SL Green Realty stock: The 9.78% dividend yield trap
SL Green Realty (NYSE: SLR) stock price has been in a freefall despite the company’s high dividend yield. It has retreated to a low of $31.55, the lowest…
SL Green Realty (NYSE: SLR) stock price has been in a freefall despite the company’s high dividend yield. It has retreated to a low of $31.55, the lowest level since 2010. This price is about 66% from its highest level on record.
Worst REIT stock?
SL Green Realty is one of the biggest REITs in the United States. It has a dividend yield of about 9.78%, meaning that there are significant risks of investing the company. The stock has plunged hard amid rising concerns about the commercial real estate industry.
SL Green is the biggest commercial landlord in the US, where it owns 61 buildings with more than 33.1 million square feet. Some of the properties it owns are One Madison Avenue, One Vanderbilt Avenue, 100 Church Street, and 11 Madison Avenue among others.
The commercial real estate industry is in trouble as interest rates surge. Earlier this week, Jerome Powell, the Federal Reserve chair warned that interest rates will need to continue rising in the coming months. He cited the fact that inflation remains sticky.
Therefore, companies of all sizes are cutting costs, with some of the biggest ones like Microsoft and Meta Platforms laying off staff. Recent data also shows that workers at the office are still lower than where they were during the pandemic.
And most recently, companies like Pimco-owned landlord defaulted on a $1.7 billion mortgage. Analysts believe that these defaults will continue, especially in cities like New York and San Francisco. The markets are simply oversupplied in a period when demand is a bit tepid.
The most recent results showed that SL Green is in trouble. The company’s loss came in at $1.01 per share, bigger than the previous net loss of about 82 cents. Funds from operations (FFO) came in at $1.46, down from $1.47.
Therefore, I believe that it is always not good to try and catch a falling knife. While the commercial real estate sector will bounce back, my crystal ball believes that the SLG stock price will continue unraveling in the coming months.
SL Green stock price forecast
On the daily chart, we see that the SLG share price has been in a steep sell-off in the past few months. It is now sitting at an important support level, which was the lowest point on December 22. The stock has moved below the 50-day and 100-day moving averages.
A closer look shows that it has formed a double-bottom pattern whose neckline is at $44.22. Therefore, a break below the current level will signal that bears have prevailed. But because of the double-bottom pattern, we cannot rule out a situation where the stock stages a brief relief rally.
The post SL Green Realty stock: The 9.78% dividend yield trap appeared first on Invezz.federal reserve pandemic reit real estate interest rates
US Job Openings Unexpectedly Soar Above Highest Estimate Even As Number Of Quits Tumble
US Job Openings Unexpectedly Soar Above Highest Estimate Even As Number Of Quits Tumble
For those following the recent sharp drop in job openings,…
For those following the recent sharp drop in job openings, or perhaps merely fascinated by the narrative that AI will cause a margin-busting corporate revolution as millions of mid-level employees are replaced by a cheap "bullshitting" AI algorithm, then today's latest bizarro JOLTS report will come as a shock. That's because after three months of sharp declines, the BLS reported that in April the number of job openings soared by 358K from an upward revised 9.7 million to 10.1 million, the biggest increase since Dec 2022...
.... and printing not only above the median consensus which expected the trend to continue with 9.4 million job openings this month, but came higher than the highest Wall Street estimate! As shown in the chart below, the delta to median consensus print was a whopping 703K.
According to the BLS, the biggest increase in job openings was in retail trade (+209,000); health care and social assistance (+185,000); and transportation, warehousing, and utilities (+154,000)
The sudden, bizarre reversal in the job openings trend, meant that after falling to the lowest level since Sept 2021, in April the number of job openings was 4.446 million more than the number of unemployed workers, the highest since January.
Said otherwise, after dropping to just 1.64 job openings for every unemployed worker, the lowest since Nov 2021, in April there were 1.79 openings for every worker, a sharp spike back to levels that the Fed does not want to see.
To be sure, none of the above data are credible for reasons we have discussed before but the simplest one is because the response rate of the JOLTS survey is stuck at a record low 31%. Which means that only those who actually have job openings to report do so, while two-thirds of employers are either non-responsive or their mail is quietly lost in the mail.
