Empire State Realty OP Returns to Profit After Impairment Quarter
Core funds from operations attributable to common unitholders were $52.7 million in the three months ended September 30, 2026.
Empire State Realty OP, L.P. (ESBA) reported net income attributable to common unitholders of $4.8 million for the three months ended September 30, 2026, after a $40.6 million net loss in the June quarter that included a $166.1 million non-cash goodwill impairment at the Observatory, a $124.6 million gain on the sale of 250 West 57th Street, and $5.5 million of severance.
Core funds from operations attributable to common unitholders were $52.7 million in the September quarter, down from $57.1 million in the June quarter.
Total revenues were $193.1 million, down 2.4% from $197.7 million a year earlier, after a 3.0% year-over-year increase in the June quarter. Rental revenue rose 2.2% to $162.0 million, a slower increase than the 7.6% year-over-year rise to $165.2 million in the June quarter. The company said the rental increase was primarily attributable to higher base rent from new or renewed tenants and increases in tenant reimbursement income, partially offset by the net impact of acquisitions and dispositions in 2025 and 2026.
Observatory revenue fell 25.6% to $26.8 million, after a 28.5% year-over-year decline to $24.2 million in the June quarter. The company attributed the drop to a continued decline in visitation from reduced pass-program performance and fewer international visitors. Operating income was $35.8 million, down 9.0% from $39.3 million a year earlier.
Interest expense was $27.9 million, up 10.7% from $25.2 million a year earlier. The company said the increase was primarily due to the December 2025 issuance of $175.0 million of Series L senior unsecured notes, the July 2026 issuance of $130.0 million of Series M notes, and draws on the revolving credit facility, partially offset by the December 2025 repayment of the $71.6 million Metro Center mortgage, a $55.0 million paydown of Series B notes, and the purchaser’s assumption of the $180.0 million mortgage on 250 West 57th Street. Ground rent expense was $0.4 million, down from $2.3 million a year earlier, after the May 2026 purchase of land under 111 West 33rd Street and 1400 Broadway. The company recorded a $1.1 million loss on disposition of property, with no such loss in the year-ago period.
The company signed 189,477 rentable square feet of new, renewal, and expansion leases in the September quarter, versus 381,799 square feet in the June quarter. In August 2026 it entered into a purchase and sale agreement for 1359 Broadway in New York and, in October 2026 after quarter-end, closed the sale for $217.5 million, subject to certain post-closing obligations.
Cash and cash equivalents were $85.3 million at September 30, 2026, with $520.0 million available under the unsecured revolving credit facility, versus $85.6 million cash and $445.0 million of revolver availability at June 30. Total indebtedness was approximately $2.2 billion, with a weighted average interest rate of 4.78% and a weighted average maturity of 4.5 years. Revolving-credit borrowings were $100.0 million, down from $175.0 million at June 30. Maximum total leverage was 37.8% and maximum unsecured leverage was 40.0%. Mortgage notes payable, net, were $442.4 million.
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