| NEW YORK, June 3
NEW YORK, June 3 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
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
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."
But the concepts are a far cry from original plans that
called for Vornado to move Madison Square Garden to the back of
the Moynihan Station, opening up the commuter train station
that lies underground.
The original deal also would have given Vornado about 5
million square feet of air rights. That would have allowed the
company to build beyond height restrictions on adjacent
Government approval delays prompted Cablevision Systems
Corp. CVC.N, which owns Madison Square Garden, to renovate
the arena instead of moving.
"Either the (city and state) governments are going to get
their act together, which they probably will not or we'll go to
plan B," Roth said.
Vornado also intended to build a 3 million square-foot-
tower for Merrill Lynch & Co Inc's MER.N new headquarters on
the site of the Hotel Pennsylvania. But Merrill Lynch's credit
problems scratched the plans for the tower.
For Times Square, Vornado plans to close the Virgin
Megastore in the first quarter of 2009, said Sandeep Mathrani,
Vornado's executive vice president and head of its Retail Real
Vornado and Related Cos bought Virgin Megastores North
America last year. "We bought the Virgin business to wind it
down to get a hold of the real estate," Mathrani said.
Virgin pays only a $54 per square foot when the market rent
in the are is about $700, Mathrani said.
Vornado is sitting on a mountain of cash it can have at its
disposal. As of May 27, it had $1.4 billion in cash and a
revolving credit line of $2.6 billion. It has only $71 million
of debt maturing in 2008, $431 million in 2009 and $1.101
billion in 2010.
The credit squeeze has made debt, which is critical to
financing of commercial real estate, expensive and difficult to
get. Roth said he believed that the markets are still too
unstable for acquisitions. But he is keeping the money
available for when an opportunity arises, as he expects it
"There is an enormous amount of uncertainty in the market
right now," Roth said. "Having liquidity and waiting until you
see the whites of their eyes is a good thing."
The company has a dimmer view on retail properties.
"We've been pretty scared about the environment," Vornado
President Michael Fascitelli said. "We think there's a
recession going on. We think it could get much tougher in the
(Reporting by Ilaina Jonas; Editing by Tim Dobbyn)