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SL Green Realty Q1 FFO Declines, Yet Tops Consensus - Update

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Real estate investment trust SL Green Realty Corp. (SLG) on Monday reported a decline in funds from operations for the first quarter from last year. On a per share basis, FFO declined 28%, yet topped analysts' consensus estimate. Revenue for the quarter edged down 1.5%.

New York-based SL Green's funds from operations or FFO for the first quarter declined to $84.95 million or $1.07 per share from $88.12 million or $1.48 per share in the previous-year quarter.

On average, fourteen analysts polled by Thomson Reuters expected the company to report earnings of $1.05 per share for the quarter. Analysts' estimates typically exclude special items.

Net income attributable to common stockholders for the first quarter was $15.08 million or $0.19 per share, down from $32.77 million or $0.57 per share for the same period last year.

The year-sgo period's results include gains on sale of $0.27 per share.

GAAP net operating income for the latest quarter declined to $131.45 million from $132.75 million in the same period last year. However, same-store GAAP non operating income was $130.57 million, up 2.4% from $127.43 million the previous-year period. This includes 2.5% from the consolidated same-store properties and 2.2% from the unconsolidated joint venture same-store properties.

Revenues for the quarter declined 1.5% to $258.63 million from $262.44 million in the prior-year quarter. Analysts had a consensus revenue estimate for the quarter of $226.68 million.

Net rental revenue for the quarter rose to $198.59 million from $195.63 million a year-ago, while escalations & reimbursement revenues declined to $31.47 million from $33.63 million last year. Preferred equity and investment income for the quarter was $20.38 million, up from $16.90 million in the previous-year quarter. Other revenue declined to $8.20 million from $16.28 million in the prior-year period.

Total expenses for the quarter were $130.43 million, down from $179.81 million in the year-ago quarter, reflecting a decrease in loan loss and other investment reserves to $6 million from $62 million a year earlier.

During the first quarter, SL Green Realty signed 47 Manhattan office leases totaling 501,321 square feet, with average starting rents of $45.00 per rentable square foot. The company also signed 31 Suburban office leases totaling 214,931 square feet, with average starting rents of $28.57 per rentable square foot. The company ended the quarter with Manhattan occupancy rate of 94.0%, excluding 100 Church Street, which it foreclosed on in January 2010. Occupancy for the Suburban portfolio was 88.1% as at the end of the first quarter.

In April, SL Green Realty entered into an agreement to acquire the 303,515 square foot property located at 600 Lexington Avenue in Manhattan for $193.0 million. This transaction is expected to close during the second quarter of 2010. In connection with the acquisition, SL Green will assume $49.85 million of in-place financing.

The company's CEO Marc Holliday noted that recent improvements in New York City office fundamentals, combined with improvements in the credit markets, have resulted in the New York City real estate market beginning to open up after two years.

Among SL Green's peers, New York-based Brookefield Properties Corp. (BPO) is slated to report its financial results for the first quarter on May 6. Analysts expect the company to earn $0.29 per share for the quarter on revenues of $577.84 million.

SLG closed Monday's regular trading session at $64.33, down $0.19 or 0.29% on a volume of 0.90 million shares. In the past 52 weeks, the stock has been trading in a range of $16.76-$66.11.

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