In a report released yesterday, Blaine Heck from Wells Fargo maintained a Sell rating on Empire State Realty (ESRT – Research Report), with a price target of $7.00.
Blaine Heck has given his Sell rating due to a combination of factors that suggest potential headwinds for Empire State Realty Trust’s (ESRT) financial performance. Despite a first-quarter Funds From Operations (FFO) that exceeded expectations, Heck appears concerned that the unchanged full-year guidance may be a result of capital activities rather than core operational strength. Moreover, while leasing activity was solid, concessions were notably higher, indicating a possible strain on profitability. The issuance of a private placement note expected later in the year suggests there could be an impact on core FFO, which could have otherwise been more optimistic without this capital activity.
Additionally, while there was an uptick in leasing volume and occupancy, office rent spreads have slightly decreased, and expected future vacancies have shown mixed trends, which could signal uncertainties in sustained revenue growth. The observatory’s revenue beat estimates, but this alone may not be enough to offset concerns around the broader operational aspects of the business. After the first quarter, ESRT also engaged in capital transactions such as the buyout of a partner’s interest in assets and the agreement to a high-interest rate on the issuance of green senior unsecured notes, potentially increasing financial obligations and impacting future earnings. These factors are likely to have informed Heck’s decision to rate ESRT’s stock with a Sell.
Heck covers the Real Estate sector, focusing on stocks such as Cousins Properties, Terreno Realty, and Rexford Industrial Realty. According to TipRanks, Heck has an average return of -2.5% and a 45.39% success rate on recommended stocks.
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Empire State Realty (ESRT) Company Description:
Empire State Realty Trust, Inc. is a real estate investment trust, which engages in owning, managing, acquiring, and repositioning office and retail properties in Manhattan and the greater New York metropolitan area. It operates through the Real Estate and Observatory segments. The real estate segment includes ownership, management, operation, acquisition, repositioning and disposition of real estate assets. The Observatory segment manages observatories at the empire state building. The company was founded on July 29, 2011 and is headquartered in New York, NY.
