SL Green Operating Partnership, L.P., SL Green Realty Corp.’s (SLG - Free Report) operating partnership, has announced the pricing of senior notes valued at $500 million.
The offering comprises 3.250% senior unsecured obligations of the operating partnership and will mature in 2022. It will be unconditionally and fully guaranteed by the company and wholly owned subsidiary of SL Green Operating Partnership, L.P. — Reckson Operating Partnership, L.P.
The company anticipates raising nearly $495.25 million from this offering. This amount is estimated after making adjustments for underwriting discount and estimated fees and expenses. The offering is anticipated to close on Oct 5, after complying with the customary closing conditions.
The operating partnership plans to utilize the net proceeds of this offering to initially settle a 3% Exchangeable Senior Notes borrowing set to mature in 2017. Thereafter, the remaining proceeds will be used for general corporate purposes, which may include shrinking debt obligations undertaken by the operating partnership.
We believe the senior notes offering will bring down the company’s cost of capital, which will, in turn, strengthen the balance sheet and fuel growth. A balanced capital structure, along with a robust operating platform, will likely enable it to execute strategic priorities and drive growth in net asset value.
Currently, the company carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for funds from operation (FFO) per share for full-year 2017 has been revised upward to $6.55 in a month’s time.
However, due to the unfavorable environment in the office and retail sector, shares of this real estate investment trust (REIT) have underperformed the industry it belongs to, year to date. The company’s shares have lost 4%, while the industry recorded growth of 4.1%, during this time period.
Stocks to Consider
Better-ranked stocks in the REIT space include Seritage Growth Properties , Sabra Healthcare REIT, Inc. (SBRA - Free Report) and Communications Sales & Leasing, Inc. (UNIT - Free Report) . While Seritage and Sabra Healthcare flaunt a Zacks Rank of 1 (Strong Buy), Communications Sales & Leasing carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Seritage’s 2017 FFO per share estimates inched up 0.5% to $2.01 in the past 60 days.
Sabra Healthcare’s 2017 FFO per share estimates climbed 3% to $2.38 over the past month.
Communications Sales & Leasing’s 2017 FFO per share estimates climbed 14.4% to $2.54 in two months’ time.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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