SL Green(SLG) - 2023 Q4 - Annual Report

PART I Business SL Green is a self-managed REIT focused on owning, managing, and developing commercial real estate, primarily Manhattan office properties - SL Green is a self-managed REIT focused on commercial real estate, principally office properties, with a primary concentration in Manhattan[23] Portfolio Summary as of December 31, 2023 | Property Type | Number of Properties | Approx. Square Feet | Weighted Avg. Leased Occupancy | | :--- | :--- | :--- | :--- | | Total Commercial | 48 | 29,333,575 | 89.0% | | Manhattan Office | 25 | 23,811,315 | 89.4% | | Manhattan Retail | 10 | 322,332 | 91.2% | | Suburban Office | 7 | 862,800 | 77.1% | | Total Residential | 2 | 362,266 | 99.0% | | Total Portfolio | 50 | 29,695,841 | 89.2% | - The company's primary objective is to maximize total stockholder return through dividends, earnings, and asset value appreciation, employing strategies like leasing, acquisitions/dispositions, development/redevelopment, debt/preferred equity investments, and maintaining a strong balance sheet[34][35] - The company operates through three reportable segments: real estate, debt and preferred equity investments, and SUMMIT, with the latter portfolio having a book value of $346.7 million as of year-end 2023[61][63] - In 2023, the company signed 160 Manhattan office leases covering approximately 1.8 million square feet and sold a 49.9% joint venture interest in 245 Park Avenue at a gross asset valuation of $2.0 billion[72][75] - The One Madison Avenue development project secured its temporary certificate of occupancy in September 2023, ahead of schedule and under budget, triggering $577.4 million in cash payments used to repay corporate debt[78] Risk Factors The company faces significant risks primarily concentrated in the Manhattan commercial office market, including demand declines and operational, financial, and regulatory challenges - A significant majority of the company's holdings are commercial office properties in midtown Manhattan, making the business highly dependent on the New York metropolitan area economy, with remote/hybrid work schedules posing a risk to long-term office space demand[79][80] - As of December 31, 2023, approximately 44.1% of rentable square feet at consolidated properties and 20.6% at unconsolidated joint ventures are scheduled to expire by December 31, 2028, posing a risk if leases cannot be renewed or relet on favorable terms[81] - Five properties accounted for 38.9% of the Portfolio's annualized cash rent as of year-end 2023, concentrating revenue risk[85] - The company is subject to risks from climate change initiatives, particularly New York City's Local Law 97 (LL97), which sets carbon caps for large buildings starting in 2024; while no material financial impact is anticipated for the 2024-2029 compliance period, future costs or penalties could be significant[103] - The company has significant debt obligations, including $3.5 billion in consolidated indebtedness and a proportionate share of $7.4 billion in joint venture debt as of December 31, 2023; a hypothetical 100 basis point increase in interest rates would increase net annual interest costs by $1.0 million and the share of JV interest costs by $12.2 million[104][108] - Failure to qualify as a REIT would be costly, subjecting the company to federal income tax at regular corporate rates and eliminating the deduction for dividends paid, thereby substantially reducing funds available for distribution[133][134] Unresolved Staff Comments As of December 31, 2023, the company reported no unresolved comments with the staff of the SEC - As of December 31, 2023, there were no unresolved comments with the SEC staff[150] Cybersecurity The company's cybersecurity program, guided by the NIST Cybersecurity Framework, protects information assets and ensures business resiliency through risk-based assessments and oversight - The company's cybersecurity strategy is guided by the National Institute for Standards and Technology (NIST) Cybersecurity Framework and includes an incident response plan and monitoring program[153] - The Audit Committee of the Board provides oversight for the company's risk assessment and management policies related to cybersecurity[157] - The Senior Director, Information Security & Network Systems, and the Senior Vice President, Information Technology, are responsible for managing cybersecurity risks and report to the Board and Audit Committee as needed[158] - The company states that to date, cybersecurity risks have not materially affected