Author Topic: VNO - Vornado Realty Trust  (Read 47453 times)

thepupil

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Re: VNO - Vornado Realty Trust
« Reply #240 on: October 04, 2020, 06:56:41 AM »
Most would not include g&a in cap rate.

I just use the term “burdened” to mean NOI burdened by g&a.

When loan documents or sales figures are quoting cap rates, g&a is not included. The g&a belongs to the company and buildings trade/ are borrowed separately from the company. As an example, PGRE sold a 10% stake in 1633 Broadway recently at about a 5 cap; the buyers of that did not take into account PGRE’s corporate g&a because they aren’t paying it (well they are probably paying a management fee to Paramount)

The g&a has to be taken into account when evaluating a company as a going concern consolidated entity. You have to take it into account with respect to value growth and the income statement, but it is useful to see where individual buildings/ assets may trade separately from the g&a.
« Last Edit: October 04, 2020, 08:29:27 AM by thepupil »


BG2008

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Re: VNO - Vornado Realty Trust
« Reply #241 on: October 04, 2020, 08:10:34 AM »
We can intellectually masturbate about whether including G&A in NOI/Cap Rate calculation should be performed or not.  But there are literally decades of transactions that strips out G&A.  This is mostly because a new buyer with a ton of scale can implement their own G&A. We can just look at the GRIF thread.  The G&A debated raged forever.  The truth is that a bunch of office buildings or warehouses aren't "intrinsically" worth less become it resides in a publicly traded REIT.  If you run an auction, 95% of the bids that come back will be a NOI excluding G&A divided by their own cap rate.  So what is the true "intrinsic" value?  Well, if the standard arms length transaction with multiple bidders is a certain method, then that's probably the intrinsic value. 

The only exception that I will make is when there is a price where you cannot carry the assets, i.e. single family homes pre financial crisis.  People will literally go belly up within 6 months because the cashflow couldn't service the mortgage.  When you can service the mortgage with ample coverage ratios, it's a good "intrinsic" value for me.   

thepupil

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Re: VNO - Vornado Realty Trust
« Reply #242 on: October 04, 2020, 08:20:58 AM »
I knew this discussion would get BG2008 going...

Here's snippets from JP Morgan on September 3rd.

Note that VNO, in JPM's view, can simultaneously trade at 22x EV/EBITDA (a significant premium to the space and a 4.5% "EBITDA yield"<--sounds a lot like Chanos number, right?), and a 38% discount to NAV / implied 6.8% cap rate.

In the note, JPM more or less says "VNO is an expensive stock, but very cheap to its real estate".

this is a constant tension in RE stock investing. valuing them as companies/stocks or as piles of assets.

The differences get real fun when you layer in a bunch of low returning or no returning assets (in VNO’s case the development / redevelopment assets, the retail JV preferred, a $2B pile of cash, some recently dark assets, theMart’s trade show business, Hotel Penn, a JV in a huge development site in Roslyn VA that VNO did not spin to JBGS) etc.

these assets produce little in earnings, but may have substantially more value than an analysis that puts an undue "primacy on the income account" would suggest. These assets' will realize value via "resource conversion activities". May Marty Whitman RIP.

Quote
VNO trades at 12.2x our 2021 FFO adjusted for comparability estimate vs. the office group at 13.9x. On an AFFO basis, VNO trades at 16.0x our 2021 estimate vs. the office group of 20.8x.

Stripping out differences due to financial leverage and non-recurring items, we estimate that VNO trades at 22.2x EV / EBITDA vs. the office group at 18.9x.

We calculate that VNO trades at a 38% discount to our $58/share NAV estimate. And at the current stock price, we calculate an implied cap rate of 6.8%.

 To the extent large-scale take-outs in office emerge as viable, VNO could be a name to watch as its valuation is still heavily discounted to the real estate.
« Last Edit: October 04, 2020, 08:59:26 AM by thepupil »

BG2008

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Re: VNO - Vornado Realty Trust
« Reply #243 on: October 04, 2020, 08:42:37 AM »
I knew this discussion would get BG2008 going...

