Empire State Reported Decent Q4 Results; Observatory Recovered to 88% of 2019 Levels in December

No-moat-rated Empire State Realty reported decent fourth-quarter results as the core funds from operations, or FFO, was $0.22 per share in the current quarter, lower than the $0.18 in core FFO during the same quarter last year. Same-store property cash net operating income, or NOI, excluding lease termination fees decreased by 3.3% in the current quarter on a year-over-year basis, primarily because of higher property-operating expenses and real estate taxes. The company reported an occupancy rate of 85.2% in the fourth quarter, up 100 basis points on a sequential basis and 280 basis points compared with a year ago. The company has guided for an 85% to 87% occupancy rate for the 2023 year-end. The average starting cash rents on the newly executed leases in the office and retail portfolio of the company were 2.2% lower than the previously escalated cash rents in the fourth quarter. We are maintaining our $10 per share fair value estimate for the firm after incorporating fourth-quarter results.