‘Fat Lady’ Gives Glimpse Into Vornado’s Future, Tells Steven Roth to Sell


Vornado Realty Trust’s Steven Roth told investors that “the fat lady is entering the building” in his annual letter filed with the U.S. Securities and Exchange Commission on Friday, just days before Mike Fascitelli officially stepped down as company CEO.

The appearance of the fat lady means that the year ahead will be marked by careful buying, and more selling than buying, Mr. Roth said in the letter, first reported on by Bloomberg News.

SEE ALSO: Babies R Us Making Stateside Return at American Dream Mall

“My belly tells me that prices are now higher than future prospects,” Mr. Roth said in the letter.  “It also feels to me like interest rates will stay lower for longer than the pundits expect and that we are near the tipping point where market participants will start to believe and act as if it’s their God-given right to zero-bound interest rates.”

FatLadyMr. Fascitelli announced his resignation back in February, one day after the company reported a $224.9 million loss on its stake in J.C. Penney Co., which many had criticized along with other Vornado investments as being too diverse, especially when thrown in the same bag with debt-focused companies like LNR Property LLC.

The company also reported dips in net income last year, from $601.8 million in 2011 to $549.3; and funds from operation, from $1.2 billion to $818.6 million, which are likely further motivation for the imminent sell-off.

The company remains one of the largest real estate businesses in the nation, with over $17 billion of equity and $30 billion in assets, however, with Mr. Roth poised to carry on as CEO in the absence of his longtime collaborator in Mr. Fascitelli.

Industry professionals, even those within the company, were shocked by Mr. Fascitelli’s decision to leave the company during a conference call in February, as he was long considered a driving force at the organization.

“People inside the organization are blown away from the whole thing, from the most senior levels,” one industry veteran said at the time.  “It’s shocking.”

Mr. Fascitelli was viewed as the spark plug that initiated many of the REIT’s high-profile acquisitions, which include partial or full stakes in Merchandise Mart, Charles E. Smith Commercial Realty, Toys “R” Us, department store chain Alexander’s and a number of office buildings near Madison Square Garden, including 1 and 2 Penn Plaza – as well as J.C. Penney, the failures of which Mr. Roth seemed well aware.

“This has obviously been a difficult and very disappointing investment,” he said.