UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011
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.
(Exact name of registrant as specified in its charter)
Maryland |
|
13-3956775 |
(State or other jurisdiction of |
|
(I.R.S. Employer |
incorporation or organization) |
|
Identification No.) |
420 Lexington Avenue, New York, New York 10170
(Address of principal executive offices) (Zip Code)
(212) 594-2700
(Registrants 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. YES þ 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). YES þ 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):
Large accelerated filer þ |
Accelerated filer o |
Non-accelerated filer o |
Smaller Reporting Company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ
The number of shares outstanding of the registrants common stock, $0.01 par value, was 85,464,921 as of July 31, 2011.
SL GREEN REALTY CORP.
SL Green Realty Corp.
(Amounts in thousands, except per share data)
|
|
June 30, |
|
December 31, |
| |||
|
|
(Unaudited) |
|
|
| |||
Assets |
|
|
|
|
| |||
Commercial real estate properties, at cost: |
|
|
|
|
| |||
Land and land interests |
|
$ |
2,472,584 |
|
$ |
1,750,220 |
| |
Building and improvements |
|
6,835,204 |
|
5,840,701 |
| |||
Building leasehold and improvements |
|
1,289,664 |
|
1,286,935 |
| |||
Property under capital lease |
|
12,208 |
|
12,208 |
| |||
|
|
10,609,660 |
|
8,890,064 |
| |||
Less: accumulated depreciation |
|
(1,008,064 |
) |
(916,293 |
) | |||
|
|
9,601,596 |
|
7,973,771 |
| |||
Cash and cash equivalents |
|
390,229 |
|
332,830 |
| |||
Restricted cash |
|
85,370 |
|
137,673 |
| |||
Investment in marketable securities |
|
55,366 |
|
34,052 |
| |||
Tenant and other receivables, net of allowance of $16,548 and $12,981 in 2011 and 2010, respectively |
|
28,452 |
|
27,054 |
| |||
Related party receivables |
|
2,579 |
|
6,295 |
| |||
Deferred rents receivable, net of allowance of $29,352 and $30,834 in 2011 and 2010, respectively |
|
244,008 |
|
201,317 |
| |||
Debt and preferred equity investments, net of discount of $19,351 and $42,937 and allowance of $41,800 and $61,361 in 2011 and 2010, respectively |
|
582,418 |
|
963,772 |
| |||
Investments in unconsolidated joint ventures |
|
896,632 |
|
631,570 |
| |||
Deferred costs, net |
|
182,241 |
|
172,517 |
| |||
Other assets |
|
575,187 |
|
819,443 |
| |||
Total assets |
|
$ |
12,644,078 |
|
$ |
11,300,294 |
| |
|
|
|
|
|
| |||
Liabilities |
|
|
|
|
| |||
Mortgages and other loans payable |
|
$ |
3,978,345 |
|
$ |
3,400,468 |
| |
Revolving credit facility |
|
500,000 |
|
650,000 |
| |||
Senior unsecured notes |
|
1,019,240 |
|
1,100,545 |
| |||
Accrued interest payable and other liabilities |
|
102,710 |
|
38,149 |
| |||
Accounts payable and accrued expenses |
|
130,735 |
|
133,389 |
| |||
Deferred revenue/gains |
|
300,093 |
|
307,678 |
| |||
Capitalized lease obligation |
|
17,077 |
|
17,044 |
| |||
Deferred land leases payable |
|
18,322 |
|
18,267 |
| |||
Dividend and distributions payable |
|
14,861 |
|
14,182 |
| |||
Security deposits |
|
43,032 |
|
38,690 |
| |||
Junior subordinate deferrable interest debentures held by trusts that issued trust preferred securities |
|
100,000 |
|
100,000 |
| |||
Total liabilities |
|
6,224,415 |
|
5,818,412 |
| |||
|
|
|
|
|
| |||
Commitments and contingencies |
|
--- |
|
--- |
| |||
|
|
|
|
|
| |||
Noncontrolling interest in operating partnership |
|
158,418 |
|
84,338 |
| |||
|
|
|
|
|
| |||
Equity |
|
|
|
|
| |||
SL Green stockholders equity: |
|
|
|
|
| |||
Series C preferred stock, $0.01 par value, $25.00 liquidation preference, 11,700 issued and outstanding at both June 30, 2011 and December 31, 2010, respectively |
|
274,022 |
|
274,022 |
| |||
Series D preferred stock, $0.01 par value, $25.00 liquidation preference, 4,000 issued and outstanding at both June 30, 2011 and December 31, 2010, respectively |
|
96,321 |
|
96,321 |
| |||
Common stock, $0.01 par value 160,000 shares authorized and 87,723 and 81,675 issued and outstanding at June 30, 2011 and December 31, 2010, respectively (including 3,426 and 3,369 shares at June 30, 2011 and December 31, 2010, held in Treasury, respectively) |
|
878 |
|
817 |
| |||
Additional paid-in-capital |
|
4,105,442 |
|
3,660,842 |
| |||
Treasury stock at cost |
|
(307,419 |
) |
(303,222 |
) | |||
Accumulated other comprehensive loss |
|
(21,589 |
) |
(22,659 |
) | |||
Retained earnings |
|
1,721,440 |
|
1,172,963 |
| |||
Total SL Green stockholders equity |
|
5,869,095 |
|
4,879,084 |
| |||
Noncontrolling interests in other partnerships |
|
392,150 |
|
518,460 |
| |||
Total equity |
|
6,261,245 |
|
5,397,544 |
| |||
Total liabilities and equity |
|
$ |
12,644,078 |
|
$ |
11,300,294 |
| |
The accompanying notes are an integral part of these financial statements.
SL Green Realty Corp.
Consolidated Statements of Income
(Unaudited, and amounts in thousands, except per share data)
|
|
Three Months Ended |
|
Six Months Ended |
| ||||
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
Revenues |
|
|
|
|
|
|
|
|
|
Rental revenue, net |
$ |
240,585 |
$ |
193,252 |
$ |
469,555 |
$ |
385,462 |
|
Escalation and reimbursement |
|
34,994 |
|
28,655 |
|
65,269 |
|
58,749 |
|
Investment and preferred equity income |
|
15,144 |
|
20,788 |
|
79,823 |
|
41,167 |
|
Other income |
|
9,932 |
|
8,877 |
|
17,180 |
|
17,075 |
|
Total revenues |
|
300,655 |
|
251,572 |
|
631,827 |
|
502,453 |
|
Expenses |
|
|
|
|
|
|
|
|
|
Operating expenses (including approximately $3,498 and $6,613 (2011) and $3,077 and $6,180 (2010) paid to affiliates) |
|
62,406 |
|
52,748 |
|
122,710 |
|
109,531 |
|
Real estate taxes |
|
43,975 |
|
37,194 |
|
84,042 |
|
74,166 |
|
Ground rent |
|
7,813 |
|
7,679 |
|
15,647 |
|
15,501 |
|
Interest expense, net of interest income |
|
68,990 |
|
56,941 |
|
134,063 |
|
113,729 |
|
Amortization of deferred financing costs |
|
2,690 |
|
1,571 |
|
6,496 |
|
3,867 |
|
Depreciation and amortization |
|
65,539 |
|
55,373 |
|
129,036 |
|
110,898 |
|
Loan loss and other investment reserves, net of recoveries |
|
1,280 |
|
4,985 |
|
(1,870 |
) |
10,985 |
|
Transaction related costs |
|
1,217 |
|
4,104 |
|
3,651 |
|
5,162 |
|
Marketing, general and administrative |
|
22,454 |
|
18,379 |
|
42,475 |
|
36,778 |
|
Total expenses |
|
276,364 |
|
238,974 |
|
536,250 |
|
480,617 |
|
Income from continuing operations before equity in net income of unconsolidated joint ventures, noncontrolling interests and discontinued operations |
|
24,291 |
|
12,598 |
|
95,577 |
|
21,836 |
|
Equity in net income from unconsolidated joint ventures |
|
2,184 |
|
10,005 |
|
10,390 |
|
25,381 |
|
Equity in net gain on sale of interest in unconsolidated joint venture |
|
--- |
|
126,769 |
|
--- |
|
126,769 |
|
Purchase price fair value adjustment |
|
475,102 |
|
--- |
|
488,890 |
|
--- |
|
Loss on investment in marketable securities |
|
(6 |
) |
--- |
|
(133 |
) |
(285 |
) |
Gain (loss) on early extinguishment of debt |
|
971 |
|
(1,276 |
) |
971 |
|
(1,389 |
) |
Income from continuing operations |
|
502,542 |
|
148,096 |
|
595,695 |
|
172,312 |
|
Net income from discontinued operations |
|
560 |
|
2,403 |
|
1,298 |
|
4,320 |
|
Gain on sale of discontinued operations |
|
46,085 |
|
--- |
|
46,085 |
|
--- |
|
Net income |
|
549,187 |
|
150,499 |
|
643,078 |
|
176,632 |
|
Net income attributable to noncontrolling interests in the operating partnership |
|
(11,925 |
) |
(2,467 |
) |
(13,776 |
) |
(2,758 |
) |
Net income attributable to noncontrolling interests in other partnerships |
|
(3,259 |
) |
(3,449 |
) |
(6,869 |
) |
(7,097 |
) |
Net income attributable to SL Green |
|
534,003 |
|
144,583 |
|
622,433 |
|
166,777 |
|
Preferred stock dividends |
|
(7,545 |
) |
(7,545 |
) |
(15,089 |
) |
(14,660 |
) |
Net income attributable to SL Green common stockholders |
$ |
526,458 |
$ |
137,038 |
$ |
607,344 |
$ |
152,117 |
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to SL Green common stockholders: |
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ |
480,858 |
$ |
134,675 |
$ |
561,015 |
$ |
147,874 |
|
Net income from discontinued operations |
|
548 |
|
2,363 |
|
1,269 |
|
4,243 |
|
Gain on sale of discontinued operations |
|
45,052 |
|
--- |
|
45,060 |
|
---- |
|
Net income |
$ |
526,458 |
$ |
137,038 |
$ |
607,344 |
$ |
152,117 |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
Net income from continuing operations before discontinued operations |
$ |
5.75 |
$ |
0.13 |
$ |
6.87 |
$ |
0.30 |
|
Net income from discontinued operations |
|
0.01 |
|
0.03 |
|
0.02 |
|
0.05 |
|
Gain on sale of discontinued operations |
|
0.54 |
|
--- |
|
0.55 |
|
--- |
|
Gain on sale of interest in unconsolidated joint venture |
|
--- |
|
1.60 |
|
--- |
|
1.60 |
|
Net income attributable to SL Green common stockholders |
$ |
6.30 |
$ |
1.76 |
$ |
7.44 |
$ |
1.95 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
Net income from continuing operations before discontinued operations |
$ |
5.71 |
$ |
0.13 |
$ |
6.84 |
$ |
0.30 |
|
Net income from discontinued operations |
|
0.01 |
|
0.03 |
|
0.02 |
|
0.05 |
|
Gain on sale of discontinued operations |
|
0.54 |
|
--- |
|
0.54 |
|
--- |
|
Gain on sale of interest in unconsolidated joint venture |
|
--- |
|
1.59 |
|
--- |
|
1.59 |
|
Net income attributable to SL Green common stockholders |
$ |
6.26 |
$ |
1.75 |
$ |
7.40 |
$ |
1.94 |
|
|
|
|
|
|
|
|
|
|
|
Dividends per share |
$ |
0.10 |
$ |
0.10 |
$ |
0.20 |
$ |
0.20 |
|
Basic weighted average common shares outstanding |
|
83,578 |
|
78,046 |
|
81,632 |
|
77,936 |
|
Diluted weighted average common shares and common share equivalents outstanding |
|
86,010 |
|
79,791 |
|
83,995 |
|
79,771 |
|
The accompanying notes are an integral part of these financial statements.
SL Green Realty Corp.
Consolidated Statement of Equity
(Unaudited, and amounts in thousands, except per share data)
|
|
SL Green Realty Corp. Stockholders |
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
Series C |
|
Series D |
|
Shares |
|
Par |
|
Additional |
|
Treasury |
|
Accumulated |
|
Retained |
|
Noncontrolling |
|
Total |
|
Comprehensive |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Balance at December 31, 2010 |
|
$ |
274,022 |
|
$ |
96,321 |
|
78,307 |
|
$ |
817 |
|
$ |
3,660,842 |
|
$ |
(303,222 |
) |
$ |
(22,659 |
) |
$ |
1,172,963 |
|
$ |
518,460 |
|
$ |
5,397,544 |
|
|
| |
Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
622,433 |
|
6,869 |
|
629,302 |
|
$ |
629,302 |
| |||||||||
Net unrealized loss on derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,835 |
) |
|
|
|
|
(2,835 |
) |
(2,835) |
| ||||||||||
SL Greens share of joint venture net unrealized gain on derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
3,417 |
|
|
|
|
|
3,417 |
|
3,417 |
| ||||||||||
Unrealized gains on marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
488 |
|
|
|
|
|
488 |
|
488 |
| ||||||||||
Preferred dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,089 |
) |
|
|
(15,089 |
) |
|
| ||||||||||
Redemption of units and DRIP proceeds |
|
|
|
|
|
11 |
|
- |
|
731 |
|
|
|
|
|
|
|
|
|
731 |
|
|
| ||||||||||
Reallocation of noncontrolling interest in the operating partnership |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42,296 |
) |
|
|
(42,296 |
) |
|
| ||||||||||
Deferred compensation plan & stock award, net |
|
|
|
|
|
249 |
|
3 |
|
542 |
|
(4,197 |
) |
|
|
|
|
|
|
(3,652 |
) |
|
| ||||||||||
Amortization of deferred compensation plan |
|
|
|
|
|
|
|
|
|
16,831 |
|
|
|
|
|
|
|
|
|
16,831 |
|
|
| ||||||||||
Proceeds from issuance of common stock |
|
|
|
|
|
5,572 |
|
56 |
|
419,407 |
|
|
|
|
|
|
|
|
|
419,463 |
|
|
| ||||||||||
Proceeds from stock options exercised |
|
|
|
|
|
158 |
|
2 |
|
7,089 |
|
|
|
|
|
|
|
|
|
7,091 |
|
|
| ||||||||||
Consolidation of joint venture interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
533 |
|
533 |
|
|
| ||||||||||
Cash distributions to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(133,712 |
) |
(133,712 |
) |
|
| ||||||||||
Cash distribution declared ($0.20 per common share, none of which represented a return of capital for federal income tax purposes) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,571 |
) |
|
|
(16,571 |
) |
|
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Balance at June 30, 2011 |
|
$ |
274,022 |
|
$ |
96,321 |
|
84,297 |
|
$ |
878 |
|
$ |
4,105,442 |
|
$ |
(307,419 |
) |
$ |
(21,589 |
) |
$ |
1,721,440 |
|
$ |
392,150 |
|
$ |
6,261,245 |
|
$ |
630,372 |
|
The accompanying notes are an integral part of these financial statements.
SL Green Realty Corp.
