QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of Securities | Trading Symbol | Exchange on which traded |
N/A | N/A |
☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company |
EMPIRE STATE REALTY TRUST, INC. | ||
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2019 | ||
TABLE OF CONTENTS | PAGE | |
PART 1. | FINANCIAL INFORMATION | |
ITEM 1. | FINANCIAL STATEMENTS | |
Condensed Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018 | ||
Condensed Consolidated Statements of Income for the three and six months ended June 30, 2019 and 2018 (unaudited) | ||
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and 2018 (unaudited) | ||
Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2019 and 2018 (unaudited) | ||
Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2019 and 2018 (unaudited) | ||
Notes to Condensed Consolidated Financial Statements (unaudited) | ||
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK | |
ITEM 4. | CONTROLS AND PROCEDURES | |
PART II. | OTHER INFORMATION | |
ITEM 1. | LEGAL PROCEEDINGS | |
ITEM 1A. | RISK FACTORS | |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | |
ITEM 4. | MINE SAFETY DISCLOSURES | |
ITEM 5. | OTHER INFORMATION | |
ITEM 6. | EXHIBITS | |
SIGNATURES |
June 30, 2019 | December 31, 2018 | ||||||
ASSETS | (unaudited) | ||||||
Commercial real estate properties, at cost: | |||||||
Land | $ | $ | |||||
Development costs | |||||||
Building and improvements | |||||||
Less: accumulated depreciation | ( | ) | ( | ) | |||
Commercial real estate properties, net | |||||||
Cash and cash equivalents | |||||||
Restricted cash | |||||||
Short-term investments | |||||||
Tenant and other receivables, net of allowance of $488 as of December 31, 2018 | |||||||
Deferred rent receivables, net of allowance of $19 as of December 31, 2018 | |||||||
Prepaid expenses and other assets | |||||||
Deferred costs, net | |||||||
Acquired below-market ground leases, net | |||||||
Right of use assets | — | ||||||
Goodwill | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND EQUITY | |||||||
Liabilities: | |||||||
Mortgage notes payable, net | $ | $ | |||||
Senior unsecured notes, net | |||||||
Unsecured term loan facility, net | |||||||
Unsecured revolving credit facility | |||||||
Accounts payable and accrued expenses | |||||||
Acquired below-market leases, net | |||||||
Ground lease liabilities | — | ||||||
Deferred revenue and other liabilities | |||||||
Tenants’ security deposits | |||||||
Total liabilities | |||||||
Commitments and contingencies | |||||||
Equity: | |||||||
Empire State Realty Trust, Inc. stockholders' equity: | |||||||
Preferred stock, $0.01 par value per share, 50,000,000 shares authorized, none issued or outstanding | |||||||
Class A common stock, $0.01 par value per share, 400,000,000 shares authorized, 176,991,123 shares issued and outstanding and 173,872,536 shares issued and outstanding in 2019 and 2018, respectively | |||||||
Class B common stock, $0.01 par value per share, 50,000,000 shares authorized, 1,029,782 and 1,038,090 shares issued and outstanding in 2019 and 2018, respectively | |||||||
Additional paid-in capital | |||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Retained earnings | |||||||
Total Empire State Realty Trust, Inc.'s stockholders' equity | |||||||
Non-controlling interests in operating partnership | |||||||
Private perpetual preferred units, $16.62 per unit liquidation preference, 1,560,360 issued and outstanding in 2019 and 2018 | |||||||
Total equity | |||||||
Total liabilities and equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Rental revenue | $ | $ | $ | $ | |||||||||||
Tenant expense reimbursement | |||||||||||||||
Observatory revenue | |||||||||||||||
Lease termination fees | |||||||||||||||
Third-party management and other fees | |||||||||||||||
Other revenue and fees | |||||||||||||||
Total revenues | |||||||||||||||
Operating expenses: | |||||||||||||||
Property operating expenses | |||||||||||||||
Ground rent expenses | |||||||||||||||
General and administrative expenses | |||||||||||||||
Observatory expenses | |||||||||||||||
Real estate taxes | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Total operating expenses | |||||||||||||||
Total operating income | |||||||||||||||
Other income (expense): | |||||||||||||||
Interest income | |||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Income before income taxes | |||||||||||||||
Income tax benefit (expense) | ( | ) | ( | ) | ( | ) | |||||||||
Net income | |||||||||||||||
Private perpetual preferred unit distributions | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income attributable to common stockholders | $ | $ | $ | $ | |||||||||||
Total weighted average shares: | |||||||||||||||
Basic | |||||||||||||||
Diluted | |||||||||||||||
Earnings per share attributable to common stockholders: | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ | |||||||||||
Dividends per share | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Other comprehensive income (loss): | |||||||||||||||
Unrealized gain (loss) on valuation of interest rate swap agreements | ( | ) | ( | ) | |||||||||||
Less: amount reclassified into interest expense | |||||||||||||||
Other comprehensive income (loss) | ( | ) | ( | ) | |||||||||||
Comprehensive income | |||||||||||||||
Net income attributable to non-controlling interests and private perpetual preferred unitholders | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Other comprehensive (income) loss attributable to non-controlling interests | ( | ) | ( | ) | |||||||||||
Comprehensive income attributable to common stockholders | $ | $ | $ | $ |
Number of Class A Common Shares | Class A Common Stock | Number of Class B Common Shares | Class B Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Stockholders' Equity | Non-controlling Interests | Private Perpetual Preferred Units | Total Equity | |||||||||||||||||||||||||||||||
Balance at March 31, 2019 | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
Issuance of Class A shares | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Conversion of operating partnership units and Class B shares to Class A shares | ( | ) | ( | ) | — | ( | ) | — | |||||||||||||||||||||||||||||||||
Equity compensation: | — | — | |||||||||||||||||||||||||||||||||||||||
LTIP units | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Restricted stock, net of forfeitures | ( | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Dividends and distributions | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | ( | ) | — | ( | ) | ( | ) | — | ( | ) | ||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ |
Number of Class A Common Shares | Class A Common Stock | Number of Class B Common Shares | Class B Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Stockholders' Equity | Non-controlling Interests | Private Perpetual Preferred Units | Total Equity | |||||||||||||||||||||||||||||||
Balance at March 31, 2018 | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
Issuance of Class A shares | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Conversion of operating partnership units and Class B shares to Class A shares | ( | ) | — | ( | ) | — | |||||||||||||||||||||||||||||||||||
Equity compensation: | — | — | |||||||||||||||||||||||||||||||||||||||
LTIP units | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Restricted stock, net of forfeitures | ( | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Dividends and distributions | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ |
Number of Class A Common Shares | Class A Common Stock | Number of Class B Common Shares | Class B Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Stockholders' Equity | Non-controlling Interests | Private Perpetual Preferred Units | Total Equity | ||||||||||||||||||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||
Issuance of Class A shares | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Conversion of operating partnership units and Class B shares to Class A shares | ( | ) | ( | ) | — | ( | ) | — | ||||||||||||||||||||||||||||||||||
Equity compensation: | ||||||||||||||||||||||||||||||||||||||||||
LTIP units | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Restricted stock, net of forfeitures | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Dividends and distributions | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | ( | ) | — | ( | ) | ( | ) | — | ( | ) | |||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ |
Number of Class A Common Shares | Class A Common Stock | Number of Class B Common Shares | Class B Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Stockholders' Equity | Non-controlling Interests | Private Perpetual Preferred Units | Total Equity | |||||||||||||||||||||||||||||||
Balance at December 31, 2017 | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||||||
Issuance of Class A shares | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Conversion of operating partnership units and Class B shares to Class A shares | ( | ) | ( | ) | ( | ) | — | ( | ) | — | |||||||||||||||||||||||||||||||
Equity compensation: | |||||||||||||||||||||||||||||||||||||||||
LTIP units | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Restricted stock, net of forfeitures | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Dividends and distributions | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash Flows From Operating Activities | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Amortization of non-cash items within interest expense | |||||||
Amortization of acquired above- and below-market leases, net | ( | ) | ( | ) | |||
Amortization of acquired below-market ground leases | |||||||
Straight-lining of rental revenue | ( | ) | ( | ) | |||
Equity based compensation | |||||||
Increase (decrease) in cash flows due to changes in operating assets and liabilities: | |||||||
Security deposits | ( | ) | ( | ) | |||
Tenant and other receivables | ( | ) | |||||
Deferred leasing costs | ( | ) | ( | ) | |||
Prepaid expenses and other assets | |||||||
Accounts payable and accrued expenses | ( | ) | ( | ) | |||
Deferred revenue and other liabilities | ( | ) | |||||
Net cash provided by operating activities | |||||||
Cash Flows From Investing Activities | |||||||
Short-term investments | ( | ) | |||||
Development costs | ( | ) | |||||
Additions to building and improvements | ( | ) | ( | ) | |||
Net cash provided by (used in) investing activities | ( | ) |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash Flows From Financing Activities | |||||||
Proceeds from mortgage notes payable | |||||||
Repayment of mortgage notes payable | ( | ) | ( | ) | |||
Proceeds from unsecured senior notes | |||||||
Proceeds from the sale of common stock | |||||||
Deferred financing costs | ( | ) | |||||
Private perpetual preferred unit distributions | ( | ) | ( | ) | |||
Dividends paid to common stockholders | ( | ) | ( | ) | |||
Distributions paid to non-controlling interests in the operating partnership | ( | ) | ( | ) | |||
Net cash provided by (used in) financing activities | ( | ) | |||||
Net increase in cash and cash equivalents and restricted cash | ( | ) | |||||
Cash and cash equivalents and restricted cash—beginning of period | |||||||
Cash and cash equivalents and restricted cash—end of period | $ | $ | |||||
Reconciliation of Cash and Cash Equivalents and Restricted Cash: | |||||||
Cash and cash equivalents at beginning of period | $ | $ | |||||
Restricted cash at beginning of period | |||||||
Cash and cash equivalents and restricted cash at beginning of period | $ | $ | |||||
Cash and cash equivalents at end of period | $ | $ | |||||
Restricted cash at end of period | |||||||
Cash and cash equivalents and restricted cash at end of period | $ | $ | |||||
Supplemental disclosures of cash flow information: | |||||||
Cash paid for interest | $ | $ | |||||
Cash paid for income taxes | $ | $ | |||||
Non-cash investing and financing activities: | |||||||
Building and improvements included in accounts payable and accrued expenses | $ | $ | |||||
Write-off of fully depreciated assets | |||||||
Derivative instruments at fair values included in prepaid expenses and other assets | |||||||
Derivative instruments at fair values included in accounts payable and accrued expenses | |||||||
Conversion of operating partnership units and Class B shares to Class A shares | |||||||
Right of use assets | — | ||||||
Ground lease liabilities | — |
June 30, 2019 | December 31, 2018 | ||||||
Leasing costs | $ | $ | |||||
Acquired in-place lease value and deferred leasing costs | |||||||
Acquired above-market leases | |||||||
Less: accumulated amortization | ( | ) | ( | ) | |||
Total deferred costs, net, excluding net deferred financing costs | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
Acquired below-market ground leases | $ | $ | |||||
Less: accumulated amortization | ( | ) | ( | ) | |||
Acquired below-market ground leases, net | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
Acquired below-market leases | $ | ( | ) | $ | ( | ) | |
Less: accumulated amortization | |||||||
Acquired below-market leases, net | $ | ( | ) | $ | ( | ) |
Principal Balance | As of June 30, 2019 | ||||||||||||||
June 30, 2019 | December 31, 2018 | Stated Rate | Effective Rate(1) | Maturity Date(2) | |||||||||||
Mortgage debt collateralized by: | |||||||||||||||
Fixed rate mortgage debt | |||||||||||||||
Metro Center | $ | $ | % | % | 11/5/2024 | ||||||||||
10 Union Square | % | % | 4/1/2026 | ||||||||||||
1542 Third Avenue | % | % | 5/1/2027 | ||||||||||||
First Stamford Place(3) | % | % | 7/1/2027 | ||||||||||||
1010 Third Avenue and 77 West 55th Street | % | % | 1/5/2028 | ||||||||||||
10 Bank Street | % | % | 6/1/2032 | ||||||||||||
383 Main Avenue | % | % | 6/30/2032 | ||||||||||||
