UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36105 EMPIRE STATE REALTY TRUST, INC. (Exact name of Registrant as specified in its charter) (State or other jurisdiction of incorporation or orga ...

NEW YORK--(BUSINESS WIRE)--Empire State Realty Trust, Inc. (NYSE: ESRT) announced today that it signed a new 11-year office lease with Sol de Janeiro USA – a luxury skincare and beauty brand – for 57,203 square feet at One Grand Central Place. Sol de Janeiro is a subsidiary of French beauty brand L’Occitane, who recently signed a separate 9,497 square foot expansion and lease term extension on their existing 20,962 square foot space at ESRT’s 111 W. 33rd Street. One Grand Central Place offers 55 stories of ...

NEW YORK--(BUSINESS WIRE)--Be an ESB VIP. The Empire State Building (ESB) announced today its new ambassador program for locals who host guests in New York City and superfans of its world-famous Observatory Experience. Visitors earn points in the loyalty program for each ticket purchased on the ESB website for the 86th and 102nd Floor Observatories and redeem them for complimentary experiences and collectibles. “ Each visit to the Empire State Building is unique, and we made it easier for our loyal locals ...

NEW YORK--(BUSINESS WIRE)--Empire State Realty Trust, Inc. (NYSE: ESRT) announced today that Burlington Stores, Inc. signed an expansion lease for an additional 67,865 square feet of office space across two full floors at 1400 Broadway. With this expansion, Burlington will occupy a total of 170,763 square feet within ESRT’s portfolio across five full floors, with a new 16-year lease term for the expansion space coterminous with the current office space. After an initial deal in 2010 for 35,182 square feet, ...

NEW YORK--(BUSINESS WIRE)--Empire State Realty Trust, Inc. (NYSE: ESRT) announced today that it signed a new lease with Hanover Street Capital, a commercial real estate platform that provides comprehensive services for Deutsche Bank’s commercial and multifamily real estate financing business, for a 12,622 square foot space at 250 West 57th Street. “ We were drawn to 250 W. 57th Street for its unbeatable location and our high end pre-built space that is move-in ready,” said Sunil Madan, Head and COO, at Han ...

NEW YORK--(BUSINESS WIRE)--Celebrate the most romantic day of the year at the “World’s Most Romantic Building.” The Empire State Building (ESB) – the number one attraction in the U.S. by Tripadvisor travelers for two consecutive years – announced today that it will host themed movie screenings; offer an over-the-top, bucket list Valentine’s Day date for one lucky couple; and provide a special engagement package for couples who plan to tie the knot this February. Empire for Two – This year, one lucky coupl ...

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%201.%20FINANCIAL%20INFORMATION) [Financial Statements](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The company's financial statements for the period ended September 30, 2023, show total assets of $4.22 billion, a slight increase from $4.16 billion at year-end 2022. For the nine months ended September 30, 2023, net income attributable to common stockholders was $39.9 million, a significant increase from $23.8 million in the prior-year period, driven by higher observatory revenue and gains on property dispositions. Cash flow from operations also increased to $196.0 million from $174.0 million year-over-year [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2023, total assets were $4.217 billion, a slight increase from $4.164 billion at December 31, 2022. The increase was primarily driven by a rise in cash and cash equivalents. Total liabilities remained stable at approximately $2.48 billion, while total equity increased to $1.733 billion from $1.683 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 (unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Commercial real estate properties, net | $2,402,130 | $2,414,182 | | Cash and cash equivalents | $353,999 | $264,434 | | Total assets | $4,216,547 | $4,163,594 | | **Liabilities & Equity** | | | | Mortgage notes payable, net | $878,757 | $883,705 | | Senior unsecured notes, net | $973,819 | $973,659 | | Total liabilities | $2,483,227 | $2,480,503 | | Total equity | $1,733,320 | $1,683,091 | | Total liabilities and equity | $4,216,547 | $4,163,594 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the third quarter of 2023, total revenues increased to $191.5 million from $183.7 million year-over-year, primarily due to a 13.6% rise in Observatory revenue. Net income attributable to common stockholders more than doubled to $11.6 million, or $0.07 per diluted share, compared to $5.6 million, or $0.03 per diluted share, in Q3 2022. For the nine-month period, net income attributable to common stockholders rose to $39.9 million from $23.8 million Q3 2023 vs Q3 2022 Performance (in thousands, except per share) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Total revenues | $191,526 | $183,712 | | Rental revenue | $151,458 | $148,290 | | Observatory revenue | $37,562 | $33,051 | | Total operating income | $42,257 | $35,527 | | Net income attributable to common stockholders | $11,560 | $5,557 | | Diluted EPS | $0.07 | $0.03 | Nine Months Ended Sep 30, 2023 vs 2022 Performance (in thousands, except per share) | Metric | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | Total revenues | $546,690 | $545,768 | | Observatory revenue | $93,149 | $73,660 | | Gain on disposition of property | $29,261 | $27,170 | | Net income attributable to common stockholders | $39,933 | $23,847 | | Diluted EPS | $0.25 | $0.14 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2023, net cash provided by operating activities increased to $196.0 million from $174.0 million in the prior-year period. Net cash used in investing activities decreased significantly to $39.4 million from $89.1 million, mainly due to proceeds from property dispositions. Net cash used in financing activities also decreased to $50.4 million from $119.7 million, primarily due to lower share repurchases Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $196,048 | $173,985 | | Net cash used in investing activities | ($39,379) | ($89,116) | | Net cash used in financing activities | ($50,394) | ($119,692) | | **Net increase (decrease) in cash** | **$106,275** | **($34,823)** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's business as a New York City-focused REIT with a portfolio of office, retail, and multifamily assets, including the Empire State Building Observatory. Key notes cover acquisitions and dispositions, debt structure, lease information, segment performance, and equity compensation. In Q3 2023, the company acquired a retail property in Brooklyn for $26.4 million. Total debt stood at $2.26 billion, with no significant maturities until November 2024. The company remains in compliance with all debt covenants - As of September 30, 2023, ESRT's portfolio comprised approximately **8.6 million rentable sq. ft. of office space**, **0.7 million rentable sq. ft. of retail space**, and **727 residential units**, primarily in New York City[26](index=26&type=chunk) - On September 14, 2023, the company acquired a retail property in Williamsburg, Brooklyn for **$26.4 million**. In early 2023, it disposed of properties in Harrison, NY, and Westport, CT, for a total of **$93.0 million**, generating a combined gain of **$29.3 million**[37](index=37&type=chunk)[40](index=40&type=chunk) - Total principal debt as of September 30, 2023, was approximately **$2.26 billion**, consisting of mortgage debt, senior unsecured notes, and unsecured term loan facilities. The company was in compliance with all debt covenants[48](index=48&type=chunk)[49](index=49&type=chunk) - The company has two reportable segments: Real Estate and Observatory. For Q3 2023, the Real Estate segment generated **$15.2 million in net income**, while the Observatory segment generated **$4.7 million**[113](index=113&type=chunk)[115](index=115&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=30&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management reports strong Q3 2023 results, with net income attributable to common stockholders of $11.6 million and Core FFO of $65.9 million. The performance was driven by a 13.6% year-over-year increase in Observatory revenue and stable rental revenue. The company maintains a strong liquidity position with $354.0 million in cash and $850 million available on its credit facility, with no significant debt maturities until late 2024. While acknowledging macroeconomic uncertainties, management believes its diversified, modernized New York City-focused portfolio and strong balance sheet position it well