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SLG SL Green Operating Partnership

Filed: 5 Nov 19, 9:50pm
0001040971 us-gaap:OperatingSegmentsMember slg:StructuredFinanceSegmentMember 2019-01-01 2019-09-30
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to                
Commission File Number: 1-13199 (SL Green Realty Corp.)
Commission File Number: 33-167793-02 (SL Green Operating Partnership, L.P.)
______________________________________________________________________
SL GREEN REALTY CORP.
SL GREEN OPERATING PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
______________________________________________________________________
SL Green Realty Corp.Maryland13-3956775
SL Green Operating Partnership, L.P.Delaware13-3960938
 
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
420 Lexington AvenueNew YorkNY 10170
(Address of principal executive offices—Zip Code)

(212594-2700
(Registrant's telephone number, including area code)
______________________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
SL Green Realty Corp.    Yes x    No o            SL Green Operating Partnership, L.P.    Yes x    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 
SL Green Realty Corp.     Yes x    No o            SL Green Operating Partnership, L.P.    Yes x    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
SL Green Realty Corp.
Large accelerated filerx Accelerated filer
Non-accelerated filer  
Smaller Reporting Company Emerging Growth Company
     
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
SL Green Operating Partnership, L.P.
Large accelerated filer Accelerated filer
Non-accelerated filerx  
Smaller Reporting Company Emerging Growth Company
     
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 
SL Green Realty Corp.    Yes     No x            SL Green Operating Partnership, L.P.    Yes     No x
Securities registered pursuant to Section 12(b) of the Act:
Registrant Trading Symbol Title of Each Class Name of Each Exchange on Which Registered
SL Green Realty Corp. SLG Common Stock, $0.01 par value New York Stock Exchange
SL Green Realty Corp. SLG.PRI 6.500% Series I Cumulative Redeemable Preferred Stock, $0.01 par value New York Stock Exchange
As of November 4, 2019, 80,110,275 shares of SL Green Realty Corp.'s common stock, par value $0.01 per share, were outstanding. As of November 4, 2019, 1,022,624 common units of limited partnership interest of SL Green Operating Partnership, L.P. were held by non-affiliates. There is no established trading market for such units.
 




EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2019 of SL Green Realty Corp. and SL Green Operating Partnership, L.P. Unless stated otherwise or the context otherwise requires, references to "SL Green Realty Corp.," the "Company" or "SL Green" mean SL Green Realty Corp. and its consolidated subsidiaries, including SL Green Operating Partnership, L.P.; and references to "SL Green Operating Partnership, L.P.," the "Operating Partnership" or "SLGOP" mean SL Green Operating Partnership, L.P. and its consolidated subsidiaries. The terms "we," "our" and "us" mean the Company and all the entities owned or controlled by the Company, including the Operating Partnership.
The Company is a Maryland corporation which operates as a self-administered and self-managed real estate investment trust, or REIT, and is the sole managing general partner of the Operating Partnership. As a general partner of the Operating Partnership, the Company has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership.
As of September 30, 2019 the Company owns 95.04% of the outstanding general and limited partnership interest in the Operating Partnership and owns 9,200,000 Series I Preferred Units of the Operating Partnership. As of September 30, 2019, noncontrolling investors held, in aggregate, a 4.96% limited partnership interest in the Operating Partnership. We refer to these interests as the noncontrolling interests in the Operating Partnership.
The Company and the Operating Partnership are managed and operated as one entity. The financial results of the Operating Partnership are consolidated into the financial statements of the Company. The Company has no significant assets other than its investment in the Operating Partnership. Substantially all of our assets are held by, and our operations are conducted through, the Operating Partnership. Therefore, the assets and liabilities of the Company and the Operating Partnership are substantially the same.
Noncontrolling interests in the Operating Partnership, stockholders' equity of the Company and partners' capital of the Operating Partnership are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The common limited partnership interests in the Operating Partnership not owned by the Company are accounted as noncontrolling interests, within mezzanine equity, in the Company's and the Operating Partnership's consolidated financial statements.
We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:
Combined reports enhance investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
Combined reports eliminate duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the Company's disclosure applies to both the Company and the Operating Partnership; and
Combined reports create time and cost efficiencies through the preparation of one combined report instead of two separate reports.
To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:
consolidated financial statements;
the following notes to the consolidated financial statements:
Note 11, Noncontrolling Interests on the Company’s Consolidated Financial Statements;
Note 12, Stockholders' Equity of the Company;
Note 13, Partners' Capital of the Operating Partnership.
This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Company and the Operating Partnership, respectively, in order to establish that the Chief Executive Officer and the Chief Financial Officer of the Company, in both their capacity as the principal executive officer and principal financial officer of the Company and the principal executive officer and principal financial officer of the general partner of the Operating Partnership, have made the requisite certifications and that the Company and the Operating Partnership are compliant with Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended.



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

PART I. FINANCIAL INFORMATION 
Item 1.FINANCIAL STATEMENTS
   
 FINANCIAL STATEMENTS OF SL GREEN REALTY CORP. 
 Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018
 Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (unaudited)
 Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018 (unaudited)
 Consolidated Statements of Equity for the three and nine months ended September 30, 2019 and 2018 (unaudited)
 Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)
   
 FINANCIAL STATEMENTS OF SL GREEN OPERATING PARTNERSHIP, L.P. 
 Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018
 Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (unaudited)
 Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018 (unaudited)
 Consolidated Statements of Capital for the three and nine months ended September 30, 2019 and 2018 (unaudited)
 Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)
 Notes to Consolidated Financial Statements (unaudited)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Controls and Procedures (SL Green Realty Corp. and SL Green Operating Partnership, L.P.)
PART II.OTHER INFORMATION 
Legal Proceedings
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Other Information
Exhibits
 Signatures



PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SL Green Realty Corp.
Consolidated Balance Sheets
(in thousands)
 September 30, 2019 December 31, 2018
 (unaudited)  
Assets   
Commercial real estate properties, at cost:   
Land and land interests 
$1,860,922
 $1,774,899
Building and improvements 
5,352,144
 5,268,484
Building leasehold and improvements 
1,431,183
 1,423,107
Right of use asset - financing leases47,445
 47,445
Right of use asset - operating leases396,795
 
 9,088,489
 8,513,935
Less: accumulated depreciation 
(2,147,395) (2,099,137)
 6,941,094
 6,414,798
Assets held for sale403,488
 
Cash and cash equivalents121,751
 129,475
Restricted cash94,793
 149,638
Investments in marketable securities30,208
 28,638
Tenant and other receivables44,950
 41,589
Related party receivables20,030
 28,033
Deferred rents receivable306,431
 335,985
Debt and preferred equity investments, net of discounts and deferred origination fees of $16,224 and $22,379 in 2019 and 2018, respectively, and allowances of $1,750 and $5,750 in 2019 and 2018, respectively.1,954,556
 2,099,393
Investments in unconsolidated joint ventures2,923,595
 3,019,020
Deferred costs, net182,621
 209,110
Other assets271,467
 295,679
Total assets (1)
$13,294,984
 $12,751,358
Liabilities   
Mortgages and other loans payable, net$2,417,161
 $1,961,240
Revolving credit facility, net328,549
 492,196
Unsecured term loans, net1,493,691
 1,493,051
Unsecured notes, net1,496,367
 1,495,214
Accrued interest payable27,568
 23,154
Other liabilities140,899
 116,566
Accounts payable and accrued expenses143,361
 147,060
Deferred revenue126,321
 94,453
Lease liability - financing leases44,251
 43,616
Lease liability - operating leases384,661
 3,603
Dividend and distributions payable78,541
 80,430
Security deposits62,166
 64,688
Junior subordinated deferrable interest debentures held by trusts that issued trust preferred securities100,000
 100,000
Total liabilities (1)
6,843,536
 6,115,271

4


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

 September 30, 2019 December 31, 2018
 (unaudited)  
Commitments and contingencies
 
Noncontrolling interests in Operating Partnership401,863
 387,805
Preferred units286,285
 300,427
    
Equity   
SL Green stockholders' equity:   
Series I Preferred Stock, $0.01 par value, $25.00 liquidation preference, 9,200 issued and outstanding at both September 30, 2019 and December 31, 2018221,932
 221,932
Common stock, $0.01 par value, 160,000 shares authorized and 82,570 and 84,739 issued and outstanding at September 30, 2019 and December 31, 2018, respectively (including 1,055 shares held in treasury at September 30, 2019 and December 31, 2018)826
 847
Additional paid-in-capital4,407,667
 4,508,685
Treasury stock at cost(124,049) (124,049)
Accumulated other comprehensive (loss) income(40,132) 15,108
Retained earnings1,225,904
 1,278,998
Total SL Green stockholders' equity5,692,148
 5,901,521
Noncontrolling interests in other partnerships71,152
 46,334
Total equity5,763,300
 5,947,855
Total liabilities and equity$13,294,984
 $12,751,358
    
(1) The Company's consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs"). See Note 2. The consolidated balance sheets include the following amounts related to our consolidated VIEs, excluding the Operating Partnership: $219.4 million and $110.0 million of land, $522.9 million and $346.7 million of building and improvements, $2.0 million and $2.0 million of building and leasehold improvements, $61.7 million and $47.4 million of right of use assets, $27.6 million and $42.2 million of accumulated depreciation, $99.4 million and $112.6 million of other assets included in other line items, $473.2 million and $140.8 million of real estate debt, net, $1.4 million and $0.4 million of accrued interest payable, $57.4 million and $43.6 million of lease liabilities, and $35.7 million and $18.3 million of other liabilities included in other line items as of September 30, 2019 and December 31, 2018, respectively.


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

5


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


  Three Months Ended September 30, Nine Months Ended September 30,
  2019 2018 2019 2018
Revenues        
Rental revenue, net $248,028
 $250,866
 $733,105
 $731,055
Investment income 51,518
 48,977
 153,167
 143,540
Other income 14,088
 7,702
 44,641
 35,761
Total revenues 313,634
 307,545
 930,913
 910,356
Expenses 
   
  
Operating expenses, including related party expenses of $5,460 and $13,575 in 2019 and $4,790 and $13,289 in 2018 59,847
 56,852
 175,862
 172,871
Real estate taxes 49,626
 48,805
 143,008
 139,788
Operating lease rent 8,295
 9,507
 24,891
 26,661
Interest expense, net of interest income 48,112
 55,168
 145,797
 156,695
Amortization of deferred financing costs 3,112
 2,630
 8,566
 9,713
Depreciation and amortization 70,464
 70,747
 208,268
 208,049
Loan loss and other investment reserves, net of recoveries 
 1,087
 
 1,087
Transaction related costs 44
 163
 360
 673
Marketing, general and administrative 23,841
 20,594
 75,300
 66,601
Total expenses 263,341
 265,553
 782,052
 782,138

 

 

 

 

Equity in net (loss) income from unconsolidated joint ventures (9,864) 971
 (22,644) 9,709
Equity in net gain on sale of interest in unconsolidated joint venture/real estate 
 70,937
 76,181
 136,522
Purchase price and other fair value adjustments 3,799
 (3,057) 69,389
 57,385
Gain (loss) on sale of real estate, net 3,541
 (2,504) 2,492
 6,227
Depreciable real estate reserves and impairment (7,047) (6,691) (7,047) (6,691)
Loss on early extinguishment of debt 
 (2,194) 
 (2,194)
Net income 40,722
 99,454
 267,232
 329,176
Net (income) loss attributable to noncontrolling interests:        
Noncontrolling interests in the Operating Partnership
(1,719) (4,797) (12,306) (15,656)
Noncontrolling interests in other partnerships
624
 136
 2,524
 (234)
Preferred units distributions
(2,732) (2,846) (8,185) (8,542)
Net income attributable to SL Green 36,895
 91,947
 249,265
 304,744
Perpetual preferred stock dividends (3,738) (3,738) (11,213) (11,213)
Net income attributable to SL Green common stockholders $33,157
 $88,209
 $238,052
 $293,531
         
Basic Earnings per Share $0.40
 $1.03
 $2.87
 $3.34
Diluted Earnings per Share $0.40
 $1.03
 $2.87
 $3.34
         
Basic weighted average common shares outstanding 82,292
 85,566
 82,855
 87,692
Diluted weighted average common shares and common share equivalents outstanding 86,714
 90,428
 87,309
 92,580
The accompanying notes are an integral part of these consolidated financial statements.

6


SL Green Realty Corp.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)

  Three Months Ended September 30, Nine Months Ended September 30,
  2019 2018 2019 2018
Net income
$40,722
 $99,454
 $267,232
 $329,176
Other comprehensive (loss) income:

   
  
(Decrease) increase in unrealized value of derivative instruments, including SL Green's share of joint venture derivative instruments
(12,574) 3,919
 (59,680) 18,809
Increase (decrease) in unrealized value of marketable securities
230
 (32) 1,571
 (39)
Other comprehensive (loss) income
(12,344) 3,887
 (58,109) 18,770
Comprehensive income
28,378
 103,341
 209,123
 347,946
Net income attributable to noncontrolling interests and preferred units distributions
(3,827) (7,507) (17,967) (24,432)
Other comprehensive loss (income) attributable to noncontrolling interests
607
 (210) 2,869
 (1,075)
Comprehensive income attributable to SL Green
$25,158
 $95,624
 $194,025
 $322,439


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


7


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


 SL Green Realty Corp. Stockholders  
    Common Stock         


  Series I
Preferred
Stock
 Shares Par
Value
 Additional
Paid-
In-Capital
 Treasury
Stock
 Accumulated
Other
Comprehensive Income (Loss)
 Retained
Earnings
 Noncontrolling
Interests
 Total
Balance at December 31, 2018 $221,932
 83,684
 $847
 $4,508,685
 $(124,049) $15,108
 $1,278,998
 $46,334
 $5,947,855
Net income             212,370
 (1,900) 210,470
Acquisition of subsidiary interest from noncontrolling interest       (515)       (25,276) (25,791)
Other comprehensive loss           (43,503)     (43,503)
Preferred dividends             (7,475)   (7,475)
DRSPP proceeds   3
   263
         263
Conversion of units in the Operating Partnership for common stock   5
   446
         446
Reallocation of noncontrolling interest in the Operating Partnership             (14,028)   (14,028)
Deferred compensation plan and stock awards, net of forfeitures and tax withholdings   (17)   10,533
         10,533
Repurchases of common stock   (1,265) (12) (68,203)     (41,098)   (109,313)
Contributions to consolidated joint venture interests               50,692
 50,692
Cash distributions to noncontrolling interests               (271) (271)
Cash distributions declared ($1.70 per common share, none of which represented a return of capital for federal income tax purposes)             (140,377)   (140,377)
Balance at June 30, 2019 $221,932
 82,410
 $835
 $4,451,209
 $(124,049) $(28,395) $1,288,390
 $69,579
 $5,879,501
Net income             36,895
 (624) 36,271
Acquisition of subsidiary interest from noncontrolling interest       (54)       
 (54)
Other comprehensive loss           (11,737)     (11,737)
Preferred dividends             (3,738)   (3,738)
DRSPP proceeds   
   39
         39
Conversion of units in the Operating Partnership for common stock   
   25
         25
Reallocation of noncontrolling interest in the Operating Partnership             (1,481)   (1,481)
Deferred compensation plan and stock awards, net of forfeitures and tax withholdings   21
   5,948
         5,948
Repurchases of common stock   (916) (9) (49,500)     (25,022)   (74,531)
Contributions to consolidated joint venture interests               2,404
 2,404
Cash distributions to noncontrolling interests               (207) (207)
Cash distributions declared ($0.85 per common share, none of which represented a return of capital for federal income tax purposes)             (69,140)   (69,140)
Balance at September 30, 2019 $221,932
 81,515
 $826
 $4,407,667
 $(124,049) $(40,132) $1,225,904
 $71,152
 $5,763,300

8


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


 SL Green Realty Corp. Stockholders  
    Common Stock          
  Series I
Preferred
Stock
 Shares Par
Value
 Additional
Paid-
In-Capital
 Treasury
Stock
 Accumulated
Other
Comprehensive Income (Loss)
 Retained
Earnings
 Noncontrolling
Interests
 Total
Balance at December 31, 2017 $221,932
 92,803
 $939
 $4,968,338
 $(124,049) $18,604
 $1,139,329
 $364,361
 $6,589,454
Cumulative adjustment upon adoption of ASC 610-20             570,524
   570,524
Balance at January 1, 2018 $221,932
 92,803
 $939
 $4,968,338
 $(124,049) $18,604
 $1,709,853
 $364,361
 $7,159,978
Net income             212,797
 371
 213,168
Other comprehensive income           14,018
     14,018
Preferred dividends             (7,475)   (7,475)
DRSPP proceeds   1
   64
         64
Conversion of units in the Operating Partnership for common stock   15
 

 1,560
         1,560
Reallocation of noncontrolling interest in the Operating Partnership             (4,493)   (4,493)
Deferred compensation plan and stock awards, net of forfeitures and tax withholdings   (20)   8,090
         8,090
Repurchases of common stock   (7,133) (72) (382,080)     (310,939)   (693,091)
Proceeds from stock options exercised   59
 1
 5,636
         5,637
Contributions to consolidated joint venture interests               1,828
 1,828
Deconsolidation of partially owned entity               (314,596) (314,596)
Cash distributions to noncontrolling interests               (724) (724)
Cash distributions declared ($1.625 per common share, none of which represented a return of capital for federal income tax purposes)             (141,908)   (141,908)
Balance at June 30, 2018 $221,932
 85,725
 $868
 $4,601,608
 $(124,049) $32,622
 $1,457,835
 $51,240
 $6,242,056
Net income             91,947
 (136) 91,811
Other comprehensive income           3,677
     3,677
Preferred dividends             (3,738)   (3,738)
DRSPP proceeds   
   52
         52
Conversion of units in the Operating Partnership for common stock   
 

 
         
Reallocation of noncontrolling interest in the Operating Partnership             11,941
   11,941
Deferred compensation plan and stock awards, net of forfeitures and tax withholdings   13
   4,634
         4,634
Repurchases of common stock   (253) (2) (13,579)     (11,655)   (25,236)
Proceeds from stock options exercised   109
 1
 9,935
         9,936
Contributions to consolidated joint venture interests               3,072
 3,072
Deconsolidation of partially owned entity               (520) (520)
Cash distributions to noncontrolling interests               (1,139) (1,139)
Cash distributions declared ($0.8125 per common share, none of which represented a return of capital for federal income tax purposes)             (69,371)   (69,371)
Balance at September 30, 2018 $221,932
 85,594
 $867
 $4,602,650
 $(124,049) $36,299
 $1,476,959
 $52,517
 $6,267,175

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

9


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


 Nine Months Ended September 30,
 2019 2018
Operating Activities   
Net income$267,232
 $329,176
Adjustments to reconcile net income to net cash provided by operating activities:
 
Depreciation and amortization216,834
 217,762
Equity in net loss (income) from unconsolidated joint ventures22,644
 (9,709)
Distributions of cumulative earnings from unconsolidated joint ventures648
 10,174
Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate(76,181) (136,522)
Purchase price and other fair value adjustments(69,389) (57,385)
Depreciable real estate reserves and impairment7,047
 6,691
Gain on sale of real estate, net(2,492) (6,227)
Loan loss reserves and other investment reserves, net of recoveries
 1,087
Loss on early extinguishment of debt
 2,194
Deferred rents receivable(10,005) (11,328)
Other non-cash adjustments(9,573) 8,907
Changes in operating assets and liabilities:
  
Tenant and other receivables(7,564) 3,186
Related party receivables8,921
 5,186
Deferred lease costs(38,542) (31,828)
Other assets(47,139) (52,172)
Accounts payable, accrued expenses, other liabilities and security deposits18,737
 20,715
Deferred revenue and land leases payable18,255
 17,638
Net cash provided by operating activities299,433

317,545
Investing Activities   
Acquisitions of real estate property(261,596) (40,279)
Additions to land, buildings and improvements(150,742) (163,750)
Acquisition deposits and deferred purchase price(228) 
Investments in unconsolidated joint ventures(114,050) (298,836)
Distributions in excess of cumulative earnings from unconsolidated joint ventures62,576
 208,724
Net proceeds from disposition of real estate/joint venture interest138,948
 892,350
Other investments(2,491) 991
Origination of debt and preferred equity investments(555,951) (652,309)
Repayments or redemption of debt and preferred equity investments642,634
 553,341
Net cash (used in) provided by investing activities(240,900) 500,232

10


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

 Nine Months Ended September 30,
 2019 2018
Financing Activities   
Proceeds from mortgages and other loans payable$699,072
 $339,125
Repayments of mortgages and other loans payable(162,024) (351,080)
Proceeds from revolving credit facility and senior unsecured notes1,090,000
 2,205,000
Repayments of revolving credit facility and senior unsecured notes(1,255,000) (2,000,000)
Proceeds from stock options exercised and DRSPP issuance302
 15,689
Repurchase of common stock(175,005) (760,073)
Redemption of preferred units(15,142) (350)
Redemption of OP units(15,918) 
Distributions to noncontrolling interests in other partnerships(478) (1,863)
Contributions from noncontrolling interests in other partnerships4,873
 4,900
Acquisition of subsidiary interest from noncontrolling interest(25,791) 
Distributions to noncontrolling interests in the Operating Partnership(10,993) (11,469)
Dividends paid on common and preferred stock(230,804) (237,007)
Other obligations related to loan participations
 16
Tax withholdings related to restricted share awards(3,126) (3,842)
Deferred loan costs and capitalized lease obligation(21,068) (8,257)
Net cash used in financing activities(121,102) (809,211)
Net (decrease) increase in cash, cash equivalents, and restricted cash(62,569) 8,566
Cash, cash equivalents, and restricted cash at beginning of year279,113
 250,026
Cash, cash equivalents, and restricted cash at end of period$216,544
 $258,592
   
Supplemental Disclosure of Non-Cash Investing and Financing Activities:   
Conversion of units in the Operating Partnership for common stock$471
 $1,560
Redemption of units in the Operating Partnership for the sale of a joint venture
 10,445
Issuance of preferred units relating to a real estate acquisition1,000
 
Tenant improvements and capital expenditures payable10,040
 16,246
Fair value adjustment to noncontrolling interest in Operating Partnership15,509
 7,448
Deconsolidation of subsidiaries395
 298,391
Transfer of assets related to assets held for sale403,488
 734,008
Transfer of liabilities related to assets held for sale
 310,496
Removal of fully depreciated commercial real estate properties6,602
 115,320
Contribution to consolidated joint venture by noncontrolling interest48,223
 
Share repurchase payable8,839
 41,746
Recognition of right of use assets and related lease liabilities389,120
 
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,
 2019 2018
Cash and cash equivalents$121,751
 $160,248
Restricted cash94,793
 98,344
Total cash, cash equivalents, and restricted cash$216,544
 $258,592
The accompanying notes are an integral part of these consolidated financial statements.


