Summary of Empire State Realty Trust Q2 2026 Earnings Call

1Key Financial Results and Metrics

Core FFO: Reported at $0.21 per diluted share.

Same-store Property Cash NOI: Increased by 3.3% year-over-year, primarily due to $4 million from prior real estate tax abatements. Adjusted for nonrecurring items, it decreased by 3.2%.

Observation Deck NOI: Generated approximately $12.4 million, down from $24.1 million year-over-year, with visitation down 28.5%.

Commercial Portfolio Leasing: Achieved a lease percentage of 94.9%, up from 93.8% in Q1. Mark-to-market spreads were positive at 17.8%.

2026 Core FFO Guidance: Revised to a range of $0.75 to $0.79, reflecting a $0.13 decrease due to lower expected NOI from the Observation Deck.

2Strategic Updates and Business Highlights

Leasing Activity: Strong performance with 382,000 square feet signed, including over 250,000 square feet of new leases, the highest since Q4 2021.

Acquisitions and Dispositions: Sold 250 West 57th Street for $275 million and acquired land under 111 West 33rd Street and 1400 Broadway for $110 million, enhancing long-term value.

Sustainability Focus: Continued emphasis on sustainability as a differentiator in attracting tenants.

Capital Allocation Strategy: Focused on value creation and long-term cash flow, with a disciplined approach to capital recycling and potential share repurchases.

3Forward Guidance and Outlook

Commercial Portfolio: Expecting year-end occupancy of 90% to 92%, unchanged from prior guidance.

Same-store Property Cash NOI Growth: Projected to be between -1.5% to +2%, factoring in temporary downtime from FDIC expirations.

G&A Expenses: Anticipated to decline to approximately $17 million per quarter in the second half of 2026.

4Bad News, Challenges, or Points of Concern

Observation Deck Performance: Significant decline in visitation, particularly from international tourists, due to geopolitical factors and competition. The reliance on budget-conscious international travelers and the decline of pass program visitors (down 45% year-to-date) are major concerns.

Market Competition: Increased competition from other attractions and observation decks is impacting performance.

Economic Environment: Uncertainty in the operating environment and limited visibility into near-term performance trends for the Observation Deck.

5Notable Q&A Insights

Visitor Trends: Management acknowledged a shift from international to domestic visitors, with domestic visitors now making up over 60% of traffic.

AI and Office Market: Demand from AI tenants is strong, with no current impact on the portfolio. The focus remains on securing long-term tenants.

Capital Allocation: Management remains open to share repurchases and capital recycling but emphasizes that the Observatory will remain a key component of the business despite current challenges.

Long-term Strategy: Management is focused on fixing the Observatory business before considering any monetization options. Overall, while ESRT demonstrated strong leasing activity and maintained a solid commercial portfolio, the significant decline in Observation Deck performance poses challenges that the company is actively working to address.