In accordance with its strategic initiative to strengthen the balance sheet, Vornado Realty Trust (VNO), a leading real estate investment trust (REIT), has recently announced that its operating partnership has renewed and extended its unsecured revolving credit facility. This follows the latest industry buzz that the company is likely to tap the commercial mortgage-backed securities (CMBS) market to raise $600 million to $700 million to repay debt.
Vornado Realty L.P., the operating partnership through which the company operates, renewed one of its two unsecured revolving credit facilities, and extended its borrowing capacity from $1 billion to $1.25 billion. The renewed credit facility is scheduled to mature in 2015 and has a one-year extension option.
Vornado has historically maintained manageable near-term debt maturities and plenty of cash. The company is currently mulling its options to extend its second revolving credit facility of $1.6 billion that is scheduled to mature in September 2012. Presently, total revolving credit facility of the company aggregate over $2.8 billion, out of which about $100 million is outstanding.
New York-based Vornado is one of the largest REIT in the U.S., engaged in acquiring, owning and leasing office properties, retail space and temperature-controlled logistics and refrigerated warehouses. Besides its properties, the company also has investments in other REITs, industrial buildings and Toys ‘R’ Us. Vornado currently owns about 32.7% of Toys ‘R’ Us.
Vornado 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 provides the company a competitive advantage to continually increase rents. The core properties of the company are also 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 power.
We maintain our long-term ‘Neutral’ rating on Vornado, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ recommendation and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Brookfield Properties Corporation (BPO), a competitor of Vornado.
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