EX-99.1 2 d96767dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

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EMPIRE STATE REALTY TRUST ANNOUNCES THIRD QUARTER 2015 RESULTS

- Reports Core FFO of $0.27 Per Fully Diluted Share -

New York, New York, October 28, 2015 - Empire State Realty Trust, Inc. (NYSE: ESRT) (the “Company”), a real estate investment trust with office and retail properties in Manhattan and the greater New York metropolitan area, today reported its operational and financial results for the third quarter of 2015.

“Our strong third quarter results represent continued progress towards the objectives we set forth during our initial public offering. Third quarter leasing was highlighted by a 126,000 square foot expansion with LinkedIn, and our year-to-date total volume of leases signed now exceeds one million square feet, representing 73% growth year over year. In addition, in the face of adverse New York City tourist trends and the opening of One World Trade Center’s new attraction, our Observatory revenues are steady. We enhanced our balance sheet with our new $265 million seven year senior unsecured bank loan facility. Finally, we entered into a contingent contract for an off-market property from which we ultimately received a break-up fee when the seller achieved a higher price and we declined to match. We are happy that our off-market efforts produced a result, but adhere to our view of value and reflect $2.3 million in non-recurring income in our results,” stated John B. Kessler, Empire State Realty Trust’s President and Chief Operating Officer. “We believe we will continue to create value in our Manhattan office and retail portfolio as our redevelopment program delivers embedded, derisked growth through market-leading rent spreads.”

Third Quarter Highlights

 

    Achieved Core Funds From Operations (“Core FFO”) of $0.27 per fully diluted share and net income attributable to the Company of $0.10 per fully diluted share.

 

    Total portfolio was 87.4% occupied; including signed leases not commenced (“SLNC”), the total portfolio was 90.0% leased at September 30, 2015.

 

    Manhattan office portfolio (excluding the retail component of these properties) was 85.4% occupied; including SLNC, the Manhattan office portfolio was 88.4% leased at September 30, 2015.

 

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    Retail portfolio was 92.7% occupied; including SLNC, the retail portfolio was 94.6% leased at September 30, 2015.

 

    Empire State Building was 83.7% occupied; including SLNC, the Empire State Building was 91.2% leased at September 30, 2015.

 

    Executed 67 leases, representing 338,477 rentable square feet across the total portfolio, achieving a 34.5% increase in mark-to-market rent over previous fully escalated rents on new, renewal, and expansion leases.

 

    Signed 23 new leases representing 232,198 rentable square feet in the third quarter 2015 for the Manhattan office portfolio (excluding the retail component of these properties), achieving an increase of 41.0% in mark-to-market rent over previous fully escalated rents.

 

    The Empire State Building Observatory revenue for the third quarter 2015 was $35.7 million, same as the third quarter 2014.

 

    Netted a $2.3 million break-up fee on a contingent contract we entered into on an off-market transaction to acquire a property.

 

    Closed on a new seven year $265.0 million senior unsecured term loan facility.

 

    Declared a dividend in the amount of $0.085 per share for the third quarter 2015, which was paid on September 30, 2015.

Financial Results for the Third Quarter 2015

Core FFO was $70.6 million, or $0.27 per fully diluted share, compared to $65.1 million, or $0.25 per fully diluted share in the third quarter of 2014.

Modified FFO was $72.9 million, or $0.27 per fully diluted share, compared to $62.0 million, or $0.24 per fully diluted share in the third quarter of 2014.

FFO was $70.9 million, or $0.27 per fully diluted share, compared to $60.3 million or $0.23 per fully diluted share in the third quarter of 2014.

Net income attributable to common stockholders was $11.2 million, or $0.10 per fully diluted share, compared to $8.3 million, or $0.09 per fully diluted share, in the third quarter of 2014.

 

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Financial Results for the Nine Months Ended September 30, 2015

Core FFO was $191.5 million, or $0.72 per fully diluted share, compared to $162.2 million, or $0.65 per fully diluted share in the nine months ended September 30, 2014.

