U.S. Markets closed

Vornado Realty (VNO) Misses Q4 FFO Estimates on Lower NOI

Zacks Equity Research

Vornado Realty Trust VNO reported fourth-quarter 2018 adjusting funds from operations (FFO) per share with assumed conversions of 90 cents, missing the Zacks Consensus Estimate of 97 cents. Also, the reported figure compares unfavorably with the year-ago tally of 98 cents.

The company exited the quarter with lower sequential occupancy at its New York and theMART portfolios. Further, a decline in same-store net operating income (NOI) witnessed in these segments impacted results.

Total revenues came in at $543.4 million in the reported quarter, missing the Zacks Consensus Estimate of $548.1 million. Nonetheless, the reported figure compares favorably with the year-ago tally of $536.2 million.

For full-year 2018, adjusting FFO per share with assumed conversions came in at $3.76, missing the Zacks Consensus Estimate of $3.82. The figure, however, improved 0.8% year over year. Revenues for full-year 2018 improved 3.8% year over year to $2.16 billion. However, the revenue tally marginally missed the Zacks Consensus Estimate of $2.18 billion.

Behind the Headline Numbers

In the New York portfolio, 479,000square feet of office space (415,000 square feet of space at share) and 26,000 square feet of retail space (17,000 square feet of space at share) were leased in the Dec-end quarter. Also, 46,000 square feet of area was leased in theMart.

At the end of the quarter under review, occupancy in the New York portfolio was 97%, down 30 basis points (bps) sequentially, and 20 bps year over year. Occupancy in theMART was 94.7%, down 80 bps sequentially and 390 bps year over year. Furthermore, occupancy in 555 California Street was 99.4%, remaining flat sequentially, and up 520 bps year over year.

During the fourth quarter, same-store NOI at the company’s share declined 3.1% year over year for the New York portfolio. The same for theMART plunged 56.6%, while at 555 California Street it grew 16.8%, year over year, respectively.

As of Dec 31, 2018, Vornado had nearly $570.9 million of cash and cash equivalents, down from $1.8 billion as of the prior-year end.

Our Viewpoint

Amid lucrative pricing environment, Vornado opportunistically monetized its assets during the Dec-end quarter. Specifically, it closed the sale of 11 condominium units at 220 Central Park South for financial statement net gain of around $81.2 million.

Also, in October, Vornado increased ownership stake in its Farley Post Office joint venture (JV) with the Related Companies, by acquiring additional 44.9% from its JV partner. This brings the company’s total interest at 95% and increases its Penn Plaza-holdings to 9 million square feet of area.

Such timely portfolio-repositioning initiatives will drive the company’s growth over the long term. Nonetheless, rising interest rates remains a concern for Vornado.

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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Ventas, Inc. VTR reported fourth-quarter 2018 normalized FFO of 96 cents, beating the Zacks Consensus Estimate of 95 cents. However, the figure came in lower than the year-ago tally of $1.03.

Alexandria Real Estate Equities, Inc. ARE reported fourth-quarter 2018 adjusted FFO of $1.68 per share, missing the Zacks Consensus Estimate by a whisker.

Boston Properties Inc.’s BXP fourth-quarter 2018 FFO per share of $1.59 also missed the Zacks Consensus Estimate of $1.68. The figure, however, came in 7% higher than the prior-year tally.

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.

Zacks' Best Stock-Picking Strategy

It's hard to believe, even for us at Zacks. But from 2000-2018, while the market gained +4.8% per year, our top stock-picking strategy averaged +54.3% per year.

How has that screen done lately? From 2017-2018, it sextupled the market's +15.8% gain with a soaring +98.3% return.

Free – See the Stocks It Turned Up for Today >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Boston Properties, Inc. (BXP) : Free Stock Analysis Report
 
Alexandria Real Estate Equities, Inc. (ARE) : Free Stock Analysis Report
 
Vornado Realty Trust (VNO) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.