While SL Green leases space to tenants across many industries, it has a high concentration in the financial services sector. That's a potential concern. If that sector needs less office space in the future, it could significantly impact SL Green's occupancy level and rental rates.
Overall, the company leases space to various tenants. Leading the way is Viacom CBS at 5.9% of its annualized contractual cash rent. Meanwhile, its top 20 tenants contribute 38.7% of its rent, giving it a reasonably diversified rent roll.
Another major aspect of SL Green's portfolio is its debt and preferred equity investments. As of the end of 2021's first quarter, it held nearly $1.1 billion of these investments with a weighted average yield of 6.86%. These investments included mezzanine loans, mortgages, junior mortgage loans, and preferred equity investments secured by office, multifamily rental, residential, and retail properties.
SL Green Realty news
The COVID-19 pandemic had a significant impact on New York City in 2020. The city was an early virus hotspot, forcing government officials to restrict travel and non-essential businesses. As a result, companies shifted to working remotely while many retailers closed their doors. That impacted SL Green's ability to collect rent from some tenants, mainly retailers, while also affecting revenue generated from parking fees. These headwinds led the company to take steps to shore up its balance sheet by selling several properties and certain debt and preferred equity investments.
Because of all that, the REIT's funds from operations (FFO) declined from $605.7 million in 2019 to $562.7 million in 2020. However, it increased on a per-share basis from $7.00 to $7.11, thanks to the positive impact of its share repurchase program.
SL Green sold several properties in 2020, led by 410 Tenth Avenue. The company and its partners received $952.5 million in gross consideration from the sale, generating $206.5 million in net cash proceeds to SL Green and a $41.3 million gain. The company used those funds to repay debt, increase its share repurchase program authorization, and pay a special dividend.
Another highlight in 2020 was the opening of its One Vanderbilt Avenue construction project. The company completed the 1,401 foot tall, 1.7-million-square-foot skyline defining tower in September. It will serve as the new headquarters for many leading finance, banking, law, and real estate companies.
The REIT continued to make progress on its strategic plan in early 2021. While its FFO declined on a per-share basis due to the continued headwinds from the pandemic and asset sales, it signed new leases, sold additional assets, and repurchased more stock. Among its notable early accomplishments were signing more leases for One Vanderbilt, bringing it to 81% leased by early May and on target to reach its goal of 90% by year end. The company also continued to take advantage of strong buyer demand for Class A office space by selling 635-641 Sixth Avenue for $325 million, or more than $1,200 per square foot.
SL Green Realty stock price
Despite being the biggest landlord in one of the world's top office markets, SL Green Realty hasn't created any shareholder value in recent years: