SL Green beats Q2 estimates as NYC office demand lifts revenue 16.5%

SL Green Realty Corp. posted funds from operations of $1.43 a share for the second quarter, beating the $1.19 consensus by 20.2%, as Manhattan's largest office landlord benefited from surging demand for premium workspace in New York City.

"The leasing environment in Manhattan has never been stronger for high-quality, transit-oriented office space," said Marc Holliday, chairman and chief executive officer at SL Green, in a statement. "We signed 53 office leases totaling 445,161 square feet in the quarter, with replacement rents 18% above prior levels."

Revenue climbed 16.5% to $171.8 million, topping the $171.5 million estimate, driven by higher rental income and fee income that rose to $19.4 million from $12.2 million a year earlier. Same-store cash net operating income excluding lease termination income increased 4.3% in Manhattan. The company's occupancy rate reached 94.7% as of June 30, up from 93% at the end of 2025 and 94.4% at the end of the first quarter, with management targeting 95% by year-end.

The results underscore a broader recovery in New York's office market, where companies are consolidating into premium buildings near transit hubs to attract workers back to the office. SL Green signed a 10-year lease with an unnamed leading AI tenant for 98,420 square feet at 11 Madison Avenue during the quarter, and has now signed 1.48 million square feet of office leases year to date with a pipeline exceeding 900,000 square feet. The company raised its 2026 FFO guidance by $1.20 at the midpoint to $5.60-$5.90 a share, citing higher net operating income, incremental fees, and additional income from One Vanderbilt Avenue. Net income guidance was also raised to $0.20-$0.50 a share from a prior range of negative $0.27 to $0.03.

Investment Activity and Capital Allocation

SL Green generated $23.7 million in net cash from the sale of the residential and retail components of 7 Dey Street for $222.6 million in May, while retaining the 21,000-square-foot office condominium. The company also sold a 49% joint venture interest in the development at 346 Madison Avenue to Japan's Mori Building Co. at a $175 million valuation, receiving $94.9 million in net proceeds. A contract to sell 10 East 53rd Street for $312.2 million is expected to close in the third quarter, with net proceeds of roughly $100 million earmarked for corporate debt repayment. During the quarter, SL Green repurchased $14.1 million of common stock at an average price of $49.67 a share.

The company's SLG Opportunistic Debt Fund deployed $94.7 million in the second quarter, bringing total deployment to $590.5 million. SL Green reported a net loss attributable to common stockholders of $26.5 million, or $0.38 a share, compared with a loss of $11.1 million a year earlier, reflecting higher depreciation and interest expenses tied to its expanded portfolio. The company held interests in 54 buildings totaling 30.6 million square feet as of June 30.

The Manhattan office market's recovery has been uneven, with older buildings struggling while newer, amenity-rich properties near transit hubs command premium rents. SL Green's portfolio, concentrated in Midtown and Midtown South, has benefited from this flight to quality. The company's average rent on new Manhattan office leases reached $93.17 per square foot in the second quarter, with replacement leases achieving $98.42 — an 18% mark-to-market increase over prior rents. With 11 Madison Avenue and One Madison Avenue both fully leased to AI and technology tenants including IBM, Pinterest, and Palo Alto Networks, SL Green is positioned to capture further demand from the technology sector's expansion in New York.

This article is for informational purposes only and does not constitute investment advice.