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SL Green Decreases Dividend as Office Market Woes Continue

It has been a brutal year for REITs, and office REITs may be getting beat up the worst in this softening market. For evidence of this, we can look no further than the struggles of SL Green, New York City’s largest owner of office real estate. The company recently announced a 12.9 percent decrease in its dividend to meet its projections for 2023 funds available for distribution.

Investors thought there might be risk of this happening, so SL Green’s move doesn’t come as that much of a surprise. But the office market’s sluggish recovery has taken its toll. SL Green expects 2023 funds from operations to be lower than in 2022, mainly because of rising interest rates. SL Green CEO Marc Holliday also acknowledged at the firm’s recent investor day that the “hybrid work model has persisted far longer than I expected it to.”

SL Green still has a lot going for it, including its NYC casino bid, but they, like many other office REITs, could be in for an even tougher 2023. About a week ago, SL Green was trading at about half its book value, and Scotiabank downgraded its opinion of it from “sector perform” to “sector underperform.” There are some gale-force headwinds right now for the office and those facing them will have to hunker down and find a way to ride it out as best as possible.

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