City’s New Third-Tallest Tower?

But despite his anxious and bullish stance, Mr. Roth has earned a reputation for being one of the more patient developers in the city. For about a decade, he sat on the vacant site of Alexander’s department store on 59th Street and Lexington Avenue before he ultimately signed the expanding Bloomberg LP and built its new headquarters.

He’s now waited an entire real estate cycle with no major steps toward the transformative goals for the “Penn Plaza” area (though rents did rise), apparently content to keep sitting on his 7 million square feet of property until the time is right.

To that end, the 1919-built Hotel Pennsylvania holds little nostalgic value in Vornado’s heart. Talking to Vornado investors in 2008, Mr. Roth referred to it as “a placeholder, sort of like a parking lot,” until a tenant can once again be wooed to the area. Then again, the firm has vacillated at times, saying it might renovate the hotel to draw a higher-end clientele.

At the market’s peak, the Pennsylvania, with its dimly lit lobby and dingy rooms, was a cash cow, as demand for hotel rooms skyrocketed while the supply stayed mostly constant. In 2007, Vornado reported $38 million in earnings on the hotel; in 2008 it grew to $42 million. (Vornado and other partners paid just $159 million for it in 1997.)

But this year, with tourism down and smaller, limited-service hotels opening their doors, its numbers have tanked. Through September, at the latest filing, Vornado reported $7.8 million in earnings from the hotel, down $21 million through the same period the year before.

As of yet, it’s unclear just how high the hurdle will be for Vornado to win public approval of its tower. Local residents are sure to have concerns with the density—its proposed size is larger than the Empire State Building—and there is a set of preservationists who have been trying to landmark the McKim, Mead & White-designed Hotel Pennsylvania, to no avail thus far.

On the other hand, Vornado is permitted to build a rather tall building without any approvals at all, and it is entitled to a “transit bonus” of density, provided that the transit agencies and community are content with the improvements being offered.

And then there are the union workers in the hotel, who have not yet made much noise about the proposed tower (though they did join in a push to landmark the hotel in late 2007). A new office tower would, after all, mean the demolition of the 1,700-room hotel and the jobs inside, but given the economy and the dearth of would-be tenants lining up to occupy the tower, it’s not as though a wrecking ball is imminent.

Whatever resistance there is will become clearer in the coming weeks. The plan goes before the community board, which may give a nonbinding recommendation on the tower. Ultimately, any changes would likely come as a result of pressure from the City Planning Commission or from Council Speaker Christine Quinn, the local representative for the tower. Both must vote in favor of the project if it is to proceed.

City’s New Third-Tallest Tower?