Vornado sees $100M retail JV loss, $190M in 220 CPS gains

REIT also records $6M in severance for Hotel Pennsylvania closure in Q3

Vornado CEO Steven Roth with 1535 Broadway and 220 Central Park South (Getty, VNO, Google Maps)
Vornado CEO Steven Roth with 1535 Broadway and 220 Central Park South (Getty, VNO, Google Maps, iStock)

The ultra-luxury condo tower at 220 Central Park South continues to be a key income source for Vornado Realty Trust, as the coronavirus batters its prized retail assets on Fifth Avenue and in Times Square.

The real estate investment trust has recorded an additional $103 million impairment loss on its prime retail joint venture for the third quarter, according to preliminary estimates released Tuesday. Over the same period, unit sales at 220 Central Park South generated a $187 million net gain.

The retail loss adds to the $306 million recorded in the second quarter. Gains from 220 Central Park South in that quarter totalled much less, at just $49 million. As an accounting loss, the joint venture impairment does not impact Vornado’s funds from operations (FFO) figure, while the Midtown condo’s sales contributed $0.92 per share.

The REIT has also recorded $6.1 million in severance accruals in connection with the closure of the Hotel Pennsylvania. CEO Steven Roth noted in the firm’s first-quarter earnings call that Vornado might use the pandemic as an opportunity to close the century-old property for good, making way for a possible redevelopment.

At the time, 414 of the hotel’s employees had been furloughed but not laid off.

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Additionally, Vornado’s filings shows that the company has taken another $26 million in write-offs related to straight-lining of rents and uncollectible tenant receivables — not as stark as the $45 million loss Vornado saw in the prior quarter, when J.C. Penney and New York & Company declared bankruptcy.

The J.C. Penney space in Midtown may now be converted to a last-mile logistics facility, Roth mentioned on the firm’s second-quarter earnings call.

An analysis by The Real Deal this month found that 220 Central Park South was one of the few bright spots for Manhattan’s condo market in the third quarter, single-handedly accounting for $592 million of the borough’s $1.85 billion sales volume. Many of its apartments have been in contract for several years, with closings finally happening this year.

The company’s third-quarter earnings call is scheduled for Nov. 2.