Entering text into the input field will update the search result below

Empire State: A Quality Play On New York


  • We have covered SL Green Realty Corp. and Vornado previously.
  • Today, we add a third New York-focused REIT.
  • This one is currently the cheapest among the three by a few metrics and is certainly putting its money where its mouth is.
  • The bull case though comes down to answers to two major questions.
  • I do much more than just articles at Conservative Income Portfolio: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »
new york empire state building and statue of liberty

upthebanner/iStock via Getty Images

We wrote about SL Green Realty Corp. (SLG), an office REIT based in Manhattan, in the recent past. While we liked it, we gave it a neutral rating as we preferred the more conservative Vornado Realty Trust (

Are you looking for Real Yields which reduce portfolio volatility?

Conservative Income Portfolio targets the best value stocks with the highest margins of safety. The volatility of these investments is further lowered using the best priced options. Our Cash Secured Put and Covered Call Portfolios are designed to reduce volatility while generating 7-9% yields. We focus on being the house and take the opposite side of the gambler.

Learn more about our method & why it might be right for your portfolio.

This article was written by

Trapping Value profile picture

Conservative Income Portfolio is designed for investors who want reliable income with the lowest volatility.

High Valuations have distorted the investing landscape and investors are poised for exceptionally low forward returns. Using cash secured puts and covered calls to harvest income off value income stocks is the best way forward. We "lock-in" high yields when volatility is high and capture multiple years of dividends in advance to reach the goal of producing 7-9% yields with the lowest volatility.

Preferred Stock Trader is Comanager of Conservative Income Portfolio and shares research and resources with author. He manages our fixed income side looking for opportunistic investments with 12% plus potential returns. 

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (42)

Baloney Sandwitch profile picture
Stock price has crashed 50% since this article was written. Cap rate is 12%. What is happening? any update? anyone?
BeaBaggage profile picture
@nsolot re $ESRT I thought the quarter looked good, more ES Bldg visitors, more leasing, rents good, more leasing...slow uphill climb but looked decent to me..continuing share buybacks which I like. Bea seekingalpha.com/...
nsolot profile picture
@BeaBaggage I hope so! Now, ESB is an iconic NYC landmark, so it may not be a good proxy for the overall market, but I'll take any sign of the mid town office market firming up.

I'll be NYC next week, and then in June for REITWeek. Hope to get an updated read on NYC.

Did you see this WSJ article?


If you don't have WSJ access, here are the first 3 paras:

The recent recovery of U.S. office rents owes much of its success to something landlords hate to discuss: all the freebies, cash gifts and other incentives they have to fork over to tenants.

These sort of payouts have long existed to a degree in the office, retail real-estate and apartment markets, especially in places like New York City and San Francisco. But they have never been so big or so commonplace as they are in urban office markets these days, real-estate brokers say.

Landlords are showering tenants with tens of millions of dollars and months of free rent. They are paying moving expenses and for customized alterations. In exchange for this largess, building owners are able to charge inflated rents that amount to much less than their face value suggests when all the giveaways are factored in.
BeaBaggage profile picture
@nsolot -- yes.. well as I follow you I saw your comments to that effect which are helpful.. again it will be a slow pace and have to stay on top of things quarterly.. w buybacks, no debt due 2yrs, healthy bal sheet etc, I am ok here. You are a great resource on r/e here..thanx again.
Any selloff will probably add a little, it is a small position at this time. Usually I am early in things so I have to reinforce my decisions- and remember not to be too attached! BeaFayWray
nsolot profile picture
@BeaBaggage GL! I sincerely hope it works out to be a great trade for you. I'm looking out 8-12 years, so I don't put a lot of emphasis on a quarter or two. I'll be watching for vacancy rates to come down to at least 15% and prefer 12%. Also watching to see if deals are getting less landlord concessions.

For the time being, I prefer to be in industrial where vacancy is low, and rents are going way up!

BeaBaggage profile picture
I see $ESRT signed a nice new tennant in a prime area of NYC..so much for NY being 'dead'.. BeaKong markets.businessinsider.com/...
nsolot profile picture
@BeaBaggage If you sign up on ESRT's website, you can get the PRs they send out with new lease announcements, and there have been several, but usually they don't speak much about lease terms (Rent PSF, Free rent, TA and other tenant concessions).

The latest news I see about the Manhattan office market still looks like a tenant's market


Make no mistake, I want NYC office to bounce back big & fast, and I have skin in the game.
BeaBaggage profile picture
@nsolot thank you.. things can change fast..real fast.. a friend told me today there are lines around the block for new Airjordans..working from home gets old.. I know.
nsolot profile picture
@BeaBaggage They do! First people were leaving NYC in droves... now they are returning and there are reports of people trying to find an apartment end up in bidding wars! Not to buy, but to rent!


