SL Green Reports Strong Leasing and Cash Flow in Q3 Earnings

After years of being caught in the post-COVID office malaise, SL Green (SLG) has seemingly righted the ship. 

SL Green reported $78.6 million in funds from operations (FFO) — a figure used by real estate investment trusts to designate cash flow — in the third quarter of 2024. While down from the $87.7 million FFO the firm reported for the same period in 2023, SL Green reported FFO of $437.9 million for the nine months of 2024, significantly larger than the $291.6 million FFO the firm reported the first nine months of the same period in 2023. 

Perhaps most impressively, SL Green reported it expects occupancy across its portfolio to reach 92.5 percent by the end of the year, outpacing the 90 percent occupancy rate the firm has reported for all of 2023 and much of 2024. 

“We called the pivot in the market about one year ago, and since then we’ve seen four consecutive quarters of positive market momentum that reinforces our belief that New York City has turned the corner, and we are now meeting or exceeding many of our goals,” CEO Marc Holliday said during Thursday’s third-quarter earnings call. “The worst is, without question, behind us.

“This is a market for being affirmative and offensive, and our portfolio is well positioned to capitalize on this market,” he added.  

Holliday pointed out that SL Green opened One Madison Avenue last month, culminating a multiyear renovation of a 1.4 million-square-foot mixed-use office tower that opened in 1893, and is expecting 6 million guests to visit Summit One Vanderbilt, a new observatory at the firm’s signature Midtown tower. 

Holliday called both office towers “a shining example of a new model for modern and innovative office buildings.” 

SL Green signed 42 office leases across Manhattan, amounting to 763,755 square feet, in the third quarter of 2024, and has signed 140 Manhattan office leases of 1.8 million square feet in the first nine months of 2024. 

Overall the firm reported 2.8 million square feet of leasing year-to-date, according to Holliday.  

Perhaps no deal has raised more eyebrows than the firm securing Bloomberg at 919 Third Avenue, where SL Green announced Wednesday that Bloomberg signed a 924,876 square feet renewal and expansion package, one of the largest office leasing deals of the year. 

“[This is] further evidence of really incredible leasing momentum,” said Holliday. “This was not really within the expectations at the beginning of this year. It was a very pleasant surprise, and it’s more telling about the strength of this market.”

The strong leasing trends have buoyed increasing rents across the REIT’s New York portfolio. 

Steven M. Durels, executive vice president and director of leasing, told listeners on the earnings call that SL Green has raised rents four times over the last year on its Park Avenue assets and is now doing so on its Sixth Avenue assets. Durels implied that rent increases are likely the new norm on most Class A office properties. 

“As we look forward, we’ll see, broadly speaking, Midtown specifically, rents increasing on a lot of parts of the market, and on lots of types of buildings, next year,” he said. 

SL Green has invested $110 million thus far this year into different capital stacks, according to Holliday, who added that the firm is preparing to invest in both debt and equity opportunities in the months to come. Holliday said the firm will fund its transactions via a $1 billion debt fund, and “$500 million of upcoming asset monetization we expect to close this quarter,” as well as by evaluating “stock along the way as a source of potential equity.”  

“I know there’s a lot of questions between equity and debt, equity and debt, and to me it’s a spectrum — it’s real estate, and we just want to find the best point on that spectrum to invest,” explained Holliday.  “It’s not always one or the other. A lot of these opportunities we approach, we can do any aspects of these deals — from senior financing, mezzanine, preferred equity, common equity, servicing, or a combination thereof — and we don’t always know.”  

SL Green has seen its stock price rise from $36.27 per share on Oct. 17, 2023 to $74.58 per share as of Oct. 17, 2024. 

“We’re in a really good place right now,” said Holliday. “We’ve shrunk our share count down considerably, we’re retired a lot of debt around the way … and I think we have a lot of access to capital in all those various ways, including potential stock issuances. 

“It’s a good position to be in and we’ll use it wisely, and hopefully very accretively,” he said.  

Brian Pascus can be reached at bpascus@commercialobserver.com