VNO - Vornado Realty Trust

[Spekulatius]

When looking at the drawdown during the GFC, keep in mind that VNO was trading at or above NAV back then (they have a nice chart on this in their annual report) and now they are trading at a 35% discount. Same issue than with BRK trading at around 2x book in 2007. Valuations matter!

[no_free_lunch]

Vornado has actually done better than I originally assumed.  They list everything on their site but essentially there are a number of special dividends, some substantial which when considered boost the returns substantially.

 

I actually quite like this one having spent some time on the annual report.  In particular I like the reporting style which includes frequent references to per share values and numerous 10 year charts.  It is clear that they have focused on the longer term and encourage investors to do the same.

 

I have a reasonable sized position as of this morning.

[thepupil]

 

Michael Bilerman

 

And maybe a question for Steve. You've not been shy about where your shares trade relative to the inherent value of the asset base and you've been extraordinarily aggressive over the last six years at simplifying a lot of the complexity spins, merge, sales, completely new construction at 220, done the Farley buy out all variety of long lists. I guess where is your head today in terms of further sort of potential sales? In most obvious would be something on the office side, either New York or outside of New York either an end joint venture or outright or is all the focus right now on Penn Plaza and the redevelopment efforts?

 

Steven Roth

 

All of the above. I'll say a couple of things. Number one everything's on the table as it has been for the last number of years. Number two, we are certainly not done yet. Number three is we definitely are not satisfied with our stock price at all. And just, I would like to throw it back to you. For example you said asset sales outside of New York and I guess you were referring to San Francisco or Chicago. I would remind you that for the last five years, you and your brethren had been begging me to sell San Francisco. And in the last five years it has gone up in vacuum over a $1 billion since we continue to hold it. So everything's on the table. We're not done yet.

 

And we’re actually surprised by our stock price. But Mr. Market speaks and we're not done yet

 

VNO reported, cash piling up (though in part because they paid off a mortgage w/ their L+100 facility rather than cash), $1.7 billion more to come from 220CPS, most of which under contract, big 400K lease in late states at one of the Penn buildings, San Francisco throwing out ridiculous 30% mark to market lease renewals, VNO saying they’ll make their own version of WeWork as part of Penn development, $1.90 special divvy coming

 

On the minus: forever21, topshop, blah SS NOI growth

 

All-in more of the same story.

 

He’s a promotional guy, but any chairman who talks about Mr. Market deserves a second look!

[thepupil]

More Facebook-Farley rumors today, a top story on bloomberg.

 

VNO also recently refinanced an $800mm loan at 650 Madison. VNO only owns 20% of the building so it's not that important to NAV, but I think that it's a good data point on the robustness of the finance market for NYC office right now.

 

3.5% 10 year interest only!

 

  Vornado Completes $800 Million Refinancing of 650 Madison Avenue

  NEW YORK, Dec. 02, 2019 (GLOBE NEWSWIRE) -- VORNADO REALTY TRUST (NYSE:

  VNO) announced today that its 20.1% owned joint venture has completed an

  $800 million refinancing of 650 Madison Avenue, a 600,000 square foot

  Manhattan office and retail property. The ten-year interest only loan carries a

  fixed rate of 3.486% and matures in December 2029.

  The loan replaces the previous $800 million loan that bore interest at a fixed

  rate of 4.39% and was scheduled to mature in October 2020.

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

CONTACT:

  JOSEPH MACNOW

  (212) 894-7000

  Certain statements contained herein may constitute “forward-looking

  statements” within the meaning of the Private Securities Litigation Reform Act

  of 1995.  Such forward-looking statements involve known and unknown risks,

  uncertainties and other factors which may cause the actual results,

  performance or achievements of the Company to be materially different from

  any future results, performance or achievements expressed or implied by such

 

 

Facebook’s deal for office space at the Farley Building isn’t dead.

 

The social media giant is in talks to lease 700,000 square feet of office space at Vornado Realty Trust’s conversion of the James A. Farley Post Office, according to the Wall Street Journal. Apple had also reportedly been looking into leasing space at the office redevelopment.

 

Facebook’s potential deal comes on the heels of the 1.5 million-square-foot lease it signed at Hudson Yards last month. A lease a Farley would make the social media company one of the largest office tenants in the city.

 

READ MORE

Facebook facing off with Apple over Farley office space

Here’s how much Facebook is paying at Hudson Yards

Facebook’s presence would help to make up for the loss sustained by the city earlier this year, when Amazon abandoned plans for a Long Island City headquarters because of community opposition. According to experts, Facebook’s presence will lead to 14,000 jobs — more than half the 25,000 tech jobs Amazon had initially promised.

 

After the Amazon debacle, experts speculated that Amazon’s rejection of New York City would lead other tech firms to shun the five boroughs. But tech giants show no intention of leaving New York City, with Google, Apple and Spotify all leasing office space in the last two years.

 

Tech-sector jobs grew four times as fast as private jobs from 2009 to 2018, according to an analysis by an economist at The New School. Those high-paying jobs have also led to increased demand for rental housing, dining and ride-hailing services. [WSJ] — Georgia Kromrei

 

 

EDIT 12/13/2019 I'm just going to add news here rather than continue to spam and bump up the VNO thread

 

VNO sold another $100 million unit at 220 Central Park South which brings QTD closings to something like $350 million. Cash just keeps pouring into VNO from 220CPS and while the luxury market has taken a turn for the worse, the vast majority of units are sold so closings should continue.

 

A penthouse at 220 Central Park South has sold for $100 million, making it the third New York City residence ever to close for $100 million or more, according to people familiar with the deal.

 

Previously, the only deals to sell in New York at that price point were hedge-fund executive Ken Griffin’s nearly $240 million deal for another apartment in the same building earlier this year, and tech titan Michael Dell’s $100.47 million purchase of a penthouse at the nearby tower One57, at 157 West 57th Street, in 2014.

 

The latest sale is for a four-bedroom apartment that is about 9,800 square feet, according to marketing materials for the property. The identity of the buyer couldn't be determined.

 

While the deal shows that buyers are willing to pony up nine-figure sums for the most spectacular homes in New York, luxury agents said this particular sale has little relationship with today’s market, which is more sluggish for luxury homes. The contract for the home was likely signed a couple of years ago and is closing now that the tower is nearing completion, according to people familiar with the building.

 

More: Lachlan Murdoch Sets L.A. Record by Paying $150 Million for a Château-Style Mansion

 

"I don’t think this is a barometer for what’s happening right now," said Frances Katzen of Douglas Elliman, who wasn’t involved in the deal. "It’s a deal predicated on a different market."

 

Ms. Katzen pointed to the new mansion tax in New York, which increased taxes for purchasers of ultrahigh-end real estate, as well as an oversupply of luxury condos as reasons why the market has slowed.

 

"The pricing you’re seeing now is much more measured," she said.

 

Corcoran Sunshine Marketing Group led sales at the building, which was developed by Vornado Realty Trust.

 

 

12/15 Edit, Again just adding news to this post rather than bumping the thread

 

Vornado sells 2 unlevered and unoccupied building for $71 million, more than they paid in 2015. Between this and the aforementinoed 220CPS sales, the cash keeps pouring into VNO

https://therealdeal.com/2019/12/13/naftali-buys-two-vacated-vornado-properties-for-71m/

 

12/18 Edit: Special Dividend, previously telegraphed

 

this was already known to anyone who reads the call transcripts or sell side commentary, but the stock is up a little on the news. in general, VNO is selling assets and has run out of tax offsets, so asset sales make their way to shareholders.

 

NEW YORK, Dec. 18, 2019 (GLOBE NEWSWIRE) -- VORNADO REALTY TRUST (NYSE: VNO) today announced that its Board of Trustees has declared a special dividend of $1.95 per share payable on January 15, 2020 to shareholders of record on December 30, 2019.  Approximately $1.74 of the special dividend will be long-term capital gain.

The dividend is the result of gains from the transfer of a 45.4% common equity interest in Vornado’s portfolio of flagship high street retail assets on Upper Fifth Avenue and Times Square, the sale of its 25% interest in 330 Madison Avenue and other previously disclosed asset sales, partially offset by a tax deduction resulting from its former investment in Toys “R” Us.

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

 

Vornado closed on a total of $560 million of units at 220 CPS in the 4th quarter.

 

+ the aforementioned $71 million sale of vacant UES commercial buildings

 

that's at least $630 million of cash pouring into VNO this Q (minus some transaction cost and taxes), $370mm is being sent to shareholders via the special divvy (ex date already past, pay date on the 15th) so net of that, I'd expect 4Q cash to still increase significantly.

 

for the year 2019, inclusive of the retail JV, by my count,  VNO sold/monetized about $3 billion of real estate, and paid about 7% of its stock price in regular/special dividends.

 

it massively underperformed in 2019, returning only 14.9%; underperforming REITs by 15% or so and SPX by 17%.

 

Call me stubborn, but as long as they keep selling assets for what they say they're worth, sending cash to shareholders, and the leasing doesn't totally fall through the floor, continue to think this is an opportunity.

 

Expect more 220 CPS sales to close and hopefully getting some positive news on the Farley / Penn Station area leasing in 2020.

 

 

 

 

 

 

[thepupil]

the constant use of the word "dilution" by sell side when discussing Vornado is puzzling to me. if a stock trades for $65 and the company says its "worth" $97 and sells assets that imply $97, isn't "dilution" a good thing? if you move tenants out and decrease cash flow for the next couple of years in order to redevelop your asset at good unlevered yields, isn't dilution a good thing? 

 

I'm continuing my stubborn idiocy here. 220 CPS is 91% sold and the company expects another $1 billion of cash to come in from that. they'll give shareholders what is required by REIT law and pour the rest into their assets.

 

this delusional shareholder is fine with dilution!

 

maybe Elliott will come bail me out and increase their 0.9% stake.

 

Okay. And then you think about, I mean you were running basically $0.89 of adjusted FFO in third and fourth quarter, right? So annualizing out to 356 for the year relative to the 349 for the full year, arguably the last two quarters should have the dilution from the asset sales certainly on the retail side from the stock investments already a take in to that number and arguably has some of the retail loss as well. So I'm trying to reconcile those two things, where you had been reporting a quarterly number of $0.89, 356 annualized, which should already take into account some of this $0.28 of added dilutions that were talking about for 2020.

 

 

Sure. Okay. And then you updated your NAV Now your stock is trading the 32% discount to it wouldn't a buyback. I know you've talked about in the past.

 

But wouldn't buy a backup offset some of this dilution and it would have been a lever, or could be a lever for sauce that learning solution going forward.

 

John look, we recognize we're adding these will discount. The market seems to ignore any (NAV VNO puts out) and the NAV put out by sell side communities And that was something that we have evaluated, we continue to evaluate. It's not the course of, action that repair department embark on today.

 

We are just as we've done in the past. We consistently look at ways to try to narrow that gap. First of all to grow anything, which is what we're trying to do through our pens issue we developments, but secondly, they have to close that gap and we've shown an ability to execute within the creative transactions and we are continuing to look at that. Obviously, a buyback is one-way a now the significant in terms of we've done the past but not something that we had felt is the appropriate use of capital yet.

 

I guess what would be the appropriate time to use that? I mean you have free cash flow that is significant new trading in a big discount. You have some earnings dilution, which is near term. I mean if this is not the right time then when what it is?

 

John say, it's a matter of using that capital for that or other things, and we continue to have significant opportunities to invest in our business. We've outlined the three initial redevelopments from Penn District that are substantially a accretive.

 

The opportunities behind that where, our capital we want to have available to continue to execute on our redevelopment whole District. We were attacking the first 5 million square feet today, but there's significant amounts to do beyond that. And right now we want to have that capital available for, that or other purposes.

 

 

[thepupil]

the mirage of NAV....

 

 

JPM:

While  we  get  the  impact from  the  “guide,”  the  handholding with  the investment community was  arguably also  lacking.  Management had  a tough  time  bridging a  variety of  items  and  answering questions on numbers. We  don’t think this will be good  enough for investors when combined with its opaque financials, and this is a matter that doesn’t seem to faze the company; by the way, VNO isn’t the only REIT in this bucket. From our vantage point, VNO’s FFO “guide” for 2020 could have just as easily been up $0.23-0.33, and we’re not sure it would matter (beyond perhaps the stock performing better today) because it is all so hard to even trace and model.We believe VNO has strong people in the organization, and the stock is probably below private market value (NAV). But this may matter far less for the stock than one might think; the mirage of NAV and being an “NAV story” is  just that, absent a  takeout. We  think  challenges around NYC office and retail right now will continue (even if VNO’s West Side assets are well positioned where the demand is), but VNO’s financial complexity and communication is not helping and instead seems to just exacerbate those negatives. We maintain our Underweight rating.

[Spekulatius]

the mirage of NAV....