Hopefully retail and office moves that direction also. Last time I was NYC, there was tons of street retail with "For Lease" signs in the windows. From what I hear, office is still soft. The brand new A class buildings are doing well, and office near GC and Penn St are faring better than those which require another subway or bus to get to the office.
BeaBaggage profile picture
starting a position here in $ESRT. Agree w a poster the Summit at One Vanderbilt ($SLG) is competition but there is so much pent up demand for experiences all will benefit. Especially when the foreign tourists return. Retail will pick up w restaurants/specialty stores; apts/condos/townhouses are booming and the owners will want to shop or order for delivery.. patience. BeaHelmsley
12 Jan. 2022
I'm a lifelong NYer. The tourist related aspects to Empire St. Building are huge moneymakers but I don't understand why people would want their offices in the building.You are forced to wait for elevators that packed. The retail services in and around ESB are overpriced. Who wants to fight tourist crowds in a destination location when going to work everyday? Another issue is being on a 50 or higher floor in the event of a terrorist attack or fire. My final issue is that the building is almost 100yo and that should mean increased capex both maintenance and improvement.
The rest of the portfolio is generic office space.
nsolot profile picture
@wex2 I'm a native of NYC and I feel the same way. Apparently there are lots of tenants that want to be there. Few years ago, I saw Tony Malkin at REITWeek talking about Empire St. Building and I quote him exactly, "the tenants leave in pine boxes".
13 Jan. 2022
@nsolot clearly, they have tenants but I'm baffled why the rents aren't at a discount to mid manhattan office space. Perhaps there are businesses that feel they benefit from the prestige of such well known location?
nsolot profile picture
@wex2 Besides the prestige, the lobby has been very well maintained so it's a beautiful example of the Art Deco era.

Now maybe if a Giant Gorilla starts climbing the façade, rents might fall :-)
arson profile picture
I just can't go there, and my eligible REIT purchase screen starts at 3% yield. Too easy to get a higher return elsewhere, even FRT would be a lot better IMHO.
In July I went to NYC for a week with my 19 year old son. It was an opportune time because Covid was decreasing especially among the vaccinated but tourism was just restarting so there was very little wait time anywhere. We went to the Top of the Rock, Empire State Building, New World Trade Center, and The Edge. We liked the Empire State Building the best since you can go all the way around and its location in midtown Manhattan. The Edge viewing outside is only on one side and it is actually quite difficult to see through the bottom glass. The World Trade Center had a restaurant where you could eat at (near) the top and that was great and the food was actually OK and not a total rip off but the main attraction was the museum which is across the street at the location of the old trade center.

Anyway I got to see the names of all the REITs on the side of the buildings but I would say the most distressing thing is what you see on the ground when you walk between the buildings. If that could be cleaned up I think that there is room for all and I doubt that the Empire State Building will lose out. It had been a couple of decades since I had been in NYC and I had quite forgot how great some of the features of the city are. I really don't see how anyone can operate a business there profitably. The prices for food and lodging were not much more than California (the hotel rooms were actually less staying at the Crowne Plaza HY36 for less than $200/night where during the same week it was over $400 on the Central Coast where I live).

So I vote for ESRT.
Charlie's Munger profile picture
@PreCambrian that’s bc nyc was world COVID epicenter - many hotels were used homeless shelters. Nobody will go esb now that there is one Vanderbilt. Armed robbery now-a misdemeanor in Manhattan
The quality of the RE held is not similar to VNO or SLG. ESRT says their focus is on B+ office space. In addition, the management is not in the same league as the other two companies. The main wild card with valuing the company is the observatory. The new competition from the summit at OVA and the Edge should permanently reduce revenues since most tourists will only spend the $40+ to visit one of them.
Franz-Joachim Kauffels profile picture
NYC has many problems of course but my hope is the new mayor which was introduced some days ago. Personally I like ESRT and especially their ESG initiatives very much and was long from the IPO but at the moment I wait a little, it seems not to be a crying bargain.
Charlie's Munger profile picture
@Franz-Joachim Kauffels new mayor is nothing w new Manhattan DA
CincinnatiRick profile picture
Poor yield, limited upside to your EV, WFH, New York City, crime and Covid hysteria. Ugh! Now everything has a price but this would have to be a whole lot lower to get a sniff.
No Guilt profile picture

Lower than what?

The stock is down 50% from highs.
CincinnatiRick profile picture
@No Guilt Lower than the current price. 50% off of what may or may not have been a fair price under previous conditions says nothing at all about its present value.
This is a strange one because as you pointed out a large % of revenue comes from the observatory (almost 50% from what I recall?). The bet it's really on NYC tourism returning (and the competitive issues you mentioned). It used to be 2 options, top of the rock or ESB. Now it includes one world trade center and the edge. I'm not sure ESRTs portion of the pie will ever be the same even if all tourism returns.
jkane56 profile picture
The new normal and work from home and office occupancy all depends on if there is a continuing new stream of covid mutations that re-enforce the desire for work from home. I'm not about to bet on something that I cant forecast at all.
NY will always have tourism, and ESRT will generate revenue from visitors. However an accelerating trend is the number of people leaving the NY metro area (and other large, expensive cities). Many of these people were and are working- but instead of commuting to a NYC office, they work from home or from an office (if needed) in another city. Demand for expensive office RE in dense and expensive urban areas is declining...and will continue to decline. Key time frame is over the next 2-5yrs as leases begin to roll over. It will be interesting to see how many companies walk away from space or reduce their footprint. Another trend is companies moving from high cost areas to lower cost areas; IE away from NYC and to Florida/Texas/Georgia and other areas with lower RE costs and tax burdens. They say a bull mkt climbs a wall of worry, but sometimes that wall can crumble. The cracks are visible and expanding.
No Guilt profile picture
@john doe4944

Chicago for Nashville
San Francisco for Austin
New York for Miami

Notice any themes?
New York is analogous to investing in China
@Carrengine Except you get bargains in China lol
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.