(8)
133 Greene
Street(1)
712 Madison
Avenue(1)(11)
106 Spring
Street(1)
410 Tenth
Avenue(1)(9)
Other(10)
—
—
—
1,721
8,386
43,242
173,546
672,805
209,296
34,994
183,932
—
—
—
120,900
6,200
36,196
39,094
17,549
771
6,153
—
—
—
54,489
24,343
45,976
35,123
—
270,598
10,158
78,353
38,749
10,570
90,643
88,261
77,076
47,948
250,000
195,834
179,562
—
284,286
8,314
50,000
41,180
46,232
—
45,120
228,393
120,110
45,422
—
4,652
15,523
3,446
27,865
26,654
27,542
28,000
7,207
47,397
38,025
330,820
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,693)
41,180
44,539
85,719
1,623
2,414
45,120
230,807
275,927
31,147
118
28,282
45,540
56,147
101,687
4,238
4,652
30,892
35,544
82
18
3,446
7,207
27,624
31,070
47,415
54,622
1,185
1900/1980
12/2018
1927
1910
1921
1927
7/2014
7/2015
8/2015
8/2015
Various
Various
Various
Various
1900
10/2018
Various
419
3,267
827
1,240
(3,175)
4,890
1900
1927
4/2019
5/2019
Various
Various
Various
14,173
66,052
14,173
66,052
80,225
—
1,736
16,224
(2)
1,460
1,734
140,307
363,523
140,307
363,523
17,684
503,830
19,418
Total
$
2,019,700
$ 1,596,948
$
6,033,164
$ 154,596
$
999,859
$ 1,751,544
$
7,033,023
$ 8,784,567
$
2,060,560
90
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2019
(in thousands)
Property located in New York, New York.
(1)
Property located in Connecticut.
(2)
(3)
Property located in Brooklyn, New York.
(4) We own a 90.0% interest in this property.
(5) We own a 92.5% interest in this property.
(6) We own a 75.0% interest in this property.
(7)
(8) We own a 60.0% interest in this property.
(9) We own a 70.9% interest in this property.
(10) Other includes tenant improvements of eEmerge, capitalized interest and corporate improvements.
(11) The tenant at this property has an option to purchase the fee interest for a fixed price on a specific date.
Properties at 5-7 Dey Street, 183 Broadway, and 185 Broadway were demolished in preparation of the development site for the 185 Broadway project.
91
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2019
(in thousands)
The changes in real estate for the years ended December 31, 2019, 2018 and 2017 are as follows (in thousands):
Balance at beginning of year
Property acquisitions
Improvements
Retirements/disposals/deconsolidation
Balance at end of year
2019
2018
2017
$
8,513,935
$
10,206,122
$
12,743,332
—
251,674
18,958
52,939
267,726
13,323
342,014
(2,012,852)
(2,892,547)
$
8,784,567
$
8,513,935
$
10,206,122
The aggregate cost of land, buildings and improvements, before depreciation, for Federal income tax purposes at
December 31, 2019 was $10.3 billion (unaudited).
The changes in accumulated depreciation, exclusive of amounts relating to equipment, autos, and furniture and fixtures,
for the years ended December 31, 2019, 2018 and 2017 are as follows (in thousands):
Balance at beginning of year
Depreciation for year
Retirements/disposals/deconsolidation
Balance at end of year
2019
2018
2017
$
2,099,137
$
2,300,116
$
2,264,694
222,867
(261,444)
245,033
(446,012)
347,015
(311,593)
$
2,060,560
$
2,099,137
$
2,300,116
92
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of SL Green Realty Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SL Green Realty Corp. (the Company) as of December 31,
2019 and 2018, the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the
three years in the period ended December 31, 2019, 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, 2019 and 2018, and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, 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, 2019, 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 28, 2020 expressed an unqualified opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019
due to the adoption of ASU No. 2016-02, Leases (Topic 842), and the related amendments.
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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
93
SL Green Realty Corp.
Joint Venture Consolidation Assessment
Description of
the Matter
The Company accounted for certain investments in real estate joint ventures under the equity method of
accounting and consolidated certain other investments in real estate joint ventures. At December 31, 2019,
the Company’s investments in unconsolidated joint ventures was $2.9 billion and noncontrolling interests
in consolidated other partnerships was $75.9 million. As discussed in Note 2 to the consolidated financial
statements, for each joint venture, the Company evaluated the rights provided to each party in the venture
to assess the consolidation of the venture.
Auditing management’s joint venture consolidation analyses was complex and highly judgmental due to
the subjectivity in assessing which activities most significantly impact a joint venture’s economic
performance based on the purpose and design of the entity over the duration of its expected life and
assessing which party has rights to direct those activities.
We tested the Company’s controls over the assessment of joint venture consolidation. For example, we
tested controls over management's review of the consolidation analyses for newly formed ventures as
well as controls over management's identification of reconsideration events which could trigger modified
consolidation conclusions for existing ventures.
How We
Addressed the
Matter in Our
Audit
To test the Company’s consolidation assessment for real estate joint ventures, our procedures included,
among others, reviewing new and amended joint venture agreements and discussing with management
the nature of the rights conveyed to the Company through the joint venture agreements as well as the
business purpose of the joint venture transactions. We reviewed management’s assessment of the activities
that would most significantly impact the joint venture’s economic performance and evaluated whether
the joint venture agreements provided participating or protective rights to the Company. We also evaluated
transactions with the joint ventures for events which would require a reconsideration of previous
consolidation conclusions.
/s/ Ernst & Young LLP
We have served as the Company‘s auditor since 1997.
New York, New York
February 28, 2020
94
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of SL Green Realty Corp.
Opinion on Internal Control Over Financial Reporting
We have audited SL Green Realty Corp.'s internal control over financial reporting as of December 31, 2019, 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, 2019, 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 2019 consolidated financial statements of the Company and our report dated February 28, 2020 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 28, 2020
95
Report of Independent Registered Public Accounting Firm
.
To the Partners of SL Green Operating Partnership, L.P.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SL Green Operating Partnership, L.P. (the Operating Partnership)
as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, capital and cash
flows for each of the three years in the period ended December 31, 2019, 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, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2019, 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, 2019, 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 28, 2020 expressed an unqualified opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 2 to the consolidated financial statements, the Operating Partnership changed its method of accounting for
leases in 2019 due to the adoption of ASU No. 2016-02, Leases (Topic 842), and the related amendments.
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 28, 2020
96
Report of Independent Registered Public Accounting Firm
To the Partners of SL Green Operating Partnership, L.P.
Opinion on Internal Control Over Financial Reporting
We have audited SL Green Operating Partnership L.P.'s internal control over financial reporting as of December 31, 2019, 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, 2019, 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 2019 consolidated financial statements of the Operating Partnership and our report dated February 28, 2020
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 28, 2020
97
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, 2019 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, 2019.
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, 2019 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, 2019 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.
98
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, 2019 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, 2019.
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, 2019 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, 2019 that has materially affected, or is reasonably likely to materially affect, its internal control over
financial reporting.
99
MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
SL GREEN REALTY CORP.
Our common stock trades on the New York Stock Exchange, or the NYSE, under the symbol "SLG." On February 27, 2020,
the reported closing sale price per share of common stock on the NYSE was $80.44 and there were 454 holders of record of our
common stock.
SL GREEN OPERATING PARTNERSHIP, L.P.
At December 31, 2019, there were 4,195,875 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 27, 2020,
there were 34 holders of record and 82,066,533 common units outstanding, 77,935,496 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 program under which we can buy up to $1.0 billion of
shares of our common stock. The Board of Directors has since authorized four separate $500.0 million increases to the size of the
share repurchase program in the fourth quarter of 2017, second quarter of 2018, fourth quarter of 2018, and fourth quarter of 2019
bringing the total program size to $3.0 billion.
At December 31, 2019 repurchases executed under the program were as follows:
Period
Year ended 2017
Year ended 2018
Year ended 2019
Shares repurchased
Average price paid per
share
8,342,411
9,744,911
4,596,171
$101.64
$96.22
$83.62
Cumulative number of
shares repurchased as
part of the repurchase
plan or programs
8,342,411
18,087,322
22,683,493
SALE OF UNREGISTERED AND REGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED
SECURITIES
During the year ended December 31, 2019, we issued 5,013 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, 2018 and 2017, we issued 160,466 and 201,696 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.
100
The following table summarizes information, as of December 31, 2019, 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)
3,838,427 (2) $
101.69 (3)
4,435,096 (4)
Equity compensation plans not approved by security
holders
Total
—
3,838,427
$
—
101.69
—
4,435,096
(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) 1,037,068 shares of common stock issuable upon the exercise of outstanding options (914,929 of which are vested and exercisable), (ii) 21,500
restricted stock units and 128,946 phantom stock units that may be settled in shares of common stock (128,946 of which are vested), (iii) 2,394,267 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 (1,781,709 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.
101
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Funds From Operations (FFO) Reconciliation
Funds From Operations (FFO) Reconciliation
Below are reconciliations of net income attributable to our stockholders to FFO per share and Normalized FFO per share
Below are reconciliations of net income attributable to our stockholders to FFO per share and Normalized FFO per share
for the years ended December 31, 2019, and 2018 (amounts in thousands, except per share data).
for the years ended December 31, 2019, and 2018 (amounts in thousands, except per share data).
