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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-08 · 113 added, 220 removed, 243 unchanged (58% 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 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.

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 and Form 10-K/A.

This Management’s Discussion and Analysis provides a comparison of our performance for the three month periods ended March 31, 2025 with the corresponding three month periods ended March 31, 2024 and reviews our financial position as of March 31, 2025.

FORWARD-LOOKING STATEMENTS

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Many important factors could cause actual results, performance, achievements, and future events to differ materially from those set forth, implied, anticipated, expected, projected, assumed or contemplated in the forward-looking statements, including, among other things:

(i) economic, market, political and social impact of, and uncertainty relating to, any catastrophic events, including pandemics, epidemics or other outbreaks of disease, climate-related risks such as natural disasters and extreme weather events, terrorism and other armed hostilities, as well as cybersecurity threats and technology disruptions;

(ii) a failure of conditions or performance regarding any event or transaction described herein;

(iii) resolution of legal proceedings involving the Company;

(iv) reduced demand for office, multifamily or retail space, including as a result of the changes in the use of office space and remote work;

(v) changes in our business strategy;

(vi) a decline in Observatory visitors due to changes in domestic or international tourism, including due to health crises, geopolitical events, currency exchange rates, and/or competition from other observatories;

(vii) defaults on, early terminations of, or non-renewal of, leases by tenants;

(viii) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors;

(ix) declining real estate valuations and impairment charges;

(x) termination of our ground leases;

(xi) limitations on our ability to pay down, refinance, restructure or extend our indebtedness or borrow additional funds;

(xii) decreased rental rates or increased vacancy rates;

(xiii) difficulties in executing capital projects or development projects successfully or on the anticipated timeline or budget;

(xiv) difficulties in identifying and completing acquisitions;

(xv) impact of changes in governmental regulations, tax laws and rates and similar matters;

(xvi) our failure to qualify as a REIT;

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

(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 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.

(i) economic, market, political and social impact of, and uncertainty relating to, any catastrophic events, including pandemics, epidemics or other outbreaks of disease, natural disasters and extreme weather events, terrorism and other armed hostilities, as well as cybersecurity threats and technology disruptions;

(ii) increased costs due to tariffs or other economic factors;

(iii) a failure of conditions or performance regarding any event or transaction described herein;

(iv) resolution of legal proceedings involving the Company;

(v) reduced demand for office, multifamily or retail space, including as a result of the changes in the use of office space and remote work;

(vi) changes in our business strategy;

(vii) a decline in Observatory visitors due to changes in domestic or international tourism, including due to health crises, geopolitical events, currency exchange rates, and/or competition from other observatories;

(viii) defaults on, early terminations of, or non-renewal of, leases by tenants;

(ix) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors;

(x) declining real estate valuations and impairment charges;

(xi) termination of our ground leases;

(xii) limitations on our ability to pay down, refinance, restructure or extend our indebtedness or borrow additional funds;

(xiii) decreased rental rates or increased vacancy rates;

(xiv) difficulties in executing capital projects or development projects successfully or on the anticipated timeline or budget;

(xv) difficulties in identifying and completing acquisitions;

(xvi) impact of changes in governmental regulations, tax laws and rates and similar matters;

(xvii) our failure to qualify as a REIT;

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

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

and (xx) 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 for the year ended December 31, 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 September 30, 2024

Highlights for the three months ended March 31, 2025

• Net income attributable to common unitholders of $14.7 million.

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• Signed a total of 231,000 rentable square feet of new, renewal, and expansion leases.

• 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 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,

The discussion below relates to our results of operations for the three months ended March 31, 2025 and 2024, respectively.

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

The following table summarizes the historical results of operations:

Three Months Ended March 31,

2025 2024 Change %

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Observatory revenue — 23,161 23,161 — 24,596 24,596 (1,435) (5.8) %

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

Lease termination fees — — — — — — — — %

Third-party management and other fees

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Interest expense associated with property in receivership (647) — (647) — — — (647) N/A

Loss on early extinguishment of debt — — — (553) — (553) 553 100.0 %

Gain on disposition of property

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15,247 (88) 15,159 9,461 99 9,560 5,599 58.6 %

