Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________
FORM 10-Q
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
OR
o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to                
Commission File Number: 1-13199 (SL Green Realty Corp.)
Commission File Number: 33-167793-02 (SL Green Operating Partnership, L.P.)
______________________________________________________________________
SL GREEN REALTY CORP.
SL GREEN OPERATING PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
______________________________________________________________________
SL Green Realty Corp.
Maryland
13-3956755
SL Green Operating Partnership, L.P.
Delaware
13-3960938
 
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
420 Lexington Avenue, New York, NY 10170
(Address of principal executive offices—Zip Code)

(212) 594-2700
(Registrant's telephone number, including area code)
______________________________________________________________________

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
SL Green Realty Corp.
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller Reporting Company o
 
 
 (Do not check if a
smaller reporting
company)
 
SL Green Operating Partnership, L.P.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller Reporting Company o
 
 
(Do not check if a
smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 
SL Green Realty Corp.    Yes o    No x            SL Green Operating Partnership, L.P.    Yes o    No x
As of November 8, 2016, 101,322,189 shares of SL Green Realty Corp.'s common stock, par value $0.01 per share, were outstanding. As of November 8, 2016, 1,497,718 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, 2016 of SL Green Realty Corp. and SL Green Operating Partnership, L.P. Unless stated otherwise or the context otherwise requires, references to "SL Green Realty Corp.," the "Company" or "SL Green" mean SL Green Realty Corp. and its consolidated subsidiaries; and references to "SL Green Operating Partnership, L.P.," the "Operating Partnership" or "SLGOP" mean SL Green Operating Partnership, L.P. and its consolidated subsidiaries. The terms "we," "our" and "us" mean the Company and all the entities owned or controlled by the Company, including the Operating Partnership.
The Company is a Maryland corporation which operates as a self-administered and self-managed real estate investment trust, or REIT, and is the sole managing general partner of the Operating Partnership. As a general partner of the Operating Partnership, the Company has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership.
As of September 30, 2016, the Company owned 95.71% of the outstanding general and limited partnership interest in the Operating Partnership and noncontrolling investors held, in aggregate, a 4.29% limited partnership interest in the Operating Partnership. The Company also owns 9,200,000 Series I Preferred Units of the Operating Partnership. We refer to these interests as the noncontrolling interests in the Operating Partnership.
The Company and the Operating Partnership are managed and operated as one entity. The financial results of the Operating Partnership are consolidated into the financial statements of the Company. The Company has no significant assets other than its investment in the Operating Partnership. Substantially all of our assets are held by, and our operations are conducted through, the Operating Partnership. Therefore, the assets and liabilities of the Company and the Operating Partnership are substantially the same.
Noncontrolling interests in the Operating Partnership, stockholders' equity of the Company and partners' capital of the Operating Partnership are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The common limited partnership interests in the Operating Partnership not owned by the Company are accounted for as 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
 
 
FINANCIAL STATEMENTS OF SL GREEN REALTY CORP.
 
 
Consolidated Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015
 
Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015 (unaudited)
 
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 and 2015 (unaudited)
 
Consolidated Statement of Equity for the nine months ended September 30, 2016 (unaudited)
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 (unaudited)
 
FINANCIAL STATEMENTS OF SL GREEN OPERATING PARTNERSHIP, L.P.
 
 
Consolidated Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015
 
Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015 (unaudited)
 
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 and 2015 (unaudited)
 
Consolidated Statement of Capital for the nine months ended September 30, 2016 (unaudited)
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 (unaudited)
 
PART II.
OTHER INFORMATION
 
 


Table of Contents


PART I

ITEM 1.

SL Green Realty Corp.
Consolidated Balance Sheets
(in thousands, except per share data)
 
September 30, 2016
 
December 31, 2015
   
(unaudited)
 
 
Assets
 
 
 
Commercial real estate properties, at cost:
 
 
 
Land and land interests
$
3,347,482

 
$
4,779,159

Building and improvements
7,777,647

 
10,423,739

Building leasehold and improvements
1,436,287

 
1,431,259

Properties under capital lease
47,445

 
47,445

 
12,608,861

 
16,681,602

Less: accumulated depreciation
(2,190,142
)
 
(2,060,706
)
 
10,418,719

 
14,620,896

Assets held for sale
117,159

 
34,981

Cash and cash equivalents
405,896

 
255,399

Restricted cash
100,195

 
233,578

Investments in marketable securities
60,352

 
45,138

Tenant and other receivables, net of allowance of $18,278 and $17,618 in 2016 and 2015, respectively
55,976

 
63,491

Related party receivables
14,840

 
10,650

Deferred rents receivable, net of allowance of $24,922 and $21,730 in 2016 and 2015, respectively
430,642

 
498,776

Debt and preferred equity investments, net of discounts and deferred origination fees of $14,630 and $18,759 in 2016 and 2015, respectively
1,453,234

