New York City’s declining international tourism over the past year since President Donald Trump assumed office are starting to affect Empire State Realty Trust (ESRT)’s finances.
Revenue dropped at the observation deck.
ESRT reported second-quarter funds from operations (FFO) of $57 million, or 21 cents per share, marking a loss of $25.8 million or 15 cents per share from the same period a year ago. The trust attributed the loss largely to a massive non-cash impairment charge of $166.11 million connected to underperforming visitations at the Empire State Building observatory stemming from persistent drops in international tourists to the Big Apple.
The observatory generated $12.4 million of net income in the first quarter, a sharp 48.5 percent decrease from $24.1 million in the same period in 2025. Visitors to the observatory during the quarter were 450,000, down 28.5 percent year-over-year.
ESRT also cited lower usage of third-party pass program channels used for tourist sites around New York as a factor in the profit loss. Such passes are often used by budget-conscious international travelers. “While all attractions have experienced reduced visitorship in 2026, our drop compared to the market in general is larger due to our prior dominance with pass programs and their international presence,” Anthony Malkin, CEO of ESRT, said during the firm’s earnings call. “Softer visitation persisted through the second quarter.”
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Despite the challenges at the observation deck, ESRT netted $196.9 million of revenue for the second quarter, up slightly from $191.3 million a year ago. The REIT achieved gains in its office portfolio with its 20th consecutive quarter of positive leasing spreads while signing 363,968 rentable square feet of leases.
Leasing activity was highlighted by a new 16-year, 100,948-square-foot lease with United Talent Agency at the Empire State Building. Ryan Kass, executive vice president, co-head of real estate and chief revenue officer at ESRT, said there is now one full floor available to lease in the building, and the company will look to increase rents there.
ESRT now has a healthy pipeline of 200,000 square feet of leases in negotiation. “Demand continues to concentrate in high-quality, modernized, amenitized, transit-oriented buildings owned by well-capitalized landlords with proven operating platforms,” Kass said. “New York City’s leasing market remains strong and provides a favorable backdrop for execution with demand broad-based across finance, professional services, TAMI and consumer products.”
The company was busy on the transaction front during the quarter, which included a 250 West 57th Street disposition of $275 million where the buyer, Namdar Realty Group, assumes $180 million of mortgage debt on the 26-story office building. ESRT also acquired land beneath 111 West 33rd Street and 1400 Broadway for an aggregate purchase price of $110 million.
On the debt front, ESRT closed on a $245 million unsecured delayed-draw term loan during the quarter that matures in 2032. The REIT said the loan proceeds are expected to be drawn in January 2027 to repay existing debt. “We maintain ample liquidity, a well-laddered debt maturity schedule and have no unaddressed debt maturities until January 2028,” Christina Chiu, chief financial officer at ESRT, said during the earnings call. “We maintain a well-positioned and flexible balance sheet and predominantly unencumbered portfolio that provides substantial optionality.”
