Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: Gregmal on April 27, 2020, 05:52:21 PM

Title: ESRT- Empire State Realty Trust
Post by: Gregmal on April 27, 2020, 05:52:21 PM
Read Pupils Paramount write up, and was inspired to put this one out there.

Refer to the company overview and investor presentation for references:
http://investors.empirestaterealtytrust.com/Cache/IRCache/abcb17e3-e55e-b7f8-7448-2cc6369d513f.PDF?O=PDF&T=&Y=&D=&FID=abcb17e3-e55e-b7f8-7448-2cc6369d513f&iid=4313470

http://investors.empirestaterealtytrust.com/Presentations

Check out most recent 4/22/20 presentation

But this one is somewhat simple and the timing is really the driver as all these things from VNO down have been "reset".

Headlined by legendary NYC RE investor Peter Malkin, this one was long fought in terms of even getting to be public as the convoluted ownership group feared wild fluctuations in the stock market(and thus their holdings) like we have just recently seen. So, to the new investor, here is your chance.
https://dealbook.nytimes.com/2013/05/29/i-p-o-for-empire-state-building-gets-shareholder-backing/

You've got a healthy balance sheet, currently net debt to EV is ~35%, more importantly average maturity is more than 7 years out and 80% of the portfolio unencumbered

A few preferred/OP issues out there.

A month or so ago there was a thread asking "who is buying back stock right now"/ these guys were, and big time, acquiring north of 4% outstanding at an average price below $10.

Tenant roster is robust, highlighted by EY, Legg Mason, LinkedIn, IPG, and PartnerRE

Rent collected for April was about 70%, surprisingly strong for a city that was shut

What I am attracted to here is yes the namesake trophy asset, but further, The Observatory, which may single handedly be one of the greatest income generating assets of all time. Its  the commercial equivalent to letting people pay you to walk around your attic and then on the way out charging them $25 for a shitty $3 ceramic mug. There is again a simplicity with the assets here, something I tend to favor over gargantuans with so many properties and moving parts that it becomes impossible to stay on top of the day to day.

Other notable assets include locations at Herald's Sq, Grand Central Terminal, and a slew of other mid town assets along with a few properties in Westchester and CT


The company is well managed and has a track record that allows me to feel comforted that they are not a liability here. You really dont need geniuses to do well in these types of assets, you just need to avoid hucksters who will rob you.

I was very impressed with the conservative nature of the COVID impact assumptions and timelines they gave on normalization. Despite this, the company continues to pay its regular dividends, repurchase shares, and explore value enhancing redevelopment opportunities. Much of this is linked above and was touched on with the most recent call, I am just lazy and highlighting right now.

I have long tracked this asset but never felt the desire to own it at the $15-$20 price range its traded at since coming public. But here, provided you think that things eventually normalize over the next 2-3 years, it's a simple, conservative shot at 50-100% upside not including dividends and repurchases made along the way. I find it difficult to envision losing money on ESRT @ $8 per share.



Title: Re: ESRT- Empire State Realty Trust
Post by: CorpRaider on April 27, 2020, 06:05:26 PM
I've looked at it for a diversification/basket type play.  Thanks for the background on the management.  I didn't know that.  I think I saw the Quataris owned like 30 million shares/biggest slug.  I've liked several of their presentations. 

Did they count deposits forfeited in that collection figure?  Just curious.  SLG collected 86% but one of the analysts asked if they included deposits in that because some other peer did and Marc Holiday was like "C'mon you kidding' me? Cash rent."  I am wondering who it was. {edit, I think it was them/ESRT.  They provided both figures tho with forfeited deposits and without, so it's not like it was sketchy, but with the deposits it was very close to SLG's figures so I can see why the analyst asked}

Title: Re: ESRT- Empire State Realty Trust
Post by: SI2020 on April 27, 2020, 07:23:30 PM
This looks really interesting, but why is free cash flow so low? What is normalized capex?
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on April 27, 2020, 08:23:33 PM
I believe the number of April rents if including deposits was mentioned to be ~85%.

As to the cash flows, there has been some redevelopment cost as well as a deliberate effort in some cases to run off congregants of smaller tenants hoping to then release to a single larger one. This can naturally cause somewhat extended drags on the occupancy rates and NOI, but will result in a higher quality lease. There's currently about 500k sf of which 30% is in the ES for development. I think part of the upside is the $40M or so free rent burn off and commencement thru YE 21. Over the past several years, as they've made some improvements, you've had the double whack of TI(cost) and free rent period, and in some cases, reimbursements but I haven't gotten an idea yet the degree to which those would be consistent or one off. You also have existing tenant expansion and improvements which can mask some of the future figure. The LinkedIn expansion is a good example of this. Typically, their lease spreads have been decent.

The one thing I dont care for is that they of course pay themselves quite handsomely. But whatever. At $8 per share you live with that.

Below was a great snippet from the recent earnings call


For years I have said repeatedly, that we would maintain the balance sheet to execute our strategy and provide for future growth. During that period, we have been criticized for too much cash on our balance sheet too low leverage failure to repurchase stock. And failure to buy at what we have repeatedly said we thought was a market top.

