Empire State Realty Trust, Inc. Q3 FY2025 earnings call

• Tony Malkin stated they delivered FFO above consensus and reaffirmed 2025 guidance, with a highly leased portfolio benefiting from strong lease-up, and 3Q was a slightly lighter quarter for office leasing but signed 50,000 sq ft post 3Q and had ~150,000 sq ft in negotiation. 17th consecutive quarter of positive marks-to-market.
• Observatory results consistent with guidance. ESRT is purpose-built for strength and agility across cycles with long-term leases, high occupancy, diversified income streams, and flexible balance sheet.
• In NYC, office leasing market remains strong with low availability at top-tier buildings like theirs, rents rising, and no new supply at their price point. Focus on over 500,000 sq ft of availability in Manhattan office portfolio for large contiguous blocks.
• Observatory revenue per capita increased in 3Q despite reduced budget traveler visitation. Strong balance sheet provides flexibility to act on opportunities. Achieved highest possible GRESB 5-star rating for sixth consecutive year.
• Entire organization focused on 5 priorities: lease space, sell tickets to Observatory, manage balance sheet, identify growth opportunities, achieve sustainability goals. Tom Durels transitioned role to Ryan Kass and Jackie Renton.
• Ryan Kass discussed 3Q leasing results: signed 88,000 sq ft of new and renewal leases, post quarter end signed ~50,000 sq ft, ~150,000 sq ft in negotiation. Manhattan office occupancy at 90.3%, on track for year-end guidance. Manhattan office portfolio over 93% leased for 11th consecutive quarter. Multifamily with 99% occupancy and 9% YoY net rent growth.
• Steve Horn reported core FFO of $0.23 per diluted share, same-store property cash NOI increased 1.1% YoY after adjustment for nonrecurring items, expected strong 4Q cash NOI growth due to real estate tax abatement at year end.
• Christina Chiu talked about Observatory as resilient asset, well-positioned and flexible balance sheet with $175 million senior unsecured notes issuance, actively underwriting new investment opportunities across NYC office, retail, multifamily.

Manhattan Office:

• In 3Q 2025, signed 88,000 square feet of new and renewal leases. Post 3Q, signed approximately 50,000 square feet of additional leases and have ~150,000 square feet of leases in negotiation. Manhattan office occupancy increased 80 basis points sequentially to 90.3%, and is on track to achieve year-end commercial occupancy guidance of 89% to 91%. Has $46 million in incremental cash revenue from signed leases not commenced and free rent burnoff. 17th consecutive quarter of positive mark-to-market lease spreads.

Observatory:

• Generated approximately $26.5 million of NOI in 3Q. Observatory expenses totaled $9.5 million and revenue per capita increased 2.7% year-over-year. Core FAD increased to $40.4 million in 3Q from $11.9 million in 2Q, mainly due to reduced FAD FX spend.

Multifamily:

• 99% occupancy and 9% year-over-year net rent growth.

• Reaffirmed 2025 guidance.
• Expected strong 4Q cash NOI growth due to real estate tax abatement at year end.
• Year-end commercial occupancy guidance of 89% to 91%.

• Forward-looking statements subject to risks and uncertainties related to market conditions, property operations, capital expenditures, income expense, financial results, proposed transactions and events, which may cause actual results to differ from those discussed.

Q: Expand on capital uses side after private placement, acquisition potential, cap rates in NYC.

A: Christina Chiu said they continue to actively underwrite deals in NYC across office, retail, multifamily with good liquidity, cap rates vary by bespoke transactions, actively looking.

Q: Concerned about tenants exposed to mayoral election policies?

A: Anthony Malkin said NYC is best market, operate on policy not politics, positive on future of NYC, New Yorkers are employees and employers, Amazon still wants NYC desks.

Q: Attractiveness of buying back stock?

A: Christina Chiu said share price is attractive, part of strategic capital allocation, flexible balance sheet allows both buybacks and investments.

Q: Change in trends with layoffs on office space demand?

A: Anthony Malkin said over 3.1 million sq ft of expansions since IPO, see good growth, serve top tier of office market, no contraction seen, NYC still #1 desired desk for Amazon.

Q: Update on Metro Center disposition, asset dispositions for acquisitions?

A: Christina Chiu said no additional update on Metro, open to capital recycling, dispose of assets to redeploy into value-adding assets across NYC sectors.

Q: Pipeline of 150,000 sq ft: office vs retail breakdown, rent spreads, multifamily rent growth?

A: Ryan Kass said healthy mix of office, retail, new and renewal, vast bulk of 150k sq ft is office, Williamsburg leasing doing well with rents increasing, Christina Chiu said multifamily fundamentals strong, details offline.