Empire State Realty Trust Inc (ESRT) 2013 Q4 法說會逐字稿

Greetings, and welcome to the Empire State Realty Trust fourth-quarter and year-end 2013 results conference call. (Operator Instructions). As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Brad Cohen with ICR. Thank you. You may begin.

Good morning. We would like to thank you for joining us today for Empire State Realty Trust's fourth-quarter and year-end 2013 earnings conference call. In addition to the press release distributed last evening, we have posted a quarterly supplemental packet with additional detail on the Company's results in the Investor Relations section on the Company's website at www.empirestaterealtytrust.com.

On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include those related to revenue, operating income, financial guidance, as well as non-GAAP financial measures such as FFO, core FFO, same-store results, and EBITDA. We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in the Company's filings with the Securities and Exchange Commission.

We also caution that prior-period results that are referenced in any comments today may not necessarily be reflective of the results, had Empire State Realty Trust truly been a standalone entity during the periods presented. As a reminder, forward-looking statements represent management's current estimates. Empire State Realty Trust assumes no obligation to update any forward-looking statements in the future.

Finally, during today's conference call, we will discuss certain non-GAAP financial measures 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.

This morning's conference call is hosted by Empire State Realty Trust's Chairman, President, and Chief Executive Officer, Anthony Malkin; Chief of Property Operations and Leasing, Tom Durels; and Chief Financial Officer, David Karp. They will make some introductory comments, after which we will open up the call to your questions.

Now, I will turn the call over to Mr. Anthony Malkin. Anthony?

Thank you, and good morning. I am delighted to welcome you to our fourth-quarter 2013 earnings conference call. The run of show for today's call will include a brief review and overview update on the Company by me; Thomas Durels, our Executive Vice President and Director of Leasing and Operations, will give a brief review of our portfolio; and David Karp, our Chief Executive Officer (sic - Chief Financial Officer), will review financial results and discuss our balance sheet.

Empire State Realty Trust is a pure play New York City metro area real estate portfolio. We like our assets, and believe they are well-positioned to generate long-term value creation and cash flow growth. We believe our portfolio continues to offer embedded growth, and a unique opportunity to capture upside through our continued renovation and repositioning of our properties, bringing their occupancies to market, and leasing them at market rents. Our results for the fourth-quarter 2013 were fully consistent with our expectations for operations and financial performance. The successful completion of our formation transactions and Initial Public Offering has given us an integrated management and leasing mandate, and we are well positioned to meet our goals.

Our core management team has decades of experience, and a track record of value creation over many years and through many cycles in the ownership, operation, redevelopment, and repositioning of office and retail properties in Manhattan and the greater New York metropolitan area. We are focused on the strong prospects we see as we continue to bring our existing portfolio occupancy and rents to market with our innovative, market-leading, energy efficiency initiatives. We are also very pleased with our Observatory operations and the good results we have achieved as our planning, new programs, and execution of new initiatives begin to bear fruit.

In 2013, we continued the upgrading of our Observatory experience, and soft-launched our new handheld multimedia self-guided tour, which is now included in our increased price of admission. We were pleased to set another record for attendance with 4.3 million visitors, a nearly 3% increase over 2012. David Karp will cover the numbers for the observatory in his remarks.

Our balance sheet makes it easy for us to continue to implement our redevelopment, repositioning, and leasing strategies. The process detailed in the option agreements with respect to our option properties is underway in accordance with such agreements. We will comment further when a final decision on the option properties has been made.

Just another word on our strong balance sheet. We now have one of the lowest leveraged balance sheets in the industry, and have the capacity and flexibility to finance our capital programs and support our pursuit of incremental opportunities that may arrive. We see our balance sheet as one of our greatest assets, and will deploy it judiciously when we see that it can create real value. We enjoy an excellent network of industry relationships, and these relationships support all our activities. With our team, our competitive position in our markets, and our solid execution, I am quite confident in our future prospects.

Lastly and importantly, our interests are aligned with our shareholders. My family remains a major stakeholder, with the same objectives of value creation, value recognition, capital appreciation, and the growth of our current return.

I'd now like to turn the call over to Thomas Durels.

Thank you, Tony. Good morning, everyone. 2013 was a strong year for the Company as we drove leasing momentum throughout the portfolio; continued to execute on our repositioning and redevelopment program at the Empire State Building; captured our mark-to-market on vacant office and retail space that we are repositioning; and consolidating in Manhattan. And we began our transition to in-house property management from third-party agents, further centralizing our organization, which we believe will result in greater control and cost efficiencies.

