SL Green Hit Higher Revenues in Q3

NEW YORK CITY—SL Green Realty issued a rather upbeat third quarter financial report today, posting higher net income and funds from operations as compared to a year earlier. The REIT reports leasing activity led to an increase in its occupancy rate in Manhattan during the last three months.

For the quarter ended September 30, 2015, New York City's largest office landlord reported consolidated revenues and operating income of $432.1 million and $258.5 million, respectively, compared to $390.3 million and $211.1 million, respectively, for the same period in 2014.

SL Green reports that third quarter 2015 FFO was $1.71 per share before transaction related costs of $0.06 per share compared to third quarter 2014 FFO of $1.55 per share before non-recurring charges related to the refinancing of 420 Lexington Ave. of $0.24 per share and transaction related costs of $0.03 per share. Current year FFO includes a tax benefit of $0.05 per share related to the company's taxable REIT subsidiary, SL Green states.

The largest of its investments in the third quarter by far was the completion of the $2.285-billion acquisition of Eleven Madison Avenue in Midtown South. The deal also included approximately $300 million in costs associated with lease stipulated improvements to the property. Other notable investments during the third quarter was the closing of the sales of Tower 45, the Meadows Office Complex, 315 West 36th St. and an interest in 131-137 Spring St. for total gross asset valuations of $878.9 million.

During the third quarter, SL Green signed 51 office leases in its Manhattan portfolio totaling 533,697 square feet. Replacement leases had average starting rents of $71.60-per-rentable-square-foot, representing a 15.6% increase over the previously fully escalated rents on the same office spaces.

SL Green secured 23 suburban office leases covering 131,366 square feet during the third quarter. Replacement leases had average starting rents of $29.58-per-rentable-square-foot, representing a 3.8% decrease over the previously fully escalated rents on the same office spaces.

Manhattan same-store occupancy increased to 97.3% at Sept. 30, 2015, inclusive of 143,757 square feet of leases signed but not yet commenced, as compared to 95.3% at Sept. 30, 2014 and 97.0% at June 30, 2015.

Same-store occupancy for its suburban portfolio was 81.6% as of Sept. 30, 2015, inclusive of 79,091 square feet of leases signed but not yet commenced, as compared to 81.5% at Sept. 30, 2014 and 82.8% at June 30, 2015.

The most notable lease deal of late was announced earlier this month when hedge fund Fir Tree, Inc., signed a lease deal for its headquarter space at 55 West 46th St., also known as Tower 46. The lease was for 31,126 square feet with a term of 10.5 years and marked the first significant lease transaction following the launch of a new marketing campaign for the property. The new headquarters lease covers the entire 29th and part of the 28th floors of the newly-constructed office building.