Citigroup Raises Price Target on Vornado Realty Trust (VNO)

Citigroup is out with a research report this morning, where it reiterates its Hold rating on Vornado Realty Trust VNO; it has a $91.00 price target on the stock, up from $85.00. The Citi analysts cited the company's recent announced earnings, which were in-line with expectations. They noted that management's view of the fundamental environment seems unchanged, i.e. stable, with in-place rents close to market and incremental job growth needed to driver rents higher. Management continues to believe private market debt maturities will create external growth opportunities in 2011-12. However, the analysts noted the recent hiring of senior executives (including a former investment banker and opportunity fund executives), which suggests the company and its investments will remain complex. As for valuation, the analysts remarked, “We value VNO triangulating between NAV, AFFO and FFO multiple valuation. For VNO, our valuation methodologies take into consideration VNO's attractive exposure to supply constrained CBD office markets and the company's plentiful liquidity and access to attractive capital. This methodology results in a target price of $91. We use a 26x AFFO multiple and a 17x FFO multiple on 2011 AFFO and FFO estimates, at a premium to office peers given factors discussed above. Our target price is at a premium to our NAV due to improving leasing trends and VNO's ability to access capital for growth opportunities, and is underpinned by a cash cap rate of 6.25% on core NOI.”