NEW YORK–(BUSINESS WIRE)–
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.
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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.
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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.
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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
And Assumptions: Liquidity Descriptors For Global Corporate Issuers,
Dec. 16, 2014
Credit Factors For The Real Estate Industry, Nov. 19, 2013
Methodology: Ratios And Adjustments, Nov. 19, 2013
Risk, Nov. 19, 2013
Methodology, Nov. 19, 2013
And Governance Credit Factors For Corporate Entities And Insurers,
Nov. 13, 2012
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
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and at www.spcapitaliq.com.
All ratings affected by this rating action can be found on Standard &
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Use the Ratings search box located in the left column.
|
Primary Credit Analyst: |
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Anita Ogbara, New York (1) 212-438-5077;
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|
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Secondary Contact: |
Fernanda Hernandez, New York (1) 212-438-1347; |
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SLG- GEN
View source version on businesswire.com: http://www.businesswire.com/news/home/20160129005923/en/
SL Green Realty Corp.
Matt DiLiberto, 212-594-2700
Chief
Financial Officer
Source: SL Green Realty Corp.
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