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Vornado's (VNO) Q3 FFO Beat Estimates, Revenues Down Y/Y

Zacks Equity Research

Vornado Realty Trust VNO reported third-quarter 2019 funds from operations (FFO) plus assumed conversions, as adjusted of 89 cents per share, surpassing the Zacks Consensus Estimate of 87 cents. However, the reported figure compares unfavorably with the year-ago tally of 96 cents.

At the end of the third quarter, the company’s 555 California Street property was fully occupied. Further, total same-store net operating income (NOI) in the New York portfolio and 555 California buoyed the company’s performance.

However, total revenues came in at $465.9 million in the reported quarter, missing the Zacks Consensus Estimate of $467.8 million. Moreover, the revenue figure compares unfavorably with the year-ago tally of $542 million.

Behind the Headline Numbers

In the New York portfolio, 197,000 square feet of office space (171,000 square feet of space at share) and 26,000 square feet of retail space (24,000 square feet of space at share) were leased during the September-end quarter. Also, 45,000 square feet of area was leased in theMart and 50,000 square feet was leased at 555 California Street (35,000 square feet at share).

At the end of the third quarter, occupancy in the New York portfolio came in at 96.8%, shrinking 30 basis points (bps) sequentially, and 50 bps year over year. Occupancy in theMART was 95%, up 20 bps sequentially but down 50 bps year over year. Furthermore, occupancy in 555 California Street was 100%, expanding 50 bps sequentially, and 60 bps year over year.

During the reported quarter, total same-store NOI inched up 0.9% year over year. In fact, same-store NOI in the company’s New York portfolio and 555 California grew 0.5% and 13.9% year over year, respectively. The same for theMART declined 2.8% year over year.

As of Sep 30, 2019, Vornado had nearly $1.1 billion of cash and cash equivalents, up from $570.9 million as of the prior-year end.

Conclusion

During the July-September quarter, Vornado closed the sale of 14 condominium units at 220 CPS for net proceeds amounting to roughly $348.7 million. This resulted in a financial statement net gain of around $130.9 million.

Further, in July, the company closed the sale of 25% interest in 330 Madison Avenue, pursuant to a buy/sell process initiated by its 75% partner for net proceeds of $100 million.

These attempts to strengthen its core business by executing opportunistic divestures provide Vornado the dry powder to reinvest in opportunistic acquisitions and redevelopments.

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

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

Performance of Other REITs

Highwoods Properties Inc.’s HIW third-quarter FFO per share of 88 cents surpassed the Zacks Consensus Estimate of 85 cents. The reported tally excluded the net impact of 5 cents relating to the company’s market rotation plan. The figure also improved 2.3% year over year.

Cousins Properties Incorporated CUZ reported third-quarter 2019 FFO per share (before TIER transaction costs) of 72 cents, outpacing the Zacks Consensus Estimate of 69 cents. Further, the figure came in higher than the prior-year quarter’s reported tally of 63 cents.

Ventas, Inc. VTR recorded third-quarter 2019 normalized FFO per share of 96 cents, beating the Zacks Consensus Estimate of 94 cents. However, the figure came in lower than the year-ago tally of 99 cents.

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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