- Earnings Per Share of ($0.02) Per Fully
Diluted Share -
- Core FFO of $0.15 Per Fully Diluted Share
-
- $1.4 Billion of Liquidity, No Outstanding
Debt Maturity Through 2024 -
- Indoor Environmental Quality and Energy
Efficiency Differentiate Portfolio -
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 first
quarter of 2021.
“We remain realistic about the current market and confident in
New York City’s recovery. The ongoing, successful vaccination
rollout, increased leasing and sales of apartments, enthusiastic
return to restaurants and entertainment, and increased tours by
office brokers and tenants all are bellwethers for our predicted
bottom in New York City by the end of the first quarter of 2022.
Rent collection levels remain stable, we continue to operate
efficiently, and visits to the Empire State Building Observatory
continue to grow gradually off a low base consistent with our
forecast,” stated Anthony E. Malkin, Empire State Realty Trust’s
Chairman, President and Chief Executive Officer. “ESRT published
its inaugural sustainability report that provides details on its
ESG accomplishments in April, when we were named an ENERGY STAR
Partner of the Year and announced our participation in the Empire
Building Challenge on the heels of the announcement that as of
January 100% of ESRT’s portfolio is powered by renewable wind
energy. We have begun to see interesting opportunities on the
investment side as the market disruption and uncertainty have their
impacts.”
First Quarter and Recent Highlights
- Earnings per share was ($0.02) per fully diluted share.
- Core Funds From Operations (“Core FFO”) was $0.15 per fully
diluted share.
- Same-Store Property Cash NOI excluding lease termination fees
was up 3.0% from the first quarter of 2020 primarily driven by
lower property operating expenses, partially offset by lower
revenue compared to the prior year period.
- Signed 26 new, renewal, and expansion leases, representing a
total of 171,817 rentable square feet.
- Collected 94% of first quarter 2021 total billings with 96% for
office tenants and 86% for retail tenants. The Company recorded a
non-cash reduction of straight-line balances of $0.6 million and
wrote off $0.5 million of tenant receivables assessed as
uncollectible during the first quarter of 2021.
- Strong liquidity position of $1.4 billion as of March 31, 2021,
which consists of $567 million of cash plus an additional $850
million of undrawn capacity under the Company’s new revolving
credit facility entered into during the quarter, which matures in
March 2025 and has two six-month extension options subject to
certain conditions. In addition, the facility has a
sustainability-linked, “green” pricing mechanism that reduces the
borrowing spread if certain benchmarks are achieved each year.
Moreover, the Company has no outstanding debt maturity until
2024.
- In the first quarter and through April 27, 2021, the Company
repurchased $3.5 million of its common stock at an average price of
$9.22 per share. This brings the cumulative total, since the stock
repurchase program began on March 5, 2020 through April 27, 2021,
to $147.2 million at an average price of $8.34 per share.
- ESG accomplishments:
- As of January 2021, 100% of the Company’s portfolio is powered
by renewable wind energy.
- In April 2021, the Company was awarded the 2021 ENERGY STAR
Partner of the Year in recognition of its contributions and
leadership in the fight against climate change. Currently, 76% of
the Company’s portfolio is ENERGY STAR certified.
- In April 2021, the Company published its inaugural
sustainability report that details the current state of its ESG,
Healthy Buildings, and Indoor Environmental Quality accomplishments
and recognition. The report sets forth ESRT’s quantified goals and
commitments to lead the real estate industry towards a net-zero
future.
- In April 2021, the Company joined the Empire Building
Challenge, a New York state initiative to accelerate progress
towards the reduction of 85 percent of greenhouse gas emissions by
2050. ESRT has announced a goal to achieve net-zero carbon
emissions for the Empire State Building by 2030 and across its
portfolio by 2035.
Investor Presentation Update
The Company has posted on the “Investors” section of its website
(www.empirestaterealtytrust.com) the latest investor presentation,
which contains additional information on the current impact of the
COVID-19 pandemic on its businesses, financial condition and
results of operations.
Portfolio Operations
As of March 31, 2021, the Company’s total portfolio contained
10.1 million rentable square feet which consisted of 9.4 million
rentable square feet of office space and 0.7 million rentable
square feet of retail space. As of March 31, 2021, the Company’s
portfolio was occupied and leased as shown below. The Company’s
occupancy levels fluctuate in certain periods due to the timing lag
between the date of tenants’ move out and the lease commencement
date of new leases.
March
31, 2021
December
31, 2020
March
31, 2020
Percent occupied:
Total portfolio
85.0%
85.9%
88.7%
Total office
84.7%
85.6%
88.7%
Manhattan office
86.2%
87.2%
90.0%
GNYMA office
78.4%
79.0%
83.0%
Total retail
88.6%
89.8%
88.5%
Percent leased (includes signed leases
not commenced):
Total portfolio
88.7%
88.7%
91.1%
Total office
88.4%
88.3%
90.9%
Manhattan office
90.0%
89.8%
92.6%
GNYMA office
82.1%
82.4%
84.0%
Total retail
92.0%
93.2%
94.0%
Leasing
Leasing activity has been reduced due to the impact of the
COVID-19 pandemic. The tables below summarize leasing activity for
the three months ended March 31, 2021:
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
25
170,757
$
54.42
$
50.96
6.8%
Retail
1
1,060
$
90.00
$
97.32
(7.5%)
Total Overall
26
171,817
$
54.64
$
51.24
6.6%
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
7
111,397
$
57.66
$
50.25
14.7%
Renewal Office
10
31,612
$
57.58
$
65.12
(11.6%)
Total Office
17
143,009
$
57.64
$
53.54
7.7%
Significant Leases Executed During First Quarter 2021
- At 1400 Broadway, the Company signed an expansion office lease
with Burlington Stores for approximately 33,100 square feet for a
term of 16.0 years. Burlington Stores now occupies approximately
68,300 square feet in the building.
- At 1359 Broadway, the Company signed a new office lease with
Zentalis Pharmaceuticals, Inc. for approximately 31,400 square feet
for a term of 11.0 years. Zentalis will occupy space that will be
vacated by Li & Fung later this year.
- At One Grand Central Place, the Company signed a new office
lease with Belkin Burden Goldman, LLP for approximately 30,600
square feet for a term of 16.5 years.
Observatory Results
The Observatory has seen continued increases in visitors as New
York State travel restrictions are lifted and vaccinations are
rolled out balanced with challenged international pandemic surges
and sluggish vaccination rates.
The Observatory hosted approximately 51,000 visitors in the
first quarter of 2021, compared to 55,000 visitors in the fourth
quarter of 2020 and visitors of 422,000 in the first quarter of
2020. As a reminder, the first quarter is historically the
seasonally lightest quarter for the Observatory due to the winter
weather conditions. First quarter attendance was approximately 9%
of 2019 comparable period attendance, in-line with the Company’s
hypothetical recovery scenario for the quarter. The Company remains
confident attendance will return to pre COVID-19 levels, though its
hypothetical recovery does not show that until the fourth quarter
of 2022.
Observatory revenue for the first quarter 2021 was $2.6 million.
Observatory revenue included $0.1 million of deferred revenue from
unused tickets. Observatory expenses were $4.6 million in the first
quarter 2021.
Balance Sheet
During March 2021, the Company closed on an $850 million,
four-year unsecured revolving credit agreement with a group of
financial institutions. The new unsecured facility, which has an
initial maturity of March 31, 2025 that can be extended by two,
six-month periods at the Company’s option, will replace the
Company’s existing undrawn revolving credit facility that was
scheduled to mature on August 29, 2021. In addition, the facility
has a sustainability-linked pricing mechanism that reduces the
borrowing spread if certain benchmarks are achieved each year.
The Company had $1.4 billion of total liquidity as of March 31,
2021, which is comprised of $567 million of cash, plus an
additional $850 million available under its new revolving credit
facility.
At March 31, 2021, the Company had total debt outstanding of
approximately $2.2 billion, with a weighted average interest rate
of 3.9% per annum, and a weighted average term to maturity of 7.9
years. At March 31, 2021, the Company’s net debt to total market
capitalization was 32.6% and net debt to adjusted EBITDA was 6.5x.
