Company Reports

We will discontinue analyst coverage of Vornado Realty Trust on or about Jan. 5, 2026.

Vornado Realty is a fully integrated real estate investment trust with interests in high-quality office and retail properties located principally in Manhattan. The portfolio of the company is around 85% New York-centric and 80% office-centric. It owns 56 Manhattan properties consisting of 20.1 million square feet of office space, 2.4 million square feet of street retail space, 1,330 residential units, and a 32.4% interest in Alexander’s, which owns six properties in the New York area. Vornado also owns a few non-New York properties which are well-located in CBDs of Chicago and San Francisco, but has recently announced its intention to sell these properties. The strategy of the company is to maintain a high-quality portfolio by investing in markets that have a high likelihood of capital appreciation through acquisition, new development, and redevelopment opportunities.

Vornado's third-quarter adjusted funds from operations were $0.57 per share, 9.6% higher on a year-over-year basis. The headline FFO number was affected by higher net operating income from variable businesses and new rent commencements, partially offset by lower NOI from asset sales.

Vornado's second-quarter adjusted funds from operations came in at $0.56 per share, 1.7% lower than the $0.57 per share in the same quarter of the previous year. The Manhattan office market has been performing much better than other markets over the past couple of years, but uncertainty persists.

Vornado Realty is a fully integrated real estate investment trust with interests in high-quality office and retail properties located principally in Manhattan. The portfolio of the company is around 85% New York-centric and 80% office-centric. It owns 56 Manhattan properties consisting of 20.1 million square feet of office space, 2.4 million square feet of street retail space, 1,330 residential units, and a 32.4% interest in Alexander’s, which owns six properties in the New York area. Vornado also owns a few non-New York properties which are well-located in CBDs of Chicago and San Francisco, but has recently announced its intention to sell these properties. The strategy of the company is to maintain a high-quality portfolio by investing in markets that have a high likelihood of capital appreciation through acquisition, new development, and redevelopment opportunities.

Vornado's first-quarter adjusted funds from operations came in at $0.63 per share, 14.5% higher than the $0.55 per share in the same quarter of the previous year. Macroeconomic uncertainty looms large on the stock as any weakness can dent employment creation thereby impacting office leasing volumes.

Vornado Realty is a fully integrated real estate investment trust with interests in high-quality office and retail properties located principally in Manhattan. The portfolio of the company is around 85% New York-centric and 80% office-centric. It owns 56 Manhattan properties consisting of 20.1 million square feet of office space, 2.4 million square feet of street retail space, 1,330 residential units, and a 32.4% interest in Alexander’s, which owns six properties in the New York area. Vornado also owns a few non-New York properties which are well-located in CBDs of Chicago and San Francisco that have benefited from healthy office demand in supply-constrained regions. The strategy of the company is to maintain a high-quality portfolio by investing in markets that have a high likelihood of capital appreciation through acquisition, new development, and redevelopment opportunities.

Vornado reported good numbers in the fourth quarter as adjusted funds from operations came in at $0.61 per share, 3.2% lower than the $0.63 per share in the same quarter of the previous year.

Over the past few years, we have observed an inverse relationship between share prices in the REIT sector and interest-rate movements. We believe a major reason is that all commercial real estate valuations are connected to interest rates. Capitalization rates directly indicate the return expectations for a real estate investment and expectations for risk and growth. Historically, we have observed that commercial real trades at cap rates consistently spread above the 10-year US Treasury. If interest rates rise, investors will require a higher return, and thus a higher cap rate, to accept the risk associated with an investment in a real estate asset. Since return expectations have held relatively steady for most real estate sectors over the past few years, higher cap rates translate to falling prices for real estate.

No-moat-rated Vornado Realty reported a middling set of numbers in the third quarter as the firm recorded adjusted funds from operations, or FFO, of $102.8 million or $0.52 per share, which was around 21% lower than the $127.2 million or $0.66 per share FFO reported in the third quarter of the previous year. Most of the year-over-year decline in FFO can be attributed to lower net operating income from lease expirations that were expected by management largely at the 770 Broadway, 1290 Avenue, and 280 Park Avenue properties and higher net interest expense. Management maintained its previous guidance as it expects 2024 comparable FFO to have a $0.30 per share impact from higher interest rates and a $0.25-$0.30 per share impact from increased vacancies. The impact of higher rates on the company's bottom line should reverse as interest rates decline. We are maintaining our $28.50 per share fair value estimate for Vornado Realty after incorporating third-quarter results.

The REIT sector in the US offers many companies that should see relatively stable cashflow growth over the next several years. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years with many reaching historical levels of net operating income growth, the REIT sector underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that is due to the sector’s negative correlation with interest rates, as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. Still, we still view many of companies in the US REIT sector as being undervalued as the companies should continue to produce solid long-term growth.

Despite a rally over the past two months, we still view the US REIT sector as being undervalued. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors led combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years, with many reaching historical levels of net operating income growth, the REIT sector has underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that the cause has been due to the sector's negative correlation with interest rates as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. We believe that US REITs will continue to see share price movements that are inverse of interest rate movements.

No-moat-rated Vornado Realty reported a good set of numbers in the second quarter because it sold a few assets at a good valuation and leasing volume remained robust. The firm recorded adjusted funds from operations, or FFO, of $112.8 million or $0.57 per share, which was around 21% lower than the $140.7 million or $0.72 per share FFO reported in the second quarter of the previous year. Most of the year-over -year decline in FFO can be attributed to lease expirations, higher interest expense, and tenant settlement proceeds related to termination income from a former tenant at 345 Montgomery Street property in the previous year.

Vornado Realty is a fully integrated real estate investment trust with interests in high-quality office and retail properties located principally in Manhattan. The portfolio of the company is around 85% New York-centric and 80% office-centric. It owns 57 Manhattan properties consisting of 20.4 million square feet of office space, 2.4 million square feet of street retail space, 1,330 residential units, and a 32.4% interest in Alexander’s, which owns six properties in the New York area. Vornado also owns a few non-New York properties which are well-located in CBDs of Chicago and San Francisco that have benefited from healthy tech office demand in supply-constrained regions. The strategy of the company is to maintain a high-quality portfolio by investing in markets that have a high likelihood of capital appreciation through acquisition, new development, and redevelopment opportunities.

The US REIT sector remains significantly undervalued, in our perspective. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past two years, with many REITs reaching historical levels of net operating income growth, the sector has underperformed the broader equity markets over the past two years. We believe that the cause has been the sector’s negative correlation with interest rates as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, we don’t believe that higher rates significantly change our fair value estimates for the sector. Additionally, interest rates are down from the October 2023 highs, and REIT share prices have generally inversely followed the movements of the US 10-year Treasury.

No-moat-rated Vornado Realty reported a weak set of numbers in the first quarter, as adjusted funds from operations, or FFO, was reported at $108.8 million ($0.55 per share), which was around 7% lower than the $116.3 million FFO ($0.60 per share) reported in the first quarter of the previous year. The year-over-year decline in FFO can mostly be attributed to lower net operating income, or NOI, from higher interest expenses and lease expirations. Management expects 2024 comparable FFO to be affected by higher interest rates and increased vacancies. The impact of higher interest rates on FFO is estimated to be about $0.30 per share and the impact from increased vacancies is estimated to be around $0.25-$0.30 per share. The impact of higher rates on the bottom line of the company should reverse when interest rates start to decline. For upcoming vacancies, management suggested that most of the impact should be temporary, as a good percentage of this space has already been leased up, but the effect of new leases would not begin to show up until sometime in 2025. We are maintaining our $28.50 per share fair value estimate for Vornado Realty after incorporating first-quarter results.

We believe that there are several attractive opportunities across the US REIT sector for investors to consider. Following the recovery of many REIT sector fundamentals from the pandemic by mid-2021, we viewed the REIT sector as fairly valued through early 2022. However, the past two years have seen the rapid rise in interest rates and a slowing economy, which has led to major valuation declines across the sector. Our analysis of the REIT sector over the past 25 years suggests that the relative stock performance of REITs is negatively correlated with interest rate movements. The second and third quarters of 2023 saw large interest rate increases with the 10-year Treasury approaching 5%, which led to the sector underperforming. This occurred even as many REITs reported same-store net operating income, or NOI, growth at historical highs in 2022 due to high inflation. Higher interest rates, lower liquidity, tighter capital market conditions, and decelerating same-store NOI growth all led to a significant correction in the stock price for many REITs.

No-moat-rated Vornado Realty reported middling fourth-quarter results as adjusted funds from operations were reported at $123.8 million or $0.63 per share, which was around 11% lower than the $139.0 million or $0.72 per share FFO reported in the fourth quarter of the previous year. The decline in FFO on a year-over-year basis can be attributed to a $4.8 million impact from accrual adjustments recorded in fourth quarter 2022 related to changes in the tax-assessed value of the Mart, $6.4 million from higher development fee pool bonus expense, $6.0 million from higher stock compensation, and a $2.9 million from the impact of properties sold. The important thing to note is that the results from the core business were flat and the entire decrease in FFO on a year-over-year basis was driven by increased general and administrative expenses and lower FFO from sold properties. We think that the current results are decent as the company's core Manhattan office portfolio has been holding up relatively well.

Vornado Realty is a fully integrated real estate investment trust with interests in high-quality office and retail properties located principally in Manhattan. The portfolio of the company is around 85% New York-centric and 80% office-centric. It owns 57 Manhattan properties consisting of 20.4 million square feet of office space, 2.4 million square feet of street retail space, 1,662 residential units, and a 32.4% interest in Alexander’s, which owns six properties in the New York area. Vornado also owns two non-New York properties in well-located central business districts of Chicago and San Francisco that have benefited from healthy tech office demand in supply-constrained regions. The strategy of the company is to maintain a high-quality portfolio by investing in markets that have a high likelihood of capital appreciation through acquisition, new development, and redevelopment opportunities.

No-moat-rated Vornado Realty’s third-quarter results were largely in line with our expectations as the firm reported funds from operations, or FFO, of $127.2 million or $0.66 per share, which was around 19% lower than the $157.4 million or $0.81 per share FFO reported in the third quarter of the previous year. The approximately $30 million decline in FFO on a year-over-year basis can be attributed to $11.9 million impact from accrual adjustments recorded in third-quarter 2022 related to changes in the tax assessed value of the Merchandise Mart, $7.3 million from higher interest rates, $6.1 million from higher stock compensation, and $4.9 million from the impact of properties sold. We note that the $11.9 million and $6.1 million impact from the Mart and stock compensation are largely nonrecurring in nature and should not impact year-over-year growth in the next year. The demand for Manhattan office real estate remains muted due to macroeconomic factors and a slower recovery in physical office utilization rates. We expect the firm will continue to feel a disproportionate impact of higher interest rates due to its significantly leveraged capital structure. Its leveraged capital structure also makes the equity valuation highly sensitive to movements in interest rates and cap rates. We are maintaining our $29 per share fair value estimate for Vornado Realty after incorporating third-quarter results.