SL Green Realty Corp (SLG) Q1 2025 Earnings Conference Call April 17, 2025 02:00 PM ET Company Participants Conference Operator - ModeratorMark Holliday - Chairman & Chief Executive Officer, SL Green Realty Corp.Unnamed Executive - Executive, SL Green Realty Corp. (Leasing/Operations)Unnamed Executive - Head of Capital Markets, SL Green Realty Corp.Matt (Last Name Not Provided) - Chief Financial Officer, SL Green Realty Corp.Brett - Development Executive (Title Not Specified)Tayo - Technical/Audio (Name as ...

Financial Performance - For the quarter ended March 31, 2025, SL Green reported a net loss attributable to common stockholders of $21.1 million, or $0.30 per share, compared to a net income of $13.1 million, or $0.20 per share, for the same quarter in 2024[24]. - The Company reported Funds from Operations (FFO) of $106.5 million, or $1.40 per share, for the first quarter of 2025, down from $215.4 million, or $3.07 per share, for the same period in 2024[25]. - The Company reported a diluted net loss per share of $(0.30) for Q1 2025, compared to earnings of $0.13 in Q4 2024[42]. - Funds from operations (FFO) available to common stockholders was $1.40 per share in Q1 2025, down from $1.81 in Q4 2024[42]. - The market value of common equity decreased to $4.39 billion as of March 31, 2025, from $5.14 billion at the end of 2024[43]. - Total revenues for Q1 2025 were $239.846 million, an increase of 27.7% compared to $187.882 million in Q1 2024[51]. - Operating income for Q1 2025 was $124.667 million, a decrease of 28.4% from $174.236 million in Q4 2024[51]. - The net loss attributable to SL Green common stockholders for Q1 2025 was $21.075 million, compared to a net income of $13.141 million in Q1 2024[51]. - Total revenues for the three months ended March 31, 2025, were $371,926,000, an increase from $365,339,000 in the same period of 2024, representing a growth of 1.4%[57]. - The net loss for the three months ended March 31, 2025, was $(30,394,000), compared to a net income of $97,347,000 for the same period in 2024[57]. Operational Metrics - Same-store cash Net Operating Income (NOI) increased by 2.6% for the first quarter of 2025, or 2.4% excluding lease termination income, compared to the same period in 2024[27]. - The net operating income (NOI) for properties was $70,627,000 in Q1 2025, down from $74,243,000 in Q4 2024, indicating a decrease of 4.3%[45]. - Same-store office occupancy was reported at 91.8% for Q1 2025, a slight decline from 92.4% in Q4 2024[45]. - The average starting cash rent per square foot for office leases commenced was $84.80 in Q1 2025, up from $80.72 in Q4 2024, marking an increase of 2.7%[45]. - Cash NOI for Q1 2025 was $153,549,000, a 2.6% increase from $149,656,000 in Q1 2024[63]. - Same Store Net Operating Income (NOI) was $163,501,000, reflecting a 1.1% increase from $161,701,000 in the same period last year[63]. - The SLG share of NOI from unconsolidated joint ventures was $114,596,000 for the three months ended March 31, 2025, up from $112,990,000 in the same period of 2024, indicating a growth of 1.4%[58]. Debt and Financing - The carrying value of the Company's debt and preferred equity portfolio was $537.6 million at March 31, 2025, with a weighted average current yield of 7.5%[33]. - The consolidated debt as of March 31, 2025, was $3.88 billion, up from $3.62 billion at the end of 2024[43]. - The Company achieved a consolidated debt service coverage ratio of 3.49x for the trailing 12 months, compared to 3.80x in the previous period[43]. - Total debt, net of deferred financing costs increased to $3.761 billion as of March 31, 2025, from $3.507 billion as of December 31, 2024[50]. - The company has a total debt to total assets ratio of 40.0%, which is below the required threshold of less than 60%[72]. - The consolidated fixed charge coverage ratio stands at 1.90x, exceeding the required minimum of greater than 1.40x[72]. - The company has unencumbered assets to unsecured debt ratio of 408.3%, significantly above the required minimum of greater than 150%[73]. Property and Portfolio Management - The average rent on Manhattan office leases signed in the first quarter of 2025 was $83.75 per rentable square foot, with an average lease term of 9.8 years[28]. - The Company signed 45 office leases totaling 602,105 square feet in its Manhattan office portfolio during the first quarter of 2025[28]. - The Company closed on six Giorgio Armani Residences at 760 Madison Avenue during the first quarter of 2025, generating net proceeds of $93.3 million[32]. - The total rentable square footage for Manhattan operating properties is 21,964,001 square feet[90]. - The occupancy rate for "Same Store" properties in Manhattan is 88.6% as of March 31, 2025[90]. - The property at One Vanderbilt Avenue has a 99.4% occupancy rate with an annualized cash rent of $287,985,000[90]. - The company has a total of 510 tenants across its consolidated properties[90]. Acquisitions and Dispositions - In January 2025, the Company acquired 500 Park Avenue for $130.0 million, financed with an $80.0 million mortgage at a floating rate of 2.40% over Term SOFR[31]. - In April 2025, the Company closed on the sale of 85 Fifth Avenue for a gross asset valuation of $47.0 million, generating net proceeds of $3.2 million[30]. - The company has disposed of properties with a total gross asset valuation of $31,352,356,000, with net rentable square footage of 26,013,825 SF[129]. - The company sold 100% interest in multiple properties, including 1 Park Avenue and 1414 Avenue of the Americas, indicating a strong divestment strategy[129]. - The company has engaged in leasehold interest transactions, such as the sale of 2 Herald Square for $265,000,000, reflecting a diversified approach to asset management[129]. Dividends and Shareholder Returns - The Company declared three monthly ordinary dividends of $0.2575 per share in Q1 2025, maintaining an annualized dividend of $3.09 per share[41]. - The company reported a cash distribution of $0.77 per common share, totaling $(54,469,000) for the quarter[55]. - Basic FFO per share for Q1 2025 was $1.43, down 54.9% from $3.11 in Q1 2024[54]. Sustainability and Recognition - The Company was recognized as a GRESB Sector Leader in the Mixed-Use Residential Real Estate sector, earning a Green Star designation and a 5-star rating[36].

