Maynihan/Farley is an example of the type of asset that Vornado owns that the market dislikes. It is non-earning, long in duration, and of unknown return.
Vornado owns 95% of the project and has spent $438mm / $1 billion total projected cost. If I read the filings correctly, the government is spending about $1.6 billion on the project.
From the most recent Q: The obligations of Skanska Moynihan Train Hall Builders have been bonded by Skanska USA and bear a full guaranty from Skanska AB. The development expenditures for the Moynihan Train Hall are estimated to be approximately $1.6 billion, which will be funded by governmental agencies.
In a few years, this will probably be 725K square feet of office space leased to a global tech giant for the long term. Vornado expects leases to be in the "triple digits" Let's say that means $110/foot. So in a few years, you could have $80mm of rental revenue from Facebook or Apple on a completely unlevered building (maybe $50mm-$60mmof NOI plus 100K sq feet of retail NOI. all in you could be creating extremely high quality real estate at a 6-7-8% cap. That's the type of thing that shows up at cost (or 110% of cost) in VNO's NAV that I think is very solid. I think it is highly likely to be worth 100 cents on the dollar or more in several years. This will obviously be good for VNO's other buildings around Penn Station.
The market will like a 100% leased building on top of Penn Station leased to Apple spitting out cash. The debt market will allow VNO to extract much of its cost.
I realize I'm repetitive on this name. Just updating as news comes out.
From the most recen transcript: In addition, both at Farley and Penn 2, we are deep in negotiations with multiple large users for anchor spaces, all in the
triple digits
Facebook facing off with Apple over space in Vornado’s Farley Building conversion
Vornado chairman Steve Roth appears to be leaning toward Facebook
TRD New York /
October 16, 2019 10:32 AM
Staff
Facebook CEO Mark Zuckerberg and Apple CEO Tim Cook with a rendering of the Farley development (Credit: Getty Images, SOM iStock)
Facebook CEO Mark Zuckerberg and Apple CEO Tim Cook with a rendering of the Farley development (Credit: Getty Images, SOM iStock)
A pair of tech giants are battling it out over some prime office space in New York.
Facebook and Apple are both interested in leasing space at Vornado Realty Trust’s conversion of the massive James A. Farley Post Office, according to the New York Post.
Facebook has been in talks for 740,000 square feet of space in the project since at least September, but Apple has more recently decided it wants to lease all four floors of office space and a new floor being built on the roof.
The competition puts Vornado chairman Steven Roth in a tough spot. He is already Facebook’s landlord at 770 Broadway, where the company has a 758,000-square-foot lease, but Apple’s market capitalization of more than $1 trillion is more than double Facebook’s.
However, Roth appears to be leaning toward Facebook, and Apple has put feelers out for space in Tishman Speyer’s development project at the Morgan North Post Office as a backup, according to the Post.