Empire State Realty Trust, Inc. Q2 FY2025 earnings call

• Strong office leasing in second quarter, with 232,000 sq ft leased including new Manhattan office leasing.
• Observatory impacted by adverse weather and lower international demand. Revised 2025 core FFO to $0.83-$0.86 per share.
• ESRT's foundation: long-term leases, high occupancy, diversified income streams, flexible balance sheet.
• Sustainability focus is a cornerstone.
• Manhattan office portfolio at 93.8% leased, 16th consecutive quarter of positive mark-to-market rent spreads.
• Multifamily portfolio 99% occupied, 8% y-o-y rent growth in Q2.
• Retail acquisition in Williamsburg, Brooklyn: $31 million acquisition of 86-90 North 6th Street, plan to redevelop and reposition.

Office

• Second quarter leasing: Approximately 232,000 square feet leased, including 202,000 square feet of new Manhattan office leasing at double-digit positive mark-to-market leasing spreads. Manhattan office portfolio is 93.8% leased, 89.5% occupied, with 16th consecutive quarter of positive New York City office mark-to-market rent spreads.

Observatory

• Second quarter NOI: $24 million, a 4.3% decline year-over-year. First half 2025 NOI declined 5.3% year-over-year. Revised 2025 Observatory NOI guidance to a range of $90 million to $94 million.

Multifamily

• 99% occupied, achieved 8% year-over-year rent growth in the second quarter.

• Revised 2025 core FFO to range between $0.83 and $0.86 per share.
• Observatory NOI guidance revised to $90 million to $94 million for 2025.
• Operating expenses and real estate taxes expected to fluctuate quarter-over-quarter due to timing of planned work, seasonal utility usage, and tax abatements.
• Fed CapEx expected to trend lower in the second half of 2025.

• Adverse weather and lower international demand impacting Observatory performance.
• Potential headwinds from Mayoral race results and any hesitation from prospective tenants.
• Market conditions affecting transaction activity and pricing of properties.

Q: Thoughts on potential headwinds from Mayoral race and leasing hesitation?

A: Anthony E. Malkin stated no seen hesitation, business strong, leasing activity healthy. Tom Durels added good momentum in market, strong demand for top-of-tier products.

Q: Return expectations for Brooklyn acquisition?

A: Christina Chiu mentioned viewed as unique opportunity, redevelopment planned, expected sub-7% return within a couple of years, strong leasing interest already.

Q: Tech tenant demand in New York office market?

A: Thomas P. Durels said demand is broad-based, including tech tenants, with activity from various industries.

Q: Investment pipeline and capital recycling?

A: Anthony E. Malkin discussed focus on existing portfolio growth, high standard for new investments, second round of debt opportunities emerging.

Q: Timeline for leasing at 86-90 North 6th Street?

A: Thomas P. Durels said redevelopment planned, strong tenant interest, expect lease-up ahead of projected time frame, stabilization around 2027 possibly earlier.