Greetings, and welcome to the Empire State Realty Trust Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Heather Houston, Senior Vice President, Deputy General Counsel and Corporate Secretary. Thank you. You may begin.

Good afternoon. Thank you for joining us today for Empire State Realty Trust third quarter 2022 earnings conference call. In addition to the press release distributed yesterday, a quarterly supplemental package with further detail on our results and our latest investor presentation were posted in the Investors section of the company's website at esrtreit.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in applicable securities laws, including those related to market conditions, property operations, capital expenditures, income, expense, financial results and proposed transactions and events. As a reminder, forward-looking statements represent management's current estimates. They are subject to risks and uncertainties and 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. The COVID situation has normalized and we will no longer include specific COVID disclosure unless warranted. During today's call, we will discuss certain non-GAAP financial measures, such as FFO, modified and core FFO, NOI, same-store 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, Heather, and good afternoon to everyone. We are pleased to report strong third quarter results, updates on our capital recycling activities and share the outlook for the balance of our year with you today. ESRT's focus is unchanged, lease space, sell tickets to the observatory and enhance shareholder value through proactive portfolio management and capital allocation. ESRT remains well positioned with a modernized portfolio to take advantage of the flight to quality signed leases that will contribute to earnings and a strong and flexible balance sheet to take advantage of investment opportunities. There is no doubt about it. New York City is busy again, and we are a great way to benefit from New York City's upside with multiple revenue streams from office, tourism, residential and retail. Some of you may have noted certain sell-side commentary that we exceeded expectations in some areas and fell below in others. That is the beauty to our revenue composition. We have four revenue streams. And therefore, if you want to bet on New York City, we are the best way to make a balanced investment. Our modernized buildings close to mass transit with great amenities and more to come and our industry leadership in energy efficiency and indoor environmental quality help us to draw consistent leasing volumes and the third quarter was no exception. We find some great independent validation of how the market values our portfolio -- in the video, by our 250 West 57th Street tenant COOKFOX Architects, and we have that on Page five in our updated investor presentation. In fact, there are several videos in our investor presentation, and they are all worth the time of anyone who wants to understand our company. The Empire State Building Observatory is TripAdvisor's number one attraction in the United States and…

Thanks, Tony, and good afternoon, everyone. We had another solid quarter, headlined by 335,000 square feet of total leasing volume across our commercial portfolio, which included strong mark-to-market spreads in our Manhattan office portfolio for new leases, steady tenant demand for our prebuilt spaces and over 182,000 square feet of renewals. The facts show continued improvement from the environment we were in one year ago and that our fully modernized energy efficient and healthy buildings continue to be a destination for tenants flight to quality. We offer newly built tenant spaces with latest in indoor environmental quality technologies at a great price point with convenient access to mass transit and fantastic amenities to which we continue to add. In the third quarter, we signed 34 new and renewal leases totaling approximately 335,000 square feet at a weighted average lease term of approximately eight years. which includes 179,000 square feet in our Manhattan office properties, 115,000 square feet in our Greater New York Metropolitan office properties and 41,000 square feet of retail. Notable leases signed this quarter include a 79,000 square foot renewal lease with Franklin Templeton at First Stamford Place and with this most recent renewal and previously signed direct leases with former subtenants of Franklin Templeton, we have now re-leased all of Franklin Templeton's 138,000 square feet that was set to expire in September 2024. We also signed a 59,000 square foot direct lease with Alfred Dunner at 1333 Broadway that formerly occupied the space under a sublet from GBG and an expansion lease with Universal Services of America, who we located within our portfolio from one grand such a place to 5017 Seventh Avenue, where they more than doubled in size to 30,000 square feet and the versus original space at One Grand Central Place is already leased…

