Q2 2023 Empire State Realty Trust Inc Earnings Call
Greetings and welcome to the Empire State Realty Trust's second quarter 2023 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Pretty much require operator assistance during the call. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Now my pleasure to introduce Heather Houston, Senior Vice President Chief Counsel Corporate Secretary. Thank you you may begin.
Good afternoon. Thank you for joining us today for Empire State Realty Trust second quarter 2023 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 ESR T REIT dotcom.
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 result, and proposed transactions and events.
As a reminder, forward looking statements represent managements current estimates they are subject to risks and uncertainties, which may cause actual results to differ from those discussed today.
Empire State Realty Trust assumes no obligations to update any forward looking statement in the future. We encourage listeners to review the more detailed discussions related to these forward looking statements in the company's filings with the SEC.
During today's call, we will discuss certain non-GAAP financial measures such as <unk> modified and core F. F. L. 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 President and Chief Executive Officer.
Thanks, Heather and good afternoon to everyone.
We were pleased to report another solid quarter and first half of the year, we put points on the board with strong leasing and observatory performance our balance sheet positioning remains best in class, we have a positive outlook for the second half of 2023.
Our focus on modernization amenities energy efficiency indoor environmental quality, and an industry, leading balance sheet make us a destination and the flight to quality.
Yeah. So <unk> is a new York city focused landlord with four diverse drivers of value. When you walk the busy streets of New York now it is clear how resilient the city really is and we are primed to take advantage of New York City's continued recovery.
Wanted to live here people want to visit here and people want to work here.
This is a city that draws a regular migration of young highly educated hungry and diverse talent to work in person and learn.
New York is a top three city for return to office post pandemic. According to Pacer AI.
Top companies offered talent place together in person to plan mentor learn build execute together and move forward through uncertain times and they want to be in office buildings, like ours, which serve as talent attraction and retention tools.
We leased more than 336000 square feet.
In this quarter and those leases were double digit positive leasing spreads our Manhattan lease.
At least.
Office percentage is up to 91, 6% and reflects an increase of 90 basis points sequentially.
And 330 basis points year over year.
ESR T offers a trophy experience in prewar assets.
<unk> properties are fully modernized and a monetized.
More than 95% of our office space has been stripped to the studs and redeveloped.
The quality is not as simple as new versus old ESR team's properties performed consistently as measured on an occupancy percentage leased percentage.
And total leasing volume basis, because we have made the investment to make our assets future ready.
Our leasing progress meets the performance of newly built.
Class a office properties, we offer compelling value propositions, and well located fully modernized energy efficient and monetized healthy buildings at our attractive price points importantly.
We are also a landlord who has the balance sheet to stand behind its commitments and obligations with an economically accessible winning portfolio. This makes a big difference in today's environment. It helps set us apart as a landlord.
We have always said that our goal is to get the best deals in good times.
Get the deals in challenged times and draw consistent leasing volumes through cycles.
We know what we have to do and we are absolutely focused.
The observatory continues to perform well.
For the second year in a row.
Our observatory experience was ranked the number one attraction in the United States by Tripadvisor.
In the first half of the year.
Observatory NOI exceeded comparable 2019 levels by 4% with 71% of the admissions relative to 2019 levels.
We continue to manage expenses drive topline growth.
And provide visitors with unmatched customer experience.
The Empire State building Observatory is the authentic New York City experience.
Observatory as cash flows are reliable as demonstrated on slide 17 of our investor presentation.
Yes, Archie as balance sheet is clean and the capital structure is simple we have the lowest leverage amongst all New York City office, REIT and have neither near term debt maturities, nor floating rate debt exposure.
<unk> owns 100% of our office assets with no complex joint venture structures and that allows for greater flexibility and optionality for future financing and capitalization.
Tenants look to partner with a financially stable landlord, who will maintain high quality standards at their assets.
We can allocate capital as we think best bit capital recycling, new acquisitions or share repurchases.
