EX-99.2 3 d625882dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

 

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LOGO    Third 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


LOGO    Third 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 world’s 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
   Jason Green    (212) 446-9449    jason.green@evercoreisi.com
Goldman Sachs & Co. LLC    Andrew Rosivach    (212) 902-4736    rosivach@gs.com
Green Street Advisors    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


LOGO   

Third Quarter 2018

Financial Highlights

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

 

 

     Three Months Ended  

Selected Items:

   September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 

Revenue

   $ 186,402     $ 178,529     $ 167,271     $ 182,297     $ 186,546  

Net income

   $ 29,230     $ 30,184     $ 18,058     $ 32,260     $ 35,489  

Cash net operating income (1) (2)

   $ 99,138     $ 96,580     $ 81,149     $ 98,898     $ 100,540  

Core funds from operations (“Core FFO”) (1)

   $ 72,957     $ 70,957     $ 59,250     $ 74,914     $ 77,503  

Core funds available for distribution (“Core FAD”) (1)

   $ 59,205     $ 60,830     $ 51,170     $ 57,467     $ 64,201  

Core FFO per share - diluted

   $ 0.25     $ 0.24     $ 0.20     $ 0.25     $ 0.26  

Diluted weighted average shares

     297,478,000       297,244,000       296,827,000       297,898,000       297,871,000  

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

     10,126,547       10,140,545       10,143,376       10,144,638       10,137,074  

Percent occupied (3)

     88.4     88.4     88.1     89.6     89.8

Percent leased (4)

     92.1     91.4     91.5     92.2     91.7

Observatory Metrics:

          

Number of visitors (5)

     1,168,000       1,049,000       644,000       991,000       1,237,000  

Change in visitors year over year

     (5.6 %)      (4.1 %)      4.1     (4.7 %)      (5.2 %) 

Observatory revenues (6)

   $ 40,241     $ 35,201     $ 21,249     $ 32,906     $ 39,306  

Change in revenues year over year

     2.4     3.6     1.5     (2.4 %)      3.1

Ratios:

          

Consolidated Debt to Total Market Capitalization (7)

     27.6     27.0     27.4     21.5     20.4

Consolidated Net Debt to Total Market Capitalization (7)

     20.4     19.7     19.5     16.6     15.7

Consolidated Debt and Perpetual Preferred Units to Total Market Capitalization (7)

     28.0     27.4     27.8     21.9     20.7

Consolidated Net Debt and Perpetual Preferred Units to Total Market Capitalization (7)

     20.8     20.1     19.9     17.0     16.1

Consolidated Debt to EBITDA (8)

     5.5x       5.5x       5.5x       4.8x       4.5x  

Consolidated Net Debt to EBITDA (8)

     3.7x       3.6x       3.5x       3.5x       3.3x  

Interest Coverage Ratio

     5.0x       4.8x       4.4x       5.8x       5.6x  

Core FFO Payout Ratio (9)

     44     45     53     42     41

Core FAD Payout Ratio (10)

     54     52     62     55     49

Class A common stock price at quarter end

   $ 16.61     $ 17.10     $ 16.79     $ 20.53     $ 20.54  

Average closing price

   $ 17.07     $ 16.89     $ 18.10     $ 20.46     $ 20.48  

Dividends per share - annualized

   $ 0.42     $ 0.42     $ 0.42     $ 0.42     $ 0.42  

Dividend yield (11)

     2.5     2.5     2.5     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

     168,176,734       166,658,962       163,321,049       160,424,575       158,349,708  

Class B common stock

     1,044,169       1,045,670       1,048,161       1,052,469       1,077,740  

Operating partnership units

     134,112,696       135,628,967       138,627,149       138,932,443       140,989,373  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total common stock and operating partnership units outstanding (12)

     303,333,599       303,333,599       302,996,359       300,409,487       300,416,821  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 5 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)

Reflects the number of visitors who pass through the turnstile, excluding visitors who make a second visit on the same ticket at no additional charge.

(6)

Observatory revenues include the fixed license fee received from WDFG North America, the Observatory gift shop operator. See page 16.

(7)

Market capitalization represents the sum of (i) Company’s common stock per share price as of September 30, 2018 multiplied by the total outstanding number of shares of common stock and operating partnership units as of September 30, 2018; (ii) the number of perpetual preferred units at September 30, 2018 multiplied by $16.62 and (iii) our outstanding indebtedness or net indebtedness as of September 30, 2018.

(8)

Calculated based on trailing 12 months EBITDA.

(9)

Represents the amount of Core FFO paid out in distributions.

(10)

Represents the amount of Core FAD paid out in distributions.

(11)

Based on the closing price per share of Class A common stock on September 30, 2018.

(12)

As of September 30, 2018, the Company has had conversions from operating partnership units and Class B common shares to Class A common shares totaling 43.7 million shares or approximately $726 million at a closing share price of $16.61. This represents a 53% increase in the number of Class A shares since the IPO.

 

Page 4


LOGO   

Third Quarter 2018

Property Summary - Net Operating Income (“NOI”) by Quarter

(unaudited and dollars in thousands)

 

 

     Three Months Ended  
     September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 

Total Portfolio

          

Revenues

   $ 145,849     $ 142,952     $ 145,559     $ 149,079     $ 146,895  

Operating expenses

     (73,387     (68,493     (73,260     (70,319     (70,502
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net operating income (“NOI”)

     72,462       74,459       72,299       78,760       76,393  

Straight-line rent

     (5,000     (5,809     (5,853     (5,963     (6,861

Above/below-market rent revenue amortization

     (1,668     (1,551     (1,168     (1,567     (1,607

Below-market ground lease amortization

     1,957       1,958       1,958       1,958       1,957  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cash NOI - excluding Observatory

     67,751       69,057       67,236       73,188       69,882  

Observatory cash NOI

     31,387       27,523       13,913       25,710       30,658  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cash NOI - including Observatory

   $ 99,138     $ 96,580     $ 81,149     $ 98,898     $ 100,540  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Manhattan Office Portfolio (1)

          

Revenues

   $ 122,687     $ 119,384     $ 122,303     $ 124,422     $ 123,421  

Operating expenses

     (62,464     (58,457     (63,218     (59,760     (60,052
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOI

     60,223       60,927       59,085       64,662       63,369  

Straight-line rent

     (4,068     (4,970     (6,089     (5,840     (6,825

Above/below-market rent revenue amortization

     (1,668     (1,551     (1,168     (1,567     (1,607

Below-market ground lease amortization

     1,957       1,958       1,958       1,958       1,957  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash NOI

   $ 56,444     $ 56,364     $ 53,786     $ 59,213     $ 56,894  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Greater New York Office Portfolio

          

Revenues

   $ 18,536     $ 18,741     $ 18,697     $ 19,710     $ 18,582  

Operating expenses

     (9,069     (8,326     (8,425     (8,800     (8,565
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOI

     9,467       10,415       10,272       10,910       10,017  

Straight-line rent

     (1,014     (895     (285     (272     (190

Above/below-market rent revenue amortization

     —         —         —         —         —    

Below-market ground lease amortization

     —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash NOI

   $ 8,453     $ 9,520     $ 9,987     $ 10,638     $ 9,827  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Standalone Retail Portfolio

          

Revenues

   $ 4,626     $ 4,827     $ 4,559     $ 4,947     $ 4,892  

Operating expenses

     (1,854     (1,710     (1,617     (1,759     (1,885
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOI

     2,772       3,117       2,942       3,188       3,007  

Straight-line rent

     82       56       521       149       154  

Above/below-market rent revenue amortization

     —         —         —         —         —    

Below-market ground lease amortization

     —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash NOI

   $ 2,854     $ 3,173     $ 3,463     $ 3,337     $ 3,161  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Note:

 

(1)

Includes 513,437 rentable square feet of retail space in the Company’s nine Manhattan office properties.

