NEW YORK - Vornado Realty Trust (NYSE:VNO) has reached an agreement to sell its share of the UNIQLO flagship store at 666 Fifth Avenue to the retailer for $350 million, the company announced Monday. The 52% owned street retail joint venture holds the fee condominium interest in a portion of UNIQLO's 90,732 square foot store, specifically 17,295 square feet, with 6,477 square feet at street level.
The transaction will also involve the termination of pass-through leases between the office condominium owner and the retail joint venture. Despite the sale, Vornado's joint venture will retain ownership of 23,832 square feet of retail space at the same location, housing the Abercrombie & Fitch and Tissot stores.
The net proceeds from the sale, estimated at $340 million, are expected to be directed towards partially repaying Vornado's $390 million of preferred equity on the asset. The closure of the sale is contingent upon standard closing conditions and the completion of UNIQLO's separate transaction with the office condominium owner for the rest of its store. The entire process is projected to be finalized by the first quarter of 2025, following the formation of the new condominium interests.
Eastdil Secured provided advisory services to Vornado's street retail joint venture during the deal. Vornado Realty Trust, known for its fully-integrated equity real estate investment portfolio, has stated that the sale is a strategic move for the company.
In other recent news, Vornado Realty Trust has been at the center of several developments. The company highlighted significant leasing activities and strong liquidity during its First Quarter 2024 Earnings Call, announcing the renewal and extension of Bloomberg's lease for a 950,000 square foot office condo at 731 Lexington Avenue until February 2040. Vornado's balance sheet remains robust, with $2.7 billion in liquidity.
Analysts from BMO Capital and Piper Sandler adjusted their financial outlooks for Vornado Realty Trust. BMO Capital reduced the real estate company's price target from $31.00 to $29.00, maintaining a Market Perform rating, after a recent fireside chat with Michael Franco, the President and CFO of Vornado. Piper Sandler revised the price target downward to $22.00 from the previous $25.00 while maintaining an Underweight rating. The adjustments reflect current interest rates, the company's performance in the first quarter of 2024, and an anticipated decrease in occupancy.
Vornado Realty Trust continues to navigate the evolving real estate landscape, actively backfilling known move-outs and exploring office-to-residential conversion opportunities. The company's strategic locations cater to the needs of major tech firms expanding their footprint in New York City, with analysts believing Vornado stands a good chance of securing either Apple (NASDAQ:AAPL) or Amazon (NASDAQ:AMZN) as tenants for PENN2, one of its redeveloped properties. These are just some of the recent developments for Vornado Realty Trust.
InvestingPro Insights
As Vornado Realty Trust (NYSE:VNO) navigates through strategic asset sales, such as the recent agreement to sell a portion of its UNIQLO flagship store, investors may find the following InvestingPro Data metrics and InvestingPro Tips useful in assessing the company's financial health and market positioning.
InvestingPro Data reveals that Vornado Realty Trust currently has a market capitalization of $5.57 billion, which places it among the notable players in the real estate investment sector. The company's P/E ratio stands at a high 179.67, suggesting that the stock is trading at a premium relative to its earnings. This is further reflected in an adjusted P/E ratio for the last twelve months as of Q1 2024, which is 101.82. Despite a slight revenue decline of 0.92% over the last twelve months as of Q1 2024, Vornado has managed to maintain a gross profit margin of 51.83%, indicating a strong ability to control costs and generate earnings before interest and taxes (EBIT) of $375.82 million.
InvestingPro Tips highlight that Vornado is trading at a high P/E ratio relative to near-term earnings growth, and analysts are not expecting the company to be profitable this year. However, it's noteworthy that Vornado has maintained dividend payments for 34 consecutive years, with a current dividend yield of 4.21%, and its liquid assets exceed short-term obligations, suggesting a stable financial footing.
For investors seeking a deeper dive into Vornado's financials and future prospects, InvestingPro offers additional insights. There are a total of 7 InvestingPro Tips available on https://www.investing.com/pro/VNO, which can provide a more comprehensive understanding of VNO's potential risks and opportunities.
The strategic sale of assets such as the UNIQLO store reflects Vornado's ongoing efforts to streamline its portfolio and focus on core properties. The company's ability to navigate these transactions while maintaining a solid dividend track record may appeal to investors looking for stability in the dynamic real estate market.
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