Our industry and environmental stewardship, and healthy building performance matters, more and more each year to tenants landlords and shareholders.
For our tenants this was put to the test this quarter.
When the Canadian wildfires greatly impacted the air quality in New York City.
E <unk> testing during the Canadian wildfire event in early June that Empire State Realty Trust's rigorous indoor and environmental standards, which are aligned with lead version 4.1, and well version two standards.
Our sustainability work at ESR T isn't an add on to our platform. It is integrated with and every decision we make we uphold our values and adhere to the highest standards and reporting.
I encourage you all to read our 2022 sustainability report that was released in the second quarter during Earth day week, which contains full details on our recent accomplishments.
New investments and return based goal.
As we look ahead, we see opportunities created through the market.
Credit disruptions.
And we will manage through them.
<unk> T is prepared to act on opportunities, which arise from the disruption.
Priority is our unchanged leased space sell tickets to the observatory manage the balance sheet.
At achieve sustainability goals in.
In short put points on the board.
These actions together enhance our shareholder value.
We believe in New York City, and we offer four ways to play it office.
Empire State building observatory retail and multifamily in.
New York City is resilient and Empire State Realty Trust as future ready and well positioned to drive value for our shareholders in 2023.
Tom and Kristina will provide more detail on our progress and how we plan to accomplish these goals and the balance of the year.
Tom.
Thanks, Tony and good afternoon, everyone.
We had another strong quarter with 336000 square feet of total leasing at 10% positive mark to market rent spreads for our office and retail portfolio.
Year to date, we've leased a total of 538000 square feet.
This represents our sixth consecutive quarter in which we achieved positive absorption based upon leased percentage for office and retail portfolio and our eighth straight quarter with positive mark to market lease spreads in our Manhattan office portfolio.
Our leasing results demonstrate that our fully modernized buildings located in Midtown with convenient access to mass transit quality amenities best in class sustainability and indoor environmental quality offered at an accessible price point continues to attract quality tenants.
We increased our Manhattan office leased percentage to 91, 6% in the second quarter, which increased 90 basis points compared to last quarter is up 330 basis points compared to a year ago.
And has increased to 460 basis points since the end of 2021.
In the second quarter, we signed over 336000 square feet of leases, which include 308000 square feet in our Manhattan office properties.
Where we achieved our highest rent levels to date in two of our properties.
The average starting rent and all Manhattan office leases signed was $64 48 per square foot.
With an average lease term of 7.9 years and seven months of free rent with a tenant improvement allowance of $64 58 per square foot.
18000 square feet of leases signed in our Greater New York Metropolitan Office properties, and 10000 square feet in our retail portfolio, where we continue to bring food wellness and services to our campus properties to support the demand from growing office users.
Notable leases signed in the second quarter include a full floor 11 year lease for 27000 square feet at the Empire State building with cap co a global management and technology consulting company.
At 11 year lease for 25000 square feet at the Empire State building with Skanska, a world leading project development and construction group and ESB tenants since 2008.
An 11 year 12000 square feet at least at one Grand Central place with breakthrough bread beverage, a leading north American distributor of luxury wines and spirits.
A 30 year 29000 square foot lease at 13, 33 Broadway with rising ground.
Non for profit organization.
Leases for 18 pre built office suites.
And earlier this quarter, we were happy to announce that flagstar assumed the entirety of signature banks 313000 square foot lease at 1400 Broadway.
As shown on page six of our supplemental we have $59 million and incremental initial cash revenue from signed leases not commenced and free rent burn off.
We remain well positioned to increase our lease percentage by year end.
Since we proactively managed our rent roll.
Executed early renewals and expect only about 191000 square feet of tenants to vacate by the end of 2023, which will be offset by any new leases that are signed before year end.
We have a healthy pipeline of lease activity and have demonstrated our ability to lease space.
We have invested nearly $1 billion into our assets to create <unk>.
Healthy fully modernized buildings, our tenant spaces are newly built with our leading standards for I E Q and sustainability.