 

Page 5


LOGO   

Third Quarter 2018

Net Operating Income (“NOI”), Initial Free Rent Burn-Off  and Signed Leases Not Commenced

(unaudited and dollars in thousands)

 

 

     Three Months Ended  

Reconciliation of Net Income to NOI and Cash NOI

   September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 

Net income

   $ 29,230     $ 30,184     $ 18,058     $ 32,260     $ 35,489  

Add:

          

General and administrative expenses

     13,148       13,225       12,628       13,749       12,899  

Depreciation and amortization

     42,475       39,468       39,883       40,842       38,490  

Interest expense

     20,658       20,525       17,591       16,364       16,890  

Loss on early extinguishment of debt

     —         —         —         —         2,157  

Income tax expense (benefit)

     2,135       1,455       (260     2,340       2,245  

Less:

          

Third-party management and other fees

     (312     (376     (463     (312     (345

Interest income

     (3,485     (2,499     (1,225     (773     (774
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net operating income

     103,849       101,982       86,212       104,470       107,051  

Straight-line rent

     (5,000     (5,809     (5,853     (5,963     (6,861

Above/below-market rent revenue amortization

     (1,668     (1,551     (1,168     (1,567     (1,607

Below-market ground lease amortization

     1,957       1,958       1,958       1,958       1,957  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cash NOI - including Observatory

     99,138       96,580       81,149       98,898       100,540  

Less: Observatory NOI

     (31,387     (27,523     (13,913     (25,710     (30,658
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cash NOI - excluding Observatory

   $ 67,751     $ 69,057     $ 67,236     $ 73,188     $ 69,882  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash NOI by Portfolio

          

Manhattan Office Portfolio

   $ 56,444     $ 56,364     $ 53,786     $ 59,213     $ 56,894  

Greater New York Office Portfolio

     8,453       9,520       9,987       10,638       9,827  

Standalone Retail Portfolio

     2,854       3,173       3,463       3,337       3,161  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cash NOI - excluding Observatory

     67,751       69,057       67,236       73,188       69,882  

Observatory cash NOI

     31,387       27,523       13,913       25,710       30,658  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cash NOI - including Observatory

   $ 99,138     $ 96,580     $ 81,149     $ 98,898     $  100,540  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Schedule of Initial Free Rent Burn-Off

As of September 30, 2018, the Company had approximately $49 million of annualized cash rents that have yet to contribute to Cash NOI:

 

    

Annualized

     Cash Base Rent Contributing to Cash NOI in the Following Years on a
Cumulative Basis
 

Total Portfolio

   Initial Base
Cash Rent
     Remaining
2018
     2019      2020      2021  

Commenced leases in free rent period

   $ 27,381      $ 1,576      $ 22,099      $ 27,381      $ 27,381  

Signed leases not commenced

     21,940        197        6,160        19,952        21,940  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 49,321      $ 1,773      $ 28,259      $ 47,333      $ 49,321  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Signed leases not commenced

 

          9/30/18           Expected Base Rent     Incremental  
    Square     Escalated     New     Commencement     Annual  

Tenant

  Feet     Annual Rent     Annual Rent     GAAP     Cash     Revenue  

Clearview Healthcare Partners LLC

    10,539     $ —       $ 720       Oct. 2018       Dec. 2018     $ 720  

Captivate

    12,352       —         690       Nov. 2018       Mar. 2019       690  

Michael J. Fox Foundation

    10,533       —         670       Dec. 2018       May 2019       670  

Nespresso

    41,835       —         2,380       Dec. 2018       Aug. 2019       2,380  

Diligent Corporation

    44,700       730       2,860       Dec. 2018 - Mar. 2020       Aug. 2019 - Nov. 2020       2,130  

Prime Clerk LLC

    15,675       —         850       Apr. 2019       Jan. 2020       850  

Fragoman, Del Rey, Bernsen & Loewy LLP

    107,680       1,090       5,920       Jul. 2019       Jan. 2020       4,830  

Signature Bank

    91,181       —         5,440       Jul.- Sept. 2019       May 2020       5,440  

Other SLNC

    77,193       40       4,270       Oct. 2018 - Apr. 2019       Dec. 2018 - Sept. 2019       4,230  
 

 

 

   

 

 

   

 

 

       

 

 

 

Total

    411,688     $ 1,860     $ 23,800         $ 21,940  
 

 

 

   

 

 

   

 

 

       

 

 

 

 

Page 6


LOGO   

Third Quarter 2018

Property Summary - Leasing Activity by Quarter

(unaudited)

 

 

     Three Months Ended  
     September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 

Total Portfolio

          

Total leases executed

     43       37       41       55       34  

Weighted average lease term

     9.8 years       6.1 years       7.1 years       8.1 years       12.2 years  

Average free rent period

     6.8 months       4.5 months       4.8 months       6.4 months       9.3 months  

Office

          

Total square footage executed

     353,686       142,286       253,626       252,244       487,854  

Average rent psf - leases executed

   $ 58.47     $ 55.45     $ 54.51     $ 56.14     $ 52.52  

Previously escalated rents psf

   $ 47.10     $ 46.86     $ 48.53     $ 44.85     $ 41.12  

Percentage of new rent over previously escalated rents

     24.1     18.3     12.3     25.2     27.7

Retail

          

Total square footage executed

     413       1,131       5,904       22,744       —    

Average rent psf - leases executed

   $ 65.03     $ 122.02     $ 175.43     $ 115.33     $ —    

Previously escalated rents psf

   $ 63.22     $ 122.83     $ 175.43     $ 86.38     $ —    

Percentage of new rent over previously escalated rents

     2.9     (0.7 %)      0.0     33.5     0.0

Total Portfolio

          

Total square footage executed

     354,099       143,417       259,530       274,988       487,854  

Average rent psf - leases executed

   $ 58.48     $ 55.99     $ 57.29     $ 61.42     $ 52.52  

Previously escalated rents psf

   $ 47.12     $ 47.48     $ 51.44     $ 48.45     $ 41.12  

Percentage of new rent over previously escalated rents

     24.1     17.9     11.4     26.8     27.7

Leasing commission costs per square foot

   $ 22.33     $ 10.66     $ 15.35     $ 18.06     $ 22.15  

Tenant improvement costs per square foot

     75.17       66.27       49.54       65.95       72.92  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total LC and TI per square foot (2)

   $ 97.50     $ 76.93     $ 64.89     $ 84.01     $ 95.07  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Occupancy

     88.4     88.4     88.1     89.6     89.8

Manhattan Office Portfolio (1)

          

Total leases executed

     37       30       31       41       27  

Office - New Leases

          

Total square footage executed

     281,844       83,251       158,932       170,669       276,964  

Average rent psf - leases executed

   $ 61.84     $ 62.88     $ 59.51     $ 61.31     $ 58.79  

Previously escalated rents psf

   $ 48.56     $ 49.69     $ 48.05     $ 45.80     $ 40.24  

Percentage of new rent over previously escalated rents

     27.3     26.5     23.8     33.9     46.1

Office - Renewal Leases

          

