Vornado To Start Construction On 3 NYC Projects This Year

After a banner year of office leasing, Vornado is hitting the development gas.

The REIT plans to start construction in April on a $6B office tower on Park Avenue with Citadel CEO Ken Griffin, break ground in the fall on a 475-unit apartment building near Penn Station, and start work immediately on redeveloping the office tower above the Saks Fifth Avenue flagship, Vornado Chairman and CEO Steve Roth said Tuesday on a call with analysts.

Roth spoke in romantic terms about the latter of those projects, 623 Fifth Ave., which the company acquired last year for $218M. Previous owner Charles Cohen had planned to convert the space into luxury condos, but he wound up offloading the building to help pay off a $187M personal guarantee.

A conversion of the 11th through 36th floors, which have views of St. Patrick's Cathedral and Rockefeller Center, is “not the right program,” Roth said.

Instead, Vornado plans to spend another $230M to upgrade the space into a “soup-to-nuts building” that is projected to generate a 10% return, Roth said.

With leverage, Vornado could quadruple its investment. The building is “substantially vacant,” Roth said, but it sits in one of the city's top submarkets that has a dearth of new blocks of space available. 

“I’m in love with this asset,” Roth said on the call. “I think it’s probably the best acquisition ever.”

At 350 Park Ave., Griffin exercised his option in December to buy 60% of the upcoming 1.8M SF development, Vornado disclosed Monday. A joint venture of Vornado and Rudin — which each contributed a building to be demolished to make way for the tower — has the option to buy between 23% and 40% of the project or sell the minority stake to Griffin for $1.2B. 

The final structure of the project hasn't been finalized, but Vornado executives expressed excitement about investing in the project, which they said would eventually command the highest rents in the city. Citadel has committed to leasing 800K SF of the tower, but that number appears likely to rise.

“Citadel is still finalizing their space planning,” Vornado Chief Financial Officer Michael Franco said on the call. “I would tell you in general their appetite for space has grown since the original deal.”

Franco said demolition of the existing building on the site will start April 1, but the company doesn't expect to have to start contributing toward construction funding for several years.

As for the apartment building, Vornado has been largely mum on its plans. The project at 484 Eighth Ave. was disclosed last year at an investor conference and reported by Crain's New York Business, but the only details were the projected cost — $350M — and that it would use the 485-x tax abatement.

On the call Tuesday, Roth said the building would span 475 units at 34th Street and Eighth Avenue, and construction is expected to start this fall. He didn't provide additional details, and the project isn't mentioned in the REIT's quarterly earnings report. Vornado owns two apartment buildings in Manhattan.

Vornado also acquired 3 E. 54th St. in January from Cohen for $141M. It plans to “promptly” demolish the building, according to its release. While the land is zoned for a 232K SF development that could be a new office, hotel or apartment tower, Roth only said the REIT is “considering several options” and has already received inbound interest.

The development push comes after Vornado had a better-than-expected year of office leasing, driving occupancy in its NYC portfolio to 91.2% at the end of 2025, up from 88.8% a year earlier. The 4.6M SF of leases the REIT signed, 3.7M SF of which were in New York, were its most in a decade and second-most ever, Roth said.

The rents Vornado is commanding on those deals are also rising, up roughly 8% on second-generation deals at an average initial rent of $95.36 per SF. With availability plummeting across Manhattan, “New York is now on the foothills of the best landlord's market in 20 years,” Roth said.

It will take some time before the company's balance sheet begins to reflect that reality, however. The increase in leasing activity was partly fueled by aggressive concessions, and many of the tenants that signed leases in 2025 won't start paying rent until 2027. Roth said there is $200M committed for signed leases that are not yet paying rent.

“When the very ugly and painful free rent burns off, that’s when the cash starts to become positive,” Roth said.

Shares in Vornado were up 3% in trading as of Tuesday afternoon, hitting nearly $32 per share — still about 25% lower than their value a year ago. Roth called the stock price “stupid cheap” and said the company will continue with stock buybacks after repurchasing $80M of its shares over the past few months at $34 per share.

Some of those buybacks, as well as Vornado's development program, are likely to be funded by selling assets. Many of the company's signature holdings around Penn Station, such as the Farley Building, which is fully leased to Meta, and the Penn 1 and 2 office towers, are clear of debt and could also be leveraged to fund some of the projects, Roth said.

“We have significant financing available to us should we need it or choose to,” Roth said.