SLG

Public companies mentioned herein: SL Green (SLG).

Highlights

REITs have continued to struggle since the election, underperforming most sectors. The presenter concedes that there are numerous legitimate concerns surrounding various REIT sectors, but the one that appears most overblown is the so-called high barrier office, which includes the high-end office space markets in NYC, DC, Boston, Los Angeles and San Francisco. While there continues to be modest supply growth in each of these markets given ongoing construction activity, pricing remains attractively high in view of sovereigns and other international buyers continuing to favor those markets and therefore overpaying for them. In this context, the presenter regards SL Green as perhaps the most compelling office REIT opportunity on the long side, with the potential to trade to the $140-$150 level over the next 12-18 months. He sees little risk to the company’s FFO estimates over the next couple of years, with just 3% of SLG’s rent base rolling in 2017 and 2018. Further, he anticipates that soon-to-be-released 2017 guidance will likely be stronger than expected.