DEFA14A: SL Green Realty Corp. Delivers Stellar Performance and Aligns Executive Compensation with Stockholder Feedback

SL Green Realty Corp. announced its exceptional 2024 financial and operational outperformance, including a 58% total stockholder return, while detailing significant enhancements to its executive compensation program in direct response to stockholder feedback.

Summary

• SL Green Realty Corp. (SL Green) achieved a Total Stockholder Return (TSR) of 58% in 2024 and 135% over the last two years, making it the #1 performing U.S. REIT for the second consecutive year.
• The Company is one of only three U.S. Office REITs to deliver positive shareholder return over the last five-year period, significantly outperforming both U.S. Office Peers and NYC Peers.
• SL Green met or exceeded target performance goals for all key metrics determining annual incentives and four of five operational goals for 2024 performance equity incentives.
• The Compensation Committee has systematically updated the executive compensation structure, particularly the CEO's new employment agreement, to align incentives with Company performance and stockholder value.
• Key changes to the CEO's compensation include the first base salary increase since 2018, 100% formulaic annual incentive, elimination of short-term performance periods for long-term equity awards (now exclusively three-year goals), and a reduction in the target value of performance-based equity awards from $7.5 million to $5 million.
• Severance provisions were reduced to be based on average bonus in the prior two years, compared to maximum bonus in prior contracts.
• Approximately 94% of CEO pay and 92% of other Named Executive Officer (NEO) pay was at risk, with 94% of CEO compensation and 88% of other NEO compensation being equity-based, demonstrating a strong pay-for-performance linkage.
• Further modifications to the CEO's agreement are anticipated in 2025 to clarify that the $5 million annual time-based award is not guaranteed and to eliminate formulaic cash payments following a change in control.

Sentiment

Score: 9

Explanation: The document conveys a highly positive sentiment, emphasizing strong financial and operational outperformance, proactive and responsive corporate governance regarding executive compensation, and a clear strategic vision. The tone is confident and highlights achievements and alignment with stockholder interests.

Positives

• Achieved 58% Total Stockholder Return (TSR) in 2024 and 135% over the last two years.
• Ranked as the #1 performing U.S. REIT for the second consecutive year.
• One of only three U.S. Office REITs to deliver positive shareholder return over the last five-year period.
• Outperformed U.S. Office Peers by 44% and NYC Peers by 50% in FY 2024 TSR.
• Achieved or exceeded target performance goals for all key annual incentive metrics and four of five operational performance goals for 2024 performance equity incentives.
• Executive compensation program significantly enhanced to align with stockholder feedback, including eliminating short-term performance periods for long-term equity incentives.
• Reduced CEO's performance-based equity awards target value from $7.5 million to $5 million.
• Demonstrated strong pay-for-performance linkage with approximately 94% of CEO pay and 92% of other NEO pay at risk.
• Received a 'LOW CONCERN' level under the ISS Pay-For-Performance Quantitative Screen.

Future Outlook

SL Green's CEO agreement incentivizes a visionary long-term strategy to diversify beyond traditional Class A assets by building new highly profitable, complementary businesses, leveraging the Company's scale and expertise, developing recurring revenue streams with limited G&A expense, and diversifying the business to lessen exposure to business cycles. The Compensation Committee and CEO also expect to further modify the CEO's new agreement during 2025 to clarify the non-guaranteed nature of the $5 million annual time-based award and eliminate formulaic cash payments following a change in control.

Management Comments

• The Board of Directors and Compensation Committee express appreciation for stockholders' consistent support of the Company over many years.
• The Board has provided robust oversight of our long-term strategy to create sustainable stockholder value.
• The Committee has continuously enhanced our executive compensation program to align with Company performance and stockholder value, while retaining our talented and tenured management team.
• We strongly disagree with the statement in the ISS report issued on May 21, 2025, that the Committee has not been sufficiently responsive to the 2024 say on pay vote.
• Responsiveness to stockholders is not simply a one-year event; the Committee has systematically and successively updated our executive compensation structure.
• The Committee believes that the actions taken in direct response to stockholder feedback are consistent with our executive compensation philosophy and further strengthened the link between Company performance and executive pay outcomes.
• The Board and Committee deeply values all stockholder feedback and is proud of our track record of Board and Committee responsiveness demonstrated year after year.
• The Committee and our Board will continue to collaborate with investors on these important topics and the Committee will continue to assess our executive compensation program to ensure strong alignment between management and our stockholders.

Industry Context

SL Green's exceptional performance, particularly its #1 U.S. REIT ranking for two consecutive years and positive five-year shareholder return, stands out significantly in an office REIT sector that has faced considerable headwinds and challenges. This indicates strong operational execution and strategic positioning relative to broader industry trends.

Comparison to Industry Standards

• SL Green ranked #1 among U.S. Office Peers (constituents of the Bloomberg North American Office REIT Valuation Peers Index) in FY 2024 TSR, exceeding the peer median by 44%.
• SL Green ranked #1 among NYC Peers (Acadia Realty Trust, Empire State Realty Trust, Inc., Veris Residential, Inc., Paramount Group, Inc., and Vornado Realty Trust) in FY 2024 TSR, exceeding the peer median by 50%.
• Over a three-year period, SL Green ranked #4 among U.S. Office Peers, exceeding the peer median by 47%, and #3 among NYC Peers, exceeding the peer median by 3%.
• Over a five-year period, SL Green ranked #3 among U.S. Office Peers, exceeding the peer median by 45%, and #2 among NYC Peers, exceeding the peer median by 25%.
• SL Green is one of only three U.S. Office REITs to have delivered positive shareholder return over the last five-year period, highlighting its sustained outperformance in a challenging sector.

Corporate Governance

Stakeholder Impact

• Shareholders: Positively impacted by strong Total Stockholder Return (58% in 2024, 135% over two years) and the Company's commitment to aligning executive compensation with shareholder value creation and feedback.
• Management: Retained and incentivized through a compensation structure designed to reward long-term performance and strategic execution, with a significant portion of pay at risk and equity-based.
• Employees: While not directly addressed, strong company performance and strategic diversification can contribute to a stable and growing work environment.

Next Steps

• The Annual Meeting of SL Green Realty Corp. is scheduled for June 3, 2025.
• The Compensation Committee and CEO expect to further modify the CEO's new employment agreement during 2025.
• The Board and Committee will continue to collaborate with investors on important topics.
• The Committee will continue to assess the executive compensation program to ensure strong alignment between management and stockholders.

Key Dates

Recommendation

Keywords

SL Green Realty, REIT, Office REIT, Real Estate, Executive Compensation, Corporate Governance, Shareholder Value, Proxy Statement, SEC Filing, Total Stockholder Return, Performance-based Pay, Stockholder Engagement