SL Green took a blow this quarter in the casino race, but all hope is not lost, Chairman and CEO Marc Holliday said on the company’s earnings call Thursday.
The REIT was the first one voted out of the competition for a downstate casino license by its community board. SL Green and partners Caesars Entertainment and Jay Z’s Roc Nation proposed building a $5.4B development in the middle of Times Square at 1515 Broadway.
In third-quarter filings, SL Green attributes as much as $13.1M in losses to its pursuit of a gaming license, a process that has taken years.
Courtesy of SL Green
A rendering of 1515 Broadway, SL Green’s original casino pitch
But when asked on the call Thursday if the project is “completely dead,” Holliday said the firm may still have a chance.
“This is still a process playing out,” he said.
That renewed faith follows MGM Resorts’ stunning decision to drop out of the battle for a license this week. Its Yonkers racino was one of four bids to get community approval, but the gaming company claimed that changes in government guidance no longer made the project viable.
That leaves three casinos in the running for three licenses but no guarantee that they will receive them. The gaming board, appointed by Gov. Kathy Hochul, is expected to make its final decisions by the end of the year.
“The whole process and the outcome is still unknown,” Holliday said. “How many bidders will there be? How many licenses will be awarded? And, whether, if any are held back, there will be another shot for casinos in Manhattan or otherwise to come into play.”
He added that 1515 Broadway remains an “extremely valuable asset” and that the office tower on the site is fully leased through mid-2031.
Holliday’s ability to stay upbeat may be assisted by his company’s rosy quarterly results.
SL Green reported funds from operations — a widely recognized financial measure of REIT performance — of $1.58 per share, beating the consensus estimate of $1.41. That figure is net of transaction costs related to its casino proposal.
Its FFO was up nearly 39% from the same period in 2024, when it generated $1.14 per share.
SL Green has been at the forefront of the office recovery in the city, where activity is back at prepandemic levels and rents for prime space are at all-time highs. Despite broader economic uncertainty, the company beat Wall Street’s expectations in both the first and second quarter. This one was no different.
The firm signed 52 Manhattan office leases, totaling 658K SF in the third quarter, bringing its occupancy to 92%, up 1% from Q2. That is inclusive of leases signed but not yet commenced. The company projects that its portfolio will be over 93% occupied by the end of the year.
SL Green has particularly doubled down on Park Avenue, where Holliday predicted rents could grow as much as 25% over the next five years. The corridor’s vacancy rate was 11% as of the third quarter, according to a Cushman & Wakefield report, and asking rents average $121.40 per SF.
The company announced Wednesday afternoon that it struck a deal to buy Park Avenue Tower for $730M from Blackstone. Holliday said that in the 12 hours that followed, he has been “inundated with lenders reaching out.”
“Bond buyers, balance sheet lenders, banks all trying to get their hands on financing this,” Holliday said on the call.
He said he expects to borrow $475M for the purchase, financing the rest with equity from its balance sheet.
SL Green is also under contract to purchase 346 Madison Ave. and the adjacent site at 11 E. 44th St. for $160M. At the site of Brooks Brothers’ former flagship store, the company plans to build a ground-up office development, adding to a recently rejuvenated construction pipeline.
Both projects have received inquiries from outside investors, which Holliday said the firm is evaluating to ensure it is “not leaving any money on the table by bringing in partners too soon.”
Holliday added that there were even more opportunities on the market that SL Green considered. That includes 590 Madison Ave., 623 Fifth Ave. and Paramount Group, a publicly traded REIT with more than 13M SF across 17 assets.
Ultimately, RXR bought 590 Madison for nearly $1.1B, Vornado Realty Trust acquired 623 Fifth for $218M and Rithm Capital agreed to pay $1.6B for Paramount, although that deal is coming under scrutiny from Paramount investors for being underpriced.
“There was a lot on the market in a very short period of time,” Holliday said. “I think what’s interesting to note is it all cleared.”