Feb. 27 (Bloomberg) -- Vornado Realty Trust, the owner of more than 100 million square feet of U.S. properties, said Chief Executive Officer Michael Fascitelli resigned and will be replaced by Chairman Steven Roth.
The change is effective April 15, New York-based Vornado said in a statement today. Fascitelli, who joined the real estate investment trust 16 years ago, will remain on the board of trustees and maintain an office at the company, Roth said in a memo to employees posted on the company’s website.
“The transition will be seamless,” Roth said in the memo. “Vornado will continue its business plan of measured growth in its core New York and Washington businesses, simplification and balance sheet fortification.”
Roth vowed in his annual chairman’s letter last year to simplify Vornado’s operations in response to shareholder complaints that it has too many disparate businesses. The company yesterday reported an 80 percent decline in fourth-quarter funds from operations, a measure of cash flow used by REITs, including a $224.9 million loss on its 11 percent stake in retailer J.C. Penney Co. and a $40 million impairment on its investment in Toys R Us Inc.
“Vornado has been my consuming passion for 16 years,” Fascitelli, 56, said on a conference call with investors. “Now is the right time for me to take a break, before doing something different.”
Roth, 71, joined Vornado in 1980 and has been chairman since 1989. He was CEO from May 1989 through May 2009. Fascitelli started at the company in 1996 as president and chief growth officer after 12 years at Goldman Sachs Group Inc., the last four as a partner. He took over as chief executive after Roth gave up the title.
“The question is, does Steve Roth really want to be CEO, and if not, who’s going to take that CEO role?” said Alex Goldfarb, an analyst with Sandler O’Neill & Partners LP in New York, who said the company should sell its J.C. Penney and Toys “R” Us stakes. He has a hold rating on Vornado shares.
“The board decided the right thing was for me to do another tour of duty, and there you have it,” Roth said on the call. “I’m a Vornado lifer. I’m not going to do this forever. I’m not saying I’m going to do it shortly, but I’m not going to do it forever.”
Fascitelli’s duties will be split among Roth, Joseph Macnow, Vornado’s chief financial officer, and other senior managers, Roth said.
Terms of the separation with Fascitelli probably will be disclosed in a regulatory filing tomorrow, Roth said. Fascitelli will be restricted from competing with Vornado for one year, the chairman said.
“Mike’s not going that far,” Roth said on the call. “If I need him to work an all-nighter or two to do something, he’s going to do it.”
Vornado has sold $2.75 billion of assets since the chairman’s letter in April, Fascitelli said. 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.
“They’ve taken some baby steps toward simplification, but they haven’t done anything material,” Goldfarb said. “People are going to say its time for action, enough of the chairman’s letters, enough of these small things on the side.”
Vornado’s J.C. Penney stake, which the REIT bought in 2010, “is struggling right now,” Roth said on the conference call. Shares of the Plano, Texas-based retailer have lost about 38 percent in past two years.
“I’m a director of J.C. Penney so I can’t talk very much about it, but J.C. Penney is an investment that is in progress now, and it would be inappropriate for me to talk about what our holding period might be, or our plans in terms of sale or not-sale,” Roth said.
Toys “R” Us, meanwhile, “was a business that we bought to sell,” Roth said. “We’ve been struggling to sell it.”
Vornado was little changed at $82.88 at 2:42 p.m. New York time. The shares fell 1.4 percent in the 12 months through yesterday, compared with a 12 percent gain in the Bloomberg REIT Index.
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