Sporting a blue blazer, checkered shirt and khakis, the president of Vornado/Charles E. Smith zips down to 220 20th St., a 19-story Vornado apartment building. In the elevator is a young man with a puppy and a young woman with a toddler. On the roof there is a young woman in a bikini by the pool enjoying views of the Washington Monument and the Jefferson Memorial.
Few would consider Crystal City and its dense collection of interconnected high-rises just north of Reagan National Airport a go-to destination for the 20-something crowd.
“In the old days, we had a lot of people say, ‘I’m in Crystal City for a meeting, or for business, but now I’m going to leave,’ ” said Schear, looking out from the rooftop. “You have all of the infrastructure in terms of transportation and Metro, and the airport. But you have people like John McCain who rented an apartment here, and then at the end of the week, would get on a plane.”
Schear, 53, is trying to change that perception block by block, and the restaurants and apartments are early steps. His company owns half of all the commercial property in Crystal City, a total of 26 buildings, so he’s got lots of work to do.
The key to drawing new interest will be making Crystal City seem cool. But will Vornado’s stockholders be willing to give the plan time to work?
BRAC takes its toll
Vornado Realty Trust is a $30 billion New York-based real estate investment trust with a charismatic chairman, Steven Roth, who is trying to reinvigorate the company’s lagging stock price. Schear controls the 20 million-square-foot Washington portfolio, which amounts to about one-quarter of the company.
That portion, however, is a matter of considerable focus in New York, largely because the Pentagon’s Base Realignment and Closure Commission (BRAC) has wreaked havoc on the holdings. Government agencies are vacating 2.4 million square feet of Vornado space in Northern Virginia. Roth, in his annual letter to shareholders in April, wrote that he expected BRAC losses to cost the company $1.50 per share. Two research firms downgraded the outlook for Vornado stock in the spring.
Since then, concerns about the company’s Washington portfolio have not receded. Last month, analysts from Stifel Nicolaus suggested that Vornado could ultimately face 3-to-4 million square feet of move-outs, writing that “while investors perceive Vornado to have a high quality management team, the bloom is off the rose.” Vornado has begun holding investor calls, and Schear has been asked to New York for the next one, Aug. 7.
The man behind the plan
Top Washington commercial real estate executives often say the same two things about Schear. First, that he is one of the smartest in the business. Second, given Vornado’s situation in Washington, he had better be.