UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 28, 2015
EMPIRE STATE REALTY TRUST, INC.
(Exact Name of Registrant as Specified in its Charter)
Maryland | 001-36105 | 37-1645259 | ||
(State or other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
EMPIRE STATE REALTY OP, L.P.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 001-36106 | 45-4685158 | ||
(State or other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
One Grand Central Place 60 East 42nd Street New York, New York |
10165 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrants telephone number, including area code: (212) 687-8700
n/a
(Former name or former address, if changed from last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On April 28, 2015, Empire State Realty Trust, Inc. (the Company or we) issued a press release announcing its financial results for the first quarter of 2015. The press release referred to certain supplemental information that is available on the Companys website. The press release and the supplemental information are attached hereto as Exhibits 99.1 and 99.2, respectively, and are incorporated by reference herein.
The information in Item 2.02 of this Current Report, including Exhibits 99.1 and 99.2, is being furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that Section. Such information shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act, unless it is specifically incorporated by reference therein.
Item 7.01. Regulation FD Disclosure
As discussed in Item 2.02 above, the Company issued a press release regarding its financial results for the first quarter of 2015 and made available on its website certain supplemental information relating thereto.
The information in Item 7.01 of this Current Report is being furnished and shall not be deemed filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section. Such information shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act or the Exchange Act, unless it is specifically incorporated by reference therein.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits. |
Exhibit No. | Description | |
99.1 | Press Release announcing financial results for the first quarter of 2015 | |
99.2 | Supplemental report |
Non-GAAP Supplemental Financial Measures
Funds From Operations (FFO)
We compute FFO in accordance with the White Paper on FFO published by the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding impairment writedowns of investments in depreciable real estate and investments in in-substance real estate investments, gains or losses from debt restructurings and sales of depreciable operating properties, plus real estate-related depreciation and amortization (excluding amortization of
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deferred financing costs), less distributions to non-controlling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships and joint ventures. FFO is a widely recognized non-GAAP financial measure for REITs that we believe, when considered with financial statements determined in accordance with GAAP, is useful to investors in understanding financial performance and providing a relevant basis for comparison among REITs. In addition, FFO is useful to investors as it captures features particular to real estate performance by recognizing that real estate has generally appreciated over time or maintains residual value to a much greater extent than do other depreciable assets. Investors should review FFO, along with GAAP net income, when trying to understand an equity REITs operating performance. We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results of operations, the utility of FFO as a measure of its performance is limited. There can be no assurance that FFO presented by us is comparable to similarly titled measures of other REITs. FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. Although FFO is a measure used for comparability in assessing the performance of REITs, as the NAREIT White Paper only provides guidelines for computing FFO, the computation of FFO may vary from one company to another.
Modified Funds From Operations (Modified FFO)
Modified FFO adds back an adjustment for any above or below-market ground lease amortization to traditionally defined FFO. We consider this a useful supplemental measure in evaluating our operating performance due to the non-cash accounting treatment under GAAP, which stems from the July 2014 acquisition of two properties as they carry significantly below market ground leases, the amortization of which is material to our overall results. We present Modified FFO because we consider it an important supplemental measure of our operating performance in that it adds back the non-cash amortization of below-market ground leases. There can be no assurance that Modified FFO presented by us is comparable to similarly titled measures of other REITs. Modified FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Modified FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions.
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Core Funds From Operations (Core FFO)
Core FFO adds back to Modified FFO the following items associated with the Companys initial public offering, or IPO, and formation transactions: gain on consolidation of non-controlling entities, acquisition expenses, severance expenses and retirement equity compensation expenses. It also adds back private perpetual preferred exchange offering expenses, acquisition expenses, and gain on settlement of lawsuit related to the Observatory, net of income taxes, deferred financing cost write-off, prepayment penalties, and construction severance expenses. The Company presents Core FFO because it considers it an important supplemental measure of its operating performance in that it excludes items associated with its IPO and formation transactions and other non-recurring items. There can be no assurance that Core FFO presented by the Company is comparable to similarly titled measures of other REITs. Core FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Core FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. In future periods, we may also exclude other items from Core FFO that we believe may help investors compare our results.
Core Funds Available for Distribution (Core FAD)
In addition to Core FFO, we present Core FAD by (i) adding to Core FFO non-real estate depreciation and amortization, the amortization of deferred financing costs, amortization of debt discounts and non-cash compensation expense and (ii) deducting straight line rent, recurring second generation leasing commissions, tenant improvements, prebuilts, capital expenditures, furniture, fixtures & equipment purchases, amortization of debt premiums and above/below market rent revenue. Core FAD is presented solely as a supplemental disclosure that management believes provides useful information regarding our ability to fund our dividends. Core FAD does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Core FAD is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. There can be no assurance that Core FAD presented by us is comparable to similarly titled measures of other REITs.
Net Operating Income (NOI)
NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by; (i) the cost of funds of the property owner, (i) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (iii) acquisition expenses, or (iv) general and administrative expenses and other gains and losses that are specific to the property owner. The cost of funds is eliminated from net operating income because it is specific to the particular financing capabilities and constraints of the owner. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Depreciation and amortization
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expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our office or retail properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed, purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue, generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness. NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income computed in accordance with GAAP. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not-be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.
EBITDA
We compute EBITDA as net income plus perpetual preferred unit distributions, interest expense, income taxes, depreciation and amortization and acquisition expenses. We presents EBITDA because we believe that EBITDA, along with cash flow from operating activities, investing activities and financing activities, provides investors with an additional indicator of its ability to incur and service debt. EBITDA should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of its liquidity.
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SIGNATURE
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
EMPIRE STATE REALTY TRUST, INC. (Registrant) | ||||||||
Date: April 28, 2015 | By: | /s/ David A. Karp | ||||||
Name: | David A. Karp | |||||||
Title: | Executive Vice President, Chief Financial Officer and Treasurer |
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
EMPIRE STATE REALTY OP, L.P. (Registrant) | ||||||||
Date: April 28, 2015 | By: | Empire State Realty Trust, Inc., as general partner | ||||||
By: | /s/ David A. Karp | |||||||
Name: | David A. Karp | |||||||
Title: |
Executive Vice President, Chief Financial Officer and Treasurer |
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Exhibit 99.1
EMPIRE STATE REALTY TRUST ANNOUNCES FIRST QUARTER 2015 RESULTS
- Reports Core FFO of $0.20 Per Fully Diluted Share -
New York, New York, April 28, 2015Empire State Realty Trust, Inc. (NYSE: ESRT) (the Company), a real estate investment trust with office and retail properties in Manhattan and the greater New York metropolitan area, today reported operational and financial results for the first quarter 2015.
We are very pleased with our first quarter performance, particularly our volume of leases signed and industry-leading spreads that averaged 67.8% for new Manhattan office leases and 149.5% across all leases. These results reflect strong momentum to start the year and underscore the efficacy of our program to recapture, redevelop efficiently and lease our space for longer term leases with better credit tenants, stated Anthony E. Malkin, Empire State Realty Trusts Chairman and Chief Executive Officer. Mr. Malkin continued, At the Empire State Building, we again experienced strong year over year revenue growth in the first quarter for our Observatory, despite an increase in bad weather days that affected attendance. Finally, we strengthened our balance sheet even further with the completion of our private placement of senior unsecured notes, which significantly extended our maturities and increased our financial flexibility. We will continue to focus on deploying our capital to achieve outsized returns over the long term for our shareholders.
First Quarter Highlights
| Achieved Core Funds From Operations (Core FFO) of $0.20 per fully diluted share and net income attributable to the Company of $0.03 per fully diluted share. |
| Total portfolio was 87.6% occupied; including signed leases not commenced (SLNC), the total portfolio was 90.0% leased at March 31, 2015. |
| Manhattan office portfolio (excluding the retail component of these properties) was 86.1% occupied; including SLNC, the Manhattan office portfolio was 88.8% leased at March 31, 2015. |
| Retail portfolio was 91.2% occupied; including SLNC, the retail portfolio was 92.7% leased at March 31, 2015. |
| Empire State Building was 84.2% occupied; including SLNC, the Empire State Building was 89.8% leased at March 31, 2015. |
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| Executed 60 leases, representing 418,092 rentable square feet across the total portfolio, achieving a 149.5% increase in mark-to-market rent over previously fully escalated rents on new, renewal, and expansion leases. |
| Signed 21 new leases representing 264,839 rentable square feet of new leases in the first quarter 2015 for the Manhattan office portfolio (excluding the retail component of these properties), achieving an increase of 67.8% in mark-to-market rent over previously fully escalated rents. |
| Signed five new retail leases representing 50,331 rentable square feet of new leases in the first quarter 2015 for the retail component of the Manhattan office portfolio, achieving an increase of 861.0% in mark-to-market rent over previously fully escalated rents. |
| The Empire State Building Observatory revenue for the first quarter 2015 grew 5.2% to $18.2 million, from $17.3 million in the first quarter 2014. |
| Recast its corporate credit facility, converting it from a secured to an unsecured facility, reducing its interest rate and extending its maturity by one year. |
| Completed a private placement of $350 million aggregate principal amount of senior unsecured notes with a blended 12.5 year average life and 4.08% coupon. |
| Declared a dividend in the amount of $0.085 per share for the first quarter 2015, which was paid on March 31, 2015. |
Financial Results for the First Quarter 2015
Core FFO was $52.7 million, or $0.20 per fully diluted share, compared to $41.7 million, or $0.17 per fully diluted share in the first quarter of 2014.
Modified FFO was $50.8 million, or $0.19 per fully diluted share, compared to $41.7 million, or $0.17 per fully diluted share in the first quarter of 2014.
FFO was $48.9 million, or $0.18 per fully diluted share, compared to $41.3 million or $0.17 per fully diluted share in the first quarter of 2014.
Net income attributable to common stockholders was $3.1 million, or $0.03 per fully diluted share, compared to $4.4 million, or $0.05 per fully diluted share, in the first quarter of 2014.
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Portfolio Operations
The Company reported that its total portfolio as of March 31, 2015, containing 10.0 million rentable square feet of office and retail space, was 87.6% occupied at the end of the first quarter 2015. Including SLNC, the Companys portfolio was 90.0% leased at March 31, 2015.
The Companys same store portfolio, defined as the total portfolio excluding 112 West 34th Street and 1400 Broadway and containing 8.4 million rentable square feet of office and retail space, was 88.1% occupied at the end of the first quarter 2015. Percentage occupied was down 110 basis points from 89.2% at the end of the fourth quarter 2014, and up 90 basis points from 87.2% at the end of the first quarter 2014. Including SLNC, the Companys same store portfolio was 90.5% leased at March 31, 2015.
The Companys office portfolio (excluding the retail component of these properties), containing 9.3 million rentable square feet, was 87.3% occupied at the end of the first quarter 2015. On a same store basis, the office portfolio was 87.9% occupied, down 100 basis points from the end of the fourth quarter 2014, and up 110 basis points from the end of the first quarter 2014. Including SLNC, the Companys office portfolio (excluding the retail component of these properties) was 89.7% leased at March 31, 2015.
The Manhattan office portfolio (excluding the retail component of these properties), containing 7.4 million rentable square feet was 86.1% occupied at the end of the first quarter 2015. On a same store basis, the Manhattan office portfolio was 86.6% occupied, down 160 basis points from the end of the fourth quarter 2014, and up 60 basis points from the end of the first quarter 2014. Including SLNC, the Companys Manhattan office portfolio (excluding the retail component of these properties) was 88.8% leased at March 31, 2015.
The Companys retail portfolio, containing approximately 727,000 rentable square feet, was 91.2% occupied at the end of the first quarter 2015. On a same store basis, the retail portfolio was 90.9% occupied, which compares to 93.2% at the end of the fourth quarter of 2014 and 92.2% at the end of the first quarter 2014. Including SLNC, the Companys retail portfolio was 92.7% leased at March 31, 2015.
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Leasing
For the three months ended March 31, 2015, the Company executed 60 leases within the total portfolio, comprising 418,092 rentable square feet. Total leasing volume included 55 office leases, comprising 367,761 rentable square feet, and five retail leases, comprising 50,331 rentable square feet.
On a blended basis, the 60 new, renewal and expansion leases signed within the total portfolio during the quarter had an average starting rental rate of $88.38 per rentable square foot, representing an increase of 149.5% over the prior in-place rent on a fully escalated basis.
On a blended basis, the 55 new, renewal and expansion office leases signed within the total portfolio during the quarter had an average starting rental rate of $52.64 per rentable square foot, representing an increase of 49.0% over the prior in-place rent on a fully escalated basis.
On a blended basis, the five new retail leases signed within the total portfolio during the quarter had an average starting rental rate of $347.32 per rentable square foot, representing an increase of 861.0% over the prior in-place rent on a fully escalated basis.
Leases signed in the First Quarter 2015 for the Manhattan office portfolio
| 21 new leases comprising 264,839 rentable square feet, with an average starting rental rate of $54.62 per rentable square foot, representing an increase of 67.8% over the prior in-place rent on a fully escalated basis, and |
| 22 renewal leases, comprising 56,210 rentable square feet, with an average starting rental rate of $52.87 per rentable square foot, representing an increase of 15.3% over the prior in-place rent on a fully escalated basis. |
Significant Leases Executed During the First Quarter
| At 1400 Broadway, the Company signed a 78,787 rentable square foot expansion lease with OnDeck Capital Inc., a leading platform for small business loans, for a term of 11 years. OnDeck Capital, Inc. now leases a total of 117,248 rentable square feet. |
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| At the Empire State Building, the Company signed a 78,361 rentable square foot new lease for a total of three floors with HNTB Corporation, an infrastructure solutions firm, for a term of 10.4 years. |
| At 112 West 34th Street, the Company signed a 34,192 rentable square foot lease recast with Foot Locker Retail Inc., a sportswear and footwear retailer, for a term of 15.5 years. |
| At 112 West 34th Street, the Company signed an 11,334 rentable square foot new lease with Sephora USA, LLC, a beauty-retail concept owned by LVMH Moët Hennessy Louis Vuitton S.A., one of the worlds leading luxury goods retailers. |
Empire State Building
The Company continues to renovate and lease the 2.8 million rentable square foot Empire State Building, its flagship property. At March 31, 2015, the Empire State Building was 84.2% occupied; including SLNC, the Empire State Building was 89.8% leased.
