Vornado outlines post-Fascitelli succession plan

New York-based REIT will continue to sell off non-core assets
By Hiten Samtani | May 07, 2013 06:00PM

Vornado Realty Trust officials outlined a plan today to divvy up former CEO Michael Fascitelli’s responsibilities among several of the real estate investment trust’s New York City executives. Additionally, the company will continue to divest non-core assets, and sell more properties this year than it intends to buy, Chairman and CEO Steven Roth said during the REIT’s first quarter earnings call. The post-Fascitelli succession plan involves promoting Chief Financial Officer Joseph Macnow to the newly-created position of chief administrative officer, and replacing him with Steve Theriot, formerly Vornado’s audit partner at Deloitte & Touche. 

Macnow will “live more in our New York headquarters” and take on a greater strategic and management role, Roth said on the call.

“Steve has a deep institutional knowledge of our company and people,” Roth added. “He will represent us very effectively.”

Wendy Silverstein and Michael Franco, co-heads of acquisitions and capital markets at the REIT, will also shoulder some of Fascitelli’s capital markets duties, a field in which Roth said Fascitelli was “enormously talented.”

Fascitelli stepped down abruptly in April, creating concerns over Vornado’s future.

Though Roth said his age would make him an inappropriate choice to head the company for the next ten years, he stressed that there was no active search underway for his successor.

“We have some work to do to get the company in fighting shape, and when we get to the end of that journey, we’ll have issues to deal with,” he said.

Roth also noted that Mort Zuckerman, the real estate and publishing mogul who recently announced he would step down as CEO of Boston Properties, said last week that “he had not been the CEO for 98 percent of his tenure with the company. My response to that is I have been CEO for 98 percent of my tenure with the company. I miss Mike, but everything’s fine.”

So far in 2013, Vornado sold $1.1 billion worth of non-core assets — or assets that do not fit into their core office and retail portfolio — leading to an aggregate net gain of $288 million.

“Our basic instinct is to build, acquire and grow,” Roth said. “But my belly tells me that prices are now higher than future prospects.”

This continued a trend from last year, when Vornado sold $1.7 billion worth of non-core assets, netting $454 million. The transactions included a $241 million sale of its 26.2 percent stake in distressed debt provider LNR Property to Barry Sternlicht’s Starwood Capital Group and the sale of 10 million shares, or 43 percent of its stake, in retailer JCPenney, which represented a $38.6 million loss.

Vornado’s operating performance — determined by a metric known as Funds From Operations — improved by 16.3 percent year-over-year, and Roth added with relish that Vornado now had $1.3 billion in cash.

This quarter, the REIT also inked several important Manhattan office deals, including leases with two financial firms which took a total of 100,000 square feet at 280 Park Avenue (a building the company owns with SL Green Realty) and a 646,000-square-foot renewal with Macy’s at 11 Penn Plaza, as Vornado’s New York chief David Greenbaum noted.

Only 587,000 square feet of Vornado-owned space is set to expire in 2013, a figure Greenbaum described as “quite modest.” In 2014, roughly 1 million square feet is set to expire, with about a quarter of the space belonging to three large tenants at 1290 Avenue of the Americas.

“No surprises here,” Greenbaum said, adding that the REIT had prepared for the firms’ exit with an extensive lobby renovation designed to attract new tenants.

State Street Bank took 106,000 square feet of space at the building in the first quarter of 2013, reserving two-thirds of the space that Microsoft vacated when it moved to 11 Times Square.

In the Manhattan retail market, Vornado was well-poised to take advantage of the spike in Soho rents, Greenbaum said, referring to a recent report showing average prices inching north of $1,000 per square foot in the neighborhood. Another key milestone was the Sunglass Hut deal at 1540 Broadway, which commanded a price of $2,025 per square foot, a “record for this submarket.”

Roth added that “pound-for-pound,” retail was a superb business for the REIT, “which each year, keeps giving and giving and giving.”

In response to a question about a dispute with Extell Development at a Vornado-owned condominium site at 220 Central Park South — Vornado has been trying to vacate Extell from a basement parking garage it leases in the building — Roth said that it was arguably “the best residential site in town,” but lay outside of the company’s business focus. Roth declined to comment further, except to say that “we are obviously in a dialogue with our neighbor.”