Empire State Realty Trust, Inc. (ESRT) | Investment Case

1. Company Snapshot

1.a. Company Description

Empire State Realty Trust, Inc.(NYSE: ESRT), a leading real estate investment trust (REIT), owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the World's Most Famous Building. Headquartered in New York, New York, the Company's office and retail portfolio covers 10.1 million rentable square feet, as of September 30, 2020, consisting of 9.4 million rentable square feet in 14 office properties, including nine in Manhattan, three in Fairfield County, Connecticut, and two in Westchester County, New York; and approximately 700,000 rentable square feet in the retail portfolio.Long the leader in energy efficiency retrofits and Indoor Environmental Quality, Empire State Realty Trust is the first commercial real estate portfolio in the U.S. to achieve the WELL Health-Safety Rating.

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1.b. Last Insights on ESRT

Empire State Realty Trust, Inc.'s recent performance was negatively impacted by lower international demand, as stated by CEO Anthony Malkin. The company's exposure to older NYC office buildings and tourism-related revenues also pose risks. Although Q2 revenue increased, a 1.6% dividend yield is considered unattractive. Additionally, escalating concerns over trade wars and potential impacts on NYC's business climate may affect the company's performance. A new lease with Mott MacDonald and George L. W. Malkin's addition to the Board of Directors are recent positive developments.

1.c. Company Highlights

Last Price	7.46
Change Percentage	1.91%
Open	7.44
Previous Close	7.32
Market Cap ( Millions)	1262
Volume	1421224
Year High	11.43
Year Low	6.56
M A 50	7.58
M A 200	7.88

FCF Yield	11.43%
Dividend Yield	1.88%
ROE	4.53%
Debt / Equity	200.90%
Net Debt / EBIDTA	643.10%
Price To Book	1.22
Price Earnings Ratio	26.87
Price To FCF	8.75
Price To sales	1.65
EV / EBITDA	10.6

2. Empire State Realty Trust Delivers Resilient Q1 2025 Results Amid Macro Uncertainty

Empire State Realty Trust (ESRT) kicked off 2025 with a strong first-quarter performance, beating earnings expectations and demonstrating the resilience of its diversified portfolio. The company reported core funds from operations (FFO) of $0.24 per share, significantly outpacing the consensus estimate of $0.05. This robust performance was driven by continued leasing momentum, strong operational execution, and the steady contribution from its iconic Observatory asset. Despite macroeconomic headwinds, ESRT reaffirmed its 2025 FFO guidance of $0.86 to $0.89 per share, underscoring confidence in its ability to navigate challenging conditions.

Publication Date: May -01

                                    📋 Highlights
                                    Strong Office Portfolio Performance:
                                                Manhattan office portfolio is 93% leased with 15th consecutive positive rent spreads and $57 million in incremental cash revenue.
Resilient Observatory Performance:
                                                Generated $15 million in NOI despite a 4.6% year-over-year visitation decline, offset by a 5.9% increase in revenue per capita.
Robust Balance Sheet:
                                                No floating-rate debt, $100 million in note repayments, and $2.1 million in share repurchases.
Leasing Momentum:
                                                Strong demand in Manhattan office space, particularly from TAMI, consumer products, and professional services sectors.
CapEx Stabilization:
                                                TI spend expected to decrease post-2025, with leasing commissions and building improvements stabilizing at $5 million quarterly.

                                

The Observatory: A Bright Spot in Challenging Times

The Observatory remained a standout performer, generating $15 million in net operating income (NOI) during the quarter. While visitation declined 4.6% year-over-year, a 5.9% increase in revenue per capita helped offset the drop. Management highlighted the success of direct marketing efforts and cost controls in maintaining profitability. This performance underscores the Observatory's role as a stable cash flow generator, even as broader tourism trends remain uneven.

