VNO - Vornado Realty Trust

[CorpRaider]

Some how, buying VNO feels like going into Ross store and buying a shirt that I don’t need, in an outdated style that I don’t like, just because the discount noted on the sticker is so great.

 

If I am lucky, I can sell it at a yard sale for a lesser discount (and a profit for me), but likely it will end up in a closet forgotten.

 

<Chef's kiss>  But also a tear is drawn.

[Gregmal]

Agreed and have been swapping /adding to PGRE and ALX.

 

I think ALX is the easiest thing to average down in, unless you think Bloomberg and Home Depot are going to try to weasel their way out of leases. There will be some bumps; expect Container Store to go away, don’t love the Kohl’s lease which is sublet to AtHome (who will go BK first?), etc.

 

Gregmal, it’s interesting to me that you like the Garden and Observatory; my intuition would be that there will be some time (potentially a long one) where people are going to work in offices but aren’t going to a concert/Knicks/Rangers game at the garden or being a tourist in NYC. Maybe that’s totally wrong of me though.

 

By the way, I want MSG to thrive; as they are VNO’s tenants for their corporate office and obviously MSG is important to Penn District.

 

I do think ALX is probably the cleaner way to play whatever it is one is playing with a VNO investment.

 

There will be a bigger lag before Observatory and Garden get back to business. I totally agree. However I do think there is a major growth runway, especially with millennials and retired boomers, for lifestyle/experience based businesses. This was on full display pre COVID and I dont see it going away. I think in fact, there will be big time pent up demand. The Garden is definitely a benefactor. LiveNation is too but I dont like that as much as the MSGE which is basically trading for cash right now, with 0 debt.

[thepupil]

the idiosyncratic (>IYR/PGRE/SLG/ESRT) spike in VNO the day before 13-F day is giving this bag holder  a teensy bit of hope

 

Blackstone bought 2.5%. Since their latest fund is 20 bilsky’s, I doubt they only want a lousy $160mm

[Spekulatius]

However I do think there is a major growth runway, especially with millennials and retired boomers, for lifestyle/experience based businesses. This was on full display pre COVID and I dont see it going away. I think in fact, there will be big time pent up demand. The Garden is definitely a benefactor. LiveNation is too but I dont like that as much as the MSGE which is basically trading for cash right now, with 0 debt.

 

 

I am kind of wondering if the 2 decade old mega trend of younger and to some extend older people moving into urban centers  has come to an end. Some folks clearly think so. Again I follow some real estate podcasts and MF had a pretty interesting guest they was building on the idea of 18 hour suburbs. Also, the millennials are getting older and might think about having kids. When you get to they point, having a backyard is typically of more value than having a Starbucks in the same city block. Then this COVID-19 thing might have been the final straw. Here are some anecdotes:

https://www.cnbc.com/2020/05/15/gov-ned-lamont-people-could-move-from-new-york-city-to-connecticut.html

 

I am skeptical of NYC real estate and I think even those residential apartment REITs that concentrated on this millennial big city trend might be challenged.

[thepupil]

I would suggest paying attention to what Blackstone is doing in the real estate market. I ignore all the energy stuff they bought because I am not choosing to focus on energy as one sector in severe crisis is enough. Others can opine on that.

 

Also if you think PE is dead, just look at BX raising $5 billion in the last two weeks of Marc and $500mm from a single investor ($27 billion in Q1 2020)

 

PE ain't dead. A lot of PE PortCo's are. But PE is only just beginning. Blackstone has $150 billion of dry powder. 

 

What they bought:

- lot of hotel and gaming exposure with the bulk being in Host Hotels

- good bit of office, focusing on Kilroy and Vornado.

- little industrial (which they already own a massive amount of)

- a little multi-family (Equity Residential being the biggest).

 

In my view, Blackstone bought high quality, high barrier to entry assets with relatively low leverage (to comps and private market) and they bought liquid stocks that they could buy a material (in the context of a $20B real estate fund and ginormous overall AUM complex) of stock in a short amount of time.

 

because the bid-ask in the private market is so wide Blackstone did what few appear to actually be doing, buying the cheapest/least levered square feet and keys available: on the New York Stock Exchange.

