For the right price, Vornado Realty Trust will sell the Merchandise Mart in Chicago and 555 California Street in San Francisco.
CEO Steve Roth said the real estate investment trust is not planning to actively market either office building, per se, but if a buyer comes along, the firm is open to shedding the properties.
“Those two assets we will sell for the right price at the right timing,” Roth said during Vornados’ second quarter earnings call on Tuesday. “They are not sacred. By the way, nothing is sacred.”
When asked if selling the properties was part of a broader effort to focus exclusively on New York City, Roth said it was a matter of the value of the properties.
“We’ve worked very hard to focus the company, stick to our knitting,” he said. “Our mission is to increase our stock price. That’s our sole mission.”
As the majority owner of 555 California, Vornado has the final say over what happens to the 52-story tower. The firm owns a 70 percent stake in the building, while the Trump Organization is a 30 percent limited partner.
Vornado bought a controlling interest in the building in 2007, and has kept the office complex — the second largest in San Francisco — largely leased up. Two law firm tenants are expected to leave at the end of their leases early next year, departures that would cause occupancy in the building to drop below 90 percent for the first time in the last two decades, according to the San Francisco Business Times.
Executives on Tuesday said the building has seen a steady flow of prospective tenant tours and that they were hopeful about the local office market’s recovery.
Vornado acquired the Mart, a 3.5 million-square-foot office building in Chicago’s River North, in 1998 from the Kennedy family. The REIT invested $70 million upgrading the building in recent years.
The overhaul has helped attract new tenants. In June, Berlin Packaging inked a 38,600-square-foot lease on the building’s fourth floor.
In New York, the company is getting ready to lease retail on West 34th Street that it has held off the market “waiting for the right timing.” Roth noted that the former Forever 21 store at Seventh Avenue and 34th Street will likely be reconfigured and couldn’t provide a timeline for re-leasing that space.
The company is also planning a 475-unit rental building on 34th Street. Roth said Vornado has been “trolling for tenants” for its former Hotel Penn site, where Vornado plans to build an office tower, though executives have said they are considering incorporating housing on that site. He cited the high cost of ground up development as the project’s extended timeline.
“When the right tenant comes along, we’ll make a deal and develop the land,” he said. “It certainly will not be imminent or quick.”
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