SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
------------------
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: March 27, 2002
SL GREEN REALTY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND
(STATE OF INCORPORATION)
1-13199 13-3956775
(COMMISSION FILE NUMBER) (IRS EMPLOYER ID. NUMBER)
420 Lexington Avenue 10170
New York, New York (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(212) 594-2700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant hereby amends its Current Report on Form 8-K, dated March 27, 2002
(filed with the Securities and Exchange Commission on May 16, 2002), to provide
the financial statements and pro forma financial information of 1515 Broadway,
New York, New York.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) and (b) FINANCIAL STATEMENTS OF PROPERTY ACQUIRED AND PRO FORMA FINANCIAL
INFORMATION
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited) as of March 31, 2002 ............................... F2
Pro Forma Condensed Consolidated Income Statement
(Unaudited) for the three months ended March 31, 2002 .......... F3
Pro Forma Condensed Consolidated Income Statement
(Unaudited) for the year ended December 31, 2001 ............... F4
Notes to Pro Forma Financial Information ............................. F5
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors ....................................... F8
Balance sheets of 1515 Broadway Associates, L.P. as of
March 31, 2002 (unaudited) and December 31, 2001 ............... F9
Statements of Operations of 1515 Broadway Associates, L.P.
for the three months ended March 31, 2002 (unaudited)
and the year ended December 31, 2001 ........................... F10
Statements of Cash Flows of 1515 Broadway Associates, L.P.
for the three months ended March 31, 2002 (unaudited)
and the year ended December 31, 2001 ........................... F11
Notes to Financial Statements ........................................ F12
(C) EXHIBITS
None
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SL GREEN REALTY CORP.
By: /s/ Thomas E. Wirth
----------------------
Thomas E. Wirth
Chief Financial Officer
Date: July 15, 2002
3
SL GREEN REALTY CORP.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The unaudited pro forma consolidated balance sheet of SL Green Realty Corp. (the
"Company") as of March 31, 2002 has been prepared as if the Company's
acquisition of the partnership interest in the joint venture owning the property
located at 1515 Broadway, Manhattan ("1515 Broadway") had been consummated on
March 31, 2002. The unaudited pro forma consolidated income statements for the
year ended December 31, 2001 and the three months ended March 31, 2002 are
presented as if the Company's acquisition of the partnership interest in 1515
Broadway occurred on January 1, 2001 and the effect was carried forward through
the year and the three month period.
On May 15, 2002, a joint venture between the Company and SITQ Immobilier
completed the acquisition of the partnership interests in 1515 Broadway for an
aggregate purchase price of $483.5 million. The Company has an approximate 55%
interest in the joint venture.
1515 Broadway was owned by 1515 Broadway Associates, L.P. (the "Partnership"),
whose general partner was an affiliate of The Equitable Life Assurance Society
of the United States. The acquisition was accomplished through a pre-packaged
bankruptcy reorganization by the Partnership, to which the parties have
consented.
The pro forma consolidated financial statements do not purport to represent what
the Company's financial position or results of operations would have been
assuming the completion of the Company's acquisition of 1515 Broadway had
occurred on January 1, 2001 and for the period indicated, nor do they purport to
project the Company's financial position or results of operations at any future
date or for any future period. These pro forma consolidated financial statements
should be read in conjunction with the Company's 2001 Annual Report on Form 10-K
and the Company's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2002.
F 1
SL GREEN REALTY CORP.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2002
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
SL GREEN REALTY
CORP. PRO FORMA SL GREEN
HISTORICAL ADJUSTMENTS PROFORMA
(A) (B)
ASSETS:
Commerical real estate properties at cost:
Land and land interests $ 138,337 $ -- $ 138,337
Buildings and improvements 699,610 -- 699,610
Building leasehold 145,012 -- 145,012
Property under capital lease 12,208 -- 12,208
------------ ------------ ------------
995,167 -- 995,167
Less accumulated depreciation (108,034) -- (108,034)
------------ ------------ ------------
887,133 -- 887,133
Cash and cash equivalents 12,429 -- 12,429
Restricted cash 37,126 -- 37,126
Tenant and other receivables,
net of allowance of $4,229 7,754 -- 7,754
Related party receivables 3,417 -- 3,417
Deferred rents receivable, net of
allowance for tenant credit loss of $5,492 53,816 -- 53,816
Investment in and advances to affiliates 2,811 -- 2,811
Structured finance investments 189,120 -- 189,120
Investments in unconsolidated joint ventures 124,958 93,335 218,293
Deferred costs, net 34,416 -- 34,416
Other assets 15,005 -- 15,005
------------ ------------ ------------
Total Assets $ 1,367,985 $ 93,335 $ 1,461,320
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Mortgage notes payable $ 408,186 $ -- $ 408,186
Revolving credit facilities 86,931 93,335 180,266
Derivative instruments at fair value 2,002 -- 2,002
Accrued interest payable 1,617 -- 1,617
Accounts payable and accrued expenses 24,386 -- 24,386
Deferred compensation awards 671 -- 671
Deferred revenue 1,676 -- 1,676
Capitalized lease obligations 15,644 -- 15,644
Deferred land lease payable 14,246 -- 14,246
Dividend and distributions payable 16,596 -- 16,596
Security deposits 19,019 -- 19,019
------------ ------------ ------------
Total liabilities 590,974 93,335 684,309
Commitments and Contingencies
Minority interest in Operating Partnership 47,295 -- 47,295
8% Preferred Income Equity
Redeemable Shares(SM) $0.01 par
value $25.00 mandatory liquidation
preference, 25,000 authorized and 4,600
outstanding at March 31, 2002 111,353 -- 111,353
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 100,000 shares
authorized, 30,042 issued and outstanding
at March 31, 2002 301 -- 301
Additional paid - in capital 584,407 -- 584,407
Deferred compensation plans (6,234) -- (6,234)
Accumulated other comprehensive loss (1,709) -- (1,709)
Retained earnings 41,598 -- 41,598
------------ ------------ ------------
Total stockholders' equity 618,363 -- 618,363
------------ ------------ ------------
Total liabilities and stockholders' equity $ 1,367,985 $ 93,335 $ 1,461,320
============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA FINANCIAL
STATEMENTS.
F 2
SL GREEN REALTY CORP.
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2002
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
SL GREEN
SL GREEN REALTY REALTY CORP. SL GREEN
CORP. HISTORICAL PRO FORMA PRO FORMA
(A) ADJUSTMENTS
REVENUES:
Rental revenue $ 47,784 $ -- $ 47,784
Escalation and reimbursement revenues 6,726 -- 6,726
Signage rent 466 -- 466
Investment income 3,720 -- 3,720
Preferred equity income 1,911 -- 1,911
Other income 1,076 -- 1,076
------------ ------------ ------------
Total revenues 61,683 -- 61,683
------------ ------------ ------------
EXPENSES:
Operating expenses including $1,513 to
affiliates 13,719 -- 13,719
Real estate taxes 7,355 -- 7,355
Ground rent 3,159 -- 3,159
Interest 9,112 791 (B) 9,903
Depreciation and amortization 9,597 -- 9,597
Marketing, general and administrative 3,202 -- 3,202
------------ ------------ ------------
Total expenses 46,144 791 46,935
------------ ------------ ------------
Income before equity in net loss from affiliates,
equity in net income of unconsolidated joint ventures,
gain on sale and minority interest 15,539 (791) 14,748
Equity in net loss from affiliates (84) -- (84)
Equity in net income of unconsolidated
joint ventures 3,333 2,140 (C) 5,473
------------ ------------ ------------
Income before minority interest 18,788 1,349 20,137
Minority interest in operating partnership (1,152) (94)(D) (1,246)
------------ ------------ ------------
Net income 17,636 1,255 18,891
Preferred stock dividends (2,300) -- (2,300)
Preferred stock accretion (123) -- (123)
------------ ------------ ------------
Net income available to common shareholders $ 15,213 $ 1,255 $ 16,468
============ ============ ============
BASIC EARNINGS PER SHARE:(E)
Net income $ 0.51 $ 0.55
============ ============
DILUTED EARNINGS PER SHARE:(E)
Net income $ 0.50 $ 0.54
============ ============
Dividends per common share $ 0.4425 $ 0.4425
============ ============
Basic weighted average common shares outstanding 29,992 29,992
============ ============
Diluted weighted average common shares
and common share equivalents outstanding 32,905 37,604
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA FINANCIAL
STATEMENTS.
F 3
SL GREEN REALTY CORP.
