Critical Review: Washington Real Estate Investment Trust (WRE) and Empire State Realty Trust (ESRT)

Washington Real Estate Investment Trust (NYSE: WRE) and Empire State Realty Trust (NYSE:ESRT) are both mid-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, dividends, risk, earnings and valuation.

Analyst Ratings

This is a summary of recent recommendations and price targets for Washington Real Estate Investment Trust and Empire State Realty Trust, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Washington Real Estate Investment Trust 0 2 3 0 2.60
Empire State Realty Trust 0 3 1 0 2.25

Washington Real Estate Investment Trust presently has a consensus price target of $34.10, suggesting a potential upside of 5.70%. Empire State Realty Trust has a consensus price target of $21.75, suggesting a potential upside of 7.09%. Given Empire State Realty Trust’s higher possible upside, analysts plainly believe Empire State Realty Trust is more favorable than Washington Real Estate Investment Trust.

Volatility and Risk

Washington Real Estate Investment Trust has a beta of 0.97, meaning that its stock price is 3% less volatile than the S&P 500. Comparatively, Empire State Realty Trust has a beta of 1.01, meaning that its stock price is 1% more volatile than the S&P 500.

Earnings & Valuation

This table compares Washington Real Estate Investment Trust and Empire State Realty Trust’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Washington Real Estate Investment Trust $317.68 million 7.81 $182.98 million $1.33 24.26
Empire State Realty Trust $691.49 million 4.66 $329.91 million $0.39 52.08

Empire State Realty Trust has higher revenue and earnings than Washington Real Estate Investment Trust. Washington Real Estate Investment Trust is trading at a lower price-to-earnings ratio than Empire State Realty Trust, indicating that it is currently the more affordable of the two stocks.

Dividends

Washington Real Estate Investment Trust pays an annual dividend of $1.20 per share and has a dividend yield of 3.7%. Empire State Realty Trust pays an annual dividend of $0.42 per share and has a dividend yield of 2.1%. Washington Real Estate Investment Trust pays out 90.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Empire State Realty Trust pays out 107.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Washington Real Estate Investment Trust is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Washington Real Estate Investment Trust and Empire State Realty Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Washington Real Estate Investment Trust 31.36% 9.34% 4.36%
Empire State Realty Trust 11.67% 3.85% 1.96%

Insider and Institutional Ownership

84.9% of Washington Real Estate Investment Trust shares are held by institutional investors. Comparatively, 83.5% of Empire State Realty Trust shares are held by institutional investors. 0.6% of Washington Real Estate Investment Trust shares are held by company insiders. Comparatively, 11.8% of Empire State Realty Trust shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Washington Real Estate Investment Trust beats Empire State Realty Trust on 10 of the 16 factors compared between the two stocks.

About Washington Real Estate Investment Trust

Washington Real Estate Investment Trust is a self-administered equity real estate investment trust. The Company’s business consists of the ownership and operation of real property in the greater Washington metro region. The Company owns a diversified portfolio of office buildings, multifamily buildings and retail centers. The Company’s segments include office, multifamily and retail. The Company’s office properties provide office space for various types of businesses and professions. The Company’s multifamily properties provide rental housing for individuals and families throughout the Washington metro region. Its retail properties are typically grocery store anchored neighborhood centers that include other small shop tenants or regional power centers with various junior box tenants. As of April 4, 2017, it owned a diversified portfolio of 50 properties, totaling approximately 6.0 million square feet of commercial space and 4,480 residential units, and land held for development.

About Empire State Realty Trust

Empire State Realty Trust, Inc. is a real estate investment trust. The Company owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building. The Company operates through two segments: Real Estate and Observatory. The Real Estate segment includes all activities related to the ownership, management, operation, acquisition, repositioning and disposition of its real estate assets. The Observatory segment operates the 86th and 102nd floor observatories at the Empire State Building. As of December 31, 2016, its portfolio consisted of 14 office properties and six standalone retail properties totaling approximately 10.1 million rentable square feet. The Company’s properties include One Grand Central Place, 1400 Broadway, 111 West 33rd Street, 250 West 57th Street, 1359 Broadway and 1333 Broadway.

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