We are adding to our robust in boating and campus amenities.
All of our assets are centrally located near mass transit.
As an industry leader, we offer our tenants the latest advancements in sustainability and indoor environmental quality, our strong balance sheet allows us to compete in today's environment. It gives tenants and brokers confidence that we will deliver on our promises.
And we have an exceptional dedicated team that delivers a high level of service to our tenants.
Within our multifamily portfolio. The average occupancy of 97, 4% reflects strong market fundamentals and we are underway with property improvements that will enhance future performance.
Our recently acquired 298 Mulberry continues to experience strong demand that exceeds our expectations.
Once again, we had another solid quarter with 336000 square feet of total office and retail leasing a strong positive mark to market spreads.
We increased our Manhattan office portfolio lease percentage by 90 basis points over the prior quarter and by 330 basis points from a year ago to reach 91, 6%.
We are well positioned to further increase our lease percentage in the second half of 2023.
And we continue to see strong performance in our growing multi family portfolio.
And now I'll turn the call over to Christina Christina.
Thanks, Tom our focus is to put points on the board for the second quarter of 2023, we've appointed Corp. S. F. L. A $69 million or 26 cents per diluted share, which is up 17% year over year, excluding lease termination fee.
As previously announced in the second quarter of 2023, we reversed $5 8 million of the $6 $4 million straight line reserve taken in the first quarter of 2023 as a result of the flagstar lease assumption at 1400 Broadway. This had a positive two cent impact on our second quarter SSO herself.
Same store property cash NOI, excluding lease termination fees increased one 1% year over year, primarily driven by an increase in cash rental revenue and timing of tenant expense reimbursements, partially offset by increases in property operating expenses and real estate taxes.
In the second quarter, the observatory generated NOI of 24 point $20 million, an increase of 26% year over year.
This represents NOI recapture of 101% as compared to the same period in 2019 I'm.
Observatory expense was $8 $7 million in the second quarter.
We have the balance sheet flexibility these uncertain times demand to generate shareholder value.
As of June 30th 2023, the company had total liquidity of $1 $2 billion, which was comprised of $215 million of cash and $850 million of undrawn capacity on our revolving credit facility.
At quarter end the company had net debt at share of $2 3 billion with a weighted average interest rate of three 9% and a weighted average term to maturity of 5.9 years, our ratio of net debt to adjusted EBITDA was well below peer averages of five point any time, we have no floating rate debt exposure.
Oh, well ladder maturity schedule and no debt maturity until November 2024, when a $78 million mortgage matures.
We can choose to recycle our balance sheets pursue investment opportunities that are additive to our New York City focused portfolio and repurchase our shares.
In the second quarter and through July 25, 2023, the company repurchased seven 4 million of its common stock at a weighted average price of $6.09 per share. This spring the accumulative amount repurchase to $293 $7 million at a weighted average price of $8.18 per <unk>.
Sure.
At present, approximately 12% of total shares outstanding as of March 5th 'twenty 'twenty to date, our share buyback program began.
In the second quarter, we completed the sale of our 500 Mamaroneck office property for $53 million and the proceeds were partially utilized and of our birth 10 31 tactic for auto transaction into the 298 Mulberry residential acquisition that was executed in December 2022.
We continue to evaluate opportunities to recycle our balance sheet and invest in new assets and remain prudent in our underwriting.
And now onto our outlook for the balance of the year, we've adjusted our 'twenty through 'twenty three guidance as follows our 2023 S. F. O guidance range has increased to 83 to 86 cents per fully diluted share. The increase reflects the Tucson positive impact from the reversal of the straight line versus our previously.
Taken in the first quarter related to signature bank and the subsequent assumption of the lease at 1400 Broadway by Flagstar in the second quarter.
And updated our full year same store cash NOI outlook by 100 basis points.
As a reminder, our team actively manage expenses amid COVID-19 and significantly reduced operating expenses in 'twenty, and 2020 'twenty, one compared to 2019.
