Empire State Realty Trust Eyes More Multifamily, Retail Diversification
The owner of the Empire State Building, one of New York City’s most recognizable office buildings, will look to continue diversifying its portfolio of real estate investments, its executives said during its quarterly earnings call Thursday.
Empire State Realty Trust unexpectedly announced a foray into multifamily ownership last fall — something CEO Tony Malkin said in Thursday’s earnings call that the NYC-based REIT hopes to do more of in the near future. ESRT acquired a majority stake in 625 multifamily units across two Class-A Manhattan multifamily buildings last quarter for $307M and is eyeing further multifamily opportunities.
“Our investment team continues actively to underwrite new office, retail and multifamily acquisition opportunities, where we think we can get an edge with our local knowledge, ability to spot special opportunities,” Malkin said on the call.
Christina Chiu, ESRT’s vice president and chief financial officer, said the REIT wouldn’t chase deals that it felt didn’t make sense, but the company was looking for the right opportunities to expand further into the multifamily market.
ESRT’s announcement comes on the heels of a decline in office leasing — its portfolio was at 85% occupancy at the end of the year, down from 87% the year before, The Real Deal reported. Tenancy of the REIT’s retail space has also been slipping, from 93% at the end of 2020 to 91% a year later.
Overall, ESRT’s properties are being affected by the same trends sweeping the rest of Manhattan’s skyline: an already-slow return to office exacerbated by omicron, with employers looking for solutions for a workforce demanding hybrid employment models and retailers that are less than confident about occupying physical stores.
Tom Durels, ESRT’s vice president for real estate, said the company expected a small decline in occupancy in Q1 across its portfolio but that it expected leasing to return to the mid-80s by the end of the year.
