Sl Green Realty Corp · NYSE:SLG
Sl Green Realty — Investor Day (December 2006)
93 slides from Sl Green Realty's investor day presentation, Dec 4, 2006
Slide 1: Beyond Outperformance: 2006 Investor Conference
Beyond Outperformance SL Green Realty Corp. 2006 Investor Conference December 4, 2006
Slide 2: Forward Looking Information
Forward Looking Information: This presentation contains forward-looking information based upon the Company's current best judgment and expectations. Actual results could vary from those presented herein. The risks and uncertainties associated with forward-looking information in this presentation inc
Slide 3: Marc Holliday, President & CEO
Marc Holliday President & CEO Beyond Outperformance
Slide 4: Investment Activity
Investment Activity Real Estate 7 Transactions for $1.05 Billion Structured Finance 9 Transactions for $271.3 Million Sales 3 Transactions for $411.5 Million GKK NYC & NJ Originations 14 Transactions for $625.5 Million
Slide 5: SL Green Executive Management
SL Green Executive Management
Slide 6: Total Return to Shareholders: One-Year
Total Return to Shareholders 84.1% $75.13 $134.95 Source: Stifel, Nicolaus & Company Incorporated and SNL One-Year Total Return: 12/1/2005 2/1/2006 4/1/2006 6/1/2006 8/1/2006 10/1/2006 12/1/2006
Slide 7: Total Return to Shareholders: Three-Year
Total Return to Shareholders 289.5% $38.41 $134.95 Source: Stifel, Nicolaus & Company Incorporated and SNL Three-Year Total Return: 12/1/2003 6/1/2004 12/1/2004 6/1/2005 12/1/2005 6/1/2006 < font size="1" color="white" style="color:white;font-size:1.0pt;">12/1/2006
Slide 8: Total Return to Shareholders: Five-Year
Total Return to Shareholders 450.7% $30.30 $134.95 Source: Stifel, Nicolaus & Company Incorporated and SNL Five-Year Total Return: 12/1/2001 12/1/2002 12/1/2003 12/1/2004 12/1/2005 12/1/2006
Slide 9: Total Return Rankings Versus Office REIT Peers
-19.2% American Fin Rlty 24. -13.5% Parkway Properties 23. -10.3% HRPT Properties Trst 22. -5.7% Glenborough Realty 21. -3.1% Investors RE Trust 20. -1.7% Washington REIT 19. -1.7% Government Properties 18. -0.3% Cousins Ppts Tr 17. 2.1% Mack Cali Realty Corp 16. 4.9% Brandywine Realty Tr 15. 13.5%
Slide 10: Consistent Growth: FFO and Dividends Per Share
Consistent Growth *2007 Based on annualized 4Q06 dividend Annualized Growth: 8.0% *2006 Data reflects Firstcall estimates **Annualized growth through 2006 Annualized Growth: 11.3%** Funds From Operations Per Share $1.94 $2.29 $2.67 $3.00 $3.32 < /font> $3.48 $3.77 $4.16 $4.58 '98 '99 '00 '01 '02 '03
Slide 11: Enterprise Value Ranking Among Peers
Source: Stifel, Nicolaus & Company Incorporated *Data as of market close December 1, 2006 2000 Enterprise Value $1.4 Billion Rank #10 2005 Enterprise Value $6.2 Billion Rank #5 YTD Enterprise Value $10.2 Billion Rank #4 $334 AmeriVest Ppts Inc 25. $398 Government Properties 24. $1,280 Parkway Proper
Slide 12: 2006 Scorecard
2006 Scorecard Finish redevelopment and leasing of Grand Central Square Increase same-store performance by 4% to 6% Deploy existing capacity into new opportunistic investments Increase portfolio occupancy 100 basis points Continue Gramercy Capital Corp.’s growth trajectory Exploit retail redevelopme
