VNO - Vornado Realty Trust

[johnny]

Do we have a way of knowing when the pricing changed? Or do we just know list and close?

[thepupil]

my impression is that for the 220 CPS units, the prices for the units closing today were agreed to years ago, as in this unit was listed at $85mm but agreed to sell at $65mm in 2018 and is closing now. the discount is not a result of covid.

 

i don't think anyone  would be buying these today at these prices. they are buying because they put down 25% non-refundable deposits and this is a small % of balance sheet for the buyers. i have low hopes for the unsold units. then again you only need to find 30 more centimillionaires/billionaires. 

 

all these closings aren't really that important and "in the price" of VNO, but it's just kind of a fun phenomenon where you can watch 1% of the market cap (and 1/2% of the total gross debt at share) come in whenever some rich dude buys a condo.

 

 

 

[johnny]

Agreed, just think its an interesting situation. Substantial deposits locked in on the price, but on other hand these are billionaires that -could- walk away, and the current market is weak enough that maybe they perceive some scope for renegotiation. I assume that Vornado feels itself safely in the position to refuse to entertain any bullshit, especially since billionaires are gossipy little bitches. But was just wondering if there was any way of trying to suss it out.

[thepupil]

in retrospect, all the attention put into picking the buyers may have been more than a marketing gimmick/ego trip.

 

https://ny.curbed.com/2016/6/23/12015902/220-central-park-south-buyers-interview-process

https://therealdeal.com/2016/06/23/at-220-cps-steve-roth-is-the-bouncer/

[CorpRaider]

It's not like he has anything else to do....

[fareastwarriors]

Vornado sees $100M retail JV loss, $190M in 220 CPS gains

REIT also records $6M in severance for Hotel Pennsylvania closure in Q3

 

https://therealdeal.com/2020/10/21/vornado-sees-100m-retail-jv-loss-190m-in-220-cps-gains/?utm_source=internal&utm_medium=widget&utm_campaign=feature_posts

 

 

[thepupil]

https://www.bamsec.com/filing/89968920000049?cik=899689

 

similar to some thoughts i had on ALX earnings, there is a weird use of cash on VNO's CFO statement.

 

"Prepaid Assets" and "Other Assets" increased substantially this quarter and used $250mm of cash.

 

I was expecting VNO's cash balance to increase by more. I saw they have invested a fair bit in Penn District / Moynihan (that's fine and expected), but this "prepaid asset" / "other asset" is puzzling.

 

Changes in operating assets and liabilities:

 

Q2: Prepaid assets +3mm

Q3: Prepaid assets -$215mm

 

A $218mm swing.

 

q2: Other assets: -$12mm

q3: other assets:  -$41mm

 

A $30mm swind.

 

Q3: +$250mm use in cash between these two items.

 

Alexander's had a similar thing.

https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/alx-alexander's/msg436253/#msg436253

 

EDIT: My question on the pre-paid still stands but now I see that they paid off $500mm of their unsec'd facility. Q3 has $575mm outstanding. Q2 has $1,075mm. that's where all the 220CPS cash went.

 

 

[Spekulatius]

Can someone explain why their lease revenues are down ~24% when they collected 95% of their rents. Did they lower the rents, yet some still don’t pay?

 

they also wrote down another $107M on their retail JV after roughly 300M in the last quarter.

[thepupil]

Hotel Pennsylvania is down 100% and bleeding money (-$16mm last q, I'm ready for them to tear that baby down)   

 

theMart trade show revenue is down 100%

 

general retail weakness (JC Penney, large tenant at Manhattan Mall went bankrupt, New York Company (office) went bankrupt, Forever21 went bankrupt.

 

Cash NOI is down 7% for office, 45% for retail, 33% for theMart, 18% for apartments (small), 14% for Alexanders' (retail driven)

 

retail is the driver.

 

with respect to the impairment, that doesn't really matter. what matters is if you think that JV's pref is still money good. I was super confident in this pre-covid, and have grown much less so. there is great term there on a lot of it (but some credit risk like Victoria's Secret)

 

Also the collected 95% of office, retail was in the low 80’s

[thepupil]

I'd also note that VNO has taken a fair bit of square feet out of service in order to redevelop the Penn District, most notably:

 

Office:

945K square feet of office at Penn2

169K at Penn1.

