Empire State Realty (ESRT) Earnings Transcript

Image source: The Motley Fool.

DATE

Thursday, Oct. 30, 2025, at 12 p.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Anthony E. Malkin
• Executive Vice President, Real Estate — Thomas P. Durels
• Chief Revenue Officer — Ryan Cass
• Chief Financial Officer — Stephen Thomas Sakwa
• President and Chief Operating Officer — Christina Chiu

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS

• Core FFO -- Core FFO for 2025 was $0.23 per diluted share.
• Same-Store Property Cash NOI Growth -- Same-store property cash NOI increased 1.1% year over year, excluding lease termination fees and adjusted for $1.7 million in nonrecurring items.
• Office Leasing -- 88,000 square feet of new and renewal leases were signed in Q3 2025, with an additional 50,000 square feet were signed after Q3 2025 and 150,000 square feet of leases are currently under negotiation.
• Manhattan Office Occupancy -- Increased by 80 basis points sequentially to 90.3% in Q3 2025; the portfolio remains over 93% leased for the eleventh consecutive quarter above the 90% threshold.
• Guidance -- Year-end 2025 commercial occupancy guidance reaffirmed at 89% to 91%.
• Mark-to-Market Lease Spreads -- Marked the seventeenth consecutive quarter of positive mark-to-market lease spreads in the Manhattan office portfolio.
• Incremental Cash Revenue -- $46 million from signed leases not yet commenced and free rent burn-off as of Q3 2025, according to Ryan Cass.
• Retail Leasing -- Three new leases signed post quarter-end at the North Sixth Street collection, including Tornow/Roledex (Rolex), Tocovus, and HOKA; one vacancy remains at 8690 North Sixth redevelopment property.
• Williamsburg Acquisition -- Tornow/Roledex lease signed prior to redevelopment commencement at 8690 North Sixth property.
• Multifamily Platform -- The multifamily platform reported 99% occupancy. Net effective rent grew 9.3% year over year for the multifamily platform. An occupancy pickup of 180 basis points contributed about 25% of year-over-year revenue growth for the multifamily platform, and all units held offline for potential 421-a program have now been released.
• Observatory Performance -- $26.5 million of NOI in the third quarter; Expenses totaled $9.5 million in Q3 2025; Revenue per capita rose 2.7% year over year in Q3 2025; performance consistent with guidance.
• Core FAD -- Increased to $40.4 million in the third quarter from $11.9 million in the second quarter, mainly due to a reduction in capital expenditures from $52 million to $25 million.
• Balance Sheet Leverage -- Net debt to EBITDA is 5.6 times. No unaddressed maturities until 2026.
• Private Placement -- $175 million of senior unsecured notes were issued after Q3 2025 in a private placement at a 5.47% rate, with funding in mid-December and maturity in 2031; proceeds intended for general corporate purposes and debt repayment.
• Share Repurchases -- Company has repurchased $300 million of shares to date and continues to consider future opportunistic repurchases.
• Portfolio Investment -- Approximately $675 million invested in Manhattan multifamily and Williamsburg retail assets in recent years; all $250 million for Williamsburg acquisitions in 2023 were unlevered transactions.
• Property Recycling and Dispositions -- No additional update on Metro Center; company remains flexible about timing and continues to evaluate asset recycling to redeploy capital.
• Leadership Transition -- Announced transition of roles from Thomas P. Durels to Ryan Cass (Chief Revenue Officer) and Jackie Renton (Chief Operating Officer) as new co-heads of real estate.
• Environmental Recognition -- Received a five-star rating for environmental leadership for the sixth consecutive year in October 2025.

SUMMARY

Empire State Realty Trust (NYSE:ESRT) highlighted sequential progress in leasing, occupancy, and financial performance in Q3 2025, supported by ongoing operational execution and active capital allocation. Management specifically cited a favorable leasing market in New York City, ongoing success in multifamily rent growth, and stable Observatory revenue streams. Leverage remains at conservative levels, and liquidity is further enhanced by a new $175 million private note issue. No material debt maturities until 2026. Direct investment into Manhattan multifamily and Williamsburg retail continues, while the company evaluates asset recycling and future share repurchases as key components of its strategy.