11

SL Green Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands)


 September 30, 2019 December 31, 2018
 (unaudited)  
Assets   
Commercial real estate properties, at cost:   
Land and land interests 
$1,860,922
 $1,774,899
Building and improvements 
5,352,144
 5,268,484
Building leasehold and improvements 
1,431,183
 1,423,107
Right of use asset - financing leases47,445
 47,445
Right of use asset - operating leases396,795
 
 9,088,489
 8,513,935
Less: accumulated depreciation 
(2,147,395) (2,099,137)
 6,941,094
 6,414,798
Assets held for sale403,488
 
Cash and cash equivalents121,751
 129,475
Restricted cash94,793
 149,638
Investments in marketable securities30,208
 28,638
Tenant and other receivables44,950
 41,589
Related party receivables20,030
 28,033
Deferred rents receivable306,431
 335,985
Debt and preferred equity investments, net of discounts and deferred origination fees of $16,224 and $22,379 in 2019 and 2018, respectively, and allowances of $1,750 and $5,750 in 2019 and 2018, respectively.1,954,556
 2,099,393
Investments in unconsolidated joint ventures2,923,595
 3,019,020
Deferred costs, net182,621
 209,110
Other assets271,467
 295,679
Total assets (1)
$13,294,984
 $12,751,358
Liabilities   
Mortgages and other loans payable, net$2,417,161
 $1,961,240
Revolving credit facility, net328,549
 492,196
Unsecured term loans, net1,493,691
 1,493,051
Unsecured notes, net1,496,367
 1,495,214
Accrued interest payable27,568
 23,154
Other liabilities140,899
 116,566
Accounts payable and accrued expenses143,361
 147,060
Deferred revenue126,321
 94,453
Lease liability - financing leases44,251
 43,616
Lease liability - operating leases384,661
 3,603
Dividend and distributions payable78,541
 80,430
Security deposits62,166
 64,688
Junior subordinated deferrable interest debentures held by trusts that issued trust preferred securities100,000
 100,000
Total liabilities (1)
6,843,536
 6,115,271
Commitments and contingencies
 
Limited partner interests in SLGOP (4,258 and 4,131 limited partner common units outstanding at September 30, 2019 and December 31, 2018, respectively)401,863
 387,805
Preferred units286,285
 300,427

12

SL Green Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands)


 September 30, 2019 December 31, 2018
 (unaudited)  
Capital   
SLGOP partners' capital:   
Series I Preferred Units, $25.00 liquidation preference, 9,200 issued and outstanding at both September 30, 2019 and December 31, 2018221,932
 221,932
SL Green partners' capital (858 and 878 general partner common units and 80,657 and 82,806 limited partner common units outstanding at September 30, 2019 and December 31, 2018, respectively)5,510,348
 5,664,481
Accumulated other comprehensive (loss) income(40,132) 15,108
Total SLGOP partners' capital5,692,148
 5,901,521
Noncontrolling interests in other partnerships71,152
 46,334
Total capital5,763,300
 5,947,855
Total liabilities and capital$13,294,984
 $12,751,358
    
(1) The Company's consolidated balance sheets include assets and liabilities of consolidated variable interest entities ("VIEs"). See Note 2. The consolidated balance sheets include the following amounts related to our consolidated VIEs, excluding the Operating Partnership: $219.4 million and $110.0 million of land, $522.9 million and $346.7 million of building and improvements, $2.0 million and $2.0 million of building and leasehold improvements, $61.7 million and $47.4 million of right of use assets, $27.6 million and $42.2 million of accumulated depreciation, $99.4 million and $112.6 million of other assets included in other line items, $473.2 million and $140.8 million of real estate debt, net, $1.4 million and $0.4 million of accrued interest payable, $57.4 million and $43.6 million of lease liabilities, and $35.7 million and $18.3 million of other liabilities included in other line items as of September 30, 2019 and December 31, 2018, respectively.


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

13


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



  Three Months Ended September 30, Nine Months Ended September 30,
  2019
2018 2019 2018
Revenues        
Rental revenue, net $248,028
 $250,866
 $733,105
 $731,055
Investment income 51,518
 48,977
 153,167
 143,540
Other income 14,088
 7,702
 44,641
 35,761
Total revenues 313,634
 307,545
 930,913
 910,356
Expenses 
   
  
Operating expenses, including related party expenses of $5,460 and $13,575 in 2019 and $4,790 and $13,289 in 2018 59,847
 56,852
 175,862
 172,871
Real estate taxes 49,626
 48,805
 143,008
 139,788
Operating lease rent 8,295
 9,507
 24,891
 26,661
Interest expense, net of interest income 48,112
 55,168
 145,797
 156,695
Amortization of deferred financing costs 3,112
 2,630
 8,566
 9,713
Depreciation and amortization 70,464
 70,747
 208,268
 208,049
Loan loss and other investment reserves, net of recoveries 
 1,087
 
 1,087
Transaction related costs 44
 163
 360
 673
Marketing, general and administrative 23,841
 20,594
 75,300
 66,601
Total expenses 263,341
 265,553
 782,052
 782,138
         
Equity in net (loss) income from unconsolidated joint ventures (9,864) 971
 (22,644) 9,709
Equity in net gain on sale of interest in unconsolidated joint venture/real estate 
 70,937
 76,181
 136,522
Purchase price and other fair value adjustments 3,799
 (3,057) 69,389
 57,385
Gain (loss) on sale of real estate, net 3,541
 (2,504) 2,492
 6,227
Depreciable real estate reserves and impairment (7,047) (6,691) (7,047) (6,691)
Loss on early extinguishment of debt 
 (2,194) 
 (2,194)
Net income 40,722
 99,454
 267,232
 329,176
Net loss (income) attributable to noncontrolling interests:        
Noncontrolling interests in other partnerships 624
 136
 2,524
 (234)
Preferred units distributions (2,732) (2,846) (8,185) (8,542)
Net income attributable to SLGOP 38,614
 96,744
 261,571
 320,400
Perpetual preferred unit distributions (3,738) (3,738) (11,213) (11,213)
Net income attributable to SLGOP common unitholders $34,876
 $93,006
 $250,358
 $309,187
         
Basic Earnings per Unit $0.40
 $1.03
 $2.87
 $3.34
Diluted Earnings per Unit $0.40
 $1.03
 $2.87
 $3.34
         
Basic weighted average common units outstanding 86,550
 90,209
 87,138
 92,369
Diluted weighted average common units and common unit equivalents outstanding 86,714
 90,428
 87,309
 92,580


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

14


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

  Three Months Ended September 30, Nine Months Ended September 30,
  2019
2018 2019 2018
Net income $40,722
 $99,454
 $267,232
 $329,176
Other comprehensive (loss) income:        
(Decrease) increase in unrealized value of derivative instruments, including SL Green's share of joint venture derivative instruments (12,574) 3,919
 (59,680) 18,809
Increase (decrease) in unrealized value of marketable securities 230
 (32) 1,571
 (39)
Other comprehensive (loss) income (12,344) 3,887
 (58,109) 18,770
Comprehensive income 28,378
 103,341
 209,123
 347,946
Net loss (income) attributable to noncontrolling interests 624
 136
 2,524
 (234)
Other comprehensive loss (income) attributable to noncontrolling interests 607
 (210) 2,869
 (1,075)
Comprehensive income attributable to SLGOP $29,609
 $103,267
 $214,516
 $346,637


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


15


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



  SL Green Operating Partnership Unitholders    
    Partners' Interest      
  
Series I
Preferred
Units
 
Common
Units
 
Common
Unitholders
 Accumulated
Other
Comprehensive Income (Loss)
 Noncontrolling
Interests
 Total
Balance at December 31, 2018 $221,932
 83,684
 $5,664,481
 $15,108
 $46,334
 $5,947,855
Net income     212,370
   (1,900) 210,470
Acquisition of subsidiary interest from noncontrolling interest     (515)   (25,276) (25,791)
Other comprehensive loss       (43,503) 

 (43,503)
Preferred distributions     (7,475)     (7,475)
DRSPP proceeds   3
 263
     263
Conversion of common units   5
 446
     446
Reallocation of noncontrolling interests in the operating partnership     (14,028)     (14,028)
Deferred compensation plan and stock awards, net of forfeitures and tax withholdings   (17) 10,533
     10,533
Repurchases of common stock   (1,265) (109,313)     (109,313)
Contribution to consolidated joint venture interests         50,692
 50,692
Cash distributions to noncontrolling interests         (271) (271)
Cash distributions declared ($1.70 per common unit, none of which represented a return of capital for federal income tax purposes)     (140,377)     (140,377)
Balance at June 30, 2019 $221,932
 82,410
 $5,616,385
 $(28,395) $69,579
 $5,879,501
Net income     36,895
   (624) 36,271
Acquisition of subsidiary interest from noncontrolling interest     (54)   
 (54)
Other comprehensive loss       (11,737)   (11,737)
Preferred distributions     (3,738)     (3,738)
DRSPP proceeds   
 39
     39
Conversion of common units   
 25
     25
Reallocation of noncontrolling interests in the operating partnership     (1,481)     (1,481)
Deferred compensation plan and stock awards, net of forfeitures and tax withholdings   21
 5,948
     5,948
Repurchases of common stock   (916) (74,531)     (74,531)
Contribution to consolidated joint venture interests         2,404
 2,404
Cash distributions to noncontrolling interests         (207) (207)
Cash distributions declared ($0.85 per common unit, none of which represented a return of capital for federal income tax purposes)     (69,140)     (69,140)
Balance at September 30, 2019 $221,932
 81,515
 $5,510,348
 $(40,132) $71,152
 $5,763,300
   

16


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



  SL Green Operating Partnership Unitholders    
    Partners' Interest      
  
Series I
Preferred
Units
 
Common
Units
 
Common
Unitholders
 Accumulated
Other
Comprehensive Income (Loss)
 Noncontrolling
Interests
 Total
Balance at December 31, 2017 $221,932
 92,803
 $5,984,557
 $18,604
 $364,361
 $6,589,454
Cumulative adjustment upon adoption of ASC 610-20     570,524
     570,524
Balance at January 1, 2018 $221,932
 92,803
 $6,555,081
 $18,604
 $364,361
 $7,159,978
Net income     212,797
   371
 213,168
Other comprehensive income       14,018
   14,018
Preferred distributions     (7,475)     (7,475)
DRSPP proceeds   1
 64
     64
Conversion of common units   15
 1,560
     1,560
Reallocation of noncontrolling interests in the operating partnership     (4,493)     (4,493)
Deferred compensation plan and stock awards, net of forfeitures and tax withholdings   (20) 8,090
     8,090
Repurchases of common stock   (7,133) (693,091)     (693,091)
Contribution to consolidated joint venture interests         1,828
 1,828
Deconsolidation of partially owned entity         (314,596) (314,596)
Contributions - proceeds from stock options exercised   59
 5,637
     5,637
Cash distributions to noncontrolling interests         (724) (724)
Cash distributions declared ($1.625 per common unit, none of which represented a return of capital for federal income tax purposes)     (141,908)     (141,908)
Balance at June 30, 2018 $221,932
 85,725
 $5,936,262
 $32,622
 $51,240
 $6,242,056
Net income     91,947
   (136) 91,811
Other comprehensive income       3,677
   3,677
Preferred distributions     (3,738)     (3,738)
DRSPP proceeds   
 52
     52
Conversion of common units   
 
     
Reallocation of noncontrolling interests in the operating partnership     11,941
     11,941
Deferred compensation plan and stock awards, net of forfeitures and tax withholdings   13
 4,634
     4,634
Repurchases of common stock   (253) (25,236)     (25,236)
Contribution to consolidated joint venture interests         3,072
 3,072
Deconsolidation of partially owned entity         (520) (520)
Contributions - proceeds from stock options exercised   109
 9,936
     9,936
Cash distributions to noncontrolling interests         (1,139) (1,139)
Cash distributions declared ($0.8125 per common unit, none of which represented a return of capital for federal income tax purposes)     (69,371)     (69,371)
Balance at September 30, 2018 $221,932
 85,594
 $5,956,427
 $36,299
 $52,517
 $6,267,175


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


17


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



 Nine Months Ended September 30,
 2019
2018
Operating Activities   
Net income$267,232
 $329,176
Adjustments to reconcile net income to net cash provided by operating activities:
  
Depreciation and amortization216,834
 217,762
Equity in net loss (income) from unconsolidated joint ventures22,644
 (9,709)
Distributions of cumulative earnings from unconsolidated joint ventures648
 10,174
Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate(76,181) (136,522)
Purchase price and other fair value adjustments(69,389) (57,385)
Depreciable real estate reserves and impairment7,047
 6,691
Gain on sale of real estate, net(2,492) (6,227)
Loan loss reserves and other investment reserves, net of recoveries
 1,087
Loss on early extinguishment of debt
 2,194
Deferred rents receivable(10,005) (11,328)
Other non-cash adjustments(9,573) 8,907
Changes in operating assets and liabilities:
  
Tenant and other receivables(7,564) 3,186
Related party receivables8,921
 5,186
Deferred lease costs(38,542) (31,828)
Other assets(47,139) (52,172)
Accounts payable, accrued expenses, other liabilities and security deposits18,737
 20,715
Deferred revenue and land leases payable18,255
 17,638
Net cash provided by operating activities299,433
 317,545
Investing Activities
  
Acquisitions of real estate property(261,596) (40,279)
Additions to land, buildings and improvements(150,742) (163,750)
Acquisition deposits and deferred purchase price(228) 
Investments in unconsolidated joint ventures(114,050) (298,836)
Distributions in excess of cumulative earnings from unconsolidated joint ventures62,576
 208,724
Net proceeds from disposition of real estate/joint venture interest138,948
 892,350
Other investments(2,491) 991
Origination of debt and preferred equity investments(555,951) (652,309)
Repayments or redemption of debt and preferred equity investments642,634
 553,341
Net cash (used in) provided by investing activities(240,900) 500,232
    

18


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


 Nine Months Ended September 30,
 2019
2018
Financing Activities   
Proceeds from mortgages and other loans payable$699,072
 $339,125
Repayments of mortgages and other loans payable(162,024) (351,080)
Proceeds from revolving credit facility and senior unsecured notes1,090,000
 2,205,000
Repayments of revolving credit facility and senior unsecured notes(1,255,000) (2,000,000)
Proceeds from stock options exercised and DRSPP issuance302
 15,689
Repurchase of common stock(175,005) (760,073)
Redemption of preferred units(15,142) (350)
Redemption of OP units(15,918) 
Distributions to noncontrolling interests in other partnerships(478) (1,863)
Contributions from noncontrolling interests in other partnerships4,873
 4,900
Acquisition of subsidiary interest from noncontrolling interest(25,791) 
Distributions paid on common and preferred units(241,797) (248,476)
Other obligations related to loan participations
 16
Tax withholdings related to restricted share awards(3,126)
(3,842)
Deferred loan costs and capitalized lease obligation(21,068) (8,257)
Net cash used in financing activities(121,102) (809,211)
Net (decrease) increase in cash, cash equivalents, and restricted cash(62,569) 8,566
Cash, cash equivalents, and restricted cash at beginning of year279,113
 250,026
Cash, cash equivalents, and restricted cash at end of period$216,544
 $258,592
    
Supplemental Disclosure of Non-Cash Investing and Financing Activities:   
Conversion of units in the Operating Partnership for common stock$471
 $1,560
Redemption of units in the Operating Partnership for the sale of a joint venture
 10,445
Issuance of preferred units relating to a real estate acquisition1,000
 
Tenant improvements and capital expenditures payable10,040
 16,246
Fair value adjustment to noncontrolling interest in Operating Partnership15,509
 7,448
Deconsolidation of subsidiaries395
 298,391
Transfer of assets related to assets held for sale403,488
 734,008
Transfer of liabilities related to assets held for sale
 310,496
Removal of fully depreciated commercial real estate properties6,602
 115,320
Contribution to consolidated joint venture by noncontrolling interest48,223
 
Share repurchase payable8,839
 41,746
Recognition of right of use assets and related lease liabilities389,120
 
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,
 2019 2018
Cash and cash equivalents$121,751
 $160,248
Restricted cash94,793
 98,344
Total cash, cash equivalents, and restricted cash$216,544
 $258,592
    
The accompanying notes are an integral part of these consolidated financial statements.

19


SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements
September 30, 2019
(unaudited)

1. Organization and Basis of Presentation
SL Green Realty Corp., which is referred to as the Company or SL Green, a Maryland corporation, and SL Green Operating Partnership, L.P., which is referred to as SLGOP or the Operating Partnership, a Delaware limited partnership, were formed in June 1997 for the purpose of combining the commercial real estate business of S.L. Green Properties, Inc. and its affiliated partnerships and entities. The Operating Partnership received a contribution of interest in the real estate properties, as well as 95% of the economic interest in the management, leasing and construction companies which are referred to as the Service Corporation. 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 which is 100% owned by the Operating Partnership. The Company has qualified, and expects to qualify in the current fiscal year, as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Code, and operates as a self-administered, self-managed REIT. A REIT is a legal entity that holds real estate interests and, through payments of dividends to stockholders, is permitted to minimize the payment of Federal income taxes at the corporate level. Unless the context requires otherwise, all references to "we," "our" and "us" means the Company and all entities owned or controlled by the Company, including the Operating Partnership.
Substantially all of our assets are held by, and 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, 2019, noncontrolling investors held, in the aggregate, a 4.96% 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."
As of September 30, 2019, 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:

20

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

   
 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 20

12,387,091
 10
 11,216,183
 30
 23,603,274
 94.2%

 Retail 6
(2)320,430
 8
 289,050
 14
 609,480
 98.9%

 Development/Redevelopment 6

870,173
 1
 
 7
 870,173
 77.5%

 Fee Interest 


 1
 
 1
 
 %

 
 32

13,577,694
 20
 11,505,233
 52
 25,082,927
 93.8%
Suburban Office 13

2,295,200
 
 
 13
 2,295,200
 89.4%

 Retail 1

52,000
 
 
 1
 52,000
 100.0%

 Development/Redevelopment 1

1,000
 
 
 1
 1,000
 %

 
 15

2,348,200
 
 
 15
 2,348,200
 89.6%
Total commercial properties 47

15,925,894
 20
 11,505,233
 67
 27,431,127
 93.4%
Residential: 
 


 
 
 
 
 
Manhattan Residential 2
(2)445,105
 8
 1,663,774
 10
 2,108,879
 95.0%
Suburban Residential 


 
 
 
 
 %
Total residential properties 2

445,105
 8
 1,663,774
 10
 2,108,879
 95.0%
Total portfolio 49

16,370,999
 28
 13,169,007
 77
 29,540,006
 93.5%
   
(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.
(2)As of September 30, 2019, 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.
As of September 30, 2019, we also managed 2 office buildings owned by third parties encompassing approximately 2.1 million square feet (unaudited), and held debt and preferred equity investments with a book value of $2.0 billion, including $0.1 billion of debt and preferred equity investments and other financing receivables that are included in balance sheet line items other than the Debt and Preferred 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. 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-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, 2019 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, 2019. 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, 2018 of the Company and the Operating Partnership.