Total square footage executed

     33,212       27,738       33,964       43,237       38,180  

Average rent psf - leases executed

   $ 53.77     $ 53.48     $ 56.31     $ 53.72     $ 56.12  

Previously escalated rents psf

   $ 46.90     $ 49.35     $ 56.22     $ 47.65     $ 50.02  

Percentage of new rent over previously escalated rents

     14.7     8.4     0.2     12.7     12.2

Retail - New and Renewal Leases

          

Total square footage executed

     413       1,131       —         20,366       —    

Average rent psf - leases executed

   $ 65.03     $ 122.02     $ —       $ 99.98     $ —    

Previously escalated rents psf

   $ 63.22     $ 122.83     $ —       $ 70.61     $ —    

Percentage of new rent over previously escalated rents

     2.9     (0.7 %)      0.0     41.6     0.0

Total Manhattan Office Portfolio

          

Total square footage executed

     315,469       112,120       192,896       234,272       315,144  

Average rent psf - leases executed

   $ 61.00     $ 61.15     $ 58.94     $ 63.27     $ 58.46  

Previously escalated rents psf

   $ 48.40     $ 50.35     $ 49.49     $ 48.30     $ 41.42  

Percentage of new rent over previously escalated rents

     26.0     21.5     19.1     31.0     41.1

Leasing commission costs per square foot

   $ 24.23     $ 11.70     $ 18.56     $ 19.02     $ 26.21  

Tenant improvement costs per square foot

     79.42       68.11       63.22       69.16       80.69  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total LC and TI per square foot (2)

   $ 103.65     $ 79.81     $ 81.78     $ 88.18     $ 106.90  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Occupancy

     88.3     88.1     87.3     89.0     89.2

 

Page 7


LOGO   

Third Quarter 2018

Property Summary - Leasing Activity by Quarter - (Continued)

(unaudited )

 

 

     Three Months Ended  
     September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 

Greater New York Office Portfolio

          

Total leases executed

     6       7       8       11       7  

Total square footage executed

     38,630       31,297       60,730       38,338       172,710  

Average rent psf - leases executed

   $ 37.92     $ 34.31     $ 39.85     $ 35.89     $ 41.68  

Previously escalated rents psf

   $ 36.63     $ 35.43     $ 45.36     $ 37.45     $ 40.57  

Percentage of new rent over previously escalated rents

     3.5     (3.2 %)      (12.1 %)      (4.2 %)      2.7

Leasing commission costs per square foot

   $ 6.81     $ 6.95     $ 4.21     $ 10.35     $ 14.74  

Tenant improvement costs per square foot

     40.47       59.68       7.89       50.40       58.76  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total LC and TI per square foot (2)

   $ 47.28     $ 66.63     $ 12.10     $ 60.75     $ 73.50  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Occupancy

     88.3     88.9     90.8     91.2     91.3

Standalone Retail Portfolio

          

Total leases executed

     —         —         2       3       —    

Total square footage executed

     —         —         5,904       2,378       —    

Average rent psf - leases executed

   $ —       $ —       $ 175.42     $ 246.78     $ —    

Previously escalated rents psf

   $ —       $ —       $ 175.42     $ 221.47     $ —    

Percentage of new rent over previously escalated rents

     0.0     0.0     0.0     11.4     0.0

Leasing commission costs per square foot

   $ —       $ —       $ 25.20     $ 48.45     $ —    

Tenant improvement costs per square foot

     —         —         31       —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total LC and TI per square foot (2)

   $ —       $ —       $ 56.51     $ 48.45     $ —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Occupancy

     94.4     95.4     97.3     99.4     99.4

Notes:

 

(1)

Includes 513,437 rentable square feet of retail space in the Company’s 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


LOGO   

Third Quarter 2018

Total Portfolio Expirations and Vacates Summary

(unaudited and in square feet)

 

 

     Actual     Forecast (1)     Forecast (1)  
     Three Months Ended     Three Months Ended         

Total Portfolio (2)

   September 30,
2018
    December 31,
2018
    March 31,
2019
    June 30,
2019
     September 30,
2019
     December 31,
2019
     Full Year
2019
    Full Year
2020
 

Total Expirations

     278,217       191,205       103,173       138,386        184,141        284,834        710,534       852,301  

Less: Broadcasting

     (26,038     (27,283     (586     —          —          —          (586     (1,673
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Office and Retail Expirations

     252,179       163,922       102,587       138,386        184,141        284,834        709,948       850,628  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Renewal & Relocations (3)

     32,796       50,142       18,765       72,485        16,043        56,081        163,374       346,260  

Short-term renewals (4)

     14,796       —         —         —          —          —          —         —    

New Leases (5)

     39,252       33,106       6,295       —          3,533        13,969        23,797       21,819  

Tenant Vacates (6)

     55,567       31,546       48,277       11,215        41,099        114,542        215,133       101,708  

Intentional Vacates (7)

     91,652       45,782       1,501       30,979        51,492        72,389        156,361       31,089  

Holdover (8)

     18,116       —         —         —          —          —          —         —    

Unknown (9)

     —         3,346       27,749       23,707        71,974        27,853        151,283       349,752  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total Portfolio expirations and vacates

     252,179       163,922       102,587       138,386        184,141        284,834        709,948       850,628  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Manhattan Office Portfolio

                   

Total Expirations

     202,295       179,237       76,362       78,252        170,745        133,816        459,175       588,079  

Less: Broadcasting

     (26,038     (27,283     (586     —          —          —          (586     (1,673
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Office Expirations

     176,257       151,954       75,776       78,252        170,745        133,816        458,589       586,406  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Renewal & Relocations (3)

     26,121       40,946       15,618       22,788        10,453        38,887        87,746       175,786  

Short-term renewals (4)

     4,517       —         —         —          —          —          —         —    

New Leases (5)

     8,662       33,106       6,295       —          3,533        13,969        23,797       21,819  

Tenant Vacates (6)

     49,407       31,546       42,173       2,640        41,099        17,815        103,727       56,269  

Intentional Vacates (7)

     69,434       45,782       1,501       30,979        45,733        54,956        133,169       31,089  

Holdover (8)

     18,116       —         —         —          —          —          —         —    

Unknown (9)

     —         574       10,189       21,845        69,927        8,189        110,150       301,443  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total expirations and vacates

     176,257       151,954       75,776       78,252        170,745        133,816        458,589       586,406  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Greater New York Metropolitan Area Office Portfolio

 

                

Office Expirations

     73,675       11,968       26,811       57,361        7,146        133,585        224,903       235,589  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Renewal & Relocations (3)

     6,675       9,196       3,147       46,924        5,099        17,194        72,364       160,815  

Short-term renewals (4)

     10,279       —         —         —          —          —          —         —    

New Leases (5)

     30,590       —         —         —          —          —          —         —    

Tenant Vacates (6)

     4,155       —         6,104       8,575        —          96,727        111,406       42,507  

Intentional Vacates (7)

     21,976       —         —         —          —          —          —         —    

Holdover (8)

     —         —         —         —          —          —          —         —    

Unknown (9)

     —         2,772       17,560       1,862        2,047        19,664        41,133       32,267  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total expirations and vacates

     73,675       11,968       26,811       57,361        7,146        133,585        224,903       235,589  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Retail Portfolio

                   

Retail Expirations

     2,247       —         —         2,773        6,250        17,433        26,456       28,633  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Renewal & Relocations (3)

     —         —         —         2,773        491        —          3,264       9,659  

