SL Green Raises Outlook as Office Income Strengthens
Second-quarter revenue rose 9.1% to $264.0 million as rental and fee income increased.
SL Green Realty (SLG), the Manhattan office landlord, raised its annual earnings outlook after property income strengthened and occupancy extended its recovery.
Funds from operations rebounded 70% sequentially to $1.43 a share from $0.84, reversing three quarters of declines. FFO remained 12% below the year-earlier $1.63, which included $0.61 a share from the resolution of a mortgage investment tied to 522 Fifth Avenue.
Revenue increased to $264.0 million from $241.9 million a year earlier, led by a 16.5% rise in rental revenue and a 59.1% increase in fee income. The GAAP loss narrowed to $0.38 a share from $1.20 in the first quarter, though it widened from a loss of $0.16 a share a year earlier.
Manhattan same-store cash net operating income, excluding lease-termination income, grew 4.3%, accelerating from 2.6% in the first quarter and reversing a year-earlier decline. Same-store office occupancy rose to 94.7% from 94.4% sequentially and 91.4% a year earlier.
Leasing volume fell 52% from the first-quarter record to 445,161 square feet, while average starting rent declined 11% to $93.17 per square foot and the average lease term shortened to 5.8 years. Pricing on replacement leases strengthened, with rents coming in 18.0% above prior fully escalated rents, up from a 16.1% spread in the first quarter and a 2.4% gain a year earlier.
SL Green now expects 2026 FFO of $5.60 to $5.90 a share, up from its previous range of $4.40 to $4.70. The $1.20 increase in the midpoint reflected $0.40 a share from higher portfolio NOI, fees and other income and $0.80 from additional One Vanderbilt income. Net-income guidance rose to $0.20 to $0.50 a share from a range spanning a $0.27 loss to earnings of $0.03.
The company closed the $222.6 million sale of the residential and retail portions of 7 Dey Street, generating $23.7 million in net cash proceeds while retaining the office condominium. It also repurchased $14.1 million of common stock and agreed to sell 10 East 53rd Street for $312.2 million, a transaction expected to provide about $100 million for corporate debt repayment.