ESRT - Earnings call transcript Q2 2022 | Empire State Realty Trust, Inc.

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Operator

Greetings and welcome to the Empire State Realty Trust Second Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Tom Keltner, Executive Vice President and General Counsel. you. Thank

begin. may You

Tom Keltner

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

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

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

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

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

Tony Malkin

and Thanks, Tom, good afternoon everyone. to

and year. are strong the our shareholder through sell Through We are our the tickets quarter pro to we top enhance report priorities second that achieve and our of will active half goals. that first is a portfolio of to allocation. value of management portfolio capital sustainability Observatory to signed pleased all investment the of – and positioned leases takes ESRT lease allows to that with space, the take to and advantage earnings modernized strong us advantage well balance opportunities. and quality, sheet contribute flexible will a that ESRT's flight

City XX% New York. no up. of nears Foot We to in great planes our about many in our York growing. are streams retail City second York neighborhoods hotel International returned XXXX that numbers way play their is and have levels tourists office, busy again. to New of traffic second the doubt New pre-pandemic surround and and a and and residential portfolio. on there's reached revenue City's quarter are from it quarter Seats the upside tourism, demand is with levels

At modernized tremendous and of with have very a leadership to with we environmental and transit to buildings, positioned set well amenities close with more quality and advantage. our indoor are We come. mass buildings attractive energy a efficiency great and industry pricing

you some tenant, our values to market If presentation. updated on portfolio, by Slide of our and largest how view you our see the video validation investor the want LinkedIn, independent new to X great encourage I

the Empire number new you three in Observatory presentation. by fact, there is Tripadvisor the view the State The can strong. and United are that several world In as in attraction new number in Building rated videos one States

year-to-date. passed already million have We X visitors

on in moment. a target this our on more are for We recovery, hypothetical

we said, focus portfolio buyback for activity a accretive our how stock presented on accelerated recycle identification very external can give legs growth better opportunity the compelling and an growth. to Our quarter. and we with That the eye our we performance continue has ESRT second of next of during its

unstable and Durels with this of quarter. see building We points. modernized to will and focus opportunity amenities, success to healthy convenient have the the ahead. leasing on compelling buildings price and to tenant energy quality Tom efficiency, Tenants our markets in cover emissions, mass ESRT our quality, healthy access of indoor we buildings including beneficiary low features, trend. their a environmental history attracted transit flight are is

several Burlington, expansions activity continue quarter. largest a see within existing expanded on their an expansion follow to our We space other and office portfolio the video tenant, updated also ESRT's investor is great how Empire product, iCapital last talent. office showcases the State includes presentation, and video tenants and X our watch. recently be found which videos signature Slide and at to helps expansion bank created them our that Again, asset has know attract many great which that can with recent Building from and retain robust signed our including times their who love Linkedin,

Tripadvisor’s our the after and from reopened the we of number will Choice Two the the in and the drive and Best rankings. COVID that shutdown, future. moon Best Building build that is occupancy United in the State one, Empire continue world the the three was entire top number States years in We least the Travelers' to over our higher percentage XXXX earnings team declared attraction in

iconic authentic brand observation The reimagined recognition lead historic a to New and continues and visit an prominence. deck City. do unmatched for to York must newly Our

And experiences it. delivers prices, people timed our love new fantastic without system higher implemented Our ticketing and our post-COVID, lines. even with reservation visitors,

to year-to-date. observation We already our deck visitors million one passed have

approximately in State was with expectations recapture with Visitation Building in line our hypothetical recapture Second the XX% visitation to our quarter levels. of July, relative line XXXX in to Empire continue recovery. rates

increase travel partners program touring grow. numbers from steadily visitor our As percentage past the and

third-party traffic Our mix. A versus levels shareholders. direct at periods record revenue Observatory per the capita for comparable to with big prior remains win and ESRT relative a

was visitors. Christina traffic is will quarter second That NOI that achieved recapture while on of to levels, provide from experience XX%. XXXX pricing best-in-class was update result XX% you this we the our buybacks. we have power a As

to We acquisition to returns opportunities an we adjusted York new strong our be have with ability with risk our balance local focused knowledge, and and New think complementary can where we our portfolio, underwrite to to unique edge where opportunities, are compelling which flexible and nimble continue be spot sheet. ability City

added portfolio review value acquisitions. to continue in we reinvest our that We proceeds so which in have the assets can we monetize to accretive

ESRT was happy by XXXX Institute Alliance are to achieve one only Notably, of air for Department We sustainability And its our Energy's ESRT award. report awarded sustainability leasing sustainability high Platinum cost Better U.S. quality, will ESRT is practices Buildings to nine the the new for quarter. highest Market distinction. milestones Transformation. of achieved platinum efficiency, Lease and integration during Leader into for tenants. business now and the the operations, and to performance over the additional energy is awardees Green With savings, recognized of it Durels. turn which this I deliver Tom

Tom Durels

Hey, thanks, Tony. And good afternoon, everyone.

