Empire State Realty Trust Announces First Quarter 2024 Results
– Net Income Per Fully Diluted Share of
– Core FFO Per Fully Diluted Share of
– Signed 248,000 Rentable Square Feet of Leases –
– Closed New Credit Facility, over
– Reaffirms 2024 Outlook –
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 asMarch 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 onApril 23, 2024 (linked here).
Property Operations
As of
|
|
|
|
|||
Percent occupied: |
|
|
|
|||
Total commercial portfolio |
87.6% |
|
86.3% |
|
86.7% |
|
Total office |
87.4% |
|
86.0% |
|
86.7% |
|
|
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% |
|
|
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 |
2 |
“Total retail” for the periods ended |
Leasing
The tables that follow summarize leasing activity for the three months ended
Total Portfolio
Total Portfolio |
Total Leases
|
Total square
|
Average cash
|
Previously
|
% of new cash
|
||||||||
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 |
% |
|
Total Leases
|
Total square
|
Average cash
|
Previously
|
% of new cash
|
||||||||
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 at1400 Broadway . -
11-year 57,203 square foot new lease with
Sol de Janeiro USA, Inc. atOne Grand Central Place .
Observatory Results
In the first quarter, Observatory revenue was
Balance Sheet
The Company had
In March, the Company closed on a new
In April, the Company entered into a note purchase agreement to issue
Portfolio Transaction Activity
In March, the Company executed a buyout of its partner’s 10% interest in two multifamily assets located at
In April, the Company worked with the
Share Repurchase
The stock repurchase program began in
Dividend
On
On
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 |
|
|
• 2023 FFO included approximately |
Commercial Property Drivers |
|
|
|
Commercial Occupancy at year-end |
87% to 89% |
86.3% |
|
SS Property Cash NOI
|
-1% to +2% |
+2.2% |
• Assumes positive revenue growth
|
Observatory Drivers |
|
|
|
Observatory NOI |
|
|
• Reflects average quarterly expenses of |
Low |
High |
|||
Net Income (Loss) Attributable to Common Stockholders and the |
|
|
||
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 |
|
|
||
Add: | ||||
Amortization of Below Market Ground Lease |
0.03 |
0.03 |
||
Core FFO Attributable to Common Stockholders and the |
|
|
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
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
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,
About
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
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).
Condensed Consolidated Statements of Operations (unaudited and amounts in thousands, except per share data) |
||||||||
|
|
|||||||
Three Months Ended |
||||||||
|
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 |
|
(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 |
|
||
|
||||||||
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 |
||||||||
|
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 |
|
54,018 |
|
|
41,015 |
|
||
|
||||||||
Amortization of below-market ground leases |
|
1,958 |
|
|
1,958 |
|
||
Modified FFO attributable to common stockholders and |
|
55,976 |
|
|
42,973 |
|
||
Loss on early extinguishment of debt |
|
553 |
|
|
- |
|
||
Core FFO attributable to common stockholders and |
$ |
56,529 |
|
$ |
42,973 |
|
||
|
|
|||||||
Total weighted average shares and |
||||||||
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 |
|
||
|
||||||||
Condensed Consolidated Balance Sheets |
||||||||
(unaudited and amounts in thousands) |
||||||||
|
|
|
||||||
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 |
|
||
|
|
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
(212) 850-2678
IR@esrtreit.com
Source: