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Vornado Focuses on Strategic Investment: Should You Hold?

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We have updated our research report on Vornado Realty Trust (VNO - Free Report) on Sep 23, 2016. This New York-based real estate investment trust (“REIT”) is the owner and manager of commercial real estate in the United States, with a portfolio mainly located in the New York City and Washington D.C. areas.

Vornado aims at improving its core business through strategic acquisitions and divestitures. Strategic dispositions provide the company with dry powder to reinvest in opportunistic acquisitions. Vornado’s Class A office properties are concentrated in a few select high-rent, high barrier-to-entry geographic markets.

Vornado has a strong liquidity position which helps it maintain its growth momentum. As of Jun 30, 2016 the company had $4.3 billion of immediate liquidity, which included $1.9 billion in cash and marketable securities and $2.4 billion un-drawn capacity from the revolving credit facilities worth $2.5 billion. Further, the company recently announced the realization of $124 million of net proceeds from the completion of $675 million refinancing of theMART (Merchandise Mart) in Chicago. This move is aimed at enhancing the financial capacity on favorable terms.

Though the company’s efforts to streamline its business is commendable, the earnings dilutive effects of these moves can’t be denied. Further, intense competition from developers, owners and operators of office properties and other commercial real estate and any rise in rate of interest are concerns before the company.

Notably, over the past seven days, the Zacks Consensus Estimate remained stable at $4.88 and $5.47 per share for 2016 and 2017, respectively.

Vornado currently has a Zacks Rank #3 (Hold). Some better-ranked stocks include CorEnergy Infrastructure Trust, Inc. (CORR - Free Report) , Crown Castle International Corp. (CCI - Free Report) and Seritage Growth Properties (SRG - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). Current quarter estimates for both Crown Castle International and Seritage Growth Properties moved up over the past one month while for CorEnergy Infrastructure Trust it remained stable. You can see the complete list of today’s Zacks #1 Rank stocks here.

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