 

One shouldn't get too excited about this if you own any of these names, because the other reason to buy liquid stocks is so that you can punch out of them when you want to fund the next deal, or when your view changes.

 

they did not buy retail.

 

Lodging and Gaming:

$380mm of Host Hotels

$115mm of MGM Growth Properties

$70mm of Pebblebrook Hotels

$63mm of Extended Stay

 

Office:

$184mm of Kilroy (West Coast, SF/Tech focused developer / office landlord) : https://kilroyrealty.com/company-about

$150mm of Vornado (needs no intro)

$45mm of Columbia Property Trust (NYC, SF, DC, Boston Office) <---this is pretty small company so  doesn't fit the mold...interesting

 

Industrial

$45mm of Prologis

$39mm of Duke

 

Multi-family

$45 of Equity Residential

$38mm AIV

 

https://whalewisdom.com/filer/blackstone-group-l-p#tabholdings_tab_link

https://seekingalpha.com/article/4339579-blackstone-groups-bx-ceo-steve-schwarzman-on-q1-2020-results-earnings-call-transcript?part=single

 

I've included some quotes from their call to give some context. Blackstone has a massive amount of money to put to work.

 

Since the crisis began, we bought $11 billion of public equities and liquid debt across the firm and are well positioned to do more.

 

So Craig, I’d start by saying that first quarter was pretty remarkable in the sense that we raised $27 billion and $12 billion of that was raised in March during this sharp decline, which sort of reflected, as we said in the comments, the strength of the relationship we have with our customers. Probably the best example was our core private equity business. We were raising our second fund, and we raised all $5 billion in the last two weeks of March.

 

I just got an e-mail. I guess it was two days ago that we just got $500 million from an individual account for one of our funds, which to me, at least, is a reaffirmation that the life goes on. There are different strengths from limited partners in different parts of the world.

 

econd, and Jon alluded to this, from a fund reserve standpoint, we are very well positioned. And so out of that $152 billion of dry powder, about $30 billion of that or so is really dedicated to support funds that are fully invested out of their investment periods, and we have those reserves ready to support companies on defense and then also go on offense where there will be opportunities which we expect.

 

Glenn Schorr

 

Post last cycle, you were a huge beneficiary of – I won’t call it for sellers, but you needed some big assets to move because of companies that were long, a lot of real estate that needed to monetize, you’re the natural buyer. Have you seen that yet? Or is that too early, but do you anticipate it?

 

Jon Gray

 

Yes, it’s too early. What we’ve done in real estate so far has basically been on the screen. We talked about it. We bought debt at a discount. We bought some public equities. That’s really the initial phase. Then the next thing you’ll see is some rescue capital needs, and we’ll start to address some of that. And then after sort of the weight of this comes through the system, in some cases, there’ll be special servicers you take over assets.

 

People will run through their reserves, then you’ll begin to see assets trade. We saw that happen really, it took a year after the 2001 downturn. It took a year basically after 2008. That first year after the shock, is generally pretty slow in terms of deployment. It can change. And then things start to pick up, and to our overall comment, the fact that we have so much capital, not only in real estate but across the firm, that is a great competitive advantage. We don’t need financing to get things done. And so I think we’re very well positioned just as we were in the previous two downturns to deploy capital at scale.

 

Jon Gray

 

So Mike, I would say, the near-term opportunities we talked about were initially on the screen. I think the sectors where you’ll be able to deploy capital and scale early on here will be the most impacted sectors. So areas like lodging, location-based entertainment, things, obviously, broadly in the travel business. There will be opportunities. You’ve seen some of those deals recently in terms of rescue financings. We would expect to deploy significant amounts of capital in some of those areas. There are other businesses that are just generally more leveraged. And when a storm comes in and the business suffers, they don’t have as much margin for error. And so I think we’ll see some of those businesses.

 

[BG2008]

220 CPS sexual harassment lawsuit.  Liabiliity likely resides with GC, but distraction indeed.  Terrible on a human level if allegation is true. 

