Office real estate is no longer one story. In New York, the buildings that hold up best are the upgraded ones in top locations, where tenants sign longer leases and pay for quality. That difference is important, because it explains why some landlords can still produce solid cash flow even when the sector has a bad reputation.

This company is an example. Over the last year it produced about $538 million of free cash flow and paid $0.74 per share in dividends, so the common dividend looks well supported. The attention, however, is moving to the preferred shares, because they trade at a low price and show a yield above 7%. The key point is that the yield is high for a reason: the market is charging a premium for credit risk.

Top points of analysis

• Dividend per common share: $0.74 per year, yielding roughly 2%.

• Preferred stock: Dividend e.g. 4.45% (Series O = $1.1125 per year), 5.25% (Series M/N = $1.3125 per year); at a price below $25, the current yield comes out over 7%.

• Debt to assets 0.50,…