Slide 13: Additional Highlights
Additional Highlights Entered into merger agreement with Reckson Associates Signed more than 1.5 million square feet year to date of leasing; 34 leases pending totaling more than 181,000 square feet Average rent psf in 3Q06 topped $62 - 25.8% above escalated rents for the quarter Received $25.1 mill
Slide 14: Projected NOI Growth
6.6% Projected NOI Growth NOI Growth Based on Management’s 10-Year Cash Flow Projections NOTE: Representative Property Data is Reflective of 10-Year CAGR 100 Park Ave. – 11.36% 70 West 36 th Street - 3.98% 125 Broad Street – 4.41% 1 Park Ave. – 4.51% 1515 Broadway – 8.30% 461 Fifth Avenue – 8.12% 10
Slide 15: Major Midtown Manhattan Leases
Major Midtown Manhattan Leases 168,000 1325 Avenue of the Americas Renewal/ Expansion ING Financial Holdings 193,249 620 Eighth Avenue New Lease Legg Mason 165,000 1372 Broadway Renewal/ Expansion Ross Stores, Inc. 168,000 40 West 57th Street Renewal/ Expansion VF Sportswear/Nautica Enterprises 203,
Slide 16: Major Downtown Manhattan Leases
Major Downtown Manhattan Leases 53,611 Three World Financial Center New Lease Bearingpoint, Inc. 64,500 160 Water Street Expansion American International Group 68,442 140 Broadway New Lease Labaton Rudoff & Sucharow LLP 79,322 40 Wall Street Sublease American International Group 81,734 Seven World T
Slide 17: Vacancy and Limited Midtown Supply
Vacancy 13% 11% 9% 7% 5% 3% Tenant’s Market Supply Diminishing Demand Increasing Equilibrium Limited Midtown Supply Current Market: 7% Source: Cushman & Wakefield Landlord’s Market
Slide 18: New Development
New Development One Bryant Park 2.1 Mil SF Major Tenants: Bank of America – 1.2 Mil SF Akin & Gump – 203,000 SF Remaining Space – 235,901 SF 620 8 th Avenue 1.5 Mil SF Major Tenants: New York Times – 800,000 SF Covington & Burling – 159,801 SF Seyfarth Shaw – 95,259 SF Olser Hoskin Harcourt – 63,506
Slide 19: Potential Midtown Development Sites
1. 11 Times Square SJP Properties, 1.0 msf Hotel Pennsylvania Vornado Realty Trust, 2.5 msf Madison Square Garden Cablevision, 3.0 msf Farley Post Office NYS Urban Development, Vornado & Related, 1.75 msf 5.Eighth Ave & 54th Street Boston Properties/Related 800,000 sf 6. United Nations Site New York
Slide 20: MTA Rail Yards
MTA Rail Yards Source: Hamilton, Rabinowitz & Alschuler
Slide 21: The Hudson Yards District
Max FAR: Western Rail Yards The Hudson Yards District SF by use: 2025 full build-out Total: 45.0 m Office: 29.2 m Retail: 1.1 m Hotel: 1.5 m Resi: 12,600 units Institutional Open space Predominantly commercial with limited residential Mixed use Predominantly residential with limited retail Source: H
Slide 22: Alignment of Market Fundamentals
Alignment of Market Fundamentals Annualized Growth 11.2% Tight Leasing Market Robust NYC Economy Limited New Supply Embedded Rental Growth of 15%+ Strong Capital Flows Low Interest Rates *2006 Data reflects First Call estimates **2007 Mid-Point Management guidance $1.94 $2.29 $2.67 $3.00 $3.32 $3.48
Slide 23: 2007 Goals & Objectives
2007 Goals & Objectives Close Acquisition of Reckson Substantially Complete Redevelopment of 100 Park Ave. Dispose of at Least $250 Million of Non-Core Assets Secure a Tenant for 1551 Broadway Increase GKK Contribution to FFO by $5 Million Increase FFO by 9% - 11% Increase Same-Store Performance by
Slide 24: Andrew Mathias, Chief Investment Officer
Andrew Mathias Chief Investment Officer Beyond Outperformance
Slide 25: Record Sales Volumes
Sales in Billions Cost PSF Record Sales Volumes
Slide 26: Diversity of Buyers in Market
Diversity of Buyers in Market Source: Cushman and Wakefield – Data reflects Midtown and Downtown; closed and under contract as of 11/30/06 2005 2006 Corporate / User Private Capital 71% REIT 15% Foreign 7% Pension Fund 6% Not Yet Determined 2% Corporate / User Private Capital 52% REIT 24% Foreign 11
Slide 27: Recent Manhattan Sales Transactions
July 2006891,000$774$690 Mil4.3%ParamountEOP 1540 Broadway (Office) September 2006 538,424 $1,005 $541 Mil 3.5% FosterLane (Government of Kuwait) Vornado 350 Park Avenue October 2006 245,500 $815 $200 Mil NA L&L and Principal Global Investors BlackRock Realty 142 West 57 th Street October 2006 1,100
Slide 28: 2006 Acquisitions
2006 Acquisitions Current Occupancy Occupancy At Acquisition Stabilized Yield Underwritten Rents PSF Price PSF Total Square Feet Purchase Price 98.6% 98.5% 7.15% $55 - $58 Office: $500 Retail: $2,633 157,500 $182 mil 98% 95.7% 7.54% $42 - $53 $489 460,000 $225 mil 609 Fifth Avenue 521 Fifth Avenue
Slide 29: 2006 Acquisitions
2006 Acquisitions Current Occupancy Stabilized Yield Underwritten Rents PSF Price PSF Total Square Feet Purchase Price 88% 7.0% $53 - $68 $628 921,000 $578 mil 93% 8.0% $48 - $58 $517 551,400 $285 mil 800 Third Avenue 485 Lexington Avenue* *Reflects acquisition announced today
Slide 30: SL Green Retail Portfolio
SL Green Retail Portfolio 21-29 West 34 th Street 1551-1551 Broadway 141 Fifth Avenue 379 West Broadway 720 Fifth Avenue 1604 Broadway 717 Fifth Avenue
Slide 31: Retail Portfolio
Retail Portfolio 141 Fifth Avenue 379 West Broadway HSBC Bath & Body Works 13% Resi – Un-promoted Retail – 40% Promote to Sutton 50% Tenancy Projected Stabilized Cash on Cost Upside Participation (After Hurdle) Equity Participation Polo Morgane LeFay 8% Un-promoted 50%
Slide 32: Retail Portfolio
Retail Portfolio 21-25 West 34th Street 27-29 West 34th Street Apple Computer, Inc. 14% Un-promoted 50% Tenancy Projected Stabilized Cash on Cost Upside Participation (After Hurdle) Equity Participation Speculative 10% Un-promoted 50%
Slide 33: Case Study: Retail Value Creation
Case Study: Retail Value Creation Acquired 21-23 West 34 th Street (50 Feet of Frontage) with Jeff Sutton in Package with Howard Johnson’s Site Executed Lease with Apple Computer, Inc. at Property Subsequently Acquired 25-29 West 34 th Street (75 Feet of Additional Frontage) Negotiated Lease Expansi
Slide 34: Case Study: Retail Value Creation
Case Study: Retail Value Creation Negotiated Buy-out of Sutton Promote at Accretive Price Established 50/50 JV Partnership going forward Total Deal Costs: $47.8 Million Property Value: $125.0 Million Closed on $100 Million Non-Recourse Refinancing Apple Lease Average Triple Net Lease Cash on Cost: 1
Slide 35: Retail Portfolio