Expenses and building utilization will normalize this year, but that said full year property operating expenses are still expected to be approximately 5% below 2019 levels, which reflects some permanent cost savings and efficiencies we achieved from pre COVID-19 levels. Additionally, the year over year expense increase.
Partially offset by tenant expense reimbursements.
The increase in our 2023 same store cash NOI guidance range is primarily due to modestly higher cash rental revenue and later property operating expense increases relative to our initial expectations.
Our same store commercial occupancy guidance is unchanged at 85% to 87% the leasing pipeline remains on track as we stated last quarter our range factors in some conservatism in terms of the timing of lease commencement.
For the Observatory, we continue to expect 2023, NOI to be approximately $88 million to $96 million up from $75 million in 2022.
Our NOI guidance assumes observatory expenses at approximately 9 million per quarter on average for 2023.
In summary, the company continues to manage our balance sheet prudently and strategically and have strong liquidity to take advantage of attractive investment opportunities that may emerge from this period of uncertainty and capital dislocation, we continued share buybacks, albeit at a more measured pace in the second quarter in aggregate with a purchase.
12% of total shares outstanding since the inception of our buyback program. Our commercial portfolio is now 86, 8% occupied and 93% leased and we continue to benefit from tenants demand for our high quality assets and the unique value proposition and balance sheet strength that we offer.
As a landlord.
Our observatory recovery continues with good momentum to start the year and our fourth leg of growth multifamily continues to perform well and adds to the resiliency of ESR team's cashless and with that I will now turn the call back to the operator for the Q&A session operator.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
We ask that you. Please limit yourself to one question and one follow up question and then re queue for additional questions. One moment. Please while we poll for your questions.
Our first questions come from the line of Steve Sochua with Evercore ISI. Please proceed with your questions.
Thanks, Good afternoon, Tom I was wondering if you could just provide a little bit more color and detail around the pipeline maybe help size the pipeline for us where it is today versus say three to six months ago and the types of tenants that you're seeing and maybe the size of tenants that you're seeing today.
Sure Steve will first of all you know our solid quarter demonstrates that there is tenant demand for our well located a monetized quality product in tennis have confidence in our ability to execute and deliver on our promises that said, we've got a healthy pipeline.
We've had some 20 or so leases in negotiation for about 200000 square feet, mostly in our Manhattan office properties for both.
New renewal relocations and early extension deals and comprised of both prebuilt and full floors and then we then we have another 20 or so proposals that we're trading paper on for for really several hundred thousand square feet.
I'd say 14 of those deals range between 10 to 70000 square feet and then.
Over a dozen proposals for prebuilt that Friday sizes that add up to about 100000 square feet. So so overall a pretty good healthy pipeline.
Tenant types that we're seeing are consistent with this past quarter than prior quarters, which represent a variety of industries that include professional services nonprofit consumer products, some check in and fire sector tonnage. So good diverse mix of China. So overall, we feel pretty good about.
Where we're at in the quarter ahead.
Okay. Thanks, [noise] excuse me and then I'll just follow up Christiana I guess on the share buyback I'm I don't know if the activity level was muted just you know that was sort of share price driven if you were looking at some other capital deployment opportunities just I guess with the rise in the stock price I guess, how sensitive are you.
<unk> to kind of share buybacks and I guess, how do you sort of evaluate.
When to say no how to kind of lead into that or or sort of lead out from the buyback.
Yeah. So we continue to believe and buyback and it's a strategic part of our capital allocation that's evident from our the overall volume that we've done on $290 million for it since we started as we've always mentioned the pace can vary from period to period for a number of.
Factors, including fluctuations in share price, but beyond that because it's still a discounted level sorry, so beyond that because it can be five one period and other factors.
And as a final reminder, we do valley buy back, but we also look at operating runway and liquidity as well as the chance to evaluate and take advantage of opportunities that may arise in the marketplace and we have been very active on capital recycling and so those are all of our priority buybacks are on the last we've done it in volume but.
Certainly the pink Berry.
Okay.
