Vornado's Q2 FFO and Revenues Surpass Estimates

Vornado Realty Trust's VNO second-quarter 2024 funds from operations (FFO) plus assumed conversions as adjusted per share of 57 cents surpassed the Zacks Consensus Estimate of 55 cents. However, the figure declined 20.8% year over year.

Results display better-than-anticipated top-line growth. Vornado experienced decent leasing activity, higher initial rent and lower leasing commissions in the quarter. However, the total same-store net operating income (NOI) declined year over year.

Total revenues came in at $450.3 million in the reported quarter, which beat the Zacks Consensus Estimate of $434.6 million. However, on a year-over-year basis, revenues declined nearly 4.7%.

Quarter in Detail

In the reported quarter, total same-store NOI (at share) came in at $263.8 million compared with the prior-year quarter's $289.8 million. The metric for the New York, THE MART and 555 California Street portfolios decreased 4.4%, 4.6% and 46.4%, respectively, from the prior-year period.

Operating expenses increased 3% to $229.4 million year over year. Interest expenses rose 12.9% to $98.4 million year over year.

During the quarter, in the New York office portfolio, 1,322,000 square feet of office space (598,000 square feet at share) was leased for an initial rent of $131.37 per square foot and a weighted average lease term of 9.7 years. The tenant improvements and leasing commissions were $6.54 per square foot per annum or 5% of the initial rent.

In the New York retail portfolio, 4,000 square feet were leased (all at share) at an initial rent of $301.14 per square foot and a weighted average lease term of five years. The tenant improvements and leasing commissions were $10.99 per square foot per annum or 3.6% of the initial rent.

At THE MART, 32,000 square feet of space (all at share) was leased for an initial rent of $56.39 per square foot and a weighted average lease term of 7.2 years. The tenant improvements and leasing commissions were $7.86 per square foot per annum or 13.9% of the initial rent.

Additionally, at 555 California Street, 66,000 square feet of office space (47,000 square feet at share) was leased for an initial rent of $99.14 per square foot and a weighted average lease term of 9.8 years. The tenant improvements and leasing commissions were $12.56 per square foot per annum or 12.7% of the initial rent.

Vornado ended the quarter with occupancy in the New York portfolio at 88.3%, down 180 basis points (bps) year over year. Occupancy in THE MART declined to 76.9% from 80% reported at the end of the year-ago period. However, occupancy in 555 California Street remained unchanged at 94.5%.

Portfolio Activity

During the second quarter, Vornado sold two condominium units at 220 CPS for a net amount of $31.6 million. It also sold its 49.9% interest in 50-70 West 93^rd Street to its joint venture partner for a net amount of $2 million.

Balance Sheet

Vornado exited the second quarter of 2024 with cash and cash equivalents of $872.6 million, down 2.3% from $892.7 million as of Mar 31, 2024.

Vornado currently carries a Zacks Rank #4 (Sell).

Vornado Realty Trust Price, Consensus and EPS Surprise

Performance of Other REITs

Highwoods Properties Inc. HIW reported a second-quarter 2024 FFO per share of 98 cents, which beat the Zacks Consensus Estimate of 90 cents. The figure was also higher than the prior-year quarter's 94 cents.

Quarterly results reflected a decline in rental property and other expenses year over year and improving leasing activity. However, interest expenses were up year over year. HIW raised its outlook for 2024. HIW currently carries a Zacks Rank#3 (Hold).

Cousins Properties' CUZ second-quarter 2024 FFO per share of 68 cents beat the Zacks Consensus Estimate of 66 cents.

Results reflected decent leasing activity and better-than-anticipated revenues. However, rental property operating and interest expenses increased year over year.CUZ also raised its 2024 outlook for FFO per share. CUZ currently carries a Zacks Rank #3.

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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