Company Reports

We will discontinue analyst coverage of Empire State Realty on or about Jan. 5, 2026.

Empire State Realty owns and manages about 8.6 million square feet of commercial real estate portfolio composed principally of office buildings in Manhattan and the greater New York area. Its office portfolio fetches lower rents and has higher vacancy rates, reflective of an older, less premium building stock. Management has successfully focused on redeveloping its older office properties in recent years by providing more amenities and aligning its portfolio to meet the maintainability requirements of its clients.

Empire State Realty Trust's third-quarter core funds from operations came in at $0.23 per share, down from $0.26 in the year-ago quarter. The stock slid about 6% after the earnings release, as weaker results in the observatory business continued to weigh on consolidated performance.

Empire State Realty owns and manages about 8.6 million square feet of commercial real estate portfolio composed principally of office buildings in Manhattan and the greater New York area. Its office portfolio fetches lower rents and has higher vacancy rates, reflective of an older, less premium building stock. Management has successfully focused on redeveloping its older office properties in recent years by providing more amenities and aligning its portfolio to meet the maintainability requirements of its clients.

Empire State's second-quarter core funds from operations came in at $0.22 per share, down from $0.24 per share in the second quarter of 2024. The stock slid by about 6% after the earnings announcement, as the firm lowered its 2025 FFO guidance primarily due to weaker observatory results.

Empire State's first-quarter core FFO came in at $0.19 per share, down from $0.21 per share in the first quarter of 2024. The stock has sold off considerably in recent months in anticipation of macroeconomic weakness, which will dent employment creation and affect office leasing volumes.

Empire State Realty owns and manages about 8.5 million square feet of commercial real estate portfolio composed principally of office buildings in Manhattan and the greater New York area. Its office portfolio fetches lower rents and has higher vacancy rates, reflective of an older, less premium building stock. Management has successfully focused on redeveloping its older office properties in recent years by providing more amenities and aligning its portfolio to meet the maintainability requirements of its clients.

Empire State reported decent numbers in the fourth quarter as core funds from operations came in at $0.24 per share, down from $0.25 per share in the fourth quarter of 2023.

Over the past few years, we have observed an inverse relationship between share prices in the REIT sector and interest-rate movements. We believe a major reason is that all commercial real estate valuations are connected to interest rates. Capitalization rates directly indicate the return expectations for a real estate investment and expectations for risk and growth. Historically, we have observed that commercial real trades at cap rates consistently spread above the 10-year US Treasury. If interest rates rise, investors will require a higher return, and thus a higher cap rate, to accept the risk associated with an investment in a real estate asset. Since return expectations have held relatively steady for most real estate sectors over the past few years, higher cap rates translate to falling prices for real estate.

No-moat-rated Empire State Realty reported decent results in the third quarter as core funds from operations, or FFO, was reported at $0.26 per share in the current quarter, compared with $0.25 per share during the same quarter last year. The third-quarter results were positively affected by $0.02 per share of lease termination fee income. Management has updated its 2024 full-year guidance to around the top end of its previous expectations. Core FFO in 2024 is expected to be in the $0.92-$0.94 per share range, with an occupancy rate in the 88%-89% range by the end of 2024 compared with 88.8% as of the end of the third quarter. Same-store property cash net operating income is now expected to be in the 3%-4% range for the full year. We are maintaining our fair value estimate of $9.60 per share for Empire State Realty after incorporating the third-quarter results.

Despite a rally over the past two months, we still view the US REIT sector as being undervalued. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors led combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years, with many reaching historical levels of net operating income growth, the REIT sector has underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that the cause has been due to the sector's negative correlation with interest rates as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. We believe that US REITs will continue to see share price movements that are inverse of interest rate movements.

Empire State Realty owns and manages about 8.5 million square feet of commercial real estate portfolio composed principally of office buildings in Manhattan and the greater New York area. Its office portfolio fetches lower rents and has higher vacancy rates, reflective of an older, less premium building stock. Management has successfully focused on redeveloping its older office properties in recent years by providing more amenities and aligning its portfolio to meet the maintainability requirements of its clients.

No-moat-rated Empire State Realty reported a middling set of numbers in the second-quarter results as core funds from operations, or FFO, was reported at $0.24 per share in the current quarter, around 8% lower than the $0.26 in core FFO during the same quarter last year. Management reaffirmed its 2024 core FFO guidance of $0.90-0.94 per share, up 2.2% at the midpoint compared with $0.90 in core FFO during 2023 after excluding nonrecurring items. The occupancy rate is expected to be in the 87%-89% range by the end of 2024 compared with 88.5% as of the end of the second quarter. We are maintaining our fair value estimate of $9.60 per share for Empire State Realty after incorporating the second-quarter results.