Modified FFO was $191.6 million, or $0.72 per fully diluted share, compared to $158.0 million, or $0.63 per fully diluted share in the nine months ended September 30, 2014.

FFO was $185.7 million, or $0.70 per fully diluted share, compared to $155.4 million or $0.62 per fully diluted share in the nine months ended September 30, 2014.

Net income attributable to common stockholders was $25.5 million, or $0.22 per fully diluted share, compared to $22.5 million, or $0.23 per fully diluted share, in the nine months ended September 30, 2014.

Portfolio Operations

As of September 30, 2015, the Company’s total portfolio contained 10.1 million rentable square feet of office and retail space and was 87.4% occupied. Including SLNC, the Company’s portfolio was 90.0% leased at September 30, 2015.

The Company’s same store portfolio, defined as the total portfolio excluding 112 West 34th Street and 1400 Broadway and containing 8.4 million rentable square feet of office and retail space, was 88.1% occupied at the end of the third quarter 2015. Percentage occupied was down 30 basis points from 88.4% at the end of the second quarter 2015, and down 110 basis points from 89.2% at the end of the third quarter 2014. Including SLNC, the Company’s same store portfolio was 91.1% leased at September 30, 2015.

The Company’s office portfolio (excluding the retail component of these properties), containing 9.4 million rentable square feet, was 87.0% occupied at the end of the third quarter 2015. On a same store basis, the office portfolio was 87.7% occupied, down 40 basis points from the end of the second quarter 2015, and down 130 basis points from the end of the third quarter 2014. Including SLNC, the Company’s office portfolio (excluding the retail component of these properties) was 89.7% leased at September 30, 2015.

 

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The Manhattan office portfolio (excluding the retail component of these properties), containing 7.5 million rentable square feet was 85.4% occupied at the end of the third quarter 2015. On a same store basis, the Manhattan office portfolio was 85.9% occupied, down 50 basis points from the end of the second quarter 2015, and down 220 basis points from the end of the third quarter 2014. Including SLNC, the Company’s Manhattan office portfolio (excluding the retail component of these properties) was 88.4% leased at September 30, 2015.

The Company’s retail portfolio, containing approximately 724,000 rentable square feet, was 92.7% occupied at the end of the third quarter 2015. On a same store basis, the retail portfolio was 92.1% occupied, which compares to 92.2% at the end of the second quarter of 2015 and 92.1% at the end of the third quarter 2014. Including SLNC, the Company’s retail portfolio was 94.6% leased at September 30, 2015.

Leasing

For the three months ended September 30, 2015, the Company executed 67 leases within the total portfolio, comprising 338,477 rentable square feet. Total leasing volume included 65 office leases, comprising 335,904 rentable square feet, and two retail leases, comprising 2,573 rentable square feet.

On a blended basis, the 67 new, renewal and expansion leases signed within the total portfolio during the quarter had an average starting rental rate of $53.55 per rentable square foot, representing an increase of 34.5% over the prior in-place rent on a fully escalated basis.

On a blended basis, the 65 new, renewal and expansion office leases signed within the total portfolio during the quarter had an average starting rental rate of $51.89 per rentable square foot, representing an increase of 32.9% over the prior in-place rent on a fully escalated basis.

 

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On a blended basis, the two new retail leases signed within the total portfolio during the quarter had an average starting rental rate of $269.80 per rentable square foot, representing an increase of 94.6% over the prior in-place rent on a fully escalated basis.

Leases signed in the Third Quarter 2015 for the Manhattan office portfolio

 

    23 new leases comprising 232,198 rentable square feet, with an average starting rental rate of $55.84 per rentable square foot, representing an increase of 41.0% over the prior in-place rent on a fully escalated basis, and

 

    26 renewal leases, comprising 50,402 rentable square feet, with an average starting rental rate of $52.68 per rentable square foot, representing an increase of 23.8% over the prior in-place rent on a fully escalated basis.

