SL Green Realty Corp. (SLG) Q3 2026 earnings review
SL Green fills its offices, but interest costs cut its plan
SL Green filled its offices faster than planned, but higher interest costs now take a larger share of the rent. Manhattan's largest office landlord reached its 95% year-end leasing target in September, and cash income from buildings it held both years rose 5%. The company raised its full-year profit plan, yet the whole increase comes from a one-time gain on selling a stake in its restaurant business. Strip that out and by our math the plan fell $0.25 a share because of interest rates.
| Leased occupancy, Manhattan same-store offices | 95.0% 92.9% at the end of 2025; year-end target reached early |
|---|---|
| Same-store cash income (NOI), excluding lease termination fees | +5.0% +4.3% last quarter |
| FFO per share | $1.59 $1.58 a year ago |
| Full-year FFO outlook | Raised $0.85 at the middle $1.10 from a one-time sale, −$0.25 for interest rates |
⚖️ Verdict: 🔴 Bearish
The story got worse, because the cost of carrying the buildings is now rising as fast as the rent they earn. SL Green refinanced its first large 2027 loan, on 245 Park Avenue, at a rate about two percentage points above the old one, and it trimmed its underlying plan for this year on interest costs. The good news: every leasing measure improved, and the gap between leases signed and rent actually collected is closing.
The question now is whether rent from the new leases arrives before the 2027 refinancings reset interest costs. One answer is that cash rents catch up next year as free-rent periods end and cover the higher interest; the other is that the wholly owned buildings keep losing cash income while the loans reprice. The 2027 financing plan at the December 7 investor conference, and fourth-quarter cash income from the wholly owned buildings, will tell.
🐂 Bull Case
Offices Reached the 95% Target Three Months Early
SL Green set a target of 95% leased occupancy in its established Manhattan offices by the end of 2026. Leased occupancy counts signed leases before the tenant pays rent, so it runs ahead of income. Manhattan's largest office landlord reached the target on September 30, three months early.
- Leased occupancy: 95.0%, from 92.9% at the end of 2025
- Occupancy on leases that have started: 92.8%, from 92.2% in June
- Space already earning rent: 90.0%, from 89.1% in June
- Rent on replacement leases: 13.6% above the expiring rent; tenant improvement allowance $85.20 a square foot, from $99.09 a year ago
The gap between leased space and rent-earning space is where next year's growth sits, because a new lease earns nothing until its free months end. By our math that gap narrowed to 5.0 percentage points from 5.7 in June. The landlord also gave less away to win tenants, with free rent on new leases shorter than a year ago.
What to watch: rent-earning occupancy at year-end. Finance chief Matthew DiLiberto said earlier this year it would reach about 89% by December, a level the same-store buildings have already passed, so a reading near 91% would mean the free-rent periods are ending on schedule.
Fees From Managing Outside Money Rose 31%
Besides owning buildings, SL Green earns fees for managing money and property for others, including a $1.3 billion debt fund that lends against New York real estate and a business that services troubled loans. Fee income reached $30.6 million, 31% more than a year ago.
The fund put another $100.7 million to work, taking cumulative deployment to about half of its size by our math, and nine-month fee income is up 47%. Fees need no new debt, but they follow deals: the quarter held the sale of 10 East 53rd Street, and the release does not separate fees earned on the landlord's own transactions.
What to watch: fourth-quarter fee income. A figure near this quarter's with no large sale in the period would mean the fund and the servicing work, not deal timing, now drive the line.
Sales Raised $148 Million, and $216 Million Follows
SL Green set out to sell $2.5 billion of property in 2026 and put the money toward debt. President Harrison Sitomer said in July that four of eleven planned deals were closed or under contract, with the rest due in the second half.
- 10 East 53rd Street: sold in August for $312.2 million, net cash proceeds $99.0 million
- 110 Greene Street: contract signed at $226.0 million, about $216.0 million net due in the fourth quarter
- Restaurant and hospitality venture: 20% stake sold in October for $40.0 million; an office condominium at 185 Broadway went for $9.0 million
The Greene Street cash will be "used for corporate debt repayment", the landlord said, which matters because most of its new borrowing this year sits on a floating-rate credit line. It has not said how many of the eleven deals these count for, or whether the $2.5 billion total still holds.
