Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the Empire State Realty Trust Fourth Quarter 2022 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 Corporate Heather & my President, Senior now Counsel, Chief Secretary. is to Houston, introduce Vice It Thank you.

You may begin.

Heather Houston

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

release press detail at were esrtreit.com. company's further results posted the to the our addition distributed a section package on investor quarterly latest our website Investors yesterday, and in with supplemental presentation the In of

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

those As current uncertainties, discussed estimates. a risks management's actual and statements which to reminder, represent They may are from results today. forward-looking subject cause differ to

Empire in update discussions assumes with company's the review State statement in listeners to statements We detailed the the more no forward-looking forward-looking the obligation future. these any encourage to filings SEC. to Trust related Realty

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

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

Tony Malkin

to afternoon Thanks, everyone. good Heather, and

the wheel Keltner. on our firsthand Tom the Heather's is of call This on earnings since retirement

than and entities. of and are we Keltner's and us of will years and to always commitment here more grateful her ESRT appreciative its with to We be Tom contribution predecessor delighted have XX

provide out our fourth to close updates recycling and XXXX. our outlook to quarter report activities strong the ESRT and is leasing, on pleased for capital results year,

the sustainability and balance year. use of a do achieve this our this with Observatory, State sell lease to space, focus top accomplished goals, on tickets sheet, team good of ESRT Our our value. are an Empire unrelenting priorities to Building ESRT's lot make all shareholder

solid feet leased leasing with very Manhattan meaningful office in basis positive We points square absorption year. a had leasing X leased million basis and percentage over increase occupancy XXX XXX consistently in We increase a a Manhattan throughout the points office spreads and progress made at year.

represent efficiency buildings great the transit, amenities flight in affordable full great industry options more and and Our locations with quality. environmental to the place character, indoor mass in to energy come in leadership modernization, near quality,

in consistent get tenants product Our and best deal deals leasing good times and goal the through in to draw cycles. volumes and portfolio. in our is love challenged the Existing grow our get times know who

XXX feet expansions, total since X.X company went have which We the public. million completed square

build future. our and drive leased and higher percentage in to continue occupancy that We the earnings will

and more detail, XXXX completed just cover Tom a in our will great XXXX announce discuss pipeline. lease

Our quality trend. to quality the portfolio resilient is and flight ESRT from benefits

been improved entirely of exhibits Empire and exhibits a customer ticketing crowds with experience is re-imagined reduced generally by our the just new by pandemic the renovation timed operation. completed lines. has million beneficiary prior our the Our State $XXX Observatory to introduction and The Building no and of

Now staffing our We rewards will better expenses. we now that know control these reap of there, we customers be and plan efforts. the when

market. the that in the world in experience attraction one comparison the authentic number by the entrants number benefits other Tripadvisor's United new the in all States, is three to

pre-COVID XXXX excellence commitment of reached XXXX visitation XXXX, leadership NOI and driven capita, We expectations and largely and a reached levels. team. by In exceptional by levels XXXX, revenue observatory XX% shared expense in to management, our brand pre-COVID XX% December entire the NOI awareness, observatory per prudent hit growth of

We are an international brand.

standards a financially a tenants seek of about strength Tenants and ESRT quality who us a at value compelling trophy years. to experience deliver new proposition will offers stable and and It point. win tenants. sheet spoken attractive commitments who for high price helps their their assets high assets quality on at partner ESRT's our balance have the look landlord with We maintain to

be sheet balance engage and share Observatory capital acquisitions sources, diverse allows income derive new nimble Our our us We rentals. office and to rentals, in and repurchases rentals, retail income, from recycling. residential

further since addition The our flow portfolio multi-family stream. cash to of XXXX December diversified our

various recycled We sale the assets of Manhattan tax multi-family. have balance reinvestment suburban efficiently through our into and sheet

industry leadership performance building our the We healthy have and over past sustainability in year. broadened environmental

neutrality the by and net emissions -- continue we Building achieve make zero in York Energy guide We State a of for on carbon of sustainability Research XXXX existing Development achieved in New Playbook for partnership Authority, ESRT to buildings published goals. how Empire XXXX. goal zero with net a to others progress decarbonization towards the

global degree WELL sector for re-certifications target We approval from well leadership and achieved initiative targets with X.X and Platinum Energy target. Leaders received and with ratings maintained distinction Health-Safety most GRESB Star. validation the recognition science-based the their highest possible Lease fit advanced Green

