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VORNADO REALTY TRUST (VNO)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered a clean operational beat on FFO and revenue versus consensus, with FFO/diluted share at $0.58 vs $0.545* and total revenues at $453.7M vs $435.2M*, while GAAP EPS printed $0.06 vs -$0.015* consensus, aided by leasing momentum and signage strength .*
  • New York office occupancy stepped up to 88.4% from 86.7% in Q2 (total New York 87.5%), and Penn 2 leasing accelerated; management expects Penn 2 to be at or above 80% occupancy by year-end and overall NYC occupancy to reach low-90s over the next year .
  • Balance sheet metrics improved: immediate liquidity of ~$2.6B and Net Debt/EBITDAre (as adjusted) down to 7.3x; management reiterated 2025 comparable FFO “slightly higher” y/y, 2026 “flattish,” and 2027 as an earnings inflection year .
  • Strategic actions: closed the $218M acquisition of 623 Fifth Avenue to create a high-end boutique office with targeted ~9–10% yield on cost by 2027; noted a non-recourse mortgage default at 650 Madison JV already written down to zero on Vornado’s books .
  • Near-term stock narrative catalysts: continuing Penn District lease-up, rising Manhattan Class A rents, signage growth, and progress on 34th/7th retail redevelopment; legal uncertainty on Penn 1 ground rent reset remains a watch item (court vacated arbitration; appeal planned) .

What Went Well and What Went Wrong

  • What Went Well

    • Solid beat versus Street: FFO/diluted share $0.58 vs $0.545*, revenue $453.7M vs $435.2M*, EPS $0.06 vs -$0.015*, supported by strong leasing and signage; “third-quarter comparable FFO was $0.57 per share… beating analyst consensus by $0.02” (management) .*
    • NYC leasing strength: 594K sf New York office in Q3 at $103 psf starting rents, mark-to-markets +15.7% GAAP and +10.4% cash; Penn 2 at 78% occupancy and expected ≥80% YE 2025; “our business is good, really good, and growing stronger” (CEO) .
    • Balance sheet and liquidity: Net Debt/EBITDAre (as adjusted) improved to 7.3x; immediate liquidity ~$2.6B; $1.5B net proceeds YTD from sales/financings/NYU deal with $900M debt paydown and $500M cash build (management) .

  • What Went Wrong

    • EBITDAre margin compression: EBITDAre $253.7M on $453.7M revenue implies ~55.9% margin vs ~60.6% in Q2, reflecting free rent on new leases and Penn 1 ground rent cash impacts; management highlighted GAAP vs cash NOI divergence (free rent) .
    • Legal uncertainty: NY Supreme Court vacated the Penn 1 ground rent arbitration; appeal planned; if fee owner ultimately prevails, annual rent could be $20.22M retroactive to 6/17/2023 .
    • 650 Madison JV default: JV received notice of default on $800M non-recourse mortgage; VNO previously wrote investment to zero—no P&L, but headline risk persists .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Total Revenues ($USD Millions)$443.3 $441.4 $453.7
Net Income to Common ($USD Millions)$(19.2) $743.8 $11.6
Diluted EPS ($USD)$(0.10) $3.70 $0.06
FFO per Diluted Share (non-GAAP) ($USD)$0.50 $0.60 $0.58
EBITDAre ($USD Millions)$255.7 $267.3 $253.7
EBITDAre Margin (%)57.7% 60.6% 55.9%

Segment NOI at share (non-GAAP):

SegmentQ3 2024 ($USD Thousands)Q2 2025 ($USD Thousands)Q3 2025 ($USD Thousands)
New York$229,588 $230,579 $228,538
THE MART$14,972 $25,197 $13,275
555 California Street$15,780 $18,686 $17,293
Other Investments$5,151 $3,211 $7,570
Total NOI at share$265,491 $277,673 $266,676

KPIs:

KPIQ3 2024Q2 2025Q3 2025
Occupancy – New York86.7% 85.2% 87.5%
Occupancy – THE MART79.7% 78.2% 80.7%
Occupancy – 555 California94.5% 92.3% 96.3%
Liquidity ($USD Millions)$2,589 $2,923 $2,571
Net Debt / EBITDAre (as adjusted)8.6x (FY24) 7.2x (TTM Q2) 7.3x (TTM Q3)

Vs Estimates (S&P Global):

