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    ESRT
    Earnings call· Jun 2026(Q2 FY26)

    Empire State Realty Trust Q2 FY26 earnings call ESRT

    Jul 30, 2026 Source

    Executive summary

    Empire State Realty Trust Q2 FY26 — Strong Real Estate Performance Offset by Observation Deck Weakness

    Empire State Realty Trust delivered strong performance across its office, retail, and multifamily portfolios, marked by accelerated leasing and positive mark-to-market spreads. However, these gains were significantly offset by continued weakness in the Empire State Building Observation Deck, leading to a revised full-year FFO outlook. The company remains focused on strategic capital allocation, including land acquisitions and dispositions, while actively re-evaluating and optimizing the Observation Deck's business model for long-term value.

    Highlights

    5

    • Office leasing accelerated with 382,000 square feet signed, including over 250,000 square feet of new leases, the highest level since Q4 2021.

    • Commercial portfolio was 94.9% leased at quarter end, up from 93.8% in Q1 on a comparable basis.

    • Achieved 20th consecutive quarter of positive mark-to-market spreads in Manhattan office at 17.8%.

    • Multifamily portfolio net rents increased 8% and was almost 98% occupied.

    • Acquired the land beneath 111 West 33rd Street and 1400 Broadway for $110 million, creating permanent value.

    Concerns

    5

    • Empire State Building Observation Deck weighed on performance, generating $12.4 million of NOI in Q2, down from $24.1 million in the prior year period.

    • Observation Deck visitation was lower by approximately 28.5% year-over-year in Q2.

    • Updated full-year 2026 Core FFO range to 75 to 79 cents, reflecting an assumption of no improvement to current Observation Deck visitation levels and utilizing $55 million of NOI for the deck.

    • Experienced a 45% decline in past program visitors for the Observation Deck from 2024 year-to-date to 2026 year-to-date.

    • Adjusted same-store property cash NOI was off 3.2% in Q2, primarily due to increases in free rent and operating expenses.

    Guidance & targets

    5
    CategoryTargetConfidence
    Core FFO per diluted share
    $0.75 to $0.79
    high materiality
    Medium
    Observation Deck NOI
    $55 million
    high materiality
    Medium
    Commercial portfolio year-end occupancy
    90% to 92%
    medium materiality
    High
    Same-store property cash NOI growth
    -1.5% to +2%
    medium materiality
    Medium
    G&A
    Decline to approximately $17 million per quarter
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Commercial Portfolio (Office/Retail)
    Leased percentage increased from Q1 on a comparable basis, excluding 250 West 57th Street. Achieved 20th consecutive quarter of positive mark-to-market spreads.
    Leased percentage: 94.9%Leased percentage (Q1 FY26): 93.8%Manhattan office mark-to-market spreads: 17.8%
    		————
    Multifamily
    Multifamily portfolio continues to perform well with strong rent growth and high occupancy.
    Net rents growth: 8%Occupancy rate: 98%
    		————
    Empire State Building Observation Deck
    Weighed on performance, with NOI significantly down year-over-year. Visitation declined substantially, though revenue per capita saw a slight increase.
    NOI (prior year period): $24.1MExpenses: $11.8MVisitation change YoY: -28.5%Revenue per capita change YoY (excl. gift shop license fees): +1.6%
    		$24.2M——$12.4M

    Operational metrics

    9
    Core FFO per diluted share
    $0.21
    Q2 FY26

    Reported for the second quarter.

    Core FAD
    $16.2MUp from $11.9M prior year
    Q2 FY26

    Improvement reflects FAD CapEx savings and significant lease-up.

    FAD CapEx savings
    $14MYoY
    Q2 FY26

    Due to reduced capital requirements for a recycled portfolio.

    G&A
    $17M
    Per quarter

    Expected to decline, consistent with prior guidance of 5-10% reduction in run rate G&A by year-end.

    Leasing volume signed
    382,000 sq ftHighest level since Q4 2021
    Q2 FY26

    Strong leasing performance in the second quarter.

    Average lease duration on new leases
    12 years
    Q2 FY26

    Reflects tenants making long-term commitments.

    Past program visitors decline (Observation Deck)
    45%
    2024 YTD to 2026 YTD

    Significant decline in a key visitor segment, primarily budget-conscious international travelers.

    International visitors mix (Observation Deck)
    >60%
    Historically

    Historically, more than 60% of visitors were international.

    Domestic visitors mix (Observation Deck)
    >60%
    Last week of Q2 FY26

    Shift to a majority of domestic visitors, though not as high for the full year-to-date.

    Industry KPIs

    8
    MetricValueDetails
    Occupancy rate94.9% / 98%%
    Disposition volume$275MUSD
    Same store noi growth+3.3% / -3.2%%
    Investment volume closed$110MUSD
    Net debt adjusted EBITDA6.6xx
    Leasing bookings volume signed382,000 sq ftsq ft
    Ffo core ffo normalized ffo per share$0.21USD
    Lease renewal spread re leasing recapture17.8%%

    Orderbook & backlog

    2
    Leases in negotiation pipeline200,000 sq ftQ2 FY26

    Healthy pipeline of leases.

    1359 Broadway dispositionOn the marketQ2 FY26

    Public knowledge that the asset is for sale.

    Deals & partnerships

    8
    Buyer (unnamed)Sale of 250 West 57th Street$275M

    Includes buyer's assumption of $180 million of mortgage debt.

    Seller (unnamed)Acquisition of land beneath 111 West 33rd Street and 1400 Broadway$110M

    Aggregate purchase price, approximately $65 per square foot. Acquired ground leases carried below market annual rent of $1.4 million.

