Vornado to Create Tracking Stock for Revitalized Penn District

In his annual letter to shareholders, Vornado Realty Trust Chairman and CEO Steven Roth announced that the REIT plans to permanently close and raze the Hotel Pennsylvania to create what he called the premier development site in New York.

Roth said that a fully demolished and ready-to-go site will take less than two years to complete. Vornado is working with Foster + Partners to design what it calls the “22nd century workplace of the future,” which will be called PENN 15.

“This decision was inevitable… the Pennsylvania may have been a grande dame in its time, but it is decades past its glory and sell-by date,” Roth said.

Vornado is also gearing up to fully activate the Penn District, which contains more than 9 million square feet and neighbors Hudson Yards and Manhattan West. Vornado, which is the largest owner in the district, has assets that will sit on top of Penn Station

“The Penn District is our moonshot, the highest growth opportunity in our portfolio,” Roth said.

Vornado intends to separate the Penn District through a tracking stock. That will give investors the ability to choose between the higher growth but the longer-term Penn District or our other Class A, traditional core assets, or both, according to Roth.

Vornado’s 5 million square feet in three existing buildings—Farley, PENN 1 and PENN—are under construction. These buildings will be connected above and below ground. “Here we are investing $2.4 billion to create a unique environment for work, to bring to 22nd century standards, and to totally transform,” Roth said in the letter.

In PENN 1 and PENN 2, Vornado is creating a two-building, 4.4 million-square-foot campus directly on top of Penn Station. Roth says the campus will include a three-block plaza along 7th Avenue covered by a giant new bustle across the entire 430-foot frontage of PENN 2. The bustle will extend 70 feet from the face of the building and will be 45 feet above the street.

“It will be striking, extraordinary and unique, creating a huge covered plaza in front of our PENN 2 and the main entrance to Penn Station,” Roth says. “At PENN 2, we will also be removing the skin of the entire building and replacing it with a new, exciting, 22nd century curtainwall featuring floor-to-ceiling windows,” Roth said.

Roth says the 4.4-million square foot campus’ scale will allow Vornado to provide tenants with flexibility for their growth and expansion.

“In the Penn District, we are creating a campus, a city within a city, which will become the very beating heart of the NEW New York,” Roth wrote. “Over time, we hope to grow our interconnected campus by as much as 10 million square feet of new-builds. And over time, our Penn District campus will almost certainly command premium pricing.”