VNO - Vornado Realty Trust

[BG2008]

Gained TCI, lost Blackstone (who mostly blew out of their liquid real estate at first glance) on the register. Chris Hohn is truly one of the best, but I’d rather have BX in this case!

 

BG, your longing for delicious restaurants and all these headlines about NYC exodus are depressing!

 

Pupil,

 

I'm up a bit in my NYC plays.  But it's nothing like the chemicals and plastic packagings that I picked up during the selloff.  So of course, I am going to blame you.  :).  One thing that do worry me is that homeless and the shooting that has increased.  We can debate about politics all day long, but if people who look like you are afraid to move to NYC, it won't matter even if FB, GOOG, and AMZN wants to rent a bunch of offices here.  That is something that I am tracking.  Perhaps, buying some LEAPs on VNO is good schmuck insurance.  Just thinking out loud.  Also, I thinking trading around the position until we get some clarity on vaccine etc is likely a good idea.  Don't have to sell everything.  But selling some and adding back is likely a good idea. 

 

[Mephistopheles]

https://www.wsj.com/articles/amazon-bets-on-office-based-work-with-expansion-in-major-cities-11597741203?mod=hp_lead_pos3

 

Amazon hiring thousands of in office workers in big cities

[fareastwarriors]

https://www.wsj.com/articles/amazon-bets-on-office-based-work-with-expansion-in-major-cities-11597741203?mod=hp_lead_pos3

 

Amazon hiring thousands of in office workers in big cities

 

 

 

The e-commerce giant said it will expand its tech hubs and corporate offices in Dallas, Detroit, Denver, New York (Manhattan), Phoenix, and San Diego.

 

Amazon said it expects to invest $1.4 billion in the offices and add more square feet to each location.

...

Of the new roles, 2,000 will be based in New York, where it has acquired the Lord & Taylor Fifth Avenue building.

 

Last December, Amazon signed a lease on building at Hudson Yards, and it reportedly planned to hire 1,500 people at the site. 

 

Amazon has already committed to creating thousands of jobs in New York. In November 2018, Amazon said it would create 25,000 jobs in New York over a 15-year period. Amazon did not immediately respond when CNBC asked how many staff it now has in New York.

 

https://www.cnbc.com/2020/08/18/amazon-3500-jobs-6-us-cities.html

[Gregmal]

I dont know guys, everywhere I turn I see articles about the death of NY, all of which seem to quote Jonathan Litt, who thinks these are all going to 0....He posted a picture of Times Square in July, and said there was not a lot of people!

[Spekulatius]

I dont know guys, everywhere I turn I see articles about the death of NY, all of which seem to quote Jonathan Litt, who thinks these are all going to 0....He posted a picture of Times Square in July, and said there was not a lot of people!

 

There is nothing broken that can’t get fixed with somewhat lower rents and getting the crime issue fixed. Getting Blasio booted would be a good first step, imo.

 

 

Of course Reits won’t like the lower rent part, but it might be necessary to keep occupancy, at least for a while. A Biden win might actually help too, if the SALT tax becomes deductible again.

 

Some NYC retail and apartment rents don’t seem sustainable to me and may need a reset.

[BG2008]

I dont know guys, everywhere I turn I see articles about the death of NY, all of which seem to quote Jonathan Litt, who thinks these are all going to 0....He posted a picture of Times Square in July, and said there was not a lot of people!

 

Jon Litt, haha, he's kind of like those perma bears every time we have a crisis.

[Gregmal]

Agree. The crime is whats concerning to me. The covid will go away and people will come back if its safe. I think rents settling somewhere, even lower, helps this out, given spreads vs norm. But people won't come back if NYC becomes Chicago. I think a Biden win has a better likelihood to soothe some of the unrest, however Joe is not extreme left enough for many of those protesting, and on top of that, my feel is that the criminals and gun toting thugs dont care either way.

[Gregmal]

I dont know guys, everywhere I turn I see articles about the death of NY, all of which seem to quote Jonathan Litt, who thinks these are all going to 0....He posted a picture of Times Square in July, and said there was not a lot of people!

 

Jon Litt, haha, he's kind of like those perma bears every time we have a crisis.

 

Ive found one of the better WS marketing tools is to come out with a thesis, after the big event has occurred, in hopes of confusing people into thinking you "called it" ahead of time. Happens every time we have a major event/crisis.

 

I was amused by his picture of Empire State in June titled "85% empty" or something like that. I was surely expecting 90% occupancy. What a let down.

[BG2008]

Agree. The crime is whats concerning to me. The covid will go away and people will come back if its safe. I think rents settling somewhere, even lower, helps this out, given spreads vs norm. But people won't come back if NYC becomes Chicago. I think a Biden win has a better likelihood to soothe some of the unrest, however Joe is not extreme left enough for many of those protesting, and on top of that, my feel is that the criminals and gun toting thugs dont care either way.

 

Gregmal,

 

I agree with you on this.  I'm a pragmatist and RE involves quite a bit of politics, gentrification, affordable rent, etc.  I find it super interesting that a residential broker can't talk to you about demographics in the building or neighborhood.  They get super cagey anytime I bring it up.  But any CRE presentations includes demographics, income, school etc data.  It is probably the number 1 or number 2 reason why people invest in a property or neighborhood.  Crime can spiral things out of control.  A lot of people track WFH trends for NYC, I keenly track crime stats.  If the Upper East Side mom don't feel safe because there is literally some homeless drug addict shooting up or pleasuring himself in front of her kids, that mom instinct will kick in and they are never coming back.  If that bubbly 22 year old gal from U Mich, UNC, or Stanford don't feel safe moving to NYC, you have a real problem.  A big part of the allure of NYC is that it creates a very deep liquidity pool for dating.  This is likely why Amazon, FB, etc are still leasing new spaces. They know that to succeed they must get their hands on the talented coders and those talented coders want to be in NYC or one of the big cities. 

[CorpRaider]

I very much agree with you about crime and related economic unrest issues.  I would not be surprised at all to see a negative feedback loop touch off here.  I really wanted to post because I so strongly agree with the "dating liquidity point."  I just kind of see new york (and really big cities) as a good example of how I understand network effects and it goes beyond dating imop.  Maybe you want great cupcakes, or poke bowls or to launch your momofoku cereal bar or your peanut butter and jelly sandwich restaurant, you are more likely to struggle to find your audience in smaller cities with less scale effects/liquidity.  I think the urban flight due to safety or other issues is unlikely to have a material impact over the longer term because of these scale/network advantages (absent like a Detroit robocop type spiral). 

[BG2008]

I very much agree with you about crime and related economic unrest issues.  I would not be surprised at all to see a negative feedback loop touch off here.  I really wanted to post because I so strongly agree with the "dating liquidity point."  I just kind of see new york (and really big cities) as a good example of how I understand network effects and it goes beyond dating imop.  Maybe you want great cupcakes, or poke bowls or to launch your momofoku cereal bar or your peanut butter and jelly sandwich restaurant, you are more likely to struggle to find your audience in smaller cities with less scale effects/liquidity.  I think the urban flight due to safety or other issues is unlikely to have a material impact over the longer term because of these scale/network advantages (absent like a Detroit robocop type spiral).

 

Don't underestimated white folk's fear of crime - BG2008

 

For nostalgia's sake,

It's got Magnolia's cupcake etc. 

 

10 places on Sex and the City

 

Network effect is very real - Deep liquidity pool for dating, deep restaurant liquidity (you better bring your A game in NYC or you won't survive here)

 

 

[Packer16]

Another trend I have seen is although NYC is still the largest metro/city you have many other Southern Cities (Atlanta, Houston, Miami & Dallas for instance) growing to the point where they are maybe 30 - 40% of the size of NYC & NYC is declining in population.  These cities may be closer to providing alternatives than maybe even 10 years ago if NYC safety declines. 

 

Packer

[BG2008]

Another trend I have seen is although NYC is still the largest metro/city you have many other Southern Cities (Atlanta, Houston, Miami & Dallas for instance) growing to the point where they are maybe 30 - 40% of the size of NYC & NYC is declining in population.  These cities may be closer to providing alternatives than maybe even 10 years ago if NYC safety declines. 

 

Packer

 

Very true Packer.  I was very surprised that Houston had such a vibrant Asian community.  The Viet food is pretty solid there (well, Viet Crawfish boils).  Sometimes, I wish I have kept my involvements in office and NYC multi-family quiet.  I think the prices that I paid for the public REITs are such bargains to the private market that if the worst proves to be true, I will likely only lose 10-20% plus I am de-risking by getting a decent dividend.  But I get bombarded with so many articles on the exodus from NYC and people get so focus on it.  At the end of the day, it's still too early to tell.  When we have a vaccine, we will likely get a ton of clarity on both the multi-family and office trends. 

 

But I will remain flexible.  If I start seeing sustained exodus and sustained crime issues, then I will change my mind.  It's historically a bad idea to bet against NYC.  I'll continue to believe in that until it breaks. 

[BG2008]

As a reference, 2008/2009 look really bad as well.  Banks were going to go broke.  All the PE, HF, and IBanks were not going to be the same.  Finance was a dying sector.  Who would have thought that Tech would become this juggernaut?  Tech wind up becoming the "get rich" accelerant career for talented young folks that previously belong to finance. 

 

Multi-family rent was down quite a bit with broker fees waived and one month free.  By the end of 2009, I got a 2 bed apartment with my good friend for $2,900.  It was legit steal as previous market value might have been in the high $3,000s.  But it didn't take long, maybe 2-3 years before we started hearing that apartments were not affordable anymore. 

[merkhet]

As someone who grew up in Houston and lived there for a while as an adult, lived in NYC for a couple of years, and now currently lives in Dallas, I can assure y’all that neither Houston nor Dallas is a satisfactory alternative to NYC.

[johnny]

Just paid fifty dollars to have some idiot website mail me a dozen bagels from ess-a-bagel in flyover country. This is a metaphor for the dating pool liquidity argument.

[CorpRaider]

As someone who grew up in Houston and lived there for a while as an adult, lived in NYC for a couple of years, and now currently lives in Dallas, I can assure y’all that neither Houston nor Dallas is a satisfactory alternative to NYC.

 

Ditto with CLT and ATL.  <rips open Zabar's delivery package and sighs>

[fareastwarriors]

All other stocks rallying except my office REITs.

Time to add!

[Gregmal]

All other stocks rallying except my office REITs.

Time to add!

 

LOL. Welcome to the club. Its hard "investing" sometimes. But I think with much of this stuff, if you dont care about headlines or narratives on a shorter term basis, and dont care where things may go next week or month, you'll do very well.

 

People always seem to wonder what it takes to own stocks at ridiculous hind site prices. Well, situations like this. The whole office/retail RE isn't going to be worthless, IMO of course. I like ESRT or even PGRE a little better than VNO and the smaller size makes them easier to monetize their assets in a meaningful way. And typically, I think something like Simon is(for me) preferable to VNO for the simple reason that if you think retail can survive, Simon, owns the best. Maybe Unibal-Rodamco or a few others have some "nice" properties, but Simon is your go to for basically a monopoly on retail locations and leverage with the tenant base. I am a bit cloudier in my ability to pick office, simply because the above described advantage, doesnt really exist. I can probably name a half dozen or more REITS with really, really nice, tier A location office setups. So there's not as much of a pure play on just "a recovery" here, at least to me.

[fareastwarriors]

https://therealdeal.com/2020/08/19/duplex-at-220-central-park-south-sells-for-49m/

 

A condo at 220 Central Park South sold for $49 million six months after its anonymous buyer went into contract in February, property records show.

 

The 4,820-square-foot unit was bought by a Delaware limited liability company, CPS Realty Partners, which went into contract for the condo weeks before the city shut down to hamper the spread of coronavirus. The transaction pencils out to $10,165 per foot.

 

...

 

Of the 10 villa units at 220 Central Park South, there are three that haven’t yet sold. They include two nearly 4,900-square-foot units on the second and sixth floors, and a 7,900-square-foot duplex on the seventh and eighth floors.

 

The development has been a cash cow for Vornado. On the company’s second quarter earnings call, CEO Steve Roth referred to the project as a “financial engine,” with proceeds from sales pushing the firm’s total liquidity to $3.8 billion dollars. “If you’ll pardon the expression — we’re loaded,” he said.

[Spekulatius]

If I were fresh out of college, I would target cities like Austin.

[Spekulatius]

All other stocks rallying except my office REITs.

Time to add!

 

LOL. Welcome to the club. Its hard "investing" sometimes. But I think with much of this stuff, if you dont care about headlines or narratives on a shorter term basis, and dont care where things may go next week or month, you'll do very well.

 

People always seem to wonder what it takes to own stocks at ridiculous hind site prices. Well, situations like this. The whole office/retail RE isn't going to be worthless, IMO of course. I like ESRT or even PGRE a little better than VNO and the smaller size makes them easier to monetize their assets in a meaningful way. And typically, I think something like Simon is(for me) preferable to VNO for the simple reason that if you think retail can survive, Simon, owns the best. Maybe Unibal-Rodamco or a few others have some "nice" properties, but Simon is your go to for basically a monopoly on retail locations and leverage with the tenant base. I am a bit cloudier in my ability to pick office, simply because the above described advantage, doesnt really exist. I can probably name a half dozen or more REITS with really, really nice, tier A location office setups. So there's not as much of a pure play on just "a recovery" here, at least to me.

 

It’s fun to think where these Reits could trade when the market actually starts to decline. ;D

[BG2008]

All other stocks rallying except my office REITs.

Time to add!

 

LOL. Welcome to the club. Its hard "investing" sometimes. But I think with much of this stuff, if you dont care about headlines or narratives on a shorter term basis, and dont care where things may go next week or month, you'll do very well.

 

People always seem to wonder what it takes to own stocks at ridiculous hind site prices. Well, situations like this. The whole office/retail RE isn't going to be worthless, IMO of course. I like ESRT or even PGRE a little better than VNO and the smaller size makes them easier to monetize their assets in a meaningful way. And typically, I think something like Simon is(for me) preferable to VNO for the simple reason that if you think retail can survive, Simon, owns the best. Maybe Unibal-Rodamco or a few others have some "nice" properties, but Simon is your go to for basically a monopoly on retail locations and leverage with the tenant base. I am a bit cloudier in my ability to pick office, simply because the above described advantage, doesnt really exist. I can probably name a half dozen or more REITS with really, really nice, tier A location office setups. So there's not as much of a pure play on just "a recovery" here, at least to me.

 

It’s fun to think where these Reits could trade when the market actually starts to decline. ;D

 

This one is trading at 23% higher than the low it reached this year.  How low do you think it goes? With the dividend, you can create your own form of share buybacks.

[CorpRaider]

Chanos made some negative comments about VNO and SLG today on CNN.  He's short some midsize CRE heavy banks though, but he cited the big boys just as evidence the market is negative.  Cited a (20%) rents figure and a (30%) cash flow for these guys.  I have to run that down, off the cuff I figured he was citing year over year renewal rates for people who signed leases during covid, which I would expect to be a weirdly small sample size.

[fareastwarriors]

Save NYC landlords, go back to the office!

 

 

https://www.bloomberg.com/news/articles/2020-08-20/nyc-landlords-press-finance-bosses-to-speed-return-and-save-city?srnd=premium

 

New York Landlords Press Finance Bosses to Speed up Return-to-Work and Save City

 

 

Group urges employers to be patriotic and call workforce back

Despite ‘guilt trip,’ the reaction so far has been lukewarm