Another reason why today's data is meaningless is that even as employers allegedly put up many more job wanted signs, the number of workers actually quitting their jobs - a proxy for those who believe they can get a better-paying job elsewhere, and thus strength of the overall job market - tumbled by 129K to 3.8 million, the lowest number since May 2021.
Even the Fed's WSJ mouthpiece Nick Timiraos ignored the stellar headline print, and instead focused on the plunge in quits, writing that the "rate of workers who are voluntarily leaving their jobs (including leisure and hospitality) is returning closer to pre-pandemic levels, a possible sign of less tight labor markets. Quits tend to rise when workers think they can receive better pay by changing jobs."
The rate of workers who are voluntarily leaving their jobs (including leisure and hospitality) is returning closer to pre-pandemic levels, a possible sign of less tight labor markets— Nick Timiraos (@NickTimiraos) May 31, 2023
Quits tend to rise when workers think they can receive better pay by changing jobs. pic.twitter.com/hAEAMy1I81
And the biggest paradox: as pointed out by Peter Tchir of Academy Securities, the seasonally adjusted JOLTS quits rate was 2.4 (we reached a "peak" of 2.4 in July 2019), while the Hires rate (also seasonally adjusted) was 3.9% just like it was 3.9 in July 2019. So allegedly there are 3,000,000 more jobs available now than then.
So what to make of this bizarro, conflicting report?
Well, after three months of drops in job openings, at a time when it is especially critical for Biden to still maintain the illusion that at least the labor market remains strong when everything else in the senile president's economy is crashing and burning, it appears that the BLS got a tap on the shoulder once again, especially when considering that the one category that will be most impacted by ChatGPT and which according to Indeed is seeing a collapse in job postings was also the one category that had the highest number of job openings.
The U.S. Office Sector: Further Disruption and Rightsizing May Give Way to a Golden Age
The NAIOP Research Foundation, as part of its Industry Trends meeting, recently hosted a panel discussion on what’s next for the office sector. The panelists…
The NAIOP Research Foundation, as part of its Industry Trends meeting, recently hosted a panel discussion on what’s next for the office sector. Analysts from leading service firms joined NAIOP Research Foundation Governors and office developers Greg Fuller, president and COO, Granite Properties and Paul Ciminelli, president and CEO, Ciminelli Development, to discuss problems and potential opportunities. The panelists agreed that the sector will undergo a shakeout that will include transformation, streamlining, new approaches to work and holistic solutions.
A “Broken” Market
Remote work and economic headwinds have created a negative demand shock in the office sector and a temporarily “broken” market that has not yet reached stability. Before the pandemic, office workspaces were densifying, with less square footage assigned per employee. Remote work and downsizing accelerated this trend, with tenants now needing less space per employee. Although office-using employment has rebounded from the brief pandemic-induced recession, office space demand has declined sharply. Phil Mobley, national director of office analytics at CoStar, estimated that the gap between office-using employment and previously expected demand could be as much as 400 million square feet. As supply continues to come online, vacancy rates will continue to climb over the next three years with negative absorption levels higher than during the Great Financial Recession.
According to Mobley, sublease availability is a key indicator of the market’s health, and it has more than doubled since 2019 and continues to rise. While transactions have slowed down, the ones that have taken place in the last two years have been at lower price points, but with strong fundamentals such as lower cap rates, which gives the impression of positive price growth. However, this masks some of the underlying problems that will inevitably come to light during loan maturities and price discoveries. The Mortgage Bankers Association reports that over 40 percent of office loans are maturing in the next 20 months.
The Hardest-hit Buildings
Not all markets, nor all types of office buildings are experiencing dramatic setbacks. CBRE’s Global Head of Occupier Thought Leadership, Julie Whelan, and her team conducted a study to identify the buildings that saw the most significant increase in vacancies. Their research revealed that smaller buildings (between 100,000-300,000 square feet) constructed between 1980 and 2009, located primarily in downtown areas with limited surrounding amenities and/or in high crime areas, were the most affected. Furthermore, the study found that only 10% of the buildings in the 64 markets examined accounted for 80% of the vacancies from Q1 2020 to Q1 2023.
