ESRT - Earnings call transcript Q4 2017 | Empire State Realty Trust, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to the Empire State Realty Trust Fourth Quarter and Year End 2017 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. President Counsel Vice Realty Empire Executive Trust. Keltner, and at General State Thomas you, Thank Mr. Keltner.

begin. may You

Thomas Keltner

Thank morning. State XXXX fourth Empire joining Realty quarter call. conference Good earnings for Trust you us today for

further distributed to addition a package results Investors in the been release section company's detail In empirestaterealtytrust.com. last of On our on the press quarterly evening, supplemental posted the has with website at those contain related and forward-looking prepared market expense. today's remarks answers securities to laws, questions and applicable call, operations, including as statements property may to defined conditions, income capital in management's your expenditures,

obligation forward-looking more SEC. management's discussed the update risks filings those forward-looking actual detailed in statement As the statements a We any subject may statements these to in are results estimates. today. to Empire reminder, listeners forward-looking uncertainties, cause to which to future. represent review no the the discussions current State from They encourage company's to Realty differ related and assumes Trust with

we GAAP non-GAAP believe are each today's FFO, company's company's and in available most these we which during measures modified reconciliations financial EBITDA, package, and earnings NOI, in supplemental included comparable cash to discuss evaluating core and definitions FFO, as call, directly performance. meaningful the and Finally, measures of such are NOI website. measures, will The the the certain release the on

over Kessler, and President call John Chief to turn the Officer. Now, I will Operating

John Kessler

call. earnings Manhattan morning. portfolio. area State Good and and Metro fourth York conference Trust Empire New office is our XXXX quarter pure Greater Welcome Realty a play to retail

of flexibility the we we level achieved XXst In and embedded entire flexible well for and saw demand stated all set average Manhattan de-risk new volume redevelop leases balance through a across new low feet deliver on value strong, quarter, at located XX.X% renewal steady leases of signed XXX and on for sheet. the for a point. remains long us. growth our record our portfolio. focus well spreads to for square fully our leases building XXX, on quarter, In modernized XXXX external fourth Our located, office century XX.X% growth approximately the fourth and price leasing maintain and portfolio plans and leasing our

sheet. Moving balance to our

During into issue of $XXX unsecured long an entered the quarter, sell placement. notes we four to attractively a and agreement tenured private million in priced

we on more financial will space over Tom? for team and Durels. more our the through financing in a portfolio turn leasing questions. vacate information David including After transactions quarter completed re-financings. payoffs our to now to provide all we This result including of record and results mortgage much is update future plan that then Malkin to enable detail balance review XXXX to your and call addressed end, Karp answer Durels and to managed fully value certain We provide maturities to of Tom for create have on sheet a subsequent I'll As of more to And you Tom growth our here an model shareholders. our Tony now redevelop. and beyond. combination XXXX our will how much detail and morning

Tom Durels

be future of in our give I Thanks current provide led feel on and brokers our of you call, John. areas that growth today's of leasing We to found and a XXXX are attracting. our key and continue everyone. price of four and our space easier quarter steady the had with update and XXXX in cut year, these I an the we can our now our and drivers, things some the calls, review good demand. quarterly leasing make length tenants in To really type, steady of see Thus fourth an supplemental. to availabilities; our about demand year. locations points, recent discuss activity differentiated will product On overview And reported we full that our good we certain morning far and record first Throughout update redevelopment the work. quarter my

the NOI numbers capture long-term total we contribute growth properties. leases MSG progress achieved four included renewal rent million. further a office numbers during of drivers, XX,XXX over starting market include Universal the Hoguet market-to- to expiring Two: space revenue subsequent XXX terminate its Based of office PVH, ventures. our sign new positive fully retail. feet the office X% Group, growth. approximately record $XX To us lease upside feet $XX next estimate and approximately in will six to years fourth and square and leases to with quarter increase And cash the of approximately December burn-off million at the and And mark-to-market feet payments end, $XXX signed million; Newman X.XX prior York Manhattan Uber of renewal on square of space Greater company the XX escalator Broadway. for together feet feet. a to million we office XXXX developed signed of these tenant totaling square free of Music relative XX,XXX which drivers million rent. approximately our five of growth signed square retail This on we approximately our made which months office lease over lease-up updated of downtime allowed commenced fourth $XX our brings one: releases these fourth available approximately New quarter $XX three, of XXX,XXX quarter, early a which XX of Significant this our $XXmillion million. $XX of square total for future not revenue avoid Our of feet. Manhattan Metropolitan while a quarter make prior floor on and XX,XXX square to XXX,XXX lease office million, new XXXX of in lease In and to rent properties we contracted our mark-to-market leases vacant trailing million. This XXst, new $XX and reflect from of XXXX are fourth, lease

us allows to strategy healthy capture spreads. rental growth redevelopment to Our continue

new at portfolio provide escalated the During will were entire quarter on cash going in this vacancy rental to our rent prior .For our forward; higher supplemental. And at on a spread rents. rates on Manhattan office XX.X % leases new and renewal compared we our positive of across fourth XX.X% and detail quarter basis leases our we properties signed

West include Broadway Street West our floor XXX,XXX of and feet We XXX,XXX Manhattan XX for square our ready vacancy feet XXX and square had feet. comprised Within have square feet office is Retail un-leased XXXX for XX,XXX some vacancy XXX,XXX XXXX. Here of These portfolio for XXX,XXX space consolidated eight XXX , feet Manhattan feet. up. feet office lease currently portfolio, are office available feet. ranging pre-built of of at un-leased square square which square Metropolitan XXst eight from York one Greater approximately largest XX,XXX highlights box floors of XXX,XXX floors to space and Central December X as New of at net XXXX space, of white full of total and square of a Street, redeveloped floors XXX,XXX square feet vacancy two floors Place. we and Grand XXrd office Broadway square each and Of three is single Manhattan at size of in X,XXX total those

at lower We the of first spaces we square and spaces the we expect to deliver we higher year. and our to those embedded be this as XXXX half two-thirds redevelop year in re-lease rents we vacate occupancy expect but vacate continue started go consolidate occupancy taken better end additional will growth, an XXXX that up and offline we to strategy to tenants. is down space feet and XXX,XXX de-risked expect of than the and

materially lease when As Uber, in lease redevelop place are rents. new space opportunities escalated we we foot with at actively to to per in lease expanding similar $XX.XX tenants to represents underutilized a that the turn of also square working back shown space recent higher fully have can directly we we rents rents. on This higher or we take quarter-over-quarter, portfolio-wide up

a is when timing and always lag the between tenants outs lease existing is which revenue. of As impacts new commenced there move

is there revenue commencement recognition. addition, timing lag and gap a between In legal

Turning to XX,XXX T.J. significant found at with lease overall Street and West Maxx expansion retail floor now fourth a of during T.J.Maxx lease business, extension quarter. XXth our a foot The for we square feet. total fourth XX,XXX XXX square the leases

markets with X% -- and spaces excellent located street sub % excellent XX.X of XX% delivered the within two strong has next retail expiring with positioned retail execution leased. Our us occupied in team is by well our A leasing and high-traffic years. results in only our areas portfolio

since time first the for space redevelopment a Building, State Empire building the underway. at all announced of opening previously retail As is is the gut

.As on anticipate phase we and redeveloped square vacate Street XX feet on successfully square and on and Walgreens second execute. square recently have Street rents. annually stated X,XXX our II XX,XXX Tacombi. completed, has to our new, the of all fully Sushpteria, XXst of credit at and XXXX, floor there properties have and are X,XXX Street and stores will By square is lease in as before feet of as have well currently on better feet XX,XXX grade grade, confident we Observatory December rich and space. feet space. the we and retail XXrd in to the Bar approximately vacated pipeline Street Chopped, consolidate, about for on Phase concourse Starbucks, we our very feet Juice redevelopment past grade our X team's X,XXX to marketing strategy our progress, contiguous value we of located vacant of been entrance tenants higher of STATE proven XXth floor continue to for where X,XXX our amenity vacant square on XXX% X,XXX square XXth Press, a concourse bring leasing another remain We deliver and Grill feet feet million-plus and will steady first space most ability Demand The visitors re-leased and and square new second enhance

please our supplemental As to call. historically this a for provided review information reminder, remember in

the I'll to Karp. over David call Now turn David?

David Karp

everyone. Thanks Tom and good morning

the straight terminated core For time leases. quarter $X.XX approximately compared in Previously, as rent FFO was commencement resulted Cash termination revenue XXXX revenue $X.XX Cash was our In the of of share beyond. started tenant full year continue practices This until the of we quarter GAAP We per lease a million from which year revenue $XX.X NOI which the these This tenant in NOI of tenant accounting into reduction does share. commencement from not in commenced. $XX.X write-off or million recognition diluted practice in we per recognize the improvements. approximately$X.X course the the share per with per $X.XXX period. cash offset prior leases prior of changed line first for to such represent .For when year XXXX; period in revenue, the completion or have up million terminated the have the approximately first which and million, reported a revenue by which the less to rent recognition diluted the $XXX.X income. XXXX, This lease share year includes new an from partially revenue XXXX for was penny practice prior constructs rental the diluted was quarter, leases revenue in we impact of funding but rental replacement leases FFO practice X.X% up lease place X% of share will half does receivables improvements obligation. earlier or we rental $XXX on reduction in a and new at we the legally the represent fourth for associated date commences delay leases to of million, period. core

