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VORNADO REALTY TRUST (VNO)·Q2 2025 Earnings Summary

Executive Summary

  • GAAP EPS of $3.70 was driven by the $803.2M gain on the NYU 770 Broadway sales-type lease; comparable FFO was $0.56, beating the $0.53 analyst consensus referenced by management, while revenues declined year over year and missed Wall Street consensus on S&P Global, reflecting timing and one-off effects .
  • Leasing momentum and pricing power continued: 1.48M SF signed in New York office with GAAP mark-to-market of +11.8% and cash +8.7%; PENN 2 reached 62% occupancy and secured Verizon’s ~200K SF, 19-year HQ lease after the quarter .
  • Balance sheet strengthened: liquidity rose to $2.9B, net debt/EBITDAre (as adjusted) improved to 7.2x; management completed $675M Independence Plaza and $450M PENN 11 refinancings, and repaid $450M senior notes in January .
  • Dividend outlook: the board continues the single annual common dividend policy; management expects at least $0.74 for FY25, with consideration to reinstating quarterly dividends as earnings inflect toward 2027 on PENN lease-up .

What Went Well and What Went Wrong

What Went Well

  • NYU master lease at 770 Broadway (1.076M SF) eliminated ~500K SF vacancy and produced an $803.2M GAAP gain; prepaid rent of $935M and annual payments of $9.281M; $700M mortgage repaid .
  • Leasing/pricing strength: Q2 New York office leasing at $101.44/SF initial rent, +11.8% GAAP and +8.7% cash relet mark-to-market; PENN 1 activity robust and PENN 2 signed marquee tenants with management expecting sustained rent push in a landlord’s market .
  • Deleveraging and liquidity: liquidity increased to $2.923B; net debt/EBITDAre improved to 7.2x; refinancings (Independence Plaza, PENN 11) extended maturities on attractive structures .
    Quote: “Taken together all this is the very definition of a landlord’s market… we have the potential to see growth rates we haven't seen in quite some time and we're going to push [rents]” .

What Went Wrong

  • Revenues fell 2% YoY and 4% sequential; cash NOI declined due to an April PENN 1 ground rent true-up payment and free-rent on recently commenced leases .
  • Retail occupancy dropped (~7 pp impact) after two Forever 21 store closures, weighing on New York retail occupancy to 67.7% .
  • FAD was negative in Q2 (-$6.6M) as recurring TIs/LCs and capital spend accelerated with lease-up; recurring TIs/LCs were $104.2M in the quarter .
    Analyst concern: timing of PENN 2 reaching ~80% by year-end shifted to “patient/choosy” approach on tenant mix and price, tempering the near-term occupancy ramp .

Financial Results

Income Statement and Cash Metrics

MetricQ2 2024Q1 2025Q2 2025
Revenues ($USD Millions)$450.3 $461.6 $441.4
Net Income to Common ($USD Millions)$35.3 $86.8 $743.8
Diluted EPS ($USD)$0.18 $0.43 $3.70
FFO per Diluted Share (non-GAAP) ($USD)$0.76 $0.67 $0.60
FFO as Adjusted per Diluted Share (non-GAAP) ($USD)$0.57 $0.63 $0.56
EBITDAre, as Adjusted ($USD Millions)$265.8 $273.7 $257.6
NOI at Share – Cash Basis ($USD Millions)$279.6 $269.4 $231.7

Estimates vs Actuals (Wall Street Consensus - S&P Global)

MetricQ2 2025 ConsensusQ2 2025 ActualSurprise
Revenue ($USD Millions)$468.8*$441.4 Miss (~$27.4)
Primary EPS ($USD)-$0.07*$3.70 Beat (one-time gain)

Values marked with * retrieved from S&P Global.

Management also cited comparable FFO of $0.56 beating analyst consensus of $0.53 (company-sourced) .

