Dj Sl Green Realty Corp. Stock Falls Thursday, Still Outperforms Market

Shares of SL Green Realty SLG have risen 23.6% in the past three months compared with the industry's upside of 0.8%.

Last month, this New York-based office real estate investment trust (REIT) reported a third-quarter 2024 FFO per share of $1.13, which missed the Zacks Consensus Estimate of $1.21. Results reflected decent leasing activity in its Manhattan portfolio and higher rental revenues.

Analysts seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its fourth-quarter 2024 FFO per share revised 3.9% upward over the past month to $1.33.

Factors Behind SLG's Stock Price Surge

SL Green has a mono-market strategy focus with an enviable footprint in the large and high-barrier to entry New York real estate market. The company is well-positioned to benefit from its well-located properties and the ability to offer top-notch amenities at recently developed office buildings.

SL Green is witnessing healthy leasing demand for its properties as tenants’ demand for premium office spaces continues to grow. In the third quarter of 2024, SL Green signed 42 office leases for its Manhattan office portfolio, encompassing 763,755 square feet. With an encouraging office leasing pipeline, the company remains well-positioned to navigate any challenging environment.

SL Green maintains a diversified tenant base to hedge the risk associated with dependency on single-industry tenants. Its largest tenants include renowned firms from different industries. As of Sept. 30, 2024, except for Paramount Global, which accounted for 5.5% of the company’s share of annualized cash rent, no other tenant in SLG’s portfolio accounted for more than 5% of its share of annualized cash rent, including its share of joint venture annualized cash rent. Moreover, with long-term leases to tenants with a strong credit profile, it is well-poised to generate stable rental revenues over the long term.

SL Green has been following an opportunistic investment policy to enhance its overall portfolio quality. This includes divesting its mature and non-core assets, including residential properties, in a tax-efficient manner and using the proceeds to fund development projects and share buybacks.

In July 2024, SL Green closed the sale of the Palisades Premier Conference Center for $26.3 million plus certain fees. The transaction generated net proceeds of $19.8 million for the company. Such match-funding initiatives indicate the company’s prudent capital-management practices and will relieve pressure from its balance sheet.

Key Risks for SLG

The elevated supply of office properties in some of SLG’s markets remain concern. Competition from developers, owners and operators of office properties and other commercial real estate are likely to weigh on its pricing power. Geographic concentration of assets adds to the company’s woes.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Iron Mountain IRM and Welltower WELL, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Iron Mountain’s 2024 FFO per share stands at $4.49, indicating an increase of 9% from the year-ago reported figure.

The Zacks Consensus Estimate for Welltower’s 2024 FFO per share is pinned at $4.26, suggesting year-over-year growth of 17%.

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.

Zacks Investment Research

Shares of Simon Property SPG have rallied 16.9% over the past three months, outperforming the industry's 7.1% growth.

The retail real estate investment trust’s (REIT) portfolio of premium retail assets in the United States and abroad, the adoption of omnichannel retailing, a focus on strategic acquisitions and mixed-use developments and solid balance sheet strength have enabled it to ride the growth curve so far.

In early November, SPG reported third-quarter funds from operations (FFO) per share of $2.84, missing the Zacks Consensus Estimate of $3. The figure decreased from $3.20 reported in the year-ago period.

Factors Behind SPG Stock’s Price Surge: Will the Trend Last?

Simon Property enjoys wide exposure to retail assets across the United States. The company’s international presence fosters sustainable long-term growth compared to its domestically-focused peers. In an improving leasing environment, the retail REIT is poised to benefit from its superior assets at premium locations. As of Sept. 30, 2024, the ending occupancy for the U.S. Malls and Premium Outlets portfolio came in at 96.2%, up 100 basis points from 95.2% as of Sept. 30, 2023.

Simon Property’s adoption of an omni-channel strategy and successful tie-ups with premium retailers have paid off well. Its online retail platform, coupled with an omnichannel strategy, is likely to be accretive for its long-term growth. The company is also focused on tapping its growth opportunities by assisting digital brands in enhancing their brick-and-mortar presence.

