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Vornado Completes Funding for Office Asset in Washington, DC - Analyst Blog

Vornado Realty Trust ( VNO ) accomplished a $185-million financing for an office asset in Washington, DC. This unencumbered property - Universal buildings - is a two-building office complex spanning over 690,000 square foot. Bearing an interest rate at LIBOR plus 1.90%, this loan will mature in 2019 and has two one-year extension opportunities.

This funding accomplishment surely boosts Vornado's strategic efforts. We believe that going forward, the company's portfolio-repositioning activities and leasing efforts would help it to raise the revenue momentum.

In April, Vornado disclosed its plan to spin off its U.S. shopping center business into a new publicly traded REIT. Specifically, the company will spin off 80 strip centers, 4 malls and a warehouse park. The spin off is expected to be completed by the end of this year.

This shopping center spin-off decision is in line with Vornado's streamlining measures and will help it to focus exclusively on the office assets in the New York City and Washington, DC region as well as the Manhattan street retail properties.

Earlier this month, hurt by higher Toys 'R' Us losses, Vornado reported funds from operations (FFO) per share of $1.15 for second-quarter 2014, down from $1.25 in the year-ago quarter.

However, on an adjusted basis, Vornado's funds from operations (FFO) per share came in at $1.44, higher than the year-ago figure of $1.27. The Zacks Consensus Estimate for second-quarter 2014 FFO per share stood at $1.11. As of Jun 30, 2014, Vornado had $1.4 billion of cash and cash equivalents, up from $1.2 billion as of Mar 31, 2014.

Vornado currently carries a Zacks Rank #3 (Hold). Investors interested in REITs may consider stocks like Pebblebrook Hotel Trust ( PEB ), Ashford Hospitality Trust, Inc. ( AHT ) and W. P. Carey Inc. ( WPC ). All these stocks sport a Zacks Rank #1 (Strong 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.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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