The Company has no outstanding debt maturity until November
2024.
In the first quarter and through April 27, 2021, the Company
repurchased $3.5 million of its common stock at an average price of
$9.22 per share. This brings the cumulative total, since the stock
repurchase program began on March 5, 2020 through April 27, 2021,
to $147.2 million at an average price of $8.34 per share, through a
combination of open-market purchases and the execution of a 10b5-1
program.
Dividend
On December 14, 2020, the Company announced its decision to
continue with the suspension of the dividend for the first and
second quarters of 2021 for 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”). The Company will review
resumption of its dividend with its Board of Directors at its next
board meeting.
On March 31, 2021, the Company paid a preferred dividend of
$0.15 per unit for the first quarter 2021 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 2021 to holders of the Operating Partnership’s Series 2019
private perpetual preferred units.
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 29,
2021 at 12:00 pm Eastern time.
The webcast will be accessible on the “Investors” section of the
Company’s website at www.empirestaterealtytrust.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. Shortly after the call, a replay of
the webcast will be available for 90 days on the Company’s
website.
The conference call can also be accessed by dialing
1-877-407-3982 for domestic callers or 1-201-493-6780 for
international callers. A dial-in replay will be available starting
shortly after the call until May 6, 2021, which can be accessed 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
13718579.
The Supplemental Report and Investor Presentation are integral
components of quarterly earnings announcement and are now available
on the “Investors” section of the Company’s website at www.empirestaterealtytrust.com.
The Company uses, and intends to continue to use, the Investors
page of its website, which can be found at
www.empirestaterealtytrust.com, as a means of disclosing material
nonpublic information and of complying 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) 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.” The
company's office and retail portfolio covers 10.1 million rentable
square feet, as of March 31, 2021, which consists of 9.4 million
rentable square feet across 14 office properties, including nine in
Manhattan, three in Fairfield County, Connecticut, and two in
Westchester County, New York; as well as approximately 700,000
rentable square feet in the retail portfolio.
Empire State Realty Trust is a leader in energy efficiency in
the built environment and sustainability space, with 76 percent of
the eligible portfolio ENERGY STAR certified and 100 percent fully
powered by renewable wind electricity. As the first commercial real
estate portfolio in the Americas to achieve the evidence-based,
third-party verified WELL Health-Safety Rating for health and
safety, ESRT additionally earned the highest possible GRESB 5 Star
Rating and Green Star recognition for sustainability performance in
real estate and was named a Fitwel Champion for healthy,
high-performance buildings. To learn more about Empire State Realty
Trust, visit empirestaterealtytrust.com and follow 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, political and social
impact of, and uncertainty relating to, the COVID-19 pandemic; (ii)
resolution of legal proceedings involving the Company; (iii)
reduced demand for office or retail space, including as a result of
the COVID-19 pandemic; (iv) changes in our business strategy; (v)
changes in technology and market competition that affect
utilization of our office, retail, broadcast or other facilities;
(vi) changes in domestic or international tourism, including due to
health crises such as the COVID-19 pandemic, geopolitical events
and/or currency exchange rates, which may cause a decline in
Observatory visitors; (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, including the potential phasing out of LIBOR
after 2021; (ix) declining real estate valuations and impairment
charges; (x) termination or expiration of our ground leases; (xi)
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; (xii) decreased rental
rates or increased vacancy rates; (xiii) our failure to redevelop
and reposition properties, or to execute any newly planned capital
project successfully or on the anticipated timeline or at the