 

Retail: 174K at Penn1 and 26K at Penn2.

 

Both Penn1 and Penn2 are unencumbered as is Farley.

 

Farley coming online then that 1mm+ sf is important.

 

I am not sure on exact timing of when all that went out of service and the balance between totally new sf in development and sf actually removed.

 

EDIT: VNO had 3.5mm sf in service between Penn1 and Penn2 3Q2019. This year is 2.8mm, so 750K square feet was taken out of service for the redevelopment this is $45mm+ of revenue decrease.

 

Pre-covid, everyone was focused on the "earnings dilution" from kicking paying tenants out, pouring a ton of money into these, and no earnings for a few years. Now it's all but forgotten since that's the least of VNO's problems, but its an important long-term source of earnings growth not captured in the current financials or in Chanos incessant "VNO NOI down 25% tweets". 

 

I'll admit it seems like a century from now that all of that will be rented and cash flowing

 

 

 

[thepupil]

A few minor observations from earnings:

 

- the NYU lease signed is pretty small (300-400K at share, only 2% of their core NYC office in service sf at share), but locks up 70% of the office at One Park Avenue for 20+ years at HIGHER rents than previously (Facebook lease is 15 years, WA duration of leases signed is 19 years, so you know NYU Langone's lease is over 20 years, by my estimate, it's 25 years). Considering One Park is their next maturity (March 2021), it's good to know that that asset is money good for a long time. NYU Langone is a decent credit (2055 bonds trade at 3.5%). what's the right cap rate for a 20+ secured escalating obligation of NY Langone (of course that building has other tenants and 100K of retail, but this is just me channelling permabull bruce flatt.

 

this is the type of data point where if it went the other way ( if NYU left) it'd make headlines and people would freak out, but VNO quietly signing a 20+ year lease at decent step ups is not news (it should not be news).

 

- they extended 770 Broadway maturity (leased to FB, their HQ before Farley from MArch 21 to March 2022), continues trend of terming out the maturity wall. 555 and 1290 are the next and far more important step. the 770 Broadway loan ($700 million) is VNO's largest at share.

 

- this is extremely small asset so who cares but they paid off one of their highest cost mortgages, "Borgata Land". I had never previously looked into this and assumed it was some failed development play and was assuming they'd hand back the keys. in actuality, they own the ground underneath the Borgata with payments owed until 2070. They bought this in 2010 and were able to borrow $60mm at 5% back then against it. this is probably one of the lower discount rate assets they own (no capex, corporate guarantee from MGM Resorts to MGM Properties to Borgata Land, secured by the land, etc).

 

 

[thepupil]

in my opinion, this is a result of real caution in markets and the complication of no institution wanting to put money directly or indirectly in trump's pockets.

 

think a modest cash-out refi is the base case outcome here.

 

Vornado Realty Trust is tempering its pricing expectations for trophy office towers in Manhattan and San Francisco that it co-owns with the Trump Organization, citing caution in commercial-property markets.

Since June, the New York landlord has been actively marketing its 70% interest in the properties, at 555 California St. in San Francisco and 1290 Avenue of the Americas in Manhattan.

But it’s a tricky time to sell big assets, especially in New York and San Francisco, two of the priciest office markets in the country, and among the hardest hit by the pandemic. Many companies are rolling out plans to let employees work remotely indefinitely, which could have a long-term impact on future office demand.

“Given the investor caution, it does not look like we’re going to achieve our original top-tier pricing objective,” Vornado Chief Executive Officer Steven Rothsaid on an earnings call Wednesday.

[fareastwarriors]

The inside story of the world’s most profitable condo

After Vornado’s 15-year odyssey, a $1 billion prize

 

 

 

https://therealdeal.com/2020/11/19/the-inside-story-of-220-central-park-south/?utm_source=internal&utm_medium=widget&utm_campaign=feature_posts

[thepupil]

weird to me that this isn't a refinance of the 5.7%'s which are open for prepayment. it may be, but they didn't announce calling them. don't think this effects RC borrowing amount, so VNO now has $300mm more cash/liquidity, but at 5.25% this is the most "expensive" money they raise (since it's subordinated preferred equity w/ no maturity and negative convexity due to its 5 year call).

