“We’ve closed the books on another banner year for the company, in which we met most of our key objectives and positioned the company well for continued growth and outperformance in 2019.” So said SL Green Corp. CEO and director, Marc Holliday, on the firm’s Q4 earnings call. Once again, he said, SL Green led the way in New York City in all major areas of our business.
“On the investments front, we made attractive acquisitions of 460 West 34th Street and 2 Herald Square, in each case, acquiring these assets in unconventional and off-market transactions at pricing that should yield substantial profits to shareholders,” he said. “We also made a strategic investment in 245 Park Avenue, whereby we will receive an 11% preferred return while also enhancing yields through SL Green’s management and leasing of the asset, which we took over responsibility of at the beginning of this year. Additionally, we took possession of 2 high-quality retail assets through the debt and preferred equity program, one on Upper Madison Avenue, one in Soho, and we are comfortable with our basis in these assets.”
Taking advantage of the strong sales mortgage in 2018, where Manhattan investment sales volume topped out at $33 billion for the year, he explained that the REIT disposed of mature and non-core assets like 3 Columbus Circle, 635 Madison, 1745 Broadway and a development property in Brooklyn. And in the fourth quarter, he said, the company also sold its remaining interest in 131 Spring Street, another retail asset.
“Most of all, we focused on implementing an aggressive share buyback program that takes advantage of the unprecedented discount in our stock. To date, we have acquired 18.8 million shares and units of SL Green equity, with every intention of continuing this investment strategy in 2019, pursuant to the remaining $686 million of authorized buyback capacity. Without question, we continue to believe that the repurchasing of our shares at today’s heavily discounted pricing is the most attractive investment opportunity before us. With that said, we received some questions as to why we weren’t more acquisitive since our Investor Conference about 6 or 7 weeks ago, and that is simply a function of timing of receipt of capital proceeds from sales and dispositions that could be used to acquire additional shares in a leverage-neutral manner. To that end, we have substantial disposition goals for 2019 that will provide the fuel for additional share repurchases, and we covered the extent of those dispositions in December at the Investor Conference. To be more aggressive in our approach, we necessarily require that we meaningfully increase leverage, which is something that we have said in the past that we’re simply not in favor of. Our confidence in the underlying value of our shares is predicated on market conditions that continue to be quite favorable for the New York City economy.”
Moving to leasing market, he said that at 32.4 million square feet of leasing activity Manhattan-wide, 2018 was the most active leasing year in nearly two decades. “And the vast majority of this activity was in Midtown, which finished the year very strong in the fourth quarter and hit an all-time high of 23.7 million square feet leased for the year. So again, extraordinary numbers that show that tenants still in this market have very high desire and aptitude to lease space as jobs are growing and economic activity continues at pace.”
He added that “Notwithstanding these great efforts and our team’s extraordinary achievements, our stock price continues to be totally disconnected from the underlying value of the portfolio and the value of this company that year after year demonstrates an ability to outperform in the areas of investments, leasing and operations.”