21

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

The consolidated balance sheet at December 31, 2018 has been derived from the audited financial statements as of that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
2. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include our accounts and those of our subsidiaries, which are wholly-owned or controlled by us. Entities which we do not control through our voting interest and entities which are variable interest entities, but where we are not the primary beneficiary, are accounted for under the equity method. 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 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
We allocate the purchase price of real estate to land and building (inclusive of tenant improvements) and, if determined to be material, intangibles, such as the value of above- and below-market leases and origination costs associated with the in-place leases. We depreciate the amount allocated to building (inclusive of tenant improvements) over their estimated useful lives, which generally range from three to 40 years. We amortize the amount allocated to the above- and below-market leases over the remaining term of the associated lease, which generally range from one to 14 years, and record it as either an increase (in the case of below-market leases) or a decrease (in the case of above-market leases) to rental income. We amortize the amount allocated to the values associated with in-place leases over the expected term of the associated lease, which generally ranges from one to 14 years. If a tenant vacates its space prior to the contractual termination of the lease and no rental payments are being made on the lease, any unamortized balance of the related intangible will be written off. The tenant improvements and origination costs are amortized as an expense over the remaining life of the lease (or charged against earnings if the lease is terminated prior to its contractual expiration date). We assess fair value of the leases based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. To the extent acquired leases contain fixed rate renewal options that are below-market and determined to be material, we amortize such below-market lease value into rental income over the renewal period.
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 statements of operations, operating leases are expensed through operating lease rent while financing leases are expensed through amortization and interest expense. On the balance sheet, financing leases include the amounts previously captioned "Properties under capital lease." 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.
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 calculated fair value of the property. 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.

22

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

We recognized $1.2 million and $3.6 million of rental revenue for the three and nine months ended September 30, 2019, respectively, and $1.3 million and $5.5 million of rental revenue for the three and nine months ended September 30, 2018, respectively, for the amortization of aggregate below-market leases in excess of above-market leases.
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, 2019 and December 31, 2018 (in thousands):
 September 30, 2019 December 31, 2018
Identified intangible assets (included in other assets):   
Gross amount$278,192
 $266,540
Accumulated amortization(248,111) (241,040)
Net(1)
$30,081
 $25,500
Identified intangible liabilities (included in deferred revenue):   
Gross amount$304,998
 $276,245
Accumulated amortization(267,429) (253,767)
Net(1)
$37,569
 $22,478

(1)As of September 30, 2019, and December 31, 2018, no net intangible assets and no net intangible liabilities, were reclassified to assets held for sale and liabilities related to assets held for sale.
Fair Value Measurements
See Note 16, "Fair Value Measurements."
Investment in Marketable Securities
At acquisition, we designate a security as held-to-maturity, available-for-sale, or trading. As of September 30, 2019, we did not have any 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. The cost of marketable securities sold and the amount reclassified out of accumulated other comprehensive income into earnings is determined using the specific identification method. Any unrealized losses that are determined to be other-than-temporary are recognized in earnings up to their credit component.
At September 30, 2019 and December 31, 2018, we held the following marketable securities (in thousands):
 September 30, 2019 December 31, 2018
Commercial mortgage-backed securities$30,208
 $28,638
Total marketable securities available-for-sale$30,208
 $28,638

The cost basis of the commercial mortgage-backed securities was $27.5 million at both September 30, 2019 and December 31, 2018. These securities mature at various times through 2035. We held 0 equity marketable securities as of September 30, 2019 and December 31, 2018.
During the three months ended September 30, 2019 and the nine months ended September 30, 2019, we did not dispose of any marketable securities. During the three months ended September 30, 2018 and the nine months ended September 30, 2018, we did not dispose of any marketable securities.
Investments in Unconsolidated Joint Ventures
We assess our investments in unconsolidated joint ventures for recoverability and if it is determined that a loss in value of the investment is other than temporary, we write down the investment to its fair value. We evaluate our equity investments for impairment based on the joint ventures' projected discounted cash flows. We do not believe that the values of any of our equity investments were impaired at September 30, 2019.
Deferred 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.

23

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

Lease Classification
Lease classification for leases 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 substantially ready for its intended use.
To determine whether the leased space is substantially ready for its intended use, management evaluates whether we are or the tenant is the owner of tenant improvements for accounting purposes. When management concludes that we are the owner of tenant improvements, rental revenue recognition begins when the tenant takes possession of the finished space, which is when such tenant improvements are substantially complete. In certain instances, when management concludes that we are not the owner of tenant improvements, rental revenue recognition begins when the tenant takes possession of or controls the space.
When management concludes that we are the owner of tenant improvements for accounting purposes, we record amounts funded to construct the tenant improvements as a capital asset. For these tenant improvements, we record amounts reimbursed by tenants as a reduction of the capital asset. When management concludes that the tenant is the owner of tenant improvements for accounting purposes, we record our contribution towards those improvements as a lease incentive, which is included in deferred costs, net on our consolidated balance sheets and amortized as a reduction to rental revenue on a straight-line basis over the term of the lease.
The excess of rents recognized over amounts contractually due pursuant to the underlying leases are included in deferred rents receivable on the consolidated balance sheets.
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 operating expenses for the building over a base year. In some leases, in lieu of paying additional rent based upon increases in building operating expenses, the tenant will pay additional rent based upon increases in the wage rate paid to porters over the porters' wage rate in effect during a base year or increases in the consumer price index over the index value in effect during a base year. In addition, many of our leases contain fixed percentage increases over the base rent to cover escalations. Electricity is most often supplied by the landlord either on a sub-metered basis, or rent inclusion basis (i.e., a fixed fee is included in the rent for electricity, which amount may increase based upon increases in electricity rates or increases in electrical usage by the tenant). Base building services other than electricity (such as heat, air conditioning and freight elevator service during business hours, and base building cleaning) are typically provided at no additional cost, with the tenant paying additional rent only for services which exceed base building services or for services which are provided outside normal business hours. These escalations are based on actual expenses incurred in the prior calendar year. If the expenses in the current year are different from those in the prior year, then during the current year, the escalations will be adjusted to reflect the actual expenses for the current year.
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 nonlease 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 on sale of real estate assets when we no longer hold a controlling financial interest in the entity holding 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, in the opinion of management, 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

24

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

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.
Debt and preferred equity investments are placed on a non-accrual status at the earlier of the date at which payments become 90 days past due or when, in the opinion of management, a full recovery of interest income becomes doubtful. Interest income recognition on any non-accrual debt or preferred equity investment is resumed when such non-accrual debt or preferred equity investment becomes contractually current and performance is demonstrated to be resumed. Interest is recorded as income on impaired loans only to the extent cash is received.
We may syndicate a portion of the loans that we originate or sell 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.
Allowance for Loan Loss and Other Investment Reserves
The expense for loan loss and other investment reserves in connection with debt and preferred equity investments is the charge to earnings to adjust the allowance for possible losses to the level that we estimate to be adequate, based on Level 3 data, considering delinquencies, loss experience and collateral quality.
The Company evaluates debt and preferred equity investments that are classified as held to maturity for possible impairment or 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. Quarterly, the Company assigns each loan a risk rating. Based on a 3-point scale, loans are rated “1” through “3,” from less risk to greater 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.
When it is probable that we will be unable to collect all amounts contractually due, the investment is considered impaired. A valuation allowance is measured based upon the excess of the carrying value of the investment over the fair value of the collateral. Any deficiency between the carrying value of an asset and the calculated value of the collateral is charged to expense. We continue to assess or adjust our estimates based on circumstances of a loan and the underlying collateral. If additional information reflects increased recovery of our investment, we will adjust our reserves accordingly.
Debt and preferred equity investments that are classified as held for sale are carried at the lower of cost or fair market value using available market information obtained through consultation with dealers or other originators of such investments as well as discounted cash flow models based on Level 3 data pursuant to ASC 820-10. As circumstances change, management may conclude not to sell an investment designated as held for sale. In such situations, the investment will be reclassified at its net carrying value to debt and preferred equity investments held to maturity. For these reclassified investments, the difference between the current carrying value and the expected cash to be collected at maturity will be accreted into income over the remaining term of the investment.

25

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

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 its 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 its undistributed taxable income.
The Operating Partnership is a partnership and, as a result, all income and losses of the partnership are allocated to the partners for inclusion in their respective income tax returns. The only provision for income taxes included in the consolidated statements of 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.
We have elected, and may elect in the future, to treat certain of our 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.
During the three and nine months ended September 30, 2019, we recorded a Federal, state and local tax benefit of $1.0 million and a provision of $0.5 million, respectively. During the three and nine months ended September 30, 2018, we recorded Federal, state and local tax provisions of $0.3 million and $2.0 million, respectively.
We follow a two-step approach for evaluating uncertain tax positions. Recognition (step one) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that is more-likely-than-not to be realized upon settlement. Derecognition of a tax position that was previously recognized would occur when a company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained. The use of a valuation allowance as a substitute for derecognition of tax positions is prohibited.
On December 22, 2017, the Tax Cuts and Jobs Act (the ‘‘Tax Act’’) was signed into law and makes substantial changes to the Code. The Tax Act did not have a material impact on our financial statements.
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.

26

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash investments, debt and preferred equity investments and accounts receivable. We place our cash investments with high quality financial institutions. The collateral securing our debt and preferred equity investments is located in the New York metropolitan area. See Note 5, "Debt and Preferred Equity Investments."
We perform ongoing credit evaluations of our tenants and require most tenants to provide security deposits or letters of credit. Though these security deposits and letters of credit are insufficient to meet the total value of a tenant's lease obligation, they are a measure of good faith and a source of funds to offset the economic costs associated with lost revenue and the costs associated with re-tenanting a space. The properties in our real estate portfolio are located in the New York metropolitan area. The tenants located in our buildings operate in various industries. Other than 1 tenant, Credit Suisse Securities (USA), Inc., who accounts for 8.1% of our share of annualized cash rent, 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 rent, at September 30, 2019.
For the three months ended September 30, 2019, the following properties contributed more than 5.0% of our annualized cash rent, including our share of joint venture annualized cash rent:
PropertyThree months ended September 30, 2019
1185 Avenue of the Americas7.2%
11 Madison Avenue7.0%
420 Lexington Avenue6.2%
1515 Broadway5.8%
One Madison Avenue5.7%
220 East 42nd Street5.2%

Annualized cash rent for each of our other consolidated properties was below 5.0%.
Reclassification
Certain prior year balances have been reclassified to conform to our current year presentation.
Accounting Standards Updates
In August 2018, the FASB issued Accounting Standard Update, or ASU, No. 2018-15, Intangibles - Goodwill and Other- Internal-Use Software (Topic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendments provide guidance on accounting for fees paid when the arrangement includes a software license and align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs to develop or obtain internal-use software. The guidance is effective for the Company for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company has not yet adopted this new guidance and does not expect it to have a material impact on the Company’s consolidated financial statements when the new standard is implemented.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This amendment removed, modified and added the disclosure requirements under Topic 820. The changes are effective for the Company for fiscal years beginning after December 15, 2019. Early adoption is permitted for the removed or modified disclosures with adoption of the additional disclosures upon the effective date. The Company has not yet adopted this new guidance and does not expect it to have a material impact on the Company’s consolidated financial statements when the new standard is implemented.
In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This amendment provides additional guidance related to share-based payment transactions for acquiring goods or services from nonemployees. The Company adopted this guidance on January 1, 2019 and it did not have a material impact on the Company’s consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities; in July 2018, the FASB issued ASU No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes; and in May 2019, issued ASU No. 2019-05, Codification Improvements. The amendments in the

27

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

new standards will permit more flexibility in hedging interest rate risk for both variable rate and fixed rate financial instruments. The standards will also enhance the presentation of hedge results in the financial statements. The guidance is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company adopted this guidance on January 1, 2019, and it did not have a material 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; in November 2018 issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, and in April and May 2019, issued ASU No. 2019-04 and 2019-05, which provide codification improvements and targeted transition relief. 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 guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted after December 15, 2018. The Company’s DPE portfolio and financing lease assets will be subject to this guidance once the Company adopts it. ASU No. 2018-19 excludes operating lease receivables from the scope of this guidance. The Company continues to evaluate the impact of adopting this new accounting standard on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases. In July 2018, the FASB issued ASU No. 2018-10 - Codification Improvements to Topic 842, Leases, and ASU No. 2018-11 - Targeted Improvements. In December 2018, the FASB issued ASU No. 2018-20 - Narrow-Scope Improvements for Lessors and in March 2019 issued ASU No. 2019-01 - Codification Improvements. The Company adopted this guidance on January 1, 2019 using the modified retrospective approach which allows the Company to apply the guidance for the current year presentation and not adjust the prior year numbers. The Company elected the package of practical expedients that allows an entity to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases and (iii) initial direct costs for any expired or existing leases. The new guidance applies to the ground leases under which the Company is a lessee. The Company has recognized a new asset and liability - “Right of use asset - operating leases” and “Lease liability - operating leases” - for those leases classified as operating leases under the previous standard. The Company will continue to recognize expense on a straight-line basis for these operating leases. The ground leases that the Company historically reported as “Properties under capital leases” and “Capitalized lease obligations” are now labeled “Right of use asset - financing leases” and “Lease liability - financing leases”. The expense recognition of these leases has not changed. The Company adopted the practical expedient offered in ASU No. 2018-11 that allows lessors to not separate non-lease components from the related lease components under certain conditions. In doing so, the Company has collapsed the line “Escalation and reimbursement revenues” into the “Rental revenue, net” line to reflect adopting this practical expedient. The Company also collapsed the prior year balances to conform to the current year presentation. For future leases, the Company no longer capitalizes internal leasing costs that are not incremental as defined under the new guidance. The Company has recorded additional expense of approximately $2.2 million and $6.6 million related to this change for the three and nine months ended September 30, 2019, respectively.
3. Property Acquisitions
The following table summarizes the properties acquired during the nine months ended September 30, 2019:
Property Acquisition Date Property Type Approximate Square Feet 
Gross Asset Valuation
(in millions)
106 Spring Street(1)
 April 2019 Fee Interest 5,928 $80.2
460 West 34th Street(2)
 May 2019 Fee Interest 638,000 440.0
110 Greene Street(3)
 May 2019 Fee Interest 223,600 256.5
(1)In April 2019, the Company accepted an assignment of the equity interests in the property in lieu of repayment of the Company's debt investment and marked the assets received and liabilities assumed to fair value.
(2)In May 2019, the Company closed on the acquisition of a majority and controlling 70.87% interest in 460 West 34th Street. We recorded the assets acquired and liabilities assumed at fair value, which resulted in the recognition of a fair value adjustment of $67.6 million, which is reflected in the Company's consolidated statement of operations within purchase price and other fair value adjustments, and $18.3 million of net intangible lease liabilities.
(3)In May 2019, the Company acquired from our joint venture partner the remaining 10% interest in this property that the Company did not already own.

28

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

4. Properties Held for Sale and Property Dispositions
Properties Held for Sale
During the three months ended September 30, 2019, we entered into agreements to sell 220 East 42nd Street in Manhattan and 1010 Washington Boulevard in Stamford, Connecticut for total consideration of $815.0 million and $23.1 million, respectively. The sale of 1010 Washington Boulevard closed in November. The sale of 220 East 42nd Street is expected to close in the first quarter of 2020.
As of September 30, 2019, 220 East 42nd Street and 1010 Washington Boulevard were classified as held for sale. During the third quarter of 2019, the Company recorded a charge of $7.0 million in connection with the reclassification of 1010 Washington Boulevard to held for sale. This charge is included in depreciable real estate reserves and impairment in the consolidated statements of operations.
Property Dispositions
The following table summarizes the properties sold during the nine months ended September 30, 2019:
Property Disposition Date Property Type Approximate Square Feet 
Sales Price(1)
(in millions)
 
Gain (loss)
(in millions)
115 Spring Street (2)
 August 2019 Fee Interest 5,218
 $66.6
 $3.6
(1)Sales price represents the gross sales price for a property or the gross asset valuation for interests in a property.
(2)The Company sold a 49% interest, which resulted in the deconsolidation of our remaining 51% interest. We recorded our investment at fair value which resulted in the recognition of a fair value adjustment of $3.8 million, which is reflected in the Company's consolidated statements of operations within purchase price and other fair value adjustments. See Note 6, "Investments in Unconsolidated Joint Ventures."
5. Debt and Preferred Equity Investments
Below is a summary of the activity relating to our debt and preferred equity investments for the nine months ended September 30, 2019 and the twelve months ended December 31, 2018 (in thousands):
 September 30, 2019 December 31, 2018
Balance at beginning of year (1)
$2,099,393
 $2,114,041
Debt investment originations/accretion (2)
573,786
 834,304
Preferred equity investment originations/accretion (2)
10,969
 151,704
Redemptions/sales/syndications/amortization (3)
(733,592) (994,906)
Net change in loan loss reserves4,000
 (5,750)
Balance at end of period (1)
$1,954,556
 $2,099,393
(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.
The following table is a rollforward of our total loan loss reserves for the nine months ended September 30, 2019 and the twelve months ended December 31, 2018 (in thousands):
 September 30, 2019 December 31, 2018
Balance at beginning of year$5,750
 $
Expensed
 6,839
Recoveries
 
Charge-offs and reclassifications(4,000) (1,089)
Balance at end of period$1,750
 $5,750

At September 30, 2019, all debt and preferred equity investments were performing in accordance with their respective terms, with the exception of 3 investments with carrying values of $29.0 million, $30.0 million and $41.6 million, as discussed in subnotes 5 and 6 of the Debt Investments table below. The investment with a carrying value of $41.6 million was repaid in October 2019. At December 31, 2018, all debt and preferred equity investments were performing in accordance with their respective terms.

29

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

At September 30, 2019, the Company's loan loss reserves of $1.8 million were attributable to 1 investment with an unpaid principal balance of $145.4 million that is being marketed for sale, but is otherwise performing in accordance with its respective terms, and was not put on nonaccrual.
We have determined that we have 1 portfolio segment of financing receivables at September 30, 2019 and December 31, 2018 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 $89.8 million and $88.8 million at September 30, 2019 and December 31, 2018, respectively. NaN financing receivables were 90 days past due at September 30, 2019 and December 31, 2018 with the exception of a $28.4 million financing receivable which was put on nonaccrual in August 2018 as a result of interest default. The loan was evaluated in accordance with our loan review procedures and the Company concluded that the fair value of the collateral exceeded the carrying amount of the loan.
As of September 30, 2019, management estimated the weighted average risk rating for our debt and preferred equity investments to be 1.2.
Debt Investments
As of September 30, 2019 and December 31, 2018, we held the following debt investments with an aggregate weighted average current yield of 8.89% at September 30, 2019 (dollars in thousands):
Loan Type September 30, 2019
Future Funding
Obligations
 September 30, 2019 Senior
Financing
 
September 30, 2019
Carrying Value
(1)
 
December 31, 2018
Carrying Value
(1)
 
Maturity
Date
(2)
Fixed Rate Investments:          
Mezzanine Loan(3a)
 $
 $1,160,000
 $220,321
 $213,185
 March 2020
Mezzanine Loan 
 15,000
 3,500
 3,500
 September 2021
Mezzanine Loan 
 147,000
 24,946
 24,932
 April 2022
Mezzanine Loan 
 280,000
 38,177
 36,585
 August 2022
Mezzanine Loan 
 323,003
 211,105
 
 June 2023
Mezzanine Loan 
 84,207
 12,712
 12,706
 November 2023
Mezzanine Loan 
 180,000
 30,000
 30,000
 December 2023
Mezzanine Loan(3b)
 
 115,000
 12,948
 12,941
 June 2024
Mezzanine Loan 
 95,000
 30,000
 30,000
 January 2025
Mezzanine Loan 
 1,712,750
 55,250
 55,250
 June 2027
Mezzanine Loan(4)
 
 
 
 11,000
  
Total fixed rate $
 $4,111,960
 $638,959
 $430,099
  
Floating Rate Investments:          
Mezzanine Loan(5)
 
 142,000
 30,000
 15,333
 May 2019
Mezzanine Loan(5)
 
 
 29,000
 14,822
 May 2019
Mortgage/Mezzanine Loan(6)
 
 
 41,631
 154,070
 September 2019
Mezzanine Loan(7)
 
 350,000
 34,999
 34,886
 October 2019
Mortgage/Mezzanine Loan 5,598
 37,291
 92,185
 62,493
 January 2020
Mezzanine Loan 1
 579,997
 94,730
 79,164
 January 2020
Mortgage Loan 6,987
 
 92,922
 88,501
 February 2020
Mortgage/Mezzanine Loan 
 
 69,661
 
 March 2020
Mezzanine Loan 51
 329,673
 54,832
 53,402
 March 2020
Mezzanine Loan 
 40,000
 19,999
 19,986
 April 2020
Mezzanine Loan 5,664
 44,812
 14,886
 12,627
 July 2020
Mortgage/Mezzanine Loan 
 
 19,958
 19,999
 August 2020
Mortgage/Mezzanine Loan 
 64,070
 55,349
 83,449
 October 2020
Mezzanine Loan 28,834
 402,237
 98,960
 88,817
 November 2020

30

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

Loan Type September 30, 2019
Future Funding
Obligations
 September 30, 2019 Senior
Financing
 
September 30, 2019
Carrying Value
(1)
 
December 31, 2018
Carrying Value
(1)
 
Maturity
Date
(2)
Mortgage and Mezzanine Loan 
 
 35,355
 35,266
 December 2020
Mortgage/Mezzanine Loan 25,504
 
 194,545
 277,694
 April 2021
Mezzanine Loan 9,750
 275,000
 40,023
 24,961
 April 2021
Jr. Mortgage Participation/Mezzanine Loan 
 60,000
 15,689
 15,665
 July 2021
Mezzanine Loan 13,978
 147,626
 40,364
 
 July 2021
Mortgage/Jr. Mortgage Participation Loan 
 
 
 84,012
  
Mortgage/Mezzanine Loan 
 
 
 37,094
  
Mortgage and Mezzanine Loan 
 
 
 98,804
  
Mezzanine Loan 
 
 
 7,305
  
Mezzanine Loan 
 
 
 14,998
  
Mezzanine Loan 
 
 
 21,990
  
Mezzanine Loan(8)
 
 
 
 37,499
  
Total floating rate $96,367
 $2,472,706
 $1,075,088
 $1,382,837
  
Total $96,367
 $6,584,666
 $1,714,047
 $1,812,936
  
(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)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) $1.3 million and (b) $12.0 million.
(4)This loan was sold in 2019.
(5)This loan is in maturity default. No impairment was recorded as the Company believes that the fair value of the property exceeded the carrying amount of the loans.
(6)This loan was in maturity default as of September 30, 2019, but was repaid in October 2019.
(7)This loan was repaid in October 2019.
(8)In 2019, the Company accepted an assignment of the equity interests in the property in lieu of repayment, and marked the assets received and liabilities assumed to fair value.

