The Real Deal New York

Market underestimates value of retail by an “enormous number”: Steve Roth

REIT owns roughly 2.5 million square feet of urban "street retail"
March 11, 2015 12:30PM

The most undervalued part of Vornado Realty Trust’s portfolio is the firm’s urban retail, according to Vornado chairman and founder Steven Roth.

“This is just one man’s opinion that the market underestimates the value of that retail buy at an enormous number, double-digit number,” Roth said during a Citigroup investor conference last week, according to a transcript cited by the Wall Street Journal.

“Here’s a musing for you,” Roth wrote in Vornado’s 2o13 annual report about the possibility of making retail a separate company. “Probably will never happen, but such a company would be unique and undoubtedly be the highest growth, highest quality, highest multiple real estate entity in REITland.”

It’s still unclear what Roth’s plans are for the 2.5 million square feet of urban “street retail” Vornado owns in the bases of its Manhattan office buildings, according to the newspaper.

In June, Vornado Realty Trust and Crown Acquisitions paid $700 million for 24,700 square feet of retail space and air rights at the St. Regis Hotel and a neighboring townhouse. [WSJ] — Claire Moses

  • Marc

    Hard to put a price on that if so much of it is actually good retail. Vornado was always abnormally difficult to do retail deals in the past in non urban locations & too many good sites stayed empty for too long.

  • David Brown

    REITs are primarily valued on cashflow and all of Vornado’s cashflow from urban retail is included in those numbers and hence in the value. Conceptually an urban retail REIT might have a higher multiple than a mixed asset REIT. However that also implies that the residual Vornado would have a lower multiple than it enjoys today once urban retail was taken out.