MetricConsensusActualSurprise
FFO / Share (REIT)$0.545*$0.58 +$0.035 (≈+6.4%)*
Primary EPS (GAAP)$(0.015)*$0.06 +$0.075*
Revenue ($USD Millions)$435.2*$453.7 +$18.5 (≈+4.2%)*
Primary EPS – # of Estimates2*——*
Revenue – # of Estimates3*——*
Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Comparable FFO (non-GAAP)FY 2025Slightly higher vs 2024 (implied)Slightly higher vs 2024 (reiterated) Maintained
Comparable FFO (non-GAAP)FY 2026Flattish (implied)Flattish vs 2025 Maintained
Comparable FFO (non-GAAP)FY 2027Significant growth (implied)Significant growth; 2027 inflection Raised narrative clarity
Penn 2 OccupancyYE 2025~80% target≥80% YE; 78% now, two Oct leases added Raised to “at or above”
New York Office OccupancyNext ~12–18 monthsHigh-80s (implied)Low-90s over next year or so Raised
Dividend Policy (Common)FY 2025One dividend in DecemberOne dividend in December (board approval) Maintained
Preferred DividendsQ4 pay date—Series A/L/M/N/O declared, payable Jan 2, 2026 Announced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1–Q2 2025)Current Period (Q3 2025)Trend
Penn District leasingPenn 2 placed in service; accelerating signings; Penn 1 lease-up continues 594K NYC office leases at $103 psf; Penn 2 at 78% occ; YE ≥80%; strong tenant mix Strengthening
Manhattan office rents$95–102 psf starting rents; double-digit GAAP m/mts Expect broader rent spikes; “landlord’s market” with 6% vacancy in better buildings (CEO) Bullish
Signage businessHigh-margin, attached to owned buildings; steady growth 2025 projected record signage revenue; fast paybacks (12–18 months) Positive
Liquidity & leverageLiquidity ~$2.3–$2.9B; ND/EBITDA trending down Liquidity ~$2.6B; ND/EBITDA 7.3x; further improvement expected Improving
Ground rent legalArb set $15M; reversal of accrued rent; litigation ongoing Court vacated arbitration; appeal planned; potential $20.22M scenario (retroactive) Uncertain
Asset recyclingUNIQLO sale at 666 Fifth; financings at 1535 Broadway, Penn 11 $250–$300M+ non-core sales likely in 1H26 (mgmt); evaluate 555 California/The Mart opportunistically Active
623 Fifth redevelopmentAcquisition pending (Sept close) $218M closed; plan best-in-class boutique office; target ~9–10% yield on cost Executing

Management Commentary

  • “Here at Vornado, our business is good, really good, and growing stronger… Our performance continues to lead both the national office pack and our New York peers.” (CEO) .
  • “During the third quarter, we executed 21 New York office deals totaling 594,000 sq ft at robust starting rents of $103 per sq ft… mark-to-markets for the quarter were +15.7% GAAP and 10.4% cash.” .
  • “We have generated $1.5 billion in net proceeds… paid down $900 million in debt… increased our cash by $500 million… immediate liquidity of $2.6 billion… net debt-to-EBITDA down to 7.3x.” .
  • “We will redevelop 623 Fifth Avenue into the very best, elite boutique office… budgeting at least a 9% return on cost… pushing to crack double digits.” .
  • “We were surprised and disappointed [Penn 1 ground rent ruling]; we are optimistic this will be reversed on appeal.” .

Q&A Highlights

  • Leasing strategy: Penn 2 remaining space is mostly single floors in the tower; rents “moving up, up, and up”; confidence in reaching/exceeding 80% YE occupancy .
  • Signage economics: Dominant inventory in Penn District and Times Square; perpetual control by owning buildings; steady 4–5% annual growth historically; rapid paybacks on new signs .
  • Capital recycling: At least $250–$300M non-core sales likely by mid-2026; remain opportunistic on 555 California/The Mart at right values .
  • Concessions: Downtime falling and free rent periods declining as market tightens; longer leases (15–20 years) explain some free rent length .
  • Same-store NOI trajectory: Cash same-store NOI turns positive toward end of 2026, then significantly positive in 2027 as free rent burns off .
  • Penn Station: Metro-North service into Penn planned to begin in 2027 on existing tracks; broader station improvements targeted by end-2027 start .

Estimates Context

  • Q3 2025 FFO/share: $0.58 actual vs $0.545* consensus; beat driven by signage revenue and NYU 770 Broadway master lease, partly offset by asset sales/capitalized interest burn-off .*
  • Q3 2025 Revenue: $453.7M actual vs $435.2M* consensus; beat ~4% on strong NYC leasing and BMS/other income .*
  • Q3 2025 GAAP EPS: $0.06 vs -$0.015* consensus; beat ~$0.075; note REITs are primarily judged on FFO rather than GAAP EPS .* Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Leasing momentum and rising mark-to-markets in prime Manhattan assets underpin multi-year growth; Penn 2/Penn 1 lease-ups are approaching underwriting ahead of schedule .
  • 2025 is tracking slightly higher comparable FFO; 2026 likely flattish as retail redevelopment takes some income offline; 2027 is the earnings inflection as free rents roll and signed-not-opened rents commence .
  • Liquidity is robust and leverage metrics are improving, giving flexibility for further asset recycling and development; ND/EBITDAre down to 7.3x (TTM) .
  • 623 Fifth Avenue offers a clear value-creation path with targeted high single-digit to low double-digit unlevered yields by 2027—potential medium-term NAV accretion .
  • Watch legal overhang on Penn 1 ground lease; base-case continues to accrue/pay at $15M pending appeal, but adverse outcome could raise rent to $20.22M retroactively .
  • Near-term catalysts: continued Penn District lease signings, signage growth, preferred dividend stability, and formalizing dispositions pipeline .
  • Medium-term thesis: landlord’s market dynamic in NYC Class A driving rents higher, lower concessions, and higher renewal probabilities; supports FFO expansion in 2027–2028 .
Notes: 
- All financial figures and operational metrics cited from Vornado’s Q3 2025 supplemental and press release unless marked with an asterisk.
- Asterisked estimate values are from S&P Global consensus.