Empire State Realty Trust, Inc. (ESRT): what the price requires

The current priced-in claim for Empire State Realty Trust, Inc. (ESRT) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-19 · Exported: 2026-07-20 · Source: https://boothcheck.com/report/ESRT

Headline

FieldValue
TickerESRT
CompanyEmpire State Realty Trust, Inc.
Current price$5.56/sh
CompositionReal Estate 83% / Observatory 17%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisreit
Price-to-FFO6.3x
FFO yield15.9%

The price sits below what even a 5%/yr funds-from-operations decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 10.7% cost of equity with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.40σ
cohort percentile (of 89 peers)6
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset3.78x5expensive
Earnings1.41x5expensive
Relative0.32x4justifies
Growth0.73x3justifies

Families that justify the price: Relative, Growth Families that call it expensive: Asset

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 5.3%); the inversion above states its own rate.

Per-Model Detail (n=17)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$18.290.30xyesFCF base $0.2B, growth 2% (input: historical growth), terminal g 1.6%, WACC 5.3%, 5yr projection
DCF Exit MultipleGrowth$7.620.73xyesExit EV/EBITDA: 6.9x / 8.9x / 10.9x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$17.290.32xyesP/E 23.52x (blended: static sector reference 35x + trailing (TTM) 6x), scenarios: 19.8x / 23.5x / 27.2x (bear / base = reference held flat / bull), EV/EBITDA 15.55x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$2.422.30xyesBV/sh $6.77, ROE (TTM) 3.3%, ke 9.3%
Two-Stage Excess ReturnAsset$1.473.78xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$3.791.47xyesRev $0.8B, growth 2% (input: historical growth; tapered), Terminal P/S: 1.6x / 1.9x / 2.2x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$1.833.04xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.13B × (1−21%) / WACC 5.3% → EPV (no growth)
Residual IncomeAsset$1.105.05xyesBV $6.77 + 5yr PV of (ROE (TTM) 3.3% − Kₑ 9.3%) × BV; BV grows 2.1%/yr
Graham NumberAsset$11.580.48xyes√(22.5 × FFO/share $0.88 × BVPS $6.77) — Graham's conservative floor
EV/EBITDA RelativeRelative$19.420.29xyesEBITDA $0.34B × sector EV/EBITDA 20.0x
FCF YieldEarnings$3.931.41xyesFCF $234.8M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$2.881.93xyesSBC-adj FCF $0.21B (FCF $0.23B − SBC $0.03B) capitalized at Kₑ
Ben Graham FormulaEarnings$5.650.98xyesFFO/share $0.88 × (8.5 + 2×-0.4%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$0.906.17xyesBV $6.77 × (ROIC 0.7% / WACC 5.3%)
P/Sales SectorRelative$17.340.32xyesRevenue $0.78B × sector P/S 6.0x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$9.510.58xyesFFO/share $0.88 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative$12.480.45xyesFFO/share $0.88 × 14.1x P/FFO (route cohort median, n=86); FFO $0.24B (FFO incl. D&A + impairments, FY2025, companyfacts), shares 269M
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt (REIT basis)$1.2b
Net debt / FFO5.05x
Fixed-charge coverage (FFO basis)3.3x
Funds from operations (trailing)$238.2m
Share count CAGR (buyback)-0.4%
Burning cashno

REIT basis: leverage is read against funds from operations (FFO), not depreciation-gutted operating income. The header's implied growth runs on ADJUSTED FFO — FFO minus recurring maintenance capex — so the header's multiple and this leverage ratio use bases that differ by that capex; neither substitutes for the other.

Bullet Takeaways

Bull Case

What a standard real-estate model misses about Empire State Realty Trust is that it is not purely an office landlord. Roughly a sixth of the business is the Empire State Building Observatory, one of the most recognized tourist attractions in the world, and that is a consumer-experience operation sitting inside a REIT wrapper. The company has run it accordingly, shifting the "Observatory business to operate by reservations only," with "a new focus on customer experience and reduction of crowds and lines, with an emphasis on growing revenue per visitor." That is the language of a hospitality business optimizing yield, not a landlord collecting rent. Observatory NOI is guided to $87 million to $92 million for the year, a high-margin income stream tied to a landmark no competitor can replicate. A pure office multiple cannot capture an irreplaceable attraction.

The office portfolio underneath is performing far better than the sector's reputation. Empire State Realty Trust ended the quarter 93% leased, its thirteenth consecutive quarter above 90% occupancy, with same-store cash net operating income up 5.5% year over year. The leasing pipeline grew to about 280,000 square feet in negotiation from 170,000 the prior quarter, and new leases are being signed at ten-year terms. The company has spent years modernizing its Manhattan buildings, and the result is a flight-to-quality beneficiary: tenants leaving older stock are choosing the upgraded, well-located space ESRT offers. That is the opposite of the empty-tower narrative that has tarred office REITs broadly.

The valuation is where the case becomes compelling. The units trade at roughly 6.5 times adjusted funds from operations, an AFFO yield above 15%, and the peer-multiple lens prices them at a fraction of where comparable REITs trade. Core FFO guidance of $0.85 to $0.89 per share against a low-single-digit share price is an enormous cash yield for a portfolio that is 93% leased and growing NOI. Management has also shown capital discipline, walking away from a weak suburban asset via a consensual foreclosure rather than feeding it. Buy ESRT and you are buying a modernized, well-occupied Manhattan office book plus an iconic, high-margin attraction, at a price that values it as a distressed office landlord.