Thanks, Tom. I'm pleased to provide comments on a solid quarter that emphasizes the competitive strength of our portfolio comprised of quality office assets at accessible price points, the Empire State Building Observatory the number one attraction in the United States, strong everyday retail assets with 95% national retail tenancy and our well-located, amenities multifamily assets. For the third quarter of 2022, we reported core FFO of $56.5 million or $0.21 per diluted share which compares to core FFO of $55.3 million or $0.20 per diluted share for the third quarter of 2021. In line with our 2022 earnings outlook, same-store property cash NOI, excluding lease termination fees, was down 7.5% year-over-year, primarily due to the normalization of operating expenses amid higher building utilization as well as the impact from the occupancy loss of GBG in late 2021. For the third quarter of 2022, the Observatory hosted 687,000 visitors, and generated NOI of $24.5 million, up significantly from 255,000 visitors and $6.4 million in the third quarter of 2021. We continue to generate strong revenues per capita, tightly manage expenses and remain confident in the path back to pre-pandemic levels of performance. However, as Tony mentioned earlier, we expect this full recovery will take longer. As a reminder, the Observatory historically contributed roughly 1/4 of the company's NOI and stands at roughly 19% on a trailing 12-month basis through the third quarter. Turning to our balance sheet. As of September 30, 2022, the company had liquidity totaling $1.2 billion which is comprised of $387 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 3.9% and a weighted average term to maturity of 6.7 years. Notably,…

[Operator Instructions] Our first questions come from the line of Camille Bonnel with Bank of America.

Hi, starting with your guidance, expectations for Observatory NOI was lowered from the original projections. Our guidance midpoint was up by $0.01. Just doing the quick math here, what's driving the sustained guidance? Can you highlight any drivers to core performance that keeps you comfortable with this level for the remainder of the year?

Sure. Thanks, Camile. So just a quick point. I know analysts tend to look at midpoint. So technically, it went up. But from our vantage, it wasn't really raising the midpoint. We started with a $0.05 range. And as we get down to on the latter part of the year, we were able to narrow in the range from $0.05 to $0.03. And the previous wide range had room for other downside from uncertainties in the market, including leasing starts, higher OpEx and slower-than-expected recovery in Observatory. So now with that revised observatory range and better visibility on the balance of the year, able to keep the same high end and able to reduce a little bit of that downside room and narrow the range to $0.83 to $0.85, which inherently brings the midpoint up by $0.01.

And Camille, I'd just point out, this is our inaugural year of guidance. Some people may have forgotten that. And so, we're quite pleased how this went for our first year after having run a shadow guidance program last year. So, we're happy with our FP&A and we're happy with how the team has come through.

Okay. Great. Can you update us with your latest thoughts on capital allocation with the backdrop of limited access to Bank Financing even though Empire State doesn't have any debt coming due soon and below average -- just how are you balancing investment opportunities such as development or acquisitions for purchases.

Camille, you're cutting in and out. Could you please repeat that question or maybe we could move you to the back of the queue and you could dial back in on a line that's more constant?

Hi. Is this clear?

We got a bunch to give another shot.

Can you please update us with your latest thoughts on capital allocation with the backdrop of limited access to Bank Financing even though you don't have any debt coming due? I'm just wondering how are you balancing investment opportunities such as deployment or acquisitions versus share repurchases?

