Investors can finally own
a piece of the Empire State Building. The Empire State will be a part
of a real estate investment trust that will list with 100% exposure to Manhattan and Greater
NY Metropolitan market offices and retail. The portfolio of buildings has been assembled
over an 80 year period which has been consolidated into one public company. What makes
this company special is not only the Empire State Building but the observatory.
Even the famous antenna makes money
The Empire State Building
is the flagship property and accounted for 45.5% of total pro forma revenues
for the six months ended June 30, 2013. Included in this number was the
observatory which on its own contributed 18% of revenues in 2012. Last year
4.15 million visitors took the lifts up to the 86th and 102nd floor
observatories. Over the past 5 years ticket prices have increased from $15.47 to
$20.21. The observatory does show some tourism cyclicality with negative growth
in 2001 and 2009 but has tended to grow at a low double digit pace.
Remember the famous antenna that King Kong climbed, well that antenna made $17.1million last year luckily he didn’t break it. The building has 150 antennas which are licensed to 35 third party television and radio broadcasters and made up 9.5% of the Empire buildings revenue. These customers include CBS, Univision, FOX, ABC and NBC.
King Kong lego style at New York Toys R Us
What else do they own?
As of June 30, 2013, they owned 12 office properties (including
one long-term ground leasehold interest) encompassing approximately
7.7 million rentable square feet of office space, which were approximately
83.5% leased.
Why list? Upgrades are needed
The company currently
estimates that between $95.0 million and $125.0 million is needed
beyond 2013 to complete substantially the renovation program at the Empire
State Building. This is expected to be finished by the end of 2016. The goal is to
re position the building for new higher credit quality tenants including
Linkedin, Coty and even Shutterstock.
The risks are tenant concentration. Currently LF USA, Coty, Inc., Legg Mason, Warnaco, a subsidiary of PVH Corp, and Thomson Reuters are the largest customers. Together they represented 22.2% of the portfolio’s base rent as of June 30, 2013.
At the end of the day what
is special about this listing is the Empire State Building. If King Kong wants it
it must be special!
Jason
Disclosure:
Decisive has no long position in Empire State Realty Trust (ESRT) stock
The
material in this article is for informational purposes only and in no way
constitutes a solicitation of business or investment advice. The material has
been prepared without regard to any client's or other person's investment
objectives. Before making an investment decision you should consider the
assistance of a financial adviser and whether any investment or service is
appropriate in light of your particular investment needs.