Here's snippets from JP Morgan on September 3rd.

Note that VNO, in JPM's view, can simultaneously trade at 22x EV/EBITDA (a significant premium to the space and a 4.5% "EBITDA yield"<--sounds a lot like Chanos number, right?), and a 38% discount to NAV / implied 6.8% cap rate.

In the note, JPM more or less says "VNO is an expensive stock, but very cheap to its real estate".

this is a constant tension in RE stock investing. valuing them as companies/stocks or as piles of assets.

The differences get real fun when you layer in a bunch of low returning or no returning assets (in VNO’s case the development / redevelopment assets, the retail JV preferred, a $2B pile of cash, some recently dark assets, theMart’s trade show business, Hotel Penn, a JV in a huge development site in Roslyn VA that VNO did. Not spin to JBGS) etc.

these assets produce little in earnings, but may have substantial value than an analysis that puts an undue "primacy on the income account" would suggest. These assets' will realize value via "resource conversion activities". May Marty Whitman RIP.

Quote
VNO trades at 12.2x our 2021 FFO adjusted for comparability estimate vs. the office group at 13.9x. On an AFFO basis, VNO trades at 16.0x our 2021 estimate vs. the office group of 20.8x.

Stripping out differences due to financial leverage and non-recurring items, we estimate that VNO trades at 22.2x EV / EBITDA vs. the office group at 18.9x.

We calculate that VNO trades at a 38% discount to our $58/share NAV estimate. And at the current stock price, we calculate an implied cap rate of 6.8%.

 To the extent large-scale take-outs in office emerge as viable, VNO could be a name to watch as its valuation is still heavily discounted to the real estate.

Pupil,

Why do you do this to me?  You paper me with intellectual stimulating conversations about Office REITs.  I took time off from daddy duty for the weekend and was going to sit down and do taxes and catch up on so many things.  Now I am bantering with you on this website about Office valuations and resource conversion activities.  My taxes will never get done at this rate!!

thepupil

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Re: VNO - Vornado Realty Trust
« Reply #244 on: October 04, 2020, 08:52:18 AM »
haha, I'm currently reviewing a long and tedious legal document.

much more fun to wax poetic on the treatment of g&a and how various market participants may value Hotel Pennsylvania or the retail preferred or the signed but not commenced Farley etc. differently than others.

CorpRaider

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Re: VNO - Vornado Realty Trust
« Reply #245 on: October 04, 2020, 05:50:21 PM »
If they used all the cash to build Penn and then just like held it without generating any EBITDA for sentimental reasons, that would not be good, but seems to be factored into your kind of stress test case/attempt to reverse engineer some of the bear numbers. 

I must I've found the sort of spin on the numbers cited by certain famous money managers pretty telling, given some passing familiarity with the name.  It's almost like politician level spin.  It seems some are shocked that REITs distribute most of the EBIT. 

BG2008

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Re: VNO - Vornado Realty Trust
« Reply #246 on: October 06, 2020, 09:47:41 AM »
I found this from an online tweet

I guess we know that IB won't be moving to permanent WFH

Seems like the MDs, VPs, and Directors want to get away from their wife and kiddos.  Burnout risk is amplified. 

https://www.wallstreetoasis.com/forums/any-other-juniors-exhausted-due-to-covid-work-from-home

SugarRE

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Re: VNO - Vornado Realty Trust
« Reply #247 on: October 08, 2020, 04:21:26 PM »
We can intellectually masturbate about whether including G&A in NOI/Cap Rate calculation should be performed or not.  But there are literally decades of transactions that strips out G&A.  This is mostly because a new buyer with a ton of scale can implement their own G&A. We can just look at the GRIF thread.  The G&A debated raged forever.  The truth is that a bunch of office buildings or warehouses aren't "intrinsically" worth less become it resides in a publicly traded REIT.  If you run an auction, 95% of the bids that come back will be a NOI excluding G&A divided by their own cap rate.  So what is the true "intrinsic" value?  Well, if the standard arms length transaction with multiple bidders is a certain method, then that's probably the intrinsic value. 

