On Thursday, SL Green Realty (NYSE:SLG), a real estate investment trust that owns and operates commercial office properties in Manhattan, announced the acquisition of competitor Reckson Associates Realty (NYSE:RA) for about $6 billion. The price tag included $2 billion of Reckson's outstanding debt. This move further strengthens the New York City presence of one of the industry's preeminent leaders.

SL Green will now hold a total of 28.1 million square feet of real estate, with 23 million square feet being located in Manhattan. News of the transaction and strong second-quarter earnings were the key drivers that led Deutsche Securities to upgrade the REIT from a hold to a buy rating on Friday.

The stock's recent 52-week high of $115.20 is backed by solid fundamentals. At the end of July, the company reported a second quarter that saw its quarterly funds from operations rise 23% compared to the prior year's second quarter. SL Green hit $57.2 million, or $1.22 per share for the quarter, compared to funds from operations of $46.4 million, or $1.02 per share for the same period last year. The increase is largely attributable to increased office rents. The stock still has room to run, as evidenced by its aggressive acquisition history and a price/FFO ratio of 25 that is comparable to the 24 maintained by competitor Boston Properties (NYSE:BXP).

Potential investors in this stock should also note that it is the second-largest holding of the perennial market-outperformer CGMRealty Fund (FUND:CGMRX). CGM has been under the command of G. Kenneth Heebner since 1994. Upon becoming the lead manager of CGM, Heebner strapped on a helmet and came out guns blazing, with 10 of 11 years in the black and a current five-year average return of 31.43% per year. Simply put, CGM only holds companies that produce lights-out returns. SL Green is no exception, with a current year-to-date return of nearly 45%.

Being strategically located in a market where the company can virtually name its price on its rentals, I wouldn't expect this juggernaut to cool off anytime soon. While many investors might have shied away from real estate in general over the past year on concerns of being on the losing end of a bubble, SL Green is in a market virtually immune to any such potential bubbles. With Manhattan office rentals experiencing a vacancy rate presently less than 6%, potential lessees will be at the mercy of this company and its fellow landlords for some time to come.

Related Foolishness:

Check out our suite of newsletters with a 30-day trial.

Fool contributor Billy Fisher does not own shares of any of the companies mentioned.