A JPMorgan analyst in a new investor note suggests that retirement for longtime Chairman and CEO Steven Roth could be a catalyst for Vornado Realty Trust’s hard-hit stock price.
“We think succession planning and the future prospects around how the company will be run long-term – and by whom – could be a swing factor in the stock,” JPMorgan real estate analyst Anthony Paolone, who is bearish on Vornado, wrote in a client note this morning.
Questions about how long the 83-year-old Roth will remain at the helm have surfaced periodically since at least 2018. The veteran developer had bypass surgery that year that, he told analysts, left him “better than new.”
Roth has run Vornado since 1979, when he won a proxy fight for control of a New Jersey-based retailer whose real estate he coveted. By acquiring existing towers and constructing new ones, he built New York’s second largest commercial landlord, with more than 20 million square feet of commercial space, including the Farley Office Building, Bloomberg LP’s headquarters tower at 731 Lexington Ave., and 1290 Sixth Ave., which is 30% owned by Trump Organization. He also developed the supertall apartment tower at 220 Central Park South.
Vornado’s stock price rallied last year, but at $38 a share remains more than 40% below its pre-pandemic level.
In a 2018 conference call, Roth acknowledged he wouldn’t hold the CEO job “forever.”
“I’m clearly on the back nine,” he said. “I may be on the back half of the back nine.”
A year later, Vornado promoted a new generation of leaders as part of what its board called “an important management succession process.” Among those promoted were President Michael Franco, who in 2020 added the position of chief financial officer. Franco is seen as Roth’s most likely successor and speaks regularly on earnings calls.
A spokesman for Roth had no immediate comment on the JPMorgan report, which forecast Vornado’s funds from operations will fall slightly this year. The report cited “structural headwinds” from work from home while Vornado’s “high level” of debt creates added risk. JPMorgan declined to comment further.
A change at the top is one factor that could cause Vornado shares to outperform, Paolone wrote. Others include improved leasing, significant strides in redeveloping the area around Penn Station, and a potential sale of large properties. Roth has said he would consider selling a piece of Farley, which is home to Meta Platforms, and recently entered into a long-term lease at 770 Broadway with New York University.
Vornado seems inclined to keep Roth around. In an April 2024 regulatory filing, the company said the CEO effectively guided the firm through various real estate cycles and has skilfully led it through the pandemic challenge. At last year’s annual meeting 96% of shareholder votes were in favor of keeping Roth on the board.
“After considering the views expressed by our shareholders and other constituents, as well as the particular circumstances affecting the company, the board concluded he is the best person to continue to serve as chairman and CEO,” the filing reads.
In 2023 another analyst asked Roth on a conference call how long he played to stay on the job.
“So, Steve — look, we all know you,” said Deutsche Bank’s Derek Johnston, according to a transcript. “You could be anywhere, but you’re right here. You’re sticking this out, which means to us that you see a way out” of the office sector’s difficulties.
Roth said a turnaround was already underway even if it wasn’t apparent to everyone.
“Time,” he said, “is our friend.”
