Empire State Realty Trust - Earnings Call - Q1 2018

Transcript

Speaker 0

Greetings, and welcome to the Emperor State Realty Trust's First Quarter Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Thomas Keltner, General Counsel for Empire State Realty Trust.

Thank you, Mr. Keltner. You may begin.

Speaker 1

Good morning. Thank you for joining us today for Empire State Realty Trust's first quarter twenty eighteen earnings conference call. In addition to the press release distributed last evening, a quarterly supplemental package with further detail on our results has been posted in the Investors section of the company's website at empirestaterealtytrust.com. On today's call, management's prepared remarks and answers to your questions may contain forward looking statements as defined in applicable securities laws, including those related to market conditions, property operations, capital expenditures, income 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. Empire State Realty Trust assumes no obligation to update any forward looking statement in the future. We encourage listeners to review the more detailed discussions related to these forward looking statements in the company's filings with the SEC. Finally, during today's call, we will discuss certain non GAAP financial measures such as FFO, modified and core FFO, NOI, cash NOI and EBITDA, which we believe are meaningful in evaluating the company's performance. The definitions and reconciliations of these measures to the most directly comparable GAAP measures are included in the earnings release and supplemental package, each available on the company's website.

Now I will turn the call over to John Kessler, President and Chief Operating Officer. Good morning. Welcome to our first quarter twenty eighteen earnings conference call. Empire State Realty Trust is differentiated from our peers. Our fully modernized assets are centrally located near mass transit and heavily amenitized.

Our market position offers tenants a value price point between trophy Class A and Class B properties and provides us with both upside opportunity and downside protection. We have a derisked embedded growth strategy and generate market leading leasing spreads from the redevelopment of our office space. We have the lowest levered balance sheet among office REITs, a significant cash position and no outstanding borrowings against our line. And we are an industry leader in sustainability and energy efficiency. Today, Tom Durels will speak about the first quarter's approximately 260,000 square feet of leases, market demand for our properties and our peer and market leading leasing spreads.

And then David Karp will address our financial performance and our balance sheet for which we completed the second and final funding under our private placement of unsecured notes, bringing our cash balance to $690,000,000 at quarter end. David will also discuss new disclosures in our supplemental, disclosures added to provide investors and analysts with more information with which to better understand our business and performance. After that, our

Speaker 2

team is here to answer your questions. I'll now turn the call over to Tom Durels. Tom? Thanks, John, and good morning, everyone. Our first quarter numbers reflect further progress on our four drivers of top line derisked and embedded growth over the next five to six years.

The breakdown of our four revenue growth drivers, which as of March 3138, we estimate to be $97,000,000 can be found in our investor presentation to be published on the Investors section of our website. For reference, this compares to $381,000,000 in trailing twelve months cash NOI and the trailing twelve month cash rental revenue and tenant reimbursements of $533,000,000 as of March 3138. Just as a reminder, the $97,000,000 in revenue growth is revenue growth, and not all of this will flow through to NOI. In our last quarterly call, we noted that scheduled gross vacates for all of 2018 could total 700,000 square feet. In order to address questions and give better clarity, we included a new disclosure on Page nine of our supplemental.

This new chart, total portfolio expirations and vacates summary, shows tenants to be relocated within our portfolio or vacates to be replaced by new tenants with whom leases have been signed and defines our estimated net potential vacates for 2018 as 504,000 square feet. We also include our estimates for 2019. As a reminder, our occupancy can vary quarter by quarter as we continue with our strategy to deliver derisked and better growth by vacating and consolidating spaces, redeveloping them and re leasing those spaces at higher rents to better tenants. There is a timing lag between the move outs of existing tenants and when new leases commence, which impacts revenue. There is also a timing lag between legal commencement and GAAP revenue recognition.

In the first quarter, we signed 41 new and renewal leases totaling approximately 260,000 square feet. This included approximately 193,000 square feet in our Manhattan office properties, 61,000 square feet in our Greater New York Metropolitan office properties and 6,000 square feet of retail. Significant new office leases signed during the quarter include a 42,000 square foot full floor lease with Nestle's Nespresso at 111 West 30 Third Street and a 35,000 square foot full floor lease with Uber at 1400 Broadway. During the first quarter, rental rates on new and renewal leases across our entire portfolio were 11.4% higher on a cash basis compared to prior escalated rents. At our Manhattan office properties, we signed new leases at positive rent spreads of 23.8%.

Our leasing spreads, which are market and peer leading, were lowered by a number of factors this quarter. In Manhattan new office leasing, our lease with Uber involved the early recapture of a floor that had already been redeveloped and had experienced an earlier significant rent bump. The Uber lease had a 9% positive mark to market. We secured a termination payment by the prior tenant and avoided future downtime. Without the Uber lease, our reported leasing spreads for New Manhattan office leasing would have been approximately 29.3%.

Leasing spreads for our total portfolio this quarter were reduced by a 31,000 square foot lease in the Greater New York Metropolitan office portfolio with a negative spread of 19% from a market top lease from 2007 that had a high fully escalated rent. The Greater New York Metropolitan Area office market is soft, and we compete with properties that have been redeveloped recently or have planned redevelopment. As such, we plan to spend approximately $40,000,000 over twenty eighteen to 2020 on these well maintained and well located properties, common areas and amenities to ensure competitiveness and protect our market position. Turning back to our Manhattan office portfolio. So far in 2018, we have continued to see steady demand for available space.

Now I'll turn the call over to David Karp. David?

Speaker 1

Thanks, Tom, and good morning, everyone. For the first quarter, we reported core FFO of 59,300,000 or $0.20 per diluted share. Cash NOI was $82,400,000 essentially unchanged from the prior year period. Tom just walked us through our new disclosure on Page nine of our supplemental. In addition, within the supplemental, we have included the weighted average free rent on leases signed in the quarter on Page seven.

We've extended the quarterly breakout on lease expirations on Pages 11 through 13. We provided a schedule on the anticipated timing of development of space to be vacated in 2018 on Page 15. We've broken out the 100 And Second Floor Observatory revenue from total Observatory revenue on Page 16. And we've broken out from other income and separately report lease termination fees on Page 18. We hope this added disclosure is helpful to you, and we will continue to look to enhance our disclosure as we move forward.

Turning to our Observatory operations, which are highlighted on Page 16 of our supplemental. In spite of the loss of use of the 100 And Second Floor for the first quarter, revenue for the 2018 increased 1.5% to 21,200,000 from the prior year period. NOI was $13,900,000 up 1.7% from the 2017 and our visitor count was up. A combination of higher visitor count, previously announced price increases, dynamic pricing and mix improvement along with expense management drove the year over year improvement in NOI. The Observatory hosted approximately 660,000 visitors in the first quarter twenty eighteen, an increase of 3.8% compared to the first quarter twenty seventeen.

This year, the Easter holiday was split between the first and second quarters, whereas in the prior year, the Easter holiday fell entirely within the second quarter. We estimate that this shift in the Easter holiday resulted in approximately 35,500 more visitors in the 2018 as compared to the 2017. While we had a lower number of bad weather days in the 2018 than the prior year period, it fell on days of typically higher visitor count and had a more adverse impact. For the first quarter, we estimate that bad weather resulted in approximately 14,000 net fewer visitors than in the prior year period. We define a bad weather day as one in which the top of the Empire State Building is obscured for more than 50% of the day.

The 100 And Second Floor observatory is again open following the planned replacement of the machinery and a new glass cab for the elevator, which serves it. The glass cab is part of a component of the Observatory Experience upgrade, which will be more fully developed in 2019. To produce a normalized comparison, one could remove the $1,900,000 in revenue in the 2017 related to the 100 And Second Floor Observatory as identified on Page 16 of the supplemental. And on that basis, revenues in the first quarter twenty eighteen would have increased 11.4% overall and visitor per capita spend would have increased 6.1%. We're pleased with the work of our team in ensuring that the planned work was completed on time such that we were able to reopen the 100 And Second Floor prior to Easter.