1333 Broadway | % | % | 2/5/2033 | ||||||||||||
Total mortgage debt | |||||||||||||||
Senior unsecured notes - exchangeable | % | % | 8/15/2019 | ||||||||||||
Senior unsecured notes:(6) | |||||||||||||||
Series A | % | % | 3/27/2025 | ||||||||||||
Series B | % | % | 3/27/2027 | ||||||||||||
Series C | % | % | 3/27/2030 | ||||||||||||
Series D | % | % | 1/22/2028 | ||||||||||||
Series E | % | % | 3/22/2030 | ||||||||||||
Series F | % | % | 3/22/2033 | ||||||||||||
Unsecured revolving credit facility(6) | (4) | (4) | 8/29/2021 | ||||||||||||
Unsecured term loan facility(6) | (5) | (5) | 8/29/2022 | ||||||||||||
Total principal | |||||||||||||||
Unamortized discount, net of unamortized premium | ( | ) | ( | ) | |||||||||||
Deferred financing costs, net | ( | ) | ( | ) | |||||||||||
Total | $ | $ |
(1) | The effective rate is the yield as of June 30, 2019, including the effects of debt issuance costs and the amortization of the fair value of debt adjustment. |
(2) | Pre-payment is generally allowed for each loan upon payment of a customary pre-payment penalty. |
(3) | Represents a $ |
(4) | At June 30, 2019, the unsecured revolving credit facility bears a floating rate at 30 day LIBOR plus |
(5) | The unsecured term loan facility bears a floating rate at 30 day LIBOR plus |
(6) | At June 30, 2019, we were in compliance with all debt covenants. |
Year | Amortization | Maturities | Total | ||||||||
2019 | $ | $ | $ | ||||||||
2020 | |||||||||||
2021 | |||||||||||
2022 | |||||||||||
2023 | |||||||||||
Thereafter | |||||||||||
Total | $ | $ | $ |
June 30, 2019 | December 31, 2018 | |||||||
Financing costs | $ | $ | ||||||
Less: accumulated amortization | ( | ) | ( | ) | ||||
Total deferred financing costs, net | $ | $ |
June 30, 2019 | December 31, 2018 | ||||||
Accrued capital expenditures | $ | $ | |||||
Accounts payable and accrued expenses | |||||||
Interest rate swap agreements liability | |||||||
Accrued interest payable | |||||||
Due to affiliated companies | |||||||
Total accounts payable and accrued expenses | $ | $ |
June 30, 2019 | December 31, 2018 | |||||||||||||||||||||
Derivative | Notional Amount | Receive Rate | Pay Rate | Effective Date | Expiration Date | Asset | Liability | Asset | Liability | |||||||||||||
Interest rate swap | $ | 1 Month LIBOR | August 31, 2017 | August 24, 2022 | $ | $ | ( | ) | $ | $ | ||||||||||||
Interest rate swap | 3 Month LIBOR | July 1, 2019 | July 1, 2026 | ( | ) | ( | ) | |||||||||||||||
Interest rate swap | 3 Month LIBOR | July 1, 2019 | July 1, 2026 | ( | ) | ( | ) | |||||||||||||||
$ | $ | ( | ) | $ | $ | ( | ) |
Three Months Ended | Six Months Ended | |||||||||||||||
Effects of Cash Flow Hedges | June 30, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | ||||||||||||
Amount of gain (loss) recognized in other comprehensive income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense | ( | ) | ( | ) | ( | ) | ( | ) |
Three Months Ended | Six Months Ended | |||||||||||||||
Effects of Cash Flow Hedges | June 30, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | ||||||||||||
Total interest (expense) presented in the condensed consolidated statements of income in which the effects of cash flow hedges are recorded | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense | ( | ) | ( | ) | ( | ) | ( | ) |
June 30, 2019 | |||||||||||||||||||
Estimated Fair Value | |||||||||||||||||||
Carrying Value | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||
Interest rate swaps included in prepaid expenses and other assets | $ | $ | $ | $ | $ | ||||||||||||||
Interest rate swaps included in accounts payable and accrued expenses | |||||||||||||||||||
Mortgage notes payable | |||||||||||||||||||
Senior unsecured notes - Exchangeable | |||||||||||||||||||
Senior unsecured notes - Series A, B, C, D, E and F | |||||||||||||||||||
Unsecured term loan facility | |||||||||||||||||||
Ground lease liabilities |
December 31, 2018 | |||||||||||||||||||
Estimated Fair Value | |||||||||||||||||||
Carrying Value | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||
Interest rate swaps included in prepaid expenses and other assets | $ | $ | $ | $ | $ | ||||||||||||||
Interest rate swaps included in accounts payable and accrued expenses | |||||||||||||||||||
Mortgage notes payable | |||||||||||||||||||
Senior unsecured notes - Exchangeable | |||||||||||||||||||
Senior unsecured notes - Series A, B, C, D, E and F | |||||||||||||||||||
Unsecured term loan facility |
Three months ended June 30, 2019 | Six months ended June 30, 2019 | ||||||
Fixed payments | $ | $ | |||||
Variable payments | |||||||
Total rental revenue | $ | $ |
Remainder of 2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
$ |
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
$ |
Weighted average remaining lease term (in years) | |||
Weighted average discount rate | % | ||
Cash paid for operating leases six months ended June 30, 2019 (in thousands) | $ |
Remainder of 2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total undiscounted cash flows | |||
Present value discount | ( | ) | |
Ground lease liabilities | $ |
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
$ |
Three Months Ended | Six Months Ended, | ||||||||||||||
June 30, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | ||||||||||||
Net income attributable to common stockholders | $ | $ | $ | $ | |||||||||||
Increase in additional paid-in capital for the conversion of OP Units into common stock | |||||||||||||||
Change from net income attributable to common stockholders and transfers from non-controlling interests | $ | $ | $ | $ |
Restricted Stock | LTIP Units | Weighted Average Grant Fair Value | |||||||
Unvested balance at December 31, 2018 | $ | ||||||||
Vested | ( | ) | ( | ) | |||||
Granted | |||||||||
Forfeited or unearned | ( | ) | ( | ) | |||||
Unvested balance at June 30, 2019 | $ |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | ||||||||||||
Numerator - Basic: | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Private perpetual preferred unit distributions | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Earnings allocated to unvested shares | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income attributable to common stockholders - basic | $ | $ | $ | $ | |||||||||||
Numerator - Diluted: | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Private perpetual preferred unit distributions | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Earnings allocated to unvested shares | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income attributable to common stockholders - diluted | $ | $ | $ | $ | |||||||||||
Denominator: | |||||||||||||||
Weighted average shares outstanding - basic | |||||||||||||||
Operating partnership units | |||||||||||||||
Effect of dilutive securities: | |||||||||||||||
Stock-based compensation plans | |||||||||||||||
Weighted average shares outstanding - diluted | |||||||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ |
Three Months Ended June 30, 2019 | ||||||||||||||||
Real Estate | Observatory | Intersegment Elimination | Total | |||||||||||||
Revenues: | ||||||||||||||||
Rental revenue | $ | $ | $ | $ | ||||||||||||
Intercompany rental revenue | ( | ) | ||||||||||||||
Observatory revenue | ||||||||||||||||
Lease termination fees | ||||||||||||||||
Third-party management and other fees | ||||||||||||||||
Other revenue and fees | ||||||||||||||||
Total revenues | ( | ) | ||||||||||||||
Operating expenses: | ||||||||||||||||
Property operating expenses | ||||||||||||||||
Intercompany rent expense | ( | ) | ||||||||||||||
Ground rent expense | ||||||||||||||||
General and administrative expenses | ||||||||||||||||
Observatory expenses | ||||||||||||||||
Real estate taxes | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Total operating expenses | ( | ) | ||||||||||||||
Total operating income | ||||||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | ||||||||||||||||
Interest expense | ( | ) | ( | ) | ||||||||||||
Income before income taxes | ||||||||||||||||
Income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Segment assets | $ | $ | $ | $ | ||||||||||||
Expenditures for segment assets | $ | $ | $ | $ |
Three Months Ended June 30, 2018 | ||||||||||||||||
Real Estate | Observatory | Intersegment Elimination | Total | |||||||||||||
Revenues: | ||||||||||||||||
Rental revenue | $ | $ | $ | $ | ||||||||||||
Intercompany rental revenue | ( | ) | ||||||||||||||
Tenant expense reimbursement | ||||||||||||||||
Observatory revenue | ||||||||||||||||
Lease termination fees | ||||||||||||||||
Third-party management and other fees | ||||||||||||||||
Other revenue and fees | ||||||||||||||||
Total revenues | ( | ) | ||||||||||||||
Operating expenses: | ||||||||||||||||
Property operating expenses | ||||||||||||||||
Intercompany rent expense | ( | ) | ||||||||||||||
Ground rent expense | ||||||||||||||||
General and administrative expenses | ||||||||||||||||
Observatory expenses | ||||||||||||||||
Real estate taxes | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Total operating expenses | ( | ) | ||||||||||||||
Total operating income | ||||||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | ||||||||||||||||
Interest expense | ( | ) | ( | ) | ||||||||||||
Income before income taxes | ||||||||||||||||
Income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Segment assets | $ | $ | $ | $ | ||||||||||||
Expenditures for segment assets | $ | $ | $ | $ |
Six Months Ended June 30, 2019 | ||||||||||||||||
Real Estate | Observatory | Intersegment Elimination | Total | |||||||||||||
Revenues: | ||||||||||||||||
Rental revenue | $ | $ | $ | $ | ||||||||||||
Intercompany rental revenue | ( | ) | ||||||||||||||
Observatory revenue | ||||||||||||||||
Lease termination fees | ||||||||||||||||
Third-party management and other fees | ||||||||||||||||
Other revenue and fees | ||||||||||||||||
Total revenues | ( | ) | ||||||||||||||
Operating expenses: | ||||||||||||||||
Property operating expenses | ||||||||||||||||
Intercompany rent expense | ( | ) | ||||||||||||||
Ground rent expense | ||||||||||||||||
General and administrative expenses | ||||||||||||||||
Observatory expenses | ||||||||||||||||
Real estate taxes | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Total operating expenses | ( | ) | ||||||||||||||
Total operating income | ||||||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | ||||||||||||||||
Interest expense | ( | ) | ( | ) | ||||||||||||
Income before income taxes | ||||||||||||||||
Income tax (expense) benefit | ( | ) | ||||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Expenditures for segment assets | $ | $ | $ | $ |
Six Months Ended June 30, 2018 | ||||||||||||||||
Real Estate | Observatory | Intersegment Elimination | Total | |||||||||||||
Revenues: | ||||||||||||||||
Rental revenue | $ | $ | $ | $ | ||||||||||||
Intercompany rental revenue | ( | ) | ||||||||||||||
Tenant expense reimbursement | ||||||||||||||||
Observatory revenue | ||||||||||||||||
Lease termination fees | ||||||||||||||||
Third-party management and other fees | ||||||||||||||||
Other revenue and fees | ||||||||||||||||
Total revenues | ( | ) | ||||||||||||||
Operating expenses: | ||||||||||||||||
Property operating expenses | ||||||||||||||||
Intercompany rent expense | ( | ) | ||||||||||||||
Ground rent expense | ||||||||||||||||
General and administrative expenses | ||||||||||||||||
Observatory expenses | ||||||||||||||||
Real estate taxes | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Total operating expenses | ( | ) | ||||||||||||||
Total operating income | ||||||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | ||||||||||||||||
Interest expense | ( | ) | ( | ) | ||||||||||||
Income before income taxes | ||||||||||||||||
Income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Expenditures for segment assets | $ | $ | $ | $ |
• | changes in our industry, the real estate markets, either nationally or in Manhattan or the greater New York metropolitan area; |
• | reduced demand for office or retail space; |
• | decreased rental rates or increased vacancy rates; |
• | defaults on, early terminations of, or non-renewal of leases by tenants; |
• | insolvency of a major tenant or a significant number of smaller tenants; |
• | our failure to redevelop 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 development and capital projects, including construction delays and cost overruns; |
• | inability to manage our properties and our growth effectively; |
• | departure of any of our key personnel and challenges in succession transition; |
• | declining real estate valuations and impairment charges; |
• | termination or expiration of our ground leases; |
• | changes in real estate and zoning laws and increases in real property tax rates; |
• | increased operating costs; |
• | misunderstanding of our competition; |
• | new office or observatory development in our market; |
• | fluctuations in attendance at the observatory; |
• | changes in domestic or international tourism, including geopolitical events and currency exchange rates; |
• | changes in technology and market competition, which affect utilization of our broadcast or other facilities; |
• | changes in our business strategy; |
• | resolution of legal proceedings involving the company; |
• | general volatility of the capital and credit markets and the market price of our Class A common stock and our publicly-traded OP Units; |
• | availability and terms of debt and equity capital; |
• | failure to deploy capital effectively; |
• | our leverage; |
• | fluctuations in interest rates; |
• | the discontinuance of LIBOR as an index for interest rates and the possible resulting disruption in debt agreements and/or markets; |
• | inability to continue to raise additional debt or equity financing on attractive terms, or at all; |