Core Office Portfolio Strength

ESRT's Manhattan office portfolio continues to demonstrate resilience, with occupancy levels at 93% and 15th consecutive quarter of positive rent spreads. The company reported $57 million in incremental cash revenue from signed leases, reflecting its ability to maintain pricing power in a competitive market. Leasing activity remained robust, with strong demand from TAMI (Technology, Advertising, Media, and Information) sectors, as well as legal, financial, and consumer products firms. This momentum highlights ESRT's strategic positioning in one of the world's most desirable office markets.

Balance Sheet and Capital Allocation

ESRT's balance sheet remains fortress-like, with no floating-rate debt and $100 million in note repayments completed during the quarter. The company also repurchased $2.1 million in shares, signaling its commitment to returning capital to shareholders. Management emphasized a balanced capital allocation approach, prioritizing operational runway while staying open to strategic investment opportunities across office, retail, and multi-family assets. Capital expenditures, particularly tenant improvement (TI) spend, are expected to moderate post-2025 as the impact of prior-year leasing activity fades.

Valuation and Strategic Outlook

Trading at a P/E ratio of 21.56 and a P/B ratio of 0.67, ESRT appears fairly valued relative to its peers, with its strong liquidity and diversified portfolio providing a cushion against macroeconomic uncertainty. The company's focus on sustainability and operational excellence further positions it to capitalize on long-term trends in urban real estate. With a dividend yield of 1.97% and a free cash flow yield of 2.71%, ESRT offers an attractive risk-reward proposition for income-focused investors. Management's optimism about New York City's recovery, coupled with its proven ability to execute, suggests ESRT is well-positioned to drive shareholder value in 2025 and beyond.

3. NewsRoom

The Empire State Building Holiday Celebrations Include: Radio City Rockettes 100th Anniversary Exhibits, Visits from Santa, Holiday Décor, Movie Screenings, Pop-ups, Lightings, and More

Nov -10

Source: businesswire.com

Empire State Realty Trust Might Be Overly Discounted

Nov -05

Source: seekingalpha.com

Nisa Investment Advisors LLC Sells 9,674 Shares of Empire State Realty Trust, Inc. $ESRT

Nov -04

Source: defenseworld.net

The Empire State Building Ushers in Autumn with an Iconic NYC Pop-Up, Festive Photo Corner, Special Tower Lighting, Exclusive Ticket Offer, and Visit from Halloween Queen Heidi Klum

Oct -31

Source: businesswire.com

Brokerages Set Empire State Realty Trust, Inc. (NYSE:ESRT) Price Target at $10.43

Oct -31

Source: defenseworld.net

Empire State Realty Trust, Inc. (ESRT) Q3 2025 Earnings Call Transcript

Oct -30

Source: seekingalpha.com

Empire State Realty Trust Welcomes Rolex to Its North Sixth Street Collection in Williamsburg

Oct -28

Source: businesswire.com

Empire State Realty Trust Achieves New ENERGY STAR NextGen Certification for New York City Properties, With ESRT Buildings Recognized as More Energy Efficient Than 90 Percent of Similar Properties Nationwide

Oct -28

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.13%)

6. Segments

Real Estate

Expected Growth: 1.2%

Empire State Realty Trust, Inc.'s 1.2% growth in Real Estate is driven by increasing demand for office and retail spaces in prime locations, steady rent growth, and strategic acquisitions. Additionally, the company's focus on sustainability and energy-efficient practices enhances its appeal to tenants, contributing to its growth.

Observatory

Expected Growth: 0.8%

The Observatory's 0.8% growth is driven by increasing tourism in NYC, fueled by a strong US economy and low unemployment. Additionally, the Observatory's unique experience, including its 360-degree views and interactive exhibits, continues to attract visitors. Furthermore, Empire State Realty Trust's effective marketing strategies and partnerships with travel companies also contribute to the growth.

7. Detailed Products

Office Space Leasing

Empire State Realty Trust, Inc. offers premium office spaces for lease in iconic buildings such as the Empire State Building, providing tenants with modern amenities and unparalleled views.

