https://seekingalpha.com/article/466...all-transcript
Vornado Realty Trust (VNO) Q4 2023 Earnings Call Transcript
Feb. 13, 2024
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Steven Roth
This year, our New York City office leasing team won the gold medal. In the fourth quarter, we leased 840,000 square feet. For the full year, we leased 2.1 million square feet. Average bidding rents for the quarter and the year were record-breaking at $100 and $99 per square foot, respectively. In more gold medal stuff for the year, we leased 1.2 million square feet at over $100 a square foot rents. The office leasing market is on the foothills of recovery but the capital markets still remain challenged and are even tightening -- and even tightening slightly as we speak. Foreclosures and givebacks are still in front of us and therefore, so is the opportunity.
As Michael and I have said on the last few calls, retail in New York City has bottomed and is recovering rapidly. While rents have a way to go to reach peak pricing of 5 years ago, we feel very good about the activity level and strength of the retail recovery. And there's more big retail news. In 2 blockbuster deals announced in December, major global luxury retailer's product at time block front Upper Fifth Avenue properties for their own use as stores. One deal was $835 million and the other was $963 million. So in round numbers, call it about $900 million for a half block front on Upper Fifth Avenue. So we now have the most important retailers in the world investing aggressively in real estate for their own use on the most important retail street in our country. This is only happening in the most important world cities, New York, London, Paris.
Now we take this mark very personally because we own in our retail joint venture, so 52% on our share, a 26% market share of available Upper Fifth Avenue in 4 blocks -- half block -- 4 half blocks of similar AAA quality. I'm sure you can all do the math here. We also own in that same joint venture, the 2 best full blocks. So that would be 4 half blocks in Times Square and we have the largest signed business in town.
It's been a long ride and we announced just about completed construction of our renovation of the double block-wide PENN 2 and we are about 90% complete with the surrounding clauses. The huge positive in front of PENN 2, combined with the 33rd Street Promenade and the 33rd Street setback at ton [ph] have created an enormous open public space which I might say will be quite logistic. Directly core 7th Avenue [ph], the hotel PENN is now down to the ground, creating our PENN15 site. All this taken together is for sure a game trader. If you are a shareholder of Vornado or are interested in Vornado, this is an immediate must go see.
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.....now we have a CBD office Apocalypse involving the work from home threat and the total black listing of office in the capital markets. In the end, the major cities of America will continue to grow and thrive with New York, our hometown leading that. All these workers will gather in offices with their colleagues rather than be alone at home at a kitchen table. And in the end, the supply-demand equation will come into balance and bring on a landlords market by a total cut-off of new supply. You can't build anything in these frozen capital markets. and in New York, the evaporation or relevance of, say, 100 million square feet of old, obsolete, unrentable space. This cycle was not over yet. There remain challenges but for forward-looking investors, the time is now.
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Steven Roth
.....my guess is that the main company will continue to be New York-centric. The likelihood is we will continue to be a large aggressive office company. But I think I've said this before, we will not make acquisitions of conventional office at full pricing. We will only be a buyer at -- I don't want to call it distress, if that's the right word, Michael. Okay, at distressed prices for office building. And we will only buy the finest of building.
We have some residential. I'd like to do a little bit more of that. And then what we will develop in the Penn District is an extraordinarily important part of our company and maybe arguably the most important development in the country as we go forward. That you can't build anything in district today because of the frozen capital markets. You cannot do it the math doesn't work. But as that begins, we will consider residential building and developing residential in that marketplace and we might even sell a piece of it, land through a residential developer. So we can't predict what's going ahead to happen. In 5 years, we will be New York-centric. We will be minor and office company and the Penn District will be really important 5 years from now.
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Steven Roth
I'd like to make a couple of comments. The first is that all of us focus on what the initial yield is on an asset. I think it's a very interesting exercise to say what can that asset produce in terms of revenue 3, 5, 7 years out. So we believe, for example, in the Penn District, we believe in the west side of Manhattan. We believe that when you combine Penn District with Manhattan West and Hudson Yards, I mean that's a hell of enablement. Highly sought after and whatever. So we believe that these assets will return a very satisfactory return at the get-go and will grow from there as we continue to own them over the next period of time; so there's that.
We also believe that -- I mean there's some question about which is more important, Penn or Grand Central. Well, the answer is obviously, Grand Central is at the foot of Park Avenue. So that's very important. And I think everybody considers Park Avenue the principal business boulevard in the country, maybe even in the world. We have a representation of multiple assets on Park Avenue too. But it's interesting to note that New Jersey Transit comes into only Penn Station. And New Jersey is the growing suburb of New York. So we are very, very happy with our position.
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NEW YORK is Back!
“Office buildings are our factories – whether for tech, creative or traditional industries we must continue to grow our modern factories to create new jobs,” said United States Senator Chuck Schumer.
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MSG moving just like stated months/yrs ago but the bots didn't approve the info they couldn't attain online. They stated a move next to Macys across 7th would work... New Garden + New Penn Station that will revamp property values + development via Vornado of course 
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