Retail Portfolio 1551-1555 Broadway 1604 Broadway Speculative 11% 40% Promote to Sutton 50% Tenancy Projected Stabilized Cash on Cost Upside Participation (After Hurdle) Equity Participation Spotlight Times Square Metro Lights Mama Sbarro’s 22% 18% promote to SLG 45%
Slide 36: 1604-1610 Broadway
1604-1610 Broadway Acquired in December 2005 SE corner of Broadway & 49th St. 30,217 Square Feet Signed New 10-year Lease for 22,809 Square Feet With: Spotlight Times Square A restaurant and entertainment concept from Las Vegas Unlevered Cash on Cost: 22% Additional Upside Through Below Market Lease
Slide 37: Retail Portfolio
Retail Portfolio 717 Fifth Avenue 720 Fifth Avenue Hugo Boss Escada 9% 33% to Sutton 32.75% Tenancy Projected Stabilized Cash on Cost Upside Participation (After Hurdle) Equity Participation Abercrombie & Fitch 7% Un-promoted 25%
Slide 38: Current Structured Finance Portfolio
2006 New Originations: $ 242.5 Mil 2006 Loan Payoffs: $ 178.4 Mil Net Originations: $ 64.1 Mil Current Structured Finance Portfolio 2006 Structured Finance Floating Rate 6% Fixed Rate 94% Preferred Equity 13% Motgage Participation 17% Mezzanine 70%
Slide 39: Structured Finance: Lexington Capital Stack
Structured Finance: 450 Lexington $128.8 Mil Istithmar Equity $128.8 Mil $60.0 Mil $15 Mil (GKK) $15 Mil (SLG) $30 Mil $205.0 Mil Mortgage $205 Mil $180.0 Mil Mezzanine $180 Mil $17.5 Mil (SLG) $17.5 Mil (GKK) $613.8 Mil $40.0 Mil $5 Mil Junior Preferred Equity Senior Preferred Equity Capital Stack
Slide 40: 2007 Investment Goals
2007 Investment Goals Continue to Grow Core Portfolio Upgrade Portfolio Via Selective Sales Continue to Harvest Long-Term Pipeline Identify New Off Market, Structured Transactions Continue Joint Venture Investment Program Structured Finance Maintain GKK’s Leadership Role in Tri-State Originations Co
Slide 41: Steven Durels, Director of Leasing
Steven Durels Executive Vice President Director of Leasing Beyond Outperformance
Slide 42: Historical Leasing Performance
Historical Leasing Performance Lease Expirations *2006 Occupancy as Expected Year End 1.26 1.33 0.85 0.99 1.62 2.23 2.36 0.63 1.72 97% 96% 96% 96% 97% 98% 98% 97% 1999 2000 2001 2002 2003 2004 2005 2006* Total Square Feet Leased (millions) Occupancy
Slide 43: 2006 Major Leasing Transactions
2006 Major Leasing Transactions 314,363 Morgan Stanley 1221 Avenue of the Americas 673 First Avenue One Park Avenue 1250 Broadway 67,976 Omnicom 485 Lexington Avenue 41,147 Novantas 165,183 Ross Stores 1372 Broadway 22,284 Archstone Smith Operating Trust 22,070 NY Presbyterian Hospital 22,694 New Yo
Slide 44: 2007 Leasing Goals
2007 Leasing Goals Accelerate Future Year Lease Renewals – NOI Growth Smooth Out Lease Rollover Schedule Prune Weaker Tenants – Improve Credit Profile Consolidate Smaller Spaces – Improve Operating Efficiency Secure Longer Term Leases Covering Secondary Space
Slide 45: Leasing Outperformance: 485 Lexington Ave.
Leasing Outperformance $51.00 13,703 28 Imperial Capital $51.00 13,703 27 Sheresky Aronson $51.00* 13,827 26 Omnicom $51.00 13,827 25 Global Realty Outsourcing $51.00 18,827 24 Pending $51.00 41,147 20-22 Novantas $48.00 27,250 18 Nortel Networks $46.55 291,712 9-17 Citibank $45.52 214,978 4-8 St. P
Slide 46: Leasing Outperformance: 750 Third Ave.
$41.74* 85,481 24-26 29-33 TIAA $51.50 10,599 34 First Commercial Bank $51.50 11,465 28 Drake Bean Morin, Inc. $51.50 11,456 27 Schonbraun McCann Group $47.50 10,167 22 BSI Investment Advisors $47.50 11,659 20 Colonial Consulting 33,533 Square Footage 18-19 Floor $47.50 Endurance Reinsurance Underwr
Slide 47: 100 Park Avenue: Unlocking Rental Value
Market Rents: $70 - $80 PSF Rollover Schedule (in square feet) 100 Park Avenue Unlocking Rental Value (27%) (9%) (24%) (4%) (36%) 227,029 35,824 199,193 77,178 295,453 2007 2008 2009 2010 2011+
Slide 48: Fifth Avenue Repositioning Strategy
521 Fifth AvenueBoutique Beauty Repositioning Strategy Expand Retail Area Improve Infrastructure Windows HVAC Restrooms Corridors Upgrade Curb Appeal New Storefronts Higher Quality Tenants Develop Comprehensive Marketing Program Upgrade Credit Profile Cater to High End, Full Floor Tenants
Slide 49: Competitive Buildings
Competitive Buildings 505 Fifth Ave. 300,000 rsf $90 psf 350 Madison Ave. 380,700 rsf $85 psf 500 Fifth Ave. 687,565 rsf $52-$65 psf 546 Fifth Ave. 177,400 rsf $63 psf 360 Madison Ave. 97,500 rsf $65 psf 461Fifth Ave. 200,835 rsf $70-$80 psf
Slide 50: Existing Configuration: Retail Repositioning
Existing Configuration 521 Retail Repositioning
Slide 51: New Configuration: Retail Repositioning
New Configuration 521 Retail Repositioning
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Slide 54: 1515 Broadway Strategic Possibilities
1515 Broadway Strategic Possibilities
Slide 55: Edward V. Piccinich, Property Management & Construction
Edward V. Piccinich Executive Vice President Director of Property Management & Construction Beyond Outperformance
Slide 56: 100 Park Avenue
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Slide 57: 100 Park Avenue: Modern Classic
Sins SSS EAN AAA TI SRRERRERE! REEL! ew ava Vodern Classic 100Park Avenue
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Slide 77: Gregory Hughes, Chief Financial Officer
Gregory Hughes Chief Financial Officer Beyond Outperformance
Slide 78: Total Combined Market Capitalization
Total Combined Market Capitalization ($ in Billions) $3.9 Billion Increase in Combined Market Capitalization Over Past Year $1.0 $1.5 $2.6 $3.4 $6.5 $0.1 $0.2 $0.3 $0.3 $0.4 $1.0 $1.6 $1.7 $2.6 $3.3 $2.1 $3.3 $4.6 $6.3 $10.2 2002 2003 2004 2005 2006 Debt Preferred Equity Equity
Slide 79: Accessing Multiple Capital Sources
($ in millions) Accessing Multiple Capital Sources *Includes pro-forma effect of capital raised to fund Reckson bid
Slide 80: Effective Capital Recycling
Effective Capital Recycling except per share data Substantial Proceeds & Gains $1,214 $1,368 $669 $511 $458 $213 $1,528 $6.42 $5.31 $2.58 $1.91 $1.86 $1.30 $8.45 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2000 2001 2002 2003 2004 2005 2006 ($ in Millions) Gains Per Share Cumulative Gr
Slide 81: Enhancing Liquidity & Growth with Capital Retention
Enhancing Liquidity & Growth with Capital Retention SL GREEN 2006 (Estimated) 100% Taxable 0% Return of Capital OFFICE SECTOR 2005 (data from NAREIT) 75% Taxable 25% Return of Capital
Slide 82: Lines of Credit Balances
Lines of Credit Balances *Shown with the exercise of the accordion feature $800 $500 $500 $500 $500 $500 $425< /font> $425 $425 $425 $425 $425 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06* Availabiity Outstanding