competitively - Highlights for Q3 2023 include net income of **$11.6 million**, Core FFO of **$65.9 million**, and signing **248,479 rentable square feet of leases**. The Empire State Building Observatory generated **$28.1 million of net operating income**[126](index=126&type=chunk) - The company maintains a strong liquidity position with **$354.0 million in cash and cash equivalents** and **$850 million available** under its unsecured revolving credit facility as of September 30, 2023[146](index=146&type=chunk) - Management acknowledges global economic uncertainty but believes ESRT is well-positioned due to its diversified income drivers (office, retail, multifamily, observatory), modernized NYC-focused portfolio, and a strong balance sheet with no near-term debt maturities[188](index=188&type=chunk)[189](index=189&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) For Q3 2023, total revenues grew 4.3% YoY to $191.5 million, driven by a $4.5 million (13.6%) increase in Observatory revenue. Real Estate rental revenue saw a modest 2.1% increase. For the nine-month period, Observatory revenue grew 26.5% YoY, while a $20 million lease termination fee in 2022 kept total revenue growth nearly flat at 0.2%. The decrease in nine-month depreciation and amortization was due to accelerated depreciation on a disposed property in 2022 - Q3 2023 vs. Q3 2022: Observatory revenue increased by **$4.5 million (13.6%)** due to higher visitation and revenue per visitor. Rental revenue increased by **$3.2 million (2.1%)** from new leases and higher rents[127](index=127&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - YTD 2023 vs. YTD 2022: Observatory revenue increased by **$19.5 million (26.5%)**. Total revenue growth was muted by the absence of a **$20.0 million lease termination fee** that was recognized in 2022[133](index=133&type=chunk) - YTD 2023 vs. YTD 2022: Depreciation and amortization decreased by **$32.1 million**, primarily reflecting accelerated depreciation in 2022 related to the consensual foreclosure of the 383 Main Avenue property[133](index=133&type=chunk)[138](index=138&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company has a strong liquidity position with $354.0 million in cash and $850 million available under its credit facility. Total debt is approximately $2.2 billion with a weighted average interest rate of 3.9% and no maturities until November 2024. The company is in compliance with all financial covenants, maintaining a total leverage ratio of 33.2% against a required maximum of 60%. Capital expenditure commitments for existing leases are estimated at $139.3 million Financial Covenant Compliance (as of Sep 30, 2023) | Financial covenant | Required | Actual | In Compliance | | :--- | :--- | :--- | :--- | | Maximum total leverage | < 60% | 33.2 % | Yes | | Maximum secured leverage | < 40% | 13.0 % | Yes | | Minimum fixed charge coverage | > 1.50x | 3.0x | Yes | | Minimum unencumbered interest coverage | > 1.75x | 5.3x | Yes | | Maximum unsecured leverage | < 60% | 24.8 % | Yes | - As of September 30, 2023, the company had approximately **$2.2 billion of total consolidated debt** with a weighted average interest rate of **3.9%** and a weighted average maturity of **5.7 years**[146](index=146&type=chunk) - The company expects to incur approximately **$139.3 million** for future tenant improvements and leasing commissions related to existing lease agreements[159](index=159&type=chunk) [Non-GAAP Financial Measures](index=40&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like NOI, FFO, and Core FFO to evaluate performance. For Q3 2023, Net Operating Income (NOI) was $104.6 million, up from $97.8 million in Q3 2022. Core Funds From Operations (Core FFO) for Q3 2023 was $65.9 million, an increase from $56.5 million in the prior-year quarter Reconciliation of Net Income to NOI (in thousands) | | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Net income | $19,928 | $10,118 | | Adjustments... | ... | ... | | **Net operating income** | **$104,625** | **$97,847** | Reconciliation of Net Income to Core FFO (in thousands) | | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Net income | $19,928 | $10,118 | | Real estate depreciation and amortization | $45,174 | $45,461 | | Other adjustments... | ... | ... | | **FFO** | **$63,941** | **$54,578** | | Amortization of below-market ground leases | $1,957 | $1,957 | | **Modified FFO** | **$65,898** | **$56,535** | | **Core FFO** | **$65,898** | **$56,535** | [Quantitative and Qualitative Disclosure About Market Risk](index=44&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) The company is primarily exposed to interest rate risk on its variable-rate debt and future refinancings. To mitigate this, ESRT uses fixed-rate debt and derivative instruments like interest rate swaps. As of September 30, 2023, the company had interest rate swap and cap agreements with a notional value of $573.6 million. The weighted average interest rate on its $2.2 billion of fixed-rate debt was 3.9% per annum - The company uses derivative financial instruments, such as interest rate swaps and caps, to manage interest rate risk on floating-rate debt[192](index=192&type=chunk) - As of September 30, 2023, the company had interest rate swap and cap agreements with an aggregate notional value of **$573.6 million**[193](index=193&type=chunk) - The weighted average interest rate on the company's **$2.2 billion of fixed-rate debt** was **3.9%** per annum as of September 30, 2023[194](index=194&type=chunk) [Controls and Procedures](index=44&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of September 30, 2023. They concluded that these controls were effective. There were no material changes to the company's internal control over financial reporting during the quarter - The CEO and CFO concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective[197](index=197&type=chunk) - No material changes to internal control over financial reporting occurred during the third quarter of 2023[198](index=198&type=chunk) [PART II. OTHER INFORMATION](index=44&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=44&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in an ongoing arbitration dispute with former investors of Empire State Building Associates L.L.C. related to the IPO. An initial award of approximately $1.2 million to the claimants was confirmed by a New York State court in July 2023. The company has appealed this ruling and believes it is incorrect. Other than this, the company is not involved in any material litigation outside the ordinary course of business - The company is appealing a New York State court ruling that confirmed a **~$1.2 million** arbitration award in favor of former investors related to the IPO[78](index=78&type=chunk) - The company believes the ruling is incorrect and the appeal is pending. Other than routine litigation, no other material legal proceedings are reported[77](index=77&type=chunk)[78](index=78&type=chunk) [Risk Factors](index=45&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - As of September 30, 2023, there were no material changes to the company's risk factors[200](index=200&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECUIRITIES%20AND%20USE%20OF%20PROCEEDS) The company did not have any unregistered sales of equity securities. Under its stock repurchase program, authorized through December 31, 2023, no equity securities were repurchased during the three-month period ended September 30, 2023. Approximately $396.7 million remains available under the $500 million authorization - No equity securities were repurchased in the three months ended September 30, 2023[203](index=203&type=chunk) - The company has a **$500 million** stock repurchase program authorized through December 31, 2023, with approximately **$396.7 million** remaining available as of September 30, 2023[202](index=202&type=chunk) [Exhibits](index=46&type=section&id=ITEM%206.%20EXHIBITS) The report includes several exhibits filed herewith, including CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and XBRL data files - Exhibits filed include CEO/CFO certifications (31.1, 31.2, 32.1, 32.2) and XBRL data files (101 series)[208](index=208&type=chunk)

Empire State Realty Trust Inc. (NYSE:ESRT) Q3 2023 Results Conference Call October 26, 2023 12:00 PM ET Company Participants Katy Malonoski - VP and Head of Investor Relations Anthony Malkin - Chairman, President and CEO Tom Durels - Executive Vice President of Real Estate Christina Chiu - Executive VP, COO and CFO Financial & Investment Officer Conference Call Participants Steve Sakwa - Evercore Michael Griffin - Citi John Kim - BMO Capital Markets Camille Bonnel - Bank of America Blaine Heck - Wells Fargo ...

