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ES

Empire State Realty Trust, Inc. (ESRT)·Q1 2025 Earnings Summary

Executive Summary

  • ESRT’s Q1 2025 delivered Core FFO/share of $0.19 and diluted EPS of $0.05; total revenues were $180.07M. Same-store Property Cash NOI declined 1.9% YoY due to higher OpEx/taxes and lapped non-recurring revenue in Q1 2024; adjusted for non-recurring items, same-store Property Cash NOI rose 0.4% .
  • Versus S&P Global consensus, Q1 revenue ($182.26M*) and EBITDA ($78.04M*) were modest misses; Core FFO/share (~$0.1924*) was approximately in line to slightly below actual $0.19 (minor miss). Observatory NOI was $15.0M, impacted by bad weather and the Easter shift to Q2 .
  • Guidance unchanged: 2025 Core FFO/share $0.86–$0.89, Observatory NOI $97–$102M, year-end commercial occupancy 89–91%, SS Property Cash NOI growth -2.0% to +1.5% (0.5–4.0% ex one-time items). Management reiterated a strong balance sheet with $0.8B liquidity and no floating-rate debt .
  • Near-term stock narrative hinges on maintained outlook despite slight misses, continued positive leasing spreads (+10.4%) and expected occupancy gains by year-end; observatory demand management and cost controls remain focal levers .

What Went Well and What Went Wrong

What Went Well

  • Leasing momentum and pricing power: 230,548 sq ft signed, blended Manhattan office spreads +10.4%, 15th consecutive quarter of positive spreads; average lease term 8.4 years . “Availability of high-quality ‘haves’ office space in Manhattan’s better buildings continues to shrink… we increased rents and reduced concessions” .
  • Observatory revenue management: Q1 Observatory NOI $15.0M with +5.9% revenue-per-cap growth; pricing optimization, reservation-based cost controls and domestic marketing focus highlighted .
  • Balance sheet resilience: $0.8B liquidity, no floating-rate debt, net debt/Adj. EBITDA 5.2x; repaid $100M notes and $120M revolver balance; $2.1M buybacks at $6.92 post quarter end .

What Went Wrong

  • Topline/EBITDA shortfall vs consensus: Total revenue ($182.26M*) vs actual $180.07M and EBITDA ($78.04M*) vs actual $70.36M; observatory volumes pressured by weather and Easter timing; Core FFO/share ($0.1924*) narrowly above actual $0.19 .
  • Sequential net absorption contraction and occupancy dip: Manhattan office occupancy fell to 88.1% from 89.0% in Q4, total commercial occupancy to 87.9% from 88.6%; management still expects occupancy to increase by year-end .
  • Higher operating expenses: Expenses up ~5% YoY (taxes, payroll, R&M), offset partly by tenant reimbursements; same-store Property Cash NOI down 1.9% YoY due to OpEx/taxes and prior-year non-recurring revenue; +0.4% when adjusted .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Millions)$199.60 $197.60 $180.07
Diluted EPS ($)$0.08 $0.07 $0.05
Core FFO per Share - Diluted ($)$0.26 $0.24 $0.19
EBITDA ($USD Millions)$86.80*$84.07*$70.36*
EBITDA Margin (%)44.55%*42.54%*39.07%*
Net Income Margin (%)7.49%*6.18%*5.70%*

Values with asterisks retrieved from S&P Global.

Segment revenue breakdown:

Segment MetricQ3 2024Q4 2024Q1 2025
Rental Revenue ($USD Millions)$153.12 $155.13 $154.54
Observatory Revenue ($USD Millions)$39.38 $38.28 $23.16

Key KPIs:

KPIQ3 2024Q4 2024Q1 2025
Manhattan Office Leased %93.6% 94.2% 93.0%
Manhattan Office Occupied %89.2% 89.0% 88.1%
Total Commercial Leased %93.0% 93.5% 92.5%
Total Commercial Occupied %88.8% 88.6% 87.9%
Observatory NOI ($USD Millions)$29.67 $28.55 $15.04
Observatory Visitors (000s)727 718 428
Net Debt / Adjusted EBITDA (x)5.2x 5.3x 5.2x
Liquidity ($USD Billions)$0.9B $0.9B $0.8B
Weighted Avg Interest Rate (%)4.27% 4.27% 4.30%

