“Cash NOI is the most important metric in our business.” So said Michael Franco, president of Vornado Realty Trust, on the firm’s recent earnings call. “That’s how real estate is traditionally valued.”
According to Franco, company-wide the REIT’s second quarter cash basis, same-store NOI increased by a healthy 4.3% broken down as follows: New York office was up 3.3%; Street retail was up 4.2%; theMART was up 15.5%; and 555 California Street was up 12.9%.
“New York’s deep pool of talent and the fact that they want to live and work here coupled with record venture capital investment has led to enormous technology sector employment growth of 80% since 2009. This has played an important role in attracting large tech tenants to the city and continues to feed their insatiable appetite to grow their footprints in Manhattan,” he said on the call.
Anticipating the company’s redevelopment program, during the second quarter, the said that the REIT signed a 38,000 square foot lease at PENN1 with a Fortune 200 company at a starting rent of $93 per square foot a sign of things to come. “This is a first-generation lease. If this lease would have been included in our mark-to-markets the mark-to-market for New York Office would have been approximately 20% on a cash basis.”
In addition to the capital, the REIT is spending in the Penn District, the government is also investing an estimated $3 billion on various infrastructure improvements including the Moynihan Train Hall, the West End Concourse, 34th Street subway station improvements and the new 33rd Street train station entrance.
“In addition, we have entered into a memorandum of understanding with New York State to redevelop the Long Island Rail Road Concourse under PENN1. This redevelopment will tie together Seventh and Eighth Avenues underground, dramatically widen the corridor and raise the ceiling height allow natural light into the Concourse and substantially improve the user experience. Overall, we couldn’t be more excited about what we’re doing here.”
At theMART in Chicago, occupancy was 94.8% at quarter end. “We have strong leasing activity with term sheets in negotiation for much of the 125,000 square feet of vacant space on floors four and five in addition to discussions with two large tenants regarding early renewals fueled by their expansion needs.”