SLG-2014.03.31-10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________
FORM 10-Q
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x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2014 |
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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.)
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SL GREEN REALTY CORP.
SL GREEN OPERATING PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
___________________________________________
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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.
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Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller Reporting Company o |
| | (Do not check if a smaller reporting company) | |
SL Green Operating Partnership, L.P.
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Large accelerated filer o | Accelerated filer o | Non-accelerated filer x | Smaller Reporting Company o |
| | (Do not check if a smaller reporting company) | |
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 95,438,817 as of April 30, 2014. As of April 30, 2014, 876,199 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 March 31, 2014 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, L.P. 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 Maryland corporation which operates as a self-administered and self-managed real estate investment trust, or 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 96.95% of the outstanding general and limited partnership interest in the Operating Partnership. The Company also owns 9,200,000 Series I Preferred Units of the Operating Partnership. As of March 31, 2014, noncontrolling investors held, in aggregate, a 3.05% 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:
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• | 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; |
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• | 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 |
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• | 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:
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• | consolidated financial statements; |
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• | the following notes to the consolidated financial statements: |
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◦ | Note 10, Noncontrolling Interest on the Company’s Consolidated Financial Statements; |
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◦ | Note 11, Stockholders' Equity of the Company; |
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◦ | Note 12, Partners' Capital of the Operating Partnership; |
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◦ | Note 14, Accumulated Other Comprehensive Loss of the Company; and |
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◦ | Note 15, 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.
SL GREEN REALTY CORP. AND SL GREEN OPERATING PARTNERSHIP, L.P.
TABLE OF CONTENTS
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PART I. | FINANCIAL INFORMATION | |
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| FINANCIAL STATEMENTS OF SL GREEN REALTY CORP. | |
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| FINANCIAL STATEMENTS OF SL GREEN OPERATING PARTNERSHIP, L.P. | |
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PART II | OTHER INFORMATION | |
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
SL Green Realty Corp.
Consolidated Balance Sheets
(in thousands, except per share data) |
| | | | | | | |
| March 31, 2014 | | December 31, 2013 |
| (unaudited) | | |
Assets | | | |
Commercial real estate properties, at cost: | | | |
Land and land interests | $ | 3,112,013 |
| | $ | 3,032,526 |
|
Building and improvements | 7,767,616 |
| | 7,884,663 |
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Building leasehold and improvements | 1,375,007 |
| | 1,366,281 |
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Properties under capital lease | 27,445 |
| | 50,310 |
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| 12,282,081 |
| | 12,333,780 |
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Less: accumulated depreciation | (1,695,568 | ) | | (1,646,240 | ) |
| 10,586,513 |
| | 10,687,540 |
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Assets held for sale | 63,925 |
| | — |
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Cash and cash equivalents | 447,162 |
| | 206,692 |
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Restricted cash | 154,492 |
| | 142,051 |
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Investment in marketable securities | 32,130 |
| | 32,049 |
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Tenant and other receivables, net of allowance of $18,627 and $17,325 in 2014 and 2013, respectively | 47,296 |
| | 60,393 |
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Related party receivables | 19,947 |
| | 8,530 |
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Deferred rents receivable, net of allowance of $27,939 and $30,333 in 2014 and 2013, respectively | 378,980 |
| | 386,508 |
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Debt and preferred equity investments, net of discounts and deferred origination fees of $17,751 and $18,593 in 2014 and 2013, respectively, and allowance of $1,000 in 2013 | 1,493,725 |
| | 1,304,839 |
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Investments in unconsolidated joint ventures | 1,061,704 |
| | 1,113,218 |
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Deferred costs, net | 261,542 |
| | 267,058 |
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Other assets | 815,873 |
| | 750,123 |
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Total assets | $ | 15,363,289 |
| | $ | 14,959,001 |
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Liabilities | | | |
Mortgages and other loans payable | $ | 4,971,022 |
| | $ | 4,860,578 |
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Revolving credit facility | — |
| | 220,000 |
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Term loan and senior unsecured notes | 2,124,397 |
| | 1,739,330 |
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Accrued interest payable and other liabilities | 112,852 |
| | 114,622 |
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Accounts payable and accrued expenses | 140,346 |
| | 145,889 |
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Deferred revenue | 259,929 |
| | 263,261 |
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Capitalized lease obligations | 20,541 |
| | 47,671 |
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Deferred land leases payable | 958 |
| | 22,185 |
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Dividend and distributions payable | 52,471 |
| | 52,255 |
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Security deposits | 65,077 |
| | 61,308 |
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Liabilities related to assets held for sale | 49,704 |
| | — |
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Junior subordinate deferrable interest debentures held by trusts that issued trust preferred securities | 100,000 |
| | 100,000 |
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Total liabilities | 7,897,297 |
| | 7,627,099 |
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Commitments and contingencies | — |
| | — |
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Noncontrolling interests in Operating Partnership | 298,858 |
| | 265,476 |
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Series G Preferred Units, $25.00 liquidation preference, 1,902 issued and outstanding at both March 31, 2014 and December 31, 2013 | 47,550 |
| | 47,550 |
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Series H Preferred Units, $25.00 liquidation preference, 80 issued and outstanding at both March 31, 2014 and December 31, 2013 | 2,000 |
| | 2,000 |
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SL Green Realty Corp.
Consolidated Balance Sheets (cont.)
(in thousands, except per share data)
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| March 31, 2014 | | December 31, 2013 |
| (unaudited) | | |
Equity | | | |
SL Green stockholders' equity: | | | |
Series I Preferred Stock, $0.01 par value, $25.00 liquidation preference, 9,200 issued and outstanding at both March 31, 2014 and December 31, 2013 | 221,932 |
| | 221,932 |
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Common stock, $0.01 par value, 160,000 shares authorized and 98,919 and 98,563 issued and outstanding at March 31, 2014 and December 31, 2013, respectively (including 3,600 and 3,570 shares held in Treasury at March 31, 2014 and December 31, 2013, respectively) | 990 |
| | 986 |
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Additional paid-in-capital | 5,049,507 |
| | 5,015,904 |
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Treasury stock at cost | (320,076 | ) | | (317,356 | ) |
Accumulated other comprehensive loss | (14,872 | ) | | (15,211 | ) |
Retained earnings | 1,688,211 |
| | 1,619,150 |
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Total SL Green stockholders' equity | 6,625,692 |
| | 6,525,405 |
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Noncontrolling interests in other partnerships | 491,892 |
| | 491,471 |
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Total equity | 7,117,584 |
| | 7,016,876 |
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Total liabilities and equity | $ | 15,363,289 |
| | $ | 14,959,001 |
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The accompanying notes are an integral part of these financial statements.
SL Green Realty Corp.
