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Vornado (VNO) Boosts Strength With $350M Refinancing, Stock Up

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Vornado Realty Trust (VNO - Free Report) recently completed a $350-million refinancing of 909 Third Avenue. This Manhattan office building encompasses 1.4 million square feet of space.

The interest-only loan carries a fixed rate of 3.23% and is slated to mature in April 2031. It replaces the prior $350-million loan that bore interest at a fixed rate of 3.91% and was slated to mature in May 2021.

This refinancing offers Vornado a cheaper line of credit and helps reduce annualized interest expenses. Moreover, extended maturities of the assumed debt will help the company improve its maturity profile and enjoy greater liquidity for day-to-day operations.

Shares of Vornado gained 1.64% during Tuesday’s regular trading session, reflecting bullish sentiments.

Last month too, Vornado completed a $525-million refinancing of One Park Avenue. The company owns a 55% stake in the joint venture for the ownership of the 943,000-square-foot Manhattan office building.

The interest-only loan carries an interest rate of LIBOR plus 1.107% and is slated to mature in March 2026, after considering any further extension. It replaced a previous $300-million LIBOR plus 1.75% loan, which was slated to mature in March 2021. The company’s share of the net proceeds from this refinancing was nearly $105 million.

Such efforts will also boost the company’s cash flow and alleviate its bottom-line pressure. The reduction offers greater financial flexibility and will strengthen Vornado’s balance sheet. Markedly, as of Dec 31, 2020, the company had $3.9 billion in liquidity, consisting of $2.2 billion available on its $2.75-billion revolving credit facilities and $1.7 billion of cash and cash equivalents, and restricted cash.

Also, Vornado secured numerous loan refinancings in fourth-quarter 2020, enabling it to reduce the interest rate on borrowings and extend debt maturities. Hence, a flexible financial position will enable it to take advantage of investment opportunities and fund its development projects.

Vornado’s focus on having assets in a few select high-rent and high barrier-to-entry markets will likely drive steady cash flows and fuel its growth engine over the long term. It is selling assets and reinvesting proceeds in developments and redevelopments. Furthermore, loan refinancing enables Vornado to reduce the interest rate on borrowings and extend debt maturities.

However, the COVID-led shutdown of certain businesses is likely to reduce rental income and impact occupancy. Additionally, store closures and bankruptcy woes have aggravated amid social-distancing requirements and higher e-commerce adoption. This has also been affecting its retail tenants’ rent-paying abilities.

Shares of this Zacks Rank #3 (Hold) company have gained 24.8% over the past three months compared with the industry's rally of 7.3%.

Stocks to Consider

Alpine Income Property Trust, Inc.’s (PINE - Free Report) FFO per share estimate for the current year has moved up 3.9% to $1.61 in the past month. The company sports a Zacks Rank of 1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Extra Space Storage Inc.’s (EXR - Free Report) Zacks Consensus Estimate for first-quarter 2021 FFO per share has moved 4.2% north to $1.48 in the past month. The company currently carries a Zacks Rank of 2 (Buy).

Global Net Lease, Inc. (GNL - Free Report) holds a Zacks Rank of 2 at present. The Zacks Consensus Estimate for 2021 FFO per share has been revised 4% upward to $2.10 in a month’s time.

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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