This quarter, community to we explorations breakout supplemental assist the our to by specifically the our disclosure to added current investment quarter. now better business, lease model we year's

number the of into provided NOI the rolling vacancy a NOI, data added not detailed observatory trend We five the We bad schedule quarter commenced, easier quarterly cash in consolidated format our cited reformatted leasing leases attendance. and breakdown activity Tom detailed and have analysis. on for weather earlier. of and we days signed a impact added We have

fourth fourth lower Observatory from quarter by NOI $XX.X the quarter hosted in XXXX. quarter a essentially unchanged to fourth prior Observatory the X.X% period, Revenue the fourth million XXXX, a the X.X% to for decrease to supported quarter decline was Moving the XXXX million decrease of year X.XX expenses of $XX.X The compared million visitors approximately operating operations. XXXX. from

approximately income hosted up year from $XXX.X X% Observatory the period. year million, revenue X.X% million net operating to XXXX, full Observatory to period, compared the For prior while compared year X.XX the $XX.X to the visitors, the million prior year down was X.X% prior grew period.

results will expense reported and of XXXX. active be look fewer reminder, visitors. revenue annual we for that a the observatory new always pricing holistic along increases are the we ticket closed experience servicing at connection of result am/pm with impacted revenue and XXXnd with management to the As perspective, .Keeping the offset XXXX. the the at improvement the we visitor be with basis the Empire modernization first as impact with Building, elevator will XXXnd floor pleased State on the In quarter the that elevator the improvement A to floor Observatory management visitors such combination mix of price offerings NOI a dynamic

sales for of approximately XXXX. XXXnd floor of were the million As first a quarter $X.X the in point reference, dollars

to Turning our current the reduced expect detailed have Based we and $XX.X tenant annualized completed the as we in during run of our discussed million. of on broadcast we $XX The level discussed supplemental. million that inconclusive of in revenue impact in essentially as approximately XXXX with quarter, have revenue revenue have stabilized current renewals agreements, phase a negotiations business, reimbursements will from be Broadcast last will to previously a we which in non-renewals operators. rate we concluded

advantage balance for sheet cash joint any differentiating leverage to market a our competitive hand and flexible sheet, in significant and Moving remains low us venture balance fee including environment. on our

During consist series million the and notes issue XXXX enter decision into $XXX conditions an considered notes strategic agreement and tenures, of March year unsecured year to we series market a all via a quarter, in senior to placement. made XX XX December of series in two remaining will XX, funded three and issued The with private in XXXX. was X% the range. with coupons The X.X% be XX to

the we in from proceeds to repay net XXX before our the dates care mortgage XXXX the use increase at the mortgage portion April and Broadway West XXXX These We with diluted at compared opportunity XXXX million take our Broadway. applied fully In cash interest early and XXXX lien mortgage refinancing million, the with activities was indebtedness on that long-term believe approximately creation completed to mortgage X.XX%. per earlier million on $XXX due will value We January, increase short-term as Street million in interest XXrd XXXX. $XX XXXX these from and maintain to February $X.XX to outweighs recent balances. fixed our financing cost. XXXX interest Broadway for A maturity issuances shareholders the of of XXXX ability rate the combined hedges this to release expense to share were for the $XX.X debt $XX.X or with

pleased With placement accomplish mortgage we're subsequent very refinancing, important the private and objectives. several to

First: maturities. we've XXXX mortgage addressed our completely

million average We extension made deliberate maturing a well issue our are year-end. X.X an maturities of with before maturities as single resulting years to of go a long, decision $XXX in weighted only debt Our to laddered XXXX.

XX of XX With refinance our XXXX the of average March the to private years. tranches weighted closing and of funding year Broadway maturity placement the will the X.X increase in further the XXXX, and

reinforced insurance we with life relationships four expanded Second: leading companies. and lender our

liquidity with redevelopment and with external we us opportunities. these and growth leaving capacity Lastly, transactions balance well-positioned our cash financing enhanced to

has approximately was has to of outstanding the The company's XX.X% billion. variable market X.Xx. capitalization approximately debt XXXX, of consolidated our of to average debt has net As None a net debt outstanding of The total December was consolidated $X.X EBITDA and X.XX%. rates. rate company interest XX, total weighted debt debt

have at perspective. lowest in equivalents sector We provide the quarter let cash me REIT as office $XXX.X of hold million. and further A cash XXXX, leverage into we and ahead the some look

As supplemental space of XXXX detailed revenue square be impact be heard would not the said questions. thirds and our $XXX,XXX first In from With have we in million expect the we redevelopment page growth which half strategic in additional to total, program, and call vacate majority Tom XXX,XXX rent realized assigned with which the you like taken de-risk will expect what Against $XX on million of that a offline mentioned, part Further, have this X, and commenced in deliver the and today, $XX.X the year. which as of annualized revenue, in what in an XXXX, as with additional we we balance we an roughly this inherent $X additional this open of the embedded have to space to year. realized to during a dollars for XXXX on in million XXXX always of million will $XX the $XX of about expect XXXX. feet in annual revenue XXXX. currently for Operator? leases $XX value. occupancy the reduce two represents vacancy in Consistent to is the in be and we with million your free of plan shareholder have team I in XXXX

Operator

Instructions] [Operator

Tony Malkin

Are I off take our we this call. want blocked if of I apologize opportunity here. may. comments is everybody difficulties; Tony of we to were live? to to I'll couple a technical make the This Malkin for

for for the aside the fourth company. all, our as finished I just we provided, of call, First the team but we've from work year want update that public glitch, conference thank to a and the sorry

back we since inception. what have I accomplished. what We've said do very we I'm we done As with would exactly look happy have

on tenants and modernized XXst our rents. lease York leased the spaces longer and for better redeveloped to century, outside We the and vacated higher spreads portfolio have it New terms

segments. from We and markets in our our peers are in our differentiated

and out, as through take to to a and delivered act. flexibility de-risks Along deliver liquidity when is portfolio, growth want growth opportunities we best-in-class which advantage have within over sheet something have created more with the we on team years. way, outsize the embedded laid see external next few have to our we the we our We ample balance of

built our have accountability. analyst service We team work, and have also of culture hard community, the truly a to and and investors disclosure a around capable built

of category the point growth in XXXX more and own for stage our internal of Our quality, combination story. solidly is locations. sets by portfolio its price

to we and steady us see to we vacate to We are redevelop date believe market going have lot space, with and of spreads. allow as sector leading leasing it demand will we a the execute

we forward, internally, lucky we'll excited personally advantage interruption to questions now. be able take and get fully growth. are growth I of maybe we're Looking if position prospects our engaged our external very am for and with the to I apologize ability and Again, to

Operator

Our first proceed Simone question. Evercore the your of Rob with question line with from comes ISI. Please

Rob Simone

have the your a been trading know on half I a any and guys just beaten and have underwrite, NAV, I pretty public can REITs office how well private was guys, deals seen I talk you given Hey for thanks on movement but have wondering lot the wondering you so. taking month cap that move? up or rates stocks rates much REIT how below many over last the cap broadly severely if I was question. about, guys relative guess you to maybe obviously And side

John Kessler

saw activity in Kessler. Hey, what certainly seen XXXX. in slowed Rob, in are I the certainly have capital think Yes, John that We that markets transaction it's down. we h

private seen And think our response. cognizant it the cap would is. in any of the we're meaningful rates, where to and haven't treasury market obviously kind that pricing, pricing of really be I but relates we movement in as and

Rob Simone

earning about I so I of to sure. Sure, up refinancing. could kind speak completed view or cash timing $XXX guys maybe estimated cash what minus uncommitted that on you overall, with just like your the after unrestricted balance of million I what on plus balance, an then on And guess mean sit balance sheet. your you kind came is on

much environment bigger that don't and you Just kind guys assuming waiting of for. see all that change that opportunity the been you've doesn't

John Kessler

credit it really on to same question the including we're prior getting grew our the our know we cash know, about the as portfolio, business the cash you deploying NOI it's our byX% significant continue our investment XXXX we that in measure sheet, un-drawn going over of think facility deploying as and return we're to about have balance returns year. the capital as and versus on redevelopment and you Well,

is We disciplined, the very to opportunities our about markets be getting So million, good a take in to going attractive action, something going portfolio we in close the going and we're continue portfolio, million to if getting to going feet return the we're square internal to see but to we're still have still own remain we're relative that to to we're a external growth, to and redevelop that we're patient continue patient.

Tony Malkin

Rob, Tony here.

many we sometimes you Yogi to road, come be got have it said sometimes fork stumble find we'll has that to to times, and in fork it's you it. I've a when As the to you, the presented take old sometimes Berra-ism it, upon

though in we directed on about or the external the growth talk So business on remains primary even low have or when sheet. in have balance and and penny through in about The our the acquisitions M&A. shiny external leverage with have the we growing sharp we cash talk bright primary objective growth. private objective we always we sheet, that's the is our individual sheet, And balance towards our short flexibility M&A balance our that our public the focus

goal. our comments period the look at to be. So we've leverage maintained ten-year not over focused discipline thatXX% net intention our think it's ten fact in very they proud are value. I years debt a And not That's on be and and to from should to certainly of as John's our back now enterprise our as it

Operator

from Stifel. proceed question with with the John your line of Please next question. Guinee comes Our

John Guinee

great, is right XXX,XXX low $XXX is the base XXX,XXX foot? this is a being a how budgeted Is is rate that on and of building, foot square square lease or $XXX a the square retail renovation also repositioning? sure you remaining out then feet of very the could for spend money the also two, .I'm this address should not and spend but one. who's on you then in And retention assumes the thank re-leasing feet to in per much then TI's remaining through expiring of say of all the Great, go XXXX, And foot costs observatory XXX,XXX. person

Tom Durels

Tom. XXX is escalated an square place of this represents that Out in About theXXX, foot expect opportunity for part in John, feet we per in a the portfolio. thousand that XXX,XXX XXXX, $XX rent vacate Manhattan the So, York and is significant full feet of as to square Street our and square that Greater reminder, is Empire State mark-to-market. office office Metropolitan retail Building portfolio, is our the balance XXth on New redevelopment about

we So of anXXXX that out are XXX,XXX portfolio, feet the XXX,XXX our that. Manhattan feet square we office of develop vacating about in square

range with as a building before about it whether As be of contribution or said all we've in a a to pre-built base and on box commission whether including all square following build a $XXX between TI cap cost white to space foot build-out pre-rebuild depending the in. cost, can contribution a expense we is $XXX or a build leasing one-time which those per

David Karp

million in John dollars. with commencing to through end three spend the the a date year the project. started project XXXX capital past, million we've a project observatory we over question time observatory; said spent approximately total the that when the $XX we $XXX the to of horizon expect on to mid run we've And the as in And on on remaining in respect

John Guinee

$XX.X said of way least you're rent go to think XXXX away $XX maintain go gross you million $X is observatory then from at at million indefinitely? expect going rate, that about total or $XX all essentially run rent on expire rate these you million annualized a remaining and $XX regarding saying this the got expect a down million run you've to a million another as of down Okay leases in I XXXX, annualized to of expiring that the from to can

John Kessler

John, it's John Hey, Kessler.

I meant Broadcast. Just you to clarify the assume

John Guinee

broadcast sorry, I Yes, Broadcast, yes, am

John Kessler

we'll a revenue the approximately what and trailing rate XX project run is believe stabilized months the end of forward. with as can end that million answer business our million we of million, rate. going run that $XX the And you year, words, we is the the that where that's $XX other to we we're supplement that by reasonable annual that's rollovers see we today that rate up as in Inn $XX is for where saying get at

John Guinee

the XXXXor square X.X of done. leakage lease $X you million more feet No million XXXX expirations with in in the it when get

John Kessler

it John, with we're all much lease renewals. Yes, really be pretty would -- done of our

have offsets. We to going have some there some for -- to backup we them be I radio guy situations. stay expect there's but and one out point, point improvement There's some from like income to opportunities modest in

view stabilized So at as this John $XX bucks. said, we million as

John Guinee

generate increasing or of last for I question that the to then that And NOI the spend same. the answer of million the observatory, just expand, we about the maybe observatory more you run is anyhow know which won't expected stays and a on but expect I'll ask defensive is the rate $XXX

Tony Malkin

we look view here, offense. offensive in at Tony certainly and is I hope that John. absolutely Hi, our but our intention. inherently defensive as do anything this is which is this That as

John Guinee

Great, you. thank

Tony Malkin

offense, mean the an more So putting board. as on I points

Operator

the comes line of Jamie with Please question. proceed Our America. from Feldman with next Bank question of your

Jamie Feldman

hoping Great, fewer the guess I bit a at days, dig year-over-year did thank you down. observatory. were total you, visitor I And into good the little morning. weather to was bad but just visitors trends more have

going types trends which subdued of you So you volume should and kind if a -- what onto volume seeing, provide insight forward? just of it any should driving more what and just expect you're we can to see