Consolidated Statements of Income
(unaudited, in thousands, except per share data)
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| Three Months Ended March 31, |
| 2014 | | 2013 |
Revenues | | | |
Rental revenue, net | $ | 272,079 |
| | $ | 261,675 |
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Escalation and reimbursement | 40,383 |
| | 39,804 |
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Investment income | 54,084 |
| | 52,708 |
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Other income | 14,582 |
| | 5,766 |
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Total revenues | 381,128 |
| | 359,953 |
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Expenses | | | |
Operating expenses, including $3,411 (2014) and $3,889 (2013) of related party expenses | 73,486 |
| | 71,170 |
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Real estate taxes | 55,316 |
| | 52,444 |
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Ground rent | 8,033 |
| | 8,128 |
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Interest expense, net of interest income | 80,180 |
| | 80,775 |
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Amortization of deferred financing costs | 3,868 |
| | 4,463 |
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Depreciation and amortization | 89,379 |
| | 78,623 |
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Transaction related costs, net of recoveries | 2,474 |
| | 1,358 |
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Marketing, general and administrative | 23,257 |
| | 21,067 |
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Total expenses | 335,993 |
| | 318,028 |
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Income from continuing operations before equity in net income from unconsolidated joint ventures, equity in net gain on sale of interest in unconsolidated joint venture/real estate, loss on sale of investment in marketable securities and gain (loss) on early extinguishment of debt | 45,135 |
| | 41,925 |
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Equity in net income from unconsolidated joint ventures | 6,128 |
| | 5,073 |
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Equity in net gain on sale of interest in unconsolidated joint venture/real estate | 104,640 |
| | — |
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Loss on sale of investment in marketable securities | — |
| | (57 | ) |
Gain (loss) on early extinguishment of debt | 3 |
| | (18,513 | ) |
Income from continuing operations | 155,906 |
| | 28,428 |
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Net income from discontinued operations | 706 |
| | 796 |
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Gain on sale of discontinued operations | — |
| | 1,113 |
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Net income | 156,612 |
| | 30,337 |
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Net income attributable to noncontrolling interests: | | | |
Noncontrolling interests in the Operating Partnership | (4,729 | ) | | (555 | ) |
Noncontrolling interests in other partnerships | (1,490 | ) | | (2,901 | ) |
Preferred units distribution | (565 | ) | | (565 | ) |
Net income attributable to SL Green | 149,828 |
| | 26,316 |
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Perpetual preferred stock dividends | (3,738 | ) | | (7,407 | ) |
Net income attributable to SL Green common stockholders | $ | 146,090 |
| | $ | 18,909 |
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Amounts attributable to SL Green common stockholders: | | | |
Income from continuing operations | $ | 44,047 |
| | $ | 17,055 |
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Equity in net gain on sale of interest in unconsolidated joint venture/real estate | 101,359 |
| | — |
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Net income from discontinued operations | 684 |
| | 773 |
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Gain on sale of discontinued operations | — |
| | 1,081 |
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Net income | $ | 146,090 |
| | $ | 18,909 |
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SL Green Realty Corp.
Consolidated Statements of Income (cont.)
(unaudited, in thousands, except per share data)
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| Three Months Ended March 31, |
| 2014 | | 2013 |
Basic earnings per share: | | | |
Income from continuing operations before gains on sale and discontinued operations | $ | 0.46 |
| | $ | 0.19 |
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Equity in net gain on sale of interest in unconsolidated joint venture/real estate | 1.07 |
| | — |
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Net income from discontinued operations | 0.01 |
| | 0.01 |
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Gain on sale of discontinued operations | — |
| | 0.01 |
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Net income attributable to SL Green common stockholders | $ | 1.54 |
| | $ | 0.21 |
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Diluted earnings per share: | | | |
Income from continuing operations before gains on sale and discontinued operations | $ | 0.46 |
| | $ | 0.19 |
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Equity in net gain on sale of interest in unconsolidated joint venture/real estate | 1.06 |
| | — |
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Net income from discontinued operations | 0.01 |
| | 0.01 |
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Gain on sale of discontinued operations | — |
| | 0.01 |
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Net income attributable to SL Green common stockholders | $ | 1.53 |
| | $ | 0.21 |
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Dividends per share | $ | 0.50 |
| | $ | 0.33 |
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Basic weighted average common shares outstanding | 95,117 |
| | 91,399 |
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Diluted weighted average common shares and common share equivalents outstanding | 98,716 |
| | 94,302 |
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The accompanying notes are an integral part of these financial statements.
SL Green Realty Corp.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)
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| Three Months Ended March 31, |
| 2014 | | 2013 |
Net income | $ | 156,612 |
| | $ | 30,337 |
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Other comprehensive income: | | | |
Change in net unrealized gain on derivative instruments, including SL Green's share of joint venture net unrealized gain on derivative instruments | 168 |
| | 1,888 |
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Change in unrealized gain on marketable securities | 129 |
| | 1,641 |
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Other comprehensive income | 297 |
| | 3,529 |
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Comprehensive income | 156,909 |
| | 33,866 |
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Net income attributable to noncontrolling interests | (6,784 | ) | | (4,021 | ) |
Other comprehensive loss (income) attributable to noncontrolling interests | 42 |
| | (59 | ) |
Comprehensive income attributable to SL Green | $ | 150,167 |
| | $ | 29,786 |
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The accompanying notes are an integral part of these financial statements.
SL Green Realty Corp.
Consolidated Statement of Equity
(unaudited, in thousands, except per share data) |
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| | SL Green Realty Corp. Stockholders | | |
| | | Common Stock | | | | | | | | | | | | |
| Series I Preferred Stock | | Number of Shares | | Par Value | | Additional Paid-In Capital | | Treasury Stock | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Noncontrolling Interests | | Total |
Balance at December 31, 2013 | | $ | 221,932 |
| | 94,993 |
| | $ | 986 |
| | $ | 5,015,904 |
| | $ | (317,356 | ) | | $ | (15,211 | ) | | $ | 1,619,150 |
| | $ | 491,471 |
| | $ | 7,016,876 |
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Net income | | | | | | | | | | | | |
| | 149,828 |
| | 1,490 |
| | 151,318 |
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Other comprehensive income | | | | | | | | | | | | 339 |
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| | | | 339 |
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Preferred dividends | | | | | | | | | | | | | | (3,738 | ) | | | | (3,738 | ) |
DRIP proceeds | | | |
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| | 15 |
| | | | | | | | | | 15 |
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Conversion of units of the Operating Partnership to common stock | | | | 168 |
| | 2 |
| | 16,581 |
| | | | | | | | | | 16,583 |
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Reallocation of noncontrolling interest in the Operating Partnership | | | | | | | | | | | | | | (29,464 | ) | | | | (29,464 | ) |
Deferred compensation plan and stock award, net | | | | 2 |
| | — |
| | 1,295 |
| | (2,720 | ) | | | | | | | | (1,425 | ) |
Amortization of deferred compensation plan | | | | | | | | 6,713 |
| | | | | | | | | | 6,713 |
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Issuance of common stock | | | | — |
| | — |
| | 24 |
| | | | | | | | | | 24 |
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Proceeds from stock options exercised | | | | 156 |
| | 2 |
| | 8,975 |
| | | | | | | | | | 8,977 |
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Contributions to consolidated joint venture interest | | | | | | | | | | | | | | | | 517 |
| | 517 |
|
Cash distributions to noncontrolling interests | | | | | | | | | | | | | | | | (1,586 | ) | | (1,586 | ) |
Cash distributions declared ($0.50 per common share, none of which represented a return of capital for federal income tax purposes) | | | | | | | | | | | | | | (47,565 | ) | | | | (47,565 | ) |
Balance at March 31, 2014 | | $ | 221,932 |
| | 95,319 |
| | $ | 990 |
| | $ | 5,049,507 |
| | $ | (320,076 | ) | | $ | (14,872 | ) | | $ | 1,688,211 |
| | $ | 491,892 |
| | $ | 7,117,584 |
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The accompanying notes are an integral part of these financial statements.
SL Green Realty Corp.
