SL Green Realty Corp. SLG, Manhattan’s largest office landlord, has reinforced its dominance in New York City’s premium office market by entering into a contract to acquire 500 Park Avenue for $130 million. This iconic 11-story Class A office building, designed by Skidmore, Owings & Merrill (SOM), is a strategic addition to SL Green’s portfolio in the highly coveted Park Avenue corridor.
Located at the corner of 59th Street and Park Avenue, 500 Park Avenue is steeped in history, originally serving as Pepsi-Cola’s headquarters when constructed in 1960. It has been institutionally maintained and houses high-end boutique tenants like Vera Wang and Friedland Properties, along with the flagship showroom of FRATO, a luxury furniture brand. SL Green plans to enhance the building’s appeal through a capital investment strategy that includes lobby renovations, new amenities and upgrades to the public plaza.
Despite the broader challenges facing the U.S. office real estate sector, such as remote work and fluctuating demand, SL Green has proven adept at navigating the evolving landscape. The company is leveraging demand for high-quality office spaces that offer premium amenities.
SL Green’s leasing performance underscores its resilience. During the third quarter of 2024, it secured 42 office leases across Manhattan, spanning 763,755 square feet. Over the first nine months of the year, the company completed 140 Manhattan office leases totaling 1,817,928 square feet. The mark-to-market on these leases reflected a 10.8% increase in the third quarter and an 8.2% rise over the first nine months of 2024 compared to the prior fully escalated rents for the same spaces.
Since the beginning of the year through Oct. 16, 2024, SL Green has executed 150 office leases in Manhattan, encompassing 2,795,746 square feet, achieving a 12.4% increase in mark-to-market compared to prior fully escalated rents for those spaces. The company maintains an active leasing pipeline of approximately 1.1 million square feet. These deals highlight the enduring appeal of SL Green’s properties to prominent tenants seeking prestige and convenience.
Final Words on SLG
SL Green’s acquisition of 500 Park Avenue aligns with its strategy of owning and managing trophy assets in Manhattan. The Park Avenue market, characterized by historically low vacancy rates and robust demand, offers a solid foundation for sustained rental income growth. Apart from strategic acquisitions, SL Green’s leasing successes position it as a standout in the office real estate sector despite ongoing market challenges.
Shares of SL Green Realty, currently carrying a Zacks Rank #3 (Hold), have risen 18.6% in the past three months compared with the industry's upside of 0.6%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Welltower Inc. WELL and Cousins Properties CUZ, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Welltower’s 2024 FFO per share has been raised 1.7% over the past month to $4.26.
The Zacks Consensus Estimate for Cousins Properties’ current-year FFO per share has moved marginally north in the past month to $2.68.
Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.
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