Q4 2019 Earnings Call
Greetings and welcome to the Empire State Realty Trust fourth quarter 2019 earnings call.
At this time all participants are in listen only mode. A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during a conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Tom Keltner Executive Vice President General Counsel and Secretary. Thank you you may begin.
Afternoon. Thank you for joining us today for Empire State Realty Trust's fourth quarter 29, <unk> earnings Conference call.
In addition to the press release distributed last evening.
Quarterly supplemental package with further details on our results and our latest investor presentation.
I've been posted in the Investor section of the company's website.
At Empire State Realty Trust Dot com.
On today's call managements prepared remarks, and answers to your questions may contain forward looking statements as defined in the applicable securities laws.
Getting those related to market conditions property operations capital expenditures income and expense.
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.
Apart 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 and the company's filings with the FCC.
Finally during today's call, we will discuss certain non-GAAP financial measures such as that that's all modified and core FFO and NOI Gosh Hawaiian EBITDA.
Which we believe are meaningful when evaluating the company's performance.
Connections and reconciliations of these measures.
Most directly comparable GAAP measures are included in the earnings release and supplemental package each are available on the company's website.
Now I will turn the call over to John Kessler, President and Chief operating Officer.
Good afternoon, and thank you Tom.
Welcome to our fourth quarter 2019 earnings conference call.
Excuse me I was very pleased with our quarter and here is the run of show for today's call.
Tom Durels will speak about the fourth quarter is approximately 346000 square feet of leases market demand for our properties and our market leading leasing spreads.
Right for Jay will then review, our financial performance and balance sheet.
As always we're joined bite you press, our Chief Accounting Officer, Treasurer, and acting CFO and John our head of financial planning and analysis, who can also assist with questions.
The fourth quarter, we completed our multiyear redevelopment of the Empire State building Observatory visitor feedback has been positive and the fourth quarter Observatory results will be covered in more detail later in this call.
In addition, we completed the 62 million dollar exchange offer for our 2019 series private perpetual preferred units.
Once one exchange a 4.6 million operating partnership units.
Or perpetual preferred units is accretive for shareholders locked in effectively permanent capital and reduced our fully diluted share count without using any of our cash.
We also renewed or 500 million dollar class a common stock and publicly traded operating partnership unit repurchase authorization.
Through December 31 2020.
I'll now turn the call over to Tom Durels Tom.
Thanks, Sean and good afternoon.
But every measurement.
Our fourth quarter was another strong quarter during which we made solid progress on a four drivers up topline embedded growth.
The breakdown of these topline revenue growth drivers, which as of December 31st too Dark Knight team.
Over the next five years, we estimate to be $99 billion.
Can be found on page seven of our Investor presentation.
The referenced as compared to $559 million in trailing 12 month cash went to revenue as of December 31st 2019.
In the fourth quarter, we signed 47, new and renewal leases totaling approximately 346000 square feet.
This included approximately 225000 square feet in our Manhattan office properties.
88000 square feet in or Greater New York Metropolitan Office properties, and 33000 square feet in our retail portfolio.
Significant new office and retail leases signed during the quarter include a $46 a square foot New office lease a 250, what's the 57th Street with Concord Music group.
At a 33000 square foot new retail lease with target.
10 Union square disease that is expected to commence after the existing tenants lease expires in 2023.
As a reminder, on page nine of our supplemental we have maintained updated disclosure on potential vacates renewals for leases that expire for the four quarters of 2020 and full year 2021.
The schedule shows tends to be relocated within our portfolio.
And vacates to be replaced by new tenants with whom leases have been signed.
During the fourth quarter.
At the rates on new and renewal leases across our entire portfolio were 20.2% higher.
Cash basis compared to prior cash escalated rents.
And that are Manhattan office properties, we saw a new leases.
At a positive cash rent spread of 24.4%.
Our leasing spreads vary from quarter to quarter as they are a factor of expire.
<unk> escalator rental rates and new leases.
On page 27 of our Investor presentation.
We estimate our future cash leasing spreads on the release of future expiring Manhattan office leases will vary between 12% and 19%.
Based on the assumption of current market rents without any increase.
Our weighted average asking rents in our Manhattan office buildings have increased by over 3% on a trailing 12 months basis.
Demand for a product.
Locations and price points remains good.
As we show on page 12 of our Investor presentation, our trailing 12 month net effective rent growth on a year over year basis for new Manhattan office.
Increased by 14.8%.
This is the fifth straight quarter in which we have experienced net effective rent growth in excess of 5%.
We have a healthy pipeline of leases and negotiation across the portfolio for both full floors and pre builts.
We remain focused on our strategy to vacate and redevelop space that we're bringing to market for future lease up.
And now I'll turn the call over to Greg <unk> correct.
Thanks, Tom for the fourth quarter, we reported core FFO of $75 million or 25 cents per diluted share.
Same store property operations, if you exclude onetime lease termination fees and the observatory results from the respective periods drove a 6.9% cash NOI increase.
Page 16 of our supplemental highlights a 13.1% increase in observatory net operating income to approximately $29 million. Thanks to our completed redevelopment.
Revenue for the fourth quarter of 2019 increased to $37.7 million or 9.2% under prior year period, driven primarily by improved pricing.
The brand new hundred and second floor observation deck experience was opened her roughly 10 weeks in the fourth quarter and drove approximately $1 million, an additional performance compared to the fourth quarter of 2018 for a total 102nd poor contribution for the quarter of $3.4 million.
As reported on page 16 in the supplemental the observatory hosted approximately 894000 visitors in the fourth quarter of 2019, a decrease of 5.5 per cent compared to the fourth quarter 2018.
For the 12 months ended December 30, Onest 2019 Observatory revenue was $128.8 million, a decrease of $2.5 million or 1.9% for the prior year period due to the closure of the 102nd participation deck for more than nine months and lower visitation, partially offset by improved pricing.
Net operating income was $95 million, a decrease of $3.5 million compared to the prior period.
Excluding the 102nd floor revenue in the respective periods Observatory revenue was up 2.1% and I know I was up 1.7% over the same carried.
The Observatory hosted approximately 3.5 million visitors in 2019 down 7.9% compared to the 3.8 million in the prior year.
Our new pricing strategy for the new Observatory experience, which has been in place since January 2020 can be found it SP and why see dotcom just by clicking on the buy tickets button.
Moving to our balance sheet as of December 30, Onest 2019, we had total debt outstanding of approximately $1.7 billion and no borrowing under our 1.1 billion dollar unsecured line of credit.
That has a weighted average interest rate of 4.03% and a weighted average term to maturity of 8.3 years.
None of our outstanding debt has variable rates.
We are well underway with our efforts to replenish our cash balance after the repayment of the 250 million dollar exchangeable note in August 2019.
We aim to finalize long term financing in the first quarter right final details at such time.
As we've stated on prior earnings calls if you were to take into account our interest rate swap.
Current spreads and tenure the initial GAAP interest expense would be in the 4.5% range.
As of December 31st 2019, our consolidated net debt to total market capitalization was 25.2% and our consolidated net debt to EBITDA was 4.1 times, and we hope cash and cash equivalents of $234 million.
As we look ahead to 2020, please listen carefully to the following insight on items that we expect to impact full year results.
First we have now completed the redevelopment of the observatory and the hydrogen second floor observation deck is back in service. The nine month closure of the 102nd floor was an approximate 9 million dollar headwind 2019 results that won't repeat in 2020.
In addition, we expect to benefit from our new pricing, which can be found I.E.S. b and why Si dot com.
Second we anticipate higher gionee expense in 2020 than in 2019.
As a starting point, we would annualize the fourth quarter 2019 run rate of $16.6 million as seen on page 18 of the supplemental.
When our officers and employees meet certain tests for length of service and age there was an accelerated accounting vesting period for the time based equity compensation.
This accounting treatment will result, $1.3 million more GNS expense in 2020 than in 2019.
And last please see page six of the supplemental which you can see that we have $29 million of annualized free rent burn all of which $20 million will be realized and cash revenue for 2020 with the balance in 2021.
And we have $23 million, a signed leases not commence of which we expect $4 million to be realized in 2020 revenue with an additional $11 million and 2021, an incremental $5 million in 2022, and an additional $1 million in 2023.
