Vornado(US:VNO)2024-02-13 22:46Financial Data and Key Metrics Changes - The overall New York business same-store cash NOI increased by 2.8% for the year and 2% in Q4 compared to the previous year [13] - Comparable FFO as adjusted was $2.61 per share for the year, down $0.54 from 2022, primarily due to increased interest expense [13] - Fourth quarter comparable FFO as adjusted was $0.63 per share, a decrease of $0.09 from the previous year's fourth quarter [14] - The company recorded $73 million of noncash impairment charges during Q4, mainly related to joint venture assets intended for exit in the next few years [14] Business Line Data and Key Metrics Changes - In Q4, the company leased 840,000 square feet, with a total of 2.1 million square feet leased for the full year [7][18] - Average bidding rents for Q4 and the year were record-breaking at $100 and $99 per square foot, respectively [7] - The retail sector in New York City is recovering rapidly, with significant leasing activity and two major deals totaling approximately $1.8 billion announced in December [8][9] Market Data and Key Metrics Changes - The office leasing market is showing signs of recovery, with strong employment growth in New York City and favorable market conditions entering 2024 [16] - Vacancy rates in the best buildings are below 10%, and rents are rising, indicating a tightening market for high-quality space [17] - The financing market for retail is now open, while the office financing market remains challenging [22] Company Strategy and Development Direction - The company is focused on maintaining balance sheet strength and has strong liquidity of $3.2 billion [23] - Future growth opportunities include acquiring new assets at distressed prices, paying off debt, and potentially selling non-core assets [30] - The company plans to continue developing in the Penn District, which is considered a critical part of its strategy moving forward [61] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the office market, anticipating that occupancy will improve as the market stabilizes [50][56] - The company expects 2024 to represent a trough in earnings, with a rebound anticipated as interest rates trend down and income from leased spaces increases [15][57] - Management noted that the supply-demand equation in major cities will eventually balance, leading to a landlord's market [11] Other Important Information - The company is actively working to push out the maturities on its loans, maintaining a strong liquidity position [23] - Management highlighted the importance of high-quality retail space, noting that the supply of such assets is finite [35][36] Q&A Session Summary Question: Can you provide details on the leasing pipeline and upcoming expirations? - The pipeline includes activity at both PENN 1 and PENN 2, with over 50% of expiring space at 1290 already leased [25][26] Question: What are the opportunities in the current market? - The company is focused on buying back stock, paying off debt, and acquiring new assets at distressed prices [30] Question: How did retention levels perform in 2023? - Retention rates were strong, with better-than-expected leasing activity and discussions with tenants occurring earlier due to limited quality space [33][34] Question: Will the company consider selling retail assets? - The company may sell assets to take advantage of the retail market's recovery, although it does not expect to reach peak pricing from five years ago [41][42] Question: What is the outlook for occupancy and leasing in 2024? - Occupancy is expected to dip in 2024 but recover as leasing activity increases, particularly in the Penn District [48][56]