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SL Green Revamps Portfolio Through Strategic Dispositions

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SL Green Realty (SLG - Free Report) is disposing its stake in a joint venture asset and redeeming its investment in a property. These retail transactions are in line with the company’s efforts to improve its overall portfolio mix and enhance shareholders value.

Particularly, the company entered into an agreement to sell its ownership stake at 724 Fifth Avenue to its joint venture partner, Jeff Sutton. Notably, Prada has a flagship presence in the building occupying 15,540 square feet of retail space among four floors and 5,200 square feet of office space.

Additionally, SL Green’s investment in 720 Fifth Avenue, a 132,317-square-foot building, will be redeemed. The building currently has Abercrombie & Fitch’s (ANF - Free Report) flagship store. Moreover, the company will be partly repaid on one of its partnership loans.

All the above transactions are subject to customary closing conditions and are likely to be completed by third-quarter 2018. These are expected to collectively generate net proceeds of $85.5 million for SL Green.

Moreover, in May 2018, the company announced that it has entered into an agreement to sell the fee interest at 635 Madison Avenue for a gross consideration of $151 million. Further, the company had also declared that it had successfully bid on the leasehold interest at 2 Herald Square.

These transactions to dispose non-core assets, gives SL Green an opportunity to channelize the proceeds in high-growth properties. The company is the largest commercial landlord of New York City that primarily acquires, manages, develops and leases commercial office properties in the New York Metropolitan area, especially in mid-town Manhattan. The company is likely to experienced decent demand for its properties amid a recovering economy and healthy job market environment.

However, increased supply of office space in some of its markets remains a concern. There is intense competition from developers, owners and operators of office properties, and other commercial real estates and this is likely to restrict its ability to attract and retain tenants at relatively higher rents than its competitors.

So far this year, this Zacks Rank #3 (Hold) stock’s decline has been narrower than the industry’s loss. While the company’s shares have declined 2.6%, the industry has recorded a loss of 3.1%.

 

Stocks Worth a Look

A few better-ranked stocks from the same space include Arbor Realty Trust (ABR - Free Report) and Columbia Property Trust, Inc. (CXP - Free Report) . Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arbor Realty Trust’s Zacks Consensus Estimate for 2018 FFO per share rose 14.4% to $1.03 over the past month. Its shares have returned 8.9% in the past three months.

Columbia Property Trust’s FFO per share estimates for 2018 witnessed rise of 0.7% and moved to $1.46 over the past month. The stock has gained 6.6% during the past three months.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs

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