Is Empire State Realty Trust ready to become a buyer?

REIT sits on a pile of cash, but faces difficult market conditions

TRD New York /
Feb.February 23, 2017 12:50 PM

Anthony Malkin, the Empire State Building and an asteroid (Credit: Max Dworkin and Getty Images)

Empire State Realty Trust hasn’t bought a single building since May 2014. Is that about to change?

The REIT held $554.4 million cash and cash equivalents as of Dec. 31, according to its latest quarterly report — up from $46.7 million a year earlier. It also expanded a corporate credit line from $800 million to $1.1 billion. In other words: it now has plenty of money to buy properties… if it wants to.

During an earnings call Thursday morning, the trust’s management said it’s considering acquisitions in the New York area. “We continue to pursue off-market opportunities,” COO John Kessler said.

But CEO Anthony Malkin TRData LogoTINY cautioned that he still sees the market as too expensive, and is focusing on “complicated” deals where market knowledge and relationships can offer a competitive advantage.

The trust, which owns the Empire State Building, sold a 9.9-percent stake to the Qatar Investment Authority for $622 million in August by issuing new shares.

The company’s only acquisitions since going public in October 2013 were the ground leases for two Midtown office buildings, which it agreed to buy for $734 million in May 2014.

The Empire State Building’s observatory increased its visitor count to 4.25 million in 2016 from 4.06 million in 2015 despite competition from One World Trade Center. During the call, Malkin took a gentle stab at planned or current observatories in new developments like 1 WTC, Hudson Yards or One Vanderbilt. “All these new observatories are offering their own version of the Burj al-Khalifa,” he said, referencing the glass skyscraper in Dubai. “The cultural and emotional connection is really very different.”

Malkin also saw the silver lining in apocalyptic scenarios. “If you read about in the news yesterday a crack in a glacier in Antarctica which was the width of the Empire State Building, or the asteroid the size of the Empire State Building that might hit Earth — this has become a form of measurement around the world. So that brand, and capitalizing on that brand and delivering those people at full price to our front door as well as premium product (…) are all, we think, opportunities.”

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