Vornado Realty Trust is a veritable whirlwind of real estate activity. The company's commercial property holdings total more than 100 million sq. ft. of space, primarily in New York City and Washington, DC. It also owns the 1,700-room Hotel Pennsylvania in Manhattan. The company's retail portfolio consists of about 105 strip shopping centers and single tenant retail assets, and six regional malls in the Northeast, California, and Puerto Rico. Its Merchandise Mart segment owns six showroom properties, including Chicago's Merchandise Mart and L.A. Mart; it also produces trade shows. In addition, Vornado owns about a third each of New York retail property owner Alexander's and big-box toy giant Toys ''R'' Us .
Manhattan is Vornado's largest market, home to more than 60 properties totaling 28 million square feet. In Washington, DC the REIT owns 71 properties measuring 19.2 million square feet. It also owns six properties in Chicago. Vornado also has retail holdings in Miami and owns a 70% interest in a three-building office complex in San Francisco's office district, known as the Bank of America Center.
The fully-integrated REIT owns office, retail, and residential properties. It owns a quarter of Vornado Capital Partners, its real estate fund.
The REIT's revenue rose 1% while and net income fell 19% in 2013 versus 2012. The company realized a loss of nearly $56.9 million on the sale of its shares in ailing retailer J.C. Penney in 2013.
One of Vornado's stated goals is to purchase new properties and redevelop existing ones in its portfolio in the New York and Washington, DC markets. Indeed, in 2013 the firm's focus was on the hot Manhattan market, where it made several acquisitions, as well as divestments. With the New York real estate market heating up, Vornado is looking to simplify its business by exiting investments, such as its stakes in Toys "R" Us, so it can focus on growing its property portfolio. However, while it sold its shares in J.C. Penney in 2013, it appears to be stuck with Toys "R" Us for the foreseeable future. Indeed, the firm's trickiest real estate investment is Toys "R" Us, which it, along with two partners, took private in a $6.6 billion leveraged buyout in 2005. In 2010 Toys "R" Us announced plans for an IPO that it hoped would raise as much as $800 million (and allow Vornado to cash out). However the offering has been delayed by market conditions. In the meantime, income from its investment in the toy retailer has tumbled to about $14.8 million in 2012 compared with $71.6 million in 2010. Vornado was attracted to the big-box toy retailer because of its real estate holdings.
The REIT is also selling its properties in non-core markets, such as Boston, Chicago, San Jose, Long Island, New York, and Philadelphia.
Mergers, Acquisitions and Divestments
In 2013 Vornado's acquisition activity was focused on Manhattan. The REIT acquired: a 20% interest in 650 Madison Avenue, a 27-story office and retail tower between 59th and 60th streets, for $260 million; a 93% stake in 655 Fifth Avenue, a 57,500 square foot retail and office property on 52nd Street, for $277.5 million; land and air rights for 137,000 square feet at 220 Central Park South for $194 million; and three other Manhattan street retail properties for an aggregate cost of $65.3 million.
The 20 divestments made by Vornado in 2013 included its shares in J.C. Penney, and the Green Acres Mall in Valley Stream, New York for $500 million. Overall, the firm sold $1.8 billion in assets, with net proceeds of about $1.3 billion.
Previous real estate acquisitions in core markets included: a 59% interest in Independence Plaza, a 1,328-unit residential complex in lower Manhattan with 54,500 square feet of retail space and 550 parking spaces; a retail condominium at 666 Fifth Avenue at 53rd Street for $707 million. Tenants include Uniqlo, Hollister, and Swatch; and 1399 New York Avenue, a 130,000-square-foot Class A office building in Washington, DC (not far from the White House) for $104 million. All of these purchases closed in 2012.