We are commercial Advisory York York on only New City Advisory Board. Sustainability and are XX City Local Law we on Board, New New implementation landlord the the the York only City the commercial landlord

as a We well employees have important for for Gender-Equality in top been years. and included tenants These priority ESG as ESRT. increasingly and Index their both remain accomplishments the initiatives investors, consecutive two Bloomberg are and

many office think at trades peers year-to-date and these crazy a CBD obvious of it from though is XXXX it outperformed for still to discount. even XXXX reasons, that stock we Our

exceeded rises actual to for to expectations. priorities through a occasion the is introduced progress. demonstrated XXXX the and challenges results, focus for work guidance clarity give four our navigated more the on our incredible This we in on with Lastly, earnings team the initial that great company of outlook time Street trajectory company's and is which first the and our and

the our our the same to sustainability manage achieve drive lease goals, proactively We and shareholder value. move forward balance our sell goals, XXXX space, into observatory, with portfolio, tickets manage sheet,

accomplish XXXX. on detail more to will Christina progress these in plan we our provide and how and goals Tom

and great leader to over to has it strategic promotion great all want as is to quarter. partner to to to also congratulate Before every Chief new I this her on Officer Operating officer Christina of she I a Financial executive Her has Chief in role addition Officer Christina the title Tom, reflects Tom fellow she's into which me, and a involved a value. in great grown decision. us, and tremendous turn

Tom?

Tom Durels

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

XXXX a had in solid We year very promise. real XXXX and shows

our During volume square over average XXXX. we the which of feet lease million signed with year, for three-year XXXX consistent is to leases, pre-COVID X.X

Signature and and of expansion portfolio, net the steady quarters, four leases matching major In office we Crown iCapital, our others, in the achieved XXX,XXX effective square mark-to-market signed Manhattan new including last with leased tenants, lease growth experienced total throughout of pre-built during each Castle, pre-built year, quality year nearly of just and spreads shy Bank, the volume our in of Progyny, XXXX. positive and leased to rent feet

demonstrates in and the outperformance neighborhood market located are modernized, desire conveniently our rate which basis increased amenities in-building mass efficient from ESRT's an access healthy with your leased rate and tenant Manhattan's and We buildings, year. availability to energy and fully the wide office services, office increased in While exceptional percentage our price by flight XXX amenities, points and by XXX XXXX, improved to transit attractive tenants' Manhattan trend point. benefit for for points occupancy basis quality

on signed spreads properties renewal York square renewal by which signed XX,XXX activity lease dominated Building. XXX,XXX compared we under to cash X% lease signed properties escalated positive feet an and Greater over prior engineering at our New rents. We pre-built square new at healthy office Empire and leasing feet with X,XXX office quarter, Manhattan our square fourth remained XX totaling includes our and square with in firm suites, office a approximately Manhattan XX,XXX up the the spreads of basis a square the After In leases office feet Metropolitan properties XX,XXX feet, in XX-year retail. State our smaller foot year-end, new

Combined have leases, leases signed our percentage. nearly have XXX,XXX we significantly a of square at increased State where leased feet new with Empire quarter we Building, the fourth

drive several leased portfolio, leases active throughout deals portfolio pipeline in and higher. percentage have pre-built We suites floor our that full the should including

confident IPO buildings that and create modernized. our XXXX. rate in approximately in into $X ability billion leased to our to We invested are fully our healthy our since well-positioned We're drive higher assets

our robust and amenities South shared in-building amenities the Square at State our to Building in Empire adding Times campus are portfolio. We

Our which lowers efficiency, tenants' and spaces occupancy are tenants' newly built quality with the employee while energy best indoor health in increasing costs environmental productivity. and

will amenities the Grand Our opening assets neighborhood well us Central Access Central near benefit recent at to greatly The and are One mass located Station East transit Place. hubs. Side of Grand

immediate lease consolidating redeveloped, our vacant and pre-built ready move-in hard turnkey tenant done our with spaces floor of years now is After ready spaces, to full is space for create and our over XX% of smaller work spaces up. suites

managed set that or contracted XXXX. of leases from commenced square are expire and to incremental proactively not of XXX,XXX signed X.X% feet million roll burn-off. rent We we yet such And our in rent rent leases free have $XX only

strong affords the gives Our brokers in environment today's promises. tenants that we compete on will to deliver ability confidence our sheet and and balance our

exceeds team that has an the office and on daily jobs using quarter been New pre-pandemic behalf have since their our second to and tenants employment executes XXXX. office now brokers. XXX,XXX of as using although, We exceptional dedicated recovered have City York of levels close added And

achieve cycles. work ourselves We've to our We ability hard have percentage through our XXXX. and position increase space absorption positive in demonstrated all lease to lease done to the

Same-store approximately work taxes real throughout gradual guidance, year. contemplated a estate saving of our pre-pandemic property were expenses were by due the of the up in operations cost in excellent to year X% as our to team below measures and but permanent operating XXXX return and office this levels combination

were will we levels alone XXXX detail forecast a moment. control; actuals. pre-pandemic will provide property more through and XXXX cost operating X% approximately Christina continued expenses operating expenses Property below in our discipline be below XX%

our assets. Turning to multi-family

at XXX XXX off As and of our growing add this previously unit portfolio. close to are XX thrilled limited walking a a which service December in on Nolita distance the product located East Village full the market and fully acquisition multi-family to property highly we NYU. Mulberry supply to is occupied market a Street of announced, submarkets, late Mulberry the is neighborhood asset in multi-family rate, of NoHo, in confluence and desirable have

remains upside which strong in-place rents and acquired multi-family XXX as increases future Importantly, and free-market at across mark-to-market our mark-to-market we XX.X%, steady newly see Board, on good decision. validates continue through the Mulberry, includes investment demand growth. we rent to asset now which and occupancy, see the this opportunity XXX% Total is

over again start, positive in We've I space years, XXXX we achieve the and assets summary, well-positioned very In as year. solid at hard our work, lease many and had absorption to the said in invested a exceptionally are done

XXX lease office portfolio basis the We in during occupancy prior and after and year-end, absorption where of the increased XXX,XXX the in feet signed continue the and Empire our new of points we and portfolio percentage fundamentals at grown X.X strong over We Manhattan fourth for XX,XXX over Building XXX leased office square leases feet to we year. have and positive square quarter multi-family million feet a We achieved by signed our full see points basis year. performance. State square retail

I'll call call now Christina. over the turn -- And Christina? to

Christina Chiu

Thanks, Tom.

X.X%, in to full-year range FFO XXXX out offset results X% overview or of core year. with higher share most and expenses an for driven largely the $X.XX our year-end by to by approximate diluted exceeded diluted same-store observatory million stronger of $XXX per recent lower start per or decline $X.XX for an revenue Let's of towards guidance $X.XX of XXXX. performance at $XXX core expected than which modest compares core FFO property same-store million expected. NOI the as growth by of year-over-year FFO driven We share, $X.XX, reported

XXXX, fourth XXXX. reported of per or For the of for of core which the core share compares million diluted per million we $XX diluted of or fourth $X.XX to quarter $XX share, FFO FFO $X.XX quarter

cash estate property NOI driven commencements. down higher fees excluding X.X% lease year-over-year, partially revenues cash operating was by expenses termination rent and higher from property largely taxes Same-store real by offset

the was strong hypothetical XXXX of visitation NOI of NOI forecast comparable XX% quarter generated fourth Observatory in visitation driven demand comparable our the quarter, recapture million by The XX% visitation, when the which million hosted and levels. in exceeded quarter of from of in of fourth of comparable XXXX. XX% exceeded fourth XXXX December revised significantly largely XXXX of XXX,XXX visitors XXX,XXX up $XX.X visitors and observatory $XX.X visitation

execution. quarter fourth percentage to the of a recapture XXXX Notably, XX% testament and team's was NOI our as

NOI of observatory recapture represented full-year, the XXXX percentage NOI For million, XX%. which totaled a of $XX.X as

level. We comparable continue XXXX per expenses up to the strong generate and versus XXXX which manage tightly at XX% in observatory revenue were capita,

levels. pre-pandemic the a relative visitation outpaced As recovery result, NOI to has

focused observatory's will We from on here. guidance as the be to NOI Street performance forward we the provide the outlook going on

stands of company's quarter. XX-month observatory the NOI XX% roughly through As at basis contributed a reminder, the on fourth and trailing approximately a a historically the quarter

total on billion our weighted At December X.X% sheet year-end, billion, $XXX comprised of with balance share $X.X of debt million Our of had $XXX million as of was and XX, undrawn capacity a cash which interest of liquidity XXXX, rate $X.X X.X maturity revolving company had to the and average credit of a facility. net weighted term of years. of average at

of a debt ratio Notably, and with schedule rate until X.Xx million $XX maturity we was floating XXXX, EBITDA no below debt averages. net laddered Our debt to matures. mortgage adjusted have a no exposure November peer when well maturity well

that our shareholder New focused portfolio pursuit opportunities that activities of Our recycling. and us additive balance capital to City shares, value. the sheet This the affords in includes investment engage repurchase are of our York to flexibility generate

full-year repurchased March program stock XXXX, common of $X.XX This of of brings stock average as In which of X, began. a $X.XX the company repurchased price weighted date total of the weighted of a repurchased XXXX, outstanding the the a the million through average $XX.X common the $X.XX. to of share. approximately $XXX.X $X.X at and price XXXX, its million at of cumulative price buyback For total a company shares our February amount weighted fourth represent average XX, per its share XX% per share, at quarter, million

and recycling align our executed the previously that assets of mentioned, plan every capital portfolio at assets and/or on flow recycle where one long-term cash on the dispositions a pursue take look hard and focus and we each we we As with growth proceeds can our into objectives. have business

during on company We of successfully this pleased strategy. market executed period significant capital uncertainty, are recycling that its the

of Avenue $XX quarter closing with York, to company dispositions, asset closed of closing gross sale Plains, an million. for the in the million the condition. in office an under on at sale Harrison in XXX Street contract asset White valuation $XX terms at In New Mamaroneck subject first the Bank fourth York New located for quarter, of XX expected a remains customary in

redeployed the The transaction from approved million party to valuation in a in accordance disposition Subsequent retail manner with retail Main the February, year-end sale in XXX-XXX and December Connecticut, we gross was a into located asset these the on of that its the XXXX company our $XX announced company's Street Street protocols. a in suburban of and tax efficient XX-XX acquisition Westport, closed million. Westport Update. at office The were assets related dispositions in Business proceeds $XXX of XXX Mulberry at

the able with a we opportunities investment markets, quality, high are limited particularly of off-market capital this given In source dislocation was that team in market investment to our pleased those transaction.

enabled acquisition asset proceeds into tax this redeploy profile. to disposition an Importantly, the manner efficient its with company more in CapEx favorable a a

to acquire acquisition transit, represents mass tenants we company sheet locations and high proposition, portfolio fully to modernized this flexible benefit amenitized experience our which compared focused and and third able a in continue a stronger a of recognition This to as include business, our our Building Observatory, portfolio recovery foot traffic were even assets. contribute from as and in strengthen given unencumbered margin well State to retail the well near the office buildings that value high quality multi-family everyday to position pre-COVID ESRT's an brand strong liquidity, unlevered a search basis strong York upside with that continues a located sources of multiple Empire sheet Further, with of asset multi-family New City strong with pool. balance strong balance ESRT's we with on

guidance. to Turning

core We expect This to between FFO income. $X.XX excluding to of per fully range FFO lease $X.XX, core diluted $X.XX share. XXXX to fee compares XXXX termination

our reminder, any include in totaled a lease fees, does As not which termination meaningful range $X.XX guidance XXXX. future

to approximate we our to XXXX In guidance. reimbursement The be in higher expect down to primarily termination spend me a excluding assumptions partially is income. taxes, expenses from X% increase the used estate by change which and is X% X% real discuss Let in property the due income XXXX, NOI, an in cash operating same-store moment forecasted lease range to offset levels.

The in building largely increased for OpEx increase assumptions utilization XXXX. in to is tied

by operating increase, which even levels, and X% XXXX from reference, below expenses For pre-COVID partially reflect will with permanent operating this modest approximately property lease by the of levels. cost increased are to savings we particularly revenue The in achieve be some conservatism offset Similar growth some occupancy anticipated, expenses XX% to property guidance, same-store and assumptions of XXXX XX% on side, of which timing we assumes factored leasing commencements. revenue terms have year-end. in efficiencies

the observatory. to Turning

expect observatory We in $XX up to to million approximately XXXX from million be $XX million, NOI $XX XXXX.

reminder, million a observatory This XXXX. per NOI As in expenses of assumes guidance NOI. approximately for million $XX generated the pre-pandemic, $X observatory quarter

The ramp a low assumptions for impact around leasing lease expected end potential the of in revenues, of that tourism could of conservatism property our up and travel to and uncontrollable guidance timing range factors due particularly slower reflects than and commencements. terms observatory

end capital the unannounced ramp range income, up and that or just described high the not of reflects performance markets our Please acquisitions, do assumptions note observatory impact a termination any future activity. pre-pandemic that in any marginally guidance lease property fee of future meaningful levels. The include exceeds or dispositions estimates

manner. two additional pending We In strategy summary, were of the suburban assets, structured each suburban a the redeploy proceeds suburban transactions to company recycling assets, the enable one to retail well company closing. on dispositions our capital executed has the office asset tax two on with completed and executed instance, its In efficient priorities. office in

all Manhattan continued balance approximately this million attractive debt capital includes XXXX to revolving XXXX, investment in FFO. a no enable ESRT's of three has in XXXX, X% plus emerge and two to We contributes buyback pool while the assets, undrawn of unencumbered debt or this brings cumulative in multi-family strong and take XXXX, share and and began company shares a program now attractive executed XXXX. remained outstanding that advantage comprise transactions multi-family NOI exposure, six-month March credit extensions, in approximately total our $XX $X.XX active and to $XXX prudently which off-market managing total XX% matures buybacks sheet to did in uncertainty late the may of rate on through since million opportunities source of We that now strengthened buyback strategically approximately We which floating to that no have until maturity period our liquidity dislocation. remains facility and of

