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Vornado (VNO) Buys Remaining 46% Share in New York Property

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Vornado Realty Trust VNO recently purchased 46% share in a retail condominium, for $442 million, from Host Hotels & Resorts, Inc. HST. Vornado already owns 54% interest in the property, and this acquisition makes it the sole owner of the condominium. The property is located at the base of the New York Marriott Marquis Times Square hotel.

This acquisition has been made, per the initial agreement. Vornado had acquired 54% share in the property earlier. The original deal provided for sale of the remaining ownership to the company through a put/call arrangement, subject to laid down terms and conditions.

Vornado’s total investment in the property now equals around $663 million. This includes the cost of acquisition and redevelopment till now, as well as an amount of $17 million, which will be utilized for tenant improvement in 2019. This investment will likely provide stabilized cash net operating income yield of 8.5% from 2019, indicating solid return on investment.

The property includes 45,000 square feet of retail space, a theatre and the largest digital display sign in New York. This will be conducive to the company’s top-line growth since the property remains fully leased out to various tenants. While its retail space has been leased out to companies like T-Mobile, Invicta, Swatch, Levi’s and Sephora, the theatre has been leased out to the Nederlander Organization.

Further, the property’s favorable location will ensure demand, moving ahead. It is situated at 1535 Broadway, in the Times Square area, very close to Vornado’s another retail property at 1540 Broadway.

Notably, Vornado’s portfolio-repositioning strategy through acquisitions and dispositions looks well for the long run. Nevertheless, the retail real estate market is facing intense competition from e-retail, which will likely dampen the profitability of Vornado’s retail portfolio, as well as thwart performance of retail REITs like Macerich Company MAC and Taubman Centers TCO.

Nonetheless, shares of the company have outperformed the industry over the past six months. The stock has appreciated 11.4% compared with the industry’s rally of 6.4% during the same time frame.

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

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Taubman Centers, Inc. (TCO) : Free Stock Analysis Report
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Vornado Realty Trust (VNO) : Free Stock Analysis Report
Host Hotels & Resorts, Inc. (HST) : Free Stock Analysis Report
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