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UPDATE: Goldman Sachs Downgrades Vornado Realty Trust (VNO) to Neutral

July 13, 2015 6:50 AM EDT
Get Alerts VNO Hot Sheet
Price: $28.77 +4.69%

Rating Summary:
    2 Buy, 13 Hold, 6 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 13 | Down: 11 | New: 11
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(Updated - July 13, 2015 9:12 AM EDT)

Goldman Sachs downgraded Vornado Realty Trust (NYSE: VNO) from Buy to Neutral with a price target of $100.00 (from $119.00). Analyst Brad Burke thinks catalysts have passed and noted a moderating growth outlook.

"Our positive view on VNO had been predicated on an overall bullish stance for CBD office, the execution on a number of specific value-creating catalysts (asset sales and a retail spin), and Washington, DC results exceeding excessively bearish expectations. With VNO now indicating its portfolio transition is largely complete and with the REIT now guiding to flat EBITDA in Washington, DC, we believe a Neutral rating is appropriate in the context of our more modest expectations for CBD office," said Burke.

"We view VNO as having a number of possible catalysts to drive growth, such as reducing cash levels, selling or spinning portfolios that remain under-appreciated by the market (notably NYC street retail and Washington, DC), better articulating a long-term management succession plan, and identifying/quantifying high-return uses of capital within VNO’s massive Penn Plaza portfolio. Our base case, however, assumes that these arrows remain in VNO’s quiver," continued the analyst.

"Our growth expectations are in line with our broader REIT coverage, though much of the growth is predicated on assumptions used for the reinvestment of proceeds from condo sales at 220 Central Park South. Further, we highlight that VNO’s $2.5bn of floating rate debt could reduce forward FFO by 6.5% using the current forward curve as a forecast," Burke added. "Finally, we highlight our view that VNO’s guidance for flat EBITDA in Washington, DC appears somewhat optimistic considering more challenging comps, recent negative GAAP releasing spreads, and a number of outstanding leases to be renewed for the remainder of the year."

For an analyst ratings summary and ratings history on Vornado Realty Trust click here. For more ratings news on Vornado Realty Trust click here.

Shares of Vornado Realty Trust closed at $97.13 yesterday.



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