Limited Brands will take floors 14 through 17 in the expansion and will now occupy about 500,000 square feet in the roughly 700,000 square foot property. The company, formerly known as The Limited, is represented by a team from the real estate services firm CBRE, led by CBRE's New York area Chief Executive Mary Ann Tighe and executives Eric Deutsch and Ken Meyerson.

1740 Broadway (Courtesy Property Shark)

Ms. Tighe and Mr. Meyerson couldn’t be reached by press time. Mr. Deutsch declined to comment.

An in-house leasing team at Vornado led by one of the company’s top leasing executives, Glen Weiss, handled the deal on behalf of ownership. Mr. Weiss could not be reached.

A media contact at Limited Brands didn’t get back to The Commercial Observer by press time.

Sources say that rents in the lease are in the $60s per square foot and that the length of the deal stretches 10-years, so that the company’s new space will expire at the same time as its existing offices, which run for another decade.

Limited Brands first inked a deal at 1740 Broadway in 2006, signing one of the biggest leases of the year then, a 320,000 square foot transaction for a cluster of floors. According to reports at the time, Vornado had wooed the large tenant to the property in part by conducting a multimillion dollar renovation there.

The deal isn’t the only large lease that Vornado, which is one of the city’s largest landlords, is in the process of arranging. The company is said to be closing in on a roughly 200,000 square foot deal with the financial firm Guggenheim Partners at 330 Madison Avenue, another midtown office building owned by Vornado that it has recently spent millions of dollars renovating.

DGeiger@Observer.com

Even more temporary office space to come. (Courtesy Property Shark)

The firm will be relocating from 11 Penn Plaza, where the retailing giant Macy’s is expanding into the space it will leave behind.

Regus will take floors 17-18 at 112 West 34th Street, a 26-story, 770,000-square-foot asset owned by Malkin Properties. The firm has committed to the spaces--at 28,000 and 23,000 square feet respectively--for 15 years. Rents start in the mid $40s per square foot.

A spokesman for Regus confirmed the deal and said that 112 West 34th Street was an ideal location because it was nearby its offices at 11 Penn Plaza, making the move more convenient for its tenants while remaining close to Penn Station, a central transit hub.

“We want to retain as many tenants as possible in the move and stay close to Penn,” the spokesman said. “The 11 Penn location is almost fully leased.”

Regus rents offices and then partitions the space for smaller users such as start up companies or even individuals who would like to lease a single work station.

“Many of our tenants are firms that are starting out and want flexibility,” the spokesman said. “It’s a great way to enter the market because we allow tenants to easily shrink or add space.”

Lately the concept has appeared to gain steam in the city amid lingering economic problems that have cast swaths of the workforce into the job market and spurred some to start their own business or embark on a more entrepreneurial career path.

As The Commercial Observer reported yesterday, WeWork, another office suite provider, just committed to about 75,000 square feet at 175 Varick Street where it will open its fourth location in the city. According to WeWork’s chief executive, Adam Neuman, the firm has taken almost 200,000 square feet in under two years.

Regus is one of the largest office suite companies with 20 locations in the city and over 1,200 in 92 countries worldwide. The company has opened a number of offices this year in Manhattan, at 99 Hudson Street, 41 Madison Avenue, 600 Third Avenue, 77 Water Street and 477 Madison Avenue its spokesman said and looking for more space in which to expand next year.

Mitch Arkin, an executive at the brokerage firm Cushman & Wakefield, leades a C&W agency team that represents Malkin Properties at 112 West 34th Street. Mr. Arkin could not be reached for comment. Regus is represented by a CBRE team headed by broker Mark Ravesloot. Mr. Ravesloot also could not be reached.

Macy’s will take up the the roughly 60,000 square feet that Regus will be leaving behind at 11 Penn Plaza. In that deal, Macy’s will lease the roughly 1.1 million square foot building’s fifth floor, expanding its already huge presence in the property to about 600,000 square feet sources say. Macy’s will pay rents in the $50s per square foot for the space, which it will take through 2020 to match the existing term of a portion of its lease in the building. 11 Penn Plaza is owned by the real estate investment trust Vqornado and represented by one of Vornado’s in house leasing executive Glen Weiss. Mr. Weiss couldn’t be reached for comment.

Dan Geiger, Staff Writer, is reachable at DGeiger@Observer.com

The latest figure shows it climbing to yet another peak, closing this past October at 10.7 percent.

Times Square's wild ride.

The cause for the most recent increase is two particular properties. First up is 229 West 43rd Street, a.k.a. the former New York Times building, which, at one point, expected to convert to residential or hotel use, was pulled from availability. A recent sale changed all that and now its 478,000 square feet is once again being marketed as office product. Second is 1140 Avenue of the Americas, which underwent a renovation complete with shiny glass and aluminum curtain wall.

Approximately 175,000 square feet of relatively new office product has been made available. Beyond those two more recent availabilities is 11 Times Square, with 633,000 square feet of prime space still available after law firm Proskauer Rose signed for 406,000 square feet back in May 2010. This building will apparently not be getting a new neighbor across the street for a while, either, as Vornado Realty announced it has nixed the idea of building a new 1.3-million-square-foot office tower (to be known as 20 Times Square) on top of the Port Authority Bus Terminal. This is the second time in more than a decade this project has been postponed, with the inability to land financing supposedly being the death knell this go-round. Talk about a roller coaster ride.
Robert Sammons, Cassidy Turley

The investment and financial services firm would take several floors in the base of the Vornado Realty-owned tower. Estimates vary how much space Guggenheim could fill in the building, but several people with knowledge of the firm’s requirements pinned the potential deal at 220,000 square feet or larger.

Guggenheim's Madison Avenue trophy.

For months Guggenheim has been in the market in search of a space to relocate from its current location at 135 East 57th Street. The company began as an investment operation set up in the early part of the 20 Century to invest the Guggenheim family fortune but has since grown into a major private investment company with roughly $100 billion of funds under management and over 1,400 employees.

The company almost had a deal to move to 1251 Avenue of the Americas in recent months, where it was set to sublease about 220,000 square feet from the French financial company Natixis. That lease however crumbled abruptly over the summer when Natixis was unable to complete a transaction it had been arranging to relocate from 1251 Avenue of the Americas to 9 West 57th Street. Natixis in the end was forced to remain in place instead of subleasing the space to Guggenheim, casting the firm back into the market in search of space.

The deal at 330 Madison Avenue, if it gets done, would be a substantial expansion over the company’s existing location at 135 West 57th Street, a building owned by Cohen Brothers Real Estate. According to sources, Guggenheim has less than 140,000 square feet in its present New York location. Its lease at 135 West 57th Street expires in 2013.

The deal at 330 Madison Avenue would be a sweet reward for Vornado, which has recently poured about $100 million dollar into extensive work to renovate the 39-story, 850,000 s/f building’s facade, interior spaces and systems. The company anticipates the investment will allow the property to achieve LEED Silver certification, a benchmark of energy efficiency and environmental sustainability.

Last year, the real estate services company Jones Lang LaSalle took about 82,000 square feet in 330 Madison Avenue for its New York headquarters for rents in the $60s per square foot. It was not clear by press time if Guggenheim is negotiating to pay a similar rate.

Peter Hennessy, a top executive at the real estate services firm Cassidy Turley, is representing Guggenheim in its space search. Mr. Hennessy declined to comment. Frank Doyle, an executive at JLL, leads an agency team that handles leasing at 330 Madison Avenue. Doyle also declined to speak. Reps at Vornado and Guggenheim couldn’t be reached.

He will offer the 13,721-square-foot condominium for $19 million with his Eastern Consolidated colleagues Peter Hauspurg, Lipa Lieberman, Marion Jones and Gary Meese, he said yesterday.

The most popular building on the block.

“Greene Street is one of the most undervalued retail destinations on planet earth,” said Mr. Schechtman. He laughed. “Ok, it’s actually one of the most undervalued north-south thoroughfares in the city."

There are a lot of factors contributing to the neighborhood’s strength, Mr. Schechtman said. He pointed to the recent sale of 60 Greene Street, with its vacant storefront, and noted that 70 Greene Street is in hard contract. The nearby Apple store, meanwhile, has helped propel rents in the area, but he also cites the purchase last month of 334 Canal Street by Vornado Realty, among signs of the increasing demand in the neighborhood.

