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SL Green Realty (SLG) Might Acquire Stake in NY Office Asset

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SL Green Realty SLG has been making solid strides to revamp its portfolio by acquiring interests in potential properties and disposing non-core assets.

In fact, this real estate investment trust is expected to acquire stake in the 245 Park Avenue office tower in New York City from Chinese conglomerate, HNA Group, according to a report by the Wall Street Journal.  

While details of the deal remain undisclosed, the report citing people familiar with the matter stated that SL Green will likely enjoy operating control of the skyscraper, along with a preferred position in the joint venture for the property.  

Citing others knowledgeable of the deal, the report mentioned that the deal for the 1.8-million-square-foot tower will likely close in multiple stages.

Notably, the sale is part of HNA’s restructuring activity, which was on a buying spree for the past two years, and is now realigning its operations and trimming assets to repay debt. Moreover, the office tower was purchased by the company last year for $2.21 billion, with $1.8 billion of debt. It was among the highest price paid for a Manhattan office building during the time of purchase.

Importantly, SL Green’s sale of non-core assets offers the company an opportunity to channelize the proceeds in high-growth properties. The company is the largest commercial landlord of New York City that primarily acquires, manages, develops and leases commercial office properties in the New York Metropolitan area, especially in mid-town Manhattan.

The above-mentioned purchase will further strengthen its foothold in the New York market. Further, the company is likely to experience decent demand for its properties amid recovering economy and healthy job market environment.

Nonetheless, increased supply of office space in some of its markets is a concern. There is intense competition from developers, owners and operators of office properties, and other commercial real estates, which is likely to restrict the company’s ability to attract and retain tenants at relatively higher rents than its competitors.

In the year-to-date period, this Zacks Rank #3 (Hold) stock has outperformed its industry. While the company’s shares have inched up 0.7%, the industry has incurred a loss of 1.3%.


Stocks Worth a Look

A few better-ranked stocks from the same space include Arbor Realty Trust ABR, Columbia Property Trust, Inc. CXP and Extra Space Storage EXR. 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 have remained unchanged at $1.03 over the past month. Its shares have returned 14.4% in the past three months.

Columbia Property Trust’s FFO per share estimates for 2018 have remained unchanged at $1.46 over the past month. The stock has gained 14% during the past three months.

Extra Space Storage’s Zacks Consensus Estimate for 2018 FFO per share have remained unchanged at $4.62 over the past month. Its shares have returned 17.7% in three months’ time.

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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