Yes, sure. So, you're correct in noting that we have no debt coming due for the next two years. Additionally, we're fortunate. We have no floating rate debt exposure. So that places us in a very good position that coupled with a high cash balance and an undrawn credit facility. And so, with that, we really do focus on ways to enhance shareholder value. So, share buybacks continue to be a strategic part of how we think about capital allocation, if the market does not recognize the value that we bring within our portfolio and how we operate the business, it is a good opportunity to buy back our shares. Additionally, we have been very clear. We are focused on opportunities in the market that are the right deals and that makes sense and we continue to be active on that front. And last piece is capital recycling. So, we have the balance sheet that affords us flexibility. All of our commercial assets are 100% owned. That affords us additional flexibility. And if we see that there are certain assets where we've added value, completed the business plan and can monetize and redeploy into other opportunities that make sense and generate good cash flow growth going forward for the company, we will certainly take advantage. You're right in that the debt market are really tricky and I think not having to access forcefully is an advantage that we have. But clearly, we're all looking for that. The last thing that I'll mention and I think we've noted this before, but maybe if it's relevant is that we do have net operating loss balance that we disclosed in our 10-K, right? So as of that date, it ran in the mid-70s million. And I mentioned that because currently, our dividend runs at about one-third of our previous levels. And we've always said we'll monitor the dividend level. We actively discuss that between management and the Board and we'll find the right point in time to bring that back up. And clearly, we're entering into peak uncertain market periods. And so, I mentioned the NOLs because our job is not to hold back the dividend. But as we determine the pace of ramp-up and other alternative uses of that capital, including share buybacks, we can definitely use some of the NOLs, effectively monetize on that and allocate the cash instead towards share buybacks. So, everything is on the table, everything is with an eye towards generating and maximizing shareholder value.

Okay. I appreciate that color. And finally, we've been hearing from other landlords this week that demand from occupiers will be weaker in 2023. You had a solid quarter of leasing activity, and I know you mentioned absorption will remain positive. But are you expecting the rate of leasing for your portfolio to slow?

Well, first, we had a really solid quarter with 335,000 square feet, and that follows three solid quarters prior to that. We have a good pipeline of activity heading into the fourth quarter and whether those tenants that -- with whom we're in negotiation right now close in the fourth or first quarter, the good news is we've got activity from a broad range of industry types that includes financial services, professional services, health care, tech, legal and others. And look, I would say that we benefit from a flight to quality as tenants are focused on the things that our portfolio provides. So I think we our competition because we offer healthy buildings that are modernized for the 21st century, the latest technologies in EQ, newly built energy-efficient tenant spaces, great access to mass transit, great amenities to which we're adding on an accessible price point. And remember, we've invested $1 billion into our assets, upgrading common areas and building systems. And we've redeveloped 95% of our tenant space to deliver modern, efficient office spaces that tenants seek today. So those tenants are looking at their alternatives, I think that we are well positioned to outperform. So we have not given our guidance for 2023. And of course, we'll be paying that and that will be provided in a later quarter. But right now, where we sit today, I feel very good about our portfolio and our offering.

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

So now that we've moved past Labor Day, I'm curious what you guys are seeing in terms of tenant base usage or your estimate of utilization and also days in the office per week at your office properties?

So I think that we can look at a couple of things there. I think that the statistic at which I like to look the most is not -- certainly not castle systems we don't have it in all of our portfolio, and a lot of that data is incorrect. That gives you the daily in and out. It doesn't tell you how many times individuals are in the office through the week. We actually look at -- I like the most is the utilization of the Empire State Building fitness center. That's an only -- a tenant-only fitness center. And I can just tell you that we're close to two-thirds of restored memberships from 2019. We can check our utilization. So what we find is that we don't think that the commonly stated statistics are accurate. We think that work has changed. And at the same time of what we think tenants understand and our tenants understand is you don't want a scenario in which people are walking around as though they're at an airport lounge saying, are you done with this space? Can I sit here? Are you moving on? And that's what we've seen the most with our tenants who have leased space expanded in space. And I think another big issue for us is that we are flight to quality. We've got great amenities. We've got both existing and on the way. And we've got great healthy environments with energy-efficient spaces in terrific locations at very accessible price points. And that all dictates towards tenants Who have workers, they need to occupy space and to lease with us. I'll ask Tom if he's got any other comment on this.

Look, definitely, the way tenants work has changed, but you can see the vibrancy of New York City walk around the streets look at the activity in general. And we're not seeing a diminishing demand for tenants because of the change in the way they use our space. Constantly, I ask our leasing folks what are tenants saying, why are they leasing the space. And they fundamentally they still want a place to work a place for their employees together to collaborate and to work together regardless of the daily utilization that everybody is so fixated on, look, the real measuring stick is the 335,000 square feet of leasing that we just posted this quarter.

