SLG-2014.09.30-10Q
 
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, 2014
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
Smaller Reporting Company o
 
 
(Do not check if a
smaller reporting company)
 
SL Green Operating Partnership, L.P.
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 96,516,521 as of November 3, 2014. As of November 3, 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 September 30, 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 96.25% 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 September 30, 2014, noncontrolling investors held, in aggregate, a 3.75% 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

PART I.
FINANCIAL INFORMATION
 
 
 
FINANCIAL STATEMENTS OF SL GREEN REALTY CORP.
 
 
 
 
 
 
 
FINANCIAL STATEMENTS OF SL GREEN OPERATING PARTNERSHIP, L.P.
 
 
 
 
 
 
 
PART II
OTHER INFORMATION
 
 


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, 2014
 
December 31, 2013
 
(unaudited)
 
 
Assets
 
 
 
Commercial real estate properties, at cost:
 
 
 
Land and land interests
$
3,833,305

 
$
3,032,526

Building and improvements
8,679,637

 
7,884,663

Building leasehold and improvements
1,405,255

 
1,366,281

Properties under capital lease
27,445

 
50,310

 
13,945,642

 
12,333,780

Less: accumulated depreciation
(1,826,027
)
 
(1,646,240
)
 
12,119,615

 
10,687,540

Assets held for sale
753,457

 

Cash and cash equivalents
253,520

 
206,692

Restricted cash
159,303

 
142,051

Investment in marketable securities
39,293

 
32,049

Tenant and other receivables, net of allowance of $20,719 and $17,325 in 2014 and 2013, respectively
64,184

 
60,393

Related party receivables
13,262

 
8,530

Deferred rents receivable, net of allowance of $27,185 and $30,333 in 2014 and 2013, respectively
364,284

 
386,508

Debt and preferred equity investments, net of discounts and deferred origination fees of $19,801 and $18,593 in 2014 and 2013, respectively, and allowance of $1,000 in 2013
1,432,951

 
1,304,839

Investments in unconsolidated joint ventures
996,842

 
1,113,218

Deferred costs, net
310,860

 
267,058

Other assets
729,538

 
750,123

Total assets
$
17,237,109

 
$
14,959,001

Liabilities
 
 
 
Mortgages and other loans payable
$
5,890,782

 
$
4,860,578

Revolving credit facility
244,000

 
220,000

Term loan and senior unsecured notes
2,054,168

 
1,739,330

Accrued interest payable and other liabilities
127,811

 
114,622

Accounts payable and accrued expenses
183,001

 
145,889

Deferred revenue
215,527

 
263,261

Capitalized lease obligations
20,728

 
47,671

Deferred land leases payable
1,129

 
22,185

Dividend and distributions payable
53,571

 
52,255

Security deposits
66,659

 
61,308

Liabilities related to assets held for sale
461,891

 

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

 
100,000

Total liabilities
9,419,267

 
7,627,099

Commitments and contingencies

 

Noncontrolling interests in the Operating Partnership
381,274

 
265,476

Preferred Units
73,115

 
49,550


5

Table of Contents
SL Green Realty Corp.
Consolidated Balance Sheets (cont.)
(in thousands, except per share data)


 
September 30, 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 September 30, 2014 and December 31, 2013
221,932

 
221,932

Common stock, $0.01 par value, 160,000 shares authorized and 99,547 and 98,563 issued and outstanding at September 30, 2014 and December 31, 2013, respectively (including 3,602 and 3,570 shares held in Treasury at September 30, 2014 and December 31, 2013, respectively)
996

 
986

Additional paid-in-capital
5,130,858

 
5,015,904

Treasury stock at cost
(320,222
)
 
(317,356
)
Accumulated other comprehensive loss
(2,896
)
 
(15,211
)
Retained earnings
1,813,956

 
1,619,150

Total SL Green stockholders' equity
6,844,624

 
6,525,405

Noncontrolling interests in other partnerships
518,829

 
491,471

Total equity
7,363,453

 
7,016,876

Total liabilities and equity
$
17,237,109

 
$
14,959,001

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

6

Table of Contents

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,
 
 
2014
 
2013
 
2014
 
2013
Revenues
 
 
 
 
 
 
 
