EX-99.1 2 d284704dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

EMPIRE STATE REALTY TRUST ANNOUNCES THIRD QUARTER 2016 RESULTS

- Reports Earnings Per Share of $0.12 Per Fully Diluted Share -

- Reports Core FFO of $0.26 Per Fully Diluted Share -

- Leased 348,770 Square Feet of Office and Retail Space -

- Achieved a 59.3% Increase in Mark-To-Market Rent on New Manhattan Office Leases -

- Secured a $622 Million Equity Investment from an affiliate of Qatar Investment Authority -

New York, New York, November 2, 2016 - Empire 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 its operational and financial results for the third quarter of 2016.

“We are pleased with our strong third quarter results, which reflect the continued successful execution of our strategy as we consolidate, redevelop and re-lease space to larger, higher credit quality tenants at materially higher rents. We saw another solid quarter of concluded leases and new leasing activity as our newly renovated space allowed us to achieve market-leading spreads on new Manhattan office and total portfolio leases of 59.3% and 30.2%, respectively, this quarter. Prospective tenants continued to be attracted to our modernized spaces within well-located, redeveloped amenity-rich office buildings,” stated John B. Kessler, Empire State Realty Trust’s President and Chief Operating Officer.

“For the year-to-date Observatory revenues grew 7.8% driven by increased tourist visits, improved revenue mix and favorable weekend weather conditions. As previously disclosed, on August 23rd we closed on a $622 million new issuance of common shares to an affiliate of the Qatar Investment Authority, and our performance for the quarter represents one month of our increased share count from that investment. Additionally, as we previously disclosed, we increased the capacity of our line of credit from $800 million to $1.1 billion. As we continue to unlock the embedded, de-risked growth within our portfolio, the added strength and flexibility in our balance sheet positions us to create long-term value for our shareholders,” added Kessler.

 

1


LOGO

 

Third Quarter Highlights

 

    Achieved net income attributable to the Company of $0.12 per fully diluted share and Core Funds From Operations (“Core FFO”) of $0.26 per fully diluted share.

 

    This reflects our increased share count from the issuance of 9.9% of fully diluted shares on August 23rd.

 

    Occupancy and leased percentages at September 30, 2016:

 

    Total portfolio was 87.9% occupied; including signed leases not commenced (“SLNC”), the total portfolio was 90.3% leased.

 

    Manhattan office portfolio (excluding the retail component of these properties) was 86.6% occupied; including SLNC, the Manhattan office portfolio was 89.5% leased.

 

    Retail portfolio was 86.3% occupied; including SLNC, the retail portfolio was 88.3% leased.

 

    Empire State Building was 90.1% occupied; including SLNC, the Empire State Building was 91.5% leased.

 

    Executed 51 leases, representing 348,770 rentable square feet across the total portfolio, achieving a portfolio-wide 30.2% increase in mark-to-market rent over previous fully escalated rents on new, renewal, and expansion leases.

 

    Signed 20 new leases representing 224,125 rentable square feet in the third quarter 2016 for the Manhattan office portfolio (excluding the retail component of these properties), achieving an increase of 59.3% in mark-to-market rent over previous fully escalated rents.

 

    The Empire State Building Observatory revenue for the third quarter 2016 grew 6.7% to $38.1 million from $35.7 million in the third quarter 2015.

 

    Issued 29,610,854 Class A common shares at $21.00 per share in a private placement transaction with an affiliate of the Qatar Investment Authority which raised approximately $622 million in gross proceeds.

 

    Increased the Company’s committed borrowing capacity under the unsecured revolving credit facility from $800 million to $1.1 billion.

 

    Declared a dividend in the amount of $0.105 per share for the third quarter 2016.

 

2


LOGO

 

Financial Results for the Third Quarter 2016

Net income attributable to common stockholders was $16.0 million, or $0.12 per fully diluted share, compared to $11.2 million, or $0.10 per fully diluted share, in the third quarter of 2015.

Core FFO was $71.9 million, or $0.26 per fully diluted share, compared to $70.6 million, or $0.27 per fully diluted share, in the third quarter of 2015.

Modified FFO was $71.9 million, or $0.26 per fully diluted share, compared to $72.9 million, or $0.27 per fully diluted share, in the third quarter of 2015.

FFO was $70.0 million, or $0.25 per fully diluted share, compared to $70.9 million, or $0.27 per fully diluted share, in the third quarter of 2015.

