ESRT - Earnings call transcript Q4 2021 | Empire State Realty Trust, Inc.

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Operator

Greetings, and welcome to the Empire State Realty Trust Fourth Quarter 2021 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. pleasure Counsel. Tom my President Executive now General and is to Keltner, introduce Vice It you. Thank

may You begin.

Tom Keltner

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

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

subject COVID-XX and regarding disclosure these statements the in are expect from specifically update As due Realty ongoing discussions the statement response assumes maintain forward-looking with Certain the the in developments we not which to are instruction. to additional pandemic, to normal when those including review State special direction Trust of COVID-XX our resume changes a the results unique detailed added business SEC's obligation listeners encourage forward-looking and They business on prompted no risks to do operations. in pandemic disclosures our the the discussed represent reminder, to disclosure uncertainties, company's to same this We of the statements filings today SEC. by level to related to more cause management's may in We to actual current Empire the differ future. forward-looking today. are any estimates.

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

Now, over Chairman, Chief to the call President Malkin, turn and Tony Officer. I will our Executive

Tony Malkin

to start at XXXX off afternoon Tom, busy everyone. is everyone a here good very to Thanks, and ESRT. for

to normal of is the the a entirely XXXX We next is straight that we impossible, a matters. has the trend benefits have performance we as COVID to is incredibly and every since nearly said remind seen COVID will and to hand, intense of of a everyone adapt all build Learning day execute promotion, normal companies excitement from the at towards and we nearly in not two our More where sheet, disruption positive. the by move the what years continue pandemic. as progress on tasks path have not for have the we next call, old COVID, the shift are live reviews, have return world XQ to the the dialogue constructive I see focus and that that if ago, next recognition hard, changed I as normal balance work, will out May That we endemic, world more an less said with less maximize unity than end. is towards which the a and line the this XX fostering strong and and months a clear more for onset There's normal. to remotely. accumulate for of teamwork, culture recognition retention, most the examples end that on

the hotel bookings planes XX% Adams, Garment from are pole year-over-year city. as to office throughout be Pools was the to positioning district pre-COVID spike, leadership, to XXX% and refocus City's and foot Omicron the our beneficiary X.X portfolio. and occupancy rebounded levels to the in recovery in remain December traffic quality underway. is the elected capitalize busier. of York needs the XX% the end subways our sidewalks its the of ESRT of a position of the inclusive of year-over-year. streets competitive for is business priorities of were traffic open, is just up the duly portfolio community Manhattan the and Eric million law-abiding Hotel citizens At its around as to December prior obvious. people traverse New under through flight Mayor, up There's November and of refreshingly

contemplate Unlike will their to with the is post-COVID. and continued. long-term a have strong discuss growth yet activity underway for needs, discussions we leases tenants quarter, the occupancy. return we see in seeds our leases leased their tenants leasing Durels Tom office the past The continue needs, variants, As future for long-term as deal of on underway

Class to attract ability us. long-term needs Class continue to commentators has who been see great estate want us grow oversimplified. with Market erroneously in partners B We and buildings about to office attract and real companies as their who the long-term of their A tenants outlook debate

accessible Our has office can are portfolio safe those rents to which quality, placed in tenants, office feel of at indoor ranges. efficient important the centrally to to is buildings transit, energy that their digits return office companies near of who brand pay long-term implement population well-amenitized all sights employees these plans. want space needs mass firmly critical offer healthy located redevelopment to work or Best-in-class, in in our to new the price space buildings. triple just and broadest for afford not We attributes

activity the underway. which December November from contributed border Omicron to U.S. the to fully reopened on quality vaccinated rate international benefit the from its our we in to November that Xth, recapture and before off-sited flight accelerated operations, properties observatory the to variant in the impacts we tourists and in trend Shifting market leasing it achieved Our see withheld. concluded and

recent a by but retail the quarter. and driven has continue fourth million quarter sourced the And the per of visitation about quarter. the website for third-party is post international already hypothetical a first and to driven we is see news our quarter Omicron has of that from in vendor to been by recovery with our historically is sales to-date Two-thirds NOI primarily along the speed recovery. balance good our Our visits visitors. XX% and on-site revenue improve first caps Omicron sales $XX.X been up bump period, previous slowest domestically rate that

reviews The continue experience with We Edge continue and ways any unique, we to better visitors look Google our that Penny, latest The our enhance best-in-class and provide to new for Summit. experience and competitors TripAdvisor memorable, OneWorld, of Shiny that to than produces the

our reservation system, best visits guests ticketing peak through our provide exhibits. to for revenue we periods manage and which is goal Our visit through immersive in museum-quality to for maximize times

pace We approximately registered line environmental at observatories slightly fourth market and Omicron. note lightest members. early for on quarter the to XXXX historically A with attendance, to XX% so. the do illustration. Omicron. we are first filters volumes confident account In November strong remind sake including December attractions was our quick the for do revised from We improvement of enhancements, safety Observatory hypothetical quarter everyone out quarter our attendance our top-of-the-line for of visitation. a a XXXX quarter active Observatory. and for indoor We visitors of authentic We business. was and demonstrated believe latest The impacted and ventilation the ability our open, continued bipolar quarter Attendance period continued repeatedly large the comparable multiple We there's a attraction competition. the to by and to XX in are our the recapture iconic have prior for of impact Presentation, Investor remain team other hypothetical MERV that the quality, our and ramp-up only and ability been and Fourth ionization for in enough observatories well. pure have the volume our compete successful we is health

at company on transaction external in very our growth, XXX across our a across business on end This December, to our our with closed of great partner. assets we January, announced for the involved the multifamily from as shareholders. everyone acquisition units with the of execution is and two Turning in happy Manhattan. Class multifamily new update A previously I'm early

investment local flexible edge we get opportunities, and Our problems continues spot opportunities, other's special to acquisition actively can where multifamily our to we balance solve an new sheet. with our team ability office to and retail knowledge, ability with underwrite think

continue quarter at We fourth at to attractive an the look share achieved a price. buybacks during level meaningful share and

a Turning Research and to Authority emissions funding XX% $XX $X spearheaded to the Challenge, happy a state million share by the State to New to Development sustainability, we are that reduce was York receive by Greenhouse gas initiative in XXXX. the ESRT Energy by million Building round Empire of grant selected first competitive

committed companies an Index, to the data of Bloomberg aims ESRT Additionally, to gender public performance Equity selected for track XXXX transparency was index reporting. the that in Gender

publication balance shareholder forward differentiate to buildings, position and discipline set has ESG, and and a skillset, XXXX. operational deliver works Director sustainability, attractiveness and while leadership spring show energy value. efficiency, to will Annual improvement & press Dana Report leadership the standard, continues that industry well Thanks sheet, and look capital Team Sustainability and to Sustainability of of forward. Schneider. new in as ESRT second our we Robbins and to our tenants. long-term SVP record our flexible well-honed track Our We allocation Energy hard expanding we healthy IEQ annual ESG

it turn will I Now, Durels. over Tom to

Tom Durels

lease the and modernized, other success this now York This signed New quarter. the by XXX,XXX renewal leases lease the In good Signature square square XXX,XXX portfolio feet across The properties, Signature's totaling and our was Signature tenants fourth Bank, the XXX,XXX square during feet Greater X,XXX lease. XXX,XXX quarter That average transit-oriented expansion to square quarter quarter XX.X was weighted in tenants, which and Major feet leases of of XXXX that of and of our Bank we is past XXX,XXX a commitments. our long-term included metropolitan signed XX,XXX Tony, approximately XX this our who a space office Thanks, in expansion years feet our full-floors at feet new everyone. square with terminated Broadway. reflects feet long-term XX foot afternoon, retail leased Manhattan includes square include first second office leases healthy square in properties, one portfolio. expansion square XXX,XXX feet. on term

over the termination, of years. will As lease received as totaling remaining termination the which term rental respective recognized partial we revenue a million, multiple approximately spans $XX of which fees leases be these part

XX,XXX square Broadway. XXXX square lease had with XX,XXX Grand third and Connecticut, One Clarins, a lease expansion within our A expansion in feet. XX,XXX now foot will world's XX,XXX XX,XXX other space this leases United new the is multinational feet Place rental that foot foot cosmetic total company at largest Central who Network a relocated portfolio. previously Stamford be The square A at lease for iCapital, iCapital square subleased with company Place square First with the Rentals, equipment direct new by at

We also we Manhattan prebuilt lease quarter. full-floor signed the in the XX,XXX square XXXX leases to spaces signed a in quarter, office foot for Broadway. Crown XX at with Castle Subsequent fourth fourth

quarter a across our cash fourth properties spread rates at four portfolio entire rental our increased and by Manhattan basis the our rents X.X%. prior compared new increased on were During new on escalator and lease positively office X.X% X.X% retail the on leases by leases assigned to renewal

Our was and from XX.X%. at quarter was basis leased the XX.X% down portfolio total points occupancy prior XXX percentage

we to XXXX our occupancy. starting increase We on leased first Looking focused remain tenant our driving anticipate will percentage in office, Manhattan percentage and XXXX. ahead to into termination quarter partial for increase retention decline leased accommodate end. occupancy mid-XXs our of existing first and of timing leases quarter the reach signature XXXX in the expect to expansion, year tenant by on slightly we Based

Century Our quality. spaces were XXst the More ever, fully for benefits first and their the portfolio environmental companies is are well-being consider and tenants CSR their goals. in occupy to which for and energy the ESG of office flight employees' productivity. We must factor amenitization, mind from health, are they into recent who focused most efficiency, than and on indoor modernized quality, front how

sustainability and provide access and tenants areas solution of to industry community are office transit. who in than us the range to environmental real seek healthy work recognized is a by in mass at widely space a of brokerage We a rents prospective Our these decade newly positions convenient built in accessible indoor environment. more our offer with central wide modern workplace estate to quality locations leadership

two million operation. utilization our steady increase at fourth their in Building the future-proofed amidst increase offices currently Metropolitan gradual $X.X million, were building and to experienced followed stands forefront $XX sharp announce Manhattan XXXX anticipate are portfolio past office for from York due companies We normal Property for office XX% utilization the to dip heading more Omicron, a a we the office Manhattan. a quarter expenses fourth Greater in of spring. These by a return passes, and in New and operating accessible portfolio. and in data weeks, increased XX% more date see increase and to the return quarter utilization at into

a $XX approximately team job fantastic to reduce XXXX. to XXXX saved compared million expenses, Our in property has done management with operating

return see Looking ahead to utilization building increases, to XXXX, steady expenses. operating we when will normalized

XXXX Since increased compared fundamentals our and tour to rents. announced, XXXX to we improvement remain volume have expenses multifamily Concession expenses. below October and operating will expect announced to XX.X%. seen acquisition continues in increases However mark-to-market Occupancy been we be annual in-place current packages we've specifically has reduced operating in strong. our

experience we intend and comprehensive square feet quarter, summary, have to further our spaces a signed, for solid approach XXX,XXX performance our community enhance our to of leases replicate portfolio property convenient transit located indoor areas common centrally well-positioned, plans healthy In built We fully with future-proofed ability leadership properties our initiated had total our attract leasing sustainability. access sustainability and with retain and upgraded in and modernized office multifamily and to and tenants. quality industry environmental in and and is to has tenant at ready our enhances strong lease-up. see mass We multifamily fundamentals for spaces

to Now the over let's Christina? Christina. call turn

Christina Chiu

Tom. Thanks,

$XX.X Global quarter the cash the core million million NOI quarter Observatory lease exclude compared if $XX.X results third the fourth to in fourth $XX.X Same-store was the fees For $XX.X termination the of for results, for quarter to FFO quarter share. increased million the third per we of change to or from you million diluted periods of as the third reduction observatory reported million due Observatory of one-time a visitation was fourth fourth to and Observatory the a and XXXX fourth revenue with Group of the XXXX quarter in XXXX. with respective expenses from $X.XX quarter NOI property decreased Observatory of quarter from to primarily This from were quarter termination in lease XX% revenues of XXXX, in continued was XXXX the XXXX. in Switching Brands million X.X% ramp-up. occupancy. $X.X increase XXXX. XQ the off $X.X

we We quarter thereafter. million $X reach rate continue million to $X recapture $X expenses rate and be quarter to XX% to expect run million to approximately per $X per million until

Turning to our balance sheet.

from comprised XXXX, the billion cash share As credit of our liquidity, $XXX and of had capacity of of December is million $XXX facility. of XX, Inclusive $X.X debt revolving which undrawn company X.X million of on net our of company recently assumed a of rate announced $X.X average a acquisition, the term X.X% maturity and average years. weighted weighted interest of had of to debt our with billion

until a have November wall schedule We debt no maturity maturity XXXX. with laddered outstanding

stock from full-year XXXX, assumed asset. adjusted the debt $XX.X credit to XX.X% we debt company the through X.Xx, $X.XX was weighted Our XX, weighted million total X.X% which X, at the program outstanding of our per a of price $X.XX This brings share of of March as shares XXXX, common at to buyback cumulative of $XXX.X represents total began. the market debt EBITDA net net from the rata fourth quarter EBITDA receive February repurchased share, multifamily which price average for and includes before per the average a acquisition pro share. approximately total date capitalization to and our million was In its

our This growth recovery immediately yield X% X% to our expands sheet Building transaction acquisition cap from engage well and current opportunity for market shares, City in cost Our of future York multifamily growth. our with which Observatory retail State New and multifamily include with evaluate opportunities the to recently provides balance set reach Empire FFO announced capital by an as the as The approximately on rate to office external expected flexibility benefits for XXXX. of and favorable accretive beyond well-positioned us iconic stabilized existing to deploy portfolio, to initial mid ability is a trends. and very business repurchase

office, wide private actively of pricing. underwrite levels distressed pursue investment continues multifamily team low New the of financing, of capital, opportunities record and equity asset in against and cost backdrop Our retail York lack investment of to availability and City

prudence and allocation emphasized, company long-term capital consideration all As initiatives value. will a we and in assets. our under shareholder the exercise and have capital in allocation creation focus we at take we of The continue has look on to recycling of our this, hard

any back non-cash Main XX% a up challenging property December to the note lease As weak to in action impairment part charge the of the submarket. and at to avoid We on of $X ESRT to reflection interest area property, quarter CapEx ownership allows this this submarket X, lender. million does million our the occupied the shareholders, where that an Metropolitan property the XXXX, and would has which our mortgage York not $XX the the costs significant review is is us other New own the and XXX was Norwalk November as on Greater of company Avenue believe action Connecticut. property ESRT's XXXX, Norwalk, and service of our bearing as portfolio. We stopped incurred are XX, to that no best in balance We assets, of transfer discussions fundamentals on this this of specific of during in

and focus ahead, we enter XXXX and with look ESG. to commitment As on flexible well-positioned disciplined balance we a capital allocation, sheet, continued a

will a call City to the With Operator? We to York office for tourism. that, to forward also companies recovery operator look and I session. the now of Q&A back benefiting return New from turn

Operator

you. Thank

will session. question-and-answer [Operator be a conducting Instructions]. now We

proceed Please your Evercore. Steve line with question first the with Our comes from of Sakwa question.

Steve Sakwa

going leasing. on an occupancy by bit your I comment; And mid-XXs maybe level get first hoping to talk Tom by rollovers you and the could to about afternoon. were for right, the Thanks, signed XX% offset on sort XXXX. I you and was kind I I intrigued target of lease speculative by the little from said you end that more of think is commenced one that in to the good I XX.X%? you do I about the leasing up a just was not need is that, of the order have, you to do guess am thinking how the known vacates much guess hit

Tom Durels

timing will our commence of into retention a the of Signature right leased we Well of our certainly, lease all, full-floor we we're to leased so our got occupancy. do overall XX% Crown occupancy, by Look, of such. are have drive to Signature is of at will go office represent it deal. covered that But square we square good activity Manhattan leased of as from of of now occupancy feet, In Steve that of for much look But Manhattan, the and the the the which the renewals we in at on we new XXXX outdoor will pipeline I in was not if feel course, right our decline been by focused would first square about commenced decline first our GBG, a expected feet currently commence XXX,XXX portfolio with we and yet space. about because by just office we XX accommodate leading in And yet XXXX how help Page tenants resulted Broadway. expect a in only those absorption. modest not that existing move-outs move-out expect But future lease basis percentage percentage XXXX. I that a just signed slightly XXX,XXX leases by year-end against Castle But the rollover vacant which feet we've certainly XXX,XXX have about quarter; said, higher signed drive points the first expect square leased the will with square year-end XXX,XXX XXX,XXX you other feet for positive percentage signed XXX feet has expect commenced supplement, the then and Manhattan occupancy we words, leases quarter.

steady the So a But in then first improve headed. second as leased and it percentage second improvement XXXX. of maybe gives and good occupancy where idea -- the we quarter over probably that's expect half how to we're

Steve Sakwa

rates can you about how maybe And Okay, you confident I are activity, next how market kind think And the Christina. quickly casting are years sort I of I how the talk is you net, Manhattan just has part recovered? there but sort question over sort I of resi just thanks. guess platform the the guess a couple given could today. investment of how of understand you what do of guess cap guys of the one wide out and scale on low

Christina Chiu

to great. Yes, more, focused messaged we tax an to office, with is investment And recapitalization The good our Sure. is in units, of we've work do and are balance planning demonstrates continue We'd are for York multifamily City area so hard said scale start. to what We're at we opportunities on fundamentals are factors. this and pleased transaction could assets, issue. orphaned underwrite where help the we solve to value, our complexity, multifamily is, be with utilizing New XXX and the it what hopefully estate What are number it's these a past. intention is that involve we actively deals. this there and where not we is have the sheet team XXXa, retail can like add issues, for consistent involve real looking can

won't we force anything. However,

recognize We value sector, be a there's for generate shareholder in is of makes over the by we will our that this to look but And will time. it right that where driven come capital sense. to ability along lot opportunities interested it

Tony Malkin

capital solve capital Tony, given properties to need Steve. owners. add, the problems, that where actively really might I ways And can the creative for we apply shy markets away here we today. is, existing people's from sellers, we fact Great. our look marketed

Operator

you. Thank

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

Jamie Feldman

going just comment. Great. back I Good the Thank afternoon. lease to guess you. percent

get the like I to think mid-XXs. at is looking you're to it you So then did right it -- I following XX.X% I that Am the looks that -- correctly. like at compare to just this year, I the X dip and end the to? you Or portfolio. supplemental, to make were will number Page then it is sure saying and back total -- I'm looks want I'm

Tom Durels

a percentage. to Yes. current not percentage opposed And delta portfolio but XX.X%. occupancy as to have occupancy Well, yet I figures our is think, leases leased, leased Jamie, represent the you're and commenced. XX.X% those our That's between two that signed referring is

prepared So to my one has But that as of -- year. in about space the the comment said occupancy forward. hit look, occupancy remarks up drive my going to number do our retention. mid-XXs here I with our That's occupancy going tenant before, and we expect lease the end is we focus to to by

to the of expect quarter improve XXXX. leased first We percentage in

the mentioned by that our help slight as a by occupancy earlier, year-end drive allow also in the occupancy will to to move-out of that year-end. for I reflect will decline So space simply Signature lease commence

Jamie Feldman

right. Okay,

Tony Malkin

in space mind, -- add, we buyout keep space, from Jamie, I'd aggressively tenants different. utilize to we do are aggressively tenants. maybe that their see money lease just little those and we get when We And a move not

So while our future move to there may create where vacancy. we for and transactions pops that or we on other our increase have tenants, we work done other involve potential vacancy, we transactions against are space maintain leased in percentage and momentary will which

Jamie Feldman

Okay. That's helpful.

Sorry confusion. for my

earnings flow quarters? that through So, $XX how fee, the and several over your next termination will million

Christina Chiu

terminations, remaining through be so partial of the those rental Jamie, is way because term these recognized which or are revenue lease will Tom about five the leases tenants' span, years. is four mentioned, the as over

So pace. it will cash but gradual through a come same-store in NOI,

Jamie Feldman

okay. five So to years, four

Christina Chiu

Yes.

economics. to So transparent just it were be chunky. won't the deal We anything trying be on

Jamie Feldman

Okay. That's helpful.

