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Stifel Turns Bullish On New York's Largest Owner Of Commercial Real Estate

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January 26, 2018 2:17 pm
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SL Green Realty Corp (NYSE:SLG), New York's largest owner of commercial real estate properties including One Vanderbilt Avenue and 100 Park Avenue, boasts a valuation that's "simply too attractive to ignore."

The Analyst

Stifel's John Guinee upgraded SL Green Realty's stock from Hold to Buy with a price target increased from $105 to $111.

The Thesis

The case for buying shares of SL Green Realty is based more on just controlling the "most significant single building office development in this country," One Vanderbilt, Guinee said in a note. Simply put, multiple valuation metrics are very attractive, including a TEV (total enterprise value) of $720 per square foot for the Manhattan office assets that's a 56 percent discount to the analyst's estimate of $1,621 and a "healthy" discount to net asset value using sovereign wealth fund-driven low 4 percent cap rates.

Moreover, SL Green has grown its net asset value by 15 percent over the past year at a static cap rate of 4.5 percent due to a combination of accretive asset sales and share buybacks, Guinee said. Coupled with a "deep and talented" management team, the analyst is now ready to turn bullish on the stock.

Price Action

Shares of SL Green Realty were trading higher by 0.8 percent at $97.30 Friday.

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