Q2 2021 Empire State Realty Trust Inc Earnings Call
Greetings and welcome to the Empire State Realty Trust second quarter of 2021 earnings call.
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A question and answer session will follow the formal presentation.
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I would now like to turn the conference over to your host Greg for Jay Director of Investor Relations. Please go ahead.
Okay.
Good afternoon, I'm going to turn the call over to Tom Keltner, Our general Counsel and secretary of the Remy to read the prepared remarks.
Good afternoon. Thank you for joining us today for Empire State Realty Trust second quarter 2021 earnings Conference call. In addition to the press release distributed yesterday.
The quarterly supplemental package with further detail on our results and our latest investor presentation.
We posted in the investors section of the company's website DSR of T Rieck Dot com.
On today's call management's prepared remarks and answers to your questions may contain forward looking statements as defined in applicable.
Applicable securities laws, including those relating the market conditions property operations capital expenditures income and expense as a reminder, forward looking statements represent managements current estimates they are subject to risks and uncertainties, including ongoing developments regarding the COVID-19 pandemic, which.
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 from the company's filings with the SEC.
Certain of our disclosures.
<unk> 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 construction, we do not expect to maintain the same level of disclosure when we resume normal business operations finally.
During today's call, we will discuss certain non-GAAP financial measures such as <unk> modified and core <unk> 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 Good afternoon to everyone or good morning, if youre on the West coast.
We continue to see.
Signs of New York city's recovery and then the ability of at least for the vaccinated to move past the pandemic and begin our lives of the fact that Covid is here and likely to stay here for many years.
The reduction of Covid related restrictions of greater number of company announcements about returned to office with fall of the most popular day.
Date.
And increased property tours proposals and conversions to deals all point to the return the business I.
I still believe that the office industry in New York City will not move fully to our front foot and the storyline in the press will not change until after the first quarter 2022.
The data show increased department leasing and sales in New York City schools have committed to in person learning in the fall cultural institutions are open or have announced their reopening and demand continues to grow for dining and nightlife options.
Political leadership has initiated actions to clean.
Midtown streets in conjunction with the re population that has begun.
Police have been given the authority to take actions to deter crime and.
And the city has begun to move the homeless from hotels back the shelters.
And the restoration of social services to those in need of transition assistance.
The open air bizarre setting of unlicensed sidewalk merchants of source of much street activity and violence.
Has begun to be addressed and it's mostly absent from the neighborhoods in which we do business.
Retail has begun to show the life signs of life with improvement in foot traffic.
Additional shopping Carter's such as 34th Street and Union Square mid.
Midtown service related retail such as food vendors still remain slow awaiting the greater office work of return.
Tourism has picked up with materially increased domestic air travel to New York City as the destination.
Introduced hotels tourist destinations concerts restaurants, virtually everything has reopened or is the plan to reopen.
That has directly positively impacted our business at the observatory.
Our tenant presence has grown since last quarter and are building utilization stands now.
<unk> below 25% and our New York City portfolio, and nearly 50% in our greater New York portfolio compared to comparable 2019 periods.
Companies have announced returned to office states, primarily as post labor day and virtually all of.
Now just hell of tenants are open.
We have resumed operations summit reduced hours at our amenities from state bar and grill at the Empire State building to our tenants only fitness facilities throughout our portfolio.
We also announced the return of the Empire State building run ups scheduled for October 26.2021.
Of our.
As I said just before.
We have to understand that even with all of the positive facts, we will continue to see media outlook.
That will be mixed until an inflection point in Q1 'twenty 2.
And I think we will see a shift in tonality.
<unk> from there.
Switching to our observatory operations visits continue to grow with our highest per caps in history and visitor feedback on our immersive museum quality exhibits and our focus on safety with the top of the line indoor environmental quality, including Merv 13 filters.
It's ventilation and active for bipolar ionization is terrific.
We've increased hours on busy days to accommodate increased demand and fully reopened all of our interactive exhibits and elements.
The strength of our brand.
Carefully domestically and internationally during Covid lockdowns.
<unk> has never been stronger.
We are authentic and iconic New York City.
We believe our timed reservation ticketing has helped to drive a higher retail mix versus tour and travel partners like past programs and online travel agents to be clear our tour and travel partners have all been accommodated.
By an adjusted to our new timed reservation system for their customers.
The suggested our visitors buy their tickets directly to a larger degree than in the past and by upgraded experiences when they do and that drives our per caps.
Second quarter attendance was at approximately 17.
Percentage of 2019 comparable attendance of continued improvement from 2020 levels and above our hypothetical admissions forecast of 13% for the quarter largely driven by May and June for.
For example, the month of June attendance was at approximately 25% of 2019 comparable.
Tendance above our hypothetical admissions forecast of 20% for the month.
The month to date through July 25th attendance was at nearly 30% of 2019 comparable period of attendance above our hypothetical July admissions forecast of 25%.
Visit.
Today are higher than last week.
Visitation is driven virtually entirely by domestically sourced retail onsite and website sales.
We're not sure how revenue per cap will hold up over time as international travelers return.
We do believe that the higher percentage.
Through Nastic visitors will continue for a period of time as international tourists.
Visit New York City, right now and U S based tourists do not presently travel abroad in significant numbers.
Overall, we seek to maintain our current higher level of customer satisfaction, driven by our new times.
<unk> of <unk> system that enables us to manage volume in peak periods to deliver further improved experience.
We have nurtured and enhanced the observatory brand from our redevelopment work completed the just before the pandemic and through the pandemic through our various lighting and activation events.
<unk> most recently the second.
<unk> decade of Macy's fourth of July fireworks show visitor.
Visitors to New York want to visit our iconic destination and are willing to pay for the unique experience to do so.
We have made no change to our hypothetical observatory admissions shown on page 12 of the Investor presentation.
Consistent with.
<unk> in previous remarks, we are seeing of higher retail website, driven local visitor mix, followed by a ramp up of regional and national source of travel.
And we anticipate a restoration of our typical of visitor mix that is approximately 2 thirds international once there is a broad resumption of international air travel.
That we want and we anticipate will occur sometime in 2022.
Our hypothetical admissions forecast suggests that we can reach 60% of 2019 attendance levels by the end of 2021 and returned to 100% by the end of 2022.
Ex remember 2 points for your modeling please.
We believe that we can maintain our current observatory operating cost structure up to approximately 60% of our 2019 attendance.
With more international inbound tourists.
We believe we will see growth from lower margin passes in online travel.
Tourists.
Which will lower our per caps.
Let me step back for a moment to share a couple of thoughts about the observatory business for your consideration.
At ESR tea, we have multiple drivers of future growth from the recovery of New York City.
As the New York City landlord.
<unk> agents, we will benefit from a recovery in office and retail fundamentals. However, as we are aware of there is a lag in cash flow contribution given the lengthy lease negotiation cycle.
Pause before lease commencement.
Tenant construction period.
Emissions free rent and Capex.
Lord of the with these businesses.
Observatory wrap up contributes revenue immediately no delay.
The observatory business represents an important diversification asset and has significant potential to contribute to our bottom line.
It is non correlated to the office business and has high operating leverage.
And what we can control expenses, depending upon visitor volume and we have no further capex requirements given the full scale redevelopment of the observatory completed in late 2019.
Our observatory with its iconic brand is an important differentiator in an additive feature of our business.
ESR.
It remains well positioned with our flexible balance sheet and our focus on improved processes and practices.
We continue to seek ways to deploy our capital through disciplined external growth opportunity pursuit.
Team has bid on deals in the market and not wanting 1 any as of yet.
Our team active as we look at on an off market situations across New York City, and office retail and multifamily assets.
ESR T is well positioned with our operational skill set of flexible balance sheet disciplined approach to capital allocation.
<unk> and leadership in ESG to deliver long term shareholder value.
I think that at this point I might like to make 1 last comment while.
You were in the midst of your earnings calls you may be aware or we'll know shortly that 1 of our tenants Gvg. Just this morning filed for chapter.
For 11 bankruptcy protection for its North American operations.
We have been on top of the situation for several months and Christina Chu, who will provide you with the current state of affairs and impact in her remarks now.
Now I'm happy to turn the call over to Tom <unk>.
Thanks, Tony and good afternoon, everyone.
In the second quarter, we signed 35, new and renewal leases totaling approximately 191000 square feet.
That included approximately 153000 square feet in our Manhattan office properties 2.
27000 square feet in our Greater New York Metropolitan Office properties and 11000.
Square feet in our retail portfolio.
Most of leasing activity in our Manhattan office portfolio was for spaces under 10000 square feet and in fact 15 of the 25 Manhattan Office leases signed this quarter were for pre built office space.
The largest new office lease we signed this quarter was for <unk>.
11800 square foot space at $13.50 Broadway.
Tour volume in the second quarter of 2021 for our Manhattan Office portfolio was about 84% of the second quarter 2019 level and represents a very significant increase in tour activity compared.
<unk> the first quarter of this year.
Most of the space tourists continued continue to be for our smaller prebuilt suites and at 1.1 graphics of places are most active building.
Fortunately, we have 276000 square feet of prebuilt suites in our portfolio that are built and ready.
For immediate lease up.
We do see an increase in interest from full floor tenants of under 30000 square feet and are in active discussions with both new and expansion tenants in finance technology and professional services.
The increase is a positive sign of tenants are re engaged however, our <unk>.
Smaller suites will be the quickest to lease and larger lease transactions will likely appear in the latter part of the year.
Healthy buildings and indoor environmental quality remain front of mind for most tenants who are focused on having their employees return to office in September.
Our industry leadership in this area is widely recognized by.
For the brokerage community and are more than a decade of work in the indoor environmental quality and sustainability positions us to provide real estate solutions to prospective tenants, who seek a healthy workplace environment.
During the second quarter rental rates on new leases signed at our Manhattan office properties decreased by 1.7%.
<unk> on a cash basis compared to the prior escalator rents.
Spreads on renewal leases out of Manhattan office properties were down for 3%.
New and renewal office leases across our entire portfolio were down 3.6%.
And our Mark to market results are always driven by the escalated rents.
<unk> of leases that have expired and in today's market, we remain focused on retention of tenants.
We estimate the net effective rents in our Manhattan office portfolio today versus pre COVID-19 levels of declined 10% to 20% on a comparable space basis the.
The contributing factors of face rent free rent.
<unk> of.
The lease term of tenant work all vary by deal and depends on the space condition location and tenant credit.
Our total portfolio leased percentage is 88, 2% down 50 basis points from last quarter.
Occupancy of 85, 2% was up 20 basis points from prior quarter.
For the balance of 2.
2021, we anticipate tenant move outs of 141000 square feet, which will be offset by signed leases that we anticipate will commence before year end of 234000 square feet.
Please refer to tables on pages, 6 and 10 in our supplemental for more detail.
Tail.
We reduced property operating expenses by $1 million in the second quarter of 2021 compared to the prior year period, an accumulative total of $51 million since the pandemic onset.
While most of the cost reductions were primarily driven by low building utilization we have locked.
Nearly $8 million in recurring savings that will however, be offset by contractual union right labor increases and a reduction in tenant expense recoveries from existing tenants.
Looking ahead to the second half of 2021 with a greater increase in vaccination distribution and a return.
Return to the office, we expect the gradual increase in operating expense levels.
In summary, we had a solid leasing quarter with 191000 square feet total leases signed.
We continue to manage property operating expenses tightly with the cumulative reduction of $51 million since the pandemic.
Onset of nearly $8 million in permanent savings.
Our portfolio is well positioned fully modernized and has built tenant spaces ready for lease up.
And our industry leadership and experience in indoor environmental quality and sustainability enhances our ability to attract and retain quality tenants.
Minutes.
Now I will turn the call over to Kristina Kristina.
Thanks, Tom.
For the second quarter, we reported core <unk> of.
$49 million for 18 cents per diluted share.
Same store property operations, if you exclude onetime lease termination fees and observatory results from the respective period.
6% cash NOI decrease from the second quarter of 2020.
This decrease was primarily driven by a reduction in revenue due to write offs taken over the period.
Our rent collections totaled 95% of second quarter, 2021, billing with 95% for office tenants of 91% for retail channel.
There were no write offs of straight line balances nor receivables from the second quarter of 2021.
Switching to Observatory results the observatory revenue for the second quarter of 2021 was $8.4 million.
The observatory expenses were $5.3 million from the second quarter of 2021, and we continue to expect run rate.
