Jones Lang LaSalle

GlobeSt.com UPDATE: Vornado Takes $30M Toys Hit

By Ian Ritter Last updated: December 15, 2005 08:34am
(Ian Ritter is national online editor for GlobeSt.com/RETAIL.)

PARAMUS, NJ-Vornado Realty Trust, the owner of nearly one-third of the Toys “R” Us chain, will take a Q4 net loss of about $39.6 million due to the retailer’s third-quarter performance. The drop also accounts for close to a $30-million drop in FFO, or 23 cents per share.

During the same period last year, the net loss was $24.3 million, accounting just over $23 million of fallen FFO. However, a statement released by company executives says that about 80% of Toys “R” Us’ income comes during the fourth quarter, which will be reflected in Vornado’s Q1 report next year.

Toys “R” Us net sales for its Q3, which ended on Oct. 29, were about $2.2 billion, while its operating expenses were $776 million. Coupled with other expenses the retailer had a net loss of $136 million, according to Vornado documents.

Either Toys “R” Us will make a significant turnaround, or Vornado will own a major stake in a retailer will very valuable real estate, said Michael Fascitelli, Vornado’s president a Wachovia Securities event earlier this month. “We think the [Toys “R” Us] real estate in the US is unbelievably valuable, and we’re going to work the real estate in that toy business like you’ve never seen,” he said. “There’s lots of opportunities to mine the Toys deal.”

Vornado and private equity firms Bain Capital and Kohlberg, Kravis, Roberts & Co. acquired Toys “R” Us in March for $6.6 billion. The retailer operates 674 domestic and 641 international namesake stores as well as 225 Babies “R” Us units. Vornado owns 87 million sf of commercial space, including 96 retail properties, across the country. For previous coverage, click here.