The battle for views is heating up but Empire State Realty Trust CEO Tony Malkin isn’t worried.
In fact, he’s “eager” to “play it out,” he said during the real estate investment trust’s fourth-quarter earnings call in reference to the March opening of Related Companies’ 1,100-foot-high observation deck at 30 Hudson Yards, dubbed Edge.
When it comes to the Edge’s imminent launch, Malkin said he was “confident” it would open “with quite a splash, with a big spend.” But “having seen the Edge, we feel very good.”
“The entrance and the security is really not well laid out. It’s not going to support high volume. The experience itself, aside from the elevator, is very sterile and modern,” he said.
Malkin noted during the call that he’d gotten a glimpse of the not-yet-open observation deck at 30 Hudson Yards after attending a client event hosted at the lofty venue. He said that he viewed the Edge as competing for tourists with One World Observatory, but noted that Related’s platform has “a nicer restaurant and an outside deck.”
“That’s about it as far as subtle features,” he concluded.
Related Companies declined to comment.
Malkin’s comments come on the heels of ESRT completing its multi-year upgrades of the Empire State Building’s Observatory. Last fall the REIT reopened its 102nd-floor viewing gallery, which had been closed for the first three quarters of 2019, as well as space on its 80th floor.
The Observatory reported $37.7 million in revenue for the fourth quarter of 2019, up 9.2 percent from $34.5 million in the same period in 2018. Quarterly net operating income increased more than 13 percent year-over-year to $29 million from $25.6 million.
But total annual visitors to the Empire State Building’s viewing deck declined nearly 8 percent to 3.5 million. The company attributed the drop to the upgrades and bad weather in 2019.
Related Companies’ prices for general admission to the Edge is in the $30-range for a fixed time to more than $50 for flexible arrival.
At the Empire State Building, standard pricing for the 86th-floor deck ranges from $36 to $42 with no time requirements. To also visit the 102nd floor, patrons pay between $66 and $72 — or $108 to skip the lines.
“We like our competitive position there,” said Malkin.
But the Empire State Building’s observation galleries are facing more competition than just The Edge.
SL Green Realty’s viewing platform, The Summit, will debut next year in its One Vanderbilt office tower in Midtown East. The company hasn’t released pricing but expects gross revenue of $110 million starting in 2024, based on a presentation to investors the company gave in late December. That’s a $33 million increase from its estimate in 2018. Minus operating expenses, SL Green expects its observation to bring in $47 million in net operating income.
There’s also growing concern over how the coronavirus’ spread will affect tourism.
“The fact is, though, that there will be more competition. And the fact is that if we have something that extends broadly beyond China to impact international travel, we have a significant — as we’ve disclosed previously — international component to our visitors,” Malkin admitted. “[But] at the moment, in the steady state world, we feel pretty comfortable.”
Write to Erin Hudson at ekh@therealdeal.com
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