Consolidated Statements of Cash Flows
(Unaudited, and amounts in thousands, except per share data)
|
|
Six Months Ended |
| ||
|
|
2011 |
|
2010 |
|
Operating Activities |
|
|
|
|
|
Net income |
$ |
643,078 |
$ |
176,632 |
|
Adjustment to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
136,355 |
|
118,265 |
|
Equity in net income from unconsolidated joint ventures |
|
(10,390 |
) |
(25,381 |
) |
Distributions of cumulative earnings from unconsolidated joint ventures |
|
7,866 |
|
15,965 |
|
Equity in net gain on sale of interest in unconsolidated joint venture |
|
--- |
|
(126,769 |
) |
Purchase price fair value adjustment |
|
(488,890 |
) |
--- |
|
Gain on sale of discontinued operations |
|
(46,085 |
) |
--- |
|
Gain on sale of debt securities |
|
(19,840 |
) |
--- |
|
Loan loss and other investment reserves, net of recoveries |
|
(1,870 |
) |
10,985 |
|
Loss on investments in marketable securities |
|
133 |
|
285 |
|
(Gain) loss on early extinguishment of debt |
|
(971 |
) |
1,389 |
|
Deferred rents receivable |
|
(44,343 |
) |
(19,177 |
) |
Other non-cash adjustments |
|
3,774 |
|
(11,851 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
Restricted cash operations |
|
15,487 |
|
(5,468 |
) |
Tenant and other receivables |
|
(841 |
) |
3,893 |
|
Related party receivables |
|
1,157 |
|
2,671 |
|
Deferred lease costs |
|
(14,534 |
) |
(13,775 |
) |
Other assets |
|
5,169 |
|
12,109 |
|
Accounts payable, accrued expenses and other liabilities |
|
(5,323 |
) |
16,705 |
|
Deferred revenue and land leases payable |
|
(3,084 |
) |
(3,824 |
) |
Net cash provided by operating activities |
|
176,848 |
|
152,654 |
|
Investing Activities |
|
|
|
|
|
Acquisitions of real estate property |
|
(331,972 |
) |
--- |
|
Additions to land, buildings and improvements |
|
(57,442 |
) |
(34,594 |
) |
Escrowed cash capital improvements/acquisition deposits |
|
46,861 |
|
(54,076 |
) |
Investments in unconsolidated joint ventures |
|
(60,321 |
) |
(81,903 |
) |
Distributions in excess of cumulative earnings from unconsolidated joint ventures |
|
102,089 |
|
10,339 |
|
Net proceeds from disposition of real estate/joint venture interest |
|
150,893 |
|
504,172 |
|
Other investments |
|
631 |
|
(7,611 |
) |
Debt and preferred equity and other investments, net of repayments/participations |
|
84,528 |
|
(89,428 |
) |
Net cash (used in) provided by investing activities |
|
(64,733 |
) |
246,899 |
|
Financing Activities |
|
|
|
|
|
Proceeds from mortgages and other loans payable |
|
690,000 |
|
104,100 |
|
Repayments of mortgages and other loans payable |
|
(744,873 |
) |
(20,925 |
) |
Proceeds from revolving credit facility and senior unsecured notes |
|
725,079 |
|
250,000 |
|
Repayments of revolving credit facility and senior unsecured notes |
|
(962,395 |
) |
(792,543 |
) |
Proceeds from stock options exercised and DRIP issuance |
|
7,097 |
|
13,989 |
|
Net proceeds from sale of common stock |
|
419,463 |
|
--- |
|
Net proceeds from sale of preferred stock |
|
--- |
|
122,019 |
|
Purchase of treasury stock |
|
(4,197 |
) |
--- |
|
Distributions to noncontrolling interests in other partnerships |
|
(133,712 |
) |
(6,814 |
) |
Redemption of noncontrolling interest in operating partnership |
|
--- |
|
(11,096 |
) |
Distributions to noncontrolling interests in operating partnership |
|
(382 |
) |
(262 |
) |
Dividends paid on common and preferred stock |
|
(31,662 |
) |
(28,223 |
) |
Deferred loan costs and capitalized lease obligation |
|
(19,134 |
) |
(33,936 |
) |
Net cash used in financing activities |
|
(54,716 |
) |
(403,691 |
) |
Net increase (decrease) in cash and cash equivalents |
|
57,399 |
|
(4,138 |
) |
Cash and cash equivalents at beginning of period |
|
332,830 |
|
343,715 |
|
Cash and cash equivalents at end of period |
$ |
390,229 |
$ |
339,577 |
|
The accompanying notes are an integral part of these financial statements.
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
1. Organization and Basis of Presentation
SL Green Realty Corp., also referred to as the Company or SL Green, a Maryland corporation, and SL Green Operating Partnership, L.P., 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 wholly-owned by us are conducted through SL Green Management LLC which is 100% owned by our 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 reduce or avoid the payment of Federal income taxes at the corporate level. Unless the context requires otherwise, all references to the Company, 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 June 30, 2011, noncontrolling investors held, in the aggregate, a 2.22% limited partnership interest in the operating partnership. We refer to this as the noncontrolling interests in the operating partnership. See Note 13.
Reckson Operating Partnership, L.P., or ROP, is a subsidiary of our Operating Partnership.
As of June 30, 2011, we owned the following interests in commercial office properties in the New York Metropolitan area, primarily in midtown Manhattan, a borough of New York City, or Manhattan. Our investments in the New York Metropolitan area also include investments in Brooklyn, Queens, Long Island, Westchester County, Connecticut and New Jersey, which are collectively known as the Suburban assets:
Location |
|
Ownership |
|
Number of |
|
Square Feet |
|
Weighted Average |
| ||
Manhattan |
|
Consolidated properties |
|
24 |
|
|
17,197,945 |
|
|
92.8 |
% |
|
|
Unconsolidated properties |
|
7 |
|
|
6,191,673 |
|
|
92.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Suburban |
|
Consolidated properties |
|
25 |
|
|
3,863,000 |
|
|
81.0 |
% |
|
|
Unconsolidated properties |
|
6 |
|
|
2,941,700 |
|
|
93.6 |
% |
|
|
|
|
62 |
|
|
30,194,318 |
|
|
91.3 |
% |
(1) The weighted average occupancy represents the total leased square feet divided by total available rentable square feet.
We also owned investments in nine stand-alone retail properties encompassing approximately 334,782 square feet, six development properties encompassing approximately 1,359,941 square feet and three land interests as of June 30, 2011. In addition, we manage four office properties owned by third parties and affiliated companies encompassing approximately 1.3 million rentable square feet.
Partnership Agreement
In accordance with the partnership agreement of the operating partnership, or the operating partnership agreement, we allocate all distributions and profits and losses in proportion to the percentage 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 avoid any Federal income or excise tax at the Company level. Under the operating partnership agreement, each limited partner has the right to redeem units of limited partnership interests for cash, or if we so elect, shares of our 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 fair presentation have been included. The 2011 operating results for the period presented are not necessarily indicative of the
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
results that may be expected for the year ending December 31, 2011. These financial statements should be read in conjunction with the financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2010.
The balance sheet at December 31, 2010 has been derived from the audited financial statements at that date but does 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 Notes 5 and 6. All significant intercompany balances and transactions have been eliminated.
The FASB amended the guidance for determining whether an entity is a variable interest entity, or VIE, and requires the performance of a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE. Under this guidance, an entity would be required to consolidate a VIE if it has (i) the power to direct the activities that most significantly impact the entitys economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.
A noncontrolling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. Noncontrolling interests are required to be presented as a separate component of equity in the consolidated balance sheet and modifies the presentation of net income by requiring earnings and other comprehensive income to be attributed to controlling and noncontrolling interests.
We assess the accounting treatment for each joint venture and debt and preferred equity investment. This assessment includes a review of each joint venture or partnership limited liability company agreement to determine which party has what rights and whether those rights are protective or participating. For all VIEs, we review such agreements in order to determine which party has the power to direct the activities that most significantly impact the entitys economic performance. In situations where we or our partner approves, among other things, the annual budget, receives a detailed monthly reporting package from us, meets on a quarterly basis to review the results of the joint venture, reviews and approves the joint ventures tax return before filing, and approves 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 also 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 indicators that the value of our real estate properties may be impaired or that their carrying value may not be recoverable. A propertys value is considered impaired if managements estimate of the aggregate future cash flows (undiscounted and without interest charges for consolidated properties) to be generated by the property are less than the carrying value of the property. To the extent impairment has occurred and is considered to be other than temporary, the loss will be measured as the excess of the carrying amount of the property over the calculated fair value of the property. In addition, we assess our investments in unconsolidated joint ventures for recoverability, and if it is determined that a loss in value of the investment is other than temporary, we write down the investment to its fair value. We evaluate our equity investments for impairment based on the joint ventures projected discounted cash flows. We do not believe that the value of any of our consolidated properties was impaired at June 30, 2011 or December 31, 2010, respectively.
