Vornado Realty Trust · NYSE:VNO
Vornado Realty Trust — Nareit REITweek 2016
44 slides from Vornado Realty Trust's conference presentation, November 2016
Slide 1: Vornado Realty Trust – November 2016
VORNADO REALTY TRUST etal tiara) ") Oat November 2016
Slide 2: Forward Looking Statements
F O R WA R D L O O K I N G S TAT E M E N T S Certain statements contained in this investor presentation constitute forward‐looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward‐
Slide 3: Non-GAAP Financial Measures
NON‐GAAP FINANCIAL MEASURES Non‐GAAP Measures This investor presentation contains certain non‐GAAP financial measures, including earnings before interest, taxes, depreciation and amortization (“EBITDA”) and net operating income (“NOI”). EBITDA is earnings before interest, taxes, depreciation and amo
Slide 4: GAAP Reconciliation
G A A P R E C O N C I L I AT I O N Reconciliation of Vornado Net Income to EBITDA, Adjusted EBITDA and Cash Net Operating Income for the twelve months ended December 31, for the fiscal years 2006 through 2015, as well as the twelve months ended September 30, 2016 LTM (9/30/16) $MM 2006 2007 2008 200
Slide 5: GAAP Reconciliation (Cont'd)
G A A P R E C O N C I L I AT I O N ( C O N T ’ D ) Reconciliation of Vornado Net Income to EBITDA and Adjusted EBITDA for the twelve months ended September 30, 2016 LTM Ended September 30, 2016 ($MM) Total Net income (loss) attributable to Vornado 491 Net income attributable to NCI in the Operating
Slide 6: Relentless Focus on Shareholder Value Creation
R E L E N T L E S S F O C U S O N S H A R E H O L D E R VA L U E C R E AT I O N In the past few years, we have exited multiple business lines and non‐core holdings ‐ $14.6 Billion of total transactions • Sold $5 Billion of non‐core assets including regional malls, the Mart business (retaining the Ch
Slide 7: Washington, DC Spin-Merger Transaction Overview
WASHINGTO N, DC SPIN‐MERGER TRANSACTION OVERVIEW Will create the market‐leading, pure‐play Washington D.C. real estate platform • Vornado to combine its Washington, DC business with The JBG Companies and a select pool of their assets via a tax‐free spin‐ Deal Summary merger to form a new publicly tr
Slide 8: Washington, DC Spin-Merger Transaction Rationale & Investor Benefits
WA S H I N GTO N , D C S P I N ‐ M E RG E R T R A N S A C T I O N R AT I O N A L E & I N V E S T O R B E N E F I T S Vornado believes that creating two separate, market‐leading, focused REITs will greatly enhance shareholder value Benefits to Vornado Shareholders Rationale for DC Separation Rational
Slide 9: JBG Overview
JBG OVERVIEW Best‐in‐class real estate operator with long history of value creation through opportunistic acquisition and development in the DC metro area JBG’s Track Record of Performance (Since 1999) $3.6B Over 235 EQUITY RAISED1 INVESTMENTS1 2.2x 23.3% EQUITY MULTIPLE1 GROSS LEVERAGED IRR1 Experi
Slide 10: Largest Pure-Play DC Metro Area Focused Real Estate Company
L A R G E S T P U R E ‐ P L AY D C M E T R O A R E A F O C U S E D R E A L E S TAT E C O M PA N Y The clear public vehicle for real estate investment in the DC metro area Public REITs with DC Metro Area Commercial Ownership1 (MM SF) 14.0 Operating Construction in Progress + Near‐Term Development 9.0
Slide 11: Premier Assets Located in Metro-Served, Urban Infill Submarkets
P R E M I E R A S S E T S L O C AT E D I N M E T R O ‐ S E R V E D , URBAN INFILL SUBMARKETS Over 98% of the portfolio is Metro‐served1 Portfolio Summary2 Based on GAV Operating Assets Assets 79 3 Commercial SF / % Leased 12.4MM / 89.3% 4 Multifamily Units / % Leased 4,451 / 97.6% Construction in Pr
Slide 12: Select Properties
JBG SMITH PROPERTIES SELECT PROPERTIES VORNADO ATLANTIC PLUMBING A 0 NORFOLK EB TOWER AT CENTRAL PLACE ARTERY PLAZA WARNER BUILDING COURTHOUSE PLAZA RTC - WEST RETAIL ATLANTIC PLUMBING ( 220 TWENTIETH STREET 1399 NEW YORK AVENUE 2101 L STREET 121 CRYSTAL DRIVE 01 17TH STREET 4749 BETHESDA AVENUE RET
Slide 13: Vornado RemainCo
VORNADO REMAINCO Peerless NYC focused real estate company with premier office assets and the only publicly investable high street retail portfolio of scale • Following the Washington, D.C. spin‐off, Vornado RemainCo will be a pure‐play New York City real estate company, with an irreplaceable NYC por
Slide 14: Near-Term Catalysts for Shareholder Value Creation
VORNADO REMAINCO – N E A R ‐ T E R M C ATA LY S T S F O R S H A R E H O L D E R VA L U E C R E AT I O N • Spin‐merger of the DC Business with JBG creates the market‐leading DC focused REIT and, by subtraction, the premier NYC pure‐play REIT • Sharpens focus on Vornado’s unique NYC franchise and irre
Slide 15: Trading at a Significant Discount to Net Asset Value
VORNADO REMAINCO – T R A D I N G AT A S I G N I F I C A N T D I S C O U N T T O N E T A S S E T VA L U E In millions except per share / psf VNO Share Price (11/11/16) $95 (at 9/30/16) Shares Outstanding 202 Equity Market Capitalization $19,243 Plus Debt and Preferred (1) $11,148 Other Liabilities (1
Slide 16: Fortress Balance Sheet
VORNADO REMAINCO ‐ FORTRESS BALANCE SHEET In millions (at 9/30/16) Secured Debt $9,968 Senior Unsecured Notes 850 Unsecured Term Loan 375 • Over $4 Billion of liquidity Unsecured Credit Facilities 116 Pro‐Rata Share of Non‐Consolidated Debt (Excluding Toys R Us) 2,918 Less: Noncontrolling Interests'
Slide 17: Deep and Experienced Management Team
VORNADO REMAINCO – DEEP AND EXPERIENCED MANAGEMENT TEAM • Vertically‐integrated platform that includes best‐in‐class in‐house development, leasing, operations and investment teams • With over 680 associates, no other company offers more in‐house expertise 12
Slide 18: Premier New York City Platform
VORNADO REMAINCO – P R E M I E R N E W YO R K C I T Y P L AT F O R M NYC Gross Asset Value (GAV) (in BN’s)1 NYC Gross Office Rents (PSF)2 (Per Green Street Advisors) $102 $25.0 $20.9 $78 $76 $10.7 $68 $7.0 $6.4 $60 $51 Vornado SL Green Boston Empire State Paramount Vornado Vornado Penn Boston Paramo
Slide 19: Premier New York City Platform (Continued)
VORNADO REMAINCO – P R E M I E R N E W YO R K C I T Y P L AT F O R M ( C O N T I N U E D ) Vornado is the only REIT with significant NYC high street retail holdings and the only publicly investable high street retail portfolio of scale Number of Buildings with Signed NYC NOI (Office / Retail, in MM’
Slide 20: Consistent Track Record of Strong Growth
VORNADO REMAINCO – CONSISTENT TRACK RECORD OF STRONG GROWTH Vornado RemainCo 10‐year NOI1 $38 $117 $18 $874 $891 $959 $799 $686 $689 $635 $585 $547 $510 $396 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 LTM as of 9/30/16 2017 2018 1. NOI from continuing operations (excludes sold properties and
Slide 21: Leader Among Best-in-Class REITs
VORNADO REMAINCO – LEADER AMONG BEST‐IN‐CLASS REITS Vornado RemainCo has delivered superior same‐store NOI growth relative to blue‐chip peers 5.2% 4.5% 4.3% 3.9% 3.9% 3.6% 3.3% 3.3% 3.0% 2.8% 1.6% Vornado SLG BXP PSA EQR AVB SPG TCO VTR FRT PLD RemainCo 2005– 2015 Same‐Store NOI CAGR1 1. Per reports
Slide 22: New York Portfolio by Submarket
VORNADO REMAINCO – N E W YO R K P O R T F O L I O B Y S U B M A R K E T AT 9 / 3 0 / 1 6 NEW YORK OFFICE NEW YORK RETAIL BY SF BY GROSS REVENUE Plaza District Other 15% 11% Midtown South 8% Chelsea/ Union Square Meatpacking 5% Penn Plaza 3% 25% Other 4% Midtown Times Square 32% Soho/Tribeca 14% 3% M
Slide 23: Select New York City Office Properties
VORNADO REMAINCO – SELECT NEW YORK CITY OFFICE PROPERTIES 18
Slide 24: Blue-Chip Office Tenant Roster
VORNADO REMAINCO – BLUE‐CHIP OFFICE TENANT ROSTER1 19 1. Includes office tenants from 555 California Street and theMART.
Slide 25: Select New York City Street Retail Properties
VORNADO REMAINCO – S E L E C T N E W YO R K C I T Y S T R E E T R E TA I L P R O P E R T I E S 20
Slide 26: Blue-Chip Retail Tenant Roster
VORNADO REMAINCO – B L U E ‐ C H I P R E TA I L T E N A N T R O S T E R 21
Slide 27: Control of the Key High Street Retail Submarkets in Manhattan
VORNADO REMAINCO – C O N T R O L O F T H E K E Y H I G H S T R E E T R E TA I L S U B M A R K E T S I N M A N H AT TA N UPPER FIFTH AVENUE ‐ OWN 23% OF FRONTAGE1 TIMES SQUARE CONTROL BOTH SIDES OF THE BOWTIE Note 1. Excludes churches, clubs and retail owned by users. 1540 BROADWAY 1535 BROADWAY 22
Slide 28: Staggered Lease Expirations
VORNADO REMAINCO – S TA G G E R E D L E A S E E X P I R AT I O N S AT 9 / 3 0 / 1 6 Office Weighted Average Lease Term: 8.2 years Retail Weighted Average Lease Term: 8.6 years 180 6,000 Office Expirations by SF Retail Expirations by Revenue 37% 31% 150 5,000 120 Millions of Dollars 4,000 Thousands o
Slide 29: Leader in Repositioning and Modernizing Properties
VORNADO REMAINCO – LEADER IN REPOSITIONING AND MODERNIZING PROPERTIES 1 1 A S S E T S T O TA L I N G 1 0 . 3 M M S F 90 PARK AVENUE – 2016 1290 AVE OF THE AMERICAS – 2014 640 FIFTH AVENUE – 2005 959,000 SF 2,110,000 SF 314,000 SF • Pricewaterhouse Coopers LLP • Neuberger Berman • Victoria’s Secret •
Slide 30: theMART and 555 California Street
VORNADO REMAINCO – theMART AND 555 CALIFORNIA STREET theMART (Chicago) – transformed from a showroom building to the premier 555 California Street – the franchise office building in San Francisco and creative and tech hub in the Midwest, resulting in significant earnings growth and arguably the most
Slide 31: Market Leader in Sustainability
VORNADO REMAINCO – M A R K E T L E A D E R I N S U S TA I N A B I L I T Y & E A R LY E N D O R S E R O F T H I S P H I L O S O P H Y Nationally recognized, industry‐leading sustainability program: • Energy Star Partner of the Year, Sustained Excellence Recipient 2015 • Over 30 million square feet LE
Slide 32: Penn Plaza – An Unprecedented Opportunity
VORNADO REMAINCO – PENN PLAZA – AN UNPRECEDENTED OPPORTUNITY W 35TH STREET FIFTH AVENUE 7 WEST MACY’S 34TH ST W 34TH STREET 330 WEST 1 PENN Tremendous Value Creation Opportunity 34TH ST PLAZA W 33RD STREET • Existing office leasable space of 6.8MM SF with average in‐place rents of 15 PENN PLAZA MANH
Slide 33: Farley Post Office Development
VO R N A D O R E M A I N CO ‐ FA R L E Y P O ST O F F I C E D E V E LO P M E N T FURTHER TRANSFORMING THE PENN PLAZA NEIGHBORHOOD • A 50/50 joint venture between Vornado and the Related Companies has been conditionally designated as the developer to convert the Farley Post Office in Penn Plaza into
Slide 34: Growth from New Developments in Chelsea/Meatpacking
VORNADO REMAINCO – G R O W T H F R O M N E W D E V E L O P M E N T S I N C H E L S E A / M E AT PA C K I N G 260 ELEVENTH AVENUE Size: 173,000 RSF Size: 325,000 RSF Completion: 4Q 2017 Est. Completion: 2021 85 TENTH AVENUE Size: 170,000 RSF Size:618,000 RSF Completion: 4Q 2017 Stabilized 29
Slide 35: 220 Central Park South – The Premier Residential Building in NYC
2 2 0 C E N T R A L PA R K S O U T H – THE PREMIER RESIDENTIAL BUILDING IN NYC • Scheduled completion for 3Q18 • Incremental net proceeds after repayment of debt and taxes is expected to be $900MM 1 (1) A portion of which will be part of a dividend to shareholders prior to completion of the developm
Slide 36: Appendix: Why New York?
APPENDIX: WHY NEW YORK? • Global city favored by businesses, residents, tourists and investors • US gateway city with the strongest long‐term population growth1 – vibrant 24/7 environment benefits from trend towards urbanization • Diversified employment base continues path of outsized growth • In 19
Slide 37: Population Growth by MSA
P O P U L AT I O N G R O W T H B Y M S A S I N C E 1 9 9 5 2,500 New York Los Angeles Washington D.C. Chicago San Francisco Boston 2,048 2,000 Continued Urbanization 1,647 People want to live, work and shop in NY Thousands of Persons 1,621 1,500 1,000 858 772 500 544 0 1995 1996 1997 1998 1999 2000
Slide 38: New York City Office-Using Employment
NEW YORK CITY OFFICE‐USING EMPLOYMENT 1,400 + 232,000 JOBS +109,000 JOBS + 214,000 JOBS 1,368 TECH & FINANCIAL DRIVEN FINANCIAL DRIVEN TAMI DRIVEN 1,350 1,300 1,275 1,250 1,237 1,200 1,150 1,154 1,128 1,100 1,050 1,043 1,000 Office‐using employment Source: Moody’s Economy and Cushman & Wakefield 33
Slide 39: Manhattan Inventory Over Time
M A N H AT TA N I N V E N T O R Y O V E R T I M E NET OFFICE SUPPLY IS FLAT SINCE 1990 420 410 408 400 403 400 400 398 398 397 397 396 395 395 395 394 393 393 393 393 392 392 392 392 391 391 390 Million Square Feet 389 389 389 389 387 380 379 360 340 320 300 Expected Additions 2019: 2020: 2016: 2017
Slide 40: Consistent Tourism Growth
CONSISTENT TOURISM GROWTH 70 International Tourism CAGR: 4.3% estimated Domestic Tourism CAGR: 3.1% International Overall CAGR: 3.3% 59.7 Domestic 58.3 60 56.4 54.3 50.9 52 48.8 12.3 12.7 50 46 47.1 12.2 45.6 11.4 42.6 43.8 10.9 10.6 39.9 9.7 37.8 8.9 9.5 8.6 Million of Tourists 40 36.4 36.2 6.8 7.3
Slide 41: Manhattan Retail Sales Growth
M A N H AT TA N R E TA I L S A L E S G R O W T H SOME OF THE HIGHEST GROSSING STORES IN THE WORLD → DRIVES RENTS $80,000 Manhattan High Street Retail Rent $PSF CAGR’s $70,000 High Street 2004 2016 CAGR $67,085 Upper Fifth Avenue 742 3,398 13.5% Times Square 331 2,363 17.8% $60,000 Madison Avenue 667
Slide 42: Major Cities: Total Investment Sales Volume Since 2010
MAJOR CITIES: T O TA L I N V E S T M E N T S A L E S V O L U M E S I N C E 2 0 1 0 $70,000 Most in-demand and liquid investment market globally $62,161 $60,000 Manhattan Total Los Angeles Total Boston Total DC Total $48,879 $50,000 Chicago Total London Total $45,583 Volume in $ millions San Francisc
Slide 43: Long Term Capital Appreciation – Manhattan Office Pricing PSF
L O N G T E R M C A P I TA L A P P R E C I AT I O N – M A N H AT TA N OFFICE PRICING PSF $1,200 On average, Manhattan office buildings double in CAGRs value every 10 years Manhattan 7.7% Boston CBD 5.3% $1,000 San Francisco CBD 5.2% $975 Los Angeles CBD 5.1% Manhattan DC CBD 4.4% San Francisco CBD $
Slide 44: Vornado Realty Trust – November 2016
VORNADO REALTY TRUST etal tiara) ") Oat November 2016