Q1 2024 Empire State Realty Trust Inc Earnings Call

Participants

Heather Houston; Senior Vice President, Chief Counsel, Corporate & Secretary; Empire State Realty Trust Inc

Tony Malkin; Chairman and CEO; Empire State Realty Trust Inc

Thomas Durels; Executive Vice President - Real Estate; Empire State Realty Trust Inc

Stephen Horn; Chief Financial Officer, Executive Vice President, Chief Accounting Officer; Empire State Realty Trust Inc

Christina Chiu; President; Empire State Realty Trust Inc

Steve Sakwa; Analyst; Evercore ISI

John Kim; Analyst; BMO Capital Markets

Michael Griffin; Analyst; Citigroup Inc

Blaine Heck; Analyst; Wells Fargo Securities LLC

Camille Bonnel; Analyst; BofA Securities

Presentation

Operator

Greetings and welcome to the Empire State Realty Trust First Quarter 2024 earnings call. At this time, all participants are in a listen only mode, a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Heather Huston, Senior Vice President, Chief Counsel, Corporate and Secretary. Thank you. You may begin.

Heather Houston

Good afternoon. Thank you for joining us today for Empire State Realty Trust First Quarter 2024 earnings conference call. In addition to the press release distributed yesterday, a quarterly supplemental package with further detail on our results and our latest investor presentation are posted in the Investors section of the Company's website at ESRT. reit.com.
On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements as defined in applicable securities law, including those related to market conditions, property operations, capital expenditures, income expense, financial results and proposed transactions. As a reminder, forward-looking statements represent management's current estimates. They 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 in the Company's filings with the SEC.
During today's call, we will discuss certain non-GAAP financial measures such as FFO, modified and core FFO, NOI, same-store property, cash NOI, EBITDA and adjusted EBITDA, which we believe are meaningful in evaluating the Company's performance. Definitions and reconciliations of these measures to the most directly comparable GAAP measures are included in the Company's release and supplemental package each available on the company's website.
Now I will turn the call over to Tony Malkin, our Chairman and Chief Executive Officer.

Tony Malkin

And good afternoon to everyone. Yesterday, you saw two reported strong first quarter results to start the year with strong leasing progress Observatory results and proactive balance sheet actions. Today, we will discuss them and our outlook for the rest of 2024.
The first quarter, FFO came in above expectations. Office leasing absorption and spreads each showed consistently strong positive results. We delivered our ninth consecutive quarter of leased percentage growth and our 11th consecutive quarter of positive mark-to-market lease spreads. Our Observatory performance continues and we maintain a best-in-class balance sheet. Year to date, the Company completed several capital markets actions to ensure the balance sheet strength and flexibility, which put us on our front foot, and we are eager to create additional value for our shareholders.
In the current real estate cycle, we leased about 250,000 square feet in our top tier commercial portfolio to start the year. Our Manhattan office portfolio had 200 basis points of positive leased absorption year over year and is now nearly 93% leased. Tom will discuss our current activity.
Our office leasing has outperformed the market because one, we maintained balance sheet discipline during the financing and acquisition. Booms did not lever up and did not pay top of market prices to for a decade, we invested portfolio-wide and upgrades to modernize and monetize our portfolio. This included intentional vacates to consolidate floors modernization through got renovation addition of amenities and leadership in energy efficiency and indoor environmental quality. These efforts have resulted in top of tier future ready product that attracts high quality tenants.
Three, our goal has always been to get the best deals in good times, get the deals in challenged times and draw consistent leasing volumes through cycles for our price point and unique value proposition cater to the deepest segment of tenant demand in the New York City office market. Five ESRT.'s commitment to service and tenant relationships drives strong tenant retention and expansion within our portfolio over time since our IPO, we have seen over 2.7 million square feet of tenant expansions in our portfolio from six tenants look to partner with a financially stable landlord who will maintain high quality standards at their assets.
We have the lowest leverage of any New York City reef and a strong liquidity position with no significant debt maturity until 2026 December. Kristina will later discuss this seven and last, this is how we consistently put points on the board. The Observatory continues to perform in the face of an abundance of rainy low visibility days, first quarter NOI was up 13% year-over-year, driven by the continued improvement in revenue per caps and a 10% increase in visitation, which was partially helped by the shift of the Easter holiday into March of this year as compared to April in 2023 and generally based upon a gradual build back of international travel, our NOI per cap towers above the competition.
There is further upside to our observatory performance as tourism continues to return. We have an exceptional global brand awareness our observatory is iconic New York City and has been resilient through all economic cycles, new competition and the pandemic, all as shown on slide 15 of our investor presentation, sustainability is a cornerstone of ESRT.'s business philosophy, and we are the leader in environmental stewardship and healthy building performance.
Our track record of successful partnerships with tenants and their employees and sustainability attracts tenants. We received the highest scores in this area this quarter. We were pleased to receive the energy star Partner of the Year, Sustained Excellence Award for the second consecutive year and the well equity award and well Health Safety Leadership Award.
This makes ESRT the first commercial and multifamily reach to achieve well health safety certification four times achieve well equity and have all buildings enrolled and well at scale. We are committed to deliver long-term value to our shareholders through continued excellence and sustainability. I encourage you all to read our just released 2024 sustainability report that contains full details on our recent accomplishments and initiatives ESRT's 2024 priorities include growth and a company-wide focus on cash generation from continuing operations.
Of course, day in and day out. Our focus is to lease space, sell tickets to the Observatory, manage the balance sheet and achieve our sustainability goals. These actions together enhance shareholder value. We have a future ready portfolio and an opportunity ready balance sheet, which gives us options today. We are in a position to take advantage of opportunities created through market disruptions and capital dislocations. Tom, Steve and Kristina will provide more detail on our progress and how we plan to accomplish these goals in 2024 Over to you, Tom.

