The Real Deal New York

Times Square shops can gross $8,000 per square foot: Vornado

REIT’s assertion met with skepticism among retail insiders

November 02, 2012 03:00PM
By Adam Pincus

David Greenbaum of Vornado

Small retail tenants in the heart of Times Square earn as much at $6,000 to $8,000 per square foot in annual sales, a top executive with the landlord Vornado Realty Trust said on an earnings call today. That figure was higher than several retail insiders believed was possible for a typically sized Times Square store of several thousand square feet, when they were asked by The Real Deal about the Vornado figures.

David Greenbaum, president of the New York office division for Vornado, said some of their tenants were making those high numbers. “Times Square is an extraordinary market. Because it’s almost a 24/7 market,” Greenbaum said during the call with analysts discussing the firm’s third quarter results. “As we have looked at some of our retailers, some of them have approached sales of $6,000, $7,000 or $8,000 per square foot on some small stores.”

He continued, “So I don’t think these things are just — quote — advertising and branding. I think these companies today and especially fast retailers that do their own production, are making money.”

Yesterday, the firm reported that through the third quarter, it had revenues of $2.08 billion this year compared with $2.05 billion for the same period in 2011. The company’s adjusted funds from operations – a measure REITs use to define cash flow – for the first nine months of the year was down slightly, to $744.4 million, compared with $746 million in the first nine months of 2011.

Vornado owns the 162,000-square-foot retail condominium at 1540 Broadway, at 45th Street, with tenants such as Forever 21 and the Disney store. In August, the real estate investment trust, based in Parsippany, N.J., announced it signed a 20-year lease for space under the Marriott Marquis Times Square hotel, where Vornado plans to spend as much as $140 million to redevelop the retail and expand signage.

Annual sales as high as $8,000 per foot is far more than estimates made as recently as two years ago. In 2010, retail broker Faith Hope Consolo, chairman of retail leasing, marketing and sales at Prudential Douglas Elliman, told the Wall Street Journal that she surmised that top annual sales figures in the Times Square area were between $2,500 to $3,000 per foot.

Several insiders viewed the Vornado number with skepticism, saying it may be accurate for very small stores, but was not representative of typical space in the area.

“The Vornado [pricing] seems very high and likely skewed by retailers with minuscule spaces,” Jared Epstein, a vice president with the retail-focused Aurora Capital Associates, said.

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