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Originally Posted by RobertWalpole
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That's the article I posted yesterday, and somewhat regret doing so. But let me say again that this isn't really anything Vornado hasn't already been saying, I guess people just haven't paid attention.
Some points of the article:
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-Sources tell us that Vornado Realty Trust is putting off constructing 15 Penn Plaza until market rents reach a point where it’s worthwhile to redevelop the site
-Vornado is mulling plowing millions of dollars into renovating its Hotel Pennsylvania
-“It could cost $30 million just to renovate the rooms,” said one executive who was not authorized to speak on the record. “It’s 1,000 rooms and everything adds up.”
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They're thinking about it, but they've been thinking about it for the past few years. The article was not intended to give people the idea that the tower was canceled.
Here's another piece that was posted last year that also gives an idea...
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http://www.hotelnewsnow.com/Articles.asp...best%20use%E2%80%99%20of%20real%20estate
The ‘highest and best use’ of real estate
13 September 2010
By Daniel H. Lesser
The recent vote by the New York City Council approving construction of 15 Penn Plaza, a 1.3-million-square-foot office building on the site of the Hotel Pennsylvania in Manhattan, is most likely the final chapter of this storied hotel’s economic life......The notion of the Hotel Pennsylvania's demolition was first introduced in the late 1990s when Vornado Realty Trust acquired the property.
Vornado then announced in 2007 the hotel would be demolished to make way for a new office building with Merrill Lynch & Company...the recent financial crisis and the concerns regarding Merrill Lynch’s solvency ultimately led to collapse of the proposal to erect the then planned 2.5-million square-foot tower. While in 2007 the highest and best use of the Hotel Pennsylvania site appeared to be razing the structure and constructing a brand new office tower, just one year later the global financial crisis rendered the economic feasibility of that proposed development untenable, and halted the project.
During 2008, the interim highest and best use of the property evolved to the continued use of the site as a functionally and physically obsolete hotel until such time when a proposed redevelopment of the site again became financially viable. An analysis of highest and best use involves two considerations:
1. The most likely and profitable use of the site "as if vacant" under the requirements set forth above.
2. If a property is "already improved," “highest and best use” is the use that should be made of the property to maximize value for non-income producing properties or, maximize net operating income on a long range basis for investment properties. In cases where capital expenditure is necessary to renovate or improve an income producing property, these costs must provide a sufficient rate of return (to the owner) for the total amount invested in the site and building improvements.
As long as the value of a property "as improved" is greater than the value of the site as "if vacant," the highest and best use is typically the "improved" property. Once the value of the vacant land exceeds the value of the improved property (including demolition costs), highest and best use usually dictates that improvements be demolished.
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