A reconciliation of net income to FFO, Modified FFO and Core FFO is provided in the tables accompanying this press release.

Financial Results for the Nine Months Ended September 30, 2016

Net income attributable to common stockholders was $34.5 million, or $0.27 per fully diluted share, compared to $25.5 million, or $0.22 per fully diluted share, in the nine months ended September 30, 2015.

Core FFO was $194.8 million, or $0.72 per fully diluted share, compared to $191.5 million, or $0.72 per fully diluted share, in the nine months ended September 30, 2015.

Modified FFO was $194.2 million, or $0.72 per fully diluted share, compared to $191.6 million, or $0.72 per fully diluted share, in the nine months ended September 30, 2015.

FFO was $188.3 million, or $0.69 per fully diluted share, compared to $185.7 million, or $0.70 per fully diluted share, in the nine months ended September 30, 2015.

 

3


LOGO

 

Portfolio Operations

As of September 30, 2016, the Company’s total portfolio contained 10.1 million rentable square feet of office and retail space. The Company’s occupancy levels fluctuate in certain periods due to the timing lag that exists between when tenants move out and before the Company completes redevelopment work and new leases commence. As of September 30, 2016, the Company’s portfolio was occupied and leased as follows. Leased percentages include signed leases not commenced.

 

     September 30, 2016     June 30, 2016     September 30, 2015  

Percent occupied:

      

Total portfolio

     87.9     86.6     87.4

Total office

     88.0     86.9     87.0

Manhattan office

     86.6     84.9     85.4

Empire State Building

     90.1     88.7     83.7

Retail

     86.3     83.6     92.7

Percent leased:

      

Total portfolio

     90.3     89.4     90.0

Total office

     90.4     89.6     89.7

Manhattan office

     89.5     88.4     88.4

Empire State Building

     91.5     90.7     91.2

Retail

     88.3     86.0     94.6

Leasing

For the three months ended September 30, 2016, the Company executed 51 new, renewal, and expansion leases within the total portfolio, comprising 348,770 rentable square feet with an average starting rental rate of $57.61 per rentable square foot, representing an increase of 30.2% over the prior in-place rent on a fully escalated basis.

On a blended basis, the 45 new, renewal, and expansion office leases signed within the total portfolio during the quarter had an average starting rental rate of $54.12 per rentable square foot, representing an increase of 41.6% over the prior in-place rent on a fully escalated basis.

 

4


LOGO

 

On a blended basis, the six new, and renewal retail leases signed within the total portfolio during the quarter had a starting rental rate of $99.07 per rentable square foot, representing a decrease of 19.0% over the prior in-place rent on a fully escalated basis.

Leases Signed in the Third Quarter 2016 for the Manhattan Office Portfolio

 

    20 new leases comprising 224,125 rentable square feet, with an average starting rental rate of $60.46 per rentable square foot, representing an increase of 59.3% over the prior in-place rent on a fully escalated basis, and

 

    17 renewal leases, comprising 40,459 rentable square feet, with an average starting rental rate of $49.62 per rentable square foot, representing an increase of 8.3% over the prior in-place rent on a fully escalated basis.

Significant Leases Executed During the Third Quarter 2016

 

    At 111 West 33rd Street, the Company signed a new lease totaling 86,492 rentable square feet with the Michael J. Fox Foundation for Parkinson’s Research for a term of 12.5 years.

 

    At the Empire State Building, the Company signed a new lease for two full floors, totaling 46,537 rentable square feet, with JCDecaux, for a term of 16.0 years.

 

    At 1359 Broadway, the Company signed a new full floor lease, totaling 24,169 rentable square feet, with Sisense, Inc., for a term of 10.3 years.

Empire State Building

The Company continues to renovate and lease the 2.8 million rentable square foot Empire State Building, its flagship property. At September 30, 2016, the Empire State Building was 90.1% occupied; including SLNC, the Empire State Building was 91.5% leased.

During the third quarter 2016, the Company executed three office leases at the Empire State Building, representing 51,093 rentable square feet in the aggregate.

 

5


LOGO

 

The Observatory revenue for the third quarter 2016 grew 6.7% to $38.1 million, from $35.7 million in the third quarter 2015. The Observatory hosted approximately 1,340,000 visitors in the third quarter 2016 compared to 1,327,000 visitors in the third quarter 2015, an increase of 1.0%. In the third quarter 2016, there were ten bad weather days, four of which fell on weekend days compared to six bad weather days, zero of which fell on weekend days, in the third quarter 2015.

