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    SL GREEN REALTY (SLG)

    Q1 2025 Earnings Summary

    Reported on Apr 17, 2025 (After Market Close)
    Pre-Earnings Price$52.39Last close (Apr 17, 2025)
    Post-Earnings Price$52.39Last close (Apr 17, 2025)
    Price Change
    $0.00(0.00%)
    • Robust Debt Investment Platform: Executives underscored a strong debt business with nearly $200 million in closed DPE investments and an active pipeline exceeding $1.2 billion in new debt investments, highlighting their long-established expertise and the potential for equity-like returns.
    • Healthy Leasing Pipeline and Occupancy Targets: Leadership emphasized a current pipeline of over 1.1 million square feet and expressed confidence in achieving the 2 million square feet leasing target by year-end, with occupancy levels on track despite market uncertainties.
    • Resilient Market Fundamentals in New York: Executives pointed to favorable conditions in the Manhattan market, including active CMBS deal-making, stable investor and foreign partner demand, and ongoing leasing momentum, even amid macroeconomic challenges.
    • Macroeconomic and tariff uncertainty risk: Executives acknowledged challenges in forecasting market disruptions due to tariffs and global uncertainty, which could eventually dampen leasing momentum and tenant demand.
    • Worsening asset valuation signals: At 500 Park, the yield increased from a 6.8% acquisition reference to 7.2% today, suggesting potential pricing pressure and a decline in mark-to-market asset values.
    • Execution risk amid complex development and financing activities: Long-term projects such as new high-quality developments and Summit Paris, together with turbulent debt financing and CMBS market conditions, create uncertainties around timely execution and sustained market strength.
    MetricYoY ChangeReason

    Total Revenue

    Increased from $187.88M in Q1 2024 to $239.85M in Q1 2025 (+27.7%)

    Total Revenue rose significantly as improved performance in other segments offset prior lower revenue. The jump was driven mainly by stronger Real Estate and Debt & Preferred Equity results compared to the previous period.

    Real Estate Revenue

    Increased from $154.88M in Q1 2024 to $185.22M in Q1 2025 (+19.6%)

    Real Estate revenue improved due to higher rental revenues and escalation/reimbursement income – with rental revenue likely rising from around $128.2M to $144.5M and escalation figures from $13.3M to $18.5M – along with increased contributions from joint venture operations compared to Q1 2024.

    SUMMIT Revenue

    Declined from $25.60M in Q1 2024 to $22.53M in Q1 2025 (–12%)

    SUMMIT revenue decreased despite previous improvements attributed to increased attendance in FY 2024, suggesting a reversal possibly due to lower attendance or other market dynamics in Q1 2025 compared to the prior period.

    Debt and Preferred Equity Revenue

    Increased from $7.40M in Q1 2024 to $32.10M in Q1 2025 (+333%)

    Debt and Preferred Equity revenue surged markedly, likely reflecting a rebound in investment activity and improved yields (with the weighted average yield rising from 7.30% to 7.50%), along with portfolio adjustments that drove the fourfold increase over Q1 2024.

    Net Income

    Swing from $18.39M profit in Q1 2024 to a $(21.55)M loss in Q1 2025

    Net income deteriorated sharply driven by increased depreciation and amortization expenses (rising from $50.1M to $66.2M), a dramatic decline in equity income from joint ventures (dropping from $111.2M to –$1.2M), and higher interest expense, despite the revenue growth seen in other areas.

    Operating Expenses

    Increased from $43.61M in Q1 2024 to $56.06M in Q1 2025 (+28.5%)

    Operating expenses rose significantly, reflecting an increased cost structure and possibly higher spending to support the growth in revenue segments, a shift from Q1 2024’s lower expense base.

    Interest Expense, Net of Interest Income

    Increased from $31.17M in Q1 2024 to $45.68M in Q1 2025 (+46.6%)

    Net interest expense was higher due to increased cost of borrowing and changes in the interest income mix; Q1 2025 recorded higher expense components than the prior period, contributing to a 46.6% rise compared to Q1 2024.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Funds Available for Distribution (FAD)

    FY 2025

    “The guidance considers CapEx and decorative CapEx, with expectations that recurring CapEx will decrease as occupancy increases to 93% this year and 94–95% thereafter.”

