Vornado Realty Trust’s leasing activity for the year across the entire business including New York, theMART, 555 California Street and Retail, totaled over 2.6 million square feet and 230 leases with industry-leading mark-to-markets of 25.6% GAAP and 18.4% cash.
At year-end, according to Steven Roth, chairman and CEO, office occupancy across the board was 97%; and retail occupancy was 97.3%. “These numbers in the very high 90s are typical of our performance year-in and year-out over the past 20 years,” he said on the firm’s Q4 earnings call.
“We have begun closings that are 220 Central Park South super-tall condominium project. In the fourth quarter, we closed 11 units aggregating $222 million with a $67.3 million after-tax gain. And we have already closed in just the first five weeks of this year, another $290 million. Closings will continue throughout 2019, as we climb up the building. And the last of the 27 large full floor apartments in the tower is now committed and under contract. I’m guessing that this is the most successful project ever, anywhere.”
He continued that the company “increased our ownership in the Moynihan Train Hall Farley project from 50% to 95%. We are in full blown construction here. And in 2020, we will deliver the best creative space in Manhattan. We love this asset. It is the link between our Penn Plaza neighborhood and Hudson Yards. It is a doublewide block with 150,000 square foot floor plates and high ceilings. It is a horizontal campus in an iconic landmark building much like the horizontal campuses favored by our fan tenants in the West. It is a truly unique asset.”
In the Penn District, he notes that the REIT is under way to transform PENN1 and PENN2 to create a two building 4.4 million square foot campus right on top of Penn Station. It will include a three block, Grant Plaza along Seventh Avenue covered by a giant new bustle across the entire 400 foot frontage of PENN2.
This plaza will extend 70 feet out from the building and will be 50 feet above the street. It will serve a dual-purpose, he said. “It will be striking, creating a huge covered plaza in front of our 1.8 million square foot PENN2, and the main entrance to PENN Station. It will bring the neighborhood into the modern age.”
And at the same time, he explains that the company “will create 140,000 square feet of very valuable new best-in-class creative space. The scale of our campus here will allow us to provide our tenants with the biggest and best unparalleled amenity package. Even a giant step forward from what many of you have seen that we have done at theMART. Considering our redevelopment plans and everything that’s happening around us, we expect that incremental $30 uplift in rents here. This financial reward is the main event.”
So putting 220 Central Park South and the Penn District together; big picture, he says the REIT’s “financial plan is to redeploy the proceeds of 220 Central Park South sales into the CapEx of Farley PENN1 and Penn2. Give or take, we expect to finance all this CapEx internally, probably with no or very little new debt. Given that the only cost of the capital coming out of 220 Central Park South is the accounting item capitalized interest, which in round numbers is about $25 million. This will be enormously accretive.”
Financial results for the full year are as follows: net income was $2.01 per share, compared to $0.85 per share for 2017. Total FFO was $3.82 per diluted share compared to $3.75 for 2017. FFO as adjusted was $3.76, compared to $3.73 for 2017, consistent with our comments at the beginning of the year that 2018 would be flat. 2018 cash basis FFO as adjusted was $3.73, compared to $3.48 for 2017, up a strong 7.2%.