 
Rental revenue, net
 
$
291,293

 
$
242,439

 
$
826,877

 
$
741,022

Escalation and reimbursement
 
43,826

 
42,026

 
120,209

 
114,850

Investment income
 
43,969

 
44,448

 
137,767

 
143,887

Other income
 
11,186

 
9,869

 
48,498

 
20,855

Total revenues
 
390,274

 
338,782

 
1,133,351

 
1,020,614

Expenses
 
 
 
 
 
 
 
 
Operating expenses, including $5,104 and $13,183 (2014) and $4,698 and $12,858 (2013) of related party expenses
 
72,111

 
72,784

 
211,118

 
205,921

Real estate taxes
 
55,548

 
51,529

 
159,702

 
149,857

Ground rent
 
8,088

 
7,930

 
24,161

 
23,988

Interest expense, net of interest income
 
82,376

 
78,226

 
236,424

 
232,862

Amortization of deferred financing costs
 
6,679

 
4,121

 
15,737

 
12,404

Depreciation and amortization
 
94,443

 
84,162

 
274,337

 
238,666

Transaction related costs, net of recoveries
 
2,383

 
(2,368
)
 
6,554

 
717

Marketing, general and administrative
 
22,649

 
20,869

 
69,778

 
63,450

Total expenses
 
344,277

 
317,253

 
997,811

 
927,865

Income from continuing operations before equity in net income from unconsolidated joint ventures, equity in net gain (loss) on sale of interest in unconsolidated joint venture/real estate, loss on sale of investment in marketable securities, purchase price fair value adjustment and loss on early extinguishment of debt
 
45,997

 
21,529

 
135,540

 
92,749

Equity in net income from unconsolidated joint ventures
 
6,034

 
2,939

 
20,781

 
4,251

Equity in net gain (loss) on sale of interest in unconsolidated joint venture/real estate
 
16,496

 
(354
)
 
122,580

 
(3,937
)
Loss on sale of investment in marketable securities
 

 

 

 
(65
)
Purchase price fair value adjustment
 
(4,000
)
 

 
67,446

 
(2,305
)
Loss on early extinguishment of debt
 
(24,475
)
 

 
(25,500
)
 
(18,523
)
Income from continuing operations
 
40,052

 
24,114

 
320,847

 
72,170

Net income from discontinued operations
 
4,035

 
7,435

 
15,449

 
19,851

Gain on sale of discontinued operations
 
29,507

 
13,787

 
144,242

 
14,900

Net income
 
73,594

 
45,336

 
480,538

 
106,921

Net income attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
Noncontrolling interests in the Operating Partnership
 
(2,636
)
 
(1,110
)
 
(16,010
)
 
(1,909
)
Noncontrolling interests in other partnerships
 
(1,712
)
 
(2,901
)
 
(5,045
)
 
(8,806
)
Preferred units distribution
 
(820
)
 
(562
)
 
(1,950
)
 
(1,692
)
Net income attributable to SL Green
 
68,426

 
40,763

 
457,533

 
94,514

Preferred stock redemption costs
 

 

 

 
(12,160
)
Perpetual preferred stock dividends
 
(3,738
)
 
(3,738
)
 
(11,214
)
 
(18,144
)
Net income attributable to SL Green common stockholders
 
$
64,688

 
$
37,025

 
$
446,319

 
$
64,210

Amounts attributable to SL Green common stockholders:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
20,312

 
$
16,772

 
$
108,710

 
$
36,518

Purchase price fair value adjustment
 
(3,856
)
 

 
65,111

 
(2,239
)
Equity in net gain (loss) on sale of interest in unconsolidated joint venture/real estate
 
15,901

 
(344
)
 
118,336

 
(3,824
)
Net income from discontinued operations
 
3,889

 
7,216

 
14,914

 
19,282

Gain on sale of discontinued operations
 
28,442

 
13,381

 
139,248

 
14,473

Net income attributable to SL Green common stockholders
 
$
64,688

 
$
37,025

 
$
446,319

 
$
64,210

 
 
 
 
 
 
 
 
 

7

Table of Contents
SL Green Realty Corp.
Consolidated Statements of Income (cont.)
(unaudited, in thousands, except per share data)


 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Basic earnings per share:
 
 
 
 
 
 
 
 
Income from continuing operations before gains (loss) on sale and discontinued operations
 
$
0.17

 
$
0.18

 
$
1.82

 
$
0.37

Equity in net gain (loss) on sale of interest in unconsolidated joint venture/real estate
 
0.17

 

 
1.24

 
(0.04
)
Net income from discontinued operations
 
0.04

 
0.07

 
0.16

 
0.21

Gain on sale of discontinued operations
 
0.30

 
0.15

 
1.46

 
0.16

Net income attributable to SL Green common stockholders
 
$
0.68

 
$
0.40

 
$
4.68

 
$
0.70

Diluted earnings per share:
 
 
 
 
 
 
 
 
Income from continuing operations before gains (loss) on sale and discontinued operations
 
$
0.17

 
$
0.18

 
$
1.82

 
$
0.37

Equity in net gain (loss) on sale of interest in unconsolidated joint venture/real estate
 
0.17

 

 
1.23

 
(0.04
)
Net income from discontinued operations
 
0.04

 
0.07

 
0.16

 
0.21

Gain on sale of discontinued operations
 
0.30

 
0.15

 
1.45

 
0.16

Net income attributable to SL Green common stockholders
 
$
0.68

 
$
0.40

 
$
4.66

 
$
0.70

Dividends per share
 
$
0.50

 
$
0.33

 
$
1.50

 
$
0.99

Basic weighted average common shares outstanding
 
95,734

 
91,988

 
95,437

 
91,684

Diluted weighted average common shares and common share equivalents outstanding
 
99,706

 
95,016

 
99,322

 
94,631

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

8

Table of Contents

SL Green Realty Corp.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Net income
 
$
73,594

 
$
45,336

 
$
480,538

 
$
106,921

Other comprehensive income:
 

 

 
 
 
 
Change in net unrealized gain (loss) on derivative instruments, including SL Green's share of joint venture net unrealized gain (loss) on derivative instruments
 
3,919

 
(1,165
)
 
11,380

 
10,522

Change in unrealized (loss) gain on marketable securities
 
(506
)
 
513

 
1,282

 
306

Other comprehensive income (loss)
 
3,413

 
(652
)
 
12,662

 
10,828

Comprehensive income
 
77,007

 
44,684

 
493,200

 
117,749

Net income attributable to noncontrolling interests
 
(5,168
)
 
(4,573
)
 
(23,005
)
 
(12,407
)
Other comprehensive (income) loss attributable to noncontrolling interests
 
(113
)
 
25

 
(347
)
 
(490
)
Comprehensive income attributable to SL Green
 
$
71,726

 
$
40,136

 
$
469,848

 
$
104,852

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


9

Table of Contents

SL Green Realty Corp.
Consolidated Statement of Equity
(unaudited, in thousands, except per share data)
 
 
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

Net income
 
 
 
 
 
 
 
 
 
 
 
 

 
457,533

 
5,045

 
462,578

Other comprehensive income
 
 
 
 
 
 
 
 
 
 
 
12,315

 
 

 
 
 
12,315

Preferred dividends
 
 
 
 
 
 
 
 
 
 
 
 
 
(11,214
)
 
 
 
(11,214
)
DRIP proceeds
 
 
 


 


 
40

 
 
 
 
 
 
 
 
 
40

Conversion of units of the Operating Partnership to common stock
 
 
 
264

 
3

 
26,389

 
 
 
 
 
 
 
 
 
26,392

Reallocation of noncontrolling interest in the Operating Partnership
 
 
 
 
 
 
 
 
 
 
 
 
 
(108,453
)
 
 
 
(108,453
)
Deferred compensation plan and stock award, net
 
 
 
4

 

 
1,503

 
(2,866
)
 
 
 
 
 
 
 
(1,363
)
Amortization of deferred compensation plan
 
 
 
 
 
 
 
23,822

 
 
 
 
 
 
 
 
 
23,822

Issuance of common stock
 
 
 
394

 
4

 
42,694

 
 
 
 
 
 
 
 
 
42,698

Proceeds from stock options exercised
 
 
 
290

 
3

 
20,506

 
 
 
 
 
 
 
 
 
20,509

Contributions to consolidated joint venture interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28,058

 
28,058

Cash distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(5,745
)
 
(5,745
)
Cash distributions declared ($1.50 per common share, none of which represented a return of capital for federal income tax purposes)
 
 
 
 
 
 
 
 
 
 
 
 
 
(143,060
)
 
 
 
(143,060
)
Balance at September 30, 2014
 
$
221,932

 
95,945

 
$
996

 
$
5,130,858

 
$
(320,222
)
 
