The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
SL Green Operating Partnership, L.P.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
|
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 |
| 2016 |
| Operating Activities | | | |
| Net income | $ | 62,734 |
| | $ | 224,941 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: |
| | |
| Depreciation and amortization | 331,117 |
| | 737,195 |
|
| Equity in net income from unconsolidated joint ventures | (14,104 | ) | | (11,969 | ) |
| Distributions of cumulative earnings from unconsolidated joint ventures | 19,609 |
| | 19,311 |
|
| Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate | (16,166 | ) | | (43,588 | ) |
| Depreciable real estate reserves | 85,336 |
| | 10,387 |
|
| Loss (gain) on sale of real estate, net | 3,256 |
| | (210,750 | ) |
| (Gain) loss on sale of investments in marketable securities | (3,262 | ) | | 83 |
|
| Deferred rents receivable | (33,523 | ) | | 40,056 |
|
Other non-cash adjustments (1) | 18,423 |
| | (155,558 | ) |
| Changes in operating assets and liabilities: |
| | |
| Restricted cash—operations | 6,520 |
| | (12,855 | ) |
| Tenant and other receivables | (2,318 | ) | | 2,714 |
|
| Related party receivables | (8,238 | ) | | (4,167 | ) |
| Deferred lease costs | (31,479 | ) | | (47,036 | ) |
| Other assets | (58,068 | ) | | (30,899 | ) |
| Accounts payable, accrued expenses, other liabilities and security deposits | 1,423 |
| | (28,089 | ) |
| Deferred revenue and land leases payable | 55,361 |
| | 19,016 |
|
| Net cash provided by operating activities | 416,621 |
| | 508,792 |
|
| Investing Activities |
| | |
| Acquisitions of real estate property | (25,114 | ) | | (38,005 | ) |
| Additions to land, buildings and improvements | (251,158 | ) | | (269,182 | ) |
| Escrowed cash—capital improvements/acquisition deposits/deferred purchase price | 17,431 |
| | 85,983 |
|
| Investments in unconsolidated joint ventures | (112,697 | ) | | (69,422 | ) |
| Distributions in excess of cumulative earnings from unconsolidated joint ventures | 279,478 |
| | 171,472 |
|
| Net proceeds from disposition of real estate/joint venture interest | 116,983 |
| | 2,419,841 |
|
| Proceeds from sale or redemption of marketable securities | 55,129 |
| | 6,868 |
|
| Purchases of marketable securities | — |
| | (23,062 | ) |
| Other investments | 46,955 |
| | 8,232 |
|
| Origination of debt and preferred equity investments | (935,724 | ) | | (554,803 | ) |
| Repayments or redemption of debt and preferred equity investments | 707,676 |
| | 667,251 |
|
| Net cash (used in) provided by investing activities | (101,041 | ) | | 2,405,173 |
|
| | | | |
SL Green Operating Partnership, L.P.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| | 2022 | | 2021 |
| Distributions to noncontrolling interests in other partnerships | (123) | | | (110) | |
| Contributions from noncontrolling interests in other partnerships | — | | | 171 | |
| | | |
| Distributions paid on common and preferred units | (70,754) | | | (73,920) | |
| Other obligations related to secured borrowing | 77,874 | | | — | |
| Tax withholdings related to restricted share awards | (3,888) | | | (2,788) | |
| Deferred loan costs | 80 | | | (288) | |
| Principal payments of on financing lease liabilities | — | | | (255) | |
| Net cash used in financing activities | (124,564) | | | (9,971) | |
| Net (decrease) increase in cash, cash equivalents, and restricted cash | (29,666) | | | 28,812 | |
| Cash, cash equivalents, and restricted cash at beginning of year | 336,984 | | | 372,795 | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 307,318 | | | $ | 401,607 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Issuance of special distribution paid primarily in units | $ | 160,620 | | | $ | 123,529 | |
| Tenant improvements and capital expenditures payable | 8,700 | | | 15,214 | |
| Fair value adjustment to noncontrolling interest in the Operating Partnership | 43,023 | | | 26,609 | |
| Consolidation of real estate investment | — | | | 119,444 | |
| | | |
| | | |
| | | |
| Extinguishment of debt in connection with property dispositions | — | | | 53,548 | |
| | | |
| | | |
| Debt and preferred equity investments | — | | | 10,000 | |
| | | |
| | | |
| Removal of fully depreciated commercial real estate properties | 651 | | | 1,120 | |
| | | |
| | | |
| Share repurchase payable | — | | | 3,779 | |
| | | |
| | | |
| Recognition of right of use assets and related lease liabilities | — | | | 119,711 | |
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows. |
| | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 |
| 2016 |
| Financing Activities | | | |
| Proceeds from mortgages and other loans payable | $ | 779,650 |
| | $ | 256,207 |
|
| Repayments of mortgages and other loans payable | (706,056 | ) | | (1,786,034 | ) |
| Proceeds from revolving credit facility and senior unsecured notes | 1,447,800 |
| | 1,260,300 |
|
| Repayments of revolving credit facility and senior unsecured notes | (1,270,804 | ) | | (2,269,604 | ) |
| Proceeds from stock options exercised and DRIP issuance | 12,475 |
| | 12,404 |
|
| Repurchase of common stock | (349,991 | ) | | — |
|
| Redemption of preferred stock | (125 | ) | | (2,999 | ) |
| Distributions to noncontrolling interests in other partnerships | (45,089 | ) | | (11,023 | ) |
| Contributions from noncontrolling interests in other partnerships | 33,202 |
| | 2,019 |
|
| Distributions paid on common and preferred units | (262,340 | ) | | (244,046 | ) |
| Other obligations related to loan participations | 16,737 |
| | 59,150 |
|
| Deferred loan costs and capitalized lease obligation | (8,993 | ) | | (39,842 | ) |
| Net cash used in financing activities | (353,534 | ) | | (2,763,468 | ) |
| Net (decrease) increase in cash and cash equivalents | (37,954 | ) | | 150,497 |
|
| Cash and cash equivalents at beginning of year | 279,443 |
| | 255,399 |
|
| Cash and cash equivalents at end of period | $ | 241,489 |
| | $ | 405,896 |
|
| | | | |
(1) Included in Other non-cash adjustments is $172.4 million for the nine months ended September 30, 2016 for the amortization of the below-market lease at 388-390 Greenwich Street as a result of the tenant exercising their option to purchase the property and entering into an agreement to accelerate the sale. |
| | | | |
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | | | |
| Issuance of units in the Operating Partnership | $ | 23,273 |
| | $ | 51,647 |
|
| Redemption of units in the Operating Partnership for stock | 15,352 |
| | 12,746 |
|
| Derivative instruments at fair value | 7,362 |
| | — |
|
| Exchange of debt investment for equity in joint venture | — |
| | 68,581 |
|
| Issuance of preferred units relating to a real estate acquisition | — |
| | 22,793 |
|
| Tenant improvements and capital expenditures payable | 8,926 |
| | 4,281 |
|
| Fair value adjustment to noncontrolling interest in Operating Partnership | 2,669 |
| | 4,959 |
|
| Deconsolidation of subsidiaries | 328,643 |
| | 1,173,570 |
|
| Transfer of assets related to assets held for sale | 273,455 |
| | 2,048,376 |
|
| Transfer of liabilities related to assets held for sale | 1,290 |
| | 1,677,528 |
|
| Deferred leasing payable | 810 |
| | 1,208 |
|
| Removal of fully depreciated commercial real estate properties | 11,158 |
| | 22,179 |
|
| | | | | | | | | | | |
| Three Months Ended March 31, |
| | 2022 | | 2021 |
| Cash and cash equivalents | $ | 223,674 | | | $ | 304,999 | |
| Restricted cash | 83,644 | | | 96,608 | |
| Total cash, cash equivalents, and restricted cash | $ | 307,318 | | | $ | 401,607 | |
The accompanying notes are an integral part of these consolidated financial statements.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements
September 30, 2017March 31, 2022
(unaudited)
1. Organization and Basis of Presentation
SL Green Realty Corp., which is referred to as the Company or SL Green, a Maryland corporation, and SL Green Operating Partnership, L.P., which is referred to as SLGOP or the Operating Partnership, a Delaware limited partnership, were formed in June 1997 for the purpose of combining the commercial real estate business of S.L. Green Properties, Inc. and its affiliated partnerships and entities. The Operating Partnership received a contribution of interest in the real estate properties, as well as 95% of the economic interest in the management, leasing and construction companies which are referred to as S.L. Green Management Corp, or the Service Corporation. All of the management, leasing and construction services that are provided to the properties that are wholly-owned by us and that are provided to certain joint ventures are conducted through SL Green Management LLC and S.L. Green Management Corp., respectively, which isare 100% owned by the Operating Partnership. The Company has qualified, and expects to qualify in the current fiscal year, as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Code, and operates as a self-administered, self-managed REIT. A REIT is a legal entity that holds real estate interests and, through payments of dividends to stockholders, is permitted to minimize the payment of Federal income taxes at the corporate level. Unless the context requires otherwise, all references to "we," "our" and "us" means the Company and all entities owned or controlled by the Company, including the Operating Partnership.
Substantially all of our assets are held by, and all of our operations are conducted through, the Operating Partnership. The Company is the sole managing general partner of the Operating Partnership. As of September 30, 2017,March 31, 2022, noncontrolling investors held, in the aggregate, a 4.45%6.00% limited partnership interest in the Operating Partnership. We refer to these interests as the noncontrolling interests in the Operating Partnership. The Operating Partnership is considered a variable interest entity, or VIE, in which we are the primary beneficiary. See Note 11, "Noncontrolling Interests on the Company's Consolidated Financial Statements".Statements."
Reckson Associates Realty Corp., or Reckson,On December 2, 2021, our Board of Directors declared an ordinary dividend of $0.3108 per share and Reckson Operating Partnership, L.P., or ROP, are wholly-owned subsidiariesa special dividend of SL Green Realty Corp.
As$2.4392 per share (together, "the Total Dividend"). The Total Dividend was paid on January 18, 2022 to shareholders of September 30, 2017, we ownedrecord at the following interests in propertiesclose of business on December 15, 2021 ("the Record Date"). Shareholders had the opportunity to elect to receive the Total Dividend in the New York Metropolitan area, primarilyform of all cash or all stock, subject to proration if either option was oversubscribed. As a result of the elections made, the cash option was oversubscribed and was prorated. Shareholders who elected to receive cash received, for each share of common stock they owned as of the Record Date, approximately $0.3976 in midtown Manhattan. Our investmentscash and 0.0295 shares of common stock. Shareholders who elected to receive shares received, for each share of common stock they owned as of the Record Date, approximately 0.0345 shares of common stock. The number of shares issued was calculated based on the volume weighted average trading price of SLG's common stock between January 5-7, 2022 of $79.71 per share.
To mitigate the dilutive impact of the common stock issued in the New York Metropolitan areaspecial dividend, the Board of Directors also include investmentsauthorized a reverse stock split, which was effective after markets closed on January 21, 2022. On January 10, 2022, a committee of the Board of Directors calculated the ratio for the reverse stock split of our issued and outstanding shares of common stock as 1.03060-for-1. After the issuance of the dividend and the completion of the reverse stock split, the number of shares of our common stock outstanding was equivalent to the number of total shares outstanding on the Record Date (not including any issuances or repurchases that occurred following the Record Date, as well as any fractional shares that would have been issued but for which cash-in-lieu was paid). However, on a relative basis, some individual shareholders may have more shares of SLG’s common stock, and some individual shareholders may have fewer shares of our common stock, depending on their individual elections to receive cash or stock and as a result of the cash option being oversubscribed.
All share-related references and measurements including the number of shares outstanding, share prices, number of shares repurchased, earnings per share, dividends per share, and share-based compensation awards, have been retroactively adjusted to reflect the reverse stock split for all periods presented in Brooklyn, Long Island, Westchester County, Connecticut and New Jersey, which are collectively known as the Suburban properties:this Quarterly Report on Form 10-Q.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | Consolidated | | Unconsolidated | | Total | |
|
| Location | | Property
Type | | Number of Properties |
| Approximate Square Feet (unaudited) | | Number of Properties | | Approximate Square Feet (unaudited) | | Number of Properties | | Approximate Square Feet (unaudited) | | Weighted Average Occupancy(1) (unaudited) |
| Commercial: | |
|
|
| |
| |
| |
| |
| |
|
| Manhattan | | Office | | 24 |
|
| 16,054,606 |
| | 7 |
| | 6,558,139 |
| | 31 |
| | 22,612,745 |
| | 93.4 | % |
| | Retail | | 4 |
| (2) | 302,583 |
| | 9 |
| | 347,970 |
| | 13 |
| | 650,553 |
| | 94.5 | % |
| | Development/Redevelopment | | 7 |
|
| 158,985 |
| | 4 |
| | 770,514 |
| | 11 |
| | 929,499 |
| | 59.9 | % |
| | Fee Interest | | 1 |
|
| 176,530 |
| | 1 |
| | — |
| | 2 |
| | 176,530 |
| | 100.0 | % |
| |
| | 36 |
|
| 16,692,704 |
| | 21 |
| | 7,676,623 |
| | 57 |
| | 24,369,327 |
| | 92.2 | % |
| Suburban | | Office | | 22 |
| (3)(4) | 3,608,800 |
| | 2 |
| | 640,000 |
| | 24 |
| | 4,248,800 |
| | 83.1 | % |
| | Retail | | 1 |
|
| 52,000 |
| | — |
| | — |
| | 1 |
| | 52,000 |
| | 100.0 | % |
| | Development/Redevelopment | | 1 |
|
| 1,000 |
| | 1 |
| | — |
| | 2 |
| | 1,000 |
| | 100.0 | % |
| |
| | 24 |
|
| 3,661,800 |
| | 3 |
| | 640,000 |
| | 27 |
| | 4,301,800 |
| | 83.3 | % |
| Total commercial properties | | 60 |
|
| 20,354,504 |
| | 24 |
| | 8,316,623 |
| | 84 |
| | 28,671,127 |
| | 90.8 | % |
| Residential: | |
| |
|
|
| |
| |
| |
| |
| |
|
| Manhattan | | Residential | | 3 |
| (2) | 472,105 |
| | 12 |
| | 2,656,856 |
| | 15 |
| | 3,128,961 |
| | 86.4 | % |
| Suburban | | Residential | | — |
|
| — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
| Total residential properties | | 3 |
|
| 472,105 |
| | 12 |
| | 2,656,856 |
| | 15 |
| | 3,128,961 |
| | 86.4 | % |
Total portfolio(2)(3) | | 63 |
|
| 20,826,609 |
| | 36 |
| | 10,973,479 |
| | 99 |
| | 31,800,088 |
| | 90.4 | % |
| |
(1) | The weighted average occupancy for commercial properties represents the total occupied square feet divided by total square footage at acquisition. The weighted average occupancy for residential properties represents the total occupied units divided by total available units. |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
| |
(2) | As of September 30, 2017, we owned a building at 315 West 33rd Street, also known as The Olivia, that was comprised of approximately 270,132 square feet (unaudited) of retail space and approximately 222,855 square feet (unaudited) of residential space. For the purpose of this report, we have included this building in the number of retail properties we own. However, we have included only the retail square footage in the retail approximate square footage, and have listed the balance of the square footage as residential square footage. |
| |
(3) | Includes the properties at 16 Court Street in Brooklyn, New York, and 125 Chubb Avenue in Lyndhurst, New Jersey which are classified as held for sale at September 30, 2017. The sales closed in October 2017. |
As of September 30, 2017,March 31, 2022, we owned the following interests in properties in the New York metropolitan area, primarily in midtown Manhattan. Our investments located outside of Manhattan are referred to as the Suburban properties:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Consolidated | | Unconsolidated | | Total | | |
| Location | | Property
Type | | Number of Buildings | | Approximate Square Feet (unaudited) | | Number of Buildings | | Approximate Square Feet (unaudited) | | Number of Buildings | | Approximate Square Feet (unaudited) | | Weighted Average Occupancy(1) (unaudited) |
| Commercial: | | | | | | | | | | | | | | |
| Manhattan | | Office | | 12 | | | 8,180,345 | | | 11 | | | 13,661,381 | | | 23 | | | 21,841,726 | | | 91.5 | % |
| | Retail | | 2 | | (2) | 17,888 | | | 9 | | | 301,996 | | | 11 | | | 319,884 | | | 91.2 | % |
| | Development/Redevelopment | (1) | 6 | | | 2,230,282 | | | 2 | | | 1,618,310 | | | 8 | | | 3,848,592 | | | N/A |
| | Fee Interest | | 1 | | | 7,684 | | | — | | | — | | | 1 | | | 7,684 | | | N/A |
| | | | 21 | | | 10,436,199 | | | 22 | | | 15,581,687 | | | 43 | | | 26,017,886 | | | 91.5 | % |
| Suburban | | Office | | 7 | | | 862,800 | | | — | | | — | | | 7 | | | 862,800 | | | 78.6 | % |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total commercial properties | | 28 | | | 11,298,999 | | | 22 | | | 15,581,687 | | | 50 | | | 26,880,686 | | | 91.0 | % |
| Residential: | | | | | | | | | | | | | | | | |
| Manhattan | | Residential | | 2 | | (2) | 222,632 | | | 6 | | | 445,934 | | | 8 | | | 668,566 | | | 87.9 | % |
| | | | | | | | | | | | | | |
| Total portfolio | | 30 | | | 11,521,631 | | | 28 | | | 16,027,621 | | | 58 | | | 27,549,252 | | | 91.0 | % |
(1)The weighted average occupancy for commercial properties represents the total occupied square footage divided by the total square footage at acquisition. The weighted average occupancy for residential properties represents the total occupied units divided by the total available units. Properties under construction are not included in the calculation of weighted average occupancy.
(2)As of March 31, 2022, we owned a building at 7 Dey / 185 Broadway that was comprised of approximately 50,206 square feet (unaudited) of retail space and approximately 140,382 square feet (unaudited) of residential space. For the purpose of this report, we have included this building in the number of retail properties we own. However, we have included only the retail square footage in the retail approximate square footage, and have listed the balance of the square footage as residential square footage.
As of March 31, 2022, we also managed an approximately 336,000 square foot (unaudited)manage 1 office building owned by a third party encompassing approximately 0.3 million square feet (unaudited), and held debt and preferred equity investments with a book value of $2.2$1.1 billion, including $0.1 billion ofexcluding debt and preferred equity investments and other financing receivables totaling less than $0.1 billion that are included in other balance sheet line items other than the Debt and Preferred Equity Investmentspreferred equity investments line item.
Partnership Agreement
In accordance with the partnership agreement of the Operating Partnership, or the Operating Partnership Agreement, we allocate all distributions and profits and losses in proportion to the percentage of ownership interests of the respective partners.partners, subject to the priority distributions with respect to preferred units and special provisions that apply to Long Term Incentive Plan ("LTIP") Units. As the managing general partner of the Operating Partnership, we are required to take such reasonable efforts, as determined by us in our sole discretion, to cause the Operating Partnership to distribute sufficient amounts to enable the payment of sufficient dividends by us to minimize any Federal income or excise tax at the Company level. Under the Operating Partnership Agreement, each limited partner has the right to redeem units of limited partnership interests for cash, or if we so elect, shares of SL Green's common stock on a one-for-oneone-for-1 basis.
Basis of Quarterly Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of the financial position of the Company and the Operating Partnership at September 30, 2017March 31, 2022 and the results of operations for the periods presented have been included. The operating results for the period presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2022. These financial statements should be read in conjunction with the financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 20162021 of the Company and the Operating Partnership.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
The consolidated balance sheet at December 31, 20162021 has been derived from the audited financial statements as of that date but dodoes not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
In April 2022, the Company closed on the sale of 1080 Amsterdam Avenue and its remaining interests in the Stonehenge portfolio for a gross sales price of $42.7 million and $1.0 million, respectively.
2. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include our accounts and those of our subsidiaries, which are wholly-owned or controlled by us. Entities which we do not control through our voting interest and entities which are variable interest entities, but where we are not the primary beneficiary, are accounted for under the equity method. See Note 5, "Debt and Preferred Equity Investments" and Note 6, "Investments in Unconsolidated Joint Ventures." All significant intercompany balances and transactions have been eliminated.
We consolidate a variable interest entity, or VIE in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.
Investment in Commercial Real Estate Properties
On a periodic basis, we assess whether there are any indications that the value of our real estate properties may be other than temporarily impaired or that their carrying value may not be recoverable. A property's value is considered impaired if management's estimate of the aggregate future cash flows (undiscounted) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the calculated fair value of the property. We also evaluate our real estate properties for potential impairment when a real estate property has been classified as held for sale. Real estate assets held for sale are valued at the lower of either their carrying value or fair value less costs to sell. We do not believe that there were any indicators of impairment at any of our consolidated properties at September 30, 2017. We recorded no depreciable real estate reserves for the three months ended September 30, 2017, and
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
aggregate depreciable real estate reserves of $85.3 million for the nine months ended September 30, 2017. See Note 4, "Property Dispositions".
We allocate the purchase price of real estate to land and building (inclusive of tenant improvements) and, if determined to be material, intangibles, such as the value of above- and below-market leases and origination costs associated with the in-place leases. We depreciate the amount allocated to building (inclusive of tenant improvements) over their estimated useful lives, which generally range from three3 years to 40 years. We amortize the amount allocated to the above- and below-market leases over the remaining term of the associated lease, which generally range from one1 year to 1415 years, and record it as either an increase (in the case of below-market leases) or a decrease (in the case of above-market leases) to rental income. We amortize the amount allocated to the values associated with in-place leases over the expected term of the associated lease, which generally ranges from one1 year to 1415 years. If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balance of the related intangible will be written off. The tenant improvements and origination costs are amortized as an expense over the remaining life of the lease (or charged against earnings if the lease is terminated prior to its contractual expiration date). We assess fair value of the leases based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. To the extent acquired leases contain fixed rate renewal options that are below-market and determined to be material, we amortize such below-market lease value into rental income over the renewal period.
The Company classifies those leases under which the Company is the lessee at lease commencement as finance or operating leases. Leases qualify as finance leases if the lease transfers ownership of the asset at the end of the lease term, the lease grants an option to purchase the asset that we are reasonably certain to exercise, the lease term is for a major part of the remaining economic life of the asset, or the present value of the lease payments exceeds substantially all of the fair value of the asset. Leases that do not qualify as finance leases are deemed to be operating leases. At lease commencement the Company records a lease liability which is measured as the present value of the lease payments and a right of use asset which is measured as the amount of the lease liability and any initial direct costs incurred. The Company applies a discount rate to determine the present value of the lease payments. If the rate implicit in the lease is known, the Company uses that rate. If the rate implicit in the lease is not known, the Company uses a discount rate reflective of the Company’s collateralized borrowing rate given the term of the lease. To determine the discount rate, the Company employs a third party specialist to develop an analysis based primarily on the observable borrowing rates of the Company, other REITs, and other corporate borrowers with long-term borrowings. On the consolidated statements of operations, operating leases are expensed through operating lease rent while financing leases are expensed through amortization and interest expense. When applicable, the Company combines the consideration for lease and non-lease components in the calculation of the value of the lease obligation and right-of-use asset.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
On a periodic basis, we assess whether there are any indications that the value of our real estate properties may be impaired or that their carrying value may not be recoverable. A property's value is considered impaired if management's estimate of the aggregate future cash flows (undiscounted) to be generated by the property is less than the carrying value of the property. To the extent impairment has occurred, the loss will be measured as the excess of the carrying amount of the property over the fair value of the property as calculated in accordance with Accounting Standards Codification, or ASC 820. We also evaluate our real estate properties for impairment when a property has been classified as held for sale. Real estate assets held for sale are valued at the lower of their carrying value or fair value less costs to sell and depreciation expense is no longer recorded.
For the three months ended March 31, 2022 and 2021, we recognized $4.6 million and $15.8 milliona reduction of rental revenue for the threeof ($0.1 million) and nine months ended September 30, 2017, and $0.2 million and $191.4 million of rental revenue for the three and nine months ended September 30, 2016($1.9 million), respectively, for the amortization of aggregate below-marketabove-market leases in excess of above-marketbelow-market leases and a reduction in lease origination costs, resulting from the allocation of the purchase price of the applicable properties. Included in rental revenue is zero and $172.4 million for the three and nine months ended September 30, 2016, for the amortization of the below-market lease at 388-390 Greenwich Street as a result of the tenant exercising their option to purchase the property and entering into an agreement to accelerate the sale. For the three and nine months ended September 30, 2017, we recognized as a reduction to interest expense the amortization of above-market rate mortgages of $0.0 million and $0.8 million, respectively. For the three and nine months ended September 30, 2016, we recognized as a reduction to interest expense the amortization of the above-market rate mortgages assumed of $0.7 million and $2.0 million, respectively.
The following summarizes our identified intangible assets (acquired above-market leases and in-place leases) and intangible liabilities (acquired below-market leases) as of September 30, 2017March 31, 2022 and December 31, 20162021 (in thousands):
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Identified intangible assets (included in other assets): | | | |
| Gross amount | $ | 199,722 | | | $ | 199,722 | |
| Accumulated amortization | (184,129) | | | (182,643) | |
Net (1) | $ | 15,593 | | | $ | 17,079 | |
| Identified intangible liabilities (included in deferred revenue): | | | |
| Gross amount | $ | 212,767 | | | $ | 212,767 | |
| Accumulated amortization | (210,454) | | | (210,262) | |
Net (1) | $ | 2,313 | | | $ | 2,505 | |
(1)As of March 31, 2022, no net intangible assets and no net intangible liabilities were reclassified to assets held for sale or liabilities related to assets held for sale. As of December 31, 2021, $1.8 million of net intangible assets and no net intangible liabilities were reclassified to assets held for sale and liabilities related to assets held for sale.
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Identified intangible assets (included in other assets): | | | |
| Gross amount | $ | 474,493 |
| | $ | 651,099 |
|
| Accumulated amortization | (398,047 | ) | | (410,930 | ) |
Net(1) | $ | 76,446 |
| | $ | 240,169 |
|
| Identified intangible liabilities (included in deferred revenue): | | | |
| Gross amount | $ | 639,511 |
| | $ | 655,930 |
|
| Accumulated amortization | (474,365 | ) | | (464,749 | ) |
Net(1) | $ | 165,146 |
| | $ | 191,181 |
|
We consider all highly liquid investments with maturity of three months or less when purchased to be cash equivalents.
| |
(1) | As of September 30, 2017 and December 31, 2016, $3.9 million and none, respectively and $1.1 million and none, respectively, of net intangible assets and net intangible liabilities, were reclassified to assets held for sale and liabilities related to assets held for sale.Restricted Cash Restricted cash primarily consists of security deposits held on behalf of our tenants, interest reserves, as well as capital improvement and real estate tax escrows required under certain loan agreements. |
Fair Value Measurements
See Note 16, "Fair Value Measurements."
Investment in Marketable Securities
At acquisition, we designate a debt security as held-to-maturity, available-for-sale, or trading. As of September 30, 2017,March 31, 2022, we did not have any debt securities designated as held-to-maturity or trading. We account for our available-for-sale securities at fair value pursuant to Accounting Standards Codification, or ASC 820-10, with the net unrealized gains or losses reported as a component of accumulated other comprehensive income or loss. Any unrealizedThe cost of marketable securities sold and the amount reclassified out of accumulated other comprehensive income into earnings is determined using the specific identification method. Credit losses that are determined to be other-than-temporary are recognized in earnings upaccordance with ASC 326. We account for our equity marketable securities at fair value pursuant to their credit component.
ASC 820-10, with the net unrealized gains or losses reported in net income.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
The costAs of bonds and marketable securities sold is determined using the specific identification method.
At September 30, 2017March 31, 2022 and December 31, 2016,2021, we held the following marketable securities (in thousands):
| | | | | | | | March 31, 2022 | | December 31, 2021 |
| Commercial mortgage-backed securities | | Commercial mortgage-backed securities | $ | 22,353 | | | $ | 24,146 | |
| Total marketable securities available-for-sale | | Total marketable securities available-for-sale | $ | 22,353 | | | $ | 24,146 | |
| | September 30, 2017 | | December 31, 2016 | | | | |
| Equity marketable securities | $ | — |
| | $ | 48,315 |
| Equity marketable securities | $ | 10,536 | | | $ | 10,606 | |
| Commercial mortgage-backed securities | 28,802 |
| | 36,795 |
| |
| Total marketable securities available-for-sale | $ | 28,802 |
| | $ | 85,110 |
| |
| Total investment in marketable securities | | Total investment in marketable securities | $ | 32,889 | | | $ | 34,752 | |
The cost basis of the commercial mortgage-backed securities was $27.5$23.0 million as of March 31, 2022 and $36.0 million at September 30, 2017 andas of December 31, 2016, respectively.2021. These securities mature at various times through 2049.2035. All securities were in an unrealized gain position as of March 31, 2022 and December 31, 2021 except for 1 security, which had an unrealized loss of $2.1 million and a fair market value of $5.7 million as of March 31, 2022, and an unrealized loss of $0.6 million and a fair value of $7.2 million as of December 31, 2021. This marketable security was in a continuous unrealized loss position for more than 12 months as of March 31, 2022 and December 31, 2021. We do not intend to sell these securities, and it is more likely than not that we will not be required to sell the investments before recovery of their amortized cost bases.
We held no equity marketable securities as of September 30, 2017. The cost basisMarch 31, 2022 and December 31, 2021. We recognized $0.1 million of unrealized loss for the three months ended March 31, 2022. We did not hold any equity marketable securities was $43.3 million at Decemberduring the three months ended March 31, 2016.2021.
We did not dispose of any debt or equity marketable securities during the three months ended March 31, 2022. During the three and nine months ended September 30, 2017,March 31, 2021, we disposed of marketable securities forreceived aggregate net proceeds of $0.8$5.0 million and $55.2 million, respectively. Duringfrom the three and nine months ended September 30, 2016, we disposedrepayment of 1 debt marketable securities for aggregate net proceeds of $1.7 million and $6.9 million, respectively.security.
Investments in Unconsolidated Joint Ventures
We assess our investments in unconsolidated joint ventures for recoverability and if it is determined that a loss in value of the investment is other than temporary, we write down the investment to its fair value. We evaluate our equity investments for impairment based on theeach joint ventures' actual and projected discounted cash flows. We do not believe that the values of any of our equity investments were impaired at September 30, 2017.March 31, 2022.
ReserveDeferred Lease Costs
Deferred lease costs consist of incremental fees and direct costs that would not have been incurred if the lease had not been obtained and are amortized on a straight-line basis over the related lease term.
Lease Classification
Lease classification for Possible Credit Lossesleases under which the Company is the lessor is evaluated at lease commencement and leases not classified as sales-type leases or direct financing leases are classified as operating leases. Leases qualify as sales-type leases if the contract includes either transfer of ownership clauses, certain purchase options, a lease term representing a major part of the economic life of the asset, or the present value of the lease payments and residual guarantees provided by the lessee exceeds substantially all of the fair value of the asset. Additionally, leasing an asset so specialized that it is not deemed to have any value to the Company at the end of the lease term may also result in classification as a sales-type lease. Leases qualify as direct financing leases when the present value of the lease payments and residual value guarantees provided by the lessee and unrelated third parties exceeds substantially all of the fair value of the asset and collection of the payments is probable.
Revenue Recognition
Rental revenue for operating leases is recognized on a straight-line basis over the term of the lease. Rental revenue recognition commences when the leased space is available for its intended use by the lessee.
To determine whether the leased space is available for its intended use by the lessee, management evaluates whether we or the tenant are the owner of tenant improvements for accounting purposes. When management concludes that we are the owner of tenant improvements, rental revenue recognition begins when the tenant takes possession of the finished space, which is when such tenant improvements are substantially complete. In certain instances, when management concludes that we are not the owner of tenant improvements, rental revenue recognition begins when the tenant takes possession of or controls the space.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
The expenseexcess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred rents receivable on the consolidated balance sheets.
In addition to base rent, our tenants also generally will pay variable rent, which represents their pro rata share of increases in real estate taxes and certain operating expenses for possible credit lossesthe building over a base year. In some leases, in connectionlieu of paying additional rent based upon increases in certain building operating expenses, the tenant will pay additional rent based upon increases in the wage rate paid to porters over the porters' wage rate in effect during a base year or increases in the consumer price index over the index value in effect during a base year. In addition, many of our leases contain fixed percentage increases over the base rent to cover escalations. Electricity is most often supplied by the landlord either on a sub-metered basis, or rent inclusion basis (i.e., a fixed fee is included in the rent for electricity, which amount may increase based upon increases in electricity rates or increases in electrical usage by the tenant). Base building services other than electricity (such as heat, air conditioning and freight elevator service during business hours, and base building cleaning) are typically provided at no additional cost, with the tenant paying additional rent only for services which exceed base building services or for services which are provided outside normal business hours. These escalations are based on actual expenses incurred in the prior calendar year. If the expenses in the current year are different from those in the prior year, then during the current year, the escalations will be adjusted to reflect the actual expenses for the current year.
Rental revenue is recognized if collectability is probable. If collectability of substantially all of the lease payments is assessed as not probable, any difference between the rental revenue recognized to date and the lease payments that have been collected is recognized as a current-period adjustment to rental revenue. A subsequent change in the assessment of collectability to probable may result in a current-period adjustment to rental revenue for any difference between the rental revenue that would have been recognized if collectability had always been assessed as probable and the rental revenue recognized to date.
The Company provides its tenants with certain customary services for lease contracts such as common area maintenance and general security. We have elected to combine the non-lease components with the lease components of our operating lease agreements and account for them as a single lease component in accordance with ASC 842.
We record a gain or loss on sale of real estate assets when we no longer have a controlling financial interest in the entity owning the real estate, a contract exists with a third party and that third party has control of the assets acquired.
Investment income on debt and preferred equity investments is accrued based on the contractual terms of the instruments and when it is deemed collectible. Some debt and preferred equity investments provide for accrual of interest at specified rates, which differ from current payment terms. Interest is recognized on such loans at the accrual rate subject to management's determination that accrued interest is collectible. If management cannot make this determination, interest income above the current pay rate is recognized only upon actual receipt.
Deferred origination fees, original issue discounts and loan origination costs, if any, are recognized as an adjustment to interest income over the terms of the related investments using the effective interest method. Fees received in connection with loan commitments are also deferred until the loan is funded and are then recognized over the term of the loan as an adjustment to yield. Discounts or premiums associated with the purchase of loans are amortized or accreted into interest income as a yield adjustment on the effective interest method based on expected cash flows through the expected maturity date of the related investment. If we purchase a debt or preferred equity investment at a discount, intend to hold it until maturity and expect to recover the full value of the investment, we accrete the discount into income as an adjustment to yield over the term of the investment. If we purchase a debt or preferred equity investment at a discount with the intention of foreclosing on the collateral, we do not accrete the discount. For debt investments acquired at a discount for credit quality, the difference between contractual cash flows and expected cash flows at acquisition is not accreted. Anticipated exit fees, the collection of which is expected, are also recognized over the term of the loan as an adjustment to yield.
We consider a debt and preferred equity investment to be past due when amounts contractually due have not been paid. Debt and preferred equity investments are placed on a non-accrual status at the earlier of the date at which payments become 90 days past due or when, in the opinion of management, a full recovery of interest income becomes doubtful. Interest income recognition is resumed on any debt or preferred equity investment that is on non-accrual status when such debt or preferred equity investment becomes contractually current and performance is demonstrated to be resumed.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
We may syndicate a portion of the loans that we originate or sell the loans individually. When a transaction meets the criteria for sale accounting, we recognize gain or loss based on the difference between the sales price and the carrying value of the loan sold. Any related unamortized deferred origination fees, original issue discounts, loan origination costs, discounts or premiums at the time of sale are recognized as an adjustment to the gain or loss on sale, which is included in investment income on the consolidated statement of operations. Any fees received at the time of sale or syndication are recognized as part of investment income.
Asset management fees are recognized on a straight-line basis over the term of the asset management agreement.
Debt and Preferred Equity Investments
Debt and preferred equity investments are presented at the net amount expected to be collected in accordance with ASC 326. An allowance for loan losses is deducted from the amortized cost basis of the financial assets to present the net carrying value at the amount expected to be collected through the expected maturity date of such investments. The expense for loan loss and other investment reserves is the charge to earnings to increaseadjust the allowance for possible creditloan losses to the level thatappropriate level. Amounts are written off from the allowance when we estimatede-recognize the related investment either as a result of a sale of the investment or acquisition of equity interests in the collateral.
The Company evaluates the amount expected to be adequate,collected based on current market and economic conditions, historical loss information, and reasonable and supportable forecasts. The Company's assumptions are derived from both internal data and external data which may include, among others, governmental economic projections for the New York City Metropolitan area, public data on recent transactions and filings for securitized debt instruments. This information is aggregated by asset class and adjusted for duration. Based on these inputs, loans are evaluated at the individual asset level. In certain instances, we may also use a probability-weighted model that considers the likelihood of multiple outcomes and the amount expected to be collected for each outcome.
The evaluation of the possible credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor requires significant judgment, which include both asset level and market assumptions over the relevant time period.
In addition, quarterly, the Company assigns each loan a risk rating. Based on a 3-point scale, loans are rated “1” through “3,” from lower risk to higher risk, which ratings are defined as follows: 1 - Low Risk Assets - Low probability of loss, 2 - Watch List Assets - Higher potential for loss, 3 - High Risk Assets - Loss more likely than not. Loans with risk ratings of 2 or above are evaluated to determine whether the expected risk of loss is appropriately captured through the combination of our expectations of current conditions, historical loss information and supportable forecasts described above or whether risk characteristics specific to the loan warrant the use of a probability-weighted model.
Financing investments that are classified as held for sale are carried at the expected amount to be collected 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 considering delinquencies, loss experience and collateral quality. Other factors considered include geographic trends, product diversification,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 size of the portfolio and current economic conditions. Based upon these factors, we establish a provision for possible credit loss on each individual investment. When it is probable that weinvestment will be unablereclassified at its expected amount to collect all amounts contractually due,be collected.
Other financing receivables that are included in balance sheet line items other than the investment is considered impaired.
Where impairment is indicated on an investment that is held to maturity, a valuation allowance isDebt and preferred equity investments line are also measured based upon the excess of the recorded investment amount overat the net fair value ofamount expected to be collected.
Accrued interest receivable amounts related to these debt and preferred equity investment and other financing receivables are recorded at the collateral. Any deficiency betweennet amount expected to be collected within Other assets in the carrying amount ofconsolidated balance sheets. Accrued interest receivables that are written off are recognized as an assetexpense in loan loss and the calculated value of the collateral is charged to expense. We continue to assess or adjust our estimates based on circumstances of a loan and the underlying collateral. If additional information reflects increased recovery of ourother investment we will adjust our reserves accordingly. There were no loan reserves recorded during the three and nine months ended September 30, 2017 and 2016.reserves.
Income Taxes
SL Green is taxed as a REIT under Section 856(c) of the Code. As a REIT, SL Green generally is not subject to Federal income tax. To maintain its qualification as a REIT, SL Green must distribute at least 90% of its REIT taxable income to its stockholders and meet certain other requirements. If SL Green fails to qualify as a REIT in any taxable year, SL Green will be subject to Federal income tax on SL Green'sits taxable income at regular corporate rates. SL Green may also be subject to certain state, local and franchise taxes. Under certain circumstances, Federal income and excise taxes may be due on SL Green'sits undistributed taxable income.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
The Operating Partnership is a partnership and, as a result, all income and losses of the partnership are allocated to the partners for inclusion in their respective income tax returns. The only provision for income taxes included in the consolidated statements of operations relates to the Operating Partnership’s consolidated taxable REIT subsidiaries. The Operating Partnership may also be subject to certain state, local and franchise taxes.
Pursuant to amendments to the Code that became effective January 1, 2001, weWe have elected, and may elect in the future, to treat certain of our existing or newly created corporate subsidiaries as taxable REIT subsidiaries, or TRSs. In general, TRSs may perform non-customary services for the tenants of the Company, hold assets that we cannot hold directly and generally may engage in any real estate or non-real estate related business. The TRSs generate income, resulting in Federal and state income tax liability for these entities.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
During the three and nine months ended September 30, 2017, weWe recorded Federal, state and local tax provisions of $0.1totaling $0.9 million and $2.8$0.7 million during the three months ended March 31, 2022 and 2021, 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.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash investments, debt and preferred equity investments and accounts receivable. We place our cash investments with high quality financial institutions. The collateral securing our debt and preferred equity investments is located in New York City. See Note 5, "Debt and Preferred Equity Investments."
We perform initial and ongoing evaluations of the credit evaluationsquality of our tenants and require most tenants to provide security deposits or letters of credit. Though these security deposits and letters of credit are insufficient to meet the total value of a tenant's lease obligation, they are a measure of good faith and a potential source of funds to offset the economic costs associated with lost revenue from that tenant and the costs associated with re-tenanting a space. The properties in our real estate portfolio are primarily located in the New York metropolitan area, principally in Manhattan. We also have properties located in Brooklyn, Long Island, Westchester County, Connecticut and New Jersey. TheOur tenants located in our buildings operate in various industries. Other than two tenants, Credit Suisse Securities (USA), Inc. and1 tenant, Viacom International,CBS Inc., who accountwhich accounted for 8.8% and 6.7%6.3% of our share of annualized cash rent as of March 31, 2022, no other tenant in our portfolio accounted for more than 5.0% of our share of annualized cash rent, including our share of joint venture annualized cash rent, at September 30, 2017. as of March 31, 2022.
For the three months ended September 30, 2017, 8.9%, 6.3%, 6.2%, and 5.4%March 31, 2022, the following properties contributed more than 5.0% of our share ofannualized cash rent from office properties, including our share of joint venture annualized rent, was attributable to 1515 Broadway, 11 Madison Avenue, 1185 Avenue of the Americas, and 420 Lexington Avenue, respectively. Our share of annualized cash rent for all other properties was below 5.0%.from joint venture office properties:
| | | | | |
| Property | Three months ended March 31, 2022 |
| One Vanderbilt Avenue | 14.3% |
| 11 Madison Avenue | 9.3% |
| 420 Lexington Ave | 7.0% |
| 1185 Avenue of the Americas | 7.0% |
| 1515 Broadway | 6.9% |
| 280 Park Avenue | 5.8% |
Reclassification
Certain prior year balances have been reclassified to conform to our current year presentation.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
Accounting Standards Updates
In August 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. The amendments in the new standard will permit more flexibility in hedging interest rate risk for both variable rate and fixed rate financial instruments. The standard will also enhance the presentation of hedge results in the financial statements. The guidance is effective for fiscal years beginning after December 15, 2018 and early adoption is permitted. The Company has not yet adopted the guidance, and does not expect a material impact on the Company’s consolidated financial statements when the new standard is implemented.
In May 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-09, Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting. The guidance clarifies the changes to the terms or conditions of a share-based payment award that require an entity to apply modification accounting in Topic 718. The guidance is effective for fiscal years beginning after December 15, 2017 and early adoption is permitted. The Company has not yet adopted the guidance.
In February 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-05 to clarify the scope of Subtopic 610-20 as well as provide guidance on accounting for partial sales of nonfinancial assets. Subtopic 610-20 was issued in May 2014 as part of ASU 2014-09. The Company anticipates adopting this guidance January 1, 2018, and applying the modified retrospective approach. The Company is currently evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements.
In January, 2017,March 2022, the FASB issued ASU No. 2017-01, Business Combinations2022-02 Financial Instruments - Credit Losses (Topic 805): Clarifying326) Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 eliminates the Definition of a Business. Thetroubled debt restructuring recognition and measurement guidance clarifies the definition of a business and, provides guidance to assist with determining whether transactions should be accounted for as acquisitions of assets or businesses. The main provision isinstead, requires that an acquiree is notentity evaluate whether the modification represents a business if substantially
SL Green Realty Corp.an existing loan. The amendments enhance existing disclosure requirements and SL Green Operating Partnership, L.P.
Notesintroduce new requirements related to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
allcertain modifications of receivables made to borrowers experiencing financial difficulties. Additionally, ASU 2022-02 requires an entity to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within the fair valuescope of the gross assets is concentrated in a single identifiable asset or group of assets. The Company adopted the guidance on the issuance date effective January 5, 2017. The Company expects that most of our real estate acquisitions willSubtopic 326-20. Gross write-off information must be considered asset acquisitions under the new guidance and that transaction costs will be capitalized to the investment basis which is then subject to a purchase price allocation based on relative fair value.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The guidance will require entities to show the changes on the total cash, cash equivalents, restricted cash and restricted cash equivalentsincluded in the statementvintage disclosures required for entities in accordance with Subtopic 326-20, which requires that an entity disclose the amortized cost basis of cash flows. As a result, entities will no longer present transfers between these items on the statementfinancing receivables by credit-quality indicator and class of cash flows. The guidancefinancing receivable by year of origination. ASU 2022-02 is effective for fiscal yearsreporting periods beginning after December 15, 2017,2022, including interim periods within those fiscal years. Earlyyears, with early adoption is permitted. The Company has not yet adopted this new guidance and isWe are currently evaluating the impact of adoptingthe adoption of ASU 2022-02 on our consolidated financial statements, but do not believe the adoption of this new accounting standard will have a material impact on the Company’sour consolidated financial statements.
In August 2016,July 2021, the FASB issued ASU No. 2016-15, Statement of Cash Flows2021-05 Leases (Topic 230): Classification of842) Lessors - Certain Cash ReceiptsLeases with Variable Lease Payments. ASU 2021-05 amends the lease classification requirements for lessors when classifying and Cash Payments.accounting for a lease with variable lease payments that do not depend on a reference rate index or a rate. The update provides criteria, that if met, the lease would be classified and accounted for as an operating lease. ASU provides final guidance on eight cash flow issues, including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, distributions received from equity method investees, separately identifiable cash flows and application of the predominance principle, and others. The amendments in the ASU are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted the guidance effective January 1, 2017 and there was no impact on the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The guidance changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance replaces the current ‘incurred loss’ model with an ‘expected loss’ approach. The guidance2021-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted after December 2018. The Company has not yet adopted this new guidance and is currently evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The guidance simplifies the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted the guidance effective January 1, 2017 and there was no material impact on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU 2016-07, Investments Equity Method and Joint Ventures (Topic 323). The guidance eliminates the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The Company adopted the guidance effective January 1, 2017 and there was no impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases. The guidance requires lessees to recognize lease assets and lease liabilities for those leases classified as operating leases under the previous standard. Depending on the lease classification, lessees will recognize expense based on the effective interest method for finance leases or on a straight-line basis for operating leases. The accounting applied by a lessor is largely unchanged from that applied under the previous standard. One of the impacts on the Company will be the presentation and disclosure in the financial statements of non-lease components such as charges to tenants for a building’s operating expenses. The non-lease components will be presented separately from the lease components in both the Consolidated Statements of Operations and Consolidated Balance Sheets. Another impact is the measurement and presentation of ground leases under which the Company is lessee. The Company is required to record a liability for the obligation to make payments under the lease and an asset for the right to use the underlying asset during the lease term and will also apply the new expense recognition requirements given the lease classification. The Company is currently quantifying these impacts. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company anticipates adopting this guidance January 1, 2019 and will apply the modified retrospective approach.
In January 2016, the FASB issued ASU 2016-01 (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and to record changes in instruments-specific credit risk for financial liabilities
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
measured under the fair value option in other comprehensive income. The guidance is effective for fiscal years beginning after December 15, 2017, and for interim periods therein. The Company has not yet adopted this new guidance and is currently evaluating the impact of adopting this new accounting standard on the Company’s consolidated financial statements.
In May 2014, the FASB issued a new comprehensive revenue recognition guidance which requires us to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services (ASU 2014-09). The FASB also issued implementation guidance in March 2016, April 2016 and May 2016 - ASU’s 2016-08, 2016-10 and 2016-12, respectively.
These ASUs are effective for annual and interimreporting periods beginning after December 15, 2017.2021. The Company will adoptadopted this guidance on January 1, 2018. Since the Company’s revenue is related to leasing activities, the adoption of this guidance will2022 and it did not have a material impact on the Company's consolidated financial statements. The new guidance is applicable to service contracts
In August 2020, the FASB issued Accounting Standard Update, or "ASU," No. 2020-06 Debt - Debt with joint ventures for which the Company earns property management fees, leasing commissionsConversion and developmentOther Options (Subtopic 470-20) and construction fees. The adoption of this new guidance does not changeDerivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40). ASU 2020-06 simplifies the accounting for these fees asconvertible instruments by reducing the patternnumber of recognitionaccounting models for convertible debt instruments and convertible preferred stock, removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for reporting periods beginning after December 15, 2021. The Company adopted this guidance on January 1, 2022 and it did not have a material impact on the Company's consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04 Reference Rate Reform (Topic 848) Facilitation of revenue does not change with the new guidance. We will continue to recognize revenueEffects of Reference Rate Reform on Financial Reporting and then in January 2021, the FASB issued ASU No. 2021-01. The amendments provide practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance is optional and is effective between March 12, 2020 and December 31, 2022. The guidance may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these contracts becauseexpedients preserves the customer simultaneously receives and consumes the benefits provided by our performance. Thus, the analysispresentation of our contracts under the new revenue recognition standard isderivatives consistent with our current revenue recognition model.past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
3. Property Acquisitions
During the ninethree months ended September 30, 2017,March 31, 2022, we did not acquire any properties from a third party.
4. Properties Held for Sale and Property Dispositions
Properties Held for Sale
During the three months ended September 30, 2017,As of March 31, 2022, 1080 Amsterdam Avenue was classified as held for sale as we entered into an agreement to sell the property at 16 Court Streetfor total consideration of $42.7 million. The sale closed in Brooklyn, New York, for a gross sales pricethe second quarter of $171.0 million.
As of September 30, 2017, 16 Court Street in Brooklyn, New York and 125 Chubb in Lyndhurst, New Jersey were held for sale. We closed on the sale of both properties in October 2017.2022.
Property Dispositions
The following table summarizes the properties solddisposed of during the ninethree months ended September 30, 2017:March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property | | Disposition Date | | Property Type | | Approximate Square Feet | | Sales Price
(in millions) | | Gain (Loss) (in millions) |
| 707 Eleventh Avenue | | February 2022 | | Fee Interest | | 159,720 | | | $ | 95.0 | | | $ | (0.8) | |
|
| | | | | | | | | | | | | | | |
| Property | | Disposition Date | | Property Type | | Approximate Square Feet | | Sales Price(1) (in millions) | | Gain (loss)(2) (in millions) |
885 Third Avenue (3) | | February 2016 | | Fee Interest | | 607,000 |
| | $ | 453.0 |
| | $ | (8.8 | ) |
| 520 White Plains Road | | April 2017 | | Office | | 180,000 |
| | 21.0 |
| | (14.6 | ) |
102 Greene Street (4) | | April 2017 | | Retail | | 9,200 |
| | 43.5 |
| | 4.9 |
|
| 680-750 Washington Boulevard | | July 2017 | | Office | | 325,000 |
| | 97.0 |
| | (44.2 | ) |
| |
(1) | Sales price represents the gross sales price for a property or the gross asset valuation for interests in a property. |
| |
(2) | The gain on sale for 102 Greene Street is net of $0.9 million in employee compensation awards accrued in connection with the realization of the investment gain as a bonus to certain employees that were instrumental in realizing the gain on sale. Additionally, gain on sale amounts do not include adjustments for expenses recorded in subsequent periods. |
| |
(3) | In February 2016, we closed on the sale of 885 Third Avenue. The sale did not meet the criteria for sale accounting and as a result the property remained on our consolidated financial statements until the criteria was met in April 2017. |
| |
(4) | In April 2017, we closed on the sale of a 90% interest 102 Greene Street and had subsequently accounted for our interest in the property as an investment in unconsolidated joint ventures. We sold the remaining 10% interest in September 2017. See Note 6, "Investments in Unconsolidated Joint Ventures". |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
5. Debt and Preferred Equity Investments
Below is the rollforward analysisa summary of the activity relating toin our debt and preferred equity investments for the three months ended March 31, 2022 and the twelve months ended December 31, 2021 (in thousands):
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Balance at beginning of year (1) | $ | 1,088,723 | | | $ | 1,076,542 | |
Debt investment originations/fundings/accretion (2) | 16,615 | | | 193,824 | |
Preferred equity investment originations/accretion (2) | 8,937 | | | 13,220 | |
Redemptions/sales/syndications/equity ownership/amortization (3) | (6,405) | | | (201,446) | |
| Net change in loan loss reserves | — | | | 6,583 | |
Balance at end of period (1) | $ | 1,107,870 | | | $ | 1,088,723 | |
(1)Net of unamortized fees, discounts, and premiums.
(2)Accretion includes amortization of fees and discounts and paid-in-kind investment income.
(3)Certain participations in debt investments that were sold or syndicated, but did not meet the conditions for sale accounting, are included in Other assets and Other liabilities on the consolidated balance sheets.
Below is a summary of our debt and preferred equity investments as of September 30, 2017March 31, 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Floating Rate | | Fixed Rate | | Total Carrying Value | Senior Financing | Weighted Average Yield at End of Period | Maturity (1) |
| Type | Carrying Value | Face Value | Interest Rate | | Carrying Value | Face Value | Interest Rate | |
| Senior Mortgage Debt | $ | 26,088 | | $ | 26,233 | | L + 3.50% | | $ | 73,000 | | $ | 73,000 | | 3.00% | | $ | 99,088 | | $ | — | | 4.25% | 2022 - 2023 |
| | | | | | | | | | | | |
| Mezzanine Debt | 276,040 | | 276,670 | | L + 4.95% - 12.57% | | 450,799 | | 459,865 | | 2.90% - 14.30% | | 726,839 | | 4,700,426 | | 6.98% | 2022 - 2029 |
| Preferred Equity | — | | — | | — | | 281,943 | | 282,403 | | 6.50% - 11.00% | | 281,943 | | 1,962,750 | | 9.64% | 2022 - 2027 |
| Balance at end of period | $ | 302,128 | | $ | 302,903 | | | | $ | 805,742 | | $ | 815,268 | | | | $ | 1,107,870 | | $ | 6,663,176 | | | |
(1)Excludes available extension options to the extent they have not been exercised as of the date of this filing.
The following table is a roll forward of our total allowance for loan losses for the three months ended March 31, 2022 and the twelve months ended December 31, 2021 (in thousands):
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Balance at beginning of year | $ | 6,630 | | | $ | 13,213 | |
| | | |
| | | |
| Write-offs charged against the allowance | — | | | (6,583) | |
Balance at end of period (1) | $ | 6,630 | | | $ | 6,630 | |
(1)As of March 31, 2022, all financing receivables on non-accrual had an allowance for loan loss except for 1 debt investment with a carrying value of $225.4 million.
As of March 31, 2022 and December 31, 2016 (in thousands):
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
Balance at beginning of period (1) | $ | 1,640,412 |
| | $ | 1,670,020 |
|
Debt Investment Originations/Accretion (2) | 944,494 |
| | 1,009,176 |
|
Preferred Equity Investment Originations/Accretion (2) | 144,013 |
| | 5,698 |
|
Redemptions/Sales/Syndications/Amortization (3) | (708,180 | ) | | (1,044,482 | ) |
Balance at end of period (1) | $ | 2,020,739 |
| | $ | 1,640,412 |
|
| |
(1) | Net of unamortized fees, discounts, and premiums. |
| |
(2) | Accretion includes amortization of fees and discounts and paid-in-kind investment income. |
| |
(3) | Certain participations2021, all debt and preferred equity investments were performing in accordance with their respective terms, with the exception of 2 investments with a carrying value, net of reserves, of $223.1 million and $6.8 million, as discussed in debt investments that were sold or syndicated did not meet the conditions for sale accounting are included in other assets and other liabilities on the consolidated balance sheets. |
Debt Investments and Preferred Equity Investments tables further below.
AsNo other financing receivables were 90 days past due as of September 30, 2017March 31, 2022 and December 31, 2016, we held the following debt investments with an aggregate weighted average current yield of 9.49%, excluding our investment in Two Herald Square, at September 30, 2017 (in thousands):2021.
|
| | | | | | | | | | | | | | | | | | |
| Loan Type | | September 30, 2017 Future Funding Obligations | | September 30, 2017 Senior
Financing | | September 30, 2017
Carrying Value (1) | | December 31, 2016 Carrying Value (1) | | Maturity Date (2) |
| Fixed Rate Investments: | | | | | | | | | | |
Mortgage/Jr. Mortgage Loan(3) | | $ | — |
| | $ | — |
| | $ | 250,164 |
| | $ | — |
| | April 2017 |
Mortgage Loan(4) | | — |
| | — |
| | 26,352 |
| | 26,311 |
| | February 2019 |
| Mortgage Loan | | — |
| | — |
| | 275 |
| | 380 |
| | August 2019 |
Mezzanine Loan(5a) | | — |
| | 1,160,000 |
| | 201,757 |
| | — |
| | March 2020 |
| Mezzanine Loan | | — |
| | 15,000 |
| | 3,500 |
| | 3,500 |
| | September 2021 |
| Mezzanine Loan | | — |
| | 147,000 |
| | 24,909 |
| | — |
| | April 2022 |
| Mezzanine Loan | | — |
| | 87,595 |
| | 12,697 |
| | 12,692 |
| | November 2023 |
Mezzanine Loan(5b) | | — |
| | 115,000 |
| | 12,930 |
| | 12,925 |
| | June 2024 |
| Mezzanine Loan | | — |
| | 95,000 |
| | 30,000 |
| | 30,000 |
| | January 2025 |
| Mezzanine Loan | | — |
| | 340,000 |
| | 15,000 |
| | 15,000 |
| | November 2026 |
| Mezzanine Loan | | — |
| | 1,657,500 |
| | 55,250 |
| | — |
| | June 2027 |
Mezzanine Loan(6) | | — |
| | — |
| | — |
| | 66,129 |
| | |
Jr. Mortgage Participation/Mezzanine Loan (7) | | — |
| | — |
| | — |
| | 193,422 |
| | |
| Total fixed rate | | $ | — |
| | $ | 3,617,095 |
| | $ | 632,834 |
| | $ | 360,359 |
| | |
| Floating Rate Investments: | | | | | | | | | | |
Mortgage/Mezzanine Loan(8) | | 622 |
| | — |
| | 23,372 |
| | 20,423 |
| | October 2017 |
Mezzanine Loan(5c) | | — |
| | 85,000 |
| | 15,340 |
| | 15,141 |
| | December 2017 |
Mezzanine Loan(5d) | | — |
| | 65,000 |
| | 14,832 |
| | 14,656 |
| | December 2017 |
Mezzanine Loan(5e) | | 795 |
| | — |
| | 15,132 |
| | 15,051 |
| | December 2017 |
Mortgage/Mezzanine Loan(9) | | — |
| | 125,000 |
| | 29,966 |
| | 29,998 |
| | January 2018 |
| Mezzanine Loan | | — |
| | 40,000 |
| | 19,964 |
| | 19,913 |
| | April 2018 |
| Jr. Mortgage Participation | | — |
| | 117,808 |
| | 34,899 |
| | 34,844 |
| | April 2018 |
| Mezzanine Loan | | 523 |
| | 20,523 |
| | 10,916 |
| | 10,863 |
| | August 2018 |
| Mortgage/Mezzanine Loan | | — |
| | — |
| | 19,914 |
| | 19,840 |
| | August 2018 |
| Mortgage Loan | | — |
| | 65,000 |
| | 14,935 |
| | 14,880 |
| | August 2018 |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
The following table sets forth the carrying value of our debt and preferred equity investment portfolio by risk rating as of March 31, 2022 and December 31, 2021 (dollars in thousands):
| | | | | | | | | | | | | | |
| Risk Rating | | March 31, 2022 | | December 31, 2021 |
| 1 - Low Risk Assets - Low probability of loss | | $ | 517,330 | | | $ | 644,489 | |
| 2 - Watch List Assets - Higher potential for loss | | 583,650 | | | 437,344 | |
| 3 - High Risk Assets - Loss more likely than not | | 6,890 | | | 6,890 | |
| | $ | 1,107,870 | | | $ | 1,088,723 | |
The following table sets forth the carrying value of our debt and preferred equity investment portfolio by year of origination and risk rating as of March 31, 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2022 |
| Risk Rating | | 2022(1) | | 2021(1) | | 2020(1) | | Prior(1) | | Total |
| 1 - Low Risk Assets - Low probability of loss | | $ | — | | | $ | 142,264 | | | $ | 153,055 | | | $ | 222,011 | | | $ | 517,330 | |
| 2 - Watch List Assets - Higher potential for loss | | — | | | — | | | 135,157 | | | 448,493 | | | 583,650 | |
| 3 - High Risk Assets - Loss more likely than not | | — | | | — | | | — | | | 6,890 | | | 6,890 | |
| | $ | — | | | $ | 142,264 | | | $ | 288,212 | | | $ | 677,394 | | | $ | 1,107,870 | |
(1)Year in which the investment was originated or acquired by us or in which a material modification occurred.
We have determined that we have 1 portfolio segment of financing receivables as of March 31, 2022 and December 31, 2021 comprised of commercial real estate which is primarily recorded in debt and preferred equity investments.
Included in Other assets is an additional amount of financing receivables representing loans to joint venture partners totaling $10.4 million and $10.5 million as of March 31, 2022 and December 31, 2021, respectively. The Company recorded no provisions for loan losses related to these financing receivables for the three months ended March 31, 2022 and 2021. All of these loans have a risk rating of 2 and were performing in accordance with their respective terms.
|
| | | | | | | | | | | | | | | | | | |
| Loan Type | | September 30, 2017 Future Funding Obligations | | September 30, 2017 Senior
Financing | | September 30, 2017
Carrying Value (1) | | December 31, 2016 Carrying Value (1) | | Maturity Date (2) |
Mortgage/Mezzanine Loan(10) | | — |
| | — |
| | 16,957 |
| | 16,960 |
| | September 2018 |
| Mezzanine Loan | | — |
| | 37,500 |
| | 14,801 |
| | 14,648 |
| | September 2018 |
| Mezzanine Loan | | 2,325 |
| | 45,025 |
| | 34,782 |
| | 34,502 |
| | October 2018 |
| Mezzanine Loan | | — |
| | 335,000 |
| | 74,683 |
| | 74,476 |
| | November 2018 |
| Mezzanine Loan | | — |
| | 33,000 |
| | 26,907 |
| | 26,850 |
| | December 2018 |
| Mezzanine Loan | | 1,050 |
| | 171,939 |
| | 58,598 |
| | 56,114 |
| | December 2018 |
| Mezzanine Loan | | 8,267 |
| | 289,621 |
| | 71,067 |
| | 63,137 |
| | December 2018 |
| Mezzanine Loan | | 5,197 |
| | 229,084 |
| | 74,314 |
| | 64,505 |
| | December 2018 |
| Mezzanine Loan | | — |
| | 45,000 |
| | 12,156 |
| | 12,104 |
| | January 2019 |
Mortgage/Mezzanine Loan (5f) | | 30,101 |
| | — |
| | 158,757 |
| | — |
| | January 2019 |
| Mezzanine Loan | | 6,081 |
| | 24,086 |
| | 7,812 |
| | 5,410 |
| | January 2019 |
| Mezzanine Loan | | — |
| | 38,000 |
| | 21,927 |
| | 21,891 |
| | March 2019 |
| Mezzanine Loan | | 279 |
| | 173,700 |
| | 36,936 |
| | — |
| | April 2019 |
| Mezzanine Loan | | — |
| | 265,000 |
| | 24,798 |
| | 24,707 |
| | April 2019 |
| Mortgage/Jr. Mortgage Participation Loan | | 29,661 |
| | 194,094 |
| | 69,705 |
| | 65,554 |
| | August 2019 |
| Mezzanine Loan | | 2,034 |
| | 187,500 |
| | 37,835 |
| | 37,322 |
| | September 2019 |
| Mortgage/Mezzanine Loan | | 49,933 |
| | — |
| | 130,350 |
| | 111,819 |
| | September 2019 |
| Mortgage/Mezzanine Loan | | 30,494 |
| | — |
| | 38,934 |
| | 33,682 |
| | January 2020 |
Mezzanine Loan(11) | | 6,794 |
| | 537,748 |
| | 72,597 |
| | 125,911 |
| | January 2020 |
| Mezzanine Loan | | 7,164 |
| | 33,587 |
| | 10,988 |
| | — |
| | July 2020 |
| Jr. Mortgage Participation/Mezzanine Loan | | — |
|
| 60,000 |
|
| 15,627 |
|
| 15,606 |
| | July 2021 |
| Mezzanine Loan | | — |
| | 280,000 |
| | 34,124 |
| | — |
| | August 2022 |
Mezzanine Loan(12) | | — |
| | — |
| | — |
| | 15,369 |
| | |
Mortgage/ Mezzanine Loan(6) | | — |
| | — |
| | — |
| | 32,847 |
| | |
Mortgage/Mezzanine Loan(6) | | — |
| | — |
| | — |
| | 22,959 |
| | |
Mezzanine Loan(13) | | — |
| | — |
| | — |
| | 14,957 |
| | |
Mortgage/Mezzanine Loan(14) | | — |
| | — |
| | — |
| | 145,239 |
| | |
| Total floating rate | | $ | 181,320 |
| | $ | 3,498,215 |
| | $ | 1,243,925 |
| | $ | 1,232,178 |
| | |
| Total | | $ | 181,320 |
| | $ | 7,115,310 |
| | $ | 1,876,759 |
| | $ | 1,592,537 |
| | |
| |
(1) | Carrying value is net of discounts, premiums, original issue discounts and deferred origination fees. |
| |
(2) | Represents contractual maturity, excluding any unexercised extension options. |
| |
(3) | These loans were purchased at par in April and May 2017 and were in maturity default at the time of acquisition. At the time the loans were purchased, the Company expected to collect all contractually required payments, including interest. In August 2017, the Company determined that it was probable that the loans would not be repaid in full and therefore, the loans were put on non-accrual status. No impairment was recorded as the Company believes that the fair value of the property exceeds the carrying amount of the loans. The loans had an outstanding balance including accrued interest of $259.3 million at the time that they were put on non-accrual status. |
| |
(4) | In September 2014, we acquired a $26.4 million mortgage loan at a $0.2 million discount and a $5.7 million junior mortgage participation at a $5.7 million discount. The junior mortgage participation was a nonperforming loan at acquisition, is currently on non-accrual status and has no carrying value. |
| |
(5) | Carrying value is net of the following amounts that were sold or syndicated, which are included in other assets and other liabilities on the consolidated balance sheets as a result of the transfers not meeting the conditions for sale accounting: (a) $1.2 million, (b) $12.0 million, (c) $14.6 million, (d) $14.1 million, (e) $5.1 million, and (f) $21.2 million
|
| |
(6) | This loan was repaid in June 2017. |
| |
(7) | This loan was repaid in March 2017. |
| |
(8) | This loan was extended in October 2017. |
| |
(9) | This loan was extended in January 2017. |
| |
(10) | This loan was extended in September 2017. |
| |
(11) | $66.1 million of outstanding principal was syndicated in February 2017. |
| |
(12) | This loan was repaid in September 2017. |
| |
(13) | This loan was contributed to a joint venture in May 2017. |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
Debt Investments
| |
(14) | This loan was repaid in January 2017. |
As of March 31, 2022 and December 31, 2021, we held the following debt investments with an aggregate weighted average current yield of 6.65% as of March 31, 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loan Type | | March 31, 2022
Future Funding
Obligations | | March 31, 2022 Senior
Financing | | March 31, 2022 Carrying Value (1) | | December 31, 2021
Carrying Value (1) | | Maturity
Date (2) |
| Fixed Rate Investments: | | | | | | | | | | |
| Mezzanine Loan | | $ | — | | | $ | 280,000 | | | $ | 44,182 | | | $ | 43,521 | | | August 2022 |
| Mortgage Loan | | — | | | — | | | 73,000 | | | 73,000 | | | April 2023 |
Mezzanine Loan (3) | | — | | | 382,473 | | | 225,367 | | | 225,367 | | | June 2023 |
| Mezzanine Loan | | — | | | 276,885 | | | 69,264 | | | 66,873 | | | June 2023 |
Mezzanine Loan (4a)(5) | | — | | | 105,000 | | | 13,366 | | | 13,366 | | | June 2024 |
| Mezzanine Loan | | — | | | 95,000 | | | 30,000 | | | 30,000 | | | January 2025 |
Mezzanine Loan (6) | | — | | | 1,712,750 | | | 55,250 | | | 55,250 | | | June 2027 |
| Mezzanine Loan | | — | | | 85,000 | | | 20,000 | | | 20,000 | | | December 2029 |
| Total fixed rate | | $ | — | | | $ | 2,937,108 | | | $ | 530,429 | | | $ | 527,377 | | | |
| Floating Rate Investments: | | | | | | | | | | |
| Mezzanine Loan | | $ | — | | | $ | 275,000 | | | $ | 49,999 | | | $ | 49,998 | | | April 2023 |
| Mezzanine Loan | | 4,624 | | | 181,536 | | | 37,824 | | | 37,511 | | | July 2022 |
Mezzanine Loan (4b)(7) | | — | | | 1,115,000 | | | 135,157 | | | 133,735 | | | April 2022 |
| Mezzanine Loan | | 3,761 | | | 54,000 | | | 8,238 | | | 8,050 | | | May 2022 |
| Mortgage and Mezzanine Loan | | 18,142 | | | — | | | 40,161 | | | 34,874 | | | December 2022 |
| Mezzanine Loan | | 33,685 | | | 137,783 | | | 30,749 | | | 30,802 | | | May 2023 |
| Total floating rate | | $ | 60,212 | | | $ | 1,763,319 | | | $ | 302,128 | | | $ | 294,970 | | | |
| Allowance for loan loss | | — | | | — | | | (6,630) | | | (6,630) | | | |
| Total | | $ | 60,212 | | | $ | 4,700,427 | | | $ | 825,927 | | | $ | 815,717 | | | |
(1)Carrying value is net of discounts, premiums, original issue discounts and deferred origination fees.
(2)Represents contractual maturity, excluding any extension options to the extent they have not been exercised as of the date of this filing.
(3)This loan was put on non-accrual in July 2020 and remains on non-accrual as of March 31, 2022. No investment income has been recognized subsequent to it being put on non-accrual. The Company is in discussions with the borrower.
(4)Carrying value is net of the following amounts that were sold or syndicated, which are included in Other assets and Other liabilities on the consolidated balance sheets as a result of the transfers not meeting the conditions for sale accounting: (a) $12.0 million, and (b) $0.4 million.
(5)This loan went into default and was put on non-accrual in June 2020 and remains on non-accrual as of March 31, 2022. No investment income has been recognized subsequent to it being put on non-accrual. The Company is in discussions with the borrower. Additionally, we determined the borrower entity to be a VIE, in which we are not the primary beneficiary.
(6)The borrower under this mezzanine loan is an entity affiliated with HNA, which owns an equity interest in 245 Park Avenue. The borrower filed for bankruptcy protection on October 31, 2021, which the Company contested.
(7)In the second quarter of 2022, this loan was extended for two months to May 2022.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
Preferred Equity Investments
As of September 30, 2017March 31, 2022 and December 31, 2016,2021, we held the following preferred equity investments with an aggregate weighted average current yield of 6.98% at September 30, 2017 (in9.64% as of March 31, 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Type | | March 31, 2022
Future Funding
Obligations | | March 31, 2022 Senior
Financing | | March 31, 2022 Carrying Value (1) | | December 31, 2021
Carrying Value (1) | | Mandatory Redemption (2) |
Preferred Equity (3) | | $ | — | | | $ | 1,712,750 | | | $ | 167,875 | | | $ | 160,772 | | | June 2022 |
| Preferred Equity | | — | | | 250,000 | | | 114,068 | | | 112,234 | | | February 2027 |
| Total Preferred Equity | | $ | — | | | $ | 1,962,750 | | | $ | 281,943 | | | $ | 273,006 | | | |
| Allowance for loan loss | | — | | | — | | | — | | | — | | | |
| Total | | $ | — | | | $ | 1,962,750 | | | $ | 281,943 | | | $ | 273,006 | | | |
|
| | | | | | | | | | | | | | | | | | |
| Type | | September 30, 2017
Future Funding
Obligations | | September 30, 2017
Senior
Financing | | September 30, 2017
Carrying Value (1) | | December 31, 2016
Carrying Value (1) | | Mandatory Redemption (2) |
Preferred Equity(3) | | $ | — |
| | $ | 272,000 |
| | $ | 143,980 |
| | $ | — |
| | April 2021 |
Preferred Equity(4) | | — |
| | — |
| | — |
| | 9,982 |
| | |
Preferred Equity(5) | | — |
| | — |
| | — |
| | 37,893 |
| | |
| Total | | $ | — |
| | $ | 272,000 |
| | $ | 143,980 |
| | $ | 47,875 |
| | |
| |
(1) | Carrying value is net of deferred origination fees. |
| |
(2) | Represents contractual maturity, excluding any unexercised extension options. |
| |
(3) | In February 2016, we closed on the sale of 885 Third Avenue and retained a preferred equity position in the property. The sale did not meet the criteria for sale accounting under the full accrual method in ASC 360-20, Property, Plant and Equipment - Real Estate Sales. As a result the property remained on our consolidated balance sheet until the criteria was met in April 2017 at which time the property was deconsolidated and the preferred equity investment was recognized. |
| |
(4) | This investment was redeemed in May 2017. |
| |
(5) | This investment was redeemed in April 2017. |
At September 30, 2017(2)Represents contractual redemption, excluding any unexercised extension options.
(3)On October 31, 2021, HNA, through an affiliated entity, filed for Chapter 11 bankruptcy protection on account of its investment in 245 Park Avenue, together with another asset in Chicago. The Company contested the filing, on the basis that the filing was done in bad faith and December 31, 2016, all debt and preferred equity investments were performing in accordanceviolation of HNA's agreements with the terms ofCompany, and is currently appealing the relevant investments, withBankruptcy court's ruling upholding the exception of a mortgage and junior mortgage participation purchased in maturity default in May 2017 and April 2017 discussed in subnote 3 of the Debt Investments table above and a junior mortgage participation acquired in September 2014, which was acquired for zero and has a carrying value of zero, as further discussed in subnote 4 of the Debt Investments table above.filing by HNA.
We have determined that we have one portfolio segment of financing receivables at September 30, 2017 and 2016 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 $65.6 million and $99.5 million at September 30, 2017 and December 31, 2016, respectively. No financing receivables were 90 days past due at September 30, 2017.
6. Investments in Unconsolidated Joint Ventures
We have investments in several real estate joint ventures with various partners. As of September 30, 2017,March 31, 2022, the book value of these investments was $3.0 billion, net of investments with negative book values totaling $105.6 million for which we have an implicit commitment to fund future capital needs.
As of March 31, 2022 and December 31, 2021, 800 Third Avenue, 21 East 66th Street, 605 West 42nd Street, 333 East 22nd Street, One Vanderbilt, and certain properties within the Stonehenge Portfolio are VIEs in which we are not the primary beneficiary. Our net equity investment in these VIEs was $598.7$86.2 million and $85.6 million as of September 30, 2017. As ofMarch 31, 2022 and December 31, 2016, 650 Fifth Avenue, 800 Third Avenue, 21 East 66th Street, 605 West 42nd Street, 333 East 22nd Street, and certain properties within the Stonehenge Portfolio were VIEs in which we were not the primary beneficiary. Our net equity investment in these VIEs was $220.1 million as of December 31, 2016.2021, respectively. Our maximum loss is limited to the amount of our equity investment in these VIEs. See the "Principles of Consolidation" section of Note 2, "Significant Accounting Policies." All other investments below are voting interest entities. As we do not control the joint ventures listed below, we account for them under the equity method of accounting. The table below provides general information on each of our joint ventures as of September 30, 2017:
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
The table below provides general information on each of our joint ventures as of March 31, 2022:
| | | | | | | | | | | | | | | | |
| Property | Partner | Ownership
Interest (1) | Economic
Interest (1) | Unaudited Approximate Square Feet | | |
| 100 Park Avenue | Prudential Real Estate Investors | 49.90% | 49.90% | 834,000 | | | |
| 717 Fifth Avenue | Wharton Properties/Private Investor | 10.92% | 10.92% | 119,500 | | | |
| 800 Third Avenue | Private Investors | 60.52% | 60.52% | 526,000 | | | |
| 919 Third Avenue | New York State Teacher's Retirement System | 51.00% | 51.00% | 1,454,000 | | | |
| 11 West 34th Street | Private Investor/Wharton Properties | 30.00% | 30.00% | 17,150 | | | |
| 280 Park Avenue | Vornado Realty Trust | 50.00% | 50.00% | 1,219,158 | | | |
1552-1560 Broadway (2) | Wharton Properties | 50.00% | 50.00% | 57,718 | | | |
| 10 East 53rd Street | Canadian Pension Plan Investment Board | 55.00% | 55.00% | 354,300 | | | |
21 East 66th Street (3) | Private Investors | 32.28% | 32.28% | 13,069 | | | |
650 Fifth Avenue (4) | Wharton Properties | 50.00% | 50.00% | 69,214 | | | |
| 121 Greene Street | Wharton Properties | 50.00% | 50.00% | 7,131 | | | |
Stonehenge Portfolio (5) | Various | Various | Various | 1,439,016 | | | |
| 11 Madison Avenue | PGIM Real Estate | 60.00% | 60.00% | 2,314,000 | | | |
| One Vanderbilt Avenue | National Pension Service of Korea/Hines Interest LP | 71.01% | 71.01% | 1,657,198 | | | |
| Worldwide Plaza | RXR Realty / New York REIT | 24.95% | 24.95% | 2,048,725 | | | |
| 1515 Broadway | Allianz Real Estate of America | 56.87% | 56.87% | 1,750,000 | | | |
| 2 Herald Square | Israeli Institutional Investor | 51.00% | 51.00% | 369,000 | | | |
| 115 Spring Street | Private Investor | 51.00% | 51.00% | 5,218 | | | |
15 Beekman (6) | A fund managed by Meritz Alternative Investment Management | 20.00% | 20.00% | 221,884 | | | |
| 85 Fifth Avenue | Wells Fargo | 36.27% | 36.27% | 12,946 | | | |
One Madison Avenue (7) | National Pension Service of Korea/Hines Interest LP/International Investor | 25.50% | 25.50% | 1,048,700 | | | |
| 220 East 42nd Street | A fund managed by Meritz Alternative Investment Management | 51.00% | 51.00% | 1,135,000 | | | |
|
| | | | | | | | | |
| Property | Partner | Ownership
Interest (1) | Economic
Interest (1) | Unaudited Approximate Square Feet | Acquisition Date(2) | Acquisition
Price(2)
(in thousands) |
| 100 Park Avenue | Prudential Real Estate Investors | 49.90% | 49.90% | 834,000 |
| February 2000 | $ | 95,800 |
|
| 717 Fifth Avenue | Jeff Sutton/Private Investor | 10.92% | 10.92% | 119,500 |
| September 2006 | 251,900 |
|
| 800 Third Avenue | Private Investors | 60.52% | 60.52% | 526,000 |
| December 2006 | 285,000 |
|
| 1745 Broadway | Ivanhoe Cambridge, Inc. | 56.87% | 56.87% | 674,000 |
| April 2007 | 520,000 |
|
| Jericho Plaza | Onyx Equities/Credit Suisse | 11.67% | 11.67% | 640,000 |
| April 2007 | 210,000 |
|
| 11 West 34th Street | Private Investor/
Jeff Sutton | 30.00% | 30.00% | 17,150 |
| December 2010 | 10,800 |
|
3 Columbus Circle(3) | The Moinian Group | 48.90% | 48.90% | 741,500 |
| January 2011 | 500,000 |
|
| 280 Park Avenue | Vornado Realty Trust | 50.00% | 50.00% | 1,219,158 |
| March 2011 | 400,000 |
|
1552-1560 Broadway(4) | Jeff Sutton | 50.00% | 50.00% | 57,718 |
| August 2011 | 136,550 |
|
| 724 Fifth Avenue | Jeff Sutton | 50.00% | 50.00% | 65,010 |
| January 2012 | 223,000 |
|
| 10 East 53rd Street | Canadian Pension Plan Investment Board | 55.00% | 55.00% | 354,300 |
| February 2012 | 252,500 |
|
| 521 Fifth Avenue | Plaza Global
Real Estate Partners LP | 50.50% | 50.50% | 460,000 |
| November 2012 | 315,000 |
|
21 East 66th Street(5) | Private Investors | 32.28% | 32.28% | 13,069 |
| December 2012 | 75,000 |
|
650 Fifth Avenue(6) | Jeff Sutton | 50.00% | 50.00% | 69,214 |
| November 2013 | — |
|
| 121 Greene Street | Jeff Sutton | 50.00% | 50.00% | 7,131 |
| September 2014 | 27,400 |
|
| 175-225 Third Street Brooklyn, New York | KCLW 3rd Street LLC/LIVWRK LLC | 95.00% | 95.00% | — |
| October 2014 | 74,600 |
|
| 55 West 46th Street | Prudential Real Estate Investors | 25.00% | 25.00% | 347,000 |
| November 2014 | 295,000 |
|
Stonehenge Portfolio (7) | Various | Various | Various | 1,439,016 |
| February 2015 | 36,668 |
|
| 131-137 Spring Street | Invesco Real Estate | 20.00% | 20.00% | 68,342 |
| August 2015 | 277,750 |
|
| 605 West 42nd Street | The Moinian Group | 20.00% | 20.00% | 927,358 |
| April 2016 | 759,000 |
|
| 11 Madison Avenue | PGIM Real Estate | 60.00% | 60.00% | 2,314,000 |
| August 2016 | 2,605,000 |
|
333 East 22nd Street (8) | Private Investors | 33.33% | 33.33% | 26,926 |
| August 2016 | — |
|
400 E 57th Street (9) | BlackRock, Inc and Stonehenge Partners | 51.00% | 41.00% | 290,482 |
| October 2016 | 170,000 |
|
One Vanderbilt (10) | National Pension Service of Korea/Hines Interest LP | 71.01% | 71.01% | — |
| January 2017 | 3,310,000 |
|
Mezzanine Loan (11) | Private Investors | 33.33% | 33.33% | — |
| May 2017 | 15,000 |
|
| |
(1) | Ownership interest and economic interest represent the Company's interests in the joint venture as of September 30, 2017. Changes in ownership or economic interests, if any, within the current year are disclosed in the notes below. |
| |
(2) | Acquisition date and price represent the date on which the Company initially acquired an interest in the joint venture and the actual or implied gross purchase price for the joint venture on that date. Acquisition date and price are not adjusted for subsequent acquisitions or dispositions of interest. |
| |
(3) | As a result of the sale of a condominium interest in September 2012, Young & Rubicam, Inc., or Y&R, owns floors three through eight at the property. Because the joint venture has an option to repurchase these floors, the gain associated with this sale was deferred. |
| |
(4) | (2)The joint venture also owns a long-term leasehold interest in the retail space and certain other spaces at 1560 Broadway, which is adjacent to 1552 Broadway. (3)We hold a 32.28% interest in 3 retail units and 1 residential unit at the property and a 16.14% interest in 2 residential units at the property. (4)The joint venture owns a long-term leasehold interest in the retail space at 650 Fifth Avenue. (5)The sale of this investment closed in April 2022 for a gross consideration of $1.0 million. (6)In 2020, the Company formed a joint venture, which then entered into a long-term sublease with the Company. (7)In 2020, the Company admitted partners to the One Madison Avenue development project, which resulted in the Company no longer retaining a controlling interest in the entity, as defined in ASC 810, and the deconsolidation of our remaining 50.5% interest. We recorded our investment at fair value, which resulted in the recognition of a fair value adjustment of $187.5 million in 2020. The fair value of our investment was determined by the terms of the joint venture agreement governing the capitalization of the project. The purchase price represents only the purchase of the 1552 Broadway interest which comprised approximately 13,045 square feet. The joint venture also owns a long-term leasehold interest in the retail space and certain other spaces at 1560 Broadway, which is adjacent to 1552 Broadway. |
| |
(5) | We hold a 32.28% interest in three retail and two residential units at the property and a 16.14% interest in three residential units at the property. |
| |
(6) | The joint venture owns a long-term leasehold interest in the retail space at 650 Fifth Avenue. In connection with the ground lease obligation, SLG provided a performance guaranty and our joint venture partner executed a contribution agreement to reflect its pro rata obligation. In the event the property is converted into a condominium unit and the landlord elects the purchase option, the joint venture shall be obligated to acquire the unit at the then fair value. |
| |
(7) | In March 2017, the Company sold a partial interest in the Stonehenge Portfolio as further described under Sale of Joint Venture Interest or Properties below. |
| |
(8) | The joint venture acquired a leasehold interest in the property in October 2016. |
| |
(9) | In October 2016, the Company sold a 49% interest in this property to an investment account managed by BlackRock, Inc. The Company's interest in the property was sold within a consolidated joint venture owned 90% by the Company and 10% by Stonehenge. The transaction resulted in the deconsolidation of the venture's remaining 51% interest in the property. The Company's joint venture with Stonehenge remains consolidated resulting in the combined 51% interest being shown within investments in unconsolidated joint ventures on the Company's balance sheet. |
| |
(10) | In January 2017, the Company admitted two partners, National Pension Service of Korea and Hines Interest LP, into the One Vanderbilt Avenue development project. In April 2017, the criteria for deconsolidation were met, and the development is shown within investments in unconsolidated joint ventures. The |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
partners have committed aggregate equity to the project totaling no less than $525$492.2 million and their ownership interest in the joint venture is based on their capital contributions, up to an aggregate maximum of 29.0%49.5%. At September 30, 2017As of March 31, 2022, the total of the two2 partners' ownership interests based on equity contributed was 3.49%39.2%.
| |
(11) | In May 2017, the Company contributed a mezzanine loan secured by a commercial property in midtown Manhattan to a joint venture and retained a 33.33% interest in the venture. The carrying value is net of $10.0 million that was sold, which is included in other assets and other liabilities on the consolidated balance sheets as a result of the transfers not meeting the conditions for sale accounting. In October 2017, the initial maturity date of November 2017 was extended to November 2018. |
Acquisition, Development In 2021, the Company admitted an additional partner to the development project for a committed aggregate equity investment totaling no less than $259.3 million. The partner's indirect ownership interest in the joint venture is based on it's capital contributions, up to an aggregate maximum of 25.0%. The transaction did not meet sale accounting under ASC 860 and, Construction Arrangements
Based on the characteristics of the following arrangements, which are similar to those of an investment, combined with the expected residual profit of not greater than 50%, we have accountedas a result, was treated as a secured borrowing for these debtaccounting purposes and preferred equity investments under the equity method. As of September 30, 2017is included in Other liabilities in our consolidated balance sheets at March 31, 2022 and December 31, 2016, the carrying value for acquisition, development and construction arrangements were as follows (in thousands):2021.
|
| | | | | | | | | | |
| Loan Type | | September 30, 2017 | | December 31, 2016 | | Maturity Date |
Mezzanine Loan and Preferred Equity(1) | | $ | 100,000 |
| | $ | 100,000 |
| | March 2018 |
Mezzanine Loan(2) | | 44,881 |
| | 45,622 |
| | February 2022 |
Mezzanine Loan(3) | | 25,854 |
| | 24,542 |
| | July 2036 |
| | | $ | 170,735 |
| | $ | 170,164 |
| | |
| |
(1) | These loans were extended in February 2017. |
| |
(2) | We have an option to convert our loan to an equity interest subject to certain conditions. We have determined that our option to convert the loan to equity is not a derivative financial instrument pursuant to GAAP. |
| |
(3) | The Company has the ability to convert this loan into an equity position starting in 2021 and the borrower is able to force this conversion in 2024. |
SaleDisposition of Joint Venture Interests or Properties
The following table summarizes theWe did not dispose of any investments in unconsolidated joint ventures sold during the ninethree months ended September 30, 2017:March 31, 2022.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
|
| | | | | | | | | | | | | | |
| Property | | Ownership Interest | | Disposition Date | | Type of Sale | | Gross Asset Valuation (in thousands)(1) | | Gain on Sale (in thousands)(2) |
| Stonehenge Portfolio (partial) | | Various | | March 2017 | | Ownership Interest | | $ | 300,000 |
| | $ | 871 |
|
| 102 Greene Street | | 10.00% | | September 2017 | | Ownership Interest | | $ | 43,500 |
| | $ | 283 |
|
| |
(1) | Represents implied gross valuation for the joint venture or sales price of the property. |
| |
(2) | Represents the Company's share of the gain. |
In May 2017, our investment in a joint venture that owned two mezzanine notes secured by interests in the entity that owns 76 11th Avenue was repaid after the joint venture received repayment of the underlying loans.
In May 2017, we recognized a gain of $13.0 million related to the sale in May 2014 of our ownership interest in 747 Madison Avenue. The sale did not meet the criteria for sale accounting at that time and, therefore, remained on our consolidated financial statements. The sale criteria was met in the second quarter of 2017 resulting in recognition of the deferred gain on the sale.
Joint Venture Mortgages and Other Loans Payable
We generally finance our joint ventures with non-recourse debt. In certain cases we have providedmay provide guarantees or master leases, for tenant space, which terminate upon the satisfaction of specified circumstances or repayment of the underlying loans. The first mortgage notes and other loans payable collateralized by the respective joint venture properties and assignment of leases at September 30, 2017as of March 31, 2022 and December 31, 2016,2021, respectively, are as follows (amounts(dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property | | Economic
Interest (1) | | Current Maturity
Date | Final Maturity Date (2) | | Interest Rate (3) | | March 31, 2022 | | December 31, 2021 |
| Fixed Rate Debt: | | | | | | | | | | | | |
| 717 Fifth Avenue (mortgage) | | 10.92 | % | | July 2022 | July 2022 | | | 4.45 | % | | $ | 300,000 | | | $ | 300,000 | |
| 717 Fifth Avenue (mezzanine) | | 10.92 | % | | July 2022 | July 2022 | | | 5.50 | % | | 355,328 | | | 355,328 | |
| 650 Fifth Avenue (mortgage) | | 50.00 | % | | October 2022 | October 2022 | | | 4.46 | % | | 210,000 | | | 210,000 | |
| 650 Fifth Avenue (mezzanine) | | 50.00 | % | | October 2022 | October 2022 | | | 5.45 | % | | 65,000 | | | 65,000 | |
| 21 East 66th Street | | 32.28 | % | | April 2023 | April 2028 | | | 3.60 | % | | 12,000 | | | 12,000 | |
| 919 Third Avenue | | 51.00 | % | | June 2023 | June 2023 | | | 5.12 | % | | 500,000 | | | 500,000 | |
| 1515 Broadway | | 56.87 | % | | March 2025 | March 2025 | | | 3.93 | % | | 796,929 | | | 801,845 | |
| 11 Madison Avenue | | 60.00 | % | | September 2025 | September 2025 | | | 3.84 | % | | 1,400,000 | | | 1,400,000 | |
| 800 Third Avenue | | 60.52 | % | | February 2026 | February 2026 | | | 3.37 | % | | 177,000 | | | 177,000 | |
| Worldwide Plaza | | 24.95 | % | | November 2027 | November 2027 | | | 3.98 | % | | 1,200,000 | | | 1,200,000 | |
| One Vanderbilt Avenue | | 71.01 | % | | July 2031 | July 2031 | | | 2.95 | % | | 3,000,000 | | | 3,000,000 | |
Stonehenge Portfolio (4) | | Various | | Various | Various | | | 3.50 | % | | 194,558 | | | 195,493 | |
| Total fixed rate debt | | | | | | | | | | $ | 8,210,815 | | | $ | 8,216,666 | |
| Floating Rate Debt: | | | | | | | | | | | | |
| 1552 Broadway | | 50.00 | % | | October 2022 | October 2022 | | L+ | 2.65 | % | | $ | 193,132 | | | $ | 193,132 | |
| 280 Park Avenue | | 50.00 | % | | September 2022 | September 2024 | | L+ | 1.73 | % | | 1,200,000 | | | 1,200,000 | |
| 121 Greene Street | | 50.00 | % | | November 2022 | November 2022 | | L+ | 2.00 | % | | 13,056 | | | 13,228 | |
| 2 Herald Square | | 51.00 | % | | November 2022 | November 2023 | | L+ | 1.95 | % | | 199,664 | | | 200,989 | |
| 11 West 34th Street | | 30.00 | % | | January 2023 | January 2023 | | L+ | 1.45 | % | | 23,000 | | | 23,000 | |
| 220 East 42nd Street | | 51.00 | % | | June 2023 | June 2025 | | L+ | 2.75 | % | | 510,000 | | | 510,000 | |
| 115 Spring Street | | 51.00 | % | | September 2023 | September 2023 | | L+ | 3.40 | % | | 65,550 | | | 65,550 | |
| 100 Park Avenue | | 49.90 | % | | December 2023 | December 2025 | | L+ | 2.25 | % | | 360,000 | | | 360,000 | |
15 Beekman (5) | | 20.00 | % | | January 2024 | July 2025 | | L+ | 1.50 | % | | 50,805 | | | 43,566 | |
| 10 East 53rd Street | | 55.00 | % | | February 2025 | February 2025 | | L+ | 1.35 | % | | 220,000 | | | 220,000 | |
One Madison Avenue (6) | | 25.50 | % | | November 2025 | November 2026 | | L+ | 3.35 | % | | 193,184 | | | 169,629 | |
| 21 East 66th Street | | 32.28 | % | | June 2033 | June 2033 | | T+ | 2.75 | % | | 620 | | | 632 | |
| Total floating rate debt | | | | | | | | | | $ | 3,029,011 | | | $ | 2,999,726 | |
| Total joint venture mortgages and other loans payable | | | | | | $ | 11,239,826 | | | $ | 11,216,392 | |
| Deferred financing costs, net | | | | | | | | | | (121,491) | | | (130,516) | |
| Total joint venture mortgages and other loans payable, net | | | | | | $ | 11,118,335 | | | $ | 11,085,876 | |
|
| | | | | | | | | | | | | | | | |
| Property | | Economic
Interest (1) | | Maturity Date | | Interest Rate (2) | | September 30, 2017 | | December 31, 2016 |
| Fixed Rate Debt: | | | | | | | | | | |
| 521 Fifth Avenue | | 50.50 | % | | November 2019 | | 3.73 | % | | $ | 170,000 |
| | $ | 170,000 |
|
717 Fifth Avenue (3) | | 10.92 | % | | July 2022 | | 4.45 | % | | 300,000 |
| | 300,000 |
|
(2)Reflects exercise of all available options. The ability to exercise extension options may be subject to certain conditions, including meeting tests based on the operating performance of the property.
(3)Interest rates as of March 31, 2022, taking into account interest rate hedges in effect during the period. Floating rate debt is presented with the stated spread over the 30-day LIBOR ("L") or 1-year Treasury ("T").
(4)Comprised of 3 mortgages totaling $131.6 million that mature in April 2028 and 2 mortgages totaling $63.0 million that mature in July 2029. The sale of this investment closed in April 2022.
(5)This loan is a $125.0 million construction facility. Advances under the loan are subject to costs incurred.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
(6)The loan is a $1.25 billion construction facility with an initial term of five years with 1, one year extension option. Advances under the loan are subject to costs incurred. In conjunction with the loan, we provided partial guarantees for interest and principal payments, the amounts of which are based on certain construction milestones and operating metrics.
|
| | | | | | | | | | | | | | | | |
| Property | | Economic
Interest (1) | | Maturity Date | | Interest Rate (2) | | September 30, 2017 | | December 31, 2016 |
717 Fifth Avenue (3) | | 10.92 | % | | July 2022 | | 5.50 | % | | 355,328 |
| | 355,328 |
|
| 650 Fifth Avenue | | 50.00 | % | | October 2022 | | 4.95 | % | | 225,000 |
| | — |
|
| 21 East 66th Street | | 32.28 | % | | April 2023 | | 3.60 | % | | 12,000 |
| | 12,000 |
|
| 3 Columbus Circle | | 48.90 | % | | March 2025 | | 3.61 | % | | 350,000 |
| | 350,000 |
|
| 11 Madison Avenue | | 60.00 | % | | September 2025 | | 3.84 | % | | 1,400,000 |
| | 1,400,000 |
|
| 800 Third Avenue | | 60.52 | % | | February 2026 | | 3.37 | % | | 177,000 |
| | 177,000 |
|
| 400 East 57th Street | | 41.00 | % | | November 2026 | | 3.00 | % | | 100,000 |
| | 100,000 |
|
Stonehenge Portfolio (4) | | Various |
| | Various | | 4.17 | % | | 359,095 |
| | 362,518 |
|
1745 Broadway (5) | | | | | |
|
| | — |
| | 340,000 |
|
| Total fixed rate debt | | | | | | | | $ | 3,448,423 |
| | $ | 3,566,846 |
|
| Floating Rate Debt: | | | | | | | | | | |
55 West 46th Street (6) | | 25.00 | % | | October 2017 | | 3.52 | % | | $ | 165,328 |
| | $ | 157,322 |
|
| 175-225 Third Street Brooklyn, New York | | 95.00 | % | | December 2017 | | 5.25 | % | | 40,000 |
| | 40,000 |
|
Jericho Plaza (7) | | 11.67 | % | | March 2018 | | 5.37 | % | | 79,530 |
| | 76,993 |
|
| 724 Fifth Avenue | | 50.00 | % | | April 2018 | | 3.64 | % | | 275,000 |
| | 275,000 |
|
1552 Broadway (8) | | 50.00 | % | | April 2018 | | 5.41 | % | | 185,410 |
| | 185,410 |
|
280 Park Avenue (9) | | 50.00 | % | | September 2019 | | 3.09 | % | | 1,200,000 |
| | 900,000 |
|
| 121 Greene Street | | 50.00 | % | | November 2019 | | 2.72 | % | | 15,000 |
| | 15,000 |
|
1745 Broadway (10) | | 56.87 | % | | January 2020 | | 3.07 | % | | 345,000 |
| | — |
|
| 10 East 53rd Street | | 55.00 | % | | February 2020 | | 3.47 | % | | 170,000 |
| | 125,000 |
|
| 131-137 Spring Street | | 20.00 | % | | August 2020 | | 2.77 | % | | 141,000 |
| | 141,000 |
|
| 11 West 34th Street | | 30.00 | % | | January 2021 | | 2.68 | % | | 23,000 |
| | 23,000 |
|
| 100 Park Avenue | | 49.90 | % | | February 2021 | | 2.97 | % | | 360,000 |
| | 360,000 |
|
One Vanderbilt (11) | | 71.01 | % | | September 2021 | | 4.72 | % | | 271,229 |
| | — |
|
605 West 42nd Street (12) | | 20.00 | % | | August 2027 | | 2.84 | % | | 550,000 |
| | 539,000 |
|
| 21 East 66th Street | | 32.28 | % | | June 2033 | | 3.62 | % | | 1,667 |
| | 1,726 |
|
| Stonehenge Portfolio | | Various |
| | April 2018 | | 2.47 | % | | 55,340 |
| | 65,577 |
|
650 Fifth Avenue (13) | | | | | | | | — |
| | 77,500 |
|
| Total floating rate debt | | | | | | | | $ | 3,877,504 |
| | $ | 2,982,528 |
|
| Total joint venture mortgages and other loans payable | | | | $ | 7,325,927 |
| | $ | 6,549,374 |
|
| Deferred financing costs, net | | | | | | | | (127,318 | ) | | (95,408 | ) |
| Total joint venture mortgages and other loans payable, net | | | | $ | 7,198,609 |
| | $ | 6,453,966 |
|
| |
(1) | Economic interest represent the Company's interests in the joint venture as of September 30, 2017. Changes in ownership or economic interests, if any, within the current year are disclosed in the notes to the investment in unconsolidated joint ventures note above. |
| |
(2) | Effective weighted average interest rate for the three months ended September 30, 2017, taking into account interest rate hedges in effect during the period. |
| |
(3) | These loans are comprised of a $300.0 million fixed rate mortgage loan and $355.3 million mezzanine loan. The mezzanine loan is subject to accretion based on the difference between contractual interest rate and contractual pay rate. |
| |
(4) | Amount is comprised of $34.0 million, $137.7 million, $172.5 million, and $14.9 million in fixed-rate mortgages that mature in November 2017, August 2019, June 2024, and February 2027, respectively. |
| |
(5) | In January 2017, this loan was refinanced with a floating rate loan as shown above. |
| |
(6) | This loan has a committed amount of $190.0 million, of which $24.7 million was unfunded as of September 30, 2017. In October 2017, this loan was refinanced with a new $195.0 million mortgage loan with a floating interest rate of 213 basis points over 30-day LIBOR and a maturity date of November 2020. |
| |
(7) | The property secures a two year $100.0 million loan, of which $79.5 million is currently outstanding. |
| |
(8) | These loans are comprised of a $145.0 million mortgage loan and a $41.5 million mezzanine loan. As of September 30, 2017, $0.6 million of the mortgage loan and $0.5 million of the mezzanine loan were unfunded. In October 2017, this loan was refinanced with a new $195.0 million mortgage loan with a floating interest rate of 265 basis points over 30-day LIBOR and a maturity date of October 2020. |
| |
(9) | In August 2017, this loan was refinanced with a new $1.075 billion mortgage loan and a new $125.0 million mezzanine loan, which carry floating interest rates of 148 basis points over 30-day LIBOR and 385 basis points over 30-day LIBOR, respectively. Both the mortgage loan and mezzanine loan initially mature in September 2019.
|
| |
(10) | This loan has a committed amount of $375.0 million, of which $30.0 million was unfunded as of September 30, 2017.
|
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
| |
(11) | This loan is a $1.5 billion construction facility in connection with the development of One Vanderbilt. This facility bears interest at 350 basis points over 30-day LIBOR, with reduction based on meeting certain conditions, and has an initial five-year term with twoone-year extension options. Advances under the loan are subject to incurred costs, funded equity, loan to value thresholds, and entering into construction contracts.
|
| |
(12) | In August 2017, this loan was refinanced with a new $550.0 million mortgage note, with a floating interest rate of 144 basis points over 30-day LIBOR and a maturity date of August 2027. |
| |
(13) | In September 2017, this loan was refinanced with a fixed rate loan as shown above. |
We act as the operating partner and day-to-day manager for all our joint ventures, except for 800 Third Avenue, Jericho Plaza, 280 Park Avenue, 3 Columbus Circle, 21 East 66th Street, 175-225 Third Street, 605 West 42nd Street, 400 East 57th Street, and the Stonehenge Portfolio. We are entitled to receive fees for providing management, leasing, construction supervision and asset management services to certain of our joint ventures. We earned $2.9$6.2 million and $28.1$2.4 million from these services, net of our ownership share of the joint ventures, for the three and nine months ended September 30, 2017, respectively. We earned $2.0 millionMarch 31, 2022 and $4.5 million from these services for the three and nine months ended September 30, 2016,2021, respectively. In addition, we have the ability to earn incentive fees based on the ultimate financial performance of certain of the joint venture properties.
