Commercial Office REITS Pop after Selloff [SLG]

Submitted by old_shows t3_1260s7q in wallstreetbets

SL Green is a commercial office REIT which holds interest in 61 buildings comprising 33.1m NRSF (net rentable square feet) with 28.9m NRSF in Manhattan. In the weeks following SVB’s collapse, the stock tumbled ~45%. This was the most battered CREIT stock for good reason:

-The Manhattan office market remains near an abysmal ~50% occupancy level.

-Famed short seller Jim Chanos short portfolio comprises a significant SLG short position (TSLA, AMC, and COIN are his other large positions). He has publicly shat on the stock on the finance Disney channel (CNBC).

-The implied cap rates (according to Chanos) on their properties are ~5%, a nonsensical number relative to the risk of these properties and uncertainty surrounding future NOIs.

-The uncertainty surrounding the NYC property market is at an all-time high as large tenants leave Manhattan for lower rents in locales with more stable workforces and less affordability issues.

-CREIT’s continue to face interest rate risk as they rollover existing debt from the free money era to significantly higher rates.

Nonetheless, the stock has rebounded ~10% this week. It appears that many of the short sellers are taking profits before earnings are reported on 4/19. Earnings are sure to be brutal but, there is good reason to assume that pessimism peaked last week. The banking crisis has proven (for now) to be manageable and, in spite of the very valid long-term doubts about the Manhattan office market, it remains a vital center of commerce in the US. I agree with the short sellers theses on SLG but, they may be in pain if the macro environment remains (relatively) stable over the next few weeks. The stock is still ~50% off of its pre SVB price of $35.06 which is well below its 2022 high of $83.96.

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VisualMod t1_je6xblr wrote

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>TL;DR: SVB is dead, SLG will survive.
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VisualMod t1_je6xc8q wrote

>I agree that the short sellers' thesis on SLG is correct, but I believe that the stock may rebound in the near future. The banking crisis appears to be manageable, and Manhattan remains a vital center of commerce.

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nateccs t1_je6yjzf wrote

thinking some short term SVB 25 strike calls as shorts exit their position and then throw down on some puts if it gets above 30.

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old_shows OP t1_je6zold wrote

Replying to nateccs (#2,461,627)

Totally agree with this strategy, we’ve seen plenty of examples of shorts piling back-in this year after a rally and I don’t think this will be an exception. But $25 call with 4/7 expiry date is where I’m hanging out.

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DYTTIGAF t1_je739lf wrote

You don't run into a burning building to turn off the coffee pot. You just witnessed a 50% decline in this REIT for reason.

The 100 year old business lease models are changed and it has to do with a variety of reasons: demographics, COVID stay at home work models, increases in office lease costs due to inflation and currency devaluation.

Imagine "hot" desks were workers work at home 3 days a week (and in the office the other 2 days). Sharing desk with others.

The REIT debt models are not designed to deal with this shrinkage of needed square footage by its customers.

BX just walked away from a portfolio of properties in Europe. Why? The numbers aren't working. United States market is next.

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old_shows OP t1_je7bng9 wrote

Replying to DYTTIGAF (#2,462,641)

I stated very clearly that I agree with the shorts theses on office REITs that are overexposed to poorly performing markets. The stock isn’t rebounding for any fundamentally driven reasons, it was reading oversold for a week and the momentum is driven by demand for stock as the shorts (who composed nearly 70% of the float) close out their positions. It comes off as extremely uninformed (whether or not you intended to) to put “commercial REITs” in one bucket as commercial real estate consists of nearly a dozen property types, each of which has its own set of economics. I have worked in commercial property valuation for over a decade so, I feel qualified to form an opinion (which again, you completely misread).

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WhoYaTappin t1_je7hmuh wrote

I’m balls deep - SLG YOLO 300 LEAPs and 6500 shares, $20/share is a joke.

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Jrecondite t1_je7isnj wrote

14% divvy is nice but can we get 28%?

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DYTTIGAF t1_je7qdai wrote

Replying to old_shows (#2,464,475)

You have not accepted the truth that all commercial real estate is falling in sympathy to macro trends that are not going to be reversed for at least 5 years.

This is a global problem. They main purchasers of REIT products have been foreign investors who are now concerned about the stability of all securitized products (especially commercial real estate).

Diversification works on financial assets when you are trying to mitigate risks that are known (to a degree) but are not inherently ineffective when the underlying fabrics of currency and interest rates are destroying investment models globally.

Investors are not stupid. They see the tide going out. There's zero chance that they will have the patience to hold an illiquid "product" when they can get a risk free return of possible 9%-10% on sovereign backed debt in the near future.

Far East investors are exiting structured products and seeking saftey in "tax payer" backed debt instrument to ride out the coming collapse on both residential and commercial real estate.

The markets are accurately leading indicators of what coming over the horizon. You are seeing 50%-70% collapses (which are only the beginning) as capital moves out all these managed funds.

My view is stay away. You can achieve better risk free returns without swallowing the commercial real estate risk chasing yield.