Short-term renewals (4)

     —         —         —         —          —          —          —         —    

New Leases (5)

     —         —         —         —          —          —          —         —    

Tenant Vacates (6)

     2,005       —         —         —          —          —          —         2,932  

Intentional Vacates (7)

     242       —         —         —          5,759        17,433        23,192       —    

Holdover (8)

     —         —         —         —          —          —          —         —    

Unknown (9)

     —         —         —         —          —          —          —         16,042  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total expirations and vacates

     2,247       —         —         2,773        6,250        17,433        26,456       28,633  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Notes:

 

(1)

These forecasts, which are subject to change, are based on management’s expectations, including, among other things, discussions with and other information provided by tenants as well as management’s 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 Company’s 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


LOGO   

Third Quarter 2018

Property Detail

(unaudited)

 

 

Property Name

 

Location or Sub-Market

  Rentable
Square Feet (1)
    Percent
Occupied (2)
    Annualized
Rent (3)
    Annualized
Rent

per Occupied
Square Foot (4)
    Number of
Leases (5)
 

Manhattan Office Properties - Office

           

The Empire State Building (6)

 

Penn Station -Times Sq. South

    2,711,148       95.0   $  145,071,461     $ 56.34       183  

One Grand Central Place

 

Grand Central

    1,247,419       89.0     62,902,812       56.64       213  

1400 Broadway (8)

 

Penn Station -Times Sq. South

    911,112       73.4     32,810,884       49.09       28  

111 West 33rd Street (9)

 

Penn Station -Times Sq. South

    639,304       67.5     24,567,157       56.90       16  

250 West 57th Street

 

Columbus Circle - West Side

    468,602       91.2     24,149,652       56.51       68  

501 Seventh Avenue

 

Penn Station -Times Sq. South

    460,150       93.1     19,117,644       44.65       28  

1359 Broadway

 

Penn Station -Times Sq. South

    455,824       97.1     23,340,536       52.75       35  

1350 Broadway (10)

 

Penn Station -Times Sq. South

    373,262       87.3     18,493,614       56.73       63  

1333 Broadway

 

Penn Station -Times Sq. South

    292,835       89.4     13,316,112       50.89       10  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Manhattan Office Properties - Office

      7,559,656       88.3     363,769,871       54.53       644  

Manhattan Office Properties - Retail

           

The Empire State Building (7)

 

Penn Station -Times Sq. South

    104,558       69.8     13,295,326       182.19       14  

One Grand Central Place

 

Grand Central

    68,563       79.0     6,367,515       117.63       13  

1400 Broadway (8)

 

Penn Station -Times Sq. South

    20,418       77.4     2,040,613       129.05       8  

112 West 34th Street (9)

 

Penn Station -Times Sq. South

    90,132       100.0     22,596,784       250.71       4  

250 West 57th Street

 

Columbus Circle - West Side

    67,927       100.0     9,973,756       146.83       8  

501 Seventh Avenue

 

Penn Station -Times Sq. South

    35,558       88.3     2,011,424       64.05       9  

1359 Broadway

 

Penn Station -Times Sq. South

    27,506       100.0     2,245,576       81.64       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     8,719,437       130.14       4  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Manhattan Office Properties - Retail

      513,437       89.3     74,031,258       161.40       72  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-Total/Weighted Average

           

Manhattan Office Properties - Office and Retail

    8,073,093       88.3     437,801,129       61.40       716  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Greater New York Metropolitan Area Office Properties

           

First Stamford Place (11)

 

Stamford, CT

    784,402       89.0     30,164,572       43.19       50  

Metro Center

 

Stamford, CT

    281,928       82.5     13,487,165       57.97       25  

383 Main Avenue

 

Norwalk, CT

    260,657       89.2     7,366,206       31.67       21  

500 Mamaroneck Avenue

 

Harrison, NY

    288,202       86.5     7,195,811       28.87       31  

10 Bank Street

 

White Plains, NY

    232,517       94.0     7,689,364       35.19       33  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-Total/Weighted Average Greater New York

         

Metropolitan Area Office Properties

    1,847,706       88.3     65,903,118       40.40       160  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Standalone Retail Properties

           

10 Union Square

 

Union Square

    58,007       100.0     6,917,640       119.26       13  

1542 Third Avenue

 

Upper East Side

    56,250       100.0     3,855,912       68.55       4  

1010 Third Avenue

 

Upper East Side

    44,662       100.0     3,738,322       83.70       2  

77 West 55th Street

 

Midtown

    25,388       100.0     2,637,533       103.89       3  

69-97 Main Street

 

Westport, CT

    17,111       32.4     722,262       130.35       3  

103-107 Main Street

 

Westport, CT

    4,330       100.0     722,355       166.83       1  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Sub-Total/Weighted Average Standalone

           

Retail Properties

      205,748       94.4     18,594,025       95.76       26  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Portfolio Total

      10,126,547       88.4   $ 522,298,271     $ 58.32       902  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total/Weighted Average Office Properties

      9,407,362       88.3   $ 429,672,989     $ 51.75       804  

Total/Weighted Average Retail Properties

      719,185       90.8     92,625,282       141.88       98  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Portfolio Total

      10,126,547       88.4   $ 522,298,271     $ 58.32       902  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Notes:

 

(1)

Excludes (i) 179,350 square feet of space across the Company’s portfolio attributable to building management use and tenant amenities and (ii) 69,789 square feet of space attributable to the Company’s observatory.

(2)

Based on leases signed and commenced as of September 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 September 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 63,360 rentable square feet of space leased by the Company’s broadcasting tenants.

(7)

Includes 5,300 rentable square feet of space leased by WDFG North America, a licensee of the Company’s 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


LOGO   

Third Quarter 2018

Tenant Lease Expirations

(unaudited)

 

 

                   Percent of                     
            Rentable      Portfolio                  Annualized  
     Number      Square      Rentable            Percent of     Rent Per  
     of Leases      Feet      Square Feet     Annualized      Annualized     Rentable  

Total Lease Expirations

   Expiring (1)      Expiring (2)      Expiring     Rent (3)      Rent     Square Foot  

Available

     —          803,315        7.9   $ —          0.0   $ —    

Signed leases not commenced

     24        367,423        3.6     —          0.0     —    

3Q 2018 (4)

     13        45,670        0.5     2,149,967        0.4     47.08  

4Q 2018

     56        191,205        1.9     9,622,278        1.8     50.32  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total 2018

     69        236,875        2.3     11,772,245        2.3     49.70  

1Q 2019

     22        103,173        1.0     5,505,440        1.1     53.36  

2Q 2019

     29        138,386        1.4     8,082,923        1.5     58.41  

3Q 2019

     40        184,141        1.8     10,148,512        1.9     55.11  

4Q 2019

     41        284,834        2.8     13,401,784        2.6     47.05  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total 2019

     132        710,534        7.0     37,138,659        7.1     52.27  

2020

     136        852,301        8.4     46,597,693        8.9     54.67  

2021

     105        696,825        6.9     39,380,361        7.5     56.51  

2022

     95        543,870        5.4     34,097,158        6.5     62.69  

2023

     83        698,721        6.9     41,117,309        7.9     58.85  

2024

     59        591,160        5.8     33,556,552        6.4     56.76  

2025

     55        376,647        3.7     28,119,656        5.4     74.66  

2026

     41        934,767        9.2     51,489,135        9.9     55.08  

2027

     43        543,865        5.4     31,268,652        6.0     57.42  

Thereafter

     83        2,770,244        27.5     167,760,851        32.1     60.56  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

     925        10,126,547        100.0   $ 522,298,271        100.0   $ 58.32  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Manhattan Office Properties (5)

               

Available

     —          529,931        7.0   $ —          0.0   $ —    

Signed leases not commenced

     21        358,217        4.7     —          0.0     —    

3Q 2018 (4)

     11        41,273        0.5     1,968,588        0.5     47.70  

4Q 2018

     48        179,237        2.4     9,174,361        2.5     51.19  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total 2018

     59        220,510        2.9     11,142,949        3.1     50.53  

1Q 2019

     13        76,362        1.0     4,762,957        1.3     62.37  

2Q 2019

     21        78,252        1.0     4,111,809        1.1     52.55  

3Q 2019

     33        170,745        2.3     8,537,904        2.3     50.00  

4Q 2019

     34        133,816        1.8     7,384,224        2.0     55.18  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total 2019

     101        459,175        6.1     24,796,894        6.8     54.00  

2020

     104        588,079        7.8     32,706,757        9.0     55.62  

2021

     66        455,980        6.0     24,917,000        6.8     54.64  

2022

     71        363,454        4.8     20,841,447        5.7     57.34  

2023

     60        517,900        6.9     28,629,153        7.9     55.28  

2024

     37        365,160        4.8     19,118,623        5.3     52.36  

2025

     35        236,225        3.1     13,741,633        3.8     58.17  

2026

     28        799,003        10.6     44,918,376        12.3     56.22  

2027

     29        391,863        5.2     21,554,531        5.9     55.01  

Thereafter

     54        2,274,159        30.1     121,402,508        33.4     53.38  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Manhattan office properties

     665        7,559,656        100.0   $  363,769,871        100.0   $  54.53  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

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) 179,350 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 Company’s 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 September 30, 2018 and expire on September 30, 2018.

(5)

Excludes (i) retail space in the Company’s Manhattan office properties and (ii) the Empire State Building broadcasting licenses and observatory operations.

 

Page 11


LOGO   

Third Quarter 2018

Tenant Lease Expirations

(unaudited)

 

 

                   Percent of                     
            Rentable      Portfolio                  Annualized  
     Number      Square      Rentable            Percent of     Rent Per  
Greater New York Metropolitan    of Leases      Feet      Square Feet     Annualized      Annualized     Rentable  

Area Office Properties

   Expiring (1)      Expiring (2)      Expiring     Rent (3)      Rent     Square Foot  

Available

     —          207,045        11.2   $ —          0.0   $ —    

Signed leases not commenced

     3        9,206        0.5     —          0.0     —    

3Q 2018 (4)

     1        4,155        0.2     157,379        0.2     37.88  

4Q 2018

     6        11,968        0.6     443,117        0.7     37.03  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total 2018

     7        16,123        0.9     600,496        0.9     37.24  

1Q 2019

     9        26,811        1.5     742,483        1.1     27.69  

2Q 2019

     7        57,361        3.1     2,620,448        4.0     45.68  

3Q 2019

     3        7,146        0.4     266,934        0.4     37.35  

4Q 2019

     6        133,585        7.2     4,740,591        7.2     35.49  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total 2019

     25        224,903        12.2     8,370,456        12.7     37.22  

2020

     23        235,589        12.8     10,316,645        15.7     43.79  

2021

     31        210,934        11.4     9,439,606        14.3     44.75  

2022

     15        120,775        6.5     4,369,009        6.6     36.17  

2023

     14        126,488        6.8     5,737,772        8.7     45.36  

2024

     10        197,581        10.7     8,735,253        13.3     44.21  

2025

     12        103,097        5.6     3,466,487        5.3     33.62  

2026

     5        65,413        3.5     2,072,961        3.1     31.69  

2027

     6        64,229        3.5     2,334,094        3.5     36.34  

Thereafter

     12        266,323        14.4     10,460,339        15.9     39.28  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total greater New York metropolitan area office properties

     163        1,847,706        100.0   $ 65,903,118        100.0   $ 40.40  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Retail Properties

               

Available

     —          66,339        9.2   $ —          0.0   $ —    

Signed leases not commenced

     —          —          0.0     —          0.0     —    

3Q 2018 (4)

     1        242        0.0     24,000        0.0     99.17  

4Q 2018 (5)

     2        —          0.0     4,800        0.0     —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total 2018

     3        242        0.0     28,800        0.0     99.17  

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     1,343,674        1.5     214.99  

4Q 2019

     1        17,433        2.4     1,276,969        1.4     73.25  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total 2019

     6        26,456        3.7     3,971,309        4.3     150.11  

2020

     9        28,633        4.0     3,574,291        3.9     124.83  

2021

     8        29,911        4.2     5,023,755        5.4     167.96  

2022

     9        59,641        8.3     8,886,702        9.6     149.00  

2023

     9        54,333        7.6     6,750,384        7.3     124.24  

2024

     12        28,419        4.0     5,702,676        6.2     200.66  

2025

     8        37,325        5.2     10,911,536        11.8     292.34  

2026

     8        70,351        9.8     4,497,798        4.9     63.93  

2027

     8        87,773        12.2     7,380,027        8.0     84.08  

Thereafter

     17        229,762        31.8     35,898,004        38.6     156.24  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total retail properties

     97        719,185        100.0   $  92,625,282        100.0   $  141.88  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

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) 179,350 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 Company’s 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 September 30, 2018 and expire on September 30, 2018.

(5)

Represents two license agreements.

 

Page 12


LOGO   

Third Quarter 2018

Tenant Lease Expirations

(unaudited)

 

 

                   Percent of                     
            Rentable      Portfolio                  Annualized  
     Number      Square      Rentable            Percent of     Rent Per  
     of Leases      Feet      Square Feet     Annualized      Annualized     Rentable  

Empire State Building Office (1)

   Expiring (2)      Expiring (3)      Expiring     Rent (4) (5)      Rent     Square Foot  

Available

     —          130,169        4.8   $ —          0.0   $ —    

Signed leases not commenced

     1        5,891        0.2     —          0.0     —    

3Q 2018 (6)

     1        4,738        0.2     245,004        0.2     51.71  

4Q 2018

     15        32,473        1.2     1,981,956        1.4     61.03  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total 2018

     16        37,211        1.4     2,226,960        1.5     59.85  

1Q 2019

     5        9,288        0.3     486,785        0.3     52.41  

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

     13        57,809        2.1     3,161,424        2.2     54.69  

2020

     34        294,210        10.9     17,218,004        11.9     58.52  

2021

     21        131,888        4.9     7,528,906        5.2     57.09  

2022

     21        95,218        3.5     5,970,750        4.1     62.71  

2023

     18        97,672        3.6     6,180,757        4.3     63.28  

2024

     13        92,516        3.4     5,717,776        3.9     61.80  

2025

     7        63,165        2.3     3,495,673        2.4     55.34  

2026

     11        459,331        16.9     26,773,658        18.5     58.29  

2027

     4        16,613        0.6     1,132,853        0.8     68.19  

Thereafter

     25        1,229,455        45.3     65,664,700        45.2     53.41  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Empire State Building office

     184        2,711,148        100.0   $  145,071,461        100.0   $  56.34  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 
                         Annualized            Percent of  
                   Annualized     Expense      Annualized     Annualized  

Empire State Building Broadcasting Licenses and Leases

     Base Rent (7)     Reimbursements      Rent (4) (8)     Rent  

3Q 2018 (6)

