SL Green's (SLG) Q4 FFO Lag Estimates, 2024 View Raised
SL Green Realty Corp. SLG reported fourth-quarter 2023 funds from operations (FFO) per share of 72 cents, lagging the Zacks Consensus Estimate of 88 cents per share. The figure fell 50.7% from the year-ago quarter’s $1.46.
The results reflect lower-than-anticipated revenues despite decent leasing activity in its Manhattan portfolio. However, lower interest expenses and a rise in same-store cash net operating income (NOI) during the quarter were commendable. SL Green raised its guidance for 2024 FFO per share.
Net rental revenues of $131.9 million outpaced the Zacks Consensus Estimate of $131 million. However, the figure slipped 23.7% from the prior-year quarter.
For 2023, SLG’s FFO per share was $4.94. The figure compared unfavorably with the prior year’s $6.64. Net revenues of $603.7 million rose 2.5% from the prior year’s $588.8 million.
Quarter in Detail
During the fourth quarter, the same-store cash NOI, including SL Green’s share of same-store cash NOI from unconsolidated joint ventures, increased 3.9% year over year to $163.6 million. This excludes the lease termination income.
For its Manhattan portfolio, SL Green signed 26 office leases encompassing 505,152 square feet of space in the reported quarter. The mark-to-market on signed Manhattan office leases increased 3.2% from the previous fully-escalated rents on the same spaces in the quarter.
The average lease term for the Manhattan office leases signed was 14.7 years, while average tenant concessions were 14.9 months of free rent with a tenant improvement allowance of $120.56 per rentable square foot. This excludes the leases signed at One Madison Avenue.
As of Dec 31, 2023, Manhattan’s same-store office occupancy, inclusive of 177,836 square feet of leases signed but not yet commenced, was 90.0%, up from 89.9% at the end of the prior quarter but down from 92% at the end of the year-ago quarter.
As of the same date, the carrying value of the company’s debt and preferred equity portfolio was $346.7 million, which declined 44.4% from the year-ago quarter.
The company’s interest expense (net of interest income) fell 27.2% year over year to $27.4 million.
Liquidity
SL Green exited the fourth quarter with cash and cash equivalents of $221.8 million, up from $189.8 million recorded as of Sep 30, 2023.
2024 Guidance Increased
To reflect incremental gains on discounted debt extinguishment, SL Green increased its guidance for 2024 FFO per share to the range of $5.90-$6.20 from $4.90-$5.20 guided earlier.
SL Green currently carries a Zacks Rank #3 (Hold).
SL Green Realty Corporation Price, Consensus and EPS Surprise
SL Green Realty Corporation price-consensus-eps-surprise-chart | SL Green Realty Corporation Quote
Upcoming Earnings Releases
We now look forward to the earnings releases of other REITs like Alexandria Real Estate Equities ARE and Boston Properties BXP, slated to report on Jan 29 and Jan 30, respectively. Meanwhile, Ventas VTR is scheduled for Feb 8.
The Zacks Consensus Estimate for Alexandria’s fourth-quarter 2023 FFO per share is pegged at $2.29, implying a 7% year-over-year increase. ARE currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Boston Properties’ fourth-quarter 2023 FFO per share is pegged at $1.81, suggesting a year-over-year fall of 2.7%. BXP currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for Ventas’ fourth-quarter 2023 FFO per share stands at 76 cents, indicating a 4.1% rise year over year. VTR currently has a Zacks Rank #2 (Buy).
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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