Consolidated Statements of Cash Flows
(unaudited, in thousands, except per share data) |
| | | | | | | |
| Three Months Ended March 31, |
| 2014 | | 2013 |
Operating Activities | | | |
Net income | $ | 156,612 |
| | $ | 30,337 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 93,680 |
| | 85,146 |
|
Equity in net income from unconsolidated joint ventures | (6,128 | ) | | (5,073 | ) |
Distributions of cumulative earnings from unconsolidated joint ventures | 7,669 |
| | 6,901 |
|
Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate | (104,640 | ) | | — |
|
Gain on sale of discontinued operations | — |
| | (1,113 | ) |
(Gain) loss on early extinguishment of debt | (3 | ) | | 10,958 |
|
Deferred rents receivable | (11,133 | ) | | (13,923 | ) |
Other non-cash adjustments | (12,792 | ) | | (24,028 | ) |
Changes in operating assets and liabilities: | | | |
Restricted cash—operations | (10,520 | ) | | 5,447 |
|
Tenant and other receivables | 11,899 |
| | 7,409 |
|
Related party receivables | (11,885 | ) | | (3,638 | ) |
Deferred lease costs | (4,476 | ) | | (4,646 | ) |
Other assets | (32,949 | ) | | (21,185 | ) |
Accounts payable, accrued expenses and other liabilities and security deposits | (1,821 | ) | | 869 |
|
Deferred revenue and deferred land leases payable | 14,635 |
| | 16,095 |
|
Net cash provided by operating activities | 88,148 |
| | 89,556 |
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Investing Activities | | | |
Acquisitions of real estate property | — |
| | (48,500 | ) |
Additions to land, buildings and improvements | (48,213 | ) | | (11,617 | ) |
Escrowed cash—capital improvements/acquisition deposits | (34,861 | ) | | 191 |
|
Investments in unconsolidated joint ventures | (18,966 | ) | | (49,996 | ) |
Distributions in excess of cumulative earnings from unconsolidated joint ventures | 72,558 |
| | 5,333 |
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Net proceeds from disposition of real estate/joint venture interest | 109,196 |
| | 5,852 |
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Other investments | (1,573 | ) | | (10,146 | ) |
Origination of debt and preferred equity investments | (150,464 | ) | | (195,004 | ) |
Repayments or redemption of debt and preferred equity investments | 522 |
| | 134,811 |
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Net cash used in investing activities | (71,801 | ) | | (169,076 | ) |
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SL Green Realty Corp.
Consolidated Statements of Cash Flows (cont.)
(unaudited, in thousands, except per share data)
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| Three Months Ended March 31, |
| 2014 | | 2013 |
Financing Activities | | | |
Proceeds from mortgages and other loans payable | 121,216 |
| | 980,333 |
|
Repayments of mortgages and other loans payable | (10,772 | ) | | (780,332 | ) |
Proceeds from revolving credit facility, term loan and senior unsecured notes | 603,000 |
| | 155,000 |
|
Repayments of revolving credit facility, term loan and senior unsecured notes | (440,690 | ) | | (199,960 | ) |
Proceeds from stock options exercised and DRIP issuance | 8,992 |
| | 4,546 |
|
Net proceeds from sale of common stock | 24 |
| | (24 | ) |
Net proceeds from sale of preferred stock | — |
| | (33 | ) |
Distributions to noncontrolling interests in other partnerships | (1,586 | ) | | (4,879 | ) |
Contributions from noncontrolling interests in other partnerships | 517 |
| | 3,110 |
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Distributions to noncontrolling interests in the Operating Partnership | (1,500 | ) | | (853 | ) |
Dividends paid on common and preferred stock | (51,652 | ) | | (38,591 | ) |
Deferred loan costs and capitalized lease obligation | (3,426 | ) | | (8,677 | ) |
Net cash provided by financing activities | 224,123 |
| | 109,640 |
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Net increase in cash and cash equivalents | 240,470 |
| | 30,120 |
|
Cash and cash equivalents at beginning of period | 206,692 |
| | 189,984 |
|
Cash and cash equivalents at end of period | $ | 447,162 |
| | $ | 220,104 |
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Supplemental Disclosure of Non-Cash Investing and Financing Activities: | | | |
Issuance of common stock as deferred compensation | $ | 1,295 |
| | $ | — |
|
Issuance of units in the Operating Partnership | 17,314 |
| | 777 |
|
Redemption of units in the Operating Partnership | 16,583 |
| | 17,287 |
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Derivative instruments at fair value | 110 |
| | 128 |
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Tenant improvements and capital expenditures payable | 9,898 |
| | 9,136 |
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Fair value adjustment to noncontrolling interest in the Operating Partnership | 29,464 |
| | 24,016 |
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Capital leased asset | — |
| | 6,839 |
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Transfer to net assets held for sale | 63,925 |
| | — |
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Transfer to liabilities related to net assets held for sale | 49,704 |
| | — |
|
Transfer of financing receivable to debt investment | 19,675 |
| | — |
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The accompanying notes are an integral part of these financial statements.
SL Green Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands, except per unit data)
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| | | | | | | | |
| | March 31, 2014 | | December 31, 2013 |
| | (unaudited) | | |
Assets | | | | |
Commercial real estate properties, at cost: | | | | |
Land and land interests | | $ | 3,112,013 |
| | $ | 3,032,526 |
|
Building and improvements | | 7,767,616 |
| | 7,884,663 |
|
Building leasehold and improvements | | 1,375,007 |
| | 1,366,281 |
|
Properties under capital lease | | 27,445 |
| | 50,310 |
|
| | 12,282,081 |
| | 12,333,780 |
|
Less: accumulated depreciation | | (1,695,568 | ) | | (1,646,240 | ) |
| | 10,586,513 |
| | 10,687,540 |
|
Assets held for sale | | 63,925 |
| | — |
|
Cash and cash equivalents | | 447,162 |
| | 206,692 |
|
Restricted cash | | 154,492 |
| | 142,051 |
|
Investment in marketable securities | | 32,130 |
| | 32,049 |
|
Tenant and other receivables, net of allowance of $18,627 and $17,325 in 2014 and 2013, respectively | | 47,296 |
| | 60,393 |
|
Related party receivables | | 19,947 |
| | 8,530 |
|
Deferred rents receivable, net of allowance of $27,939 and $30,333 in 2014 and 2013, respectively | | 378,980 |
| | 386,508 |
|
Debt and preferred equity investments, net of discount and deferred origination fees of $17,751 and $18,593 in 2013 and 2014, respectively, and allowance of $1,000 in 2013 | | 1,493,725 |
| | 1,304,839 |
|
Investments in unconsolidated joint ventures | | 1,061,704 |
| | 1,113,218 |
|
Deferred costs, net | | 261,542 |
| | 267,058 |
|
Other assets | | 815,873 |
| | 750,123 |
|
Total assets | | $ | 15,363,289 |
| | $ | 14,959,001 |
|
Liabilities | | | | |
Mortgages and other loans payable | | $ | 4,971,022 |
| | $ | 4,860,578 |
|
Revolving credit facility | | — |
| | 220,000 |
|
Term loan and senior unsecured notes | | 2,124,397 |
| | 1,739,330 |
|
Accrued interest payable and other liabilities | | 112,852 |
| | 114,622 |
|
Accounts payable and accrued expenses | | 140,346 |
| | 145,889 |
|
Deferred revenue | | 259,929 |
| | 263,261 |
|
Capitalized lease obligations | | 20,541 |
| | 47,671 |
|
Deferred land leases payable | | 958 |
| | 22,185 |
|
Dividend and distributions payable | | 52,471 |
| | 52,255 |
|
Security deposits | | 65,077 |
| | 61,308 |
|
Liabilities related to assets held for sale | | 49,704 |
| | — |
|
Junior subordinate deferrable interest debentures held by trusts that issued trust preferred securities | | 100,000 |
| | 100,000 |
|
Total liabilities | | 7,897,297 |
| | 7,627,099 |
|
Commitments and contingencies | | — |
| | — |
|
Series G Preferred Units, $25.00 liquidation preference, 1,902 issued and outstanding at both March 31, 2014 and December 31, 2013 | | 47,550 |
| | 47,550 |
|
Series H Preferred Units, $25.00 liquidation preference, 80 issued and outstanding at both March 31, 2014 and December 31, 2013 | | 2,000 |
| | 2,000 |
|
SL Green Operating Partnership, L.P.
