Vornado More Likely to Sell Than Buy After Prices Rise

Vornado Realty Trust (VNO), owner of more than 100 million square feet (9.3 million square meters) of U.S. properties, will probably sell more real estate than it acquires following a surge in values, Chairman Steven Roth said today.

“I can see the bubble on the horizon; the fat lady entering the building,” Roth wrote in his annual letter to investors, filed with the U.S. Securities and Exchange Commission. “My belly tells me that prices are now higher than future prospects and therefore, we will buy carefully and likely sell more than we buy.”

U.S. commercial properties have recovered value lost during the recession and are now back to 2007 highs on average, real estate research firm Green Street Advisors Inc. said in a report earlier this month. Economic growth, low interest rates and minimal construction have fueled appreciation, according to the Newport Beach, California-based firm.

“It also feels to me like interest rates will stay lower for longer than the pundits expect and that we are near the tipping point where market participants will start to believe and act as if it’s their God-given right to zero-bound interest rates,” Roth said in today’s letter.

Vornado, based in New York, has sold $2.75 billion of assets since the chairman’s letter last April, outgoing Chief Executive Officer Michael Fascitelli said on Feb. 27. The company had a net gain of $718 million from 26 transactions, he said. Sales included the Kings Plaza shopping center in New York’s Brooklyn borough, for $751 million; the Green Acres Mall in Valley Stream, New York, for $500 million; and Vornado’s stake in LNR Property LLC, the biggest manager of troubled U.S. commercial mortgages, for proceeds of $241 million.

J.C. Penney

Fascitelli, whose last day as CEO is April 15, announced his resignation on Feb. 27, a day after the company reported a $224.9 million loss on its stake in J.C. Penney Co. (JCP) Vornado, which bought its stake in the Plano, Texas-based department- store chain in 2010, sold 10 million shares in the company last month, leaving it with a 6.1 percent stake.

“This has obviously been a difficult and very disappointing investment,” Roth said in today’s letter.

Roth, 71, who will take over as Vornado’s CEO, joined Vornado in 1980 and has been chairman since 1989. He was CEO from May 1989 through May 2009.

The letter was filed after the close of regular U.S. trading. Vornado rose 0.2 percent to $87.41 today in New York. The shares have gained 7.9 percent in the past year.

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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