anticipated costs; (xiv) difficulties in identifying properties to
acquire and completing acquisitions; (xv) risks related to our
development projects (including our Metro Tower development site)
and capital projects, including the cost of construction delays and
cost overruns; (xvi) impact of changes in governmental regulations,
tax laws and rates and similar matters; (xvii) our failure to
qualify as a REIT; (xviii) environmental uncertainties and risks
related to adverse weather conditions, rising sea levels and
natural disasters; and (xix) the accuracy of our methodologies and
estimates regarding ESG metrics, goals and targets, tenant
willingness and ability to collaborate towards reporting ESG
metrics and meeting ESG goals and targets, and the 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, performance or transactions, see the
section entitled “Risk Factors” in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2020, 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 March
31,
2021
2020
Revenues
Rental revenue
$
140,231
$
148,113
Observatory revenue
2,603
19,544
Lease termination fees
1,289
211
Third-party management and other fees
276
346
Other revenue and fees
905
2,010
Total revenues
145,304
170,224
Operating expenses
Property operating expenses
30,279
41,468
Ground rent expenses
2,331
2,331
General and administrative expenses
13,853
15,951
Observatory expenses
4,588
8,154
Real estate taxes
31,447
29,254
Depreciation and amortization
44,457
46,093
Total operating expenses
126,955
143,251
Total operating income
18,349
26,973
Other income (expense):
Interest income
122
637
Interest expense
(23,554
)
(19,618
)
Loss on early extinguishment of debt
(214
)
(86
)
Income (loss) before income
taxes
(5,297
)
7,906
Income tax benefit
2,106
382
Net income
(3,191
)
8,288
Preferred unit distributions
(1,050
)
(1,050
)
Net (income) loss attributable to
non-controlling interests
1,620
(2,743
)
Net income (loss) attributable to
common stockholders
$
(2,621
)
$
4,495
Total weighted average shares
Basic
171,735
181,741
Diluted
277,881
292,645
Net income (loss) per share
attributable to common stockholders
Basic
$
(0.02
)
$
0.02
Diluted
$
(0.02
)
$
0.02
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,
2021
2020
Net income (loss)
$
(3,191
)
$
8,288
Preferred unit distributions
(1,050
)
(1,050
)
Real estate depreciation and
amortization
43,104
44,430
FFO attributable to common stockholders
and non-controlling interests
38,863
51,668
Amortization of below-market ground
leases
1,958
1,958
Modified FFO attributable to common
stockholders and non-controlling interests
40,821
53,626
Loss on early extinguishment of debt
214
86
Core FFO attributable to common
stockholders and non-controlling interests
$
41,035
$
53,712
Total weighted average shares
Basic
277,881
292,645
Diluted
277,881
292,645
FFO per share
Basic
$
0.14
$
0.18
Diluted
$
0.14
$
0.18
Modified FFO per share
Basic
$
0.15
$
0.18
Diluted
$
0.15
$
0.18
Core FFO per share
Basic
$
0.15
$
0.18
Diluted
$
0.15
$
0.18
Empire State Realty Trust,
Inc.
Condensed Consolidated Balance
Sheets
(unaudited and amounts in
thousands)
March 31, 2021
December 31, 2020
Assets
Commercial real estate properties, at
cost
$
3,152,408
$
3,133,966
Less: accumulated depreciation
(973,940
)
(941,612
)
Commercial real estate properties, net
2,178,468
2,192,354
Cash and cash equivalents
567,102
526,714
Restricted cash
40,295
41,225
Tenant and other receivables
16,749
21,541
Deferred rent receivables
228,117
222,508
Prepaid expenses and other assets
50,427
77,182
Deferred costs, net
207,058
203,853
Acquired below market ground leases,
net
342,777
344,735
Right of use assets
29,051
29,104
Goodwill
491,479
491,479
Total assets
$
4,151,523
$
4,150,695
Liabilities and equity
Mortgage notes payable, net
$
775,276
$
775,929
Senior unsecured notes, net
973,214
973,159
Unsecured term loan facility, net
387,811
387,561
Accounts payable and accrued expenses
102,381
103,203
Acquired below market leases, net
30,112
31,705
Ground lease liabilities
29,051
29,104
Deferred revenue and other liabilities
94,625
88,319
Tenants’ security deposits
27,858
30,408
Total liabilities
2,420,328
2,419,388
Total equity
1,731,195
1,731,307
Total liabilities and equity
$
4,151,523
$
4,150,695
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210428005997/en/
Investors and Media
Empire State Realty Trust Investor Relations (212) 850-2678
IR@empirestaterealtytrust.com
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