Greetings and welcome to the Empire State Realty Trust Third Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to introduce your host for today Mr. Thomas Keltner, General Counsel at Empire State Realty Trust. Thank you, Mr. Keltner. You may now begin.

Good morning. Thank you for joining us today for Empire State Realty Trust's third quarter 2014 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 Investor's section of the Company's Web site 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. Examples of forward-looking statements include those related to revenue, operating income and financial guidance as well as non-GAAP financial measures such as FFO, core FFO, same store results and EBITDA. As a reminder forward-looking statements represent management's current estimates that 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 contained in the Company's filings with the SEC. We also caution that prior period results which are referenced in any comment today may not necessarily be reflective of the results for Empire State Realty Trust if we had had truly been a standalone entity during the periods presented. Finally, during today's 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 call is hosted by Empire State Realty Trust's Chairman, President and CEO, Anthony Malkin; Director of Property Operations and Leasing, Thomas Durels; and Chief Financial Officer, David Karp. They will make introductory comments, after which we will open the call to your questions. Now, I will turn the call over to Anthony Malkin.

Good morning. We are delighted to welcome you to our third quarter 2014 earnings conference call. On today's call, I will begin with a brief overview and update. Tom Durels, will then provide an update on our portfolio and David Karp will review financial results in more detail and discuss our balance sheet. Empire State Realty Trust is a pure play, Manhattan and New York City metro area office and retail real-estate portfolio. We believe our portfolio offers a unique opportunity to capture upside through the continued renovation and repositioning of our properties, bringing their occupancies to market and leasing them at market rates. Our ability to execute this strategy should drive meaningful growth in cash flow and create long-term value for shareholders. October marks the 1 year anniversary of our initial public offering. Since our IPO our team has worked tirelessly and to great effect to deliver on the opportunity we set forth in our offering documents and our conversations with investors and analysts. We've used our deep experience and our culture of disciplined execution and innovation to continue to create value in our portfolio. While we already had a track record of performance prior to our IPO, as a public company, things are much more straight-forward. Our more simplified organizational structure and unified balance sheet has made it much easier for us to achieve results in line with our exertions. With the accomplishments of the last quarter, we now have 12 months as a public company in which we have delivered meaningful progress on our redevelopment and repositioning program. We had achieved strong leasing results added depth to our talented bench and enhanced our balance sheet. In July we exercised our options to acquire 112, West 34th Street and 1400 Broadway providing what we think has more growth potential and adding greater diversity to our portfolio. The Empire State Building Observatory set records in July and August. In August we set an all-time monthly record for admissions and revenue. My family has sold no share and remains a major stakeholder in Empire State Realty Trust. Our interests remain aligned with our shareholders with the same objectives of value creation, capital appreciation and a growing and safe comp return. Before I turn the call over to Tom, I’d like to take a moment to thank our entire team for their efforts over the past year. Every one of our employees and each member of our Board of Directors have contributed to our progress and as we look ahead, we believe we’re well positioned to continue to execute at our stated plan which we have communicated and which we believe will create value for years to come Tom?

Thank you, Tony. Good morning everyone. On this morning’s call I will review our overall leasing activity in the third quarter, discuss the recent completion of amenities at the Empire State Building and provide an update on our undeveloped tenant spaces that we continue to consolidate, bring to market and lease at higher rent. Our third quarter leasing results staff 57 new and renewal leases signed totaling 182,000 square feet of office and retail space. Approximately 171,000 square feet of this leasing activity took place within our office portfolio and with approximately 133,000 square feet in our Manhattan office properties. At September 30, 2014 our total portfolio was 88.7% occupied and including signed leases that have not yet commenced our portfolio is 89.7% leased. On a same store basis our portfolio occupancy is up 60 basis points quarter-over-quarter and up 350 basis points year-over-year. Also on a same store basis our signed leases not commenced percentage is up 70 basis points quarter-over-quarter and up 280 basis points year-over-year. Significant leases that we signed during the quarter include at the Empire State Building a 26,000 square foot four floored new lease with BrightRoll, the leading video advertising company and at 1333 Broadway, we signed a 3300 square foot new lease with Shake Shack, the popular restaurant created by Danny Meyer’s Union Square Hospitality Group. We continue to be pleased with the quality of tenants signing new leases at our properties and BrightRoll is a prime example. We believe our price point, our locations with convenient access to mass transit, our buildings modernized for the 21st century with new amenities combined with newly built tenant spaces attract a variety of tenants and continue to drive a strong leasing things. Our lease with Shake Shack at 1333 Broadway, along with the opening of…

Thanks Tom and good morning everyone. I'll begin with a review of our third quarter results, followed by an update on our balance sheet and after that we'll be happy to take your questions. Last night we reported core FFO of $65.1 million or $0.25 per diluted share for the third quarter 2014. Our strong results in the third quarter were the results of the continued execution of our stated operating and capital strategy. For nine months ended September 30, 2014 core FFO was $162.2 million or $0.65 per fully diluted share. Core FFO excludes approximately $2.6 million of acquisition costs related to our acquisition of the option properties, approximately $407,000 of issuance expenses related to our private perpetual preferred unit exchange offering and approximately $1.75 million related to the amortization of below market ground leases. Combined these expenses totaled approximately $4.7 million which was excluded from FFO in the third quarter 2014 to determine core FFO. Turning to our Observatory operations, the Observatory hosted approximately 1.4 million visitors in the third quarter 2014, representing a 0.9% increase from the same period in 2013. Additionally, we are pleased to report that the Observatory revenue for the third quarter grew 10.2% to $35.7 million compared to the third quarter of 2013 due to increased commissions, higher admission pricing and more profitable mix of ticket sales based on our implementation of the revised pricing metrics that we put in place during 2013. This is the first third quarter on which we have reported as a public company. Remember tourist visits to New York are seasonal and the third quarter it's the peak to our season which is reflected in the Observatory performance. On the expense side, for the third quarter Observatory expenses improved due to lower net personnel costs and reduced advertising…

Thank you. (Operator Instructions) Our first question comes from Jamie Feldman with Merrill Lynch. Please proceed with your question.

I’m hoping you can provide a little bit more color on the leasing pipeline. I think you had mentioned you’re working on one potential full floor of the Empire State Building but just generally how does the leasing queue heading into the end of the year and into early 2015?

Sure Jamie, this is Tom. I’d say that we got the momentum at all our properties driven by the success of our redevelopment of tenant spaces, the agility of our property's redevelopment and the strong -- the strength of the submarkets in which they're located and Empire state building is specially as we have mentioned -- one fourth floor that we have in negotiation that’s on the heels of the three full floors that we signed earlier this year with LinkedIn, BrightRoll and Bulova. The pre-builts are moving steadily at Empire State Building and throughout the portfolio where we’re hard at work right now to deliver more pre-builts where we have the space available at all of our properties. As far as the fourth quarter I would simply comment that we’ve had good momentum that started in 2013. It's started through all of this year and I think we’re looking at a healthy fourth quarter based upon leases that we have in negotiation, in term sheets that we have in negotiations and then active showings and proposals that we’re constantly receiving.

Okay, and then you had mentioned 2015 you'll probably see occupancy kicked down as you take space out of service for redevelopment. Can you give some guidance in terms of how we should be thinking about that on a quarterly basis?

No, I'd really not put that out on a quarterly basis. I'd try to give some color and some visibility as to how much space believe we would deliver in a developed condition by the end of 2016 and it all depends upon obviously the timing of lease expirations and then lining up spaces to be contiguous for execution on that redevelopment. But we will be actively at work between now and through the end of the 2015 delivering that redeveloped space of about 600,000 to 700,000 square feet.

Okay, but I guess an area like any one quarter like first half of ‘15, a major hit you'll be taking to occupancy. I guess, where you saying by year end '15 you'll be down 500,000 square feet of occupied space or not necessarily.

Don’t forget Jamie, Tony here. What we do is we develop space, we lease space. There's a possibility that we show a dip, there's a possibility that it could stay exactly flat and as a possibility actually that -- we have instances spaces are leased before they actually go vacant. So the turnaround is very quick. We gave the comment. Tom did. We want to point out then we have the leasing spreads which we’re accomplishing to give you an idea of what additional revenue we think we’re going to be able to drive.

Okay, that’s helpful. And then finally I know you've made some personalization for Company recently. Can you guys talk a little bit more about some of the traditions you added?