$
(2,896
)
 
$
1,813,956

 
$
518,829

 
$
7,363,453

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

10

Table of Contents

SL Green Realty Corp.
Consolidated Statements of Cash Flows
(unaudited, in thousands, except per share data)
 
Nine Months Ended September 30,
 
2014
 
2013
Operating Activities
 
 
 
Net income
$
480,538

 
$
106,921

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
295,877

 
264,833

Equity in net income from unconsolidated joint ventures
(20,781
)
 
(4,251
)
Distributions of cumulative earnings from unconsolidated joint ventures
23,065

 
21,723

Equity in net (gain) loss on sale of interest in unconsolidated joint venture interest/real estate
(122,580
)
 
3,937

Purchase price fair value adjustment
(71,446
)
 
2,305

Depreciable real estate reserves

 
2,150

Gain on sale of discontinued operations
(144,242
)
 
(14,900
)
Loss on early extinguishment of debt
25,500

 
10,968

Deferred rents receivable
(43,736
)
 
(44,021
)
Other non-cash adjustments
(13,121
)
 
(31,732
)
Changes in operating assets and liabilities:
 
 
 
Restricted cash—operations
(7,124
)
 
1,254

Tenant and other receivables
(7,336
)
 
(3,018
)
Related party receivables
(5,200
)
 
(187
)
Deferred lease costs
(17,544
)
 
(28,502
)
Other assets
(35,717
)
 
(23,316
)
Accounts payable, accrued expenses and other liabilities and security deposits
17,445

 
23,635

Deferred revenue and deferred land leases payable
23,608

 
22,731

Net cash provided by operating activities
377,206

 
310,530

Investing Activities
 
 
 
Acquisitions of real estate property
(711,437
)
 
(58,185
)
Additions to land, buildings and improvements
(282,947
)
 
(108,849
)
Escrowed cash—capital improvements/acquisition deposits
(67,868
)
 
(246,682
)
Investments in unconsolidated joint ventures
(217,187
)
 
(120,130
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
158,809

 
19,795

Net proceeds from disposition of real estate/joint venture interest
357,426

 
218,701

Proceeds from sale of marketable securities
3,669

 
287

Purchase of marketable securities
(10,025
)
 
(11,492
)
Other investments
15,980

 
(14,874
)
Origination of debt and preferred equity investments
(421,003
)
 
(393,429
)
Repayments or redemption of debt and preferred equity investments
349,320

 
472,317

Net cash used in investing activities
(825,263
)
 
(242,541
)
 
 
 
 

11

Table of Contents
SL Green Realty Corp.
Consolidated Statements of Cash Flows (cont.)
(unaudited, in thousands, except per share data)

 
Nine Months Ended September 30,
 
2014
 
2013
Financing Activities
 
 
 
Proceeds from mortgages and other loans payable
2,001,603

 
980,333

Repayments of mortgages and other loans payable
(1,688,466
)
 
(1,027,201
)
Proceeds from revolving credit facility, term loan and senior unsecured notes
1,136,400

 
844,000

Repayments of revolving credit facility, term loan and senior unsecured notes
(805,988
)
 
(578,970
)
Payment of debt extinguishment costs
(23,332
)
 

Proceeds from stock options exercised and DRIP issuance
20,549

 
10,452

Net proceeds from sale of common stock
42,698

 
41,734

Net proceeds from sale of preferred stock

 
24

Redemption of preferred stock

 
(192,500
)
Sale of treasury stock

 
6,089

Distributions to noncontrolling interests in other partnerships
(5,745
)
 
(11,809
)
Contributions from noncontrolling interests in other partnerships
27,933

 
3,781

Distributions to noncontrolling interests in the Operating Partnership
(5,482
)
 
(2,695
)
Dividends paid on common and preferred stock
(154,907
)
 
(113,192
)
Deferred loan costs and capitalized lease obligation
(50,378
)
 
(8,921
)
Net cash provided by (used in) financing activities
494,885

 
(48,875
)
Net increase in cash and cash equivalents
46,828

 
19,114

Cash and cash equivalents at beginning of period
206,692

 
189,984

Cash and cash equivalents at end of period
$
253,520

 
$
209,098

 
 
 
 
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
 
 
 
