Empire State Realty OP Books Observatory Goodwill Impairment
Core FFO attributable to common unitholders was $57.1 million as the company recorded a $166.1 million non-cash charge on the Observatory reporting unit.
Empire State Realty OP, L.P. (ESBA) recorded a $166.1 million non-cash goodwill impairment on its Observatory reporting unit in the three months ended June 30, 2026, after a further drop in visitation, and posted a net loss attributable to the company of $40.6 million.
The New York real estate operating partnership said the charge reflected a decline in projected performance and expected future cash flows from a sustained drop in visitor volume, including weaker pass-program performance and fewer international visitors. Observatory revenue was $24.2 million, down 28.5% from $33.9 million a year earlier. That decline accelerated from the prior quarter, when Observatory revenue was $18.5 million, down 20.1% year over year.
Goodwill remaining in the Observatory unit was $61.4 million. That balance remains at risk of further impairment if visitation falls more than expected or if strategies and market conditions do not support the unit’s fair value.
Core funds from operations attributable to common unitholders were $57.1 million, up from $53.2 million in the prior quarter. The net loss included the impairment, a $124.6 million gain on the sale of 250 West 57th Street, and $5.5 million of one-time severance costs in general and administrative expenses.
Total revenues were $196.9 million, up 3.0% from $191.3 million a year earlier. Rental revenue was $165.2 million, up 7.6% from $153.5 million a year earlier. The rental increase reflected higher base rent from new or renewed tenants, tenant reimbursement income, and the net impact of acquisitions and dispositions in 2025 and 2026. Other revenues and fees were $7.2 million, primarily real estate tax abatement refunds related to 2024 and 2025.
General and administrative expenses were $25.1 million, up 34.5% from $18.7 million a year earlier, primarily because of the $5.5 million of severance. Property operating expenses were $47.8 million, driven by higher repair and maintenance, operating payroll, and utilities. Interest expense was $27.8 million.
In June 2026, the company sold 250 West 57th Street for $275.0 million, including the purchaser’s assumption of a $180.0 million mortgage. In May it bought the land under 111 West 33rd Street and 1400 Broadway for an aggregate $110.0 million, with remaining ground-lease terms of about 51 and 38 years. In March it acquired a Williamsburg retail property for $46.0 million.
Leasing picked up. The company signed 381,799 rentable square feet of new, renewal, and expansion leases in the quarter, versus 113,484 square feet in the prior quarter.
Cash and cash equivalents were $85.6 million at June 30, 2026, with $445.0 million available on the unsecured revolving credit facility. Total indebtedness was approximately $2.2 billion, with a weighted average interest rate of 4.70% and a weighted average maturity of 4.5 years. Revolving credit borrowings were $175.0 million. Mortgage notes payable, net, were $443.1 million. Maximum total leverage was 37.9% against a 60% covenant; maximum unsecured leverage was 38.1%.
Subsequent to quarter-end, in July 2026 the company closed a $130.0 million issuance of 5.99% Series M senior notes due July 15, 2032, and amended the Wells term loan facility to add a $245.0 million delayed-draw term loan. The existing $245.0 million term loan matures January 15, 2031; the delayed-draw facility matures January 12, 2032.
The remaining Observatory goodwill of $61.4 million is the next impairment test if visitation continues to miss the projections used in the charge.