    “Economic occupancy is expected to increase every quarter, moving from 88–89% at the end of FY 2024 to over 92% by the end of FY 2025. FAD is expected to be roughly in line with the December guidance.”

    no change

    Funds from Operations (FFO)

    FY 2025

    no prior guidance

    “The company is comfortable with the current guidance range for FY 2025 FFO, with potential upward revisions based on investment opportunities.”

    no prior guidance

    Leasing Objectives

    FY 2025

    no prior guidance

    “Aim to achieve 2 million square feet of leasing and 93.2% year-end leased occupancy for FY 2025.”

    no prior guidance

    Debt Investments

    FY 2025

    no prior guidance

    “Nearly $200 million in DPE investments closed in the past nine months, with an actively negotiated pipeline of over $1.2 billion of new debt investments.”

    no prior guidance

    Disposition Targets

    FY 2025

    no prior guidance

    “A disposition target of $1 billion for FY 2025, with confidence based on past performance and current negotiations.”

    no prior guidance

    Occupancy

    FY 2025

    “Over 93% leased occupancy in the coming year, with a goal to reach close to 95% occupancy.”

    no current guidance

    no current guidance

    Capital Expenditures (CapEx)

    FY 2025

    “Guided to $88 million in specs this year and $99 million committed; base building and other smaller CapEx expected to remain high until closer to 95% occupancy.”

    no current guidance

    no current guidance

    Dividend Coverage

    FY 2025

    “The dividend is covered this year, and it is evaluated annually based on taxable income and coverage, though FAD is not considered the right metric for dividend coverage.”

    no current guidance

    no current guidance

    Economic Occupancy

    FY 2025

    “Economic occupancy is expected to trail leased occupancy as space is built and leases commence, but it will trend upward throughout 2025 and beyond.”

    no current guidance

    no current guidance

    Gains

    FY 2025

    “Another $20 million of gains is included in the guidance for 2025, with potential opportunities to stretch that goal to $50 million.”

    no current guidance

    no current guidance

    TopicPrevious MentionsCurrent PeriodTrend

    Leasing Momentum

    In Q4 2024, Q3 2024, and Q2 2024, leasing momentum was highlighted via strong leasing volumes (e.g. 3.6 million sq ft in Q4, 2.8 million sq ft in Q3, and significant pipeline development in Q2) with robust occupancy improvements and diverse industry pipelines.

    Q1 2025 reaffirmed targets with early achievements (over 100,000 sq ft YTD) and confidence in reaching 2 million sq ft by year-end despite a slight Q1 dip in occupancy, while maintaining a broad leasing pipeline.

    Consistently strong sentiment. The topic has remained a cornerstone with broad-based pipeline details; Q1 continues to emphasize momentum and ambitious leasing targets despite minor short‐term occupancy dips.

    Robust Debt Investment

    The prior periods saw detailed discussions on closing opportunistic funds, a focus on DPE investments, and strategic debt-related activities; Q4 emphasized deployment from a debt fund and Q3 and Q2 underscored structured debt and preferred equity deals ( ).

    Q1 2025 reported nearly $200 million of DPE investments over nine months and an active pipeline exceeding $1.2 billion, showing ongoing strength and commitment on the debt front.

    Steady and growing. The commitment to a robust debt platform is consistent; the pipeline has grown and Q1 highlights strong confidence and larger deal flow.

    Market Fundamentals and Office Tightness

    Q4 detailed extremely low vacancies (notably in Park Avenue) and strong fundamentals such as job creation and office-to-residential conversions, while Q3 and Q2 emphasized recovering submarkets and stable leasing pipelines.

    Q1 2025 added the element of office-to-residential conversions as a factor tightening inventory, with robust submarket leasing activity and a stable pipeline, alongside confidence that NYC fundamentals support long‐term demand.

    Sustained optimism. While core fundamentals remain positive, Q1 integrates the conversion dynamic as a new twist that further tightens supply, reinforcing the bullish outlook on market fundamentals.

    Macroeconomic and Tariff Uncertainty

    Earlier periods (Q4, Q3, Q2) did not provide commentary on this topic.

    In Q1 2025, executives stated that tariff and macro uncertainty had minimal effect on long-term development projects and tenant decision-making; they noted steady foreign investor interest and stable leasing pipeline dynamics.

    New emergence. This topic is newly addressed in Q1. Despite heightened global uncertainties, leadership remains confident and downplays short-term impacts on strategy or tenant sentiment.

    Execution Risks in Development/Financing

    Q2 provided detailed assessments on risks tied to residential conversions and financing constraints; Q3 and Q4 mentioned execution capabilities in development and financing activities under challenging market conditions ( ).

    Q1 2025 continued to underscore long development cycles (5–7 years) and strong balance sheet insulation with hedged debt, highlighting the company’s operational confidence and experience in managing risks.

    Stable and well-managed. The recurring narrative is one of seasoned execution; risk factors are acknowledged but mitigated by strategic planning and financial insulation, maintaining consistent confidence over time.

    Asset Valuation & Special Servicing Exposure

    Q2 featured detailed discussions on potential valuation premiums and a robust pipeline in special servicing (with over $3 billion in active assignments and an additional $6 billion in opportunities), while Q3 and Q4 similarly addressed these challenges.

    Q1 2025 did not specifically address asset valuation challenges or special servicing exposure.

    Less emphasis in current period. Unlike prior periods, Q1 leaves this topic unaddressed, suggesting it may be lower in immediate priority or already resolved in prior communications.

    Investor Activity & Recapitalizations

    Q2, Q3, and Q4 highlighted strong investor interest with active discussions on recapitalizations and asset sales dependency, noting significant transactions and strategic partnerships, with examples like One Vanderbilt and discussions of a $1 billion disposal target ( ).

    Q1 2025 maintained focus on robust investor activity with continued interest from both domestic and foreign institutions, reiterated recapitalization plans, and clear asset sales targets (e.g. $1 billion target) supported by a well-insulated balance sheet.

    Consistently positive. Investor confidence and strategic recapitalization remain key themes, with Q1 reinforcing these messages and maintaining a positive sentiment toward capital markets.

    Mortgage Servicing Business Expansion

    Q2, Q3, and Q4 provided robust detail on expanding the mortgage servicing business, with mentions of active special servicing assignments, scalable fee-based revenue models, and staffing/capacity enhancements (e.g. $5 billion in active assignments in Q3).

    Q1 2025 touched on the growth of debt-related businesses overall, including allusions to special servicing via a strong debt platform, but with less granular detail compared to prior periods.

    Continued growth. While previous calls provided more detail, Q1 reaffirms overall expansion of the servicing business, integrated into a broader debt strategy, maintaining a positive growth outlook.

    Foreign Investment Demand & JV Opportunities

    Q2, Q3, and Q4 discussed strong foreign investor interest and active joint venture formations—with notable transactions and targeted asset sales strategies—with emphasis on flexible, asset-light approaches and strategic partnerships.

    Q1 2025 reiterated that foreign investor demand remains robust (helped by a more favorable U.S. dollar) and that the company is actively pursuing various JV opportunities, expecting several deals to close in H2 2025.

    Consistent. The momentum from earlier periods persists in Q1. Interest from international investors and strategic joint venture opportunities continue to underpin SL Green’s capital strategies.

    Debt Liquidity Challenges in Capital Markets

    Q2 highlighted the challenge of limited debt liquidity affecting transactions. Q3 noted a strong rebound in liquidity with a surge in SASB deal activity, while Q4 discussed active deployment of debt funds and favorable refinancing outcomes despite liquidity constraints.

    Q1 2025 described credit market turbulence but emphasized that NYC’s status as a quality market, along with strong CMBS activity and a significant debt platform, is mitigating liquidity challenges; the company maintains a positive outlook.

    Improving but cautious. Although liquidity challenges persist, Q1 reflects a market recovery in debt markets, with improved transaction volumes and investor demand, easing earlier liquidity constraints.

    Delayed Revenue Recognition from Leases

    Q3 2024 provided explicit details on the typical delay (6–12 months) between lease-up and revenue recognition, reflecting the inherent timing gap between leasing performance and financial impacts.

    Q1 2025 did not mention delayed revenue recognition from leasing arrangements.

    Reduced focus. While the subject was detailed in Q3, it does not surface in Q1, possibly indicating that its impact is now being absorbed as part of the ongoing revenue trajectory or is less of an immediate focus.

    Dividend & Cash Flow Sustainability Concerns

    Q4 2024 had a focused discussion ensuring that dividend coverage was adequately maintained (using metrics beyond FAD) and reinforcing cash flow stability; earlier periods did not feature significant commentary on this topic.

    Q1 2025 did not mention dividend or cash flow sustainability concerns.

    Lower salience. With detailed assurances provided in Q4 and no further mention in Q1, this topic appears to be well-managed and not a growing concern at present.

    1. Disposition Targets
      Q: What about the $1B disposition targets?
      A: Management confirmed the plan remains on track, having delivered $9B in gross sales at a 4.3% blended cap rate and $1,400/ft, underscoring strong liquidity and market resilience.

    2. Debt Market Trends
      Q: What’s the update on NYC debt markets?
      A: They noted a rebound in New York’s CMBS arena with over $6.9B closed year-to-date, reflecting robust buyer interest despite macro challenges.

    3. Leasing & Occupancy
      Q: Are the 2M SF leasing and occupancy targets intact?
      A: Management is confident, having already leased over 100K SF in Q1 and targeting year-end occupancy surpassing 92% with a 2M SF leasing milestone.

    4. Asset Yield Update
      Q: What’s the update on 500 Park’s yield?
      A: With a new lease at $10/ft above previous expectations and a $20M+ upgrade program, yields improved from 6.8% to 7.2%.

    5. FFO Guidance & Downside
      Q: How are FFO guidance and downside risks managed?
      A: They remain well-hedged and comfortable, with a strong balance sheet and opportunities that could drive upward revisions, cushioning against economic headwinds.

    6. Office-to-Resi Conversion
      Q: What’s the progress on office-to-resi conversions?
      A: Several viable conversion projects are underway, especially downtown, with a potential market shift of over 25M SF off the office inventory.

    7. Development Pipeline
      Q: Are new Midtown development sites a priority?
      A: Long-term plans are robust, with development projects seen as 5–7 year journeys and high-quality sites remaining scarce in core Midtown.

    8. Leasing Pipeline Stability
      Q: Is leasing pipeline activity showing any slowdown?
      A: Despite some market volatility, the pipeline remains steady, with tenant discussions and leasing activity continuing at a consistent pace.

    9. Tenant Mix & TAMI Focus
      Q: What’s driving growth in the TAMI tenant pipeline?
      A: There is a notable 0.25M SF of nonfinancial, relocation-driven tenants—many tied to growth sectors such as AI—bolstering the pipeline.

    10. FAD Guidance Outlook
      Q: How is FAD expected to ramp up?
      A: Improved economic and physical occupancy trends are expected each quarter, aligning with full-year targets as build-out costs taper off.

    11. Capital Partners & Foreign Demand
      Q: Are foreign investors still active in funds and JVs?
      A: Yes, institutional investors both domestic and international remain engaged, aided by a weaker U.S. dollar bolstering their interest.

    12. Prebuilds Strategy
      Q: How effective is the prebuild strategy for leasing?
      A: Custom-built prebuilds continue to be a competitive advantage, providing clarity and accelerating lease decisions for smaller spaces.

    13. Summit Visitor Trends
      Q: What are the trends for Summit attendance?
      A: The attraction enjoys strong repeat visits with about 2/3 tourism participation and a balanced mix of domestic and foreign visitors, ensuring sustained demand.

    14. Summit Paris Timeline
      Q: What is the expected timeline for Summit Paris?
      A: The project is on track with possession expected in Q1 2026 and a public opening slated by the end of Q1 2027.

    15. Fee Rent & Concessions
      Q: How are fee rents and TI concessions trending?
      A: Concessions have been stable overall, with expectations for modest tightening in strong submarkets like Park Avenue and Sixth Avenue as face rents rise.

    16. Casino License Progress
      Q: What is the progress on the casino license?
      A: The process is advancing rapidly, with environmental reviews underway and a target for license submission by June 27, followed by local approval in September and a year-end award.

    17. Refi Market for 11 Madison
      Q: Any comparable deals for the 11 Madison refinance?
      A: Management is actively negotiating this deal, though further details will be provided in future updates as conditions solidify.

    Research analysts covering SL GREEN REALTY.