Issuance of common stock as deferred compensation
$
1,503

 
$
434

Issuance of units in the Operating Partnership
22,862

 
14,270

Redemption of units in the Operating Partnership
26,392

 
17,287

Issuance of preferred units of limited partnership interest in the Operating Partnership
27,565

 

Fair value adjustment to noncontrolling interest in the Operating Partnership
108,453

 
38,452

Derivative instruments at fair value
12,713

 
494

Tenant improvements and capital expenditures payable
8,456

 
9,855

Capital leased asset

 
9,992

Transfer to net assets held for sale
753,457

 

Transfer to liabilities related to net assets held for sale
461,891

 

Transfer of financing receivable to debt investment
19,675

 

Deferred leasing payable
13,086

 
2,849

Consolidation of real estate
1,316,591

 
90,934

Assumption of mortgage loan

 
84,642

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

12

Table of Contents


SL Green Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands, except per unit data)
 
 
September 30, 2014
 
December 31, 2013
 
 
(unaudited)
 
 
Assets
 
 
 
 
Commercial real estate properties, at cost:
 
 
 
 
Land and land interests
 
$
3,833,305

 
$
3,032,526

Building and improvements
 
8,679,637

 
7,884,663

Building leasehold and improvements
 
1,405,255

 
1,366,281

Properties under capital lease
 
27,445

 
50,310

 
 
13,945,642

 
12,333,780

Less: accumulated depreciation
 
(1,826,027
)
 
(1,646,240
)
 
 
12,119,615

 
10,687,540

Assets held for sale
 
753,457

 

Cash and cash equivalents
 
253,520

 
206,692

Restricted cash
 
159,303

 
142,051

Investment in marketable securities
 
39,293

 
32,049

Tenant and other receivables, net of allowance of $20,719 and $17,325 in 2014 and 2013, respectively
 
64,184

 
60,393

Related party receivables
 
13,262

 
8,530

Deferred rents receivable, net of allowance of $27,185 and $30,333 in 2014 and 2013, respectively
 
364,284

 
386,508

Debt and preferred equity investments, net of discounts and deferred origination fees of $19,801 and $18,593 in 2014 and 2013, respectively, and allowance of $1,000 in 2013
 
1,432,951

 
1,304,839

Investments in unconsolidated joint ventures
 
996,842

 
1,113,218

Deferred costs, net
 
310,860

 
267,058

Other assets
 
729,538

 
750,123

Total assets
 
$
17,237,109

 
$
14,959,001

Liabilities
 
 
 
 
Mortgages and other loans payable
 
$
5,890,782

 
$
4,860,578

Revolving credit facility
 
244,000

 
220,000

Term loan and senior unsecured notes
 
2,054,168

 
1,739,330

Accrued interest payable and other liabilities
 
127,811

 
114,622

Accounts payable and accrued expenses
 
183,001

 
145,889

Deferred revenue
 
215,527

 
263,261

Capitalized lease obligations
 
20,728

 
47,671

Deferred land leases payable
 
1,129

 
22,185

Dividend and distributions payable
 
53,571

 
52,255

Security deposits
 
66,659

 
61,308

Liabilities related to assets held for sale
 
461,891

 

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

 
100,000

Total liabilities
 
9,419,267

 
7,627,099

Commitments and contingencies
 

 

Preferred Units
 
73,115

 
49,550


13

Table of Contents
SL Green Operating Partnership, L.P.
Consolidated Balance Sheets (cont.)
(in thousands, except per share data)


 
 
September 30, 2014
 
December 31, 2013
 
 
(unaudited)
 
 
Capital
 
 
 
 
SLGOP partners' capital:
 
 
 
 
Series I Preferred Units, $25.00 liquidation preference, 9,200 outstanding at both September 30, 2014 and December 31, 2013
 
221,932

 
221,932

SL Green partners' capital 997 and 979 general partner common units and 94,948 and 94,014 limited partner common units outstanding at September 30, 2014 and December 31, 2013, respectively)
 
6,922,104

 
6,506,747

Limited partner interests in SLGOP (3,735 and 2,902 limited partner common units outstanding at September 30, 2014 and December 31, 2013, respectively)
 
84,862

 
77,864

Accumulated other comprehensive loss
 
(3,000
)
 
