Analyst Note| Yousuf Hafuda |
Vornado Realty reported disappointing third-quarter results, with the firm continuing to suffer as the office real estate industry remains frozen amid a pandemic that has forced most corporate employees to work from home. This impact has been particularly strong in New York City, where Vornado owns most of its assets. During the third quarter, the company reported adjusted funds form operations of $0.59 per share, a sharp decline as compared with $0.89 during the third quarter of 2019. This decrease was primarily driven by various write-offs related to retail bankruptcies and variable income from lodging and trade shows. Vornado has been hard-hit by the pandemic given its somewhat elevated exposure to these variable businesses and a higher retail presence as compared with its fellow office REIT peers. With third-quarter results providing a near-term disappointment, we are lowering our fair value estimate for no-moat rated Vornado Realty to $55 per share from $58.