Must-know background: Vornado Realty Trust, a key office REIT

Brent Nyitray, CFA, MBA
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Vornado Realty Trust's 1Q14 earnings: A key office REIT (Part 1 of 4)

Vornado Realty Trust is the largest office REIT in the United States

Vornado Realty Trust (VNO) is one of the largest owners and managers of commercial real estate in the United States with a portfolio of over 100 million square feet, primarily located in the New York and Washington, DC, areas. Vornado’s core businesses include New York, Washington, DC, and retail properties primarily in the Northeast states, California, and Puerto Rico.

Brief description of portfolio

As of December 31, 2013, Vornado’s real estate portfolio consisted of the following:

New York City:

  • 19.8 million square feet of Manhattan office space in 31 properties and four residential properties containing 1,653 units

  • 2.4 million square feet of Manhattan street retail space in 55 properties

  • The 1,700 room Hotel Pennsylvania located on Seventh Avenue at 33 rd Street in the heart of the Penn Plaza district

  • A 32.4% interest in Alexander’s, Inc. (ALX), which owns six properties in the greater New York metropolitan area, including 731 Lexington Avenue — the 1.3 million square foot Bloomberg, L.P. headquarters building

Washington, DC

  • 16.2 million square feet of office space in 59 properties and seven residential properties containing 2,405 units

Retail portfolio

  • 14.9 million square feet of retail space in 106 strip shopping centers and single-tenant retail assets, primarily in the Northeast states and California

  • 5.3 million square feet of retail space in six regional malls located in the Northeast, Mid-Atlantic, and Puerto Rico

Retail spin-off

In early April, Vornado announced that it intended to spin off its retail portfolio into a separate REIT and distribute the new company (cleverly called Spinco) to shareholders as a tax-free distribution. This follows Simon Property Group’s (SPG) plan to spin off its strip mall portfolio into a separate REIT and distribute it to shareholders.

Competitive landscape

Vornado is the largest office REIT by market cap, coming in at just under $20 billion. Its primary competitors are Boston Properties (BXP), S.L. Green (SLG), and Brookfield Office Properties (BPO). The office REIT space is highly competitive.

Continue to Part 2

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