Greetings and welcome to the Empire State Realty Trust Second Quarter Earnings Conference 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. I would now like to turn the conference over to Mr. Tom Keltner, General Counsel of 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 second quarter 2015 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 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. 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, modified 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. 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, and Chief Executive Officer, Anthony Malkin; President and Chief Operating Officer, John Kessler; 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 Tony Malkin.

Good morning. We are delighted to welcome you to our second quarter 2015 earnings conference call. During the quarter we continued to execute on our strategy and delivered strong results. Our prepared comments will be fairly brief. John Kessler, our President and COO, will begin with an overview of overall results. Tom Durels, our Executive Vice President and Director of Leasing and Operations, will then provide an update on our portfolio. David Karp, our Executive Vice President and Chief Financial Officer, will next review financial results in more detail and discuss our balance sheet. After that we will open up the call for questions. Now I will turn the call over to John Kessler. John.

Thank you, Tony and good morning everyone. I would like to use my time this morning to summarize the quarter and provide an overview of a significant new lease that we signed subsequent to quarter end. 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 grow income through our continued redevelopment and leasing of our properties at market rents and bringing their occupancy to market level. As we execute our work on our existing portfolio over the next three years to four years, we expect to deliver meaningful embedded derisked growth from the consolidation, redevelopment, and lease-up space at market rents to better-credit and larger users. As we have said in the past, we view this captive internal growth capability to be very attractive in the current environment. Our leasing and financial performance continues to be strong. Year-to-date we have signed leases totaling over 672,000 square feet of space which compares to approximately 403,000 in the first half of 2014. Additionally, we continue to increase observatory revenue. Also during the quarter we enhanced our balance sheet flexibility by repaying the outstanding mortgage debt on One Grand Central Place and created another unencumbered asset. Subsequent to quarter end, I am pleased to announce that we signed an expansion lease with LinkedIn Corporation for approximately 130,000 square feet at the Empire State Building. This meaningful expansion is LinkedIn's fourth since they signed with us in 2011 and their largest, as it encompasses the entire third and 26th floors. Including this expansion LinkedIn will occupy 280,000 square feet on seven floors at ESB. We are always happy to see tenants grow with us at ESRT, and we will continue to focus on providing the first-class service and amenities which they are looking for. When you combine our leasing volumes during the first two quarters of the year with this most recent LinkedIn expansion, which we signed since the end of the quarter, we have completed approximately 800,000 square feet of leases to date. This puts us well ahead of our leasing pace last year. Our strong performance is a credit to Tom Durels and our entire leasing and operations team. Overall, we are pleased with our results this quarter. Looking ahead we remain focused and continue to execute on our plan. We remain very excited about the future here at ESRT. I'll now turn the call over to Tom Durels. Tom?

Thank you, John and good morning everyone. On today's call I will review our overall leasing activity, provide a summary of our current space availabilities that we are actively marketing, and provide an outlook on space that we plan to vacate and redevelop in order to re-lease at higher rent. Our second quarter results continued to reflect the progress we are making in driving and capturing growth potential within our portfolio, including upside from signed leases now commenced, the mark-to-market on our expiring Manhattan office leases, leaseup of developed vacant office space, and the mark-to-market and leaseup of vacant retail space. In the second quarter we signed 79 new and renewal leases totaling 254,000 square feet of office and retail space. Approximately 185,000 square feet took place in our Manhattan office properties; approximately 51,000 square feet took place in our Greater New York Metropolitan properties; and nearly 18,000 square feet took place in our retail portfolio. Year-to-date we have signed leases for over 672,000 square feet, which is 67% more than the volume of leases signed in the first half of 2014. At June 30 of 2015 our total portfolio was 88% occupied and, including signed leases that have not yet commenced, our portfolio was 90% leased. Our portfolio occupancy was up 40 basis points over the first quarter and, including signed leases not commenced, our leased occupancy percentage was unchanged. On a same-store basis, our portfolio occupancy was down slightly by 20 basis points year-over-year; and including signed leases not commenced our occupancy percentage is up 110 basis points year-over-year. At our flagship property, the Empire State Building, at June 30 we were 85% occupied, up 80 basis points from the previous quarter. Including our signed leases not commenced, our leased percentage was 89.6%. Empire State Building’s urban campus…

