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NYC is Dead Forever... Wanna Bet?

Vornado Realty is a bet on NYC and commercial real estate. Two things people are betting heavily against.

Insights team

Last updated 8/31/2020.


Since hitting $93.50 in January 2015, Vornado Realty ($VNO) has fallen roughly 70%. It was last at these levels in 2008/09. It has trailed the S&P 500 over the previous 3, 5, and 10 year periods.

What they do

Vornado is REIT (Real-Estate Investment Trust). They own all or portions of properties in New York, Chicago, and San Francisco.

New York:

  • 19.1 million square feet of Manhattan office space in 35 properties.
  • 2.3 million square feet of Manhattan street retail in 70 properties.
  • 1,991 units in 10 residential properties.
  • The 1,700 room Hotel Pennsylvania located on Seventh Avenue at 33rd Street in the heart of the Penn District.
  • A 32.4% interest in Alexander’s, Inc. (“Alexander’s”) (NYSE: ALX), which owns seven properties in the greater New York metropolitan area, including 731 Lexington Avenue, the 1.3 million square foot Bloomberg, L.P. headquarters building.

Chicago and San Francisco:

  • 3.7 million square foot theMART in Chicago.
  • A 70% controlling interest in 555 California Street, a three-building office complex in San Francisco’s financial district aggregating 1.8 million square feet.
  • A 25.0% interest in Vornado Capital Partners, our real estate fund (the "Fund"). We are the Fund’s general partner and investment manager.

Buying Vornado is making a bet on three cities. Primarily New York, but also Chicago and San Francisco.

And some people think betting on New York is a terrible idea. Because in their words, “NYC is dead forever.


What's its chart telling us?

  • The price is testing the demand (support) zone between $20-$30.
  • The last time the stock was at this level was in 2009, and it rallied ~380% over the next six years.

KEY FACTS
Ticker $VNO
Headquarters New York, New York
# of Employees 4,008 (as of 2020)
Market Cap. $7.56 billion
TTM Revenue $1.5 billion
Date Founded 1982
IPO Date 1968
Short Interest 8.1%
52-Week Range $29-$68

Note: Stephen Roth used his holding company, Interstate Properties, to win a proxy battle for control of Vornado in 1981.

Vornado started life as a discount chain called Two Guys in 1947. In 1959, Two Guys acquired A. Sutton Corporation, makers of the Vornado line of electrical fans. After the acquisition, they renamed the company Vornado.


CAPITAL STRUCTURE
Market cap $7.6 billion
Total debt $8.6 billion
Cash $1.6 billion
Other $2.0 billion
Enterprise value $15.6 billion

RETURNS TTM
Return on Assets 1.4%
Return on Invested Capital (ROIC) 1.5%
Return on Equity 2.5%

VALUATION METRICS
Forward Price/Revenues 4.1x
Trailing Price/Revenues 4.0x
Forward Price/Earnings 154.8x
Trailing Price/Earnings 22.0x

Additional Information: