Greetings, welcome to the Empire State Realty Trust fourth quarter 2019 earnings call. At this time, all participants are on a listen-only mode. A brief 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 your host, Thomas Keltner, Executive Vice President, General Counsel, and Secretary. Thank you. You may begin.
Good afternoon. Thank you for joining us today for Empire State Realty Trust fourth quarter 2019 earnings conference call. In addition to the press release distributed last evening, a quarterly supplemental package with further details on our results and our latest investor presentation have been posted in the Investors section of the company's website at empirestaterealtytrust.com. On today's call, management prepared remarks and answers to your questions may contain forward-looking statements as defined in the applicable securities laws, including those related to market conditions, property operations, capital expenditures, income, and expense. 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. Finally, during today's call, we will discuss certain non-GAAP financial measures such as FFO, modified and Core FFO, NOI, cash NOI, and EBITDA, 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. Now I will turn the call over to John Kessler, President and Chief Operating Officer.
Good afternoon. Thank you, Thomas. Welcome to our fourth quarter 2019 earnings conference call. The team here is very pleased with our quarter, and here is the run of show for today's call. Thomas Durels will speak about the fourth quarter's approximately 346,000 sq ft of leases, market demand for our properties, and our market leading leasing spreads. Greg Faje will review our financial performance and balance sheet. As always, we are joined by Drew Prentice, our Chief Accounting Officer, Treasurer, and Acting CFO, and John Hogg, our Head of Financial Planning and Analysis, who can also assist with questions. In the fourth quarter, we completed our multi-year redevelopment of the Empire State Building Observatory. Visitor feedback has been positive, and the fourth quarter observatory results will be covered in more detail later in this call.
We completed the $62 million exchange offer for our 2019 series private perpetual preferred units. This 1-to-1 exchange of 4.6 million operating partnership units for perpetual preferred units is accretive for shareholders, locked in effectively permanent capital, and reduced our fully diluted share count without using any of our cash. We also renewed our $500 million Class A common stock and publicly traded operating partnership unit repurchase authorization through December 31, 2020. I now turn the call over to Thomas Durels. Thomas?
Thanks, John. Good afternoon. By every measurement, our fourth quarter was another strong quarter during which we made solid progress on our four drivers of top-line embedded growth. The breakdown of these top-line revenue growth drivers, which as of December 31, 2019, over the next five years we estimate to be $99 million, can be found on page seven of our investor presentation. For reference, this compares to $559 million in trailing 12-month cash rental revenue as of December 31, 2019. In the fourth quarter, we signed 47 new and renewal leases totaling approximately 346,000 sq ft. This included approximately 225,000 sq ft in our Manhattan office properties, 88,000 sq ft in our greater New York metropolitan office properties, and 33,000 sq ft in our retail portfolio.
Significant new office and retail leases signed during the quarter include a 46,000 square foot new office lease at 250 West 57th Street with Concord Music Group and a 33,000 square foot new retail lease with Target at 10 Union Square East that is expected to commence after the existing tenant's lease expires in 2023.
As a reminder, on page nine of our supplemental, we have maintained updated disclosure on potential vacates or renewals for leases that expire for the four quarters of 2020 and full year 2021. This schedule shows tenants to be relocated within our portfolio and vacates to be replaced by new tenants with whom leases have been signed. During the fourth quarter, rent the rates on new and renewal leases across our entire portfolio were 20.2% higher on a cash basis compared to prior cash escalated rent.
At our Manhattan office properties, we signed new leases at a positive cash rent spread of 24.4%. Our leasing spreads vary from quarter to quarter as they are a factor of expired, fully escalated rental rates, and new leases. On page 27 of our investor presentation, we estimate our future cash leasing spreads on the re-lease of future expiring Manhattan office leases will vary between 12% and 19%, based on the assumption of current market rents without any increase. Our weighted average asking rents in our Manhattan office buildings have increased by over 3% on a trailing 12-month basis, and demand for our product locations and price points remains good. As we show on page 12 of our investor presentation, our trailing 12-month net effective rent growth on a year-over-year basis for new Manhattan office increased by 14.8%.
