Vornado Realty Trust (VNO), a leading real estate investment trust (:REIT), has recently completed a mortgage loan refinancing transaction of a 206,000 square foot Manhattan retail property titled ‘4 Union Square South’. The seven-year refinanced loan worth $120 million bears interest at LIBOR plus 2.15%.
The new mortgage loan has a 30-year amortization schedule beginning in the third year. Besides reducing debt through the repayment of the existing mortgage loan, the transaction increased the liquidity of the company amid a challenging macroeconomic environment. Vornado Realty received net proceeds of approximately $42 million after repaying the existing loan and closing costs of the transaction.
Over the past few quarters, the company has continuously increased its cash reserves through asset sale transactions. During third quarter 2012, Vornado Realty entered into agreements to sell the Washington Design Center, the Boston Design Center and the Canadian Trade Shows, for a total of $175.0 million in cash. In addition, Vornado completed the sale of 409 Third Street S.W., a 409,000 square foot office building in Washington, DC, for $200.0 million in cash.
Subsequent to the quarter-end, the company entered into an agreement to sell three office buildings (494,000 square feet) in suburban Fairfax County, Virginia, for $126.0 million, and the Green Acres Mall in Valley Stream, New York, for $500.0 million.
New York-based Vornado Realty acquires, owns and leases office properties, retail space and temperature-controlled logistics and refrigerated warehouses. Besides its properties, the company also has investments in other REITs, industrial buildings, retail assets, and Toys ‘R’ Us.
Vornado Realty has a strong asset portfolio in two of the best long-term office markets in the U.S. – New York City and Washington DC. This provides the company with a competitive advantage to continually increase rents. The company also has a healthy balance sheet and adequate liquidity.
We maintain our long-term Neutral rating on Vornado Realty, which currently has a Zacks #2 Rank that translates into a short-term Buy recommendation. We also have a Neutral recommendation and a Zacks #3 Rank (short-term Hold recommendation) for Boston Properties Inc. (BXP), a competitor of Vornado Realty.
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