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Vornado's (VNO) FFO and Revenues Miss Estimates in Q1

Vornado Realty Trust VNO reported funds from operations (“FFO”) per share of $1.07 for first-quarter 2016, missing the Zacks Consensus Estimate of $1.23. The figure also came in lower than the prior-year tally of $1.16 per share.

Total revenue came in at $613 million for the first quarter, up 1% year over year. However, it lagged the Zacks Consensus Estimate of $642.4 million.

Quarter in Detail

In the New York City portfolio, Vornado leased 737,000 square feet of office and 38,000 square feet of retail space. In Washington DC, the company leased 569,000 square feet of office space.

At quarter-end, same-store occupancy in the New York portfolio was 96.2%, reflecting a year-over-year decrease of 110 basis points. On the other hand, same-store occupancy in the Washington DC portfolio was 84.8%, up from 83.1% at the end of first-quarter 2015. Same-store earnings before interest, tax, depreciation and amortization for New York and Washington DC inched up 5.5% year over year and declined 0.1% year over year, respectively.

Other Developments

On Mar 17, 2016, Vornado inked a joint venture deal for owning 33.3% stake in a mezzanine loan.

As of Mar 31, 2016, Vornado had $1.67 billion of cash and cash equivalents, down from $1.84 billion as of Dec 31, 2015.

Our Viewpoint

We believe Vornado’s streamlining measures will help it focus exclusively on office assets in the New York City and Washington, DC region as well as on Manhattan street retail properties.

Currently, Vornado has a Zacks Rank #3 (Hold).

Investors interested in the REIT space may consider stocks like American Tower Corporation AMT, Brookfield Canada Office Properties BOXC and Gaming and Leisure Properties, Inc GLPI. All these stocks sport a Zacks Rank #1 (Strong Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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