NEW YORK CITY-Vornado Realty Trust’s funds from operations for the second quarter rose to $243.4 million, according to financial results from the office and retail REIT released late Monday. With $1.27 per diluted share, Q2’s results are a $38.6 million increase from the prior year quarter of $204.8 million, or $1.11 per diluted share.
During the three-month period, several factors contributed to Vornado’s comparability income, including an $8.3 million net gain resulting from Lexington Realty Trust’s stock issuances, a net gain of $6 million from Vornado’s share of LNR Property Corp’s asset sales and a $2 million discount of redemption of perpetual preferred units.
Year-to-date, the Paramus, NJ-based REIT reported $749.3 million funds from operations over the first six months of 2011, compared to $565.1 million for 2010’s first half. The REIT reported a net gain of $83.9 million on early extinguishment of debt, a near $15 million gain from LNR’s asset sales and tax settlement, about $10.4 million in income from the mark-to-market of JC Penney’s derivative position and a $9.7 million net gain resulting from Lexington’s stock issuances. Overall, net income to common shareholders was $491.1 million, or $2.63 per diluted share, for the period ending on June 30.
While Vornado declined to comment to GlobeSt.com about the results, Ross Smotrich, managing director at Barclays Capital, wrote in a report that while Vornado’s fundamentals were “solid in New York City due to its “incremental capital to work via recapitalizations,” the Paramus, NJ-based REIT shows “weakness in DC and slowing growth in the retail portfolio may over hang the stock in the near term,” suggesting reinvestment possibly in the multifamily space.
In terms of transaction activity, Smotrich writes that Vornado formed a 50/50 joint venture in Q1 with SL Green Realty Corp. for the 1.2-million-square-foot 280 Park Ave. in Midtown Manhattan, where both companies contributed debt positions. In Q2, the JV reached an agreement to convert its $400 million debt position into a 99% equity stake, he says. On the multifamily side, Vornado also formed a JV that acquired $185 million of debt on the Independence Plaza apartment complex at 80 North Moore Street in TriBeCa.
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