Asset management giant BlackRock has dialed down its exposure to the Empire State Building, offloading nearly 2 million shares in the owner of the iconic tower over the last two weeks.
BlackRock remains a large shareholder with 15 million shares, or an 8.9% stake in Empire State Realty Trust. BlackRock held a 10.1% stake as recently as April 3, the day after President Donald Trump declared “Liberation Day” and launched a trade war. BlackRock’s sale of shares in the Malkin-family controlled real estate investment trust was disclosed in a regulatory filing Thursday.
BlackRock didn’t reply to an email seeking comment. Empire State Realty said: “These types of positions may fluctuate based on index rebalancing.” The landlord’s stock is a component of the MSCI U.S. Equity Real Estate Index and the FTSE NAREIT Equity REIT Office Index.
If BlackRock has a concern with the investment, it may center on the tower’s observatory, which is some of New York’s most valuable real estate. Tourists pay a standard admission price of $44 to access the 86th floor while getting to the 102nd costs $79. Last year the observatory produced $100 million in earnings on $136 million in revenue, for an extraordinary 75% profit margin. The rest of the 3 million square-foot tower is 96% leased to commercial tenants including LinkedIn and Coty.
Trouble is, there’s a bit more elbow room in the observatory elevators these days.
BMO Capital Markets analyst John Kim estimated in a recent client report that the Empire State Building saw a 2.9% decline in first-quarter visitors. Almost two-thirds of observatory visitors are from overseas, said Kim, who went on to observe that in March 14% fewer passengers came to the U.S. from Europe and 7% fewer from Canada.
Empire State Realty’s stock price has fallen by 10% since the start of the month. It has lost 33% of its value since early January. Kim described the performance as “an inauspicious sign” for the tower that symbolizes New York.
Shares in other companies that cater to tourists are down as well. The owner of the Marriott Marquis in Times Square, Host Hotels & Resorts, has lost 24% this year and so has the Bryant Park Grill’s owner, Ark Restaurants. SL Green, owner of the Summit observatory atop 1 Vanderbilt Ave., has dropped 26%.
Empire State Realty is expected to report quarterly earnings on April 29.
