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Item 2. Management’s Discussion and Analysis

2024-10-08 compared with 2024-05-07 · 158 added, 72 removed, 289 unchanged (44% of the section changed)

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and its consolidated subsidiaries.

This Management’s Discussion and Analysis provides a comparison of our performance for the three-month periods ended March 31, 2024 with the corresponding three-month periods ended March 31, 2023 and reviews our financial position as of March 31, 2024.

This Management’s Discussion and Analysis provides a comparison of our performance for the three and six month periods ended June 30, 2024 with the corresponding three and six month periods ended June 30, 2023 and reviews our financial position as of June 30, 2024.

The following discussion related to our consolidated financial statements should be read in conjunction with the financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K.

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(xvii) incurrence of taxable capital gain on disposition of an asset due to failure of compliance with a 1031 exchange program;

and (xviii) failure to achieve sustainability metrics and goals, including as a result of tenant collaboration, and impact of governmental regulation on our sustainability efforts.

(xviii) our disclosure controls and internal control over financial reporting, including any material weakness;

and (xix) failure to achieve sustainability metrics and goals, including as a result of tenant collaboration, and impact of governmental regulation on our sustainability efforts.

For a further discussion of these and other factors that could impact the Company's future results, performance, or transactions, see the section entitled “Risk Factors” in the Company’s Annual Report, and other risks described in documents subsequently filed by the Company from time to time with the SEC.

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Prospective investors should not place undue reliance on any forward-looking statements, which are based only on information currently available to the Company (or to third parties making the forward-looking statements).

Highlights for the three months ended March 31, 2024

Highlights for the three months ended June 30, 2024

• Net income attributable to common unitholders of $27.5 million.

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• Signed a total of 272,000 rentable square feet of new, renewal, and expansion leases.

• Commercial portfolio 91.1% leased, Manhattan office portfolio 92.7% leased.

• Empire State Building Observatory generated $16.2 million of net operating income.

• Announces agreements to acquire North 6 th Street Williamsburg, Brooklyn retail.

Results of Operations

The discussion below relates to our results of operations for the three months ended March 31, 2024 and 2023, respectively.

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

The following table summarizes our historical results of operations for the three months ended March 31, 2024 and 2023, respectively (amounts in thousands):

Three Months Ended March 31,

The discussion below relates to our results of operations for the three and six months ended June 30, 2024 and 2023, respectively.

Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

The following table summarizes our historical results of operations for the three months ended June 30, 2024 and 2023, respectively (amounts in thousands):

Three Months Ended June 30,

2024 2023 Change %

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(25,323) — (25,323) (25,405) — (25,405) 82 0.3 %

Interest expense associated with property in receivership (628) — (628) — — — (628) N/A

Loss on early extinguishment of debt — — — — — — — — %

Gain on disposition of property

10,803 — 10,803 13,565 — 13,565 (2,762) (20.4) %

Income before income taxes

25,070 4,235 29,305 33,847 3,841 37,688 (8,383) (22.2) %

Income tax expense

(208) (542) (750) (197) (536) (733) (17) (2.3) %

24,862 3,693 28,555 33,650 3,305 36,955 (8,400) (22.7) %

Private perpetual preferred unit distributions (1,051) — (1,051) (1,051) — (1,051) — — %

Net income attributable to non-controlling interests in other partnerships — — — (1) — (1) 1 100.0 %

Net income attributable to common unitholders

$ 23,811 $ 3,693 $ 27,504 $ 32,598 $ 3,305 $ 35,903 $ (8,399) (23.4) %

Real Estate Segment

Rental Revenue

The decrease in rental revenue was primarily attributable to our disposition of First Stamford Place in May 2024 which offset the increased revenues from our acquisition of Williamsburg Retail in September 2023.

Property Operating Expenses

The increase in property operating expenses was primarily due to higher utilities costs and higher payroll costs during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

General and Administrative Expenses

The increase in general and administrative expenses primarily reflects higher payroll costs during the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

This increase in payroll costs is partially attributable to an acceleration of share based compensation expense as certain executives approach their retirement eligibility date.

Interest Income

The increase in interest income in the three months ended June 30, 2024 reflects higher interest rates and cash balances compared to the three months ended June 30, 2023.

Gain on Sale/Disposition of Property

The gain on disposition activity for the three months ended June 30, 2024 relates to the disposition of First Stamford Place in Stamford, Connecticut in May 2024.

The gain on disposition activity for the three months ended June 30, 2023 relates to the disposition of 500 Mamaroneck Avenue in Harrison, New York in April 2023.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

The following table summarizes our historical results of operations for the six months ended June 30, 2024 and 2023, respectively (amounts in thousands):

Six Months Ended June 30,

2024 2023 Change %

Real Estate Segment Observatory Segment Total Real Estate Segment Observatory Segment Total

Rental revenue

$ 306,352 $ — $ 306,352 $ 294,694 $ — $ 294,694 $ 11,658 4.0 %

Observatory revenue — 58,720 58,720 — 55,587 55,587 3,133 5.6 %

Third-party management and other fees

641 — 641 808 — 808 (167) (20.7) %

Other revenues and fees

5,009 — 5,009 4,075 — 4,075 934 22.9 %

Total revenues

312,002 58,720 370,722 299,577 55,587 355,164 15,558 4.4 %

Operating expenses:

Property operating expenses

86,576 — 86,576 81,563 — 81,563 (5,013) (6.1) %

Ground rent expenses

4,663 — 4,663 4,663 — 4,663 — — %

General and administrative expenses

33,992 — 33,992 31,783 — 31,783 (2,209) (7.0) %

Observatory expenses

— 17,389 17,389 — 16,512 16,512 (877) (5.3) %

Real estate taxes

64,124 — 64,124 63,278 — 63,278 (846) (1.3) %

Depreciation and amortization

93,485 69 93,554 93,601 87 93,688 134 0.1 %

Total operating expenses

282,840 17,458 300,298 274,888 16,599 291,487 (8,811) (3.0) %

Operating income

29,162 41,262 70,424 24,689 38,988 63,677 6,747 10.6 %

Intercompany rent revenue (expense) 37,047 (37,047) — 36,856 (36,856) — — — %

Other income (expense):

Interest income

9,151 119 9,270 5,847 87 5,934 3,336 56.2 %

Interest expense

(50,451) — (50,451) (50,709) — (50,709) 258 0.5 %

Interest expense associated with property in receivership (628) — (628) — — — (628) N/A

Loss on early extinguishment of debt (553) — (553) — — — (553) N/A

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(321) 226 (95) (395) 881 486 (581) (119.5) %

Net income (loss)

34,210 4,560 38,770 45,549 3,100 48,649 (9,879) (20.3) %

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Net (income) loss attributable to non-controlling interests in other partnerships (4) — (4) 42 — 42 (46) (109.5) %

Net income (loss) attributable to common unitholders

Net income attributable to common unitholders

$ 32,105 $ 4,560 $ 36,665 $ 43,490 $ 3,100 $ 46,590 $ (9,925) (21.3) %

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Rental Revenue

The increase in rental revenue was primarily attributable to higher write-offs of straight-line receivables and uncollectible tenant receivables and higher rent concessions during the three months period March 31, 2023 compared to the three months period March 31, 2024.

Higher tenant escalations and real estate tax escalations during the period March 31, 2024 also contributed to the increase.

The increase in rental revenue was primarily attributable to higher occupancy and higher operating and real estate tax expense escalations during the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Property Operating Expenses

The increase in property operating expenses was primarily due to higher repair and maintenance costs, higher utilities costs, and higher payroll costs during the three months period March 31, 2024 compared to the three months period March 31, 2023.

