Despite geopolitical tensions and economic challenges, Vornado Realty Trust (NYSE:VNO) showcased resilience in its Q3 2023 earnings call. Steven Roth, Chairman and CEO, acknowledged the impact of ongoing conflicts in Ukraine and Gaza, and the Federal Reserve's interest rate increases but remained optimistic about the company's performance. The firm reported a Q3 comparable FFO as adjusted of $0.66 per share, a decrease from $0.81 in the same period last year. Yet, the New York office and retail businesses showed robust leasing activity and increasing rents, indicating signs of recovery.
Key takeaways from the call include:
- Despite geopolitical and economic challenges, Vornado's business performed well, with strong leasing activity and increasing rents in its New York office and retail businesses.
- The construction of PENN 2 is nearing completion, generating tenant interest.
- The company recently opened a Wegmans supermarket in Manhattan and contributed its Pier 94 leasehold to a joint venture with Hudson (NYSE:HUD) Pacific and Blackstone (NYSE:BX).
- The company's liquidity is strong at $3.2 billion, with no significant maturities until mid-2024.
- The company received GRESB's Green Star distinction for the 11th time.
- Vornado has leased 2.5 million square feet in the Penn District.
- The company expects to pay a dividend of about $0.10 to $0.30 in cash in the fourth quarter.
- Leasing processes are taking longer than historic norms, and concession trends have stabilized.
Roth also highlighted the company's focus on protecting its balance sheet and extending maturities. The firm has no significant maturities until mid-2024 and is actively working with lenders to extend these. Its current liquidity stands at $3.2 billion, including $1.3 billion in cash and restricted cash and $1.9 billion undrawn from its revolving credit facilities.
Vornado Realty Trust also discussed its New York City leasing pipeline, with a focus on PENN 1 and PENN 2. It has leased 2.5 million square feet in the Penn District. Furthermore, the company mentioned its dividend and share buyback program, stating that it expects to pay a dividend of about $0.10 to $0.30 in cash in the fourth quarter.
The firm is also actively discussing extensions with its lending counterparties and plans to use its revolver as a backstop for dealing with unsecured bonds if necessary. The company has exposure to expiring swaps and caps but plans to replace them and continue to hedge its portfolio.
In terms of leasing and development projects, Vornado expects to close leases for 280 Park, 1290 Ave of Americas, and 650 PENN 1 in the fourth quarter. There are ongoing discussions regarding mortgage debt due for 280 Park, and the company is exploring opportunities to generate cash flow from the Hotel Penn site until it is ready for development.
Finally, the company reported $62 million in cash from operations for the quarter. It also mentioned a signed lease with Selendy Gay for 100,000 square feet at 1290 Avenue of the Americas, with another sizable lease currently being documented. The next earnings call is scheduled for February 13.
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