Vornado Realty Trust reported higher third-quarter comparable funds from operations and continued leasing momentum across its New York office portfolio, as management pointed to rising rents, tightening availability of high-quality space and substantial signed revenue yet to commence.
Comparable FFO was $0.65 per share in the third quarter, up $0.08, or 14%, from $0.57 per share a year earlier, President and Chief Financial Officer Michael Franco said. The increase reflected rent commencements, particularly at PENN 1 and PENN 2, the acquisition of Park Avenue Plaza and higher signage income, partly offset by higher net interest expense.
Chairman and Chief Executive Officer Steven Roth said comparable FFO exceeded analyst consensus by $0.02 per share. He characterized the quarter as one of strong mark-to-market leasing and same-store growth.
New York Office Leasing Drives Results
Vornado said New York office same-store net operating income increased 11.9% on a GAAP basis and 8.7% on a cash basis during the quarter. New York street retail same-store NOI rose 8.4% on a GAAP basis and 9.3% on a cash basis.
Overall New York operations, including Alexander's NYSE: ALX, posted same-store NOI growth of 10.2% on a GAAP basis and 4.9% on a cash basis. Excluding a Bloomberg rent abatement at 731 Lexington Avenue that Vornado accelerated for tax reasons, cash same-store growth was 8.4%.
New York office occupancy rose 80 basis points sequentially to 93%, compared with 88.4% a year earlier. Franco said the company had previously expected occupancy to exceed 93% by year-end and has now reached that level ahead of schedule.
During the first nine months of 2026, Vornado leased 1.6 million square feet companywide, including 1.15 million square feet of Manhattan office space. Manhattan office leases signed during that period carried average starting rents and produced mark-to-market increases of 23.5% on a GAAP basis and 16.8% on a cash basis, according to Roth.
In the third quarter, Vornado completed 30 Manhattan office leases covering 489,000 square feet. The leases had an average term of 9.5 years and generated mark-to-market increases of 37.2% on a GAAP basis and 25.9% on a cash basis.
Roth said the company expects to recognize its 1.05 million-square-foot Citadel lease at 350 Park Avenue in the fourth quarter. Vornado expects full-year Manhattan office leasing of approximately 2.4 million square feet in 2026, following 3.7 million square feet leased in 2025.
The company has $204 million of signed leases not yet reflected in GAAP results. Roth said the revenue will “almost entirely drop to the bottom line” because taxes and operating expenses are already included at the building level, with the impact expected over roughly the next five quarters.
PENN District Leasing and Redevelopment
Vornado said the first phase of its PENN District transformation is complete after $2.5 billion of capital spending. The completed work includes Moynihan Train Hall, Meta’s Moynihan office complex, an expanded Long Island Rail Road concourse, food and beverage offerings, the 33rd Street pedestrian plaza and redeveloped PENN 1 and PENN 2 properties.
At PENN 1, Vornado signed 10 leases totaling 248,000 square feet during the quarter at average starting rents of $123 per square foot and an average mark-to-market increase of 40%. The building is 96% leased. Roth said approximately 400,000 square feet of space paying below-market rents is scheduled to roll over during the next three years, in addition to 83,000 square feet of vacancy.
PENN 2 is 92% occupied, with approximately 150,000 square feet available, after Vornado leased more than 1.6 million square feet there since the project began. Roth said current dealmaking at the property is in the $125-to-$135-per-square-foot range.
The company plans to begin physical construction early next year on redevelopment of retail along Seventh Avenue and 34th Street, as well as a 480-unit rental residential building at 34th Street and Eighth Avenue. Franco said the residential project is expected to begin delivering units in late 2028 or early 2029.
350 Park and Other Development Activity
Vornado formally closed its 350 Park Avenue joint venture after the quarter ended. Ken Griffin is providing a 60% financial interest in the venture, while Vornado owns 36% and the Rudin family owns 4%.
The partners also closed a $3.3 billion construction loan and a 1.05 million-square-foot lease with Citadel. The 1.9 million-square-foot tower is expected to include 520,000 square feet of available space across 20 floors at the top of the building. Citadel has an option to expand by up to 330,000 square feet.
Franco said the project is projected to generate a 9.2% return on cost to Vornado, based on marking the company’s land contribution to $900 million. The company expects its incremental capital investment to begin in mid-2028, with most spending occurring from 2029 through 2031. Roth said the project was 60% bought, with another 20% of costs “soft circled.”
At 623 Fifth Avenue, Vornado signed its first lease with a financial services firm for 31,000 square feet over two floors, at a starting rent close to $200 per square foot. The project is scheduled for tenant delivery in the fourth quarter of 2027.
Vornado also said 1290 Avenue of the Americas is 97% occupied after leasing 650,000 square feet to new tenants since beginning its amenity-focused transformation. The property has an upcoming 240,000-square-foot expiration next year.
Outlook, Capital and Asset Sales
Franco said Vornado expects full-year 2026 comparable FFO to exceed 2025 results. While the company is still finalizing its 2027 budget, he said the third-quarter FFO level is a reasonable net run rate for 2027, accounting for higher interest rates, known move-outs and income being taken offline for redevelopment.
The company expects significant additional growth beginning in 2028, management said. Glen Weiss, executive vice president of office leasing and co-head of real estate, said tenant demand remains strong across industries, with greater renewal activity, longer lease terms and tightening concessions.
Vornado ended the quarter with $1.9 billion of liquidity, including $724 million of cash and restricted cash and $1.2 billion of undrawn credit lines. Franco said the company completed more than $4 billion of refinancings earlier in the year.
Roth said Vornado is in advanced discussions to sell two assets, which together could generate more than $1 billion of new cash if completed. He said pricing has “wobbled a little bit” amid higher interest rates. Management has not determined how it would allocate the potential proceeds, though Roth said the company’s current capital program is already funded and the cash could be available for opportunistic investments or share repurchases.
About Alexander's (NYSE:ALX)
Alexander's, Inc NYSE: ALX is a real estate investment trust that owns, manages and leases a portfolio of office, retail and residential properties, primarily in the New York metropolitan area. Its properties are generally located in densely populated, high-traffic locations and serve commercial tenants, retailers and residents.
The company's portfolio includes mixed-use and office properties in Manhattan and surrounding communities. Its best-known asset is 731 Lexington Avenue, a major mixed-use development in Manhattan that includes office space, retail establishments and residential units.
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