Exhibit 99.1

 

EMPIRE STATE REALTY TRUST ANNOUNCES THIRD QUARTER 2021 RESULTS

- Earnings of ($0.04) Per Fully Diluted Share -

- Core FFO of $0.20 Per Fully Diluted Share -

- Observatory Recovery and Continued Expense Discipline -

- $1.4 Billion of Liquidity, No Outstanding Debt Maturity Through 2024 -

New York, New York, October 27, 2021 - 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 2021.

Third Quarter and Recent Highlights

 

•

Earnings was ($0.04) per fully diluted share.

 

•

Core Funds From Operations (“Core FFO”) was $0.20 per fully diluted share. Excluding lease termination fees, Core FFO would be $0.16 per fully diluted share.

 

•

Same-Store Property Cash Net Operating Income (“NOI”) excluding lease termination fees was down 5.7% from the third quarter of 2020 primarily driven by a reduction in revenues due to write-offs taken over the period and 3Q 2021 revenue from Global Brands Group treated partially as rental revenue and partially as lease termination income.

 

•

Empire State Building Observatory revenue for the third quarter 2021 increased to $12.8 million, from $8.4 million in the second quarter 2021 as visitation continued to ramp up. Observatory NOI was $6.4 million for the third quarter 2021, which is the second consecutive quarter of positive NOI since the onset of the COVID-19 pandemic and more than double the second quarter 2021 earnings contribution.

 

•

Realized lease termination fees were $11.3 million, or approximately $0.04 per fully diluted share. In keeping with historical practice, the Company includes lease termination fees when calculating FFO and Core FFO.

 

•

Signed 34 new, renewal, and expansion leases, representing a total of 268,055 rentable square feet. This includes 21 leases totaling 212,301 rentable square feet in the Manhattan office portfolio.

 

•

Collected 95% of third quarter 2021 total billings, stable and in-line with recent quarters.

 

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•

Earned the highest possible GRESB 5 Star Rating and Green Star recognition for the second consecutive year with a score of 94, a six-point increase from the Company’s first year of participation in 2020. The company additionally received a score of 96 – the highest in the U.S. diversified group – and an “A” rating in the Public Disclosure Agreement, which measures ESG disclosure activities.

 

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In the third quarter and through October 26, 2021, the Company repurchased $6.5 million of its common stock at a weighted average price of $10.41 per share. This brings the cumulative total, since the stock repurchase program began on March 5, 2020 through October 26, 2021, to $153.8 million at a weighted average price of $8.41 per share.

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 the current impact of the COVID-19 pandemic on its businesses, financial condition and results of operations.

Portfolio Operations

As of September 30, 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, which was occupied and leased as shown below.

 

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		September 30, 2021				June 30, 2021				September 30, 2020
Percent occupied:
Total portfolio			83.5	%			85.2	%			85.9	%
Total office			83.5	%			85.0	%			85.6	%
Manhattan office			84.5	%			87.2	%			86.9	%
GNYMA office			79.8	%			76.1	%			80.1	%
Total retail			83.0	%			88.5	%			89.4	%
Percent leased (includes signed leases not commenced):
Total portfolio			86.5	%			88.2	%			89.7	%
Total office			86.1	%			87.9	%			89.4	%
Manhattan office			87.4	%			89.9	%			90.9	%
GNYMA office			80.7	%			79.8	%			83.1	%
Total retail			91.9	%			92.0	%			93.4	%

Leasing

The tables below summarize leasing activity for the three months ended September 30, 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			31				264,132			$	53.39			$	53.25				0.3	%
Retail			3				3,923			$	99.97			$	179.25				(44.2	%)
Total Overall			34				268,055			$	54.11			$	55.18				(2.0	%)

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			13				139,620			$	57.86			$	57.23				1.1	%
Renewal Office			8				72,681			$	54.73			$	54.26				0.9	%
Total Office			21				212,301			$	56.79			$	56.21				1.0	%

 

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Leasing Activity Highlights During Third Quarter 2021

 

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At One Grand Central Place, the Company signed an expansion office lease with Institutional Capital Network Inc., for approximately 29,400 square feet for a term of 12.9 years. Institutional Capital Network now occupies approximately 64,500 square feet in the building.

