Vornado sells 45% stake in prime Manhattan retail portfolio valued at $5.6B
Vornado writes down portfolio by $600M
Roughly 80% comes from Midtown properties
Vornado Realty Trust’s challenges continue to show up on its balance sheet: The company has written down the value of its real estate portfolio by $600 million.
Steve Roth’s real estate investment trust indicated the reduction late Tuesday, Crain’s reported. About 80 percent of the writedown — $480 million — stems from a handful of Midtown properties. The properties accounting for the other $120 million is unclear.
The seven buildings involved in the writedown were valued at $5.6 billion four years ago. Today, they are worth $4 billion, a 30 percent drop. Evercore ISI analyst Steve Sakwa estimated the properties generate between $200 million and $225 million in net operating income, down from $250 million four years ago.
The assets include 489,000 square feet of retail space and 327,000 square feet of office space, as well as signage, a parking garage and a theater in the Marriott Marquis at 1535 Broadway.
Vornado: Coronavirus responsible for $306M loss on value of prized retail JV
In April 2019, Vornado formed a joint venture by selling a 45 percent stake in the involved properties to a group including the Qatar Investment Authority, pension funds and the late Stanley Chera’s Crown Acquisitions. Vornado recorded a $2.6 billion gain from the sale. The portfolio includes five Fifth Avenue properties between 51st and 55th streets.
In July 2020, Roth’s REIT recorded a nearly $306 million impairment loss on the Fifth Avenue and Times Square properties as Covid and other factors slammed the prime retail corridor.
It’s the latest in a litany of bad news for Roth’s firm. Last month, the city’s second-largest commercial landlord cut its dividend by nearly 30 percent, blaming the economic downturn and rising interest rates. A cut was expected, but the size of it shocked some analysts, including Sakwa.
At the same time, the S&P 500 booted Vornado’s stock from the index because shares became “more representative of the midcap market space.” The demotion led to index funds tracking the S&P 500 to drop the stock like a hot potato.
At the close of trading Wednesday, Vornado’s share price was actually up by 0.4 percent from the previous day’s close, indicating the properties’ lower valuation was already priced in by investors. Nevertheless, Vornado shares have lost two-thirds of their pre-pandemic value.
— Holden Walter-Warner