Vornado's (VNO) FFO and Revenues Surpass Estimates in Q2
Vornado Realty Trust’s VNO second-quarter 2023 funds from operations (FFO) plus assumed conversions as adjusted per share of 72 cents surpassed the Zacks Consensus Estimate of 64 cents. Moreover, the figure declined 13.3% year over year.
Vornado’s results display better-than-anticipated top-line growth. Healthy leasing activity was witnessed across all portfolios.
Total revenues came in at $472.3 million in the reported quarter, surpassing the Zacks Consensus Estimate of $440.3 million. On a year-over-year basis, revenues improved nearly 4.2%.
On Jul 27, 2023, VNO entered into an agreement to dispose of four Manhattan retail properties for $100 million. The sale of the properties, located at 510 Fifth Avenue, 148–150 Spring Street, 443 Broadway and 692 Broadway, is anticipated to be carried out in the third quarter of 2023, subject to customary closing conditions. VNO expects to realize a financial statement loss of roughly $500,000 from the transaction.
Quarter in Detail
In the reported quarter, total same-store net operating income (NOI) (at share) came in at $287.5 million compared with the prior-year quarter’s $239.7 million. The metric for the New York and 555 California Street portfolios improved 2.9% and 87.4%, respectively. However, the same-store NOI (at share) for THE MART portfolio declined 17.5% from the prior-year period.
Operating expenses increased marginally to $222.7 million year over year.
During the quarter, in the New York office portfolio, 279,000 square feet of office space (224,000 square feet at share) was leased for an initial rent of $91.57 per square foot and a weighted average lease term of 10.7 years. The tenant improvements and leasing commissions were $10.94 per square foot per annum or 11.9% of the initial rent.
In the New York retail portfolio, 205,000 square feet were leased (159,000 square feet at share) at an initial rent of $50.29 per square foot and a weighted average lease term of 5.1 years. The tenant improvements and leasing commissions were $16.17 per square foot per annum or 32.2% of the initial rent.
Additionally, at THE MART, 29,000 square feet of space (all at share) was leased for an initial rent of $56.85 per square foot and a weighted average lease term of 3.7 years. The tenant improvements and leasing commissions were $4.86 per square foot per annum or 8.5% of the initial rent.
For VNO’s 555 California Street portfolio, 6,000 square feet of space (4,000 square feet at share) was leased for an initial rent of $120.56 per square foot and a weighted average lease term of 5.2 years. The tenant improvements and leasing commissions were $9.12 per square foot per annum or 7.6% of the initial rent.
Vornado ended the quarter with occupancy in the New York portfolio at 90.1%, down 70 basis points (bps) year over year. Occupancy in THE MART declined to 80% from 88.6%. However, occupancy in 555 California Street improved 30 bps to 94.5%.
Portfolio Activity
On Jun 20, 2023, Vornado closed its earlier announced transaction related to the purchase of 39 East 51st Street for $40 million. It had entered into a joint venture with Rudin (“Vornado/Rudin”) for the same and the transaction was funded on a 50-50 basis by Vornado and Rudin.
Balance Sheet
Vornado exited second-quarter 2023 with cash and cash equivalents of $1.13 billion, up 27.4% from $889.7 million as of Dec 31, 2022.
During the quarter ended Jun 30, 2023, Vornado repurchased 1,722,295 common shares for $23,216,000, at an average price of $13.48 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-eps-surprise-chart | Vornado Realty Trust Quote
Performance of Other REITs
Healthpeak Properties, Inc. PEAK reported second-quarter 2023 FFO as adjusted per share of 45 cents, beating the Zacks Consensus Estimate by a whisker. The reported figure improved 2.3% from the year-ago quarter.
Results reflect better-than-anticipated revenues. Moreover, year-over-year improvement in same-store portfolio cash (adjusted) NOI was witnessed across the portfolio. The PEAK revised its 2023 outlook.
Highwoods Properties Inc. HIW reported a second-quarter 2023 FFO per share of 94 cents, in line with the Zacks Consensus Estimate. However, the figure was lower than the prior-year quarter’s $1.
HIW’s quarterly results reflect lower operating expenses and rent growth. However, a fall in occupancy acted as a dampener. It also revised its outlook for 2023.
Cousins Properties’ CUZ second-quarter 2023 FFO per share of 68 cents beat the Zacks Consensus Estimate of 66 cents. However, the figure declined from the prior-year quarter’s 70 cents.
CUZ's results reflect better-than-anticipated revenues, supported by healthy leasing activity and improvement in second-generation net rent per square foot. Yet, higher same-property rental property operating expenses acted as a dampener. The company also revised its 2023 FFO per share outlook.
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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