 

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At 501 Seventh Avenue, the Company signed a new office lease with Argo Group US, Inc. for approximately 30,000 square feet for a term of 7.6 years.

 

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At 1333 Broadway, the Company signed a new office lease with Playfly, LLC for approximately 29,600 square feet for a term of 7.7 years.

 

•

Prebuilt leasing activity in the Manhattan office portfolio comprised 15 of the 21 leases.

Observatory Results

As previously disclosed in our investor presentation dated September 21, 2021, we revised our hypothetical Observatory admissions based on the following factors:

 

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Observatory visitor recapture versus 2019 was above our hypothetical in July and early August.

 

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Two factors reduced admissions below our hypothetical in balance of 3Q 2021:

 

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Resurgent Delta variant and impact on travel;

 

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U.S. borders remain closed to international tourism.

 

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Historically, September, October, and November (ex-Thanksgiving) are seasonally low volume months with strong international component.

 

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We have adjusted down October and November to take into account no, and ramp-up of, international tourists, respectively.

 

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On October 15, 2021, the Biden administration announced that effective November 8, 2021, fully vaccinated international tourists are permitted into the U.S.

The Observatory hosted approximately 255,000 visitors in the third quarter 2021, compared to 162,000 visitors in the second quarter 2021 and 30,000 visitors in the third quarter 2020. Third quarter attendance was approximately 24% of 2019 comparable period attendance. Month-to-date through October 26th, attendance was at 24% of 2019 comparable period attendance, above the Company’s revised hypothetical October admissions forecast of 20%. The Company will monitor developments and update the hypothetical admissions forecast, as warranted. The Company believes attendance will return to pre-COVID-19 levels as tourism and travel normalize in the quarters ahead.

 

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Observatory revenue for the third quarter 2021 was $12.8 million and Observatory expenses were $6.4 million in the third quarter 2021. The Company continues to manage expenses given the gradual ramp-up in visitation. Observatory NOI was $6.4 million in the third quarter, marking the second consecutive positive quarter since the onset of the COVID-19 pandemic in first quarter 2020.

Balance Sheet

The Company had $1.4 billion of total liquidity as of September 30, 2021, which is comprised of $582 million of cash, plus an additional $850 million available under its revolving credit facility.

At September 30, 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 7.4 years. At September 30, 2021, the Company’s net debt to total market capitalization was 34.7% and net debt to adjusted EBITDA was 5.6x. The Company has no outstanding debt maturity until November 2024.

In the third quarter and through October 26, 2021, the Company repurchased $6.5 million of its common stock at a weighted average price of $10.41 per share. This brings the cumulative total, since the stock repurchase program began on March 5, 2020 through October 26, 2021, to $153.8 million at a weighted average price of $8.41 per share, through a combination of open-market purchases and 10b5-1 programs.

Acquisitions

Earlier this week and referenced in the 8K filed on October 27th, the Company signed conditional agreements for purchase of two multifamily assets in Manhattan totaling 625 residential units, for a total purchase price of approximately $307 million, inclusive of approximately $186 million of assumed debt. An affiliate of one of the principal current owners of the properties would retain a 10% equity stake and would continue to serve as property manager. The transaction is subject to conditions, the satisfaction of which depend upon actions by third parties as well as the Company. As such, there can be no assurance that the transaction can or will be closed.

 

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Dividend

On September 30, 2021, the Company paid a dividend of $0.035 per share or unit, as applicable, for the third quarter 2021 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, 2021, the Company paid a preferred dividend of $0.15 per unit for the third 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 third 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, October 28, 2021 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. 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 November 4, 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 13723868.

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.esrtreit.com.

 

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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 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 September 30, 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 esrtreit.com and follow ESRT on Facebook, Instagram, Twitter and LinkedIn.