The increase in property operating expenses was primarily due to higher utilities costs, higher payroll costs and higher repair and maintenance costs during the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

General and Administrative Expenses

The increase in general and administrative expenses primarily reflects higher payroll costs during the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

This increase in payroll costs is partially attributable to an acceleration of share based compensation expense as certain executives approach their retirement eligibility date.

Interest Income

The increase in interest income in the three months ended March 31, 2024 reflects higher interest rates and cash balances compared to the three months ended March 31, 2023.

The increase in interest income in the six months ended June 30, 2024 reflects higher interest rates and cash balances compared to the six months ended June 30, 2023.

Gain on Sale/Disposition of Property

The gain on disposition activity for the three months ended March 31, 2023 relates to the disposition of 69-97 and 103-107 Main Street in Westport, Connecticut in February 2023.

The gain on disposition activity for the six months ended June 30, 2024 relates to the disposition of First Stamford Place in Stamford, Connecticut in May 2024.

The gain on disposition activity for the six months ended June 30, 2023 relates to the disposition of 500 Mamaroneck Avenue in Harrison, New York in April 2023 and 69-97 and 103-107 Main Street in Westport, Connecticut in February 2023.

Observatory Segment

Observatory Revenue

Observatory revenues were higher driven by increased visitation and revenue per visitor during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, and helped by the shift in the timing of the Easter holiday that fell in March during 2024 as compared to April in 2023.

Observatory revenues were higher driven by increased visitation and revenue per visitor during the six months ended June 30, 2024 as compared to the six months ended June 30, 2024.

Liquidity and Capital Resources

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The availability of these borrowings is subject to the conditions set forth in the applicable loan agreements.

We expect to meet our long-term capital requirements, including acquisitions, redevelopments and capital expenditures through our cash flows from operations, cash on hand, our unsecured revolving credit facility, mortgage financings, debt issuances, common and/or preferred equity issuances and asset sales.

We expect to meet

our long-term capital requirements, including acquisitions, redevelopments and capital expenditures through our cash flows from operations, cash on hand, our unsecured revolving credit facility, mortgage financings, debt issuances, common and/or preferred equity issuances and asset sales.

Our properties require periodic investments of capital for individual lease related tenant improvement allowances, general capital improvements and costs associated with capital expenditures.

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ESRT's charter does not restrict the amount of leverage that we may use.

At March 31, 2024, we had $333.6 million available in cash and cash equivalents, and $500.0 million available under our unsecured revolving credit facility.

As of March 31, 2024, we had approximately $2.2 billion of total consolidated indebtedness outstanding, with a weighted average interest rate of 3.97% and a weighted average maturity of 5.4 years.

At June 30, 2024, we had $535.5 million available in cash and cash equivalents, and $500.0 million available under our unsecured revolving credit facility.

As of June 30, 2024, we had approximately $2.3 billion of total consolidated indebtedness outstanding, with a weighted average interest rate of 4.27% and a weighted average maturity of 5.4 years.

Portfolio Transaction Activity

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On March 28, 2024, we executed a buyout of our partner's 10% interest in two of our multifamily properties located at 561 10 th Avenue and 345 East 94 th Street in Manhattan for $14.2 million in cash and the assumption of $18.0 million of in-place debt and now own 100% of the ownership interests in these assets.

In July 2024, we entered into two purchase agreements, each relating to the acquisition of separate prime retail portfolios located on North 6 th Street in the Williamsburg neighborhood of Brooklyn, New York, for $103 million and $92 million, respectively.

These acquisitions are subject to customary closing conditions and are anticipated to close in the third quarter of 2024.

Unsecured Revolving Credit and Term Loan Facilities

During March 2024, we closed on the BofA Credit Facilities, a $715 million, five-year unsecured credit agreement which consists of the $620.0 million Revolving Credit Facility and the $95.0 million BofA Term Loan Facility.

In March 2024, we closed on the BofA Credit Facilities, a $715 million, five-year unsecured credit agreement which consists of the $620.0 million Revolving Credit Facility and the $95.0 million BofA Term Loan Facility.

