Vornado goes to "Plan B"; closing Virgin Times Sq

By Ilaina Jonas

NEW YORK, June 3 (Reuters) - Vornado Realty Trust VNO.N executives on Tuesday laid out alternative plans that call for a scaled back redevelopment of Madison Square Garden and the Hotel Pennsylvania, after ambitious projects were killed by government delays and the credit crisis.

It also said it plans to close the Times Square Virgin Megastore.

Vornado owns 8 million square feet of property in Pennsylvania Plaza district, an area roughly bounded by 38th to 32nd streets and 9th and Sixth avenues.

The real estate investment trust said it may renovate the Hotel Pennsylvania in midtown and add about three floors of retail space which would connect to the adjacent Manhattan Mall, which Vornado owns and one of the few traditional indoor malls in Manhattan.

An alternative plan calls a huge tower, to be built at the site, if Vornado can land a major tenant, or build three floors of retail property attached to the Manhattan Mall and a tower above it.

At the Pennsylvania Station/Madison Square Garden complex, Vornado plans to remove the theater, build a grand entrance to Eighth Avenue underneath the seating of the arena and another grand entrance to the train station on 7th Avenue.

The Garden is across from the Moynihan Station, a Beaux Arts style post office completed in 1914. Vornado and partner Related Cos. are redeveloping the structure.

"What that will do is to create a new grand train station," Chairman and Chief Executive Steven Roth said during an investor meeting. "What happens with this Moynihan and Madison Square Garden is to increase the value of our adjacent 8 million square feet."