Empire State Realty Trust, Inc. (ESRT) Earnings Call Transcript & Summary

Ladies and gentlemen, here is Empire State Realty Trust's Chairman, President and Chief Executive Officer, Anthony E. Malkin.

Good morning. On behalf of Empire State Realty Trust, I welcome you to our Annual Shareholders Meeting. We hope that all of you and your loved ones remain safe during this time. I hereby call the meeting to order. We continue again this year to utilize a virtual meeting format due to public health and safety concerns. Additionally, our virtual annual meeting format last year resulted in increased shareholder attendance. All of our directors are in attendance: Steven J. Gilbert, our Lead Independent Director; Leslie D. Biddle, Director and Chair of our Compensation and Human Capital Committee; Thomas J. DeRosa, Director; S. Michael Giliberto, Director and Chair of our Audit Committee; Patricia S. Han, Director; and I'd like to say happily present in person in our boardroom, Grant H. Hill, Director; R. Paige Hood, Director and Chair of our Finance Committee; and James D. Robinson IV, Director and Chair of our Nominating and Corporate Governance Committee. Also present are Peter L. Malkin, our Chairman Emeritus; Christina Chiu, our Executive Vice President and Chief Financial Officer; Thomas P. Durels, our Executive Vice President, Real Estate; Thomas N. Keltner, our Executive Vice President, General Counsel and Secretary; Heather M. Lawson, our Vice President, Senior Corporate Counsel and Compliance Officer; Christopher Wood, representing Broadridge, the inspector of elections; Kyle D. Bolden from Ernst & Young, our auditors. I would now like to ask Heather to conduct the formal part of the meeting. After the formal part of the meeting, we will hold a general question-and-answer session. Heather, please?

Good morning, ladies and gentlemen. The meeting agenda and rules of conduct are posted on the virtual meeting website. To assure an orderly meeting, we ask that all participants abide by these rules. Our virtual meeting format is accessible to shareholders and guests who enter the meeting website. If you are a shareholder and entered your 16-digit control number from your notice of availability or your proxy card, you will be able to participate in the meeting by submitting up to 2 written questions, which will be addressed during the question-and-answer session following the formal meeting. The question portal is now open and you may submit questions. We now turn to the formal business of the meeting. As confirmed by an affidavit of mailing from Broadridge, notice of this meeting was mailed commencing on April 1, 2021, to all Class A and Class B common stockholders as of March 4, 2021, the record date for this meeting. The inspector of elections has informed me that Class A and Class B common stockholders entitled to cast a majority of all votes entitled to be cast at this meeting are in attendance either virtually or by proxy. We, therefore, recognize a quorum for the transaction of business. The polls are now open. Any shareholder who entered the 16-digit control number from his or her notice of availability or proxy card and who has not yet voted or wishes to change a vote may do so now by clicking on the voting button on the virtual meeting website and following the instructions there. The polls will close after a brief presentation of the 3 proposals on today's agenda. Today, we consider the following 3 proposals, each as described in the proxy statement. First, the reelection of all 9 members of the company's Board of Directors. The Board recommends a vote for each of them. Second, the approval on a nonbinding advisory basis of the compensation of our named executive officers. The Board recommends a vote for this proposal. And third, the ratification of the selection of Ernst & Young as the company's independent registered public accounting firm for the fiscal year ended December 31, 2021. The Board recommends a vote for this proposal. That concludes the business of the meeting. I will now pause to give shareholders additional time to vote or change their vote. [Voting]