During the first quarter 2015, the Company executed 10 office leases at the Empire State Building, representing 161,727 rentable square feet in the aggregate.
The Observatory revenue for the first quarter grew 5.2% to $18.2 million, from $17.3 million in the first quarter 2014. The increase in Observatory revenue was driven by higher admission prices. The Observatory hosted approximately 622,000 visitors in the first quarter 2015 versus 664,000 visitors in the first quarter of 2014. In the first quarter of 2015, there were 25 bad weather days, nine of which fell on weekend days. This compares to the first quarter 2014, in which we experienced 21 bad weather days, eight of which fell on weekend days.
Balance Sheet and Financial Transactions
As of March 31, 2015, the outstanding balance on the Companys unsecured revolving credit facility was $165.0 million. During the quarter, the Company terminated its previous secured term loan and revolving credit facility and entered into a new $800 million unsecured revolving credit facility, which has an accordion feature, allowing for an increase in its maximum aggregate principal balance to $1.25 billion under certain circumstances.
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At March 31, 2015, the Company had total debt outstanding of approximately $1.6 billion, with a weighted average interest rate of 4.10% per annum, and a weighted average term to maturity of 5.6 years. At March 31, 2015, the Company had no debt maturing during 2015 and 2016. The Companys consolidated debt to total market capitalization was approximately 24% as of March 31, 2015.
On March 27, 2015, the Company issued and sold an aggregate principal amount of $350 million of its senior unsecured notes in a private placement. The notes have a blended 12.5 year average life and a 4.08% coupon. Proceeds were used to repay outstanding mortgage debt, to reduce amounts outstanding under its unsecured credit facility and for other general corporate purposes.
Weighted average shares and operating partnership units were 265.8 million in the first quarter 2015, compared to 244.4 million in the first quarter 2014. The increase is attributable to the issuance of shares and operating partnership units in connection with the acquisition of two properties in July 2014.
Dividend
On March 31, 2015, the Company paid a dividend of $0.085 per share for the first quarter 2015 to holders of the Companys Class A common stock and Class B common stock and to holders of the operating partnerships Series ES, Series 250 and Series 60 operating partnership units (NYSE Arca: ESBA, FISK and OGCP, respectively) and Series PR operating partnership units. The Company paid a dividend of $0.15 per unit for the first quarter 2015 to holders of the operating partnerships private perpetual preferred units.
Webcast and Conference Call Details
Empire State Realty Trust, Inc. will host a webcast and conference call, open to the general public, on Wednesday, April 29, 2015 at 8:30 am Eastern time.
The webcast will be available in the Investors section of the Companys website at www.empirestaterealtytrust.com. To listen to a live broadcast, go to the site at least 5 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. Shortly after the call, a replay of the webcast will be available for 90 days on the Companys website.
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The conference call can be accessed by dialing 1-877-407-3982 for domestic callers or 1-201-493-6780 for international callers. A replay will be available shortly after the call and can be accessed by dialing 1-877-870-5176 for domestic callers or 1-858-384-5517 for international callers. The passcode for the replay is 13606506. A replay of the conference call will be available until May 6, 2015.
The Supplemental Report will be available prior to the conference call in the Investors section of the Companys website, www.empirestaterealtytrust.com.
About Empire State Realty Trust
Empire State Realty Trust, Inc. (NYSE: ESRT), a leading real estate investment trust (REIT), owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the worlds most famous office building. Headquartered in New York, New York, the Companys office and retail portfolio covers 10.0 million rentable square feet, as of March 31, 2015, consisting of 9.3 million rentable square feet in 14 office properties, including nine in Manhattan, three in Fairfield County, Connecticut and two in Westchester County, New York; and approximately 727,000 rentable square feet in the retail portfolio.
Non-GAAP Financial Measures
The Company has used non-GAAP financial measures in this press release. A reconciliation of each non-GAAP financial measure and the comparable GAAP financial measure can be found on page 10 of this release and in the Companys supplemental report.
Forward-Looking Statements
This press release includes forward looking statements. Forward-looking statements may be identified by the use of words such as believes, expects, may, will, should, seeks, approximately, intends, plans, pro forma, estimates, contemplates, aims, continues, would or anticipates or the negative of these words and phrases or similar words or phrases. The following factors, among
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others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: the factors included in (i) the Companys Annual Report on Form 10-K for the year ended December 31, 2014, including those set forth under the headings Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations, Business, and Properties and (ii) in future periodic reports filed by the Company under the Securities and Exchange Act of 1934, as amended. While forward-looking statements reflect the Companys good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, or new information, data or methods, future events or other changes after the date of this press release, except as required by applicable law. For a further discussion of these and other factors that could impact the Companys future results, performance or transactions, see the section entitled Risk Factors in the Annual Report on Form 10-K for the year ended December 31, 2014, and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. Prospective investors should not place undue reliance on any forward-looking statements, which are based only on information currently available to the Company (or to third parties making the forward-looking statements).
Contact:
Investors
Empire State Realty Trust Investor Relations
(212) 850-2678
IR@empirestaterealtytrust.com
Media
Brandy Bergman/Hugh Burns
Sard Verbinnen & Co.
(212) 687-8080
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Empire State Realty Trust, Inc.
Condensed Consolidated Statements of Income
(unaudited and amounts in thousands, except per share data)
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Revenues |
||||||||
Rental revenue |
$ | 110,058 | $ | 90,204 | ||||
Tenant expense reimbursement |
18,200 | 15,153 | ||||||
Observatory revenue |
18,223 | 17,301 | ||||||
Construction revenue |
1,607 | 14,963 | ||||||
Third-party management and other fees |
446 | 611 | ||||||
Other revenue and fees |
3,348 | 2,074 | ||||||
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|
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Total revenues |
151,882 | 140,306 | ||||||
Operating expenses |
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Property operating expenses |
42,452 | 35,860 | ||||||
Ground rent expenses |
2,331 | 451 | ||||||
Marketing, general and administrative expenses |
9,100 | 10,155 | ||||||
Observatory expenses |
6,977 | 6,981 | ||||||
Construction expenses |
2,869 | 14,283 | ||||||
Real estate taxes |
22,978 | 18,373 | ||||||
Depreciation and amortization |
41,418 | 30,115 | ||||||
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Total operating expenses |
128,125 | 116,218 | ||||||
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Total operating income |
23,757 | 24,088 | ||||||
Other income (expense) |
||||||||
Interest expense |
(16,047 | ) | (14,337 | ) | ||||
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Income before income taxes |
7,710 | 9,751 | ||||||
Income tax benefit |
178 | 1,480 | ||||||
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Net income |
7,888 | 11,231 | ||||||
Preferred unit distributions |
(234 | ) | | |||||
Net income attributable to non-controlling interests |
(4,516 | ) | (6,862 | ) | ||||
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Net income attributable to common stockholders |
$ | 3,138 | $ | 4,369 | ||||
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Total weighted average shares |
||||||||
Basic |
109,400 | 95,466 | ||||||
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Diluted |
265,810 | 244,425 | ||||||
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Net income per share attributable to common stockholders |
||||||||
Basic |
$ | 0.03 | $ | 0.05 | ||||
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Diluted |
$ | 0.03 | $ | 0.05 | ||||
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Empire State Realty Trust, Inc.
Reconciliation of Net Income to Funds From Operations (FFO),
Modified Funds From Operations (Modified FFO) and Core Funds From Operations (Core FFO)
(unaudited and amounts in thousands, except per share data)
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Net income |
$ | 7,888 | $ | 11,231 | ||||
Preferred unit distributions |
(234 | ) | | |||||
Real estate depreciation and amortization |
41,233 | 30,052 | ||||||
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FFO |
48,887 | 41,283 | ||||||
Amortization of below-market ground leases |
1,958 | 426 | ||||||
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Modified FFO |
50,845 | 41,709 | ||||||
Deferred financing costs write-off |
1,345 | | ||||||
Construction severance expenses, net of taxes |
480 | | ||||||
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Core FFO |
$ | 52,670 | $ | 41,709 | ||||
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|
|||||
Total weighted average shares and Operating Partnership Units |
||||||||
Basic |
265,810 | 244,425 | ||||||
|
|
|
|
|||||
Diluted |
265,810 | 244,425 | ||||||
|
|
|
|
|||||
FFO per share |
||||||||
Basic |
$ | 0.18 | $ | 0.17 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.18 | $ | 0.17 | ||||
|
|
|
|
|||||
Modified FFO per share |
||||||||
Basic |
$ | 0.19 | $ | 0.17 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.19 | $ | 0.17 | ||||
|
|
|
|
|||||
Core FFO per share |
||||||||
Basic |
$ | 0.20 | $ | 0.17 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.20 | $ | 0.17 | ||||
|
|
|
|
Empire State Realty Trust, Inc.
Condensed Consolidated Balance Sheets
(unaudited and amounts in thousands)
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Assets |
||||||||
Commercial real estate properties, at cost |
$ | 2,175,788 | $ | 2,139,863 | ||||
Less: accumulated depreciation |
(399,851 | ) | (377,552 | ) | ||||
|
|
|
|
|||||
Commercial real estate properties, net |
1,775,937 | 1,762,311 | ||||||
Cash and cash equivalents |
36,463 | 45,732 | ||||||
Restricted cash |
61,007 | 60,273 | ||||||
Tenant and other receivables |
12,759 | 23,745 | ||||||
Deferred rent receivables |
106,226 | 102,104 | ||||||
Prepaid expenses and other assets |
30,715 | 48,504 | ||||||
Deferred costs, net |
95,551 | 80,212 | ||||||
Acquired below market ground leases, net |
389,765 | 391,887 | ||||||
Acquired lease intangibles, net |
273,086 | 290,248 | ||||||
Goodwill |
491,479 | 491,479 | ||||||
|
|
|
|
|||||
Total assets |
$ | 3,272,988 | $ | 3,296,495 | ||||
|
|
|
|
|||||
Liabilities and equity |
||||||||
Mortgage notes payable |
$ | 855,032 | $ | 903,985 | ||||
Senior unsecured notes |
588,335 | 237,667 | ||||||
Unsecured revolving credit facility |
165,000 | | ||||||
Term loan and credit facility |
| 470,000 | ||||||
Accounts payable and accrued expenses |
101,797 | 96,563 | ||||||
Acquired below market leases, net |
129,736 | 138,859 | ||||||
Deferred revenue and other liabilities |
20,994 | 27,876 | ||||||
Tenants security deposits |
44,388 | 40,448 | ||||||
|
|
|
|
|||||
Total liabilities |
1,905,282 | 1,915,398 | ||||||
Total equity |
1,367,706 | 1,381,097 | ||||||
|
|
|
|
|||||
Total liabilities and equity |
$ | 3,272,988 | $ | 3,296,495 | ||||
|
|
|
|
Exhibit 99.2
EMPIRE STATE REALTY TRUST
Supplemental Operating and Financial Data
For the Quarter Ended March 31, 2015
First Quarter 2015 Table of Contents |
Page | |||
Summary |
||||
Company Profile |
3 | |||
Financial Highlights |
4 | |||
Selected Property Data |
| |||
Property Summary |
5 | |||
Property Same Store Summary |
8 | |||
Property Detail |
9 | |||
Tenant Lease Expirations |
10 | |||
Largest Tenants and Portfolio Tenant Diversification by Industry |
13 | |||
Capital Expenditures and Redevelopment Program |
14 | |||
Observatory Summary |
15 | |||
Financial information |
| |||
Condensed Consolidated Balance Sheets |
16 | |||
Condensed Consolidated Statements of Income |
17 | |||
Core FFO, Modified FFO, FFO, FAD and EBITDA |
18 | |||
Net Operating Income |
19 | |||
Consolidated Debt Analysis |
||||
Debt Summary |
20 | |||
Debt Detail |
21 | |||
Debt Maturities |
22 | |||
Ground Leases |
22 | |||
Supplemental Definitions |
23 |
Forward-looking Statements
We make forward-looking statements in this supplemental package within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You should not rely on them as predictions of future events. For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Sections.
You can identify forward-looking statements by the use of forward-looking terminology such as believes, expects, may, will, should, seeks, approximately, intends, plans, estimates, contemplates, aims, continues, would or anticipates or similar words or phrases in the positive or negative. In particular, forward looking statements include those pertaining to our capital resources, portfolio performance, dividend policy, results of operations, anticipated growth in our portfolio from operations, acquisitions, and market conditions and demographics.
Forward-looking statements involve numerous risks and uncertainties, many of which are difficult to predict and generally beyond our control. They depend on assumptions, data or methods which may be incorrect or imprecise, and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all).
The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: changes in our industry and markets, either nationally or in Manhattan or the greater New York metropolitan area; resolution of the litigations and arbitration involving our company; reduced demand for office or retail space; general volatility of the capital and credit markets and the market price of our Class A common stock and listed operating partnership units; changes in our business strategy; defaults on, early terminations of, or non-renewal of, leases by tenants; bankruptcy or insolvency of a major tenant or a significant number of smaller tenants; litigation; fluctuations in interest rates; increased operating costs; declining real estate valuations and impairment charges; availability, terms and deployment of capital; our failure to obtain necessary outside financing; our expected leverage; decreased rental rates or increased vacancy rates; breach of or the expiration of our ground lease; our failure to generate sufficient cash flows to service our outstanding indebtedness; our failure to redevelop, renovate and reposition properties successfully or on the anticipated timeline or at the anticipated costs; difficulties in identifying properties to acquire and completing acquisitions; risks of real estate acquisitions, dispositions and development (including our Metro Tower development site), including construction delays and cost overruns; our failure to operate acquired properties and operations successfully; our ability to manage our growth effectively; changes in governmental regulations, tax laws and rates and similar matters; estimates relating to our ability to make distributions to our securityholders in the future; our failure to qualify as a REIT; a future terrorist event in the U.S.; environmental uncertainties and risks related to adverse weather conditions and natural disasters; lack or insufficient amounts of insurance; financial market fluctuations; availability of, and our ability to attract and retain, qualified personnel; conflicts of interest affecting our senior management team; competition; changes in real estate and zoning laws and increases in real property tax rates; and our ability to comply with the laws, rules and regulations applicable to companies and, in particular, public companies. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, or new information, data or methods, future events or other changes after the date of this presentation, except as required by applicable law. For a further discussion of these and other factors that could impact our future results, performance or transactions, see the section entitled Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2014 and other risks described in documents we subsequently file from time to time with the Securities and Exchange Commission.
