NEW YORK CITY-Depending on what happens this coming holiday season, Vornado Realty Trust could recapitalize it Toys “R” Us or sell off the business as soon as next year, said Michael Fascitelli, the Vornado’s president and a trustee. “I think you’ll see quite a bit of activity on Toys after Christmas season this year,” he said, speaking here at Nareit’s REITWeek 2007.

Since acquiring the 1,750-store company, along with joint-venture partners in 2005 for $6.6 billion, the retailer has provided a $200 million increase in EBITA, Fascitelli said, half of which is in the 586-unit US Toys “R” Us business, which was largely written off as unsuccessful. Of the 118 stores that were closed and up for retenanting after the acquisition, only nine are left to fill, and Vornado has identified 18 to 20 where another tenant would serve as a better use.

Fascitelli stresses that there is value in the Toys business as well as the 50 million sf of real estate that it occupies, but says his company’s run with the retailer is not quite over. “It’s too early to declare victory on Toys,” he said.

For future real estate acquisitions, in both retail and office, Vornado is looking at its core markets in the New York City and Washington DC metro areas, California and Boston, but the firm is not interested in other US locales. “We would rather go to London than Chicago,” Fascitelli said. Management is interested in possible investments in India as well.

On the development front, Vornado is honing its plans for the redevelopment of land along 34th Street here between 6th and 9th avenues. Up first for a mixed-use redevelopment, Fascitelli says, is likely the Hotel Pennsylvania, across Seventh Avenue from Madison Square Garden and Penn Station. In all eigth-to-10-million sf of building could take place in the entire area, which will include the relocation of Penn Station and the Garden across Eighth Avenue to the current Farley Post Office.

Meanwhile, Vornado is renovating its mall portfolio, including Bergen Town Center, in Paramus, NJ, and Springfield [VA] Town Center. “The redevelopment we have in the retail portfolio is enormous,” Fascitelli said.

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