Vornado Realty Trust
), a leading real estate investment trust (REIT), disclosed its
share of the second-quarter 2013 financial results of Toys 'R' Us
- a global retailer of dedicated toys and baby products. Vornado
currently owns about 32.6% of Toys 'R' Us.
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Vornado's third-quarter 2013 results will include a loss of $34.2
million or 17 cents per share on account of Toys 'R' Us,
comparatively wider than the loss of $8.6 million or 4 cents per
share reported in the year-ago quarter.
As a result, Vornado will record negative FFO (funds from
operations) after income taxes of $22.3 million or 11 cents per
share, compared with negative FFO after income tax of $2.4
million or 1 cent per share in the year-ago quarter.
As a matter of fact, the Toys 'R' Us business is extremely
seasonal. Its previous performance has revealed that the
company's fourth quarter accounts for over 80% of its fiscal net
income owing to the strong holiday sales.
New York-based Vornado Realty, acquires, owns and leases office
properties, retail space and warehouses. In addition to its
properties, the company has investments in other REITs,
industrial buildings and Toys 'R' Us.
Vornado is scheduled to release its third-quarter 2013 results on
Nov 4, after the market closes. The Zacks Consensus Estimate for
FFO per share for the upcoming quarter is pegged at $1.19 cents
per share, depicting a year-over-year increase of 4.6%.
Vornado has a strong asset portfolio and its repositioning moves
have strengthened its foothold in 2 of the best long-term office
markets in the U.S. 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.
Despite the impact of the negative FFO in Vornado Realty's
third-quarter results from its share in Toys 'R' Us, we believe
that its ample portfolio diversification would help reduce such
an impact on the whole.
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). However, other
promising REITs that deserve a look are
Sotherly Hotels Inc.
Cousins Properties Incorporated
). While CubeSmart and Sotherly Hotels have a Zacks Rank #1
(Strong Buy), Cousins Properties carries a Zacks Rank #2 (Buy).
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.