Greetings, and welcome to the Empire State Realty Trust fourth quarter 2024 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, it is now my pleasure to introduce Heather Houston, SVP, 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 2024 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 and 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 statements 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 property cash NOI, EBITDA, and adjusted 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 and Chief Executive Officer.

Thank you, and welcome back to you, Heather. Congratulations on your new addition. And good afternoon to everyone. Yesterday, we reported Empire State Realty Trust's strong fourth quarter and 2024 results. We are happy to discuss today our continued leasing momentum, observatory execution, and our outlook for 2025. In the fourth quarter, FFO came in above expectations. Our leasing team again put points on the board within the quarter. We now have achieved more than three years of consecutive quarterly lease percentage growth and positive New York City office rent spreads. For the year, we leased 1.3 million square feet, up from 982,000 square feet in 2023. Our Manhattan office portfolio is over 94% leased, and that reflects the desirability of our top-tier modernized, amenitized, well-located, energy-efficient, sustainability-leading portfolio. Return to office is no longer a question, as leasing momentum in the Manhattan market has told the story for itself. The need to provide a good workspace is a boon for Empire State Realty Trust, and the price gap between brand new offices and our product has enabled us to raise the rents and reduce concessions. The observatory continued its performance as TripAdvisor's number one attraction in the world, with year-over-year growth in fourth quarter and full-year 2024 net operating income exceeding 2019 levels. As this benchmark has been passed, we will no longer refer to our performance relative to 2019 results. Our focus remains to provide visitors with an unmatched customer experience to drive top-line growth, manage expenses, and continue to build exceptional brand awareness. In 2024, the Empire State Building had over 485 billion global media impressions, an increase of 25% year-over-year, and generated globally over $950 million in advertising value equivalency. We enter 2025 on our front foot. The leasing environment in New York City continues to benefit our product and price point. In fact, it has allowed us to increase rents and reduce free rent. The office sector statistics illustrate the results of haves and have-nots. The haves are buildings like ours, which have been modernized, are well-located near mass transit, are sustainability leaders, have great amenities, and are owned by a financially stable landlord. Our product meets the demand of informed, better credit tenants. It may be bumpy. With our reduced inventory of space to lease, we expect positive occupancy absorption again for the full year 2025. Our observatory deck remains the leader. Our average check size per visitor increased year-over-year, and we expect continued growth in 2025 as we introduce a new dynamic pricing model designed to monetize high-demand times through the day. We are still below overall 2019 levels of volume and have room for upside as visitation levels improve. We continue to scour the market for additional transaction opportunities and are prepared to act when we see opportunities to enhance growth either through expansion or trade-out of our existing portfolio. The maintenance of a best-in-class balance sheet allows Empire State Realty Trust tremendous flexibility to lease and transact opportunistically and to create additional value for our shareholders. Our entire organization remains laser-focused on the company's five priorities: lease space, sell tickets to the observatory, manage our balance sheet, identify growth opportunities, and achieve our sustainability goals. Tom, Christina, and Steve will provide more detail on our progress and how we plan to accomplish these goals in 2025.

Thanks, Tony, and good afternoon, everyone. In 2024, our property team delivered another year of exceptional performance. We leased over 1.3 million square feet in our commercial portfolio, which was our highest annual volume since 2019. Our Manhattan office portfolio stands at 94.2% leased, an increase of 10 basis points compared to last quarter and up 160 basis points compared to a year ago, and an increase of 670 basis points since the fourth quarter of 2021. For the twelfth consecutive quarter, our office and retail portfolio achieved higher leased percentage and positive absorption. We had our fourteenth consecutive quarter with positive mark-to-market lease spreads in our Manhattan office portfolio, where our average net effective rent per square foot increased by 13% year-over-year. We signed major office leases with quality tenants across our portfolio, including Burlington, Sol De Janeiro, Bloomsbury Publishing, AT Kearny, and Ponterra. We enhanced the amenities of the Empire State Building with the opening of a multisports court for basketball and pickleball that converts to a 275-person presentation room, a new tenant lounge with a full-service wet bar for hosting tenant events, and a golf simulator lounge. We continue to deliver an exceptional tenant experience and superior service, contributing to our impressive track record of tenant retention and expansions. In 2024, approximately 450,000 square feet of our annual lease volume came from early renewals with existing tenants, where we proactively extended future lease expirations.

