Empire State Building owner endures painful wait for tourists’ return
Admissions to observation deck remain 9% of 2019 level
In addition to workers coming back to their desks, Empire State Realty Trust has another wish: the return of international tourists.
The famed observation deck of its Empire State Building reopened in mid-July at limited capacity, but visitors have been few and far between. Admissions during the first quarter were about 9 percent of what they were during the comparable period in 2019, said Tony Malkin, chairman, president and CEO of the real estate investment trust, on an earnings call.
The slow pace was anticipated because two-thirds of visitors have traditionally been international tourists, who have not returned to the city and probably won’t until next year, said Malkin. The REIT is up against international travel restrictions and varying Covid-19 vaccine rollouts in each county, Malkin said.
The observation deck is an important component of Empire State Realty’s revenue stream, so the pandemic has been especially painful for the office landlord. First-quarter observatory revenue was $2.6 million, down 74 percent from the same period last year and off 48 percent from the fourth quarter, according to the REIT’s quarterly financial report.
The company expects observatory visits to reach 60 percent of 2019 levels by December, even though the cost to operate the facility will be nearly the same, Malkin said. Admissions are expected to fully recover by December 2022.
On a brighter note, Malkin said the company’s balance sheet “gives us a long runway and the ability to take advantage of growth opportunities.”
The company reported a net loss of $3.2 million in the quarter. Revenue was $145.3 million, down 11 percent from a year ago and down 4 percent from the fourth quarter of 2020.
Revenue from office leasing appears relatively stable. First-quarter rental revenue was $140.2 million, down 7.5 percent compared to a year ago and up 2.3 percent from the fourth quarter.
Recent major leases in the REIT’s portfolio include an 33,000-square-foot office expansion of off-price retailer Burlington, formerly known as Burlington Coat Factory, at 1400 Broadway. The company now occupies about 68,300 square feet. And at 1359 Broadway, Zentalis Pharmaceuticals, a biotech company focusing on cancer therapeutics, has signed a 31,400-square-foot office lease.