Executive Summary

Q1 2024 delivered solid operational momentum: total revenues were $181.2M, diluted EPS $0.03, and Core FFO per share $0.21, with same-store property cash NOI up 12.3% YoY, driven by cash rent commencements and strong leasing absorption .
Leasing trends strengthened: 248K RSF signed in the quarter; Manhattan office percent leased rose 60bps QoQ and 200bps YoY to 92.7%, marking the 11th consecutive quarter of positive leasing spreads and 9th of positive absorption .
Observatory performance was a bright spot: revenue $24.6M, expenses $8.4M, with NOI of $16.2M up 13% YoY, supported by improved per-capita revenue and visitation; management reiterated Observatory NOI guidance of $94–$102M for 2024 .
Balance sheet actions reduced near-term maturities and preserved flexibility: new $715M credit facility closed in March; agreement to issue $225M green senior notes; anticipated cooperative consensual foreclosure of First Stamford Place to eliminate a $176M liability; no floating rate debt and $834M liquidity as of 3/31/24 .
Guidance reaffirmed: 2024 Core FFO $0.90–$0.94 per share; commercial year-end occupancy 87–89%; same-store cash NOI -1% to +2%; Observatory NOI $94–$102M. Balance sheet and transaction activities are expected to be ~$0.02 dilutive to 2024 FFO, still within guidance range — a potential stock narrative catalyst around improved leverage, maturity profile, and leasing execution .

What Went Well and What Went Wrong

What Went Well
- Consistent leasing momentum: 248K RSF signed, Manhattan office percent leased reached 92.7%, and blended leasing spreads were +5.4%; notable deals include Burlington’s 68K RSF expansion and Sol de Janeiro’s 57K RSF new lease .
- Observatory strength: NOI rose 13% YoY to $16.2M; management highlighted resilient demand through cycles and brand partnerships (e.g., Disney/Star Wars) as drivers of sustained performance .
- Balance sheet fortification: $715M credit facility maturing in 2029, $225M green notes at 7.25% WA rate scheduled to fund mid-June, and proactive disposition plans to eliminate a $176M 2027 liability; no floating rate exposure and 5.3x net debt to adjusted EBITDA .
What Went Wrong
- Same-store NOI comp dynamics: Q1 benefited from ~$1.5M one-time items and easier comps vs. 1Q’23; management expects tougher comps from 2Q–4Q given 2023 nonrecurring positives, limiting full-year same-store growth to -1% to +2% .
- Submarket softness: Management noted weaker leasing traction in certain submarkets (e.g., Columbus Circle/250 West 57th) versus stronger Penn Station-adjacent assets, underscoring uneven market recovery .
- Diluted EPS declined sequentially: diluted EPS was $0.03 in Q1 vs. $0.06 in Q4, reflecting seasonal observatory patterns and higher OpEx; management held guidance citing visibility but acknowledged modest $0.02 dilution from balance sheet/transactions .

Financial Results

Metric	Q3 2023	Q4 2023	Q1 2024
Total Revenues ($USD Millions)	$190.542	$192.882	$181.179
Rental Revenue ($USD Millions)	$154.603	$151.167	$153.882
Observatory Revenue ($USD Millions)	$33.433	$36.217	$24.596
Operating Income ($USD Millions)	$46.189	$40.772	$31.063
Net Income Attributable to Common ($USD Millions)	$21.854	$9.111	$5.661
Diluted EPS ($USD)	$0.14	$0.06	$0.03
Core FFO per Diluted Share ($USD)	—	$0.25	$0.21

Segment/KPIs

KPI	Q3 2023	Q4 2023	Q1 2024
Manhattan Office Percent Leased (%)	90.7	92.1	92.7
Manhattan Office Occupancy (%)	87.8	87.3	88.9
Total Commercial Percent Leased (%)	89.4	90.6	91.1
Total Retail Percent Occupied (%)	86.7	90.4	89.8
Total Multifamily Occupancy (%)	97.2	98.1	97.1
Leases Executed (Total RSF)	—	—	248,108
Manhattan Office Blended Leasing Spreads (%)	—	—	+5.4

Note on estimates: S&P Global consensus data for Q1 2024 was unavailable at time of request due to API limit; thus “vs. estimates” comparisons cannot be provided in this section .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Core FFO per Fully Diluted Share ($)	FY 2024	$0.90–$0.94	$0.90–$0.94	Maintained
Commercial Occupancy at Year-End (%)	FY 2024	87–89%	87–89%	Maintained
Same-Store Property Cash NOI (ex term fees) (%)	FY 2024	-1% to +2%	-1% to +2%	Maintained
Observatory NOI ($M)	FY 2024	$94–$102	$94–$102	Maintained
Dividend per Share ($)	Q1 2024	$0.035 (Q4 paid)	$0.035 paid Mar 28, 2024	Maintained