Thomas Durels

Hey, thanks, Tony, and good afternoon, everyone. We just concluded our ninth consecutive quarter in which we increased our leased percentage for our office and retail portfolio. That's nine consecutive quarters of positive absorption and an increase of 540 basis points in leased percentage since the fourth quarter of 2021.
Fourth quarter of 2024 it was our 11th straight quarter with positive mark to market lease spreads in our Manhattan office portfolio. And we are off to a strong start in 2024 with 248,000 square feet of total leasing in the first quarter. New and renewal leases were signed at positive mark-to-market rent spreads of 4.8% and a weighted average lease duration of approximately 10 years.
We increased our Manhattan office leased percentage to 92.7% in the first quarter, which increased 60 basis points compared to last quarter and is up 200 basis points compared to a year ago. And Manhattan office occupancy increased by 160 basis points from last quarter to 88.9% and notable office leases signed in the first quarter include a 16 year 68,000 square foot expansion lease with Burlington at 1,400 Broadway. Burlington has expanded with us 3 times with this latest expansion, along with an extension of their current lease, Burlington will occupy a total of 170,000 square feet for 16 year lease term, an 11 year 57,000 square foot new lease with solid de Janeiro, a lots of changes subsidiary at One Grand Central Place, and we signed leases for 14 prebuilt office suites that totaled 67,000 square feet.
Additionally, as shown on page 10 of our supplemental, we have $47 million in incremental cash revenue from signed leases, not committed free rent burn-off. Our nine consecutive quarters of strong leasing performance demonstrate that in today's market, there is a flight to quality in product service and balance sheets. Esrt continues to offer the top tier offering in our price bracket and our portfolio offers what tenants want high quality product that is fully modernized.
We've invested approximately $1 billion since our IPO to modernize our buildings, amenities with a variety of fitness, food offerings, tenant lounges, conferencing and abundant outdoor spaces, energy efficiency, sustainability and indoor environmental quality locations, near mass transit and neighborhood amenities quality service, turnkey built tenant spaces and accessible price points as tenants look for value and balance sheet strength today in advance of every building tour, the brokers' qualification list includes the capital stack of the building and the financial strength of the landlord tenants make long term commitments with us based on our financial strength and confidence that we will deliver on our promises. We've seen strong tour volume year to date, which will help drive new leasing activity later this year.
In our Manhattan office portfolio, we have modest lease expirations for the balance of 2024 with 486,000 square feet set to expire, of which 268,000 square feet is covered by expected renewals, relocations and new leases, only 193,000 square feet are known vacates and 25,000 square feet remains undecided. At this time, we have a healthy pipeline of over 200,000 square feet of leases in negotiation, of which 140,000 square feet are new deals and the balance are renewals.
Our multifamily portfolio with occupancy of 97.1% at quarter end continues to perform exceptionally well and benefit from strong market fundamentals and recent property improvements. Once again, we had a strong start to the year. And in the first quarter, we signed over 248,000 square feet of commercial leases and increased our Manhattan office leased percentage by 200 basis points from a year ago to 92.7%. Our Manhattan office occupancy increased by 160 basis points compared to last quarter to 88.9%, and we are well positioned to lease space and achieve positive lease absorption with modest lease expirations for the year and a healthy pipeline of new leases to start the year and we continue to see strong demand for our multifamily portfolio.
Thank you, and I'll now turn the call over to Steve.

Stephen Horn

Thanks, Tom. For the first quarter of 2024 we reported core FFO of $57 million or $0.21 per diluted share, which increased 30% year over year. Same-store property cash NOI, which now excludes first Stamford place increased 12.3% year over year, primarily driven by higher revenues from cash rent commencements, which was partially offset by increases in property operating expenses. Excluding nonrecurring items, 1Q '24 adjusted same-store NOI increased by approximately 8% year over year.
As it relates to the onetime items in the current period, we recognized approximately $1.5 million of revenue from various items, including bad debt recovery and settlement of an insurance claim. The 1Q '23 period was an easier comp as it had about $1 million less cash rents that resulted from adjustments recorded for a few delays in rent commencements while not material to their individual quarters.
We call this out as it contributed to a roughly 4% pop in the comparable same-store cash NOI growth year over year. As Christina will discuss, our outlook for same-store NOI growth for the year remains unchanged. We had a solid first quarter of growth driven by strong recurring rental revenues and free rent burn-off as well as the one-time items just discussed. That said, the remainder of the year will be a tougher year-over-year comp due to several nonrecurring items discussed last quarter, which benefited 2023 results, primarily in 2Q '23 through 4Q '23.
Moving to our Observatory business, we generated net operating income of $16 million in the first quarter, an increase of 13% year over year. Revenue per capita remains high and admissions continued to improve year over year. Observatory expense was $8.4 million in the first quarter. Cristina will discuss the proactive measures we recently took to fortify our balance sheet and then discuss our outlook for the balance of the year. Cristina.

