Posted Apr 17, 2023, 6:49 PM
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New Yorker for life
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Join Date: Jul 2001
Location: Borough of Jersey
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https://therealdeal.com/new-york/202...plainin-to-do/
Vornado’s Roth has some ’splainin’ to do
Exec still trying to stop fallout from comments about Penn redevelopment
April 17, 2023
By Erik EngquistKathryn Brenzel
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In trying to set the record straight, Steve Roth might have sent some investors’ heads spinning.
The Vornado Realty Trust CEO used the company’s recently issued annual report to take another stab at downplaying four-month old comments that many observers interpreted as an about-face on the developer’s Penn District overhaul.
“I inadvertently created a whirlwind when I made what I thought was an obvious comment on our third quarter 2022 conference call that, ‘the headwinds in the current environment are not at all conducive to ground-up development,’ which was interpreted as our abandoning the grand plan,” he wrote in a letter to shareholders. “Nothing could be further from the truth. A pause necessitated by economic conditions is not abandoning.”
But as he tried to calm everyone down, in the same note, published in Vornado’s April 7 annual report, he resorted to a dire warning to justify the decision, writing, “We are now approaching the eye of the economic storm, and I expect it will get even worse.”
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“Defaults and ‘give back the keys’ have already started, led by some of the industry’s largest companies,” he wrote. “There is no new debt available for office, so no buying, no selling, no new builds. When a loan comes due, the only refinance available (and that with a fight) is from the existing lender.”
Vornado’s investments are 86 percent New York and 77 percent office assets, facts it does not bury in the back of its 23-page report. In fact, it’s the second sentence. Those are major reasons its stock has performed so badly, even while revenue poured in from the most profitable condominium ever.
….. Roth continues to insist that Vornado will ultimately complete its grand plans around Penn Station, which — even before his November remarks — the Hochul administration had estimated would not be finished until 2044, when Roth would be more than 100 years old.
“My excitement and conviction about our Penn District grows quarter by quarter,” he wrote. “I still believe that a winning strategy is to allow investors to choose between the high-growth, development-oriented Penn District or our other, pretty terrific in their own right, Class A traditional core assets, or both.”
“Nonetheless,” he continued, “we have decided to pause.”
Not that he has any choice — given the lending environment, doubts about the future of office, and New York politicians’ loss of faith in the Penn plan — but Roth wrote that he’s in no hurry.
“I believe it wise to delay until Covid and the current economic storm are resolved, workers return en masse to the office, construction is further along, etc.” he wrote. “No rush, let’s get it right.”
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