Management noted balance sheet/transaction activities are ~$0.02 dilutive to 2024 FFO but remain within the guidance range .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2023 and Q4 2023)	Current Period (Q1 2024)	Trend
Leasing momentum and spreads	Emphasis on consistent leasing and positive spreads across portfolio	248K RSF leased; 11th straight quarter of positive spreads; Manhattan office leased 92.7%	Improving
Observatory performance	Recovery trajectory post-pandemic; resilient NOI through cycles	NOI +13% YoY; brand partnerships (Disney/Star Wars), high per-capita revenue	Strengthening with seasonal normalization
Balance sheet and capital markets	Focus on laddered maturities and low leverage	New $715M facility; $225M green notes; Stamford foreclosure to eliminate $176M liability	Risk mitigation, flexibility improved
Macro/distress opportunity	Monitoring capital dislocation; disciplined underwriting	“Once-in-a-generation” buy-in opportunities; inbound JV interest from large private capital	Opportunity set expanding
Submarket variance	Mixed conditions by submarket in NYC	Columbus Circle softness vs. stronger Penn Station area assets	Uneven
Sustainability leadership	Ongoing awards and WELL programs	ENERGY STAR Partner of the Year Sustained Excellence; WELL Equity and Health-Safety awards	Recognized leadership sustained

Management Commentary

“We delivered our ninth consecutive quarter of leased percentage growth and our 11th consecutive quarter of positive mark-to-market lease spreads.” — Anthony Malkin .
“We have $47 million in incremental cash revenue from signed leases not commenced and free rent burn off.” — Thomas Durels .
“We generated net operating income of $16 million in the first quarter, an increase of 13% year-over-year… revenue per capita remains high.” — Stephen Horn (Observatory) .
“We closed on a new $715 million credit facility… and entered into a note purchase agreement to issue $225 million of green senior unsecured notes… we have strong liquidity, no floating rate debt exposure.” — Christina Chiu .
“The crisis created by capital dislocation… will create a once-in-a-generation opportunity to buy into certain New York City assets… we are extremely disciplined.” — Anthony Malkin .

Q&A Highlights

Tenant demand and pipeline: Management sees broad-based tenant categories (consumer brands, tech, financial/professional services) and little “tire kicking,” with 200K+ RSF in negotiation and rising tour volumes .
Transactions/JV capital: Inbound interest from large private investors focused on long-duration MOIC rather than high-leverage IRR; CMBS likely to drive asset sales faster than banks .
Same-store NOI cadence: Strong Q1 boosted by one-time items and easier comps; comps get tougher in 2Q–4Q due to 2023 nonrecurring positives; full-year guidance maintained .
Submarket commentary: Columbus Circle area showing less activity; Penn Station-adjacent assets have good showings and pipeline .
Observatory demand visibility: Reservations mostly near-term; performance tracking in line with expectations .

Estimates Context

S&P Global Wall Street consensus data (EPS, revenue, EBITDA, # of estimates) for Q1 2024 was unavailable at time of request due to API limit; management commentary suggests results were “above expectations,” but formal vs-consensus comparisons cannot be shown here .
Given strong leasing and Observatory performance, estimate revisions may focus on 2024 occupancy trajectory and Observatory NOI range confidence; however, management held FFO guidance given tougher comps ahead and modest (~$0.02) dilution from capital actions .

Key Takeaways for Investors

Leasing momentum and pricing power remain intact, evidenced by 11 straight quarters of positive spreads and higher leased rates; this supports stabilized cash flows into 2H 2024 despite uneven submarkets .
Observatory resilience and brand activations bolster non-office income diversification; Q1 NOI +13% YoY and per-capita revenue strength underpin high-quality earnings mix .
Balance sheet de-risking is a core catalyst: extended maturities, elimination of a $176M 2027 liability, and no floating rate exposure should reduce equity risk premiums in a higher-rate environment .
Full-year guidance reaffirmation signals confidence in pipeline and cash generation, while acknowledging tougher comps; watch for leasing commencements/free-rent burn-off translating into same-store cash NOI later in the year .
Capital dislocation may unlock attractive NYC acquisition/JV opportunities; disciplined basis selection and priority structures could create value without stressing the balance sheet .
Near-term narrative drivers: execution on pending transactions, continued leasing absorption, and Observatory performance consistency; medium-term thesis anchored on portfolio modernization, sustainability leadership, and MOIC-focused capital partnerships .
Dividend maintained at $0.035 per quarter; ongoing Core FAD discipline and liquidity provide coverage while reinvestment priorities target higher-return NYC assets .

Empire State Realty OP, L.P. (ESBA)·Q1 2024 Earnings Summary