After four months without tourists paying a small fortune to peek over the edge of the Empire State Building, it should be no surprise that its owner is out $20 million.
Empire State Realty Trust reported a net loss of $19.6 million during the second quarter of 2020, down from $18.9 million in net income a year earlier. The real estate investment trust also announced a series of cost-cutting measures, including executive salary cuts and a 12 percent cut in general and administrative expenses to improve its balance sheet.
“It takes a moment to grasp the magnitude of the dynamic situation we all have confronted and continue to confront since we last reported the results,” Tony Malkin, the company’s CEO and president, said during an earnings call Thursday. ESRT’s 10.1 million-square-foot portfolio spans New York City, Westchester County and Connecticut.
The landlord’s total revenue for the second quarter was $141 million, down 20 percent from $176 million a year ago. During the first quarter, the company brought in $8.3 million in net income and $170 million in revenue.
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The dismal figures follow a big management shakeup in June, when Malkin took over John Kessler’s post as president. Those changes also included the appointment of Chief Financial Officer Christina Chiu and Chief Investment Officer Aaron Ratner. Chiu replaced David Karp, who announced his resignation in May.
“We have made hard choices that have resulted in a great deal of change in our organization, and reduction in force costs, and positioned us on our front feet to preserve and create value for our shareholders,” Malkin said.
The company is set to impose a base salary cut for Malkin and Executive Vice President Thomas Durels by 33 percent and 25 percent, respectively, effective Aug. 1 through the rest of the year. Malkin took base salary reduction to $1 for the second quarter of 2020.
It’s not all bad news for the property owner, though. Executives on the call emphasized that office and retail rent collections and admissions from the Empire State Building’s observation deck have started to improve as the New York region gradually reopened.
The firm collected 84 percent of rent in the second quarter, representing 86 percent of office tenants and 75 percent of retail tenants, according to the company. As of July 24, monthly collection reached 90 percent, representing 93 percent of office tenants and 75 percent of retailers. A third of ESRT’s tenants sought rent relief during the first quarter.
The Empire State Building’s observatory, which remained shut for the entire second quarter, reopened July 20 at limited capacity, after conducting several days of staff training to master safety and health protocols.
Malkin noted that he has been encouraged by positive reviews on social media, which praised the facility’s safety protocol first and then the spectacular view.
“The week two was stronger than the week one. Our first weekend was stronger than our week prior,” he said. “So we look forward to this weekend coming.”
Contact Akiko Matsuda at akiko.matsuda@therealdeal.com