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NEW YORK--(BUSINESS WIRE)--Oct 26, 2022--
Empire State Realty Trust, Inc. (NYSE: ESRT) (the "Company") is a REIT that owns and manages office, retail and multifamily assets in Manhattan and the greater New York metropolitan area. ESRT owns the Empire State Building, the World’s Most Famous Building, and Tripadvisor’s 2022 Travelers’ Choice Best of the Best Awards #1 attraction in the U.S. and #3 attraction in the world, the newly reimagined and iconic Empire State Building Observatory. Today the Company reported its operational and financial results for the third quarter of 2022.
Third Quarter 2022 and Recent Highlights
Property Operations
As of September 30, 2022, the Company’s property portfolio contained 9.2 million rentable square feet of office space, 0.7 million rentable square feet of retail space and 625 residential units across two multifamily properties, which were occupied and leased as shown below.
September 30, 2022
June 30, 2022
September 30, 2021
Percent occupied:
Total commercial portfolio
84.2%
84.3%
83.5%
Total office
84.0%
83.7%
83.5%
Manhattan office
84.7%
84.0%
84.5%
GNYMA office 1
80.7%
82.2%
79.8%
Total retail 2
86.4%
92.0%
83.0%
Total multifamily portfolio
98.4%
98.4%
N/A
Percent leased (includes signed leases not commenced):
Total commercial portfolio
88.5%
87.8%
86.5%
Total office
88.3%
87.4%
86.1%
Manhattan office
89.4%
88.3%
87.4%
GNYMA office 1
82.8%
83.5%
80.7%
Total retail 2
91.9%
92.4%
91.9%
1 “GNYMA office” for the period ending June 30, 2022 and September 30, 2022 reflects the removal of 383 Main Avenue, Norwalk, CT.
2 “Total retail” for the periods ending June 30, 2022 and September 30, 2022 includes the retail assets acquired as part of the multifamily acquisition completed in late-December 2021.
Leasing
The tables below summarize leasing activity for the three months ended September 30, 2022:
Total Portfolio
Total Portfolio
Total Leases
Executed
Total square
footage
executed
Average cash
rent psf –
leases executed
Previously
escalated cash
rents psf
% of new cash
rent over/ under
previously
escalated rents
Office
27
294,016
$
52.35
$
49.87
5.0%
Retail
7
41,366
$
137.72
$
153.81
(10.5%)
Total Overall
34
335,382
$
63.01
$
62.84
0.3%
Manhattan Office Portfolio
Manhattan Office
Portfolio
Total Leases
Executed
Total square
footage
executed
Average cash
rent psf –
leases executed
Previously
escalated cash
rents psf
% of new cash
rent over /
under
previously
escalated rents
New Office
14
94,467
$
59.97
$
48.52
23.6%
Renewal Office
7
84,867
$
57.97
$
59.37
(2.3%)
Total Office
21
179,334
$
59.02
$
53.65
10.0%
Observatory Results
For the third quarter of 2022, the Observatory hosted approximately 687,000 visitors, compared to 255,000 visitors in the third quarter of 2021. Observatory revenue was $33.0 million, expenses were $8.5 million, and NOI was $24.5 million, an increase of $18.1 million on a year-over-year basis. Third quarter visitation recapture (as % of 2019) was 66% and the Company expects a similar recapture rate for the balance of 2022 as international tourism, while improved, did not match domestic recovery rates.
ESG
In the third quarter the Company announced the achievement of carbon neutrality for its 9.9 million square foot commercial portfolio through a combination of industry leadership in building energy-efficiency retrofit work which has reduced emissions 54% at the Empire State Building and 43% portfolio-wide to date since 2009, renewable wind RECs for 100% of electrical usage, and a new three-year agreement with 18 Reserves and ACT. The new agreement supports the preservation of close to 9,000 acres of biodiverse forest that will offset 100% of ESRT’s non-electric fossil fuel usage. Earlier this month the Company announced that it earned the highest possible GRESB 5 Star Rating and Green Star recognition for the third consecutive year with a score of 95. The Company additionally received a score of 96 – the highest in the U.S. diversified group – and an “A” rating in the Public Disclosure Assessment, which measures ESG disclosure activities. ESRT has been named by GRESB as the Sector Leader for “Global Listed Sector Leader, Office”, “Regional Sector Leader, Americas, Office” and “Regional Listed Sector Leader, Americas, Office”.
