What's Behind SL Green's Lower 2026 Outlook and Dividend Shift

Core Viewpoint - SL Green has reduced its 2026 funds from operations (FFO) per share guidance to a range of $4.4-$4.7, compared to the Zacks Consensus Estimate of $5.16 per share. The company is also shifting from monthly to quarterly dividend payouts to enhance liquidity and balance sheet flexibility [2][6][9]. Financial Guidance - The reduction in FFO guidance is attributed to several factors, including a 2.5% increase in operating expenses and a 4.3% rise in real estate taxes, which are expected to pressure margins and dampen same-store net operating income (NOI) and FFO growth for 2026 [3][9]. - Significant tenant vacates in 2026 at properties such as 1185 AOTA, 125 Park Ave, and others, along with potential asset sales, are anticipated to further lower NOI [4][9]. - An increase in floating rate debt will lead to higher interest expenses, while lower development activity will decrease capitalized interest expenses, negatively impacting NOI growth. Additionally, a rise in the average diluted share count from 76.4 million to 77.1 million will dilute earnings per share [5][9]. Dividend Strategy - The transition from monthly to quarterly dividends is a strategic move to preserve cash and simplify liquidity planning, reflecting a more conservative approach to capital allocation amid a $7 billion financing plan [6][7]. Market Performance - Over the past three months, SL Green's shares have declined by 28.2%, contrasting with a 1.8% growth in the broader industry [8].