The combined balance sheets for the unconsolidated joint ventures, at September 30, 2017March 31, 2022 and December 31, 20162021 are as follows (in thousands):
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Assets (1) | | | |
| Commercial real estate property, net | $ | 14,785,274 | | | $ | 14,763,874 | |
| Cash and restricted cash | 751,944 | | | 768,510 | |
| Tenant and other receivables, related party receivables, and deferred rents receivable | 562,483 | | | 533,455 | |
| | | |
| Other assets | 1,796,952 | | | 1,776,030 | |
| Total assets | $ | 17,896,653 | | | $ | 17,841,869 | |
Liabilities and equity (1) | | | |
| Mortgages and other loans payable, net | $ | 11,118,335 | | | $ | 11,085,876 | |
| Deferred revenue | 1,141,181 | | | 1,158,242 | |
| Lease liabilities | 999,553 | | | 980,595 | |
| Other liabilities | 368,957 | | | 352,499 | |
| Equity | 4,268,627 | | | 4,264,657 | |
| Total liabilities and equity | $ | 17,896,653 | | | $ | 17,841,869 | |
| Company's investments in unconsolidated joint ventures | $ | 3,000,986 | | | $ | 2,997,934 | |
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Assets | | | |
| Commercial real estate property, net | $ | 9,944,280 |
| | $ | 9,131,717 |
|
| Cash and restricted cash | 370,596 |
| | 328,455 |
|
| Tenant and other receivables, related party receivables, and deferred rents receivable, net of allowance | 267,244 |
| | 232,778 |
|
| Debt and preferred equity investments, net | 201,731 |
| | 336,164 |
|
| Other assets | 636,365 |
| | 683,481 |
|
| Total assets | $ | 11,420,216 |
| | $ | 10,712,595 |
|
| Liabilities and members' equity | | | |
| Mortgages and other loans payable, net | $ | 7,198,609 |
| | $ | 6,453,966 |
|
| Deferred revenue/gain | 340,310 |
| | 356,414 |
|
| Other liabilities | 411,261 |
| | 391,500 |
|
| Members' equity | 3,470,036 |
| | 3,510,715 |
|
| Total liabilities and members' equity | $ | 11,420,216 |
| | $ | 10,712,595 |
|
| Company's investments in unconsolidated joint ventures | $ | 2,045,796 |
| | $ | 1,890,186 |
|
The combined statements of operations for the unconsolidated joint ventures, forfrom acquisition date through the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, are as follows (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
| Total revenues | $ | 335,266 | | | $ | 301,541 | | | | | |
| Operating expenses | 59,914 | | | 46,233 | | | | | |
| Real estate taxes | 60,722 | | | 54,592 | | | | | |
| Operating lease rent | 6,268 | | | 5,644 | | | | | |
| Interest expense, net of interest income | 94,913 | | | 78,749 | | | | | |
| Amortization of deferred financing costs | 6,757 | | | 6,384 | | | | | |
| | | | | | | |
| Depreciation and amortization | 112,713 | | | 114,879 | | | | | |
| Total expenses | 341,287 | | | 306,481 | | | | | |
| | | | | | | |
| Net loss before gain on sale | $ | (6,021) | | | $ | (4,940) | | | | | |
| Company's equity in net loss from unconsolidated joint ventures | $ | (4,715) | | | $ | (2,864) | | | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Total revenues | $ | 216,100 |
| | $ | 184,221 |
| | $ | 643,210 |
| | $ | 498,308 |
|
| Operating expenses | 38,055 |
| | 34,727 |
| | 115,996 |
| | 89,147 |
|
| Ground rent | 4,182 |
| | 3,744 |
| | 12,612 |
| | 10,670 |
|
| Real estate taxes | 37,282 |
| | 30,814 |
| | 107,391 |
| | 79,356 |
|
| Interest expense, net of interest income | 61,066 |
| | 51,789 |
| | 176,096 |
| | 147,876 |
|
| Amortization of deferred financing costs | 4,030 |
| | 7,155 |
| | 17,994 |
| | 17,667 |
|
| Transaction related costs | — |
| | 5,359 |
| | 146 |
| | 5,359 |
|
| Depreciation and amortization | 61,447 |
| | 56,890 |
| | 198,556 |
| | 132,035 |
|
| Total expenses | 206,062 |
| | 190,478 |
| | 628,791 |
| | 482,110 |
|
| Loss on early extinguishment of debt | (7,638 | ) | | — |
| | (7,638 | ) | | (1,606 | ) |
| Net income (loss) before gain on sale | $ | 2,400 |
| | $ | (6,257 | ) | | $ | 6,781 |
| | $ | 14,592 |
|
| Company's equity in net income (loss) from unconsolidated joint ventures | $ | 4,078 |
| | $ | (3,968 | ) | | $ | 14,104 |
| | $ | 11,969 |
|
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
7. Deferred Costs
Deferred costs at September 30, 2017as of March 31, 2022 and December 31, 20162021 consisted of the following (in thousands):
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Deferred leasing costs | $ | 404,778 | | | $ | 400,419 | |
| Less: accumulated amortization | (282,484) | | | (275,924) | |
| Deferred costs, net | $ | 122,294 | | | $ | 124,495 | |
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Deferred leasing costs | $ | 464,788 |
| | $ | 468,971 |
|
| Less: accumulated amortization | (216,807 | ) | | (201,371 | ) |
| Deferred costs, net | $ | 247,981 |
| | $ | 267,600 |
|
8. Mortgages and Other Loans Payable
The first mortgages and other loans payable collateralized by the respective properties and assignment of leases or debt investments at September 30, 2017as of March 31, 2022 and December 31, 2016,2021, respectively, were as follows (amounts(dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property | | Current Maturity
Date | Final Maturity Date (1) | | Interest Rate (2) | | March 31, 2022 | | December 31, 2021 |
| Fixed Rate Debt: | | | | | | | | | | |
| 100 Church Street | | July 2022 | July 2022 | | | 4.68% | | $ | 198,980 | | | $ | 200,212 | |
| 420 Lexington Avenue | | October 2024 | October 2040 | | | 3.99% | | 287,243 | | | 288,660 | |
| Landmark Square | | January 2027 | January 2027 | | | 4.90% | | 100,000 | | | 100,000 | |
| 485 Lexington Avenue | | February 2027 | February 2027 | | | 4.25% | | 450,000 | | | 450,000 | |
1080 Amsterdam (3) | | February 2027 | February 2027 | | | 3.59% | | 34,348 | | | 34,537 | |
| Total fixed rate debt | | | | | | | | $ | 1,070,571 | | | $ | 1,073,409 | |
| Floating Rate Debt: | | | | | | | | | | |
7 Dey / 185 Broadway (4) | | November 2022 | November 2023 | | L+ | 2.85% | | $ | 203,478 | | | $ | 198,169 | |
| 719 Seventh Avenue | | September 2023 | September 2023 | | L+ | 1.20% | | 50,000 | | | 50,000 | |
| 690 Madison Avenue | | July 2024 | July 2025 | | L+ | 1.50% | | 60,000 | | | 60,000 | |
| 609 Fifth Avenue | | March 2022 | March 2025 | | L+ | —% | | — | | | 52,882 | |
2017 Master Repurchase Agreement (5) | | | | | | | | — | | | — | |
| Total floating rate debt | | | | | | | | $ | 313,478 | | | $ | 361,051 | |
| Total fixed rate and floating rate debt | | | | | | | | $ | 1,384,049 | | | $ | 1,434,460 | |
| Mortgages reclassed to liabilities related to assets held for sale | | | | | | | | (34,348) | | | (34,537) | |
| Total mortgages and other loans payable | | | | | | | | $ | 1,349,701 | | | $ | 1,399,923 | |
| Deferred financing costs, net of amortization | | | | | | | | (4,926) | | | (5,537) | |
| Total mortgages and other loans payable, net | | | | | | | | $ | 1,344,775 | | | $ | 1,394,386 | |
(1)Reflects exercise of all available options. The ability to exercise extension options may be subject to certain tests based on the operating performance of the property.
(2)Interest rate as of March 31, 2022, taking into account interest rate hedges in effect during the period. Floating rate debt is presented with the stated spread over the 30-day LIBOR, unless otherwise specified.
(3)The loan is comprised of a $33.4 million mortgage loan and $0.9 million mezzanine loan with a fixed interest rate of 350 basis points and 700 basis points, respectively, for the first five years and is prepayable without penalty at the end of the fifth year. The Company closed on the sale of this investment in April 2022.
(4)This loan is a $225.0 million construction facility, with reductions in interest cost based on meeting certain conditions, and has an initial three year term with 2 one year extension options. In October 2021, an extension option was exercised, and the maturity date of this loan was extended by one year. Advances under the loan are subject to incurred costs and funded equity requirements.
(5)In June 2021, we exercised a one year extension option which extended the maturity date to June 2022. As of March 31, 2022, there was no outstanding balance on the $400 million facility.
As of March 31, 2022 and December 31, 2021, the gross book value of the properties collateralizing the mortgages and other loans payable was approximately $1.9 billion and $2.1 billion, respectively.
|
| | | | | | | | | | | | | |
| Property | | Maturity Date | | Interest Rate (1) | | September 30, 2017 | | December 31, 2016 |
| Fixed Rate Debt: | | | | | | | | |
| Unsecured Loan | | June 2018 | | 4.81 | % | | $ | 16,000 |
| | $ | 16,000 |
|
| One Madison Avenue | | May 2020 | | 5.91 | % | | 494,264 |
| | 517,806 |
|
| 762 Madison Avenue | | February 2022 | | 5.00 | % | | 771 |
| | 7,694 |
|
| 100 Church Street | | July 2022 | | 4.68 | % | | 218,237 |
| | 221,446 |
|
919 Third Avenue (2) | | June 2023 | | 5.12 | % | | 500,000 |
| | 500,000 |
|
| 420 Lexington Avenue | | October 2024 | | 3.99 | % | | 300,000 |
| | 300,000 |
|
| 1515 Broadway | | March 2025 | | 3.93 | % | | 876,613 |
| | 888,531 |
|
400 East 58th Street (3) | | November 2026 | | 3.00 | % | | 40,000 |
| | 40,000 |
|
| Landmark Square | | January 2027 | | 4.90 | % | | 100,000 |
| | 100,000 |
|
| 485 Lexington Avenue | | February 2027 | | 4.25 | % | | 450,000 |
| | 450,000 |
|
1080 Amsterdam (4) | | February 2027 | | 3.58 | % | | 36,363 |
| | — |
|
| 315 West 33rd Street | | February 2027 | | 4.17 | % | | 250,000 |
| | — |
|
Series J Preferred Units (5) | | April 2051 | | 3.75 | % | | 4,000 |
| | 4,000 |
|
885 Third Avenue (6) | | | |
| | — |
| | 267,650 |
|
FHLBNY Facility (7) | | | | | | — |
| | 105,000 |
|
FHLBNY Facility (7) | | | | | | — |
| | 100,000 |
|
| Total fixed rate debt | | | | | | $ | 3,286,248 |
| | $ | 3,518,127 |
|
| Floating Rate Debt: | | | | | | | | |
| 719 Seventh Avenue | | February 2018 | | 4.27 | % | | $ | 41,171 |
| | $ | 37,388 |
|
| 183, 187 Broadway & 5-7 Dey Street | | May 2018 | | 3.92 | % | | 58,000 |
| | 58,000 |
|
| 2016 Master Repurchase Agreement | | July 2018 | | 3.73 | % | | 184,642 |
| | 184,642 |
|
| 220 East 42nd Street | | October 2020 | | 2.82 | % | | 275,000 |
| | 275,000 |
|
One Vanderbilt Avenue (8) | | | |
|
| | — |
| | 64,030 |
|
1080 Amsterdam (9) | | | |
|
| | — |
| | 3,525 |
|
| Total floating rate debt | | | | | | $ | 558,813 |
| | $ | 622,585 |
|
| Total fixed rate and floating rate debt | | | | | | $ | 3,845,061 |
| | $ | 4,140,712 |
|
| Mortgages reclassed to liabilities related to assets held for sale | | | | | | — |
| | — |
|
| Total mortgages and other loans payable | | | | | | $ | 3,845,061 |
| | $ | 4,140,712 |
|
| Deferred financing costs, net of amortization | | | | | | (40,887 | ) | | (66,882 | ) |
| Total mortgages and other loans payable, net | | | | | | $ | 3,804,174 |
| | $ | 4,073,830 |
|
| |
(1) | Effective weighted average interest rate for the quarter ended September 30, 2017, taking into account interest rate hedges in effect during the period. |
| |
(2) | We own a 51.0% controlling interest in the consolidated joint venture that is the borrower on this loan. |
| |
(3) | The loan carries a fixed interest rate of 3.00% for the first 5 years and is prepayable without penalty in year 5.
|
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
| |
(4) | The loan is comprised of a $35.5 million mortgage loan and $0.9 million subordinate loan with a fixed interest rate of 3.50% and 7.00%, respectively, for the first 5 years and is prepayable without penalty in year 5.
|
| |
(5) | In connection with the acquisition of a commercial real estate property, the Operating Partnership issued $4.0 million, 3.75% Series J Preferred Units of limited partnership interest, or the Series J Preferred Units, with a mandatory liquidation preference of $1,000 per unit. The Series J Preferred Units are accounted for as debt because they can be redeemed in cash by the Operating Partnership on the earlier of (i) the date of the sale of the property or (ii) April 30, 2051 or at the option of the unitholders as provided for in the related agreement. |
| |
(6) | In February 2016, we closed on the sale of 885 Third Avenue. The sale did not meet the criteria for sale accounting at that time. In April 2017, the mortgage was refinanced by the buyer, resulting in the Company deconsolidating the property from its financial statements in the second quarter of 2017. |
| |
(7) | The facility was repaid in January 2017. |
| |
(8) | In September 2016, we closed on a $1.5 billion construction facility in connection with the development of One Vanderbilt Avenue. In January 2017, we admitted two partners, National Pension Service of Korea and Hines Interest LP, into the One Vanderbilt Avenue development project. In April 2017, the criteria for deconsolidation were met, and the development is shown within investments in unconsolidated joint ventures. See Note 6, "Investments in Unconsolidated Joint Ventures". |
| |
(9) | In January 2017, this loan was refinanced with a fixed rate loan as shown above. |
At September 30, 2017 and December 31, 2016, the gross book value of the properties and debt and preferred equity investments collateralizing the mortgages and other loans payable, not including assets held for sale, was approximately $6.7 billion and $6.0 billion, respectively.
Federal Home Loan Bank of New York Facility
The Company’s wholly-owned subsidiary, Belmont Insurance Company, or Belmont, a New York licensed captive insurance company, was a member of the Federal Home Loan Bank of New York, or FHLBNY. In January 2017, all funds borrowed from the FHLBNY were repaid and Belmont's membership was terminated in February 2017.
Master Repurchase AgreementsAgreement
The Company has entered into twoa Master Repurchase Agreements,Agreement, or MRAs,MRA, known as the 2016 MRA and 2017 MRA, which provideprovides us with the ability to sell certain debtmortgage investments with a simultaneous agreement to repurchase the same at a certain date or on demand. We seek to mitigate risks associated with our repurchase agreement by managing the credit quality of our assets, early repayments, interest rate volatility, liquidity, and market value. The margin call provisions under our repurchase facilitiesfacility permit valuation adjustments based on capital markets activity, and are not limited to collateral-specific credit marks. To monitor credit risk associated with our debt investments, our asset management team regularly reviews our investment portfolio and is in contact with our borrowers in order to monitor the collateral and enforce our rights as necessary. The risk associated with potential margin calls is further mitigated by our ability to recollateralizecollateralize the facility with additional assets from our portfolio of debt investments, our ability to satisfy margin calls with cash or cash equivalents and our access to additional liquidity throughliquidity. As of March 31, 2022, there have been no margin calls on the 2012 credit facility, as defined below.2017 MRA.
In June 2017,April 2018, we entered intoincreased the 2017 MRA, with a maximum facility capacity offrom $300.0 million to $400.0 million. The facility bears interest on a floating rate basis at a spread to 30-day LIBOR based on the pledged collateral and advance rate and has an initial one year term, with two one year extension options. At September 30, 2017,is scheduled to mature in June 2022. As of March 31, 2022, the facility had a carrying value of $(1.1) million, representing deferred financing costs presented within other liabilities.no outstanding balance.
In July 2016, we entered into a restated 2016 MRA, with a maximum facility capacity of $300.0 million. The facility bears interest ranging from 225 and 400 basis points over 30-day LIBOR depending on the pledged collateral and has an initial two-year term, with a one year extension option. Since December 6, 2015, we have been required to pay monthly in arrears a 25 basis point fee on the excess of $150.0 million over the average daily balance during the period when the average daily balance is less than $150.0 million. At September 30, 2017, the facility had a carrying value of $182.8 million, net of deferred financing costs.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
9. Corporate Indebtedness
20122021 Credit Facility
In August 2016,December 2021, we entered into an amendment to theamended and restated credit facility, referred to as the 2021 credit facility, that was previously amended by the Company in November 2017, or the 2017 credit facility, and was originally entered into by the Company in November 2012, referred to asor the 2012 credit facility. As of September 30, 2017,March 31, 2022, the 20122021 credit facility as amended, consisted of a $1.6$1.25 billion revolving credit facility, and a $1.2$1.05 billion term loan (or "Term Loan A"), and a $200.0 million term loan (or "Term Loan B") with a maturity datedates of March 29, 2019May 15, 2026, May 15, 2027, and June 30, 2019,November 21, 2024, respectively. The revolving credit facility has an2 six-month, as-of-right extension options to March 29, 2020.May 15, 2027. We also have an option, subject to customary conditions, to increase the capacity underof the revolving credit facility to $3.0$4.5 billion at any time prior to the maturity datedates for the revolving credit facility and term loans without the consent of existing lenders, by obtaining additional commitments from our existing lenders and other financial institutions.
As of September 30, 2017,March 31, 2022, the 20122021 credit facility bore interest at a spread over LIBORadjusted Term SOFR plus 10 basis points with an interest period of one or three months, as we may elect, ranging from (i) 87.572.5 basis points to 155140 basis points for loans under the revolving credit facility, and (ii) 9580 basis points to 190160 basis points for loans under the term loan facility,Term Loan A, and (iii) 85 basis points to 165 basis points for loans under Term Loan B, in each case based on the credit rating assigned to the senior unsecured long term indebtedness of ROP.the Company. In instances where there are either only two ratings available or where there are more than two and the difference between them is one rating category, the applicable rating shall be the highest rating. In instances where there are more than two ratings and the difference between the highest and the lowest is two or more rating categories, then the applicable rating used is the average of the highest two, rounded down if the average is not a recognized category.
At September 30, 2017,As of March 31, 2022, the applicable spread over adjusted Term SOFR plus 10 basis points was 125105 basis points for the revolving credit facility, and 140120 basis points for the term loan facility. At September 30, 2017, the effective interest rate, including the effect of interest rate swaps, was 2.49%Term Loan A, and 125 basis points for the revolving credit facility and 2.49% for the term loan facility.Term Loan B. We are required to pay quarterly in arrears a 12.5 to 30 basis point facility fee on the total commitments under the revolving credit facility based on the credit rating assigned to the senior unsecured long term indebtedness of ROP.the Company. As of September 30, 2017,March 31, 2022, the facility fee was 2520 basis points.
As of September 30, 2017,March 31, 2022, we had $80.8$2.0 million of outstanding letters of credit, $280.0$500.0 million drawn under the revolving credit facility and $1.2$1.25 billion outstanding under the term loan facility,facilities, with total undrawn capacity of $1.2$0.75 billion under the 20122021 credit facility. At September 30, 2017As of March 31, 2022 and December 31, 2016,2021, the revolving credit facility had a carrying value of $275.8$492.0 million and $(6.3)$381.3 million, respectively, net of deferred financing costs. The DecemberAs of March 31, 2016 carrying value represents deferred financing costs and is presented within other liabilities. At September 30, 20172022 and December 31, 2016,2021, the term loan facilityfacilities had a carrying value of $1.2 billion and $1.2 billion, respectively, net of deferred financing costs.
The Company and the Operating Partnership and ROP are all borrowers jointly and severally obligated under the 20122021 credit facility. None of our other subsidiaries are obligors under the 2012 credit facility.
The 20122021 credit facility includes certain restrictions and covenants (see Restrictive Covenants below).
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
Senior Unsecured Notes
The following table sets forth our senior unsecured notes and other related disclosures as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively, by scheduled maturity date (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuance | | March 31, 2022
Unpaid
Principal
Balance | | March 31, 2022
Accreted
Balance | | December 31,
2021
Accreted
Balance | | Interest Rate (1) | | Initial Term
(in Years) | | Maturity Date |
October 5, 2017 (2) | | $ | 500,000 | | | $ | 499,940 | | | $ | 499,913 | | | | 3.25 | % | | 5 | | October 2022 |
November 15, 2012 (3) | | 300,000 | | | 300,728 | | | 301,002 | | | | 4.50 | % | | 10 | | December 2022 |
December 17, 2015 (4) | | 100,000 | | | 100,000 | | | 100,000 | | | | 4.27 | % | | 10 | | December 2025 |
| | $ | 900,000 | | | $ | 900,668 | | | $ | 900,915 | | | | | | | | |
| Deferred financing costs, net | | — | | | (1,127) | | | (1,607) | | | | | | | | |
| | $ | 900,000 | | | $ | 899,541 | | | $ | 899,308 | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | |
| Issuance | | September 30,
2017
Unpaid
Principal
Balance | | September 30,
2017
Accreted
Balance | | December 31,
2016
Accreted
Balance | | Coupon Rate (1) | | Effective Rate | | Initial Term (in Years) | | Maturity Date |
October 12, 2010 (2) | | $ | 269,000 |
| | $ | 268,628 |
| | $ | 334,077 |
| | 3.00 | % | | 3.00 | % | | 7 | | October 2017 |
August 5, 2011 (3) | | 250,000 |
| | 249,934 |
| | 249,880 |
| | 5.00 | % | | 5.00 | % | | 7 | | August 2018 |
March 16, 2010 (3) | | 250,000 |
| | 250,000 |
| | 250,000 |
| | 7.75 | % | | 7.75 | % | | 10 | | March 2020 |
November 15, 2012 (3) | | 200,000 |
| | 200,000 |
| | 200,000 |
| | 4.50 | % | | 4.50 | % | | 10 | | December 2022 |
December 17, 2015 (3) | | 100,000 |
| | 100,000 |
| | 100,000 |
| | 4.27 | % | | 4.27 | % | | 10 | | December 2025 |
| | | $ | 1,069,000 |
| | $ | 1,068,562 |
| | $ | 1,133,957 |
| | | | | | | | |
| Deferred financing costs, net | | | | (4,018 | ) | | (5,642 | ) | | | | | | | | |
| | | $ | 1,069,000 |
| | $ | 1,064,544 |
| | $ | 1,128,315 |
| | | | | | | | |
| |
(1) | Interest on the senior unsecured notes is payable semi-annually with principal and unpaid interest due on the scheduled maturity dates. |
| |
(2) | (2)Issued by the Operating Partnership. The notes were senior unsecured obligations of the Operating Partnership and exchangeable at a calculated exchange rate upon the occurrence of specified events and during the period beginning on the twenty-second scheduled trading day prior to the maturity date and ending on the second business day prior to the maturity date, into cash, or a combination of cash and shares of SL Green's common stock, if any, at our option. In accordance with the terms of the indenture, the notes became exchangeable commencing September 14, 2017 and the Operating Partnership elected to settle exchanges in cash. In October 2017, all note holders elected to exchange the notes and the notes were repaid for $350.8 million, excluding accrued interest based on the applicable exchange rate. |
SL Green Realty Corp. and SL Green Operating Partnership L.P.with the Company as the guarantor.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
| |
(3) | Issued by the Company, the Operating Partnership and ROP, as co-obligors. In October 2017, the Company, the Operating Partnership and ROP, as co-obligors issued an additional $100.0 million of the 4.50% senior unsecured bonds due December 2022. The additional notes priced at 105.334% plus accrued interest from June 1, 2017, with a yield to maturity of 3.298%. |
(3)In October 2017, the Company and the Operating Partnership as co-obligors issued $500.0an additional $100.0 million of 4.50% senior unsecured notes which will mature in October 2022due December 2022. The notes were priced at 105.334% of par.
(4)Issued by the Company and bear interest at a fixed rate of 3.25%.the Operating Partnership as co-obligors.
Restrictive Covenants
The terms of the 20122021 credit facility as amended, and certain of our senior unsecured notes include certain restrictions and covenants which may limit, among other things, our ability to pay dividends, make certain types of investments, incur additional indebtedness, incur liens and enter into negative pledge agreements and dispose of assets, and which require compliance with financial ratios relating to the maximum ratio of total indebtedness to total asset value, a minimum ratio of EBITDA to fixed charges, a maximum ratio of secured indebtedness to total asset value and a maximum ratio of unsecured indebtedness to unencumbered asset value. The dividend restriction referred to above provides that we will not, during any time when a default is continuing, make distributions with respect to common stock or other equity interests, except to enable the Company to continue to qualify as a REIT for Federal income tax purposes. As of September 30, 2017March 31, 2022 and 2016,December 31, 2021, we were in compliance with all such covenants.
Junior Subordinated Deferrable Interest Debentures
In June 2005, the Company and the Operating Partnership issued $100.0 million in unsecured trust preferred securities through a newly formed trust, SL Green Capital Trust I, or the Trust, which is a wholly-owned subsidiary of the Operating Partnership. The securities mature in 2035 and bear interest at a floating rate of 125 basis points over the three-month LIBOR. The effective weighted average interest rate for the quarter ended September 30, 2017 was 2.52%. Interest payments may be deferred for a period of up to eight8 consecutive quarters if the Operating Partnership exercises its right to defer such payments. The Trust preferred securities are redeemable at the option of the Operating Partnership, in whole or in part, with no prepayment premium. We do not consolidate the Trust even though it is a variable interest entity as we are not the primary beneficiary. Because the Trust is not consolidated, we have recorded the debt on our consolidated balance sheets and the related payments are classified as interest expense.
Principal Maturities
Combined aggregate principal maturities of mortgages and other loans payable, 2012 credit facility, trust preferred securities, senior unsecured notes and our share of joint venture debt as of September 30, 2017, including as-of-right extension options and put options, were as follows (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Scheduled Amortization | | Principal | | Revolving Credit Facility | | Unsecured Term Loan | | Trust Preferred Securities | | Senior Unsecured Notes | | Total | | Joint Venture Debt |
| Remaining 2017 | $ | 12,846 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 269,000 |
| (1) | $ | 281,846 |
| | $ | 79,787 |
|
| 2018 | 54,937 |
| | 299,813 |
| | — |
| | — |
| | — |
| | 250,000 |
| | 604,750 |
| | 242,799 |
|
| 2019 | 59,618 |
| | — |
| | — |
| | 1,183,000 |
| | — |
| | — |
| | 1,242,618 |
| | 705,574 |
|
| 2020 | 41,427 |
| | 679,531 |
| | 280,000 |
| | — |
| | — |
| | 250,000 |
| | 1,250,958 |
| | 320,914 |
|
| 2021 | 30,418 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 30,418 |
| | 376,765 |
|
| Thereafter | 90,532 |
| | 2,575,939 |
| | — |
| | — |
| | 100,000 |
| | 300,000 |
| | 3,066,471 |
| | 1,465,371 |
|
| | $ | 289,778 |
| | $ | 3,555,283 |
| | $ | 280,000 |
| | $ | 1,183,000 |
| | $ | 100,000 |
| | $ | 1,069,000 |
| | $ | 6,477,061 |
| | $ | 3,191,210 |
|
| |
(1) | The $269.0 million of 3.00% convertible notes which matured in October 2017 became exchangeable commencing September 14, 2017 and the Operating Partnership elected to settle exchanges in cash. In October 2017, all note holders elected to exchange the notes and the notes were repaid for $350.8 million. |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
Principal Maturities
Combined aggregate principal maturities of mortgages and other loans payable, the 2021 credit facility, trust preferred securities, senior unsecured notes and our share of joint venture debt as of March 31, 2022, including as-of-right extension options, were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Scheduled
Amortization | | Principal | | Revolving
Credit
Facility | | Unsecured Term Loans | | Trust
Preferred
Securities | | Senior
Unsecured
Notes | | Total | | Joint
Venture
Debt |
| Remaining 2022 | $ | 5,962 | | | $ | 401,261 | | | $ | — | | | $ | — | | | $ | — | | | $ | 800,000 | | | $ | 1,207,223 | | | $ | 422,442 | |
| 2023 | 6,640 | | | 50,000 | | | — | | | — | | | — | | | — | | | 56,640 | | | 750,696 | |
| 2024 | 5,328 | | | 332,749 | | | — | | | 200,000 | | | — | | | — | | | 538,077 | | | 626,671 | |
| 2025 | 873 | | | — | | | — | | | — | | | — | | | 100,000 | | | 100,873 | | | 1,431,734 | |
| 2026 | 904 | | | — | | | 500,000 | | | — | | | — | | | — | | | 500,904 | | | 107,230 | |
| Thereafter | 75 | | | 580,257 | | | — | | | 1,050,000 | | | 100,000 | | | — | | | 1,730,332 | | | 2,435,913 | |
| $ | 19,782 | | | $ | 1,364,267 | | | $ | 500,000 | | | $ | 1,250,000 | | | $ | 100,000 | | | $ | 900,000 | | | $ | 4,134,049 | | | $ | 5,774,686 | |
Consolidated interest expense, excluding capitalized interest, was comprised of the following (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
| Interest expense before capitalized interest | $ | 32,052 | | | $ | 39,868 | | | | | |
| Interest on financing leases | 1,237 | | | 1,492 | | | | | |
| Interest capitalized | (17,941) | | | (17,583) | | | | | |
| Interest income | (278) | | | (389) | | | | | |
| Interest expense, net | $ | 15,070 | | | $ | 23,388 | | | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Interest expense before capitalized interest | $ | 72,859 |
| | $ | 78,715 |
| | $ | 217,273 |
| | $ | 276,437 |
|
| Interest capitalized | (6,869 | ) | | (6,084 | ) | | (19,892 | ) | | (18,135 | ) |
| Interest income | (356 | ) | | (66 | ) | | (1,269 | ) | | (1,976 | ) |
| Interest expense, net | $ | 65,634 |
| | $ | 72,565 |
| | $ | 196,112 |
| | $ | 256,326 |
|
10. Related Party Transactions
Cleaning/ Security/ Messenger and Restoration Services
Alliance Building Services, or Alliance, and its affiliates, which provide services to certain properties owned by us, are partially owned by Gary Green, a son of Stephen L. Green, who serves as a member and as the chairman emeritus of SL Green's boardour Board of directors, and provide services to certain properties owned by us.Directors. Alliance’s affiliates include First Quality Maintenance, L.P., or First Quality, Classic Security LLC, Bright Star Couriers LLC and Onyx Restoration Works, and provide cleaning, extermination, security, messenger, and restoration services, respectively. In addition, First Quality has the non-exclusive opportunity to provide cleaning and related services to individual tenants at our properties on a basis separately negotiated with any tenant seeking such additional services. The Service Corporation has entered into an arrangement with Alliance whereby it will receive a profit participation above a certain threshold for services provided by Alliance to certain tenants at certain buildings above the base services specified in their lease agreements.
Income earned from the profit participation, which is included in otherOther income on the consolidated statements of operations, was $1.0$0.7 million and $3.0$0.3 million for the three and nine months ended September 30, 2017, respectively,March 31, 2022 and was $0.8 million and $2.6 million for the three and nine months ended September 30, 2016,2021, respectively.
We also recorded expenses, for these services, inclusive of capitalized expenses, of $5.7$4.3 million and $16.0$2.3 million for the three and nine months ended September 30, 2017,March 31, 2022 and 2021, respectively, for these services (excluding services provided directly to tenants), and $5.3 million and $16.1 million for the three and nine months ended September 30, 2016, respectively..
Management Fees
S.L. Green Management Corp., a consolidated entity, receives property management fees from an entity in which Stephen L. Green owns an interest. We received management fees from this entity of $0.1$0.2 million and $0.4$0.1 million for the three and nine months ended September 30, 2017, respectively,March 31, 2022 and $0.1 million2021, respectively.
