Vornado Realty Trust, one of the leading New York developers, announced on 26 October 2023 that the company would step out from the race for a casino license in New York City. The developer’s decision has reportedly been driven by the $3 billion casino licensing and construction costs and the mounting financial pressure for the company in the circumstances of the eroding demand for investment opportunities.
Giving Up Casino License Pursuit:
CEO Steven Roth reportedly said: “It is highly likely that we will not pursue a casino license,” the one required for the casino development on the site of the recently demolished Hotel Pennsylvania, across the street from Madison Square Garden, that Vornado had been interested in. But, as Crain’s New York Business (CNYB) reports, the competitors like SL Green and Related Cos. teaming up with big Las Vegas operators for the same purpose seem to turn Vornado away from the uncertain and costly adventure.
As reported by CYNB, the state of New York is expected to award three casino licenses in 2024, with two of these almost secured for race tracks in Quenns and Yonkers. Therefore, the last license for a mid-town casino reportedly includes four strong bidders such as Mets owner Steve Cohen or Silverstein Properties, to name a few. Although such a development in the heart of the city could bring $2 billion in annual revenue and as much as $600 million in operating income, CNYB reports that the licensing and construction costs are estimated at $3 billion.
As reported, Vornado, as the city’s second-largest commercial landlord, decided to refrain from further activities in this regard due to the currently unfavorable office space demand, high interest rates, and the rising overall cost circumstances and pending debt payments. Roth reportedly said: “The policy of the company in this environment is to retain as much cash as we can. The preservation of our balance sheet is the number one priority.”
For this reason, Vornado has reportedly already engaged in a series of activities to save as much as possible to meet its financial liabilities with some of these due already in 12 months. According to CNYB, the developer has suspended its dividend in April and announced a share repurchase program to see the stock price going down by 5% on November 1, 2023 to around $19 a share. Vornado reportedly copes to keep the pace with its plans regardless of the fact that the company owns some of the most attractive office buildings in the city of New York, such as 1290 Sixth Ave., the Farley Building, and the Penn 1 tower.
The source reports that the company’s figures are being under pressure as the occupancy rate in these buildings fell to 89.9% in the third quarter to mark the rate lower than the preceding quarter and the one from 2022. The trend is reflected in other Vornado’s activities and, as CNYB reports, the company said it might sell or borrow some properties to raise cash.
The developer is reportedly looking to refinance $1.2 billion mortgage for its 280 Park Ave property co-owned with SL Green until September 2023. After the company reportedly refinanced some other mortgages to secure a $75 million loan instead of the previously obtained $100 million, Vornado decided to focus on current liabilities rather than gamble with the casino license bid.