Vornado Realty Trust’s CEO Michael Fascitelli was bullish on Upper Fifth Avenue in the company’s first ever earnings call, covering the second quarter of 2012. Fascitelli said that the firm expected to receive a huge bump in Rent As The Lease For A Large Retail Location On Fifth Avenue ends.
“In just the next couple of years, one of our best leases on Fifth Avenue expires,” he said during the call. “Re-leasing there could produce an annual increase in rent of more than $20 million.”
Fascitelli did not identify the space, but Vornado has quietly begun marketing the 36,000-square-foot space at 640 Fifth Avenue, at 51st Street. It is currently occupied by the clothing retailer H&M, and the lease expires at the end of 2014. One retail source said the firm is asking $3,500 per square foot for the 10,000 square feet on the ground floor, but a total figure for the entire space was not immediately available.
Vornado held its first earnings call amid disappointment among investors with the company’s financial results. The office and retail landlord, which also owns an interest in J.C. Penney, Toys R Us and the loan servicing company LNR Partners, reported funds from operations of $166.7 million, down from $243.4 million in the second quarter of 2011.
Fascitelli also confirmed the record $2,700 per square foot lease that it signed with make-up retailer MAC at its 689 Fifth Avenue property.
In addition, company executives discussed new developments. David Greenbaum, president of Vornado’s New York office, said demolition has started at 220 Central Park South, which is directly in front of Extell Development’s 225 West 58th Street. Barnett holds a lease on the underground garage on the Vornado site, and has refused to sell the lease to Vornado. “The timing of this thing remains uncertain,” Greenbaum said. “We are involved in a tussle with a neighboring property owner. Our site is directly — directly — in front of his site and we feel very good about where we are in the process.”
When asked about residential holdings and acquisitions, Fascitelli said he expected Vornado to favor rentals with the exception of projects like 220 Central Park South, which can yield much higher returns as a condominium.