SLG-2013.9.30-10Q

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________

FORM 10-Q 
___________________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to
Commission File Number: 1-13199 (SL Green Realty Corp.)
Commission File Number: 33-167793-02 (SL Green Operating Partnership, L.P.)
___________________________________________

SL GREEN REALTY CORP.
SL GREEN OPERATING PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
___________________________________________
SL Green Realty Corp.
Maryland
 
13-3956775
SL Green Operating Partnership, L.P.
Delaware
 
13-3960938
 
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
420 Lexington Avenue, New York, New York 10170
(Address of principal executive offices) (Zip Code)
 
(212) 594-2700
(Registrant’s telephone number, including area code)
___________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
SL Green Realty Corp. YES x  NO o SL Green Operating Partnership, L.P. YES x  NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
SL Green Realty Corp. YES x  NO o SL Green Operating Partnership, L.P. YES x  NO o



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
SL Green Realty Corp.
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
(Do not check if a
smaller reporting company)
Smaller Reporting Company o
SL Green Operating Partnership, L.P.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
(Do not check if a
smaller reporting company)
Smaller Reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
SL Green Realty Corp. YES o NO x SL Green Operating Partnership, L.P. YES o  NO x
The number of shares outstanding of SL Green Realty Corp.'s common stock, $0.01 par value, was 92,260,239 as of October 31, 2013. As of October 31, 2013, 879,183 common units of limited partnership interest of SL Green Operating Partnership, L.P. were held by non-affiliates. There is no established trading market for such units.
 



EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2013 of SL Green Realty Corp. and SL Green Operating Partnership, L.P. Unless stated otherwise or the context otherwise requires, references to "SL Green Realty Corp.," the "Company" or "SL Green" mean SL Green Realty Corp. and its consolidated subsidiaries; and references to "SL Green Operating Partnership, L.P.," the "Operating Partnership" or "SLGOP" mean SL Green Operating Partnership and its consolidated subsidiaries. The terms "we,' "our" and "us" mean the Company and all the entities owned or controlled by the Company, including the Operating Partnership.

The Company is a self-administered and self-managed Maryland real estate investment trust ("REIT") and is the sole managing general partner of the Operating Partnership. As a general partner of the Operating Partnership, the Company has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership.

The Company owns 97.06% of the outstanding general and limited partnership interest in the Operating Partnership. The Company also owns 9,200,000 Series I Preferred units in the Operating Partnership. As of September 30, 2013, noncontrolling investors held, in aggregate, a 2.94% limited partnership interest in the Operating Partnership. We refer to these interests as the noncontrolling interests in the Operating Partnership.

The Company and the Operating Partnership are managed and operated as one entity. The financial results of the Operating Partnership are consolidated into the financial statements of the Company. The Company has no significant assets other than its investment in the Operating Partnership. Substantially all of our assets are held by, and our operations are conducted through, the Operating Partnership. Therefore, the assets and liabilities of the Company and the Operating Partnership are substantially the same.

Noncontrolling interests in the Operating Partnership, stockholders' equity of the Company and partners' capital of the Operating Partnership are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The common limited partnership interests in the Operating Partnership not owned by the Company are accounted for as partners' capital in the Operating Partnership’s consolidated financial statements and as noncontrolling interests, within mezzanine equity, in the Company's consolidated financial statements.

We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:

Combined reports enhance investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
Combined reports eliminate duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the Company's disclosure applies to both the Company and the Operating Partnership; and
Combined reports create time and cost efficiencies through the preparation of one combined report instead of two separate reports.

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:

consolidated financial statements;
the following notes to the consolidated financial statements:
Note 11, Noncontrolling Interest on the Company’s Consolidated Financial Statements;
Note 12, Stockholders' Equity of the Company;
Note 13, Partners' Capital of the Operating Partnership;
Note 15, Accumulated Other Comprehensive Loss of the Company; and
Note 16, Accumulated Other Comprehensive Loss of the Operating Partnership.
 
This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Company and the Operating Partnership, respectively, in order to establish that the Chief Executive Officer and the Chief Financial Officer of the Company, in both their capacity as the principal executive officer and principal financial officer of the Company and the principal executive officer and principal financial officer of the general partner of the Operating Partnership, have made the requisite certifications and that the Company and the Operating Partnership are compliant with Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended.


i


SL GREEN REALTY CORP. AND SL GREEN OPERATING PARTNERSHIP, L.P.
 
