Empire State Realty Trust (ESRT) 25 Jul 192019 Q2 Earnings call transcript

Company Profile

Participants

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

Call transcript

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Operator

Greetings, and welcome to the Empire State Realty Trust Second Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded.

to conference like host, to now Mr. would turn over the your I of Empire Relations Faje, Investor Greg Director for State Trust. Realty you. Thank

You begin. may

Greg Faje

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

company's distributed posted In evening, supplemental section in on results the a detail investor latest the last and addition Investors further press our with Web presentation quarterly empirestaterealtytrust.com. the our to site release at package has of been

your market questions prepared defined income management's remarks operations, to statements laws, and call, capital contain today's as may answers in including On forward-looking those conditions, expenditures, securities applicable expense. related and to property

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

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

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

John Kessler

not these we York office fully State XXXX central REIT conference you, and morning. modernized New call. transit. Welcome quarter popular City and At Greg. access Empire days is Trust, it retail Thank easy Reality to earnings a locations focused with to mass second our assets, are though Good that

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

in to Our portfolio B and priced outperform well between positioned, A market. any properties, trophy/class class is

an and have we low significant a sustainability and energy credit efficiency. of undrawn cash, are leverage. industry with We leader sheet And line fortress in balance

leases, Tom for Today, properties quarter's our second of and market demand about square feet spreads. speak will our leasing Durels the approximately XXX,XXX market-leading

of CFO discussion from will a from our the last here our we Greg our filing, David our our is sheet, today we For and all balance is off all for Karp’s signed us performance numbers know Faje prior week with day and David hear financial from quarter. as on and has

for David our today me. and As plan analysts to And going be will Greg lead CEO report David’s he some comments part Malkin, transition CFO forward, he a will And and our with few on Tony provide say Then, will investors our the will call. Chair remarks role words. assumes David transition. of prepared and and our finally,

also and will we who you many our as Planning be Financial our always, who Head have Acting filings our of the Drew per with Treasurer Accounting of room know Prentice, and us As Officer and Chief in Analysis. CFO; surely John Hogg our

call now Tom? over to Durels. the Tom turn I’ll

Thomas Durels

and embedded estimate we made four found of progress derisked next The to of Page be line over XXXX, investor of our our Thanks, growth. second good revenue everyone. the growth presentation. numbers $XX In can five John, more top of morning, top on June X drivers be quarter breakdown million years these our drivers as we XX, line, and on

cash of million as rental XX in this revenue months compares NOI June and million trailing cash $XXX in to XX, XXXX. reference, For $XXX XX-month trailing

and retail Metropolitan included feet XX,XXX XXX,XXX in in Manhattan quarter, square In renewal square New parking garage square included we office space. XX,XXX office approximately portfolio, Greater feet. in our feet XX,XXX totaling our feet the XXX,XXX leases This and our properties, square new second of square XX York signed properties approximately which feet

XXX a with XXX West West include quarter a at lease the during The also Group signed XX,XXX L’Occitane, square XXrd lease Interpublic leases new full at office XXrd with foot square Street floor new Street. new Significant XX,XXX and foot

and leased Central In XXrd XX Broadway Grand we Street. West predominately or new addition, XXX pre-builds at XX,XXX square XXXX Place, feet One

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

replacement the our and a them with is out consolidate between delay near-term GAAP and higher our continued redevelop reported and of to the of delay commencement vacate have existing move tenants tenants. a further commencement our those recognition, quarter-by-quarter spaces, proven so occupancy at impact We to revenue. delays revenue spaces There and leases re-lease and quality strategy and rents better between lease varies

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

of Now, leasing rents. depend fully expiring the escalated always spreads course, on

prior is without between and market. XX% redeveloped rents Page based XX of On office office below market $XX assumption escalated per investor our increase. well spreads on leasing XX% the on Manhattan space leases our current had will rents we cash square of current cash of Our future presentation, fully any vacant vary foot, estimate which

basis average X% asking raised throughout XXXX for over weighted demand a good. product, rents points our and months location XX have and on in We remains our Manhattan office following by increases price trailing our buildings

on increased in net quarter basis effective effective growth rent As we XX investor X.X%, of growth straight by we which Manhattan X%. XX excess our on presentation, net in office show the Page year-over-year of new for third our trailing have experienced a months rent

negotiation redevelop strategy have we healthy We remain and a market of We vacate and focused on bring for that to floors lease-up. pre-builds. our both portfolio in leases pipeline to across future space will the for full

Greg? Greg over Now, to I Faje. will turn the call

Greg Faje

Tom. Thanks,

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

the Observatory momentarily, results which cash will Excluding flat. comment on was NOI I

in new free to is of from This we NOI leases disclosure On investors visibility of period cash added the commenced in when schedule had comments rent analysts. their response Page provides X realized. quarterly new and contribution’s the helpful a to supplemental, the

Also, quinquennial, for second operating are million to our property and approximately work Empire note in your R&M models, two These the impacted total Building. expenses Law at be associated next expenses one-time expected our $X half. State will tower XX by quarters the with the in expense Local

reduced prior factors combined of to X.X% of of second Revenue bad Page XX weather of million for period. operations. $X Observatory quarter XXXX to $XX.X from decreased year our second Four this the supplemental the our quarter. to for pricing of million highlights the improved result. the shift and observation the deck revenue and the Easter by related closure XXXnd floor offset or

was lower Observatory of income than quarter the $XX.X the for due Observatory redevelopment. higher million second operating and the or aforementioned to to XXXX, drivers relating the revenue XX.X% Net expenses

phase, gallery schedule the of Our final the the floor present new the July, and XXth on floor open the to XXth second on new floor, November. is the XXXnd in in new September