Very helpful commentary. And then switching gears here a little bit. There seems to be a healthy debate emerging here around asset values and cap rates in this increasing interest rate environment. And since there aren't many transactions to point to, Tony, I wanted to get your take on how you think asset values and cap rates may have moved this year given the increase in cost of debt and low availability. And maybe you can touch on both office and multifamily.

Well, it's sort of interesting. If Christina and I sound a little slower this morning, it's because we both got in late last night from Dallas from Urban Land Institute, where we got to chat with a lot of different folks and our councils and people with whom we met. And I saw a few things out. First of all, the primary activity of new acquisitions right now appears to be 1031. And we fit in there. And it's logical from that perspective. I suppose people to sell assets and on to 1031 are active. Number two, don't focus on the headline cap rate, focus on to what people underwrite. And there are 2 ways you can underwrite your cap rates other than just what's the entry level. One is you look at the -- make a choice as to what you think the interest rates will be over the time of your hold. There's no question that we approach. We're not there yet. We approach the peak of the Fed activity. We had 1 member of the San Francisco Fed and a former member of the Dallas Fed comment that they expect another 75, 75 and 25 over the next 3 meetings as far as increases. And -- but number 2 is also -- well, there could be some assets which aren't run properly or well or which have been started from capital, where you might buy at a cap rate of 4 or 4.5 million or even 3.5%. However, you have the opportunity over time to improve their performance. So I think there's been a widening at certain levels as far as what people are prepared to pay I think, transactions, we know transactions are fewer. And then you get a print like the 1 that Boston Properties just announced the partial purchase at 205th Avenue. So when you look at that, I'd say that it's a little early to call anything other than a modest increase sort of maybe a 50 to 75 bps increase in cap rates. If there were arm's length transactions that were not 1031.

Very helpful. And if I could just do 1 follow-up to that, Tony. You talked about before about your interest in kind of complicated transactions. And based on some kind of broker conversations we're having, it sounds like there might be some distressed opportunities that come about on the office side. Is that something you guys would be interested in? Or is your focus more on growing the multifamily portfolio?

I've said this before, omnivorous opportunivores. And it really comes down to not just FFO accretion, but cash accretion. And it comes down to how we can structure things. Most of what we have on our plate right now, really, the only things in which we're active right now are either failed transactions from quite some time ago or transactions that have not even hit the market. So I think that office will be interesting to us when it reaches a point of traction, we haven't seen anything to date that reaches that point.

Our next questions come from the line of Steve Sakwa with Evercore. Please proceed with your questions.

I guess I was hoping you guys could talk a little bit about the widening spread between the percent lease and the percent occupied. It's up from about 300 basis points to kind of 430 basis points, and it's nice to certainly see the percent lease moving up. I'm just curious kind of when you start to expect that gap to close and I guess, how tight can that gap actually get?

Steve, this is Tom. Yes. Certainly, keep an eye on our lease percentage that will drive our occupancy as signed leases commence later this year and into 2023. We're confident in our stated goal of 84%, 86% portfolio occupancy by year-end. I think it will be more towards the middle or high end of that range, depending on when certain leases commence this year in our -- in the fourth quarter, we only have about 68,000 square feet of tenant move-outs, offset by roughly 0.25 million square feet of leases that are signed that should commence in the fourth quarter or first quarter of '23. So depending on when those leases commence and they will commence we will see positive absorption and increased occupancy in the near term of well over 100 basis points. And then in 2023, we only have about 5.5% of our portfolio leases expiring. We're about 539,000 square feet, and we've identified about 280,000 square feet of known move-outs, but that's offset by another 179,000 square feet or so of leases that should commence in 2023 plus any additional leasing that we do. So given the signed leases that are due to commence in the near term and in 2023, a very modest lease rollover in tenant move-outs we're well positioned to move our occupancy up, which obviously trails our lease percentage.

Great. And I guess, on the disposition -- in the press release, you made mention that you would be looking to 1031 the proceeds from the 2 suburban sales. And I guess, I'm just curious, is that sort of a hard and fast, we're definitely looking to buy something or we need to buy something for tax protection? Does the NOL help offset that and might share repurchases be a better use of that capital.

So thanks, Steve. So I think 1031 is part of the business plan. As you mentioned, we do have the NOL, so that's additional optionality. And we also have cash on the balance sheet, so that always provides us an avenue to do share repurchases. And without any real need to forcefully pay down debt, we can allocate capital in that fashion towards buybacks. So all of those are options for us. But I think 1031 is an appealing 1 because that allows us to monetize the NOLs in other ways to generate shareholder value. That continues to be the interest. And in terms of what categories as we've mentioned, we focus on New York City, it's office, multifamily and retail. And we have interest in multifamily in the right assets that complement the portfolio.

Great. I guess last question, Tony, on the Observatory, I realize international travel sort of stalled out a little bit with the strengthening U.S. dollar I guess does that give you any sort of pause for concern just around the ramp into '23. And I guess, do you need strong international tourism to kind of get back to the prior peak levels?

So I guess -- and I know, Steve, you probably expect this that I will differ with the concept of stalled out. We know our sources of traffic. Some of our international sources are virtually near 100%. Some are not. One of the things that hit in the third quarter is a reduction in the seasonality of our domestic travel and an increase in our international. And that's what smooths it out. To be quite honest, we're a little perplexed how countries which are adjacent to each other have very different return to U.S. visits rates. We do hear a lot more foreign languages and accents at the Observatory. So our real initial thought is that people are so scared from the horror stories of airports traveled and lost luggage and experiences that they just said, we're just not going to go anywhere until things calm down. So we'll see. In the meantime, the key to us is -- and this is really important. We know we are number one. Based upon public disclosures, we can tell you that during the period for which SL Green disclosed, the Summit had 1.1 million visitors, and we had 1.7 million visitors. And that's a period that covers -- you guys have heard me say this so many times, the right shiny penny moment. So we are actually very happy with the performance. We are thrilled even as volumes increase how well the reservation system has worked. It has reduced crowds and produced a much better quality experience for our visitors, the visitors love it, our offering is absolute premier number one, and they have more time. So they're not running out because they haven't waited in line. So even our sales in the gift shop are higher on a per-cap basis and close to where they used to be, our use of our prefixed menus at our restaurants. And we also know that we will have the benefit of this fantastic 23,000 square foot 3-level Starbucks Reserve that is about to open, which is truly spectacular and will be makkah for Starbucks fan and for tourists to New York. So we feel good. At the same time, keep in mind, we'll take a look at guidance for 2023. And when we give guidance, we'll probably give some indications of where we think the Observatory comes through.

Our next questions come from the line of Michael Griffin with Citi. Please proceed with your question.

Great. Thanks. Maybe we can go back to the leasing side. Durels, I'm curious, are there things that tenants are asking for now that they may not have been call it, earlier in the year? And have they been quicker or slower to make decisions recently? Any color around that would be great.

Well, on your second question, I would comment that as we look at our tour volume, while we're seeing total tours that are below maybe the high points of 2018 and '19, our conversion of deals to tour has increased significantly. And so what that tells us clearly is that the business leaders and decision-makers who are out touring space and spending the time on are committed to transact, so that's kind of an interesting stat and quite telling. In terms of what tenants are seeking, look, it goes back to the things that we are offering, and we've been building pre-COVID and as we redeveloped 95% of our portfolio space, since IPO, including healthy buildings, technologies in energy efficiency space and obviously, can be in access to mass transit. Certainly, we are adding to our amenities, as I mentioned before, because it's certainly that tenants are focused on, but it's the right amenities. And we have -- we think we are delivering the right mix and a great addition, particularly not by stating with our plans for a new best all sports pickable court of 400 person all hence presentation room, a tenant lounge with bar service, golf simulators. That, combined with the eight on-site food and beverage options at 23,000-square Starbucks that was just mentioned, the rooftop 1333 Broadway, the expanded lounge and town oil, Rumino Broadway. So these are the things that tenants are looking for. And of course, remember, we're in great neighborhoods with great neighborhood amenities to complement our in-building offering. So we think we deliver the right suite and package of amenities and efficient modern-built office spaces that tenants are seeking.

Great. And then just maybe going back on the guidance part. It looks like the change implies a deceleration into the fourth quarter. I guess, is this a function of expense timing? Or could there be something more there and then kind of looking to run rate through to 2023, understanding you haven't gave 2023 guidance. I guess, how should we think about this? Is this a good kind of starting point for that? Any color around that would be great.

Sure. So in 4Q, we already mentioned the slower recovery of the Observatory for the backdrop and the reasons that Tony already mentioned, so that's reflected in there. And we're still not through the end of the year. So as I mentioned, the factors that are considered variable, what else on the Observatory, what else on operating expenses and maybe some variation in leases going into commencement. So that's pretty much it. And we're really transparent on each of the drivers. It's been pretty consistent with the rest of our earnings guidance. We have not given guidance yet for '23. But I think 1 comment we have made is regarding operating expenses. This was a year where the increase in operating expenses compared to the prior year accentuated because our team did a phenomenal job of proactively lowering expenses when we were able to, during very low levels of building utilization. The drawback of that is on the way up, it creates a tough comparison year. So we're seeing that in this year. that's now back to normalization based on what you saw in 3Q and what's expected in 4Q. So we should have a normal a more normal path and assuming that's not the main drag on NOI, it gets us to a better trajectory. So that's all I'll say on next year, but that's 1 item that we've mentioned.

Awesome. That’s it for me. Thanks for the time.

Our next questions come from the line of Daniel Ismail with Green Street. Please proceed with your question.

Maybe just going back to the asset sales. I believe those have been on the market since at least earlier this year. And I'm just curious, how much is pricing change, if at all, when you first put those assets on the market to the final sale price?

Yes. Dan, thanks for the question. So those were on the market since then. And like any process, you go through back and forth. Ten bank actually has assumable debt. The other 1 has no debt on it and there are various factors. So without getting into too much specifics, we're still in the deal. You have these conversations and you work through all the points. And for us, as we've mentioned, we're not for sellers. So it's got to be a fair, reasonable price that makes it through, and our eye is on execution and how we redeploy the assets into new ones that makes sense for the portfolio and the future cash flow growth for the company.

Yes. I would just add that the pricing came in where we thought the pricing would come in on the basis of where we launched the sales. And there you go.

Got it. And then Tony can -- and everyone I get convening carbon neutrality. I'm just curious, on Local LON97, the Mayor's office released some new guidance a few weeks ago. But I'm just curious, Tony, as you said, close to the implementation of the law. How do you think it's broadly being implemented towards office? It did seem like there were some new technical changes in there, which seems unfair generally to office owners, at least in the technical definitions of carbon limits I'm just curious how you think broadly how that new law is being implemented and then how Empire State is adjusting to these new changes?

Well, as we've said, we know we have no fines in 2024 and we have plans for how we get successfully through 2030. We'll see how that goes. I'm on the advisory implementation Board, the Board for the implementation of Local Law 97 or the DOB. The only commercial land on I don't think there's been anything unfair put out there. I think it's pretty straightforward. I would say that resi it is one level of performance achievability versus office. There are other challenges, opportunities for achievability, achievement of goals in retail and logistics. The partnership that we developed with our tenants and that's from our groundbreaking work led by Dana Schneider, who's our lead on this of energy sustainability and ESG. We're very science-based targets. I think the big challenge for a lot of companies is that they've gone for soft targets to date, and they might have lead -- and even Gras, to some degree, is a softer target. When you get to the local law 97, it's all about data and it's all about actual performance. And it's pretty much in line with, in many ways, sort of data and performance that we may have to produce under the SEC's proposed new reporting requirements. We'll see if they actually go into place. And you may be aware that there is a lawsuit against Local Law 97. We have no involvement in that. So we'll see about the implementation of Local Law 97. That said, we believe it's good business to be an asset rather than a liability to users, tenants whose actual companies the better credit quality companies have a greater and greater responsibility and burden and practice of disclosure of their carbon footprint of what they do and what space they occupies makes a difference in their own scores. So we look at all of this strictly from a perspective, Daniel, of how do we compete best for tenants? How does this put points on the board for ESRT. Everything we do is integrated to any other expense we have life cycle cost analysis included, we spend the money, we get the results. We attract better tenants on longer leases with better credit quality and we think better rents. So we're accessible through our price points, along with indoor environmental quality and healthy buildings and those practices, things we started to put in place back in 2009, it's a real competitive advantage. And LocalA97 is something that occurs along the way.

Yes. I would just add 1 more point, which is our journey to carbon neutrality is very much about what we do within our operations. So as there's more focus on this, it's not enough to just use racks and offset, you really need to engage with the tenants that Tony mentioned, being helpful to the tenant, but it's also bringing them along in the journey on what they can do, and that's how we'll all landlords will ultimately achieve it, and the fact that we're ahead even with these tweaks in the law, makes us much better positioned.

Our next questions come from the line of John Kim with BMO. Please proceed with your question.

Thank you. I realize it's only two assets, but I was wondering if you could provide any more color on how your multifamily portfolio has done. I know you mentioned 90% occupancy, but the organic growth, any additional commentary on same-store revenue or NOI and how that's performed relative to your expectation?

No, John, they've done well. I think that's the best color we can say. We are ahead of where we thought we would be when we acquired them and underwrote them. And we love our partner, the Fetter organization. And we think that the success we have had with them and the work we do makes us quite appealing for others who might like to recap and we've done well as we thought we would. And we're happy that people can look at the wisdom of what we did, although that people were not thrilled when we acquired them originally.

Given the success of your multifamily investments and the economies of scale, are you inclined to build scale in multifamily? Or do you anticipate, I don't know big or dislocations in the market. And I know you're not seeing signs of distress today, but I'm just wondering, given your balance sheet, given that you had previously talked about opportunities like this. I'm wondering if potentially you look at other asset types for use of proceeds?

Well, we already said that we're not really looking at office right now, so that kind of narrows down the food groups.

Yes. And John, we've spoken on this. We have interest in multifamily. We've made it clear, but it's not just about we will get to scale at all costs, were going to wait for the very healthy asset class, so probably not likely to see a ton of distress. So we'll look for situations and our team is hard at work on that.

And Tony, you mentioned you retained your top position for the Observatory. Are you surprised at all by the success of Summit in the edge? I mean you've outpaced summit, but it's not open 70s a week yet. And I was wondering if that played it all apart in your reduced outlook for the third story.

So we didn't outpace some. We crush them. It's not out of pace. Let's look at the numbers that I just cited, number one. Number two, our Rev per caps are awesome. Number three, we know the performance of the edge, and we'll just say that their bright shiny penny moment has passed, and we anticipate the bright China penne moment of the summit will pass. We are number one. We are the international icon. Our brand is fantastic in every continent in the world.

What was the visitor count on the edge?

Just read the disclosure. I think we're running to the end of the call. So if unless we have many other calls, I think we probably want to wrap up and let people go. And you can also listen to what we said earlier in the call. So look, please remember that forward-looking statements, including guidance are meant to be helpful with forward modeling, but are not guarantees. Many thanks to our great team who have read incredibly hard and I have every confidence we'll continue to do a great job on behalf of stakeholders. We look forward to the chance with -- to meet with many of you at non-deal roadshows, conferences and property tours in the months ahead. Until then, thanks for your interest. Onward effort, everybody.

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.