For the nine months ended September 30, 2016, the Observatory hosted approximately 3,183,000 visitors, compared to 3,114,000 visitors for the same period in 2015, an increase of 2.2%. Observatory revenue was $91.1 million for the nine months ended September 30, 2016, a 7.8% increase from $84.5 million for the nine months ended September 30, 2015. The increase is a result of greater tourist visits, favorable weather conditions, and improved ticket mix. For the nine months ended September 30, 2016, there were 31 bad weather days, eight of which fell on weekend days compared to 52 bad weather days, 14 of which fell on weekend days, in the nine months ended September 30, 2015.

Balance Sheet

At September 30, 2016, there was no outstanding balance on the Company’s $1.1 billion unsecured revolving credit facility. On July 6, 2016, the Company increased its committed borrowing capacity under the unsecured revolving credit facility from $800 million to $1.1 billion. The unsecured revolving credit facility has an accordion feature allowing for an additional increase in its maximum aggregate principal balance to $1.25 billion under certain circumstances.

On August 23, 2016, an affiliate of Qatar Investment Authority purchased 29,610,854 newly issued Class A common shares at $21.00 per share, equivalent to a 9.9% economic interest in the Company on a fully diluted basis, and also received the right to vote 9.9% of Class A common shares of the company. The Company received approximately $621.8 million in gross proceeds from the sale. Proceeds from the investment were used to pay down the $45.0 million balance on the Company’s revolving credit facility. The Company intends to use the remaining proceeds for general corporate purposes, including redevelopment of the portfolio and future investments.

At September 30, 2016, the Company had total debt outstanding of approximately $1.6 billion, with a weighted average interest rate of 4.15% per annum, and a weighted average term to maturity of 4.9

 

6


LOGO

 

years. As of September 30, 2016, the Company had no debt maturing during 2016 and $336.0 million of debt maturing in 2017. As of September 30, 2016, the Company had cash and cash equivalents of $594.3 million. The Company’s consolidated net debt to total market capitalization was approximately 14% as of September 30, 2016 and consolidated net debt to EBITDA was 3.1x.

Dividend

On September 30, 2016, the Company paid a dividend of $0.105 per share for the third quarter 2016 to holders of the Company’s Class A common stock and Class B common stock and to holders of the operating partnership’s 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 third quarter 2016 to holders of the operating partnership’s 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 Thursday, November 3, 2016 at 8:30 am Eastern time.

The webcast will be available in the Investors section of the Company’s website at www.empirestaterealtytrust.com. To listen to a live broadcast, go to the site at least five 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 Company’s website.

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 13647068. A replay of the conference call will be available until November 10, 2016.

The Supplemental Report will be available prior to the conference call in the Investors section of the Company’s website, www.empirestaterealtytrust.com.

 

7


LOGO

 

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 world’s most famous building. Headquartered in New York, New York, the Company’s office and retail portfolio covers 10.1 million rentable square feet, as of September 30, 2016, consisting of 9.4 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 707,000 rentable square feet in the retail portfolio.

Forward-Looking Statements

This press release includes “forward looking statements” within the meaning of the federal securities laws. 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 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, the real estate markets, either nationally or in Manhattan or the greater New York metropolitan area; resolution of the litigations and arbitration involving the 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 our publicly-traded OP Units; changes in technology and market competition, which affect utilization of our broadcast or other facilities; changes in domestic or international tourism, including geopolitical events and currency exchange rates; defaults on, early terminations of, or non-renewal of leases by tenants; fluctuations in interest rates; declining real estate valuations and impairment charges; our failure to obtain necessary outside financing, including our unsecured revolving credit facility; decreased rental rates or increased vacancy rates; our failure to redevelop 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 development (including our Metro Tower development site), including the cost of construction delays and cost overruns; and conflicts of interest affecting any of our senior management team.

 

8


LOGO

 

While forward-looking statements reflect the Company’s 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 Company’s 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, 2015, 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

 

9


LOGO

 

Empire State Realty Trust, Inc.