Since our IPO in 2013, we have signed 299 current tenant expansion leases, totaling 3 million square feet compared to our current total portfolio size of 8.6 million square feet. Our multifamily portfolio, with occupancy of 98.5%, continues to excel, benefiting from robust market fundamentals, strategic property improvements, and improved operations. This has proven to be a great exchange of existing properties for what we perceive to be better for Empire State Realty Trust's growth. We finished the year strong, and in the fourth quarter, we leased a total of 379,000 square feet, including an 11-year, 37,000 square foot expansion lease with Booking Holdings at the Empire State Building, which, along with a 7-year, 27,000 square foot lease extension, more than doubles their footprint to 64,000 square feet. We were told that Booking Holdings consolidated their New York City office because of their employees' experience and our partnership on sustainability. We signed a 16-year, 79,000 square foot expansion lease with an investment firm at One Grand Central Place, representing a 56% growth in that tenant's footprint, along with a 2-year lease extension of their existing space, bringing their combined total to over 200,000 square feet of space expiring in 2041. That company has further expansion rights as part of their newly amended lease. We also signed a 16-year, 39,000 square foot expansion lease with NYSERDA at 1333 Broadway, and we signed the leases for 13 prebuilt office suites, which totaled 64,000 square feet. In the fourth quarter, the average lease duration was 12.3 years, excluding early renewals and extensions. The new and renewal leases in our Manhattan office portfolio were signed with an average positive mark-to-market cash rent spread of 10.8%. We are well-positioned for strong performance in 2025, during which our Manhattan office portfolio faces modest lease expirations. We have only 186,000 square feet of known vacates and 64,000 square feet of undecided for 2025. So we expect that we will see a higher overall lease percentage in 2025. Our known vacates will be early in this year and could cause our lease percentage to dip temporarily at the start of the year. We anticipate the commencement of leases signed previously will lead to steady increased occupancy throughout 2025 to approximately 90% at the midpoint of our guidance range by year-end.

We have signed 50,000 square feet of leases during the first quarter of 2025 and have a healthy pipeline with 130,000 square feet of leases in negotiation. With increased occupancy, reduced availability, and improvement in the market, we were able to increase rents and reduce concessions last year. We will continue that trend and push harder on rents and reduce concessions in 2025. We have $62 million in incremental cash revenue from signed leases not yet commenced and free rent burn-off, as shown on page 10 of our supplemental, that reflects our leasing success. And with that, I'll turn the call over to Christina.

Thanks, Tom. We continue to manage our balance sheet in a proactive manner with strong liquidity, no floating rate debt exposure, a well-laddered debt maturity schedule, no unaddressed debt maturity until December 2026, and the lowest leverage among all New York City-focused REITs at 5.3 times net debt to EBITDA as of year-end 2024. Our tax-efficient capital recycling diversified Empire State Realty Trust into attractive multifamily assets in Manhattan and prime retail assets in Williamsburg, Brooklyn, with better growth profiles and lower CapEx in the years ahead. Over the past year and a half, we established our presence and further scaled our footprint on the prime retail corridor of North Sixth Street in Williamsburg with $221 million of acquisitions executed and another $30 million acquisition expected to close in mid-2025. In a market that has had relatively limited high-quality opportunities, we are very pleased to execute on these transactions. Our best-in-class balance sheet is primed to provide operating runway and flexibility to execute on attractive investment opportunities. We actively underwrite deals across all three sectors which we target: retail, multifamily, and office, with a focus on New York City. Investment transaction volumes are still not back to historical levels, but in recent months, we have seen more transactions come to market from motivated sellers and debt default-driven transactions. We will continue to underwrite prudently and be patient to find the right deals which have attractive upside and are additive to our New York City-focused portfolio. Steve will cover our outlook for 2025 in a moment, but I would like to discuss our longer-term growth objectives. We expect to drive solid cash flow growth beyond 2025, driven by strong near completion in our shift from non-core suburban assets towards high-quality New York City multifamily and retail assets with lower CapEx and higher growth prospects in the years ahead. Our healthy leasing pipeline with solid prospects for higher rents and reduced concessions on new deals due to strong tenant demand and limited availability of top-tier office supply in the market. Favorable mark-to-market upside in the years ahead as leases roll and we now show on page seven of the investor deck. Continued performance of our Observatory business and potential NOI upside driven by our new dynamic pricing model and improved visitation. As a reminder, 2024 NOI exceeds pre-pandemic levels of NOI with approximately 74% of the visitors compared to 2019. Contractual or expected from the Williamsburg Retail acquisition as NOI ramps up over time driven by both lease-up and mark-to-market rent growth as leases roll over. Hi. Multifamily continues to perform well with solid occupancy and continued rent growth and adds to the resilience of Empire State Realty Trust's cash flows. And finally, we are well-positioned to do additional deals to enhance our cash flow growth profile in the years ahead. And with that, I'll turn it to Steve to discuss our fourth quarter results and outlook for 2025.

