Sales  ·  Commercial

Vornado Plans to Sell 666 Fifth Stake to Kushner, Maybe Build Big Penn Plaza Towers


Vornado Realty Trust (VNO) Chairman Steven Roth just revealed that his firm has reached a tentative deal to sell its 49.5 percent stake in 666 Fifth Avenue back to Kushner Companies.

He slipped the bombshell news into his annual chairman’s letter to investors, where he noted that Vornado had a “handshake to sell our interest to our partner at a price which will repay our investment plus a mezzanine type return.” He added that the loan on the property will be repaid, and the sale would help pay off the portion of the debt that Vornado holds. Vornado will keep the building’s 114,000-square-foot retail condominium unit, which is leased to Victoria’s Secret, Hollister, Uniqlo and Citibank among others, according to the letter.

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However, Roth cast doubt on whether the sale to Kushner would actually close. “This situation continues to be fluid. There can be no assurance that a final agreement will be reached,” he concluded. Bloomberg first reported the news of the deal.

Kushner Companies purchased the 41-story office building between East 52nd and East 53rd Streets in 2007 for a then-record breaking price of $1.8 billion. In 2011, Vornado acquired half the building for $80 million and took on half of building’s $1.2 billion in debt. The mortgage on the 1.4-million-square-foot property comes due in February 2019, which has sent Kushner scrambling to find investors who could bail it out.  

But the 666 Fifth deal wasn’t the only news hidden in the letter. Roth also mentioned that his firm was at “a tipping point” with redeveloping the Hotel Pennsylvania site at 401 Seventh Avenue, across the street from Two Penn Plaza. The real estate investment trust could create a “giant convention/entertainment hotel.” Alternatively, the firm could tear down the hotel to build a 2.8-million-square-foot, 68-story office tower called 15 Penn Plaza. It just renewed special permits with the City Planning Commission to develop the tower last month.

And Two Penn Plaza—which is already set to be redeveloped—could be razed for an entirely new building, Roth noted. If Vornado knocked down the 1.6-million-square-foot office tower, it could tap into property’s potential 1.6 million square feet of air rights, as well as 5 million square feet of air rights that it owns on the nearby Madison Square Garden site. That extra floor area could go toward a new Penn Plaza tower, plus adjacent sites like the Hotel Pennsylvania. The company’s master plan includes three to five new developments on its Penn Plaza properties.

“There is an enormous public purpose to this bold plan,” Roth wrote. “It would daylight the eastern half of Penn Station, permitting modernization and improvements to Penn Station, as great as the imagination can conceive…finally curing the ills and creating the grand transportation hub that New Yorkers deserve.”

Finally, he dropped a hint that Vornado’s 350 Park Avenue could be dramatically expanded or torn down. The 58-year-old, Emery Roth & Sons-designed tower between East 51st and 52nd Streets is well-positioned to take advantage of the new floor area and zoning incentives created by the Midtown East rezoning, the letter explained.