The Real Deal New York

Vornado seeks dominion in West Chelsea

REIT saw "robust demand" and "record rents" across Manhattan in Q2

August 04, 2015 05:20PM
By Rey Mashayekhi

260 11th Avenue in Chelsea and Steven Roth

260 11th Avenue in Chelsea and Steven Roth

Vornado Realty Trust’s recent acquisition of the Otis Elevator Building will help the company become “one of the largest owners in the West Chelsea market,” chair and CEO Steven Roth said on the real estate investment trust’s second quarter earnings call Tuesday.

Despite its stock getting hammered in the second quarter — Vornado reported returns of -14.72 percent — Roth said the REIT enjoyed “robust demand” across all of its submarkets and saw “record rents” for both its office and retail portfolios.

The acquisition of the Otis property, located at 260 11th Avenue, is structured as a 99-year ground lease with $3.9 million annual ground rent and a purchase option for $110 million. The City of New York is leasing the property through 2021.

The deal is part of a number of recent moves by Vornado in the West Chelsea area. The REIT recently tapped architect Rafael Vinoly to design a 10-story office and retail building on the former Prince Lumber site at 61 Ninth Avenue. Vornado also has a 55 percent stake in a joint venture that plans to develop a 173,000-square-foot office building at 510 West 22nd Street.

The REIT plans to expand and redevelop 260 11th Avenue “to attractive creative class and TAMI tenants,” Roth said – pointing to Vornado’s success in leasing out 770 Broadway to tenants like Facebook and AOL.

He also provided an update on 220 Central Park South, noting that the Robert A.M. Stern-designed project has hit $1.6 billion in sales to date. As The Real Deal reported in June, a Qatari buyer is looking to combine apartments at the building into a $250 million mansion in the sky.

David Greenbaum, president of the REIT’s New York division, noted the resurgence of the financial sector, which he said has added 22,000 jobs in the city over the past two years. Financial firms, Greenbaum added, accounted for eight of the REIT’s top 10 leases in the quarter.