Vornado (VNO) Q2 FY26 earnings call: guidance and Q&A

What is the gap between leased and economic occupancy, what was the historical peak, and how much runway is there for growth?

Historically, physical occupancy ran at 95-96%, currently 92.2%, with expectations to return to mid-90s. Economic (GAAP) occupancy is lower at 83-84%. Signed but not commenced leases represent $180 million in revenue, translating to over $150,000 in FFO, which is 'in the bag'.

“So historically, we ran at 95%, 96% occupancy on a physical basis. I think maybe touched a little bit higher casual, but I would say that was a pretty consistent run rate. Today, we're at a little over 92%. We expect that we'll get back to our historical run rate in the next couple of years.”

asked by Floris Gerbrand Van Dijkum · answered by Michael Franco

How will the high rents expected at 350 Park Avenue ($350/sq ft) impact adjacent or nearby buildings, particularly Park Avenue Plaza?

The high rents in new buildings like 350 Park Avenue will create an 'umbrella' for older, well-located buildings. This will cause significant appreciation in value for these older assets, such as Park Avenue Plaza, where in-place rents are currently much lower, due to scarcity, demand, and high construction costs for new supply.

“The rents on the new buildings, your number is approximately correct, will create an umbrella at all of the older buildings, which have in-place rents of less than that in Park Avenue Plaza has rents up about 1/3 of what you just mentioned. It will all shut them all up.”

asked by Floris Gerbrand Van Dijkum · answered by Steven Roth

What has caused the target construction rents for new deals to increase from $250/sq ft a few quarters ago to $300-$350/sq ft now?

The numbers are ranges, not fixed. The market doesn't strictly require $350/sq ft to start a new building; competitors were building in the mid-to-high $200s. The high cost of new construction (e.g., $3,000/sq ft for a new Park Avenue building) drives these rents, with anchor tenants often receiving bargain rates while smaller tenants pay higher.

“The market doesn't really need $350 a foot to start a new building in the market and our competitors were not building somewhere in the probably mid- to high 3s -- sorry mid to high 2s. And what the market is doing is giving a bargain rent to the anchor tenant with the hopes and aspirations that the follow-on smaller tenants and higher rents will make the whole thing pencil.”

asked by Alexander Goldfarb · answered by Steven Roth

Is Vornado still interested in selling assets to capitalize on private market valuations and use the funds for share buybacks, given the stock's NAV discount?

Vornado is actively in conversations to sell two non-essential assets, which would provide significant cash and meet short-term financial objectives. While acknowledging the NAV discount, management believes their buildings will appreciate and that the NAV calculation is static, not reflecting future value from projects like 350 Park Avenue or Park Avenue Plaza.

“We are actually in conversations with selling 2 buildings the proceeds of which would be a very significant cash amount and which accomplishes our financial objectives in the short term.”

asked by Dylan Burzinski · answered by Steven Roth

Does the previously mentioned $0.40 FFO uplift for 2027 still apply, or has some of that growth shifted into 2026?

Some of the $0.40 FFO growth is indeed occurring earlier in 2026. However, the company still expects meaningful growth in 2027, and the original $0.40 uplift relative to the 'flattish' 2025 comment remains intact, with potential to be exceeded given current dynamics.

“Some of that $0.40 got started flowing through this year. But certainly relative to where we started beginning of the year is still intact. And given the dynamics, hopefully, will be in excess of that.”

asked by Steve Sakwa · answered by Michael Franco

What are the incremental capital outlays for Vornado's maximum 36% stake in the 350 Park Avenue project?

Vornado's incremental capital requirements for the 350 Park Avenue project are in the $300 million to $350 million range. These outlays are back-ended, with significant amounts not expected until 2029 and thereafter, as the partner's equity is trued up and construction financing is drawn.

“Incremental capital requirements from us over time are in the $300 million, $350 million neighborhood that doesn't really start for probably 2.5, maybe even 3 years in any significant scale given that Ken has to true up his equity with ours and then the bank wants to get money out.”

asked by Anthony Paolone · answered by Michael Franco

How does Vornado differentiate and assess opportunities for future capital allocation between New York and San Francisco, considering their different market stages?

Vornado loves San Francisco as a recovering market and owns a top-performing asset there (555 California). However, the company has a full plate of investments in New York, including new acquisitions, enhancing existing buildings, amenities, and the PENN District, in addition to investing in its own stock. The focus is on prime locations and assets that generate strong returns.

“We have invested in 2 or 3 new acquisitions. We invest in our existing buildings by leasing them up in the TI in keeping them modern and a pristine and ahead of the market. We invested our buildings in terms of amenities. We invest in our stock. So we're investing in new acquisitions, our existing assets our common stock and, of course, the PENN district. So we have a very full plate.”

asked by Vikram Malhotra · answered by Steven Roth