Income tax expense

(216) (1,226) (1,442) (146) (1,263) (1,409) (33) (2.3) %

17,765 5,031 22,796 15,192 4,736 19,928 2,868 14.4 %

Private perpetual preferred unit distributions (1,050) — (1,050) (1,050) — (1,050) — — %

Net income attributable to non-controlling interests in other partnerships — — — (111) — (111) 111 100.0 %

Net income attributable to common unitholders

$ 16,715 $ 5,031 $ 21,746 $ 14,031 $ 4,736 $ 18,767 $ 2,979 15.9 %

Real Estate Segment

Rental Revenue

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 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 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 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

Rental revenue

$ 459,469 $ — $ 459,469 $ 446,152 $ — $ 446,152 $ 13,317 3.0 %

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

912 — 912 1,076 — 1,076 (164) (15.2) %

Other revenues and fees

7,067 — 7,067 6,313 — 6,313 754 11.9 %

Total revenues

472,219 98,102 570,321 453,541 93,149 546,690 23,631 4.3 %

Operating expenses:

Property operating expenses

132,530 — 132,530 124,380 — 124,380 (8,150) (6.6) %

Ground rent expenses

6,994 — 6,994 6,994 — 6,994 — — %

General and administrative expenses

52,364 — 52,364 47,795 — 47,795 (4,569) (9.6) %

Observatory expenses

— 27,104 27,104 — 25,983 25,983 (1,121) (4.3) %

Real estate taxes

96,106 — 96,106 95,292 — 95,292 (814) (0.9) %

Depreciation and amortization

139,346 107 139,453 140,194 118 140,312 859 0.6 %

Total operating expenses

427,340 27,211 454,551 414,655 26,101 440,756 (13,795) (3.1) %

Operating income

44,879 70,891 115,770 38,886 67,048 105,934 9,836 9.3 %

Intercompany rent revenue (expense) 60,508 (60,508) — 58,969 (58,969) — — — %

Other income (expense):

Interest income

16,022 208 16,230 10,257 139 10,396 5,834 56.1 %

Interest expense

(77,859) — (77,859) (76,091) — (76,091) (1,768) (2.3) %

Interest expense associated with property in receivership (2,550) — (2,550) — — — (2,550) N/A

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

Gain on disposition of property

12,065 — 12,065 29,261 — 29,261 (17,196) (58.8) %

Income before income taxes

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

Income tax expense

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

Income tax (expense) benefit (206) 825 619 (113) 768 655 (36) (5.5) %

15,041 737 15,778 9,348 867 10,215 5,563 54.5 %

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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 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.

The increase in rental revenue was primarily attributable to higher operating and real estate tax expense escalations driving a $5.0 million increase during the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

This was partially offset by the net impact of acquisitions and dispositions made during 2024, which reduced rental revenue by $4.0 million.

Property Operating Expenses

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

Property operating expenses was consistent primarily attributable to a $2.1 million decrease due to the net impact of acquisitions and dispositions made during 2024, primarily offset by increases in payroll costs and utilities.

Interest Expense

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

The increase in interest expense was attributable to the June 2024 issuance of Series I-K senior unsecured notes, partially offset by the February 2025 release of the First Stamford Place senior mortgage obligation, and March 2025 paydown of the Series A senior unsecured notes and revolver.

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.

The gain on disposition activity for the three months ended March 31, 2025 primarily represents the mezzanine debt obligation which was deconsolidated in connection with the completion of the consensual foreclosure of First Stamford Place.

See "Financial Statements - Note 3 Acquisitions and Dispositions" for additional details.

Observatory Segment

Observatory Revenue

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.

Observatory revenues were lower due to decreased visitation during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to the shift in the timing of the Easter holiday that fell in April during 2025 as compared to March in 2024.

Liquidity and Capital Resources

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

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.

At March 31, 2025, we had $187.8 million available in cash and cash equivalents, and $620.0 million available under our unsecured revolving credit facility.

At March 31, 2025, we had approximately $2.1 billion of total consolidated indebtedness outstanding, with a weighted average interest rate of 4.30% and a weighted average maturity of 5.3 years.

Portfolio Transaction Activity

On February 1, 2023, we closed on the sale of 69-97 and 103-107 Main Street in Westport, Connecticut at a gross asset valuation of $40.0 million.

On April 5, 2023, we closed on the sale of 500 Mamaroneck Avenue in Harrison, New York at a gross asset valuation of $53.0 million.

