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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-10-08 · 101 added, 85 removed, 362 unchanged (34% 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 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.

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

FORWARD-LOOKING STATEMENTS

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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.

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 for the year ended December 31, 2023 and our quarterly report for the quarter ended June 30, 2024, and other risks described in documents subsequently filed by the Company from time to time with the SEC.

While forward-looking statements reflect the Company's good faith beliefs, they do not guarantee future performance.

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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 June 30, 2024

Highlights for the three months ended September 30, 2024

• Net income attributable to common unitholders of $21.7 million.

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• Signed a total of 304,000 rentable square feet of new, renewal, and expansion leases.

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

• Closed on $143.0 million of the previously announced $195.0 million acquisition of prime retail assets on North 6 th Street in Williamsburg, Brooklyn.

The balance closed subsequent to quarter-end, in October 2024.

• Announced agreement to acquire additional retail asset for approximately $30.0 million located on North 6 th Street in Williamsburg, Brooklyn.

Results of Operations

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,

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

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

The following table summarizes our historical results of operations:

Three Months Ended September 30,

2024 2023 Change %

(amounts in thousands)

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

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Observatory revenue — 39,382 39,382 — 37,562 37,562 1,820 4.8 %

Lease termination fees 4,771 — 4,771 — — — 4,771 N/A

Third-party management and other fees

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Interest expense associated with property in receivership (1,922) — (1,922) — — — (1,922) 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) %

1,262 — 1,262 — — — 1,262 N/A

Income before income taxes

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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.

The increase in rental revenue was primarily attributable to higher occupancy and higher operating and real estate tax expense escalations driving a $7.7 million increase during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

This was partially offset by the net impact of acquisitions and dispositions made during the comparative period, which reduced rental revenue by $6.0 million.

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.

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

The increase in general and administrative expenses primarily reflects higher audit related costs and recognition of non-cash stock-based compensation expense of awards granted to executives that are nearing retirement eligibility during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

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,

The increase in interest income in the three months ended September 30, 2024 reflects larger cash balances compared to the three months ended September 30, 2023.

Interest Expense

The increase in interest expense was primarily attributable to the new senior unsecured notes issuance in April 2024.

Gain on Disposition of Property

The gain on disposition activity for the three months ended September 30, 2024 represents the additional obligation we expect to be released arising from the accrued interest expense associated with the First Stamford Place mortgage, net of certain closing costs.

Observatory Segment

Observatory Revenue

Observatory revenues were higher driven by increased ticket prices during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

The following table summarizes our historical results of operations:

Nine Months Ended September 30,

2024 2023 Change %

(amounts in thousands)

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

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Observatory revenue — 98,102 98,102 — 93,149 93,149 4,953 5.3 %

Lease termination fees 4,771 — 4,771 — — — 4,771 N/A

Third-party management and other fees

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52,512 10,591 63,103 61,282 8,218 69,500 (6,397) (9.2) %

Income tax (expense) benefit

Income tax expense

(537) (1,000) (1,537) (541) (382) (923) (614) (66.5) %

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Private perpetual preferred unit distributions (3,151) — (3,151) (3,151) — (3,151) — — %

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

Net income attributable to non-controlling interests in other partnerships (4) — (4) (69) — (69) 65 (94.2) %

Net income attributable to common unitholders

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Rental Revenue

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.

The increase in rental revenue was primarily attributable to higher occupancy and higher operating and real estate tax expense escalations driving a $23.0 million increase during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

This was partially offset by the net impact of acquisitions and dispositions made during the comparative period, which reduced rental revenue by $9.7 million.

Property Operating Expenses

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.

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

The increase in general and administrative expenses primarily reflects higher audit related costs and recognition of non-cash stock-based compensation expense of awards granted to executives that are nearing retirement eligibility during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Interest Income

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 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.

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

Interest Expense

The increase in interest expense was primarily attributable to the new senior unsecured notes issuance in April 2024.

Gain on Disposition of Property

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

The gain on disposition activity for the nine months ended September 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 six months ended June 30, 2024 as compared to the six months ended June 30, 2024.

Observatory revenues were higher driven by increased visitation and ticket prices during the nine months ended September 30, 2024 as compared to the nine months ended September 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 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.

At September 30, 2024, we had $421.9 million available in cash and cash equivalents, and $500.0 million available under our unsecured revolving credit facility.

As of September 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 5.3 years.

Portfolio Transaction Activity

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On September 14, 2023, we closed on the acquisition of a Williamsburg retail property located on the corner of North 6 th Street and Wythe Avenue in Brooklyn, New York, for a purchase price of $26.4 million.

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.

On March 28, 2024, we executed a buyout of the 10% non-controlling 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.

On September 25, 2024, we closed on the acquisition of a portfolio of retail properties on North 6 th Street in Williamsburg, Brooklyn for a purchase price of $143.0 million.

Subsequent to quarter-end, in October 2024, we closed on the acquisition of additional retail properties on North 6 th Street in Williamsburg, Brooklyn for approximately $52.0 million.

In September 2024, we entered into an agreement to acquire an additional retail asset on North 6 th Street in Williamsburg, Brooklyn for approximately $30.0 million.

This acquisition is subject to customary closing conditions.

The acquisition is anticipated to close in mid-2025.

Unsecured Revolving Credit and Term Loan Facilities

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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.

The BofA Term Loan Facility matures on March 8, 2029, inclusive of two twelve-month extension periods and replaced the existing term loan facility that matures in March 2025.

Initial interest rates on the new facility, which may change based on our leverage levels, are adjusted SOFR plus 130 basis points for any drawn portion of the Revolving Credit Facility and adjusted SOFR plus 150 basis points for the BofA Term Loan Facility.

The BofA Term Loan Facility matures on March 8, 2029, inclusive of two twelve-month extension periods and replaced the existing term loan facility that was due to mature in March 2025.

Initial interest rates on the BofA Credit Facilities, which may change based on our leverage levels, are adjusted SOFR plus 130 basis points for any drawn portion of the Revolving Credit Facility and adjusted SOFR plus 150 basis points for the BofA Term Loan Facility.

In addition, the BofA Credit Facilities have a sustainability-linked pricing mechanism that reduces the borrowing spread if certain benchmarks are achieved each year.

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Financial Covenants

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

Financial Covenant Required June 30, 2024 In Compliance

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

Financial Covenant Required September 30, 2024 In Compliance

Maximum total leverage < 60% 33.2 % Yes

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Mortgage Debt

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.

As of September 30, 2024, mortgage notes payable, net, amounted to $705.6 million.

We have no mortgage debt maturity until 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.

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 September 30, 2024, this debt consists of a $164 million mortgage loan bearing interest at 4.09% and a $11.9 million loan bearing interest at 6.25%.

In connection with this we recorded a contract asset which represents the amount of obligation we expect to be released upon the final resolution of the foreclosure process on the First Stamford Place property.

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 in 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.

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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 REIT qualification.

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

As of September 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)

Six Months Ended June 30,

Nine Months Ended September 30,

Total New Leases, Expansions, and Renewals (3)

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Retail Properties (2)(6)

Six Months Ended June 30,

Nine Months Ended September 30,

Total New Leases, Expansions, and Renewals (3)

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_______________

(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.

(1) Excludes an aggregate of 475,744 and 498,672 rentable square feet of retail space in our Manhattan office properties in 2024 and 2023, respectively.

Includes the Empire State Building broadcasting licenses and Observatory operations.

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(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.

(5) Presents all tenant improvement and leasing commission costs as if they were incurred in the period in which the lease was signed, which may be different than the period in which they were actually paid.

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

Excludes the Empire State Building broadcasting licenses and Observatory operations.

Six Months Ended June 30,

(6) Includes an aggregate of 475,744 and 498,672 rentable square feet of retail space in our Manhattan office properties in 2024 and 2023, respectively.

(amounts in thousands) Nine Months Ended September 30,

Total Commercial Portfolio

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

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.

As of September 30, 2024, we expect to incur additional costs relating to obligations under existing lease agreements of approximately $126.5 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.

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Off-Balance Sheet Arrangements

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

As of September 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 $21.2 million and $20.3 million have been made to equity holders for the six months ended June 30, 2024 and 2023, respectively.

Distributions and dividends amounting to $31.8 million and $30.8 million have been made to equity holders for the nine months ended September 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 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.

As of September 30, 2024, we had $500.0 million remaining of the authorized repurchase amount.

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

See "Financial Statements - Note 10.

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.

Comparison of Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023

Cash and cash equivalents and restricted cash were $469.9 million and $421.0 million, respectively, as of September 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 increased by $2.1 million to $108.1 million primarily due to an increase in revenue including decreases in rent concessions.

Net cash provided by operating activities increased by $14.8 million to $210.9 million primarily due to an increase in revenue including decreases in rent concessions and increase in lease termination fees.

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 $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.

Net cash used in investing activities increased by $279.1 million to $318.5 million primarily due to the $143.4 million acquisition of a portfolio of retail properties on North 6 th Street in Williamsburg in September 2024, compared to the $26.9 million acquisition of retail properties on North 6 th Street in Williamsburg in September 2023.

In addition, in the nine months ended September 30, 2024 there were no proceeds from dispositions of properties compared to $88.9 million of proceeds on dispositions received in the nine months ended September 30, 2023 (see "Financial Statements - Note 3.

Acquisitions and Dispositions").

Net cash used in investing activities also increased due to a $42.5 million increase in capital expenditures and redevelopment in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Financing activities .

Net cash provided by financing activities increased by $221.0 million to $170.6 million primarily due to proceeds from a private placement of senior unsecured notes in the current period.

See "Financial Statements - Note 5.

Net Operating Income

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NOI is used by our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by:

(i) the cost of funds of the property owner, (ii) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (iii) acquisition expenses, loss on early extinguishment of debt, impairment charges and loss from derivative financial instruments, or (iv) general and administrative expenses and other gains and losses that are specific to the property owner.

early extinguishment of debt, impairment charges and loss from derivative financial instruments, or (iv) general and administrative expenses and other gains and losses that are specific to the property owner.

The cost of funds is eliminated from NOI because it is specific to the particular financing capabilities and constraints of the owner.

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Other companies may use different methods for calculating NOI or similarly titled measures and, accordingly, our NOI may not be comparable to similarly titled measures reported by other companies that do not define the measure exactly as we do.

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 June 30, Six Months Ended June 30,

2024 2023 2024 2023

The following table presents a reconciliation of our net income, the most directly comparable GAAP measure, to NOI:

Three Months Ended September 30, Nine Months Ended September 30,

(amounts in thousands) 2024 2023 2024 2023

(unaudited) (unaudited)

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Loss on early extinguishment of debt

Income tax expense (benefit)

Income tax expense

1,442 1,409 1,537 923

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We present below a discussion of FFO.

We compute FFO in accordance with the “White Paper” on FFO published by the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding impairment write-off of investments in depreciable real estate and investments in in-substance real estate investments, gains or losses from debt restructurings and sales of depreciable operating properties, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), less distributions to non-controlling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships and joint ventures.

from debt restructurings and sales of depreciable operating properties, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), less distributions to non-controlling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships and joint ventures.

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.

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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.

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In future periods, we may also exclude other items from Core FFO that we believe may help investors compare our results.

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 June 30, Six Months Ended June 30,

2024 2023 2024 2023

The following table presents a reconciliation of our net income, the most directly comparable GAAP measure, to FFO, Modified FFO and Core FFO:

Three Months Ended September 30, Nine Months Ended September 30,

(amounts in thousands) 2024 2023 2024 2023

(unaudited) (unaudited)

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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 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.

As of September 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 7.0% of the net rentable square footage of the properties in our commercial portfolio.

In addition, leases representing 2.6% and 6.3% 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 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.

For the nine months ended September 30, 2024, the Observatory hosted 1,860,000 visitors, compared to 1,852,000 visitors for the nine months ended September 30, 2023, an increase of 0.4%.

Observatory revenue for the nine months ended September 30, 2024 was $98.1 million, a 5% increase from $93.1 million for the nine months ended September 30, 2023.

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

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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.

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.

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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 provides an added degree of security in a rising rate environment.

The absence of unaddressed 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.

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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