Vornado mulls splitting itself up, again

Steve Roth said spinoffs of retail, development businesses are possible

TRD New York /
May.May 01, 2018 11:54 AM

Steven Roth and 2 Penn Plaza (Credit: Vornado Realty Trust, Google Maps)

More than a year after spinning off its Washington, D.C., business, Vornado Realty Trust is once again toying with the idea of splitting itself into separate companies.

Steven Roth, CEO of the firm, said it’s possible Vornado will spin off a development company from its income-producing real estate. The rationale: Vornado has several expensive development projects in planning around Penn Station, and REIT investors tend to dislike the uncertainty associated with development.

“Development is not a business that can be measured quarter to quarter,” Roth said. If the stock price continues to trade below asset values because investors don’t like the development risk, Roth said, it “doesn’t make intellectual sense” to not try to change that. He declined to say how exactly the company could be split up, saying these are “glimmers of value creation ideas.”

Forest City Realty Trust, another public REIT, has been grappling with the same problem and responded by shrinking its development business. The former CEO of its New York division, MaryAnne Gilmartin, recently left the firm to found a new development firm, L&L MAG.

Roth also said Vornado is considering another split: spinning off its retail business.

“The softness of retail is what’s hurting our stock the most,” he said, adding that he is “dying to find out what retail would trade at as an isolated business.”

Vornado spun off its D.C. properties in October 2016, creating the new public company JBG Smith.

In his annual letter to investors last month, Roth wrote that Vornado is considering tearing down 2 Penn Plaza and replacing it with a new tower. But during Tuesday’s call, he said that the development probably won’t happen after all because the company is having a hard time landing public subsidies to fund it.

“It does not appear that that plan is going to go forward and is feasible,” Roth said. Instead, the company will renovate the tower, give it a new facade and add 300,000 square feet near the base.

Roth again declined to say how many units the company has sold at its luxury condo project 220 Central Park South, but noted that closings will start at the end of 2018.

He claimed that the tower is “aesthetically and financially the best project that’s ever been done in New York, and therefore the country.”


Related Articles

arrow_forward_ios
Vornado's Steve Roth and 220 Central Park South (Credit: Getty Images, iStock)

Free and clear: Vornado pays off debt at 220 CPS

Free and clear: Vornado pays off debt at 220 CPS
Vornado chairman and CEO Steven Roth, and 608 Fifth Avenue (Credit: Getty Images)

“Negative surprises”: Vornado execs talk retail struggles on Q2 earnings call

“Negative surprises”: Vornado execs talk retail struggles on Q2 earnings call
Steven Roth, CEO of Vornado and 640 Fifth Avenue (Credit: Getty Images and Vornado Realty Trust)

Bank of China issues $500M to Vornado in refi of 640 Fifth Avenue

Bank of China issues $500M to Vornado in refi of 640 Fifth Avenue
445 Fifth Avenue and Harbor Group's Jordan Slone (Google Maps)

Harbor Group sued after defaulting on $40M loan at Midtown retail space

Harbor Group sued after defaulting on $40M loan at Midtown retail space
Governor Andrew Cuomo (Getty; Pixabay)

Landlords, tenants react to Cuomo’s latest eviction ban

Landlords, tenants react to Cuomo’s latest eviction ban
Retail bankruptcies are on pace to surpass those filed in 2010, while store closings have already passed those from 2019, according to a report (Getty)

Retail bankruptcies on pace to rival 2010: report

Retail bankruptcies on pace to rival 2010: report
175 Water Street and Nathan Berman of Metro Loft Management (Berman via CityRealty)

Inside Metro Loft’s new design for 175 Water Street

Inside Metro Loft’s new design for 175 Water Street
A rendering of 121 Morgan Avenue in Bushwick and Benefit Street Partners’ managing director Micah Goodman (Photos via EXR; Benefit Street Partners)

Brooklyn developer duo hit with foreclosure lawsuit

Brooklyn developer duo hit with foreclosure lawsuit
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...