Investing Opinion
Kass Nailed It on Vornado
Doug Kass
11/10/08 - 07:56 AM EST
(This blog post originally appeared on RealMoney Silver on Nov. 7 at 1:47 p.m. EST.
In it, Doug Kass gives his reasons for taking a long shot on Vornado Realty Trust. The stock shot up nearly 4 points after he picked up his shares.
Were you on RealMoney Silver?)
Going Long VNO
I recently initiated an investment long position in the premiere office REIT extant, Vornado Realty Trust (VNO), run by the best management team in commercial real estate. As always, in this economy, I want to stick with quality. From my perch, the shares at $64 more than incorporate (legitimate) concerns regarding New York City financial service industry layoffs -- that horse is now out of the barn! -- and the resulting impact on office occupancy rates, which management estimates will result in a 15% drop in rents. The shares, however, do not account for:- a superior office portfolio;
- $1.5 billion in cash, with another $400 million in escrow deposits and restricted cash;
- a large cushion of $2.5 billion in its outstanding credit line;
- a light debt rollover schedule;
- the potential for a stable/improving Washington, D.C., market, reflecting not only the political transition that will occur over the next few months but also from a buildup in government-formed agencies that will be the byproduct of recent policy moves to stabilize the credit and housing markets; and
- as mentioned previously, a skilled management team.