Thank you our next questions come from the line of Michael Griffin with Citi. Please proceed with your questions.
Great. Thanks, maybe to follow up on that on that leasing question at first I'm curious if you've noticed if more tenants or quicker about making decisions. When it comes to leasing I mean, it seems like the positive commentary we've heard about more tenants coming into the market is there less uncertainty around them, taking space and it was over the last few quarters.
I'd say that what we're seeing is.
Are tenants that are more committed to to making a decision.
A lot fewer tire kickers out there and and that's evidenced by really our conversion rates from what we see strong conversion from tour too to actual deals.
So as I look at all of those prospects that we're speaking with are right now we feel very good about they are committed to landing somewhere and so it's good for the overall market and good for us.
Great. Thanks, and then just on capital allocation priorities you touched on the various food groups you know the multifamily the office the share buybacks I'm just curious with some distress we've seen in the office market recently could there be an opportunity out there to potentially acquire an asset and maybe reposition that consistent with your current strategy.
Yes.
So Tony.
Tony here, Thanks, as I tell our younger colleagues.
We really view this as a 1989 to 1992 for the real estate industry.
Bottom line when you raise interest rates to levels, which are more historical and you've gone through a period, where people have borrowed as much as they could afford at low interest rates.
You're going to have a more than a few borrowers heads go through the windshield.
And the.
The benefit to us in our current position is that we have an opportunity both because of our execution at a high level and because of our balance sheet to take advantage of this and we do believe that there are opportunities that we know very clearly and we understand very clearly.
At what we rent, but our costs are to rent.
More importantly, though we understand what it cost to modernize and monetize make energy efficient.
And <unk>.
Executing on indoor environmental quality the type of asset that we operate and that we can deliver at an attractive price.
So we have our bogey.
We know the locations, where we want to be we know the floor plates we want.
We know the types.
Of of.
Tenants, who are interested and we are definitely interested at the right price and office.
Great. That's it for me thanks for the time.
Thank you our next questions come from the line of coming Albano with Bank of America. Please proceed with your questions.
Christina you spoke about a number of factors impacting the positive same store NOI growth for the quarter.
Wondering if you could provide a bit more context behind the moving pieces and trying to get a sense of whether one or another may have played a bigger factor here.
Sure. So the key drivers are higher cash rental revenue and as a reminder, we have long put out a schedule of signed leases not commenced and free rents and as the free rent Burns off that are contributing to our same store.
Cash NOI, that's that was a primary and large factor. The second item is we called out was the timing of tenant reimbursements of some work. So over the course of the year that would be a net wash are pretty much however between quarters that could lead to a little more lumpiness in there.
Same store results. So that was another contributor but pre rent I think its something that look out far which is why we continue to provide the disclosure of how much contractual rental revenues on the call.
And another core factor in your same store guidance is not expectation of higher operating expense from tenants utilizing your buildings more could you just talk to how that's been tracking against your projections for the year.
Sure we continue to trend up in operating expenses, but as I mentioned in our remarks it.
It was really due to the team doing a fantastic job being very proactive in reducing expenses amid slow building utilization levels. So what we're seeing now is a normalization, which we called out beginning last year and continues into this year that said even with this increase we also mentioned we expect.
Property operating expenses there'll be about 5% below 2018 levels due to some permanent expense savings and what we're seeing in sort of a normalization and that will continue through the end of the year consistent with our same store NOI guidance range.
Thank you.
Thank you.
Thank you. Our next question is come from the line of Blaine Heck with Wells Fargo. Please proceed with your questions.
Thanks, Good afternoon, just wanted to dig into occupancy guidance, a little bit more as you guys are at the upper end of the range and I think you've got about 325000 square feet of signed leases that havent commenced but the guidance range for occupancy implies a decrease in the second half I know you you lay out some of the known Bacon vacate.
On page 10, but you know given.
Given the leasing pipeline I'm still a little surprised the occupancy guidance wasn't increase can you give us some more color on that and whether it's just the timing issue or or anything else.
