Empire State Realty OP, L.P. (NYSE: ESBA) is the publicly traded operating partnership that sits beneath Empire State Realty Trust, the landlord of the Empire State Building and a portfolio of Manhattan, Brooklyn, and Westchester County office and retail properties. Because each ESBA unit is exchangeable one for one into a Class A share of the parent REIT, the unit trades as a proxy for the entire enterprise, and at $4.55 it now trades like a distressed asset in a trophy building. The unit sits a few cents above its 52-week low of $4.37 and roughly 45% below its 52-week high of $8.30, valuing the combined equity at about $1.27 billion. The trailing price to earnings ratio of 227.5x and the dividend yield of 2.98% tell you the two halves of the story: GAAP earnings have collapsed under one-time charges, while management continues to pay out roughly $0.035 per unit each quarter and insists the property-level cash engine still covers it.
The second quarter of 2026 crystallized the tension. The partnership reported a net loss attributable to common unitholders of $40.6 million, but that headline was constructed from two enormous offsetting items: a non-cash goodwill impairment of $166.1 million tied to the Observatory reporting unit, and a $124.6 million gain on the sale of 250 West 57th Street. Strip those out, along with $5.5 million of severance costs, and Core Funds From Operations, the non-GAAP profit measure REITs use to approximate recurring earnings power, came in at $57.1 million attributable to common unitholders. Rental revenue grew 7.6% year over year to $165.2 million on the strength of new leasing, and the partnership signed 381,799 rentable square feet of new, renewal, and expansion leases in the quarter. The office portfolio, in other words, is behaving better than the share price implies.
The problem is the Observatory. Revenue at the Empire State Building's observation decks fell 28.5% in the quarter and 25.1% across the first half of 2026, driven by weaker performance in the pass program that sells admission through tour operators and a continued slide in international visitation. Management wrote down $166.1 million of Observatory goodwill on that basis and flagged that the remaining $61.4 million of goodwill in the segment could follow if projections deteriorate further. That admission is what the market is punishing: the Observatory was long the highest-margin, most distinctive asset in the portfolio, and its cash flow now looks structurally lower than the model that justified the 2013 IPO.
The counterargument is equally concrete. Net operating income across the portfolio still grew, to $102.6 million in the quarter, leverage sits at a conservative 37.9% of the covenant ceiling of 60%, the company just bought out $110 million of ground leases to de-risk its two largest midtown properties, and it recycled capital out of a fully leased suburban office asset into Manhattan retail and SoHo. If Observatory visitation stabilizes, the units are cheap relative to replacement value of the underlying real estate. If it does not, the remaining goodwill and the Observatory's carrying value are the next writedowns to watch. This report walks through both sides of that ledger, using the Q2 2026 10-Q filed August 6, 2026 as the primary source.