Low Treasury yields make it difficult to find attractive yield investments. We don’t complain; instead, we roll up our sleeves and look for equities that offer good yields, asserts Todd Shaver, editor of BullMarket Report.

Vornado Realty Trust (VNO) owns properties that are geographically concentrated in New York City. New York City is notoriously a difficult market to crack, creating barriers to entry and providing some protection to Vornado’s properties from the competition.

The properties are attractive assets to own and include 19 million square feet of Manhattan office space across 35 properties. Vornado also owns the Hotel Pennsylvania (across the street from Penn Station) and 69 Manhattan Retail properties encompassing 2.4 million square feet.

They own 10 residential properties totaling 1.5 million square feet; and a third of Alexander’s, a REIT that owns seven properties in the metropolitan area, including Bloomberg’s Manhattan headquarters.

Meanwhile, the company is redeveloping the New York Penn Station assets. These new buildings should have strong leasing characteristics given the good location and capital improvements Vornado is doing. We expect strong occupancy and leasing rates.

They also own other marquee properties outside New York City, including Chicago’s theMART, and a 70% interest in the Bank of America Center, located in San Francisco. These have strong characteristics and the latter property is fully occupied.

Vornado’s properties already have strong occupancy rates. Its 10 properties in the “other” category have a 93% occupancy rate while its New York (97%), the MART (95%), and San Francisco (100%) assets were even stronger.

Third-quarter revenue fell by 14% year-over-year, from $540 million to $465 million. Income grew sharply, from $205 million to $335 million due to several property dispositions, including Fifth Avenue/Time Square JV, and 330 Madison Avenue. Plus there were redevelopments, and retail bankruptcies that the company took advantage of. On a same-store basis, rental revenue increased by $4.5 million.

Management has been astute operators, selling properties in a hot market. Investors benefitted after receiving a nice bonus when Vornado paid a special $1.95 dividend last month due to the profit realized from the sale of certain assets, including Fifth Avenue and Madison Avenue.

Most of this, $1.74 per share, is considered a long-term capital gain. Excluding this payout, Vornado’s yield is 4%. At the end of the day, the three keys to success in real estate, location, location, and location, will continue to serve Vornado’s shareholders well.

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