Vornado Buying Manhattan Mall

Vornado Realty Trust(VNO) is paying $689 million to buy the Manhattan Mall, a one-million-square-foot office and retail property near New York City's Pennsylvania Station.

The purchase adds to the company's cluster of buildings in the Penn Station vicinity, which Vornado has targeted as Manhattan's next major redevelopment area.

The property is located on the entire Sixth Avenue block between 32nd and 33rd streets in Manhattan, adjacent to the real estate investment trust's 1.4-million-square-foot Hotel Pennsylvania. Vornado has said that it will likely redevelop the Hotel Pennsylvania, which sits across from Penn Station and Madison Square Garden, at some point in the future.

The Manhattan Mall, which is 97% leased, contains 812,000 square feet of office space, mostly leased to Bank of America(BAC) and Interpublic Group(IPG).

The building also contains 164,000 square feet of retail space and 250,000 square feet of air rights, which would allow Vornado to build higher.

HausInvest Global, a German fund, has owned the Manhattan Mall since 2004.

Vornado already owns four office buildings that comprise Penn Plaza surrounding Pennsylvania Station, along with several retail properties that also hold redevelopment opportunity.

Vornado and the Related Companies were picked last year by a New York state agency to turn the nearby Farley Post Office Building, on 32nd Street and Eighth Avenue, into a new transit hub.

That project, however, is now in limbo. State Assembly Speaker Sheldon Silver blocked the renovation of the building, which is planned to become Moynihan Station, in October.