You gotta love New York. Even as its infrastructure ages and steampipes explode, commercial rents have been blasting upwards. And if you gotta love New York, you gotta love SL Green (NYSE:SLG).

Late Monday, the only public office REIT primarily focused on Manhattan posted second-quarter earnings that exceeded Wall Street's expectations. Funds from operations increased 3.5% from a year ago to $79.5 million, or $1.26 per share, while most analysts estimated $1.12 per share. Revenue more than doubled to $257.7 million from $123.6 million a year ago due to strong leasing activity, and property sales helped boost net income to $265.9 million from $29.1 million a year ago.

Management believes that it just completed one of its strongest quarters ever, as it executed on all fronts amid volatile capital markets and increased costs of capital. The company paid down debt, increased its revolving credit facility while reducing interest rate spreads, and repurchased $49.9 million of its stock. The firm also benefited from its 25% stake in real estate finance REIT Gramercy Capital (NYSE:GKK), which announced its own record earnings last week, by receiving $12.8 million in dividends and fees and a $3.8 million incentive fee.

In a city that never sleeps, SL Green continued its brisk pace. The firm's Manhattan occupancy rate rose to 97.6%, up from 97.3% a year ago, and signed 75 leases. Significantly, the average new office space rent was 40.5% higher than from those leases which expired. The company sold $724.5 million of properties while transacting $1.24 billion in acquisitions. Among those acquisitions was the recent purchase of a stake in the well-known "Lipstick Building" for $317 million. SL Green's ability to reposition buildings is also working. The firm has nearly finished its $72 million makeover of a bland Park Avenue building into up-to-date eye candy, and raised rents to $90-$110 per square foot from the previous $53 per square foot rate.

SL Green is a financially sound, experienced player with niche expertise in the Manhattan market. There's no shortage of demand for the firm's underlying properties, and that should confirm value in its shares. While the market's repricing of risk will make it a more difficult environment for all REITS, including others with New York exposure such as Vornado (NYSE:VNO) or Mack-Cali (NYSE:CLI), to do business, SL Green's market knowledge and balance sheet flexibility should allow it to take advantage of opportunities as they arise.

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Fool contributor S.J. Caplan does not own shares of the companies discussed in this article.