 
1,670,020

Investments in unconsolidated joint ventures
1,860,912

 
1,203,858

Deferred costs, net
252,179

 
239,920

Other assets
620,838

 
850,939

Total assets
$
15,790,942

 
$
19,727,646

Liabilities
 
 
 
Mortgages and other loans payable, net
$
3,954,155

 
$
6,881,920

Revolving credit facility, net

 
985,055

Term loan and senior unsecured notes, net
2,303,657

 
2,308,478

Accrued interest payable
30,734

 
42,406

Other liabilities
211,513

 
168,477

Accounts payable and accrued expenses
178,946

 
196,213

Deferred revenue
237,548

 
399,102

Capital lease obligations
41,951

 
41,360

Deferred land leases payable
2,419

 
1,783

Dividend and distributions payable
81,392

 
79,790

Security deposits
67,709

 
68,023

Liabilities related to assets held for sale
65,520

 
29,000

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

 
100,000

Total liabilities
7,275,544

 
11,301,607


4

Table of Contents

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

 
September 30, 2016
 
December 31, 2015
   
(unaudited)
 
 
Commitments and contingencies

 

Noncontrolling interests in Operating Partnership
490,440

 
424,206

Preferred units
302,310

 
282,516

 
 
 
 
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, 2016 and December 31, 2015
221,932

 
221,932

Common stock, $0.01 par value, 160,000 shares authorized and 101,319 and 100,063 issued and outstanding at September 30, 2016 and December 31, 2015, respectively (including 1,055 and 87 shares held in treasury at September 30, 2016 and December 31, 2015, respectively)
1,013

 
1,001

Additional paid-in-capital
5,596,026

 
5,439,735

Treasury stock at cost
(124,049
)
 
(10,000
)
Accumulated other comprehensive loss
(14,074
)
 
(8,749
)
Retained earnings
1,612,707

 
1,643,546

Total SL Green stockholders' equity
7,293,555

 
7,287,465

Noncontrolling interests in other partnerships
429,093

 
431,852

Total equity
7,722,648

 
7,719,317

Total liabilities and equity
$
15,790,942

 
$
19,727,646



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

5

Table of Contents

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,
 
 
2016
 
2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
 
Rental revenue, net
 
$
281,482

 
$
318,465

 
$
1,043,898

 
$
926,020

Escalation and reimbursement
 
53,130

 
48,254

 
147,357

 
130,630

Investment income
 
75,396

 
49,328

 
174,347

 
136,588

Other income
 
6,673

 
16,019

 
124,137

 
44,201

Total revenues
 
416,681

 
432,066

 
1,489,739

 
1,237,439

Expenses
 

 
 
 

 
 
Operating expenses, including $5,042 and $15,171 in 2016 and $5,238 and $13,415 in 2015 of related party expenses
 
79,425

 
78,648

 
234,269

 
225,539

Real estate taxes
 
64,133

 
61,009

 
187,931

 
173,018

Ground rent
 
8,338

 
8,252

 
24,953

 
24,526

Interest expense, net of interest income
 
72,565

 
84,141

 
256,326

 
235,694

Amortization of deferred financing costs
 
4,815

 
7,160

 
20,180

 
19,727

Depreciation and amortization
 
112,665

 
146,185

 
717,015

 
454,087

Transaction related costs
 
2,593

 
5,829

 
5,987

 
10,039

Marketing, general and administrative
 
25,458

 
23,475

 
73,974

 
72,139

Total expenses
 
369,992

 
414,699

 
1,520,635

 
1,214,769

Income (loss) from continuing operations before equity in net (loss) income from unconsolidated joint ventures, equity in net gain on sale of interest in unconsolidated joint venture/real estate, gain on sale of real estate, net, depreciable real estate reserves, loss on sale of investment in marketable securities and loss on early extinguishment of debt
 
46,689

 
17,367

 
(30,896
)
 
22,670

Equity in net (loss) income from unconsolidated joint ventures
 
(3,968
)
 
3,627

 
11,969

 
10,651

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 
225

 
15,281

 
43,588

 
16,050

Gain on sale of real estate, net
 
397

 
159,704

 
210,750

 
159,704

Depreciable real estate reserves
 

 
(19,226
)
 
(10,387
)
 
(19,226
)
Loss on sale of investment in marketable securities
 

 

 
(83
)
 

Loss on early extinguishment of debt
 

 

 

 
(49
)
Income from continuing operations
 
43,343

 
176,753

 
224,941

 
189,800

Net income from discontinued operations
 

 

 

 
427

Gain on sale of discontinued operations
 

 

 

 
12,983

Net income
 
43,343

 
176,753

 
224,941

 
203,210

Net income attributable to noncontrolling interests:
 


 
 
 


 
 
Noncontrolling interests in the Operating Partnership

(1,663
)
 
(6,467
)
 
(8,171
)
 
(6,634
)
Noncontrolling interests in other partnerships

(836
)
 
(665
)
 
(6,245
)
 
(13,217
)
Preferred units distributions

(2,854
)
 
(2,225
)
 
(8,382
)
 
(4,316
)
Net income attributable to SL Green
 
37,990

 
167,396

 
202,143

 
179,043

Perpetual preferred stock dividends
 
(3,738
)
 
(3,738
)
 
(11,213
)
 
(11,214
)
Net income attributable to SL Green common stockholders
 
$
34,252

 
$
163,658

 
$
190,930

 
$
167,829

 
 
 
 
 
 
 
 
 

6

Table of Contents

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,
 
 
2016
 
2015
 
2016
 
2015
Amounts attributable to SL Green common stockholders:
 
 
 
 
 
 
 
 
Income (loss) from continuing operations before depreciable real estate reserves, gains on sale and discontinued operations
 
$
33,657

 
$
13,768

 
$
(43,041
)
 
$
4,357

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 
215

 
14,705

 
41,805

 
15,439

Net income from discontinued operations
 

 

 

 
411

Gain on sale of discontinued operations
 

 

 

 
12,489

Gain on sale of real estate
 
380

 
153,687

 
202,128

 
153,628

Depreciable real estate reserves
 

 
(18,502
)
 
(9,962
)
 
(18,495
)
Net income attributable to SL Green common stockholders
 
$
34,252

 
$
163,658

 
$
190,930

 
$
167,829

Basic earnings per share:
 
 
 
 
 
 
 
 
Income (loss) from continuing operations before depreciable real estate reserves, gains on sale and discontinued operations
 
$
0.34

 
$
0.14

 
$
(0.43
)
 
$
0.04

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 

 
0.15

 
0.42

 
0.16

Net income from discontinued operations
 

 

 

 

Gain on sale of discontinued operations
 

 

 

 
0.13

Gain on sale of real estate
 

 
1.54

 
2.02

 
1.55

Depreciable real estate reserves
 

 
(0.19
)
 
(0.10
)
 
(0.19
)
Net income attributable to SL Green common stockholders
 
$
0.34

 
$
1.64

 
$
1.91


$
1.69

Diluted earnings per share:
 
 
 
 
 
 
 
 
Income (loss) from continuing operations before depreciable real estate reserves, gains on sale and discontinued operations
 
$
0.34

 
$
0.14

 
$
(0.43
)
 
$
0.04

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 

 
0.15

 
0.42

 
0.16

Net income from discontinued operations
 

 

 

 

Gain on sale of discontinued operations
 

 

 

 
0.13

Gain on sale of real estate
 

 
1.54

 
2.01

 
1.54

Depreciable real estate reserves
 

 
(0.19
)
 
(0.10
)
 
(0.19
)
Net income attributable to SL Green common stockholders
 
$
0.34

 
$
1.64

 
$
1.90

 
$
1.68

Dividends per share
 
$
0.72

 
$
0.60

 
$
2.16

 
$
1.80

Basic weighted average common shares outstanding
 
100,233

 
99,621

 
100,140

 
99,205

Diluted weighted average common shares and common share equivalents outstanding
 
105,143

 
103,929

 
104,761

 
103,609



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

7

Table of Contents


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

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Net income

$
43,343

 
$
176,753

 
$
224,941

 
$
203,210

Other comprehensive income (loss):


 
 
 

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

2,632

 
(5,423
)
 
(4,682
)
 
(8,853
)
Change in unrealized (loss) gain on marketable securities

(30
)
 
317

 
(900
)
 
(337
)
Other comprehensive income (loss)

2,602

 
(5,106
)
 
(5,582
)
 
(9,190
)
Comprehensive income

45,945

 
171,647

 
219,359

 
194,020

Net income attributable to noncontrolling interests and preferred units distributions

(5,353
)
 
(9,357
)
 
(22,798
)
 
(24,167
)
Other comprehensive (loss) income attributable to noncontrolling interests

(118
)
 
191

 
257

 
349

Comprehensive income attributable to SL Green

$
40,474

 
$
162,481

 
$
196,818

 
$
170,202



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


8

Table of Contents

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


 
SL Green Realty Corp. Stockholders
 
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 


  
 
Series I
Preferred
Stock
 
Shares
 
Par
Value
 
Additional
Paid-
In-Capital
 
Treasury
Stock
 
Accumulated
Other
Comprehensive (Loss)
 
Retained
Earnings
 
Noncontrolling
Interests
 
Total
Balance at December 31, 2015
 
$
221,932

 
99,976

 
$
1,001

 
$
5,439,735

 
$
(10,000
)
 
$
(8,749
)
 
$
1,643,546

 
$
431,852

 
$
7,719,317

Net income
 
 
 
 
 
 
 
 
 
 
 
 
 