Preferred Equity Investments
As of September 30, 2019 and December 31, 2018, we held the following preferred equity investments with an aggregate weighted average current yield of 9.51% at September 30, 2019 (dollars in thousands):
Type September 30, 2019
Future Funding
Obligations
 September 30, 2019 Senior
Financing
 
September 30, 2019
Carrying Value
(1)
 
December 31, 2018
Carrying Value
(1)
 
Mandatory Redemption (2)
Preferred Equity $
 $272,000
 $143,614
 $143,183
 April 2021
Preferred Equity 
 1,763,271
 96,895
 143,274
 June 2022
Total $
 $2,035,271
 $240,509
 $286,457
  
(1)Carrying value is net of deferred origination fees.
(2)Represents contractual maturity, excluding any unexercised extension options.
6. Investments in Unconsolidated Joint Ventures
We have investments in several real estate joint ventures with various partners. As of September 30, 2019, the book value of these investments was $2.9 billion, net of investments with negative book values totaling $82.1 million for which we have an implicit commitment to fund future capital needs.

31

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

As of September 30, 2019 and December 31, 2018, 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 $876.9 million and $808.3 million as of September 30, 2019 and December 31, 2018, 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, 2019:
PropertyPartner
Ownership
Interest
(1)
Economic
Interest
(1)
Unaudited Approximate Square Feet
100 Park AvenuePrudential Real Estate Investors49.90%49.90%834,000
717 Fifth AvenueJeff Sutton/Private Investor10.92%10.92%119,500
800 Third AvenuePrivate Investors60.52%60.52%526,000
919 Third Avenue(2)
New York State Teacher's Retirement System51.00%51.00%1,454,000
11 West 34th StreetPrivate Investor/Jeff Sutton30.00%30.00%17,150
280 Park AvenueVornado Realty Trust50.00%50.00%1,219,158
1552-1560 Broadway(3)
Jeff Sutton50.00%50.00%57,718
10 East 53rd StreetCanadian Pension Plan Investment Board55.00%55.00%354,300
21 East 66th Street(4)
Private Investors32.28%32.28%13,069
650 Fifth Avenue(5)
Jeff Sutton50.00%50.00%69,214
121 Greene StreetJeff Sutton50.00%50.00%7,131
55 West 46th StreetPrudential Real Estate Investors25.00%25.00%347,000
Stonehenge Portfolio(6)
VariousVariousVarious1,439,016
605 West 42nd StreetThe Moinian Group20.00%20.00%927,358
11 Madison AvenuePGIM Real Estate60.00%60.00%2,314,000
333 East 22nd StreetPrivate Investors33.33%33.33%26,926
400 East 57th Street(7)
BlackRock, Inc and Stonehenge Partners51.00%41.00%290,482
One VanderbiltNational Pension Service of Korea/Hines Interest LP71.01%71.01%
Worldwide PlazaRXR Realty / New York REIT / Private Investor24.35%24.35%2,048,725
1515 BroadwayAllianz Real Estate of America56.87%56.87%1,750,000
2 Herald SquareIsraeli Institutional Investor51.00%51.00%369,000
115 Spring StreetPrivate Investor51.00%51.00%5,218
(1)Ownership interest and economic interest represent the Company's interests in the joint venture as of September 30, 2019. Changes in ownership or economic interests within the current year are disclosed in the notes below.
(2)In January 2018, the partnership agreement for our investment was modified resulting in the Company no longer having a controlling interest in this investment. As a result, the investment was deconsolidated as of January 1, 2018. We recorded our non-controlling interest at fair value resulting in a $49.3 million fair value adjustment in the consolidated statement of operations. This fair value was allocated to the assets and liabilities, including identified intangibles, of the joint venture.
(3)The acquisition 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.
(4)We hold a 32.28% interest in 3 retail and 2 residential units at the property and a 16.14% interest in 3 residential units at the property.
(5)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.
(6)We, together with our joint venture partner, closed on the sale of 1 property from the Stonehenge Portfolio in February 2019 and another property in May 2019. These sales are further described under Sale of Joint Venture Interest of Properties below.
(7)In October 2016, we sold a 49% interest in this property. Our 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. Our joint venture with Stonehenge remains consolidated resulting in the combined 51% interest being shown within investments in unconsolidated joint ventures on our balance sheet.

32

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

Acquisition, Development 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 accounted for these debt and preferred equity investments under the equity method. As of September 30, 2019 and December 31, 2018, the carrying value for acquisition, development and construction arrangements were as follows (dollars in thousands):
Loan Type September 30, 2019 December 31, 2018 Maturity Date
Mezzanine Loan 
 44,357
 February 2022
  $
 $44,357
  

Disposition of Joint Venture Interests or Properties
The following table summarizes the investments in unconsolidated joint ventures sold during the nine months ended September 30, 2019:
Property Ownership Interest Disposition Date 
Gross Asset Valuation
(in thousands)(1)
 
Gain (Loss)
on Sale
(in thousands)(2)
131-137 Spring Street 20.00% January 2019 $216,000
 $17,660
521 Fifth Avenue 50.50% May 2019 381,000
 57,874
Stonehenge Portfolio (partial) Various Various 468,800
 (2,408)
(1)Represents implied gross valuation for the joint venture or sales price of the property.
(2)Represents the Company's share of the gain (loss). Gain (loss) amounts do not include adjustments for expenses recorded in subsequent periods.
Joint Venture Mortgages and Other Loans Payable
We generally finance our joint ventures with non-recourse debt. In certain cases we may 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, 2019 and December 31, 2018, respectively, are as follows (dollars in thousands):
Property 
Economic
Interest
(1)
 Maturity Date 
Interest
Rate (2)
 September 30, 2019 December 31, 2018
Fixed Rate Debt:           
717 Fifth Avenue (mortgage) 10.92% July 2022  4.45% $300,000
 $300,000
717 Fifth Avenue (mezzanine) 10.92% July 2022  5.50% 355,328
 355,328
650 Fifth Avenue (mortgage) 50.00% October 2022  4.46% 210,000
 210,000
650 Fifth Avenue (mezzanine) 50.00% October 2022  5.45% 65,000
 65,000
21 East 66th Street 32.28% April 2023  3.60% 12,000
 12,000
919 Third Avenue 51.00% June 2023  5.12% 500,000
 500,000
1515 Broadway 56.87% March 2025  3.93% 842,966
 855,876
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% 98,265
 99,828
Worldwide Plaza 24.35% November 2027  3.98% 1,200,000
 1,200,000
Stonehenge Portfolio (3)
 Various
 Various  3.50% 196,112
 321,076
521 Fifth Avenue (4)
        
 170,000
Total fixed rate debt        $5,356,671
 $5,666,108


33

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

Property 
Economic
Interest
(1)
 Maturity Date 
Interest
Rate (2)
 September 30, 2019 December 31, 2018
Floating Rate Debt:           
121 Greene Street 50.00% November 2019 L+1.50% $15,000
 $15,000
10 East 53rd Street 55.00% February 2020 L+2.25% 170,000
 170,000
280 Park Avenue 50.00% September 2020 L+1.73% 1,200,000
 1,200,000
1552 Broadway 50.00% October 2020 L+2.65% 195,000
 195,000
11 West 34th Street 30.00% January 2021 L+1.45% 23,000
 23,000
100 Park Avenue 49.90% February 2021 L+1.75% 357,897
 360,000
One Vanderbilt (5)
 71.01% September 2021 L+2.75% 619,258
 375,000
2 Herald Square 51.00% November 2021 L+1.55% 150,000
 133,565
55 West 46th Street (6)
 25.00% August 2022 L+1.25% 192,524
 185,569
115 Spring Street 51.00% September 2023 L+3.40% 65,550
 
605 West 42nd Street 20.00% August 2027 L+1.44% 550,000
 550,000
21 East 66th Street 32.28% June 2033 1 Year Treasury+2.75% 1,515
 1,571
131-137 Spring Street (7)
        
 141,000
103 East 86th Street (8)
        
 38,000
Total floating rate debt        $3,539,744
 $3,387,705
Total joint venture mortgages and other loans payable    $8,896,415
 $9,053,813
Deferred financing costs, net        (97,400) (103,191)
Total joint venture mortgages and other loans payable, net    $8,799,015
 $8,950,622

(1)Economic interest represents the Company's interests in the joint venture as of September 30, 2019. Changes in ownership or economic interests, if any, within the current year are disclosed in the notes to the investment in unconsolidated joint ventures table above.
(2)Interest rates as of September 30, 2019, taking into account interest rate hedges in effect during the period. Floating rate debt is presented with the stated interest rate spread over 30-day LIBOR, unless otherwise specified.
(3)Amount is comprised of $132.6 million and $63.5 million in fixed-rate mortgages that mature in April 2028 and July 2029, respectively.
(4)In May 2019, we, along with our joint venture partner, closed on the sale of the property.
(5)
This loan is a $1.75 billion construction facility with reductions in interest cost based on meeting certain conditions and has an initial five-year term with 2 one-year extension options. Advances under the loan are subject to incurred costs, funded equity, loan to value thresholds, and entering into construction contracts.
(6)In August 2019, this loan was refinanced with a new $192.5 million mortgage loan which carries a floating interest rate of 125 basis points over 30-day LIBOR. This loan has a committed amount of $198.0 million, of which $5.5 million was unfunded as of September 30, 2019.
(7)In January 2019, we closed on the sale of our interest in the property.
(8)In February 2019, we, along with our joint venture partner, closed on the sale of the property.

We are entitled to receive fees for providing management, leasing, construction supervision and asset management services to certain of our joint ventures. We earned $2.4 million and $8.8 million from these services, net of our ownership share of the joint ventures, for the three and nine months ended September 30, 2019, respectively. We earned $2.4 million and $9.3 million from these services, net of our ownership share of the joint ventures, for the three and nine months ended September 30, 2018, respectively. In addition, we have the ability to earn incentive fees based on the ultimate financial performance of certain of the joint venture properties.

34

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

The combined balance sheets for the unconsolidated joint ventures, at September 30, 2019 and December 31, 2018 are as follows (in thousands):
 September 30, 2019 December 31, 2018
Assets (1)
   
Commercial real estate property, net$14,280,158
 $14,347,673
Cash and restricted cash299,699
 381,301
Tenant and other receivables, related party receivables, and deferred rents receivable360,394
 273,141
Debt and preferred equity investments, net
 44,357
Other assets2,084,421
 2,187,166
Total assets$17,024,672
 $17,233,638
Liabilities and equity (1)
   
Mortgages and other loans payable, net$8,799,015
 $8,950,622
Deferred revenue/gain1,535,067
 1,660,838
Lease liabilities898,996
 637,168
Other liabilities300,576
 309,145
Equity5,491,018
 5,675,865
Total liabilities and equity$17,024,672
 $17,233,638
Company's investments in unconsolidated joint ventures$2,923,595
 $3,019,020

(1)The combined assets, liabilities and equity for the unconsolidated joint ventures reflects the effect of step ups in basis on the retained non-controlling interests in deconsolidated investments as a result of the adoption of ASC 610-20 in January 2018.
The combined statements of operations for the unconsolidated joint ventures, from acquisition date through the three and nine months ended September 30, 2019 and 2018, are as follows (in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Total revenues$286,010
 $304,869
 $883,977
 $940,005
Operating expenses50,759
 56,304
 153,397
 166,433
Operating lease rent6,713
 4,397
 18,848
 13,247
Real estate taxes53,321
 56,747
 159,544
 169,612
Interest expense, net of interest income92,601
 88,328
 282,917
 269,717
Amortization of deferred financing costs4,436
 4,446
 14,434
 16,912
Depreciation and amortization100,736
 101,538
 308,748
 318,113
Total expenses308,566
 311,760
 937,888
 954,034
Loss on early extinguishment of debt(1,031) 
 (1,031) 
Net loss before gain on sale (1)
$(23,587) $(6,891) $(54,942) $(14,029)
Company's equity in net (loss) income from unconsolidated joint ventures (1)
$(9,864) $971
 $(22,644) $9,709

(1)The combined statements of operations and the Company's equity in net (loss) income for the unconsolidated joint ventures reflects the effect of step ups in basis on the retained non-controlling interests in deconsolidated investments as a result of the adoption of ASC 610-20 in January 2018.
7. Deferred Costs
Deferred costs at September 30, 2019 and December 31, 2018 consisted of the following (in thousands):
 September 30, 2019 December 31, 2018
Deferred leasing costs$445,489
 $453,833
Less: accumulated amortization(262,868) (244,723)
Deferred costs, net$182,621
 $209,110


35

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

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, 2019 and December 31, 2018, respectively, were as follows (dollars in thousands):
Property 
Maturity
Date
 
Interest
Rate (1)
 September 30, 2019 December 31, 2018
Fixed Rate Debt:         
762 Madison Avenue February 2022  5.00% 771
 771
100 Church Street July 2022  4.68% 210,382
 213,208
420 Lexington Avenue October 2024  3.99% 300,000
 300,000
400 East 58th Street (2)
 November 2026  3.00% 39,306
 39,931
Landmark Square January 2027  4.90% 100,000
 100,000
485 Lexington Avenue February 2027  4.25% 450,000
 450,000
1080 Amsterdam (3)
 February 2027  3.59% 35,297
 35,807
315 West 33rd Street February 2027  4.17% 250,000
 250,000
Total fixed rate debt      $1,385,756
 $1,389,717
Floating Rate Debt:         
FHLB Facility December 2019 L+0.18% 14,500
 14,500
FHLB Facility January 2020 L+0.26% 10,000
 
FHLB Facility February 2020 L+0.32% 15,000
 
2017 Master Repurchase Agreement June 2020 L+2.22% 190,107
 300,000
133 Greene Street August 2020 L+2.00% 15,523
 15,523
106 Spring Street January 2021 L+2.50% 38,025
 
609 Fifth Avenue March 2021 L+2.40% 52,990
 
185 Broadway (4)
 November 2021 L+2.85% 115,886
 111,869
712 Madison Avenue December 2021 L+2.50% 28,000
 28,000
460 West 34th Street (5)
 May 2022 L+2.23% 310,236
 


Suburban Loan (6)
 July 2022 L+2.79% 228,660
 
719 Seventh Avenue September 2023 L+1.20% 50,000
 50,000
FHLB Facility (7)
      
 13,000
115 Spring Street (8)
      
 65,550
Total floating rate debt      $1,068,927
 $598,442
Total mortgages and other loans payable      $2,454,683
 $1,988,159
Deferred financing costs, net of amortization      (37,522) (26,919)
Total mortgages and other loans payable, net      $2,417,161
 $1,961,240
(1)Interest rate as of September 30, 2019, taking into account interest rate hedges in effect during the period. Floating rate debt is presented with the stated interest rate spread over 30-day LIBOR, unless otherwise specified.
(2)
The loan carries a fixed interest rate of 300 basis points for the first five years and is prepayable without penalty at the end of year five.
(3)
The loan is comprised of a $35.5 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 year five.
(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. Advances under the loan are subject to incurred costs and funded equity requirements.
(5)This loan is a $465.0 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. Advances under the loan are subject to incurred costs and funded equity requirements.
(6)Collateralized by the properties located at 360 Hamilton Avenue, 100 Summit Lake Drive, 200 Summit Lake Drive and 500 Summit Lake Drive.
(7)In August 2019, the loan was repaid.
(8)In August 2019, the Company sold a 49% interest in 115 Spring Street to a private investor. The transaction resulted in the deconsolidation of our remaining 51% interest. See Note 6, "Investments in Unconsolidated Joint Ventures."
At September 30, 2019 and December 31, 2018, the gross book value of the properties and debt and preferred equity investments collateralizing the mortgages and other loans payable was approximately $3.7 billion and $2.6 billion, respectively.

36

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

Federal Home Loan Bank of New York Facility
The Company's wholly-owned subsidiary, Ticonderoga Insurance Company, or Ticonderoga, a Vermont licensed captive insurance company, is a member of the Federal Home Loan Bank of New York, or FHLBNY. As a member, Ticonderoga may borrow funds from the FHLBNY in the form of secured advances. As of September 30, 2019, we had $14.5 million, $10.0 million and $15.0 million in outstanding secured advances with a borrowing rate of 30-day LIBOR plus 18 basis points, 30-day LIBOR plus 26 basis points and 30-day LIBOR plus 32 basis points, respectively.
Master Repurchase Agreement
The Company entered into a Master Repurchase Agreement, or MRA, known as the 2017 MRA, which provides us with the ability to sell certain mortgage 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 facility 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 recollateralize 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 through the 2017 credit facility, as defined below.
The 2017 MRA has a maximum facility capacity of $300.0 million. In April 2018, we increased the maximum facility capacity 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. In June 2018, we exercised a one year extension option and in June 2019, we exercised another one year extension option. In August 2019, we amended our agreement to include 2 additional one year extension options. At September 30, 2019, the facility had a carrying value of $189.6 million, net of deferred financing costs.
9. Corporate Indebtedness
2017 Credit Facility
In November 2017, we entered into an amendment to the credit facility, referred to as the 2017 credit facility, that was originally entered into by the Company in November 2012, or the 2012 credit facility. As of September 30, 2019, the 2017 credit facility consisted of a $1.5 billion revolving credit facility, a $1.3 billion term loan (or "Term Loan A"), and a $200.0 million term loan (or "Term Loan B") with maturity dates of March 31, 2022, March 31, 2023, and November 21, 2024, respectively. The revolving credit facility has 2 six-month as-of-right extension options to March 31, 2023. We also have an option, subject to customary conditions, to increase the capacity of the credit facility to $4.5 billion at any time prior to the maturity dates 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, 2019, the 2017 credit facility bore interest at a spread over 30-day LIBOR ranging from (i) 82.5 basis points to 155 basis points for loans under the revolving credit facility, (ii) 90 basis points to 175 basis points for loans under Term Loan A, and (iii) 150 basis points to 245 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 the Company.
In May 2019, we entered into an agreement to reduce the interest rate spread under Term Loan B by 65 basis points to a spread over 30-day LIBOR ranging from 85 basis points to 165 basis points. This reduction will be effective in November 2019.
At September 30, 2019, the applicable spread was 100 basis points for the revolving credit facility, 110 basis points for Term Loan A, and 165 basis points for 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 the Company. As of September 30, 2019, the facility fee was 20 basis points.
As of September 30, 2019, we had $11.8 million of outstanding letters of credit, $335.0 million drawn under the revolving credit facility and $1.5 billion outstanding under the term loan facilities, with total undrawn capacity of $1.2 billion under the 2017 credit facility. At September 30, 2019 and December 31, 2018, the revolving credit facility had a carrying value of $328.5 million and $492.2 million, respectively, net of deferred financing costs. At September 30, 2019 and December 31, 2018, the term loan facilities had a carrying value of $1.5 billion and $1.5 billion, respectively, net of deferred financing costs.
The Company and the Operating Partnership are borrowers jointly and severally obligated under the 2017 credit facility.
The 2017 credit facility includes certain restrictions and covenants (see Restrictive Covenants below).