 

 

JPM:

While  we  get  the  impact from  the  “guide,”  the  handholding with  the investment community was  arguably also  lacking.  Management had  a tough  time  bridging a  variety of  items  and  answering questions on numbers. We  don’t think this will be good  enough for investors when combined with its opaque financials, and this is a matter that doesn’t seem to faze the company; by the way, VNO isn’t the only REIT in this bucket. From our vantage point, VNO’s FFO “guide” for 2020 could have just as easily been up $0.23-0.33, and we’re not sure it would matter (beyond perhaps the stock performing better today) because it is all so hard to even trace and model.We believe VNO has strong people in the organization, and the stock is probably below private market value (NAV). But this may matter far less for the stock than one might think; the mirage of NAV and being an “NAV story” is  just that, absent a  takeout. We  think  challenges around NYC office and retail right now will continue (even if VNO’s West Side assets are well positioned where the demand is), but VNO’s financial complexity and communication is not helping and instead seems to just exacerbate those negatives. We maintain our Underweight rating.

 

Well this happens when management is playing one game (increase NAV) while the analysts expecting another  (increase AFFO). VNO is a developer and owner, similar to HHC, so if you own it, you do need to look at both. I’d tend to side with management here, but I do agree that just pointing out the NAV May not help the stock all they much. The only way that may do something is unlock the value via opportunistic sales and stock purchases, which over time will keep compounding both. SLG has done some of this. VNO has Jv’s some retail and billboard assets in a creative Deal, but they haven’t bought back any stock. I like it, but I own already enough undervalued NYC real estate via stock as is.

[thepupil]

Making our way to a 7 cap! 

 

Soon we’ll get to start playing the “what can we mark at $0 and still not lose money” game. So far we’re at retail and 220CPS”

[Spekulatius]

Making our way to a 7 cap! 

 

Soon we’ll get to start playing the “what can we mark at $0 and still not lose money” game. So far we’re at retail and 220CPS”

 

The problem with VNO is that the NAV actually hasn’t moved for a couple of years. YE 2018 value was $97.9, YE 2019 value is $96. So if you include the dividends, the total return was probably about 2%.

 

That’s  the issue with Roth concentrating on NAV. The issue appears to be that the NY real estate market has topped out for the time being.

[thepupil]

completely agree that NAV growth has been anemic and that prices have topped out (in like 2015).

 

the only thing I'd point out is that only $24 billion / $30 billion of VNO's assets are real estate w/ earnings power.

 

You have

$1.8 billion of super safe retail preferreds (like 0-50% LTV)

$1.2 billion of 220CPS future proceeds (remaining units are unencumbered as of 2019,91% sold as of last call)

$0.5 billion of Hotel Pennsylvania (which earning virtually nothing, but we can agree land of that huge footprint directly across from Penn Station is very valuable...eventually, for now its a shitty hotel)

$1.1 billion of construction in progress.

 

Like GRIF's or HHC's landbank, these are assets that don't earn too much and don't flow into FFO (exept the 4% or whatever coupons on the prefs).

 

So I generally agree with you that NAV and prices have topped out but 1/4 of the assets (and 63% of the mark to market equity) have little earnings power and little risk, which reduces the risk of impairment in my opinion and reduces growth in one year.

 

but that's just me being repetitive, no more VNO posts until news comes out or we hit a 4 handle!

 

[Spekulatius]

So we know that VNO will naturally gravitate towards 50% of its NAV in the most liquid real estate market in the world.

 

Interesting times..,

[thepupil]

https://investors.vno.com/Cache/IRCache/ff65ef3e-c2fc-c45e-73d6-086d02a971b7.PDF?O=PDF&T=&Y=&D=&FID=ff65ef3e-c2fc-c45e-73d6-086d02a971b7&iid=103050

 

As I transition to VNO's un-official IR department head and post yet again, I think their new slide deck is pretty hilarious, namely because of slide 27, which attempts to address the disastrophe that was the last earnings call with a bridge called the "what we didn't know in Q3" section.

 

What didn’t we know at Q3? Amount Per Share

Street’s estimate of 2020 “FFO, as adjusted”              3.40

Adjustments:

Kmart at PENN 1                                                      (3.4)

Loss of dividend income due to PREIT sale                (5.2)

Accelerated relocation of tenants from PENN 2          (8.3)

Free rent period for LVMH replacing Coach at 595 Madison Avenue (7.2)

Adjustments coming from our year end budget process:

Lowering Hotel Penn (9.1)

Correction of a straight-line rent error in a joint venture partner’s budget (4.5)

Total (37.7) (0.19)

Vornado 2020 budget “FFO, as adjusted” 3.21

[BG2008]

https://investors.vno.com/Cache/IRCache/ff65ef3e-c2fc-c45e-73d6-086d02a971b7.PDF?O=PDF&T=&Y=&D=&FID=ff65ef3e-c2fc-c45e-73d6-086d02a971b7&iid=103050

 

As I transition to VNO's un-official IR department head and post yet again, I think their new slide deck is pretty hilarious, namely because of slide 27, which attempts to address the disastrophe that was the last earnings call with a bridge called the "what we didn't know in Q3" section.

 

What didn’t we know at Q3? Amount Per Share

Street’s estimate of 2020 “FFO, as adjusted”              3.40

Adjustments:

Kmart at PENN 1                                                      (3.4)

Loss of dividend income due to PREIT sale                (5.2)

Accelerated relocation of tenants from PENN 2          (8.3)

Free rent period for LVMH replacing Coach at 595 Madison Avenue (7.2)

Adjustments coming from our year end budget process:

Lowering Hotel Penn (9.1)

Correction of a straight-line rent error in a joint venture partner’s budget (4.5)

Total (37.7) (0.19)

Vornado 2020 budget “FFO, as adjusted” 3.21

 

Love the self designation of Unofficial IR Dept of VNO

[bizaro86]

https://investors.vno.com/Cache/IRCache/ff65ef3e-c2fc-c45e-73d6-086d02a971b7.PDF?O=PDF&T=&Y=&D=&FID=ff65ef3e-c2fc-c45e-73d6-086d02a971b7&iid=103050

 

As I transition to VNO's un-official IR department head and post yet again, I think their new slide deck is pretty hilarious, namely because of slide 27, which attempts to address the disastrophe that was the last earnings call with a bridge called the "what we didn't know in Q3" section.

