Leases

6 Months Ended

Jun. 30, 2025

Lessor

We lease various spaces to tenants over terms ranging from one to 30 years. Certain leases have termination options for a fee and/or renewal options. The leases provide for base monthly rentals and reimbursements for real estate taxes, escalations linked to the consumer price index or common area maintenance known as operating expense escalation. Tenant expense reimbursements are reflected in our June 30, 2025 and 2024 condensed consolidated statements of operations as rental revenue.

Rental revenue includes fixed and variable payments. Fixed payments primarily relate to base rent and variable payments primarily relate to tenant expense reimbursements for certain property operating costs. The components of rental revenue consisted of the following:


	Three Months Ended				Six Months Ended
(amounts in thousands)	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
Fixed payments	$	133,873	$	136,235	$	269,829	$	272,588
Variable payments	19,667		16,235		38,253		33,764
Total rental revenue	$	153,540	$	152,470	$	308,082	$	306,352

As of June 30, 2025, we were entitled to the following future contractual minimum lease payments (excluding tenant expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2054 (amounts in thousands):


Remainder of 2025	$	251,509
2026	484,579
2027	463,653
2028	426,970
2029	363,439
Thereafter	1,759,249
	$	3,749,399

The above future minimum lease payments exclude tenant recoveries and the net accretion of above-market leases and below-market lease intangibles. Some leases are subject to termination options generally upon payment of a termination fee. The preceding table is prepared assuming such options are not exercised.

As of June 30, 2025, the future lease payments to be received for signed leases that have not yet commenced was approximately $570.1 million.

Lessee

We determine if an arrangement is a lease at inception. Our operating lease agreements relate to three ground lease assets and are reflected in right-of-use assets and lease liabilities of $28.1 million as of June 30, 2025 and right-of-use assets and lease liabilities of $28.2 million as of December 31, 2024 in our condensed consolidated balance sheets. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Variable lease payments are excluded from the right-of-use assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

The ground leases are due to expire between the years 2050 and 2077, inclusive of extension options, and have no variable payments or residual value guarantees. As our leases do not provide an implicit rate, we determined our incremental borrowing rate based on information available at the date of adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842), in determining the present value of lease payments. The weighted average incremental borrowing rate used to calculate the right-of-use assets and lease liabilities as of June 30, 2025 was 4.5%. Rent expense for lease payments related to our operating leases is recognized on a straight-line basis over the non-cancellable term of the leases. The weighted average remaining lease term as of June 30, 2025 was 45.0 years.

As of June 30, 2025, the following table summarizes our future minimum lease payments discounted by our incremental borrowing rates to calculate the lease liabilities of our leases (amounts in thousands):


Remainder of 2025	$	760
2026	1,503
2027	1,482
2028	1,482
2029	1,482
Thereafter	59,283
Total undiscounted lease payments	65,992
Present value discount	(37,922)
Ground lease liabilities	$	28,070

Leases

Lessor


	Three Months Ended				Six Months Ended
(amounts in thousands)	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
Fixed payments	$	133,873	$	136,235	$	269,829	$	272,588
Variable payments	19,667		16,235		38,253		33,764
Total rental revenue	$	153,540	$	152,470	$	308,082	$	306,352


Remainder of 2025	$	251,509
2026	484,579
2027	463,653
2028	426,970
2029	363,439
Thereafter	1,759,249
	$	3,749,399

As of June 30, 2025, the future lease payments to be received for signed leases that have not yet commenced was approximately $570.1 million.

Lessee


Remainder of 2025	$	760
2026	1,503
2027	1,482
2028	1,482
2029	1,482
Thereafter	59,283
Total undiscounted lease payments	65,992
Present value discount	(37,922)
Ground lease liabilities	$	28,070

Empire State Realty OP, L.P. 10-Q