• Management affirmed that approximately 20% of current Manhattan office vacancy is strategically held off-market for the assembly of large contiguous blocks to meet anticipated demand.
• Chief Financial Officer Christina Chiu stated, "we continue to underwrite deals in New York City, and that would span across office, retail, as well as multifamily," reflecting broad acquisition interest supported by strong liquidity.
• Ryan Cass noted, "The third quarter marked our seventeenth consecutive quarter of positive mark-to-market lease spreads in our Manhattan office portfolio," confirming ongoing pricing power in key office assets.
• Leadership emphasized sustained tenant demand across diverse industries, with ongoing interest from finance, professional services, TAMI, consumer products, and others.
• Management clarified that recent acquisition and leasing activity in Williamsburg, including the direct Tornow/Roledex lease, exceeded expectations for both speed and economics.

INDUSTRY GLOSSARY

• 421-a Program: New York City tax incentive for multifamily residential development aimed at encouraging new rental housing construction.
• TAMI: Acronym for technology, advertising, media, and information companies, representing a key tenant segment in commercial real estate leasing.
• FIRE: Acronym for finance, insurance, and real estate sectors, indicating tenant diversity in office portfolios.
• NOI (Net Operating Income): Calculated as property revenue minus operating expenses, excluding interest, taxes, depreciation, and amortization.
• FAD (Funds Available for Distribution): Cash flow metric in REITs that adjusts FFO for recurring capital expenditures and other adjustments to determine cash available for dividends or reinvestment.
• Mark-to-Market Lease Spread: The difference between the new lease rate and the prior lease rate for the same space, measuring pricing power at lease rollover.

Full Conference Call Transcript

Tony Malkin, our Chairman and Chief Executive Officer.

Anthony E. Malkin: Thanks, Heather. Good afternoon, everyone. Yesterday, we reported Empire State Realty Trust's third quarter and year-to-date results. We delivered FFO above consensus and reaffirmed our 2025 guidance. Our highly leased portfolio has benefited from strong lease-up executed over the last several years, and 3Q was a slightly lighter quarter for office leasing. Post-week two, closed, we signed another 50,000 square feet of leases, and we presently have approximately 150,000 square feet of leases in negotiation. We also delivered our seventeenth consecutive quarter of positive marks to market. We will discuss our healthy pipeline of leasing activity and leasing in October in this call. Observatory results were consistent with our guidance.

Empire State Realty Trust is purpose-built for strength and agility across all cycles. Our long-term leases, high occupancy, diversified income streams, and flexible balance sheet provide a solid foundation for consistent performance and strategic growth. In New York City, the office leasing market remains strong. Availability is low at top-tier buildings like ours, and rents continue to rise. There is no new supply at our price point, and many older buildings, properties which are not like our portfolio, modernized, amenitized, well-located, supported by sustainability leadership and a strong financial position, continue to be taken off the market for conversion to residential. We continue to outperform.

Our focus right now is on our little over 500,000 square feet of availability in our Manhattan office portfolio. Some is held off the market for assembly of large contiguous blocks at several properties. We remain focused on our ability to drive occupancy and maximize lease economics. At the observatory, revenue per capita continued to increase in the third quarter in the face of reduced budget traveler visitation. More than half of our visitation is domestic. Slide 16 of our latest investor presentation shows that the Observatory remains resilient. Our strong balance sheet gives Empire State Realty Trust the flexibility to act on opportunity, maintain our portfolio at the highest standards, and create durable long-term value for our shareholders.

We continue to be leaders in environmental stewardship and healthy building performance, focus on business outcomes, and partner with our tenants to help them achieve their own sustainability goals. Earlier this month, Empire State Realty Trust achieved the highest possible grade, a five-star rating, for the sixth consecutive year. Hats off to the team for their continued leadership and excellence. Our entire organization remains laser-focused on the company's five priorities: lease space, sell tickets to the Observatory, manage our balance sheet, identify growth opportunities, and achieve our sustainability goals.

