On July 24, 2024, Empire State Realty OP LP (ESBA, Financial) released its 8-K filing detailing the financial performance for the second quarter of 2024. Empire State Realty OP LP is the operating partner of Empire State Realty Inc., managing properties in Manhattan and the greater New York metropolitan area. The company operates in two segments: Real Estate and Observatory, with the Real Estate segment generating the majority of its revenue.
Second Quarter Financial Performance
Empire State Realty OP LP reported a net income per fully diluted share of $0.10 and Core Funds From Operations (FFO) per fully diluted share of $0.24. The company signed 272,000 rentable square feet of leases and announced agreements to acquire retail properties on North 6th Street in Williamsburg, Brooklyn. This marks the 10th consecutive quarter of positive leased absorption and the 12th quarter of positive leasing spreads.
Property Operations and Leasing Activity
As of June 30, 2024, the company's property portfolio included 7.9 million rentable square feet of office space, 0.7 million rentable square feet of retail space, and 727 residential units. The total commercial portfolio was 88.5% occupied and 92.6% leased, showing an improvement from previous quarters.
| Metric | June 30, 2024 | March 31, 2024 | June 30, 2023 |
|---|---|---|---|
| Total Commercial Portfolio Occupancy | 88.5% | 87.6% | 86.8% |
| Total Office Occupancy | 88.2% | 87.4% | 86.5% |
| Total Retail Occupancy | 92.3% | 89.8% | 90.7% |
Observatory Segment Performance
The Observatory segment reported revenue of $34.1 million and expenses of $8.9 million, resulting in a net operating income (NOI) of $25.2 million, a 1.6% increase year-over-year. Year-to-date, Observatory NOI was $41.3 million, a 5.8% increase year-over-year.
Balance Sheet and Liquidity
Empire State Realty OP LP had over $1.0 billion in total liquidity as of June 30, 2024, including $536 million in cash and $500 million available under its revolving credit facility. The company had total debt outstanding of approximately $2.3 billion with no floating rate debt exposure and a weighted average interest rate of 4.27% per annum. The ratio of net debt to adjusted EBITDA was 5.1x.
Recent Acquisitions and Share Repurchase Program
Subsequent to the quarter end, the company entered into agreements to acquire prime retail portfolios on North 6th Street in Williamsburg, Brooklyn for a total of $195 million. These acquisitions align with the company's strategy to recycle capital from non-core suburban assets into strong NYC assets. The stock repurchase program, which began in March 2020, has repurchased approximately $293.7 million at a weighted average price of $8.18 per share, with no repurchases during the second quarter.
Dividend and Earnings Outlook
On June 28, 2024, the company paid a quarterly dividend of $0.035 per share or unit for the second quarter of 2024. The company reaffirmed its 2024 FFO guidance, projecting Core FFO per fully diluted share between $0.90 and $0.94.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Rental Revenue | $152,470 | $154,603 |
| Observatory Revenue | $34,124 | $33,433 |
| Total Revenues | $189,543 | $190,542 |
| Total Operating Expenses | $150,182 | $144,353 |
| Net Income | $28,555 | $36,955 |
Analysis and Conclusion
Empire State Realty OP LP's second quarter results demonstrate steady performance in leasing and occupancy rates, particularly in the Manhattan office and retail segments. The company's strategic acquisitions and strong liquidity position it well for future growth. However, challenges such as increased operating expenses and interest rates may impact profitability. Investors should monitor these factors closely as they evaluate the company's long-term potential.
Explore the complete 8-K earnings release (here) from Empire State Realty OP LP for further details.
