Vornado Realty (NYSE:VNO) held its first-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.
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The full earnings call is available at https://edge.media-server.com/mmc/p/iv6i4ys9/
Summary
Vornado Realty reported a decrease in first-quarter comparable FFO to $0.52 per share from $0.63 last year, attributing the decline to various factors including higher interest expenses.
The company announced the acquisition of a 49% interest in Park Avenue Plaza, a Class A office building, expecting the transaction to be approximately $0.10 accretive on a full-year basis.
Vornado Realty anticipates continued growth in the New York office market, projecting significant earnings growth in 2027 as leasing activities at Penn1 and Penn2 take effect.
Management highlighted strong leasing activity, with average starting rents in Manhattan at $103 per square foot and a robust pipeline of over 1 million square feet of leases in negotiation.
The company actively engages in share buybacks and recently authorized an additional $300 million buyback program.
There were significant discussions about the potential development of 350 Park Avenue, with Citadel as a key anchor tenant.
Vornado Realty’s liquidity position remains strong with $2.6 billion, comprising cash and undrawn credit lines.
Full Transcript
OPERATOR
Good morning and welcome to the Vornado Realty Trust first quarter 2026 earnings call. My name is Rocco and I will be your operator for today’s call. This call is being recorded for replay purposes. All lines are in a listen only mode. Our speakers will address your questions at the end of the presentation during the question and answer session. At that time, please press star then one on your touchtone phone. I will now turn the call over to Mr. Steve Borenstein, executive Vice President and Corporation Counsel. Please go ahead.
Steve Borenstein (Executive Vice President and Corporation Counsel)
Welcome to Vornado Realty Trust’s first quarter earnings call. Yesterday afternoon we issued our first quarter earnings release and filed our quarterly report on Form 10Q with the Securities and Exchange Commission. These documents as well as our supplemental financial information package are available on our website www.vno.com under the Investor Relations section. In these documents and during today’s call we will discuss certain non GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in our Earnings Release Form 10Q and Financial Supplement. Please be aware that statements made during this call may contain forward looking statements and actual results may differ materially from these statements due to a variety of risks, uncertainties and other factors. Please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2025 for more information regarding these risks and uncertainties. The call may include time sensitive information that may be accurate only as of today’s date. The Company does not undertake a duty to update any forward looking statements on the call today from management. For our opening remarks are Steven Roth, Chairman and Chief Executive Officer and Michael Frankel, President and Chief Financial Officer. Our senior team is also present and available for questions. I will now turn the call over to Steven Roth.
Steven Roth (Chairman and Chief Executive Officer)
Thank you Steve and good morning everyone. Business at Vornado continues to be excellent and it’s getting better and better. We are riding the wave of a strengthening, long lasting landlord’s market and New York is by far and away the strongest real estate market in the country. Michael will get into the details shortly, but today I have different fish to fry and and I will ask the first question Question: What do you make of the spat between Mayor Mondavi and Ken Griffin and how will it affect your 350 Park Avenue development? Answer Let me begin by saying that I do not and cannot speak for Ken, but I do unambiguously stand with him. And notwithstanding the mistakes and bad form of the recent video that went viral we are pulling for Mayor Mondavi to succeed. Let me establish my credentials. Vornado is a New York company and I am a New Yorker, born in Brooklyn and attended DeWitt Clinton Public High School in the Bronx. Both Vernado and I are lucky to be New Yorkers. My daughter and three granddaughters live in the Bronx and my son and his family live in Brooklyn. My wife of 56 years and I live and work in Manhattan. We follow the rules and we pay our fair share. Vornado will pay $560 million in real estate taxes this year and I’m pretty sure that’s in the top three. And that doesn’t begin to count the personal income taxes that I and our Grenado population pay to the city and state of New York. We work our asses off. We are not boastful. We are very proud of our lifetime of achievements. We are the company that is investing billions to transform the Penn District. New York is a union town and we are a union shop employing thousands of hard working New Yorkers in our buildings and on our construction sites. The ugly unnecessary video stunt is personal to Ken and sort of personal to me too. You see, Vornado and I are the developers of both 220 Central Park south residential building and the 350 Park Avenue Citadel Tower. We are all shocked that our young mayor would pull this stunt in front of Kent’s home and single them out for ridicule. This was both irresponsible and dangerous. As I said, Vornado is the owner of the 65 year old building on Park Avenue on the Park Avenue blockfront that will be raised to make way for the Citadel New York headquarters tower which will employ thousands further cementing New York as the financial capital of the world and pay significant taxes