Rising Rent Expectations Raise Vornado Realty Rating At Argus

Ahead of the quarterly results release from Vornado Realty Trust VNO, Argus upgraded the shares of the company amid expectations that the company would raise rents in New York despite rising supply, as demand trends remain solid.

Giving the geographical break-up, the firm noted that the New York market now accounted for 89 percent of Vornado's EBITDA, with 59 percent in office and 30 percent in retail. The remainder, according to the firm, came from its office properties in Chicago and San Francisco.

The firm also expects the company's results to benefit from the recent spin-off of the struggling Washington, D.C., segment.

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As such, Argus upgraded shares of Vornado Realty from Hold to Buy and set a price target of $83.

At last check, shares of Vornado were trading higher by 0.92 percent at $74.74.

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Analyst Jacob Kilstein noted that the company is now pursuing a "prune-and-simplify" strategy following the spin-off of its malls and strip shopping centers in 2015. Despite the REIT sector facing the risk of higher interest rates for the next few quarters, the analyst said the company had earned the upgrade due to the recent pullback in its share price and the prospects for stronger performance following the D.C. spin-off.

To account for the impact of the Washington spin-off, Argus lowered its 2017 adjusted funds from operations per share forecast from $5.36 to $5.20 and its 2018 estimate from $5.59 to $3.99.