Core Insights - SL Green Realty Corp. reported first-quarter 2025 funds from operations (FFO) per share of $1.40, exceeding the Zacks Consensus Estimate of $1.27, compared to $3.07 per share in the same period last year [1] - The results were driven by improved average rental rates on Manhattan office leases and higher same-store cash net operating income (NOI), despite elevated interest expenses impacting overall performance [2] Financial Performance - Net rental revenues reached $144.5 million, surpassing the Zacks Consensus Estimate of $140.7 million, reflecting a 12.7% year-over-year increase [2] - Same-store cash NOI increased by 2.4% year over year to $149.2 million, excluding lease termination income [3] Leasing Activity - In the first quarter, SL Green signed 45 office leases totaling 0.6 million square feet in Manhattan, with an average rental rate of $83.75 per rentable square foot, up from $74.38 in the previous quarter [4] - The average lease term for signed leases was 9.8 years, with tenant concessions averaging 9.4 months of free rent and a tenant improvement allowance of $94.35 per rentable square foot [5] Occupancy and Interest Expenses - As of March 31, 2025, Manhattan's same-store office occupancy was 91.8%, down from 92.4% at the end of the previous quarter [6] - Interest expenses increased by 46.5% year over year to $45.7 million [6] Portfolio Activity - In April 2025, SL Green sold 85 Fifth Avenue, generating net proceeds of $3.2 million, and in the first quarter, sold six Giorgio Armani Residences for net proceeds of $93.3 million [7] - The company acquired 500 Park Avenue for $130 million in January 2025 [7] Liquidity Position - At the end of the first quarter, SL Green had cash and cash equivalents of $180.1 million, a decrease from $184.3 million as of December 31, 2024 [8] - The net carrying value of the company's debt and preferred equity portfolio was $318.2 million, reflecting a 4.8% increase from the last quarter [8]

Group 1 - SL Green reported $144.52 million in revenue for Q1 2025, a year-over-year increase of 12.7% and a surprise of +2.74% over the Zacks Consensus Estimate of $140.66 million [1] - The EPS for the same period was $1.40, compared to $0.20 a year ago, resulting in an EPS surprise of +10.24% against the consensus estimate of $1.27 [1] - The stock has returned -9.9% over the past month, while the Zacks S&P 500 composite has changed by -4.2%, with a current Zacks Rank of 3 (Hold) [3] Group 2 - Investment income was reported at $16.11 million, exceeding the average estimate of $8.44 million by four analysts, representing a year-over-year change of +117.7% [4] - Rental revenue, including escalation and reimbursement revenues, was $163.02 million, compared to the estimated $157.37 million by three analysts, reflecting a +15.2% change year-over-year [4] - Other income was reported at $22.20 million, surpassing the average estimate of $20.73 million by three analysts, with a year-over-year increase of +66% [4] - SUMMIT Operator revenue was $22.53 million, below the three-analyst average estimate of $26.63 million [4] - Net Earnings Per Share (Diluted) was -$0.30, compared to the average estimate of -$0.36 from five analysts [4]

Financial Performance - SL Green reported quarterly funds from operations (FFO) of $1.40 per share, exceeding the Zacks Consensus Estimate of $1.27 per share, but down from $3.07 per share a year ago, indicating a FFO surprise of 10.24% [1] - The company posted revenues of $144.52 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.74%, compared to $128.2 million in the same quarter last year [2] - Over the last four quarters, SL Green has surpassed consensus FFO estimates two times and topped consensus revenue estimates three times [2] Stock Performance and Outlook - SL Green shares have declined approximately 23.3% since the beginning of the year, while the S&P 500 has decreased by 8.3% [3] - The future performance of SL Green's stock will largely depend on management's commentary during the earnings call and the company's FFO outlook [3][4] - The current consensus FFO estimate for the upcoming quarter is $1.39 on revenues of $141.1 million, and for the current fiscal year, it is $5.42 on revenues of $565.3 million [7] Industry Context - The REIT and Equity Trust - Other industry, to which SL Green belongs, is currently ranked in the bottom 35% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in estimate revisions, which could impact SL Green's stock performance [5][6]

Financial Performance - The company reported a net loss attributable to common stockholders of $21.1 million, or $0.30 per share, for Q1 2025, compared to a net income of $13.1 million, or $0.20 per share, in Q1 2024 [3][5] - Funds from operations (FFO) for Q1 2025 were $106.5 million, or $1.40 per share, which included $25.0 million related to a commercial mortgage investment resolution and $3.1 million of negative non-cash fair value adjustments [4][5] - Same-store cash net operating income (NOI) increased by 2.4% for Q1 2025, excluding lease termination income, compared to the same period in 2024 [7][8] Leasing Activity - The company signed 45 office leases in Manhattan totaling 602,105 square feet in Q1 2025, with an average rent of $83.75 per rentable square foot and an average lease term of 9.8 years [8][9] - The mark-to-market on signed Manhattan office leases was 3.1% lower than previous fully escalated rents [8] - Manhattan same-store office occupancy was 91.8% as of March 31, 2025, with expectations to increase to 93.2% by December 31, 2025 [9] Investment Activity - The company closed on the sale of 85 Fifth Avenue for a gross asset valuation of $47.0 million, generating net proceeds of $3.2 million [10][12] - The acquisition of 500 Park Avenue for $130.0 million was financed with an $80.0 million mortgage, which was swapped to a fixed rate of 6.57% through February 2028 [11][12] - The company also acquired a 49.9% interest in 100 Park Avenue for $14.9 million and closed on the sale of six Giorgio Armani Residences at 760 Madison Avenue, generating net proceeds of $93.3 million [12] Debt and Preferred Equity - The carrying value of the company's debt and preferred equity portfolio was $537.6 million as of March 31, 2025, with a weighted average current yield of 7.5% [13][14] - The company invested $28.3 million in real estate debt and commercial mortgage-backed securities during Q1 2025 [14] ESG Highlights - The company was recognized as a GRESB Sector Leader in the Mixed-Use Residential Real Estate sector, earning a Green Star designation and a 5-star rating [16] - It ranked in the 95th percentile of a global peer set assessed by S&P CSA (DJSI) and was listed as a Sustainability Yearbook Member for the fourth consecutive year [17]