Twelve Months Ended
Twelve Months Ended
December 31,
December 31,
2019
2019
2018
2018
$255,484
$255,484
272,358
272,358
192,426
192,426
10,142
10,142
(16,749)
(16,749)
76,181
76,181
69,389
69,389
(7,047)
(7,047)
2,935
2,935
$ 605,701
$ 605,701
-
-
$
$
605,701
605,701
86,562
86,562
7.00
7.00
$
$
$232,312
$232,312
279,507
279,507
187,147
187,147
12,210
12,210
(30,757)
(30,757)
303,967
303,967
57,385
57,385
(227,543)
(227,543)
2,404
2,404
$ 605,720
$ 605,720
(14,889)
(14,889)
620,609
620,609
91,530
91,530
6.78
6.78
$
$
$
$
FFO Reconciliation:
FFO Reconciliation:
Net income attributable to SL Green common stockholders
Net income attributable to SL Green common stockholders
Add:
Add:
Depreciation and amortization
Depreciation and amortization
Joint venture depreciation and noncontrolling interest adjustments
Joint venture depreciation and noncontrolling interest adjustments
Net income attributable to noncontrolling interests
Net income attributable to noncontrolling interests
Less:
Less:
Loss on sale of real estate, net
Loss on sale of real estate, net
Equity in net gain on sale of interest in unconsolidated joint venture/real estate
Equity in net gain on sale of interest in unconsolidated joint venture/real estate
Purchase price and other fair value adjustments
Purchase price and other fair value adjustments
Depreciable real estate reserves
Depreciable real estate reserves
Depreciation on non-rental real estate assets
Depreciation on non-rental real estate assets
FFO attributable to SL Green common stockholders
FFO attributable to SL Green common stockholders
FFO attributable to the early repayment of the debt at One Madison Avenue in 2018
FFO attributable to the early repayment of the debt at One Madison Avenue in 2018
Normalized FFO attributable to SL Green common stockholders
Normalized FFO attributable to SL Green common stockholders
Diluted weighted average shares and units outstanding
Diluted weighted average shares and units outstanding
FFO / Normalized FFO per share
FFO / Normalized FFO per share
TOTAL RETURN TO SHAREHOLDERS
TOTAL RETURN TO SHAREHOLDERS
102
102
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 28, 2020
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. 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.
103
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 28, 2020
President and Director
February 28, 2020
/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 28, 2020
February 28, 2020
February 28, 2020
February 28, 2020
February 28, 2020
February 28, 2020
February 28, 2020
February 28, 2020
104
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 28, 2020
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.
105
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 28, 2020
President and Director of SL Green, the sole general
partner of the Operating Partnership
February 28, 2020
/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 28, 2020
February 28, 2020
February 28, 2020
February 28, 2020
February 28, 2020
February 28, 2020
February 28, 2020
February 28, 2020
106
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, 333-228887 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 28, 2020, 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)
of SL Green Realty Corp for the year ended December 31, 2019.
New York, New York
February 28, 2020
/s/ Ernst & Young LLP
107
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
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 28, 2020, 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, 2019.
New York, New York
February 28, 2020
/s/ Ernst & Young LLP
108
Exhibit 31.1
I, Marc Holliday, certify that:
CERTIFICATION
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 28, 2020
/s/ Marc Holliday
Name: Marc Holliday
Title:
Chairman and Chief Executive Officer
109
Exhibit 31.2
I, Matthew J. DiLiberto, certify that:
CERTIFICATION
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 28, 2020
/s/ Matthew J. DiLiberto
Name: Matthew J. DiLiberto
Title:
Chief Financial Officer
110
Exhibit 31.3
I, Marc Holliday, 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 28, 2020
/s/ Marc Holliday
Name: Marc Holliday
Title:
Chairman and Chief Executive Officer
of SL Green Realty Corp., the
general partner of the registrant
111
Exhibit 31.4
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 28, 2020
/s/ Matthew J. DiLiberto
Name: Matthew J. DiLiberto
Title:
Chief Financial Officer
of SL Green Realty Corp., the
general partner of the registrant
112
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
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 28, 2020
113
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
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.
/s/ Matthew J. DiLiberto
Name: Matthew J. DiLiberto
Title:
Chief Financial Officer
February 28, 2020
114
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.3
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/ Marc Holliday
Name: Marc Holliday
Title:
Chairman and Chief Executive Officer
of SL Green Realty Corp., the
general partner of the Operating Partnership
February 28, 2020
115
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 28, 2020
116
Corporate
Directory
Board of Directors
Counsel
Skadden, Arps, Slate,
Meagher & Flom LLP
New York, NY
Auditors
Ernst & Young LLP
New York, NY
Registrar & Transfer Agent
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
Executive Offices
420 Lexington Avenue
New York, NY 10170
Tel: 212-594-2700
Fax: 212-216-1785
www.slgreen.com
Marc Holliday
Chairman & Chief Executive Officer
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
Executive Vice President,
Global Information Service,
Nasdaq
Executive Officers
Marc Holliday
Chairman & Chief Executive Officer
Andrew W. Mathias
President
Matthew J. DiLiberto
Chief Financial Officer
Andrew S. Levine
Chief Legal Officer,
General Counsel
S L G R E E N R E A L T Y C O R P.
420 Lexington Avenue
New York, NY 10170
212.594.2700
www.slgreen.com