Empire State Building

The Company continues to renovate and lease the 2.8 million rentable square foot Empire State Building, its flagship property. At September 30, 2015, the Empire State Building was 83.7% occupied; including SLNC, the Empire State Building was 91.2% leased.

During the third quarter 2015, the Company executed nine office leases at the Empire State Building, representing 172,112 rentable square feet in the aggregate.

The Observatory revenue for the third quarter was $35.7 million, equal to the $35.7 million in the third quarter 2014. The Observatory hosted approximately 1.3 million visitors in the third quarter 2015 compared to 1.4 million visitors in the third quarter of 2014. In the third quarter of 2015, there were no bad weather days which fell on weekends. This compares to the third quarter 2014, in which there were two bad weather days which fell on a weekend. Observatory admissions were impacted by general tourism trends in Manhattan.

For the nine months ended September 30, 2015, the Observatory hosted 3.1 million visitors, compared to 3.3 million visitors for the same period in 2014. Observatory revenue was $84.5 million, a 1.4% increase from $83.4 million for the nine months ended September 30, 2014. For the nine months of 2015, there were 14 bad weather weekend days. This compares to the nine months of 2014, in which there were 11 bad weather weekend days.

 

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Balance Sheet and Financial Transactions

As of September 30, 2015, the outstanding balance on the Company’s unsecured revolving credit facility was $20.0 million. The unsecured revolving credit facility has an accordion feature allowing for an increase in its maximum aggregate principal balance to $1.25 billion under certain circumstances.

During the quarter, the Company closed on a new seven year $265.0 million senior unsecured term loan facility. The facility is expandable by $100.0 million to $365.0 million under certain circumstances. The term loan matures on August 24, 2022. Interest is calculated at LIBOR plus 1.6% at September 30, 2015. Pursuant to a forward interest rate swap agreement, the Company effectively fixed LIBOR at 2.1485% beginning August 2017 through maturity for $265.0 million of the facility. The net proceeds were used to repay borrowings made under the Company’s unsecured revolving credit facility.

At September 30, 2015, the Company had total debt outstanding of approximately $1.6 billion, with a weighted average interest rate of 4.11% per annum, and a weighted average term to maturity of 5.7 years. At September 30, 2015, the Company had no debt maturing during 2015 and 2016. The Company’s consolidated debt to total market capitalization was approximately 26% as of September 30, 2015 and consolidated net debt to EBITDA was 5.0x.

Dividend

On September 30, 2015, the Company paid a dividend of $0.085 per share for the third quarter 2015 to holders of the Company’s Class A common stock and Class B common stock and to holders of the operating partnership’s Series ES, Series 250 and Series 60 operating partnership units (NYSE Arca: ESBA, FISK and OGCP, respectively) and Series PR operating partnership units. The Company paid a dividend of $0.15 per unit for the third quarter 2015 to holders of the operating partnership’s private perpetual preferred units.

 

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Webcast and Conference Call Details

Empire State Realty Trust, Inc. will host a webcast and conference call, open to the general public, on Thursday, October 29, 2015 at 8:30 am Eastern time.

The webcast will be available in the Investors section of the Company’s website at www.empirestaterealtytrust.com. To listen to a live broadcast, go to the site at least five minutes prior to the scheduled start time in order to register, download and install any necessary audio software. Shortly after the call, a replay of the webcast will be available for 90 days on the Company’s website.

The conference call can be accessed by dialing 1-877-407-3982 for domestic callers or 1-201-493-6780 for international callers. A replay will be available shortly after the call and can be accessed by dialing 1-877-870-5176 for domestic callers or 1-858-384-5517 for international callers. The passcode for the replay is 13620670. A replay of the conference call will be available until November 5, 2015.

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

About Empire State Realty Trust

Empire State Realty Trust, Inc. (NYSE: ESRT), a leading real estate investment trust (REIT), owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the world’s most famous building. Headquartered in New York, New York, the Company’s office and retail portfolio covers 10.1 million rentable square feet, as of September 30, 2015, consisting of 9.4 million rentable square feet in 14 office properties, including nine in Manhattan, three in Fairfield County, Connecticut and two in Westchester County, New York; and approximately 724,000 rentable square feet in the retail portfolio.

Non-GAAP Financial Measures

The Company has used non-GAAP financial measures in this press release. A reconciliation of each non-GAAP financial measure and the comparable GAAP financial measure can be found on pages 11 and 12 of this release and in the Company’s supplemental report.

 

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Forward-Looking Statements

This press release includes “forward looking statements” within the meaning of the federal securities laws. Forward-looking statements may be identified by the use of words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates,” “contemplates,” “aims,” “continues,” “would” or “anticipates” or the negative of these words and phrases or similar words or phrases. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: changes in our industry, the real estate markets, either nationally or in Manhattan or the greater New York metropolitan area; resolution of the litigations and arbitration involving the company; reduced demand for office or retail space; general volatility of the capital and credit markets and the market price of our Class A common stock and our publicly-traded OP Units; changes in technology and market competition, which affect utilization of our broadcast or other facilities; changes in domestic or international tourism, including geopolitical events and currency exchange rates; defaults on, early terminations of, or non-renewal of leases by tenants; fluctuations in interest rates; declining real estate valuations and impairment charges; our failure to obtain necessary outside financing, including our unsecured revolving credit facility; decreased rental rates or increased vacancy rates; our failure to redevelop and reposition properties successfully or on the anticipated timeline or at the anticipated costs; difficulties in identifying properties to acquire and completing acquisitions; risks of real estate development (including our Metro Tower development site), including the cost of construction delays and cost overruns; and conflicts of interest affecting any of our senior management team.

While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, or new information, data or methods, future events or other changes after the date of this press release, except as required by applicable law. For a further discussion of these and other factors that could impact the Company’s future results, performance or transactions, see the section entitled “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2014, and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. Prospective investors should not place undue reliance on any forward-looking statements, which are based only on information currently available to the Company (or to third parties making the forward-looking statements).

 

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Contact:

Investors

Empire State Realty Trust Investor Relations

(212) 850-2678

IR@empirestaterealtytrust.com

Media

Brandy Bergman/Hugh Burns

Sard Verbinnen & Co.

(212) 687-8080

Empire State Realty Trust, Inc.

Condensed Consolidated Statements of Income

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

 

     Three Months Ended September 30,  
     2015     2014  

Revenues

    

Rental revenue

   $ 110,903      $ 106,152   

Tenant expense reimbursement

     23,096        20,034   

Observatory revenue

     35,702        35,684   

Construction revenue

     —          5,804   

Third-party management and other fees

     618        561   

Other revenue and fees

     5,460        1,206   
  

 

 

   

 

 

 

Total revenues

     175,779        169,441   

Operating expenses

    

Property operating expenses

     41,664        38,291   

Ground rent expenses

     2,331        2,066   

Marketing, general and administrative expenses

     10,182        10,071   

Observatory expenses

     7,284        7,109   

Construction expenses

     —          6,095   

Real estate taxes

     23,613        21,870   

Acquisition expenses

     193        2,647   

Depreciation and amortization

     45,169        37,880   
  

 

 

   

 

 

 

Total operating expenses

     130,436        126,029   
  

 

 

   

 

 

 

Total operating income

     45,343        43,412   

Interest expense

     (16,680     (17,674
  

 

 

   

 

 

 

Income before income taxes

     28,663        25,738   

Income tax expense

     (2,578     (3,004
  

 

 

   

 

 

 

Net income

     26,085        22,734   

Preferred unit distributions

     (234     (241

Net income attributable to non-controlling interests

     (14,631     (14,171
  

 

 

   

 

 

 

Net income attributable to common stockholders

   $ 11,220      $ 8,322   
  

 

 

   

 

 

 

Total weighted average shares

    

Basic

     115,900        97,729   
  

 

 

   

 

 

 

Diluted

     265,873        263,041   
  

 

 

   

 

 

 

Net income per share attributable to common stockholders

  

Basic

   $ 0.10      $ 0.09   
  

 

 

   

 

 

 

Diluted

   $ 0.10      $ 0.09   
  

 

 

   

 

 

 

 

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Empire State Realty Trust, Inc.