Page 2
First Quarter 2015
COMPANY PROFILE
Empire State Realty Trust, Inc., or the Company, is a leading real estate investment trust (REIT) that owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the worlds most famous office building.
BOARD OF DIRECTORS | ||||
Anthony E. Malkin | William H. Berkman | Alice M. Connell | ||
Chairman and Chief Executive | Director, Chair of Compensation | Director | ||
Officer | and Nominating/Corporate | |||
Governance Committees | ||||
Thomas J. DeRosa | Steven J. Gilbert | S. Michael Giliberto | ||
Director, Chair of | Director, Lead Director | Director | ||
Audit Committee | ||||
James D. Robinson IV | ||||
Director | ||||
EXECUTIVE MANAGEMENT | ||||
Anthony E. Malkin | John B. Kessler | Thomas P. Durels | ||
Chairman and Chief Executive | President and Chief Operating | Executive Vice President and | ||
Officer | Officer | Director of Leasing and Operations | ||
David A. Karp | Thomas N. Keltner, Jr. | |||
Executive Vice President, Chief | Executive Vice President, | |||
Financial Officer and Treasurer | General Counsel and Secretary | |||
COMPANY INFORMATION | ||||
Corporate Headquarters | Investor Relations | New York Stock Exchange | ||
One Grand Central Place | David A. Karp | Trading Symbol: ESRT | ||
60 East 42nd Street | IR@empirestaterealtytrust.com | |||
New York, NY 10165 www.empirestaterealtytrust.com |
||||
(212) 687-8700 |
Page 3
First Quarter 2015
Financial Highlights
(unaudited and dollars in thousands, except per share amounts)
Three Months Ended | ||||||||||||||||||||
Selected Items: |
March 31, 2015 |
December 31, 2014 |
September 30, 2014 |
June 30, 2014 |
March 31, 2014 |
|||||||||||||||
Revenue |
$ | 151,882 | $ | 170,411 | $ | 169,441 | $ | 155,168 | $ | 140,306 | ||||||||||
EBITDA (1) |
$ | 64,941 | $ | 79,846 | $ | 83,698 | $ | 71,911 | $ | 54,203 | ||||||||||
Cash net operating income (1) |
$ | 67,656 | $ | 78,161 | $ | 82,379 | $ | 66,994 | $ | 49,029 | ||||||||||
Net income |
$ | 7,888 | $ | 10,964 | $ | 22,734 | $ | 25,281 | $ | 11,231 | ||||||||||
Core funds from operations (Core FFO) (1) |
$ | 52,670 | $ | 65,212 | $ | 65,094 | $ | 55,408 | $ | 41,709 | ||||||||||
Core funds available for distribution (Core FAD) (1) |
$ | 42,645 | $ | 49,546 | $ | 49,008 | $ | 39,236 | $ | 25,839 | ||||||||||
Core FFO per sharediluted |
$ | 0.20 | $ | 0.25 | $ | 0.25 | $ | 0.23 | $ | 0.17 | ||||||||||
Core FAD per sharediluted |
$ | 0.16 | $ | 0.19 | $ | 0.19 | $ | 0.16 | $ | 0.11 | ||||||||||
Dividends declared and paid per share |
$ | 0.085 | $ | 0.085 | $ | 0.085 | $ | 0.085 | $ | 0.085 | ||||||||||
Portfolio Statistics: |
||||||||||||||||||||
Number of properties |
20 | 20 | 20 | 18 | 18 | |||||||||||||||
Total rentable square footage |
10,018,399 | 10,014,264 | 10,024,329 | 8,371,044 | 8,362,786 | |||||||||||||||
Percent occupied (2) |
87.6% | 88.6% | 88.7% | 88.6% | 87.2% | |||||||||||||||
Observatory Metrics: |
||||||||||||||||||||
Number of visitors |
622,000 | 997,000 | 1,405,000 | 1,222,000 | 664,000 | |||||||||||||||
Change in visitors year over year |
-6.3% | 1.8% | 0.9% | 3.8% | -6.3% | |||||||||||||||
Observatory revenues |
$ | 18,223 | $ | 28,167 | $ | 35,684 | $ | 30,389 | $ | 17,301 | ||||||||||
Change in revenues year over year |
5.2% | 10.9% | 10.2% | 11.4% | 3.6% | |||||||||||||||
Ratios: |
||||||||||||||||||||
Consolidated Debt to Total Market Capitalization (3) |
24% | 25% | 28% | 23% | 24% | |||||||||||||||
Consolidated Debt and Perpetual Preferred Units to |
||||||||||||||||||||
Total Market Capitalization (4) |
24% | 26% | 29% | 23% | 24% | |||||||||||||||
Consolidated Debt to EBITDA (5) |
5.4x | 5.6x | 4.8x | 4.3x | 5.6x | |||||||||||||||
Interest Coverage Ratio |
4.4x | 5.3x | 5.5x | 4.9x | 3.9x | |||||||||||||||
Core FFO Payout Ratio (6) |
43% | 35% | 35% | 38% | 51% | |||||||||||||||
Core FAD Payout Ratio (7) |
53% | 46% | 46% | 53% | 78% | |||||||||||||||
Class A common stock price at quarter end |
$ | 18.81 | $ | 17.58 | $ | 15.02 | $ | 16.50 | $ | 15.11 | ||||||||||
Average closing price |
$ | 18.15 | $ | 16.28 | $ | 16.20 | $ | 16.07 | $ | 14.88 | ||||||||||
Dividends per shareannualized |
$ | 0.34 | $ | 0.34 | $ | 0.34 | $ | 0.34 | $ | 0.34 | ||||||||||
Dividend yield (8) |
1.8% | 1.9% | 2.3% | 2.1% | 2.3% | |||||||||||||||
Private Perpetual Preferred Units outstanding ($16.62 liquidation value) |
1,560,360 | 1,560,360 | 1,609,813 | | | |||||||||||||||
Class A common stock |
110,598,327 | 106,030,449 | 97,035,359 | 94,486,204 | 94,496,534 | |||||||||||||||
Class B common stock |
1,149,014 | 1,161,438 | 1,232,183 | 1,121,786 | 1,122,130 | |||||||||||||||
Operating partnership units |
155,808,466 | 159,912,447 | 168,862,138 | 150,356,053 | 150,275,657 | |||||||||||||||
Total common stock and operating partnership units outstanding |
267,555,807 | 267,104,334 | 267,129,680 | 245,964,043 | 245,894,321 |
Notes:
(1) Represents non-GAAP financial measures. For a discussion on what these metrics represent and why the Company presents them, see page 23 and for a reconciliation of these metrics to net income, see pages 18 and 19.
(2) | Based on leases signed and commenced as of end of period. |
(3) | Market capitalization represents the sum of (i) Companys common stock per share price as of March 31, 2015 multiplied by the total outstanding number of shares of common stock and operating partnership units as of March 31, 2015 and (ii) our outstanding indebtedness as of March 31, 2015. |
(4) | Market capitalization represents the sum of (i) Companys common stock per share price as of March 31, 2015 multiplied by the total outstanding number of shares of common stock and operating partnership units as of March 31, 2015; (ii) the number of perpetual preferred units at March 31, 2015 multiplied by $16.62 and (iii) our outstanding indebtedness as of March 31, 2015. |
(5) | Calculated based on trailing 12 months EBITDA for the first quarter 2015 and the fourth quarter 2014. For prior quarters, quarterly EBITDA was annualized. |
(6) | Represents the amount of Core FFO paid out in distributions. |
(7) | Represents the amount of Core FAD paid out in distributions. |
(8) | Based on the closing price per share of Class A common stock on March 31, 2015. |
Page 4
First Quarter 2015
Property Summary
(unaudited and dollars in thousands, except per square foot amounts)
Three Months Ended March 31, 2015 | ||||||||||||||||||||
Total Portfolio |
Manhattan Office Portfolio (1) |
Greater New York Office Portfolio |
Standalone Retail Portfolio |
Observatory | ||||||||||||||||
Number of properties |
20 | 9 | 5 | 6 | ||||||||||||||||
Square feet |
10,018,399 | 7,953,643 | 1,860,581 | 204,175 | ||||||||||||||||
Occupancy (2) |
87.6 | % | 86.2 | % | 92.0 | % | 100.0 | % | ||||||||||||
Revenue |
$ | 149,829 | $ | 107,733 | $ | 19,118 | $ | 4,755 | $ | 18,223 | ||||||||||
Operating expenses |
(74,738 | ) | (58,224 | ) | (8,039 | ) | (1,498 | ) | (6,977 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net operating income |
75,091 | 49,509 | 11,079 | 3,257 | 11,246 | |||||||||||||||
Straight-line rent |
(4,102 | ) | (4,349 | ) | 271 | (24 | ) | | ||||||||||||
Above/below-market lease amortization |
(5,291 | ) | (5,291 | ) | | | | |||||||||||||
Below-market ground lease amortization |
1,958 | 1,958 | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash net operating income |
$ | 67,656 | $ | 41,827 | $ | 11,350 | $ | 3,233 | $ | 11,246 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Leasing activity |
||||||||||||||||||||
Total leases executed |
60 | 51 | 9 | | ||||||||||||||||
Total square footage executed |
418,092 | 372,028 | 46,064 | | ||||||||||||||||
Average rent psfleases executed |
$ | 88.38 | $ | 93.92 | $ | 40.44 | $ | | ||||||||||||
Previously escalated rents psf |
$ | 35.43 | $ | 35.00 | $ | 39.14 | $ | | ||||||||||||
Percentage of new rent over previously escalated rents |
149.5 | % | 168.3 | % | 3.3 | % | | |||||||||||||
Leasing commission costs per square foot |
$ | 37.58 | $ | 41.21 | $ | 8.22 | $ | | ||||||||||||
Tenant improvement costs per square foot |
52.41 | 53.46 | 43.95 | | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total LC and TI per square foot (3) |
$ | 89.99 | $ | 94.67 | $ | 52.17 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Office | Retail | Total | ||||||||||||||||||
Total Portfolio | ||||||||||||||||||||
Total square footage executed |
367,761 | 50,331 | 418,092 | |||||||||||||||||
Average rent psfleases executed |
$ | 52.64 | $ | 347.32 | $ | 88.38 | ||||||||||||||
Previously escalated rents psf |
$ | 35.33 | $ | 36.14 | $ | 35.43 | ||||||||||||||
Percentage of new rent over previously escalated rents |
49.0 | % | 861.0 | % | 149.5 | % | ||||||||||||||
Office | Retail | Total | ||||||||||||||||||
Manhattan Office Portfolio | ||||||||||||||||||||
Total square footage executed |
321,697 | 50,331 | 372,028 | |||||||||||||||||
Average rent psfleases executed |
$ | 54.27 | $ | 347.32 | $ | 93.92 | ||||||||||||||
Previously escalated rents psf |
$ | 34.82 | $ | 36.14 | $ | 35.00 | ||||||||||||||
Percentage of new rent over previously escalated rents |
55.9 | % | 861.0 | % | 168.3 | % |
Three Months Ended December 31, 2014 | ||||||||||||||||||||
Total Portfolio |
Manhattan Office Portfolio (1) |
Greater New York Office Portfolio |
Standalone Retail Portfolio |
Observatory | ||||||||||||||||
Number of properties |
20 | 9 | 5 | 6 | ||||||||||||||||
Square feet |
10,014,264 | 7,948,743 | 1,861,346 | 204,175 | ||||||||||||||||
Occupancy (2) |
88.6 | % | 87.7 | % | 91.1 | % | 100.0 | % | ||||||||||||
Revenue |
$ | 165,041 | $ | 113,789 | $ | 18,497 | $ | 4,588 | $ | 28,167 | ||||||||||
Operating expenses |
(75,655 | ) | (58,483 | ) | (7,591 | ) | (1,750 | ) | (7,831 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net operating income |
89,386 | 55,306 | 10,906 | 2,838 | 20,336 | |||||||||||||||
Straight-line rent |
(7,613 | ) | (7,538 | ) | (135 | ) | 60 | | ||||||||||||
Above/below-market lease amortization |
(5,613 | ) | (5,613 | ) | | | | |||||||||||||
Below-market ground lease amortization |
2,001 | 2,001 | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash net operating income |
$ | 78,161 | $ | 44,156 | $ | 10,771 | $ | 2,898 | $ | 20,336 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Leasing activity |
||||||||||||||||||||
Total leases executed |
63 | 54 | 9 | | ||||||||||||||||
Total square footage executed |
200,480 | 155,482 | 44,998 | | ||||||||||||||||
Average rent psfleases executed |
$ | 55.67 | $ | 58.60 | $ | 34.93 | $ | | ||||||||||||
Previously escalated rents psf |
$ | 44.12 | $ | 45.23 | $ | 36.30 | $ | | ||||||||||||
Percentage of new rent over previously escalated rents |
26.2 | % | 29.6 | % | -3.8 | % | | |||||||||||||
Leasing commission costs per square foot |
$ | 12.39 | $ | 13.41 | $ | 8.85 | $ | | ||||||||||||
Tenant improvement costs per square foot |
36.92 | 35.28 | 42.58 | | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total LC and TI per square foot (3) |
$ | 49.31 | $ | 48.69 | $ | 51.43 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
Page 5
First Quarter 2015
Property Summary
(unaudited and dollars in thousands, except per square foot amounts)
Three Months Ended September 30, 2014 | ||||||||||||||||||||
Total Portfolio |
Manhattan Office Portfolio (1) |
Greater New York Office Portfolio |
Standalone Retail Portfolio |
Observatory | ||||||||||||||||
Number of properties |
20 | 9 | 5 | 6 | ||||||||||||||||
Square feet |
10,024,329 | 7,976,822 | 1,843,332 | 204,175 | ||||||||||||||||
Occupancy (2) |
88.7 | % | 87.7 | % | 91.8 | % | 100.0 | % | ||||||||||||
Revenue |
$ | 163,076 | $ | 103,528 | $ | 19,053 | $ | 4,811 | $ | 35,684 | ||||||||||
Operating expenses |
(69,336 | ) | (52,916 | ) | (7,773 | ) | (1,538 | ) | (7,109 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net operating income |
93,740 | 50,612 | 11,280 | 3,273 | 28,575 | |||||||||||||||
Straight-line rent |
(8,543 | ) | (8,858 | ) | 433 | (118 | ) | | ||||||||||||
Above/below-market lease amortization |
(4,568 | ) | (4,568 | ) | | | | |||||||||||||
Below-market ground lease amortization |
1,750 | 1,750 | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash net operating income |
$ | 82,379 | $ | 38,936 | $ | 11,713 | $ | 3,155 | $ | 28,575 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Leasing activity |
||||||||||||||||||||
Total leases executed |
57 | 48 | 9 | | ||||||||||||||||
Total square footage executed |
181,743 | 143,290 | 38,453 | | ||||||||||||||||
Average rent psfleases executed |
$ | 51.11 | $ | 55.80 | $ | 33.65 | $ | | ||||||||||||
Previously escalated rents psf |
$ | 42.67 | $ | 44.99 | $ | 34.02 | $ | | ||||||||||||
Percentage of new rent over previously escalated rents |
19.8 | % | 24.0 | % | -1.1 | % | | |||||||||||||
Leasing commission costs per square foot |
$ | 14.30 | $ | 16.97 | $ | 4.34 | $ | | ||||||||||||
Tenant improvement costs per square foot |
43.54 | 53.14 | 7.79 | | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total LC and TI per square foot (3) |
$ | 57.84 | $ | 70.11 | $ | 12.13 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2014 | ||||||||||||||||||||
Total Portfolio |
Manhattan Office Portfolio (1) |
Greater New York Office Portfolio |
Standalone Retail Portfolio |
Observatory | ||||||||||||||||
Number of properties |
18 | 7 | 5 | 6 | ||||||||||||||||
Square feet |
8,371,044 | 6,323,271 | 1,843,598 | 204,175 | ||||||||||||||||
Occupancy (2) |
88.6 | % | 87.8 | % | 90.2 | % | 100.0 | % | ||||||||||||
Revenue |
$ | 140,477 | $ | 86,693 | $ | 18,991 | $ | 4,404 | $ | 30,389 | ||||||||||
Operating expenses |
(60,902 | ) | (44,527 | ) | (7,902 | ) | (1,353 | ) | (7,120 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net operating income |
79,575 | 42,166 | 11,089 | 3,051 | 23,269 | |||||||||||||||
Straight-line rent |
(10,979 | ) | (10,540 | ) | (192 | ) | (247 | ) | | |||||||||||
Above/below-market lease amortization |
(2,028 | ) | (2,028 | ) | | | | |||||||||||||
Below-market ground lease amortization |
426 | 426 | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash net operating income |
$ | 66,994 | $ | 30,024 | $ | 10,897 | $ | 2,804 | $ | 23,269 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Leasing activity |
||||||||||||||||||||
Total leases executed |
69 | 58 | 11 | | ||||||||||||||||
Total square footage executed |
211,259 | 172,212 | 39,047 | | ||||||||||||||||
Average rent psfleases executed |
$ | 49.05 | $ | 51.54 | $ | 37.53 | $ | | ||||||||||||
Previously escalated rents psf |
$ | 41.15 | $ | 41.03 | $ | 41.30 | $ | | ||||||||||||
Percentage of new rent over previously escalated rents |
19.2 | % | 25.6 | % | -9.1 | % | | |||||||||||||
Leasing commission costs per square foot |
$ | 15.20 | $ | 16.52 | $ | 9.41 | $ | | ||||||||||||
Tenant improvement costs per square foot |
45.65 | 51.29 | 20.78 | | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total LC and TI per square foot (3) |
$ | 60.85 | $ | 67.81 | $ | 30.19 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
Page 6
First Quarter 2015
Property Summary
(unaudited and dollars in thousands, except per square foot amounts)
Three Months Ended March 31, 2014 | ||||||||||||||||||||
Total Portfolio |
Manhattan Office Portfolio (1) |
Greater New York Office Portfolio |
Standalone Retail Portfolio |
Observatory | ||||||||||||||||
Number of properties |
18 | 7 | 5 | 6 | ||||||||||||||||
Square feet |
8,362,786 | 6,318,516 | 1,840,095 | 204,175 | ||||||||||||||||
Occupancy (2) |
87.2 | % | 86.2 | % | 89.5 | % | 98.9 | % | ||||||||||||
Revenue |
$ | 124,732 | $ | 84,946 | $ | 17,985 | $ | 4,500 | $ | 17,301 | ||||||||||
Operating expenses |
(61,665 | ) | (44,438 | ) | (8,854 | ) | (1,392 | ) | (6,981 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net operating income |
63,067 | 40,508 | 9,131 | 3,108 | 10,320 | |||||||||||||||
Straight-line rent |
(12,580 | ) | (12,748 | ) | 250 |
(82 | ) | | ||||||||||||
Above/below-market lease amortization |
(1,884 | ) | (1,884 | ) | | | | |||||||||||||
Below-market ground lease amortization |
426 | 426 | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash net operating income |
$ | 49,029 | $ | 26,302 | $ | 9,381 | $ | 3,026 | $ | 10,320 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Leasing activity |
||||||||||||||||||||
Total leases executed |
50 | 46 | 4 | | ||||||||||||||||
Total square footage executed |
191,319 | 172,716 | 18,603 | | ||||||||||||||||
Average rent psfleases executed |
$ | 48.03 | $ | 49.42 | $ | 35.11 | $ | | ||||||||||||
Previously escalated rents psf |
$ | 41.47 | $ | 40.43 | $ | 51.14 | $ | | ||||||||||||
Percentage of new rent over previously escalated rents |
15.8 | % | 22.3 | % | -31.3 | % | | |||||||||||||
Leasing commission costs per square foot |
$ | 14.75 | $ | 15.07 | $ | 11.71 | $ | | ||||||||||||
Tenant improvement costs per square foot |
53.36 | 54.25 | 46.11 | | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total LC and TI per square foot (3) |
$ | 68.11 | $ | 69.32 | $ | 57.82 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
Notes:
(1) | Includes 522,601 rentable square feet of retail space in the Companys nine Manhattan office properties. |
(2) | Based on leases signed and commenced as of period end. |
(3) | Presents all tenant improvement and leasing commission costs as if they were incurred in the period in which the lease was signed, which may be different than the period in which they were actually paid. |
Page 7
First Quarter 2015
Same Store Summary
(unaudited and dollars in thousands, except per square foot amounts)
Total Portfolio (Excluding Observatory)Same Store (1) | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, 2015 |
December 31, 2014 |
September 30, 2014 |
June 30, 2014 |
March 31, 2014 |
||||||||||||||||
Number of properties |
18 | 18 | 18 | 18 | 18 | |||||||||||||||
Square feet |
8,365,056 | 8,362,744 | 8,372,784 | 8,371,044 | 8,362,786 | |||||||||||||||
Occupancy (2) |
88.1 | % | 89.2 | % | 89.2 | % | 88.6 | % | 87.2 | % | ||||||||||
Revenue |
$ | 111,387 | $ | 116,347 | $ | 110,414 | $ | 110,088 | $ | 107,431 | ||||||||||
Operating expenses |
(58,879 | ) | (58,815 | ) | (55,393 | ) | (53,782 | ) | (54,684 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net operating income |
52,508 | 57,532 | 55,021 | 56,306 | 52,747 | |||||||||||||||
Straight-line rent |
(3,272 | ) | (5,237 | ) | (7,132 | ) | (10,979 | ) | (12,580 | ) | ||||||||||
Above/below-market lease amortization |
(1,731 | ) | (2,449 | ) | (1,892 | ) | (2,028 | ) | (1,884 | ) | ||||||||||
Below-market ground lease amortization |
426 | 426 | 426 | 426 | 426 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash net operating income |
$ | 47,931 | $ | 50,272 | $ | 46,423 | $ | 43,725 | $ | 38,709 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Leasing activity |
||||||||||||||||||||
Total leases executed |
50 | 56 | 55 | 69 | 50 | |||||||||||||||
Total square footage executed |
281,110 | 172,168 | 179,366 | 212,259 | 191,319 | |||||||||||||||
Average rent psfleases executed |
$ | 53.27 | $ | 60.03 | $ | 51.20 | $ | 49.05 | $ | 48.03 | ||||||||||
Previously escalated rents psf |
$ | 34.61 | $ | 46.43 | $ | 42.64 | $ | 41.15 | $ | 41.47 | ||||||||||
Percentage of new rent over previously escalated rents |
53.9 | % | 29.3 | % | 20.1 | % | 19.2 | % | 15.8 | % | ||||||||||
Leasing commission costs per square foot |
$ | 16.54 | $ | 14.18 | $ | 14.45 | $ | 15.20 | $ | 14.75 | ||||||||||
Tenant improvement costs per square foot |
52.57 | 42.72 | 44.08 | 45.65 | 53.36 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total LC and TI per square foot (3) |
$ | 69.11 | $ | 56.90 | $ | 58.53 | $ | 60.85 | $ | 68.11 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Manhattan Office PortfolioSame Store (1) | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, 2015 |
December 31, 2014 |
September 30, 2014 |
June 30, 2014 |
March 31, 2014 |
||||||||||||||||
Number of properties |
7 | 7 | 7 | 7 | 7 | |||||||||||||||
Square feet |
6,300,300 | 6,297,223 | 6,325,276 | 6,323,271 | 6,318,516 | |||||||||||||||
Occupancy (2) |
86.6 | % | 88.3 | % | 88.1 | % | 87.8 | % | 86.2 | % | ||||||||||
Revenue |
$ | 87,514 | $ | 93,262 | $ | 86,550 | $ | 86,693 | $ | 84,946 | ||||||||||
Operating expenses |
(49,342 | ) | (49,474 | ) | (46,082 | ) | (44,527 | ) | (44,438 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net operating income |
38,172 | 43,788 | 40,468 | 42,166 | 40,508 | |||||||||||||||
Straight-line rent |
(3,519 | ) | (5,162 | ) | (7,447 | ) | (10,540 | ) | (12,748 | ) | ||||||||||
Above/below-market lease amortization |
(1,731 | ) | (2,449 | ) | (1,892 | ) | (2,028 | ) | (1,884 | ) | ||||||||||
Below-market ground lease amortization |
426 | 426 | 426 | 426 | 426 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash net operating income |
$ | 33,348 | $ | 36,603 | $ | 31,555 | $ | 30,024 | $ | 26,302 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Leasing activity |
||||||||||||||||||||
Total leases executed |
41 | 47 | 46 | 58 | 46 | |||||||||||||||
Total square footage executed |
235,046 | 127,170 | 140,913 | 172,212 | 172,716 | |||||||||||||||
Average rent psfleases executed |
$ | 55.61 | $ | 64.36 | $ | 56.00 | $ | 51.54 | $ | 49.42 | ||||||||||
Previously escalated rents psf |
$ | 33.79 | $ | 48.17 | $ | 44.99 | $ | 41.03 | $ | 40.43 | ||||||||||
Percentage of new rent over previously escalated rents |
64.6 | % | 33.6 | % | 24.5 | % | 25.6 | % | 22.3 | % | ||||||||||
Leasing commission costs per square foot |
$ | 18.17 | $ | 16.11 | $ | 17.21 | $ | 16.52 | $ | 15.07 | ||||||||||
Tenant improvement costs per square foot |
54.26 | 42.76 | 53.98 | 51.29 | 54.25 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total LC and TI per square foot (3) |
$ | 72.43 | $ | 58.87 | $ | 71.19 | $ | 67.81 | $ | 69.32 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Notes:
(1) | Defined as the total portfolio excluding 112 West 34th Street and 1400 Broadway which the Company acquired on July 15, 2014 and the observatory. |
(2) | Based on leases signed and commenced as of period end. |
(3) | Presents all tenant improvement and leasing commission costs as if they were incurred in the period in which the lease was signed, which may be different than the period in which they were actually paid. |
Page 8
First Quarter 2015
Property Detail
(unaudited)
Property Name |
Location or Sub-Market |
Rentable Square Feet (1) |
Percent Occupied (2) |
Annualized Rent (3) | Annualized Rent per Occupied Square Foot (4) |
Number of Leases (5) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Manhattan Office PropertiesOffice |
|
|||||||||||||||||||||
The Empire State Building (6) |
Penn Station -Times Sq. South | 2,657,256 | 84.1 | % | $ | 105,304,459 | $ | 47.12 | 186 | |||||||||||||
One Grand Central Place |
Grand Central | 1,184,298 | 87.3 | % | 51,788,376 | 50.09 | 270 | |||||||||||||||
1400 Broadway (8) |
Penn Station -Times Sq. South | 890,299 | 88.1 | % | 31,943,232 | 40.73 | 56 | |||||||||||||||
112 West 34th Street (9) |
Penn Station -Times Sq. South | 652,900 | 78.6 | % | 23,421,421 | 45.64 | 29 | |||||||||||||||
250 West 57th Street |
Columbus CircleWest Side | 481,171 | 77.0 | % | 18,431,154 | 49.75 | 143 | |||||||||||||||
501 Seventh Avenue |
Penn Station -Times Sq. South | 456,569 | 93.1 | % | 17,788,943 | 41.85 | 34 | |||||||||||||||
1359 Broadway |
Penn Station -Times Sq. South | 448,146 | 91.1 | % | 18,348,706 | 44.94 | 33 | |||||||||||||||
1350 Broadway (10) |
Penn Station -Times Sq. South | 368,107 | 92.5 | % | 16,648,063 | 48.89 | 70 | |||||||||||||||
1333 Broadway |
Penn Station -Times Sq. South | 292,296 | 98.7 | % | 13,012,526 | 45.10 | 9 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Manhattan Office PropertiesOffice |
7,431,042 | 86.1 | % | 296,686,880 | 46.37 | 830 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Manhattan Office PropertiesRetail |
|
|||||||||||||||||||||
The Empire State Building (7) |
Penn Station -Times Sq. South | 142,563 | 87.3 | % | 14,546,989 | 116.88 | 16 | |||||||||||||||
One Grand Central Place |
Grand Central | 66,721 | 92.3 | % | 6,592,006 | 107.04 | 16 | |||||||||||||||
