Real Estate Weekly
Image default
Deals & Dealmakers Featured

Roth puts Pennsylvania Hotel in his ‘development parking lot’

While signs point to a slowdown in commercial real estate, at least one segment of the market may be immune to the effects of gravity.

According to Steven Roth, the Chairman and CEO of Vornado Realty Trust, the sluggish pace of transactions in the CRE market touches everything except prime real estate assets.

“I think in terms of the highest quality, if anything, the demand looks like it’s increasing,” Roth said during an earnings call last week.

“Where I am is in New York and New York is in a class of its own by the way. In New York at the highest quality, if anything, I see it increasing demand and no diminishing in pricing.”

Steve Roth
Steve Roth

Roth, who said that financing is starting to “withdraw” from many commercial real estate deals, attributed the strength of the segment to the lack of premium assets in the city, which, in turn, has heightened competition between local and international investors.

“I see if anything, a scarcity of highest quality product,” he said. “I know that incomings that we get from global investors interested in partnering (and) buying at the highest quality is increasing rather than decreasing. And the incomings are now coming from very, very far and wide geographies including Asia, the Middle East, Europe and domestically, by the way.”

Roth’s statements come as a widening collection of evidence points to a slowdown in the commercial real estate market. According to data from Cushman & Wakefield, the value of CRE deals in the first quarter of this year amounted to $14 billion, the lowest since the third quarter of 2014. This has resulted in lowered projections for the rest of the year. Sales across the city are expected to drop by as much as 30 percent compared to last year’s total of $75.5 billion.

Vornado, which has a portfolio that includes 21.3 million s/f of office space and 2.6 million s/f of retail in New York City alone, has not totally escaped the softening of the city’s commercial real estate market.

The main casualty is its hospitality business, particularly Hotel Pennsylvania in Midtown, which has been awaiting an exhaustive renovation since 2013.

Hotel Pennsylvania
Hotel Pennsylvania

“While both domestic and international tourism remains strong, the hotel industry is in a down cycle, the victim of gross oversupply. The results of our Hotel Pennsylvania have been weak. We continue to look at this hotel as a parking lot for future development as part of our overall Penn Plaza strategy,” Ross said.

Vornado still has no solid plans for the property. The company originally planned to raze the tower to give way to a 1,216-foot office tower called 15 Penn Plaza.

According to David Greenbaum, the president of Vornado’s New York division, converting the hotel would cost between $1,200 to $1,400 per square foot.

(Visited 1 times, 1 visits today)

Related posts

ON THE SCENE: Cushman marketing Bronx development site

REW

Bruckner Building in Bronx fetches $65M

REW

Nightingale, Wafra buy 111 Wall for $175M

REW