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SL Green (SLG) Stock Rises 18.4% Year to Date: Here's How

Shares of SL Green Realty Corp. SLG have gained 18.4% in the year-to-date period against the industry’s decline of 7.4%.

This New York-based office real estate investment trust’s (REIT) portfolio of high-quality and well-amenitized office properties poises it well to ride the growth curve. Its opportunistic investment policy and balance-sheet-strengthening efforts are encouraging.

In the first quarter earnings release, SL Green increased its guidance for 2024 FFO per share to the range of $7.35-$7.65 from $5.90-$6.20 guided earlier to reflect gains on discounted debt extinguishment. The Zacks Consensus Estimate for SLG’s current-year FFO per share is pegged at $7.53, which lies within expectations.

 

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Zacks Investment Research


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Let’s find out the factors behind the surge in the stock price.

SLG is witnessing healthy leasing demand for its properties as tenants’ demand for premium office spaces continues to grow. In the first quarter, it signed 60 office leases for its Manhattan office portfolio, spanning around 633,660 square feet.

In April 2024, SL Green announced the signing of leases with three new tenants aggregating 104,110 square feet at One Madison Avenue. With encouraging leases executed over the past few quarters, several new names have been added to SL Green’s tenant roster.

Given that office space demand in the upcoming period is likely to be driven by de-densification to allow higher square footage per office worker and the need for high-quality, well-amenitized office properties, SLG remains well-positioned to capitalize on the favorable trend.

Moreover, this office real estate investment trust (REIT) enjoys a diversified tenant base with long-term leases and a strong credit profile. This lowers the risk associated with dependency on single-industry tenants and assures stable rental revenues for the company.

As of Mar 31, 2024, except for Paramount Global, which accounted for 5.5% of the company’s share of annualized cash rent, no other tenant in the company’s portfolio accounted for more than 5% of its share of annualized cash rent, including its share of joint venture annualized cash rent.

To enhance its overall portfolio quality, the company follows an opportunistic investment policy. It divests mature and non-core assets and utilizes the proceeds to fund development projects and share buybacks. Such efforts highlight its prudent capital-management practices and will relieve pressure from its balance sheet.

In January 2024, SL Green closed the sale of a retail condominium, along with its partner, at 717 Fifth Avenue for $963 million. The transaction generated net proceeds of $27 million, which was used for corporate debt repayment.

Over the years, the large-scale sub-urban asset sale has helped it to narrow its focus on the Manhattan market as well as retain premium and highest-growth assets in the portfolio.

Analysts seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2024 funds from operations (FFO) per share has risen 2.7% over the past week to $7.53.

However, the elevated supply of office properties in its markets remains a concern, and it could limit pricing power and hurt occupancy. Competition from other industry players may limit the company’s ability to retain tenants. High interest rates add to its woes.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Rexford Industrial Realty REXR and Lamar Advertising LAMR, 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 REXR’s 2024 funds from operation (FFO) per share has moved marginally northward over the past two months to $2.34.

The Zacks Consensus Estimate for LAMR’s current-year FFO per share has been raised 3.7% over the past two months to $8.03.

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

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SL Green Realty Corporation (SLG) : Free Stock Analysis Report

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