Thanks Tom and good morning everyone. I'll start with a review of our financial performance and follow with an update on our balance sheet. For the first quarter we reported core FFO of $68.3 million, or $0.26 per diluted share. For the second quarter 2015, core FFO excluded approximately $404,000 million of deferred financing costs written off in connection with the prepayment of the mortgage debt on One Grand Central Place. Modified FFO, which is defined as FFO plus adjustments for any above or below market ground lease amortization, was $57.9 million or $0.26 for fully diluted share for the second quarter. For the six months ended June 30, 2015 core FFO was $120.9 million, or $0.45 per fully diluted share. Modified FFO was $118.7 million per fully diluted share. Turning to our observatory operations, observatory revenue increased year-over-year. Revenue for the second quarter rose 0.7% to $30.6 million compared to the second quarter of 2014, as we benefited from higher admission pricing. Observatory expenses were up 4.2% over the second quarter of 2014 due to additional operational and payroll costs, observatory net operating income decreased slightly by 0.4% year-over-year. Year-to-date, the observatory hosted approximately 1.8 million visitors, compared to 1.9 million in the prior year. Observatory revenue was $48.8 million, a 2.3% increase from $47.7 million for the six months ended June 30, 2014. For the second quarter of 2015, compared with the second quarter of 2014, there was a 4.7% decline in attendance of the observatory. We believe this was primarily due to a noticeable increase in the number of weekend bad weather days in the second quarter 2015 over the prior year. Specifically within the busy month of June, combined with the effects of general tourism trends in Manhattan. One World observatory opened to the public on…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Brad Burke of Goldman Sachs. Please go ahead.

Good morning, guys. I wanted to ask about the observatory attendance; and certainly appreciate the point on tough weather comps, and we've also heard about softer New York tourism. But just wanted to ask what gives you confidence that those are the drivers of the year-over-year decline and that you actually haven't seen some impact yet from the opening of One World Trade for the 30-plus days that it was open in the quarter?

Hi, Brad; Tony here. Thanks for your question. On the One World Trade Center, we continue to believe that the downtown day is different from the midtown day for a New York City tourist. One World Trade Center is open and brand-new; the consumer is learning what their offering is. We look forward to the establishment of a better-informed consumer view of what their offering is. And candidly we think we'll have a better idea of their impact, if any, on our performance by the end of this year. But I would focus on the factors which we think matter. Weekend days are materially more important to visitor volume than weekdays. Bad weather days, by the way, which we define to be 30% or more of the day has zero visibility, are very hard to overcome on a weekend day, which is a different visitor to New York than the weekday visitor. They don't have as much time. General tourism trends are challenging. RevPAR in New York City hotels is down compared to a nationwide increase of 6% as has been broadly reported, with much of that impact attributed to a reduction in international tourist visits. So when – we also look at airlines, who have similarly reported a reduction in international travel. And finally, primarily data from our credit card sales, which we track via our ticket office and our online sales, this is a partial picture of our total visitor, but it suggests reduced visits by international travelers. Yet we've never seen an impact on visits due to currency fluctuations; but it may be that worldwide economic performance ex- the United States and currency is having an impact. We continue to feel comfortable with our competitive position, and we continue to think that the best way to look at our observatory performance is holistically through the entire year. And in the end we really think we'll know by the end of the year how One World Trade Center is impacting our business.

If we were to think about the two drivers that you're highlighting, one being broader tourism trends, two being weather comps, is there any way to think about, if we were to isolate the weather which obviously is going to be choppy in any given quarter, how much the weather comps were a driver, specifically?

To give a lot of detail information, more than we've given, we think will reveal proprietary information to competitors. But what we will say is that Weekend days are materially more important than a weekday. And when you have five weekend days in the month of June with zero visibility, and a couple of these weekend days in a row which means the visitor who's come to New York for the weekend is not going to come on a Friday, is not going to come on a Monday you don't make up that day. You've lost that visitor. That's we feel the biggest challenge to us right now.

Okay; all right. I appreciate the detail. Then the operating expenses, moving away from the observatory into the core real estate, the operating expenses saw a pretty meaningful decline. So just want to know if there was anything unusual or chunky in the quarter that we should be thinking about.

Brad, you're referring to operating expenses at Observatory, or property operating expenses?

Property operating expenses.

Yes, I think what we're seeing in property operating expenses, two things. One, we're seeing the impact of seasonality, utility expenses being higher in the first quarter than in the second quarter. And then secondly within the second quarter there was a reduction in the repairs and maintenance, and that's a function of two things. One, some timing differences, projects that may get extended out later into the year; and two, some projects that were completed came in under budget.

Okay. Then just the last one for me, Tom. You always give us a lot to think about as we try to project your occupancy over the course of the year, and we'll have to go back and think hard about what you have said on the conference call today. But I just wanted to get your updated thoughts on how you are thinking about occupancy trending. I think last conference call you said that we ought to expect it being flat to slightly down, so I want to know if there's anything that might change that.

First, Brad, with the signing of the LinkedIn lease that brings us to 800,000 square feet of total leasing year-to-date. That puts us above 90% leased, based upon signed leases not yet commenced throughout the entire portfolio about 91.5% leased at the Empire State Building. These are all good stats. We're seeing overall positive momentum. Our leasing spreads are up, and we see good activity, and we continue to sign leases and negotiate deals and show space. And we're getting good traction in the marketplace. That said, we have stated that it'll be choppy and that in order for us to execute on one of our four defined growth drivers to unlock the mark-to-market in our current leased office space we need to vacate space and in order to unlock that growth driver we will vacate space; we will redevelop it; and then we will re-lease it at higher rent. Through the – vacate about 330,000 square feet in the first half of the year. We expect to vacate another 350,000 square feet in the balance of this year our Manhattan office portfolio. The good news is, as we develop space we are leasing it up, and the market is strong. We're seeing good activity and we're achieving positive spreads. So, will it be choppy? Again, we develop space and we are leasing it.

Okay. Thank you, guys.

Thank you. The next question is from Craig Mailman with KeyBanc. Please go ahead.

Good morning, guys. Just wanted to follow-up on the LinkedIn lease? Can you guys just give us a sense of what the mark-to-market on that was, on the 26th floor, and then also relative to what Global Brands was paying?

Sure. First of all, the LinkedIn deal overall is just a great statement. It's their fourth expansion in the building. They're a great brand. They're a great partner to have. It sends a strong message to the market, and it really demonstrates the qualities and the incredible versatility of the Empire State Building. The things that we were able to achieve and deliver for LinkedIn, for them to create their own corporate campus within Empire State Building's urban campus would not be possible were it not for the fantastic amenities that we delivered and the fact that the building is over elevatored to begin with, plus the elevator modernization that we're doing, which will improve performance by 35% allowed us to provide elevators to connect LinkedIn floor and provide dedicated shuttle cars. That type of thing would not be possible in a new building – and you wouldn't build a building like that today. So we're in a unique position to have done this deal with LinkedIn. Getting to your question on the mark-to-market, on the third floor of about 94,000 square feet, we achieved positive spreads of well over $9 a square foot. Now, that’s mark-to-market and unlocking value that we hadn't really counted on, because that space was already leased to Global Brands Group. So that's a bonus. On the 26th floor we're – I will say this that we're going to achieve average rents north of $60 a square foot over term. And the floor was vacant, so that goes right to the bottom line. We haven't reported on the spreads on that. That will be certainly part of the next quarter's reporting.

What's the $9 off a base of? Is that 20% mark-to-market?

Well, I think, yes, it'll end up being north of 20% mark-to-market.

Okay. And you guys did that in-house, right, the direct deal, right? So you guys get the full $9? There are no real broker fees on that?

Oh, there was certainly – there was a tenant rep broker.

Okay. That's helpful. And then just moving back to the observatory, can you guys just help us understand a little bit? We know the weekends are a much higher traffic. But as we look at a seven-day week, kind of what's the breakdown of those two days versus the other five percentage wise for a full week's revenue?

Hi, thanks for the question Craig, in short, we have a very clear understanding, obviously. But what we do as far as weekends, seasonally, holiday periods, we view this all as proprietary information. So we can just tell you that weekends are materially more important than weekdays. Weekend travelers are different from weeklong travelers to New York. But the greater percentage of visitors to New York for tourism are on weekends. So when we have consecutive days of bad weather on a weekend, we lose that visitor, as opposed to during the week when, if we have bad weather, tourists will go, knowing the weather is going to be bad the day before or the day after the bad weather event. So we'll just tell you it's materially more important and we just don't want to give out any more data than that. We really believe we've identified the primary drivers for our business, and we do believe we've given heaps more information than we've given in the past. But we've got to draw a line somewhere.

Got it; that's fair, Tony. I guess, I know you guys are pretty close to the vest with it. But the World Trade Center observatory, you can go down there and they give you all the data on the screen as you walk in. So I guess we can all go down there and see what traffic is each month versus we have to wait for you guys for three months and it's - I get it from the competitive standpoint. But from a public company and market standpoint, it just gives people a lot more time to think about what the potential could be each quarter instead of just give us maybe a better sense of it so we can understand it.

Right. Well, it's interesting because the feature that they have at One World Trade Center is in fact a feature which we had suggested when we, prior to being a public company, competed for that concession to run that attraction. That is, identifying the number of visitors per day and from where they come. We enjoy that very much because it allows us to see on a real-time basis how our performance is relative to One World Trade Center. And I can assure you that we do feel very comfortable with our competitive position, looking at those numbers.

Okay. As we look at 2Q of 2015, you guys had similar traffic growth into 2Q of 2013. Do you guys have what the bad weather days on weekends were in 2013 to give us a sense of - it's similar and maybe that's what's guiding this? Or is it just general tourism trends?

I think we could look back at 2013. That was a predecessor period for us mostly, and certainly that the second quarter was as our predecessor entity. We might be able to take a look back at that and see what information we have. I think that's really all I can say on that subject at this time.

Tony, its Jordan Sadler. Just one quick follow-up on the observatory. It sounds like you guys still seem reasonably confident. Obviously we need more time - several quarters I think you guys alluded to - to really understand the competitive position. But based on what you're seeing, and I know you don't like providing guidance surrounding this, but would you say your confidence surrounding the position in the market for the observatory is somewhat - you're taking something away from what you're seeing in July?

Look, we like our competitive position in general, number one. Number two, we really are focused when we look at things on tourism visits to New York City. That's our primary focus right now. And as far as where we look in July, we look forward to reporting that with our third quarter numbers.

Okay, thank you.

Thank you. The next question is from John Guinee of Stifel. Please go ahead.

Great, thank you. Tom, a big sale earlier this year, 11 Madison Avenue, the same iconic building in the same general submarket as the Empire State Building. I'm not sure if there is space for lease in that building or not. But what's the relative differences between the buildings and the rents achieved, that sort of thing, if somebody's looking for large floorplates in the Midtown South market?

I think it's a completely different experience. Look at what we created and continue to create at the Empire State Building. We've called it the urban campus because of the incredible amenities that we provide, with the city's largest tenant-only fitness center, six on-site dining and cuisine options, with more concepts to follow, tenant-only conference center. It is a very, very unique experience. You look at what LinkedIn did in deciding to place their corporate campus at Empire State Building. That would not be possible were it not for the creation of the urban campus that we've created. So we have a lot of space yet to redevelop at Empire State Building and bring to market, and I just think - I look at it as a completely different experience. Plus at 11 Madison is pretty well leased up, so the comparison is a little bit apples and oranges, I think.

Same general rental rate, or not?

Well, I will simply say this, that we are now asking in the mid-$60s to low $70s per square foot.

Great. Thank you.

Thank you. Our next question is from Jamie Feldman of Bank of America Merrill Lynch. Please go ahead.

Great. Thanks and good morning. I guess just starting out, can you guys talk about net effective rents in the market and just what you've seen maybe over the past year or so, in terms of increases or flat for your buildings?

Jamie, what we're seeing is a steady positive trend in our asking and taking rent. Quarter-over-quarter we raised our rents 2% to 3% again; on a year-over-year basis plus or minus 10% depending on the space, depending on the building. We've steadily been increasing our rents as I pointed out just a moment ago, asking rents in the $60s to low $70s per square foot at the Empire State Building. On a net effective basis we're seeing concessions remain relatively flat, so that means net effective rents are also improving. As those gross based amounts of concessions remain flat against rising base rent that means the net effect of rent overall is improving. So good positive trends certainly throughout our entire portfolio.

Think you can quantify in terms of percentage? I guess what I'm asking is, you look at like Brookfield downtown is pretty much full. So if you look at like the lower price point big-block space, is there really that much out there? I would think that puts upward pressure on your rent.

Yes, as I commented, we've been steadily raising our rents. We're looking at them on a monthly basis. We're adjusting our rents continuously. Throughout our portfolio we are generally asking rents starting with a 6 in front of it, up into the low $70s. And that reflects the really healthy movement on a year-over-year basis. As I commented before, certainly it's plus or minus 10% on a year-over-year basis, and 2% to 3% in the past quarter alone. So again, we are seeing positive momentum. We are achieving very, very healthy leasing spreads. And keep in mind, no matter what the market does overall and where rents are headed, we're still going to achieve very, very healthy mark-to-market against our in-place fully escalated rent.

Okay, thanks. Can you give an update on the rest of the Global Brands space? It sounded like LinkedIn took some of theirs. What's left for them to either sublease or available? Or have you taken care of all of that now?

Really taken care of all of it. Really taken care of all of Global Brands Group sublease space at the Empire State Building.

Okay. And then just thinking about the leasing pipeline, can you talk more about the demand profile for the Empire State Building versus the rest of your Manhattan assets? And even if you could comment on the suburbs, how things look today.

