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Vornado (VNO) Announces Sale of Five Manhattan Retail Properties

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Vornado Realty Trust (VNO - Free Report) has signed agreements to sell five Manhattan retail properties for $184.5 million. These properties are located at 677 – 679, 759 – 771 and 828 – 850 Madison Avenue, 478-482 Broadway and 155 Spring Street.

With the properties witnessing negative income and street level occupancy of nearly 30%, this disposition move seems a strategic fit.

These unencumbered properties are to be sold in three different sale transactions and are subject to customary closing conditions. While the divestiture of the Madison Avenue properties is expected to close in the third quarter of the ongoing year, the sale of the Soho properties will likely close in the first quarter of 2022. The company anticipates a total financial statement loss of roughly $7 million.

Strategic sell-outs provide the company with the dry powder to reinvest in opportunistic developments and redevelopments. Such timely portfolio-repositioning initiatives will drive its growth over the long run.

The retail real estate market had already been battling store closures and retailers’ bankruptcy, and the pandemic has further aggravated its woes with e-commerce adoption rising significantly amid the social-distancing wave. Vornado has also felt the brunt of the pandemic. The company’s retail tenants continue to be affected by the economic conditions and other factors, including the limitations on international travel.

Nevertheless, amid significant government stimulus and improvement in conditions in the office-leasing market, the company is well positioned to benefit from the emerging trend, given its ability to offer top-quality office spaces in key locations.

Shares of this Zacks Rank #3 (Hold) company have appreciated 11%, year to date, underperforming the industry’s growth of 21%.

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Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs

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