Retail Space Leasing

The company provides retail spaces for lease in high-traffic areas, ideal for restaurants, cafes, and shops, with flexible lease terms and dedicated property management.

Observation Deck Tickets

Empire State Realty Trust, Inc. operates the iconic Empire State Building's observation decks, offering breathtaking 360-degree views of the city to visitors from around the world.

Broadcasting and Telecommunications

The company provides premier broadcasting and telecommunications infrastructure, including antenna and transmission services, to major media and telecommunications companies.

Property Management Services

Empire State Realty Trust, Inc. offers comprehensive property management services, including maintenance, repairs, and customer support, to ensure seamless operations for tenants.

8. Empire State Realty Trust, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Empire State Realty Trust, Inc. is medium due to the availability of alternative properties and investment options for tenants and investors.

Bargaining Power Of Customers

The bargaining power of customers for Empire State Realty Trust, Inc. is low due to the company's strong brand and limited alternatives for tenants.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Empire State Realty Trust, Inc. is medium due to the company's dependence on a few large contractors and suppliers.

Threat Of New Entrants

The threat of new entrants for Empire State Realty Trust, Inc. is low due to the high barriers to entry in the real estate industry and the company's established market position.

Intensity Of Rivalry

The intensity of rivalry for Empire State Realty Trust, Inc. is high due to the competitive nature of the real estate industry and the presence of several large competitors.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	69.45%
Debt Cost	4.97%
Equity Weight	30.55%
Equity Cost	10.60%
WACC	6.69%
Leverage	227.35%

11. Quality Control: Empire State Realty Trust, Inc. passed 1 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Alexander & Baldwin

A-Score: 6.2/10

Value: 4.3

Growth: 3.7

Quality: 6.3

Yield: 8.0

Momentum: 5.0

Volatility: 10.0

1-Year Total Return ->

Global Net Lease

A-Score: 6.1/10

Value: 6.9

Growth: 3.3

Quality: 3.6

Yield: 10.0

Momentum: 5.0

Volatility: 8.0

1-Year Total Return ->

Armada Hoffler Properties

A-Score: 6.0/10

Value: 6.5

Growth: 5.7

Quality: 4.7

Yield: 10.0

Momentum: 1.0

Volatility: 8.3

1-Year Total Return ->

Peakstone Realty Trust

A-Score: 5.5/10

Value: 7.0

Growth: 5.1

Quality: 3.6

Yield: 9.0

Momentum: 4.0

Volatility: 4.0

1-Year Total Return ->

Generation Income Properties

A-Score: 4.3/10

Value: 7.0

Growth: 5.4

Quality: 3.9

Yield: 3.0

Momentum: 5.0

Volatility: 1.3

1-Year Total Return ->

Empire State Realty Trust

A-Score: 4.2/10

Value: 5.7

Growth: 4.4

Quality: 4.4

Yield: 3.0

Momentum: 1.5

Volatility: 6.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-2.90%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

6.69%

Empire State Realty Trust, Inc. - US2921041065

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on ESRT

1.c. Company Highlights

Strong Momentum

Lower Yield

Average Quality

Earnings Miss

Revenues Beats

Earnings Beats

Fairly Valued

Stable Momentum

Average Growth

Average Yield

Medium Volatility

Revenues Miss

Weak Momentum

2. Empire State Realty Trust Delivers Resilient Q1 2025 Results Amid Macro Uncertainty

The Observatory: A Bright Spot in Challenging Times

Core Office Portfolio Strength

Balance Sheet and Capital Allocation

Valuation and Strategic Outlook

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.13%)

6. Segments

Real Estate

Expected Growth: 1.2%

Observatory

Expected Growth: 0.8%

7. Detailed Products

Office Space Leasing

Retail Space Leasing

Observation Deck Tickets

Broadcasting and Telecommunications

Property Management Services

8. Empire State Realty Trust, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Empire State Realty Trust, Inc. passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

7.46$

Current Price

7.46$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA