Bay Street News

SL Green Realty Corp. Reports Second Quarter 2024 EPS of ($0.04) Per Share; and FFO of $2.05 Per Share

Financial and Operating Highlights

Investing Highlights

Financing Highlights

Special Servicing and Asset Management Highlights

NEW YORK, July 17, 2024 (GLOBE NEWSWIRE) — SL Green Realty Corp. (the “Company”) (NYSE: SLG) today reported a net loss attributable to common stockholders for the quarter ended June 30, 2024 of $2.2 million and $0.04 per share as compared to a net loss of $360.2 million and $5.63 per share for the same quarter in 2023.

The Company also reported net income attributable to common stockholders for the six months ended June 30, 2024 of $11.0 million and $0.16 per share as compared to a net loss of $399.9 million and $6.25 per share for the same period in 2023.

The Company reported FFO for the quarter ended June 30, 2024 of $143.9 million and $2.05 per share, or $94.1 million and $1.34 per share, excluding $48.5 million, or $0.69 per share, of gains on discounted debt extinguishments at 280 Park Avenue and 719 Seventh Avenue and $1.4 million, or $0.02 per share, of non-cash fair value adjustments on mark-to-market derivatives. The Company reported FFO of $98.4 million and $1.43 per share for the same period in 2023, which was net of $0.4 million, or $0.01 per share, of non-cash fair value adjustments for derivatives.

The Company also reported FFO for the six months ended June 30, 2024 of $359.4 million and $5.12 per share, or $162.7 million and $2.32 per share, excluding $190.1 million, or $2.71 per share, of gains on discounted debt extinguishments at 2 Herald Square, 280 Park Avenue, and 719 Seventh Avenue and $6.5 million, or $0.09 per share, of non-cash fair value adjustments on mark-to-market derivatives. The Company reported FFO of $203.9 million and $2.96 per share for the same period in 2023.

All per share amounts are presented on a diluted basis.

Operating and Leasing Activity

Same-store cash NOI, including the Company’s share of same-store cash NOI from unconsolidated joint ventures, decreased by 0.9% for the second quarter of 2024, or 1.3% excluding lease termination income, as compared to the same period in 2023.

Same-store cash NOI, including the Company’s share of same-store cash NOI from unconsolidated joint ventures, increased by 0.1% for the six months ended June 30, 2024, and decreased 1.3% excluding lease termination income, as compared to the same period in 2023.

During the second quarter of 2024, the Company signed 38 office leases in its Manhattan office portfolio totaling 420,513 square feet. The average rent on the Manhattan office leases signed in the second quarter of 2024, excluding leases signed at One Vanderbilt and One Madison, was $100.66 per rentable square foot with an average lease term of 8.8 years and average tenant concessions of 7.0 months of free rent with a tenant improvement allowance of $77.26 per rentable square foot. Twenty-one leases comprising 266,133 square feet, representing office leases on space that had been occupied within the prior twelve months, are considered replacement leases on which mark-to-market is calculated. Those replacement leases had average starting rents of $112.76 per rentable square foot, representing a 15.5% increase over the previous fully escalated rents on the same office spaces.

During the six months ended June 30, 2024, the Company signed 98 office leases in its Manhattan office portfolio totaling 1,054,173 square feet. The average rent on the Manhattan office leases signed in 2024, excluding leases signed at One Vanderbilt and One Madison, was $85.54 per rentable square foot with an average lease term of 7.5 years and average tenant concessions of 6.9 months of free rent with a tenant improvement allowance of $63.46 per rentable square foot. Fifty-three leases comprising 560,716 square feet, representing office leases on space that had been occupied within the prior twelve months, are considered replacement leases on which mark-to-market is calculated. Those replacement leases had average starting rents of $94.45 per rentable square foot, representing a 5.4% increase over the previous fully escalated rents on the same office spaces.

Occupancy in the Company’s Manhattan same-store office portfolio increased to 89.6% as of June 30, 2024, inclusive of 436,291 square feet of leases signed but not yet commenced, as compared to 89.2% at the end of the previous quarter. The Company expects to increase Manhattan same-store office occupancy, inclusive of leases signed but not yet commenced, to more than 91.5% by December 31, 2024.

