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VORNADO REALTY TRUST (VNO)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was a clean operational beat: FFO per diluted share was $0.67 (as adjusted $0.63) vs $0.55 in Q1 2024, on revenues of $461.6M (+5.8% YoY). GAAP diluted EPS was $0.43, aided by a $76.2M gain on 666 Fifth and a $17.2M PENN 1 ground-rent reversal .
  • Versus S&P Global consensus, VNO delivered a broad beat: revenue $461.6M vs $450.6M*, FFO/share $0.67 vs $0.546*, and GAAP EPS $0.43 vs -$0.03*; management also stated comparable FFO of $0.63 was ~$0.09 above analyst consensus on the call .
  • Strategic catalysts de-risked the story: an arbitration set PENN 1 ground rent at $15M (reversing $17.2M of prior accruals) and a 70-year NYU master lease at 770 Broadway brought a $935M prepaid rent inflow and post-quarter debt paydown; New York office occupancy pro forma rises to 87.4% and is expected to move into the low-90s over the next year .
  • Guidance tone improved: 2025 comparable FFO is now expected to be essentially flat vs 2024 (vs “slightly lower” previously), with greater earnings inflection as PENN 1 & PENN 2 leasing fully contributes by 2027 .

What Went Well and What Went Wrong

  • What Went Well

    • Strong financial delivery and beat: “Comparable FFO was $0.63… and is $0.09 higher than analyst consensus,” driven by the PENN 1 ground rent reset, higher signage NOI and rent commencements .
    • Balance sheet/liquidity actions: Completed NYU’s master lease with $935M prepaid rent (used to repay $700M mortgage) and 1535 Broadway financing; ended Q1 with ~$2.3B liquidity (cash/restricted + undrawn revolvers) .
    • Leasing momentum: 1.039M sf signed across the platform, including 709k sf in New York office at $95.53 psf starting rents and 14.7-year WALT; UMG’s 337k sf at PENN 2 highlights quality/pipeline .

  • What Went Wrong

    • Occupancy optics: New York total occupancy fell to 83.5% (office 84.4%) due to bringing PENN 2 into service; though pro forma rises to 87.4% post-NYU .
    • Interest income headwind: Lower interest income was a -$5.6M drag in the FFO bridge YoY .
    • Same-store softness vs prior quarter in NY: Same-store NOI at share decreased -6.3% QoQ in New York (total -1.5% QoQ), reflecting timing/straight-line dynamics; offset by strong rebounds at THE MART and 555 California QoQ .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Revenue ($M)436.4 443.3 457.8 461.6
GAAP Diluted EPS ($)-0.05 -0.10 0.01 0.43
FFO/share (NAREIT, diluted $)0.53 0.50 0.58 0.67
FFO/share, as adjusted ($)0.55 0.52 0.61 0.63

Estimate vs Actual – Q1 2025

MetricConsensusActualSurprise
Revenue ($M)450.6*461.6 +2.4%
FFO / Share ($)0.546*0.67 +$0.12
GAAP EPS ($)-0.03*0.43 +$0.46
  • Drivers: GAAP EPS benefited from (i) $76.2M gain on UNIQLO/666 Fifth and (ii) $17.2M PENN 1 ground rent accrual reversal .
  • Same-store NOI: Total +3.5% YoY; New York +3.0%; THE MART +9.7%; 555 California +5.2%. QoQ: Total -1.5%; New York -6.3%; THE MART +160.8%; 555 California +10.5% .

Segment NOI at Share ($000s)

SegmentQ1 2024Q4 2024Q1 2025
New York – Office167,988 193,215 191,501
New York – Retail47,466 48,238 46,115
THE MART14,486 6,168 15,916
555 California Street16,529 15,854 17,843
Other Investments4,980 5,904 6,214
Total NOI at share269,124 284,966 293,290

KPIs

  • Occupancy (at share)

    • New York Total: 87.6% (Q4’24) → 83.5% (Q1’25); pro forma 86.2–87.4% with NYU master lease .
    • THE MART: 80.1% (Q4’24) → 78.2% (Q1’25) .
    • 555 California: 92.0% (Q4’24) → 92.3% (Q1’25) .

  • Q1 2025 Leasing Highlights

    • New York Office: 709k sf; starting rent $95.53 psf; WALT 14.7 yrs; second-gen relets +9.5% GAAP/+6.5% cash mark-to-market .
    • PENN 2: 337k sf new lease with Universal Music Group anchors base floors .
    • 555 California: 222k sf; GAAP relet +19.8% on second-gen; WALT 13.1 yrs .

Guidance Changes

MetricPeriodPrevious Guidance/CommentaryCurrent Guidance/CommentaryChange
Comparable FFO/shareFY 2025“Slightly lower than 2024” (prior call commentary) “Essentially flat vs 2024” Raised
Dividend policyFY 2025Single common dividend at year-end (policy carryover signaled in late-2024) “Anticipate paying one common share dividend in Q4 2025, subject to Board approval” Maintained
Occupancy trajectory (NY office)Next 12–24 monthsN/APro forma 87.4% after NYU; “tick up… into the low 90s” over next year; ~94% if PENN 1/2 fully leased in ~24 months New color

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 & Q-1)Current Period (Q1 2025)Trend
NYC office cycle“Foothills of recovery… limited new supply → landlord’s market” Demand broad-based; rents rising; pipeline robust; PENN 2 prebuilt rents “spectacular” Improving
PENN District leasingMulti-million sf pipeline, PENN 2 positioned for large tenants 337k sf UMG at PENN 2; confidence in reaching ~80% PENN 2 leasing; PENN 1 continues to “flood with new tenants” Strengthening
Liquidity/capitalQ4’24: $2.6B liquidity; planned actions (NYU, 1535 Broadway) $2.3B liquidity at Q1; $935M NYU prepaid lease closed; 1535 Broadway $450M financing; debt paydowns Stable to improving
Macro/tariffsNot a major Q3 focusTariffs as macro noise; expect resolution; focus on structural supply/demand tailwinds Watchful, not thesis-changing
Owner-occupier trend (retail/office)Validated luxury retail and office demand Retailers/owner-users (e.g., UNIQLO, Amazon) active in prime NYC locations Ongoing
Dividend policyOne annual payout to conserve cash, supported by shareholders Maintain one dividend in 2025, subject to Board Maintained
555 CaliforniaOutperforming SF market; positive re-leasing Continued HQ renewals/expansions; positive cash mark-to-market; 657k sf leased since 2022 Continued outperformance

Management Commentary

  • “Comparable FFO was $0.63… and is $0.09 higher than analyst consensus. Our overall GAAP same-store NOI is up 3.5%.”
  • “We received a favorable ruling on the PENN 1 ground lease… annual rent $15 million… we reversed $17.2 million of previously overaccrued rent expense… GAAP earnings will increase by $11 million annually.”
  • “We completed a master lease with NYU… prepaid $935 million… repaid the $700 million mortgage… the transaction is accretive by $25 million annually.”
  • “Our New York office leasing market maintained strong momentum… limited new construction… expect market to continue to tighten… sets the table for strong rental growth.”

Q&A Highlights

  • PENN 2 leasing pace/target: Management remains confident in trajectory toward ~80% by timing bands; emphasized quality and rising achievable rents at PENN 2 .
  • 2025 outlook: Comparable FFO now “essentially flat” vs 2024 (improved from prior “slightly lower”), with significant earnings growth expected by 2027 as PENN 1/2 fully contribute .
  • Capital allocation: Use cash to pay higher-cost debt, fund development at 350 Park and PENN District, and preserve buffer for opportunities; no near-term equity issuance .
  • Owner-occupier trend: Luxury retailers and large corporates increasingly buy/long-control flagship real estate in NYC (e.g., UNIQLO, Amazon), supporting asset values .
  • Refinancing: Markets remain open for high-quality assets; some coupons will rise (e.g., Independence Plaza) but many roll at/near current levels; activity expected near-term .
  • Ground rent litigation: Arbitration set $15M; if landlord ultimately prevails in court, rent becomes $20.22M; either way economics are defined; VNO views position favorably .

Estimates Context

Metric (Q1 2025)ConsensusActual
Revenue ($M)450.6*461.6
FFO / Share ($)0.546*0.67
GAAP EPS ($)-0.03*0.43
  • The beat vs consensus was broad-based (revenue/FFO/EPS). EPS upside reflects one-time items (UNIQLO gain, PENN 1 accrual reversal). Street models may adjust FY25 FFO assumptions upward given the shift from “slightly lower” to “flat” and continued leasing traction, while normalizing GAAP EPS for one-time items .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Core beat and improved outlook: FFO as adjusted $0.63 (+$0.08 YoY) with 2025 comp FFO now “flat” vs prior “slightly lower,” setting a better base for 2026/2027 earnings acceleration .
  • Structural de-risking: PENN 1 ground rent reset reduces expense run-rate and removes uncertainty; NYU master lease monetizes 770 Broadway and repays $700M debt, lifting pro forma occupancy and liquidity .
  • Leasing-led thesis: PENN 1 and PENN 2 are the principal earnings drivers; Q1 activity (UMG at PENN 2; 709k sf in NY office) validates demand and pricing power in VNO’s submarkets .
  • Balance sheet optionality: ~$2.3B liquidity at quarter end, recent $450M 1535 Broadway financing, and targeted debt reduction provide flexibility through refinancing cycles .
  • SF trophy resilience: 555 California continues to outperform a weak local market with positive re-leasing and stable occupancy—supporting NOI diversification .
  • Dividend framework unchanged: One common dividend expected in Q4 2025 (subject to Board), prioritizing balance sheet strength while the leasing bridge builds .
  • Trading lens: Focus on leasing milestones at PENN 2, occupancy progression into the low-90s within ~12 months, and 2026–2027 NOI ramp; GAAP EPS is less indicative due to one-offs—FFO and same-store NOI are the cleaner metrics .

Appendix – Additional Detail

Leasing & Mark-to-Market – Q1 2025 (select items)

  • New York Office: 709k sf; second-gen relet GAAP +9.5% / cash +6.5% .
  • THE MART: 83k sf; second-gen relet GAAP -5.3% / cash -14.5% (mix/timing; QoQ same-store NOI rebounded) .
  • 555 California: 222k sf; second-gen relet GAAP +19.8% / cash +3.1% .

Same-Store NOI % Changes

ComparisonTotalNew YorkTHE MART555 California
Q1’25 vs Q1’24+3.5% +3.0% +9.7% +5.2%
Q1’25 vs Q4’24-1.5% -6.3% +160.8% +10.5%

Notes on GAAP EPS adjustments

  • Q1 GAAP EPS includes $76.2M gain (UNIQLO/666 Fifth) and $17.2M PENN 1 ground rent accrual reversal .
  • FFO as adjusted excludes certain items (e.g., condo sales gains at 220 CPS; Farley deferred tax) to present a normalized run-rate view .