April 13 (Bloomberg) -- Vornado Realty Trust, owner of more than 100 million square feet (9.3 million square meters) of U.S. properties, will start holding conference calls with investors and reduce its retail-center holdings, Chairman Steven Roth said in his annual letter to investors.
The New York-based real estate investment trust will hold quarterly calls beginning with the second quarter, Roth wrote in the letter, filed today with the U.S. Securities and Exchange Commission. The change is a result of conversations with shareholders and analysts, he said.
“Everyone suggests conference calls -- fair enough,” Roth wrote.
Vornado also plans to cut its enclosed-mall holdings, reduce its portfolio of strip shopping centers and “sell all non-core assets,” including its stake in Toys “R” Us Inc., Roth wrote. The company plans to keep its 23.4 million shares of J.C. Penney Co. “to reap the benefit of the company’s transformation,” he said.
“We are in a recovery (but by no means recovered),” he wrote in the letter. “Consensus is that the recovery will be shallow and as such, I believe it will be much longer in duration than the three to five to seven year economic cycles that we are used to. All this will prove to be a very good environment for our business.”
The recovery has led to an increase in property prices that has made acquisitions difficult, Roth said.
Assets ‘Not Cheap’
“I must say, I find investing in this market difficult,” he wrote. “Nobody expected building prices to bounce back as strongly or as quickly as they did -- but they did. Assets are not cheap, either historically or in relation to current rents.”
Government cutbacks in Washington will cause Vornado’s occupancies near the U.S. capital to drop to 80 percent to 85 percent this year and cost the company as much as $1.50 per share, Roth said.
“Damn annoying, but livable,” he wrote.
Vornado’s Washington-area properties include the 26-building Crystal City complex and the eight Skyline buildings, which, being located 3.5 miles (5.6 kilometers) from the Pentagon, will probably experience vacancies of more than 30 percent because of the Base Realignment and Closure process aimed at reducing military expenditures. The assets are backing a $678 million loan due in 2017.
“We need relief here, and accordingly have requested the loan be placed in special servicing,” Roth said.
‘On the Table’
Investors and analysts have recommended Vornado do everything from buying back shares to splitting the company up into smaller firms focused on individual types of real estate, Roth said.
“Everything is on the table,” he wrote.
The letter was released after the close of regular U.S. trading. Vornado shares fell 1.4 percent to $79.94 today in New York Stock Exchange composite trading. They have dropped 9 percent in the past year.
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