We have avoided exposure to FADs like co-working and short-term leases. As of the quarter end we held over $1 billion in cash on hand. Commenced in early March and through April 22 we purchased 8.5 million shares at a weighted average price of $9.37 per share totaling $79.8 million in aggregate.

Title: Re: ESRT- Empire State Realty Trust
Post by: thepupil on April 28, 2020, 10:33:52 AM
89% occupied, $58 / foot rents, concentration near Penn Station where VNO is about to dump $2 billion of re-development making their buildings shinier and more competitive, largest tenant is Global Brands Group which is a rinky dink hong kong listed company that trades for $0.2.

I recognize that they have been renovated substantially, but this portfolio is basically 100 years old. while that is a testament to the durability of hard assets (something along the lines of "they don't make them like they used to" is perhaps appropriate), it means that this is commodity office and not trophy office. In ESRT's presentations own words, it is "Class B". That's not to say it's worse or better, but wouldn't this be higher beta? if shit hits the fan, won't the newer nicer buildings lower their rents and attract all the tenants to that are slumming it in a 1925 building to move to a 1975 building? Hudson Yards and One Vandy own all the $150 / foot tenants which are few in number, then the SLG's (non-One Vandy), PGRE's  and VNO's of the world are lower (VNO is $76), then these guys are another step down.

aren't these the employees/divisions who might get re-located to the hinterlands in an NYC exodus?

I want a big gleaming 1960's or newer brutalist structure that screams at the CMBS buyers of the world "lend to me at 3.0% interest only you little yield pig". I want CEO vanity projects like 61 Ninth Avenue  (aetna built this ridiculous building for shits and gigs then subleased it to Yext when they got bought out)
https://www.vno.com/office/property/61-ninth-avenue/3312727/landing

this is a different trade. willing to hear why you think it's a better trade, but I'm not so sure. 

111 West 33rd:              1954
501 7th Ave:                  1923
1350 Broadway:             1928
1400 Broadway:             1930
One Grand Central Place: 1929
250 W 57th                     1927
1333 Broadway               1926
1359 Broadway               1924
Empire State Building      1930


Also, does the CEO own a unit at 220 CPS? Or did he develop it? Didn't think so. This is a pre-requisite for investing in NYC office.

Your CEO must be in the cool kid crowd and own at least one unit at 220CPS. if you don't own a unit at 220CPS, you might as well live an outer borough. 
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on April 28, 2020, 11:29:37 AM
Agreed there are "better", "shinier" and more "desirable" locations out there. The buildings are for the most part on the older side. I like one of a kind assets, and there's only one Empire State Building. The other buildings while older to me are interchangeable with a lot else of what I own or have looked at.

I also think the capital allocation here is stellar. How many guys, cool kids or not, get on an analyst call and basically say "see you dumb fuck this is why I had all that cash when you criticized me, and now we're buying hand over first while everyone else is caught with their pants down"...

Buybacks, plus dividends, plus an unequivocal discount to NAV is one of my favorite formulas. I like SPG, I like VNO, HHC, the PGRE idea is a good one as well. To a degree they are all tied to the same recovery. Some in different ways than others. VNO has the best assets, they also have the most. The advantage to me with this much of a discount and a smaller company, is this. How do you ultimately solve the discount to NAV? By monetizing assets. VNO and SPG will have to sell a lot more assets to move the needle, and even then, if they are sellers who is the buyer? Whereas these little old smallco's(ESRT, PGRE, FRPH, HHC) are small and simple enough that they can pull an asset out of their ass and immediately rerate. At $8 a share, I dont think you need anything other than Father Time to make money here as things normalize. This goes for all the NYC RE names. But having another way to win works for me as well. Its similar to why I own MSGN vs SBGI. Sure I like RSN's. They are both "cheap". But if I am wrong monetizing one or two assets its a much easier bailout scenario than running some long arduous process for dozens of them. Provided you dont buy at a premium to NAV or see significant mismanagement, you should do OK. Capital allocation is huge and I like what these guys have done. Much better than a company like HHC which, despite having massively superior assets, has destroyed a lot of value the past year; not even factoring in the coronavirus issues.
Title: Re: ESRT- Empire State Realty Trust
Post by: thepupil on April 28, 2020, 11:52:17 AM
Agreed there are "better", "shinier" and more "desirable" locations out there. The buildings are for the most part on the older side. I like one of a kind assets, and there's only one Empire State Building. The other buildings while older to me are interchangeable with a lot else of what I own or have looked at.

I also think the capital allocation here is stellar. How many guys, cool kids or not, get on an analyst call and basically say "see you dumb fuck this is why I had all that cash when you criticized me, and now we're buying hand over first while everyone else is caught with their pants down"...

Buybacks, plus dividends, plus an unequivocal discount to NAV is one of my favorite formulas. I like SPG, I like VNO, HHC, the PGRE idea is a good one as well. To a degree they are all tied to the same recovery. Some in different ways than others. VNO has the best assets, they also have the most. The advantage to me with this much of a discount and a smaller company, is this. How do you ultimately solve the discount to NAV? By monetizing assets. VNO and SPG will have to sell a lot more assets to move the needle, and even then, if they are sellers who is the buyer? Whereas these little old smallco's(ESRT, PGRE, FRPH, HHC) are small and simple enough that they can pull an asset out of their ass and immediately rerate. At $8 a share, I dont think you need anything other than Father Time to make money here as things normalize. This goes for all the NYC RE names. But having another way to win works for me as well. Its similar to why I own MSGN vs SBGI. Sure I like RSN's. They are both "cheap". But if I am wrong monetizing one or two assets its a much easier bailout scenario than running some long arduous process for dozens of them. Provided you dont buy at a premium to NAV or see significant mismanagement, you should do OK. Capital allocation is huge and I like what these guys have done. Much better than a company like HHC which, despite having massively superior assets, has destroyed a lot of value the past year; not even factoring in the coronavirus issues.

very fair point and I agree with you about the small factor, generally. PGRE sold 1/10 of  the equity in its biggest building and generated 5% of its market cap in cash. VNO has sold a lot of 220 CPS units, including $150mm post covid, but that's not the same when its on a $7 billion market cap.

my big insight for the day is that $2 billion is less than $7 billion.

the flip side of that, and this thinking is admittedly soooo 2014, but there is an argument for "platform value"/scale/shiny-ness advantage to being big. relationships with bankers/PE firms/sovereign wealth funds. There's a reason Norges owns 9% of VNO and PGRE and not ESRT**. Norwegians want to stash their oil money abroad in big shiny buildings, they can't buy enough on the private market to move the needle, so their only choice is VNO/PGRE whatever. Likewise, VNO JV'd their flagship upper 5th / times square retail to the qataris at a steamy valuation. no one is going to pay a 4 cap during retailpocalypse for ESRT's retail, but they did with VNO because they can put 100's of millions to work in times square signage and vanity retail. Now someone could pony up an uneconomic price to buy THE Empire State Building and The Observatory. So I'll agree with that.

agree to disagree here and it's all kind of splitting hairs as they kind of have the same drivers, but I think VNO/PGRE are lower risk even if they are more levered.

Neverhteless,  I think you are highly likely to make money on this.

**to be fair Norges does own a little ESRT but they also own like 2-3% of the world's stocks. And the Qatari's own a slug of ESRT so I guess they like ESRT too.
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on April 28, 2020, 12:10:37 PM
True dat.

Its funny. Some are still debating whether March was really throw darts at a board territory or not. Newsflash, with some of these NYRE plays, you are still in throw darts at a board territory. There's only nothing to invest in right now if you arent willing to invest in things worth investing in. Thats my big insight for the day.

Title: Re: ESRT- Empire State Realty Trust
Post by: bizaro86 on April 28, 2020, 01:45:12 PM
Any thoughts on management comp here and how much to take off the valuation for it? I was surprised at the level of G&A, and then read the transcript and noted that they are hiring 2 new C level execs, one of whom they expect to build out a team around them. And that's a CIO, so I'm sure the team members wont be making a measly $200k...

Edited to add: I really like this. I'd like it more if was just the empire state building, and even more if it was just the observatory. That's a great asset.
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on April 28, 2020, 01:53:15 PM
I hate the exec comp here. Nothing more to really add there. They are overpaid. Its hard to find reasonably comped RE executives in the public universe. My biggest gripe about investing there. Theyre all overpaid.

On the additional execs, they did mention on the call we will have a lot more clarity there shortly. If this were 50-100% higher, it would be a bigger issue for me. At least right now, I can tell myself they may have earned they pay(paid for by shareholders who owned this at twice the current price) by sticking to their guns and keeping the company in tip top financial shape. How many companies were aggressively buying back mid single digit %s of their stock between 3/1-4/20?
Title: Re: ESRT- Empire State Realty Trust
Post by: CorpRaider on April 28, 2020, 06:32:42 PM
Yeah, i pegged it class B, and I don't like the "greater metro" exposure that much; but then again I don't love the debt and preferreds SLG so much, though I get why they do it.
Title: Re: ESRT- Empire State Realty Trust
Post by: Mephistopheles on April 30, 2020, 01:16:13 PM
My friend works in the Empire State building. The company originally had 6 floors and happened to cut to 3 prior to COVID. Right before the stay at home measures, it was her first day at her new desk. The reason for the cut is because the company found that on average half the people are not in the office on any given day. So now they're doing shared work space. You don't get your own desk, you just get a designated desk for the day, and a drawer to keep your stuff in.

Don't really have any input. Wanted to share that anecdote. I know there is a separate thread on WFH trends, so I will look there.

I really do like the Observatory asset and agree that it makes this a potentially interesting play.
Title: Re: ESRT- Empire State Realty Trust
Post by: ugadawg_98 on May 03, 2020, 11:57:54 AM
Gregmal,

Could you (or anyone) else describe the OP issues? Should they be thought of like preferreds?

Do you own them or are you playing this straight common?
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on May 03, 2020, 02:07:01 PM
They lack voting rights and require a k1, so I immediately wrote them off. I just own the common.
Title: Re: ESRT- Empire State Realty Trust
Post by: Mephistopheles on May 03, 2020, 11:01:56 PM
Gregmal, thank you for posting this idea. Observatory seems to be the crown jewel and will last regardless of what happens to the rest of the RE portfolio. Thus it probably serves to value it separately.