NOI flat the of revenue second the entire XXXnd quarter and second was the floor XXXX, but over X.X% period. Excluding quarter year-over-year holiday same Easter benefit the of the including increased during revenue XXXX

visitors quarter in As XX,XXX of XXXX, decline, the second that days estimate a prior second Of reported period. fewer XX,XXX year weather of XXX,XXX visitors XX in XXXX. on decrease to visitors bad in this hosted the resulted we of supplemental, the of quarter Page compared the Observatory XX,XXX the approximately approximately

the Easter visitors visitors. XX,XXX and attributable in holiday shift addition, between the estimate of other year quarter prior factors. the a second first approximately leaves XX,XXX which of and that quarters, to benefit we in fewer the year second In split entirely within results the That in was fell this

just similar Net June For to Observatory prior mix $XX.X the from revenue million I prior period X.X% X.X% decreased ended operating XX, was to lower the of than factors million, due year six or income the period. months XXXX, $XX.X mentioned. a

XXXX, hosted first down was same over XXXnd in XXXX, in half roughly NOI compared down was million The the and visitors the period. Observatory flat revenue X.XX in the million X.X% year the Excluding of X.XX Observatory prior X.X% revenue to the period. floor

sheet. Moving to our balance

no outstanding of debt X.X and a $X.X As rate outstanding of The has of total $X.X to of line approximately of our credit. June billion maturity X.XX% debt years. interest unsecured XX, average XXXX, our term billion we weighted of rates. under borrowing average variable and had None has weighted a debt

well are laddered August our maturities debt matures Our XX. bond million exchangeable this and $XXX

offering bond cash some many We secured balance options; options retire in our we debt consider the of financing. fourth loan, plan and placement, the with private existing bank financing long-term following cash sheet balance fixed continue term our mortgage XXXX quarter of rate replenish in our to of public the to for our to utilizing or

held capitalization As was to XXXX, $XXX consolidated short-term cash net was net our And investments debt market XX.X% consolidated of and of we equivalents cash, debt-to-EBITDA and million. XX, June total X.Xx.

I now David. turn the mic to would David? to over like

David Karp

financial subject, balance in the press in and and the take accounting, back down company’s As as built I joined November planning per our release our I my the and IPO, return and and next the I West to week of our the creation step CFO here. analysis pride teams from I on responsibilities I ESRT will investor Coast. sheet extraordinary role played in XXXX

some spent I’ve the particularly enjoyed To together. difference we’ve in just proud and now AR. that an analysts, sell-side of farmhouse you our a and can investors, IPA vendors our the tell between collaboration knowing I’m time

you I paths will next and I when cross. with to forward thank that, our say So look

to Tony Tony? questions. call your turn Now, the the some for we call I remarks open before will over for

Anthony Malkin

our to want First we leadership David to service ESRT. of of for team, all, thank on behalf and all Board his

team You and recognize run we a all company is all no that is and by here know ESRT different. a

look continue maintain excellent and Our worked work leverage, balance flexible analysts. our with investors, to lenders together will to relationships to together continue great liquid sheet. low our forward and We has team and here our

two Drew guided all veteran, accounting team Hogg; John we be Kessler our Analysis soon-to-be new Relations our Officer, acting half to Financial team led and a CFO. as Faje by Chief Financial and transition led by decade a Prentice; Greg by by The through Investor move team the John led our and Planning will

leadership within. Ferry we contribution there out interest him the in his in outside We next inbound and from wish our and the thank from and have position interest David and and have California engaged CFO best search tremendous company the Korn for luck of Oregon. in a for We International

call the operator let’s for to over Now, Q&A. turn the

Operator

session. At we’ll time, question-and-answer a Instructions]. you. be this Thank conducting [Operator

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

Jason Green

Good morning.

stock makes surrounding thinking in sense, buybacks? be an an acquisition where and today marketplace find the the any has sits in seems change to been inability Given what that to there

John Kessler

past. John. continues Good to buybacks view where No, was Jason. the on our morning, It’s I in be it think

focused business we’re know, on share it. And a cetera. into deploying trying you the reduces to than As capital et grow buyback shrink our rather count,

for future balance that where create We to is which at. cash for our constructed, growth to for and have and and the liquidity that a be is we’ve sheet continues mind optionality purpose the the

Jason Green

guys beyond you market driving Okay. at general potentially are weather And Thanks. down seeing Observatory? what then guess in visitation the bad be I days, might tourism the that

Anthony Malkin

common been we same down down. which here. in Well, the – of XXXX Metropolitan opened you’ve that Hudson Yards a performance meaning One XX,XXX with announced general. time, to of Tony folks is is we World got other competitive people and is our the source Top for vendors first We who World venues. tracking for our has data which through the board day of initially picture has their One show and Rock, know cell on museums who know full Museum We in year last very attractions from challenging the way only performance I though vendors, from six which at The the we’re and Trade input other do some some say down folks sell XX% And public landscape tickets have everything weekends. when Center I upwards other The our reports across the of quite that sketchy of outperforming from look on would months we destination and Circle a share Trade. at are Line numbers don’t been attractions

same that reports data number per than day. less Now that half cell

Memorial including and around and for Center of I and time. think some competing One press trends that XXX World even with of continue Museum tourist transactions we see this the revenue. from did I the the should We advertising anticipate Rock. of them always said will and opening the we’ve Top the noise reopening grown the [indiscernible] Trade

which an which and XXth X redo Phase XXth is Xth doing. the Phase September. end of will space of will the desirability alike. we’re just by redo users Observatory as July. guys give on XXXnd November. and the on and redo to extraordinary. the set to of which the floor will the say of see XXth, our and new entrance of galleries open opened be our complete X end believe floor moment And Avenue words the XXth what are already this it of of to office open our a going of new it our couple by up we I it’s our XXXX X to tourists is think you X I Phase a to August to open and increased Observatory was the about have floor where expectation that of the have say you’ll table has are that to for the is in cleaned complete Phase Xth Avenue which retail it. lobby the But availability Monday, second Street has experience

all full like no there’s And Empire Observatory. we operating So this by exceptions. will folks This team. it done have tourists scaffolding has and nothing the had addition contractors creative XX We’ve truly add and our State world, in in move that out of professionals trades ESRT work that period, nothing fact quinquennial, to millions we’ve the been and stop, you outside work, impressive and the like of is and and simple the Local in deliver while that up not laborers creative to we and our for had if there’s Building here execution Observatory. the all the Law of to

that one. light going to the office. full and worthwhile at I on number be shine we two, just high well And out a there’s little there, noise to executing number So level we’re think recognize to just Observatory, a the very it’s on note

able to it, Tom great XX We trailing delivering, be months Durels growth. are net rent will go into

We doesn’t are hurdle had of we reduction know a was deliver leasing buildings, to great the But isn’t our which that income. in our going to to delivering have broadcast leases if we’ve the lot fantastic that credits that we long-term office on Observatory busy. very overcome which result the on And significant show. a

a period. first a increase answer our XX gone per last a but on sorry year. said, coming this caps months the if lot years be second over figured we noise the had we opening. lot we’re That of competitive as The at there is the observation the of trailing forget revenue in questions flat you of long, X% place. this I’d If was revenue all – and the weather, about for Observatory too for up was the I’m half and Don’t for versus was once. upcoming And half on landscape will we all heinous I X.X% the So last excited deck, had closure year. of quarter first know, I’ve worst adjust for XXXnd year

Jason Green

Thank problem. No you.

Operator

Thank you.

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

Craig Mailman

with congrats I’ll of guys. phase best over the thanks all start next and Hi, to your the David for say years. and luck help

talk of just pickup want hit the have I could more that to margin? have maybe more Could offset thought and would you flow kind a XQ the through just that we in top the guys that have kind that quarter given about this the Just kind that takes quarter. NOI million kind than of of I of may last on the cash David, through? guess a puts so on me X would Greg growth the in bit or walk you kind quarter. on of about may little had bigger of conversation

Greg Faje

Sure. Greg This here. is

a cash look first two about million closely on NOI from to did quarter. sequential on This second the about increase you property of you we they sequential X%. X.X look consisted really. rental a basis, more increased parts basis And If show if growth cash at of some quarter revenues,

vacates here small hit XQ, XX about free holdover quarter, of about rent by XXX,XXX occurred first approximately was rents that X XXX,XXX in few offset miscellaneous items. partially burn-off If you that a the other of and in million in and and

Craig Mailman

Okay.

So because be of looks the of it at it until just gave? you’re – you XXXX going should up kind this occupancy not the probably guys still disclosure is ramp on to we enhanced given but kind next looks, way point more year at get going basis cash a to

Greg Faje

Yes.

timing if the model it more new terms in the of also in little help at of gives put you think look to you’ve in it Page X schedule you there would people at look I in then comes offset schedule on saw that got specifically that that a over terms of early quarterly. the vacate you’ll as course you clarity better. We’ve in Page the that to see that you X I and that And 'XX. have on – the 'XX there

David Karp

add generate I’d tenant always can The look, to existing revenue we from is lease. that only we to opportunistic thing are where additional

you of to leases tenants cost underlying and of recurring other with we we tenants If direct always transactions than the pick at it’s business, do the really the income market to let covers than discount. In prefer to from actually new that well. buy way had produces to like rather tenant-related and the doing look subleasing. extent our other very the that do we’ll leases up We extra spaces, re-tenanting of revenue out enable get scrape which their our

excellent can we’re on that basis. recurring so the distort achieving a And performance

Craig Mailman

effective have yet results the been trades occupancy wide been And global York; helpful. growth here good thoughts in New still just on here. The last pretty checked Tony a stock today time pretty discount maybe That’s but I the at still a net the side, market. commentary rent The has side good.

of the understand just needs and to I’m or thoughts on to your overall private fundamentals guys think So the versus curious market between you here sentiment? on need what public kind do values you and disconnect

Anthony Malkin

chance explain than First because very appreciate to I all, gives a your to much the Feldman I me more question of Observatory. just it Jamie that do

are we bringing stand a liability I one, that and and which and companies a few And out. was resolve partnerships unified government to more sheet reason we public a structure things antiquated went Second the was balance Number all, things of reason really make efficient. think of went process series modern public there there’s limited difficult. a and

glad that brethren I other would down right We’re and access reason markets we in the is markets – to and brethren it. which just the public. to a sistren, public should If be I with access did business we we’re public sit now a that say the in hear capital REIT able your can’t say, I capital we would common trading, that why so refrain companies, be there’s I discounts

right a that a through great One, think our don’t lot balance grow to we cash line speaks of sheet, great to things. two and access externally. to I access to have We’ve we need leverage. liquidity, additional that now got capital markets low

July to single by So And discount, consistent also trading from in I XXXX. not, determined accurate differentiated takes I’m had XXXX NAV or look different the peer something on compare and had [ph] premium we’re it CEO sectors whether or slight we a together group to digit Street lowest general REIT measure it’s me Greg July there. discount were very put a the a discount. in say I’d hear side that’s you at as XXXX July we Green and a of the and mindful our their discount by and scale the Faje at which for that how

being we still July question mute the SL are properties [ph] spot with said, office there And that to massive If Vornado, discount disconnect and values the all you REITs; today in Paramount sector, to the we’re open a you market there to we choir, chart lowest look New be. difficult down the blow based are in loudest being at how XXXX, that four malls. REITs York is a that focused where have have if still no on what driving But the that company. at the That that public NAV. ourselves and it’s between office to external see that’s private while as you’ll look growth, in are are and flows equity same bottom we City Green, which and

while exercising So buyback we’re not all, got we’ve that first it knows of everybody a now, privilege.

that to made Number time We When we that capacity to at should that things high allow last it. something a to we a focused the and continue do, to continue bigger would level. have look to and have that balance REIT, to we primarily execute execute right and an want as New we’ve to occur office the we sheet we picture reviewed have two, that which retail at York we we got pursue. a bigger have

address is the years to saw fruition work right. Observatory, you’re all that have We half which and And which we’re three then think we I doing now. coming ago and to

do every existential bottom have for weigh tasks. every at having is in try we it with option. that positioning our look always our on And a would a we daily and public we you look with of robust how the not at which shareholders, It’s options line? gets together long-term question answer I to But we Board. the get to to do of which the every Board we we we time we you’re way we that how recurring way a amongst because and with regular conversation. value executive basis what the and a it option the variety something executing deliver that do is the regular just drive should best company, be is which And have our as what’s ourselves We team tell conversation in

Jordan Sadler

base, you by with guys I not in follow here company understood, to Would buyback, on stock? capital guys John because quite you returns is be the buying one assets shrink market. It’s by questions just that today had capital is garnered of sort could lower cost Jordan at the that implied high grow in Tony. Craig. invest but opportunistically as want those and the your are up than just Hi, response initial to which that Sadler the the to your

Anthony Malkin

a to yes. look that at current be return I think would it time, prospect at improvement that would of a you over answer if the with

other transactions of you return I or which run economic top we’re that buying We the either thing’s the at underwrite to million look, cycle that a every list better have Avenue this or articles share. sign cycle see have have rationalizing forget, taken end, In this our unfunded the how asset never – embedded a a will when driving the up. We’ve articles deficits. articles to that is still look have number at and or we growth a City, those it’s growth can still liabilities. start for increase so at But were why is are no close to unlevered tremendous XXX got economic place time tremendous Madison think state the if in IRR, flexibility you government, at or York popping and have XXX Madison answer we it, virtuous to drivers. which I Those down X.X there pretty line up, popped to justifying a ending. explaining of believe similar out New per least $XX It’s absolutely way. our we don’t lesser why

flows with of homes, impacting along it. sales which capital, is of you a tourist trade war visits name have We China with

makes negative interest some which in world alternatives, a think negative point where our some say anything it Europeans talking at view. right the lowering do find to in correctly could I Europe succinctly zero to got have stock and else. would – spreads again. the in more We’ve At are would sense expressed buy now in Japan. position we imagine to given John rates a very their ourselves and price than Europe and we about We our But I [indiscernible]

Jordan Sadler

Thank Okay. you.

Operator

you. Thank

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

Blaine Heck

right of or just the color Tony can Good specific morning. situations Thanks. or to the assets you pursuing before? there expand are picture, unique you’ve you now whether kind give on John, that on investment for are and anything guys opportunities whether any talked about challenged

John Kessler

capital? Hi, I We at deploy I It’s market and is echoing to see back in think haven’t, look we actively right. can there here. maybe that Blaine. I John what how what think you out the would think question, – the do and prior we

made haven’t the environment the the private we’re investors in super because returns current in so because We investments are getting any capital seeing low of there’s that there. that much market

liquidity smaller I and we’ve or more think core date place in We’ve found aggressively. also even and the whether see transaction attractive I they’re market there’s we that income is it the is that’s haven’t a us aggressively priced. continued redevelopment – anything more to what haven’t seen to a price certainly change. think to deal to or it also value-add a seen it sizes continues like or seems we situation that And

Blaine Heck

on do. right guys have Okay, any to you QIA. might with the that’s have And guys relationship like of They refusal helpful. the obviously JV first you

them. you their Can for appetite point? this give of guys New discussions with in So have investing sense us York any I’m assuming at regular you office

Anthony Malkin

relationship are to all, a view. fortunate people we been and maintain Qatari terrific excellent with First very a of with these and good partners. long-term close partners They’ve are our

have know have equity a new transact of the venture the half played write secret They the the to new invest I Second Tornado to of providing big they into big and ability retail capitalization check. in role went capital which the still joint think of no that they they large did on it’s that and a to all, wrote checks.

long-term them thinkers clear. often. anything also about and ready participate is in a we These haven’t we present get smart, added are to reality, able this however, And that willing very think to I case. it’s they talked we compelling and present where anything fees The are where capital, for a certificate been private upside able aggregate the hope compelling a future. and optionality case. not in we’re where a we’ve for collect operation And to to seeking equity we’re

So we very advocate, are regard. And seriously. have treat confidence respect with take participate. And with we things it have know them, if there with the and which that we if they partnership highest we discuss our ear. their high will things them very of level we that We we a

interest As I’m It’s position do, and a not what in to far their they comment ask to might best that. as on them. generically

very our and together And ideas trying remain sticks for we which engaged we create supportive. investors, where discuss when rub we’re with Just they’ve value they with them, to have very us. been two

Blaine Heck

noticed it’s intentional Tom, guys space lastly, size and you color but a in vacate just retail some big. XXXX kind of that Then the to is? square XX,XXX for that in on we added decision the Can small you give where retail helpful. that’s Okay, portfolio, foot

Thomas Durels

vacates to lease in in XXXX. primarily early expires relate whose XXXX the Heartland Brewery Well,

they for As Building. square the base of State State this Empire a experience They Building. to We occupy XXth of Empire XX,XXX the the the and corner us occupy reminder, base as view opportunity at the a the at retail feet. about Xth great the in enhance

to bring XXX garment in in just tenants. a that We can added space. we then office of provide our by in street services And some Seventh tenants. Avenue to We occupied side actively marketing type are retail think legacy better tenancy we amenity some

an intentional for XXXX primary per escalated back just will we There are Building upside for vacate represents the opportunity that getting State have be of floors of office rent whether those and back that side known vacates or potential us. the that the vacates, foot. at vacate, on at topic getting we on Empire potentially planned the include be while in of fully average $XX or with vacates So square floors are tower tenant space great But the it drivers unknowns, retail. and the the

full Avenue have escalated XX% below in-place Seventh floors rent of at and well square XXX Broadway We with a XXXX These also fully are market. foot.

We’re anxious rents. the spaces to at re-lease to significantly those have higher opportunity

Blaine Heck

for That’s and Coast Great. helpful. the over beer. West years enjoy that help thanks David, your

David Karp

I appreciate Blaine. Thanks, that.

Operator

you. Thank

Citi. from of the comes line Please your proceed question next Our question. Korchman with with Emmanuel

Michael Bilerman

$XX. last Board’s October that Mike back which authorizing with in Manny. program, the was it come to sort I stock at It’s buyback let’s million. just XXX call Bilerman Hi. $XX here The of to the wanted to understand the time perspective Tony, buyback

Over it’s to XX% last those the the XX% months, course levels. of been down anywhere from from nine

I have want I probably represented want value in in place at and it any than was there more and I tool feel when that liquidity the point. in felt some that And stock compelled Board that that But put why balance fresh. XX% put when one it that that to values understand then have you to you put imagine the a decent sheet to modestly it and you at not place, very and keep you XX% you that the imagine So would even expectation as place lower it’s even to now even execute comfortable of value?

Anthony Malkin

Sure. two in Thanks, this ways. at I look Michael.

with to in public for opposed value that the and investors. is price parties, investors that aggregate were And of we’ve territory is to of already it bigger we for with lifetime. we a execute to we number we fact but if way First, new to stealthily could is to exposed we And that not that make we having litigation we through drabs the altogether. recognize just buyback I authorized. were had this in a should going public as what to support number wanted really authorization it we it to that the two, we a And ongoing selling at make we if make make litigation should and in and plan in in by you New to acquire sure put buyback wanted could counsel in various as that background, do public, the recall make bed to time in advantage that this to we one, place, place that really a drips for from entering did stock into With had what be if quiet in have do decided frankly quietly two, didn’t it because and sector just my out program general. office company things bigger not discovered advice we did into but that again authorization we us and reason wanted we that our mind fall interest fashion. was we two into take spent And And announce to of had stealthy public. City York opportunity no decades execute things;

it So measure. was a prophylactic

again, conduct peers we ourselves like we all that would are. internally The look a at we New say to to at that. we merger trading we for price whom I relationship thing look which We to value M&A our fact value rub is want and option second but York the activity might we than for relative which in outlet price stock discounts not sticks in to just our at regular in – as And they’re meaningful And us together. open that with City. opportunity I’m relationship our relative to leave trying two to is stock bigger the we have at discussions look

us transact a others to their sheet with the ability develop cash and price and just case both price, on of of with our stock of instead balance within where liquidity and surrounding sheet, major what’s say, the and that’s sheet lot look I the we And is leverage and balance our between assist our our net So distinguishing value, have at in to disorientation. of looking our I might at a stock environment. problems asset our and rest balance watches asset our factor net that lot further value

management the part as carefully. the to is So far second with size again, on And when at and that management look factor and we increase XXX% of these Board, made at the we aligned Board we is protect flexibility. with very discussions and our that just public first the as ourselves XXX% change level and Board going aligned the response, have

Michael Bilerman

would Empire can how you an you your talk those given stock into Trust that within other assume when where discussions types and to a then you’ve relative units little aside but NAV that your have And more just the property big is, think can relationships owners been one was not office assets that about always where family a negotiations it’s things about ability stock that advantage. Realty was M&A and to the metro think challenging of the bit provide since to talked the of owned buy And is process the IPO going what area a to you current assets, lot State had public, price because holders I the putting private those little with the bit New you public those and York one that perceive as or about given value?

Anthony Malkin

of You’re a Manny master -- understatement there,

Michael Bilerman

Michael. It’s

Anthony Malkin

okay, a when retail clear at say you’re so that and it’s Oh, silent a ceiling, is low master Michael, XXX sorry. block downhill you’re Manny Well, with look goes retail on Madison which because height, there, best of slumpy, you the Michael half I then frontage understatement. not frontage. of – it’s even Madison would Avenue

You’re to the and Hotel. Palace St. next Pat’s Cathedral

which their has as terrific of just distributions a the interest that New but it’s would receive single I know to difference who’s can a distributions, it’s to to we there’s every we the availability square be as such other wanting to of next real not assumes out, which being have when which bridge program that has of wanting confronting there’s and or a XXX% at taxes, it’s the the cash you foot. the a market office going lease. It retiring market private debt easier gen speculation achieved tenant. XX gen which is still So disputes have. there’s building has We’d have when That things one when get family gap firmly diffuse you believe or vacate. solve. gas next her are value. not that what as the property a properties fund or energy you like easily owner as if his these capable, is York and conversations that They’ve coefficient said, the there on greenhouse operating improvements no in make value and to on expiring, of increase to a charge, to far of loan trading improvement the $X,XXX if York over we wow, highlight and take that say in consumption new and and value, the you to next there’s nearly out that City regard with asset that go costs gen you x at output. it, vacant a between and time or a a and laws with much price and they transaction her comment. say which same New and look It you to on his $XXX if We the are It’s to foot. And debt. or in prices to depth on if a look estate got to to at – one these yourself at rents $X,XXX take is has proposals public private functionally And slight maturing value their worth continuing over purchase execute between an look at spend has carbon City at all the XX based maturing no an

it us, in the question debt daunt the there’s availability our doesn’t stop so it it makes availability us doesn’t in capital definitely And harder. no but task It markets, harder. markets makes

