Empire State Realty Trust: A Strong Finish to 2024, Despite Fourth Quarter Headwinds

Empire State Realty Trust (ESRT), a NYC-focused REIT, recently reported its fourth quarter and full year 2024 results. Despite facing some headwinds in the fourth quarter, the company maintained a strong performance for the full year. Here's a breakdown of the key highlights and analysis of the results.

Fourth Quarter and Full Year 2024 Highlights

* Net Income: $0.07 per share in the fourth quarter and $0.28 per share for the full year.
* Core Funds From Operations (Core FFO): $0.24 per share in the fourth quarter and $0.95 per share for the full year, compared to $0.25 per share and $0.93 per share for the same respective periods in 2023.
* Same-Store Property Cash Net Operating Income (NOI): Decreased 2.9% for the fourth quarter and increased 5.2% for the full year as compared to the same periods in 2023. Adjusted for non-recurring items, fourth quarter Same-Store Property Cash NOI was flat.
* Manhattan office leased rate: Increased by 160bps year-over-year to 94.2%. The total commercial portfolio was 93.5% leased as of December 31, 2024.
* Manhattan office occupancy: Increased by 130bps year-over-year to 89.0%. The total commercial portfolio was 88.6% occupied as of December 31, 2024.
* Leasing activity: Signed approximately 379 thousand rentable square feet of office leases in the fourth quarter and 1.325 million rentable square feet of office and retail leases in the full year. Blended leasing spreads were +10.8% in the Manhattan office portfolio, marking the 14th consecutive quarter of positive leasing spreads.
* Empire State Building Observatory: Generated year-over-year NOI growth of 6.0% to $28.5 million in the fourth quarter and 5.8% NOI growth to $99.5 million for the full year.
* Liquidity: $0.9 billion of total liquidity as of December 31, 2024, which was comprised of $385 million of cash, plus $500 million of available capacity under the company's revolving credit facility.

Analysis

ESRT's full-year performance in 2024 was strong, with net income and Core FFO both increasing compared to the previous year. The company's ability to maintain a high occupancy rate and secure long-term leases contributed to its overall financial performance. However, the fourth quarter saw a decline in Same-Store Property Cash NOI, primarily due to a decrease in positive non-recurring items and increases in operating expenses. Adjusted for non-recurring items, fourth quarter Same-Store Property Cash NOI was flat.

ESRT's leasing activity remained robust, with positive commercial leased rate absorption for the 12th consecutive quarter. The company's focus on modernizing and amenitizing its properties, as well as its iconic Empire State Building Observatory, has helped maintain strong occupancy and attract tenants. The Empire State Building's unique features and status as the "World's Most Famous Building" continue to draw visitors and tenants, contributing to the company's overall performance.

Despite the headwinds in the fourth quarter, ESRT's strong full-year performance and robust leasing activity indicate that the company is well-positioned to continue its growth trajectory in 2025. The company's focus on maintaining a well-leased, top-tier portfolio, combined with its ability to adapt to market trends and attract tenants, should help ESRT navigate any potential challenges in the coming year.



In conclusion, Empire State Realty Trust's strong full-year performance in 2024, despite some headwinds in the fourth quarter, demonstrates the company's ability to maintain a well-leased, top-tier portfolio and adapt to market trends. With a focus on modernizing and amenitizing its properties, ESRT is well-positioned to continue its growth trajectory in 2025.