Vornado Realty to Buy Back Debt - Analyst Blog

Vornado Realty Trust (VNO), a leading real estate investment trust (REIT), recently announced a debt buyback offer totaling $404.5 million due 2026 and 2027. The company would fund the debt buyback with cash from its operating partnership.

The offer included about $382.1 million 3.63% convertible senior debentures due 2026 and $22.5 million 2.85% convertible senior debentures due 2027. Vornado Realty has priced the offering at $1,020 for every $1,000 of the 2026 debentures and $1,015 for every $1,000 of the 2027 debentures.

Vornado Realty is the largest publicly traded office REIT in the New York region concentrating on Class A office properties. We believe this puts the company well ahead of many competitors who have assets in less desirable markets still struggling with high vacancies and little pricing power.

However, we expect continued volatility in the office sector with increasing job cuts. The continued troubles in the residential sector are also weighing on commercial property operations. The credit crunch has widened the bid-ask spread between buyers and sellers of commercial real estate, which has caused deal volumes to fall dramatically. This has affected the top-line growth of the company.

We maintain our long-term Neutral rating on Vornado Realty, which currently has a Zacks #3 Rank that translates into a short-term Hold recommendation and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1-3 months.