    Lenders (unnamed)New unsecured delayed draw term loan$245MMatures in 2032

    Unsecured delayed draw term loan.

    United Talent AgencyOffice lease at Empire State Building16 years

    101,000 square foot lease across four full floors.

    Infiniium Wall SystemsNew office lease at 1359 Broadway

    29,000 square foot new office lease for the duplex penthouse.

    InstacartNew office lease at 111 West 33rd Street

    26,000 square foot new office lease.

    Landmark ManagementNew office lease at One Grand Central Place

    12,000 square foot full floor new office lease.

    Alfred DunnerRenewal office lease at 1333 Broadway

    59,000 square foot renewal office lease.

    Risks & headwinds

    4
    Empire State Building Observation Deck visitation declineQ2 FY26 and year-to-date

    Visitation down 28.5% YoY in Q2; 45% decline in past program visitors from 2024 YTD to 2026 YTD.

    Mitigation: Total re-evaluation of business model, fresh channel-by-channel approach, adjusting online presence for AI search, reinvesting to strengthen the business.

    Shift in Observation Deck visitor mixOngoing

    Shift from historically >60% international to >60% domestic visitors in recent weeks.

    Mitigation: Re-evaluation of business model to adapt to changing customer sourcing mix, focus on converting international brand to revenues.

    Impact of free rent and operating expenses on same-store NOIQ2 FY26

    Adjusted same-store property cash NOI was off 3.2% in Q2.

    Mitigation: Anticipated burn-off of free rent (e.g., H&M in Williamsburg), increases in operating expenses materially offset by tenant reimbursement income.

    Temporary downtime from FDIC expiration impacting same-store NOIFull-year 2026

    270 basis point impact on same-store property cash NOI growth.

    Mitigation: Space has been re-leased to LinkedIn, with cash flow expected to begin early next year as occupancy was delivered in July.

    What to watch in Q3 FY26

    5

    Observation Deck visitation and NOI

    Next quarter
    CurrentVisitation down 28.5% YoY; Q2 NOI $12.4M
    TargetImprovement in visitation levels and NOI

    Why it matters

    The Observation Deck's performance significantly impacts overall FFO, and management is re-evaluating its business model.

    In our press release, we gave an updated FFO range under an assumption there is no improvement to current visitation levels, but it utilizes $55 million of NOI for the observation deck for full year 2026.

    Q&A highlights

    6

    What factors, beyond international tourism, contributed to the Observation Deck's Q2 performance, such as ticket pricing, competition, or weather?

    The primary factors were the shift in international to domestic visitors and the significant decline in budget-conscious international travelers using past programs. While other attractions also saw declines, ESRT's prior dominance in past programs made its drop larger. Management is re-evaluating online presence and customer presentation.

    “I think the biggest change has been the mix of international to domestic, or more importantly, the gutting of the bargain international traveler and the really tremendous decline in our past program partners.”

    asked by John Kim · answered by Anthony Malkin

    2 min read5 chapters

    Detailed Narrative

    01

    Observation Deck Re-evaluation and Market Shift

    The Empire State Building Observation Deck experienced softer visitation in Q2, with NOI down significantly year-over-year and a 28.5% decline in visitors. This was attributed to a shift from international to domestic visitors, a 45% decline in past program visitors (primarily budget-conscious international travelers), and increased competition. Management has initiated a total re-evaluation of the observatory business model, focusing on channel-by-channel approaches, including adapting online presence for AI search, to convert its strong brand into revenue amidst changing market dynamics.

    02

    Strategic Capital Allocation and Transactions

    ESRT executed on its disciplined capital allocation strategy, completing the sale of 250 West 57th Street for $275 million. The proceeds were effectively recycled into the prior acquisition of 130 Mercer Street, without recognizing a taxable gain. Additionally, the company acquired the land beneath 111 West 33rd Street and 1400 Broadway for an aggregate $110 million, which, despite reducing FFO in the short term, is expected to create a permanent and material increase in real estate value by converting leasehold assets to owned real estate.

    03

    Strong Office Leasing Momentum

    The Manhattan office portfolio demonstrated strong performance, signing 382,000 square feet of leases in Q2, including over 250,000 square feet of new leases, marking the highest level since Q4 2021. The commercial portfolio's leased percentage increased to 94.9%. ESRT achieved its 20th consecutive quarter of positive mark-to-market spreads in Manhattan office at 17.8%, with an average lease duration of 12 years for new leases, highlighting sustained pricing power and tenant commitment to high-quality, amenitized, transit-oriented buildings.

    04

    Balance Sheet Management and Liquidity

    ESRT maintains a well-positioned and flexible balance sheet with ample liquidity and a well-laddered debt maturity schedule. Subsequent to quarter end, the company announced a new $245 million unsecured delayed draw term loan maturing in 2032, with proceeds expected to repay existing debt in January 2027. Leverage stood at approximately 6.6 times net debt to trailing 12-month adjusted EBITDA at quarter end, with no unaddressed debt maturities until January 2028.

    05

    Multifamily Portfolio and Sustainability Leadership

    The multifamily portfolio continued its strong performance, with net rents increasing 8% and an occupancy rate of almost 98%. ESRT also reiterated its leadership position in sustainability, emphasizing its role as a key differentiator that attracts and retains tenants across its portfolio. The company remains focused on measurable business outcomes from its sustainability initiatives, aligning with its objectives to drive long-term cash flow growth and value creation.

    AI-generated summary of the company’s earnings call. Not investment advice.