By Ian Salisbury
Shares of Manhattan office powerhouse SL Green Realty look cheap -- as long as investors can live with risk to its 7.8% dividend yield.
It's been a rough year for the real estate investment trust, which owns interests in roughly 30 million square feet of New York office space. Shares have tumbled about 40% over the past 12 months, hurt by slower-than-expected property sales and a failed bid to build a coveted Times Square casino.
The most recent headache: New York Mayor Zohran Mamdani's threat to hike property taxes by nearly 10% if state officials refuse to increase taxes on corporations and the wealthy.
The selloff has pushed SL Green's 2026 price-to-funds-from-operations ratio below 9, down from more than 14 in late 2024. By contrast, the State Street Real Estate Select Sector SPDR, an ETF that tracks the sector, trades at about 18 times forward price to FFO. (Funds from operations are the real estate industry's equivalent to operating profits.)
For patient investors, SL Green's woes may be a buying opportunity. The company disappointed Wall Street analysts at its December investor day when it forecast 2026 funds from operations of $4.40 to $4.70 a share, down from the $5.72 reported for 2025. Still, analysts expect growth to turn positive again in 2027, with the average forecast calling for FFO of $4.80 a share.
A big reason that some analysts think SL Green has turned the corner: After years of struggling with higher interest rates and Covid-era work from home policies, the Manhattan office market is heating up.
In the fourth quarter, Manhattan office rents were flat quarter-over-quarter and up just 1% year over year, according CBRE. But space is filling up quickly. Year-end leasing activity amounted to just over 32 million square feet -- up more than 37% from 2024.
"Midtown NYC office has among the best fundamentals, attracting more private capital, while the public stocks languish," wrote Piper Sandler analyst Alexander Goldfarb in a note last month. "Demand only seems to be accelerating."
Goldfarb rates SL Green Overweight, with a price target of $60, suggesting an upside of about 50% on today's prices of around $40. While that may seem aggressive, the average Wall Street price target sits near $52, implying upside of about 30%.
One facet of SL Green that looks shakier is its dividend. The stock currently yields 7.8%, more than twice the 3.4% yield of the Real Estate Select Sector SPDR. But there are red flags. In December, SL Green switched from monthly to quarterly payouts, a move that gives management more flexibility in managing cash -- perhaps prudent, but rarely comforting for dividend-focused investors.
Last month, on the company's latest earnings call, an analyst asked CEO Marc Holliday to address the issue. His response was noncommittal.
"I think what you're hearing is we're generally optimistic as it relates to the business plan," he said. "Where we peg the dividend at a moment in time is something the board will take up in, I guess...in March. And there's not a lot more I can add to that."
Write to Ian Salisbury at ian.salisbury@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
February 18, 2026 15:36 ET (20:36 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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