• Comparable FFO: $0.52 per share for Q3 2024, down from $0.66 per share in Q3 2023.
• Leasing Activity: 2.5 million square feet leased year-to-date, including 2.1 million square feet in Manhattan.
• Liquidity: $2.6 billion, including $1 billion in cash.
• Office Occupancy: 87.5%, expected to increase to 90.8% with pending leases.
• New York Office Leasing: 454,000 square feet leased in Q3 2024 at starting rents of $92 per square foot.
• San Francisco Leasing: 443,000 square feet leased at 555 California Street with starting rents of $110 per square foot.
• Chicago Leasing: 239,000 square feet leased at the Mart, including a 161,000 square foot renewal with Medline.
• Cash Mark-to-Market: Reported at negative 7%, adjusted to positive 17.9% including certain transactions.

• Warning! GuruFocus has detected 11 Warning Signs with VNO.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• $Vornado Realty Trust(VNO-N)$ (NYSE:VNO) has leased 2.5 million square feet year-to-date, with expectations to reach between 3.5 million and 3.8 million square feet by year-end, marking one of the highest volumes in the company's history.
• The company has a strong liquidity position with $2.6 billion, including $1 billion in cash, which supports its leasing programs and debt repayments.
• Vornado Realty Trust (NYSE:VNO) has successfully negotiated a master lease with NYU for 770 Broadway, which will provide significant upfront prepaid rent and cover the $700 million loan on the property.
• The Manhattan Class A office market is showing signs of recovery, with declining vacancies and rising rents, particularly in areas like Park Avenue and Sixth Avenue.
• The company has made strategic moves in the retail sector, including bringing Primark to the Penn District, enhancing the district's appeal and tenant mix.

Negative Points

• Third-quarter comparable FFO as adjusted decreased to $0.52 per share from $0.66 per share in the previous year, primarily due to lower NOI from known move-outs and higher net interest expenses.
• The office occupancy rate has decreased to 87.5%, down from 89.3% last quarter, due to move-outs at key properties like 770 Broadway.
• The financing markets remain challenging for office properties, with high borrowing rates impacting real estate values and refinancing options.
• Despite improvements, the San Francisco office market remains weak, with city-wide vacancies at 36% and declining rents, although Vornado's 555 California Street is performing well.
• The company faces challenges with overleveraged assets that do not currently contribute to FFO, and it may need to restructure loans or consider non-recourse options.

Q & A Highlights

Q: Does the leasing activity include the NYU lease, and when does occupancy start at 770 Broadway? A: Yes, it includes the NYU lease. The closing, rent commencement, and fund transfer are expected in January, with the papers signed imminently. (Steven Roth, CEO)

Q: Is the strategy for the Mart to build up occupancy with reduced rents? A: The Chicago market is soft, but the Mart is financially strong and unencumbered, giving strategic flexibility. We will rent opportunistically as attractive deals arise. (Steven Roth, CEO)

Q: Can you provide an update on the PENN2 leasing pipeline and confidence in signing leases by year-end? A: The pipeline is robust with significant transactions expected to go to lease in Q4. We have over 600,000 square feet in negotiation, with strong confidence in closing deals. (Glen Weiss, EVP - Office Leasing)

Q: Are there plans to monetize the remaining half of the preferred equity position in retail JV? A: We have no current plans to monetize the remaining half. We are in a strong capital position and content with holding the preferred equity for now. (Steven Roth, CEO)

Q: How do you view the opportunity for acquisitions and external growth in 2025? A: We are opportunistic, open to both debt and asset purchases, focusing on value-added opportunities that generate attractive returns. We aim for strategic growth, not just growth for growth's sake. (Michael Franco, CFO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.