Our commercial strong from commitments. XX% benefit portfolio with a leased, strong quality can XX% who we deliver is occupied balance over tenants high on their to proposition, and now demand and for sheets over continue landlords and assets, value

ahead, continued XXXX advances focus As ESRT sheet, market. we allow on we with to a the and look us to continue the commitment ESG, capital disciplined flexible and economic in into uncertainties a and allocation, perform headwinds to believe will which well-positioned balance despite

turn Q&A. I'll the with now that, for And Operator? to operator

Operator

you. [Operator session. question-and-answer Instructions]. a We'll be Thank conducting now

the first line Steve from proceed Our of questions. come ISI. with questions Sakwa your with Evercore Please

Steve Sakwa

is sort some assets B market of the A being that buildings guess Yes. Tom out these and the more with little couple, to your assets. starting value-oriented pushing maybe Thanks. leasing. to redeveloped are demand from I'm extent Penn are into the to you're I maybe in of that maybe of understand afternoon. saying more what the guess tenants seeing, these demand portfolio? and trying a of some you Class that And Good I a on coming bit Class

Tom Durels

Yes, Steve.

all what seen transit, as to newly We from the modernized to continue adding, fully spaces, delivering giving access they are we're we to built healthy we're environmental a that mass past, continue benefit an flight buildings because accessible in want. robust indoor great We're quality and to and benefit amenities we've quality, tenants price point. tenant which latest in to at

average which X.X but market, And that's we to with square million all areas that nearly quality. we're the over the excellent not leases signed, from Penn just buildings, from have the equals We Building of leasing feet engineering our with of to year this I evidenced a XXXX generally average So tenants is which an seeing across firm by flight that XXXX, -- robust January the as at in pretty from Empire square XX,XXX three-year that foot State close was just lease following was signed, a mentioned signed the the market. quarter. earlier,

lease and approximately at signed signed fourth quarter January, leases look the into you feet a of So Empire the we've XXX,XXX at Building. over square State

a brokers our feet full what amongst and XX,XXX broker floor pre-built where we're I'm good marketing we're a robust creating event Empire week about at We held last some excited of we that's to buzz amenities. end are high doing because adding square

square a tenant bar about square before court on XXX converts at we a reserve the on XX,XXX lounge, that three is hall spoken options. a have the of Starbucks beverage onsite golf include that gym two new that executive to that that foot the with existing in up fitness presentation top floors. We've center, and town simulators, multi-sports feet opened conference service, room food eight person this Empire November XX,XXX center, And spectacular amenities the

to think up. we're occupancy incredibly leased XXXX that's I going improve drive our to our in percentage So well-positioned

Tony Malkin

they just their Steve, have here, And feet own XX,XXX at to that people and yet. not to that -- tenant came that Empire announced I'll square leased just Tony add

amenities, tenant of So March, attraction the with that environmental beginning of we talent and Park retention more indoor come is. It's actually will mandate they're to what was a efficiency, energy the space South, for with talent. hot coming to specific tenant to an and quality great that so from is an a Avenue will get before quality the the announce be at name that area

Steve Sakwa

Okay.

You've about back, ticket to dramatically COVID. the think average and volume through guys of that volume comes that just Tony, price? price? I'm are the as of tourism how think do sort sort and obviously balance just able price you using you've wondering question, been increase and you between continued observatory, the about on system you how the got, ticketing recovery Second as balancing

Tony Malkin

now, performance with month over will two; the the we one. Part goals, January, happy of go keep we When That's been happy In in at for hours operate, that the capture we just very on volume. part to to mind very we hours before we are in the observatory. demand. when with fact NOI we our has observatory we capture, strong. because can XXXX, all the always quite the opportunity whereas need we're look we're of always they based through. reservation, Look, which visitors stayed we what add order know to provide to Right came open

So we feel very good.

We have the best had. per caps we've

we've we basis programs same look at past mix the more When comparable means than at that and on that still ratio. added the a to volume

Our per cap is dramatically higher.

Our never that come branding people us, the get been pay only it, brand builds don't brand which opportunities, and brand. co-branding, We're has that and stronger. now come we we true us they global our for to a to got further three direct experience more attraction one demand what diminish increases, to is as world. volume customer we us for attraction. we'll that's builds number in the and number And States, in What the do, add however, the the ours. United The won't

customer We'll the maintain experience.

are what only edge. perform to play be heard, our it's to do. in Since going City. Oh, improve summit. and to We've to York oh, to game, World Trade be to I've going Oh, XXXX, be authentic the continue and that's the it's continue New we'll We the going Center. it's continued One

Steve Sakwa

the under And last guys Great. Connecticut. $XX asset wants up I it was that sort know sort provide guess I sort I that me, Westport, priced was know mechanics or and in sold described just related the don't could and you saw how information transaction as for that deal. And of you transaction, I activity question million what of this. that to this a then on who of details of deal sort behind party didn't maybe take

Heather Houston

can to Heather I is I'll This Sure. Christina one it. Houston. and add take that let

transactions the precautions with the related the for practices was reviewed process. transaction protocol that's related additional buyer transaction affiliated in counsel with took conducted that party including to compliance it's Malkin. length ensure affiliated, Tony company an was with our an entity outside and So arm's And

members separate seller. the full were appraisals both which to approved in made review for of There guidance conducted our buyer And then and counsel transaction. outside of the transaction independent Board will the XX-K, and counsel the independent an the plan our file be we under of disclosure and week. next The

Operator

you. Thank

of come Our line next Bonnel Please from of with Bank questions. the proceed America. Camille questions with your

Camille Bonnel

same-store guidance in please of can your particular NOI Metropolitan your portfolios? expecting spreads retail revenue New around modest on office leasing growth, you comment expectations your Hello. and for Greater Within York

Tom Durels

Sure, Camille.

Metropolitan portfolio -- for For quarter Greater this We we past positive a to New in office, spreads achieved course, of negative the It's going had were X% our Manhattan spread. -- in York depend. office this quarter. all

of of Going fully what are leases spreads lease we are to mix going they depend the forward, types on that what the and spaces spaces are. and the prior escalator rents

office, Metropolitan rents to the see in-place going spreads for York about New York Greater just specifically If New modest flat at asked we're Greater portfolio. our negative probably you to look in you Metropolitan

we expect in go Manhattan. foot $XX spreads square escalated significantly, forward was leasing more move leasing the rent prior the Manhattan, our foot vacant in up given space can I positive new would where above needle and doing and we we're per deals As square in $XX on around

that going And then of it's on we be there, really to spaces amount tremendous it's have over years. retail, if might than markdown, any vacant offset the by spreads $X on modest million, offset of expiring. $X the million. of to the negative it's several more space. don't we -- value up could But if see lease a retail flat leases the range That Well rolling in be of next

Camille Bonnel

weighted, outlook expenses does how NOI much to of your the same-store point due XXXX? will higher Okay. comps utilization, around in of impact And the to tougher half the on given second operating the be anticipated front-end

Tom Durels

we're be see in mean expect increased operating expenses of I to a utilization. that to operating in going due increase much front-end how You expenses? gradual terms will would

of that increased we'll like we're things increases. see will the costs be rate union Some that -- next year

be the expenses So bit got we've year. be some lumpy. one-time will over And then that a spread that would

mix. So basically, of bit a it's a

that expenses will utilization a and gradually our of some see will due bit lumpy. others be You'll to rise

Camille Bonnel

the And the been and of please you final will question, on commissions in comment lower leasing XXXX? costs can be costs good QX what's driving is Okay. And level where improvement if year? a throughout leasing tenant and these

Tom Durels

of costs in quarter a Well, this term of costs the past vary pre-built, costs, space. type, as and the with see to year leasing And as box, it's last historically a compared the space on four-year line increase by you're lease of the term, to percentage our white they see initial length second-generation and whether really first-generation depend quarter quarter, was a the going really quarter rent, per range. this you

that square foot. and in around rent foot or and XXXX cost X%. that's foot, last $XX we But aggregate per of a rent leasing five really well effective weighted what XX% about average that net per an square effective we basis saw focus range increased XX% basis by and of is about in as net kind quarters our think square this we average on per dollars were below to on our $XX quarter It's on we year-over-year

that on our keep forward. that's very and stat going a So positive eye we think we that's what

Operator

Thank you.

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

Michael Griffin

Thanks. Great.

is assuming mid-point map. with Just this guidance, back be I in rate maybe should calculating that on the I'm it? the thinking run $X.XX mean, the quarter, expectations envelope way fourth in of of the for kind about the XXXX we

sort the estate us higher gets call taxes, observatory of impact of benefit that else sort I for higher Anything an Did $X.XX from bit NOI closer might that, that OpEx increase be getting little $X.XX a there give toward me You're that maybe maybe increased those numbers end, occupancy. mid-point? real from and missing a to in above? a X%

Christina Chiu

key it. Hey, I think Griff, are Those the you ingredients. have

very the we exactly same-store in transparent be So the to blocks components, what so try those do showing have right? of terms drives building you NOI,

to is other There when quarter is, you you The I think a be observatory last just results. seasonality that. the little can thing with some would cautious I'm bit element about the mention whether annualize

that any want annualize given not and to careful in the quarter just take year. fourth You to

is other the the The you the second component recycling. on is decline, NOI got capital but component

it's about offset that $X.XXX have people terms But you for component. Mulberry $X.XXX map of from another gets the of to by right the quick on in you contribution the do to hit $X.XX. XXX the Just FFO

Michael Griffin

Tony And Thanks. this a been multi-family a second. a it his avenue I recently. like we over can to growth about then talked in shift maybe has bit prepared for remarks. it seems Great. mean,

deck, investor including Mulberry, the at the Looking makes the about pro portfolio. forma, X% up of

a You've sort think medium-term? grow the piece New just this you City focused York pie I'm to in being curious how of could to of of a talked more big the be about near REIT.

