Vornado Realty stock upgraded by Evercore ISI as NYC office deals loom

On Tuesday, Vornado Realty Trust (NYSE:VNO) stock was upgraded by Evercore ISI, shifting from an Underperform to an Outperform rating. The firm also raised the price target on the stock to $38.00, up from the previous $32.00.

The upgrade follows a notable 17% year-to-date increase in Vornado's stock value, outpacing the REIT index's 9% gain since the beginning of the year.

Much of Vornado's outperformance came after its second-quarter results earlier in August, with the analyst citing several potential catalysts that could further drive the stock's performance over the next 6 to 12 months.

One such catalyst is the potential leasing or selling of 770 Broadway to a high-credit tenant. The deal is expected to be significantly higher than the current implied value of Vornado's New York City office portfolio. This could affirm the value of NYC office buildings and mitigate the risk associated with the recent lease expiration of a major tenant, Meta (NASDAQ:META).

Additionally, strong leasing activity at PENN 2, coupled with a growing pipeline for the New York market totaling 2.6 million square feet, is a positive sign. There is anticipation that a significant transaction involving large tenants could occur before the end of the year.

The analyst also pointed out that a decline in the 10-year treasury and SOFR curve could benefit Vornado due to its higher exposure to floating-rate debt. If the current Federal Reserve cut expectations hold, this could positively impact the firm's funds from operations (FFO) estimate.

Lastly, as PENN 2 transitions from development to service in 2025, it will create an FFO drag of $0.22 per share and affect discounted cash flow valuations.

The analyst suggests that investors adjust their valuations accordingly, either by adding back this dilution or by focusing on 2026 for a more stabilized earnings projection. Based on these factors, the decision was made to upgrade the stock's rating and increase the price target.

In other recent news, Cousins Properties (NYSE:CUZ) Incorporated has issued $500 million in 5.875% Senior Notes due on October 1, 2034, as part of its broader strategy to manage its capital structure and liquidity.

The funds will be used to repay loans under its credit facility and for general corporate purposes. The company also reported robust financial results for the second quarter, with funds from operations of $0.68 per share and a 5% increase in same-property net operating income.

Baird and Jefferies have adjusted their price targets for Cousins Properties to $31 and $27, respectively. Baird maintains an Outperform rating, citing the company's robust balance sheet and active pursuit of strategic acquisitions.

At the same time, Jefferies retains a Hold rating, noting the impact of two new mezzanine investments on the projected higher net operating income.

In addition, Cousins Properties has reduced leverage and acquired two mezzanine loans in Nashville and Charlotte. It anticipates stable or increased reported occupancy by year-end, supported by a strong leasing pipeline.

Despite negative net absorption in the Phoenix market, the company has reported positive leasing activity across several markets, including Atlanta and Charlotte. These developments reflect the company's recent growth strategy.

InvestingPro Insights

Following the upgrade by Evercore ISI of Vornado Realty Trust, InvestingPro data offers additional insights into the company's financial health and performance. With a market capitalization of $4.17 billion, Vornado stands as a significant player in the real estate investment trust (REIT) market. Despite trading at a high earnings multiple with a P/E ratio of 69.77, the company has shown a commitment to its shareholders by maintaining dividend payments for an impressive 45 consecutive years. This dedication is reflected in the dividend yield of 4.67%, providing a steady income stream to investors.

InvestingPro Tips further highlight that Vornado is trading near its 52-week high, indicating a strong market sentiment. This is supported by robust returns over the last one and three months, with price total returns of 13.54% and 17.68%, respectively. Additionally, the company's consistent profitability over the last twelve months suggests a stable financial footing. For those interested in a deeper dive into Vornado's performance and prospects, InvestingPro offers additional tips on its platform.

For investors seeking to make informed decisions based on real-time metrics and expert analysis, InvestingPro provides a comprehensive suite of tools and insights. With the next earnings date set for October 24, 2024, keeping an eye on Vornado's performance and market position through InvestingPro could offer valuable guidance for potential and current investors.

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