Q4 2023 Empire State Realty Trust Inc Earnings Call
Participants
Heather Houston; Senior VP, Chief Counsel, Corporate & Secretary; Empire State Realty Trust, Inc
Tony Malkin; Chairman and CEO; Empire State Realty Trust, Inc
Thomas Durels; Executive VP, Real Estate; Empire State Realty Trust, Inc
Christina Chiu; President; Empire State Realty Trust, Inc
John Kim; Analyst; BMO Capital Markets
Michael Griffin; Analyst; Citigroup Inc
Camille Bonnel; Analyst; BofA Securities
Presentation
Operator
Greetings. And welcome to the Empire State Realty Trust Fourth Quarter 2023 earnings call. As a reminder, all participants are in a listen-only mode and a question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Heather Houston, Senior Vice President, Chief Counsel, Corporate and Secretary. Thank you. You may begin.
Heather Houston
Good afternoon and thank you for joining us today for Empire State Realty Trust Fourth Quarter 2023 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 were posted in the Investors section of the Company's website at ESTRE. dot com.
On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements. As defined in applicable securities laws, 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. Empire State Realty Trust assumes no obligation to update any forward-looking statement in the future. And 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 and same-store property, cash NOI, EBITDA and adjusted EBITDA, which we believe are meaningful in evaluating the company so far, 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.
Now I will turn the call over to Tony Malkin, our Chairman and Chief Executive Officer.
Tony Malkin
Thanks, Heather, and it's great to have you back after your parental leave. And good afternoon to everyone.
Yes, our team is pleased to report a strong fourth quarter to close out what was a very productive year for our top tier portfolio. We have a modernized amenitized, energy-efficient portfolio of properties in great locations, absolute commitment to put points on the board under any circumstance and a balance sheet that allows us to do so. Our team's focus and relentless effort once again delivered results in the fourth quarter FFO came in $0.05 above expectations, $0.015 from nonrecurring items, the majority from recurring operations, Kristina, our new President, will handle that in more depth in her comments, we delivered our eighth consecutive quarter of positive leased percentage absorption.
We achieved our 10th consecutive quarter of positive mark to market lease spreads for Manhattan office. Our Observatory performance continues, and our balance sheet remains best in class. Our top of tier portfolio sees continued demand, and we leased nearly 1 million square feet lease up progress over the last year. Increased our Manhattan office leased percentage to over 92% and increased leased absorption by 250 basis points. The Empire State Building is now just shy of 92% leased. That is an increase of 720 basis points over the last year. Within our Broadway campus, the leased rate at 1359 Broadway increased 730 basis points over the last year. Tom will discuss some of the quality tenant leases which contribute to this progress. ESRT.'s commitment to service and tenant relationships, combined with our modernized amenitized, energy-efficient portfolio of properties in great locations drives our consistent leasing volumes over 2.6 million square feet of tenant expansions and our portfolio since our IPO, quite significant relative to our entire portfolio that totaled 9.3 million square feet today proves the value of our market proposition. I would like to share some words from recently signed tenants as to why they chose ESRT.'s buildings. All of the following are quotes, industry leading facilities and client services, iconic prime location, blend of heritage and contemporary design, top tier amenities, forefront of sustainability, Astute partner, commuter friendly, energy-efficient bolsters teamwork and innovation. That is the end of the quotes from tenants. You can see more tenant testimonials on slides 11 and 12 are at our investor presentation, the right offices in the right buildings at the right prices in the right locations with the right landlord. Our critical components of company culture and employee collaboration, recruitment and retention.
Yes, our T's leasing successes are built upon the $1 billion we invested in portfolio upgrades to consolidate floor plates and renovate our buildings so that our assets are fully modernized leaders in energy efficiency, competitive and attractive to lease. We maintain a best-in-class balance sheet and that makes a big difference to tenants and brokers in today's environment, and we service the deepest segment of the tenant demand of the New York City office market at our accessible price points. Our goal is to get the best deals in good times, get the deals and challenged times and draw consistent leasing volumes through cycles. We know what we have to do, and we remain absolutely focused and we believe with the right capital partners with whom we can share our balance sheet and expertise. The current debt issues create opportunities for us to grow that success amongst select additional office buildings. The Observatory continues to perform 2023, saw the Observatory NOI return back to pre-COVID levels, and that was just with 20--excuse me, just with 73% of the admissions relative to 2019. For years, we have put in the hard work to build exceptional brand awareness, our iconic authentic brand. In 2023, the Empire State Building had over 388 billion global media impressions and generated globally nearly $800 million in advertising value equivalency. The Empire State Building Observatory is the authentic New York experience and was ranked the number one attraction in the United States by TripAdvisor for the 2nd year in a row, our Observatory as cash flows are reliable through all economic cycles, new competition and the pandemic.
As shown on slide 13 of our investor presentation, we now focus on year-over-year NOI growth. Tenants look to partner with a financially stable landlord, who will maintain high quality standards at their assets. We can allocate capital as we think best to achieve return for our investors, be it capital recycling, new acquisitions or share repurchases, ESRT. has been the quantitative sustainability leader for more than a decade, and sustainability is integrated into every decision we make from property to FP&A and reporting our industry leadership and sustainability and healthy building performance matters more and more each year to tenants who come to us based upon our reputation for successful partnerships with companies and their employees and sustainability this quarter, we were pleased to be recognized as one of Newsweek's most responsible companies. And on the governance front, we were awarded governance Intelligence's 2023 Corporate Governance Award for Best small-cap Proxy Statement and nominee for best shareholder engagement.
Yes, our T's 2024 priorities remain unchanged. Lease space, sell tickets to the Observatory, manage the balance sheet and achieve our sustainability goals. These actions together enhance shareholder value. We are in a position to take advantage of opportunities created through market disruptions and capital dislocation. We believe in New York City and we have four diverse ways to play at an office portfolio that is the top of our tier and targets the deepest market segment, our Observatory, that is the number one ranked attraction in the United States, our high foot traffic every day, street retail and a growing multi-family platform. Tom and Kristina will provide more detail on our progress and how we plan to accomplish these goals in 2024.
Before I hand things over to Tom, a big congratulations to Christina for her just announced promotion to President and Steve Horn to EVP, CFO and Chief Accounting Officer, and Christina has nearly four years with ESRT. She has grown with experience. Leadless strength contributed materially to the sector leading successes of ESRT. and has been a great partner. Her well-deserved promotion recognizes our capabilities, responsibilities and value add to ESRT. and reflects our success in the attraction development and promotion of talent for our present and future opportunities. I will let Christina comment more directly on Steve and I assure you that I have no plan to depart ESRT and Tom Durels is as committed as ever.
Now on to Tom.
Thomas Durels
Thanks, Tony, and good afternoon, everyone. We had another strong year in 2023 and have the people and the properties to deliver strong results in 2024. During the full year of 2023, we leased over 950,000 square feet in our commercial portfolio in our Manhattan office portfolio, we leased 862,000 square feet, which was our highest annual volume since 2019. Our new lease spreads averaged 14% for the year, which exceeds the prior three-year average. We achieved our highest new starting rents for office leases at the Empire State Building and One Grand Central Place. We signed major office leases with quality tenants, including Capco, Greater New York mutual insurance company, LinkedIn, rising ground Starbucks and STV. to name a few. And we welcomed new retail tenants like cured deli who will open their first ever New York store at the Empire State building next to the Observatory entrance at 34th Street frontage now hosts the Starbucks Reserve supposedly tier Delhi AT&T and has one more retail opportunity to lease and two new Sushi restaurants, one at the base of 1359 Broadway and one in the Empire State Building, which will serve as great amenities to our office tenants. Our property team delivered a strong close to the year. And in the fourth quarter, we achieved positive mark to market lease spreads across our Manhattan office portfolio for the 10th consecutive quarter. It was our eighth consecutive quarter in which we achieved positive leased rate absorption for our commercial portfolio. We increased our Manhattan office lease percentage by 250 basis points compared to a year ago and 20 basis points quarter over quarter to 92.1%, which reflects an increase of 510 basis points since the end of 2021. We leased 164,000 square feet in our commercial portfolio, including 135,000 square feet in our Manhattan office portfolio at 5.8% positive mark-to-market rent spreads. The weighted average lease duration in our Manhattan office portfolio increased to 11.9 years, which is the highest it has been in the last two years. Notable leases signed in the fourth quarter include a full-floor 17 year new office lease with greater New York mutual insurance company for 52,000 square feet at the Empire State Building, Greater New York mutual will relocate to offices from Madison Avenue to the Empire State Building because of our industry-leading sustainability measures and excellent 10 only amenities, which aid in employee recruitment, retention and productivity. We signed a full-floor renewal deals with this quarter with Ingram content group Anaplan and Fairfield Maxwell Ingram renewed their lease for 12 years in a 14,000 square foot space at 1,400 Broadway.
This marks our third collaboration with Ingram and reflects their desire for our quality services, amenities and convenient location. Additionally, our partnership with Fairfield Maxwell has spanned over 28 years. We signed a 10-year new full-floor office lease with Hanover Street Capital for 13,000 square feet at 250 West 57th Street. And we signed leases for 11 prebuilt office suites that totaled 59,000 square feet. Additionally, as shown on page 10 of our supplemental, we have $51 million in incremental cash revenue from signed leases, not commenced and free rent burn-off. And we're off to a great start in 2024. We recently signed a 16 year 68,000 square foot expansion lease with Burlington at 1,400 Broadway. Burlington has expanded with us three times with this latest expansion, along with an extension of their current lease. Burlington will occupy a total of 170,000 square feet for a 16 year lease term. And we just signed an 11 year 57,000 square foot new lease with Sol de Janeiro, a loss attained subsidiary at One Grand Central Place. We have a healthy leasing pipeline for 2024 and saw an uptick in tour volume in the fourth quarter, reaching our second highest level since 2019. That should drive leasing activity in the year ahead.
We have modest lease expirations in 2024 with 578,000 square feet set to expire. And after the Burlington and sold these narrow leases that were just signed 320,000 square feet of that is covered by expected renewals, relocations and new leases, and only 183,000 square feet of known vacates and 75,000 square feet is undecided at this time based on our annual average of approximately 650,000 square feet of new leases signed in the past four years, we are well positioned to increase our lease percentage in 2024.
In today's market, there is a flight to property balance sheet and sustainability quality at every price tier and ESRT. offers the top of tier offering in our price bracket. We attract tenants who want product that is modernized amenitized energy efficient and well located near mass transit and neighborhood amenities, financially stable ownership, high quality service and indoor environmental quality at our price points. More and more, we hear tenants are sensitive to rental costs and look for a value proposition as they seek the best office space they can get for their money that will complement our employee and workspace strategy. Tenants in our price range make up the deepest part of the Manhattan leasing market as we show on Page 13 of our investor presentation. Since 2019, nearly 50% of market leases were for $50 to $75 per square foot rents, which is our sweet spot. Our unique product is competitive and attractive to tenants system demonstrated by our actual leasing results, 92% leased percentage from Manhattan office. Of course, we did a hard work over many years. We invested in our assets to provide fully modernized amenitized product, committed early to build all our tenant spaces with the latest in sustainability and IQ technology, which sets us apart from competitors. And as brought up more and more frequently in our broker and tenant leasing discussions, we fostered enduring tenant relationships through a service oriented culture and maintain a solid balance sheet, which Cristina will speak to, which is more important than ever to attract and renew quality tenants as they consider to make long-term lease commitments. The average occupancy in our multifamily portfolio was 98.1% in the fourth quarter and continues to benefit from strong market fundamentals that validates our prior investments into these assets. So once again, we had a solid fourth quarter that completed a very good year. In 2023, we signed over 950,000 square feet of commercial leases and increased our Manhattan office portfolio lease percentage by 250 basis points from a year ago to 92.1% at year end, which represents a 510 basis point increase since the end of 2021.
We are well-positioned to lease space and achieve positive lease absorption again in 2024 with modest lease expirations for the year and a healthy pipeline of new leases to start the year. And we continue to see impressive performance in our multifamily portfolio Thank you. And before I turn the call over to Christina, I want to extend my congratulations to both Christina and Steve on your well deserved promotions, having worked closely alongside both of you these past few years, I have immense confidence in your abilities and the value you bring to ESRT. I'm also optimistic that our ongoing partnership will yield fresh opportunities and enhanced value for ESRT. shareholders.
Christina Chiu
And thanks, Tom. For the fourth quarter of 2023, we reported core FFO of $68 million or $0.25 per diluted share, which increased 15% year over year. This was largely driven by strong same-store property cash NOI growth, strong performance from our Observatory business, as well as higher interest income year over year. Results for the quarter included approximately $0.015 of nonrecurring items, mostly within other income. Same-store property cash NOI increased 11.3% year over year, primarily driven by higher revenues from early cash rent, commencement, free rent burn-off, higher tenant expense reimbursements and higher other income. These revenue items came in ahead of expectations embedded in our same-store property cash NOI guidance for the year. The higher revenues in the fourth quarter were partially offset by an increase in property operating expenses, which we anticipated in our guidance, albeit the increase was less than what we expected due to a few successful tax appeals that resulted in refunds as well as some repair and maintenance cost savings relative to expectations. Overall, as mentioned, there were approximately $4 million of $0.015 of nonrecurring items that benefited same-store NOI in the fourth quarter. In the fourth quarter, the Observatory generated net operating income of $27 million, an increase of 13% year over year. Revenue per capita remains high and admissions continued to improve. Year over year. Observatory expense was $9.3 million in the fourth quarter. For the full year 2023, the Observatory generated NOI of $94 million, and that exceeded the midpoint of our guidance for the year. For the full year, we reported core FFO of $0.93 per diluted share within fourth quarter results. Each of the building blocks same-store revenues, same-store expenses, Observatory NOI that we provided in our full year guidance table happened to skew to the favorable side, which contributed to the large beat relative to our 2023 FFO guidance. As mentioned in the release 2023 results also included approximately $0.03 of items that were nonrecurring in nature and also benefited from higher than expected interest income as of December 31st, 2023, the company had total liquidity of $1.2 billion, which was comprised of $347 million of cash and $850 million of undrawn capacity on our revolving credit facility. At quarter end, the company had net debt of $2.2 billion with a weighted average interest rate of 3.9% 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 rates at 5.4 times net debt to adjusted EBITDA. Esrt owned 100% of our commercial assets with no complex JV structures. And that allows for great opportunity and flexibility for future financing and capitalization with this balance sheet flexibility. Over the past two years, we actively recycled capital in a tax-efficient manner, pursued investment opportunities that are additive to our New York City focused portfolio and repurchased our shares, and we will continue to allocate capital to generate shareholder value.
Now onto our outlook for 2024, we expect 2024 core FFO to range between $0.9 and $0.94 per diluted share, which compares to 2023 core FFO of $0.9 per share, excluding non-recurring items.
Let me spend a moment to discuss the assumptions used in our guidance in 2024. We expect same-store cash NOI 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, up from 86.3% at year end 2023, driven by a strong pipeline of signed leases not yet commenced and manageable lease expirations in 2024. On the expense side, 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 tenant expense reimbursement income. It is important to note that 2023 operating expenses ultimately increased 6.8% from the prior year, about 120 basis points lighter than the 8% year-over-year growth anticipated in our 2023 guidance, driven by tax refunds, some R&M cost savings and timing changes from certain projects that will now fall into 2024 2024. Property operating expenses also reflect inflationary cost increases.
Turning to the Observatory, we expect 2024 for Observatory NOI. to be approximately $94 million to $102 million, up from $94 million in 2023. This NOI guidance assumes Observatory expenses of approximately $9 million per quarter for 2024. We continue to leave room within our 2024 FFO guidance range for uncertainty around tourism fluctuations and bad weather that could impact results in any given quarter. Please note that the guidance estimates and assumptions just described do not include the impact of any meaningful future lease termination fee income or any unannounced future property acquisitions, dispositions or capital markets activity.
In summary, over the last year, the Company has executed well on its priorities. We leased over 950,000 square feet of total commercial space and achieved over 100 basis points of positive occupancy absorption across the portfolio. We continue to benefit from tenants demand for our high-quality assets and the unique value proposition and balance sheet strength that we offer as a landlord. Importantly, we have already invested to fully modernize our portfolio and our portfolio now reap the rewards of those forward-looking efforts, we are 92% leased and position to lease up further. Our Observatory business remains TripAdvisor's number one attraction in the U.S. for the second consecutive year and has seen a strong recovery, and we expect continued growth into 2024. The Company continues to manage our best-in-class balance sheet prudently and strategically with net debt to EBITDA, which continue to trend down to 5.4 times liquidity to take advantage of attractive investment opportunities that may emerge in this period of uncertainty and capital dislocation and our fourth leg of growth. Multifamily has performed well and adds to the resiliency of ESRT.'s cash flows.
Before I turn it over to Q&A, I'd like to congratulate Steve on his promotion to Chief Financial Officer and Chief Accounting Officer. Steve has been a tremendous asset to ESRT. since he joined us in December 2020, and this promotion was a natural part of our succession plan that we had in mind when we brought Steve on board, I will continue to work closely with Steve on its growth and development in his new role at ESRT.
And with that, I'll turn the call back to the operator for Q&A. Operator?
Question and Answer Session
Operator
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. Confirmation tone will indicate your line is in the question queue. You may press star two. If you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please while we poll for your quest. Our first questions come from the line of John Kim with BMO Capital Markets. Please proceed with your question.
John Kim
Thank you and congratulations to Christine And Steve, I wanted to ask about Flagstar. I realize it's a little bit of potential to potentially, but how concerned are you with Flagstar's lease given NYCB stockprice, and it looks like they gave us a little bit of space at 1,359 Broadway. Was that is that already known or was that done?
We're adding more states to make it?
Thomas Durels
Yes, John. The giveback of the small space at 1,359 Broadway was anticipated has previously been leased as temporary space in connection with the larger expansion previously down to 1,400 Broadway, FlexStar leases, 313,000 square feet at 1,400 Broadway there. If in-place fully escalated rents is about 58 bucks a foot. This compares favorably low compared to say where the lease was just done with Burlington in the low 60s per square foot. Remember, Flex only represents about 3.4% of our total commercial portfolio rent and about 2.5% of our total annual revenue. Beyond that, I've said it like 1,400 Broadway. So a fantastic building at 100% leased. It's fully modernized. We have a new tenant lounge, new town hall facility. We have they tend to have access to campus amenities publicly just expanded by 68,000 square feet or whatever happens reflects our we're confident that our leasing of 14 or broader Wood will do very, very well.
John Kim
Okay. My second question is on opportunistic investments. It seems like there's a lot of opportunities that are attractive on the debt side. I was wondering if you could comment on that and I know you've been buying stock repurchasing shares recently wanted to know if you were you would consider going the other route raising capital, either you own stock or third party capital and go on defensive because you can make the argument that it would be accretive depending on the investments.
Tony Malkin
Well, thanks, John. Tony. Here, we believe the crisis created by capital dislocation, rising rates and heavy near term market maturities will create a once-in-a-generation opportunity to buy into certain New York City office assets with great upside. We have unique intellectual property and a track record of success in the redevelopment of assets in that type of tier modernized amenitized, energy-efficient buildings, which are competitive and attractive to lease. We continue to look for these opportunities and of course, we'll be prudent in our underwritings. We know, the costs required to create prime assets will be patient to find the right deals and the right partners. We always look let you know if we find anything and at the same time, we are on numerous opportunities for us. So we have acquired resi and we've acquired retail. We'll keep our eyes open for opportunities in any of the above. I don't know whether or not Kristian or Tom wants to add anything to that response.
Christina Chiu
As the only thing is to address John's other question on access to capital and all I would say is, as we've demonstrated, we evaluate actions and capital allocation decisions in the best interests of our stakeholders. So when redline any options that really depends on the situation it is too soon to rule either way what you do in offenses on equity issuance. But we're certainly looking at opportunities, as Tony mentioned.
John Kim
Okay, great. Thank you.
Operator
And thank you. Our next question has come from the line of Michael Griffin with Citi. Please proceed with your question.
Michael Griffin
Great, thanks. And maybe going back to the guidance for a second number. If you strip out the $0.015 of non-core in the quarter, can you do about $0.235 for a run rate for 2024? If you look at the other pieces, it looks like you had about a half benefit from the Observatory NOI increase, call it a cent benefit from occupancy. I was just curious, are there any other puts and takes some on the guidance you? How should we think about kind of getting to that mid-teens?
Christina Chiu
I think on the guidance, as always, we point to our building blocks, and we tried to provide a lot of transparency. And what you could see is same-store NOI, cash property NOI is roughly flattish, and we do pick up the midpoint does represent a pickup from where we ended 2023 for the Observatory arm. So that gets us to our initial guidance range with revenue at modest growth modest positive growth and same-store operating expenses at 6% to 8% up and will continue to narrow as we have better visibility over the course.
Michael Griffin
Yes, all right. That's helpful. And then just maybe going back to kind of capital allocation opportunities. You've had stress in the past, but the simple structure, no joint ventures out there, but it seems like there are opportunities. I have reason that there's nothing off the table. If the right joint venture opportunity came up, would you entertain it or that's just not part of a long-term strategy.
Tony Malkin
Gryphon, Tony here, absolutely. We'll entertain the right structure, the right capital at the right price. And if it's more logical to incorporate the use of third-party capital, we will.
Michael Griffin
Great. That's it for me.
Operator
Thanks for the time. Thank you. Our next questions come from the line of Camille Bonnel with Bank of America. Please proceed with your question.
Camille Bonnel
Congrats, everyone, on a solid quarter. And to Kristina mentioned, last quarter you had around 200,000 square feet of leases in negotiation. And looking at the activity you've done to date, it looks like you were able to get those all over the line. So following up on earlier comments, Tom, could you quantify our leasing pipeline and what currently under contract?
Thomas Durels
Sure. Well, look, first of all, Camille, we're off to a great start in the first quarter was approximately 125,000 square feet of new leases signed with between the Burlington and some of these narrow leases. We're constantly adding to our pipeline. But where we sit right now, we have roughly about call about 190,000 square feet of additional leases out in various stages of negotiation for final term sheets. And most of that is in for our Manhattan office properties of around 160,000 square feet. That's our current pipeline in addition to the Burlington is all leases that we just signed up. In addition to that, we have probably a few hundred thousand square feet of active proposals in various stages of negotiations. Now, not all of those will transition into leases, but that gives you an indication that we have a good, healthy pipeline of activity. And this in the backdrop of very modest lease expirations and very little exposure to tenant move outs in 2024. So I think we're incredibly well positioned to improve our leased percentage in 2024.
Camille Bonnel
Appreciate the time. And just shifting to your liquidity position on very strong earnings, good momentum was wondering how you're balancing various capital allocation decisions with the potential to increase the dividend, do you expect to grow this at some point in the near term? Or do you need to see more visibility and operations first.
Christina Chiu
And so on the dividend and what we've mentioned is it will track the business. However, we've also mentioned that we do have a net operating loss carry forward in the balance of approximately $100 million and an environment in an environment where capital market conditions are uncertain, increased cost of capital. It does seem prudent if we have the ability to monetize on that and utilize the cash to return capital in other ways, whether it be share buybacks or pursue opportunities, that's something that we should consider. So our current dividend level allows us to continue to pay dividend very comfortably. We'll continue to monitor the business. We'll monetize on our NOL and we'll see what the conditions are and when it makes sense to raise it a bit.
Camille Bonnel
Thank you.
Operator
Thank you. Our next questions come from the line of Jay Pascoe with Evercore ISI. Please proceed with your question.
Thanks for taking my question. I was wondering if you could just help bridge the gap between the total office and retail portfolio forecast forecast, which you show on page 14 of the supplemental and the just 170 basis point uptick in occupancy. That guidance implies. I assume a lot of this has to do with the signed leases not yet commenced, but I just wanted to put those two buckets.
Thomas Durels
Got it. I'm sure the up. I think we give a lot of a lot of detail on that on that page 14. But I think that more simply if you if you go back to my earlier comments about the fact that we only have about 183,000 square feet known vacates that are not that are not covered the balance of our leases expiring in 2024 have been covered by expected renewals, relocations or new leasing, and then only about 75,000 square feet of undecided tenants. How are you look for sort of does that answer your question or did you have something else on office or retail?
I guess just to that point of the roughly 400,000 square feet of signed leases not yet commenced. Would you say that the majority of that will commence in 24? Is that tenant over the next two years when the documents.
Thomas Durels
We give we give detail on the commencement of those leases on a page 10 of the supplemental. You can see the quarter by which by when is up by when signed leases not yet commenced are expected to commence and contribute to cash NOI.
Okay, thank you. And then just on the debt maturity front, I know you have a mortgage coming due at the end of the year and then a little over $315 million coming due in early 25. So just any color on what the plans are for that would be great.
Christina Chiu
We continue to discuss with our lending partners. I don't have an update to provide now, but as always, we have protected productive discussions and we'll provide an update to the market on as soon as it's available.
Great. Thanks. That's all for me.
Operator
Thank you.
As a reminder, if you would like to ask a question, please press star one on your telephone keypad. And with that, we have reached the end of our question-and-answer session. I would now like to turn the floor back over to Tony Malkin, Chairman and CEO for closing remarks.
Tony Malkin
Thanks very much. Esrt is the pure play, New York City res, and we are well positioned to perform and build on our well-diversified income stream. We are confident the company's ability to execute on our goals and drive further growth for shareholders in 2020. For many thanks to our great team who work incredibly hard, and I have every confidence. We'll continue to do a great job on behalf of stakeholders.
Thank you all for your participation in today's call with afforded the chance to meet with many of you at non-deal roadshows, conferences and property tours in the months ahead. Until then, thank you for your interest onward and upward.
Operator
Thank you. That does conclude today's teleconference. We appreciate your participation.
You may disconnect your lines at this time. Enjoy the rest of your day from my side.
