New York developer Vornado Realty Trust is open to parting with two high-profile properties in San Francisco and Chicago, the last two it owns outside New York, as Chief Executive Steven Roth declared “nothing is sacred” in the company’s pursuit of what he described as higher shareholder value.
The two properties, San Francisco’s 555 California St. and the Mart in Chicago, may be “on the for-sale list for the right deal at the right time,” Roth said Tuesday during a second-quarter earnings call, adding that Vornado’s portfolio is 90% New York-centric. To be clear, Roth said Vornado isn’t actively marketing the buildings and doesn’t have a plan to list them in the next year or so.
“We have no prediction on timing, but they are available if the deal is correct and the timing is correct,” Roth said. “Those two are valuable. We will sell for the right price at the right time. Nothing is sacred. … We think 555 is the single best asset in San Francisco. San Francisco is in a recovery phase, which we think is going to be very dramatic. … We look upon them as financial assets. … Our mission is to increase our stock price.”
That stock price is one of Roth's consistent talking points during earnings calls. Shares have risen 42% over the past 12 months, he said, almost double the S&P 500 performance. The CEO pointed out that other office real estate investment trusts, whether on the East Coast or West Coast, including New York office specialists, were negative during that period.
Vornado’s willingness to unload these two properties comes as Roth said “Manhattan is universally claimed to be the strongest real estate market in the country, and the strongest by far.” If the properties were eventually sold, it would complete Vornado’s yearslong journey to simplify its portfolio to become a New York-focused real estate firm.
Vornado declined to comment further to CoStar News.
"We think 555 California is likely the more sell-able, given San Francisco's rapid rebound driven by [return to office], AI growth, and a new more centrist pro-business, pro-quality of life mayor,” Piper Sandler analyst Alexander Goldfarb wrote in a report. “By contrast, the Mart is likely to be of interest to a certain type of buyer who is comfortable with Chicago's notorious easy to build market and progressive political scene.”
Once tallest building west of the Mississippi
In San Francisco’s Financial District, Vornado in 2007 acquired a 70% interest in a three-building office campus anchored by the 52-story 555 California with the remaining 30% owned by the Trump Organization. The 1.51 million-square-foot tower, opened in 1969 and renovated in 2017, counts among major tenants Bank of America, law firm Kirkland & Ellis and Goldman Sachs, according to CoStar data. The campus also includes 315 and 345 Montgomery Street and totals 1.8 million square feet.
555 California has a vacancy rate of 6.3%, far below San Francisco’s average of about 29%, CoStar data shows. The property was said to be the tallest U.S. building west of the Mississippi River when it debuted.
Roth previously mentioned buyer interest in 555 California in his annual shareholders letter this year. And this isn’t the first time Vornado has floated the idea of selling the property. The real estate investment trust considered selling 555 California and 1290 Avenue of the Americas in Manhattan but shelved the sale process in 2020 after failing to attract prices it wanted, according to The Wall Street Journal at the time, adding that Vornado was seeking up to $5 billion combined for the two properties.
Former Kennedy family property
Vornado acquired the Mart in Chicago as part of a 1998 purchase from the Kennedy family.
If Vornado does strike a deal to sell the Merchandise Mart, it will be just the second time the riverfront behemoth has changed hands in 80 years.
Joseph P. Kennedy Sr., patriarch of the political dynasty, bought the two-block-wide building and adjacent land from department store giant Marshall Field & Co. in 1945. The family later developed an adjacent structure called the Apparel Mart.
Those two buildings, plus two others in Washington, D.C., were sold to Vornado for $625 million in 1998. Chris Kennedy, a son of former U.S. Attorney General and Sen. Robert F. Kennedy, stayed on to help run the properties.
Completed in 1930 as a warehouse and wholesale center for department stores, the Chicago art deco structure later housed federal government offices during World War II before the sale to the Kennedys. It was the world’s largest building by square feet when it opened.
Vornado has gradually shifted large blocks of the building from showrooms to modern offices, although some showrooms and large design events still call the 25-story building home
The 95-year-old building has nearly 3.7 million square feet of rentable space, with large office tenants including Conagra Brands, Motorola Mobility, Medline, Braintree, Allstate and IPG. The property is just under 80% leased, according to CoStar data.
In 2023, Vornado completed a major renovation project featuring a reconfigured outdoor plaza overlooking the Chicago River, and new fitness, lounge, conference, retail and work areas.
Vornado in 2017 spun off its D.C. properties to create JBG Smith, with Vornado saying at the time it plans to “be a best-in-class, highly focused, New York-centric office and high street retail” REIT. Vornado in 2015 also separated its portfolio of strip malls, shopping centers and other properties in states including New Jersey and Pennsylvania as Urban Edge Properties.