The US REIT sector remains significantly undervalued, in our perspective. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past two years, with many REITs reaching historical levels of net operating income growth, the sector has underperformed the broader equity markets over the past two years. We believe that the cause has been the sector’s negative correlation with interest rates as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, we don’t believe that higher rates significantly change our fair value estimates for the sector. Additionally, interest rates are down from the October 2023 highs, and REIT share prices have generally inversely followed the movements of the US 10-year Treasury.

No-moat-rated Empire State Realty reported a decent set of numbers in the first quarter as core funds from operations, or FFO, was reported at $0.21 per share in the current quarter, around 31% higher than the $0.16 in core FFO during the same quarter last year. The full-year 2024 guidance was reaffirmed, which we see as a good sign for leasing momentum in the Manhattan office market environment. Core FFO for 2024 is guided at $0.90-0.94 per share, up 2.2% at the midpoint compared with $0.90 in core FFO during 2023 after excluding nonrecurring items. The occupancy rate is expected to be in the 87%-89% range by the end of 2024 compared with 87.6% as of the end of the first quarter. We are maintaining our fair value estimate of $9.60 per share for Empire State Realty after incorporating the first-quarter results.

We believe that there are several attractive opportunities across the US REIT sector for investors to consider. Following the recovery of many REIT sector fundamentals from the pandemic by mid-2021, we viewed the REIT sector as fairly valued through early 2022. However, the past two years have seen the rapid rise in interest rates and a slowing economy, which has led to major valuation declines across the sector. Our analysis of the REIT sector over the past 25 years suggests that the relative stock performance of REITs is negatively correlated with interest rate movements. The second and third quarters of 2023 saw large interest rate increases with the 10-year Treasury approaching 5%, which led to the sector underperforming. This occurred even as many REITs reported same-store net operating income, or NOI, growth at historical highs in 2022 due to high inflation. Higher interest rates, lower liquidity, tighter capital market conditions, and decelerating same-store NOI growth all led to a significant correction in the stock price for many REITs.

Empire State owns and manages about 9.4 million square feet of commercial real estate portfolio composed principally of office buildings in Manhattan and the greater New York area. Its office portfolio fetches lower rents and has higher vacancy rates, reflective of an older, less premium building stock. Management has successfully focused on redeveloping its older office properties in recent years by providing more amenities and aligning its portfolio to meet the maintainability requirements of its clients.

No-moat-rated Empire State Realty Trust reported a good set of results for the fourth quarter. Core funds from operations came in at $0.25 per share, around 14% higher than the $0.22 in core FFO in the same quarter last year. Full-year 2024 guidance was also quite decent, especially given the challenging Manhattan office market environment. Management expects 2024 core FFO of $0.90-0.94 per share, up 2.2% at the midpoint compared with $0.90 in core FFO during 2023 after excluding nonrecurring items. The occupancy rate is expected to be 87%-89% by the end of 2024 compared with 86.3% in 2023. Same-store property cash net operating income is expected to be in the negative 1% to positive 2% range. The same-store cash NOI guidance assumes positive revenue growth and a 6%-8% increase in operating expenses and real estate taxes, partially offset by higher tenant expense reimbursements. We are maintaining our $9.60 fair value estimate after incorporating fourth-quarter results into our model.

Empire State Realty owns and manages about 9.4 million square feet of commercial real estate portfolio composed principally of office buildings in Manhattan and the greater New York area. Its office portfolio fetches lower rents and has higher vacancy rates, reflective of an older, less premium building stock. Management has successfully focused on redeveloping its older office properties in recent years by providing more amenities and aligning its portfolio to meet the maintainability requirements of its clients.

No-moat-rated Empire State Realty reported a good set of numbers in the third-quarter results as core funds from operations, or FFO, was reported at $0.25 per share in the current quarter, around 19% higher than the $0.21 in core FFO during the same quarter last year. The shares of the company were up around 7% after the company released its third-quarter results. The demand for Manhattan office real estate remains muted because of macroeconomic factors and a slower recovery in physical office utilization rates, but the company has performed relatively well given the current environment. We are maintaining our fair value estimate of $9.50 per share for Empire State Realty after incorporating the third-quarter results.