Vornado Acquires Mortgage Loan - Analyst Blog

Vornado Realty Trust(VNO), a leading real estate investment trust (REIT), has recently acquired a mortgage loan collateralized by the Springfield Mall in Fairfax County, Virginia. The company paid $115 million for the mortgage loan, which had an outstanding balance of $171.5 million.
 
Spanning 1.7 million square feet of retail space, the mall is one of the largest shopping destinations in Northern Virginia and is anchored by leading retailers such as J. C. Penney Company, Inc. (JCP), Target Corp. (TGT) and Macy's, Inc. (M). In a separate transaction, Vornado Realty also acquired a joint-venture ownership stake that owns the Springfield Mall. The company will record a profit of approximately $98 million in fourth quarter 2010 related to both the transactions.
 
Vornado Realty is the largest publicly traded office REIT in the New York region, concentrating mostly on Class A office properties. The company also owns retail space, and temperature-controlled logistics and refrigerated warehouses. Besides its properties, Vornado Realty has investments in other REITs, industrial buildings and Toys ‘R' Us. The company currently owns about 32.7% of Toys ‘R' Us.
 
Vornado Realty has a strong asset portfolio in two of the best long-term office markets in the U.S. – the New York City and Washington DC. We believe this puts the company well ahead of many competitors, who have assets in less desirable markets that are 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.

 
PENNEY (JC) INC (JCP): Free Stock Analysis Report
 
MACYS INC (M): Free Stock Analysis Report
 
TARGET CORP (TGT): Free Stock Analysis Report
 
VORNADO RLTY TR (VNO): Free Stock Analysis Report
 
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