The COVID-19 lockdowns have demonstrated the efficacy of the work-from-home model, causing many investors to question whether this signifies a permanent sea-change in the way people work. In its recent second-quarter earnings, Manhattan office space REIT SL Green (SLG 1.89%) spent a lot of time discussing its tenants' current thinking. Numerous CEOs have bluntly encouraged employees to return to the office, but there are signs that this could get pushed back yet again -- and even if that does happen, SL Green's dividend is safe.

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The company has not seen any indication that companies are planning on shrinking square footage in response to work-from-home trends. On the earnings conference call, SL Green CEO Marc Holliday said that the majority of SL Green's tenants were planning to transition back to work-from-office after Labor Day. 

The wildcard in this question is the delta variant of COVID-19, and whether that will cause companies to push back the return to the office, as Apple has apparently done. At the moment, SL Green believes any sort of delta-driven delay will be measured in weeks, not months. SL Green's tenants generally lock up space for a period of five to 10 years, so incremental delays are probably not going to impact longer-term plans all that much. 

Concessions seem to have stabilized

Despite any fears of the delta variant, lease signings have continued, with the company signing up 557,703 square feet of space during the quarter. The company mentioned on the call that concessions -- bonuses thrown in to sweeten the deal for reluctant tenants -- have stabilized.

Concessions demonstrate a REIT's bargaining power versus its tenants. A REIT with a high occupancy rate might not have to give freebies to entice a tenant to stay, while one with a high vacancy rate might have to "buy" occupancy with giveaways. We saw this a lot with the urban apartment REITs last year. SL Green's typical concession offering right now might involve 12-14 months of free rent including $110,000-$130,000 in tenant improvements.

When reporting performance, REITs like to use funds from operations, instead of net income because it better describes the company's true financial health. SL Green is guiding for 2021 funds from operations (FFO) per share to come in between $6.30 and $6.70 per share, down from $6.82 last year. 

This means the company trades for 11.6 times FFO per share, at the lower end of its historical range. SL Green pays a monthly dividend of $0.303 per share, which works out a 4.91% yield. The company's guided for enough FFO to amply cover its $3.64 annual dividend -- so even if the Delta variant pushes back the return to the office, a dividend cut is probably not in the cards.

SL Green has rallied 70% from its COVID-19 lows, which means the stock can no longer be considered beaten up, and with its concessions stabilized, it looks like the worst may be over for the company. The company still has a ways to go in order to recoup all of its COVID-19 related losses, but investors' fears of a sea change in corporate attitudes toward Manhattan office real estate have yet to come true.