First-quarter earnings at SL Green Realty Corp., New York's largest commercial landlord and a big lender to other property owners, dropped 68% from a year earlier, in part because of higher loan-loss reserves.

After the market closed Monday, the real estate investment trust reported a profit of $42.5 million, or 57 cents a share.

SL Green lends both from its balance sheet and through its ailing finance spinoff, Gramercy Capital Corp. SL Green's leasing business is expected to bear the brunt of layoffs in financial services this year. In December the REIT cut its quarterly dividend by more than half to save about $95 million this year.

First-quarter expenses climbed 52%, to $180.4 million. That total included $62 million of loan-loss reserves against the company's structured finance investments.

The value of SL Green's structured finance investments fell 13% during the quarter, to $589.3 million on March 31, excluding about $102.1 million classified as held for sale.

The first-quarter results included a gain of 27 cents a share on a sale of discontinued operations, compared with a $1.80 gain on a similar sale a year earlier. The latest results also included a $57.5 million gain related to debt repurchases.

Funds from operations — a key measure of profitability for REITs — rose 12 cents, to $1.48 a share.

Revenue rose 3.9%, to $263.4 million, and net rental revenue grew 1.4%.

The average estimate of analysts had called for earnings of 11 cents, funds of $1.48 from operations and revenue of $213.3 million, according to Thomson Reuters.

In its Manhattan portfolio, SL Green signed 32 leases totaling 296,840 square feet, finishing the quarter with an occupancy rate that fell 50 basis points from a quarter earlier, to 96.2%. The average starting rent grew 24% from a year earlier, to $52.71 per rentable square foot.

In its suburban portfolio, the REIT signed 32 leases totaling 124,090 square feet, and the occupancy rate was flat from a quarter earlier, at 90.4%. The average starting rent fell 1.5%, to $30.89 per rentable square foot.

Also Monday, Gramercy Capital said it had acquired its external manager, GKK Manager LLC, from SL Green, further severing ties between the two companies. Gramercy said it paid a negligible amount.

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