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2001
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
SL GREEN REALTY
SL GREEN REALTY CORP. PRO FORMA SL GREEN
CORP. HISTORICAL ADJUSTMENTS PRO FORMA
(A)
REVENUES:
Rental revenue $ 204,662 -- $ 204,662
Escalation and reimbursement revenues 31,339 -- 31,339
Signage rent 1,522 -- 1,522
Investment income 14,808 -- 14,808
Preferred equity income 2,561 -- 2,561
Other income 2,793 -- 2,793
------------ ------------ ------------
Total revenues 257,685 -- 257,685
------------ ------------ ------------
EXPENSES:
Operating expenses including $5,805 to affiliates 58,141 -- 58,141
Real estate taxes 30,963 -- 30,963
Ground rent 12,579 -- 12,579
Interest 46,238 5,283 (B) 51,521
Depreciation and amortization 38,336 -- 38,336
Marketing, general and administrative 15,374 -- 15,374
------------ ------------ ------------
Total expenses 201,631 5,283 206,914
------------ ------------ ------------
Income (loss) before equity in net income
from affiliates,
equity in net income of unconsolidated
joint ventures, gain on sale, minority
interest and extraordinary Items 56,054 (5,283) 50,771
Equity in net loss from affiliates (1,054) -- (1,054)
Equity in net income of unconsolidated
joint ventures 8,607 7,049 (C) 15,656
Gain on sale of rental
property/preferred Investment 4,956 -- 4,956
------------ ------------ ------------
Income before minority interest 68,563 1,766 70,329
Minority interest (4,600) (138)(D) (4,738)
Extraordinary items, net of minority
interest of $34 (430) -- (430)
Cumulative effect of change in
accounting principle (532) -- (532)
------------ ------------ ------------
Net (loss) income 63,001 1,628 64,629
Preferred stock dividends (9,200) -- (9,200)
Preferred stock accretion (458) -- (458)
------------ ------------ ------------
Net income available to common shareholders $ 53,343 $ 1,628 $ 54,971
============ ============ ============
BASIC EARNINGS PER SHARE:(E)
Net income before gain on sale,
extraordinary item and cumulative effect
effect adjustment $ 1.83 $ 1.89
Gain on sales 0.18 0.18
Extraordinary item (0.01) (0.01)
Cumulative effect of change in
accounting principle (0.02) (0.02)
------------ ------------
Net income $ 1.98 $ 2.04
============ ============
DILUTED EARNINGS PER SHARE:(E)
Net income before gain on sale, extraordinary
Item and cumulative effect adjustment $ 1.81 $ 1.87
Gain on sales 0.16 0.16
Extraordinary item (0.01) (0.01)
Cumulative effect of change in
accounting principle (0.02) (0.02)
------------ ------------
Net income $ 1.94 $ 2.00
============ ============
Basic weighted average common shares
outstanding 26,993 26,993
============ ============
Diluted weighted average common shares
and common share equivalents outstanding 29,808 29,808
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA FINANCIAL
STATEMENTS.
F 4
SL GREEN REALTY CORP.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2002
(UNAUDITED AND IN THOUSANDS)
(A) To reflect the condensed consolidated balance sheet of SL Green Realty
Corp. at March 31, 2002 as reported on the Company's Quarterly Report
on Form 10-Q.
(B) To reflect the May 15, 2002 purchase of the partnership interests which
controlled the property located at 1515 Broadway as of March 31, 2002
for $483,500. There was no independent valuation performed on this
property. SL Green accounts for its investment in 1515 Broadway on the
equity method of accounting as it does not control the joint venture
that owns the property.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED AND IN THOUSANDS)
(A) To reflect the consolidated statement of income of SL Green Realty
Corp. for the three month period ended March 31, 2002 as reported on
the Company's Quarterly Report on Form 10-Q.
(B) To record interest expense for borrowings under the Company's revolving
credit facility ($93,335 at a weighted average interest rate of 3.39%).
