Canada markets closed

SL Green (SLG) Q4 FFO & Revenues Top Estimates, Occupancy Up

Zacks Equity Research

SL Green Realty Corp. SLG reported fourth-quarter 2019 funds from operations (FFO) per share of $1.75, surpassing the Zacks Consensus Estimate of $1.74. The figure also compares favorably with the year-ago quarter’s reported tally of $1.61.

Results reflect strong leasing activity in the company’s Manhattan portfolio. Further, rental revenues for the quarter improved year over year.

Net rental revenues of $218.5 million in the fourth quarter outpaced the Zacks Consensus Estimate of $216.1 million. The revenue figure also improved marginally from the prior-year tally of $216.5 million.

For full-year 2019, the FFO per share came in at $7, ahead of the Zacks Consensus Estimate of $6.99 and the prior-year tally of $6.62. However, rental revenues witnessed marginal decline, year over year, to $863.1 million.

Quarter in Detail

For the December-end quarter, same-store cash net operating income (NOI), including SL Green’s share of same-store cash NOI from unconsolidated joint ventures, improved 2% as compared with the prior-year period. This excludes free rent and lease termination income given to Viacom for space at 1515 Broadway.  

In the Manhattan portfolio, SL Green signed 59 office leases for 1,283,470 square feet of space during the period. The average lease term on these leases is 10.6 years, while average tenant concessions were 7.9 months of free rent.

Importantly, for the reported quarter, the mark-to-market on signed Manhattan office replacement leases was 56% higher than the previous fully-escalated rents in the same spaces. As of Dec 31, 2019, Manhattan’s same-store occupancy, inclusive of leases signed but not yet commenced, was 96.2%, up 90 basis points as compared with the prior quarter. 

The company also decreased the carrying value of its debt and preferred equity investment portfolio to $1.61 billion.

Liquidity

SL Green exited 2019 with cash and cash equivalents of nearly $166.1 million, up from the $129.5 million recorded at the end of 2018.

Investment Activity

In December, the company’s board of directors authorized a $500-million addition to its share-repurchase program, bringing the tally to $3 billion. Under this program, to date, the company has repurchased 22.7 million shares and redeemed 0.6 million common units of its Operating Partnership, or OP units. These were repurchased at an average price of $95.70 per share.  

Additionally, the company completed the sale of the development sites at 562 Fifth Avenue and 1640 Flatbush Avenue in Brooklyn for $52.4 million and $16.2 million, respectively. The disposals generated net cash proceeds of $50.9 million and $15.6 million, respectively.

Our Take

SL Green’s better-than-anticipated results are encouraging. In fact, during 2019, the company remained committed pursuing its business plan to shed mature and non-core assets, reinvesting the proceeds in new development and share buybacks. This aided the company’s performance.

In the days to come, SL Green is well poised to benefit from the resilient economy and stable job-market environment that has been spurring demand for office spaces, given its predominant presence in Manhattan and New York Metropolitan area.

SL Green Realty Corporation Price, Consensus and EPS Surprise
 

SL Green Realty Corporation Price, Consensus and EPS Surprise


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

SL Green currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Duke Realty DRE, Mid-America Apartment Communities, Inc. MAA and Essex Property Trust, Inc. ESS. All three companies are slated to report their quarterly numbers on Jan 29.

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.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>