Empire State Realty Trust’s Strong Financial Performance in 2024

Empire State Realty Trust (ESRT), a leading real estate investment trust (REIT) that owns and operates office and retail properties in New York City, reported solid financial results for the year ended December 31, 2024. The company’s strong performance was driven by higher occupancy, increased rental rates, and growth in its Observatory segment.

Financial Highlights

• Net income attributable to the company was $76.2 million in 2024, compared to $80.1 million in 2023.
• Core Funds From Operations (Core FFO), a key metric used to evaluate REIT performance, increased to $256.2 million in 2024 from $245.8 million in 2023.
• The company signed 1,324,824 rentable square feet of new, renewal, and expansion leases in 2024.
• ESRT had $385.5 million in cash and cash equivalents and $500 million available under its unsecured revolving credit facility as of December 31, 2024.
• Total consolidated indebtedness was $2.3 billion as of December 31, 2024, with a weighted average interest rate of 4.27% and a weighted average maturity of 5.2 years.

Segment Performance

Real Estate Segment

• Rental revenue increased by 2.9% to $614.6 million in 2024, primarily due to higher occupancy and higher operating and real estate tax expense escalations.
• Property operating expenses increased by 7.1% to $179.2 million, driven by higher repair, maintenance, cleaning, and payroll costs.
• Real estate taxes increased by 1.4% to $128.8 million, primarily due to higher assessed values for multiple properties.

Observatory Segment

• Observatory revenue increased by 5.4% to $136.4 million in 2024, driven by increased revenue per visitor from pricing increases.
• Observatory expenses increased by 4.4% to $36.8 million, due to higher labor, marketing, and maintenance costs.

Liquidity and Capital Resources

ESRT maintains a strong liquidity position to fund its operations, capital expenditures, and growth initiatives. The company’s primary sources of liquidity include cash on hand, cash generated from operations, debt issuances, and its unsecured revolving credit facility.

As of December 31, 2024, ESRT had $385.5 million in cash and cash equivalents and $500 million available under its unsecured revolving credit facility. The company’s total consolidated indebtedness was $2.3 billion, with a weighted average interest rate of 4.27% and a weighted average maturity of 5.2 years.

ESRT’s Board of Directors has authorized a $500 million stock and operating partnership unit repurchase program, which the company can use to repurchase its Class A common stock and operating partnership units from January 1, 2024, through December 31, 2025. As of December 31, 2024, the full $500 million remained available for future repurchases.

Capital Expenditures and Leasing Activity

ESRT continues to invest in its properties to maintain and enhance their competitiveness. In 2024, the company incurred $72.9 million in capital expenditures, excluding tenant improvements and leasing commissions.

The company’s leasing activity remained strong in 2024, with the signing of 1,324,824 rentable square feet of new, renewal, and expansion leases. The weighted average annualized cash rent per square foot for new and renewal leases executed during the year was $70.07 for office properties and $181.95 for retail properties.

As of December 31, 2024, ESRT expects to incur an additional $130.8 million in costs related to obligations under signed new leases for tenant improvements and leasing commissions.

Outlook and Strategies

ESRT’s management remains cautiously optimistic about the company’s future prospects. The company’s diversified portfolio of office and retail properties, combined with its strong financial position and strategic initiatives, position it well to navigate the evolving real estate landscape.

Key focus areas for ESRT include:

• Maintaining high occupancy levels and increasing rental rates across its portfolio
• Enhancing the performance of its Observatory segment through pricing adjustments and operational improvements
• Prudently managing its capital structure and leverage to support growth
• Selectively pursuing accretive acquisition and redevelopment opportunities
• Continuing to invest in sustainability and technology initiatives to improve the efficiency and competitiveness of its properties

Conclusion

Empire State Realty Trust delivered a solid financial performance in 2024, driven by strong leasing activity, increased revenue in its Observatory segment, and disciplined cost management. The company’s strong liquidity position and strategic initiatives position it well to capitalize on future growth opportunities and create value for its shareholders.