feet, over commitments retail. a lease assigned at square One expansion with in square floor major quarter, leasing we XXXX leases XX,XXX sequentially. quarter of XXX,XXX long-term office the at net a full XXX,XXX two square a sign foot for The XX,XXX properties, was term environmental from newly include Overall at our feet Merchandising recapture great the at a for term portfolio. years said have with with some now one totalling space. a ten that provide with XXX,XXX Notable built efficient square including which with amenities to XX% Burlington space existing and of and quarter, Grand Greater oriented exit early the this lease. of environment XX,XXX floors their lease we will our transit quality our in healthy York office XX-year which This Broadway, average obtain year feet energy over point now mass square expansion upon transit reflects weighted fee in volumes quality, Manhattan total were of this add. our square leased marking our year expansion full A healthy fourth We and leasing with feet tenant tenant's to expansions in for new renewal a iCapital and great quarter we of a from buildings, this this were direct second lease under flight to termination Manhattan and second One XXX,XXX have expansion We tenants leases years formally where approximately effective in lease than feet indoor term XXXX past XX a Burlington with price XX% foot square look our lease XX had We payments, ago. spaces we we long-term feet Central subleases signed it this convenient year-over-year us excess facilitate six paid XXX,XXX and and increased results always leases which termination and tenant which total modernized significant to at in New Grand floors in benefit when locations, Metropolitan modernized the fantastic full rents increase to who office iCapital’s increase to In by access consistent quarter-over-quarter Uber Place Central quarter, feet, is includes square time rather to properties excellent from Place. space. square space a portfolio improvement portfolio across leases in Company

five are of for our office $XX million XX last the had As the signed an Manhattan. termination years. spaces annually we in regular leases a fees a quarter, over And during lease average part and reminder, business prebuilt

be tour due the our half year, of this on year communicated inclusive the offsets commence Burlington's occupancy scheduled expectations, to up second reach track Burlington's the commencement. is with lease XXXX. saw with for will XX% activity typical in the That volumes the with the positive Following this long-term that activity. and during First by feet the points on basis leases by and Place summer is year. the and The occupancy have basis we in we our to to Stamford have commercial through escalator lease XX our ready slow in in prior in on guidance last leasing environment points Templeton Blended Uber's other call, Office lease signed the timing a second quarter cash unchanged of Properties portfolio delay up X.X%. more extend spread will people with trended our good our XX.X% quarter the the the conversion total that lease square reflects is on between Manhattan improved from showing XX,XXX of decisions three news lease to and overall signed removal XXXX our tour for somewhat leased second quarter, said, our the termination XX end by following was reduced Recently, combined remain are X.X% the Franklin new over rents basis earnings first Therefore, to of vacant by make We positive to main portfolio tours up up of driven a portfolio. Consistent higher. the past from catch space quarter-over-quarter we rates approximately close the a portfolio our which though lease post-pandemic to between of likely their focused quarter to percentage that leasing at tenant renewal occupancy property. retention slowed XX%. at a stabilized are and second up term year compared

bar good will lounge simulator to XX% State operating Concourse compared which in an XX% off. were portfolio at leasing the yet not been burn million, court, consistent Same-store of located leases, hall events gatherings. as lounge, taxes have town of XXXX lounge XXXX has service We rooftop the level but $XX expenses inflationary first from in LinkedIn person increase a in added activity benefit a XXXX and price recessionary Thursday incremental rooftop amenities and in unutilized very of a our labor, Tennis proposition highlighted, and south quarter with Broadway. the at free our through and third XX tennis that from Building previously Manhattan new a Metropolitan presentation new hall New second on tenant testimonial new positively our for office mid lounge second and you announcement Slide may roughly our our for we hall a sports offers reserved social leasing Times to $XX.X XXXX where on preview video with investor Broadway be Square cabanas adjacent rent new the point at Greater and We a be tenant tenants, with utilization. campus especially for levels, pipeline $X.X rent quarter to expansion received town by for levels increased basketball will commenced these and a XXX cash, Empire to utilization quarter a a room updated property to reached of compelling Tony significant XXX contracted Office We the At shared new has private value million special due communities, and through announced and have decisions. and including and quarter to X. believe for can Broadway, Along room, signed video environment a that in built golf amenities that be million and room and from portfolio. presentation tenant Broadway, O&M deck links Portfolio York brokerage of potentially with related our estate town Building and real XXXX will by Tuesday person a space. the utilities, recently access XXXX all lounge factor

to project and pre-pandemic office of run year. to operating continue earlier cost measures We through gradual the to due XXXX to saving return same-store X% combination in expenses a approximately permanent levels below

decision. assets. mark-to-market leases we our up feet points In with of at And reduced Turning to investment total had basis leasing XX square which we Occupancy and summary, our retail multifamily strong another quarter validates remains to XX.X%, see office earlier concessions, solid and continue strong XXX,XXX increases quarter-over-quarter. signed.

a tenants And amenities have locations. healthy summertime strong robust see heading with to fundamentals to of somewhat multi-family pipeline we into properties. convenient quarter, efficient, our tour And slower we as good energy from quality We activity leasing the continue third flight volumes. benefit in despite at buildings continue to

Christina? Now I’ll turn the call over to Christina.

