Vornado's (VNO) Q4 FFO Beats Estimates, Same-Store NOI Declines
Vornado Realty Trust’s VNO fourth-quarter 2023 funds from operations (FFO) plus assumed conversions as adjusted per share of 63 cents outpaced the Zacks Consensus Estimate of 59 cents. However, the figure declined 12.5% year over year.
Results displayed lower-than-anticipated top-line growth despite decent leasing activity across the company’s portfolio. Also, the year-over-year decline in total same-store net operating income (NOI) was noticeable.
Total revenues came in at $441.9 million in the reported quarter, missing the Zacks Consensus Estimate of $444.4 million. On a year-over-year basis, revenues declined nearly 1.1%.
For 2023, FFO plus assumed conversions, as adjusted per share, came in at $2.61, lower than the prior-year tally of $3.15, beating the Zacks Consensus Estimate of $2.57. This was backed by marginal growth in total revenues of $1.81 billion, which matched the consensus mark.
Quarter in Detail
In the reported quarter, total same-store NOI (at share) came in at $272.8 million compared with the prior-year quarter’s $277.2 million. The metric for the New York portfolio improved marginally and the 555 California Street portfolio increased 8.9%. However, the same-store NOI (at share) for THE MART portfolio declined 32.5% from the prior-year period.
Operating expenses increased 3% to $219.9 million year over year.
During the quarter, in the New York office portfolio, 840,000 square feet of office space (475,000 square feet at share) was leased for an initial rent of $100.33 per square foot and a weighted average lease term of 11.2 years. The tenant improvements and leasing commissions were $11.41 per square foot per annum or 11.4% of the initial rent.
In the New York retail portfolio, 41,000 square feet were leased (39,000 square feet at share) at an initial rent of $131.01 per square foot and a weighted average lease term of 11.1 years. The tenant improvements and leasing commissions were $29.58 per square foot per annum or 22.6% of the initial rent.
Additionally, at THE MART, 161,000 square feet of space (all at share) was leased for an initial rent of $49.89 per square foot and a weighted average lease term of 8.7 years. The tenant improvements and leasing commissions were $13.62 per square foot per annum or 27.3% of the initial rent.
Vornado ended the quarter with occupancy in the New York portfolio at 89.4%, down 100 basis points (bps) year over year. Occupancy in THE MART declined to 79.2% from 81.6%. Further, occupancy in 555 California Street also declined 20 bps to 94.5%.
Balance Sheet
Vornado exited fourth-quarter 2023 with cash and cash equivalents of $997 million, up 12.1% from $889.7 million as of Dec 31, 2022.
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 fourth-quarter 2023 FFO as adjusted per share of 46 cents, beating the Zacks Consensus Estimate by a whisker. The reported figure rose 4.5% 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 also issued its 2024 outlook.
Highwoods Properties Inc. HIW reported fourth-quarter 2023 FFO per share of 99 cents, outpacing the Zacks Consensus Estimate of 91 cents. The figure was also above the prior-year quarter’s 96 cents.
HIW’s quarterly results reflect rent growth. However, a fall in occupancy and higher operating expenses acted as dampeners. It also issued its outlook for 2024.
Cousins Properties’ CUZ fourth-quarter 2023 FFO per share of 65 cents was in line with the Zacks Consensus Estimate.
Results reflect year-over-year growth in the top line, aided by healthy leasing activity, a rise in occupancy levels, and a decent improvement in second-generation net rent per square foot. However, higher same-property rental property operating expenses are a headwind in the quarter. CUZ also issued its 2024 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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