Yes, Jamie we’ve added in a number of areas. We added first in the areas that report to me. We've added a new Senior Vice President of Human Resources, someone who is a veteran in the industry and comes with years of experience, both at private and public companies. We’ve also added a Chief Information Officer who comes to us from another New York centric REIT who had been there for 15 years and prior to had done years of work as a consultant in the industry. I think Tom, in your group you've had some addition as well.

In construction I’ve hired a Head of Design and Construction, a fellow that has decades of experience and he will be adding additional staffs beneath him in the construction area. In property management we made a number of hires that’s as part of our program to bring management of all their properties in house, including -- 112 West 34th Street and 1400 Broadway will soon be brought in-house. And then in leasing, about a year ago we hired a Senior Vice President and Director of Leasing and then beneath him we recently added a Vice President of Leasing. So we’ve added staff in construction and property management and leasing.

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

Just wanted to see if you could comment on how the observatory performance has held up in October and your expectations for that business going forward.

This is Tony Malkin. Just to let you know, we remain pleased with the performance of the Observatory. I think our concern that everyone has focused on is One World Trade Center but nobody has focused on the fact that the 911 museum opened to capacity crows this year and has been operating at capacity the entire year. It hasn’t impacted us at all. So we’re looking forward to seasonal performance. We are pleased with our competitive position. We’re pleased with our execution. I'll just add a slight note of color that we are just finishing hosting three days of the World’s Federation of Towers, which are buildings like the Empire State Building from around the world at Annual Conference, all of them have observatories and the number of comments we get on our level of execution and products we deliver from our visitors from within the industry, equal the positive comments we get form our tourist visitors.

Okay, that’s helpful. And Tony, sticking with you, can you comment on the acquisition side of things what are you seeing out there? Have you been in discussions with colleagues about any opportunities? And is there anything to share there?

We have maintained an active screening process with regular consultation amongst not only ourselves but also with our bankers on opportunities. We are kinetically wired to enjoy and have a competitive advantage on complicated transactions. So we like to keep track of things where we believe that certainly in today’s market there are things which might fall out of bed and into our laps which are difficult and complicated from any different level or angle of execution. We are really not looking generally speaking at any one off acquisitions, though from time to time we will underwrite and work our muscles on individual acquisitions as part of being able to underwrite larger more complex transactions, but I would say that we have a very active radar screen and interaction as far as seeking out opportunities. I think we’re going to be more directionally inclined to go for things that have problems in today’s environment rather than things which are open competitions.

Okay. So is there any sort of color you can give on maybe the size of that acquisition pipeline, whether it be the number of deals that are aggregate kind of costs you’re looking at.

I can only tell you that in our review process, with the one bank with whom we’re doing the closest work, we have pages of prospects ranging from families to businesses to portfolios, and we are very focused on two things. One we have years of embedded material growth which we believe is de-risked growth from our existing portfolio and we've proven before we went public and since we've gone public that we've executed and achieved excellent results there, the 37% plus spread on Manhattan new leases that Tom mentioned earlier. This is not the market. Some of it's the market. And as I said before, we believe that we're going to outperform in a down market, sideways market, or up market with our portfolio. And with that in mind, it is natural for us to focus on that execution at the same time. When we look at opportunities in general it is no secret that it's very competitive out there and any of you who have spoken with David Karp know the excellent returns that we get on reinvesting capital on our own portfolio and we really have to weigh what we do. We are more inclined to look at more complicated transactions and in today's world those generically are one-offs. So we're certainly looking I think generically at larger transactions than smaller.

And then a couple for David. Thanks for the new disclosure on the redevelopment program. It looks as though the first generation CapEx costs were up pretty significantly in the quarter. Do you expect that to continue or was there something one time in nature this quarter?

I think, when you take a look at -- the first generation CapEx will include not only the common area redevelopment, but also base building work in connection with leasing and we talk about base building being things like asbestos removal, new conductive coverage, things that are one time charges, but expenses as we lease up to redevelop space. That is going vary quarter by quarter based upon volume of leasing and also where we are in the overall CapEx program. Tom may want to add to that, but I think overall, I think the guidance we've given on that is we're currently looking at somewhere between 85 million and 125 million of the common area work between now and the end of 2016. Additionally, the first generation CapEx related to specific leasing will really just be a function of leasing velocity.

I think David hit it correctly that it's driven by the execution on our redevelopment of the common areas and the base building work is a function of the volume of new leasing that we do, particularly on these older spaces that we intentionally vacate, consolidate and redevelop and then lease up at significantly higher spreads.

