Vornado (VNO) Refinances $800M Loan For 650 Madison Avenue
Zacks Investment Research | Dec 02, 2019 08:28PM ET
Vornado Realty Trust (NYSE:VNO) recently announced that its 20.1% owned joint venture has accomplished refinancing of an $800-million loan for 650 Madison Avenue. The interest-only loan carries a fixed rate of 3.486%. The move is a strategic fit as it helps boost the company’s financial position.
The 10-year loan will mature in December 2029, and replace a previous $800-million loan, which had an interest at a fixed rate of 4.39% and was slated to mature in October 2020. Notably, the refinancing has been done for the 600,000-square-foot office and retail property in Manhattan.
This will offer the company a cheaper line of credit and help reduce its annualized interest expense. Moreover, extended maturities of the assumed debt will help the company improve its maturity profile and enjoy greater liquidity for day-to-day operations. The move will also boost the company’s cash flow and alleviate its bottom-line pressure.
In addition, Vornado has a strong liquidity position of $3.36 billion, as of Oct 29. This included $1.28 billion in cash, restricted cash and securities, and $2.08 billion undrawn on its revolving credit facilities. Furthermore, decent leverage and well-manageable debt maturities look encouraging. With a flexible financial position, the company is well poised to take advantage of future investment opportunities and fund its development projects.
Notably, amid resilient economy and stable job-market environment, demand for Vornado’s premium assets in high-rent, high barrier-to-entry markets will likely remain healthy. The company’s strong balance sheet also supports its growth endeavors. Further, it is redeploying sale proceeds to fund strategic acquisitions and redevelopments, which augurs well for long-term growth.
Nonetheless, consistent with its portfolio-repositioning efforts, Vornado has been aggressively disposing the company’s assets. In fact, since the beginning of 2019 through October, the company has executed more than $3.1 billion in asset sales. Although these streamlining efforts are expected to propel growth over the long term, the earnings dilutive impact from asset sales cannot be bypassed in the near term. Also, shrinking footfall at malls as well as store closures and retail tenant bankruptcy are other concerns.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have outperformed the Zacks Investment Research
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