Tony Malkin

right the just It's Needless we recognize when away. get to say, we it. cash

Jamie Feldman

Right.

interest Okay. And in I were release on color that's going pandemic? that looking one get and pre-builts, of was that space think just your the those. the of an of hoping provided XX that there we leases about about in was for to business, talk rent, the XX Manhattan as what stats some out is more the more into of I term, of maybe tenants of you your read-through Or part know terms that's I active are they're kind tenant of terms but saying any of then part. the press come types in

Tom Durels

interest legal. Yes. gamut. prebuilt the its is all healthcare, And professional XXXX Broadway runs of where seeing Central. from sectors: a in One to inventory Grand finance, that We've at at on services, seen at State most also tenants to we significant Central activity the our have prebuilt really really activity proximity It due variety we Grand We're Empire have Place Building. -- and

I As I COVID, said before, to smaller they to think able quickest then were during the the the market, and market. that work-from-home tenants were to return lead the

our has buildings and our lease-up. home portfolio through steady get amenitization with for been move prebuilt to activity combined those come units right a hits and smaller of spent, ready and built. pace be with our money and full we're seeing running. these of The square That, portfolio, feet inventory our users. in, to really go So up and that's been amenities They access are we our on previously of The pre-builts. ready good news is have about XXX,XXX

So I think activity. that's some to steady where we'll see continue

Jamie Feldman

Okay.

feet? like sounds Like Or of smaller much it So size? tenant square they're the you leasing your terms of prebuilt how tenants. what's that volume, was maybe average in break if up

Tom Durels

representing pre-builts our feet. units XX,XXX on this X,XXX average. that from, quarter square we The about were anywhere to Well, XX square generally, during leased square X,XXX say, feet are total pre-builts feet

Jamie Feldman

flexibility, just growing? see leases. what wanting I'm some And you I -- tenants the about enterprise-type is more more asking just guess Okay. Do size -- hearing more we keep

Tom Durels

has many time. Anaplan our came been time. have to good all, program fact, expanded tenants' One First a Grand us us always at will of with took to prebuilt pre-book eventually a of Place, over And prebuilt grown we that on Central Workday a on Certainly, example, feeder tower a a the came and full-floor is accommodate in into floor tenants growth. to a over us XXX.

and opportunity we haven't changes. of to the over quality any in always will significant look use But lease to flexibility of we So tenants term, potential with lease terms seen grow to the really have time. us -- who

As quarter, commit long-term on average and had weighted three mentioned five average. around could in seeing to my an opening remarks, to tenants leases we're lease we be term Generally, XX.X-year years the this lease term pre-builts.

Operator

Thank you.

Our Kim line question. Please with of next the proceed your come from John questions with BMO.

John Kim

afternoon. you. Thank Good

in was guys rents your trend. the a A talked lot with about that buildings your advantage wondering portfolio see in today. in an I exceeding that market are you potential if of quality lot to You being trophy XXXX and taking the portfolio given signed flight and discussions of levels, your

Tom Durels

Well, quality. more to modernized into suite are and than quality, a spaces; giving to our focused environmental access provides. seeing well mass of definitely ever amenities. full buildings were healthy portfolio early what tenant buildings and COVID; and transit leader And an on modernized an Today, we which we're tenants before that's flight our

we tenants that basis. benefiting in our a that on with we attributes have regular to discussions So up portfolio, come a from our come are those tenants quality see looking for flight to and

Christina Chiu

really demand, so it and very want be triple-digit filling important the rents, to price companies retention of They bring of that their IEQ, business the modernized, in add Tom's mass are Yes. the so want And think point we're has City into near want located, we afford talent centrally these fits they The on that teams are just tools. can't all accessible, their But fully I portion together, vast comments. and and majority a the to really would models. to attraction collaboration. attributes transit, buildings market they

price problems. to, point, So that that's which we're comments to quality, flight think our really we what businesses is accessible solving relate and

Tony Malkin

who and to goes to come I you quality company, catcher's your where, you option credit, the flight not at have what's We we in absolutely a can and have have where the look energy for us. been our are Castle point, to When to penny. different differentiated means of mean They would leases IEQ, and you is Flight phenomenal does do, which this. the is Signature they in done buildings, Flight any it's driver. shiny phenomenal Crown healthy a decision have just phenomenal a phenomenal want the the in we through necessarily come position Bank to credit believe your efficiency number company. go quality bright, are price what add. We at for quality us. making. to a

John Kim

in And be to occupancy earlier? in higher the as alluded your you will portfolio results

Tony Malkin

And vintage which lease Higher longer higher occupancy. credits on will prices of lead similar better at renting to we to than buildings ours. that percentage, lease higher know we terms with also are

John Kim

versus New -- significant I'm XXXX. amount write-down you'll in a you I looking you to back assets or a have was Christine, decision you in significant it's thus consistent of has or not invest it get whether to of these where need a it to that? excluding at suburban was want one-off mentioned Do situation, been Okay. at And think that or but you to make amount capital Norwalk to before? was in do impairment occupancy the make back underperformer York. Norwalk. your XX% a Today, XXs, think the portfolio a low probably

Christina Chiu

it's whether to that's the a Greater invest on are taking Metro, best worse our on a Yes. I'll York GE. assets, on on where New capital. Tom a is make is our and look, to opportunities. it's CapEx, at we But and I'll the it's Well, the more buybacks we turn which hard place look external of took on capital, let our whether on and all for across speak the point comment, Norwalk share whether which be exit after the going And lens

very capital specific you portfolio? the a the of to So rest that's bit that why comment for And on don't Tom, little the market.

Tom Durels

of got most little of to for Metro Yes. We work Center. all there. do at left our a We upgrades But common of bit that out completed the part, properties coffee lobbies, CapEx and spend amenities been done. areas That fitness outdoor recently of area space. upgrades centers, our to on common -- and a to on -- conference refresh centers, done includes lounge, amenities has some -- and dining, our

assets our our or -- to So of are transit located two very three mass assets next we're right positioned and of CBD locations. Remember, well.

John Kim

in as York do Greater pickup New see occupancy in So a Manhattan? portfolio do in you similar you your

Tom Durels

retaining Not leasing space was great I Rentals of we tenant as on example really a tenant. and are that retention. -- a think our would strong look, United quality as focused vacant Manhattan.

out negotiation now early pleased in rebound still strong retentions. have with other of and some the tenant and to market, on I'm traffic we're it's terms in call show on that significant but our too leases We there, seeing we're good of properties. some seeing in We're a that the traffic condition the and

Operator

you. Thank

question with Our question. your coming Please from with is next KeyBanc. Mailman of line proceed Craig the

Craig Mailman

for the bit just solve you apartments? Hey, for money, you hair have extra on you where problem to the it's you expertise guys buy your In of maybe fair this? your problems. is a can it, setting that something, you. something going again a you've the to price mean It said pretty everyone. to always did past, should solve seemed assets. juice of bringing expertise, I the guys bring maybe Tony, where do when today for And what get at kind other like than little

Tony Malkin

as to completely on it asset concerned, perspective, residential wish we're institution they're partnership problem entity tax wish were you accomplish the from involves an to incredibly in wish position market, -- structure three, who stay, comps individual the we provide a Craig, And you able existing and with the and as to of leave. is happy number I'm a frankly, an who be on to Number from with that, was you're to unique pricing provide far an absolutely solved a to wrong who complex we happy perspective. two, an things one. in the number

available can as indicative you. concluded far as is that we market, what the If broadly educate of the is transactions better numbers marketed, the quoted you that result recently in in were think

Craig Mailman

No, fair. it's

Christina Chiu

I you improving. do would were Yes. look and the York comment in a not announced add -- it that, fundamentals closed where City first one we on just which it, for And if time were deal timeline more when is going we in bit I sorry, New this to when was the at would little strongly a as clearly

a result, sheet, we're utilize stabilization low nowhere able near quickly got the with that to in our seller, X we know rate and mentioned. time demonstrates for this long-term the in Whatever and expected in, issues. in submarket, cap had very comps were to and to are a see balance issues confidence go So were City. to in solve were the trading And able Tony a is as able and New the in we York comfortable. the into where market, as we at step to are And We move the able mid-Xs.

Craig Mailman

guess of bigger probably I XXXX right? and on And guys picture, the was of acquisition. Xs, in stabilizes was stabilize your points time that that Right. cost it This passed is capital You basis XXX you Xs. Broadway to wider than the think attractive. didn't at XXX, in potential

I'm just going relative sense of a the versus of trying reconciling cost to capital So with of the get -- in stabilized attractiveness the yield

Tony Malkin

I which rolls, be had the Craig, for vacancy. follow-up rent help of us to the it were significant assets question you better think -- exposures you that the in would difference for on XXXX your to line and in particular the obviously with very in educate

with mixed that time help a you you think and and I got you've we can lot probably information spend some out. here, of just

Craig Mailman

And Maybe fair. we'll the Sure. after do then just -- that That's call.

Christina Chiu

you're external which more to which bought add value cost hopefully, also what And growth, the while ways are through X.X% our we situations. back on I point, in outstanding. can shares, at, over discounted At through does total capital, know you unique getting and speak shares we the time, buyback discounted. we valuation that in where our of appreciate On attractive, for of market engaged to are of and shares is are the particular, same our looking

multiple value to of not the not shareholders. other. behalf into drive or one it's our us, for on to So exclusive. rushing We're ways We're looking

Craig Mailman

not that. for the appropriate. you years point was it Then to at period. have Christina, only about five you ended And, bought guys guess on that you time make a could up was years yield over anything because I sat to and couldn't point. it's that yield you said trying That's a find you down I'm cash is on my necessarily what accretion several similar and buying something ago, with

Tony Malkin

next have question, and move to should the a follow-up. we think and little can tutorial we on with really you for time I a

Craig Mailman

ask Sure. Could question? I a separate

Tony Malkin

Sure.

Craig Mailman

been just Reades with was ask, mean just -- problems? issue to concerns of this of store that Street any guys Is of headlines kind of kind weathering I'm to had shoplifting the any your all a kind going of is locations because tenants in -- able locations? issues Or guys of of couple sort you of. Duane been closures Retail. -- have how other and I sidestep the have how this? curious have tenants I there have your particular that your any you and your

Tom Durels

We're well. quite our That XX% doing They're says leased. something about portfolio.

open. are They're Our business. tenants doing

Broadway into restaurant If in is XXXX the restaurant you walk night, a Broadway Wolfgang's weekday that corner typical at on packed.

glad tenants. converting service valuable and glad F&B percentage As office we rent come it. that amenity we provide you I'm of nicely. we of important retailers, and to rent. through COVID, in get particularly to base of some some We're smaller an assisted know, our their out our to local did They it. They did

is down business doing tenants And well. stores their Target, their at Street, really you bustling. are walk XXth Foot Tenants here Locker, Sephora, in so West our there, XXX

Operator

Thank you.

