A Phoenix Rising Or A Dead Horse? Vornado Realty Trust Might Contain Preferred Opportunities
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A real estate investment trust (REIT) founded in 1982, Vornado Realty Trust is a premier owner, manager, and developer of office and retail properties with a focus on the important markets of the country, such as New York City, San Francisco, and Chicago. Office and Manhattan street retail assets make up a large portion of the company`s portfolio. In the real estate sector, Vornado is also a pioneer in sustainability policy.
Vornado Realty Trust Overview
Given the present slump in the office and retail markets, the company`s concentration in these markets has raised questions about its performance. Despite this, Vornado has disclosed significant adjustments that could affect investors in addition to its Q1 profits. Investors are concerned because it is delaying the payment of its usual dividend, but it has also authorized a $200 million share repurchase. Share repurchases, which often result in higher share prices, can have a comparable impact to dividends but are given preferential tax status unlike dividends, which are often subject to standard income tax.
Performance Concerns
The Vornado Preferred Series M is a more conservative option for those who take a more cautious approach to investing. An investment in the Vornado Series M preferred shares would effectively be a wager that office property valuations are approaching a low point and that key market cities will recover successfully. Preferred shares normally do not have as much volatility as common shares, which is an added benefit.
Preferred Series M
| Attribute | Value |
|---|---|
| Series | M |
| Alternate Ticker Symbols | VNO-M, VNO-PM, VNOprM |
| Redeemable? | Yes |
| Call Date | 12/13/2022 (Now Trading Post Call Date) |
| Perpetual? | Yes |
| Cumulative? | Yes |
| Shares Outstanding | 12,000,000 |
| Liquidation Preference | $25 |
| Recent Market Price | $12.77 |
| Discount to Liquidation Preference | $-12.23 (-48.92%) |
| Annualized Dividend | 1.3125 |
| Recent Ex-Date | 3/14/2023 |
| Current Yield | 10.28% |
| Original Coupon | 5.25% |
| Pay Period | Quarterly |
| Pay Dates | 1-Jan, 1-Apr, 1-Jul, 1-Oct |
Because of the cumulative dividend catch-ups in the Vornado Preferred Series M shares, if a dividend is missed, the preferred shares collect a sum that must be paid before any common dividends. Investors can increase their level of protection while taking part in potential future gains by purchasing these preferred shares. It is significant to note that the preferred shares have a $25 per share liquidation preference, which means that holders of these shares are entitled to receive that sum in the case of a liquidation, assuming sufficient value remained after more senior debts were repaid.
Protection and Potential Future Gains
Vornado is regarded as one of the worst REITs in some of the worst markets and has sold off considerably since releasing its Q1 earnings on April 26. While MyEListing does not make specific investment recommendations, the class M shares may offer an embedded value discount when compared to similar REITs in other situations. Investors can increase their protection while also taking part in potential future gains by owning the preferred shares.
In summary, Vornado Realty Trust`s success has been questioned due to the company`s exclusive focus on office and street retail, two of the worst-performing asset classes, notably in cities undergoing systemic problems at present. For those who anticipate a recovery in the office and retail markets, the company`s management team and recent financial decisions point to possible investment opportunities. Investors who choose Vornado`s Preferred Series M shares can benefit from additional protection and also partake in any potential growth. But before making any investing decisions, investors should conduct extensive research and seek professional advice that takes into account their unique risk profile.
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