The only exception that I will make is when there is a price where you cannot carry the assets, i.e. single family homes pre financial crisis.  People will literally go belly up within 6 months because the cashflow couldn't service the mortgage.  When you can service the mortgage with ample coverage ratios, it's a good "intrinsic" value for me.

A bit delayed here....but my 2 cents on this masturbation.  If one is truly looking at private market value as THE valuation metric, buyers of individual real estate assets and portfolios do not load them with corporate OH/G&A when purchasing.  I'm almost 20 years into a career with name brand core/value add/debt investment management organizations.  Not once have I underwritten my salary into a purchase. I could be wrong, but........

thepupil

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Re: VNO - Vornado Realty Trust
« Reply #248 on: October 16, 2020, 01:49:52 PM »
Nice. no need to pay this one off, $50mm cash out. decrease in interest rate.

guess that Macy's 2030's expiry + Apple sublease + AMC + MSG tenancy is good enough.


Vornado Completes $500 Million Refinancing of PENN11
Company Release - 10/16/2020

NEW YORK, Oct. 16, 2020 (GLOBE NEWSWIRE) -- VORNADO REALTY TRUST (NYSE: VNO) announced today that it has completed a $500 million refinancing of PENN11, a 1.2 million square foot Manhattan office building. The interest-only loan carries a rate of LIBOR plus 2.75% (currently 2.90%) and matures in October 2025, as fully extended.

The loan replaces the previous $450 million loan that bore interest at a fixed rate of 3.95% and was scheduled to mature in December 2020.

Vornado Realty Trust is a fully-integrated equity real estate investment trust.
« Last Edit: October 16, 2020, 01:51:47 PM by thepupil »

thepupil

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Re: VNO - Vornado Realty Trust
« Reply #249 on: October 20, 2020, 09:21:55 AM »
https://streeteasy.com/building/220-central-park-south-new_york#tab_building_detail=2

220 CPS with a nice $60 million closing on the 19th, now getting reported.

I count $380mm+ of closings since Q2 end, should bring cash above $2B and liquidity past $4 billion.

based on a RealDealNY article out today indicating they sold another ~$60mm (their 6th $50mm+ of the Q), I think the number for post Q2, 220 CPS closings is $510mm now.

I don't think anyone sees risk to these closing anymore given how they've now accelerated, but it still gives me comfort every time I see gobs of cash going to VNO.

having 4 yards of liquidity certainly can't hurt.

https://streeteasy.com/building/220-central-park-south-new_york#tab_building_detail=2

$590mm in Q3

+$65mm more

220 CPS sales ($655mm) + ~$50mm of cash out at Penn11 on the refi means VNO has generated ~$700mm of cash since Q2 end from asset sales/borrowings.



https://therealdeal.com/2020/10/20/duplex-sells-at-vornados-220-cps-for-65-million/
Quote
After a string of big-ticket closings last month, Vornado Realty Trust has sold a duplex at 220 Central Park South for $65 million.
The unit, which occupies the eighth and ninth floors in the “villa” portion of the condo, went into contract in February 2018, according to property records. It closed this October for $65.6 million.

The buyer, named only as ENKA Residence LLC, secured a $32.5 million mortgage from Bank of America, records show. The acquirer’s address was listed care of Gregorgy Fescina at Nima Capital, a family office that invests in real estate assets. Reached by phone, Fescina said he was not aware of the transaction, and hung up.

The 7,911 square-foot unit has eight bedrooms, eight bathrooms and 1,145 square feet of terrace space, according to a recent amendment to the condo’s offering plan.

The purchase works out to $8,291 per square foot — slightly lower than the three units in the tower that traded last month for upwards of $10,000 per square foot. The unit was initially priced at $85 million, the offering plan shows.

With contracts for many apartments signed prior to 2020, the success of 220 Central Park South has been seemingly unaffected by the pandemic, with several pricey units closing in the past six months. The building now has fewer than 30 units left to sell, according to a recent Real Deal analysis.

The 18-story villa portion of the building, which sits in front of the tower, now has just two units remaining, on the second and sixth floors.