NYC’s Hotel Penn to Be Razed as Vornado Plans Stock Spinoff

(Bloomberg) -- Vornado Realty Trust plans to create a tracking stock centered on its development projects around Manhattan’s Pennsylvania Station, which will include a new tower the company intends to build in place of the Hotel Pennsylvania.

The real estate investment trust will “permanently close and raze the hotel to create the premier development site in town,” Chairman and Chief Executive Officer Steven Roth said in his annual letter to shareholders Friday. “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.”

The news comes a year after Vornado shut down the hotel in response to the pandemic. The Manhattan-based landlord is also planning to separate its developments around Penn Station through a new tracking stock. The move would give investors the ability to choose between the “higher growth but longer-term” Penn District properties or the company’s traditional core assets, Roth said.

Vornado’s shares fell 44% in 2020 but have since rebounded. They have gained 22% so far this year.

Like other landlords, the company has taken a hit as Covid-19 roiled New York’s real estate industry. Hotels, stores and restaurants have suffered from social-distancing measures. And with office workers slow to return after the lockdown, many tenants have been questioning their space needs. Building sales and new leasing have dropped dramatically because of uncertainty in the market.

Vornado tried to sell two offices towers that it co-owns with the Trump Organization last year to no avail. It also recorded hundreds of millions in losses on its investment in a Manhattan retail joint venture.

©2021 Bloomberg L.P.