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During the early days of the coronavirus pandemic, the focus for those who like to forecast wasn’t so much whether the US economy would recover, but what “shape” it would take.

Optimists believed a “v-shaped” economic recovery was just around the corner, while others foresaw a slower “Nike swoosh” of a rebound. Those who believed the pain was here to stay, believed an elongated “U” was most likely.

However, what seems to have transpired is none of the above, but rather a “K-shaped” recovery where some segments of the economy — whether it be retail or housing — have recovered sharply, while others have continued to downtrend. The bottom line? With low-wage workers suffering the most and asset values soaring, the gap between the haves and the have-nots stateside has widened from its already French Revolution-esque levels.

The Washington Post ran an excellent story this Wednesday morning on various qualitative and quantitative indicators that tell this story, so do read that as a primer.

But we came across another data point just now that we thought worth adding to the ever lengthening list.

Vornado Realty Trust is a $6.7bn real estate investment trust that invests primarily in commercial and residential real estate in New York. The virus has put the business on the back foot, as it has done to pretty much all real estate firms. That’s forced the company to close to down its Manhattan-based Hotel Pennsylvania, accept deferred rents, and furlough over 1,000 of its staff. Of course, this has translated into its operating performance: it posted a $193m loss in the first half of the year versus a $2.6bn profit in the same period last year, according to its latest 10-Q.

Yet, despite the cataclysmic circumstances for most of its business, one arm of Vornado’s business has ticked along rather nicely: sales of super-prime real estate.

Here’s Steven Roth, Vornado’s chairman and chief executive, on last week’s conference call following the results (with our emphasis):

220 Central Park South is the most successful residential development ever. We are 92% sold or under contract and we are now reaping the financial rewards from 2020. It is a financial engine feeding our liquidity and financial strength. Year-to-date through July, we have closed on 13 units for net proceeds of $598 million, all of this during the health crisis. From inception through July, we have closed 67 units for net proceeds of $2.42 billion. We expect closings in the balance of the year will bring in an additional $496 million in net proceeds.

220 Central Park South is a luxury development situated just next to Columbus Circle. You might remember that name as, in early 2019, Citadel’s Ken Griffin made headlines when he dropped $238m of loose change on the penthouse. It clearly pays to be a quant.

Yet the price-per-unit sold in 2020 — a whopping $46m — isn’t the story here, but the fact that these units sold at all. Even if you’re richer than Croesus, making a large real estate purchase requires some confidence in the future, and stability, of your own net worth. The fact that 13 members of the three-comma-club were willing to stump up that much cash is pretty telling of how insulated the 0.01 percenters have been from the economic chaos enveloping the the rest of the world.

Related Links:
The gap between the haves and the have-nots is widening sharply — FT

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