Consolidated Balance Sheets (cont.)
(in thousands, except per share data)
|
| | | | | | | | |
| | March 31, 2014 | | December 31, 2013 |
| | (unaudited) | | |
Capital | | | | |
SLGOP partners' capital: | | | | |
Series I Preferred Units, $25.00 liquidation preference, 9,200 outstanding at both March 31, 2014 and December 31, 2013 | | 221,932 |
| | 221,932 |
|
SL Green partners' capital 984 and 979 general partner common units and 94,335 and 94,014 limited partner common units outstanding at March 31, 2014 and December 31, 2013, respectively) | | 6,636,159 |
| | 6,506,747 |
|
Limited partner interests in SLGOP (3,000 and 2,902 limited partner common units outstanding at March 31, 2014 and December 31, 2013, respectively) | | 81,824 |
| | 77,864 |
|
Accumulated other comprehensive loss | | (15,365 | ) | | (15,662 | ) |
Total SLGOP partners' capital | | 6,924,550 |
| | 6,790,881 |
|
Noncontrolling interests in other partnerships | | 491,892 |
| | 491,471 |
|
Total capital | | 7,416,442 |
| | 7,282,352 |
|
Total liabilities and capital | | $ | 15,363,289 |
| | $ | 14,959,001 |
|
The accompanying notes are an integral part of these financial statements.
SL Green Operating Partnership, L.P.
Consolidated Statements of Income
(unaudited, in thousands except per unit amounts)
|
| | | | | | | | |
| | Three Months Ended March 31, |
| | 2014 | | 2013 |
Revenues | | | | |
Rental revenue, net | | $ | 272,079 |
| | $ | 261,675 |
|
Escalation and reimbursement | | 40,383 |
| | 39,804 |
|
Investment income | | 54,084 |
| | 52,708 |
|
Other income | | 14,582 |
| | 5,766 |
|
Total revenues | | 381,128 |
| | 359,953 |
|
Expenses | | | | |
Operating expenses, including $3,411 (2014) and $3,889 (2013) of related party expenses | | 73,486 |
| | 71,170 |
|
Real estate taxes | | 55,316 |
| | 52,444 |
|
Ground rent | | 8,033 |
| | 8,128 |
|
Interest expense, net of interest income | | 80,180 |
| | 80,775 |
|
Amortization of deferred financing costs | | 3,868 |
| | 4,463 |
|
Depreciation and amortization | | 89,379 |
| | 78,623 |
|
Transaction related costs, net of recoveries | | 2,474 |
| | 1,358 |
|
Marketing, general and administrative | | 23,257 |
| | 21,067 |
|
Total expenses | | 335,993 |
| | 318,028 |
|
Income from continuing operations before equity in net income from unconsolidated joint ventures, equity in net gain on sale of interest in unconsolidated joint venture/real estate, loss on sale of investment in marketable securities and gain (loss) on early extinguishment of debt | | 45,135 |
| | 41,925 |
|
Equity in net income from unconsolidated joint ventures | | 6,128 |
| | 5,073 |
|
Equity in net gain on sale of interest in unconsolidated joint venture/real estate | | 104,640 |
| | — |
|
Loss on sale of investment in marketable securities | | — |
| | (57 | ) |
Gain (loss) on early extinguishment of debt | | 3 |
| | (18,513 | ) |
Income from continuing operations | | 155,906 |
| | 28,428 |
|
Net income from discontinued operations | | 706 |
| | 796 |
|
Gain on sale of discontinued operations | | — |
| | 1,113 |
|
Net income | | 156,612 |
| | 30,337 |
|
Net income attributable to noncontrolling interests in other partnerships | | (1,490 | ) | | (2,901 | ) |
Preferred unit distributions | | (565 | ) | | (565 | ) |
Net income attributable to SLGOP | | 154,557 |
| | 26,871 |
|
Perpetual preferred unit distributions | | (3,738 | ) | | (7,407 | ) |
Net income attributable to SLGOP common unitholders | | $ | 150,819 |
| | $ | 19,464 |
|
Amounts attributable to SLGOP common unitholders: | | | | |
Income from continuing operations | | $ | 45,473 |
| | $ | 17,555 |
|
Equity in net gain on sale of interest in unconsolidated joint venture/real estate | | 104,640 |
| | — |
|
Net income from discontinued operations | | 706 |
| | 796 |
|
Gain on sale of discontinued operations | | — |
| | 1,113 |
|
Net income | | $ | 150,819 |
| | $ | 19,464 |
|
| | | | |
SL Green Operating Partnership, L.P.
Consolidated Statements of Income
(unaudited, in thousands except per unit amounts)
|
| | | | | | | | |
| | Three Months Ended March 31, |
| | 2014 | | 2013 |
Basic earnings per unit: | | | | |
Income from continuing operations before gains on sale and discontinued operations | | $ | 0.46 |
| | $ | 0.19 |
|
Equity in net gain on sale of interest in unconsolidated joint venture/real estate | | 1.07 |
| | — |
|
Net income from discontinued operations | | 0.01 |
| | 0.01 |
|
Gain on sale of discontinued operations | | — |
| | 0.01 |
|
Net income attributable to SLGOP common unitholders | | $ | 1.54 |
| | $ | 0.21 |
|
Diluted earnings per unit: | | | | |
Income from continuing operations before gains on sale and discontinued operations | | $ | 0.46 |
| | $ | 0.19 |
|
Equity in net gain on sale of interest in unconsolidated joint venture/real estate | | 1.06 |
| | — |
|
Net income from discontinued operations | | 0.01 |
| | 0.01 |
|
Gain on sale of discontinued operations | | — |
| | 0.01 |
|
Net income attributable to SLGOP common unitholders | | $ | 1.53 |
| | $ | 0.21 |
|
Dividends per unit | | $ | 0.50 |
| | $ | 0.33 |
|
Basic weighted average common units outstanding | | 98,196 |
| | 94,086 |
|
Diluted weighted average common units and common unit equivalents outstanding | | 98,716 |
| | 94,302 |
|
The accompanying notes are an integral part of these financial statements.
SL Green Operating Partnership, L.P.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)
|
| | | | | | | | |
| | Three Months Ended March 31, |
| | 2014 | | 2013 |
Net income | | $ | 156,612 |
| | $ | 30,337 |
|
Other comprehensive income: | | | | |
Change in net unrealized gain on derivative instruments, including SLGOP's share of joint venture net unrealized gain on derivative instruments | | 168 |
| | 1,888 |
|
Change in unrealized gain on marketable securities | | 129 |
| | 1,641 |
|
Other comprehensive income | | 297 |
| | 3,529 |
|
Comprehensive income | | 156,909 |
| | 33,866 |
|
Net income attributable to noncontrolling interests | | (1,490 | ) | | (2,901 | ) |
Comprehensive income attributable to SLGOP | | $ | 155,419 |
| | $ | 30,965 |
|
The accompanying notes are an integral part of these financial statements.