Significant leasing activity in the second quarter and to date in July includes:

Investment Activity

Contracted for sale of 100% of the Giorgio Armani Residences at 760 Madison Avenue for gross consideration totaling $168.2 million. All sales are expected to close in the fourth quarter of 2024.

In July, the Company closed on the previously announced sale of the Palisades Premier Conference Center for $26.3 million plus certain fees payable to the Company. The Company took control of the property in July 2023 in partial satisfaction of a legal judgement. The transaction generated net proceeds to the Company of $19.8 million.

In June, the Company closed on the previously announced sale of 719 Seventh Avenue in Times Square for $30.5 million plus certain fees payable to the Company. The transaction generated net proceeds to the Company of $3.6 million after repayment of the mortgage loan. In connection with the closing of the sale, the Company repaid the existing $50.0 million mortgage for $32.0 million.

In May, together with our joint venture partner, the Company closed on the previously announced sale of the fee ownership interest in 625 Madison Avenue for a gross sales price of $634.6 million plus certain fees payable to the Company. In connection with the sale, the Company, together with its joint venture partner, originated a $235.5 million preferred equity investment in the property. The transaction generated net proceeds to the Company of $199.3 million.

Debt and Preferred Equity Investment Activity

The carrying value of the Company’s debt and preferred equity portfolio was $495.7 million at June 30, 2024, including $205.2 million representing the Company’s share of the preferred equity investment in 625 Madison Avenue that was originated in the second quarter and is accounted for as an unconsolidated joint venture. The portfolio had a weighted average current yield of 7.5%, or 8.8% as of June 30, 2024, excluding the effect of a $50.0 million investment that is on non-accrual. During the second quarter, no investments were sold or repaid, and the Company did not acquire any new investments.

Financing Activity

In April, together with our joint venture partner, closed on a modification and extension of the $1.075 billion securitized mortgage on 280 Park Avenue. The modification extended the maturity date to September 2026, with the partnership’s option to extend to a fully extended maturity date of September 2028. The interest rate was maintained at 1.78% over Term SOFR, which the partnership subsequently fixed at 5.84% through the fully extended maturity date.

The partnership separately modified and extended the $125.0 million mezzanine loan on 280 Park Avenue and subsequently repaid the loan for $62.5 million.

Special Servicing and Asset Management Activity

The Company continues to grow its special servicing and asset management business, with $3.0 billion of active assignments. In addition, we have been designated as special servicer of $6.4 billion of assets that are not currently in special servicing. Since inception, the Company’s cumulative special servicing and asset management appointments total $17.4 billion.

Earnings Guidance

The Company is increasing its 2024 earnings guidance range for the year ending December 31, 2024 to FFO per share of $7.45 to $7.75, to reflect the outperformance of the real estate portfolio and SUMMIT One Vanderbilt as well as incremental fee generation, while maintaining its 2024 net income guidance range of $2.73 to $3.03.

Dividends

In the second quarter of 2024, the Company declared:

Conference Call and Audio Webcast

The Company’s executive management team, led by Marc Holliday, Chairman and Chief Executive Officer, will host a conference call and audio webcast on Thursday, July 18, 2024, at 2:00 pm ET to discuss the financial results.

Supplemental data will be available prior to the quarterly conference call in the Investors section of the SL Green Realty Corp. website at www.slgreen.com under “Financial Reports.”

The live conference call will be webcast in listen-only mode and a replay will be available in the Investors section of the SL Green Realty Corp. website at www.slgreen.com under “Presentations & Webcasts.”

Research analysts who wish to participate in the conference call must first register at https://register.vevent.com/register/BIa4aa7c3f3c3b4914a98f1cb01261b5f1.

Company Profile

SL Green Realty Corp., Manhattan’s largest office landlord, is a fully integrated real estate investment trust, or REIT, that is focused primarily on acquiring, managing and maximizing value of Manhattan commercial properties. As of June 30, 2024, SL Green held interests in 55 buildings totaling 31.8 million square feet. This included ownership interests in 28.1 million square feet of Manhattan buildings and 2.8 million square feet securing debt and preferred equity investments.

To obtain the latest news releases and other Company information, please visit our website at www.slgreen.com or contact Investor Relations at investor.relations@slgreen.com.

Disclaimers

Non-GAAP Financial Measures
During the quarterly conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. In addition, the Company has used non-GAAP financial measures in this press release. A reconciliation of each non-GAAP financial measure and the comparable GAAP financial measure can be found in this release and in the Company’s Supplemental Package.

Forward-looking Statements

This press release 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 press release 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 press release are subject to a number of risks and uncertainties, many of which are beyond our control, 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. Factors and risks to our business that could cause actual results to differ from those contained in the forward-looking statements include risks and uncertainties described in our filings with the Securities and Exchange Commission. Except to the extent required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise.

 
SL GREEN REALTY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share data)
 
  Three Months Ended   Six Months Ended
  June 30,   June 30,
Revenues:   2024       2023       2024       2023  
             
Rental revenue, net $ 135,563     $ 165,651     $ 263,766     $ 340,243  
Escalation and reimbursement revenues   15,069       20,294       28,370       40,744  
SUMMIT Operator revenue   32,602       28,180       58,206       47,951  
Investment income   6,191       9,103       13,594       18,160  
Other income   33,395       22,808       46,766       44,702  
Total revenues   222,820       246,036       410,702       491,800  
Expenses:              
Operating expenses, including related party expenses of $0 and $0 in 2024 and $0 and $1 in 2023   46,333       46,957       89,941       99,021  
Real estate taxes   32,058       39,885       63,664       81,268  
Operating lease rent   6,368       6,655       12,773       12,956  
SUMMIT Operator expenses   23,188       22,836       45,046       43,524  
Interest expense, net of interest income   35,803       40,621       66,976       82,274  
Amortization of deferred financing costs   1,677       2,154       3,216       4,175  
SUMMIT Operator tax expense   1,855       1,879       560       3,146  
Depreciation and amortization   52,247       69,335       100,831       148,117  
Loan loss and other investment reserves, net of recoveries                     6,890  
Transaction related costs   76       33       92       917  
Marketing, general and administrative   20,032       22,974       41,345       46,259  
Total expenses   219,637       253,329       424,444       528,547  
               
Equity in net income (loss) from unconsolidated joint ventures   4,325       (21,932 )     115,485       (29,344 )
Equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate   (8,129 )           18,635       (79 )
Purchase price and other fair value adjustments   1,265       (17,409 )     (49,227 )     (17,170 )
Loss on sale of real estate, net   (2,741 )     (26,678 )     (2,741 )     (28,329 )
Depreciable real estate reserves   (13,721 )     (305,916 )     (65,839 )     (305,916 )
Gain on early extinguishment of debt   17,777             17,777        
Net (loss) income   1,959       (379,228 )     20,348       (417,585 )
Net loss attributable to noncontrolling interests:              
Noncontrolling interests in the Operating Partnership   153       23,582       (748 )     25,919  
Noncontrolling interests in other partnerships   1,871       1,040       3,165       2,665  
Preferred units distributions   (2,406 )     (1,851 )     (4,309 )     (3,449 )
Net (loss) income attributable to SL Green   1,577       (356,457 )     18,456       (392,450 )
Perpetual preferred stock dividends   (3,737 )     (3,737 )     (7,475 )     (7,475 )
Net (loss) income attributable to SL Green common stockholders $ (2,160 )   $ (360,194 )   $ 10,981     $ (399,925 )
Earnings Per Share (EPS)              
Basic (loss) earnings per share $ (0.04 )   $ (5.63 )   $ 0.16     $ (6.25 )
Diluted (loss) earnings per share $ (0.04 )   $ (5.63 )   $ 0.16     $ (6.25 )
               
Funds From Operations (FFO)              
Basic FFO per share $ 2.08     $ 1.43     $ 5.19     $ 2.98  
Diluted FFO per share $ 2.05     $ 1.43     $ 5.12     $ 2.96  
               
Basic ownership interest              
Weighted average REIT common shares for net income per share   64,353       64,102       64,340       64,091  
Weighted average partnership units held by noncontrolling interests   4,387       4,239       4,413       4,172  
Basic weighted average shares and units outstanding   68,740       68,341       68,753       68,263  
               
