- SL Green tests New York's dying commercial real estate market by selling 410 Tenth Avenue for $ 1.1 billion.
- The building is anchored by Amazon, a high-profile tenant who could make the property more attractive to investors who are afraid of an unsafe office market.
- SL Green has been eager to raise capital and buy back its shares that have fallen amid the corona virus pandemic.
- You can find more stories on the Business Insider homepage.
SL Green is testing the shaky market for large commercial real estate sales in an aggressive urge by the big New York City landlord to continue to raise cash as its stock price was hit by the corona virus crisis.
The $ 3.6 billion owner, whose market cap has dropped amid the pandemic like other REITs and public real estate companies, is offering potential buyers Hudson Yards' 410 Tenth Avenue office property for around $ 1.1 billion, two people with direct Knowledge of the sale said Business Insider.
Regardless, SL commissioned Green Cushman & Wakefield to market and sell a approximately $ 62 million mortgage loan for the One Court Square office tower in Long Island City. This emerges from marketing materials that were viewed by Business Insider.
SL Green did not immediately respond to a request for comment.
Read More: IBM is looking for a huge space in Manhattan and shows that concerns about the death of the city office may be exaggerated.
The deals are the latest steps SL Green has taken to raise money to buy back shares and to financially stand up to the pandemic that has weakened leasing demand and tarnished the future benefits of the job as companies are long-term from home working out.
In a recent call to profit to discuss second-quarter results, SL Green executives said they had raised $ 1 billion and started buying their shares again at what they thought was a discount.
SL Green shares were trading at $ 46.94 on Thursday, down more than 50% from a 52-week high of $ 96.39. John Kim, an analyst at BMO Capital Markets, said Wall Street's consensus rating for the company's nearly 50 million square meters of space portfolio was about $ 100 per share.
"They are going full throttle with this buyback program and are taking advantage of the gap between the value of property and trading the stock," said Kim.
Read more: WeWork supports large brokerage firms to fill the space devoured in NYC and Los Angeles. This is a central linchpin for the coworking giant as leasing demand is slowing.
SL Green announced in its recent earnings that it bought 6.2 million of its shares for almost $ 400 million in 2020. The company has announced it will spend nearly $ 2.6 billion out of a total of $ 3 billion it previously spent on the share buyback.
The company reported earnings of 74 cents a share in the second quarter, a dramatic decrease of $ 1.94 in the same period last year.
Selling 410 Tenth Avenue for a 10-figure sum would bring SL Green a big win and improve the company's image and performance.
"If they can get good prices, they can immediately show the market how much value they have created," said Kim. "They want to show that they create value and that the public markets discount the stock too much."
SL Green acquired a majority stake in 410 Tenth Avenue last year, previously located at 460 West 34th Street. The 640,000-square-foot building was valued at approximately $ 440 million. after a report back then. Since then, SL Green has leased more than half of the building space to Amazon, a highly accredited tenant who is likely to increase interest in the property.
SL Green offers the office building and mortgage loan at a time when both the city and country markets were dying for commercial property sales.
Few large office properties have traded hands as investors remain cautious about future profitability and demand for office space.
On Monday, Google announced that 200,000 employees could work from home by next summer. If companies postpone the re-population of the workplace, this could reduce demand for office space in the short term and lead to a decrease in rents and occupancy, which undermines the core of SL Green's business.
SL Green was one of the few landlords to do business with the tumult and sold a 49.5% stake in One Madison Avenue, a building in need of renovation, in May. The company has also sold loans from its debt business.
The company's ambitious share buyback plan tarnishes the company's future, concentrates its shares in fewer hands, and may make it easier to privatize or liquidate its assets.
"I don't currently know that there is an explicit goal of an M&A deal, but something will happen at some point," said Steve Sakwa, REIT analyst at Evercore ISI. "If you were to do this kind of repurchase in a natural way, you would eventually sell all your assets and buy back more and more stocks until everyone got their money back."
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