Sure. We're seeing a steady pipeline throughout the portfolio right, we’re trying to talk a lot or questions get asked a lot about the Empire State Building, but we have activity throughout all of our properties. As I pointed out, this is been a year of developing, redeveloping space that we bring it to market and give us new leaseup opportunity and unlock that mark-to-market growth driver. We're creating full floors at 112 West 34th Street. We're creating full floors at 250 West 57th Street. We're building prebuilts throughout the portfolio. So we are seeing demand throughout all of our properties. It's not really just at one property. Certainly Empire State Building is unique in terms of the urban campus and the experience that we created there. But we like the submarket in, and our properties show very, very well. As far as the Greater New York Metropolitan portfolio, as we reported were about 95% leased with very modest rollover in the balance of the year. We only have about 46,000 square feet rolling through the end of 2015 and about 59,000 square feet rolling in 2016. We are seeing steady activity. Our properties show well. They are incredibly well maintained. They all have a full suite of amenities. But it's a very stable situation there. And if anything, as we lease up the balance of the vacant space of only about 97,000 square feet, it all flows to the bottom line. As I've commented before, don't be fooled by the larger market statistics. One really needs to look at the direct competitive set of Class A multi-tenanted office buildings, particularly in the CBD of Stamford and White Plains, near the mass transit that exists. Keep in mind, two of our properties in Stamford are the closest to the Stamford Transportation Center, with direct express trains to Grand Central. So it's a different submarket within that overall larger market.

Okay. Then for Tony, any update on acquisition prospects?

Well, I think I might hand this over to John to comment on, if he would.

Yes, hey Jamie its John here. Look we, as we think about looking externally, we also continue to really focus on the internal growth opportunity that we have, I think as evidenced by the results that Tom and the team have delivered in terms of leasing and rent spreads and the growth in our NOI. I think we're really pleased with the growth that where generating internally. And so I think as we look externally, we continue to see the market as being competitive. We think it's cyclical, and as we look at opportunities we're going to continue to focus on relationship-driven opportunities and we're going to continue to work on that. And when we have something to say we will report to you guys.

Okay. Thanks, John and then just one final question. Just thinking about the observatory operating costs, what's interesting is your visitations was down, but your revenue held in and your NOI held in. But can you talk about second-quarter operating expenses and what will or will not continue to hold those margins up, even if you do see year-over-year declines in visitors?

Well, Jamie. One of the things again the operating expenses at the observatory are going to track somewhat the seasonality. So if you're talking sequentially on a quarter-over-quarter same year, we'll see an increase in those operating expenses for the second quarter as admissions increase over the first quarter. When you're taking a look at year-over-year, one of the things impacting that was the fact that we kicked in the union contract wage increases over the prior year.

So then those will – that higher level of costs will remain?

Generally yes.

And I think I'd throw something in there, Jamie. Look, as we continue to evolve and we look at technology and its potential application at the observatory, we continue to look at the fact that the single highest cost which is not in control as to its rate of increase by us is in fact labor. Over time we have been able to finesse staffing plans, and over time we will continue to work on that particular component, which is really dictated by contracts with labor over which we generally have no control.

Okay. All right. Thank you.

Thank you. The next question is from Brendan Maiorana of Wells Fargo. Please go ahead.

Thanks and good morning. I was hoping you guys could provide an update on the signed leases not commenced, given that it looks like you had some of the amount of that square footage reduced in the quarter. So where do we stand versus the – I think it was $32 million at the end of the first quarter?

I think right now we have a total of about $29.5 million of signed leases not commenced as of the end of the second quarter.

Okay, David. That's as of the second quarter, so that obviously does not include the LinkedIn information that you guys gave; that would be additive to that number. Okay, that's helpful. And then Tom, you said you're going to take back 350,000 of space that expires through the end of this year. Your average rent for the remainder of this year is, I think, $44 for the expirations. Do you think that the space you are taking back is in line with that average, or is it materially different?

Probably a little bit lower. Keep in mind that the space that we target for taking back for redevelopment is generally unimproved space and therefore is typically occupied by tenants paying lower rent. So it tends to be on - the space that we are vacating typically tends to be less than the overall escalator rent for all of our leases expiring.

Okay, that's helpful. Then I guess, is it - if you're taking 350,000 back for the remainder of this year, expiries 2015 and 2016 total 780,000 square feet of undeveloped space. So is it fair to think you're taking back 430,000 of space next year as well?

