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): July 25, 2018
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.) |
111 West 33rd Street, 12th Floor New York, New York |
10120 | |
(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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On July 25, 2018, Empire State Realty Trust, Inc. (the Company or we) issued a press release announcing its financial results for the second quarter 2018. 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 second quarter 2018 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 second quarter 2018 | |
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 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 third quarter 2014 acquisition of two option properties following our formation transactions 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: acquisition expenses, deferred tax asset write-off and loss on early extinguishment of debt. The Company presents Core FFO because it considers it an important supplemental measure of its operating performance in that it excludes 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 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, (ii) 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, loss on early extinguishment of debt and loss from derivative financial instruments, 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 NOI because it is specific to the particular financing capabilities and constraints of the owner. The cost of funds is 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
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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. Other companies may use different methods for calculating NOI or similarly titled measures and, accordingly, our NOI may not be comparable to similarly titled measures reported by other companies that do not define the measure exactly as we do.
EBITDA
We compute EBITDA as net income plus interest expense, income taxes and depreciation and amortization. We present 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: July 25, 2018 |
By: | /s/ David A. Karp | ||||
Name: David A. Karp | ||||||
Title: Executive Vice President and Chief Financial Officer |
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) | ||||||
By: |
Empire State Realty Trust, Inc., as general partner | |||||
Date: July 25, 2018 |
By: | /s/ David A. Karp | ||||
Name: David A. Karp | ||||||
Title: Executive Vice President and Chief Financial Officer |
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Exhibit 99.1
EMPIRE STATE REALTY TRUST ANNOUNCES SECOND QUARTER 2018 RESULTS
- Earnings of $0.10 Per Fully Diluted Share -
- Core FFO of $0.24 Per Fully Diluted Share -
- Leased 143,417 Square Feet of Office and Retail Space -
New York, New York, July 25, 2018 - 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 second quarter of 2018.
We continued to execute our long-term strategy to consolidate, redevelop and re-lease space to larger, higher credit quality tenants at higher rents and create long-term value for shareholders. During the quarter, we leased approximately 143,000 square feet of office and retail space that resulted in attractive spreads on both new Manhattan office and total portfolio leases of 26.5% and 17.9%, respectively. Our well-located, amenity-rich office buildings continue to draw a diverse group of prospective tenants. Our value price point between trophy Class A and Class B properties positions us well to capture steady tenant demand, stated John B. Kessler, Empire State Realty Trusts President and Chief Operating Officer.
Year-to-date, Observatory revenue increased 2.8% and Observatory net operating income increased 2.4%, as compared with the first half of 2017, driven by improved revenue mix despite slightly lower attendance. We are excited to open the new Observatory entrance in the third quarter, added Kessler. We continue to manage the business with a long-term perspective as we proactively position the balance sheet to fund our redevelopment program and allow for potential external growth opportunities.
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Second Quarter Highlights
| Achieved net income attributable to the Company of $0.10 per fully diluted share. |
| Core Funds From Operations (Core FFO) was $0.24 per fully diluted share. |
| Occupancy and leased percentages at June 30, 2018: |
| Total portfolio was 88.4% occupied; including signed leases not commenced (SLNC), the total portfolio was 91.4% leased. |
| Manhattan office portfolio (excluding the retail component of these properties) was 88.3% occupied; including SLNC, the Manhattan office portfolio was 91.9% leased. |
| Retail portfolio was 88.3% occupied; including SLNC, the retail portfolio was 91.1% leased. |
| Empire State Building was 92.9% occupied; including SLNC, was 94.6% leased. |
| Signed 37 leases, representing 143,417 rentable square feet across the total portfolio, and achieved a portfolio-wide 17.9% increase in mark-to-market rent over previous fully escalated rents on new, renewal, and expansion leases. |
| Signed 15 new leases representing 83,251 rentable square feet for the Manhattan office portfolio (excluding the retail component of these properties), and achieved an increase of 26.5% in mark-to-market rent over previous fully escalated rents. |
| Empire State Building Observatory revenue for the second quarter 2018 grew 3.6% to $35.2 million from $34.0 million in the second quarter 2017. |
| Declared a dividend of $0.105 per share. |
Financial Results for the Second Quarter 2018
Net income attributable to common stockholders was $16.7 million, or $0.10 per fully diluted share, compared to $16.6 million, or $0.10 per fully diluted share, in the second quarter of 2017.
Core FFO was $71.0 million, or $0.24 per fully diluted share, compared to $73.2 million, or $0.25 per fully diluted share, in the second quarter of 2017.
Modified FFO was $71.0 million, or $0.24 per fully diluted share, compared to $73.2 million, or $0.25 per fully diluted share, in the second quarter of 2017.
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FFO was $69.0 million, or $0.23 per fully diluted share, compared to $71.3 million, or $0.24 per fully diluted share, in the second quarter of 2017.
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 Six Months Ended June 30, 2018
Net income attributable to common stockholders was $26.4 million, or $0.16 per fully diluted share, compared to $26.6 million, or $0.17 per fully diluted share, in the six months ended June 30, 2017.
Core FFO was $130.2 million, or $0.44 per fully diluted share, compared to $134.5 million, or $0.45 per fully diluted share, in the six months ended June 30, 2017.
Modified FFO was $130.2 million, or $0.44 per fully diluted share, compared to $134.5 million, or $0.45 per fully diluted share, in the six months ended June 30, 2017.
FFO was $126.3 million, or $0.43 per fully diluted share, compared to $130.6 million, or $0.44 per fully diluted share, in the six months ended June 30, 2017.
Portfolio Operations
As of June 30, 2018, the Companys total portfolio contained 10.1 million rentable square feet of office and retail space. The Companys occupancy levels fluctuate in certain periods due to the timing lag that exists between the date of tenants move out and the date of Companys completion of redevelopment work for new leases to commence. As of June 30, 2018, the Companys portfolio was occupied and leased as follows. Leased percentages include signed leases not commenced.
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June 30, 2018 | March 31, 2018 | June 30, 2017 | ||||||||||
Percent occupied: |
||||||||||||
Total portfolio |
88.4 | % | 88.1 | % | 89.2 | % | ||||||
Total office |
88.4 | % | 88.0 | % | 88.7 | % | ||||||
Manhattan office |
88.3 | % | 87.3 | % | 88.3 | % | ||||||
Empire State Building |
92.9 | % | 92.8 | % | 92.1 | % | ||||||
Retail |
88.3 | % | 89.7 | % | 95.9 | % | ||||||
Percent leased: |
||||||||||||
Total portfolio |
91.4 | % | 91.5 | % | 91.3 | % | ||||||
Total office |
91.4 | % | 91.5 | % | 90.9 | % | ||||||
Manhattan office |
91.9 | % | 91.6 | % | 90.7 | % | ||||||
Empire State Building |
94.6 | % | 93.9 | % | 92.4 | % | ||||||
Retail |
91.1 | % | 91.4 | % | 96.0 | % |
Leasing
For the three months ended June 30, 2018, the Company signed 37 new, renewal, and expansion leases within the total portfolio, comprising 143,417 rentable square feet with an average starting rental rate of $55.99 per rentable square foot, representing an increase of 17.9% over the previous fully escalated rent.
On a blended basis, the 29 new, renewal, and expansion office leases, comprising 110,989 rentable square feet, signed within the Manhattan office portfolio during the second quarter, had an average starting rental rate of $60.53 per rentable square foot, representing an increase of 22.0% over the previous fully escalated rent.
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Leases Signed in the Second Quarter 2018 for the Manhattan Office Portfolio
| 15 new leases, comprising 83,251 rentable square feet, with an average starting rental rate of $62.88 per rentable square foot, representing an increase of 26.5% over the previous fully escalated rent, and |
| 14 renewal leases, comprising 27,738 rentable square feet, with an average starting rental rate of $53.48 per rentable square foot, representing an increase of 8.4% over the previous fully escalated rent. |
Significant Lease Executed During the Second Quarter 2018
| At Empire State Building, the Company signed a new full floor office lease, totaling 30,200 rentable square feet with LinkedIn, for a term of 7.5 years. |
Empire State Building
The Company continues to renovate and lease the 2.8 million rentable square foot Empire State Building, its flagship property. As previously announced, the Company has commenced the first phase of a capital project to enhance the experience of office and retail tenants and Observatory visitors. The first phase will move the Observatory entrance to a new, larger, designated entrance at the western side of the Empire State Building on 34th Street, which will improve the commercial tenant and office visitor experience and the value of the Empire State Buildings 34th Street retail. The Company expects the new entrance to open by the end of the third quarter of 2018.
During the second quarter 2018, the Company signed eight office leases at the Empire State Building, representing 46,643 rentable square feet in the aggregate.
Observatory revenue for the second quarter 2018 was $35.2 million, a 3.6% increase from $34.0 million in the second quarter 2017. The Observatory hosted approximately 1,078,000 visitors in the second quarter 2018 compared to 1,126,000 visitors in the second quarter 2017, a decrease of 4.3%. This year, the Easter holiday was spilt between the first and second quarters, whereas in 2017, the Easter holiday fell entirely within the second quarter. In the second quarter 2018, there were 11 bad weather days compared to 15 bad weather days in the second quarter 2017. For the second quarter 2018, the Company estimates that fewer bad weather days resulted in approximately nineteen thousand more visitors than in the prior year period.
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Observatory revenue was $56.5 million for the six months ended June 30, 2018, a 2.8% increase from $54.9 million for the six months ended June 30, 2017. The 102nd floor observation deck was closed in the first quarter of 2018 for the scheduled replacement of original elevator machinery with a new, higher speed glass elevator. Excluding first quarter revenue from the 102nd floor observation deck (which was $1.9 million in 2017), revenue would have increased 6.4% for the six months ended June 30, 2018 as compared with the same period in 2017. For the six months ended June 30, 2018, the Observatory hosted approximately 1,738,000 visitors, compared to 1,762,000 visitors for the same period in 2017, a decrease of 1.4%. For the six months ended June 30, 2018, there were 26 bad weather days compared to 37 bad weather days in the six months ended June 30, 2017.
Balance Sheet
At June 30, 2018, there was no outstanding balance under the Companys $1.1 billion unsecured revolving credit facility and $265 million outstanding under the term loan facility. The facilities have an accordion feature allowing for an additional increase in the maximum aggregate principal balance to $1.75 billion under certain circumstances. The Company held cash, cash equivalents and short-term investments of $651.8 million at June 30, 2018.
As of June 30, 2018, the Company had total debt outstanding of approximately $1.9 billion, with a weighted average interest rate of 3.84% per annum, and a weighted average term to maturity of 8.6 years. None of the Companys outstanding debt is subject to variable interest rates. At June 30, 2018, the Companys consolidated net debt to total market capitalization was approximately 19.7% and consolidated net debt to EBITDA was 3.6x.
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Dividend
On June 29, 2018, the Company paid a dividend of $0.105 per share for the second quarter 2018 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 second quarter 2018 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 Thursday, July 26, 2018 at 8:30 am Eastern time.
The webcast will be accessible in the Investors section of the Companys website at www.empirestaterealtytrust.com. To listen to the live webcast, 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 Companys website.
The conference call can also be accessed by dialing 1-877-407-3982 for domestic callers or 1-201-493-6780 for international callers. A dial-in replay will be available starting shortly after the call until August 2, 2018, which can be accessed by dialing 1-844-512-2921 for domestic callers or 1-412-317-6671 for international callers. The passcode for this dial-in replay is 13681494.
The Supplemental Report will be available prior to the conference call in the Investors section of the Companys website at 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 building.
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Headquartered in New York, New York, the Companys office and retail portfolio covers 10.1 million rentable square feet, as of June 30, 2018, 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 700,000 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 legal proceedings 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 operating partnership units; changes in our business strategy; 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; termination or expiration of our ground leases; our failure to obtain or maintain necessary outside financing, including our unsecured revolving credit facility; our leverage; decreased rental rates or increased vacancy rates; our failure to redevelop and reposition properties, or to execute any newly planned capital project, 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) and capital projects, including the cost of construction delays and cost overruns; impact of changes in governmental regulations, tax law and rates and similar matters; and our failure to qualify as a real estate investment trust, or REIT. 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, 2017, and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission.
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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, new information, data or methods, future events, or other changes after the date of this press release, except as required by applicable law. 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
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 June 30, | ||||||||
2018 | 2017 | |||||||
Revenues |
||||||||
Rental revenue |
$ | 124,038 | $ | 120,844 | ||||
Tenant expense reimbursement |
16,205 | 17,569 | ||||||
Observatory revenue |
35,201 | 33,966 | ||||||
Lease termination fees |
357 | 1,251 | ||||||
Third-party management and other fees |
376 | 392 | ||||||
Other revenue and fees |
2,352 | 2,327 | ||||||
|
|
|
|
|||||
Total revenues |
178,529 | 176,349 | ||||||
Operating expenses |
||||||||
Property operating expenses |
39,418 | 38,529 | ||||||
Ground rent expenses |
2,332 | 2,332 | ||||||
General and administrative expenses |
13,225 | 12,579 | ||||||
Observatory expenses |
7,678 | 7,176 | ||||||
Real estate taxes |
26,743 | 24,542 | ||||||
Depreciation and amortization |
39,468 | 40,532 | ||||||
|
|
|
|
|||||
Total operating expenses |
128,864 | 125,690 | ||||||
|
|
|
|
|||||
Total operating income |
49,665 | 50,659 | ||||||
Other income (expense): |
||||||||
Interest income |
2,499 | 775 | ||||||
Interest expense |
(20,525 | ) | (17,477 | ) | ||||
Loss from derivative financial instruments |
| (42 | ) | |||||
|
|
|
|
|||||
Income before income taxes |
31,639 | 33,915 | ||||||
Income tax expense |
(1,455 | ) | (2,556 | ) | ||||
|
|
|
|
|||||
Net income |
30,184 | 31,359 | ||||||
Preferred unit distributions |
(234 | ) | (234 | ) | ||||
Net income attributable to non-controlling interests |
(13,299 | ) | (14,541 | ) | ||||
|
|
|
|
|||||
Net income attributable to common stockholders |
$ | 16,651 | $ | 16,584 | ||||
|
|
|
|
|||||
Total weighted average shares |
||||||||
Basic |
165,256 | 157,921 | ||||||
|
|
|
|
|||||
Diluted |
297,244 | 298,398 | ||||||
|
|
|
|
|||||
Net income per share attributable to common stockholders |
| |||||||
Basic |
$ | 0.10 | $ | 0.10 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.10 | $ | 0.10 | ||||
|
|
|
|
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Empire State Realty Trust, Inc.
Condensed Consolidated Statements of Income
(unaudited and amounts in thousands, except per share data)
Six Months Ended June 30, | ||||||||
2018 | 2017 | |||||||
Revenues |
||||||||
Rental revenue |
$ | 246,349 | $ | 237,957 | ||||
Tenant expense reimbursement |
33,999 | 33,543 | ||||||
Observatory revenue |
56,450 | 54,906 | ||||||
Lease termination fees |
979 | 9,189 | ||||||
Third-party management and other fees |
839 | 743 | ||||||
Other revenue and fees |
7,184 | 4,344 | ||||||
|
|
|
|
|||||
Total revenues |
345,800 | 340,682 | ||||||
Operating expenses |
||||||||
Property operating expenses |
83,603 | 80,739 | ||||||
Ground rent expenses |
4,663 | 4,663 | ||||||
General and administrative expenses |
25,853 | 23,667 | ||||||
Observatory expenses |
15,014 | 14,431 | ||||||
Real estate taxes |
53,487 | 49,100 | ||||||
Depreciation and amortization |
79,351 | 81,378 | ||||||
|
|
|
|
|||||
Total operating expenses |
261,971 | 253,978 | ||||||
|
|
|
|
|||||
Total operating income |
83,829 | 86,704 | ||||||
Other income (expense): |
||||||||
Interest income |
3,724 | 1,396 | ||||||
Interest expense |
(38,116 | ) | (35,219 | ) | ||||
Loss from derivative financial instruments |
| (289 | ) | |||||
|
|
|
|
|||||
Income before income taxes |
49,437 | 52,592 | ||||||
Income tax expense |
(1,195 | ) | (2,088 | ) | ||||
|
|
|
|
|||||
Net income |
48,242 | 50,504 | ||||||
Preferred unit distributions |
(468 | ) | (468 | ) | ||||
Net income attributable to non-controlling interests |
(21,355 | ) | (23,467 | ) | ||||
|
|
|
|
|||||
Net income attributable to common stockholders |
$ | 26,419 | $ | 26,569 | ||||
|
|
|
|
|||||
Total weighted average shares |
||||||||
Basic |
164,311 | 157,265 | ||||||
|
|
|
|
|||||
Diluted |
297,029 | 298,180 | ||||||
|
|
|
|
|||||
Net income per share attributable to common stockholders |
| |||||||
Basic |
$ | 0.16 | $ | 0.17 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.16 | $ | 0.17 | ||||
|
|
|
|
11
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 June 30, | ||||||||
2018 | 2017 | |||||||
Net income |
$ | 30,184 | $ | 31,359 | ||||
Preferred unit distributions |
(234 | ) | (234 | ) | ||||
Real estate depreciation and amortization |
39,049 | 40,132 | ||||||
|
|
|
|
|||||
FFO attributable to common stockholders and non-controlling interests |
68,999 | 71,257 | ||||||
Amortization of below-market ground leases |
1,958 | 1,958 | ||||||
|
|
|
|
|||||
Modified FFO attributable to common stockholders and non-controlling interests |
70,957 | 73,215 | ||||||
Core FFO attributable to common stockholders and non-controlling interests |
$ | 70,957 | $ | 73,215 | ||||
|
|
|
|
|||||
Total weighted average shares |
||||||||
Basic |
297,244 | 296,388 | ||||||
|
|
|
|
|||||
Diluted |
297,244 | 298,398 | ||||||
|
|
|
|
|||||
FFO per share |
| |||||||
Basic |
$ | 0.23 | $ | 0.24 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.23 | $ | 0.24 | ||||
|
|
|
|
|||||
Modified FFO per share |
||||||||
Basic |
$ | 0.24 | $ | 0.25 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.24 | $ | 0.25 | ||||
|
|
|
|
|||||
Core FFO per share |
||||||||
Basic |
$ | 0.24 | $ | 0.25 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.24 | $ | 0.25 | ||||
|
|
|
|
12
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)
Six Months Ended June 30, | ||||||||
2018 | 2017 | |||||||
Net income |
$ | 48,242 | $ | 50,504 | ||||
Preferred unit distributions |
(468 | ) | (468 | ) | ||||
Real estate depreciation and amortization |
78,517 | 80,556 | ||||||
|
|
|
|
|||||
FFO attributable to common stockholders and non-controlling interests |
126,291 | 130,592 | ||||||
Amortization of below-market ground leases |
3,916 | 3,916 | ||||||
|
|
|
|
|||||
Modified FFO attributable to common stockholders and non-controlling interests |
130,207 | 134,508 | ||||||
Core FFO attributable to common stockholders and non-controlling interests |
$ | 130,207 | $ | 134,508 | ||||
|
|
|
|
|||||
Total weighted average shares |
||||||||
Basic |
297,028 | 296,388 | ||||||
|
|
|
|
|||||
Diluted |
297,029 | 298,180 | ||||||
|
|
|
|
|||||
FFO per share |
| |||||||
Basic |
$ | 0.43 | $ | 0.44 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.43 | $ | 0.44 | ||||
|
|
|
|
|||||
Modified FFO per share |
||||||||
Basic |
$ | 0.44 | $ | 0.45 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.44 | $ | 0.45 | ||||
|
|
|
|
|||||
Core FFO per share |
||||||||
Basic |
$ | 0.44 | $ | 0.45 | ||||
|
|
|
|
|||||
Diluted |
$ | 0.44 | $ | 0.45 | ||||
|
|
|
|
13
Empire State Realty Trust, Inc.
Condensed Consolidated Balance Sheets
(unaudited and amounts in thousands)
June 30, | December 31, | |||||||
2018 | 2017 | |||||||
Assets |
||||||||
Commercial real estate properties, at cost |
$ | 2,771,845 | $ | 2,667,655 | ||||
Less: accumulated depreciation |
(698,725 | ) | (656,900 | ) | ||||
|
|
|
|
|||||
Commercial real estate properties, net |
2,073,120 | 2,010,755 | ||||||
Cash and cash equivalents |
251,797 | 464,344 | ||||||
Restricted cash |
58,719 | 65,853 | ||||||
Short-term investments |
400,000 | | ||||||
Tenant and other receivables |
21,600 | 28,329 | ||||||
Deferred rent receivables |
190,419 | 178,629 | ||||||
Prepaid expenses and other assets |
64,695 | 61,028 | ||||||
Deferred costs, net |
246,763 | 262,701 | ||||||
Acquired below market ground leases, net |
364,313 | 368,229 | ||||||
Goodwill |
491,479 | 491,479 | ||||||
|
|
|
|
|||||
Total assets |
$ | 4,162,905 | $ | 3,931,347 | ||||
|
|
|
|
|||||
Liabilities and equity |
||||||||
Mortgage notes payable, net |
$ | 610,026 | $ | 717,164 | ||||
Senior unsecured notes, net |
1,044,573 | 707,895 | ||||||
Unsecured term loan facility, net |
263,900 | 263,662 | ||||||
Unsecured revolving credit facility |
| | ||||||
Accounts payable and accrued expenses |
129,944 | 110,849 | ||||||
Acquired below market leases, net |
58,960 | 66,047 | ||||||
Deferred revenue and other liabilities |
29,553 | 40,907 | ||||||
Tenants security deposits |
42,808 | 47,086 | ||||||
|
|
|
|
|||||
Total liabilities |
2,179,764 | 1,953,610 | ||||||
Total equity |
1,983,141 | 1,977,737 | ||||||
|
|
|
|
|||||
Total liabilities and equity |
$ | 4,162,905 | $ | 3,931,347 | ||||
|
|
|
|
14
Exhibit 99.2
|
Second Quarter 2018
|
Table of Contents
Page | ||||
Summary |
||||
Company Profile |
3 | |||
Financial Highlights |
4 | |||
Selected Property Data |
||||
Property Summary Net Operating Income |
5 | |||
Net Operating Income and Initial Free Rent Burn-Off |
6 | |||
Leasing Activity |
7 | |||
Portfolio Expirations and Vacates Summary |
9 | |||
Property Detail |
10 | |||
Tenant Lease Expirations |
11 | |||
Largest Tenants and Portfolio Tenant Diversification by Industry |
14 | |||
Capital Expenditures and Redevelopment Program |
15 | |||
Observatory Summary |
16 | |||
Financial information |
||||
Condensed Consolidated Balance Sheets |
17 | |||
Condensed Consolidated Statements of Income |
18 | |||
Core FFO, Modified FFO, FFO, FAD and EBITDA |
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 legal proceedings involving our company; reduced demand for office or retail space; new office or observatory development in our market; 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; 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 or to execute any planned capital project, 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; inability to comply with applicable rules and regulations and, in particular, public companies and damages resulting from security breaches through cyberattacks, cyber intrusions or otherwise, as well as other significant disruptions of our technology (IT) networks related systems. 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, 2017 and other risks described in documents we subsequently file from time to time with the Securities and Exchange Commission.
Page 2
|
Second Quarter 2018
|
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 building.
BOARD OF DIRECTORS
Anthony E. Malkin | Chairman and Chief Executive Officer | |
William H. Berkman | Director, Chair of Finance Committee | |
Leslie D. Biddle | Director | |
Thomas J. DeRosa | Director | |
Steven J. Gilbert | Director, Lead Director | |
S. Michael Giliberto | Director, Chair of Audit Committee | |
James D. Robinson IV | Director, Chair of Compensation and Nominating/Corporate Governance Committees |
EXECUTIVE MANAGEMENT
Anthony E. Malkin | Chairman and Chief Executive Officer | |
John B. Kessler | President and Chief Operating Officer | |
Thomas P. Durels | Executive Vice President, Real Estate | |
David A. Karp | Executive Vice President and Chief Financial Officer | |
Thomas N. Keltner, Jr. | Executive Vice President, General Counsel and Secretary |
COMPANY INFORMATION
Corporate Headquarters | Investor Relations | New York Stock Exchange | ||
111 West 33rd Street, 12th Floor | Greg Faje | Trading Symbol: ESRT | ||
New York, NY 10120 | IR@empirestaterealtytrust.com | |||
www.empirestaterealtytrust.com | ||||
(212) 687-8700 |
RESEARCH COVERAGE
Bank of America Merrill Lynch | Jeffrey Spector | (646) 855-1363 | jeff.spector@baml.com | |||
James Feldman | (646) 855-5808 | james.feldman@baml.com | ||||
BMO Capital Markets Corp. | John Kim | (212) 885-4115 | jp.kim@bmo.com | |||
BTIG | Thomas Catherwood | (212) 738-6140 | tcatherwood@btig.com | |||
Evercore ISI | Steve Sakwa | (212) 446-9462 | steve.sakwa@evercoreisi.com | |||
Robert Simone | (212) 446-9459 | robert.simone@evercoreisi.com | ||||
Goldman Sachs & Co. LLC | Andrew Rosivach | (212) 902-4736 | rosivach@gs.com | |||
Green Street Advisors | Jed Reagan | (949) 640-8780 | jreagan@greenstreetadvisors.com | |||
Daniel Ismail | (949) 640-8780 | dismail@greenstreetadvisors.com | ||||
KeyBanc Capital Markets | Jordan Sadler | (917) 368-2280 | jsadler@key.com | |||
Craig Mailman | (917) 368-2316 | cmailman@key.com | ||||
Stifel | John Guinee | (443) 224-1307 | jwguinee@stifel.com | |||
Wells Fargo Securities, LLC | Blaine Heck | (443) 263-6529 | blaine.heck@wellsfargo.com |
Page 3
|
Second Quarter 2018 Financial Highlights (unaudited and dollars in thousands, except per share amounts)
|
Three Months Ended | ||||||||||||||||||||
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
June 30, 2017 |
||||||||||||||||
Selected Items: |
||||||||||||||||||||
Revenue |
$ | 178,529 | $ | 167,271 | $ | 182,297 | $ | 186,546 | $ | 176,349 | ||||||||||
Net income |
$ | 30,184 | $ | 18,058 | $ | 32,260 | $ | 35,489 | $ | 31,359 | ||||||||||
Cash net operating income (1) (2) |
$ | 96,580 | $ | 81,149 | $ | 98,898 | $ | 100,540 | $ | 96,495 | ||||||||||
Core funds from operations (Core FFO) (1) |
$ | 70,957 | $ | 59,250 | $ | 74,914 | $ | 77,503 | $ | 73,215 | ||||||||||
Core funds available for distribution (Core FAD) (1) |
$ | 60,830 | $ | 51,170 | $ | 57,467 | $ | 64,201 | $ | 61,546 | ||||||||||
Core FFO per share - diluted |
$ | 0.24 | $ | 0.20 | $ | 0.25 | $ | 0.26 | $ | 0.25 | ||||||||||
Diluted weighted average shares |
297,244,000 | 296,827,000 | 297,898,000 | 297,871,000 | 298,398,000 | |||||||||||||||
Dividends declared and paid per share |
$ | 0.105 | $ | 0.105 | $ | 0.105 | $ | 0.105 | $ | 0.105 | ||||||||||
Portfolio Statistics: |
||||||||||||||||||||
Number of properties |
20 | 20 | 20 | 20 | 20 | |||||||||||||||
Total rentable square footage |
10,140,545 | 10,143,376 | 10,144,638 | 10,137,074 | 10,139,660 | |||||||||||||||
Percent occupied (3) |
88.4 | % | 88.1 | % | 89.6 | % | 89.8 | % | 89.2 | % | ||||||||||
Percent leased (4) |
91.4 | % | 91.5 | % | 92.2 | % | 91.7 | % | 91.3 | % | ||||||||||
Observatory Metrics: |
||||||||||||||||||||
Number of visitors |
1,078,000 | 660,000 | 1,014,000 | 1,276,000 | 1,126,000 | |||||||||||||||
Change in visitors year over year |
(4.3 | %) | 3.8 | % | (5.1 | %) | (4.8 | %) | 0.2 | % | ||||||||||
Observatory revenues |
$ | 35,201 | $ | 21,249 | $ | 32,906 | $ | 39,306 | $ | 33,966 | ||||||||||
Change in revenues year over year |
3.6 | % | 1.5 | % | (2.4 | %) | 3.1 | % | 6.9 | % | ||||||||||
Ratios: |
||||||||||||||||||||
Consolidated Debt to Total Market Capitalization (5) |
27.0 | % | 27.4 | % | 21.5 | % | 20.4 | % | 20.2 | % | ||||||||||
Consolidated Net Debt to Total Market Capitalization (5) |
19.7 | % | 19.5 | % | 16.6 | % | 15.7 | % | 15.5 | % | ||||||||||
Consolidated Debt and Perpetual Preferred Units to |
||||||||||||||||||||
Total Market Capitalization (5) |
27.4 | % | 27.8 | % | 21.9 | % | 20.7 | % | 20.6 | % | ||||||||||
