Recently, Vornado Realty Trust (VNO) penned a deal to acquire an office building in the Long Island City, NY for around $142 million, including the assumption of an existing $62 million mortgage. The acquisition is projected to be accomplished in the first quarter of 2015, provided certain customary closing conditions are met.
The company also disclosed a 17-year lease agreement with Amazon.com Inc. (AMZN) for 470,000 square feet of space in a Manhattan, NY-based office building. In recent times, the company closed the buyout of the St. Regis Hotel retail condominium and the nearby townhouse for about $700 million. We believe these strategic acquisitions and leasing activities will go a long way in enhancing Vornado’s profitability.
In November, Vornado came up with third-quarter results. On an adjusted basis, the company’s FFO per share came in at $1.31, higher than the year-ago figure of $1.23 and ahead of the Zacks Consensus Estimate of $1.15. The results were aided by improving strategic portfolio repositioning and leasing activities.
Earlier, Vornado disclosed its plan to spin off its shopping center business into a publicly traded REIT. We believe that spin-off decision is encouraging as it would help the company streamline its business and focus exclusively on the office assets in the New York City and Washington DC region as well as the Manhattan street retail properties.
Yet, while the New York portfolio is projected to grow, weakness in the Washington DC region, stiff competition and an anticipated rise in the interest rates in the long term remain our concerns.
Echoing similar sentiments, over the last 30 days, the Zacks Consensus Estimate for 2014 climbed 0.6% to $4.84 per share while that for 2015 edged up 0.8% to $5.27 per share. Vornado currently has a Zacks Rank #3 (Hold).
To gain a deeper insight into Vornado, you can refer to our updated research report issued on Dec 5, 2014.
Stocks That Warrant a Look
Investors interested in the REIT industry may consider better-ranked stocks like Host Hotels & Resorts, Inc. (HST) and Public Storage (PSA). Both these stocks carry a Zacks Rank #2 (Buy).
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