[FORM 10-Q Header](index=1&type=section&id=FORM%2010-Q%20Header) [TABLE OF CONTENTS](index=2&type=section&id=TABLE%20OF%20CONTENTS) [PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section details the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and comprehensive notes, along with management's discussion and analysis of financial condition and results of operations [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements of Empire State Realty Trust, Inc. for the quarter and six months ended June 30, 2023, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, acquisitions, debt, equity, and segment performance - The financial statements are unaudited and prepared in conformity with GAAP for interim financial information[29](index=29&type=chunk) - The observatory business is subject to seasonality based on tourism trends and weather, with the second quarter typically realizing **26-28%** of annual observatory revenue[30](index=30&type=chunk)[32](index=32&type=chunk) - The multifamily business also experiences some seasonality, with slower leasing activity in winter months[32](index=32&type=chunk) [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets show the financial position of Empire State Realty Trust, Inc. as of June 30, 2023, compared to December 31, 2022, detailing assets, liabilities, and equity Balance Sheet Data | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Total assets | $4,184,768 | $4,163,594 | $21,174 | | Total liabilities | $2,473,156 | $2,480,503 | $(7,347) | | Total equity | $1,711,612 | $1,683,091 | $28,521 | | Cash and cash equivalents | $315,357 | $264,434 | $50,923 | | Commercial real estate properties, net | $2,385,324 | $2,414,182 | $(28,858) | | Assets held for sale | $— | $35,538 | $(35,538) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations provide a comparative view of revenues, operating expenses, and net income for the three and six months ended June 30, 2023, and 2022 Operations Data | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Total revenues | $190,542 | $198,022 | $(7,480) | (3.8)% | | Total operating expenses | $144,353 | $151,523 | $(7,170) | (4.7)% | | Total operating income | $46,189 | $46,499 | $(310) | (0.7)% | | Net income | $36,955 | $48,695 | $(11,740) | (24.1)% | | Net income attributable to common stockholders | $21,854 | $29,579 | $(7,725) | (26.1)% | | Basic EPS | $0.14 | $0.18 | $(0.04) | (22.2)% | | Diluted EPS | $0.14 | $0.18 | $(0.04) | (22.2)% | | Dividends per share | $0.035 | $0.035 | $0.000 | 0.0% | | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Total revenues | $355,164 | $362,056 | $(6,892) | (1.9)% | | Total operating expenses | $291,487 | $309,509 | $(18,022) | (5.8)% | | Total operating income | $63,677 | $52,547 | $11,130 | 21.2% | | Net income | $48,649 | $31,474 | $17,175 | 54.6% | | Net income attributable to common stockholders | $28,373 | $18,290 | $10,083 | 55.1% | | Basic EPS | $0.18 | $0.11 | $0.07 | 63.6% | | Diluted EPS | $0.18 | $0.11 | $0.07 | 63.6% | | Dividends per share | $0.070 | $0.070 | $0.000 | 0.0% | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) The condensed consolidated statements of comprehensive income show net income and other comprehensive income components, primarily unrealized gains on interest rate swap agreements, for the three and six months ended June 30, 2023, and 2022 Comprehensive Income Data | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change | % Change | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Net income | $36,955 | $48,695 | $(11,740) | (24.1)% | | Other comprehensive income | $10,053 | $12,798 | $(2,745) | (21.4)% | | Comprehensive income | $47,008 | $61,493 | $(14,485) | (23.6)% | | Comprehensive income attributable to common stockholders | $27,809 | $36,457 | $(8,648) | (23.7)% | | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change | % Change | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Net income | $48,649 | $31,474 | $17,175 | 54.6% | | Other comprehensive income | $3,379 | $25,855 | $(22,476) | (87.0)% | | Comprehensive income | $52,028 | $57,329 | $(5,301) | (9.2)% | | Comprehensive income attributable to common stockholders | $30,489 | $33,263 | $(2,774) | (8.3)% | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) The condensed consolidated statements of stockholders' equity detail changes in equity for the three and six months ended June 30, 2023, and 2022 Stockholders' Equity Data | Metric (in thousands) | June 30, 2023 | December 31, 2022 | Change | | :------------------------------------ | :------------ | :---------------- | :----- | | Total Empire State Realty Trust, Inc. stockholders' equity | $965,950 | $954,375 | $11,575 | | Non-controlling interests in the Operating Partnership | $700,282 | $683,310 | $16,972 | | Total equity | $1,711,612 | $1,683,091 | $28,521 | - Repurchases of common shares amounted to **$7.4 million** for the three months ended June 30, 2023, and **$13.1 million** for the six months ended June 30, 2023[14](index=14&type=chunk)[16](index=16&type=chunk) - Net income attributable to common stockholders was **$21.9 million** for the three months ended June 30, 2023, and **$28.4 million** for the six months ended June 30, 2023[14](index=14&type=chunk)[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows present the cash generated from or used in operating, investing, and financing activities for the six months ended June 30, 2023, and 2022 Cash Flow Data | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :----- | | Net cash provided by operating activities | $105,906 | $83,678 | $22,228 | | Net cash provided by (used in) investing activities | $12,744 | $(56,645) | $69,389 | | Net cash used in financing activities | $(37,520) | $(88,912) | $51,392 | | Net increase (decrease) in cash and cash equivalents and restricted cash | $81,130 | $(61,879) | $143,009 | | Cash and cash equivalents and restricted cash—end of period | $395,808 | $412,759 | $(16,951) | - Cash paid for interest increased to **$46.1 million** for the six months ended June 30, 2023, from **$40.2 million** in the prior year[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanatory notes to the condensed consolidated financial statements, covering the company's business, accounting policies, recent acquisitions and dispositions, debt structure, equity, and segment performance [Note 1. Description of Business and Organization](index=10&type=section&id=Note%201.%20Description%20of%20Business%20and%20Organization) Empire State Realty Trust, Inc. (ESRT) is a self-administered and self-managed REIT focused on owning, managing, operating, acquiring, and repositioning office, retail, and multifamily properties in Manhattan and the greater New York metropolitan area, including the iconic Empire State Building and its Observatory Experience - ESRT is a REIT that owns and operates office, retail, and multifamily properties in Manhattan and the greater New York metropolitan area[25](index=25&type=chunk) - As of June 30, 2023, the portfolio included **9.4 million** rentable square feet of office and retail space, with **11** office properties (**8.6 million** sq ft), **4** standalone retail properties (**0.2 million** sq ft), and **3** multifamily properties (**721** units)[26](index=26&type=chunk) - ESRT owns approximately **59.4%** of the aggregate operating partnership units in its Operating Partnership, which holds substantially all assets and conducts business[27](index=27&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=10&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the significant accounting policies used in preparing the unaudited condensed consolidated financial statements, emphasizing conformity with GAAP and SEC rules for interim reporting - Financial statements are prepared in conformity with GAAP for interim information and SEC rules, with certain disclosures condensed or omitted[29](index=29&type=chunk) - The observatory business is seasonal, with **26-28%** of annual revenue typically realized in Q2, while the multifamily business also experiences seasonality[30](index=30&type=chunk)[32](index=32&type=chunk) - The company consolidates entities where it has a controlling financial interest, including its Operating Partnership, which is identified as a Variable Interest Entity (VIE)[33](index=33&type=chunk) [Note 3. Acquisitions and Dispositions](index=11&type=section&id=Note%203.%20Acquisitions%20and%20Dispositions) This note details the company's property disposition activities during the reporting period - Sold **500** Mamaroneck Avenue in Harrison, NY, on April 5, 2023, for a gross asset valuation of **$53.0 million**, recording a gain of **$13.6 million**[37](index=37&type=chunk) - Sold **69-97** and **103-107** Main Street in Westport, CT, on February 1, 2023, for a gross asset valuation of **$40.0 million**, recording a gain of **$15.7 million**[39](index=39&type=chunk) [Note 4. Deferred Costs, Acquired Lease Intangibles and Goodwill](index=12&type=section&id=Note%204.%20Deferred%20Costs%2C%20Acquired%20Lease%20Intangibles%20and%20Goodwill) This note provides a breakdown of deferred costs, acquired lease intangibles, and goodwill Deferred Costs, Acquired Lease Intangibles and Goodwill Table | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :---------------- | | Total deferred costs, net (excluding net deferred financing costs) | $172,754 | $183,977 | | Acquired below-market ground leases, net | $325,157 | $329,073 | | Acquired below-market leases, net | $(15,280) | $(17,849) | | Goodwill | $491,479 | $491,479 | - Amortization expense for deferred leasing costs was **$11.9 million** for the six months ended June 30, 2023, and **$4.6 million** for acquired lease intangibles[41](index=41&type=chunk) - Goodwill of **$491.5 million** is allocated **$227.5 million** to the observatory segment and **$264.0 million** to the real estate segment[43](index=43&type=chunk) - A qualitative assessment for the quarter ended June 30, 2023, indicated no impairment of goodwill for the observatory reportable segment[44](index=44&type=chunk)[46](index=46&type=chunk) [Note 5. Debt](index=13&type=section&id=Note%205.%20Debt) This note details the company's debt structure, including mortgage notes payable, senior unsecured notes, and unsecured term loan facilities Debt Summary | Debt Type (in thousands) | Principal Balance as of June 30, 2023 | Principal Balance as of December 31, 2022 | | :------------------------------------ | :------------------------------------ | :---------------------------------------- | | Total mortgage debt | $896,361 | $900,630 | | Senior unsecured notes | $875,000 | $875,000 | | Unsecured term loan facility (BofA) | $215,000 | $215,000 | | Unsecured term loan facility (Wells Fargo) | $175,000 | $175,000 | | Total principal | $2,261,361 | $2,265,630 | - Weighted average interest rate on total consolidated indebtedness was **3.9%** with a weighted average maturity of **5.9 years** as of June 30, 2023[155](index=155&type=chunk) - The company was in compliance with all debt covenants as of June 30, 2023[47](index=47&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - Aggregate required principal payments for 2024 are **$86.5 million**, and for 2025 are **$321.9 million**[49](index=49&type=chunk) [Note 6. Accounts Payable and Accrued Expenses](index=15&type=section&id=Note%206.%20Accounts%20Payable%20and%20Accrued%20Expenses) This note provides a breakdown of accounts payable and accrued expenses, which totaled $71.7 million as of June 30, 2023, a decrease from $80.7 million at December 31, 2022 Accounts Payable and Accrued Expenses Summary | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :---------------- | | Accrued capital expenditures | $38,677 | $44,293 | | Accounts payable and accrued expenses | $29,468 | $32,927 | | Accrued interest payable | $3,564 | $3,509 | | Total accounts payable and accrued expenses | $71,709 | $80,729 | [Note 7. Financial Instruments and Fair Values](index=15&type=section&id=Note%207.%20Financial%20Instruments%20and%20Fair%20Values) This note discusses the company's use of derivative financial instruments, primarily interest rate swaps and caps, to manage interest rate risk - The company uses derivative financial instruments (interest rate swaps and caps) to manage interest rate risk, not for speculative purposes[57](index=57&type=chunk) Financial Instruments and Fair Values Summary | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :---------------- | | Notional value of interest rate swaps and caps | $574,000 | $574,800 | | Fair value of derivative instruments (asset position) | $19,361 | $17,936 | | Fair value of outstanding debt | $2,025,794 | $2,038,940 | | Book value of outstanding debt | $2,243,388 | $2,246,137 | - An estimated **$8.5 million** net gain from accumulated other comprehensive income related to derivatives is expected to be reclassified into interest expense within the next **12 months**[60](index=60&type=chunk) [Note 8. Leases](index=17&type=section&id=Note%208.%20Leases) This note covers the company's role as both a lessor and a lessee Lease Revenue Summary | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Fixed payments (rental revenue) | $138,318 | $134,794 | $262,882 | $268,195 | | Variable payments (rental revenue) | $16,285 | $14,545 | $31,812 | $28,658 | | Total rental revenue | $154,603 | $149,339 | $294,694 | $296,853 | - Future contractual minimum lease payments on non-cancellable operating leases total **$4.06 billion**, expiring through **2040**[68](index=68&type=chunk) - As a lessee, right-of-use assets and ground lease liabilities were **$28.6 million** as of June 30, 2023, with a weighted average remaining lease term of **46.9 years**[72](index=72&type=chunk)[73](index=73&type=chunk) - The company reversed **$5.8 million** of a **$6.4 million** reserve for Signature Bank's straight-line rent receivable after Flagstar Bank assumed the lease at 1400 Broadway[70](index=70&type=chunk) [Note 9. Commitments and Contingencies](index=19&type=section&id=Note%209.%20Commitments%20and%20Contingencies) This note addresses legal proceedings, unfunded capital expenditures, concentration of credit risk, asset retirement obligations, and other environmental matters - An arbitration award of approximately **$1.2 million** (inclusive of interest) was confirmed against the Respondents in litigation related to the IPO and Empire State Building Associates[77](index=77&type=chunk) - The company estimates approximately **$138.4 million** in unfunded capital expenditures (tenant improvements and leasing commissions) for existing lease agreements[79](index=79&type=chunk) - The company holds cash and cash equivalents and restricted cash balances in excess of FDIC insured amounts at major financial institutions, posing a concentration of credit risk[81](index=81&type=chunk) - The company has identified asbestos in certain properties but has no current plans for removal that would trigger federal regulations, thus the fair value of the associated asset retirement obligation is indeterminable[82](index=82&type=chunk) [Note 10. Equity](index=20&type=section&id=Note%2010.