NYC REITs Look Beyond The Lack Of Rent Collection In April
By Macarena Carrizosa
The equities markets seem to stray away from the labor market, except when it comes to REITS.
The New York City real estate market has some of the highest priced properties in the world. It's a city of renters, not landlords or owners, unless you count in REITS.
- VNO
- SLG
- BXP
- ESRT
Vornado Realty Trust
Total Rentable Sq Ft: 29,487,000
Net Income 2019: $3,334,262,000
Net Income 2018: $422,603,000
Largest Tenants: IPG and affiliates, Facebook, Macy’s, AXA Equitable Life Insurance, Neuberger Berman Group LLC, Ziff Brothers Investments Inc.
Share of annualized rent: 13.7%
SL Green
Total Rentable Sq Ft: 26,946,491
Net Income 2019: $291,487,000/p>
Net Income 2018: $270,856,000
Largest tenants: Credit Suisse Securities, Viacom CBS, Ralph Lauren Corporation, Sony Corporation, Debevoise & Plimpton, The City of New York, King & Spalding, Visiting Nurse Service of New York, Giorgio Armani Corporation, Advance Magazine Group, Fairchild Publications, Metro-North Commuter Railroad Company, News America Incorporated, Nike Retail Services, Inc., Cravath, Swaine & Moore LLP, Omnicom Group, Inc., Cardinia Real Estate, National Hockey League, WME IMG, LLC, Amerada Hess Corp, WeWork, Amerada Hess Corp
Share of annualized rent: 37.2%
Boston Properties
Total Rentable Sq Ft: 51,968,676
Net Income 2019: $651,999,000
Net Income 2018: $712,563,000
Largest tenants: U.S. Government, Salesforce, Arnold & Porter Kaye Scholer, Biogen, WeWork, Arnold & Porter Kaye Scholer, Kirkland & Ellis, Wellington Management, Bank of America, Ropes & Grey, Shearman & Sterling, Google, Weil Gotshal & Manges, O’Melveny & Myers, Snap, Ann Taylor Corp., Bechtel Corporation, Blue Cross Blue Shield, Mass FInancial Services, Finnegan Henderson Farabow.
Share of annualized rent: 25.99%
Empire State Realty Trust
Total Rentable Sq. Ft.: 10,138,057
Net Income 2019: $554,817,196
Net Income 2018: $117,253,000
Largest tenants: Global Brands Group, LinkedIn, Coty Inc., PVH Corp., Sephora, Li & Fung, Signature Bank, Urban Outfitters, Macy's, Foot Locker, Federal Deposit Insurance Corp., Duane Reade/Walgreens, HNTB Corporation, The Interpublic Group of Co's, Inc., Legg Mason, Shutterstock, Fragoman, WDFG North America, The Michael J. Fox Foundation, ASCAP.
Share of annualized rent: 35.00%
Real Estate Investment Trusts (REITs) are companies that invest in real estate properties or mortgages. According to data from the National Association of Real Estate Investment Trusts Nareit, 43% of households in New York State are invested in REITs. There are 125 REITs that own property in New York, that is 16,501 properties that compose $140 billion in total property value.
Your landlord may be one of these REITS or maybe you’d like to invest in one.
These are five NYC reits that own New York City and how they plan to weather the storm.
NYC REITs MAP
Data obtained from the REIT's 10K filings on Edgar.
Vornado Realty Trust is one of the largest REITs in New York. In April alone, 47% of its retail tenants did not make rent payments. Steve Roth, CEO of Vornado took a 50% salary cut for the rest of the year, other executives took similar income reductions.
“Life as we know it is upside down, people are hurting, businesses are hurting, and the future is uncertain,” said Roth.
They also had to place 1,800 employees on furlough and deferred $125 million in capital projects. Despite the impact, Roth states that the 40% devaluation of Vornado’s stock value is an “exaggeration”. He estimates that if things continue the same way it would cost investors $1 per share for a total of 12 months. In fact when it comes to distress type opportunities Roth says their antenna is “very alert”.
SL Green is making bold moves to increase its cash balance. It sold half its stake in the skyscraper 1 Madison and put several non core properties for sale at discount prices. Over 90% of office rents came on time in April but only 65% of retail tenants made rent. SL Green shares feel 46% since February but the largest office owner REIT in New York has no doubt that activity will at some point go back to normal.
“Count me out is someone who believes that the future of work will be at home in a bedroom with a laptop computer and spotty Wi-Fi connections with family members doing video bumps,” said Marc Holliday, CEO and Chairman of SL Green.
“I would normally point out at the start of our earnings call that we once again beat our estimates and explain to you how well we performed in the first quarter as well as our growth expectations for 2020,” said Owen D. Thomas, CEO of Boston Properties. “However, we recognized all our worlds changed in March.”
Unlike other REITs, Boston properties did not see a significant decline in rent collections. 95% of office tenants paid rent on time as did 90% of their commercial tenants.
Empire State Realty Trust collected only 73% of its office rents and 46%of its retail rents in April. In their first quarter earnings call for the year, they expressed confidence in the markets bounce back and that all tenants were being worked with, “What we saw in April is not an indication of the future,” said Thomas P. Durels, Executive Vice President.