 

https://nypost.com/2020/05/30/nyc-carpenter-claims-foreman-forced-her-into-threesomes/

[fareastwarriors]

Facebook Considering Neiman Marcus’ Hudson Yard Space

 

https://commercialobserver.com/2020/06/facebook-considering-neiman-marcus-hudson-yard-space/

 

 

In November, Facebook signed a deal for more than 1.5 million square feet of office across three buildings the Hudson Yards mega-project and has been in talks to take more than 700,000 square feet in Vornado Realty Trust’s Farley Post Office site.

 

Facebook — which recently announced plans to allow up to half of its staff to work remotely within the next five to ten years — is close to finalizing the deal at the Farley Post office, as Commercial Observer previously reported. It’s unclear if the Neiman Marcus space impacted those talks.

[thepupil]

given the low leverage/full occupancy/quality tenants on 555, would expect/hope that VNO is able to pull-off a nice cash-out refi here.

 

555:

~$85mm NOI and only $546mm of debt on 555 at 5.1% due in 9/2021 so not much prepayment penalty to pay given how close the maturity is getting. I think you could put $800-$1.1 billion on @ 3% or so.

 

Base case $950mm @ 3%? that would provide $280mm of cash to VNO and not increase interest expense. President Orange would get $120mm for his share.

 

1290 AoA has $950mm of debt, interest only, 3.3% due in 2022. It's doing about $177mm of rental rev (2.0mm*$87). It seems more fully levered and optimized, don't see a huge cash out opportunity there.

 

alternatively, VNO could buy out Trump's equity stake to remove that complication or sell the properties, but it'd have to be a clean buyer that raises no eyebrow w/ Trump ownership and have to be a very full price to overcome tax leakage.

 

https://seekingalpha.com/pr/17909047-vornado-to-explore-options-to-recapitalize-1290-avenue-of-americas-and-555-california-street

 

in other news, I've been continuing to reduce VNO to the benefit of other names like PGRE and ALX. No 220CPS sales in 2 months and no farley confirmation (and the run to the mid $40's a little while back) decreased relative attractiveness or at least decreased my willingness to hold a very big position. Still a large position though, just more biased to the others.

 

that said, this is incremental positive news in that could get a nice little monetization here, but I'm not sure it is really news in that anyone would have expected a recap of 555 California. a big sale or purchase would be unexpected.

 

NEW YORK, June 23, 2020 (GLOBE NEWSWIRE) -- VORNADO REALTY TRUST (VNO) announced today that it is initiating a process to explore options to recapitalize, either together or separately, 1290 Avenue of the Americas, a 2.1 million square foot Manhattan office building, and 555 California Street, a three building, 1.8 million square foot office campus in San Francisco.

 

Vornado owns 70% controlling interests in the partnerships that own these properties and has sole decision-making authority.

 

Cushman & Wakefield is the exclusive agent for 1290 Avenue of the Americas and Eastdil Secured is the exclusive agent for 555 California Street.

 

There can be no assurance that a transaction will be completed.

 

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

 

 

 

 

[thepupil]

Sell sider saying 555 is worth $2B / 4 cap, which would be like $1B to VNO, maybe $800mm with some transaction costs. That would generate 10-14% of market cap in cash from 6% of office NOI or 5 % of total NOI.

 

The $2B figure is also consistent with estimate that they can potentially borrow over $1B against the asset.

 

We’ll see. Not sure who forks over $1B of ewuity to buy that asset in this market and send $100’s into the president’s pocket. Think a nice SASB CMBS with low rate and cash out is the more likely path

 

 

 

 

 

(Bloomberg) --Two of Vornado’s trophy assets co-owned with the Trump Organization may attract a sales price valuing them at $3.7 billion, or $938 per square foot, versus the implied price of $410 per square foot reflected in Vornado’s shares, BMO analyst John Kim wrote in a note.

NOTE: June 23, VNO is exploring selling two office towers in Manhattan and San Francisco co-owned with the Trump Organization

Deal may be complicated by President Donald Trump’s ownership and an uncertain commercial real estate market; see story: Trump Stakes in Play as Vornado Explores Office Building Sales

Kim also said that a dividend cut is a “possibility, but unnecessary given VNO’s cash flow growth”

Added that even asking about whether VNO’s dividend was at risk was an “unfathomable question in January,” when VNO paid a special dividend of $1.95/share

He also sees NYC’s “slower-than-expected recovery” as a significant headwind to earnings, though he added that low collection rates, NYC employers delaying a return to work and tough-to-lease developments are largely priced into VNO’s shares

NOTE: June 23, Only a Trickle of Finance Workers Are Returning: NYC Reopens

Rates VNO outperform, with Street-high PT $60; VNO has 2 buys, 8 holds, 4 sells, avg PT $43: Bloomberg data

Separately, analyst Steve Sakwa wrote on Tuesday that Evercore ISI assigns a gross value of $2b, or $1,100 per square foot, to the San Francisco building; as 1290 Avenue of the Americas is part of the NY portfolio, the firm doesn’t value it separately

Sakwa saw “good news” in that VNO controls all decisions unilaterally on both assets, which may “make a transaction much easier than getting a partner’s consent”

Announcement seemed consistent with Steve Roth’s conference call commentary that all assets were on the table for potential sale, as the stock traded at deep discount to net asset value, Sakwa said

Based on 1Q results, Sakwa has VNO’s NAV at ~$65/share; with the stock ~$40, VNO’s assets are “trading at a meaningful discount to private market values”

Rates VNO in line, PT $48

VNO has slumped 41% YTD vs a 3.1% drop for the S&P 500

[elevensecsrt4]

the pupil,

 

I have enjoyed following your comments and news flow on VNO.  I am looking heavily into since the COVID related drop in share price. Management seems to Best of breed.

 

 

[thepupil]

Article implies that 1290 is doing $90+ million of NOI. If it’s doing $63mm of cash flow after debt service with a $950mm 3.3% IO loan on it

 

Also says specifically VNO looking to sell, not just borrow more.

 

So roughly 12% of VNO’s existing office NOI ($85mm 555, $95mm 1290, *0.7= $120mm ish with roughly $1B of office NOI) is in play.

 

Green Street figures of $3.7B for both building’s gross value is a high 4’s cap rate.

 

I’ll believe that when I see it!

 

Also note that these two buildings are a big chunk of the upcoming maturity/refi wall.

 

 

 

(Bloomberg) --Manhattan’s 1290 Sixth Avenue and San Francisco’s 555 California Street are outliers in President Donald Trump’s real-estate portfolio. His name doesn’t appear in big letters there. Trump owns only 30% of them. His company doesn’t have a management role.

Yet without fanfare, the two office towers are also among the Trump Organization’s most lucrative assets, together generating tens of millions in cash flow each year, according to a Bloomberg analysis. Now the properties could propel the most lucrative real estate deal involving Trump’s company during tenure in the White House.

 

 

555 California Street stands in San Francisco.

Vornado Realty Trust, which holds the remaining 70% in the buildings, said this week it’s seeking to recapitalize them. People familiar with the matter said Vornado is looking to sell the high-rises and would lead the effort, meaning Trump’s family would be a step removed from talks. The Trump Organization is likely to sell its stakes as part of a deal, the people said.

 

The president bucked decades of tradition by declining to divest from his family business when joining the White House, and he has been dogged by lawsuits alleging his businesses open the door to spending by favor-seekers. In any sale, opponents and ethics organizations will surely scrutinize the buyer’s motives and the fairness of terms. A deal could yield hundreds of millions of dollars that the president’s company could plow into new investments, which could benefit from some of the real-estate friendly tax policies and banking regulations enacted by his administration.

 

Vornado declined to comment. The Trump Organization didn’t respond to requests for comment.

 

The two office buildings occupy prime commercial zones in two of the U.S.’s priciest cities, with tenants including Cushman & Wakefield and Neuberger Berman in Manhattan, and Microsoft Corp. and Goldman Sachs Group Inc in San Francisco. Vornado’s stakes in the two could be worth $2.6 billion, according to an analysis by Green Street Advisors, a real estate advisory firm. That implies that Trump’s stake could be worth as much as $1.1 billion before accounting for his share of debt.

 

The 45-floor Sixth Avenue building generated $63 million of net cash flow after debt payments last year, according to loan disclosures compiled by Bloomberg. Trump’s share of that, $19 million, is more than the combined $15 million in net cash flow after debt generated by offices at two of his marquee office properties, Trump Tower and 40 Wall Street.

 

“This is is a significant asset,” said Danny Ismail, an analyst at Green Street. With more than 2 million square feet, it has a roster of blue chip tenants and gets healthy rents given its quality and location, he said. ”It would be a good North Star in terms of where investors are valuing NYC office buildings.”

 

Beyond the challenges posed by a minority partner who is running for re-election, it is an uncertain time to be marketing office properties. Companies are re-evaluating their need for space as the continuing coronavirus surge in the U.S. has left millions of workers uncertain about when they’ll return to their offices.

 

“Last week everything was looking pretty good. Now all of a sudden we have new outbreaks so maybe things aren’t so good,” said Joshua Stein, a New York-based real estate attorney. “The value of this building could change by the minute.”

 

Such a sale could give Vornado the chance to make a statement about the value of its portfolio of commercial properties, after the coronavirus pandemic helped depress its shares in March to levels reminiscent of the troughs of 2009.

 

Both properties have rent rolls filled with tenants in long leases that are likely to outlast the economic upheaval. To handle the sales, Vornado turned to two firms that specialize in high-end commercial real estate. San Francisco’s 555 California is being brokered by Eastdil Secured, a real estate investment banking company. Cushman & Wakefield, which has handled an assortment of billion-dollar transactions in Manhattan in recent years, is representing 1290 Sixth Avenue.

 

Trump’s office properties are his company’s most reliable income generators, and throughout the years have helped fuel the companies acquisition of higher-risk assets, including golf courses.

 

This isn’t the first time that Vornado’s chairman, Steve Roth, has featured prominently in Trump family dealings. Kushner Cos., the family firm of Trump’s son-in-law Jared Kushner, co-owned another midtown office building, 666 Fifth Avenue, with Vornado prior to its sale in 2018.

 

[thepupil]

https://www.bloomberg.com/news/articles/2020-07-06/manhattan-luxury-condo-developer-tries-hand-at-reit-investing

 

another pot committed owner of NYC real estate that loves VNO.

 

A developer of some of Manhattan’s newest ultra-luxury condos has started a more down-to-earth project: a fund investing in real estate companies that appear undervalued.

 

The venture by Ziel Feldman’s HFZ Capital Group will buy shares of publicly traded real estate investment trusts that have taken a hit from the pandemic, Feldman said in an interview. HFZ, Lionbridge Capital LP and other partners provided $50 million in seed money for the fund, which aims to raise as much as $500 million from institutional investors.

 

 

It has already bought stakes in New York office landlord Vornado Realty Trust and senior-housing operator Ventas Inc. Both companies’ shares have slid since the beginning of March.

 

“We’re in the very businesses we’re investing in,” said Feldman, whose company also owns and develops offices, including a speculative tower under construction in Manhattan’s NoMad neighborhood. “We have real-time information from brokers, we’re seeing the rent collections and leasing activity from our own portfolio.”

 

The prolonged Covid-19 lockdown has upended the commercial real estate market, shuttering retail spaces and emptying office buildings while the nation at large stayed home. Even as social-distancing rules ease, the virus may leave a lasting impact on how and where Americans work and spend their leisure time and on the values of properties where those activities take place.

 

 

The Power Lunch Is Dead and the Bagels Are Lousy: NYC Reopens

 

But anyone looking for discounted buildings in the private market won’t find them yet, said Adam Feldman, the developer’s son and HFZ’s director of acquisitions. The deals now are in the stock market, where shares of many REITs are trading below the value of the properties they hold, he said.

 

“The highest returns you can get today are in the public market,” said Adam Feldman, who will co-manage the fund with Lionbridge.

 

In one of its office buildings in Detroit, HFZ collected 92% of rents last month, and it’s hearing from brokers in other markets that tenants are looking for more space so workers can spread out, Ziel Feldman said. That’s giving the firm an upbeat view of the future for offices, and motivating its bet on shares of public landlords.

 

Firms that own properties such as nursing homes and assisted-living communities have also seen their shares slide amid a contagion that was especially deadly for the elderly. The fund has bought Ventas stock because it sees a bright side.

 

Nursing homes are “going to end up being the most-controlled environment when the rest of the world goes back out,” Adam Feldman said. “These facilities will be the safest place to put your parents or grandparents.”

 

The fund also holds shares of Welltower Inc., a REIT that invests in senior housing and health-care properties.

 

Investing in REITs is a different tack for HFZ, which unleashed more than $3 billion worth of luxury condos onto the Manhattan market in 2018. It’s still trying to find buyers for many of them.

 

 

The firm’s condo projects include the Belnord, a conversion of a century-old rental building on the Upper West Side, and The XI, rising near the High Line in Chelsea with a futuristic design by Bjarke Ingel

[thepupil]

https://investors.vno.com/press-releases/news-details/2020/Vornado-Announces-Certain-Items-to-be-Included-in-itsSecond-Quarter-Financial-Results/default.aspx

 

Non cash impairment of retail JV (considering they had to write it up to a 4.5 cap where the transaction occurred, this makes complete sense)

 

Retailpocalypse related hits to earning (JC Penney and New York and Co at Manhattan Mall)

 

Some gains from 220 CPS unit sales, below Q1. There haven’t been any 220CPS closings since April according to StreetEasy. I continue to find this concerning and am hoping that we don’t have bad news as it relates to change in status of deposits.

https://streeteasy.com/building/220-central-park-south-new_york

 

I would say nothing unexpected here but also no good news.

[fareastwarriors]

@thepupil

 

Are you concerned about the continued general weakness of office REIT space despite market being up (primarily tech-driven but still)?

 

Still no word on Farley Post Office.

[thepupil]

@thepupil

 

Are you concerned about the continued general weakness of office REIT space despite market being up (primarily tech-driven but still)?

 

Still no word on Farley Post Office.

 

I think the underperformance is warranted. There's been little good news and still plenty of shoes to drop.

 

VNO shoes to drop.

1) Facebook / Farley. 

2) Dividend cut

3) continued retail deterioration etc.

 

I'm not worried because I think I own companies with great balance sheets that will survive a multi-year tough period, but I wouldn't be surprised if they trade down further or languish for a long time.

 

 

 

 

 

 

[BG2008]

@thepupil

 

Are you concerned about the continued general weakness of office REIT space despite market being up (primarily tech-driven but still)?

 

Still no word on Farley Post Office.

 

I think the underperformance is warranted. There's been little good news and still plenty of shoes to drop.

 

VNO shoes to drop.

1) Facebook / Farley. 

2) Dividend cut

3) continued retail deterioration etc.

 

I'm not worried because I think I own companies with great balance sheets that will survive a multi-year tough period, but I wouldn't be surprised if they trade down further or languish for a long time.

 

I have come around to thinking that the under performance is warranted.  It is starting to become obvious which RE sectors are benefitting and which RE sectors are suffering from Covid 19's development.  Across the board, I am seeing the following ranked from most favorable to least favorable

 

Data Centers

Cell Towers

Warehouses

Self Storage

Mulit-family

Office

Retail

Entertainment and restaurants

 

VNO contains 2 of the more hurt.  I think retail is more challenged in a secular sense.  Office is still up in the air.  It's just tough to tell what urban office look like.  This is largely the reason why I swapped VNO for ALX because ALX has no near term office maturity and a 9 year lease to Bloomberg.  Also, I am a bit more comfortable that charging $40-50 rent per sqft in Queens is more sustainable in the long run than charging $3,000 a square foot on Fifth Ave. 

 

I actually think that something like the Seaport (HHC bagholder here) as a retail location actually has a tremendous amount of long term value.  It appears that retail is moving towards an equity ownership model for those locations that are paying higher levels of rent.  When we do have a vaccine and people can congregate again, I think the Seaport is a "place" and a destination.  Fifth Ave has those characteristics as well.  But at $3,000/sqft versus $100/sqft, I think the Seaport is a lot more sustainable in the long run in drawing people to it.  I am bearish on Madison Ave, Fifth Ave, and Herald Square and most retail corridor.  One way that I think about it is that a multiple of 1.5 to 2.0 of what multi-family rent for above the retail is likely a base case for retail rent on ground floor.  As a customer acquisition tool, it does have real tangible value.  In addition to being able to generate cash flow, I think it improve user experience. 

 

The problem that I have with VNO is that at low cap rates, if people starts questioning the long term sustainability of the assets, it becomes very hard for the market to rate the assets to its private market valuation.  This is something that I had to learn the hard way with companies such as Berry.  They can gush a ton of cash flow.  But if people perceive that the company is not sustainable in the long run, it will contain to trade at a deep discount until that perceived risk goes away.  One success with this is with the cable operators like Charter.  There was a time when people thought cord cutting was disconnecting broadband.  We find out that if anything Broadband can grow and increase unit price.  The re-rating was quite powerful.  So if the market's perception on office is that structurally we will have 10-20% less demand, you have the double whammy of lower occupancy coupled with lower rent.  Throw in the retail and it's tough.  I have swapped my office exposure for multi-family. 

 

I think Pupil has done an amazing job sharing his knowledge of the office names.  I think that the sector is tough and hence the opportunity.  Another CoB member had mentioned that he tends to sell during large run ups.  Perhaps, these are pretty good trading opportunities.  Low to mid $30s are buys and mid $40s are sells.  I don't the stock re-rating to $60+ anytime soon. 

 

Just my unworthy 2 cents

[Gregmal]

@thepupil

 

Are you concerned about the continued general weakness of office REIT space despite market being up (primarily tech-driven but still)?

 

Still no word on Farley Post Office.

 

I think the underperformance is warranted. There's been little good news and still plenty of shoes to drop.

 

VNO shoes to drop.

1) Facebook / Farley. 

2) Dividend cut

3) continued retail deterioration etc.

 

I'm not worried because I think I own companies with great balance sheets that will survive a multi-year tough period, but I wouldn't be surprised if they trade down further or languish for a long time.

 

You crazy bastard! You sound like you're investing. Better get with it and buy some NKLA or TSLA. Better off predicting where the stock will be in the next 16 hours. Worst case next 3-4 weeks! Sucker!

[thepupil]

AIG is moving its NYC headquarters out of lower Manhattan......to.....Midtown Manhattan

 

AIG's crappy downtown office will become apartments.

https://therealdeal.com/2019/08/16/fidi-office-to-resi-guru-nathan-bermans-next-big-project-is-aigs-headquarters/

 

AIG to Relocate New York Headquarters to Midtown Office Space

By Katherine Chiglinsky

(Bloomberg) -- American International Group Inc. will move its headquarters to 1271 Avenue of the Americas in New York City as the insurer reworks its real estate footprint.

The company will occupy eight floors of the building, AIG said Tuesday in a statement. It will also consolidate the rest of its New York metropolitan area office space into two locations at 28 Liberty Street in Manhattan and 30 Hudson Street in Jersey City, New Jersey.

Chief Executive Officer Brian Duperreault has been pushing to modernize the company through an initiative called AIG 200, which includes a re-evaluation of the insurer’s real estate strategy. The company, which hired James Love to oversee its real estate operations last year, expects to move into the three offices next year.

“Our new midtown headquarters building is in close proximity to many of our clients, distribution partners and other stakeholders,” Duperreault said in the statement.

The current headquarters is at 175 Water Street.

 

This building is not owned by VNO but is catty corner to 1290 avenue of Americas which is part of the 2 building package that VNO has in play for a recap/sale and also very close to PGRE's 2 buildings on AoA (1325 and 1301). It's a real shame that PGRE didn't win this for the Barclay's space, but also good for VNO/PGRE that you have a big decently prominent tenant leasing space in that submarket. I consider it a very minor validation of the appeal of boring corporate row midtown manhattan space. AIG isn't going to Atlanta or Denver and they're not going virtual, because AIG is AIG and NYC is NYC (it's insights like that are the reasons that keep you all coming back).

 

In total, I bet they rent (and other similar tenants) less space than they did in the past. Their old obsolete building becomes apartments and they consolidate their footprint to a few higher quality buildings. The fundamental trend is highly negative (which is why I think that absent big important news, we shouldn't expect the stocks to go up). We will only know the degree to which that's the case over time.

 

potential big important news: farley/220/1290AoA & 555 California, etc. None of these are resolved.

 

[johnny]

So AIG was asking ~$400/sqft for the building a year ago. Is that about the price this went off at? (Edit: yes)

 

Anyone have resources for learning more about these office-to-loft conversions and what the economics tend to look like? Would like to get a firm idea of how those projects cost out, since this is probably how we get supply/demand restored in the Bad Case scenario of universal-WFH-option by 2025.

[fareastwarriors]

Nothing new here but

 

Coronavirus Threatens the Luster of Superstar Cities

 

Urban centers, with a dynamism that feeds innovation, have long been resilient. But the pandemic could drive a shift away from density.

 

https://www.nytimes.com/2020/07/21/business/economy/coronavirus-cities.html

[fareastwarriors]

NYC Property Mogul Charles Cohen Sticks With Buy-and-Hold Plan in Crisis

T

 

CMBS debt near $1 billion; half of loans have missed deadlines

Pandemic will pass and ‘there’s no place like New York’

 

https://www.bloomberg.com/news/articles/2020-07-21/nyc-property-mogul-cohen-sticks-with-buy-and-hold-plan-in-crisis?srnd=premium

[Gregmal]

I wonder what Buffett thought about narratives when picking off banks during the GFC or previously, scooping up WFC during the S&L crisis. I believe Berkowitz made his name going big on the "death of banks" in the early 90s as well. Narratives are awesome. People will stop banking before they decide to spent the rest of their lives on their couches, not going to work, not shopping, not traveling, etc. We will see softness in pricing and rents for a bit, thats called a cycle....so what?

 

I mean shit, look at the life cycle of ALX if you need evidence of the durability of well located RE.

[Spekulatius]

So AIG was asking ~$400/sqft for the building a year ago. Is that about the price this went off at? (Edit: yes)

 

Anyone have resources for learning more about these office-to-loft conversions and what the economics tend to look like? Would like to get a firm idea of how those projects cost out, since this is probably how we get supply/demand restored in the Bad Case scenario of universal-WFH-option by 2025.

 

Yeah, but who wants to live in Manhattan now? My twitter feed says everyone moves to a cabin in the woods.

#NYtaxes #Covid2wave

 

Jokes aside, selling or even renting out NYC Appartement seems challenging now.

[fareastwarriors]

 

Vornado: Coronavirus responsible for $306M loss on value of prized retail JV

Financial results disclosed ahead of early August earnings call

 

https://therealdeal.com/2020/07/21/vornado-coronavirus-responsible-for-306m-loss-on-value-of-prized-retail-jv/

 

 

 

 

[BG2008]

FWIW, I am having serious issues with communicating, mentoring, and getting productivity out of my intern this year.  Last year, she sat next to me and I would explain things to her.  If she was confused, she would just walk 5 steps and ask me in person.  She is working from home this summer.  I tried to give her a project that included doing comparable company analysis and precedent transaction analysis.  I gave her 2 weeks to run and then quickly figured out that the presentation was not going to get done.  If it did, it would take 2x the time if I did it myself.  The issue is the "time sink" where I had to spend 2 hours for every one hour of productivity out of her. 

 

I take pride in mentoring young interns and provide a lot of time for Q&As and we used to go to lunch for an hour to teach them concepts etc.  She is my third intern now.  Last year was this amazing experience where she was exposed to a lot of new concepts and a lot of industry knowledge.  I think we both grew a lot where I became a better teacher and she learned a ton on the job and built a good resume.  All of these teaching and mentoring has been thrown out the window.  If I am totally honest, I dread having to come up with assigning her work this summer.  Because she will inevitably hit a dead end and then there will be no productivity.  Previously, if she hit a dead end, she just walk over and we talk about it.  Now each iteration is a day and the work product is not what I was expecting 80% of the time.  I hate to say it, but I thinks she kind of "mailed it in this year" which lead me to kind of "mail it in" as well.  Mentally, I think my intern was also a little less excited this year.  She was studying abroad and had to come home in the middle of it.  2020 is quite awful. 

 

If my anecdote is helpful at all, I think entry level jobs that require a lot of "drinking from the fire hose" and will have to continue to be in the office.  How do you "bring someone up to speed" when they are bright eyed recent college grads?  I think more senior positions will likely continue to transition out of the office to WFH.