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Giant Office REIT Vornado Realty Trust to Sell New Preferred

Office REIT Vornado Realty Trust (VNO) will be selling a new issue of $25 preferred stock.

The terms of the issue are typical–cumulative, optionally redeemable in about 5 years and non qualified.

The company has 3 other issues outstanding, 2 of which are currently redeemable with coupons of 5.7% and 5.40%. The company has NOT signaled an intention to call these, but one can never tell. Neither issue has much, if any call risk built into the price.

I believe this issue will be split investment grade–Baa3 by Moodys and BB+ from S&P.

The preliminary prospectus can be found here.

EarlyBird was on this one right away.

9 thoughts on “Giant Office REIT Vornado Realty Trust to Sell New Preferred”

  1. 5.25%. $300 million, just like all the other VNO preferred.

    I own VNO-K, which is past call, stripped yield of 5.69%, and no call risk in the sense that it’s trading essentially at redemption amount.

    I’ll continue to take the 5.69%. VNO-M is the same coupon and trading right at $25 stripped, meaning this new issue doesn’t have a lot of upward price potential.

    No reason to buy, even as a flip.

    1. My guess is about 4.75- 5%. Vornado is office but is also investment grade with some of the highest quality buildings in USA. Tough business to be in but capital is cheap.

      1. Actually, most of their office assets are in NYC and they also own the giant Merchandise Mart in Chicago. Also own 1700 room Hotel Pennsylvania in NYC. Anyone who has stayed there knows it is a dump.

        These are two cities that people are moving out of en masse. Stock price of VNO common has been hammered for good reason.

        A 5% yield sitting below the $10 Billion in debt is insane. Balance sheet is mediocre at best. Only reason their current preferreds all trade above $25 is because the entire REIT preferred market has been swept to all time highs due to the unquenchable thirst for yield.

        No margin of safety on this one. Pass.

    2. Given where other issues are trading I would look for 5.25-5.375%.

      If that’s correct a call on existing issues is unlikely.

      The big issue here is NYC. The company reported a decent 3rd quarter but the first 9 months in aggregate were awful.

      I would rather have seen VNO raising equity, as a number of other REITS have done recently.

      1. I like the investment grade part, but Office REITs could be in trouble in the years ahead. No one I know who has fled NYC is volunteering to come back or want to work in the skyrise office 5 days a week. Office REITs are now in a high risk category no matter who they are. I would need a higher yield to be interested and offset the risk.

      2. Yesterday Cuomo referred to the coming second wave as “astronomical.” And just when apartments were starting to rent again in NYC. I pass on office NYC office REIT’s.

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