X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

NEW YORK CITY-Although SL Green Realty Corp.’s third-quarter results were impacted by what Marc Holliday called “a significant battering of the New York economy and real estate fundamentals in our market,” the office REIT’s CEO said in an earnings call Tuesday that we’ll see a better tomorrow next year.

“After two bearish years, 2010 will be a transitional year” that will be marked by fundamentals beginning to recover, Holliday said. “With a rebounding economy, I believe we’ll see an inflection point in the leasing market.”

Holliday predicted that by the second half of next year, landlords will begin pulling back on concession packages, which have generally grown more generous this year. In the meantime, he said, the current uptick in leasing will continue as tenants sense that rents may soon start going back up, and therefore take action to avoid missing out on the opportunities now available. However, Holliday said owners’ financial results would still be affected by current market conditions for a couple more quarters.

While Manhattan’s availability rate is expected to continue creeping upward into 2010, with downward pressure on rents, the specter of increasing vacancy rates appears not to be affecting S.L. Green’s existing portfolio. During the quarter that ended Sept. 30, the REIT maintained a 95.7% occupancy rate in its Manhattan office properties, increasing occupancy at 100 Park Ave., 625 Madison Ave., 750 Third Ave. and 1515 Broadway. The REIT signed 28 office leases totaling 251,888 square feet during Q3, according to an earnings report released Monday evening.

The average starting rent on these deals was $47.31 per rentable square foot, up 5.2% over previously fully escalated rents. In S.L. Green’s suburban office portfolio, though, starting rents slid downward by 5.7% to $29.46 per square foot.

At S.L. Green’s retail properties, same-store GAAP NOI saw a year-over-year increase of 5.9% for Q3. Year to date, same-store GAAP NOI has grown 3.5%.

Even so, the company’s Q3 results reflected the market’s continued ailments. Funds from operations totaled $78.1 million, or $0.98 per diluted share, a decrease of 28.5% from the $83.1 million for the same quarter last year. Net income to common stockholders fell 93% from $28.8 million in Q3 2008 to a loss of $2.5 million for the most recent quarter.

Revenues and EBITDA for Q3 of this year reached $249.6 million and $141.7 million, respectively, a year-over-year decrease of 7% and 6%, respectively. In a release, S.L. Green attributes this mainly to lower investment income and greater loan loss reserves during 2009 compared to ’08.

During Tuesday’s earnings call, Holliday said the REIT’s overall Q3 performance was in accordance with the guidance it had issued and “should have contained no surprises.” Despite the drop in earnings, he accentuated the positive. “I thought we had a good quarter.”

S.L. Green successfully refinanced two of its Manhattan properties during Q3, closing on a $145-million refi of 420 Lexington Ave. and retiring the $175-million mortgage on 100 Park Ave. with a $215-million recap. It also sold a 49.5% interest in 485 Lexington Ave. and took over control of 100 Church St., with full beneficial ownership of the 21-story Lower Manhattan property expected to occur in the first quarter of ’10. That will mean a leasing assignment of 600,000 square feet at 100 Church, but president and CIO Andrew Mathias said Tuesday that “we’re very confident our leasing team is up to the challenge.”

Mathias said that the next 12 to 24 months will offer “significant opportunities” for S.L. Green to utilize its capacity as a structured debt provider. Unlike other large operators, such as Vornado Realty Trust and the newly launched REITs formed by Brookfield Asset Management and Marathon Real Estate Mortgage Trust, S.L. Green has not been actively raising huge amounts of capital lately to take advantage of distressed situations. Holliday said thus far, debt defaults haven’t generated many buying opportunities as far as S.L. Green is concerned.Mp>However, he added, “We believe the pipeline is beginning to open. We’re very hopeful that in ’10, we’ll see a very transaction-rich environment.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.