By Ian Salisbury

The prospect that New York City may choose a 33-year-old democratic socialist as its next mayor has unnerved investors in SL Green Realty Corp., one of the city's largest commercial landlords. It is an overreaction that could create a buying opportunity for income investors.

This past summer, the little known Zohran Mamdani made national headlines when he defeated former New York Gov. Andrew Cuomo to win the Democratic mayoral primary, making him the favorite to become Big Apple's next leader. Mamdani's rise has cast a pall over share prices of New York-oriented real estate investment trusts.

So far this year, shares of SL Green, which owns 27 million square feet of Manhattan real estate, have lost 1.9%, according to FactSet. $Vornado Realty Trust(VNO-N)$, not far behind with 20 million square feet, are up just 1%. In contrast the Real Estate Select Sector SPDR ETF has returned 5.9%.

Mamdani, who campaigned on a platform of making the city more affordable for middle-class residents, appears to have spooked investors with proposals to raise taxes on corporations and high earners and freeze residential rents. The opportunity lies in the fact that even if Mamdani wins, it isn't clear how many promises he will be able to keep.

Mamdani wouldn't be able to hike taxes without cooperation from more conservative politicians in Albany, Citi analysts Seth Bergey, Lauren McNichol, and Nick Joseph, said in a research report Thursday. Citi upgraded SL Green to Buy from Neutral and lifted Vornado to Neutral from Sell.

"We believe the market reaction is likely overdone as tenants continue to look through the mayoral cycle to make decisions about their future real estate needs and commit to space, which has been reaffirmed in our conversations with both private and public landlords with NYC office exposure," wrote the Citi team.

The Manhattan office market, which has struggled since Covid upended traditional in-office work culture, has slowly been stabilizing. During the first half of 2025, the amount of space newly leased in Manhattan jumped 42% compared with the same period a year ago, according to industry researcher Colliers. Meanwhile, the supply of office sublets fell to the lowest levels since the summer of 2020.

For investors worried about where to find yield ahead of widely anticipated Federal Reserve rate cuts next week, SL Green's recent travails could provide an attractive entry point.

Assuming the worst is over for Manhattan's real estate, SL Green's 4.8% dividend yield looks fairly solid. Wall Street analysts expect, on average, that the firm's adjusted funds from operations, the REIT industry's equivalent to operating profits, will grow about 6% next year, before accelerating in 2027.

To put SL Green's payout in context, the average yield among REITs as a sector is just 3.3%. For all stocks in the S&P 500, it is 1.1%.

Vornado, which yields just 1.7% after recent cuts to its payout is a harder sell.

Write to Ian Salisbury at ian.salisbury@barrons.com

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September 12, 2025 13:49 ET (17:49 GMT)

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