Greetings, and welcome to the Empire State Realty Trust First Quarter 2022 Earnings Call. 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's 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 Investors 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 is 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 31, 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 surrounding our portfolio. Office tenants plan their future space needs based on 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 Durels 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 in 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-amenitized, 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 who 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 tour 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 at 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 and 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, 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 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 the 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 Hocol, and Eric Adams were at the Empire State Building to reveal the Empire Building playbook, a guide to low carbon retrofit, 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 supply more than double the building's energy needs and require no 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 Durels.

Thanks, Tony, and good afternoon, everyone. The office leasing environment in New York City has improved significantly from a year ago. The 15-year average of quarterly leasing volume in New York City is 6.4 million square feet. First quarter 2022 saw 7.2 million square feet of new leases in the second consecutive quarter with over 7 million square feet of new leases. In the first quarter, we benefited from the ongoing flight to quality and signed 44 new and renewal leases totaling approximately 319,000 square feet, which includes 256,000 square feet in our Manhattan office properties, 62,000 square feet in our Greater New York Metropolitan office properties, and 1,000 square feet of retail. The weighted average lease term of 8.7 years this past quarter reflects our tenants' long-term commitments to our modernized, healthy, transit-oriented portfolio. Notable leases signed this quarter include a 71,000 square foot new direct lease with Progeny for 3 full floors at 1359 Broadway; a 33,000 square foot expansion lease with Signature Bank at 1400 Broadway, where Signature now leases 313,000 square feet for a term of 17.4 years. 1400 Broadway is now 100% leased, and we signed leases for 18 prebuilt office spaces in Manhattan. Lease spreads for new and renewal leases signed at our Manhattan office properties in the first quarter improved to a positive 3.5% on a cash basis compared to the prior escalated rents. Leasing costs for tenant installations and free rents in our Manhattan office properties were relatively flat this quarter compared to our fourth quarter 2021 results. Consistent with our expectation, which we communicated during our last earnings call, the total commercial portfolio leased percentage improved in the first quarter and was up 130 basis points quarter-over-quarter to 87% while our Manhattan office portfolio lease percentage increased by 160 basis points to 88.6%. We remain laser-focused on lease-up of our vacant space and tenant retention to drive occupancy. As stated in our 2022 guidance on which Christina will provide details, we expect occupancy in our entire commercial portfolio to reach between 84% to 86% by year-end. Tenants remain focused on quality at all price points, and ESRT delivers modernized buildings with energy efficiency, low emissions, indoor environmental quality, healthy buildings features, convenience to mass transit and amenities, all at an accessible price point. We have new and exciting amenities underway with a basketball court, lounge and town hall assembly space at the Empire State Building. Additionally, we will open an outdoor rooftop tenant lounge at 1333 Broadway and town hall assembly space at 1400 Broadway to be shared with tenants in our Broadway portfolio. These amenities will be added to our portfolio's current robust offering of state-of-the-art fitness centers, tenant lounges, comp centers and more than 60 usable outdoor terraces and 23 curated food and beverage providers in our ground floor spaces that are surrounded by robust neighborhood amenities. Building utilization experienced an increase in February that continued throughout the first quarter, and Tuesday through Thursday comparison to 2019 is currently in the mid-40% range for our Manhattan office portfolio and high 60% range for the Greater New York Metropolitan office portfolio. Same-store cash operating expenses and real estate taxes in the first quarter were $65.3 million, a $3.5 million increase from the fourth quarter 2021 due to increased building utilization. We project same-store operating expenses in 2022 to run about 7% below pre-pandemic levels due to a combination of earlier permanent cost-saving measures and gradual return to office through the year. Our multifamily occupancy has increased 120 basis points since last quarter and up 260 basis points since our initial underwriting and now stands at 97.6% with strong mark-to-market increases and reduced concessions and broker commissions. In summary, we had a solid leasing quarter with 319,000 square feet of total office and retail leases signed. Our centrally-located office portfolio with convenient access to mass transit is fully modernized and amenitized and has built healthy tenant spaces ready for lease. Our industry leadership and experience in indoor environmental quality and sustainability enhances our ability to attract and retain office tenants, and we continue to see strong fundamentals at our multifamily properties. Now I'll turn the call over to Christina.