This is the fifth straight quarter in which we have experienced net effective rent growth in excess of 5%. We have a healthy pipeline of leases and negotiation across the portfolio for both full floors and pre-built. We remain focused on our strategy to vacate and redevelop space that we will bring to market for future lease-up. Now I'll turn the call over to Greg Faje. Greg?
Thanks, Thomas. For the fourth quarter, we reported Core FFO of $75 million, or $0.25 per diluted share. Same-store property operations, it exclude one-time lease termination fees and the observatory results from the respective periods drove a 6.9% cash NOI increase. Page 16 of our supplemental highlights a 13.1% increase in observatory net operating income to approximately $29 million, thanks to our completed redevelopment. Revenue for the fourth quarter of 2019 increased to $37.7 million, or 9.2% from the prior year period, driven primarily by improved pricing. The brand new 102nd floor observation deck experience was open for roughly 10 weeks in the fourth quarter and drove approximately $1 million in additional performance compared to the fourth quarter of 2018, for a total 102nd floor contribution for the quarter of $3.4 million.
As reported on page 16 of the supplemental, the observatory hosted approximately 894,000 visitors in the fourth quarter of 2019, a decrease of 5.5% compared to the fourth quarter 2018. For the 12 months ended December 31st, 2019, observatory revenue was $128.8 million, a decrease of $2.5 million, or 1.9% from the prior period due to the closure of the 102nd floor observation deck for more than nine months and lower visitation, partially offset by improved pricing. Net operating income was $95 million, a decrease of $3.5 million compared to the prior period. Excluding the 102nd floor revenue in the respective periods, observatory revenue was up 2.1%, and NOI was up 1.7% over the same period. The observatory hosted approximately 3.5 million visitors in 2019, down 7.9% compared to the 3.8 million in the prior year.
Our new pricing strategy for the new observatory experience, which has been in place since January 2020, can be found at esbnyc.com, just by clicking on the Buy Ticket button. Moving to our balance sheet as of December 31st, 2019, we had total debt outstanding of approximately $1.7 billion and no borrowing under our $1.1 billion unsecured line of credit. The debt has a weighted average interest rate of 4.03% and a weighted average term to maturity of 8.3 years. None of our outstanding debt has variable rates. We are well underway with our efforts to replenish our cash balance after the repayment of $250 million exchangeable note in August 2019. We aim to finalize long-term financing in the first quarter and will provide final details at such time.
As we have stated on prior earnings calls, if you were to take into account our interest rate swap, current spreads and tenure, the initial GAAP interest expense would be in the 4.5% range. As of December 31st, 2019, our consolidated net debt to total market capitalization was 25.2%, and our consolidated net debt to EBITDA was 4.1x, and we held cash and cash equivalents of $234 million.
As we look ahead to 2020, please listen carefully to the following insight on items that we expect to impact full-year results. First, we have now completed the redevelopment of the observatory, and the 102nd floor observation deck is back in service. The nine-month closure of the 102nd floor was an approximate $9 million headwind 2019 result that won't repeat in 2020. In addition, we expect to benefit from our new pricing, which can be found on esbnyc.com.
Second, we anticipate higher G&A expense in 2020 than in 2019. As a starting point, we would annualize the fourth quarter 2019 run rate of $16.6 million, as seen on page 18 of the supplemental. When our officers and employees meet certain tests for length of service and age, there is an accelerated accounting vesting period for the time-based equity compensation. This accounting treatment will result $1.3 million more G&A expense in 2020 than in 2019. Last, please see page six of the supplemental, on which you can see that we have $29 million of annualized free rent burn-off, of which $20 million will be realized as cash revenue for 2020 with the balance in 2021.
We have $23 million of signed leases not yet in effect, of which we expect $4 million to be realized in 2020 revenue with an additional $11 million in 2021, an incremental $5 million in 2022, and an additional $1 million in 2023. With that, I'd like to open the call for your questions. To keep the call moving, we ask that each participant limits themselves to one primary question and one follow-up question and rejoin the queue if they have any additional questions. Operator?
Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, you may press star one on your telephone keypad. A 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 key. Our first question comes from the line of Jason Green with Evercore ISI. Please proceed with your question.
Just one question on Observatory visitation. I know revenue and NOI increased, but on visitation, are you seeing anything that gives you confidence that we're getting near a bottom, that that number might start to increase year-over-year?
Hi, Jason. Anthony Malkin here. I'm happy to say that our bottom-line performance has improved as a result of the very well-received redeveloped Observatory. That said, I think we have to look at how we're going to perform over the year ahead. We have a new competitor in The Edge in Hudson Yards, which opens in March. We have previewed the product and believe it will compete most directly with One World, Top of the Rock, and SUMMIT One Vanderbilt when it opens. That said, we expect a lot of noise based upon the new competition, and we have yet to see how the full year is going to unfold.
Got it. I guess I know it's difficult to track, but have you seen any quantifiable downtick in visitation due to Coronavirus or just less tourism in general?
The Chinese market accounted for approximately 3% of revenue in Q1 2019. We disclosed that previously, and it accounts for a similar percentage of revenue on an annual basis. We have not seen it go to zero here, but we have seen a reduction. While we have a modest headwind perhaps here, it is not as severe for us as the headlines would suggest. Do keep in mind that while Chinese group travel to the U.S. has been canceled in total, in early 2019, we began our shift away from this highly discounted source of visitors. Look, I think that there's no question. We have a study that was put together of all flights to and from New York City from China.
They're down to six weekly flights to and from China, all carriers around the world, and these are just two Chinese carriers that are presently making these flights. There's no question there's a big impact there. I think that if we have a more broad spread of this, we could have a more broad impact. At the moment, it's really not material to us.
Got it. Thank you very much.
Our next question comes from the line of Craig Mailman from KeyBanc Capital Markets. Please proceed with your question.
Hey, guys. Could you give us an update on the CFO search?
Sure. Anthony Malkin again on that subject. Our transition team has done and continues to do an excellent job. I'd point out that the high level of execution we have maintained since David Karp's departure demonstrates that ESRT's success is team-driven, does not belong to any one person. That said, we have a lot of interest in this position. We're not going to fill it till we have the right person, and as we've seen our team members step up post David's retirement, candidly, that helps us get a better definition as to who that right fit would be. In short, very pleased with the way things are going.
Very happy with the work that's been done by Drew Prentice and John Hogg under the watchful eye of John Kessler, and it's really making sure we've got the right person on a go-forward basis for us as we look towards growth in the future, and it's a different job definition than the one that David held. A lot of interest, no rush. When we have something to report, we'll report it.
Great. Craig, I know you had mentioned that you guys are still in process of sourcing the replacement debt for the exchangeable. I'm just curious, as you guys are kind of doing the calculus, does it make sense to just flush the $9 million on the swap and not replace the debt given the cash balance you guys have, versus the capital needs you're going to have here in the next 12 to 18 months?
If we could, Anthony Malkin here, let's just remember to be kind to everybody and ask one question. We'll answer this one, but we'll ask for you in the future just to ask one question, and that way we rotate ourselves around and everybody get a chance to get his or her question in.
Hey, Craig, John here. Just to respond there. I think, as you know, our plan has been consistent to replenish the capital from the exchangeable. That's why we had the swap in place that we did. I think that continues to be our plan. Given that, we'll keep that swap in place until it makes sense to unwind it.
Great. Thanks.
Our next question comes from the line of Michael Bilerman from Citi. Please proceed with your question.
It's Michael Bilerman here. Anthony, it's really hard to only ask one question. I will for you. As we think about the unit exchange that you did, I know John talked about in the opening comments how that didn't use cash and took a, what was perpetual in the sense of common stock and made it perpetual in the sense of preferred. My understanding is while the liquidation preference is effectively where you bought it back at. How will that work in a buy-out of that security, number one? Number two, it does carry a higher dividend, right? There is some cash leakage, just from the fact that the preferred will carry a dividend yield of relative 5%, relative to your common stock of about 3%.
If you can address those two points about introducing more of these preferred securities, what happens in a wind up or in a take out of those securities and dealing with the higher dividend distribution?
Well, Michael, excuse me, Michael, it's John. Just first on the topic of the dividend. The private professional preferred pays a $0.70 annual dividend, which is above what our common dividend is, as you know. The key is that, obviously, it's just a preferred, and it's got a fixed return, and it has the benefit of reducing our common share count. In the event of a liquidation of the company, there is a liquidation value, which is $13.52 a share. Then in certain other instances, such as a capital transaction, an M&A transaction, there are triggers where we have the ability to call those preferred in, but that would be at our option. In that case, it would be at a premium preference.
They will not participate in that upside? If someone's an operator NAV tomorrow.
No.
They're fixed at $13.50.
Yeah.
You've effectively bought back $62 million worth of stock. You're giving that $62 million a higher rate of 5.2%, so $1 million more of cash flow. You've effectively locked in that massive spread relative to NAV to do it. Fair?
Yeah.
Way of characterizing it? Okay. Thank you.
Yeah.
We will welcome another question from you, Michael, as soon as we make it through the queue.
Our next question comes from the line of John Guinee from Stifel. Please proceed with your question.
Oh, great. Mr. Bilerman second question was that your G&A is up to $66 million for the run rate, which is 17% of overall cash NOI and 24% of cash NOI excluding the observatory. How big an impact do you think that has on your share price?
Hey, John, this is Greg here. We carefully monitor our G&A, and we've tried to communicate here to the streets so people understand what's coming as we look forward to 2020. It's something we look at in relation to our peer set and both the public peer set as well as the private real estate market we compete with in New York. It's a competitive market. We try and keep our competition in line with it. We're giving all the details to the streets so they can fully digest it as they look out towards 2020.
Yeah. John, Anthony Malkin here. We absolutely do maintain a focus on this. We have a couple of unique situations which will work their way through the snake, as Greg laid them out. Specifically, we've got the unique situation that we've got some folks who are aging in leadership. As they age, due to our retirement policy, even though the vesting doesn't change the accounting for the unvested stock which they're issued does. We also have the recognition that we've got some unique situations that we've begun to look at the folks who have deferred cash comp in exchange for stock, and that's beginning to bite. We additionally absolutely are looking at our total load. We're looking at our total load and our total expenses versus what we've got on the ability to put capital out there.
That's something that's a major focus of mine, specifically in 2020. I would add, of course, that a significant component of the G&A is on the basis of performance stock grants. Well, the bottom line is we don't earn it, we don't get it. If our stock price doesn't perform and if our bottom line doesn't perform, then that G&A is actually overstated to the extent that those grants will not be earned.
Thank you.
Our next question comes from the line of Elvis Rodriguez from Bank of America. Please proceed with your question.
Good afternoon, gentlemen. Perhaps we can get an update on the Target lease that you did in Union Square, maybe the mark to market on that lease, and how long those conversations took, and when will they actually occupy the space. Thank you.
Elvis, this is Thomas. The new lease with Target, which is for 32,600 sq ft, is for long-term, nearly 16 years, down at 10 Union Square East. That space has 22,460 sq ft on grade and about 9,000 sq ft on a low level, plus 1,000 sq ft loading dock.
The blended rent for that store is $123 a sq ft. It's a blended rent on both the grade and below-grade space and loading dock, and that equates to $4 million in annual starting rent, which resulted in a 100% mark to market. We are doubling the rent from the prior fullest rent of the existing tenant. Now, the existing tenant's lease does not expire until April 30th of 2023, and the expected new lease commencement will be in January of 2024. On a GAAP basis, that would be mid-year of 2024.
That is laid out on page six of the supplemental.
Thank you.
Our next question comes from the line of John Kim with BMO Capital Markets. Please proceed with your question.
