The Real Deal New York

SL Green buys $250M of its own shares

REIT had resisted the urge to acquire supposedly bargain-priced stock
By Konrad Putzier | July 20, 2017 06:00PM

SL Green’s Andrew Mathias and rendering of One Vanderbilt (Credit: Visualhouse)

SL Green Realty recently made headlines with a blockbuster bid for One Worldwide Plaza, but another big investment rarely received attention. The real estate investment trust bought up around $250 million worth of its own shares in the second quarter and could end up spending $750 million more under a previously announced plan.

REITs have grumbled that their shares trade below the value of underlying assets for a while, but until recently SL Green resisted the urge to buy its own supposedly bargain-priced stock. What changed?

On an earnings call Thursday, SL Green’s president Andrew Mathias said the company wanted to wait and see how capital markets fare in 2017, and whether demand for commercial properties continues to outpace stock prices. “It became clear to us that there is just a ton of equity out there,” Mathias said, adding that buying the company’s own stock was a “glaringly obvious investment opportunity.”

New York REIT last year followed a similar logic, deciding to simply sell all its buildings in private markets and liquidate itself.

Last week Real Estate Alert reported that a partnership between SL Green and RXR Realty is the front-runner to buy New York REIT’s 1.8 million-square-foot Office Tower One Worldwide Plaza for $1.7 billion.

SL Green is also developing the $3.2 billion office tower One Vanderbilt. Head of leasing Steven Durels declined to say whether the firm is nearing any new lease deals at the tower. “Clearly we are having a lot of meetings,” he said, but added that the plan is still to officially start leasing in 2018.

Mathias acknowledged that the investment sales market had a lackluster first half of the year in part because the “refinancing market is creating a very attractive alternative for sellers.” But predicted that investment volume will increase in the second half of the year as delayed deals get inked.

Overall the company’s executives sounded bullish on the Manhattan office leasing market and slightly pessimistic on retail leasing (although they claimed their portfolio is doing fine). Mathias also suggested recent reports that Chinese capital controls could hurt investment may be overblown. “We continue to see Chinese investors actively looking at both equity and debt opportunities in the market,” he said.