New York Real Estate Bustling
I just returned from my annual holiday visit to NYC, mainly to see some shows, visit with family, and take in that holiday spirit that only NYC can deliver in so many wonderful ways.
During my visit, I went to Ground Zero, the third time I have been there since 9/11, and was very moved by the new construction that has been done, with taste and appropriate reflection. The memorial pools were beautiful and somber as well as inspirational to me. Never forgetting the moments that disaster hit so close to home and took so many fellow New Yorkers from us.
The buildings not yet complete are beautiful, unique, as well as appropriate for their location, and even though the museum itself has yet to be officially opened to the public, I was struck by the original World Trade Center beams, stairwells, and actual furnishings that survived the direct hit on its upper floors, that were placed in this museum as a constant reminder to the devastation that was inflicted on that day.
As I traveled around the city, I was struck by the activity and the buzz, as well as the obvious face-lifting of the existing office buildings, virtually throughout the city. It occurred to me that a new beginning has begun, as individual investors, developers, well heeled venture capitalists and well financed businesses are literally pouring money into revitalyzing the capital of economic growth, New York City.
I was both surprised and thrilled by seeing all of this, and at dinner that evening I discussed it with my family, and I mentioned that I was going to write an article on a REIT I had been researching which had to do with NYC commercial real estate.
S.L. Green (NYSE:SLG) is the REIT, as it has many commercial real estate endeavors within NYC, from my understanding.
The Basic Fundamentals
S.L. Green is currently trading at around $65.00/share as of this writing, (down around 3% today) current dividend yield of 1.75%, and a buy rating by a variety of research analysts.
SLG has an all time high of $155/share posted back on 2/8/2007, and an all time low of $10.29/share posted on 3/29/2010 during the height of the real estate mess. SLG has a 2011 low of $55.14/share on 10/3/2011 and a high of $90/share back on 5/31/2011. It has settled in at around the $65 range since then.
SLG missed the street earning estimates by a penny on 10/26/2011 as well, and in my opinion has not told the complete story of this stock.
Action to Take Now
As an investor seeking capital appreciation as well as a modest dividend yield (which had been reduced) I would take a look at the future earning projection increases which shows an indication that business is getting better, and on the road back to pre-2009 levels, one step at a time (slowly right now).
Take a look at the business S.L. Green engages in, which is the construction of, the managing of, the acquiring of, and the repositioning of commercial office properties in all boroughs on NYC primarily in Manhattan (which, as I noted before, is surprisingly buzzing with activity).
I would look at the major shareholders of this stock. Institutions and Mutual Funds make up the vast majority of holdings, and remember what we discussed about those large investors and re-balancing of portfolios this time of year. That also includes stocks that could potentially offer significant capital appreciation over the next 12-24 months -- which I believe this stock could offer.
Take a look at the company's margins of over 27% in an industry that averages about 10% and a sector that averages around 14%. To me, this is quite positive as revenues pick up moving ahead into the next year or two.
S.L. Green is not your typical high-flying, dividend-scorching REIT. It also has been faced with the many challenges of commercial real estate the past few years. That being said, it has redeployed capital into property acquisitions at very reasonable prices, and has been upgrading existing properties to appeal to tenants of the future, which they seem to be attracting now.
For diversified portfolios, I would take a look at SLG to add a risk allocation of no more than 2%-5% of investable funds into the purchase of this stock. If the capital appreciation I believe will occur at some point, actually does occur, it could add a very nice pop to a balanced portfolio, prior to the herd scrambling in.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: Please do your own research and decide whether this or any stock is worth buying or selling based on your individual investment goals, as well as tolerance for risk. Do not rely on opinions written by others.