SL Green expands share buybacks by $500M
REIT reports uptick in leasing activities in the fourth quarter
SL Green Realty’s board has authorized another $500 million in share buybacks, bringing the real estate investment trust’s repurchase program to $3.5 billion.
For the past three years, Manhattan’s biggest commercial landlord has been aggressively buying back its own stock, while shedding properties.
Most recently, the company reached an agreement to sell its Amazon-anchored building at 410 10th Avenue to the 601W Companies for $952.5 million, the most expensive office sale since the start of the pandemic. The buyer will assume a $600 million construction loan on the property.
Through the buybacks, SL Green has reduced its number of outstanding shares by about 25 percent since 2017. The company says its rationale is that the stock is undervalued.
“We believe the stock price continues to significantly lag behind the real financial value of the platform,” said Marc Holliday, SL Green’s chairman and CEO, in a statement. “So we intend to continue to invest in a strategic share repurchase program with the proceeds from asset sales as we believe strongly that using incremental capital to buy our stock provides our shareholders the highest return on investment.”
Critics of stock buybacks argue that they are used to temporarily boost the stock price and earnings per share — which can trigger huge compensation for executives — by reducing the number of shares.
SL Green declined to comment on whether its executives have any such incentives.
The share prices of office real estate investment trusts, including SL Green, plunged at the onset of the health crisis, and leasing activities are down sharply from their pre-pandemic level.
But SL Green said the market regained some energy in the fourth quarter. For example, Heidrick & Struggles International, an executive search firm, has signed a new 12-year lease for 36,000 square feet on the 25th floor at One Vanderbilt, SL Green’s newly opened Midtown East skyscraper. RSC Insurance Brokerage has signed a new 16-year lease for 24,500 square feet on the 15th floor at the REIT’s 750 Third Avenue, a few blocks northeast of there.
Travelers Indemnity Company also signed a five-year lease renewal for its 133,500-square-foot office at 485 Lexington Avenue, another SL Green property.