Vornado Realty Trust (NYSE: VNO) is one of America's largest and most prominent Real Estate Investment Trusts (REITs). Think of it as a corporate landlord on a massive scale. Its primary business is owning, managing, and developing a portfolio of premier office and retail properties. While it has assets in other major U.S. markets like Chicago and San Francisco, Vornado is famous—or perhaps infamous—for its immense concentration in New York City, particularly Manhattan. The company is inextricably linked with its long-time chairman and CEO, Steven Roth, a titan of the real estate world known for his aggressive deal-making and sharp-witted, often blunt, annual letters to shareholders. For decades, Vornado has been a go-to name for investors looking to gain exposure to high-end, or “trophy,” Manhattan real estate without having to buy a skyscraper themselves.
At its heart, the Vornado story is a New York City story. The company's portfolio is packed with some of the most recognizable and valuable office towers and high-street retail spaces in Manhattan. This includes a massive, multi-decade redevelopment project around Pennsylvania Station, dubbed the “Penn District.” The strategy has always been to own the best properties in the best locations, based on the timeless real estate mantra: location, location, location. Guiding this strategy is Steven Roth, a figure who inspires both admiration and trepidation. He is a legendary capital allocation expert, revered in value investing circles for his ability to pounce on opportunities and create long-term value. His annual shareholder letters are considered must-reads, not just for their insights into real estate but for their candid, no-nonsense style—a stark contrast to the bland corporate-speak common in most annual reports. An investment in Vornado is, for many, a bet on Roth's continued ability to navigate the treacherous waters of the real estate market.
From a value investor's perspective, a company like Vornado presents a fascinating case study, blending tangible assets with cyclical industry dynamics and strong-willed management.
Unlike a software company whose value lies in intangible code, Vornado's value is anchored in concrete and steel. This appeals to investors who follow the principles of Ben Graham, preferring to invest in businesses with hard, physical assets. The key challenge is to estimate Vornado's intrinsic value. For a REIT, the most common metric is the Net Asset Value (NAV), which is the estimated market value of all its properties minus all its liabilities. The classic value play is to buy shares of Vornado when the stock market price is trading at a significant discount to its NAV per share. This provides a “margin of safety,” as you are theoretically buying a dollar's worth of prime real estate for 70 or 80 cents.
Commercial real estate is famously cyclical, experiencing dramatic booms and busts. When economic sentiment sours and headlines declare the “death of the office,” a company like Vornado can see its stock price plummet. This is precisely when a contrarian investment thesis might emerge. While the crowd is panicking, a value investor asks: Is the fear overblown? Are these irreplaceable Manhattan assets truly going to be worthless? Buying during these periods of maximum pessimism is a high-stakes move, but it's often where the greatest returns are made.
For value investors, who you invest with is just as important as what you invest in. Steven Roth's track record of creating value over many decades is a central part of the investment case for Vornado. His focus on buying low, selling high, and strategically reinvesting capital aligns perfectly with the value ethos. Reading his letters and analyzing his past decisions is a crucial part of due diligence for any serious investor in the company.
No investment is without risk, and Vornado's are significant and straightforward.