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Vornado Loses $256.2 Million on Investment in J.C. Penney

Vornado Realty Trust (VNO) lost a total of $256.2 million over the course of its three-year investment in the J.C. Penney Co. department store chain, the company said today in a regulatory filing.

The New York-based real estate investment trust sold its last shares of J.C Penney on Sept. 19, recognizing an $18.1 million loss, according to its quarterly earnings report. Vornado Chairman Steven Roth had joined co-investor Bill Ackman in a failed attempt to revitalize the retailer.

Ackman’s Pershing Square Capital Management LP took an initial stake of 16.5 percent in the Plano, Texas-based retailer, and Vornado had an original investment of 9.9 percent. Both joined the J.C. Penney board in early 2011 and pushed through a plan to transform the chain’s merchandising, pricing and store layouts. Instead, established customers fled and the stores failed to attract enough new ones.

Vornado analysts including Alexander Goldfarb of Sandler O’Neill & Co. urged the REIT to sell its J.C. Penney investment, even if it meant recording losses, and focus on New York and Washington office buildings and urban retail properties. As of Sept. 30, Vornado had a 32.6 percent stake in retailer Toys “R” Us Inc., which Goldfarb and others have said Vornado should sell.

The REIT has said it plans to simplify its holdings. Earlier this year, Toys “R” Us withdrew plans for an initial public offering.

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net

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

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