We allocate the purchase price of real estate to land and building and, if determined to be material, intangibles, such as the value of above-, below- and at-market leases and origination costs associated with the in-place leases. We depreciate the amount allocated to building and other intangible assets over their estimated useful lives, which generally range from three to 40 years and from one to 14 years, respectively. The values of the above- and below-market leases are amortized and recorded as either an increase (in the case of below-market leases) or a decrease (in the case of above-market leases) to rental income over the remaining term of the associated lease, which generally range from one to 14 years. The value associated with in-place leases are amortized over the expected term of the associated lease, which generally range from one to 14 years. If a tenant vacates its space prior to the contractual termination of
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
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.
We recognized an increase of approximately $5.0 million, $12.2 million, $6.2 million and $12.8 million in rental revenue for the three and six months ended June 30, 2011 and 2010, 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 approximately $1.8 million, $3.2 million, $0.6 million and $0.9 million for the three and six months ended June 30, 2011 and 2010, respectively.
The following summarizes our identified intangible assets (acquired above-market leases and in-place leases) and intangible liabilities (acquired below-market leases) (amounts in thousands):
|
|
June 30, |
|
December 31, |
|
Identified intangible assets (included in other assets): |
|
|
|
|
|
Gross amount |
$ |
567,046 |
$ |
758,300 |
|
Accumulated amortization |
|
(157,411 |
) |
(133,737 |
) |
Net |
$ |
409,635 |
$ |
624,563 |
|
|
|
|
|
|
|
Identified intangible liabilities (included in deferred revenue): |
|
|
|
|
|
Gross amount |
$ |
534,227 |
$ |
508,339 |
|
Accumulated amortization |
|
(252,753 |
) |
(220,417 |
) |
Net |
$ |
281,474 |
$ |
287,922 |
|
Fair Value Measurements
Fair value is a market-based measurement, not an entity-specific measurement, and should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, FASB guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within levels one and two of the hierarchy) and the reporting entitys own assumptions about market participant assumptions (unobservable inputs classified within level three of the hierarchy).
We determined the fair value of our current investments in marketable securities using level one, level two and level three inputs. Additionally, we determined the valuation allowance for loan losses based on level three inputs. See Note 5Debt and Preferred Equity Investments.
The estimated fair values of tangible and intangible assets and liabilities recorded in connection with business combinations are based on level three inputs. We estimate fair values based on cash flow projections utilizing appropriate discount and/or capitalization rates and available market information.
We determine impairment in real estate investments and debt and preferred equity investments, including intangibles, utilizing cash flow projections that apply estimated revenue and expense growth rates, discount rates and capitalization rates, which are classified as level three inputs.
We use the following methods and assumptions in estimating fair value disclosures for financial instruments.
· Cash and cash equivalents: The carrying amount of unrestricted cash and cash equivalents reported in our Consolidated Balance Sheets approximates fair value due to the short maturity of these instruments.
· Debt and Preferred Equity Investments: The fair value of debt and preferred equity investments is estimated by discounting the future cash flows using current interest rates at which similar loans with the same maturities would be made to borrowers with similar credit ratings. See Note 5 regarding valuation allowances for loan losses.
· Mortgage and other loans payable and other debt: The fair value of borrowings is estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made by us.
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
The methodologies used for valuing financial instruments have been categorized into three broad levels as follows:
Level 1 Quoted prices in active markets for identical instruments.
Level 2 - Valuations based principally on other observable market parameters, including
· Quoted prices in active markets for similar instruments,
· Quoted prices in less active or inactive markets for identical or similar instruments,
· Other observable inputs (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates), and
· Market corroborated inputs (derived principally from or corroborated by observable market data).
Level 3 Valuations based significantly on unobservable inputs.
· Valuations based on third-party indications (broker quotes or counterparty quotes) which were, in turn, based significantly on unobservable inputs or were otherwise not supportable as Level 2 valuations.
· Valuations based on internal models with significant unobservable inputs.
These levels form a hierarchy. We follow this hierarchy for our financial instruments measured at fair value on a recurring and nonrecurring basis. The classifications are based on the lowest level of input that is significant to the fair value measurement.
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 loss. Unrealized losses that are determined to be other-than-temporary are recognized in earnings up to their credit component. Included in accumulated other comprehensive loss at June 30, 2011 is approximately $10.6 million in net unrealized gains related to marketable securities.
The basis on which the cost of bonds and marketable securities sold is determined based on the specific identification method.
At June 30, 2011 and December 31, 2010, we held the following marketable securities (in thousands):
|
|
June 30, |
|
December 31, |
|
|
|
2011 |
|
2010 |
|
Level 1 Equity marketable securities |
$ |
16,209 |
$ |
12,357 |
|
Level 2 Commercial mortgage-backed securities |
|
15,672 |
|
17,445 |
|
Level 3 Rake bonds |
|
23,485 |
|
4,250 |
|
Total marketable securities available-for-sale |
$ |
55,366 |
$ |
34,052 |
|
The cost basis of the Level 3 securities was $26.5 million at June 30, 2011 and $4.3 million at December 31, 2010. There were no sales of Level 3 securities during the six months ended June 30, 2011. The Level 3 securities mature at various times through 2041.
Revenue Recognition
Interest income on debt and preferred equity investments is recognized over the life of the investment using the effective interest method and recognized on the accrual basis. Fees received in connection with loan commitments are deferred until the loan is funded and are then recognized over the term of the loan as an adjustment to yield. Anticipated exit fees, whose collection is expected, are also recognized over the term of the loan as an adjustment to yield. Fees on commitments that expire unused are recognized at expiration.
Income recognition is generally suspended for debt and preferred equity investments 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 income and principal becomes doubtful. Income recognition is resumed when the loan 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. 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 managements determination that accrued interest and outstanding principal 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.
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
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 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.
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 recorded loan loss reserves of $2.5 million, $2.5 million, $4.0 million and $10.0 million during the three and six months ended June 30, 2011 and 2010, respectively, on investments being held to maturity, and $1.0 million against our held for sale investment during the three and six months ended June 30, 2010, respectively. We also recorded approximately $1.2 million and $4.4 million in recoveries during the three and six months ended June 30, 2011 in connection with the sale of investments.
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
We are taxed as a REIT under Section 856(c) of the Code. As a REIT, we generally are not subject to Federal income tax. To maintain our qualification as a REIT, we must distribute at least 90% of our REIT taxable income to our stockholders and meet certain other requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income tax on our taxable income at regular corporate rates. We may also be subject to certain state, local and franchise taxes. Under certain circumstances, Federal income and excise taxes may be due on our undistributed taxable income.
Pursuant to amendments to the Code that became effective January 1, 2001, we have elected, and may in the future, elect to treat certain of our existing or newly created corporate subsidiaries as taxable REIT subsidiaries, or a TRS. In general, a TRS of ours may perform non-customary services for our tenants, hold assets that we cannot hold directly and generally may engage in any real estate or non-real estate related business. Our TRSs generate income, resulting in Federal income tax liability for these entities. Our TRSs recorded none and approximately $1.3 million in Federal, state and local tax provision during the six months ended June 30, 2011 and 2010, respectively, and made estimated tax payments of $0.1 million and $0.3 million during the six months ended June 30, 2011 and 2010, 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 12.
The Black-Scholes option-pricing 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
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
models do not necessarily provide a reliable single measure of the fair value of our employee stock options.
Compensation cost for stock options, if any, is recognized on a straight line basis 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 our 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 authorizes the award and adopts any relevant performance measures. For programs with market 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 Company common stock, at the current quoted market price, from certain key employee to satisfy minimum statutory tax-withholding requirements related to shares that vested during the period.