TABLE OF CONTENTS
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
 
FINANCIAL STATEMENTS OF SL GREEN REALTY CORP.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FINANCIAL STATEMENTS OF SL GREEN OPERATING PARTNERSHIP, L.P.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

PART I.                                                  FINANCIAL INFORMATION
ITEM 1.    Financial Statements
 

SL Green Realty Corp.
Consolidated Balance Sheets
(in thousands, except per share data)
 
 
September 30,
2013
 
December 31,
2012
 
 
(Unaudited)
 
 
Assets
 
 

 
 

Commercial real estate properties, at cost:
 
 

 
 

Land and land interests
 
$
2,868,833

 
$
2,886,099

Building and improvements
 
7,440,543

 
7,389,766

Building leasehold and improvements
 
1,353,997

 
1,346,748

Properties under capital lease
 
50,332

 
40,340

 
 
11,713,705

 
11,662,953

Less: accumulated depreciation
 
(1,574,002
)
 
(1,393,323
)
 
 
10,139,703

 
10,269,630

Assets held for sale
 

 
4,901

Cash and cash equivalents
 
209,098

 
189,984

Restricted cash
 
356,844

 
136,071

Investment in marketable securities
 
32,863

 
21,429

Tenant and other receivables, net of allowance of $22,383 and $21,652 in 2013 and 2012, respectively
 
51,354

 
48,544

Related party receivables
 
7,800

 
7,531

Deferred rents receivable, net of allowance of $29,508 and $29,580 in 2013 and 2012, respectively
 
374,615

 
340,747

Debt and preferred equity investments, net of discounts and deferred origination fees of $26,466 and $22,341 in 2013 and 2012, and allowance of $4,000 and $7,000 in 2013 and 2012, respectively
 
1,315,551

 
1,348,434

Investments in unconsolidated joint ventures
 
1,109,815

 
1,032,243

Deferred costs, net
 
247,850

 
261,145

Other assets
 
729,426

 
718,326

Total assets
 
$
14,574,919

 
$
14,378,985

Liabilities
 
 

 
 

Mortgages and other loans payable
 
$
4,641,758

 
$
4,615,464

Revolving credit facility
 
340,000

 
70,000

Term loan and senior unsecured notes
 
1,737,869

 
1,734,956

Accrued interest payable and other liabilities
 
69,359

 
73,769

Accounts payable and accrued expenses
 
167,719

 
159,598

Deferred revenue
 
293,393

 
312,995

Capitalized lease obligations
 
47,492

 
37,518

Deferred land leases payable
 
21,066

 
20,897

Dividend and distributions payable
 
34,749

 
37,839

Security deposits
 
54,824

 
46,253

Liabilities related to assets held for sale
 

 
136

Junior subordinate deferrable interest debentures held by trusts that issued trust preferred securities
 
100,000

 
100,000

Total liabilities
 
7,508,229

 
7,209,425

Commitments and contingencies
 

 

Noncontrolling interest in the Operating Partnership
 
248,046

 
212,907

Series G Preferred Units, $25.00 liquidation preference, 1,902 issued and outstanding at both September 30, 2013 and December 31, 2012
 
47,550

 
47,550

Series H Preferred Units, $25.00 liquidation preference, 80 issued and outstanding at both September 30, 2013 and December 31, 2012
 
2,000

 
2,000

Equity
 
 

 
 

SL Green stockholders’ equity:
 
 

 
 

Series C Preferred Stock, $0.01 par value, $25.00 liquidation preference, 7,700 issued and outstanding at December 31, 2012
 

 
180,340

Series I Preferred Stock, $0.01 par value, $25.00 liquidation preference, 9,200 issued and outstanding at both September 30, 2013 and December 31, 2012
 
221,932

 
221,965

Common stock, $0.01 par value, 160,000 shares authorized and 95,780 and 94,896 issued and outstanding at September 30, 2013 and December 31, 2012, respectively (including 3,566 and 3,646 shares held in Treasury at September 30, 2013 and December 31, 2012, respectively)
 
959

 
950

Additional paid-in-capital
 
4,757,778

 
4,667,900

Treasury stock at cost
 
(316,989
)
 
(322,858
)
Accumulated other comprehensive loss
 
(19,249
)
 
(29,587
)
Retained earnings
 
1,636,584

 
1,701,092

Total SL Green stockholders’ equity
 
6,281,015

 
6,419,802

Noncontrolling interests in other partnerships
 
488,079

 
487,301

Total equity
 
6,769,094

 
6,907,103

Total liabilities and equity
 
$
14,574,919

 
$
14,378,985

 
The accompanying notes are an integral part of these financial statements.

