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SL Green Sees Solid Demand at One Vanderbilt, Gets 52% Leased

Office landlord SL Green Realty Corp. SLG is witnessing decent demand for space at One Vanderbilt Avenue, its 1,401-foot trophy office tower in East Midtown in New York City. In fact, with TD Securities’ recent 20-year lease deal for 118,872 square feet of space on the full 10th and 12th floors plus a part of the 11th floor, the office portion of One Vanderbilt is now 52% leased.

This lease co-locates TD Securities with its affiliate TD Bank, which was previously committed to 193,159 square feet of office space at One Vanderbilt Avenue. In addition, publicly traded REIT MFA Financial Inc. MFA struck a 15-year lease for 30,000 square feet of space (the entire 47th floor) in One Vanderbilt Avenue. Moreover, international law firm McDermott Will & Emery expanded their 20-year lease by taking an additional 10,000 square feet of space. The law firm is transferring its New York operations to One Vanderbilt.

Notably, the sky scrapper — One Vanderbilt — is expected to achieve both LEED Gold under version 4.0 and WELL certification. It will offer its tenants a host of amenities, including a 30,000-square-foot tenant-only amenity floor with large format meeting spaces, club style lounge and outdoor terrace. It is just close to Grand Central Terminal and will enjoy direct access to the adjacent transit network. Moreover, a whopping $220 million is being invested by SL Green in private funds to upgrade the transit system, which is encouraging. The building opening is now hastened to early August, 2020.

Apart from TD Securities and MFA Financial, a number of reputed firms from financial, banking and legal industries have committed to this property. In fact, the tenant roster includes names like global alternative asset manager, The Carlyle Group CG; law firm, Greenberg Traurig; and global German financial firms DZ and DVB Banks. Also, SL Green is shifting its headquarters from 420 Lexington Avenue to One Vanderbilt, leasing 70,000 square feet on the 27th and 28th floors.

SL Green also noted that after breaking ground on the project in 2016, the construction is progressing at a rapid pace with the super structure already raised to the 60th floor. Also, leasing at the property is taking place fast and the company refinanced the project with new $1.75 billion construction facility, up from the prior $1.5 billion facility size, as well lowered the interest rate by 75 basis points.

Notably, SL Green enjoys premium office properties and a diverse tenant base along with solid balance-sheet strength. Also, the company is divesting its non-core assets, and using the proceeds to fund share buybacks and development projects. Nonetheless, intense competition from other market players limits the company’s pricing power. Further, rate hike is a concern for the company.

SL Green currently has a Zacks Rank #3 (Hold). Moreover, in the past month, the company’s shares have appreciated 3.7% compared with the industry’s growth 3.8%.

Stock to Consider

A better-ranked stock from the real-estate space is Boston Properties, Inc. BXP. Its FFO per share estimates for 2018 have been revised slightly north to $6.39 north in 30 days’ time.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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