Vornado Realty Trust ( VNO ) - a leading real
estate investment trust (REIT) - reported first-quarter 2013
adjusted FFO (funds from operations) per share of $1.14, missing
the Zacks Consensus Estimate of $1.85. However, the FFO exceeded
the year-ago number of 98 cents by 16.3%. The year-over-year
increase was attributable to the company's successful execution of
Including the non-recurring items, FFO came in at $201.8 million
or $1.08 per share, compared with $348.5 million or $1.82 in the
Total revenue upped 7.7% to $721.0 million from $669.2 million
in prior-year quarter. The figure also outpaced the Zacks Consensus
Estimate of $631 million.
Behind the Headlines
Same-store EBITDA (earnings before interest, tax, depreciation
and amortization) on GAAP basis nudged up 4.6% and decreased 7.4%
year over year in the quarter in New York City and Washington, D.C.
portfolios, respectively. Same-store occupancy in the
company's New York City and Washington, D.C. portfolios were 96.1%
and 83.8%, respectively, at the end of the first quarter.
In the reported quarter, Vornado leased 909 square feet and 297
square feet of office space in New York City and Washington, D.C.
portfolios, respectively. Rents increased 0.8% (cash basis) and
15.1% (GAAP) compared with the previous rents in New York City
office segment. In Washington, D.C., rents escalated 3.5% (cash)
and 5.5% (GAAP) versus the expiring rents.
Notable Portfolio Activities
Vornado divested Green Acres Mall in Valley Stream, N.Y., for
$500.0 million and generated a net gain of $202.3 million.
Subsequent to the end of the quarter, Vornado sold a power strip
shopping center - The Plant - in San Jose for $203 million and
realized a net gain of approximately $33 million.
Additionally, Vornado sold its 26.2% stake in LNR Property LLC
to Starwood Property Trust Inc. ( STWD ) and Starwood
Capital Group for $1.05 billion. Vornado reaped approximately $241
million as net proceeds from the sale.
Vornado has a healthy balance sheet with very manageable
near-term debt maturities and adequate cash. As of Mar 31, 2013,
the company had $585.8 million of cash and cash equivalents,
compared with $960.3 million as of Dec 31, 2012. At the end of the
quarter, total outstanding debt stood at $13.5 million.
The FFO payout ratio (based on FFO as adjusted for
comparability) in the quarter was 64.0% compared with 70.4% in the
first quarter of 2012.
During the quarter, Vornado closed on the $390 million worth
financing of the retail condominium situated at 666 Fifth Avenue at
53rd Street. Moreover, the company completed $300 million financing
of a N.J.-based shopping center - Outlets at Bergen Town
Additionally, Vornado extended one of the 2 revolving credit
facilities from Jun 2015 to Jun 2017, with two six-month extension
options. This helped in reducing the interest expense of the
We are impressed with the decent first-quarter results at
Vornado. We believe that Vornado's portfolio repositioning through
strategic sale-offs would position it well on the growth
trajectory. This has further strengthened its foothold in 2 of the
best long-term office markets in the U.S. -New York City and
Washington, D.C. Moreover, the company's healthy balance sheet and
liquidity position facilitate it to take advantage of distressed
selling as asset values of office and retail properties continue to
drop in the aftermath of the recession. We expect all these factors
to provide upside potential to the company going forward.
However, we anticipate continued volatility in the office sector
with job cuts and a decline in market fundamentals, which in turn
are likely to limit Vornado's growth prospects.
Vornado currently has a Zacks Rank #3 (Hold). Other better
performing REITs include Host Hotels & Resorts
Inc. ( HST
) and LaSalle Hotel Properties ( LHO ). Both stocks
carry a Zacks Rank #2 (Buy).
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.HOST HOTEL&RSRT (HST): Free Stock Analysis
ReportLASALLE HTL PRP (LHO): Free Stock Analysis
ReportSTARWOOD PROPRT (STWD): Free Stock Analysis
ReportVORNADO RLTY TR (VNO): Free Stock Analysis
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