Last month, we announced that Thomas Durels, my partner for more than thirty-five years, and our head of real estate, began to transition his role to two senior leaders at Empire State Realty Trust. We are deeply grateful to Thomas Durels. His impact on our company's success and culture, strategy, and post-IPO transformation into a modernized, amenitized, sustainable portfolio are all indelible. We have an experienced and capable team to build on the strong foundation that Thomas Durels helped to establish. I will now turn the call over to Thomas Durels, who has a few remarks. Then Ryan, Steve, and Christina will provide more detail on our progress and outlook for the balance of 2025. Thomas Durels?

Thomas P. Durels: Thanks, Tony, and thank you for those remarks and good afternoon, everyone. I'd like to touch on our recent leadership succession update. We announced in mid-September that after more than thirty-five years, we began the transition of my role at Empire State Realty Trust to Ryan Cass as Chief Revenue Officer and Jackie Renton as Chief Operating Officer, the new co-heads of real estate. I'm here in the room today as Ryan covers our leasing update. I continue to work with Christina and Tony and assist Ryan and Jackie in our work to deliver strong results and long-term value for our shareholders.

And with that, I will hand it off to Ryan to discuss our third quarter leasing results and outlook for the balance of the year. Ryan?

Ryan Cass: Thanks, Thomas Durels, and good afternoon, everyone. In the third quarter, we signed 88,000 square feet of new and renewal leases. Subsequent to quarter-end, we signed approximately 50,000 square feet of additional leases and have approximately 150,000 square feet of leases in negotiation. We are excited to announce since quarter-end, we signed three new leases within our North Sixth Street collection. Tornow leased over 3,700 square feet to open a Rolex store at 8690 North Sixth, an asset we purchased last quarter as a strategic redevelopment opportunity on one of New York City's most dynamic retail corridors.

Our partnership with a global luxury brand like Rolex, prior to the commencement of our redevelopment work, underscores both the quality and success of this location, which anchors Williamsburg as the premier destination for high-end retail and institutional investment. We also signed new leases with Tocovus and HOKA. Beyond that, we have one space left to lease on North Sixth Street, and that is adjacent to Rolex in our 8690 redevelopment property. We are confident in more good news when existing leases roll. Manhattan office occupancy increased 80 basis points sequentially to 90.3%, and we remain on track to achieve our year-end commercial occupancy guidance of 89 to 91%. As mentioned, we have 150,000 square feet of leases in negotiation.

Tenant demand continues to be diversified, and we are in discussions with prospects from various industries, such as finance, professional services, TAMI, consumer products, and others. New York City's office leasing market is the strongest it has been since 2019, which creates a favorable backdrop for us to execute. Our Manhattan office portfolio is over 93% leased, our eleventh consecutive quarter above 90%, which is a testament to the strength of our leasing platform and strong execution over the last few years. We have slightly over 500,000 square feet of Manhattan office vacancy. As Tony mentioned, in a market with limited supply, we will create large contiguous blocks at several properties to accommodate demand.

We remain focused on improved occupancy and rent growth as the market continues to strengthen. In today's bifurcated market of haves and have-nots, Empire State Realty Trust remains a clear have. Demand is concentrated among top-quality, amenitized, transit-oriented buildings owned by financially strong landlords with proven operational performance. Our best-in-class portfolio has enabled us to push rents, reduce concessions, and extend lease terms. The third quarter marked our seventeenth consecutive quarter of positive mark-to-market lease spreads in our Manhattan office portfolio and underscores the consistent pricing power of our portfolio. We have $46 million in incremental cash revenue from signed leases not commenced and free rent burn-off as shown on page 19 of our supplemental that reflects our leasing success.

Lastly, our multifamily platform portfolio continues to deliver excellent performance with 99% occupancy and 9% year-over-year net rent growth. These results reflect strong market fundamentals and our focus on operational excellence. Thank you. I will now turn the call over to Steve. Steve?

