Empire State Realty Trust (ESRT) 26 Apr 192019 Q1 Earnings call transcript

Company Profile

Participants

Greg Faje	VP, IR
Anthony Malkin	Chairman & CEO
David Karp	Executive VP & CFO
John Kessler	President & COO
Thomas Durels	EVP of Real Estate
Emmanuel Korchman	Citi
Craig Mailman	KeyBanc Capital Markets
Jason Green	Evercore ISI
John Guinee	Stifel
Jamie Feldman	Bank of America Merrill Lynch
Blaine Heck	Wells Fargo
John Kim	BMO Capital Markets
Michael Bilerman	Citi

Call transcript

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Operator

Greetings, and welcome to the Empire State Realty Trust First Quarter 2019 Earnings Call. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Greg Faje, Director of Investor Relations for Empire State Realty Trust. Thank you.

begin. may You

Greg Faje

you Realty Thank us for today Good First for Quarter State Trust's Call. XXXX Empire morning. joining Earnings Conference

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

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

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

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

John Kessler

XXXX to mass and earnings to we Empire quarter easy call. locations our fully Realty Welcome essential have first transit. Good assets, morning. Trust, conference State modernized At access

spreads. and upside peer-leading deliver leasing four Our growth drivers of embedded cash

positioned, to in and well any priced market. throughout between Our A properties the outperform Class B portfolio Class is

energy line address additional provide and will leases, the XXX,XXX with to first Today, our and balance feet David we fortress efficiency. I'll for quarter's market-leading will the market spreads. turn significant conclusion. our leverage. We and approximately Tom Tom Tony leader industry our in cash, our sheet And have in properties will our Durels demand leasing about sheet. of Tom? some sustainability financial And balance speak comments credit Then, undrawn over Karp Durels. CEO are and Malkin, an square and low a of call now finally, performance Chair

Thomas Durels

Thanks, John, and good morning, everyone.

X numbers breakdown progress growth presentation. our be be XX, top XXXX, of to to growth quarter further first investor years. on $XXX embedded Page million X drivers of as line, The drivers, line our of top Our the estimate reflect four these of and next over which derisked revenue on we found March

the quarter Federal square Corporation, retail our FDIC, a lease at with Empire State foot new portfolio. leases the renewal in Deposit include square-foot the feet XX,XXX during a XX Broadway. signed square XXX,XXX Building Building, State office Significant Sisense at Insurance square-foot one expansion XX,XXX the leases, with months March at tenants. XXXX largest million this reference, compares XXXX. $XXX our cash properties, to renewal For XXX,XXX square quarter, Greater X,XXX first This in XX office trailing totaling our in we York New XXX,XXX and signed million included feet approximately the XX, feet as Manhattan cash and new approximately square XX in months office of full Agency Empire leased our Artists NOI square new of Abrams and A $XXX lease feet. XX trailing with Metropolitan XX,XXX In rental and in the revenue properties floor

with by to our X have leases on shows be and our the renewals whom XXXX and As XXXX tenants new vacates expire potential portfolio leases tenants updated to supplemental. of relocated for three been Page that remaining of and full on disclosure be chart This maintained a within reminder, we signed. year for vacates replaced quarters

quality those proven with continued spaces tenants. them re-lease spaces, consolidate to and vacate better and our redevelop rents to strategy have at We higher

recognition, revenue. the timing tenants leases reported commencement can the lags impact a GAAP out of between these the commencement our revenue quarter-by-quarter, timing existing delay legal occupancy Given further and move delay new between and our and replacement vary of and

quarter, across of on on properties, leases our escalated new first were our renewal compared Manhattan XX.X% And prior higher positive rates portfolio rental the rent a cash entire basis to leases new rents. at and a During signed we cash office cash spread at XX.X%.

lease-up near leasing the space, had redeveloped office spreads on market. and which current cash is the benefit fully always rents, well from square depend $XX in spreads rents escalated term, Of cash which expiring foot, prior below the escalated fully of will leasing of per course, vacant

influenced lease on disclosed Our future be will spreads leasing on future we our XX of supplemental. Page by rents cash expirations, which

We continue feel very product, confident points location our to and see offerings. our and price in demand for

raised rents office average our in Manhattan throughout by X% buildings following on asking XXXX. over year-over-year have in We a our rents weighted our increases asking basis,

We as redevelop a pipeline focused floors lease-up. the by the timing volume significantly future quarter to we that particular We vary healthy have deals. space a prebuilts. both and And of leasing bring remain reminder, our strategy for and negotiation of market vacate and portfolio will full leases may across on given for the

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

David Karp

Thanks, Tom, everyone. and good morning,

Cash quarter, was down approximately prior the the first from FFO For period. or year million of $X.XX core $XX reported per share. X% $XX NOI we diluted million,

year Page reimbursement. income or we build X million In settlement the $XX.X lower of the X.X% breaking to quarter Page explain lower I'll quarter shown. related a which in tenant leases holiday X%. all quarter year $XX prior in redevelopment. than revenue expense revisions million our a is now In up retail for of X lightest increase prices is have quarter decline rental due earned the information forward. base retail prior we'll channel tenant is of decreased rental roughly higher April, inclusive in categories schedule, former for operating quarter the our versus tenant the prior and are the Historical and operations, of new perspective, included strategy. from Easter our quarter show of shift, show $XXX,XXX in NOI. from which combination trailing reflected that pricing under highlighted XXXX XX X.X% for NOI new first X Observatory moment, which first display going the Net few to of Observatory period. the made tenant price To standard, resulting a tiers category. adopted revenue XXXX accounting in Observatory rent We've We operating prior In tax. the one this a the now periods on first noted On XX cash reimbursement XX of the lease the and our expenses wholesale net supplemental, was out months of expense with $X.X income supplemental, under this less to million, period, X% the first implemented broadcast Excluding of XXXX, revenue early we also was and we a to and a previously our represents the website and income seasonally our pricing put moved net in to

the the year, estimate quarter decrease approximately approximately supplemental, was of the the of the XX,XXX in second compared first Of on in year, we which the to of Page quarter attributable between in that decline, visitors prior XXX,XXX Easter hosted the quarters. to first XX XX,XXX quarter a XXXX. this split first whereas As the the XXXX, shift Observatory visitors XX,XXX the holiday, this Easter fell is holiday second and entirely within reported

That year XX,XXX prior visitors period based factors. In in those resulted than X,XXX in leaves when attributable estimate that the each days visitors approximately we period. addition, to fewer bad bad fewer weather weather within days upon other occurred

to sheet. Moving our balance

hand, competitive execute our for and advantage low redevelopment external joint sheet, balance in market including give a Our us plans leverage, and to venture flexible growth any cash significant environment. free on opportunities

no outstanding maturity of As we credit. term weighted unsecured total borrowing weighted of debt had X.X $X.X XX, approximately to X.XX% under debt $X.X of line of XXXX, years. The a of billion average average interest and a and our March rate has billion

of laddered variable outstanding before million Our debt rates. our single maturities has a debt are well issue, maturing XXXX. only $XXX None with

As equivalents investments have And consolidated like would XX, market debt the and to debt-to-EBITDA for short-term consolidated was With open net net of March cash I $XXX million. of we to total was your questions. XX.X% . call times that, XXXX, cash, and our capitalization X.X Operator?

Operator

line Thank the you Instructions] from with of with [Operator Korchman Citi. your question Please proceed Emmanuel comes first Our question.

Emmanuel Korchman

been Hey. the especially, York. we're start generally Good seeing morning, just with topic. your It's in big we But results New can a what everyone. renewal maybe look if at more Tom, certainly concessionary seeing that. you're environment you not on

you just update? could give us an So

Thomas Durels

you average increased of pace square XXXX in office Empire new over increase have is office $X.XX concessions in many our at net least rents as average quarter X% yes, my And a we cost basis spaces per pace rents. good in commissions or compared Actually, leases for for much for slowed average leasing and about as basis. rent a see increased State our portfolio a all pointed as is asking rents a saw in year-over-year certain increases a our XX% generally questions office basis New as entire to offset There asking Manny. renewal supplemental, to and by We've Manhattan off year-over-year on to full City in for leasing leveling net new and Building seen what office the Manhattan per X.X% weighted lease in Broadway, weighted growth for about the seeing rents I first rent floors year-over-year by been basis. at York remarks. and fourth we've growths of Manhattan TI effective quarter. is concessions for portfolio X% an our We're increased by our our on weighted -- on effective earlier out average Sure, we've on year foot about year-over-year such decreased at as of net

Emmanuel Korchman

the other you thoughts Great. factors were, given you And at guys deck best factors. mentioned those? those could your to what guys when into fewer you Maybe other visitors on dig then X,XXX share

Anthony Malkin

We that, our this say and was if that, I And in take difficult international. there overall, weather and continue then, Easter. Manny. decline see shift there I'll yes, could, a was the in to at the we look

last put increased wholesale And categories we raised we fact tiers. this, against versus changed months, our year. ticket April. in look per we've trailing revenue our XX tiers our recently X capita prices X.X% over from this X when the to the We've at So most pricing that

offerings the of that floor July XXXnd we for perspective bad in floor are to We us and and continue Street of well think our XXth to will Fifth an new by this has the desirability the as XXth and floors far our entrance of all working the Observatory by Lobby already Avenue put and Avenue improved the offensive everything best up new retail the from experience maximize the place we per towards end of October to just with during visitorship, It's prove continuing and cap. on Overall, cleaned second available due with what encouraging lease. visitors per maximize Fifth very of to weather opportunities. innovate our the Observatory doing increased improve come we and days tourists to our the revenue-generating as completion on is caps and users. are Like new end to new our building regard experience the -- obs to new concerned

per other their one opposite at other because again at the and of And the post slightly attractions interrupted tourist the that's down trends. One Trade direction, we're Primarily, we versus face over look can are we they trailing So still some can tremendously last in think revenue to XX attendance these out capita track the as World month. increasing there, Center easiest discounting. We months it's tremendous X.X% by they our every that's typical factors. of look Again in year. all

Emmanuel Korchman

lot. Thanks a

Operator

Thank you.

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

Craig Mailman

I be you floor expected? Good just is the just that morning, and clarify, guys XXXnd. up more -- of XXth end so you Is it the work a Tony, -- X months opening little floor on said than bit to the guys. think XXXnd elevator for could October

Anthony Malkin

for we're is, months by certainly the was No, X and still that X-month the -- whatever XXX. end expecting of that October, period said XX I

the completely was put to our I We've X the longer. is transforming months This year. a if going think work, in on elevator XXth for little recall, work. perhaps XXX; you And is experience floor. a is is So still XX not XXXnd elevator We last elevator be done the the on glass work done predictions. shaft. This which to target XXX. at the was of people at get is time. the work our in walls should the walls That the didn't together changes with major XXX, do could XX. place it There's on that as we earlier look mooping just just on glass through this so addressed underway of elevator That taking

David Karp

it's David. Craig,

your XXXX of would with go I for million. again, to in just closure over purposes, an revenue Just $X XXX connection with in still modeling impact the slightly

Craig Mailman

Okay. normalized tried what Have That's some redeveloped? space basis? is you even kind then you It of to helpful. mark-to-market. that mark-to-market do to getting after guys to guys by keep the job of earlier think of see the redevelopment mark-to-market work lease, that's these you of you're could FDIC done. gone could a indicative X.X% back and space posting kind looks in done already see kind mark-to-market on spaces where go on like Do And on have good of right around vintage been that that

Thomas Durels

lease are very -- XX and largest keep Craig, with thrilled outcome. so low State at of the all, square we're are first the of the for Empire one we Building. FDIC XXX,XXX concessions, feet tenants to happy They very had our and them

Our higher on about vacant rents space, rents going a square foot. $XX redeveloped office escalator escalator our mark-to-market to were the prior on, obviously, is depend Manhattan

end So healthy represent future to if It's do you we a a the leases rolling. mark-to-market on can be to and the -- going low in math doing up leases mid-$XXs.

on the a office about and are square Manhattan -- rents the $XX portfolio foot asking rents way in Our low foot, floor. up depending we're generally, space $XXs and to to in-place all the $XX square

So that's there -- we mark-to-market represent our do going provide is, in supplemental, future supplemental. the future mark-to-market. future then And obviously, tenant to in

Craig Mailman

at of they're it? the consolidate feet. to XXX,XXX from I know square want That's XXX,XXX they'd keep may expire? just Or lease tenant if helpful. indications And space? for XXXX us remind reports out then looking could does obviously of Uber you kind it early, And but when be that that Any to whether there's they

Thomas Durels

Well, they them. with square relationship we've would us have with feet just I got Broadway. XXXX done excellent that at just say XX,XXX an

We has create have tremendous space an opportunity XXXX to which activity. Broadway, seen at

full create We have to opportunity the floors there. additional

full floors this two accommodating think year to that And can square existing feet all we about -- in forward, floors. slated XX,XXX additional to tenants. say been we creative we in growth consolidate alone, Going I I'm that's create. that And our very were that. We've have for going on

Craig Mailman

stuff one been maybe green other then coming Tony. of And initiatives, which about one Okay. for big been Blasio out administration you've know some just emissions the last There's pioneer in. carbon and a to things I related

would compliance? you've some You like guys the put they're would put guys to potentially you carbon work come into compliance your on that that? more look that at talking about stuff of do buildings feel in side, buildings, done the with be the kind you Or there of into of kind the capital

Anthony Malkin

of constructive a sought follow This of was with Congress, legislation. passage the challenging is rules lot the some input, are in legislation was which rules give actual a which legislation of and to active The I laws associated of going like piece those into the to incorporated.

greenwashing new constructively present not The Our people under this as and can have I like how on of I proof the requirements does expense our mitigate have which our and been how little industry's how exposure view is much to position in no, is at repeatedly, the GRESB, buildings LEED spent one, their to meet we at legislation. to leadership things: this has anything do wrong. focus address and legislation. said in the on certainly, Two, two to will it this how better, to significant. does look maintain our opportunities say will energy is highlight efficiency, most LEED

millions We out about, And and required best are is anybody of radical. absolutely target The to our any LEED this, are will And It's innovations. are under made, their and same have the a future moving as leases do roll spaces position radical. roll dollars been to is measures again, rules built. uncertain. continue and spending time, being is money. be wasting spoken they of at continuing That's is on in energy-saving to But who's landlord. in tenants tenant out GRESB which and to we're the what

Craig Mailman

very Great. you much. Thank

Operator

you. Thank

of comes with the your next question. Our ISI. Evercore Please from line question with Green Jason proceed

Jason Green

morning. Good

as Observatory it far any seasonal decline? Just higher just or there that down expense as curious is versus coming the you QX. IT spend experienced change was HVAC a there material in and Was

David Karp

related. decrease, timing expenses, IT are quarter-over-quarter On for accounted was and past marketing that lower those some David. we it's this primarily a and Jason, had what quarter lower expenses

of quarters. some coming So we expect to incur expenses the those do in

We card credit revenue translates to fees, lower quarter. the expenses. in the And of is fees seasonality. part and also the credit this attributable saw is lower security which to Lower card

is it. going new that costs. we how rate a say what systems waiver at learn, anticipate better and we let be our in rate arms There take lot still over that technology and really year, We're of we by as change a good in that fourth the these stabilize, run The a the from when that the So estimate would savings technology rate. Observatory we this the sense know. probably around for you look these run are we'll the reduction we new. for systems being the of coming as realized will getting have forward, run a quarter I would experienced may is offset the still we'll cashiers higher

Jason Green

year, comfortable last of And days are to number other? just impacts, because timing I missing visitation, a less fact bad year days the that or truly some bad those XX,XXX the are methodology versus recognizing international there visitation do same you are bad the trend Okay. of worse how visitors. on and days mean had travelers get and you of impact I given understand based regarding curious on even weather from weather this the and not that but international weather you

David Karp

the bad methodology also of Bad into the occurs. weather takes is weather a firstly, bad number weather Wednesday And different on weather. day into days of consecutive than the when the week bad Well, consideration takes consideration Saturday. it the of a on

So it bad in longer over year, Once X, another you those XX concentrated have days weather one spread X period, row. relates a a It of a that days period. the it's you've period visitors, out a you function period, also could or in in a non-peak to whereas, number be back. bad weather whether lost could have them and may don't you get has those in peak

there's into it. basically, based estimate So and bad weather to day. an into just goes interpolating is are upon a that it we throughout remember, with trends means that that seeing And quarter regard lot this the what

think a I perfect, of lot consideration So good takes estimate. it's into it factors. not It's but a

estimate. that with comfortable pretty feel we So

Jason Green

Thank Okay. you/

Operator

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

John Guinee

Great. looks rate Thank David, the on $XX million about has you. cash. burn been last it XX over like months your

If still exceeding do $XXX And your cash stays you've so look equal, out you XX more got to million office. March suburban expenses? When when you flow and stop from -- office positive? other having your XX, assuming do cash your March else balances everything you just get at to Observatory -- Manhattan

David Karp

Well, good that's question. John, a

our repayments we short-term transferred We of of dividends past from of cash Sounds operating principal just $XX had was cash. from take guidance, CapEx. $XX we million. don't a like investments this a But into million To roughly $XX offset $X million that, at you quarter, million. lot had our our provide. look operations question had then $XX a our if We and which we regarding million roughly

of overall, into can by Again, million have you came our up that position went see investments. to you $XX take consideration million. So cash short-term that overall, from $XX

quarter. So we this little bit a did use cash of

cash the of down. basis, I generator the to starting spend as certainly, think that, to getting a you'll we're and And to of cash. by opposed quarter-by-quarter that a historically if of look do be closer same end that you where we position should a year, net rate to on user analysis a is come net see

John Guinee

what is York? that environment Is Okay. immigration of tourism effect the And Trump globally you think thing? the big on do for then, and political New far-left is and it Tony, picture, worse or that sort

Anthony Malkin

of job two of in evils to look lot There creation. impacts political perspectives. way wide And ability a individual. there friend absorb to creation in of the to New the a York a that cities from in City and terror the of overcome ability recovered strong. one like said have remained is at mine world we've is Well, I'd still attacks. once seen wide And lesser evil. impressions job is And the

presidency good. good. think from focusing recovering it's we is as from the York So Overall, absorption as far creation, as Trump well, tourists destinations City again, Space the goes. on New international job is

potential I on. company there that from we ultimately, ordinary a work than as rather money absorb. greater to company grow think to of either even to factors -- a think you've a of two I commented spend that need to the as is start that the able And impacts we operate can that's than just

John Guinee

And then last.

a One XX think there's capacity. those million have between people at capacity, are asking lot XX% the of maybe of Rock observatories about maybe World questions And XX running million annually. Empire, lot I But about I on been and or Observatory. three a and XX% think The people

that's it a I'm play that. going about You X correct Vanderbilt million you and can each. on Edge looks to sense capacity like if for One the out? wrong how me have have And Do

Anthony Malkin

Well, in the probably and I true that David you capacity, operating XX%. on calculations you're said if his math we've based at think around done has our past that look before the

is our already utilization maximum on That that's said that attraction redo connection visits. Instagram accelerating effort I each already geared comes Observatory account improving Of is which We operate world the on we it entire is authenticity. think -- the being that to And authenticity, win geared I to and values, course, when these and -- win hour. and that to think about of the look, our into of values destination hours to we day, -- and in and takes all attraction is what World, And look in the Hudson, XX at of X fact are York #X look, got at all this capacity Vanderbilt. when you've amount look of I to out be One who this, that City. it's where people even that go New we allocation Burj Khalifas visitors. One already online. certain really go Instagram -- has to so that of going and based the the number in than all want people the rather to of itself on going

John Guinee

Great. Thank you.

Operator

Thank you.

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

Jamie Feldman

back want on comments Thank Tony, I the you. to your go to green legislation.

Can my is be and understanding in won't saying with? not a you not, is you talk -- are Empire's feel then -- benchmark So in is what's if compliance there get I like XXXX, to you even plan? the mean, And what's the there portfolio there? a XXXX cost in XXXX. is And

Anthony Malkin

definitions to that for look situation the is need say We've there's next general, which that most the asking our and competitive we've growth at in recently a first, fact made time. rulemaking be our that's Citi there outperform market, about And laws how advisory growth against position be leasing office? pointed rent order position, I As like Tom was look York Everybody think our And as it to has look returns that to same at quite some a still just net perspective. the price our X we over City we our any Congress, way in is repeatedly. rent should position still but Conference, in year at again, that's had basis on from be said our the board the service. When assets here. in to New the Durels at the product we I XXXX out, talk some up market set we we'll and probably of our said. years. which So service the are said, this by the down been codified

efficiency, that this I to everybody. get to on particular is we a know All of that legislation. know start I So less. we've focusing piece it's been which consumption that And is know All only energy, deployed head it cost not I and is tout we've of got buildings on All us in who've how going folks is on tenant basis been but our well LEED spaces. the they're on the thing energy our first, that additionally, through LEED right we've well and who the also the and that doing GRESB. said how repeatedly, of on doing focusing basis and they're know GRESB they're piece I think, these it's soft anticipate United move we And this they I eschew around be don't States. copied all to targets, you going because the legislation, standards the should of particular needle. I

spending expect follow So New absolutely cities City, should I we'll York a our perspective, been it's the going rulemaking. We you everywhere think not have just this that are to take on. And potential on take position. -- but importantly, improve one the lot to competitive of it's looking the potential measures our how of more this and can that can are costs continue what time from and we

Jamie Feldman

very for been to on interesting the said to additional don't but some would they're it's spending, XXXX, some like me you you be for be what is it's I a different feel in no least guess spoken there'll have who I different. that XXXX peers your that at I of path you doing. because compliance. than mean... they be there? think to mean they've glide I even Okay. think Are saying XXXX, I've

Anthony Malkin

fully he thinks haven't to lot making on basis been an laid yet. the glide on is or my of out of that path a is who the awful And accomplishment anybody she XXXX rules is comment assumptions because

board, and than with rather a perspective, advisory -- in my knowledge from I'd rather of the I'd process perspective So from assumption. that rather participate with speak the careful, watch rather

everything's that there could So time, complete still at in that the and are make till can't compliance. there done work, out very we comment. it is At studies be possible same

Jamie Feldman

just any Okay. we've curious any recently, with you've on just York But guys. And investment an foreign I New -- changes uptick Vornado. just there? bigger then, thoughts, I market? investment mean, very at know retail make big are in picture, a big interest City capital a the I'm in And seen QIA any in looking you thoughts from you seeing a they've

John Kessler

We Vornado to John. it's for And they and certainly Plaza is great QIA Penn what did good our that's Jamie, certainly analysis We saw they're use towards reinvestment raised which there. in going have with a partner Vornado. us. that capital, think

and we the growth of at continue As market, to of find capital including own best top million X million of redevelopment use years, opportunities substantial next $XXX contractual. the portfolio look internal that that our our over is in line we very we $XX-plus the got

look think of pricing capital, driven sovereigns your certainly, I numbers incremental billion -- is you more frequent billion If like to are -- other assets, part dry about foreign powder, and people foreign QIA $XXX in than about of which to show and question $XXX at the that.

to the careful and to is And we the example tremendous to also they're the in that on to continues we continue continue the want that investment. focus I were finance think, and fact but investment able dedicated and of that an we're prudent. additional by there to city, is business, be so where going -- Chrysler impressed looking certainly capital, to growing in price their to for be And up continues pricing. hold

Anthony Malkin

there frequent. out to lot be and a of who and is and Doug out is Jamie. it Darcy a cross-bordering capital there's you by able Spies tracked Harmon. is going lot and Talk a Stacom. No, even there, They're but isn't of there, Adam lot capital to tell of to to Talk

Jamie Feldman

with though? think Okay. capital we Do see pickup I obviously, QIA you we'll in if that to did. getting actual work put a mean,

Anthony Malkin

going tell All where you it. aren't to way, can that very I where take spent to in I before. work be office can know, $XXX that off-market partnership in the York now units. advantage pull can hard deploy is like capital, for is where our our to deploying on get that, use and the sheet deploy our the a to a private Nonetheless, back. situations knowing, you City. we money we a on continue of balance more It's right person way can trigger give unique we the equity New don't just -- we we it's all than operating skills, People billion And wouldn't in going by

in all So in real should, some estate we throughout general, looking I at time. support be price sectors think for

Jamie Feldman

response said growth think in side, and think the an on you then you I said they pace actually, think of think are earlier -- I finally, question, is -- the Okay. slowing. concession Tom, And then the I said, to about flat well, growth you I

you're seeing concession? those? clarify, you can rate is And of, it's pace which of the So growth, of if that in kind the just one what growth

Thomas Durels

rents. speaking, new the on basis in -- year-over-year York for We generally And per leasing increase and our lease the weighted square increase to for TIs and means quarter. about of that a seen slow, net year X.X% we're -- fourth foot Manhattan office on quarter average renewal Manhattan a average per effective in a our leases commissions our average City for for very and first leveling -- weighted to grew net $X.XX that seeing effective say is an for New I all pace Well, the at have that would experienced rents concession new leasing, the decreased cost office office compared lease, minimum, our off. we've Certainly, just basis. and

Jamie Feldman

Okay. Thank you.

Operator

Thank you.

with line comes Heck Our Please of with next Fargo. question your proceed Blaine question. from the Wells

Blaine Heck

morning. Good

follow discussion. pricing So the just on up to

talked XX quarters I to think, a XX a ago. couple cap basis Tony point in of expansion about rates

or of this deals changed gap the guess bit priciest in that's a capital least cycle? all is amount has come we saw from where to your I the the it of So that And back at tires, is still a the at kicking there given mind market?