Condensed Consolidated Statements of Income

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

 

     Nine Months Ended September 30,  
     2015     2014  

Revenues

    

Rental revenue

   $ 333,827      $ 288,566   

Tenant expense reimbursement

     59,878        49,491   

Observatory revenue

     84,525        83,374   

Construction revenue

     1,981        33,730   

Third-party management and other fees

     1,658        1,925   

Other revenue and fees

     10,565        7,829   
  

 

 

   

 

 

 

Total revenues

     492,434        464,915   

Operating expenses

    

Property operating expenses

     122,051        109,300   

Ground rent expenses

     6,994        2,964   

Marketing, general and administrative expenses

     28,395        29,786   

Observatory expenses

     21,681        21,210   

Construction expenses

     3,222        33,173   

Real estate taxes

     69,543        58,429   

Acquisition expenses

     193        3,382   

Depreciation and amortization

     126,216        96,632   
  

 

 

   

 

 

 

Total operating expenses

     378,295        354,876   
  

 

 

   

 

 

 

Total operating income

     114,139        110,039   

Interest expense

     (50,298     (46,640
  

 

 

   

 

 

 

Income before income taxes

     63,841        63,399   

Income tax expense

     (3,283     (4,153
  

 

 

   

 

 

 

Net income

     60,558        59,246   

Preferred unit distributions

     (702     (241

Net income attributable to non-controlling interests

     (34,378     (36,480
  

 

 

   

 

 

 

Net income attributable to common stockholders

   $ 25,478      $ 22,525   
  

 

 

   

 

 

 

Total weighted average shares

    

Basic

     112,741        96,226   
  

 

 

   

 

 

 

Diluted

     265,868        250,696   
  

 

 

   

 

 

 

Net income per share attributable to common stockholders

  

Basic

   $ 0.23      $ 0.23   
  

 

 

   

 

 

 

Diluted

   $ 0.22      $ 0.23   
  

 

 

   

 

 

 

 

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Empire State Realty Trust, Inc.

Reconciliation of Net Income to Funds From Operations (“FFO”),

Modified Funds From Operations (“Modified FFO”) and Core Funds From Operations (“Core FFO”)

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

 

     Three Months Ended September 30,  
     2015     2014  

Net income

   $ 26,085      $ 22,734   

Preferred unit distributions

     (234     (241

Real estate depreciation and amortization

     45,072        37,797   
  

 

 

   

 

 

 

FFO attributable to common stockholders and non-controlling interests

     70,923        60,290   

Amortization of below-market ground leases

     1,957        1,750   
  

 

 

   

 

 

 

Modified FFO attributable to common stockholders and non-controlling interests

     72,880        62,040   

Acquisition break-up fee

     (2,500     —     

Acquisition expenses

     193        2,647   

Private perpetual preferred exchange offering expenses

     —          407   
  

 

 

   

 

 

 

Core FFO attributable to common stockholders and non-controlling interests

   $ 70,573      $ 65,094   
  

 

 

   

 

 

 

Total weighted average shares

    

Basic

     265,873        263,041   
  

 

 

   

 

 

 

Diluted

     265,873        263,041   
  

 

 

   

 

 

 

FFO per share

    

Basic

   $ 0.27      $ 0.23   
  

 

 

   

 

 

 

Diluted

   $ 0.27      $ 0.23   
  

 

 

   

 

 

 

Modified FFO per share

    

Basic

   $ 0.27      $ 0.24   
  

 

 

   

 

 

 

Diluted

   $ 0.27      $ 0.24   
  

 

 

   

 

 

 

Core FFO per share

    

Basic

   $ 0.27      $ 0.25   
  

 

 

   

 

 

 

Diluted

   $ 0.27      $ 0.25   
  

 

 

   

 

 

 

 

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Empire State Realty Trust, Inc.

