Boston, MA 05/12/2014 (wallstreetpr) – When two Defense Department agencies pulled out of Crystal City building, Vornado Realty Trust (NYSE:VNO) has not been able to attract enough tenants to fill the vacancies left. The company now seeks to redevelop the building into an apartment, and it is joining forces with WeWork on the project.
The renovation of the building into an apartment is aimed at attracting tech tenants. However, the company is leasing out the space to its partner WeWork at much reduced rate, a move that the management say is aimed at achieving maximum occupancy rate in the building and attract regular revenue stream.
The company has offered to lease the space in the building to its partner WeWork at a bug discount of $24.77 per sq ft, reflecting about $10 per sq ft below the market price in the area. However, according to CEO Steve Roth, the sacrifice is worth it. In any case, the company believes that the Crystal City approach might become a pilot project on how to go about filling many other of its vacant spaces to avoid revenue loss.
Vornado Realty Trust (NYSE:VNO) has earmarked about $40 million to renovate the building and the renovation works are expected to complete by mid-2015. The company has already submitted its renovation plans for approval to the Arlington County.
Besides the Crystal City building that Vornado Realty Trust (NYSE:VNO) seeks to convert into an apartment, the company is also seeking to attract higher revenue through a variety of means. The company can be seen making property acquisitions while redeveloping properties in certain market to attract high dollar-tenants. Moreover, the company is also divesting assets to unlock funds for acquisitions in areas with long-term market potential.
In addition to property renovation, acquisition and portfolio balance, the company also expects curb on costs and expenses to lead to significant financial saving to support bottom line and result into bigger value for the investors.