Michael Bilerman

does the the that? Board buyback what intent this to What’s is the at that point the the end for let XXX year. level discussion of thing, you expire and At million year? reauthorize on for the flow going last at just another Just do process and

Anthony Malkin

– talk is stock our believe important our view future the ways authorizations about the can there. it and that quiver, and are we this and a way. Board under the it’s but buyback stock have management place. our I I want has different view let’s is Let’s it’s this means to been can’t that talk say option, the when current I and and can an which sure about an having put our forget very to couple in of in not back arrow make And there because buy one in past

Michael Bilerman

take to any but intent take future? and arrow anytime it doesn’t able like sound out in out Right, been it an haven’t just the to you

Anthony Malkin

a time At to a we a have it as today way. that long which we look reason time, for that standing in would we a get moved were and act. that coming say and there that. sure in But a stock price I Board would our New at that if right other future is to can City stock would do yet. we here find would would is question haven’t in concert that at REIT that based we number say we the here which out no I is are, price the sitting along have specific decision. York absolutely with act. Well, agreed the you we ours, and any at with every seen same There or to own I tell we now

Michael Bilerman

right. All

math. value but interest which liquid macro York talked just Arguably back if large assets think just New that environment you capacity, what’s from about value at and assets a and selling selling in allocation their think on stock you’ve It’s that of selling NAV discount Inherently buying Green I SL perspective and NAV going they’re a assets, perspective, that just there’s value. that market affecting then of creating stock back some is value, real and purely clearly at buying prices estate they’re at stock in and look I level a capital creates and using your market a from the discount. right. all

argue with it. can’t You

would strategy a it seems that though So as be good one.

Anthony Malkin

spent SL Look, lot a of materially their price where buyback is and stock excess Green average trades of today. their in money

Michael Bilerman

assets to NAV it, value to higher doing NAV be where It’s pure of if right? that, back selling success, they and look stock yes, it. would at if value as look that back being would be NAV do in add stock a discount their done absent Where would stock wouldn’t value assets I and below at one but But capital like hindsight, they of terms stock the measure value creation their in In stock buying the be at hadn’t the would buying the nothing. price didn’t I allocation. creates selling

call the let you. I’ll go So Thank on.

Anthony Malkin

Thanks.

Operator

Thank you.

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

Jamie Feldman

think guys Great. assets? asset Thank kind sales, up. guess your you. about in just all New follow of Do Manhattan York I at a especially core you

Anthony Malkin

New not the you’re and this, shrink the should Manhattan, looked partial in or flexibility and that that company we are we does going whenever that only sell we locations or City with York portions we interest what at whatever to absolute we assets at gives Jamie, look to want. which core in our do do we if in any say We’ve business now particularly have we us perspective selling from at of want assets, already we that right a, at when liquidate a definitively it will wouldn’t say, money? but taking the And And And do there’s and either to of partners, b, that shouldn’t we if can selling we’re a we whole liquidate that not have a at if really when we company. and sell company. smallest JV look to look just we smaller further, have anything. point that assets, be don’t we lot And

right we’re what discussions again, But we’ve at everything. the discuss is where doing look out robust come So now to we’ve everything. we had after We date.

Jamie Feldman

several dilution think you neutral coming accretion back talked Okay, earnings? you gears, we had the talk more those all different half think debt about to about options should it’s right. do – the you from or the different know options talked How up potential or a of Shifting for in guys about maturity I the refinance. you Can year. about

David Karp

David. Yes. it’s Jamie,

existing a at X.X%. option non-cash portion GAAP X.XXX% basis, you the for deferred purposes a which and financing exchange and of the amortization we coupon pay it’s costs, on cash look incorporates back around equity take the the of the If

strike put interest in we a of place a starting before have We swap [ph] in rate which place swap X.XXX%. seven-year has price a

us of seven-year let’s an all-in in points. If XXX put running current at you a X.X%. just basis on about term about say would spreads that’s That loan look coupon

million interest million be basis, would annually. XXX roughly to million our GAAP higher XXX On million. cost amount roughly about our So into X.X points again equates on assuming translate be would which notional that basis which a $X.X cash a basis, interest cost incremental XXX notional basis a same annually would on points XX higher,

Jamie Feldman

sounds you Okay. think to like into that’s likely most listed it guys different Because several options, roll your is option -- I it

David Karp

Yes, secured yes, do I’m could a and we placement, could have you a loan, a as the we we markets But giving public that mortgage private do enter just term can financing. do We a we of number do one seven-year options. example. can

the look there as a loan So example. lot to are at. gave one options just I term of you

Jamie Feldman

Okay.

if those were all about So not case the at I scenario, to which dilutive? – guess be neutral least think would be would accretive actually of of they you best or kind if would there

David Karp

They’re same I think that that’s and think roughly to really so going the all X% are this have swap spreads roughly in of we ballpark that’s to The given difference. the across place driver. be be in the executions, I comparable going somewhat

Jamie Feldman

to hit. forward? the and then it’s much the Can you year-over-year about year-over-year in look Greg Okay. more the they’re expense talk what if Can expenses And the compare about fact going you meaningfully year. to decline talked NOI bigger and the this half back you at revenue year-over-year a had the in you the talk on just R&M your up decline Observatory, of expect about expenses And and then quarter then in that?

