The company now generates about 90% of its net operating income from New York City. While the focus is certainly on premier office properties, Vornado continues to invest in high-quality retail. Around 60% of companywide NOI comes from New York office properties, with New York retail generating around one fifth of total NOI.
In contrast with its New York office REIT peers, Vornado has made a concentrated bet on developments in the Penn District submarket just east of the Hudson Yards megaproject. The new development should have positive knock-on effects by increasing foot traffic and rents, as the project adds activity to a once-drab slice of Manhattan. Despite investor concern about oversupply in the region and the spectre of a massive rise in remote work due to the coronavirus pandemic, New York will remain a hub for global talent in the long run. With its enviable roster of blue-chip office and retail tenants, Vornado should benefit from healthy rent collections despite the coronavirus crisis.
Vornado only owns two non-New York properties in well-located central business districts in Chicago and San Francisco. In San Francisco, 555 California Street has benefited from healthy tech office demand in a supply-constrained region. In Chicago, the Merchandise Mart has likewise performed well, emerging as a hub for tech office users in the Midwest. With the completion of the Art on the Mart digital exhibition in 2018, the building is set to continue to benefit from its great location and iconic status within the Chicago office market.
Financial Strength
We view Vornado’s balance sheet as a slight concern, with the firm carrying more debt than many of its already bloated office REIT peers. We forecast 2021 debt/adjusted EBITDA to be around 11 times, with adjusted EBITDA/interest of 3.4 times. We forecast debt/EBITDA to decline gradually over the next 10 years. As a real estate investment trust, Vornado Realty is required to pay out at least 90% of its income as dividends to shareholders. Vornado’s 2020 dividend payout represented an elevated 110% of its funds from operations figure, although this is slightly obscured by acute COVID-related cyclicality.
Company’s Megaproject
Vornado’s well-located portfolio of office and retail assets attracts the highest-quality tenants. Developments near the Hudson Yards megaproject should pay off as the company benefits from increased property values in that region. Vornado’s Chicago and San Francisco properties represent some of the best assets in those markets.
Company Profile
Vornado owns and has ownership interest in Class A office and retail properties highly concentrated in Manhattan, with additional properties in San Francisco and Chicago. It operates as a real estate investment trust.
(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
). Although the present environment poses unique challenges, the off-price sector has performed well in such situations historically (Ross and TJX saw low- to mid-single-digit percentage comparable growth in 2008-09), and we expect Burlington to exit the crisis in better shape than full-price retailers.
Burlington’s strong inventory management operations hold inventory turnover above that of full-price stores, driving traffic with a fast-changing assortment. We believe off-price chains are valuable to manufacturers looking to sell excess product, as they offer flexibility, prompt payment, and discretion by avoiding advertising the brands they carry (important to producers looking to protect conventional channel pricing power). Product availability should stay high, as vendors’ production forecasting is complicated by factors such as mercurial customer preferences, channel diffusion, and unpredictable weather.
We believe off-price retailers such as Burlington are better positioned than other physical sellers to fend off digital rivals. The treasure hunt experience and low-frills environment enable steep discounts relative to the full-price channel (up to 60% for Burlington), limiting price gaps. Shipping and return costs (in addition to vendors’ restrictions) also limit the discounts digital sellers can offer.
Financial Strength
Burlington had reduced leverage meaningfully since its 2013 initial public offering (fiscal 2013 net debt was around 3.3 times EBITDA, versus a 0.7 mark in fiscal 2019, before the pandemic), and we expect growth and ample cash flows to keep the balance sheet strong despite ambitious expansion plans. We expect Burlington will take more than a decade to reach its 2,000-unit footprint target, in addition to relocations of existing stores. Considering Burlington’s store network is mostly leased and its payback period averages less than three years, we expect the firm to dedicate around 4% of sales to capital expenditures over the next decade (roughly $500 million on average annually). We expect the firm will continue to return excess capital to shareholders via buybacks after a pandemic-related pause; however, we expect this to eventually be augmented by a dividend approaching 40% of earnings (which we forecast the firm to initiate in fiscal 2023). We assume roughly 45% of long-term annual operating cash flow is returned to shareholders via repurchases. Burlington could pursue acquisitions of regional chains or other concepts (including operations outside the United States) to accelerate its growth, though we do not incorporate any such purchases into our forecasts because of the uncertain timing and nature of any deal.
Bulls Say
-With low prices spurred by efficiency, relatively high inventory turnover, and a differentiated value proposition to customers, Burlington should be relatively well protected from digital rivals.
– As Burlington’s assortment shifts toward more advantaged categories for the off-price channel (such as ladies’ apparel and home), performance should continue to improve.
– Burlington should be able to downsize its locations’ average square footage as it adds new, smaller stores and relocates existing inefficient units, boosting margins and the customer experience.
Company profile
The third-largest American off-price apparel and home fashion retail firm, with 761 stores as of the end of fiscal 2020, Burlington Stores offers an assortment of products from over 5,000 brands through an everyday low price approach that undercuts conventional retailers’ regular prices by up to 60%. The company focuses on providing a treasure hunt experience, with a quickly changing array of merchandise in a relatively low-frills shopping environment. In fiscal 2020, 21% of sales came from women’s ready-to-wear apparel, 21% from accessories and footwear, 19% from menswear, 19% from home décor, 15% from youth apparel and baby, and 5% from coats. All sales come from the United States.
(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
Categories
Dealing with Debt and financial freedom
Determine how much debt you owe
For many people, the most important step is to figure out how much debt they have. Knowing how much you owe is a crucial aspect of dealing with the problem. You’ll need the most recent statements from all of your creditors to total up your debts (e.g. bank, mortgage provider, store cards, etc).
