Vornado Realty Trust VNO realized $43 million in net proceeds from $308 million refinancing of RiverHouse Apartments in Washington, D.C.
This 3-building, 1,670-unit complex was earlier burdened with a 5.43% $195 million mortgage, due Apr 2015 and a $64 million mortgage at LIBOR +1.53% maturing in 2018. The move allows flexibility to Vornado with the new loan being interest-only at LIBOR + 1.28% and slated to mature in 2025.
To streamline operations, in January, this real estate investment trust (“REIT”) finally spun off its shopping center business into a publicly traded REIT named Urban Edge Properties. This spin-off was an outcome of Vornado’s decision to separate two businesses, which have been together for legacy reasons but with no real operating synergies.
Vornado, which has been subject to criticism for venturing into too many sectors, would now be able to focus exclusively on office properties and retail shops in Washington and Manhattan.
Moreover, in March, the company closed the acquisition of the 8-story Center Building, located at Northern Boulevard in Long Island City, NY, for $142 million. The 437,000 square feet office building is 98% leased and should help Vornado strengthen its business in the New York market, going forward.
We believe the strategic investments and refinancing moves would offer the company a scope to ride on the growth trajectory. Yet, a choppy environment in some of its markets and stiff competition might dampen its growth tempo to some extent.
Vornado currently carries a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider stocks like Prologis, Inc. PLD, PS Business Parks Inc. PSB and SL Green Realty Corp. SLG. All these stocks carry a Zacks Rank #2 (Buy).
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