SL Green (SLG) Q1 FFO Meets Estimates, Revenues Decline (Revised)

SL Green Realty Corp. SLG reported first-quarter 2017 funds from operations (FFO) of $1.57 per share, in line with the Zacks Consensus Estimate. The figure was below the prior-year quarter’s FFO per share of $1.84.

Results indicate a decline in quarterly net rental revenues, which fell 18.6% year over year to $281.3 million. Also, it missed the Zacks Consensus Estimate of $283 million.

Quarter in Detail

For the quarter, combined same-store cash net operating income (NOI) rose 2% year over year. Excluding the impact of lease termination income, NOI grew 3.6%.
 
In the Manhattan portfolio, SL Green inked 44 office leases for 346,345 square feet of space. As of Mar 31, 2017, Manhattan same-store occupancy, inclusive of leases signed but not yet commenced, remained unchanged sequentially and rose 50 basis points (bps) year over year to 96.2%. Importantly, in the first quarter, the mark-to-market on signed Manhattan office leases was 21.6% higher over the previous fully escalated rents on the same spaces.

On the other hand, in the Suburban portfolio, SL Green signed 26 office lease deals for 146,257 square feet of space. Same-store occupancy for the Suburban portfolio, inclusive of leases signed but not yet commenced, was 85.2% as of Mar 31, 2017, down 10 bps sequentially, and up 30 bps year over year. Moreover, in the first quarter, mark-to-market on signed Suburban office leases was 2.5% higher than the previously fully escalated rents on the same spaces.

SL Green exited the quarter with cash and cash equivalents of $468 million, up from $279.4 million at the end of 2016.

Notable Investment Activities

In January, SL Green closed the sale of a 27.6% interest in One Vanderbilt Avenue to NPS and 1.4% interest to Hines. Both NPS and Hines committed equity infusion of no less than $525 million.

Further, in March, the company inked a deal to sell 90% interest in 102 Greene Street for net proceeds of $38 million.

In the first-quarter 2017, the company sold around 4.7 million shares of New York REIT, Inc. and made a gain of $3.3 million.

Our Take

The decline in quarterly revenues from the previous year is discouraging. Nevertheless, the company has been actively pursuing portfolio enhancement initiatives through investment in opportunistic assets, and debt and preferred equities. However, cut-throat competition and interest rate issues remain concerns.

SL Green currently carries a Zacks Rank #3 (Hold). 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 and EPS Surprise | SL Green Realty Corporation Quote

We now look forward to the earnings releases of other REITs like UDR, Inc. UDR, Boston Properties, Inc. BXP and Equity Residential EQR, which are slated to report results next week.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

(We have re-issued this blog to correct an error. The original version, dated Apr 20, 2017, should no longer be relied upon.)                             

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