What to watch: the tally of 2026 sales at the December 7 investor conference. Reaching $2.5 billion would bring the credit line back toward its year-end level before the 2027 loans come due.
🐻 Bear Case
One-Time Gain Lifts the Plan, the Rest Fell
SL Green measures itself by FFO, funds from operations, the property-company profit figure that adds depreciation back to net income. It raised its 2026 FFO plan to $6.50–6.70 a share from $5.60–5.90 and put the increase at the top of its results.
Both parts of the change come from outside the buildings: $1.10 a share is income from selling a 20% stake in "an entity related to the Company's food and beverage hospitality operations", and $0.25 comes off for "the higher interest rate environment". Without the sale, the plan is $5.40–5.60 by our math, below July's range.
The stake sale brought $40.0 million of cash, yet $1.10 a share is about $84 million of FFO by our math, and the release does not explain the difference. FFO also feeds pay, because the landlord "uses FFO as one of several criteria to determine performance-based compensation". Cash tells a plainer story: FAD, the cash left after leasing costs and upkeep, was $29.5 million, up from June but far below the roughly $47 million of common dividends by our math.
What to watch: fourth-quarter FFO without the hospitality gain. By our math the plan implies about $1.65 a share on that basis, close to this quarter's $1.59; a lower figure would mean the interest-rate drag is still growing.
245 Park's New Loan Costs Two Points More
SL Green's largest standing risk is the set of loans due in 2027. In October it and its partner refinanced 245 Park Avenue with a $2.0 billion, five-year loan at 6.52%, hedged on SL Green's half to 6.37%; the loan it replaced cost 4.30%.
- Extra interest on SL Green's share: about $26 million a year by our math, roughly $0.34 a share
- Consolidated loans due in 2027: about $1.1 billion by our math, after a $100 million term loan in November
- Floating-rate share of consolidated debt: 22.5%, from 9.1% at the end of 2025, as the credit line rose to $930 million
One building's extra interest equals most of a year's growth in same-store cash NOI, which rose $7.6 million in the quarter, so leasing gains and financing costs are now racing each other. The $0.25 taken off this year's plan is the first instalment, and finance chief Matthew DiLiberto said in July he would present the 2027 plan in December.
The other outside risk, a Wall Street downturn, got no test this quarter: finance tenants pay 44% of rent and nine-month leasing ran 9% ahead of last year. The weak spots stay in the side portfolio, where SL Green bought out a $65 million junior loan on 650 Fifth Avenue for $2.0 million and is "in discussions with the lender on resolution of the past maturity" of the senior loan.
What to watch: the all-in rates in the December 7 plan. Rates near 245 Park's 6.4% across the $1.1 billion would mean interest rising faster than cash rent through 2027.
Cash Rents in Wholly Owned Buildings Fell 4%
Same-store cash NOI, rent minus building costs on buildings SL Green held both years, rose 5.0%, but all of the growth came from the jointly owned towers. The buildings it owns outright earned less cash than a year ago, even as leasing set records.
- Wholly owned same-store buildings: $63.5 million, down 4.2%
- Jointly owned buildings, SL Green's share: $96.1 million, up 12.1%
- Free rent across the portfolio: $10.8 million, nearly three times a year ago
- Rent on leases that started in the quarter: 0.5% above the previous rent, after 5.6% in June
The wholly owned buildings hold most of the vacancy, 88.6% leased against 99.2% in the ventures, so they hold the new leases, and each new lease starts with free months; real estate taxes there also rose 5%. Leases starting now were signed in 2025 at thin spreads, which is why the commenced spread sits near zero while signed spreads run above 13%.
What to watch: fourth-quarter cash NOI from the wholly owned buildings. A return to growth would show that free-rent periods on early-2026 leases are ending; another decline would push the 2027 catch-up further out.
