Empire State Realty Trust, Inc. (ESRT)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context otherwise requires or indicates, references in this section to “we,” “our,” and “us” refer to our Company and its consolidated subsidiaries. This Management’s Discussion and Analysis provides a comparison of the Company’s performance for its three and six month periods ended June 30, 2026 with the corresponding three and six month periods ended June 30, 2025 and reviews the Company’s financial position as of June 30, 2026. The following discussion related to our consolidated financial statements should be read in conjunction with the financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend these forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts and can generally be identified by words such as “anticipate,” “believe,” “expect,” “intend,” “plan,” “project,” “estimate,” “may,” “will,” “should,” “would,” and similar expressions.

Forward-looking statements are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks and uncertainties include, among others: economic and market conditions (including the impact of catastrophic events, pandemics, extreme weather, terrorism, armed hostilities, cybersecurity threats and other technology disruptions); increased costs due to tariffs or other economic factors; changes in the New York City office, retail, multifamily and tourism markets (including changes in the use of office space and remote work); leasing activity, tenant defaults, early terminations and renewals, occupancy levels and rental rates; performance of the Observatory (including tourism levels, currency and geopolitical impacts, weather and competition); interest rate volatility and capital markets conditions, including our ability to refinance, restructure or extend indebtedness; real estate valuation declines and potential impairment charges; our ability to execute capital projects and complete acquisitions on acceptable terms; risks relating to governmental regulation, environmental and climate-related requirements (including Local Law 97), and our ability to achieve sustainability goals and metrics; risks relating to our ground leases; our ability to maintain our qualification as a REIT; potential taxable gain arising from transactions structured to qualify under Section 1031; legal proceedings; and risks relating to our disclosure controls and internal control over financial reporting. For a discussion of these and other factors, see the section entitled “Risk Factors” in the Company’s Annual Report for the year ended December 31, 2025, and any additional factors that may be contained in any filing the Company makes with the SEC. We undertake no obligation to update or revise any forward-looking statement to reflect subsequent events or circumstances, except as required by law.

Overview

Highlights for the three months ended June 30, 2026

•Net loss attributable to common stockholders of $(25.8) million, which includes items that are excluded from Core Funds From Operations ("Core FFO"), including a non-cash goodwill impairment charge of $166.1 million related to our Observatory reporting unit, a $124.6 million gain on the disposition of 250 West 57th Street, and $5.5 million of one-time severance costs included in general and administrative expenses.

•Core Funds From Operations of $57.1 million attributable to common stockholders and the operating partnership.

•Signed a total of 381,799 rentable square feet of new, renewal, and expansion leases.

•In May 2026, we closed on the acquisition of land underlying the properties at 111 West 33rd Street and 1400 Broadway for an aggregate purchase price of $110.0 million.

Results of Operations

The discussion below relates to our results of operations for the three and six months ended June 30, 2026 and 2025, respectively.

Three Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 2025

The following table summarizes the historical results of operations:

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Real Estate Segment

Rental Revenue

The increase in rental revenue during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 was primarily attributable to higher base rent from new or renewed tenants, increases in tenant reimbursement income, and the net impact of acquisitions and dispositions made during 2025 and 2026 as disclosed in "Financial Statements - Note 3. Acquisitions and Dispositions" in this Quarterly Report on Form 10-Q.

Other Revenues and Fees

The increase in other revenues and fees during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 was primarily due to receiving real estate tax abatement refunds related to 2024 and 2025.

Property Operating Expenses

The increase in property operating expenses during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 was primarily due to higher repair and maintenance costs, operating payroll costs and utilities costs.

General and Administrative Expenses

The increase in general and administrative expenses during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 was primarily due to $5.5 million of severance costs.

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Gain on Disposition of Properties

The gain on disposition activity for the three months ended June 30, 2026 relates to the disposition of 250 West 57th Street in New York, New York. See "Financial Statements - Note 3. Acquisitions and Dispositions" for additional details.

Observatory Segment

Observatory Revenue

Observatory revenues were lower due to a continued decline in visitation during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 from a reduction in pass program performance and a continued decrease in international visitors.

Goodwill Impairment Charge

We recognized a non-cash goodwill impairment charge of $166.1 million during the three months ended June 30, 2026 as a result of a decline in projected performance and expected future cash flows due to a sustained decline in visitor volume from a reduction in pass program performance and a continued decrease in international visitors. The $61.4 million goodwill remaining in the Observatory reporting unit remains at risk of future impairment if the fair value of the reporting unit decreases due to changes in the amount and timing of expected future cash flows, decreases in visitation in excess of expectations, an inability to execute management’s business strategies, or general market conditions. See "Financial Statements - Note 4. Deferred Costs, Acquired Lease Intangibles and Goodwill" for additional details.

Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context otherwise requires or indicates, references in this section to "we," "our," and "us" refer to our Company and its consolidated subsidiaries. The following discussion and analysis should be read in conjunction with our consolidated financial statements as of December 31, 2025 and 2024 and for the years ended December 31, 2025, 2024 and 2023 and the notes related thereto which are included in this Annual Report on Form 10-K.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. We intend these forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts and can generally be identified by words such as “anticipate,” “believe,” “expect,” “intend,” “plan,” “project,” “estimate,” “may,” “will,” “should,” “would,” and similar expressions. Forward-looking statements are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied.