Simon Property has been restructuring its portfolio, aiming at premium acquisitions and transformative redevelopments. In September 2024, it concluded the expansion and renovation of Busan Premium Outlets in South Korea. This move, along with past restructuring initiatives, is likely to bolster the company’s growth in the upcoming period. Its efforts to explore the mixed-use development option, which has gained immense popularity in recent years, have enabled it to tap the growth opportunities in areas where people prefer to live, work and play.

SPG is making efforts to bolster its financial flexibility. This enabled the company to exit the third quarter of 2024 with $11.1 billion of liquidity. As of Sept. 30, 2024, Simon Property’s total secured debt to total assets was 17%, while the fixed-charge coverage ratio was 4.3, ahead of the required level. With solid balance sheet strength and available capital resources, it remains well-poised to tide over any mayhem and bank on growth opportunities.

Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Simon Property remains committed to that. Concurrent with its third-quarter earnings release, the company announced a hike in its dividend to $2.10 from $2.05 paid out earlier. This marked a hike of 2.4% from the prior dividend payment and a year-over-year increase of 10.5%. This retail REIT has increased its dividend 12 times in the last five years. Such disbursements highlight its operational strength and commitment to rewarding shareholders handsomely.

Key Risks for SPG

Higher e-commerce adoption and limited consumers’ willingness to spend amid macroeconomic uncertainty raise concerns for Simon Property.

Simon Property currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Crown Castle Inc. CCI and SL Green Realty SLG,each carrying a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for Crown Castle Inc.’s ongoing year’s FFO per share has increased marginally over the past month to $6.98.

The Zacks Consensus Estimate for SL Green Realty’s 2024 FFO per share has moved marginally northward in the past two months to $7.61.

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.

Zacks Investment Research

Investors looking for stocks in the REIT and Equity Trust - Other sector might want to consider either Community Healthcare Trust (CHCT) or SL Green (SLG). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Community Healthcare Trust and SL Green are both sporting a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

CHCT currently has a forward P/E ratio of 8.49, while SLG has a forward P/E of 10.02. We also note that CHCT has a PEG ratio of 1.06. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SLG currently has a PEG ratio of 2.01.

Another notable valuation metric for CHCT is its P/B ratio of 1.11. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, SLG has a P/B of 1.34.

Based on these metrics and many more, CHCT holds a Value grade of B, while SLG has a Value grade of D.

Both CHCT and SLG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CHCT is the superior value option right now.

Zacks Investment Research

As of Oct. 31, 2024, two stocks in the real estate sector could be flashing a real warning to investors who value momentum as a key criteria in their trading decisions.

The RSI is a momentum indicator, which compares a stock’s strength on days when prices go up to its strength on days when prices go down. When compared to a stock’s price action, it can give traders a better sense of how a stock may perform in the short term. An asset is typically considered overbought when the RSI is above 70, according to Benzinga Pro.

Here's the latest list of major overbought players in this sector.

SL Green Realty Corp

• On Oct. 16, SL Green Realty reported a quarterly loss of 21 cents per share, which beat the analyst consensus estimate of 50 cents per share. The company reported quarterly sales of $229.691 million which beat the analyst consensus estimate of $142.537 million. The company's stock gained around 12% over the past month and has a 52-week high of $79.92.
• RSI Value: 70.97
• SLG Price Action: Shares of SL Green Realty gained 0.3% to close at $77.83 on Wednesday.

Digital Realty Trust Inc

• On Oct. 24, Digital Realty Trust reported better-than-expected third-quarter FFO results and raised its FY24 FFO guidance. “In the third quarter, Digital Realty posted over $520 million of new leasing, more than double the record set in the first quarter. Record leasing across both the greater-than-a-megawatt and 0-1 MW plus interconnection segments drove the backlog up nearly 60% above our prior record,” said Digital Realty President & Chief Executive Officer Andy Power. The company's stock gained around 13% over the past month and has a 52-week high of $193.88.
• RSI Value: 76.86
• DLR Price Action: Shares of Digital Realty Trust closed at $182.17 on Wednesday.

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