Segment NOI at Share (non-GAAP)

Segment NOI at Share ($USD Millions)Q2 2024Q1 2025Q2 2025
New York$242.2 $253.3 $230.6
THE MART$16.1 $15.9 $25.2
555 California Street$16.8 $17.8 $18.7
Other Investments$5.2 $6.2 $3.2
Total NOI at Share$280.2 $293.3 $277.7

KPIs and Balance Sheet

KPIQ2 2024Q1 2025Q2 2025
Occupancy – New York (Total)88.3% 83.5% 85.2%
Occupancy – New York Office88.8% 84.4% 86.7%
Occupancy – New York Retail73.7% 72.2% 67.7%
Occupancy – THE MART76.9% 78.2% 78.2%
Occupancy – 555 California Street94.5% 92.3% 92.3%
Same-store NOI YoY (GAAP) – Total——+5.4%
Same-store NOI YoY (GAAP) – THE MART——+57.7%
Same-store NOI YoY (Cash) – Total——-4.8%
Liquidity ($USD Millions)$2,677 $2,347 $2,923
Cash & Cash Equivalents ($USD Millions)$873 $569 $1,205
Net Debt / EBITDAre (as adjusted)——7.2x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Comparable FFO per shareFY 2025“Essentially flat vs 2024” (Q1) Reaffirmed “essentially flat” Maintained
New York office occupancy trajectoryNext ~12 monthsLow-90s over next year (Q1) Still targeting low-90s; PENN 2 at 62% with a patient approach; unlikely to exceed 80% by year-end Timeline softened vs earlier ambition
Dividend policyFY 2025Single annual common dividend (policy) Expect at least $0.74 and consider reinstating quarterly cadence at year-end Maintained policy; clarified amount and cadence consideration

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Landlord’s market & rent trajectoryExpect rent “spike” as Class A availability shrinks; replacement costs imply high-100s rents for new builds Weekly evaluation to push rents across Park/Midtown/PENN; seeing deals “well into the 100s” Strengthening
PENN District lease-upPENN 2 targeted ~80% by YE’25; robust pipeline PENN 2 at 62%; Verizon lease signed post-Q2; being choosy to maximize pricing/credit Positive but paced
Tariffs/macro commentaryQ1 remarks on tariff symmetry and budget deficit impacts; cautious but constructive Minimal direct impact on office leasing; retailer sourcing with overseas exposure shows some pause Stabilizing
San Francisco (555 California)Outperforming market; large renewals and expansions; bullish on recovery “Markedly improved” environment; tours “almost daily”; ~600K SF run of leasing; continuing action on expirations Improving
Legal/regulatory (PENN 1 ground rent)Favorable arbitration to $15M; litigation could set $20.22M; reversed accruals Paying based on $15M; motion to vacate deemed meritless; reversal helped S1H earnings Addressed; residual litigation
Capital allocation & deleveraging$1B+ cash proceeds expected (Q4 update); repay unsecured; invest in development Liquidity $2.9B; net debt/EBITDAre improved; multiple refinancings completed Strengthening

Management Commentary

  • “Taken together all this is the very definition of a landlord’s market… the next few years have the potential to be one of the strongest periods of rental growth we've seen in decades” (Steven Roth) .
  • “Second quarter comparable FFO was $0.56 per share which beat analyst consensus of $0.53… cash NOI is lower this quarter primarily due to the one-time PENN1 ground rent true-up payment and free rent associated with recently commenced leases” (Michael Franco) .
  • “We will sell [THE MART and 555 California] for the right price at the right timing… they’re not sacred… we look upon them as a financial asset” (Steven Roth) .
  • “Occupancy at PENN2 is now 62% and we have multiple deals in the on deck circle… Verizon will relocate its HQ to PENN2” (Steven Roth; VNO press) .
  • “We have meaningfully delevered… net debt to EBITDA improved by 1.4 turns to 7.2x… immediate liquidity of $2.9 billion” (Steven Roth) .