its business strategy, results of operations, or financial condition[155] Properties SL Green's portfolio, primarily Manhattan office properties, had an 89.4% leased occupancy as of December 31, 2023, with proactive management of lease expirations Manhattan Office Portfolio Summary (as of Dec 31, 2023) | Category | Number of Properties | Square Feet | % Leased | | :--- | :--- | :--- | :--- | | Consolidated | 13 | 8,399,141 | 86.4% | | Unconsolidated | 12 | 15,412,174 | 91.1% | | Total | 25 | 23,811,315 | 89.4% | Historical Occupancy Rate of Manhattan Operating Portfolio | Date | SLG Portfolio Occupancy | Midtown Class A Market | Midtown Class B Market | | :--- | :--- | :--- | :--- | | Dec 31, 2023 | 89.4% | 78.4% | 75.5% | | Dec 31, 2022 | 90.7% | 78.4% | 76.6% | | Dec 31, 2021 | 92.1% | 80.6% | 77.1% | - The average annual lease expiration rate for the five years ending December 31, 2028, is approximately 9.2% for Manhattan consolidated properties and 4.0% for unconsolidated properties[170] - The company's 20 largest tenants account for 36.4% of its share of annualized cash rent, with the single largest tenant, Paramount Global, contributing 5.9%[179][181] Legal Proceedings As of December 31, 2023, the company was not involved in any material litigation, nor was any material litigation threatened - The Company and Operating Partnership were not involved in any material litigation as of December 31, 2023[185] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[186] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities SL Green's common stock trades on the NYSE, with a policy of regular dividends and a $3.5 billion share repurchase program in place - SL Green's common stock (SLG) trades on the New York Stock Exchange, and the company has a policy of paying regular dividends to maintain its REIT qualification[188][191] - The company has a $3.5 billion share repurchase program; no shares were repurchased during the three months ended December 31, 2023, and the cumulative number of shares repurchased under the plan is 36,107,719[193][194] Management's Discussion and Analysis of Financial Condition and Results of Operations In 2023, SL Green reported a net loss of $599.3 million due to impairments, with revenues slightly down and expenses up, while maintaining $0.9 billion liquidity - In 2023, the company signed office leases in Manhattan for approximately 1.8 million square feet; same-store Manhattan office occupancy was 90.0% as of December 31, 2023, down from 91.2% a year earlier[199] - The company continued to dispose of non-core assets and sell joint venture interests, generating net proceeds of $176.9 million in 2023, primarily used for debt reduction[201] Results of Operations Comparison (in millions) | Metric | 2023 | 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $913.7 | $919.4 | ($5.7) | (0.6)% | | Rental Revenue | $683.3 | $671.5 | $11.8 | 1.8% | | SUMMIT Operator Revenue | $118.3 | $89.0 | $29.3 | 32.9% | | Investment Income | $34.7 | $81.1 | ($46.4) | (57.2)% | | Total Expenses | $990.3 | $838.8 | $151.5 | 18.1% | | Property Operating | $367.5 | $339.2 | $28.3 | 8.3% | | Interest Expense, net | $145.0 | $97.3 | $47.7 | 49.0% | | Depreciable real estate reserves and impairments | $382.4 | $6.3 | $376.1 | 5,969.8% | | Net Loss | ($599.3) | ($76.3) | ($523.0) | 685.5% | Funds from Operations (FFO) (in thousands) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net (loss) income attributable to SL Green common stockholders | $(579,509) | $(93,024) | $434,804 | | FFO attributable to SL Green common stockholders and unit holders | $341,341 | $458,827 | $481,234 | - As of December 31, 2023, the company had liquidity of $0.9 billion, comprising $688.0 million available under its revolving credit facility and $231.4 million of consolidated cash and marketable securities[262] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate volatility on variable rate debt, managed through derivatives, with a 100 basis point increase impacting annual interest costs by $1.0 million consolidated and $12.2 million for JVs - The company's primary market risk is from changes in interest rates on its variable rate debt, which is managed through derivative instruments and mitigated by variable rate investments[296] - A hypothetical 100 basis point increase in interest rates would increase consolidated annual net interest cost by $1.0 million and the company's share of joint venture annual interest cost by $12.2 million as of December 31, 2023[296] Debt and Preferred Equity Investments by Maturity (as of Dec 31, 2023, in thousands) | Year | Long-Term Debt (Fixed & Variable) | Debt & Preferred Equity Investments | | :--- | :--- | :--- | | 2024 | $587,238 | $120,422 | | 2025 | $470,000 | $30,000 | | 2026 | $190,148 | $48,323 | | 2027 | $2,160,000 | $128,000 | | 2028 | $0 | $0 | | Thereafter | $100,000 | $20,000 | | Total | $3,507,386 | $346,745 | Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for SL Green Realty Corp. and its Operating Partnership, including balance sheets, statements of operations, and cash flows, with total assets of $9.5 billion and a net loss of $579.5 million for 2023 SL Green Realty Corp. Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $9,531,181 | $12,355,794 | | Commercial real estate properties, net | $5,020,789 | $7,159,245 | | Investments in unconsolidated joint ventures | $2,983,313 | $3,190,137 | | Total Liabilities | $5,270,704 | $7,260,936 | | Mortgages and other loans payable, net | $1,491,319 | $3,227,563 | | Unsecured term loans, net | $1,244,881 | $1,641,552 | | Total SL Green stockholders' equity | $3,786,315 | $4,585,033 | SL Green Realty Corp. Consolidated Statement of Operations Highlights (in thousands) | | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Total revenues | $913,710 | $919,454 | | Total expenses | $990,296 | $838,752 | | Depreciable real estate reserves and impairments | ($382,374) | ($6,313) | | Net (loss) income | ($599,337) | ($76,303) | | Net (loss) income attributable to SL Green common stockholders | ($579,509) | ($93,024) | | Diluted (loss) earnings per share | ($9.12) | ($1.49) | - The financial statements have been audited by Ernst & Young LLP, which provided an unqualified opinion on the financial statements and the company's internal control over financial reporting as of December 31, 2023[332][333] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with its accountants on accounting and financial disclosure - None reported[704] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with an unqualified audit opinion and no significant changes - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[706] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework[707] - The effectiveness of internal control over financial reporting was audited by Ernst & Young LLP, which issued an unqualified opinion[709][720] - There were no significant changes in internal control over financial reporting during the year ended December 31, 2023[710] Other Information The company reported no other information under this item - None[738] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[739] PART III Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the company's 2024 Proxy Statement - The information required by this item is incorporated by reference from the company's 2024 Proxy Statement[741] Executive Compensation Information for this item is incorporated by reference from the company's 2024 Proxy Statement - The information required by this item is incorporated by reference from the company's 2024 Proxy Statement[742] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information is incorporated by reference, detailing 4,692,094 securities for issuance under equity plans and 4,139,076 remaining available as of December 31, 2023 Equity Compensation Plan Information as of December 31, 2023 | Plan Category | Securities to be Issued Upon Exercise (a) | Weighted-Average Exercise Price (b) | Securities Remaining for Future Issuance (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 4,692,094 | $103.52 | 4,139,076 | Certain Relationships and Related Transactions, and Director Independence Information for this item is incorporated by reference from the company's 2024 Proxy Statement - The information required by this item is incorporated by reference from the company's 2024 Proxy Statement[748] Principal Accountant Fees and Services Information for this item is incorporated by reference from the company's 2024 Proxy Statement - The information required by this item is incorporated by reference from the company's 2024 Proxy Statement[749] PART IV Exhibits, Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report, including consolidated financials and a comprehensive index - This section contains the consolidated financial statements for SL Green Realty Corp. and SL Green Operating Partnership, L.P[751] - Includes Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2023[751] - Provides a detailed index of all exhibits filed with the report, including governance documents, debt agreements, employment contracts, and certifications[755][757][759]