Part of the plan to rebuild Penn Station and Madison Gardens
Heres a big loss to the NYC Hotel Industry, this place packs in Midwesterns
Vornado Plans Tower, 5 Trading Floors for Hotel Site
By David M. Levitt
Jan. 4 (Bloomberg)
Vornado Realty Trust plans to replace New York's Hotel Pennsylvania, where Glenn Miller and Duke Ellington once played, with a 2.5 million square-foot office tower with five trading floors designed to attract financial firms, according to a report by brokers Grubb & Ellis Co.
Vornado, the second-largest U.S. real estate investment trust, aims to complete the building in midtown Manhattan by 2011, according to the report, which Grubb plans to release by next week.
The planned 500,000 square feet of trading space could entice a major financial firm as the property's anchor tenant, said David Arena, president of Grubb's New York office. Goldman Sachs Group Inc. is building a new headquarters in lower Manhattan with 500,000 square feet of trading space, and its rivals are anxious to keep up, he said.
"The next most logical site in New York that can be brought to market the fastest is the Hotel Pennsylvania,'' said Arena. "There's definitely a market for the space right now.''
The 1,700-room hotel -- the city's fourth largest, according to visitors bureau NYC & Co. -- is across Seventh Ave. from Pennsylvania Station, the largest U.S. rail hub.
Vornado, based in Paramus, New Jersey, said in filings with securities regulators last year that it's considering building a skyscraper where the hotel now stands. The Grubb report provides the first detail on how big that building might be, and how much trading space is planned.
Wendi Kopsick, a Vornado spokeswoman, said the company had no comment.
In his annual letter to shareholders on May 1, Vornado Chairman Steven Roth described the hotel as a placeholder, sort of like a parking lot, but in this case with $22 million of earnings. It is one of the few obvious office sites that could support 2 million-plus square feet.''
The property could also support housing, or a mix of uses, Roth said in the letter.
Vornado shares rose 39 cents to $122.10 at 4:00 p.m. in New York Stock Exchange composite trading. The shares rose 46 percent in 2006, compared with a 28 percent gain for the Bloomberg Real Estate Investment Trust Index.
Vornado executives briefed Grubb in October on its plan for the site. They didn't say how tall the building would be, said Richard Persichetti, senior Grubb research analyst. At 2.5 million square feet it would rival the 2.7 million square-foot Empire State Building in terms of floor space.
"There are zoning restrictions that have to do with sunlight and daylight,'' he said. So the massing and height still have to be determined,'' said Persichetti.
Another broker who's been briefed on the plan said he isn't sure a new building would house a financial company.
"They don't intend to build that building on a speculative basis,'' Neil Goldmacher, executive vice president of Newmark Knight Frank said of Vornado. The building can absolutely be customized depending on the type of user they attract.''
Silverstein Properties Inc. is planning to offer up to nine trading floors in two of the three towers it is building at the World Trade Center site in lower Manhattan.
Merrill Lynch & Co. has talked with executives of both companies about moving its headquarters to either site, as well as to sites in Jersey City, New Jersey, people with knowledge of the discussions said in November.
Largest Area Landlord
Vornado is the largest landlord in the Penn Station area, where it owns seven other properties. In November, it agreed to buy the Manhattan Mall, a 1-million square-foot retail and office building complex that abuts the back of Hotel Pennsylvania, for $689 million.
In a partnership with Related Cos., Vornado also holds development rights to the landmark Farley Post Office building just west of Penn Station on Eighth Ave. The Farley Post Office is planned to become Moynihan Station, a regional rail hub.
Vornado and Related have proposed tearing down the Madison Square Garden sports arena, which sits on top of Penn Station, opening the site up for a new mixed-use tower, and a new glass- domed Penn Station.
That tower could be 2.5 million to 3 million square feet, according to the Grubb report.
The 87-year-old hotel's phone number inspired the 1938 Glenn Miller hit Pennsylvania 6-5000.'' It was built by the Pennsylvania Railroad and designed by the firm McKim Mead & White in the same Beaux Arts style as the Farley Building and as the original Penn Station, whose demolition in the early 1960s galvanized New York's preservation movement.
Citing the hotel's big-band era heritage, Arena said, ``it's probably still a great place for a dance, but it makes an even better trading floor.''
The hotel, in spite of its pedigree, has never been considered a standout piece of architecture, said Peg Breen, president of the New York Landmarks Conservancy, which monitors the city's landmarks designation process. She said she had no record of it ever being proposed for landmarking.
"It's a shame to lose any McKim Mead & White, because even their second-best is better than most,'' she said. It's probably slightly more of a cultural loss than an architectural loss.''
