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Moody's trims SL Green
Moody's Investors Service said it downgraded SL Green Realty Corp.’s ratings and assigned a negative outlook. Previously, the ratings were on review for downgrade.
The rating downgrades include the REIT's senior unsecured shelf rating to (P)Ba2 from (P)Ba1, its subordinate shelf rating to (P)Ba3 from (P)Ba2, its junior subordinate shelf rating to (P)Ba3 from (P)Ba2, its preferred stock rating to B1 from Ba3, its preferred shelf rating to (P)B1 from (P)Ba3 and its preferred shelf non-cumulative rating to (P)B1 from (P)Ba3.
The agency also lowered SL Green Operating Partnership, LP's (collectively SL Green) corporate family rating to Ba2 from Ba1 as well as its senior unsecured shelf rating to (P)Ba2 from (P)Ba1, its subordinate shelf rating to (P)Ba3 from (P)Ba2, and its junior subordinate shelf rating to (P)Ba3 from (P)Ba2.
These actions conclude the review for downgrade started on May 22, Moody’s said.
“SL Green's leverage remains very high at 14.2x net debt/EBITDA (including pro-rata share of unconsolidated joint ventures) for the TTM ending June 30, 2023. Despite the company's debt reduction initiatives, Moody's expects leverage to remain very high in the near term given the challenging operating environment for office landlords and the resulting pressures on income and cash flows. In addition, the REIT's fixed charge coverage remains weak at 1.6x for the trailing twelve months ended June 30, 2023, amid higher interest rates, down from historical levels when its coverage ratio had been steadily above 2x, the agency said in a press release.
However, Moody’s noted “SL Green's operating performance still outperforms the broader market by a wide margin with positive same-store net operating income growth and mark-to-market rents in the face of challenging operating conditions. This reflects the demand for the REIT's high-quality, and well-located Manhattan office portfolio.”
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