Greg Faje

The R&M do State years five is primarily – work is switch talk related and Jamie, Law here. Yes. five Empire R&M that to at work Greg David this I’ll you and the work is to that’s year on the then a have about XX every to the Local touch which I’ll Building. Observatory. to back done

Anthony Malkin

Also quinquennial. known as

Greg Faje

top there. the some of tower as at the well work As

We these combined. expect expense relating about of X the two million to second half in

David Karp

approximate the R&M year-over-year and and still higher in by run increase And the of expenses fourth our rate out on IT and we offset this expense, was will really hardware quarter associated XXXX. partially is to what to that experienced marketing entrance higher was Observatory consulting had I both point and we expenses, with the higher on expenses payroll software. we maintenance But expenses kiosks benefits. had the new ticket and the was attributable anticipate the lower what which We

I the of run And going differences feel the a rate. better as based be experience you sense run before, new the stabilized, going are year what if As any early with progresses we and have said this systems to to to communicate upon technology. that as be anticipation there in technology is rate the would from are we’re we’ll

we on being the offset that Lastly, labor realized just the from savings of the the reduction costs. cash by higher somewhat technology is

Jamie Feldman

should we comes Okay, rate run as down look from so at XQ it an the example. and XQ

David Karp

there some which card quarter-over-quarter seasonality. increase higher higher security and as timing well is is that credit which an with fees was related associated was and marketing Yes,

But rate We we’re what around the we introduction the software. movement in going the saw for I our So new always expenses the think seasonality. to at expectations, quarter see some good XXXX. had of we when is look fourth of a run

Jamie Feldman

as in long signs something’s of he’s about the space one him of to the prior to gave just responses leasing that’s telling curious. of shift or some tenants tenant of types well? you on you’re concern kind that guys we’re of cycle commented short had the that Tony seeing the behavior changing then any kind of a their I’m in you seeing And whether based seeing late of or in that before. one Are go his cycles it’s bit Okay. willingness questions anything little or

Thomas Durels

Tom front leasing the is the on far this As – by way.

cycle. in We’ve in great office front, market negotiations not indicate of say and floors in in XXX, would leasing XXX. the change for the we’re On that that and activity pipeline space. partial would feel also XXXX this seeing the about at full late any that and have our XXXX, I leases got we we’re we

Manhattan we actual floors of effective growth posted growth straight year-over-year effective at my includes that We’re that professional net which by seeing our pointed rent demand types office in variety and net we quarter. this for rent third the across for properties. That’s all growth rent our pre-build I And on of in tech, in a new X% and both Manhattan X.X% as leases effective earlier trailing office consumer experienced full look XX-month excess in quarter product, comments, services our leases increased new have for net TAMI, of from a properties a other. tenant out or

lot presentation. reminder, generous that Page growth. employment a our we’re seeing doing leasing And involve investor a that’s of we’re on As of XX does

good are these of all So signs.

change the not seeing we��re the where least street at We’re on doing leasing. on any frontlines out

Jamie Feldman

luck good working with David, right, your in pleasure chapter. All helpful. that’s Okay, been It’s you. next a

David Karp

Jamie. Thanks,

As with you.

Jamie Feldman

All right. Take care.

Operator

Thank you.

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

John Guinee

Great. Thank I’m Well, share worn buyback from you. you. out are David, to theoretical the going conversation. miss we

in that don’t know only drink drink they do California You they wine, beer.

Anthony Malkin

he’s spend Oregon. why going in Bend, That’s year his to half

John Guinee

about at helpful – stuff So X commenced I next your the comparison and at leases and dealing with and intentional rent about with look up analysis to the rent, the mundane $XX million. you this gains $XX day if feet equates the vacations, here, or more year that come cash if to X, of Page your square look come and And vacates I then rest at in-place and I day in is look million. with XXX,XXX year free Page get at up I about for tenant incredibly I the

the is XX months or to is growth? just commence the all kind Yin offset this rollouts chance we are the in a Yang about some there by next a of see leases that where So NOI

Greg Faje

Greg floor think to capitalized and floor out sort is of And XXXnd a both the perspective Page other out at as X the and schedules come And you of leasing clarity that look give previously we I of created you on of the Hi, that’s gives important these back as a that it’s vacates more previously new give just little We have do few here are we online discussed X. XXXX observation now we headwinds into John. that help schedule that there. a terms you from end expensed. growth that This on in currently give costs factors Page are at the do have noted these September. we’ll And to timing here. here in service we being

forward, so to And expect some we we see as growth. look

David Karp

representation are and of the it is other both of timing occurs. the the free the thing important that why that’s quarterly when And vacates the rent and important went to the we burn-off

just took midyear, convention you or a to If really mid-quarter might it what distort happen. is expected

you closer your tune might model. fine the I’d So and quarterly breakdown look help a that at take

Thomas Durels

Tom. is this John,

is are the unlock comment creation that rents. like one make remind just space market I’d Just additional intentionally through you mark on we vacating to increasing value to to

have I below chose at we market. a will we number are out significantly that that either of tenants or we’re rents to earlier, significantly because spaces if vacate, in-place As the vacating the spaces re-lease rents higher pointed intentionally those

an opportunity. this So as we upside view

John Guinee

or suburban Tom, markets I read a given rent XX,XXX and suburban capital product roll that a curiosity there? Connecticut Brewery vicinity Stamford, do roll Everything kind be talk spend? about feet, and square about $XX to up in you this the think also is capital question. segue. in great re-lease Heartland pretty market York that expend scary. the And and New down Can a have of million will your then you you’d ability the what to