37

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

Senior Unsecured Notes
The following table sets forth our senior unsecured notes and other related disclosures as of September 30, 2019 and December 31, 2018, respectively, by scheduled maturity date (amounts in thousands):
Issuance September 30,
2019
Unpaid
Principal
Balance
 September 30,
2019
Accreted
Balance
 December 31,
2018
Accreted
Balance
 
Interest
Rate (1)
 
Initial Term
(in Years)
 Maturity Date
March 16, 2010 (2)
 $250,000
 $250,000
 $250,000
  7.75% 10 March 2020
August 7, 2018 (3) (4)
 350,000
 350,000
 350,000
 L+0.98% 3 August 2021
October 5, 2017 (3)
 500,000
 499,669
 499,591
  3.25% 5 October 2022
November 15, 2012 (5)
 300,000
 303,404
 304,168
  4.50% 10 December 2022
December 17, 2015 (2)
 100,000
 100,000
 100,000
  4.27% 10 December 2025
  $1,500,000
 $1,503,073
 $1,503,759
       
Deferred financing costs, net   (6,706) (8,545)       
  $1,500,000
 $1,496,367
 $1,495,214
       
(1)Interest rate as of September 30, 2019, taking into account interest rate hedges in effect during the period. Floating rate notes are presented with the stated spread over 3-month LIBOR, unless otherwise specified.
(2)Issued by the Company and the Operating Partnership as co-obligors.
(3)Issued by the Operating Partnership with the Company as the guarantor.
(4)Beginning on August 8, 2019 and at any time thereafter, the notes are subject to redemption at the Company's option, in whole but not in part, at a redemption price equal to 100% of the principal amount of the notes, plus unpaid accrued interest thereon to the redemption date.
(5)
In October 2017, the Company and the Operating Partnership as co-obligors issued an additional $100.0 million of 4.50% senior unsecured notes due December 2022. The notes were priced at 105.334% of par.

Restrictive Covenants
The terms of the 2017 credit facility 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, 2019 and December 31, 2018, 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. Interest payments may be deferred for a period of up to eight 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.

38

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

Principal Maturities
Combined aggregate principal maturities of mortgages and other loans payable, 2017 credit facility, trust preferred securities, senior unsecured notes and our share of joint venture debt as of September 30, 2019, including as-of-right extension options and put options, were as follows (in thousands):
 
Scheduled
Amortization
 Mortgages and Other Loans Payable 
Revolving
Credit
Facility
 Unsecured Term Loans 
Trust
Preferred
Securities
 
Senior
Unsecured
Notes
 Total 
Joint
Venture
Debt
Remaining 2019$2,307
 $14,500
 $
 $
 $
 $
 $16,807
 $10,700
202011,118
 230,630
 
 
 
 250,000
 491,748
 804,143
202111,638
 234,901
 
 
 
 350,000
 596,539
 704,174
20229,430
 737,452
 
 
 
 800,000
 1,546,882
 268,968
20237,301
 50,000
 335,000
 1,300,000
 
 
 1,692,301
 311,452
Thereafter9,290
 1,136,116
 
 200,000
 100,000
 100,000
 1,545,406
 1,831,026
 $51,084
 $2,403,599
 $335,000
 $1,500,000
 $100,000
 $1,500,000
 $5,889,683
 $3,930,463

Consolidated interest expense, excluding capitalized interest, was comprised of the following (in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Interest expense before capitalized interest$63,607
 $64,078
 $185,163
 $180,550
Interest on financing leases813
 
 2,425
 
Interest capitalized(15,700) (8,504) (38,228) (22,785)
Interest income(608) (406) (3,563) (1,070)
Interest expense, net$48,112
 $55,168
 $145,797
 $156,695

10. Related Party Transactions
Cleaning/ Security/ Messenger and Restoration Services
Alliance Building Services, or Alliance, and its affiliates are partially owned by Gary Green, a son of Stephen L. Green, who serves as a member and as the chairman emeritus of our board of directors, and provide services to certain properties owned by us. 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 other income on the consolidated statements of operations, was $0.9 million and $2.7 million for the three and nine months ended September 30, 2019, respectively, and was $0.9 million and $3.0 million for the three and nine months ended September 30, 2018, respectively.
We also recorded expenses, inclusive of capitalized expenses, of $5.6 million and $14.1 million for the three and nine months ended September 30, 2019, respectively, for these services (excluding services provided directly to tenants), and $5.0 million and $14.0 million for the three and nine months ended September 30, 2018, 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 $0.2 million and $0.5 million for the three and nine months ended September 30, 2019, respectively, and $0.1 million and $0.4 million for the three and nine months ended September 30, 2018, respectively.

39

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

One Vanderbilt 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. The entities owned and controlled by Messrs. Holliday and Mathias paid $1.4 million and $1.0 million, respectively, which equal 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.
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 Note 6, "Investments in Unconsolidated Joint Ventures." Amounts due from joint ventures and related parties at September 30, 2019 and December 31, 2018 consisted of the following (in thousands):
 September 30, 2019 December 31, 2018
Due from joint ventures$7,648
 $18,655
Other12,382
 9,378
Related party receivables$20,030
 $28,033

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.
Common Units of Limited Partnership Interest in the Operating Partnership
As of September 30, 2019 and December 31, 2018, the noncontrolling interest unit holders owned 4.96%, or 4,257,754 units, and 4.70%, or 4,130,579 units, of the Operating Partnership, respectively. As of September 30, 2019, 4,257,754 shares of our 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 our common stock at the end of the reporting period.
Below is a summary of the activity relating to the noncontrolling interests in the Operating Partnership for the nine months ended September 30, 2019 and the twelve months ended December 31, 2018 (in thousands):
 September 30, 2019 December 31, 2018
Balance at beginning of period$387,805
 $461,954
Distributions(10,993) (15,000)
Issuance of common units16,493
 23,655
Redemption of common units(16,388) (60,718)
Net income12,306
 12,216
Accumulated other comprehensive income allocation(2,869) (66)
Fair value adjustment15,509
 (34,236)
Balance at end of period$401,863
 $387,805


40

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

Preferred Units of Limited Partnership Interest in the Operating Partnership
Below is a summary of the preferred units of limited partnership interest in the Operating Partnership as of September 30, 2019:
Issuance Number of Units Authorized Number of Units Issued 
Dividends Per Unit(1)
 
Liquidation Preference Per Unit(2)
 
Conversion Price Per Unit(3)
 Date of Issuance
4.50% Series G (4)
 1,902,000
 1,902,000
 $1.1250
 $25.00
 $88.50
 January 2012
7.00% Series F 60
 60
 $70.0000
 $1,000.00
 $29.12
 January 2007
3.50% Series K 700,000
 563,954
 $0.8750
 $25.00
 $134.67
 August 2014
4.00% Series L 500,000
 378,634
 $1.0000
 $25.00
 
 August 2014
3.75% Series M 1,600,000
 1,600,000
 $0.9375
 $25.00
 
 February 2015
3.00% Series N (5)
 552,303
 552,303
 $0.7500
 $25.00
 
 June 2015
Series O (6)
 1
 1
 
(6 
) 
 
(6 
) 
 
 June 2015
4.00% Series P 200,000
 200,000
 $1.0000
 $25.00
 
 July 2015
3.50% Series Q 268,000
 268,000
 $0.8750
 $25.00
 $148.95
 July 2015
3.50% Series R 400,000
 400,000
 $0.8750
 $25.00
 $154.89
 August 2015
4.00% Series S 1,077,280
 1,077,280
 $1.0000
 $25.00
 
 August 2015
2.75% Series T 230,000
 230,000
 $0.6875
 $25.00
 $119.02
 March 2016
4.50% Series U (7)
 680,000
 680,000
 $1.1250
 $25.00
 
 March 2016
3.50% Series A (8)
 109,161
 109,161
 $35.0000
 $1,000.00
 
 August 2015
3.50% Series V 40,000
 40,000
 $0.8750
 $25.00
 
 May 2019
(1)Dividends are cumulative, subject to certain provisions.
(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) the amount shown in the table.
(4)Common units of limited partnership interest in the Operating Partnership issued in a conversion may be redeemed in exchange for our 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.
(5)All of the outstanding units were redeemed at par for cash by the unitholder during the nine months ended September 30, 2019.
(6)The holder of the Series O 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 O unit for cash 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 at the time of a liquidation event.
(7)The annual dividend is subject to reduction upon the occurrence of certain circumstances. The minimum annual dividend is $0.75 per unit.
(8)Issued through a consolidated subsidiary. The units 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, 2019, 0 Subsidiary Series B Preferred Units have been issued.
Below is a summary of the activity relating to the preferred units in the Operating Partnership for the nine months ended September 30, 2019 and the twelve months ended December 31, 2018 (in thousands):
 September 30, 2019 December 31, 2018
Balance at beginning of period$300,427
 $301,735
Issuance of preferred units1,000
 
Redemption of preferred units(15,142) (1,308)
Balance at end of period$286,285
 $300,427

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

41

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

of preferred stock, par value $0.01 per share. As of September 30, 2019, 81,515,066 shares of common stock and 0 shares of excess stock were issued and outstanding.
Share Repurchase Program
In August 2016, our Board of Directors approved a share repurchase program under which we can buy up to $1.0 billion of shares of our common stock. The Board of Directors has since authorized 3 separate $500.0 million increases to the size of the share repurchase program in the fourth quarter of 2017, second quarter of 2018, and fourth quarter of 2018, bringing the total program size to $2.5 billion.
At September 30, 2019, repurchases executed under the program were as follows:
PeriodShares repurchasedAverage price paid per shareCumulative number of shares repurchased as part of the repurchase plan or programs
Year ended 20178,342,411$101.648,342,411
Year ended 20189,744,911$96.2218,087,322
First quarter 2019397,783$86.0718,485,105
Second quarter 2019866,924$86.5819,352,029
Third quarter 2019 (1)
916,439$81.3120,268,468

(1)Includes 108,300 shares of common stock repurchased by the Company in September 2019 that were settled in October 2019.
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 par for cash at our option. 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 2018, 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 our 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 and nine months ended September 30, 2019 and 2018, respectively (dollars in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Shares of common stock issued490
 509
 3,485
 1,183
Dividend reinvestments/stock purchases under the DRSPP$39
 $52
 $303
 $116

Earnings per Share
We use the two-class method of computing earnings per share (“EPS”), which is an earnings allocation formula that determines EPS for common stock and any participating securities according to dividends declared (whether paid or unpaid). Under the two-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 period. Diluted EPS reflects the potential dilution that could occur from share equivalent activity.

42

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

SL Green's earnings per share for the three and nine months ended September 30, 2019 and 2018 are computed as follows (in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
Numerator2019 2018 2019 2018
Basic Earnings:       
Income attributable to SL Green common stockholders$33,157
 $88,209
 $238,052
 $293,531
Less: distributed earnings allocated to participating securities(108) (125) (325) (371)
Less: undistributed earnings allocated to participating securities
 (33) (41) (138)
Net income attributable to SL Green common stockholders (numerator for basic earnings per share)$33,049
 $88,051
 $237,686
 $293,022
Add back: distributed earnings allocated to participating securities108
 125
 325
 371
Add back: undistributed earnings allocated to participating securities
 33
 41
 138
Add back: Effect of dilutive securities (redemption of units to common shares)1,719
 4,797
 12,306
 15,656
Income attributable to SL Green common stockholders (numerator for diluted earnings per share)$34,876
 $93,006
 $250,358
 $309,187
 Three Months Ended September 30, Nine Months Ended September 30,
Denominator2019 2018 2019 2018
Basic Shares:       
Weighted average common stock outstanding82,292
 85,566
 82,855
 87,692
Effect of Dilutive Securities:       
Operating Partnership units redeemable for common shares4,258
 4,643
 4,283
 4,677
Stock-based compensation plans164
 219
 171
 211
Diluted weighted average common stock outstanding86,714
 90,428
 87,309
 92,580

SL Green has excluded 1,317,803 and 1,266,296 common stock equivalents from the diluted shares outstanding for the three and nine months ended September 30, 2019, respectively, as they were anti-dilutive. SL Green has excluded 941,636 and 1,137,971 common stock equivalents from the diluted shares outstanding for the three and nine months ended September 30, 2018, 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, 2019 owned 81,515,066 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 1 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, one share of common stock is generally the economic equivalent of one 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.

43

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

Net income (loss) allocated to the preferred unitholders and common unitholders reflects their pro rata share of net income (loss) and distributions.
Limited Partner Units
As of September 30, 2019, limited partners other than SL Green owned 4.96%, or 4,257,754 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, 2019 and 2018, respectively, are computed as follows (in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
Numerator2019
2018 2019 2018
Basic Earnings:       
Income attributable to SLGOP common unitholders$34,876
 $93,006
 $250,358
 $309,187
Less: distributed earnings allocated to participating securities(108) (125) (325) (371)
Less: undistributed earnings allocated to participating securities
 (33) (41) (138)
Net Income attributable to SLGOP common unitholders (numerator for basic earnings per unit)$34,768
 $92,848
 $249,992
 $308,678
Add back: distributed earnings allocated to participating securities108
 125
 325
 371
Add back: undistributed earnings allocated to participating securities
 33
 41
 138
Income attributable to SLGOP common unitholders (numerator for diluted earnings per unit)$34,876
 $93,006
 $250,358
 $309,187
 Three Months Ended September 30, Nine Months Ended September 30,
Denominator2019
2018 2019 2018
Basic units:       
Weighted average common units outstanding86,550
 90,209
 87,138
 92,369
Effect of Dilutive Securities:       
Stock-based compensation plans164
 219
 171
 211
Diluted weighted average common units outstanding86,714
 90,428
 87,309
 92,580

The Operating Partnership has excluded 1,317,803 and 1,266,296 common unit equivalents from the diluted units outstanding for the three and nine months ended September 30, 2019, respectively, as they were anti-dilutive. The Operating Partnership has excluded 941,636 and 1,137,971 common unit equivalents from the diluted units outstanding for the three and nine months ended September 30, 2018, respectively, as they were anti-dilutive.
14. Share-based Compensation
We have share-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.

44

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

The Fourth Amended and Restated 2005 Stock Option and Incentive Plan, or the 2005 Plan, was approved by the Company's board of directors 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) 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-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 our 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 board of 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, 2019, 4.9 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.
Stock Options and Class O LTIP Units
Options are granted 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 or ten years from the date of grant, are not transferable other than on death, and generally vest in one 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 grants during the year ended December 31, 2018. There were no grants during the nine months ended September 30, 2019.
 September 30, 2019 December 31, 2018
Dividend yieldNaN 2.85%
Expected lifezero years 3.5 years
Risk-free interest rateNaN 2.48%
Expected stock price volatilityNaN 22.00%


45

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

A summary of the status of the Company's stock options as of September 30, 2019 and December 31, 2018, and changes during the nine months ended September 30, 2019 and year ended December 31, 2018 are as follows:
 September 30, 2019 December 31, 2018
 Options Outstanding 
Weighted Average
Exercise Price
 Options Outstanding 
Weighted Average
Exercise Price
Balance at beginning of period1,137,017
 $103.54
 1,548,719
 $101.48
Granted
 
 6,000
 97.91
Exercised
 
 (316,302) 90.22
Lapsed or canceled(40,499) 111.60
 (101,400) 113.22
Balance at end of period1,096,518
 $103.24
 1,137,017
 $103.54
Options exercisable at end of period966,045
 $102.68
 783,035
 $101.28
Total fair value of options granted during the period$
  
 $84,068
  

All options were granted with strike prices ranging from $20.67 to $137.18. The remaining weighted average contractual life of the options outstanding was 2.8 years and the remaining average contractual life of the options exercisable was 2.8 years.
During the three and nine months ended September 30, 2019, we recognized compensation expense for these options of $0.6 million and $1.8 million, respectively. During the three and nine months ended September 30, 2018, we recognized compensation expense for these options of $1.1 million and $4.3 million, respectively.
As of September 30, 2019, there was $0.7 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 0.3 years.
Restricted Shares
Shares are granted to certain employees, including our executives and vesting will occur annually upon the completion of a service period or our meeting established financial performance criteria. Annual vesting 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, 2019 and December 31, 2018 and charges during the nine months ended September 30, 2019 and the year ended December 31, 2018, are as follows:
 September 30, 2019 December 31, 2018
Balance at beginning of period3,452,016
 3,298,216
Granted27,650
 162,900
Canceled(11,500) (9,100)
Balance at end of period3,468,166
 3,452,016
Vested during the period111,374
 92,114
Compensation expense recorded$9,469,622
 $12,757,704
Total fair value of restricted stock granted during the period$2,233,548
 $13,440,503

The fair value of restricted stock that vested during the nine months ended September 30, 2019 and the year ended December 31, 2018 was $12.0 million and $9.8 million, respectively. As of September 30, 2019 there was $15.1 million of total unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of 1.8 years.
We granted LTIP Units, which include bonus, time-based and performance-based awards, with a fair value of $41.6 million and $22.0 million as of September 30, 2019 and December 31, 2018, respectively. The grant date fair value of the LTIP Unit awards was calculated in accordance with ASC 718. A third party consultant determined the fair value of the LTIP Units to have a discount from 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, 2019, there was $22.5 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 2.3 years.

46

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

During the three and nine months ended September 30, 2019, we recorded compensation expense related to bonus, time-based and performance based awards of $3.0 million and $14.0 million, respectively. During the three and nine months ended September 30, 2018, we recorded compensation expense related to bonus, time-based and performance based awards of $2.3 million and $11.4 million, respectively.
For the three and nine months ended September 30, 2019, $0.5 million and $1.4 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, 2018, $1.6 million and $4.7 million, respectively, was capitalized to assets associated with compensation expense related to our long-term compensation plans, restricted stock and 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 our 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 nine months ended September 30, 2019, 17,227 phantom stock units and 9,869 shares of common stock were issued to our board of directors. We recorded compensation expense of $0.2 million and $2.2 million during the three and nine months ended September 30, 2019, respectively, related to the Deferred Compensation Plan. We recorded compensation expense of $0.1 million and $2.2 million during the three and nine months ended September 30, 2018, respectively, related to the Deferred Compensation Plan.
As of September 30, 2019, there were 127,505 phantom stock units outstanding pursuant to our Non-Employee Director's Deferral Program.
Employee Stock Purchase Plan
In 2007, the Company's board of directors adopted the 2008 Employee Stock Purchase Plan, or ESPP, to encourage our employees to make our business more successful by providing 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, 2019, 127,280 shares of our common stock had been issued under the ESPP.

47

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

15. Accumulated Other Comprehensive (Loss) Income
The following tables set forth the changes in accumulated other comprehensive (loss) income by component as of September 30, 2019 (in thousands):
 
Net unrealized gain (loss) on derivative instruments (1)
 
SL Green’s share
of joint venture
net unrealized gain (loss)
on derivative
instruments (2)
 Net unrealized gain on marketable securities Total
Balance at December 31, 2018$9,716
 $4,299
 $1,093
 $15,108
Other comprehensive (loss) income before reclassifications(41,385) (13,680) 1,494
 (53,571)
Amounts reclassified from accumulated other comprehensive loss(864) (805) 
 (1,669)
Balance at September 30, 2019$(32,533) $(10,186) $2,587
 $(40,132)
(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, 2019 and December 31, 2018, the deferred net (gains) losses from these terminated hedges, which is included in accumulated other comprehensive loss relating to net unrealized loss on derivative instrument, was $(0.2) million and $1.3 million, respectively.
(2)Amount reclassified from accumulated other comprehensive (loss) income is included in equity in net (loss) income from unconsolidated joint ventures in the respective consolidated statements of operations.
16. Fair Value Measurements
We are required to disclose fair value information with regard to 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 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.