Q&A Highlights

  • Pipeline distribution: ~50% of 1.4M SF pipeline focused on PENN 2; broader NYC demand across assets .
  • Retail occupancy drop: two Forever 21 store closures reduced retail occupancy, but rent impact minimal due to low rents; strategic redevelopment planned on 34th Street corridor .
  • Net effective rent dynamics: Free rent starting to decline; TIs stable but expected to moderate as market tightens .
  • San Francisco renewals: Environment markedly improved; building tours and action on all upcoming expirations with strong tenant roster .
  • Dividend: Expect ≥$0.74 for 2025 under single annual policy; board will consider quarterly cadence as environment heals .

Estimates Context

  • Revenue missed S&P Global consensus in Q2 (actual $441.4M vs $468.8M*), while GAAP EPS beat due to the $803.2M gain (actual $3.70 vs -$0.07*) .
  • Comparable FFO of $0.56 beat analyst consensus of $0.53, per management’s call commentary .
  • With PENN lease-up and occupancy rising into the low-90s next year, Street estimates likely need to reflect near-term cash NOI headwinds (free rent, ground rent true-up) and back-end loaded FFO inflection in 2027 .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • VNO’s Q2 headline EPS is not a run-rate metric; focus on comparable FFO ($0.56) and the cash NOI bridge to 2027 as PENN 1/2 roll-ins mature .
  • Leasing/pricing power is accelerating in prime Manhattan Class A; management is actively “pushing rents,” suggesting positive rent-driven mark-to-market as expirations roll .
  • Liquidity and leverage metrics improved; refinancings are extending maturities and reducing near-term risk, supporting optionality for asset sales or development at 350 Park/PENN 15 .
  • Near-term retail occupancy noise should be viewed in context of strategic repositioning of the 34th Street corridor and minimal rent impact from departed low-rent tenants .
  • The Verizon HQ lease validates PENN 2’s appeal; expect additional blue-chip tenants and continued rent progression, albeit with a paced approach to tenant mix/credit .
  • Dividend remains annual in 2025 with expected ≥$0.74; watch for signals on reinstating quarterly distributions as FFO inflects .
  • Tactical positioning: overweight the medium-term (2026–2027) PENN uplift and rent-driven re-pricing vs near-term cash NOI softness; catalysts include additional marquee leases, asset monetizations, and 350 Park milestones .
Notes:
- All company financials, leasing, occupancy, and non-GAAP metrics are sourced from VNO’s Q2 2025 supplemental/press release or call: **[899689_0000899689-25-000034_vno-063025xex992xfinancial.htm:2]** **[899689_0000899689-25-000034_vno-063025xex992xfinancial.htm:4]** **[899689_0000899689-25-000034_vno-063025xex992xfinancial.htm:6]** **[899689_0000899689-25-000034_vno-063025xex992xfinancial.htm:8]** **[899689_0000899689-25-000034_vno-063025xex992xfinancial.htm:11]** **[899689_0000899689-25-000034_vno-063025xex992xfinancial.htm:19]** **[899689_959ca481fc494624bde7991bdbc4c15d_7]** **[899689_959ca481fc494624bde7991bdbc4c15d_13]** **[899689_2055133_2]** **[899689_2055133_5]**.
- Major press releases referenced: Verizon HQ lease **[899689_0da1c3f132294dd8b637b73338246d85_0]**; Independence Plaza refinancing **[899689_c43674e8568d4de383f9da2dbc1956a0_0]**; PENN 11 refinancing **[899689_b261f2bf8e47489da532020d7a39a352_0]**.
- Prior-quarter trend references: Q1 2025 press release/call **[899689_f2f5d391667e4e5f96f2936198c3fb69_0]** **[899689_f2f5d391667e4e5f96f2936198c3fb69_10]** **[899689_VNO_3425392_4]**; Q4 2024 press/call baseline **[899689_bb3403fb81b44554835ad878b869e936_0]** **[899689_bb3403fb81b44554835ad878b869e936_7]** **[899689_VNO_3415300_7]**.
- Estimates from S&P Global marked with *; Values retrieved from S&P Global.