I hereby declare the polls closed. All ballots are now in the company of the inspector of election. I have received the preliminary vote tabulation from the inspector of election. Based upon the calculation, I am pleased to report all director nominees have been reelected to the Board of Directors. The company's shareholders have approved the compensation of our named executive officers, and Ernst & Young has been ratified to serve as the company's independent registered public accounting firm for 2021. The final voting results of today's meeting will be reported on a Form 8-K filed with the SEC within 4 business days after this meeting. As there is no further business to come before the meeting, this concludes the formal meeting, and it is adjourned. I would now like to invite Anthony Malkin, our Chairman, President and Chief Executive Officer, to rejoin us to conduct a question-and-answer session. [Operator Instructions] We appreciate the questions shareholders have submitted, and we will try to answer all of them subject to practical time constraints. As stated in the rules of conduct, each shareholder is limited to 2 questions. And if multiple questions are submitted on the same subject, we will consolidate them for a single response. Each question should be distinct and cover only one topic. If you have any remaining questions when we conclude today, you may communicate further via our company's website. We will continue to pause as we wait for further questions.

Our first question. Can we get an update on the traffic currently and projected forecast for the Empire State Building's Observatory?

Thank you very much for that question. We do not give updates outside of our ordinary course of quarterly updates. I can comment and reiterate that in our most recent earnings call, the minutes of which can be found at our website and which also are in the Investors Section of the website, did address the fact that our hypothetical scenario for return to volume at the Observatory was, in fact, met through the first quarter. So we are quite pleased that this projection, which we put together a year ago and have updated once now, is in line with what we actually see. What I can comment on outside of any disclosure, outside of our normal disclosure is that we still feel comfortable with our hypothetical projections. The local visits came first as we initially anticipated. Regional visits by tourists from outside the tristate region have begun. The tristate region is no longer the highest, largest source of our visitors, and we have begun to see some longer distance travel from within the United States. International will not come until later. I would like to point out that the United Kingdom, as we have disclosed in the past, is our largest international market. And they are the most advanced on vaccinations. So our hope is that we could benefit from that. And we'd like to think that, that might happen by the end of this year. However, there's no guarantee, and we don't project that as part of our hypothetical analysis going forward. Our brand is stronger than ever in social media reviews since we reopened our 5-star. Interestingly and understandably, they are focused on safety first and the spectacular view and the experience, second. We believe these reviews will and have encouraged others to visit. Since our quarterly meeting, we also began the celebration of the 90th anniversary year of the Empire State Building. She is 90 years young. We had Mayor de Blasio there for that function. He gave some terrific comments and specifically focused that if you don't come to the Empire State Building, you haven't visited New York. So come along back in New York. We're very happy about that. I'd also like to point out that the restrictions on occupancy and our operations are set to decline significantly in the middle of May. And by the end of May, maybe gone all together, relative to anything that would impede our use of the facility. So that means under present guidelines as we understand them, while facial coverings will be required to be continued, we will be able to reopen certain aspects of the Observatory experience. So I think that's all that I really have to answer on that particular question. And I hope that, that satisfies your question. And I think we can go to the next question.

Thank you, Tony. Our next question, does ESRT have a position on who, among those running, would make the best individual to serve as mayor of New York City and work in the best interest of the real estate community?

Thank you very much for that question. We are constantly reminded of the fact that while we as a company believe very strongly in the obligation we have to focus on the social aspect of our ESG and to call out things when we feel we must, one of the areas in which we do not get involved as a company is politics. That said, we have encouraged all of our employees to state a political affiliation as of April of this year so that they can vote in a primary of their choice and we have encouraged our employees to vote. And we have said that we will get paid time off so people can vote in the primary, which typically determines who will be mayor in the City of New York because it is typically a Democratic mayor and chosen from the Democratic primary and also for the vote itself. That said, we believe that, across the board, focus on quality of life, policing issues and the restart of the New York City economy, or I should rather say, the acceleration of the restart of the New York City economy figures prominently in all candidates' perspectives, and we think that, that is encouraging.

Thank you, Tony. As there are no other questions in the queue, this concludes our meeting. We extend our appreciation to our shareholders as well as our directors and colleagues at ESRT. We look forward to addressing the challenges and opportunities ahead. Thank you for your support and stay safe.