Standard & Poor's Ratings Services (S&P) raised its corporate credit rating on SL Green Realty Corp. to 'BBB-' from 'BB+'. The outlook is stable.

At the same time, S&P affirmed its 'BBB-' unsecured issue-level ratings and withdrew the '2' recovery rating.

“The upgrade reflects S&P’s expectation that SL Green will use proceeds from asset sales to repay debt and continue to benefit from modest demand and disciplined supply growth in the Manhattan office market," said credit analyst Anita Ogbara. "Over the next two years, S&P expects debt to EBITDA to decline into the 8.5x to 9.0x area and fixed-charge coverage (FCC) will remain in the 2.0x to 2.5x range. S&P does not anticipate any significant shifts in financial policy and believes the company will manage future acquisitions and development with a combination of debt and equity."

The stable outlook reflects S&P’s expectation that SL Green will continue to use asset sale proceeds to reduce debt. In S&P’s view, the company's competitively positioned, high quality N.Y. office portfolio is supported by strong occupancy levels, good quality tenants, and still favorable supply/demand dynamics, which will support improving financial leverage and FCC over the next 12 to 18 months. The stable outlook incorporates S&P’s expectation that SL Green will continue to grow its unencumbered asset base.

S&P would lower ratings if operating performance deteriorates perhaps because of considerable weakness among tenants in the financial and legal sectors or if leverage does not improve with debt to EBITDA remaining above 9.5x or FCC declining to 2.1x on a sustained basis. S&P could also lower ratings if the company were to further encumber its portfolio with additional debt from acquisitions.

Although less likely, S&P could raise the rating if the company significantly reduces debt, and continues to outperform similarly sized peers as evidenced by occupancy and rental rate growth resulting in fixed-charge coverage measures in the high 2x area and debt to EBITDA of less than 7.5x on a sustained basis.

  • On Jan. 27, 2016, New York based REIT, SL Green Realty Corp. reported a 4.6% increase in 2015 same-property net operating income (NOI) and occupancy levels improved to 97.1% in its core Manhattan office portfolio.
  • The company also announced that Citigroup, Inc. exercised its option to purchase 388-390 Greenwich Street for $2 billion, which is expected to close in December 2017.
  • S&P is raising its corporate credit rating on SL Green to 'BBB-' from 'BB+'. At the same time, S&P affirmed its 'BBB-' unsecured issue-level ratings.
  • The stable outlook reflects S&P’s expectation that SL Green will continue to use asset sale proceeds to reduce debt. In S&P’s view, the company's competitively positioned, high quality N.Y. office portfolio is supported by strong occupancy levels and good quality tenants, which will support improving financial leverage and FCC over the next 12 to 18 months.

RELATED CRITERIA AND RESEARCH

Related Criteria

Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014

Key Credit Factors For The Real Estate Industry, Nov. 19, 2013

Corporate Methodology: Ratios And Adjustments, Nov. 19, 2013

Industry Risk, Nov. 19, 2013

Corporate Methodology, Nov. 19, 2013

Management And Governance Credit Factors For Corporate Entities And Insurers, Nov. 13, 2012

2008 Corporate Criteria: Rating Each Issue, April 15, 2008

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.

Primary Credit Analyst:  

Anita Ogbara, New York (1) 212-438-5077;

anita.ogbara@standardandpoors.com

Secondary Contact:

Fernanda Hernandez, New York (1) 212-438-1347;
fernanda.hernandez@standardandpoors.com

No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P’s opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or an investment advisor. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.

Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@standardandpoors.com.

Legal Disclaimers

Careers at S&P Ratings Services

Terms of Use

Privacy and Cookie Notice

Copyright © 2016 Standard & Poor's Financial Services LLC, a part of McGraw Hill Financial. All rights reserved.

Reproduction and distribution of this information in any form is prohibited except with the prior written permission of Standard & Poor's. Standard & Poor's does not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and is not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such information. STANDARD & POOR'S GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. STANDARD & POOR'S shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs) in connection with any use of this information, including ratings. Standard & Poor's ratings are statements of opinions and are not statements of fact or recommendations to purchase hold or sell securities. They do not address the market value of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice. Please read our complete disclaimer here

SLG- GEN