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This Office REIT Has 2 Unique Advantages

By Matthew Frankel, CFP® and Brian Feroldi - Apr 23, 2021 at 7:17AM

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One New York office real estate company is different from its competitors.

Empire State Realty Trust (ESRT 2.13%) is an office REIT with a portfolio of excellent office properties, mostly in New York City. And although it isn't the only New York City office REIT, it has a couple of unique differentiators: the Empire State Building Observatory and its focus on using clean energy and creating clean and safe office spaces. In this Fool Live video clip, recorded on April 15, Fool.com contributors Matt Frankel, CFP, and Brian Feroldi discuss why these factors are advantages for the company. 

Brian Feroldi: When do you think Empire will resume its dividend?

Matthew Frankel: Like most REITs, they had suspended their dividend at the start of the pandemic. Unlike most REITs, they continued the suspension for the first and second quarters of this year. Reason being, REITs are required to pay out a certain amount of their income. Because Empire State uniquely has that observatory business that's been so hard hit, they didn't have to pay a dividend. The CEO made it clear that they are in complete growth mode right now, so they chose to conserve that capital instead of paying a dividend and add it to their war chest of cash that they're planning to use. Having said that, I see them resuming their dividend in the second half of the year. As tourism picks up and the observatory business picks up, they'll have no choice but to resume a dividend just because of the REIT requirements.

The other one I wanted to hit was that second one from Randy. "The big issue for office buildings going forward will be healthy office spaces. Remember sick buildings, think filtration systems, etc." I hear you, I have been to many buildings in New York City, where you can't breathe, like you just taste the mold in the air. I think everyone has been in an office building like that. Empire State, not only are they a very green company, they are also taking a lot of steps to create clean office spaces. Focus on that middle box that you see in your screen right now. They are really increasing their cleaning protocols, they've installed really high-quality filters in all public areas. Their air purification systems actually neutralize virus particles. They've really invested heavily during the pandemic in turning their businesses into clean office spaces. So, I agree that's a big priority, and I view that as a competitive advantage. Not only are they a green business, but they really spent money on increasing the cleanliness of their spaces. 

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