Q2 2025 Empire State Realty Trust Inc Earnings Call

Operator: 25 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.

Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Heather Houston: It is now my pleasure to introduce Heather Houston, Senior Vice President, Chief Counsel, Corporate, and Secretary. Thank you. You may begin.

Greetings and welcome to the Empire State Realty. Trust second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the form of presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Heather Houston, senior Vice President, Chief counsel corporate and secretary. Thank you. You may begin.

Speaker: Good afternoon.

Speaker: Welcome to Empire State Realty Trust second quarter 2025 earning In addition to the press release distributed yesterday, a quarterly supplemental package with further detail on our results and our latest investor are posted in the investor section of the company's website at esrtreads.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in applicable securities law, including those related to market conditions, property operations, capital expenditures, income, expense, financial results, and proposed transactions and events. As a reminder, forward-looking statements represent management's current... They are subject to risks and uncertainties, which may cause actual results to differ from those discussed.

Good afternoon. Welcome to Empire State Realty. Trust second quarter 2025 earnings conference call.

In addition to the pressure release distributed yesterday, a quarterly supplemental package.

The further detail on our results, and our latest investor presentation.

were posted in the investor section of the company's website at esrt reed.com

On today's call Management's prepared, remarks and answers to your questions. May contain forward-looking statements as defined in applicable Securities Law, including those related to market conditions, property operations, Capital expenditures income expense, Financial results and proposed, transactions and events.

As a reminder, or looking statements represent Management's, current estimates.

Speaker: Empire State Realty Trust assumes no obligation to update any for booking statement in the We encourage listeners to review the more detailed discussions related to those board looking statements and the company's filings with the SEC.

they are subject to risks and uncertainties, which may cause actual results to differ from those discussed today,

Empire State Realty Trust assumes. No obligation to update any forward-looking statement in the future.

We encourage listeners to review. The more detailed discussions related to those, forward-looking statements and the company's filings with the SEC.

Speaker: During today's call, we will discuss certain non-GAAP financial measures, such as FFO, Modified and Core FFO, NOI, Same-Store Property Cash NOI, EBITDA, and Adjusted EBITDA, which we believe are meaningful in evaluating the company's performance. The definitions and reconciliations of these measures to the most directly comparable GAAP measures are included in the Earnings Release and Supplemental each available on the company's.

Evaluating the company's performance, the definitions and reconciliations of these measures to the most directly comparable. Gaap measures are included in the earnings release and supplemental package.

Tony Malkin: Now, I will turn the call over to Tony Malkin, our Chairman and Chief Executive. Good afternoon, everyone. Yesterday, we reported ESRT's second quarter and year-to-date results. We delivered strong office leasing, and we had a more challenged quarter for the observatory. Our progress in our core office portfolio reflects the value of our proposition, and observatory performance was impacted by adverse weather and lower demand from past programs, which are predominantly international. On this call, the team will walk through our adjusted full-year outlook to reflect observatory performance.

Each available on the company's website.

Speaker Change: Now I will turn the call over to Tony Malkin, our chairman and chief executive officer.

Good afternoon everyone. Yesterday, we reported esrt second quarter and year to date results.

We delivered, strong offices, Leasing. And we had a more challenged quarter for the observatory.

Speaker Change: Our programs in our core office, portfolio reflects the value of our proposition and Observatory performance was impacted by adverse weather and lower demand from past programs, which are predominantly International.

Tony Malkin: ESRT is purpose built for strength and agility across all cycles. Our long term leases, high occupancy Diversified Income Streams and Flexible Balance Sheet are a solid foundation for consistent performance and strategic options. In New York City, demand for our top-of-tier office space remains robust. Our modernized, well-located, near-mass transit, amenity-rich portfolio is supported by our sustainability leadership and strong financial position. This clear differentiation leads the market and we can thrive in any environment and continue to deliver long-term value. In the second quarter, our leasing team continued to put points on the board with approximately 232,000 square feet leased.

Speaker Change: On this call, the team will walk through our adjusted full year outlook to reflect Observatory performance.

Speaker Change: Esrt is purpose, built for strength and Agility across all Cycles. Our long-term leases High occupancy.

Diversified income streams and flexible balance sheet are a solid foundation for consistent performance and strategic options.

In New York City demand for our topic to your office. Space remains robust, our modernized well-located near mass transit. Amenity risk portfolio is supported by our sustainability leadership and strong financial position.

This clear differentiation leads the market and we can thrive in any environment and continued to deliver long-term value.

Tony Malkin: which includes 202,000 square feet of new Manhattan office leasing at double-digit positive mark-to-market leasing spread. As we stated would happen in our last call, our Manhattan office portfolio is 93.8% leased and we expect further leasing and occupancy gains for the full year. We achieved our 16th consecutive quarter of positive New York City office mark-to-market rent spread. Our observatory generated $24 million in NOI in the second quarter in the face of a visitation decline of 2.9%. Revenue per capita increased 2.3% year over year. More than half of our visitors are domestic and our international audience remains well diversified with no single region accounting for more than 10% of total visitation.

Speaker Change: In the second quarter, our leasing team continued to put points on the board with a proximately 232,000 square feet. Least

Speaker Change: Which includes 202,000 square feet of new. Manhattan office, leasing at double-digit positive mark-to-market leasing spreads.

Speaker Change: As we stated what happened in our last call.

Speaker Change: Our Manhattan office portfolio is 93.8% leased and we expect further Leasing and documents he gained. So the full year

We achieved our 16th consecutive quarter of positive, New York City.

Speaker Change: Office Mark to Market rent spreads.

Our Observatory generated 24 million dollars in noi and the second quarter in the face of a visitation decline of 2.9%.

Speaker Change: Revenue per capita increased 2.3% year-over-year.

Tony Malkin: The observatory is resilient across all cycles, as shown on slide 18 of our latest investor presentation. Our best-in-class balance sheet continues to be a key strategic advantage for ESRT. It gives us the flexibility to lease space, maintain our portfolio to the highest standards, and act opportunistically to create long-term value for our shareholders.

And our International audience remains. Well, Diversified with no single region accounting for more than 10% of total visitation.

Speaker Change: The Observatory is resilient across all Cycles as shown on slide 18 of our latest investor presentation.

Our best-in-class balance sheet continues to be a key, strategic Advantage for esrt.

Speaker Change: It gives us the flexibility to lease space maintain our portfolio to the highest standards and act opportunistically to create long-term value for our shareholders.

Tony Malkin: Sustainability continues to be a cornerstone of ESRT's business philosophy, and we are the leader in environmental stewardship and healthy building performance. Our sustainability work that we began in 2007 has always been focused on business outcomes and we continue to engage actively with our tenants to help them achieve their own sustainability objectives. Our entire organization remains laser-focused on the company's five priorities to lease space, sell tickets to the observatory, manage our balance sheet, identify growth opportunities, and achieve our sustainability goals.

Speaker Change: Sustainability continues to be a Cornerstone of esrt business philosophy. And we are the leader in environmental stewardship and healthy building performance.

Speaker Change: Our sustainability work that we began in 2007, has always been focused on business outcomes and we continue to engage actively with our tenants to help them achieve their own sustainability objectives.

