Author Topic: VNO - Vornado Realty Trust  (Read 42885 times)

Spekulatius

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Re: VNO - Vornado Realty Trust
« Reply #20 on: October 16, 2019, 09:26:22 AM »
I like the Penn station development. I think office and retail space will do very well there because it’s very accessible for commuters and there is enormous foot traffic. This area really needs it too.

Disclosure: no position.
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cameronfen

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Re: VNO - Vornado Realty Trust
« Reply #21 on: October 16, 2019, 12:07:02 PM »
I like the Penn station development. I think office and retail space will do very well there because it’s very accessible for commuters and there is enormous foot traffic. This area really needs it too.

Disclosure: no position.

This might be ancilliary, but you may have some other tech firms like Google a couple blocks away in Hudson Yards when that is finished, plus additional office, retail and luxury condos. 

no_free_lunch

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Re: VNO - Vornado Realty Trust
« Reply #22 on: October 16, 2019, 12:15:02 PM »
Looking at their history, VNO blew up during the GFC it would appear.  I don't think their dividend is as high as it was back in 07.  I realize that was an extraordinary circumstance but it is worth keeping in mind if we are to consider this a compounder.

thepupil

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Re: VNO - Vornado Realty Trust
« Reply #23 on: October 16, 2019, 03:09:00 PM »
Looking at their history, VNO blew up during the GFC it would appear.  I don't think their dividend is as high as it was back in 07.  I realize that was an extraordinary circumstance but it is worth keeping in mind if we are to consider this a compounder.

I looked at the crisis period a few months back. the stock fell a ton. they had to issue about 12% of then current shares outstanding at the bottom. operating metrics didn't move crazily. Occupancy on what is in the current portfolio fell a few points (during the crisis VNO was much more complex; recent annual reports have what the metrics did for the core NYC office portfolio). 

VNO used to own JCP, toys R Us, Urban Edge, JBGS, etc. so the portfolio is simpler now than it was then. They also went in with about $4 billion of unsecured debt (of $12 billion total) and now have $1.2 billion of unsecured debt (of $8 billion total). Just using Bloomberg simplified metrics on each of those figures. The point being that VNO went into the crisis with greater complexity, a lot more recourse debt (as a percent of total) and from what I could tell, a much less cash rich and unencumbered corporate balance sheet.

VNO leverage today is kind of an inkblot. One can take all their debt add the unconsolidated debt from JV's and get to about a total top down consolidated mark to market LTV of 45% (debt and preferred =$11  billion of $24 billion total consolidated cap structure) or total debt to EBITDA of 6-7x and conclude that VNO is pretty levered.

Or one could do the math of counting the retail JV preferreds as quasi investment grade bonds, add up balance sheet cash, add up high visibility 220CPS sales and compare those balances to corporate recourse liabilities and corporate guaranteed mortgages and conclude that VNO as a corporate entity is virtually unlevered. If there's no corporate recourse leverage, then the equity fully owns the $311mm of unencumbered (no secured debt) annualized EBITDA and fully owns the unlevered development projects like Farley Post Office (discussed above). this math will lead you to conclude that they could hand back the keys on some properties if SHTF and the equity won't be crazily impaired. It will help frame the low probability of leverage/distress becoming an issue ina severe downturn.

My overall takeaway is that VNO is highly unlikely to repeat the 63% peak to trough drawdown of the crisis. I'd also note that from '03 to '06 VNO went from $26 per share to $86 per share. It had a lot of room to fall in part because it was so hot in the years leading in. VNO of today is simpler and safer. The stock has done nothing for 5 years and is starting from here at a substantial discount to current NAV (it probably traded at a significant premium in the heady pre-crisis real estate /securitization/financials/euphoria).

All that said I don't think VNO is a compounder (unsure of what the definition of compounder is in this context, but I don't think it is whatever your definition is). Core office assets have low to moderate unlevered returns and NYC office fundamentals/economics of ownership aren't wonderful. I wouldn't expect VNO to compound NAV / share or NOI or any other kind of metric at a high rate.

I would expect the company to maintain and grow its current NAV of ~$95/share, pay a reasonable divvy, and monetize assets at at NAV via borrowings and potentially sales or JV's or spin-offs (as they have been doing). VNO will soon have something like $2-3 billion in cash and 4.5% yielding preferreds which is the defintion of low risk/low return, not compounding.

I think it should be clear that if one requires companies to be "compounders", an office REIT at a discount to NAV (no opporutnity to grow fast via issuance) is not going to fit one's criteria. this is a capital return/discount narrowing via asset conversion/paid to wait story. This is not likely to compound at a high rate. the stock could provide a high return if more dramatic action is taken to close the gap (sale of entire company, even more aggressive JV's/monetizations, etc.)
« Last Edit: October 16, 2019, 03:12:38 PM by thepupil »

no_free_lunch

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Re: VNO - Vornado Realty Trust
« Reply #24 on: October 16, 2019, 03:34:28 PM »
Thank you for your detailed response.