As noted previously, we have more work to do on the 100 And Second Floor component of our Observatory upgrade program in 2019. We anticipate we will close 102 in early twenty nineteen for as long as nine months. We will communicate final work plans as they become available. Moving to our balance sheet. Our low leverage joint venture free and flexible balance sheet, including significant cash on hand, remains a differentiating and competitive advantage for us in any market environment.

During the quarter, we issued and sold $335,000,000 of senior unsecured notes, which were the final tranches of the $450,000,000 private placement of unsecured notes announced in December 2017. Proceeds from the notes were used to repay the mortgage indebtedness on 111 West 30 Third Street and 1350 Broadway and build our cash balances. As discussed during last quarter's call, we refinanced the maturing mortgage on 1333 Broadway and used a portion of the proceeds to remove the mortgage on 1400 Broadway. Unencumbered assets now represent 79% of our portfolio square footage versus less than 1% at the time of the IPO. We have transitioned to a more unsecured borrowing model and successfully demonstrated our ability to access a variety of capital sources.

As a note, new debt financing and related hedging activities completed during 2017 and year to date 2018 will result in approximately $12,000,000 or zero four dollars per fully diluted share of incremental interest expense for our full year 2018 results as compared with 2017. As of March 3138, the company had total debt outstanding of approximately $1,900,000,000 The debt has a weighted average interest rate of 3.84% and a weighted average term to maturity of eight point eight years. Our debt maturities are well laddered with only a single $250,000,000 issue maturing before 2022. None of our outstanding debt has variable rates. As of March 3138, the company's consolidated net debt to total market capitalization was approximately 19.5% and consolidated net debt to EBITDA was 3.5 times.

And we have cash and cash equivalents of $690,000,000 With that, I would like to open the call for your questions. Operator?

Speaker 0

Thank Our first question comes from the line of Rob Simone with Evercore. Just

Speaker 3

a quick question on the schedule of expirations that you guys provided. Is there I guess I'm just trying to understand, is there a possibility for some of the vacate activity that you guys list? I think it's about 470,000 plus or minus square feet for the year. Is it possible for some of that to transition into the other buckets, namely the relocation bucket, which would, again, kind of like shift around people's views of how much of that $700,000 would actually be taken back?

Speaker 2

Rob, this is Tom. The answer is that no. We have provided the detailed schedule as we currently see our activity shaping up for the year 2018 and then into 2019. Those spaces that are being intentionally vacated are for the most part, a combination of spaces that are being redeveloped, some spaces that have already been developed that may make sense to vacate in connection with, another leasing strategy for a floor. And the spaces that we think are going to be renewed or will be taken by tenants relocating or spaces that have been leased to new tenants, we've already defined in that schedule.

So the bottom line is that those spaces which we've labeled as tenant vacates and intentional vacates will go into our vacancy that we need to lease up.

Speaker 3

Got it. Okay. And just a quick follow-up, Tom. I think on the prior call, mentioned that of that 700,000 square feet plus or minus that it could be gross vacates. I think you highlighted an average rent number in like the $49 range or so.

Of the tenant vacates and intentional vacates now that you have now listed for the year, is there any difference between the in place rents for that square footage versus that kind of all in gross number? Or how has that number moved?

Speaker 2

The space that's being vacated in Manhattan has a fully escalated rent of just over $49 I'm sorry, just over $47 per square foot on our vacant space and just over $49 of space that's being vacated. So the point is that with our asking rents in the range of high 50s to low 70s per square foot depending on the building and the floor location, that represents an opportunity for significant healthy mark to market lease spreads.

Speaker 3

Right. Got it. All right. Thanks Tom. Appreciate it.

Speaker 2

You bet.

Speaker 0

Thank you. Our next question comes from the line of Craig Mailman with KeyBanc Capital Markets.

Speaker 4

This is Laura Dixon here with Craig. So you continue to have ample capacity on your balance sheet position. I was wondering if you could give an update on what you're seeing in terms of external growth opportunities.

Speaker 1

Laura, it's John here. Yes, we are well positioned with the balance sheet. And as you know, we're continuing to invest in our own portfolio because we're getting very attractive returns, which we estimated about 9%. And we still have a ways to go from an external from an additional redevelopment perspective in terms of remaining square footage. And if we see an opportunity externally that compares well with that type of return opportunity over the long term, we're going to pursue it and continue to look.

But for now, this is the best allocation of our capital.

Speaker 4

Okay. And then I appreciate the added disclosure regarding portfolio expirations and vacates. And I wanted to follow-up on a prior question. If I'm looking at Page nine of the supplement, it looks like the $504,000 of net vacates are in the two vacate buckets, intentional and tenant, and then the holdover unknown. And I just want to know if you could like reconcile that with the gross $700,000 if I'm looking

Speaker 5

at supplement?

Speaker 2

Right. Sure. This is Tom. The balance is predominantly in relocations within our portfolio. And that's a point of clarification that tenants that vacate one space that move within our portfolio, and we define that as a relocation.

And so that would have made up the difference reconciling the 700,000 to roughly 504,000 square feet that I mentioned on the prior call.

Speaker 4

Got it. Okay. Appreciate the color. Thank you.

Speaker 2

You bet.

Speaker 0

Thank you. Our next question comes from the line of Jamie Feldman with Bank of America Merrill Lynch. I

Speaker 6

guess sticking with the schedule, which we definitely appreciate here, can you just talk about the criteria to be in the holdover unknown bucket? Like what's the likelihood that those end up being renewals versus fallout and end up being vacancy?

Speaker 2

Sure. Jamie, it's Tom. First of all, the amount of unknown or undefined for 2017 is a relatively small amount I'm sorry, for 2018 is a relatively small amount of about just under 37,000 square feet. We would expect that the unknown category to decrease over time as we progress through the year and we gain greater certainty and certainly we will continue to provide an update to the schedule on a quarterly basis. I just would point out that obviously we maintain regular contact with all of our tenants.

We typically reach out to a tenant two years in advance of their lease expiration specifically to speak to them about their intention, but and then with increasing frequency as we get closer to their expiration date. But with such a small amount of unknown for 2018, represents relatively smaller tenants. We find the smaller tenants generally delay their or put off their decision making on leasing until just prior to their lease expiration date.

Speaker 6

I was actually focusing more on 'nineteen. I get that it'll Sure. That number will shrink over time, but okay.

Speaker 5

That

Speaker 2

yeah. We'll give updates quarterly as we go forward, definitely.

Speaker 6

Okay. And then as you think about 'nineteen, I mean, how does this schedule we haven't seen a schedule like this in the past. I mean, I know 2018 had an abnormally large number of unintended vacates. But if you compare it to 2017 and 2016, like how does 2019 shape up versus what you've seen in the past based on the different buckets?

Speaker 2

Jamie, I would point out that our 2018 vacates are expected to be greater than they were in 2017. That said, this is the first time we've provided this level of detail and I can't say that I'm in a position to comment on the prior vacates in past years in the same way we've reported here. So I would just maybe again point out that 2018 is going to expect we expect a rate of vacates in 2018 than in 2017. And then as you see, 2019 we have fewer lease expirations, so naturally that will be a less active year than 2018.

Speaker 6

And then switching to the I know you had mentioned that there was a suburban lease that brought down your renewal leasing spread. Can you talk generally what you're seeing on renewal leasing spreads? Like if you were to back that lease out, how things would have looked?

Speaker 2

Well, first, we're happy to have done that lease because it was an as is deal, no TI, no free rent. The prior tenant had signed its lease during the absolute height of the market in 2007 and with escalations had escalated well above market. So we're delighted to backfill that space. I think that generally what you're going see is that that was a more significant markdown in rents than what we would expect going forward. And you see where we've been trending in the greater New York metropolitan portfolio over the last couple of years.

It bumped around a little bit, but generally it could be slightly negative to current in place rents.

Speaker 6

Okay. And then can you talk about the leasing pipeline for your largest retail and even office vacancies? What how does the market feel?

Speaker 2

Well, starting with office, I think the overall market feels pretty healthy. I feel good about the market in general. I feel good about our portfolio and our activity. Our product locations and price points still remains in demand. I and we have absolute conviction in our strategy to consolidate and redevelop space.

We continue to execute and deliver value for our shareholders and we're delivering results. I think that coming off the heels of a very strong year in 2017 and you see the results in the first quarter in New York City office, they were good. I'm pleased with the leases with Nestle's Nespresso at 111, delighted to have Uber at 1400 Broadway. I think there's a prospect for growth there. But overall, I'd say that the office market in Manhattan feels healthy and steady.

On retail, certainly the overall retail market is slow, that's why I'm pleased with the execution and results we've delivered this past year and even this first quarter. We're early in our redevelopment process at Empire State Building and we have early discussions with a variety of tenants. So I think that space will take time. And then other we have some side street space in Times Square South and that will get leased up to some service or food users over time. And our other large vacancy is at 1 Grand Central Place, a space of about 14,000 square feet, only about 2,200 square feet is our grade.

It's a unique space. Most of that space is on Second Floor with access to 40 First Street and that might lease to a nontraditional retail tenant. It could go to anywhere from medical daycare, some service, some showroom, could go office.

Speaker 6

Okay, great. Thank you for the color.

Speaker 0

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

Speaker 7

Thanks. Good morning. Maybe for Tony or John, just to get back to the investment picture, there are a few significant properties on the market and a few that have recently traded. Can you guys give any color on whether you've been involved in the pursuit of acquisitions recently? And you've previously talked about wanting to look at kind of complicated deals.

Are those specific opportunities still on the table today?

Speaker 1

Well, just to hit the second question first, absolutely. I think we've as we've said consistently, Blaine, we're more interested in trying to find something that's not a marketed situation, something more complex, maybe a portfolio opportunity. And we do continue to pursue those types of opportunities. And with respect to some of the larger single asset transactions, we certainly follow the market very closely. We do look at opportunities.

But in general, we have not found anything that was attractive to us relative to the returns we're getting on our own portfolio redevelopment.

Speaker 5

I would add to that if I may that the Tony here that the way in which I look at this is transaction volumes are down particularly if you take the Chelsea market out which is a unique transaction, which both added volume and price to the market, you see a pretty soft first quarter. And you've got a lot of people who have left the market, Chinese particularly, which would be out of left field topping bid. But the reality of today's market remains pretty high prices and with a lot of uncertainty as far as interest rates and other factors, I don't know how much support there is for the current level of pricing. We're looking, but we're very happy with where we are, with how we're lined up and just don't see a reason to do anything now based on what the offerings are and the pricing out there.

Speaker 7

Got it. Okay. That's helpful. I guess on the flip side and related to that, you guys traded a pretty significant discount to NAV and have plenty of capital available as we discussed. When does it make sense if at all to look into stock repurchases?

Speaker 1

Ryan, it's David here. This is something that we look at and we discuss with our Board on a regular basis. And it's not something that we are inclined to pursue at this time. And we think that our cash position is a strategic asset and it's not our intention to reduce it. Additionally, we're more interested in growing our balance sheet rather than shrinking it.

Our focus is to create value for shareholders that want to own us as we continue to execute on our strategic plan to deliver embedded derisk growth and shareholder value.

Speaker 7

Okay. That's helpful. And then switching gears, maybe we can look at a different schedule in the supplemental. The free rent burn off and signed leases not commenced. It certainly, I think, paints a pretty solid picture for you guys for your cash NOI commencements going forward in 2019 and 2020.

But I think the timing of free rent burn off in each year is probably going to be important. Is there any color you can give us around whether the burn off is front end or back end weighted in 2019? Or should we assume it's pretty ratable throughout the year?

Speaker 2

Yes.

Speaker 1

The schedule that we provide clearly on an annual basis, we have not broken it down on a quarterly basis or on a monthly basis. And that would require us to go back and we could take a look at whether that's something we could easily provide and consider breaking that out in our next supplemental if it's a value.

Speaker 7

Okay. Thanks guys.