1


SL Green Realty Corp.
Consolidated Statements of Income
(unaudited, in thousands, except per share data)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2013
 
2012
 
2013
 
2012
Revenues
 
 

 
 

 
 

 
 

Rental revenue, net
 
$
264,349

 
$
277,676

 
$
804,104

 
$
798,271

Escalation and reimbursement
 
45,091

 
42,194

 
125,018

 
124,273

Investment and preferred equity income
 
44,448

 
27,869

 
143,887

 
87,655

Other income
 
9,877

 
9,272

 
21,369

 
25,931

Total revenues
 
363,765

 
357,011

 
1,094,378

 
1,036,130

Expenses
 
 

 
 

 
 

 
 

Operating expenses, including approximately $4,876 and $13,345 (2013) and $4,670 and $12,914 (2012) paid to related parties
 
77,272

 
82,351

 
218,901

 
221,670

Real estate taxes
 
55,511

 
53,293

 
161,625

 
156,746

Ground rent
 
10,127

 
8,874

 
29,767

 
26,570

Interest expense, net of interest income
 
82,973

 
85,659

 
247,420

 
247,789

Amortization of deferred financing costs
 
4,331

 
4,493

 
13,034

 
11,626

Depreciation and amortization
 
87,473

 
81,827

 
248,587

 
233,566

Loan loss and other investment reserves, net of recoveries
 

 

 

 
564

Transaction related costs, net of recoveries
 
(2,349
)
 
1,372

 
719

 
4,398

Marketing, general and administrative
 
20,869

 
20,551

 
63,450

 
61,469

Total expenses
 
336,207

 
338,420

 
983,503

 
964,398

Income from continuing operations before equity in net income from unconsolidated joint ventures, equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate, gain (loss) on sale of investment in marketable securities, purchase price fair value adjustment and loss on early extinguishment of debt
 
27,558

 
18,591

 
110,875

 
71,732

Equity in net income from unconsolidated joint ventures
 
2,939

 
11,658

 
4,251

 
80,988

Equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate
 
(354
)
 
(4,807
)
 
(3,937
)
 
17,776

Gain (loss) on sale of investment in marketable securities
 

 
2,237

 
(65
)
 
2,237

Purchase price fair value adjustment
 

 

 
(2,305
)
 

Loss on early extinguishment of debt
 

 

 
(18,523
)
 

Income from continuing operations
 
30,143

 
27,679

 
90,296

 
172,733

Net income from discontinued operations
 
1,406

 
951

 
1,725

 
2,883

Gain on sale of discontinued operations
 
13,787

 

 
14,900

 
6,627

Net income
 
45,336

 
28,630

 
106,921

 
182,243

Net income attributable to noncontrolling interests:
 
 

 
 

 
 

 
 

Noncontrolling interests in the Operating Partnership
 
(1,110
)
 
(567
)
 
(1,909
)
 
(4,876
)
Noncontrolling interests in other partnerships
 
(2,901
)
 
(1,835
)
 
(8,806
)
 
(6,792
)
Preferred unit distributions
 
(562
)
 
(571
)
 
(1,692
)
 
(1,533
)
Net income attributable to SL Green
 
40,763

 
25,657

 
94,514

 
169,042

Preferred stock redemption costs
 

 
(10,010
)
 
(12,160
)
 
(10,010
)
Perpetual preferred stock dividends
 
(3,738
)
 
(7,915
)
 
(18,144
)
 
(23,004
)
Net income attributable to SL Green common stockholders
 
$
37,025

 
$
7,732

 
$
64,210

 
$
136,028

Amounts attributable to SL Green common stockholders:
 
 

 
 

 
 

 
 

Income from continuing operations
 
$
22,623

 
$
11,451

 
$
54,125

 
$
109,687

Purchase price fair value adjustment
 

 

 
(2,239
)
 

Equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate
 
(344
)
 
(4,636
)
 
(3,825
)
 
17,160

Net income from discontinued operations
 
1,365

 
917

 
1,676

 
2,783

Gain on sale of discontinued operations
 
13,381

 

 
14,473

 
6,398

Net income
 
$
37,025

 
$
7,732

 
$
64,210

 
$
136,028

Basic earnings per share:
 
 

 
 

 
 

 
 

Income from continuing operations before discontinued operations
 
$
0.25

 
$
0.13

 
$
0.57

 
$
1.24

Equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate
 

 
(0.05
)
 
(0.04
)
 
0.19

Net income from discontinued operations
 

 
0.01

 
0.01

 
0.03

Gain on sale of discontinued operations
 
0.15

 

 
0.16

 
0.07

Net income attributable to SL Green common stockholders
 
$
0.40

 
$
0.09

 
$
0.70

 
$
1.53

Diluted earnings per share:
 
 

 
 

 
 

 
 

