Vornado Realty Trust
), a leading real estate investment trust (REIT), recently bought
a 58.75% interest in Independence Plaza, a 1,328-unit residential
complex in Tribeca submarket of Manhattan. The property which
comprises 54,500 square feet of retail space and 550 parking
spaces is valued at $844.8 million.
As a matter of fact, only last year, Vornado initiated its
efforts to get a majority stake in Independence Plaza. It
purchased a 51% interest in Independence Plaza's subordinated
debt for $45 million as well as a warrant to buy 25% of the
equity for $1 million.
For the recent transaction, Vornado bought 33.75% interest for
$160 million from one of the equity partners and exercised its
warrant for 25%. Further, the company contributed the appreciated
value of its interest in the subordinated debt as preferred
Owing to the deal, Vornado will gain a net amount of $100 million
in the fourth quarter, which stems from contributing the debt for
preferred equity and exercising its warrant.
The property is burdened by a $329.2 million mortgage. However,
in the first quarter of 2013, Vornado and Stellar Management, the
other equity partner, plan to refinance the mortgage,
significantly reducing their cash investment. The retail space at
the property is being managed by Vornado while the residential is
being managed by Stellar Management.
New York-based Vornado Realty, acquires, owns and leases office
properties, retail space and temperature-controlled logistics and
refrigerated warehouses. In addition, the company has investments
in other REITs, industrial buildings and Toys 'R' Us.
Vornado Realty has a strong asset portfolio in two of the best
long-term office markets in the U.S. - New York City and
Washington DC. This gives the company a competitive advantage to
continually increase rents.
This increase in stake in Independence Plaza further enhances its
portfolio and will likely be accretive to its financials going
forward. Alongside, it has a healthy balance sheet and adequate
Vornado Realty currently has a Zacks #2 Rank that translates into
a short-term Buy recommendation. However, one of its competitors,
Boston Properties Inc.
) has a Zacks #4 Rank, implying a short-term Sell recommendation.
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