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polarbear456 t1_je7wzhd wrote

Replying to old_shows (#2,461,929)

Cohodes called the collapse of Silvergate and FTX almost a year before they went bust. I follow him on twitter and you’re 100% right on his ego and bullshit, but his track record is pretty solid as far as shorts go.

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old_shows OP t1_je82st4 wrote

Replying to polarbear456 (#2,469,093)

Oh he’s 100% right about being one of the all-time great short sellers. I just don’t think he needs to tell us that he’s the “greatest of all time” (literally his words) 50x in the span of an interview.

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old_shows OP t1_je84inl wrote

Replying to DYTTIGAF (#2,467,611)

My business profits when classes of commercial real estate drop in price. If that were the case, I’d happily believe it. But, you’re indefensibly wrong about this. And you’re forecasting 9-10% sovereign debt in developed markets!? I’m not even going to begin to tell you how impossibly stupid that is. Suffice to say it wouldn’t be “risk-free” as nearly every country would default on its debt. I’m done responding to you because you are spouting nonsense that could very easily be invalidated by 5 minutes of reading.

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DYTTIGAF t1_je8ddhv wrote

Replying to old_shows (#2,470,780)

I don't need to be right. The market is telling me that I am right.

My position is the marketplace is forecasting these truths. You can ignore these breadcrumbs all you want (and following your own beliefs).

You're not selling me your views. I just presented mine.

That's why you have a counter party in every trade. You have winners and losers. You exchange that value in every transaction.

Good luck.

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old_shows OP t1_je9l3bb wrote

Replying to DYTTIGAF (#2,472,787)

There is nowhere in the market that is telling you sovereign debt yields will rise to 9-10%. That’s so absurd it borders on conspiracy. Your apocalyptic and way-too-self-assured style of speaking confirms that you’re listening to quacks. Best of luck waiting for the world to end. I’m sure it will be immensely profitable for your counterparties.

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Steve_Dobbs_69 t1_je9l8r6 wrote

Replying to DYTTIGAF (#2,472,787)

I’m up on SLG shares and also bought in on all its preferred shares as well, just bought in at the beginning of market yesterday. I use an AI program that trades for me, was surprised to find out it selected these. I don’t know anything about SLG, the dividends look nice. I also thought it was strange that the AI selected commercial real estate. Maybe people are going to be headed back to the office and commercial real estate is oversold? Let’s see.

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old_shows OP t1_je9vje6 wrote

Replying to Steve_Dobbs_69 (#2,481,625)

It was the most oversold CREIT of the post-SVB crisis. It was completely relentless on the way down with multiple days of double digit % losses. The dividend is going to get hammered in April but, the momentum is real after opening again strong this morning. Def a ride the momentum and gtfo trade in my opinion. Great to see the algo’s supporting the trade, if people pile in, these shorts will get squeezed hard.

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DYTTIGAF t1_jea3sa6 wrote

Replying to old_shows (#2,481,590)

BX just told their investor group the Federal Reserve isn't stopping their rate escalation until late 2024.

Do you honestly believe they would waste the equity of 9 rate hikes in just over a year to reverse course now?

Dumb and stupid is no way to go through life.

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old_shows OP t1_jebk85l wrote

Replying to DYTTIGAF (#2,486,609)

“Blackstone Inc.’s Jonathan Gray expects the US Federal Reserve will raise interest rates to 5.25% to 5.5% and will then hold there an extended period of time, despite emerging signs of slowing inflation.”

…“While the firm expects an inverted yield curve and slowing economic activity this year, the world is in a ‘much better spot’ than during the 2008 financial crisis, Gray told a Hong Kong audience at a Webinar held by the Hong Kong Academy of Finance on Thursday. ‘It feels to me more like what we experienced in the early-2000 period where we had technology stocks that had run up too much, we had a Fed-induced slowdown that ended up being shallow and we then came out of it.’”

From Bloomberg, 2-16-2023.

Again, fucking read dude. You’re the worst kind of stupid. There is no winning with someone who is both arrogant and dumb. I sincerely hope that when the world inevitably presents you with incontrovertible evidence of your own idiocy that you possess the self awareness to internalize it and be humbled.

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DYTTIGAF t1_jebr485 wrote

Replying to old_shows (#2,499,739)

What's the problem Princess. Do you you really believe an inverted yield curve that predicted every recession for the last 50 years is going to be beneficial?

You only have 120 Karma. You have 9 posts about watches and 1 post on WSB. What are you some paid hack for this stock?

I can tell by your persistent disregard for reality and facts you're pumping this stock. You're such a lightweight you don't have enough brainpower for me to block you.

I will just let you be. Sucking your thumb.

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DYTTIGAF t1_jed1d84 wrote

Replying to old_shows (#2,513,060)

Look at you coming back for more abuse. You're such a narcissistic twit.

You so uneducated you can't swallow what was said and points made because they went over your head.

You sound like the sales twits that work for me. Go back to looking at watches, blow drying your hair, and dreaming of a Porsche.

Geez. You're a cliche. Go work for another 20 years and get back with me. You're wasting my time.

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