SL Green (SLG) Acquires Stake In Manhattan Sky Property

SL Green Realty Corp. (NYSE:SLG) disclosed the acquisition of a 20% stake in Manhattan’s luxury residential tower “Sky”. The move enhances the company’s residential investments and reflects the scope of its debt and preferred equity platform.

The deal took place through an option that was granted to SL Green for purchasing the stake at a valuation agreed upon in Jul 2014 when the company originated a $50 million mezzanine loan on the property to the developer of the project, The Moinian Group. The mezzanine loan was repaid before the closure of the transaction that was disclosed on Monday.

Notably, the 71-story Sky is situated near the Hudson River in Manhattan's Midtown West. The property comprises 927,358 square feet of space and includes 1,176 rental units. It boasts a two skydeck pools, a full-service spa, a professional-size basketball court, a private park, and a children's playground, together with a full range of services for tenants. Moreover, its proximity to the New York's theater district, the High Line, Hudson River Park and Chelsea's concentration of art galleries, ensures solid demand for its space.

Last month, SL Green reported first-quarter 2016 adjusted funds from operation (“FFO”) of $1.85 per share, exceeding the Zacks Consensus Estimate of $1.65. In the prior-year quarter, the company had reported adjusted FFO of $1.51 per share. A rise in combined same-store net operating income aided the better-than-expected results in the quarter.

Going forward, SL Green is expected to benefit from its substantial high-quality office properties in proximity to midtown Manhattan’s key commuter stations and a diverse tenant base. The company has been actively pursuing portfolio enhancement initiatives through investment in opportunistic assets, and debt and preferred equities. While this is encouraging, stiff competition and interest rate issues remain as concerns.

SL Green currently has a Zacks Rank #3 (Hold). However, investors interested in the REIT sector can consider stocks like Digital Realty Trust Inc. (NYSE:DLR) , Public Storage (NYSE:PSA) and PS Business Parks Inc. (NYSE:PSB) . Each of these stocks carries a Zacks Rank #2 (Buy).

Note: 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.


PUBLIC STORAGE (PSA): Free Stock Analysis Report

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