Steve: Steve, Tom, and Christina will provide more detail on our progress and outlook for the balance of 2025. Steve? Thanks, Tony. For the second quarter of 2025, we reported core FFO of $0.22 per diluted share. Same store property cash NOI was down 3% year over year after the exclusion of lease termination fees and approximately $2 million of non-recurring revenue items recognized in the second quarter of 2024. Operating expenses were up 8.8%, primarily due to increases in real estate taxes, cleaning-related payroll, and repair and maintenance work that included approximately $1.4 million of non-recurring repair work in the quarter.

Our entire organization remains Ledger laser, Forest on the company's 5 priority is to lease space. Sell tickets to The Observatory manage, our balance sheet, identify growth opportunities and Achieve our sustainability goals.

Speaker Change: Steve Tom and Christina will provide more detail on our progress and outlook for the balance of 2025.

Steve: Steve. Thanks Sony.

Steve: For the second quarter of 2025, we reported core fso of 22 cents per diluted share.

Same store property cach. Noi was down, 3% year-over-year. F is the exclusion of lease termination fees and approximately dollars of non-recurring Revenue items recognized in the second quarter of 2024.

Steve: Operating expenses were up 8.8% primarily due to increases in real estate taxes, cleaning related, payroll and repair, and maintenance work that included approximately 1.4 million of non-recurring repair work in the quarter.

Steve: With the exclusion of the aforementioned repair work, operating expenses were up 6.7% year over year. These increases in operating expenses were partially offset by higher tenant reimbursement. In our observatory business, we generated approximately $24 million of net operating income in the second quarter, or a 4.3% decline year over year. Observatory expenses totaled $9.8 million, and revenue per capita continued to improve year over year.

Steve: With the exclusion of the aforementioned repair work operating expenses over up 6.7% year-over-year. These increases in operating expenses were partially offset by higher tenant reimbursement income.

Steve: Regenerated approximately 24 million of net operating income in the second quarter or 4.3% decline year-over-year.

Steve: To expenses total of 9.8 million and revenue per capita continued to improve year-over-year.

Steve: Turning to our outlook for 2025, with visibility on the full first half of the year, we have revised our observatory NOI guidance to a range of 90 to 94 million. Last quarter, we acknowledged the headwinds the observatory could face this year, including reduced tourism. During the first six months of 2025, the observatory was impacted by bad weather, particularly on the weekends in May and June, and lower demand from our past program business, which is predominantly international. As a result, we revised our NOI guidance for the observatory, tracing our year-to-date results and a more conservative outlook for the remainder of 2025.

To our outlook for 2025.

Steve: With visibility on the full first, half of the year, we have revised our Observatory. Noi guidance, to a range of 90 to 94 million.

Steve: Last quarter, we acknowledged the headwinds. The Observatory could face this year including reduced tourism.

Steve: during the first 6 months of 2025, The Observatory was impacted by bad weather, particularly on the weekends in May and June and lower demand from our past program business, which is predominantly International,

As a result. We revised our NY guidance for the observatory, turn our year to date results, and a more conservative outlook for the remainder of 2025.

Steve: During the first half of 2025, our NOI declined by 5.3% year over year. As a result of this adjustment, we now expect 2025 Core FFO to range between $0.83 and $0.86 per share. All other components of our guidance are unchanged. To reiterate my remarks from our last earnings call, we expect operating expenses and real estate taxes to fluctuate quarter over quarter, influenced by the timing of planned maintenance work, which is expected to be heavily concentrated in the third quarter, seasonal utility usage, and the timing of real estate tax abatement. Lastly, we expect Fed CapEx to trend lower in the second half of 2025.

Steve: During the first half of 2025, our noi declined by 5.3% year-over-year.

Steve: As a result of this adjustment, we now expect 2025 cor ffo to rank between 83 and 86 cents per share.

Steve: All other components of our guidance are unchanged.

Steve: To reiterate my remarks from our last earnings call. We expect operating expenses in real estate. Taxes to fluctuate, quarter over quarter influenced by the timing of planned maintenance work, which is expected to be heavily concentrated in the third quarter, seasonal utility usage and the timing of real estate tax abatements.

Steve: The building blocks I discussed in our last call with regard to TIs, leasing commissions, and building improvements remain intact. There will always be CapEx fluctuations quarter to quarter depending on the volume of new versus renewal leasing completed, where renewals typically have lower costs, and the timing of related TI spend generally falls into later periods. In 2Q25, our leasing volume was heavily weighted towards new leases, which drove higher leasing commissions in the quarter, which are recognized immediately, and the TIs associated with these leases are expected to be recognized over the remainder of 2025 and into 2026.

Lastly, we expect fed capex to Trend lower in the second half of 2025.

Steve: The building blocks I discussed in our last call with regard to TI's using commissions and building improvements remain intact.

There will always be capex fluctuations quarter to quarter depending on the volume of new versus renewal leasing completed where renewals typically have lower costs and the timing of related. TI spend generally falls into later periods.

In 2q 25, our leasing volume was heavily weighted towards a new leases which drove higher losing Commissions in the quarter which are recognized immediately and the TI's associated with these. Leases are expected to be recognized over the remainder of 2025 and into 2026.

Tom: And with that, I will now turn the call over to Tom. Hey, thanks, Steve, and good afternoon, everyone. We had another strong quarter with 232,000 square feet total leasing at 7% positive market market rent spreads in our commercial portfolio. That includes a 14 year 40,000 square foot expansion lease with an investment firm at One Grant Central Place. a 12-year, 39,000-square-foot new lease with Ellsberg Baker at the Empire State Building. an 11-year, 25,000-square-foot new lease with Mott McDonald at the Empire State Building, a 12-year, 24,000-square-foot expansion lease with Slice Architects at 1359 Broadway, and we signed leases for 11 pre-built office suites, which total 77,000 square feet.

Tom: And with that I will now turn the call over to Tom Tom Tom. Hey thanks Steve and good afternoon everyone.

Tom: We had another strong quarter with 232,000 square feet. Total leasing at 7%, positive marked of Market rent spreads in our commercial portfolio.

Tom: That includes a 14-year 40,000 square foot expansion lease with an investment firm at 1 grand central place.

A 12-year 39,000 square foot new lease with ellisburg Baker at the Empire State Building

Tom: In the second quarter, we signed 222,000 square feet of new and renewal leases in our Manhattan office portfolio, where we have only 93,000 square feet of remaining lease expirations to address for the balance of 2025. Our Manhattan office portfolio stands at 93.8% leased, an increase of 80 basis points compared to last quarter, and an increase of 630 basis points since the fourth quarter of 2021. Occupancy is now 89.5% and an increase of 140 basis points compared to last quarter. We have a healthy pipeline of leasing activity, which includes approximately 160,000 square feet of leases in negotiation and a few hundred thousand square feet of proposals exchanged with tenants, tenant prospects in various industries, including finance, professional services, TAMI, and others.

Tom: And 11year 25,000 square foot new lease with M McDonald at the Empire State Building a 12-year 24,000 square foot expansion. Lease with sliced Architects at 1359 Broadway and we signed a leases for 11 pre build office suites, which total 77,000 square feet.

Tom: In the second quarter, we signed 222,000 square feet of new and renewal leases in our Manhattan office portfolio where we have only 93,000 square. Feet of remaining lease expirations to address for the balance of 2025.

Tom: Our Manhattan office portfolio stands at 93.8% leased and increase of 80 basis points compared to last quarter, and an increase of 630 basis points since the fourth quarter of 2021 occupancy is now 89.5% and an increase of 140 basis points compared to last quarter.

