Recurring FFO up 14%, the best leasing market Steve Roth says he has ever seen — and a stock 17% off its August high. The 350 Park deal is now real; the 2027 earnings are not yet.
VNO · Earnings Call · 2026-11-03
Two markets, one stock
Vornado reported one of its strongest operating quarters in years into a tape that has stopped caring. The stock is down 14.3% over the last 90 trading days and sits 17.2% below its 2026-08-04 close of $40.91 — a fresh report into a deepening drawdown, not a breakout. That gap is the story.
The operating numbers are not ambiguous. Comparable FFO of $0.65 came in $0.08, or 14%, above last year's third quarter. New York office same-store NOI rose 11.9% GAAP and 8.7% cash. Year-to-date Manhattan office leasing of 1.15 million square feet cleared at $113 average starting rents with 23.5% GAAP mark-to-market, and the third quarter alone — 30 deals, 489,000 square feet, $123 starting rents, 9.5-year average term — posted 37.2% GAAP and 25.9% cash spreads. Glen Weiss was almost reckless about it: “we have never seen it as strong as it is right now. Not even close.” — Glen J. Weiss, Head of Leasing · 2026-11-03
And yet the Manhattan office story is not what the tape is pricing. Roth himself delivered the punchline in his own prepared remarks, almost as an aside:
the 10 year treasury run-up to 5% may be impeding the supply of new builds, but it is seems to be having absolutely no effect on tenant demand.
That sentence is the whole dossier. Demand is immune to rates; the equity is not. The rising interest rate environment that sits atop the market's own keyword list this quarter is the discount-rate problem, and Vornado is a levered, development-heavy New York office REIT — precisely the instrument that de-rates when the long bond backs up, no matter how many $123 leases it signs.
What actually changed: 350 Park stops being a promise
For three quarters, 350 Park Avenue was an option. In May, Roth was explicit that Vornado had not yet committed: “I do expect we will be all in, but that's not a legal commitment at this time yet.” — Steven Roth, Chairman and Chief Executive Officer · 2026-05-05
In October, that became a closed transaction. The joint venture with Ken Griffin at 60%, Vornado at 36% and Rudin at 4%, a $3.3 billion construction loan — a record for an office deal — and a 1.05 million square foot anchor tenant lease with Citadel. Roth put the returns on the table: “Our return on cost is over 9%. Note that this is an unlevered return. The levered return is over 13%.” — Steven Roth, Chairman and Chief Executive Officer · 2026-11-03 Incremental Vornado capital is roughly $290 million and does not begin in scale until mid-2028.
Read that against the construction loan market Franco described — CMBS spreads widening modestly, office bond spreads 30-40bp wider than April — and the achievement sharpens: they got a record-sized office construction loan and a $3.3 billion commitment done in a market that got worse, not better. The transformation pipeline behind it is stacked: 623 Fifth Avenue's first lease at close to $200 per foot with delivery in Q4 2027, a 480-unit residential building at 34th and 8th breaking ground early next year, and PENN 15 still to come.
The guidance question everyone circled
The Q&A was three analysts asking the same question in different words, and management giving the same non-answer. Franco called the current quarter "a reasonable run rate through 2027." John Kim did the arithmetic out loud — roughly $2.60 — and asked why that was $0.10 to $0.15 light of the previously discussed uplift. Franco's answer to the follow-up was four words: “Just a net number.” — Michael J. Franco, Chief Financial Officer · 2026-11-03
What is inside that net number is where the quarter actually lives. Franco flagged “with rates being higher, that probably has a, let's call it, $0.10 impact next year” — Michael J. Franco, Chief Financial Officer · 2026-11-03 — plus income taken offline at 34th and 7th retail and, notably, in signage, a decision management says it made recently because the re-leasing upside is greater. Tony Paolone tried to pull the $0.10-$0.15 back into 2028 and Franco declined: "I am not backing off what I said last quarter... I am not backing off 2027."
Meanwhile the off-balance-sheet cushion everyone has been waiting for keeps getting closer without arriving. Two asset sales have been "in conversations" since at least August, when Roth said “We are actually in conversations with selling 2 buildings” — Steven Roth, Chairman and CEO · 2026-08-04. Today: "well advanced," and “over $1 billion of new free cash” — Steven Roth, Chairman and Chief Executive Officer · 2026-11-03 if both close — with pricing that "has wobbled a little bit." The same pattern shows up in leverage. In August, Franco said the metric “could go sub-7. We think it probably will go sub-7 absent other investing.” — Michael Franco, Chief Financial Officer · 2026-08-04 On Tuesday, with Caitlin Burrows quoting 7.9x, the target was “probably the low 7s. You know, by the end of next year beginning of, following year.” — Michael J. Franco, Chief Financial Officer · 2026-11-03 That is a slip of roughly four quarters on the single number a levered office REIT is judged by.
Liabilities to assets stood at 57.1% at quarter-end, up 2.0pp year-over-year — not alarming for a REIT, but trending the wrong way into a development cycle that will absorb cash through 2031.
Cap rates replace landlord markets
The most revealing change is in what management chose to talk about. Through the spring, the vocabulary was landlord market, new supply scarcity, and old-versus-new buildings. This quarter the language shifted to valuation: cap rate became the single most prominent theme on the call, and Franco was unusually specific about Street retail: “I would definitely tell you sub 5% cap rates. And it could be much more aggressive than that.” — Michael J. Franco, Chief Financial Officer · 2026-11-03 Over in San Francisco, 555 California leased 55,000 square feet at a $163 starting rent — the building's highest ever — at a 59% GAAP mark-to-market.
Roth then made the pitch directly: Green Street carries NAV at $56 a share, implying a 38% discount, "the deepest discount in our office group." That is a company saying, in public, that the private market and the public market disagree by more than a third. Two-quarters-running asset-sale chatter is how they intend to prove it — and the reason the stock is down 17% is that the proof has not landed yet.
What got dropped is equally telling. Office rents and Times Square still rank, but the texture of the call — a charity gala, a Thanksgiving Turkey tradition, a plea to vote on election day — reads like a victory lap delivered a quarter early. Roth is right that the leasing market is as good as he says. The market is simply asking a different question: how much of that good run rate survives a 5% ten-year, $0.10 of interest headwind, and a $1 billion of dispositions that has not closed. Until those three resolve, a 38% NAV discount is a claim, not a catalyst.