SUMMIT Lost $8 Million as Costs Outran Ticket Sales
SUMMIT is SL Green's ticketed visitor attraction at the top of One Vanderbilt, and chief executive Marc Holliday said in July that a Paris version opens next summer, with Tokyo to follow in 2030. In New York the attraction's costs rose much faster than its revenue this quarter.
- Revenue: $34.7 million, up 5% from a year ago
- Operating expenses: $42.9 million, up 19%
- Result before tax: a loss of $8.3 million by our math, after a $3.1 million loss a year earlier; nine months show a $3.1 million loss against a $3.9 million profit
The release does not say whether Paris start-up costs sit in the expense line, although the landlord holds about $62 million of euro forward contracts for the project. The attraction has now lost money in three of the last five quarters, so the business the company wants to export is not yet earning at home.
What to watch: fourth-quarter SUMMIT expenses, which fell back to $33.8 million in the same quarter last year. Costs staying near this quarter's level would mean a lasting step-up ahead of Paris rather than a seasonal one.
💲 Other KPIs
Loans held through the consolidated SLG Opportunistic Debt Fund rose for a fifth straight quarter, to 3.7% of total assets from 1.4% at the end of 2025. The fund has deployed $643.1 million of its $1.3 billion, with $100.7 million added this quarter; outside investors fund most of it, and SL Green earns management fees.
Leasing volume came in below the record first quarter but above the second, and nine-month signings of 1.97 million square feet run 9% ahead of last year by our math. The largest deals were Legora at 11 Madison Avenue and an early renewal by IMG at 304 Park Avenue South; average term rose to 10.7 years.
Cash earnings covered interest and principal payments 1.80 times, up from 1.70 in June after three quarters of decline, but still below 1.86 a year ago. The covenant on the credit line requires fixed-charge coverage above 1.50 times; the company reports 1.81 on that test.
Total borrowings fell 1.5% from June as the 10 East 53rd Street sale repaid a mortgage, but remain 4.4% above the year-end level because of the January purchase of Park Avenue Tower. SL Green bought back no shares in the quarter after $14.1 million in the spring; units outstanding were 76.2 million.
🔮 Guidance
Raised. The middle of the range rose $0.85 to $6.60, but the new figure contains $1.10 of income from selling a stake in the hospitality business and subtracts $0.25 for interest costs. By our math that leaves $2.65–2.85 for the fourth quarter, or about $1.65 without the gain, against $1.59 this quarter. Third statement this year: held in April, raised $1.20 in July, raised $0.85 now.
Raised. The plan still has SL Green earning a small accounting profit for the year after a loss of $0.56 a share over nine months. By our math the fourth quarter must deliver $0.96–1.16, more than this quarter's $1.01, which came mostly from the $91.4 million gain on 10 East 53rd Street. The release does not say which items make up the fourth-quarter figure.
❓ Key Questions
How does a $40 million stake sale produce $1.10 a share?
The hospitality stake sold for $40.0 million, yet the FFO plan rose by about $84 million for it by our math. Readers need the accounting mechanism, and whether any of it is a revaluation of the 80% SL Green kept.
What are the all-in rates for the other 2027 loans?
About $1.1 billion of consolidated loans mature in 2027 by our math, and the Term Loan C swaps near 2.7% expire in February. The December conference should give rates for each, so readers can size the interest step-up after 245 Park.
How much One Vanderbilt income sits in this quarter's FFO?
The company said in July that distributions from One Vanderbilt would add about $0.80 a share this year. The release gives no quarterly figure, so the underlying quality of the $1.59 cannot be read from these materials.
How many of the eleven planned 2026 sales are done?
July's count was four. Since then 10 East 53rd closed and 110 Greene, the hospitality stake and 185 Broadway were sold or contracted, but the company has not said whether each counts toward the eleven or whether $2.5 billion still holds.
Did the 750 Third Avenue financing close in the quarter?
Chief executive Marc Holliday said in July that the residential conversion's debt and equity would close in the third quarter, and that the 346 Madison dispute would be settled in August. Neither appears in the release.