Here's Why You Should Retain SL Green Stock in Your Portfolio Now

SL Green SLG boasts a portfolio of high-quality and amenitized office properties in New York City to cater to the rising demand for premier office spaces. Its long-term leases with a diverse tenant base and focus on an opportunistic investment policy to enhance its portfolio quality are encouraging. However, the elevated supply of office properties in its markets and the geographic concentration of assets remain a concern.Analysts seem bullish on this office REIT carrying a Zacks Rank #2 (Buy), with the Zacks Consensus Estimate for its 2024 funds from operations (FFO) per share being raised marginally northward over the past week to $7.61.Shares of SLG have rallied 36.7%, outperforming the industry's upside of 19.9% over the past six months.Image Source: Zacks Investment Research What’s Aiding SLG?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 aims to maintain a diversified tenant base to hedge the risk associated with dependency on single-industry tenants. 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.Office space demand in the upcoming period is likely to be driven by de-densification to allow higher square footage per office worker and the need for high-quality, amenitized office properties. SL Green is well-positioned to benefit from the emerging trend, given its well-located properties and the ability to offer top-notch amenities at recently-developed office buildings.Last July, SLG announced that since the end of the first quarter of 2024, it had signed retail leases covering 66,014 square feet, achieving full retail occupancy at One Madison Avenue.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 the second quarter through July 17, 2024, SL Green had completed the sale of three properties, comprising 625 Madison Avenue, 719 Seventh Avenue and the Palisades Premier Conference Center, for a total of $691.4 million. Last July, the company also unveiled the sellout of the exclusive Giorgio Armani Residences on Manhattan's Upper East Side. What’s Hurting SLG?SL Green faces competition from developers, owners and operators of office properties and other commercial real estate. This restricts its ability to attract and retain tenants at relatively higher rents than its competitors. Amid higher leasing costs and an elevated supply of office properties, it will be challenging for the company to backfill tenant move-outs and vacancies in the near term.Moreover, the U.S. office real estate market continues to struggle from the aftereffects of the health crisis, with negative absorption and increasing vacancy levels. The lackluster environment can be attributed to the pandemic-led job cuts and hybrid working environment, which has diminished office space utilization. To lure tenants, the company offers rent concessions on its leased properties.In the second quarter, average tenant concessions for the company’s Manhattan portfolio were 7.0 months of free rent, with a tenant improvement allowance of $77.26 per rentable square foot. This excluded the leases signed at One Vanderbilt Avenue and One Madison Avenue. Other Stocks to ConsiderOther top-ranked stocks from the broader REIT sector are Crown Castle Inc. CCI and Iron Mountain IRM, each carrying a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The Zacks Consensus Estimate for Crown Castle’s current-year FFO per share has been raised marginally over the past three months to $6.97.The Zacks Consensus Estimate for Iron Mountain’s current-year FFO per share has moved northward marginally over the past two months to $4.49.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.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.7% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Iron Mountain Incorporated (IRM): Free Stock Analysis Report Crown Castle Inc. (CCI): Free Stock Analysis Report SL Green Realty Corporation (SLG): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks