VNO – Market expectations are for Uniform ROA recovery, but management appears concerned about the New York market, their PENN2 development, and demand

• Vornado Realty Trust (VNO:USA) currently trades near historical lows relative to Uniform Assets, with a 1.6x Uniform P/B. However, even at these levels, markets are pricing in bullish expectations for the firm, but management appears concerned about the value and potential of the New York market, the progress of the PENN2 development, and leasing demand
• Specifically, management may be exaggerating the value and potential of the New York market, and they may be concerned about their ability to sustain growth in new office lease rentals and rent prices per square foot. Moreover, they may be concerned about the progress of their PENN2 development and may be overstating the leasing demand for PENN2 space. In addition, management may be concerned about the Forever 21 rent relief deal, their relocation expansion deal with an existing client, and declines in international capital market volume activity. Furthermore, management may lack confidence in their ability to refinance and redeem their retail preferred securities, and they may be concerned about yields and their termination of two Fifth Avenue locations. Finally, they may be exaggerating the demand for their portfolio spaces and the extent to which tenants have reacted favorably to their amenities.