Vornado Realty Trust logged a $98.8 million first-quarter loss on its star-crossed investment in J.C. Penney Co. Inc.
This story first appeared in the May 7, 2013 issue of WWD. Subscribe Today.
The red ink included $39.5 million in noncash impairment losses on its remaining stake in the company, a $36.8 million loss on the sale of 10 million Penney’s shares in March and a $22.5 million loss on derivatives tied to the retailer.
Those losses helped cut Vornado’s first-quarter funds from operations — the standard yardstick of financial performance for real estate companies — by 42 percent to $201.8 million from $348.5 million a year earlier. Adjusting away the Penney’s losses and other items, the firm’s funds from operations rose 14.1 percent to $213.3 million.
Vornado chairman Steven Roth helped activist investor William Ackman shake up Penney’s, buying control over more than 25 percent of the retailer’s stock in 2010. Former chief executive officer Ron Johnson was installed the next year and began to remake Penney’s, eliminating coupons, cutting brands and steering away from the traditional department store layout and toward a cluster of shops-in-shop.
Johnson pushed ahead with little consumer testing and ultimately led the company to a loss of nearly $1 billion last year as sales dropped 25 percent.
But Vornado began pulling its money out about a month before Johnson was ousted on April 8 and replaced by his predecessor, Myron “Mike” Ullman 3rd.
Roth retains a seat on Penney’s board and Vornado still controls 13.4 million shares of the retailer, or 6.1 percent of those outstanding.
Shares of Penney’s fell 2 percent Monday to $16.92.