• | our failure to generate sufficient cash flows to service our outstanding indebtedness; |
• | inability to make distributions to our securityholders in the future; |
• | impact of changes in governmental regulations, tax law and rates and similar matters; |
• | failure to continue to qualify as a real estate investment trust, or REIT; |
• | lack, or insufficient amounts, of insurance; |
• | a future terrorist event in New York City or the U.S.; |
• | environmental uncertainties and risks related to climate change, rising sea levels, adverse weather conditions and natural disasters; |
• | inability to comply with applicable laws, rules and regulations; |
• | damages resulting from security breaches through cyberattacks, cyber intrusions or otherwise, as well as other significant disruptions of our technology (IT) networks related systems; and |
• | other factors discussed under “Item 1A, Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018 and additional factors that may be contained in any filing we make with the SEC, including Part II, Item 1A of our Quarterly Reports on Form 10-Q. |
• | Achieved net income attributable to the Company of $11.1 million and Core Funds From Operations of $64.5 million. |
• | Occupancy and leased percentages at June 30, 2019: |
• | Total portfolio was 90.2% occupied; including signed leases not commenced (“SLNC”), the total portfolio was 92.2% leased. |
• | Manhattan office portfolio (excluding the retail component of these properties) was 90.7% occupied; including SLNC, the Manhattan office portfolio was 93.0% leased. |
• | Retail portfolio was 90.5% occupied; including SLNC, the retail portfolio was 92.3% leased. |
• | Empire State Building was 93.5% occupied; including SLNC, was 95.2% leased. |
• | Signed 55 leases, representing 261,052 rentable square feet across the total portfolio, and achieved a 12.2% increase in mark-to-market cash rent over previous fully escalated cash rents portfolio-wide on new, renewal, and expansion leases. |
• | Signed 22 new leases representing 119,235 rentable square feet for the Manhattan office portfolio (excluding the retail component of these properties), and achieved an increase of 22.2% in mark-to-market cash rent over previous fully escalated cash rents. |
• | Empire State Building Observatory revenue for the second quarter 2019 decreased by 6.6% to $32.9 million from $35.2 million in the second quarter 2018. Net operating income for the second quarter 2019 decreased by 10.9% to $24.5 million from $27.5 million in the second quarter 2018. As a reminder, the 102nd floor observation deck was closed in the second quarter 2019. |
• | Declared a dividend of $0.105 per share. |
Six Months Ended June 30, | |||||||||||||
2019 | 2018 | ||||||||||||
Office leases | $ | 71,337 | 47.4 | % | $ | 65,407 | 42.6 | % | |||||
Retail leases | 3,666 | 2.4 | % | 3,716 | 2.4 | % | |||||||
Tenant reimbursements & other income | 14,465 | 9.6 | % | 15,939 | 10.4 | % | |||||||
Observatory operations | 53,464 | 35.6 | % | 56,451 | 36.7 | % | |||||||
Broadcasting licenses and leases | 7,457 | 5.0 | % | 12,102 | 7.9 | % | |||||||
Total | $ | 150,389 | 100.0 | % | $ | 153,615 | 100.0 | % |
Three Months Ended June 30, | ||||||||||||||
2019 | 2018 | Change | % | |||||||||||
Revenues: | ||||||||||||||
Rental revenue | $ | 141,071 | $ | 124,038 | $ | 17,033 | 13.7 | % | ||||||
Tenant expense reimbursement | — | 16,205 | (16,205 | ) | (100.0 | )% | ||||||||
Observatory revenue | 32,895 | 35,201 | (2,306 | ) | (6.6 | )% | ||||||||
Lease termination fees | 363 | 357 | 6 | 1.7 | % | |||||||||
Third-party management and other fees | 331 | 376 | (45 | ) | (12.0 | )% | ||||||||
Other revenues and fees | 1,584 | 2,352 | (768 | ) | (32.7 | )% | ||||||||
Total revenues | 176,244 | 178,529 | (2,285 | ) | (1.3 | )% | ||||||||
Operating expenses: | ||||||||||||||
Property operating expenses | 40,227 | 39,418 | (809 | ) | (2.1 | )% | ||||||||
Ground rent expenses | 2,332 | 2,332 | — | — | % | |||||||||
General and administrative expenses | 15,998 | 13,225 | (2,773 | ) | (21.0 | )% | ||||||||
Observatory expenses | 8,360 | 7,678 | (682 | ) | (8.9 | )% | ||||||||
Real estate taxes | 28,267 | 26,743 | (1,524 | ) | (5.7 | )% | ||||||||
Depreciation and amortization | 44,821 | 39,468 | (5,353 | ) | (13.6 | )% | ||||||||
Total operating expenses | 140,005 | 128,864 | (11,141 | ) | (8.6 | )% | ||||||||
Operating income | 36,239 | 49,665 | (13,426 | ) | (27.0 | )% | ||||||||
Other income (expense): | — | |||||||||||||
Interest income | 3,899 | 2,499 | 1,400 | 56.0 | % | |||||||||
Interest expense | (20,597 | ) | (20,525 | ) | (72 | ) | (0.4 | )% | ||||||
Income before income taxes | 19,541 | 31,639 | (12,098 | ) | (38.2 | )% | ||||||||
Income tax expense | (611 | ) | (1,455 | ) | 844 | 58.0 | % | |||||||
Net income | 18,930 | 30,184 | (11,254 | ) | (37.3 | )% | ||||||||
Private perpetual preferred unit distributions | (234 | ) | (234 | ) | — | — | % | |||||||
Net income attributable to non-controlling interests | (7,609 | ) | (13,299 | ) | 5,690 | 42.8 | % | |||||||
Net income attributable to common stockholders | $ | 11,087 | $ | 16,651 | $ | (5,564 | ) | (33.4 | )% |
Three Months Ended | |||
June 30, 2019 | |||
Rental revenue | |||
Base rent | $ | 125,170 | |
Billed tenant expense reimbursement | 15,901 | ||
Total rental revenue | $ | 141,071 |
Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | Change | % | |||||||||||
Revenues: | ||||||||||||||
Rental revenue | $ | 284,488 | $ | 246,349 | $ | 38,139 | 15.5 | % | ||||||
Tenant expense reimbursement | — | 33,999 | (33,999 | ) | (100.0 | )% | ||||||||
Observatory revenue | 53,464 | 56,450 | (2,986 | ) | (5.3 | )% | ||||||||
Lease termination fees | 751 | 979 | (228 | ) | (23.3 | )% | ||||||||
Third-party management and other fees | 651 | 839 | (188 | ) | (22.4 | )% | ||||||||
Other revenues and fees | 4,183 | 7,184 | (3,001 | ) | (41.8 | )% | ||||||||
Total revenues | 343,537 | 345,800 | (2,263 | ) | (0.7 | )% | ||||||||
Operating expenses: | ||||||||||||||
Property operating expenses | 83,182 | 83,603 | 421 | 0.5 | % | |||||||||
Ground rent expenses | 4,663 | 4,663 | — | — | % | |||||||||
General and administrative expenses | 30,024 | 25,853 | (4,171 | ) | (16.1 | )% | ||||||||
Observatory expenses | 15,935 | 15,014 | (921 | ) | (6.1 | )% | ||||||||
Real estate taxes | 56,499 | 53,487 | (3,012 | ) | (5.6 | )% | ||||||||
Depreciation and amortization | 90,919 | 79,351 | (11,568 | ) | (14.6 | )% | ||||||||
Total operating expenses | 281,222 | 261,971 | (19,251 | ) | (7.3 | )% | ||||||||
Operating income | 62,315 | 83,829 | (21,514 | ) | (25.7 | )% | ||||||||
Other income (expense): | ||||||||||||||
Interest income | 7,638 | 3,724 | 3,914 | 105.1 | % | |||||||||
Interest expense | (41,286 | ) | (38,116 | ) | (3,170 | ) | (8.3 | )% | ||||||
Income before income taxes | 28,667 | 49,437 | (20,770 | ) | (42.0 | )% | ||||||||
Income tax benefit (expense) | 119 | (1,195 | ) | 1,314 | 110.0 | % | ||||||||
Net income | 28,786 | 48,242 | (19,456 | ) | (40.3 | )% | ||||||||
Private perpetual preferred unit distributions | (468 | ) | (468 | ) | — | — | % | |||||||
Net income attributable to non-controlling interests | (11,554 | ) | (21,355 | ) | 9,801 | 45.9 | % | |||||||
Net income attributable to common stockholders | $ | 16,764 | $ | 26,419 | $ | (9,655 | ) | (36.5 | )% |
Six Months Ended | |||
June 30, 2019 | |||
Rental revenue | |||
Base rent | $ | 251,804 | |
Billed tenant expense reimbursement | 32,684 | ||
Total rental revenue | $ | 284,488 |
Financial covenant | Required | June 30, 2019 | In Compliance | ||||
Maximum total leverage | < 60% | 29.6 | % | Yes | |||
Maximum secured debt | < 40% | 9.3 | % | Yes | |||
Minimum fixed charge coverage | > 1.50x | 3.9x | Yes | ||||
Minimum unencumbered interest coverage | > 1.75x | 5.7x | Yes | ||||
Maximum unsecured leverage | < 60% | 23.6 | % | Yes | |||
Minimum tangible net worth | $ | 1,252,954 | $ | 1,821,329 | Yes |
Six Months Ended June 30, | |||||||
Total New Leases, Expansions, and Renewals | 2019 | 2018 | |||||
Number of leases signed(2) | 82 | 75 | |||||
Total square feet | 528,754 | 395,912 | |||||
Leasing commission costs(3) | $ | 7,730 | $ | 5,316 | |||
Tenant improvement costs(3) | 28,123 | 22,167 | |||||
Total leasing commissions and tenant improvement costs(3) | $ | 35,853 | $ | 27,483 | |||
Leasing commission costs per square foot(3) | $ | 14.62 | $ | 13.43 | |||
Tenant improvement costs per square foot(3) | 53.19 | 55.99 | |||||
Total leasing commissions and tenant improvement costs per square foot(3) | $ | 67.81 | $ | 69.42 |
Six Months Ended June 30, | |||||||
Total New Leases, Expansions, and Renewals | 2019 | 2018 | |||||
Number of leases signed(2) | 7 | 3 | |||||
Total square feet | 40,349 | 7,035 | |||||
Leasing commission costs(3) | $ | 966 | $ | 197 | |||
Tenant improvement costs(3) | 1,132 | 196 | |||||
Total leasing commissions and tenant improvement costs(3) | $ | 2,098 | $ | 393 | |||
Leasing commission costs per square foot(3) | $ | 23.94 | $ | 28.07 | |||
Tenant improvement costs per square foot(3) | 28.06 | 27.91 | |||||
Total leasing commissions and tenant improvement costs per square foot(3) | $ | 52.00 | $ | 55.98 |
(1) | Excludes an aggregate of 512,951 and 513,196 rentable square feet of retail space in our Manhattan office properties in 2019 and 2018, respectively. Includes the Empire State Building broadcasting licenses and observatory operations. |
(2) | Presents a renewed and expansion lease as one lease signed. |
(3) | Presents all tenant improvement and leasing commission costs as if they were incurred in the period in which the lease was signed, which may be different than the period in which they were actually paid. |
(4) | Includes an aggregate of 512,951 and 513,196 rentable square feet of retail space in our Manhattan office properties in 2019 and 2018, respectively. Excludes the Empire State Building broadcasting licenses and observatory operations. |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Total Portfolio | |||||||
Capital expenditures (1) | $ | 64,356 | $ | 67,106 |
(1) | Excludes tenant improvements and leasing commission costs. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||||
Net income | $ | 18,930 | $ | 30,184 | $ | 28,786 | $ | 48,242 | |||||||
Add: | |||||||||||||||
General and administrative expenses | 15,998 | 13,225 | 30,024 | 25,853 | |||||||||||
Depreciation and amortization | 44,821 | 39,468 | 90,919 | 79,351 | |||||||||||
Interest expense | 20,597 | 20,525 | 41,286 | 38,116 | |||||||||||
Income tax expense (benefit) | 611 | 1,455 | (119 | ) | 1,195 | ||||||||||
Less: | |||||||||||||||
Third-party management and other fees | (331 | ) | (376 | ) | (651 | ) | (839 | ) | |||||||
Interest income | (3,899 | ) | (2,499 | ) | (7,638 | ) | (3,724 | ) | |||||||
Net operating income | $ | 96,727 | $ | 101,982 | $ | 182,607 | $ | 188,194 | |||||||
Other Net Operating Income Data | |||||||||||||||
Straight-line rental revenue | $ | 3,203 | $ | 5,809 | $ | 8,607 | $ | 11,662 | |||||||
Net increase in rental revenue from the amortization of above- and below-market lease assets and liabilities | $ | 1,745 | $ | 1,551 | $ | 4,099 | $ | 2,719 | |||||||
Amortization of acquired below-market ground leases | $ | 1,958 | $ | 1,958 | $ | 3,916 | $ | 3,916 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||||
Net income | $ | 18,930 | $ | 30,184 | $ | 28,786 | $ | 48,242 | |||||||
Private perpetual preferred unit distributions | (234 | ) | (234 | ) | (468 | ) | (468 | ) | |||||||
Real estate depreciation and amortization | 43,822 | 39,049 | 88,914 | 78,517 | |||||||||||
FFO attributable to common stockholders and non-controlled interests | 62,518 | 68,999 | 117,232 | 126,291 | |||||||||||
Amortization of below-market ground leases | 1,958 | 1,958 | 3,916 | 3,916 | |||||||||||
Modified FFO attributable to common stockholders and non-controlled interests | 64,476 | 70,957 | 121,148 | 130,207 | |||||||||||
Core FFO attributable to common stockholders and non-controlled interests | $ | 64,476 | $ | 70,957 | $ | 121,148 | $ | 130,207 | |||||||
Weighted average shares and Operating Partnership Units | |||||||||||||||
Basic | 298,131 | 297,244 | 298,100 | 297,028 | |||||||||||
Diluted | 298,131 | 297,244 | 298,100 | 297,029 |
Exhibit No. | Description |
101.INS* | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH* | XBRL Taxonomy Extension Schema Document |
101.CAL* | XBRL Taxonomy Extension Calculation Document |
101.DEF* | XBRL Taxonomy Extension Definitions Document |
101.LAB* | XBRL Taxonomy Extension Labels Document |
101.PRE* | XBRL Taxonomy Extension Presentation Document |
Notes: | |
* Filed herewith. |
Dated: July 31, 2019 | By: /s/ Anthony E. Malkin Anthony E. Malkin Chairman and Chief Executive Officer |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: July 31, 2019 | By: /s/ David A. Karp David A. Karp Executive Vice President and Chief Financial Officer |
Date: July 31, 2019 | By: /s/ Anthony E. Malkin Anthony E. Malkin Chairman and Chief Executive Officer |
Date: July 31, 2019 | By: /s/ David A. Karp David A. Karp Executive Vice President and Chief Financial Officer |
Condensed Consolidated Statements of Income (unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Revenues: | ||||
Rental revenue | $ 141,071 | $ 284,488 | ||
Rental revenue | $ 124,038 | $ 246,349 | ||
Tenant expense reimbursement | 0 | 16,205 | 0 | 33,999 |
Observatory revenue | 32,895 | 35,201 | 53,464 | 56,450 |
Lease termination fees | 363 | 357 | 751 | 979 |
Third-party management and other fees | 331 | 376 | 651 | 839 |
Other revenue and fees | 1,584 | 2,352 | 4,183 | 7,184 |
Total revenues | 176,244 | 178,529 | 343,537 | 345,800 |
Operating expenses: | ||||
Property operating expenses | 40,227 | 39,418 | 83,182 | 83,603 |
Ground rent expenses | 2,332 | 2,332 | 4,663 | 4,663 |
General and administrative expenses | 15,998 | 13,225 | 30,024 | 25,853 |
Observatory expenses | 8,360 | 7,678 | 15,935 | 15,014 |
Real estate taxes | 28,267 | 26,743 | 56,499 | 53,487 |
Depreciation and amortization | 44,821 | 39,468 | 90,919 | 79,351 |
Total operating expenses | 140,005 | 128,864 | 281,222 | 261,971 |
Total operating income | 36,239 | 49,665 | 62,315 | 83,829 |
Other income (expense): | ||||
Interest income | 3,899 | 2,499 | 7,638 | 3,724 |
Interest expense | (20,597) | (20,525) | (41,286) | (38,116) |
Income before income taxes | 19,541 | 31,639 | 28,667 | 49,437 |
Income tax benefit (expense) | (611) | (1,455) | 119 | (1,195) |
Net income | 18,930 | 30,184 | 28,786 | 48,242 |
Private perpetual preferred unit distributions | (234) | (234) | (468) | (468) |
Net income attributable to non-controlling interests | (7,609) | (13,299) | (11,554) | (21,355) |
Net income attributable to common stockholders | $ 11,087 | $ 16,651 | $ 16,764 | $ 26,419 |
Total weighted average shares: | ||||
Basic (in shares) | 176,796 | 165,256 | 176,495 | 164,311 |
Diluted (in shares) | 298,131 | 297,244 | 298,100 | 297,029 |
Earnings per share attributable to common stockholders: | ||||
Basic (in USD per share) | $ 0.06 | $ 0.10 | $ 0.09 | $ 0.16 |
Diluted (in USD per share) | 0.06 | 0.10 | 0.09 | 0.16 |
Dividends per share (in USD per share) | $ 0.105 | $ 0.105 | $ 0.210 | $ 0.210 |
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 18,930 | $ 30,184 | $ 28,786 | $ 48,242 |
Other comprehensive income (loss): | ||||
Unrealized gain (loss) on valuation of interest rate swap agreements | (12,346) | 1,763 | (19,736) | 5,943 |
Less: amount reclassified into interest expense | 169 | 536 | 318 | 1,135 |
Other comprehensive income (loss) | (12,177) | 2,299 | (19,418) | 7,078 |
Comprehensive income | 6,753 | 32,483 | 9,368 | 55,320 |
Net income attributable to non-controlling interests and private perpetual preferred unitholders | (7,843) | (13,533) | (12,022) | (21,823) |
Other comprehensive (income) loss attributable to non-controlling interests | 4,953 | (1,004) | 7,922 | (3,164) |
Comprehensive income attributable to common stockholders | $ 3,863 | $ 17,946 | $ 5,268 | $ 30,333 |
Description of Business and Organization |
6 Months Ended |
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Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business and Organization | Description of Business and Organization As used in these condensed consolidated financial statements, unless the context otherwise requires, “we,” “us,” “our,” the “company,” and "ESRT" mean Empire State Realty Trust, Inc. and its consolidated subsidiaries. We are a self-administered and self-managed 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. As of June 30, 2019, our total portfolio contained 10.1 million rentable square feet of office and retail space. We owned 14 office properties (including three long-term ground leasehold interests) encompassing approximately 9.4 million rentable square feet of office space. Nine of these properties are located in the midtown Manhattan market and aggregate approximately 7.6 million rentable square feet of office space, including the Empire State Building. Our Manhattan office properties also contain an aggregate of 512,951 rentable square feet of retail space on their ground floor and/or contiguous levels. Our remaining five office properties are located in Fairfield County, Connecticut and Westchester County, New York, encompassing in the aggregate approximately 1.8 million rentable square feet. The majority of square footage for these five properties is located in densely populated metropolitan communities with immediate access to mass transportation. Additionally, we have entitled land at the Stamford Transportation Center in Stamford, Connecticut, adjacent to one of our office properties, that will support the development of an approximately 380,000 rentable square foot office building and garage. As of June 30, 2019, our portfolio included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of Westport, Connecticut, encompassing 205,595 rentable square feet in the aggregate. We were organized as a Maryland corporation on July 29, 2011 and commenced operations upon completion of our initial public offering and related formation transactions on October 7, 2013. Our operating partnership, Empire State Realty OP, L.P. (the "Operating Partnership"), holds substantially all of our assets and conducts substantially all of our business. As of June 30, 2019, we owned approximately 58.4% of the aggregate operating partnership units in the Operating Partnership. We, as the sole general partner in the Operating Partnership, have responsibility and discretion in the management and control of the Operating Partnership, and the limited partners in the Operating Partnership, in such capacity, have no authority to transact business for, or participate in the management activities of, the Operating Partnership. Accordingly, the Operating Partnership has been consolidated by us. We elected to be taxed as a REIT and operate in a manner that we believe allows us to qualify as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2013.
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Summary of Significant Accounting Policies |
6 Months Ended |
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Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies There have been no material changes to the summary of significant accounting policies included in the section entitled "Summary of Significant Accounting Policies" in our December 31, 2018 Annual Report on Form 10-K, with the exception of the adoption of Financial Accounting Standards Board ("FASB") Topic 842, Lease Accounting on January 1, 2019. We adopted FASB Topic 842, Lease Accounting, using the modified retrospective approach on January 1, 2019 and elected to apply the transition provisions of the standard at adoption. As such, the prior period amounts presented under Topic 840 were not restated to conform with the 2019 presentation. We adopted the practical expedient in Topic 842, which allows us to avoid separating lease and non-lease rental income. Consequently, all rental income earned pursuant to tenant leases in 2019 is reflected as one category, “Rental Revenue,” in the 2019 consolidated statement of income. Topic 842 also requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The adoption of this standard resulted in the recognition of right-of-use assets and lease liabilities for our operating leases on our balance sheet of approximately $29.5 million. In addition, under Topic 842, lessors may only capitalize incremental direct leasing costs. As a result, we no longer capitalize our non-contingent leasing costs and instead expense these costs as incurred. These costs totaled $2.2 million for the six months ended June 30, 2019. Basis of Quarterly Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), for interim financial information, and with the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments and eliminations (including intercompany balances and transactions), consisting of normal recurring adjustments, considered necessary for the fair presentation of the financial statements have been included. The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the corresponding full years. These financial statements should be read in conjunction with the financial statements and accompanying notes included in the financial statements for the year ended December 31, 2018 contained in our Annual Report on Form 10-K. We do not consider our business to be subject to material seasonal fluctuations, except that our observatory business is subject to tourism seasonality. During the past ten years, approximately 16.0% to 18.0% of our annual observatory revenue was realized in the first quarter, 26.0% to 28.0% was realized in the second quarter, 31.0% to 33.0% was realized in the third quarter and 23.0% to 25.0% was realized in the fourth quarter. We consolidate entities in which we have a controlling financial interest. In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members. For variable interest entities ("VIE"), we consolidate the entity if we are deemed to have a variable interest in the entity and through that interest we are deemed the primary beneficiary. The primary beneficiary of a VIE is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. The primary beneficiary is required to consolidate the VIE. The Operating Partnership is a variable interest entity of our company, Empire State Realty Trust, Inc. As the Operating Partnership is already consolidated in the financial statements of Empire State Realty Trust, Inc., the identification of this entity as a variable interest entity has no impact on our consolidated financial statements. We will assess the accounting treatment for each investment we may have in the future. This assessment will include a review of each entity’s organizational agreement to determine which party has what rights and whether those rights are protective or participating. For all VIEs, we will review such agreements in order to determine which party has the power to direct the activities that most significantly impact the entity’s economic performance and benefit. In situations where we or our partner could approve, among other things, the annual budget, or leases that cover more than a nominal amount of space relative to the total rentable space at each property, we would not consolidate the investment as we consider these to be substantive participation rights that result in shared power of the activities that would most significantly impact the performance and benefit of such joint venture investment. A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling interests are required to be presented as a separate component of equity in the condensed consolidated balance sheets and in the condensed consolidated statements of income by requiring earnings and other comprehensive income to be attributed to controlling and non-controlling interests. Accounting Estimates The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to use estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Significant items subject to such estimates and assumptions include allocation of the purchase price of acquired real estate properties among tangible and intangible assets, determination of the useful life of real estate properties and other long-lived assets, valuation and impairment analysis of commercial real estate properties, right of use assets and other long-lived assets, estimate of tenant expense reimbursements, valuation of the allowance for doubtful accounts, and valuation of derivative instruments, ground lease liabilities, senior unsecured notes, mortgage notes payable, unsecured term loan and revolving credit facilities, and equity based compensation. These estimates are prepared using management’s best judgment, after considering past, current, and expected events and economic conditions. Actual results could differ from those estimates. Recently Issued or Adopted Accounting Standards During August 2018, the FASB issued Accounting Standards Update ("ASU") No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force), which contain amendments that align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). Accordingly, for entities in a hosting arrangement that is a service contract, costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed. The amendments in ASU No. 2018-15 also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments is permitted, including adoption in any interim period. The amendments in ASU No. 2018-15 should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are evaluating the impact of adopting this new accounting standard on our consolidated financial statements. During January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which contain amendments that modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Because these amendments eliminate Step 2 from the goodwill impairment test, they should reduce the cost and complexity of evaluating goodwill for impairment. ASU No. 2017-04 should be applied on a prospective basis and the amendments adopted for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are evaluating the impact of adopting this new accounting standard on our consolidated financial statements. During June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which contains amendments that replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU No. 2016-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Earlier adoption as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, is permitted. The amendments must be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified retrospective approach). We anticipate the adoption of this new accounting standard will have no impact on our consolidated financial statements. During February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In addition, lessors may only capitalize incremental direct leasing costs. Subsequent amendments to ASU No. 2016-02 also provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component provided that (1) the timing and pattern of transfer are the same for the nonlease components and associated lease component and (2) the lease component, if accounted separately, would be classified as an operating lease. We adopted this standard and related amendments on January 1, 2019 and elected the available practical expedients. Such adoption resulted in the recognition of right-of-use assets and lease liabilities for our operating leases on our balance sheet of approximately recognition of right-of-use assets and lease liabilities for our operating leases on our balance sheet of approximately $29.5 million.