Tom: We have a healthy pipeline of leasing activity which includes approximately 160,000 square feet of leases in negotiation.

Tom: And a few hundred thousand square feet of proposals exchanged with tenants, what kind of prospects in various Industries, including Finance.

Speaker Change: Professional Services Tammy and others.

Tom: Our tour volume and leasing activity remains strong. We expect to further increase our leased percentage for our Manhattan office. And we remain on track with our full year guidance increase in occupancy rate of 89% to 91% by year end. In today's bifurcated office market of haves and have-nots, the ESRT stands out as a clear have. Demand is concentrated in high-quality assets and tennis-prioritized buildings, which are top-of-tier, modernized, well-located near mass transit, sustainability-focused, amenity-rich, and backed by a financially sound owner who will provide quality services and a high level of execution. DSRT's portfolio checks all these boxes.

Our tour of volume and leasing activity remains strong. Uh, we expect to further increase our least percentage for our Manhattan office and we remain on track with our full year, guidance, increase in occupancy rate of 89, to 91% by year end.

Speaker Change: in today's bifurcated, office Market of halves and Have Nots, the SRT stands out as a clear half

Speaker Change: demand is concentrated in high-quality assets and Tennis prioritized buildings, which are top of tier modernized well-located, near mass transit sustainability focused, amenity-rich and backed by financially sound owner who will provide quality services and a high level of execution.

Srt's portfolio. Checks. All these boxes.

Tom: The supply of such top-of-tier office space in Manhattan continues to tighten, which creates a favorable supply-demand dynamic that allows ESRT to capture outsized value and market share. We have increased our asking rents. reduced concessions and seek longer lease terms throughout our portfolio. We just completed our 16th consecutive quarter with positive mark to market lease spreads in our Manhattan office portfolio, where spreads were positive 12.1 percent in the second quarter. We continue to see stable trends in TI packages in the marketplace. During the first half of 2025, our leasing costs, including TIs and leasing commissions, were consistent with our full year 2024 adjusted for term.

Speaker Change: The supply of such top of tier office space, in Manhattan continues to tighten, which creates a favorable Supply demand Dynamic that allows esrt to capture outside value and market share.

Speaker Change: Reduced concessions and seek longer lease terms throughout our portfolio. We just completed our 16th consecutive quarter with positive mark-to-market lease spreads in our Manhattan office portfolio. We're spreads, were positive 12.1% in the second quarter.

We continue to see stable Trends in TI packages in the marketplace.

During the first half of 2025, our leasing costs, including TI's and leasing commissions.

Speaker Change: Were consistent with our full year. 2024 adjusted for term.

Tom: Our mix of new and renewal leasing will fluctuate from quarter to quarter, and new leases typically require higher leasing costs than renewal. In the second quarter, over 90 percent of our Manhattan office leasing was for new or expansion transactions, which demonstrates strong demand for our high-quality office space. Additionally, our net effect of rent increased by 2 percent over last quarter due to longer average lease term of 10.1 years and higher starting rents compared to the prior quarter. We have $50 million in income relative cash revenue from signed leases not commenced and free rent burn off as shown on page 19 of our supplemental that reflects our leasing success.

Speaker Change: our mix of new and renewal leasing will fluctuate from quarter to quarter and new leases typically require higher leasing costs than renewals

in the second quarter over 90% of our Manhattan office, leasing was for new or expansion transactions, which demonstrates strong demand for our high-quality Office Space.

Speaker Change: Additionally, our net effect of rent increased by 2% over the last quarter due to longer average lease term of 10.1 years and higher starting rents compared to the prior quarter.

Speaker Change: We have 50 million dollars in incremental cash revenue from sign. Leases is not commenced and free. Rent, burn off as shown on page, 19 of our supplemental that reflects our leasing success.

Tom: Our multifamily portfolio continues to excel benefiting from robust market fundamentals, strategic property improvements and improved operations. The portfolio was 99% occupied and achieved 8% year over year rent growth in the second quarter. Lastly, these outstanding results are a testament to the exceptional work by our talented and seasoned leaders in the real estate group.

Speaker Change: Our multi-family portfolio continues to excel, benefiting from robust Market, fundamentals, strategic property improvements and improved operations. The portfolio is 99% occupied and Achieve 8% year-over-year. Rent growth in the second quarter,

Tom: This includes Ryan Kass, our Senior Vice President of Leasing, Pete Sholin, Senior Vice President of Design and Construction, Mike Prunty, Senior Vice President of Property Management, and Dana Schneider, our Senior Vice President of Energy and Sustainability. These senior executives lead a dedicated team of professionals who consistently deliver top-notch service to our tenants and deliver excellent results.

Speaker Change: Lastly, these outstanding results are Testament to the exceptional, work by our talented and seasoned leaders in the Real Estate Group.

This includes Ryan Cass, our senior vice president of Leasing.

Pete, Champs, senior vice president of design and construction. Mike pronty, Senior, vice president of property management and Dana Schneider our senior vice president of energy and sustainability.

Christina: With that, thank you, and I'll turn it over to Christina. Thanks, Tom. I'd like to provide additional color on three key areas today, the performance of our observatory, our recent retail acquisition, and overall commentary on Williamsburg and the current dynamics of the investment market. Our iconic Empire State Building Observatory remains a resilient asset and a meaningful contributor to our overall business. With high operating margins and dynamic pricing that adjusts with inflation, it is structurally advantaged within our portfolio. While first half performance was hurt by external headwinds, including an unusually high number of bad weather days, particularly on weekends, and lower demand from our past program business, which is predominantly international, the observatory remains a positive contributor to cash flow and earnings.

These senior Executives lead, a dedicated team of professionals who consistently deliver top-notch service to our tenants and deliver, excellent results with that. Thank you and I'll turn it over to Christina.

Christina: Thank you, Tom.

I'd like to provide additional color on 3 key areas. Today, the performance of our Observatory, our recent retail, acquisition and overall commentary on Williamsburg and the current dynamics of the investment Market.

Christina: Our iconic Empire State Building observatory remains a resilient asset and a meaningful contributor to our overall business with high operating margins and dynamic pricing that adjusts with inflation. It is structurally Advantage within our portfolio.

Christina: Long-term fundamentals of this business continue to stand out. Importantly, we remain focused on the things we can control, the enhancement of our guest experience, the execution of targeted marketing campaigns, and driving operational efficiency. Our distinct position as the iconic and authentic New York City experience anchored by an iconic global landmark sets us apart in a competitive market and positions the Observatory for sustained long-term growth as external conditions normal.

Well, first half performance Was Heard by external headwinds including an unusually high number of bad weather days, particularly on weekends and lower demand from our past program business, which is predominantly International, The Observatory remains a positive, contributor to cash, flow and earnings.

Christina: Long-term fundamentals of this business. Continued to stand out importantly, we remain focused on the things, we can control the enhancement of Our Guest experience. The execution of targeted marketing campaigns and driving operational efficiency,

our distinct position as the iconic and authentic New York City experience anchored by an iconic, Global Landmark sets us apart in a competitive market and positions The Observatory for sustained long-term growth as external conditions normalize.

Christina: Our acquisitions and entry into the Prime Retail Corridor on North 6th Street in Williamsburg, Brooklyn over the past two years aggregate approximately $250 million. This reflects our disciplined and strategic approach to capital allocation and value creation as this represented a redeployment of capital from our suburban asset distribution with lower growth and higher capex into North 6th Street retail with higher long-term growth prospects and lower capex. At the end of June, we closed on the previously announced acquisition of a prime retail asset on North 6th Street in Williamsburg for $31 million. 86-90 North 6th Street is approximately 15,000 square feet of ground retail space on the strategic corner of North 6th Street and White Avenue, adjacent to our existing holding.

Christina: Our Acquisitions and entry into the prime retail Corridor on North 6th Street in Williamsburg Brooklyn over the past 2 years aggregate approximately 250 million dollars.

Christina: This reflects our disciplined and strategic approach to Capital allocation and value creation. As this represented a redeployment of capital from our Suburban assets. Expositions with lower growth and higher capex. Into North 6th Street, retail with higher long-term growth prospects, and lower capex.

Christina: At the end of June, we closed on the previously announced acquisition of a prime. Retail asset on North 6th Street in Williamsburg for 31 million.

Christina: we plan to redevelop and reposition the app. We now own three key street corners on North 6th Street and one of the most dynamic and sought-after retail corridors in Williamsburg. Prime location benefits from high foot traffic, a strong local demographic, and growing interest from both national retailers and institutional investors. The increased presence of institutional capital in the area further validates our thesis and enhances the long-term value of our For more information visit www.empirestate.com These acquisitions position us to capture outsized returns as the neighborhood continues to evolve and mature.

Christina: 86-90. North 6th Street is approximately 15,000 square feet of ground retail space on the Strategic corner of North 6th Street and White Avenue adjacent to our existing Holdings.

Christina: We plan to redevelop and reposition the assets.

Christina: We now own 3, key street corners on North 6th Street and 1 of the most dynamic and sought-after Retail corridors in Williamsburg.

Christina: This prime location benefits from high foot traffic, a strong local demographic, and growing interest from both National retailers and institutional investors.

Christina: The increased presence of institutional capital in the area, further validates, our thesis and enhances the long-term value of our Holdings.

Christina: We continue to see increased activity in the investment and acquisitions market, with more transactions beginning to take place, especially as interest in New York City is strong, given favorable operating fundamentals, pricing expectations have adjusted, and institutional capital reengaged. We remain well positioned to act with discipline and agility. We will continue to pursue opportunities where we see attractive pricing and clear potential to add value to our expertise in operating and repositioning assets.

We continue to see increased activity in the investment in Acquisitions Market with more transactions. Beginning to take place, especially as interest in New York. City is strong is in favorable operating fundamentals pricing. Expectations have adjusted and institutional capital re-engages.

Christina: We remain well positioned to act with discipline and Agility.

Christina: We will continue to pursue opportunities where we see attractive pricing and clear, potential to add value to our expertise, in operating and repositioning assets.

Christina: Our strong balance sheet gives us flexibility to be opportunistic. We manage our balance sheet proactively with strong liquidity, no floating rate debt exposure, a well-ladder debt maturity schedule, and no unaddressed maturity until December 2020. Our leverage remains low relative to our New York City-focused peers, with net debt to EBITDA at 5.6 times as of quarter end. This positions us well to support both our leasing initiatives and capital allocation priorities, and we are confident in our strategy and fundamentals, and continue to execute with discipline across our partners.

Christina: Our strong balance sheet, gives us flexibility to be opportunistic.

We manage our balance sheet. Proactively with strong liquidity. No floating rate, debt. Exposure a well ladder debt maturity schedule and no 1 addresses maturity until December 2026.

Our leverage remains low relative to our New York City focused peers with net debt to ibaad 5.6 times as of quarter end.

Operator: That concludes our prepared remarks. With that, I'll turn the call back to the operator to begin the Q&A session. Operator. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the line. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for your questions.

Christina: This positions us well to support both our leasing initiatives and capital allocation priorities and we are confident in our strategy and fundamentals and continue to execute with discipline across our platform.

Christina: That concludes our prepared remarks with that. I'll turn the call back to the operator to begin the Q&A session operator.

Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue participants using speaker equipment. It may be necessary to pick up your handset before pressing the star Keys 1 moment, please while we pull for your questions.

Blaine Heck: Our first questions come from the line of Blaine Heck with Wells Fargo. Please proceed with your question. Great, thanks. Good afternoon.

Blaine Heck: Our first question is come from the line of Blaine heck with Wells. Fargo, please proceed with your questions.

Christina: Just starting from the observatory, I guess, can you talk about the visitation trends you've seen thus far in July and how you came to the revised guidance targets for that asset? I guess, do you feel as though this is now a relatively conservative range and there's more upside bias or are there scenarios in which, you know, you think you could hit the low end or below? And I guess, what would drive it?

Tony Malkin: So, first of all, I'll let Christina talk to the point about the guidance and how we constructed that. I don't think that one should look to either end of the range. We look at the range, and we certainly look to outperform wherever we can. In the first quarter, we did discuss our unusually high number of bad weather days. and that was consistently on weekends. And that phenomenon continued through the first two months of the second quarter. We had 21 bad weather days in 2Q25 versus 8 in 2Q24. And when you have that many and they're on weekends and they tend to be consecutive with an average visitor state in New York City of three days, consecutive bad weather days mean we never see that visitor.

Great, thanks. Good afternoon. Um, just starting on the observatory, I guess. Can you talk about the visitation Trends? You've seen thus far in July and, and how you came to the revised guidance targets for, um, that asset I guess. Do you feel as though this is now a relatively conservative range, and there's more upside bias, or are there scenarios in which, you know, you think you could hit the low end or below? Uh, and and I guess what would drive that

so,

Blaine Heck: first of all, um,

Speaker Change: I'll let Christine to talk to the point of about the guidance and how we constructed that, I don't think that 1 should look to either end of the range. We look at the range and and that we're certainly look to outperform wherever we can.

Blaine Heck: In the first quarter, we did discuss our unusually high number of bad weather days.

Uh, and that was consistently on weekends.

And that phenomena consent uh continued through the first 2 months of the second quarter. We had 21 bad weather days in uh 2 Q, 25 versus 8 and 2 Q. 24.

Christina: We have seen a lower demand from our past program as we've referenced. That's a predominantly international visitor. and it's predominantly a budget conscious visitor. So so when we look at the at what we have, we do know that historically 60 percent of our NOI comes in the second half. We're conscious of challenges for Brand America, and that said, New York City is a strong tourism market. So, you know, we continue to pivot and focus on from where the tourists come to deliver better results.

And when you have that many and they're on weekends, and they, and they tend to be consecutive with an average visitor state, in New York City of 3 days consecutive bad, weather days. I mean, we never see that visitor,

Uh, we have seen uh, a lower demand from our past program, at least as we've referenced. Uh, that's a predominantly International visitor.

Blaine Heck: And it's predominantly a budget, conscious visitor.

Blaine Heck: So uh, so when we look at the at what we have, we do know that historically 60% of our noi comes in the second half.

Um, we're conscious of challenges for brand America. That said, New York City is strong tourism market. So, you know, we we we we continue to Pivot and focus on from where the tourists come.

Speaker: Christina, do you want to talk about how we composed our guidance? Sure. We provide a range that says if the first half experienced some slowdown due to a combination of weather and visitorship, especially from international, without any incremental information, if that were to persist, this is roughly a range. And as Tony mentioned, we focus on, you know, outperforming wherever we can and the factors that we can control, which is to provide a great experience and continue to target our audience. But we're takers in the market, and some of it is the market environment, but we'll obviously seek to outperform what we can.