(C) To adjust for SL Green's 55% equity interest in the net income of the
joint venture:
1515 BROADWAY 1515 BROADWAY SL GREEN
ACQUISITION PRO FORMA PRO FORMA 1515 BROADWAY
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
(a)
REVENUES:
Rental revenue $ 12,957 $ 890 $ 979 (b) $ 14,826
Escalation and reimbursement revenues 2,396 -- -- 2,396
Other income 24 (24) -- (c) --
------------ ------------ ------------ ------------
Total revenues 15,377 866 979 17,222
------------ ------------ ------------ ------------
EXPENSES:
Operating expenses 3,189 -- -- 3,189
Real estate taxes 2,393 -- -- 2,393
Interest 6,532 (6,532) 3,953 (d) 3,953
Depreciation and amortization 2,543 (2,089) 2,421 (e) 2,875
Marketing, general and administrative 517 (255) 660 (f) 922
------------ ------------ ------------ ------------
Total expenses 15,174 (8,876) 7,034 13,332
------------ ------------ ------------ ------------
Net income $ 203 $ 9,742 $ (6,055) $ 3,890
============ ============ ============ ============
SL Green's 55% of joint venture pro
forma net income (g) $ 2,140
============
(a) This represent the historical financial statements of 1515
Broadway Associates, L.P.,
(b) Rental income from 1515 Broadway was increased to reflect pro
forma straight line amounts as of January 1, 2001 ($979) and
the historic straight line amount ($890) was added back,
(c) To eliminate interest income,
(d) To reverse the historic interest expense ($6,532) and reflect
interest expense on $335,000 of new property level mortgage
debt ($3,953) at a weighted average annual rate of 4.70%,
F 5
(e) To reverse historic depreciation expense ($2,089) and reflect
straight line depreciation of $2,421 for 1515 Broadway based
on an estimated useful life of 40 years and a purchase price
of $483,500,
(f) To eliminate historic management and bank administrative fees
($255) and increase expenses for pro forma management fees
($660), and
(g) To reflect the Company's 55% equity interest in the pro forma
net income of 1515 Broadway.
(D) To reflect the minority shareholders interest of 7.0% in the operating
partnership.
(E) Basic income per common share is calculated based on 29,992 weighted
average common shares outstanding and diluted income per common share
is calculated based on 32,905 weighted average common shares and common
share equivalents outstanding. The diluted weighted average common
shares for the Company Pro Forma includes 4,699 of preferred shares as
if they were converted to common shares.
YEAR ENDED DECEMBER 31, 2001
NOTES TO PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
(UNAUDITED AND IN THOUSANDS)
(A) To reflect the consolidated statement of income of SL Green Realty
Corp. for the year ended December 31, 2001 as reported on the Company's
Annual Report on Form 10-K.
(B) To record interest expense for borrowings under the Company's revolving
credit facility ($93,335 at a weighted average interest rate of 5.66%).
(C) To adjust for SL Green's 55% equity interest in the net income of the
joint venture:
1515 BROADWAY 1515 BROADWAY SL GREEN
ACQUISITION PRO FORMA PRO FORMA 1515 BROADWAY
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
(a)
REVENUES:
Rental revenue $ 51,138 $ 3,301 $ 4,187 (b) $ 58,626
Escalation and reimbursement revenues 8,024 - - 8,024
Other income 344 (344) - (c) -
------------ ------------ ------------ ------------
Total revenues 59,506 2,957 4,187 66,650
------------ ------------ ------------ ------------
EXPENSES:
Operating expenses 13,626 - - 13,626
Real estate taxes 9,122 - - 9,122
Interest 40,475 (40,475) 15,812 (d) 15,812
Depreciation and amortization 10,258 (8,399) 9,684 (e) 11,543
Marketing, general and administrative 2,106 (1,015) 2,639 (f) 3,730
------------ ------------ ------------ ------------
Total expenses 75,587 (49,889) 28,135 53,833
------------ ------------ ------------ ------------
Net (loss) income $ (16,081) $ 52,846 $ (23,948) $ 12,817
============ ============ ============ ============
SL Green's 55% of joint venture pro
forma net income (g) $ 7,049
============
(a) This represent the historical financial statements of 1515
Broadway Associates, L.P.,
(b) Rental income from 1515 Broadway was increased to reflect pro
forma straight line amounts as of January 1, 2001 ($4,187) and
the historic straight line amount ($3,301) was added back,
(c) To eliminate interest income,
(d) To reverse the historic interest expense ($40,475) and reflect
interest expense on $335,000 of new property level mortgage
debt ($15,812) at a weighted average annual rate of 4.70%,
(e) To reverse historic depreciation expense ($8,399) and reflect
straight line depreciation of $9,684 for 1515 Broadway based
on an estimated useful life of 40 years and a purchase price
of $483,500,
(f) To eliminate historic management and bank administrative fees
($1,015) and increase expenses for pro forma management fees
($2,639), and
F 6
(g) To reflect the Company's 55% equity interest in the pro forma
net income of 1515 Broadway.
(D) To reflect the minority shareholders interest of 7.8% in the operating
partnership.
(E) Basic income per common share is calculated based on 26,993 weighted
average common shares outstanding and diluted income per common share
is calculated based on 29,808 weighted average common shares and common
share equivalents outstanding.
