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Vornado Loses $409 Million on Fifth Avenue, Times Square Venture

The REIT sold a stake in the retail properties in 2019 and retained a 51 percent equity interest in the assets that were then valued at $5.6 billion.

(Bloomberg)—Vornado Realty Trust said its investment in a Manhattan retail joint venture is “other-than-temporarily” impaired and recorded $409 million in losses for the first nine months of the year.

The New York landlord sold a stake in its retail properties on Upper Fifth Avenue and Times Square in 2019. The transaction valued the portfolio at $5.6 billion, and Vornado retained a 51% equity interest.

Since then, Manhattan has taken a major hit from Covid-19. Retail rents have plunged in key shopping corridors as stores shuttered and consumers shifted more purchases to the internet. Tourism has also slowed dramatically in the city and few workers have returned to their offices.

The pandemic, which has roiled the commercial real estate industry across the U.S., may have a longer-term material impact on Vornado’s business, including lower rental income and occupancies, the company said Monday in its third-quarter earnings statement. That, in turn, may result in less cash flow to pay off debt or distributions to shareholders.

For the third quarter, Vornado said it collected 82% of rent due from its retail tenants and 95% from office tenants. The company is one of New York’s biggest office landlords, with properties including towers in the neighborhood of New York’s Pennsylvania Station.

Vornado’s shares have dropped more than 50% this year, closing at $32.50 Monday. They fell as much as 2.7% in late trading.

The company plans a conference call to discuss its quarterly results on Wednesday at 10 a.m. New York time.

© 2020 Bloomberg L.P.

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