Vornado (VNO) Eyes Core Office Assets: Should You Hold? - Analyst Blog
On Jan 23, 2014, we issued an updated research report on Vornado Realty Trust (VNO). The New York-based company, from the REIT-Equity Trust-Others industry, continues with streamlining the business structure, and concentrating exclusively on core office assets.
Notably, few days back, Vornado completed the spin-off of Urban Edge Properties, which holds stake in 79 strip shopping centers, 3 malls and one Warehouse Park. The move came as part of the company’s effort to downsize its business. Vornado, which has been subject to criticism for venturing into too many sectors, would now be able to focus exclusively on core office properties and retail shops in Washington and Manhattan.
Moreover, Vornado’s strong tenant base and robust balance sheet are expected to drive its growth momentum, going forward. However, the company’s strategy to divest its non-core assets exerts pressure on its earnings in the near term. Moreover, sluggish leasing environment in the Washington D.C. market remains a cause of concern. At the same time, we anticipate intensified competition in the market to somewhat limit the company’s top-line growth.
On Nov 3, 2014, Vornado reported adjusted funds from operations (“FFO”) per share of $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.
Over the past 30 days, the Zacks Consensus Estimates for 2014 edged down 0.2% to $4.83 per share while the same declined 2.7% to $5.14 per share for 2015.
Other stocks in the same industry include Ashford Hospitality Trust, Inc. (AHT), Extra Space Storage Inc. (EXR) and Gladstone Commercial Corp. (GOOD).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation, amortization and other non-cash expenses to net income.
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