%20Equity) This note details the company's equity structure, including common stock, operating partnership units (OP Units), and private perpetual preferred units Equity Structure | Metric | June 30, 2023 | | :------------------------------------ | :------------ | | Class A common stock shares outstanding | 159,842,614 | | Class B common stock shares outstanding | 988,180 | | Operating Partnership Units (OP Units) outstanding | 110,086,858 | | REIT controlling interest in OP | 59.4% | | Noncontrolling interest in OP | 40.6% | - The company's Board authorized a repurchase program of up to **$500 million** of Class A common stock and OP units from January 1, 2022, through December 31, 2023, with **$396.7 million** remaining as of June 30, 2023[93](index=93&type=chunk)[210](index=210&type=chunk) - Total dividends paid to common stockholders were **$11.3 million** for the six months ended June 30, 2023[98](index=98&type=chunk) - In May 2023, **237,856** LTIP units with a fair market value of **$1.2 million** were granted to non-employee directors, vesting over three or four years[100](index=100&type=chunk) [Note 11. Related Party Transactions](index=24&type=section&id=Note%2011.%20Related%20Party%20Transactions) This note discloses transactions with related parties, primarily entities affiliated with Anthony E. Malkin (Chairman, President, and CEO) Related Party Transactions Revenue | Revenue Type (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Supervisory fees | $300 | $300 | $500 | $500 | | Property management fees | $50 | $100 | $200 | $100 | | Other revenue (rent/support services) | $100 | $100 | $200 | $200 | - The company advanced a **$0.6 million** loan to the buyer of Westport retail assets in February 2023, with **$0.1 million** outstanding as of June 30, 2023[112](index=112&type=chunk) [Note 12. Segment Reporting](index=25&type=section&id=Note%2012.%20Segment%20Reporting) This note segments the company's operations into two reportable segments: real estate and observatory - The company operates in two reportable segments: real estate (ownership, management, operation of properties) and observatory (Empire State Building observatories)[113](index=113&type=chunk) Segment Performance | Metric (in thousands) | Real Estate Segment (3 Months Ended June 30, 2023) | Observatory Segment (3 Months Ended June 30, 2023) | Total (3 Months Ended June 30, 2023) | | :------------------------------------ | :------------------------------------------------- | :------------------------------------------------- | :----------------------------------- | | Total revenues | $178,051 | $33,433 | $190,542 | | Total operating expenses | $135,653 | $29,642 | $144,353 | | Net income | $33,650 | $3,305 | $36,955 | | Segment assets | $3,928,943 | $255,825 | $4,184,768 | | Metric (in thousands) | Real Estate Segment (6 Months Ended June 30, 2023) | Observatory Segment (6 Months Ended June 30, 2023) | Total (6 Months Ended June 30, 2023) | | :------------------------------------ | :------------------------------------------------- | :------------------------------------------------- | :----------------------------------- | | Total revenues | $336,433 | $55,587 | $355,164 | | Total operating expenses | $274,888 | $53,455 | $291,487 | | Net income | $45,549 | $3,100 | $48,649 | | Expenditures for segment assets | $35,576 | $58 | $35,634 | [Note 13. Subsequent Events](index=29&type=section&id=Note%2013.%20Subsequent%20Events) This note states that there were no subsequent events requiring disclosure after June 30, 2023 - No subsequent events were identified after June 30, 2023[119](index=119&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=30&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2023, compared to the prior year - The discussion compares performance for the three and six months ended June 30, 2023, with the corresponding periods in 2022[121](index=121&type=chunk) - Forward-looking statements are subject to substantial risks and uncertainties, including economic impact of catastrophic events, reduced demand for space, changes in tourism, increased borrowing costs, and declining real estate valuations[123](index=123&type=chunk)[124](index=124&type=chunk) [FORWARD-LOOKING STATEMENTS](index=30&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section clarifies that the report contains forward-looking statements, which are subject to substantial risks and uncertainties and should not be relied upon as predictions of future events - Forward-looking statements are identified by terms like "aims," "anticipates," "believes," "expects," and "will," and are covered by safe harbor provisions[122](index=122&type=chunk) - Key risks include economic impact of catastrophic events, reduced demand for office/multifamily/retail space, changes in tourism, increased borrowing costs, declining real estate valuations, and termination of ground leases[124](index=124&type=chunk) - The company assumes no obligation to update or revise publicly any forward-looking statement after the report date[125](index=125&type=chunk) [Overview](index=30&type=section&id=Overview) This overview highlights key achievements for the three months ended June 30, 2023, including net income attributable to common stockholders of $21.9 million, Core FFO of $69.2 million, a 90.3% leased commercial portfolio, significant leasing activity, and strong observatory performance - Net income attributable to common stockholders: **$21.9 million**[129](index=129&type=chunk) - Core Funds From Operations ("Core FFO") attributable to common stockholders and the operating partnership: **$69.2 million**[129](index=129&type=chunk) - Commercial portfolio **90.3%** leased; Manhattan office portfolio **91.6%** leased[129](index=129&type=chunk) - Signed **336,314** rentable square feet of new, renewal, and expansion leases[129](index=129&type=chunk) - Empire State Building Observatory generated **$24.8 million** of net operating income[129](index=129&type=chunk) - Repurchased **$7.4 million** of common stock in Q2 2023 and through July 25, 2023[129](index=129&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the company's financial performance for the three and six months ended June 30, 2023, versus 2022, broken down by Real Estate and Observatory segments [Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022](index=31&type=section&id=Three%20Months%20Ended%20June%2030%2C%202023%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030%2C%202022) For the three months ended June 30, 2023, total revenues decreased by 3.8% to $190.5 million, primarily due to the absence of lease termination fees Results of Operations Summary | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Total revenues | $190,542 | $198,022 | $(7,480) | (3.8)% | | Net income attributable to common stockholders | $21,854 | $29,579 | $(7,725) | (26.1)% | | Rental revenue | $154,603 | $149,339 | $5,264 | 3.5% | | Observatory revenue | $33,433 | $27,368 | $6,065 | 22.2% | | Lease termination fees | $— | $18,859 | $(18,859) | (100.0)% | | Depreciation and amortization | $46,280 | $58,304 | $12,024 | 20.6% | | Interest income | $3,339 | $431 | $2,908 | 674.7% | | Gain on disposition of property | $13,565 | $27,170 | $(13,605) | (50.1)% | [Real Estate Segment](index=31&type=section&id=Real%20Estate%20Segment_3M) For the Real Estate segment in Q2 2023, rental revenue increased by 3.5% primarily due to the reversal of a straight-line rent receivable reserve related to Signature Bank - Rental revenue increased due to the reversal of a one-time straight-line rent receivable reserve tied to Signature Bank[131](index=131&type=chunk) - Property operating expenses increased due to higher repairs, maintenance, cleaning, and payroll costs[132](index=132&type=chunk) - Real estate taxes increased due to higher assessed values for multiple properties and the inclusion of a recently acquired multifamily property[133](index=133&type=chunk) - Depreciation and amortization decreased due to accelerated depreciation in Q2 2022 and the sale of properties[134](index=134&type=chunk) - Interest income increased significantly due to higher interest rates[135](index=135&type=chunk) - Gain on disposition of property reflects the sale of **500** Mamaroneck in April 2023[136](index=136&type=chunk) [Observatory Segment](index=33&type=section&id=Observatory%20Segment_3M) The Observatory segment experienced a 22.2% increase in revenue for Q2 2023, driven by higher visitation - Observatory revenues increased by **22.2%** due to higher visitation[137](index=137&type=chunk) - Observatory expenses increased by **11.3%** due to increased operating hours and higher variable costs (marketing, labor, maintenance)[138](index=138&type=chunk) - Income tax expense increased due to higher taxable income for the observatory segment[139](index=139&type=chunk) [Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022](index=33&type=section&id=Six%20Months%20Ended%20June%2030%2C%202023%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202022) For the six months ended June 30, 2023, total revenues decreased by 1.9% to $355.2 million, primarily due to property dispositions and the absence of lease termination fees Results of Operations Summary | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Total revenues | $355,164 | $362,056 | $(6,892) | (1.9)% | | Net income attributable to common stockholders | $28,373 | $18,290 | $10,083 | 55.1% | | Rental revenue | $294,694 | $296,853 | $(2,159) | (0.7)% | | Observatory revenue | $55,587 | $40,609 | $14,978 | 36.9% | | Lease termination fees | $— | $20,032 | $(20,032) | (100.0)% | | Depreciation and amortization | $93,688 | $125,410 | $31,722 | 25.3% | | Interest income | $5,934 | $580 | $5,354 | 923.1% | | Gain on disposition of property | $29,261 | $27,170 | $2,091 | 7.7% | [Real Estate Segment](index=34&type=section&id=Real%20Estate%20Segment_6M) For the Real Estate segment in H1 2023, rental revenue slightly decreased due to property dispositions - Rental revenue decreased primarily due to the dispositions of four properties between April 2022 and April 2023[142](index=142&type=chunk) - Property operating expenses increased due to higher repairs, maintenance, cleaning, and payroll costs[143](index=143&type=chunk) - General and administrative expenses increased due to higher payroll and equity compensation costs[144](index=144&type=chunk) - Real estate taxes increased due to higher assessed values and the inclusion of a recently acquired multifamily property[145](index=145&type=chunk) - Depreciation and amortization decreased due to accelerated depreciation in H1 2022 and the sale of properties[147](index=147&type=chunk) - Interest income increased due to higher interest rates[148](index=148&type=chunk) - Gain on disposition of property reflects the sales of **500** Mamaroneck and Westport retail assets[149](index=149&type=chunk) [Observatory Segment](index=36&type=section&id=Observatory%20Segment_6M) The Observatory segment's revenue increased by 36.9% for H1 2023, driven by higher visitation - Observatory revenues increased by **36.9%** due to increased visitation[150](index=150&type=chunk) - Observatory expenses increased due to increased operating hours and higher variable costs (marketing, labor, maintenance)[151](index=151&type=chunk) - Income tax benefit decreased due to a lower taxable loss for the observatory segment[152](index=152&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its cash requirements, highlighting primary liquidity sources such as cash on hand, operating cash flows, debt issuances, and an $850 million unsecured revolving credit facility - Primary liquidity sources include cash on hand, operating cash flows, debt issuances, and an unsecured revolving credit facility[154](index=154&type=chunk) - As of June 30, 2023, the company had **$315.4 million** in cash and cash equivalents and **$850 million** available under its unsecured revolving credit facility[155](index=155&type=chunk) - Total consolidated indebtedness was approximately **$2.3 billion**, with a weighted average interest rate of **3.9%** and a weighted average maturity of **5.9 years**[155](index=155&type=chunk) - No outstanding debt matures until November 2024, excluding principal amortization[155](index=155&type=chunk) [Portfolio Transaction Activity](index=36&type=section&id=Portfolio%20Transaction%20Activity) This section summarizes recent property sales, including the disposition of 69-97 and 103-107 Main Street in Westport, Connecticut, for $40.0 million on February 1, 2023, and 500 Mamaroneck Avenue in Harrison, NY, for $53.0 million on April 5, 2023 - Sold **69-97** and **103-107** Main Street in Westport, CT, for **$40.0 million** on February 1, 2023[156](index=156&type=chunk) - Sold **500** Mamaroneck Avenue in Harrison, NY, for **$53.0 million** on April 5, 2023[157](index=157&type=chunk) [Unsecured Revolving Credit and Term Loan Facilities](index=37&type=section&id=Unsecured%20Revolving%20Credit%20and%20Term%20Loan%20Facilities) The company's BofA Credit Facility includes an $850.0 million revolving credit facility and a $215.0 million term loan, both maturing in March 2025 - BofA Credit Facility includes an **$850.0 million** revolving credit facility (matures March 2025) and a **$215.0 million** term loan (matures March 2025)[51](index=51&type=chunk) - Wells Term Loan Facility is for **$175.0 million** (matures December 2026)[52](index=52&type=chunk) - Both facilities' terms were revised to replace LIBOR with SOFR and allow multifamily assets as Unencumbered Eligible Property[51](index=51&type=chunk)[52](index=52&type=chunk) - As of June 30, 2023, there were no borrowings under the revolving credit facility and **$215.0 million** under the BofA term loan, and **$175.0 million** under the Wells Term Loan Facility[51](index=51&type=chunk)[52](index=52&type=chunk) [Mortgage Debt](index=37&type=section&id=Mortgage%20Debt) As of June 30, 2023, consolidated mortgage notes payable amounted to $896.4 million - Consolidated mortgage notes payable totaled **$896.4 million** as of June 30, 2023[159](index=159&type=chunk) - The first maturity for mortgage debt is in November 2024[159](index=159&type=chunk) [Senior Unsecured Notes](index=37&type=section&id=Senior%20Unsecured%20Notes) The company's senior unsecured notes include customary covenants and financial ratios, such as maximum leverage and minimum fixed charge coverage - Senior unsecured notes include customary covenants and financial ratios, such as maximum leverage ratio and minimum fixed charge coverage ratio[160](index=160&type=chunk) - As of June 30, 2023, the company was in compliance with all covenants under the outstanding senior unsecured notes[160](index=160&type=chunk) [Financial Covenants](index=37&type=section&id=Financial%20Covenants) As of June 30, 2023, Empire State Realty Trust was in compliance with all its financial covenants, including maximum total leverage (33.8% vs. <60%), maximum secured leverage (13.2% vs. <40%), minimum fixed charge coverage (3.1x vs. >1.50x), minimum unencumbered interest coverage (5.3x vs. >1.75x), and maximum unsecured leverage (25.1% vs. <60%) Financial Covenants Compliance | Financial covenant | Required | June 30, 2023 | In Compliance | | :------------------------------------ | :------- | :------------ | :------------ | | Maximum total leverage | < 60% | 33.8 % | Yes | | Maximum secured leverage | < 40% | 13.2 % | Yes | | Minimum fixed charge coverage | > 1.50x | 3.1x | Yes | | Minimum unencumbered interest coverage | > 1.75x | 5.3x | Yes | | Maximum unsecured leverage | < 60% | 25.1 % | Yes | [Leverage Policies](index=37&type=section&id=Leverage%20Policies) The company's Board of Directors determines the amount of leverage in its capital structure and considers various factors, including economic conditions, cost of capital, market