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Vornado (VNO) Q2 Earnings: FFO, Revenues Miss Estimates
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Vornado Realty Trust (VNO - Free Report) reported second-quarter 2016 funds from operations (“FFO”) per share of $1.21, missing the Zacks Consensus Estimate of $1.25. The figure also came in lower than the prior-year tally of $1.71 per share.
Results reflect weaker-than-expected revenue numbers and a fall in occupancy in both the New York and Washington DC portfolio.
Total revenue came in at $621.7 million for the second quarter, up 0.9% year over year. However, it lagged the Zacks Consensus Estimate of $626.5 million.
Quarter in Detail
In the New York portfolio, Vornado leased 259,000 square feet of space in Manhattan, 285,000 square feet of space in Long Island City (Center Building) and 55,000 square feet of retail space. The company leased 352,000 square feet of office space in Washington DC.
At quarter end, same-store occupancy in the New York portfolio was 96.0%, reflecting a contraction of 20 basis points sequentially and 50 bps year over year. On the other hand, same-store occupancy in the Washington DC portfolio was 84.0%, down 80 bps both sequentially and year over year.
Same-store earnings before interest, tax, depreciation and amortization for New York portfolio increased 6.9% from a year ago while for the Washington DC, it declined 1.3% year over year.
As of Jun 30, 2016, Vornado had $1.64 billion of cash and cash equivalents, down from $1.84 billion as of Dec 31, 2015.
Other Developments
On May 20, the company contributed $19.65 million for a 50% equity stake in a joint venture, which would develop a 33,000 square foot office and retail building on Houston Street in Manhattan.
On the other hand, on May 27, 2016, the company sold a 47% ownership stake in 7 West 34th Street – a 477,000 square foot Manhattan office building leased to Amazon.com, Inc. (AMZN - Free Report) – and retained the residual 53% stake. Based on a property value of around $561.0 million, this sale helped the company reap net proceeds of nearly $127.4 million.
Our Viewpoint
Vornado’s lower-than-expected result in the second quarter is disappointing. Though strategic acquisitions and divestitures including spin-offs are projected to improve growth in the long term, its portfolio-repositioning efforts, through property dispositions have earnings dilutive effects. Further, stiff competition and any hike in interest rates remain concerns before the company.
Currently, Vornado has a Zacks Rank #3 (Hold).
Investors interested in the REIT space may consider stocks like CoreSite Realty Corp. (COR - Free Report) and Mack-Cali Realty Corp. . Both the stocks sport a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All EPS numbers presented in this write up represent FFO per share.
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Vornado (VNO) Q2 Earnings: FFO, Revenues Miss Estimates
Vornado Realty Trust (VNO - Free Report) reported second-quarter 2016 funds from operations (“FFO”) per share of $1.21, missing the Zacks Consensus Estimate of $1.25. The figure also came in lower than the prior-year tally of $1.71 per share.
Results reflect weaker-than-expected revenue numbers and a fall in occupancy in both the New York and Washington DC portfolio.
Total revenue came in at $621.7 million for the second quarter, up 0.9% year over year. However, it lagged the Zacks Consensus Estimate of $626.5 million.
Quarter in Detail
In the New York portfolio, Vornado leased 259,000 square feet of space in Manhattan, 285,000 square feet of space in Long Island City (Center Building) and 55,000 square feet of retail space. The company leased 352,000 square feet of office space in Washington DC.
At quarter end, same-store occupancy in the New York portfolio was 96.0%, reflecting a contraction of 20 basis points sequentially and 50 bps year over year. On the other hand, same-store occupancy in the Washington DC portfolio was 84.0%, down 80 bps both sequentially and year over year.
Same-store earnings before interest, tax, depreciation and amortization for New York portfolio increased 6.9% from a year ago while for the Washington DC, it declined 1.3% year over year.
As of Jun 30, 2016, Vornado had $1.64 billion of cash and cash equivalents, down from $1.84 billion as of Dec 31, 2015.
Other Developments
On May 20, the company contributed $19.65 million for a 50% equity stake in a joint venture, which would develop a 33,000 square foot office and retail building on Houston Street in Manhattan.
On the other hand, on May 27, 2016, the company sold a 47% ownership stake in 7 West 34th Street – a 477,000 square foot Manhattan office building leased to Amazon.com, Inc. (AMZN - Free Report) – and retained the residual 53% stake. Based on a property value of around $561.0 million, this sale helped the company reap net proceeds of nearly $127.4 million.
Our Viewpoint
Vornado’s lower-than-expected result in the second quarter is disappointing. Though strategic acquisitions and divestitures including spin-offs are projected to improve growth in the long term, its portfolio-repositioning efforts, through property dispositions have earnings dilutive effects. Further, stiff competition and any hike in interest rates remain concerns before the company.
Currently, Vornado has a Zacks Rank #3 (Hold).
Investors interested in the REIT space may consider stocks like CoreSite Realty Corp. (COR - Free Report) and Mack-Cali Realty Corp. . Both the stocks sport a Zacks Rank #2 (Buy).
VORNADO RLTY TR Price, Consensus and EPS Surprise
VORNADO RLTY TR Price, Consensus and EPS Surprise | VORNADO RLTY TR Quote
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All EPS numbers presented in this write up represent FFO per share.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>