– Net Income Per Fully Diluted Share of
$0.03 –
– Core FFO Per Fully Diluted Share of $0.21
–
– Signed 248,000 Rentable Square Feet of
Leases –
– Closed New Credit Facility, over $800M of
Liquidity, No Floating Rate Debt Exposure –
– Reaffirms 2024 Outlook –
Empire State Realty Trust, Inc. (NYSE: ESRT) is a NYC-focused
REIT that owns and operates a portfolio of modernized, amenitized,
and well-located office, retail, and multifamily assets, and the
Observatory deck attraction in ESRT’s flagship Empire State
Building – the “World’s Most Famous Building”. The Company is a
recognized leader in energy efficiency and indoor environmental
quality. Today the Company reported its operational and financial
results for the first quarter 2024. All per share amounts are on a
fully diluted basis, where applicable.
First Quarter and Recent Highlights
- Net Income of $0.03 per share.
- Core Funds From Operations (“Core FFO”) of $0.21 per
share.
- Same-Store Property Cash Net Operating Income (“NOI”) increased
12.3% year-over-year, excluding lease termination fees, primarily
driven by higher revenues from cash rent commencement, which was
partially offset by increases in operating expenses. Adjusted for
certain nonrecurring items, first quarter Same-Store NOI increased
by approximately 8% year-over-year.
- Manhattan office portfolio leased rate increased by 60bps
sequentially and 200bps year-over-year to 92.7%. The total
commercial portfolio is 91.1% leased as March 31, 2024. This is the
9th consecutive quarter of positive commercial leased rate
absorption.
- Signed approximately 248,000 rentable square feet of new,
renewal, and expansion leases. In our Manhattan office portfolio,
blended leasing spreads were +5.4% and this is the 11th consecutive
quarter of positive leasing spreads.
- Empire State Building Observatory generated $16.2 million of
NOI, a 13% increase year-over-year.
- In March, closed on a new $715 million credit facility
comprised of a revolver and term loan that mature in 2029,
inclusive of extensions, which replaces the existing facility that
was due to mature in 2025.
- In April, entered into a note purchase agreement to issue $225
million of green senior unsecured notes in a private placement
transaction.
- Achieved the Energy Star Partner of the Year Sustained
Excellence award for the second year, the WELL Equity Award and
WELL Health-Safety Leadership Award. Published ESRT’s fourth annual
Sustainability Report on April 23, 2024 (linked here).
Property Operations
As of March 31, 2024, the Company’s property portfolio contained
8.6 million rentable square feet of office space, 0.7 million
rentable square feet of retail space and 727 residential units,
which were occupied and leased as shown below.
March
31, 2024
December
31, 2023
March
31, 2023
Percent occupied:
Total commercial portfolio
87.6%
86.3%
86.7%
Total office
87.4%
86.0%
86.7%
Manhattan office
88.9%
87.3%
87.8%
GNYMA office1
76.8%
76.6%
80.6%
Total retail2
89.8%
90.4%
86.7%
Percent leased (includes signed leases
not commenced):
Total commercial portfolio
91.1%
90.6%
89.4%
Total office
91.1%
90.5%
89.3%
Manhattan office
92.7%
92.1%
90.7%
GNYMA office1
79.5%
79.3%
81.6%
Total retail2
91.0%
92.1%
90.6%
Total multifamily portfolio
97.1%
98.1%
97.2%
1
“GNYMA office” for the periods ended March
31, 2024 and December 31, 2023 reflects the removal of 500
Mamaroneck.
2
“Total retail” for the periods ended March
31, 2024 and December 31, 2023 includes the Williamsburg Retail,
Brooklyn assets which were acquired in September 2023.
Leasing
The tables that follow summarize leasing activity for the three
months ended March 31, 2024. During this period, the Company signed
23 leases that totaled 248,108 square feet. Within the Manhattan
office portfolio, the Company signed 20 office leases that totaled
235,664 square feet.
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
22
245,650
$
59.21
$
56.51
4.8
%
Retail
1
2,458
$
400.00
$
378.97
5.5
%
Total Overall
23
248,108
$
62.59
$
59.71
4.8
%
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
12
201,580
$
59.70
$
55.66
7.3
%
Renewal Office
8
34,084
$
57.92
$
60.62
-4.4
%
Total Office
20
235,664
$
59.44
$
56.38
5.4
%
Leasing Activity Highlights
- 16-year 67,865 square foot expansion lease with Burlington
Merchandising Corporation at 1400 Broadway.
