VNO - Vornado Realty Trust

[BG2008]

New York Post is a trashy tabloid newspaper, but it is the only newspaper that is reporting shootings, rapes, slashings, and other scary crimes. 

 

Stuff like this that happens in broad daylight is what really scares me.  Because somewhere a young woman is having a conversation with her parents about the safety of moving to NYC

 

https://nypost.com/2020/08/30/attempted-rape-on-nyc-subway-platform-thwarted/

 

If you own VNO or any other NYC related RE names, you need to pay attention to stuff like this. 

 

This is not a political post, this is a post from someone who is pragmatic.  If moms are worried about homeless people masturbating in front of their kids or people are afraid of getting slashed or you have to walk through druggies shooting up, the appeal of living in NYC is gone

 

I looked at the NYC crime states and everything except shootings  (which are up substantially) is down YoY and far below levels from way back. I agree the shootings are a concern, but the historical, perspective seems to indicate that this surge in crime is exaggerated way out of proportion.

 

https://www1.nyc.gov/assets/nypd/downloads/pdf/crime_statistics/cs-en-us-city.pdf

 

I agree historical perspective is important, but the relevant history for NYCers is to compare Giuliani and Bloomberg terms with deblasio terms, and that comparison leads many NYCers to conclude that the city has become much more oppressive (and dangerous) to live in...not just crime, but also homelessness, which is far more visible than crime...and unless you want to see some guy taking a dump while you are out going to the supermarket , you are not a fan of homelessness. one factoid most people don't appreciate is that deblasio made nonpayment of violations a civil offense (formerly criminal), which means that the guy who just got ticketed for taking a dump on Broadway while you are out going to Zabars never faces any incentive to avoid taking another dump on Broadway.

 

We see this on the daily here in SF.

 

A politician can probably get quite a bit of votes running on "No more shit, literally!"

 

Nah, he/she would get run out of town with that platform.

 

 

Anyways, maybe we shouldn't crowd the VNO specific thread and move on the death of the urban office building thread.

 

https://www.cornerofberkshireandfairfax.ca/forum/general-discussion/the-death-of-the-urban-office-building/100/

 

I think this is fairly central to the VNO, ESRT, SLG thesis

[thepupil]

https://streeteasy.com/building/220-central-park-south-new_york#tab_building_detail=2

 

220 CPS with a nice $60 million closing on the 19th, now getting reported.

 

I count $380mm+ of closings since Q2 end, should bring cash above $2B and liquidity past $4 billion.

 

based on a RealDealNY article out today indicating they sold another ~$60mm (their 6th $50mm+ of the Q), I think the number for post Q2, 220 CPS closings is $510mm now.

 

I don't think anyone sees risk to these closing anymore given how they've now accelerated, but it still gives me comfort every time I see gobs of cash going to VNO.

 

having 4 yards of liquidity certainly can't hurt.

 

 

 

 

 

 

 

[thepupil]

Someone who listened to BofA event with VNO executives today let me know that VNO collected over 80% of retail rents in August.

 

Not bad.

 

EDIT: Transcript is out

 

Minimal roll over next two years

So well protected from near-term market fluctuations. I think over the next -- through '22 we've got about 10%, 11% on both the office and retail. So fairly minimal roll as we look out.

 

Fourth is, we think we have the largest and the best development opportunity and growth opportunity in the country with the Penn District. We are in the center of New York City with 10 million square feet, with the ability to expand that to 15 plus million square feet over time.

 

And as everything has improved to the West, to the South, we're now the hole in the donut on top of the biggest transit hub not only in the city but in the country, where there is significant government investment in that infrastructure and with further plans to improve and expand that. And we own all the real estate around it.

 

we feel very well positioned no matter what's going to happen here. We don't have a real large block in our lap right now to lease.

 

Penn District anchored by Facebook and Apple

So first piece is Farley with Facebook, you now have a district anchored if you think about it. On the east side with Apple, on the west side with Facebook in our district, and we are underway on the redevelopment of PENN1 and PENN2. So I couldn't think of a better landscape if we would have sat in our conference room, and we did, thinking about how we would like to have that district developed and who we would like to attract.

 

Confirms $500mm  of 220CPS proceeds, this q, but sadly only $200mm or so left this year.

The last thing I would say before we turn over to the market and so on is, we have always planned for to manage our balance sheet with one eye on looking to take advantage of opportunities, but importantly always being mindful of where we are in the cycle and positioning ourselves to be able to weather any storm. And we did that leading into this. We sit with cash as of the second quarter of a little bit more than $1.8 billion. We've got another $700 million plus coming in from 220 Central Park South, the remainder of this year, $500 million of which has already closed.

 

animal instincts. lol.

But I think as some comfort develops and as they see others doing it, and the animal instincts kick-in, those five private equity firms are like, Why aren't our guys in, those banks are in and why aren't we and so on.

 

on rents:

But Jamie, look, we'd all be kidding ourselves, net effect rents are going to be down near-term given all the factors that Glenn said. But to predict today what that's going to be, too early. But tenants, the lease space, they're demanding more concessions and so obviously that's going to impact on net effect.

 

AIV/AIMCO tracking stock discussion

Okay, thank you. And then AIMCOannounced their reverse spin this week, it seems like it was pretty well received by the market. I know you guys have been in simplification mode for many years now, including discussing a potential tracking stock. Thinking about what they've done and how the market reacted, how do you think about the potential to move forward for something like this for Vornado?

 

We're waiting to see if we get a royalty fee, Jamie. So, we are sort of intrigued in terms of how the market reacts. That was that was obviously an idea that Steve laid out in the Chairman's letter, given the different risk profiles of the business.

 

Retail:

Without people on the streets, in terms of office workers and particularly with tourism down to the trickle, it's very difficult for retailers to generate much in the way of sales. So their business is challenged and that colors your thinking. I think that there's a lot of lessons learned coming through this, and obviously there's many retailers that have thrived and then there's many that have struggled and some have failed and will fail.

 

Is it a robust leasing dynamic? Absolutely not. But there is some, obviously, we signed a lease with Target on the Upper East Side, that's a company that said this is a great time to get into some key locations in New York City and there's a couple of other large tenants like that are kicking the tires on a few things. So I think the strong balance sheets are looking at the markets saying, we're going to have an opportunity to pick up some great real estate at much more attractive prices. And even I would say, Madison Avenue where rents are down significantly, pricing is inducing a little bit of demand there.

 

Jamie, this is Joe. I'm just going to echo one factoid. We published in the second quarter that we collected 72% of our retail rent or 78%, including deferrals. That's stronger in July and August, principally because two major tenants with very strong balance sheets started to pay rent, and they were rewritten that hadn't been paid in Q2.

 

Q - Jamie Feldman

Thanks, Joe. So where does that take your number up to?

 

A - Joseph Macnow

First digit now is an 8 instead of a 7.

 

Q - Jamie Feldman

Okay, great. That's helped -- very helpful. And can you talk about how much you think rents are down for retail?

 

Obviously, Madison was down significantly from the peak beforehand as was Soho, Fifth Avenue was down some, Time Square probably down a little bit. But it's just too hard to -- there's no data points to tell you, I think this is where, I'd be guessing either way. The deal we did, we replaced Barnes & Noble with Target, it was probably down 10%, is that good for Vornado? No, I think the other markets where higher, they're obviously down more from peak to where we are today.

 

But to give you specific numbers, it's just -- it's just not doable right now

 

1290/555 recap

You know, we're in the middle of the sausage mix right now, Jamie. So I'm not going to comment too much on the process while we're in the middle of it. What I would say is that, the tone of capital markets has gotten better over the last couple months, financing markets, as I said at the outset, are clearly improving. And CMBS market is now back open. The bank market is improving, not as robust as CMBS market as the banks are still dealing with a lot of issues.

 

But deals can get financed and rates are very attractive. And so the CMBS quotes for example, these two are quite attractive. So the financing markets are improving and are good. The equity markets are, obviously, up from the spring and summer, hedging cost, foreign investors is down. So, all those are positive backdrops. There's obviously uncertainty over office and then the deals are large. So, it's going to take generally one or a couple of investors to get the deals done.

 

And so we got a number of different types of investors looking at both assets, really cutting across all types, sovereign, high net worth, pension funds, investment advisors, et cetera. So, working hard on both and nothing to report yet. As I've said, Steve said previously, could go a number of different directions, they're two assets and could have different executions on each and we'll just see. Investors are actively underwriting and if we have something to report we'll report, but nothing yet.