Diluted ownership interest              
Weighted average REIT common share and common share equivalents   65,793       64,694       65,724       64,684  
Weighted average partnership units held by noncontrolling interests   4,387       4,239       4,413       4,172  
Diluted weighted average shares and units outstanding   70,180       68,933       70,137       68,856  
               
 
SL GREEN REALTY CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
 
  June 30,   December 31,
  2024   2023
Assets (Unaudited)    
Commercial real estate properties, at cost:      
Land and land interests $ 1,134,432     $ 1,092,671  
Building and improvements   3,743,316       3,655,624  
Building leasehold and improvements   1,365,423       1,354,569  
    6,243,171       6,102,864  
Less: accumulated depreciation   (2,041,102 )     (1,968,004 )
    4,202,069       4,134,860  
Assets held for sale   21,615        
Cash and cash equivalents   199,501       221,823  
Restricted cash   116,310       113,696  
Investment in marketable securities   16,593       9,591  
Tenant and other receivables   41,202       33,270  
Related party receivables   8,127       12,168  
Deferred rents receivable   266,596       264,653  
Debt and preferred equity investments, net of discounts and deferred origination fees of $1,618 and $1,630 in 2024 and 2023, respectively, and allowances of $13,520 and $13,520 in 2024 and 2023, respectively   290,487       346,745  
Investments in unconsolidated joint ventures   2,895,399       2,983,313  
Deferred costs, net   107,163       111,463  
Right-of-use assets – operating leases   875,878       885,929  
Other assets   507,712       413,670  
Total assets $ 9,548,652     $ 9,531,181  
       
Liabilities      
Mortgages and other loans payable $ 1,649,892     $ 1,497,386  
Revolving credit facility   540,000       560,000  
Unsecured term loan   1,250,000       1,250,000  
Unsecured notes   100,000       100,000  
Deferred financing costs, net   (14,304 )     (16,639 )
Total debt, net of deferred financing costs   3,525,588       3,390,747  
Accrued interest payable   20,083       17,930  
Accounts payable and accrued expenses   121,050       153,164  
Deferred revenue   153,660       134,053  
Lease liability – financing leases   106,187       105,531  
Lease liability – operating leases   819,439       827,692  
Dividend and distributions payable   20,088       20,280  
Security deposits   58,002       49,906  
Liabilities related to assets held for sale   10,424        
Junior subordinate deferrable interest debentures held by trusts that issued trust preferred securities   100,000       100,000  
Other liabilities   423,816       471,401  
Total liabilities   5,358,337       5,270,704  
       
Commitments and contingencies      
Noncontrolling interests in Operating Partnership   265,823       238,051  
Preferred units   166,731       166,501  
       
Equity      
SL Green stockholders’ equity:      
Series I Preferred Stock, $0.01 par value, $25.00 liquidation preference, 9,200 issued and outstanding at both June 30, 2024 and December 31, 2023   221,932       221,932  
Common stock, $0.01 par value 160,000 shares authorized, 65,874 and 65,786 issued and outstanding (including 1,060 and 1,060 held in Treasury) at June 30, 2024 and December 31, 2023, respectively   660       660  
Additional paid-in capital   3,836,751       3,826,452  
Treasury stock at cost   (128,655 )     (128,655 )
Accumulated other comprehensive income   40,371       17,477  
Retained deficit   (279,763 )     (151,551 )
Total SL Green Realty Corp. stockholders’ equity   3,691,296       3,786,315  
Noncontrolling interests in other partnerships   66,465       69,610  
Total equity   3,757,761       3,855,925  
Total liabilities and equity $ 9,548,652     $ 9,531,181  
 
SL GREEN REALTY CORP.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited and in thousands, except per share data)
 
  Three Months Ended   Six Months Ended
  June 30,   June 30,
Funds From Operations (FFO) Reconciliation: 2024   2023   2024   2023
               
Net (loss) income attributable to SL Green common stockholders $ (2,160 )   $ (360,194 )   $ 10,981     $ (399,925 )
Add:              
Depreciation and amortization   52,247       69,335       100,831       148,117  
Joint venture depreciation and noncontrolling interest adjustments   72,238       65,149       146,496       134,683  
Net loss attributable to noncontrolling interests   (2,024 )     (24,622 )     (2,417 )     (28,584 )
Less:              
Equity in net (loss) gain on sale of interest in unconsolidated joint venture/real estate   (8,129 )           18,635       (79 )
Purchase price and other fair value adjustments   (50 )     (17,013 )     (55,702 )     (17,013 )
Loss on sale of real estate, net   (2,741 )     (26,678 )     (2,741 )     (28,329 )
Depreciable real estate reserves   (13,721 )     (305,916 )     (65,839 )     (305,916 )
Depreciation on non-rental real estate assets   1,000       851       2,153       1,719  
FFO attributable to SL Green common stockholders and unit holders $ 143,942     $ 98,424     $ 359,385     $ 203,909  
 
SL GREEN REALTY CORP.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited and in thousands, except per share data)
 
  Three Months Ended   Six Months Ended
  June 30,   June 30,
Operating income and Same-store NOI Reconciliation: 2024   2023   2024   2023
               
Net (loss) income $ 1,959     $ (379,228 )   $ 20,348     $ (417,585 )
               
Depreciable real estate reserves   13,721       305,916       65,839       305,916  
Loss on sale of real estate, net   2,741       26,678       2,741       28,329  
Purchase price and other fair value adjustments   (1,265 )     17,409       49,227       17,170  
Equity in net loss (gain) on sale of interest in unconsolidated joint venture/real estate   8,129             (18,635 )     79  
Depreciation and amortization   52,247       69,335       100,831       148,117  
SUMMIT Operator tax expense   1,855       1,879       560       3,146  
Amortization of deferred financing costs   1,677       2,154       3,216       4,175  
Interest expense, net of interest income   35,803       40,621       66,976       82,274  
Operating income   116,867       84,764       291,103       171,621  
               
Equity in net (income) loss from unconsolidated joint ventures   (4,325 )     21,932       (115,485 )     29,344  
Marketing, general and administrative expense   20,032       22,974       41,345       46,259  
Transaction related costs   76       33       92       917  
Loan loss and other investment reserves, net of recoveries                     6,890  
SUMMIT Operator expenses   23,188       22,836       45,046       43,524  
Gain on early extinguishment of debt   (17,777 )           (17,777 )      
Investment income   (6,191 )     (9,103 )     (13,594 )     (18,160 )
SUMMIT Operator revenue   (32,602 )     (28,180 )     (58,206 )     (47,951 )
Non-building revenue   (25,714 )     (21,110 )     (30,763 )     (27,916 )
Net operating income (NOI)   73,554       94,146       141,761       204,528  
               
Equity in net income (loss) from unconsolidated joint ventures   4,325       (21,932 )     115,485       (29,344 )
SLG share of unconsolidated JV depreciation and amortization   70,652       60,781       140,098       125,504  
SLG share of unconsolidated JV amortization of deferred financing costs   2,367       3,141       5,462       6,203  
SLG share of unconsolidated JV interest expense, net of interest income   69,280       62,589       142,083       125,735  
SLG share of unconsolidated JV gain on early extinguishment of debt   (30,705 )           (172,369 )      
SLG share of unconsolidated JV investment income   (1,720 )     (317 )     (1,720 )     (630 )
SLG share of unconsolidated JV non-building revenue   (1,623 )     (2,046 )     (2,124 )     (4,343 )
NOI including SLG share of unconsolidated JVs   186,130       196,362       368,676       427,653  
               
NOI from other properties/affiliates   (30,401 )     (28,848 )     (53,487 )     (92,960 )
Same-Store NOI   155,729       167,514       315,189       334,693  
               
Straight-line and free rent   1,743       (3,082 )     (1,162 )     (8,882 )
Amortization of acquired above and below-market leases, net   865       166       914       332  
Operating lease straight-line adjustment   204       204       408       408  
SLG share of unconsolidated JV straight-line and free rent   (1,324 )     (6,448 )     (3,216 )     (15,001 )
SLG share of unconsolidated JV amortization of acquired above and below-market leases, net   (4,409 )     (4,212 )     (8,816 )     (8,436 )
SLG share of unconsolidated JV operating lease straight-line adjustment                      
Same-store cash NOI $ 152,808     $ 154,142     $ 303,317     $ 303,114  
               
