Steven Roth has been Vornado’s overlord for more than 35 years — but some are wondering if the aging CEO has a succession plan in place
Vornado s Steven Roth and One Penn Plaza
“Don’t be jerky,” Steven Roth told Gary Barnett. “It’s not even close.”
Sitting among other industry titans at Bloomberg LP’s headquarters last spring, Roth was in full troll mode. Barnett had dared to suggest that One57, his cathedral for the 0.1 percent, was better than Roth’s luxury condo tower in the works at 220 Central Park South. And when Jeff Blau spoke about the upcoming condos at Hudson Yards, Roth quipped that his firm, the Related Companies, was “selling to the suckers.” Of his lender at 220 CPS, the Vornado Realty Trust chairman and CEO said: “I’m in the suck-up business to the Bank of China.”
The chiefs of public companies tend to be careful to a fault about what they say in public. Not Roth, who is one of the last in a line of brash hustlers running blue-chip real estate investment trusts — very much in the vein of Sam Zell, whom he’s referred to as a “bald-headed chicken fucker.” At the same time, Roth has shown remarkable patience in turning Vornado, once a developer of New Jersey industrial properties and strip malls, into the $40 billion behemoth, with more than 30 million square feet of New York City holdings, it is today.
Vornado is now one of the largest owners of commercial property in Manhattan. And there is near-universal acclaim within the industry for the way that Roth has managed the company since Michael Fascitelli — his golden boy and former heir apparent — stepped down as CEO in 2013. The REIT made good on its promise to simplify its portfolio, shedding some of its troublesome fringe investments and doubling down on its prime New York retail holdings.
Vornado’s discipline has given it a fortified balance sheet that now allows it to make transformative bets, including the repositioning of 8 million square feet of office space in Penn Plaza, the $1.6 billion redevelopment of Moynihan Station and 220 CPS, the luxury market’s new prom queen.
A rendering of 220 Central Park South in Midtown (credit: Vornado)
Roth has championed the bulk of those initiatives, and his power at the company is absolute.
“He runs his company as if he owned it all, and his shareholders benefit from that,” Richard LeFrak, CEO of the LeFrak Organization and a close friend of Roth’s, told The Real Deal.
But the Vornado chief, who is now pushing 75, has yet to announce a clear successor — a glaring lack of transparency for a public company with an aging CEO. This makes some Vornado shareholders nervous about the REIT’s fate when he finally calls it quits. Will he leave a void that’s impossible to fill?
“It’s akin to the Grateful Dead,” said Alexander Goldfarb, an analyst at investment bank Sandler O’Neill. “No one wants to see the warm-up band.”
What makes the succession issue particularly grating for the REIT’s shareholders is that the many of Vornado’s biggest competitors appear to have figured it out.
Stephen Green, founder of SL Green Realty Corp., brought in Marc Holliday as the firm’s chief investment officer in 1998, and Holliday, who’s 50, has been its CEO since 2004. His second-in-command, Andrew Mathias, is in his mid-40s.
Meanwhile, Boston Properties’ founder, Mort Zuckerman, named Owen Thomas, a relative outsider, CEO in 2013. Thomas, who came to the REIT from Lehman Brothers Holdings — where he helped the underwater firm unravel its real estate assets — is 54. Related’s Blau, who started at the firm in the early 1990s and became its second CEO in 2012, is 48.
“Some companies will choose to be very upfront with it, and some companies will choose to keep it in the dark,” said John Guinee, a REIT analyst at financial services firm Stifel, Nicolaus Co. “Usually what happens is, if they think they need to go outside the firm and hire an executive recruiter, then they go public with it. But in other cases, if they think that the candidate is internal, then they will keep it hush-hush.”
Greedy No. 1
But Roth has been known to pull rabbits out of his hat before.
Back in 2006, he had just acquired a prime retail site at 1540 Broadway, in a $260 million, all-cash deal. But Virgin Megastores had a 200-year lease in place, at 15 percent of market value. Unless Virgin left, the deal was a dud.
“We went upon a two-year mission to buy them out, and we flunked,” Roth recalled during an April 2011 quarterly luncheon hosted by the Real Estate Board of New York. “What we eventually did was we teamed up with Related, who had a similar situation in Union Square, and we bought the whole damn Virgin Record company operation in the United States, 20-some odd stores.”
He then pointed to a chuckling Stephen Ross, sitting next to him, and said: “Just so Greedy Number 1 could get his hands on it, and Greedy Number 2 could get that — and it worked!”
When reminded of the story last month, Ross laughed. “I love Steve Roth,” the Related chairman said, “[but] he’s greedier.”
Acquiring a company for its underlying real estate was a textbook move for the Vornado chief.