Vornado Realty Trust (VNO) Earnings & Analysis

Latest quarter

Vornado reported Q2 revenue of $462.2 million, below the consensus of $472.4 million. Adjusted EPS, as counted by the consensus, was $0.67, above the $0.57 estimate.

Revenue rose from $441.4 million a year earlier. The filing shows that higher rental revenue from same-store operations was partly offset by declines associated with acquisitions, dispositions and redevelopment. On the call, CFO Michael Franco said New York same-store net operating income rose 11.9% on a GAAP basis and 6.2% on a cash basis.

Diluted EPS fell to $0.08 from $3.70; Vornado attributed the decline primarily to the prior year’s $803,248,000 gain related to the 770 Broadway master lease with New York University. Funds from operations were $0.74 per diluted share, up from $0.60, though the filing noted items affecting comparability in both periods.

Vornado’s gross margin rose to 51.6% from 50.1%, while operating margin fell to 5.54% from 14.2%. Free cash flow was $82.8 million, compared with $875.5 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Steven Roth said Manhattan office demand spanned industries and that available and sublease space was shrinking. He said Vornado executed 29 office deals totaling 348,000 square feet in Manhattan during the quarter, at an average starting rent of $107 per square foot.

Roth said rents on relet space rose 7.7% on a GAAP basis and 5.0% on a cash basis, but cautioned that those mark-to-market measures depend on which leases are included. He favored starting rents for comparisons between buildings and companies. For the next quarter, he said: “Company-wide, we are projecting third quarter mark-to-markets of over 20%.”

CFO Michael Franco said New York office occupancy reached 92.2%, and the leasing pipeline included over 2.2 million square feet in negotiation or proposal. Asked about the path back to historical occupancy, Franco said GAAP economic occupancy was approximately 83% to 84%, lower than physical occupancy because of signed leases that had not commenced.

Roth said Vornado recently acquired a half interest in Park Avenue Plaza alongside Fisher Brothers and that its existing leases were at roughly half of market rents. At 350 Park Avenue, he said Vornado intended to exercise its option for a 36% interest, had a $3.3 billion construction loan ready, and expected the joint venture to close in September. Franco estimated Vornado’s incremental capital requirements for the project at $300 million to $350 million.

Asked about tenant-improvement spending, Franco said he did not have the numbers in front of him but expected spending to be comparable year over year, depending on when tenants requested funds. He added: “I think in ‘28 is when that starts to tail down as we’re through that big leasing.” Roth said Vornado was also in conversations to sell two nonessential assets to increase liquidity.

Guidance

CFO Michael Franco now expects full-year 2026 comparable FFO to be higher than in 2025, with second-quarter comparable FFO a reasonable average run rate for the rest of the year. Previously, Vornado expected comparable FFO to be slightly higher than in 2025, ramping up each quarter.