 

regardless, it's not really important / material. if it's a refi, it's only $1.5mm of interest savings. if it's not a refi, interest expense increases by ~$15.75mm (4-5% of previous interest)

 

 

Vornado Realty Prices Series N Cumulative Redeemable Preferred Shares

(MT Newswires)

Vornado Realty Trust (VNO) on Thursday priced a public public offering of $300 million perpetual 5.25% Series N Cumulative Redeemable Preferred Shares at $25.00 per share.

 

The company said it may redeem the shares at $25.00 per share on and after Nov. 24, 2025.

 

The offering is expected to close on Nov. 24, 2020.

[thepupil]

the material de-risking events/roadmap during corona have been

 

1)  close 220 CPS units and generate gobs of cash, this has more or less happened

2)  lease Farley to FB at underwritten rents, this has more or less happened

 

3)  get some level of clarity on high street retail values to give confidence that the $1.8B of preferred is both a) money good and b) monetizable <--in my view, this hasn't happened

4)  generate gobs of cash and term out the maturity wall through a sale / recap of 1290 / 555

 

as of today, number 4 has not and will not happen. trump ownership appears to have been a problem or maybe the market has deteriorated enough such that VNO jsut didn't want to sell.

 

they could still refi (hopefully with substantial cash out)

 

this decreases conviction.

 

(Dow Jones) -- The Trump family's partner in two of its most valuable properties halted an effort to sell the buildings, cutting off what could have been a big cash payout for the Trump Organization, which has hundreds of millions of dollars in debt coming due.

Vornado Realty Trust, which co-owns with the Trumps an office tower in San Francisco and another in Midtown Manhattan, decided to shelve the sales process when it couldn't attract a buyer at the prices it wanted, according to one of the selling brokers and other people familiar with the matter. Concerns about conflicts of interested presented by selling the buildings with President Trump still in the White House also hampered the efforts, some of these people said.

Vornado was hoping to raise up to $5 billion in a sale of the two properties, these people said. At that price, the Trumps' 30% stake in each of the towers would have been worth $1.5 billion.

As recently as this month, Vornado Chief Executive Steven Roth said during the property firm's analyst call that he was continuing to actively pursue a deal for the buildings despite what he described as investor caution. "There is active interest from investors and widespread appreciation for the quality of these assets," he said.

New York City and San Francisco office buildings have been among the hardest hit real-estate sectors since the outbreak of Covid-19. The markets were the most expensive in the U.S. when the pandemic arrived.

Since then, many workers have been working from home or fled to cheaper cities, reducing corporate demand for office space. Vornado's asking price proved lofty given how rapidly office values have declined in those cities, these people said.

The Trump Organization has more than $400 million of debt due in the next few years, and it isn't known how many lenders might be willing to work with the Trumps to refinance it. Mr. Trump's tumultuous business history and concerns over his political activities have made banks reluctant to do business with the company.

The Trump Organization has also considered selling its Seven Springs estate outside of New York City, and it has previously looked for a buyer for the Trump International Hotel in Washington, D.C.

The company has said its businesses are financially sound. "The Trump Organization is an incredible company with tremendous cash flow. We have never been stronger," it said.

With its minority stake, the Trump family is a passive owner and has no control over the sales decision-making for the two Vornado buildings, these people said. Vornado's Mr. Roth has served as an adviser to Mr. Trump, part of a yearslong relationship between the men.

The high price tag limited the number of potential buyers. In many cases, flush foreign-government funds with an eye for trophy American properties would be leading candidates for these high-end properties. Some of these buyers were concerned about potential conflicts, or the perception of conflicts, in buying an asset from the U.S. president, these people said.

The two buildings, at 555 California Street in San Francisco's Financial District and at 1290 Avenue of the Americas not far from Manhattan's Rockefeller Center, are both modern office towers. They are near-fully leased properties with blue-chip tenants in the law, technology, finance and investment industries.

Vornado now plans to refinance its loans on the buildings, said Doug Harmon, an investment adviser at Cushman & Wakefield. His firm led marketing on the New York property, while Eastdil Secured LLC led on the San Francisco tower.

"We are now focusing more on refinancing both assets," Mr. Harmon said. He added that the owners hope to put the properties back on the market sometime next year after election uncertainty fades, a coronavirus vaccine arrives and "when international investors can travel with less restrictions, and the path back to normal is under way."

The Trumps are unlikely to receive much if any cash from refinancing, which is typically used for a building's cash reserves or improvements.

[johnny]

From the real deal piece:

 

"The overall cost of capital on the $1.5 billion project, Roth said, was just 1.4 percent, far lower than his rivals paid."

 

How much detail is available on this? I'm quite curious about the Bank of China facility especially, but in general I'm just trying to get into the head of the people providing capital at 1.4% (back when rates were "normal").

[thepupil]

Yea I don’t know about that googled around and it said L+2%

 

https://www.google.com/amp/s/therealdeal.com/2015/09/29/vornado-ups-bank-of-china-loan-on-220-cps-to-950m/amp/

 

https://s23.q4cdn.com/623119702/files/doc_news/Vornado-Upsizes-Its-220-Central-Park-South-Development-Loan-to-950-Million-2015.pdf

[CorpRaider]

Sold my $VNO @ $42. 

[thepupil]

this won't impact cash flow, but nice to see Apple taking more space at Penn11.

 

I maintain that Apple is setting itself up well to be the anchor tenant to Penn2 (across the street) above the main entrance to Penn Station, but that's speculative.

 

Apple is betting big on Midtown: The tech giant has inked a deal to expand its offices at Vornado Realty Trust’s 11 Penn Plaza.

In February, the Cupertino, California-based company signed a sublease for 220,000 square feet spanning four floors of the building. At the time, the Art Deco tower had 638,921 square feet available on the 4th through 14th floors as a sublease from Macy’s.

 

Now, The Real Deal has learned that Apple has added two additional floors to its lease, bringing its total occupancy to 336,000 square feet. The tech company’s offices will span the ninth through 14th floors.

 

 

Apple’s sublease is for just six years, according to the source, with the rent in the mid-$60’s per square foot.

Representatives for Apple and Vornado did not respond to requests for comment.

 

For the 11 Penn Plaza deal, Apple was represented by Peter Riguardi and Martin Horner of JLL, and Vornado was represented in-house. Macy’s has Scott Gottlieb, Liz Lash and Ross Zimbalist of CBRE working on the remaining sublease on the 4th through 7th floors, which are roughly 60,000 square feet each. Neither JLL nor CBRE responded to requests for comment.

 

ADVERTISEMENT

 

Macy’s will remain on the lease for its entire term, which ends in April 2035. Earlier this year, the department store moved its headquarters to the Jacx, Tishman Speyer’s office building in Long Island City.

 

Tech companies are clustering on Manhattan’s Far West Side: Apple previously duked it out with Facebook for space in Vornado’s renovation of the Farley Post Office building. Facebook finally won that battle, signing a deal over the summer for 740,000 square feet. The Vornado-led redevelopment includes the new Moynihan Station, as well as 120,000 square feet of shops and restaurants.

 

Facebook also inked a deal for 1.5 million square feet at 50 and 55 Hudson Yards, where its rent is over $100 per square foot.

 

And Amazon recently signed a deal for space at 410 Tenth Avenue, which SL Green recently agreed to sell to 601W Companies. The company, which previously redeveloped the nearby Starrett-Lehigh Building at 601 West 26th Street, agreed to pay $952.5 million.

[thepupil]

G&A cuts.

 

If you capitalize the g&a savings, this is a $3+ uplift in value per share, but if you were capitalizing G&A at VNO then you'd be applying a $4 billion + g&a discount, so you probably didn't care for the stock anyways.

 

If it's truly excess / fat, then I'm okay with this, but if it hurts their competitive position in the name of near term optics or FFOPS, then I don't agree with this.

 

$500K / person being laid off, so they must be gutting some heavy hitters compensation.

 

Vornado Announces Leadership Changes and $35 Million Annual Overhead Reduction Program

Vornado Announces Leadership Changes and $35 Million Annual Overhead Reduction Program

NEW YORK, Dec. 01, 2020 (GLOBE NEWSWIRE) -- Vornado Realty Trust (NYSE:VNO) announced today a series of senior management changes. The Company also announced a $35 million annual overhead reduction program.