Slide 83: Combined Debt Composition
Combined Debt Composition 6.22% 5.85% 20% 2006 2005 2004 2003 2002 Weighted Average Interest Rate 4.79% 3.29% 2.86% 3.26% FLOATING 5. 69% 5.76% 6.46% 7.32% FIXED 28% 16% 31% 16% NET OF FLOATING RATE INVESTMENTS ($ in billions) $0.7 $1.0 $1.3 $1.8 $2.0 $0.3 $0.6 $0.4 $0.8 $0.8 $1.0 $1.6 $ 1.7 $2.6 $2
Slide 84: Estimated Cost of Capital
Estimated Cost of Capital Common Equity Preferred Equity Fixed Debt Variable Debt 7.0% - 8.0% 6.5% - 7.0% 5.0% - 6.0% 5.0% - 6/0% 2005 8.0% - 9.0% 7.0% - 7.5% 5.0% - 6.0% 4.0% - 5.0% 2004 2006 6.0% - 7.0% 7.0% - 7.25% 5.5% - 6.25% 6.25% - 6.75% 15% 35% 10% 40%
Slide 85: Rent Spikes Drive NOI Growth
Rent Spikes Drive NOI Growth 16.7% 25.8% 10.3% 1.7% 5.1% 20.3% 3.5% 7.5% 5.3% 6.6% 4.7% 0.5% 0% 5% 10% 15% 20% 25% 30% 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 Mark-to-Market % Same-Store Combined NOI %
Slide 86: 2006 Lexington Leasing Drives 2007 NOI
2006 485 Lexington Leasing Drives 2007 NOI Occupied Vacancy Leased to Be Delivered 2007 $28.0 Mil $7.6 Mil Property NOI Contribution:
Slide 87: The Power of the Promote
The Power of the Promote Increased Economic Ownership 50.0% 50.0% 66.8% 66.175% 68.45% 10% 37.5% 55%* 55% 55% Initial Ownership 55 Corporate Drive 485 Lexington Ave. One Park Ave. 1250 Broadway 1515 Broadway Fees & Promote $ $12.9 Mil $13.8 Mil $6.3 Mil $2.0 Mil $26.2 Mil *Original ownership interes
Slide 88: Retail Portfolio Financial Metrics
Retail Portfolio Financial Metrics $0.5 M $22.8 M $2.4 M $33.0 M $85.4 M $4.8 M $235.0 M Joint Venture 379 West Broadway Joint Venture 21-29 West 34 th St. Joint Venture Structured Finance Consol. Consol. Consol. 141 5 th Ave. 720 5th Ave. 1551-1555 Broadway 1604 Broadway 717 5 th Ave. $0.1 M $2.7 M
Slide 89: Gramercy Growth Continues
Gramercy Growth Continues 1. First call estimate 2. Mid-point of 2007 management guidance. $ in Thousands Except for Per Share Data (A + B + C ) $31,400 $25,300 Total FFO Contribution to SLG $2,500 $2,000 Reimbursements @ 50% Margin $9,500 $7,800 SLG Share ($4,900) ($4,100) Less Minority Interest MG
Slide 90: 2007 FFO Guidance Summary of Earnings
$(1.00) ($4.13) $0.60 $1.67 $3.02 $4.89 Incentive fees on 1 Park and 55 Corp. Investment in Stuy Town & Peter Cooper Village $1.50 Structured Finance & Other Net acquisitions from 2006 Retail investments Same store growth of 4%-5% Downtime on 100 Park Ave. $2.86 Property NOI – Joint Venture Net acqu
Slide 91: Substantial Discount to Estimated Replacement Cost Per Share
Substantial Discount to Estimated Replacement Cost Per Share Source: Stifel Nicolaus Estimates November, 2006; Stock Prices as of December 1, 2006 $135 $40 $35 $26 $55 $19 $48 $30 $74 $116 $50 $215 $56 $49 $27 $65 $24 $34 $57 $39 $50 $87 SLG HIW BDN DEI CLI COE EOP BMR MPG BXP OFC Share Price Gross
Slide 92: Steady Earnings Accompanied by Compounding Dividend Increases
Steady Earnings Accompanied by Compounding Dividend Increases 10.1% 11.1% 70.5% 52.4% 2006 1 FFO GROWTH DIVIDEND GROWTH FAD PAYOUT FFO PAYOUT 10.3% 10.3% 8.3% 4.8% 10.7% 12.4% 16.6% 18.0% 14.1% 16.7% 8.0% 7.5% 5.1% 14.2% 6.9% 3.6% NA NA 72.2% 89.0% 87.5% 75.3% 69.0% 70.9% 79.2% 92.9% 98.6% 55.4% 58.
Slide 93: Question & Answer
Beyond Outperformance Question & Answer SL Green Realty Corp. 2006 Investor Conference December 4, 2006