During the pandemic, the vacancy rates of buildings in downtown markets have surpassed those of suburban areas. Specifically, 41% of buildings with the highest vacancy rates are in downtown markets, mainly in the Pacific Northwest and Northeastern regions of the United States. For instance, San Francisco’s vacancy rate has surged from 4% before the pandemic to almost 30% due to its reliance on the tech sector. Additionally, buildings located in high-crime areas (usually downtowns) and those with fewer adjacent amenities (usually suburbs) are struggling to retain tenants. However, there are opportunities to reposition or reinvent these properties, but they will require innovative public-private partnerships and community-based approaches. What surrounds office buildings, such as safe and walkable mixed-use communities, is just as crucial as what is inside them, according to Whelan.
Back to the (New) Office
The shift to remote and hybrid work has had a significant impact on office space demand. However, many companies are realizing that returning to the office more often offers advantages. While some employers have opted for 100% remote, hybrid, or office-centric policies, Lauren Hasson, the vice president of workplace strategy at JLL, has noticed a growing number of companies that want their employees back in the office at least three days a week. Studies have shown that it is difficult to engage and mentor employees who are not physically present. Furthermore, there has been a decrease in innovation, as evidenced by a decline in patent applications. Remote job postings have decreased, but employee demand for remote work remains high. Remote job listings on LinkedIn reached their peak in early 2022 at around 20% before recently falling to 12%. However, over 50% of job applications submitted are for remote positions, indicating that many job seekers may need to accept hybrid or in-person jobs. Markets with higher costs of living, intense talent competition, and long commutes, such as Boston, San Francisco, and New York, tend to advertise a higher percentage of remote positions and have slower rates of return to the office.
Hasson has reported that companies that require employees to work in the office only one or two days a week have the highest turnover rates. Thus, companies that offer either full-time remote or full-time in-office work have a better chance of retaining their talent. However, tenants that require in-person work are offering more amenities, and flexibility while creating C-suite positions such as “Chief Workplace Experience Officer” to ensure employee satisfaction and engagement. Hasson believes that enhanced office workspace will become the ultimate recruiting tool, similar to how prospective students consider a university’s athletic facilities and campus environment. According to Hasson, the new experiential office environment, which will be fueled by innovation, creativity, employee diversity, and cutting-edge technology, will recalibrate the sector and ultimately usher in a “golden age” of work.
According to Ciminelli and Fuller, the office market is going through both cyclical and structural changes. While some office properties are flourishing, others lack the necessary amenities and locations to attract employees. Fuller noted that pre-pandemic, office buildings were rarely completely occupied, with a strong occupancy rate of 72%. Currently, occupancy rates vary between 40 and 65%.
Certain buildings are structurally obsolete or not ideal for conversion, particularly when considering residential use. In some cases, it may not be feasible to convert due to the property’s floorplan or location. Furthermore, the costs associated with redevelopment have risen considerably, making it necessary to acquire properties at lower costs.
Despite the challenges ahead, Fuller and Ciminelli anticipate opportunities once the dust settles. The office market will gradually reach an equilibrium as employees return to work, albeit with more flexibility and discipline in office space utilization. Like the retail sector, the office market will undergo a rightsizing process, ultimately emerging more streamlined and beneficial for both employees and employers.recession pandemic
April JOLTS report noisily shows continued deceleration
– by New Deal democratIt is always a bad idea simply to project a current trend forward, especially with data series that are noisy and heavily revised….
- by New Deal democrat
It is always a bad idea simply to project a current trend forward, especially with data series that are noisy and heavily revised. That was certainly on display with the April JOLTS report.
For the last several years, the jobs market has been a game of “reverse musical chairs,” where there are always more chairs than participants. Those employers whose chairs weren’t filled had to increase their wage and/or benefits offerings, or go without. This was good for labor, but certainly put pressure on prices as well.
Last month, there were steep declines in job openings and hires also declined significantly. This morning’s report reversed some of those dynamics, while the overall trend of deceleration remained intact.
Here is the longer term view of all 3 metrics from the series inception, better to show the current situation with the historical one before the pandemic hit:
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