This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Take a Bite Out of a 'Big Apple' REIT

NEW YORK (TheStreet) -- Manhattan commercial real estate volumes increased in the second quarter as total transaction volume rose more than $2.1 billion to $9.1 billion from the first quarter.

Manhattan office property sales doubled in the second quarter to $5.2 billion, due to the sale of a 40% interest sale of the GM building for a whopping $1,870 per square foot. (Source: Eastern Consolidated).

That large deal, known as 767 Fifth Avenue, traded for $1.36 billion (40% interest) and the buyer was M. Safra & Company and the seller was Meraas Capital and Goldman Sachs. Other large office deals included Tenth Avenue (leasehold) for $750 million, 425 Lexington Avenue for $700 million, 125 West 55th Street for $470 million, and 499 Park Avenue for $386 million.

One of the most overwhelming differentiators for the New York City real estate market today is employment. Since 2009, New York City has added more jobs (112,600 since September 2009) and in 2013 the all-star city added 45,400 jobs. According to Barbara Byrne Denham, chief economist with Eastern Consolidated, "the outlook for New York City is very favorable given how popular New York is for investors, students, tourists, potential residents and young entrepreneurs.

In a commentary in The Commercial Real Estate Observer on July 23, Robert Knakal, chairman of Massey Knakal Realty Services explained, "The recovery in the property sales market continues to outpace the recovery in the broader economy and is, in fact, performing better than the recovery in commercial real estate's underlying fundamentals would dictate."

How Can the Average Investor Get a Bite Out of a Big Apple REIT?

There are many REITs that own property in or near the New York City area; however, there are just a few REITs that have a significant concentration of properties in the "big apple."

SL Green (SLG) is the only fully integrated REIT that focuses on the New York City market. The company also owns more than 3 million square feet of prime office space in nearby Westchester County and Stamford, Conn.

As the FAST Graph illustrates below, SL Green began (IPO in 1997) to develop a strong track record for paying dividends. But in 2008 the company was forced to slash its dividend from a high payout of $3.15 per share (aqua blue-shaded area represents dividends paid) to a low of 40 cents in 2010 (and 2011).

The share price (the black line) fell from $146.58 in January 2007 to a low of $11.62 in 2009. SL Green has made steady progress with its share price (now $92.90), and the current dividend yield is 1.42%. I consider SL Green to be fairly valued today (with a price-to-funds from operations ratio of 18.5), and the dividend yield is modest compared with other office REIT peers.

Courtesy of F.A.S.T Graphs

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs