Empire State Realty Trust, Inc.

Greetings and welcome to the Empire State Realty Trust third 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. 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 Heather Houston, Senior Vice President, Deputy General Counsel and Corporate Secretary. Thank you. You may begin.

Good afternoon. Thank you for joining us today for Empire State Realty Trust third 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 esrtread.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, 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. The COVID situation has normalized, and we will no longer include specific COVID disclosure unless warranted. During today's call, we will discuss certain non-GAAP financial measures, such as FSO, modified and core FSO, 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 Wolkin, our Chairman, President, and Chief Executive Officer.

Thanks, Heather, and good afternoon to everyone. We are pleased to report a strong third quarter of results, updates on our capital recycling activities, and share the outlook for the balance of our year with you today. ESRT's focus is unchanged, lease space, sell tickets to the observatory, and enhance shareholder value through proactive portfolio management and capital allocation. ESRT remains well positioned with a modernized portfolio to take advantage of the flight to quality, signed leases that will contribute to earnings, and a strong and flexible balance sheet to take advantage of investment opportunities. There is no doubt about it. New York City is busy again, and we are a great way to benefit from New York City's upside with multiple revenue streams from office, tourism, residential, and retail. Some of you may have noted certain sell side commentary that we exceeded expectations in some areas and fell below in others. That is the beauty to our revenue composition. We have four revenue streams, and therefore, if you want to bet on New York City, we are the best way to make a balanced investment. Our modernized buildings close to mass transit with great amenities and more to come, and our industry leadership in energy efficiency and indoor environmental quality help us to draw consistent leasing volumes, and the third quarter was no exception. We find some great independent validation of how the market values our portfolio and in the video by our 250 West 57th Street tenant, Cook Fox Architects, and we have that on page five in our updated investor presentation. In fact, there are several videos in our investor presentation, and they are all worth the time of anyone who wants to understand our company. The Empire State Building Observatory is TripAdvisor's number one attraction in the United States and number three in the world. In today's world, The customer rates the experiences and amplifies the brand. Our customers have made our iconic brand universally and internationally important, and our visitors rate more highly than ever our best-in-class experience. Our strong and flexible balance sheet with no floating rate debt exposure and a well-laddered maturity schedule with no debt maturity for the next two years makes us very well positioned to allocate capital strategically. We continued our buyback activity during the third quarter and beyond. Our identification of cash accretive external growth with an eye to how we can recycle our portfolio for better cash performance and give ESRT its next legs of growth has been very successful. Christina will comment on our current balance sheet recycling. We built our business to create success in unstable markets, and we see an opportunity ahead. Tom Durrells will cover our healthy leasing this quarter, which totaled 335,000 square feet, with strong mark-to-market spreads on new leases signed in our Manhattan office portfolio. ESRT is a beneficiary of the flight-to-quality trend. Tenants focus on buildings with amenities, healthy building features, energy efficiency, low emissions, indoor environmental quality, and convenient access to mass transit. Tenants are attracted to our modernized buildings and their accessible price points, particularly in this environment. Existing tenants who know and love our product grow in our portfolio. The recent expansion of Universal Services of America, follows expansions with iCapital, and Burlington signed last quarter and Signature Bank prior to that. LinkedIn, our largest office tenant, has expanded many times within ESRT's portfolio and recently created a great video showcasing how their office space at the Empire State Building is an asset that helps them attract and retain talent. The link to that video can be found on page six in our updated investor presentation. We continue to build our least percentage, and that will drive higher occupancy and earnings in the future. Third quarter visitation to the Empire State Building Observatory totaled 687,000 visitors, and we continued to benefit from strong revenues per capita. A variety of factors, which include airport operation disruptions, war in Europe, and the continued shutdown of China, slowed the pace of growth of international travel to the United States through the quarter. Third quarter recapture rate of 2019 levels was 66%. We have modified our hypothetical fourth quarter visitation recapture to remain at the third quarter's level. While it will take longer than we previously expected to reach full recovery of the observatory business back to pre-pandemic levels, we remain confident in the full recovery. We have effectively managed the business through market downturns before, as seen on page 15 of our investor presentation. Our team continues to focus on effective expense management made so much easier and more effective through our all-reservation ticketing and reservation system implemented during the COVID shutdown, delivery of our best-in-class experience and the procurement of the best partnerships for our iconic brand. The Empire State Building Observatory has unmatched brand recognition and is the authentic must-do for a visitor to New York City. This was recognized by TripAdvisor, who declared the ESB Observatory as the number one attraction in the United States and number three in the world. We continue to underwrite new acquisition opportunities that 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 very well-positioned balance sheet. We also continue to review our portfolio to monetize assets in which we have added value and reinvest the proceeds in cash accretive acquisitions, which Christina will touch upon shortly. We are happy to report additional sustainability milestones achieved during the quarter. ESRT achieved carbon neutrality for our entire commercial portfolio in 2022. ESRT accomplished this through its industry leadership on in-building energy efficiency retrofit work, which has reduced operational emissions 54% at the Empire State Building and 43% portfolio-wide to date since 2009. Combined with renewable wind RECs, that's renewable energy credits, to offset 100% of our electrical usage, and preservation of close to 9,000 acres of biodiverse forest to offset 100% of ESRT's non-electric fossil fuel usage. ESRT has made notable strides in emissions reductions due to the important building energy efficiency retrofit work that we have done over the last decade, coupled with ongoing tenant engagement and collaboration. ESRT is America's first commercial office REIT to join the United Nations Global Compact and commit to the Women's Empowerment Principles. And lastly, we announced just earlier this month that ESRT earned the highest possible GRESB five-star rating and green star recognition for the third consecutive year with a score of 95. Additionally, ESRT received a score of 96. the highest in the U.S. diversified group, and an A rating in the public disclosure assessment, which measures ESG disclosure activities. We are extremely happy with these accomplishments and recognition within the ESG space this quarter, and we'll continue to build on these going forward. Now I will turn it over to Tom Durrells.