Earnings per Share
We present 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. This also includes units of limited partnership interest. The dilutive effect of the outstanding nonvested shares of common stock (nonvested shares) and restricted stock units (RSUs) that have not yet been granted but are contingently issuable under the share-based compensation programs is reflected in the weighted average diluted shares calculation by application of the treasury stock method at the beginning of the quarterly period in which all necessary conditions have been satisfied. 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 debentures 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.
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 the New York Metropolitan area. See Note 5. 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 tenants 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, Queens, Long Island, Westchester County, Connecticut and New Jersey. The tenants located in our buildings operate in various industries. Other than one tenant who accounts for approximately 7.5% of our annualized rent, no other tenant in our portfolio accounted for more than 7.1% of our annualized rent, including our share of joint venture annualized rent at June 30, 2011. Approximately 9.6%, 6.8% and 5.6% of our annualized rent, including our share of joint venture annualized rent, was attributable to 1515 Broadway, 1185 Avenue of the Americas and One Madison Avenue, respectively, for the quarter ended June 30, 2011. Two borrowers accounted for more than 10.0% of the revenue earned on debt and preferred equity investments during the three months ended June 30, 2011.
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 July 2010, the FASB issued updated guidance on disclosures about the credit quality of financing receivables and the allowance for
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
credit losses which will require a greater level of information disclosed about the credit quality of loans and allowance for loan losses, as well as additional information related to credit quality indicators, past due information, and information related to loans modified in trouble debt restructuring. The guidance related to disclosures of financing receivables as of the end of a reporting period is required to be adopted for interim and annual reporting periods ending on or after December 15, 2010. The financing receivables disclosures related to the activity that occurs during a reporting period are required to be adopted for interim and annual reporting periods beginning on or after December 15, 2010. In January 2011, the FASB temporarily delayed the effective date of the disclosures about troubled debt restructurings to allow the FASB the time needed to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. The guidance is effective for interim and annual periods ending after June 15, 2011. Adoption of the remaining guidance resulted in additional disclosures in our consolidated financial statements.
In January 2010, the FASB issued updated guidance on fair value measurements and disclosures, which requires disclosure of details of significant asset or liability transfers in and out of Level 1 and Level 2 measurements within the fair value hierarchy and inclusion of gross purchases, sales, issuances, and settlements in the rollforward of assets and liabilities valued using Level 3 inputs within the fair value hierarchy. The guidance also clarifies and expands existing disclosure requirements related to the disaggregation of fair value disclosures and inputs used in arriving at fair values for assets and liabilities using Level 2 and Level 3 inputs within the fair value hierarchy. These disclosure requirements were effective for interim and annual reporting periods beginning after December 15, 2009. Adoption of this guidance on January 1, 2010, excluding the Level 3 rollforward, resulted in additional disclosures in our consolidated financial statements. The gross presentation of the Level 3 rollforward is required for interim and annual reporting periods beginning after December 15, 2010. Adoption of this guidance did not have a material impact on our consolidated financial statements.
In December 2010, the FASB issued guidance on the disclosure of supplementary pro forma information for business combinations. Effective for periods beginning after December 15, 2010, the guidance specifies that if a public entity enters into business combinations that are material on an individual or aggregate basis and presents comparative financial statements, the entity must present pro forma revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. Adoption of this guidance did not have a material impact on our consolidated financial statements.
In June 2011, the FASB issued guidance to increase the prominence of other comprehensive income in financial statements. The standard gives businesses two options for presenting other comprehensive income (OCI), which until now has typically been included within the statement of shareholders equity. An OCI statement can be included with the statement of income, and together the two will make a statement of total comprehensive income. Alternatively, businesses can have an OCI statement separate from the statement of income, but the two statements will have to appear consecutively within a financial report. These disclosure requirements are effective for interim and annual reporting periods beginning after December 15, 2011. Early adoption of this guidance is permitted. Adoption of this guidance will not have a material impact on our consolidated financial statements.
In April 2011, the FASB issued updated guidance on a creditors determination of whether a restructuring will be a troubled debt restructuring, which establishes new guidelines in evaluating whether a loan modification meets the criteria of a troubled debt restructuring. This guidance is effective as of the third quarter of 2011, applied retrospectively to the beginning of the fiscal year as required, and its adoption is not expected to have a material effect on our consolidated financial statements.
In May 2011, the FASB issued updated guidance on fair value measurement which amends U.S. GAAP to conform to IFRS measurement and disclosure requirements. The amendments change the wording used to describe the requirements in U.S. GAAP for measuring fair value, changes certain fair value measurement principles and enhances disclosure requirements. This guidance is effective as of the first quarter of 2012, applied prospectively, and its adoption is not expected to have a material effect on our consolidated financial statements.
3. Property Acquisitions
In May 2011, we acquired a substantial ownership interest in the 205,000-square-foot office condominium at 110 East 42nd Street, along with control of the asset. We provided a senior mezzanine loan as part of the sale of the condominium unit in 2007. The May 2011 transaction included a consensual modification of that loan. In conjunction with the transaction, we successfully restructured the in-place mortgage financing, which had previously been in default. We are in the process of obtaining the information needed to prepare our allocation of the purchase price of the assets acquired and liabilities assumed and expect to record these adjustments in the
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
third quarter of 2011. We are in the process of analyzing the fair value of the in-place leases; and, consequently, no value has yet been assigned to the leases. Therefore, the purchase price allocation is preliminary and subject to change.
In April 2011, we acquired the entire interest of SITQ Immobilier, a subsidiary of Caisse de depot et placement du Quebec, or SITQs, in 1515 Broadway, thereby consolidating full ownership of the 1,750,000 square foot building. The transaction valued the consolidated interests at $1.234 billion. We acquired the interest subject to the $458.8 million mortgage encumbering the property. We recognized a purchase price fair value adjustment of $475.1 million upon the closing of this transaction. This property, which we initially acquired in May 2002, was previously accounted for as an investment in unconsolidated joint ventures. We are currently in the process of analyzing the fair value of the in-place leases; and, consequently, no value has yet been assigned to the leases. Therefore, the purchase price allocation is preliminary and subject to change.
In January 2011, we purchased City Investment Fund, or CIFs, 49.9% interest in 521 Fifth Avenue, thereby assuming full ownership of the building. The transaction valued the consolidated interest at approximately $245.7 million, excluding $4.5 million of cash and other assets acquired. We acquired the interest subject to $140.0 million of mortgage financing in connection with this acquisition. We recognized a purchase price fair value adjustment of $13.8 million upon the closing of this transaction. In April 2011, we refinanced 521 Fifth Avenue with a new $150.0 million 2-year mortgage which carries a floating rate of interest of 200 basis points over the 30-day LIBOR In connection with that refinancing, we acquired the fee interest in the property for $15.0 million.
The following summarizes our preliminary allocation of the purchase price of the assets acquired and liabilities assumed upon the purchase of 521 Fifth Avenue (in thousands):
Land |
$ |
110,100 |
|
Building |
|
146,369 |
|
Above market lease value |
|
3,278 |
|
Acquired in-place leases |
|
23,009 |
|
Other assets, net of other liabilities |
|
4,532 |
|
Assets acquired |
|
287,288 |
|
|
|
|
|
Mortgage note payable |
|
140,000 |
|
Below market lease value |
|
25,612 |
|
Liabilities assumed |
|
165,612 |
|
|
|
121,676 |
|
Investment in unconsolidated joint ventures |
|
(41,414 |
) |
Net assets acquired |
$ |
80,262 |
|
In December 2010, we completed the acquisition of investments from Gramercy Capital Corp. (NYSE:GKK), or Gramercy. This included (1) the remaining 45% interest in the leased fee at 885 Third Avenue for approximately $39.3 million plus assumed mortgage debt of approximately $120.4 million, (2) the remaining 45% interest in the leased fee at 2 Herald Square for approximately $25.6 million plus assumed mortgage debt of approximately $86.1 million and, (3) the entire leased fee interest in 292 Madison Avenue for approximately $19.2 million plus assumed mortgage debt of approximately $59.1 million. These assets are all leased to third-party operators.
