Vornado Q1 FFO Beats Estimates

NEW YORK CITY-Vornado’s funds from operations for the first quarter rose 43% year over year, according to financial results the office and retail REIT released Tuesday. The FFO of $2.64 per diluted share, or $505.9 million, was up from $1.87 per share the year prior and beat the average estimate of $2.03 per diluted share from 12 analysts polled by Bloomberg. A portion of that stemmed from its disposition of its High Point, NC furniture showrooms, which removed nearly $84 million in liabilities from its balance sheet at quarter’s end.

The REIT’s Q1 net income of $399.2 million, or $2.12 per diluted share, nearly doubled the $200.3 million net income recorded for the first quarter of 2010. It included $51.2 million realized in net gains on sales of real estate.

During Q1, Vornado closed on its acquisition of a 95% interest in Murray Hill Properties’ 1 Park Ave. in partnership with a real estate fund of which Vornado is 25% owner. The deal values the 95% stake at $374 million, or $422 per square foot, including $137 million in cash and Vornado’s share of a new $250-million, five-year mortgage. MHP retains a 5% stake and will continue managing and leasing the property. Vornado and another office REIT, SL Green Realty Corp., formed a first-ever joint venture to hold $400 million of debt on another property along the same street, 280 Park Ave., during the quarter.

Going forward, Vornado’s outlook remains bullish, as evinced by chairman and CEO Steven Roth’s comments during the “View from 10,000 Feet” panel discussion that concluded the annual REIT Symposium sponsored by the NYU Schack Institute of Real Estate in March. Roth said he takes encouragement from a graph depicting New York City’s office rental market over the past three recessions, showing that rents declined by an average of 25% during the market troughs and then rose at three times the rate of decline. “I believe that is predictive of what is going to happen,” he told the Schack Institute audience.