I guess the term compounder was a bit subjective.  All I was really going for was that with a 4% dividend, I really need to see growth in the dividend over time (or I guess a sale) to achieve a reasonable investment return.  It just concerned me that over a longer trend (2007-2019), the dividend is flat.  However, as you say, this is not the same company as what went into the GFC.  Prior to the GFC it did have an excellent return.

Spekulatius

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Re: VNO - Vornado Realty Trust
« Reply #25 on: October 16, 2019, 03:42:18 PM »
When looking at the drawdown during the GFC, keep in mind that VNO was trading at or above NAV back then (they have a nice chart on this in their annual report) and now they are trading at a 35% discount. Same issue than with BRK trading at around 2x book in 2007. Valuations matter!
Life is too short for cheap beer and wine.

no_free_lunch

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Re: VNO - Vornado Realty Trust
« Reply #26 on: October 17, 2019, 07:49:28 AM »
Vornado has actually done better than I originally assumed.  They list everything on their site but essentially there are a number of special dividends, some substantial which when considered boost the returns substantially.

I actually quite like this one having spent some time on the annual report.  In particular I like the reporting style which includes frequent references to per share values and numerous 10 year charts.  It is clear that they have focused on the longer term and encourage investors to do the same.

I have a reasonable sized position as of this morning.

thepupil

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Re: VNO - Vornado Realty Trust
« Reply #27 on: October 29, 2019, 02:59:41 PM »
Quote

Michael Bilerman

And maybe a question for Steve. You've not been shy about where your shares trade relative to the inherent value of the asset base and you've been extraordinarily aggressive over the last six years at simplifying a lot of the complexity spins, merge, sales, completely new construction at 220, done the Farley buy out all variety of long lists. I guess where is your head today in terms of further sort of potential sales? In most obvious would be something on the office side, either New York or outside of New York either an end joint venture or outright or is all the focus right now on Penn Plaza and the redevelopment efforts?

Steven Roth

All of the above. I'll say a couple of things. Number one everything's on the table as it has been for the last number of years. Number two, we are certainly not done yet. Number three is we definitely are not satisfied with our stock price at all. And just, I would like to throw it back to you. For example you said asset sales outside of New York and I guess you were referring to San Francisco or Chicago. I would remind you that for the last five years, you and your brethren had been begging me to sell San Francisco. And in the last five years it has gone up in vacuum over a $1 billion since we continue to hold it. So everything's on the table. We're not done yet.

And we’re actually surprised by our stock price. But Mr. Market speaks and we're not done yet

VNO reported, cash piling up (though in part because they paid off a mortgage w/ their L+100 facility rather than cash), $1.7 billion more to come from 220CPS, most of which under contract, big 400K lease in late states at one of the Penn buildings, San Francisco throwing out ridiculous 30% mark to market lease renewals, VNO saying they’ll make their own version of WeWork as part of Penn development, $1.90 special divvy coming

On the minus: forever21, topshop, blah SS NOI growth

All-in more of the same story.

He’s a promotional guy, but any chairman who talks about Mr. Market deserves a second look!

thepupil

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Re: VNO - Vornado Realty Trust
« Reply #28 on: December 06, 2019, 10:10:18 AM »
More Facebook-Farley rumors today, a top story on bloomberg.

VNO also recently refinanced an $800mm loan at 650 Madison. VNO only owns 20% of the building so it's not that important to NAV, but I think that it's a good data point on the robustness of the finance market for NYC office right now.

3.5% 10 year interest only!

  Vornado Completes $800 Million Refinancing of 650 Madison Avenue
  NEW YORK, Dec. 02, 2019 (GLOBE NEWSWIRE) -- VORNADO REALTY TRUST (NYSE:
  VNO) announced today that its 20.1% owned joint venture has completed an
  $800 million refinancing of 650 Madison Avenue, a 600,000 square foot
  Manhattan office and retail property. The ten-year interest only loan carries a
  fixed rate of 3.486% and matures in December 2029.
  The loan replaces the previous $800 million loan that bore interest at a fixed
  rate of 4.39% and was scheduled to mature in October 2020.
  Vornado Realty Trust is a fully-integrated equity real estate investment trust.
 CONTACT:
  JOSEPH MACNOW
  (212) 894-7000
  Certain statements contained herein may constitute “forward-looking
  statements” within the meaning of the Private Securities Litigation Reform Act
  of 1995.  Such forward-looking statements involve known and unknown risks,
  uncertainties and other factors which may cause the actual results,
  performance or achievements of the Company to be materially different from
  any future results, performance or achievements expressed or implied by such


Facebook’s deal for office space at the Farley Building isn’t dead.

The social media giant is in talks to lease 700,000 square feet of office space at Vornado Realty Trust’s conversion of the James A. Farley Post Office, according to the Wall Street Journal. Apple had also reportedly been looking into leasing space at the office redevelopment.

Facebook’s potential deal comes on the heels of the 1.5 million-square-foot lease it signed at Hudson Yards last month. A lease a Farley would make the social media company one of the largest office tenants in the city.

READ MORE
Facebook facing off with Apple over Farley office space
Here’s how much Facebook is paying at Hudson Yards
Facebook’s presence would help to make up for the loss sustained by the city earlier this year, when Amazon abandoned plans for a Long Island City headquarters because of community opposition. According to experts, Facebook’s presence will lead to 14,000 jobs — more than half the 25,000 tech jobs Amazon had initially promised.

After the Amazon debacle, experts speculated that Amazon’s rejection of New York City would lead other tech firms to shun the five boroughs. But tech giants show no intention of leaving New York City, with Google, Apple and Spotify all leasing office space in the last two years.

Tech-sector jobs grew four times as fast as private jobs from 2009 to 2018, according to an analysis by an economist at The New School. Those high-paying jobs have also led to increased demand for rental housing, dining and ride-hailing services. [WSJ] — Georgia Kromrei


EDIT 12/13/2019 I'm just going to add news here rather than continue to spam and bump up the VNO thread

VNO sold another $100 million unit at 220 Central Park South which brings QTD closings to something like $350 million. Cash just keeps pouring into VNO from 220CPS and while the luxury market has taken a turn for the worse, the vast majority of units are sold so closings should continue.

A penthouse at 220 Central Park South has sold for $100 million, making it the third New York City residence ever to close for $100 million or more, according to people familiar with the deal.

Previously, the only deals to sell in New York at that price point were hedge-fund executive Ken Griffin’s nearly $240 million deal for another apartment in the same building earlier this year, and tech titan Michael Dell’s $100.47 million purchase of a penthouse at the nearby tower One57, at 157 West 57th Street, in 2014.

The latest sale is for a four-bedroom apartment that is about 9,800 square feet, according to marketing materials for the property. The identity of the buyer couldn't be determined.

While the deal shows that buyers are willing to pony up nine-figure sums for the most spectacular homes in New York, luxury agents said this particular sale has little relationship with today’s market, which is more sluggish for luxury homes. The contract for the home was likely signed a couple of years ago and is closing now that the tower is nearing completion, according to people familiar with the building.

More: Lachlan Murdoch Sets L.A. Record by Paying $150 Million for a Château-Style Mansion

"I don’t think this is a barometer for what’s happening right now," said Frances Katzen of Douglas Elliman, who wasn’t involved in the deal. "It’s a deal predicated on a different market."

Ms. Katzen pointed to the new mansion tax in New York, which increased taxes for purchasers of ultrahigh-end real estate, as well as an oversupply of luxury condos as reasons why the market has slowed.

"The pricing you’re seeing now is much more measured," she said.

Corcoran Sunshine Marketing Group led sales at the building, which was developed by Vornado Realty Trust.


12/15 Edit, Again just adding news to this post rather than bumping the thread

Vornado sells 2 unlevered and unoccupied building for $71 million, more than they paid in 2015. Between this and the aforementinoed 220CPS sales, the cash keeps pouring into VNO
https://therealdeal.com/2019/12/13/naftali-buys-two-vacated-vornado-properties-for-71m/

12/18 Edit: Special Dividend, previously telegraphed

this was already known to anyone who reads the call transcripts or sell side commentary, but the stock is up a little on the news. in general, VNO is selling assets and has run out of tax offsets, so asset sales make their way to shareholders.

NEW YORK, Dec. 18, 2019 (GLOBE NEWSWIRE) -- VORNADO REALTY TRUST (NYSE: VNO) today announced that its Board of Trustees has declared a special dividend of $1.95 per share payable on January 15, 2020 to shareholders of record on December 30, 2019.  Approximately $1.74 of the special dividend will be long-term capital gain.
The dividend is the result of gains from the transfer of a 45.4% common equity interest in Vornado’s portfolio of flagship high street retail assets on Upper Fifth Avenue and Times Square, the sale of its 25% interest in 330 Madison Avenue and other previously disclosed asset sales, partially offset by a tax deduction resulting from its former investment in Toys “R” Us.
Vornado Realty Trust is a fully-integrated equity real estate investment trust.



 
« Last Edit: December 18, 2019, 09:39:18 AM by thepupil »

thepupil

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Re: VNO - Vornado Realty Trust
« Reply #29 on: January 06, 2020, 07:45:53 AM »
https://streeteasy.com/building/220-central-park-south-new_york#tab_building_detail=2

Vornado closed on a total of $560 million of units at 220 CPS in the 4th quarter.

+ the aforementioned $71 million sale of vacant UES commercial buildings

that's at least $630 million of cash pouring into VNO this Q (minus some transaction cost and taxes), $370mm is being sent to shareholders via the special divvy (ex date already past, pay date on the 15th) so net of that, I'd expect 4Q cash to still increase significantly.

for the year 2019, inclusive of the retail JV, by my count,  VNO sold/monetized about $3 billion of real estate, and paid about 7% of its stock price in regular/special dividends.

it massively underperformed in 2019, returning only 14.9%; underperforming REITs by 15% or so and SPX by 17%.

Call me stubborn, but as long as they keep selling assets for what they say they're worth, sending cash to shareholders, and the leasing doesn't totally fall through the floor, continue to think this is an opportunity.

Expect more 220 CPS sales to close and hopefully getting some positive news on the Farley / Penn Station area leasing in 2020.