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Vornado Realty's (VNO) Q3 FFO Misses Estimates, Revenues Up

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Vornado Realty Trust VNO reported third-quarter 2018 adjusted funds from operations (FFO) per share with assumed conversions of 97 cents, missing the Zacks Consensus Estimate of 99 cents. Also, the figure remained flat year over year.

Results reflect decent leasing activity in the New York office portfolio, giving rise to higher occupancy in the overall New York portfolio. However, the company witnessed a decline in same-store net operating income (NOI) and occupancy at its theMART segment.

Total revenues came in at $542 million in the reported quarter, comfortably surpassing the Zacks Consensus Estimate of $537.6 million. Further, the reported figure compares favorably with the year-ago tally of $528.7 million.

Behind the Headline Numbers

In the New York portfolio, 312,000 square feet of office space (308,000 square feet of space at share) and 104,000 square feet of retail space (99,000 square feet of space at share) were leased in the Sep-end quarter. Also, 28,000 square feet of area was leased in theMart.

At the end of the quarter under review, occupancy in the New York portfolio was 97.3%, up 70 basis points (bps) sequentially, and 40 bps year over year. Occupancy in theMART was 95.5%, down 380 bps sequentially and 320 bps year over year. Furthermore, occupancy in 555 California Street was 99.4%, expanding 210 bps sequentially and 520 bps year over year.

During the third quarter, same-store NOI at the company’s share inched up 0.6% year over year for the New York portfolio. The same for theMART decreased 3.8%, while occupancy at 555 California Street grew 17.2%, year over year, respectively.

As of Sep 30, 2018, Vornado had nearly $772.5 million of cash and cash equivalents, down from $1.8 billion as of the prior-year end.

Our Viewpoint

Vornado’s portfolio-repositioning initiatives, per which it has been expanding its New York City office and Manhattan retail footprint, supported its third-quarter performance. We anticipate economic improvement and recovery in the job market to spur demand for the company’s office spaces, moving ahead. Also, strong consumer sentiments will likely drive revenues at the company’s retail avenues.

Vornado Realty Trust Price, Consensus and EPS Surprise

Vornado Realty Trust Price, Consensus and EPS Surprise | Vornado Realty Trust Quote

Currently, Vornado carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like The Macerich Company MAC, Federal Realty Trust FRT and Mark Cali Realty CLI. All three companies are scheduled to report their Q3 numbers on Oct 31.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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