SL Green Operating Partnership, L.P.
Consolidated Statement of Capital
(unaudited, in thousands, except per unit data)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | SL Green Operating Partnership Unitholders | | | | |
| | | | General Partner | | Limited Partners | | | | | | |
| | Series I Preferred Units | | Common Units | | Common Unitholders | | Common Units | | Common Unitholders | | Accumulated Other Comprehensive Income (Loss) | | Noncontrolling Interests | | Total |
Balance at December 31, 2013 | | $ | 221,932 |
| | 94,993 |
| | $ | 6,506,747 |
| | 2,902 |
| | $ | 77,864 |
| | $ | (15,662 | ) | | $ | 491,471 |
| | 7,282,352 |
|
Net income | | 3,738 |
| | |
| | 146,090 |
| | |
| | 4,729 |
| | |
| | 1,490 |
| | 156,047 |
|
Other comprehensive income | | |
| | |
| | |
| | |
| | |
| | 297 |
| | |
| | 297 |
|
Preferred distributions | | (3,738 | ) | | |
| | |
| | |
| | |
| | |
| | |
| | (3,738 | ) |
Issuance of common units | | |
| | |
| | |
| | 235 |
| | 17,314 |
| | |
| | |
| | 17,314 |
|
DRIP proceeds | | |
| | 168 |
| | 15 |
| | |
| | |
| | |
| | |
| | 15 |
|
Redemption of units | | |
| | — |
| | 16,583 |
| | (137 | ) | | (16,583 | ) | | |
| | |
| | — |
|
Deferred compensation plan and stock award, net | | |
| | 2 |
| | (1,425 | ) | |
|
| | |
| | |
| | |
| | (1,425 | ) |
Amortization of deferred compensation plan | | |
| | |
| | 6,713 |
| | |
| | |
| | |
| | |
| | 6,713 |
|
Contribution to consolidated joint venture interest | | |
| | |
| | |
| | |
| | |
| | |
| | 517 |
| | 517 |
|
Contributions—net proceeds from common stock offering | | |
| | — |
| | 24 |
| | |
| | |
| | |
| | |
| | 24 |
|
Contributions—proceeds from stock options exercised | | |
| | 156 |
| | 8,977 |
| | |
| | |
| | |
| | |
| | 8,977 |
|
Cash distributions to noncontrolling interests | | |
| | |
| | |
| | |
| | |
| | |
| | (1,586 | ) | | (1,586 | ) |
Cash distribution declared ($0.50 per common unit, none of which represented a return of capital for federal income tax purposes) | | |
| | |
| | (47,565 | ) | | |
| | (1,500 | ) | | |
| | |
| | (49,065 | ) |
Balance at March 31, 2014 | | $ | 221,932 |
| | 95,319 |
| | $ | 6,636,159 |
| | 3,000 |
| | $ | 81,824 |
| | $ | (15,365 | ) | | $ | 491,892 |
| | $ | 7,416,442 |
|
The accompanying notes are an integral part of these financial statements.
SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
|
| | | | | | | | |
| | Three Months Ended March 31, |
| | 2014 | | 2013 |
Operating Activities | | | | |
Net income | | $ | 156,612 |
| | $ | 30,337 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation and amortization | | 93,680 |
| | 85,146 |
|
Equity in net income from unconsolidated joint ventures | | (6,128 | ) | | (5,073 | ) |
Distributions of cumulative earnings from unconsolidated joint ventures | | 7,669 |
| | 6,901 |
|
Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate | | (104,640 | ) | | — |
|
Gain on sale of discontinued operations | | — |
| | (1,113 | ) |
(Gain) loss on early extinguishment of debt | | (3 | ) | | 10,958 |
|
Deferred rents receivable | | (11,133 | ) | | (13,923 | ) |
Other non-cash adjustments | | (12,792 | ) | | (24,028 | ) |
Changes in operating assets and liabilities: | | | | |
Restricted cash—operations | | (10,520 | ) | | 5,447 |
|
Tenant and other receivables | | 11,899 |
| | 7,409 |
|
Related party receivables | | (11,885 | ) | | (3,638 | ) |
Deferred lease costs | | (4,476 | ) | | (4,646 | ) |
Other assets | | (32,949 | ) | | (21,185 | ) |
Accounts payable, accrued expenses and other liabilities and security deposits | | (1,821 | ) | | 869 |
|
Deferred revenue and deferred land leases payable | | 14,635 |
| | 16,095 |
|
Net cash provided by operating activities | | 88,148 |
| | 89,556 |
|
Investing Activities | | | | |
Acquisitions of real estate property | | — |
| | (48,500 | ) |
Additions to land, buildings and improvements | | (48,213 | ) | | (11,617 | ) |
Escrowed cash—capital improvements/acquisition deposits | | (34,861 | ) | | 191 |
|
Investments in unconsolidated joint ventures | | (18,966 | ) | | (49,996 | ) |
Distributions in excess of cumulative earnings from unconsolidated joint ventures | | 72,558 |
| | 5,333 |
|
Net proceeds from disposition of real estate/joint venture interest | | 109,196 |
| | 5,852 |
|
Other investments | | (1,573 | ) | | (10,146 | ) |
Origination of debt and preferred equity investments | | (150,464 | ) | | (195,004 | ) |
Repayments or redemption of debt and preferred equity investments | | 522 |
| | 134,811 |
|
Net cash used in investing activities | | (71,801 | ) | | (169,076 | ) |
| | | | |
SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows (cont.)
(unaudited, in thousands)
|
| | | | | | | | |
| | Three Months Ended March 31, |
| | 2014 | | 2013 |
Financing Activities | | | | |
Proceeds from mortgages and other loans payable | | 121,216 |
| | 980,333 |
|
Repayments of mortgages and other loans payable | | (10,772 | ) | | (780,332 | ) |
Proceeds from revolving credit facility, term loan and senior unsecured notes | | 603,000 |
| | 155,000 |
|
Repayments of revolving credit facility, term loan and senior unsecured notes | | (440,690 | ) | | (199,960 | ) |
Contributions of proceeds from stock options exercised and DRIP issuance | | 8,992 |
| | 4,546 |
|
Contributions of net proceeds from sale of common stock | | 24 |
| | (24 | ) |
Contributions of net proceeds from sale of preferred stock | | — |
| | (33 | ) |
Distributions to noncontrolling interests in other partnerships | | (1,586 | ) | | (4,879 | ) |
Contributions from noncontrolling interests in other partnerships | | 517 |
| | 3,110 |
|
Distributions paid on common and preferred units | | (53,152 | ) | | (39,444 | ) |
Deferred loan costs and capitalized lease obligation | | (3,426 | ) | | (8,677 | ) |
Net cash provided by financing activities | | 224,123 |
| | 109,640 |
|
Net increase in cash and cash equivalents | | 240,470 |
| | 30,120 |
|
Cash and cash equivalents at beginning of period | | 206,692 |
| | 189,984 |
|
Cash and cash equivalents at end of period | | $ | 447,162 |
| | $ | 220,104 |
|
| | | | |
Supplemental Disclosure of Non-Cash Investing and Financing Activities: | | | | |
Issuance of common stock as deferred compensation | | $ | 1,295 |
| | $ | — |
|
Issuance of units in the Operating Partnership | | 17,314 |
| | 777 |
|
Redemption of units in the Operating Partnership | | 16,583 |
| | 17,287 |
|
Derivative instruments at fair value | | 110 |
| | 128 |
|
Tenant improvements and capital expenditures payable | | 9,898 |
| | 9,136 |
|
Capital leased asset | | — |
| | 6,839 |
|
Transfer to net assets held for sale | | 63,925 |
| | — |
|
Transfer to liabilities related to net assets held for sale | | 49,704 |
| | — |
|
Transfer of financing receivable to debt investment | | 19,675 |
|
| — |
|
The accompanying notes are an integral part of these financial statements.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements
March 31, 2014
(unaudited)
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, a consolidated variable interest entity. All of the management, leasing and construction services with respect to the properties that are wholly-owned by us 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 our operations are conducted through, the Operating Partnership. The Company is the sole managing general partner of the Operating Partnership. As of March 31, 2014, noncontrolling investors held, in the aggregate, a 3.05% limited partnership interest in the Operating Partnership. We refer to these interests as the noncontrolling interests in the Operating Partnership. See Note 10, "Noncontrolling Interests on the Company's Consolidated Financial Statements."
Reckson Associates Realty Corp., or Reckson, and Reckson Operating Partnership, L.P., or ROP, are wholly-owned subsidiaries of the Operating Partnership.
As of March 31, 2014, we owned the following interests in properties in the New York Metropolitan area, primarily in midtown Manhattan, a borough of New York City. Our investments in the New York Metropolitan area also include investments in Brooklyn, Long Island, Westchester County, Connecticut and Northern New Jersey, which are collectively known as the Suburban properties:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Consolidated | | Unconsolidated | | Total |
Location | | Type | | Number of Properties | | | Square Feet | | Number of Properties | | Square Feet | | Number of Properties | | Square Feet | | Weighted Average Occupancy(1) |
Commercial: | | | | | | | | | | | | | | | |
Manhattan | | Office | | 23 |
| | | 17,306,045 |
| | 10 |
| | 6,465,415 |
| | 33 |
| | 23,771,460 |
| | 94.3 | % |
| | Retail | | 7 |
| (2) | | 389,317 |
| | 8 |
| | 432,250 |
| | 15 |
| | 821,567 |
| | 93.0 | % |
| | Development/Redevelopment | | 10 |
| | | 973,790 |
| | 4 |
| | 1,261,482 |
| | 14 |
| | 2,235,272 |
| | 55.0 | % |
| | Fee Interest | | 2 |
| | | 961,400 |
| | — |
| | — |
| | 2 |
| | 961,400 |
| | 100.0 | % |
| | | | 42 |
| | | 19,630,552 |
| | 22 |
| | 8,159,147 |
| | 64 |
| | 27,789,699 |
| | 91.3 | % |
Suburban | | Office | | 27 |
| | | 4,365,400 |
| | 4 |
| | 1,222,100 |
| | 31 |
| | 5,587,500 |
| | 80.9 | % |
| | Retail | | 1 |
| | | 52,000 |
| | — |
| | — |
| | 1 |
| | 52,000 |
| | 100.0 | % |
| | Development/Redevelopment | | 1 |
| | | 85,000 |
| | 1 |
| | 65,641 |
| | 2 |
| | 150,641 |
| | 40.7 | % |
| | | | 29 |
| | | 4,502,400 |
| | 5 |
| | 1,287,741 |
| | 34 |
| | 5,790,141 |
| | 80.0 | % |
Total commercial properties | | 71 |
| | | 24,132,952 |
| | 27 |
| | 9,446,888 |
| | 98 |
| | 33,579,840 |
| | 89.4 | % |
Residential: | | | | | | | | | | | | | | | | | |
Manhattan | | Residential | | 2 |
| (2) | | 653,337 |
| | — |
| | — |
| | 2 |
| | 653,337 |
| | 94.7 | % |
Suburban | | Residential | | 1 |
| | | 66,611 |
| | — |
| | — |
| | 1 |
| | 66,611 |
| | 87.7 | % |
Total residential properties | | 3 |
| | | 719,948 |
| | — |
| | — |
| | 3 |
| | 719,948 |
| | 94.0 | % |
Total portfolio | | 74 |
| | | 24,852,900 |
| | 27 |
| | 9,446,888 |
| | 101 |
| | 34,299,788 |
| | 89.5 | % |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2014
(unaudited)
______________________________________________________________________
| |
(1) | The weighted average occupancy for commercial properties represents the total occupied square feet divided by total available rentable square feet. The weighted average occupancy for residential properties represents the total occupied units divided by total available units. |
| |
(2) | As of March 31, 2014, we owned a building that was comprised of 270,132 square feet of retail space and 222,855 square feet of residential space. For the purpose of this report, we have included the building as part of retail properties and have shown the square footage under its respective classifications. |
As of March 31, 2014, we also managed two office buildings owned by third parties and affiliated companies, which included 708,500 square feet. As of March 31, 2014, we also held debt and preferred equity investments with a book value of $1.5 billion.
Partnership Agreement
In accordance with the partnership agreement of the Operating Partnership, or the Operating Partnership Agreement, the Operating Partnership allocates all distributions and profits and losses in proportion to the percentage of ownership interests of the respective partners. As the managing general partner of the Operating Partnership, we are required to take such reasonable efforts, as determined by us in our sole discretion, to cause the Operating Partnership to distribute sufficient amounts to enable the payment of sufficient dividends by us to minimize any Federal income or excise tax at the Company level. Under the Operating Partnership Agreement, each limited partner has the right to redeem units of limited partnership interests for cash, or if we so elect, for shares of SL Green's common stock on a one-for-one basis.
Basis of Quarterly Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of the financial position of the Company and the Operating Partnership at March 31, 2014 and the results of operations for the periods presented have been included. The operating results for the period presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. These financial statements should be read in conjunction with the financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2013 of the Company and the Operating Partnership.
The balance sheets at December 31, 2013 have been derived from the audited financial statements as of that date but do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
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 or as debt and preferred equity investments. See Note 4, "Debt and Preferred Equity Investments" and Note 5, "Investments in Unconsolidated Joint Ventures." All significant intercompany balances and transactions have been eliminated.
We consolidate a variable interest entity, or VIE, in which we are considered a 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. Included in commercial real estate properties on our consolidated balance sheets as of March 31, 2014 and December 31, 2013 are $603.9 million and $605.9 million, respectively, related to our consolidated VIEs. Included in mortgages and other loans payable on our consolidated balance sheets as of March 31, 2014 and December 31, 2013 are $368.4 million and $370.9 million, respectively, related to our consolidated VIEs.
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 was modified to present earnings and other comprehensive income attributed to controlling and noncontrolling interests.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2014
(unaudited)
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 which party has what rights and whether those rights are protective or participating. For all VIE's, 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 from us, 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 our joint venture. Our joint venture agreements typically contain certain protective rights such as the requirement of 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
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 and without interest charges for consolidated properties) 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 potential impairment when a real estate 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. We do not believe that the values of any of our consolidated properties or properties held for sale were impaired at March 31, 2014.
We allocate the purchase price of real estate to land and building (inclusive of tenant improvements) and, if determined to be material, intangibles, such as the value of above- and below-market leases and origination costs associated with the in-place leases. We depreciate the amount allocated to building (inclusive of tenant improvements) over their estimated useful lives, which generally range from three to 40 years. We amortize the amount allocated to the above- and below-market leases over the remaining term of the associated lease, which generally range from one to 14 years, and record it as either an increase (in the case of below-market leases) or a decrease (in the case of above-market leases) to rental income. We amortize the amount allocated to the values associated with in-place leases over the expected term of the associated lease, which generally ranges from one to 14 years. If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balance of the related intangible will be written off. The tenant improvements and origination costs are amortized as an expense over the remaining life of the lease (or charged against earnings if the lease is terminated prior to its contractual expiration date). We assess fair value of the leases based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. To the extent acquired leases contain fixed rate renewal options that are below market and determined to be material, we amortize such below-market lease value into rental income over the renewal period.