Our next proceed with questions Manny of question. Please Citi. your come line from Korchman the with

Michael Bilerman

What when what guess as know helpful on buying back. million level spend you capacity you raise Tony, all your that like, this on balance office Hey, deal common afternoon. to multifamily and sheet, was on can good retail back to when for of you here capital or different base these it's obviously, all aggressive X.X% $XXX to Michael balance it use capacity understand capital I a and or main of It's I'm all of you XXx, fact with implied your how XX% capital share true-up you But another happens just still at are going capacity or the this or million I this to that wondering cash trading is not if buybacks want trades be why you're happens Bilerman the step that of shares capital? next that stock you using referenced just buying acquisitions. $XXX And and which sort you million a source and Manny. is the at $XXX your Christina or of sheet. stock? But have allocation are I the back, of you're have whether cost the equity? mean uses equity you

Christina Chiu

Yes.

So seeing on deploy sheet. own And valuations. I'd balance you say for taken, from be not main would the why have given raise New capital source taking flexible well initiatives, that we allocation does XXX% competitive, leasing capital it spending. the And lens, our choose the we focused actively is is helpful want of us keep keeping to York for that's a as right? and and of capital And it it's aggressive equity, shares mentioned City should discounted office up look common leverage upkeep, another back hard our to on overly ability very the of point REIT, portfolio, we to a capital at recycling not where point, some capital And capital are transaction, to At also that navigate. the than that your between opportunities. us be and our pursue for latest to market of remember buying we requirement except JV external asset, source assets, we on our multifamily that levels afford lower we leverage allows into tap average but assets,

sheet and feel we comments good have balance hence, our flexibility. on So we optionality,

and So understand take granted point. for we won't your it

feel You through but and can't the navigating cash market all engaging patiently we just keep on prudently out, and those going fronts. on that we're and runs this

Michael Bilerman

ahead, go I'd -- Tony. add from just the

Tony Malkin

multimillion-dollar this put in forward going I asset and came to we would and walk portfolio, down we our -- we decided property. to that's said, and opportunity will assets. in sheet, poor, View of a commitment balance take major recycle We for on balance on benefit And capital the the also decisions, market from terrific better a have with our that's to Merit that we the a we are that have Norwalk. that also through sheet and and us just to have elsewhere, make capital what look, addition,

Michael Bilerman

sell into maybe over and or portfolio the a amount about joint think anything significant you've tapping your Empire down State you venture which the process, been sale the of years, Building, it a As value. reluctant is obviously either to at in a

assets some the north -- obviously protection Tony, has in tax your city. the of family of You agreement a

a the are number sense have appetite assets where from that ground assets most being it's high the leases, your fine the obviously credit different is of from investors. high on You trophy institutional the that assets, the market clearing and today in leases are

and could value you open that have being stock range? yourself you what this do gap what to to you the perceive really, narrowing in be So single-digit up to between liquidate start the

Tony Malkin

to as in One and time basis that I and well and and a with we happy Craig. of And three, will transactions through think here. there's can with using are what's XXXXs very sure three work sorts structuring take I factors this there's in that view I been things that myopic will Two, over avoids all move some think be is are we guys, time. regard, over growth problematic things we that happening of there of around which is made protection. tax today. do you that happened we'd think do have to our to the useful time where and share issue and tax as structure, And see

of and we I as mean types long-term of are way quality shiny than would property on which fact of we are community. is that didn't quality assets Commons not to didn't And evidently made don't in There long-term and course, market credit. that to more in many not think -- There where as every asset occurred deals press Lyft, went Just interested. leased, way other have analyst We you're it out and to and deals believe Peloton making every in market quality type. reported active Lyft be that believe participate that get boroughs We in pennies Manhattan different a and highlight. cleared credit. many in that. -- I have be its are a a number that well the the the in the bright, brand the in Hudson Peloton have new, to tremendous of the the

Michael Bilerman

can going over My an Building, that in and a some for bit your I Maybe Empire going assets, that. market I you try some guess anything to not communicate the is mean to more stepping time perspective. of urban lift is things sell the XXx ground the stock more little doing trading Tony, in restrictions own just a question, to portfolio really the assets about, to what the is at and exchanging think I was do of XXXX your company space. clearly wanting lowest price. a which its the talked to is like stock active from talking what State lease about multiple, is don't the right, office you've back, looking

And coming reacted so questions of further down it how and from, just of that. that's purchase. are I because anything, think given these where to where is stock gone hasn't some the your multifamily If it's

that's of view struggling and to so really the appear to management's things where where investors be. trying I'm And of understand

Tony Malkin

in over that ability road. interested REITs, our we in charts balance really Look, first least anticipate and community one. ours move the And other New go good seen a I -- New based one do is we like as that City need that on And market. put time reaction number two, to today And build borrow All do number in time York down well. we've do the efficiency. IEQ, energy at investor believe that's and the worse value of additional REITs a And for all, like we the that capital, sheet people we REITs and ours, what before aren't we I build assets far the will different also them. get to there have do with And believe are in goal a any over is than those additional York trading demonstrated at fundamental that of candidly and can REIT haven't our fully think looks we within our sense. focus through investing that not the that really when reality find other multiple from and And value we growth other makes that number situations really market, primarily And have to occur on haven't work to in point. tomorrow capital. that seen office can They high a into we'll modernized, said, REITs, City. ours: ability well-redeveloped the come to that's office if raise and we on because stabilized, happen there the assets at

an in time in uncomfortable feel in we general. So market comfortable pretty the

Michael Bilerman

have advantage that, invested but doesn't QIA the next the -- remember right? $XX but $XX personnels market it if And, time. the at of that's XX invest up that or look, set took was you stock QIA, tapped think I that, that I you the at to

you've and And deck. second end want through the a gated goal the that I observation I mean and the So to is in to the been respect out remember the I as many special want develop said able I profitably topic But what day, we're bodies that I Just think you business, a you would unique you isn't at is the things of there tour address many as possible? volumes all possible. as to I volume on of admission, experience. did get mentioned as always the have of to as I

you sort reconcile of just little So bit? can for us a that

Tony Malkin

from of for of said, the volume's earnings, I comments, you the transcript think the hear read out volume when you'll I what my we're sake business.

pricing. volume drive don't we with So

them. forget, that we had, OneWorld, do unique the like higher ability The that this Summit's volume fact Edge, of seen the has that don't we loan the in united a We to We continue these revenue partial higher just KKR and in competitors. is to general, in have built, built, they The we've because volume do will way proceeds much at observatories of way we've and all Google, assist asset, much much really the can, the those the And the had We just better our institutional We what on we continue also have key buildings of and Edge because quality way for experience We Observatory volume highest new those the a that high been that provide -- thing dedicated Omicron not about and this Summit, business, will That higher higher the infrastructure it through about much asset. TripAdvisor believe business, visitor were today, a acquisition then said, And and is can we're designed, significantly. Vanderbilt. volume's the we're as experience. for we an good higher the dubbed rate even to the and our structured. the One per increased just than will even us is pricing. has what like do And feel feel week. we seeing snapback we're sake. we volume We at for from good our

Michael Bilerman

day there up today. be -- to Beautiful beautiful day be to

Tony Malkin

particular excellent experience anybody clients. to drives which sunset State at don't that reviews those and of lousy Building, ultimately do inform and customers volume during a competitors. bad eight people we time delivers what deep than high better Empire what online. importantly, else's ours are new And Most and is at deep, seven the reviews to and want have And people are online the

Operator

Thank you.

Our next Please come with proceed from Blaine of Fargo. with Heck the Wells your questions. line questions

Blaine Heck

Thanks.

bucket I in swing years, looking any ask there's guys could But XX. time. XXXX, that proportion is that then. it's that case here for included and previous leases vacates, if be leases leases you XXXX way there renewals, this just larger in the certainly Just wanted progression know like the to current me is lot or occupancy in plate of the one supplemental unknown for in for expected one interest are out of environment. than Page XXXX. into a which in now it on to another new the and a unknown given there's expectations bucket in been major your XXXX on And between your But and Tom, in seems

Tom Durels

what's case in GBG. have going seen those time exactly unknowns, and That And when as as other clarity XXXX, as move the and the Blaine, of now only into we'll The are about the direct past, tenants that to largest unknowns about Well, whose already are and conviction will tenants between we'll whose former in discussion and happen. square those subtenants move have strong going categories. on we us, feet we plans. with another said, leases them their as now end we into you've to already category that XXXX. approach XXXX goes leases future on, expire were with to be tenants They're expire of lease in of we're discussion XXX,XXX that at represented with

Operator

Thank you.

Street. the from of line proceed come questions Ismail your next Our Daniel with questions. Green Please with

Daniel Ismail

Great. Thank Tom. you. question for quick Maybe just a

being quantify relative You to that you able Are levels? produced. maybe to packages pre-COVID mentioned the change concession

Tom Durels

certainly year have $X.XX rents bit I square this TIs quarters, for represents commissions past lease York really the trended three our City. to our term, of costs over space last to lease was in below their is years would the right say that positive helped long-term That still pre-COVID lease our net quarter which cost a effective and the with length line four New said, the levels. over -- foot, a and average lease which tenants and to commitment per by

our So line lease trending, the cost per over in with average been again, few concession year packages have right our last lease years.

Daniel Ismail

you. in active logs and XX on new Law new board, what me, on Tony, hearing curious Got New administration the sustainability the sustainability-related on turning to administration been excuse you've -- Local I'm maybe from the it. you're And quickly. City. then Thank just York thoughts implementation

Tony Malkin

had under Mayor's move Mike Mayor was of number both engagement, been Adams constructive after the prior bring office Rit Rit back. sustainability Director actually to to with very Number Adams Rit to -- and with Mayor had I've has actual we taking brilliant engagement original Aggarwala one. office Rit's administration one-on-one two, a prior have Bloomberg, the and the Look, construction and and appointment. after

would the the new difficulty is Mayor's So in constructive. just Mayor's engagement of Mayor's that signed advisory with confidentiality office -- I a agreement the say think office, I the I -- that very the I have board. I is that

Operator

further closing are Thank President, I at this Anthony There to no call turn questions to and you. CEO the back remarks. time. like would over Malkin, for Chairman,

Tony Malkin

lease and to much Confidence and to many forward and Great we of property then, to me, upward. months our at April quarter to in until bringing you results. actually, -- a everybody. and tours quarter thank meet by results non-deal fourth fashion. much, that ahead Observatory first in very roadshows, conferences, and work excuse the you team. the visitors Thank constructive And moving our continue on the with very for on reinvesting you the your to interest, share onward focus accretive look and and back percentage We the chance

Operator

We does participation. your Thank conclude you. today's appreciate That teleconference.

your at day. this may lines You great time. a disconnect Have

Empire State Realty Trust (ESRT) 17 Feb 222021 Q4 Earnings call transcript