Vornado(US:VNO)2019-10-29 21:03Financial Data and Key Metrics Changes - Third quarter FFO as adjusted was $0.89 per share, a decrease of $0.07 compared to the same quarter last year [10] - The company anticipates meeting an approximate $3.40 per share in comparable FFO for 2019 [15] - Non-comparable items included $178.8 million in net gains on sale of real estate and a $109 million after-tax net gain on unit closings at 220 Central Park South [16] Business Line Data and Key Metrics Changes - Company-wide, third quarter cash basis same store NOI increased by 1%, with New York office and street retail both up 1%, while theMART was down 1% and 555 California Street up 17.7% [18] - In New York, leasing activity remains strong with 25 million square feet of new leases signed in the first three quarters of 2019 [20] - Retail occupancy was 95.9% at quarter-end, with nine leases executed for 26,000 square feet achieving positive mark-to-markets of 6.2% cash and 15.6% GAAP [39] Market Data and Key Metrics Changes - The New York office market is experiencing positive job growth, with office sector jobs increasing by about 18,000 compared to 20,000 for all of 2018 [22] - There are currently 65 tenants actively looking for 100,000 square feet or more, totaling 16 million square feet of potential activity [23] - The Chicago market at theMART executed 45,000 square feet of leases at an average starting rent of over $48 per square foot [34] Company Strategy and Development Direction - The company is focusing on the redevelopment of the Penn District, with 5.2 million square feet of combined redevelopments [24] - The goal is to make the Penn District the go-to location for tenants in the city, enhancing offerings with new food and beverage outlets and other amenities [27][28] - The company maintains a fortress balance sheet with current liquidity of $3.36 billion [41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term potential of prime locations despite recent bankruptcies of tenants like Forever 21 [14] - The company is optimistic about the future growth driven by the Penn District redevelopment, although it may take time to realize significant cash flow [106] - Management acknowledged the challenges in the retail market but emphasized the strength of their office portfolio [39][60] Other Important Information - The company plans to pay out a special dividend of approximately $1.90 per share this year based on tactical gains from asset sales [41] - The retail market is correcting, with rents coming down in certain sub-markets, particularly Madison Avenue [95] Q&A Session Summary Question: Leasing pipeline in the Penn District - Management noted a balance of activity from tenants in Midtown and tech sector tenants looking at their projects [44] Question: Impact of Forever 21 on leasing and tenant psychology - Management acknowledged the negative surprise but emphasized the importance of keeping the space occupied and flexible for future tenants [46] Question: Timing of impacts from Topshop and Forever 21 on NOI - Management confirmed that Topshop started affecting NOI in Q3, while Forever 21's impact began in Q3 as well [52] Question: Update on the 400,000 square foot headquarters lease - Management indicated that the lease is out for signature and expects it to be signed in the next few months [67] Question: Retail market conditions and potential tenant concerns - Management stated that the retail market is soft, and they are monitoring various tenants closely [59] Question: Future sales and asset management strategy - Management confirmed that all options are on the table regarding future sales and emphasized the importance of their ongoing redevelopment efforts [121]