Stephen Thomas Sakwa: Thanks, Ryan. For 2025, we reported core FFO of $0.23 per diluted share. Same-store property cash NOI, excluding lease termination fees, increased 1.1% year over year after adjustment for approximately $1.7 million nonrecurring items recognized in 2024. Adjusted for these nonrecurring items, same-store cash revenue and operating expenses increased 1.3% and 1.5%, respectively, year over year. Operating expenses increased due to the timing of planned repair and maintenance work and higher real estate taxes and were partially offset by higher tenant reimbursement income.

As we progress through the balance of 2025, we expect a strong fourth quarter from a year-over-year cash NOI growth perspective due in large part to real estate tax abatement we expect to recognize by the end of the year. In our Observatory business, we generated approximately $26.5 million of NOI in the third quarter. Observatory expenses totaled $9.5 million, and revenue per capita increased 2.7% year over year. Core FAD increased to $40.4 million in the third quarter from $11.9 million in the second quarter. This mainly reflects a reduction in bad CapEx spend from $52 million last quarter to $25 million this quarter.

This is consistent with the commentary from our previous earnings call where we conveyed our expectation for CapEx to trend lower in 2025. With that, I will now turn the call over to Christina. Christina?

Christina Chiu: Thanks, Steve. I'll touch on the Observatory and our capital allocation strategies before we shift to Q&A. Our iconic Empire State Building Observatory remains a resilient asset and strong contributor to our bottom-line cash flow. As Tony mentioned, performance has been consistent with our revised guidance. We continue to see steady domestic demand offset by reduced international visitation. We remain focused on the levers within our control to enhance the guest experience, broaden our marketing reach, and drive operational efficiency. Our unmatched brand position as the authentic New York City experience, anchored by the world's most iconic building, supports sustained long-term growth as global travel patterns normalize.

Our well-positioned and flexible balance sheet remains one of our key strengths, with ample liquidity, lower leverage versus sector peers at 5.6 times net debt to EBITDA, a well-laddered maturity schedule, and no unaddressed maturities until 2026. Subsequent to quarter-end, we announced the issuance of $175 million of senior unsecured notes in a private placement at a rate of 5.47% that will fund in mid-December and mature in 2031. Proceeds will be used for general corporate purposes, including potential new investments and repayment of debt. And as a reminder, all $250 million of our Williamsburg acquisitions in late 2023 were executed on an unlevered basis.

From a capital allocation standpoint, we continue to actively underwrite new investment opportunities across New York City office, retail, and multifamily. The market has seen a pickup in transaction activity and investment opportunity, the return of institutional capital, and strong recognition of the strength of New York City's underlying property fundamentals. We continue to pursue opportunities where our operating and repositioning expertise can create meaningful value, and our strong liquidity provides the possibility to act safely when conditions align. As we look ahead, our focus remains on driving sustainable cash flow to the bottom line through our high-quality New York City portfolio that is well-diversified across sectors and sources of income that benefit from live, work, play, visit.

Our operating expertise, flexible balance sheet, and high-quality assets continue to position us to capitalize on the strength of the Manhattan office market. Over the last several years, we have achieved more than 600 basis points of positive lease-up absorption across our Manhattan office portfolio. At the same time, we have tax-efficiently recycled out of non-core suburban markets and invested approximately $675 million into Manhattan multifamily and Williamsburg retail assets to optimize cash flow growth over time through higher rent growth and lower CapEx requirements. We continue to evaluate additional recycling opportunities that are accretive to long-term cash flow and seek ways to operate more efficiently. We also continue to evaluate opportunistic share repurchases within our broader capital allocation framework.

That concludes our prepared remarks. With that, I'll turn the call back to the operator to begin Q&A.

Operator: Thank you. We will now be conducting a question and answer session. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset. One moment, please, while we poll for your questions. Our first questions come from the line of Manas Abeki with Evercore ISI. Please proceed with your questions.

Manas Abeki: Great. Thanks. I was just wondering if you could expand a little bit more on the capital user side after you now place a private placement in December. In terms of if there's any specific acquisition or potential transactions that you're looking at, maybe also comment on a general transaction more if there are kind of pockets within New York that are more attractive than others. If you could talk about cap rates too to the extent you can, that would be great. Or just kind of giving a little bit more color on that bucket in general, that would be very helpful.