“The rents in the neighborhood are really $150 to $170,” he said, sounding as though he barely believes it himself. The space is being sold by Aion Partners, a New York real estate investment firm.

In fact, buyers are sending unsolicited messengers to his office in a bid to pick up the prospectus, for a listing of his on Mercer Street—just north of Canal Street—because, he claims, the information isn’t being sent out quickly enough to satiate them.

Pricing for 57-63 Greene Street is pretty firm, said Mr. Schechtman. The 100 percent occupied condo is rented to Bang & Olufsen, Cyrus Company and Raul Carrasco.--Guelda Voien

Peter Riguardi and Jones Lang LaSalle will move to 330 Madison Avenue.

The Commercial Observer: In 2008 Jones Lang LaSalle entered what I’ll call its major hiring phase. Has the firm’s position in the market changed since that latest binge?
Mr. Riguardi: A lot has changed. We’ve added probably 50 to 75 brokers from our competitors here in the city. A lot of them are very senior rainmakers in the market place. The question at the time was, ‘Wow, how will these people do at JLL and how will it affect the culture?’

With Cushman & Wakefield in particular, Jones Lang LaSalle managed to poach a lot of rainmakers, including Mitch Konsker and his team. Is there bad blood between the firms?
Between the lines it’s a tough game and people hit hard and play to win. But we have the utmost respect for them as a competitor, and I’m sure they do for us. They’re still doing fine and we’re doing fine so hopefully there’s no more competitiveness than there normally is.

Jones Lang LaSalle has a softball team. Has the firm played Cushman since Mr. Konsker and his team came over earlier this year?
I’m sure we have, but I’m too old to play now—thank goodness. But I’m sure you wouldn’t want to have been playing second base on the double play during that game.

With leasing activity increasing in the past several quarters, are you personally sitting in on more pitch meetings than, say, a year or two ago?
I am blessed with a great Rolodex and have also been fortunate to work on varying kinds of assignments over the years, so I’m on just about every significant new business pitch that the firm goes on. Some of them are just to sort of help the teams and help secure and let the client understand the firm’s involvement. But still, a lot of them I’m still involved with actively as a broker. And in those instances I’m usually coupled with some really competent people at the firm to be a part of that as well.

You remain very focused on bringing in and overseeing new deals while simultaneously overseeing the growth of Jones Lang LaSalle’s tristate region. Is that hard to balance?
I don’t want to toot my own horn, but I don’t think it’s ever been done. I mean, there are people who have had my type of responsibility, like [Global Chairman of CB Richard Ellis Stephen] Siegel, but they already had a very big ship. When I started here we weren’t even 20 percent of the size that we are now.

Is it by choice or simply circumstances that you’ve been wearing several hats?
It was always the plan, and I think Jones Lang LaSalle always thought New York was strategic for them because it’s New York, but also because it would help all of their business around the globe—so it was always their intent to grow and have a significant footprint. I don’t think they ever realized that it could be as significant as it turned out.

Jones Lang LaSalle has been heading up leasing at 85 Broad Street since it was hired by building owner Metropolitan Life in early 2010. How has that assignment been going?
We had a million square feet to let there and we secured Oppenheimer for about 300,000 feet and so we’ve had a lot of great activity there. That deal was done just about six weeks ago and so we have about 700,000 feet left to lease. The building is going to undergo an uplift pretty soon with the lobby and cafeteria, but the building itself really has unbelievable systems and infrastructure because it was Goldman’s headquarters up until they moved last year. So we’re just really excited by the activity and the prospect.

When you were coming up in the commercial real estate industry, sustainability wasn’t on the radar. As brokerage firms continue to hire sustainability directors, how hands-on are you when it comes to that particular aspect of the business?
It’s a big part of what we do. We did the greening of the Empire State Building, which is really a great project for us, and it’s something that I personally believe in. I live my life that way at home. And we’re building new space and we’re trying to achieve the highest level of LEED certification that we can. Our global CEO believes in it, so we’re trying to definitely keep up with where the world is on that.

Was sustainability something you or your colleagues thought about 30 years ago?
Oh, not at all. It’s something we never thought of. But my wife has always been on the edge with this, and at home I’ve been dealing with it for a much longer time than it’s been popular.

Can you tell me anything about plans for Jones Lang LaSalle to relocate its offices?
We have made a commitment. We’ve taken 90,000 feet at 330 Madison Avenue—a Vornado building. And we’re actually under construction right now and we’ll move into the new space in late January 2012. And I think we’re very excited to be moving to such a great building with a terrific landlord like Vornado, but I have to say—and you wouldn’t be right if you didn’t write it—we’ve had tremendous success in 601 Lexington. Boston Properties is just a premier landlord and it was a very difficult decision to leave.

Than why did you decide to relocate?
But obviously we’re moving from the 30th-something floor to the lower floor of another building, and that was more in line with where we wanted to be financially.

Is this a result of all the recent new hires at Jones Lang LaSalle over the past two years?
Absolutely. We’re so cramped on space right now it’s a wonder that people can even be productive. We’ve added so many people, and we’ve jerry-rigged our space three or four times to accommodate it—so it is going to be nice to be able to get more comfortable and a little more efficient in our layout. Between brokers, accounts guys and the project managers, we’ve hired a couple hundred people—all in New York. In the tristate region we’ve had close to, like, 600 people.

Considering the recent moves by Cushman & Wakefield, CB Richard Ellis and Studley—not to mention a move later this month by Cassidy Turley—why are so many brokerages reconsidering their office space lately?
I think it’s just timely with the lease expirations and maybe the consolidation and changes within the industry. I think everyone has made a different decision on what they believe their space should look like. Ours is going to be very open and transparent.

Considering that Jones Lang LaSalle’s hiring phase has, for all intents and purposes, come to its fruition, what do you foresee as the next phase for the firm?
The next phase is to spread our wings. We expect that the people we brought to the firm will exceed their production levels historically from where they were at other firms, and one of my jobs will be to help them get there.
jsederstrom@observer.com

2009 is about the Great Recession, declining asset values and stock prices, deleveraging and balance sheet strength. No one anticipated the speed and severity of the economic collapse. Currently, New York Office and Retail are experiencing declining rents and reduced tenant demand. Notwithstanding, we expect mark-to-market of new leases to be better than flat, and we don’t anticipate more than about a two percent loss of occupancy. Merchandise Mart will be weaker than that. The Hotel Pennsylvania will struggle to do half as well as last year. Washington, the beneficiary of an ambitious, new administration, is a more positive story (and perhaps now the strongest real estate market in the country), where we anticipate level occupancies and higher rents. We will struggle to achieve flattish same store in New York Office and in Retail. We are fighting very challenging capital markets, but are able to execute some financings. We have chosen to not yet pursue acquisitions and, for other than a few select assets, will not try to sell into this market. [emphasis ours]

In his disarmingly frank and, dare we say, self-flagellating letter, Mr. Roth describes 2008 as "the one-timer year from hell." “This year we abandoned the MSG move project, delayed and substantially wrote down the Downtown Crossing project in Boston, and the Harlem Park project, and wrote-down/impaired eight others,” he writes.

A footnote at the end of the above graf leads the reader to this mea culpa, of sorts: 

This is performance that we cannot be proud of. But ours is a large business and we pursue money making through multiple acquisitions, transactions, developments, etc., predictably, some of which will be unsuccessful. As my 92-year old father taught me forty years ago, when he was working and I was just starting ‘…if you don’t have any bad debts, you are not doing enough business…’ Most of these write-downs were the result of the current economic crisis, but several were simply mistakes.

Overall, Vornado’s funds from operations for 2008 were up slightly over 2007, though net income applicable to common shares was down. Leasing numbers were also down. Share prices, for their part, “declined 28.4 in 2008 and a further 40.0% in 2009 to date.”

Again with the low self-esteem:

Mike [Fascitelli, Vornado's president] and I consider our share price over time to be an important report card on our performance and, this year, if we were still school age, we’d be off to detention (along with every other REIT manager). Commercial real estate is a cyclical business, and our stock price fluctuates. With our stock price now at $35.91 a share, the market has reversed almost ten years of shareholder gains.