SL Green Realty Corp. and $0.3 million for the three and nine months ended September 30, 2016, respectively.SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
One Vanderbilt Avenue Investment
In December 2016, we entered into agreements with entities owned and controlled by our Chairman and CEO, Marc Holliday, and our President, Andrew Mathias, pursuant to which they agreed to make an investment in our One Vanderbilt project at the appraised fair market value for the interests acquired. This investment entitles these entities to receive approximately 1.50% - 1.80% and 1.00% - 1.20%, respectively, of any profits realized by the Company from its One Vanderbilt project in excess of the Company’s capital contributions. The entities have no right to any return of capital. Accordingly, subject to previously disclosed repurchase rights, these interests will have no value and will not entitle these entities to any amounts (other than limited distributions to cover tax liabilities incurred) unless and until the Company has received distributions from the One Vanderbilt project in excess of the Company’s aggregate investment in the project. In the event that the Company does not realize a profit on its investment in the project (or would not realize a profit based on the value at the time the interests are repurchased), the entities owned and controlled by Messrs. Holliday and Mathias will lose the entire amount of their investment.
Fifty percent of these interests were purchased on December 31, 2016 and the remaining fifty percent will be purchased on December 31, 2017. The entities owned and controlled by Messrs. Holliday and Mathias will paypaid $1.4 million and $1.0 million, respectively, which equalsequaled the fair market value of the interests acquired as of the date the investment agreements were entered into as determined by an independent third party appraisal that we obtained.
Messrs. Holliday and Mathias cannot monetize their interests until after stabilization of the property (50% within three years after stabilization and 100% three years or more after stabilization). In addition, the agreement calls for us to repurchase these interests in the event of a sale of One Vanderbilt or a transactional change of control of the Company. We also have the right to repurchase these interests on the 7-year anniversary of the stabilization of the project or upon the occurrence of certain separation events prior to the stabilization of the project relating to each of Messrs. Holliday’s and Mathias’s continued service with us. The price paid upon monetization of the interests will equal the liquidation value of the interests at the time, with the value of One Vanderbilt being based on its sale price, if applicable, or fair market value as determined by an independent third party appraiser. As of March 31, 2022, stabilization of the property was achieved.
One Vanderbilt Avenue Leases
38
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
rent expense under the lease. Additionally, in June 2021, we, through a wholly-owned subsidiary, entered into a lease agreement with the One Vanderbilt Avenue joint venture for SUMMIT One Vanderbilt, which commenced in October 2021. For the three months ended March 31, 2022, we recorded $9.8 million of rent expense under the lease, including percentage rent, of which $6.6 million was recognized as income as a component of Equity in net loss from unconsolidated joint ventures in our consolidated statements of operations.
Other
We are entitled to receive fees for providing management, leasing, construction supervision and asset management services to certain of our joint ventures as further described in InvestmentsNote 6, "Investments in Unconsolidated Joint Ventures." Amounts due from joint ventures and related parties at September 30, 2017as of March 31, 2022 and December 31, 20162021 consisted of the following (in thousands):
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Due from joint ventures | $ | 31,001 | | | $ | 28,204 | |
| Other | 710 | | | 1,204 | |
| Related party receivables | $ | 31,711 | | | $ | 29,408 | |
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Due from joint ventures | $ | 16,736 |
| | $ | 1,240 |
|
| Other | 7,332 |
| | 14,616 |
|
| Related party receivables | $ | 24,068 |
| | $ | 15,856 |
|
11. Noncontrolling Interests on the Company's Consolidated Financial Statements
Noncontrolling interests represent the common and preferred units of limited partnership interest in the Operating Partnership not held by the Company as well as third party equity interests in our other consolidated subsidiaries. Noncontrolling interests in the Operating Partnership are shown in the mezzanine equity while the noncontrolling interests in our other consolidated subsidiaries are shown in the equity section of the Company’s consolidated financial statements.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
Common Units of Limited Partnership Interest in the Operating Partnership
As of September 30, 2017March 31, 2022 and December 31, 2016,2021, the noncontrolling interest unit holders owned 4.45%6.00%, or 4,541,7654,095,291 units, and 4.16%5.57%, or 4,363,7163,781,565 units, of the Operating Partnership, respectively.respectively, inclusive of retroactive adjustments to reflect the reverse stock split effectuated by SL Green in January 2022. As of September 30, 2017, 4,541,765March 31, 2022, 4,095,291 shares of SL Green'sour common stock were reserved for issuance upon the redemption of units of limited partnership interest of the Operating Partnership.
Noncontrolling interests in the Operating Partnership is recorded at the greater of its cost basis or fair market value based on the closing stock price of SL Green'sour common stock at the end of the reporting period.
Below is the rollforward analysisa summary of the activity relating to the noncontrolling interests in the Operating Partnership as of September 30, 2017for the three months ended March 31, 2022 and the twelve months ended December 31, 20162021 (in thousands):
| | | | September 30, 2017 | | December 31, 2016 | | March 31, 2022 | | December 31, 2021 |
| Balance at beginning of period | $ | 473,882 |
| | $ | 424,206 |
| Balance at beginning of period | $ | 344,252 | | | $ | 358,262 | |
| Distributions | (10,639 | ) | | (12,671 | ) | Distributions | (4,415) | | | (15,749) | |
| Issuance of common units | 23,273 |
| | 78,495 |
| Issuance of common units | 6,721 | | | 18,678 | |
| Redemption of common units | (15,353 | ) | | (31,805 | ) | |
| Redemption and conversion of common units | | Redemption and conversion of common units | (18,272) | | | (53,289) | |
| Net income | 2,707 |
| | 10,136 |
| Net income | 492 | | | 25,457 | |
| Accumulated other comprehensive income allocation | (303 | ) | | 1,299 |
| |
| Accumulated other comprehensive loss allocation | | Accumulated other comprehensive loss allocation | 2,277 | | | 1,042 | |
| Fair value adjustment | (2,669 | ) | | 4,222 |
| Fair value adjustment | 43,023 | | | 9,851 | |
| Balance at end of period | $ | 470,898 |
| | $ | 473,882 |
| Balance at end of period | $ | 374,078 | | | $ | 344,252 | |
Preferred Units of Limited Partnership Interest in the Operating Partnership
The Operating Partnership has 1,902,000 4.50% Series G Preferred UnitsBelow is a summary of the preferred units of limited partnership interest orin the Series G Preferred Units outstanding, with a liquidation preferenceOperating Partnership as of $25.00 per unit, which were issued in January 2012 in conjunction with an acquisition. The Series G Preferred unitholders receive annual dividends of $1.125 per unit paid on a quarterly basis and dividendsMarch 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuance | | Stated Distribution Rate | | Number of Units Authorized | | Number of Units Issued | | Number of Units Outstanding | | Annual Dividend Per Unit(1) | | Liquidation Preference Per Unit(2) | | Conversion Price Per Unit(3) | | Date of Issuance |
Series A (4) | | 3.50 | % | | 109,161 | | | 109,161 | | | 109,161 | | | $ | 35.0000 | | | $ | 1,000.00 | | | $ | — | | | August 2015 |
| Series F | | 7.00% | | 60 | | | 60 | | | 60 | | | 70.0000 | | | 1,000.00 | | | 29.12 | | | January 2007 |
| Series K | | 3.50% | | 700,000 | | | 563,954 | | | 341,677 | | | 0.8750 | | | 25.00 | | | 134.67 | | | August 2014 |
| Series L | | 4.00% | | 500,000 | | | 378,634 | | | 372,634 | | | 1.0000 | | | 25.00 | | | — | | | August 2014 |
| Series P | | 4.00% | | 200,000 | | | 200,000 | | | 200,000 | | | 1.0000 | | | 25.00 | | | — | | | July 2015 |
| Series Q | | 3.50% | | 268,000 | | | 268,000 | | | 268,000 | | | 0.8750 | | | 25.00 | | | 148.95 | | | July 2015 |
| Series R | | 3.50% | | 400,000 | | | 400,000 | | | 400,000 | | | 0.8750 | | | 25.00 | | | 154.89 | | | August 2015 |
| Series S | | 4.00% | | 1,077,280 | | | 1,077,280 | | | 1,077,280 | | | 1.0000 | | | 25.00 | | | — | | | August 2015 |
| Series V | | 3.50% | | 40,000 | | | 40,000 | | | 40,000 | | | 0.8750 | | | 25.00 | | | — | | | May 2019 |
Series W (5) | | (6) | | | 1 | | | 1 | | | 1 | | | (6) | | | (6) | | | (6) | | | January 2020 |
| | | | | | | | | | | | | | | | |
(1)Dividends are cumulative, subject to certain provisions. The Series G Preferred
(2)Units are redeemable at any time at par for cash at the option of the unitholder unless otherwise specified.
(3)If applicable, units are convertible into a number of common units of limited partnership interest in the Operating Partnership equal to (i) the liquidation preference plus accumulated and unpaid distributions on the conversion date divided by (ii) $88.50. The common units of limited partnership interestthe amount shown in the Operating Partnership may be redeemed in exchange for SL Green's common stock on a 1-to-1 basis. The Series G Preferred Units also provide the holder with the right to require the Operating Partnership to repurchase the Series G Preferred Units for cash before January 31, 2022.table.
The Operating Partnership has 60 Series F Preferred Units outstanding with a mandatory liquidation preference of $1,000.00 per unit.
The Operating Partnership has authorized up to 700,000 3.50% Series K Preferred Units of limited partnership interest, or the Series K Preferred Units, with a liquidation preference of $25.00 per unit. In August 2014, the Company issued 563,954 Series
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
K Preferred Units in conjunction with an acquisition. The Series K Preferred unitholders receive annual dividends of $0.875 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series K Preferred Units can be redeemed at any time, at the option of the unitholder, either for cash or are convertible into a number of common units of limited partnership interest in the Operating Partnership equal to (i) the liquidation preference plus accumulated and unpaid distributions on the conversion date divided by (ii) $134.67.
The Operating Partnership has authorized up to 500,000 4.00% Series L Preferred Units of limited partnership interest, or the Series L Preferred Units, with a liquidation preference of $25.00 per unit. In August 2014, the Company issued 378,634 Series L Preferred Units in conjunction with an acquisition. The Series L Preferred unitholders receive annual dividends of $1.00 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series L Preferred Units can be redeemed at any time at par for cash at the option of the unitholder.
The Operating Partnership has authorized up to 1,600,000 3.75% Series M Preferred Units of limited partnership interest, or the Series M Preferred Units, with a liquidation preference of $25.00 per unit. In February 2015, the Company issued 1,600,000 Series M Preferred Units in conjunction with the acquisition of ownership interests in and relating to certain residential and retail real estate properties. The Series M Preferred unitholders receive annual dividends of $0.9375 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series M Preferred Units can be redeemed at any time at par for cash at the option of the unitholder.
The Operating Partnership has authorized up to 552,303 3.00% Series N Preferred Units of limited partnership interest, or the Series N Preferred Units, with a liquidation preference of $25.00 per unit. In June 2015, the Company issued 552,303 Series N Preferred Units in conjunction with an acquisition. The Series N Preferred unitholders receive annual dividends of $0.75 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series N Preferred Units can be redeemed at any time at par for cash at the option of the unitholder.
The Operating Partnership has authorized an aggregate of one 6.25% Series O Preferred Unit of limited partnership interest, or the Series O Preferred Unit. In June 2015, the Company issued the Series O Preferred Unit in connection with an acquisition.
The Operating Partnership has authorized up to 200,000 4.00% Series P Preferred Units of limited partnership interest, or the Series P Preferred Units, with a liquidation preference of $25.00 per unit. In July 2015, the Company issued 200,000 Series P Preferred Units in conjunction with an acquisition. The Series P Preferred unitholders receive annual dividends of $1.00 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series P Preferred Units can be redeemed at any time at par for cash at the option of the unitholder.
The Operating Partnership has authorized up to 268,000 3.50% Series Q Preferred Units of limited partnership interest, or the Series Q Preferred Units, with a liquidation preference of $25.00 per unit. In July 2015, the Company issued 268,000 Series Q Preferred Units in conjunction with an acquisition. The Series Q Preferred unitholders receive annual dividends of $0.875 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series Q Preferred Units can be redeemed at any time, at the option of the unitholder, either for cash or are convertible into a number of common units of limited partnership interest in the Operating Partnership equal to (i) the liquidation preference plus accumulated and unpaid distributions on the conversion date divided by (ii) $148.95.
The Operating Partnership has authorized up to 400,000 3.50% Series R Preferred Units of limited partnership interest, or the Series R Preferred Units, with a liquidation preference of $25.00 per unit. In August 2015, the Company issued 400,000 Series R Preferred Units in conjunction with an acquisition. The Series R Preferred unitholders receive annual dividends of $0.875 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series R Preferred Units can be redeemed at any time, at the option of the unitholder, either for cash or are convertible into a number of common units of limited partnership interest in the Operating Partnership equal to (i) the liquidation preference plus accumulated and unpaid distributions on the conversion date divided by (ii) $154.89.
The Operating Partnership has authorized up to 1,077,280 4.00% Series S Preferred Units of limited partnership interest, or the Series S Preferred Units, with a liquidation preference of $25.00 per unit. In August 2015, the Company issued 1,077,280 Series S Preferred Units in conjunction with an acquisition. The Series S Preferred unitholders receive annual dividends of $1.00 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series S Preferred Units can be redeemed at any time at par for cash at the option of the unitholder.
The Operating Partnership has authorized up to 230,000 2.75% Series T Preferred Units of limited partnership interest, or the Series T Preferred Units, with a liquidation preference of $25.00 per unit. In March 2016, the Company issued 230,000 Series T Preferred Units in conjunction with an acquisition. The Series T Preferred unitholders receive annual dividends of $0.6875 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Series T Preferred Units can be
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
redeemed at any time at par, at the option of the unitholder, either for cash or are convertible into a number of common units of limited partnership interest in the Operating Partnership equal to (i) the liquidation preference plus accumulated and unpaid distributions on the conversion date divided by (ii) $119.02.
The Operating Partnership has authorized up to 680,000 4.50% Series U Preferred Units of limited partnership interest, or the Series U Preferred Units, with a liquidation preference of $25.00 per unit. In March 2016, the Company issued 680,000 Series U Preferred Units in conjunction with an acquisition. The Series U Preferred unitholders initially receive annual dividends of $1.125 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The annual dividend is subject to reduction upon the occurence of certain circumstances set forth in the terms of the Series U Preferred Units. The minimum annual dividend is $0.75 per unit. The Series U Preferred Units can be redeemed at any time at par for cash at the option of the unitholder.
Through(4)Issued through a consolidated subsidiary, we have authorized up to 109,161 3.50% Series A Preferred Units of limited partnership interest, or the Subsidiary Series A Preferred Units, with a liquidation preference of $1,000.00 per unit. In August 2015, the Company issued 109,161 Subsidiary Series A Preferred Units in conjunction with an acquisition.subsidiary. The Subsidiary Series A Preferred unitholders receive annual dividends of $35.00 per unit paid on a quarterly basis and dividends are cumulative, subject to certain provisions. The Subsidiary Series A Preferred Units can be redeemed at any time, at the option of the unitholder, either for cash orunits are convertible on a one-for-one basis, into the Series B Preferred Units of limited partnership interest, or the Subsidiary Series B Preferred Units. The Subsidiary Series B Preferred Units can be converted at any time, at the option of the unitholder, into a number of common stock equal to 6.71348 shares of common stock for each Subsidiary Series B Preferred Unit. As of September 30, 2017,March 31, 2022, no Subsidiary Series B Preferred Units have been issued.
(5)The Series W preferred unit was issued in January 2020 in exchange for the then-outstanding Series O preferred unit. The holder of the Series W preferred unit is entitled to quarterly dividends in an amount calculated as (i) 1,350 multiplied by (ii) the current distribution per common unit of limited partnership in SL Green Operating Partnership. The holder has the right to require the Operating Partnership to repurchase the Series W unit for cash, or convert the Series W unit for Class B units, in each case at a price that is determined based on the closing price of the Company's common stock at the time such right is exercised. The unit's liquidation preference is the fair market value of the unit plus accrued distributions at the time of a liquidation event.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
Below is the rollforward analysisa summary of the activity relating to the preferred units in the Operating Partnership as of September 30, 2017for the three months ended March 31, 2022 and the twelve months ended December 31, 20162021 (in thousands):
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Balance at beginning of period | $ | 196,075 | | | $ | 202,169 | |
| Issuance of preferred units | — | | | — | |
| Redemption of preferred units | (17,967) | | | (6,040) | |
| Dividends paid on preferred units | (1,662) | | | (6,760) | |
| Accrued dividends on preferred units | 1,497 | | | 6,706 | |
| Balance at end of period | $ | 177,943 | | | $ | 196,075 | |
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Balance at beginning of period | $ | 302,010 |
| | $ | 282,516 |
|
| Issuance of preferred units | — |
| | 22,793 |
|
| Redemption of preferred units | (125 | ) | | (3,299 | ) |
| Balance at end of period | $ | 301,885 |
| | $ | 302,010 |
|
12. Stockholders’ Equity of the Company
Common Stock
Our authorized capital stock consists of 260,000,000 shares, $0.01 par value per share, consisting of 160,000,000 shares of common stock, $0.01 par value per share, 75,000,000 shares of excess stock, at $0.01 par value per share, and 25,000,000 shares of preferred stock, par value $0.01 per share. As of September 30, 2017, 97,445,509March 31, 2022, 64,124,447 shares of common stock and no shares of excess stock were issued and outstanding.
In August 2016,On December 2, 2021, our boardBoard of directors approvedDirectors declared an ordinary dividend of $0.3108 per share and a special dividend of $2.4392 per share (together, "the Total Dividend"). The Total Dividend was paid on January 18, 2022 to shareholders of record at the close of business on December 15, 2021 ("the Record Date"). Shareholders had the opportunity to elect to receive the Total Dividend in the form of all cash or all stock, repurchase plan undersubject to proration if either option was oversubscribed. As a result of the elections made, the cash option was oversubscribed and was prorated. Shareholders who elected to receive cash received, for each share of common stock they owned as of the Record Date, approximately $0.3976 in cash and 0.0295 shares of common stock. Shareholders who elected to receive shares received, for each share of common stock they owned as of the Record Date, approximately 0.0345 shares of common stock. The number of shares issued was calculated based on the volume weighted average trading price of SLG's common stock between January 5-7, 2022 of $79.71 per share.
To mitigate the dilutive impact of the common stock issued in the special dividend, the Board of Directors also authorized a reverse stock split, which we can buy up to $1.0 billionwas effective after markets closed on January 21, 2022. On January 10, 2022, a committee of the Board of Directors calculated the ratio for the reverse stock split of our issued and outstanding shares of common stock as 1.03060-for-1. After the issuance of the dividend and the completion of the reverse stock split, the number of shares of our common stock. At September 30, 2017,stock outstanding was equivalent to the number of total shares outstanding on the Record Date (not including any issuances or repurchases made underthat occurred following the Record Date, as well as any fractional shares that would have been issued but for which cash-in-lieu was paid). However, on a relative basis, some individual shareholders may have more shares of SLG’s common stock, repurchase plans wereand some individual shareholders may have fewer shares of our common stock, depending on their individual elections to receive cash or stock and as follows:a result of the cash option being oversubscribed.
All share-related references and measurements including the number of shares outstanding, share prices, number of shares repurchased, earnings per share, dividends per share, and share-based compensation awards, have been retroactively adjusted to reflect the reverse stock split for all periods presented in this Quarterly Report on Form 10-Q.
|
| | | | |
| Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of the repurchase plan or programs | Maximum approximate dollar value of shares that may yet be purchased under the plan (in millions) |
| First quarter 2017 | 982 | $103.89 | 982 | $999.9 |
| Second quarter 2017 | 2,447,153 | $103.41 | 2,448,135 | $746.8 |
Third quarter 2017
| 951,866 | $101.67 | 3,400,001 | $650.0 |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
Share Repurchase Program
In August 2016, our Board of Directors approved a $1.0 billion share repurchase program under which we can buy shares of our common stock. The Board of Directors has since authorized 5 separate $500.0 million increases to the size of the share repurchase program in the fourth quarter of 2017, second quarter of 2018, fourth quarter of 2018, fourth quarter of 2019, and fourth quarter of 2020 bringing the total program size to $3.5 billion.
As of March 31, 2022, share repurchases executed under the program, excluding the redemption of OP units, were as follows:
| | | | | | | | | | | | |
| Period | Shares repurchased | Average price paid per share | Cumulative number of shares repurchased as part of the repurchase plan or programs | |
| Year ended 2017 | 7,865,206 | $107.81 | 7,865,206 | |
| Year ended 2018 | 9,187,480 | $102.06 | 17,052,686 | |
| Year ended 2019 | 4,333,260 | $88.69 | 21,385,946 | |
| Year ended 2020 | 8,276,032 | $64.30 | 29,661,978 | |
| Year ended 2021 | 4,474,649 | $75.44 | 34,136,627 | |
| Three months ended March 31, 2022 | 1,971,092 | $76.69 | 36,107,719 | |
Perpetual Preferred Stock
We have 9,200,000 shares of our 6.50% Series I Cumulative Redeemable Preferred Stock, or the Series I Preferred Stock, outstanding with a mandatory liquidation preference of $25.00 per share. The Series I Preferred stockholders receive annual dividends of $1.625 per share paid on a quarterly basis and dividends are cumulative, subject to certain provisions. We are entitled to redeem the Series I Preferred Stock at any time, in whole or from time to time in part, at par for cash at our option.cash. In August 2012, we received $221.9 million in net proceeds from the issuance of the Series I Preferred Stock, which were recorded net of underwriters' discount and issuance costs, and contributed the net proceeds to the Operating Partnership in exchange for 9,200,000 units of 6.50% Series I Cumulative Redeemable Preferred Units of limited partnership interest, or the Series I Preferred Units.
Dividend Reinvestment and Stock Purchase Plan ("DRSPP")
In February 2015,2021, the Company filed a registration statement with the SEC for our dividend reinvestment and stock purchase plan, or DRSPP, which automatically became effective upon filing. The Company registered 3,500,000 shares of SL Green'sour common stock under the DRSPP. The DRSPP commenced on September 24, 2001.
The following table summarizes SL Green common stock issued, and proceeds received from dividend reinvestments and/or stock purchases under the DRSPP for the three months ended March 31, 2022 and 2021, respectively (dollars in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
| Shares of common stock issued | 1,132 | | | 5,320 | | | | | |
| Dividend reinvestments/stock purchases under the DRSPP | $ | 89 | | | $ | 351 | | | | | |
Earnings per Share
SL Green'sWe use the two-class method of computing earnings per share (“EPS”), which is an earnings allocation formula that determines EPS for the three and nine months ended September 30, 2017 and 2016 are computed as follows (in thousands):
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| Numerator | 2017 | | 2016 | | 2017 | | 2016 |
| Basic Earnings: | | | | | | | |
| Income attributable to SL Green common stockholders | $ | 38,869 |
| | $ | 34,252 |
| | $ | 58,442 |
| | $ | 190,930 |
|
| Effect of Dilutive Securities: | | | | | | | |
| Redemption of units to common shares | 1,812 |
| | 1,663 |
| | 2,707 |
| | 8,171 |
|
| Diluted Earnings: | | | | | | | |
| Income attributable to SL Green common stockholders | $ | 40,681 |
| | $ | 35,915 |
| | $ | 61,149 |
| | $ | 199,101 |
|
|
| | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| Denominator | 2017 | | 2016 | | 2017 | | 2016 |
| Basic Shares: | | | | | | | |
| Weighted average common stock outstanding | 97,783 |
| | 100,233 |
| | 99,431 |
| | 100,140 |
|
| Effect of Dilutive Securities: | | | | | | | |
| Operating Partnership units redeemable for common shares | 4,543 |
| | 4,497 |
| | 4,570 |
| | 4,272 |
|
| Stock-based compensation plans | 244 |
| | 413 |
| | 279 |
| | 349 |
|
| Diluted weighted average common stock outstanding | 102,570 |
| | 105,143 |
| | 104,280 |
| | 104,761 |
|
SL Green has excluded 1,175,708 and 1,076,695 common stock equivalents fromand any participating securities according to dividends declared (whether paid or unpaid). Under the dilutedtwo-class method, basic EPS is computed by dividing the income available to common stockholders by the weighted-average number of common stock shares outstanding for the three and nine months ended September 30, 2017, respectively, as they were anti-dilutive. SL Green has excluded 673,298 and 753,344 common stock equivalentsperiod. Diluted EPS reflects the potential dilution that could occur from the diluted shares outstanding for the three and nine months ended September 30, 2016, respectively, as they were anti-dilutive.
share equivalent activity.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
SL Green's earnings per share for the three months ended March 31, 2022 and 2021 are computed as follows (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| Numerator | 2022 | | 2021 | | | | |
| Basic Earnings: | | | | | | | |
| Income (loss) attributable to SL Green common stockholders | $ | 7,751 | | | $ | (7,464) | | | | | |
| Less: distributed earnings allocated to participating securities | (335) | | | (364) | | | | | |
| | | | | | | |
| Net income (loss) attributable to SL Green common stockholders (numerator for basic earnings per share) | $ | 7,416 | | | $ | (7,828) | | | | | |
| Add back: dilutive effect of earnings allocated to participating securities and contingently issuable shares | (96) | | | 7 | | | | | |
| | | | | | | |
| Add back: effect of dilutive securities (redemption of units to common shares) | 492 | | | (476) | | | | | |
| Net income (loss) attributable to SL Green common stockholders (numerator for diluted earnings per share) | $ | 7,812 | | | $ | (8,297) | | | | | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| Denominator | 2022 | | 2021 | | | | |
| Basic Shares: | | | | | | | |
| Weighted average common stock outstanding | 64,349 | | | 66,961 | | | | | |
| Effect of Dilutive Securities: | | | | | | | |
| Operating Partnership units redeemable for common shares | 4,121 | | | 4,148 | | | | | |
| Stock-based compensation plans | 984 | | | 588 | | | | | |
| Contingently issuable shares | 774 | | | 307 | | | | | |
| Diluted weighted average common stock outstanding | 70,228 | | | 72,004 | | | | | |
The Company has excluded 351,927 and 1,124,920 common stock equivalents from the calculation of diluted shares outstanding for the three months ended March 31, 2022 and 2021, respectively, as they were anti-dilutive.
13. Partners' Capital of the Operating Partnership
The Company is the sole managing general partner of the Operating Partnership and at September 30, 2017March 31, 2022 owned 97,445,50964,124,447 general and limited partnership interests in the Operating Partnership and 9,200,000 Series I Preferred Units. Partnership interests in the Operating Partnership are denominated as “common units of limited partnership interest” (also referred to as “OP Units”) or “preferred units of limited partnership interest” (also referred to as “Preferred Units”). All references to OP Units and Preferred Units outstanding exclude such units held by the Company. A holder of an OP Unit may present such OP Unit to the Operating Partnership for redemption at any time (subject to restrictions agreed upon at the issuance of OP Units to particular holders that may restrict such right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, the Operating Partnership must redeem such OP Unit in exchange for the cash equal to the then value of a share of common stock of the Company, except that the Company may, at its election, in lieu of cash redemption, acquire such OP Unit for one1 share of common stock. Because the number of shares of common stock outstanding at all times equals the number of OP Units that the Company owns, one1 share of common stock is generally the economic equivalent of one1 OP Unit, and the quarterly distribution that may be paid to the holder of an OP Unit equals the quarterly dividend that may be paid to the holder of a share of common stock. Each series of Preferred Units makes a distribution that is set in accordance with an amendment to the partnership agreement of the Operating Partnership. Preferred Units may also be convertible into OP Units at the election of the holder thereof or the Company, subject to the terms of such Preferred Units.
Net income (loss) allocated to the preferred unitholders and common unitholders reflects their pro rata share of net income (loss) and distributions.
All unit-related references and measurements including the number of units outstanding and earnings per unit have been retroactively adjusted to reflect the reverse stock split effectuated by SL Green’s Board of Directors in January 2021 for all periods presented in this Quarterly Report on Form 10-Q.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
Limited Partner Units
As of September 30, 2017,March 31, 2022, limited partners other than SL Green owned 4.45%6.00%, or 4,541,7654,095,291 common units, of the Operating Partnership.
Preferred Units
Preferred units not owned by SL Green are further described in Note 11, “Noncontrolling Interests on the Company’s Consolidated Financial Statements - Preferred Units of Limited Partnership Interest in the Operating Partnership.”
Earnings per Unit
The Operating Partnership's earnings per unit for the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, respectively, are computed as follows (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| Numerator | 2022 | | 2021 | | | | |
| Basic Earnings: | | | | | | | |
| Net income attributable to SLGOP common unitholders (numerator for diluted earnings per unit) | $ | 8,243 | | | $ | (7,940) | | | | | |
| Less: distributed earnings allocated to participating securities | (335) | | | (364) | | | | | |
| | | | | | | |
| Net Income attributable to SLGOP common unitholders (numerator for basic earnings per unit) | $ | 7,908 | | | $ | (8,304) | | | | | |
| Add back: dilutive effect of earnings allocated to participating securities and contingently issuable shares | (96) | | | 7 | | | | | |
| | | | | | | |
| Net Income attributable to SLGOP common unitholders (numerator for diluted earnings per unit) | $ | 7,812 | | | $ | (8,297) | | | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| Numerator | 2017 |
| 2016 | | 2017 | | 2016 |
| Basic and Diluted Earnings: | | | | | | | |
| Net income attributable to SLGOP common unitholders | $ | 40,681 |
| | $ | 35,915 |
| | $ | 61,149 |
| | $ | 199,101 |
|
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| Denominator | 2017 |
| 2016 | | 2017 | | 2016 | Denominator | 2022 | | 2021 | |
| Basic units: | | | | | | | | Basic units: | | | | |
| Weighted average common units outstanding | 102,326 |
| | 104,730 |
| | 104,001 |
| | 104,412 |
| Weighted average common units outstanding | 68,470 | | | 71,109 | | |
| Effect of Dilutive Securities: | | | | | | | | Effect of Dilutive Securities: | | |
| Stock-based compensation plans | 244 |
| | 413 |
| | 279 |
| | 349 |
| Stock-based compensation plans | 984 | | | 588 | | |
| Contingently issuable units | | Contingently issuable units | 774 | | | 307 | | |
| Diluted weighted average common units outstanding | 102,570 |
| | 105,143 |
| | 104,280 |
| | 104,761 |
| Diluted weighted average common units outstanding | 70,228 | | | 72,004 | | |
The Operating Partnership has excluded 1,175,708351,927 and 1,076,6951,124,920 common unit equivalents from the diluted units outstanding for the three and nine months ended September 30, 2017, respectively, as they were anti-dilutive. The Operating Partnership has excluded 673,298March 31, 2022 and 753,344 common unit equivalents from the diluted units outstanding for the three and nine months ended September 30, 2016,2021, respectively, as they were anti-dilutive.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
14. Share-based Compensation
We have stock-basedshare-based employee and director compensation plans. Our employees are compensated through the Operating Partnership. Under each plan, whenever the Company issues common or preferred stock, the Operating Partnership issues an equivalent number of units of limited partnership interest of a corresponding class to the Company.
Fourth Amended and Restated 2005 Stock Option and Incentive Plan
The Fourth Amended and Restated 2005 Stock Option and Incentive Plan, or the 2005 Plan, was approved by the Company's boardBoard of directorsDirectors in April 2016 and its stockholders in June 2016 at the Company's annual meeting of stockholders. The 2005 Plan authorizes the issuance of stock options, stock appreciation rights, unrestricted and restricted stock, phantom shares, dividend equivalent rights, cash-based awards and other equity-based awards. Subject to adjustments upon certain corporate transactions or events, awards with respect to up to a maximum of 27,030,000 fungible units may be granted under the 2005 Plan. Currently, different types of awards count against the limit on the number of fungible units differently, with (1) full-value awards (i.e., those that deliver the full value of the award upon vesting, such as restricted stock) granted after the effective date of the Fourth Amendment 2005 Plan counting as 3.74 Fungible Units per share subject to such awards, (2) stock options, stock appreciation rights and other awards that do not deliver full value and expire five years from the date of grant counting as 0.73 fungible units per share subject to such awards, and (3) all other awards (e.g., ten-year10-year stock options) counting as 1.0 fungible units per share subject to such awards. Awards granted under the 2005 Plan prior to the approval of the fourth amendment and restatement in June 2016 continue to count against the fungible unit limit based on the ratios that were in effect at the time such awards were granted, which may be different than the current ratios. As a result, depending on the types of awards issued, the 2005 Plan may result in the issuance of more or less than 27,030,000 shares. If a stock option or other award granted under the 2005 Plan expires or terminates, the common stock subject to any portion of the award that expires or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards. Shares of SL Green'sour common stock distributed under the 2005 Plan may be treasury shares or authorized but unissued shares. Currently, unless the 2005 Plan has been previously terminated by the Company's boardBoard of directors,Directors, new awards may be granted under the 2005 Plan until June 2, 2026, which is the tenth anniversary of the date that the 2005 Plan was most recently approved by the Company's stockholders. As of September 30, 2017, 8.7March 31, 2022, 0.2 million fungible units were available for issuance under the 2005 Plan after reserving for shares underlying outstanding restricted stock units, phantom stock units granted pursuant to our Non-Employee Directors' Deferral Program and LTIP Units, including, among others, outstandingUnits. A proposal to increase the 2005 Plan by 5,180,000 fungible units was approved by the Board of Directors in April 2022 and will be voted upon at the Company's annual meeting of stockholders on June 1, 2022.
Stock Options and Class O LTIP Units issued under our 2014 Outperformance Plan.
Options are granted under the plan with an exercise price at the fair market value of the Company's common stock on the date of grant and, subject to employment, generally expire five years or ten years from the date of grant, are not transferable other than on death, and generally vest in one year to five years commencing one year from the date of grant. We have also granted Class O LTIP Units, which are a class of LTIP Units in the Operating Partnership structured to provide economics similar to those of stock options. Class O LTIP Units, once vested, may be converted, at the election of the holder, into a number of common units of the Operating Partnership per Class O LTIP Unit determined by the increase in value of a share of the Company’s common stock at the time of conversion over a participation threshold, which equals the fair market value of a share of the Company’s common stock at the time of grant. Class O LTIP Units are entitled to distributions, subject to vesting, equal per unit to 10% of the per unit distributions paid with respect to the common units of the Operating Partnership.
The fair value of each stock option or LTIP Unit granted is estimated on the date of grant using the Black-Scholes option pricing model based on historical information with the following weighted average assumptions for grantsinformation. There were no options granted during the ninethree months ended September 30, 2017 andMarch 31, 2022 or the year ended December 31, 2016.2021.
|
| | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Dividend yield | 2.50 | % | | 2.37 | % |
| Expected life | 4.4 years |
| | 3.7 years |
|
| Risk-free interest rate | 1.73 | % | | 1.57 | % |
| Expected stock price volatility | 28.21 | % | | 26.76 | % |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
A summary of the status of the Company's stock options as of September 30, 2017March 31, 2022 and December 31, 2016,2021, and changes during the ninethree months ended September 30, 2017March 31, 2022 and year ended December 31, 20162021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Options Outstanding | | Weighted Average
Exercise Price | | Options Outstanding | | Weighted Average
Exercise Price |
| Balance at beginning of period | 394,089 | | | $ | 100.56 | | | 761,686 | | | $ | 105.76 | |
| | | | | | | |
| Exercised | — | | | — | | | (11,314) | | | 72.30 | |
| Lapsed or canceled | (28,283) | | | 112.48 | | | (356,283) | | | 112.56 | |
| Balance at end of period | 365,806 | | | $ | 99.64 | | | 394,089 | | | $ | 100.56 | |
| Options exercisable at end of period | 365,806 | | | $ | 99.64 | | | 394,089 | | | $ | 100.56 | |
| | | | | | | |
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Options Outstanding | | Weighted Average Exercise Price | | Options Outstanding | | Weighted Average Exercise Price |
| Balance at beginning of period | $ | 1,737,213 |
| | $ | 98.44 |
| | $ | 1,595,007 |
| | $ | 95.52 |
|
| Granted | 171,000 |
| | 105.70 |
| | 445,100 |
| | 105.86 |
|
| Exercised | (146,277 | ) | | 84.02 |
| | (192,875 | ) | | 76.90 |
|
| Lapsed or cancelled | (65,300 | ) | | 122.30 |
| | (110,019 | ) | | 123.86 |
|
| Balance at end of period | $ | 1,696,636 |
| | $ | 99.50 |
| | $ | 1,737,213 |
| | $ | 98.44 |
|
| Options exercisable at end of period | 939,485 |
| | $ | 91.71 |
| | 748,617 |
| | $ | 87.72 |
|
| Weighted average fair value of options granted during the period | $ | 3,775,639 |
| | |
| | $ | 8,363,036 |
| | |
|
All options were granted with strike prices ranging from $20.67 to $128.82. The remaining weighted average contractual life of the options outstanding was 3.62.3 years and the remaining average contractual life of the options exercisable was 2.82.3 years.
During the three and nine months ended September 30, 2017,March 31, 2022, we recognized no compensation expense for these options of $2.0 million and $5.9 million, respectively.related to options. During the three and nine months ended September 30, 2016,March 31, 2021, we recognized no compensation expense for these options of $2.5 million and $6.4 million, respectively.
related to options. As of September 30, 2017,March 31, 2022, there was $10.6 million of totalno unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 1.7 years.options.
Stock-based CompensationRestricted Shares
Effective January 1, 1999, the Company implemented a deferred compensation plan, or the Deferred Plan, where shares issued under the Deferred Plan wereShares are granted to certain employees, including certain of our executives, and vesting will occur annuallyoccurs upon the completion of a service period or our meeting established financial performance criteria. Annual vestingVesting occurs at rates ranging from 15% to 35% once performance criteria are reached.
A summary of the Company's restricted stock as of September 30, 2017March 31, 2022 and December 31, 20162021 and chargeschanges during the ninethree months ended September 30, 2017March 31, 2022 and the year ended December 31, 2016,2021, are as follows:
| | | | September 30, 2017 | | December 31, 2016 | | March 31, 2022 | | December 31, 2021 |
| Balance at beginning of period | 3,202,031 |
| | 3,137,881 |
| Balance at beginning of period | 3,459,363 | | | 3,337,545 | | |
| Granted | 300 |
| | 98,800 |
| Granted | 77,148 | | | 141,515 | | |
| Cancelled | — |
| | (34,650 | ) | |
| Canceled | | Canceled | (9,075) | | | (19,697) | | |
| Balance at end of period | 3,202,331 |
| | 3,202,031 |
| Balance at end of period | 3,527,436 | | | 3,459,363 | | |
| Vested during the period | 86,736 |
| | 83,822 |
| Vested during the period | 116,862 | | | 122,759 | | |
| Compensation expense recorded | $ | 7,277,054 |
| | $ | 7,153,966 |
| Compensation expense recorded | $ | 1,920,738 | | | $ | 8,497,054 | | |
| Weighted average fair value of restricted stock granted during the period | $ | 30,813 |
| | $ | 10,650,077 |
| |
| Total fair value of restricted stock granted during the period | | Total fair value of restricted stock granted during the period | $ | 5,931,470 | | | $ | 9,214,531 | | |
The fair value of restricted stock that vested during the ninethree months ended September 30, 2017March 31, 2022 and the year ended December 31, 20162021 was $8.4$9.6 million and $7.6$11.3 million, respectively. As of September 30, 2017March 31, 2022, there was $13.7$10.3 million of total unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of 1.71.5 years.
For the three and nine months ended September 30, 2017, $1.4 million and $5.0 million, respectively, was capitalized to assets associated with compensation expense related to our long-term compensation plans, restricted stock and stock options. For the three and nine months ended September 30, 2016, $1.5 million and $4.4 million, respectively, was capitalized to assets associated with compensation expense related to our long-term compensation plans, restricted stock and stock options.
We have granted LTIP Units, which include bonus, time-based and performance basedperformance-based awards, with a fair value of $20.5$38.6 million and $34.9$55.0 million as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively. The grant date fair value of the LTIP Unit awards was calculated in accordance with ASC 718. A third party consultant determined that the fair value of the LTIP Units to
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
havehas a discount from SL Green'sto our common stock price. The discount was calculated by considering the inherent uncertainty that the LTIP Units will reach parity with other common partnership units and the illiquidity due to transfer restrictions. As of September 30, 2017,March 31, 2022, there was $7.1$72.8 million of total unrecognized compensation expense related to the time-based and performance based awards, which is expected to be recognized over a weighted average period of 1.21.9 years.
During the three and nine months ended September 30, 2017,March 31, 2022, we recorded compensation expense related to bonus, time-based and performance based awards of $2.5 million and $15.1 million, respectively.$10.2 million. During the three and nine months ended September 30, 2016,March 31, 2021, we recorded compensation expense related to bonus, time-based and performance based awards of $2.3 million and $15.1 million, respectively.$9.1 million.
In August 2014, the compensation committee of the Company's board of directors approved the general terms of the SL Green Realty Corp. 2014 Outperformance Plan, or the 2014 Outperformance Plan. Participants in the 2014 Outperformance Plan may earn, in the aggregate, up to 610,000 LTIP Units in ourand SL Green Operating Partnership, based on our total returnL.P.
Notes to stockholders forConsolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
For the three-year period beginning September 1, 2014. Under the 2014 Outperformance Plan, two-thirds of the LTIP Units may be earned based on the Company’s absolute total returnthree months ended March 31, 2022, $0.3 million was capitalized to stockholders and one-third of the LTIP Units may be earned based on relative total return to stockholders compared to the constituents of the MSCI REIT Index. Awards earned based on absolute total return to stockholders will be determined independently of awards earned based on relative total return to stockholders. In the event the Company’s performance reaches either threshold before the end of the three-year performance period, a pro-rata portion of the maximum award may be earned. For each component, if the Company’s performance reaches the maximum threshold beginningassets associated with the 19th month of the performance period, participants will earn one-third of the maximum award that may be earned for that component. If the Company’s performance reaches the maximum threshold during the third year of the performance period for a component, participants will earn two-thirds (or an additional one-third) of the maximum award that may be earned for that component. LTIP Units earned under the 2014 Outperformance Plan will be subject to continued vesting requirements, with 50% of any awards earned vesting on August 31, 2017 and the remaining 50% vesting on August 31, 2018, subject to continued employment with us through such dates. Participants will not be entitled to distributions with respect to LTIP Units granted under the 2014 Outperformance Plan unless and until they are earned. If LTIP Units are earned, each participant will also be entitled to the distributions that would have been paid had the number of earned LTIP Units been issued at the beginning of the performance period, with such distributions being paid in the form of cash or additional LTIP Units. Thereafter, distributions will be paid currently with respect to all earned LTIP Units, whether vested or unvested.
The cost of the 2014 Outperformance Plan ($29.2 million, subject to forfeitures), based on the portion of the 2014 Outperformance Plan granted as of September 30, 2017, will be amortized into earnings through the final vesting period. We recorded compensation expense of $1.9 millionrelated to our long-term compensation plans, restricted stock and $8.2 million forstock options. For the three and nine months ended September 30, 2017, respectively,March 31, 2021, $0.5 million was capitalized to assets associated with compensation expense related to the 2014 Outperformance Plan. We recordedour long-term compensation expense of $1.8 millionplans, restricted stock and $6.6 million for the three and nine months ended September 30, 2016, respectively, related to the 2014 Outperformance Plan.stock options.
Deferred Compensation Plan for Directors
Under our Non-Employee Director's Deferral Program, which commenced July 2004, the Company's non-employee directors may elect to defer up to 100% of their annual retainer fee, chairman fees, meeting fees and annual stock grant. Unless otherwise elected by a participant, fees deferred under the program shall be credited in the form of phantom stock units. The program provides that a director's phantom stock units generally will be settled in an equal number of shares of common stock upon the earlier of (i) the January 1 coincident with or the next following such director's termination of service from the Board of Directors or (ii) a change in control by us, as defined by the program. Phantom stock units are credited to each non-employee director quarterly using the closing price of SL Green'sour common stock on the first business day of the respective quarter. Each participating non-employee director is also credited with dividend equivalents or phantom stock units based on the dividend rate for each quarter, which are either paid in cash currently or credited to the director’s account as additional phantom stock units.
During the ninethree months ended September 30, 2017, 11,510March 31, 2022, 14,261 phantom stock units and 9,1719,207 shares of common stock were issued to our boardBoard of directors.Directors. We recorded compensation expense of $0.1$1.8 million and $2.2$1.8 million during the three and nine months ended September 30, 2017, respectively, related to the Deferred Compensation Plan. We recorded compensation expense of $0.1 millionMarch 31, 2022 and $1.9 million during the three and nine months ended September 30, 2016,2021, respectively, related to the Deferred Compensation Plan.
As of September 30, 2017,March 31, 2022, there were 98,637179,462 phantom stock units outstanding pursuant to our Non-Employee Director's Deferral Program.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
Employee Stock Purchase Plan
In 2007, the Company's boardBoard of directorsDirectors adopted the 2008 Employee Stock Purchase Plan, or ESPP, to encourage our employees to increase their efforts to make our business more successful by providingprovide equity-based incentives to eligible employees. The ESPP is intended to qualify as an "employee stock purchase plan" under Section 423 of the Code, and has been adopted by the board to enable our eligible employees to purchase the Company's shares of common stock through payroll deductions. The ESPP became effective on January 1, 2008 with a maximum of 500,000 shares of the common stock available for issuance, subject to adjustment upon a merger, reorganization, stock split or other similar corporate change. The Company filed a registration statement on Form S-8 with the SEC with respect to the ESPP. The common stock is offered for purchase through a series of successive offering periods. Each offering period will be three months in duration and will begin on the first day of each calendar quarter, with the first offering period having commenced on January 1, 2008. The ESPP provides for eligible employees to purchase the common stock at a purchase price equal to 85% of the lesser of (1) the market value of the common stock on the first day of the offering period or (2) the market value of the common stock on the last day of the offering period. The ESPP was approved by our stockholders at our 2008 annual meeting of stockholders. As of September 30, 2017, 101,882March 31, 2022, 176,385 shares of SL Green'sour common stock had been issued under the ESPP.
15. Accumulated Other Comprehensive IncomeLoss
The following tables set forth the changes in accumulated other comprehensive income (loss)loss by component as of September 30, 2017March 31, 2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Net unrealized gain (loss) on derivative instruments (1) | | SL Green’s share of joint venture net unrealized loss on derivative instruments (2) | | Net unrealized (loss) gain on marketable securities | | Total |
| Balance at December 31, 2021 | $ | (25,881) | | | $ | (21,994) | | | $ | 1,117 | | | $ | (46,758) | |
| Other comprehensive gain before reclassifications | 26,790 | | | 9,785 | | | (1,691) | | | 34,884 | |
| Amounts reclassified from accumulated other comprehensive loss | 3,649 | | | 964 | | | — | | | 4,613 | |
| Balance at March 31, 2022 | $ | 4,558 | | | $ | (11,245) | | | $ | (574) | | | $ | (7,261) | |
(1)Amount reclassified from accumulated other comprehensive loss is included in interest expense in the respective consolidated statements of operations. As of March 31, 2022 and December 31, 2021, the deferred net gains from these terminated hedges, which is included in accumulated other comprehensive loss relating to net unrealized loss on derivative instruments, was $(0.6) million and $(0.6) million, respectively.
(2)Amount reclassified from accumulated other comprehensive loss is included in equity in net loss from unconsolidated joint ventures in the respective consolidated statements of operations.
|
| | | | | | | | | | | | | | | |
| | Net unrealized gain on derivative instruments (1) | | SL Green’s share of joint venture net unrealized gain on derivative instruments (2) | | Net unrealized gain on marketable securities | | Total |
| Balance at December 31, 2016 | $ | 12,596 |
| | $ | 4,021 |
| | $ | 5,520 |
| | $ | 22,137 |
|
| Other comprehensive (loss) before reclassifications | (4,669 | ) | | (947 | ) | | (1,133 | ) | | (6,749 | ) |
| Amounts reclassified from accumulated other comprehensive income | 1,336 |
| | 591 |
| | (3,130 | ) | | (1,203 | ) |
| Balance at September 30, 2017 | $ | 9,263 |
| | $ | 3,665 |
| | $ | 1,257 |
| | $ | 14,185 |
|
| |
(1) | Amount reclassified from accumulated other comprehensive income (loss) is included in interest expense in the respective consolidated statements of operations. As of September 30, 2017 and December 31, 2016, the deferred net losses from these terminated hedges, which is included in accumulated other comprehensive loss relating to net unrealized loss on derivative instrument, was $3.7 million and $7.1 million, respectively. |
| |
(2) | Amount reclassified from accumulated other comprehensive income (loss) is included in equity in net income from unconsolidated joint ventures in the respective consolidated statements of operations. |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
16. Fair Value Measurements
We are required to disclose fair value information with regard to certain of our financial instruments, whether or not recognized in the consolidated balance sheets, for which it is practical to estimate fair value. The FASB guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. We measure and/or disclose the estimated fair value of certain financial assets and liabilities based on a hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions. This hierarchy consists of three broad levels: Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date; Level 2 - inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 - unobservable inputs for the asset or liability that are used when little or no market data is available. We follow this hierarchy for our assets and liabilities measured at fair value on a recurring and nonrecurring basis. In instances in which the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level of input that is significant to the fair value measurement in its entirety. Our assessment of the significance of the particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The following tables set forth the assets and liabilities that we measure at fair value on a recurring and non-recurring basis by their levels in the fair value hierarchy at September 30, 2017as of March 31, 2022 and December 31, 20162021 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 |
| Total | | Level 1 | | Level 2 | | Level 3 |
| Assets: | | | | | | | |
| Marketable securities available-for-sale | $ | 22,353 | | | $ | — | | | $ | 22,353 | | | $ | — | |
| Interest rate cap and swap agreements (included in Other assets) | 10,052 | | | — | | | 10,052 | | | — | |
| Liabilities: | | | | | | | |
| Interest rate cap and swap agreements (included in Other liabilities) | $ | 5,795 | | | $ | — | | | $ | 5,795 | | | $ | — | |
| | | | | | | |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | Total | | Level 1 | | Level 2 | | Level 3 |
| Assets: | | | | | | | |
| Marketable securities | $ | 28,802 |
| | $ | — |
| | $ | 28,802 |
| | $ | — |
|
| Interest rate cap and swap agreements (included in other assets) | $ | 13,727 |
| | $ | — |
| | $ | 13,727 |
| | $ | — |
|
|
| | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | Total | | Level 1 | | Level 2 | | Level 3 |
| Assets: | | | | | | | |
| Marketable securities | $ | 85,110 |
| | $ | 48,315 |
| | $ | 36,795 |
| | $ | — |
|
| Interest rate cap and swap agreements (included in other assets) | $ | 21,090 |
| | $ | — |
| | $ | 21,090 |
| | $ | — |
|
| Liabilities: | | | | | | | |
| Interest rate cap and swap agreements (included in accrued interest payable and other liabilities) | $ | 1 |
| | $ | — |
| | $ | 1 |
| | $ | — |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Total | | Level 1 | | Level 2 | | Level 3 |
| Assets: | | | | | | | |
| Marketable securities available-for-sale | $ | 24,146 | | | $ | — | | | $ | 24,146 | | | $ | — | |
| Interest rate cap and swap agreements (included in Other assets) | 1,896 | | | — | | | 1,896 | | | — | |
| Liabilities: | | | | | | | |
| Interest rate cap and swap agreements (included in Other liabilities) | $ | 29,912 | | | $ | — | | | $ | 29,912 | | | $ | — | |
We determine other than temporary impairment inevaluate real estate investments and debt and preferred equity investments, including intangibles, for potential impairment primarily utilizing cash flow projections that apply, among other things, estimated revenue and expense growth rates, discount rates and capitalization rates, as well as sales comparison approach, which utilizes comparable sales, listings and sales contracts. Allcontracts, all of which are classified as Level 3 inputs.
As of September 30, 2017, we held notes receivable totaling $250.0 million, which were purchased at par, and were in maturity default at the time of acquisition. In August 2017, the Company determined that it was probable that the loans would not be repaid in full and therefore, the loans were put on non-accrual status. The Company has initiated proceedings to foreclose on the property, and expects to take control of the property unless the buyer is able to repay the principal and interest, including default interest and fees, on the notes receivable in full prior to the completion of the foreclosure process. We believe the collateral value is sufficient to recover the carrying amounts of the notes receivable.
The marketableMarketable securities classified as Level 1 wereare derived from quoted prices in active markets. The valuation technique used to measure the fair value of the marketable securities classified as Level 2 were valued based on quoted market prices or model driven valuations using the significant inputs derived from or corroborated by observable market data. Marketable securities in an unrealized loss position are not considered to be other than temporarily impaired. We do not intend to sell these securities and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases.
The fair value of derivative instruments is based on current market data received from financial sources that trade such instruments and are based on prevailing market data and derived from third party proprietary models based on well-recognized financial principles and reasonable estimates about relevant future market conditions, which are classified as Level 2 inputs.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
The financial assets and liabilities that are not measured at fair value on our consolidated balance sheets include cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses, debt and preferred equity investments, mortgages and other loans payable and other secured and unsecured debt. The carrying amount of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and accrued expenses reported in our consolidated balance sheets approximates fair value due to the short termshort-term nature of these instruments. The fair value of debt and preferred equity investments, which is classified as Level 3, is estimated by discounting the future cash flows using current interest rates at which similar loans with the same maturities would be made to borrowers with similar credit ratings. The fair value of borrowings, which is classified as Level 3, is estimated by discounting the contractual cash flows of each debt instrument to their present value using adjusted market interest rates, which is provided by a third-party specialist.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
The following table provides the carrying value and fair value of these financial instruments as of September 30, 2017March 31, 2022 and December 31, 20162021 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Carrying Value (1) | | Fair Value | | Carrying Value (1) | | Fair Value |
| | | | | | | |
| Debt and preferred equity investments | $ | 1,107,870 | | | (2) | | $ | 1,088,723 | | | (2) |
| | | | | | | |
| Fixed rate debt | $ | 3,321,239 | | | $ | 3,322,000 | | | $ | 3,274,324 | | | $ | 3,336,463 | |
| Variable rate debt | 813,478 | | | 813,040 | | | 801,051 | | | 800,672 | |
| $ | 4,134,717 | | | $ | 4,135,040 | | | $ | 4,075,375 | | | $ | 4,137,135 | |
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Carrying Value (1) | | Fair Value | | Carrying Value (1) | | Fair Value |
| | | | | | | | |
| Debt and preferred equity investments | $ | 2,020,739 |
| | (2) | | $ | 1,640,412 |
| | (2) |
| | | | | | | | |
| Fixed rate debt | $ | 5,154,810 |
| | $ | 5,398,870 |
| | $ | 5,452,084 |
| | $ | 5,722,494 |
|
| Variable rate debt | 1,321,813 |
| | 1,314,223 |
| | 1,105,585 |
| | 1,110,110 |
|
| | $ | 6,476,623 |
| | $ | 6,713,093 |
| | $ | 6,557,669 |
| | $ | 6,832,604 |
|
| |
(1) | Amounts exclude net deferred financing costs. |
| |
(2) | At September 30, 2017, debt and preferred equity investments had an estimated fair value ranging between $2.0 billion and $2.2 billion. At December 31, 2016, debt and preferred equity investments had an estimated fair value ranging between $1.6 billion and $1.8 billion. |
(1)Amounts exclude net deferred financing costs.
Disclosure about(2)As of March 31, 2022, debt and preferred equity investments had an estimated fair value ranging between $1.0 billion and $1.1 billion. As of December 31, 2021, debt and preferred equity investments had an estimated fair value ranging between $1.0 billion and $1.1 billion.
Disclosures regarding fair value of financial instruments was based on pertinent information available to us as of September 30, 2017March 31, 2022 and December 31, 2016. Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, such2021. Such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
17. Financial Instruments: Derivatives and Hedging
In the normal course of business, we use a variety of commonly used derivative instruments, such as interest rate swaps, caps, collarcollars and floors, to manage, or hedge interest rate risk. We hedge our exposure to variability in future cash flows for forecasted transactions in addition to anticipated future interest payments on existing debt. We recognize all derivatives on the balance sheetssheet at fair value. Derivatives that are not hedges are adjusted to fair value through earnings. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedge asset, liability, or firm commitment through earnings, or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. Reported net income and equity may increase or decrease prospectively, depending on future levels of interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows. Currently, all of our designated derivative instruments are effective hedging instruments.
The following table summarizes the notional value at inception and fair value of our consolidated derivative financial instruments at September 30, 2017as of March 31, 2022 based on Level 2 information. The notional value is an indication of the extent of our involvement in these instruments at that time, but does not represent exposure to credit, interest rate or market risks (amounts(dollars in thousands).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Notional
Value | | Strike
Rate | | Effective
Date | | Expiration
Date | | Balance Sheet Location | | Fair
Value |
| Interest Rate Cap | $ | 111,869 | | | 3.500 | % | | November 2021 | | November 2022 | | Other Assets | | $ | 9 | |
| Interest Rate Swap | 100,000 | | | 0.212 | % | | January 2021 | | January 2023 | | Other Assets | | 1,223 | |
| Interest Rate Swap | 400,000 | | | 0.184 | % | | January 2022 | | February 2023 | | Other Assets | | 4,838 | |
| Interest Rate Swap | 50,000 | | | 0.633 | % | | February 2022 | | February 2023 | | Other Assets | | 373 | |
| Interest Rate Swap | 100,000 | | | 1.163 | % | | November 2021 | | July 2023 | | Other Assets | | 1,177 | |
| Interest Rate Swap | 200,000 | | | 1.133 | % | | November 2021 | | July 2023 | | Other Assets | | 2,432 | |
| Interest Rate Swap | 150,000 | | | 2.700 | % | | December 2021 | | January 2024 | | Other Liabilities | | (1,153) | |
| Interest Rate Swap | 150,000 | | | 2.721 | % | | December 2021 | | January 2026 | | Other Liabilities | | (1,865) | |
| Interest Rate Swap | 200,000 | | | 2.762 | % | | December 2021 | | January 2026 | | Other Liabilities | | (2,777) | |
| | | | | | | | | | | $ | 4,257 | |
|
| | | | | | | | | | | | | | | | |
| | Notional Value | | Strike Rate | | Effective Date | | Expiration Date | | Balance Sheet Location | | Fair Value |
| Interest Rate Swap | $ | 200,000 |
| | 0.938 | % | | October 2014 | | December 2017 | | Other Assets | | $ | 105 |
|
| Interest Rate Swap | 150,000 |
| | 0.940 | % | | October 2014 | | December 2017 | | Other Assets | | 78 |
|
| Interest Rate Swap | 150,000 |
| | 0.940 | % | | October 2014 | | December 2017 | | Other Assets | | 78 |
|
| Interest Rate Cap | 137,500 |
| | 4.000 | % | | September 2017 | | September 2019 | | Other Assets | | 4 |
|
| Interest Rate Swap | 200,000 |
| | 1.131 | % | | July 2016 | | July 2023 | | Other Assets | | 8,998 |
|
| Interest Rate Swap | 100,000 |
| | 1.161 | % | | July 2016 | | July 2023 | | Other Assets | | 4,335 |
|
| Interest Rate Swap | 100,000 |
| | 2.287 | % | | November 2017 | | November 2027 | | Other Assets | | 129 |
|
| | | | | | | | | | | | $ | 13,727 |
|
During both the three and nine months ended September 30, 2017, we recorded a lossNo gains or losses on the changes in the fair value of $0.1 million, which isvalues were included in interest expense onin the consolidated statements of operations. Duringoperations during the three and nine months ended September 30, 2016, we recorded a $0.1 million loss and a $0.5 million gain, respectively, on the changes in the fair value, which is included in interest expense on the consolidated statements of operations.March 31, 2022 or 2021.
The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
on its derivative obligations. As of September 30, 2017,March 31, 2022, the fair value of derivatives in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was zero.$6.8 million. As of September 30, 2017,March 31, 2022, the Company haswas not postedrequired to post any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of zero at September 30, 2017.$7.0 million as of March 31, 2022.
Gains and losses on terminated hedges are included in accumulated other comprehensive loss,income (loss), and are recognized into earnings over the term of the related mortgage obligation. Over time, the realized and unrealized gains and losses held in accumulated other comprehensive loss will be reclassified into earnings as an adjustment to interest expense in the same periods in which the hedged interest payments affect earnings. We estimate that $0.8$(3.7) million of the current balance held in accumulated other comprehensive loss will be reclassified into interest expense and $0.3$1.3 million of the portion related to our share of joint venture accumulated other comprehensive loss will be reclassified into equity in net incomeloss from unconsolidated joint ventures within the next 12 months.
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
The following table presents the effect of our derivative financial instruments and our share of our joint ventures' derivative financial instruments that are designated and qualify as hedging instruments on the consolidated statements of operations for the three months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Amount of Gain
Recognized in
Other Comprehensive
Loss | | Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income | | Amount of Loss Reclassified from
Accumulated Other
Comprehensive Loss into Income |
| | Three Months Ended March 31, | | | Three Months Ended March 31, |
| Derivative | | 2022 | | 2021 | | | | | 2022 | | 2021 | | |
| Interest Rate Swaps/Caps | | $ | 28,378 | | | $ | 10,220 | | | | | Interest expense | | $ | (3,866) | | | $ | (4,388) | | | |
| Share of unconsolidated joint ventures' derivative instruments | | 10,308 | | | 34,955 | | | | | Equity in net loss from unconsolidated joint ventures | | (1,015) | | | (1,700) | | | |
| | $ | 38,686 | | | $ | 45,175 | | | | | | | $ | (4,881) | | | $ | (6,088) | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| Amount of (Loss)
Recognized in
Other Comprehensive
Loss
(Effective Portion) |
| Location of (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income |
| Amount of Loss
Reclassified from
Accumulated Other
Comprehensive Loss into Income
(Effective Portion) |
| Location of (Loss) Recognized in Income on Derivative |
| Amount of (Loss) Gain
Recognized into Income
(Ineffective Portion) |
|
| Three Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Three Months Ended September 30, |
| Derivative |
| 2017 |
| 2016 |
|
| 2017 |
| 2016 |
|
| 2017 |
| 2016 |
| Interest Rate Swaps/Caps |
| $ | (304 | ) | | $ | (7 | ) |
| Interest expense |
| $ | 85 |
| | $ | 1,442 |
|
| Interest expense |
| $ | 4 |
| | $ | — |
|
| Share of unconsolidated joint ventures' derivative instruments |
| (290 | ) | | (222 | ) |
| Equity in net income from unconsolidated joint ventures |
| 185 |
| | 547 |
|
| Equity in net income from unconsolidated joint ventures |
| (48 | ) | | 830 |
|
|
| $ | (594 | ) |
| $ | (229 | ) |
|
|
| $ | 270 |
|
| $ | 1,989 |
|
|
|
| $ | (44 | ) |
| $ | 830 |
|
The following table presentssummarizes the effect of our derivative financial instrumentsnotional value at inception and our sharefair value of our joint ventures' derivative financial instruments as of March 31, 2022 based on Level 2 information. The notional value is an indication of the extent of our involvement in these instruments at that are designated and qualify as hedging instruments on the consolidated statements of operations for the nine months ended September 30, 2017 and 2016, respectively (intime, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Notional
Value | | Strike
Rate | | Effective
Date | | Expiration
Date | | Classification | | Fair
Value |
| Interest Rate Cap | $ | 1,075,000 | | | 2.850 | % | | September 2021 | | September 2022 | | Asset | | $ | 21 | |
| Interest Rate Cap | 125,000 | | | 2.850 | % | | September 2021 | | September 2022 | | Asset | | 2 | |
| Interest Rate Cap | 23,000 | | | 4.750 | % | | January 2021 | | January 2023 | | Asset | | 2 | |
| Interest Rate Cap | 220,000 | | | 4.000 | % | | February 2022 | | February 2023 | | Asset | | 68 | |
| Interest Rate Cap | 510,000 | | | 3.000 | % | | December 2021 | | June 2023 | | Asset | | 1,297 | |
| Interest Rate Cap | 237,340 | | | 0.550 | % | | February 2022 | | May 2024 | | Asset | | 14,994 | |
| Interest Rate Cap | 118,670 | | | 0.550 | % | | February 2022 | | May 2024 | | Asset | | 14,977 | |
| Interest Rate Swap | 177,000 | | | 1.669 | % | | March 2016 | | February 2026 | | Asset | | 5,014 | |
| | | | | | | | | | | $ | 36,375 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Amount of (Loss) Recognized in
Other Comprehensive
Loss
(Effective Portion) | | Location of (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income | | Amount of Loss
Reclassified from
Accumulated Other
Comprehensive Loss into Income
(Effective Portion) | | Location of (Loss) Recognized in Income on Derivative | | Amount of (Loss)
Recognized into Income
(Ineffective Portion) |
| | | Nine Months Ended September 30, | | | Nine Months Ended September 30, | | | Nine Months Ended September 30, |
| Derivative | | 2017 | | 2016 | | | 2017 | | 2016 | | | 2017 | | 2016 |
| Interest Rate Swaps/Caps | | $ | (5,477 | ) | | $ | (8,112 | ) | | Interest expense | | $ | 1,583 |
| | $ | 8,073 |
| | Interest expense | | $ | (4 | ) | | $ | (38 | ) |
| Share of unconsolidated joint ventures' derivative instruments | | (1,277 | ) | | (5,992 | ) | | Equity in net income from unconsolidated joint ventures | | 876 |
| | 1,465 |
| | Equity in net income from unconsolidated joint ventures | | (109 | ) | | (206 | ) |
| | | $ | (6,754 | ) | | $ | (14,104 | ) | | | | $ | 2,459 |
| | $ | 9,538 |
| | | | $ | (113 | ) | | $ | (244 | ) |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017March 31, 2022
(unaudited)
18. Lease Income
18.The Operating Partnership is the lessor and the sublessor to tenants under operating and sales-type leases. The minimum rental amounts due under the leases are generally subject to scheduled fixed increases or adjustments. The leases generally also require that the tenants reimburse us for increases in certain operating costs and real estate taxes above their base year costs.
The components of lease income from operating leases during the three months ended March 31, 2022 and 2021 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2022 | | 2021 | | | | |
| Fixed lease payments | | $ | 136,581 | | | $ | 164,679 | | | | | |
| Variable lease payments | | 19,555 | | | 25,279 | | | | | |
Total lease payments (1) | | $ | 156,136 | | | $ | 189,958 | | | | | |
| Amortization of acquired above and below-market leases | | (105) | | | (1,869) | | | | | |
| Total rental revenue | | $ | 156,031 | | | $ | 188,089 | | | | | |
(1)Amounts include $56.2 million and $65.8 million of sublease income during the three months ended March 31, 2022 and 2021, respectively.
The components of lease income from sales-type leases during the three months ended March 31, 2022 and 2021 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2022 | | 2021 | | | | |
| | | | | | | | |
Interest income (1) | | $ | 1,092 | | | $ | 1,101 | | | | | |
| | | | | | | | |
(1)These amounts are included in Other income in our consolidated statements of operations.
19. Commitments and Contingencies
Legal Proceedings
As of September 30, 2017,March 31, 2022, the Company and the Operating Partnership were not involved in any material litigation nor, to management's knowledge, was any material litigation threatened against us or our portfolio which if adversely determined could have a material adverse impact on us.
In September 2021, the Company acquired the fee position in 1591-1597 Broadway. The property was conveyed by the Company to a third party in May 2022, in connection with a settlement.
On October 31, 2021, HNA, through an affiliated entity, filed for Chapter 11 bankruptcy protection on account of its investment in 245 Park Avenue, together with another asset in Chicago. The Company contested the filing, on the basis that the filing was done in bad faith and in violation of HNA's agreements with the Company, and is currently appealing the Bankruptcy court’s ruling upholding the filing by HNA. See Note 5, "Debt and Preferred Equity Investments."
Environmental Matters
Our management believes that the properties are in compliance in all material respects with applicable Federal,federal, state and local ordinances and regulations regarding environmental issues. Management is not aware of any environmental liability that it believes would have a materially adverse impact on our financial position, results of operations or cash flows. Management is unaware of any instances in which it would incur significant environmental cost if any of our properties were sold.
