Vornado Realty Trust is a veritable whirlwind of real estate activity. The company's commercial property holdings total more than 100 million sq. ft. of space, primarily in New York City and Washington, DC. The company's retail portfolio consists of about 115 strip shopping centers and single tenant retail assets, and six regional malls in the Northeast, California, and Puerto Rico. Its Merchandise Mart segment owns six showroom properties, including Chicago's Merchandise Mart and L.A. Mart; it also produces trade shows. In addition, Vornado owns about a third each of New York retail property owner Alexander's and Toys ''R'' Us and an 11% interest in J.C, Penney.
The New York City metropolitan area is Vornado's #1 market, accounting for two-thirds of its EBITDA (earnings before interest, taxes, depreciation, and amortization). The Washington, DC/northern Virginia area accounts for about 25%, with Chicago and California representing 4% and 2%, respectively.
In addition to its office and retail properties, Vornado owns apartment buildings in New York, Virginia, and Washington, DC.
The REIT reported revenue in 2012 of nearly $3.2 billion, a 1% decline versus 2011. Net income fell 7% over the same period. 2012 marked the second consecutive year of declining revenue following two years of gains.
One of Vornado's stated goals is to purchase new properties and redevelop existing ones in its portfolio in the New York and Washington, DC markets. To that end, the REIT entered into an agreement to acquire a 57,500-square-foot retail and office property located at the northeast corner of Fifth Avenue and 52nd Street, in Manhattan with 50 feet of frontage on Fifth Avenue. Vornado will acquire approximately 92.5% of the property for $278 million. The other 7.5% is owned by Madison Capital. The sale is expected to close in late 2013.
With the New York real estate market heating up, Vornado is looking to simplify its business by exiting investments, such as its stakes in Toys "R" Us and ailing J.C. Penney, so it can focus on growing its property portfolio. However, it appears to be stuck with Toys "R" Us for the foreseeable future. Indeed, the firm's trickiest real estate investment is Toys "R" Us, which it, along with two partners, took private in a $6.6 billion leveraged buyout in 2005. In 2010 Toys "R" Us announced plans for an IPO that it hoped would raise as much as $800 million (and allow Vornado to cash out). However the offering has been delayed by market conditions. In the meantime, income from its investment in the toy retailer has tumbled to about $14.8 million in 2012 compared with $71.6 million in 2010. Vornado was attracted to the big-box toy retailer because of its real estate holdings.
The REIT is also selling its properties in non-core markets, such as Boston, Chicago, San Jose, and Long Island, New York.
Mergers and Acquisitions
Recent real estate acquisitions in core markets include: a 59% interest in Independence Plaza, a 1,328-unit residential complex in lower Manhattan with 54,500 square feet of retail space and 550 parking spaces; a retail condominium at 666 Fifth Avenue at 53rd Street for $707 million. Tenants include Uniqlo, Hollister, and Swatch; and 1399 New York Avenue, a 130,000-square-foot Class A office building in Washington, DC (not far from the White House) for $104 million. All of these purchases closed in 2012.