Speaker 0

Thank you. Our next question comes from the line of John Guinee with Stifel. Please proceed with your question.

Speaker 8

David, dollars $690,000,000 of cash on the balance sheet. Looks to me or maybe you can just give us the numbers in the next three year two or three year budget. How much is allocated towards redevelopment, the well publicized redevelopment of primarily Manhattan office? How much is left to be spent on the Observatory? The

Speaker 6

third category, I

Speaker 8

think, is suburban office, and I think you mentioned $40,000,000 of CapEx there. And then maybe a fourth category if you were to take your ground leases to a fee position. But can you give us just some round numbers on uses of capital?

Speaker 1

Yes, John. So from just as a reminder, from 2002 through March 2018, we've invested a total of $864,000,000 in the Manhattan office properties, including $48,000,000 to date on the Observatory Capital project. Some of the major repositioning activities that remain at our existing Manhattan office properties include the completion of the final stages of the elevator modernization project at the Empire State Building and the completion of new elevator cabs at 250 West 50 Seventh And 111 West 30 Third. So with respect to the common area, those are really the major remaining items. For tenant spaces, we have about 890,000 square feet remaining to be redeveloped.

If we use an average cost per square foot of roughly $200 which is the midpoint between what it's costing us on our white builds and white boxes in our pre builds, that would imply roughly $177,000,000 in total spend until the entire portfolio has been redeveloped and that's and as we show in our investor presentation, the time period which extends roughly six plus years. And then as Tom mentioned, we anticipate spending approximately $40,000,000 over the next thirty months in the Greater New York Metropolitan Area portfolio. So that gives you the Manhattan, the observatories we said was roughly 150,000,000 over a three year period. And again, I mentioned, we spent to date roughly $48,000,000 of that. The suburban, as I mentioned, $40,000,000 that Tom mentioned.

With respect to the ground leases to feed position, that's not something I can really give clarity on right now. Those the earliest of the leaseholds expire in a good thirty years thirty plus years from now. And it's certainly too early for us to have started any negotiations on those and can't give any visibility on that. I guess the important thing to note is we have ample liquidity, as you pointed out, to fund these capital improvements through a combination of our operating cash flow, the cash on the balance sheet and availability under our $1,100,000,000 revolver on which nothing is currently drawn.

Speaker 8

Okay, great. And then just looking at this wonderful Page nine at the bottom, retail about in 2018, 24,000 square feet of tenant vacancies or intentional vacancies. And then in 02/2019, another 23,000 square feet. So that's about 47,000 square feet. Is can you talk a little bit about the big spaces and also whether it's a roll up or roll down in net rents and the capital budgeted to release those?

Speaker 2

Bet, John. This is Tom. It's predominantly in two locations. 1 Empire State Building, we've spoken about the redevelopment of our 30 Fourth Street retail space. It will extend all the way from the new Observatory entrance and all the way to the corner with the corner space expiring in 2019.

We believe there is opportunity for the healthy mark to market positive rent spreads regardless of the softness in the retail market. We're coming off some leases that are below market there. And the balance is our corner space down at Union Square, where again we have an opportunity to achieve some healthy mark to market rent spreads. As far as capital costs and redeveloping those spaces, it's the typical white box space. Union Square will be pretty modest.

In Empire State Building, the base building cost will be similar to what we've seen on the off side. And the only added cost will be storefronts to comply with our building standards and any vertical transportation as part of the lease negotiation similar to what we've done in the past at 112 West 30 Fourth Street.

Speaker 6

Great. Thank you very much.

Speaker 2

You bet.

Speaker 0

Thank you. We have a follow-up question coming from Rob Timone from Evercore. Please proceed with your question.

Speaker 3

Hey guys, thanks again. Just a quick question on the 40,000,000 of CapEx for the Greater New York portfolio. Was just wondering if you guys would be able to share kind of your views internally on what type of returns you're going to get on that capital versus the investment and redevelopment in New York?

Speaker 2

Well, Rob, this is Tom. The money that we're spending there is only about $21 a square foot for the whole portfolio and it's going to be spent on common areas, bathrooms, corridors, update of gyms and dining and conference facility, really to stay competitive within that marketplace. We are competing against some newly redeveloped properties and some properties that are planned to redevelopment. And the way we look at this is, this is a necessary spend in order to remain competitive and to give us the best opportunity for tenant retention to keep our occupancies up as high as possible. So it's we view this as if we do not spend this money, we will lose competitive position.

Speaker 3

Is there any measure of you guys being proactive ahead of some of your competitors doing something similar? Or are you seeing some of your most direct competitors investing in their assets as well? And this is more of like a reaction to them?

Speaker 2

No. It's again, it's just exactly what I said. It's where we're spending the money is to remain competitive.

Speaker 3

Got it. Thanks, Tom.

Speaker 2

You bet.

Speaker 0

Thank you. We have another follow-up question from Craig Mailman with KeyBanc. Please proceed with your question.

Speaker 4

Hey everyone, Laura Dixon here. Just a quick follow-up on the Observatory. It sounded apologize if I missed this, but for the 100 And Second Floor coming offline in 2019 for nine months, can you do you have an estimate or a sense of how what the revenue impact will be?

Speaker 1

Yes, Laura. As we mentioned, the 100 And Second Floor Observatory could be closed for as long as nine months during 2019 in connection with the capital investment program. Our plan is to time the work so as to minimize the costs including lost revenues. What we've provided in supplemental on Page 16 is the historical revenue figures for the 100 And Second Floor so that you can get an idea of the possible range of the revenue impact.

Speaker 4

Okay. I appreciate that. Thank you.

Speaker 0

Thank you. Our next question comes from the line of Jamie Feldman with Bank of America Merrill Lynch. Please proceed with your question.

Speaker 6

Great. Thank you. Just sticking with the Observatory, are there any other portions of it that we should be thinking about that will be out of service over the next twenty four months or so?

Speaker 5

Tony here. The entrance ticketing and flow to get up to the Observatory decks will be reorganized to mitigate any construction impact. The access to the iconic open air experience that is the 80 Sixth Floor main observation deck will be maintained throughout the entire project. And in addition, of course, you'll see what things look like as different aspects open up in August. But long story short, the 86 Floor is open the entire time.

Speaker 6

Okay. And then any I know you gave a lot of data on how the first quarter turned out, but just any reads on the type of visitors coming through, like foreign versus domestic? And it seemed like it was a pretty good quarter for the Observatory. Any changes here just on

Speaker 5

No, nothing we'll call out. Just I think that it's interesting to note that our performance was up significantly up if you discount 102. And other attractions, frankly, New York did not do so well. A lot of new offerings, the NFL experience not doing so well, not actually doing poorly, the Nat Geo doing so so, One World doing very poorly and discounting tremendously. And so we're again, we're

Speaker 2

pleased with our competitive position.

Speaker 6

Okay, great. Thank you.

Speaker 0

Thank you. This does conclude our question and answer session for today. I'd like to turn the floor back to Mr. Malkin for closing comments.

Speaker 5

So thank you all very much. Our goal was to get in and get out and leave you guys time to do work. So we're glad we did. I'd like to point out that we've got Tom Durels is not out late drinking last night. He's got a wicked cold, so he held up here.

And I'd also like to point out that John Kessler performed very well even though he's three weeks into his new hip. Jon is walking around the office with a large Lord of the Rings staff that illuminates and using that mightily to help deliver the results in the second quarter already. With that in mind, thank you all for attending today's call. We have made meaningful additions to our disclosures this quarter in response to your thoughts. We hope it makes it easier for you guys and ladies and we want to be responsive.

So if you have other questions, let us know. Very happy with our competitive position overall and the team's execution. Happy with our competitive position at the Observatory and pleased with the ongoing work on the upgrade. We have several property tours and events for investors and analysts calendared for the spring and summer. So don't forget that our door is always open.

Don't be bashful, look us up. Thank you for your time and we look forward to reporting second quarter results in three months. Until then, all the best.

Speaker 0

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.