Vornado(VNO) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter comparable FFO as adjusted was $0.66 per share, down from$0.81 in the same quarter last year, a decrease of $0.15 driven by various factors including a one-time real estate tax accrual adjustment and higher net interest expenses [14][15][16] - New York office same-store cash NOI for the quarter increased by 3$93 per square foot during the third quarter [17] - The leasing volume in Manhattan was 6.5 million square feet for the quarter, with the fire sector leading at 31% of activity [16] - Retail leasing activity showed a noticeable pickup, with eight leases totaling 29,000 square feet signed at a positive 33.5% cash mark-to-market [22] Market Data and Key Metrics Changes - The financing markets remain challenging, particularly for office properties, due to volatility from the Federal Reserve's rate increases [23] - The company reported a strong liquidity position of $3.2 billion, including$1.3 billion in cash and restricted cash [24] Company Strategy and Development Direction - The company is focused on leasing PENN 1 and PENN 2, with significant tenant interest expected as construction nears completion [9][10] - The company believes in the long-term potential of American cities, particularly New York, and anticipates that the current challenges will lay the groundwork for future recovery in fundamentals and values [8][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the resilience of the economy despite challenges, noting that the real estate capital markets are currently "frozen" [7] - The company expects to maintain its outlook for comparable FFO for 2023, despite additional G&A expenses related to share-based awards [15] Other Important Information - The company has a strong pipeline of future leases totaling 1.8 million square feet, with 750,000 square feet expected to close in the fourth quarter [20] - The company received GRESB's Green Star distinction for the 11th time, highlighting its commitment to sustainability [24] Q&A Session Summary Question: Can you expound on the New York City leasing pipeline? - The pipeline is focused on current vacancies, particularly in PENN 1 and PENN 2, with strong activity expected as the projects open [26][27] Question: What are your thoughts on the dividend and share repurchase program? - The company expects FFO to be about $2.55 for the year, with a dividend payout expected to be between$0.20 and $0.30 for the fourth quarter [30][32] Question: How are you managing refinancing in the current debt market? - The company is actively discussing refinancing options with lenders, recognizing the challenges in the current market [33][35] Question: Can you provide an update on sublease activity across the portfolio? - Sublease activity in New York has remained stable, with some spaces fully leased, while Chicago has seen more sublease space available [46] Question: What is the current status of leasing activity compared to previous quarters? - The decrease in leasing activity was attributed to timing rather than deals falling apart, with expectations to reach 2 million square feet by year-end [71] Question: What are the plans for generating cash flow from the Hotel Pennsylvania site? - The company is exploring temporary uses for the site to generate cash flow until a long-term plan is developed [76] Question: Can you clarify the company's approach to capital allocation moving forward? - The company plans to be opportunistic in selling or recapitalizing assets, focusing on accretive pricing [67][68]