Empire State Realty Trust, Inc.

Greetings and welcome to the Empire State Realty Trust fourth quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Tom Keltner, Executive Vice President and General Counsel. Thank you. You may begin.

Good afternoon. Thank you for joining us today for Empire State Realty Trust fourth quarter 2021 earnings conference call. In addition to the press release distributed yesterday, a quarterly supplemental package with further detail on our results and our latest investor presentation were posted in the investor section of the company's website at esrtreit.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in applicable securities laws, including those related to market conditions, property operations, capital expenditures, income, expense, and proposed transactions and events. As a reminder, forward-looking statements represent management's current estimates. They are subject to risks and uncertainties, including ongoing developments regarding the COVID-19 pandemic, which may cause actual results to differ from those discussed today. Empire State Realty Trust assumes no obligation to update any forward-looking statement in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements in the company's filings with the SEC. Certain of our disclosures today are added specifically in response to the SEC's direction on special additional disclosure due to the changes in our business prompted by the COVID-19 pandemic and are unique to this instruction. We do not expect to maintain the same level of disclosure when we resume normal business operations. During today's call, we will discuss certain non-GAAP financial measures, such as FFO, modified and core FFO, NOI, cash NOI, and EBITDA, which we believe are meaningful in evaluating the company's performance. The definitions and reconciliations of these measures to the most directly comparable GAAP measures are included in the earnings release and supplemental package, each available on the company's website. Now I will turn the call over to Tony Malkin, our Chairman, President, and Chief Executive Officer.

Thanks, Tom, and good afternoon to everyone. 2022 is off to a very busy start for everyone here at ESRT. We have intense focus on the tasks at hand, maximize the benefits of our balance sheet, and excitement for the next normal as we all continue to adapt to a world where we live with COVID as an endemic and have less and less disruption from COVID as a pandemic. May I remind everyone on the call that I have said for nearly more than 18 months that we will see a constructive shift in the dialogue by the end of 1Q 2022, and we have seen progress towards that end. There's clear recognition that the world has changed since the onset of COVID nearly two years ago. The path towards the next normal is not a straight line, and the trend is positive. More and more examples accumulate every day, which build companies' recognition that work unity matters. Learning, teamwork, performance reviews, retention, promotion, and fostering a strong culture are incredibly hard, if not impossible, for most to execute entirely remotely. That said, this is the next normal to which we will move, not a return to the old normal. New York City's refocus of its priorities to be inclusive of the business community and the needs of its law-abiding citizens, under the leadership of newly elected Mayor Eric Adams, is refreshingly underway. Schools remain open, trains and subways are busier, there's traffic throughout the city, Hotel occupancy was up 21% year-over-year through November, and hotel bookings for December were up 312% year-over-year. At the end of December, just prior to the Omicron spike, foot traffic in the Garment District rebounded to 86% of pre-COVID levels, as 3.2 million people traversed the streets and sidewalks around our Manhattan office portfolio. ESRT is in pole position to capitalize from the recovery and the competitive positioning of our portfolio as a beneficiary of the flight to quality is obvious. As Tom Durrells will discuss, we had a strong leasing quarter. We continued to see the return of activity on long-term leases as tenants contemplate their future needs post-COVID. Unlike past variants, discussions with tenants and leases underway for their long-term office needs continued. With deals underway, we have the seeds for the growth in our leased occupancy. We continue to attract great companies who see us as long-term partners in their real estate needs who want to grow with us. Market commentators debate about the long-term outlook of Class A and Class B office buildings and their ability to attract tenants has been erroneously oversimplified. Our redevelopment work has placed our portfolio firmly in the sights of companies' needs to implement their long-term return to office plans. Best-in-class office space and well-amanitized, healthy, indoor-quality, energy-efficient buildings centrally located near mass transit in which employees feel safe is critical in all price ranges. We offer office space with these important attributes at rents that are accessible to the broadest population of tenants, not just those who can afford or want to pay triple digits for brand new buildings. Our properties benefit from the off-sited flight-to-quality trend in the market, and we see it in leasing activity concluded and underway. Shifting to our observatory operations, the U.S. reopened its border to fully vaccinated international tourists on November 8th. which contributed to the accelerated recapture rate that we achieved in November and December before impacts from the Omicron variant were felt. Our visits continue to improve along with our revenue per caps, and fourth quarter NOI of $10.7 million is up 67% from the previous quarter. Two-thirds of recent visitation has been driven primarily by domestically sourced retail onsite and website sales, with the balance driven by our third-party vendor sales to international visitors. Omicron has been a speed bump in our hypothetical recovery rate for the first quarter, and the good news about that is that the first quarter to date is our historically slowest period, and we already see post-Omicron recovery. We continue to provide our visitors with the unique, memorable, best-in-class experience, and we continue to look for ways to enhance that experience that produces better Google and TripAdvisor reviews than any of our new competitors, One World, The Edge, and the latest shiny penny, The Summit. Our goal is to provide best visit for our guests and to maximize revenue through our timed ticketing reservation system through which we manage visits in peak periods for our immersive museum quality exhibits. We are out of the pure volume for volumes sake business. The observatory's health and safety enhancements, the top of the line indoor environmental quality, including MERV 13 filters, ventilation, and active bipolar ionization, have been successful for our visitors and our team members. Fourth quarter attendance, that approximately 40% of 2019 comparable period attendance, a continued improvement from 2020 and the prior quarter, and in line with our hypothetical illustration. We registered strong November and early December visitation. Attendance for the fourth quarter was slightly impacted by Omicron. In our latest investor presentation, we revised the pace of our hypothetical observatory recapture wrap-up to account for the impact of Omicron. We remind everyone that the first quarter is historically the lightest quarter for the observatory. A quick note on competition, we believe there's a large enough market for multiple attractions to do well. We remain the only authentic, iconic attraction and have demonstrated repeatedly our ability to compete when other observatories opened. We are confident in our continued ability to do so. Turning to external growth, as previously announced in our business update in early January, at the end of December, we closed on the acquisition of 625 attractions multifamily units across two Class A multifamily assets in Manhattan. This is a great transaction for our shareholders. I'm very happy with the execution from everyone involved across our company and with our new partner. Our investment team continues actively to underwrite new office, retail, and multifamily acquisition opportunities where we think we can get an edge with our local knowledge, ability to spot special opportunities, and ability to solve others' problems with our flexible balance sheet. We continue to look at share buybacks and achieved a meaningful level during the fourth quarter at an attractive share price. Turning to sustainability, we are happy to share that ESRT was selected to receive a $5 million competitive grant in the first funding round of the Empire Building Challenge, a $50 million grant. state initiatives spearheaded by the New York State Energy Research and Development Authority to reduce greenhouse gas emissions by 85% by 2050. Additionally, ESRT was selected for the 2022 Bloomberg Gender Equity Index, an index that aims to track the performance of public companies committed to transparency in gender data reporting. Our leadership in energy efficiency Sustainability, Healthy Buildings, and IEQ continues to set the industry standard while we show annual improvement and differentiate our attractiveness to expanding and new tenants. Thanks to our SVP and Director of Energy, Sustainability, and ESG, Dana Robbins Schneider, we look forward to our second annual sustainability report publication in spring 2022. ESRT has a well-honed operational skill set, flexible balance sheet, disciplined track record of capital allocation, and ESG leadership position that will deliver long-term shareholder value. The team works well and hard as we press forward. Now, I will turn it over to Tom Durells.