Thank you. Good afternoon. I'd like to revisit one of my favorite topics, which is your signed leases not commenced disclosure on page six. If you look at 2020, you have $4.4 million of base cash rent that will be contributing and starting this year, the $4.4 million for 2020. Last quarter, that figure was $17.3 million, and a number of tenants are no longer under schedule. Distinguished Concert, Glass Attain, Institutional Capital. It looks like those leases actually started in the fourth quarter on a GAAP basis. My question is that $3 million difference, is that going to be contributing and be in addition to your first quarter 2020 cash NOI year, or has that already been recognized in the fourth quarter?
John, no. This is Greg, here. No is the short answer to your question. We can walk you through it offline, the math behind it in detail, so you can get firm grasp on the numbers, if that helps you.
I'm just wondering why those tenants are no longer on this list. I'm assuming it's because of GAAP recognition, but I would think that a cash contribution is still going to occur this year.
The lease legally commenced. Those examples you said, it's when the lease legally commenced, and they're under construction, the space. It's a good example. If you look at InterDigital as an example, the lease legally commenced in the quarter, and they're under construction in the space. GAAP revenue begins a little bit later in the year, and then cash revenue recognition behind that, as an example. We can walk you through individual leases offline if you want, in detail.
Okay. Thank you.
Our next question comes from the line of Daniel Ismail from Green Street Advisors. Please proceed with your question.
Great. Thank you. I was hoping you'd talk a little bit more about the leasing environment, and outlook for 2020, and maybe specifically where you see concessions going for your Manhattan office portfolio.
Sure, Daniel. This is Tom. Overall in Manhattan, our pipeline of activity for Manhattan office space remains solid. We have leases or proposals in negotiation on full floors and pre-builts throughout our portfolio, from a wide spectrum of tenant types. That includes a TAMI, financial sector, consumer product, professional service, non-profit, you name it.
We've increased, as I noted before, our asking rents by 3% on a trailing 12-month basis on a year-over-year weighted average basis for our Manhattan office portfolio. Of course, as I noted previously, our actual trailing 12-month net effective rent growth on a year-over-year basis for our new Manhattan office increased by 14.8% this quarter. That's laid out on page 12 of our investor presentation that also shows that our median Manhattan net effective rent growth for new leases over the last five quarters has been over 6%. We see good activity.
We've got deals in negotiation, as I said before, on both full floors and pre-builts. Beyond that, I'm not going to provide greater guidance, but overall, the activity's healthy. I'm sorry, your thoughts about concessions. I would point out that our average lease cost per lease year for TI and commissions for all new and renewal Manhattan office leases in the fourth quarter was $10.45 a square foot. That's very much in line with our average of about ten and a quarter for the past eight quarters. What we've been seeing is steady run rate on our average lease cost per lease year on concessions, combined with steady increase in rental rates, and that's been producing the above-average net effective rent growth.
Great. That's helpful. Thank you.
You bet.
As a reminder, ladies and gentlemen, it is star one to ask a question. Our next question is a follow-up question from the line of Michael Bilerman from Citi. Please proceed with your question.
Hey, it's Michael Bilerman again. I wondered if you can maybe provide some goalposts on the Observatory for 2019. I think Greg Faje sort of referenced $9 million of income of a loss in 2019 that won't repeat, right? If you take the $95 million of NOI that's listed on page 16, ideally you're, I guess, at least indicating as a starting point getting to $104 million first calendar year 2020.
The offsets being potentially, if the coronavirus has a bigger impact on travel, tourism overall, not just from China, but other Asian regions, the competition from The Edge and eventually One Vanderbilt open draw offset by your revised pricing strategy. Maybe you can give us at least some range knowing that you're giving us the $9 million already, but just sort of dialing into some sort of guideposts for the Observatory deck for 2020.
I'll start and then Anthony will add on comments. Oh, sorry. Go ahead, Anthony.
Please do.
Michael, just to clarify, it's a $9 million revenue impact from the 102nd floor in 2019 that we won't have. The 102nd floor is back online in 2020. It's a revenue number, not an NOI number. I'll turn it over to Tony.
Why is it not going on NOI then?
Correct. That's not an NOI, that's a revenue impact.
Right. What is that NOI impact then?
It's a fairly high contribution from 102nd floor. We have not broken it out, but it's a fairly high contribution.
To the margin, to apply a higher margin than the rest of the business?
Correct.
Okay. Anthony, sorry.
I just think to clarify what Greg just said, that the fact is that those are incremental dollars on top of fixed expenses. I'm not sure if your question, Michael, were margin contribution, any additional revenue should flow. As far as the business going forward, it's really very early. Nonetheless, I could say we're very happy, to look at what we have accomplished with the new observatory. The reviews have been spectacular.
The installation itself is great. The activity on social is huge. We are very happy to take a look at, get a preview of what was going on at The Edge with Hudson Yards. While that is new competition, it is very clear to us that is very much a sort of a One World experience, with a nicer restaurant and an outside deck. It has an elevator feature similar to One World.
That's about it as far as special features. I think they're going to have an added charge opportunity during better weather involving some sort of limited activity where people can upcharge. We're pleased with the pricing. Our pricing remains at constant and available at any time. That's one of the beauties of the new exhibit. It's really gotten rid of crowds inside the exhibit. People pace themselves through the exhibit, whereas The Edge is anytime it's over $50. We like our competitive position there. The fact is, though, that there will be more competition, and the fact is that if we have something that extends broadly beyond China to impact international travel, we have a significant, as we've disclosed previously, international component to our visitors. At the moment, in a steady state world, we feel pretty comfortable.
We feel very comfortable, very happy the way things are working, and we will see noise, I'm quite sure, from the opening of The Edge. I think it's very difficult for us to give you better clarity than that.
Yeah, with the office business, because of the leasing and the schedules, I think we can make pretty good assumptions. I think the observatory has always been a little bit more difficult to model, and clearly some of the stuff that's been going on the last few years has muddled it a little bit. I was just trying to get a sense for 2020. You gave us the 102nd floor sort of positive impact. I was just trying to weigh the competitive landscape relative to your pricing and whether those wash it out, whether we should be thinking that NOI is going down or is NOI going up outside of the 102nd floor being open this year relative to last. I didn't want the Street to get ahead of themselves, nor did I want them to be too low either.
That's why I was just trying to get a picture of what we should be thinking about for that business.
Right. I would just encourage folks to take a look at esbnyc.com, and go to the buy ticket section and take a look at our new pricing, and that covers all of our various upcharges. You'll note that we increased the pricing to the 102nd floor as part of its new experience. The additional part that I would say is I feel quite confident that The Edge at Hudson Yards is going to open with quite a splash with a big spend. At the same time, we were invited by a party with whom we have a client relationship to an event that happened to be a preview of The Edge. Having seen The Edge, we feel very good. The experience and the security is really not well laid out. It's not going to support high volume.
The experience itself, aside from the elevator, is very sterile and modern. I think that competes very much with the folks at One World. I think you should be prepared to see a significant drop-off in some of these folks who've relied significantly on the China bus tour business.
Yeah.
Specifically, One World has become really dominated by that business, and that business is gone. When it comes back.
Yeah
It was a highly discounted business to begin with. Our move to the independent traveler, and our inroads in the China markets really paid off nicely. Outside of that, Michael, I wish I could give you more definition. We're as eager to get this year underway and play it out as you are.
That's really helpful color on the competitive landscape and what you're thinking about and the impacts. I think the pricing that we all can now look at on the website gives us some indication of the varied. I think we'd all love to be able to see the percentages of those tickets sold in each of those categories, and so that we can start to track not just the baseline net revenue that you're collecting, but how the composition of it is. As you move to this pricing model, sharing a little bit more, getting to look under the skirt a little bit more about how revenues are coming in by type would be something that would be great addition to the supplemental.
We appreciate that very much, and we'll look at that carefully. We'd really just like to see how The Edge and One Vanderbilt open up. We don't want to influence the way they do their business by giving them too much insight as to how the business works. Once we get a little bit of stability and we see what they're doing, maybe we can look at that a little more closely and give you a little more information.