Condensed Consolidated Statements of Income

(unaudited and amounts in thousands, except per share data)

 

     Three Months Ended September 30,  
     2016     2015  

Revenues

    

Rental revenue

   $ 115,634      $ 110,903   

Tenant expense reimbursement

     19,176        23,096   

Observatory revenue

     38,093        35,702   

Third-party management and other fees

     404        618   

Other revenue and fees

     2,541        5,460   
  

 

 

   

 

 

 

Total revenues

     175,848        175,779   

Operating expenses

    

Property operating expenses

     38,585        41,052   

Ground rent expenses

     2,331        2,331   

General and administrative expenses

     11,798        10,182   

Observatory expenses

     7,250        7,896   

Real estate taxes

     24,691        23,613   

Acquisition expenses

     —          193   

Depreciation and amortization

     37,607        45,169   
  

 

 

   

 

 

 

Total operating expenses

     122,262        130,436   
  

 

 

   

 

 

 

Total operating income

     53,586        45,343   

Interest expense

     (17,939     (16,680
  

 

 

   

 

 

 

Income before income taxes

     35,647        28,663   

Income tax expense

     (2,750     (2,578
  

 

 

   

 

 

 

Net income

     32,897        26,085   

Preferred unit distributions

     (234     (234

Net income attributable to non-controlling interests

     (16,690     (14,631
  

 

 

   

 

 

 

Net income attributable to common stockholders

   $ 15,973      $ 11,220   
  

 

 

   

 

 

 

Total weighted average shares

    

Basic

     136,831        115,900   
  

 

 

   

 

 

 

Diluted

     280,614        265,873   
  

 

 

   

 

 

 

Net income per share attributable to common stockholders

  

Basic

   $ 0.12      $ 0.10   
  

 

 

   

 

 

 

Diluted

   $ 0.12      $ 0.10   
  

 

 

   

 

 

 

For the three months ended September 30, 2015, certain Empire State Building public relations costs previously included in property operating expenses are included in observatory expenses. For the three months ended September 30, 2016 and 2015, these costs were $471 and $612, respectively.

 

10


LOGO

 

Empire State Realty Trust, Inc.

Condensed Consolidated Statements of Income

(unaudited and amounts in thousands, except per share data)

 

     Nine Months Ended September 30,  
     2016     2015  

Revenues

    

Rental revenue

   $ 343,155      $ 333,827   

Tenant expense reimbursement

     56,350        59,878   

Observatory revenue

     91,112        84,525   

Construction revenue

     —          1,981   

Third-party management and other fees

     1,372        1,658   

Other revenue and fees

     6,748        10,565   
  

 

 

   

 

 

 

Total revenues

     498,737        492,434   

Operating expenses

    

Property operating expenses

     115,075        120,341   

Ground rent expenses

     6,994        6,994   

General and administrative expenses

     35,623        28,395   

Observatory expenses

     21,900        23,391   

Construction expenses

     —          3,222   

Real estate taxes

     71,773        69,543   

Acquisition expenses

     98        193   

Depreciation and amortization

     115,382        126,216   
  

 

 

   

 

 

 

Total operating expenses

     366,845        378,295   
  

 

 

   

 

 

 

Total operating income

     131,892        114,139   

Interest expense

     (53,310     (50,298
  

 

 

   

 

 

 

Income before income taxes

     78,582        63,841   

Income tax expense

     (4,340     (3,283
  

 

 

   

 

 

 

Net income

     74,242        60,558   

Preferred unit distributions

     (702     (702

Net income attributable to non-controlling interests

     (39,050     (34,378
  

 

 

   

 

 

 

Net income attributable to common stockholders

   $ 34,490      $ 25,478   
  

 

 

   

 

 

 

Total weighted average shares

    

Basic

     126,740        112,741   
  

 

 

   

 

 

 

Diluted

     271,028        265,868   
  

 

 

   

 

 

 

Net income per share attributable to common stockholders

  

Basic

   $ 0.27      $ 0.23   
  

 

 

   

 

 

 

Diluted

   $ 0.27      $ 0.22   
  

 

 

   

 

 

 

For the nine months ended September 30, 2015, certain Empire State Building public relations costs previously included in property operating expenses are included in observatory expenses. For the nine months ended September 30, 2016 and 2015, these costs were $1,797 and $1,710, respectively.