In contrast to our fluctuating stock price, our income stream, which comes from some 300 buildings and 5,600 tenants, is quite stable. Over the years, our comparable income stream has constantly marched upward and, in fact, has never declined either in total or on a same-store basis.”

On the acquisition front, “Mike recently observed that over the past 10 years we completed $14.9 billion of acquisitions but sold only $1.2 billion. This is a numerical mismatch, for better or worse, a product of a buy-and-hold strategy. With 20/20 hindsight, we should have sold everything non-core, but we hesitated as the knife started dropping, and now it’s too late.”

Fortunately, it's not all fire and brimstone:

...Vornado has a portfolio of great assets, principally in two great cities. Vornado is one of the largest owners in Manhattan and the largest owner by far in Washington. This diversification benefits us enormously. We benefit from Washington’s stability and measured growth, and the fact that investors always value assets in our nation’s capital at a premium. In most years we benefit from the increasing rents and real estate values in New York, our nation’s financial capital. And, let’s not forget our Manhattan street retail.

...It sounds trite, but buy low still works. A good friend of mine and Mike’s, who runs a large real estate opportunity fund, years ago made an observation which I still remember. He said they analyzed every deal in every cycle and concluded that everything bought in the first half of a business cycle was profitable to super-profitable, while everything bought in the second half was a struggle or worse. Well, the buying half of the cycle is now on the horizon. But first, we must batten down the hatches and make sure our house is in order and is strong – we’ve already done that. Then, we must determine when systemic risk has passed – not quite yet.

...The Great Recession has momentum and has taken an enormous financial toll on our economy and all of us. An enormous adjustment of values has already occurred. The price of everything has been rolled back ten years and price does matter - a lot. I recently was quoted for a remark that I made at an industry conference… “a bottom will not be made until asset values are stupid, stupid, stupid cheap.” This is a necessary, but not a sufficient condition, and I think we are now on the third and last stupid. For example, New York is on sale - commercial rents, residential rents and co-ops are at bargain prices. For example, builders around the country can now deliver for, say, $200,000 a home that would have cost double two years ago, and, with a 4.9% Fannie Mae conforming mortgage, new home construction around America will shortly begin again(7). It sounds like a stretch, but even General Motors when reorganized, will be able to offer lower-cost automobiles, and they will sell. And, for another example, (and pardon the self-serving nature of this comment) blue chip REIT stocks are now on sale. [emphasis ours]

Read the whole letter here.

His gesture of confidence: Vornado Realty Trust, of which he is CEO and chairman, will within three months begin construction on a more than $100 million rehabilitation and prettification of 330 Madison Avenue, the classy old broad of a building at the near-peerless corner of 42nd Street. 

Industry sources say the firm has hired Moed de Armas & Shannon Architects to re-clad the building with a new curtain wall; create an entirely new storefront; enlarge and center the lobby (which at the moment doesn’t sit quite squarely between 42nd and 43rd streets); install computer-based elevator systems; upgrade the electric and HVAC capabilities; and even, as at One Penn Plaza, install a cogeneration plant, which at 2 megawatts will provide about half of 330 Madison’s energy needs at peak mode and, as a byproduct, about a third of the building’s steam requirements.

If the tower wants to keep up with the Joneses, the lovely old lady probably needs the face-lift. Back when the Mendik Company, which merged with Vornado in 1997, bought the tower in 1979, 330 Madison was the fresh face on the block, its more modernist facade surrounded by a crowd of heavy masonry buildings.

But over the past 30 years, the competition has sharpened, likely emboldened by the rehabilitation of Grand Central Terminal in the 1990s. By 2004, Brookfield Properties had completed construction of 300 Madison Avenue, designed by Skidmore, Owings & Merrill, which also, for that matter, designed the old Bear Stearns tower at 383 Madison Avenue. We could go on, but you get the idea.

Now it’s 330 Madison’s turn. The building, rising 39 stories and holding 742,000 square feet, has nearly 180,000 square feet of available space, much of it sublease space, according to CoStar. Its tenants include HSBC Securities, Wells Fargo and alleged fraudster Stanford Capital Group. Tenants will remain in place during the two-year-long process.

Odd as the timing may seem, down markets can be ideal times to take on projects like this, according to Craig Evans, a senior managing director at Colliers ABR.

