SL Green Seems Attractive at 10% Dividend Yield; Higher Leverage Also Makes It Relatively Risky

No-moat-rated SL Green Realty reported middling third-quarter results as share prices of office REITs have declined significantly in the past few months. The firm reported funds from operations, or FFO, of $1.66 per share, 6.8% lower than the $1.78 in FFO during the third quarter of 2021. The mark-to-market on signed Manhattan office leases for the company were 1.1% higher in the third quarter of 2022 than the previous fully escalated rents on the same spaces. The same-store cash NOI decreased by 0.5% in the third quarter of 2022, excluding lease termination income on a year-over-year basis. Manhattan same-store office occupancy increased 10 basis points on a sequential basis as it was reported at 92.1% for the current quarter. We have reduced our fair value estimate for SL Green Realty to $59 per share from $64 per share after moderating our long-term rent growth, occupancy, and interest expense expectations for the company.