<unk> expenses to be approximately $6 million to $7 million per quarter for the balance of 2021, depending upon the pace of visitor of ramp up.
Turning to our balance sheet as of June 32021, the company had $1.4 billion of liquidity, which is comprised of $541 million of cash and 800.
$2 million of Undrawn capacity on our revolving credit facility.
The company had total debt outstanding of approximately $2.2 billion on a growth basis and $1.6 billion on a net basis as of June 30 of 2021.
The company's total debt has a weighted average interest rate of 3 <unk>.
9% and a weighted average term to maturity of 7.7 years, we have of well ladder of maturity schedule with no outstanding debt maturity until November of 2024.
Our net debt to total market capitalization was 31, 4% and net debt to adjusted EBITDA was 6.2 times.
From January.
Hundreds of it for 2021 to date the company repurchased $3.5 million of its common stock at a weighted average price of $9.22 per share.
This brings the cumulative total since the stock repurchase program began on March 5th 2020 to $147.2 million at a weighted average price.
Of $8.34 per share.
In the second quarter, the company announced the reinstatement of its quarterly dividend at a rate of $3.5 per share, which equates to an annualized rate of <unk> 14 per share.
The board and management's confidence in the recovery of New York City, the improvement to date in the companies.
These results and the company's liquidity position and strengthening balance sheet resulted in the dividend reinstatement 1 quarter earlier than previously announced.
Our balance sheet flexibility provides us with the ability to evaluate opportunities to deploy capital for external growth as well as engage and the repurchase of our shares our investment team.
<unk> continued to actively underwrite investment opportunities against the backdrop of record levels of private equity capital y.
Wide availability of low cost financing and lack of distressed asset pricing as we have emphasized we will continue to exercise prudence in our capital allocation and focus on the creation of long term shareholder value.
This morning, Gvg North America filed for chapter 11 bankruptcy, our filings identify gvg as the top 10 tenant with 353000 square feet. Currently lease we wanted to give you background on this and unpack this number as well as provide an update.
<unk> was spun out of land from us.
At 1 point as of June 30th 2020 leased 669000 square feet of state.
Overtime, we are proactively in partnership with Gvg reduced our mutual exposure through several actions.
In <unk> 'twenty, we recaptured 103000 square feet from Gvg and lease directly.
Anthony.
In <unk> 'twenty, we recaptured 212000 square feet from Gvg, which had previously been sublease of centric and find a direct lease with centric centric.
Centric itself had filed for bankruptcy and came out of bankruptcy with the new balance sheet that is materially back by Blackstone amongst others.
<unk> of <unk> current 353000 square feet under lease of 162000 square feet of space at $13.33 Broadway has been sublet for several years.
The sublet fees at <unk>.
<unk> 33 Broadway pay of higher rent than Gvg's base rent and as per the terms of those sublet that rent will now be.
Roughly to ESR team, we have had discussions to convert the sub tenants to direct leases.
The space that is uncovered by sublet.
Our net exposure that remains is 191000 square feet that net exposure represents 2% of total ESR tea portfolio annualized range.
We collected Gvg run through June and recently drew down in for the balance of GBP $17 million letter of credit to give us unconditional ownership of those funds. They are not part of the bankruptcy of state and will be applied against the amounts due to us.
Related to Gvg as of June 30, we have of $1.6 million.
Driller straight line rent receivable balance, which given this morning's filing we no longer believe it is probable of collection and expect to take in as a noncash write off in the third quarter.
We have always had and continue to appreciate of positive relationship with <unk> and have an ongoing constructive dialogue in fact, we received.
A courtesy call immediately upon this morning's filings.
This is of chapter 11 filing and we expect that we will be in touch with <unk> about their ongoing safety I'd like to hand, the call over to Tony for any comments, they would like to make about the space from which we currently have exposure to GBT.
Hey, Kristina this is Tom I would like to add.
Received we are well positioned at the Empire State building with the space should TPG reject any or all of their space and restructure of Tpg's large floor plates at Empire State building were highly desirable pre COVID-19 and we believe the remains so today.
We are well positioned to re let the space should we need to do so.
The situation evolves for example, when linked in the largest tenant in our portfolio and at Empire State building, who currently occupies 419000 square feet and is committed to take occupancy of additional 83000 square feet, which at least for commencement of 2022 for a total of 501.
