Vornado Realty Trust
), a leading real estate investment trust (REIT), reported first
quarter 2012 FFO (funds from operations) of $348.5 million or $1.82
per share, versus $505.9 million or $2.64 in the year-earlier
quarter. Funds from operations, 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.
The reported FFO per share during first quarter 2012 surpassed
the Zacks Consensus Estimate by 5 cents. After adjusting items for
comparability, FFO during the first quarter of 2012 was $346.8
million or $1.81 per share, compared with $331.2 million or $1.73
in the prior-year quarter.
Total revenues during the reported quarter were $727.5 million
compared with $726.9 million in the year-ago period. Total revenues
during the quarter were well ahead of the Zacks Consensus Estimate
of $661 million.
Same-store occupancy in the company's New York City and
Washington, DC portfolio was 96.1% and 87.5%, respectively, at
quarter-end. Same-store EBITDA (earnings before interest, tax,
depreciation and amortization) on GAAP basis increased 3.5% and
decreased 7.1% during the quarter in the New York City and DC
office portfolios, respectively, compared with the year-earlier
The company's retail portfolio faltered slightly during the
reported quarter; same-store occupancy was 93.2% at quarter-end,
while same-store EBITDA (GAAP) decreased 0.5% versus the year-ago
quarter. In the Merchandise Mart segment, same-store occupancy was
83.5%, while same-store EBITDA (GAAP) increased 5.4%
During the reported quarter, Vornado leased 513 square feet and
712 square feet in New York City and Washington, DC office
portfolio. Rents increased 2.2% (cash basis) and 3.0% (GAAP)
compared with the previous rents in New York City office segment.
In Washington DC, rents increased 0.9% (cash) and 2.9% (GAAP)
versus expiring rents. Retail rents (strip mall) increased 5.0%
(cash) and 26.3% (GAAP) over in-place rents.
Vornado has a healthy balance sheet with very manageable
near-term debt maturities and plenty of cash. At quarter-end, the
company had $614.4 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 38.2% compared to 39.8% in first quarter
Vornado is the largest publicly traded office REIT in the New
York region. The core properties of the company are performing at a
high level and it is maintaining strong occupancies in its New York
City office and retail portfolios. We believe this puts the company
well ahead of many of its competitors, who have assets in weak
markets struggling with high vacancies and little pricing
We maintain our Neutral recommendation on Vornado, which
presently has a Zacks #3 Rank that translates into a short-term
Hold recommendation.We also have a Neutral recommendation and a
Zacks #3 Rank for
Brookfield Properties Corporation
), a competitor of Vornado.
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