Capital
SL Green Realty Corp. and Ground Leases ArrangementsSL Green Operating Partnership, L.P.
The following is a schedule of future minimum lease payments under capital leases and non-cancellable operating leases with initial terms in excess of one year as of September 30, 2017 (in thousands):Notes to Consolidated Financial Statements (cont.)
March 31, 2022
(unaudited)
|
| | | | | | | | |
| | | Capital lease | | Non-cancellable operating leases |
| Remaining 2017 | | $ | 597 |
| | $ | 7,763 |
|
| 2018 | | 2,387 |
| | 31,049 |
|
| 2019 | | 2,411 |
| | 31,066 |
|
| 2020 | | 2,620 |
| | 31,436 |
|
| 2021 | | 2,794 |
| | 31,628 |
|
| Thereafter | | 822,688 |
| | 732,724 |
|
| Total minimum lease payments | | $ | 833,497 |
| | $ | 865,666 |
|
| Amount representing interest | | (790,837 | ) | | |
| Capital lease obligations | | $ | 42,660 |
| | |
19.20. Segment Information
The Company is a REIT with in-house capabilities in commercial and residential property management, acquisitions and dispositions, financing, development and redevelopment, construction and leasing in the New York Metropolitan area, and has two2 reportable segments, real estate and debt and preferred equity investments. We evaluate real estate performance and allocate resources based on earnings contribution to income from continuing operations.contributions.
The primary sources of revenue are generated from tenant rents, and escalations and reimbursement revenue. Real estate property operating expenses consist primarily of security, maintenance, utility costs, insurance, real estate taxes and ground rent expense (at certain applicable properties). See Note 5, "Debt and Preferred Equity Investments," for additional details on our debt and preferred equity investments.
Selected consolidated results of operations for the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, and selected asset information as of September 30, 2017March 31, 2022 and December 31, 2016,2021, regarding our operating segments are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Real Estate Segment | | Debt and Preferred Equity Segment | | Total Company |
| Total revenues | | | | | | |
| Three months ended: | | | | | | |
| March 31, 2022 | | $ | 168,076 | | | $ | 19,888 | | | $ | 187,964 | |
| March 31, 2021 | | 206,829 | | | 19,273 | | | 226,102 | |
| | | | | | |
| | | | | | |
| | | | | | |
| Net income (loss) | | | | | | |
| Three months ended: | | | | | | |
| March 31, 2022 | | $ | (3,482) | | | $ | 16,967 | | | $ | 13,485 | |
| March 31, 2021 | | (20,027) | | | 16,172 | | | (3,855) | |
| | | | | | |
| | | | | | |
| | | | | | |
| Total assets | | | | | | |
| As of: | | | | | | |
| March 31, 2022 | | $ | 9,902,557 | | | $ | 1,112,408 | | | $ | 11,014,965 | |
| December 31, 2021 | | 9,974,140 | | | 1,092,489 | | | 11,066,629 | |
SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2017
(unaudited)
|
| | | | | | | | | | | | |
| | | Real Estate Segment | | Debt and Preferred Equity Segment | | Total Company |
| Total revenues | | | | | | |
| Three months ended: | | | | | | |
| September 30, 2017 | | $ | 326,780 |
| | $ | 47,820 |
| | $ | 374,600 |
|
| September 30, 2016 | | 341,285 |
| | 75,396 |
| | 416,681 |
|
| Nine months ended: | | | | | | |
| September 30, 2017 | | 1,001,390 |
| | 148,741 |
| | 1,150,131 |
|
| September 30, 2016 | | 1,315,392 |
| | 174,347 |
| | 1,489,739 |
|
| Net income (loss) before equity in net gain on sale of interest in unconsolidated joint venture/real estate, gain on sale of real estate, net, depreciable real estate reserves, and gain on sale of investment in marketable securities | | | | | |
|
|
| Three months ended: | | | | | |
|
|
| September 30, 2017 | | $ | 4,873 |
| | $ | 39,892 |
| | $ | 44,765 |
|
| September 30, 2016 | | (32,731 | ) | | 75,452 |
| | 42,721 |
|
| Nine months ended: | | | | | | |
| September 30, 2017 | | (504 | ) | | 132,402 |
| | 131,898 |
|
| September 30, 2016 | | (187,222 | ) | | 168,295 |
| | (18,927 | ) |
| Total assets | | | | | |
|
|
| As of: | | | | | |
|
|
| September 30, 2017 | | $ | 12,939,363 |
| | $ | 2,170,507 |
| | $ | 15,109,870 |
|
| December 31, 2016 | | 13,868,672 |
| | 1,989,115 |
| | 15,857,787 |
|
Income from continuing operations represents total revenues less total expenses for the real estate segment and total investment income less allocated interest expense for the debt and preferred equity segment. Interest costs for the debt and preferred equity segment includesinclude actual costs incurred for borrowings on the 2016 MRA and 2017 MRA. Interest is imputed on the investments that do not collateralize the 2016 MRA or 2017 MRA using our weighted average corporate borrowing cost. We also allocate loan loss reserves, net of recoveries, and transaction related costs to the debt and preferred equity segment. We do not allocate marketing, general and administrative expenses to the debt and preferred equity segment sincebecause the use of personnel and resources is dependent on transaction volume between the two segments and varies period over period.between periods. In addition, we base performance on the individual segments prior to allocating marketing, general and administrative expenses. For the three and nine months ended September 30, 2017,March 31, 2022, marketing, general and administrative expenses totaled $24.0 million, and $72.4 million respectively.$24.8 million. For the three and nine months ended September 30, 2016,March 31, 2021, marketing, general and administrative expenses totaled $25.5 million and $74.0 million, respectively.$22.9 million. All other expenses, except interest, relate entirely to the real estate assets.
There were no transactions between the above two segments.
The table below reconciles income from continuing operations to net income for the three and nine months ended September 30, 2017 and 2016 (in thousands):
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2017 |
| 2016 | | 2017 | | 2016 |
| Net income (loss) before equity in net gain on sale of interest in unconsolidated joint venture/real estate, gain on sale of real estate, net, depreciable real estate reserves, and gain on sale of investment in marketable securities | | $ | 44,765 |
| | $ | 42,721 |
| | $ | 131,898 |
| | $ | (18,927 | ) |
| Equity in net gain on sale of interest in unconsolidated joint venture/real estate | | 1,030 |
| | 225 |
| | 16,166 |
| | 43,588 |
|
| Gain (loss) on sale of real estate, net | | — |
| | 397 |
| | (3,256 | ) | | 210,750 |
|
| Depreciable real estate reserves | | — |
| | — |
| | (85,336 | ) | | (10,387 | ) |
| Gain (loss) on sale of investment in marketable securities | | — |
| | — |
| | 3,262 |
| | (83 | ) |
| Net income | | $ | 45,795 |
| | $ | 43,343 |
|
| $ | 62,734 |
|
| $ | 224,941 |
|
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
SL Green Realty Corp., which is referred to as SL Green or the Company, a Maryland corporation, and SL Green Operating Partnership, L.P., which is referred to as SLGOP or the Operating Partnership, a Delaware limited partnership, were formed in June 1997 for the purpose of combining the commercial real estate business of S.L. Green Properties, Inc. and its affiliated partnerships and entities. The Company is a self-managed real estate investment trust, or REIT, with in-house capabilitiesengaged in the acquisition, development, repositioning, ownership, management and operation of commercial and residential property management, acquisitions and dispositions, financing, development and redevelopment, construction and leasing.real estate properties, principally office properties, located in the New York metropolitan area, principally Manhattan. Unless the context requires otherwise, all references to "we," "our" and "us" means the Company and all entities owned or controlled by the Company, including the Operating Partnership.
Reckson Associates Realty Corp., or Reckson, and Reckson Operating Partnership, L.P. or ROP, are wholly-owned subsidiaries of the SL Green Realty Corp.
The following discussion related to our consolidated financial statements should be read in conjunction with the financial statements appearing in this Quarterly Report ofon this Form 10-Q and in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2016.2021.
As of September 30, 2017,March 31, 2022, we owned the following interests in properties in the New York Metropolitanmetropolitan area, primarily in midtown Manhattan. Our investments in the New York Metropolitan area also include investments in Brooklyn, Long Island, Westchester County, Connecticut and New Jersey, whichlocated outside of Manhattan are collectively knownreferred to as the Suburban properties:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Consolidated | | Unconsolidated | | Total | | |
| Location | | Property
Type | | Number of Buildings | | Approximate Square Feet (unaudited) | | Number of Buildings | | Approximate Square Feet (unaudited) | | Number of Buildings | | Approximate Square Feet (unaudited) | | Weighted Average Occupancy(1) (unaudited) |
| Commercial: | | | | | | | | | | | | | | |
| Manhattan | | Office | | 12 | | | 8,180,345 | | | 11 | | | 13,661,381 | | | 23 | | | 21,841,726 | | | 91.5 | % |
| | Retail | | 2 | | (2) | 17,888 | | | 9 | | | 301,996 | | | 11 | | | 319,884 | | | 91.2 | % |
| | Development/Redevelopment | (1) | 6 | | | 2,230,282 | | | 2 | | | 1,618,310 | | | 8 | | | 3,848,592 | | | N/A |
| | Fee Interest | | 1 | | | 7,684 | | | — | | | — | | | 1 | | | 7,684 | | | N/A |
| | | | 21 | | | 10,436,199 | | | 22 | | | 15,581,687 | | | 43 | | | 26,017,886 | | | 91.5 | % |
| Suburban | | Office | | 7 | | | 862,800 | | | — | | | — | | | 7 | | | 862,800 | | | 78.6 | % |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total commercial properties | | 28 | | | 11,298,999 | | | 22 | | | 15,581,687 | | | 50 | | | 26,880,686 | | | 91.0 | % |
| Residential: | | | | | | | | | | | | | | | | |
| Manhattan | | Residential | | 2 | | (2) | 222,632 | | | 6 | | | 445,934 | | | 8 | | | 668,566 | | | 87.9 | % |
| | | | | | | | | | | | | | |
| Total portfolio | | 30 | | | 11,521,631 | | | 28 | | | 16,027,621 | | | 58 | | | 27,549,252 | | | 91.0 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Consolidated | | Unconsolidated | | Total | | |
| Location | | Property
Type | | Number of Properties | | Approximate Square Feet (unaudited) | | Number of Properties | | Approximate Square Feet (unaudited) | | Number of Properties | | Approximate Square Feet (unaudited) | | Weighted Average Occupancy(1) (unaudited) |
| Commercial: | | | | | | | | | | | | | | |
| Manhattan | | Office | | 24 |
| | 16,054,606 |
| | 7 |
| | 6,558,139 |
| | 31 |
| | 22,612,745 |
| | 93.4 | % |
| | | Retail | | 4 |
| (2) | 302,583 |
| | 9 |
| | 347,970 |
| | 13 |
| | 650,553 |
| | 94.5 | % |
| | | Development/Redevelopment | | 7 |
| | 158,985 |
| | 4 |
| | 770,514 |
| | 11 |
| | 929,499 |
| | 59.9 | % |
| | | Fee Interest | | 1 |
| | 176,530 |
| | 1 |
| | — |
| | 2 |
| | 176,530 |
| | 100.0 | % |
| | | | | 36 |
| | 16,692,704 |
| | 21 |
| | 7,676,623 |
| | 57 |
| | 24,369,327 |
| | 92.2 | % |
| Suburban | | Office | | 22 |
| | 3,608,800 |
| | 2 |
| | 640,000 |
| | 24 |
| | 4,248,800 |
| | 83.1 | % |
| | | Retail | | 1 |
| | 52,000 |
| | — |
| | — |
| | 1 |
| | 52,000 |
| | 100.0 | % |
| | | Development/Redevelopment | | 1 |
| | 1,000 |
| | 1 |
| | — |
| | 2 |
| | 1,000 |
| | 100.0 | % |
| | | | | 24 |
| | 3,661,800 |
| | 3 |
| | 640,000 |
| | 27 |
| | 4,301,800 |
| | 83.3 | % |
| Total commercial properties | | 60 |
| | 20,354,504 |
| | 24 |
| | 8,316,623 |
| | 84 |
| | 28,671,127 |
| | 90.8 | % |
| Residential: | | | | | | | | | | | | | | | | |
| Manhattan | | Residential | | 3 |
| (2) | 472,105 |
| | 12 |
| | 2,656,856 |
| | 15 |
| | 3,128,961 |
| | 86.4 | % |
| Suburban | | Residential | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — | % |
| Total residential properties | | 3 |
| | 472,105 |
| | 12 |
| | 2,656,856 |
| | 15 |
| | 3,128,961 |
| | 86.4 | % |
Total portfolio(2)(3) | | 63 |
| | 20,826,609 |
| | 36 |
| | 10,973,479 |
| | 99 |
| | 31,800,088 |
| | 90.4 | % |
| |
(1) | The weighted average occupancy for commercial properties represents the total occupied square feet divided by total square footage at acquisition. The weighted average occupancy for residential properties represents the total occupied units divided by total available units. |
| |
(2) | As of September 30, 2017, we owned a building at 315 West 33rd Street, also known as The Olivia, that was comprised of approximately 270,132 square feet (unaudited) of retail space and approximately 222,855 square feet (unaudited) of residential space. For the purpose of this report, we have included this building in the number of retail properties we own. However, we have included only the retail square footage in the retail approximate square footage, and have listed the balance of the square footage as residential square footage. |
| |
(3) | Includes the properties at 16 Court Street in Brooklyn, New York, and 125 Chubb Avenue in Lyndhurst, New Jersey which are classified as held for sale at September 30, 2017. The sales closed in October 2017. |
(2)As of September 30, 2017,March 31, 2022, we owned a building at 7 Dey / 185 Broadway that was comprised of approximately 50,206 square feet (unaudited) of retail space and approximately 140,382 square feet (unaudited) of residential space. For the purpose of this report, we have included this building in the number of retail properties we own. However, we have included only the retail square footage in the retail approximate square footage, and have listed the balance of the square footage as residential square footage.
As of March 31, 2022, we also managed an approximately 336,000 square foot (unaudited)one office building owned by a third party encompassing approximately 0.3 million square feet (unaudited), and held debt and preferred equity investments with a book value of $2.2$1.1 billion, including excluding approximately $0.1 billion of debt and preferred equity investments and other financing receivables that are included in other balance sheet line items other than the Debt and Preferred Equity Investmentspreferred equity investments line item.
Critical Accounting Policies and Estimates
Refer to the 20162021 Annual Report on Form 10-K of the Company and the Operating Partnership for a discussion of our critical accounting policies and estimates, which include investment in commercial real estate properties, investment in unconsolidated joint ventures, lease classification, revenue recognition, allowance for doubtful accounts, reserve for possible credit losses and derivative instruments. There have beendebt and preferred equity investments. During the three months ended March 31, 2022, there were no material changes to these accounting policies during the three and nine months ended September 30, 2017.
policies.
Reconciliation of Net Income to Same-Store Operating Income
The Company presents Same-Store Operating Income because the Company believes that this measure, when taken together with the corresponding GAAP financial measures and our reconciliation, provides investors with meaningful information regarding the operating performance of properties. When operating performance is compared across multiple periods, the investor is provided with information not immediately apparent from net income that is determined in accordance with GAAP. Same-Store Operating Income provides information on trends in the revenue generated and expenses incurred in operating our properties, unaffected by the cost of leverage, depreciation, amortization, and other net income components. The Company uses this metric internally as a performance measure. This measure is not an alternative to net income (determined in accordance with GAAP) and same-store performance should not be considered an alternative to GAAP net income performance.
For properties owned since January 1, 2016 and still owned and operated at September 30, 2017, Same-Store Operating Income is determined as follows (in millions):
|
| | | | | | | | | | | | | | | | |
| | | Three months ended | | Nine months ended |
| | | September 30, | | September 30, |
| (in millions) | | 2017 | | 2016 | | 2017 | | 2016 |
| Net income | | $ | 45.8 |
| | $ | 43.3 |
| | $ | 62.7 |
| | $ | 224.9 |
|
| Equity in net gain on sale of interest in unconsolidated joint venture/real estate | | (1.0 | ) | | (0.2 | ) | | (16.2 | ) | | (43.6 | ) |
| Loss (gain) on sale of real estate, net | | — |
| | (0.4 | ) | | 3.3 |
| | (210.8 | ) |
| Depreciable real estate reserves | | — |
| | — |
| | 85.3 |
| | 10.4 |
|
| Loss on sale of investment in marketable securities | | — |
| | — |
| | (3.3 | ) | | 0.1 |
|
| Depreciation and amortization | | 91.7 |
| | 112.7 |
| | 318.9 |
| | 717.0 |
|
| Interest expense, net of interest income | | 65.6 |
| | 72.6 |
| | 196.1 |
| | 256.3 |
|
| Amortization of deferred financing costs | | 4.0 |
| | 4.8 |
| | 12.2 |
| | 20.2 |
|
| Operating income | | 206.1 |
| | 232.8 |
| | 659.0 |
| | 974.5 |
|
| Less: Operating income from other properties/affiliates | | (31.9 | ) | | (72.8 | ) | | (129.5 | ) | | (465.5 | ) |
| Same-store operating income | | $ | 174.2 |
| | $ | 160.0 |
| | $ | 529.5 |
| | $ | 509.0 |
|
Results of Operations
Comparison of the three months ended September 30, 2017March 31, 2022 to the three months ended September 30, 2016March 31, 2021
The following comparison for the three months ended September 30, 2017,March 31, 2022, or 2017,2022, to the three months ended September 30, 2016,March 31, 2021, or 2016,2021, makes reference to the effect of the following:
| |
i. | “Same-Store Properties,” which represents all operating properties owned by us at January 1, 2016 and still owned by us in the same manner at September 30, 2017 (Same-Store Properties totaled52 of our 63 consolidated operating properties),
|
| |
ii. | “Acquisition Properties,” which represents all properties or interests in properties acquired in 2017 and 2016 and all non-Same-Store Properties, including properties that are under development, redevelopment or were deconsolidated during the period, |
| |
iii. | "Disposed Properties" which represents all properties or interests in properties sold or partially sold in 2017 and 2016, and |
| |
iv. | “Other,” which represents corporate level items not allocable to specific properties, as well as the Service Corporation and eEmerge Inc. |
i.“Same-Store Properties,” which represents all operating properties owned by us at January 1, 2021 and still owned by us in the same manner as of March 31, 2022 (Same-Store Properties totaled 21 of our 30 consolidated operating buildings),
ii.“Acquisition Properties,” which represents all properties or interests in properties acquired in 2022 and 2021 and all non-Same-Store Properties, including properties that are under development or redevelopment,
iii."Disposed Properties," which represents all properties or interests in properties sold in 2022 and 2021, and
iv.“Other,” which represents properties where we sold an interest resulting in deconsolidation and corporate level items not allocable to specific properties, as well as the Service Corporation and eEmerge Inc.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Same-Store | | Disposed | | Other | | Consolidated |
| (in millions) | | 2022 | | 2021 | | $
Change | | %
Change | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | $
Change | | %
Change |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Rental revenue | | $ | 141.9 | | | $ | 134.6 | | | $ | 7.3 | | | 5.4 | % | | $ | (0.6) | | | $ | 10.3 | | | $ | 14.7 | | | $ | 43.2 | | | $ | 156.0 | | | $ | 188.1 | | | $ | (32.1) | | | (17.1) | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Investment income | | — | | | — | | | — | | | — | % | | — | | | — | | | 19.9 | | | 19.3 | | | 19.9 | | | 19.3 | | | 0.6 | | | 3.1 | % |
| Other income | | 0.2 | | | — | | | 0.2 | | | 100.0 | % | | — | | | 0.1 | | | 11.8 | | | 18.6 | | | 12.0 | | | 18.7 | | | (6.7) | | | (35.8) | % |
| Total revenues | | 142.1 | | | 134.6 | | | 7.5 | | | 5.6 | % | | (0.6) | | | 10.4 | | | 46.4 | | | 81.1 | | | 187.9 | | | 226.1 | | | (38.2) | | | (16.9) | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Property operating expenses | | 65.6 | | | 66.5 | | | (0.9) | | | (1.4) | % | | 0.2 | | | 4.1 | | | 14.0 | | | 23.9 | | | 79.8 | | | 94.5 | | | (14.7) | | | (15.6) | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Marketing, general and administrative | | — | | | — | | | — | | | — | % | | — | | | — | | | 24.8 | | | 22.9 | | | 24.8 | | | 22.9 | | | 1.9 | | | 8.3 | % |
| | 65.6 | | | 66.5 | | | (0.9) | | | (1.4) | % | | 0.2 | | | 4.1 | | | 38.8 | | | 46.8 | | | 104.6 | | | 117.4 | | | (12.8) | | | (10.9) | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Other income (expenses): | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense and amortization of deferred financing costs, net of interest income | | | | | | | | | | | | | | | | | | (17.0) | | | (27.2) | | | 10.2 | | | (37.5) | % |
| Depreciation and amortization | | | | | | | | | | | | | | | | | | (47.0) | | | (63.0) | | | 16.0 | | | (25.4) | % |
| Equity in net loss from unconsolidated joint ventures | | | | | | | | | | | | | | | | | | (4.7) | | | (2.9) | | | (1.8) | | | 62.1 | % |
| Equity in net loss on sale of interest in unconsolidated joint venture/real estate | | | | | | | | | | | | | | | | | | — | | | (12.6) | | | 12.6 | | | (100.0) | % |
| Purchase price and other fair value adjustments | | | | | | | | | | | | | | | | | | (0.1) | | | 2.7 | | | (2.8) | | | (103.7) | % |
| Loss on sale of real estate, net | | | | | | | | | | | | | | | | | | (1.0) | | | (1.4) | | | 0.4 | | | (28.6) | % |
| Depreciable real estate reserves and impairment | | | | | | | | | | | | | | | | | | — | | | (8.2) | | | 8.2 | | | (100.0) | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) | | | | | | | | | | | | | | | | | | $ | 13.5 | | | $ | (3.9) | | | $ | 17.4 | | | (446.2) | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Same-Store | | Disposed | | Other | | Consolidated |
| (in millions) | | 2017 | | 2016 | | $ Change | | % Change | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 | | $ Change | | % Change |
| Rental revenue | | $ | 270.9 |
| | $ | 248.8 |
| | $ | 22.1 |
| | 8.9 | % | | $ | 0.3 |
| | $ | 26.7 |
| | $ | 3.6 |
| | $ | 6.0 |
| | $ | 274.8 |
| | $ | 281.5 |
| | $ | (6.7 | ) | | (2.4 | )% |
| Escalation and reimbursement | | 44.4 |
| | 50.2 |
| | (5.8 | ) | | (11.6 | )% | | — |
| | 2.5 |
| | 0.3 |
| | 0.4 |
| | 44.7 |
| | 53.1 |
| | (8.4 | ) | | (15.8 | )% |
| Investment income | | — |
| | — |
| | — |
| | — | % | | — |
| | — |
| | 47.8 |
| | 75.4 |
| | 47.8 |
| | 75.4 |
| | (27.6 | ) | | (36.6 | )% |
| Other income | | 1.8 |
| | 1.7 |
| | 0.1 |
| | 5.9 | % | | — |
| | 0.1 |
| | 5.5 |
| | 4.9 |
| | 7.3 |
| | 6.7 |
| | 0.6 |
| | 9.0 | % |
| Total revenues | | 317.1 |
| | 300.7 |
| | 16.4 |
| | 5.5 | % | | 0.3 |
| | 29.3 |
| | 57.2 |
| | 86.7 |
| | 374.6 |
| | 416.7 |
| | (42.1 | ) | | (10.1 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Property operating expenses | | 142.9 |
| | 140.7 |
| | 2.2 |
| | 1.6 | % | | 0.4 |
| | 7.4 |
| | 5.1 |
| | 3.8 |
| | 148.4 |
| | 151.9 |
| | (3.5 | ) | | (2.3 | )% |
| Transaction related costs | | — |
| | — |
| | — |
| | — | % | | — |
| | — |
| | 0.2 |
| | 2.6 |
| | 0.2 |
| | 2.6 |
| | (2.4 | ) | | (92.3 | )% |
| Marketing, general and administrative | | — |
| | — |
| | — |
| | — | % | | — |
| | — |
| | 24.0 |
| | 25.5 |
| | 24.0 |
| | 25.5 |
| | (1.5 | ) | | (5.9 | )% |
| | | 142.9 |
| | 140.7 |
| | 2.2 |
| | 1.6 | % | | 0.4 |
| | 7.4 |
| | 29.3 |
| | 31.9 |
| | 172.6 |
| | 180.0 |
| | (7.4 | ) | | (4.1 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating income before equity in net income from unconsolidated joint ventures | | $ | 174.2 |
| | $ | 160.0 |
| | $ | 14.2 |
| | 8.9 | % | | $ | (0.1 | ) | | $ | 21.9 |
| | $ | 27.9 |
| | $ | 54.8 |
| | $ | 202.0 |
| | $ | 236.7 |
| | $ | (34.7 | ) | | (14.7 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Other income (expenses): | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense and amortization of deferred financing costs, net of interest income | | | | | | | | | | | | | | | | | | (69.6 | ) | | (77.4 | ) | | 7.8 |
| | (10.1 | )% |
| Depreciation and amortization | | | | | | | | | |
|
| | | | | | | | (91.7 | ) | | (112.7 | ) | | 21.0 |
| | (18.6 | )% |
| Equity in net income (loss) from unconsolidated joint ventures | | | | | | | | | | | | | | | | | | 4.1 |
| | (4.0 | ) | | 8.1 |
| | (202.5 | )% |
| Equity in net gain on sale of interest in unconsolidated joint venture/real estate | | | | | | | | | | | | | | | | | | 1.0 |
| | 0.2 |
| | 0.8 |
| | 400.0 | % |
| Gain (loss) on sale of real estate, net | | | | | | | | | | | | | | | | | | — |
| | 0.4 |
| | (0.4 | ) | | (100.0 | )% |
| Net income | | | | | | | | | | | | | | | | | | $ | 45.8 |
| | $ | 43.2 |
| | $ | 2.6 |
| | 6.0 | % |
Rental Escalation and Reimbursement RevenuesRevenue
Rental revenues decreased primarily due to Disposed Properties ($10.9 million), properties moved into redevelopment ($6.7 million), and the deconsolidation of 220 East 42nd Street as a result of Disposed Properties ($26.4 million), which included the effectsale of the partial sale and deconsolidation of 11 Madison Avenue ina joint venture interest during the third quarter of 20162021 ($16.7 million), partially offset by increased rental revenue at our Same-Store Properties ($22.1 million). Increased rental revenue at our Same-Store Properties was primarily driven by 1515 Broadway which, in 2016, recognized accounting write-offs ($17.4 million) related to the space previously leased to Aeropostale following the tenant's bankruptcy.
Escalation and reimbursement revenue decreased primarily as a result of Disposed Properties ($2.5 million) and lower recoveries at our Same-Store properties ($5.816.5 million).
The following table presents a summary of the commenced leasing activity for the three months ended September 30, 2017March 31, 2022 in our Manhattan and Suburban portfolio:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Usable
SF | | Rentable
SF | | New Cash Rent (per rentable SF) (1) | | Prev. Escalated Rent (per rentable SF) (2) | | TI/LC
per
rentable
SF | | Free
Rent (in
months) | | Average
Lease
Term (in
years) |
| Manhattan | | | | | | | | | | | | | |
| Space available at beginning of the period | 1,638,009 | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Property out of redevelopment | 107,612 | | | | | | | | | | | | | |
Space which became available during the period (3) | | | | | | | | | | | | | |
| • Office | 371,968 | | | | | | | | | | | | | |
| • Retail | 10,695 | | | | | | | | | | | | | |
| • Storage | 3,111 | | | | | | | | | | | | | |
| | 385,774 | | | | | | | | | | | | | |
| Total space available | 2,131,395 | | | | | | | | | | | | | |
| Leased space commenced during the period: | | | | | | | | | | | | | |
• Office(4) | 237,557 | | | 269,385 | | | $ | 66.72 | | | $ | 74.00 | | | $ | 79.40 | | | 9.2 | | | 9.0 | |
| • Retail | 5,945 | | | 5,399 | | | $ | 89.83 | | | $ | — | | | $ | — | | | 7.0 | | | 10.6 | |
| • Storage | 2,946 | | | 3,191 | | | $ | 28.75 | | | $ | 31.25 | | | $ | 5.79 | | | 9.0 | | | 10.0 | |
| Total leased space commenced | 246,448 | | | 277,975 | | | $ | 66.74 | | | $ | 73.40 | | | $ | 77.01 | | | 9.1 | | | 9.0 | |
| | | | | | | | | | | | | |
| Total available space at end of period | 1,884,947 | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Early renewals | | | | | | | | | | | | | |
| • Office | 24,679 | | | 27,031 | | | $ | 87.40 | | | $ | 85.70 | | | $ | 18.29 | | | 1.6 | | | 3.1 | |
| • Retail | 7,198 | | | 8,152 | | | $ | 187.79 | | | $ | 206.76 | | | $ | — | | | — | | | 8.1 | |
| | | | | | | | | | | | | |
| Total early renewals | 31,877 | | | 35,183 | | | $ | 110.66 | | | $ | 113.75 | | | $ | 14.05 | | | 1.3 | | | 4.2 | |
| | | | | | | | | | | | | |
| Total commenced leases, including replaced previous vacancy | | | | | | | | | | | | | |
| • Office | | | 296,416 | | | $ | 68.61 | | | $ | 75.26 | | | $ | 73.83 | | | 8.5 | | | 8.5 |
| • Retail | | | 13,551 | | | $ | 148.76 | | | $ | 206.76 | | | $ | — | | | 2.8 | | | 9.1 |
| • Storage | | | 3,191 | | | $ | 28.75 | | | $ | 31.25 | | | $ | 5.79 | | | 9.0 | | | 10.0 | |
| Total commenced leases | | | 313,158 | | | $ | 71.67 | | | $ | 78.81 | | | $ | 69.94 | | | 8.3 | | | 8.5 | |
(1)Annual initial base rent.
(2)Escalated rent includes base rent plus all additional amounts paid by the tenant in the form of real estate taxes, operating expenses, porters wage or a consumer price index (CPI) adjustment.
(3)Includes expiring space, relocating tenants and move-outs where tenants vacated. Excludes lease expirations where tenants held over.
(4)Average starting office rent excluding new tenants replacing vacancies was $65.71 per rentable square feet for 224,300 rentable square feet. Average starting office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $68.04 per rentable square feet for 251,331 rentable square feet.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Useable SF | | Rentable SF | | New Cash Rent (per rentable SF) (1) | | Prev. Escalated Rent (per rentable SF) (2) | | TI/LC per rentable SF | | Free Rent (in months) | | Average Lease Term (in years) |
| Manhattan | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Space available at beginning of the period | 1,553,301 |
| | |
| | | | |
| | |
| | |
| | |
|
Space which became available during the period (3) | | | |
| | | | |
| | |
| | |
| | |
|
| • Office | 149,453 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| • Retail | 1,600 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| • Storage | 3,102 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| | 154,155 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Total space available | 1,707,456 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Leased space commenced during the period: | |
| | |
| | |
| | |
| | |
| | |
| | |
|
• Office(4) | 198,250 |
| | 214,637 |
| | $ | 73.72 |
| | $ | 62.63 |
| | $ | 60.01 |
| | 4.1 |
| | 7.0 |
|
| • Retail | 11,715 |
| | 11,180 |
| | $ | 356.82 |
| | $ | 475.65 |
| | $ | 111.55 |
| | 8.3 |
| | 10.3 |
|
| • Storage | 1,082 |
| | 994 |
| | $ | 35.92 |
| | $ | — |
| | $ | — |
| | — |
| | 13.1 |
|
| Total leased space commenced | 211,047 |
| | 226,811 |
| | $ | 87.51 |
| | $ | 105.70 |
| | $ | 62.28 |
| | 4.3 |
| | 7.2 |
|
| | | | | | | | | | | | | | |
| Total available space at end of period | 1,496,409 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| | | | | | | | | | | | | | |
| Early renewals | |
| | | | |
| | |
| | |
| | |
| | |
|
| • Office | 75,472 |
| | 85,927 |
| | $ | 76.42 |
| | $ | 78.87 |
| | $ | 8.78 |
| | 1.0 |
| | 4.4 |
|
| • Retail | 7,058 |
| | 6,430 |
| | $ | 236.77 |
| | $ | 226.52 |
| | $ | 10.95 |
| | 0.4 |
| | 7.9 |
|
| Total early renewals | 82,530 |
| | 92,357 |
| | $ | 87.59 |
| | $ | 89.15 |
| | $ | 8.93 |
| | 1.0 |
| | 4.6 |
|
| | | | | | | | | | | | | | |
| Total commenced leases, including replaced previous vacancy | |
| | |
| | | | | | | | | | |
| • Office | | | 300,564 |
| | $ | 74.50 |
| | $ | 70.30 |
| | $ | 45.36 |
| | 3.2 |
| | 6.3 |
|
| • Retail | |
| | 17,610 |
| | $ | 312.99 |
| | $ | 384.69 |
| | $ | 74.82 |
| | 5.5 |
| | 9.4 |
|
| • Storage | |
| | 994 |
| | $ | 35.92 |
| | $ | — |
| | $ | — |
| | — |
| | 13.1 |
|
| Total commenced leases | |
| | 319,168 |
| | $ | 87.53 |
| | $ | 98.04 |
| | $ | 46.85 |
| | 3.3 |
| | 6.5 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Useable SF | | Rentable SF | | New Cash Rent (per rentable SF) (1) | | Prev. Escalated Rent (per rentable SF) (2) | | TI/LC per rentable SF | | Free Rent (in months) | | Average Lease Term (in years) |
| Suburban | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Space available at beginning of period | 926,139 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Sold vacancies | (61,954 | ) | | | | | | | | | | | | |
Space which became available during the period(3) | | | |
| | |
| | |
| | |
| | |
| | |
|
| • Office | 86,623 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| • Storage | 404 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| | 87,027 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Total space available | 951,212 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Leased space commenced during the period: | |
| | | | |
| | |
| | |
| | |
| | |
|
• Office(5) | 94,896 |
| | 93,612 |
| | $ | 29.63 |
| | $ | 32.66 |
| | $ | 36.36 |
| | 5.6 |
| | 7.7 |
|
| Total leased space commenced | 94,896 |
| | 93,612 |
| | $ | 29.63 |
| | $ | 32.66 |
| | $ | 36.36 |
| | 5.6 |
| | 7.7 |
|
| | | | | | | | | | | | | | |
| Total available space at end of the period | 856,316 |
| | |
| | | | | | | | | | |
| | | | | | | | | | | | | | |
| Early renewals | |
| | |
| | | | | | | | | | |
| • Office | 39,767 |
| | 39,767 |
| | $ | 31.44 |
| | $ | 33.33 |
| | $ | 10.77 |
| | 11.8 |
| | 5.9 |
|
| • Retail | — |
| | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | — |
| | — |
|
| • Storage | 658 |
| | 658 |
| | $ | 14.52 |
| | $ | 15.14 |
| | $ | — |
| | — |
| | 6.7 |
|
| Total early renewals | 40,425 |
| | 40,425 |
| | $ | 31.16 |
| | $ | 33.03 |
| | $ | 10.59 |
| | 11.6 |
| | 6.0 |
|
| | | | | | | | | | | | | | |
| Total commenced leases, including replaced previous vacancy | |
| | |
| | |
| | |
| | |
| | |
| | |
| • Office | |
| | 133,379 |
| | $ | 30.17 |
| | $ | 32.94 |
| | $ | 28.73 |
| | 7.5 |
| | 7.2 |
|
| • Retail | |
| | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | — |
| | — |
|
| • Storage | |
| | 658 |
| | $ | 14.52 |
| | $ | 15.14 |
| | $ | — |
| | — |
| | 6.7 |
|
| Total commenced leases | |
| | 134,037 |
| | $ | 30.09 |
| | $ | 32.82 |
| | $ | 28.59 |
| | 7.4 |
| | 7.4 |
|
| |
(1) | Annual initial base rent. |
| |
(2) | Escalated rent is calculated as total annual income less electric charges. |
| |
(3) | Includes expiring space, relocating tenants and move-outs where tenants vacated. Excludes lease expirations where tenants held over. |
| |
(4) | Average starting office rent excluding new tenants replacing vacancies was $67.52 per rentable square feet for 96,047 rentable square feet. Average starting office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $71.73 per rentable square feet for 181,974 rentable square feet.
|
| |
(5) | Average starting office rent excluding new tenants replacing vacancies was $30.96 per rentable square feet for 55,545 rentable square feet. Average starting office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $31.16 per rentable square feet for 95,312 rentable square feet.
|
Investment Income
For the three months ended September 30, 2017,March 31, 2022, investment income decreasedincreased primarily as a result of additional income recognized from the recapitalization of a debt investment ($41.0 million) in the third quarter of 2016, partially offset by a larger weighted average book balance and an increase in the LIBOR benchmark rate.weighted average yield of our debt and preferred equity investments. For the three months ended September 30, 2017,March 31, 2022, the weighted average debt and preferred equity investment balance outstanding and weighted average yield were $2.0$1.1 billion and 9.4%7.3%, excluding our investment in Two Herald Square which was put on non-accrual in August 2017, respectively, as compared to $1.4$1.1 billion and 9.4%6.8%, respectively, for the same period in 2016. As of September 30, 2017, the debt and preferred equity investments had a weighted average term to maturity of 2.3 years excluding extension options and our investment in Two Herald Square.three months ended March 31, 2021.
Other Income
Other income increaseddecreased primarily due to lower lease termination income for the three months ended March 31, 2022 ($5.4 million) as a result of construction management and other fees earned fromcompared to the One Vanderbilt venturesame period in 2021 ($0.59.9 million) in 2017..
Property Operating Expenses
Property operating expenses decreased primarily due to reduced variable expenses and real estate taxes at our Acquisition and Disposed Properties ($6.9 million and $3.9 million, respectively). Further decreases resulted from the effectsale of the partial salea joint venture interest and deconsolidation of 11 Madison Avenue220 East 42nd Street ($3.75.7 million) in the third quarter of 2016,2021 and the partial sale of 400 East 57th Street ($1.6 million) in the fourth quarter of 2016, offset by increasedreduced real estate taxes at our Same-Store Properties ($2.95.2 million).
Transaction Related Costs
The decrease in transaction related costs in 2017 is primarily due to the adoption of ASU No. 2017-01 in 2017, which clarified the definition of a business and provided guidance to assist in determining whether transactions should be accounted for as acquisitions of assets or businesses. Following the adoption of the guidance, most of, partially offset by increased variable expenses at our real estate acquisitions are considered asset acquisitions and transaction costs are therefore capitalized to the investment basis when they would have previously been expensed under the previous guidance. Transaction costs expensed in 2017 relate primarily to deals that are not moving forward for which any costs incurred are expensed.Same-Store Properties ($4.3 million).
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses increased primarily due to an increase in rent expense for the three months ended September 30, 2017 were $24.0 million, or 5.1% of total combined revenues, including our share of joint venture revenues, and an annualized 51 basis points of total combined assets, including our share of joint venture assets compared to $25.5 million, or 5.2% of total revenues including our share of joint venture revenues, and 55 basis points of total assets including our share of joint venture assets for 2016.Company's corporate offices at One Vanderbilt Avenue.
Interest Expense and Amortization of Deferred Financing Costs, Net of Interest Income
Interest expense and amortization of deferred financing costs, net of interest income, decreased primarily as a result of the Disposed Properties ($10.7 million) which includeddue to the deconsolidation of 11 Madison220 East 42nd Street ($4.8 million), lower interest expense from term loans ($1.4 million) and senior unsecured notes ($1.1 million) resulting from a decrease in balances outstanding during the third quarter of 2016three months ended March 31, 2022 as compared to the three months ended March 31, 2021, and interest capitalization in connection with properties that are under development ($6.4 million), partially offset by a higher weighted average balance of the 2012 revolving credit facility ($2.1 million), and a higher weighted average balance of the 2012 term loan facility ($1.61.5 million). The weighted average consolidated debt balance outstanding was $6.7$4.2 billion for the three months ended September 30, 2017March 31, 2022, compared to $7.2$5.4 billion for the three months ended September 30, 2016.March 31, 2021. The consolidated weighted average interest rate was 3.98%3.01% for the three months ended September 30, 2017March 31, 2022, as compared to 4.00%2.88% for the three months ended September 30, 2016.March 31, 2021.
Depreciation and Amortization
Depreciation and amortization decreased primarilyat our Acquired Properties ($7.1 million), Disposed Properties ($3.0 million) and Same-Store Properties ($1.3 million) during the three months ended March 31, 2022. Depreciation and amortization decreased further due to the deconsolidation of 220 East 42nd Street ($4.5 million) as a result of the Disposed Properties ($11.0 million),interest sale during the acquisitionthird quarter of 110 Greene Street ($5.6 million) and starting the redevelopment of 5-7 Dey Street, 183 & 187 Broadway in 2017 ($5.1 million).
Equity in Net Income in Unconsolidated Joint Venture2021.
Equity in net incomeloss from unconsolidated joint ventures increased primarily as a result of additional depreciation expense from the deconsolidation of 11 Madison Avenue ($10.4 million) in 2016, partially offset by the repayment of a debt position held in an unconsolidated joint venture ($1.5 million).
Equity in Net Gain on Sale of Interest in Unconsolidated Joint Ventures/Real Estate
During the three months ended September 30, 2017, we recognized a gain on sale related to our interest in 102 Greene Street ($0.3 million).
Comparison of the nine months ended September 30, 2017 to the nine months ended September 30, 2016
The following comparison for the nine months ended September 30, 2017, or 2017, to the nine months ended September 30, 2016, or 2016, makes reference to the effect of the following:
| |
i. | “Same-Store Properties,” which represents all operating properties owned by us at January 1, 2016 and still owned by us in the same manner at September 30, 2017 (Same-Store Properties totaled52 of our 63 consolidated operating properties),
|
| |
ii. | “Acquisition Properties,” which represents all properties or interests in properties acquired in 2017 and 2016 and all non- |
Same-Store Properties, including properties that are under development, redevelopment or were deconsolidated during the period,
| |
iii. | "Disposed Properties" which represents all properties or interests in properties sold or partially sold in 2017 and 2016, and |
| |
iv. | “Other,” which represents corporate level items not allocable to specific properties, as well as the Service Corporation and eEmerge Inc. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Same-Store | | Disposed | | Other | | Consolidated |
| (in millions) | | 2017 | | 2016 | | $ Change | | % Change | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 | | $ Change | | % Change |
| Rental revenue | | $ | 810.3 |
| | $ | 773.3 |
| | $ | 37.0 |
| | 4.8 | % | | $ | 10.9 |
| | $ | 255.4 |
| | $ | 14.3 |
| | $ | 15.2 |
| | $ | 835.5 |
| | $ | 1,043.9 |
| | $ | (208.4 | ) | | (20.0 | )% |
| Escalation and reimbursement | | 126.9 |
| | 134.4 |
| | (7.5 | ) | | (5.6 | )% | | 3.5 |
| | 11.5 |
| | 1.2 |
| | 1.5 |
| | 131.6 |
| | 147.4 |
| | (15.8 | ) | | (10.7 | )% |
| Investment income | | — |
| | — |
| | — |
| | — | % | | — |
| | — |
| | 148.7 |
| | 174.3 |
| | 148.7 |
| | 174.3 |
| | (25.6 | ) | | (14.7 | )% |
| Other income | | 5.0 |
| | 5.4 |
| | (0.4 | ) | | (7.4 | )% | | 0.3 |
| | 94.1 |
| | 29.0 |
| | 24.6 |
| | 34.3 |
| | 124.1 |
| | (89.8 | ) | | (72.4 | )% |
| Total revenues | | 942.2 |
| | 913.1 |
| | 29.1 |
| | 3.2 | % | | 14.7 |
| | 361.0 |
| | 193.2 |
| | 215.6 |
| | 1,150.1 |
| | 1,489.7 |
| | (339.6 | ) | | (22.8 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Property operating expenses | | 412.7 |
| | 404.1 |
| | 8.6 |
| | 2.1 | % | | 3.7 |
| | 30.5 |
| | 16.0 |
| | 12.6 |
| | 432.4 |
| | 447.2 |
| | (14.8 | ) | | (3.3 | )% |
| Transaction related costs | | — |
| | — |
| | — |
| | — | % | | — |
| | — |
| | 0.4 |
| | 6.0 |
| | 0.4 |
| | 6.0 |
| | (5.6 | ) | | (93.3 | )% |
| Marketing, general and administrative | | — |
| | — |
| | — |
| | — | % | | — |
| | — |
| | 72.4 |
| | 74.0 |
| | 72.4 |
| | 74.0 |
| | (1.6 | ) | | (2.2 | )% |
| | | 412.7 |
| | 404.1 |
| | 8.6 |
| | 2.1 | % | | 3.7 |
| | 30.5 |
| | 88.8 |
| | 92.6 |
| | 505.2 |
| | 527.2 |
| | (22.0 | ) | | (4.2 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating income before equity in net income from unconsolidated joint ventures | | $ | 529.5 |
| | $ | 509.0 |
| | $ | 20.5 |
| | 4.0 | % | | $ | 11.0 |
| | $ | 330.5 |
| | $ | 104.4 |
| | $ | 123.0 |
| | $ | 644.9 |
| | $ | 962.5 |
| | $ | (317.6 | ) | | (33.0 | )% |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Other income (expenses): | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense and amortization of deferred financing costs, net of interest income | | | | | | | | | | | | | | | | | | (208.3 | ) | | (276.5 | ) | | 68.2 |
| | (24.7 | )% |
| Depreciation and amortization | | | | | | | | | | | | | | | | | | (318.9 | ) | | (717.0 | ) | | 398.1 |
| | (55.5 | )% |
| Equity in net income (loss) from unconsolidated joint ventures | | | | | | | | | | | | | | | | | | 14.1 |
| | 12.0 |
| | 2.1 |
| | 17.5 | % |
| Equity in net gain on sale of interest in unconsolidated joint venture/real estate | | | | | | | | | | | | | | | | | | 16.2 |
| | 43.6 |
| | (27.4 | ) | | (62.8 | )% |
| Gain (loss) on sale of real estate, net | | | | | | | | | | | | | | | | | | (3.3 | ) | | 210.8 |
| | (214.1 | ) | | (101.6 | )% |
| Depreciable real estate reserves | | | | | | | | | | | | | | | | | | (85.3 | ) | | (10.4 | ) | | (74.9 | ) | | 720.2 | % |
| Gain (loss) on sale of investment in marketable securities | | | | | | | | | | | | | | | | | | 3.3 |
| | (0.1 | ) | | 3.4 |
| | (3,400.0 | )% |
| Net income | | | | | | | | | | | | | | | | | | $ | 62.7 |
| | $ | 224.9 |
| | $ | (162.2 | ) | | (72.1 | )% |
Rental, Escalation and Reimbursement Revenues
Rental revenues decreased primarily as a result of Disposed Properties ($244.4 million), which included 388-390 Greenwich Street and the effect of the partial sale and deconsolidation of 11 Madison Avenue in the third quarter of 2016, partially offset by increased rental revenue at our Same-Store Properties ($37.0 million). Increased rental revenue at Same-Store Properties was primarily driven by 1515 Broadway which, in 2016, recognized accounting write-offs ($17.4 million) related to the space previously leased to Aeropostale following the tenant's bankruptcy, 919 Third Avenue ($7.8 million), and 711 Third Avenue ($7.7 million).
Escalation and reimbursement revenue decreased primarily as a result of Disposed Properties ($8.0 million) and lower recoveries at our Same-Store properties ($7.5 million).
The following table presents a summary of the commenced leasing activity for the three months ended September 30, 2017 in our Manhattan and Suburban portfolio:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Useable SF | | Rentable SF | | New Cash Rent (per rentable SF) (1) | | Prev. Escalated Rent (per rentable SF) (2) | | TI/LC per rentable SF | | Free Rent (in months) | | Average Lease Term (in years) |
| Manhattan | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Space available at beginning of the year | 1,149,571 |
| | |
| | | | |
| | |
| | |
| | |
|
Space which became available during the year (3) | | | |
| | | | |
| | |
| | |
| | |
|
| • Office | 1,006,674 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| • Retail | 28,858 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| • Storage | 14,189 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| | 1,049,721 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Total space available | 2,199,292 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Leased space commenced during the year: | |
| | |
| | |
| | |
| | |
| | |
| | |
|
• Office(4) | 642,073 |
| | 705,353 |
| | $ | 74.68 |
| | $ | 65.09 |
| | $ | 57.23 |
| | 5.2 |
| | 7.7 |
|
| • Retail | 27,873 |
| | 58,070 |
| | $ | 315.78 |
| | $ | 253.52 |
| | $ | 40.66 |
| | 6.5 |
| | 13.4 |
|
| • Storage | 32,937 |
| | 3,657 |
| | $ | 35.86 |
| | $ | 42.91 |
| | $ | 0.29 |
| | — |
| | 6.4 |
|
| Total leased space commenced | 702,883 |
| | 767,080 |
| | $ | 92.75 |
| | $ | 91.45 |
| | $ | 55.70 |
| | 5.2 |
| | 8.1 |
|
| | | | | | | | | | | | | | |
| Total available space at end of year | 1,496,409 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| | | | | | | | | | | | | | |
| Early renewals | |
| | | | |
| | |
| | |
| | |
| | |
|
| • Office | 200,430 |
| | 189,071 |
| | $ | 80.60 |
| | $ | 76.11 |
| | $ | 15.10 |
| | 1.9 |
| | 4.6 |
|
| • Retail | 44,602 |
| | 33,812 |
| | $ | 70.91 |
| | $ | 47.20 |
| | $ | 2.08 |
| | 0.1 |
| | 5.5 |
|
| • Storage | 2,236 |
| | 2,291 |
| | $ | 29.99 |
| | $ | 31.02 |
| | $ | — |
| | — |
| | 2.6 |
|
| Total early renewals | 247,268 |
| | 225,174 |
| | $ | 78.63 |
| | $ | 71.31 |
| | $ | 13.00 |
| | 1.6 |
| | 4.7 |
|
| | | | | | | | | | | | | | |
| Total commenced leases, including replaced previous vacancy | |
| | |
| | | | | | | | | | |
| • Office | | | 894,424 |
| | $ | 75.93 |
| | $ | 68.93 |
| | $ | 48.32 |
| | 4.5 |
| | 7.0 |
|
| • Retail | |
| | 91,882 |
| | $ | 225.67 |
| | $ | 177.59 |
| | $ | 26.46 |
| | 4.2 |
| | 10.5 |
|
| • Storage | |
| | 5,948 |
| | $ | 33.60 |
| | $ | 36.38 |
| | $ | 0.18 |
| | — |
| | 4.9 |
|
| Total commenced leases | |
| | 992,254 |
| | $ | 89.54 |
| | $ | 84.35 |
| | $ | 46.01 |
| | 4.4 |
| | 7.3 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Useable SF | | Rentable SF | | New Cash Rent (per rentable SF) (1) | | Prev. Escalated Rent (per rentable SF) (2) | | TI/LC per rentable SF | | Free Rent (in months) | | Average Lease Term (in years) |
| Suburban | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Space available at beginning of period | 965,021 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Sold vacancies | (73,919 | ) | | | | | | | | | | | | |
Space which became available during the year (3) | | | |
| | |
| | |
| | |
| | |
| | |
|
| • Office | 211,272 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| • Retail | 338 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| • Storage | 1,889 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| | 213,499 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Total space available | 1,104,601 |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Leased space commenced during the year: | |
| | | | |
| | |
| | |
| | |
| | |
|
• Office(5) | 246,960 |
| | 259,258 |
| | $ | 30.06 |
| | $ | 34.51 |
| | $ | 36.34 |
| | 6.3 |
| | 7.7 |
|
| • Retail | 338 |
| | 338 |
| | $ | 33.00 |
| | $ | 33.00 |
| | $ | — |
| | — |
| | 5.0 |
|
| • Storage | 987 |
| | 1,054 |
| | $ | 23.72 |
| | $ | 23.72 |
| | $ | 27.46 |
| | 2.4 |
| | 9.2 |
|
| Total leased space commenced | 248,285 |
| | 260,650 |
| | $ | 30.04 |
| | $ | 34.45 |
| | $ | 36.25 |
| | 6.3 |
| | 7.7 |
|
| | | | | | | | | | | | | | |
| Total available space at end of the year | 856,316 |
| | |
| | | | | | | | | | |
| | | | | | | | | | | | | | |
| Early renewals | |
| | |
| | | | | | | | | | |
| • Office | 110,975 |
| | 112,509 |
| | $ | 30.95 |
| | $ | 31.16 |
| | $ | 4.26 |
| | 5.8 |
| | 4.1 |
|
| • Storage | 1,410 |
| | 1,410 |
| | $ | 14.78 |
| | $ | 14.00 |
| | $ | — |
| | — |
| | 4.5 |
|
| Total early renewals | 112,385 |
| | 113,919 |
| | $ | 30.75 |
| | $ | 30.95 |
| | $ | 4.21 |
| | 5.8 |
| | 4.2 |
|
| | | | | | | | | | | | | | |
| Total commenced leases, including replaced previous vacancy | |
| | |
| | |
| | |
| | |
| | |
| | |
| • Office | |
| | 371,767 |
| | $ | 30.33 |
| | $ | 32.67 |
| | $ | 26.63 |
| | 6.2 |
| | 6.6 |
|
| • Retail | |
| | 338 |
| | $ | 33.00 |
| | $ | 33.00 |
| | $ | — |
| | — |
| | 5.0 |
|
| • Storage | |
| | 2,464 |
| | $ | 18.60 |
| | $ | 14.26 |
| | $ | 11.75 |
| | 1.0 |
| | 6.5 |
|
| Total commenced leases | |
| | 374,569 |
| | $ | 30.26 |
| | $ | 32.53 |
| | $ | 26.51 |
| | 6.1 |
| | 6.6 |
|
| |
(1) | Annual initial base rent. |
| |
(2) | Escalated rent is calculated as total annual income less electric charges. |
| |
(3) | Includes expiring space, relocating tenants and move-outs where tenants vacated. Excludes lease expirations where tenants held over. |
| |
(4) | Average starting office rent excluding new tenants replacing vacancies was $70.53 per rentable square feet for 353,537 rentable square feet. Average starting office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $74.04 per rentable square feet for 542,608 rentable square feet. |
| |
(5) | Average starting office rent excluding new tenants replacing vacancies was $35.65 per rentable square feet for 89,326 rentable square feet. Average starting office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $33.01 per rentable square feet for 182,112 rentable square feet. |
Investment Income
For the nine months ended September 30, 2017, investment income decreased primarily as a result of additional income recognized from the recapitalization of a debt investment ($41.0 million) in the third quarter of 2016, partially offset by previously unrecognized income related to our preferred equity investment in 885 Third Avenue ($14.3 million), a larger weighted average book balance and an increase in the LIBOR benchmark rate. For the nine months ended September 30, 2017, the weighted average debt and preferred equity investment balance outstanding and weighted average yield were $1.9 billion and 9.3% excluding our investment in Two Herald Square which was put on non-accrual in August 2017, respectively, compared to $1.5 billion and 9.8%, respectively, for the same period in 2016. As of September 30, 2017, the debt and preferred equity investments had a weighted average term to maturity of 2.3 years excluding extension options and our investment in Two Herald Square.
Other Income
Other income decreased primarily as a result of the termination fee earned in connection with the termination of the lease with Citigroup, Inc. at 388-390 Greenwich in 2016 ($94.0 million) and promote income earned in connection with the sale of 33 Beekman in the second quarter of 2016 ($10.8 million). The decrease was partially offset by net fees recognized in connection with the One Vanderbilt venture in 2017 ($10.8 million).
Property Operating Expenses
Property operating expenses decreased primarily as a result of Disposed Properties ($26.7 million) offset by increased real estate taxes at our Same-Store Properties ($8.0 million).
Transaction Related Costs
The decrease in transaction related costs in 2017 is primarily due to the adoption of ASU No. 2017-01 in 2017, which clarified the definition of a business and provided guidance to assist in determining whether transactions should be accounted for as acquisitions of assets or businesses. Following the adoption of the guidance, most of our real estate acquisitions are considered asset acquisitions and transaction costs are therefore capitalized to the investment basis when they would have previously been expensed under the previous guidance. Transaction costs expensed in 2017 related primarily to deals that are not moving forward for which any costs incurred are expensed.
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses for the nine months ended September 30, 2017 were $72.4 million, or 5.1% of total combined revenues, including our share of joint venture revenues, and annualized 52 basis points of total combined assets, including our share of joint venture assets compared to $74.0 million, or 4.4% of total revenues including our share of joint venture revenues, and 53 basis points of total assets including our share of joint venture assets for 2016.
Interest Expense and Amortization of Deferred Financing Costs, Net of Interest Income
Interest expense and amortization of deferred financing costs, net of interest income, decreased primarily as a result of the Disposed Properties ($64.5 million). The weighted average consolidated debt balance outstanding was $6.6 billion for the nine months ended September 30, 2017 compared to $9.1 billion for the nine months ended September 30, 2016. The consolidated weighted average interest rate was 4.02% for the nine months ended September 30, 2017 as compared to 3.79% for the nine months ended September 30, 2016.
Depreciation and Amortization
Depreciation and amortization decreased primarily as a result of the Disposed Properties ($440.5 million), partially offset
by accelerated amortization at 5-7 Dey Street, 183 & 187 Broadway upon the commencement of demolition of the properties ($39.9 million).
Equity in Net Income in Unconsolidated Joint Venture
Equity in net incomeloss from unconsolidated joint ventures increased primarily as a result of higher net income contributions from 1745 Broadwaydepreciation expense at One Vanderbilt Avenue ($6.47.8 million) in 2017,, partially offset by a reduced occupancyan increase in income from operations at 3 Columbus Circle1515 Broadway ($3.56.2 million).
Equity in Net Gainnet loss on Salesale of Interestinterest in Unconsolidated Joint Ventures/Real Estateunconsolidated joint venture/real estate
During the ninethree months ended September 30, 2017,March 31, 2022, we did not sell any joint venture interests or properties. During the three months ended March 31, 2021, we recognized a gainloss on sale related to our interests in 747 Madison Avenue ($13.0 million), part of our interest in the Stonehenge Portfolio ($0.9 million), and 102 Greene55 West 46th Street ($0.315.2 million). The sale of 747 Madison, which occurred in 2014,
Purchase price and other fair value adjustments
During the three months ended March 31, 2022, we did not meet the criteria for sale accounting at that timerecord any significant purchase price and therefore, remained on our consolidated financial statement until the criteria was met in the second quarter of 2017.other fair value adjustments. During the ninethree months ended September 30, 2016,March 31, 2021, we recognized a gain on the salerecorded $2.7 million of purchase price and other fair value adjustments related to our interests in 33 Beekman ($33.0 million), 7 Renaissance Square ($4.2 million), 1 Jericho ($3.3 million) and EOP Denver ($2.8 million).One Madison Avenue.
Gain (loss)Loss on sale of real estate, net
During the ninethree months ended September 30, 2017,March 31, 2022, we recognized a loss on the sale of 885 Thirdrelated to our interest in 707 Eleventh Avenue ($8.8 million) which closed in 2016, but was only recognized in the second quarter of 2017 due to the sale not meeting the criteria for sale accounting under the full accrual method in ASC 360-20 until the second quarter of 2017. This loss was partially offset by a gain on sale associated with the partial sale of the property at 102 Greene Street ($4.90.8 million). During the ninethree months ended September 30, 2016,March 31, 2021, we recognized gains on sale associated with the sale of the property at 388-390 Greenwich ($206.5 million) and 248-252 Bedford Avenue in Brooklyn, New York ($15.3 million), which were partially offset by the salea loss on sale related to our interest in 712 Madison Avenue ($1.4 million).
Depreciable Real Estate Reservesreal estate reserves and impairment
During the ninethree months ended September 30, 2017,March 31, 2022, we recorded a $85.3 million charge related to 125 Chubb Avenue in Lyndhurst, NJ, Stamford Towersdid not recognize any depreciable real estate reserves and 520 White Plains Road in Tarrytown, NY.impairment. During the ninethree months ended September 30, 2016,March 31, 2021, we recognized depreciable real estate reserves and impairments related to 500 West Putnam400 East 57th Street ($10.45.7 million) and 106 Spring Street ($2.7 million), offset by 133 Greene Street ($0.2 million).
Liquidity and Capital Resources
We currently expect that ourthe principal sources of funds to meet our short-term and long-term liquidity requirements for working capital, acquisitions, development or redevelopment of properties, tenant improvements, leasing costs, share repurchases, dividends to shareholders, distributions to unitholders, repurchases or repayments of outstanding indebtedness (which may include exchangeable debt) and for debt and preferred equity investments will include:
| |
(1) | Cash flow from operations; |
| |
(3) | Borrowings under the 2012 credit facility; |
| |
(4) | Other forms of secured or unsecured financing; |
| |
(5) | Net proceeds from divestitures of properties and redemptions, participations and dispositions of debt and preferred equity investments; and |
| |
(6) | Proceeds from common or preferred equity or debt offerings by the Company, the Operating Partnership (including issuances of units of limited partnership interest in the Operating Partnership and Trust preferred securities) or ROP. |
(1)Cash flow from operations;
(2)Cash on hand;
(3)Net proceeds from divestitures of properties and redemptions, participations, dispositions and repayments of debt and preferred equity investments;
(4)Borrowings under the revolving credit facility;
(5)Other forms of secured or unsecured financing; and
(6)Proceeds from common or preferred equity or debt offerings by the Company or the Operating Partnership (including issuances of units of limited partnership interest in the Operating Partnership and Trust preferred securities).
Cash flow from operations is primarily dependent upon the collectability of rent, the occupancy level of our portfolio, the net effective rental rates achieved on our leases, the collectability of rent, operating escalations and recoveries from our tenants and the level of operating and other costs. Additionally, we believe that our debt and preferred equity investment program will continue to serve as a source of operating cash flow.
The combined aggregate principal maturities of our property mortgages and other loans payable, corporate obligations andthe 2021 credit facility, senior unsecured notes (net of discount), trust preferred securities, our share of joint venture debt, including as-of-right extension options and put options, estimated interest expense, and our obligations under our financing and operating leases, as of September 30, 2017 areMarch 31, 2022 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Remaining 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total |
| Property mortgages and other loans | $ | 407,223 | | | $ | 56,640 | | | $ | 338,077 | | | $ | 873 | | | $ | 904 | | | $ | 580,332 | | | $ | 1,384,049 | |
| Revolving credit facility | — | | | — | | | — | | | — | | | 500,000 | | | — | | | 500,000 | |
| Unsecured term loans | — | | | — | | | 200,000 | | | — | | | — | | | 1,050,000 | | | 1,250,000 | |
| Senior unsecured notes | 800,000 | | | — | | | — | | | 100,000 | | | — | | | — | | | 900,000 | |
| Trust preferred securities | — | | | — | | | — | | | — | | | — | | | 100,000 | | | 100,000 | |
| Financing leases | 2,645 | | | 3,570 | | | 3,641 | | | 3,810 | | | 3,858 | | | 256,692 | | | 274,216 | |
| Operating leases | 27,960 | | | 48,680 | | | 54,545 | | | 54,772 | | | 54,911 | | | 1,395,533 | | | 1,636,401 | |
| Estimated interest expense | 94,851 | | | 116,214 | | | 111,418 | | | 88,476 | | | 70,216 | | | 45,307 | | | 526,482 | |
| Joint venture debt | 422,442 | | | 750,696 | | | 626,671 | | | 1,431,734 | | | 107,230 | | | 2,435,913 | | | 5,774,686 | |
| Total | $ | 1,755,121 | | | $ | 975,800 | | | $ | 1,334,352 | | | $ | 1,679,665 | | | $ | 737,119 | | | $ | 5,863,777 | | | $ | 12,345,834 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Remaining 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total |
| Property mortgages and other loans | $ | 12,846 |
| | $ | 170,108 |
| | $ | 59,618 |
| | $ | 720,958 |
| | $ | 30,418 |
| | $ | 2,666,471 |
| | $ | 3,660,419 |
|
| MRA and FHLB facilities | — |
| | 184,642 |
| | — |
| | — |
| | — |
| | — |
| | 184,642 |
|
Corporate obligations (1) | 269,000 |
| | 250,000 |
| | 1,183,000 |
| | 530,000 |
| | — |
| | 400,000 |
| | 2,632,000 |
|
| Joint venture debt-our share | 79,787 |
| | 242,799 |
| | 705,574 |
| | 320,914 |
| | 376,765 |
| | 1,465,371 |
| | 3,191,210 |
|
| Total | $ | 361,633 |
| | $ | 847,549 |
| | $ | 1,948,192 |
| | $ | 1,571,872 |
| | $ | 407,183 |
| | $ | 4,531,842 |
| | $ | 9,668,271 |
|
| |
(1) | The $269.0 million of 3.00% convertible notes which matured in October 2017 became exchangeable commencing September 14, 2017 and the Operating Partnership elected to settle exchanges in cash. In October 2017, all note holders elected to exchange the notes and the notes were repaid for $350.8 million. |
As of September 30, 2017,March 31, 2022, we had $270.3 millionliquidity of $1.1 billion, comprised of $0.8 billion of availability under our revolving credit facility and $0.3 billion of consolidated cash on hand, inclusive of $28.8$32.9 million of marketable securities. We expect to generate positiveThis liquidity excludes $150.2 million representing our share of cash flow from operations for the foreseeable future.at unconsolidated joint venture properties. We may seek to divest of properties, or interests in properties or debt and preferred equity investments or access private and public debt and equity capital when the opportunity presents itself, although there is no guarantee that this capital will be made available to us at efficient levels or at all. Management believes that these sources of liquidity, if we are able to access them, along with potential
refinancing opportunities for secured and unsecured debt, will allow us to satisfy our debt obligations, as described above, upon maturity, if not before.
We also have investments in several real estate joint ventures with various partners who we consider to be financially stable and who have the ability to fund a capital call when needed. Most of our joint ventures are financed with non-recourse debt. We believe that property level cash flows along with unfunded committed indebtedness and proceeds from the refinancing of outstanding secured indebtedness will be sufficient to fund the capital needs of our joint venture properties.
Cash Flows
The following summary discussion of our cash flows is based on our consolidated statements of cash flows in "Item 1. Financial Statements" and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.
Cash, restricted cash, and cash equivalents were $241.5$307.3 million and $405.9$401.6 million at September 30, 2017as of March 31, 2022 and 2016,2021, respectively, representing a decrease of $164.4$94.3 million. The decrease was a result of the following changes in cash flows (in thousands):
| | | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2017 | | 2016 | | Increase (Decrease) | | 2022 | | 2021 | | Change |
| Net cash provided by operating activities | $ | 416,621 |
| | $ | 508,792 |
| | $ | (92,171 | ) | Net cash provided by operating activities | $ | 81,402 | | | $ | 18,602 | | | $ | 62,800 | |
| Net cash (used in) provided by investing activities | $ | (101,041 | ) | | $ | 2,405,173 |
| | $ | (2,506,214 | ) | |
| Net cash provided by investing activities | | Net cash provided by investing activities | 13,496 | | | 20,181 | | | (6,685) | |
| Net cash used in financing activities | $ | (353,534 | ) | | $ | (2,763,468 | ) | | $ | 2,409,934 |
| Net cash used in financing activities | (124,564) | | | (9,971) | | | (114,593) | |
Cash is used in investing activities to fund acquisitions, development or redevelopment projects and recurring and nonrecurring capital expenditures. We selectively invest in new projects that enable us to take advantage of our development, leasing, financing and property management skills and invest in existing buildings that meet our investment criteria. During the ninethree months ended September 30, 2017,March 31, 2022, when compared to the ninethree months ended September 30, 2016,March 31, 2021, we used cash primarily for the following investing activities (in thousands):