A third of Empire State Realty Trust tenants sought rent relief: Q1 report

So far just 3 of 170 requests from retail and office tenants have been granted; REIT also reported business at newly renovated Empire State Building Observatory plummeted

Empire State Realty Trust CEO Anthony Malkin and the Empire State Building (Photo by Roy Rochlin/Getty Images)
Empire State Realty Trust CEO Anthony Malkin and the Empire State Building (Photo by Roy Rochlin/Getty Images)

Empire State Realty Trust said nearly one third of its office and retail tenants have asked for rent deferrals because of the coronavirus pandemic.

The company, whose most prominent property is the Empire State Building, made the disclosure during its first quarter earnings call. 

Spread across its entire portfolio, 170 tenants are asking for an average of  three months to pay back their rent, said Thomas Durels, executive vice president of real estate, during Thursday’s call. So far, ESRT has granted just three of those requests.

For the quarter, the firm reported net income of $8.3 million, down from $9.9 million the same time last year. Its core funds from operations came in at $53.7 million, a drop from $56.7 million last year. The real estate investment trust also reported hiring a new chief financial officer, former Morgan Stanley executive Christina Chiu.

As of Monday, ESRT had collected 69 percent of its April rent, with 73 percent of office tenants and 46 percent of retail tenants paying up. But after tapping into some tenants’ security deposits, total rent collections rose to 87 percent, he said.

In order to be granted a rent deferral, tenants must provide a significant amount of financial information to prove they deserve a break. Durels said he was surprised by some tenants that asked for a reprieve but had strong balance sheets.

“We are not granting deferrals across the board,” he said.

Sign Up for the undefined Newsletter

Those who are approved will have a maximum of a year to pay back the owed rent.

ESRT saw requests from a range of tenants — from public companies to law firms — though he said smaller businesses, like those in the food industry, have been hit hardest.

“We want these service and food providers to re-open, so that they are there to provide services when our office tenants re-occupy” Durels said.

Another area of ESRT’s business that took a hit was its newly renovated Empire State Building Observatory, which was completed late last year. 

For the first two months of 2020, revenue had been up at the iconic property’s observatory by 13.2 percent year-over-year. But the pandemic and mandated government shutdowns — the observatory closed March 16 — halted that activity. The observatory brought in 30 percent fewer visitors compared to the same time last year, and revenue dropped 13 percent from the first quarter of 2019.

ESRT’s CEO Anthony Malkin said the firm does not expect the traffic at the observatory to resume to normal levels until January 2022.

The company’s stock closed Thursday at $7.87, down about 3 percent.

Write to Mary Diduch at md@therealdeal.com