Thanks, Christina. For the fourth quarter of 2024, we reported core FFO of $0.24 per diluted share. Results for the quarter included approximately $0.01 of non-recurring items, which mostly related to credits received against prior year utility expenses, which we recognized in other income. For the full year 2024, we reported core FFO of $0.95 per diluted share, or $0.91 when adjusted for the $0.04 of nonrecurring items and lease termination income we recognize throughout the year. Same-store property cash NOI was down 2.9% in the fourth quarter year-over-year, primarily due to less benefit by approximately $1.9 million from positive nonrecurring items recognized in 2023 and increased operating expenses. When adjusted for the nonrecurring items in each period, fourth quarter same-store property cash NOI was roughly flat on a year-over-year basis. In our observatory business, we generated net operating income of approximately $29 million in the fourth quarter and $100 million for the full year, which reached the high end of our guidance range for 2024 and reflects a 6% year-over-year growth rate. We generated FAD of approximately $3 million and $91 million for the fourth quarter and full-year 2024 periods, respectively. That was impacted in the fourth quarter from the timing of a $23.5 million disbursement of tenant improvement allowance related to leases signed in 2018 and 2021. Excluding the timing impact from this TI spend, our fourth quarter and full-year 2024 FAD was approximately $27 million and $114 million respectively, resulting in adjusted FAD payout ratios of 36% and 33% respectively. I'll now move into our guidance for the upcoming year. In 2025, we expect core FFO will range from $0.86 to $0.89. This compares to 2024 adjusted core FFO of $0.91, after the aforementioned exclusion of $0.04 of nonrecurring items and lease termination. As previewed in our third quarter earnings call, certain items will contribute to the year-over-year decline. First, lower interest income by approximately $0.05. $195 million of balance sheet cash was used towards retail acquisitions in the second half of 2024, and $220 million of cash will be used to pay down the balance drawn on our revolving credit facility and our series A senior unsecured note in March 2025. And the assumption of an approximate 125 basis point reduction in the deposit rate applied to our cash. Second, higher G&A by approximately $0.015, half of which is attributed to the accelerated recognition of non-cash stock-based compensation expense of awards, grants, to employees that are nearing retirement eligibility and related cash bonus elections. The remaining increase is primarily attributed to increased non-cash equity expense related to the 2024 NEO promotions and standard inflation-based payroll increases. Other key assumptions that are factored into our 2025 guidance are as follows. Adjusted same-store property cash net operating income growth, excluding lease termination fees and nonrecurring items recognized in 2024, is expected to range from 0.5% to 4%. Within this range, we expect positive cash revenue growth, which assumes commercial occupancy of 89% to 91% by year-end 2025, up from 88.6% at year-end 2024, driven by free rent amortization and manageable lease expirations in 2025. On the expense side, we expect an approximate 2% to 4% increase in property operating expenses and real estate taxes, which will be partially offset by higher tenant reimbursement income. While we do not guide to quarterly performance, we do expect a slight skew of same-store cash NOI to the back half of 2025 due to the expected timing of cash rent commencements for leases currently in their free rent period. Of note, we expect an increase in straight-line rent in 2025 by approximately $0.015 year-over-year as a portion of our pipeline of signed leases commences but remains in the free rent period, so will not contribute to same-store cash NOI but will contribute to GAAP rental growth. We expect 2025 observatory NOI to be approximately $97 to $102 million. This NOI guidance assumes observatory expenses of approximately $9 million to $10 million per quarter in 2025. The guidance range accounts for uncertainty around tourism fluctuations and bad weather that could impact results in any given quarter. With that, we now turn the call back to the operator for the Q&A session.