 

What didn’t we know at Q3? Amount Per Share

Street’s estimate of 2020 “FFO, as adjusted”              3.40

Adjustments:

Kmart at PENN 1                                                      (3.4)

Loss of dividend income due to PREIT sale                (5.2)

Accelerated relocation of tenants from PENN 2          (8.3)

Free rent period for LVMH replacing Coach at 595 Madison Avenue (7.2)

Adjustments coming from our year end budget process:

Lowering Hotel Penn (9.1)

Correction of a straight-line rent error in a joint venture partner’s budget (4.5)

Total (37.7) (0.19)

Vornado 2020 budget “FFO, as adjusted” 3.21

 

Love the self designation of Unofficial IR Dept of VNO

 

Also two thumbs up for use of "disastrophe"

[thepupil]

Mr. Roth is prone to hyperbole...the best office building in San Francisco...the best condo development ever (220CPS)...the most profitable/valuable office building in Chicago...the best development opportunity in the world...

 

But is he wrong?

 

In other news, the Facebook Farley lease cannot be more telegraphed (they say on this call "there's no reason to show it to brokers"...which I assume means the stock won't go up when its announced in the next few months..

 

I deleted the last 1/4 of this transcript for length purposes, mostly talk about politics and board composition...I did not delete the part where Citi's head of real estate brags about his posterior.

 

Steven Roth {BIO 1436128 <GO>}

So three reasons I guess cheap, cheap, cheap is the first reason. The second is that we have the best development opportunity building a city, within a city in the Penn Plaza District of Manhattan. So those are the two -- those are two of the three reasons. Well actually cheap, cheap, cheap is three and Penn Plaza is the fourth reason. Our company is actually very simple and very understandable. We are 80% office and 80% New York Centric. I'll describe our office business for you very simply, we own 555 California arguably the best single building in San Francisco, which is a building where we are now enjoying prints that are doubling.

 

So the mark-to-markets in that building are doubling. We own the 4.2 million square foot gross 3.6 million square foot rentable mark building in Chicago arguably the best financial performer in Chicago. We started out some years ago with the $40 million income that pick a number an 8 cap, so it was valued at somewhere $400 million, $500 million. We now have over a $100 million of income and rising at say a 5 cap so it's worth the better part of $2 billion. So $400 million, $500 million goes to $2 billion that's a decent business. Then, we have our New York office portfolio, where we have some great product high-quality, well performing all of which -- all of the buildings of which had been renovated updated modernized and are very well accepted by our tenants.

 

Then we have the Penn District, which is I've called it the promised land, and that we think it is -- and it's become very timely now because we are under construction for delivery of the Farley building at the end of the year, and we have PENN1, PENN2 and they're under construction right now. And then we have our retail business, where we had the best quality assets in Times Square, Fifth Avenue et cetera. Retail is challenged now, we understand that we -- and that's something that we are working through.

 

One last thing about the Penn District and that is we also own -- and are finishing up now 220 Central Park South, which is probably well not for sure the best apartment house that's ever been built in the United States, which has made a very significant profit, which will have -- we'll have $1 billion cash flow coming out of that building this year from signed contracts with 25% non-refundable deposits. And all of that capital goes into finance at the Penn District. So the Penn District as you sort of self finances. Cheap, cheap, cheap and you have to believe in the Penn District.

 

Michael Bilerman {BIO 15926660 <GO>}

Great. Thank you for those opening comments. Steve, one of the things you've really been focused in addition to the simplification over the last number of years is making the balance sheet as liquid, as low leveraged and as cash-rich as possible. Both to invest in the Penn District, but being prepared to be able to go on offense or offense if opportunities arise. So can you talk a little about the mindset today with a little bit more uncertainty in the economy, more uncertainty in the stock market. Is your desire to put more capital work outside of what you have in the company or is the focus today all on the internal projects that you have?

 

Steven Roth {BIO 1436128 <GO>}

Michael stand up.

 

Michael Bilerman {BIO 15926660 <GO>}

I'm up.

 

Steven Roth {BIO 1436128 <GO>}

Michael you can never be to tall and you can never be too rich, okay. So in terms of our balance sheet, we have a --

 

Michael Bilerman {BIO 15926660 <GO>}

I'd like to be a little rich, little rich is good.

 

Steven Roth {BIO 1436128 <GO>}

Michael, I can't believe your feel for that. So look, we have a great balance sheet. We would always like more liquidity, we were almost like more dry powder. Up until about a month or two ago there was for sure a feeling in the land that it's not when there would be the next recession or the next business decline, there was if there would be. So people were thinking oh, this is a perpetual goldilocks [ph]. So things come out of the blue, who knows what has happened.

 

My feeling is that, it is -- actually it's a very risky world out there, very uncertain world out there, we have a in addition to the coronavirus and other miscellaneous things, we've got all kinds of things in the international arena and then we have this election with an uncertain result and the -- you're not going to get into the politics unless you insist.

 

Michael Bilerman {BIO 15926660 <GO>}

Who's going to ask you what your --

 

Steven Roth {BIO 1436128 <GO>}

So basically I can only tell you that we prepared to act and act aggressively when the right opportunity is come, they are not here yet.

 

Michael Bilerman {BIO 15926660 <GO>}

Okay. The uncertainty regarding the election. How do you sort of see that playing out and its impact on the economy. Because obviously that's going to --

 

Steven Roth {BIO 1436128 <GO>}

My dream is that, it would Mr.Bloomberg against Mr.Trump. So I have now a tenant. We own the Bloomberg headquarters building and Mr.Trump, we are his major partner. So that's a -- so either way I get to go to the state dinners in the White House, and that's where I am.

 

Michael Bilerman {BIO 15926660 <GO>}

All right.

 

Steven Roth {BIO 1436128 <GO>}

There are some pretty scary candidates out there. I'll let you, but you make your own judgments on that.

 

Michael Bilerman {BIO 15926660 <GO>}

As you think about Penn Plaza, which is clearly the biggest opportunity that the company has for --

 

Steven Roth {BIO 1436128 <GO>}

I think, may be the biggest opportunity there is in the entire REIT universe in the entire nation.

 

Michael Bilerman {BIO 15926660 <GO>}

The Big Kahuna, you called it the promised land, I think there's been ac -- number of acronyms.

 

Steven Roth {BIO 1436128 <GO>}

Wait till I was see what I call it in the next letter.

 

Michael Bilerman {BIO 15926660 <GO>}

Very excited. Where do things stand. You know, I think this quarter's earnings got dominated by sort of what's happening with earnings, GAAP earnings rather than value creation, we can get to some of that noise. And so what didn't get talked about is where things currently stand. You know, last quarter you talked about a bit headquarters lease at PENN2. You talked about having some discussions on Farley. Where is that leasing activity today and when should the market expect some of that to occur?

 

Steven Roth {BIO 1436128 <GO>}

You know, we don't pre-announce big important leases, nothing has changed since the last time we talked about it publicly. And by the way -- and that's a good thing.

 

Michael Bilerman {BIO 15926660 <GO>}

Not talking about it or that nothing has changed.

 

Steven Roth {BIO 1436128 <GO>}

Nothing has changed.

 

Michael Bilerman {BIO 15926660 <GO>}

And so, what should the market expect from I guess timing perspective?

 

Steven Roth {BIO 1436128 <GO>}

Market should expect that we will make an announcement when we execute the leases.

 

Michael Bilerman {BIO 15926660 <GO>}

How is the tenant demand and tours, maybe obviously there is a lot of space that you're going to have around the Penn Plaza District. Can you give us a sense of the tone of those conversations and how that's all going. I know, obviously you signed the big lease at the top. Was it PENN1 or PENN2?

 

Steven Roth {BIO 1436128 <GO>}

One.

 

Michael Bilerman {BIO 15926660 <GO>}

PENN1. Sorry, I got to get lapped if I keep on referring it to, but you have that which validated the rents.

 

Steven Roth {BIO 1436128 <GO>}

Now that's the most massive rebranding in the history of American Commerce. PENN1 becomes PENN1 massive.

 

Unidentified Speaker

We give them [ph] internally.

 

Michael Bilerman {BIO 15926660 <GO>}

So you have to pay $25 million to the guy who came up with that? Franco you were going to say something?

 

Michael J. Franco {BIO 17013791 <GO>}

No. It just -- Michael I think you asked about the tenant the interest. I think the reaction reception on the brokerage community who knows that sort of the front lines of the tenants it's been outstanding. And as the tenants have seen what we're doing renderings. Obviously, Farley stands on its own in terms of that massive redevelopment. And I think being a totally unique floor plate and roof deck and so on, but what we're doing in terms of the campus PENN1, PENN2 is absolutely resonating with tenants. We've signed a couple leases of PENN1 in the 90s, which validate everything we've been saying to you in terms of taking rents in the mid-60s into the 90s and higher and that's just initially, right?

 

Over time, we expect that to grow. And given us on transit, it could be on part of living to the rest of us. And over time in terms of the large users that's going to create opportunities on the development side. So I think what's going on in PENN1, PENN2 everything is on track both in terms of development in terms of some attended discussions we talked about. Even most important thing is when does it get. We've published in the last few supplements, right? Stabilization dates, right? Which is not within whatever we decided. Two months from now or six months, right? When we expected the head debt still the best estimate of when that's going to come online for an income standpoint, which I know you and others care about and so that's on track.

 

Michael Bilerman {BIO 15926660 <GO>}

There was some disclosure that you had --

 

Steven Roth {BIO 1436128 <GO>}

Let's me just add to what Michael said. Your question was what's the activity level. What are the tourists, what's the acceptance in the marketplace of these three buildings Farley, PENN1, PENN2. There are with -- nobody gets to look at Farley anymore, we have no reason to show that, so we're done with that. In terms of PENN1 and PENN2, the point of first contact is with the brokerage community. And so we have a very robust marketing operation and very robust leasing team. And we spend lots of time with the brokers, each of them -- and the response on the part of the brokers to this product offering has been nothing short of spectacular.

 

So the answer is that we are unbelievably confident in what we're doing. And what we're basically doing is something that's very simple. We are transforming $60 rents into pick a number $95, or $100 rents. So if you think about the math, the value creation is I don't know, three some odd billion dollars and the cost of getting that is one some odd billion dollar. So it's a very, very exciting profitable thing.

 

Even more important than that is what drove the value of the -- of those buildings go to 5 years or 7 years from now. So I think about it, this 4.2 million square feet in the PENN1, PENN2 cluster, and if you had on Farley as a better part of 5 million square feet, every $10 of (inaudible) the market rents go up and they will go up, because this is a unique place in the bullseye location of Manhattan on top of the transportation network. So that's 5 million square feet at $5 a foot, you can do the math.

 

Michael Bilerman {BIO 15926660 <GO>}

Manny you got the Farley is done -- You got the Farley has done.

 

Manny Korchman

Not showing it.

 

Michael Bilerman {BIO 15926660 <GO>}

Not showing, closer being.

 

Steven Roth {BIO 1436128 <GO>}

By the way, you can't write that. If you write that I'll break your ass.

 

Michael Bilerman {BIO 15926660 <GO>}

My ass is very good though. Really good ass. My wife is in the room, now she's very embarrassed that I --

Steven Roth {BIO 1436128 <GO>}

That's nothing new.

 

Michael Bilerman {BIO 15926660 <GO>}

No, that's nothing new. I want to sort of go back to I think the earnings call and what effectively was a non guidance, guidance discussion.

 

Steven Roth {BIO 1436128 <GO>}

If this is going to be a nasty question, I'm going to turn it over to Joe.

 

Michael Bilerman {BIO 15926660 <GO>}

Yes. Well, no. It's just more so I guess how do you think about and I think was helpful to have the bridge that you provided in the presentation this morning that walk through all of the items that were different, but I guess just from a company policy perspective are you re-thinking at all sort of -- and I just know maybe what your thinking is, is it purely in NAV story or does earnings and guidance and those things matter, and it's just that interplay where clearly the stock market has spoken a little bit about how they react from an earnings perspective. So I just want to know how you're thinking about it from a corporate perspective?

 

Steven Roth {BIO 1436128 <GO>}

What's the question?

 

Michael Bilerman {BIO 15926660 <GO>}

The question effectively is from a guidance, you've never given guidance, right? You never been -- you never given guidance, right? Guidance has never been part of it, but there's been areas where the markets focused on earnings and dribbled out different negative impacts, where the value creation side I would concur with your view is nothing has really changed from a value perspective, but we're caught in this scenario where the market is more earnings focused than NAV focused. And NAV unfortunately is not a investable metric, and so are you're thinking maybe providing more disclosure, more guidance, more bridges as you sort of go forward?

 

Steven Roth {BIO 1436128 <GO>}

Joe you want to give that a short or updates through?

 

Joseph Macnow {BIO 1476454 <GO>}

Updates the way you gave us this morning. So we -- Michael praised us for putting in page 27 of the deck. Page 27 of the deck did two things: One, it took Michael Franco's remarks concerning '19 versus '18's adjusted FFO and '20 verses '19s adjusted FFO. Put them together in writing because we had -- we do understand it's hot on a script and a phone call to get all the numbers. So now we printed them for you. So we did that. And I think when you look at it clearly the first $80 million of $100 million of diminution dealing with asset sales, monetizing assets, including the April 2019 monetization of 50% of our upper Fifth Avenue and Times Square, street retail assets at a 4.5% cap rate, which everyone in this room that Michael and I spoke to raved about should have increase the stock price anywhere between $4 and $7 did nothing for the stock price, plus the assets sales listed beneath it and above it the stocks, the remnant stocks, et cetera et cetera very positive, very co-offensive.

 

Clearly taking PENN1 and PENN2 out of service, principally PENN1 in 2020 -- PENN2 in 2020 as Steve said before is the means to the end to take $60 rents and move them into the high 90s or triple digits, also very offensive. The bankruptcies of Topshop and Forever 21 were clearly not offensive. However, as Michael Franco said in an earlier conference call, the only portion of that has a finite answer and can't be recouped is the giving back of 608 Fifth Avenue, which we will get back the lease later this year and then have a 70 plus million-dollar non-cash, non adjusted FFO income item reversing the capital lease we put on the books when we had to adopt a new FASB, but that did cost us $1 NAV.

 

We did pay out $2 in NAV through the special dividend of online from the special dividend in January. Notwithstanding that when we published our NAV this year, it was 96, last year it was 97. We also took care of in large part management succession, which is publicly known, there was some G&A cost associated with that. That's been reflected. Our interest goes down at every corner without what's been going on recently, paying off the $450 million notes at the beginning of the year, saved us $20 million in interest. Lower interest rates, lower LIBOR interest rates, less debt and capitalizing interest on Farley, all leave for a very large interest reduction. And then notwithstanding the negative views, there where pluses in the business were $26 million over the two year period.

 

What's new is what's at the bottom of the page and tries to deal with why this 34 would be at 340 in 2020, and we end up being a 321. These are things that was not possible for us to know about when we talked about flattish 2020, but now it's here in writing. We'll deal with any questions now, as public information Matt or Iocco or any of the rest of our team can not monopolize the rest of this session, but we'll deal with you and any questions you have about specifics. We don't give guidance, we have on occasion given guidance, if you remember when in Washington.

 

Michael Bilerman {BIO 15926660 <GO>}

Correct.

 

Joseph Macnow {BIO 1476454 <GO>}

We've done it on occasion, but we've never gone all the way. We don't intend to go all the way. We're not going to give guidance. However, earnings NAV do have to come together at some point in time. Our NAV is capped NOI. NOI has to produce earnings. So look there's a big disconnect today at some point, either the NAV goes down, or the earnings go up. And we're thinking about ways to help demonstrate that but no commitment yet.

 

Michael Bilerman {BIO 15926660 <GO>}

And so --

 

Steven Roth {BIO 1436128 <GO>}

So bottom line to your answer -- answer your question: Our business is very tightly controlled, especially with respect to the numbers. And the page 27 that we put out over the weekend, we think very crisply, very succinctly and very accurately shows a recap of what happened with our numbers over the last period of time, okay. We think that answers or it's intended answer of every question, number one. Number two, it's not a secret that I basically a value creation real estate guy with dirt under my fingernails.

 

Michael Bilerman {BIO 15926660 <GO>}

Those must get cleaned pretty often though.

 

Steven Roth {BIO 1436128 <GO>}

If you look at the NAV, we have compounded NAV over whatever period of time you chose to at the top quartile or top decibel or whatever it is of all of the public competitors. You making yourself a note to check the fact check and I'm going to -- Okay. I'm going to get the President on.

 

Michael Bilerman {BIO 15926660 <GO>}

I'm an American citizen now, by the way, I have my letter from Mr.Trump.

 

Steven Roth {BIO 1436128 <GO>}

That's of normally, congratulations. So as I said, we have compounded NAV at an extraor -- at an extremely expect -- acceptable and competitive rate. With respect to guidance is also pretty well-known that I'm not a big fan of guidance for lots of different reasons. And -- I mean for example, we did some things over the last half which if we were in the micromanaging, trying to get every penny -- squeeze every penny for earnings we wouldn't have done. So, we sold some stock that had a 12% or 13% dividend, we bought back a Kmart lease that we took that sacrifice, there're lots of different things. So we run the business to create shareholder value on the real estate level. We're old-fashioned real estate guys like it or not.

Michael Bilerman {BIO 15926660 <GO>}

So how do you eventually get to NAV, right? Because there's an element of you can continue to sell assets and bringing the cash and invest it or buyback the stock. You can sell the company. And if someone was willing to pay NAV or something close to it, or you can wait for the market to reflect the value that you see is value creation.

 

Steven Roth {BIO 1436128 <GO>}

(inaudible) came out with the report a couple of days ago, where they debunked NAV.

 

Michael Bilerman {BIO 15926660 <GO>}

Okay.

 

Steven Roth {BIO 1436128 <GO>}

NAV is theoretical computation, which you could each of you can judge its value. Everybody in the room has their own NAV calculation, so it's a subjective kind of a thing. It is from my point of view, it's a tool, it's a guide, it's directionally correct, it's not intended to be nor can it be exact, okay, so much for NAV.

 

Michael Bilerman {BIO 15926660 <GO>}

Then I guess what is the Joe you mentioned, trying to do some things that may illuminate it more. I don't know if that's reflective of doing an office joint-venture like you did on the retail side. I don't know if that's full building sales?

 

(Multiple Speakers)

 

Joseph Macnow {BIO 1476454 <GO>}

I was talking about your flourishing not a business.

 

Steven Roth {BIO 1436128 <GO>}

Every time we do a transaction. Okay. In my recent memory, it has justified the our NAV and most other people's NAV the most recent one sale -- multi-billion dollar sale of some of our retail at a 4.5% cap rate, which is only 9 months old. I don't -- it's been my experience that if you illustrate NAV to the marketplace quote unquote that doesn't mean the stock is going to change or move. Okay, so everybody knows that we could sell one or two or three buildings at the stated NAV or your stated NAV that's a totally different thing, I can't tell you why the stock moves the way it does.

 

Michael Bilerman {BIO 15926660 <GO>}

Right so is the stock --

 

Joseph Macnow {BIO 1476454 <GO>}

I wish you'd tell me.

 

Michael Bilerman {BIO 15926660 <GO>}

Well, I wasn't. I'm in the same boat as you.

 

Steven Roth {BIO 1436128 <GO>}

} Next question.

 

Michael Bilerman {BIO 15926660 <GO>}

Well, because look, I think all the things that you've done: You sold the malls, the 4 malls became a really bad for a letter word. You spun-off Urban Edge, you merged the Washington D.C. portfolio with JBG.