F 7
Report of Independent Auditors
To the Board of Directors of
SL Green Realty Corp.
We have audited the accompanying balance sheet of 1515 Broadway Associates, L.P.
(the "Partnership") as of December 31, 2001 and the related statements of
operations and cash flows for the year ended December 31, 2001. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 1515 Broadway Associates, L.P.
at December 31, 2001 and the results of its operations and its cash flows for
the year ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
July 5, 2002
F 8
1515 BROADWAY ASSOCIATES, L.P.
Balance Sheets
(In Thousands)
December 31, March 31,
2001 2002
------------ ------------
(Unaudited)
ASSETS
Commercial real estate property, at cost:
Land $ 42,828 $ 42,828
Building and improvements 261,673 261,673
------------ ------------
304,501 304,501
Less accumulated depreciation (137,817) (139,905)
------------ ------------
166,684 164,596
Cash and cash equivalents 1,454 1,453
Restricted cash 5,115 6,560
Tenant receivables, net of allowance of $298 and $342 for 2001
and March 31, 2002, respectively 1,985 923
Deferred rents receivable 61,363 60,474
Deferred costs, net 16,015 15,567
Other assets 5,689 3,842
------------ ------------
Total assets $ 258,305 $ 253,415
============ ============
LIABILITIES AND MEMBERS' DEFICIT
Mortgage loans payable $ 590,619 $ 585,866
Accrued interest payable 647 567
Accounts payable and accrued expenses 2,733 2,473
Security deposits 623 623
------------ ------------
Total liabilities 594,622 589,529
Total members' deficit (336,317) (336,114)
------------ ------------
Total liabilities and members' deficit $ 258,305 $ 253,415
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F 9
1515 BROADWAY ASSOCIATES, L.P.
Statements of Operations
(In Thousands)
Year Ended Three Months
December 31, Ended March 31,
2001 2002
------------ ------------
(Unaudited)
REVENUE:
Rental revenue $ 51,138 $ 12,957
Escalation and reimbursement revenues 8,024 2,396
Interest income 344 24
------------ ------------
Total revenues 59,506 15,377
------------ ------------
EXPENSES:
Operating expenses 13,626 3,189
Real estate taxes 9,122 2,393
Interest 40,475 6,532
Depreciation and amortization 10,258 2,543
Marketing, general and administrative 2,106 517
------------ ------------
Total expenses 75,587 15,174
------------ ------------
Net (loss) income $ (16,081) $ 203
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F10
1515 BROADWAY ASSOCIATES, L.P.
Statements of Cash Flows
(In Thousands)
Year Ended Three Months
December 31, Ended March 31,
2001 2002
------------ ------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (16,081) $ 203
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Provision for bad debt 219 44
Deferred rents receivable 3,301 890
Depreciation and amortization 10,258 2,543
Interest not currently payable 26,840 4,736
Changes in operating assets and liabilities:
Restricted cash 2,765 (1,445)
Tenant receivables 858 1,018
Prepaid taxes (4,690) 2,393
Other assets 30 (2)
Accounts payable and accrued expenses (276) (252)
------------ ------------
Net cash provided by operating activities 23,224 10,128
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate and related costs (499) (88)
Payments for lease cancellation costs (14) --
Payments for deferred leasing and legal costs (999) (8)
------------ ------------
Net cash used in investment activities (1,512) (96)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred disposition costs (903) (544)
Proceeds from mortgage loans payable 1,011 11
Payments of mortgage principal (26,000) (9,500)
------------ ------------
Net cash used in financing activities (25,892) (10,033)
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (4,180) (1)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,634 1,454
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,454 $ 1,453
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 14,649 $ 1,876
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F11
1515 BROADWAY ASSOCIATES, L.P.
Notes To Financial Statements
Year Ended December 31, 2001
(In Thousands)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Presented herein are the balance sheet and the statements of operations
and cash flows for 1515 Broadway Associates, L.P. (the "Partnership")
related to the operations of the property, located at 1515 Broadway, which
is in the Times Square sub-market, in the borough of Manhattan in New York
City, (the "Property"). On January 11, 2002, the Partnership, its general
partner, and The Equitable Life Assurance Society of the United States
("Equitable") (an affiliated entity of the general partner) executed a
contribution agreement with SL Green Realty Acquisition LLC ("SL Green")
to reorganize the Partnership. On January 25, 2002, the Partnership
solicited the limited partners' consent to a transaction, which included a
pre-packaged Chapter 11 Bankruptcy filing in March 2002. On May 15, 2002
the Property was transferred to a new entity owned 99.8% by SL Green and
SITQ Immobilier and 0.2% by the Partnership. The above transaction
included the redemption of the Partnership's general partnership interest;
the repayment of all of the first mortgage bank loan, the second mortgage
bank loan, and the Equitable third tier loans; and the repayment of a
portion of the Equitable second tier loan, the remainder of which was
forgiven. The Property was sold for an aggregate purchase price of
approximately $483,500.