48

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

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, 2019 and December 31, 2018 (in thousands):
 September 30, 2019
 Total Level 1 Level 2 Level 3
Assets:       
Marketable securities$30,208
 $
 $30,208
 $
Interest rate cap and swap agreements (included in other assets)$2,784
 $
 $2,784
 $
Liabilities:       
Interest rate cap and swap agreements (included in other liabilities)$37,208
 $
 $37,208
 $
 December 31, 2018
 Total Level 1 Level 2 Level 3
Assets:       
Marketable securities$28,638
 $
 $28,638
 $
Interest rate cap and swap agreements (included in other assets)$18,676
 $
 $18,676
 $
Liabilities:       
Interest rate cap and swap agreements (included in other liabilities)$7,663
 $
 $7,663
 $

We determine impairment in real estate investments and debt and preferred equity investments, including intangibles 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. All of which are classified as Level 3 inputs.
In May 2018, the Company was the successful bidder at the foreclosure of 2 Herald Square, at which time the Company's $250.5 million outstanding principal balance and $7.7 million accrued interest balance were credited to our equity investment in the property. We recorded the assets acquired and liabilities assumed at fair value. This resulted in the recognition of a fair value adjustment of $8.1 million, which is reflected on the Company's consolidated statements of operations within purchase price and other fair value adjustments. This fair value was determined by utilizing our successful bid at the foreclosure of the asset, the agreement to sell a partial interest in the property, and cash flow projections that apply, among other things, estimated revenue and expense growth rates, discount rates and capitalization rates, as well as a sales comparison approach, which utilizes comparable sales, listings and sales contracts, all of which are classified as Level 3 inputs.
In January 2018, the partnership agreement for our investment in 919 Third Avenue was modified resulting in the Company no longer having a controlling interest in this investment. As a result the investment was deconsolidated as of January 1, 2018. The Company recorded its non-controlling interest at fair value resulting in a $49.3 million fair value adjustment in the consolidated statements of operations. This fair value was determined using a third party valuation which primarily utilized 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. All of which are classified as Level 3 inputs.
Marketable securities classified as Level 1 are derived from quoted prices in active markets. The valuation technique used to measure the fair value of 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.
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

49

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

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 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.
The following table provides the carrying value and fair value of these financial instruments as of September 30, 2019 and December 31, 2018 (in thousands):
 September 30, 2019 December 31, 2018
 
Carrying Value (1)
 Fair Value 
Carrying Value (1)
 Fair Value
        
Debt and preferred equity investments$1,954,556
 
(2) 
 $2,099,393
 
(2) 
        
Fixed rate debt$3,538,829
 $3,661,582
 $3,543,476
 $3,230,127
Variable rate debt2,353,927
 2,364,868
 2,048,442
 2,057,966
 $5,892,756
 $6,026,450
 $5,591,918
 $5,288,093
(1)Amounts exclude net deferred financing costs.
(2)At September 30, 2019, debt and preferred equity investments had an estimated fair value ranging between $1.9 billion and $2.1 billion. At December 31, 2018, debt and preferred equity investments had an estimated fair value ranging between $2.1 billion and $2.3 billion.

Disclosure about fair value of financial instruments was based on pertinent information available to us as of September 30, 2019 and December 31, 2018. Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, 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.

50

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(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, collar 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 sheet 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 until the hedged item is 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, 2019 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 (dollars in thousands).
 
Notional
Value
 
Strike
Rate
 
Effective
Date
 
Expiration
Date
 Balance Sheet Location 
Fair
Value
Interest Rate Cap$111,869
 3.500% November 2018 December 2019 Other Assets $
Interest Rate Cap300,000
 3.750% May 2019 May 2020 Other Assets 
Interest Rate Swap100,000
 1.928% December 2017 November 2020 Other Liabilities (369)
Interest Rate Swap100,000
 1.934% December 2017 November 2020 Other Liabilities (376)
Interest Rate Cap85,000
 4.000% March 2019 March 2021 Other Assets 
Interest Rate Swap200,000
 1.131% July 2016 July 2023 Other Assets 1,930
Interest Rate Swap100,000
 1.161% July 2016 July 2023 Other Assets 854
Interest Rate Swap150,000
 2.696% January 2019 January 2024 Other Liabilities (8,164)
Interest Rate Swap150,000
 2.721% January 2019 January 2026 Other Liabilities (12,049)
Interest Rate Swap200,000
 2.740% January 2019 January 2026 Other Liabilities (16,250)
           $(34,424)

During the three months ended September 30, 2019, we recorded a loss on the changes in the fair value of $0.1 million, which is included in interest expense in the consolidated statements of operations. During the nine months ended September 30, 2019, we recorded a loss on the changes in the fair value of $0.1 million, which is included in interest expense in the consolidated statements of operations. During the three months ended September 30, 2018, we recorded a loss on the changes in the fair value of $0.1 million, which is included in interest expense in the consolidated statements of operations. During the nine months ended September 30, 2018, we recorded a loss on the changes in the fair value of $0.4 million, which is included in interest expense in the consolidated statements of operations.
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 on its derivative obligations. As of September 30, 2019, 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 $37.4 million. As of September 30, 2019, the Company has not posted 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 $38.3 million at September 30, 2019.
Gains and losses on terminated hedges are included in accumulated other comprehensive income, 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 income 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 $5.5 million of the current balance held in accumulated other comprehensive loss will be reclassified into interest expense and $3.1 million of the portion related to our share of joint venture accumulated other comprehensive loss will be reclassified into equity in net income from unconsolidated joint ventures within the next 12 months.

51

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(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, 2019 and 2018, respectively (in thousands):
 
Amount of (Loss) Gain
Recognized in
Other Comprehensive
Loss

Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income
Amount of Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive Loss into Income


Three Months Ended September 30,

Three Months Ended September 30,
Derivative
2019
2018

2019
2018
Interest Rate Swaps/Caps
$(10,169) $2,207

Interest expense
$(105) $276
Share of unconsolidated joint ventures' derivative instruments
(2,437) 2,263

Equity in net income from unconsolidated joint ventures
(192) 222


$(12,606)
$4,470



$(297)
$498

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 nine months ended September 30, 2019 and 2018, respectively (in thousands):
  Amount of (Loss) Gain
Recognized in
Other Comprehensive
Loss
 Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Amount of Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive Loss into Income
  Nine Months Ended September 30,  Nine Months Ended September 30,
Derivative 2019 2018  2019 2018
Interest Rate Swaps/Caps $(43,008) $12,605
 Interest expense $886
 $35
Share of unconsolidated joint ventures' derivative instruments (11,963) 6,668
 Equity in net income from unconsolidated joint ventures 713
 495
  $(54,971) $19,273
   $1,599
 $530




52

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

18. Rental Income
The Operating Partnership is the lessor and the sublessor to tenants under operating leases with expiration dates ranging from October 1, 2019 to 2064. The minimum rental amounts due under the leases are generally either 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. Approximate future minimum rents to be received over the next five years and thereafter for non-cancelable operating leases in effect at September 30, 2019 for the consolidated properties, including consolidated joint venture properties, and our share of unconsolidated joint venture properties, are as follows (in thousands):
  
Consolidated
Properties
 
Unconsolidated
Properties
Remaining 2019 $217,473
 $95,575
2020 823,857
 388,519
2021 676,880
 395,558
2022 621,613
 378,888
2023 555,748
 352,418
2024 513,416
 323,113
Thereafter 3,299,836
 1,909,299
  $6,708,823
 $3,843,370

As of December 31, 2018, under ASC 840, approximate future minimum rents to be received over the next five years and thereafter for non-cancelable operating leases for the consolidated properties, including consolidated joint venture properties, and our share of unconsolidated joint venture properties are as follows (in thousands):
  
Consolidated
Properties
 
Unconsolidated
Properties
2019 $830,336
 $348,060
2020 765,610
 375,228
2021 625,956
 380,886
2022 562,250
 348,222
2023 500,499
 333,501
Thereafter 3,272,014
 2,098,995
  $6,556,665
 $3,884,892

The components of lease revenues were as follows (in thousands):
  Three Months Ended  
 September 30, 2019
 Three Months Ended  
 September 30, 2018
 Nine Months Ended 
 September 30, 2019
 Nine Months Ended 
 September 30, 2018
Fixed lease payments $214,282
 $220,443
 $641,007
 $643,015
Variable lease payments 32,581
 29,103
 88,539
 82,554
Total lease payments $246,863
 $249,546
 $729,546
 $725,569
Amortization of acquired above and below-market leases 1,165
 1,320
 3,559
 5,486
Total rental revenue $248,028
 $250,866
 $733,105
 $731,055

19. Commitments and Contingencies
Legal Proceedings
As of September 30, 2019, 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.

53

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

Environmental Matters
Our management believes that the properties are in compliance in all material respects with applicable 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.
Ground Lease Arrangements
We are a tenant under ground leases for certain properties. These leases have expirations from 2022 to 2114, or 2043 to 2114 as fully extended. Certain leases offer extension options which we assess against relevant economic factors to determine whether we are reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods that we are reasonably certain will be exercised, if any, are included in the measurement of the corresponding lease liability and right of use asset.
The following is a schedule of future minimum lease payments under financing leases and operating leases with initial terms in excess of one year as of September 30, 2019 (in thousands):
  Financing leases 
Operating leases (1)
Remaining 2019 $621
 $7,797
2020 2,619
 31,508
2021 2,794
 31,702
2022 2,794
 29,548
2023 2,794
 27,243
2024 2,819
 27,263
Thereafter 814,283
 649,289
Total minimum lease payments $828,724
 $804,350
Amount representing interest (784,473)  
Amount discounted using incremental borrowing rate   (419,689)
Lease liabilities $44,251
 $384,661

(1)As of September 30, 2019, the total minimum sublease rentals to be received in the future under non-cancelable subleases is $1.7 billion.
During the nine months ended September 30, 2019, we recognized $3.3 million of financing lease costs, of which $2.4 million represented interest and $0.9 million represented amortization of the right-of-use assets. These amounts are included in interest expense, net of interest income and depreciation and amortization in our consolidated statements of operations, respectively. During the nine months ended September 30, 2019, we recognized $24.9 million of operating lease costs, which is calculated on a straight-line basis over the remaining lease terms. This amount is included in operating lease rent in our consolidated statements of operations. As of September 30, 2019, the weighted-average discount rate used to calculate the lease liabilities was 8.47%. As of September 30, 2019, the weighted-average remaining lease term was 67 years.
20. Segment Information
The Company has 2 reportable segments, real estate and debt and preferred equity investments. We evaluate real estate performance and allocate resources based on earnings 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, 2019 and 2018, and selected asset information as of September 30, 2019 and December 31, 2018, regarding our operating segments are as follows (in thousands):

54

SL Green Realty Corp. and SL Green Operating Partnership, L.P.
Notes to Consolidated Financial Statements (cont.)
September 30, 2019
(unaudited)

  Real Estate Segment Debt and Preferred Equity Segment Total Company
Total revenues      
Three months ended:      
September 30, 2019 $262,115
 $51,519
 $313,634
September 30, 2018 258,568
 48,977
 307,545
Nine months ended:      
September 30, 2019 777,745
 153,168
 930,913
September 30, 2018 766,816
 143,540
 910,356
Net income     

Three months ended:     

September 30, 2019 $6,133
 $34,589
 $40,722
September 30, 2018 62,199
 37,255
 99,454
Nine months ended:      
September 30, 2019 168,639
 98,593
 267,232
September 30, 2018 224,246
 104,930
 329,176
Total assets     

As of:     

September 30, 2019 $11,216,682
 $2,078,302
 $13,294,984
December 31, 2018 10,481,594
 2,269,764
 12,751,358

Interest costs for the debt and preferred equity segment include actual costs incurred for borrowings on the 2017 MRA. Interest is imputed on the investments that do not collateralize the 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 since the use of personnel and resources is dependent on transaction volume between the two segments and varies period over period. 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, 2019 marketing, general and administrative expenses totaled $23.8 million and $75.3 million, respectively. For the three and nine months ended September 30, 2018 marketing, general and administrative expenses totaled $20.6 million and $66.6 million, respectively. All other expenses, except interest, relate entirely to the real estate assets.
There were no transactions between the above two segments.

55


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, engaged in the acquisition, development, ownership, management and operation of commercial and residential real estate properties, principally office properties, located in the New York metropolitan area. 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.
The following discussion related to our consolidated financial statements should be read in conjunction with the financial statements appearing in this Quarterly Report on this Form 10-Q and in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2018.
As of September 30, 2019, 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 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 20

12,387,091
 10
 11,216,183
 30
 23,603,274
 94.2%
  Retail 6
(2)320,430
 8
 289,050
 14
 609,480
 98.9%
  Development/Redevelopment 6
 870,173
 1
 
 7
 870,173
 77.5%
  Fee Interest 
 
 1
 
 1
 
 %
    32
 13,577,694
 20
 11,505,233
 52
 25,082,927
 93.8%
Suburban Office 13

2,295,200
 
 
 13
 2,295,200
 89.4%
  Retail 1
 52,000
 
 
 1
 52,000
 100.0%
  Development/Redevelopment 1
 1,000
 
 
 1
 1,000
 %
    15
 2,348,200
 
 
 15
 2,348,200
 89.6%
Total commercial properties 47
 15,925,894
 20
 11,505,233
 67
 27,431,127
 93.4%
Residential:                
Manhattan Residential 2
(2)445,105
 8
 1,663,774
 10
 2,108,879
 95.0%
Suburban Residential 
 
 
 
 
 
 %
Total residential properties 2
 445,105
 8
 1,663,774
 10
 2,108,879
 95.0%
Total portfolio 49
 16,370,999
 28
 13,169,007
 77
 29,540,006
 93.5%
(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.
(2)As of September 30, 2019, 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.
As of September 30, 2019, we also managed two office buildings owned by third parties encompassing approximately 2.1 million square feet (unaudited), and held debt and preferred equity investments with a book value of $2.0 billion, including $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 Investments line item.

56


Critical Accounting Policies
Refer to the 2018 Annual Report on Form 10-K of the Company and the Operating Partnership for a discussion of our critical accounting policies, which include investment in commercial real estate properties, investment in unconsolidated joint ventures, revenue recognition, reserve for possible credit losses and derivative instruments. During the three and nine months ended September 30, 2019, there were no material changes to these policies, other than the adoption of the Accounting Standards Codification Topic 842, Leases, described in Note 2 - Significant Accounting Policies and Note 19 - Commitments and Contingencies to the unaudited consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q.

57


Results of Operations
Comparison of the three months ended September 30, 2019 to the three months ended September 30, 2018
The following comparison for the three months ended September 30, 2019, or 2019, to the three months ended September 30, 2018, or 2018, makes reference to the effect of the following:
i.
“Same-Store Properties,” which represents all operating properties owned by us at January 1, 2018 and still owned by us in the same manner at September 30, 2019 (Same-Store Properties totaled 39 of our 49 consolidated operating properties),
ii.“Acquisition Properties,” which represents all properties or interests in properties acquired in 2019 and 2018 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 2019 and 2018, 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) 2019 2018 
$
Change
 
%
Change
 2019 2018 2019 2018 2019 2018 
$
Change
 
%
Change
Rental revenue $241.2
 $238.8
 $2.4
 1.0% $
 $0.4
 $6.8
 $11.7
 $248.0
 $250.9
 $(2.9) (1.2)%
Investment income 
 
 
 % 
 
 51.5
 49.0
 51.5
 49.0
 2.5
 5.1 %
Other income 6.3
 1.3
 5.0
 384.6% 
 (0.6) 7.8
 7.0
 14.1
 7.7
 6.4
 83.1 %
Total revenues 247.5
 240.1
 7.4
 3.1% 
 (0.2) 66.1
 67.7
 313.6
 307.6
 6.0
 2.0 %
                         
Property operating expenses 109.9
 105.9
 4.0
 3.8% 
 0.3
 7.9
 8.9
 117.8
 115.1
 2.7
 2.3 %
Transaction related costs 
 
 
 % 
 
 
 0.2
 
 0.2
 (0.2) (100.0)%
Marketing, general and administrative 
 
 
 % 
 
 23.8
 20.6
 23.8
 20.6
 3.2
 15.5 %
  109.9
 105.9
 4.0
 3.8% 
 0.3
 31.7
 29.7
 141.6
 135.9
 5.7
 4.2 %
                         
Other income (expenses):                        
Interest expense and amortization of deferred financing costs, net of interest income                 (51.2) (57.8) 6.6
 (11.4)%
Depreciation and amortization         

       (70.5) (70.7) 0.2
 (0.3)%
Equity in net (loss) income from unconsolidated joint ventures                 (9.9) 1.0
 (10.9) (1,090.0)%
Equity in net gain on sale of interest in unconsolidated joint venture/real estate                 
 70.9
 (70.9) (100.0)%
Purchase price and other fair value adjustments                 3.8
 (3.1) 6.9
 (222.6)%
Gain (loss) on sale of real estate, net                 3.5
 (2.5) 6.0
 (240.0)%
Depreciable real estate reserves and impairment                 (7.0) (6.7) (0.3) 4.5 %
Loss on early extinguishment of debt                 
 (2.2) 2.2
 (100.0)%
Loan loss and other investment reserves, net of recoveries                 
 (1.1) 1.1
 (100.0)%
Net income                 $40.7
 $99.5
 $(58.8) (59.1)%
Rental Revenue
Rental revenue decreased primarily as a result of the partial sale and deconsolidation of 2 Herald ($5.7 million) in the fourth quarter of 2018, partially offset by increased revenue at our Same-Store properties ($2.4 million).

58


The following table presents a summary of the commenced leasing activity for the three months ended September 30, 2019 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 period1,460,517
  
    
  
  
  
Space which became available during the period (3)
   
    
  
  
  
•       Office117,112
  
  
  
  
  
  
•       Retail41,313
  
  
  
  
  
  
•       Storage433
  
  
  
  
  
  
 158,858
  
  
  
  
  
  
Total space available1,619,375
  
  
  
  
  
  
Leased space commenced during the period: 
  
  
  
  
  
  
•       Office(4)
242,977
 270,212
 $78.21
 $71.87
 $92.13
 5.4
 19.2
•       Retail420
 496
 $90.73
 $
 $
 4.0
 10.0
Total leased space commenced243,397
 270,708
 $78.23
 $71.74
 $91.96
 5.4
 19.2
              
Total available space at end of period1,375,978
  
  
  
  
  
  
              
Early renewals 
    
  
  
  
  
•       Office71,455
 81,076
 $71.18
 $75.26
 $30.76
 0.8
 5.4
•       Retail4,998
 4,755
 $220.14
 $194.97
 $
 
 9.3
Total early renewals76,453
 85,831
 $79.43
 $81.89
 $29.06
 0.8
 5.7
              
Total commenced leases, including replaced previous vacancy 
  
          
•       Office  351,288
 $76.59
 $73.39
 $77.97
 4.4
 16.1
•       Retail 
 5,251
 $207.92
 $194.97
 $
 0.4
 9.3
Total commenced leases 
 356,539
 $78.52
 $76.50
 $76.82
 4.3
 16.0
 
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)
Suburban 
  
  
  
  
  
  
Space available at beginning of period232,313
  
  
  
  
  
  
Space which became available during the period(3)
   
  
  
  
  
  
•       Office29,364
  
  
  
  
  
  
•       Retail1,091
  
  
  
  
  
  
•       Storage561
  
  
  
  
  
  
 31,016
  
  
  
  
  
  
Total space available263,329
  
  
  
  
  
  
Leased space commenced during the period: 
    
  
  
  
  
•       Office(5)
13,698
 13,560
 $34.02
 $32.88
 $4.97
 0.9
 2.4
•       Retail3,797
 3,797
 $11.46
 $19.74
 $
 
 10.8
•       Storage661
 661
 $12.45
 $12.00
 $
 
 1.3
Total leased space commenced18,156
 18,018
 $28.48
 $30.78
 $3.74
 0.7
 4.2
              
Total available space at end of the period245,173
  
          
              

59


Early renewals 
  
          
•       Office15,575
 15,575
 $31.34
 $29.66
 $
 
 0.7
Total early renewals15,575
 15,575
 $31.34
 $29.66
 $
 
 0.7
              
Total commenced leases, including replaced previous vacancy 
  
  
  
  
  
  
•       Office 
 29,135
 $32.59
 $30.97
 $2.31
 0.4
 1.5
•       Retail 
 3,797
 $11.46
 $19.74
 $
 
 10.8
•       Storage 
 661
 $12.45
 $12.00
 $
 
 1.3
Total commenced leases 
 33,593
 $29.80
 $30.15
 $2.01
 0.4
 2.6
(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 $81.87 per rentable square feet for 100,150 rentable square feet. Average starting office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $77.09 per rentable square feet for 181,226 rentable square feet.
(5)Average starting office rent excluding new tenants replacing vacancies was $33.87 per rentable square feet for 10,706 rentable square feet. Average starting office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $32.37 per rentable square feet for 26,281 rentable square feet.
Investment Income
For the three months ended September 30, 2019, investment income increased primarily as a result of an increase in the weighted average yield of our debt and preferred equity investments. For the three months ended September 30, 2019, the weighted average debt and preferred equity investment balance outstanding and weighted average yield were $2.12 billion and 9.0%, respectively, compared to $2.07 billion and 8.7%, respectively, for the same period in 2018.
Other Income
Other income increased primarily due to a tax refund received at 220 East 42nd Street ($2.5 million) and lease termination income at 304 Park Avenue South ($2.7 million).
Property Operating Expenses
Property operating expenses increased primarily due to increased operating expenses and real estate taxes at our Same-Store Properties ($1.3 million and $2.8 million, respectively).
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses were $23.8 million for the three months ended September 30, 2019, compared to $20.6 million for the three months ended September 30, 2018. Marketing, general and administrative expenses for the three months ended September 30, 2019 includes $2.2 million of additional expense related to new accounting guidance for leasing costs, which requires the Company to expense certain internal costs that were previously capitalized.
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 1 Madison loan repayment in the fourth quarter of 2018 ($7.7 million) and interest capitalization in connection with properties that are under development ($2.1 million), partially offset by a new loan collateralized by four suburban properties ($2.9 million). The weighted average consolidated debt balance outstanding was $6.1 billion for the three months ended September 30, 2019, compared to $5.8 billion for the three months ended September 30, 2018. The consolidated weighted average interest rate was 4.04% for the three months ended September 30, 2019, as compared to 4.10% for the three months ended September 30, 2018.
Depreciation and Amortization
Depreciation and amortization decreased primarily due to decreased depreciation and amortization at our Same-Store properties ($2.8 million), partially offset by increased depreciation and amortization at our Acquired properties ($2.0 million).
Equity in Net (Loss) Income in Unconsolidated Joint Ventures
Equity in net income from unconsolidated joint ventures decreased primarily as a result of a debt position accounted for under the equity method in 2018 ($3.9 million), depreciation expense at 650 5th Avenue ($3.4 million), which was put in service in the fourth quarter of 2018, depreciation expense at 2 Herald Square ($1.7 million), which was deconsolidated in the fourth quarter of 2018, and the sale of 3 Columbus Circle in the fourth quarter of 2018 ($1.7 million).

