Vornado (VNO), SL Green (SLG) Refinance $1.2 Billion Loan – August 25, 2017

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Vornado Realty Trust (VNO Free Report) and SL Green Realty Corporation (SLG Free Report) recently closed a loan refinancing worth $1.2 billion for the Manhattan-based office building — 280 Park Avenue. Both companies hold a joint venture spanning 1,250,000 square feet at this property.

The interest-only loan is slated to mature in September 2024, as extended, and carries a rate of LIBOR plus 1.73%. It will replace a previous LIBOR plus 2% loan of $900 million, which was slated to mature in May 2023.

The aforementioned joint venture has strategically improved the Manhattan-based building with a renovation plan worth $150 million. The plan was focused on the revitalization of the façade and the interior of the property. It has been upgraded with a premium lobby, new thin-line perimeter induction units, bathrooms and elevator cabs, electrical distribution and an advance security system.  

Moreover, the plaza adjacent to this property has been redesigned. Improvements have been made to make the building more sustainable. Such transformative redevelopments helped enhance its profile and achieve 97% occupancy. Following the redevelopment work, Vornado closed the above discussed loan refinancing.

Recently, the famous Four Season restaurant became a tenant at this property. Other significant tenants on its roster include Fiduciary Trust, Promontory Financial Group, Teneo Holdings, Viking Global and Starbucks.

Vornado is a New York-based real estate investment trust (REIT), which mainly owns office and retail properties. Its portfolio is concentrated in the New York City.

The company faces intense competition from developers, owners and operators of office properties, and other commercial real estate. In addition, persistent office space efficiency trends continue to curb any robust demand. Hence, Vornado’s strategy to attract and retain tenants at favorable rents through extensive redevelopment programs looks encouraging for its long-term profitability.   

Vornado currently carries a Zacks Rank #5 (Strong Sell). Over the past 30 days, the company’s full-year 2017 funds from operations (FFO) per share estimate inched up 0.7% to $4.20, while the third-quarter 2017 FFO estimate remained unchanged at 88 cents.

Furthermore, its shares have lost 29.1% year to date, underperforming 4.6% growth recorded by its industry.

Stocks to Consider

A few better-ranked stocks in the REIT space include Getty Realty Corporation (GTY Free Report) , Seritage Growth Properties (SRG Free Report) and Communications Sales & Leasing, Inc. (UNIT Free Report) .

While Getty Realty and Seritage sport a Zacks Rank #1 (Strong Buy), Communications Sales & Leasing carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Getty Realty’s 2017 FFO per share estimates moved up 7.8% to $1.94 in the past month.

Seritage’s 2017 FFO per share estimates inched up 0.5% to $2.01 over the past 30 days.

Communications Sales & Leasing’s 2017 FFO per share estimates climbed 14.4% to $2.54 over the same time frame.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. 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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