Consolidated Net Debt and Perpetual Preferred Units to |
||||||||||||||||||||
Total Market Capitalization (5) |
20.1 | % | 19.9 | % | 17.0 | % | 16.1 | % | 15.8 | % | ||||||||||
Consolidated Debt to EBITDA (6) |
5.5x | 5.5x | 4.8x | 4.5x | 4.5x | |||||||||||||||
Consolidated Net Debt to EBITDA (6) |
3.6x | 3.5x | 3.5x | 3.3x | 3.3x | |||||||||||||||
Interest Coverage Ratio |
4.8x | 4.4x | 5.8x | 5.6x | 5.5x | |||||||||||||||
Core FFO Payout Ratio (7) |
45 | % | 53 | % | 42 | % | 41 | % | 43 | % | ||||||||||
Core FAD Payout Ratio (8) |
52 | % | 62 | % | 55 | % | 49 | % | 51 | % | ||||||||||
Class A common stock price at quarter end |
$ | 17.10 | $ | 16.79 | $ | 20.53 | $ | 20.54 | $ | 20.77 | ||||||||||
Average closing price |
$ | 16.89 | $ | 18.10 | $ | 20.46 | $ | 20.48 | $ | 21.05 | ||||||||||
Dividends per share - annualized |
$ | 0.42 | $ | 0.42 | $ | 0.42 | $ | 0.42 | $ | 0.42 | ||||||||||
Dividend yield (9) |
2.5 | % | 2.5 | % | 2.0 | % | 2.0 | % | 2.0 | % | ||||||||||
Private Perpetual Preferred Units outstanding ($16.62 liquidation value) |
1,560,360 | 1,560,360 | 1,560,360 | 1,560,360 | 1,560,360 | |||||||||||||||
Class A common stock |
166,658,962 | 163,321,049 | 160,424,575 | 158,349,708 | 157,493,025 | |||||||||||||||
Class B common stock |
1,045,670 | 1,048,161 | 1,052,469 | 1,077,740 | 1,080,475 | |||||||||||||||
Operating partnership units |
135,628,967 | 138,627,149 | 138,932,443 | 140,989,373 | 141,844,339 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total common stock and operating partnership units outstanding (10) |
303,333,599 | 302,996,359 | 300,409,487 | 300,416,821 | 300,417,839 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
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 6 and 19. |
(2) | Interest income has been reclassed from Other Revenues and Fees to Other Income (Expense) and is not included in Revenues. |
(3) | Based on leases signed and commenced as of end of period. |
(4) | Represents occupancy and includes signed leases not commenced. |
(5) | Market capitalization represents the sum of (i) Companys common stock per share price as of June 30, 2018 multiplied by the total outstanding number of shares of common stock and operating partnership units as of June 30, 2018; (ii) the number of perpetual preferred units at June 30, 2018 multiplied by $16.62 and (iii) our outstanding indebtedness or net indebtedness as of June 30, 2018. |
(6) | Calculated based on trailing 12 months EBITDA. |
(7) | Represents the amount of Core FFO paid out in distributions. |
(8) | Represents the amount of Core FAD paid out in distributions. |
(9) | Based on the closing price per share of Class A common stock on June 30, 2018. |
(10) | As of June 30, 2018, the Company has had conversions from operating partnership units and Class B common shares to Class A common shares totaling 42 million shares or approximately $721 million at a closing share price of $17.10. This represents a 51% increase in the number of Class A shares since the IPO. |
Page 4
|
Second Quarter 2018 Property Summary - Net Operating Income (NOI) by Quarter (unaudited and dollars in thousands)
|
Three Months Ended | ||||||||||||||||||||
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
June 30, 2017 |
||||||||||||||||
Total Portfolio (1) |
||||||||||||||||||||
Revenues |
$ | 142,952 | $ | 145,559 | $ | 149,079 | $ | 146,895 | $ | 141,991 | ||||||||||
Operating expenses |
(68,493 | ) | (73,260 | ) | (70,319 | ) | (70,502 | ) | (65,403 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net operating income (NOI) |
74,459 | 72,299 | 78,760 | 76,393 | 76,588 | |||||||||||||||
Straight-line rent |
(5,809 | ) | (5,853 | ) | (5,963 | ) | (6,861 | ) | (7,722 | ) | ||||||||||
Above/below-market rent revenue amortization |
(1,551 | ) | (1,168 | ) | (1,567 | ) | (1,607 | ) | (1,119 | ) | ||||||||||
Below-market ground lease amortization |
1,958 | 1,958 | 1,958 | 1,957 | 1,958 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total cash NOI - excluding Observatory |
69,057 | 67,236 | 73,188 | 69,882 | 69,705 | |||||||||||||||
Observatory cash NOI |
27,523 | 13,913 | 25,710 | 30,658 | 26,790 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total cash NOI - including Observatory |
$ | 96,580 | $ | 81,149 | $ | 98,898 | $ | 100,540 | $ | 96,495 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Manhattan Office Portfolio (1) (2) |
||||||||||||||||||||
Revenues |
$ | 119,384 | $ | 122,303 | $ | 124,422 | $ | 123,421 | $ | 117,239 | ||||||||||
Operating expenses |
(58,457 | ) | (63,218 | ) | (59,760 | ) | (60,052 | ) | (55,230 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NOI |
60,927 | 59,085 | 64,662 | 63,369 | 62,009 | |||||||||||||||
Straight-line rent |
(4,970 | ) | (6,089 | ) | (5,840 | ) | (6,825 | ) | (7,305 | ) | ||||||||||
Above/below-market rent revenue amortization |
(1,551 | ) | (1,168 | ) | (1,567 | ) | (1,607 | ) | (1,119 | ) | ||||||||||
Below-market ground lease amortization |
1,958 | 1,958 | 1,958 | 1,957 | 1,958 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash NOI |
$ | 56,364 | $ | 53,786 | $ | 59,213 | $ | 56,894 | $ | 55,543 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Greater New York Office Portfolio |
||||||||||||||||||||
Revenues |
$ | 18,741 | $ | 18,697 | $ | 19,710 | $ | 18,582 | $ | 19,721 | ||||||||||
Operating expenses |
(8,326 | ) | (8,425 | ) | (8,800 | ) | (8,565 | ) | (8,425 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NOI |
10,415 | 10,272 | 10,910 | 10,017 | 11,296 | |||||||||||||||
Straight-line rent |
(895 | ) | (285 | ) | (272 | ) | (190 | ) | (460 | ) | ||||||||||
Above/below-market rent revenue amortization |
| | | | | |||||||||||||||
Below-market ground lease amortization |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash NOI |
$ | 9,520 | $ | 9,987 | $ | 10,638 | $ | 9,827 | $ | 10,836 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Standalone Retail Portfolio |
||||||||||||||||||||
Revenues |
$ | 4,827 | $ | 4,559 | $ | 4,947 | $ | 4,892 | $ | 5,031 | ||||||||||
Operating expenses |
(1,710 | ) | (1,617 | ) | (1,759 | ) | (1,885 | ) | (1,748 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NOI |
3,117 | 2,942 | 3,188 | 3,007 | 3,283 | |||||||||||||||
Straight-line rent |
56 | 521 | 149 | 154 | 43 | |||||||||||||||
Above/below-market rent revenue amortization |
| | | | | |||||||||||||||
Below-market ground lease amortization |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash NOI |
$ | 3,173 | $ | 3,463 | $ | 3,337 | $ | 3,161 | $ | 3,326 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Note:
(1) | Interest income has been reclassed from Other Revenues and Fees to Other Income (Expense) and is not included in Revenues. For the three months ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, interest income was $2,499, $1,225, $773, $774 and $775, respectively. |
(2) | Includes 513,196 rentable square feet of retail space in the Companys nine Manhattan office properties. |
Page 5
|
Second Quarter 2018 Net Operating Income (NOI), Initial Free Rent Burn-Off and Signed Leases Not Commenced (unaudited and dollars in thousands)
|
Three Months Ended | ||||||||||||||||||||
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
June 30, 2017 |
||||||||||||||||
Reconciliation of Net Income to NOI and Cash NOI |
||||||||||||||||||||
Net income |
$ | 30,184 | $ | 18,058 | $ | 32,260 | $ | 35,489 | $ | 31,359 | ||||||||||
Add: |
||||||||||||||||||||
General and administrative expenses |
13,225 | 12,628 | 13,749 | 12,899 | 12,579 | |||||||||||||||
Depreciation and amortization |
39,468 | 39,883 | 40,842 | 38,490 | 40,532 | |||||||||||||||
Interest expense |
20,525 | 17,591 | 16,364 | 16,890 | 17,477 | |||||||||||||||
Loss on early extinguishment of debt |
| | | 2,157 | | |||||||||||||||
Loss from derivative financial instruments |
| | | | 42 | |||||||||||||||
Income tax expense (benefit) |
1,455 | (260 | ) | 2,340 | 2,245 | 2,556 | ||||||||||||||
Less: |
||||||||||||||||||||
Third-party management and other fees |
(376 | ) | (463 | ) | (312 | ) | (345 | ) | (392 | ) | ||||||||||
Interest income |
(2,499 | ) | (1,225 | ) | (773 | ) | (774 | ) | (775 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net operating income |
101,982 | 86,212 | 104,470 | 107,051 | 103,378 | |||||||||||||||
Straight-line rent |
(5,809 | ) | (5,853 | ) | (5,963 | ) | (6,861 | ) | (7,722 | ) | ||||||||||
Above/below-market rent revenue amortization |
(1,551 | ) | (1,168 | ) | (1,567 | ) | (1,607 | ) | (1,119 | ) | ||||||||||
Below-market ground lease amortization |
1,958 | 1,958 | 1,958 | 1,957 | 1,958 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total cash NOI - including Observatory |
96,580 | 81,149 | 98,898 | 100,540 | 96,495 | |||||||||||||||
Less: Observatory NOI |
(27,523 | ) | (13,913 | ) | (25,710 | ) | (30,658 | ) | (26,790 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total cash NOI - excluding Observatory |
$ | 69,057 | $ | 67,236 | $ | 73,188 | $ | 69,882 | $ | 69,705 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash NOI by Portfolio |
||||||||||||||||||||
Manhattan Office Portfolio |
$ | 56,364 | $ | 53,786 | $ | 59,213 | $ | 56,894 | $ | 55,543 | ||||||||||
Greater New York Office Portfolio |
9,520 | 9,987 | 10,638 | 9,827 | 10,836 | |||||||||||||||
Standalone Retail Portfolio |
3,173 | 3,463 | 3,337 | 3,161 | 3,326 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total cash NOI - excluding Observatory |
69,057 | 67,236 | 73,188 | 69,882 | 69,705 | |||||||||||||||
Observatory cash NOI |
27,523 | 13,913 | 25,710 | 30,658 | 26,790 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total cash NOI - including Observatory |
$ | 96,580 | $ | 81,149 | $ | 98,898 | $ | 100,540 | $ | 96,495 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Schedule of Initial Free Rent Burn-Off
As of June 30, 2018, the Company had approximately $42 million of annualized cash rents that have yet to contribute to Cash NOI:
Annualized Initial Base Cash Rent |
Cumulative Contribution to Annualized Base Rent in the Following Years |
|||||||||||||||||||
Total Portfolio |
Remaining 2018 |
2019 | 2020 | 2021 | ||||||||||||||||
Commenced leases in free rent period |
$ | 23,476 | $ | 3,261 | $ | 20,241 | $ | 23,476 | $ | 23,476 | ||||||||||
Signed leases not commenced |
18,750 | 5,269 | 17,998 | 18,750 | 18,750 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 42,226 | $ | 8,530 | $ | 38,239 | $ | 42,226 | $ | 42,226 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Signed leases not commenced
Square | 6/30/18 Escalated |
New | Expected Base Rent Commencement | Incremental Annual |
||||||||||||||||
Tenant |
Feet | Annual Rent | Annual Rent | GAAP | Cash | Revenue | ||||||||||||||
BTS USA, Inc. |
11,552 | $ | | $ | 790 | Jul. 2018 | Feb. 2019 | $ | 790 | |||||||||||
Hoguet Newman Regal & Kenney |
12,732 | | 850 | Sep. 2018 | Feb. 2019 | 850 | ||||||||||||||
RZO, LLC |
12,635 | | 820 | Sep. 2018 | May 2019 | 820 | ||||||||||||||
Michael J. Fox Foundation |
10,533 | | 670 | Oct. 2018 | May 2019 | 670 | ||||||||||||||
Nespresso |
41,835 | | 2,380 | Oct. 2018 | Jun. 2019 | 2,380 | ||||||||||||||
LinkedIn Corporation |
30,165 | | 2,020 | Dec. 2018 | Jul. 2019 | 2,020 | ||||||||||||||
TJX Companies |
18,965 | | 1,900 | May 2019 | Jul. 2019 | 1,900 | ||||||||||||||
Fragoman, Del Rey, Bernsen & Loewy LLP |
107,680 | 1,520 | 5,920 | Jun. 2019 | Mar. 2020 | 4,400 | ||||||||||||||
Other SLNC |
90,403 | | 4,920 | Jul. 2018 - Mar. 2019 | Jul. 2018 - May 2019 | 4,920 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total |
336,500 | $ | 1,520 | $ | 20,270 | $ | 18,750 | |||||||||||||
|
|
|
|
|
|
|
|
Page 6
|
Second Quarter 2018 Property Summary - Leasing Activity by Quarter (unaudited)
|
Three Months Ended | ||||||||||||||||||||
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
June 30, 2017 |
||||||||||||||||
Total Portfolio |
||||||||||||||||||||
Total leases executed |
37 | 41 | 55 | 34 | 51 | |||||||||||||||
Weighted average lease term |
6.1 years | 7.1 years | 8.1 years | 12.2 years | 9.3 years | |||||||||||||||
Average free rent period |
4.5 months | 4.8 months | 6.4 months | 9.3 months | 6.9 months | |||||||||||||||
Office |
||||||||||||||||||||
Total square footage executed |
142,286 | 253,626 | 252,244 | 487,854 | 300,269 | |||||||||||||||
Average rent psf - leases executed |
$ | 55.45 | $ | 54.51 | $ | 56.14 | $ | 52.52 | $ | 55.22 | ||||||||||
Previously escalated rents psf |
$ | 46.86 | $ | 48.53 | $ | 44.85 | $ | 41.12 | $ | 40.61 | ||||||||||
Percentage of new rent over previously escalated rents |
18.3 | % | 12.3 | % | 25.2 | % | 27.7 | % | 36.0 | % | ||||||||||
Retail |
||||||||||||||||||||
Total square footage executed |
1,131 | 5,904 | 22,744 | | 29,597 | |||||||||||||||
Average rent psf - leases executed |
$ | 122.02 | $ | 175.43 | $ | 115.33 | $ | | $ | 40.66 | ||||||||||
Previously escalated rents psf |
$ | 122.83 | $ | 175.43 | $ | 86.38 | $ | | $ | 48.13 | ||||||||||
Percentage of new rent over previously escalated rents |
(0.7 | %) | 0.0 | % | 33.5 | % | 0.0 | % | (15.5 | %) | ||||||||||
Total Portfolio |
||||||||||||||||||||
Total square footage executed |
143,417 | 259,530 | 274,988 | 487,854 | 329,866 | |||||||||||||||
Average rent psf - leases executed |
$ | 55.99 | $ | 57.29 | $ | 61.42 | $ | 52.52 | $ | 54.39 | ||||||||||
Previously escalated rents psf |
$ | 47.48 | $ | 51.44 | $ | 48.45 | $ | 41.12 | $ | 41.52 | ||||||||||
Percentage of new rent over previously escalated rents |
17.9 | % | 11.4 | % | 26.8 | % | 27.7 | % | 31.0 | % | ||||||||||
Leasing commission costs per square foot |
$ | 10.66 | $ | 15.35 | $ | 18.06 | $ | 22.15 | $ | 17.74 | ||||||||||
Tenant improvement costs per square foot |
66.27 | 49.54 | 65.95 | 72.92 | 68.24 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total LC and TI per square foot (2) |
$ | 76.93 | $ | 64.89 | $ | 84.01 | $ | 95.07 | $ | 85.98 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Occupancy |
88.4 | % | 88.1 | % | 89.6 | % | 89.8 | % | 89.2 | % | ||||||||||
Manhattan Office Portfolio (1) |
||||||||||||||||||||
Total leases executed |
30 | 31 | 41 | 27 | 43 | |||||||||||||||
Office - New Leases |
||||||||||||||||||||
Total square footage executed |
83,251 | 158,932 | 170,669 | 276,964 | 208,594 | |||||||||||||||
Average rent psf - leases executed |
$ | 62.88 | $ | 59.51 | $ | 61.31 | $ | 58.79 | $ | 60.11 | ||||||||||
Previously escalated rents psf |
$ | 49.69 | $ | 48.05 | $ | 45.80 | $ | 40.24 | $ | 40.11 | ||||||||||
Percentage of new rent over previously escalated rents |
26.5 | % | 23.8 | % | 33.9 | % | 46.1 | % | 49.9 | % | ||||||||||
Office - Renewal Leases |
||||||||||||||||||||
Total square footage executed |
27,738 | 33,964 | 43,237 | 38,180 | 42,447 | |||||||||||||||
Average rent psf - leases executed |
$ | 53.48 | $ | 56.31 | $ | 53.72 | $ | 56.12 | $ | 58.07 | ||||||||||
Previously escalated rents psf |
$ | 49.35 | $ | 56.22 | $ | 47.65 | $ | 50.02 | $ | 54.92 | ||||||||||
Percentage of new rent over previously escalated rents |
8.4 | % | 0.2 | % | 12.7 | % | 12.2 | % | 5.7 | % | ||||||||||
Retail - New and Renewal Leases |
||||||||||||||||||||
Total square footage executed |
1,131 | | 20,366 | | 2,454 | |||||||||||||||
Average rent psf - leases executed |
$ | 122.02 | $ | | $ | 99.98 | $ | | $ | 111.42 | ||||||||||
Previously escalated rents psf |
$ | 122.83 | $ | | $ | 70.61 | $ | | $ | 128.87 | ||||||||||
Percentage of new rent over previously escalated rents |
(0.7 | %) | 0.0 | % | 41.6 | % | 0.0 | % | (13.5 | %) | ||||||||||
Total Manhattan Office Portfolio |
||||||||||||||||||||
Total square footage executed |
112,120 | 192,896 | 234,272 | 315,144 | 253,495 | |||||||||||||||
Average rent psf - leases executed |
$ | 61.15 | $ | 58.94 | $ | 63.27 | $ | 58.46 | $ | 60.26 | ||||||||||
Previously escalated rents psf |
$ | 50.35 | $ | 49.49 | $ | 48.30 | $ | 41.42 | $ | 43.45 | ||||||||||
Percentage of new rent over previously escalated rents |
21.5 | % | 19.1 | % | 31.0 | % | 41.1 | % | 38.7 | % | ||||||||||
Leasing commission costs per square foot |
$ | 11.70 | $ | 18.56 | $ | 19.02 | $ | 26.21 | $ | 21.97 | ||||||||||
Tenant improvement costs per square foot |
68.11 | 63.22 | 69.16 | 80.69 | 79.19 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total LC and TI per square foot (2) |
$ | 79.81 | $ | 81.78 | $ | 88.18 | $ | 106.90 | $ | 101.16 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Occupancy |
88.1 | % | 87.3 | % | 89.0 | % | 89.2 | % | 88.7 | % |
Page 7
|
Second Quarter 2018 Property Summary - Leasing Activity by Quarter - (Continued) (unaudited)
|
Three Months Ended | ||||||||||||||||||||
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
June 30, 2017 |
||||||||||||||||
Greater New York Office Portfolio |
||||||||||||||||||||
Total leases executed |
7 | 8 | 11 | 7 | 6 | |||||||||||||||
Total square footage executed |
31,297 | 60,730 | 38,338 | 172,710 | 49,228 | |||||||||||||||
Average rent psf - leases executed |
$ | 34.31 | $ | 39.85 | $ | 35.89 | $ | 41.68 | $ | 32.02 | ||||||||||
Previously escalated rents psf |
$ | 35.43 | $ | 45.36 | $ | 37.45 | $ | 40.57 | $ | 30.41 | ||||||||||
Percentage of new rent over previously escalated rents |
(3.2 | %) | (12.1 | %) | (4.2 | %) | 2.7 | % | 5.3 | % | ||||||||||
Leasing commission costs per square foot |
$ | 6.95 | $ | 4.21 | $ | 10.35 | $ | 14.74 | $ | 5.71 | ||||||||||
Tenant improvement costs per square foot |
59.68 | 7.89 | 50.40 | 58.76 | 49.50 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total LC and TI per square foot (2) |
$ | 66.63 | $ | 12.10 | $ | 60.75 | $ | 73.50 | $ | 55.21 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Occupancy |
88.9 | % | 90.8 | % | 91.2 | % | 91.3 | % | 90.5 | % | ||||||||||
Standalone Retail Portfolio |
||||||||||||||||||||
Total leases executed |
| 2 | 3 | | 2 | |||||||||||||||
Total square footage executed |
| 5,904 | 2,378 | | 27,143 | |||||||||||||||
Average rent psf - leases executed |
$ | | $ | 175.42 | $ | 246.78 | $ | | $ | 34.26 | ||||||||||
Previously escalated rents psf |
$ | | $ | 175.42 | $ | 221.47 | $ | | $ | 40.83 | ||||||||||
Percentage of new rent over previously escalated rents |
| 0.0 | % | 0.0 | % | | 0.0 | % | ||||||||||||
Leasing commission costs per square foot |
$ | | $ | 25.20 | $ | 48.45 | $ | | $ | | ||||||||||
Tenant improvement costs per square foot |
| 31.31 | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total LC and TI per square foot (2) |
$ | | $ | 56.51 | $ | 48.45 | $ | | $ | | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Occupancy |
95.4 | % | 97.3 | % | 99.4 | % | 99.4 | % | 99.4 | % |
Notes:
(1) | Includes 513,196 rentable square feet of retail space in the Companys nine Manhattan office properties. |
(2) | 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
|
Second Quarter 2018 Total Portfolio Expirations and Vacates Summary (unaudited and in square feet)
|
Actual | Forecast (1) | |||||||||||||||||||||||
Three Months Ended | Three Months Ended | Forecast (1) | Forecast (1) | |||||||||||||||||||||
March 31, 2018 |
June 30, 2018 |
September 30, 2018 |
December 31, 2018 |
July to Dec. 2018 |
Full Year 2019 |
|||||||||||||||||||
Total Portfolio (2) |
||||||||||||||||||||||||
Total Expirations |
419,086 | 188,127 | 278,217 | 161,159 | 439,376 | 734,383 | ||||||||||||||||||
Less: Broadcasting |
(19,511 | ) | (21,776 | ) | (26,038 | ) | (10,529 | ) | (36,567 | ) | (586 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Office and Retail Expirations |
399,575 | 166,351 | 252,179 | 150,630 | 402,809 | 733,797 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Renewal & Relocations (3) |
76,747 | 46,274 | 54,776 | 49,068 | 103,844 | 198,825 | ||||||||||||||||||
Short-term renewals (4) |
37,034 | 7,246 | | | | | ||||||||||||||||||
New Leases (5) |
67,614 | 44,058 | 39,252 | 35,916 | 75,168 | 19,420 | ||||||||||||||||||
Tenant Vacates (6) |
108,114 | 55,243 | 59,810 | 33,973 | 93,783 | 232,530 | ||||||||||||||||||
Intentional Vacates (7) |
99,626 | 12,419 | 88,062 | 28,168 | 116,230 | 154,634 | ||||||||||||||||||
Holdover (8) |
10,440 | 1,111 | | | | | ||||||||||||||||||
Unknown (9) |
| | 10,279 | 3,505 | 13,784 | 128,388 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Portfolio expirations and vacates |
399,575 | 166,351 | 252,179 | 150,630 | 402,809 | 733,797 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Manhattan Office Portfolio |
||||||||||||||||||||||||
Total Expirations |
344,883 | 133,636 | 202,295 | 123,706 | 326,001 | 485,103 | ||||||||||||||||||
Less: Broadcasting |
(19,511 | ) | (21,776 | ) | (26,038 | ) | (10,529 | ) | (36,567 | ) | (586 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Office Expirations |
325,372 | 111,860 | 176,257 | 113,177 | 289,434 | 484,517 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Renewal & Relocations (3) |
53,121 | 20,536 | 48,101 | 21,095 | 69,196 | 105,404 | ||||||||||||||||||
Short-term renewals (4) |
37,034 | 242 | | | | | ||||||||||||||||||
New Leases (5) |
67,614 | 44,058 | 8,662 | 35,916 | 44,578 | 19,420 | ||||||||||||||||||
Tenant Vacates (6) |
70,092 | 33,494 | 53,650 | 24,493 | 78,143 | 102,973 | ||||||||||||||||||
Intentional Vacates (7) |
87,071 | 12,419 | 65,844 | 28,168 | 94,012 | 131,442 | ||||||||||||||||||
Holdover (8) |
10,440 | 1,111 | | | | | ||||||||||||||||||
Unknown (9) |
| | | 3,505 | 3,505 | 125,278 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total expirations and vacates |
325,372 | 111,860 | 176,257 | 113,177 | 289,434 | 484,517 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Greater New York Office Portfolio |
||||||||||||||||||||||||
Office Expirations |
54,661 | 50,369 | 73,675 | 37,209 | 110,884 | 222,824 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Renewal & Relocations (3) |
22,316 | 25,496 | 6,675 | 27,729 | 34,404 | 90,157 | ||||||||||||||||||
Short-term renewals (4) |
| 7,004 | | | | | ||||||||||||||||||
New Leases (5) |
| | 30,590 | | 30,590 | | ||||||||||||||||||
Tenant Vacates (6) |
32,345 | 17,869 | 4,155 | 9,480 | 13,635 | 129,557 | ||||||||||||||||||
Intentional Vacates (7) |
| | 21,976 | | 21,976 | | ||||||||||||||||||
Holdover (8) |
| | | | | | ||||||||||||||||||
Unknown (9) |
| | 10,279 | | 10,279 | 3,110 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total expirations and vacates |
54,661 | 50,369 | 73,675 | 37,209 | 110,884 | 222,824 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Retail Portfolio |
||||||||||||||||||||||||
Retail Expirations |
19,542 | 4,122 | 2,247 | 244 | 2,491 | 26,456 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Renewal & Relocations (3) |
1,310 | 242 | | 244 | 244 | 3,264 | ||||||||||||||||||
Short-term renewals (4) |
| | | | | | ||||||||||||||||||
New Leases (5) |
| | | | | | ||||||||||||||||||
Tenant Vacates (6) |
5,677 | 3,880 | 2,005 | | 2,005 | | ||||||||||||||||||
Intentional Vacates (7) |
12,555 | | 242 | | 242 | 23,192 | ||||||||||||||||||
Holdover (8) |
| | | | | |||||||||||||||||||
Unknown (9) |
| | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total expirations and vacates |
19,542 | 4,122 | 2,247 | 244 | 2,491 | 26,456 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
(1) | These forecasts, which are subject to change, are based on managements expectations, including, among other things, discussions with and other information provided by tenants as well as managements analyses of past historical trends. |
(2) | Any lease on month to month or short-term will re-appear in Actual in each period until tenant has vacated or renewed, and thus it would be double counted if periods were cumulated. Forecast avoids double counting. |
(3) | For forecasted periods, Renewals assume tenants renew their existing leases in all or a portion of their current spaces, and Relocations assume tenants move within a building or within the Companys portfolio. |
(4) | Represents tenants which signed renewal leases for a term of less than six months and reappear in forecast periods in 2018. |
(5) | For forecasted periods, New Leases represents leases that have been signed with a new tenant, a subtenant who signed a direct lease or a tenant who expanded. The lease commencement dates are not provided in this section. |
(6) | For forecasted periods, Tenant Vacates assumes a tenant elects not to renew at the end of their existing lease or exercises an early termination option. |
(7) | For forecasted periods, Intentional Vacates assumes the Company decides not to renew tenant at the end of their existing lease due to anticipated future redevelopment or for other reasons. This also may include early lease terminations. |