The Revolving Credit Facility matures on March 8, 2029, inclusive of two six-month extension periods and replaced the existing revolving credit facility that was due to mature in March 2025.

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Financial Covenants

As of March 31, 2024, we were in compliance with the following financial covenants:

Financial Covenant Required March 31, 2024 In Compliance

As of June 30, 2024, we were in compliance with the following financial covenants:

Financial Covenant Required June 30, 2024 In Compliance

Maximum total leverage < 60% 32.7 % Yes

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Mortgage Debt

As of March 31, 2024, mortgage notes payable, net, amounted to $876.5 million.

The next mortgage debt maturity is November 2024.

In April 2024, we worked with the First Stamford P lace mortgage lender to structure a cooperative consensual foreclosure, which is anticipated to be completed by June 30, 2024.

Upon completion, this transaction is expected to eliminate a $175.9 million liability that matures in July 2027 from the balance sheet.

As of June 30, 2024, mortgage notes payable, net, amounted to $700.3 million.

After the refinancing discussed below, the next mortgage debt maturity is April 2026.

In April 2024, we worked with the First Stamford P lace mortgage lender to structure a consensual foreclosure.

In May 2024, the First

Stamford Place property was placed in receivership and accordingly, we reclassified the related debt and applicable accrued interest to debt associated with property under receivership and accrued interest associated with property in receivership, respectively, in our condensed consolidated balance sheet as of June 30, 2024.

In connection with this we recorded a contract asset which represents our right to debt extinguishment once the foreclosure process on the First Stamford Place property is completed.

Subsequent to quarter-end, in July 2024, we executed an agreement for the refinance of the mortgage for the Metro Center property that was due to mature in November 2024.

Beginning November 2024, the new loan balance of $71.6 million will be interest-only at the same interest rate of 3.59%, with a maturity of November 2029, inclusive of a one-year extension option.

See "Financial Statements - Note 5 Debt" for more information on mortgage debt.

Senior Unsecured Notes

The terms of the senior unsecured notes include customary covenants, including limitations on liens, investment, distributions, debt, fundamental changes, and transactions with affiliates and require certain customary financial reports.

On April 10, 2024, we entered into a Purchase Agreement pursuant to which we issued and sold an aggregate $225 million principal amount of notes, consisting of (a) $155 million aggregate principal amount of 7.20% Series I Green Guaranteed Senior Notes due June 17, 2029, (b) $45 million aggregate principal amount of 7.32% Series J Green Guaranteed Senior Notes due June 17, 2031 and (c) $25 million aggregate principal amount of 7.41% Series K Green Guaranteed Senior Notes due June 17, 2034.

The sale of the Series I-K notes closed on June 17, 2024.

The issue price for the notes was 100% of the aggregate principal amount thereof.

Pursuant to the terms of the Purchase Agreement, we may prepay all or a portion of the notes upon notice to the holders at a price equal to 100% of the principal amount plus a make-whole premium as set forth in the Purchase Agreement.

The terms of our senior unsecured notes, including the Series I-K notes, include customary covenants, including limitations on liens, investment, distributions, debt, fundamental changes, and transactions with affiliates and require certain customary financial reports.

The terms also require compliance with financial ratios including a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a minimum unencumbered interest coverage ratio, and a maximum unsecured leverage ratio.

The agreements also contain customary events of default (subject in certain cases to specified cure periods), including but not limited to non-payment, breach of covenants, representations or warranties, cross defaults, bankruptcy or other insolvency events, judgments, ERISA events, the occurrence of certain change of control transactions and loss of real estate investment trust qualification.

As of March 31, 2024, we were in compliance with these covenants.

On April 10, 2024, we entered into the Purchase Agreement in connection with a private placement of the Notes.

Under the Purchase Agreement, we will issue and sell an aggregate $225 million principal amount of its Notes, consisting of (a) $155 million aggregate principal amount of 7.20% Series I Green Guaranteed Senior Notes due June 17, 2029, (b) $45 million aggregate principal amount of 7.32% Series J Green Guaranteed Senior Notes due June 17, 2031 and (c) $25 million aggregate principal amount of 7.41% Series K Green Guaranteed Senior Notes due June 17, 2034.

The sale and purchase of the Notes is scheduled to be held on June 17, 2024, subject to customary closing conditions.

The issue price for the Notes is 100% of the aggregate principal amount thereof.

Pursuant to the terms of the Purchase Agreement, we may prepay all or a portion of the Notes upon notice to the holders at a price equal to 100% of the principal amount so prepaid plus a make-whole premium as set forth in the Purchase Agreement.

The Purchase Agreement contains customary covenants and customary events of default similar to those in our Series A-H senior unsecured notes.

As of June 30, 2024, we were in compliance with these covenants.

See "Financial Statements - Note 5 Debt" for more information on senior unsecured notes.

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Office Properties (1)(2)

Three Months Ended March 31,

Six Months Ended June 30,

Total New Leases, Expansions, and Renewals (3)

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Retail Properties (2)(6)

Three Months Ended March 31,

Six Months Ended June 30,

Total New Leases, Expansions, and Renewals (3)

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Total square feet

11,448 11,076

Leasing commission costs per square foot (5)

$ 74.33 $ 25.95

Tenant improvement costs per square foot (5)

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$ 92.49 $ 52.02

_______________

(1) Excludes an aggregate of 486,943 and 497,786 rentable square feet of retail space in our Manhattan office in 2024 and 2023, respectively.

Includes the Empire State Building broadcasting licenses and Observatory operations.

(2) The tables above exclude our multifamily properties.

(3) Beginning in 2024, the number of leases signed include "Early Renewals" which are leases signed over two years prior to the lease expiration.

Amounts for number of leases signed, total square feet, leasing commission costs per square foot and tenant improvement costs per square foot have been adjusted to include the impact of early renewals for the six months ended June 30, 2023.

(4) Presents a renewed and expansion lease as one lease signed.

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Excludes the Empire State Building broadcasting licenses and Observatory operations.

(5) The tables above exclude our multifamily properties.

Three Months Ended March 31,

Six Months Ended June 30,

Total Commercial Portfolio

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(1) Includes all capital expenditures, excluding tenant improvements and leasing commission costs.

As of March 31, 2024, we expect to incur additional costs relating to obligations under existing lease agreements of approximately $125.2 million for tenant improvements and leasing commissions.

We intend to fund the tenant improvements and leasing commission costs through a combination of operating cash flow, cash on hand and borrowings.

As of June 30, 2024, we expect to incur additional costs relating to obligations under existing lease agreements of approximately $111.6 million for tenant improvements and leasing commissions.

We intend to fund the tenant improvements and leasing commission costs through a combination of operating cash flow, cash on hand and other borrowings.

Capital expenditures are considered part of both our short-term and long-term liquidity requirements.

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Off-Balance Sheet Arrangements

As of March 31, 2024, we did not have any off-balance sheet arrangements.

As of June 30, 2024, we did not have any off-balance sheet arrangements.

Distribution Policy

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Distribution to Equity Holders

Distributions and dividends amounting to $10.6 million and $9.7 million have been made to equity holders for the three months ended March 31, 2024 and 2023, respectively.

Distributions and dividends amounting to $21.2 million and $20.3 million have been made to equity holders for the six months ended June 30, 2024 and 2023, respectively.

Stock and Publicly Traded Operating Partnership Unit Repurchase Program

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The authorization does not obligate ESRT or us to acquire any particular amount of securities, and the program may be suspended or discontinued at ESRT's and our discretion without prior notice.

As of March 31, 2024, we had $500 million remaining of the authorized repurchase amount.

There were no repurchases of equity securities during the three months ended March 31, 2024.

As of June 30, 2024, we had $500 million remaining of the authorized repurchase amount.

There were no repurchases of equity securities during the three and six months ended June 30, 2024.

See "Financial Statements - Note 10.

Comparison of Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023

Cash and cash equivalents and restricted cash were $385.3 million and $380.8 million, respectively, as of March 31, 2024 and 2023.

Comparison of Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023

Cash and cash equivalents and restricted cash were $576.5 million and $395.8 million, respectively, as of June 30, 2024 and 2023.

The increase was primarily the result of the following changes in cash flows:

Operating activities .

Net cash provided by operating activities decreased by $15.5 million to $70.9 million due to changes in working capital, particularly a reduction in security deposits as more tenants replaced cash deposits with letters of credit in the current period.

Net cash provided by operating activities increased by $2.1 million to $108.1 million primarily due to an increase in revenue including decreases in rent concessions.

These increases are partially offset by decreases in working capital, particularly a reduction in security deposits as more tenants replaced cash deposits with letters of credit in the current period, as well as the derecognition of First Stamford Place in May 2024.

Investing activities .

Net cash used in investing activities increased by $68.7 million to $71.3 million primarily due to the acquisition of non-controlling interests in other partnerships (see "Financial Statements - Note 3.

Acquisitions and Dispositions") as well as there being no proceeds from the disposition of property in the current period.

Also during the current period, we paid post-closing costs on a prior period sale of property and spent more on capital expenditures.

Net cash used in investing activities increased by $140.4 million to $127.7 million primarily due to there being no proceeds from the disposition of property in the current period and the acquisition of non-controlling interests in other partnerships in March 2024, as well as a $12.9 million reduction of cash associated with the derecognition of First Stamford Place in May 2024 (see "Financial Statements - Note 3.

Acquisitions and Dispositions").

Financing activities .

Net cash used in financing activities increased by $3.7 million to $21.3 million primarily due to financing costs in connection with the recast of our revolving credit and term loan facilities in the current period.

Net cash provided by financing activities increased by $226.7 million to $189.2 million primarily due to proceeds from a private placement of senior unsecured notes in the current period.

Net Operating Income

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The cost of funds is eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future.

Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our office or retail properties that result from use of the properties or

changes in market conditions.

While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time.

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The following table presents a reconciliation of our net income, the most directly comparable GAAP measure, to NOI for the periods presented (amounts in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(unaudited) (unaudited)

$ 28,555 $ 36,955 $ 38,770 $ 48,649

General and administrative expenses

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25,323 25,405 50,451 50,709

Interest expense associated with property in receivership 628 — 628 —

Loss on early extinguishment of debt

Income tax benefit

Income tax expense (benefit)

750 733 95 (486)

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Third-party management and other fees

(376) (381) (641) (808)

Interest income

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Net increase in rental revenue from the amortization of above-and below-market lease assets and liabilities

$ 513 $ 675 $ 1,027 $ 1,378

Amortization of acquired below-market ground leases

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FFO is a widely recognized non-GAAP financial measure for REITs that we believe, when considered with financial statements determined in accordance with GAAP, is useful to investors in understanding financial performance and providing a relevant basis for comparison among REITs.

In addition, we believe FFO is useful to investors as it captures features particular to real estate performance by recognizing that real estate has generally appreciated over time or maintains residual value to a

much greater extent than do other depreciable assets.

Investors should review FFO, along with GAAP net income, when trying to understand an equity REIT’s operating performance.

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There can be no assurance that Modified FFO presented by us is comparable to similarly titled measures of other REITs.

Modified FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP.

Modified FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in

accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP.

Modified FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions.

Core Funds From Operations

Core FFO adds back to Modified FFO the following item:

loss on early extinguishment of debt.

Core FFO adds back to Modified FFO the following items:

Interest expense associated with property in receivership and loss on early extinguishment of debt.

The Company believes Core FFO is an important supplemental measure of its operating performance because it excludes non-recurring items.