Well, we haven't provided a stat for 2016. I certainly look forward to given that information on future quarterly calls. Not all of that space is undeveloped space; but the majority of it is because, as we've said before, we have been lining up lease expiration dates in order to execute our consolidation program and redevelopment program. So one could assume that the majority of that was space that was targeted for redevelopment. But not all of it. We have given an estimate of what we expect to develop between now and the end of 2016, and we put that figure at somewhere between 620,000 to 690,000 square feet that we expect to develop, redevelop, by the end of 2016. Now that's a combination of space that we're taking back as well as some of the vacant undeveloped space that we have now.

And that’ll be that 620,000 to 690,000 will be added to the 560,000 square feet of developed vacant space that is currently in inventory?

We have about a total of about 440,000 square feet of redeveloped space.

Okay, great.

Yes, I was going to say, and then the balance of that - certainly anything that's not developed is either targeted for redevelopment. Keep in mind, out of the total vacant space that we have of about 860,000 square feet, there is about 90,000 square feet that is on hold because we've got in a hold pending the lease expiration dates of adjacent spaces. And that will be planned for development in future years.

Okay, super. Then just had one on the observatory, probably for Tony. I've been pretty impressed with the conversion of change in visitors versus change in revenue that you guys have posted over the past several quarters. It seemed to run around 10% more revenue growth than change in visitor; but this quarter it was a little bit lower than that. Your visitors were down a little less than 5% and your revenue was up a little less than 1%. So it was more like a 5% or 6% differential. Was there anything that caused maybe that ratio to be a little less favorable in Q2 versus where it had been prior quarters?

Do me a favor and just restate the question. I want to make sure I understand it. I didn't.

Yes. Typically if you guys - the prior quarters, if you guys had let's say flat visitors, your revenue growth in the observatory had been up about 10%. Last quarter your visitors were down 6% and your revenue was up 5%, so the difference was 11%. The quarter before that your visitors were up 2%, your revenue was up 11%; so that was plus, a 9% more revenue growth than visitor growth. This quarter the difference, your visitors were down about 5%, a little - 4.7%; and your revenue growth was up 0.7%. So the change in revenue growth was less - there was less revenue growth for the amount of change in visitors than had been the case the past couple of quarters. And I was just wondering if there was something particular to maybe the bad weather weekend days, or there was just something that caused revenue growth to be a little lower than we might have expected based on the change in visitors.

Sure. We look at this business and we look at the different sources of our ticket mix. Remember, we don't recognize income on the observatory until a ticket is actually presented. So those bad weather days really impact the folks who have a habit of buying tickets the day of, day before their visit to the Empire State Building. So I think that it impacted our ticket mix. I think that the pricing increases you have to remember for tour and travel go in a year in delay from when we impact our retail pricing. So what you are actually seeing is the ticket price increase on our tour and travel sectors from one that we announced back in 2014 and implemented with the tour and travel industry in 2015. So I think those are the two factors. And I think that our interpretation is that that retail visit was impacted by the weather. They're there; they look at it; they make a decision of whether they going to go or not. And that's our – the best interpretation we can give at this time. David, I don’t no if you shed any other light on this?

No, I think that's right. And remember, when we do have a ticket price increase, and we generally do that once a year, there may be a lag between that ticket price increase and what we see in the revenue, again for the reason that Tony mentioned. We don't recognize the revenue until the ticket is actually used. So if somebody buys a ticket in advance and they are buying it at the old rate and then they use it, say, in the next quarter and it's redeemed in the next quarter, we'll see that come through at the old price level. So that, and together with the ticket mix between the tour operators and what we sell directly, will impact those dynamics.

Okay. Very helpful. Thanks, guys.

Thank you. Our next is from Tom Lesnick of Capital One Securities. Please go ahead.

Good morning, and thanks for taking my questions. To follow up on Brendan's question, to his point, average revenue per visitor was up about 5.6% year-over-year, but down a little over 10% sequentially. I know you just talked about bad weather day impact. But is there any seasonality to the ticket mix at all? Are there more direct sales in, say, the winter months than the summer months?

Let’s just say there's certainly seasonality overall in the performance of the observatory. And in the second quarter you catch just the beginning of the summer season in June, so that's the first point. The second point is, we would have to look at this and make determinations if we wanted to make a comment. Certainly we have the data; we know what that revenue mix looks like. We know based on ticket sales. But at this point we wouldn't make any comment on that.

Okay. And then just looking at income tax on the TRS, for the quarter it looked like it fell pretty significantly year-over-year. I was just wondering how should we thinking about intercompany rent expense going forward. And the effective income tax rate looks like it dipped fairly significantly as well this quarter. How should we thinking about that going forward?

Well, there's two things to look at. If you take a look at year-to-date year-over-year, you will see an impact caused by the construction business, whereas last year in that period we profits from the construction activities, whereas this year we generated losses for that period. So that's going to have an impact. The other thing that's going to impact on a quarter-to-quarter basis will be again the seasonality of the observatory. In the first quarter we're not going to see as great a profit. We calculate our income tax accrual on a quarterly basis, and it's driven primarily by the results and profitability of the observatory in any one quarter. On an annual basis clearly that all washes out, and it becomes more of a constant look at the income tax accrual.

Okay. Thanks. And then turning to the building redevelopment program costs that you guys present on page 15 of the supplement, this quarter you reduced the range to $55 million to $85 million by year-end 2016, from a range of $65 million to $105 million last quarter. So it was reduced about $10 million on the low end and $20 million on the high end of the range; and you guys spent about $14 million in the quarter. I was just wondering what gave you confidence to reduce the higher end of that range through 2016?

Really it's due to the fact that we've got better visibility on the remaining work to be done and more of the work had been either bid, specified, bid, and/or purchased. There really remains work mostly at Empire State Building completing the elevator modernization in the elevator shaft. We've got good visibility on that. Corridors and bathrooms, which get done in sequence with our leasing and then a large mooring mast glass project for waterproofing. So the number of projects are fewer, the visibility is greater, we are further along just in the sequence of those projects. And that's what all led to us adjusting those numbers.

Okay, great and then a final question. Obviously rent spreads in the Manhattan office portfolio have been strong. But looking at the Greater New York office portfolio, spreads were down about 4% this quarter. Just wondering if you're seeing any softening demand, or if there was anything lumpy in there that was just causing those numbers to be soft this quarter?

No. We have raised our asking rent quarter-over-quarter in the Greater New York Metropolitan properties by about 2% to 3%. I think that speaks to some of the comments that I made earlier. Keep in mind that with such a little amount of leasing done based upon the limited roll and little vacancy that we have, it can be a little bit skewed just based upon whatever the prior fully escalated rents were on those specific spaces and when those deals were done – if they were done at the height of the market, or not. So we're not seeing a softening. I again continue to try and point folks not to the larger stats but to really the CBD Class A multi-tenanted office buildings that perform much better.

All right. Thanks, guys. That's all I've got.

Thank you. Our final question is a follow-up from Craig Mailman of KeyBanc. Please go ahead.

Hey, it's Jordan Sadler here with Craig. I just had a question about the observatory. Obviously there seems to be quite a bit of consternation and discussion around it. I know it's not terribly small, but a smaller piece of what you guys do everyday relative to the overall company. And I'm curious about the current thinking on monetizing that business.

Could you relate a little better your concept of what monetizing mean that.

I mean selling it, parceling it off. Somehow reducing your exposure from an operating and/or economic perspective.

Right. So first of all I think it’s important and appreciate the question, Jordan to state that we like the observatory business. It's very low capital intensity for us. It's a solid performer. It is not really related to what goes on in the office market, as we're seeing in this quarter. So we like it. We like it a bunch, number one. Number two, I think you have to be absolutely insane to separate a business which has such an impact on the operation of your building from the ownership of the building. And I just think that we are going to let people determine over time for themselves what the consumer experience is that they get downtown. We're going to be in a position to let the market react to that. We feel very comfortable with our competitive position and we like controlling what goes on in our building. We can't wait for the Skyride lease. As you visited the building and you see these people assaulting passersby, selling tickets on the street, that's over in the middle of 2016. We will still happy to see that lease terminate so that we can control our overall experience for our building better. We will never give up the opportunity to control our brand. So but the other way I would look is to say, remember, over the term of their lease at One World Trade Center, the Legends Group has committed to nearly $1 billion just under $900 million of fixed rent obligation to The Port Authority and The Durst Organization. Our business is worth more than that. I can just tell you that we look at those reports that they generate every minute of every day, and we know how we're doing compared to them, and we do better. Very simple. When we look at our business, we truly believe this provides, to your point, the reality this is rent. It could be monetized, I think that could be damaging. Could be good for capital gain and sale of the observatory. I think it could be damaging to the office and retail business. We like what we have at the Empire State Building. We like center that it provides for commerce. We like the concept of how we're going to play with that better and improve upon it using all the different components working together.

I appreciate your comments. I guess my comment or question really comes from the fact that it dominates the dialogue and we're going to wait several quarters until we're sure, or more sure, about the impact of One World Trade, etc. So trying to figure out how do you put that in a box a little bit? But I don't know; maybe as you guys grow the office portfolio it's less important. I think Craig has a quick one.