Okay. Thank you.
Our next question is a follow-up question from the line of John Kim with BMO Capital Markets. Please proceed with your question.
Thank you. Just a question for Tom. I was wondering if you could describe the depth of the office leasing market in Manhattan at the $60-$70 price point as far as expansionary tenants, now that the co-working tenants are basically on stall. Also, if you could discuss leasing economics, because it looks like CapEx this quarter was unusually high during the quarter on relatively average leasing volumes. I was wondering if this was a good run rate going forward as far as tenant improvement costs.
Sure, John. First, as I said before, our pipeline of activity for Manhattan office portfolio remains really solid. We've got activity across the portfolio for both full floors and pre-builts, and we're seeing inboard activity and interest from a wide spectrum of tenants. That has always been a hallmark, I think, of our portfolio, that we do attract a wide range of tenants. As I look at deals in negotiation or in proposal phase right now, those tenant types range from tech to professional services to the FIRE sector and beyond. As far as co-working or WeWork specifically, I just would make a comment that we've continued to see steady activity in our pre-built program. We offer a wide range of pre-builts throughout our portfolio. For the year of 2019, we did over 45 pre-built deals.
We've got over a quarter million sq ft of pre-built activity for the year. We really haven't seen any impact from that. We have expanded our services as we look at broadening our appeal to tenants through offering truly turnkey experience of furnished, wired, and move coordination services. As far as concessions, I commented earlier, the average lease cost per lease year for TIs and commissions has remained steady. We're at $10.45 per sq ft cost per lease year this past quarter. That's very much in line with the past eight quarters.
Okay. That $87 million, that's really just timing as far as when leases started or when you paid out TIs.
I don't know if, Greg, if you want to.
Yeah. Correct.
comment on that.
There is a bit of a timing lag between what we report Tom's talking about the leasing activity in the quarter and when the actual CapEx dollars go out the door.
Got it. Okay. Thank you.
You bet.
Our next question is a follow-up question from the line of John Guinee with Stifel. Please proceed with your question.
Great. Investment market in New York City, where are you guys overall in current taking prices, current closing prices versus what you think is appropriate? Are you 5% low or 15% low in the current environment?
Hey, John. John here. We continue to look and underwrite potential deals in our market, and we have not seen anything which has been attractive enough for us to act. The capital markets remain strong, and we haven't gotten close. I'm not going to quantify for you the gap.
Great. Your cash and cash equivalents went down about $60 million this last quarter from $294 to $234. How much more burn do we have? You're done with the observatory. How much burn do you have until you break even on sources and uses?
Hey, John Guinee, this is Greg Faje. If you look at page nine of our investor presentation, we still have some redevelopment work to go. We have approximately 550,000 sq ft. If you use an average cost per square foot of $200, that implies about $110 in total spend until the entire portfolio has been redeveloped. In addition, as you are well aware, as we noted in our first quarter 2018 earnings call, we anticipate additional spending of approximately $40 million in the greater New York metropolitan portfolio. To date, we've spent $29 million. We're getting there, but there's still some additional CapEx spending to go, and the trend line has been trending down. That's where I'll leave it for right now.
Great. Thank you.
There are no further questions in the queue. I'd like to hand the call back to Mr. Malkin for closing remarks.
Thank you very much. Folks, this was a solid quarter for ESRT. Our leasing volume, cash spreads, and net effect of rent growth all highlight the strength of our core real estate operations, which experienced strong NOI growth from recurring operations. I'm pleased to see stronger bottom-line contribution to our results from the multi-year observatory redevelopment. As discussed on our last earnings call, we've expanded our team with key hires in ESG and technology.
You can find more details on our ESG and technology initiatives in our new slides in our investor presentation. We look forward to sharing more details of our work over the course of 2020. Overall, hard work and great results. Thanks to the team. We thank you very much for your time and your questions, and we look forward to chances to meet with you at upcoming conferences, NDRs, and property tours.
Look forward to reporting our first quarter results in April, and until then, all the best.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.