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Vornado missed the boat, says Fascitelli

10:23 am, January 9, 2013

By Orlando Lee Rodriguez
Admitting that his company did indeed lose out by not investing into the Penn Station area sooner, Michael D. Fascitelli, president and chief executive officer of Vornado Realty Trust, spoke of his continued interest in the rapidly changing area, but said a market move would have to be delayed.

MICHAEL FASCITELLI

“I think we missed an opportunity to do what we wanted to do,” Fascitelli said. “I think it will be the center of what’s going on down there. We have the capability to make it happen, we just have to wait until the next cycle. We are one cycle late.”

Speaking at the January luncheon meeting of the Young Men’s/Women’s Real Estate Association of New York at midtown’s University Club, Fascitelli said that although he feels bullish about the Penn Station area and the Manhattan market in general, growth at this time will be slower than in previous cycles.

“The office recovery is going to be different than before,” he said.“I don’t think we’ll see the spike we saw in the past. It will be slow, but it will be steady. The growth that we usually see with lack of supply will not happen because of the financial services slump.”

Fascitelli said that although New York has emerged stronger and grown steadily compared to other cities, such as Boston and San Francisco, domestic growth will likely be slow because of government ambivalence on fiscal policy.

“Businesses are hesitant to invest,” he said. “All we did was raise taxes. That doesn’t mean we solved the fiscal problem.”

The effect of quantitative easing on interest rates, Fascitelli said, is hurting the local office market in terms of companies moving into new space.
It has been cheaper for corporations to negotiate extensions than to move to new offices.

Artist’s rendering of 15 Penn Plaza

“We have interest rates that are increadably volatile,” he said. “Rates makes a huge difference. The trend we are seeing are people renewing leases, they are reluctant because they will pay much more to move.”

In 2006, Vornado agreed to pay more than $310 million for rights to develop retail in the rear of the Penn Station building, a plan that never took off.

The company has also outlined plans for a new tower at 15 Penn Plaza . Also indefinitely postponed, the 68-story tower would have 430 units and 2,050,000 s/f of floor space.

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