With that I'd like to open the call for your questions to keep the call moving we ask that each participant limit themselves to one primary question and one follow up question and rejoin the queue. If they have any additional questions operator.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad a confirmation total indicate your line is into question Q you May Press Star too if you would like to remove your question from the Q4 participants using speaker equipment, it may be necessary to pick up your hands.
But before pressing the star key.
Our first question comes from the line of Jason Green with Evercore ISI. Please proceed with your question.
Hi, just one question on Observatory visitation, I know revenue and I know why increased but I'm visitation are you seeing anything that gives you confidence that we're getting near a bottom that that number might start to increase year over year.
Hi, Jason Hi, Tony Malkin here.
Nothing to say that our bottom line performance has improved as a result at the very well received redevelop.
Inventory.
That said I think we have to look at how we're going to perform over the year ahead, we have a new competitor in the edge in Hudson yards, which opens in March.
We have previewed the product and believe it will compete most directly with one world.
Top of the rock and one Vanderbilt when it opens.
That said, we expect a lot of noise based upon the new competition and we had stopped to see how the full year, it's going to unfold.
Got it and then I I guess I know, it's difficult to track, but have you seen any quantifiable downtick in visitation due to the Corona virus or just you know less less tourism in general.
Well the Chinese market accounted for approximately 3% of revenue in Q1 2019.
We disclose that previously and that accounts for a similar percentage of revenue on an annual basis.
You have not seen that go to zero here that we have seen a reduction.
Well we had.
A modest headwind, perhaps here it is not a severe for us as the headlines would suggest.
Do keep in mind that well Chinese group travel to the U.S. has been canceled in total.
In early 2019, we began our shift away from this highly discounted source of visitors.
So look I think that.
There's no question.
We have a study that was put together of all flights to and from New York City from China.
They're down to six weekly flights to and from China.
All carriers around the world and these are just to Chinese carriers that are presently making these flights.
So that's that there's no question, there's a big impact there.
I think that if we have a more abroad.
Spread of this we could have a more brought impact at the moment.
It's really not material to us.
Got it thank you very much.
Our next question comes from the line of Craig Mailman from Keybanc Capital markets. Please proceed with your question.
Hey, guys could you give us an update on the CFO search.
Sure Ah Tony Malkin again on on on that subject.
Our transition team has done and continues to do an excellent job.
I'd point out at the high level execution, we have maintained since David Carbs departure demonstrates that yes. Archie successes are team driven does not belong to any one person.
That said.
We Oh a lot of interest in this position.
We're not going to fill it till we have the right person.
And.
As we've seen our team members step up post David.
Retirement candidly that help us get a better definition.
As to who that right fit would be.
So.
In short very pleased with the way things are going very very happy with the work that's been done.
I drew practice and John Hog under the a watchful eye of John Kessler.
And it's really making sure we've got the right person on a go forward basis for us as we look towards growth in the future.
And it's a different job definition than the one that David held so lot of interest no rush when we have something to report will report it.
Great and then Greg and I know you'd mentioned that you guys are still in process of sourcing the replacement debt for the Exchangeables I I'm. Just curious as you guys are kinda doing the calculus I mean does it make sense to just flush that 9 million on the swap.
And.
Not replaced that given kind of a cash balances you guys have versus kind of the capital needs you're going to happen here in the next 12 to 18 months.
If we could Tony Malkin here, let's just remember to be kind to everybody and ask one question.
Oh, well answer this one but we'll ask for you in the future just ask one question and that way, we rotate ourselves around and ever get to be a chance to get his or her question.
Oh, Hey, Craig John John Here, just to respond there I think as you know our plan has been consistent to.
Replenish the capital from the exchangeable and that's why we if we had the swap in place that we did and I think that that continues to be our plan. So.
Given that we're going to we'll keep that swap in place until makes sense to unlock unwind it.
Great. Thanks.
Our next question comes from the line of Manny Korchman from Citi. Please proceed with your question.
Hey, it's Michael Bilerman here, Tony it's really hard to only ask one question, but I will pretty you [laughter] as we as we think about the unit exchange that you did and I know John talked about on the other than the opening comments.
I would that Didnt use cash and took a what was perpetual in the sense of common stock and made it perpetual in that sense of preferred.
My understanding is well the liquidation preference is exactly where you bought back yet.
How will that work in you know a biota that security number one number two it does carry a higher dividend right. So there is some cash leakage just from the fact that the preferred will carry a dividend yield of north of five relative to your common stock of up to about three so do you can address those two points about introducing more of these preferred.
Securities what happens in a in a wind up weren't a takeout of those securities and dealing with the higher dividend distribution.
Well Manny Michael excuse me, Michael It's John just first and they are on the topic of the dividend. So the private perpetual preferred pays a 77 annual dividend, which is above what our common dividend is a as you know.
And that but but the key is that it's does obviously, it's it's just a preferred and it's got to fix a return.
And it has the benefit of reducing our.
Our common share count in the event of the liquidation of the company there is a liquidation value.
Which is a 13 52 a share.
And then and certain other instances such as a capital transaction in M&A transaction to our triggers where we have the ability to to call those preferred Dan but that would be a at our option and attack in that case it would be at a premium preference.
And so they will not would they participate in that upside, but so filling but not for any not tomorrow.
No. Yeah can you were just pick that 13th.
Yeah, you much I know we bought back right. So you can factor, we bought back $52 million worth of stock, you're giving that $62 million a higher rate up 5.2%. So a million dollar oh more cash flow, but you've effectively locked in that massive spread relative to a navy deal.
Fair, Yes, I'd characterize it okay. Thank you.
Yeah.
And we will welcome another question from you Michael as soon as we make it through about Q.
Our next question comes from the line of John Guinee from Stifel. Please proceed with your question Oh.
Oh, great. Mr. Belem, Mr. Bilerman second question was that your DNA is up to 66 million Bucks part of the run rate which is up.
17% of overall cash NOI at 24%.
Oh cash NOI, excluding the observatory.
How big an impact you think that has on your share price.
[laughter].
Hey, John This is Greg care you know we.
Carefully monitor our DNA and Weve tried to communicate here to the street sort of people understand whats coming as we look forward to 20.
You know, it's something we look out in relation to our appears that and the both seen public curious had as well as the private real estate Mark we compete within your markets competitive market and so trying to keep our compensation line with it.
And were given all the details the streets that can fully digested say look out towards 2020.
Yeah.
John Tony Malkin here, we absolutely do.
And they tend to focus on this we have a couple of unique situations, which will work their way through the snake as Greg laid them out specifically.
We've got the unique situation that.
We've got some folks who are aging and leadership and as they age.
Due to our.
Retirement policy, even though the best thing doesn't change the accounting for the.
Hi invested stock, which they are issued does that we also have the recognition that we've got.
Some.
A unique situations that we've begun to look at the folks who have deferred.
Cash pop in exchange for stock.
That's beginning to bite and then we.
Additionally, absolutely are looking at our total loan were looking at our total load and our total expenses versus what we've got on the ability to put capital out there and that's something that's a major focus abide specifically in twentytwenty.
I would add of course at a significant component. The gionee is on the basis of performance stock grants well. The bottom line is we don't earn it we don't get it so if our stock price doesn't perform and if our bottom line doesn't perform.
Then that DNA is actually overstated the extent that those.
No those grants will not be earn.
Thank you.
Our next question comes from the line of Elvis Rodriguez from Bank of America. Please proceed with your question.
Good afternoon, gentlemen, perhaps we can get an update on you know the target at least that you did a union square or maybe the mark to market on that lease and you know how long those conversations took and when will they actually occupy the space. Thank you.
I was this is Tom.
The new lease with target, which is for 32006 trying to square feet as for long term, we nailed nearly 16 years it down to 10 Union Square East [laughter] that space has 22460 square feet on grade and about 9000 square feet on a lower level, plus 1000 square foot loading dock in the blended.
Right.
For that store was $123 a square foot.
So it's a blood run on both the a grade and below grade space and loading dock and that's a equates to a $4 million in annual starting right, which resulted in a 100% mark to market. So we are doubling the right from the prior affiliates like rent of the existing kinda no the existing tenants.
At least does not expire until April thirtyth of 2023, and the expected new lease commencement will be a January of 2024 on a GAAP basis that would be midyear of 2024 that has laid out on page six of the supplemental.
Thank you.
Our next question comes from the line of John Kim with BMO Capital markets. Please proceed with your question.
Thank you good afternoon.
To revisit when my favorite topics, which is your signed leases not come in.
Disclosure on page fixed.
Thank you look at 2020, you have 4.4 million of based cash rents.
That will be contributing in starting this year 4.4 million for 2020.
Last quarter that figure was 7.3 million.
And a number of tenants are in a long no ahead of schedule distinguish concerts lots attain institutional capital it looks like those leases actually started in the fourth quarter on a GAAP basis.
But my question is that $3 million difference is that going to be contributing and be in addition to your first quarter 20 cash NOI figure or has that already been.
Recognized in the fourth quarter.
John No the spread care no. There's the short answer to your question, where we can walk you through it all find the math behind it in detail. So you can progress on the numbers that helps you.
I'm just wondering why those tenants are no longer.
On this lift I'm, assuming it's because.
Of the gap recognition, but I'm just.
I would think that the cash contribution is still going to occur this year.
Yeah, well the lease legally commenced so the those examples besides when the least legally commencing they're under construction the space.
It's a good example, so if you look at like Interdigital as an example, right the least legally can that's in the quarter on their under construction in the space. So GAAP revenue began to little bit later in the year and then catching your cash revenue recognition is behind that as an example, we can walk you through you know individual leases offline if you want detail.
Okay.
<unk>.
Our next question comes from the line of Daniel Ishmael from Green Street Advisors. Please proceed with your question.
Great. Thank you I was hoping you could talk a little bit more about the leasing environments and outlook for 2020, maybe specifically where you see concessions going for you might not office portfolio.
Sure Dan This is Tom Oh, well in Manhattan, our pipeline of activity for Manhattan Office space remains solid.
We have leases or proposals in negotiation on full floors and prebuilts throughout our portfolio.
Got it from a wide spectrum of kind of types and that includes a tammy financial sector consumer products professional service nonprofit you name it weve.
Increased as I noted before are asking rents by 3% on a trailing 12 month basis on a year over year ever weighted average basis for Manhattan office portfolio and of course as I've noted previously our actual trailing 12 month net effective rent growth.
On a year over year basis for our new Manhattan office increased by 14.8% this quarter.
And that's laid out on page 12 of our Investor presentation, but also shows that our media in Manhattan net effective rent growth for new leases over.
Over the last five years has bad or less five quarters has been over 6%.
We see good activity.
We've got deals in negotiation as I said before on both full floors and pre builts beyond that.
To provide greater honest, but overall overall the you know the activity is healthy.
And then also I'm sorry, you had asked about concessions.
I would point out that our average lease cost per lease year for Ti leasing Commission for all new and renewal Manhattan office leases in the fourth quarter was $10, a 45 cents a square foot and that's very much in line with our average of about 10 on a quarter for the past eight quarters. So what we've been seeing is.
You know steady run rate on our average lease cost per lease year on lease on concessions combined with steady increase in Russia rights nuts, and producing the above average net effective rent growth.
Great that's helpful. Thank.
You bet.
As a reminder, ladies and gentlemen, it is star one to ask a question.
Our next question as a follow up question from the line of Manny Korchman from Citi. Please proceed with your question.
Hey, it's Michael Bilerman again.
So I wanted if you can maybe provide some goalpost calm the observatory for 2019, I think Greg could sort of referenced $9 million of income.
The law in 19 that won't repeat right. So if you take the 95 million of NOI, that's what's going on page 16, ideally your I guess at least indicating as a starting point getting to 104 million for calendar year 2020.
The offsets being potentially you know with the Corona virus has a bigger impact on travel tourism overall, not just from China, but other Asian region the competition from the.
The edge and eventually when one day, Andy open drop offset by your revised pricing strategy. So maybe you can give us at least some range knowing that you're giving us a 9 million already but just sort of dialing into some sort of guideposts for the observatory back for Twentytwenty.
I'll start and Tony will add ons comments.
Sorry go ahead, please do.
No.
Matt Michael just to clarify it's a 9 million dollar revenue impact on the 102nd floor in 2019 that we won't have now the 102nd floor is back on line in 2020. So it's a revenue number not and I know why number and then I'll turn it over to Tony.
So what I'm going to widen.
Like correctly that Todd I know why that's a revenue impact related to what is what is that in Hawaii impact then yeah. It's it's a fairly high contribution for 102nd or we have not broken up at a fairly high contribution.
So the margin to apply a higher margin and the rest of the business.
Correct.
And then Tony sorry.
Well I, just think to clarify what what Greg just said that the.
The fact is that but those are incremental dollars on top of fixed expenses. So I'm not sure. If your question many were margin contribution or any additional revenue should should flow.
And as far as the business going forward. It's it's it's really very early were.
Nonetheless, I can say, where we're very happy.
To look at what we have accomplished with the new Observatory.
Views have been spectacular.
The installation itself as great the activity on social is huge.
We're very happy to take a look at.
At a preview of what was going on at the edge with Hudson yards, well that is new competition. It is it's very clear.
To to us.
That.
That is very much a sort of a one world experience.
With a nicer restaurant and an outside deck, but.
Got it.
Has an elevator feature a similar to one world.
That's about it as far as special features I think they're going to have an added charge opportunity during a better weather.
Involving some sort of limited activity, where people can upcharge, we're pleased with their pricing.
Our pricing remains.
At constant.
And available at any time, that's one of the beauties of the new exhibit it's really gotten rid of crowds inside the exhibit people pace themselves through the exhibit.
Whereas.
The edges anytime silver 50 Bucks.
And and so we like our competitive position there.
The the fact is.
No that there will be more.
There will be more competition in the fact is that it if we have something that extends broadly beyond China to impact international travel.
We have a significant as we've disclosed previously international component to our visitors.
At the moment in the study state World, we feel pretty comfortable.
Very comfortable very happy the way things working and we will see noise I'm quite sure from the opening of <unk> of the edge.
So I think it's very difficult for us to give you better clarity than that.
Yeah, I was just trying to being with the office business because of the leasing in the schedules say. Thank you. We can make pretty good assumptions I think the observatory has always been a little bit more difficult to model and clearly some of the stuff. That's been going last few years is modeled it a little bit I was just trying to get a sense for 2020, you gave us he went on.
102nd floor sort of a positive impact I was trying to weigh the competitive landscape relative to your pricing and whether those wash it out whether whether you we should be thinking that and Hawaii is going down wars and alike going up outside of hundreds second floor.
Being opened this year relative to last and that's [noise].
And what the street to get ahead of themselves nor did I want them to be too low either that's why I'm just trying to get a picture of.
What we should be thinking about for that business.
Right I I would just encourage folks to take a look at yes be end my Si dot com and go to buy tickets to actually take a look at our new pricing.
And that covers all of our various up charges.
You'll note that we've increased the pricing to the hundred and second floor as part of its new experience.
And then the additional part that I would say as I feel quite confident that.
The the edge at Hudson yards is going to open with quite a splash with a big spend.
At the same time, having been through the we were invited by a.
A a party with whom we have a client relationship to and event that happened to be a preview of the edge and having seen the edge.
We feel very good at the that rents.
And let the the security.
It is it's really not well laid out.
Not going to support high volume.
The <unk> that they experience itself aside from the elevator is it's very sterile and modern.
So I think that that competes very much with the folks that one world I think you should be prepared to see.
Significant drop off in some of these folks who have relied significantly on the China bus tour business you specific specifically one world has become really dominated by that business and that business has gone when it comes back.
And it was a highly discounted business to begin with so our move to the independent traveler.
And our inroads in the China markets really paid off nicely and outside of that Michael I wish I could give you.
More definition, whereas eager to to get this year are underway and play it out as you are.
Well, that's really helpful color on the competitive landscape and what you're thinking about any impacts I think the pricing a that we all can now look at on the web site gives us some indication of the varied I think we'd all love to be able to see the percentages are those tickets sold in each of those categories and so that we can start to track not just.
The baseline a net revenue that you're collecting but how the composition of it is as soon as you've moved to this pricing model sharing a little bit more I'm getting to work under the skirt a little bit more about how the say how.
Things are coming in by type would be something that would be great addition to the supplemental.
We appreciate that that very much and we'll look at that carefully we really just like to see how.
The edge and one van de open up we don't want to influence the way there do they do their business by giving them too much insight as to how that works and once we get a little bit of stability and we see what they're doing maybe we can look at that a little more closely given a little more information.
Okay. Thank you.
Our next question as a follow up question from the line of John Kim with BMO Capital markets. Please proceed with your question.
Thank you just a question for Tom.
Wondering if you could describe like the depth of the office leasing market in Manhattan that the 60 to 79 price point as far as expansionary tenants now that the co working tenants or basically install and also if you could discuss leasing economics because.
It looks like Capex. This quarter was unusually high during the quarter on relatively average leasing volumes I was wondering if this was a good run rate going forward as far as and from a cost.
Sure John So first as I said before the our pipeline of activity for Manhattan office portfolio remains really solid.
We've got activity across the portfolio for both full floors and Prebuilts and we're seeing a inboard a activity and interest from a wide spectrum of tenants that has always been a hallmark I think of our portfolio that we do attract a wide range of tenants and that if I look at deals.
Negotiation.
Or and proposal phase right now that those kind of types range from.
Yep Tami to talk to professional services to the to the fire sector and and beyond.
As far as a co working or or we work specifically I just would make a comment that.
Weve continued to.
See steady activity in our Prebuilt program, you know we offer a wide range of pre books throughout our portfolio.
Yeah for the year of 2019, we did over.
45, prebuilt deals or about a quarter over quarter million square feet of pre productivity for the year. So we really haven't seen any impact.
From that and we have expanded or our services as we look at.
Broadening our appeal to tenants through offering truly turnkey experience of furnished wired and boobs move coordination services.
As far as concessions I commented earlier, the average lease cost per lease year for just commissions is remained steady so we're at 10 $10.45 per square foot.
Cost per lease year.
This past quarter and that's very much in line with the past eight quarters.
Okay. So about 87 million, that's really just timing as far as when leases.
Started when you when you pay enough T.I.s.
I don't know Greg if you wanted yeah correct that went on there is a bit of a timing lag between what we reported Tom's talking about the leasing activity in the quarter when the actual capex dollars go out the door.
Okay. Thank you.
You bet.
Our next question as a follow up question from the line of John Guinee with Stifel. Please proceed with your question.
Great investment market in New York City.
Where are you guys, yes overall in and current taking prices current.
Current a closing prices versus what you think is appropriate or you up.
5% low or 15% low in the current environment.
Hey, John John Here, we will continue to look and under great potential deals in our market and weve not seen anything which has been attractive.
Now for us to to act.
Capital markets remained strong and we haven't we haven't gotten close I'm not going to quantify for you.
A gap.
Great and then.
Your cash and cash equivalents went down about 60 million this last quarter.
Up to 94 to 234.
How much burn rate more burn do we have you done with the observatory how much burn do you have in taking a break even on a sources and uses.
John This is Greg care, you know if we look at in terms of them. If you look at page nine of our Investor presentation. We still some redevelopment work to go we have approximately 550000 square feet. So if you use an average cost per square square foot of $200.
And that implies about a 110 in total spend into the entire portfolio has been redeveloped.
In addition, as you know well aware as we noted on our first quarter earnings first quarter 2018 earnings call. We anticipate additional spending of approximately 40 million in the Greater New York Manhattan, The Greater New York Metropolitan portfolio to date, we spent $29 million.
And so we're getting there, but there's still some additional capex spending they go and that trend line has been trending down.
And so that's where I'll leave it for right now.
Great. Thank you.
There are no further questions into queue I'd like to hand, the call back to Mr. Malkin for closing remarks.
Thank you very much so folks this was a solid quarter for SRT, our leasing volume cash spreads and net effective rent growth all highlight.
The strength of our core real estate operations, which experienced strong anti wide growth from recurring operations.
I'm pleased to see stronger bottom line contribution to our results from the multiyear observatory redevelopment.
As discussed on our last earnings call.
We've expanded our team with key hires and yes, Gi and technology you can find more details on our E.S.G. and technology initiatives and our new slides in our investor presentation, and we look forward to showing more details of our work over the course of 2020.
Overall hard working great results. Thank the team.
Thank you very much for your time and your questions and we look forward to chances to meet with you at upcoming conferences and Drs and property tours.
Look forward to reporting our first quarter results in April and until then all the best.
Ladies and gentlemen, this does conclude todays teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.