Make a budget
Budgeting is an effective strategy for taking control of your financial destiny. It assists you in budgeting so that you can cover the necessities while still having money left over to save. It can assist you in determining where your money goes, what you can afford, and ensuring debt repayment.
Recognize interest rates
Whether it’s a credit card, a personal loan, or a home loan, there are a variety of interest rates to choose from. Understanding how interest rates operate is critical to determining how much your repayments will be and if you will be able to afford them if they rise in the future.
When it comes to loans, there are several options to consider, such as fixed vs. variable interest rates, balance transfers, and overdrafts. It can be difficult to decipher the meanings of all of these varied phrases. Small variances in interest rates can add up to a lot of money over time, so shopping around for the best price will help you obtains the best deal.
Consolidation of debt
Debt consolidation is the process of combining all of your current debts into a single new debt. It can help you decrease the amount of interest and fees you spend on various loans while also making repayments easier. If you’re having trouble managing your obligations, paying someone to consolidate them all into one loan may seem like a good idea. However, there are a lot of things to be cautious of when it comes to debt consolidation, so be sure you know what you’re getting into before signing anything.
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
Categories
Household debt in Australian market
Several reasons have contributed to the rapid increase in housing debt in recent years, the most significant of which being that lower interest rates in Australia allow consumers to borrow more when taking out a home loan. This raises the average size of new loans, as well as the average amount of outstanding loans, over time.
An rise in the availability of housing finance has exacerbated the effect of increased household borrowing capacity. These new lenders actively battled for market share by undercutting traditional lenders’ mortgage rates and offering innovative mortgage products such home equity loans, interest-only loans, and loans with minimal documentation. Between 1990 and 2003, strong demand for property from retail investors contributed significantly to the rise in home debt. The constant rapid growth in house values, mediocre returns in alternative asset classes such as shares, and advances in the financing and tax treatment of residential property lured retail investors to residential property.
The turmoil in global capital markets has had a major influence on Australia’s house finance industry. This is because deposits provide for just around half of total funding for Australian financial institutions, with the rest coming from domestic and international capital markets.
While the overall availability of housing finance appears to be unaffected, market share has shifted and mortgage rates have risen.
The turmoil in the financial markets has raised the cost of various sources of capital market borrowing and limited the availability of others, but it has had the greatest impact on securitisation markets.
Deregulation and financial innovation have considerably improved loan availability in the household sector. Furthermore, the economy’s continued robust performance has given households additional confidence in taking on debt. Household debt has increased dramatically, but household balance sheets remain in good health, with a strong growth in asset value offsetting the increase in debt.
Furthermore, the majority of the new debt is held by households that are well positioned to service it.
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
According to the most recent OECD data, the ratio of Australian household debt to net disposable income is 217 percent, implying that the average household owes twice as much as it earns in a year. The Bank of International Settlements estimates Australian household debt to be 119 percent of GDP, second only to the Swiss. While the housing market is responsible for much of this debt, the situation for young people is more complicated. Many will be burdened by a constellation of personal credit arrangements — credit cards, overdrafts, payday loans, overdue bills, fines, and Afterpay-style agreements – since they are less likely to possess assets.
According to the Consumer Policy Research Centre, one out of every ten young people took out a personal loan in October, up from one out of every fifty in May, while one out of every five used more informal lines of credit, such as borrowing from family members.
Borrow only what you need
“I think this will have a major influence on people’s mental health, living with this financial insecurity over their heads,” says Gerard Brody of the Consumer Action Law Centre. As a result, a young person’s ability to hold down a job, see friends, and maintain their mental health is impacted. It influences all they do. “If we truly intended to achieve financial security, the first principle, the simple advice is: don’t borrow for necessities.”
“As a result, you have more young people struggling to make ends meet on a jobseeker stipend that is once again below the poverty line. Those who do not find work will face a worsening of the crisis.”
Since the global financial crisis of 2008, Australians have seen their earnings fall by 2% and have been forced to work in increasingly precarious and insecure occupations. The process of young people becoming self-sufficient adults has become more difficult over time. This has been going on for a long time, but some people also have access to their parents’ bank accounts.
When that person is finished, they may still require funds, so they seek out another loan. This has the potential to create a self-fulfilling cycle that makes life increasingly unfair for young people without financial resources.
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
1. Calculate how much money you owe on your bills.
Making a list of how much you owe and to which providers, as well as how much you spend in fees and interest to each, is a smart place to start when trying to figure out how to manage your obligations. While this may be a jarring wake-up call, it will provide you with a clear picture of where you are and how varying interest rates and fees may alter the amount you owe.
2. Compare how much money you make, how much money you owe, and how much money you spend
Apart from figuring out how much money you owe, it’s also a good idea to keep track of how much money you have coming in, how much money you’ll need for necessities, and where the remainder of your money will go. This will allow you to see where there is opportunity for improvement and where you may contribute a little extra to your repayments.
3. Check to see if you may combine your debts into a single loan.
Multiple loans can result in a slew of fees and interest charges, which are why consolidating your debts into a single loan with a cheaper interest rate and costs could save you money. If you consolidate your loans into one, you may find it easier to handle because you’ll only have to make one payment rather than numerous.
4. Make timely payments on your bills.
Time management and debt management typically go hand in hand, because paying bills on time can help you avoid things like late penalties and interest costs. Consider setting up alerts to remind you when your payments are due, or see if paying via direct debit may be more convenient.
5. Rather than paying the minimum amount owed, try to pay the entire amount owed.
When it comes to paying payments, you usually have two options: pay the full amount owed or pay the minimal amount owed.
While it may be tempting to pay only the least amount due, bear in mind that you may still be charged interest on the remaining balance, resulting in you owing more money.
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