(15,662
)
Total SLGOP partners' capital
 
7,225,898

 
6,790,881

Noncontrolling interests in other partnerships
 
518,829

 
491,471

Total capital
 
7,744,727

 
7,282,352

Total liabilities and capital
 
$
17,237,109

 
$
14,959,001

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


14

Table of Contents

SL Green Operating Partnership, L.P.
Consolidated Statements of Income
(unaudited, in thousands, except per unit amounts)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Revenues
 
 
 
 
 
 
 
 
Rental revenue, net
 
$
291,293

 
$
242,439

 
$
826,877

 
$
741,022

Escalation and reimbursement
 
43,826

 
42,026

 
120,209

 
114,850

Investment income
 
43,969

 
44,448

 
137,767

 
143,887

Other income
 
11,186

 
9,869

 
48,498

 
20,855

Total revenues
 
390,274

 
338,782

 
1,133,351

 
1,020,614

Expenses
 
 
 
 
 
 
 
 
Operating expenses, including $5,104 and $13,183 (2014) and $4,698 and $12,858 (2013) of related party expenses
 
72,111

 
72,784

 
211,118

 
205,921

Real estate taxes
 
55,548

 
51,529

 
159,702

 
149,857

Ground rent
 
8,088

 
7,930

 
24,161

 
23,988

Interest expense, net of interest income
 
82,376

 
78,226

 
236,424

 
232,862

Amortization of deferred financing costs
 
6,679

 
4,121

 
15,737

 
12,404

Depreciation and amortization
 
94,443

 
84,162

 
274,337

 
238,666

Transaction related costs, net of recoveries
 
2,383

 
(2,368
)
 
6,554

 
717

Marketing, general and administrative
 
22,649

 
20,869

 
69,778

 
63,450

Total expenses
 
344,277

 
317,253

 
997,811

 
927,865

Income from continuing operations before equity in net income from unconsolidated joint ventures, equity in net gain (loss) on sale of interest in unconsolidated joint venture/real estate, loss on sale of investment in marketable securities, purchase price fair value adjustment and loss on early extinguishment of debt
 
45,997

 
21,529

 
135,540

 
92,749

Equity in net income from unconsolidated joint ventures
 
6,034

 
2,939

 
20,781

 
4,251

Equity in net gain (loss) on sale of interest in unconsolidated joint venture/real estate
 
16,496

 
(354
)
 
122,580

 
(3,937
)
Loss on sale of investment in marketable securities
 

 

 

 
(65
)
Purchase price fair value adjustment
 
(4,000
)
 

 
67,446

 
(2,305
)
Loss on early extinguishment of debt
 
(24,475
)
 

 
(25,500
)
 
(18,523
)
Income from continuing operations
 
40,052

 
24,114

 
320,847

 
72,170

Net income from discontinued operations
 
4,035

 
7,435

 
15,449

 
19,851

Gain on sale of discontinued operations
 
29,507

 
13,787

 
144,242

 
14,900

Net income
 
73,594

 
45,336

 
480,538

 
106,921

Net income attributable to noncontrolling interests in other partnerships
 
(1,712
)
 
(2,901
)
 
(5,045
)
 
(8,806
)
Preferred unit distributions
 
(820
)
 
(562
)
 
(1,950
)
 
(1,692
)
Net income attributable to SLGOP
 
71,062

 
41,873

 
473,543

 
96,423

Preferred unit redemption costs
 

 

 

 
(12,160
)
Perpetual preferred unit distributions
 
(3,738
)
 
(3,738
)
 
(11,214
)
 
(18,144
)
Net income attributable to SLGOP common unitholders
 
$
67,324

 
$
38,135

 
$
462,329

 
$
66,119

Amounts attributable to SLGOP common unitholders:
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
21,286

 
$
17,267

 
$
112,612

 
$
37,610

Purchase price fair value adjustment
 
(4,000
)
 

 
67,446

 
(2,305
)
Equity in net gain (loss) on sale of interest in unconsolidated joint venture/real estate
 
16,496

 
(354
)
 
122,580

 
(3,937
)
Net income from discontinued operations
 
4,035

 
7,435

 
15,449

 
19,851

Gain on sale of discontinued operations
 
29,507

 
13,787

 
144,242

 
14,900

Net income attributable to SLGOP common unitholders
 
$
67,324

 
$
38,135

 
$
462,329

 
$
66,119

 
 
 
 
 
 
 
 
 

15

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


 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Basic earnings per unit:
 