How would you go about doing that? The company says the market value of the Observatory rent is $82 million /year, that comes out to $1,062/sqft based on 80,000 sqft size. After accounting for the intercompany rent, the pretax earning of the unit is $12.5 m.

So I am thinking to put a cap rate of like 5% on the intercompany rent, however it doesn't include operating expenses namely RE tax.

The 82mn figure is about 12% of total rental revenue. So take 12% of the $115mn RE taxes, and we get $14 mn. So that comes out to (82-14) $68mn approx NOI on the Observatory RE. 5% cap on that is $1.3 billion.

As far as the $12.5 m pretax earnings of the Observatory, we can slap a 16x multiple on there for a $200 million valuation for the operation.

Add $1.3 billion to $200 million and we have $1.5 billion value for the Observatory including the RE.

Company EV is about $3.9 billion, subtract the $1.5 and you get $2.4 billion / 10 mn sq ft of space is $240 / ft for the remaining company.

What do you think of my math or am I missing something?
Title: Re: ESRT- Empire State Realty Trust
Post by: realassetsvalue on May 04, 2020, 05:57:42 AM
What do you think the impact will be of the opening of SL Green's One Vanderbilt Observatory (another 1,000 ft+ location in Midtown) in Q4 2021?

Slides 97 - 102 (yeah its a 250 slide deck) of the linked presentation may be of interest to see what assumptions SL Green are making and how they are underwriting their Observatory: https://slgreen.gcs-web.com/static-files/f187c1df-7350-408e-b73b-083d37850dea
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on May 04, 2020, 04:25:24 PM
As to the above two posts:


On valuation, its tough because of where we currently are with the CRE market. My assumptions I try to leave generalized. If I can tell the man is fat, thats good enough here given the circumstances. The entire company per the stock market was worth $14 per share/~$5.75B EV pre-COVID. We know for certain it IS NOT worth that now. So then the question is, how much less? I wasn't an investor at $14 and wouldn't be now. I am a believer in the asset and think much of this is just time arbitrage. If push comes to shove I just needed to get comfortable with 2 things. 1) That the value of what a buyer is willing to pay TODAY, would be much more than the current EV. 2) Things will normalize in 3-5 years and pre COVID valuations will probably need to get bumped because of monetary policy and lower rates. Both those things bode well for me here.

The problem with using cap rates for a hard figure is that you dont have sufficient post COVID data. Many properties in various parts of the CRE market are still no bid. Its by and large getting better. But the only thing that is moving and at least comparable to preCOVID is some of the net lease stuff. What is appropriate for run of the mill NY office today? No clue. Again, less than pre COVID. By how much? I highly doubt 30-50% less. Their "other" properties are nothing special. Not bad, not good, just kind of a revenue streamer that insulates the trophy property.

The figures you use are fine as a framework. But I'd also mention that with one of a kind stuff, the figures are rarely right and often not optimistic enough. One racist tirade and the LA Clippers estimated value increased 5x. There is likely no shortage of suitors for the Empire State Building. Model it out conservatively, sure, but I would expect to be surprised positively if and when that ever plays out, which for the record, I dont think will be anytime soon.

The Observatory I would definitely think is a sub 5 cap, maybe even sub 4. SL Greens knockoff to me is irrelevant. The moat is the asset. The Empire State Building is The Empire State Building. Its a clever use of space and attempt at additional revenue for SL Green, but theres no shortages of cool buildings or things to do/experience/spend money on in NYC. Over and over, its even touched on in the ESRT presentation, people come to NY with the Observatory on their check list of things to do. The Yankees were such a great idea they followed with the Mets. But the Mets are still the Mets which just arent nor will they ever be The Yankees...if that analogy makes sense.

The main takeaways I would have here is that

1) no I am not "thrilled" with this operationally or in terms of overall quality of the non ES assets. Its not the best investment ever or a top tier ship firing on all cylinders. Its just an incredibly timely investment with very remarkable upside in a bunch of rather conservative scenarios.
2) Simplicity is your friend here with things like this or pupils mention of PGRE. Go look at what VNO just dropped today(or SPG when they release). I dont want to deal with that shit if I am making an investment in any size(I own both but ESRT > VNO+SPG for me)...Just soooooo many different moving pieces and things that can shift. Give me a top tier trophy property and a handful of OK ones any day over that.
3) management is very conservative and will allocate capital responsibly. There is upside with that.
4)This is basically just a very high quality, event driven, discount to NAV play.
Title: Re: ESRT- Empire State Realty Trust
Post by: realassetsvalue on May 06, 2020, 09:35:06 AM
Jon Litt's Land & Buildings is short ESRT and put out a press release with their negative view on NYC office RE.

I am still absorbing their view and what that should mean for NYC Office RE but given the discussion around ESRT, VNO, ALX and PGRE (full disclosure I own ALX and PGRE) I thought useful to bring the negative case to the forefront.

https://landandbuildings.com/wp-content/uploads/2020/05/LandB-NYC-Office-Facing-Existential-Hurricane-1.pdf

Additional info that I think is useful is this CBRE piece - it doesn't draw any conclusions but has useful case studies of early 2000s and GFC Manhattan office rents on page 21, down ~25% and ~30% over 4 years and 3 years respectively.

https://f.tlcollect.com/fr2/520/33500/VP_Covid_19_impact_on_Manhattan_Office_-_040120A.pdf

Will this downturn have a similar or different impact on the Manhattan office market? Do the prices of NYC office REITs today compensate for this kind of downturn? This is what I am trying to figure out.

Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on May 06, 2020, 10:22:16 AM
He may very well be right, but his short thesis isn't very well laid out; other than to state the obvious, Observatory revenue will be bad for a bit, and their buildings are old. If I had to guess this sounds more like a pair/hedge or basket short rather than ESRT is fucked.

The CBRE report looks interesting, thanks.
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on May 06, 2020, 11:15:42 AM
I would also add, any scenario where the Vandy Observatory "outcompetes" the Empire State Building, is going to be predicated on outrageously positive implications for NYC real estate assets. So I think that theres a major flaw in the thesis that all NYC RE is done for but One Vandy will be a bigger draw/take business from The Observatory...
Title: Re: ESRT- Empire State Realty Trust
Post by: thepupil on May 06, 2020, 11:46:03 AM
So I wouldn't at all be surprised at that kind of drop in spot lease rates, which is why I am focusing on building and tenant quality/lease length. I think a drastic decline in spot rates and spike in vacancy is inevitable. it's whether or not we get to the heady pre-covid rates/occupancy in the out years (with the new supply) that will determine whether or not these are successful investments.

Lease length doesn't matter if the tenant goes away / default of course and I think that ESRT's tenants are incrementally more scary than the others as L&B highlights.

I think PGRE's 1633 Broadway and ALX's 731 is about as good as it gets in that regard VNO has more variability in both what you're paying and on how Penn shakes out, but VNO is more "west and south" than PGRE's midtown/Rock Center less "trendy" location.
 
i think L&B's characterization of ESRT is pretty high level and similar to my thoughts after 20 minutes of googling the building's ages and looking at the lower rent per foot, lower NOI margins, lower historical and current occupancy, etc of ESRT relative to others. I don't think it adds much analytical value to the discussion and one should give ESRT credit for re-developing its asset base. but I pretty much agree with him.

 If property taxes and operating costs go up while rents drop, the lowest margin guys will get hit the worst, right? With the lowest NOI margin and the observatory NOI juicing the aggregate, it just seems that ESRT's NOI is most at risk relative to the others. VNO/SLG have high street retail juicing their overall margins too, but it's not like that Observatory beast. only tourist (particularly international) go there and elevators packed with tourist going to the top of a very tall building comes after people going back to work in the covid recovery timeline (if such a thing exists).

I think it's tough to figure out where which type of tenants go (if they're switching between buildings in NYC) but would mostly guess that people either pay the same for higher quality or pay lower for the same quality. to make a stretched analysis, it's the marginal oil fields and pipelines that go away in an energy crisis and I characterize ESRT as having incrementally worse assets than the other public guys, but who knows.

But in the end, I'll restate that they are all different deck chairs on the titanic and have similar drivers.

one should aggregate them for risk management purposes.

When Bear Sterns went down, did Lehman shareholders say "see I knew it was them that would go down!" lol.
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on May 06, 2020, 11:55:42 AM
i think L&B's characterization of ESRT is pretty high level and similar to my thoughts after 20 minutes of googling.

Depending on how you read this, this is either brilliant sarcasm or a brilliant and probably unintentional self tout.
Title: Re: ESRT- Empire State Realty Trust
Post by: thepupil on May 06, 2020, 11:58:30 AM
i think L&B's characterization of ESRT is pretty high level and similar to my thoughts after 20 minutes of googling.

Depending on how you read this, this is either brilliant sarcasm or a brilliant and probably unintentional self tout.

lol it is not self tout. why would I self tout when I've been pimping VNO since the $60's.

 it is simply saying that ESRT having 100 year old buildings is not unknown or deserving of a press release.

Give me a nice Ackman-esque 150 slide deck.

I think I need to make a youtube video of me crying and defending Steve Roth. that will help.
Title: Re: ESRT- Empire State Realty Trust
Post by: thepupil on May 19, 2020, 11:02:15 AM
What do you all think of this?

ESRT just announced they made a 32/3 year old (Emory Undergrad 2009) their Chief Investment Officer

https://www.marketscreener.com/EMPIRE-STATE-REALTY-TRUST-14439062/news/Empire-State-Realty-Trust-Announces-Appointment-of-Aaron-Ratner-as-Senior-Vice-President-and-Chief-30636081/

I think it's pretty cool to hand the keys to a young gun, but it does seem highly unusual.

Is he by chance related to the Forest City Ratners?

Quote
New York, NY, May 19, 2020 - Empire State Realty Trust, Inc. (NYSE: ESRT) (the 'Company'), a real estate investment trust with office and retail properties in Manhattan and the greater New York metropolitan area, today announced the appointment of Aaron Ratner as Senior Vice President and Chief Investment Officer, effective May 26, 2020. In this newly created role, Mr. Ratner will lead the Company's investment strategies and sourcing of external growth opportunities.

Anthony E. Malkin, Chairman and Chief Executive Officer of ESRT said, 'Aaron's appointment follows our comments in our Q1 earnings call. I am confident he is the right person to create opportunities for us in this cycle and those to come, and we welcome him to our team.'

'Empire State Realty Trust is a platform poised for accretive growth,' said Mr. Ratner. 'I am honored and motivated by the opportunity to work with ESRT's talented team and to create value for ESRT's shareholders.'

Mr. Ratner joins ESRT after nine-years with TPG. He most recently served as a principal on the real estate team, where he developed investment strategies, sourced opportunities, and executed and managed real estate debt and equity investments. He served on the Board of Directors and Finance Committee for AV Homes (NASDAQ: AVHI). Before TPG, he worked in the real estate investment banking group at Eastdil Secured. Mr. Ratner earned a B.B.A in Finance with distinction from Emory University's Goizueta Business School.

About Empire State Realty Trust Empire State Realty Trust, Inc. (NYSE: ESRT), a leading real estate investment trust (REIT), owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the world's most famous building. Headquartered in New York, New York, the Company's office and retail portfolio covers 10.1 million rentable square feet, as of March 31, 2020, consisting of 9.4 million rentable square feet in 14 office properties, including nine in Manhattan, three in Fairfield County, Connecticut and two in Westchester County, New York; and approximately 700,000 rentable square feet in the retail portfolio.
Title: Re: ESRT- Empire State Realty Trust
Post by: johnny on May 19, 2020, 11:11:08 AM
For those of you afraid of getting networking inmails from LinkedIn stalking, nothing left out of the press release:
Title: Re: ESRT- Empire State Realty Trust
Post by: thepupil on May 19, 2020, 11:27:16 AM
as an additional fun fact, AV Homes used to be called Avatar Holdings; they changed their name not long after the movie Avatar came out. Avatar was a nice little post GFC value trap where it traded at like 20-30 points of unlevered book and that was too high a price because it mostly owned marginal land in god forsaken parts of central florida and Arizona.

https://www.globenewswire.com/news-release/2012/02/15/468145/246013/en/Avatar-Holdings-Inc-Becomes-AV-Homes-Inc.html

Here's a February 2010 VIC pitch @ $17 and change; I pitched it as a long in an interview with the one the only vampire squid and the guy didn't like it one bit; no second interview was rewarded, no Goldman Sachs Principal Strategies job for me.

So if you all thought that me being a little early to a real estate recovery trade was a new thing, I've been doing this since college lol! with hopefully better assets than lots in Poinciana, Florida.

https://valueinvestorsclub.com/idea/AVATAR_HOLDINGS_INC/0684703277

Thereafter went as low as $6 in 2011, and got taken out by Taylor Morrison 2018 for about $20.

TPG bought in 2014 for $14 and change, not exactly a crazy good (or bad) investment on the surface, maybe they made a little more than it looks like because of the converts/prefs.
https://www.globenewswire.com/news-release/2013/06/19/555135/10036881/en/AV-Homes-Inc-Announces-135-Million-Equity-Investment-by-TPG.html


Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on May 19, 2020, 11:35:58 AM
I'd like to see his compensation structure. Giving a young, motivated fella the reigns is more appealing to me than some grey haired industry vet still living in the 90's.

Title: Re: ESRT- Empire State Realty Trust
Post by: rb on May 19, 2020, 11:39:14 AM

Is he by chance related to the Forest City Ratners?

My first thought was who's nephew is this. But then if he is a Forest City Ratner and the best school they managed to get him in was Emory then I would stay the hell away from the stock.
Title: Re: ESRT- Empire State Realty Trust
Post by: fareastwarriors on May 19, 2020, 11:57:11 AM

Is he by chance related to the Forest City Ratners?

My first thought was who's nephew is this. But then if he is a Forest City Ratner and the best school they managed to get him in was Emory then I would stay the hell away from the stock.

lol! ouch
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on May 19, 2020, 12:15:49 PM
Yea NYC RE circles can be very incestuous.
Title: Re: ESRT- Empire State Realty Trust
Post by: CorpRaider on May 19, 2020, 07:12:15 PM

Is he by chance related to the Forest City Ratners?

My first thought was who's nephew is this. But then if he is a Forest City Ratner and the best school they managed to get him in was Emory then I would stay the hell away from the stock.

You sir, are an absolute unit! 
Title: Re: ESRT- Empire State Realty Trust
Post by: CorpRaider on May 19, 2020, 07:13:03 PM
as an additional fun fact...I pitched it as a long in an interview with the one the only vampire squid and the guy didn't like it one bit; no second interview was rewarded, no Goldman Sachs Principal Strategies job for me.

  No wonder Buffett sold that trash. 
Title: Re: ESRT- Empire State Realty Trust
Post by: BG2008 on May 19, 2020, 07:34:02 PM

Is he by chance related to the Forest City Ratners?

My first thought was who's nephew is this. But then if he is a Forest City Ratner and the best school they managed to get him in was Emory then I would stay the hell away from the stock.

Well, is this better or worse than JW May's bringing in a poker player as a director?
Title: Re: ESRT- Empire State Realty Trust
Post by: MVP444300 on May 31, 2020, 11:41:12 AM
Empire State Building Slashes Carbon Emissions By 40% With Energy Saving Upgrades

https://cleantechnica.com/2020/05/31/empire-state-building-slashes-carbon-emissions-by-40-with-energy-saving-upgrades/

Over the past decade, the trust that owns the Empire State Building has invested more than $30 million to make it more energy efficient.  Today, the improvements made over the past decade are saving $4 million in electricity every year and the project is expected to pay for itself twice over.

The elevators in the building now have energy recovery systems. Think of them as regenerative braking devices that operate vertically instead of horizontally. Every light in the entire building is now an LED, including those that flash from its top at night to remind New Yorkers that brighter days are ahead despite the darkness on the land at present.

Every window has been upgraded to the highest energy conservation standards. Automated window treatments adjust the amount of daylight that enters the rooms during the day to reduce heating and cooling needs and decrease the amount of electricity needed to illuminate the rooms. Heating devices have been modified to make them more efficient.

Here is the much longer article from the Washington Post:  https://www.washingtonpost.com/graphics/2020/climate-solutions/empire-state-building-emissions/?itid=hp_hp-more-top-stories_climate-solutions-1110am%3Ahomepage%2Fstory-ans
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on June 09, 2020, 08:12:03 AM
Full dividend announced. No cut here....yet.
Title: Re: ESRT- Empire State Realty Trust
Post by: fareastwarriors on June 09, 2020, 09:31:02 AM
Full dividend announced. No cut here....yet.

Was the dividend in doubt?
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on June 09, 2020, 09:39:32 AM
Full dividend announced. No cut here....yet.

Was the dividend in doubt?

I dont think so, but as we've seen with a number of companies, there was/is always the risk that "preserving cash" becomes the "safe" option. Part of the reason I like this is because these guys have been notoriously cautious over the past several years with an emphasis on building a fortress like balance sheet and allocating capital in a highly disciplined manner.
Title: Re: ESRT- Empire State Realty Trust
Post by: pbi on June 09, 2020, 09:48:15 PM
I've hacked together a spreadsheet to try and get a handle on how the market is pricing the portfolio. EV atm of around $3.4B. $2.2B for ESB + Obs (which is arguably low given its the ESB after all) leaves about $1.6B for the balance, spread out over 7.3M SF, so $220/SF. Deals for these kind of assets - ageism aside - seem to be occurring around the $600/SF mark, but as gregmal has said, everything is currently no bid. Still seems low though.

Understand that ESB is the trophy asset, but am interested to see what the stub is currently worth if it were to be excluded. 
Title: Re: ESRT- Empire State Realty Trust
Post by: Spekulatius on June 27, 2020, 05:47:23 PM
Short report (from reddit):
https://landandbuildings.com/wp-content/uploads/2020/05/LandB-NYC-Office-Facing-Existential-Hurricane-1.pdf (https://landandbuildings.com/wp-content/uploads/2020/05/LandB-NYC-Office-Facing-Existential-Hurricane-1.pdf)
Title: Re: ESRT- Empire State Realty Trust
Post by: fareastwarriors on June 28, 2020, 11:06:39 AM
Short report (from reddit):
https://landandbuildings.com/wp-content/uploads/2020/05/LandB-NYC-Office-Facing-Existential-Hurricane-1.pdf (https://landandbuildings.com/wp-content/uploads/2020/05/LandB-NYC-Office-Facing-Existential-Hurricane-1.pdf)

Yup, thanks. This was shared already by user realassetsvalue on May 6 earlier in the thread.

Jon Litt's Land & Buildings is short ESRT and put out a press release with their negative view on NYC office RE.

I am still absorbing their view and what that should mean for NYC Office RE but given the discussion around ESRT, VNO, ALX and PGRE (full disclosure I own ALX and PGRE) I thought useful to bring the negative case to the forefront.

https://landandbuildings.com/wp-content/uploads/2020/05/LandB-NYC-Office-Facing-Existential-Hurricane-1.pdf

Additional info that I think is useful is this CBRE piece - it doesn't draw any conclusions but has useful case studies of early 2000s and GFC Manhattan office rents on page 21, down ~25% and ~30% over 4 years and 3 years respectively.

https://f.tlcollect.com/fr2/520/33500/VP_Covid_19_impact_on_Manhattan_Office_-_040120A.pdf

Will this downturn have a similar or different impact on the Manhattan office market? Do the prices of NYC office REITs today compensate for this kind of downturn? This is what I am trying to figure out.



Title: Re: ESRT- Empire State Realty Trust
Post by: fareastwarriors on June 29, 2020, 10:04:21 AM
Will office buildings ever be the same? Empire State offers clues

https://www.reuters.com/article/us-health-coronavirus-usa-empire-state-b/will-office-buildings-ever-be-the-same-empire-state-offers-clues-idUSKBN2401A1 (https://www.reuters.com/article/us-health-coronavirus-usa-empire-state-b/will-office-buildings-ever-be-the-same-empire-state-offers-clues-idUSKBN2401A1)
Title: Re: ESRT- Empire State Realty Trust
Post by: changegonnacome on June 29, 2020, 02:49:18 PM
Empire State building alone I think could fetch the current EV of ESRT- given the iconic address alone with the added attraction business attached.......its inflation protected bond like income stream would possibly warrant a 25x multiple. The rent roll on the Empire State building a 20x rate.