Core Viewpoint - Analysts project that SL Green (SLG) will report quarterly earnings of $1.27 per share, reflecting a year-over-year decline of 58.6%, while revenues are expected to reach $140.66 million, an increase of 9.7% from the same quarter last year [1] Earnings Projections - The consensus EPS estimate has been revised downward by 0.6% over the past 30 days, indicating a collective reassessment by analysts [2] - Changes in earnings projections are crucial for predicting investor reactions, with empirical studies showing a strong correlation between earnings estimate trends and short-term stock price movements [3] Revenue Estimates - Analysts estimate 'Revenues- Investment income' to be $8.44 million, representing a 14% increase from the previous year [5] - 'Revenues- Rental revenue including Escalation and reimbursement revenues' is projected to reach $157.37 million, indicating an 11.2% year-over-year change [5] - The consensus for 'Revenues- Other income' stands at $20.73 million, reflecting a significant year-over-year increase of 55% [5] Depreciation and Amortization - Analysts expect 'Depreciation and amortization' to be $52.26 million, compared to $48.58 million reported in the same quarter last year [6] Stock Performance - SL Green shares have returned -11.4% over the past month, underperforming compared to the Zacks S&P 500 composite's -6.1% change, with a Zacks Rank 3 (Hold) indicating expected performance in line with the overall market [7]

Core Insights - San Lorenzo Gold Corp. announced assay results from the second hole (SAL 02-25) on its Arco de Oro gold target, showing significant gold grades and extending the strike length of the vein system by approximately 250 meters to the southeast [1][2] - Preliminary results from the third hole (SAL 03-25) indicated anomalous gold values but were deemed unreliable due to wide spacing and intermittent results, prompting a detailed field investigation [2] - The company plans to initiate an IP survey to expand geophysical coverage at both Arco de Oro and Cerro Blanco, followed by the next phase of drilling [3] Assay Results - Hole SAL 02-25 reported an intercept of 4.4 meters at 6.52 g/t Au, with a notable inclusion of 1.2 meters at 9.54 g/t Au [1] - The vein system has been confirmed to extend over 1.3 kilometers of strike length and at depths up to 300 meters, remaining open in all directions [1] Future Plans - San Lorenzo will conduct an IP survey to enhance geophysical coverage and will follow up with further drilling [3] - The company is focused on advancing its flagship Salvadora property, which is believed to contain significant gold and copper enriched systems [5]

Company Overview - SL Green Realty Corp. is Manhattan's largest office landlord and operates as a fully integrated real estate investment trust (REIT) focused on acquiring, managing, and maximizing the value of Manhattan commercial properties [5] - As of December 31, 2024, SL Green held interests in 55 buildings totaling 31.8 million square feet, including ownership interests in 28.1 million square feet of Manhattan buildings and 2.8 million square feet securing debt and preferred equity investments [5] Leadership Appointment - Peggy Lamb has been appointed as an Independent Director to SL Green's Board of Directors, bringing over thirty years of experience in the real estate industry [1][2] - Ms. Lamb currently serves as Managing Director of Halstatt, LLC, where she is responsible for originating, underwriting, structuring, and managing real estate transactions [2] - Marc Holliday, Chairman and CEO of SL Green, expressed confidence in Ms. Lamb's ability to assist the company in formulating and executing growth strategies through various market cycles [3] Ms. Lamb's Background - Ms. Lamb has a notable background, having worked at Goldman Sachs in investment banking for fifteen years and serving on the boards of Starwood REIT and Starwood Credit [4] - She holds an M.B.A. from Harvard Business School and a B.S. from the University of Illinois, and is involved in real estate advisory boards for the University of Florida and Florida Gulf Coast University [4] Market Position - SL Green is recognized as the market leader in Manhattan's office sector, with a strong portfolio and a strategic approach that positions the company to capitalize on a resurgent New York City market [3]

Core Viewpoint - SL Green Realty Corp. will release its earnings for Q1 2025 on April 16, 2025, followed by a conference call on April 17, 2025, to discuss the financial results [1][2]. Company Overview - SL Green Realty Corp. is Manhattan's largest office landlord and operates as a fully integrated real estate investment trust (REIT) focused on acquiring, managing, and maximizing the value of Manhattan commercial properties [4]. - As of December 31, 2024, SL Green held interests in 55 buildings totaling 31.8 million square feet, which includes ownership interests in 28.1 million square feet of Manhattan buildings and 2.8 million square feet securing debt and preferred equity investments [4].