Leadership Changes

Michael Franco, the Company’s President, has been appointed to the additional position of Chief Financial Officer, succeeding Joseph Macnow. Mr. Franco has been with Vornado since 2010 and is experienced in capital markets, strategy, deal-making, accounting, and investor relations. 

Thomas Sanelli is being promoted to Executive Vice President – Finance & Chief Administrative Officer. Mr. Sanelli has been with Vornado since 2003. Among his responsibilities, he will lead the Investor Relations function.

Matthew Iocco will continue in his existing position of Executive Vice President – Chief Accounting Officer. Mr. Iocco has been with Vornado since 1999.

Joseph Macnow, the Company’s Chief Financial Officer and Chief Administrative Officer, is stepping down. Mr. Macnow will remain a Senior Advisor to the Company. Mr. Macnow has been with Vornado since 1981 and has played an integral part in the growth of the Company.

These changes will take effect on December 31, 2020.

Overhead Reduction Program

The Company is executing a program to reduce overhead costs by over $35 million annually, which involves compensation reductions and a 70 person reduction in force.

The Company will recognize in the fourth quarter a reduction in Net Income of $23 million attributable to estimated severance and other reduction in force related expenses, which will be excluded from Net Income, as adjusted, and FFO, as adjusted, both non-GAAP measures reported by the Company.

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

[thepupil]

https://www.sec.gov/Archives/edgar/data/1515166/000153949720000567/n2054_x2-teaser.htm

 

Page 46 details VNO’s 50% owned 650 Madison Avenue, was looking for info on AIV’s Parkmerced and noticed this had a VNO asset in there.

 

This is one of the more levered properties (66% pre covid LTV) with high in place rents and lots of rollover in 2023/4 and $800/ft+ retail leases. Wonder if Bloomberg’s FO (willets advisors) will renew on that $155 / foot  :o lease when it comes up in 4 year.

 

 

[rosemontseneca]

Price action was odd today.  Presume it was driven by shorts coming off given happenings in broader market?

 

At $40, I’m wavering a little bit. I like Roth and the VNO assets, but I’m struggling with the relative value. 

 

Consider KRC at $56. $10bn EV vs. $774mm 2021 runrate NOI.  Less debt albeit all recourse. Perhaps more susceptible to WFH, but I’m not sure whether NYC or the Bay Area is scarier at this point?

 

Or JBGS at $30? Tighter cap rate but multi family exposure at tailwinds from Amazon, big gov, etc.

[thepupil]

Agreed, for my parents portfolio I lightened up an already small position VNO today in favor of BXP. I’ve only owned a very small position via options for a while now.

[fareastwarriors]

 

Deutsche Bank, Barclays to Refi Vornado’s 1 Park Avenue With $525M CMBS Loan

 

https://commercialobserver.com/2021/02/deutsche-bank-barclays-cbre-vornado-1-park-avenue-cmbs/

[thepupil]

nice cash out refi, small though since they only own 55% of this building. should give them about $100mm of cash out and push out maturity from 2021 to 2026 (hoping there are some optional extension in there). interest cost probably won't decrease since the existing loan was L+175

 

Loan / foot = $550, the claimed LTV is 55% which would imply $1000 / foot for a building that doesn't command that high of rents (low $60's / foot vs $76 for core office portfolio), but the huge caveat is that the just signed 25 year lease with NYU Langone means this is a much safer asset in terms of lease rollover than much of the portfolio.

 

From November 2020:

- the NYU lease signed is pretty small (300-400K at share, only 2% of their core NYC office in service sf at share), but locks up 70% of the office at One Park Avenue for 20+ years at HIGHER rents than previously (Facebook lease is 15 years, WA duration of leases signed is 19 years, so you know NYU Langone's lease is over 20 years, by my estimate, it's 25 years). Considering One Park is their next maturity (March 2021), it's good to know that that asset is money good for a long time. NYU Langone is a decent credit (2055 bonds trade at 3.5%). what's the right cap rate for a 20+ secured escalating obligation of NY Langone (of course that building has other tenants and 100K of retail, but this is just me channelling permabull bruce flatt.

 

this is the type of data point where if it went the other way ( if NYU left) it'd make headlines and people would freak out, but VNO quietly signing a 20+ year lease at decent step ups is not news (it should not be news).