SL Green Realty Corp.
) - an office real estate investment trust (REIT) - reported
third-quarter 2013 funds from operations (FFO) of $1.34 per
share, beating the Zacks Consensus Estimate of $1.28 by 4.7% and
the prior-year quarter figure of $1.12 by 19.6%.
The results came on the back of better-than-expected revenue
growth and strong leasing activity. It reflected non-recurring,
non-cash charge of 7 cents per share related to previous tenant.
Consequently, SL Green raised its quarterly dividend by 52% as
well as the 2013 FFO per share outlook.
Total revenue for the third quarter climbed 1.9% to $363.8
million from $357.0 million in the year-ago quarter. Moreover,
total revenue substantially surpassed the Zacks Consensus
Estimate of $312 million.
Inside the Headlines
During third-quarter 2013, same-store cash net operating
income (NOI), on a combined basis, rose 1.6% year over year to
In the Manhattan portfolio, SL Green inked 52 office leases
for 441,338 square feet of space during the quarter under review.
The average lease term of the deals penned was 9.4 years.
Notably, in the quarter, the mark-to-market on replacement lease
deals was 1.0% higher than the earlier full rents increment on
the same spaces.
Additionally, in the Suburban portfolio, SL Green penned 28
office lease deals for 142,384 square feet of space during
third-quarter 2013. The average lease term of the deals was 8
years. Noticeably, the mark-to-market on replacement lease deals
was 0.2% high in comparison to fully escalated rents on the same
spaces, on the prior occasion.
As of Sep 30, 2013, same-store occupancy for SL Green's
Manhattan portfolio (including inked lease deals for 370,113
square feet of space that is yet to start) increased to 95.8%. On
the other hand, for the Suburban portfolio same-store occupancy
(including inked lease deals for 57,412 square feet of space that
is yet to start) rose to 81.2%.
During the said quarter, SL Green inked a deal to acquire a
mixed-use residential and commercial asset at 315 West 33rd
Street in New York for $386.0 million. The buyout of the
36-story, 492,987 square foot asset is likely to close in
On the other hand, SL Green shed several assets during the
quarter. This includes the divestiture of a property (345,400
square foot) at 333 West 34th Street in Manhattan for $220.3
million; and an asset (130,000 square foot) at 300 Main Street in
Stamford, Conn. for $13.5 million. In addition, SL Green disposed
2 properties of its West Coast Office portfolio for $112.4
million. Notably, in Jul 2012, the company took the equity
ownership position in the portfolio and since then has sold 3
assets for a total of $224.3 million.
Debt and Preferred Equity Investments
During the third quarter, SL Green originated new debt and
preferred equity investments worth $180.8 million, all of which
were secured by the New York City commercial office assets.
Moreover, SL Green recorded principal reductions of $110.0
million from investments that were sold or paid off. As of Sep
30, 2013, SL Green's debt and preferred equity investment
portfolio totaled $1.3 billion, compared with $1.2 billion as of
Jun 30, 2013.
Concurrent with its earnings release, SL Green increased the
quarterly dividend by 52% to 50 cents from 33 cents in the last
quarter. Consequently, the annual dividend elevated 52% to $2.00
from $1.32. This fourth-quarter 2013 dividend will be paid in Jan
2013 Outlook Increased
Encouraged with its quarterly performance and outlook for the
rest of the year, SL Green raised its FFO per share outlook for
full-year 2013 to $5.12 - $5.16, from the previous guidance of
$4.90 - $5.00.
As of Sep 30, 2013, SL Green had $209.1 million of cash and cash
equivalents, up from $199.0 million as of Jun 30, 2013.
Subsequent to the quarter-end, Fitch Ratings upgraded the
rating outlook of SL Green to 'Positive' from 'Stable'. This was
based on the company's increasing mortgage-free assets base and
We are encouraged with SL Green's third-quarter 2013 results
that benefitted from the successful execution of strategic
initiatives and notable operating portfolio performance. In
addition, the ratings upgrade of the company's outlook by Fitch
owing to its strong balance sheet position is noteworthy.
Moreover, the dividend hike and increased full-year outlook boost
investors' confidence in this Zacks Rank #2 (Buy) stock.
We are looking forward to the results of other REITs that are
scheduled to report early next week after the market closes.
Highwoods Properties Inc.
PS Business Parks Inc.
Boston Properties Inc.
Note: Funds from operations, a widely accepted and reported
measure of REITs performance, are derived by adding
depreciation, amortization and other non-cash expenses to net
BOSTON PPTYS (BXP): Free Stock Analysis
HIGHWOODS PPTYS (HIW): Free Stock Analysis
PS BUSINESS PKS (PSB): Free Stock Analysis
SL GREEN REALTY (SLG): Free Stock Analysis
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