Alexander's Q2 Earnings Call Highlights

Key Points

• Vornado’s comparable FFO rose to $0.67 per share in the second quarter from $0.56 a year earlier, beating consensus by $0.10, driven by PENN District leasing, higher signage revenue and stronger New York office and retail performance.
• New York office occupancy and leasing improved significantly: occupancy reached 92.2%, while first-half Manhattan office leasing totaled 659,000 square feet with positive mark-to-market gains. Management expects occupancy to exceed 93% by the end of 2026 and PENN 2 to be effectively fully leased by year-end.
• Management raised its outlook for 2026 and expects further growth in 2027 as signed leases commence and Park Avenue Plaza contributes. Vornado reported $2 billion in liquidity, plans to sell two nonessential assets, and repurchased 1.8 million shares during the quarter.

Vornado Realty Trust reported second-quarter comparable funds from operations of $0.67 per share, up from $0.56 a year earlier, as leasing gains at its PENN District properties, signage revenue and New York office and retail performance contributed to growth.

Chairman and Chief Executive Officer Steven Roth said the company’s comparable FFO exceeded analyst consensus by $0.10 per share. President and Chief Financial Officer Michael Franco said the year-over-year increase was driven primarily by rent from PENN 2, the absence of a prior-year effect related to New York University’s master lease at 770 Broadway, and higher signage revenue, partly offset by increased net interest expense.

New York office leasing and occupancy advance

Vornado said its New York office same-store net operating income increased 13.7% under GAAP and 11.9% on a cash basis from the prior-year quarter. New York retail same-store NOI rose 7.3% on a GAAP basis and 5.7% on a cash basis.

The company’s New York office occupancy rose 60 basis points sequentially to 92.2%, compared with a trough of 84.4% in the first quarter of 2025. Franco said Vornado expects occupancy to exceed 93% by the end of 2026, with additional gains thereafter. Historically, the company has operated at physical occupancy of roughly 95% to 96%, he said.

During the first half of 2026, Vornado leased 978,000 square feet overall. Manhattan office leasing totaled 659,000 square feet at average starting rents of $105 per square foot, with positive mark-to-market changes of 9.5% under GAAP and 7.1% on a cash basis.

For the second quarter, Vornado completed 29 Manhattan office leases totaling 328,000 square feet, at average starting rents of $107 per square foot. Those leases included 181,000 square feet in the PENN District and 167,000 square feet elsewhere in Manhattan.

Roth said the company has 67,000 square feet of leases out for signature at PENN 2 and expects the property to be effectively fully leased by year-end. At PENN 1, Vornado has 246,000 square feet of leases out for signature, with an average mark-to-market increase of 44%, he said. The company projected third-quarter companywide mark-to-market increases of more than 20%.

Franco said signed but not yet commenced leases represent approximately $180 million of revenue and more than $150 million of FFO. He estimated that roughly 60% of that signed-but-not-commenced pipeline is related to PENN 2.

Management cites landlord-favorable market conditions

Roth described Manhattan’s Class A office market as increasingly landlord-favorable, citing rising leasing activity, shrinking availability and limited supply of large office blocks. He said office leasing volume in Manhattan is at its highest level in 25 years and that vacancy in the 180 million-square-foot Class A market in which Vornado competes has declined to 6.2%.

He also said new office development can take as long as five years to deliver and requires rents of roughly $300 per square foot to support construction economics. During the question-and-answer session, Roth said new buildings on Park Avenue may require rents in the mid- to high-$200s per square foot, with anchor tenants sometimes receiving lower rents than subsequent tenants.

Executive Vice President and Co-Head of Real Estate and Office Leasing Glen Weiss said Vornado’s office pipeline includes more than 2.2 million square feet in various stages of negotiation and proposal, including Citadel’s planned 1 million-square-foot lease at 350 Park Avenue and more than 500,000 square feet in the PENN District. Weiss said the company is seeing concessions decline, rents rise and tenant-improvement allowances tighten.

350 Park Avenue and recent acquisitions

Vornado said demolition is underway at its 350 Park Avenue site. Roth said the company intends to exercise an option to invest at its maximum 36% ownership level in the planned joint venture with Ken Griffin, who will hold a 60% interest, and Citadel, the project’s 1 million-square-foot anchor tenant.

Franco said Vornado’s incremental equity requirements for the project are expected to be approximately $300 million to $350 million over time. He said meaningful equity contributions are not expected for roughly two and a half to three years, with the company’s contribution likely becoming more substantial in 2029 and thereafter. The project has a $3.3 billion construction loan arranged, according to Roth, and the venture closing is expected in September.

Management also discussed two recent acquisitions: 623 Fifth Avenue and Park Avenue Plaza. Roth said Vornado is redeveloping 623 Fifth Avenue, a 383,000-square-foot property above Saks Fifth Avenue, into boutique office space and is preparing to execute its first lease there with a financial services firm for two floors at rents consistent with underwriting.

For Park Avenue Plaza, where Vornado acquired a half interest with Fisher Brothers, Roth said the transaction valued the 1.2 million-square-foot tower at $950 per square foot. He said in-place leases are at about half of current market rents, which management believes provides potential for future appreciation and earnings growth.

Outlook, liquidity and capital allocation

Franco said Vornado now expects full-year 2026 comparable FFO to exceed 2025 levels, with the second-quarter result serving as “a decent average run rate” for the rest of the year. He added that management still expects significant earnings growth in 2027 as leases at PENN 1, PENN 2 and other vacant space commence, along with contributions from Park Avenue Plaza.

Vornado reported liquidity of $2 billion, including $789 million of cash and $1.2 billion of undrawn credit facilities. Roth said the company is in discussions to sell two nonessential assets, while Franco said one potential sale would be in a non-core category and another would be aimed at crystallizing private-market value.

The company repurchased 1.8 million shares during the quarter at an average price of $29.92 per share. Since beginning its repurchase program in 2023, Vornado has bought back 8 million shares at an average price of $26.61 per share.

Roth said Vornado plans to maintain liquidity for both investment opportunities and potential market downturns, while continuing to invest in its existing portfolio, acquisitions, development projects and share repurchases.

About Alexander's (NYSE:ALX)

Alexander's NYSE: ALX is a publicly traded real estate investment trust focused on owning, leasing and managing commercial properties in the New York metropolitan area. The company's portfolio encompasses office buildings, retail storefronts and parking facilities, all held on a wholly owned basis. By concentrating on prime urban and suburban locations, Alexander's seeks to generate stable rental income and long-term asset appreciation.

Founded in 1928 as a family-run department store chain, Alexander's transitioned during the early 1990s into a pure-play real estate company following the sale of its retail operations.

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