 

Steven Roth {BIO 1436128 <GO>}

And won HQ2 deal.

 

Michael Bilerman {BIO 15926660 <GO>}

Correct. And then --

 

Steven Roth {BIO 1436128 <GO>}

On the land that we contributed we are 75%. We contributed to --

 

Michael Bilerman {BIO 15926660 <GO>}

Billion dollar profit on.

 

Steven Roth {BIO 1436128 <GO>}

A little plug for JBG SMITH, okay. So the team down there, which has all of our assets has done a great job in landing Amazon HQ2 and we will continue to do a great.

 

Michael Bilerman {BIO 15926660 <GO>}

Right. So then $1 billion profit on 2020, doing the retail joint venture on NOI that no one believes that 4.5 cap rate, right? So at some point the stock market --

 

Steven Roth {BIO 1436128 <GO>}

I like the direction it is going.

 

Michael Bilerman {BIO 15926660 <GO>}

Well, I'm going to go in for the jugular, but it's at some point like it, like what -- like what's going to happen? Like the stock markets not willing to take hold of the value, you can't go back and say that those weren't value-creating. And if you hadn't done them, I shudder to think where your stock would be. But I guess how do you narrow that valuation gap? What else, I mean a lot of people always talk about a sale the company, right? There's no secret that you are older and want to see this get the value, right? I don't like --

 

Joseph Macnow {BIO 1476454 <GO>}

Michael, let's not forget $5 a share of done deal at 2020.

 

Michael Bilerman {BIO 15926660 <GO>}

Right, no, (inaudible). That's right, so I think it's like is a stock market wrong, and is it better to be private. right? And I just don't know at some point, like how do you balance those things?

 

Steven Roth {BIO 1436128 <GO>}

Yes. Everything that you said up until that last phrase was a 100% correct I endorse it until we think that what we've been done -- what we've been doing has been extraordinary and correct. And we're sort of proud of our record with respect to the metaphysical speculation on why the stock price hasn't reacted and what's going to happen in the future I pass.

 

.

[KJP]

pupil, 

 

I've followed your VNO posts with great interest.  I realize the company needs cash for development, but what is the reason for refusing to buy back any stock if it's selling for ~55% of NAV?  On the Q4 call they seemed adamantly against any buybacks.  Are the retail preferreds transferable?  If so, why not sell some of them to buy back if their NAV number is anywhere near correct?

[thepupil]

KJP,

 

I actually agree with the no buyback as I have built a concentrated position in VNO and gotten to know it a little better. I prefer VNO's course of action to SLG's as it gives me comfort to average down into VNO as it falls. VNO has been in the process of "de-grossing" (selling assets, paying off debt, monetizing JV) that make the NAV more certain rather than more aggressive attempts to grow per share NAV via re-leverage / buyback.

 

VNO is cash rich. But it also has $5.3 billion of debt and construction obligations over the next 0-3 years (see page 67 of the most recent 10-K).

 

This includes $4.5 billion of mortgage debt coming due, ~$700mm of construction related obligations, and a few odds and ends, so it's the big refi wall, rather than development that I think may underlie the cash hoarding.

 

Against that $5.3 billion, VNO has a pile of cash ($1b+), 220 CPS ($1.2), and the revolver ($2.1b) and of course, will be able to refinance the bulk (probably all) of the $4.7 billion of debt coming due. they also have the retail JV preferreds (I am unsure about transferrability) . I, for one, think this is mostly an opportunity to take VNO's weighted average cost of debt even lower than its current 3.5% as the the debt coming due includes some higher cost paper. On a weighted average basis it's similar to VNO's longer term debt, though. but the cost of money is in freefall for now. 

 

But that doesn't change the fact that if VNO engaged in a very big buyback (say $2 billion) that would reduce their overall flexibility in addressing this sizable debt maturity wall and construction obligations. While I think they certainly could do this and be okay in the majority of scenarios, VNO (and I) value the flexibility and risk reduction of having the option to self-fund some of these.

 

As far as a path forward, I think that once VNO closes on 220 CPS completely, and terms out some of these chunkier loans AND secures tenants for the development pipeline, then that excess capital on the balance sheet will find its way to shareholders pockets (or if conditions warrant, in accretive acquisitions) . Imagine how quickly the narrative will change if and when FB signs a long-term lease at Farley and VNO announces a 10 year SASB CMBS at t+150 to (2.5%) to finance 60-70% of the cost and a simultaneous buyback with the freed up capital.

 

In short, I think they need to de-risk the development pipeline and lock in some re-fi's before they think it prudent to really do anything on the buyback/special div front (mind you this is a stock that returned 7% in divvies last year and likley will again this year, so capital return is still well above the general market). they could do a number of other things (like a core leased up office JV monetization with institutional investors) to accomplish the same goal, and I'm sure they have explored a lot of things.

 

VNO is aggressively transforming 25% of its asset base (by NOI) over the next 3-5 years. I think it will work out well, but I'm okay with them treading cautiously.

 

If you want a more aggressive private public arbitrageur, buy SLG as its just as cheap if not cheaper and also has 1 Vandy as its super sexy long term development option. I think both will work out but am more comfy owning VNO.

 

 

 

For detail on what's coming up, see page 27 of the most recent supplemental: 

https://investors.vno.com/Cache/IRCache/edcae237-6ce6-2bf9-4985-a53452c40a60.PDF?O=PDF&T=&Y=&D=&FID=edcae237-6ce6-2bf9-4985-a53452c40a60&iid=103050

 

On 12/20 we have $450mm of PENN11 debt at 3.95% (this will get refi'd lower)

In 2021 we have:

$53mm of Borgata land at 5.14% (hand back keys or pay off, no idea of value)

$700mm of 700 Broadway at 2.56% (re-fi higher fixed or refi at same floating rate)

$350mm 909 3rd Avenue, $350mm at 3.91% (refi'd lower)

$550mm of 555 California at 5.10% (this will certainly get refi'd much lower, possibly with significant cash out)

$675mm theMart at 2.70% (cash out opportunity again here as this is like 35% LTV paper), but not an opportunity to reduce rate.