1400 Broadway (8) |
Penn Station -Times Sq. South | 17,689 | 71.2 | % | 1,354,424 | 107.54 | 8 | |||||||||||||||
112 West 34th Street (9) |
Penn Station -Times Sq. South | 92,455 | 97.5 | % | 3,592,267 | 39.85 | 2 | |||||||||||||||
250 West 57th Street |
Columbus CircleWest Side | 47,985 | 85.5 | % | 5,270,143 | 128.45 | 6 | |||||||||||||||
501 Seventh Avenue |
Penn Station -Times Sq. South | 35,495 | 84.7 | % | 1,721,011 | 57.24 | 8 | |||||||||||||||
1359 Broadway |
Penn Station -Times Sq. South | 25,286 | 31.4 | % | 1,184,211 | 149.15 | 4 | |||||||||||||||
1350 Broadway (10) |
Penn Station -Times Sq. South | 31,741 | 98.3 | % | 6,509,056 | 208.61 | 6 | |||||||||||||||
1333 Broadway |
Penn Station -Times Sq. South | 62,666 | 95.6 | % | 6,688,097 | 111.64 | 4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Manhattan Office PropertiesRetail |
522,601 | 87.8 | % | 47,458,204 | 103.43 | 70 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Sub-Total/Weighted Average |
|
|||||||||||||||||||||
Manhattan Office PropertiesOffice and Retail |
7,953,643 | 86.2 | % | 344,145,084 | 50.18 | 900 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Greater New York Metropolitan Area Office Properties |
|
|||||||||||||||||||||
First Stamford Place (11) |
Stamford, CT | 794,340 | 91.3 | % | 30,146,939 | 41.57 | 52 | |||||||||||||||
Metro Center |
Stamford, CT | 282,608 | 96.8 | % | 15,212,943 | 55.61 | 32 | |||||||||||||||
383 Main Street |
Norwalk, CT | 259,905 | 92.5 | % | 7,763,149 | 32.29 | 22 | |||||||||||||||
500 Mamaroneck Avenue |
Harrison, NY | 294,192 | 91.9 | % | 7,932,570 | 29.34 | 35 | |||||||||||||||
10 Bank Street |
White Plains, NY | 229,536 | 87.8 | % | 7,325,641 | 36.35 | 31 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Sub-Total/Weighted Average Greater New York |
|
|||||||||||||||||||||
Metropolitan Area Office Properties |
1,860,581 | 92.0 | % | 68,381,242 | 39.96 | 172 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Standalone Retail Properties |
|
|||||||||||||||||||||
10 Union Square |
Union Square | 58,005 | 100.0 | % | 6,060,797 | 104.49 | 14 | |||||||||||||||
1542 Third Avenue |
Upper East Side | 56,250 | 100.0 | % | 3,522,558 | 62.62 | 4 | |||||||||||||||
1010 Third Avenue |
Upper East Side | 44,662 | 100.0 | % | 3,274,947 | 73.33 | 2 | |||||||||||||||
77 West 55th Street |
Midtown | 24,102 | 100.0 | % | 2,495,049 | 103.52 | 3 | |||||||||||||||
69-97 Main Street |
Westport, CT | 16,826 | 100.0 | % | 2,074,215 | 123.27 | 5 | |||||||||||||||
103-107 Main Street |
Westport, CT | 4,330 | 100.0 | % | 606,446 | 140.06 | 1 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Sub-Total/Weighted Average Standalone |
|
|||||||||||||||||||||
Retail Properties |
204,175 | 100.0 | % | 18,034,012 | 88.33 | 29 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Portfolio Total |
10,018,399 | 87.6 | % | $ | 430,560,338 | $ | 49.08 | 1,101 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total/Weighted Average Office Properties |
9,291,623 | 87.3 | % | $ | 365,068,122 | $ | 45.01 | 1,002 | ||||||||||||||
Total/Weighted Average Retail Properties |
726,776 | 91.2 | % | 65,492,216 | 98.78 | 99 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Portfolio Total |
10,018,399 | 87.6 | % | $ | 430,560,338 | $ | 49.08 | 1,101 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
Notes:
(1) | Excludes (i) 151,172 square feet of space across the Companys portfolio attributable to building management use and tenant amenities and (ii) 69,757 square feet of space attributable to the Companys observatory. |
(2) | Based on leases signed and commenced as of March 31, 2015. |
(3) | Represents annualized base rent and current reimbursement for operating expenses and real estate taxes. |
(4) | Represents annualized rent under leases commenced as of March 31, 2015 divided by occupied square feet. |
(5) | Represents the number of leases at each property or on a portfolio basis. If a tenant has more than one lease, whether or not at the same property, but with different expirations, the number of leases is calculated equal to the number of leases with different expirations. |
(6) | Includes 86,902 rentable square feet of space leased by the Companys broadcasting tenants. |
(7) | Includes 5,300 rentable square feet of space leased by Host Services of New York, a licensee of the Companys observatory. |
(8) | Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 48 years (expiring December 31, 2063). |
(9) | Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 62 years (expiring May 31, 2077). |
(10) | Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 35 years (expiring July 31, 2050). |
(11) | First Stamford Place consists of three buildings. |
Page 9
First Quarter 2015
Tenant Lease Expirations
(unaudited)
Total Lease Expirations |
Number of Leases Expiring (1) |
Rentable Square Feet Expiring (2) |
Percent of Portfolio Rentable Square Feet Expiring |
Annualized Rent (3) |
Percent of Portfolio Annualized Rent (4) |
Annualized Rent Per Rentable Square Foot |
||||||||||||||||||
Available |
| 1,005,516 | 10.0 | % | $ | | 0.0 | % | $ | | ||||||||||||||
Signed leases not commenced |
19 | 240,568 | 2.4 | % | | 0.0 | % | | ||||||||||||||||
2015 |
230 | 766,089 | 7.6 | % | 34,943,475 | 8.1 | % | 45.61 | ||||||||||||||||
2016 |
148 | 699,571 | 7.0 | % | 29,996,681 | 7.0 | % | 42.88 | ||||||||||||||||
2017 |
167 | 761,642 | 7.6 | % | 37,488,066 | 8.7 | % | 49.22 | ||||||||||||||||
2018 |
152 | 827,022 | 8.3 | % | 39,115,832 | 9.1 | % | 47.30 | ||||||||||||||||
2019 |
102 | 678,834 | 6.8 | % | 31,097,681 | 7.2 | % | 45.81 | ||||||||||||||||
2020 |
93 | 812,587 | 8.1 | % | 43,926,207 | 10.2 | % | 54.06 | ||||||||||||||||
2021 |
53 | 598,820 | 6.0 | % | 30,733,446 | 7.1 | % | 51.32 | ||||||||||||||||
2022 |
41 | 429,115 | 4.3 | % | 23,750,612 | 5.5 | % | 55.35 | ||||||||||||||||
2023 |
33 | 461,569 | 4.6 | % | 24,335,709 | 5.7 | % | 52.72 | ||||||||||||||||
2024 |
29 | 528,957 | 5.3 | % | 27,798,629 | 6.5 | % | 52.55 | ||||||||||||||||
2025 |
22 | 189,605 | 1.9 | % | 11,127,046 | 2.6 | % | 58.69 | ||||||||||||||||
Thereafter |
31 | 2,018,504 | 20.1 | % | 96,246,954 | 22.4 | % | 47.68 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
1,120 | 10,018,399 | 100.0 | % | $ | 430,560,338 | 100.0 | % | $ | 49.08 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
(1) | If a lease has two different expiration dates, it is considered to be two leases (for the purpose of lease count and square footage). |
(2) | Excludes (i) 151,172 rentable square feet of space across the Company portfolio attributable to building management use and tenant amenities and (ii) 69,757 square feet of space attributable to the Companys observatory. |
(3) | Represents annualized base rent and current reimbursement for operating expenses and real estate taxes. |
(4) | Represents the percentage of annualized rent of the Companys office and retail portfolio in the aggregate. |
Page 10
First Quarter 2015
Tenant Lease Expirations
(unaudited)
Manhattan Office Properties (1) |
Number of Leases Expiring (2) |
Rentable Square Feet Expiring (3) |
Percent of Portfolio Rentable Square Feet Expiring |
Annualized Rent (4) |
Percent of Portfolio Annualized Rent (5) |
Annualized Rent Per Rentable Square Foot |
||||||||||||||||||
Available |
| 831,270 | 11.2 | % | $ | | 0.0 | % | $ | | ||||||||||||||
Signed leases not commenced |
8 | 201,616 | 2.7 | % | | 0.0 | % | | ||||||||||||||||
2015 |
204 | 670,257 | 9.0 | % | 29,532,811 | 10.0 | % | 44.06 | ||||||||||||||||
2016 |
117 | 455,315 | 6.1 | % | 20,426,407 | 6.9 | % | 44.86 | ||||||||||||||||
2017 |
135 | 548,700 | 7.4 | % | 26,481,469 | 8.9 | % | 48.26 | ||||||||||||||||
2018 |
110 | 528,346 | 7.1 | % | 26,577,478 | 9.0 | % | 50.30 | ||||||||||||||||
2019 |
74 | 398,423 | 5.4 | % | 18,315,946 | 6.2 | % | 45.97 | ||||||||||||||||
2020 |
59 | 535,622 | 7.2 | % | 25,083,615 | 8.5 | % | 46.83 | ||||||||||||||||
2021 |
36 | 439,903 | 5.9 | % | 20,522,201 | 6.9 | % | 46.65 | ||||||||||||||||
2022 |
26 | 197,531 | 2.7 | % | 10,161,887 | 3.4 | % | 51.44 | ||||||||||||||||
2023 |
21 | 295,602 | 4.0 | % | 13,884,549 | 4.7 | % | 46.97 | ||||||||||||||||
2024 |
13 | 323,938 | 4.4 | % | 14,895,157 | 5.0 | % | 45.98 | ||||||||||||||||
2025 |
11 | 99,453 | 1.3 | % | 5,709,795 | 1.9 | % | 57.41 | ||||||||||||||||
Thereafter |
24 | 1,905,066 | 25.6 | % | 85,095,565 | 28.7 | % | 44.67 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Manhattan office properties |
838 | 7,431,042 | 100.0 | % | 296,686,880 | 100.0 | % | 46.37 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Greater New York Metropolitan Area Office Properties |
||||||||||||||||||||||||
Available |
| 121,227 | 6.5 | % | | 0.0 | % | | ||||||||||||||||
Signed leases not commenced |
5 | 28,218 | 1.5 | % | | 0.0 | % | | ||||||||||||||||
2015 |
16 | 75,668 | 4.1 | % | 3,412,912 | 5.0 | % | 45.10 | ||||||||||||||||
2016 |
16 | 68,574 | 3.7 | % | 2,736,257 | 4.0 | % | 39.90 | ||||||||||||||||
2017 |
25 | 166,122 | 8.9 | % | 6,641,874 | 9.7 | % | 39.98 | ||||||||||||||||
2018 |
36 | 272,773 | 14.7 | % | 10,163,129 | 14.9 | % | 37.26 | ||||||||||||||||
2019 |
22 | 253,464 | 13.6 | % | 9,760,418 | 14.3 | % | 38.51 | ||||||||||||||||
2020 |
23 | 213,299 | 11.5 | % | 8,577,924 | 12.5 | % | 40.22 | ||||||||||||||||
2021 |
11 | 129,980 | 7.0 | % | 5,581,956 | 8.2 | % | 42.94 | ||||||||||||||||
2022 |
6 | 168,044 | 9.0 | % | 6,597,611 | 9.6 | % | 39.26 | ||||||||||||||||
2023 |
6 | 118,242 | 6.4 | % | 5,245,943 | 7.7 | % | 44.37 | ||||||||||||||||
2024 |
2 | 174,448 | 9.4 | % | 7,134,991 | 10.4 | % | 40.90 | ||||||||||||||||
2025 |
9 | 70,522 | 3.8 | % | 2,528,227 | 3.7 | % | 35.85 | ||||||||||||||||
Thereafter |
| | 0.0 | % | | 0.0 | % | | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total greater New York metropolitan area office properties |
177 | 1,860,581 | 100.0 | % | 68,381,242 | 100.0 | % | 39.96 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Retail Properties |
||||||||||||||||||||||||
Available |
| 53,019 | 7.3 | % | | 0.0 | % | | ||||||||||||||||
Signed leases not commenced |
6 | 10,734 | 1.5 | % | | 0.0 | % | | ||||||||||||||||
2015 |
10 | 20,164 | 2.8 | % | 1,997,752 | 3.1 | % | 99.08 | ||||||||||||||||
2016 |
15 | 175,682 | 24.2 | % | 6,834,017 | 10.4 | % | 38.90 | ||||||||||||||||
2017 |
7 | 46,820 | 6.4 | % | 4,364,723 | 6.7 | % | 93.22 | ||||||||||||||||
2018 |
6 | 25,903 | 3.6 | % | 2,375,225 | 3.6 | % | 91.70 | ||||||||||||||||
2019 |
6 | 26,947 | 3.7 | % | 3,021,317 | 4.6 | % | 112.12 | ||||||||||||||||
2020 |
11 | 63,666 | 8.8 | % | 10,264,668 | 15.7 | % | 161.23 | ||||||||||||||||
2021 |
6 | 28,937 | 4.0 | % | 4,629,289 | 7.1 | % | 159.98 | ||||||||||||||||
2022 |
9 | 63,540 | 8.7 | % | 6,991,114 | 10.7 | % | 110.03 | ||||||||||||||||
2023 |
6 | 47,725 | 6.6 | % | 5,205,217 | 7.9 | % | 109.07 | ||||||||||||||||
2024 |
14 | 30,571 | 4.2 | % | 5,768,481 | 8.8 | % | 188.69 | ||||||||||||||||
2025 |
2 | 19,630 | 2.7 | % | 2,889,024 | 4.4 | % | 147.17 | ||||||||||||||||
Thereafter |
7 | 113,438 | 15.6 | % | 11,151,389 | 17.0 | % | 98.30 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total retail properties |
105 | 726,776 | 100.0 | % | 65,492,216 | 100.0 | % | 98.78 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total portfolio lease expirations |
1,120 | 10,018,399 | 100.0 | % | $ | 430,560,338 | 100.0 | % | $ | 49.08 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
(1) | Excludes (i) retail space in the Companys Manhattan office properties and (ii) the Empire State Building broadcasting licenses and observatory operations. |
(2) | If a lease has two different expiration dates, it is considered to be two leases (for the purpose of lease count and square footage). |
(3) | Excludes (i) 151,172 rentable square feet of space across the Company portfolio attributable to building management use and tenant amenities and (ii) 69,757 square feet of space attributable to the Companys observatory. |
(4) | Represents annualized base rent and current reimbursement for operating expenses and real estate taxes. |
(5) | Represents the percentage of annualized rent of the Companys office and retail portfolio in the aggregate. |
Page 11
First Quarter 2015
Tenant Lease Expirations
(unaudited)
Empire State Building Office (1) |
Number of Leases Expiring (2) |
Rentable Square Feet Expiring (3) |
Percent of Portfolio Rentable Square Feet Expiring |
Annualized Rent (4) |
Percent of Portfolio Annualized Rent (5) |
Annualized Rent Per Rentable Square Foot |
||||||||||||||||||
Available |
| 270,001 | 10.1 | % | $ | | 0.0 | % | $ | | ||||||||||||||
Signed leases not commenced |
4 | 152,830 | 5.8 | % | | 0.0 | % | | ||||||||||||||||
2015 |
36 | 194,364 | 7.3 | % | 8,548,566 | 8.1 | % | 43.98 | ||||||||||||||||
2016 |
13 | 53,592 | 2.0 | % | 2,365,491 | 2.2 | % | 44.14 | ||||||||||||||||
2017 |
26 | 94,470 | 3.6 | % | 5,236,229 | 5.0 | % | 55.43 | ||||||||||||||||
2018 |
24 | 97,794 | 3.7 | % | 4,732,855 | 4.5 | % | 48.40 | ||||||||||||||||
2019 |
14 | 62,989 | 2.4 | % | 2,709,461 | 2.6 | % | 43.01 | ||||||||||||||||
2020 |
26 | 264,032 | 9.9 | % | 13,022,461 | 12.4 | % | 49.32 | ||||||||||||||||
2021 |
11 | 83,520 | 3.1 | % | 3,986,295 | 3.8 | % | 47.73 | ||||||||||||||||
2022 |
12 | 48,565 | 1.8 | % | 2,529,495 | 2.4 | % | 52.08 | ||||||||||||||||
2023 |
6 | 34,549 | 1.3 | % | 1,792,300 | 1.7 | % | 51.88 | ||||||||||||||||
2024 |
7 | 140,386 | 5.3 | % | 6,849,630 | 6.5 | % | 48.79 | ||||||||||||||||
2025 |
3 | 17,852 | 0.7 | % | 1,279,049 | 1.2 | % | 71.65 | ||||||||||||||||
Thereafter |
8 | 1,142,312 | 43.1 | % | 52,252,627 | 49.6 | % | 45.74 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Empire State Building office |
190 | 2,657,256 | 100.0 | % | $ | 105,304,459 | 100.0 | % | $ | 47.12 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
(1) | Excludes retail space, broadcasting licenses and observatory operations |
(2) | If a lease has two different expiration dates, it is considered to be two leases (for the purpose of lease count and square footage). |
(3) | Excludes 31,271 rentable square feet of space attributable to building management use. |
(4) | Represents annualized base rent and current reimbursement for operating expenses and real estate taxes. |
(5) | Represents the percentage of annualized rent of the Companys office and retail portfolio in the aggregate. |
Page 12
First Quarter 2015
20 Largest Tenants and Portfolio Tenant Diversification by Industry
(unaudited)
20 Largest Tenants |
Number of Leases |
Number of Properties |
Lease Expiration (1) |
Weighted Average Remaining Lease Term(2) |
Total Occupied Square Feet (3) |
Percent of Portfolio Rentable Square Feet (4) |
Annualized Rent (5) |
Percent of Portfolio Annualized Rent (6) |
||||||||||||||||||||||||
1. | Global Brands Group |
3 | 2 | Oct. 2021-Oct. 2028 | 13.5 years | 698,488 | 7.0 | % | $ | 29,035,922 | 6.7 | % | ||||||||||||||||||||
2. | Coty |
1 | 1 | Jan. 2030 | 14.8 years | 311,242 | 3.1 | % | 15,267,575 | 3.5 | % | |||||||||||||||||||||
3. | PVH Corp. |
1 | 1 | Oct. 2028 | 13.6 years | 211,311 | 2.1 | % | 9,021,270 | 2.1 | % | |||||||||||||||||||||
4. | Thomson Reuters |
4 | 2 | Apr. 2018-Apr. 2020 | 5.1 years | 147,208 | 1.5 | % | 7,615,166 | 1.9 | % | |||||||||||||||||||||
5. | |
1 | 1 | Feb. 2026 | 10.9 years | 152,411 | 1.5 | % | 7,332,856 | 1.7 | % | |||||||||||||||||||||
6. | Federal Deposit Insurance Corporation |
1 | 1 | Feb. 2020 | 4.9 years | 121,879 | 1.1 | % | 6,565,297 | 1.6 | % | |||||||||||||||||||||
7. | Li & Fung |
3 | 1 | Oct. 2021-Oct. 2021 | 6.6 years | 149,436 | 1.5 | % | 6,478,121 | 1.5 | % | |||||||||||||||||||||
8. | Urban Outfitters |
1 | 1 | Sept. 2029 | 14.5 years | 56,730 | 0.6 | % | 6,200,000 | 1.4 | % | |||||||||||||||||||||
9. | Legg Mason |
1 | 1 | Sept. 2024 | 9.5 years | 138,868 | 1.4 | % | 6,129,370 | 1.4 | % | |||||||||||||||||||||
10. | Duane Reade |
3 | 3 | Feb. 2021-Sept. 2027 | 12.5 years | 46,976 | 0.4 | % | 6,079,465 | 1.4 | % | |||||||||||||||||||||
11. | Footlocker |
2 | 1 | Apr. 2016 | 1.0 years | 170,187 | 1.7 | % | 5,377,020 | 1.2 | % | |||||||||||||||||||||
12. | Host Services of New York |
1 | 1 | May 2020 | 5.1 years | 5,300 | 0.1 | % | 4,950,433 | 1.1 | % | |||||||||||||||||||||
13. | Kohls |
1 | 1 | May 2029 | 14.1 years | 111,834 | 1.1 | % | 4,461,637 | 1.0 | % | |||||||||||||||||||||
14. | Aeropostale |
2 | 1 | Nov. 2015-Nov. 2016 | 1.6 years | 88,760 | 0.9 | % | 4,118,948 | 1.0 | % | |||||||||||||||||||||
15. | Odyssey Reinsurance |
1 | 1 | Sept. 2022 | 7.5 years | 101,619 | 1.0 | % | 3,843,803 | 1.0 | % | |||||||||||||||||||||
16. | The Interpublic Group of Companies |
1 | 1 | Aug. 2024 | 9.4 years | 86,561 | 0.9 | % | 3,829,133 | 0.9 | % | |||||||||||||||||||||
17. | Shutterstock |
1 | 1 | Sept. 2024 | 9.5 years | 82,331 | 0.8 | % | 3,658,715 | 0.8 | % | |||||||||||||||||||||
18. | Bank of America |
3 | 3 | Apr. 2015-Feb. 2018 | 2.9 years | 29,671 | 0.3 | % | 3,349,473 | 0.8 | % | |||||||||||||||||||||
19. | Reed Elsevier |
1 | 1 | Nov. 2019 | 4.6 years | 96,727 | 1.0 | % | 3,252,694 | 0.8 | % | |||||||||||||||||||||
20. | Human Rights Watch |
1 | 1 | Oct. 2026 | 11.5 years | 65,660 | 0.7 | % | 3,224,342 | 0.7 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total |
33 | 2,873,199 | 28.7 | % | $ | 139,791,240 | 32.5 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Notes:
(1) | Expiration dates are per lease and do not assume exercise of renewal or extension options. None of these leases contain early termination options. For tenants with more than two leases, the lease expiration is shown as a range. |
(2) | Represents the weighted average lease term, based on annualized rent. |
(3) | Based on leases signed and commenced as of March 31, 2015. |
(4) | Represents the percentage of rentable square feet of the Companys office and retail portfolios in the aggregate. |
(5) | Represents annualized base rent and current reimbursement for operating expenses and real estate taxes. |
(6) | Represents the percentage of annualized rent of the Companys office and retail portfolios in the aggregate. |
Portfolio Tenant Diversification by Industry (based on annualized rent)
]
Page 13
First Quarter 2015
Capital Expenditures and Redevelopment Program
(unaudited)
Three Months Ended | ||||||||||||||||||||
Capital expenditures | March 31, 2015 | December 31, 2014 |
September 30, 2014 |
June 30, 2014 |
March 31, 2014 |
|||||||||||||||
Tenant improvementsfirst generation |
$ | 27,662 | $ | 29,620 | $ | 28,462 | $ | 16,827 | $ | 5,095 | ||||||||||
Tenant improvementssecond generation |
1,681 | 1,020 | 3,090 | 3,250 | 1,038 | |||||||||||||||
Leasing commissionsfirst generation |
15,813 | 2,481 | 2,945 | 1,207 | 1,045 | |||||||||||||||
Leasing commissionssecond generation |
372 | 386 | 1,401 | 1,229 | 880 | |||||||||||||||
Building improvementsfirst generation |
8,420 | 13,678 | 24,328 | 11,721 | 11,241 | |||||||||||||||
Building improvementssecond generation |
333 | 2,391 | 893 | 344 | 1,106 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 54,281 | $ | 49,576 | $ | 61,119 | $ | 34,578 | $ | 20,405 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Redevelopment program components
| Upgrading common areas: lobbies, elevators, corridors and bathrooms |
| Installing energy efficient building systems |
| Improving roofs, windows and facades |
| Optimizing base floors for retail |
Current redevelopment program (1) (2)
| Spent to date: $602 million |
| To be invested: $65 to $105 million between 2015 and 2016 |
Redevelopment program by square feet (1) (2)
| Future redevelopment (Empire State Building)570,000 square feet |
| Future redevelopment (other Manhattan properties)1,560,000 square feet |
| Redevelopment completed5,850,000 square feet |
Inventory of vacant space (2)
| Developed580,000 square feet, 66% |
| Undeveloped300,000 square feet, 34% |
Inventory of undeveloped space (2)
| Vacant300,000 square feet, 14% |
| Expires in 2015 through 2016850,000 square feet, 40% |
| Expires in 2017 and thereafter980,000 square feet, 46% |
Notes:
(1) | These estimates are based on the Companys current budgets (which do not include tenant improvements and leasing commission costs) and are subject to change. |
(2) | Redevelopment program is for the Manhattan office assets only. Square footage based on market measurement. Developed space includes space that has been demolished and completed asbestos abatement and available for lease up or ready to be prebuilt. Permanent building use spaces, amenity spaces and broadcasting spaces are excluded. |
Page 14
First Quarter 2015
Observatory Summary
(unaudited and in thousands)
Three Months Ended | ||||||||||||||||||||
Observatory NOI |
March 31, 2015 |
December 31, 2014 |
September 30, 2014 |
June 30, 2014 |
March 31, 2014 |
|||||||||||||||
Observatory revenue |
$ | 18,223 | $ | 28,167 | $ | 35,684 | $ | 30,389 | $ | 17,301 | ||||||||||
Observatory expenses |
6,977 | 7,831 | 7,109 | 7,120 | 6,981 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NOI |
11,246 | 20,336 | 28,575 | 23,269 | 10,320 | |||||||||||||||
Intercompany rent expense (1) |
11,664 | 17,874 | 19,936 | 16,283 | 15,200 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NOI after intercompany rent |
$ | (418 | ) | $ | 2,462 | $ | 8,639 | $ | 6,986 | $ | (4,880 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
Note:
(1) | The observatory pays a market-based rent payment comprised of fixed and percentage rent to the Empire State Building. Intercompany rent is eliminated upon consolidation. |
Annual Observatory Revenues 2010 to 2014
Page 15
First Quarter 2015
Condensed Consolidated Balance Sheets
(unaudited and dollars in thousands)
March 31, 2015 |
December 31, 2014 |
September 30, 2014 |
June 30, 2014 |
March 31, 2014 |
||||||||||||||||
Assets |
||||||||||||||||||||
Commercial real estate properties, at cost: |
||||||||||||||||||||
Land |
$ | 201,196 | $ | 201,196 | $ | 201,172 | $ | 187,566 | $ | 187,566 | ||||||||||
Development costs |
7,332 | 6,986 | 6,971 | 6,861 | 6,459 | |||||||||||||||
Building and improvements |
1,967,260 | 1,931,681 | 1,899,467 | 1,508,309 | 1,473,665 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
2,175,788 | 2,139,863 | 2,107,610 | 1,702,736 | 1,667,690 | ||||||||||||||||
Less: accumulated depreciation |
(399,851 | ) | (377,552 | ) | (354,730 | ) | (332,766 | ) | (315,256 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Commercial real estate properties, net |
1,775,937 | 1,762,311 | 1,752,880 | 1,369,970 | 1,352,434 | |||||||||||||||
Cash and cash equivalents |
36,463 | 45,732 | 52,918 | 41,791 | 44,703 | |||||||||||||||
Restricted cash |
61,007 | 60,273 | 63,821 | 55,482 | 54,832 | |||||||||||||||
Tenant and other receivables, net |
12,759 | 23,745 | 29,837 | 26,185 | 29,644 | |||||||||||||||
Deferred rent receivables, net |
106,226 | 102,104 | 94,837 | 85,948 | 74,971 | |||||||||||||||
Prepaid expenses and other assets |
30,715 | 48,504 | 31,091 | 39,658 | 23,535 | |||||||||||||||
Deferred costs, net |
95,551 | 80,212 | 80,396 | 77,035 | 79,032 | |||||||||||||||
Acquired below-market ground leases, net |
389,765 | 391,887 | 392,756 | 61,460 | 61,886 | |||||||||||||||
Acquired lease intangibles, net |
273,086 | 290,248 | 312,001 | 227,617 | 237,900 | |||||||||||||||
Goodwill |
491,479 | 491,479 | 491,479 | 491,479 | 491,479 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 3,272,988 | $ | 3,296,495 | $ | 3,302,016 | $ | 2,476,625 | $ | 2,450,416 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Equity |
||||||||||||||||||||
Mortgage notes payable |
$ | 855,032 | $ | 903,985 | $ | 1,005,569 | $ | 873,863 | $ | 878,545 | ||||||||||
Senior unsecured notes |
588,335 | 237,667 | 236,999 | | | |||||||||||||||
Unsecured revolving credit facility |
165,000 | | | | | |||||||||||||||
Term loan and credit facility |
| 470,000 | 355,600 | 355,000 | 325,000 | |||||||||||||||
Accounts payable and accrued expenses |
101,797 | 96,563 | 97,413 | 74,807 | 71,712 | |||||||||||||||
Acquired below-market leases, net |
129,736 | 138,859 | 148,493 | 120,219 | 125,106 | |||||||||||||||
Deferred revenue and other liabilities |
20,994 | 27,876 | 24,728 | 18,722 | 22,574 | |||||||||||||||
Tenants security deposits |
44,388 | 40,448 | 40,111 | 34,170 | 32,939 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
1,905,282 | 1,915,398 | 1,908,913 | 1,476,781 | 1,455,876 | |||||||||||||||
Total equity |
1,367,706 | 1,381,097 | 1,393,103 | 999,844 | 994,540 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities and equity |
$ | 3,272,988 | $ | 3,296,495 | $ | 3,302,016 | $ | 2,476,625 | $ | 2,450,416 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Page 16
First Quarter 2015
Condensed Consolidated Statements of Income
(unaudited and in thousands, except per share amounts)
Three Months Ended | ||||||||||||||||||||
March 31, 2015 |
December 31, 2014 |
September 30, 2014 |
June 30, 2014 |
March 31, 2014 |
||||||||||||||||
Revenues |
||||||||||||||||||||
Rental revenue |
$ | 110,058 | $ | 112,259 | $ | 106,152 | $ | 92,210 | $ | 90,204 | ||||||||||
Tenant expense reimbursement |
18,200 | 18,160 | 20,034 | 14,304 | 15,153 | |||||||||||||||
Observatory revenue |
18,223 | 28,167 | 35,684 | 30,389 | 17,301 | |||||||||||||||
Construction revenue |
1,607 | 4,918 | 5,804 | 12,963 | 14,963 | |||||||||||||||
Third party management and other fees |
446 | 451 | 561 | 753 | 611 | |||||||||||||||
Other revenue and fees |
3,348 | 6,456 | 1,206 | 4,549 | 2,074 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total revenues |
151,882 | 170,411 | 169,441 | 155,168 | 140,306 | |||||||||||||||
Operating expenses |
||||||||||||||||||||
Property operating expenses |
42,452 | 41,748 | 38,291 | 35,149 | 35,860 | |||||||||||||||
Ground rent expenses |
2,331 | 2,375 | 2,066 | 447 | 451 | |||||||||||||||
Marketing, general, and administrative expenses |
9,100 | 9,251 | 10,071 | 9,560 | 10,155 | |||||||||||||||
Observatory expenses |
6,977 | 7,831 | 7,109 | 7,120 | 6,981 | |||||||||||||||
Construction expenses |
2,869 | 5,423 | 6,095 | 12,795 | 14,283 | |||||||||||||||
Real estate taxes |
22,978 | 23,702 | 21,870 | 18,186 | 18,373 | |||||||||||||||
Acquisition expenses |
| | 2,647 | 735 | | |||||||||||||||
Depreciation and amortization |
41,418 | 48,799 | 37,880 | 28,637 | 30,115 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
128,125 | 139,129 | 126,029 | 112,629 | 116,218 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating income |
23,757 | 31,282 | 43,412 | 42,539 | 24,088 | |||||||||||||||
Other income (expense) |
||||||||||||||||||||
Interest expense |
(16,047 | ) | (19,816 | ) | (17,674 | ) | (14,629 | ) | (14,337 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income before income taxes |
7,710 | 11,466 | 25,738 | 27,910 | 9,751 | |||||||||||||||
Income tax (expense) benefit |
178 | (502 | ) | (3,004 | ) | (2,629 | ) | 1,480 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
7,888 | 10,964 | 22,734 | 25,281 | 11,231 | |||||||||||||||
Perpetual preferred unit distributions |
(234 | ) | (235 | ) | (241 | ) | | | ||||||||||||
Net income attributable to non-controlling interests |
(4,516 | ) | (6,587 | ) | (14,171 | ) | (15,447 | ) | (6,862 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income attributable to Empire State Realty Trust, Inc. |
$ | 3,138 | $ | 4,142 | $ | 8,322 | $ | 9,834 | $ | 4,369 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Weighted average common shares outstanding |
||||||||||||||||||||
Basic |
109,400 | 103,022 | 97,729 | 95,573 | 95,466 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Diluted |
265,810 | 265,779 | 263,041 | 245,941 | 244,425 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income per share attributable to Empire State Realty Trust, Inc. |
||||||||||||||||||||
Basic and Diluted |
$ | 0.03 | $ | 0.04 | $ | 0.09 | $ | 0.10 | $ | 0.05 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Dividends per share |
$ | 0.085 | $ | 0.085 | $ | 0.085 | $ | 0.085 | $ | 0.085 | ||||||||||
|
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|
|
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|
|
|
|
|
Page 17
First Quarter 2015
Funds from Operations (FFO), Modified Funds From Operations (Modified FFO), Core Funds from
Operations (Core FFO), Core Funds Available for Distribution (Core FAD) and EBITDA
(unaudited and in thousands, except per share amounts)
Three Months Ended | ||||||||||||||||||||
March 31, 2015 |
December 31, 2014 |
September 30, 2014 |
June 30, 2014 |
March 31, 2014 |
||||||||||||||||
Reconciliation of Net Income to FFO, Modified FFO and Core FFO |
||||||||||||||||||||
Net Income |
$ | 7,888 | $ | 10,964 | $ | 22,734 | $ | 25,281 | $ | 11,231 | ||||||||||
Preferred unit distributions |
(234 | ) | (235 | ) | (241 | ) | | | ||||||||||||
Real estate depreciation and amortization |
41,233 | 48,711 | 37,797 | 28,556 | 30,052 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
FFO |
48,887 | 59,440 | 60,290 | 53,837 | 41,283 | |||||||||||||||
Amortization of below-market ground lease |
1,958 | 2,001 | 1,750 | 426 | 426 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Modified FFO |
50,845 | 61,441 | 62,040 | 54,263 | 41,709 | |||||||||||||||
Deferred financing costs write-off and prepayment penalty |
1,345 | 3,771 | | | | |||||||||||||||
Construction severance expenses, net of taxes |
480 | | | | | |||||||||||||||
Gain on settlement of lawsuit related to the Observatory, |
||||||||||||||||||||
net of income taxes |
| | | (540 | ) | | ||||||||||||||
Private perpetual preferred exchange offering expenses |
| | 407 | 950 | | |||||||||||||||
Acquisition expenses |
| | 2,647 | 735 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Core FFO |
$ | 52,670 | $ | 65,212 | $ | 65,094 | $ | 55,408 | $ | 41,709 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total weighted average shares and Operating Partnership Units |
||||||||||||||||||||
Basic and Diluted |
265,810 | 265,779 | 263,041 | 245,941 | 244,425 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
FFO per share |
||||||||||||||||||||
Basic and Diluted |
$ | 0.18 | $ | 0.22 | $ | 0.23 | $ | 0.22 | $ | 0.17 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Modified FFO per share |
||||||||||||||||||||
Basic and Diluted |
$ | 0.19 | $ | 0.23 | $ | 0.24 | $ | 0.22 | $ | 0.17 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Core FFO per share |
||||||||||||||||||||
Basic and Diluted |
$ | 0.20 | $ | 0.25 | $ | 0.25 | $ | 0.23 | $ | 0.17 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reconciliation of Core FFO to Core FAD |
||||||||||||||||||||
Core FFO |
$ | 52,670 | $ | 65,212 | $ | 65,094 | $ | 55,408 | $ | 41,709 | ||||||||||
Add: |
||||||||||||||||||||
Amortization of deferred financing costs |
1,076 | 1,541 | 2,653 | 1,375 | 1,090 | |||||||||||||||
Non-real estate depreciation and amortization |
185 | 88 | 83 | 80 | 65 | |||||||||||||||
Amortization of non-cash compensation expense |
1,694 | 813 | 939 | 944 | 1,025 | |||||||||||||||
Amortization of debt discount |
668 | 668 | 356 | | | |||||||||||||||
Deduct: |
||||||||||||||||||||
Straight-line rental revenues |
(4,102 | ) | (7,613 | ) | (8,543 | ) | (10,979 | ) | (12,580 | ) | ||||||||||
Amortization of debt premiums |
(1,869 | ) | (1,753 | ) | (1,622 | ) | (738 | ) | (556 | ) | ||||||||||
Above/below-market rent revenue |
(5,291 | ) | (5,613 | ) | (4,568 | ) | (2,028 | ) | (1,884 | ) | ||||||||||
FF&E purchases |
| | | (3 | ) | (6 | ) | |||||||||||||
Tenant improvementssecond generation |
(1,681 | ) | (1,020 | ) | (3,090 | ) | (3,250 | ) | (1,038 | ) | ||||||||||
Building improvementssecond generation |
(333 | ) | (2,391 | ) | (893 | ) | (344 | ) | (1,106 | ) | ||||||||||
Leasing commissionssecond generation |
(372 | ) | (386 | ) | (1,401 | ) | (1,229 | ) | (880 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Core FAD |
$ | 42,645 | $ | 49,546 | $ | 49,008 | $ | 39,236 | $ | 25,839 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Core FAD per share |
||||||||||||||||||||
Basic and Diluted |
$ | 0.16 | $ | 0.19 | $ | 0.19 | $ | 0.16 | $ | 0.11 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reconciliation of Net Income to EBITDA |
||||||||||||||||||||
Net income |
$ | 7,888 | $ | 10,964 | $ | 22,734 | $ | 25,281 | $ | 11,231 | ||||||||||
Perpetual preferred unit distributions |
(234 | ) | (235 | ) | (241 | ) | | | ||||||||||||
Interest expense |
16,047 | 19,816 | 17,674 | 14,629 | 14,337 | |||||||||||||||
Income tax expense (benefit) |
(178 | ) | 502 | 3,004 | 2,629 | (1,480 | ) | |||||||||||||
Depreciation and amortization |
41,418 | 48,799 | 37,880 | 28,637 | 30,115 | |||||||||||||||
Acquisition expenses |
| | 2,647 | 735 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
EBITDA |
$ | 64,941 | $ | 79,846 | $ | 83,698 | $ | 71,911 | $ | 54,203 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Page 18
First Quarter 2015
Net Operating Income (NOI)
(unaudited and dollars in thousands)
Three Months Ended | ||||||||||||||||||||
March 31, 2015 |
December 31, 2014 |
September 30, 2014 |
June 30, 2014 |
March 31, 2014 |
||||||||||||||||
Reconciliation of Net Income to NOI, Cash NOI and Same Store Cash NOI |
||||||||||||||||||||
Net income |
$ | 7,888 | $ | 10,964 | $ | 22,734 | $ | 25,281 | $ | 11,231 | ||||||||||
Add: |
||||||||||||||||||||
Marketing, general and administrative expenses |
9,100 | 9,251 | 10,071 | 9,560 | 10,155 | |||||||||||||||
Depreciation and amortization |
41,418 | 48,799 | 37,880 | 28,637 | 30,115 | |||||||||||||||
Interest expense |
16,047 | 19,816 | 17,674 | 14,629 | 14,337 | |||||||||||||||
Construction expenses |
2,869 | 5,423 | 6,095 | 12,795 | 14,283 | |||||||||||||||
Acquisition expenses |
| | 2,647 | 735 | | |||||||||||||||
Income tax expense (benefit) |
(178 | ) | 502 | 3,004 | 2,629 | (1,480 | ) | |||||||||||||
Less: |
||||||||||||||||||||
Construction revenue |
(1,607 | ) | (4,918 | ) | (5,804 | ) | (12,963 | ) | (14,963 | ) | ||||||||||
Third-party management and other fees |
(446 | ) | (451 | ) | (561 | ) | (753 | ) | (611 | ) | ||||||||||
Gain on settlement of lawsuit related to the Observatory |
| | | (975 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net operating income |
75,091 | 89,386 | 93,740 | 79,575 | 63,067 | |||||||||||||||
Straight-line rent |
(4,102 | ) | (7,613 | ) | (8,543 | ) | (10,979 | ) | (12,580 | ) | ||||||||||
Above/below-market lease amortization |
(5,291 | ) | (5,613 | ) | (4,568 | ) | (2,028 | ) | (1,884 | ) | ||||||||||
Below-market ground lease amortization |
1,958 | 2,001 | 1,750 | 426 | 426 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash net operating income |
67,656 | 78,161 | 82,379 | 66,994 | 49,029 | |||||||||||||||
Less: 112 West 34th St. and 1400 Broadway cash NOI |
(8,479 | ) | (7,553 | ) | (7,381 | ) | | | ||||||||||||
Less: Observatory NOI |
(11,246 | ) | (20,336 | ) | (28,575 | ) | (23,269 | ) | (10,320 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total portfolio (excluding observatory) same-store cash net operating income |
$ | 47,931 | $ | 50,272 | $ | 46,423 | $ | 43,725 | $ | 38,709 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Page 19
First Quarter 2015
Debt Summary
(unaudited and dollars in thousands)
March 31, 2015 | December 31, 2014 | |||||||||||||||||||||||
Weighted Average | Weighted Average | |||||||||||||||||||||||
Interest | Maturity | Interest | Maturity | |||||||||||||||||||||
Debt Summary |
Balance | Rate | (Years) | Balance | Rate | (Years) | ||||||||||||||||||
Fixed rate mortgage debt |
$ | 743,979 | 5.53 | % | 3.5 | $ | 746,916 | 5.53 | % | 3.7 | ||||||||||||||
Senior unsecured notes |
600,000 | 3.47 | % | 9.1 | 250,000 | 2.63 | % | 4.6 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total fixed rate debt |
1,343,979 | 4.61 | % | 6.0 | 996,916 | 4.80 | % | 3.9 | ||||||||||||||||
Variable rate mortgage debt |
91,000 | 1.53 | % | 2.6 | 135,146 | 1.65 | % | 1.9 | ||||||||||||||||
Unsecured revolving credit facility |
165,000 | 1.33 | % | 3.8 | | | | |||||||||||||||||
Term loan and credit facility |
| | | 470,000 | 1.46 | % | 3.4 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total variable rate debt |
256,000 | 1.40 | % | 3.4 | 605,146 | 1.50 | % | 3.1 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total debt |
1,599,979 | 4.10 | % | 5.6 | 1,602,062 | 3.55 | % | 3.6 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Premium/discount |
8,388 | 9,590 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
$ | 1,608,367 | $ | 1,611,652 | ||||||||||||||||||||
|
|
|
|
Available Capacity |
Facility | Outstanding at March 31, 2015 |
Letters of Credit |
Available Capacity at March 31, 2015 |
||||||||||||
Unsecured revolving credit facility (1) |
$ | 800,000 | $ | 165,000 | $ | | $ | 635,000 | ||||||||
|
|
|
|
|
|
|
|
Current | In | |||||||||||
Covenant Summary |
Required | Quarter | Compliance | |||||||||
Maximum Total Leverage (2) |
< 60% | 30.8% | Yes | |||||||||
Maximum Secured Debt |
< 40% | 16.4% | Yes | |||||||||
Minimum Fixed Charge Coverage |
> 1.50x | 4.1x | Yes | |||||||||
Minimum Unencumbered Interest Coverage |
> 1.75x | 8.7x | Yes | |||||||||
Maximum Unsecured Leverage |
< 60% | 28.0% | Yes | |||||||||
Maximum Secured Recourse Indebtedness |
< 10% | 0% | Yes | |||||||||
Minimum Tangible Net Worth |
$ | 745,356 | $ | 920,498 | Yes |
Notes:
(1) | The unsecured revolving credit facility has an accordion feature allowing for an increase in maximum aggregate principal balance to $1.25 billion under certain circumstances. This facility matures in January 2019 with two additional six-month extension options. |
(2) | Represents the ratio of total indebtedness to total asset value as defined and determined in accordance with the credit facility agreement. |
Page 20
First Quarter 2015
Debt Detail
(unaudited and dollars in thousands)
Stated Interest Rate (%) |
Current Interest Rate (%) |
Principal Balance |
Maturity Date |
Amortization | ||||||||||||||||
Fixed rate mortgage debt: |
||||||||||||||||||||
10 Union Square |
6.00 | % | 6.00 | % | $ | 20,551 | 5/1/2017 | 30 years | ||||||||||||
10 Bank Street |
5.72 | % | 5.72 | % | 32,692 | 6/1/2017 | 30 years | |||||||||||||
1542 Third Avenue |
5.90 | % | 5.90 | % | 18,525 | 6/1/2017 | 30 years | |||||||||||||
First Stamford Place |
5.65 | % | 5.65 | % | 241,384 | 7/5/2017 | 30 years | |||||||||||||
383 Main Avenue, Norwalk, CT |
5.59 | % | 5.59 | % | 29,709 | 7/5/2017 | 30 years | |||||||||||||
1010 Third Avenue and 77 West 55th Street |
5.69 | % | 5.69 | % | 27,465 | 7/5/2017 | 30 years | |||||||||||||
1333 Broadway |
6.32 | % | 6.32 | % | 69,348 | 1/5/2018 | 30 years | |||||||||||||
1400 Broadway (first lien mortgage loan) |
6.12 | % | 6.12 | % | 69,455 | 2/5/2018 | 30 years | |||||||||||||
1400 Broadway (second lien mortgage loan) |
3.35 | % | 3.35 | % | 9,753 | 2/5/2018 | 30 years | |||||||||||||
112 West 34th Street (first lien mortgage loan) |
6.01 | % | 6.01 | % | 77,221 | 4/5/2018 | 30 years | |||||||||||||
112 West 34th Street (second lien mortgage loan) |
6.56 | % | 6.56 | % | 9,733 | 4/5/2018 | 30 years | |||||||||||||
1350 Broadway |
5.87 | % | 5.87 | % | 38,765 | 4/5/2018 | Interest only | |||||||||||||
Metro Center |
3.59 | % | 3.59 | % | 99,378 | 11/5/2024 | 30 years | |||||||||||||
|
|
|||||||||||||||||||
Total fixed rate mortgage debt |
743,979 | |||||||||||||||||||
Variable rate mortgage debt: |
||||||||||||||||||||
One Grand Central Place |
LIBOR plus 1.35 | % | 1.53 | % | 91,000 | 11/5/2017 | Interest only | |||||||||||||
|
|
|||||||||||||||||||
Total variable rate mortgage debt |
91,000 | |||||||||||||||||||
|
|
|||||||||||||||||||
Total mortgage debt |
834,979 | |||||||||||||||||||
Unsecured Revolving Credit Facility |
LIBOR plus 1.15 | % | 1.33 | % | 165,000 | 1/23/2019 | Interest only | |||||||||||||
Exchangeable senior unsecured notes |
2.63 | % | 2.63 | % | 250,000 | 8/15/2019 | Interest only | |||||||||||||
Senior unsecured notes (Series A) |
3.93 | % | 3.93 | % | 100,000 | 3/27/2025 | Interest only | |||||||||||||
Senior unsecured notes (Series B) |
4.09 | % | 4.09 | % | 125,000 | 3/27/2027 | Interest only | |||||||||||||
Senior unsecured notes (Series C) |
4.18 | % | 4.18 | % | 125,000 | 3/27/2030 | Interest only | |||||||||||||
|
|
|
|
|||||||||||||||||
Total / weighted average debt |
4.10 | % | 1,599,979 | |||||||||||||||||
|
|
|||||||||||||||||||
Premium/discounts |
8,388 | |||||||||||||||||||
|
|
|||||||||||||||||||
Total |
$ | 1,608,367 | ||||||||||||||||||
|
|
Page 21
First Quarter 2015
Debt Maturities and Ground Lease Commitments
(unaudited and dollars in thousands)
Year |
Amortization | Maturities (1) | Total | Percentage of Total Debt |
Weighted Average Interest Rate of Maturing Debt |
|||||||||||||||
2015 |
$ | 8,833 | $ | | $ | 8,833 | 0.6 | % | n/a | |||||||||||
2016 |
12,387 | | 12,387 | 0.8 | % | n/a | ||||||||||||||
2017 |
10,070 | 446,761 | 456,831 | 28.6 | % | 4.87 | % | |||||||||||||
2018 |
2,880 | 262,210 | 265,090 | 16.6 | % | 6.02 | % | |||||||||||||
2019 |
2,188 | 415,000 | 417,188 | 26.1 | % | 2.11 | % | |||||||||||||
Thereafter |
11,975 | 427,675 | 439,650 | 27.5 | % | 3.97 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total debt |
$ | 48,333 | $ | 1,551,646 | 1,599,979 | 100.0 | % | 4.10 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Premium/discount |
8,388 | |||||||||||||||||||
|
|
|||||||||||||||||||
Total |
$ | 1,608,367 | ||||||||||||||||||
|
|
Note:
(1) | Assumes no extension options are exercised. |
Debt Maturity Profile
Ground Lease Commitments
Year |
1350 Broadway |
1400 Broadway |
112 West 34th Street |
Total | ||||||||||||
2015 |
$ | 81 | $ | 506 | $ | 551 | $ | 1,138 | ||||||||
2016 |
108 | 675 | 735 | 1,518 | ||||||||||||
2017 |
108 | 675 | 735 | 1,518 | ||||||||||||
2018 |
108 | 675 | 735 | 1,518 | ||||||||||||
2019 |
108 | 675 | 735 | 1,518 | ||||||||||||
Thereafter |
2,547 | 13,500 | 42,201 | 58,248 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 3,060 | $ | 16,706 | $ | 45,692 | $ | 65,458 | |||||||||
|
|
|
|
|
|
|
|
Page 22
First Quarter 2015
Supplemental Definitions
Funds From Operations (FFO)
We compute FFO in accordance with the White Paper on FFO published by the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding impairment writedowns of investments in depreciable real estate and investments in in-substance real estate investments, gains or losses from debt restructurings and sales of depreciable operating properties, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), less distributions to non-controlling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships and joint ventures. FFO is a widely recognized non-GAAP financial measure for REITs that we believe, when considered with financial statements determined in accordance with GAAP, is useful to investors in understanding financial performance and providing a relevant basis for comparison among REITs. In addition, FFO is useful to investors as it captures features particular to real estate performance by recognizing that real estate has generally appreciated over time or maintains residual value to a much greater extent than do other depreciable assets. Investors should review FFO, along with GAAP net income, when trying to understand an equity REITs operating performance. We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results of operations, the utility of FFO as a measure of its performance is limited. There can be no assurance that FFO presented by us is comparable to similarly titled measures of other REITs. FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. Although FFO is a measure used for comparability in assessing the performance of REITs, as the NAREIT White Paper only provides guidelines for computing FFO, the computation of FFO may vary from one company to another.
Modified Funds From Operations (Modified FFO)
Modified FFO adds back an adjustment for any above or below-market ground lease amortization to traditionally defined FFO. We consider this a useful supplemental measure in evaluating our operating performance due to the non-cash accounting treatment under GAAP, which stems from the July 2014 acquisition of two properties as they carry significantly below market ground leases, the amortization of which is material to our overall results. We present Modified FFO because we consider it an important supplemental measure of our operating performance in that it adds back the non-cash amortization of below-market ground leases. There can be no assurance that Modified FFO presented by us is comparable to similarly titled measures of other REITs. Modified FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Modified FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions.
Core Funds From Operations (Core FFO)
Core FFO adds back to Modified FFO the following items associated with the Companys initial public offering, or IPO, and formation transactions: gain on consolidation of non-controlling entities, acquisition expenses, severance expenses and retirement equity compensation expenses. It also adds back private perpetual preferred exchange offering expenses, acquisition expenses, and gain on settlement of lawsuit related to the Observatory, net of income taxes, deferred financing cost write-off, prepayment penalties and construction severance expenses. The Company presents Core FFO because it considers it an important supplemental measure of its operating performance in that it excludes items associated with its IPO and formation transactions and other non-recurring items. There can be no assurance that Core FFO presented by the Company is comparable to similarly titled measures of other REITs. Core FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Core FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. In future periods, we may also exclude other items from Core FFO that we believe may help investors compare our results.
Core Funds Available for Distribution (Core FAD)
In addition to Core FFO, we present Core FAD by (i) adding to Core FFO non-real estate depreciation and amortization, the amortization of deferred financing costs, amortization of debt discounts and non-cash compensation expenses and (ii) deducting straight line rent, recurring second generation leasing commissions, tenant improvements, prebuilts, capital expenditures, furniture, fixtures & equipment, amortization of debt premiums and above/below market rent revenue. Core FAD is presented solely as a supplemental disclosure that we believe provides useful information regarding our ability to fund our dividends. Core FAD does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Core FAD is not indicative of cash available to fund ongoing cash needs., including the ability to make cash distributions. There can be no assurance that Core FAD presented by us is comparable to similarly titled measures of other REITs.
Net Operating Income (NOI)
NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by; (i) the cost of funds of the property owner, (i) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (iii) acquisition expenses, or (iv) general and administrative expenses and other gains and losses that are specific to the property owner. The cost of funds is eliminated from net operating income because it is specific to the particular financing capabilities and constraints of the owner. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our office or retail properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed, purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue, generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness. NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income computed in accordance with GAAP. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not-be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.
EBITDA
We compute EBITDA as net income plus perpetual preferred unit distributions, interest expense, income taxes, depreciation and amortization and acquisition expenses. We presents EBITDA because we believe that EBITDA, along with cash flow from operating activities, investing activities and financing activities, provides investors with an additional indicator of its ability to incur and service debt. EBITDA should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of its liquidity.
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