60


Equity in net gain on sale of interest in unconsolidated joint venture/real estate
During the three months ended September 30, 2018, we recognized a gain on sale related to our interest in 724 Fifth Avenue ($64.6 million) and 720 Fifth Avenue ($6.3 million).
Purchase price and other fair value adjustments
During the three months ended September 30, 2019, we recorded a $3.7 million purchase price and other fair value adjustment related to our investment in 115 Spring Street as a result of the partial sale and deconsolidation of the property. During the three months ended September 30, 2018, we recorded a $3.1 million purchase price and other fair value adjustment related to our investment in 2 Herald Square for which the Company was the successful bidder at the foreclosure of the property in May 2018.
Gain (loss) on sale of real estate, net
During the three months ended September 30, 2019, we recognized a gain on sale related to our interest in 115 Spring Street ($3.6 million). During the three months ended September 30, 2018, we recognized a loss on sale related to our interests in Reckson Executive Park ($2.6 million).
Depreciable real estate reserves and impairment
During the three months ended September 30, 2019, we recognized depreciable real estate reserves and impairment related to 1010 Washington Boulevard ($7.0 million). During the three months ended September 30, 2018, we recognized depreciable real estate reserves and impairment related to the Upper East Side Residential Assemblage ($6.7 million).
Comparison of the nine months ended September 30, 2019 to the nine months ended September 30, 2018
The following comparison for the nine months ended September 30, 2019, or 2019, to the nine months ended September 30, 2018, or 2018, makes reference to the effect of the following:
i.
“Same-Store Properties,” which represents all operating properties owned by us at January 1, 2018 and still owned by us in the same manner at September 30, 2019 (Same-Store Properties totaled 39 of our 49 consolidated operating properties),
ii.“Acquisition Properties,” which represents all properties or interests in properties acquired in 2019 and 2018 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 2019 and 2018, and
iv.“Other,” which represents properties that were partially sold 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) 2019 2018 
$
Change
 
%
Change
 2019 2018 2019 2018 2019 2018 
$
Change
 
%
Change
Rental revenue $706.5
 $690.6
 $15.9
 2.3 % $
 $9.7
 $26.6
 $30.8
 $733.1
 $731.1
 $2.0
 0.3 %
Investment income 3.3
 3.5
 (0.2) (5.7)% 
 
 149.9
 140.0
 153.2
 143.5
 9.7
 6.8 %
Other income 8.9
 8.0
 0.9
 11.3 % 4.1
 1.5
 31.6
 26.3
 44.6
 35.8
 8.8
 24.6 %
Total revenues 718.7
 702.1
 16.6
 2.4 % 4.1
 11.2
 208.1
 197.1
 930.9
 910.4
 20.5
 2.3 %
                         
Property operating expenses 318.2
 304.4
 13.8
 4.5 % 0.2
 5.1
 25.4
 29.8
 343.8
 339.3
 4.5
 1.3 %
Transaction related costs 0.4
 0.7
 (0.3) (42.9)% 
 
 
 
 0.4
 0.7
 (0.3) (42.9)%
Marketing, general and administrative 75.3
 66.5
 8.8
 13.2 % 
 
 
 0.1
 75.3
 66.6
 8.7
 13.1 %
  393.9
 371.6
 22.3
 6.0 % 0.2
 5.1
 25.4
 29.9
 419.5
 406.6
 12.9
 3.2 %
                         
Other income (expenses):                        
Interest expense and amortization of deferred financing costs, net of interest income                 (154.4) (166.4) 12.0
 (7.2)%
Depreciation and amortization                 (208.3) (208.0) (0.3) 0.1 %
Equity in net (loss) income from unconsolidated joint ventures                 (22.6) 9.7
 (32.3) (333.0)%
Equity in net gain on sale of interest in unconsolidated joint venture/real estate                 76.2
 136.5
 (60.3) (44.2)%

61


Purchase price and other fair value adjustments                 69.4
 57.4
 12.0
 20.9 %
Gain (loss) on sale of real estate, net                 2.5
 6.2
 (3.7) (59.7)%
Depreciable real estate reserves and impairment                 (7.0) (6.7) (0.3) 4.5 %
Loss on early extinguishment of debt                 
 (2.2) 2.2
 (100.0)%
Loan loss and other investment reserves, net of recoveries                 
 (1.1) 1.1
 (100.0)%
Net income                 $267.2
 $329.2
 $(62.0) (18.8)%
Rental Revenue
Rental revenue increased primarily as a result of increased revenue at our Same-Store properties ($15.9 million), partially offset by our Disposed Properties ($9.7 million) and Acquired Properties ($5.2 million).
The following table presents a summary of the commenced leasing activity for the nine months ended September 30, 2019 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 period1,306,846
  
    
  
  
  
Property no longer in redevelopment96,857
            
Sold Vacancies(16,837)            
Acquired Vacancies
            
Property in redevelopment
            
Space which became available during the period (3)


  
    
  
  
  
•       Office668,180
  
  
  
  
  
  
•       Retail59,984
  
  
  
  
  
  
•       Storage13,886
  
  
  
  
  
  
 742,050
  
  
  
  
  
  
Total space available2,128,916
  
  
  
  
  
  
Leased space commenced during the period: 
  
  
  
  
  
  
•       Office(4)
737,340
 803,552
 $74.17
 $68.79
 $90.37
 6.6
 14.6
•       Retail9,361
 10,989
 $146.10
 $102.92
 $54.18
 5.9
 14.1
•       Storage6,237
 10,080
 $21.46
 $31.07
 $
 2.0
 16.3
Total leased space commenced752,938
 824,621
 $74.48
 $69.20
 $88.78
 6.6
 14.6
 

            
Total available space at end of period1,375,978
  
  
  
  
  
  
              
Early renewals 
 

  
  
  
  
  
•       Office279,964
 304,653
 $69.43
 $65.26
 $33.15
 3.2
 7.9
•       Retail67,394
 56,576
 $72.00
 $70.42
 $
 
 1.5
•       Storage13,745
 17,968
 $32.18
 $37.53
 $
 8.5
 15.0
Total early renewals361,103
 379,197
 $68.05
 $64.72
 $26.63
 3.0
 7.2
              
Total commenced leases, including replaced previous vacancy 
  
          
•       Office  1,108,205
 $72.87
 $67.32
 $74.64
 5.7
 12.8
•       Retail 
 67,565
 $84.05
 $75.25
 $8.81
 1.0
 3.5
•       Storage 
 28,048
 $28.33
 $36.34
 $
 6.2
 15.5
Total commenced leases  1,203,818
 $72.46
 $67.13
 $69.20
 5.4
 12.3

62


 
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)
Suburban 
  
  
  
  
  
  
Space available at beginning of period202,480
  
  
  
  
  
  
Space which became available during the year (3)
   
  
  
  
  
  
•       Office94,393
  
  
  
  
  
  
•       Retail1,261
  
  
  
  
  
  
•       Storage1,888
  
  
  
  
  
  
 97,542
  
  
  
  
  
  
Total space available300,022
  
  
  
  
  
  
Leased space commenced during the year: 
    
  
  
  
  
•       Office(5)
49,657
 49,594
 $32.96
 $33.62
 $12.89
 3.0
 4.2
•       Retail3,797
 3,797
 $11.46
 $19.74
 $
 
 10.8
•       Storage1,395
 2,021
 $14.17
 $13.95
 $
 
 3.9
Total leased space commenced54,849
 55,412
 $30.80
 $32.21
 $11.53
 2.7
 4.7
              
Total available space at end of period245,173
  
          
              
Early renewals 
  
          
•       Office103,221
 102,521
 $36.40
 $37.29
 $10.74
 6.7
 7.5
•       Storage248
 248
 $18.00
 $18.00
 $
 
 10.8
Total early renewals103,469
 102,769
 $36.35
 $37.25
 $10.72
 6.6
 7.5
              
Total commenced leases, including replaced previous vacancy 
  
  
  
  
  
  
•       Office 
 152,115
 $35.27
 $36.45
 $11.44
 5.5
 6.4
•       Retail 
 3,797
 $11.46
 $19.74
 $
 
 10.8
•       Storage 
 2,269
 $14.59
 $14.49
 $
 
 4.7
Total commenced leases 
 158,181
 $34.41
 $36.01
 $11.00
 5.3
 6.5
(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 $73.37 per rentable square feet for 426,824 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 731,477 rentable square feet.
(5)Average starting office rent excluding new tenants replacing vacancies was $34.86 per rentable square feet for 30,581 rentable square feet. Average starting office rent for office space (leased and early renewals, excluding new tenants replacing vacancies) was $36.04 per rentable square feet for 133,102 rentable square feet.
Investment Income
For the nine months ended September 30, 2019, investment income increased primarily as a result of an increase in the weighted average balance of our debt and preferred equity investments. For the nine months ended September 30, 2019 and 2018, the weighted average debt and preferred equity investment balance outstanding and weighted average yield were $2.2 billion and 8.9%, respectively, compared to $2.1 billion and 9.0%, respectively. As of September 30, 2019, the debt and preferred equity investments had a weighted average term to maturity of 1.6 years excluding extension options.
Other Income
Other income increased primarily due to promote income recognized from the sale of 521 Fifth Avenue ($3.4 million) in the second quarter of 2019, as well as a tax refund received at 220 East 42nd Street ($2.5 million), and lease termination income at 304 Park Avenue South ($2.7 million), both in the third quarter of 2019.
Property Operating Expenses
Property operating expenses increased primarily due to increased operating expenses and real estate taxes at our Same-Store Properties ($7.2 million and $6.7 million, respectively), partially offset by decreased operating expenses and real estate taxes at our Disposed Properties ($3.1 million and $1.8 million, respectively).

63


Marketing, General and Administrative Expenses
Marketing, general and administrative expenses were $75.3 million for the nine months ended September 30, 2019, compared to $66.6 million for the same period in 2018. Marketing, general and administrative expenses for the nine months ended September 30, 2019 includes $6.6 million of additional expense related to new accounting guidance for leasing costs, which requires the Company to expense certain internal costs that were previously capitalized.
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 1 Madison loan repayment in the fourth quarter of 2018 ($21.2 million) and interest capitalization in connection with properties that are under development ($10.8 million), partially offset by a higher weighted average balance of the 2017 term loan facility ($17.3 million). The weighted average consolidated debt balance outstanding was $6.1 billion for the nine months ended September 30, 2019, compared to $5.7 billion for the nine months ended September 30, 2018. The consolidated weighted average interest rate was 4.05% for the nine months ended September 30, 2019, as compared to 4.06% for the nine months ended September 30, 2018.
Depreciation and Amortization
Depreciation and amortization increased primarily as a result of 712 Madison Avenue ($4.1 million), and 133 Greene Street ($1.2 million) which are newly acquired properties that started depreciating in the fourth quarter of 2018, partially offset by the acceleration of amortization related to the redevelopment of 609 5th Avenue in the first quarter of 2018 ($3.4 million), as well as depreciation and amortization related to 641 Sixth Avenue ($1.1 million).
Equity in Net (Loss) Income in Unconsolidated Joint Venture
Equity in net income from unconsolidated joint ventures decreased primarily as a result of a tenant related charge at 280 Park Avenue ($6.9 million), depreciation at 650 5th Avenue ($8.6 million) and 2 Herald Square ($6.4 million), the sale of 3 Columbus Circle in the fourth quarter of 2018 ($4.6 million), and a debt position accounted for under the equity method in 2018 ($4.3 million).
Equity in net gain on sale of interest in unconsolidated joint venture/real estate
During the nine months ended September 30, 2019, we recognized a gain on the sale of our interests in 521 5th Avenue ($57.4 million) and 131 Spring Street ($16.7 million). During the nine months ended September 30, 2018, we recognized a gain on sale related to our joint venture interests in 724 Fifth Avenue ($64.6 million), 1745 Broadway ($52.0 million), 175-225 Third Avenue ($19.4 million), 720 Fifth Avenue ($6.3 million) and Jericho Plaza ($0.3 million) and a loss related to the sale of our interest in Stonehenge Village ($5.5 million).
Purchase price and other fair value adjustments
During the nine months ended September 30, 2019, the Company sold a 49% interest in 115 Spring Street to a private investor. The transaction resulted in the deconsolidation of our remaining 51% interest. We recorded our investment at fair value which resulted in the recognition of a fair value adjustment of $3.8 million.
In May 2019, the Company closed on the acquisition of a majority and controlling interest in 460 West 34th Street. We recorded the assets acquired and liabilities assumed at fair value which resulted in the recognition of a fair value adjustment of $67.6 million, which is reflected on the Company's consolidated statement of operations within purchase price and other fair value adjustments. This fair value was allocated to the assets and liabilities, including identified intangibles of the property.
In January 2018, the partnership agreement for our investment in 919 Third Avenue was modified resulting in our partner now having substantive participating rights in the venture and the Company no longer having a controlling interest in the investment. As a result the investment in this property was deconsolidated as of January 1, 2018. The Company recorded its non-controlling interest at fair value resulting in a $49.3 million fair value adjustment in the consolidated statement of operations. This fair value was allocated to the assets and liabilities, including identified intangibles of the property.
In May, 2018, the Company was the successful bidder at the foreclosure of 2 Herald Square, at which time the Company's $250.5 million outstanding principal balance and $7.7 million accrued interest balance receivables were credited to our equity investment in the property. We recorded the assets acquired and liabilities assumed at fair value. This resulted in the recognition of a fair value adjustment of $8.1 million, which is reflected on the Company's consolidated statement of operations within purchase price and other fair value adjustments. This fair value was allocated to the assets and liabilities, including identified intangibles of the property.

64


Gain (loss) on sale of real estate, net
During the nine months ended September 30, 2019, the Company recognized a gain on sale of $3.6 million related to our interest in 115 Spring Street. During the nine months ended September 30, 2018, we recognized a gain on sale related to our interests in 600 Lexington ($23.6 million) and we recognized a loss on sale related to our interest in 635 Madison ($14.1 million), Reckson Executive Park ($2.6 million) and 115-117 Stevens Avenue ($0.7 million).
Depreciable real estate reserves and impairment
During the nine months ended September 30, 2019, we recognized depreciable real estate reserves and impairment related to 1010 Washington Boulevard ($7.0 million). During the nine months ended September 30, 2018, we recognized depreciable real estate reserves and impairment related to the Upper East Side Residential Assemblage ($6.7 million).
Liquidity and Capital Resources
We currently expect that our 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 and for debt and preferred equity investments will include:
(1)Cash flow from operations;
(2)Liquidity on hand;
(3)Net proceeds from divestitures of properties and redemptions, participations and dispositions of debt and preferred equity investments;
(4)Borrowings under the 2017 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 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 and our share of joint venture debt, including as-of-right extension options, as of September 30, 2019 were as follows (in thousands):
 Remaining 2019 2020 2021 2022 2023 Thereafter Total
Property mortgages and other loans$2,307
 $26,641
 $246,539
 $746,882
 $57,301
 $1,145,406
 $2,225,076
MRA and FHLB facilities14,500
 215,107
 
 
 
 
 229,607
Corporate obligations
 250,000
 350,000
 800,000
 1,635,000
 400,000
 3,435,000
Joint venture debt-our share10,700
 804,143
 704,174
 268,968
 311,452
 1,831,026
 3,930,463
Total$27,507
 $1,295,891
 $1,300,713
 $1,815,850
 $2,003,753
 $3,376,432
 $9,820,146
As of September 30, 2019, we had liquidity of $1.4 billion, comprised of $1.2 billion of availability under our revolving credit facility and $152.0 million of consolidated cash on hand, inclusive of $30.2 million of marketable securities. We expect to generate positive cash flow from operations for the foreseeable future. We may seek to divest of properties or interests in properties 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.

65


Cash, cash equivalents, and restricted cash were $216.5 million and $258.6 million at September 30, 2019 and 2018, respectively, representing a decrease of $42.0 million. The decrease was a result of the following changes in cash flows (in thousands):
 Nine Months Ended September 30,
 2019 2018 Change
Net cash provided by operating activities$299,433
 $317,545
 $(18,112)
Net cash (used in) provided by investing activities$(240,900) $500,232
 $(741,132)
Net cash used in financing activities$(121,102) $(809,211) $688,109
Our principal source of operating cash flow is related to the leasing and operating of the properties in our portfolio. Our properties provide a relatively consistent stream of cash flow that provides us with resources to pay operating expenses, debt service and fund quarterly dividend and distribution requirements. Our debt and preferred equity investments and joint venture investments also provide a steady stream of operating cash flow to us.
Cash is used in investing activities to fund acquisitions, development or redevelopment projects and recurring and nonrecurring capital expenditures. We selectively invest in new projects that enable us to take advantage of our development, leasing, financing and property management skills and invest in existing buildings that meet our investment criteria. During the nine months ended September 30, 2019, when compared to the nine months ended September 30, 2018, the change in investing cash flows was due to the following activities (in thousands):
Acquisitions of real estate property$(221,317)
Additions to land, buildings and improvements13,008
Acquisition deposits and deferred purchase price(228)
Investments in unconsolidated joint ventures184,786
Distributions in excess of cumulative earnings from unconsolidated joint ventures(146,148)
Net proceeds from disposition of real estate/joint venture interest(753,402)
Other investments(3,482)
Origination of debt and preferred equity investments96,358
Repayments or redemption of debt and preferred equity investments89,293
Decrease in net cash provided by investing activities$(741,132)
Funds spent on capital expenditures, which are comprised of building and tenant improvements, decreased from $163.8 million for the nine months ended September 30, 2018 to $150.7 million for the nine months ended September 30, 2019.
We generally fund our investment activity through the sale of real estate, property-level financing, our credit facilities, our MRA facility, senior unsecured notes, convertible or exchangeable securities, and construction loans. From time to time, the Company may issue common or preferred stock, or the Operating Partnership may issue common or preferred units of limited partnership interest.

66


During the nine months ended September 30, 2019, when compared to the nine months ended September 30, 2018, we used cash for the following financing activities (in thousands):
Proceeds from mortgages and other loans payable$359,947
Repayments of mortgages and other loans payable189,056
Proceeds from revolving credit facility and senior unsecured notes(1,115,000)
Repayments of revolving credit facility and senior unsecured notes745,000
Proceeds from stock options exercised and DRSPP issuance(15,387)
Repurchase of common stock585,068
Redemption of preferred units(14,792)
Redemption of OP units(15,918)
Distributions to noncontrolling interests in other partnerships1,385
Contributions from noncontrolling interests in other partnerships(27)
Acquisition of subsidiary interest from noncontrolling interest(25,791)
Distributions to noncontrolling interests in the Operating Partnership476
Dividends paid on common and preferred stock6,203
Other obligations related to loan participations(16)
Tax withholdings related to restricted share awards716
Deferred loan costs and capitalized lease obligation(12,811)
Decrease in net cash used in financing activities$688,109
Capitalization
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, $0.01 par value per share. As of September 30, 2019, 81,515,066 shares of common stock and no shares of excess stock were issued and outstanding.
Share Repurchase Program
In August 2016, our Board of Directors approved a share repurchase program under which we can repurchase up to $1.0 billion of shares of our common stock. The Board of Directors has since authorized three separate $500.0 million increases to the size of the share repurchase program in the fourth quarter of 2017, second quarter of 2018, and fourth quarter of 2018 bringing the total program size to $2.5 billion.
At September 30, 2019, repurchases executed under the program were as follows:
PeriodShares repurchasedAverage price paid per shareCumulative number of shares repurchased as part of the repurchase plan or programs
Year ended 20178,342,411$101.648,342,411
Year ended 20189,744,911$96.2218,087,322
First quarter 2019397,783$86.0718,485,105
Second quarter 2019866,924$86.5819,352,029
Third quarter 2019 (1)
916,439$81.3120,268,468
(1)Includes 108,300 shares of common stock repurchased by the Company in September 2019 that were settled in October 2019.