And then last one for David. In the interim tax expense or benefit line, should we still expect that to fluctuate with Observatory performance, so that the first and the fourth quarters may see a benefit and second and third will see an expense and was there anything anomalous in the quarter in that line item.

No, nothing anomalous and I think you're correct. You will see those seasonal variations because we accrue on a quarterly basis and it's a function of quarterly performance, which as you know is seasonal in nature.

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

John Guinee here. Nice quarter guys. And just -- and I tend to always think about it in this manner, but it's a hard number to tack down, but if I take the -- or you take the 2.3 million square feet of internal redevelopment and you add in all of your base buildings cost, your gutting to the shell, your A&E, Tis, leasing commissions, is this a $100 square foot number or is it a $300 square foot? Can you give me a just a round number to work off of?

Sure John, this is Tom. Think of the tenant build-out cost in two parts. One is the base building cost. That's a one-time spend that Dave mentioned earlier. The cost to demolish, update asbestos, install new mechanicals, electricals, floor leveling, things that are a one-time spend that not need to be spent again for 20 or 30 years. That based on cost varies by space depends on the existing conditions and it can range from anywhere from $35 per square foot to $55 per square foot. And then from there is the TI cost and the TI cost is a market driven number. It can range on full floor deals anywhere from $55 to $65 per square foot. It can be higher or lower. Obviously it depends on the overall deal terms, the length of terms, free rent and other concessions, and base rent, and then our pre-builts generally range about a $120 to $135 per square foot. Again that's a one-time spend. We design those with the intent that they can be released for the next 20 years with nominal cost upon rollover for paint and carpet.

And then if I Tis to that number -- do you have leasing commissions for that number too?

Yes.

And what would that be, just on a 10 year average lease term?

We can get back to you on that.

I guess Tom will get back to you. That’s whatever market is and it’s a course of function of whatever the rents are.

Okay, that’s a great segue into my question. As the market improves and tightens, New York City has a heavily, heavily brokered leasing environment. Is there any chance that those leasing costs can compress for the landlords as the market improves?

I should say that we’ve seen a compression of those costs in concessions over the past few quarters. What we have seen is a steady increase in our asking and taking rents for office space types at all our properties. I would expect that if the market does improve, there will be the ability for us keep a lid on those lease concessions, both in the form of TI and free rent. The pre-builts will be a steady part of our diet and our program going forward and that said, I mentioned before, that’s a one-time cost and that's a spend that’s done intentionally to capture a good segment of the market.

John, if I could just draw your attention to a supplemental on Page 5, we do provide what our average leasing commissions were for the quarter, for the total portfolio on a weighted average basis was about $14.30, for the Manhattan office portfolio $16.97 per square foot.

And I guess I might just say to a slight unanswered portion to your question John, I don’t think there is any way that we’re going to see a reduction in the commission rates or payments to brokers and I think it’s very important to note we have always very specifically adopted a very simple program with regard to tenants who are brought to us by brokers and brokers who bring them and this goes back a decade and a half, two decades really and that is we don’t negotiate brokerage commissions. We pay them. We pay them 100% on lease signing. That is what we have always done and that’s what -- we will always do our job and our goal is to negotiate to get the at best tenant at the best rents. And the reputation we have in the brokerage industry as while our lease form itself maybe very protective of the landlord, brokers know when they come to us, they're going to be treated well, they’re going to be paid promptly and we will never negotiate for commissions and we view that as a competitive advantage. We did that in bad times. We do that in good times. And as a one change that may occur with regard to our overall expenses of leasing is I think it’s logical to expect that reason we're adding to our leasing and marketing team is not just to have more leasing and marketing professionals, that there could be other outcomes associated with that. But with regard to outside brokers brining in tenants, we never negotiate commissions. We have not since realized the terrible damage that does to a landlord’s reputation in the market. And we consider that a competitive differentiating advantage.

Good, okay, then two quick questions. As you have internal redevelopment, what happens to your operating expenses and your property taxes on a before and after basis? You’re clearly putting in more efficient HPAC systems et cetera, but you’re going to get a bump up in property tax assessments. What’s the tradeoff there?

We are seeing improved operating expense that efficiencies. As we consolidate spaces and reduce the number of suites, that hasn’t impact on our overall operating expenses. As we install energy efficient systems, keep in mind that all of our installations comply with our building standards and energy efficient guidelines. We would all improve operating efficiencies and reduce costs there. As far as real estate taxes….

Well, I mean real estate taxes are purely a function of the property revenue and expenses and is determined by the taxing authority. So I don’t know that there is any direct correlation there. There is a -- .

There is a top shelter…

There is an exemption program for real estate taxes whereby for a period of 12 years the value of building improvements are excluded from the real estate tax assessment. We have been systematically utilizing that program to reduce our real estate tax exposure on the improvements that are made at the buildings.

Got it, okay and then the last question is, Tony, when you think about the big deals versus small deals; is your definition of small deals $20 million or $200 million? Is your definition of big deals $500 million or $3 billion?

Well, actually what I think of small deals or big deals, predominantly what I think about is the returns we get on our investment and I guess my comment is that smaller deals in general these days happen both to have similar characteristics of lower returns and less money being invested. And I think John, not to be cute [ph] but what I’m actually trying to say is look, if you have a competitive situation, you have to understand the asset very well, you have to understand what your potential for a return is and we are very, very cautious of what our value proposition is that we’re extending out to investors and we don’t want to dilute it. I’m a significant investor myself and I think about allocation of capital as the single most important thing we do. That being said, are we going to go to $5 billion transaction? It would have to be -- that would obviously be extremely completed, bigger that what one would expect to occur in our balance sheet and would have to have some incredibly compelling stories around it. When we do a $20 million transaction, well, that seems pretty small. A lot of people would have a lot of competitive perspectives on that same asset and just every single small operator to serving wealth fund in the world could compete for a transaction like that. But I’ll finish with the last comment that we’re really [indiscernible]. So we have found opportunity to make money on all kinds of transactions in the past. I just think it’s harder in today’s environment and so when I think about larger --I tend to think more moving pieces, not just size. Size does have to justify how many moving pieces there are because moving pieces are a little more costly from time and transaction execution perspective. But I want to make clear we wouldn’t lock away from an outstanding small investment. I just think it’s statistically improbable in today’s environment.

Thank you. Our next question comes from Craig Mailman with KeyBanc Capital Markets. Please proceed with your question.

Tony, you touched the fact of the one year anniversary since you guys went public kind of ticked off some of the attributes of being a public company but just curious, since you guys are now in the public domain, how if any has that kind of enhanced your relationships with tenant, rent brokers and how has that helped maybe with the velocity and flow of deals to the Empire State Building and some of the other Manhattan office buildings.

I’ll tell you candidly and maybe then hand this off to Tom Durels who deals with this on a basic level. We had a remarkably good relationship with brokers built over time. When brokers realized number one, of course we treat them very well, and number two, we were delivering a product which was not found elsewhere in Manhattan by location and the type of renovation that we were doing. We had to be blunt as a sigma of sorts attached to our portfolio and that was going back in history candidly our prior operation by the prior managing agent which was embedded in these assets, most of these assets in assets in Manhattan from the time of their acquisition and we had a reputation through that agent of frankly deferring maintenance and not treating brokers well; negotiating commissions, paying overtime and it may have looked good from just a green eye shade perspective, but it was terrible in the marketplace. What we have done over time is we thought to bring tours to our buildings and what we have found is those brokers who were intrepid enough to actually come into our buildings in the first instance and do deals had tenants who were incredibly pleased and that is the word of mouth. I think of the brokerage community, what’s really happened is are buildings are just better and better received and a building like Empire, you have to see the new amenities floor in the concourse level with the fitness center, see the new conference facility up on the 57th floor, the new restaurant that just opened with three private dining rooms and the restaurant itself and it's a jaw dropper. And this is what’s now really building the momentum with the brokers I think. And the fact that they are going public means nothing to them. Tom, do you want to add any comment to that?

I would reiterate What Tony said in that we've always maintained good relationships with the brokers and our properties do stand out. Let say that they going public as simplified and clarified and provided transparency on the ownership side. So it’s enhanced our overall brand, its enhanced our overall acceptability and appeal within the marketplace and it’s been -- made our job of leasing space much easier, much simpler.

That’s helpful. And Tom you mentioned the activities in the Empire State Building. Just can you remind me again exactly when the additional four floors are going to be completed and whether you guys have any activity or tenants kind of waiting for those come online to start trading paper?

We have two floors that have been demolished and are available now. We have two more floors that are in the process of being demolished to be delivered by year end and as I mentioned before, we have one active lease in negotiation and then we have proposals on additional floors. In addition to that, specifically on Empire State Building we have activity on our pre-built as well.

It's varies by deal, keeping in mind that on those short-term renewals that we're doing with the intent of lining up lease expiration dates so that we can execute our program to consolidate, vacate and redevelop spaces, generally we're doing as is deals short-term and at below market rents. On spaces where we have a good tenant in place, we'll extract obviously closer to -- we'll extract market rents and lease those generally maybe with the paint and carpet and some modest work or on an as is basis. So it really varies and it depends on the deal. But you can expect at least on the leasing cost considerably less than on the new deals and for those tenants that we want to keep and we're looking to achieve market rents will generally get much longer term. And it depends on the size of space. If it's a small suite in the 2,500 to 5,000 square feet, it could be anywhere from a three to a seven year term. And it really depends on the deal.

Okay. And then moving to Shake Shack deal, when does that lease commence and should we assume 600% to 700% mark-to-market on that relative to where the in-place guys are? Is that sort of a fair way to think about it?

We have some base building work to complete before that lease will commence and that would be -- we're in the process of doing that now and we also have to vacate the space. There is an existing tenant that we've negotiated to take the space back from. So we're looking at a commencement in later part of 2015. As far as the mark-to-market, I'll see if I've got the floor in place, escalator rent. I'm not sure I have that on that specific space, but the rents that we achieved there are healthy. We've got -- we achieved a base rent north of 2.25 per square foot with healthy percentage rents, which we think is going to bring that overall rent per square foot up significantly.

And then moving to the balance sheet, David the prepayment on Metro Center, what kind of charge or direct investment [ph] cost should we expect in the fourth quarter related to that?

Yes, just to give a little background on that, we're fortunate we negotiated an agreement with the prior lender there, which allowed us to prepay the loan and realize a slightly more than a 40% discount in the prepayment penalty. The calculated yield maintenance charge would have been $4.8 million. We ended up paying $2.8 million which was nearly $2 million savings there.

And then just lastly, the adjustment for the amortization of ground lease payments, is that going to be a recurring kind of adjustment to core FFO as we go forward? Does that burn off eventually.

No. It will be an adjustment that we will make going forward. Given the materiality of it in connection with the auction properties we thought that this provided the best transparency to our operating performance and so we will continue to show that and that amortization will extend through the life of the ground lease.

Thank you. Our next question comes from Brad Burke with Goldman Sachs. Please proceed with your question.

I apologize if any of these have been asked already. I had some technical issues earlier. On the 37% increase on new leases, I'd certainly agree with your assessment that it's better than market rate. Is it fair to assume that the bulk of these aren't space that is coming off recent redevelopment effort or is there a meaningful component of leases that we would think about as being more like-for-like space?

I think that the majority of the leases for which contribute to that 37.2% positive spread were for redeveloped spaces, that includes both full floor deals and pre-builts. That would be where we've executed our program to consolidate smaller suites into larger availabilities and we build-out the space. I'd say that the redeveloped space was a major contributor to that.

And given the success that you're having leasing out that redeveloped space and with the market tightening, is there an opportunity to make progress with your leasing on space that is still in the earlier stages of being redeveloped or do the tenants still need to see it to believe it?

We actively market all of our available space, keeping in mind that the showing of a space is part of our success. So we have a policy that we're not going to show a -- say for example a unit that's under construction. We prefer to show spaces that are in show ready condition. But we do have success in leasing floors that have yet to be demolished as well as leasing pre-builts while they're under construction. We execute that by showing tenant prospects a full floor that's been completely white-boxed as an example of the condition that we will deliver at the end and on pre-builts we'll show them other pre-built inventory that’s been completed and then come to terms possibly on a unit that’s available in the future that’s meeting their needs.

And the only thing I'll add to that is that there have been occasions that will come from time-to-time where someone sees a floor which white-boxed and as a floor which is not yet delivered and it will say, we'll just take this floor. And we will therefore sometimes save the cost of actual white-boxing which does cost money. We always want to have a white-boxed floor, at least one when we have multiple floors or full floors available in the building, so people can see that. But the real time -- I don’t disagree, as a component of this question which maybe we didn’t address. The real issue for us is actually the timing of getting full space. We can't partially white-box a full floor if there's still tenant on it and we can’t partially start building pre-builts on a floor if the entire floor hasn’t been vacated. And that’s just the nature of these tenancies that we’ve had historically.

And then on the observatory you’re continuing to see nice growth in the revenue per visitor and you’re doing that as you noted without increases in the operating cost. I’m wondering how much more room you think you have to improve the ticket mix and increase visitation, if you can comment on that?

I would only comment on this. We have maintained a pricing position which is not a price leadership position but which is a price position towards the top of our comparable venues with whom we compete. So if you look at [indiscernible], if you look at the Museum of Modern Art, if you look at [indiscernible], you start looking at what venues charge in New York city, I think it’s interesting to note that One World Trade Center has recently put together an online presentation which is available and number one, we enjoy looking at that because we further feel comfortable with our competitive position when we look at this video walkthrough, which they’ve done but number two they specifically state their pricing and let’s say significant top from where we are today. That’s not to give you any forward guidance but it is to state that that’s certainly something within the constellation of where we price our attraction that they are -- you take a look -- it’s more than 10% higher than where we’re today.

And just a quick modeling item. There was a pretty big increase in tenant recoveries in the quarter and I realized a lot of that release to layering in the two new option properties but it’s still higher than what I would have anticipated. Is there anything that’s chunkier running through the quarter or is this quarter pretty representative of how we ought to be thinking about recoveries going forward?

I think one thing to keep in mind is that our expense reimbursements can be seasonable, depending on weather and other factors typically in the third quarter we have more reimbursements than in the first and second, due to electricity pass throughs in the summer months and then in our broadcast operations we saw a bump that was seasonal as well related to that cooling.

Thank you, our next question comes from Tom Lesnick with Capital One Securities, please proceed with your question.

Most of my questions have already been answered but just a couple of quick one. Are you guys receiving percentage rents on the STATE Bar and Grill lease?

The STATE Grill and Bar first of all is owned by Empire State Realty Trust. It is operated by Patina, who is a well-known restaurant operator. We have an agreement with them in place that provides a participation and incentive for Patina but the overall performance then of the restaurant flows right to Empire State Realty Trust after paying the certain management fees and incentives to Patina.

And just to add color to that. We chose to do that for a specific purpose. We couldn’t get a restaurant contest that was creditworthy to put together a menu in our presentation that we felt we needed to serve the tenants within the building. We had a lot of brand and we have a lot of styled steak houses chains and the like and we wanted something that would deliver a healthy menu with a lot of optionality at a reasonable price as an amenity to our tenant mix within the building and that’s what we’ve achieved with STATE Grill and Bar, which we encourage you to visit, as it emphasizes locally sourced or regionally sourced inputs. It has a broad variety and the tenants like it. We've gotten very good reaction and candidly if we make money from it, that will be fine but we really view it as part of the amenity package.

So as part of the overall amenities to deliver our promise of an urban campus we have now five onsite dining and food options as well as the other amenities that I mentioned in my early remarks with the 15,000 square foot gym and the tenant-only conference center. So it’s really about creating a very, very unique environment that’s attracting quality office tenants and I think that’s reflected in the good leasing success that we’ve had.

Appreciate the color. And then my final question on the exchangeable notes, did the effective GAAP rate, that differ from the stated interest rate and if so, what was it in the quarter.

Yes, it does differ. The stated coupon on the notes is two and five eights. And for GAAP purposes, we expensed at roughly 4%.

Thank you. That was our last question. And at this time I’d like to turn the call over to Mr. Malkin for any closing comments.

The first comment is that, first of all we very much enjoy the fact that we have the chance to chat with you as I save all the time. We feel that when we speak to our investors today we have an opportunity to speak to folks who matter and when we speak to the analyst community we have that same experience. So we appreciate that in form. And number two, within that I think that there is a certain degree of competition inherent in the analyst community and I’d like to point out that John Guinee intends to participate in the Empire State Building run up in February and if we can get anybody else to compete with John, we would happy to arrange for you folks to compete with him. It’s an exciting race. It would terrible I think if John were to win the brokers fight because he's the only one of -- the analyst fight because he is the only on running. So we’ll take those requests offline. We look forward to sharing our continued progress on our next call. And thank you and have a great day.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time and have a great day.