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Empire State Realty OP LP (ESBA) Reports Q1 2024 Earnings: A Detailed Financial Analysis

GuruFocus Research
·3-min read

  • Net Income Per Fully Diluted Share: $0.03.

  • Core FFO Per Fully Diluted Share: $0.21.

  • Total Leases Signed: 248,000 Rentable Square Feet.

  • Liquidity: Over $800M, with no floating rate debt exposure.

  • Observatory Revenue: $24.6M with a 13% year-over-year increase in NOI.

  • Commercial Portfolio Occupancy: Increased to 87.6% from 86.3% in the previous quarter.

  • 2024 Outlook: Reaffirmed, with Core FFO per share projected at $0.90 to $0.94.

On April 24, 2024, Empire State Realty OP LP (ESBA) announced its financial results for the first quarter of 2024, revealing a net income per fully diluted share of $0.03 and a core FFO (Funds From Operations) per fully diluted share of $0.21. The details of these results can be found in the company's recent 8-K filing. This performance is underscored by the signing of 248,000 rentable square feet of leases and the strategic closure of a new credit facility enhancing the company's liquidity to over $800 million.

Empire State Realty OP LP, the operating partner of Empire State Realty Trust, manages, operates, and repositions properties primarily in Manhattan and the greater New York metropolitan area. The company operates through two segments: Real Estate and Observatory, with the majority of revenue generated from the Real Estate segment.

Operational Highlights and Financial Performance

The company reported a robust leasing activity for the quarter, having signed 23 leases totaling 248,108 square feet. Notably, the Manhattan office portfolio saw 20 office leases signed, covering 235,664 square feet. The average cash rent per square foot for these new leases marked a 5.4% increase over previously escalated rents, indicating strong demand and competitive pricing in its properties.

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From an operational standpoint, the Observatory segment also showed significant growth, with revenue reaching $24.6 million and a net operating income (NOI) of $16.2 million, marking a 13% increase year-over-year. This growth reflects the enduring appeal of the Empire State Building's observatories as key tourist attractions.

Strategic Financial Movements

The balance sheet of Empire State Realty OP LP remains robust with $834 million in total liquidity, comprising $334 million in cash and $500 million available under a revolving credit facility. The company's strategic financial management is evident from its closure of a $715 million credit facility and the planned issuance of $225 million in green senior unsecured notes, scheduled for June 2024. These moves not only enhance liquidity but also extend the company's debt maturity profile and reduce borrowing costs through a sustainability-linked pricing mechanism.

Additionally, the company has taken significant steps in portfolio management by buying out a partners interest in two multifamily assets and working towards a consensual foreclosure to eliminate a $176 million liability, further strengthening its financial position.

Dividends and Share Repurchases

Empire State Realty OP LP continues to return value to its shareholders, with a quarterly dividend payment of $0.035 per share or unit for the first quarter of 2024. The company also has an active share repurchase program, although no shares were repurchased in the first quarter.

2024 Outlook and Forward Guidance

The company has reaffirmed its 2024 outlook, projecting a core FFO per fully diluted share in the range of $0.90 to $0.94. This guidance reflects the company's expectations of stable commercial property operations and a modest increase in observatory NOI, alongside anticipated increases in operating expenses and real estate taxes.

In conclusion, Empire State Realty OP LP's first-quarter results demonstrate a solid financial and operational footing. The company's strategic initiatives in leasing, liquidity management, and shareholder returns are poised to support sustained growth and stability in the evolving real estate market. Investors and stakeholders may look forward to continued robust performance aligned with the companys strategic objectives.

For further details, please refer to the full earnings report and investor presentations available on the Empire State Realty Trust website.

Explore the complete 8-K earnings release (here) from Empire State Realty OP LP for further details.

This article first appeared on GuruFocus.