The Real Deal New York

Vornado considers tearing down 2 Penn to make way for giant tower

Steve Roth says REIT has grand plan for Penn Plaza "Promised Land"
By Kathryn Brenzel | April 09, 2018 08:00AM

Steve Roth and 2 Penn Plaza

Instead of getting a new skirt designed by Bjarke Ingels, a Midtown office building valued at $1.4 billion may instead be torn down.

In his annual letter to investors, Vornado Realty Trust CEO Steve Roth said the company is considering razing 2 Penn Plaza to make way for a new building that would double the current tower’s footprint. Two years ago, Vornado unveiled renderings of a redeveloped 2 Penn designed by Bjarke Ingels. The design featured a new facade and skirt-like canopy — a reference to Marilyn Monroe’s iconic run-in with a subway grate in “The Seven-Year Itch.”

It’s not clear if Ingels would be involved in the new building if Vornado decides to go that route. Representatives for Vornado and Ingels’ firm declined to comment further.

By demolishing the 1.6-million-square-foot tower, Vornado would potentially be able to transfer some of the 5 million square feet of air rights at Madison Square Garden, which the real estate investment trust co-owns with the Dolan family. Some of the air rights could be “sprinkled to adjacent sites,” Roth noted, but the intention seems to be to create massive new development.

“The old 2 Penn has a 60,000 square foot footprint, the new [one] would have a 120,000 square foot-plus footprint at the base, perfect for our creative class tenants,” Roth said. “There would be towers above and a significant retail component below sandwiched between the train station and the office base.”

Unlocking those air rights would require the redevelopment of Penn Station. Roth noted in the letter that “everyone” regrets a formerly abandoned proposal to relocate MSG to make way for a complete makeover of Penn Station. In his State of the State address, Gov. Andrew Cuomo floated the idea of using eminent domain to redevelop the station but didn’t specify if the arena would be the target of such efforts.

The letter doesn’t address the governor’s recent proposal to take control of the area around Penn Station. Last month, Cuomo’s administration floated the idea of creating a special development zone around Penn Station, which would pave the way for skyscrapers to rise nearby and presumably generate revenue to renovate the outdated station. City officials quickly condemned the proposal.

Roth does seem, however, to envision a large-scale reboot of Penn Plaza, which he refers to in the letter as the “Promised Land.” He says the REIT’s “grand plan” is to construct three to five new buildings on the sites it owns in the district.

The company is eyeing the Hotel Pennsylvania for either a large-scale renovation or a total rebuild, something Roth has considered in the past. The REIT is pumping $200 million in overhauling One Penn Plaza, in hopes of bumping up asking rents in the building by $20 or more per square foot, the letter states.

According to Roth, tearing down 2 Penn Station would allow light to reach the eastern half of Penn Station and enable improvements to the station — also a stated goal of the governor. Roth envisions the improvement would be “self-financed” through payments in lieu of taxes.

“As you can imagine, we would require some help in the form of a tax holiday,” he stated.

Vornado owns more than 9 million square feet in the area, up 1 million square feet from when The Real Deal last checked in with the Penn Plaza “war room.” The firm, along with the Related Companies and Skanska, was tapped by Cuomo to redevelop the Moynihan Train Hall, which will feature 730,000 square feet of office space in town and 120,000 square feet of retail.