The Real Deal New York

Vornado strikes deal with Wal-Mart heiress for West Chelsea assemblage

With acquisition of 537 West 26th Street, firm now has the option to build a 326K sf project
By Christian Bautista | February 14, 2018 01:45PM

537 West 26th Street and Steve Roth

Updated, Feb. 16, 1:12 p.m.: Vornado Realty Trust is stitching together an assemblage just south of Hudson Yards. Steve Roth’s real estate company acquired 537 West 26th Street in West Chelsea, a one-story commercial building that was once the studio of celebrity photographer Annie Leibovitz, for $44 million, the company announced Tuesday during an earnings call.

Vornado already owns the adjacent property to the east at 260 11th Avenue through a 99-year ground lease, and signaled in 2015 when it acquired the two buildings on that parcel that it would make an expansion play.

In all, 260 11th Avenue, often called the “Otis Elevator Building,” comes with 235,000 square feet. Vornado’s latest investment at 537 West 26th Street features a roughly 14,000-square-foot building with 69,125 square feet of buildable rights. Vornado could create a project spanning 327,000 square feet and 348 feet of frontage on West 26th Street.

According to property records, the owner of the 26th Street parcel was Wal-Mart heiress Nancy Walton Laurie, just one of several famous deed signers in the last two decades. Laurie paid $11.4 million in 2004 to acquire the property from Leibovitz, who owned 537 and 547 West 26th Street in the early 2000s, according to records. The buildings were sold in 2004 and became a performing arts space for Laurie’s dance company Cedar Lake Ensemble.

Vornado, which said on the earnings call it has an option to buy the Otis Elevator Building for $110 million, and is on track to complete the landmarks process this year, which would spur a large-scale renovation of the buildings.

In the earnings call on Tuesday, Roth lamented that the REIT’s strategy to shed non-core assets like suburban retail and Washington, D.C. office properties hasn’t boosted the stock. According to Green Street Advisors, the REIT is trading at a more than 30 percent discount to what the value of its property would be worth if sold privately. Other REITS average about a 20 percent discount to the value of the property.

Vornado also told shareholders this week that it planned to sell its 49.5 percent stake in the persnickety office tower 666 Fifth Avenue, which it owns with Kushner Companies. Facebook also signed a deal to take 78,000 square feet of space at Vornado’s 770 Broadway.

The article was updated to include the purchase price.