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 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.

In September and October 2024, we closed on the acquisition of a portfolio of retail properties on North 6 th Street in Williamsburg, Brooklyn for an aggregate purchase price of $195.0 million.

In September 2024, we entered into an agreement for the acquisition of an additional retail property on North 6 th Street in Williamsburg, Brooklyn for approximately $30.0 million.

This acquisition is subject to customary closing conditions.

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Unsecured Revolving Credit and Term Loan Facilities

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.

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.

See "Financial Statements - Note 5 Debt" for a summary of our unsecured revolving credit and term loan facilities.

In March 2024, we closed a $715.0 million, five-year unsecured credit agreement which consists of a $620.0 million revolver and a $95.0 million term loan facility, each of which mature on March 8, 2029, inclusive of the extension periods.

On March 18, 2025, we repaid the $120.0 million borrowings previously drawn on the Revolving Credit Facility.

See "Financial Statements - Note 5.

Debt" for a summary of our unsecured revolving credit and term loan facilities.

Financial Covenants

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

Financial Covenant Required September 30, 2024 In Compliance

As of March 31, 2025, we were in compliance with the following financial covenants related to our unsecured facilities:

Financial Covenant Required March 31, 2025 In Compliance

Maximum total leverage < 60% 32.4 % Yes

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Mortgage Debt

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

As of March 31, 2025, mortgage notes payable, net, amounted to $691.8 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 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.

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

On May 22, 2024, a receiver was appointed and we ended our management of the property.

On February 5, 2025, the consensual foreclosure was completed, title of the property was transferred to the mortgage lender and we were released of our mortgage obligation.

See "Financial Statements - Note 5.

Debt" for more information on mortgage debt.

Senior Unsecured Notes

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 REIT qualification.

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.

On June 17, 2024, we closed on the issuance and sale of an aggregate $225.0 million principal amount of notes, consisting of (a) $155.0 million aggregate principal amount of 7.20% Series I Green Guaranteed Senior Notes due June 17, 2029, (b) $45.0 million aggregate principal amount of 7.32% Series J Green Guaranteed Senior Notes due June 17, 2031 and (c) $25.0 million aggregate principal amount of 7.41% Series K Green Guaranteed Senior Notes due June 17, 2034.

On March 27, 2025, the Series A senior unsecured notes matured and the aggregate principal amount of $100.0 million was repaid.

The notes had a stated interest rate of 3.93%.

See "Financial Statements - Note 5.

Debt" for more information on senior unsecured notes.

Leverage Policies

We expect to employ leverage in our capital structure in amounts determined from time to time by ESRT's Board of Directors.

Although ESRT's Board of Directors has not adopted a policy that limits the total amount of indebtedness that we may incur, we anticipate that ESRT's Board of Directors will consider a number of factors in evaluating our level of indebtedness from time to time, as well as the amount of such indebtedness that will be either fixed or floating rate.

ESRT's charter and bylaws do not limit the amount or percentage of indebtedness that we may incur nor do they restrict the form in which our indebtedness will be taken (including, but not limited to, recourse or non-recourse debt and cross-collateralized debt).

Our overall leverage will depend on our mix of investments and the cost of leverage.

ESRT's Board of Directors may from time to time modify our leverage policies in light of the then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general market conditions for debt and equity securities, fluctuations in the market price of ESRT's common stock and our traded OP units, growth and acquisition opportunities and other factors.

In the evaluation of our level of indebtedness, ESRT's Board of Directors will consider a number of factors including the mix of recourse or non-recourse debt and cross-collateralized debt, mix of fixed or floating rate debt, and cost of leverage.

ESRT's charter and bylaws do not limit the amount or percentage of indebtedness that we may incur nor do they restrict the form in which our indebtedness will be taken.

ESRT's overall leverage will depend on our mix of investments and the cost of leverage.

ESRT's Board of Directors may from time to time modify our leverage policies in light of the then-current economic conditions, access to and relative costs of debt and equity capital, market values of our properties, general market conditions for debt and equity securities, fluctuations in the market price of ESRT's common stock and our traded OP units, growth and acquisition opportunities and other factors.

Capital Expenditures

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Office Properties (1)(2)

Nine Months Ended September 30,

Three Months Ended March 31,

Total New Leases, Expansions, and Renewals (3)

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Total square feet 229,367 367,262

921,671 782,786

Weighted average annualized cash rent per square foot for new and renewal leases executed during the year $ 66.43 $ 64.03

Weighted average annualized cash rent per square foot for previous leases 60.63 61.08

Percentage of new cash rent over previously escalated rents 9.6 % 4.8 %

Leasing commission costs per square foot (5)

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Retail Properties (2)(6)

Nine Months Ended September 30,

Three Months Ended March 31,

Total New Leases, Expansions, and Renewals (3)

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Total square feet 1,181 2,458

24,240 14,263

Weighted average annualized cash rent per square foot for new and renewal leases executed during the year $ 193.00 $ 400.00

Weighted average annualized cash rent per square foot for previous leases 183.74 378.97

Percentage of new cash rent over previously escalated rents 5.0 % 5.5 %

Leasing commission costs per square foot (5)

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(1) Excludes an aggregate of 475,744 and 488,569 rentable square feet of retail space in our Manhattan office properties in 2025 and 2024, 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 nine months ended September 30, 2023.

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

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

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(6) Includes an aggregate of 475,744 and 488,569 rentable square feet of retail space in our Manhattan office properties in 2025 and 2024, respectively.

(amounts in thousands) Nine Months Ended September 30,

(amounts in thousands) Three Months Ended March 31,

Total Commercial Portfolio

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

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.

As of March 31, 2025, we expect to incur additional costs relating to obligations under existing lease agreements of approximately $110.9 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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We intend to fund capital improvements through a combination of operating cash flow, cash on hand and borrowings.

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 $31.8 million and $30.8 million have been made to equity holders for the nine months ended September 30, 2024 and 2023, respectively.

Distributions and dividends amounting to $10.8 million and 10.6 million have been made to equity holders for the three months ended March 31, 2025 and 2024, 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 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.

As of March 31, 2025, we had $500.0 million remaining of the authorized repurchase amount.

There were no repurchases of equity securities during the three months ended March 31, 2025.

Subsequent to March 31, 2025 through May 7, 2025, ESRT repurchased $2.1 million of ESRT Class A common stock at a weighted average price of $6.90 per share.

See "Financial Statements - Note 10.

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:

Comparison of Three Months Ended March 31, 2025 to the Three Months Ended March 31, 2024

Cash and cash equivalents and restricted cash were $237.4 million and $385.3 million, respectively, as of March 31, 2025 and 2024.

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

Operating activities .

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.

Net cash provided by operating activities increased by $12.2 million to $83.1 million primarily due to increases in working capital.

Investing activities .

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.

Net cash used in investing activities decreased by $29.2 million to $42.1 million primarily due to the prior year acquisition of non-controlling interests in other partnerships.

Also during the current period, there was a $10.9 million decrease in capital expenditures and redevelopment in the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

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.

Net cash used in financing activities increased by $211.7 million to $233.0 million primarily due to the repayment in full of the Series A senior unsecured notes and a pay-down on our unsecured revolving credit facility in the current period.

See "Financial Statements - Note 5.

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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:

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.

(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.

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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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.

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 has 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.

Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period.

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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,

Three Months Ended March 31,

(amounts in thousands) 2025 2024

(unaudited) (unaudited)

$ 22,796 $ 19,928 $ 61,566 $ 68,577

Net income $ 15,778 $ 10,215

General and administrative expenses 16,940 15,972

18,372 16,012 52,364 47,795

Depreciation and amortization 48,779 46,081

45,899 46,624 139,453 140,312

Interest expense 26,938 25,128

27,408 25,382 77,859 76,091

Interest expense associated with property in receivership 647 —

Loss on early extinguishment of debt — 553

Income tax expense

1,442 1,409 1,537 923

Gain on sale/disposition of property (1,262) — (12,065) (29,261)

Income tax benefit (619) (655)

Gain on disposition of property (13,170) —

Third-party management and other fees (431) (265)

(271) (268) (912) (1,076)

Interest income (3,786) (4,178)

(6,960) (4,462) (16,230) (10,396)

Net operating income $ 91,076 $ 92,851

$ 109,346 $ 104,625 $ 306,675 $ 292,965

Other Net Operating Income Data

Straight-line rental revenue $ 5,283 $ 3,061

$ 2,277 $ 5,015 $ 7,238 $ 17,430

Net increase in rental revenue from the amortization of above-and below-market lease assets and liabilities $ 798 $ 514

$ 476 $ 554 $ 1,503 $ 1,932

Amortization of acquired below-market ground leases $ 1,958 $ 1,958

$ 1,958 $ 1,957 $ 5,874 $ 5,873

Funds from Operations ("FFO")

We present below a discussion of FFO.

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.

Funds from Operations

We present below a discussion of Funds from Operations ("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.

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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We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs.

However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results of operations, the utility of FFO as a measure of performance is limited.

However, because FFO excludes depreciation and amortization and captures neither the changes in the value

of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results of operations, the utility of FFO as a measure of performance is limited.

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

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Although FFO is a measure used for comparability in assessing the performance of REITs, as the NAREIT White Paper only provides guidelines for computing FFO, the computation of FFO may vary from one company to another.

Modified Funds From Operations ("Modified FFO")

Modified FFO adds back an adjustment for any above or below-market ground lease amortization to traditionally defined FFO.

Modified Funds From Operations

Modified Funds from Operations ("Modified FFO") adds back an adjustment for any below-market ground lease amortization to traditionally defined FFO.

We believe this a useful supplemental measure in evaluating our operating performance due to the non-cash accounting treatment under GAAP, which stems from the third quarter 2014 acquisition of two option properties following our formation transactions as they carry significantly below market ground leases, the amortization of which is material to our overall results.

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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:

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

Three Months Ended March 31,

(amounts in thousands) 2025 2024

(unaudited) (unaudited)

$ 22,796 $ 19,928 $ 61,566 $ 68,577

Net income $ 15,778 $ 10,215

Non-controlling interests in other partnerships — (4)

Private perpetual preferred unit distributions (1,050) (1,050)

(1,050) (1,050) (3,151) (3,151)

Real estate depreciation and amortization 47,871 44,857

44,871 45,174 136,126 136,085

Gain on disposition of property (13,170) —

(1,262) — (12,065) (29,261)

FFO attributable to common unitholders 49,429 54,018

65,355 63,941 182,472 172,181

Amortization of below-market ground leases 1,958 1,958

1,958 1,957 5,874 5,873

Modified FFO attributable to common unitholders 51,387 55,976

67,313 65,898 188,346 178,054

Interest expense associated with property in receivership 647 —

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Core FFO attributable to common unitholders $ 52,034 $ 56,529

$ 69,235 $ 65,898 $ 191,449 $ 178,054

Weighted average Operating Partnership units

264,787 262,756 264,675 263,379

269,613 266,073 268,608 265,269

Basic 267,073 264,562

Diluted 269,529 267,494

Factors That May Influence Future Results of Operations

Due to the relatively small number of leases that are signed in any particular quarter, one or more larger leases may have a disproportionately positive or negative impact on average rent, tenant improvement and leasing commission costs for that period.

As a result, we believe it is more appropriate when analyzing trends in average rent and tenant improvement and leasing commission costs to review activity over multiple quarters or years.

As a result, we believe it is more appropriate when analyzing trends in average rent and tenant improvement and leasing commission costs to review

activity over multiple quarters or years.

Tenant improvement costs include expenditures for general improvements occurring concurrently with, but that are not directly related to, the cost of installing a new tenant.

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 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.

As of March 31, 2025, there were approximately 0.7 million rentable square feet of space in our portfolio available to lease (excluding leases signed but not yet commenced) representing 7.9% of the net rentable square footage of the properties in our commercial portfolio.

In addition, leases representing 4.7% and 6.5% of net rentable square footage of the properties in our commercial portfolio will expire in 2025 and in 2026, respectively.

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Observatory Operations

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.

For the three months ended March 31, 2025, the Observatory hosted 428,000 visitors, compared to 485,000 visitors for the three months ended March 31, 2024, a decrease of 11.8%.

Observatory revenue for the three months ended March 31, 2025 was $23.2 million, a 5.8% decrease from $24.6 million for the three months ended March 31, 2024.

The Observatory revenue decrease was driven by lower visitation levels due to the timing of the Easter holiday that fell in April during 2025 as compared to March in 2024.

Observatory revenues and admissions are dependent upon the following:

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Year to date in 2025, 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.

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

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

The absence of near term debt maturities provides an added degree of security.

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