 

sales market in general: it's all about lease term

So, I think it's too early, Jamie. What I would say is that, a couple of things. One is that, I think real-estate, particularly given the financing markets, their yield and particularly in office is, I think, viewed attractively, typically when you have duration on the leases. So where there's a lot of near-term rollover vacancy, I think, there has probably been more of a pricing impact there and there haven't been a lot of those deals that have been out there.

 

There is one West Coast deal I'm aware of where there's a fair amount of leasing that has to get done that has gotten a fair number of bits. But I think that'll come in, hopefully 10% less or whatnot. But, that's sort of right thing, all that lease-up now. Whereas, asset that have good duration on leases, I don't know if there's really been any pricing impact. Maybe it's modest at most, but again, there this no rollover to deal with, the financing markets are better and so it appears that at least on a couple of situations the pricing would be I think as expected at those cap rates in the fore. So those are, as I said, give or take 8 or 12 years in two different cases.

 

So, I think that is the key, right, where there is long duration of leases or medium duration of leases, and get past this next 2 or 3 years, I think there's minimal to little pricing impact. Where there's more rollover or scale in terms of that rollover, I think there will be some pricing impact. But not enough transactions to really point to yet, and then retail even less, but I think that would be the order of the day generally where, again, if you have a duration I think there will be a market and not I think it'll be -- I think the pricing will be off quite a bit. And it's not inconceivable, you'll start to see maybe some users step in given the opportunity to control the real estate on some key streets for forever

 

 

 

[thepupil]

for those keeping an eye on the NYC market, I suggest following tradedny on twitter or instagram

 

they tweet various real estate transactions. For example, here's 1250 Broadway getting a $443mm loan ($680/foot). Some articles say it has 721K ft, so that would be $615/foot.

 

 

The building was purchased in 2016 for $565mm but the owner likely put a lot of capex into it as well based on articles.

 

SL Green sold the building in 2009 for $310 million.

 

the overall point is that lending for decent buildings (I'm assuming this is leased well) is very much alive at debt levels that are not in line with the more dire predictions. It's obviously possible that these banks are making shitty loans, and just because someone is willing to lend to you at $600+/foot doesn't mean it will be worth that in 5 years or whatever, but I think the debt market will continue to surprise to the upside.

 

As it relates to VNO, we await the recap of 555 California / 1290 AoA to see just how friendly the debt/equity markets are. Would not be surprised if VNO is not bluffing in saying they'll pull $1B out of 555 ($700mm to VNO, $300mm to DJT).

 

https://www.forbes.com/sites/katevinton/2016/07/08/israels-richest-man-to-buy-1250-broadway-for-565-million/#136285ec3a7e

[CorpRaider]

Will follow.  Thx.

[thepupil]

https://streeteasy.com/building/220-central-park-south-new_york#tab_building_detail=2

 

220 CPS with a nice $60 million closing on the 19th, now getting reported.

 

I count $380mm+ of closings since Q2 end, should bring cash above $2B and liquidity past $4 billion.

 

based on a RealDealNY article out today indicating they sold another ~$60mm (their 6th $50mm+ of the Q), I think the number for post Q2, 220 CPS closings is $510mm now.

 

I don't think anyone sees risk to these closing anymore given how they've now accelerated, but it still gives me comfort every time I see gobs of cash going to VNO.

 

having 4 yards of liquidity certainly can't hurt.

 

https://streeteasy.com/building/220-central-park-south-new_york#tab_building_detail=2

 

$590mm in Q3

[thepupil]

https://www.zer0es.tv/interviews-and-analysis/jim-chanos-the-backstory/

 

commercial real estate bear case, starts half way through, mentions VNO specifically saying that shocked trades at a 5 cap.

 

assuming he is adjusting NOI down for lease concessions, and maybe deducting G&A also and doing something else. It's really difficult for me to see a 5 cap.

[fareastwarriors]

https://streeteasy.com/building/220-central-park-south-new_york#tab_building_detail=2

 

220 CPS with a nice $60 million closing on the 19th, now getting reported.

 

I count $380mm+ of closings since Q2 end, should bring cash above $2B and liquidity past $4 billion.

 

based on a RealDealNY article out today indicating they sold another ~$60mm (their 6th $50mm+ of the Q), I think the number for post Q2, 220 CPS closings is $510mm now.

 

I don't think anyone sees risk to these closing anymore given how they've now accelerated, but it still gives me comfort every time I see gobs of cash going to VNO.

 

having 4 yards of liquidity certainly can't hurt.

 

https://streeteasy.com/building/220-central-park-south-new_york#tab_building_detail=2

 

$590mm in Q3

 

This building is like printing money. Could we get another tower please?  ;D

 

.

.

.

https://therealdeal.com/2020/09/25/another-220-central-park-south-condo-trades-for-over-10k-psf/

[CorpRaider]

I don't see any of the accruals he's saying should be blowing up for the CARES act accounting for non-performing leases or other big accruals to get leases signed on the fact set financials for VNO or SLG.  He seems to be spinning some stuff I do know, pretty hard...

 

I could see running at some small regional banks that have exposure to smaller, private real estate players in NYC, but I don't get coming at the top dogs who have so many advantages of scale (and others).

[thepupil]

 

This building is like printing money. Could we get another tower please?  ;D

 

https://therealdeal.com/2020/09/25/another-220-central-park-south-condo-trades-for-over-10k-psf/

 

Maybe in 2035.

 

Sadly I think they’ll have to slow down soon. They were projecting $700mm for rest of 2020 and $590mm is already closed.

 

The building that previously occupied the site was a 20-story building built in 1954. It contained 124 apartments, and was purchased in 2005 by Vornado for $131.5 million.[6][7] After the purchase, Vornado entered a legal battle with its rent-stabilized tenants concerning their eviction.[7] A court sided with Vornado in 2009, and the developer ultimately settled with tenants in 2010, paying between $1.3 million and $1.56 million to those remaining in the building.[8] Vornado has reported the total land cost for the building to be over $515.4 million.[1]

 

https://en.m.wikipedia.org/wiki/220_Central_Park_South

[thepupil]

Business Insider is reporting the terms of the Facebook Farley Deal

 

The lease is for 15 years starting at $109 / foot, escalating by $10 / foot every five years. Facebook gets free rent for the first 18 months and 20% off that for 5 months after that. Additionally, Facebook is getting $150mm of buildout costs versus $100mm budgeted.

 

In total BI estimates the pre-covid to post covid concession is about 9% or $100 million, but there is also a line saying that "another knowledgeable source estimates about a 3% discount"

 

Over the life of the lease, the effective rent is $108 / foot (combining the escalators with the free rent). If in 15 years after the start of the lease (2037?), Facebook wants to renew at the same rate they'll be paying, $94mm / year to do so.

 

If Vornado did not include any of the tenant buildout expense in their estimate of cost, this would reduce the effective rent to $90 / foot.

 

Penciling it out in excel Facebook will pay VNO about $1.18 billion of cash rent over the next 15 years, taking into account the concessions.

 

Facebook projected that Farley costs is $1.05 billion, but I think they'll revise that up to $1.1-$1.15 billion.

 

On balance, I'd consider this good news and confirms that Farley is a big success. I imagine the 115K sf of retail that is next to the busiest transportation hub in north america and a bunch of highly paid young Facebook employees is not going to come cheap.

 

I'm sure Jim Chanos will point out the huge concessions and free rent...

 

 

[ratiman]

Chanos singles out Vornado for overvaluation. It's at 26 but starts at 20.

 

[thepupil]

Chanos singles out Vornado for overvaluation. It's at 26 but starts at 20.

 

 

I’ve spent a good bit of time trying to reverse engineer Chanos thinking through this video and his tweets on office / VNO

 

I think it comes down to

 

- Fully deducting g&a from NOI

- not giving credit for development pipeline and/or the retail JV preferred

- giving less credit to 220CPS

- assuming Q2 is the right Q to annualize (example: theMart lost all its trade show business and NOI is down huge, as is parking NOI across the whole portfolio)

- extrapolating large tenant concessions / improvements in 2020 as the run rate, lease economics have been deteriorating for 5 years, and i'd expect large concessions, but I think the number he keeps citing on this includes a very large concession related to Farley / Facebook which is a $1B blockbuster lease

- thinking 6% is the right cap rate because that’s where BXP trades, given where financing is for high quality assets, i don't think this is a given

