Vornado Realty's Q3 Results To Reflect Non-Recurring Loss

Vornado Realty Trust (NYSE:VNO) announced that its third-quarter financial results will include certain items that will have an impact of 47 cents loss on its funds from operation (FFO) per share. However, this amount will be excluded to reach adjusted FFO per share.

The non-recurring items will have a loss impact of 51 cents per share, after non-controlling interests, on its net income for the quarter. Similar to FFO, the adjusted net income will exclude the impact.

Vornado incurred transaction costs of $53.6 million related to the spin-off of its Washington D.C. segment — JBG SMITH — on Jul 17. The spun-off company recorded a net income of $3.9 million for the Jul 1 to Jul 17 period. This amount translates to a net income of $10.1 million on a FFO basis.

For the third quarter, Vornado will report the aforementioned figures as discontinued operations.

It will also recognize an unfavorable mark-to-market fair value adjustment, related to its real estate fund, amounting to $7.7 million.

Further, the company will record non-cash impairment loss of $44.5 million related to its investment in Pennsylvania Real Estate Investment Trust (PEI). As part of the sale proceeds of the Springfield Mall in March 2015, Vornado receives operating partnership units of the company.

Lastly, the company will record a net loss of $1.8 million from other items. This translates to $1 million on a FFO basis.

Vornado’s streamlining efforts have resulted in dilution of earnings. This adds to the woes of the company which is already navigating through challenging times.

The Zacks Consensus Estimate for funds from operation (FFO) per share estimate for third-quarter 2017 has been revised downward to 85 cents in a month’s time.

Also, shares of this real estate investment trust (REIT) have underperformed the industry it belongs to, year to date. The company’s shares have dropped 25.9%, while the industry recorded growth of 4.1%, during this time period.


Currently, the company carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the REIT space include Seritage Growth Properties (NYSE:SRG) , Sabra Healthcare REIT, Inc. (NASDAQ:SBRA) and Communications Sales & Leasing, Inc. (NASDAQ:UNIT) . While Seritage and Sabra Healthcare flaunt a Zacks Rank of 1 (Strong Buy), Communications Sales & Leasing carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Seritage’s 2017 FFO per share estimates inched up 0.5% to $2.01 in the past 60 days.

Sabra Healthcare’s 2017 FFO per share estimates climbed 3% to $2.38 over the past month.

Communications Sales & Leasing’s 2017 FFO per share estimates climbed 14.4% to $2.54 in two months’ time.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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