Christina Chiu: Sure. So as we've mentioned, we continue to underwrite deals in New York City, and that would span across office, retail, as well as multifamily. So that remains the case, and we're really positioned with good liquidity so that we can move quickly when the right deal comes up. On top of that, we also have a couple of debt maturities early next year, which is why we referenced that within our remarks. You're asking about cap rates, and I think the market has had some transactions that have provided some cap rate evidence, but the reality is not all deals are the same.

And so you see some deals with sort of mid-high single-digit cap rates, but they're very specific to the transaction. Then you have other deals that are more situational. And cap rates aren't as relevant of a metric. You really have to look at those on a per-pound basis. So overall, we just want to be well-positioned as always to be able to transact, and we are actively looking.

Manas Abeki: Great. Thanks.

Operator: Thank you. Our next questions come from the line of Seth Bergey with Citi. Please proceed with your questions.

Seth Eugene Bergey: Hi. Thanks for taking the question. I guess, as you think about kind of New York and the mayoral election, it seems like some of the policies are largely kind of aspirational or require state legislative support to pass. But are you concerned about any tenants that may be more directly exposed to changes in rent or anything like that?

Anthony E. Malkin: So, first of all, as I've said so many times, we are incredibly fortunate to be in New York City. And New York City is the best market in the United States. And that makes it one of the best, if not the best markets in the world. Number two, we very clearly operate on the basis, as I've mentioned before, we do policy, not politics. So whoever shows up, whatever administration arrives, that's the one with which we deal, and that's where we try to contribute both to policy and do our best work from a business perspective. We are always concerned about all developments.

And at the same time, New York City has been and continues to be a magnet for the job-seeking college graduates, the folks who want to come and make their careers and live in a vibrant environment. And by the way, those are an awful lot of today's voters. So, you know, they are the employees. The employers are here because they want those employees. And we are very positive on the future of New York City. Outside of that, it's all speculation. There are certain checks and balances, as you said, and we'll see what comes.

Seth Eugene Bergey: Okay. Great. And then I guess just a second one. You know, as you think about capital allocation, you know, how attractive is buying back stock where your shares are currently trading?

Christina Chiu: Yeah. We think our share price is very attractive. It provides a great entry point for those interested in our portfolio that is extremely well-positioned while we have strong operating fundamentals. For us as a company, we definitely look at that. As I mentioned, we've done $300 million of share buybacks over the years. So clearly, a part of our strategic capital allocation. And we've also mentioned we're looking at opportunities, and I think it's a balance that you want to find the right deals, be able to act, and you need to have liquidity and capacity for that, and at the same time, balance that against share buybacks. So both are definitely on the table.

And I think with our flexible balance sheet, we can, you know, we have room to do both.

Seth Eugene Bergey: Thank you.

Operator: Thank you. Our next questions come from the line of Blaine Heck with Wells Fargo. Please proceed with your question.

Blaine Matthew Heck: Great. Thanks. And, Thomas Durels, all the best in the future. Thanks for your help over the years. We've seen a recent uptick in layoff headlines for some companies, with Amazon probably being the largest and most recent. So within that context, can you comment on whether you've seen any change in trends with respect to expansion versus contraction of space at expiration? And more broadly, you know, just how you guys are thinking about the potential rising trend of layoffs as it relates to demand for office space as we head into '26 and '27?

Anthony E. Malkin: So, first of all, just to make sure that you're aware, Thomas Durels is not only here, he's here for the announcement for months to come. So of course, several quarters to come. Possibly, as long as for the full duration of what was announced in our disclosure. So you'll have an opportunity to see him if you'd like to because we get to see him every day. Second of all, I think it's very important to note, we've had over 3.1 million square feet of expansions of existing tenants within our portfolio since our IPO in 2013.

We have active discussions, though not actually active discussion, and part of our leasing pipeline consists of existing tenants with the intention to expand. So we still see good growth, number one. Number two, you know, we serve the fattest, widest component of the office market. And that's the opportunity with Empire State Realty Trust. And we are top of tier in our price range. So from our perspective, we do not see anything in the way of contraction. Everybody with whom we speak comes to us because of the quality of our portfolio, and several of them have migrated from what would be thought of as glass and steel buildings.

And finally, and most importantly, we still have ongoing expansion within our portfolio from existing tenants. So, you know, as we look and we go forward, there are all kinds of reasons for which people might not expand or take additional space. We don't see any of them play out right now. And the Amazon announcement, as we might say, they announced people they had already laid off and plans for future layoffs. The word we get from the sources with whom we work, New York City is still the number one desired desk for anyone who works at Amazon.

Blaine Matthew Heck: Got it. That's very helpful, Tony. Switching gears, you know, I think you guys covered the acquisition side. But with respect to dispositions, is there any update to share on Metro Center? And then past that, are there any assets in the portfolio or groups of assets in which you think you might have maximized value and could be good funding sources if you were to look at kind of a larger deal on the acquisition side?

Christina Chiu: Yes. We don't have an additional update on Metro. As we've said, we can be flexible on that front. We are looking to sell that asset. But if it doesn't work out, we also have attractive in-place debt and can continue. There is still tenant demand in space, and that was really a capital allocation decision for us. As it relates to other capital recycling, as I mentioned, we are definitely open to that. And as you stated, we've added value, and it's a quality asset. There could be buyers that are interested in a strong market like New York City.

And it may make sense for us to dispose of those assets so we can redeploy proceeds into assets where we can add more value, and that would span New York City office and multifamily. So extremely consistent with what we've communicated to you. And now with more activity in the market, it does feel like a better time as compared to eighteen, twenty-four months ago, where financing wasn't as readily available. There weren't as many deals, institutional capital had some question marks. So as we get into a more vibrant market, it does feel like that's a logical consideration, and we'll keep the market updated.

Blaine Matthew Heck: Great. Thank you.

Operator: Thank you. Our next questions come from the line of Dylan Burzynski with Green Street. Please proceed with your questions.

Dylan Robert Burzinski: Good morning, guys. Thanks for taking the question. Tony, you mentioned that your guys' portfolio caters to the largest subset of demand in New York. Can you kind of just talk about any trends you're discerning? Are you seeing more activity amongst some of the larger tenants out there in the market? Are there certain industries that are outpacing? I know, obviously, tech leasing has been subdued lately, but are you seeing any sort of green shoots on that front as it relates to demand within that industry?

Ryan Cass: So this is Ryan here. One of the advantages that Tony spoke about in our portfolio is diversification. We appeal to everybody. So we have a lot of interest from a lot of different sectors. It does range from TAMI, consumer products, FIRE, professional services. Our job is to assist our tenants with employee recruitment and retention. And what we're seeing is a lot of the conversations right now are driven by tenants looking to upgrade into better quality spaces and also expand their offering.

Dylan Robert Burzinski: That's helpful. And then, I guess, just touching on the net effective rent environment. I know you guys have noted in the past that you have continued to see net effective rent growth across the portfolio. But I guess as you look out to 2026, given limited competitive availability you guys compete with as well as the amount of robust demand in the market, I mean, is there a potential to sort of see, call it, rent spikes in '26 and '27? I know one of your peers talked about potentially seeing cumulative rent growth of, like, 25% over the next five years. So just sort of curious your guys' thoughts on that.

Anthony E. Malkin: Gosh. Well, if you look at what we've accomplished over the last five years, we have very much seen rent spikes across our portfolio. And as an example, the active negotiations underway at Empire State include rents over long terms in the mid-nineties for the lives of those leases and going into the nineties at 1 Grand Central Place. So from our perspective, we're very much in that environment. We still think it is a very healthy environment. And when it comes to the future, we do at this point still anticipate increased rents due to a shortage of available space.

When you talk about our competitive set, I think it's really important to note the buildings which are being taken out of circulation. The important thing to us is that limits our competitive set. Those buildings which will not be reinvested in will not be modernized, will not be amenitized, will not be made energy efficient for office tenants. It means that we are the best house on our block for sure. It also means we're the most affordable house on the best block. So number one, from our competitive set, many of which are being taken out of circulation, but we're top of tier.

