Vornado Realty Trust (VNO) is riding high on the strategic revamping of its portfolio to focus exclusively on the office assets in the New York City and Washington, DC region and the Manhattan street retail properties. Notably, the New York portfolio is projected to grow due to improving office leasing, retail sales, and rental rates.
Last month, this real estate investment trust (REIT) disclosed that its real estate fund – Vornado Capital Partners – along with its joint venture partner Angelo, Gordon & Co., have sold off Georgetown Park for $272.5 million. The sale follows a multi-million dollar revamp and transformation job.
Also, in July, Vornado collaborated with Crown Acquisitions to buy the retail condominium of the St. Regis Hotel and the nearby retail townhouse for about $700 million. Further, the company’s shopping center spin-off decision is encouraging as it would help in increasing its focusing on core assets.
In August, Vornado came up with second-quarter 2014 adjusted funds from operations (FFO) per share of $1.44, higher than the year-ago FFO per share of $1.27. This was aided by notable portfolio repositioning and leasing activity. However, including one-time expenses, the company’s reported FFO per share of $1.15 came below $1.25 in the year-ago quarter, due to higher Toys 'R' Us losses.
Also, the Washington D.C. market continues to remain a major concern due to sluggish leasing environment. In addition, increase in online purchases could hurt the demand for Vornado’s retail properties. Additionally, the sluggish pace of office market recovery and stiff competition remain concerns.
To gain deeper insight into Vornado, you can refer to our updated research report, which was issued on Sep 3, 2014.
Over the last 30 days, the Zacks Consensus Estimate for 2014 FFO per share remained stable at $4.79. However, for 2015, it dipped by 3 cents to $5.17. The stock currently has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Investors interested in REITs may consider stocks like Chatham Lodging Trust (CLDT), DCT Industrial Trust Inc. (DCT) and Douglas Emmett Inc (DEI). All these stocks hold a Zacks Rank #2 (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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