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Empire State Realty Trust Announces First Quarter 2024 Results

– 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 Actual

Results
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

 

 

Contacts

Investors and Media

Empire State Realty Trust Investor Relations

(212) 850-2678

IR@esrtreit.com

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