202,143

 
6,245

 
208,388

Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
(5,325
)
 
 
 
 
 
(5,325
)
Preferred dividends
 
 
 
 
 
 
 
 
 
 
 
 
 
(11,213
)
 
 
 
(11,213
)
DRSPP proceeds
 
 
 
1

 
 
 
146

 
 
 
 
 
 
 
 
 
146

Conversion of units of the Operating Partnership to common stock
 
 
 
118

 
1

 
12,745

 
 
 
 
 
 
 
 
 
12,746

Reallocation of noncontrolling interest in the Operating Partnership
 
 
 
 
 
 
 
 
 
 
 
 
 
(4,959
)
 
 
 
(4,959
)
Deferred compensation plan and stock award, net
 
 
 
12

 
 
 
(2,086
)
 
 
 
 
 
 
 
 
 
(2,086
)
Amortization of deferred compensation plan
 
 
 
 
 
 
 
19,230

 
 
 
 
 
 
 
 
 
19,230

Issuance of common stock
 
 
 
 
 
10

 
113,999

 
(114,049
)
 
 
 
 
 
 
 
(40
)
Proceeds from stock options exercised
 
 
 
157

 
1

 
12,257

 
 
 
 
 
 
 
 
 
12,258

Contributions to consolidated joint venture interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,019

 
2,019

Cash distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(11,023
)
 
(11,023
)
Cash distributions declared ($2.16 per common share, none of which represented a return of capital for federal income tax purposes)
 
 
 
 
 
 
 
 
 
 
 
 
 
(216,810
)
 
 
 
(216,810
)
Balance at September 30, 2016
 
$
221,932

 
100,264

 
$
1,013

 
$
5,596,026

 
$
(124,049
)
 
$
(14,074
)
 
$
1,612,707

 
$
429,093

 
$
7,722,648



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

9

Table of Contents

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


 
Nine Months Ended September 30,
 
2016
 
2015
Operating Activities
 
 
 
Net income
$
224,941

 
$
203,210

Adjustments to reconcile net income to net cash provided by operating activities:

 

Depreciation and amortization
737,195

 
473,817

Equity in net income from unconsolidated joint ventures
(11,969
)
 
(10,651
)
Distributions of cumulative earnings from unconsolidated joint ventures
19,311

 
33,141

Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate
(43,588
)
 
(16,050
)
Depreciable real estate reserves
10,387

 
19,226

Gain on sale of real estate
(210,750
)
 
(159,704
)
Gain on sale of discontinued operations

 
(12,983
)
Loss on sale of investments in marketable securities
83

 

Loss on early extinguishment of debt

 
49

Deferred rents receivable
40,056

 
(99,015
)
Other non-cash adjustments (1)
(155,558
)
 
(16,140
)
Changes in operating assets and liabilities:

 
 
Restricted cash—operations
(12,855
)
 
(23,437
)
Tenant and other receivables
2,714

 
(8,498
)
Related party receivables
(4,167
)
 
646

Deferred lease costs
(47,036
)
 
(46,673
)
Other assets
(30,899
)
 
(43,736
)
Accounts payable, accrued expenses and other liabilities and security deposits
(28,089
)
 
6,119

Deferred revenue and land leases payable
19,016

 
23,678

Net cash provided by operating activities
508,792


322,999

Investing Activities
 
 
 
Acquisitions of real estate property
(38,005
)
 
(2,574,687
)
Additions to land, buildings and improvements
(269,182
)
 
(219,760
)
Escrowed cash—capital improvements/acquisition deposits/deferred purchase price
85,983

 
(117,026
)
Investments in unconsolidated joint ventures
(69,422
)
 
(127,783
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
171,472

 
89,059

Net proceeds from disposition of real estate/joint venture interest
2,419,841

 
1,072,175

Proceeds from sale of marketable securities
6,868

 
432

Purchases of marketable securities
(23,062
)
 
(7,769
)
Other investments
8,232

 
(11,894
)
Origination of debt and preferred equity investments
(554,803
)
 
(461,257
)
Repayments or redemption of debt and preferred equity investments
667,251

 
372,084

Net cash provided by (used in) investing activities
2,405,173

 
(1,986,426
)

10

Table of Contents

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

 
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
Financing Activities
 
 
 
 
Proceeds from mortgages and other loans payable
$
256,207

 
$
1,706,018

 
Repayments of mortgages and other loans payable
(1,786,034
)
 
(681,286
)
 
Proceeds from revolving credit facility and senior unsecured notes
1,260,300

 
2,130,000

 
Repayments of revolving credit facility and senior unsecured notes
(2,269,604
)
 
(1,466,007
)
 
Proceeds from stock options exercised and DRIP issuance
12,404

 
112,399

 
Proceeds from sale of common stock

 
124,794

 
Redemption of preferred stock
(2,999
)
 
(200
)
 
Distributions to noncontrolling interests in other partnerships
(11,023
)
 
(113,595
)
 
Contributions from noncontrolling interests in other partnerships
2,019

 
11,931

 
Distributions to noncontrolling interests in the Operating Partnership
(9,245
)
 
(7,017
)
 
Dividends paid on common and preferred stock
(234,801
)
 
(191,920
)
 
Other obligations related to mortgage loan participations
59,150

 
25,000

 
Deferred loan costs and capitalized lease obligation
(39,842
)
 
(23,739
)
 
Net cash (used in) provided by financing activities
(2,763,468
)
 
1,626,378

 
Net increase (decrease) in cash and cash equivalents
150,497

 
(37,049
)
 
Cash and cash equivalents at beginning of year
255,399

 
281,409

 
Cash and cash equivalents at end of period
$
405,896

 
$
244,360

 
 
 
 
 
 
(1) Included in Other non-cash adjustments is $172.4 million for the nine months ended September 30, 2016 for the amortization of the below-market lease at 388-390 Greenwich Street as a result of the tenant exercising their option to purchase the property and entering into an agreement to accelerate the sale.
 
 
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
 
 
 
 
Issuance of units in the Operating Partnership relating to the investment in unconsolidated joint ventures
$
51,647

 
$

 
Redemption of units in the Operating Partnership for stock
12,746

 
41,605

 
Exchange of debt investment for equity in joint venture
68,581

 
10,151

 
Transfer of restricted cash to operating cash and cash equivalents as a result of sale

 
21,578

 
Acquisition of subsidiary interest from noncontrolling interest

 
20,630

 
Issuance of preferred units relating to a real estate acquisition
22,793

 
211,601

 
Tenant improvements and capital expenditures payable
4,281

 
14,470

 
Fair value adjustment to noncontrolling interest in Operating Partnership
4,959

 
31,664

 
Capital lease assets

 
20,000

 
Reclassification of development costs from other assets to real estate

 
47,519

 
Transfer of assets related to assets held for sale
2,048,376

 
117,885

 
Transfer of liabilities related to assets held for sale
1,677,528

 
94

 
Deferred leasing payable
1,208

 
6,176

 
Removal of fully depreciated commercial real estate properties
22,179

 

 
Deconsolidation of a subsidiary (2)
1,173,570

 
27,435

 
Issuance of common stock

 
2,228

 
Issuance of common stock to consolidated joint venture
114,049

 
10,000

 
Contribution to consolidated joint venture by noncontrolling interest

 
22,504

 
Receivable from sale of unconsolidated joint venture interest

 
15,129

 
 
 
 
 
 
(2) The 2016 amount relates to 11 Madison for which in August 2016 we closed on the sale of a 40% interest. The sale did not meet the criteria for sale accounting and as a result the property is being accounted for under the profit sharing method.
 
 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.

11

Table of Contents



SL Green Operating Partnership, L.P.
Consolidated Balance Sheets
(in thousands, except per unit data)

 
 
September 30, 2016
 
December 31, 2015
 
 
(unaudited)
 
 
Assets
 
 
 
 
Commercial real estate properties, at cost:
 
 
 
 
Land and land interests
 
$
3,347,482

 
$
4,779,159

Building and improvements
 
7,777,647

 
10,423,739

Building leasehold and improvements
 
1,436,287

 
1,431,259

Property under capital lease
 
47,445

 
47,445

 
 
12,608,861

 
16,681,602

Less: accumulated depreciation
 
(2,190,142
)
 
(2,060,706
)
 
 
10,418,719

 
14,620,896

Assets held for sale
 
117,159

 
34,981

Cash and cash equivalents
 
405,896

 
255,399

Restricted cash
 
100,195

 
233,578

Investments in marketable securities
 
60,352

 
45,138

Tenant and other receivables, net of allowance of $18,278 and $17,618 in 2016 and 2015, respectively
 
55,976

 
63,491

Related party receivables
 
14,840

 
10,650

Deferred rents receivable, net of allowance of $24,922 and $21,730 in 2016 and 2015, respectively
 
430,642

 
498,776

Debt and preferred equity investments, net of discounts and deferred origination fees of $14,630 and $18,759 in 2016 and 2015, respectively
 
1,453,234

 
1,670,020

Investments in unconsolidated joint ventures
 
1,860,912

 
1,203,858

Deferred costs, net
 
252,179

 
239,920

Other assets
 
620,838

 
850,939

Total assets
 
$
15,790,942

 
$
19,727,646

Liabilities
 
 
 
 
Mortgages and other loans payable, net
 
$
3,954,155

 
$
6,881,920

Revolving credit facility, net
 

 
985,055

Term loan and senior unsecured notes, net
 
2,303,657

 
2,308,478

Accrued interest payable
 
30,734

 
42,406

Other liabilities
 
211,513

 
168,477

Accounts payable and accrued expenses
 
178,946

 
196,213

Deferred revenue
 
237,548

 
399,102

Capital lease obligations
 
41,951

 
41,360

Deferred land leases payable
 
2,419

 
1,783

Dividend and distributions payable
 
81,392

 
79,790

Security deposits
 
67,709

 
68,023

Liabilities related to assets held for sale
 
65,520

 
29,000

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

 
100,000

Total liabilities
 
7,275,544

 
11,301,607

Commitments and contingencies
 

 

Limited partner interests in SLGOP (4,495 and 3,746 limited partner common units outstanding at September 30, 2016 and December 31, 2015, respectively)
 
490,440

 
424,206

Preferred units
 
302,310

 
282,516


12


 
 
September 30, 2016
 
December 31, 2015
 
 
(unaudited)
 
 
Capital
 
 
 
 
SLGOP partners' capital:
 
 
 
 
Series I Preferred Units, $25.00 liquidation preference, 9,200 issued and outstanding at both September 30, 2016 and December 31, 2015
 
221,932

 
221,932

SL Green partners' capital (1,047 and 1,035 general partner common units and 99,217 and 98,941 limited partner common units outstanding at September 30, 2016 and December 31, 2015, respectively)
 
7,085,697

 
7,074,282

Accumulated other comprehensive loss
 
(14,074
)
 
(8,749
)
Total SLGOP partners' capital
 
7,293,555

 
7,287,465

Noncontrolling interests in other partnerships
 
429,093

 
431,852

Total capital
 
7,722,648

 
7,719,317

Total liabilities and capital
 
$
15,790,942

 
$
19,727,646



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

13

Table of Contents

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,
 
 
2016

2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
 
Rental revenue, net
 
$
281,482

 
$
318,465

 
$
1,043,898

 
$
926,020

Escalation and reimbursement
 
53,130

 
48,254

 
147,357

 
130,630

Investment income
 
75,396

 
49,328

 
174,347

 
136,588

Other income
 
6,673

 
16,019

 
124,137

 
44,201

Total revenues
 
416,681

 
432,066

 
1,489,739

 
1,237,439

Expenses
 

 
 
 

 
 
Operating expenses, including $5,042 and $15,171 in 2016 and $5,238 and $13,415 in 2015 of related party expenses
 
79,425

 
78,648

 
234,269

 
225,539

Real estate taxes
 
64,133

 
61,009

 
187,931

 
173,018

Ground rent
 
8,338

 
8,252

 
24,953

 
24,526

Interest expense, net of interest income
 
72,565

 
84,141

 
256,326

 
235,694

Amortization of deferred financing costs
 
4,815

 
7,160

 
20,180

 
19,727

Depreciation and amortization
 
112,665

 
146,185

 
717,015

 
454,087

Transaction related costs
 
2,593

 
5,829

 
5,987

 
10,039

Marketing, general and administrative
 
25,458

 
23,475

 
73,974

 
72,139

Total expenses
 
369,992

 
414,699

 
1,520,635

 
1,214,769

Income (loss) from continuing operations before equity in net (loss) income from unconsolidated joint ventures, equity in net gain on sale of interest in unconsolidated joint venture/real estate, gain on sale of real estate, net, depreciable real estate reserves, loss on sale of investment in marketable securities and loss on early extinguishment of debt
 
46,689

 
17,367

 
(30,896
)
 
22,670

Equity in net (loss) income from unconsolidated joint ventures
 
(3,968
)
 
3,627

 
11,969

 
10,651

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 
225

 
15,281

 
43,588

 
16,050

Gain on sale of real estate, net
 
397

 
159,704

 
210,750

 
159,704

Depreciable real estate reserves
 

 
(19,226
)
 
(10,387
)
 
(19,226
)
Loss on sale of investment in marketable securities
 

 

 
(83
)
 

Loss on early extinguishment of debt
 

 

 

 
(49
)
Income from continuing operations
 
43,343

 
176,753

 
224,941

 
189,800

Net income from discontinued operations
 

 

 

 
427

Gain on sale of discontinued operations
 

 

 

 
12,983

Net income
 
43,343

 
176,753

 
224,941

 
203,210

Noncontrolling interests in other partnerships
 
(836
)
 
(665
)
 
(6,245
)
 
(13,217
)
Preferred units distributions
 
(2,854
)
 
(2,225
)
 
(8,382
)
 
(4,316
)
Net income attributable to SLGOP
 
39,653

 
173,863

 
210,314

 
185,677

Perpetual preferred unit distributions
 
(3,738
)
 
(3,738
)
 
(11,213
)
 
(11,214
)
Net income attributable to SLGOP common unitholders
 
$
35,915

 
$
170,125

 
$
199,101

 
$
174,463


14

Table of Contents

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,
 
 
2016

2015
 
2016
 
2015
Amounts attributable to SLGOP common unitholders:
 
 
 
 
 
 
 
 
Income (loss) from continuing operations before depreciable real estate reserves, gains on sale and discontinued operations
 
$
35,293

 
$
14,366


$
(44,850
)

$
4,525

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 
225

 
15,281

 
43,588

 
16,050

Net income from discontinued operations
 

 

 

 
427

Gain on sale of discontinued operations
 

 

 

 
12,983

Gain on sale of real estate
 
397

 
159,704

 
210,750

 
159,704

Depreciable real estate reserves
 

 
(19,226
)
 
(10,387
)
 
(19,226
)
Net income (loss) attributable to SLGOP common unitholders
 
$
35,915

 
$
170,125

 
$
199,101

 
$
174,463

 
 
 
 
 
 
 
 
 
Basic earnings per unit:
 
 
 
 
 
 
 
 
Income (loss) from continuing operations before depreciable real estate reserves, gains on sale and discontinued operations
 
$
0.34

 
$
0.14

 
$
(0.43
)
 
$
0.04

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 

 
0.15

 
0.42

 
0.16

Net income from discontinued operations
 

 

 

 

Gain on sale of discontinued operations
 

 

 

 
0.13

Gain on sale of real estate
 

 
1.54

 
2.02

 
1.55

Depreciable real estate reserves
 

 
(0.19
)
 
(0.10
)
 
(0.19
)
Net income (loss) attributable to SLGOP common unitholders
 
$
0.34

 
$
1.64


$
1.91


$
1.69

Diluted earnings per unit:
 
 
 
 
 
 
 
 
Income (loss) from continuing operations before depreciable real estate reserves, gains on sale and discontinued operations
 
$
0.34

 
$
0.14

 
$
(0.43
)
 
$
0.04

Equity in net gain on sale of interest in unconsolidated joint venture/real estate
 

 
0.15

 
0.42

 
0.16

Net income from discontinued operations
 

 

 

 

Gain on sale of discontinued operations
 

 

 

 
0.13

Gain on sale of real estate
 

 
1.54

 
2.01

 
1.54

Depreciable real estate reserves
 

 
(0.19
)
 
(0.10
)
 
(0.19
)
Net income (loss) attributable to SLGOP common unitholders
 
$
0.34

 
$
1.64

 
$
1.90

 
$
1.68

Dividends per unit
 
$
0.72

 
$
0.60

 
$
2.16

 
1.80

Basic weighted average common units outstanding
 
104,730

 
103,522

 
104,412

 
103,129

Diluted weighted average common units and common unit equivalents outstanding
 
105,143

 
103,929

 
104,761

 
103,609



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


15

Table of Contents


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

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016

2015
 
2016
 
2015
Net income
 
$
43,343

 
$
176,753

 
$
224,941

 
$
203,210

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Change in net unrealized gain (loss) on derivative instruments, including SLGOP's share of joint venture net unrealized gain (loss) on derivative instruments
 
2,632

 
(5,423
)
 
(4,682
)
 
(8,853
)
Change in unrealized (loss) gain on marketable securities
 
(30
)
 
317

 
(900
)
 
(337
)
Other comprehensive income (loss)
 
2,602

 
(5,106
)
 
(5,582
)
 
(9,190
)
Comprehensive income
 
45,945

 
171,647

 
219,359

 
194,020

Net income attributable to noncontrolling interests
 
(836
)
 
(665
)
 
(6,245
)
 
(13,217
)
Other comprehensive (loss) income attributable to noncontrolling interests
 
(118
)
 
191

 
257

 
349

Comprehensive income attributable to SLGOP
 
$
44,991

 
$
171,173

 
$
213,371

 
$
181,152



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


16

Table of Contents

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



 
 
SL Green Operating Partnership Unitholders
 
 
 
 
 
 
 
 
Partners' Interest
 
 
 
 
 
 
 
 
Series I
Preferred
Units
 
Common
Units
 
Common
Unitholders
 
Accumulated
Other
Comprehensive (Loss)
 
Noncontrolling
Interests
 
Total
Balance at December 31, 2015
 
$
221,932

 
99,976

 
$
7,074,282

 
$
(8,749
)
 
$
431,852

 
$
7,719,317

Net income
 
 
 
 
 
202,143

 
 
 
6,245

 
208,388

Other comprehensive (loss)
 
 
 
 
 
 
 
(5,325
)
 


 
(5,325
)
Preferred distributions
 
 
 
 
 
(11,213
)
 
 
 
 
 
(11,213
)
DRSPP proceeds
 
 
 
1

 
146

 
 
 
 
 
146

Conversion of common units
 
 
 
118

 
12,746

 
 
 
 
 
12,746

Reallocation of noncontrolling interests in the operating partnership
 
 
 
 
 
(4,959
)
 
 
 
 
 
(4,959
)
Deferred compensation plan and stock award, net
 
 
 
12

 
(2,086
)
 
 
 
 
 
(2,086
)
Amortization of deferred compensation plan
 
 
 
 
 
19,230

 
 
 
 
 
19,230

Issuance of common stock
 
 
 
 
 
(40
)
 
 
 
 
 
(40
)
Contribution to consolidated joint venture interests
 
 
 
 
 
 
 
 
 
2,019

 
2,019

Contributions - proceeds from stock options exercised
 
 
 
157

 
12,258

 
 
 
 
 
12,258

Cash distributions to noncontrolling interests
 
 
 
 
 
.

