SL Green (SLG) Secures $510M Mortgage on 220 East 42nd Street
SL Green Realty Corp SLG closed a new $510-million mortgage loan that is secured by 220 East 42nd Street. The transaction bolstered the company’s liquidity and the proceeds were used to pay down its unsecured revolving credit facility.
The loan was offered by a lending group led by Citi, Aareal Capital Corp. and Credit Agricole.
The News Building, or 220 East 42nd Street, is a 37-story high-rise property originally serving as the headquarters for The New York Daily News. Before being acquired in February 2003 for $265 million, SL Green had an initial $53.5-million preferred equity investment in the property in September 2001.
Post acquisition, the building was revamped through a multi-year repositioning and retenanting initiative. The efforts likely enable the property to enjoy the current occupancy of 97%. Further, net operating income from the property has reached its peak since SL Green’s acquisition.
Moreover, the building has an impressive tenant roster that includes names like the Visiting Nurse Service of New York, local television station WPIX, Omnicom Group and the United Nations.
Management believes that the mortgage loan transaction indicates healthy liquidity in the New York City market and was facilitated by the company’s strong relationships with lenders and continued confidence demonstrated in its platform.
In recent times, this Manhattan office landlord has been making efforts to boost its liquidity and repay its line of credit. In fact, amid the coronavirus outbreak-led uncertainties, in early June, the company achieved its aim to bolster the liquidity position to $1 billion, a month ahead of the schedule. This was done on the back of loan refinancing, sales and repayment of existing positions in the debt, and preferred equity (DPE) portfolio as well as the sale of real estate assets joint-venture interest.
With this, it has decent balance-sheet strength and financial flexibility. Also, the company has no significant debt maturities until 2021. This provides it financial flexibility to pursue other growth opportunities.
However, the coronavirus pandemic has led to an uncertain economic environment. In such a scenario, rental payment collections have become uncertain and landlords are completed to offer tenant lease incentives and concessions. In fact, the company expects to face near-term headwinds like a slowdown in leasing activities, reduced market rents, lower collections in its owned office, retail properties and the DPE portfolio, delays in development and redevelopment activities, and higher expenses related to the safety of its tenants.
Moreover, shares of this Zacks Rank #3 (Hold) company have lost 37.7% over the past year compared with the industry’s decline of 7.5%.
Stocks to Consider
Alexander Baldwin Holdings, Inc.’s ALEX Zacks Consensus Estimate for 2020 funds from operations (FFO) per share has been unchanged at 83 cents over the past month. The company currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
City Office REIT, Inc.’s CIO FFO per share estimate for the ongoing year has been unchanged at $1.11 over the past 30 days. The company currently sports a Zacks Rank of 1.
Gladstone Land Corporation’s LAND FFO per share estimate for 2020 has been unchanged at 68 cents over the past month. It currently carries a Zacks Rank of 2 (Buy).
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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