NEW YORK CITY—Whether measuring its office or retail leasing, and whether one looks at the local performance or results for other parts of the country, Vornado Realty Trust had a stellar second quarter, the company revealed in the reporting of its earnings.
“Business is absolutely terrific,” declared Steven Roth, Vornado chairman and CEO, Tuesday on the company's quarterly earnings call. “In New York we're enjoying robust demand from all tenants, led by financial service and creative class tenants in all of our submarkets, and at record rents.
“Ditto for our largest Manhattan retail street businesses,” he continued. “We did eight office deals in four buildings totaling 223,000 square feet at rents of $110 and a handful of Penn Plaza deals at over $70 per square foot.”
As for specific properties and submarkets, Roth added, “220 Central Park South. In New York we basically are full. In the Penn Plaza area, we have taken an important first step in redevelopment with the test closure of 33rd Street between Seventh and Eighth Avenues. The idea is to create a large public pedestrian plaza where the street had been, which will provide amenities to the public improve Penn Station access and connect Two and Three Penn Plaza. This is an important first step to create a sense of place.”
On the acquisition front, he continued, “We are increasing our exposure to the West Chelsea district. We entered into a joint venture for a 173,000-square foot building on the High Line at 22nd Street and yesterday we acquired the Otis Elevator Building at 260 11th Ave., along with a parking lot and development rights. This off-market transaction was facilitiated by our long-term relationship with the same sellers of 770 Broadway, a premier office building in its submarket and the headquarters of Facebook, AOL and J. Crew.
Looking ahead for the latest acquisition, Roth continued, “the plan is much the same, we'll do a redevelopment and expansion in order to attract the creative class and TAMI tenants.”
Earlier in the quarter, Vornado acquired 150 W. 34th for $355 million, he noted. The 78,000-square-foot asset—as well as 226,000 square feet of zoning air rights—is leased to Old Navy through 2019.
In New Jersey, Roth continued, “Vornado is under contract to sell its 50% interest in the Monmoth Mall at a value of 229 million. This is our exit from the mall and strip shopping center business, representing about $7 billion of business.
Overall, he stated, “We had a very strong second quarter; comparable FFO was $1.30 per share, 5.7% higher than the second quarter of 2014. Excluding income in last year's second quarter from asset sales of our real estate fund, comparable FFO would've increased a whopping 20%.
“Company wide, we leased 1.169 million square feet in 126 transactions,” he said. “In Manhattan we leased 605,000 of office space, and 36,000 square feet of retail. In Washington, DC, we leased 411,000 square feet square feet of office space. Overall occupancy is up over 80 basis points from Q1 and Crystal City is up 240 basis points.
Asserted Roth, “Washington DC is beginning to come back, it's just a matter of time.”
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