 
 
 
 
 
 
 
Income from continuing operations before gains (loss) on sale and discontinued operations
 
$
0.17

 
$
0.18

 
$
1.82

 
$
0.37

Equity in net gain (loss) on sale of interest in unconsolidated joint venture/real estate
 
0.17

 

 
1.24

 
(0.04
)
Net income from discontinued operations
 
0.04

 
0.07

 
0.16

 
0.21

Gain on sale of discontinued operations
 
0.30

 
0.15

 
1.46

 
0.16

Net income attributable to SLGOP common unitholders
 
$
0.68

 
$
0.40

 
$
4.68

 
$
0.70

Diluted earnings per unit:
 
 
 
 
 
 
 
 
Income from continuing operations before gains (loss) on sale and discontinued operations
 
$
0.17

 
$
0.18

 
$
1.82

 
$
0.37

Equity in net gain (loss) on sale of interest in unconsolidated joint venture/real estate
 
0.17

 

 
1.23

 
(0.04
)
Net income from discontinued operations
 
0.04

 
0.07

 
0.16

 
0.21

Gain on sale of discontinued operations
 
0.30

 
0.15

 
1.45

 
0.16

Net income attributable to SLGOP common unitholders
 
$
0.68

 
$
0.40

 
$
4.66

 
$
0.70

Dividends per unit
 
$
0.50

 
$
0.33

 
$
1.50

 
$
0.99

Basic weighted average common units outstanding
 
99,319

 
94,780

 
98,860

 
94,389

Diluted weighted average common units and common unit equivalents outstanding
 
99,706

 
95,016

 
99,322

 
94,631

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

16

Table of Contents

SL Green Operating Partnership, L.P.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014

2013
Net income
 
$
73,594

 
$
45,336

 
$
480,538

 
$
106,921

Other comprehensive income:
 
 
 
 
 
 
 
 
Change in net unrealized gain (loss) on derivative instruments, including SLGOP's share of joint venture net unrealized gain (loss) on derivative instruments
 
3,919

 
(1,165
)
 
11,380

 
10,522

Change in unrealized (loss) gain on marketable securities
 
(506
)
 
513

 
1,282

 
306

Other comprehensive income (loss)
 
3,413

 
(652
)
 
12,662

 
10,828

Comprehensive income
 
77,007

 
44,684

 
493,200

 
117,749

Net income attributable to noncontrolling interests
 
(1,712
)
 
(2,901
)
 
(5,045
)
 
(8,806
)
Comprehensive income attributable to SLGOP
 
$
75,295

 
$
41,783

 
$
488,155

 
$
108,943

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


17

Table of Contents

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
 
11,214

 
 

 
446,319

 
 

 
16,010

 
 

 
5,045

 
478,588

Other comprehensive income
 
 

 
 

 
 

 
 

 
 

 
12,662

 
 

 
12,662

Preferred distributions
 
(11,214
)
 
 

 
 

 
 

 
 

 
 

 
 

 
(11,214
)
Issuance of common units
 
 

 
 

 
 

 
1,097

 
22,862

 
 

 
 

 
22,862

DRIP proceeds
 
 

 

 
40

 
 

 
 

 
 

 
 

 
40

Redemption of units
 
 

 
264

 
26,392

 
(264
)
 
(26,392
)
 
 

 
 

 

Deferred compensation plan and stock award, net
 
 

 
4

 
(1,363
)
 


 
 

 
 

 
 

 
(1,363
)
Amortization of deferred compensation plan
 
 

 
 

 
23,822

 
 

 
 

 
 

 
 

 
23,822

Contribution to consolidated joint venture interest
 
 

 
 

 
 

 
 

 
 

 
 

 
28,058

 
28,058

Contributions—net proceeds from common stock offering
 
 

 
394

 
42,698

 
 

 
 

 
 

 
 

 
42,698

Contributions—proceeds from stock options exercised
 
 

 
290

 
20,509

 
 

 
 

 
 

 
 

 
20,509

Cash distributions to noncontrolling interests
 
 

 
 

 
 

 
 

 
 

 
 

 
(5,745
)
 
(5,745
)
Cash distribution declared ($1.50 per common unit, none of which represented a return of capital for federal income tax purposes)
 
 

 
 

 
(143,060
)
 
 

 
(5,482
)
 
 

 
 

 
(148,542
)
Balance at September 30, 2014
 
$
221,932

 
95,945

 
$
6,922,104

 
3,735

 
$
84,862

 
$
(3,000
)
 
$
518,829

 
$
7,744,727

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

18

Table of Contents

SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
 
 
Nine Months Ended September 30,
 
 
2014
 
2013
Operating Activities
 
 
 
 
Net income
 
$
480,538

 
$
106,921

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
295,877

 
264,833

Equity in net income from unconsolidated joint ventures
 
(20,781
)
 
(4,251
)
Distributions of cumulative earnings from unconsolidated joint ventures
 
23,065

 
21,723

Equity in net (gain) loss on sale of interest in unconsolidated joint venture interest/real estate
 
(122,580
)
 
3,937

Purchase price fair value adjustment
 
(71,446
)
 
2,305

Depreciable real estate reserves
 

 
2,150

Gain on sale of discontinued operations
 
(144,242
)
 
(14,900
)
Loss on early extinguishment of debt
 
25,500

 
10,968

Deferred rents receivable
 
(43,736
)
 
(44,021
)
Other non-cash adjustments
 
(13,121
)
 
(31,732
)
Changes in operating assets and liabilities:
 
 
 
 
Restricted cash—operations
 
(7,124
)
 
1,254

Tenant and other receivables
 
(7,336
)
 
(3,018
)
Related party receivables
 
(5,200
)
 
(187
)
Deferred lease costs
 
(17,544
)
 
(28,502
)
Other assets
 
(35,717
)
 
(23,316
)
Accounts payable, accrued expenses and other liabilities and security deposits
 
17,445

 
23,635

Deferred revenue and deferred land leases payable
 
23,608

 
22,731

Net cash provided by operating activities
 
377,206

 
310,530

Investing Activities
 
 
 
 
Acquisitions of real estate property
 
(711,437
)
 
(58,185
)
Additions to land, buildings and improvements
 
(282,947
)
 
(108,849
)
Escrowed cash—capital improvements/acquisition deposits
 
(67,868
)
 
(246,682
)
Investments in unconsolidated joint ventures
 
(217,187
)
 
(120,130
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
 
158,809

 
19,795

Net proceeds from disposition of real estate/joint venture interest
 
357,426

 
218,701

Proceeds from sale of marketable securities
 
3,669

 
287

Purchase of marketable securities
 
(10,025
)
 
(11,492
)
Other investments
 
15,980

 
(14,874
)
Origination of debt and preferred equity investments
 
(421,003
)
 
(393,429
)
Repayments or redemption of debt and preferred equity investments
 
349,320

 
472,317

Net cash used in investing activities
 
(825,263
)
 
(242,541
)
 
 
 
 
 

19

Table of Contents
SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows (cont.)
(unaudited, in thousands)


 
 
Nine Months Ended September 30,
 
 
2014
 
2013
Financing Activities
 
 
 
 
Proceeds from mortgages and other loans payable
 
2,001,603

 
980,333

Repayments of mortgages and other loans payable
 
(1,688,466
)
 
(1,027,201
)
Proceeds from revolving credit facility, term loan and senior unsecured notes
 
1,136,400

 
844,000

Repayments of revolving credit facility, term loan and senior unsecured notes
 
(805,988
)
 
(578,970
)
Payments of debt extinguishment costs
 
(23,332
)
 

Contributions of proceeds from stock options exercised and DRIP issuance
 
20,549

 
10,452

Contributions of net proceeds from sale of common stock
 
42,698

 
41,734

Contributions of net proceeds from sale of preferred stock
 

 
24

Redemption of preferred stock
 

 
(192,500
)
Sale of treasury stock
 

 
6,089

Distributions to noncontrolling interests in other partnerships
 
(5,745
)
 
(11,809
)
Contributions from noncontrolling interests in other partnerships
 
27,933

 
3,781

Distributions paid on common and preferred units
 
(160,389
)
 
(115,887
)
Deferred loan costs and capitalized lease obligation
 
(50,378
)
 
(8,921
)
Net cash provided by (used in) financing activities
 
494,885

 
(48,875
)
Net increase in cash and cash equivalents
 
46,828

 
19,114

Cash and cash equivalents at beginning of period
 
206,692

 
189,984

Cash and cash equivalents at end of period
 
$
253,520

 
$
209,098

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