Vornado FFO Declines 31% as Investment Income Decreases

Vornado Realty Trust (VNO), owner of more than 100 million square feet (9.3 million square meters) of U.S. commercial properties, said first-quarter funds from operations declined 31 percent as investment income fell.

FFO, which gauges a property company’s ability to generate cash, was $348.5 million, or $1.82 a share, compared with $505.9 million, or $2.64, a year earlier, the New York-based real estate investment trust said today in a regulatory filing. The average of 12 analyst estimates in a Bloomberg survey was for FFO of $1.77 a share.

Vornado, whose shares have fallen almost 8 percent in the past year, is seeking ways to respond to lackluster stock performance and shareholder complaints that its structure is too complex, Chairman Steven Roth said in a letter to investors last month. The REIT is considering options ranging from buying back shares to splitting into smaller companies focused on specific real estate types, he said.

“Investor impatience with the company has grown over the last few years,” David Harris, an analyst with Imperial Capital LLC in New York, wrote in an April 24 report. “As some property markets have recovered, others have pulled off deals which would have once been considered a ‘natural’ for the Vornado of old.”

Toys R Us

Investors have questioned the rationale for Vornado’s stake in Toys R Us Inc. (TOYS), the children’s toy and apparel merchant, and the Merchandise Mart showroom unit, which are outside its main businesses of Manhattan and Washington offices and New York street retail, Harris wrote. He has an in-line rating on the company, the equivalent of a hold.

The company’s adjusted FFO, which excludes some one-time items, rose to $1.81 a share from $1.73 a year earlier, the company said today in a statement.

Net interest and investment income fell to $15.7 million from $117 million a year earlier. The company had $82.7 million of gains related to mezzanine loans and dispositions in the year-earlier period that weren’t repeated in the first quarter. First-quarter results include a $1 million recorded gain from Vornado’s stake in retailer J.C. Penney & Co. (JCP), down from $17.2 million a year earlier.

The company also reported a 2.1 percent decline in revenue from property rentals to $521.8 million. In the Washington area, where Vornado faces departures by the U.S. Department of Defense from its Crystal City complex in northern Virginia, rental revenue fell 6.7 percent to $129.6 million. In New York, it was little changed at $233.9 million.

First-quarter results were announced after the close of regular U.S. trading. Vornado rose 1.5 percent to $87.54 today. Its shares have declined 6.9 percent in the past 12 months, compared with an 8.9 percent gain for Bloomberg’s REIT index.

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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