- 11-year 57,203 square foot new lease with Sol de Janeiro USA,
Inc. at One Grand Central Place.
Observatory Results
In the first quarter, Observatory revenue was $24.6 million and
expenses were $8.4 million. Observatory NOI was $16.2 million, a
13% increase year-over-year.
Balance Sheet
The Company had $834 million of total liquidity as of March 31,
2024, which was comprised of $334 million of cash, plus $500
million available under its revolving credit facility. At March 31,
2024, the Company had total debt outstanding of approximately $2.2
billion, no floating rate debt exposure, and a weighted average
interest rate of 3.97% per annum. The weighted average term to
maturity was 5.4 years. At March 31, 2024, the Company’s ratio of
net debt to adjusted EBITDA was 5.3x.
In March, the Company closed on a new $715 million credit
facility, which consists of a $620 million revolving credit
facility and a $95 million term loan facility. The new credit
facility matures in March 2029, inclusive of extensions, and
replaces the existing credit facility that was due to mature in
March 2025. The facility has a sustainability-linked pricing
mechanism that reduces the borrowing spread if certain benchmarks
are achieved each year.
In April, the Company entered into a note purchase agreement to
issue $225 million of green senior unsecured notes in a private
placement transaction with three tranches including $155 million
that matures in 2029, $45 million that matures in 2031, and $25
million that matures in 2034, at a weighted average rate of 7.25%.
The private placement is scheduled to fund on June 17, 2024.
Portfolio Transaction Activity
In March, the Company executed a buyout of its partner’s 10%
interest in two multifamily assets located at 561 10th Avenue and
345 East 94th Street for approximately $14 million in cash and the
assumption of $18 million of the in-place debt. ESRT now owns 100%
of all assets in the Company’s portfolio with no JV ownership
structures.
In April, the Company worked with the First Stamford Place
mortgage lender to structure a cooperative consensual foreclosure,
which is anticipated to be completed by the end of the second
quarter. Upon completion, this transaction is expected to eliminate
a $176 million liability that matures in July 2027 from the balance
sheet.
Share Repurchase
The stock repurchase program began in March 2020 and through
April 23, 2024, approximately $293.7 million has been repurchased
at a weighted average price of $8.18 per share. There were no share
repurchases during the first quarter.
Dividend
On March 28, 2024, the Company paid a quarterly dividend of
$0.035 per share or unit, as applicable, for the first quarter of
2024 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 March 28, 2024, the Company paid a quarterly preferred
dividend of $0.15 per unit for the first quarter of 2024 to holders
of the Operating Partnership’s Series 2014 private perpetual
preferred units and a preferred dividend of $0.175 per unit for the
first quarter of 2024 to holders of the Operating Partnership’s
Series 2019 private perpetual preferred units.
2024 Earnings Outlook
The Company reaffirms 2024 guidance and key assumptions, as
summarized in the table below. The Company’s guidance does not
include the impact of any significant future lease termination fee
income or any unannounced acquisition, disposition or other capital
markets activity.
Key Assumptions 2024 Guidance 2023
ActualResults Comments Earnings Core FFO Per
Fully Diluted Share
$0.90 to $0.94
$0.93 ($0.90 ex non recurring
items)
• 2023 FFO included approximately $0.03 of
non-recurring items • 2024 includes $0.04 from multifamily
assets
Commercial Property Drivers
Commercial Occupancy at year-end
87% to 89%
86.3%
SS Property Cash NOI (excluding lease
termination fees)
-1% to +2%
+2.2%
• Assumes positive revenue growth •
Assumes a ~6-8% y/y increase in operating expenses and real estate
taxes, partially offset by higher tenant expense reimbursements
Observatory Drivers
Observatory NOI
$94M to $102M
$94.1M
• Reflects average quarterly expenses of ~$9M
Low
High
Net Income (Loss) Attributable to Common Stockholders and the
Operating Partnership
$0.24
$0.28
Add: Impairment Charge
0.00
0.00
Real Estate Depreciation & Amortization
0.65
0.65
Less: Private Perpetual Distributions
0.02
0.02
Gain on Disposal of Real Estate, net
0.00
0.00
FFO Attributable to Common Stockholders and the Operating
Partnership
$0.87
$0.91
Add: Amortization of Below Market Ground Lease
0.03
0.03
Core FFO Attributable to Common Stockholders and the Operating
Partnership
$0.90
$0.94
The estimates set forth above may be subject to fluctuations as
a result of several factors, including continued impacts of changes
in the use of office space and remote work on our business and our
market, our ability to complete planned capital improvements in
line with budget, costs of integration of completed acquisitions,
costs associated with future acquisitions or other transactions,
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 ESRT’s
website 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, April 25,
2024 at 12:00 pm Eastern time.
The webcast will be accessible on the “Investors” section of
ESRT’s website. 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 for international callers.
Starting shortly after the call until May 2, 2024, 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 13741461.
The Supplemental Report and Investor Presentation are additional
components of the quarterly earnings announcement and are now
available on the “Investors” section of ESRT’s website.
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 NYC-focused
REIT that owns and operates a portfolio of modernized, amenitized,
and well-located office, retail, and multifamily assets and the
Observatory deck attraction in ESRT’s flagship Empire State
Building – the “World’s Most Famous Building”. The Company is the
recognized leader in energy efficiency and indoor environmental
quality. As of March 31, 2024, ESRT's portfolio is comprised of
approximately 8.6 million rentable square feet of office space, 0.7
million rentable square feet of retail space and 727 residential
units. More information about Empire State Realty Trust can be
found at esrtreit.com and by following ESRT on Facebook, Instagram,
TikTok, X, and LinkedIn.
Forward-Looking Statements
This press release includes “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act"), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). We intend
these forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995 and are including this
statement for purposes of complying with those safe harbor
provisions. You can identify forward-looking statements by the use
of forward-looking terminology such as “aims," "anticipates,"
"approximately," "believes," "contemplates," "continues,"
"estimates," "expects," "forecasts," "hope," "intends," "may,"
"plans," "seeks," "should," "thinks," "will," "would" or the
negative of these words and phrases or similar words or phrases.
For the avoidance of doubt, any projection, guidance, or similar
estimation about the future or future results, performance or
achievements is a forward-looking statement.
Forward-looking statements are subject to substantial risks and
uncertainties, many of which are difficult to predict and are
generally beyond our control, and you should not rely on them as
predictions of future events. Forward-looking statements depend on
assumptions, data or methods which may be incorrect or imprecise,
and we may not be able to realize them. We do not guarantee that
the transactions and events described will happen as described (or
that they will happen at all).
Many important factors could cause our actual results,
performance, achievements, and future events to differ materially
from those set forth, implied, anticipated, expected, projected,
assumed or contemplated in our forward-looking statements,
including, among other things: (i) economic, market, political and
social impact of, and uncertainty relating to, any catastrophic
events, including pandemics, epidemics or other outbreaks of
disease, climate-related risks such as natural disasters and
extreme weather events, terrorism and other armed hostilities, as
well as cybersecurity threats and technology disruptions; (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 changes in the use of
office space and remote work; (v) changes in our business strategy;
(vi) a decline in Observatory visitors due to changes in domestic
or international tourism, including due to health crises,
geopolitical events, currency exchange rates, and/or competition
from other observatories; (vii) defaults on, early terminations of,
or non-renewal of, leases by tenants; (viii) increases in the
Company’s borrowing costs as a result of changes in interest rates
and other factors; (ix) declining real estate valuations and
impairment charges; (x) termination of our ground leases; (xi)
limitations on our ability to pay down, refinance, restructure or
extend our indebtedness or borrow additional funds; (xii) decreased
rental rates or increased vacancy rates; (xiii) difficulties in
executing capital projects or development projects successfully or
on the anticipated timeline or budget; (xiv) difficulties in
identifying and completing acquisitions; (xv) impact of changes in
governmental regulations, tax laws and rates and similar matters;
(xvi) our failure to qualify as a REIT; (xvii) incurrence of
taxable capital gain on disposition of an asset due to failure of
compliance with a 1031 exchange program; and (xviii) failure to
achieve sustainability metrics and goals, including as a result of
tenant collaboration, and impact of governmental regulation on our
sustainability efforts. 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” of our annual report on Form 10-K for the year ended
December 31, 2023 and any additional factors that may be contained
in any filing we make with the SEC.
While forward-looking statements reflect the Company's good
faith beliefs, they do not guarantee future performance. Any
forward-looking statement contained in this press release speaks
only as of the date on which it was made, and we assume no
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 March
31,
2024
2023
Revenues
Rental revenue
$
153,882
$
140,091
Observatory revenue
24,596
22,154
Lease termination fees
-
-
Third-party management and other fees
265
427
Other revenue and fees
2,436
1,950
Total revenues
181,179
164,622
Operating expenses
Property operating expenses
45,060
42,044
Ground rent expenses
2,331
2,331
General and administrative expenses
15,972
15,708
Observatory expenses
8,431
7,855
Real estate taxes
32,241
31,788
Depreciation and amortization
46,081
47,408
Total operating expenses
150,116
147,134
Total operating income
31,063
17,488
Other income (expense):
Interest income
4,178
2,595
Interest expense
(25,128
)
(25,304
)
Loss on early extinguishment of debt
(553
)
-
Gain (loss) on sale of properties
-
15,696
Income before income taxes
9,560
10,475
Income tax benefit (expense)
655
1,219
Net income
10,215
11,694
Net (income) loss attributable to
non-controlling interests:
Non-controlling interest in the Operating
Partnership
(3,500
)
(4,168
)
Non-controlling interests in other
partnerships
(4
)
43
Preferred unit distributions
(1,050
)
(1,050
)
Net income attributable to common
stockholders
$
5,661
$
6,519
Total weighted average shares
Basic
163,491
161,339
Diluted
267,494
265,197
Earnings per share attributable to
common stockholders
Basic
$
0.03
$
0.04
Diluted
$
0.03
$
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 March
31,
2024
2023
Net income
$
10,215
$
11,694
Non-controlling interests in other
partnerships
(4
)
43
Preferred unit distributions
(1,050
)
(1,050
)
Real estate depreciation and
amortization
44,857
46,024
(Gain) loss on sale of properties
-
(15,696
)
FFO attributable to common stockholders
and Operating Partnership units
54,018
41,015
Amortization of below-market ground
leases
1,958
1,958
Modified FFO attributable to common
stockholders and Operating Partnership units
55,976
42,973
Loss on early extinguishment of debt
553
-
Core FFO attributable to common
stockholders and Operating Partnership units
$
56,529
$
42,973
Total weighted average shares and
Operating Partnership units
Basic
264,562
264,493
Diluted
267,494
265,197
FFO per share
Basic
$
0.20
$
0.16
Diluted
$
0.20
$
0.15
Modified FFO per share
Basic
$
0.21
$
0.16
Diluted
$
0.21
$
0.16
Core FFO per share
Basic
$
0.21
$
0.16
Diluted
$
0.21
$
0.16
Empire State Realty Trust,
Inc.
Condensed Consolidated Balance
Sheets
(unaudited and amounts in
thousands)
March 31, 2024
December 31, 2023
Assets
Commercial real estate properties, at
cost
$
3,702,317
$
3,655,192
Less: accumulated depreciation
(1,288,519
)
(1,250,062
)
Commercial real estate properties, net
2,413,798
2,405,130
Cash and cash equivalents
333,573
346,620
Restricted cash
51,738
60,336
Tenant and other receivables
40,137
39,836
Deferred rent receivables
257,266
255,628
Prepaid expenses and other assets
74,472
98,167
Deferred costs, net
180,462
172,547
Acquired below market ground leases,
net
319,284
321,241
Right of use assets
28,378
28,439
Goodwill
491,479
491,479
Total assets
$
4,190,587
$
4,219,333
Liabilities and equity
Mortgage notes payable, net
$
876,497
$
877,388
Senior unsecured notes, net
973,926
973,872
Unsecured term loan facility, net
268,503
389,286
Unsecured revolving credit facility
120,000
-
Accounts payable and accrued expenses
91,005
99,756
Acquired below market leases, net
12,798
13,750
Ground lease liabilities
28,378
28,439
Deferred revenue and other liabilities
69,289
70,298
Tenants’ security deposits
25,457
35,499
Total liabilities
2,465,853
2,488,288
Total equity
1,724,734
1,731,045
Total liabilities and equity
$
4,190,587
$
4,219,333
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240424170970/en/
Investors and Media
Empire State Realty Trust Investor Relations (212) 850-2678
IR@esrtreit.com
Empire State Realty (NYSE:ESRT)
Historical Stock Chart
From Apr 2024 to May 2024
Empire State Realty (NYSE:ESRT)
Historical Stock Chart
From May 2023 to May 2024