Blaine Heck: Uh, to deliver better results. Christina. Do you want to talk about how we compose our guidance? Sure. We provide a range that says, if the first half experience some slowdown due to a combination of weather and visitorship especially from International, um, without any incremental information, if that were to persist, this is roughly a range. And as Tony mentioned we focus on, um, you know, outperforming wherever we can and the factors that we can control, which is to provide a great experience and continue to Target, um, our audience. Uh, but we're takers in the market and some of it is the market environment. But we'll obviously seek to outperform what we can.

Speaker: Okay, great. That's very helpful.

Tony Malkin: Maybe returning to Tony, I guess there was a pretty clear negative initial reaction to the Democratic primary results, but it seems as though the leasing commentary on this call has remained generally positive. So, I wanted to get your thoughts on your general view of any potential headwinds that could come from the results of the mayoral race and whether you've seen any signs of hesitations from prospective tenants to sign significant leases driven specifically by concern around those changes at City Hall. So first of all, no. And as Tom mentioned, business is strong. Our leasing activity remains strong.

Blaine Heck: is driven specifically by concern around those changes, at City Hall,

So, first of all know, uh, and as Tom mentioned business is strong.

Tom: We have a healthy pipeline of activity. We're always concerned about New York City's quality of life and opportunities for growth. At the same time, we don't do politics. We do policy. We've worked with successive New York City administrations. We'll work with the next. We'd just like to throw in our clear comment that the priority of every New York City mayor should be New York City's safe streets, schools, and businesses. and every New York City mayor needs to respect all of its residents. So, you know, with that in mind. We don't see anything except for perhaps a slight pause in the transaction market of buying and selling of properties.

Blaine Heck: Or leasing activity remains strong, we have a healthy pipeline of activity.

Blaine Heck: Um, we're always concerned about New York City's quality of life and opportunities for growth.

Blaine Heck: Uh, at the same time we don't do politics. Uh, we do policy. We've worked with success in New York City administrations will work with the next

Blaine Heck: We just like to throw in our clear comment that priority of every New York city mayor should be in New York City, Safe Streets, schools and businesses.

Blaine Heck: And every New York city, mayor needs to respect all of its residents.

so, you know, with that in mind,

Blaine Heck: We we don't see anything uh, except for perhaps a slight, pause in the transaction Market.

Speaker: And business is strong.

Tom: Tom, do you want to throw anything else in there? Yeah, Blaine, there's good momentum in the market and we're seeing strong demand for top of tier products and location services and we've seen no change in tenant behavior. There's just, as I've stated before and I'll say it again, that there's just a dwindling supply of good quality buildings and spaces for which tenants can choose and the demand is there and we've seen no change in momentum or tenant's behavior. Good quality buildings, good quality landlords. you know, correct pricing for us. We're absolutely top of tier in our in our pricing range.

Blaine Heck: Of buying and selling a properties. Uh, and and business is strong Tom. You want to throw anything else in there. Yeah, blame there. There's good. Momentum in the market and we're seeing strong demand for top of your products and location of services. And we've seen no change in, uh, tenant Behavior. Uh, they're just as as I've stated before and, and, and I'll say it again, that there's just a Dawning dwindling supply of good quality buildings and spaces for, from which tenants can can choose and the demand is there, uh, and we've seen no change in, in, in, in, in momentum, where tenants Behavior, good, quality buildings, good quality. Landlords

Speaker: And, you know, 16 consecutive quarters of mark-to-market growth. We feel very good. Is it possible that we are unusual? Maybe. We only tell you about what we see. Okay, great. Thank you, guys. Thank you.

Blaine Heck: You know, correct pricing for us. We're absolutely top of tier in our, in our pricing.

Range. And, you know,

Blaine Heck: 16 consecutive quarters of of, of of, Mark to market growth.

Blaine Heck: We we feel we feel very good. Uh is it possible that that we are unusual? Maybe like we only tell you about what we see?

Okay, great. Thank you. Yes.

Blaine Heck: Thank you.

Steve Sakwa: Our next questions come from the line of Steve Sakwa with Evercore ISI. Please proceed with your question. Yeah, thanks. Good afternoon.

Thank you. I were next questions. Come from the line of Steve Saca with evercore. Isi, please proceed with your questions.

Steve: Maybe to follow up on Blaine's question on leasing, I guess, Tom, at like 94% leased, I mean, do you sense that tenants, I don't know, the word panic is probably too strong a word, but do you sense that there's concern on their part about space and renewing deals? And are you sensing that tenants are coming to you a bit earlier in the process now that maybe the tide is shifting a little bit? And are you doing anything differently, I guess, on the leasing strategy? Well, we're certainly focusing on leasing the vacant space that we have, and we've got a good pipeline of activity.

Speaker Change: Uh, yes thanks. Good afternoon. Um, maybe to follow up on Blaine's question, on leasing. I, I guess. Tom, like 94% at least. Um, I mean, do you sense the tenants? I don't know the word panics, probably too strong a word, but do you sense that there's concern on their part about space and renewing deals? And are, are you sensing that tenants are coming to you a bit earlier in the process? Now, that, uh, maybe the tie the shifting a little bit and, and are you doing anything differently? I guess on the leasing strategy.

Tom: We have some 14 leases in negotiation for about $100 square feet of leases, that includes pre-built and full floors. In past quarters, we have done some early renewals, and we continue to focus on that. Didn't do any this quarter, but our team is focused on expirations in 2026 and 27 to lock in tenants. So we're where we can. I think tenants are being advised by the brokers that they should move quickly because there will be continuing reduced supply of quality space. Again, quality defined by, you know, amortized, modernized, good, solid landlords, good location, sustainability, leadership.

Well, we're certainly focusing on leasing the Vegas space that we have uh and uh we we've got a good pipeline of activity, we got some 14 leases in negotiation for about a hundred thousand square feet of leases that include pre-built and full floors in past quarters. We have done some early renewals and we continue to to uh, focus on that didn't do any of this quarter. But we're, we're, we're our team is focused on expiration.

Tom: And we check all those boxes. And so I think that, again, there's really good momentum in the marketplace. And we just have not seen any slowdown or change.

Speaker Change: This is in 2026 and 27, to lock in tenants, uh, where where we can, uh, I think tenants are being advised by the Brokers that they should move quickly because there will be continuing uh, you know, reduced supply of of of quality space again. Quality defined by you know, amenitiz modernized Goods, solid landlords, good location, you know, sustainability leadership and we check all of those boxes. Uh and so the uh I I think that again, there's really good momentum. Momentum in the marketplace and we just have not seen any any slowdown or change.

Tony Malkin: Okay, thanks, and maybe just on the transaction market, I don't know, Tony or Christina, obviously your stock is trading at a fairly high implied cap rate, maybe the multiples somewhat elevated because of CapEx, but I guess how are you sort of thinking about making new investments? Have you changed sort of your hurdle rates, I guess, given where the stock is, and I know share buybacks were fairly minimal in the quarter, but just how are you sort of weighing the buybacks versus new investment opportunities, and I guess how wide is the landscape and deal flow today?