Christina Chiu

State what I’m quarter in our was United of provide to Empire the quality portfolio on Observatory, number assets, that the Building comments pleased office the attraction Tom. strength Thanks, a comprised one of emphasizes States. the solid

well retail retail and everyday assets tendency national XX% with assets. well-amenitized, strong multi-family located, Our are

our the per we core FFO termination FFO quarter contemplated our expenses cash $X.XX or Notably which $XX primarily FFO guidance late range. property second of as quarter of lease was X.X% For which assumed of to loss in building well XXXX reported in from NOI, per for XXXX. includes $X.XX outlook. the utilization, core income, the higher excluding second prior operating GBG $XX XXXX, of not share of to of XXXX fees due this occupancy down as core million Same-store share, is impact the termination fee amid million year-over-year. normalization in diluted as This compares $X.XX the lease or was diluted earnings quarter of

with For in levels. the line visitation of XXXX our of XX% XXXX hypothetical second quarter was of observatory forecast

reflecting revenues per progress of $XX.X our While approximately in million at cap. levels, XXXX XX% observatory NOI was higher

quarter the levels XXXX. NOI from confident We was pre-pandemic to performance. significantly past back $X.X second up feel in the of quarter in million Second of

reminder, we of roughly contributed NOI and reach second trailing a XX% guidance, our approximately company’s but through XX-month roughly basis quarter, stands quarter at of steadily observatory NOI. based back on full As building and expected year is on X% the a historically the the to XXXX a

price the is this share today, market. discounted significantly upside our at look fully not appreciated we by As we believe

$X.X $XXX undrawn our Turning billion, to liquidity XXXX, XX, our balance revolving term of we weighted million and Notably, company weighted of company rising sheet with a average maturity as of rate June At years. is the rate $XXX in billion X.X% credit well-positioned end, of share debt. average the of capacity totaling comprised of X.X on a which interest at with to and debt net of quarter rate environment million XX% facility. are cash had $X.X a had fixed

to December of from total notably EBITDA a year was with XX.X% net for well-laddered forma have adjusted net X.X well debt contribution We X.X was adjusted maturities outstanding acquisition, net be times times. our XXXX debt would our debt A schedule debt ratio XXXX. full November averages. per maturity Pro below to until multi-family market and EBITDA, capitalization no

of to underway. repurchased are average outstanding in million XX.X% that shareholder sheet multiple XXXX, continues which level, our New through and generate City of we across at sectors. of disciplined of of lending capital purchase our Our per March levels its private additive that New weighted An common at at to compelling price it a July focused of affords actively said, and to record our our of the retail quarter the the that pursuit share began. shares acquisitions, price shares weighted the sources engage value. $XX.X opportunity remain as average balance environment. of and That a equity million investment $XXX from $X.XX activities higher shares company investment are repurchase This per our York potential City team will well-positioned upside approximately share, buyback XXXX, the presents of repurchased underwrite discounted rates amount in York cumulative brings level multi-family flexibility This the and a program share, significantly includes to date per more against underwriting the and $X.XX X, pursue selective to investment the opportunities total benefit opportunities recycling. financing represents of York In New in capital, and portfolio office, XX, backdrop that discounted a City stock second

buyer and seek every we hard the a a yesterday’s with at dislocation than spreads tomorrow. our sellers within York as each portfolio, New On bid asset in look and and to of period to as and assets proceeds in sheet take the recycling, wider are have capital usual We added prices market seek in we share to for to flexible balance we not value want opportunities seek said, we fund position. and that monetize liquidity thanks which are reinvest That acquisition. we’ll and our sellers, buybacks City reiterate

prices. act So be right we patient the will deals right on at the to

range FFO of $XX Turning to fee in guidance. inclusion driven fully or termination core $X.XX We is increase quarter. to between of by the the income second The $X.XX million recognized now XXXX $X.XX approximately expect and share. for lease diluted

XX% underlying Our is decline change All XXXX, well lease updated from to NOI guidance XXXX operating of late year building the other the our cash meaningful of of income prior Again, the the for In to FFO normalization from in of fee not this same-store expect as XX% contemplate expectations. in increases as lease any impact the levels. other assumptions the driven we primarily this year, range expenses loss excluding balance does by large termination are occupancy unchanged year. annualized utilization XXXX. GBG as termination

are guidance We at not providing time. this XXXX

However, more we a next growth expect do year. rate normalized

to between at XX% occupancy XX.X% XX% and and XXXX. year-end, from prior same-store We unchanged expectations expect up be year-end by from

depending ramp million to increasing of first caps quarter. quarter $X up. Turning per This NOI in the reflecting of fourth pace million the provide investor Observatory the presentation, year, the NOI the to in in in the in Observatory, which million of with we to be average we latest approximately case, Observatory quarter still base on $X per the reflects the and the from third per $XX XX% stronger an $X half the $XX second that up to half ramp million revenue to expect hypothetical XXXX quarter million and assumes XX% expenses

we COVID lease tenant guidance note cost Lastly, Please levels. higher end offset to expected operating XXXX in pace comparable cost reflects The expense, by acquisitions, increased environment, guidance amids XXXX certain a G&A better termination up such rising any the due potential office, partially not return that and than in more beyond range The ramp travel. July expected as another dispositions Ukraine to and of of just any or reflects to meaningful capital uncontrollable upwards temporary utilization. future adversely borders any war potential and of assumptions XXXX G&A activity fee up for expenses described high a reminder reflected our building trend of on low slower the end guidance a variant, ramp as than income or XXXX. that future markets expect XX, property shutdown savings, Observatory from of to estimates other factors, do impacts and include our slightly the a impact Observatory

ESG. through XXXX and with As balance we balance ahead, on positioned discipline to a allocation flexible the sheet, and we capital look advance a well of focus continued commitment

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

Operator

Thank you.

from now come proceed Steve conducting first of Our ISI. Evercore Please We be line your a question-and-answer [Operator will questions. the is session. Sakwa with Instructions] question with

Steve Sakwa

a contract and And where wondering the color little Thanks. from Good was the bit could the extent talk little same? expand the new pipeline. the And more bit roughly leasing around to afternoon. looking Tom, just I a versus you if that and maybe they the provide are to stay renewals about coming or industries. they detail are new, are tenants

Tom Durels

in We’ve portfolio pipeline to ranges attracts some quarter consumer tenant in Sure, types industries. we’ve products the professional of going activity into various tech third a services, of wide similar and legal variety some what fire seen from that of Steve. past, and tenant the sector, healthcare, industries range our a with diverse good a prospects got

XXX have of full expansion Avenue we our seen, a for XX,XXX lease XX,XXX Place foot just for a Grand You Seventh square out floor feet. that tenant into may of Central signed square an One moved

– We renewal have XXX,XXX new and about in activity of negotiation. leases feet for roughly about square

feet pre-built, Broadway. a portfolio. Square XX,XXX expansion credit so Building We’ve a got from about about proposals tenants. paper, at and of a we’re XX,XXX tenant of one for is our of Empire renewal in renewal of these a Times tenant deals multi-floor includes of a sizable XXXX exchanging couple deal feet, new with in square South that’s negotiation square State this another but also And actual new a are dozen which includes So leases and about mix aside or of

So good activity. a mix we’ve got of

the over a feet activity, our average of leasing on course, XX all follows outstanding achieved a We by square this Of weighted performance total term lease a really did solid of quarter job an solid years. team. XXX,XXX of really heels of leasing which and is

great So happening, things of think commented of earlier, we’re we’re really the There’s of things lot I a a shape. things great and that State our of Empire in I at lot Building. lot doing good on that a with fantastic expansion happening the amenities

look You at that the at video videos Broadway both got look the offerings, LinkedIn Building videos, in at the Empire to campus. that Plaza about State Tony looked and mentioned and amenity expanded our the

Steve Sakwa

between that kind going for domestic mix on on in Thanks pricing of Great. just forward? And might international? color. the expectation color per capital impact Observatory, Tony can any tenants there that your Maybe And is what you and for how mix the year? of the half back provide is that of say the

Tony Malkin

this grows larger international as and visitor percentage component the per international good higher to grows, having higher. to a what We and see past first well. component I What you as who by that we cylinders, past, observatory the of are with That And have dilution quarters have partners. it percentage you have I of as to prior past answer programs week through there really visitors. travel in progress the to have residential fact would more some with come I’ll week. observatory – comparable to happen has and Look, at the tour be share Strong able our on as visitors the we in we’re we our on seen all much from in through all, domestic general come meant to overseas. really think folks. and cap think versus quarter the of firing even very as leasings, in you I over blend is said, Okay. of mix visitorship visitors international and Though full performance done yet of people we and we observatory, people in our that seen know the typically, strong visitors. be the force able a the just continues said, past through thrilled tour grow. that see in partners. is have from our a participation That revenue – a we’re travel

reopening. reopening there are I come the the really Everyone can of One, see factors, three really they’ve think I their botched airports. that which play. think they’ve botched into

makes it United States the a look think travel I in like internal dream.

the dollar performance One the will August we to over experiences over come people is more deterioration I think off there, travel fact people already As typical our in travel to season. season who declines able significant visitor with September, are two, Number see who in that on the strong, more a Center. focus World time seen the there. the We’ve authentic out Trade in of expect

opened edge, million the we’ve visitors effect visitorship over that expect in million We visitor have as prior they Look, down. announced And already mark there since X in October. the near Empire they in has State of the Building shiny X sometime at the is similarly referred Summit quarters year. The penny the bright seen hit future, to I this clocked

New continue only might points, And various we inflation just they’ve to benefits currency, inflation like our what with to of has and I rating. us they we’re though the past, come they with prepared tour we and other we Tripadvisor’s one to the come through transitions an the cap – been with think because upsells them stick opportunity that by do And not because authentic. per our the that note done number really through we most and are gives to are that’s will that’s attraction, XXX So revenue currency sell that will visitors change more need to York of think And travel will date. in past to the as pay who been visits in that be come floor and part will them reservations partners. the for. to I success the

Steve Sakwa

Great. for me. it Thanks. That’s

Operator

you. Thank

with line of comes question Michael questions. proceed with from Please next Griffin Our Citi. your the

Michael Griffin

question. the taking Thanks for

ask back and guidance. to Maybe I’m you a if that. some or it the be expense you of kind It side was that can it the additional curious implies on wanted on deceleration the seems helpful. anything of Just half year, can into from color give would add there like

Christina Chiu

the Okay. for Thanks question, Michael.

at we on the And we We’re key earnings there in by what first around the at our look expenses X%. sub assumptions table. if year XX%. outline release in of up numbers operating expect X, lay to the we’re And right? So is a half about actually out we that you go Page level,

ramp the a back up implies in that half. So

So upwards And million we million trending of other do continue to have in portion $X $X half that observatory, the quarter well the ramp million first will as there expenses have but back that recovering to $X in as some to we up a quarter have from we also the areas, bit a a half a impact. business.

expect see have clear in that we across the expense we business picking But could some you overall we results do reiterated. very So back up half. the

Tony Malkin

occupancy point, more properties, operation our is add costs as of provide And I Griff one we additional need services. increases and of that our might that to

demand the have gym our instance, Empire we materially For on of based at expanded increased membership. State and the Building hours

grow expenses it operate we and occupancy. and occupancy clean, look And we building the the continued occupancy feet we that to have So we provide services at to on those grow. has building of at number as amenities as square the depends –

Michael Griffin

Great.

lease anything than timing that kind just beat for more to adjusting no So guidance so income. just be change of given it the appears termination and in a issue, like

Christina Chiu

Correct.

Michael Griffin

their I’m on, I add a it Okay, we’ve on you other multi-family to curious there? any you of kind color, would late New Durels just about apartment might And portfolio bit, multifamily then in make sense maybe any could guys touched make more exposure more my to last seen color additional lightning York great. it And one there the entered think and the be add give would early portfolio. little why to why was appreciated. but as it exposure. reports guys next Obviously year. sense it

Tony Malkin

So thanks, Griff.

properties look, two so and And mark-to-market increased The see First properties increases quarter. New at demand again reduce occupancy we for the focus pleased we New rationale performance City the assets. in far. multifamily office fact The is York play. look strong and commissions. our with retail of with it’s multifamily broker York a concessions and York at And to our do stated are very environment the this City previously all, New the strong investment we’re we consistent our outside City in in continue multifamily, that to need of on

We office. are

attraction. destination are We

multifamily. are We

see And market. multifamily, to we We other look trade when retail. perhaps properties play market, where in we the we We have of opportunity inflation we to Within like out at adjustment are can suited are opportunity this in an the don’t that sell when this markets. love assets, we’re a exchange owner multifamily, We new we as growth better inflation that’s and we to more do. a to prepared something, the for trade observatory. that our adjustment and use of just efficient cash that play of

pass inflation protection through operating with through our office. have We

multifamily. not that does adjust basis periodicity with of greater a the However, on the rents regular

can buy purchase, buy as go to we also it fact we but capital we a forward through the capital we the that, apply just not in way like multifamily we to we think efficient, our choose when when ownership. that’s So,

Michael Griffin

for I Thanks color the Okay. appreciate there. time. the

Operator

Thank you.

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

John Kim

decades. Thank on you. the to clarity provide positive as wondering your some supplement, just you could of you you’ve on if that as XXXX your explorations, known negative. On I of provided some activity, address well more some the Page on gone the commentary XX leasing both additional and

Tom Durels

of relatively, whether so come smaller midsize early you’ve a breakdown given provide on square Well, tenant be office or a And off a of foot XX,XXX on York the on it’s expect New largest Broadway. John. to at renewal, our that change that do rest we tenants. report Not as City some lot or reminder in We comment the about the are just or XX, portfolio be tenants, new entirely. we to year do of with forecast that renewal Sure, they that. case our in XXXX seen Page

and I changed in we this the ago. improvement of get we to over So, and back certainly two year quarter effect quarter, really strong significantly prior to renewals. quarters strong rents haven’t as the with vacates, health leasing on from past comments it over the market. net quarter, being previously our really had past forecast the relates back Look, a

amenities expansion mentioned I’m of We continued our the portfolio. excited to our see about I activity that throughout earlier. And

COVID, prospective the are wellness, we’re that amenities, really health, in we’ve and investing in brokers to I quality. things the neighborhood of tenants. reason all from all that amenities, getting And provide these benefiting which think response it’s, tenants things slight for convenience from well that’s focus the building today, are this and before that attract a the terms great to tenants, mass reminder, looking our for of on newly in transit, spaces, we portfolio we’re been built

third So, into we please to activity what and see. the we I’m got going quarter good

John Kim

and pause to leasing hiring, Tom the has led in that markets decisions? And any indecision additional on capital has

Tom Durels

bit we’ve six to four slowdown Well, saw past of we the seen it, tours a over weeks. in weeks

that due is I from our much And over more summer improved that periods. touring normal has space as seeing mentioned decisive. conversion are slowdown. out But we’re of to the prior lease earlier, Some I think tour is what the tenants to that are

for So, we’re, with year. mentioned, activity being tenants said I to that’s this the a that typical of say time I bit slowdown tour a are with, engaged as would of decisive buy of we’re

get summer and a latter will we’ll the part see, So, lot as Day, we Labor be into into of

John Kim

Tony priorities and versus buybacks? an the also multi-family, a just on retail, among price just and Maybe investments three the disparities for update probably office have question additional or big between on can the Christina, given then provide we you

Christina Chiu

Yeah, categories, finding depends but sure. on focus as three right. John right we've the really so it deal. is area, that mentioned, our All

three on similarly, a And speaking you of asked all an in and point more, But categories in it's we we those and as we of up because to because ways instances year. end last our which and the on we that's can and think for add up that generate will not I return on buyback. we buyback more all of for So expense doing addition the glad I'm brought late new right area at shareholders. value upside get look that's portfolio the not multifamily at the look

balance continues we positioned any the added will as sale, further into on sense capital So value recycling if long to can well of it retail. an have eye And misprice sheet proceeds Tony office makes And towards elaborated earlier. recycling acquisitions, also fortunately as we and we've those our towards those the utilized redeploy categories, take and satisfies as and that to sheet a it maybe capital consider the have a we portfolio. can share extent our for be be buybacks proceeds multifamily, balance then to market could or means

and shares find provided, So attractive we right view compelling. are levels. share the all of deal prices clearly The at these we those with as opportunities very

Tony Malkin

just lot it in bought we and last would I bought a And quarter we stock the Yeah. add, of well.

I we second, comments. Christina's So of were pleased. all And

John Kim

color. Appreciate the you. Thank

Christina Chiu

Thank you.

Operator

Thank from questions you. with [Operator line questions. Please your Instructions] of the next America. Jamie Bank of come Our the with proceed Feldman

Jamie Feldman

some your you opportunity the having in Great. you Thank now handed doing back to headwinds. something you. think submarkets. mean, the broader good Clearly We've for buildings you're just market some here. get that's different It leasing sounds like an bank competition? up some some maybe you're success, than of that office seen that, do I

Tony Malkin

to indoor on start like we're I'll a when our out that jump modernized a efficiency, in environmental that color. you'd Jamie to of other properties, amenities lot any built look, and Tom spent We we energy or let and Christina maintained a the the position in if are money value. that price offer so to add the takes quality, money. a of spent Well, a of is, great to flight we money And our of outstandingly at competitive quality lot the set And range. located fact in top We matter to of assets work. receptor at do the focused

profit right You to the spend have money that the there. that's make to to out need basis

continue definitely the as investment for want I anything opportunity we'll at office anything. seen line. So at group to really is if time, point. look sure. to That's if this that the and And an you just Tom, add at know our same us attractive at don't to haven't looks we bottom

Tom Durels

our certainly We at everything eye look and our multifamily, I knowledge the our expertise all and we on of Tony apply what and echo underwriting keep when said. certainly office assets. we're and we'll

we'll an those ready upon opportunity, And so seize when certainly we're we see to opportunities.

Tony Malkin

might I comments, a I price two in is still discovery in if might, office throw point. other

perhaps in increase about cap load a at the announced cap There's at rate cap in look purchase material rate, is Park in the, a frankly, and at and XXXX of Americas you and just XXX cap price less material a Avenue rates XXXX. upgrade the, transaction If the releasing The assets. and the of increase at there difference rate, the the there, of the and forget you the look

primary quarter. to again leasing strong the $XXX before, are second think office office and conversation pay still assets space, did think well going square what are this it’s a beneficiary can’t foot by we we to, the for we way extraordinarily justified. even go not if and properties, in we has stuff, that in they newer to we a discovery. $XXX, movement said So And everybody a shown a wants the or about they everyone's price wanted positioned. their $XXX, older And is our All with to and

Jamie Feldman

tenants pandemic, these all. while? up different And these say a pick is, in in they for they already upgrade you. are close they the just during who thank are kind looking Like the are tenants either down city, or or you shut would have to are of, building. didn’t office at Okay, the They who leasing in didn’t be down a

Tom Durels

moved announced their in expansion fire floor again, a Avenue, Templeton take is and office, the been full And Broadway. sector. the renewed for their tenant Grand One looking at and in an and early office several the of professional of they’ve One close a double obviously been Well, well They’re space XX,XXX in a We quarter, Connecticut. iCap they’ve earlier their XXXX business that XXX renewal needs Seventh following services future the Central their mentioned we Stamford, I They’ve well. Grand they’re The was out we an multi-floor tenants. sizable times of expanded another to Central We Place Franklin square firm and is us from doing at Place. business have mix with that – now. doing

work new them all a term long place make their And for a the expansion offices, of of for mix to needs commitments. employees and are mix it’s that their So these renewal for their or conduct see are their to tenants. for tenants long-term and businesses

Tony Malkin

benefit. in continue Signature, We the that deals what tenants the and I’ll deals good price tenant as of October presentation investor most we point that’s good, in expansions. the That’s we And got the times. best good tenants we I expansions to and exercise clear. selection, don’t of these we to meaningful we’ve might again, really try just to we feet our what very times, and videos. always we coincidence. see. our think a portfolio XXXX. square that’s very It recent our since is a that’s our choose add and well, iCapital get are means Network, what And built million is our said. the I bad add be X.X And hope in portfolios, with fantastic offer, like

Jamie Feldman

And can out talk you then about little to do more spaces build in That’s plan amenity helpful. a you more that? bit do cost to And the buildings?