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
The following summarizes our allocation of the purchase price of the assets acquired and liabilities assumed upon the purchase of the abovementioned investments from Gramercy (in thousands):
Land |
$ |
501,021 |
|
Above market lease value |
|
23,178 |
|
Acquired in-place leases |
|
217,312 |
|
Assets acquired |
|
741,511 |
|
|
|
|
|
Mortgage notes payable |
|
540,805 |
|
Other liabilities, net of other assets |
|
2,091 |
|
Liabilities assumed |
|
542,896 |
|
|
|
198,615 |
|
Investments in unconsolidated joint ventures |
|
(111,751 |
) |
Net assets acquired |
$ |
86,864 |
|
In December 2010, we acquired two retail condominiums in Williamsburg, Brooklyn, for approximately $18.4 million. The retail condominiums are fully leased with rent commencement upon completion of the redevelopment work.
The following summarizes our allocation of the purchase price of the assets acquired in connection with the purchase of the abovementioned property (in thousands):
Land |
$ |
6,200 |
|
Building |
|
10,158 |
|
Acquired in-place leases |
|
2,304 |
|
Assets acquired |
|
18,662 |
|
Below market lease value |
|
277 |
|
Liabilities assumed |
|
277 |
|
Net assets acquired |
$ |
18,385 |
|
4. Property Dispositions and Assets Held for Sale
In May 2011, we sold our property located at 28 West 44th Street for $161.0 million. The property is approximately 359,000 square feet. We recognized a gain of $46.1 million on the sale.
At June 30, 2011, discontinued operations included the results of operations of real estate assets sold or held for sale prior to that date. This included 28 West 44th Street, which was sold in May 2011 and 19 West 44th Street, which was sold in September 2010.
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
The following table summarizes income from discontinued operations for the three and six months ended June 30, 2011 and 2010, respectively (in thousands).
|
|
Three |
|
Three |
|
Six |
|
Six |
|
|
|
June 30, |
|
June 30, |
|
June 30, |
|
June 30, |
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
Revenues |
|
|
|
|
|
|
|
|
|
Rental revenue |
$ |
1,245 |
$ |
6,467 |
$ |
4,835 |
$ |
12,843 |
|
Escalation and reimbursement revenues |
|
219 |
|
1,306 |
|
873 |
|
2,680 |
|
Other income |
|
56 |
|
378 |
|
60 |
|
379 |
|
Total revenues |
|
1,520 |
|
8,151 |
|
5,768 |
|
15,902 |
|
Operating expense |
|
487 |
|
1,873 |
|
1,633 |
|
3,854 |
|
Real estate taxes |
|
187 |
|
1,415 |
|
1,034 |
|
2,829 |
|
Interest expense, net of interest income |
|
286 |
|
708 |
|
980 |
|
1,399 |
|
Amortization of deferred financing costs |
|
--- |
|
220 |
|
147 |
|
441 |
|
Depreciation and amortization |
|
--- |
|
1,532 |
|
676 |
|
3,059 |
|
Total expenses |
|
960 |
|
5,748 |
|
4,470 |
|
11,582 |
|
Income from discontinued operations |
$ |
560 |
$ |
2,403 |
$ |
1,298 |
$ |
4,320 |
|
5. Debt and Preferred Equity Investments
During the six months ended June 30, 2011 and 2010, our debt and preferred equity investments (net of discounts), increased approximately $162.9 million and $181.2 million, respectively, due to originations, purchases, accretion of discounts and paid-in-kind interest. We recorded approximately $544.3 million and $99.4 million in repayments, participations, sales, foreclosures and loan loss reserves during those periods, respectively, which offset the increases in debt and preferred equity investments.
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
As of June 30, 2011 and December 31, 2010, we held the following debt investments with an aggregate weighted average current yield of approximately 5.99% (in thousands):
Loan |
|
June 30, |
|
June 30, |
|
December 31, |
|
Initial |
|
Other Loan(1) |
$ |
15,000 |
$ |
3,500 |
$ |
3,500 |
|
September 2021 |
|
Mezzanine Loan(1) |
|
205,000 |
|
63,711 |
|
60,407 |
|
February 2016 |
|
Mortgage/ Mezzanine Loan(1) |
|
172,669 |
|
46,380 |
|
46,358 |
|
May 2016 |
|
Mezzanine Loan(1) |
|
165,000 |
|
40,282 |
|
39,711 |
|
November 2016 |
|
Mezzanine Loan(1)(2)(3)(6)(7) |
|
--- |
|
--- |
|
27,187 |
|
--- |
|
Mezzanine Loan(1) (7)(14) |
|
--- |
|
--- |
|
15,697 |
|
--- |
|
Junior Participation(1)(4)(6)(7) |
|
--- |
|
9,938 |
|
9,938 |
|
April 2008 |
|
Mezzanine Loan(1)(7)(8) |
|
1,139,000 |
|
83,378 |
|
84,062 |
|
March 2017 |
|
Junior Participation(1)(6) |
|
53,000 |
|
11,000 |
|
11,000 |
|
November 2011 |
|
Junior Participation(6) |
|
61,250 |
|
10,875 |
|
10,875 |
|
June 2012 |
|
Junior Participation(6) |
|
--- |
|
--- |
|
5,866 |
|
--- |
|
Junior Participation(5)(6) |
|
--- |
|
--- |
|
47,484 |
|
--- |
|
Mortgage/ Mezzanine Loan(2)(9) |
|
--- |
|
--- |
|
137,222 |
|
--- |
|
Junior Participation(11) |
|
--- |
|
--- |
|
42,439 |
|
--- |
|
Junior Participation |
|
70,800 |
|
9,200 |
|
9,200 |
|
October 2011 |
|
Mezzanine Loan(1)(12) |
|
--- |
|
--- |
|
202,136 |
|
--- |
|
Mezzanine Loan(1) |
|
75,000 |
|
15,000 |
|
15,000 |
|
July 2013 |
|
Mortgage(10) |
|
--- |
|
86,339 |
|
86,339 |
|
June 2012 |
|
Mortgage(13) |
|
--- |
|
31,500 |
|
26,000 |
|
February 2013 |
|
Mezzanine Loan |
|
796,693 |
|
13,536 |
|
13,536 |
|
August 2011 |
|
Mezzanine Loan(1) |
|
165,440 |
|
38,682 |
|
38,892 |
|
February 2014 |
|
Mezzanine Loan(1) |
|
177,000 |
|
17,668 |
|
--- |
|
May 2016 |
|
Junior Participation(1) |
|
133,000 |
|
49,000 |
|
--- |
|
June 2016 |
|
Loan loss reserve(6) |
|
--- |
|
(18,400 |
) |
(40,461 |
) |
--- |
|
|
$ |
3,228,852 |
$ |
511,589 |
$ |
892,388 |
|
|
|
|
|
|
|
(1) |
This is a fixed rate loan. |
(2) |
The difference between the pay and accrual rates is included as an addition to the principal balance outstanding. |
(3) |
This loan was sold in February 2011. We realized $6.2 million of additional income upon the sale. A portion of this income is included in loan loss and other reserves, net of recoveries. |
(4) |
This loan is in default. The lender has begun foreclosure proceedings. Another participant holds a $12.2 million pari-pasu interest in this loan. |
(5) |
Gramercy was the borrower under this loan. We sold this loan, which consisted of mortgage and mezzanine financing, for $35.8 million, in May 2011. We realized $1.2 million of additional income upon the sale, which is included in loan loss and other reserves, net of recoveries. |
(6) |
Loan loss reserves are specifically allocated to investments. Our reserves reflect managements judgment of the probability and severity of losses based on Level 3 data. We cannot be certain that our judgment will prove to be correct or that reserves will be adequate over time to protect against potential future losses. |
(7) |
This loan is on non-accrual status. |
(8) |
Interest is added to the principal balance for this accrual only loan. |
(9) |
Gramercy held a pari passu interest in the mezzanine loan. This loan was repaid in March 2011. |
(10) |
We hold an 88% interest in the consolidated joint venture that acquired this loan. This investment is denominated in British Pounds. |
(11) |
This loan was repaid in January 2011. We realized $1.3 million of additional income upon the sale. This income is included in preferred equity and investment income. |
(12) |
