Vornado Grabs Majority Stake in Manhattan, San Francisco Towers for $1.8B

Vornado Realty Trust may have come up a bit short last month in its pursuit of Equity Office Properties Trust, but the powerhouse REIT and developer continues to flex its muscles. This morning the company disclosed that it is expanding its portfolio with the controlling interests in two trophy properties in New York City and San Francisco that have both traded in the last year and a half. In an unusual twist, Donald Trump is in litigation over the properties with the seller, Hudson Waterfront Associates.

Vornado will pay $1.8 billion for a 70 percent interest in both 1290 Avenue of the Americas (pictured) in Manhattan, a 2 million-square-foot office tower, and the 1.8 million-square-foot Bank of America Center at 555 California Street in San Francisco. Hudson Waterfront Associates is a partnership of Hong Kong investors that bought the Manhattan tower last April for $1.3 billion and closed on the San Francisco property early last year for $1.1 billion, then a record for the city.

Vornado could not be reached for comment by today's deadline, but in a statement this morning, Vornado agreed to indemnify Hudson Waterfront from certain liabilities and expenses emerging from a lawsuit filed by Trump, a minority partner of Hudson Waterfront. Against Trump's wishes, Hudson Waterfront sold assets on the former Penn Central Rail yards between West 57th and 72nd streets on Manhattan's West Side before acquiring 1290 Avenue of the Americas in a 1031 exchange, a source told CPN today. According to Vornado's statement, Trump challenged Hudson Waterfront over the sale price and Hudson Waterfront's use of the proceeds. The New York State Supreme Court dismissed Trump's lawsuit, except for claims seeking access to books and records, but Trump is appealing.

Vornado's most recent Manhattan acquisitions include its recent $689 million purchase of Manhattan Mall, which further strengthened its formidable holdings near Pennsylvania Station in Midtown Manhattan. Vornado is widely believed to be eyeing that area for redevelopment. "I was a little surprised that they spent so much on 1290 when they have so much near Penn Station," said Eric Anton, a senior managing director and New York City investment sales specialist at Eastern Consolidated. "But they're so huge now, they can buy all over."