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SL Green (SLG) Q1 FFO Beats Estimates, Revenues Decline


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SL Green Realty Corp. SLG reported first-quarter 2018 funds from operations (FFO) of $1.66 per share, beating the Zacks Consensus Estimate of $1.65. The figure also came in higher than the year-ago FFO per share of $1.57.

Results reflect a year-over-year rise in investment income and same-store cash net operating income (NOI).

Rental revenues of $215.4 million in the reported quarter missed the Zacks Consensus Estimate of $256 million. Also, the figure declined 23.4% year over year.

Quarter in Detail

For the quarter, same-store cash NOI, including the share of same-store cash NOI from unconsolidated joint ventures, rose 7.4% year over year. Notably, consolidated property same-store cash NOI increased 4.6%.

In the Manhattan portfolio, SL Green signed 28 office leases for 375,813 square feet of space during the quarter. As of Mar 31, 2018, Manhattan same-store occupancy, inclusive of leases signed but not yet commenced, was 95.6%, up 20 basis points (bps) from the end of the prior quarter. Importantly, in the first quarter, the mark-to-market on signed Manhattan office leases was 10.4% higher over the previous fully-escalated rents on the same spaces.

On the other hand, in the Suburban portfolio, SL Green signed 19 office lease deals for 157,485 square feet of space. Same-store occupancy for the Suburban portfolio, inclusive of leases signed but not yet commenced, was 86.6% as of Mar 31, 2018, shrinking 60 bps from the end of the prior quarter. Moreover, in the quarter under review, mark-to-market on signed suburban office leases came in 1.4% higher than the previously fully-escalated rents on the same spaces.

Liquidity

SL Green exited the first quarter with cash and cash equivalents of nearly $288.8 million, up from $127.9 million recorded at the end of 2017.

Investment Activity

During the reported quarter, SL Green repurchased 3.9 million shares of common stock under its previously-announced $1.5-billion share-repurchase plan. The shares were bought back at an average price of $97 per share.
Additionally, the company originated new debt and preferred equity investments, aggregating $224.5 million in the quarter, all of which were retained.

Our Take

SL Green enjoys high-quality office properties as well as diverse tenant base, makes opportunistic investments and has a strong balance sheet. Further, the company announced measures relating to its asset disposition and share-repurchasing program, which will help the company reap net proceeds of around $70 million.  Additionally, its leasing activity is likely to remain decent, amid improving economy and job market environment. However, the company faces intense competition from developers, owners and operators of office properties, and other commercial real estate which limits its pricing power.

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 Liberty Property Trust LPT , PS Business Parks PSB and Boston Properties BXP . All three companies are slated to report first-quarter earnings on Apr 24.

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: BXP , PSB , SLG , LPT



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