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Vornado Realty (VNO) Q2 FFO & Revenues Top, Liquidity Down

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Vornado Realty Trust VNO reported second-quarter 2018 adjusted funds from operations (FFO) per share with assumed conversions of $1.10, beating the Zacks Consensus Estimate of 97 cents. Further, the figure surpassed the prior-year quarter tally of $1.35.

Results reflect healthy leasing activity in the New York office portfolio. In addition, the company witnessed robust same-store net operating income (NOI) in theMART and 555 California Street segments.

Total revenues came in at $541.82 million in the reported quarter, handily surpassing the Zacks Consensus Estimate of $536.3 million. However, this compares unfavorably with the year-ago revenue figure of $626.04 million.

Behind the Headline Numbers

In the New York portfolio, 611,000 square feet of office space (545,000 square feet of space at share) and 49,000 square feet of retail space were leased in the June-end quarter. Also, 50,000 square feet of area was leased in theMart.

At the end of the quarter under review, occupancy in the New York portfolio was 96.6%, down 30 basis points (bps) sequentially, while remaining flat year over year. Occupancy in theMART was 99.3%, up 20 bps sequentially and 40 bps year over year. Furthermore, occupancy in 555 California Street was 97.3%, shrinking 50 bps sequentially, while expanding 660 bps year over year.

During the second quarter, same-store NOI at the company’s share increased 4.2% year over year for the New York portfolio. The same for theMART and 555 California Street grew 5.2% and 13.5%, respectively, year over year.

As of Jun 30, 2018, Vornado had nearly $1.1 billion of cash and cash equivalents, down from $1.8 billion as of the prior-year end.

Our Viewpoint

We are impressed with Vornado’s portfolio-repositioning initiatives, per which it has been aggressively disposing off non-core assets. Additionally, the company’s strategic focus on expanding its market share in the New York City office and Manhattan street retail bodes well for long-term growth. In fact, the Q2 performance of Vornado’s office segment in New York cements this view.

However, dilutive impact on earnings from divestitures of assets cannot be bypassed in the near term. Also, intense competition and hike in interest rates remain other concerns.

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

Vornado Realty Trust Price, Consensus and EPS Surprise

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

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 Q2 numbers on Aug 1.

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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