Vornado's Roth: Now Isn't 'Right Vintage' for Buying

NEW YORK CITY-Reiterating a point he made in his annual letter to shareholders, Vornado Realty Trust CEO Steven Roth said Tuesday that he wasn't convinced that the current environment offered “the right vintage” for making new acquisitions. “We're going to be very cautious.” Instead of buying, Roth said, “Our highest priority is to sell non-core assets, of which we have more than we should.”

However, in response to an analyst's question during a conference call to discuss first-quarter results, Roth acknowledged that a sale of certain core properties in the New York City and Washington, DC areas was a possibility. These would be assets that present limited growth potential, he added.

Over the past 18 months, VNO has sold “the better part of $3 billion” worth of non-core assets, including, among others, the Green Acres shopping center in Valley Stream, NY. It also downsized its ownership of JC Penney stock, and the loss on the sale of 10 million shares in the troubled department-store chain was a factor in reducing the REIT's Q1 funds from operations to $201.8 million, compared to $348.5 million a year earlier.

Further, Roth said, VNO now has about $300 million of assets under contract or otherwise in the sales pipeline. To see that pipeline increase to $500 million was not far-fetched, and $1 billion was also a possibility, he added.

In the REIT's two core markets, the quarter offered contrasting results. David Greenbaum, president of the New York division, said that in terms of leasing, “We are finding that there is good depth to the market” and that activity was brisk across all the submarkets where VNO has a presence.

For DC, by contrast, “some uncertainty remains,” said Mitchell Schear, president of the Vornado/Charles E. Smith Washington, DC Division. Although most of the downsizing related to the latest round of BRAC closures has already taken place, Schear said it's not clear whether the leasing environment has reached a bottom, although it's close.

Tuesday's conference call was the first without the participation of Michael Fascitelli, who stepped down as CEO earlier this year. Roth, who resumed that role while remaining as VNO chairman, said a search for his successor as CEO isn't currently under way. However, he noted, “I'm 71-and-a-half,” and therefore it's unlikely that he'll be in the CEO chair a decade from now.

Even so, for the time being the status quo will hold with regard to VNO's senior management, including the newly announced promotion of Joseph Macnow to chief administrative officer, a title he'll hold while remaining EVP of finance. Roth noted that “The company has some work to do to get into fighting shape,” and that the board has tasked the current management team with shaping the REIT up. By the time that process is completed, he added, “I'll be more than 71-and-a-half.”