In March 2011, we contributed our debt investment with a carrying value of $286.6 million to a newly formed joint venture in which we hold a 50% interest. We realized $38.7 million of additional income upon the contribution. This income is included in preferred equity and investment income. The joint venture paid us approximately $111.3 million and also assumed $30 million of related floating rate financing which matures in June 2016 and carried a weighted average interest rate for the quarter of 1.16%. In May 2011, this joint venture took control of the underlying property as part of a recapitalization transaction. See Note 6. |
(13) |
In June 2011, we funded an additional $5.5 million and extended the maturity date of this loan to February 2013. |
(14) |
In May 2011, we acquired a substantial ownership interest in the 205,000-square-foot office condominium along with control of the asset. We provided a senior mezzanine loan as part of the sale of the condominium unit in 2007. The transaction included a consensual modification of that loan. See Note 3. |
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
Preferred Equity Investments
As of June 30, 2011 and December 31, 2010, we held the following preferred equity investments, with an aggregate weighted average current yield of approximately 8.35% (in thousands):
Type |
|
June 30, |
|
June 30, |
|
December 31, |
|
Initial |
|
Preferred equity(1)(4)(5) |
$ |
203,956 |
$ |
47,857 |
$ |
45,912 |
|
February 2014 |
|
Preferred equity(3)(4) |
|
979,175 |
|
46,372 |
|
46,372 |
|
August 2012 |
|
Loan loss reserve(2) |
|
--- |
|
(23,400 |
) |
(20,900 |
) |
--- |
|
|
$ |
1,183,131 |
$ |
70,829 |
$ |
71,384 |
|
|
|
| ||
| ||
(1) |
|
This is a fixed rate investment. |
(2) |
|
Loan loss reserves are specifically allocated to investments. Our reserves reflect managements judgment of the probability and severity of losses based on Level 3 data. We cannot be certain that our judgment will prove to be correct and that reserves will be adequate over time to protect against potential future losses. |
(3) |
|
This investment is on non-accrual status. |
(4) |
|
The difference between the pay and accrual rates is included as an addition to the principal balance outstanding. |
(5) |
|
This investment was classified as held for sale at June 30, 2009, but as held-to-maturity for all periods subsequent to June 30, 2009. The reserve previously taken against this loan is being accreted up to the face amount through the maturity date. |
The following table is a rollforward of our total loan loss reserves at June 30, 2011 and December 31, 2010 (in thousands):
|
|
June 30, |
|
December 31, |
|
Balance at beginning of year |
$ |
61,361 |
$ |
93,844 |
|
Expensed |
|
2,500 |
|
24,418 |
|
Recoveries |
|
(4,370 |
) |
(3,662 |
) |
Charge-offs |
|
(17,691 |
) |
(53,239 |
) |
Balance at end of period |
$ |
41,800 |
$ |
61,361 |
|
At June 30, 2011 and December 31, 2010, all debt and preferred equity investments, other than as noted above, were performing in accordance with the terms of the loan agreements.
We have determined that we have one portfolio segment of financing receivables at June 30, 2011 and December 31, 2010 comprising commercial real estate which is primarily recorded in debt and preferred equity investments. Included in other assets is an additional amount of financing receivables totaling approximately $79.5 million at June 30, 2011 and $78.7 million at December 31, 2010. The nonaccrual balance of financing receivables at June 30, 2011 and December 31, 2010 was $85.9 million and $140.8 million, respectively. The recorded investment for financing receivables past due 90 days at June 30, 2011 was $9.9 million associated with one financing receivable and at December 31, 2010 was $9.9 million associated with one financing receivable. All financing receivables are individually evaluated for impairment.
The following table presents impaired loans, including non-accrual loans, as of June 30, 2011 and December 31, 2010, respectively (in thousands):
|
|
June 30, 2011 |
|
December 31, 2010 |
| ||||||||
|
|
Unpaid Principal |
|
Recorded |
|
Allowance |
|
Unpaid |
|
Recorded |
|
Allowance |
|
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
$101,108 |
|
$83,378 |
|
$ |
|
$103,678 |
|
$99,759 |
|
$ |
|
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
80,173 |
|
78,060 |
|
41,800 |
|
160,711 |
|
158,597 |
|
61,361 |
|
Total |
|
$181,281 |
|
$161,438 |
|
$41,800 |
|
$264,389 |
|
$258,356 |
|
$61,361 |
|
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
The following table presents the average recorded investment in impaired loans, including non-accrual loans and the related investment and preferred equity income recognized during the three and six months ended June 30, 2011 and 2010, respectively (in thousands):
|
|
Three Months |
|
Three Months |
|
Six Months |
|
Six Months |
|
|
|
|
|
|
|
|
|
|
|
Average recorded investment in impaired loans |
$ |
201,991 |
$ |
259,404 |
$ |
223,376 |
$ |
259,237 |
|
|
|
|
|
|
|
|
|
|
|
Investment and preferred equity income recognized |
|
1,551 |
|
5,117 |
|
6,361 |
|
8,084 |
|
On an ongoing basis, we monitor the credit quality of our financing receivables based on payment activity. We assess credit quality indicators based on the underlying collateral.
6. Investment in Unconsolidated Joint Ventures
We have investments in several real estate joint ventures with various partners, including The City Investment Fund, or CIF, SITQ Immobilier, a subsidiary of Caisse de depot et placement du Quebec, or SITQ, Canada Pension Plan Investment Board, or CPPIB, a fund managed by JP Morgan Investment Management, or JP Morgan, Prudential Real Estate Investors, or Prudential, Onyx Equities, or Onyx, The Witkoff Group, or Witkoff, Credit Suisse Securities (USA) LLC, or Credit Suisse, Jeff Sutton, or Sutton, Harel Insurance and Finance, or Harel, Louis Cappelli, or Cappelli, The Moinian Group, or Moinian, Vornado Realty Trust (NYSE: VNO), or Vornado, as well as private investors. As we do not control these joint ventures, we account for them under the equity method of accounting. We assess the accounting treatment for each joint venture on a stand-alone basis. This includes a review of each joint venture or partnership LLC agreement to determine which party has what rights and whether those rights are protective or participating. In situations where we or our partner are involved in some or all of the following: approving the annual budget, receiving a detailed monthly reporting package from us, meeting with us on a quarterly basis to review the results of the joint venture, reviewing and approving the joint ventures tax return before filing, and approving 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. Our joint venture agreements also 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.
In May 2010, Green Hill Acquisition LLC, our wholly owned subsidiary, sold its 45% beneficial interest in the property known as 1221 Avenue of the Americas, located in Manhattan, to a wholly owned subsidiary of CPPIB, for total consideration of $577.4 million, of which approximately $95.9 million represented payment for existing reserves and the assumption of our pro-rata share of in-place financing. The sale generated proceeds to us of approximately $500.9 million. We recognized a gain of approximately $126.8 million on the sale of our interest.
