Vornado 4Q16 Earnings Call Notes

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Steven Roth

Still feel like it’s the time in the cycle that smart guys build cash

“A word about acquisitions and dispositions. While we have invested $606 million in developments and in other internal growth initiatives, interestingly, we made virtually no external acquisitions in 2016. This fact is a testament to our belief in what I have said repeatedly on recent calls, that the easy money has been made for this cycle, that asset prices are high well past the 2007 peak, that it’s a better time to sell than to buy. And most importantly, that now is the time in the cycle when the smart guys build cash.”

I know President Trump a long time

“I mean, my role at Vornado is my day job. It’s my night job, It’s my passion. I know President Trump. I know him for a very long time. We have had dealings together. We know each other. I’m honored that he has asked me together with Richard LeFrak to be an advisor to him and the administration with respect to infrastructure matters. Infrastructure matters are not political. Everybody – every citizen of America wants interest – our infrastructure to be robust to be in a good state of repair to be good. So that we can be competitive and we can have the right quality of life, et cetera.”

Retail is soft

“First of all, I have said on the – on calls for the last year or maybe even longer that retail is soft. It continues to be soft. Rents are not rising asset. And in many instances, rents are falling. And as I’ve said before, we are in the – we are in the realism business and we will meet the market and rent our space.”

David Greenbaum

Trump good for NYC

“Let me now turn to the question on everyone’s mind. What will 2017 bring? What I will say is that our confidence in the continued economic vibrancy of New York has never been greater. One of the stated economic priorities of the new Trump administration is financial services deregulation. The administration’s efforts in this regard could have a significant and positive economic impact for the city.”

Financial services expanding again

“Since the election of course there has been a marked shift in the mood around major financial institutions. While that mindset may take some time to be captured in job numbers, there certainly is reason to believe that we may once again see increases in financial services employment here in New York with important implications for the real estate market. That is just one example of how federal policy could benefit New York. Whether it is the repatriation of overseas profits, lower tax rates or increased federal investment in major infrastructure projects such as the trans-Hudson gateway project, the prospects for the local economy are bright”

Michael Franco

Foreign capital continues to be a primary driver of investment sales

“Foreign capital continues to be a primary driver of investment sales, making up almost 40% of the activity last year and remains a strong underpinning going forward. Foreign investors continue to have a strong desire to invest in the U.S. with New York City as the number one target. Most are still in the early stages of doing so, and assets like Vornado’s are their favorite investment.”

Financing markets are wide open but construction markets are a little tighter

“Turning to the financing markets. After periods of volatility in 2016, we are now open and liquid, especially for blue chip sponsors like Vornado. While the 10-year Treasury is up 60 basis points since the election, CMBS spreads have tightened and risk retention has been the Y2K of real estate finance, a non-event on large loans. Overall, we are seeing active bidding from all types of financing sources. CMBS lenders, life companies, balance sheet lenders and foreign capital all of which is good for borrowers. On the other hand, the construction loan market has gotten quite a challenge for all, but the best sponsors, which we expect will help reduce supply going forward.”