INVESTMENT IN COMMERCIAL REAL ESTATE PROPERTY - Rental property is stated
at cost less accumulated depreciation and amortization. Costs directly
related to the acquisition and redevelopment of rental property is
capitalized. Ordinary repairs and maintenance are expensed as incurred;
major replacements and betterments, which improve or extend the life of
the asset, are capitalized and depreciated over their estimated useful
lives. Fully-depreciated assets are removed from the accounts.
Rental property is depreciated using the straight-line method over the
estimated useful lives of the assets. The estimated useful lives are as
follows:
Category Term
---------------------------------------------------------------------------
Building 40 years
Building improvements shorter of remaining life of the building or useful life
Furniture and fixtures four to seven years
Tenant improvements shorter of remaining term of the lease or useful life
Depreciation expense amounted to $8,399 for the year ended December 31,
2001 and $2,089 (unaudited) for the three months ended March 31, 2002,
respectively.
On a periodic basis, management assesses whether there are any indicators
that the value of the real estate property may be impaired. A property's
value is impaired if the aggregate future cash flows (undiscounted and
without interest charges) to be generated by the property are less than
the carrying value of the property. To the extent impairment has occurred,
the loss shall be measured as the excess of the carrying amount of the
property over the fair value of the property.
On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." The adoption did not have a
F12
material impact on the Company's results of operations or financial
position. The rental property was not impaired at December 31, 2001 or at
March 31, 2002.
CASH AND CASH EQUIVALENTS - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents.
RESTRICTED CASH - Restricted cash primarily consists of security deposits
held on behalf of tenants and escrows for mortgage loan payments.
DEFERRED LEASE COSTS - Deferred lease costs consist of fees and direct
costs incurred to initiate and renew operating leases and are amortized on
a straight-line basis over the related lease term.
DEFERRED FINANCING COSTS - Deferred financing costs represent commitment
fees, legal and other third party costs associated with obtaining
commitments for financing which result in a closing of such financing.
These costs are amortized over the terms of the respective agreements.
Unamortized deferred financing costs are expensed when the associated debt
is refinanced or repaid before maturity.
REVENUE RECOGNITION - Rental revenue is recognized 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 accompanying balance sheet. For the
year ended December 31, 2001 and the three months ended March 31, 2002
amounts contractually due were in excess of rents recognized pursuant to
the underlying leases in the amount of $3,301 and $890 (unaudited),
respectively.
INCOME TAXES - The taxable income or loss of the Partnership is reported
in the income tax returns of the members, and accordingly, no tax
provision is recognized in the accompanying 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.
CONCENTRATIONS OF CREDIT RISK - Financial instruments that potentially
subject the Partnership to concentrations of credit risk consist primarily
of cash investments and accounts receivable. The Partnership places its
cash investments with high quality credit rated institutions. Management
of the Partnership performs ongoing credit evaluation of its tenants and
requires certain tenants to provide security deposits. Though these
security deposits are insufficient to meet the terminal 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 rent and the
costs associated with retenanting the space.
The Partnership has a lease with a publicly traded entertainment industry
company, Viacom International, Inc. Approximately 86% of the total base
rent is attributable to Viacom International, Inc., at December 31, 2001
and March 31, 2002 (unaudited) on various leases, which extend to years
2008, 2010 and 2013.
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2. DEFERRED COSTS
Deferred costs incurred in connection with the financing and leasing of
the Property are as follows:
December 31, March 31,
2001 2002
------------ ------------
(Unaudited)
Deferred financing costs $ 7,063 $ 7,160
Deferred leasing commission expenses 22,678 22,685
------------ ------------
29,741 29,845
Less: accumulated amortization (13,726) (14,278)
------------ ------------
$ 16,015 $ 15,567
============ ============
3. MORTGAGE LOANS PAYABLE
The mortgage loans payable, including accrued interest, consist of the
following at:
December 31, March 31,
2001 2002
------------ ------------
(Unaudited)
Bank First Tier Loan $ 219,852 $ 210,352
Bank Second Tier Loan 39,045 39,370
Equitable Second Tier Loan 150,875 152,140
Equitable Third Tier Loan Part I 117,613 120,205
Equitable Third Tier Loan Part II 63,234 63,799
------------ ------------
$ 590,619 $ 585,866
============ ============
BANK FIRST TIER LOAN - The Bank First Tier Loan bears interest at a
floating rate equal to LIBOR plus 1.25% (the "Pay Rate") which may be
converted to a rate equal to 0.25% above the reference rate charged by the
agent bank under defined circumstances, and is payable monthly. The
three-month LIBOR rate at December 31, 2001 and March 31, 2002 was 1.883%
and 2.031%, respectively. A cash collateral account was also established
and such amount as may be in that account serves as additional security
for the Bank First Tier Loan. The loan is non-recourse to the partners of
the Partnership and matures on June 30, 2002. The loan is subject to two
options exercisable by the Partnership. The first option is to extend the
term for two periods of two-and-one-half years each as long as, at the
time of extension, no event of default under the loan has occurred. The
second option is the continuance of prepayment ability in whole or in part
at any time without penalty. The loan is collateralized by a first
priority mortgage on the Property and requires approval of certain leases
by the banks. The Partnership paid a fee to the bank of $100 and $25
(unaudited) in 2001 and 2002, respectively, for administering the loan. As
of December 31, 1999, the Partnership chose to exercise its first option
by extending its maturity date from December 31, 1999 to June 30, 2002.
Subsequent to year-end, the Partnership exercised its option
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to extend the maturity date from June 30, 2002 to December 31, 2004.
During the quarter ended March 31, 2002, the Partnership repaid $9,500 of
the Bank First Tier Loan.
BANK SECOND TIER LOAN - The Bank Second Tier Loan bears interest at a
floating rate equal to LIBOR plus 1.25%, which may be converted to a rate
equal to 0.25% above the reference rate charged by the agent bank under
defined circumstances. The three-month LIBOR rate at December 31, 2001 and
March 31, 2002 was 1.883% and 2.031%, respectively. Beginning on March 1,
1991, interest accrues, compounds monthly and is not payable currently
until the First Tier Loan has been paid in full. The accrued interest is
added to the loan principal and becomes subject to its provisions. The
loan is due the later of June 30, 2002 or the extended due date of the
First Tier Loan, and may be prepaid without penalty after the First Tier
Loan has been repaid in full. The loan is non-recourse to the partners of
the Partnership and is collateralized by a second priority mortgage.
EQUITABLE SECOND TIER LOAN - Equitable has committed to advance to the
Partnership, or under certain circumstances, to the banks, a total of
$104,000, of which $102,700 relates to the Equitable Second Tier Loan and
$1,300 relates to the Equitable Third Tier Loans. The commitment is
divided into two components: the "General Commitment" in the amount of
$52,700 and the "Reserve Commitment" in the amount of $50,000. Subject to
certain exceptions set forth in the agreement, the General Commitment is
to be applied to debt service, operating expenses of the Property and
certain other defined expenses, and the Reserve Commitment is to be
applied to leasing costs, asbestos abatement costs and certain prepetition
expenses. As the Reserve Commitment is completely drawn down, the
Partnership will draw down any unfunded costs from the General Commitment.
The Equitable Second Tier Loan bears interest, commencing on December 31,
1991, at a floating rate equal to LIBOR plus 1.25%, which may be converted
to a rate equal to 0.25% above the reference rate charged by the agent
bank under defined circumstances. The three-month LIBOR rate at December
31, 2001 and March 31, 2002 was 1.883% and 2.031%, respectively. Such
interest accrues, compounds monthly and is not payable until the Bank
First Tier Loan is paid in full. The accrued interest is added to the
outstanding balance of the Equitable Second Tier Loan and becomes subject
to its provisions. The loan is non-recourse to the partners of the
Partnership and is collateralized by a second priority mortgage, which is
pari passu with the Bank Second Tier Loan. This loan may be prepaid
without penalty after repayment in full of the Bank First Tier Loan and is
due concurrently with the Bank Second Tier Loan. In the event of a default
on the Bank First Tier Loan, the banks have the right to draw down any
unexpended portion of the General and Reserve Commitments.
