This article first appeared on GuruFocus .
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Core FFO:$0.21 per diluted share for Q2 2026.
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Same-Store Property Cash NOI Growth:Increased 3.3% year-over-year, excluding lease termination fees; decreased 3.2% when adjusted for nonrecurring items.
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Observation Deck NOI:$12.4 million in Q2 2026, compared to $24.1 million in the prior year period.
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Observation Deck Revenue:$24.2 million in Q2 2026.
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Observation Deck Expenses:$11.8 million in Q2 2026.
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Observation Deck Visitation:Decreased approximately 28.5% year-over-year.
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Observation Deck Revenue Per Capita:Increased approximately 1.6% year-over-year, excluding gift shop license fees.
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Core FAD (Funds Available for Distribution):Approximately $16.2 million in Q2 2026, up from $11.9 million in the prior year period.
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Commercial Portfolio Lease Percentage:94.9% at quarter end.
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Leasing Volume:Signed 382,000 square feet in Q2 2026, including over 250,000 square feet of new leases.
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Mark-to-Market Spreads (Manhattan Office):17.8% in Q2 2026.
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Average Lease Duration (New Leases):12 years.
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Multifamily Net Rents:Increased 8%.
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Multifamily Occupancy:Almost 98%.
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2026 Core FFO Guidance Range:$0.75 to $0.79 per diluted share.
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Observation Deck NOI Assumption (Full Year 2026):$55 million.
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Year-End Occupancy Guidance (Commercial Portfolio):90% to 92%.
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Same-Store Property Cash NOI Growth Guidance:Negative 1.5% to positive 2%.
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G&A Run Rate Guidance:Expected to decline to approximately $17 million per quarter in the second half of 2026.
Release Date: July 30, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Strong office leasing performance with 382,000 square feet signed in Q2 2026, including over 250,000 square feet of new leases, the highest since Q4 2021.
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20th consecutive quarter of positive mark-to-market spreads in Manhattan office, demonstrating sustained pricing power.
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Commercial portfolio leased at 94.9%, with occupancy expected to increase by year-end 2026.
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Successful capital recycling through sale of 250 West 57th Street and acquisition of land beneath 111 West 33rd Street and 1400 Broadway, enhancing long-term value.
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Multifamily portfolio performing well with 8% net rent growth and nearly 98% occupancy.
Negative Points
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Observation deck NOI dropped significantly to $12.4 million in Q2 2026 from $24.1 million a year ago, with visitation down 28.5% year-over-year.
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Core FFO guidance reduced to $0.75-$0.79 per share, assuming no improvement in observation deck visitation levels.
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Same-store property cash NOI declined 3.2% year-over-year, excluding nonrecurring items, due to higher free rent and operating expenses.
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Significant headwinds from pass program visitors, with a 45% decline from 2024 to 2026 year-to-date, driven by international budget traveler weakness.
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Uncertainty in observation deck recovery due to geopolitical factors, shift to domestic visitors, and competitive pressures from other attractions.
Q & A Highlights
Q: On the Observatory, can you separate what changes have been aside from international tourists, such as ticket pricing, competition, or bad weather, that resulted in the second quarter's performance? A: (Anthony Malkin, Chairman and CEO) The biggest change has been the mix shift from international to domestic, specifically the decline of the budget international traveler and a tremendous decline in our pass program partners. While attractions in New York have generally seen declines, we declined more than others, primarily due to our exposure to these two sectors. We have work to do and new learnings in place, particularly regarding how we appear online, but the biggest item is the change in the budget traveler path to New York and the pass programs.
Q: In the guidance, there's no assumed improvement in visitation levels. What did you see in June and July, and did you see any pickup in visitors recently? A: (Anthony Malkin, Chairman and CEO) We don't have much more to add. Our last week was our second highest week in the year for traffic. Interestingly, we saw no bump from the World Cup; it was a distraction. The $55 million NOI framework is based on business continuing as it has been through the end of the year, but we don't want to hold ourselves to that as we lack confidence in the current visibility.
Q: On the office side, leasing spreads were positive and occupancy is up, yet cash same-store NOI was negative excluding one-time items. When does the free rent burn-off start to impact same-store growth positively? A: (Stephen Horn, CFO) You start to see some of that flow through. At the Williamsburg portfolio, free rent at H&M burned off during the quarter. On the office side, increases in operating expenses like utility costs are materially offset by higher tenant reimbursement income. However, we had a drag from FDIC downtime of about 230 basis points. LinkedIn takes occupancy for that space this year and begins cash flowing early next year.
Q: Can you expand on your thoughts on how you might improve the Observatory business, including the shift to AI search? A: (Anthony Malkin, Chairman and CEO) We will provide updates as our work progresses. We are very focused on our marketing efforts and execution to align with the changing landscape from search engine optimization to AI. This is a new skill set, and we have good work underway to adapt. Aside from that, we have a fantastic brand, and our focus is on moving that brand towards revenue and converting customers.
Q: What is your appetite for additional dispositions or share repurchases? A: (Christina Chiu, President and COO) We look at share repurchases as a strategic part of capital allocation, but it won't be the only primary factor. We continue to look at capital recycling within the portfolio. Where there are opportunities to generate more value and good cash flow growth, we would consider it. (Anthony Malkin, Chairman and CEO) It is public knowledge that 1359 Broadway is on the market now.
Q: You mentioned historically international travel was around 60% focused on low-budget travelers through pass programs, and more recently it was 60% domestic. Is that a function of shrinking international, and what are the pricing differences? A: (Anthony Malkin, Chairman and CEO) We are an aspirational brand, and the budget-conscious traveler from Europe was the primary customer for these pass programs. That's where we have seen the biggest drop. Our position within the pass programs has not changed, but they have sold many fewer passes. European inbound budget travel is greatly reduced due to war and energy issues. We are happy to see our growth into domestic channels, and it is up to us to execute on other available sales channels.
Q: Strategically, would you like to grow traditional office, retail, and multifamily to shrink the contribution from the Observatory? A: (Anthony Malkin, Chairman and CEO) We view the Observatory as a key component of our business that needs work. Headwinds may turn to tailwinds in the future. (Christina Chiu, President and COO) We look at New York City office, retail, and multifamily, reflected in over $1 billion of transactions completed. The Observatory is a strong business with great margins going through a period impacted by international budget-conscious travelers. A few periods of weakness don't deter our long-term view. We are not saying we are acquiring more Observatories, but we will try to grow that contribution along with shifting our portfolio to better quality and cash flow growth.
Q: Can you clarify whether the pass program weakness is a direct result of weakness in international tourism or are they differentiated? A: (Christina Chiu, President and COO) They are somewhat intertwined. The pass program channel aggregates attractions, and the Empire State Building has traditionally been a leader. Pass programs cater largely to international and budget-conscious travelers. Because of our dominance, we have more exposure. When that component of our business experiences more weakness due to intertwined factors, that is where we see more of the challenge. We will look to recover those areas and expand the opportunity set for generating cash flows.
Q: What are your thoughts on AI demand in the market? Are you well-positioned to benefit from new leasing from AI tenants? A: (Ryan Kass, SVP, Director of Leasing and Marketing) AI has not impacted our portfolio negatively. Our tenants are making long-term commitments, and most transactions we are working on are expansions. The number of AI tenants in the market and deals completed year-to-date exceed 2025. This demand takes supply off the table, giving us an opportunity to push rents. We focus on getting the right tenant that will be there long-term with a high likelihood for expansion.
Q: Longer term, once a recovery happens in the Observatory business, could this ever be an asset you decide to monetize? A: (Anthony Malkin, Chairman and CEO) That's still early in the game. Our view right now is to focus on fixing the business. We are just going to get the business fixed and go on from there.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