We recognized an increase of $4.8 million and $3.9 million in rental revenue for the three months ended March 31, 2014 and 2013, respectively, for the amortization of aggregate below-market leases in excess of above-market leases and a reduction in lease origination costs, resulting from the allocation of the purchase price of the applicable properties. We recognized a reduction in interest expense for the amortization of the above-market rate mortgages assumed of $1.6 million and $1.3 million for the three months ended March 31, 2014 and 2013, respectively.
In November 2013, we acquired a 492,987 square foot mixed-use residential and commercial property located at 315 West 33rd Street, New York, New York for $386.8 million. Based on our preliminary analysis of the purchase price, we had allocated $116.0 million and $270.8 million to land and building, respectively. During the three months ended March 31, 2014, we finalized the purchase price allocation based on third party appraisal and additional information about facts and circumstances that existed at the acquisition date and reclassified $33.2 million and $7.8 million to values for above- and in-place leases and below-market leases, respectively. These adjustments did not have a material impact to our consolidated statement of income for the three months ended March 31, 2014.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2014
(unaudited)
The following summarizes our identified intangible assets (acquired above-market leases and in-place leases) and intangible liabilities (acquired below-market leases) as of March 31, 2014 and December 31, 2013 (in thousands):
|
| | | | | | | |
| March 31, 2014 | | December 31, 2013 |
Identified intangible assets (included in other assets): | | | |
Gross amount | $ | 779,913 |
| | $ | 746,704 |
|
Accumulated amortization | (364,946 | ) | | (343,339 | ) |
Net | $ | 414,967 |
| | $ | 403,365 |
|
Identified intangible liabilities (included in deferred revenue): | | | |
Gross amount | $ | 679,220 |
| | $ | 671,380 |
|
Accumulated amortization | (446,119 | ) | | (429,138 | ) |
Net | $ | 233,101 |
| | $ | 242,242 |
|
Fair Value Measurements
See Note 16, "Fair Value Measurements."
Investment in Marketable Securities
We invest in marketable securities. At the time of purchase, we are required to designate a security as held-to-maturity, available-for-sale, or trading depending on ability and intent. We do not have any securities designated as held-to-maturity or trading at this time. Securities available-for-sale are reported at fair value pursuant to ASC 820-10, with the net unrealized gains or losses reported as a component of accumulated other comprehensive income or loss. Unrealized losses that are determined to be other-than-temporary are recognized in earnings up to their credit component.
The cost of bonds and marketable securities sold is determined using the specific identification method.
At March 31, 2014 and December 31, 2013, we held the following marketable securities (in thousands):
|
| | | | | | | |
| March 31, 2014 | | December 31, 2013 |
Equity marketable securities | $ | 3,865 |
| | $ | 4,307 |
|
Commercial mortgage-backed securities | 25,028 |
| | 24,419 |
|
Rake bonds | 3,237 |
| | 3,323 |
|
Total marketable securities available-for-sale | $ | 32,130 |
| | $ | 32,049 |
|
Our equity marketable securities represent our investment in Gramercy Property Trust Inc. (NYSE: GPT), or Gramercy. Marc Holliday, our chief executive officer, remains a board member of Gramercy. As we do not have any significant influence over Gramercy, we account for our investment as available-for-sale securities.
The cost basis of the commercial mortgage-backed securities was $23.0 million at both March 31, 2014 and December 31, 2013.
The cost basis of the rake bonds was $3.5 million and $3.6 million at March 31, 2014 and December 31, 2013, respectively. These bonds mature at various times through 2030.
There were no sales of any of our marketable securities during each of the three months ended March 31, 2014 and 2013.
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 venture's projected discounted cash flows. We do not believe that the values of any of our equity investments were impaired at March 31, 2014.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the term of the lease. Rental revenue recognition commences when the tenant takes possession or controls the physical use of the leased space. In order for the tenant to take possession, the leased space must be substantially ready for its intended use. To determine whether the leased space is substantially ready for its intended
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2014
(unaudited)
use, management evaluates whether we are or the tenant is the owner of tenant improvements for accounting purposes. When management concludes that we are the owner of tenant improvements, rental revenue recognition begins when the tenant takes possession of the finished space, which is when such tenant improvements are substantially complete. In certain instances, when management concludes that we are not the owner (the tenant is the owner) of tenant improvements, rental revenue recognition begins when the tenant takes possession of or controls the space. When management concludes that we are the owner of tenant improvements for accounting purposes, we record amounts funded to construct the tenant improvements as a capital asset. For these tenant improvements, we record amounts reimbursed by tenants as a reduction of the capital asset. When management concludes that the tenant is the owner of tenant improvements for accounting purposes, we record our contribution towards those improvements as a lease incentive, which is included in deferred leasing costs on our consolidated balance sheets and amortized as a reduction to rental revenue on a straight-line basis over the term of the lease. The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred rents receivable on the consolidated balance sheets. We establish, on a current basis, an allowance for future potential tenant credit losses, which may occur against this account. The balance reflected on the consolidated balance sheets is net of such allowance.
In addition to base rent, our tenants also generally will pay their pro rata share of increases in real estate taxes and operating expenses for the building over a base year. In some leases, in lieu of paying additional rent based upon increases in building operating expenses, the tenant will pay additional rent based upon increases in the wage rate paid to porters over the porters' wage rate in effect during a base year or increases in the consumer price index over the index value in effect during a base year. In addition, many of our leases contain fixed percentage increases over the base rent to cover escalations. Electricity is most often supplied by the landlord either on a sub-metered basis, or rent inclusion basis (i.e., a fixed fee is included in the rent for electricity, which amount may increase based upon increases in electricity rates or increases in electrical usage by the tenant). Base building services other than electricity (such as heat, air conditioning and freight elevator service during business hours, and base building cleaning) are typically provided at no additional cost, with the tenant paying additional rent only for services which exceed base building services or for services which are provided outside normal business hours. These escalations are based on actual expenses incurred in the prior calendar year. If the expenses in the current year are different from those in the prior year, then during the current year, the escalations will be adjusted to reflect the actual expenses for the current year.
We record a gain on sale of real estate when title is conveyed to the buyer, subject to the buyer's financial commitment being sufficient to provide economic substance to the sale and we have no substantial economic involvement with the buyer.
Interest income on debt and preferred equity investments is accrued based on the outstanding principal amount and contractual terms of the instruments and when, in the opinion of management, it is deemed collectible. Several of the 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 are 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 originations fees and loan origination costs, if any, are recognized as a reduction 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. 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 cashflows 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. Anticipated exit fees, whose collection is expected, are also recognized over the term of the loan as an adjustment to yield.
Debt and preferred equity investments are placed on a non-accrual status at the earlier of the date at which payments become 90 days past due or when, in the opinion of management, a full recovery of interest income becomes doubtful. Interest income recognition on any non-accrual debt or preferred equity investment is resumed when such non-accrual debt or preferred equity investment becomes contractually current and performance is demonstrated to be resumed. Interest is recorded as income on impaired loans only to the extent cash is received.
We may syndicate a portion of the loans that we originate or sell these loans individually. When a transaction meets the criteria of 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, 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
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2014
(unaudited)
on the consolidated statement of income. Any fees received at the time of sale or syndication are recognized as part of investment income.
Reserve for Possible Credit Losses
The expense for possible credit losses in connection with debt and preferred equity investments is the charge to earnings to increase the allowance for possible credit losses to the level that we estimate to be adequate, based on Level 3 data, considering delinquencies, loss experience and collateral quality. Other factors considered relate to geographic trends and product diversification, the size of the portfolio and current economic conditions. Based upon these factors, we establish the provision for possible credit losses on each individual investment. When it is probable that we will be unable to collect all amounts contractually due, the investment is considered impaired.
Where impairment is indicated on an investment that is held to maturity, a valuation allowance is measured based upon the excess of the recorded investment amount over the net fair value of the collateral. Any deficiency between the carrying amount of an asset and the calculated value of the collateral is charged to expense. We continue to assess or adjust our estimates based on circumstances of a loan and the underlying collateral. If the additional information obtained reflects increased recovery of our investment, we will adjust our reserves accordingly. There were no loan reserves recorded during each of the three months ended March 31, 2014 and 2013.
Debt and preferred equity investments 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.
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, we will be subject to Federal income tax on SL Green's 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 SL Green's 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 income relates to the Operating Partnership’s consolidated taxable REIT subsidiaries. The Operating Partnership may also be subject to certain state, local and franchise taxes.
Pursuant to amendments to the Code that became effective January 1, 2001, we have elected, and may elect in the future, to treat certain of our existing or newly created corporate subsidiaries as taxable REIT subsidiaries, or TRSs. In general, a TRS 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 three months ended March 31, 2014 and 2013, we recorded a Federal, state and local tax provision of $2.9 million and $1.6 million, respectively.
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.
Stock-Based Employee Compensation Plans
We have a stock-based employee compensation plan, described more fully in Note 13, "Share-based Compensation."
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2014
(unaudited)
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 ratably 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 the grant date. Awards of stock or restricted stock are expensed as compensation over the benefit period based on the fair value of the stock on the grant date.
For share-based awards with a performance or market measure, we recognize compensation cost over the requisite service period, using the accelerated attribution expense method. The requisite service period begins on the date the compensation committee of SL Green's board of directors authorizes the award, adopts any relevant performance measures and communicates the award to the employees. For programs with performance measures, the total estimated compensation cost is based on the fair value of the award at the applicable reporting date estimated using a binomial model. 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.
Earnings per Share of the Company
The Company presents both basic and diluted earnings per share, or EPS. Basic EPS excludes dilution and is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during 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 is no dilutive effect for the exchangeable senior notes as the conversion premium will be paid in cash.
Earnings per Unit of the Operating Partnership
The Operating Partnership presents both basic and diluted earnings per unit, or EPU. Basic EPU excludes dilution and is computed by dividing net income attributable to common unitholders by the weighted average number of common units outstanding during 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 is no dilutive effect for the exchangeable senior notes as the conversion premium will 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.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2014
(unaudited)
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 in excess of insured amounts with high quality financial institutions. The collateral securing our debt and preferred equity investments is primarily located in New York City. See Note 4, "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 rent and the costs associated with re-tenanting the space. Although the properties in our real estate portfolio are primarily located in Manhattan, we also have properties located in Brooklyn, Long Island, Westchester County, Connecticut and Northern New Jersey. The tenants located in our buildings operate in various industries. Other than three tenants who account for 7.3%, 6.5% and 5.8% of our share of annualized cash rent, respectively, no other tenant in our portfolio accounted for more than 2.0% of our annualized cash rent, including our share of joint venture annualized rent, for the three months ended March 31, 2014. For the three months ended March 31, 2014, 9.7%, 7.4% and 5.9% of our annualized cash rent for consolidated properties was attributable to 1515 Broadway, 1185 Avenue of the Americas and One Madison Avenue, respectively. In addition, one of our preferred equity investments accounted for 13.7% of the income earned on debt and preferred equity investments during the three months ended March 31, 2014.
Reclassification
Certain prior year balances have been reclassified to conform to our current year presentation primarily in order to eliminate discontinued operations from income from continuing operations.
Accounting Standards Updates
In April 2014, the FASB issued new guidance on reporting discontinued operations which raises the threshold for disposals to qualify as discontinued operations. The guidance also allows us to have a significant continuing involvement and continuing cash flows with the discontinued operations. Additionally, the guidance requires additional disclosures for discontinued operations and new disclosures for individually material disposal transactions that do not meet the definition of a discontinued operation. The guidance is effective for calendar year public companies beginning in the first quarter of 2015 and is to be applied on a prospective basis for new disposals. Early adoption of the guidance is permitted. The Company will adopt this standard beginning in the first quarter of 2015. The adoption of this guidance will change the presentation of discontinued operations but will not have a material impact on our consolidated financial statements.
3. Properties Held for Sale and Dispositions
We entered into an agreement to sell our leasehold interest in 673 First Avenue for $145.0 million. This transaction closed in May 2014.
Discontinued operations included the results of operations of real estate assets under contract or sold prior to March 31, 2014. This included 673 First Avenue, which is held for sale, and 44 West 55th Street, 333 West 34th Street and 300 Main Street, which were sold in February, August, and September of 2013, respectively.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2014
(unaudited)
The following table summarizes net income from discontinued operations for the three months ended March 31, 2014 and 2013, respectively (in thousands):
|
| | | | | | | |
| Three Months Ended March 31, |
| 2014 | | 2013 |
Revenues | | | |
Rental revenue | $ | 5,076 |
| | $ | 8,804 |
|
Escalation and reimbursement revenues | 821 |
| | 1,196 |
|
Other income | — |
| | 8 |
|
Total revenues | 5,897 |
| | 10,008 |
|
Operating expenses | 884 |
| | 2,467 |
|
Real estate taxes | 1,019 |
| | 1,254 |
|
Ground rent | 2,196 |
| | 2,863 |
|
Interest expense, net of interest income | 659 |
| | 561 |
|
Depreciation and amortization | 433 |
| | 2,067 |
|
Total expenses | 5,191 |
| | 9,212 |
|
Net income from discontinued operations | $ | 706 |
| | $ | 796 |
|
4. Debt and Preferred Equity Investments
During the three months ended ended March 31, 2014 and 2013, our debt and preferred equity investments, net of discounts and deferred origination fees, increased $189.4 million and $205.2 million, respectively, due to originations, purchases, accretion of reserves, discounts and paid-in-kind interest. We recorded repayments, participations and sales of $0.5 million and $121.9 million, during the three months ended ended March 31, 2014 and 2013, respectively, which offset the increases in debt and preferred equity investments.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2014
(unaudited)
Debt Investments
As of March 31, 2014 and December 31, 2013, we held the following debt investments with an aggregate weighted average current yield of 10.69% at March 31, 2014 (in thousands):
|
| | | | | | | | | | | | | | | | | | |
Loan Type | | March 31, 2014 Funding Commitment | | March 31, 2014 Senior Financing | | March 31, 2014 Carrying Value (1) | | December 31, 2013 Carrying Value (1) | | Initial Maturity Date |
Fixed Rate Investments: | | | | | | | | | | |
Junior Participation | | $ | — |
| | $ | 398,500 |
| | $ | 11,874 |
| | $ | 11,856 |
| | March 2015 |
Mortgage/Mezzanine Loan | | — |
| | 205,000 |
| | 68,892 |
| | 68,319 |
| | |