Finance  ·  Industry

Vornado’s Debt Rating Downgraded to Junk Category by Moody’s


Vornado Realty Trust (VNO)’s debt and preferred stock ratings plunged into junk territory after a downgrade from Moody’s this week.

Moody’s knocked both Vornado’s senior debt and preferred stock ratings down to just below investment grade Monday, citing the company’s declining ability to cover its debt payments and other fixed charges. Vornado’s earnings have fallen in proportion to its fixed charges, reaching a coverage ratio of 2.3 at the end of the third quarter of 2023, according to Moody’s. 

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The new Ba1 rating indicates Vornado’s debt obligations pose “substantial credit risk,” and Moody’s predicted its coverage ratio will remain weak for the next one to two years.

Moody’s analysts said in a report the downgrade takes the difficult office leasing environment into account, as well as challenging financing conditions and the “significant geographic concentration” of Vornado’s portfolio, which is concentrated in New York. 

A spokesperson for Vornado declined to comment.

Vornado remains on the brink of the investment-grade category according to two other rating agencies, Fitch and Standard & Poor’s.

The real estate investment trust (REIT) has been on the struggle bus since 2020.

The office exodus triggered by the COVID-19 pandemic brought existential risk to the city’s biggest office landlords, and office companies nationwide have seen their stocks plummet.

Vornado saw office leasing in its New York portfolio drop 9.4 percent from 2019 to 2022, according to its annual reports. Its stock price has dipped by nearly 34 percent from 2019 to Wednesday.

The landlord opted in April to suspend its dividend payments throughout 2023, a move that surprised observers because REITs generally pay earnings to shareholders with dividends throughout the year.

While Vornado’s occupancy rates in New York — where it owns 19.9 million square feet of office and 2.6 million square feet of retail — improved slightly in the second quarter of 2023, they dipped slightly to 89.9 percent in the third quarter, according to its earnings report.

Vornado signaled optimism about its future recovery in its annual report, writing that “overall sentiment is shifting toward pre-pandemic norms.”

On bright side, Moody’s revised its outlook on Vornado from negative to stable due to the real estate investment trust’s predictable operating cash flow and very good liquidity. 

Abigail Nehring can be reached at