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SL Green's (SLG) Q4 FFO and Revenues Fall Shy of Estimates

SL Green Realty Corp. SLG reported fourth-quarter 2022 funds from operations (FFO) per share of $1.46, lagging the Zacks Consensus Estimate of $1.48. The figure fell 3.9% from the year-ago quarter’s $1.52.

The results reflect lower-than-anticipated revenues and a fall in occupancy. However, same-store cash net operating income (NOI) improved year over year.

SLG clocked in net rental revenues of $172.89 million in the fourth quarter, which missed the Zacks Consensus Estimate of $173.06 million. However, on a year-over-year basis, the net rental revenues improved 27.8% from the prior-year quarter’s $135.21 million.

In 2022, SLG’s FFO per share of $6.64 missed the Zacks Consensus Estimate of $6.67. However, the figure compared favorably with the prior year’s $6.63. Net revenues of $588.8 million dipped 2.6% from the prior year’s $604.6 million. The reported figure also missed the Zacks Consensus Estimate of $588.9 million.

Concurrent with the earnings release, SL Green unveiled that it signed leases totaling 343,186 square feet in the early weeks of 2023. The company’s new leases include a 15-year lease with 777 Partners, an alternative investment platform encompassing 18,476 square feet at One Madison Avenue’s entire 27th floor. With these leases, SLG’s leased occupancy is expected to increase to 56.6% approximately 10 months prior to the anticipated project completion date.

Quarter in Detail

During the fourth quarter, the same-store NOI, including SL Green’s share of same-store cash NOI from unconsolidated joint ventures, increased 3.3% year over year to $138.9 million. This excludes the lease termination income.

For its Manhattan portfolio, SL Green signed 33 office leases encompassing 196,421 square feet of space in the reported quarter. The mark-to-market on signed Manhattan office leases fell 4.7% from the previous fully-escalated rents on the same spaces for the quarter.

The average lease term for the Manhattan office leases signed was eight years, while average tenant concessions were 7.4 months of free rent with a tenant improvement allowance of $59.58 per rentable square foot. This excludes the leases signed at One Vanderbilt Avenue.

As of Dec 31, 2022, Manhattan’s same-store office occupancy, inclusive of 58,143 square feet of leases signed but not yet commenced, was 91.2%, decreasing 90 basis points from the prior quarter’s level.

As of the same date, the carrying value of the company’s debt and preferred equity portfolio was $623.3 million.

Liquidity

SL Green exited fourth-quarter 2022 with cash and cash equivalents of $203.3 million, up from $201.3 million recorded as of Sep 30, 2022.

Investment Activity

In December, SLG completed the earlier announced disposition of 414,317 square feet of office leasehold condominium units at 885 Third Avenue, popularly known as “The Lipstick Building”, to Memorial Sloan Kettering Cancer Center for $300.4 million. Net cash proceeds generated from the transaction were $281 million. Further, SLG retained the remaining 218,796 square feet of the building.

In the same month, the company entered into an agreement to sell the retail condominiums at 121 Greene Street, together with its joint venture partner, for $14 million. The transaction is expected to be completed in first-quarter 2023, subject to customary closing conditions.

Dividends

During the December quarter, SL Green announced two monthly dividends of 31.08 cents per share on its common stock, paid out in November and December. For January, it paid out a dividend of 27.08 cents per share, equating to an annualized dividend of $3.25 per share. This marked a 12.9% cut in SLG’s ordinary dividend.

SL Green currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SL Green Realty Corporation Price, Consensus and EPS Surprise

SL Green Realty Corporation price-consensus-eps-surprise-chart | SL Green Realty Corporation Quote

Upcoming Earnings Releases

We now look forward to the earnings releases of other REITs like Alexandria Real Estate Equities, Inc. ARE and Equity Residential EQR, slated to report on Jan 30 and Feb 9, respectively. Equinix EQIX is scheduled on Feb 15.

The Zacks Consensus Estimate for Alexandria’s fourth-quarter 2022 FFO per share is pegged at $2.13, implying a year-over-year increase of 8.1%. ARE currently carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Equity Residential’s fourth-quarter 2022 FFO per share stands at 94 cents, indicating a year-over-year increase of 14.6%. EQR currently has a Zacks Rank #3.

The Zacks Consensus Estimate for Equinix’s fourth-quarter 2022 FFO per share is pegged at $6.84, suggesting a year-over-year increase of 9.9%. EQIX currently carries a Zacks Rank #3.

Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.

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