Bear Case

The valuation methods disagree sharply about Empire State Realty Trust, and the disagreement is the bear's opening. The peer-multiple and cash-flow-growth lenses say the units are cheap, but the asset-value and earnings-power lenses say they are expensive, with the asset lens pricing the underlying real estate well below where the public price implies it should. For an office REIT, the asset-value lens is not a rounding error to dismiss: it is the market's read on what the buildings are actually worth in a NYC office market where transaction values have reset lower. When the conservative methods, asset value and earnings power, flag the stock as rich while only the optimistic methods call it cheap, the honest interpretation is that the apparent bargain rests on a recovery the asset values do not yet confirm.

The concentration risk is structural and the company states it plainly. ESRT relies "on three properties, in particular the Empire State Building and its Observatory, for a significant portion of our revenue." That single-asset dependence cuts both ways: the Observatory is a crown jewel, but it is also a tourism-exposed business that just showed its fragility. Observatory revenue fell 20.1% year over year in the quarter, driven by lower international tourism, even as revenue per visitor edged up. The filing acknowledges the Observatory "is subject to tourism trends and weather, and therefore does experience some seasonality." A meaningful chunk of the company's high-margin income depends on foreign visitors coming to New York, a variable sensitive to the dollar, travel patterns, and geopolitics, none of which ESRT controls.

The office side carries the longer-term overhang despite the strong occupancy. The work-from-home shift permanently lowered baseline office demand, and ESRT's tenants concentrate in New York, where, as the filing notes, "rate proposals may negatively impact demographic trends in high tax states like New York." Lease expirations roll continuously, and re-leasing at favorable rates depends on the flight-to-quality trend persisting. Fixed-charge coverage of 3.3 times is adequate but not comfortable for a leveraged property company facing higher refinancing costs. The bear case is not that ESRT is failing, the occupancy and NOI growth are genuinely good. It is that the deep-discount valuation is a value-trap candidate: the conservative methods price the real estate as worth less than the public quote, the iconic Observatory just proved tourism-sensitive, and the office recovery has to keep holding for the cheap-on-cash-flow read to be the right one rather than the asset-value warning.

Valuation

The price is paying for very little. At roughly 6.5 times adjusted funds from operations, an AFFO yield above 15%, the units embed a future of flat-to-declining cash flow; the price sits below what even a meaningful decline in the cash stream would warrant. For a portfolio that is 93% leased and grew same-store NOI 5.5% in the quarter, that is a deeply discounted assumption. The market is pricing ESRT as a wasting office asset, and the operating results are not currently behaving like one.

The methods are the heart of the valuation here because they split so cleanly. Peer multiples price the units at a steep discount to other REITs, the cash-flow-growth lens also reads cheap, while the asset-value and earnings-power lenses read expensive, the asset lens in particular marking the real estate below the public price. The reconciliation is the office-market reset: the asset-value lens reflects where NYC office buildings have transacted, which has fallen, so it sees the equity as rich against depressed property marks, while the cash-flow lenses credit the strong in-place occupancy and growing NOI. Which lens is right is the entire investment question. The bull view is that the cash flow is real and the asset marks are overly pessimistic; the bear view is that the asset lens is the market telling the truth about office values. The observatory income, guided to $87 million to $92 million, sits outside the office debate and adds a high-margin, attraction-based stream the office-focused methods undervalue.

Solvency is adequate but is the constraint to respect. Fixed-charge coverage is 3.3 times against a funds-from-operations base of about $238 million, workable but not generous for a leveraged property company facing higher refinancing costs as debt matures. Management has shown discipline in shedding a weak asset through a consensual foreclosure rather than supporting it, which is the right instinct in a stressed property market. The decisive variable is whether the office portfolio holds its occupancy and re-leases at acceptable rates while international tourism stabilizes the Observatory: at a 15% cash yield the price already assumes both deteriorate, so the value is real if they merely hold, and a trap if the asset-value lens proves the more accurate read.

Catalysts

The Q1 2026 report, released in late April, was the central recent catalyst and it was a mixed but constructive print. Revenue of $190.3 million beat expectations and Core FFO came in at $0.20 per share, with same-store cash NOI up 5.5% year over year, aided by about $3.0 million of non-recurring items. The office portfolio held at 93% leased, and the leasing pipeline in negotiation grew to roughly 280,000 square feet from 170,000 the prior quarter, a sign of improving demand for the company's modernized space. New and renewal office leasing in the quarter ran at ten-year average terms.

The Observatory was the soft spot and the most important catalyst to track. Observation-deck NOI was $10.6 million, with revenue per visitor up about 1%, but overall Observatory revenue fell 20.1% year over year on lower international tourism. The company maintained its full-year Observatory NOI target of $87 million to $92 million, so the question is whether foreign visitor volumes recover toward that range through the peak tourism season.

Guidance was held. Full-year Core FFO guidance remains $0.85 to $0.89 per share, with year-end commercial occupancy targeted at 90% to 92%. Into the coming quarters, the figures to watch are office re-leasing conversion from the larger pipeline, the trajectory of international tourism for the Observatory, and any further capital-allocation moves on weaker assets. With the units trading at a high-teens cash yield, the swing factor is simply whether the strong occupancy and NOI growth persist while tourism stabilizes.

Peer Cohorts (Per Segment, With Filing Citations)

Real Estate (reported)

Observatory (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 2026 earnings release

View the full interactive ESRT report on boothcheck