Forward-looking statements are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks and uncertainties include, among others: economic and market conditions (including the impact of catastrophic events, pandemics, extreme weather, terrorism, armed hostilities, cybersecurity threats and other technology disruptions); increased costs due to tariffs or other economic factors; changes in the New York City office, retail and tourism markets (including changes in the use of office space and remote work); leasing activity, tenant defaults, early terminations and renewals, occupancy levels and rental rates; performance of the Observatory (including tourism levels, currency and geopolitical impacts, weather and competition); interest rate volatility and capital markets conditions, including our ability to refinance, restructure or extend indebtedness; real estate valuation declines and potential impairment charges; our ability to execute capital projects and complete acquisitions on acceptable terms; risks relating to governmental regulation, environmental and climate-related requirements (including Local Law 97), and our ability to achieve sustainability goals and metrics; risks relating to our ground leases; our ability to maintain our qualification as a REIT; potential taxable gain arising from transactions structured to qualify under Section 1031; legal proceedings; and risks relating to our disclosure controls and internal control over financial reporting. For a discussion of these and other factors, see "Item 1A. Risk Factors" in this report. Any forward-looking statement speaks only as of the date of this report. We undertake no obligation to update or revise any forward-looking statement to reflect subsequent events or circumstances, except as required by law.

Overview

2025 Highlights

•Net income attributable to common stockholders of $43.4 million.

•Core Funds From Operations ("Core FFO") of $234.2 million attributable to common stockholders and the operating partnership.

•Signed a total of 1,009,009 rentable square feet of new, renewal and expansion leases.

•In June 2025, we closed on the acquisition of two retail properties on North 6th Street in Williamsburg, Brooklyn for a purchase price of $31.0 million.

•In December 2025, we closed on the acquisition of 130 Mercer Street, located in the SoHo submarket of Manhattan, for a purchase price of $386.0 million.

Results of Operations

Overview

The discussion below relates to the financial condition and results of operations for the years ended December 31, 2025 and 2024. For a discussion of our 2023 financial results as compared to our 2024 financial results, please see our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

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Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024

The following table summarizes the historical results of operations:

Real Estate Segment

Rental Revenue

The increase in rental revenue during the twelve months ended December 31, 2025 compared to the twelve months ended December 31, 2024 was primarily attributable to a $7.6 million increase in tenant reimbursement income and $5.9 million increase due to higher base rent from new or renewed tenants. The increases were partially offset by a net $1.9 million decrease in revenue from our recent transaction activity as disclosed in "Financial Statements - Note 3. Acquisitions and Dispositions" in this Annual Report on Form 10-K.

Property Operating Expenses

The increase in property operating expenses during the twelve months ended December 31, 2025 compared to the twelve months ended December 31, 2024 was primarily due to higher cleaning-related payroll costs, utilities costs, and repair and maintenance costs in 2025

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relating to increased building utilization and certain local law compliance costs. The increases were partially offset by a net decrease in property operating expenses from our recent transaction activity as disclosed in "Financial Statements - Note 3. Acquisitions and Dispositions" in this Annual Report on Form 10-K.

Real Estate Taxes

The increase in real estate taxes during the twelve months ended December 31, 2025 compared to the twelve months ended December 31, 2024 was primarily attributable to higher assessed values for multiple properties, partially offset by a net decrease from our recent transaction activity as disclosed in "Financial Statements - Note 3. Acquisitions and Dispositions" in this Annual Report on Form 10-K.

Depreciation and Amortization

Depreciation and amortization increased during the twelve months ended December 31, 2025 compared to the twelve months ended December 31, 2024 primarily due to depreciation on building and tenant improvement assets placed in service as a result of our increase in leasing activity. The remaining activity relates to our recent transaction activity as disclosed in "Financial Statements - Note 3. Acquisitions and Dispositions" in this Annual Report on Form 10-K.

Interest Income

The decrease in interest income during the twelve months ended December 31, 2025 compared to the twelve months ended December 31, 2024 is primarily due to lower cash balances due to unlevered property acquisitions during 2024 and 2025, the paydown of the $120.0 million revolving credit facility and the $100.0 million Series A senior unsecured notes in March 2025. See "Financial Statements — Note 5. Debt" in this Annual Report on Form 10-K.

Gain on Sale/Disposition of Property

The gain on disposition activity for the year ended December 31, 2025 relates to the disposition of Metro Center in Stamford, Connecticut as disclosed in "Financial Statements - Note 3. Acquisitions and Dispositions" in this Annual Report on Form 10-K. The gain on disposition activity for the year ended December 31, 2024 relates to the derecognition of assets and certain liabilities in connection with the consensual foreclosure of First Stamford Place in Stamford, Connecticut.

Observatory Segment

Observatory Revenue

Observatory revenues were lower due to lower visitation during the twelve months ended December 31, 2025 compared to the twelve months ended December 31, 2024, primarily due to lower levels of international tourism in 2025 as compared to 2024. While observatory revenues declined due to lower levels of international tourism, this was partially offset by an increase in domestic visitation and overall revenue per visitor for the twel

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