 
 
 
(11,023
)
 
(11,023
)
Cash distributions declared ($2.16 per common unit, none of which represented a return of capital for federal income tax purposes)
 
 
 
 
 
(216,810
)
 
 
 
 
 
(216,810
)
Balance at September 30, 2016
 
$
221,932

 
100,264

 
$
7,085,697

 
$
(14,074
)
 
$
429,093

 
$
7,722,648

   

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


17

Table of Contents

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



 
Nine Months Ended September 30,
 
2016

2015
Operating Activities
 
 
 
Net income
$
224,941

 
$
203,210

Adjustments to reconcile net income to net cash provided by operating activities:

 
 
Depreciation and amortization
737,195

 
473,817

Equity in net income from unconsolidated joint ventures
(11,969
)
 
(10,651
)
Distributions of cumulative earnings from unconsolidated joint ventures
19,311

 
33,141

Equity in net gain on sale of interest in unconsolidated joint venture interest/real estate
(43,588
)
 
(16,050
)
Depreciable real estate reserves
10,387

 
19,226

Gain on sale of real estate
(210,750
)
 
(159,704
)
Gain on sale of discontinued operations

 
(12,983
)
Loss on sale of investment in marketable securities
83

 

Loss on early extinguishment of debt

 
49

Deferred rents receivable
40,056

 
(99,015
)
Other non-cash adjustments (1)
(155,558
)
 
(16,140
)
Changes in operating assets and liabilities:

 
 
Restricted cash—operations
(12,855
)
 
(23,437
)
Tenant and other receivables
2,714

 
(8,498
)
Related party receivables
(4,167
)
 
646

Deferred lease costs
(47,036
)
 
(46,673
)
Other assets
(30,899
)
 
(43,736
)
Accounts payable, accrued expenses and other liabilities and security deposits
(28,089
)
 
6,119

Deferred revenue and land leases payable
19,016

 
23,678

Net cash provided by operating activities
508,792

 
322,999

Investing Activities

 
 
Acquisitions of real estate property
(38,005
)
 
(2,574,687
)
Additions to land, buildings and improvements
(269,182
)
 
(219,760
)
Escrowed cash—capital improvements/acquisition deposits/deferred purchase price
85,983

 
(117,026
)
Investments in unconsolidated joint ventures
(69,422
)
 
(127,783
)
Distributions in excess of cumulative earnings from unconsolidated joint ventures
171,472

 
89,059

Net proceeds from disposition of real estate/joint venture interest
2,419,841

 
1,072,175

Proceeds from sale of marketable securities
6,868

 
432

Purchases of marketable securities
(23,062
)
 
(7,769
)
Other investments
8,232

 
(11,894
)
Origination of debt and preferred equity investments
(554,803
)
 
(461,257
)
Repayments or redemption of debt and preferred equity investments
667,251

 
372,084

Net cash provided by (used in) investing activities
2,405,173

 
(1,986,426
)
 
 
 
 

18

Table of Contents

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


 
 
Nine Months Ended September 30,
 
 
2016

2015
 
Financing Activities
 
 
 
 
Proceeds from mortgages and other loans payable
$
256,207

 
$
1,706,018

 
Repayments of mortgages and other loans payable
(1,786,034
)
 
(681,286
)
 
Proceeds from revolving credit facility, term loan and senior unsecured notes
1,260,300

 
2,130,000

 
Repayments of revolving credit facility, term loan and senior unsecured notes
(2,269,604
)
 
(1,466,007
)
 
Proceeds from stock options exercised and DRIP issuance
12,404

 
112,399

 
Net proceeds from sale of common stock

 
124,794

 
Redemption of preferred units
(2,999
)
 
(200
)
 
Distributions to noncontrolling interests in other partnerships
(11,023
)
 
(113,595
)
 
Contributions from noncontrolling interests in other partnerships
2,019

 
11,931

 
Distributions paid on common and preferred units
(244,046
)
 
(198,937
)
 
Other obligations related to mortgage loan participations
59,150

 
25,000

 
Deferred loan costs and capitalized lease obligation
(39,842
)
 
(23,739
)
 
Net cash (used in) provided by financing activities
(2,763,468
)
 
1,626,378

 
Net increase (decrease) in cash and cash equivalents
150,497

 
(37,049
)
 
Cash and cash equivalents at beginning of year
255,399