values, and growth opportunities - The Board of Directors determines leverage amounts, considering economic conditions, cost of capital, market values, and growth opportunities[162](index=162&type=chunk) - The company's charter and bylaws do not limit the amount or percentage of indebtedness[162](index=162&type=chunk) [Capital Expenditures](index=37&type=section&id=Capital%20Expenditures) This section details capital expenditures, leasing commission costs, and tenant improvement costs for office and retail properties Capital Expenditures and Leasing Costs | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------ | :--------------------------- | :--------------------------- | | Office Properties: Total square feet leased | 527,295 | 634,582 | | Office Properties: Leasing commission costs per sq ft | $18.52 | $22.14 | | Office Properties: Tenant improvement costs per sq ft | $72.34 | $62.15 | | Retail Properties: Total square feet leased | 11,076 | 4,289 | | Retail Properties: Leasing commission costs per sq ft | $25.95 | $16.64 | | Retail Properties: Tenant improvement costs per sq ft | $26.07 | $— | | Total Portfolio: Capital expenditures (excluding TI & LC) (in thousands) | $25,987 | $19,697 | - The company expects to incur approximately **$138.4 million** in additional costs for tenant improvements and leasing commissions under existing lease agreements[168](index=168&type=chunk) [Off-Balance Sheet Arrangements](index=38&type=section&id=Off-Balance%20Sheet%20Arrangements) As of June 30, 2023, the company did not have any off-balance sheet arrangements - No off-balance sheet arrangements existed as of June 30, 2023[170](index=170&type=chunk) [Distribution Policy](index=38&type=section&id=Distribution%20Policy) The company intends to distribute its net taxable income to security holders to satisfy REIT distribution requirements and avoid U.S. federal income tax liability, expecting to make quarterly distributions - The company aims to distribute net taxable income to satisfy REIT distribution requirements and avoid U.S. federal income tax[171](index=171&type=chunk) - Quarterly distributions are expected, but may require using cash reserves, incurring debt, or liquidating assets under certain circumstances[172](index=172&type=chunk) [Distribution to Equity Holders](index=38&type=section&id=Distribution%20to%20Equity%20Holders) Total distributions and dividends to equity holders amounted to $20.3 million for the six months ended June 30, 2023, a decrease from $21.6 million in the prior year Equity Holder Distributions | Metric (in millions) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :----- | | Distributions and dividends to equity holders | $20.3 | $21.6 | $(1.3) | [Stock and Publicly Traded Operating Partnership Unit Repurchase Program](index=38&type=section&id=Stock%20and%20Publicly%20Traded%20Operating%20Partnership%20Unit%20Repurchase%20Program) The Board of Directors authorized a repurchase program of up to $500 million for Class A common stock and OP units from January 1, 2022, through December 31, 2023 - Board authorized a **$500 million** repurchase program for Class A common stock and OP units from Jan 1, 2022, to Dec 31, 2023[174](index=174&type=chunk)[210](index=210&type=chunk) - As of June 30, 2023, **$396.7 million** remained available for future repurchases[210](index=210&type=chunk) Stock Repurchase Program Activity | Period | Total Number of Shares Purchased | Weighted Average Price Paid per Share | Maximum Approximate Dollar Value Available for Future Purchase (in thousands) | | :----------------------- | :------------------------------- | :------------------------------------ | :-------------------------------------------------------------------------- | | April 1 - April 30, 2023 | 1,214,770 | $6.09 | $396,736 | | May 1 - May 31, 2023 | 2,700 | $6.00 | $396,720 | | June 1 - June 30, 2023 | — | $— | $396,720 | [Cash Flows](index=38&type=section&id=Cash%20Flows) For the six months ended June 30, 2023, cash and cash equivalents and restricted cash decreased to $395.8 million from $412.8 million in the prior year Cash Flow Summary | Metric (in millions) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :----- | | Cash and cash equivalents and restricted cash | $395.8 | $412.8 | $(17.0) | | Net cash provided by operating activities | $105.9 | $83.7 | $22.2 | | Net cash provided by (used in) investing activities | $12.7 | $(56.6) | $69.3 | | Net cash used in financing activities | $(37.5) | $(88.9) | $51.4 | [Net Operating Income ("NOI")](index=39&type=section&id=Net%20Operating%20Income%20%28%22NOI%22%29) Net Operating Income (NOI) is a non-GAAP financial measure used by management to evaluate property performance, excluding factors like financing costs, depreciation, and general administrative expenses - NOI is a non-GAAP measure used to evaluate property performance, excluding cost of funds, depreciation, acquisition expenses, and general & administrative expenses[179](index=179&type=chunk) Net Operating Income | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net operating income | $108,163 | $120,353 | $188,340 | $206,343 | [Funds from Operations ("FFO")](index=40&type=section&id=Funds%20from%20Operations%20%28%22FFO%22%29) Funds from Operations (FFO) is a non-GAAP measure defined by NAREIT, used to understand REIT financial performance by excluding certain non-cash items like depreciation and gains/losses from property sales - FFO is a non-GAAP measure defined by NAREIT, excluding impairment write-offs, gains/losses from debt restructurings and property sales, and including real estate-related depreciation and amortization[184](index=184&type=chunk) Funds from Operations | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | FFO attributable to common stockholders and the Operating Partnership | $67,225 | $77,204 | $108,240 | $124,410 | [Modified Funds From Operations ("Modified FFO")](index=40&type=section&id=Modified%20Funds%20From%20Operations%20%28%22Modified%20FFO%22%29) Modified FFO is a non-GAAP measure that adjusts traditional FFO by adding back amortization of above or below-market ground leases, which is considered material due to non-cash accounting treatment - Modified FFO adds back amortization of above or below-market ground leases to FFO, useful for evaluating operating performance due to non-cash accounting treatment[185](index=185&type=chunk) Modified Funds From Operations | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Modified FFO attributable to common stockholders and the Operating Partnership | $69,183 | $79,162 | $112,156 | $128,326 | [Core Funds From Operations ("Core FFO")](index=40&type=section&id=Core%20Funds%20From%20Operations%20%28%22Core%20FFO%22%29) Core FFO further adjusts Modified FFO by excluding IPO litigation expense, severance expenses, and loss on early extinguishment of debt, providing a supplemental measure of operating performance by removing non-recurring items - Core FFO adds back IPO litigation expense, severance expenses, and loss on early extinguishment of debt to Modified FFO to provide a clearer view of operating performance[187](index=187&type=chunk) Core Funds From Operations | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Core FFO attributable to common stockholders and the Operating Partnership | $69,183 | $79,162 | $112,156 | $128,326 | [Factors That May Influence Future Results of Operations](index=41&type=section&id=Factors%20That%20May%20Influence%20Future%20Results%20of%20Operations) This section discusses key factors that could impact future financial results, including leasing activity, observatory operations, and the broader economic outlook [Leasing](index=41&type=section&id=Leasing) Leasing activity can significantly impact future results due