Analyst Note
| Kevin Brown, CFA |No-moat-rated SL Green reported decent third-quarter results, with the company reporting funds from operations of $1.78 per share including $0.16 per share of lease termination income compared with $1.75 per share in the third quarter of 2020 which included $0.26 per share of net proceeds derived from a legal settlement. Same-store occupancy sequentially declined in the third quarter 50 basis points to 93.1%, while the Manhattan office re-leasing spread was 1.8% lower for the third quarter compared with the previous fully escalated rents on the same spaces. Nevertheless, SL Green reported a 3.6% increase to same-store cash net operating income excluding lease termination income compared with a year ago. Management believes that the main industries that drive demand for office space in the New York market are all doing quite well and expects occupancy will stabilize and turn into a meaningful positive absorption in 2022. This is in line with our views for the company and as a result, we are maintaining our $82 fair value estimate for SL Green.