EQUITABLE THIRD TIER LOANS
a. Part I - the first part represents the amount owed by the
Partnership to Equitable as a result of Equitable having made
a principal payment, on December 31, 1991 of $30,800
(consisting of $29,500 under the standby commitment to fund
the amount outstanding under the original line loan, which was
a line of credit available before the restructuring, and
$1,300, which is a portion of certain interest owed the bank
under the original mortgage) plus interest on the $29,500
payment from October 15, 1990 to December 31, 2001 and to
March 31, 2002 of $86,813 and $89,405 (unaudited),
respectively. The interest rate on this loan is at a bank's
prime rate plus 4%. The prime rate at both December 31, 2001
and March 31, 2002 was 4.75%. Interest accrues and compounds
in the same manner as the Equitable Second Tier Loan.
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b. Part II - the second part represents the amount owed by the
Partnership to Equitable as a result of Equitable having made
a payment, on October 15, 1990, of principal ($28,400) and
interest ($2,039) to the bank under the guarantee of the
original mortgage plus additional interest under the guarantee
of the original mortgage plus additional interest accruing
from October 15, 1990 to December 31, 2001 and March 31, 2002
of $32,795 and $33,360 (unaudited), respectively. This loan
bears interest at the same rate as the original mortgage,
except that interest accrues, compounds monthly and is not
payable until the Bank First Tier Loan and Equitable Second
Tier Loans are paid in full.
Both loans are non-recourse to the partners of the Partnership and are
collateralized by a third-priority mortgage. The loans may be prepaid in
whole or in part without penalty after the Bank First Tier and Equitable
Second Tier Loans are repaid in full. Equitable may, at its election,
advance additional funds for the payment of interest on the Bank First
Tier Loan and dependent on the time such advances are made, would become
subject to the provisions of the Part I loan or the Equitable Second Tier
Loan above.
All the above mortgage loans were repaid or forgiven as a result of the
sale of the Property (See Note 1).
4. MANAGEMENT AGREEMENTS AND RELATED PARTY TRANSACTIONS
Until May 16, 2002, Jones Lange LaSalle managed the Property. The
management fees were based on a fixed annual amount of $500. The fee
incurred for managing the Property for the year ended December 31, 2001
and the three months ended March 31, 2002 was $500 and $125 (unaudited),
respectively and is included in marketing, general and administrative
expenses on the statement of operations.
Pursuant to a separate agreement, Lend Lease Real Estate Investments, Inc.
performs supervisory and administrative services for Equitable. Until June
30, 2001, management fees were based on yield table assets, as defined in
the agreement. Beginning July 1, 2001 until May 16, 2002, management fees
were based on a fixed annual amount of $500. The fee incurred for the year
ended December 31, 2001 and the three months ended March 31, 2002 was
approximately $415 and $104 (unaudited), respectively, and is included in
marketing, general and administrative expenses on the statement of
operations.
The comprehensive general liability and all-risk property damage insurance
for the Property is carried under an umbrella policy administered by
Equitable, effective August 1, 1991. The Partnership reimbursed Equitable
approximately $329 and $89 (unaudited) for the year ended December 31,
2001 and the three months ended March 31, 2002, respectively, for such
annual insurance coverage.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by
management, using available market information and appropriate valuation
methodologies. Considerable judgment is necessary to interpret market data
and develop estimated fair values. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts the Partnership could
realize on disposition of the financial instruments. The use of different
market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
Cash and cash equivalents, restricted cash, tenant receivables, security
deposits, accounts payable and accrued expenses are carried at amounts
which reasonably approximate their fair values due to the short maturities
of these items. At December 31, 2001, the mortgage loans payable had an
estimated fair value of approximately $484,000.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 2001. Although
management is not aware of any factors that would significantly affect the
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.
6. FUTURE MINIMUM RENTS RECEIVABLE
The Property is being leased to tenants under operating leases with term
expiration dates ranging from 2002 to 2024. The minimum rental amounts due
under the leases are generally subject to scheduled fixed increases. The
leases generally also require that the tenants reimburse the Partnership
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 as of
December 31, 2001 (exclusive of renewal option periods) are as follows:
2002 $ 52,157
2003 51,289
2004 51,997
2005 53,319
2006 53,790
Thereafter 196,056
------------
$ 458,608
============
7. INTERIM UNAUDITED FINANCIAL INFORMATION
The financial statements for the three months ended March 31, 2002 are
unaudited, however, in the opinion of management all adjustments
(consisting solely of normal recurring adjustments), necessary for a fair
presentation of the financial statements for the interim period have been
included. The results of the interim period are not necessarily indicative
of the results to be obtained for a full fiscal year.
* * * * * *
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