Vornado Real Estate Trust VNO has completed a $ 525 million refinancing of One Park Avenue. The company owns a 55% interest in the joint venture for the ownership of the 943,000 square foot office building in Manhattan.
The interest-only loan bears an interest rate of LIBOR plus 1.107% and is expected to mature in February 2026, after consideration of any further extensions.
It will replace a previous LIBOR loan of $ 300 million plus 1.75%, which was due to mature in March 2021.
The company’s share of the net proceeds of this refinancing was nearly $ 105 million.
This refinancing gives Vornado a cheaper line of credit and helps reduce annualized interest charges. In addition, lengthening the maturities of the assumed debt will help the company improve its maturity profile and benefit from greater liquidity for its day-to-day operations. In fact, as of December 31, 2020, it had $ 1.56 billion in consolidated mortgage debt maturing in 2021.
This move will also increase the company’s cash flow and ease the pressure on its bottom line. The reduction offers greater financial flexibility and will strengthen Vornado’s balance sheet. Notably, as of December 31, 2020, the company had $ 3.9 billion in cash, of which $ 2.2 billion was available on its revolving credit facilities of $ 2.75 billion and $ 1.7 billion. restricted cash and cash equivalents and cash.
In addition, Vornado obtained numerous loan refinances in the fourth quarter of 2020, allowing it to reduce the interest rate on the loans and extend the maturities of the debt. Thus, a flexible financial situation will allow it to take advantage of investment opportunities and finance its development projects.
Recently, the company reported fourth quarter 2020 funds from operations (FFO) as well as adjusted assumed conversions of 66 cents per share, beating Zacks’ consensus estimate of 64 cents. The reported figure, however, plunged 34.8% year over year.
While lower interest expense contributed to net income, lower net operating income (NOI) from comparable stores in the New York portfolio and theMART affected the company’s quarterly results. Notably, during the current quarter, total comparable store NOI decreased by 11.3% per year. over the year.
The shares of this company Zacks Rank # 3 (Hold) have fallen 22.7% in the past year compared to the industry‘s fall of 2%.
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To note: Everything about earnings presented in this valuation represents funds from operations (FFO) – a measure widely used to assess the performance of REITs..
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