67


Dividend Reinvestment and Stock Purchase Plan ("DRSPP")
The following table summarizes SL Green common stock issued, and proceeds received from dividend reinvestments and/or stock purchases under the DRSPP for the nine months ended September 30, 2019 and 2018, respectively (dollars in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Shares of common stock issued490
 509
 3,485
 1,183
Dividend reinvestments/stock purchases under the DRSPP$39
 $52
 $303
 $116
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 board of directors in April 2016 and its stockholders in June 2016 at the Company's annual meeting of stockholders. 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 as options, restricted stock, phantom shares, dividend equivalent rights and other equity-based awards under the 2005 Plan. As of September 30, 2019, 4.9 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.
Deferred Compensation Plan for Directors
During the nine months ended September 30, 2019, 17,227 phantom stock units and 9,869 shares of common stock were issued to our board of directors. We recorded compensation expense of $0.2 million and $2.2 million during the three and nine months ended September 30, 2019, respectively, related to the Deferred Compensation Plan. We recorded compensation expense of $0.1 million and $2.2 million during the three and nine months ended September 30, 2018, respectively, related to the Deferred Compensation Plan.
As of September 30, 2019, there were 127,505 phantom stock units outstanding pursuant to our Non-Employee Director's Deferral Program.

68


Indebtedness
The table below summarizes our consolidated mortgages and other loans payable, 2017 credit facility, senior unsecured notes and trust preferred securities outstanding at September 30, 2019 and December 31, 2018, (amounts in thousands).
Debt Summary:September 30, 2019 December 31, 2018
Balance   
Fixed rate$2,538,829
 $2,543,476
Variable rate—hedged1,000,000
 1,000,000
Total fixed rate3,538,829
 3,543,476
Total variable rate2,353,927
 2,048,442
Total debt$5,892,756
 $5,591,918
    
Debt, preferred equity, and other investments subject to variable rate1,019,740
 1,299,390
Net exposure to variable rate debt1,334,187
 749,052
 
  
Percent of Total Debt:
   
Fixed rate60.1% 63.4%
Variable rate (1)
39.9% 36.6%
Total100.0% 100.0%
Effective Interest Rate for the Year:   
Fixed rate4.05% 4.34%
Variable rate4.05% 3.57%
Effective interest rate4.04% 4.06%
(1)Inclusive of the mitigating effect of our debt, preferred equity, and other investments subject to variable rate, the percent of total debt of our net exposure to variable rate debt was 27.4% and 17.5% as of September 30, 2019 and December 31, 2018, respectively.
The variable rate debt shown above generally bears interest at an interest rate based on 30-day LIBOR (2.02% and 2.50% at September 30, 2019 and December 31, 2018, respectively). Our consolidated debt at September 30, 2019 had a weighted average term to maturity of 3.44 years.
Certain of our debt and equity investments and other investments, with carrying values of $1.0 billion at September 30, 2019 and $1.3 billion at December 31, 2018, are variable rate investments which mitigate our exposure to interest rate changes on our unhedged variable rate debt. Inclusive of the mitigating effect of these investments, the net percent of our variable rate debt to total debt was 27.4% and 17.5% , respectively.
2017 Credit Facility
In November 2017, we entered into an amendment to the credit facility, referred to as the 2017 credit facility, that was originally entered into by the Company in November 2012, or the 2012 credit facility. As of September 30, 2019, the 2017 credit facility consisted of a $1.5 billion revolving credit facility, a $1.3 billion term loan (or "Term Loan A"), and a $200.0 million term loan (or "Term Loan B") with maturity dates of March 31, 2022, March 31, 2023, and November 21, 2024, respectively. The revolving credit facility has two six-month as-of-right extension options to March 31, 2023. We also have an option, subject to customary conditions, to increase the capacity of the credit facility to $4.5 billion at any time prior to the maturity dates 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, 2019, the 2017 credit facility bore interest at a spread over 30-day LIBOR ranging from (i) 82.5 basis points to 155 basis points for loans under the revolving credit facility, (ii) 90 basis points to 175 basis points for loans under Term Loan A, and (iii) 150 basis points to 245 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 the Company.
In May 2019, we entered into an agreement to reduce the interest rate spread under Term Loan B by 65 basis points to a spread over 30-day LIBOR ranging from 85 basis points to 165 basis points. This reduction will be effective in November 2019.
At September 30, 2019, the applicable spread was 100 basis points for the revolving credit facility, 110 basis points for Term Loan A, and 165 basis points for 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 the Company. As of September 30, 2019, the facility fee was 20 basis points.

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As of September 30, 2019, we had $11.8 million of outstanding letters of credit, $335.0 million drawn under the revolving credit facility and $1.5 billion outstanding under the term loan facilities, with total undrawn capacity of $1.2 billion under the 2017 credit facility. At September 30, 2019 and December 31, 2018, the revolving credit facility had a carrying value of $328.5 million and $492.2 million, respectively, net of deferred financing costs. At September 30, 2019 and December 31, 2018, the term loan facilities had a carrying value of $1.5 billion and $1.5 billion, respectively, net of deferred financing costs.
The Company and the Operating Partnership are borrowers jointly and severally obligated under the 2017 credit facility.
The 2017 credit facility includes certain restrictions and covenants (see Restrictive Covenants below).
Restrictive Covenants
The terms of the 2017 credit facility 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, 2019 and December 31, 2018, we were in compliance with all such covenants.
Interest Rate Risk
We are exposed to changes in interest rates primarily from our variable rate debt. Our exposure to interest rate fluctuations are managed through either the use of interest rate derivative instruments and/or through our variable rate debt and preferred equity investments. Based on the debt outstanding as of September 30, 2019, a hypothetical 100 basis point increase in the floating rate interest rate curve would increase our consolidated annual interest cost, net of interest income from variable rate debt and preferred equity investments, by $12.7 million and would increase our share of joint venture annual interest cost by $16.1 million. At September 30, 2019, 52.3% of our $2.0 billion debt and preferred equity portfolio is indexed to LIBOR.
We recognize most derivatives on the balance sheet at fair value. Derivatives that are not hedges are adjusted to fair value through income. If a derivative is considered 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 hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings.
Our long-term debt of $3.5 billion bears interest at fixed rates, and therefore the fair value of these instruments is affected by changes in the market interest rates. Our variable rate debt and variable rate joint venture debt as of September 30, 2019 bore interest based on a spread of LIBOR plus 18 basis points to LIBOR plus 340 basis points.
Contractual Obligations
Refer to our 2018 Annual Report on Form 10-K for a discussion of our contractual obligations. There have been no material changes, outside the ordinary course of business, to these contractual obligations during the three months ended September 30, 2019.
Off-Balance Sheet Arrangements
We have off-balance sheet investments, including joint ventures and debt and preferred equity investments. These investments all have varying ownership structures. Substantially all of our joint venture arrangements are accounted for under the equity method of accounting as we have the ability to exercise significant influence, but not control, over the operating and financial decisions of these joint venture arrangements. Our off-balance sheet arrangements are discussed in Note 5, "Debt and Preferred Equity Investments" and Note 6, "Investments in Unconsolidated Joint Ventures" in the accompanying consolidated financial statements.
Capital Expenditures
We estimate that for the remainder of the year ending December 31, 2019, we expect to incur $25.9 million of recurring capital expenditures and $38.8 million of development or redevelopment expenditures on existing consolidated properties, and our share of capital expenditures at our joint venture properties will be $123.4 million. Future property acquisitions may require substantial capital investments for refurbishment and leasing costs. We expect to fund these capital expenditures with operating cash flow, existing liquidity, or incremental borrowings. We expect our capital needs over the next twelve months and thereafter will be met through a combination of cash on hand, net cash provided by operations, potential asset sales, or additional borrowings.
Dividends/Distributions
We expect to pay cash dividends to our stockholders based on the distributions we receive from our Operating Partnership primarily from property revenues net of operating expenses or, if necessary, from working capital.

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To maintain our qualification as a REIT, we must pay annual dividends to our stockholders of at least 90% of our REIT taxable income, determined before taking into consideration the dividends paid deduction and net capital gains. We intend to continue to pay regular quarterly dividends to our stockholders. Based on our current annual dividend rate of $3.40 per share, we would pay $277.2 million in cash dividends to our common stockholders on an annual basis.
Any dividend we pay may be in the form of cash, stock or a combination thereof. Additionally, if our REIT taxable income in a particular year exceeds the amount of cash dividends we pay in that year, we may pay stock dividends in order to maintain our REIT status and avoid certain REIT-level taxes.
Before we pay any cash dividend, whether for Federal income tax purposes or otherwise, which would only be paid out of available cash to the extent permitted under the 2017 credit facility and senior unsecured notes, we must first meet both our operating requirements and scheduled debt service on our mortgages and loans payable.
Insurance
We maintain “all-risk” property and rental value coverage (including coverage regarding the perils of flood, earthquake and terrorism, excluding nuclear, biological, chemical, and radiological terrorism ("NBCR")), within three property insurance programs and liability insurance. Separate property and liability coverage may be purchased on a stand-alone basis for certain assets, such as the development of One Vanderbilt. Additionally, one of our captive insurance companies, Belmont Insurance Company, or Belmont, provides coverage for NBCR terrorist acts above a specified trigger. Belmont's retention is reinsured by our other captive insurance company, Ticonderoga Insurance Company ("Ticonderoga"). If Belmont or Ticonderoga are required to pay a claim under our insurance policies, we would ultimately record the loss to the extent of required payments. However, there is no assurance that in the future we will be able to procure coverage at a reasonable cost. Further, if we experience losses that are uninsured or that exceed policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. Additionally, our debt instruments contain customary covenants requiring us to maintain insurance and we could default under our debt instruments if the cost and/or availability of certain types of insurance make it impractical or impossible to comply with such covenants relating to insurance. Belmont and Ticonderoga provide coverage solely on properties owned by the Company or its affiliates.
Furthermore, with respect to certain of our properties, including properties held by joint ventures or subject to triple net leases, insurance coverage is obtained by a third-party and we do not control the coverage. While we may have agreements with such third parties to maintain adequate coverage and we monitor these policies, such coverage ultimately may not be maintained or adequately cover our risk of loss.
Funds from Operations
FFO is a widely recognized non-GAAP financial measure of REIT performance. The Company computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or Nareit, which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the Nareit definition, or that interpret the Nareit definition differently than the Company does. The revised White Paper on FFO approved by the Board of Governors of Nareit in April 2002, and subsequently restated in December 2018, defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of properties and real estate related impairment charges, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.
The Company presents FFO because it considers it an important supplemental measure of the Company’s operating performance and believes that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, particularly those that own and operate commercial office properties. The Company also uses FFO as one of several criteria to determine performance-based bonuses for members of its senior management. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions, and real estate related impairment charges, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, and interest costs, providing perspective not immediately apparent from net income. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of the Company’s financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company’s liquidity, nor is it indicative of funds available to fund the Company’s cash needs, including our ability to make cash distributions.

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FFO for the three and nine months ended September 30, 2019 and 2018 are as follows (in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2019 2018 2019 2018
Net income attributable to SL Green common stockholders$33,157
 $88,209
 $238,052
 $293,531
Add:       
Depreciation and amortization70,464
 70,747
 208,268
 208,049
Joint venture depreciation and noncontrolling interest adjustments47,674
 45,485
 145,202
 140,799
Net income attributable to noncontrolling interests1,095
 4,661
 9,782
 15,890
Less:       
Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 70,937
 76,181
 136,522
Depreciable real estate reserves and impairment(7,047) (6,691) (7,047) (6,691)
Gain (loss) on sale of real estate, net3,541
 (2,504) 2,492
 6,227
Purchase price and other fair value adjustments3,799
 (3,057) 69,389
 57,385
Depreciation on non-rental real estate assets740
 616
 2,193
 1,766
Funds from Operations attributable to SL Green common stockholders$151,357
 $149,801
 $458,096
 $463,060
Cash flows (used in) provided by operating activities$81,518
 $71,333
 $299,433
 $317,545
Cash flows (used in) provided by investing activities$225,504
 $232,168
 $(240,900) $500,232
Cash flows provided by (used in) financing activities$(331,625) $(424,889) $(121,102) $(809,211)
Inflation
Substantially all of our office leases provide for separate real estate tax and operating expense escalations as well as operating expense recoveries based on increases in the Consumer Price Index or other measures such as porters' wage. In addition, many of the leases provide for fixed base rent increases. We believe that inflationary increases will be at least partially offset by the contractual rent increases and expense escalations described above.
Accounting Standards Updates
The Accounting Standards Updates are discussed in Note 2, "Significant Accounting Policies-Accounting Standards Updates" in the accompanying consolidated financial statements.
Forward-Looking Information
This report includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be covered by the safe harbor provisions thereof. All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, including such matters as future capital expenditures, dividends and acquisitions (including the amount and nature thereof), development trends of the real estate industry and the New York metropolitan area markets, business strategies, expansion and growth of our operations and other similar matters, are forward-looking statements. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate.
Forward-looking statements are not guarantees of future performance and actual results or developments may differ materially, and we caution you not to place undue reliance on such statements. Forward-looking statements are generally identifiable by the use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," "project," "continue," or the negative of these words, or other similar words or terms.
Forward-looking statements contained in this report are subject to a number of risks and uncertainties that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by forward-looking statements made by us. These risks and uncertainties include:
the effect of general economic, business and financial conditions, and their effect on the New York City real estate market in particular;
dependence upon certain geographic markets;
risks of real estate acquisitions, dispositions, development and redevelopment, including the cost of construction delays and cost overruns;

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risks relating to debt and preferred equity investments;
availability and creditworthiness of prospective tenants and borrowers;
bankruptcy or insolvency of a major tenant or a significant number of smaller tenants or borrowers;
adverse changes in the real estate markets, including reduced demand for office space, increasing vacancy, and increasing availability of sublease space;
availability of capital (debt and equity);
unanticipated increases in financing and other costs, including a rise in interest rates;
our ability to comply with financial covenants in our debt instruments;
our ability to maintain our status as a REIT;
risks of investing through joint venture structures, including the fulfillment by our partners of their financial obligations;
the threat of terrorist attacks;
our ability to obtain adequate insurance coverage at a reasonable cost and the potential for losses in excess of our insurance coverage, including as a result of environmental contamination; and
legislative, regulatory and/or safety requirements adversely affecting REITs and the real estate business including costs of compliance with the Americans with Disabilities Act, the Fair Housing Act and other similar laws and regulations.
Other factors and risks to our business, many of which are beyond our control, are described in other sections of this report and in our other filings with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
For quantitative and qualitative disclosure about market risk, see Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operation - Market Risk" in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2019 for the Company and the Operating Partnership and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Rate Risk" in the Annual Report on Form 10-K for the year ended December 31, 2018 for the Company and the Operating Partnership. Our exposures to market risk have not changed materially since December 31, 2018.

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ITEM 4.    CONTROLS AND PROCEDURES
SL GREEN REALTY CORP.
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e) of the Exchange Act. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports. Also, the Company has investments in certain unconsolidated entities. As the Company does not control these entities, its disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those the Company maintains with respect to its consolidated subsidiaries.
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation as of the end of the period covered by this report, the Company's Chief Executive Officer and Chief Financial Officer concluded that its disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to the Company that would potentially be subject to disclosure under the Exchange Act and the rules and regulations promulgated thereunder.
Changes in Internal Control over Financial Reporting
There have been no significant changes in the Company's internal control over financial reporting during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
SL GREEN OPERATING PARTNERSHIP, L.P.
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e) of the Exchange Act. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports. Also, the Company has investments in certain unconsolidated entities. As the Company does not control these entities, its disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those the Company maintains with respect to its consolidated subsidiaries.
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation as of the end of the period covered by this report, the Company's Chief Executive Officer and Chief Financial Officer concluded that its disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to the Company that would potentially be subject to disclosure under the Exchange Act and the rules and regulations promulgated thereunder.
Changes in Internal Control over Financial Reporting
There have been no significant changes in the Operating Partnership's internal control over financial reporting during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

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PART II. OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS
As of September 30, 2019, 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.
ITEM 1A.    RISK FACTORS
As of September 30, 2019 there have been no material changes to the Risk Factors disclosed in "Part I. Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended September 30, 2019 the Company and the Operating Partnership did not have any unregistered sales of equity securities. During the nine months ended September 30, 2019 the Operating Partnership issued 40,000 units of limited partnership interest in connection with an acquisition. SL Green may satisfy redemption requests for the units issued in the transaction described above with shares of SL Green’s common stock pursuant to the Operating Partnership agreement. The units were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.
In August 2016, our Board of Directors approved a share repurchase program under which we can buy up to $1.0 billion of shares of our common stock. The Board of Directors has since authorized three separate $500.0 million increases to the size of the share repurchase program in the fourth quarter of 2017, second quarter of 2018, and fourth quarter of 2018, bringing the total program size to $2.5 billion.
At September 30, 2019, repurchases executed under the program were as follows:
PeriodShares repurchasedAverage price paid per shareTotal number of shares repurchased as part of the repurchase plan or programs
Year ended 20178,342,411$101.648,342,411
Year ended 20189,744,911$96.2218,087,322
First quarter 2019397,783$86.0718,485,105
Second quarter 2019866,924$86.5819,352,029
Third quarter 2019 (1)
916,439$81.3120,268,468
(1)Includes 108,300 shares of common stock repurchased by the Company in September 2019 that were settled in October 2019.
ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
None.

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ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.

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ITEM 5. OTHER INFORMATION
None.

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ITEM 6.   EXHIBITS

Twenty-Sixth Amendment to the First Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of May 1, 2019, incorporated by reference to the Company's Form 8-K, dated as of May 3, 2019, filed with the SEC on May 3, 2019.

Certification by the Chairman and Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

Certification by the Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

Certification by the Chairman and Chief Executive Officer of the Company, the sole general partner of the Operating Partnership pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

Certification by the Chief Financial Officer of the Company, the sole general partner of the Operating Partnership pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

Certification by the Chairman and Chief Executive Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

Certification by the Chief Financial Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

Certification by the Chairman and Chief Executive Officer of the Company, the sole general partner of the Operating Partnership pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

Certification by the Chief Financial Officer of the Company, the sole general partner of the Operating Partnership pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
     
  SL GREEN REALTY CORP.
  By:  SL Green Realty Corp.
     
    /s/ Matthew J. DiLiberto
Dated: November 5, 2019 By: 
Matthew J. DiLiberto
 Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
SignaturesTitleDate
   
/s/ Marc HollidayChairman of the Board of Directors and Chief Executive Officer and Director of SL Green, the sole general partner of the Operating Partnership (Principal Executive Officer)November 5, 2019
Marc Holliday
   
/s/ Andrew W. MathiasPresident and Director of SL Green, the sole general partner of the Operating PartnershipNovember 5, 2019
Andrew W. Mathias
   
/s/ Matthew J. DiLiberto
Chief Financial Officer of
SL Green, the sole general partner of
the Operating Partnership (Principal Financial and Accounting Officer)
November 5, 2019
Matthew J. DiLiberto
   
/s/ Stephen L. Green
Director of SL Green, the sole general
partner of the Operating Partnership
November 5, 2019
Stephen L. Green
   
/s/ John H. Alschuler, Jr.
Director of SL Green, the sole general
partner of the Operating Partnership
November 5, 2019
John H. Alschuler, Jr.
   
/s/ Edwin T. Burton, III
Director of SL Green, the sole general
partner of the Operating Partnership
November 5, 2019
Edwin T. Burton, III
   
/s/ John S. Levy
Director of SL Green, the sole general
partner of the Operating Partnership
November 5, 2019
John S. Levy
   
/s/ Craig M. Hatkoff
Director of SL Green, the sole general
partner of the Operating Partnership
November 5, 2019
Craig M. Hatkoff
   
/s/ Betsy S. AtkinsDirector of SL Green, the sole general
partner of the Operating Partnership
November 5, 2019
Betsy S. Atkins
   
/s/ Lauren B. DillardDirector of SL Green, the sole general
partner of the Operating Partnership
November 5, 2019
Lauren B. Dillard

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
     
  SL GREEN OPERATING PARTNERSHIP, L.P.
     
  By: /s/ Matthew J. DiLiberto
Dated: November 5, 2019   
Matthew J. DiLiberto
 Chief Financial Officer


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