SL Green Realty Corp. (SLG) Earnings

Management highlights

• Leasing: Had the single biggest first quarter in 28-year history, signed 51 leases totaling 930,000 square feet with mark-to-market 16% higher than previously fully escalated rents. Trophy building vacancy rate dropped to 3.4%. Pipeline of ~900,000 square feet of space. • Development: Rapid pace on 346 Madison project, closed site in fall, issued 100% schematic design on May 1st, expect to file into EULER by end of year. 753rd Ave project making progress, reached agreement with final remaining tenant, in early stages of procurement. • Disposition: Entered into contract to sell residential and retail components of seven-day project, closed sale of 690 Madison Avenue with JV partner, progressing $2.5 billion disposition plan. • Debt fund: Put out $226 million since last call, total committed to about $567 million out of $1.3 billion fund. • Leadership: Promoted Harrison Satomer to president and CIO.

Guidance

• Occupancy: Increased year-end same-store occupancy target from 94.8% to 95%. • Leasing spreads: Well on track for objectives set in December, momentum from first quarter puts on great track to meet or exceed objectives. • FFO: Quarterly FFO results may be choppy driven by fee income, but on track to midpoint of guidance range, bias to higher end. • Economic occupancy: Expected to narrow substantially over the course of the year to half as wide as at end of last year by end of 2026, with normalized basis expected to have ~200 basis points difference from leasing in fully leased portfolio. • Summit: Expected to end the year ahead of ambitious targets set in December, with summer events like FIFA World Cup and nation's 250th birthday celebrations expected to boost it.

Segment performance

No specific product segments detailed in terms of absolute financial performance and revenue contribution % as the transcript focuses more on overall leasing, development, and other operational aspects rather than distinct product segment breakdowns.

Risks & headwinds

• Macroeconomic factors: Uncertainties in macroeconomic conditions could impact the leasing market and overall business performance. • Private credit: While not seeing direct impact currently, potential broad impact if private credit issues broaden. • Budget and legislative changes: Uncertainties in city budget negotiations and legislative changes related to taxes and affordability could impact the business.

Analyst Q&A

• Q: Comment on pipeline activity, how much new or expansion tenant, pull forward renewals, tenant expectations on expansions and space usage.

  A: Pipeline predominantly medium-sized tenants, two-thirds of buildings projected to be 95% or better leased by end of year, pipeline not dominated by best buildings, mid-price point buildings seeing exceptional rent growth, concessions like TI flattened, free rent starting to come down on renewals.

• Q: Comment on feedback from overseas investors, especially Middle Eastern.

  A: Counterparties for the most part from Asia, Europe, Canada, domestic, not a lot of partnerships in Middle East, some sovereigns from Middle East pulling in horns, but still strong appetite in Asia for credit and equity for well-located assets.

• Q: Upside to occupancy target and leasing spreads.

  A: Increased year-end same-store occupancy target from 94.8% to 95%, well on track for leasing spreads objective with momentum from first quarter.

• Q: Private credit impact on real estate, opportunity to acquire B buildings.

  A: Not seeing direct impact from private credit, focus on highest nominal head rents for hold assets or redevelopment candidates rather than B assets defined as commodity space even though B assets may have upside.

• Q: New supply impact on market relative to portfolio, sub-markets.

  A: Tenants doing early renewals, spillover effect giving lift to other buildings, 1185-6 building seeing strong leasing velocity and rents.

• Q: Quarterly FFO guidance, components accelerating FFO.

  A: Quarterly FFO results choppy, property NOI better than expected offset by Summit underperformance, headed to midpoint of guidance range, FFO driven by fee income.

• Q: Liquidity in capital markets, buyer composition for dispositions, impact of AI on office.

  A: Equity and debt markets strong, buyer composition includes various groups, investors optimistic about AI tenants' impact on leasing.

• Q: Summit demand, pricing, upsells.

  A: Summit expected to recover from first quarter diminution, summer events to boost it, only upsell is Ascent elevator rides which bounced back.

• Q: Dividend cut thinking, FAD and cash flow ramp.

  A: Dividend cut based on taxable income and business plan, FAD to be boosted by NOI growth from leasing, spending in 2026 for leasing to drive FAD in back half of 2027 and 2028.

• Q: Dispositions proceeds, impact of new mayor's policy changes.

  A: Approximately half of $2.5 billion disposition plan proceeds expected by mid-year, early days of new mayor's term, current administration focus on housing production and affordability with objectives aligning with tax collections.

• Q: Guidance bias to high end, specific items contributing, underlying assumptions.

  A: NOI running ahead of projections, fee income growing, DPO in guidance, momentum from first quarter biased to midpoint or higher.

• Q: Pied-a-terre tax and budget gap, impact on business.

  A: Pied-a-terre tax to raise ~$500 million, budget gap to be closed with revenue enhancements and expense reductions, city expected to have balanced budget, impact on business to be seen through legislative actions.

• Q: Cash flow guardrails, Summit in other regions.

  A: FAD expected to be similar to dividend by 2028, Paris summit to open in summer 2027 with new features.

• Q: Cost of debt reduction, share purchases.

  A: Opportunities to reduce weighted average cost of debt through floating rate exposure and CMBS market tightening, stock considered mispriced with share repurchases getting first look if incremental liquidity available.