One thing Jordan, just to be clear. Keep in mind, this is an important investment for the Malkin family and for me personally. I haven't sold a share, the Malkin family hasn’t sold the share. If anybody had visibility to what's going on in the observatory, we do. I look at it and I say, we expected this conversation. We expect this conversation will repeat in the third quarter and the fourth quarter, and just the way it dominated conversation to some degree in prior quarters. And then we think people understand what the impacts are, and it will subside. We're happy to engage in the dialogue. We're happy to provide as much information as we are willing to provide - and we have provided more than we have in the past. But at the same time the beauty to being a public company is people can buy and sell our stock every day. And we appreciate that and we respect that.

Hey, guys, just two quick follow-ups On the observatory. Any thought about pushing through ticket price increases commensurate with the retail timing for your travel plans?

As we mentioned during prior discussions with the investment community, we have begun to experiment with - not timed, related to when you show up with a ticket, but peak pricing for certain aspects of the observatory with our Express tickets and with visits to 102. And we expect that peak pricing is going to be something which continues going forward. Keep in mind, when we refer to peak pricing we speak to an increase during peak periods, not a decrease during shoulder periods.

No, but I guess you guys put the 10% ticket price in for the retail guys but not for - it sounded like, and maybe I was wrong here - but your discount ticket providers?

Remember that the delays are a year to what we do for our tour and travel business. We did announce to the tour and travel business what our ticket pricing would be for them for the year forward, back in April. So we will see an increase for them. And if you are ingenious, you will probably be able to figure out - getting in touch with the tour and travel providers - what the increase is that we are giving them.

Okay. Then when you guys put in a 10% ticket price increase last year, right, so shouldn't that have come through? To Brendan's point about the fall off, if you guys had a 10% ticket price increase this year in the retail, and one last year should have flown through with those vendors, why was there such a wide gap between that increase and the expected buffer from the fall-off in attendance?

Right. I'm not clear with the information at hand on what the ticket price increase was 2014 to 2015. I don’t have that right in front of me. But what I will tell you as far as the 2015 to 2016 change, it did hit the 10%. And as far as the other differences, it all has to do with the mix. It all has to do with the tour and travel piece. I guess that the easiest way to look at it is the data presents itself based on what we're accomplishing and how people buy our tickets. And when we recognize that revenue we report it as they do.

That's fair. Then just one last quick one. John, you had said about the acquisitions you guys are looking at stuff. It's been – we're coming up on almost two years you guys being public; and outside of the option properties you've been very disciplined. Is there anything on the relationship opportunities that's looking more attractive these days? Just trying to potentially avoid a big surprise one quarter that you guys do a large acquisition. Just trying to get a sense if there's anything in the pipe with a better probability of moving forward.

Yes, I’ll just give you the same answer I gave already, that we like the approach of focusing on relationship-oriented opportunities and as we invest our time and resources, which are limited, we think that we get a positive value out of building on those relationships, which we can take advantage of over time and we think it’s a good use of our time to invest in that work, and we're going to continue do it. Again, I don’t think there is any more specific we can share with you at this time. But we will continue to keep you updated.

Great. Thank you, guys. End of Q&A

Thank you. I'd now like to turn the conference back to Mr. Malkin for closing remarks.

Thanks. We want to thank you all very much for joining with us. On a lighthearted note, I encourage everyone to go on YouTube and check out the Zedd video which we did, the music-to-light, which had well over 1 million hits. I think over 1.5 million hits. And of course the one that was done for the 50th anniversary of the Grateful Dead. Why do I bring these things up? Because they help build our brand on a national and international basis, bring more attention to the Empire State Building, and they are very entertaining. With regard to the acquisitions, I just want to be really clear. We didn't even look at 11 Madison, not for a moment. And while we do have limited time to apply and resources to apply to new acquisitions, the fact of the matter is that John Kessler coming onboard has provided tremendous lift to me and to the whole organization. So I will tell you we are doing dramatically more work with our relationship building and out-of the public-view work towards growing our portfolio. We will remain disciplined. We are a firm believer in cycles, as we've said before. It's very fortunate that we have tremendous, embedded, de-risked growth, and we are really seeing strong representation of that from the leasing side. Our pace of leasing, if you include the LinkedIn lease, really I know we had predecessor periods in which we weren't public; this is very, very strong work and results by the leasing and marketing team. Really happy about that. So along the lines of looking forward, people should take a look at the New York Times article today about another event at the Empire State Building on August 1, another exciting use of our international, iconography location and building of brand. And while all that is going on, we will be working hard on delivering value for you all. Look forward to speaking with you in the future.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.