Vornado Tops Estimates - Analyst Blog

Vornado Realty Trust (VNO), a leading real estate investment trust (REIT), reported second quarter 2010 FFO (funds from operations) of $204.8 million or $1.11 per share, versus $93.5 million or $0.54 in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
 
After adjusting items for comparability, FFO during the second quarter of 2010 was $217.4 million or $1.18 per share, compared with $186.2 million or $1.08 in the prior-year quarter. The recurring FFO during the quarter was well ahead of the Zacks Consensus Estimate of $1.06.
 
Total revenues during the reported quarter were $696.1 million compared with $673.8 million in the year-ago period. Total revenues during the quarter beats the Zacks Consensus Estimate of $660 million.



Same-store occupancy in the company’s New York City and Washington, DC office portfolio were 95.5% and 95.0%, respectively, at quarter-end. Same-store EBITDA (earnings before interest, tax, depreciation and amortization) on GAAP basis increased 2.2% and  6.9% during the quarter in the New York City and DC office portfolios, respectively, compared with the year-earlier quarter.

The company’s retail portfolio is also doing well: same-store occupancy was 92.3% at quarter end, while same-store EBITDA (GAAP) increased 12.3% vesus the year-ago quarter. In the Merchandise Mart segment, same-store occupancy was 91.1% (office) and 91.7% (showroom), while same-store EBITDA (GAAP) increased 2.6% year over year.

During the quarter, rents decreased 7.3% (cash basis) and decreased 7.1% (GAAP) compared with the previous rents in New York City office segment. In Washington DC, rents increased 5.8% (cash) and increased 10.2% (GAAP) versus expiring rents. Retail rents increased 1.5% (cash) and increased 9.0% (GAAP) over in-place rents.

Vornado has a healthy balance sheet with very manageable near-term debt maturities and plenty of cash. At quarter-end, the company had $652.1 million of cash and cash equivalents and total outstanding consolidated debt of $10.7 billion.

Vornado is the largest publicly traded office REIT in the New York region. The core properties of the company are still performing at a high level and it is maintaining strong occupancies in its New York City office and retail portfolios. We believe this puts the company well ahead of many competitors, who have assets in weak markets struggling with high vacancies and little pricing power. We maintain our Neutral recommendation on the stock with a Zacks #3 Rank, which translates into a short-term “Hold” rating.