Empire State Realty Trust, Inc.

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. 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 second 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, same-store 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 our strong second quarter and first half of the year. ESRT's top priorities are to lease space, sell tickets to the observatory, and achieve our sustainability goals. Through all of that, we will enhance our shareholder value through proactive portfolio management and capital allocation. ESRT is well positioned with a modernized portfolio that takes advantage of the flight to quality, signed leases that will contribute to earnings, and a strong and flexible balance sheet that allows us to take advantage of investment opportunities. We are a great way to play New York City's upside. with our revenue streams from office, tourism, residential, and retail. And there's no doubt about it, New York City is busy again. International tourists have returned and their numbers are growing. Seats on planes to New York City in the second quarter reached 87% of second quarter 2019 levels and hotel demand is up. Foot traffic nears pre-pandemic levels in many of the neighborhoods that surround our portfolio. We are well positioned with modernized buildings close to mass transit with great amenities and more to come. Add our industry leadership in energy efficiency and indoor environmental quality, and we have a very attractive set of buildings with a tremendous pricing advantage. If you want to see some great independent validation of how the market values our portfolio, I encourage you to view the new video by our largest tenant, LinkedIn, on slide six in our updated investor presentation. In fact, there are several new videos you can view in that new presentation. The Empire State Building Observatory, rated by TripAdvisor as the number one attraction in the United States and number three in the world, is strong. We have already passed one million visitors year to date. We are on target for our hypothetical recovery. More on this in a moment. Our stock has presented a very compelling opportunity and we accelerated buyback activity during the second quarter. That said, we continue our focus on the identification of accretive external growth with an eye to how we can recycle portfolio for better performance and give ESRT its next legs of growth. We have a history of success in unstable markets and we see opportunity ahead. Tom Durrell's will cover our healthy leasing this quarter. ESRT is the beneficiary of the flight quality trend. Tenants focus on buildings with tenant amenities including a healthy building features, energy efficiency, low emissions, indoor environmental quality, convenient access to mass transit, and are attracted to our modernized buildings and their compelling price points. We continue to see robust expansion activity from our existing tenants who know and love our product, including recent expansions with iCapital and Burlington. which followed the Signature Bank expansion signed last quarter. LinkedIn, our largest office tenant, has expanded many times within ESRT's portfolio and recently created a great video that showcases how their office space at the Empire State Building is an asset that helps them attract and retain talent. Again, their video can be found on slide six in our updated investor presentation presentation, which also includes several other great videos to watch. We continue to build our leased percentage, and that will drive higher occupancy and earnings in the future. Two years after we reopened from the COVID shutdown, our entire team is over the moon that the Empire State Building was declared the TripAdvisor's number one top attraction in the United States and number three in the world in the 2022 Traveler's Choice Best of the Best rankings. Our newly reimagined and iconic observation deck continues to lead in unmatched brand recognition and historic prominence, the authentic must-do for a visit to New York City. Our new timed ticketing and reservation system implemented post-COVID delivers our visitors fantastic experiences without lines and even with our higher prices, people love it. We have already passed 1 million visitors to our observation deck year to date. Second quarter visitation to the Empire State Building was in line with our expectations of approximately 60% recapture relative to 2019 levels. Visitation recapture rates in July continue in line with our hypothetical recovery. As visitor numbers increase, the percentage from our past program and tour and travel partners steadily grow. Our revenue per capita remains at record levels relative to prior periods with a comparable direct versus third-party traffic mix, a big win for the observatory and ESRT shareholders. As a result, while second quarter traffic was 59% of 2019 levels, NOI recapture was 80%. That is the pricing power we have achieved from this best-in-class experience that we provide to visitors. Christina will update you on our buybacks. We continue to underwrite new acquisition opportunities which are complementary 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 and strong balance sheet. We continue to review our portfolio to monetize assets in which we have added value so that we can reinvest the proceeds in accretive acquisitions. We are happy to report additional sustainability milestones achieved during the quarter. Notably, ESRT was awarded the new 2022 Platinum Green Lease Leader Award by the U.S. Department of Energy's Better Buildings Alliance and the Institute for Market Transformation. ESRT is one of only nine awardees to achieve the highest platinum distinction. With this award, ESRT is recognized for its integration of high-performance leasing and sustainability practices into business operations, which deliver energy efficiency, cost savings, air quality, and sustainability for our tenants. And now, I will turn it over to Tom Durrells.