         $ 487,150     $ 104,747      $ 591,897       3.8

4Q 2018

           950,515       719,608        1,670,123       10.6
        

 

 

   

 

 

    

 

 

   

 

 

 

Total 2018

           1,437,665       824,355        2,262,020       14.5

1Q 2019

           212,240       48,281        260,521       1.7

2Q 2019

           —         —          —         0.0

3Q 2019

           —         —          —         0.0

4Q 2019

           —         —          —         0.0
        

 

 

   

 

 

    

 

 

   

 

 

 

Total 2019

           212,240       48,281        260,521       1.7

2020

           828,209       144,218        972,427       6.2

2021

           55,685       103,564        159,249       1.0

2022

           1,124,545       273,346        1,397,891       8.9

2023

           82,480       22,826        105,306       0.7

2024

           47,271       63,729        111,000       0.7

2025

           1,496,090       204,225        1,700,315       10.8

2026

           799,969       87,584        887,553       5.6

2027

           768,750       62,776        831,526       5.3

Thereafter

           6,244,524       777,587        7,022,111       44.7
        

 

 

   

 

 

    

 

 

   

 

 

 

Total Empire State Building broadcasting licenses and leases

 

      $  13,097,428     $ 2,612,491      $  15,709,919       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 $6.7 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 September 30, 2018 and expire on September 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 September 30, 2018.

 

Page 13


LOGO   

Third 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 B’Way     Oct. 2023 - Oct. 2028       9.3 years       668,942       6.4   $ 31,409,092       6.0

2. LinkedIn

  ESB     Feb. 2026       7.4 years       312,947       3.0     17,909,590       3.4

3. Coty

  ESB     Jan. 2030       11.3 years       312,954       3.0     16,439,163       3.1

4. PVH Corp.

  501 Seventh Avenue     Oct 2018 - Oct. 2028       9.8 years       237,281       2.3     10,743,578       2.1

5. Sephora

  112 West 34th Street     Jan. 2029       10.3 years       11,334       0.1     10,457,709       2.0

6. Li & Fung

  1359 Broadway     Oct. 2021-Oct. 2027       5.5 years       149,436       1.4     7,446,322       1.4

7. Macy’s

  111 West 33rd Street     May 2030       11.7 years       131,117       1.3     6,947,109       1.3

8. Federal Deposit Insurance Corp.

  ESB     Jan. 2020       1.3 years       121,879       1.2     6,923,222       1.3

9. Urban Outfitters

  1333 Broadway     Sept. 2029       11.0 years       56,730       0.5     6,831,727       1.3

10. Duane Reade

  ESB, 1350 B’Way, 250 West 57th     Feb. 2021-Sept. 2027       6.2 years       47,541       0.5     6,289,470       1.2

11. Footlocker

  112 West 34th Street     Sept. 2031       13.0 years       34,192       0.3     6,258,212       1.2

12. Legg Mason

  First Stamford Place     Sept. 2024       6.0 years       137,583       1.3     6,246,888       1.2

13. WDFG North America

  ESB     Dec. 2025       7.2 years       5,300       0.1     5,680,776       1.1

14. Shutterstock

  ESB     Apr. 2029       10.6 years       104,386       1.0     5,582,973       1.1

15. ASCAP

  250 West 57th Street     Aug. 2034       15.9 years       87,943       0.8     5,250,464       1.0

16. Kohl’s

  1400 Broadway     May 2029       10.7 years       113,032       1.1     5,002,974       1.0

17. The Gap, Inc.

  111 West 33rd Street, OGCP     Jan. 2023-Jan. 2030       11.3 years       83,408       0.8     4,799,007       0.9

18. The Michael J. Fox Foundation

  111 West 33rd Street     Nov. 2029       11.2 years       75,959       0.7     4,641,592       0.9

19. HNTB Corporation

  ESB     Feb. 2026       10.4 years       78,361       0.8     4,586,184       0.9
20. The Interpublic Group   1400 Broadway     Jul. 2024       5.8 years       91,144       0.9     4,316,383       0.8
       

 

 

   

 

 

   

 

 

   

 

 

 

Total

          2,861,469       27.5   $ 173,762,435       33.2
       

 

 

   

 

 

   

 

 

   

 

 

 

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 September 30, 2018.

(4)

Represents the percentage of rentable square feet of the Company’s 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 Company’s office and retail portfolios in the aggregate.

Portfolio Tenant Diversification by Industry (based on annualized rent)

 

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Page 14


LOGO   

Third Quarter 2018

Capital Expenditures and Redevelopment Program and Leasing Opportunity

(unaudited and dollars in thousands)

 

 

     Three Months Ended  
Capital expenditures    September 30,
2018
     June 30,
2018
     March 31,
2018
     December 31,
2017
     September 30,
2017
 

Tenant improvements - first generation

   $ 21,229      $ 31,921      $ 17,298      $ 17,680      $ 16,219  

Tenant improvements - second generation

     10,069        4,874        2,039        6,966        6,058  

Leasing commissions - first generation

     4,813        1,698        3,699        6,207        7,416  

Leasing commissions - second generation

     2,576        866        3,024        2,996        817  

Building improvements - first generation

     18,418        19,862        13,664        19,591        15,759  

Building improvements - second generation

     2,279        4,329        1,719        3,566        2,105  

Observatory capital project

     14,507        15,871        11,533        16,360        13,411  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 73,891      $ 79,421      $ 52,976      $ 73,366      $ 61,785  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Tenant space redevelopment by square feet (1) (2)

 

 

Future redevelopment (Empire State Building) - 220,000 square feet

 

 

Future redevelopment (other Manhattan properties) - 520,000 square feet

 

 

Redevelopment completed - 7,240,000 square feet

Inventory of vacant space (2)

 

 

Developed - 510,000 square feet, 91% (3)

 

 

Undeveloped - 50,000 square feet, 9%

Inventory of undeveloped space (2)

 

 

Vacant - 50,000 square feet, 7%

 

 

Expires in 2018 - 70,000 square feet, 9%

 

 

Expires in 2019 and thereafter - 620,000 square feet, 84%

Developed 120,000 square feet in the third quarter 2018 and 220,000 square feet year-to-date September 2018.

Leasing Opportunity - Inventory of Current Vacant Space as of September 30, 2018 (in square feet)

 

Total Portfolio vacant space

     1,171,000  
  

 

 

 

Signed leases not commenced (“SLNC”):

  

Manhattan Office Properties SLNC

     359,000  

Greater New York Office Properties SLNC

     9,000  

Retail Properties SLNC

     —    

Redeveloped Manhattan Office space

     437,000  

Greater New York Office Properties space

     207,000  

Retail Properties space

     66,000  

Undeveloped Manhattan Office space

     30,000  

Space held off market

     29,000  

Other

     34,000  
  

 

 

 

Total

     1,171,000  
  

 

 

 

Development of Space Expected to Vacate from September 30, 2018 through December 31, 2018 (in square feet)

 

     Expected Vacates      2018      2019      2020      Thereafter  

Tenant Vacates

              

Developed

     62,149              

Undeveloped space to be developed

     2,056        —          2,056        —          —    
  

 

 

             
     64,205              
  

 

 

             

Intentional Vacates

              

Developed

     17,414              

Undeveloped space to be developed

     29,169        —          11,509        13,450        4,210  
  

 

 

             
     46,583              
  

 

 

             

Notes:

 

(1)

These estimates are based on the Company’s 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.

