Morningstar | Vornado Continues Strong Into 2019
Vornado continues to divest assets as it looks to become a pure-play New York office and retail owner and operator. With single-digit vacancy rates for Manhattan’s office market, Vornado will be well positioned to attract top tenants willing to pay some of the highest prices per square foot in the country. The company is poised to take advantage of Manhattan’s newest growth area with 6.5 million square feet of office space located just east of the upcoming Hudson Yards project. The project should bring added foot traffic to Vornado’s retail locations and increase rents for its office presence. Vornado is almost unrecognizable from its nontraditional past, free of minority investments in fledgling retail businesses and currently focused on a historically profitable region that continues to attract top tenants willing to pay top dollar for the best in Class A office and retail property. Following the spin-off of its Washington, D.C., assets in July 2017, Vornado will achieve almost 90% of its EBITDA from New York, an area where it currently maintains office space occupancy of more than 95% with properties in densely populated areas near key transportation and other highly desirable features. While the company does have investments elsewhere in the country, specifically San Francisco and Chicago, they are performing well and are in well-located central business districts. The CBD exposure for Vornado is promising, as we view this as the main growth area compared with portfolios with suburban exposure. Vornado’s tenants are some of the best names in finance, consulting, and technology, and represent the ideal tenants for Class A office space. Additionally, these large and financially sound companies typically have an established presence in Manhattan. While the West Coast continues to produce technology jobs, we believe Manhattan will maintain its status as America’s central business hub and remain confident that its expansion will have positive impacts on Vornado's existing portfolio.Vornado Realty Trust is a real estate investment trust and conducts its business through, and substantially all of its interests in properties are held by, Vornado Realty L.P. (the Operating Partnership). The company is the sole general partner of the Operating Partnership. The company owns and operates office and retail properties with a concentration in the New York City metropolitan area. In addition, the company has interest in Alexander's, Inc., which owns properties in the New York metropolitan area, as well as interests in other real estate and related investments.
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