UPDATE: Stifel Downgrades SL Green Realty (SLG) to Hold
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(Updated - October 24, 2016 9:52 AM EDT)
Stifel downgraded SL Green Realty (NYSE: SLG) from Buy to Hold with a price target of $95 (from $125). Analyst John W. Guinee sees near term headwinds.
"While we have great respect for management and think SL Green has the broadest investment platform of all the office REITs we cover, we are concerned that the near term headwinds outweigh the medium term positive attributes. Hence, we are downgrading to Hold from Buy," said the analyst.
Guinee said positives were. "1) an opportunity fund investment mentality, 2) balanced with a conservative leasing and operating platform, 3) a reasonably levered balance sheet by some Debt/TEV metrics, but maybe not by Debt/EBITDA metrics, 4) a healthy discount to Net Asset Value using sovereign wealth fund driven low 4% cap rates, 5) a very attractive TEV of $771/SF for the Manhattan assets and 5) per our recently created Lease Economics Analysis, excellent (but, inconclusive) lease economics at the sub $80/SF price point."
Discussing negatives, the analyst said, "1) our 2017 FFO/FAD estimates of $6.00/$3.95/sh represent 17.3x/26.2x multiples, and a significant decline from 2016 NAREIT-defined/Core FFO guidance, 2) NAV discounts appear less important when the 'mark' is a sub 5% cap rate, 3) while we think the One Vanderbilt development will prove to create significant value and are very supportive of a 'no JV' strategy, there will likely be headwinds until 50% leased, 4) top down Manhattan office market statistics are decelerating, 5) the complexity is testing even our elevated level of tolerance."
Shares of SL Green Realty closed at $103.61 yesterday.
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