Christina Chiu

Thanks, Steve. We had a busy start to the year from a balance sheet and transaction standpoint, starting with the balance sheet. In March, we closed on a new $715 million credit facility, which consists of a $620 million revolving credit facility and $95 million term loan. The new facility matures in March 2029, inclusive of extensions and replaces the prior facility that was due to mature in March 2025. After quarter end.
In April, we entered into a note purchase agreement to issue $225 million of green senior unsecured notes in a private placement transaction with three tranches, including $155 million that matures in 2029, $45 million. That matures in 2031 and $25 million. That matures in 2034 at an overall weighted average rate of 7.25%. We received strong support from both new and existing high-quality institutional investors. This is scheduled to fund in mid June, and we intend to use the proceeds to eventually pay down indebtedness, including the remaining $100 million maturity in 2025 and the $120 million drawn on our credit facility.
With these financings, the Company has successfully addressed the entire $315 million of debt that was due to mature in 2025 and extended the maturity of our revolving credit facility from 2025 to 2029, inclusive of extension. The next meaningful debt maturity is not until December 2026 when a $175 million term loan matures on the transaction side, in March, we executed a buyout of the remaining 10% that we did not already own in two multifamily assets located at 571 Avenue and 345 East, 34th Street for approximately $14 million in cash and the assumption of $18 million of the in-place debt.
As a reminder, the debt on these two assets have a blended interest rate of 3.9% and matures in 2030 and 2033. As a result, ESRG. now owns 100% of our portfolio. We have no JV ownership structure and that allows for great opportunity and flexibility for future financing and capitalization. Subsequent to quarter end, in early April, we entered into an agreement for the strategic disposition of first Stamford place via a cooperative consensual foreclosure with the lender, which is anticipated to close by the end of the second quarter pro forma for the completion of this disposition, 98% of net operating income will be from properties in our New York City focused portfolio further upon completion, our debt maturity in 2027 is reduced to just $155 million as shown in our pro forma debt maturity schedule. On slide 9 of the investor presentation.
This transaction is consistent with our strategy to proactively manage our balance sheet and recycle capital in our decision here, we considered after CapEx adjusted cash flows, sub-market fundamentals in Stamford, Connecticut and our capital allocation objectives. This disposition avoids significant CapEx reduces secured debt as a percentage of total debt and frees up $176 million of debt capacity from our balance sheet that we can recycle into stronger New York City focused assets that align better with our long-term business plan. Over the past two plus years, we have disposed of five other non-core assets in Westchester and Connecticut and recycled into high-quality New York City, multifamily and retail Metro Center will be our last remaining asset outside of New York City mortgage matures in November 2024. And we have had productive discussions with the lender and are close to finalization of the terms for its refinance at maturity. We continue to look for ways to reinvest capital in a tax-efficient manner and pursue investment opportunities that are additive to our New York City focused portfolio and enhance shareholder value.
At quarter end, the company had net debt of $2.2 billion with a weighted average interest rate of 3.97% and a weighted average term to maturity of 5.4 years. We have strong liquidity, no floating rate debt exposure, a well laddered debt maturity schedule and the lowest leverage among all New York City focus reach at 5.3 times net debt to adjusted EBITDA. From an earnings perspective, the net impact from the balance sheet and transaction activity announced today will be approximately $0.012 dilutive to our 2024 FFO.
This includes the repayment of the old $215 million term loan in March 2024, using proceeds from the new $95 million term loan and the $120 million revolver draw, the $215 million or so for swaps remains in place through March 2025. So the only impact is a modest change in spreads for the balance of 2024. It also includes funding of the new $225 million private placement notes in mid June prior to any repayment of debt. These proceeds will earn interest income around the current rate of approximately 5%.
It also includes the buyout of our partner's 10% interest in two multifamily assets at the end of the first quarter, including the assumption of their share of debt. And finally, it includes the disposition of first Stamford place, which for the full year of 2023 generated approximately $10 million of cash NOI and incurred $7.5 million of interest expense. We assume this transaction is completed by the end of the second quarter.
Now on to our outlook for 2024, we continue to expect 2024 FFO to range between $0.90 and $0.94 per fully diluted share. As a reminder, our prior guidance range did not include the balance sheet activity and transactions announced to date. But as discussed, these items have only $0.012 impact on 2024 FFO and we therefore have room within our $0.04 range.
Based on our performance to date and forward assumptions provided we remain confident with this range. We continue to expect same-store cash net operating income for the commercial portfolio to be modestly positive at the midpoint with a range of down 1% to up 2% relative to 2023 levels. Within this range, we expect positive revenue growth, which assumes commercial occupancy of 87% to 89% by year end 2024, driven by a strong pipeline of signed leases not yet commenced and manageable lease expirations. In 2024, we expect an approximate 6% to 8% increase in forecasted property operating expenses and real estate taxes in 2024, which is partially offset by higher reimbursement.
Lastly, we expect 2024 Observatory NOI. to be approximately $94 million to $102 million and average Observatory expenses of approximately $9 million per quarter.
In summary, ESRT had another productive quarter and executed well on our priorities. And with that, I will now turn the call back to the operator for a Q&A session. Operator?

Question and Answer Session

Operator

(Operator Instructions) Our first question come from the line of Steve Sakwa with Evercore ISI. Please proceed with your question.

Steve Sakwa

Thanks. Excuse me, good afternoon. Maybe Tom, just starting on the leasing, could you just provide a little more detail on the pipeline, maybe the types of tenants that you're currently seeing in the market and whether there seems to be any hesitation from the tenants looking for new space to in effect, pull the trigger. We've heard some C-suites in other areas, maybe being a little bit more gun-shy about making decisions. And I'm just curious what you're seeing in the discussions with the tenants in the pipeline?

Thomas Durels

Well, Steve, just looking at the results for the first quarter, about 84% of our leasing in Manhattan office sorry, and portfolio-wide was for new leasing. So I don't think that that indicates hesitancy by those decision makers. We're seeing activity from a variety of tenant types, which has always been a hallmark of our portfolio in that we are not tied to one industry. We've got activity from tenants in consumer brands, a tech of financial services, professional services and technology.
So look, we've got as I said before, 200,000 square feet of leases in negotiation, we have a few hundred thousand square feet of active proposals being exchanged and where our tour volume is up. So look, we're we continue to be a standout. We perform well. The things that I mentioned earlier about the flight to quality and things that are strengths that attract tenants, including Modernize and Monetize portfolio of great locations to our balance sheet, the access to transit, the IEQC. two, but all of these things are are leading to that. The activity that we're seeing. So again, I think I feel good.

Tony Malkin

I might just add one thing, Steve, to make sure that you understand Tom's point, clearly the people who are doing who do tours with us, our people who have action on their minds. We don't we do not see a lot of tire kicking.

Steve Sakwa

Great. Thanks, Tony. I'm maybe just sticking with you on the transaction front, you have been disciplined over the last several years. I'm just curious what are you seeing in the marketplace today as it relates to excuse me, distressed opportunities ability to get to debt stacks and maybe get to properties through the back door. I'm just curious how that activity levels may be picking up and excuse me doesn't vary greatly across the multifamily retail and office Scott complex.

Tony Malkin

So we definitely believe the crisis created by the capital dislocation rising rates and having near term market maturities will create a once-in-a-lifetime once-in-a-generation opportunity to buy into certain New York City assets. And we have begun to see cracks. And our focus is actually on the right situations with the right basis for extremely disciplined in our approach. We see interesting opportunity in office and retail and resi resi has a backstop with finance from the GSEs.
So much more eminently financeable office is more complicated on the capital requirements, what new basis is so important and retail somewhere in the middle. What I will also say is we have been surprised by the level of inbound. We have received pleasantly surprised by the level of inbound we have received from people who are interested to partner with us. They see our success and what we have done with our our product types.
They see the opportunity created by the capital dislocation. And these are people who are really not current market participants and they really, to a significant degree are what I would call Insta visuals, very wealthy individuals or groups of individuals who can stroke very large checks on a per transaction basis. And the focus is not on IRR based on higher leverage. It's based on exactly what our model is, and they really focus on multiple on invested capital over a 10-year hold. So both the opportunity sets begun to break. We think CMBS will drive sales more quickly than than banks as far as products changing hands. And we are absolutely totally and completely disciplined and focused on our basis and in structure of deals where we can accommodate existing owners needs desires, perhaps to avoid a tax recognition event or perhaps a sale of a minority interest, which will allow them to maintain their current basis and where we can invest capital on a priority basis with yields that will make it worthwhile.

Steve Sakwa

Great. That's it for me.
Thanks.

Operator

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

John Kim

Hey, good morning, Tony, but let's unpack that. But you just said I just wanted to maybe follow up and ask about timing of when you could deploy some of this capital and on the joint venture partnerships with private owners entering the market, is this on office or is it on conversions or any any other color you could provide on what kind of asset type that you're looking to partner on?

Tony Malkin

So I want to be really super specific. We will remain very focused on our discipline that has not changed. That says we've transacted more in the last 2.5 years than we did in the prior 10, including our pre IPO period. So we are absolutely on numerous opportunities and that hasn't changed. Our focus continues to be on New York. The people who have come to us have said we think you're a well established strong player with a great balance sheet without problems. And we see the leasing you've accomplished and we see your transactions you've done recently. We'd like to talk with you about whatever you think is interesting to do.
And the last thing I'll say with regard to conversions, our view on conversions is pretty simple. And we've said it before these are difficult to do in a way that doesn't produce a compromised product. And our view is that there are others who may have stronger motivations to do so than we do. We certainly don't have anything in our existing portfolio of which it makes any sense because our portfolio is extraordinarily well leased. We do believe that we can find a lot of really good opportunities without the need to do office conversions into residential. So we don't put resi conversions from office high on our list to do so.

John Kim

That's great color. Thank you on. My second question is on your tenant vacates in the first quarter, page 14 of your supplemental, it looks like the quarter ended up less than you were expecting last quarter. What led to that? Was that just a timing issue? And maybe related on a related note on second half of the year and 2025 looks like this estimated vacates have ticked up a little bit. Any color that you could provide on the tenants or location of these nonbanks?

Thomas Durels

Yes. It's really just really just timing. If you look at the overall hasn't changed significantly with the expected total vacates for the year, about 192,000 square feet in our Manhattan office portfolio. But it's really just timing from from quarter to quarter. And to John, too, given the volume of tenants that we deal with, it's nothing significant that stands out that caused that change.

John Kim

Any particular asset, the same or vacates and others?

Thomas Durels

No, no, it's you know, it's really it's really across the board of the I mean, yes, in sum, at 1,400 Broadway, we have the two full floors that are being vacated backfilled by by the Burlington lease. But as vacates uncovered, we got our consolidated full for 1,400 Broadway has got a full floor consolidated 1333 Broadway, a tower floor at Empire State Building at this year.
The good news for us is that these are for floors. They've been built out base building work a lot of the base building work have been done. So it puts us in a good position to market and lease those spaces. And then in 2025 notes, the known vacates about 122,000 square feet. It's really across the board, the largest one being a 26,000 square foot built space. So we built on a really a pre-book basis that I want to lend West 33rd Street. So the rest are our smaller spaces. So it's across the board.

John Kim

Got it. Thank you.

Operator

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

Michael Griffin

Great, thanks. I want to go back to the new leasing in the quarter and maybe get some more color on for those tenants that are taking new space? Is it people moving down the affordability curve from higher rent buildings? And if so, would you expect this trend to continue throughout the year.

Thomas Durels

What we're trying to tenant from from from all markets, and it's a mix of tenants that are looking for two to move to a of those that are better amenitized, modernized and provide better service turnkey installations, newly built tenant spaces, which we provide and offer all of that system are looking for to improve their their their employee experience in their office environment.
Others are involved some expansion. And so and we continue to attract tenants from really all of our submarkets. And so again, it speaks to this flight to quality that we've spoken about. And it's not just new developments, all the things that I continue to mention and the things that we continue to market that is very appealing to tenants to our locations that modernization the amenities, the greatest Great, great service. So by and large, we see more and more as tenants are looking for just an overall better, a better landlord, better experience, better product, better environment. And that's why we're having the success that we have.

Michael Griffin

Right. But I guess what I'm saying is, are you seeing tenants that are paying $90 rent that are looking for the pay in the $60s or is it people that are currently paying that middle of the road price point? Just trying to move to a better MedTimes building?

Thomas Durels

Well, I would characterize it more that they are, I think all tenants look for value and we have attracted tenants that could certainly afford to pay more and they look for they look for the value that we provide, they will they recognize that we provide the absolute top product in our in our price tier and we look at the vast majority of deals in the market. There's patient our investor deck to speak to this, that the vast majority of the market, we are really in our price point and that's call it high $50s to high $70s per square foot is where the bulk of activity occurs. And that's where we play. That's where we compete and and when deals.

Michael Griffin

Got you. I appreciate the color there. And then just on the full year guide, it seemed like a pretty strong quarter. You saw a pretty young good increases particularly in the Observatory.
I wonder, is it just conservatism I'm citing to not raise the guide right now? Or maybe how should we think about that?

Christina Chiu

Yes. I think as mentioned we always have building blocks for guidance. We're very clear on the various drivers. And as the year proceeds, we can look at areas where we can tighten up the range and make adjustments. And as mentioned, there was a $0.012 impact from all the activity that we just announced and we were able to maintain that. So we'll continue to monitor and make adjustments as we go along.

Michael Griffin

Great. That's it for me. Thanks for the time.

Operator

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

Blaine Heck

Right, great. Thanks. Good afternoon. Observatory attendance definitely continued to improve and July is now above pre-pandemic levels. So can you just talk about how you plan on continuing to improve those numbers? And maybe just how sensitive that business could be to a hypothetical slowdown in consumption in the US?

Tony Malkin

I'm really welcome that question. If you take a look at the I don't have the deck in front of me, Kristina, maybe you could cite the page which shows how the Observatory has performed going back a very long period of time through all sorts of economic upheavals, the SARS epidemic, the obviously what happened with COVID, new attractions opening, it's really a solid performer. And candidly, we intend to continue to do what we do to continue to maintain and build the Empire State Building brand worldwide. It continue to do the great co-branding partnerships that we have. We just did a major one with Disney and Star Wars. We have another one that has a surprise that will come up very shortly and which is all set to go. And all of this is built towards.
If you look at slide 15, the but the steady performance over time of the Observatory through economic cycles and frankly do improve and enhance our performance in the midst of what has been more competition that again, our NOI per cap powers over anybody else who reports.

Blaine Heck

Great. Thanks for that color, Tony, on second question, can you just talk about the expected cadence for same-store NOI throughout the year. You know, obviously you guys had a great quarter with 12% in the first quarter, but kept guidance unchanged at negative 1% to positive 2%. Occupancy is expected to stay largely flat to modestly higher by the end of the year. I think you talked about some tougher comps, higher OpEx and some one-time items, but just hoping you can give a little bit more color on what the impact is from each of those on same-store NOI relative to the first quarter and how we might expect same-store to trend throughout the year?

Stephen Horn

Yes. With regard to same-store NOI on you have it right. As far as looking at the comps for the first quarter, of '24 versus '23. We had the creative buoyed by the lower confidence in '23 due to the one-time items that I called out in my opening remarks.
As far as yes, the less cash rents from the short term rent commencement delays. We look through the remainder of the year on. We expect those comps get much more difficult because you have the one-time items that are to the positive from 2Q to 4Q start coming and compare against those.
We called those out in our last earnings call on to highlight the materiality of those and the timing of that. So that's all baked into our guidance. So we'll expect to see that come in on and that's really leading towards why there was no change in our in our guidance at this point in time.

Christina Chiu

Yes. And overall, as mentioned in our earnings release, we assume continued positive revenue growth and we still maintain 6% to 8% increase in OpEx. So all of that still holds, and Steve just highlighted the factors that drove an outsized one.

Blaine Heck

Great. Thanks.

Operator

Thank you. Our next questions come from the line of Camille Bonner with Bank of America. Please proceed with your question.

Camille Bonnel

Good morning. Tom. The team has had some clear success in leasing up your buildings around Penn Station but there are one or two where it doesn't seem to have gained much traction like 250 West, 57th Street and 501, 7 Avenue. Is there anything unique about the floor plates or how the space is being marketed? Just trying to get a sense of the level of interest you're getting for these spaces?

Thomas Durels

Well, specifically on 250 West, 57th Street and 12th Avenue. It's a submarket that Columbus Circle some market were 250 is located is is clearly not seeing the same level of activity we've seen in the other other submarkets. I know fiber when seven diamond you, we have had some good showings. We won a single full floor that is grateful for its Sitecore and very efficient. And I think it's an attractive price point with great access to Penn Station. So yes, I'm confident that that space will move on. But but but I think that aside from that, we've got good activity across the board, and that's the pipeline I spoke to earlier and which we've had really good momentum with nine consecutive quarters of positive absorption.

Camille Bonnel

I appreciate the additional color there. And Tony called out the pickup in Observatory visitors this quarter. If you normalize for the timing of Easter, is this side of the business tracking in line or above your expectations for Q1.

Tony Malkin

This is tracking in line with our expectations.

Heather Houston

Got it. I curious, since this business has moved to a reservations only model, do you have visibility on what demand looks like into the peak period or in the upcoming months?

Tony Malkin

The vast majority of reservations we receive do not extend that far out.

Camille Bonnel

Okay. Thank you for taking my questions.

Tony Malkin

Thank you.

Operator

Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Chairman. And CEO, Anthony Malkin for closing remarks.

Tony Malkin

And again, we're thrilled with this quarter. We're thrilled with the continuation of our theme points on the board. Yes, our TESRT. is a pure play, New York City reef, and we have four diverse ways to play at an office portfolio that is top of our tier and targets the deepest market segment, our Observatory that continues to perform high foot traffic every day, street retail and a growing multi-family platform. We have a future-ready portfolio and an opportunity ready balance sheet. We are confident in the Company's ability to execute on our goals and drive further growth for shareholders in 2024. Many thanks to our great team who work incredibly hard, and we have every confidence we will continue to do a great job on behalf of stakeholders. We thank you all for your participation in today's call and look forward to the chance to meet with many of you at non-deal roadshows conferences and property tours in the months ahead, including what we have planned for the fall in Europe until then. Thank you very much.
For your interest onward and upward.

Operator

Thank you.
This does conclude today's teleconference. You may disconnect at this time. Thank you for your participation and enjoy the rest of you.