Thomas Durels

you locked that better that prices have about -- to vacancy out cap that's Building. baked. and than rate room fully Chrysler the pretty the in where and the two, things: do stabilized. in going it's is figure capital; assets on you've dream probably more turnover being adjustment think which In a are I the but that are prices and they the people's general, underwrite for assets not there It's by back is two stayed, how supported can better to pocketbooks interesting something One, and seen If the

Blaine Heck

deals to deal of going guys the maximum kind you're for credit. a of or leverage plenty is. is and of your a liquidity while to like for If I a kind this that? at helpful. guys amount series point of you But is this do up capacity your out have That's you probably and guess David. cash come comfortable know with line put I'm really Okay. still between of large have much you your investment being stats, what think deal And I curious capacity how

David Karp

us up you XX% we've our are at of that gives Well, total we in the value, leverage, bring take enterprise look terms fair with connection a in to a right room which if debt now transaction. net where of amount to a

cash liquidity balance on the sheet. the in We place have with

We revolver drawn. revolver, has $X.X billion nothing the on been the which have

to we not So in even XX%, if capacity we doubling have Certainly, have sources uncomfortable up. XX% liquidity of position. bring us and that potentially would put to that we're an

position market that, said us of well our environment. we in low it having any Now think enjoy average. serves We

bring were in to a would level So to where we term. to path currently leverage neighborhood, our look if to up longer a the over more to we something operating comfortable that restore we're that

Thomas Durels

any we've don't out ton potential right there, might disclosed of I'd of a refusal do. has is like a venture capital add, that on joint QIA first forget, to JV as we there

of a we comfortable we'd what balance that opportunity What that take that I comfortable basis of the the the be in would matter that it's answer action be justify we would it. is, and think value the see we the to looks we see. really And of like taking we sheet on opportunity. doing when

Blaine Heck

Thank okay. right, you. All

Operator

you. Thank

your comes question with with next proceed Kim question. from Capital of the Markets. Our BMO line John Please

John Kim

Thank Morning, you.

remainder quarter. rent $XX year, $XX at for Looking free last for million your of There million was burnoff this the the the years.

NOI the rent got quarter? almost $X trying supplemental, Page free at that when went. I'm You to wondering $X where was million look looks X of $XX the million went and quarter. that that used on million this still burnoff down the million your was $XX ex-Observatory of million where during just like Because it cash it termination that you fee. you $X But And reconcile I'm

David Karp

Yes.

had quarter, cash during rent million rent. and paying their John, representing So, of rent free leases annual the the about period and $XX we begin

cash the million So what per this subsequent of the quarters to does roughly rent it in $X period $X by quarter for is from or XXXX. million increases April of XXXX December

comes quarter. the as again, gets paying spread remaining -- one the out it and the as year. doesn't over it So within out that rent, It all fall of starts

John Kim

Okay.

not thought for that, So was I number? some that anyone's in -- that reason,

David Karp

-- remaining do basis. it's it's again, this the Well, an -- we annual on

say, of will free in we instance, that XXXX? $XX XXXX. much that be So for XXXX, be million recognized in will year rent And how recognized in

John Kim

Okay.

So at come there now developed over office space to wondering as of forward with your impacts do that what Herald potentially spend couple I'm as you ability a not Penn market its think but attract newly to market moving the the on capital next only assets? development. how that And your in tenants. significant does years of is it's Square, far Macy's amount to or going the that's whether Vornado

Thomas Durels

value attractively locations. we We're Well, between access offer Class a priced are B central mass and transit with first I uniquely and development. all, before, we think, great as of to office said and convenient great typical new positioned,

space occupy marketplace. we a unique think I So in the

been diversified All great and great redeveloped as and seeing have I office variety of so including spaces, common see being systems Manhattan Look, we're areas building X.X heavily We've a well invested and rent floors prebuilts. space new We're pipeline renovated square feet and diminished of all gold both the I for infrastructure. of wide FIRE, development. very services, We're modernized. consumer roll know. think in product, don't got our interest tenants results. we level a We've it. We've by over delivered nonprofit, activity from -- tenant positioned. professional you name you of for full And TAMI, million properties the of activity building manufacturing, a quality,

In so all we're enhances us neighborhoods fact, it's and good our very, said that the think future. for well very positioned it's and for development new I

John Kim

that just XXX,XXX -- meant feet? aggregated? some of can you space available to leased to the that Is today? remind have of that be square you us Or is developed Tom, vacant that be all

Thomas Durels

About of of next half the market space. that and XXX,XXX square is bring that waiting feet which adjacent lease-up. for floors. of course early other some balance floor of to this some The is vacant and are redeveloped box year, Roughly and we'll partial half rollover and white the space ready over prebuilt of is year for and

John Kim

you. Thank

Operator

you. Thank

Please Emmanuel Citi. question follow-up with Korchman next Our a line your proceed is with question. of the from

Michael Bilerman

the last share than of assumptions maybe It's Michael Can sort captures weekend, this us Manny. your knowledge Bilerman to year would trends this what year-to-date rather both the year using and of you with Tony, through be? quote. see sort visitors Easter with which

Anthony Malkin

we'll that seeing. happy the at end give what quarter. second of second don't we're But No, do we're the Manny, end we that will do with the of I'm Michael, at We the interim sorry, updates. quarter.

