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SL Green (SLG) Completes One Madison Avenue Ahead of Schedule

SL Green Realty Corp. SLG, together with its joint venture partners, recently announced the completion of the One Madison Avenue project three months ahead of schedule. This achievement not only underscores SL Green's commitment to excellence but also positions the company favorably in the evolving landscape of office space demand.

SLG noted that One Madison Avenue, a 27-story, 1.4 million-square-foot premier office tower located in Manhattan's Midtown South submarket, has secured its Temporary Certificate of Occupancy on Sep 15, 2023. Additionally, SL Green received $577.4 million in cash, signifying the final equity payment from its joint venture partners, and these funds were subsequently employed to repay corporate unsecured debt.

Situated adjacent to Madison Square Park, One Madison Avenue offers a groundbreaking workplace experience. The tower features innovative amenities and fosters a state-of-the-art, health-conscious workspace, including the DOAS HVAC system that circulates 100% fresh outside air.

Furthermore, the project is expected to achieve LEED-Gold and WELL certifications, underscoring its commitment to sustainability and employee well-being. To further elevate the experience, the tower will house a stylish and refined steakhouse by Michelin-starred Chef Daniel Boulud.

One Madison Avenue has already attracted the attention of leading technology and financial service firms, cementing its reputation as a premier office space in the heart of the city. Notable tenants include Chelsea Piers Fitness, International Business Machines Corporation IBM and Franklin Templeton, all of which have committed to long-term leases. This diverse range of tenants underscores the appeal of One Madison Avenue to a broad spectrum of industries.

As the office space landscape evolves, SL Green is well-positioned to capitalize on emerging trends. The need for de-densification and high-quality, well-amenitized office properties is on the rise. SL Green's portfolio of well-located properties, combined with its ability to offer top-notch amenities in recently developed office buildings, makes it a standout player in this evolving market.

Despite the negative effects of pandemic-borne job losses and the remote-working dynamics that have been hindering the U.S. office real estate sector, SL Green signed 84 office leases for its Manhattan office portfolio spanning around 915,431 square feet during the first half of 2023. This success is a testament to SLG's commitment to providing high-quality office spaces and its ability to adapt to changing circumstances. Furthermore, with a robust office leasing pipeline, SL Green is well-prepared to meet the demands of a changing world and continue its legacy as a leading force in New York City's real estate landscape.

However, given the macroeconomic uncertainty, the demand for office properties is likely to remain subdued in the near term, raising concerns. Elevated supply and a high-interest-rate environment add to its woes. We project a notable year-over-year increase in net interest expenses in the current year.

Shares of the company have rallied 22.6% in the past three months against the industry’s 8.8% fall. Analysts seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2023 funds from operations (FFO) per share has been raised marginally over the past month to $5.57.

Zacks Investment Research
Zacks Investment Research


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Stocks to Consider

Some better-ranked stocks from the REIT sector are SBA Communications SBAC and Americold Realty Trust COLD, each carrying a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SBA Communications’ current-year FFO per share has moved marginally northward over the past month to $12.90.

The Zacks Consensus Estimate for Americold Realty Trust’s ongoing year’s FFO per share has been raised 2.4% upward over the past month to $1.26.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.

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