Empire State Realty Trust, Inc.

Greetings and welcome to the Empire State Realty Trust first quarter 2022 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. 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 first quarter 2022 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, financial results, 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. We are pleased to report a strong first quarter to start the year, and we have many reasons to be confident about the recovery that is underway, both in New York City and within ESRT's portfolio today. At the start of COVID, we said we were both realistic and confident about New York City, and we still are today. The New York City market shows many signs that it has passed its bottom and forward on a new upward trend. The residential market has strongly rebounded as people have returned to enjoy the city. Overall hotel demand in the city is up 80% year over year through March 31st, primarily driven by tourism, and green shoots of business travel. Room rates surpassed 2019 levels in February. Foot traffic is near pre-pandemic levels in many of the neighborhoods that surround our portfolio. And office tenants plan their future space needs on the basis of where they see the importance and benefit of in-person collaboration. These positive trends translate into improvements in office leasing activity excellent performance from our multifamily assets, and steady first quarter growth in our observatory deck visitation. We believe that ESRT is well positioned to benefit from the recovery that is underway in New York City. We are pleased to introduce inaugural earnings guidance to help the street better understand our outlook. Christina will cover the details in her remarks. Our team is focused on the identification of attractive external investment opportunities, which will continue ESRT's next legs of growth. The valuation of our company presents a compelling opportunity to purchase our shares and benefit from our multiple sources of New York City upside, which include tourism, residential, retail, and office demand as New York City continues to recover. Tom Durells will cover our healthy leasing this quarter. Tenants consider their long-term space needs, their work cultures, and our quality buildings with amenities in place or underway, healthy building attributes, indoor environmental quality, and energy efficiency, and commit to new and expansion leases within our portfolio. We continue to build back our leased percentage and that will drive higher occupancy in the future. We have attracted great companies who see us as long-term partners for their needs of high-quality real estate and want to grow with us. The evidence is in the recent expansions from Signature Bank and iCapital Network. Just a couple of recent leases announced in recent months. The debate about the long-term outlook of Class A and Class B office buildings and their ability to attract tenants has been overly simplified. Tenants today prioritize well-amanitized, healthy, energy-efficient buildings, which are centrally located near mass transit, at all price points. We are a destination for the flight-to-quality trend at a more accessible rental price point for the broadest population of tenants. not just those which can afford to pay triple-digit rents for brand new buildings. We are encouraged to see this in our leasing activity completed and underway. First quarter visitation to the Empire State Building Observatory was 45% of 2019 levels, and that exceeds our hypothetical forecast of 40%. While the first quarter is historically the lightest quarter for the observatory, We are encouraged with the start of the year. We discussed in our last earnings call that Omicron was somewhat of a speed bump earlier in the first quarter. We saw improvement towards the end of the first quarter with a recapture rate in March of 51%. Momentum has continued through April with visitation of 62% month to date. Recent performance was dominated by domestic travel with green shoots of growth from some of our international markets. With more visitors, we see the percentage of our visitors from our past program and travel partners steadily grow. That said, our revenue per capita remains stronger than prior periods with the same direct versus third-party sources of traffic, a big win for the observatory and ESRT. It is good to have had a few days with more than 10,000 visitors, and at the same time with our new reservations-only system to provide our visitors with a unique, memorable, best-in-class experience to our very well-received exhibits and 102nd floor with high revenue per cap. It is important to note that the Empire State Building Observatory's $165 million redevelopment has the capacity for thousands more visitors each day without lines or sacrifice in visitor experience. Our online research and in-person polling confirms that the Empire State Building Observatory is the authentic New York experience. Turning to acquisitions, we look to build on our successful fourth quarter multifamily investment. We see clear advantages in value creation potential for our stakeholders from our unique portfolio positioning that enables us to benefit from the continued recovery of New York City in multiple ways, including increased tourism and residential, retail, and office demand. As such, our investment team continues actively to underwrite new office, retail, and multifamily acquisition opportunities, which are complementary to to our New York City-focused portfolio, where risk-adjusted returns can be compelling and where we think we have an edge with our local knowledge, ability to spot unique opportunities, and ability to be nimble with our flexible balance sheet. We continue to measure the potential of these options against the purchase of our own stock. As we focus on shareholder value creation, We also look at potential capital recycling. In all of this, we actively review our portfolio and seek opportunities to monetize assets in which we have added value and reinvest the proceeds to fund buybacks and accretive acquisitions. We are proud to report additional sustainability milestones achieved during the quarter. ESRT was among the first to achieve recertification of well-health safety rating for our entire commercial portfolio. We were the first commercial portfolio in North America to achieve this distinction. Additionally, last week, President Bill Clinton, Governor Kathy Hochul, and Mayor Eric Adams were at the Empire State Building to reveal the Empire Building Playbook, a guide to low-carbon retrofits, which was co-developed by Empire State Realty Trust and the New York State Energy Research Development Authority, and supported by other New York City-based landlords and the Clinton Global Initiative. We now have playbooks fully planned for more than half of our New York City portfolio. On the property front, during the quarter, we announced a large community solar project at 500 Mamaroneck that will generate supply more than double the building's energy needs and require zero capital investment. We will look to highlight more of these project-specific achievements going forward. Finally, we just published our second annual sustainability report, where you can learn more about our leadership in ESG. Now, I will turn it over to Tom Durrells.