Michael Bilerman

it you give know based about important hypothetical the on because assumptions. assumptions some asked talking don't made what that's is. trends would current you've why talking and more -- be them we've I I And about made I than figured

Anthony Malkin

got prior things -- things of give Passover because and a all, know trailing Easter much the we'll XX again, Passover But during you comments, as months from that the extent at and shift of we Easter look We're create I our extent lesser quarter. this of you. report always at first on period a a next -- to we to the end time, greater do distortions. like of

Michael Bilerman

you people. sure, so available not the I'm on XXth have floor for

So went you you tiers X. the in of versus terms to said X pricing, down

of just X headline before, today? of where today tiers $XX regular price. what for you're take-up X tiers tiers So seeing was what the the were the take-up us, just and versus the $XX sort Where -- and X the between guess I remind prices the

Anthony Malkin

what's are actually tiers, Michael, different those So the gate. at

to That get to the offerings. So refers that doesn't to price attraction. the refer premium into

higher a What we after was of So tour group we celebrities products, at we what the -- our look a a -- different our we or speak, all-access our per began called people travel to personalized come really number. it's regular treatments the access we was new through just a We our all with It the days for get Number one offering at as it's looked our the What what we that was periods. outside partners. peak lot showed gives ticket doing premium. value call pass we alternative a and and It's what want a and special just help you of disclose pursue $XXX study number before did one. ticket those or back outside program so on at regular our two, things don't it, was the to our things featured just other website. entry green some up different when bought our overall. you your certain at our The to person to our of see, benefits phrasing that it is, redeemed We to had world. didn't we look special of -- throughout, visit that where pass. all-access visiting and building room green way room,

our AM/PM have ticket. We

ticket. Express our have We

at a We have our meal the with X at of view building. restaurants

We have Experience. Sunrise

are all for those something special. opt can the So people where in ones

at this revenue stuff looking and how focused find reducing discounts. on is mix really what works. focused we our our that we're And really We're so on

a we're new feet putting higher attraction at of figured derivation on focused consumer on but are less enhancing price, really that of we the number the the will that but experience find revenue are of really volume a be on a the And we focus there. by it's And experience is limitations square is the so revenue we we higher-quality volume. also mix increase our we per side. What experience, that focused on feel on experience. we any will get in consumer And on focused the the revenue. our not so consumer best just putting the we that person, so therefore, we're time together, justified the is enhancing We deck the be bodies also,

as cap pricing goes when of these an over delivering developing just tiers of a after together, been tiers X perfecting been component the it So was last strategy, at all to one growth. of look and quarter X along, after it's overall things different really we've XX quarter from months per we quarter movement the and

Michael Bilerman

one Durels. maybe Just for

you between could and just going they sort any that shorter there term? longer, rent for go you Was desire FDIC only the the and term? have maybe XXXX. talk You're the interplay lock them term I the did locked on to that out So can given guess in could -- about of lease, why

Thomas Durels

is I'd space, X-year first term. all FDIC of Well, say, limited happy our a with to were they but

the terms that So were we to we them happy on renew did.

As I modest pointed happy were very out the outcome. earlier, we're lease the with concessions and

Anthony Malkin

it are also concluded situation it hard under visibility have point towards we and that deal. have it and longer, we I'd present for us And the bring term. We a versus upside our the us extraordinarily generating we and go sacrificed years long market. We're space it versus that thought demand out benefits need redevelop is best and with felt on the But to floors decision to for as as To to about renew those pick desirable. them happy redevelop the far would out was with very that we X to and make that that do available. for the floors. good next a a tough these flow We immediately. prefer think that

Michael Bilerman

Tony. for Last you, question

on know best get given your think a trying the you your stock what liquidity into potentially tied when know that thinking than your balance you you allocation in meaningful a the out that price terms of acquisition decision portfolio, discount buyback, your going in of where but to The using that how and go. price stock assets rather at the buying you potential opportunities have, the that's terms up, Just you discount, to underleveraged and making sheet and portfolio buying have trades the just especially are where portfolio the it to capital that given has a best there is? in view and capital to stock Observatory on changed

Anthony Malkin

really or nonmarketed through availability and our private look market continue rather that on market. to that -- to We sales. optionality sheet drag-on as I to to out like public it's grow and with asset I appreciate really not primarily that the situations focus than performance because liquid as it So answer buybacks the still stock low-leveraged an give. on really And for of our we seems business. the business our our see I'd line of our but question -- appreciate We We with a do whack balance shrink we growing future.

and of pass. that bring the one we And fix do with selling working for stabilize should But actively parties for are years. interested or considerations cash not to They company in a not off been Whether assets on There's with every we are in we've that of balance the the continue stock. working off-market. focus whom issues going stock proceed. one buying rather set X different we sheet -- speaking. the shrink on help are I've to that just and to barrel and been and what motivations or on That than by X.X on opportunities. buying again, are to will for years the back they issues We involves portfolios might back I've off-market they that and they reason come

Michael Bilerman

Thank you. Okay.

Operator

you. Thank

follow-up is from question. the a Guinee Please question with line with Our John of next proceed Stifel. your

John Guinee

Do I year But occupancy? of to of questions you physically bill. foot the green markets by think changed? followed your quick next street terms just And negative expected situation, where it fairly be About buildings to for in the retail were in bill question is spent, you the $XX How bottom a legislation? a Tony, retail. legislation needed understand on you. then ago, some opinion or is this Thank base have can't two has needs situation the rules the rents the is, hit Great. be with green you. and capital comply or other a on Manhattan building

Anthony Malkin

first do then is to reaction be to don't one and the comments -- really With to it what regard the forward-looking to second. are Well, first. quite sorry, -- the down With we question bill, I'll answer want I green to second the the rules. regard -- who I'm me to any folks making I the to frankly, going don't cause to want give to comes and

So that's I I to the right? deferential respectful them, want most to And and think important piece. be

our we impact. as a make profile, sign it a and far capital Every cost we every efficiently. new more per is time different upgrade we system, any the as As space built lease, any space has kind of we building energy recycle square of consumption time old foot, any improve up

be question. So said. of lot I this a still target I a want on easy to repeat subject. not me to are first me that particular an to an would fact your and express and be careful that Do on opinion favor of to think at based unwise think There are forces it's for play. things lot is a There to reach.

