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Vornado Extends $1.25B Credit Facility

Zacks Equity Research

Vornado Realty Trust (VNO), one of the leading real estate investment trusts (:REIT), recently announced that its operating partnership firm – Vornado Realty L.P. – has extended the maturity date of one of its two $1.25 billion revolving credit facilities. The revolving credit facility has been extended from Jun 2015 to Jun 2017 and bears two 6-month extension options.

With the extension of the facility, the interest rate was slashed from LIBOR plus 135 basis points (bps) to LIBOR plus 115 bps. Also, the facility fee was reduced from 30 to 20 bps. Notably, Vornado’s second revolving credit facility worth $1.25 billion is scheduled to mature in Nov 2015 and bears 1-year extension option. Moreover, Vornado has no borrowings outstanding under both the revolving credit facilities.

J.P. Morgan Securities LLC of JPMorgan Chase & Co. (JPM) and Merrill Lynch, Pierce, Fenner & Smith Incorporated of Bank of America Corporation (BAC) functioned as the lead arrangers and book runners for the revolving credit facility extension transaction.

In Feb, Vornado reported fourth-quarter 2012 results with adjusted FFO (funds from operations) per share of $1.22, beating the Zacks Consensus Estimate by 7 cents. Moreover, the earnings exceeded the year-ago adjusted FFO of $1.03 by 18.4%. The results were attributable to the company’s successful execution of its strategic initiatives.

Vornado has a healthy balance sheet with very manageable near-term debt maturities and adequate cash. At the end of the year, the company had $960.3 million of cash and cash equivalents and total outstanding debt of $14.7 billion.

Vornado currently has a Zacks Rank #3 (Hold). Another REIT, Agree Realty Corp. (ADC) is performing better than Vornado and carries 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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