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VORNADO REALTY TRUST (VNO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered sequential improvement: revenues rose to $457.8M (+3.3% q/q; +3.6% y/y), FFO/share was $0.58 and FFO-as-adjusted/share was $0.61; NOI at share improved q/q to $285.0M while same-store NOI trends remained negative y/y due to THE MART and 555 California Street roll-downs .
  • Management signaled 2025 FFO modestly below 2024, with PENN 1/2 lease-up and 770 Broadway master lease driving a step-up into 2026 and “significant” earnings growth in 2027 .
  • PENN District momentum: a ~300k sf PENN 2 lease is “weeks away,” rents are above underwriting, and the project’s projected incremental cash yield increased to 10.2% (from 9.5% in Q3) .
  • Balance sheet actions: $450M 2025 senior notes repaid post-quarter; ~$1B of prospective near-term cash from NYU 770 master lease, 1535 Broadway refinancing to redeem >$400M of retail JV preferreds, and asset sales; liquidity at $2.5B (cash/restricted + undrawn revolvers) .
  • Stock catalysts: confirmation/announcement of the 770 Broadway master lease, execution of the PENN 2 anchor deal(s), and any large refinancing/asset-sale progress could be near-term triggers .

What Went Well and What Went Wrong

  • What Went Well

    • PENN District leasing and economics: management raised PENN 2’s projected incremental cash yield to 10.2% and said a 300k sf lease is imminent; rents are being increased “across the entire building” .
    • Leasing pipeline/occupancy: year-end office occupancy climbed to 88.8% (from 87.5% in Q3), and with the pending 770 Broadway master lease, consolidated office occupancy would rise to 92.1%; pipeline includes ~750k sf in negotiation plus ~1.3M sf in proposals .
    • Balance sheet/liquidity progress: repaid $450M 2025 notes; announced $350M UNIQLO sale at 666 Fifth (~$342M net proceeds, ~$76M gain in Q1’25) and reiterated plans to redeem >$400M of retail JV preferreds via 1535 Broadway refinancing .

  • What Went Wrong

    • Same-store NOI declines y/y: total same-store NOI -4.5% y/y in Q4; THE MART (-57.5%) and 555 California (-13.2%) pressured results; cash-basis same-store NOI also declined y/y (-3.8%) .
    • Interest expense and legacy vacancy: Q4 FFO-as-adjusted/share dipped to $0.61 from $0.63 y/y, with higher net interest and tenant churn despite helpful one-time fees at 330 West 34th Street .
    • 606 Broadway loan default: $74.1M non-recourse mortgage matured and was not repaid in September; lender declared default (additional 3% default interest) .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Thousands)441,886 443,255 457,790
Diluted EPS ($)(0.32) (0.10) 0.01
FFO/share (non-GAAP) ($)0.62 0.50 0.58
FFO-as-adjusted/share (non-GAAP) ($)0.63 0.52 0.61
NOI at Share ($USD Thousands)287,096 265,491 284,966
NOI at Share - Cash Basis ($USD Thousands)287,217 272,298 276,588

Segment NOI (non-GAAP) – At Share

Segment ($USD Thousands)Q4 2023Q3 2024Q4 2024
New York247,575 229,588 257,040
THE MART14,516 14,972 6,168
555 California Street18,125 15,780 15,854
Alexander’s12,013 9,470 9,515
Other investments6,880 5,151 5,904
Total NOI at Share287,096 265,491 284,966

KPIs

KPIQ4 2023Q3 2024Q4 2024
Occupancy – New York89.4% 86.7% 87.6%
Occupancy – THE MART79.2% 79.7% 80.1%
Occupancy – 555 California Street94.5% 94.5% 92.0%
Q4 Leasing – NY Office (Total SF; our share)——583k; 513k
Q4 Leasing – THE MART / 555 Cal (Total SF; our share)——64k; 62k (our share: 64k; 43k)

Notes: Vornado paid its 2024 common dividend of $0.74/share in Q4; preferred dividends continued per normal course .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/CommentaryChange
FFO/shareFY 2025NoneExpect 2025 “slightly lower than 2024” (company does not provide formal guidance) New commentary (down modestly)
Occupancy (Office)202588.8% at 12/31/24 With 770 Broadway master lease, office occupancy to 92.1%; Q1 2025 temporary dip as PENN 2 is placed into service, then stabilize back to low-90s over next year Raised/trajectory clarified
PENN 2 Incremental Cash YieldProject9.5% (Q3’24) 10.2% (Q4’24) Raised
Dividends2024—One-time 2024 common dividend of $0.74/share paid in Q4; ongoing practice not specified Actualized 2024 payout
Balance sheetEarly 2025—Repaid $450M 3.50% senior notes due 1/15/25; plan to redeem >$400M retail JV preferreds post 1535 Broadway refi; target ~$1B cash via refi/asset sales Executed/outlined

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
NYC office supply/demand, rentsQ3: same-store NOI pressure; occupancy 86.7%; rates high; leasing steady “Landlord market”; availability shrinking; new supply “frozen”; expect rents to “spike” Improving pricing power
PENN District leasing & yieldQ2: PENN 2 projected yield 9.5% PENN 2 yield raised to 10.2%; ~300k sf lease weeks away; achieving > underwriting rents Accelerating
Financing marketsQ3: refinanced 280 Park; swap/caps; cautious on banks CMBS “wide open” for high-quality NYC office; spreads tighter; banks cautiously re-emerging Loosening
Retail (Fifth/Madison/Times Sq)Q2: retail leasing at high headline rents Demand strong; best spaces near peak rents; some tenants prefer buying; arbitrage favors selective sales Strengthening
San Francisco (555 Cal)Q3: rent leader; large rollover pipeline Still best-in-class; ~700k sf re-leased since 2021; attacking 2025–26 expiries; leading market rents Stabilizing leadership
Alexander’s strategyQ3: Bloomberg lease to 2040; Rego plan Pursuing value recognition; Rego 1 to be redeveloped/sold as land; believe NAV > stock Unlocking value
Capex/concessionsQ3: elevated TI/LC with lease-up Concessions “neutralized” for now; expected to decline in tighter market; capex ~$250–275M indicative Moderating ahead

Management Commentary

  • “At Vornado business is good, really good and getting better… availability… is 10.7%… and that… is evaporating very quickly… This all creates a landlord market. We expect rents to rise aggressively… rents to spike.” — Steven Roth .
  • “We will finally complete the master lease to NYU at… 770 Broadway by the end of the month… [which] will relieve our balance sheet of $700 million of debt… and eliminate 500,000 square feet of vacancy.” — Steven Roth .
  • “Similar to current consensus, we expect 2025 to be slightly lower than 2024… full positive impact in 2027, resulting in significant earnings growth by 2027.” — Michael Franco .
  • “PENN 2 is… in [tenants’] top 3 list… we have a lease out… for 330,000 feet… we have an LOI for another very large headquarters tenant… we’ve raised our rents across the entire building.” — Glen Weiss .

Q&A Highlights

  • PENN 2 leasing timing and economics: ~330k sf lease “in short order”; rents lifted across the stack; yield raised to 10.2% .
  • Capital plan and cash generation: ~$1B incremental cash targeted via 770 Broadway, 1535 Broadway refi (redeem >$400M JV prefs), and select sales; $450M 2025 notes repaid .
  • Market trajectory: Management expects tightening supply and rent “spike” over next few years; big earnings ramp in 2027 as PENN 1/2 lease-up flows through .
  • Retail and asset sales: Prime Fifth Avenue demand driving interest in purchases; selective dispositions may create arbitrage .
  • New development math: Class A new builds require “high $100s” rents given ~$1,900/ft hard costs (ex-land) and 7–8% yield hurdles; new supply remains “frozen” .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 (revenue, EPS, and FFO/share) was unavailable at time of analysis due to data access limitations; as a result, we cannot assess beat/miss versus consensus for this quarter. Values retrieved from S&P Global were unavailable.

Where estimates may need to adjust:

  • 2025 FFO trajectory likely nudged lower on management commentary; upside bias to 2026–2027 as PENN 1/2 lease-up, 770 Broadway, and retail actions convert to earnings .

Key Takeaways for Investors

  • NYC “better space” is tightening with limited new supply; Vornado’s portfolio is positioned for rent growth and positive mark-to-market over the next several years .
  • PENN District is an earnings flywheel: yield increased to 10.2%; pending anchor, active pipeline, and rents above underwriting point to accelerating NOI into 2026–2027 .
  • Balance sheet de-risking continues: $450M 2025 notes repaid; plan to redeem >$400M JV preferreds and generate ~$1B cash enhances flexibility for lease-up and selective investments .
  • Near-term (2025) earnings dip vs 2024 reflects timing (one-offs in 2024, PENN capitalization interest burn-off); medium-term setup is attractive with significant ramp in 2027 per management .
  • Watch THE MART and 555 California lease rolls: 555 remains best-in-class with strong re-lease progress; THE MART’s y/y NOI drag weighed on Q4 comps but sequential trends should improve as leasing stabilizes .
  • Retail arbitrage optionality: Strong Fifth/Madison demand and buyer interest may catalyze selective monetizations at premium values .
  • Liquidity of $2.5B and covenant headroom (e.g., unsecured coverage, unencumbered ratios) provide runway; Net Debt/EBITDAre (as adjusted) 8.6x underscores importance of execution on leasing and proceeds plan .
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