SL Green Buys Manhattan Office Property, Plans Repositioning
Zacks Investment Research | Oct 20, 2019 09:21PM ET
SL Green Realty Corp. (NYSE:SLG) recently announced signing a contract to acquire a six-story, 160,000-square-foot office property — 603 West 50th Street — in Manhattan. Slated to close in the next 90 days subject to customary closing norms, this off-market acquisition will be partly funded by proceeds from the sale of 1010 Washington Boulevard in Stamford, CT.
The move is in sync with the company’s strategy of improving overall portfolio quality by exiting non-core assets and redeploying capital into better quality properties with greater upside potential, in a tax-efficient manner.
Moreover, the decision to acquire this property is a strategic fit as it offers repositioning prospects. In fact, through capital improvements and a targeted leasing strategy, the company aims at transforming an underdeveloped asset into a competitive class-A building. These efforts will help lure companies across industries.
Particularly, to lift the asset profile, SL Green plans to implement a comprehensive renovation program. This will include upgrading the building with superior infrastructure as well as improving the industrial aesthetic of the property that was built in 1940. SL Green will lease-back around 40,000-square-feet of office space to KCP Holdco, Inc., an affiliate of the seller, which presently enjoys occupancy of the asset.
Notably, SL Green has been following an opportunistic investment policy to enhance its overall portfolio. Such efforts are expected to propel its growth engine over the long term. Moreover, recently, the company reported third-quarter 2019 funds from operations (FFO) of $1.75 per share, surpassing the Zacks Consensus Estimate of $1.73. The figure also compared favorably with the year-ago quarter’s reported tally of $1.66. Results reflected decent leasing activity in the company’s Manhattan portfolio. However, intense competition from other market players and rising supply of office properties in its markets is a concern as its impacts the company’s pricing power.
SL Green currently carries a Zacks Rank #3 (Hold). Its shares have inched up 0.1% in the past three months, underperforming its Original post
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