Reconciliation of Net Income to Funds From Operations (“FFO”),

Modified Funds From Operations (“Modified FFO”) and Core Funds From Operations (“Core FFO”)

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

 

     Nine Months Ended September 30,  
     2015     2014  

Net income

   $ 60,558      $ 59,246   

Preferred unit distributions

     (702     (241

Real estate depreciation and amortization

     125,847        96,405   
  

 

 

   

 

 

 

FFO attributable to common stockholders and non-controlling interests

     185,703        155,410   

Amortization of below-market ground leases

     5,873        2,602   
  

 

 

   

 

 

 

Modified FFO attributable to common stockholders and non-controlling interests

     191,576        158,012   

Acquisition break-up fee

     (2,500     —     

Deferred financing costs write-off

     1,749        —     

Construction severance expenses, net of taxes

     480        —     

Acquisition expenses

     193        3,382   

Gain on settlement of lawsuit related to the Observatory, net of income taxes

     —          (540

Private perpetual preferred exchange offering expenses

     —          1,357   
  

 

 

   

 

 

 

Core FFO attributable to common stockholders and non-controlling interests

   $ 191,498     $ 162,211   
  

 

 

   

 

 

 

Total weighted average shares

    

Basic

     265,868        250,696   
  

 

 

   

 

 

 

Diluted

     265,868        250,696   
  

 

 

   

 

 

 

FFO per share

    

Basic

   $ 0.70      $ 0.62   
  

 

 

   

 

 

 

Diluted

   $ 0.70      $ 0.62   
  

 

 

   

 

 

 

Modified FFO per share

    

Basic

   $ 0.72      $ 0.63   
  

 

 

   

 

 

 

Diluted

   $ 0.72      $ 0.63   
  

 

 

   

 

 

 

Core FFO per share

    

Basic

   $ 0.72      $ 0.65   
  

 

 

   

 

 

 

Diluted

   $ 0.72      $ 0.65   
  

 

 

   

 

 

 

 

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Empire State Realty Trust, Inc.

Condensed Consolidated Balance Sheets

(unaudited and amounts in thousands)

 

     September 30,
2015
    December 31,
2014
 

Assets

    

Commercial real estate properties, at cost

   $ 2,244,862      $ 2,139,863   

Less: accumulated depreciation

     (445,549     (377,552
  

 

 

   

 

 

 

Commercial real estate properties, net

     1,799,313        1,762,311   

Cash and cash equivalents

     46,388        45,732   

Restricted cash

     64,899        60,273   

Tenant and other receivables

     32,406        23,745   

Deferred rent receivables

     116,208        102,104   

Prepaid expenses and other assets

     33,759        48,504   

Deferred costs, net

     338,466        370,460   

Acquired below market ground leases, net

     385,849        391,887   

Goodwill

     491,479        491,479   
  

 

 

   

 

 

 

Total assets

   $ 3,308,767      $ 3,296,495   
  

 

 

   

 

 

 

Liabilities and equity

    

Mortgage notes payable

   $ 754,738      $ 903,985   

Senior unsecured notes

     589,670        237,667   

Unsecured term loan facility

     265,000        —     

Unsecured revolving credit facility

     20,000        —     

Term loan and credit facility

     —          470,000   

Accounts payable and accrued expenses

     106,699        96,563   

Acquired below market leases, net

     112,312        138,859   

Deferred revenue and other liabilities

     38,066        27,876   

Tenants’ security deposits

     49,672        40,448   
  

 

 

   

 

 

 

Total liabilities

     1,936,157        1,915,398   

Total equity

     1,372,610        1,381,097   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 3,308,767      $ 3,296,495   
  

 

 

   

 

 

 

 

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