Vornado Selling Beverly Connection in LA - Analyst Blog

Real estate investment trust (REIT) – Vornado Realty Trust VNO – disclosed the penning of a deal to sell Beverly Connection for $260 million. This 335,000 square foot power shopping center is located in Los Angeles.

The sale of this unencumbered property is projected to be accomplished in the third quarter of this year. The move will help reap a net gain of around $40 million. We expect the deal to enhance the company's financial flexibility.

Of late, Vornado has undertaken a number of strategic measures to strengthen its business. Earlier this month, the company penned a deal to exchange the redeveloped Springfield Town Center in Virginia with Pennsylvania Real Estate Investment Trust PEI for $465 million. In February, Vornado disclosed the penning of a deal to sell Broadway Mall for $94 million. The mall is located in Hicksville, Long Island, New York.

We expect these concerted efforts to enhance Vornado's financial flexibility and pave the way to rope in capital for its more profitable investment opportunities.

In the later half of February, Vornado came up with its fourth-quarter 2013 results. Hurt by higher Toys 'R' Us losses, this REIT reported negative funds from operations (FFO) per share of 4 cents in fourth-quarter 2013. The company had reported FFO per share of 30 cents in the year-ago quarter. However, on an adjusted basis, Vornado's FFO per share came in at $1.33, higher than the year-ago FFO of $1.11.

Vornado currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the REIT industry include Cousins Properties Inc. CUZ and Public Storage PSA. Both stocks hold a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.