“Like with hotels, it’s better to renovate when the market is weak,” Mr. Evans said. “Real estate is a long-term investment and this will pay off over time.”

Assuming, of course, the long-term prospects for the commercial real estate market in New York City are good ones.

“That’s a perfectly appropriate assumption to make,” Mr. Evans said.

drubinstein@observer.com

“The air-conditioners are so old and beat up, I figure why waste electrical power during an energy crunch when I can just take off all my clothes and work nude?” quipped Mr. Biafra, the 50-year-old former lead singer of the irreverent Reagan-era rock band the Dead Kennedys and a onetime fringe presidential candidate. “I come from cold, foggy San Francisco, so I like it when the heat is sweltering. It’s a nice treat to work nude.”

He was staying at the historic Hotel Pennsylvania, a veritable musical landmark befitting the songwriter responsible for the satirical travel anthem “Holiday in Cambodia.”

Speaking to The Observer in the hallway outside the hotel’s 18th-floor ballroom this past Sunday night, Mr. Biafra stood just steps away from a framed copy of the sheet music to “Pennsylvania 6-5000,” the Glenn Miller Orchestra’s ode to the once glorious hotel, built in 1919, and its long-standing phone number.

“It’s definitely a tired old hotel that hasn’t really been fixed in a long time,” said Mr. Biafra, in town for a speaking engagement.

Earlier that afternoon, he delivered a fiery two-hour sermon to the biennial gathering at the hotel of computer geeks, conspiracy buffs and ex-convicts, known as HOPE (Hackers on Planet Earth).

Mr. Biafra is a regular guest of the conference, which this year included seminars on such cloak-and-dagger topics as safe cracking and lock picking, as well as how to turn a $50 popcorn machine into a high-tech $400 “herbal vaporizer.”

“They’ve had me five times in a row even though I don’t know how to use a computer,” joked Mr. Biafra, who openly encouraged attendees to tinker with touch-screen voting machines during the upcoming November elections, among other acts of civil disobedience and cyber-sabotage, but warned the crowd to always be wary of Big Brother: “… and those big porcelain balls you find on top of the TV sets in this hotel! What are they for?”

Other speakers included high-tech security consultant Kevin Mitnick, who spent five years in prison for illegally hacking into the computer systems of various corporations; and private investigator Steven Rambam, who during the previous hacker conference, two years ago, was arrested before even reaching the podium, on charges (which were later dropped) of interfering in a federal investigation. This year, Mr. Rambam went on for a full three hours.

The crowd of nearly 3,000 attendees—a group largely characterized by their pasty complexions, laptops and T-shirts emblazoned with techie slogans, including “Talk Nerdy To Me,” “No, I Will Not Fix Your Computer” and “Keep Out of Direct Sunlight”—seemed right at home in the long-neglected lodge on Seventh Avenue.

“I literally live in a barn, so my standards are a bit different,” said Douglas Spink, another guest speaker and former dot-com tycoon who turned to drug smuggling when the Internet bubble burst; later went to prison; and now trains horses in Washington State (his prize stallion currently being the victim of a highly publicized horse-napping). “I’m just happy to have running water.”

The hackers have been coming to the Hotel Pennsylvania every two years or so since 1994—a streak that, until recently, seemed very much in jeopardy.

A LITTLE OVER a year ago, organizers learned that landlord Vornado Realty Trust, which acquired the hotel in 1997, was planning to demolish the ancient McKim, Mead & White-designed building and replace it with a soaring office tower.

Some HOPE participants took the news personally: “There is nothing more frightening to any government, to any corporate board room, than the knowledge that thousands of hackers in a single location may be focusing their attention in the same direction at the same instant,” according to programs passed out at the conference. “A plan was thus devised by the agents of Vornado to strike down the gathering point of the hackers, to have them forever wander in search of a home, and to be in a perpetually weakened state.”

One Manhattan-based technofile even spearheaded a campaign to have the old hotel designated as a city landmark, thus blocking the wrecking ball. Gregory Jones, a resident of nearby 30th Street, spent months lobbying elected officials, community leaders and the media, to little effect. The effort eventually earned the endorsement of the local community board, whose members even launched into a sing-along of the old Glenn Miller tune prior to voting—but ultimately failed to sway the city’s Landmarks Preservation Commission, which twice rejected the proposal.

And so the hackers returned to their precious hotel on July 18 for what had been dubbed “The Last HOPE.”

“I don’t know why it doesn’t occur to more developers to remodel an historic or an old building rather than just put up some boring new monstrosity,” said Mr. Biafra as a group of hackers carried a symbolic coffin into the conference room during the event’s closing ceremonies. “It costs them less money to do it. And you’ve got all kinds of people—even if this got turned into condos!—who want to move into an old, cool, revamped building. Or, you revive the hotel, fix it up a little bit. Or, you could do a combination of all of the above, and it would be a much more vibrant community than another generic office tower.

“I mean, there have been very successful versions of this done with various train stations and old office buildings—even meatpacking plants—and people want to live there,” Mr. Biafra continued. “Part of the old Heinz ketchup factory in Pittsburgh has been turned into living space now, and the line to move into one of those lofts is out the door. They are way too expensive for me or any of my friends. But the point is, you find something cool to do with an old building that may actually be better in the long run—even for the developer.

“It’s just a matter of whether you have any taste,” he added, “or any soul.”

Or tenant, as it turns out.

ACTUALLY, IT HAS occurred to the developer to rethink the whole demolition thing: Just last month, in fact, Vornado CEO Steven Roth announced during a conference call with investors that he might just hang onto the old hotel after all.

“First off, it is doing damn well as a hotel,” said Mr. Roth, noting the hotel’s increased occupancy, up from 63.7 percent nightly on average in 2003 to 84.4 percent in 2007, as well as increased revenues.

Last year alone, the hotel brought in nearly $38 million—some $10 million more than in 2006, according to the company’s latest annual report. More recent figures point to $5.4 million in pretax earnings during the first three months of 2008—up from $3.6 million over the same period last year.

The numbers, among other financial realities, have clearly swayed Mr. Roth. “We have two basic grand strategies with this grand asset,” he said. “One is, leave it as a hotel, renovate it as a hotel, increase the income coming out of the hotel; and you introduce a very substantial amount of retail in the base of that building—probably three floors’ worth, and connect it into the Manhattan Mall, so we have an extraordinarily interesting asset.”

The “other opportunity,” as Mr. Roth put it, would have Vornado stick to its guns, raze the building and build a huge tower—“if we can land a major tenant,” he added.

A big if.

It was no secret that Mr. Roth had been wooing financial giant Merrill Lynch to relocate from Lower Manhattan to the hotel site with promises of building a new company headquarters spanning 2 million square feet, complete with a 80,000-square-foot trading floor.

Ultimately, however, the deal fell through. “The credit crisis and Merrill’s management changes disrupted this deal,” according to Vornado documents.

The developer’s abrupt about-face seemed a sweet, albeit indirect, victory for “Save the Hotel” campaigner Mr. Jones, who had grown so frustrated by his fellow hackers’ reluctance to do much of anything beyond blogging about the issue that he ultimately abandoned the HOPE convention altogether.

“The economy accomplished it for us,” Mr. Jones said on Monday. “Thank you, George Bush!”

Late Sunday night, conference organizer Emmanuel Goldstein felt comfortable enough to announce tentative plans for the next HOPE event at the Hotel Penn in 2010.

In the meantime, participants hoped Vornado would make good on its makeover proposal. And, in fact, in recent months, the hotel has added some new touches to the lobby, including additional couches and a series of flat-screen TVs above the front desk.

But there is still much to be done.

“I do think they could afford to update the hotel to the point of having coffee in the rooms,” said Mr. Biafra in a sort of off-the-cuff oblique homage to his 1987 album, Give Me Convenience or Give Me Death.

“It’s one of those things that nobody did 10 years ago,” he said of the in-room coffee makers, now an industry standard. “But now that we have it, we can’t live without it.”

cshott@observer.com

A source close to the negotiations said that the law firm, which now occupies 400,000 square feet at 1285 Avenue of the Americas, wants to take 500,000 square feet in the tower, which isn't expected to be complete until 2012.

More on this in Wednesday's paper.