The remaining assets sit at higher end of Class B Manhattan / Metro area RE........lets call them B+ with a descent environmental/sustainability footprint.

The downside is protected here.........the risk appears in the management teams contrarian instinct to now lever up and do some deals. The ability to lever up against an asset like the ESB is tempting & easily done...........what bank/bond holder wouldn't mind taking delivery of an iconic asset if they had to and selling it to China or Qatar.
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on June 29, 2020, 02:59:33 PM
I do agree, but on the flip side, I think they've proven disciplined, certainly have a financial alignment, and I think given those two things, have earned the opportunity to "take a shot", especially during a time in which it may be wise to "start shooting".
Title: Re: ESRT- Empire State Realty Trust
Post by: fareastwarriors on July 06, 2020, 03:37:23 PM
Commercial mortgage delinquencies surged at record monthly rate in June

https://www.cnbc.com/2020/07/06/commercial-mortgage-delinquencies-surged-at-record-monthly-rate-in-june.html (https://www.cnbc.com/2020/07/06/commercial-mortgage-delinquencies-surged-at-record-monthly-rate-in-june.html)

Delinquencies in commercial mortgage-backed securities jumped by 213 basis points in June to 3.59% from 1.46%.

It was the largest one-month spike since Fitch Ratings began tracking the metric nearly 16 years ago.

The hotel and retail sectors are seeing the worst delinquencies, as the coronavirus has been especially hard on those industries.
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on July 06, 2020, 04:49:12 PM
This is where having low leverage and nearly 80% of SF unencumbered plays into their hands. They are definitely well positioned should the CMBS issues prompt further softness in the market.
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on July 13, 2020, 08:57:31 AM
Numbers continue to improve, Observatory expected to reopen 7/20.
Title: Re: ESRT- Empire State Realty Trust
Post by: cherzeca on July 13, 2020, 11:40:57 AM
no position. I do have a view that you will see more "no central HQ office" businesses.  anecdotally, I hear this from the young adults that I know, about the direction their companies are taking.  I expect each business's office HQ to become more conference room availability for client meetings and less employee office space...secular shift.  I see Empire State Building/chrysler building and the like to be on the forefront of this secular contraction. 
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on July 29, 2020, 02:05:13 PM
https://www.businesswire.com/news/home/20200729005828/en/Empire-State-Realty-Trust-Announces-Quarter-2020


Second Quarter and Recent Highlights

Net loss attributable to the Company was $0.07 per fully diluted share.
After a $0.03 per share reserve against tenant receivables and non-cash reduction in straight line rent balances, Core Funds From Operations (“Core FFO”) was $0.14 per fully diluted share.
Same Store Property Cash NOI excluding lease termination fees was up 18.0% from the second quarter 2019 primarily driven by lower property operating expenses, partially offset by a reserve against tenant receivables. When COVID-related rent deferrals are excluded, Same Store Property Cash NOI increased 9.9% from the second quarter 2019.
Strong liquidity position with $1.4 billion of total liquidity as of June 30, 2020, which consists of $873 million of cash plus an additional $550 million available under its revolving credit facility.
The Company repurchased $52 million of its common stock shares at a weighted average price of $7.99 per share in the second quarter, and year-to-date through July 28, 2020, the Company repurchased $119 million of common stock at a weighted average share price of $8.67.
For the total portfolio in the second quarter, we signed 19 new, renewal, and expansion leases, representing 113,431 rentable square feet at an average starting rental rate of $64.43 per rentable square foot.
Collected 84% of second quarter 2020 total billings with 86% for office tenants and 75% for retail tenants. Through July 24, 2020, collected 90% of July total billings, with 93% for office tenants and 75% for retail tenants.
The Empire State Building Observatory remained closed during the entire second quarter and reopened on July 20, 2020.
Declared a dividend of $0.105 per share.
Announced the appointment of Christina Chiu to EVP and CFO, Aaron D. Ratner to SVP and CIO, and the departure of John B. Kessler. On July 13, 2020, the Company announced the appointment of R. Paige Hood to its Board of Directors, effective August 1, 2020, and the departure of William H. Berkman, effective July 31, 2020.
Reduced expected full year G&A by approximately 12% from the previously disclosed 2020 G&A run rate of $68 million to $60 million, excluding one-time severance charges.
Reduced property operating expenses by $10 million in the second quarter 2020 from the prior year period and expect further to reduce expenses by $12 million in the second half of 2020.
Reduced required capital expenditures planned for 2020.
Reduced annual base salary for Anthony E. Malkin, the Company’s Chairman, President and CEO, and Thomas P. Durels, EVP Real Estate, by 33% and 25%, respectively, effective August 1 through the remainder of 2020. This is in addition to Mr. Malkin’s base salary reduction to $1.00 for the second quarter of 2020.
Reduced 2021 NEO annual equity compensation by $3.9 million, comprised of a $2.7 million reduction for Mr. Malkin and $1.2 million reduction for Mr. Durels.
Title: Re: ESRT- Empire State Realty Trust
Post by: Gregmal on July 30, 2020, 01:41:06 PM
https://nypost.com/2020/07/30/nycs-bryant-park-hotel-is-being-converted-to-office-space/

You dont say!