Thanks, Tom. For the first quarter of 2022, we reported core FFO of $49 million or $0.18 per diluted share, which compares to core FFO of $41 million or $0.15 per diluted share for the first quarter of 2021 as Observatory results continue to improve. Same-store property cash NOI, excluding lease termination fees, was up 90 basis points year-over-year. This was driven by a number of cash revenue items in the quarter that aggregate approximately $3.3 million that were generally onetime in nature, including lease modification payments received, largely offset by higher operating expenses as compared to the prior year quarter. Observatory NOI was $7 million for the first quarter of '22, up from negative $2 million in the prior year quarter. This is seasonally our lightest quarter. Visitation in the quarter exceeded our hypothetical forecast. Turning to our balance sheet. As of March 31, 2022, the company had liquidity totaling $1.3 billion, which is comprised of $430 million of cash and $850 million of undrawn capacity on our revolving credit facility. Inclusive of our share of assumed debt from our multifamily acquisition that closed in late December 2021, the company had net debt of $1.9 billion with a weighted average interest rate of 3.9% and a weighted average term to maturity of 7.2 years. Notably, we are well positioned in a rising rate environment with 95% fixed-rate debt. We have a well-laddered maturity schedule with no outstanding debt maturities until November 2024. Our pro rata net debt to total market capitalization was 39.8%, and net debt to adjusted EBITDA was 6.3x. Pro forma for full year contribution from the multifamily acquisition, net debt to adjusted EBITDA would be 6.1x. In the first quarter and through April 21, 2022, the company repurchased $23.3 million of its common stock at a weighted average price of $9.34 per share. This brings the cumulative amount purchased to $215 million at a weighted average price of $8.67 per share, which represents approximately 8.5% of total shares outstanding as of March 5, 2020, to date, our share buyback program began. Our well-positioned balance sheet affords us flexibility to engage in activities that align with our objective to generate shareholder value. This includes the repurchase of our shares at currently significantly discounted share prices, the pursuit of investment opportunities that are additive to our New York City-focused portfolio and potential capital recycling. On acquisition, our investment team continues actively to pursue and underwrite investment opportunities in New York City across the office, retail and multifamily sectors. That said, we will remain disciplined in our underwriting against a backdrop of record levels of private equity capital, now coupled with the recent spike in interest rates and spreads. On capital recycling, we take a hard look at each and every asset within our portfolio, and we'll seek opportunities to monetize assets in which we have added value and to reinvest the proceeds to fund share buybacks and accretive acquisitions. Last quarter, we mentioned that as part of this review, we engaged in discussions to transfer property ownership of 383 Main Avenue in Norwalk, Connecticut, which has a $30 million mortgage back to the lender. We concluded that such transfer is in the best interest of our shareholders given that property submarket fundamentals and the projected CapEx requirements that would be needed to lease up the property. We worked in close cooperation with the lender, and the transfer was successfully concluded on April 2, 2022, as a consensual foreclosure to avoid transfer tax. We then completed a reverse 1031 exchange that we structured as part of our multifamily transaction in December 2021 to defer recognition of noncash taxable income that stems from debt cancellation. We expect to recognize an approximate $27 million noncash gain in connection with this transfer, which will be reflected in second quarter 2022 results but will have no impact on FFO. We would note again that this action is specific to this property and submarket, where ESRT does not own any other assets and has no bearing on the balance of ESRT's Greater New York Metropolitan area portfolio. Turning to guidance. We expect 2022 core FFO to range between $0.73 and $0.78 per fully diluted share, inclusive of the impact of our recent multifamily acquisition, which contributes roughly $0.02 per share for the year and the completed transfer of 383 Main Avenue. Let me spend a moment to discuss the assumptions used in our guidance. In 2022, we expect same-store cash net operating income, excluding lease termination income, to decline 10% to 12% from 2021 levels. This change is primarily driven by the normalization of operating expenses as building utilization increases this year as well as the annualized impact of a large occupancy loss of Global Brands Group in late 2021. We expect roughly 10% year-over-year increase in same-store operating expenses this year. As a reminder, our team actively managed expenses amid COVID and significantly reduced operating expenses in 2020 and 2021 compared to 2019. While we have realized some permanent savings, we expect operating expenses will normalize in 2022 to roughly 7% below 2019 levels as building utilization increases. We expect same-store occupancy to be between 84% and 86% by year-end, up from 82.4% at year-end 2021. Turning to the Observatory. We expect 2022 net operating income to be approximately $74 million to $77 million with the base case reflecting the hypothetical Observatory ramp-up that we provide in the latest investor presentation, which assumes 60% of 2019 visitation in the second quarter of 2022, 70% in the third quarter and 80% in the fourth quarter. This NOI reflects Observatory expenses of $6.2 million in the first quarter increasing to $8 million to $9 million per quarter thereafter depending on the pace of ramp-up. The low end of our guidance range reflects the potential for a slower-than-expected Observatory ramp-up due to uncontrollable factors such as another COVID variant, the war in Ukraine or any other shutdown of orders that adversely impacts travel. The high end of our guidance reflects a slightly better-than-expected Observatory ramp-up and pace of tenant return to office, partially offset by higher building utilization and operating expenses. Please note that the guidance estimates and assumptions just described do not include the impact from any potential future property acquisitions, dispositions or capital markets activity beyond April 21, 2022. As we look ahead, we advanced through 2022 with a well-positioned and flexible balance sheet, a focus on disciplined capital allocation and continued commitment to ESG. We also look forward to benefiting from companies returning to the office and recovery of New York City tourism. With that, I will now turn the call back to the Operator for a Q&A session.

