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Vornado's (VNO) FFO Meets Estimates in Q3, Revenues Miss

Vornado Realty Trust’s VNO third-quarter 2023 funds from operations (FFO) plus assumed conversions as adjusted per share of 66 cents matched the Zacks Consensus Estimate. However, the figure declined 18.5% year over year.

Results displayed lower-than-anticipated top-line growth despite decent leasing activity across the company’s portfolio. A rise in operating expenses during the quarter was a concern.

Total revenues came in at $451 million in the reported quarter, missing the Zacks Consensus Estimate of $460 million. On a year-over-year basis, revenues declined nearly 1.4%.

Quarter in Detail

In the reported quarter, total same-store net operating income (NOI) (at share) came in at $271.3 million compared with the prior-year quarter’s $279.8 million. The metric for the New York and 555 California Street portfolios improved 4% and 2.9%, respectively. However, the same-store NOI (at share) for THE MART portfolio declined 54% from the prior-year period.

Operating expenses increased 5.5% to $233.7 million year over year.

During the quarter, in the New York office portfolio, 236,000 square feet of office space (190,000 square feet at share) was leased for an initial rent of $93.33 per square foot and a weighted average lease term of 7.9 years. The tenant improvements and leasing commissions were $12.87 per square foot per annum or 13.8% of the initial rent.

In the New York retail portfolio, 29,000 square feet were leased (21,000 square feet at share) at an initial rent of $373.28 per square foot and a weighted average lease term of 8.4 years. The tenant improvements and leasing commissions were $26.02 per square foot per annum or 7% of the initial rent.

Additionally, at THE MART, 68,000 square feet of space (63,000 square feet at share) was leased for an initial rent of $54.71 per square foot and a weighted average lease term of 5.2 years. The tenant improvements and leasing commissions were $10.46 per square foot per annum or 19.1% of the initial rent.

Vornado ended the quarter with occupancy in the New York portfolio at 89.9%, down 40 basis points (bps) year over year. Occupancy in THE MART declined to 76.8% from 87.3%. Further, occupancy in 555 California Street also declined 20 bps to 94.5%.

Portfolio Activity

On 28 Aug, 2023, Vornado entered into Manhattan’s first public-private partnership venture with Hudson Pacific Properties, Blackstone, the City of New York and New York City Economic Development Corporation to build a 266,000-square-foot purpose-built studio campus at Pier 94 with a joint investment of around $350 million.

Balance Sheet

Vornado exited third-quarter 2023 with cash and cash equivalents of $1 billion, up 12.4% from $889.7 million as of Dec 31, 2022.

During the quarter ended Sep 30, 2023, it repurchased 302,200 common shares for $5,927,000, at an average price of $19.61 per share.

Vornado currently 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 Price, Consensus and EPS Surprise

Vornado Realty Trust price-consensus-eps-surprise-chart | Vornado Realty Trust Quote

 

Performance of Other REITs

Healthpeak Properties, Inc. PEAK reported third-quarter 2023 funds from operations (FFO) as adjusted per share of 45 cents, beating the Zacks Consensus Estimate by a whisker. The reported figure rose 4.6% from the prior-year quarter.

Results reflect better-than-anticipated revenues. Moreover, growth in same-store portfolio cash (adjusted) NOI was witnessed across the portfolio. PEAK raised its outlook for the current year.

Highwoods Properties Inc. HIW reported a third-quarter 2023 FFO per share of 93 cents, in line with the Zacks Consensus Estimate. However, the figure was lower than the prior-year quarter’s $1.04.

HIW’s quarterly results reflect rent growth. However, a fall in occupancy and higher operating expenses acted as dampeners. It also revised its outlook for 2023.

Cousins Properties’ CUZ third-quarter 2023 FFO per share of 65 cents was in line with the Zacks Consensus Estimate.

Results reflect lower-than-anticipated revenues. Although the company witnessed decent leasing activity during the quarter, a substantial jump in interest expenses acted as a dampener. CUZ also revised its 2023 outlook for FFO per share.

Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.

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Highwoods Properties, Inc. (HIW) : Free Stock Analysis Report

Vornado Realty Trust (VNO) : Free Stock Analysis Report

Cousins Properties Incorporated (CUZ) : Free Stock Analysis Report

Healthpeak Properties, Inc. (PEAK) : Free Stock Analysis Report

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