to the small number of large leases signed quarterly, affecting average rent, tenant improvement, and leasing commission costs - Leasing activity, particularly larger leases, can disproportionately impact average rent, tenant improvement, and leasing commission costs[189](index=189&type=chunk) - As of June 30, 2023, **0.9 million** rentable square feet (**9.7%** of portfolio) was available to lease[190](index=190&type=chunk) - Leases representing **3.4%** and **5.4%** of net rentable square footage will expire in 2023 and 2024, respectively[190](index=190&type=chunk) [Observatory Operations](index=41&type=section&id=Observatory%20Operations) Observatory operations are influenced by domestic and international tourism, admission prices, seasonal trends, competition, and weather - The observatory hosted **666,000** visitors for the three months ended June 30, 2023, up from **573,000** in the prior year[191](index=191&type=chunk) - Observatory revenue for the three months ended June 30, 2023, was **$33.4 million**, compared to **$27.4 million** in the prior year, driven by higher visitation[192](index=192&type=chunk) - Revenues and admissions are dependent on tourism trends, admission prices, seasonality, competition, and weather[193](index=193&type=chunk) [Outlook](index=42&type=section&id=Outlook) Despite global economic uncertainties, including inflation, rising interest rates, and commercial real estate market softening, the company believes its modernized, energy-efficient New York City-focused portfolio is well-positioned - The global economy faces uncertainty from inflation, rising interest rates, real estate loan weakness, and geopolitical unrest[195](index=195&type=chunk) - Concerns exist about the softening commercial real estate market, particularly office, due to refinancing challenges and the gradual return-to-office[195](index=195&type=chunk) - The company's modernized, amenitized, energy-efficient NYC-focused portfolio is in a good competitive position, characterized by competitive rental rates, strong leased percentage, and diversified income[196](index=196&type=chunk) - The Empire State Building Observatory was ranked the **1** attraction in the U.S. by Tripadvisor's 2023 Travelers' Choice Best of the Best Awards for a second consecutive year[196](index=196&type=chunk) - The business is supported by a strong balance sheet, modest leverage, and absence of near-term debt maturities or floating rate debt exposure[197](index=197&type=chunk) [Critical Accounting Estimates](index=42&type=section&id=Critical%20Accounting%20Estimates) This section refers to the Annual Report for a discussion of critical accounting estimates, noting that there were no material changes to these estimates during the period - No material changes to critical accounting estimates were disclosed in the Annual Report[198](index=198&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=43&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to market risks, primarily interest rate risk on its unsecured revolving credit facility and debt refinancings - The company is exposed to interest rate changes on its unsecured revolving credit facility and debt refinancings[200](index=200&type=chunk) - To mitigate interest rate risk, the company uses interest rate SOFR swap and cap agreements with an aggregate notional value of **$574.0 million**, maturing between October 2024 and November 2033[201](index=201&type=chunk) - The weighted average interest rate on **$2.3 billion** of fixed-rate indebtedness outstanding was **3.9%** per annum as of June 30, 2023[202](index=202&type=chunk) - The fair value of outstanding debt was approximately **$2.0 billion**, which was **$217.6 million** less than the book value as of June 30, 2023[203](index=203&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=43&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2023, and concluded they were effective - Management concluded that disclosure controls and procedures were effective as of June 30, 2023[205](index=205&type=chunk) - No material changes to internal control over financial reporting were identified during the period[206](index=206&type=chunk) [PART II. OTHER INFORMATION](index=43&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and a list of exhibits [ITEM 1. LEGAL PROCEEDINGS](index=43&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section refers to Note 9 of the financial statements for a description of legal proceedings, indicating that the company is involved in ongoing litigation related to its IPO and Empire State Building Associates - Legal proceedings are described in Note 9, primarily involving arbitration claims related to the IPO and Empire State Building Associates[207](index=207&type=chunk)[77](index=77&type=chunk) [ITEM 1A. RISK FACTORS](index=44&type=section&id=ITEM%201A.%20RISK%20FACTORS) As of June 30, 2023, there have been no material changes to the risk factors previously disclosed in the company's Annual Report and the quarterly report for Q1 2023 - No material changes to risk factors were disclosed as of June 30, 2023, compared to previous reports[208](index=208&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=44&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section reports no recent unregistered sales of equity securities - No recent unregistered sales of equity securities[209](index=209&type=chunk) - The Board authorized a **$500 million** repurchase program for Class A common stock and OP units from Jan 1, 2022, to Dec 31, 2023, with **$396.7 million** remaining as of June 30, 2023[210](index=210&type=chunk) Equity Repurchase Activity | Period | Total Number of Shares Purchased | Weighted Average Price Paid per Share | Maximum Approximate Dollar Value Available for Future Purchase (in thousands) | | :----------------------- | :------------------------------- | :------------------------------------ | :-------------------------------------------------------------------------- | | April 1 - April 30, 2023 | 1,214,770 | $6.09 | $396,736 | | May 1 - May 31, 2023 | 2,700 | $6.00 | $396,720 | | June 1 - June 30, 2023 | — | $— | $396,720 | [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=44&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section states that there were no defaults upon senior securities - No defaults upon senior securities[212](index=212&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=44&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[213](index=213&type=chunk) [ITEM 5. OTHER INFORMATION](index=44&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section states that there is no other information to report - No other information to report[214](index=214&type=chunk) [ITEM 6. EXHIBITS](index=45&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and Principal Financial Officer, and XBRL interactive data files - Includes certifications from the CEO and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[216](index=216&type=chunk) - XBRL interactive data files are provided (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[216](index=216&type=chunk) [SIGNATURES](index=46&type=section&id=SIGNATURES) This section contains the required signatures for the Form 10-Q report, confirming its submission on behalf of Empire State Realty Trust, Inc. by its Executive Vice President, Chief Operating Officer and Chief Financial Officer, and its Senior Vice President, Chief Accounting Officer - The report is signed by Christina Chiu (EVP, COO, CFO) and Stephen V. Horn (SVP, Chief Accounting Officer) on August 4, 2023[220](index=220&type=chunk)

Contents Empire State Building ° Competitive advantages | --- | --- | --- | --- | |------------------------------------|----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...