Balance Sheet
The Company had $1.2 billion of total liquidity as of September 30, 2022, which was comprised of $387 million of cash, plus $850 million available under its revolving credit facility. At September 30, 2022, the Company had total debt outstanding of approximately $2.3 billion, no floating rate debt exposure, and a weighted average interest rate of 3.9% per annum. The weighted average term to maturity was 6.7 years and the Company has no outstanding debt maturities until November 2024. At September 30, 2022, the Company’s ratio of net debt to adjusted EBITDA was 5.6x.
Portfolio Transaction Activity
Subsequent to quarter-end, the Company entered into agreements to sell 500 Mamaroneck Avenue in Harrison, NY and 10 Bank Street in White Plains, NY at a gross asset valuation of $95.0 million. These transactions are expected to close in the first quarter of 2023, subject to customary closing conditions, the proceeds from which we expect to redeploy in 1031 transactions, consistent with our capital recycling strategy.
Share Repurchase
The Company repurchased $20.1 million of common stock at a weighted average price of $7.00 per share in the third quarter and through October 24, 2022. The stock repurchase program began in March 2020 and through October 24, 2022, approximately $275 million has been repurchased at a weighted average price of $8.36 per share.
Dividend
On September 30, 2022, the Company paid a quarterly dividend of $0.035 per share or unit, as applicable, for the third quarter 2022 to holders of the Company’s Class A common stock (NYSE: ESRT) and Class B common stock and to holders of the Series ES, Series 250 and Series 60 partnership units (NYSE Arca: ESBA, FISK and OGCP, respectively) and Series PR partnership units of Empire State Realty OP, L.P., the Company’s operating partnership (the “Operating Partnership”).
On September 30, 2022, the Company paid a quarterly preferred dividend of $0.15 per unit for the third quarter 2022 to holders of the Operating Partnership’s Series 2014 private perpetual preferred units and a preferred dividend of $0.175 per unit for the third quarter 2022 to holders of the Operating Partnership’s Series 2019 private perpetual preferred units.
2022 Earnings Outlook
The Company updated its 2022 Core FFO guidance to a revised range of $0.83 to $0.85 per fully diluted share, from $0.80 to $0.85 per fully diluted share. The expected Observatory NOI for FY 2022 was revised from $74 to $77 million to $67 to $70 million. This revised 2022 Observatory NOI guidance range reflects a two-thirds visitor recapture rate (based on 2019) for 4Q 2022, a deceleration from the previous expectation for 80% visitor recapture rate, driven by a slowdown in the growth of international travel to the U.S. Other underlying guidance assumptions for the year remain unchanged. The Company’s current guidance does not include the impact of any significant future lease termination fee income or any potential acquisition, disposition or other capital markets activity beyond October 24, 2022. Key assumptions are included in the table below.Key AssumptionsCurrent 2022
GuidancePrior 2022
Guidance2021 ActualCommentsEarningsCore FFO Per Fully Diluted Share
$0.83 to $0.85
$0.80 to $0.85
$0.70
• Includes $0.02 from the multifamily
acquisition that closed in late-December 2021
• Includes ~270M fully diluted shares as of
October 24, 2022Same-Store (SS) Commercial Property DriversSS Occupancy at year-end
84% to 86%
84% to 86%
82.4%SS Cash NOI (excluding lease termination fees)-10% to -12%
from 2021-10% to -12%
from 2021$290M
• Primarily driven by normalization of operating
expenses as building utilization increases;
~10% y/y increase in SS operating expenses
• Also impacted by late-2021 occupancy declineObservatory DriversObservatory NOI
$67M to $70M
$74M to $77M
$18M
• Base case reflects 4Q22 hypothetical
Observatory admissions at two-thrids of 4Q19
visitation
• Reflects 4Q expenses of approximately $8M - $9M
Low
High
2021 ActualNet Income (loss) Attributable to Common Stockholders and the Operating Partnership
$0.14
$0.16
-$0.05Add: Impairment Charge
-
-
0.03Real Estate Depreciation & Amortization
0.78
0.78
0.71Less: Private Perpetual Distributions
0.02
0.02
0.02Gain on Disposal of Real Estate, net
0.10
0.10
-FFO Attributable to Common Stockholders and the Operating Partnership
$0.80
$0.82
$0.67Add: Amortization of Below Market Ground Lease
0.03
0.03
0.03Core FFO Attributable to Common Stockholders and the Operating Partnership
$0.83
$0.85
$0.70
The estimates set forth above may be subject to fluctuations as a result of several factors, including the negative impact of the ongoing COVID-19 global pandemic on our business and our market, straight-line rent adjustments and the amortization of above and below-market leases. There can be no assurance that the Company’s actual results will not differ materially from the estimates set forth above.
Investor Presentation Update
The Company has posted on the “Investors” section of its website ( www.esrtreit.com ) the latest investor presentation, which contains additional information on its businesses, financial condition and results of operations.
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 27, 2022 at 12:00 pm Eastern time.
The webcast will be accessible on the “Investors” section of the Company’s website at www.esrtreit.com. To listen to the live webcast, go to the site at least five minutes prior to the scheduled start time in order to register and download and install any necessary audio software. The conference call can also be accessed by dialing 1-877-407-3982 for domestic callers or 1-201-493-6780.
Starting shortly after the call until November 3, 2022, a replay of the webcast will be available on the Company’s website, and a dial-in replay will be available by dialing 1-844-512-2921 for domestic callers or 1-412-317-6671 for international callers. The passcode for this dial-in replay is 13730153.
The Supplemental Report and Investor Presentation are additional components of the quarterly earnings announcement and are now available on the “Investors” section of the Company’s website at www.esrtreit.com.
The Company uses, and intends to continue to use, the “Investors” page of its website, which can be found at www.esrtreit.com, as a means to disclose material nonpublic information and to comply with its disclosure obligations under Regulation FD, including, without limitation, through the posting of investor presentations that may include material nonpublic information. Accordingly, investors should monitor the “Investors” page, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.
About Empire State Realty Trust
Empire State Realty Trust, Inc. (NYSE: ESRT) is a REIT that owns and manages office, retail and multifamily assets in Manhattan and the greater New York metropolitan area. ESRT owns the Empire State Building, the World's Most Famous Building, and Tripadvisor's 2022 Travelers' Choice Best of the Best Awards #1 attraction in the U.S. and #3 attraction in the world, the newly reimagined and iconic Empire State Building Observatory. The company is a leader in healthy buildings, energy efficiency, and indoor environmental quality and has the lowest greenhouse gas emissions per square foot of any publicly traded REIT portfolio in New York City. As of September 30, 2022, ESRT's portfolio is comprised of approximately 9.2 million rentable square feet of office space, 700,000 rentable square feet of retail space and 625 residential units across two multifamily properties. More information about Empire State Realty Trust can be found at esrtreit.com and by following ESRT on Facebook, Instagram, Twitter and LinkedIn.
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,” “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: (i) economic, market, political and social impact of, and uncertainty relating to, the COVID-19 pandemic; (ii) a failure of conditions or performance regarding any event or transaction described herein, (iii) resolution of legal proceedings involving the Company; (iv) reduced demand for office, multifamily or retail space, including as a result of the COVID-19 pandemic; (v) changes in our business strategy; (vi) changes in technology and market competition that affect utilization of our office, retail, Observatory, broadcast or other facilities; (vii) changes in domestic or international tourism, including due to health crises such as the COVID-19 pandemic, geopolitical events, including global hostilities, currency exchange rates, and/or competition from recently opened observatories in New York City, any or all of which may cause a decline in Observatory visitors; (viii) defaults on, early terminations of, or non-renewal of, leases by tenants; (ix) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors, including the current phasing out of LIBOR; (x) declining real estate valuations and impairment charges; (xi) termination of our ground leases; (xii) changes in our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due and potential limitations on our ability to borrow additional funds in compliance with drawdown conditions and financial covenants; (xiii) decreased rental rates or increased vacancy rates; (xiv) our failure to execute any newly planned capital project successfully or on the anticipated timeline or budget; (xv) difficulties in identifying and completing acquisitions; (xvi) risks related to any development project (including our Metro Tower potential development site); (xvii) impact of changes in governmental regulations, tax laws and rates and similar matters; (xviii) our failure to qualify as a REIT; (xix) environmental uncertainties and risks related to climate change, adverse weather conditions, rising sea levels and natural disasters; (xx) incurrence of taxable capital gain on disposition of an asset due to failure of use or compliance with a 1031 exchange program; and (xxi) accuracy of our methodologies and estimates regarding ESG metrics and goals, tenant willingness and ability to collaborate in reporting ESG metrics and meeting ESG goals, and impact of governmental regulation on our ESG efforts. For a further discussion of these and other factors that could impact the Company's future results, see the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission.
