Vornado Realty Trust
), a leading real estate investment trust (REIT), reported second
quarter 2012 FFO (funds from operations) of $166.7 million or $0.89
per share, versus $243.4 million or $1.27 in the year-earlier
After adjusting items for comparability, FFO during the second
quarter of 2012 was $211.6 million or $1.13 per share, compared
with $220.3 million or $1.15 in the prior-year quarter. The
recurring FFO per share during second quarter 2012 surpassed the
Zacks Consensus Estimate of $0.96.
Total revenues during the reported quarter were $700.6 million
compared with $696.0 million in the year-ago period. Total revenues
during the quarter were well ahead of the Zacks Consensus Estimate
of $685 million.
Same-store occupancy in the company's New York City and Washington,
DC portfolios were 95.4% and 85.9%, respectively, at quarter-end.
Same-store EBITDA (earnings before interest, tax, depreciation and
amortization) on GAAP basis increased 2.9% and decreased 8.1%
during the quarter in the New York City and DC portfolios,
respectively, compared with the year-earlier quarter.
Same-store occupancy in the retail portfolio was 93.5% at
quarter-end, while same-store EBITDA (GAAP) increased 0.7% versus
the year-ago quarter. In the Merchandise Mart segment, same-store
occupancy was 82.6%, while same-store EBITDA (GAAP) increased 10.5%
year over year.
During the reported quarter, Vornado leased 614 square feet and 526
square feet in New York City and Washington, DC portfolios
respectively. Rents increased 4.5% (cash basis) and 7.4% (GAAP)
compared with the previous rents in New York City office segment.
In Washington DC, rents decreased 4.2% (cash) and increased 0.7%
(GAAP) versus expiring rents. Retail rents (strip mall) increased
23.1% (cash) and 29.2% (GAAP) over in-place rents.
Subsequent to the quarter-end, Vornado Capital Partners, L.P. - a
25% owned real estate fund, acquired 1100 Lincoln Road retail
property for $132 million. The property, spanning 167,000 square
feet, was 97% leased at the point of purchase and is one of the
prime attractions of the Lincoln Road shopping district in Miami
The transaction was financed partially by a $66 million new
mortgage loan on the property. The loan bearing an interest rate at
LIBOR plus 2.75% is scheduled to mature in July 2015 with two
one-year extension options.
Additionally, Vornado also entered into an agreement to acquire a
retail condominium located at 666 Fifth Avenue on 53rd Street in
New York City for approximately $707 million. The property
encompasses 114,000 square feet with a frontage of 126 feet on
Fifth Avenue. The transaction will be funded with property level
debt and proceeds from asset sales and is expected to close in the
fourth quarter of 2012.
Subsequent to the quarter-end, Vornado entered into a lease with
Host Hotels & Resorts, Inc.
), to redevelop the retail and signage components of the Marriott
Marquis Times Square Hotel in Manhattan. The lease contains options
based on cash flow which, if exercised, would lead to an ownership
by Vornado in the asset.
During the reported quarter, Vornado completed the sale of L.A.
Mart, a 784,000 square foot showroom building in Los Angeles,
California, for $53.0 million. Subsequent to the end of the
quarter, the company entered into agreements to sell the Washington
Design Center, the Boston Design Center and the Canadian Trade
Shows, for a total of $175.0 million in cash.
In addition, Vornado completed the sale of 409 Third Street
S.W., a 409,000 square foot office building in Washington, DC, for
$200.0 million in cash, resulting in a net gain of approximately
$124.7 million that will be recognized in the third quarter.
HOST HOTEL&RSRT (HST): Free Stock Analysis
VORNADO RLTY TR (VNO): Free Stock Analysis
To read this article on Zacks.com click here.
Vornado has a healthy balance sheet with very manageable near-term
debt maturities and adequate cash. At quarter-end, the company had
$471.4 million of cash and cash equivalents and total outstanding
consolidated debt of $13.9 billion. The FFO payout ratio (based on
FFO as adjusted for comparability) during the reported quarter was
60.8% compared to 60.0% in second quarter 2011.
We maintain our Neutral recommendation on Vornado, which presently
has a Zacks #3 Rank that translates into a short-term Hold
Note: FFO, a widely used metric to gauge the performance of
REITs, is obtained after adding depreciation and amortization and
other non-cash expenses to net income.