Number two, we do pull from other buildings where either because they may be glass and steel, but they are not modernized and amenitized with energy efficiency and sustainability and great locations, or just the rent is too darn high, they come to us, and we're a bargain even at our increased rents. Ryan, anything else you want to add there?

Ryan Cass: No. I think you summed it up really well.

Operator: Our next question comes from the line of Regan Sweeney with BMO Capital Markets. Please proceed with your question.

Regan Sweeney: Hey. Thank you for the question. I just wanted to dive into the pipeline of 150,000 square feet. Is that really all office, or is there also a retail component in that? And then just can you give the breakdown between the different property types if available?

Ryan Cass: So that's a healthy mix of both office and retail as well as a mix of new and renewal. So right now, what we're focused on, as Tony spoke about earlier, is the creation of the large blocks of space. We're 93.1% leased, have the 150,000 square feet of leases in negotiation. Roughly 20% of our Manhattan office vacancy right now is strategically held off-market in connection with the assemblage of those large blocks. And that's really in response to market demand, and we believe it's going to provide better long-term economic results.

Anthony E. Malkin: I would add, in addition to Ryan's comment, that, look, we don't have that much retail to lease, so the vast bulk of that 150,000 square feet is office, and it's across our portfolio and its price ranges.

Regan Sweeney: Great. And then just on the rent spreads, like, obviously, the office has done very well, but there's been a few quarters of weakness in the retail segment. So just where are rents really going out today? Is there opportunity for the Williamsburg portfolio to pick up on that? And then just also on multifamily, I know you said there was a 9% rent growth in the quarter. But I noticed in the presentation, you removed the bullet on the year-over-year rent growth. So has there been a change in October? Or something expected going forward?

Ryan Cass: So we're very excited with what's happened in Williamsburg this week. We signed three transactions. Obviously, Tornow will be putting Rolex at the redevelopment at 8690, Takovis, HOKA. We're left with one vacancy. We leased the Hermes temporary space that will be vacated year-end. We've been pushing rents there and continue to see an increase in demand from tenants that are walking the street.

Anthony E. Malkin: Of course, the great news for us on that Hermes moves to its permanent new flagship store, and we've already got that backfilled.

Ryan Cass: Correct. And the 8690 acquisition that leased to Tornow/Rolex is terrific for us. It exceeded what we expected to happen and happened much more quickly than we thought it would. That was a direct deal that we did ourselves with no representing broker. We just dealt with the tenant broker. Very grateful to Andrew Greenberg of CBRE for that. When we look at the resi, Christina, maybe you want to comment on that.

Christina Chiu: Not familiar with the specific bullet that was mentioned, but we continue to see good fundamentals. Happy to take it offline and go through any of the items that you want to. But overall, fundamentals remain quite strong.

Dylan Robert Burzinski: Yeah. Just to get a bit more details there. And year over year, Ryan already mentioned that net effective rent growth of 9.3%. We have two other factors that play into the success there year over year. We had a 180 basis points of occupancy pickup, which contributed about 25% of that rent growth or revenue growth, I should say. And then also, had a number of units that we held offline that we disclosed as part of a potential 421-a program. And those have now all been released. So that contributed to about another 15% of that pickup. So really firing on all cylinders on the residential side.

Regan Sweeney: Great. I appreciate the color.

Anthony E. Malkin: Thank you. There are no further questions at this time. In closing, we remain focused on our five priorities: lease space, sell tickets to the Observatory, grow Observatory revenue, maintain a strong and flexible balance sheet, pursue disciplined growth, and advance our sustainability leadership. We are well-positioned to capitalize on opportunities as they arise and to continue to deliver results with focus, discipline, and consistency in the quarters ahead. And we look forward to the chance to meet with many of you at non-deal roadshows, conferences, and tours in the months ahead. Onward and upward.

Operator: Thank you. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool recommends Empire State Realty Trust. The Motley Fool has a disclosure policy.