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SL Green (SLG) Revamps Portfolio by Selling & Buying Assets


SL Green Realty SLG is revamping its portfolio by disposing of non-core assets and acquiring interests in other properties.

The company announced that it has entered into an agreement to sell the fee interest at 635 Madison Avenue for a gross consideration of $151 million. The transaction is subject to customary closing conditions and is likely to be completed by third-quarter 2018. SL Green bought fee interest in this property for $145 million in 2014.

Also, SL Green announced that it had successfully bid on the leasehold interest at 2 Herald Square, which was in the process of foreclosing on. The asset, which spans across 369,000 square feet, is conveniently located at the juncture of the Sixth Avenue, Broadway and the 34th Street. Further, the foot traffic along the corridor of 34th Street surpasses 100 million people per annum.

Moreover, following the completion of this office and retail asset acquisition, SL Green plans to form a joint venture with an institutional investor based in Israel. The property boasts tenants like WeWork that is largely occupied by Amazon.com, Inc. AMZN, Victoria’s Secret and Mercy College.

Shrinking its ownership in non-core assets gives SL Green an opportunity to channelize the proceeds in high-growth properties. The company is New York City's largest commercial landlord, which primarily acquires, manages, develops and leases commercial office properties in the New York Metropolitan area, especially mid-town Manhattan.

However, increased supply in the company’s markets remains a concern. Also, SL Green faces intense competition from developers, owners and operators of office properties and other commercial real estates. This restricts its ability to attract and retain tenants at relatively higher rents than its competitors.

Encouragingly, in the past three months, this Zacks Rank #3 (Hold) stock has outperformed the industry. While the company’s shares have gained 9.2%, the industry has recorded 5.1% rise.

Stocks Worth a Look

A few better-ranked stocks from the same space include Arbor Realty Trust ABR, Chatham Lodging Trust CLDT and Host Hotels & Resorts, Inc. HST. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arbor Realty Trust’s Zacks Consensus Estimate for 2018 FFO per share rose 14.4% to $1.03 over the past month. Its shares have returned 16.1% in the past three months.

Chatham Lodging’s FFO per share estimates for the current year inched up 1% to $1.93 in a month’s time. Its shares have gained 5.7% over the past 12 months.

Host Hotels & Resorts’ FFO per share estimates for 2018 witnessed rise of 3% and moved to $1.71 over the past month. The stock has gained 7.7% during the past three months.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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