A high-profile dispute between New York’s mayor and a billionaire hedge fund manager is complicating Vornado Realty Trust’s (VNO) growth outlook, even as the landlord shows signs of a stabilizing office portfolio.
Vornado Realty Trust reported first-quarter funds from operations that fell short of analyst estimates, posting 49 cents per share against a forecast of 51 cents, as a political feud threatens to derail a key Manhattan development project. The results, down from 67 cents a year prior, come as investors weigh the company’s discounted valuation against the uncertain future of its planned 1.5 million-square-foot tower at 350 Park Avenue, a joint venture with Ken Griffin's Citadel.
On the company’s earnings call, Chairman Steven Roth devoted his opening remarks to a viral video from New York Mayor Zohran Mamdani that criticized Griffin, calling the mayor’s actions an “ugly, unnecessary stunt.” Roth said, “Let me begin by saying that I cannot and do not speak for Ken, but I do unambiguously stand with him. We are all shocked that our young mayor would pull this stunt.”
The landlord’s financial results showed a mixed picture. While funds from operations, a key metric for real estate investment trusts, declined, Vornado’s New York occupancy rate edged up to 90.3 percent from 90 percent, and same-store net operating income rose 1.3 percent. Revenue for the first quarter was $459.1 million, a slight decrease from $461.5 million in the same period last year. The company's net loss narrowed significantly to $22.8 million from $86.8 million a year ago.
The core issue for investors is the future of the 350 Park Avenue development, a 62-story tower intended to be the New York headquarters for Citadel. After Mayor Mamdani singled out Griffin in a video supporting a tax on unoccupied luxury apartments, Griffin threatened to pull the firm from the project. While Vornado’s CEO stated that demolition on the existing site began “literally days ago,” the public spat introduces a significant risk to a project central to Vornado’s growth narrative, which consensus estimates see returning to growth in 2027 after a projected decline in 2026.
The conflict between Mayor Mamdani and Ken Griffin has put Vornado in a difficult position. The 350 Park Avenue project, a partnership between Vornado, Citadel, and the Rudin family, received unanimous City Council approval and has been in development since the previous administration. Roth’s strong defense of Griffin on the earnings call highlights the perceived danger to the city’s business climate. “[The wealthy] are our largest employers and philanthropists, and it is the one percent that make 50 percent of New York’s income tax,” Roth said. “They should be praised and thanked.”
Despite the political drama, some analysts see value in Vornado’s stock, which trades at just 13 times forward FFO, a significant discount to the REIT average of 18 times. Evercore ISI analyst Steve Sakwa, who rates the stock as Outperform with a $37 price target, noted the improved occupancy and operating income “supports the thesis that near-term earnings remain timing-affected rather than fundamentally impaired.”
Vornado’s balance sheet was also affected by recent transactions, including the acquisition of a 49 percent stake in 55 East 52nd Street, also known as Park Avenue Plaza, at a gross valuation of $1.1 billion. The company also purchased a development site at 3 East 54th Street for $141 million. These moves indicate a continued focus on prime Manhattan assets, even as the political and economic landscape for office real estate remains complex.
This article is for informational purposes only and does not constitute investment advice.