- thinking that VNO is highly levered (this one I can’t quite figure out); there are 31 debt instruments, $14B and $10.3B at share. I’ve gone through every one and can’t find one I’d consider a clear case of overleverage, excepting the $95mm recourse note on a dark Forever21. it's true that there’s “a lot” of debt in that $10B is a big number

- analyzing VNO on a fully consolidated / income statement basis versus SOTP

- maybe assuming the Times Square / upper fifth JV will roll more quickly than the leases would suggest. There’s some credit risk in there, but in VNO’s words, it’s mostly “buttoned up for term”

 

There are basically two extremes; VNO management NAV and Chanos. One will get you to an implied cap rate / per foot value that’s extremely attractive, and the other will get you to one that is decidedly less so.

 

I obviously think VNO’s version is closer to the “truth” than Chanos’ and that VNO will prove that out through refinancing, potential asset sales and leasing up of the development pipeline (Farley Retail, Penn2, Penn1) etc.

 

I understand most of his points; I think he’s right on the macro and wrong on the micro. Macro could overwhelm the micro and he could be right.

 

We should get some big data points given that 1/8 of office NOI is in play right now, though I do fear the Trump involvement may mess that up.

 

 

[thepupil]

I think the Chanos thesis goes somehting like this:

 

$16.8B EV                                      (I am deducting the full Penn development budget from cash)

$1,055 Q2 annualized Cash NOI                          6.2% cap rate

$140mm G&A 

$915mm burdened NOI                                      5.4% burdened cap rate

$341mm interest                                     

$574mm NOI-interest                                      8.1% cash on cash before maint/capex

$300mm maint capex and tenant impr   <--this is the key to the thesis, that maint capex and TI eats up your economics

$274mm cash generation                                3.8% to equity

 

annualized divvy: $431mm         

 

must cut dividend / low compensation for risk / rents coming down, cap rates will widen, high leverage therefore good short 

[ratiman]

What is burdened cap rate? I thought G&A was included in cap rate.

[thepupil]

Most would not include g&a in cap rate.

 

I just use the term “burdened” to mean NOI burdened by g&a.

 

When loan documents or sales figures are quoting cap rates, g&a is not included. The g&a belongs to the company and buildings trade/ are borrowed separately from the company. As an example, PGRE sold a 10% stake in 1633 Broadway recently at about a 5 cap; the buyers of that did not take into account PGRE’s corporate g&a because they aren’t paying it (well they are probably paying a management fee to Paramount)

 

The g&a has to be taken into account when evaluating a company as a going concern consolidated entity. You have to take it into account with respect to value growth and the income statement, but it is useful to see where individual buildings/ assets may trade separately from the g&a.

[BG2008]

We can intellectually masturbate about whether including G&A in NOI/Cap Rate calculation should be performed or not.  But there are literally decades of transactions that strips out G&A.  This is mostly because a new buyer with a ton of scale can implement their own G&A. We can just look at the GRIF thread.  The G&A debated raged forever.  The truth is that a bunch of office buildings or warehouses aren't "intrinsically" worth less become it resides in a publicly traded REIT.  If you run an auction, 95% of the bids that come back will be a NOI excluding G&A divided by their own cap rate.  So what is the true "intrinsic" value?  Well, if the standard arms length transaction with multiple bidders is a certain method, then that's probably the intrinsic value. 

 

The only exception that I will make is when there is a price where you cannot carry the assets, i.e. single family homes pre financial crisis.  People will literally go belly up within 6 months because the cashflow couldn't service the mortgage.  When you can service the mortgage with ample coverage ratios, it's a good "intrinsic" value for me. 

[thepupil]

I knew this discussion would get BG2008 going...

 

Here's snippets from JP Morgan on September 3rd.

 

Note that VNO, in JPM's view, can simultaneously trade at 22x EV/EBITDA (a significant premium to the space and a 4.5% "EBITDA yield"<--sounds a lot like Chanos number, right?), and a 38% discount to NAV / implied 6.8% cap rate.

 

In the note, JPM more or less says "VNO is an expensive stock, but very cheap to its real estate".

 

this is a constant tension in RE stock investing. valuing them as companies/stocks or as piles of assets.

 

The differences get real fun when you layer in a bunch of low returning or no returning assets (in VNO’s case the development / redevelopment assets, the retail JV preferred, a $2B pile of cash, some recently dark assets, theMart’s trade show business, Hotel Penn, a JV in a huge development site in Roslyn VA that VNO did not spin to JBGS) etc.

 

these assets produce little in earnings, but may have substantially more value than an analysis that puts an undue "primacy on the income account" would suggest. These assets' will realize value via "resource conversion activities". May Marty Whitman RIP.

 

VNO trades at 12.2x our 2021 FFO adjusted for comparability estimate vs. the office group at 13.9x. On an AFFO basis, VNO trades at 16.0x our 2021 estimate vs. the office group of 20.8x.

 

Stripping out differences due to financial leverage and non-recurring items, we estimate that VNO trades at 22.2x EV / EBITDA vs. the office group at 18.9x.

 

We calculate that VNO trades at a 38% discount to our $58/share NAV estimate. And at the current stock price, we calculate an implied cap rate of 6.8%.

 

To the extent large-scale take-outs in office emerge as viable, VNO could be a name to watch as its valuation is still heavily discounted to the real estate.

[BG2008]

I knew this discussion would get BG2008 going...

 

Here's snippets from JP Morgan on September 3rd.

 

Note that VNO, in JPM's view, can simultaneously trade at 22x EV/EBITDA (a significant premium to the space and a 4.5% "EBITDA yield"<--sounds a lot like Chanos number, right?), and a 38% discount to NAV / implied 6.8% cap rate.

 

In the note, JPM more or less says "VNO is an expensive stock, but very cheap to its real estate".

 

this is a constant tension in RE stock investing. valuing them as companies/stocks or as piles of assets.

 

The differences get real fun when you layer in a bunch of low returning or no returning assets (in VNO’s case the development / redevelopment assets, the retail JV preferred, a $2B pile of cash, some recently dark assets, theMart’s trade show business, Hotel Penn, a JV in a huge development site in Roslyn VA that VNO did. Not spin to JBGS) etc.

 

these assets produce little in earnings, but may have substantial value than an analysis that puts an undue "primacy on the income account" would suggest. These assets' will realize value via "resource conversion activities". May Marty Whitman RIP.

 

VNO trades at 12.2x our 2021 FFO adjusted for comparability estimate vs. the office group at 13.9x. On an AFFO basis, VNO trades at 16.0x our 2021 estimate vs. the office group of 20.8x.

 

Stripping out differences due to financial leverage and non-recurring items, we estimate that VNO trades at 22.2x EV / EBITDA vs. the office group at 18.9x.

 

We calculate that VNO trades at a 38% discount to our $58/share NAV estimate. And at the current stock price, we calculate an implied cap rate of 6.8%.

 

To the extent large-scale take-outs in office emerge as viable, VNO could be a name to watch as its valuation is still heavily discounted to the real estate.

 

Pupil,

 

Why do you do this to me?  You paper me with intellectual stimulating conversations about Office REITs.  I took time off from daddy duty for the weekend and was going to sit down and do taxes and catch up on so many things.  Now I am bantering with you on this website about Office valuations and resource conversion activities.  My taxes will never get done at this rate!!

[thepupil]

haha, I'm currently reviewing a long and tedious legal document.

 

much more fun to wax poetic on the treatment of g&a and how various market participants may value Hotel Pennsylvania or the retail preferred or the signed but not commenced Farley etc. differently than others.

[CorpRaider]

If they used all the cash to build Penn and then just like held it without generating any EBITDA for sentimental reasons, that would not be good, but seems to be factored into your kind of stress test case/attempt to reverse engineer some of the bear numbers. 

 

I must I've found the sort of spin on the numbers cited by certain famous money managers pretty telling, given some passing familiarity with the name.  It's almost like politician level spin.  It seems some are shocked that REITs distribute most of the EBIT. 

 

[BG2008]

I found this from an online tweet

 

I guess we know that IB won't be moving to permanent WFH

 

Seems like the MDs, VPs, and Directors want to get away from their wife and kiddos.  Burnout risk is amplified. 

