Vornado Realty Trust indicated in a letter sent to its investors that appeared in a filing yesterday with the Securities and Exchange Commission that it is "hopeful that a scaled-back version and perhaps even a doubly scaled-back version" of the proposed redevelopment of the Farley Post Office building on Eighth Avenue between 31st and 33rd Streets "will happen."

Ambitious plans to relocate Madison Square Garden into the western half of the full-block post office structure to open up its present site on the other side of Eighth Avenue to a major renovation of the existing Pennsylvania train station and permit the transfer of several million square feet of development rights in the vicinity were thwarted by the announcement last month that the Garden would stay put and renovate its existing structure.

Vornado is a major property owner in the area and is a partner with The Related Companies in a joint venture in the proposed $14 billion redevelopment scheme involving the post office.

The eastern end of the post office building, which was designed by McKim, Mead & White with a two-block-long colonnade along Eighth Avenue, has been planned as new train station for New Jersey transit.

The smaller plan for the post office site, known as Moynihan Station, received many needed approvals and has the required funding already set aside, based on costs in 2006.

In his letters to investors, Steve Roth, CEO of Vornado Realty Trust, said that "In my view, there has been too much public endorsement of the idea of this project for nothing to happen."

Vornado and Related had been designated as co-developers for a smaller-scale version for the post office redevelopment by the Pataki administration, and Vornado owns about 7.5 million square feet of commercial space in the area including the Hotel Pennsylvania on the east side of Seventh Avenue between 32nd and 33rd Streets that it was considering tearing down for a new headquarters building for Merrill Lynch. Merrill Lynch subsequently withdrew from that plan and some preservationists campaigned unsuccessfully to convince the Landmark Preservation Commission to designate it as a landmark since it was also designed by McKim, Mead & White and had been at one time the city's largest hotel and also was the venue for many of the leading bands of the 1930s and 1940s.

Mr. Roth said that the planning process for the post office building "has frustrated all parties," adding that "It has been three years so far, a long, complicated road. The project requires public sector expenditures which, in the end, may not all be there....But in the end, it is surely worth the effort."

"I am hopeful that something good will happen here," he said.

"Much has already happened," Mr. Roth continued, "to increase the value of our Penn Station assets. The Penn Plaza District and the West Side of New York have been discovered and are the beneficiaries of an enormous amount of recent and current activity. A huge swath has already been rezoned as the future growth corridor of Manhattan. Tishman Speyer has won the bidding to develop the Hudson Rail Yards into a 12 million square foot, 20-year, Canary Wharf-type project. Brookfield has announced 5 million square feet....Vornado was the pioneer here, and owns the best and the lion's share of the real estate surrounding Pennsylvania Station - the gateway to the new West Side....The Hotel Pennsylvania, Seventh Avenue at 33rd Street, generated a best ever $37.9 million of EBITDA in 2007, $10.4 million more than in 2006, a 37.8% increase."

The planned $500 million renovation of the Garden will expand its lobby from 12,000 to 25,000 square feet, its concourses from 46,000 to 101,000 square feet, its restrooms from 12,400 to 19,500 square feet and add 20 floor level suites and 19 ledge suites.