The square feet.
When the expanded at Empire Steepening, a good chunk of that space was on these larger lowered very desirable floors.
So with that I think we're happy to open it up to any questions anyone may have on this or any other topics.
Once out or if you'd like to open the line for questions.
Thank you Sir.
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Operator, you the pickup your handset before breakfast with Barclays.
Our first question today is from Craig Mailman of Keybanc capital markets. Please proceed with your question.
Good morning, or good afternoon, everybody. This is already on with Craig just some additional color on Gvg can you give us any numbers behind that.
Necessarily space.
330, Broadway and kind of where the numbers are in terms of what youre collecting from <unk> and what they are paying.
Sure. Thanks.
Thanks for the question so the rents that Gvg incurs is in the mid fifties.
And the sub tenants are sort.
The high <unk> to $60 range.
Okay got it thank you and.
You guys have not reserved anything for that tenant previously correct. The <unk>.
Only thing would be the.
The what you mentioned of the straight line write off going forward and then anything else on top of the $17 million right.
In the correct, it's the $1.6 million, which we expect to taken as the noncash write off in <unk>.
Got it and then switching over to the leasing pipeline in the second quarter. It included mostly smaller tenants. Obviously do you have any medium size or larger requirements in the pipeline now and can you just provide some color on the breakdown of the.
And in terms of requirements sizes.
The answer is yes, we do have activity at leases in negotiation and proposals being exchanged for full floor tenants that are generally under 30000 square feet.
Definitely the most active segment of the market right now that we see is in the smaller prebuilt suites, but were.
Pipeline heartened by the fact that the number of proposals that we're exchanging and leases in negotiation for both new.
And expansion of tenants.
For full floors.
Will result in some additional Alicia full force in the latter part of this year, we're seeing activity from tenants in professional services tuck in of.
Mountain financial services I can't give you a more specific breakdown on that but.
The.
We do have activity in that range look I think we've had a really solid quarter with 191000 square feet of total leasing with a weighted average lease term of.
8383 years, we're hosting regular broke.
The health events, we've had broker outings.
Folks that we speak to or are excited and engaged.
We've got a healthy pipeline of activity going into the into the third quarter.
Great. Thank you.
The next question is from Manny Korchman of Citi.
Growth of Etsy with your question.
Hey, guys. This is part of the currently actually on for Manny I guess, 1 quick 1 from me given sort of how the month to date in June trends were for the optic.
Why arent you guys sort of pushing forward I should rephrase pushing up some of your sort of guidance or expectations on visitor levels at this point.
Please proceed.
To begin with.
We do feel comfortable with the hypothetical of the reasons I mentioned in the opening comments.
Number 1 number 2.
Now with all of the strength that we see we want to be and we always said that we would present a conservative hypothetical and that's what we've.
We don't want to look at this as guidance. It is it is hypothetical and we have provided unusually an update really right up to today or yesterday as far as performance I think it's just important to note we held it out as a conservative approach.
We do better than that now we've done better on expenses.
I originally laid out and I think the most.
<unk> thing is the incredible immediate delivery to the bottom line of every piece of benefit that we get from the operation of the Observatory I think of.
A lot of people have question that in the past.
Why does this fit how does this fit in I think that.
Stands out.
Clearly now is the real asset for the business.
Got it okay. Thanks, Tony that's all of that.
The next question is from John Kim of BMO Capital markets. Please proceed with your question.
Thank you.
Can you provide for more color on the write offs that were taken this quarter was that.
I'm, assuming it's not global brands with another tenant.
We took no write offs this quarter.
I thought you'd of revenue reduction due to the write off.
Write offs over the period. So as you recall, we took write off of <unk> of 2020.
And a little bit in <unk> and when you have that cumulative.
The impact that drives lower revenue, if that's what you're referring to but this quarter. We did not take any write offs on our receivables nor our straight line balances.
Okay.
Yeah.
With the issues announced this morning with global brands.
What is your view of the financial health of lean of fun I know its net.
No longer listed on the same thing.
We feel pretty good about Lee phone.
There is no longer listed its it is controlled by the <unk> family.
The global brands group was the spin out out of that but we feel pretty good about Lee Fung and.
Again as I said, we have a we have a good relationship with with these folks they've been very open with US we've been very open with them, obviously within the limitations of public company disclosures back and forth.
So I hope that answers your question.
Yes, it does I noticed they had of June 'twenty 1.
Exploration or that was 1 of the 1 of their explorations to day.
We renew that lease.
We had previously announced that.
<unk> has.
A 79000 square feet set to expire this year at $30.59 Broadway we've already leased.
At least approximately half of that space to.
And obviously announced.
So it's been tell us that we executed during the first quarter.
So that was anticipated vacate by Alf.
And as I've said, we've already backfill of approximately half of that in advance of their lease exploration.
Okay.
And.
The premium on page 10.
Looking at near term near term explorations in 2022 right.
Right now you are expecting a pretty low retention rate.
Is there anything you can do to address this as far as you.
You know from feedback from some of the or some of your tenants as far as being more aggressive on rate of flexibility.
The finances.
Well, what we see is the particularly with the smaller tenants is that day generally make the decision closer to their lease expiration date and there is still about 100 and.
37000 square feet of unknowns.
Martin Manhattan office portfolio.
I feel good about that at least.
For more than 30000 square feet of that we'll update that too.
Tenant renewal and retention this coming quarter. So we constantly and regularly update this as you know.
Every quarter and as we.
As we execute our renewals.
Those come off of this lists 1 cannot.
The conclude the retention rate from this page 10 in the supplemental.
But it looks like from this disclosure that you expect occupancy to pick up this year and then.
The next year, it's a little bit of unknown, but as of now there's a bit of a GAAP.
Right because.
We have about 230 for 234000 square feet of leases that are set to commence this year offset by about 141000 square feet of move outs. This year. So.
Of the occupancy will depend on the exact timing of that but that's what we expect to happen in the second half of this year, which.
Because.
It should be positive to our occupancy.
Got it very helpful. Thank you.
You bet.
The next question is from James Feldman of Bank of America. Please proceed with your question.
Good afternoon. This is all of this on for Jamie just a couple of questions maybe the first for Tony.
Which will mentioned bidding on multifamily assets.
Can you perhaps share any details or are you looking at those assets in New York City, as well or the greater metropolitan area.
So our focus is on New York City office, retail and multifamily and Thats really been.
Maybe we have made it clear.
You've really been our intention.
I think that if we were to move to a different market.
We would give you of telegraph on that right now our focus is on the New York City office retail and multifamily.
And are you able to share sort of an outlook of what the pipeline is what your.
Sure enough of it on like the size of the deals anything you can share for us to think about.
The primary interest is to do something which is worth the effort and moves the needle for the company. So from that perspective, we're conscious of the the dollars we have available.
We are.
We're.
The buildings of the fact that there is significant capital in the system against which we have to compete.
And most of what we look at in the pipeline I would say are things that are not actively marketed though we have looked at some actively marketed transactions.
We feel very good about the work.
We're confident that our team has done and has underway.
And we look forward to as soon as we have something specific to discuss.
To that discussion.
Great and then maybe just 1 quick follow up on the Observatory can you share of makeup I know you mentioned most of the visitors of domestic but are you seeing some.
Work, a little bit of a pickup in international travel.
So.
I personally believe that we are primarily virtually entirely domestically sourced that said we do have.
Something less than 10% of international addresses.
The credit cards.
Who purchased from us on a retail basis.
Mike strong feeling is that those people are not actually international tourists, but rather ex pats, who live within the United States and who originate their visit from a U S based location.
And.
For come to New York City.
So I'd say the exciting thing for us is.
That's the city actually has taken steps to clean things up.
If you were to look at.
34th Street.
Unfortunately, not at the Empire state building, but between.
The sixth and seventh avenue's, even 4 months ago. It was wall to wall Street vendors literally people with clothing racks, you name it a lot of disputes and hassles amongst those people all cleaned up the police of established very strong presence in the area the <unk>.
<unk> and.
And others who needs.
And well services and need to be taken care of.
Finally, the city has begun to reopen and deliver those services and to move those people in the places to where those services can be delivered.
Lot of optimism that we have on our side.
That we've seen the worst the.
Reporters won't.
Specialty of that to the most part the way I think we've seen the worst and we work our way towards the bottom again I think we have a much clearer of base picture at the end of the first quarter 2022.
Great. Thank you.
Thank you.
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Our next question is from Brian <unk> of Evercore ISI. Please proceed with your question.
Good afternoon.
Tony as you think about capital deployment by the.
Back in the stock in the quarter, only $3.5 million year to date.
I know that the stock's up quite a bit from its lows, but are you kind of thinking about buybacks and balancing that with potential acquisitions.
Hey, Brian I will take that 1 so look we continue to you our share price as very much discounted just given.
In New York City office landlords have trade. It we continue to believe in the importance of management teams for us and company to view the opportunity to buy back their portfolio of potentially of discounted valuation at the very important consideration for capital allocation.
And the hurdles for what you do having said.
Of that.
We have done some buybacks we have the authorization we have the balance sheet, but we're also weighing that against opportunities in the marketplace in terms of investment opportunities that will help drive long term shareholder value into the future. So we've taken all of imbalance I would not take the.
Lower level of buyback activity that its.
Off the issues, that's the level and we're weighing it against other opportunities for capital allocation, but we continue to fundamentally believe in share buybacks.
I would just add to Cristina.
Helpful and accurate comment that.
We have of.
Sort of a 10 slot scoreboard on each.
Acquisition opportunity at which we look at.
And some of those of our quantitative and some of those are qualitative measures and.
And absolutely 1 of them is a constant which is based on what we see should.
Should we deploy our capital into our stock.
Or should we continue.
You too.
The focus on the deployment of our capital in acquisitions. So this is an ongoing regular dialogue.
That we have and it's in <unk>.
We adjust our sites as we go forward.
Okay.
Thanks, that's helpful.
Maybe Tom can you just.
Talk about <unk>.
<unk> needs in the space configuration.
Maybe just provide some color on what what tenants are asking about and looking for the kind of determined their office presence going forward.
Yes. This question has come up in the past.
My response, Hasnt changed really all of that much.
We're not seeing an awful lot of.
Change in the design of tenants of office space.
What we saw pre Covid was from our tenants in any ways that many times, we're focused on employee productivity employee happiness employee retention and that they really occupied spaces at.
Maximum density there is more thought given to the furniture configuration for.
More space between employees I think tenants are focused on how their employees will work in the future.
And continue to be focused on their employee engagement and health and I.
I anticipate seeing more collaboration space.
More of amenities perks offered by employers.
And certainly the.
The fact that.
We have amenities such as the gym the conference center and for.
Food offerings of throughout our entire portfolio.
Or looked at very positively by tenants is unemployed PERC and <unk>. So thats the focus I see going forward.
Great. Thank you.
As a reminder, if you would like to ask a question. Please press star 1 on your telephone keypad.
We have a follow up question from James Feldman of Bank of America. Please proceed with your question.
Hey, guys. Just 1 quick 1 on global brands. If you were to re let that space, Let's say you were to get it back how much will it cost too to reposition that space for a tenant like Linkedin.
It's the first of all we're starting with built space.
We've already Redeveloped the space in the past so incurred.
Based upon the cost for scraping the space, putting in Hps, the electric distribution, Quebec to cover some of like.
And therefore, our base building cost will be reduced.
<unk>.
It would we'd have to look at.
It would be unique to of the incoming tenant as to what the requirement is relative to the build out of that existing space. Some of it is quite nice I think of good amount can be retained.
But if a tenant wants to do a new long term lease.
It looks for all new built out then we'll have a modest base building costs and simply of market rate Ti contribution that can be anywhere from 100 to 120 Bucks a foot depending upon the overall deal economics.
Great. Thanks, Tom.
And there are no additional questions at this time I would like to turn the call back for Mr. Malkin for closing remarks.
So thank you very much for joining us today. Please remember that forward looking statements on plans to ramp up the observatory and returned the business or for discussion purposes, only and to help with your models. They are not guidance nor are.
The guarantees.
The business has resumed in person we have had the opportunity to meet a lot of you at tours.
With different folks on the.
The sales side and we look forward to roadshow in the months ahead and to get our work done and the share for the results.
<unk> for the U and the.
For the third quarter in October So until then please stay safe get vaccinated and thank you for your continued interest.
Onward and upward.
Sure.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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