Okay, thanks and then maybe just on the transaction Market. I don't know Tony or or Christina, uh, you know, obviously your stock is trading at a, you know, fairly High implied cap rate. Um, maybe the the multiples um, you know, somewhat elevated because of capex. But I guess how are you sort of thinking about making new Investments, you know, have you changed sort of your hurdle rates I guess. Given where the stock is? And I know Cheryl BuyBacks were were fairly minimal in the quarter but, you know, just how are you sort of weighing the BuyBacks versus new investment opportunities and and you know, I guess how wide is the landscape and and deal flow today.

Christina: So I think we can, I'll take a stab at the beginning of that. We are still very much focused on what we can do with our existing. portfolio to create growth, number one. Number two, we have a high standard for what we expect to see from new investment. We don't have a 1031 need out there immediately that we do have a property on the market. So from the perspective of what we see, we did see some very aggressive bidding on multifamily leading up to the last few weeks. It's been a little slower. And needless to say, there is a transaction out there for a company that's going through a process.

Speaker Change: so I think we can, I think a stab at the beginning of that, uh, we are still very much focused on what

we can do with our existing.

Christina: We look at everything and see where we can do something that makes a value sense for us and our investors.

Uh and needless to say there is is is a transaction out there for a company that's going through a process. We look at everything and see where we can do something that makes a value sense for us and our investors

Christina: Christina, anything you want to add? No, I think you covered it. We continue to look at the landscape, focus on New York City, recognize where the share price is, recognize buybacks, definitely still part of the equation. And when we look at the market, we continue to have discipline and underwrite a lot of opportunities and make sure that we don't get caught up with, you know, chasing down, we want an appropriate return. And as a reminder, we distinguish between capital recycling, as well as use of fresh balance sheet capital for new investments, which we'd want to hire Great.

Speaker Change: You know, anything you want to add?

Speaker Change: No, I think you covered it. Um, we continue to um, look at the landscape focus on New York City, uh, recognize where the share price is recognized by Banks, definitely still part of the equation. And when we look at the market, we continue to have discipline and underwrite a lot of opportunities, um, and make sure that we don't get caught up with, you know, chasing down, we want an appropriate return. And as a reminder we distinguish between Capital recycling as well as um, you use the fresh balance sheet capital for New Investments. We we'd want to hire a return.

Speaker: That's it for me.

Speaker: Thank you.

Speaker Change: Great. That's it for me. Thank you.

Speaker Change: Thank you.

Seth Bergey: Our next questions come from the line of Seth Bergey with Citi. Please proceed with your question. Hi, thanks for taking my questions.

Speaker Change: Thank you. Our next question is come from the line of Seth Berg with the city. Please proceed with your questions.

Christina: Can you just talk about kind of the return expectations for the Brooklyn acquisition? Sure. So, as mentioned, it was a property that's located in a very strategic location, one of the key corners along North 6th Street. It's adjacent to our other assets. We viewed it as both a unique opportunity in and of itself, as well as adding to the value of our existing assets and overall to the street. So, it made a lot of sense. As we think about a redevelopment opportunity, we think of roughly sub-7%.

Seth Berg: Hi. Thanks for taking my questions. Um, can you just talk about kind of the return expectations for the Brooklyn acquisition?

Speaker: Within a couple of years, we've already seen strong leasing interest, and we look forward to announcing more to the market when the time is right. Great, thank you.

Uh sure. So as mentioned it was um a property that located uh in a very strategic location, 1 of the key Corners along, North 6th Street, it's adjacent to our other assets. So we viewed it as both a unique opportunity in and of itself as well as adding to the value of our existing assets and overall, um, to the street. So it made a lot of sense. Um, as we think about a Redevelopment opportunity, we think of roughly, um, sub 7%. Um, you know, within a couple of years we've already seen strong leasing interest and we look forward to announcing more to the market when the time comes

Christina: And just for the second question, you kind of mentioned the increase in transaction activity. You know, is there any update on the marketing process for the suburban office asset and any change in financing or the buyer pool or anything that would impact kind of pricing of that? That asset remains on the market. We'll provide an update when it's relevant. We continue to have discussions. So that's on that piece.

Speaker Change: Great. Thank you. And um just for the second question, you kind of mentioned that increase in transaction activity, um you know, is there any update on the marketing process for the Suburban, office office asset and any change in um financing or the buyer pool or anything that would impact kind of pricing of that.

Christina: And I think overall, comment on the financing market. Financing is available. There'll be some look at what the asset is and sponsor and specific debt metrics that can be supported by the asset. But I'd say financing is definitely available and out in the market. And you can see from transactions that are in the marketplace, either closed or near closed, it has picked up. There's definitely institutional capital. And New York City has moved from simply office curious to actionable. So that bodes well for the market. We continue to look for our spots. But I think overall in the marketplace, we should expect to see it pick up in action.

Speaker Change: Uh, that asset remains on the market. We'll provide an update. Um, when it's relevant, we continue to have discussions. Um, so that's on that piece and I think overall common on the financing Market. Financing is available, there will be some look at what the asset is and sponsor and specific debt metrics, um that can be supported by the asset, but I'd say financing is definitely available and out in the market. And you can see um, from transactions that are in the marketplace, either closed or near closed, it has picked up, there's definitely institutional capital

Um, and New York City has moved from Simply office curious to actionable. Um, so that both well for the market, we continue to look for our spots, but I think overall in the marketplace, um, we should expect to see it pick up in activity.

Speaker: Great. Thanks for taking my questions. Thank you.

Speaker Change: Great. Thanks for taking my questions.

Speaker Change: Thank you.

Dylan Burzinski: Our next questions come from the line of Dylan Burzinski with Green Street. Please proceed with your question. Thanks for taking the question. So it sounds like, you know, activity in New York office still continues to be very strong. I mean, are you seeing any change with regards to the amount of tech tenant demand within the market? Or are things still being largely driven by sort of the traditional financial services and legal services type tenants? It's really broad-based, and that's the good thing about a portfolio. We've always attracted tenants from a wide variety of industries. Right now, we've got activity with tenants in consumer goods, the fire sector, you know, finance, legal professional services, some nonprofits, some engineering services.

Speaker Change: Thank you. Our next questions, come from the line of Dylan berinsky with Green Street. Please proceed, with your questions.

Dylan Berinsky: Hey guys, thanks for taking the question. Uh so so it sounds like, you know, activity in New York office still continues to be very strong. I mean, are you seeing any change with regards to the amount of of tech tenant demand within the market or uh, or or things still being largely driven by sort of the, the traditional financial services, and legal services, type tenants,

Tom: But, you know, we have a good amount of tech tenants in our portfolio, and I would not be surprised if we get some activity in the coming few months. So, it's pretty broad-based, candidly, but right now, we're seeing a heavier weight in certainly the fire sector and professional services.

Dylan Berinsky: It's really broad-based, and it's a good thing about a portfolio. We've always attracted to tennis from a wide variety of Industries, right now, we've got activity, you know, with tenants and consumer goods. The fire sector, you know, Finance, uh, uh, Legal, Professional Services, some nonprofits, some engineering, uh, services. But, uh, you know, we have, uh, a good amount of tech tenants, uh, in our portfolio and I, I, I will not be surprised if we get some activity in the, in the coming few months. Um, so it's, it's pretty broad-based C, candidly but, but but right now we're seeing a heavier weight and certainly if the the fire sector and Professional Services,

Speaker: Great. Thanks, guys. That's all I have. Thank you.

