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SL Green Buys Assets in Tribeca

Zacks Equity Research

SL Green Realty Corp. (SLG) disclosed a deal with Ivanhoe Cambridge – a private property management and development company – to buy the latter’s stake in 388-390 Greenwich Street properties. The consolidated investment interest is valued at $1.585 billion. With the transaction, SL Green will obtain the full ownership of the 2.6 million square foot headquarters of Citigroup Inc. (C) in Tribeca, near the south end of Manhattan.

The move is in line with the SL Green’s strategy of boosting its tenant base with industry giants and expanding its New York City office portfolio. The deal is anticipated to close during the second quarter of 2014.

Notably, 388-390 Greenwich Street comprises two properties of which 388 Greenwich is a 39-story and 390 Greenwich is an 8-story building. The properties are triple-net leased to an affiliate of Citigroup that will expire on 2035.

SL Green has been seeking to tap opportunities to boost its overall portfolio quality, through the acquisition of premium assets and divestiture of non-core ones. In connection to this, in a separate transaction, SL Green declared the penning of a deal with an affiliate of joint venture partner, Blackstone Real Estate Partners VII, to offload its 43.7% stake in a Southern California office portfolio for $100 million. The move depicts the company’s plan to redeploy the proceeds in target markets.

In Jan 2014, keeping its winning streak alive, this real estate investment trust (:REIT) came up with impressive fourth-quarter 2013 results on the back of its operating portfolio performance and successful execution of strategic portfolio enhancement measures. The company reported fourth-quarter 2013 funds from operations (:FFO) of $1.38 per share, beating the Zacks Consensus Estimate by 3 cents and the prior-year quarter figure by 24 cents.

SL Green currently carries a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider stocks like Liberty Property Trust (LPT) and Public Storage (PSA). Both stocks carry a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.

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