(8) | Holdover represents a tenant that remains in its space, paying rent after the expiration of its lease, but is not anticipated to continue doing so on a monthly basis. These tenants may reappear in forecast periods in 2018. |
(9) | For forecasted periods, Unknown represents tenants existing leases which do not fall into any of the above categories: Renewals & Relocations, New Leases, Tenant Vacates or Intentional Vacates and tenants whose intention is unknown. |
Page 9
|
Second Quarter 2018 Property Detail (unaudited)
|
Annualized | ||||||||||||||||||||||||
Rent | ||||||||||||||||||||||||
Property Name |
Location or Sub-Market | Rentable Square Feet (1) |
Percent Occupied (2) |
Annualized Rent (3) |
per Occupied Square Foot (4) |
Number of Leases (5) |
||||||||||||||||||
Manhattan Office Properties - Office |
||||||||||||||||||||||||
The Empire State Building (6) |
Penn Station -Times Sq. South | 2,711,148 | 93.8 | % | $ | 142,714,509 | $ | 56.10 | 181 | |||||||||||||||
One Grand Central Place |
Grand Central | 1,245,384 | 88.8 | % | 62,362,923 | 56.38 | 220 | |||||||||||||||||
1400 Broadway (8) |
Penn Station -Times Sq. South | 910,238 | 77.4 | % | 34,065,142 | 48.35 | 28 | |||||||||||||||||
111 West 33rd Street (9) |
Penn Station -Times Sq. South | 638,813 | 66.5 | % | 23,757,765 | 55.93 | 15 | |||||||||||||||||
250 West 57th Street |
Columbus Circle - West Side | 468,224 | 91.7 | % | 24,557,914 | 57.19 | 74 | |||||||||||||||||
501 Seventh Avenue |
Penn Station -Times Sq. South | 460,150 | 93.3 | % | 18,783,912 | 43.75 | 29 | |||||||||||||||||
1359 Broadway |
Penn Station -Times Sq. South | 455,661 | 96.1 | % | 22,496,743 | 51.39 | 36 | |||||||||||||||||
1350 Broadway (10) |
Penn Station -Times Sq. South | 373,206 | 85.0 | % | 17,858,142 | 56.32 | 61 | |||||||||||||||||
1333 Broadway |
Penn Station -Times Sq. South | 292,544 | 94.6 | % | 13,873,235 | 50.13 | 12 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Manhattan Office Properties - Office |
|
7,555,368 | 88.3 | % | 360,470,283 | 54.05 | 656 | |||||||||||||||||
Manhattan Office Properties - Retail |
|
|||||||||||||||||||||||
The Empire State Building (7) |
Penn Station -Times Sq. South | 104,558 | 69.8 | % | 13,416,332 | 183.84 | 14 | |||||||||||||||||
One Grand Central Place |
Grand Central | 68,563 | 79.0 | % | 6,370,933 | 117.69 | 13 | |||||||||||||||||
1400 Broadway (8) |
Penn Station -Times Sq. South | 20,418 | 71.9 | % | 1,885,087 | 128.39 | 7 | |||||||||||||||||
112 West 34th Street (9) |
Penn Station -Times Sq. South | 90,132 | 100.0 | % | 22,404,847 | 248.58 | 4 | |||||||||||||||||
250 West 57th Street |
Columbus Circle - West Side | 67,927 | 72.1 | % | 8,037,423 | 164.16 | 8 | |||||||||||||||||
501 Seventh Avenue |
Penn Station -Times Sq. South | 35,558 | 88.3 | % | 1,983,248 | 63.15 | 9 | |||||||||||||||||
1359 Broadway |
Penn Station -Times Sq. South | 27,265 | 100.0 | % | 2,185,162 | 80.15 | 6 | |||||||||||||||||
1350 Broadway (10) |
Penn Station -Times Sq. South | 31,774 | 100.0 | % | 6,780,827 | 213.41 | 6 | |||||||||||||||||
1333 Broadway |
Penn Station -Times Sq. South | 67,001 | 100.0 | % | 8,696,056 | 129.79 | 4 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Manhattan Office Properties - Retail |
|
513,196 | 85.4 | % | 71,759,916 | 163.71 | 71 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Sub-Total/Weighted Average |
||||||||||||||||||||||||
Manhattan Office Properties - Office and Retail |
|
8,068,564 | 88.1 | % | 432,230,200 | 60.81 | 727 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Greater New York Metropolitan Area Office Properties |
|
|||||||||||||||||||||||
First Stamford Place (11) |
Stamford, CT | 792,863 | 91.4 | % | 30,991,133 | 42.76 | 54 | |||||||||||||||||
Metro Center |
Stamford, CT | 284,816 | 80.1 | % | 13,323,522 | 58.39 | 26 | |||||||||||||||||
383 Main Avenue |
Norwalk, CT | 263,031 | 87.2 | % | 7,340,889 | 32.01 | 21 | |||||||||||||||||
500 Mamaroneck Avenue |
Harrison, NY | 293,202 | 85.9 | % | 7,187,054 | 28.54 | 32 | |||||||||||||||||
10 Bank Street |
White Plains, NY | 232,361 | 96.9 | % | 8,045,908 | 35.72 | 35 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Sub-Total/Weighted Average Greater New York Metropolitan Area Office Properties |
|
1,866,273 | 88.9 | % | 66,888,506 | 40.31 | 168 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Standalone Retail Properties |
|
|||||||||||||||||||||||
10 Union Square |
Union Square | 58,007 | 100.0 | % | 6,709,152 | 115.66 | 13 | |||||||||||||||||
1542 Third Avenue |
Upper East Side | 56,250 | 100.0 | % | 3,800,915 | 67.57 | 4 | |||||||||||||||||
1010 Third Avenue |
Upper East Side | 44,662 | 100.0 | % | 3,735,464 | 83.64 | 2 | |||||||||||||||||
77 West 55th Street |
Midtown | 25,388 | 100.0 | % | 2,637,533 | 103.89 | 3 | |||||||||||||||||
69-97 Main Street |
Westport, CT | 17,071 | 44.2 | % | 1,116,211 | 147.92 | 3 | |||||||||||||||||
103-107 Main Street |
Westport, CT | 4,330 | 100.0 | % | 715,852 | 165.32 | 1 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Sub-Total/Weighted Average Standalone Retail Properties |
|
205,708 | 95.4 | % | 18,715,127 | 95.40 | 26 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Portfolio Total |
10,140,545 | 88.4 | % | $ | 517,833,833 | $ | 57.77 | 921 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total/Weighted Average Office Properties |
|
9,421,641 | 88.4 | % | $ | 427,358,790 | $ | 51.31 | 824 | |||||||||||||||
Total/Weighted Average Retail Properties |
|
718,904 | 88.3 | % | 90,475,043 | 142.59 | 97 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Portfolio Total |
10,140,545 | 88.4 | % | $ | 517,833,833 | $ | 57.77 | 921 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Notes:
(1) | Excludes (i) 157,338 square feet of space across the Companys portfolio attributable to building management use and tenant amenities and (ii) 69,789 square feet of space attributable to the Companys observatory. |
(2) | Based on leases signed and commenced as of June 30, 2018. |
(3) | Represents annualized base rent and current reimbursement for operating expenses and real estate taxes. |
(4) | Represents annualized rent under leases commenced as of June 30, 2018 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 67,686 rentable square feet of space leased by the Companys broadcasting tenants. |
(7) | Includes 5,300 rentable square feet of space leased by WDFG North America, 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 45 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 59 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 32 years (expiring July 31, 2050). |
(11) | First Stamford Place consists of three buildings. |
Page 10
|
Second Quarter 2018 Tenant Lease Expirations (unaudited)
|
Number of Leases Expiring (1) |
Rentable Square Feet Expiring (2) |
Percent of Portfolio Rentable Square Feet Expiring |
Annualized Rent (3) |
Percent of Annualized Rent |
Annualized Rent Per Rentable Square Foot |
|||||||||||||||||||
Total Lease Expirations |
||||||||||||||||||||||||
Available |
| 874,907 | 8.6 | % | $ | | 0.0 | % | $ | | ||||||||||||||
Signed leases not commenced |
32 | 302,134 | 3.0 | % | | 0.0 | % | | ||||||||||||||||
2Q 2018 (4) |
15 | 48,928 | 0.5 | % | 2,738,147 | 0.5 | % | 55.96 | ||||||||||||||||
3Q 2018 |
66 | 278,217 | 2.7 | % | 14,528,051 | 2.8 | % | 52.22 | ||||||||||||||||
4Q 2018 |
43 | 161,159 | 1.6 | % | 7,390,732 | 1.4 | % | 45.86 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total 2018 |
124 | 488,304 | 4.8 | % | 24,656,930 | 4.8 | % | 50.50 | ||||||||||||||||
1Q 2019 |
22 | 87,723 | 0.9 | % | 5,034,161 | 1.0 | % | 57.39 | ||||||||||||||||
2Q 2019 |
33 | 177,191 | 1.7 | % | 9,550,796 | 1.8 | % | 53.90 | ||||||||||||||||
3Q 2019 |
39 | 184,202 | 1.8 | % | 10,026,752 | 1.9 | % | 54.43 | ||||||||||||||||
4Q 2019 |
41 | 285,267 | 2.8 | % | 13,333,629 | 2.6 | % | 46.74 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total 2019 |
135 | 734,383 | 7.2 | % | 37,945,338 | 7.3 | % | 51.67 | ||||||||||||||||
2020 |
135 | 805,149 | 7.9 | % | 44,671,363 | 8.6 | % | 55.48 | ||||||||||||||||
2021 |
99 | 699,736 | 6.9 | % | 39,044,865 | 7.5 | % | 55.80 | ||||||||||||||||
2022 |
89 | 523,735 | 5.2 | % | 33,051,150 | 6.4 | % | 63.11 | ||||||||||||||||
2023 |
76 | 660,971 | 6.5 | % | 38,298,015 | 7.4 | % | 57.94 | ||||||||||||||||
2024 |
53 | 558,295 | 5.5 | % | 31,748,137 | 6.1 | % | 56.87 | ||||||||||||||||
2025 |
52 | 374,868 | 3.7 | % | 27,648,319 | 5.3 | % | 73.75 | ||||||||||||||||
2026 |
40 | 972,885 | 9.6 | % | 53,275,096 | 10.3 | % | 54.76 | ||||||||||||||||
2027 |
41 | 539,247 | 5.3 | % | 30,805,616 | 5.9 | % | 57.13 | ||||||||||||||||
Thereafter |
77 | 2,605,931 | 25.8 | % | 156,689,002 | 30.3 | % | 60.13 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
953 | 10,140,545 | 100.0 | % | $ | 517,833,833 | 100.0 | % | $ | 57.77 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Manhattan Office Properties (5) |
||||||||||||||||||||||||
Available |
| 613,532 | 8.1 | % | $ | | 0.0 | % | $ | | ||||||||||||||
Signed leases not commenced |
26 | 272,164 | 3.6 | % | | 0.0 | % | | ||||||||||||||||
2Q 2018 (4) |
10 | 33,779 | 0.4 | % | 1,915,978 | 0.5 | % | 56.72 | ||||||||||||||||
3Q 2018 |
54 | 202,295 | 2.7 | % | 10,804,796 | 3.0 | % | 53.41 | ||||||||||||||||
4Q 2018 |
33 | 123,706 | 1.6 | % | 6,664,925 | 1.8 | % | 53.88 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total 2018 |
97 | 359,780 | 4.8 | % | 19,385,699 | 5.4 | % | 53.88 | ||||||||||||||||
1Q 2019 |
16 | 81,321 | 1.1 | % | 4,848,047 | 1.3 | % | 59.62 | ||||||||||||||||
2Q 2019 |
22 | 96,680 | 1.3 | % | 4,921,565 | 1.4 | % | 50.91 | ||||||||||||||||
3Q 2019 |
33 | 172,853 | 2.3 | % | 8,536,636 | 2.4 | % | 49.39 | ||||||||||||||||
4Q 2019 |
34 | 134,249 | 1.8 | % | 7,341,975 | 2.0 | % | 54.69 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total 2019 |
105 | 485,103 | 6.4 | % | 25,648,223 | 7.1 | % | 52.87 | ||||||||||||||||
2020 |
106 | 594,839 | 7.9 | % | 32,875,142 | 9.1 | % | 55.27 | ||||||||||||||||
2021 |
61 | 459,135 | 6.1 | % | 24,743,245 | 6.9 | % | 53.89 | ||||||||||||||||
2022 |
65 | 343,319 | 4.5 | % | 19,704,701 | 5.5 | % | 57.39 | ||||||||||||||||
2023 |
55 | 489,233 | 6.5 | % | 26,594,469 | 7.4 | % | 54.36 | ||||||||||||||||
2024 |
34 | 342,986 | 4.5 | % | 17,771,053 | 4.9 | % | 51.81 | ||||||||||||||||
2025 |
31 | 221,532 | 2.9 | % | 12,841,859 | 3.6 | % | 57.97 | ||||||||||||||||
2026 |
28 | 841,824 | 11.1 | % | 46,993,498 | 13.0 | % | 55.82 | ||||||||||||||||
2027 |
27 | 387,245 | 5.1 | % | 21,095,590 | 5.9 | % | 54.48 | ||||||||||||||||
Thereafter |
47 | 2,144,676 | 28.5 | % | 112,816,802 | 31.2 | % | 52.60 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Manhattan office properties |
682 | 7,555,368 | 100.0 | % | $ | 360,470,283 | 100.0 | % | $ | 54.05 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
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) 157,338 rentable square feet of space across the Company portfolio attributable to building management use and tenant amenities and (ii) 69,789 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 leases that are included in occupancy as of June 30, 2018 and expire on June 30, 2018. |
(5) | Excludes (i) retail space in the Companys Manhattan office properties and (ii) the Empire State Building broadcasting licenses and observatory operations. |
Page 11
\
|
Second Quarter 2018 Tenant Lease Expirations (unaudited)
|
Number of Leases Expiring (1) |
Rentable Square Feet Expiring (2) |
Percent of Portfolio Rentable Square Feet Expiring |
Annualized Rent (3) |
Percent of Annualized Rent |
Annualized Rent Per Rentable Square Foot |
|||||||||||||||||||
Greater New York Metropolitan Area Office Properties | ||||||||||||||||||||||||
Available |
| 197,081 | 10.6 | % | $ | | 0.0 | % | $ | | ||||||||||||||
Signed leases not commenced |
4 | 9,874 | 0.5 | % | | 0.0 | % | | ||||||||||||||||
2Q 2018 (4) |
5 | 15,149 | 0.8 | % | 822,169 | 1.2 | % | 54.27 | ||||||||||||||||
3Q 2018 |
10 | 73,675 | 3.9 | % | 3,428,464 | 5.1 | % | 46.53 | ||||||||||||||||
4Q 2018 |
9 | 37,209 | 2.0 | % | 699,699 | 1.0 | % | 18.80 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total 2018 |
24 | 126,033 | 6.8 | % | 4,950,332 | 7.4 | % | 39.28 | ||||||||||||||||
1Q 2019 |
6 | 6,402 | 0.3 | % | 186,114 | 0.3 | % | 29.07 | ||||||||||||||||
2Q 2019 |
10 | 77,738 | 4.2 | % | 3,278,565 | 4.9 | % | 42.17 | ||||||||||||||||
3Q 2019 |
2 | 5,099 | 0.3 | % | 168,518 | 0.3 | % | 33.05 | ||||||||||||||||
4Q 2019 |
6 | 133,585 | 7.2 | % | 4,714,685 | 7.0 | % | 35.29 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total 2019 |
24 | 222,824 | 11.9 | % | 8,347,882 | 12.5 | % | 37.46 | ||||||||||||||||
2020 |
20 | 181,677 | 9.7 | % | 8,232,121 | 12.3 | % | 45.31 | ||||||||||||||||
2021 |
31 | 210,934 | 11.3 | % | 9,363,823 | 14.0 | % | 44.39 | ||||||||||||||||
2022 |
15 | 120,775 | 6.5 | % | 4,479,652 | 6.7 | % | 37.09 | ||||||||||||||||
2023 |
12 | 117,405 | 6.3 | % | 5,342,875 | 8.0 | % | 45.51 | ||||||||||||||||
2024 |
7 | 186,890 | 10.0 | % | 8,228,362 | 12.3 | % | 44.03 | ||||||||||||||||
2025 |
13 | 116,011 | 6.2 | % | 3,910,482 | 5.8 | % | 33.71 | ||||||||||||||||
2026 |
4 | 60,710 | 3.3 | % | 1,824,532 | 2.7 | % | 30.05 | ||||||||||||||||
2027 |
6 | 64,229 | 3.4 | % | 2,328,224 | 3.5 | % | 36.25 | ||||||||||||||||
Thereafter |
12 | 251,830 | 13.5 | % | 9,880,221 | 14.8 | % | 39.23 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total greater New York metropolitan area office properties |
172 | 1,866,273 | 100.0 | % | $ | 66,888,506 | 100.0 | % | $ | 40.31 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Retail Properties |
||||||||||||||||||||||||
Available |
| 64,294 | 8.9 | % | $ | | 0.0 | % | $ | | ||||||||||||||
Signed leases not commenced |
2 | 20,096 | 2.8 | % | | 0.0 | % | | ||||||||||||||||
2Q 2018 (4) |
| | 0.0 | % | | 0.0 | % | | ||||||||||||||||
3Q 2018 |
2 | 2,247 | 0.3 | % | 294,791 | 0.3 | % | 131.19 | ||||||||||||||||
4Q 2018 |
1 | 244 | 0.0 | % | 26,108 | 0.0 | % | 107.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total 2018 |
3 | 2,491 | 0.3 | % | 320,899 | 0.4 | % | 128.82 | ||||||||||||||||
1Q 2019 |
| | 0.0 | % | | 0.0 | % | | ||||||||||||||||
2Q 2019 |
1 | 2,773 | 0.4 | % | 1,350,666 | 1.5 | % | 487.08 | ||||||||||||||||
3Q 2019 |
4 | 6,250 | 0.9 | % | 1,321,598 | 1.5 | % | 211.46 | ||||||||||||||||
4Q 2019 |
1 | 17,433 | 2.4 | % | 1,276,969 | 1.4 | % | 73.25 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total 2019 |
6 | 26,456 | 3.7 | % | 3,949,233 | 4.4 | % | 149.28 | ||||||||||||||||
2020 |
9 | 28,633 | 4.0 | % | 3,564,100 | 3.9 | % | 124.48 | ||||||||||||||||
2021 |
7 | 29,667 | 4.1 | % | 4,937,797 | 5.5 | % | 166.44 | ||||||||||||||||
2022 |
9 | 59,641 | 8.3 | % | 8,866,797 | 9.8 | % | 148.67 | ||||||||||||||||
2023 |
9 | 54,333 | 7.6 | % | 6,360,671 | 7.0 | % | 117.07 | ||||||||||||||||
2024 |
12 | 28,419 | 4.0 | % | 5,748,722 | 6.4 | % | 202.28 | ||||||||||||||||
2025 |
8 | 37,325 | 5.2 | % | 10,895,978 | 12.0 | % | 291.92 | ||||||||||||||||
2026 |
8 | 70,351 | 9.8 | % | 4,457,066 | 4.9 | % | 63.35 | ||||||||||||||||
2027 |
8 | 87,773 | 12.2 | % | 7,381,802 | 8.2 | % | 84.10 | ||||||||||||||||
Thereafter |
18 | 209,425 | 29.0 | % | 33,991,978 | 37.5 | % | 162.31 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total retail properties |
99 | 718,904 | 100.0 | % | $ | 90,475,043 | 100.0 | % | $ | 142.59 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
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) 157,338 rentable square feet of space across the Company portfolio attributable to building management use and tenant amenities and (ii) 69,789 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 leases that are included in occupancy as of June 30, 2018 and expire on June 30, 2018. |
Page 12
|
Second Quarter 2018 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) (5) |
Percent of Annualized Rent |
Annualized Rent Per Rentable Square Foot |
||||||||||||||||||
Available |
| 120,824 | 4.5 | % | $ | | 0.0 | % | $ | | ||||||||||||||
Signed leases not commenced |
3 | 46,380 | 1.7 | % | | 0.0 | % | | ||||||||||||||||
2Q 2018 (6) |
3 | 8,173 | 0.3 | % | 552,569 | 0.4 | % | 67.61 | ||||||||||||||||
3Q 2018 |
12 | 51,150 | 1.9 | % | 3,071,850 | 2.2 | % | 60.06 | ||||||||||||||||
4Q 2018 |
5 | 15,719 | 0.6 | % | 969,611 | 0.7 | % | 61.68 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total 2018 |
20 | 75,042 | 2.8 | % | 4,594,030 | 3.2 | % | 61.22 | ||||||||||||||||
1Q 2019 |
6 | 10,649 | 0.4 | % | 562,437 | 0.4 | % | 52.82 | ||||||||||||||||
2Q 2019 |
1 | 1,738 | 0.1 | % | 90,437 | 0.1 | % | 52.04 | ||||||||||||||||
3Q 2019 |
1 | 5,588 | 0.2 | % | 314,590 | 0.2 | % | 56.30 | ||||||||||||||||
4Q 2019 |
6 | 41,195 | 1.5 | % | 2,269,612 | 1.6 | % | 55.09 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total 2019 |
14 | 59,170 | 2.2 | % | 3,237,076 | 2.3 | % | 54.71 | ||||||||||||||||
2020 |
35 | 295,150 | 10.9 | % | 17,242,260 | 12.1 | % | 58.42 | ||||||||||||||||
2021 |
19 | 126,599 | 4.7 | % | 7,178,352 | 5.0 | % | 56.70 | ||||||||||||||||
2022 |
21 | 95,218 | 3.5 | % | 5,949,216 | 4.2 | % | 62.48 | ||||||||||||||||
2023 |
15 | 83,429 | 3.1 | % | 5,256,606 | 3.7 | % | 63.01 | ||||||||||||||||
2024 |
13 | 92,516 | 3.4 | % | 5,723,375 | 4.0 | % | 61.86 | ||||||||||||||||
2025 |
7 | 63,165 | 2.3 | % | 3,495,673 | 2.4 | % | 55.34 | ||||||||||||||||
2026 |
11 | 502,152 | 18.5 | % | 28,989,412 | 20.3 | % | 57.73 | ||||||||||||||||
2027 |
4 | 16,613 | 0.6 | % | 1,132,853 | 0.8 | % | 68.19 | ||||||||||||||||
Thereafter |
22 | 1,134,890 | 41.9 | % | 59,915,656 | 42.0 | % | 52.79 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Empire State Building office |
184 | 2,711,148 | 100.0 | % | $ | 142,714,509 | 100.0 | % | $ | 56.10 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Empire State Building Broadcasting Licenses and Leases |
Annualized Base Rent (7) |
Annualized Expense Reimbursements |
Annualized Rent (4) (8) |
Percent of Annualized Rent |
||||||||||||||||||||
2Q 2018 (6) |
$ | 487,150 | $ | 102,936 | $ | 590,086 | 3.3 | % | ||||||||||||||||
3Q 2018 |
1,424,351 | 591,474 | 2,015,825 | 11.4 | % | |||||||||||||||||||
4Q 2018 |
1,290,646 | 747,368 | 2,038,014 | 11.5 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total 2018 |
3,202,147 | 1,441,778 | 4,643,925 | 26.3 | % | |||||||||||||||||||
1Q 2019 |
212,240 | 47,729 | 259,969 | 1.5 | % | |||||||||||||||||||
2Q 2019 |
| | | 0.0 | % | |||||||||||||||||||
3Q 2019 |
| | | 0.0 | % | |||||||||||||||||||
4Q 2019 |
| | | 0.0 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total 2019 |
212,240 | 47,729 | 259,969 | 1.5 | % | |||||||||||||||||||
2020 |
955,809 | 153,232 | 1,109,041 | 6.3 | % | |||||||||||||||||||
2021 |
55,685 | 95,271 | 150,956 | 0.9 | % | |||||||||||||||||||
2022 |
1,124,545 | 254,552 | 1,379,097 | 7.8 | % | |||||||||||||||||||
2023 |
82,480 | 20,327 | 102,807 | 0.6 | % | |||||||||||||||||||
2024 |
45,894 | 59,186 | 105,080 | 0.6 | % | |||||||||||||||||||
2025 |
1,496,090 | 183,420 | 1,679,510 | 9.5 | % | |||||||||||||||||||
2026 |
768,750 | 68,658 | 837,408 | 4.7 | % | |||||||||||||||||||
2027 |
750,000 | 54,727 | 804,727 | 4.5 | % | |||||||||||||||||||
Thereafter |
6,001,974 | 632,876 | 6,634,850 | 37.5 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total Empire State Building broadcasting licenses and leases |
|
$ | 14,695,614 | $ | 3,011,756 | $ | 17,707,370 | 100.0 | % | |||||||||||||||
|
|
|
|
|
|
|
|
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 25,937 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) | Includes approximately $8.0 million of annualized rent related to physical space occupied by broadcasting tenants for their broadcasting operations. Does not include license fees charged to broadcasting tenants. |
(6) | Represents leases that are included in occupancy as of June 30, 2018 and expire on June 30, 2018. |
(7) | Represents license fees for the use of the Empire State Building mast and base rent for physical space occupied by broadcasting tenants. |
(8) | Excludes Fox Television whose lease expired during 2017 and was billed holdover rent as of June 30, 2018. |
Page 13
|
Second Quarter 2018 20 Largest Tenants and Portfolio Tenant Diversification by Industry (unaudited)
|
20 Largest Tenants |
Property |
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 |
ESB, 1333 BWay | Oct. 2023 - Oct. 2028 | 9.6 years | 668,942 | 6.6 | % | $ | 31,409,092 | 6.1 | % | ||||||||||||||
2. Coty |
ESB | Jan. 2030 | 11.6 years | 309,757 | 3.1 | % | 16,327,268 | 3.2 | % | |||||||||||||||
3. LinkedIn |
ESB | Feb. 2026 | 7.7 years | 282,782 | 2.8 | % | 15,888,535 | 3.1 | % | |||||||||||||||
4. PVH Corp. |
501 Seventh Avenue | Oct 2018 - Oct. 2028 | 9.5 years | 238,392 | 2.4 | % | 10,572,562 | 2.0 | % | |||||||||||||||
5. Sephora |
112 West 34th Street | Jan. 2029 | 10.6 years | 11,334 | 0.1 | % | 10,445,021 | 2.0 | % | |||||||||||||||
6. Li & Fung |
1359 Broadway | Oct. 2021-Oct. 2027 | 5.8 years | 149,436 | 1.5 | % | 7,297,593 | 1.4 | % | |||||||||||||||
7. Federal Deposit Insurance Corp. |
ESB | Jan. 2020 | 1.6 years | 121,879 | 1.2 | % | 6,923,222 | 1.3 | % | |||||||||||||||
8. Macys |
111 West 33rd Street | May 2030 | 11.9 years | 131,117 | 1.3 | % | 6,867,959 | 1.3 | % | |||||||||||||||
9. Urban Outfitters |
1333 Broadway | Sept. 2029 | 11.3 years | 56,730 | 0.6 | % | 6,831,727 | 1.3 | % | |||||||||||||||
10. Duane Reade |
ESB, 1350 BWay, 250 West 57th | Feb. 2021-Sept. 2027 | 6.4 years | 47,541 | 0.5 | % | 6,279,846 | 1.2 | % | |||||||||||||||
11. Footlocker |
112 West 34th Street | Sept. 2031 | 13.3 years | 34,192 | 0.3 | % | 6,223,978 | 1.2 | % | |||||||||||||||
12. Legg Mason |
First Stamford Place | Sept. 2024 | 6.3 years | 137,583 | 1.4 | % | 6,215,355 | 1.2 | % | |||||||||||||||
13. WDFG North America |
ESB | Dec. 2025 | 7.4 years | 5,300 | 0.1 | % | 5,680,776 | 1.1 | % | |||||||||||||||
14. Shutterstock |
ESB | Apr. 2029 | 10.8 years | 104,386 | 1.0 | % | 5,582,973 | 1.1 | % | |||||||||||||||
15. ASCAP |
111 West 33rd Street | Aug. 2034 | 16.2 years | 87,943 | 0.9 | % | 5,250,464 | 1.0 | % | |||||||||||||||
16. Kohls |
1400 Broadway | May 2029 | 10.9 years | 113,032 | 1.1 | % | 4,919,135 | 0.9 | % | |||||||||||||||
17. The Gap, Inc. |
111 West 33rd Street, OGCP | Jan. 2023-Jan. 2030 | 11.5 years | 83,408 | 0.8 | % | 4,686,621 | 0.9 | % | |||||||||||||||
18. HNTB Corporation |
ESB | Feb. 2026 | 7.7 years | 78,361 | 0.8 | % | 4,586,184 | 0.9 | % | |||||||||||||||
19. The Michael J. Fox Foundation |
111 West 33rd Street | Nov. 2029 | 11.4 years | 75,959 | 0.7 | % | 4,557,540 | 0.9 | % | |||||||||||||||
20. Target |
112 West 34th Street | Jan. 2038 | 19.6 years | 43,019 | 0.4 | % | 4,300,000 | 0.8 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
2,781,093 | 27.6 | % | $ | 170,845,851 | 32.9 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
Notes:
(1) | Expiration dates are per lease and do not assume exercise of renewal or extension 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 June 30, 2018. |
(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 14
|
Second Quarter 2018 Capital Expenditures and Redevelopment Program and Leasing Opportunity (unaudited and dollars in thousands)
|
Three Months Ended | ||||||||||||||||||||
Capital expenditures | June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
June 30, 2017 |
|||||||||||||||
Tenant improvements - first generation |
$ | 31,921 | $ | 17,298 | $ | 17,680 | $ | 16,219 | $ | 20,557 | ||||||||||
Tenant improvements - second generation |
4,874 | 2,039 | 6,966 | 6,058 | 4,764 | |||||||||||||||
Leasing commissions - first generation |
1,698 | 3,699 | 6,207 | 7,416 | 7,683 | |||||||||||||||
Leasing commissions - second generation |
866 | 3,024 | 2,996 | 817 | 192 | |||||||||||||||
Building improvements - first generation |
19,862 | 13,664 | 19,591 | 15,759 | 26,680 | |||||||||||||||
Building improvements - second generation |
4,329 | 1,719 | 3,566 | 2,105 | 2,337 | |||||||||||||||
Observatory capital project |
15,871 | 11,533 | 16,360 | 13,411 | 6,850 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 79,421 | $ | 52,976 | $ | 73,366 | $ | 61,785 | $ | 69,063 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Tenant space redevelopment by square feet (1) (2)
| Future redevelopment (Empire State Building) - 230,000 square feet |
| Future redevelopment (other Manhattan properties) - 630,000 square feet |
| Redevelopment completed - 7,120,000 square feet |
Inventory of vacant space (2)
| Developed - 560,000 square feet, 88% (3) |
| Undeveloped - 80,000 square feet, 12% |
Inventory of undeveloped space (2)
| Vacant - 80,000 square feet, 10% |
| Expires in 2018 - 140,000 square feet, 16% |
| Expires in 2019 and thereafter - 640,000 square feet, 74% |
Developed 30,000 square feet in the second quarter 2018 and 110,000 square feet year-to-date June 2018.
Leasing Opportunity - Inventory of Current Vacant Space as of June 30, 2018 (in square feet)
Total Portfolio vacant space |
1,177,000 | |||
|
|
|||
Signed leases not commenced (SLNC): |
||||
Manhattan Office Properties SLNC |
272,000 | |||
Greater New York Office Properties SLNC |
10,000 | |||
Retail Properties SLNC |
20,000 | |||
Redeveloped Manhattan Office space |
498,000 | |||
Greater New York Office Properties space |
197,000 | |||
Retail Properties space |
64,000 | |||
Undeveloped Manhattan Office space |
47,000 | |||
Space held off market |
29,000 | |||
Other |
40,000 | |||
|
|
|||
Total |
1,177,000 | |||
|
|
Development of Space Expected to Vacate from June 30, 2018 through December 31, 2018 (in square feet)
Expected Vacates |
2018 | 2019 | 2020 | Thereafter | ||||||||||||||||
Tenant Vacates |
||||||||||||||||||||
Developed |
77,048 | |||||||||||||||||||
Undeveloped space to be developed |
3,100 | | 2,056 | | 1,044 | |||||||||||||||
|
|
|||||||||||||||||||
80,148 | ||||||||||||||||||||
|
|
|||||||||||||||||||
Intentional Vacates |
||||||||||||||||||||
Developed |
31,645 | |||||||||||||||||||
Undeveloped space to be developed |
62,609 | 37,034 | 19,200 | | 6,375 | |||||||||||||||
|
|
|||||||||||||||||||
94,254 | ||||||||||||||||||||
|
|
Notes:
(1) | These estimates are based on the Companys current budgets 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. |
(3) | Includes 498,000 square feet of redeveloped Manhattan office space, 37,000 square feet of redeveloped retail space and the balance reflects space held off-market. |
Page 15
|
Second Quarter 2018 Observatory Summary (unaudited and in thousands)
|
Three Months Ended | ||||||||||||||||||||||||
Observatory NOI |
Twelve Months to Date |
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
June 30, 2017 |
||||||||||||||||||
Observatory revenue |
$ | 128,662 | $ | 35,201 | $ | 21,249 | $ | 32,906 | $ | 39,306 | $ | 33,966 | ||||||||||||
Observatory expenses |
30,858 | 7,678 | 7,336 | 7,196 | 8,648 | 7,176 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
NOI |
97,804 | 27,523 | 13,913 | 25,710 | 30,658 | 26,790 | ||||||||||||||||||
Intercompany rent expense (1) |
79,144 | 21,990 | 13,561 | 20,292 | 23,301 | 20,675 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
NOI after intercompany rent |
$ | 18,660 | $ | 5,533 | $ | 352 | $ | 5,418 | $ | 7,357 | $ | 6,115 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Observatory Metrics |
||||||||||||||||||||||||
Number of visitors |
1,078,000 | 660,000 | 1,014,000 | 1,276,000 | 1,126,000 | |||||||||||||||||||
Change in visitors year over year |
|
(4.3 | %) | 3.8 | % | (5.1 | %) | (4.8 | %) | 0.2 | % | |||||||||||||
Number of bad weather days (BWD) (2) |
|
11 | 15 | 10 | 14 | 15 | ||||||||||||||||||
Estimated effect of BWDs on number of visitors (3) |
|
19,000 | (14,000 | ) | (2,000 | ) | (38,000 | ) | (65,000 | ) | ||||||||||||||
102nd floor revenue (4) |
$ | 3,041 | $ | 83 | $ | 2,767 | $ | 3,537 | $ | 3,139 |
Notes:
(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. |
(2) | The Company defines a bad weather day as one in which the top of the Empire State Building is obscured from view for more than 50% of the day. |
(3) | Represents an estimated reduction in the number of visitors due to bad weather days compared to the same quarter in the prior year. |
(4) | Reflects revenues derived from the 102nd floor observatory. This revenue is included in total observatory revenues above and will be disclosed separately throughout the duration of the observatory capital improvement program. |
Annual Observatory Revenues 2013 to 2017
Page 16
|
Second Quarter 2018 Condensed Consolidated Balance Sheets (unaudited and dollars in thousands)
|
Assets | June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
June 30, 2017 |
|||||||||||||||
Commercial real estate properties, at cost: |
||||||||||||||||||||
Land |
$ | 201,196 | $ | 201,196 | $ | 201,196 | $ | 201,196 | $ | 201,196 | ||||||||||
Development costs |
7,987 | 7,986 | 7,986 | 7,978 | 7,978 | |||||||||||||||
Building and improvements |
2,562,662 | 2,495,901 | 2,458,473 | 2,398,964 | 2,347,435 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
2,771,845 | 2,705,083 | 2,667,655 | 2,608,138 | 2,556,609 | ||||||||||||||||
Less: accumulated depreciation |
(698,725 | ) | (678,250 | ) | (656,900 | ) | (631,916 | ) | (605,481 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Commercial real estate properties, net |
2,073,120 | 2,026,833 | 2,010,755 | 1,976,222 | 1,951,128 | |||||||||||||||
Cash and cash equivalents |
251,797 | 690,471 | 464,344 | 432,105 | 440,958 | |||||||||||||||
Restricted cash |
58,719 | 61,699 | 65,853 | 64,020 | 68,011 | |||||||||||||||
Short term investments |
400,000 | | | | | |||||||||||||||
Tenant and other receivables, net |
21,600 | 25,156 | 28,329 | 34,661 | 23,995 | |||||||||||||||
Deferred rent receivables, net |
190,419 | 184,667 | 178,629 | 172,665 | 165,470 | |||||||||||||||
Prepaid expenses and other assets |
64,695 | 39,393 | 61,028 | 39,463 | 54,624 | |||||||||||||||
Deferred costs, net |
246,763 | 255,844 | 262,701 | 268,132 | 263,392 | |||||||||||||||
Acquired below-market ground leases, net |
364,313 | 366,271 | 368,229 | 370,187 | 372,144 | |||||||||||||||
Goodwill |
491,479 | 491,479 | 491,479 | 491,479 | 491,479 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 4,162,905 | $ | 4,141,813 | $ | 3,931,347 | $ | 3,848,934 | $ | 3,831,201 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Equity |
||||||||||||||||||||
Mortgage notes payable, net |
$ | 610,026 | $ | 610,826 | $ | 717,164 | $ | 720,830 | $ | 724,312 | ||||||||||
Senior unsecured notes, net |
1,044,573 | 1,043,677 | 707,895 | 592,914 | 592,073 | |||||||||||||||
Unsecured term loan facility, net |
263,900 | 263,777 | 263,662 | 263,546 | 263,114 | |||||||||||||||
Unsecured revolving credit facility |
| | | | | |||||||||||||||
Accounts payable and accrued expenses |
129,944 | 106,830 | 110,849 | 142,690 | 136,617 | |||||||||||||||
Acquired below-market leases, net |
58,960 | 62,418 | 66,047 | 70,013 | 74,083 | |||||||||||||||
Deferred revenue and other liabilities |
29,553 | 37,499 | 40,907 | 41,320 | 27,380 | |||||||||||||||
Tenants security deposits |
42,808 | 43,448 | 47,086 | 47,395 | 49,669 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
2,179,764 | 2,168,475 | 1,953,610 | 1,878,708 | 1,867,248 | |||||||||||||||
Total equity |
1,983,141 | 1,973,338 | 1,977,737 | 1,970,226 | 1,963,953 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities and equity |
$ | 4,162,905 | $ | 4,141,813 | $ | 3,931,347 | $ | 3,848,934 | $ | 3,831,201 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Page 17
|
Second Quarter 2018 Condensed Consolidated Statements of Income (unaudited and in thousands, except per share amounts)
|
Three Months Ended | ||||||||||||||||||||
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
June 30, 2017 |
||||||||||||||||
Revenues |
||||||||||||||||||||
Rental revenue |
$ | 124,038 | $ | 122,311 | $ | 123,596 | $ | 122,391 | $ | 120,844 | ||||||||||
Tenant expense reimbursement |
16,205 | 17,794 | 19,790 | 20,346 | 17,569 | |||||||||||||||
Observatory revenue |
35,201 | 21,249 | 32,906 | 39,306 | 33,966 | |||||||||||||||
Lease termination fees |
357 | 622 | 3,197 | 1,165 | 1,251 | |||||||||||||||
Third party management and other fees |
376 | 463 | 312 | 345 | 392 | |||||||||||||||
Other revenue and fees |
2,352 | 4,832 | (1) | 2,496 | 2,993 | 2,327 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total revenues |
178,529 | 167,271 | 182,297 | 186,546 | 176,349 | |||||||||||||||
Operating expenses |
||||||||||||||||||||
Property operating expenses |
39,418 | 44,185 | 41,522 | 41,270 | 38,529 | |||||||||||||||
Ground rent expenses |
2,332 | 2,331 | 2,332 | 2,331 | 2,332 | |||||||||||||||
General and administrative expenses |
13,225 | 12,628 | 13,749 | 12,899 | 12,579 | |||||||||||||||
Observatory expenses |
7,678 | 7,336 | 7,196 | 8,648 | 7,176 | |||||||||||||||
Real estate taxes |
26,743 | 26,744 | 26,465 | 26,901 | 24,542 | |||||||||||||||
Depreciation and amortization |
39,468 | 39,883 | 40,842 | 38,490 | 40,532 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
128,864 | 133,107 | 132,106 | 130,539 | 125,690 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating income |
49,665 | 34,164 | 50,191 | 56,007 | 50,659 | |||||||||||||||
Other income (expense) |
||||||||||||||||||||
Interest income |
2,499 | 1,225 | 773 | 774 | 775 | |||||||||||||||
Interest expense |
(20,525 | ) | (17,591 | ) | (16,364 | ) | (16,890 | ) | (17,477 | ) | ||||||||||
Loss on early extinguishment of debt |
| | | (2,157 | ) | | ||||||||||||||
Loss from derivative financial instruments |
| | | | (42 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income before income taxes |
31,639 | 17,798 | 34,600 | 37,734 | 33,915 | |||||||||||||||
Income tax (expense) benefit |
(1,455 | ) | 260 | (2,340 | ) | (2,245 | ) | (2,556 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
30,184 | 18,058 | 32,260 | 35,489 | 31,359 | |||||||||||||||
Perpetual preferred unit distributions |
(234 | ) | (234 | ) | (234 | ) | (234 | ) | (234 | ) | ||||||||||
Net income attributable to non-controlling interests |
(13,299 | ) | (8,056 | ) | (14,754 | ) | (16,449 | ) | (14,541 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income attributable to common stockholders |
$ | 16,651 | $ | 9,768 | $ | 17,272 | $ | 18,806 | $ | 16,584 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Weighted average common shares outstanding |
||||||||||||||||||||
Basic |
165,256 | 162,667 | 159,989 | 158,102 | 157,921 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Diluted |
297,244 | 296,827 | 297,898 | 297,871 | 298,398 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income per share attributable to common stockholders |
|
|||||||||||||||||||
Basic and diluted |
$ | 0.10 | $ | 0.06 | $ | 0.11 | $ | 0.12 | $ | 0.10 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Dividends per share |
$ | 0.105 | $ | 0.105 | $ | 0.105 | $ | 0.105 | $ | 0.105 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Notes:
(1) | Includes a $2.8 million settlement reached with a former broadcast tenant. |
Page 18
|
Second Quarter 2018 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 | ||||||||||||||||||||
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
June 30, 2017 |
||||||||||||||||
Reconciliation of Net Income to FFO, Modified FFO and Core FFO |
||||||||||||||||||||
Net Income |
$ | 30,184 | $ | 18,058 | $ | 32,260 | $ | 35,489 | $ | 31,359 | ||||||||||
Preferred unit distributions |
(234 | ) | (234 | ) | (234 | ) | (234 | ) | (234 | ) | ||||||||||
Real estate depreciation and amortization |
39,049 | 39,468 | 40,484 | 38,134 | 40,132 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
FFO attributable to common stockholders and non-controlled interests |
68,999 | 57,292 | 72,510 | 73,389 | 71,257 | |||||||||||||||
Amortization of below-market ground lease |
1,958 | 1,958 | 1,958 | 1,957 | 1,958 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Modified FFO attributable to common stockholders and non-controlled interests |
70,957 | 59,250 | 74,468 | 75,346 | 73,215 | |||||||||||||||
Deferred tax asset write-off |
| | 446 | | | |||||||||||||||
Loss on early extinguishment of debt |
| | | 2,157 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Core FFO attributable to common stockholders and non-controlled interests |
$ | 70,957 | $ | 59,250 | $ | 74,914 | $ | 77,503 | $ | 73,215 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total weighted average shares and Operating Partnership Units |
||||||||||||||||||||
Basic |
297,244 | 296,824 | 296,654 | 296,389 | 296,388 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Diluted |
297,244 | 296,827 | 297,898 | 297,871 | 298,398 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
FFO attributable to common stockholders and non-controlled interests per share |
||||||||||||||||||||
Basic |
$ | 0.23 | $ | 0.19 | $ | 0.24 | $ | 0.25 | $ | 0.24 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Diluted |
$ | 0.23 | $ | 0.19 | $ | 0.24 | $ | 0.25 | $ | 0.24 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Modified FFO attributable to common stockholders and non-controlled interests per share |
||||||||||||||||||||
Basic |
$ | 0.24 | $ | 0.20 | $ | 0.25 | $ | 0.25 | $ | 0.25 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Diluted |
$ | 0.24 | $ | 0.20 | $ | 0.25 | $ | 0.25 | $ | 0.25 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Core FFO attributable to common stockholders and non-controlled interests per share |
||||||||||||||||||||
Basic |
$ | 0.24 | $ | 0.20 | $ | 0.25 | $ | 0.26 | $ | 0.25 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Diluted |
$ | 0.24 | $ | 0.20 | $ | 0.25 | $ | 0.26 | $ | 0.25 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reconciliation of Core FFO to Core FAD |
||||||||||||||||||||
Core FFO |
$ | 70,957 | $ | 59,250 | $ | 74,914 | $ | 77,503 | $ | 73,215 | ||||||||||
Add: |
||||||||||||||||||||
Amortization of deferred financing costs |
1,023 | 1,034 | 1,036 | 1,017 | 1,331 | |||||||||||||||
Non-real estate depreciation and amortization |
419 | 415 | 358 | 356 | 400 | |||||||||||||||
Amortization of non-cash compensation expense |
4,656 | 4,555 | 3,292 | 3,841 | 3,813 | |||||||||||||||
Amortization of debt discount |
668 | 668 | 667 | 668 | 668 | |||||||||||||||
Amortization of loss on interest rate derivative |
536 | | | | | |||||||||||||||
Deduct: |
||||||||||||||||||||
Straight-line rental revenues |
(5,809 | ) | (5,853 | ) | (5,963 | ) | (6,861 | ) | (7,722 | ) | ||||||||||
Amortization of debt premiums |
| (949 | ) | (1,737 | ) | (1,736 | ) | (1,737 | ) | |||||||||||
Above/below-market rent revenue amortization |
(1,551 | ) | (1,168 | ) | (1,567 | ) | (1,607 | ) | (1,119 | ) | ||||||||||
Corporate capital expenditures |
| | (5 | ) | | (10 | ) | |||||||||||||
Tenant improvements - second generation |
(4,874 | ) | (2,039 | ) | (6,966 | ) | (6,058 | ) | (4,764 | ) | ||||||||||
Building improvements - second generation |
(4,329 | ) | (1,719 | ) | (3,566 | ) | (2,105 | ) | (2,337 | ) | ||||||||||
Leasing commissions - second generation |
(866 | ) | (3,024 | ) | (2,996 | ) | (817 | ) | (192 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Core FAD |
$ | 60,830 | $ | 51,170 | $ | 57,467 | $ | 64,201 | $ | 61,546 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reconciliation of Net Income to EBITDA |
||||||||||||||||||||
Net income |
$ | 30,184 | $ | 18,058 | $ | 32,260 | $ | 35,489 | $ | 31,359 | ||||||||||
Interest expense |
20,525 | 17,591 | 16,364 | 16,890 | 17,477 | |||||||||||||||
Income tax expense (benefit) |
1,455 | (260 | ) | 2,340 | 2,245 | 2,556 | ||||||||||||||
Depreciation and amortization |
39,468 | 39,883 | 40,842 | 38,490 | 40,532 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
EBITDA |
$ | 91,632 | $ | 75,272 | $ | 91,806 | $ | 93,114 | $ | 91,924 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Page 19
|
Second Quarter 2018 Debt Summary (unaudited and dollars in thousands)
|
June 30, 2018 | March 31, 2018 | |||||||||||||||||||||||
|
Weighted Average |
|
Weighted Average | |||||||||||||||||||||
Interest | Maturity | Interest | Maturity | |||||||||||||||||||||
Debt Summary |
Balance | Rate | (Years) | Balance | Rate | (Years) | ||||||||||||||||||
Fixed rate mortgage debt |
$ | 616,453 | 4.10 | % | 10.5 | $ | 617,361 | 4.10 | % | 10.8 | ||||||||||||||
Senior unsecured notes |
1,050,000 | 3.82 | % | 8.7 | 1,050,000 | 3.82 | % | 8.9 | ||||||||||||||||
Unsecured term loan facility (1) |
265,000 | 3.35 | % | 4.2 | 265,000 | 3.35 | % | 4.4 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total fixed rate debt |
1,931,453 | 3.84 | % | 8.6 | 1,932,361 | 3.84 | % | 8.8 | ||||||||||||||||
Unsecured revolving credit facility |
| | 3.2 | | | 3.4 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total variable rate debt |
| | 3.2 | | | 3.4 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total debt |
1,931,453 | 3.84 | % | 8.6 | 1,932,361 | 3.84 | % | 8.8 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Discount |
(2,983 | ) | (3,651 | ) | ||||||||||||||||||||
Deferred financing costs, net |
(9,971 | ) | (10,430 | ) | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
$ | 1,918,499 | $ | 1,918,280 | ||||||||||||||||||||
|
|
|
|
Note:
(1) | LIBOR is fixed at 2.1485% under a variable to fixed interest rate swap agreement. |
Outstanding at | ||||||||||||||||
June 30, | Letters | Available | ||||||||||||||
Available Capacity |
Facility | 2018 | of Credit | Capacity | ||||||||||||
Unsecured revolving credit facility (1) |
$ | 1,100,000 | $ | | $ | | $ | 1,100,000 | ||||||||
|
|
|
|
|
|
|
|
Current | In | |||||||||
Covenant Summary |
Required | Quarter | Compliance | |||||||
Maximum Total Leverage (2) |
< 60 | % | 28.6 | % | Yes | |||||
Maximum Secured Debt |
< 40 | % | 9.1 | % | Yes | |||||
Minimum Fixed Charge Coverage |
> 1.50 | x | 4.0 | x | Yes | |||||
Minimum Unencumbered Interest Coverage |
> 1.75 | x | 5.4 | x | Yes | |||||
Maximum Unsecured Leverage |
< 60 | % | 24.5 | % | Yes | |||||
Minimum Tangible Net Worth |
$ | 1,249,392 | $ | 1,755,701 | Yes |
Notes:
(1) | The unsecured revolving credit and term loan facility has an accordion feature allowing for an increase in maximum aggregate principal balance to $1.75 billion under certain circumstances. This unsecured revolving credit facility matures in August 2021 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
|
Second Quarter 2018 Debt Detail (unaudited and dollars in thousands)
|
Stated | Current | |||||||||||||||||
Interest | Interest | Principal | Maturity | |||||||||||||||
Rate (%) | Rate (%) | Balance | Date | Amortization | ||||||||||||||
Fixed rate mortgage debt: |
||||||||||||||||||
Metro Center |
3.59 | % | 3.59 | % | $ | 92,903 | 11/5/2024 | 30 years | ||||||||||
10 Union Square |
3.70 | % | 3.70 | % | 50,000 | 4/1/2026 | Interest only | |||||||||||
1542 Third Avenue |
4.29 | % | 4.29 | % | 30,000 | 5/1/2027 | Interest only | |||||||||||
First Stamford Place (1) |
4.28 | % | 4.28 | % | 180,000 | 7/1/2027 | 5 years interest only; 30 years thereafter | |||||||||||
1010 Third Avenue and 77 West 55th Street |
4.01 | % | 4.01 | % | 39,356 | 1/5/2028 | 30 years | |||||||||||
10 Bank Street |
4.23 | % | 4.23 | % | 34,194 | 6/1/2032 | 25 years | |||||||||||
383 Main Avenue |
4.44 | % | 4.44 | % | 30,000 | 6/30/2032 | 5 years interest only; 30 years thereafter | |||||||||||
1333 Broadway |
4.21 | % | 4.21 | % | 160,000 | 2/5/2033 | Interest only | |||||||||||
|
|
|||||||||||||||||
Total mortgage debt |
616,453 | |||||||||||||||||
Exchangeable senior unsecured notes |
2.63 | % | 2.63 | % | 250,000 | 8/15/2019 | Interest only | |||||||||||
Unsecured revolving credit facility |
LIBOR plus 1.10 | % | 3.19 | % | | 8/29/2021 | Interest only | |||||||||||
Unsecured term loan facility (2) |
LIBOR plus 1.20 | % | 3.35 | % | 265,000 | 8/29/2022 | Interest only | |||||||||||
Senior unsecured notes: |
||||||||||||||||||
Series A |
3.93 | % | 3.93 | % | 100,000 | 3/27/2025 | Interest only | |||||||||||
Series B |
4.09 | % | 4.09 | % | 125,000 | 3/27/2027 | Interest only | |||||||||||
Series C |
4.18 | % | 4.18 | % | 125,000 | 3/27/2030 | Interest only | |||||||||||
Series D |
4.08 | % | 4.08 | % | 115,000 | 1/22/2028 | Interest only | |||||||||||
Series E |
4.26 | % | 4.26 | % | 160,000 | 3/22/2030 | Interest only | |||||||||||
Series F |
4.44 | % | 4.44 | % | 175,000 | 3/22/2033 | Interest only | |||||||||||
|
|
|
|
|||||||||||||||
Total / weighted average debt |
3.84 | % | 1,931,453 | |||||||||||||||
|
|
|||||||||||||||||
Discount |
(2,983 | ) | ||||||||||||||||
Deferred financing costs, net |
(9,971 | ) | ||||||||||||||||
|
|
|||||||||||||||||
Total (3) |
$ | 1,918,499 | ||||||||||||||||
|
|
Notes:
(1) | Represents a $164 million mortgage loan bearing interest at 4.09% and a $16 million loan bearing interest at 6.25%. |
(2) | LIBOR is fixed at 2.1485% under a variable to fixed interest rate swap agreement. |
(3) | Capitalized interest was $0.5 million for the three months ended June 30, 2018. |
Page 21
|
Second Quarter 2018 Debt Maturities and Ground Lease Commitments (unaudited and dollars in thousands)
|
Weighted | ||||||||||||||||||||
Average | ||||||||||||||||||||
Interest | ||||||||||||||||||||
Percentage of | Rate of | |||||||||||||||||||
Year |
Amortization | Maturities (1) | Total | Total Debt | Maturing Debt | |||||||||||||||
2018 |
$ | 1,841 | $ | | $ | 1,841 | 0.1 | % | n/a | |||||||||||
2019 |
3,790 | 250,000 | 253,790 | 13.1 | % | 2.63 | % | |||||||||||||
2020 |
3,938 | | 3,938 | 0.2 | % | n/a | ||||||||||||||
2021 |
4,090 | | 4,090 | 0.2 | % | n/a | ||||||||||||||
2022 |
5,628 | 265,000 | 270,628 | 14.0 | % | 3.35 | % | |||||||||||||
Thereafter |
41,744 | 1,355,422 | 1,397,166 | 72.4 | % | 4.15 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total debt |
$ | 61,031 | $ | 1,870,422 | 1,931,453 | 100.0 | % | 3.84 | % | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Discount |
(2,983 | ) | ||||||||||||||||||
Deferred financing costs, net |
(9,971 | ) | ||||||||||||||||||
|
|
|||||||||||||||||||
Total |
$ | 1,918,499 | ||||||||||||||||||
|
|
Note:
(1) | Assumes no extension options are exercised. |
Debt Maturity Profile
Ground Lease Commitments
Year |
1350 Broadway |
1400 Broadway |
111 West 33rd Street |
Total | ||||||||||||
2018 |
$ | 54 | $ | 337 | $ | 368 | $ | 759 | ||||||||
2019 |
108 | 675 | 735 | 1,518 | ||||||||||||
2020 |
108 | 675 | 735 | 1,518 | ||||||||||||
2021 |
108 | 675 | 735 | 1,518 | ||||||||||||
2022 |
108 | 675 | 735 | 1,518 | ||||||||||||
Thereafter |
2,145 | 27,675 | 39,996 | 69,816 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 2,631 | $ | 30,712 | $ | 43,304 | $ | 76,647 | |||||||||
|
|
|
|
|
|
|
|
Page 22
|
Second Quarter 2018 Supplemental Definitions
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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 third quarter 2014 acquisition of two option properties following our formation transactions 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: deferred tax asset write-off, loss on early extinguishment of debt and acquisition expenses. The Company presents Core FFO because it considers it an important supplemental measure of its operating performance in that it excludes 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 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, (ii) 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, loss on early extinguishment of debt and loss from derivative financial instruments 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 titled measures and, accordingly, our NOI may not-be comparable to similarly titled measures reported by other companies that do not define the measure exactly as we do.
EBITDA
We compute EBITDA as net income plus interest expense, income taxes and depreciation. We present 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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