and on and on. This building is being designed by the same Foster and Partners architectural team that designed JPMorgan Chase’s new headquarters down the block. This is now the if we move forward project. Now, a project of this scale takes years and we have already worked with two prior city administrations, both of whom have recognized the benefits and have been enthusiastically welcoming and supporting and supporting. As evidenced by the rare unanimous ULIP approval for this project. Demolition began literally days ago and we at Tornado are ready to go. I must say that I consider the phrase tax the rich, quote tax the rich when spit out with anger and contempt by politicians both here and across the country to be just as hateful as some disgusting racial slurs. And even the phrase from the river to the sea. What these poll pauls seem to Be saying is that the rich are evil or the enemy or the targets, or maybe even just suckers. But the rich whom the politicians are targeting started at nothing, are the epitome of the American dream. They are our largest employers and largest philanthropists. And it is the 1% that pay 50% of New York’s income taxes. They are at the top of the great American economic pyramid for a reason. They should be praised and thanked. Ken, our partner and friend, is the best of the best. So where are we now? As we discussed last quarter, Ken exercised his option to enter our development joint venture and build a new 1.9 million square foot tower with Citadel as the anchor tenant. We have until the middle of July to sign decide whether to participate with Ken in the venture or to sell to him. It’s a good bet that we will go all in. This fence cannot be mended by a short, terse, insincere private apology. What I beg my mayor to do is to begin every day being business welcoming and business friendly as his first priority. That’s the only way to get the growth and financial wherewithal to accomplish his programs, some of which I must say are interesting and valid. Public safety, schools, child care, clean street housing, affordability, homeless programs, et cetera. The election is over. Now is the time for hard work and management, not showboating. New York is an enormous enterprise with a city budget of $120 billion and a state budget of $250 billion. If there is a 5 or $10 billion budget shortfall, surely that can be found. That money can be found by managing rather than by taxing. It is interesting to note that high tax New York spends more than double per capita. Double per capita than low tax or no tax, Florida or Texas. There is a lesson here. Maybe something good can come out of this blunder. Maybe we can draft Kent to become active and lead an effort to educate New York voters and to elect right minded candidates. Ken can do it. He’s the one who could galvanize the entire business community. Here’s an interesting fact to it. Members of the partnerships in New York city alone employ 1 million voters. Hundreds of our business leaders would line up to support Ken. I would be first in that line. I was taught and I believe that. I believe in an America where after an election, all sides get behind us and support the winning candidate for the greater good. Our mayor is young, smart and energetic. With a little tweak here and a little tweak there, his leadership could make this great city even greater. He will learn over time that growing a tax base is a winner and raising taxes is a loser. I will say it again. He will learn over time that a growing tax base is a winner and raising taxes is a loser. And that’s a hard working 1% are allies, not enemies. Let’s learn from this mistake and move upward. Turning to Vornado, we now have a lineup of assets and in process projects which I am confident will deliver the highest growth in our industry. Executing on all this is now our singular focus. In this year 2026, we will complete the heavy lifting of leasing at Penn1 and Penn2. As Michael and Tom have already been saying quarter after quarter. Our published numbers will reflect all this by the end of 2026 and going into 2027. As part of our focus on enhancing our portfolio and making great deals, we announced last week the acquisition of a 49% interest in Park Avenue Plaza, a 1.2 million square foot class A office building along the prime stretch of Park Avenue. This asset is directly across the street from our 350 Park Avenue project. The building is 99% occupied by blue chip tenants with an 11 year weighted average lease term and rents that are 40% to 50% below market. Prime Park Avenue AAA assets rarely trade and we believe we made an excellent purchase. We’re buying the asset at $950 per square foot which is 65 to 70% discount to replacement cost and we are inheriting a fixed rate, a sub 3% loan through 2031 to leverage off an enhanced return. We expect the transaction to be approximately $0.10 accretive on a full year basis. In the first year we are happy to be partnering with the Fisher family who own the other 51% of the assets. We have a long relationship with the Fisher family. They are a first class operator who think much like we do with Park Avenue Plaza. Our recent acquisition of 623 Fifth Ave and the pending development of 350 Park Ave, we will be adding, call it 2 million square feet at share of the very highest quality prime assets to our portfolio at Very Accretive economics. Speaking of 623 Fifth Avenue, our 383,000 square foot asset which we are redeveloping to be the premier boutique office building in Manhattan. We are far along in our design and planning. We are receiving outstanding reaction from the market and already have active tenant interest at or above our underwriting. Demand for our retail assets is robust and accelerated.