 

https://www.wallstreetoasis.com/forums/any-other-juniors-exhausted-due-to-covid-work-from-home

[SugarRE]

We can intellectually masturbate about whether including G&A in NOI/Cap Rate calculation should be performed or not.  But there are literally decades of transactions that strips out G&A.  This is mostly because a new buyer with a ton of scale can implement their own G&A. We can just look at the GRIF thread.  The G&A debated raged forever.  The truth is that a bunch of office buildings or warehouses aren't "intrinsically" worth less become it resides in a publicly traded REIT.  If you run an auction, 95% of the bids that come back will be a NOI excluding G&A divided by their own cap rate.  So what is the true "intrinsic" value?  Well, if the standard arms length transaction with multiple bidders is a certain method, then that's probably the intrinsic value. 

 

The only exception that I will make is when there is a price where you cannot carry the assets, i.e. single family homes pre financial crisis.  People will literally go belly up within 6 months because the cashflow couldn't service the mortgage.  When you can service the mortgage with ample coverage ratios, it's a good "intrinsic" value for me.

 

A bit delayed here....but my 2 cents on this masturbation.  If one is truly looking at private market value as THE valuation metric, buyers of individual real estate assets and portfolios do not load them with corporate OH/G&A when purchasing.  I'm almost 20 years into a career with name brand core/value add/debt investment management organizations.  Not once have I underwritten my salary into a purchase. I could be wrong, but........

[thepupil]

Nice. no need to pay this one off, $50mm cash out. decrease in interest rate.

 

guess that Macy's 2030's expiry + Apple sublease + AMC + MSG tenancy is good enough.

 

 

Vornado Completes $500 Million Refinancing of PENN11

Company Release - 10/16/2020

 

NEW YORK, Oct. 16, 2020 (GLOBE NEWSWIRE) -- VORNADO REALTY TRUST (NYSE: VNO) announced today that it has completed a $500 million refinancing of PENN11, a 1.2 million square foot Manhattan office building. The interest-only loan carries a rate of LIBOR plus 2.75% (currently 2.90%) and matures in October 2025, as fully extended.

 

The loan replaces the previous $450 million loan that bore interest at a fixed rate of 3.95% and was scheduled to mature in December 2020.

 

Vornado Realty Trust is a fully-integrated equity real estate investment trust.

[thepupil]

https://streeteasy.com/building/220-central-park-south-new_york#tab_building_detail=2

 

220 CPS with a nice $60 million closing on the 19th, now getting reported.

 

I count $380mm+ of closings since Q2 end, should bring cash above $2B and liquidity past $4 billion.

 

based on a RealDealNY article out today indicating they sold another ~$60mm (their 6th $50mm+ of the Q), I think the number for post Q2, 220 CPS closings is $510mm now.

 

I don't think anyone sees risk to these closing anymore given how they've now accelerated, but it still gives me comfort every time I see gobs of cash going to VNO.

 

having 4 yards of liquidity certainly can't hurt.

 

https://streeteasy.com/building/220-central-park-south-new_york#tab_building_detail=2

 

$590mm in Q3

 

+$65mm more

 

220 CPS sales ($655mm) + ~$50mm of cash out at Penn11 on the refi means VNO has generated ~$700mm of cash since Q2 end from asset sales/borrowings.

 

 

 

https://therealdeal.com/2020/10/20/duplex-sells-at-vornados-220-cps-for-65-million/

After a string of big-ticket closings last month, Vornado Realty Trust has sold a duplex at 220 Central Park South for $65 million.

The unit, which occupies the eighth and ninth floors in the “villa” portion of the condo, went into contract in February 2018, according to property records. It closed this October for $65.6 million.

 

The buyer, named only as ENKA Residence LLC, secured a $32.5 million mortgage from Bank of America, records show. The acquirer’s address was listed care of Gregorgy Fescina at Nima Capital, a family office that invests in real estate assets. Reached by phone, Fescina said he was not aware of the transaction, and hung up.

 

The 7,911 square-foot unit has eight bedrooms, eight bathrooms and 1,145 square feet of terrace space, according to a recent amendment to the condo’s offering plan.

 

The purchase works out to $8,291 per square foot — slightly lower than the three units in the tower that traded last month for upwards of $10,000 per square foot. The unit was initially priced at $85 million, the offering plan shows.

 

With contracts for many apartments signed prior to 2020, the success of 220 Central Park South has been seemingly unaffected by the pandemic, with several pricey units closing in the past six months. The building now has fewer than 30 units left to sell, according to a recent Real Deal analysis.

 

The 18-story villa portion of the building, which sits in front of the tower, now has just two units remaining, on the second and sixth floors.