What's Behind SL Green's Lower 2026 Outlook and Dividend Shift

SL Green SLG recently reduced its 2026 funds from operations (FFO) per share guidance to $4.4-$4.7. The Zacks Consensus Estimate stands at $5.16 per share. Per the latest investor presentation released by the company, it also plans to resort to quarterly dividend payouts from the current monthly payouts.

Factors Hindering 2026 NOI and FFO Growth

The company emphasized higher operating expenses of 2.5% and real estate taxes rising 4.3%, as well as higher variable costs owing to higher occupancy pressuring margins. This will dampen 2026 same-store net operating income (“NOI”) and FFO growth.

Several large tenant vacates in 2026 at 1185 AOTA, 125 Park Ave, 485 Lexington Ave and 10 East 53rd St and potential sales of One Madison Ave (sale portion), 500 Park Ave, 7 Dey Street, and 760 Madison Retail to result in lower NOI.

An increasing floating rate debt will lead to higher interest expenses and lower development will lead to a decrease in capitalized interest expenses, negatively impacting NOI growth. Moreover, lower other income of 96.5 million relative to elevated levels in 2025 leads to lower FFO guidance.

Lastly, a higher number of average diluted share count to 77.1 million from 76.4 million would spread earnings over more shares, reducing per-share guidance.

Dividend Moving From Monthly to Quarterly

SLG faces a $7 billion financing plan and would need balance sheet flexibility. Quarterly dividends help preserve cash and simplify liquidity planning. The shift likely reflects a more conservative, predictable capital allocation posture.

Final Conclusion

SL Green’s reduced 2026 guidance and move to quarterly dividends reflect a mix of pressures and opportunities. While higher costs, vacancies and asset sales weigh on near-term earnings, the company is also strengthening liquidity for upcoming financings and positioning itself for new leasing and investment gains. The shift signals caution in the short run but confidence in its ability to benefit from a more disciplined market ahead.

However, in the past three months, shares of this Rank #4 (Sell) office REIT company have declined 28.2% against the industry’s growth of 1.8%.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are W.P. Carey WPC and Terreno Realty TRNO, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for WPC’s 2025 FFO per share has been moved northward marginally over the past two months to $4.92.

The consensus estimate for TRNO’s 2025 FFO per share has been revised upward by 4.6% to $2.71 over the past month.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research