Empire State Realty Trust, Inc.

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. 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, Chief Counsel, Corporate and Secretary, Thank you. You may begin.

Good afternoon. Thank you for joining us today for Empire State Realty Trust's fourth 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, 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. 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, Heather, and good afternoon to everyone. This is Heather's first hand on the wheel on our earnings call since the retirement of Tom Keltner. We are delighted to have her here with us, and we will always be grateful and appreciative of Tom Keltner's more than 40 years of commitment and contribution to ESRT and its predecessor entities. ESRT is pleased to report strong fourth quarter results to close out the year, provide updates on our capital recycling activities and leasing, and our outlook for 2023. Our ESRT team accomplished a lot this year. ESRT's top priorities are to lease space, sell tickets to the Empire State Building Observatory, make good use of our balance sheet, achieve our sustainability goals, and do all of this with an unrelenting focus on shareholder value. We had a very solid leasing year. We leased over 1 million square feet at consistently positive leasing spreads, and made meaningful absorption progress with a 210 basis points increase in Manhattan office occupancy and a 260 basis points increase in Manhattan office leased percentage throughout the year. Our buildings represent affordable options in the flight to quality, the character, full modernization, great locations near mass transit, great amenities in place with more to come, and industry leadership in energy efficiency and indoor environmental quality. Our goal is to get the best deal in good times and get the deals in challenge times and draw consistent leasing volumes through cycles. Existing tenants who know and love our product grow in our portfolio. We have completed 258 expansions which total 2.5 million square feet since the company went public. We continue to build our leased percentage and that will drive higher occupancy and earnings in the future. Tom will cover 2022 in more detail, announce a great lease just completed, and discuss our 2023 pipeline. Our quality portfolio is resilient and ESRT benefits from the flight to quality trend. Our entirely reimagined Empire State Building Observatory is the beneficiary of a $165 million renovation and new exhibits completed just prior to the pandemic and our introduction of our timed ticketing operation. The customer experience has been improved by the exhibits and by reduced crowds with generally no lines. Now that we know when customers will be there, we plan better our staffing and control expenses. We now reap the rewards of these efforts. TripAdvisor's number one attraction in the United States, number three in the world, is the authentic experience that benefits by comparison to all the other new entrants in the market. We hit our Observatory NOI expectations in 2022, largely driven by growth in revenue per capita, prudent expense management, exceptional brand awareness, and a shared commitment to excellence by the entire leadership team. In December 2022, Observatory NOI reached 99% of pre-COVID 2019 levels, and visitation reached 88% of pre-COVID 2019 levels. We are an international brand. We have spoken about the strength of ESRT's balance sheet for years. It helps us win new tenants who look to partner with a financially stable landlord who will maintain high-quality standards at their assets and deliver on their commitments to tenants. Tenants seek a compelling value proposition, and ESRT offers a high-quality experience in trophy assets at our attractive price point. Our balance sheet allows us to be nimble and engage in share repurchases, new acquisitions, and capital recycling. We derive our income from diverse sources, office rentals, observatory income, retail rentals, and residential rentals. The addition of multifamily to our portfolio since 2008 December 2021 further diversified our cash flow stream. We have recycled our balance sheet tax efficiently through the sale of various suburban assets and reinvestment into Manhattan multifamily. We have broadened our industry leadership in environmental sustainability and healthy building performance over the past year. ESRT achieved carbon neutrality in 2022. and we continue to make progress towards a goal of net zero emissions by 2035. We published the Empire Building Playbook for Decarbonization of Existing Buildings in partnership with the New York State Energy Research Development Authority, a guide for others on how to achieve sustainability goals. We received target validation approval from the Science-Based Targets Initiative with their most advanced 1.5-degree target, platinum recognition with green lease leaders, maintained the highest possible RESB ratings and global sector leadership distinction, and achieved recertifications for Well, HealthSafety, FitWell, and Energy Star. We are the only New York City commercial landlord on the Local Law 97 Implementation Advisory Board. and we are the only New York City commercial landlord on the New York City Sustainability Advisory Board. We have been included in the Bloomberg Gender Equality Index for two consecutive years. These ESG accomplishments and initiatives are increasingly important, both tenants and their employees, as well as investors, and remain a top priority for ESRT. Our stock outperformed CBD office peers from 2020 to 2022 and year to date for many of these reasons, even though we think it is obvious that it still trades at a crazy discount. Lastly, we introduced guidance for the first time in 2022 to give the street more clarity on the earnings trajectory and outlook for our company and actual results, which exceeded our initial expectations. This is the work of a great team that has navigated through challenges and rises to the occasion with incredible focus on our company's four priorities and demonstrated progress. We move forward into 2023 with the same goals, lease space, sell tickets to the observatory, proactively manage our portfolio, achieve our sustainability goals, manage our balance sheet, and drive shareholder value. Tom and Christina will provide more detail on our progress and how we plan to accomplish these goals in 2023. Before I turn it over to Tom, I also want to congratulate Christina on her promotion to Chief Operating Officer in addition to Chief Financial Officer this quarter. Christina is a great partner to all of us, a great leader, and adds tremendous value. Her new title reflects the role into which she has grown. is a great fellow executive officer to Tom and me, and she is involved in every strategic decision. Tom?