Empire State Realty Trust (ESRT), which has more than 10.1 million square feet of space in its office and retail portfolio of 14 properties that includes the iconic Empire State Building and three office buildings in Fairfield County along with two in Westchester, has made a move into the multifamily residential market.
According to a document filed with the U.S. Securities and Exchange Commission (SEC) and comments made during ESRT’s third-quarter 2021 earnings conference call, the entity has signed conditional agreements for the $307 million purchase of two multifamily properties in Manhattan that have a total of 625 apartments.
ESRT did not disclose the identity of the seller or sellers nor the addresses of the properties, but did reveal that the purchase price includes the assumption of $186 million in debt.
“An affiliate of one of the principal current owners of the properties would retain a 10% equity stake and would continue to serve as property manager,” the filing said.
Anthony Malkin, chairman, president and CEO of ESRT, provided general comments about the new move into residential during the Oct. 28 conference call.
“We like the multifamily asset class and have a long institutional history of experience in multifamily assets by our predecessor entities and via Malkin Holdings,” Malkin said. Malkin Holdings has a portfolio of residential properties.
“There is remaining work to do before we close and at that time we will be prepared to provide more comment,” Malkin said. “In the interim, our investment team continues actively to underwrite new office, retail and multifamily acquisition opportunities and we remain well-positioned with our flexible balance sheet as we continue to seek ways to deploy our capital through disciplined external growth opportunities.”
Its annual report for 2020 filed with the SEC showed that outside of New York City, ESRT owns First Stamford Place and the Metro Center in Stamford as well as 381 Main St. in Norwalk. It also owns 10 Bank St. in White Plains and 500 Mamaroneck Ave. in Harrison.
Malkin did not say whether ESRT would be looking for multifamily residential properties in Westchester and Fairfield while adding that ESRT likes what he termed the ”resi” business.
“We really think we have an opportunity to add value through another asset class. We like the prospect for our capital in these two transactions,” Malkin said. “We do like this as a use of our capital. It will compare favorably to alternatives. We like the opportunity relative to what else we might do.”
ESRT reported that as of the end of the third quarter of 2021, 83.5% of its total office and retail portfolio was occupied, with 84.5% of the Manhattan office space and 79.8% of the office space outside of Manhattan occupied. It had $582 million in cash and $850 million available in a revolving credit facility. Its outstanding debt was approximately $2.2 billion.
ESRT”™s total revenues for the nine months ending Sept. 30 came to $463.8 million, compared with $457.8 million for the same period in 2020. It had a net loss of $8.9 million for the nine months ended Sept. 30, compared with a $23.6 million net loss for the same period in 2020.
Revenue for the Empire State Building Observatory for the third quarter of 2021 increased to $12.8 million as domestic tourism and local activity continued to recover from the Covid shutdown. It represented an increase of about 52% from the second quarter”™s revenue of $8.4 million.
Malkin said that he looks forward to the return of a steady stream of international visitors to New York City, which will mean higher attendance at the Empire State Building Observatory.
“New York City”™s recovery is slowly and steadily underway; schools reopened, trains and subways more crowded and there is traffic. Apartment occupancies have increased and rents are back to and beyond in many instances 2019 levels,” Malkin said. “Restaurants and entertainment attractions are opened and busy. Try to get a reservation on a Wednesday through Saturday night or for Sunday brunch and be prepared for disappointment.”
