Vornado CEO Steven Roth has ruled out converting Hotel Pennsylvania into a supertall office tower, instead floating the possibility that the hotel may be turned into an apartment building.
In a conference call during the 2016 Bank of America Merrill Lynch Global Real Estate Brokers Conference, Roth expressed skepticism over a possible office conversion, saying that the site cannot compete with other Manhattan office complexes such as Hudson Yards and the World Trade Center.
“The problem is we cannot deliver the site economically in competition with what Hudson Yards is doing and the World Trade Center is doing. And we’re not off by a little, we’re off by a lot for lots of different reasons,” he said.
“So I wouldn’t predict that a large office tower is in our future for Hotel Penn. I mean I can’t tell you how much we hate having to build a building where we have to get $150 rents or something like that, which are not in the market. It’s just not something that we do.”
Roth’s comments provide more clarity to Vornado’s on-again, off-again plans for the property. During an earnings call last February, he said that “they have not resolved what the business plan is” for the hotel. Months later, during another earnings call, he described Hotel Pennsylvania as a “parking lot for future development.”
While Roth has narrowed down the possibilities, it is still uncertain whether the property will be turned into apartments or will continue operating as a hotel. “The options for Hotel Penn are, leave it where it is, knock it down. If we knock it down, it’s going to be apartments and retail. If we leave it the way it is, it’s going to be a hotel,” Roth said.
Hotel Pennsylvania, which sits near Madison Square Garden and the Empire State Building, has been awaiting renovations since 2013. Vornado originally planned to raze the building to give way to a 1,216-foot tower called 15 Penn Plaza. However, plans were shelved when Merrill Lynch decided not to take space in the building in 2007.
Vornado: Hotel Penn office conversion unlikely, tower may be turned into apartments : Real Estate Weekly