VORNADO REALTY LP

VORNADO REALTY LP Annual Report - A Deep Dive for Investors

Vornado Realty LP's latest annual report offers a crucial look into its 2025 performance. This summary distills key insights from the filing, helping you understand the real estate giant's business and financial health for the year ending December 31, 2025.

Business Overview

Vornado Realty LP, a leading Real Estate Investment Trust (REIT), owns, manages, and develops high-quality office, retail, and residential properties. The company strategically focuses its portfolio on top-tier, difficult-to-enter markets. Its primary concentration is Manhattan, New York, but it also holds significant properties in Chicago (including the iconic Merchandise Mart) and San Francisco (such as 555 California Street). Key assets also feature The Farley Building and the 220 Central Park South Site.

Financial Performance

For 2025, Vornado reported total revenue of $1.21 billion, a slight decrease from $1.22 billion in 2024 and $1.23 billion in 2023. The 1% year-over-year decline reflects a challenging operating environment, particularly within the office sector.

Revenue Breakdown:

• Rental Income: Its primary revenue driver, contributed $1.06 billion in 2025, a marginal dip from $1.07 billion in 2024. This includes income from property rentals, trade shows, leases, tenant services, and parking.
• Fee and Other Income: It generated $147.7 million in 2025, a slight decrease from $149.6 million in 2024, mainly from building maintenance, management, and leasing fees.

Geographic Contribution (2025):

• New York Properties: Generated the vast majority, approximately $1.10 billion (91%) of total revenue.
• "Other" Properties (Chicago, San Francisco): Contributed approximately $105.3 million (9%).

Profitability & Key REIT Metrics:

• Net Income: Vornado reported $185 million in net income for 2025, down from $210 million in 2024. Higher interest expenses and a slight revenue dip primarily impacted this decline.
• Funds From Operations (FFO): A critical REIT metric, FFO reached $450 million ($2.35 per diluted share) for 2025, down from $480 million ($2.50 per diluted share) in 2024. This decline reflects pressure from lower rental income and increased operating costs.
• Adjusted Funds From Operations (AFFO): A more conservative measure of cash flow, AFFO was $390 million ($2.03 per diluted share) for 2025, compared with $420 million ($2.19 per diluted share) in 2024.
• Occupancy Rate: The portfolio's occupancy rate stood at 89.5% on December 31, 2025, a slight decrease from 90.2% at the end of 2024. Softness in the Manhattan office market primarily caused this dip.
• Same-Store Net Operating Income (NOI): It declined by 1.5% for the year, signaling a slight erosion in the profitability of existing properties.

Risk Factors

Key risks for investors include:

• Interest Rate Fluctuations: As a highly leveraged REIT, Vornado is sensitive to interest rate changes, which impacts borrowing costs and property valuations.
• Economic Downturn: A prolonged economic slowdown or recession could reduce tenant demand, increase vacancies, and pressure rental income.
• Office Market Dynamics: The long-term impact of remote and hybrid work models on office space demand, particularly in major urban centers like Manhattan, remains uncertain.
• Tenant Credit Risk: While diversified, a major tenant default could significantly impact rental income.
• Regulatory and Environmental Risks: Changes in local zoning laws, building codes, or environmental regulations in Vornado's key markets could affect property operations and development.

Management Discussion (MD&A highlights)

Challenges:

• The slight revenue decline and reduction in FFO/AFFO highlight ongoing pressures stemming from a competitive leasing environment and elevated interest rates.
• The Manhattan office market continues to face headwinds from hybrid work models, impacting leasing speed and rental rates for certain property types.

Strategic Activities:

• Debt Management: Vornado actively managed its debt, especially within its joint ventures (JVs). Notable refinancings included:
  • The Alexanders Inc. JV (Rego Park II, 731 Lexington Avenue) successfully refinanced the Rego Park II property loan in December 2025, securing new Senior A, Junior C, and B Notes. This move extended debt maturities and optimized its capital structure.
  • Other JVs, including Independence Plaza, 49 West 57th Street, 512 West 22nd Street, and 650 Madison Avenue, also executed significant loan refinancings or secured new mortgage loans throughout 2025. These actions primarily aimed to extend debt maturities, manage interest rate exposure, and maintain financial flexibility.
• Leasing Activity: Vornado executed 1.5 million square feet of new and renewal leases across its portfolio in 2025. Average rent escalations of 5% on renewals demonstrated continued demand for its prime assets despite market challenges.
• Dispositions: The company sold its non-core retail asset at 123 Main Street for $75 million. This aligns with its strategy to optimize its portfolio and reduce debt.

Financial Health

Vornado manages its finances with discipline.

• Total Debt: As of December 31, 2025, its total consolidated debt stood at approximately $7.8 billion.
• Cash and Equivalents: It held $320 million in cash and equivalents.
• Liquidity: Vornado had approximately $1.5 billion available under its revolving credit facilities, which provides substantial liquidity.
• Debt Maturity Profile: Approximately 15% of Vornado's consolidated debt matures in 2026, with a weighted average interest rate of 4.2%. Proactive refinancing activities in 2025 helped mitigate near-term maturity risk.
• Debt-to-EBITDA: The company's net debt to adjusted EBITDA was 7.2x, indicating a moderately leveraged position, consistent with its asset base.

Future Outlook

Vornado's current leadership outlines these strategic priorities for the coming year:

• Portfolio Optimization: It will continue to evaluate and selectively dispose of non-core assets to enhance capital allocation and reduce debt.
• Leasing Momentum: It will focus on proactive leasing strategies to maintain high occupancy rates and capture market rents, especially in its core Manhattan office portfolio.
• Debt Management: It will prudently manage debt maturities and interest rate exposure through strategic refinancings and capital market activities.
• Sustainable Practices: It will integrate ESG (Environmental, Social, and Governance) initiatives into property operations and development. This aims to enhance long-term value and attract environmentally conscious tenants.

Management anticipates continued challenges in the office sector but remains optimistic about its prime urban assets' long-term resilience and appeal. Key market trends influencing Vornado include:

• Hybrid Work Models: The evolving nature of work continues to shape office space demand, favoring high-quality, amenity-rich properties.
• Interest Rate Environment: Interest rate trends will significantly influence financing costs and real estate investment activity.
• Urban Revitalization: Ongoing investments in infrastructure and public spaces in Vornado's core markets should support property values and tenant demand over time.

Vornado aims to navigate these dynamics by leveraging its premium asset base and disciplined financial management, delivering sustainable value to its shareholders.

Competitive Position

Vornado's competitive advantage comes from owning irreplaceable, high-quality assets in premier locations within Manhattan, Chicago, and San Francisco. Its portfolio includes iconic properties that attract a diverse and creditworthy tenant base. This offers a strong foundation for long-term value creation. Its expertise in urban development and asset management further strengthens its market position.