Let me begin with a review of the fourth-quarter leasing results. We signed 55 new and renewal leases totaling approximately 415,000 square feet of office and retail space. Approximately 406,000 square feet of this leasing activity took place within our office portfolio, with approximately 360,000 square feet in our Manhattan office properties.

At year-end 2013, our portfolio was 86.1% occupied, and 87.7% leased, when including leases signed that have not yet commenced. Over the longer period, the opportunity to lease up and stabilize our Manhattan portfolio should result in stronger cash flow growth in coming years.

During the fourth quarter, rental rates on new and renewal leases across our entire portfolio were 6.1% higher, on a cash basis, compared to previous escalated rents. Our Manhattan office portfolio rental rates were 8% higher than prior escalated rents in the fourth quarter, during which there were no significant retail leases signed.

For the year, starting rental rates were 18% higher than prior escalated rents, on over 1.1 million square feet of total leasing. This included our Manhattan office, which achieved starting rents 13.7% higher than prior escalated rents for the year, and included a significant retail lease at 1333 Broadway, with a large mark-to-market. Our average cost for tenant improvements and leasing commissions during the fourth quarter on new and renewal office leases were $57.64 per square foot.

Also, during the fourth quarter, we signed several significant leases. At 501 Seventh Avenue, we signed a 224,000 square foot renewal, an expansion lease with PVH Corp., formerly known as Phillips-Van Heusen, one of the world's largest apparel companies. At 1359 Broadway, we executed a 48,000 square foot renewal lease with Ipreo Holdings, a global leader of data and market intelligence.

I'd like to note that these two Manhattan office leases were early renewals that provide immediate and future rent increases, and avoidance of rollover cost. These two significant early renewals are consistent with our strategy for leasing to, and retaining, quality tenants that have good prospects for growth within our portfolio.

Additionally, we saw strong progress in our greater New York metropolitan portfolio, with a 22,000 square foot new lease at First Stamford Place with Novitex Enterprise Solutions, formally a division of Pitney Bowes; also, an 11,000 square foot new lease at First Stamford Place with CareCentrix, a leader in the healthcare industry.

Looking more broadly, our portfolio offers an excellent combination of value, immediate access to mass transit, high-quality office space, and upgraded properties. We continued to intentionally vacate smaller suites occupied by legacy tenants to create new marketable space that we lease to higher-quality tenants at market rents.

So let me move on to update you on the Empire State Building, where we continue to execute on our repositioning strategy. We are managing lease expirations to create more efficient launch of blocks of space, while delivering highly marketable pre-built office suites which are being leased up; and can be, in the future, re-leased with little additional capital costs over time.

We believe our energy efficiency retrofits and sustainability guidelines are attracting tenants that seek a healthy and productive workplace environment, while recognizing that our initiatives help to lower their direct utility costs. Our ongoing improvements -- including new corridors, elevator modernization, white-tablecloth restaurant with private executive dining, distributed antenna system for building-wide cellular reception, tenant-only conference center, and a 15,000 square foot tenant-only fitness center -- will all serve as an attractive draw for new quality tenants. With these new amenities, we are creating a completely unique urban campus unlike anywhere in New York City.

Currently, we are 82.3% leased at Empire, including leases that are signed but have not yet commenced, with approximately 490,000 square feet of available space. And while the work to consolidate space is ongoing, we have four full floors that are now available. And we expect that by year-end 2014, we will deliver four additional floors to the market.

In summary, we believe the office market remains healthy, and our midtown Manhattan properties are very well positioned. Our repositioning plans continue to progress as anticipated. And we remain focused on attracting and leasing to quality tenants, enhancing NOI growth, and creating long-term value for our shareholders.

Now I'll turn the call over to David Karp, our Chief Financial Officer.

David?

Thanks, Tom, and good morning, everyone. Today, I will review our fourth-quarter operating results and then discuss our low leverage and flexible balance sheet. After that, we could open the call for questions.

Let me start with a review of our fourth-quarter results. Last night, we reported core FFO of $41.4 million or $0.17 per diluted share for the fourth-quarter 2013. Our results in the fourth quarter were in line with our expectations. As you know, the Company completed its IPO during the fourth quarter, and our reported results reflect only that portion of the period during which the Company operated as a publicly traded company. Prior to the formation transactions and IPO, the predecessor results of operations contained unconsolidated results for certain entities, and are not directly comparable to our reported results.

