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Vornado Announces "Handshake" Deal With Kushner Companies

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Vornado Realty Trust (VNO - Free Report) reached a “handshake” deal to sell 49.5% stake in the Manhattan office tower at 666 Fifth Avenue to Kushner Companies, as per the regulatory filing by Vornado done on Friday.

The terms of the deal with Kushner, the majority owner of the economically distressed building, has not been revealed yet. Notably, Vornado will retain the ownership of 666 Fifth Avenue retail.

Kushner Companies was earlier led by US President Donald Trump’s key adviser and son-in-law, Jared Kushner. The company bought the building, just before the financial crisis in 2007, for a record price of $1.8 billion. However, as recession created chaos for Kushner, they eventually started selling its parts. As a result, in 2011, Vornado acquired 49.5% stake in the building and was permitted to rearrange the mortgage on the office building.

Through the filing, Steven Roth, Vornado’s chairman and chief executive officer informed the investors, “I believe we now have a handshake to sell our interest to our partner at a price which will repay our investment plus a mezzanine-type return. The existing loan will be repaid including payment to us of the portion of the debt that we hold.”

Notably, as part of portfolio-repositioning efforts, Vornado has been aggressively disposing of its assets. Moreover, in July 2017, it completed the spin-off of its Washington, DC-segment. Earlier, the company spun-off the shopping center business, creating Urban Edge Properties – a publicly traded REIT. Another $1 billion of assets have been identified, which the company will be selling over the next several years. The streamlining efforts are a strategic fit and are anticipated to propel growth over the long term. However, the earnings dilutive impact cannot be bypassed in the near term.

Shares of this Zacks Rank #3 (Hold) stock underperformed the industry in the past 12 months, declining 16.3% versus the industry’s descend of 4.1%.

Stocks Worth a Look

A few better-ranked stocks from the same space include Arbor Realty Trust (ABR - Free Report) , Extra Space Storage Inc. (EXR - Free Report) and Sotherly Hotels Inc. (SOHO - Free Report) . All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arbor Realty Trust’s Zacks Consensus Estimate for 2018 funds from operations (FFO) per share remained unchanged at 90 cents over the past month. Its shares returned 12% in 12 months’ time.

Extra Space Storage’s FFO per share estimates for the current year moved up 1.1% to $4.59 in a month’s time. Its shares gained 14.5% over the past 12 months.

Sotherly Hotels’ FFO per share estimates for 2018 remained unchanged at $1.05 over the past month. The stock gained 24.6% during the past 12 months.

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

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