Christina Chiu

Yes.

focused observatory residential asset a office sense. to any makes So have makes mentioned of sense ton a as the having the to our everyday have business, of we've for in New ton York drivers, and player interest class, us City it retail, a definitely have quality to demand

healthy. very this think fundamentals the line responded put matter previously very we it, Because it's are multi-family of there we've the no to As don't out we'll what. thought achieve questioning, a after, target reality and prudent is to say, is

And so interested. we we and are to want say balance

strong we to go have deals prudent liquidity and want We but way the in be transactions. after source we positioning,

Michael Griffin

Great.

Tony Malkin

-- I the we may, thought value. to actually. opportunity thing when our We was portfolio. two first transaction. that, renovation it three see do One noted, occupancy it. to omnivorous opportunivores, so -- we was when will thought Everybody got to Griff Three, we on Tom to I'd in if add dumped go do. things. under we actually our One, multi-family number right we We develop it our of time XX% note the announced that, just units that like two, where we are shareholder wrong have really we

not an units, in gross is That's for that number. adjusted the not circulation. So

of bit play little a there. there's So

focus focus might on cash, more our focus just cash again, we is on FFO and on less delivery, we I add And cash.

So we're as we go with what we'll really pleased continue and on we've to opportunity acquisitions. that forward look at done

Michael Griffin

me. Tony. great, That's Appreciate additional the color. That's for it

Christina Chiu

Thank you.

Operator

Thank you.

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

Blaine Heck

Good Thanks. afternoon. Okay.

to that you are seeing signs any look office in a are efficiently hoteling just leasing to follow-up question, or First use space tenants a their to hot kind hybrid more environment, desking as the environment? on more of way at likely

Tom Durels

the and about all get everybody that like are hoteling seeing doing tenants collaboration are we're creative of tenants desire speaks these employers the habits Short about attract of train just the things for talent for things, But moving to of and No. examples are pre-COVID, is -- environment The of that. an all there just have their examples creativity, team change But what -- where I need space. that hoteling that folks are looking drives mentoring, building, of because by office doing Blaine. the there towards were and concept And is hoteling no, post-COVID. to think employees are individual answer together to workspace. is work that in tenants that's not retain demand

Tony Malkin

cited two was I Convene, prominent attended XXXX, office back in in estate I in just I'll with office that space users space. Jones real a add, flex the users Industrious, for on Lang be other occupied future Yes. person -- would WeWork asked five comment use from of short-term to by conference a short-term short-term an space at years, execs Knotel. one by And which all statistic within LaSalle XX% short-term economist of on

the you clearly and difficult to don't you're it's happened articles relate work businesses when confident comments how it to office very made remote completely. hasn't And past, settles per feel of we've forward. to comment down your the to and XXXX happen. which that going would in office in won't plays be irony the environment on have that fired is I of and We that ultimately before Well, the an central within role probably it peers. as also

Blaine Heck

and Thanks, All Tom right. helpful. Tony. That's

as XXXX. same-store quarter I to had for to XX% negative want NOI. question, gears in to same-same negative NOI Recently you guidance switch my last For XX% second guys

at for You negative that significantly beat year. number the X.X%

guess, the there how Just negative did degree forecast using that beat you and is scenario that about the to into negative for conservative should guidance a how you context, could I ultimately, much as think guess, forecast? which we built that that I is X% in X% same-store to XXXX, here XXXX? in

Christina Chiu

Yes.

so in about X% was We say quarter we was down. beat did still closer remarks, last about So but clarification, down. to it, it it our X%

reflect it the print reflect And did conservatism. So that. didn't

of And to was line OpEx items and on result and came side, in a revenue relatively in other rental make higher that OpEx outcome. wanted we in So we -- the had came the it things. and revenue, expectations. couple with a in reimbursement resulted better higher sure our revenue income line in a few

XXXX, what try reflecting deliver do is outperform any There conservative the we increase but we hope can, guidance be uncertainties as conservatism the and as to as to results to in we much market we we the over in period. promise, and hope we given

Operator

you. Thank

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

John Kim

us the both speaking the your know and NFC you. the is, stance did a Eagles stance of when on of on the a a has that Championship blowback you reconsidered celebrate? jet lot observatory teams good Tony, time kudos irked or of victory side. give my a for a has guess question your lot which that on any you I your in New State on Yorkers, lot hard -- few ago. the really giants receive publicity press celebrated Thank I you blowback, work, Building in legal years Empire But

Tony Malkin

the be but First celebrate events. funny. of two, question, all, at major Number the one. fair very always we'll whole was that event Not your sports number to

World I visitors outside majority did, answer we York the global Our is do vast -- to from a City. with New of brand. we what The NCAA our Olympics. the we us what come And Series, integration into tournament, do we're with the so the

residential what international appreciate Empire Empire attention calling We in became retail Building that's Empire the State our and Building Building And properties, big Observatory. office State have to the a phenomenon, and State our along with an is. driver what our the properties, properties, I your actually

John Kim

side. year you when offsetting starting I the would you're people start on in that low-to-mid escalators it Can It but increased are comment using off single-digits focused at that? know this a conservative, The lot you came would've on same-store you this, that a I question occupancy point mentioned out. with have Christina, I the but in wasn't of coupled -- on guidance, revenue on you being what's expecting with the agree. that revenue place, thought

Christina Chiu

The We have expenses the as operating you just key up we modest well. revenue is have driver increases mentioned. as going

We're where as So allow hits we working and progresses. to timing numbers. the guidance X% year on get we combined drive This in to X% address to as communication it's lag clarity. get the more deliver more hard think results But we We We certainly that what room and for to very I no that's uncertain can positive secret. year. is that. do an we'll as

John Kim

to guidance just not And does correct? include this clarify, same-store termination fees,

Christina Chiu

excluding. Correct,

John Kim

fund excess sale sale. use this? final proceeds of Mamaroneck What on but know the cited side. is XXX are there Okay. question Mulberry you Street, My used this I that the will some on the funds are on be to

So you of are? have determined proceeds what use the

Christina Chiu

We have the not determined on balance.

we deliver redeployed. to we And the most it more of information, will will that as be market. have So

Operator

you. Thank

your come questions. proceed the Green questions next with of Our Dylan Please Street. from with Burzinski line

Dylan Burzinski

thanks guys, Hi taking for the question.

Just bit retail. curious little you've executing of a office done sales, standalone a good the suburban job

candidates on there's thoughts terms know your but into considerations account, you're in the of I portfolio that. wanted that to for how portfolio. just the tax Here's obviously Manhattan hear disposition about office thinking take

Christina Chiu

question. for Thanks Yes. the

the mentioned our I of remarks, take a in at as look So all hard we assets.

we nothing think as the of market in about So and redlined is what sense terms sale. characteristics makes for in being today's

We sheet have are office. time until aware we popular most And have XXXX. being the that it's not due November for that we no debt strength, balance

floating unnecessary time. We inopportune to exposure. have no force a on an rate pressure at There's no us sale

explore how to monitor sale, for in be the assets. we we pursue it. So manage a active opens we the us closely, will And when very market the window will

Dylan Burzinski

kind of point still kind in retail. the that not this I then, you of at on the are in guys are office you multi-family you're and And looking time? at past Is as acquisitions, at mentioned where guys you kind think primarily focused of case that looking

Christina Chiu

on actually said York New and focused office, we're retail. residential City We've

profile and really remains those for sense flow price, predicated capital entry categories. of three most it's it So goes And the company. forward cash profile the going the what the makes that on in, and amount growth

upside of is that increase to we New City, diversified, we seeing strong, proud sources. multiple to from if very flows add and that. will York that to theme drivers coming want have common you're cash our things And different the resilient and of exposure We're

Operator

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

Tony Malkin

Thanks, everybody.

to ESRT stream. flight the advantage on build that take and signed diversified earnings income of will is to well-positioned well leases perform, contribute our to quality

stock. flexible empowers repurchase balance and investment strong to Our of take us our and sheet opportunities advantage

to New great a York play is way ESRT City.

participation a Our we excited more Thank all and ahead. your portfolio is call. today's you by stronger ago for diversified year the are in was opportunity it and than

ESRT's stream, flow our leg initiatives. one visit; into ESRT's enhanced of can progress; with leased with XXXX multi-family, a notable capital re-imagined X.X towards priorities: space year XXXX our through value shareholder assets and marked continued amongst and fourth observatory, out conclude progress shares of top brand only in tickets is the sell lease percentage observatories suburban of well lease authentic good and to our meaningful million four recycling repurchases and now To square leadership completely the feet occupancy diversified of which cash ESG in coupled

to a in execute flexible the strong and environment this and on shareholders backed goals and We are for by drive company's feel in to our confident XXXX. be sheet ability balance fortunate in growth

ESRT for great who and hard property team I months ahead. to have thank of look stakeholders. you job and we roadshows, great at to chance and to non-deal continue the Many confidence the you onward with behalf in interest, upward. many every forward do our worked We on then, to will have thanks Until meet incredibly your tours conferences, of a

Operator

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

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

Empire State Realty Trust (ESRT) 16 Feb 232022 Q4 Earnings call transcript