SL Green Realty Corp.: Navigating High-Interest-Rate Challenges with Resilient Earnings and Strategic Debt Management

In a high-interest-rate environment that has tested the resilience of real estate firms, SL Green Realty Corp. (SLG) has demonstrated a compelling blend of operational strength and strategic financial management. The company's Q3 2025 results underscore its ability to adapt to market conditions while maintaining robust earnings and funds from operations (FFO). According to the SLG Q3 2025 release, SL Green reported Q3 2025 earnings of $0.34 per share and FFO of $1.58 per share, surpassing expectations and reflecting a 40% year-over-year increase in FFO from $1.13 per share. This performance highlights the company's capacity to generate stable cash flows despite macroeconomic headwinds.

Earnings Resilience and Leasing Momentum

SL Green's earnings resilience is anchored by strong leasing activity in Manhattan, a key market for the company. During Q3 2025, the firm secured 52 office leases totaling 657,942 square feet, driving Manhattan same-store occupancy to 92.4% as of September 30, 2025. This momentum is expected to push occupancy to 93.2% by year-end, signaling sustained demand for premium office space. Revenue growth further reinforced this trend, with total revenue reaching $244.82 million-a 6.6% year-over-year increase, according to a GuruFocus article.

The company's ability to maintain high occupancy rates and secure premium rents is critical in a high-interest-rate climate, where capital costs are elevated. As stated by GuruFocus, SL Green's FFO growth reflects disciplined asset management and a focus on high-quality tenants, which insulate the firm from broader market volatility.

Notably, this marks the first time in three years that SLG has exceeded earnings expectations, as historical data from 2022 to 2025 shows no prior instances of beating consensus estimates.

Strategic Debt Management in a Rising Rate Environment

A key factor in SL Green's financial resilience is its proactive approach to debt management. In Q3 2025, the company completed a $1.4 billion, five-year fixed-rate refinancing of 11 Madison Avenue at an effective rate of 5.592%. This move locks in favorable terms amid rising interest rates, reducing refinancing risk. Additionally, the firm extinguished debt on 1552-1560 Broadway, generating a $57.2 million net gain. Such actions demonstrate a strategic focus on optimizing debt costs and improving balance sheet flexibility.

While SL Green's debt-to-EBITDA ratio of 9.46 (as of June 2025) exceeds the industry median of 6.69, according to GuruFocus debt-to-EBITDA data https://www.gurufocus.com/term/debt-to-ebitda/SLG, the company's debt-to-equity ratio of 1.31 remains below average, indicating a conservative capital structure. Furthermore, the firm has hedged variable-rate exposure by converting a $80 million mortgage on 500 Park Avenue to a fixed rate of 6.57% through 2028, as disclosed in the company's first-quarter release. These steps mitigate the impact of rate hikes and align with long-term stability goals.

Balancing Risks and Opportunities

Despite its strengths, SL Green faces challenges. The elevated debt-to-EBITDA ratio, while manageable given its strong cash flows, could become a concern if interest rates rise further or occupancy trends reverse. However, the company's focus on credit investments—such as the $46.3 million gain from loan loss reversals in Q2 2025 noted by GuruFocus—diversifies its revenue streams and enhances FFO. This strategic pivot, though increasing leverage, positions SL Green to capitalize on market dislocations.

Conclusion: A Model of Adaptability

SL Green Realty Corp.'s Q3 2025 performance exemplifies how a well-managed real estate firm can thrive in a high-interest-rate environment. By leveraging strong leasing fundamentals, optimizing debt structures, and diversifying income sources, the company has reinforced its financial resilience. For investors, SL Green's ability to balance growth with prudence offers a compelling case for long-term confidence.