By Ian Salisbury

New York office real estate investment trust Vornado certainly has its issues -- including a high-profile political spat between hedge fund tycoon Ken Griffin and New York Mayor Zohran Mamdani. But investors willing to stick with the stock could be rewarded in 2027.

On Monday, Vornado, which owns 20 million square feet of office space primarily in New York, reported first-quarter funds from operations of 49 cents a share, slightly below Wall Street forecasts for 51 cents, according to FactSet. The result was also well down from a year earlier, when the company delivered FFO of 67 cents a share. Funds from operations is the real estate industry's equivalent to operating profit.

Vornado shares were up 0.2% to $29.73 in early trading Tuesday. But they've struggled in recent months, declining about 16% over the past six months. As a result, the shares, which yield 2.5%, trade at just 13 times forward FFO, well below the REIT average of 18 times.

While no one likes to see profits lag, investors largely see Vornado as a comeback bet on New York City's office market. From that angle, the earnings report included a number of positive signs, noted Evercore ISI analyst Steve Sakwa in a note Monday.

Vornado's New York occupancy rate rose to 90.3% from 90%, Sakwa noted. Meanwhile New York same-store net operating income, a key measure of rental income health, increased 1.3%.

The result "supports the thesis that near-term earnings remain timing-affected rather than fundamentally impaired," wrote Sakwa, who rates the stock Outperform with a $37 price target, representing about 24% upside from Tuesday's trading price.

Vornado could face additional headwinds in 2026, but is expected to return to growth in 2027, according to consensus estimates. For 2026, analysts forecast FFO of $2.32 a share, on average, down from $2.42 in 2025. For 2027, FFO is expected to bounce back to $2.64 a share, according to FactSet.

One factor that's been complicating Vornado's story recently is a business partnership with Griffin's Citadel hedge fund. Vornado, Citadel and the wealthy Rudin family have a joint venture to build a 62-story, 1.5 million square-foot office tower at 350 Park Avenue, a prime Midtown location.

The problem: Last month New York's brash socialist Mayor Mamdani, singled out Griffin in a viral video designed to drum up support for a new tax on unoccupied New York apartments. Griffin, for his part, responded by threatening to yank Citadel from the Park Avenue development project.

While most observers seem to think Mamdani and Griffin will eventually resolve their Drake-and-Kendrick-Lamar-style feud, Vornado CEO Steven Roth weighed in Tuesday, seeking to reassure investors further.

After reciting his New York credentials (including his high school and his three granddaughters who live in the Bronx), he called the video an "ugly, unnecessary stunt."

He added: "Vornado is the owner of the 65-year-old building on the Park Avenue block front that will be razed to make way for the Citadel New York headquarters tower, which will employ thousands, further cementing New York as the financial capital of the world....Demolition began literally days ago and we at Vornado are ready to go."

Write to Ian Salisbury at ian.salisbury@barrons.com

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May 05, 2026 15:27 ET (19:27 GMT)

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