Thank you. We will now be conducting a question and answer session. You may press star two to remove yourself from the queue. Your handset before pressing the star keys. One moment please for the first question. Our first question has come from the line of Steve Sakwa with Evercore ISI. Please proceed with your question.

Yeah. Thanks. Good afternoon. Maybe, Tom, just going back to your comments on leasing, I'm just curious about the dynamics and the pull forward of activity and, you know, the discussion you're having with tenants. It seems like you're able to pull deals forward or maybe they're getting a bit anxious about renewals. So maybe just give a little more flavor about the leasing and, you know, where ultimately do you think the portfolio settles out on a percent lease basis?

Sure. Well, I mean, first, Steve, we've had a really good run here with positive absorption over the last three years. We've got a very good pipeline relative to our reduced inventory of available space. I mentioned earlier in the first quarter, we've already signed 50,000 square feet of leases. And we have about 20 leases in negotiation for another 130,000 square feet. We've got about 50 active proposals for several hundred thousand square feet. And as typical for us in the past week, we're seeing interest from tenants from a variety of different industries. Overall, I think that there's a recognition that there's a tightening of the market for the better buildings, which we are. You know, we've had and continue to have strong leasing momentum due to our quality product and quality buildings. Work from home is definitely not a factor. We had the highest leasing volume in 2024 since 2019. We have low tenant move-outs this year. The amenities at Empire State Building show great. So I think there's a lot of positive momentum going into 2025. As I look at availabilities out there, I think that clearly the choices for tenants are fewer and fewer for the quality buildings, quality landlords that are modernized, have good amenities, and are in good locations and are not hamstrung by some high leverage.

And just on the, I guess, lease percentage, Tom, like, where do you think ultimately the portfolio settles out? Can it get to 95-96%?

Yes. You know, as we look at our modest move-outs for the year, we only have about, for the portfolio, 200,000 square feet. In New York City, about 185,000 square feet of known move-outs. Much of that will happen in the first half of the year, but we're setting ourselves up for coming off a base of 94.2% leased in Manhattan. I can see easily us getting above 95% by year-end. There's no reason why you can't get 95% to 96%. On the occupancy front, similarly, we're going to see a steady increase in occupancy throughout the year based upon the leases that we've signed previously. And we've given the midpoint of our guidance is 90%, but I can certainly see that higher on an occupancy basis in our Manhattan office portfolio.

Okay. Great. Just one question around I think it's helpful to note, Steve, when you look at these some of these renewals of these bunch of these early renewals and extensions are with tenants who have expanded as well. So there is both that. The extreme success we have with retention and expansion of tenants, and that leads to early renewals and extensions.

I appreciate that, Tony. Thank you. Just on the observatory, I guess I was a little surprised that, you know, maybe that business is being projected to be sort of flattish, if you will, 2025 over 2024. And I realize, you know, you're not just going for pure volume that, you know, the experience is important. You've done a very good job raising pricing since you've gone to the time ticketing. But, you know, just maybe your thoughts around kind of the pricing that's moving forward and, you know, maybe where you see the upside. You know, is it more from pricing? Is it more from the visitors going up? It less bad weather days? It just would have thought maybe the NOI contribution would have been a little higher next year for 2025. Right. So, Steve, it's very early in the year. The low end of our guidance contemplates several macro factors that are not unique to our observatory. There's dollar strength. America is a brand for tourists. And Europe is, you know, under some threat. We saw this before in the prior administration. We also have an issue of airline seat capacity between China and New York City. In 2019, there were 72 direct flights each week from China to New York City. Now there are ten. That's remained at ten for quite some time, and we thought we'd see that number rise in 2024, and it did not. So when we look at it, we're confident in our ability to work with the attraction and for it to maintain its preeminent position. Our net revenue per customer towers over everyone else's in the marketplace. And it's just a matter for us. It's early in the year, and, of course, we look forward to updates as we move forward through the year.

Great. Thanks, Tony. Appreciate those comments.

Thank you. Our next question has come from the line of Nick Joseph with Citi. Proceed with your questions.

Hey there. It's Michael Griffin here with Nick. Appreciate, Christina, all your commentary just around the investment and potential acquisition opportunity set. And Tony, I know you've talked in the past about being an opportunistic omnivore, so to speak. But, you know, as you look at the, you know, what's out there, particularly on the office side, and I mean, does that obviously, we've seen some transactions start to come to market. Look more appealing right now? You know, could you find a building that meets your kind of criteria to use the Empire State Realty Trust's sort of special redevelopment sauce? And if you could kind of give us a sense of what kind of yields or IRRs you're underwriting to for prospective transactions, that'd be great.

Well, first of all, let me touch on the second part. It's very important to note that, as we said before, the new acquisition application of new dollars is different from the 1031 like-for-like replacements that we have done. So from that perspective, I think we probably, on a relative basis, have a higher expectation of benefit return. Number one. Number two, we just begin to see now movement on the office front. There's firm movement that has gone to, of what we have seen, has gone for residential conversion from office. There was a very nice asset on Park Avenue that was taken on by JPMorgan Chase for itself, which, well, we thought would have been very attractive for us. But it's adjacent to their property. I think they wanted to preserve their neighborhood for their views and what they wanted to do. So from our perspective, it's early. We begin to see now in 2024, really, in the fourth quarter, and we begin to see in the first quarter of 2025, more of these defaults by maturity and the fact that as interest rates are up, the property ownership is under pressure. The biggest impact that's had on our business so far is in the haves and have-nots. And it's really made our product much more in demand and has allowed us to increase rents and decrease free rent. As tenants become much more selective and really want to negotiate with building owners who are single service partners in a deal. They don't have to talk to the lender as well. And our great balance sheet is very helpful there. In short, though, as we look at the office piece, we just haven't seen the volume. Volumes are significantly below where they were in 2019. If you take out the transfers that are not partial, there's a deal on Sixth Avenue right now where it's a partner being taken out by somebody. It's a fund that wants to get liquidity. It's only partial. It's not control. If you start to look at these various moves, there's really nothing that's attracted our attention yet. And we do remain very interested in residential. And we do remain very interested in retail. Hope that's helpful.

That is very helpful. Appreciate all the color there, Tony. And then maybe just one for Tom on the leasing side. Seems like the pipeline is pretty strong for 2025. Have you noticed if, you know, that kind of tenant that might be looking for, you know, space in the high nineties, low triple-digit sort of rent? Is there a big pool of those potential types of tenants looking at, you know, your more affordable price point, you know, maybe moving down the price point curve just given the demand we've seen for, you know, A buildings in the city?

Yes. We actually happen to be in negotiation with two tenants. One of them is a, I call it a household name tenant, you would recognize, that is looking at the Empire State Building. And relocation and or had looked at some of the newer Penn area product. And what we find is tenants like the value that we provide. The full suite of amenities, the sustainability partnership, and so we're seeing, yes, interest from tenants that could afford and have looked at much higher price point product and are choosing our buildings.

Great. That's it for me. Thanks for the time.

Thank you. Our next question has come from the line of Blaine Heck with Wells Fargo. Please proceed with your questions.

Great. Thanks. Good afternoon. Just to follow-up on the investment side. Given a kind of tougher time, Tony, you described in finding high-yielding office deals and, you know, retail and multifamily, which I'm sure are pretty tight on cap rates. I guess, where do you think stock buybacks rank in your preference for investment given where shares are trading at this point?

I would say that we always consider that, the board always considers that. We are now going to enter into a slightly different aspect of the, I'd say, shorter-term investment approach where we will look at a business we did very successfully prior to our IPO of offering preferred equity investment on transactions. And we will probably roll that out in 2025 first half and see what we do there. It's slightly different from the kind of mezzanine originations that a lot of people have done. So from our perspective, we still look at it as a way to put money to work and create more return for our investors rather than, at this point, at least as we've discussed with the board, any material shift or forward-looking statement on buybacks?

Great. That's interesting. And then shifting gears, can you guys just provide some color around CapEx in 2025? I know you guys don't guide specifically to AFFO, but given that this quarter saw some lumpiness, it'd be great to hear whether you expect some of that elevated CapEx spending to continue into 2025 since you've done so much leasing in the past several quarters.

Yeah. So thanks for the question, Ben. When I mentioned in the remarks as far as the elevated fourth quarter spend, that's a timing issue. So you need to sort back that out. We're thinking about run rates. It's about $23.5 million there. And it comes down. And then also 2024 was a relatively heavier year on leasing spend. So building CapEx, TIs, and so, you know, we do expect that overall amount to decrease heading into 2025. But a big piece of that decrease is from, you know, the exclusion of that one-time item I called out.

Got it. Thanks, Steve.

Thank you. Our next question has come from the line of John Kim with BMO Capital Markets. Please proceed with your question.

Thank you. It's not a very big dollar amount, but your overall rents in the Williamsburg North Sixth corridor went down on a rent per square foot basis by six bucks versus last quarter. But I was wondering if you could just update us on what you think the mark-to-market is in that corridor, and an update on the existing vacancy at 89-91 North Sixth Street.

Sure. Yeah. Thanks, John. First of all, I would say going into our, we underwrote the properties in our acquisition, we forecast about a 30% overall mark-to-market increase within the embedded rent roll. And then, obviously, the lease-up of the one vacant space that we have will add to the bottom line coming off. No rent that we collect there, but as we have issued proposals, we've seen the growing momentum in interest on North Sixth Street, particularly as we look to see those mark-to-market going higher. Right out of the gate, we've got proposals with about a half dozen well-known brands that are interested in the one vacant space that we have. And so I'm very optimistic on a go-forward basis.

And I might add that when, you know, as we look at other transactions on North Sixth Street, and we see where one was re-underway, our price of entry looks very smart. I think, as I mentioned, we unfortunately, by our actions, probably highlighted the opportunity set for a lot of other people. And we look forward to, based on the early indications that we have, to a very successful outcome here.

Tony, you sort of alluded to it, but the $30 million acquisition you're looking to close this year, to invest there versus multifamily? Any commentary on pricing and how you view opportunities?

I think that, you know, look, our process is always, let's talk about things once they're done. We do look to talk about that at the end of the second quarter. And I think it will just submit further and support what I've said.

Okay. I just had a quick question on some of your large tenants, Macy's and Kohl's in particular. Have announced corporate headcount reductions recently. Does that impact their usage of space or, you know, potentially does that lead them to put some of their space on the sublease market?

Macy's subleases space that's at 111 West 33rd. So, you know, that space is spoken for, and it won't really impact us in any way. Kohl's still has a remaining lease term. And yet to be seen as to, you know, they're out there for, they've got quite a bit of term left.

Okay. Thank you.

Thank you. Our next question has come from the line of Dylan Berzynski with Green Street. Please proceed with your questions.

Hi, guys. Thanks for taking the question. You know, just wanted to touch on sort of the strong demand environment in New York. Obviously, your guys' portfolio is well leased. One of your peers mentioned on their earnings call that there's a potential ability for possible net effective rent spikes. So just curious sort of how you guys are sort of viewing your ability to be able to continue to push net effective rent growth across the portfolio as you guys continue to push lease percentage within the portfolio that is already, you know, call it north of 90%.

Well, as I said earlier, Antonio, we've raised our rents and reduced free rent concessions throughout last year, and we look to continue that into 2025. As I mentioned earlier, we had a 13% year-over-year increase in net effective rents. And we're setting up well for good net effective rent growth in the coming year based upon lower leasing costs, lower TIs. Much of the leasing that we've done has been for built previously built and paid for space that's either second-generation prebuilt or spaces that were fully built out for prior tenants. That's helping to keep a lid and reduce our go-forward tenant installation costs. So the combination of lower concessions, lower TI, and improvement in rents, I think, sets us up well for continued improvement in net effective rent, and, of course, just the overall momentum in the market.

And I would just add to that that, look, as tenants leave, we continue to, when tenants do leave and even when we do renewals, we continue to see very good upward marks. So if we have a tenant who departs, yeah, we're very confident in the demand. And that would add to additional up marks on the rents. And as far as spikes, you know, look, we have continued, as Tom said, good volume and good interest, and we're doing some very high rent leases. Each lease we do, each quarter, we now review on every transaction on everything we've got out there. Lease discussions that go on too long, we've already had a handful from 2024 where we upped the price because the lease proposal had gone out earlier in the year, and where tenants actually accepted the higher price and have moved on with their transactions with us.

Appreciate that detail. I guess just maybe touching on sort of demand across tenant size requirements. Are you starting to see, you know, larger tenants sort of get more active in terms of coming to the market and actually wanting to lease space, or is it still mostly that small to medium-sized user that is really active in the market today?

Well, in terms of tenants, I think coming to the market sooner, I think that we've seen that as evidenced by the 450,000 square feet of early renewals that we concluded this past year. And as I said earlier, there is a greater recognition by tenants that there is a shrinking pool and supply of quality product in quality buildings with good landlords. And so there is, I think, a greater sense of, I say, anxiousness to execute on leases. In terms of tenant size, we see interest from our prebuilt to full floors. There's clearly a lack of large block availabilities, particularly in the Grand Central area. Spaces that might otherwise be available are encumbered by a situation where the landlords cannot transact because the building is going through a recapitalization. And so we have our eyes going down the future, trying to look at opportunities to create large blocks where we can take advantage of that short supply.

Yeah. We would just underscore the demand in New York City is very strong. We happen to be diversified across tenant types and spaces, but that is reflective of overall strength across New York City. And the key commonality is it is migrating towards high-quality assets. What you've heard us say as haves. And those buildings, us and as well as some of the other public New York City owners you're hearing in the comments, that's where they're seeing really good demand. And over time, there's a shortage of that space because it's not getting replenished as the space is getting leased up anytime soon.

And that's top of tier in every price range. There aren't that many tenants out there who pay the $185 to $250 per square foot rents that new development today requires. And as those brand-new buildings and A buildings, as their rents move up, our rents move up as well because we remain the, frankly, attractively priced, modernized, amenitized, well-located, leaders in sustainability, and great balance sheet landlord. And as those prices go up, there are a lot of people who look at us and, as we've seen, and say, you know what? We want to stay here and grow here. We want to move here. So, you know, we feel like we're in a good position. We really do. And the market in New York is good. Yeah. We're happy with that.

Perfect. Appreciate all that detail, guys. So much.

Thank you. We'll now turn the call back over to Tony Malkin, Chairman and CEO, for some closing remarks.

So again, thanks, everybody. We remain focused on our five priorities: lease space, sell tickets to the observatory, manage the balance sheet, identify growth opportunities, and achieve our sustainability goals. All for the purpose to create shareholder value. Those of you who keep track of that list will note that identify growth opportunities is a new fifth goal. We will continue to take advantage of opportunities as they arise and are confident that our ability to execute and drive further value for shareholders going forward remains strong. We thank everyone for your participation in today's call. Look forward to the chance to meet with many of you at non-deal roadshows, conferences, and property tours in the months ahead. 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.