Acquisitions for long-term growth
SL Green Realty (SLG) acquires properties mainly for long-term appreciation and earnings growth. The company also acquires non-core properties for short-term gains by creating significant value through repositioning those assets. Over the last few years, the company has expanded its acquisition activities into selected high-value retail locations in Manhattan and multifamily properties. The company disposes of properties that don’t meet its long-term earnings and cash flow objectives.
Recent acquisitions and dispositions
In 2014, SL Green Realty acquired five retail properties, two office properties, and four fee interest properties. The total investment incurred on these transactions was $2.1 billion. The company disposed of two properties in 2014, and it expects to acquire and dispose of properties worth $400 million and $600 million, respectively, in fiscal 2015.
Recent acquisitions and dispositions are as follows:
- Acquired 11 Madison Avenue, a premier Midtown South building, for $2.3 billion
- Acquired 110 Greene Street, an iconic mixed‐use property, for $255 million
- Acquired five prime retail properties in downtown Manhattan for $175 million
- Disposed of properties for $643 million
The company’s focus on property acquisitions and dispositions bodes well for its healthy growth. The company’s average rental income has improved significantly over the past several years mainly due to acquisitions of many high-quality properties and dispositions of older assets that generated lower returns.
Other major office REITs such as Alexandria Real Estate Equities (ARE), Kilroy Realty (KRC), and Boston Properties (BXP) are also active in property acquisitions and dispositions. The SPDR Dow Jones Global Real Estate ETF (RWO) invests ~1.2% of its portfolio in SL Green Realty. Continue to the next part of this series for a discussion on SL Green’s strategy.