Anthony Malkin

the first York New upon So let portfolio. hit Greater Metropolitan me

a new favorable brokers lounges, you outdoor reminder, the work so to as as of very previously we’re [indiscernible] And As and We’ve feet coffee and lobbies an far of that mentioned, our looks XX,XXX do tenants. this and with XX% dining, areas. received improvements we’ve we’re centers, creating feedback about the great. gyms, just areas leased completed upgrade amenities, conference and from we did quarter square announced leasing underway

intersections getting best the thoroughfares. conveniently confident and gotten, quite our and locations work locations each completed and product. submarkets located be feedback we’ve know marketing of we’re the We our as have the the that we’ll our within And transit the of stations like major in Look, in we confident. back. upon we’re of space early that that in we’re and offerings. we our of got based But we like we’ve that a mass We’re reminder, some

to unique. that corner that will say incredibly space in Empire retail, Building I is simply State Moving the on

are enhance use focused that Observatory on guests. We and will bringing experience right our this both space the for for the tenants office

some concepts. now, with right We’re working and exciting very prospects interesting it on some

I So does it think as right ends Empire existing now. much Observatory experience. that does holistically what it looking whether for office up think tenants tenant and being an for the for in to not, rent overall We the more State we’re increase or us just at the Building and the don’t in

John Guinee

you. Thank great. okay, leasing, Holistic

Anthony Malkin

You bet.

Operator

Thank you.

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

John Kim

company XX% tenant but a or at for luck. occupancy. good of it’s had The you’ve an Thank as or just or you. forth, public kind stays occupancy hovers Congratulations XX is so first move and occupancy from it’s to you Do David, blip? below. there’s with And still here My on see growing a highest outs room question around upside.

Thomas Durels

Look, year, about had our million square quarter office leasing The given future look of done very new that is rollouts. date Tom. of of with did the We leasing in which good last we’ve This lot supplemental to we’ve amount X obviously a – of of XXX,XXX feet three-quarters our details leasing. square information at Page on Manhattan portfolio. a feet of we

move As to redevelopment speaks feet, square square the completed entire the X. left can the XXXX, that within as unknowns X.X feet amount go about space only lot a on of are have amount shrinking where and we see less of we’ve we of million Page forward you move-outs. just for roughly is detail give Look, into XXX,XXX targeted portfolio we

confident to our space. in lease We’re ability

right active leases proposals and We’re got portfolio. across now. active We’ve negotiation the in

around we look, quarter-to-quarter, a but overall the going an confident As where occupancy headed. to feel trend from is on bump we’re reminder,

John Kim

do I peers market and closer that peers? above your of to vacancy as X% let’s or wondering the or X% your vacancy, say X% is overall market just I’m you’re when But rates. think to to are get probably some consistently far you around X% as back

Thomas Durels

gives re-lease will we to more the to the program so at the before, to to said through spaces we’re look tenants you we stabilized going on to of happen through as as I best as our The work space, what expect Look, towards offerings spaces providing the XXXX execute higher of the consolidate larger undeveloped you of we’ll rents. in can detail much spaces continue on purpose X portfolio. better our we smaller a those end our be and vacate balance Page way that

John Kim

NOI the leases and at appreciate could the of additional of year that when to I not cash going those of year will you the If $XX.X of to contribution get I But had the disclosure a realize million leases of in Page have year cash NOI all different ask X. begin and start. way because that I this the to question this on beginning you’re contribute timing you

So But how of for lack a in a cash will see better contributing a word that’s much basis, flow cash to on XXXX? of balance number. that you XX.X flow million

Greg Faje

John, this is Greg here.

it’s If is Page you right. look out, you at a number, X schedule the there, it balance as on pointed

over have the as So to look you gets realized year. it at course it of the

realize XXst so give of X the better sense to December if forward, that help the this and you. now we on using So added number, the going timing course you some will then the year we’ve you’re million Page should XX will over clarity additional schedule

John Kim

or That’s XXXX. for XXXX

Greg Faje

XXXX.

John Kim

Okay. exhibits justify and and on just final the experience most the this higher And Tony the will to All or go the do XXth ticket question you impact Observatory. Will [ph] for floor, will now additional how the think maybe prices it on is second revenue? make better? then it really

Anthony Malkin

absolutely ourselves think important the to differentiate from that marketplace. up First Khalifas I the Burj all in being put of are all, it’s other

offense heart, do offense mind, New in but increased from bad our that increase this at around or in is to offering. maintain the days seven museum Again, thing a I with But which the of it all, AM It’s defense. And come And as definitely is looking has us instilled Think and as museum open on York building the is us only is days to good better This much believing to the to X X we’re for AM level and finally Second week uniqueness only goal will well. to revenue. the way, have seeing single help every installation. of world. most think us we believe to not name world. the a will importantly is in which it also weather you everybody’s it. be by reasons a City a we

John Kim

be it but separate exhibits? all-in won’t ticket the it’s just one price, all see and price a an to right, But Observatory

Anthony Malkin

correct. is That

of You several will or opportunity and be other. ticket one the do there the as in pricing and is “the our you visit. offer we of don’t the different still do everything levels quickest to experiences price.” express course, of part Although, know, ticket bypass This

John Kim

Got you. it. Thank

Operator

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

Anthony Malkin

redevelopment all, extraordinary continued say of leasing, level, at want the terrific of has been of our the the properties redevelopment team I to First execution the executing great that only not high but Observatory. an on

up to that’s the team. pleased whole really doing a running, off what all and there with While hats and we’re just

growth seen have momentum rent effective which quarter. and net spreads, leasing Great the continue into third we

So our earnings. next goals our and the forward you next we’re time we delivering report quarterly on on look to to we

no of to NDRs, conferences, calendared hat months look We’ve very the to David. off you off We much our hats last to many everybody. has taken you. all All times, a seeing year. second forward best, one the in give Thank hats a ahead, tours left. half the want the so for I property

the Sorry long for call.

Operator

you. concludes This Thank today's teleconference.

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

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