Dylan Berinsky: Great. Thanks guys. That's all I have.

Jamie Feldman: Our next questions come from the line of Jamie Feldman with Wells Fargo. Please proceed with your question. Great. I just wanted to get your thoughts on the potential investment pipeline. You know, a lot of private credit investments out there, you know, a lot of talk around, you know, where they were priced at much lower interest rates. Here we are in a higher rate environment, but people want to recycle capital. and start putting it to work. So can you talk more about just what you may be seeing ahead in terms of, you know, real estate opportunities?

Speaker Change: Thank you. Our next questions, come from the line of Jamie Feldman with Wells, Fargo, please proceed with your questions.

Jamie Feldman: Uh, great. I just wanted to get your thoughts on, um, just to potential investment pipeline, you know, a lot of private credit Investments out there. Uh, you know, a lot of talk around, you know, where they, they were priced at much lower interest rates. Here we are in a higher rate environment, but people want to recycle capital and

Speaker: as people try to recycle capital and put it to work in fresh investments. Well, yeah, that's, that's interesting.

start putting it to work. So can you talk more about just what you may be seeing ahead? In terms of, you know, real estate opportunities?

Jamie Feldman: Um, as people try to recycle capital and put it to work in fresh Investments.

Tony Malkin: Certainly, that was the opportunity that created itself, presented itself for us in Williamsburg, and what allowed us to take advantage of that when we had our 1031 need. We are at the point of a second round of look at debt. rents have been attractive for us, rent growth has been attractive for us, one of the things that has created that attractiveness and that growth for us is in fact the fact that we are a have as opposed to a have not and that includes a good balance sheet so we're on the market and able to do business and we can lease without the requirement for a lender to be involved in the transaction, we have the capital to be able to make good.

Jamie Feldman: Well, you know, that's, that's interesting. Certainly, that was the opportunity that created itself, uh, presented itself, for us in in Williamsburg and what allowed us to take advantage of that when we had our 1031 need,

Jamie Feldman: Uh, we are at the point of a second round of look at debt.

Tony Malkin: I think people before had a view of stay alive to 95, and now people in many instances have a view survive 95, excuse me, 2005, sorry, I'm dating myself to the savings and loan crisis. Everyone's sort of laughing at me here in the room, it's how old I am. But that said, there is a second round underway right now, and there are a lot of things which might have been kicked down the road in 23 and 24 that begin to show up in 25. And so that may create more opportunity for us. Most of that we see is not necessarily a recycling, it's an exit from people who maybe the debt is the one who gets the money back as opposed to the owner.

Rents have been attractive for us. Rent, growth has been attractive for US, 1 of the things that has created that attractiveness and that growth for us is, in fact, the fact that we are a have as opposed to a have not and that includes good balance sheet so we're on the market and able to do business. And we can lease without the requirement, for a lender to be involved in the transaction, we have the capital to be able to make good.

Uh, I think people before had a view of Stay Alive to 95 and now people in many instances have a view, survive, uh, 95. Excuse me 2005. Sorry, I'm dating myself to the, the Savings and Loan crisis. Uh, everyone's sort of laughing at me here in the room, it's how old I am. Uh, but that said, uh, there is a second round underway right now and there are a lot of, uh, things which might have been kicked down the the the road in 23 and 24. That begin to show up in 25 and and so that may create more opportunity. For us. Most of that we see is not necessarily a recycling, it's an exit.

Jamie Feldman: Uh, from people who, uh, maybe the debt is the 1 who, who gets the money back as opposed to the, the owner.

Tom: Tom? And there are Gina? Go ahead. I'm sorry, could you repeat the question? I'm just in terms of geographic location, property type, you know, the assets with that type of debt, are they even, you know, in the in your strike zone, where you'd want to invest? When you think about what's out there? We've gotten close. We'll see where we get. We definitely have made efforts. And we've made efforts amiss on retail and office and resi, and we will continue to make efforts. We have to be disciplined about what we do and the returns that we should see in order to commit capital.

Tom.

Jamie Feldman: Go ahead.

Jamie Feldman: I'm sorry. Could you repeat the question?

Jamie Feldman: I'm just in terms of geographic location, uh, property type. You know, the assets with that type of debt. Are they even you know, in the, in your Strike Zone where you'd want to invest? When you think about what's out there?

Jamie Feldman: Uh, we've gotten close. We'll see, we'll see where we get. We we we definitely

Jamie Feldman: Uh, have a made efforts.

And uh, and and we've made efforts and myths on on, on, on on retail and office and resi, and we will continue to make efforts. We have to be disciplined about what we do and the returns that that we should see in order to commit capital.

Speaker: And then, just as a follow-up, can you talk about the decision to add your son to the board? We get a decent amount of questions on that move and, you know, just talk about the merits and how we should think about that. Sure.

Okay.

Speaker Change: And then just as a top, can you talk about the decision, to add your son, to the board? Uh, we get a decent amount of questions on on that move and you know, just talk about the merits and and uh, how we should think about that.

Tony Malkin: Tom DeRosa, for personal reasons, chose not to stand for re-election earlier this year. We're grateful to Tom for his service. He was there for our formation, chaired our audit committee, and he gave great contribution and commitment to ESRT. George Malkin has been an observer on the board and various board committees for more than two years. His qualifications are clear from his academic achievements, his business experience, and his success. So he's already added value to ESRT through his participations, introductions to businesses and capital sources, and a deep understanding of long-term capital investment analysis and strategic growth.

Speaker Change: Sure, uh, Tom Dosa for personal reasons, chose not to stand for reelection earlier this year.

Speaker Change: We're grateful to Tom for his service.

Speaker Change: He was there for our formation chaired, our audit committee and he gave great contribution and commitment to esrt. George malakin has been an observer on the board and various board committees for more than 2 years. His qualifications are clear from his academic achievements, his business experience, and his success,

Speaker Change: So he's already added value to esrt through his participations.

Tony Malkin: So the fact of the matter is, he is complementary to our board structure and our composition. And that's particularly relevant as we continue to execute on our strategies. The board agreed unanimously to George's election.

Speaker Change: Uh, introductions to businesses and capital sources and a deep understanding of long-term capital, investment analysis, and strategic growth.

Speaker Change: So,

The fact of the matter is he is complimentary to our board structure and our composition.

Speaker Change: And that's particularly relevant as we continue to execute on our strategies.

Tony Malkin: And I think that's all that we really need to say. Okay, thank you for that. Do you anticipate him taking a more active role at the company? Or more just the board seat? George is the president of Malkin Holdings, that is our family office.

Speaker Change: The board agreed unanimously to George's election.

Speaker Change: And I think that's all that we really need to say.

Speaker Change: Okay, thank you for that. Do you anticipate him taking a more active role at the company or more? Just a board seat?

uh,

Speaker: I have no plan to go anywhere, nor does Christina, nor do we have any plan to bring George on as an officer of this company. Okay. Great. Thank you very much. Thank you.

Speaker Change: George is the president of malikin Holdings. That is our family office.

Speaker Change: Uh, I have no plan to go anywhere, uh, nor do uh, the Christina, uh, nor do we have any plan to bring George on as an officer of this company?

Speaker Change: Okay, great. Thank you very much.