While forward-looking statements reflect the Company's good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to update or revise publicly any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes after the date of this press release, except as required by applicable law. Prospective investors should not place undue reliance on any forward-looking statements, which are based only on information currently available to the Company (or to third parties making the forward-looking statements).
Empire State Realty Trust, Inc.
Condensed Consolidated Statements of Operations
(unaudited and amounts in thousands, except per share data)
Three Months Ended September 30,
2022
2021
Revenues
Rental revenue
$
148,290
$
139,558
Observatory revenue
33,051
12,796
Lease termination fees
-
11,321
Third-party management and other fees
389
314
Other revenue and fees
1,982
1,059
Total revenues
183,712
165,048
Operating expenses
Property operating expenses
42,798
33,357
Ground rent expenses
2,331
2,331
General and administrative expenses
15,725
14,427
Observatory expenses
8,516
6,370
Real estate taxes
31,831
29,566
Depreciation and amortization
46,984
65,794
Total operating expenses
148,185
151,845
Total operating income
35,527
13,203
Other income (expense):
Interest income
1,564
211
Interest expense
(25,516)
(23,577)
Income (loss) before income taxes
11,575
(10,163)
Income tax expense
(1,457)
(20)
Net income (loss)
10,118
(10,183)
Net (income) loss attributable to noncontrolling interests:
Noncontrolling interest in the Operating Partnership
(3,560)
4,256
Noncontrolling interests in other partnerships
49
-
Preferred unit distributions
(1,050)
(1,050)
Net income (loss) attributable to common stockholders
$
5,557
$
(6,977)
Total weighted average shares
Basic
162,165
172,494
Diluted
267,121
277,716
Earnings per share attributable to common stockholders
Basic
$
0.03
$
(0.04)
Diluted
$
0.03
$
(0.04)
Empire State Realty Trust, Inc.
Condensed Consolidated Statements of Operations
(unaudited and amounts in thousands, except per share data)
Nine Months Ended September 30,
2022
2021
Revenues
Rental revenue
$
445,143
$
420,586
Observatory revenue
73,660
23,758
Lease termination fees
20,032
15,949
Third-party management and other fees
1,025
917
Other revenue and fees
5,908
2,550
Total revenues
545,768
463,760
Operating expenses
Property operating expenses
118,875
92,429
Ground rent expenses
6,994
6,994
General and administrative expenses
45,287
42,369
Observatory expenses
22,507
16,226
Real estate taxes
91,637
92,367
Depreciation and amortization
172,394
155,339
Total operating expenses
457,694
405,724
Total operating income
88,074
58,036
Other income (expense):
Interest income
2,144
497
Interest expense
(75,572)
(70,553)
Gain on disposition of property
27,170
-
Loss on early extinguishment of debt
-
(214)
Income (loss) before income taxes
41,816
(12,234)
Income tax (expense) benefit
(224)
3,271
Net income (loss)
41,592
(8,963)
Net (income) loss attributable to noncontrolling interests:
Noncontrolling interest in the Operating Partnership
(14,865)
4,591
Noncontrolling interests in other partnerships
271
-
Preferred unit distributions
(3,151)
(3,151)
Net income (loss) attributable to common stockholders
$
23,847
$
(7,523)
Total weighted average shares
Basic
166,354
172,487
Diluted
270,966
277,829
Earnings per share attributable to common stockholders
Basic
$
0.14
$
(0.04)
Diluted
$
0.14
$
(0.04)
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,
2022
2021
Net income (loss)
$
10,118
$
(10,183)