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
The table below provides general information on each of our joint ventures as of June 30, 2011 (in thousands):
Property |
|
Partner |
|
Ownership |
|
Economic |
|
Square |
|
Acquired |
|
Acquisition |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
100 Park Avenue |
|
Prudential |
|
49.90% |
|
49.90% |
|
834 |
|
02/00 |
|
$ |
95,800 |
|
379 West Broadway |
|
Sutton |
|
45.00% |
|
45.00% |
|
62 |
|
12/05 |
|
$ |
19,750 |
|
21 West 34th Street |
|
Sutton |
|
50.00% |
|
50.00% |
|
30 |
|
07/05 |
|
$ |
22,400 |
|
800 Third Avenue(2) |
|
Private Investors |
|
42.95% |
|
42.95% |
|
526 |
|
12/06 |
|
$ |
285,000 |
|
One Court Square |
|
JP Morgan |
|
30.00% |
|
30.00% |
|
1,402 |
|
01/07 |
|
$ |
533,500 |
|
1604-1610 Broadway |
|
Onyx/Sutton |
|
45.00% |
|
63.00% |
|
30 |
|
11/05 |
|
$ |
4,400 |
|
1745 Broadway |
|
Witkoff/SITQ/Lehman Bros. |
|
32.26% |
|
32.26% |
|
674 |
|
04/07 |
|
$ |
520,000 |
|
1 and 2 Jericho Plaza |
|
Onyx/Credit Suisse |
|
20.26% |
|
20.26% |
|
640 |
|
04/07 |
|
$ |
210,000 |
|
16 Court Street |
|
CIF |
|
35.00% |
|
35.00% |
|
318 |
|
07/07 |
|
$ |
107,500 |
|
The Meadows(3) |
|
Onyx |
|
50.00% |
|
50.00% |
|
582 |
|
09/07 |
|
$ |
111,500 |
|
388 and 390 Greenwich Street(4) |
|
SITQ |
|
50.60% |
|
50.60% |
|
2,600 |
|
12/07 |
|
$ |
1,575,000 |
|
27-29 West 34th Street |
|
Sutton |
|
50.00% |
|
50.00% |
|
41 |
|
01/06 |
|
$ |
30,000 |
|
1551-1555 Broadway |
|
Sutton |
|
10.00% |
|
10.00% |
|
26 |
|
07/05 |
|
$ |
80,100 |
|
717 Fifth Avenue |
|
Sutton/Nakash |
|
32.75% |
|
32.75% |
|
120 |
|
09/06 |
|
$ |
251,900 |
|
141 Fifth Avenue(5) |
|
Sutton/Rapport |
|
50.00% |
|
50.00% |
|
22 |
|
09/05 |
|
$ |
13,250 |
|
180/182 Broadway and 63 Nassau Street(5)(6) |
|
Harel/Sutton |
|
25.50% |
|
25.50% |
|
71 |
|
02/08 |
|
$ |
43,600 |
|
600 Lexington Avenue |
|
CPPIB |
|
55.00% |
|
55.00% |
|
304 |
|
05/10 |
|
$ |
193,000 |
|
11 West 34th Street(7) |
|
Private Investor/Sutton |
|
30.00% |
|
30.00% |
|
17 |
|
12/10 |
|
$ |
10,800 |
|
7 Renaissance |
|
Cappelli |
|
50.00% |
|
50.00% |
|
37 |
|
12/10 |
|
$ |
4,000 |
|
3 Columbus Circle(8) |
|
Moinian |
|
48.90% |
|
48.90% |
|
769 |
|
01/11 |
|
$ |
500,000 |
|
280 Park Avenue(9) |
|
Vornado |
|
50.00% |
|
50.00% |
|
1,237 |
|
03/11 |
|
$ |
400,000 |
|
450 West 33rd Street(10) |
|
Normandy |
|
50.00% |
|
50.00% |
|
1,622 |
|
04/11 |
|
$ |
28,824 |
|
| ||
| ||
(1) |
|
Acquisition price represents the actual or implied purchase price for the joint venture. |
(2) |
|
We invested approximately $109.5 million in this asset through the origination of a loan secured by up to 47% of the interests in the propertys ownership, with an option to convert the loan to an equity interest, which was exercised in December 2008. Certain existing members had the right to re-acquire approximately 4% of the propertys equity. These interests were re-acquired in December 2008 and reduced our interest to 42.95% |
(3) |
|
We, along with Onyx, acquired the remaining 50% interest on a pro-rata basis in September 2009. |
(4) |
|
The property is subject to a 13-year triple-net lease arrangement with a single tenant. The lease commenced in 2007. |
(5) |
|
The deconsolidation of these joint ventures in 2010 resulted in an adjustment to retained earnings of approximately $3.0 million and to the noncontrolling interests in other partnerships of approximately $9.5 million. |
(6) |
|
In December 2010, the Companys 180-182 Broadway joint venture with Jeff Sutton announced an agreement with Pace University to convey a long-term ground lease condominium interest to Pace University for 20 floors of student housing. The joint venture also admitted Harel, which contributed $28.1 million to the joint venture, for a 49 percent partnership interest. |
(7) |
|
In December 2010, the Companys $12.0 million first mortgage collateralized by 11 West 34th Street was repaid at par, resulting in the Companys recognition of additional income of approximately $1.1 million. Simultaneous with the repayment, the joint venture was recapitalized with the Company having a 30 percent interest. The property is subject to a long-term net lease arrangement. |
(8) |
|
We issued 306,296 operating partnership units in connection with this investment. We have committed to fund an additional $47.5 million to the joint venture. This liability is recorded in accrued interest payable and other liabilities. In addition, we made a $125.0 million bridge loan to this joint venture which was bearing interest at a rate of 7.5%. This loan was repaid when the joint venture refinanced its debt in April 2011. |
(9) |
|
In March 2011, we contributed our debt investment with a carrying value of $286.6 million to a newly formed joint venture in which we hold a 50% interest. We realized $38.7 million of additional income upon the contribution. This income is included in preferred equity and investment income. The joint venture paid us approximately $111.3 million and also assumed $30 million of related floating rate financing which matures in June 2016. See Note 5. In May 2011, this joint venture took control of the underlying property as part of a recapitalization transaction which valued the investment at approximately $1.1 billion. We hold an effective 49.5% ownership interest in the underlying investment. |
(10) |
|
This joint venture holds an investment in a debt position. |
SL Green Realty Corp.
Notes to Consolidated Financial Statements
June 30, 2011
(Unaudited)
We generally finance our joint ventures with non-recourse debt. However, in certain cases we have provided guarantees or master leased tenant space. These guarantees and master leases terminate upon the satisfaction of specified circumstances or repayment of the underlying loans. The first mortgage notes and other loan payable collateralized by the respective joint venture properties and assignment of leases at June 30, 2011 and December 31, 2010, respectively, are as follows (in thousands):
Property |
|
Maturity |
|
Interest |
|
|
June 30, |
|
|
December |
|
|
|
|
|
|
|
|
|
|
|
|
|
100 Park Avenue(2) |
|
09/2014 |
|
6.64 |
% |
$ |
213,813 |
|
$ |
204,946 |
|
21 West 34th Street |
|
12/2016 |
|
5.76 |
% |
|
100,000 |
|
|
100,000 |
|
800 Third Avenue |
|
08/2017 |
|
6.00 |
% |
|
20,910 |
|
|
20,910 |
|
One Court Square |
|
09/2015 |
|
4.91 |
% |
|
315,000 |
|
|
315,000 |
|
1604-1610 Broadway(3) |
|
04/2012 |
|
5.66 |
% |
|
27,000 |
|
|
27,000 |
|
388 and 390 Greenwich Street(4) |
|
12/2017 |
|
5.19 |
% |
|
1,106,758 |
|
|
1,106,758 |
|
1745 Broadway |
|
01/2017 |
|
5.68 |
% |
|
340,000 |
|
|
340,000 |
|
141 Fifth Avenue |
|
06/2017 |
|
5.70 |
% |
|
25,000 |
|
|
25,000 |
|
1 and 2 Jericho Plaza |
|
05/2017 |
|
5.65 |
% |
|
163,750 |
|
|
163,750 |
|
11 West 34th Street |
|
01/2016 |
|
4.87 |
% |
|
17,891 |
|
|
18,000 |
|
1551-1555 Broadway(7) |
|
07/2021 |
|
5.10 |
% |
|
180,000 |
|
|
--- |
|
280 Park Avenue |
|
06/2016 |
|
6.55 |
% |
|
710,000 |
|
|
--- |
|
Total fixed rate debt |
|
|
|
|
|
$ |
3,220,122 |
|
$ |
2,321,364 |
|
1515 Broadway(5) |
|
--- |
|
--- |
|
|
--- |
|
|
462,896 |
|
The Meadows(6) |
|
09/2012 |
|
1.56 |
% |
|
85,871 |
|
|
87,034 |
|
388 and 390 Greenwich Street(4) |
|
12/2017 |
|
1.36 |