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Deferred Costs, Acquired Lease Intangibles and Goodwill |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Acquired Lease Intangibles and Goodwill | Deferred Costs, Acquired Lease Intangibles and Goodwill Deferred costs, net, consisted of the following as of June 30, 2019 and December 31, 2018 (amounts in thousands):
At June 30, 2019 and December 31, 2018, $5.2 million and $6.3 million, respectively, of net deferred financing costs associated with the unsecured revolving credit facility was included in deferred costs, net on the condensed consolidated balance sheet. Amortization expense related to deferred leasing costs and acquired deferred leasing costs was $5.9 million and $5.9 million for the three months ended June 30, 2019 and 2018, respectively, and $12.1 million and $12.1 million for the six months ended June 30, 2019 and 2018, respectively. Amortization expense related to acquired lease intangibles was $2.6 million and $3.0 million for the three months ended June 30, 2019 and 2018, respectively, and $5.8 million and $6.4 million for the six months ended June 30, 2019 and 2018, respectively. Amortizing acquired intangible assets and liabilities consisted of the following as of June 30, 2019 and December 31, 2018 (amounts in thousands):
Rental revenue related to the amortization of below-market leases, net of above-market leases, was $1.7 million and $1.5 million for the three months ended June 30, 2019 and 2018, respectively, and $4.1 million and $2.7 million for the six months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, we had goodwill of $491.5 million. Goodwill was allocated $227.5 million to the observatory reportable segment and $264.0 million to the real estate segment.
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Debt consisted of the following as of June 30, 2019 and December 31, 2018 (amounts in thousands):
______________
Principal Payments Aggregate required principal payments at June 30, 2019 are as follows (amounts in thousands):
Deferred Financing Costs Deferred financing costs, net, consisted of the following at June 30, 2019 and December 31, 2018 (amounts in thousands):
At June 30, 2019 and December 31, 2018, $5.2 million and $6.3 million, respectively, of net deferred financing costs associated with the unsecured revolving credit facility was included in deferred costs, net on the condensed consolidated balance sheet. Amortization expense related to deferred financing costs was $1.0 million and $1.0 million for the three months ended June 30, 2019 and 2018, respectively, and $2.0 million and $2.0 million for the six months ended June 30, 2019 and 2018, respectively. Unsecured Revolving Credit and Term Loan Facility During August 2017, through the Operating Partnership, we entered into an amended and restated senior unsecured revolving credit and term loan facility (the “Facility”) with Bank of America, N.A., as administrative agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC as Joint Lead Arrangers and Joint Bookrunners, Wells Fargo, National Association and Capital One, National Association, as co-syndication agents, and the lenders party thereto. The Facility is in the original principal amount of up to $1.365 billion, which consists of a $1.1 billion revolving credit facility and a $265 million term loan facility. We may request the Facility be increased through one or more increases in the revolving credit facility or one or more increases in the term loan facility or the addition of new pari passu term loan tranches, for a maximum aggregate principal amount not to exceed $1.75 billion. The initial maturity of the unsecured revolving credit facility is August 2021. We have the option to extend the initial term for up to two additional 6-month periods, subject to certain conditions, including the payment of an extension fee equal to 0.0625% and 0.075% of the then outstanding commitments under the unsecured revolving credit facility on the first and the second extensions, respectively. The term loan facility matures on August 2022. We may prepay the loans under the Facility at any time, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of Eurodollar Rate borrowings. Exchangeable Senior Notes Issued in August 2014, the $250.0 million 2.625% Exchangeable Senior Notes (“2.625% Exchangeable Senior Notes”) are due August 15, 2019. The 2.625% Exchangeable Senior Notes will be exchangeable into cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at our election. We have provided notice that we will settle the principal amount of the 2.625% Exchangeable Senior Notes in cash. As of June 30, 2019, the exchange rate of the 2.625% Exchangeable Senior Notes was 52.1451 shares per $1,000 principal amount of notes (equivalent to an initial exchange price of approximately $19.18 per share of Class A common stock), subject to adjustment, as described in the related indenture governing the 2.625% Exchangeable Senior Notes. For the three and six months ended June 30, 2019, total interest expense related to the 2.625% Exchangeable Senior Notes was $2.5 million and $4.9 million, respectively, consisting of (i) the contractual interest expense of $1.7 million and $3.3 million, respectively, (ii) the additional non-cash interest expense of $0.6 million and $1.3 million, respectively, relating to the accretion of the debt discount and (iii) the amortization of deferred financing costs of $0.2 million and $0.3 million, respectively. For the three and six months ended June 30, 2018, total interest expense related to the 2.625% Exchangeable Senior Notes was $2.5 million and $4.9 million, respectively, consisting of (i) the contractual interest expense of $1.7 million and $3.3 million, respectively, (ii) the additional non-cash interest expense of $0.6 million and $1.3 million, respectively, relating to the accretion of the debt discount, and (iii) the amortization of deferred financing costs of $0.2 million and $0.3 million, respectively.
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Accounts Payable and Accrued Expenses |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable and Accrued Expenses | Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consisted of the following as of June 30, 2019 and December 31, 2018 (amounts in thousands):
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Financial Instruments and Fair Values |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments and Fair Values | Financial Instruments and Fair Values Derivative Financial Instruments We use derivative financial instruments primarily to manage interest rate risk and such derivatives are not considered speculative. These derivative instruments are typically in the form of interest rate swap and forward agreements and the primary objective is to minimize interest rate risks associated with investing and financing activities. The counterparties of these arrangements are major financial institutions with which we may also have other financial relationships. We are exposed to credit risk in the event of non-performance by these counterparties; however, we currently do not anticipate that any of the counterparties will fail to meet their obligations. We have agreements with our derivative counterparties that contain a provision where if we either default or are capable of being declared in default on any of our indebtedness, then we could also be declared in default on our derivative obligations. As of June 30, 2019, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $23.0 million. If we had breached any of these provisions at June 30, 2019, we could have been required to settle our obligations under the agreements at their termination value of $23.0 million. As of June 30, 2019 and December 31, 2018, we had interest rate LIBOR swaps with an aggregate notional value of $515.0 million and $515.0 million, respectively. The notional value does not represent exposure to credit, interest rate or market risks. As of June 30, 2019, the fair value of our derivative instruments amounted to $(22.9) million which is included in accounts payable and accrued expenses on the condensed consolidated balance sheet. As of December 31, 2018, the fair value of our derivative instruments amounted to $2.5 million which is included in prepaid expenses and other assets and $(5.2) million which is included in accounts payable and accrued expenses on the condensed consolidated balance sheet. These interest rate swaps have been designated as cash flow hedges and hedge the variability in future cash flows associated with our existing variable-rate term loan facility and with a forecast refinancing of our exchangeable senior notes. As of June 30, 2019 and 2018, our cash flow hedges are deemed highly effective and a net unrealized gain (loss) of $(12.2) million and $2.3 million for the three months ended June 30, 2019 and 2018, respectively, and a net unrealized gain (loss) of $(19.4) million and $7.1 million for the six months ended June 30, 2019 and 2018, respectively, relating to both active and terminated hedges of interest rate risk, are reflected in the condensed consolidated statements of comprehensive income. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the debt. We estimate that $(3.8) million net loss of the current balance held in accumulated other comprehensive income (loss) will be reclassified into interest expense within the next 12 months. The table below summarizes the terms of agreements and the fair values of our derivative financial instruments as of June 30, 2019 and December 31, 2018 (dollar amounts in thousands):
The table below shows the effect of our derivative financial instruments designated as cash flow hedges on accumulated other comprehensive income (loss) for the three and six months ended June 30, 2019 and 2018 (amounts in thousands):
The table below shows the effect of our derivative financial instruments designated as cash flow hedges on the condensed consolidated statements of income for the three and six months ended June 30, 2019 and 2018 (amounts in thousands):
Fair Valuation The estimated fair values at June 30, 2019 and December 31, 2018 were determined by management, using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts we could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The fair value of our senior unsecured notes - exchangeable was derived from quoted prices in active markets and is classified as Level 2 since trading volumes are low. The fair value of derivative instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. Although the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by ourselves and our counterparties. The impact of such credit valuation adjustments, determined based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of our derivatives were classified as Level 2 of the fair value hierarchy. The fair value of our mortgage notes payable, senior unsecured notes - Series A, B, C, D, E and F, unsecured term loan facility and ground lease liabilities which are determined using Level 3 inputs, are estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made to us. The following tables summarize the carrying and estimated fair values of our financial instruments as of June 30, 2019 and December 31, 2018 (amounts in thousands):
Disclosure about the fair value of financial instruments is based on pertinent information available to us as of June 30, 2019 and December 31, 2018. Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.
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Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases Lessor We lease various spaces to tenants over terms ranging from one to 21 years. Certain leases have renewal options for additional terms. The leases provide for base monthly rentals and reimbursements for real estate taxes, escalations linked to the consumer price index or common area maintenance known as operating expense escalation. Operating expense reimbursements are reflected in our June 30, 2019 condensed consolidated statement of income as rental revenue and in our June 30, 2018 condensed consolidated statement of income as tenant expense reimbursement. Rental revenue includes fixed and variable payments. Fixed payments primarily relate to base rent and variable payments primarily relate to tenant expense reimbursements for certain property operating costs. The components of rental revenue for the three and six months ended June 30, 2019 are as follows (amounts in thousands):
As of June 30, 2019, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2038 (amounts in thousands):
As of December 31, 2018, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2038 (amounts in thousands):
The above future minimum lease payments exclude tenant recoveries, amortization of deferred rent receivables and the net accretion of above-below-market lease intangibles. Some leases are subject to termination options generally upon payment of a termination fee. The preceding tables are prepared assuming such options are not exercised. Lessee We make payments under ground leases related to three of our properties. Minimum rent is expensed on a straight-line basis over the non-cancellable term of the leases. The ground leases are due to expire between the years 2050 and 2077, inclusive of extension options, and have no variable payments or residual value guarantees. As of June 30, 2019, our balance sheet included $29.4 million and $29.4 million in right-of-use assets and lease liabilities, respectively, that are associated with these three ground leases. The rate implicit in the lease was not determinable for any of these ground leases and accordingly, we measured the related lease liabilities using discount rates based on estimated incremental borrowing rates. Our estimates required significant judgment given that the lease terms of our ground leases are significantly longer than the terms of borrowings on a fully-collateralized basis and considered factors such as U.S. Treasury rates and our own credit rating. Information relating to the measurement of our lease liabilities as of June 30, 2019 are as follows:
Future minimum lease payments to be paid over the terms of the leases as of June 30, 2019 are as follows (amounts in thousands):
Future minimum lease payments to be paid over the terms of the leases as of December 31, 2018 are as follows (amounts in thousands):
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Leases | Leases Lessor We lease various spaces to tenants over terms ranging from one to 21 years. Certain leases have renewal options for additional terms. The leases provide for base monthly rentals and reimbursements for real estate taxes, escalations linked to the consumer price index or common area maintenance known as operating expense escalation. Operating expense reimbursements are reflected in our June 30, 2019 condensed consolidated statement of income as rental revenue and in our June 30, 2018 condensed consolidated statement of income as tenant expense reimbursement. Rental revenue includes fixed and variable payments. Fixed payments primarily relate to base rent and variable payments primarily relate to tenant expense reimbursements for certain property operating costs. The components of rental revenue for the three and six months ended June 30, 2019 are as follows (amounts in thousands):
As of June 30, 2019, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2038 (amounts in thousands):
As of December 31, 2018, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2038 (amounts in thousands):
The above future minimum lease payments exclude tenant recoveries, amortization of deferred rent receivables and the net accretion of above-below-market lease intangibles. Some leases are subject to termination options generally upon payment of a termination fee. The preceding tables are prepared assuming such options are not exercised. Lessee We make payments under ground leases related to three of our properties. Minimum rent is expensed on a straight-line basis over the non-cancellable term of the leases. The ground leases are due to expire between the years 2050 and 2077, inclusive of extension options, and have no variable payments or residual value guarantees. As of June 30, 2019, our balance sheet included $29.4 million and $29.4 million in right-of-use assets and lease liabilities, respectively, that are associated with these three ground leases. The rate implicit in the lease was not determinable for any of these ground leases and accordingly, we measured the related lease liabilities using discount rates based on estimated incremental borrowing rates. Our estimates required significant judgment given that the lease terms of our ground leases are significantly longer than the terms of borrowings on a fully-collateralized basis and considered factors such as U.S. Treasury rates and our own credit rating. Information relating to the measurement of our lease liabilities as of June 30, 2019 are as follows:
Future minimum lease payments to be paid over the terms of the leases as of June 30, 2019 are as follows (amounts in thousands):
Future minimum lease payments to be paid over the terms of the leases as of December 31, 2018 are as follows (amounts in thousands):
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Commitments and Contingencies |
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Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Proceedings Except as described below, as of June 30, 2019, we were not involved in any material litigation, nor, to our knowledge, was any material litigation threatened against us or our properties, other than routine litigation arising in the ordinary course of business such as disputes with tenants. We believe that the costs and related liabilities, if any, which may result from such actions will not materially affect our condensed consolidated financial position, operating results or liquidity. As previously disclosed, in October 2014, 12 former investors in Empire State Building Associates L.L.C. (“ESBA”), which prior to the initial public offering of our company (the "Offering"), owned the fee title to the Empire State Building, filed an arbitration with the American Arbitration Association against Peter L. Malkin, Anthony E. Malkin, Thomas N. Keltner, Jr., and our subsidiary ESRT MH Holdings LLC, the former supervisor of ESBA, as respondents. The statement of claim (also filed later in federal court in New York for the expressed purpose of tolling the statute of limitations) alleges breach of fiduciary duty and related claims in connection with the Offering and formation transactions and seeks monetary damages and declaratory relief. These investors had opted out of a prior class action bringing similar claims that was settled with court approval. The respondents filed an answer and counterclaims. In March 2015, the federal court action was stayed on consent of all parties pending the arbitration. Arbitration hearings for a select number of sessions started in May 2016 and concluded in August 2018. Post-hearing briefing is currently scheduled to be completed by January 2020. The respondents believe the allegations in the arbitration are entirely without merit, and they intend to continue to defend them vigorously. Pursuant to indemnification agreements which were made with our directors, executive officers and chairman emeritus as part of our formation transactions, Anthony E. Malkin, Peter L. Malkin and Thomas N. Keltner, Jr. have defense and indemnity rights from us with respect to this arbitration. Unfunded Capital Expenditures At June 30, 2019, we estimate that we will incur approximately $93.9 million of capital expenditures (including tenant improvements and leasing commissions) on our properties pursuant to existing lease agreements. We expect to fund these capital expenditures with operating cash flow, additional property level mortgage financings, our unsecured credit facility, cash on hand and other borrowings. Future property acquisitions may require substantial capital investments for refurbishment and leasing costs. We expect that these financing requirements will be met in a similar fashion. Concentration of Credit Risk Financial instruments that subject us to credit risk consist primarily of cash and cash equivalents, restricted cash, short-term investments, tenant and other receivables and deferred rent receivables. At June 30, 2019, we held on deposit at various major financial institutions cash and cash equivalents, restricted cash and short-term investment balances in excess of amounts insured by the Federal Deposit Insurance Corporation. Asset Retirement Obligations We are required to accrue costs that we are legally obligated to incur on retirement of our properties which result from acquisition, construction, development and/or normal operation of such properties. Retirement includes sale, abandonment or disposal of a property. Under that standard, a conditional asset retirement obligation represents a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within a company’s control and a liability for a conditional asset retirement obligation must be recorded if the fair value of the obligation can be reasonably estimated. Environmental site assessments and investigations have identified asbestos or asbestos-containing building materials in certain of our properties. As of June 30, 2019, management has no plans to remove or alter these properties in a manner that would trigger federal and other applicable regulations for asbestos removal, and accordingly, the obligations to remove the asbestos or asbestos-containing building materials from these properties have indeterminable settlement dates. As such, we are unable to reasonably estimate the fair value of the associated conditional asset retirement obligation. However, ongoing asbestos abatement, maintenance programs and other required documentation are carried out as required and related costs are expensed as incurred. Other Environmental Matters Certain of our properties have been inspected for soil contamination due to pollutants, which may have occurred prior to our ownership of these properties or subsequently in connection with its development and/or its use. Required remediation to such properties has been completed, and as of June 30, 2019, management believes that there are no obligations related to environmental remediation other than maintaining the affected sites in conformity with the relevant authority’s mandates and filing the required documents. All such maintenance costs are expensed as incurred. We expect that resolution of the environmental matters relating to the above will not have a material impact on our business, assets, consolidated financial condition, results of operations or liquidity. However, we cannot be certain that we have identified all environmental liabilities at our properties, that all necessary remediation actions have been or will be undertaken at our properties or that we will be indemnified, in full or at all, in the event that such environmental liabilities arise. Insurance Coverage We carry insurance coverage on our properties of types and in amounts with deductibles that we believe are in line with coverage customarily obtained by owners of similar properties.
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Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | Equity Shares and Units An operating partnership unit of the Operating Partnership ("OP Unit") and a share of our common stock have essentially the same economic characteristics as they receive the same per unit profit distributions of the Operating Partnership. On the one-year anniversary of issuance, an OP Unit may be tendered for redemption for cash; however, we have sole and absolute discretion, and sufficient authorized common stock, to exchange OP Units for shares of common stock on a one-for-one basis instead of cash. On May 16, 2019, the Empire State Realty Trust, Inc. Empire State Realty OP, L.P. 2019 Equity Incentive Plan (“2019 Plan”) was approved by our shareholders. The 2019 Plan provides for grants to directors, employees and consultants of our company and operating partnership, including options, restricted stock, restricted stock units, stock appreciation rights, performance awards, dividend equivalents and other equity-based awards. An aggregate of approximately 11.0 million shares of our common stock are authorized for issuance under awards granted pursuant to the 2019 Plan. We will not issue any new equity awards under the First Amended and Restated Empire State Realty Trust, Inc. and Empire State Realty OP, L.P. 2013 Equity Incentive Plan ("2013 Plan", and collectively with the 2019 Plan, "the Plans"). The shares of Class A common stock underlying any awards under the 2019 Plan and the 2013 Plan that are forfeited, canceled or otherwise terminated, other than by exercise, will be added back to the shares of Class A common stock available for issuance under the 2019 Plan. Shares tendered or held back upon exercise of a stock option or settlement of an award under the 2019 Plan or the 2013 Plan to cover the exercise price or tax withholding and shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right upon exercise thereof, will not be added back to the shares of Class A common stock available for issuance under the 2019 Plan. In addition, shares of Class A common stock repurchased on the open market will not be added back to the shares of Class A common stock available for issuance under the 2019 Plan. Long-term incentive plan ("LTIP") units are a special class of partnership interests in the Operating Partnership. Each LTIP unit awarded will be deemed equivalent to an award of one share of stock under the Plans, reducing the availability for other equity awards on a one-for-one basis. The vesting period for LTIP units, if any, will be determined at the time of issuance. Under the terms of the LTIP units, the Operating Partnership will revalue for tax purposes its assets upon the occurrence of certain specified events, and any increase in valuation from the time of grant until such event will be allocated first to the holders of LTIP units to equalize the capital accounts of such holders with the capital accounts of OP unitholders. Subject to any agreed upon exceptions, once vested and having achieved parity with OP unitholders, LTIP units are convertible into OP Units in the Operating Partnership on a one-for-one basis. LTIP units subject to time based vesting, whether vested or not, receive the same per unit distributions as OP units, which equal per share dividends (both regular and special) on our common stock. Performance based LTIP units receive 10% of such distributions currently, unless and until such LTIP units are earned based on performance, at which time they will receive the accrued and unpaid 90% and will commence receiving 100% of such distributions thereafter. The following is net income attributable to common stockholders and the issuance of our Class A shares in exchange for the conversion of OP Units into common stock (amounts in thousands):
As of June 30, 2019, there were 304,891,781 OP Units outstanding, of which 178,020,905, or 58.4%, were owned by us and 126,870,876, or 41.6%, were owned by other partners, including certain directors, officers and other members of executive management. Dividends and Distributions Total dividends paid to common stockholders were $18.7 million and $37.2 million for the three and six months ended June 30, 2019, respectively, and $17.6 million and $34.8 million for the three and six months ended June 30, 2018, respectively. Total distributions paid to OP unitholders, excluding inter-company distributions, were $13.3 million and $26.5 million for the three and six months ended June 30, 2019, respectively, and $14.3 million and $28.6 million for the three and six months ended June 30, 2018, respectively. Total distributions paid to preferred unitholders were $0.2 million and $0.5 million for the three and six months ended June 30, 2019, respectively and $0.2 million and $0.5 million for the three and six months ended June 30, 2018, respectively. Incentive and Share-Based Compensation The Plans provide for grants to directors, employees and consultants consisting of stock options, restricted stock, dividend equivalents, stock payments, performance shares, LTIP units, stock appreciation rights and other incentive awards. An aggregate of 11.0 million shares of our common stock is authorized for issuance under awards granted pursuant to the 2019 Plan, and as of June 30, 2019, 10.9 million shares of common stock remain available for future issuance. In March 2019, we made grants of LTIP units to executive officers under the 2013 Plan. At such time, we granted to executive officers a total of 461,693 LTIP units that are subject to time-based vesting and 1,806,520 LTIP units that are subject to performance-based vesting, with fair market values of $6.4 million for the time-based vesting awards and $12.8 million for the performance-based vesting awards. In March 2019 we made grants of LTIP units and restricted stock to certain other employees under the 2013 Plan. At such time, we granted to certain other employees a total of 61,432 LTIP units and 69,358 shares of restricted stock that are subject to time-based vesting and 113,383 LTIP units that are subject to performance-based vesting, with fair market values of $2.0 million for the time-based vesting awards and $0.9 million for the performance-based vesting awards. The awards subject to time-based vesting vest ratably over four years from January 1, 2019, subject generally to the grantee's continued employment. The first installment vests on January 1, 2020 and the remainder will vest thereafter in three equal annual installments. The vesting of the LTIP units subject to performance-based vesting is based on the achievement of relative total stockholder return hurdles over a three-year performance period, commencing on January 1, 2019. Following the completion of the three-year performance period, our compensation committee will determine the number of LTIP units to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the award grant. These units then vest in two installments, with the first installment vesting on January 1, 2022 and the second installment vesting on January 1, 2023, subject generally to the grantee's continued employment on those dates. Our named executive officers can elect to receive their annual incentive bonus in any combination of (i) cash or vested LTIP's at the face amount of such bonus or (ii) time-vesting LTIP's which would vest over three years, subject to continued employment, at 125% of such face amount. In March 2019, we made grants of LTIP units to executive officers under the 2013 Plan in connection with the 2018 bonus election program. We granted to executive officers a total of 334,952 LTIP units that are subject to time based vesting with a fair market value of $4.6 million. Of these LTIP units, 26,056 LTIP units vested immediately on the grant date and 308,896 LTIP units vest ratably over three years from January 1, 2019, subject generally to the grantee's continued employment. The first installment vests on January 1, 2020 and the remainder will vest thereafter in two equal annual installments. In May 2019, we made grants of LTIP units to our non-employee directors under the 2019 Plan. At such time, we granted a total of 70,746 LTIP units that are subject to time-based vesting with fair market values of $1.0 million. The awards vest ratably over three years from the date of the grant, subject generally to the director's continued service on our Board of Directors. Share-based compensation is measured at the fair value of the award on the date of grant and recognized as an expense on a straight-line basis over the vesting period. For the performance-based LTIP units, the fair value of the awards was estimated using a Monte Carlo Simulation model and discounted for the restriction period during which the LTIP units cannot be redeemed or transferred and the uncertainty regarding if, and when, the book capital account of the LTIP units will equal that of the common units. Our stock price, along with the prices of the comparative indexes, is assumed to follow the Geometric Brownian Motion Process. Geometric Brownian Motion is a common assumption when modeling in financial markets, as it allows the modeled quantity (in this case the stock price) to vary randomly from its current value and take any value greater than zero. The volatilities of the returns on our stock price and the comparative indexes were estimated based on implied volatilities and historical volatilities using a six-year look-back period. The expected growth rate of the stock prices over the performance period is determined with consideration of the risk free rate as of the grant date. For LTIP unit awards that are time-based, the fair value of the awards was estimated based on the fair value of our stock at the grant date discounted for the restriction period during which the LTIP units cannot be redeemed or transferred and the uncertainty regarding if, and when, the book capital account of the LTIP units will equal that of the common units. For restricted stock awards that are time-based, we estimate the stock compensation expense based on the fair value of the stock at the grant date. LTIP units and restricted stock issued during the six months ended June 30, 2019 were valued at $27.9 million. The weighted-average per unit or share fair value was $9.55 for grants issued in 2019. The per unit or share granted in 2019 was estimated on the respective dates of grant using the following assumptions: an expected life from 2.0 to 5.3 years, a dividend rate of 2.40%, a risk-free interest rate from 2.48% to 2.63%, and an expected price volatility from 17.0% to 22.0%. No other stock options, dividend equivalents, or stock appreciation rights were issued or outstanding in 2019. The following is a summary of restricted stock and LTIP unit activity for the six months ended June 30, 2019:
The LTIP unit and restricted stock awards will immediately vest upon the later of (i) the date the grantee attains the age of 60 and (ii) the date on which grantee has first completed ten years of continuous service with our company or its affiliates. For award agreements that qualify, we recognize noncash compensation expense on the grant date for the time-based awards and ratably over the vesting period for the performance-based awards, and accordingly, we recognized $0.2 million and $1.5 million for the three and six months ended June 30, 2019, respectively, and $0.1 million and $1.3 million for the three and six months ended June 30, 2018, respectively. Unrecognized compensation expense was $1.6 million at June 30, 2019, which will be recognized over a weighted average period of 2.5 years. For the remainder of the LTIP unit and restricted stock awards, we recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized noncash compensation expense of $6.1 million and $10.2 million for the three and six months ended June 30, 2019, respectively, and $4.5 million and $7.9 million for the three and six months ended June 30, 2018, respectively. Unrecognized compensation expense was $42.7 million at June 30, 2019, which will be recognized over a weighted average period of 2.5 years. Earnings Per Share Earnings per share for the three and six months ended June 30, 2019 and 2018 is computed as follows (amounts in thousands, except per share amounts):
There were 411,019 and 205,851 antidilutive shares and LTIP units for the three and six months ended June 30, 2019, respectively, and 414,801 and 417,074 antidilutive shares and LTIP units for the three and six months ended June 30, 2018, respectively.
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Related Party Transactions |
6 Months Ended |
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Jun. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Supervisory Fee Revenue We earned supervisory fees from entities affiliated with Anthony E. Malkin, our Chairman and Chief Executive Officer, of $0.3 million and $0.3 million for the three months ended June 30, 2019 and 2018, respectively, and $0.5 million and $0.6 million for the six months ended June 30, 2019 and 2018, respectively. These fees are included within third-party management and other fees. Property Management Fee Revenue We earned property management fees from entities affiliated with Anthony E. Malkin of $0.1 million and $0.1 million for the three months ended June 30, 2019 and 2018, respectively, and $0.2 million and $0.2 million for the six months ended June 30, 2019 and 2018, respectively. These fees are included within third-party management and other fees. Other We receive rent generally at market rental rate for 5,351 square feet of leased space from entities affiliated with Anthony E. Malkin at one of our properties. Under the lease, the tenant has the right to cancel such lease without special payment on 90 days’ notice. We also have a shared use agreement with such tenant, to occupy a portion of the leased premises as the office location for Peter L. Malkin, our chairman emeritus and employee, utilizing approximately 15% of the space, for which we pay to such tenant an allocable pro rata share of the cost. We also have agreements with these entities and excluded properties and businesses to provide them with general computer-related support services. Total revenue aggregated $0.1 million and $0.1 million for the three months ended June 30, 2019 and 2018, respectively, and $0.2 million and $0.2 million for the six months ended June 30, 2019 and 2018, respectively. One of our directors, James D. Robinson IV, is a general partner in an investment fund, which owns more than a 10% economic and voting interest in one of our tenants, OnDeck Capital, with an annualized rent of $4.6 million as of June 30, 2019.
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Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting We have identified two reportable segments: (1) real estate and (2) observatory. Our real estate segment includes all activities related to the ownership, management, operation, acquisition, redevelopment, repositioning and disposition of our traditional real estate assets. Our observatory segment includes the operation of the 86th and 102nd floor observatories at the Empire State Building. These two lines of businesses are managed separately because each business requires different support infrastructures, provides different services and has dissimilar economic characteristics such as investments needed, stream of revenues and marketing strategies. We account for intersegment sales and rent as if the sales or rent were to third parties, that is, at current market prices. The following tables provide components of segment profit for each segment for the three and six months ended June 30, 2019 and 2018 (amounts in thousands):
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events None.
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Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Recently Issued or Adopted Accounting Standards | We adopted FASB Topic 842, Lease Accounting, using the modified retrospective approach on January 1, 2019 and elected to apply the transition provisions of the standard at adoption. As such, the prior period amounts presented under Topic 840 were not restated to conform with the 2019 presentation. We adopted the practical expedient in Topic 842, which allows us to avoid separating lease and non-lease rental income. Consequently, all rental income earned pursuant to tenant leases in 2019 is reflected as one category, “Rental Revenue,” in the 2019 consolidated statement of income. Topic 842 also requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The adoption of this standard resulted in the recognition of right-of-use assets and lease liabilities for our operating leases on our balance sheet of approximately $29.5 million. In addition, under Topic 842, lessors may only capitalize incremental direct leasing costs. As a result, we no longer capitalize our non-contingent leasing costs and instead expense these costs as incurred. These costs totaled $2.2 million for the six months ended June 30, 2019. During August 2018, the FASB issued Accounting Standards Update ("ASU") No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force), which contain amendments that align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). Accordingly, for entities in a hosting arrangement that is a service contract, costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed. The amendments in ASU No. 2018-15 also require the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments is permitted, including adoption in any interim period. The amendments in ASU No. 2018-15 should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are evaluating the impact of adopting this new accounting standard on our consolidated financial statements. During January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which contain amendments that modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Because these amendments eliminate Step 2 from the goodwill impairment test, they should reduce the cost and complexity of evaluating goodwill for impairment. ASU No. 2017-04 should be applied on a prospective basis and the amendments adopted for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are evaluating the impact of adopting this new accounting standard on our consolidated financial statements. During June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which contains amendments that replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU No. 2016-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Earlier adoption as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, is permitted. The amendments must be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified retrospective approach). We anticipate the adoption of this new accounting standard will have no impact on our consolidated financial statements. During February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In addition, lessors may only capitalize incremental direct leasing costs. Subsequent amendments to ASU No. 2016-02 also provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component provided that (1) the timing and pattern of transfer are the same for the nonlease components and associated lease component and (2) the lease component, if accounted separately, would be classified as an operating lease. We adopted this standard and related amendments on January 1, 2019 and elected the available practical expedients. Such adoption resulted in the recognition of right-of-use assets and lease liabilities for our operating leases on our balance sheet of approximately recognition of right-of-use assets and lease liabilities for our operating leases on our balance sheet of approximately $29.5 million.
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Basis of Quarterly Presentation | The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), for interim financial information, and with the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments and eliminations (including intercompany balances and transactions), consisting of normal recurring adjustments, considered necessary for the fair presentation of the financial statements have been included.
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Principles of Consolidation | The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the corresponding full years. These financial statements should be read in conjunction with the financial statements and accompanying notes included in the financial statements for the year ended December 31, 2018 contained in our Annual Report on Form 10-K. We do not consider our business to be subject to material seasonal fluctuations, except that our observatory business is subject to tourism seasonality. |
Principles of Consolidation for Variable Interest Entities | We consolidate entities in which we have a controlling financial interest. In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members. For variable interest entities ("VIE"), we consolidate the entity if we are deemed to have a variable interest in the entity and through that interest we are deemed the primary beneficiary. The primary beneficiary of a VIE is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. The primary beneficiary is required to consolidate the VIE. The Operating Partnership is a variable interest entity of our company, Empire State Realty Trust, Inc. As the Operating Partnership is already consolidated in the financial statements of Empire State Realty Trust, Inc., the identification of this entity as a variable interest entity has no impact on our consolidated financial statements. We will assess the accounting treatment for each investment we may have in the future. This assessment will include a review of each entity’s organizational agreement to determine which party has what rights and whether those rights are protective or participating. For all VIEs, we will review such agreements in order to determine which party has the power to direct the activities that most significantly impact the entity’s economic performance and benefit. In situations where we or our partner could approve, among other things, the annual budget, or leases that cover more than a nominal amount of space relative to the total rentable space at each property, we would not consolidate the investment as we consider these to be substantive participation rights that result in shared power of the activities that would most significantly impact the performance and benefit of such joint venture investment. A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling interests are required to be presented as a separate component of equity in the condensed consolidated balance sheets and in the condensed consolidated statements of income by requiring earnings and other comprehensive income to be attributed to controlling and non-controlling interests.
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Accounting Estimates | The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to use estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Significant items subject to such estimates and assumptions include allocation of the purchase price of acquired real estate properties among tangible and intangible assets, determination of the useful life of real estate properties and other long-lived assets, valuation and impairment analysis of commercial real estate properties, right of use assets and other long-lived assets, estimate of tenant expense reimbursements, valuation of the allowance for doubtful accounts, and valuation of derivative instruments, ground lease liabilities, senior unsecured notes, mortgage notes payable, unsecured term loan and revolving credit facilities, and equity based compensation. These estimates are prepared using management’s best judgment, after considering past, current, and expected events and economic conditions. Actual results could differ from those estimates. |
Deferred Costs, Acquired Lease Intangibles and Goodwill (Tables) |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred costs, net | Deferred costs, net, consisted of the following as of June 30, 2019 and December 31, 2018 (amounts in thousands):
Deferred financing costs, net, consisted of the following at June 30, 2019 and December 31, 2018 (amounts in thousands):
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Amortizing acquired intangible assets and liabilities | Amortizing acquired intangible assets and liabilities consisted of the following as of June 30, 2019 and December 31, 2018 (amounts in thousands):
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt | Debt consisted of the following as of June 30, 2019 and December 31, 2018 (amounts in thousands):
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(6) At June 30, 2019, we were in compliance with all debt covenants.
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Aggregate required principal payments | Aggregate required principal payments at June 30, 2019 are as follows (amounts in thousands):
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Deferred financing costs, net | Deferred costs, net, consisted of the following as of June 30, 2019 and December 31, 2018 (amounts in thousands):
Deferred financing costs, net, consisted of the following at June 30, 2019 and December 31, 2018 (amounts in thousands):
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Accounts Payable and Accrued Expenses (Tables) |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts payable and accrued expenses | Accounts payable and accrued expenses consisted of the following as of June 30, 2019 and December 31, 2018 (amounts in thousands):
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Financial Instruments and Fair Values (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the terms of the agreement and the fair value of derivative financial instrument | The table below summarizes the terms of agreements and the fair values of our derivative financial instruments as of June 30, 2019 and December 31, 2018 (dollar amounts in thousands):
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Effect of our derivative financial instruments designated as cash flow hedges on accumulated other comprehensive income (loss) | The table below shows the effect of our derivative financial instruments designated as cash flow hedges on accumulated other comprehensive income (loss) for the three and six months ended June 30, 2019 and 2018 (amounts in thousands):
The table below shows the effect of our derivative financial instruments designated as cash flow hedges on the condensed consolidated statements of income for the three and six months ended June 30, 2019 and 2018 (amounts in thousands):
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Summary carrying and estimated fair values of our financial instruments | The following tables summarize the carrying and estimated fair values of our financial instruments as of June 30, 2019 and December 31, 2018 (amounts in thousands):
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Leases (Tables) |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Rental Revenue | The components of rental revenue for the three and six months ended June 30, 2019 are as follows (amounts in thousands):
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Schedule of Future Contractual Minimum Lease Payments On Non-Cancellable Operating Leases To Be Received | As of June 30, 2019, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2038 (amounts in thousands):
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Schedule of Future Contractual Minimum Lease Payments On Non-Cancellable Operating Leases To Be Received | As of December 31, 2018, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2038 (amounts in thousands):
Future minimum lease payments to be paid over the terms of the leases as of December 31, 2018 are as follows (amounts in thousands):
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Schedule of Information Relating to the Measurement of Lease Liabilities | Information relating to the measurement of our lease liabilities as of June 30, 2019 are as follows:
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Schedule of Future Minimum Lease Payments | Future minimum lease payments to be paid over the terms of the leases as of June 30, 2019 are as follows (amounts in thousands):
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Equity (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to common stockholders and the issuance of our Class A shares in exchange for the conversion of OP Units into common stock | The following is net income attributable to common stockholders and the issuance of our Class A shares in exchange for the conversion of OP Units into common stock (amounts in thousands):
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Summary of restricted stock and LTIP unit activity | The following is a summary of restricted stock and LTIP unit activity for the six months ended June 30, 2019:
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Earnings per share | Earnings per share for the three and six months ended June 30, 2019 and 2018 is computed as follows (amounts in thousands, except per share amounts):
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Segment Reporting (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of segment profit for each segment | The following tables provide components of segment profit for each segment for the three and six months ended June 30, 2019 and 2018 (amounts in thousands):
|
Deferred Costs, Acquired Lease Intangibles and Goodwill - Deferred Costs, Net (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Leasing costs | $ 182,975 | $ 178,120 |
Total deferred costs, gross amount | 443,730 | 444,806 |
Less: accumulated amortization | (220,177) | (209,839) |
Total deferred costs, net, excluding net deferred financing costs | 223,553 | 234,967 |
Acquired in-place lease value and deferred leasing costs | ||
Finite-Lived Intangible Assets [Line Items] | ||
Acquired finite-lived intangible assets | 210,006 | 214,550 |
Acquired above-market leases | ||
Finite-Lived Intangible Assets [Line Items] | ||
Acquired finite-lived intangible assets | $ 50,749 | $ 52,136 |
Deferred Costs, Acquired Lease Intangibles and Goodwill - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Deferred Costs [Line Items] | |||||
Amortization expense related to deferred leasing costs | $ 5,900 | $ 5,900 | $ 12,100 | $ 12,100 | |
Revenue related to amortization of acquired above- and below-market leases, net | 1,700 | 1,500 | 4,098 | 2,719 | |
Goodwill | 491,479 | 491,479 | $ 491,479 | ||
Observatory | |||||
Deferred Costs [Line Items] | |||||
Goodwill | 227,500 | 227,500 | |||
Real estate | |||||
Deferred Costs [Line Items] | |||||
Goodwill | 264,000 | 264,000 | |||
Lease agreements | |||||
Deferred Costs [Line Items] | |||||
Amortization expense related to acquired lease intangibles | 2,600 | $ 3,000 | 5,800 | $ 6,400 | |
Unsecured revolving credit facility | Unsecured term loan facility | |||||
Deferred Costs [Line Items] | |||||
Net deferred financing costs | $ 5,200 | $ 5,200 | $ 6,300 |
Deferred Costs, Acquired Lease Intangibles and Goodwill - Amortizing Acquired Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Acquired below-market ground leases | ||
Acquired below-market ground leases | $ 396,916 | $ 396,916 |
Less: accumulated amortization | (40,434) | (36,518) |
Acquired below-market ground leases, net | 356,482 | 360,398 |
Acquired below-market leases | ||
Acquired below-market leases | (114,408) | (118,462) |
Less: accumulated amortization | 68,757 | 66,012 |
Acquired below-market leases, net | $ (45,651) | $ (52,450) |
Debt - Aggregate Required Principal Payments (Details) - Mortgages - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Amortization | ||
2019, amortization | $ 1,913 | |
2020, amortization | 3,938 | |
2021, amortization | 4,090 | |
2022, amortization | 5,628 | |
2023, amortization | 7,876 | |
Thereafter, amortization | 33,868 | |
Total, amortization | 57,313 | |
Maturities | ||
2019, maturities | 250,000 | |
2020, maturities | 0 | |
2021, maturities | 0 | |
2022, maturities | 265,000 | |
2023, maturities | 0 | |
Thereafter, maturities | 1,355,422 | |
Total, maturities | 1,870,422 | |
Total long term debt | ||
2019 | 251,913 | |
2020 | 3,938 | |
2021 | 4,090 | |
2022 | 270,628 | |
2023 | 7,876 | |
Thereafter | 1,389,290 | |
Total | $ 1,927,735 | $ 1,929,612 |
Debt - Deferred Financing Costs, Net (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Debt Instrument [Line Items] | |||||
Financing costs | $ 25,315 | $ 25,315 | $ 25,315 | ||
Less: accumulated amortization | (12,067) | (12,067) | (10,027) | ||
Total deferred financing costs, net | 13,248 | 13,248 | 15,288 | ||
Amortization of deferred financing costs | 1,000 | $ 1,000 | 2,000 | $ 2,000 | |
Unsecured term loan facility | Unsecured Revolving Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Net deferred financing costs | $ 5,200 | $ 5,200 | $ 6,300 |
Debt - Unsecured Revolving Credit and Term Loan Facility (Details) - Unsecured term loan facility |
1 Months Ended |
---|---|
Aug. 31, 2017
USD ($)
option
| |
Unsecured Revolving Credit Facility And Term Loan | |
Line of Credit Facility [Line Items] | |
Maximum borrowing capacity | $ 1,365,000,000 |
Unsecured revolving credit facility higher borrowing capacity option | 1,750,000,000 |
Unsecured Revolving Credit Facility | |
Line of Credit Facility [Line Items] | |
Current borrowing capacity | $ 1,100,000,000 |
Number of options to extend maturity | option | 2 |
Extension period | 6 months |
Term loan facility | |
Line of Credit Facility [Line Items] | |
Current borrowing capacity | $ 265,000,000 |
Minimum | Unsecured Revolving Credit Facility | |
Line of Credit Facility [Line Items] | |
Extension fee, as a percent of outstanding commitments under revolving credit facility | 0.0625% |
Maximum | Unsecured Revolving Credit Facility | |
Line of Credit Facility [Line Items] | |
Extension fee, as a percent of outstanding commitments under revolving credit facility | 0.075% |
Debt - Exchangeable Senior Notes (Details) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019
USD ($)
$ / shares
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2019
USD ($)
$ / shares
|
Jun. 30, 2018
USD ($)
|
Aug. 31, 2014
USD ($)
|
|
Debt Instrument [Line Items] | |||||
Amortization of deferred financing costs | $ 1,000,000.0 | $ 1,000,000.0 | $ 2,000,000.0 | $ 2,000,000.0 | |
Convertible Debt | Exchangeable Senior Notes due August 15, 2019 | |||||
Debt Instrument [Line Items] | |||||
Face amount | $ 250,000,000.0 | ||||
Stated rate (as a percent) | 2.63% | 2.63% | 2.625% | ||
Debt conversion ratio | 0.0521451 | ||||
Conversion price (in USD per share) | $ / shares | $ 19.18 | $ 19.18 | |||
Debt interest expense | $ 2,500,000 | 2,500,000 | $ 4,900,000 | 4,900,000 | |
Contractual interest expense | 1,700,000 | 1,700,000 | 3,300,000 | 3,300,000 | |
Accretion of debt discount | 600,000 | 600,000 | 1,300,000 | 1,300,000 | |
Amortization of deferred financing costs | $ 200,000 | $ 200,000 | $ 300,000 | $ 300,000 |
Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued capital expenditures | $ 74,887 | $ 85,242 |
Accounts payable and accrued expenses | 28,331 | 34,585 |
Interest rate swap agreements liability | 22,895 | 5,243 |
Accrued interest payable | 5,009 | 4,990 |
Due to affiliated companies | 720 | 616 |
Total accounts payable and accrued expenses | $ 131,842 | $ 130,676 |
Financial Instruments and Fair Values - Summary of the Terms of Agreements and the Fair Value of Derivative Financial Instruments (Details) - Designated as Hedging Instrument - Cash Flow Hedging - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Asset | $ 0 | $ 2,536,000 |
Liability | (22,895,000) | (5,243,000) |
LIBOR | Interest Rate Swap, One Month LIBOR, 2.1485% | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | $ 265,000,000 | |
Pay Rate (as a percent) | 2.1485% | |
Asset | $ 0 | 2,536,000 |
Liability | (4,449,000) | 0 |
LIBOR | Interest Rate Swap, Three Month LIBOR, 2.9580% | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | $ 125,000,000 | |
Pay Rate (as a percent) | 2.958% | |
Asset | $ 0 | 0 |
Liability | (9,223,000) | (2,623,000) |
LIBOR | Interest Rate Swap, Three Month LIBOR, 2.9580% | ||
Derivatives, Fair Value [Line Items] | ||
Notional Amount | $ 125,000,000 | |
Pay Rate (as a percent) | 2.958% | |
Asset | $ 0 | 0 |
Liability | $ (9,223,000) | $ (2,620,000) |
Leases - Narrative (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
property
|
---|---|
Operating Leases [Line Items] | |
Number of properties subject to ground leases | property | 3 |
Right of use assets | $ 29,404 |
Ground lease liabilities | $ 29,404 |
Minimum | |
Operating Leases [Line Items] | |
Term of lease | 1 year |
Maximum | |
Operating Leases [Line Items] | |
Term of lease | 21 years |
Leases - Components of Rental Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Leases [Abstract] | ||
Fixed payments | $ 125,036 | $ 251,617 |
Variable payments | 16,035 | 32,871 |
Total rental revenue | $ 141,071 | $ 284,488 |
Leases - Future Contractual Minimum Lease Payments On Non-Cancellable Operating Leases To Be Received (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Leases [Abstract] | ||
2019 | $ 246,833 | |
2020 | 490,405 | |
2021 | 465,564 | |
2022 | 434,808 | |
2023 | 407,236 | |
Thereafter | 1,862,936 | |
Total future minimum lease payments on non-cancellable operating leases to be received | $ 3,907,782 | |
2019 | $ 485,441 | |
2020 | 460,127 | |
2021 | 423,365 | |
2022 | 391,395 | |
2023 | 362,738 | |
Thereafter | 1,536,461 | |
Total future minimum lease payments on non-cancellable operating leases to be received | $ 3,659,527 |
Leases - Information Relating to the Measurement of Lease Liabilities (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
Leases [Abstract] | |
Weighted average remaining lease term (in years) | 50 years 9 months 18 days |
Weighted average discount rate | 4.49% |
Cash paid for operating leases six months ended June 30, 2019 (in thousands) | $ 759 |
Leases - Future Minimum Lease Payments on Ground Leases (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Leases [Abstract] | ||
2019 | $ 759 | |
2020 | 1,518 | |
2021 | 1,518 | |
2022 | 1,518 | |
2023 | 1,518 | |
Thereafter | 68,298 | |
Total undiscounted cash flows | 75,129 | |
Present value discount | (45,725) | |
Ground lease liabilities | $ 29,404 | |
2019 | $ 1,518 | |
2020 | 1,518 | |
2021 | 1,518 | |
2022 | 1,518 | |
2023 | 1,518 | |
Thereafter | 68,298 | |
Total undiscounted cash flows | $ 75,888 |
Commitments and Contingencies - Legal Proceedings (Details) |
1 Months Ended |
---|---|
Oct. 31, 2014
participant
| |
New York State Supreme Court, New York County | |
Loss Contingencies [Line Items] | |
Number of plaintiffs opting out of settlement | 12 |
Commitments and Contingencies - Unfunded Capital Expenditures (Details) $ in Millions |
Jun. 30, 2019
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Unfunded capital expenditures | $ 93.9 |
Equity - Shares and Units (Details) - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
May 16, 2019 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
OP Unit, redemption term for cash | 1 year | |
Dividends on common stock received until performance criteria met for LTIP units (as a percent) | 10.00% | |
Dividends on common stock received after performance criteria met for LTIP units (as a percent) | 90.00% | |
Dividends on common stock received in periods after performance criteria met for LTIP units (as a percent) | 100.00% | |
OP units outstanding (in shares) | 304,891,781 | |
OP units owned by the Company (in shares) | 178,020,905 | |
OP units owned by the Company (as a percent) | 58.40% | |
OP units not owned by the Company (in shares) | 126,870,876 | |
OP units not owned by the Company (as a percent) | 41.60% | |
2019 Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares authorized under the plan (in shares) | 11,000,000.0 | 11,000,000.0 |
Equity - Change in Net Income Attributable to Common Shareholders (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Class of Stock [Line Items] | ||||
Net income attributable to common stockholders | $ 11,087 | $ 16,651 | $ 16,764 | $ 26,419 |
Increase in additional paid-in capital for the conversion of OP Units into common stock | 0 | 0 | 0 | 0 |
Change from net income attributable to common stockholders and transfers from non-controlling interests | 16,681 | 32,329 | 25,629 | 52,259 |
Additional Paid-In Capital | ||||
Class of Stock [Line Items] | ||||
Increase in additional paid-in capital for the conversion of OP Units into common stock | $ 5,594 | $ 15,678 | $ 8,865 | $ 25,840 |
Equity - Dividends and Distributions (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Equity [Abstract] | ||||
Dividends paid to common shareholders | $ 18,700 | $ 17,600 | $ 37,200 | $ 34,800 |
Distributions paid to OP unitholders | 13,300 | 14,300 | 26,500 | 28,600 |
Private perpetual preferred unit distributions | $ 200 | $ 200 | $ 468 | $ 468 |
Segment Reporting - Narrative (Details) |
6 Months Ended |
---|---|
Jun. 30, 2019
segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
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