Guidance Changes

MetricPeriodPrevious Guidance (Feb 19, 2025)Current Guidance (Apr 29, 2025)Change
Core FFO per Share ($)FY 2025$0.86–$0.89 $0.86–$0.89 Maintained
Observatory NOI ($USD Millions)FY 2025$97–$102 $97–$102 Maintained
Year-end Commercial Occupancy (%)FY 202589–91% 89–91% Maintained
SS Property Cash NOI (ex term fees)FY 2025-2.0% to +1.5%; 0.5–4.0% ex one-time items -2.0% to +1.5%; 0.5–4.0% ex one-time items Maintained
Observatory Expenses ($/quarter)FY 2025~$9–10M ~$9–10M Maintained
Operating Expenses & Real Estate TaxesFY 2025+2–4% YoY +2–4% YoY Maintained
Quarterly Dividend ($/share)Q1 2025$0.035 (paid) $0.035 (paid) Maintained (status quo)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Leasing momentum & spreads+2.6% spreads in Q3; 14th consecutive quarter; occupancy/leasing up YoY 230k sf signed; +10.4% spreads; 15th consecutive quarter; pipeline strong Improving spreads; healthy pipeline
CapEx trajectoryElevated building improvements preparing for leasing TI spend to continue from prior leasing; lower leasing commissions; building improvements ~$5M run-rate Normalizing down outside of TI
ObservatoryQ3 NOI $29.7M; Q4 NOI $28.5M Q1 NOI $15.0M; weather/Easter shift; pricing optimization; cost controls Seasonally soft; operational levers active
Macro/policy (tariffs/immigration)—Higher replacement costs amidst tariffs and immigration shifts; supply constrained Supportive for demand/pricing
Capital allocationLiquidity ~$0.9B Q3/Q4 $0.8B liquidity; buybacks $2.1M; measured approach, optionality for offense Balanced, opportunistic
Retail (Williamsburg)Retail acquisitions closed Q3; planned additional asset Leasing interest from household brands; 94% leased; 4 negotiations Positive demand; below-market rents opportunity

Management Commentary

  • “The leasing environment in New York City remains active for our top of tier product… our Manhattan office portfolio is 93% leased, and we retain our guidance and expect to have leasing and occupancy gains for the full year.” — Anthony Malkin .
  • “Availability of high-quality ‘haves’ office space… continues to shrink. We have increased rents and reduced concessions… blended mark-to-market lease spreads increased by over 10% in the first quarter.” — Thomas Durels .
  • “We manage our balance sheet… with strong liquidity, no floating rate debt exposure… and the lowest leverage among all NYC-focused REITs at 5.2x net debt to EBITDA.” — Christina Chiu .
  • “We continue to guide to core FFO of $0.86 to $0.89… Observatory NOI guidance range of $97M to $102M is unchanged… expenses up ~5% YoY driven by real estate taxes, payroll, and R&M.” — Stephen Horn .

Q&A Highlights

  • Leasing pipeline stability: “There is not a single deal… put on hold or pause in the last 60 days” across tenant categories; strong tours despite reduced availability .
  • CapEx normalization: TI spend continues from prior absorption; leasing commissions decline with higher lease rates; building improvements ~$5M quarterly run-rate going forward .
  • Capital allocation: Measured buybacks amid uncertainty; optionality to “go on offense” across multi/retail/office with inventive structures; disciplined local execution .
  • Observatory levers: Pricing optimization, domestic focus, reservation-based cost control; caution on extrapolating Q1 weather impact .
  • Rent pushes and concessions: Asking rents increased again; free rent per year term down over five quarters; achieving mid-to-high $80s psf on tower floors .

Estimates Context

Metric (Q1 2025)ActualConsensusBeat/Miss
Core FFO per Share ($)$0.19 ~$0.1924*Slight miss
Total Revenues ($USD Millions)$180.07 ~$182.26*Miss (~$2.19M)
EBITDA ($USD Millions)~$70.36*~$78.04*Miss

Values with asterisks retrieved from S&P Global.
Consensus revenue based on 3 estimates; EPS consensus unavailable in dataset for Q1 [GetEstimates].

Key Takeaways for Investors

  • Leasing strength and pricing power persist in “have” assets; blended spreads +10.4% and rent push suggest net effective rent improvement potential through 2025 .
  • Occupancy dipped sequentially as expected, but management targets 89–91% year-end commercial occupancy; watch absorption pace and signed-not-commenced ramps .
  • Observatory performance should rebound in Q2 with Easter shift; execution focus on pricing and cost controls supports NOI guidance $97–$102M .
  • Opex/tax inflation remains a headwind; partial offsets via tenant reimbursements; monitor timing (Q2/Q3 higher R&M) on margins .
  • Balance sheet optionality (no floating-rate debt, $0.8B liquidity, 5.2x net debt/Adj. EBITDA) enables opportunistic capital recycling and selective buybacks .
  • Guidance maintained across key metrics; slight Q1 misses vs consensus but underlying leasing and multifamily (99% occupied) trends support medium-term cash flow trajectory .
  • Tactical focus: track lease-up of signed-not-commenced revenue, Williamsburg street retail mark-to-market, and CapEx normalization to enhance FAD coverage .