Thank you. Our first questions come from the line of Steve Sakwa with Evercore. Please proceed with your questions.

Yes, thanks, good afternoon, everyone. Maybe I was hoping that Tom could just talk a little bit more about the leasing pipeline. I know you don't have a lot of unknown vacates kind of the rest of this year, but the figure is still a little bit high for '23. And I'm just wondering, as you start working into the summer and talking to tenants next year, how is that discussion unfolding? Are tenants willing to kind of come back to the table now after kind of sitting on the sidelines for 2 years? And maybe just give us a sense for how the pipeline stands today versus, say, 3 to 6 months ago.

Yes, Steve, thank you for your question. Our top priority is definitely leasing our vacant space and retaining tenants. We have a strong pipeline of activity heading into the second quarter, with prospects from various industries, including financial services, professional services, tech, and more. As we progress, it's important to keep track of our leased percentage, which will influence occupancy as we sign leases that will start later this year. You can refer to the leased percentage page for each building on Page 9, where locations like 1400 Broadway, One Grand Central, and 1333 are all over 90% leased. In fact, 1400 Broadway is now fully leased as of the end of the quarter. We have received good interest in the space we still have available, with six leases currently under negotiation on six full floors, as well as more than a dozen pre-builts at One Grand Central, Broadway, and the Empire State Building. We regularly update Page 10 to provide early insights into tenant decisions regarding renewals or relocations within our portfolio, and we will refresh that information in the upcoming quarter. Many of our available spaces are smaller pre-builts, and tenants often wait until their lease expiration to make decisions. I am excited about the amenities we are developing, including a town hall assembly space at 1400 Broadway and the Empire State Building, which boasts some of the best amenities in the city. We are adding a new basketball court, town hall assembly space, tenant lounge, and golf simulator, in addition to our state-of-the-art fitness center, executive gym, and eight on-site food and beverage operators. Overall, I believe we are well-positioned and I am optimistic about the upcoming year.

Great. I guess maybe for Tony or Aaron just on acquisitions. Your timing of the apartments, I guess. Negotiating that middle of last year was good. The markets obviously have recovered very quickly in multifamily and rents in New York are now kind of well above pre-COVID. I'm just wondering, the opportunity set that's out there, is that kind of bigger or smaller than it was 6 to 12 months ago? How has pricing changed? And just how are your expectations changing on price given the ending in the bond market today?

Thank you, Steve. We continue to be very active, with our acquisition team exploring various investment opportunities. We are fortunate to have strong balance sheet flexibility and a solid liquidity position. It's an interesting time on the transaction front, given the economic uncertainty, the war in Ukraine, and rising interest rates. These factors are likely leading to more complex opportunities. We tend to embrace these challenges as we excel in handling complicated situations, such as the recapitalization we are involved in that will conclude in December. We feel optimistic about our position. With rising interest rates, it's likely that there will be fewer financial buyers who typically rely on high leverage, making them less competitive. This presents us with opportunities to intelligently recycle capital from assets where we've created value and use the proceeds to support our future external growth investments. Overall, we are engaged in a variety of activities regarding capital recycling and new investments.

Okay. And then just one last question. On the dispositions, it's not something you guys have really done much of. And so I'm just curious, how do you think about the size of that? Or how should we think about the size of that and the kind of timing? Is that something you think is a 2022 event? Or is this very early and unlikely for anything to actually get to the finish line this year?

I think that you should consider the fact that we mentioned the prospect of the recycling of existing assets some time ago as an indication that, that is when we began to think about it.

Thank you. Our next questions come from the line of Manny Korchman with Citi. Please proceed with your questions.

Hi everyone, it's Michael Bilerman here with Manny. Tony, congratulations on last week's event and the release of the playbook and blueprint from an energy perspective, which is clearly very important for our world. I was curious if you could elaborate on transaction activity in terms of being flexible with potential acquisitions, evaluating asset sales, and examining your stock. How does anything compare to buying back your shares, which represent about 50% of your net asset value? What assets could possibly provide greater value compared to buying your shares, which, although they have risen since the lows of 2020, are still significantly below where they traded five years ago?

Thanks very much, Michael, and thank you very much. It was great to see you at the event with President Clinton, Governor Hocol, and Mayor Adams. And yes, I think that the important thing to take away about that event for us is we are flight to quality. We really are at the lead, and we really are aware the most important and highest credit tenants want to be just at a different price point from the new AAA brand-new assets. So thank you for your attendance there. Our priorities include share buybacks, new acquisitions, capital recycling. We look at those in those 3 different baskets in the following way, and I'll let Christina add to my comment when I'm done, if you don't mind. The first is for our actual cash, so long as we can procure value for our investors, we are very interested in and continue to acquire our stock. Of course, we're in the 10b5-1 period now. If we are buying back stock, so that's not under our control. That said, with regard to why we might look at acquisitions even at the value of our stock, we want to be very mindful. If you take a look at how we handle the Merit view hand back to the lender, we deferred, avoided current payment recognition of a lot of gain. And if you look at our disclosures, there was also tax protection on that asset, so for certain of the original contributors of value to the REIT on our consolidation. So we do look at our existing assets as an opportunity to recycle in the higher growth prospects for the future at the same time as we look at the cash that we can generate without tax effect to repurchase our stock. And Christina, I don't know if you'd like to add to that.

I want to emphasize, Tony, that this is a critical issue for all companies. Our primary goal is to engage in actions that enhance shareholder value. This definitely involves repurchasing our stock when prices are significantly discounted, but it is not the only strategy we will employ. We will seek interesting opportunities and utilize various sources of capital, including our available cash, potential for increased leverage, and capital recycling. If we can effectively recycle assets, sell them, and invest in new acquisitions, then we can allocate a substantial amount of our capital toward share buybacks without significantly increasing risk. These are our objectives. We don't have to choose between options. If attractive opportunities arise, we will pursue them. If they are beneficial and we're buying back our shares at a discount while also driving additional value, we will take that approach.

That's helpful. I was wondering maybe you can unpack a little bit on the capital recycling front, and I understand the Norwalk transaction. And it sounds like you have the stuff up in Westport on Main Street up for sale as well. Do you have anything else on the market either as a full 100% sale or where you're looking to raise joint venture capital against your existing assets? I'm just trying to get a sense of what is taking priority right now. Is it really aggressive on the acquisition front of retail, office, and multifamily? Or is there more time being spent looking at every one of the assets and seeing what the best opportunity to monetize at today's valuations?

I appreciate the question, Michael. It's very insightful, and I'll address it before turning to Tom Durels or Christina for any additional comments. Firstly, we have thoroughly evaluated every asset and have a clear plan moving forward. Secondly, we currently have 10 Bank Street listed for sale, which was put on the market earlier this week. Thirdly, we are assessing situations like Merit View. Our analysis of Merit View indicates that it could require a significant cash investment over ten years without yielding a beneficial cash outcome, although it might affect funds from operations. Therefore, our perspective is that we are focused on generating returns for investors, enabling us to allocate cash toward growth rather than stagnation. This serves as a clear example of our strategic direction. Tom or Christina, do you have anything to add to this? Do you think that covers it sufficiently?

I believe you've addressed it well. I want to stress that we regularly assess all of our assets. The Westport Retail and 10 Bank Street serve as excellent examples where we have successfully completed full redevelopment and leasing. We see a chance to realize value through a sale and reinvest the capital. We will continue to evaluate our assets consistently from that standpoint.

Yes. I was just trying to get at, Tony, if there was a more urgent sort of perspective of really trying to narrow this gap on your stock by more aggressively looking at capital recycling and share buybacks versus growing the base through additional. I was just trying to get a sense of where the intense focus is right now, whether it's on external versus shrinking the base and trying to get to that value to improve your cost of capital. That's where I was going with.

Our four main areas of focus are as follows: first, leasing space; second, selling tickets; third, attracting investors; and fourth, continuously assessing where we can find better growth opportunities, whether within our existing operations or through potential acquisitions. When we can strategically divest from our balance sheet in a tax-efficient manner and reinvest those funds into initiatives that better align with our objectives, we will proceed accordingly. We are deeply committed to these four priorities, and they are a regular topic of discussion in our daily business operations.

Great. Thanks to all for the great color.

Thank you. Our next questions come from the line of Daniel Ismail with Green Street. Please proceed with your questions.

Great, thank you. Maybe just along those lines of the capital allocation playbook. Just a question on dispositions. I assume any disposition in Manhattan would have a large capital gain associated with that. Am I correct in that understanding?

Every situation is unique, and there are various tax factors to consider. As we've mentioned in our public disclosures, some of our assets come with tax protection. For instance, in our transaction with Merit View, we implemented an interesting structure that involved an acquisition formatted as a tenancy in common, which included returning Merit View to the lender and transferring that into the tenancy in common for one of the tenants created during the asset recapitalization, which allowed us to defer taxes on the residential investment. It's worth noting that we’ve had an acquisition team in place for nearly two years now. As we move forward, we're working on 1031 exchanges, which we've executed effectively in the past. Tom Durels, Tom Keltner, and I are focused on fostering team collaboration, especially with Aaron Ratner and his team, who are diligently learning and navigating a new cycle with younger professionals who haven't experienced this before. We've been through these situations, and our experience will be valuable. I hope that provides clarity. Regarding capital gains, as long as 1031-like exchanges remain an option, there is a way to defer tax.

Got it. That's helpful, Tony. And then maybe just last one for me. On the ESG playbook, one of your New York City office peers mentioned publicly that maybe only half of the New York City office stock qualifies for the workplace of the future, where sustainability is obviously a critical factor there. I'm curious to get your sense of how much of the New York City office stock can be decarbonized or be on the path of decarbonization and really meet a lot of these sustainability factors that you guys have implemented in your own portfolio?

I'm glad you raised that point. First, I want to highlight our 6-point improvement, achieving the second highest score in our peer group at 94% in our GRAS filings. We take pride in having the lowest carbon footprint among publicly traded New York City office REITs, as noted by Green Street. Our portfolio consists of older assets, but we have leveraged our strong balance sheet to invest in modernizing them. Through these investments, we've made our properties energy efficient and established high standards for indoor environmental quality and health. We are leaders in green leasing and have achieved platinum status with the Environmental Protection Agency. This positions us as a quality choice for a diverse range of tenants, not just those who can afford $150 to $300 per square foot. I believe there's significant potential to redevelop existing properties, which requires a capable balance sheet and expertise. Dana Schneider, our Senior Vice President of Sustainability, Energy, and ESG, has led our collaborative efforts with the New York State Energy Research Development Authority, and this work is publicly available for review. Our partnership has spanned over 1.5 decades. Ultimately, it’s about know-how, financial strength, and the practical aspects of building locations and designs. For instance, 1400 Broadway is now fully leased, with a solid floor plate and excellent location that we modernized. Signature Bank, a prominent tenant, occupies over 330,000 square feet. We aim for quality, but many buildings struggle due to mismatched floor plates and locations, exacerbated by inadequate financial resources and a lack of capable practitioners to execute these plans.

Got it. I appreciate the color, Tony.

Thank you. Our next questions come from the line of Jamie Feldman with Bank of America. Please proceed with your questions.

Hi, everyone. This is Suri Gangar on for Jamie. Could you talk about how the pace of leasing activity for your typical price point office spaces compares to the higher-end rents in the market?

Yes. A lot has been said about the high end, and much of the focus might have been on new developments. However, as Tony mentioned, there are properties that have upgraded their buildings to be energy efficient and sustainable, where we excel. We clearly benefit from this trend and are seeing a shift towards quality in our buildings because tenants value what our portfolio offers: healthy, modern spaces equipped with the latest technologies, high indoor environmental quality, newly-built, energy-efficient offices, easy access to public transit, and comprehensive amenities. I am very enthusiastic about not just our current offerings but also the enhancements we are making to our amenities, all at a reasonable price. When you combine these factors, I believe we hold a unique position in our price range, allowing us to capture a significant share of demand. While this may not draw the same attention as major leases in new developments, there is certainly a wealth of activity in our price range. The vast majority of our tenants pay less than $100 per square foot in rent, and we serve a vital niche for businesses wanting locations that offer convenient public transit access and modern office spaces at accessible prices. Therefore, I believe our level of activity is quite strong in this regard.

Okay, great. That was really helpful. And then could you just talk about your latest thoughts on how tenants will use their office space going forward? Like are they starting to get a better picture on the number of days in the office per week and what it means for their footprint? Is there a noticeable trend by tenant size or Manhattan versus your suburban portfolio?

We frequently receive feedback from tenants regarding the advantages of having employees work together in the office to enhance collaboration, creativity, productivity, training, and mentorship. Recently, I spoke with the CEO of one of our tenants who has implemented a policy requiring a minimum of three days in the office from Tuesday to Thursday. This is reflected in their continued expansion without reducing their office space. Interestingly, employees who initially preferred remote work during the COVID pandemic are now among the first to express a desire to return to the office for the benefits of social interaction and the energetic environment that being on-site fosters. An increasing number of our tenants are also concentrating on maintaining at least three days in the office, indicating that there are no plans to reduce their space. As highlighted in our leasing statistics, several tenants are actually increasing their space within our portfolio and expanding their workforce. We have not observed any significant decrease in space requirements based on reduced usage or the number of days employees are in the office.

I would just add that our occupancy in our Manhattan office properties on Tuesdays through Thursdays is nearly 50% compared to 2019, and in the Greater New York Metro area, it's over 60%. This indicates a good level of activity during those days. We strongly believe that as competition increases and people stop having work handed to them at home, they'll come into the office to find out what's happening. However, Tom's comments regarding space utilization and needs are certainly significant.

Okay, thank you. That’s all for me.

Thank you all very much for participating with us today. Please remember the forward-looking statements, including guidance, are meant to be helpful with forward modeling and are not guarantees. Many thanks to our great team who continue to work incredibly hard and in whom I have every confidence to continue to do a great job on behalf of stakeholders. We look forward to the chance to meet with many of you at non-deal roadshows, conferences, and property tours in the months ahead. Until then, thank you for your interest and onward and upward.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.