SL Green Realty Corp. (SLG): A Dividend Gem or a Short Seller’s Target?

Amid the turbulence of the U.S. real estate market, SL Green Realty Corp. (SLG), a major player in Manhattan’s office properties, has become a paradoxical investment opportunity. The company offers a compelling 5.73% dividend yield—a rare find in today’s low-interest-rate environment—but its shares have drawn intense scrutiny from short sellers. With short interest hovering near 13% of its float and a negative P/E ratio signaling losses, SLG presents a puzzle for investors: Is it a cheap dividend stock worth buying, or a trap for the unwary?

The Dividend Appeal

SLG’s dividend yield of 5.73% (as of April 2024) ranks among the highest in the REIT sector. This is no accident: The firm has prioritized income distribution despite challenges in its core Manhattan office market. In December 2024, it even increased its monthly dividend to $0.2575 per share, reversing prior cuts. For income-focused investors, this stability is alluring, especially when compared to the 10-year Treasury yield of around 3.5%.

Yet the dividend’s sustainability hinges on SLG’s ability to generate cash flow. While its Q1 2025 revenue rose 15.2% year-over-year to $163 million, the company remains in the red, with a trailing twelve-month diluted EPS of -$0.42 (as of April 2025). This negative P/E ratio of -122.55 underscores a critical flaw: SLG’s earnings are not yet covering its dividend payments.

The Short Seller’s Playbook

Short interest in SLG has been a persistent theme. As of October 2024, 13.02% of its float was held short, with a short interest ratio of 11.8 days, meaning it would take over two weeks of average trading volume to cover all bets against the stock. While this is below the “extreme” threshold of 10+ days noted in some analyses, it still reflects significant bearish sentiment.

Institutional short sellers like Millennium Management and Squarepoint Ops have piled into the stock, likely betting on a continued decline in Manhattan office demand. The reasoning is clear: Manhattan’s office vacancy rate has risen as remote work persists, and SLG’s heavy concentration in the market leaves it vulnerable.

Valuation: A Mixed Picture

On the surface, SLG’s Price-to-Book (P/B) ratio of 1.09 (as of August 2024) suggests it trades at near-book value, implying undervaluation. However, this metric is skewed by the company’s $3.73 billion market cap, which may not account for the softness in its office portfolio.

Comparisons to peers are telling. SLG’s P/B ratio is higher than Equity Commonwealth’s 0.69 but lower than Douglas Emmett’s 1.21. Meanwhile, its negative P/E ratio stands in stark contrast to REIT peers like Prologis (P/E 23.93), which are benefiting from industrial real estate booms.

Recent Performance: Signs of Life?

Despite the headwinds, SLG’s Q1 2025 results offer a glimmer of hope. Same-store cash NOI rose 2.4% year-over-year, excluding lease termination income, and Manhattan office occupancy held steady at 91.8%—in line with management’s projections. These metrics suggest demand for prime office space remains resilient, even as remote work persists.

However, the firm’s reliance on Manhattan’s cyclical market is a double-edged sword. A prolonged downturn could amplify losses, while recovery in office leasing could turn the tide.

Conclusion: Proceed with Caution

SLG presents a high-risk, high-reward scenario. Its 5.73% dividend yield and near-book-value pricing make it an intriguing play for income investors, but the negatives are formidable: a negative P/E ratio, reliance on a volatile market, and a 13% short interest that could amplify losses in a sell-off.

For now, the stock is a speculative bet on Manhattan’s office recovery. Investors should weigh two questions: Will occupancy rates stabilize, allowing SLG to return to profitability? Or will short sellers’ pessimism prove justified?

The data leans toward cautious optimism. The 91.8% occupancy and rising NOI suggest underlying strength, but the path to sustained profitability remains uncertain. For those willing to take the gamble, SLG offers dividend income and potential upside—if Manhattan’s office market rebounds. For the risk-averse, it’s best to watch from the sidelines.

In the end, SLG is a test of investors’ patience—and their tolerance for volatility.