Noncontrolling interests in other partnerships
49
-
Preferred unit distributions
(1,050)
(1,050)
Real estate depreciation and amortization
45,461
64,565
FFO attributable to common stockholders
and Operating Partnership units
54,578
53,332
Amortization of below-market ground leases
1,957
1,957
Modified FFO attributable to common
stockholders and Operating Partnership
units
56,535
55,289
Core FFO attributable to common
stockholders and Operating Partnership
units
$
56,535
$
55,289
Total weighted average shares and
Operating Partnership units
Basic
266,035
277,716
Diluted
267,121
277,716
FFO per share
Basic
$
0.21
$
0.19
Diluted
$
0.20
$
0.19
Modified FFO per share
Basic
$
0.21
$
0.20
Diluted
$
0.21
$
0.20
Core FFO per share
Basic
$
0.21
$
0.20
Diluted
$
0.21
$
0.20
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,
2022
2021
Net income (loss)
$
41,592
$
(8,963)
Noncontrolling interests in other partnerships
271
-
Preferred unit distributions
(3,151)
(3,151)
Real estate depreciation and amortization
167,446
151,149
Gain on disposition of property
(27,170)
-
FFO attributable to common stockholders
and Operating Partnership units
178,988
139,035
Amortization of below-market ground leases
5,873
5,873
Modified FFO attributable to common
stockholders and Operating Partnership
units
184,861
144,908
Loss on early extinguishment of debt
-
214
Core FFO attributable to common
stockholders and Operating Partnership
units
$
184,861
$
145,122
Total weighted average shares and
Operating Partnership units
Basic
269,880
277,829
Diluted
270,966
277,829
FFO per share
Basic
$
0.66
$
0.50
Diluted
$
0.66
$
0.50
Modified FFO per share
Basic
$
0.68
$
0.52
Diluted
$
0.68
$
0.52
Core FFO per share
Basic
$
0.68
$
0.52
Diluted
$
0.68
$
0.52
Empire State Realty Trust, Inc.
Condensed Consolidated Balance Sheets
(unaudited and amounts in thousands)
September 30,
2022
December 31,
2021
Assets
Commercial real estate properties, at cost
$
3,537,547
$
3,500,917
Less: accumulated depreciation
(1,159,364)
(1,072,938)
Commercial real estate properties, net
2,378,183
2,427,979
Cash and cash equivalents
387,248
423,695
Restricted cash
52,567
50,943
Tenant and other receivables
30,547
18,647
Deferred rent receivables
239,750
224,922
Prepaid expenses and other assets
72,905
76,549
Deferred costs, net
188,706
202,437
Acquired below market ground leases, net
331,030
336,904
Right of use assets
28,725
28,892
Goodwill
491,479
491,479
Total assets
$
4,201,140
$
4,282,447
Liabilities and equity
Mortgage notes payable, net
$
915,202
$
948,769
Senior unsecured notes, net
973,607
973,373
Unsecured term loan facility, net
388,645
388,223
Accounts payable and accrued expenses
94,436
120,810
Acquired below market leases, net
18,897
24,941
Ground lease liabilities
28,725
28,892
Deferred revenue and other liabilities
80,249
84,358
Tenants’ security deposits
27,550
28,749
Total liabilities
2,527,311
2,598,115
Total equity
1,673,829
1,684,332
Total liabilities and equity
$
4,201,140
$
4,282,447
View source version on businesswire.com:https://www.businesswire.com/news/home/20221026005757/en/
CONTACT: Investors and Media
Empire State Realty Trust Investor Relations
(212) 850-2678
IR@esrtreit.com
KEYWORD: UNITED STATES NORTH AMERICA NEW YORK
INDUSTRY KEYWORD: PROFESSIONAL SERVICES RESIDENTIAL BUILDING & REAL ESTATE COMMERCIAL BUILDING & REAL ESTATE FINANCE CONSTRUCTION & PROPERTY REIT BANKING
SOURCE: Empire State Realty Trust, Inc.
Copyright Business Wire 2022.
PUB: 10/26/2022 04:15 PM/DISC: 10/26/2022 04:17 PM
http://www.businesswire.com/news/home/20221026005757/en