Michael Frankel (President and Chief Financial Officer)
We have a handful of assets for sale in the market. I covered share buybacks in my recently posted shareholders Letter to date, under our $200 million share buyback program, we have repurchased 7 million common shares at an average of $25.80 per share, totaling $180 million. Last week our board authorized an additional $300 million buyback program. Now to Michael thank you Steve and Good morning everyone. First quarter Comparable FFO was $0.52 per share compared to $0.63 per share for last year’s first quarter. This decrease is consistent with our comments from the prior quarters and is primarily due to the reversal of previously accrued Penn one ground rent expense in the prior year’s first quarter and higher net interest expense partially offset by higher FFO resulting from the execution of the NYU master lease at 770 in the prior year and strong income growth at Penn 1 and Penn 2. We have provided a quarter over quarter bridge on page two of our earnings release and on page six of our financial supplement. We now expect full year 2026 comparable FFO to be slightly higher than 2025, ramping up each quarter due to gap rents coming online, lower interest expense after our June 2026 bonds repaid, and some seasonality relating to our signage business. As previously indicated, we expect there to be significant earnings growth in 2027 as the positive impact from 10:1 and Penn2 lease up takes effect, as well as the positive impact of the recent acquisition of Park Avenue plus Turning to Leasing the Manhattan office market is head and shoulders the best in the country and is off to its strongest start to
OPERATOR
a year in over a decade. Manhattan leasing volume reached nearly 12 million square feet, the highest first quarter level since 2014. There is a significant supply demand imbalance in the 180 million class, a better building market in which we compete as the availability rate in the prime submarkets in Midtown and the west side has tightened significantly and there is little new supply coming for the foreseeable future given the significant cost and duration to build. This is all resulting in tenants competing for space and rents rising aggressively. The landlord’s market we have been long predicting is very much here, while the macro environment we operate in today has gotten even more complicated since our last call and the geopolitical volatility is as high as we’ve seen in some time. The US Economy just continues to chug along as does New York’s. While there is a risk that the Middle east conflict lasts much longer and has a greater economic impact, to date we have not seen any change in tenant behavior. Moreover, while there has been a lot of AI fear mongering out there and while we are respectful to risk, we believe it is overblown. Over the past 50 years, office using jobs have continually evolved based on new technology from the computer revolution of the 1980s when personal computers and word processors were introduced to the 2000s when the Internet transformed workflows and the way we communicate to now with AI improving efficiencies and increasing productivity. In every example, office using jobs were not reduced but they shifted from clerical based functions to knowledge based roles and each new revolution spurred productivity and economic growth. With new businesses and net positive jobs created, there will be winners and losers, but by industry, by job function and by geography. But make no mistake, New York and San Francisco will be winners as the intellectual and innovation capitals of the country where talent will continue to aggregate and in the best buildings At Vornado we are coming off our second best leasing year in our company’s history where we leased 3.7 million square feet with 960,000 square feet of New York office in the fourth quarter. Business continues to be very good and the momentum from last year has continued during the first quarter of 2026. In the first quarter released 426,000 square feet of office space overall, including 311,000 square feet in New York. Our metrics were very strong. Average starting rents in Manhattan were $103 per square foot with mark to markets a positive 11.7% GAAP and positive 9.7% cash and an average lease term of nine years. Our new York office pipeline is robust and has over 1 million square feet of leases in negotiation and various stages of proposal. Turning to the capital markets, the financing markets continue to be strong and liquid for Class A New York office assets, though pricing has widened a bit given the current geopolitical environment. The investment sales market continues to heat up as well, with a broadening set of buyers keenly focused on New York City. We are very active in the capital markets in the first quarter, most of which we covered on the last call. Given we’ve dealt with almost all of our 2026 and 2027 maturities, we don’t have any significant financings we need to complete for the next 18 months. We do still have a few loans that we need to work through at lenders over the next two to three years. Finally, our liquidity remains strong at $2.6 billion, which is comprised of cash of $1.2 billion and our undrawn credit lines of $1.4 billion. With that, I’ll turn it over to the operator for Q and A thank you. We will now begin the question and answer session. If you have a question, please press star then one on your touchtone phone. If you wish to be removed from the queue, please Press Star then 2. If you are using the speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star than one on your touchtone phone. Each caller will be allowed to ask a question and a follow up question before we move on to the next caller. This first question comes from Steve Sacwa at Evercore isi. Please go ahead.
Steve Sacwa
Yeah, thanks. Good morning, Steve. Thanks for your opening comments on the city and the administration. I guess maybe going to Michael’s commentary on just the pipeline and the million feet. I didn’t know if Michael or Glenn could maybe expound a little bit on how much of that is for upcoming lease expirations, how much of that is for kind of vacancy within the portfolio. And I guess most of that’s probably in New York, but maybe discuss kind of The New York vs. Chicago vs. San Francisco demand trends.
Glenn
Hi Steve, it’s Glenn. How you doing? So you know, our pipeline is extremely well balanced. Of the million feet, it’s right down the middle. 50% new expansion, 50% renewal. The other thing I’ll note is on renewals due to the lack of quality space available in the market, we’re seeing many of our tenants coming to us early on renewals since they can find quality alternatives, which is a key indicator of …
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