'Eye of the Covid-19 Storm'

It's not an ideal time for the head of one of New York City's largest commercial developers to be issuing his annual letter to shareholders, but that was the task facing Vornado Realty Trust Chairman and CEO Steve Roth. The company owns 19.1 million square feet of Manhattan office space, 2.3 million square feet of Manhattan street retail space, some residential properties, and a hotel near Penn Station in midtown Manhattan.

New York City has been the epicenter of the country's coronavirus outbreak, with 126,000 cases and 4,000 deaths. So, not surprisingly, investors have been running from Vornado. Shares of the company, a real estate investment trust, have fallen 50% this year.

Roth writes:

As I write this letter, we are now in the eye of the Covid-19 storm -- an out of the blue apocalypse. Life as we know it is upside down, people are hurting, businesses are hurting, the future is uncertain. ...

The disruption to normal day-to-day life and normal work is extraordinary, but will, hopefully, be short-lived; the disruption to commerce and the financial markets is double-extraordinary and likely to be longer lived. Businesses are closed, stock markets in a rout and capital markets are seizing up. All this foretells the onset of a recession. In my view, the health crisis will need to be resolved first so that we all can leave our bunkers and get back to normal live, before economies can recover. 

But, he's not giving up on New York real estate: 

In our council room, we have wondered whether the work-from-home response to Covid-19 may become popular and affect office demand. Anecdotally, the opposite seems to be true. Most who work at home are finding it very inefficient and after a week clamor to get back to the normal routine and social interaction of the workplace...

The handful of mega gateway cities are not going away, in fact, they will go from strength-to-strength. 

For more on Roth's letter and what it means for the real estate market, check out Andrew Bary's story on Barrons.com.

JPMorgan Chase Chairman and CEO Jamie Dimon also released his latest letter to shareholders today. Barron's Carleton English has more here.