 

2022

$950mm 1290 Avenue of the Americas at 3.34% (not an opportunity to lower cost)

 

 

[KJP]

pupil,

 

Thanks for the detailed response and thoughts.  I agree with you that prudence isn't a bad thing, but as you note they're going to refi and, on average, at better terms.  Moreover, the retail preferreds likely yield less than VNO stock once special dividends are included.  It seems to me that a steady sale of those preferreds (assuming they are transferable) with the proceeds going toward stock buybacks makes alot of sense.  I'm suggesting this should happen over time, rather than a big bang $2 billion buyback that would radically change the balance sheet.  I also think this is consistent with the purpose of the retail JV.  You potentially give up some future value gains in return for proving the value of the assets today.  If the market doesn't respond, then force the issue by using the proceeds to buy back shares. 

[thepupil]

pupil,

 

Thanks for the detailed response and thoughts.  I agree with you that prudence isn't a bad thing, but as you note they're going to refi and, on average, at better terms.  Moreover, the retail preferreds likely yield less than VNO stock once special dividends are included.  It seems to me that a steady sale of those preferreds (assuming they are transferable) with the proceeds going toward stock buybacks makes alot of sense.  I'm suggesting this should happen over time, rather than a big bang $2 billion buyback that would radically change the balance sheet.  I also think this is consistent with the purpose of the retail JV.  You potentially give up some future value gains in return for proving the value of the assets today.  If the market doesn't respond, then force the issue by using the proceeds to buy back shares.

 

yea, I would generally agree with you that there's room to do more, possibly much more.

 

another thing I'd add that I really don't get is that VNO has $920mm of corporate level preferred stock paying out 5.25% - 5.7%, in the context of today's rate environment, this is very high cost paper. The $320mm of 5.25% are not callable until 2022 but the 5.4% and 5.7%'s have been open since 2017 (5.7%)  and 2018 (5.4%). it's odd to me they don't just pay those off/refi them with  lower cost debt, but it all fits the narrative of VNO foregoing near term earnings bumps in the name of flexibility.

 

if they issued a huge convert that had a coupon below 4% and converted to stock at like 80 that took out the open prefereds ($600mm) and bought back material stock it would actually decrease the amount of interest/dividends needed on an ongoing basis and improve value per share, but they aren't doing that.

 

the bottom line is there's a lot to do with the estate of assets and it's it's not fully optimized for what stock market wants (a steadily climbing FFO number, low debt/ebitda, etc). In that there is a certain amount of futility if you think nothing will change. VNO, in my opinion has proven that it will take action; this isn't a team that does nothing. but it's not necessarily going to happen on everyone else's timeline (including my own).

[CorpRaider]

I agree the story/presentation could be cleaner. They repeatedly hammer the NAV discount and then the market is like, "oh, ok...so, you are planning to buy back stock?" and they reply, "nah man, we would rather undertake more multi-year ginormous developments to create more eventual supply, because we are 'just dirt guys.'  Developers gon' develop.  YOLO." 

[thepupil]

KJP: here's what we were talking about but written better than I can

 

Vornado's Abundant Liquidity

Additional Intelligence on this Topic: Vornado Realty Trust Research

Jeffrey S Langbaum, the primary analyst for this report.

Jeffrey S Langbaum

 

Team: REITs

 

BI Senior Industry Analyst

 

Added $1 Billion From Condo Sales Funds Vornado's Development

Condo sales at 220 Central Park South could bring an additional $1 billion to Vornado in 2020 that it can use to fund its development budget, eliminating the need to raise external capital. Vornado entered 2020 with almost $4 billion of immediate liquidity considering its cash and credit-facility capacity, but it has limited uses for this capital. (03/05/20)

 

1. Self-Funding Development Pipeline

Vornado Realty Trust Liquidity

 

Source: Company Filings, Bloomberg Intelligence

DataChart

Vornado's $1.5 billion of cash and $2.2 billion of credit-facility capacity at year-end provide almost $4 billion of liquidity that the company doesn't have a clear use for in 2020. Vornado expects to generate an additional $1 billion from the sale of condos at 220 Central Park South this year that it can use to fund construction of several projects around Penn Station in Manhattan. Its debt on the condo development has been repaid, so remaining proceeds are fully available to fund the new projects.

 

Liquidity above and beyond the condo proceeds would allow Vornado to pursue additional expansion opportunities. However, the company has been more likely to sell assets than buy in recent years, and management continues to strike a cautious tone beyond its Penn Station projects. (03/05/20)

 

2. Limited Near-Term Debt Maturities

Vornado Debt Maturities ($ Million)

 

Source: Company Filings, Bloomberg Intelligence

Table

Vornado has no debt scheduled to mature until late 2020, and no unsecured debt until 2024, freeing up liquidity to fund expansion rather than refinancings. Its $3.7 billion of secured debt scheduled to mature between late 2020 and late 2022 should be easily addressed because the market for mortgage refinancings remains wide open. Also, lower interest rates should help keep costs down on new secured debt, potentially resulting in reduced interest costs as refinancings are completed.

 

Vornado has just one remaining unsecured bond outstanding ($450 million at 3.5%) that matures in 2025, as it has essentially moved to a secured-only funding model. Its credit rating was downgraded to BBB in 2019, but that's less relevant as Vornado moves away from unsecured debt, and considering its limited need for incremental capital. (03/05/20)

[KJP]

pupil, thanks for posting that report.  I agree that it's prudent to be able to self-fund development (an attribute Howard Hughes has always touted, and which the midstream companies have all moved toward) and maintain a safe balance sheet, but it seems clear that there are several simple things that VNO could do right now to boost long-term returns without taking on any real risk, e.g., calling and refinancing the preferreds that you mentioned and buying back some stock at ~55% of NAV with what appears to be abundant excess liquidity. 

 

All that being said, VNO looks good here even with a sub-optimal balance sheet.  My biggest concern is that, over time, this is essentially a capital recycling business, and the current VNO thinking can be a real drag to returns over time.

[KJP]

 

no more VNO posts until ... we hit a 4 handle!

 

You can take the muzzle off now.

[thepupil]

hahaha

 

i mean there's not anything more to say. i sold my excess hedges today and am at my maximum loss amount as my remaining puts are in the money and cover the bulk of my position.

 

all in 400-500 bp loss to net worth thus far, definitely up there with my biggest, if not biggest ever (absolutely #1 on a dollar basis)

 

$96 / share management NAV.

$47 price

203.5 shares out

 

96-47 = 49, about a $10 billion gap between management NAV and market value. there are $31 billion in assets ($27 billion which i would define as risk assets, cash/prefs i don't count as risky). 10/27 = 37% on an asset basis discount.

 

either fundamentals will deteriorate or the price will go up.

 

there is no other option. one does not languish at a 50% NAV multiple. this ain't no hong kong propco or Mitsubishi Estates. this is the US where shareholders matter and public and private markets converge....eventually.