Income from continuing operations before discontinued operations
 
$
0.25

 
$
0.13

 
$
0.56

 
$
1.23

Equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate
 

 
(0.05
)
 
(0.04
)
 
0.19

Net income from discontinued operations
 

 
0.01

 
0.02

 
0.03

Gain on sale of discontinued operations
 
0.15

 

 
0.16

 
0.07

Net income attributable to SL Green common stockholders
 
$
0.40

 
$
0.09

 
$
0.70

 
$
1.52

Dividends per share
 
$
0.33

 
$
0.25

 
$
0.99

 
$
0.75

Basic weighted average common shares outstanding
 
91,988

 
90,241

 
91,684

 
88,929

Diluted weighted average common shares and common share equivalents outstanding
 
95,016

 
93,891

 
94,631

 
92,485

 
The accompanying notes are an integral part of these financial statements.

2


SL Green Realty Corp.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2013
 
2012
 
2013
 
2012
Net income
 
$
45,336

 
$
28,630

 
$
106,921

 
$
182,243

 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income:
 
 

 
 

 
 

 
 

Change in net unrealized (loss) gain on derivative instruments, including SL Green's share of joint venture net unrealized (loss) gain on derivative instruments
 
(1,165
)
 
(102
)
 
10,522

 
(635
)
Change in unrealized gain (loss) on marketable securities
 
513

 
(825
)
 
306

 
(597
)
Other comprehensive (loss) income
 
(652
)
 
(927
)
 
10,828

 
(1,232
)
 
 
 
 
 
 
 
 
 
Comprehensive income
 
44,684

 
27,703

 
117,749

 
181,011

 
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests
 
(4,573
)
 
(2,973
)
 
(12,407
)
 
(13,201
)
Other comprehensive loss (income) attributable to noncontrolling interests in the Operating Partnership
 
25

 
59

 
(490
)
 
396

 
 
 
 
 
 
 
 
 
Comprehensive income attributable to SL Green common stockholders
 
$
40,136

 
$
24,789

 
$
104,852

 
$
168,206

 
The accompanying notes are an integral part of these financial statements.

3

Table of Contents

SL Green Realty Corp.
Consolidated Statement of Equity
(unaudited, in thousands, except per share data)
 
SL Green Realty Corp. Stockholders
 
 
 
 
 
Series C
Preferred
Stock
 
Series I
Preferred
Stock
 
Common Stock
 
Additional
Paid-
In-Capital
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
 
Noncontrolling
 Interests
 
 
 
 
 
Shares
 
Par
Value
 
 
 
 
 
 
Total
Balance at December 31, 2012
$
180,340

 
$
221,965

 
91,250

 
$
950

 
$
4,667,900

 
$
(322,858
)
 
$
(29,587
)
 
$
1,701,092

 
$
487,301

 
$
6,907,103

Net income
 

 
 

 
 

 
 

 
 

 
 

 
 

 
94,514

 
8,806

 
103,320

Other comprehensive income
 

 
 

 
 

 
 

 
 

 
 

 
10,338

 
 

 
 

 
10,338

Preferred dividends
 

 
 

 
 

 
 

 
 

 
 

 
 

 
(18,144
)
 
 

 
(18,144
)
DRIP proceeds
 

 
 

 
 

 
 

 
57

 
 

 
 

 
 

 
 

 
57

Conversion of units of the Operating Partnership to common stock
 

 
 

 
224

 
2

 
17,285

 
 

 
 

 
 

 
 

 
17,287

Reallocation of noncontrolling interest in the Operating Partnership
 

 
 

 
 

 
 

 
 

 
 

 
 

 
(38,452
)
 
 

 
(38,452
)
Deferred compensation plan
 
 
 
 
10

 
 
 
655

 
(221
)
 
 
 
 
 
 
 
434

Amortization of deferred compensation plan
 

 
 

 


 
 

 
19,702

 
 

 
 

 
 

 
 

 
19,702

Redemption of preferred stock
(180,340
)
 
 

 
 

 
 

 
 

 
 

 
 

 
(12,160
)
 
 

 
(192,500
)
Preferred stock issuance costs
 

 
(33
)
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
(33
)
Issuance of common stock
 

 
 

 
462

 
5

 
41,786

 
 

 
 

 
 

 
 

 
41,791

Sale of treasury stock
 

 
 

 
83

 
 

 
 

 
6,090

 
 

 
 

 
 

 
6,090

Proceeds from stock options exercised
 

 
 

 
185

 
2

 
10,393

 
 

 
 

 
 

 
 

 
10,395

Contributions to consolidated joint venture
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
3,781

 
3,781

Cash distributions to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
(11,809
)
 
(11,809
)
Cash distribution declared ($0.99 per common share, none of which represented a return of capital for federal income tax purposes)
 

 
 

 
 

 
 

 
 

 
 

 
 

 
(90,266
)
 
 

 
(90,266
)
Balance at September 30, 2013
$

 
$
221,932

 
92,214

 
$
959

 
$
4,757,778

 
$
(316,989
)
 
$
(19,249
)
 
$
1,636,584

 
$
488,079

 
$
6,769,094

 
The accompanying notes are an integral part of these financial statements.

4


SL Green Realty Corp.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
 
 
Nine Months Ended 
 September 30,
 
 
2013
 
2012
Operating Activities
 
 

 
 

Net income
 
$
106,921

 
$
182,243

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Depreciation and amortization
 
264,833

 
249,950

Depreciable real estate reserves
 
2,150

 

Equity in net income from unconsolidated joint ventures
 
(4,251
)
 
(80,988
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
21,723

 
84,182

Purchase price fair value adjustment
 
2,305

 

Equity in net loss (gain) on sale of interest in unconsolidated joint venture/real estate
 
3,937

 
(17,776
)
Gain on sale of discontinued operations
 
(14,900
)
 
(6,627
)
Loan loss and other investment reserves, net of recoveries
 

 
564

Gain on sale of investments in marketable securities
 

 
(2,237
)
Loss on early extinguishment of debt
 
10,968

 

Deferred rents receivable
 
(44,021
)
 
(50,910
)
Other non-cash adjustments
 
(31,808
)
 
(864
)
Changes in operating assets and liabilities:
 
 

 
 

Restricted cash — operations
 
1,254

 
(12,557
)
Tenant and other receivables
 
(3,018
)
 
(8,500
)
Related party receivables
 
(187
)
 
(3,792
)
Deferred lease costs
 
(28,502
)
 
(37,885
)
Other assets
 
(23,316
)
 
(44,915
)
Accounts payable, accrued expenses and other liabilities
 
23,635

 
11,309

Deferred revenue and land leases payable
 
22,731

 
8,997

Net cash provided by operating activities
 
310,454

 
270,194

Investing Activities
 
 

 
 

Acquisitions of real estate property
 
(58,185
)
 
(405,318
)
Additions to land, buildings and improvements
 
(108,849
)
 
(107,425
)
Escrowed cash — capital improvements/acquisition
 
(246,682
)
 
(68,692
)
Investments in unconsolidated joint ventures
 
(120,130
)
 
(159,524
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
19,795

 
48,510

Net proceeds from disposition of real estate/joint venture interest
 
218,701

 
70,367

Other investments
 
(26,003
)
 
(28,911
)
Debt and preferred equity and other investments, net of repayments/participations
 
78,888

 
(172,411
)
Net cash used in investing activities
 
(242,465
)
 
(823,404
)
Financing Activities
 
 

 
 

Proceeds from mortgages and other loans payable
 
980,333

 
1,113,500

Repayments of mortgages and other loans payable
 
(1,027,201
)
 
(484,518
)
Proceeds from credit facility and senior unsecured notes
 
844,000

 
813,339

Repayments of credit facility and senior unsecured notes
 
(578,970
)
 
(1,065,793
)
Proceeds from stock options exercised and DRIP issuance
 
10,452

 
112,447

Net proceeds from sale of common stock/preferred stock
 
41,758

 
423,544

Redemption of preferred stock
 
(192,500
)
 
(200,013
)
Sale or purchase of treasury stock
 
6,089

 
(11,197
)
Distributions to noncontrolling interests in other partnerships
 
(11,809
)
 
(15,622
)
Contributions from noncontrolling interests in other partnerships
 
3,781

 
19,181

Distributions to noncontrolling interests in the Operating Partnership
 
(2,695
)
 
(2,385
)
Dividends paid on common and preferred stock
 
(113,192
)
 
(91,272
)
Deferred loan costs and capitalized lease obligations
 
(8,921
)
 
(33,830
)
Net cash (used in) provided by financing activities
 
(48,875
)
 
577,381

Net increase in cash and cash equivalents
 
19,114

 
24,171

Cash and cash equivalents at beginning of period
 
189,984

 
138,192

Cash and cash equivalents at end of period
 
$
209,098

 
$
162,363

 
 
 
 
 
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
 
 
 
 
Issuance of common stock as deferred compensation
 
$
434

 
$
631

Issuance of units in the Operating Partnership
 
14,270

 
40,542

Redemption of units in the Operating Partnership
 
17,287

 
17,467

Derivative instruments at fair value
 
494

 
375

Assignment of debt investment to joint venture
 

 
25,362

Mortgage assigned upon asset sale
 

 
59,099

Tenant improvements and capital expenditures payable
 
9,855

 
10,056

Assumption of mortgage loans
 
84,642

 

Fair value adjustment to noncontrolling interest in the Operating Partnership
 
38,452

 
44,893

Accrued acquisition liabilities
 

 
4,372

Deferred leasing payable
 
2,849

 
509

Capital leased asset
 
9,992

 

Transfer to net assets held for sale
 

 
86,339

Transfer to liabilities related to net assets held for sale
 

 
62,792

Repayment of mezzanine loan
 

 
3,750

Redemption of Series E units
 

 
31,698

Repayment of financing receivable
 

 
28,195

Consolidation of real estate investment
 
90,934

 

Investment in joint venture
 

 
5,135

 
The accompanying notes are an integral part of these financial statements.

5



SL Green Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands, except per unit data)

 
 
September 30,  
  2013
 
December 31, 
 2012
 
 
(Unaudited)
 
 
Assets
 
 

 
 

Commercial real estate properties, at cost:
 
 

 
 

Land and land interests
 
$
2,868,833

 
$
2,886,099

Building and improvements
 
7,440,543

 
7,389,766

Building leasehold and improvements
 
1,353,997

 
1,346,748

Properties under capital lease
 
50,332

 
40,340

 
 
11,713,705

 
11,662,953

Less: accumulated depreciation
 
(1,574,002
)
 
(1,393,323
)
 
 
10,139,703

 
10,269,630

Assets held for sale
 

 
4,901

Cash and cash equivalents
 
209,098

 
189,984

Restricted cash
 
356,844

 
136,071

Investment in marketable securities
 
32,863

 
21,429

Tenant and other receivables, net of allowance of $22,383 and $21,652 in 2013 and 2012, respectively
 
51,354

 
48,544

Related party receivables
 
7,800

 
7,531

Deferred rents receivable, net of allowance of $29,508 and $29,580 in 2013 and 2012, respectively
 
374,615

 
340,747

Debt and preferred equity investments, net of discounts and deferred origination fees of $26,466 and $22,341 and allowance of $4,000 and $7,000 in 2013 and 2012, respectively
 
1,315,551

 
1,348,434

Investments in unconsolidated joint ventures
 
1,109,815

 
1,032,243

Deferred costs, net
 
247,850

 
261,145

Other assets
 
729,426

 
718,326

Total assets
 
$
14,574,919

 
$
14,378,985

Liabilities
 
 

 
 

Mortgages and other loans payable
 
$
4,641,758

 
$
4,615,464

Revolving credit facility
 
340,000

 
70,000

Term loan and senior unsecured notes
 
1,737,869

 
1,734,956

Accrued interest payable and other liabilities
 
69,359

 
73,769

Accounts payable and accrued expenses
 
167,719

 
159,598

Deferred revenue
 
293,393

 
312,995

Capitalized lease obligations
 
47,492

 
37,518

Deferred land leases payable
 
21,066

 
20,897

Dividend and distributions payable
 
34,749

 
37,839

Security deposits
 
54,824

 
46,253

Liabilities related to assets held for sale
 

 
136

Junior subordinate deferrable interest debentures held by trusts that issued trust preferred securities
 
100,000

 
100,000

Total liabilities
 
7,508,229

 
7,209,425

Commitments and contingencies
 

 

Series G Preferred Units, $25.00 liquidation preference, 1,902 issued and outstanding at both September 30, 2013 and December 31, 2012
 
47,550

 
47,550

Series H Preferred Units, $25.00 liquidation preference, 80 issued and outstanding at both September 30, 2013 and December 31, 2012
 
2,000

 
2,000

Capital
 
 

 
 

SLGOP partners’ capital:
 
 

 
 

Series C Preferred Units, 7,700 issued and outstanding at December 31, 2012
 

 
180,340

Series I Preferred Units, 9,200 issued and outstanding at both September 30, 2013 and December 31, 2012
 
221,932

 
221,965

SL Green partners’ capital (950 and 940 general partner common units and 91,264 and 90,310 limited partner common units outstanding at September 30, 2013 and December 31, 2012, respectively)
 
6,259,229

 
6,189,529

Limited partner interests in SLGOP (2,792 and 2,760 limited partner common units outstanding at September 30, 2013 and December 31, 2012, respectively
 
67,721

 
71,524

Accumulated other comprehensive loss
 
(19,821
)
 
(30,649
)
Total SLGOP partners’ capital
 
6,529,061

 
6,632,709

Noncontrolling interests in other partnerships
 
488,079

 
487,301

Total capital
 
7,017,140

 
7,120,010

Total liabilities and capital
 
$
14,574,919

 
$
14,378,985


The accompanying notes are an integral part of these financial statements.


6


SL Green Operating Partnership, L.P.
Consolidated Statements of Income
(unaudited, in thousands, except per unit data)

 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2013
 
2012
 
2013
 
2012
Revenues
 
 

 
 

 
 

 
 

Rental revenue, net
 
$
264,349

 
$
277,676

 
$
804,104

 
$
798,271

Escalation and reimbursement
 
45,091

 
42,194

 
125,018

 
124,273

Investment and preferred equity income
 
44,448

 
27,869

 
143,887

 
87,655

Other income
 
9,877

 
9,272

 
21,369

 
25,931

Total revenues
 
363,765

 
357,011

 
1,094,378

 
1,036,130

Expenses
 
 

 
 

 
 

 
 

Operating expenses, including approximately $4,876 and $13,345 (2013) and $4,670 and $12,914 (2012) paid to related parties
 
77,272

 
82,351

 
218,901

 
221,670

Real estate taxes
 
55,511

 
53,293

 
161,625

 
156,746

Ground rent
 
10,127

 
8,874

 
29,767

 
26,570

Interest expense, net of interest income
 
82,973

 
85,659

 
247,420

 
247,789

Amortization of deferred financing costs
 
4,331

 
4,493

 
13,034

 
11,626

Depreciation and amortization
 
87,473

 
81,827

 
248,587

 
233,566

Loan loss and other investment reserves, net of recoveries
 

 

 

 
564

Transaction related costs, net of recoveries
 
(2,349
)
 
1,372

 
719

 
4,398

Marketing, general and administrative
 
20,869

 
20,551

 
63,450

 
61,469

Total expenses
 
336,207

 
338,420

 
983,503

 
964,398

Income from continuing operations before equity in net income from unconsolidated joint ventures, equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate, gain (loss) on sale of investment in marketable securities, purchase price fair value adjustment and loss on early extinguishment of debt
 
27,558

 
18,591

 
110,875

 
71,732

Equity in net income from unconsolidated joint ventures
 
2,939

 
11,658

 
4,251

 
80,988

Equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate
 
(354
)
 
(4,807
)
 
(3,937
)
 
17,776

Gain (loss) on sale of investment in marketable securities
 

 
2,237

 
(65
)
 
2,237

Purchase price fair value adjustment
 

 

 
(2,305
)
 

Loss on early extinguishment of debt
 

 

 
(18,523
)
 

Income from continuing operations
 
30,143

 
27,679

 
90,296

 
172,733

Net income from discontinued operations
 
1,406

 
951

 
1,725

 
2,883

Gain on sale of discontinued operations
 
13,787

 

 
14,900

 
6,627

Net income
 
45,336

 
28,630

 
106,921

 
182,243

Net income attributable to noncontrolling interests in other partnerships
 
(2,901
)
 
(1,835
)
 
(8,806
)
 
(6,792
)
Preferred unit distributions
 
(562
)
 
(571
)
 
(1,692
)
 
(1,533
)
Net income attributable to SLGOP
 
41,873

 
26,224

 
96,423

 
173,918

Preferred unit redemption costs
 

 
(10,010
)
 
(12,160
)
 
(10,010
)
Perpetual preferred unit distributions
 
(3,738
)
 
(7,915
)
 
(18,144
)
 
(23,004
)
Net income attributable to SLGOP common unitholders
 
$
38,135

 
$
8,299

 
$
66,119

 
$
140,904

Amounts attributable to SLGOP common unitholders:
 
 

 
 

 
 

 
 

Income from continuing operations
 
$
23,296

 
$
12,155

 
$
55,736

 
$
113,618

Purchase price fair value adjustment
 

 

 
(2,305
)
 

Equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate
 
(354
)
 
(4,807
)
 
(3,937
)
 
17,776

Net income from discontinued operations
 
1,406

 
951

 
1,725

 
2,883

Gain on sale of discontinued operations
 
13,787

 

 
14,900

 
6,627

Net income
 
$
38,135

 
$
8,299

 
$
66,119

 
$
140,904

Basic earnings per unit:
 
 

 
 

 
 

 
 

Income from continuing operations before discontinued operations
 
$
0.25

 
$
0.13

 
$
0.57

 
$
1.24

Equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate
 

 
(0.05
)
 
(0.04
)
 
0.19

Net income from discontinued operations
 

 
0.01

 
0.01

 
0.03

Gain on sale of discontinued operations
 
0.15

 

 
0.16

 
0.07

Net income attributable to SLGOP common unitholders
 
$
0.40

 
$
0.09

 
$
0.70

 
$
1.53

Diluted earnings per unit:
 
 

 
 

 
 

 
 

Income from continuing operations before discontinued operations
 
$
0.25

 
$
0.13

 
$
0.56

 
$
1.23

Equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate
 

 
(0.05
)
 
(0.04
)
 
0.19

Net income from discontinued operations
 

 
0.01

 
0.02

 
0.03

Gain on sale of discontinued operations
 
0.15

 

 
0.16

 
0.07

Net income attributable to SLGOP common unitholders
 
$
0.40

 
$
0.09

 
$
0.70

 
$
1.52

Dividends per unit
 
$
0.33

 
$
0.25

 
$
0.99

 
$
0.75

Basic weighted average common units outstanding
 
94,780

 
93,561

 
94,389

 
92,117

Diluted weighted average common units and common unit equivalents outstanding
 
95,016

 
93,891

 
94,631

 
92,485


The accompanying notes are an integral part of these financial statements.


7


SL Green Operating Partnership, L.P.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)

 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2013
 
2012
 
2013
 
2012
Net income
 
$
45,336

 
$
28,630

 
$
106,921

 
$
182,243

 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income:
 
 

 
 

 
 

 
 

Change in net unrealized (loss) gain on derivative instruments, including SL Green's share of joint venture net unrealized (loss) gain on derivative instruments
 
(1,165
)
 
(102
)
 
10,522

 
(635
)
Change in unrealized gain (loss) on marketable securities
 
513

 
(825
)
 
306

 
(597
)
Other comprehensive (loss) income
 
(652
)
 
(927
)
 
10,828

 
(1,232
)
 
 
 
 
 
 
 
 
 
Comprehensive income
 
44,684

 
27,703

 
117,749

 
181,011

 
 
 
 
 
 
 
 
 
Net income attributable to noncontrolling interests in other partnerships
 
(2,901
)
 
(1,835
)
 
(8,806
)
 
(6,792
)
 
 
 
 
 
 
 
 
 
Comprehensive income attributable to SLGOP
 
$
41,783

 
$
25,868

 
$
108,943

 
$
174,219


The accompanying notes are an integral part of these financial statements.


8


SL Green Operating Partnership, L.P.
Consolidated Statement of Capital
(unaudited, in thousands, except per unit data)

 
 
SL Green Operating Partnership Unitholders
 
 
 
 
 
 
Series C Preferred Units
 
Series I Preferred Units
 
General Partner
 
Limited Partners
 
Accumulated
Other Comprehensive
Income 
(Loss)
 
 
 
 
 
 
 
 
Common
Units
 
Common
Unitholders
 
Common
Units
 
Common
Unitholders
 
 
Noncontrolling
 Interests
 
Total
Balance at December 31, 2012
 
$
180,340

 
$
221,965

 
91,250

 
$
6,189,529

 
2,760

 
$
71,524

 
$
(30,649
)
 
$
487,301

 
$
7,120,010

Net income
 
6,932

 
11,212

 
 

 
76,370

 
 

 
1,909

 
 

 
8,806

 
105,229

Other comprehensive income
 
 

 
 

 
 

 
 

 
 

 
 

 
10,828

 
 

 
10,828

Preferred distributions
 
(6,932
)
 
(11,212
)
 
 

 
 

 
 

 
 

 
 

 
 

 
(18,144
)
DRIP proceeds
 
 

 
 

 
 

 
57

 
 

 
 

 
 

 
 

 
57

Conversion of units
 
 

 
 

 
224

 
17,287

 
(224
)
 
(17,287
)
 
 

 
 

 

Issuance of units
 
 

 
 

 
 

 
 

 
256

 
14,270

 
 

 
 

 
14,270

Deferred compensation plan
 
 
 
 
 
10

 
434

 
 
 
 
 
 
 
 
 
434

Amortization of deferred compensation plan
 
 

 
 

 


 
19,702

 
 

 
 

 
 

 
 

 
19,702

Redemption of preferred units
 
(180,340
)
 
 

 
 

 
(12,160
)
 
 

 
 

 
 

 
 

 
(192,500
)
Preferred units issuance costs
 
 

 
(33
)
 
 

 
 

 
 

 
 

 
 

 
 

 
(33
)
Contributions - net proceeds from common stock offering
 
 

 
 

 
462

 
41,791

 
 

 
 

 
 

 
 

 
41,791

Contributions - treasury shares
 
 

 
 

 
83

 
6,090