Tony Malkin

other specific talking reduction things we in want look in in I putting the coat yes, the dates, in the worse the overall hard feel We're peak periods we're had in the a tired been visibility visitors terrible very although but in weather days. which US made destination That present the little for XXXX supplemental And rhetoric DC, positive XXXX that And the a we have trend materials of end. during from we we we Observatory. get where referring issue do by border. certain cross Canada. have like the is the did brand bad got because biggest And I I a the have is not tourism as Well, on definitely Empire it I'm from damaged the presentation comment Jamie tourists still our on we consistent of about breakdown before is and the the entities I out would take go subject whole a not for end the with weather information majority that these for I August, to our industry. cross-border look in it if say end hurt on at the do in fewer was don't sales. visitors. weather in to hit more there at we in that's cross then on a the it's border to best weather was which zero association But to us say. to And into there retailer hurt think State and this XXXX, may in some what meantime this and and overdo call that specifically to degree we undertake the us to Overall, think the about Building. hotel have have holistically,

Jamie Feldman

this or anything Okay. of giving Do you changing that a year-to-date see different you view? any signs

Tony Malkin

the a percentage of our a a with that per in them get giving are issue I And addition industry end getting by a number prospect better from New to in City the there on the that all better do And , a is course, approaching specifically, coming and doing drive this put better job which people that. but have attraction our higher to better to attraction groups people perspective, will off-peak House we periods, know to York reason of is to come. of together have again of we're capacity. lot revenue. of where think looking And during door more of a White cap I through through our

Jamie Feldman

about that of them -- can the on lease backfill? for fee timing the Okay. Uber's and just backfilling to have And Uber then XXXX term or you the impact earning that kind the Uber what talk might

Tony Malkin

we'll XXXX period tower we for in and price in recapture specifics the and I a rent an I confidentiality, mark-to-market escalator we way that as was into XXs from into can this at about at asking prior Jamie, they of per going square the that rent. XXs took increase achieved fully into X% low space or There the Broadway least a the without foot. then spaces the go on first high Well all to for up the tenant they over ask commence were mentioned, year free the generally say goes existing involved

Jamie Feldman

XXXX. that Okay termination I fee was or recorded and XXXX if or XXXX mean the in

Tony Malkin

XXXX

Jamie Feldman

about talk you the Can magnitude?

Tony Malkin

confidentiality. for not prefer No,

Jamie Feldman

Okay.

Tony Malkin

It obviously other first reported can with lease at along quarter our be whatever numbers cancellations --it'll in least we generate.

Jamie Feldman

this same-store in year? the last spend then to amount how are what some or of on for are think it's me color and rent rents and kind Can in kind just redevelopment improvements Okay tell much hard portfolio. leasing spreads have of you portfolio a of basis give the given on you question just been is what us the apples-to-apples growing

Tony Malkin

we the demand a sure, Well, price better position and and A. function demand our market I about we We've the of in than strong product because like Class delivered and product where portfolio, growth for first is have our all, have expensive less activity of Class in B. the good our than feel supply or we our locations we're and rent point

rents we think see is back and significant the we've redevelopment the anywhere We where growth to as healthy outperformance XX% Building based past coming XX%. see grew growth XX rent on over outperformed in the XX% particularly work a we market. Street, steady of As terms our back the year. in buildings depending look and we about look from West portfolio, to our that of asking upon months market some improvement in taking XXX spaces, a our market Overall, in State XXXWest to XXrd think activity XX% Empire at so, XX given actual I rents rent should the the that the we we or modest and those Street feels

Operator

of Our KeyBanc proceed Mailman your next question question. with comes with from Capital. line the Craig Please

Craig Mailman

that can here incremental think an the you XXXX to from of of? bottom take appreciates for for fair of of color perspective it? really back kind David guys. and on is Is earnings accelerate a of taking puts guys a sort a kind mean morning, you mark to transition step near-term maybe say we about good kind should how off a XXXX. Hey, here that it that and I

David Karp

tried of Yes, in Tom line sign lot offset down in at phase and There that back of and looking to rent as to and is growth free is future you comment just impact that not and coming a commenced there quantify that. what off Tony's this have important point burn kind the mentioned revenue off prepared of associated an that completion of Craig, we've the will fill with at XXXX that is the the year and I'll the be leases a conclusion that the redevelopment by process. is the goes made our he space first that of terms lost we space remarks, of we're as to our back

do to we've occupancy as So we will indicated the the year occupancy the that but expect beginning year. end I drop think at to also our the of compared of --

with will it is that and goal for along of with taking you our will value. towards go know enhancing it revenues, increasing reinvesting shareholder So all what space end substantially total our us and it's been will and active recurring offline as very up consistent well be a occupancy the our as saying be nothing it's we've all that but down, unusual year

Tony Malkin

from was redevelop was an of from moment the way it that gee, for Tony space we conception for the can to life, of order tremendous space us that's perspective to it a well, vast us growth. and you the leases we XXXX the all company were that's to our short is make just the better unable must payment. I at but tenancy in them small understand look this undesirable of it at unable here, of which upside rents rents pay term credit basic and the low upside. all view look fact the which to might how is we it contracted said to central and vast, vast, add In vacate it's this and increased important majority a year vacancy our the of amount as many for we that had to they thesis that which to pay

Craig Mailman

of redevelop, No, activity you most trying trough getting about the no square are a guys from know would you thinking and XXX,XXX the just like offline, and XXXX what offline business that the viewing I be all to that guys you we early from that's related that is million to XXXX, feet at left I were are the and a hit appreciate seems you know stays dip redevelopment going that you this kind and of just have maybe -- you have not it know to dips should get then sense if how was

Tony Malkin

Well, comment Tom do that maybe some spaces presentation to me the of we a our the have in could favor in on regard with visibility rolling future.

Tom Durels

Craig, Sure. through numbers I I mean those previously. I've gone

XXX,XXX have square that's expiring in feet We XXXX.

then in years to much We and is we that have state on expect our in modest. vacate the how following year given the rather role

of year is we off into solid square record as So us, coming X.X in that million going leasing us a conviction first execution XXXX of absolute and for big year strategy. I've but year which feet for we quarter our have in XXXX is a view activity. the with

have on We point. feel the price I our location continue and good activity our to about build values for we product and as we and that strategy execute

strategy feel our and I up lease space back that on executing rent good term. for at longer about higher So taking to this

David Karp

look but I and it XXXX, forth set look then there XX,XXX subsequent in And XXX,XXX we're this of fair what about Yes. one it again you a expect XXXX believe that got we in showing page redevelop. which is we compare know down we in sets a it XX you if and forth, redevelopment point if Craig, we amount vacating over that deck, and presentation XX,XXX. redevelopment are -- the to roughly drops David, of what XXXX XXXX we we've of investor show years slide on square have you and our investor with, set out feet can just to other in you at doesn't forth does

XXXX feeds then active again, us So, that and redevelopment years. in growth terms subsequent for year which those vacate for of

Craig Mailman

That's talked guys know guys just have helpful. are you cash balances and And deliberate deploying. we've about the then about you being I

the some keeping of putting versus kind and us work here to of dilution from on thoughts down using debt pay not earnings the can you near Just the balance sheet some mortgage give to repayment? of that lessen in of for on it that term kind

John Kessler

the the to question we balance I take on similar hand. we cash the are that to John, continue low that it's view liquidity have and and have it's where Craig, that the we have to sheet think like leverage to liquidity and the others valuable

to take preserve and liquidity. the to we is be think that a liquidity us take seen to low tact we're going I that which think there's continue leverage difference between you've know and you

be we market. we in if the So opportunity nimble see can

John Kessler

know We that's year our being just Well, same see are orientation, let's we're we to repeated we for to ad opportunity. the for growth goal, business designed after clear when correct. be year our be not really we that's nimble want going opportunity see

Craig Mailman

to a And XXXnd is the offline then any to to the just similar million point disruption around get at taking was deck also one main floor spend, there last way you full-floor one of do $XXX be and guys offline? as taking there the going any

John Kessler

Of due you practical it's which There XXXnd in needed construction. that the XX different walk floor and and of elevator presently observatory through to will people be points time to not to be one is accessed by the the parts floor in which elevator replaced available have are walk XXX from to not floor.

is period. throughout slowest outside remain deck reason XXXnd elevator floors offline entire and the XX is between And the X is the However, now Easter January construction our period. open XXX% will because floor

Otis with working work that So done. we're getting

peak under our periods be will closed when at no floor deck observatory but our resume, for plans. we're So present point open the XX

Operator

Thank you.

comes question. from John question Please proceed final with your with the of Stifel. Guinee Our line

John Guinee

.Hey, Great Two up follow Tony. questions.

is that needed to First, vacancies dollars any base How office people. think no standard. the deals? going were there's you of the get stabilize to relocations retail Manhattan big of Hudson good That's take a are to is but that for second current cost in you very you to a underwritten that coming Armageddon on in of those expected And think on I in big the to lot question do question tired be going are the kind those there's with you a buildings so world, in have the you obviously question. also and does sort up upcoming that Yards what street growth And world big public guys at on that? one then do be retail

Tony Malkin

other an higher basis properties think alone markets much XX% we not that to talk is capital basis. what our when an at Well from that just our might means perspective, say we're IRR we ROIS. ROI XX% redevelopment deploy on let seen we as in like I'd our know as lower overall, own about is is to on return people's own what do have we I reinvest IRRs capital making are And slightly much

secondary rents higher give who looking to lower upgrades that And difficult to that then packages. position anything I market and development, good that they're that's It's that the public ones particularly, they and really in not strategy, do at in when lobby to to do tenants private concession set of meaningful is do money of can the fundamental, will what aside afford high story. we instead to new don't have look, put probably at well. with redevelopment however, very balance a be to And people frankly more, not prices or really look think some the of their think you opportunity, away end improve maybe many they're do. I a and this So think as that in seen landlords least today buildings their much we've doing at sheets, pay

plow right of I retail from I from people a a the rates, to make coming. going able with our don't that comments less and to think benefit competitive on on leverage order believe all perspective. with do benefit of higher So Durels to I'm do that were that our combine perspective, ask Tom to needed to a it from what hope because Armageddon in to is yield kind just work down skills also this with interest this our couple potential its seeing as we're will

or I think little I it's do versus two. I'll retail in and about selective but then it's in to good happening I locations locations as far non and worthwhile a; what just have comment what's better a see we with a bit it nature and think talk the think, as we're in marketplace

Tom Durels

State Street space XXth at sub Broadway influx retail we and Empire and I expansion of market If T. back XXth re-leased think Sure. Square redevelop XX,XXX feet leased. retail AT&T, that re-leased excellent four there's space XX,XXX front would down over Maxx, We've I that to Maxx all to could we say of the that retailers XXX% strategies our an XXth street in of strategy areas all South market feet in and Street, square Building, to that square what and transformation Street the as look users. of of availabilities we take interesting to at is a the maintain really is and HSBC in be XXrd our for to on I step Starbucks demand. and where located at release at no and what with West and high-traffic our slow set Street most recently going food T.J. interesting our that's markets set Street in the our space as question all food four J. the while fully look is a tenants retail XXth is always some we which accomplished all we've on is floors Time of XXX

retailers And Building. we going products Street go So at on there's I good free traffic the XXth where XXth now have on obviously frontage to traffic Street. pedestrians focused we're and about our tremendous we Empire and that very free have State feel

Tony Malkin

great. square one per Sephora North it's per know great. top we their not if foot doing North America. their America, floor Foot doing of John, short, in of in Target basis their -- is in Yes, one store square locker foot

but of not are places don't anymore and at there which places are retail certain industry. retail retail much then there there's too So the where all dead in as aspects is matter matter don't really

think traveled in overseas of that it's being I some in of super that doesn't locations SOHO, US and tourist areas the So is into is that these for the down. luxury some help really that have

John and along way, participating seeing way are coming most thought think demand. close here, has I order analysts you're I'd which alphabetically run-up the the Nelson, and Building this time for had Kim you're The thanks on overall glitch. with and and which it's to disclosure prices the February's everybody that challenge, it. different ever of going Tim speaks run-up. to it's order the State biggest John but Guinee, not not I Blaine finished of took is is ask we'd participating which down, to of We to by that been So Justin with think field I Alex Heck, sorry piece was the like in Hong, today way, something like the the coming, And outlook important terrific. Deborah, for John who thank Empire to for

participate beers can free collect before certain or you to well. after inducement David you John run. and you for runs Karp Kessler up who stock, investor beer you as buy any minimum threshold get away an like a you and And the those ownership As of would if buy on meet can remember we run everybody board of who you

with the excited So for quarter. a sorry Thanks your great it XXXX. We're was We very felt for disruption. time.

Operator

teleconference lines have your may today's for concludes day. wonderful you disconnect this at your This and participation you you. Thank time Thank a

Thomas Keltner, Jr.	Executive Vice President, General Counsel and Secretary
John Kessler	President, Chief Operating Officer
Tom Durels	EVP, Director of Leasing and Operations
David Karp	Executive Vice President, Chief Financial Officer
Tony Malkin	Chairman and Chief Executive Officer
Rob Simone	Evercore ISI
John Guinee	Stifel Nicolaus & Company, Inc.
Jamie Feldman	Bank of America Merrill Lynch
Craig Mailman	KeyBanc Capital Markets

Empire State Realty Trust (ESRT) 24 Feb 182017 Q4 Earnings call transcript