John Kim: Our next question has come from the line of John Kim with BMO Capital Markets. Please proceed with your question. Thank you. On 8690 North 6th, how long do you think it'll take until you sign a lease there? I know you talked about a two-year period to get this sub-7% yield, and where do you see rents at that space in your existing vacant space in Williamsburg versus the in-place rent of 141? Yeah, John, first of all, we're going to redevelop the entire building with a new facade, a new storefront, create a spectacular ground floor retail presence there with two stores, one corner and one in-lot.

Speaker Change: Thank you. Our next question, has come from the line of John Kim with BMO Capital markets, please proceed with your questions.

Thank you on 8690 North 6. Um, how long do you think about take until you sign a lease there? I know you talked about a a 2-year period to get this Sub sub 7% yield. Um, and where do you see rents, uh, at that space and and your existing vacant space in Williamsburg versus the in place rent of 1 141

Tony Malkin: You know, with this acquisition, we now control four of the eight key corners on North 6th Street. We had underwritten a year of redevelopment and then some downtime for leasing. But even before we began our redevelopment, we've already got very strong interest, tenant interest.

Tony Malkin: And so I won't be surprised if we announce something well ahead of our projected timeframe for lease up and ahead of our completion of the building redevelopment. So the and then, you know, we expect stabilization somewhere around 2027. It could be earlier based on what I just said. Rents for the corner. You know, be north of 500 bucks a foot and in line, you know, in the high threes.

Speaker Change: Landlord, uh, you know, with this acquisition, we, we, we not control 4 of the 8, uh, key corners on North 6th Street. Uh, we had underwritten a a year of Redevelopment, and then some downtime for leasing, but, but even before, we've begun our Redevelopment, we've already got very strong interest tenant tenant interest. And so, I won't be surprised if we announced something. Uh, well ahead of our projected, uh, time frame for lease up and ahead of our completion of the building Redevelopment. Uh, so the, um, uh, uh, and then, you know, we, we, we expect stabilization somewhere around 2027. It could be earlier based upon, uh, what I just said rents for the corner. You you know, could be north of 500 bucks a foot and it it in line, you know in in in the high 3s.

Christina: And can you just provide an update on where you see the mark-to-market on the Williamsburg retail portfolio? Well, roughly 25-30%, but we have a good amount of lease term. So we focus on too much this few years out, but it's definitely there. And that's why we see this investment, though, going in. Yields were core in nature with rents that are significantly below market. And the area continuing to evolve and improve. It provides a lot of upside and defensive characteristics over the long. Okay. On your multifamily performance, it was about 14% year-over-year, I think you got some benefit from additional units.

And can you just provide an update on on where you see the mark to Market on the Williamsburg retail portfolio?

Speaker Change: Well, roughly

Speaker Change: 30% but we have a good amount of lease terms. So we focus on too much this few years out but it's definitely there. And that's why we see this investment though. Going in yields for um core in nature with rents that are significantly below market. And the area continuing to evolve and improve they provide a lot of upside and defensive characteristics over the long term.

Christina: from your Williamsburg acquisitions, I'm assuming. But can you just discuss the same store performance of that portfolio? And you mentioned also pricing was competitive. Where would pricing be today for products you're looking? Sure. So I'll start with the multifamily performance this quarter. So starting with the units we picked up, 8690, there's 11 units there, but we acquired that at the end of the quarter. So it's really no contribution from those units yet to our NOI. What you're seeing in that outperformance is really the 8% growth of face rents, and also a big decline in concessions year over year.

Speaker Change: Okay, on your multifamily performance. It was up 14% year-over-year. I think you got some benefit from additional units.

Speaker Change: From your Williamsburg Acquisitions. I'm assuming, but can you just discuss the same store performance of, uh, that portfolio? And you mentioned also pricing was competitive where, where would pricing be today for product, you're looking at

Speaker Change: Sure. So I'll start with the multifamily performance this quarter. So starting with the, the units we picked up, um, at 8690, there's a 11 units there, but we acquired that at the end of the quarter,

Christina: So that's driving that performance there. And then on asset valuations, you know, there were not a ton of transactions, but of those that have traded, we still see pretty strong valuations, as well as institutional demand. So seeing around a five cap or a sub five, depending on the type of asset, is not completely uncommon, and people do show up. So the fundamentals are very strong, there's not a lot of available products. And with all the changes and what's going on in New York City, one outcome is lack of visibility that creates a lack of new supply.

Speaker Change: So there's really no contribution from those units yet to our noi. Um, what you're seeing in that outperformance is really the 8% growth of face rents and also a big decline in concessions year-over-year. So that's, I was driving that performance there.

Christina: And so that backdrop is very favorable.

Speaker Change: Um, and then on asset valuations, you know, there were not a ton of transactions. But of those that have traded, we still see pretty strong, um, valuations as well as institutional demand. Um, so seeing around a 5 cap or a sub 5, depending on the type of asset, um, is not completely uncommon and people do show up. So the fundamentals are very strong. There's not a lot of available products and with all the changes and what's going on in New York City, 1 outcomes is lack of visibility that creates um, you know, a lack of new Supply and so that

Speaker Change: Office, very favorable.

Speaker: Just a quick follow-up, so the number of units went up 11 units this quarter? Well, I don't know if that was... due to another reason. Well, from an NOI perspective, it's not because they required the very end of the quarter, there was no contribution to NOI yet in 2Q. Okay, got it. Thank you. Yep. Thank you.

Speaker Change: Just a quick follow up. So you the unit number of units went up 11 units this quarter.

Speaker Change: so, I don't know if that was

Speaker Change: due to another reason.

Well, for a noi perspective. It's not because they required the very end of the quarter. There was no contribution to noi yet in 2q.

Speaker Change: Okay, got it. Thank you.

Speaker Change: Yep.

Thank you.

Speaker: We have reached the end of our question and answer session.

Tony Malkin: I would now like to turn the call back over to Anthony Malkin for any closing. At ESRT, we remain steadfast in our focus on our five strategic priorities, lease space, drive observatory ticket sales, maintain a strong and flexible balance sheet, and identify and pursue growth opportunities, while of course, continue to advance our sustainability goals, which really help differentiate us and attract tenants. So each of these pillars supports our overarching mission to create long-term value for our shareholders. We're well-positioned to capitalize on opportunities as they emerge and remain confident in our ability to execute with the discipline needed to deliver continued value in the quarters ahead.

Speaker Change: Thank you, we have reached the end of our question and answer session. I would now like to turn the call back over to Anthony Malkin for any closing comments.

Uh the esrt, we remain steadfast and our focus on our 5G priorities. Lease space Drive Observatory ticket sales, maintain a strong and flexible balance sheet and identify and pursue growth opportunities. While of course, continue to advance our sustainability goals, which really helped differentiate us and attract tenants.

Tony Malkin: Thank you all for your participation in today's call. And we look forward to the chance to meet with many of you at non-deal roadshows, conferences, and property tours in the months ahead. So onward and upward, folks. We'll get back to work here.

So each of these pillars supports our overarching mission to create long-term value for our shareholders, we're well positioned to capitalize on opportunities as they emerge and remain. Confident. Our ability to execute with the discipline needed to deliver continued value of the quarters ahead. Thank you. All for your participation in today's call.

And we look forward to the chance to meet with many of you at non-deal. Road shows conferences and property tours in the months ahead. So onward and upward folks. We'll get back to work here.

Operator: Thank you.

Operator: This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time.

Operator: Enjoy the rest of your day.

Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.