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SL Green (SLG) Raises Share Repurchase Program by $500M

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Ushering in good news for the shareholders, SL Green Realty’s SLG board of directors announced a $500-million increase in its share buyback program.

Notably, the company initially announced share repurchase program worth $1 billion in August 2016. After which, additional $500 million was authorized in December 2017. Therefore, with this authorization, the repurchase program now stands at $2 billion.

Up till now, SL Green has repurchased 15,067,975 shares.

According to the chief executive officer, Marc Holliday, the company continues to make the best use of its capital by buying back its common stock at considerable discounts compared with the value of its assets.

SL Green has robust fundamentals to back its share repurchases. Notably, this reputed New York City-based landlord enjoys high-quality office properties, solid balance sheet as well as a diverse tenant base.

Moreover, SL Green has been following an opportunistic investment policy to enhance its overall portfolio. This includes divesting its non-core assets and using the proceeds for share buybacks as well as long-term core asset acquisitions. The proceeds will also be used for investing in debt and preferred equities. Additionally, its leasing activity is likely to remain decent amid an improving economy and job market environment.

The company observes stringent financial policies and has considerable access to capital. Also, it has manageable, well-balanced debt-expiry schedules. This will likely help the company sustain its dividend payout to equity investors.

However, SL Green faces intense competition from developers, owners and operators of office properties, and other commercial real estates, which limit its pricing power. Also, rate hike remains another concern.

So far this year, shares of SL Green have outperformed the industry it belongs to. This Zacks Rank #3 (Hold) company’s shares have lost 3%, which is narrower than the industry’s decline of 4.1%.

Stocks to Consider

A few better-ranked stocks from the same space include Terreno Realty Corporation TRNO, Arbor Realty Trust ABR and Extra Space Storage Inc. EXR. While Terreno Realty sports a Zacks Rank #1 (Strong Buy), Arbor Realty and Extra Space Storage carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Terreno Realty’s Zacks Consensus Estimate for 2018 funds from operations (FFO) per share has been revised upward by 1.6% to $1.28 over the past month. The stock has rallied 8% in three months’ time.

Arbor Realty Trust’s Zacks Consensus Estimate for 2018 FFO per share has remained unchanged at $1.03 over the past month. Its shares have returned 12.6% in the past three months.

Extra Space Storage’s FFO per share estimates for 2018 have been revised upward marginally to $4.62 over the past month. The stock has gained 13.5% 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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