Empire State Realty Trust Q2 Earnings Call Highlights

Empire State Realty Trust NYSE: ESRT reported stronger office leasing and continued multifamily growth in the second quarter of 2026, while lower visitation at the Empire State Building Observation Deck weighed on results and prompted the company to reduce its full-year core FFO outlook.

Chairman and Chief Executive Officer Tony Malkin said the property portfolio, which represents about 80% of net operating income, delivered strong performance. The commercial portfolio was 94.9% leased at quarter-end, while the company completed several capital-allocation transactions during the period.

Observation Deck visitation pressures outlook

The Empire State Building Observation Deck generated approximately $12.4 million of NOI during the second quarter, down from $24.1 million a year earlier. Revenue totaled $24.2 million, while expenses were $11.8 million. Visitation declined about 28.5% year over year, although revenue per capita increased 1.6% after excluding gift shop license fees.

Malkin attributed much of the decline to changes in the composition of visitors, particularly reduced international and budget-conscious travel and weakness in attraction pass programs. Historically, more than 60% of Observation Deck visitors were international, he said. More recently, domestic visitors represented more than 60% of visitors during the company’s second-highest traffic week of 2026.

The company said one pass-program operator went out of business in 2025, and pass-program visitors declined 45% from 2024 year-to-date levels to 2026 year-to-date levels. Malkin said Empire State Realty’s visitation decline has been greater than the broader attraction market because of its historical exposure to international visitors and pass programs.

“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 pass program partners,” Malkin said during the question-and-answer session.

Management said it has begun a broad reevaluation of the Observatory business model, including its online marketing approach as consumer search behavior shifts toward artificial intelligence-based search. The company plans to reinvest in the business over the long term while seeking to convert its global brand recognition into revenue through new and existing channels.

For 2026, Empire State Realty updated its core FFO guidance range to $0.75 to $0.79 per diluted share. CFO Steve Horn said the outlook uses $55 million of full-year Observation Deck NOI and assumes no improvement in current visitation trends, with expenses similar to first-half levels. The revised assumption represents a $0.13 impact to core FFO compared with prior guidance, partially offset by lower income taxes, higher non-cash rent and real estate tax abatements.

Office leasing gains and multifamily performance

Empire State Realty signed 382,000 square feet of leases in the second quarter, including more than 250,000 square feet of new leases, its highest new-leasing volume since the fourth quarter of 2021. The company’s comparable commercial lease percentage rose to 94.9% from 93.8% in the first quarter, excluding the disposed 250 West 57th Street property from both periods.

Manhattan office mark-to-market spreads were 17.8%, marking the company’s 20th consecutive quarter of positive spreads. Ryan Kass, executive vice president, co-head of real estate and chief revenue officer, said new leases had an average duration of 12 years.

Notable transactions included United Talent Agency’s 101,000-square-foot, 16-year office lease at the Empire State Building. Kass said the deal addresses the company’s largest expiration of 2026, approximately 70,000 square feet, as the prior tenant is expected to vacate in October.

• Infinium Wall Systems signed a 29,000-square-foot office lease at 1359 Broadway.
• Instacart signed a 26,000-square-foot office lease at 111 West 33rd Street, which became 100% leased in July.
• Landmark Management signed a 12,000-square-foot full-floor lease at One Grand Central Place at an average rent of $89, a record for a new transaction at that building.
• Alfred Dunner renewed 59,000 square feet at 1333 Broadway.

The company maintained its year-end commercial occupancy assumption of 90% to 92%. Its leasing and negotiation pipeline totaled 200,000 square feet. Kass said the company has one full floor available at the Empire State Building and has brought an 80,000-square-foot duplex block at One Grand Central Place to market.

Multifamily net rents increased 8% during the quarter, and the portfolio was nearly 98% occupied, according to Kass.

Capital recycling and balance sheet

During the quarter, Empire State Realty completed the sale of 250 West 57th Street for $275 million, including the buyer’s assumption of $180 million in mortgage debt. President Christina Chiu said the sale recycled capital into the company’s prior acquisition of 130 Mercer Street in SoHo without recognizing a taxable gain.

The company also acquired the land beneath 111 West 33rd Street and 1400 Broadway for an aggregate $110 million, or about $65 per square foot. The ground leases had below-market annual rent of $1.4 million. Chiu said the transaction reduces FFO but creates a permanent and material increase in real estate value by converting leasehold interests into owned real estate.

After quarter-end, the company announced a $245 million unsecured delayed-draw term loan maturing in 2032. Proceeds are expected to be drawn in January 2027 to repay existing debt, including the line of credit. Net debt to trailing 12-month adjusted EBITDA was approximately 6.6 times at the end of the second quarter, and the company said it has no unaddressed debt maturities until January 2028.

Horn said second-quarter core FFO was $0.21 per diluted share. Same-store property cash NOI, excluding lease termination fees, increased 3.3% year over year, largely due to about $4 million in prior-period real estate tax abatements. Adjusted for non-recurring items, same-store property cash NOI declined 3.2%, reflecting higher free rent and operating expenses, partly offset by tenant reimbursement income.

About Empire State Realty Trust (NYSE:ESRT)

Empire State Realty Trust, Inc is a publicly traded real estate investment trust (REIT) focused on the ownership, management and operation of office and retail properties. The company's portfolio features the iconic Empire State Building in Midtown Manhattan, alongside a diversified collection of commercial assets situated throughout Manhattan, Brooklyn and select markets in Upstate New York. By offering premium office space and street-level retail, Empire State Realty Trust positions itself as a landlord of choice for corporate tenants, retailers and experiential brands seeking high-profile addresses.

Established through a spin-off of assets in early 2013, Empire State Realty Trust consolidated a mix of landmark and Class A properties, creating scale in one of the world's most competitive real estate markets.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.