The initiative for a $5.4 billion Caesars Palace casino in Times Square has faced rejection from a Manhattan community advisory committee, but SL Green Realty Corp. asserts that the project still holds potential.
During Thursday’s third-quarter earnings discussion, SL Green Chairman and CEO Marc Holliday expressed that they are still considering the revival of their casino venture at 1515 Broadway, created in collaboration with Caesars Entertainment and Jay-Z’s Roc Nation.
“It’s not ‘completely dead’, as you put it,” Holliday responded to a query from Bank of Montreal analyst John Kim. “The entire situation and its results remain uncertain. How many bidders are there? How many licenses will be distributed—and if some are withheld, will there be another chance for casinos in Manhattan or elsewhere?”
Being the first to be cut from the downstate New York casino competition has cost SL Green around $13.1 million in associated costs. Nevertheless, Holliday mentioned the real estate investment trust (REIT) is preserving its options as the state’s gaming board is expected to finalize decisions on up to three casino licenses by year-end.
“This is still an ongoing process,” he affirmed. The encouragement comes at a time of shifting competition. This week, MGM Resorts International withdrew its bid to convert the Empire City Casino in Yonkers into a full-scale gaming destination, citing new government guidance that rendered the project unviable. MGM’s withdrawal leaves three contenders for three licenses, although regulators do not have to grant all of them.
Rendering of the anticipated development
Holliday maintained his belief that Manhattan merits a casino, emphasizing the unparalleled nature of Times Square as a location. “There should be at least one casino in Manhattan. It’s evident to me that Times Square is the ideal spot, but the process has been structured in a way that makes it unfeasible, at least for now,” he added.
Currently, SL Green continues to secure a stable income from the 1515 Broadway site, where CBS remains the primary tenant amid support from Skydance’s acquisition. Holliday noted that the company’s robust balance sheet and adaptable financial stance enable it to pivot if the gaming project does not materialize.
“We currently have substantial flexibility owing to our low debt per square foot, estimated at around $3.75. Hence, we enjoy complete financial flexibility,” he stated.
“The building’s lease extends until around the mid-2031 mark, and the property generates considerable cash flow. This positions us favorably to explore various options, initiate multiple negotiations, and ultimately secure the most advantageous outcome.”
SL Green’s enduring performance has been reflected in strong quarterly metrics. The firm announced funds from operations (FFO) of $1.58 per share, surpassing Wall Street’s consensus projection of $1.41 and signifying a 39% increase compared to the same timeframe last year. The FFO figure encompassed transaction costs stemming from the casino proposal.
In the third quarter, SL Green executed 52 office leases in Manhattan, accumulating 658,000 square feet, which raised occupancy to 92%, with forecasts suggesting it could exceed 93% by year’s end. The REIT has played a vital role in revitalizing New York’s office market, as leasing activities and rents for premier properties have rebounded to or surpassed pre-pandemic figures.
Holliday also emphasized the firm’s expanding footprint along Park Avenue. SL Green recently finalized an agreement to acquire Park Avenue Tower from Blackstone for $730 million, planning to finance $475 million of the purchase through new debt, with the remainder covered by equity.