SL Green (SLG) Inks Long-Term Lease at One Vanderbilt Avenue

SL Green Realty Corp. SLG bagged a lease for 12,692 square feet of space at One Vanderbilt Avenue with real estate capital market advisor, Hodges Ward Elliott. With this, the tenant will occupy part of the 50th floor at the newly opened property in East Midtown for 10 years.

Moreover, this is the third lease that SL Green has signed at the building since the onset of the pandemic and hence demonstrates a resilient demand for premium office space.

The 1,401-feet tall tower spans 1.7 million square feet of space in the center of East Midtown.  The property is 70% leased, and home to many preeminent finance, banking, law and real estate firms. Along with a prime location near the Grand Central Terminal, unparalleled amenities and innovative office design have likely enabled the property to attract tenants.

The tenant roster includes TD Securities, which is a leading banking and investment firm, as well as TD Bank, America's Most Convenient Bank, which is one of the ten largest banks in the United States. Moreover, private equity firms like The Carlyle Group, KPS Capital Partners, Oak Hill Advisors, law firms Greenberg Traurig and McDermott Will & Emery, and global German financial firm DZ Bank are tenants at the property.

Additionally, the company is enhancing its offering at the property and will offer dining experience with a new restaurant named ‘Le Pavillon’ in first-quarter 2021. The restaurant will be situated on the southeast corner of the second floor across 11,000 square feet of space.

Notably, amid the uncertain environment, much of the leasing proportion has shifted from new to renewal-oriented deals due to the pandemic. Going forward, the next cycle of office-space demand will likely be driven by de-densification to allow higher square footage per office worker and the need for better-amenitized office properties to focus on health & wellness amid social-distancing requirements. Moreover, tenant downsizing is less likely and this will improve tenant retention.

Hence, SL Green is well-positioned to benefit from the emerging trend, given the demand for office space in Manhattan. Notably, the company is likely to witness a strong second half of the year on the back of its leasing deal pipeline. It has around 600,000 square feet of space in the leasing pipeline. This consists of 200,000 square feet of new or expansion deals and around 380,000 square feet of renewal deals.

However, the pandemic has led to a reduction in office space utilization and rental payment collections have become uncertain, and landlords are offering tenant lease incentives and concessions. Amid this, the company will likely face headwinds like a slowdown in leasing activities and reduced market rents.

Moreover, softness in the retail real estate market is concerning for the company, given its street-retail portfolio in important Manhattan shopping corridors.

Shares of this Zacks Rank #3 (Hold) have declined 41.8% over the past year compared with the industry’s loss of 5.9%.


Stocks to Consider

Sabra Healthcare REIT, Inc.’s SBRA funds from operations (FFO) per share estimates for 2020 have been revised marginally upward to $1.75 over the past month. The company carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Digital Realty Trust, Inc.’s DLR Zacks Consensus Estimate for 2020 FFO per share has been unrevised at $6.08 over the past month. The company currently carries a Zacks Rank of 2.

American Tower Corporation’s AMT Zacks Consensus Estimate for 2020 FFO per share has improved marginally upward to $8.28 in a months’ time. The company has a Zacks Rank of 2, at present.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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