 

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Third Quarter 2018

Observatory Summary

(unaudited and in thousands)

 

 

            Three Months Ended  

Observatory NOI

   Twelve Months
to Date
     September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 

Observatory revenue (1)

   $ 129,597      $ 40,241     $ 35,201     $ 21,249     $ 32,906     $ 39,306  

Observatory expenses

     31,064        8,854       7,678       7,336       7,196       8,648  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOI

     98,533        31,387       27,523       13,913       25,710       30,658  

Intercompany rent expense (2)

     79,648        23,805       21,990       13,561       20,292       23,301  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOI after intercompany rent

   $ 18,885      $ 7,582     $ 5,533     $ 352     $ 5,418     $ 7,357  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Observatory Metrics

             

Number of visitors (3)

        1,168,000       1,049,000       644,000       991,000       1,237,000  

Change in visitors year over year

        (5.6 %)      (4.1 %)      4.1     (4.7 %)      (5.2 %) 

Number of bad weather days (“BWD”) (4)

        11       11       15       10       14  

Estimated effect of BWD’s on number of visitors (5)

 

     (24,000     19,000       (14,000     (2,000     (38,000

102nd floor revenue (6)

      $ 3,066     $ 3,041     $ 83     $ 2,767     $ 3,537  

Notes:

 

(1)

Observatory revenues include the fixed license fee received from WDFG North America, the Observatory gift shop operator. For the three months ended September 30, 2018, June 30, 2018, March 31, 2018, December 31, 2017 and September 30, 2017, the fixed license fee was $1,411, $1,410, $1,410, $1,369 and $1,370, respectively.

(2)

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.

(3)

Reflects the number of visitors who pass through the turnstile, excluding visitors who make a second visit on the same ticket at no additional charge.

(4)

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.

(5)

Represents an estimated reduction in the number of visitors due to bad weather days compared to the same quarter in the prior year.

(6)

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

 

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Page 16


LOGO   

Third Quarter 2018

Condensed Consolidated Balance Sheets

(unaudited and dollars in thousands)

 

 

     September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 

Assets

          

Commercial real estate properties, at cost:

          

Land

   $ 201,196     $ 201,196     $ 201,196     $ 201,196     $ 201,196  

Development costs

     7,987       7,987       7,986       7,986       7,978  

Building and improvements

     2,616,772       2,562,662       2,495,901       2,458,473       2,398,964  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2,825,955       2,771,845       2,705,083       2,667,655       2,608,138  

Less: accumulated depreciation

     (718,959     (698,725     (678,250     (656,900     (631,916
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Commercial real estate properties, net

     2,106,996       2,073,120       2,026,833       2,010,755       1,976,222  

Cash and cash equivalents

     229,745       251,797       690,471       464,344       432,105  

Restricted cash

     54,356       58,719       61,699       65,853       64,020  

Short term investments

     400,000       400,000       —         —         —    

Tenant and other receivables, net

     31,342       21,600       25,156       28,329       34,661  

Deferred rent receivables, net

     195,455       190,419       184,667       178,629       172,665  

Prepaid expenses and other assets

     50,663       64,695       39,393       61,028       39,463  

Deferred costs, net

     244,441       246,763       255,844       262,701       268,132  

Acquired below-market ground leases, net

     362,355       364,313       366,271       368,229       370,187  

Goodwill

     491,479       491,479       491,479       491,479       491,479  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 4,166,832     $ 4,162,905     $ 4,141,813     $ 3,931,347     $ 3,848,934  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Equity

          

Mortgage notes payable, net

   $ 609,299     $ 610,026     $ 610,826     $ 717,164     $ 720,830  

Senior unsecured notes, net

     1,045,362       1,044,573       1,043,677       707,895       592,914  

Unsecured term loan facility, net

     264,023       263,900       263,777       263,662       263,546  

Unsecured revolving credit facility

     —         —         —         —         —    

Accounts payable and accrued expenses

     128,340       129,944       106,830       110,849       142,690  

Acquired below-market leases, net

     55,662       58,960       62,418       66,047       70,013  

Deferred revenue and other liabilities

     32,175       29,553       37,499       40,907       41,320  

Tenants’ security deposits

     42,520       42,808       43,448       47,086       47,395  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     2,177,381       2,179,764       2,168,475       1,953,610       1,878,708  

Total equity

     1,989,451       1,983,141       1,973,338       1,977,737       1,970,226  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 4,166,832     $ 4,162,905     $ 4,141,813     $ 3,931,347     $ 3,848,934  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 17


LOGO   

Third Quarter 2018

Condensed Consolidated Statements of Income

(unaudited and in thousands, except per share amounts)

 

 

     Three Months Ended  
     September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 

Revenues

          

Rental revenue

   $ 123,621     $ 124,038     $ 122,311     $ 123,596     $ 122,391  

Tenant expense reimbursement

     18,627       16,205       17,794       19,790       20,346  

Observatory revenue

     40,241       35,201       21,249       32,906       39,306  

Lease termination fees

     1,185       357       622       3,197       1,165  

Third party management and other fees

     312       376       463       312       345  

Other revenue and fees

     2,416       2,352       4,832 (1)       2,496       2,993  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     186,402       178,529       167,271       182,297       186,546  

Operating expenses

          

Property operating expenses

     42,772       39,418       44,185       41,522       41,270  

Ground rent expenses

     2,331       2,332       2,331       2,332       2,331  

General and administrative expenses

     13,148       13,225       12,628       13,749       12,899  

Observatory expenses

     8,854       7,678       7,336       7,196       8,648  

Real estate taxes

     28,284       26,743       26,744       26,465       26,901  

Depreciation and amortization

     42,475       39,468       39,883       40,842       38,490  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     137,864       128,864       133,107       132,106       130,539  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating income

     48,538       49,665       34,164       50,191       56,007  

Other income (expense)

          

Interest income

     3,485       2,499       1,225       773       774  

Interest expense

     (20,658     (20,525     (17,591     (16,364     (16,890

Loss on early extinguishment of debt

     —         —         —         —         (2,157

Loss from derivative financial instruments

     —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     31,365       31,639       17,798       34,600       37,734  

Income tax (expense) benefit

     (2,135     (1,455     260       (2,340     (2,245
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     29,230       30,184       18,058       32,260       35,489  

Perpetual preferred unit distributions

     (234     (234     (234     (234     (234

Net income attributable to non-controlling interests

     (12,654     (13,299     (8,056     (14,754     (16,449
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common stockholders

   $ 16,342     $ 16,651     $ 9,768     $ 17,272     $ 18,806  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding

          

Basic

     167,657       165,256       162,667       159,989       158,102  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     297,478       297,244       296,827       297,898       297,871  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share attributable to common stockholders

          

Basic and diluted

   $ 0.10     $ 0.10     $ 0.06     $ 0.11     $ 0.12  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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


LOGO   

Third 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  
Reconciliation of Net Income to FFO, Modified FFO and Core FFO    September 30,
2018
    June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
 

Net Income

   $ 29,230     $ 30,184     $ 18,058     $ 32,260     $ 35,489  

Preferred unit distributions

     (234     (234     (234     (234     (234

Real estate depreciation and amortization

     42,004       39,049       39,468       40,484       38,134  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

FFO attributable to common stockholders and non-controlled interests

     71,000       68,999       57,292       72,510       73,389  

Amortization of below-market ground lease

     1,957       1,958       1,958       1,958       1,957  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Modified FFO attributable to common stockholders and non-controlled interests

     72,957       70,957       59,250       74,468       75,346  

Deferred tax asset write-off

     —         —         —         446       —    

Loss on early extinguishment of debt

     —         —         —         —         2,157  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Core FFO attributable to common stockholders and non-controlled interests

   $ 72,957     $ 70,957     $ 59,250     $ 74,914     $ 77,503  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total weighted average shares and Operating Partnership Units

          

Basic

     297,478       297,244       296,824       296,654       296,389  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     297,478       297,244       296,827       297,898       297,871  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

FFO attributable to common stockholders and non-controlled interests per share

          

Basic

   $ 0.24     $ 0.23     $ 0.19     $ 0.24     $ 0.25  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.24     $ 0.23     $ 0.19     $ 0.24     $ 0.25  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Modified FFO attributable to common stockholders and non-controlled interests per share

          

Basic

   $ 0.25     $ 0.24     $ 0.20     $ 0.25     $ 0.25  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.25     $ 0.24     $ 0.20     $ 0.25     $ 0.25  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Core FFO attributable to common stockholders and non-controlled interests per share

          

Basic

   $ 0.25     $ 0.24     $ 0.20     $ 0.25     $ 0.26  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.25     $ 0.24     $ 0.20     $ 0.25     $ 0.26  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Core FFO to Core FAD

          

Core FFO

   $ 72,957     $ 70,957     $ 59,250     $ 74,914     $ 77,503  

Add:

          

Amortization of deferred financing costs

     1,020       1,023       1,034       1,036       1,017  

Non-real estate depreciation and amortization

     826       419       415       358       356  

Amortization of non-cash compensation expense

     4,852       4,656       4,555       3,292       3,841  

Amortization of debt discount

     668       668       668       667       668  

Amortization of loss on interest rate derivative

     474       536       —         —         —    

Deduct:

          

Straight-line rental revenues

     (5,000     (5,809     (5,853     (5,963     (6,861

Amortization of debt premiums

     —         —         (949     (1,737     (1,736

Above/below-market rent revenue amortization

     (1,668     (1,551     (1,168     (1,567     (1,607

Corporate capital expenditures

     —         —         —         (5     —    

Tenant improvements - second generation

     (10,069     (4,874     (2,039     (6,966     (6,058

Building improvements - second generation

     (2,279     (4,329     (1,719     (3,566     (2,105

Leasing commissions - second generation

     (2,576     (866     (3,024     (2,996     (817
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Core FAD

   $ 59,205     $ 60,830     $ 51,170     $ 57,467     $ 64,201  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Net Income to EBITDA

          

Net income

   $ 29,230     $ 30,184     $ 18,058     $ 32,260     $ 35,489  

Interest expense

     20,658       20,525       17,591       16,364       16,890  

Income tax expense (benefit)

     2,135       1,455       (260     2,340       2,245  

Depreciation and amortization

     42,475       39,468       39,883       40,842       38,490  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 94,498     $ 91,632     $ 75,272     $ 91,806     $ 93,114  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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LOGO   

Third Quarter 2018

Debt Summary

(unaudited and dollars in thousands)

 

 

     September 30, 2018      June 30, 2018  
           Weighted Average            Weighted Average  

Debt Summary

   Balance     Interest
Rate
    Maturity
(Years)
     Balance     Interest
Rate
    Maturity
(Years)
 

Fixed rate mortgage debt

   $ 615,537       4.10     10.3      $ 616,453       4.10     10.5  

Senior unsecured notes

     1,050,000       3.82     8.4        1,050,000       3.82     8.7  

Unsecured term loan facility (1)

     265,000       3.35     3.9        265,000       3.35     4.2  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total fixed rate debt

     1,930,537       3.84     8.3        1,931,453       3.84     8.6  

Unsecured revolving credit facility

     —         —         2.9        —         —         3.2  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total variable rate debt

     —         —         2.9        —         —         3.2  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total debt

     1,930,537       3.84     8.3        1,931,453       3.84     8.6  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Discount

     (2,315          (2,983    

Deferred financing costs, net

     (9,538          (9,971    
  

 

 

        

 

 

     

Total

   $ 1,918,684          $ 1,918,499      
  

 

 

        

 

 

     

Note:

 

(1)

LIBOR is fixed at 2.1485% under a variable to fixed interest rate swap agreement.

 

Available Capacity

   Facility      Outstanding at
September 30,
2018
     Letters
of Credit
     Available
Capacity
 

Unsecured revolving credit facility (1)

   $ 1,100,000      $ —        $ —        $ 1,100,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Covenant Summary

   Required     Current
Quarter
    In
Compliance

Maximum Total Leverage(2)

     < 60     29.0   Yes

Maximum Secured Debt

     < 40     9.2   Yes

Minimum Fixed Charge Coverage

     > 1.50x       3.9x     Yes

Minimum Unencumbered Interest Coverage

     > 1.75x       5.1x     Yes

Maximum Unsecured Leverage

     < 60     25.8   Yes

Minimum Tangible Net Worth

   $ 1,252,954     $ 1,777,443     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


LOGO   

Third 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   $ 92,372       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     39,177       1/5/2028      30 years

10 Bank Street

     4.23     4.23     33,988       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

         615,537       

Exchangeable senior unsecured notes

     2.63     2.63     250,000       8/15/2019      Interest only

Unsecured revolving credit facility

     LIBOR plus 1.10     3.36     —         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     1,930,537       
    

 

 

        

Discount

         (2,315     

Deferred financing costs, net

         (9,538     
      

 

 

      

Total (3)

       $ 1,918,684       
      

 

 

      

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 September 30, 2018.

 

Page 21


LOGO   

Third Quarter 2018

Debt Maturities and Ground Lease Commitments

(unaudited and dollars in thousands)

 

 

Year

   Amortization      Maturities (1)      Total     Percentage of
Total Debt
    Weighted
Average
Interest
Rate of
Maturing Debt
 

2018

   $ 925      $ —        $ 925       0.0     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       72.5     4.15
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total debt

   $ 60,115      $ 1,870,422        1,930,537       100.0     3.84
  

 

 

    

 

 

      

 

 

   

 

 

 

Discount

           (2,315    

Deferred financing costs, net

           (9,538    
        

 

 

     

Total

         $ 1,918,684      
        

 

 

     

Note:

 

(1)

Assumes no extension options are exercised.

Debt Maturity Profile

 

LOGO

Ground Lease Commitments

 

Year

   1350
Broadway
     1400
Broadway
     111 West
33rd Street
     Total  

2018

   $ 27      $ 169      $ 184      $ 380  

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  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,604      $ 30,544      $ 43,120      $ 76,268  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Page 22


LOGO   

Third Quarter 2018

Supplemental Definitions

 

 

Funds From Operations (“FFO”)

We compute FFO in accordance with the “White Paper” on FFO published by the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding impairment writedowns of investments in depreciable real estate and investments in in-substance real estate investments, gains or losses from debt restructurings and sales of depreciable operating properties, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), less distributions to non-controlling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships and joint ventures. FFO is a widely recognized non-GAAP financial measure for REITs that we believe, when considered with financial statements determined in accordance with GAAP, is useful to investors in understanding financial performance and providing a relevant basis for comparison among REITs. In addition, FFO is useful to investors as it captures features particular to real estate performance by recognizing that real estate has generally appreciated over time or maintains residual value to a much greater extent than do other depreciable assets. Investors should review FFO, along with GAAP net income, when trying to understand an equity REIT’s 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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