Core FFO excludes the impact of formation expenses and gains that we view as one-time in nature, such as acquisition costs, severance costs, retirement equity compensation costs, and gains on the consolidation of noncontrolled entities. Including these items, the Company's FFO was $220.8 million, or $0.90 per share for the fourth-quarter 2013.

Included in these numbers is the performance of the Empire State Building Observatory. The Observatory hosted approximately 980,000 visitors in the fourth-quarter 2013, representing an 8.5% increase from the same period in 2012. Observatory revenue for the fourth quarter grew 10.4% to $25.4 million as a result of greater tenants and a more profitable mix of ticket categories and direct sales to visitors.

As Tony noted, for the full-year 2013, the Empire State Observatory hosted 4.3 million visitors, a 2.7% increase from the same period in 2012. Observatory revenue for 2013 was $101.8 million, a 10.8% increase over the prior year.

Moving to our balance sheet, we continued to maintain our balance sheet with low leverage and sufficient capacity and flexibility to support our strategic initiatives and capital investment programs. At December 31 2013, we had approximately $1.2 billion of total consolidated debt outstanding, with a weighted average interest rate of 4.56%. Approximately $835.6 million of this outstanding debt is fixed rate, with a weighted average interest rate of 5.78% and a weighted average term to maturity of 2.6 years. The remaining $372.5 million of debt is variable-rate, with a weighted average interest rate of 1.81% and a weighted average term to maturity of 4.2 years.

At the end of the quarter, our leverage, reflected by debt to market capitalization, was 24%, giving us one of the lowest-leveraged balance sheets in the industry. At December 31, 2013, the outstanding balance on the Company's term loan and revolving credit facility was $325 million. Our credit facility has a total capacity, including the accordion feature, of $1.25 billion. We believe we have ample capacity and availability on our credit facilities to support our stated growth strategies, including our internal plans to continue to redevelop and reposition our properties.

During the quarter, we repaid a $9.5 million mortgage on one of our retail properties in Westport, Connecticut. In 2014, we have $197.5 million of debt maturing, which carries a weighted average interest rate of 5.49%. Included in this total is a loan on 1350 Broadway, with an outstanding balance of $13.5 million, which contains an option to extend its maturity to be coterminous with the senior financing on the property.

We will continue to manage our balance sheet in a manner consistent with our goal to achieve an investment-grade rating. In that regard, we are currently considering our various alternatives to address the debt maturities arising later this year. Looking ahead, we have only $90.5 million of debt maturing in 2015.

Last Friday, our Board of Directors approved a quarterly dividend of $0.085 per share to be paid in March.

With that, I would like to open the call for questions.

(Operator Instructions) Brad Burke, Goldman Sachs.

Wanted to touch on the Observatory -- pretty impressive revenue growth, and it looks like the direct sales and the ticket mix were really the drivers. So wondering how much more room there is to grow revenue from the mix, and from direct sales. And while we're talking about the observatory, I was hoping that you could give us an update on how we ought to be thinking about costs trending in 2014.

Tony Malkin here. First of all, we don't break out certain details on the Observatory, so we're not going to do that here. With regard to the total capacity for the Observatory, I just want to reiterate some of the stuff that we spoke about -- upside to the Observatory -- that we spoke about during our road show, and some of the conversations we've had with folks over time.

We view the total capacity a day at the Empire State Building Observatory at about 20,000 to 22,000 visitors, in that range. And we have had pretty close to 22,000 from time to time. And on that basis, with 4.3 million visitors, we're operating at just around 50% capacity. So from an actual just moving numbers -- there is room. Of course the business is cyclical, as far as seasonality is concerned. So there are shoulder periods where we can improve, and there are periods which are peak, where we can't.

With regard to our mix, again, we're not going to break that out. But I will say that as we noted in our presentations in the past, this is a significant priority, and we'll just frame it as a significant opportunity for us. We are building, and value, the direct relationship we have with our customer, and that is our objective. We have spent a lot of time, as part of our overall program and plan from the Observatory, to put that together. And we feel comfortable and confident with the progress that we're making there.

Okay, that's helpful. And then on the lease up, looks like you're making good progress. I was hoping you could give us an update on how we ought to be thinking about occupancy trending on the year, as we think about the leases that you've already signed, and the expirations that you have coming up. And do you think that you could give us an update on the Empire State Building specifically; how we should be thinking about occupancy trending in the year? That would be helpful.

Sure. This is Tom Durels. First, we continue to execute on our strategy to vacate smaller suites, create vacant space, redevelop that vacant space, and then lease it up. We have a proven history and a track record as we create vacant space, redevelop it. We've been successful in leasing that. We continue that program throughout the portfolio; delivering modern, efficient, pre-built suites on the smaller-scale side, to full-floor availabilities. As I mentioned in my remarks, we have now four full floors available at Empire State Building. And we will be delivering four additional floors as part of that program to take back space, redevelop it, and make it available for lease. So those four floors will be available at the end of 2014.

I just wanted to jump in for a moment here -- Tony Malkin here. I just want to remind you how we view ourselves and measure our accomplishments. We are not a stabilized portfolio. Our goals are to consolidate and vacate old spaces; redevelop them into vacant full floors, blocks of floors, or pre-builts; and lease them at higher rates. Our occupancy should logically follow in line with that program, and our leasing spread should show our success.

This is not to give you guidance. It's more of a frame of reference. We have given guidance on our CapEx. And as has been explained, a bunch of that CapEx is first-time CapEx towards the redevelopment of space. We still have a lot of money to spend.

And Tom, maybe this might -- just remind folks on any other detail you might offer, from things that we have disclosed and have discussed.

Sure. Our portfolio relied on space that remains to be developed. We have about 1.9 million square feet within the portfolio of undeveloped space, and about 800,000 square feet of that is at Empire State Building. So you see the progress that we've made throughout the portfolio, and the work that we have in front of us going forward.

All right, guys. I appreciate it. Thank you.

Craig Mailman, Keybanc Capital Markets.

Good morning. I was hoping you guys could give a little bit of extra color on the option properties. I know, in the release, you said you're in process there. But can you give us an update on where specifically you are in that process? And as it relates to -- for the one that expires in March, maybe give us a sense of how close you are.

Yes, Craig, it's David Karp speaking. Just to give you an update on where we are on the option properties, we're proceeding with the process as has been outlined in the option agreements. And just as a reminder of what that procedure is, for each one of the option assets, the date for the final appraisal -- and the appraisal is what determines the option price -- must be determined by April 7 of this year. Once that price is determined, we have five months within which to determine whether to exercise the option. If we elect to exercise the option, we then have approximately 90 days thereafter to close.

Two other points. One is just a reminder that Tony Malkin and Peter Malkin have recused themselves from the process because of their participation in the ownership of those assets. And we have appointed a special committee of the Board to oversee this process.

Great, thanks for the color. And David, maybe sticking with you, on the $190 million of debt maturing in 2014, does that grow, do you think? Do you guys take cash out equity in any of the properties? Or is it just going to be refinancing that principal balance?

Well, as I mentioned in my remarks, we're still looking at the various alternatives we have available to us. And, fortunately, we do have many alternatives, given our balance sheet and the low leverage that we have on those assets. So I can't tell you today what level of financing we will take, or what type of financing will be assumed in connection with those maturities. What I will tell you is that we feel very good and very comfortable, given the balance sheet, the run leverage on those assets, and the number of options available to us.

Got it, thanks. And then I just want to clarify, Tom, the 490,000 square feet at the Empire State Building, is that all white box and pre-fill at this point? Or is there still some raw space there?

It is in various stages, as part of that space consists of the four floors that I mentioned earlier. Some of that space is already pre-built. Some of it is -- are pre-builts in construction, and others are full floors that are in the process of being consolidated and demolished.

And then just lastly on some of the [redef] CapEx you guys have put in the Empire State Building recently, where have the returns been shaking out?

Well, the way we look at it is that we are seeing probably somewhere in the 10% to 12% return on the new money that we are investing in the Empire State Building. And we're looking at that based upon the incremental NOI that we're achieving from that space, at projected market rates. And taking into consideration the fact that we are already paying most, if not all, of the operating expense associated with that space already.

Great. And just lastly, how has the traction been there? What's the showings been like?

At Empire State Building??

Yes

Yes, I'm really pleased with the activity that we have. I'm really pleased with the showings and the prospects in the pipeline, both for the small pre-built suites, and the feedback that we're getting from showings and recent proposals on full floors. So we're very pleased. Very much like where we're at, and our competitive position.

Great, thank you.

Jamie Feldman, Bank of America Merrill Lynch.

Good morning, this is Steven [Zalnek] with Jamie Feldman, actually. I was wondering if you could comment -- give us an update on leasing progress you see in your suburban office assets? You've got Sanford and Norwalk, White Plains. It would be great to just get an update on that.

Yes, sure. If you followed some of the recent announcements, we had a number of new and renewal leases recently done. That follows on the heels of the two significant leases that we closed in the fourth quarter, Novitex and CareCentrix at First Stamford Place. I will say that, again, our properties show very well. I like our credit position. We're in great locations near mass transit. And if you look at the competitive set of the downtown properties near mass transits, I think we compete very favorably.

Okay, thank you.

Aaron Aslakson, Stifel.

Good morning. Could you just discuss for a moment the OpEx at One Grand Central Place, and the TIs and pre-rent periods provided to the new leases?

As far as TIs related to new leasing at One Grand Central Place, I would say that generally, our TI concessions are at market. It varies from if we're building a pre-built suite, we are delivering that to the tenant on a turnkey basis. But if it's a full-floor availability, we're providing market rates at TI concessions, in line with market. No clearly, everyone is deal dependent, meaning the specifics of each individual transaction, it depends on all the terms, the rent that we get. So you have some variability there.

And as far as operating expenses at One Grand Central Place, I would say that we are -- throughout the portfolio, still just keeping on our redevelopment work. And as we move forward, I think that we'll see operating expenses stabilize over time.

And what are OpEx on a per square foot basis today?

Generally, operating expenses at One Grand Central Place are running at about $15 per square foot and then real estate tax is another $10. So, all-in, we're just in the ballpark of $25 a square foot.

Okay, great. And then free rent was market, but what is market for a One GCP today?

Well again, it depends on the deal size and the lease term and the rent. I would say that on smaller suites for pre-builts, it may be anywhere from 1 to 3 months of free rent. On a larger transaction, I would say on a full floor availability, it could be anywhere from 8 to 10 months; again, really depending on those specific lease terms.

Right, okay. And then in terms of the available -- if I'm understanding you correctly, you have four floors currently available at the Empire State Building, with another four floors that you are planning to deliver by the year-end. In terms of bringing the four floors that you currently have available for lease -- in terms of leasing those out this year -- how do the prospects feel, in terms of delivering that space to those tenants between first quarter, second quarter, third quarter, fourth quarter? Is that late in the year; mid-year?

In terms of delivering the space to make it available, it's a matter of vacating the balance of the tenants on those floors, and executing on our redevelopment to begin the demolition on those four floors. So as we -- as that work is done, those floors will be made available to the marketplace. We are already pre-marketing those, but we're on track, and with our plan.

I think it's worthwhile to note some of the recent leasing that has been done at One Grand Central Place with 3i, which is one of the largest private equity firms in the world, based in the UK, taking a full floor; Allianz taking space for their real estate group. Of course, last year, we had Gerson Lehrman group taking a full base floor, and additional space on another floor connected thereto; and they've built out -- they're building out a beautiful space with an atrium and all kinds of great features.

So we really like the way things are coming along at One Grand Central. And though it's not material, of the one forward-looking statement that I will give you is we intend to move off of our tower floors here into a low floor in another building to rent our space.

What Tony and I didn't mention, which was in the recent release, we also did a full floor deal with Johnson Controls here at One Grand Central Place.

But that was a renew and expand.

Renew and expansion.

Yes, all that, that was great. Thank you.

(Operator Instructions) Michael Knott, Green Street Advisors.

Question for you on the leasing pipeline. I don't have a sense for how you feel about your current lot of prospects. I don't know if you are prepared to give a number of square feet that you're negotiating with, or prospects, like some of the other companies do. But just curious how you're thinking about that.

Yes, sure, Michael. This is Tom again. I feel very good about our competitive positions. I feel good about how we are executing on our redevelopment plans. I feel good about the way our properties show. And I think that I'm seeing healthy activity. As I look at our properties in the Broadway corridor and the Times Square South submarket, our properties are well positioned. They show great, in a resurging market that is very active in that corridor, so we're getting healthy amount of showings. I'm seeing a healthy amount of deal prospects. And then moving on to Empire State Building, just building on our prior comments, I like what I see there, from the small suite activity to the full floors. And I'm really excited about the work that will be completed this year, and how the property shows.

Okay, though, you guys are not giving any guidance in terms of where you expect occupancy to trend over the years, right?

We are not giving any guidance at this point. We're considering the subject of providing some form of guidance; but any change in our present policy will be in the future.

Okay. Just in general, Tom, on your comment about the additional four floors at Empire State, should we infer that occupancy or the lease percentage there is going to go down before it goes back up? Or is that not an accurate inference?

Again, Michael, as I said, we continue our strategy to vacate space, redevelop it, and lease it up. We have shown in the past that when we have vacated and redeveloped space, we've been successful at leasing it. Those four additional floors, I think, fall into that same strategy. So I feel confident about where we're at, and where we're headed.

Okay. And then just a couple more if I may. On the Observatory, is there any commentary you can provide on whether the tough winter you guys have had is making for tough, say, 1Q so far, versus 1Q of 2013?

The keys to our Observatory operation are the ability to get to and around New York City, and to be able to observe the city from the Observatory. When flights and vacations are canceled, the city is snowbound, and there are days when there is no view, our performance can be impacted. But I can tell you that results year-to-date are generally ahead of 2013 for the same period. But we're not going to provide any more detail at this time. But we feel very good about where we are. We feel good about that business. As I said, we're generally ahead of 2013. And, candidly, we're living basically in Nome, Alaska, right now in New York. And we're expecting another foot of snow on Monday, so it's been fun and interesting.

That's why Newport Beach isn't so bad.

One of many reasons. I wanted to say, in general, on the Observatory -- again, folks who met with us before -- and you'll hear the same thing if you'll meet with us in the future. We feel really good about that we've been very thoughtful about this business. We continue to be thoughtful. We continue to have programs which we've implemented. The audio tour, which I referenced, is really a multimedia handheld device, which turns our busiest periods from a line into an experience. It's included in the price of every ticket now. We increased our ticket price. We hand it out to everybody. The reviews are fantastic from visitors who have been using it. We track TripAdvisor. We've just done our polling with our visitors, which we do on a regular basis.

So the exhibits have been upgraded. The energy efficiency exhibit has received an upgrade. We're constantly moving the asset around. And our prominent and preeminent position as the featured view of New York City -- really the branding effort for that building in general -- I hate to go on about it too much, but it is our flagship property. And you guys do have a lot of questions.

Who's going to win -- #whosgoingtowin program, with Verizon over the Super Bowl, got more tweets on the Friday before the Super Bowl than the word Super Bowl. It was an incredibly engaging and engaged program. It got international coverage and. When we say international coverage, press is all about putting eyes on the Empire State Building so that we're front of mind in everybody's view of the perspective of the city of New York around the world. And we have things which dovetail with that. We have things which fit in with that. So we like what we're doing there. We like what is going on. We feel good and comfortable about it.

And, don't forget, it's a lease, just like at One World Trade Center. They lease that space out. If we weren't operating this ourselves, someone else would be operating it; they'd be paying us rent. One World Trade Center is getting $65 million starting rent from the Legends group for that. We've got a much better offering, a much better operation, a much better brand. We feel good about what we're doing.

Just real quick on the Observatory, and then one other one past that if I may -- any thoughts on the potential for competition from Hudson Yards down the road?

No. There will be competitors, always. You have to look at where that is, where we are. You have to look at what they're offering, what we offer. They're going to do a food thing. They're going to do a bunch of other stuff. I feel very good about where we are. And, candidly, the more offering and the more opportunity that people have to advertise for their offerings of a view of New York -- the view they are always advertising is of the Empire State Building, and that's brand building anyway.

I agree, you should feel good. One last question for me is just on the litigation. Any comment? Just give us your perspective on what's out there.

Sure, and I appreciate that. And I don't know if -- how many people saw. Hopefully you did see the result on Tuesday this past week, when the court challenge to the legality of the buyout provisions -- the court ruled in our favor.

We have a very simple view of this. We went through a consolidation process on which people voted. The vote took place; people approved a consolidation and IPO. The rest of this stuff, as far as I'm concerned, is ants at a picnic. It's a big M&A transaction. It was a big offering. Every [sale of] one has some litigation. We believe the claims are without merit -- totally without merit. And we respond to these things in court. And so far, I think the courts have demonstrated that their view is in line with our position on these things. We did things right; people voted; we are now talking about running the Company.

Right. Thank you for that.

Thank you. Ladies and gentlemen, we have come to the end of our time for questions. I would like to turn the floor (multiple speakers) I'm sorry.

I just want to thank everybody for being on the call. It's our first performance without a net, giving our first quarterly conference call. We're really happy as a group. The thing I'll leave you with is we are probably the one company for whom life became more simple when we went public than it was before. And to be able to devote all of our efforts to executing on our strategies is a wonderful feeling, and we're having a lot of fun with it.

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