Vornado Realty Trust is teaming with the Related Companies and Swedish construction giant Skanska on a bid to redevelop the James A. Farley Post Office Building, Vornado chair and CEO Steven Roth said Tuesday.
Speaking on the real estate investment trust’s first-quarter earnings call, Roth said Vornado submitted two “comprehensive proposals” to the state last month for the long-promised transformations of both Penn Station and the adjacent Farley Building.
While Vornado partnered with Related and Skanksa on the Farley building proposal — also known as the Moynihan Station project — the company submitted its plan for Penn Station “on our own,” Roth added.
Vornado is the largest commercial landlord in the area surrounding North America’s busiest train station. The REIT owns roughly 9 million square feet of space in the Penn Plaza area surrounding Penn Station, with Roth referring to the neighborhood as “Vornado’s big kahuna.”
The team of Vornado, Related and Skanska are already involved in the first phase of the Farley Building’s redevelopment, entailing underground work that is already underway. Vornado and Related were previously selected by the state in 2005 to helm a Penn Station redevelopment. Though setbacks knocked that project off course, revitalizing the train station and its surrounding area is a key part of Gov. Andrew Cuomo’s agenda.
David Greenbaum, president of the company’s New York division, said Vornado believes it “can play an important role in the transformation of this area into the gateway that New York deserves,” and “welcome[s] Gov. Cuomo’s focus” on the Penn Station and Farley Building redevelopments.
Roth also provided an update on Vornado’s luxury condominium development at 220 Central Park South, noting “traffic has picked up in the sales room” for the property recently despite softening conditions at the top of the luxury market.
While noting that slowdown, which Roth attributed to “too many other projects coming on board” and “extreme global financial volatility,” he said that “the market reception of the product [at 220 Central Park South] has not diminished at all.”
As for sales at the building, Vornado doesn’t expect pricing to drop “more than a smidge” from the contracts already signed, with Roth adding that prices at the building may even go up before the project is delivered in mid-2018.
Roth also talked up the REIT’s sizable street retail assets on the Upper Fifth Avenue corridor in Midtown — citing Thor Equities’ recent deal to sell 693 Fifth Avenue, which houses luxury fashion brand Valentino’s flagship store, for a reported $525 million.
Valuing the deal for 693 Fifth Avenue at $11.3 million “per retail front foot,” Roth cited Vornado’s own 150 feet of retail frontage on the very same block, and noted the REIT owns “20 percent of the retail frontage” on the Upper Fifth Avenue corridor.
As well as the 693 Fifth Avenue deal, he pointed to the Chetrit Group’s sale of the Sony Building, at 550 Madison Avenue, to Saudi investor Olayan Group as a further sign of the strength of New York City real estate.
On the office leasing front, Vornado signed more than 730,000 square feet of New York office leases across 36 different transactions in the first quarter, with average starting rents north of $84 per square foot.
Greenbaum said asking rents in Midtown have surpassed the $80 per square foot mark, while Vornado “continued to outperform the market” with six separate leasing transactions valued at north of $100 per square foot in the quarter.
Far from performing at such robust levels, the hotel industry is currently “in a down cycle,” which Greenbaum attributed to a “gross oversupply” in hotel product despite strong domestic and international tourism in the city. He noted that Vornado’s Hotel Pennsylvania, at 401 Seventh Avenue adjacent to Madison Square Garden, has continued to underperform — with the REIT viewing the property as a “parking lot” for future development opportunities.