Tom Durels

golf tenant-only executive a Starbucks Reserve basketball we the it’s the in sports is conference with room XX,XXX foot projects year. New the amenity later planned this a square York three gym town that large to City’s expanded XXX-person that time center. bar I convertible and is have mentioned, hall the to the and have or tenant fitness all And this that Again, that’s addition we Well, simulators XX,XXX then square presentation have service, for of court up opening center feet lounge, being.

be offering is presentation this Broadway. cabanas amenities with and space of incredibly all top to alongside hall So tenants Building. Empire available our landscape cool very town food South This options. the curated private tenant State that Broadway, outdoor of will the XXXX and XXXX that portfolio. XXXX I in-building the beverage on Broadway Times Square Campus robust in room of at at mentioned The a And that’s the lounge amenity

New have and the amenities. throughout City York We neighborhood the XX portfolio

adding We about And right we’re planned have we excited offering. a a what – XXth are full wellness building now. that’s that well, think it. We So XXX it’s lastly, quite we’re Street. facility West an incredibly

really, We’re Park. run, those cabanas, bike, that to Central private and want such showers, forth exercise, so in for

Christina Chiu

some the among note, just if I it rooftop add, is you building. make one a amenities, So on of would

we I build one building Another of So can trend. think on definitely buildings to return But as And marketplace, tenants compelling another It they cost. need feet these many amenities These service within each we find and the the will centers pay some very demand. and the portfolio. rooftop, all gym, is we you of don’t like set in is you rooftop, that’s question, and build a town a hall really a and to a by our build building hear building. see the more need build having at major that? amenity need a and from out one it’s same to We one more for about the benefit six hall, build to look town campus question, buildings, amazing of be the how should So a synergies amenities that? energy. for amenities, that’s building, we square in cost every you and can benefit

ESB. into it be And adding benefit going for for to example some the portfolio, by we that's Starbucks concept Reserve fantastic

Jamie Feldman

or no, a way any in this is amenities? this is And purely just Okay. revenue source

Tony Malkin

out the will on Empire [indiscernible] on with lobby is gum we've space separate the XXth way State up dead overlooking a fantastic configured that that than actually at XXXX Square. It's built views because decided of sizeable entrance building absolutely place that. we Broadway XXXX make will very rather of the Street, The and Herald be dropped Broadway

We building. show have former ship Broadway. It a elevators excess and XXXX manufacturer freight at was

as that for the So and we definitely and our though think tenants. that's a big amenity no for that XXXX priority opportunity for other an is than

Jamie Feldman

you. Thank great. Okay,

Operator

Thank you.

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

Blaine Heck

Thanks. Good afternoon.

it dividend, and covered on here annually more than dividend $X.XX in guys XXXX, Just at May this at well reinstated point. of your quick one the you a that's seems like

that level for flow be dividend So kind about how you versus whether cash or three increasing other elsewhere, future the of investments? uses maximizing that do repurchases think in

Christina Chiu

the for Blaine. question, Thanks Sure.

recover. that on the we go quarterly continues dividend have review to that to So higher as towards the levels we and eye an back business having

constantly history you we So on might do it and agenda recall will that's based is it the behind requirements. the on

business to that as we to we share if operating the other So evaluate do capital which uses include continued evaluating not for return does capital opportunities. providing will shareholders, as runway and sense alternative it buybacks and have if taxable income, whether our makes it, well we'll of

provide the what best look dividend our is we to across So generate the we'll shareholders certainly a way at board. and to value

Blaine Heck

Thanks. That's helpful. Okay.

Christina Chiu

Sure. Thank you.

Operator

you. Thank

from Our Michael of Please the question with has questions. next with line your come Citi. Griffin proceed

Michael Bilerman

of assets much of with protection, perspective us how the capital mortgage also tax here little you the Griff. sale wondering obviously just goal them. I on about think your looking number you that have was for your portfolio. you some assets and opportunities, sort debt your if expressed for of Bilerman can from Michael maybe It's have obviously bit draw portfolio a And I of, about Tony, say I out at a a could frame sort Yes. of post of of

State is wouldn't around capital observatory tax to just as then approach building campus the an the want I has that the would of protection, you to key think asset take the you're spending all those your ESB. have you about asset same buildings imagine through, leases the that. to number Obviously And it's ground Empire that out walked that with this and assets of Sometimes Christina company. have them. the you

So generated limitations capital cost sales given mortgage how some amount be debt, ground think protection, about them? the that the on effectively total of the lease tax of really some from asset investors could should capital that and a from of of

Christina Chiu

question. appreciate will start the then add and I'll maybe Tony No, some comments.

all So mentioned, that off the right that at future includes That everything we've the needs. taken includes Having transaction. future having a consideration. about That capital every includes take hard asset we tax. we've so and nothing's into look as prospects of limit, it's said and

sellers balance our debt on sheet we've based for as not definitely we're maturity positioning, schedules. communicated our So

for buyer, If that the it how pressure, we will reeled deal, categories are looking items portfolio we that right look we – right of the deal there's price, off. on to of sale. that the in available about rest If have sense at and but the number we sale. And that's shareholders, it's value So opportunistically, for structure City for that options. highly well. for New York of we already our available the makes it's at mentioned. generates we've very on there's it any allows right focused you as buyback. that around It's don't it right us back get can share the In right valuation discounted table of much more market also a redeploy buy our If

will evaluate mentioned. and of challenges one options. those that our appreciate think you we into definitely So it that and as take all We consideration every each we about

Tony Malkin

know way logical possible. ownership as We efficient Right. And we just we out that It's as the there. calculations do from effective same and done we've tax we'll View. numbers, this just the approach Merit way transferred the and in at it

Michael Bilerman

the just get trying expect much be portfolio sense could liquidated. investors really should how to I'm of of Right. a

I to disconnect recognize from it I review, this through Tony large some pretty don't gone just know goal get happy about? not seller, where stock not a you're for million, trying you're you've that you're you're around, is. if but what know to billion? is. where $XXX $X is Now looking because it's I There's price the stock talking posts, a much the sell, how I'm

Tony Malkin

bought We've of were this got maturities And having in XXXX a buyers of we year. we late benefit with sheet quarter. We've loan, of earliest. one the a certainly that's tens in the happy until several Well, last of fantastic dollars. got mortgage no the And balance millions lot the in cash.

debt is comment. Number is of X% fixed. any rate. floating Everything number our can't we two, give forward else have one, really looking We

estate retail knowledge Candidly, buyer's Street we public We market. a our Mamaroneck are liked the out. potential had Westport real Bank the and price on Street didn't it's we market. Main XXX on that work put stock, that XX on and However,

it. we unless So that. We've years term, compelling, the weighted flow got it's eight like we from the, half sell get we cash won't average and lease

our order we flexibility So balance of each as a go, we we undrawn we've of got are. things on as thing advantage wait cash of that's hand, outside to sheet on where forward. And in we online that, take lot go

Michael Bilerman

over the good has that in to last that And sheet five point down significantly it well, if stocks from, come Tony, underperforming hindsight and that REITs relative take when of Right? balance the look benchmarking XX% the over XX% But stocks peers leverage. entry, multi-family stock announced even where the is with cash and and right, you low underperforming last the to off, shape approach October, REITs, you down XX%, relative XX. years, but to you the

issues of stock buying all where trading, stock, and you what reacting it's just them we've to, the all to head okay, the want know I coming And taken you that's is. perhaps else sort I don't be to part and board sort why the just where, is that done. back there, The be is so these we your, And can and team board of it doesn't management seem keep on much steps. of but there's are the that of a and time saying, is the way other thinking. how can market mean

Tony Malkin

reason asked last like this As your our Michael, you sounds when quarter being… for what's

Michael Bilerman

are You being right.

I then at some know pricing. the going how market you're board as it's price at endorsing strategy it, a but You public to company, they're think maybe I a are And have point, you you not is Tony, exist if to the market's and the CEO, now. a not look willing

Tony Malkin

future; a we by this. We fulfill four Totally thing have the, stock go and And investors, far that our did And asking investors, a we a resi that thing good wet be not to acquired. sell our with with intelligent by we push continued want if we've or done just string sheet as with I where we've continue conversation assets repurchased. me whether space, this we're feeling to clearly tell the and the the priorities concerned, our to through I our a sense. company that that, And want going with forward in look We the on Our makes question. appreciate balance apply to forward logical you're as no, plan to stated great tickets. I to, I as you on it period. as, just work are great your this to rent goals and recycle And strong sustainability. it I'm appreciate

Michael Bilerman

Thank you.

Operator

Thank for you. time. There like over are turn call this to comments. no further to questions any I Malkin back would the at closing Antony

Tony Malkin

forward conferences on be you behalf team modeling property many folks, the Until of attending. to who incredibly with in observatory and and who in looking have and at States months great road are to many hard, look statements won and the who have including for remember tours everybody upward. Please shown helpful at to and forward your non-deal onward our of meet then, to chance stakeholders. day with Thanks forward shows, delivered the up every guarantees, that worked ahead. thanks the you that interest they really that not number guidance are the We meant thank one United for and folks the

Operator

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

your You at lines day. may your disconnect of rest time. this the Enjoy

Empire State Realty Trust (ESRT) 28 Jul 222022 Q2 Earnings call transcript