John Guinee

About ago, retail. you... Oh, just a year

Anthony Malkin

Right, right, retail.

the over And doubled were talk you comment. there not needle. made he dinner where Sorry that owns and head half. at years a Manhattan has dinner who's about and company the night lot pricing popular that much Warby I of retailers or -- time, number areas moving period, XX-year out the street they're retail, like, simple ago. said someone of that. that XX was Bonobos shrunk. Parker At a XX by then of you last peak Yes, can in same whatever retail street years Casper with they the the other or of fell they're over He about with pretty a or the And

fortunate you're view, to to less to for wants good as TI sign lease, credit have more we look a at to retail So and get for going a fact. longer-term street our invest in still rent. a you're if going and That's tenant CapEx that you're

John Guinee

Thank a very much. Have you good good. Okay, day.

Operator

Craig question our the morning with final your with Please gentlemen, question. comes KeyBanc proceed Mailman and this from Ladies Markets. you. line of Thank Capital

Craig Mailman

Hey, guys.

Just two quick ones.

burnoff about follow-up is the there. one the a free Just rent question of on earlier

sounds it schedule should quarter. that million about and burned like So beyond what this from XQ have from $X off

-- I'm trajectory give don't of it of remaining timing As $XX-plus when it just guys about of in a quarters? guidance, Is but of the that's million that is I each get back-end the kind there, sense you some trying hit? guess of weighted in sense more I to there. we know think

David Karp

Craig. Yes,

on gives lot commencement corporate the the Page if It is is correct, then you more you if look loaded see can you You're that be it to a million. you'll get look amount, sense you And year. cash dates expected XX. going presentation this based $X our at a remaining and over in of back-end

Craig Mailman

a should million And Okay. comes only think All just we a right. the That's in in way actually much fraction about that's amount that the during there. year. higher the gross $XX.X but

David Karp

am gross sure say I to that not follow I in. when you amount comes

Craig Mailman

The $XX year actually $X million off burning is of leases... million that's this

David Karp

Well, that because the in quarter was $X million of first roughly. realized

Craig Mailman

guess mean, Great. wise did $X $X Or offset the first space full timing Was of million, I go back by is million something that I go? John's sorry? a to sort $X and you just to where less question did it coming quarter? offline? $XX Or in than million, million recognize it

David Karp

you because wasn't X. full first the -- bit occur wasn't would it weren't commencement January I was a it's entire million. the the $X the quarter, mean dates in -- They less. the entire throughout partially it those on little million $X don't quarter Yes, it for have so

Craig Mailman

just then And do updated lastly, you're to going right. the convert? with All any what plans Okay. of

David Karp

which many. noted we've pay still options, How off. We're to we it are do evaluating we're as that going our

We balance cash have the do with to sheet. on the ability

is private We loan. placement. a could term term the issuance. have is for potential There ability There revolver. doing the to public for draw potential consider loan, bank a bond doing We the a on a

of lot us. available a So options to

optionality, with rate swap. As enter you'll us provide recall, greater and we to forward-starting a into did, as precaution interest a

lots on financing So we that. of have options

Craig Mailman

to the you debt could pricing replace is today think do for Relative it? coupon, that where

David Karp

look amortization to and the noncash portion you you into GAAP One at consideration we equity option pay, the the is, cost is then cash well the is that as look which when when takes exchange. deferred is remember, the Well, there coupon And costs. X.XXX% what that interest as accrual of two things consideration, at a term there's our the loan, GAAP which of the XXX X%, we to say of term finance under is accrual and if take were just X-year is comparison, loan, bank that you'll just do in X.XX%. that term In -- basis rate if loan, we points. this somewhere spread do it's to around see into laid assume out let's all were XX-K,

X.X%. is be We and around so X.XXX%, swap, all in roughly have X%. the We'd which

under increase our cash that would interest So X%. cost on basis, by a just

roughly however, basis, $XXX be incremental million roughly on that's so And on the On million $X.X $X.X year notional. interest million notional. be a would expense per X.X%, the which GAAP a about would

Craig Mailman

Great. Thanks, guys.

Operator

our Malkin comments. you. turn Thank the that session. gentlemen, I'll Ladies floor and final for any back question-and-answer Mr. concludes to

Anthony Malkin

So keep short. I'll it

Our We goal our and of a are had really we are, are thrilled was very sorry call. Q&A. XX time We minutes talking to going so very, for the but long. produce short by active we

on to to very calendar at meet We Observatory several we ahead the you the tours, quarter best. and and the until all in July much and So chance look thank including for you our attendance results, events forward months look in for all then, your everybody, Nareit and a time summer. with second property questions. We forward repeating to the our spring

Operator

concludes teleconference. This you. today's Thank

disconnect at this you may lines participation. You your time. Thank your for

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