Lease termination income   (1,069 )     (123 )     (2,200 )     (752 )
SLG share of unconsolidated JV lease termination income   (57 )     (355 )     (3,343 )     (734 )
Same-store cash NOI excluding lease termination income $ 151,682     $ 153,664     $ 297,774     $ 301,628  
                               
SL GREEN REALTY CORP.
NON-GAAP FINANCIAL MEASURES – DISCLOSURES
 

Funds from Operations (FFO)

FFO is a widely recognized non-GAAP financial measure of REIT performance. The Company computes FFO in accordance with standards established by 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 amended 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 compensation 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 the Company’s ability to make cash distributions.

Funds Available for Distribution (FAD)

FAD is a non-GAAP financial measure that is calculated as FFO plus non-real estate depreciation, allowance for straight line credit loss, adjustment for straight line operating lease rent, non-cash deferred compensation, and pro-rata adjustments for these items from the Company’s unconsolidated JVs, less straight line rental income, free rent net of amortization, second cycle tenant improvement and leasing costs, and recurring capital expenditures.

FAD is not intended to represent cash flow for the period and is not indicative of cash flow provided by operating activities as determined in accordance with GAAP. FAD is presented solely as a supplemental disclosure with respect to liquidity because the Company believes it provides useful information regarding the Company’s ability to fund its dividends. Because all companies do not calculate FAD the same way, the presentation of FAD may not be comparable to similarly titled measures of other companies. FAD does not represent cash flow from operating, investing and finance 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, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of the Company’s liquidity.

Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre)

EBITDAre is a non-GAAP financial measure. The Company computes EBITDAre in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, which may not be comparable to EBITDAre reported by other REITs that do not compute EBITDAre in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than the Company does. The White Paper on EBITDAre approved by the Board of Governors of NAREIT in September 2017 defines EBITDAre as net income (loss) (computed in accordance with Generally Accepted Accounting Principles, or GAAP), plus interest expense, plus income tax expense, plus depreciation and amortization, plus (minus) losses and gains on the disposition of depreciated property, plus impairment write-downs of depreciated property and investments in unconsolidated joint ventures, plus adjustments to reflect the entity’s share of EBITDAre of unconsolidated joint ventures.

The Company presents EBITDAre because the Company believes that EBITDAre, along with cash flow from operating activities, investing activities and financing activities, provides investors with an additional indicator of the Company’s ability to incur and service debt. EBITDAre should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of the Company’s financial performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of the Company’s liquidity.

Net Operating Income (NOI) and Cash NOI

NOI is a non-GAAP financial measure that is calculated as operating income before transaction related costs, gains/losses on early extinguishment of debt, marketing general and administrative expenses and non-real estate revenue. Cash NOI is also a non-GAAP financial measure that is calculated by subtracting free rent (net of amortization), straight-line rent, and the amortization of acquired above and below-market leases from NOI, while adding operating lease straight-line adjustment and the allowance for straight-line tenant credit loss.

The Company presents NOI and Cash NOI because the Company believes that these measures, when taken together with the corresponding GAAP financial measures and reconciliations, provide investors with meaningful information regarding the operating performance of properties. When operating performance is compared across multiple periods, the investor is provided with information not immediately apparent from net income that is determined in accordance with GAAP. NOI and Cash NOI provide information on trends in the revenue generated and expenses incurred in operating the Company’s properties, unaffected by the cost of leverage, straight-line adjustments, depreciation, amortization, and other net income components. The Company uses these metrics internally as performance measures. None of these measures is an alternative to net income (determined in accordance with GAAP) and same-store performance should not be considered an alternative to GAAP net income performance.

Coverage Ratios

The Company presents fixed charge and debt service coverage ratios to provide a measure of the Company’s financial flexibility to service current debt amortization, interest expense and operating lease rent from current cash net operating income. These coverage ratios represent a common measure of the Company’s ability to service fixed cash payments; however, these ratios are not used as an alternative to cash flow from operating, financing and investing activities (determined in accordance with GAAP).

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