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SL Green (SLG) Closes Refinancing for One Vanderbilt Avenue

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SL Green Realty Corp. (SLG - Free Report) closed a $3-billion 10-year, fixed-rate financing of One Vanderbilt Avenue, which is owned in a joint venture between SL Green, National Pension Service of Korea and Hines Interests, LP.

It marks the largest non-portfolio single asset, single borrower CMBS securitization in history. In fact, it highlights the global capital market’s confidence in class-A Manhattan office assets that have strong, credit-rated tenants.

Specifically, the new financing replaces the previous $1.75-billion construction facility with an outstanding balance at the time of payoff of $1.54 billion. Moreover, the latest financing carries a stated coupon of 2.855%, equivalent to a rate of 2.947% inclusive of hedging costs.

Per management, the completion of the largest ever single building securitization, which has been “executed with a high quality and deep bond order book”, has led to “efficient pricing” and highlighted the “attractiveness of this iconic development”.

Markedly, the 1.7-million-sq-ft skyscraper — One Vanderbilt Avenue — offers an unparalleled combination of amenities, innovative office design, state-of-the-art technology, best-in-class sustainability and a healthy work environment, together with a direct connection to the Grand Central Terminal. This has likely enabled the company to enjoy exponential tenant demand and stellar leasing velocity at the property.

Earlier this month, SL Green announced signing three leases, aggregating 124,000 square feet of space, at One Vanderbilt Avenue. With these signings, comprising both new and expansion leases, the skyline-defining tower in the center of East Midtown is now 89% leased. One Vanderbilt is the new headquarters for several leading finance, technology, law and real estate firms.

With numerous corporate leaders encouraging employees to return to offices, the outlook for urban office properties looks positive. There has been, in fact, acceleration in leasing activities in recent months. Amid the favorable developments in the office leasing market, the company is on track to surpass its year-end leasing target of 90%.

However, amid the pandemic, SL Green is facing downward pressure on rental rates, and offering higher tenant concessions and free-rent period extensions to repopulate its office buildings.

Shares of this Zacks Rank #3 (Hold) company have gained 14.3% over the past three months compared with the industry’s 10.2% rally.

Zacks Investment ResearchImage Source: Zacks Investment Research

Stocks to Consider

Mack-Cali Realty Corp.’s Zacks Consensus Estimate for 2021 FFO per share moved up marginally upwards over the past week. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National Storage Affiliates Trust’s (NSA - Free Report) consensus estimate for current-year FFO per share has moved 4.7% north to $1.99 in a month’s time. Currently, the company carries a Zacks Rank of 2.

Braemar Hotels & Resorts Inc. (BHR - Free Report) holds a Zacks Rank of 2, at present. The consensus estimate for the ongoing year’s FFO per share has been revised 4.5% upward to 46 cents over the past month.

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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