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Vornado (VNO) Boosts Strength With $525M Loan Refinancing

Zacks Equity Research
·4-min read

Vornado Realty Trust VNO completed a $525-million refinancing of One Park Avenue. The company owns a 55% stake in the joint venture for the ownership of the 943,000-square-foot Manhattan office building.

The interest-only loan carries an interest rate of LIBOR plus 1.107% and is slated to mature in February 2026, after considering any further extension.

It will replace a previous $300-million LIBOR plus 1.75% loan, which was slated to mature in March 2021.

The company’s share of the net proceeds from this refinancing was nearly $105 million.

This refinancing offers Vornado a cheaper line of credit and helps reduce annualized interest expenses. Moreover, extended maturities of the assumed debt will help the company to improve its maturity profile and enjoy greater liquidity for day-to-day operations. In fact, as of Dec 31, 2020, it had $1.56 billion of consolidated mortgage debt maturing in 2021.

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The move will also boost the company’s cash flow and alleviate its bottom-line pressure. The reduction offers greater financial flexibility and will strengthen Vornado’s balance sheet. Markedly, as of Dec 31, 2020, the company had $3.9 billion in liquidity, consisting of $2.2 billion available on its $2.75-billion revolving credit facilities and $1.7 billion of cash and cash equivalents, and restricted cash.

Also, Vornado secured numerous loan refinancings in fourth-quarter 2020, enabling it to reduce the interest rate on borrowings and extend debt maturities. Hence, a flexible financial position will enable it to take advantage of investment opportunities and fund its development projects.

Recently, the company reported fourth-quarter 2020 funds from operations (FFO) plus assumed conversions as adjusted of 66 cents per share, surpassing the Zacks Consensus Estimate of 64 cents. The reported figure, however, plunged 34.8% year over year.

While lower interest expenses aided the bottom line, a decline in same-store net operating income (NOI) in the New York portfolio and theMART affected the company’s quarterly results.Notably, during the reported quarter, total same-store NOI decreased 11.3% year over year.

Shares of this Zacks Rank #3 (Hold) company have declined 22.7% over the past year compared with the industry's fall of 2%.

Stocks to Consider

Extra Space Storage Inc’s EXR Zacks Consensus Estimate for 2021 FFO per share has moved up 2.5% to $5.66 in the past month. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Tower Corporation’s AMT FFO per share estimate for the current year has been unchanged at $9.39 over the past month. The company carries a Zacks Rank of 2, currently.

JBG SMITH Properties JBGS Zacks Consensus Estimate for 2021 FFO per share has been unchanged at $1.48 in a month’s time. The company has a Zacks Rank of 2 at present.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Zacks Investment Research