Yeah Blayne. This is Tom look we remain confident that we'll achieve our guidance.
Of 85% to 87% for the portfolio and about 100 basis points higher for New York City Office.
That said, we might trend towards the mid to higher part of that the if you look at our.
We only have about 319000 square feet of leases that expire through the balance of this year.
191000 square feet of uncovered vacates that are known.
Be partially offset by over 140000 square feet of leases on vacant space that should commence by year end plus any additional leasing that we do that commences. This year. So it's really timing of tenant vacates in windows new leases commence.
<unk>.
Okay, Great. That's really helpful. Tom and then sticking with you or Tony wants to jump in.
We're hearing that some landlords or are less willing to spend on tea is based on their higher cost of capital. So I guess, how does that play out with respect to free rent, increasing or even lower base rental rates and how do you think you all can differentiate yourselves with a great balance sheet to compete with tenants or four tenants are in this environment.
Well.
Well first yeah.
RTI average ti costs decreased this quarter from last quarter.
And it's only slightly above our five year average of about $62 per square foot and of course, if you look at the lease metrics or at least cost per year of term.
Is in line with our five year average and is actually below this quarter from the trailing 12 months average.
That said, we have invested heavily into our tenant spaces. We have a lot of pre built space that we've previously incurred the cost and of course, then our balance sheet allows us to compete for really any deal.
And that's how we'd look at it yes.
And we have enlarged our free rent and frankly.
Good look tenants and brokers sorry, Tony here tenants and brokers look very carefully at landlord sponsorship quality.
And.
There are not a lot of short sighted people out there we began to talk about this with with brokers about 12 months ago 18 months ago and now it's on the tip of every broker's Tung will.
Get paid well there.
Tenants.
<unk> be funded will the tenants have prolonged quiet enjoyment of their spaces with a quality landlord and all of that the neurostar benefit.
Very helpful. Thanks, guys.
Yeah.
Yeah.
Thank you our next questions come from the line of Julian presents <unk> with Green Street. Please proceed with your questions.
Hi, guys. Thanks for taking the question just.
Just curious you know obviously, there's been a large scale returned all of his announcements across various sectors are you seeing anything with regards to changes to how tenants are thinking about building out their space as a result.
No not really in terms of how they design their space.
Some of the some of the programming of space that begin to develop even pre COVID-19 is still relevant today I think that what we see as tenants.
Every tenant has their own are developing their own approach and policies to the their work from office, but generally the themes remain the same and it's constant throughout which is tenants and companies recognize the importance of of people being together.
For collaboration in training and in <unk>.
Creativity and really the importance of having an office.
To run their business effectively.
Yes, I guess, the only thing that I would say.
Doing that stands out is.
The least castle numbers are are all screwy.
Midtown Manhattan, probably the number one recovery in.
<unk> in the United States.
New York City is a fantastic market.
Our business is strong.
Or on the streets, we had the Dodge people yesterday as we headed over to look at some new Carters at the Empire State building around $5 $35 45 is people, where we basically were salmon swimming upstream going across 33rd Street Observatory is packed with extended hours.
As anyone can see from our.
Online ticket sales for our reservations. So we feel quite good about where we are and with regard to the use of space.
And then just one on cash releasing spread you knew the results are significantly better than call. It. The last three years through the pandemic just curious on a go forward basis. I mean do we expect this momentum to continue on that front of that and I realize in any given quarter, it's going to depend on the on the lease.
On which leases rolling where you're signing leases, but just curious over a longer term time horizon I mean, it was low single digits there.
Well it always depends on the mix of spaces that are leased but for our Manhattan office leases I expect positive spreads in the near term.
Since the prior fully escalated rent on our vacant Manhattan Manhattan office space that we're marketing is about $56 per square foot.
And that compares to our starting rent for our recent Manhattan office leases of around $66 a square foot. So feel good about our ability to post positive spreads in the near term.
Yeah.
Thank you.
Thank you our next questions come from the line of John Kim with BMO Capital markets. Please proceed with your question.
Hi, Good afternoon. This is a region Sweeney on the line with John just want to follow up on those cash spreads was that concentrated in one lease or asset or is that kind of spread out across all of your leases in Manhattan. The positive 35.6.
Well, we did this quarter, we had a 10, 1% positive spreads for our entire office and retail portfolio.
And then just under 15% for our Manhattan office space for both new and renewal.
Office leases and that's our eighth straight quarter with positive spreads for our Manhattan office portfolio.
So.
I think I think it's I think it's really important to make the no. One should leave this call without a real understanding of the single most important message here.
We have outperformed our peers, we've got proven leasing results with the increase in lease rate of 330 bps over second and in the second quarter a year.
Year over year.
We've got increased occupancy 360 bps second quarter year over year. This whole narrative that only the AAA brand new stuff will lease we've said that's wrong for several quarters.
Just look at the points on the board.
And I think that's really the key issue here.
And we got quality tenants, who are prepared to pay.
Rents, which are good for us and a great at attractive value for them and our modernized and monetized energy efficient buildings with indoor environmental quality. So I think thats. The biggest most important thing I think that I don't know if that addresses your question.
I don't know if you have other questions you might like.
Yeah I appreciate the color. Thank you and then just shifting to the observatory what percentage of these visitors are international versus domestic and has there been any sign of a pickup in international tourism demand.
So the headlines on the observatory clearly is that we are the number one attraction in the United States. According to Tripadvisor for the second year in a row.
And that is a terrific.
Indication of what people think of our value proposition and the quality of our experience and the experience they have when they're with us.
Number one number two international is definitely not back to where it was and yet we still deliver.
In excess of 2019 NOI.
And as I said, we have because we're all reservations and we want to maintain that quality experience. We only allow a certain number of people in park at a time.
And because of that we've added hours, we're going <unk>.
One of EM right now at the Observatory so.
We've got good demand look.
International travel is extremely positive, it's mostly Americans going back and forth across the ocean right now.
Nonetheless, it's a tailwind for us as we go forward and as that tourism visit normalizes.
Thank you very much I appreciate it and congrats on the quarter.
Thank you.
Thank you there are no further questions at this time with that I'll turn the call back over to Tony Malkin, Chairman President and CEO .
Joe for closing remarks.
Thank you very much everybody a few final notes first and foremost a column of gratitude and appreciation for points on the board by the entire ESR team everyone has executed at a high level from Christina and her team to Tom and the property team does Johnny Ghazi in the entire Observatory team, John <unk> and I have promised Ian.
Tire Observatory team that we will take pies and our faces if we win the Tripadvisor awards three years in a row, Tom <unk>, Ryan Kass, Mike plenty, Dana Schneider and Pete showing have made and delivered on promises for our buildings modernization energy efficiency indoor environmental quality and amenities and tenants just lease it up.
Christina too.
John Hogg, Steve Horn are the engine behind our reporting financial planning and analysis and fantastic work with our capital partners. Christina has also been a tremendous partner to me and her added title of C. O O and Abbvie Records Center team successfully spread the word special callout to the Empire State building Observatory best isn't there new rookie.
Board member Grant Hill and of course, I'm, a pyre all of you can follow us and what we do on Instagram Linkedin and Tic Toc SEC.
Second on transitions.
We salute Bill Regan, who has done a fantastic job as SVP financial reporting. Thank you Bill for your decade of contributions.
Finally, we welcome Kristina Vantassel and Hunter young to our board I encourage everyone to read through our latest investor presentation. As it includes many great improvements, including tenant testimonials that speak to the flight to quality from which our portfolio benefits and also our sustainability report shows you the future here.
<unk> now science based targets and numbers not fluffy nutter.
Thank you all for your participation in today's call. We look forward to the chance to meet with many of you at non deal Roadshows and conferences and property tours in the months ahead until then thank you for your interest onward and upward.
Okay.
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.