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The following table presents a reconciliation of our net income, the most directly comparable GAAP measure, to FFO, Modified FFO and Core FFO for the periods presented (amounts in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(unaudited) (unaudited)

$ 28,555 $ 36,955 $ 38,770 $ 48,649

Non-controlling interests in other partnerships — (1) (4) 42

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Gain on disposition of property

(10,803) (13,565) (10,803) (29,261)

FFO attributable to common unitholders

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Amortization of below-market ground leases

1,958 1,958 3,916 3,916

Modified FFO attributable to common unitholders

65,057 69,183 121,033 112,156

Interest expense associated with property in receivership 628 — 628 —

Loss on early extinguishment of debt

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Leasing commission costs are similarly subject to significant fluctuations depending upon the length of leases being signed and the mix of tenants from quarter to quarter.

As of March 31, 2024, there were approximately 0.8 million rentable square feet of space in our portfolio available to lease (excluding leases signed but not yet commenced) representing 8.9% of the net rentable square footage of the properties in our commercial portfolio.

As of June 30, 2024, there were approximately 0.6 million rentable square feet of space in our portfolio available to lease (excluding leases signed but not yet commenced) representing 7.4% of the net rentable square footage of the properties in our commercial portfolio.

In addition, leases representing 3.9% and 6.5% of net rentable square footage of the properties in our commercial portfolio will expire in 2024 and in 2025, respectively.

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Observatory Operations

For the three months ended March 31, 2024, the Observatory hosted 485,000 visitors, compared to 443,000 visitors for the three months ended March 31, 2023, an increase of 9%.

Observatory revenue for the three months ended March 31, 2024 was $24.6 million, an 11% increase from $22.2 million for the three months ended March 31, 2023.

The Observatory revenue increase was driven by higher visitation levels in 2024.

For the six months ended June 30, 2024, the Observatory hosted 1,133,000 visitors, compared to 1,108,000 visitors for the six months ended June 30, 2023, an increase of 2%.

Observatory revenue for the six months ended June 30, 2024 was $58.7 million, a 6% increase from

$55.6 million for the six months ended June 30, 2023.

The Observatory revenue increase was driven by higher visitation levels and ticket prices in 2024.

Observatory revenues and admissions are dependent upon the following:

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and (v) weather trends.

Year to date in 2024, ESRT has seen sustained demand for our properties, marked by solid leasing activity and Observatory performance.

We believe the global economy, including the real estate sector, currently navigates an environment of uncertainty around inflation, rising interest rates, reduced commercial real estate new loans, questions on the direction of capital markets, risk of recession and geopolitical unrest.

In particular, there have been concerns about the softening of the commercial real estate market, and particularly the office real estate market, amidst refinancing challenges of existing low interest rate loans and associated reduced new loan availability and increased costs of loans and related increased expectations of equity returns, coupled with the gradual pace of return-to-office and its impact on the physical utilization of space and asset valuations.

Year to date in 2024, ESRT has benefited from solid leasing activity and Observatory performance.

We believe the global economy, including the real estate sector, currently navigates an environment of uncertainty around inflation, higher interest rates, reduced availability of commercial real estate loans, questions on the direction of capital markets, risk of recession and geopolitical unrest.

In particular, there have been concerns about the softening of the office real estate market in particular, amidst refinancing challenges of existing low interest rate loans and associated reduced new loan availability and increased costs of loans and related increased expectations of equity returns, coupled with the gradual pace of return-to-office and its impact on the physical utilization of space and asset valuations.

Additionally, the risk of a global economic recession could impact the number of visitors to the Empire State Building Observatory, as well as our pricing power.

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In addition to our diversified portfolio, our business is supported by a well-positioned balance sheet, modest leverage and good access to liquidity as set forth herein.

The absence of near term debt maturities or floating rate debt exposure provides an added degree of security in a rising rate environment.

We have been able to execute on capital recycling, acquisitions, and buybacks.

The absence of near term debt maturities provides an added degree of security in a rising rate environment.

This provides us optionality to execute on capital recycling, acquisitions, and buybacks.

As we navigate these uncertain times, we remain prepared for various challenges and situations.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis