Vornado to Offer $300M of Preferred Shares

Fitch Ratings gives Vornado's stock issue a BB+ credit rating. The offering is scheduled to close this Wednesday.

Vornado Realty Trust is hoping to pocket $300 million from a public offering of perpetual 5.70% Series K cumulative redeemable preferred shares. The offering, with a price tag of $25.00 per share, is scheduled to close July 18.

Onboard as joint book-running mangers are Bank of America,  Merrill Lynch, Citigroup, Morgan Stanley, UBS Investment Bank and Wells Fargo Securities. Vornado plans to use the net proceeds from the offering for general business purposes.

Fitch Ratings has given its assessment of Vornado’s stock issuance, assigning it a credit rating of ‘BB+’. The rating, the agency noted, is supported by a number of factors, including the REIT’s solid access to capital, exceptional unencumbered assets to unsecured debt, manageable lease maturities and granular tenant base. The rating could have been higher, but for a few issues.

“These positive rating elements are offset by the likelihood for declining recurring operating EBITDA and higher recurring capital expenditures as the [federal government’s] Base Realignment and Closure statute related leases expire resulting in a lower fixed charge coverage ratio,” Fitch explained.” Additionally, there’s the issue of a debt maturity schedule in 2013 with significant concentrations of secured debt, although the agency anticipates that refinancing is likely.

Also working in Vornado’s favor is the company’s portfolio of premier assets, two of which it acquired this month. The additions include a 167,000-square-foot retail property in Miami Beach. The shopping center, purchased by Vornado Capital Partners, L.P. for $132 million, sits in a bustling shopping district and is 97 percent leased. The REIT also bought a 114,000-square-foot Manhattan retail condominium at 666 Fifth Ave. for $707 million.