We like the real estate lending business. From time to
time, we provide real estate financing on assets that we
understand as well as the assets we own.
Mike and I twice declined to buy New York's General
Motors Building for about $800 million, in 1998 and again
in 2000. In September 2003, the General Motors Building
sold for $1.4 billion to a private New York investor. We bid
$1.2 billion. This time around, we participated in the
financing of this deal by lending $225 million of mezzanine
debt (11) at an average rate of LIBOR plus 8.833% subordinate
to $900 million of senior debt. (See Note 3 to the
Financial Statements for the full details of this investment.)
Recently, the borrower began discussions with us about
prepaying/recasting a portion of the loan. |
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This year Alexander's deserves its own section. And this
year we intend, in conjunction with Alexander's Board of
Directors, to determine the end game for this investment
which may include selling it, or simply leaving it to seek its
natural value as a free standing, separately traded REIT, as
it now is, or other options.
Vornado owns 1,654,000 shares of Alexander's, Inc., a
33% stake in this NYSE-listed REIT. The shares, which
had a value of $65 on January 1, 2003 are trading now at
about $150, making Vornado's equity investment worth
$248 million at market (12) which, when taken together with
Vornado's $124 million loan to Alexander's, represents a
total investment of $372 million.
Alexander's has no corporate level employees. Vornado
serves as its for-fee external manager, leasing agent,
developer, etc. |