 

11


LOGO

 

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 September 30,  
     2016     2015  

Net income

   $ 32,897      $ 26,085   

Preferred unit distributions

     (234     (234

Real estate depreciation and amortization

     37,318        45,072   
  

 

 

   

 

 

 

FFO attributable to common stockholders and non-controlling interests

     69,981        70,923   

Amortization of below-market ground leases

     1,957        1,957   
  

 

 

   

 

 

 

Modified FFO attributable to common stockholders and non-controlling interests

     71,938        72,880   

Acquisition break-up fee

     —          (2,500

Acquisition expenses

     —          193   
  

 

 

   

 

 

 

Core FFO attributable to common stockholders and non-controlling interests

   $ 71,938      $ 70,573   
  

 

 

   

 

 

 

Total weighted average shares

    

Basic

     278,739        265,873   
  

 

 

   

 

 

 

Diluted

     280,614        265,873   
  

 

 

   

 

 

 

FFO per share

  

Basic

   $ 0.25      $ 0.27   
  

 

 

   

 

 

 

Diluted

   $ 0.25      $ 0.27   
  

 

 

   

 

 

 

Modified FFO per share

    

Basic

   $ 0.26      $ 0.27   
  

 

 

   

 

 

 

Diluted

   $ 0.26      $ 0.27   
  

 

 

   

 

 

 

Core FFO per share

    

Basic

   $ 0.26      $ 0.27   
  

 

 

   

 

 

 

Diluted

   $ 0.26      $ 0.27   
  

 

 

   

 

 

 

 

12


LOGO

 

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)

 

     Nine Months Ended September 30,  
     2016     2015  

Net income

   $ 74,242      $ 60,558   

Preferred unit distributions

     (702     (702

Real estate depreciation and amortization

     114,779        125,847   
  

 

 

   

 

 

 

FFO attributable to common stockholders and non-controlling interests

     188,319        185,703   

Amortization of below-market ground leases

     5,873        5,873   
  

 

 

   

 

 

 

Modified FFO attributable to common stockholders and non-controlling interests

     194,192        191,576   

Acquisition break-up fee

     —          (2,500

Deferred financing cost write-off

     552        1,749   

Acquisition expenses

     98        193   

Construction severance expenses, net of income taxes

     —          480   
  

 

 

   

 

 

 

Core FFO attributable to common stockholders and non-controlling interests

   $ 194,842      $ 191,498   
  

 

 

   

 

 

 

Total weighted average shares

    

Basic

     270,388        265,868   
  

 

 

   

 

 

 

Diluted

     271,028        265,868   
  

 

 

   

 

 

 

FFO per share

  

Basic

   $ 0.70      $ 0.70   
  

 

 

   

 

 

 

Diluted

   $ 0.69      $ 0.70   
  

 

 

   

 

 

 

Modified FFO per share

  

Basic

   $ 0.72      $ 0.72   
  

 

 

   

 

 

 

Diluted

   $ 0.72      $ 0.72   
  

 

 

   

 

 

 

Core FFO per share

  

Basic

   $ 0.72      $ 0.72   
  

 

 

   

 

 

 

Diluted

   $ 0.72      $ 0.72   
  

 

 

   

 

 

 

 

13


LOGO

 

Empire State Realty Trust, Inc.

Condensed Consolidated Balance Sheets

(unaudited and amounts in thousands)

 

     September 30,     December 31,  
     2016     2015  

Assets

    

Commercial real estate properties, at cost

   $ 2,406,006      $ 2,276,330   

Less: accumulated depreciation

     (532,406     (465,584
  

 

 

   

 

 

 

Commercial real estate properties, net

     1,873,600        1,810,746   

Cash and cash equivalents

     594,297        46,685   

Restricted cash

     60,752        65,880   

Tenant and other receivables

     19,569        18,782   

Deferred rent receivables

     143,578        122,048   

Prepaid expenses and other assets

     33,685        50,460   

Deferred costs, net

     287,591        310,679   

Acquired below market ground leases, net

     378,018        383,891   

Goodwill

     491,479        491,479   
  

 

 

   

 

 

 

Total assets

   $ 3,882,569      $ 3,300,650   
  

 

 

   

 

 

 

Liabilities and equity

    

Mortgage notes payable, net

   $ 763,457      $ 747,661   

Senior unsecured notes, net

     589,546        587,018   

Unsecured term loan facility, net

     262,830        262,545   

Unsecured revolving credit facility, net

     —          35,192   

Accounts payable and accrued expenses

     154,573        111,099   

Acquired below market leases, net

     87,708        104,171   

Deferred revenue and other liabilities

     24,176        31,388   

Tenants’ security deposits

     47,440        48,890   
  

 

 

   

 

 

 

Total liabilities

     1,929,730        1,927,964   

Total equity

     1,952,839        1,372,686   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 3,882,569      $ 3,300,650   
  

 

 

   

 

 

 

 

14