 

 

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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,” “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) a failure of conditions or performance regarding any event or transaction described above, (iii) resolution of legal proceedings involving the Company; (iv) reduced demand for office 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, broadcast or other facilities; (vii) 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; (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 potential phasing out of LIBOR after 2021; (x) declining real estate valuations and impairment charges; (xi) termination or expiration 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 redevelop and reposition properties, or to execute any newly planned capital project successfully or on the anticipated timeline or at the anticipated costs; (xv) difficulties in identifying properties to acquire and completing acquisitions; (xvi) risks related to our development projects (including our Metro Tower development site) and capital projects, including the cost of construction delays and cost overruns; (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 adverse weather conditions, rising sea levels and natural disasters; and (xx) 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.

 

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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).

Contact:

Investors and Media

Empire State Realty Trust Investor Relations

(212) 850-2678

IR@esrtreit.com

 

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Empire State Realty Trust, Inc.

Condensed Consolidated Statements of Operations

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

 

		Three Months Ended September 30,
		2021				2020
Revenues
Rental revenue		$	139,558			$	139,909
Observatory revenue			12,796				4,419
Lease termination fees			11,321				331
Third-party management and other fees			314				283
Other revenue and fees			1,059				1,633
Total revenues			165,048				146,575
Operating expenses
Property operating expenses			33,357				33,836
Ground rent expenses			2,331				2,331
General and administrative expenses			14,427				14,517
Observatory expenses			6,370				5,931
Real estate taxes			29,566				31,196
Impairment charge			—				2,103
Depreciation and amortization			65,794				44,733
Total operating expenses			151,845				134,647
Total operating income			13,203				11,928
Other income (expense):
Interest income			211				366
Interest expense			(23,577	)			(23,360	)
IPO litigation expense			—				(1,165	)
Loss before income taxes			(10,163	)			(12,231	)
Income tax (expense)			(20	)			(38	)
Net (loss)			(10,183	)			(12,269	)
Preferred unit distributions			(1,050	)			(1,050	)
Net loss attributable to non-controlling interests			4,256				5,115
Net (loss) attributable to common stockholders		$	(6,977	)		$	(8,204	)
Total weighted average shares
Basic			172,494				173,048
Diluted			277,716				280,940
Net income (loss) per share attributable to common stockholders
Basic		$	(0.04	)		$	(0.05	)
Diluted		$	(0.04	)		$	(0.05	)

 

10

Empire State Realty Trust, Inc.

Condensed Consolidated Statements of Operations

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

 

		Nine Months Ended September 30,
		2021				2020
Revenues
Rental revenue		$	420,586			$	426,021
Observatory revenue			23,758				24,049
Lease termination fees			15,949				1,575
Third-party management and other fees			917				930
Other revenue and fees			2,550				5,254
Total revenues			463,760				457,829
Operating expenses
Property operating expenses			92,429				105,054
Ground rent expenses			6,994				6,994
General and administrative expenses			42,369				48,617
Observatory expenses			16,226				18,087
Real estate taxes			92,367				90,029
Impairment charge			—				6,204
Depreciation and amortization			155,339				143,609
Total operating expenses			405,724				418,594
Total operating income			58,036				39,235
Other income (expense):
Interest income			497				2,529
Interest expense			(70,553	)			(66,906	)
Loss on early extinguishment of debt			(214	)			(86	)
IPO litigation expense			—				(1,165	)
Loss before income taxes			(12,234	)			(26,393	)
Income tax benefit			3,271				2,794
Net loss			(8,963	)			(23,599	)
Preferred unit distributions			(3,151	)			(3,147	)
Net loss attributable to non-controlling interests			4,591				10,244
Net loss attributable to common stockholders		$	(7,523	)		$	(16,502	)
Total weighted average shares
Basic			172,487				176,299
Diluted			277,829				285,640
Net income (loss) per share attributable to common stockholders
Basic		$	(0.04	)		$	(0.09	)
Diluted		$	(0.04	)		$	(0.09	)

 

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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,
		2021				2020
Net loss		$	(10,183	)		$	(12,269	)
Preferred unit distributions			(1,050	)			(1,050	)
Real estate depreciation and amortization			64,565				43,029
Impairment charge			—				1,259
FFO attributable to common stockholders and non-controlling interests			53,332				30,969
Amortization of below-market ground leases			1,957				1,957
Modified FFO attributable to common stockholders and non-controlling interests			55,289				32,926
Severance expenses			—				805
IPO litigation expense			—				1,165
Core FFO attributable to common stockholders and non-controlling interests		$	55,289			$	34,896
Total weighted average shares
Basic			277,716				280,940
Diluted			277,716				280,940
FFO per share
Basic		$	0.19			$	0.11
Diluted		$	0.19			$	0.11
Modified FFO per share
Basic		$	0.20			$	0.12
Diluted		$	0.20			$	0.12
Core FFO per share
Basic		$	0.20			$	0.12
Diluted		$	0.20			$	0.12

 

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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,
		2021				2020
Net loss		$	(8,963	)		$	(23,599	)
Preferred unit distributions			(3,151	)			(3,147	)
Real estate depreciation and amortization			151,149				138,555
Impairment charge			—				5,360
FFO attributable to common stockholders and non-controlling interests			139,035				117,169
Amortization of below-market ground leases			5,873				5,873
Modified FFO attributable to common stockholders and non-controlling interests			144,908				123,042
Loss on early extinguishment of debt			214				86
Severance expenses			—				3,813
IPO litigation expense			—				1,165
Core FFO attributable to common stockholders and non-controlling interests		$	145,122			$	128,106
Total weighted average shares
Basic			277,829				285,640
Diluted			277,829				285,640
FFO per share
Basic		$	0.50			$	0.41
Diluted		$	0.50			$	0.41
Modified FFO per share
Basic		$	0.52			$	0.43
Diluted		$	0.52			$	0.43
Core FFO per share
Basic		$	0.52			$	0.45
Diluted		$	0.52			$	0.45

 

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Empire State Realty Trust, Inc.

Condensed Consolidated Balance Sheets

(unaudited and amounts in thousands)

 

		September 30, 2021				December 31, 2020
Assets
Commercial real estate properties, at cost		$	3,187,734			$	3,133,966
Less: accumulated depreciation			(1,055,731	)			(941,612	)
Commercial real estate properties, net			2,132,003				2,192,354
Cash and cash equivalents			582,188				526,714
Restricted cash			38,779				41,225
Tenant and other receivables			21,664				21,541
Deferred rent receivables			228,394				222,508
Prepaid expenses and other assets			60,522				77,182
Deferred costs, net			189,327				203,853
Acquired below market ground leases, net			338,862				344,735
Right of use assets			28,945				29,104
Goodwill			491,479				491,479
Total assets		$	4,112,163			$	4,150,695
Liabilities and equity
Mortgage notes payable, net		$	773,925			$	775,929
Senior unsecured notes, net			973,320				973,159
Unsecured term loan facility, net			388,095				387,561
Accounts payable and accrued expenses			94,216				103,203
Acquired below market leases, net			23,512				31,705
Ground lease liabilities			28,945				29,104
Deferred revenue and other liabilities			90,427				88,319
Tenants’ security deposits			26,042				30,408
Total liabilities			2,398,482				2,419,388
Total equity			1,713,681				1,731,307
Total liabilities and equity		$	4,112,163			$	4,150,695

 

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Exhibit 99.2

 

		Third Quarter 2021

 

 

Table of Contents		Page
Summary
Company Profile			1
Financial Highlights			2
Selected Property Data
Property Summary Net Operating Income			3
Net Operating Income, Initial Free Rent Burn-Off and Signed Leases Not Commenced			4
Leasing Activity			5
Property Detail			7
Portfolio Expirations and Vacates Summary			8
Tenant Lease Expirations			9
Largest Tenants and Portfolio Tenant Diversification by Industry			12
Capital Expenditures and Redevelopment Program			13
Observatory Summary			14
Financial information
Condensed Consolidated Balance Sheets			15
Condensed Consolidated Statements of Operations			16
FFO, Modified FFO, Core FFO, FAD and EBITDA			17
Consolidated Debt Analysis
Debt Summary			18
Debt Detail			19
Debt Maturities			20
Ground Leases			20
Supplemental Definitions			21

Forward-looking Statements

This presentation 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, (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 and (xx) a failure of conditions or performance regarding any event or transaction described in the Company’s earnings press release for this quarter.

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).

 

		Third Quarter 2021

 

 

COMPANY PROFILE

Empire State Realty Trust, Inc., or the Company, is a leading real estate investment trust (REIT) that owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the world’s most famous building.

BOARD OF DIRECTORS

 

Anthony E. Malkin		Chairman, President and Chief Executive Officer
Leslie D. Biddle		Director, Chair of the Compensation and Human Capital Committee
Thomas J. DeRosa		Director
Steven J. Gilbert		Director, Lead Independent Director
S. Michael Giliberto		Director, Chair of the Audit Committee
Patricia S. Han		Director
Grant H. Hill		Director
R. Paige Hood		Director, Chair of the Finance Committee
James D. Robinson IV		Director, Chair of the Nominating and Corporate Governance Committee

EXECUTIVE MANAGEMENT

 

Anthony E. Malkin		Chairman, President and Chief Executive Officer
Christina Chiu		Executive Vice President and Chief Financial Officer
Thomas P. Durels		Executive Vice President, Real Estate
Thomas N. Keltner, Jr.		Executive Vice President, General Counsel

COMPANY INFORMATION

 

Corporate Headquarters		Investor Relations				New York Stock Exchange
111 West 33rd Street, 12th Floor		IR@esrtreit.com				Trading Symbol: ESRT
New York, NY 10120
www.esrtreit.com
(212) 850-2600

RESEARCH COVERAGE

 

Bank of America Merrill Lynch		James Feldman		(646) 855-5808		james.feldman@baml.com
BMO Capital Markets Corp.		John Kim		(212) 885-4115		jp.kim@bmo.com
BTIG		Thomas Catherwood		(212) 738-6140		tcatherwood@btig.com
Citi		Michael Bilerman		(212) 816-1383		michael.bilerman@citi.com
		Emmanuel Korchman		(212) 816-1382		emmanuel.korchman@citi.com
Evercore ISI		Steve Sakwa		(212) 446-9462		steve.sakwa@evercoreisi.com
Green Street Advisors		Daniel Ismail		(949) 640-8780		dismail@greenstreetadvisors.com
KeyBanc Capital Markets		Craig Mailman		(917) 368-2316		cmailman@key.com
Wells Fargo Securities, LLC		Blaine Heck		(443) 263-6529		blaine.heck@wellsfargo.com
Wolfe Research		Andrew Rosivach		(646) 582-9251		arosivach@wolferesearch.com

 

1

		Third Quarter 2021
		Financial Highlights
		(unaudited and dollars in thousands, except per share amounts)

 

		Three Months Ended
		September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
Selected Items:
Revenue		$	165,048			$	153,408			$	145,304			$	151,399			$	146,575
Net income (loss)		$	(10,183	)		$	4,411			$	(3,191	)		$	710			$	(12,269	)
Cash net operating income (1)		$	87,736			$	82,812			$	71,340			$	82,079			$	73,037
Core funds from operations (“Core FFO”) (1)		$	55,289			$	48,798			$	41,035			$	47,308			$	34,896
Core funds available for distribution (“Core FAD”) (1)		$	37,676			$	27,205			$	29,693			$	41,267			$	24,083
Core FFO per share—diluted		$	0.20			$	0.18			$	0.15			$	0.17			$	0.12
Diluted weighted average shares			277,716,000				278,436,000				277,881,000				278,471,000				280,940,000
Dividends declared and paid per share		$	0.035			$	0.035			$	—			$	—			$	—
Portfolio Statistics:
Number of properties			20				20				20				20				20
Total rentable square footage			10,129,201				10,135,063				10,134,980				10,135,330				10,136,793
Percent occupied (2)			83.5	%			85.2	%			85.0	%			85.9	%			85.9	%
Percent leased (3)			86.5	%			88.2	%			88.7	%			88.7	%			89.7	%
Observatory Metrics:
Number of visitors (4)			255,000				162,000				51,000				55,000				30,000
Change in visitors year over year			750.0	%			N/A				(87.9	%)			(93.8	%)			(97.1	%)
Observatory revenues (5)		$	12,796			$	8,359			$	2,603			$	5,008			$	4,419
Change in revenues year over year			189.6	%			N/A				(86.7	%)			(86.7	%)			(88.2	%)
Ratios:
Debt to Total Market Capitalization (6)			42.2	%			37.9	%			39.7	%			43.9	%			51.6	%
Net Debt to Total Market Capitalization (6)			34.7	%			31.4	%			32.6	%			37.2	%			46.3	%
Debt and Perpetual Preferred Units to
Total Market Capitalization (6)			43.9	%			39.5	%			41.3	%			45.7	%			53.9	%
Net Debt and Perpetual Preferred Units to
Total Market Capitalization (6)			36.7	%			33.1	%			34.5	%			39.2	%			48.9	%
Debt to Adjusted EBITDA (1) (7)			7.7x				8.3x				8.6x				8.4x				6.9x
Net Debt to Adjusted EBITDA (1) (7)			5.6x				6.2x				6.5x				6.3x				5.6x
Interest Coverage Ratio			4.0x				3.7x				3.5x				3.7x				2.9x
Core FFO Payout Ratio (8)			18	%			19	%			0	%			0	%			0	%
Core FAD Payout Ratio (9)			26	%			35	%			0	%			0	%			0	%
Class A common stock price at quarter end		$	10.03			$	12.00			$	11.13			$	9.32			$	6.12
Average closing price		$	10.79			$	11.76			$	10.42			$	7.89			$	6.49
Dividends per share—annualized		$	0.14			$	0.14			$	—			$	—			$	—
Dividend yield (10)			1.4	%			1.2	%			0.0	%			0.0	%			0.0	%
Series 2013 Private Perpetual Preferred Units outstanding ($16.62 liquidation value)			1,560,360				1,560,360				1,560,360				1,560,360				1,560,360
Series 2019 Private Perpetual Preferred Units outstanding ($13.52 liquidation value)			4,664,038				4,664,038				4,664,038				4,664,038				4,664,038
Class A common stock			172,293,081				172,399,373				171,327,270				170,555,274				171,981,257
Class B common stock			999,220				1,001,179				1,004,601				1,010,130				1,010,832
Operating partnership units			111,812,211				112,322,404				113,290,326				113,713,319				115,383,860
Total common stock and operating partnership units outstanding (11) (12)			285,104,512				285,722,956				285,622,197				285,278,723				288,375,949

Notes:

 

(1)	Represents non-GAAP financial measures. For a discussion on what these metrics represent and why the Company presents them, see page 23 and for a reconciliation of these metrics to net income, see pages 5 and 19.

(2)	Based on leases signed and commenced as of end of period.

(3)	Represents occupancy and includes signed leases not commenced.

(4)	Reflects the number of visitors who pass through the turnstile, excluding visitors who make a second visit on the same ticket at no additional charge.

(5)	Observatory revenues include the fixed license fee received from WDFG North America, the Observatory gift shop operator. See page 16.

(6)

Market capitalization represents the sum of (i) Company’s common stock per share price as of September 30, 2021 multiplied by the total outstanding number of shares of common stock and operating partnership units as of September 30, 2021; (ii) the number of Series 2014 perpetual preferred units at September 30, 2021 multiplied by $16.62, (iii) the number of Series 2019 perpetual preferred units at September 30, 2021 multiplied by $13.52, and (iv) our outstanding indebtedness as of September 30, 2021.

(7)	Calculated based on trailing 12 months Adjusted EBITDA.

(8)	Represents the amount of Core FFO paid out in distributions.

(9)	Represents the amount of Core FAD paid out in distributions.

(10)	Based on the closing price per share of Class A common stock on September 30, 2021.

(11)

As of September 30, 2021, the Company has had conversions from operating partnership units and Class B common shares to Class A common shares totaling 63.3 million shares or approximately $635 million at a closing share price of $10.03. This represents a 77% increase in the number of Class A shares since the IPO.

(12)	Represents fully diluted common stock and operating partnership units as it includes unvested restricted stock and unvested LTIP units.

 

2

		Third Quarter 2021
		Property Summary - Same Store Net Operating Income (“NOI”) by Quarter
		(unaudited and dollars in thousands)

 

		Three Months Ended
		September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
Same Store Total Portfolio
Revenues		$	140,617			$	141,383			$	141,136			$	138,255			$	140,698
Operating expenses			(65,254	)			(62,479	)			(64,057	)			(65,313	)			(67,363	)
Same store property NOI			75,363				78,904				77,079				72,942				73,335
Straight-line rent			(3,087	)			(3,763	)			(6,347	)			640				(395	)
Above/below-market rent revenue amortization			(4,244	)			(717	)			(654	)			(674	)			(679	)
Below-market ground lease amortization			1,957				1,958				1,958				1,958				1,957
Total same store property cash NOI—excluding lease termination fees		$	69,989			$	76,382			$	72,036			$	74,866			$	74,218
Percent change over prior year			(5.7	)%			(6.0	)%			3.0	%			1.5	%			9.3	%
Property cash NOI		$	69,989			$	76,382			$	72,036			$	74,866			$	74,218
Observatory cash NOI			6,426				3,091				(1,985	)			(628	)			(1,512	)
Lease termination fees			11,321				3,339				1,289				7,841				331
Total portfolio same store cash NOI		$	87,736			$	82,812			$	71,340			$	82,079			$	73,037
Same Store Manhattan Office Portfolio (1)
Revenues		$	120,636			$	121,647			$	121,611			$	119,191			$	121,348
Operating expenses			(56,058	)			(53,324	)			(54,543	)			(55,618	)			(57,642	)
Same store property NOI			64,578				68,323				67,068				63,573				63,706
Straight-line rent			(2,259	)			(4,072	)			(7,117	)			522				(380	)
Above/below-market rent revenue amortization			(4,244	)			(717	)			(654	)			(674	)			(679	)
Below-market ground lease amortization			1,957				1,958				1,958				1,958				1,957
Total same store property cash NOI—excluding lease termination fees			60,032				65,492				61,255				65,379				64,604
Lease termination fees			11,128				2,863				1,167				7,834				282
Total same store property cash NOI		$	71,160			$	68,355			$	62,422			$	73,213			$	64,886
Same Store Greater New York Metropolitan Area Office Portfolio
Revenues		$	16,691			$	15,897			$	15,721			$	15,623			$	15,930
Operating expenses			(7,576	)			(7,143	)			(7,488	)			(7,747	)			(7,870	)
Same store property NOI			9,115				8,754				8,233				7,876				8,060
Straight-line rent			(1,024	)			133				480				198				23
Above/below-market rent revenue amortization			—				—				—				—				—
Below-market ground lease amortization			—				—				—				—				—
Total same store property cash NOI—excluding lease termination fees			8,091				8,887				8,713				8,074				8,083
Lease termination fees			193				476				122				7				49
Total same store property cash NOI		$	8,284			$	9,363			$	8,835			$	8,081			$	8,132
Same Store Standalone Retail Portfolio
Revenues		$	3,290			$	3,839			$	3,804			$	3,441			$	3,420
Operating expenses			(1,620	)			(2,012	)			(2,026	)			(1,948	)			(1,851	)
Same store property NOI			1,670				1,827				1,778				1,493				1,569
Straight-line rent			196				176				290				(80	)			(38	)
Above/below-market rent revenue amortization			—				—				—				—				—
Below-market ground lease amortization			—				—				—				—				—
Total same store property cash NOI—excluding lease termination fees			1,866				2,003				2,068				1,413				1,531
Lease termination fees			—				—				—				—				—
Total same store property cash NOI		$	1,866			$	2,003			$	2,068			$	1,413			$	1,531

Note:

 

(1)	Includes 504,402 rentable square feet of retail space in the Company’s nine Manhattan office properties.

 

3

		Third Quarter 2021
		Net Operating Income (“NOI”), Initial Free Rent Burn-Off and Signed Leases Not Commenced
		(unaudited and dollars in thousands)

Reconciliation of Net Income to NOI and Cash NOI

 

		Three Months Ended
		September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
Net income (loss)		$	(10,183	)		$	4,411			$	(3,191	)		$	710			$	(12,269	)
Add:
General and administrative expenses			14,427				14,089				13,853				13,627				14,517
Depreciation and amortization			65,794				45,088				44,457				47,397				44,733
Interest expense			23,577				23,422				23,768				23,001				23,360
Income tax expense (benefit)			20				(1,185	)			(2,106	)			(4,177	)			38
Impairment charges			—				—				—				—				1,259
IPO litigation expense			—				—				—				—				1,165
Less:
Third-party management and other fees			(314	)			(327	)			(276	)			(295	)			(283	)
Interest income			(211	)			(164	)			(122	)			(108	)			(366	)
Net operating income			93,110				85,334				76,383				80,155				72,154
Straight-line rent			(3,087	)			(3,763	)			(6,347	)			640				(395	)
Above/below-market rent revenue amortization			(4,244	)			(717	)			(654	)			(674	)			(679	)
Below-market ground lease amortization			1,957				1,958				1,958				1,958				1,957
Total cash NOI—including Observatory and lease termination income			87,736				82,812				71,340				82,079				73,037
Less: Observatory NOI			(6,426	)			(3,091	)			1,985				628				1,512
Less: Lease termination income			(11,321	)			(3,339	)			(1,289	)			(7,841	)			(331	)
Total property cash NOI—excluding Observatory and lease termination income		$	69,989			$	76,382			$	72,036			$	74,866			$	74,218
Burn-off of Free Rent and Signed Leases Not Commenced
		Incremental Annual Revenue				Base Cash Rent Contributing to Cash NOI in the Following Years
Total Portfolio						2021				2022				2023				2024
Commenced leases in free rent period		$	24,329			$	1,647			$	16,904			$	23,149			$	23,259
Signed leases not commenced			20,710				—				4,038				19,381				20,710
Total		$	45,039			$	1,647			$	20,942			$	42,530			$	43,969

Commenced leases in free rent period

 

		Square Feet				Incremental Annual Revenue				Base Cash Rent Contributing to Cash NOI in the Following Years
										2021				2022				2023				2024
Fourth quarter 2021			295,260			$	10,432			$	1,647	(1)		$	10,432			$	10,432			$	9,993
First quarter 2022			80,063				2,418				—				2,153				2,418				2,153
Second quarter 2022			124,928				5,697				—				3,576				5,331				5,331
Third quarter 2022			35,260				2,096				—				724				2,096				2,096
Fourth quarter 2022			7,327				385				—				19				385				385
First quarter 2023			63,173				3,301												2,487				3,301
						$	24,329			$	1,647			$	16,904			$	23,149			$	23,259

Signed leases not commenced (“SLNC”)

 

		Square				Expected Base Rent Commencement								Incremental Annual				Base Cash Rent Contributing to Cash NOI in the Following Years
Tenant		Feet				GAAP				Cash				Revenue (2)				2021				2022				2023				2024
Zentalis Pharmaceuticals			31,362				Dec. 2021				Dec. 2022			$	1,940			$	—			$	109			$	1,940			$	1,940
Playfly, Inc.			29,566				Jan. 2022				Nov. 2022				1,630				—				189				1,630				1,630
Burlington Stores			33,125				Jan. 2022				Jan. 2023				1,890				—				—				1,883				1,890
Argo Group USA, Inc.			30,002				Mar. 2022				Oct. 2022				1,710				—				423				1,710				1,710
Starbucks Corporation			22,916				Aug. 2022				Aug. 2022				900				—				364				900				900
Institutional Capital Network, Inc.			29,351				Nov. 2022				Oct. 2023				690				—				—				169				690
Target			37,173				Sept. 2022				Dec. 2022				4,230				—				341				4,230				4,230
LinkedIn Corporation:
LinkedIn Corporation			52,574				Jul. 2022				Jul. 2022				3,840				—				1,908				3,840				3,840
LinkedIn Corporation			30,283				Dec. 2022				Oct. 2023				780				—				—				193				780
Other SLNC			58,802				Oct. 2021- Feb. 2023				Apr. 2022- Feb. 2023				3,100				—				704				2,886				3,100
Total			355,154											$	20,710			$	—			$	4,038			$	19,381			$	20,710

Notes:

 

(1)	As an example, the 2021 amount represents cash revenue contributing from the cash rent commencement date of October 2021 through December 2021. The full annual amount is realized in 2022.

(2)	Reflects new annual rent less annual rent from existing tenant in the space.

 

4