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Vornado (VNO) Q4 FFO & Revenues Top, Same-Store NOI Increases

Vornado Realty Trust’s VNO fourth-quarter 2022 funds from operations (FFO) plus assumed conversions as adjusted per share of 72 cents topped the Zacks Consensus Estimate of 67 cents.

Quarterly results display better-than-anticipated top-line growth aided by healthy leasing activity. Also, year-over-year improvement in same-store net operating income (NOI) across the portfolio was noticeable.

Total revenues came in at $446.9 million in the reported quarter, surpassing the Zacks Consensus Estimate of $444.6 million.

On a year-over-year basis, while FFO per share declined 11.1%, revenues improved 6.1%.  

For 2022, FFO plus assumed conversions, as adjusted per share, came in at $3.15, higher than the prior-year tally of $2.86 and beat the Zacks Consensus Estimate of $3.09. This was backed by 13.3% growth in total revenues of $1.80 billion, which matched the consensus mark.

Subsequent to the quarter end, Vornado and Rudin closed the earlier announced transactions related to their 350 Park Avenue and 40 East 52nd Street properties with Citadel Enterprise Americas LLC (“Citadel”) and with an affiliate of Kenneth C. Griffin, Citadel’s Founder and CEO (“KG”).

Quarter in Detail

In the reported quarter, total same-store NOI (at share) improved 6.3% year over year. While the metric for theMART increased 32.1%, the same for the New York portfolio grew 5%. The same-store NOI (at share) for the 555 California Street portfolio improved only 0.3% from the prior-year period.

Operating expenses rose 5.3% to $213.5 million year over year.

During the quarter, in the New York office portfolio, 154,000 square feet of office space (147,000 square feet at share) was leased for an initial rent of $84.58 per square foot and a weighted average lease term of 7.6 years. The tenant improvements and leasing commissions were $10.32 per square foot per annum or 12.2% of the initial rent.

In the New York retail portfolio, 20,000 square feet were leased (15,000 square feet at share) at an initial rent of $284.73 per square foot and a weighted average lease term of 11.8 years. The tenant improvements and leasing commissions were $26.98 per square foot per annum or 9.5% of the initial rent.

Additionally, at theMART, 24,000 square feet of space (all at share) was leased for an initial rent of $59.45 per square foot and a weighted average lease term of 6.5 years. The tenant improvements and leasing commissions were $6.60 per square foot per annum or 11.1% of the initial rent.

Vornado ended the quarter with occupancy in the New York portfolio at 90.4%, down 90 basis points (bps) year over year. Occupancy in theMART declined to 81.6% from 88.9%. However, occupancy in 555 California Street improved 90 bps to 94.7%.

Portfolio Activity

In the reported quarter, Vornado closed the sale of two condominium units and ancillary amenities at 220 CPS for net proceeds of $71.9 million. This resulted in a net gain of $34.8 million.

On Dec 15, 2022, the company disposed of 484-486 Broadway, a 30,000 square foot retail and residential building, for $23.5 million. The transaction resulted in net proceeds of $22.4 million and a net gain of $2.9 million.

Further, on Dec 21, 2022, VNO sold 40 Fulton Street, a 251,000 square foot Manhattan office and retail building, for $101 million. VNO realized net proceeds of $96.5 million and a net gain of $31.8 million from the disposition.

Balance Sheet

Vornado exited fourth-quarter 2022 with cash and cash equivalents of $889.7 million, up from $845.4 million as of Sep 30, 2022.

Vornado currently carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Vornado Realty Trust Price, Consensus and EPS Surprise

Vornado Realty Trust price-consensus-eps-surprise-chart | Vornado Realty Trust Quote

Performance of Other REITs

SL Green Realty Corp. SLG reported fourth-quarter 2022 FFO per share of $1.46, lagging the Zacks Consensus Estimate of $1.48. The figure fell 3.9% from the year-ago quarter’s $1.52.

SLG’s results reflected lower-than-anticipated revenues and a fall in occupancy. However, same-store cash NOI improved year over year.

Boston Properties Inc.’s BXP fourth-quarter 2022 FFO per share of $1.86 outpaced the Zacks Consensus Estimate of $1.84. The figure increased 18.7% year over year.

The quarterly figure also exceeded the mid-point of the company’s fourth-quarter guidance by a cent, reflecting portfolio outperformance. In addition, BXP experienced solid leasing activity in the quarter. The company revised its 2023 outlook for FFO per share.

Highwoods Properties Inc. HIW reported fourth-quarter 2022 FFO per share of 96 cents, in line with the Zacks Consensus Estimate. The figure compared unfavorably with the prior-year quarter’s $1.06. We estimated FFO per share for fourth-quarter 2022 to be 96 cents.

HIW’s quarterly results reflect better-than-anticipated revenues on robust leasing activity and improvement in rents. However, higher operating expenses were a headwind in the quarter.

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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