Vornado Buys $194M Land, Air Rights for Central Park Condo

Vornado completed the acquisition of the land and air rights for 137,000 zoning square feet in a transaction valued at $194 million.

Vornado has been planning to develop a luxury condominium at 220 Central Park Ave. in Manhattan for quite some time and now the last piece of the property puzzle has fallen into place for the project. The REIT just completed the acquisition of the land and air rights for 137,000 zoning square feet in a transaction valued at $194 million.

“I think most people know we have a couple of skirmishes on that site to get it so that it’s liquid,” Vornado chairman Steven Roth said about 220 Central Park South during a presentation at the 2013 Citi Global Property CEO Conference in March.

Those skirmishes undoubtedly refer to Extell Development, the seller of the rights, with whom Vornado has had a well-publicized dispute regarding development at the site.

The resolution of the conflict comes eight years after Vornado purchased the 124-unit rent-controlled apartment building at 220 Central Park South for $131.5 million.

“Given that a good part of Vornado’s land cost basis is back at 2005 levels, I believe they will do extremely well on this project unless the world changes significantly,” Dan Fasulo, managing director for Real Capital Analytics Inc., told Commercial Property Executive.

With air and land rights now in hand, Vornado is in the position to move forward with development of its planned 920-foot condominium tower, which will contain 472,000 zoning square feet. As for the vacated residential building at the site, Vornado was able to complete demolition down to the second level during 2012. The new building is being designed by the celebrated firm of Robert A.M. Stern Architects.

The project has been a long time coming, but the timing appears to be right. “We have great faith in the long-term dynamics of the residential market in Manhattan; both condominium ownership and apartment rentals,” John Guinee III, managing director with brokerage and investment banking firm Stifel Nicolaus, told CPE.

In the third quarter, the number of condo sales jumped 19.2 percent year over year and condo listing inventory dropped 27 percent, according to a report by Douglas Elliman Real Estate.

But it’s not just market fundamentals that bode well for 220 Central Park South. “We also think very highly of the Vornado management team; particularly when the investment is Manhattan-centric,” Guinee added. “Therefore we are inclined to be positive on 220 CPS. However, we should note that the for-sale economics are jaw dropping; a bit out of the ordinary.”

As for the price tag on the development of the upscale 220 Central Park South, in an SEC filing in 2011, Vornado noted an estimated project cost of approximately $400 million to $425 million.

As for the price tag on the development of the upscale 220 Central Park South, in an SEC filing in 2011, Vornado noted an estimated project cost of approximately $400 million to $425 million.