Empire State Realty Trust Announces First Quarter 2022 Results and Provides 2022 Guidance

- Net Income of ($0.07) Per Fully Diluted Share -
- First Quarter Core FFO of $0.18 Per Fully Diluted Share -
- Provides 2022 Core FFO Guidance of $0.73 to $0.78 Per Fully Diluted Share -
- $1.3 Billion of Liquidity, No Outstanding Debt Maturity Until November 2024 -

NEW YORK--()--Empire State Realty Trust, Inc. (NYSE: ESRT) (the "Company"), a NYC-focused REIT with office, retail and multifamily properties and the Empire State Building Observatory, today reported its operational and financial results for the first quarter of 2022.

First Quarter 2022 and Recent Highlights

  • Net Income of ($0.07) per fully diluted share.
  • Core Funds From Operations (“Core FFO”) of $0.18 per fully diluted share in first quarter 2022, compared to $0.15 per fully diluted share in first quarter 2021.
  • Same-Store1 Property Cash Net Operating Income (“NOI”) excluding lease termination fees increased 0.9% over the first quarter of 2021.
  • Total portfolio is 87.0% leased, Manhattan office portfolio is 88.6% leased.
  • Signed a total of 318,646 rentable square feet of new, renewal, and expansion leases, including long term new office leases with Progyny, Inc. for 70,600 square feet, Signature Bank Inc. that now has a total of 313,100 square feet, and 18 prebuilt leases in the Manhattan office portfolio.
  • Empire State Building Observatory revenue was $13.2 million and NOI was $7.0 million for the first quarter 2022. First quarter visitation at 45% of 2019 levels exceeded the Company’s hypothetical forecast of 40%, and this recapture rate increased to over 50% in March and into the 60% range during April.
  • Repurchased $23.3 million of common stock at a weighted average price of $9.34 per share in the first quarter and through April 21, 2022. Since the stock repurchase program began in March 2020 through April 21, 2022, approximately $215 million at a weighted average price of $8.67 per share has been repurchased.
  • Published second annual Sustainability Report on April 22nd, 2022.
  • Among the first to achieve recertification of WELL Health-Safety Rating for the entire commercial portfolio.
  • Hosted former President Bill Clinton, Governor Kathy Hochul, and Mayor Eric Adams at the Empire State Building to reveal the “Empire Building Playbook: A Guide to Low Carbon Retrofits.” Co-developed by Empire State Realty Trust and NYSERDA and supported by other NYC-based landlords and the Clinton Global Initiative, a manual of specific, tested steps to reduce energy consumption and carbon emissions at existing buildings through investment with assured economic returns.

1

Same-Store as described in First Quarter 2022 Supplemental

Property Operations

As of March 31, 2022, the Company’s property portfolio contained 9.4 million rentable square feet of office space, 0.7 million rentable square feet of retail space and 625 units across two multifamily properties, which were occupied and leased as shown below.

 

 

March 31, 2022

 

December 31, 2021

 

March 31, 2021

Percent occupied:

 

 

 

 

 

 

Total commercial portfolio

 

83.0%

 

82.4%

 

85.0%

Total office

 

82.4%

 

82.5%

 

84.7%

Manhattan office

 

83.9%

 

83.9%

 

86.2%

GNYMA office

 

76.2%

 

76.6%

 

78.4%

Total retail2

 

91.1%

 

81.8%

 

88.6%

Total multifamily portfolio

 

97.6%

 

96.4%

 

N/A

       
       

Percent leased (includes signed leases not commenced):

Total commercial portfolio

 

87.0%

 

85.7%

 

88.7%

Total office

 

86.6%

 

85.3%

 

88.4%

Manhattan office

 

88.6%

 

87.0%

 

90.0%

GNYMA office

 

78.5%

 

78.1%

 

82.1%

Total retail

 

91.5%

 

91.2%

 

92.0%

 

 

 

 

 

 

 

2

“Total Retail” for the period ending March 31, 2022 includes the retail assets acquired as part of the multifamily acquisition completed in late-December 2021. If “Total Retail” for the period ending December 31, 2021 were to include the retail assets acquired as part of the multifamily acquisition, occupancy would be 82.4%.

Leasing

The tables below summarize leasing activity for the three months ended March 31, 2022:

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
previously
escalated rents

Office

 

42

 

317,633

 

$

54.75

 

$

53.35

 

2.6

%

Retail

 

2

 

1,013

 

$

120.81

 

$

126.33

 

(4.4

%)

Total Overall

 

44

 

318,646

 

$

54.96

 

$

53.59

 

2.6

%

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

 

21

 

215,560

 

$

59.80

 

$

57.79

 

3.5

%

Renewal Office

 

8

 

40,616

 

$

55.99

 

$

54.00

 

3.7

%

Total Office

 

29

 

256,176

 

$

59.19

 

$

57.19

 

3.5

%

           

Observatory Results

The Observatory hosted approximately 269,000 visitors in the first quarter 2022, compared to 51,000 visitors in the first quarter 2021. For the first quarter of 2022, Observatory revenue was $13.2 million, expenses were $6.2 million, and NOI was $7.0 million. The Company’s hypothetical forecast for Observatory admissions (as % of 2019 visitation) for the rest of 2022 is provided in the investor presentation posted on its website, and the current forecast is unchanged from the update provided in February 2022.

Balance Sheet

The Company had $1.3 billion of total liquidity as of March 31, 2022, which is comprised of $430 million of cash, plus an additional $850 million available under its revolving credit facility. At March 31, 2022, the Company had total debt outstanding of approximately $2.3 billion with a weighted average interest rate of 3.9% per annum, and a weighted average term to maturity of 7.2 years. At March 31, 2022, the Company’s pro-rata net debt to total market capitalization was 39.8% and net debt / adjusted EBITDA was 6.3x, or 6.1x if adjusted for full year EBITDA contribution from the multifamily acquisition completed in late-December 2021. The Company has no outstanding debt maturity until November 2024.

Dividend

On March 31, 2022, the Company paid a quarterly dividend of $0.035 per share or unit, as applicable, for the first quarter 2022 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 31, 2022, the Company paid a quarterly preferred dividend of $0.15 per unit for the first quarter 2022 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 2022 to holders of the Operating Partnership’s Series 2019 private perpetual preferred units.

2022 Earnings Outlook

Based on current economic conditions and the assumption that the New York City market continues to steadily recover, the Company currently expects 2022 Core FFO to range between $0.73 and $0.78 per fully diluted share. The Company’s current guidance does not include the impact of any potential future acquisitions, dispositions or other capital markets activities beyond April 21, 2022. Key assumptions are included in the table below.

 

Key Assumptions

2022 Guidance

2021 Actual*

Comments
Earnings
Core FFO Per Fully Diluted Share $0.73 to $0.78

$0.70

• Includes $0.02 from the multifamily acquisition that closed in late-December 2021

• Includes ~273M fully diluted shares as of April 21, 2022
Same-Store (SS) Commercial Property Drivers
SS Occupancy at year-end 84% to 86%

82.4%

SS Cash NOI (excluding lease termination fees) -10% to -12% from 2021

$290M

• Primarily driven by normalization of operating expenses as building utilization increases; ~10% y/y increase in SS operating expenses

• Also impacted by late-2021 occupancy decline
Observatory Drivers
Observatory NOI $74M to $77M

$18M

• Base case reflects hypothetical Observatory admissions (as % of 2019 visitation) of 60% in 2Q22, 70% in 3Q22 and 80% in 4Q22

• Reflects first quarter expenses of $6.2M and approximately $8M - $9M per quarter thereafter
 
* 2021 actual is based on First Quarter 2022 Supplemental
 
 

Low

 

High

 

2021 Actual

Net Income (loss) Attributable to Common Stockholders and the Operating Partnership  

$0.08

 

$0.13

 

-$0.05

Add:  

 

 

 

 

 

Impairment Charge  

-

 

-

 

0.03

Real Estate Depreciation & Amortization  

0.74

 

0.74

 

0.71

Less:  

 

 

 

 

 

Private Perpetual Distributions  

0.02

 

0.02

 

0.02

Gain on Disposal of Real Estate, net  

0.10

 

0.10

 

-

FFO Attributable to Common Stockholders and the Operating Partnership  

$0.70

 

$0.75

 

$0.67

Add:  

 

 

 

 

 

Amortization of Below Market Ground Lease  

0.03

 

0.03

 

0.03

Core FFO Attributable to Common Stockholders and the Operating Partnership  

$0.73

 

$0.78

 

$0.70

The estimates set forth above may be subject to fluctuations as a result of several factors, including the negative impact of the ongoing COVID-19 global pandemic on our business and our market, 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 its website (www.esrtreit.com) 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 28, 2022 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 seven 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 5, 2022, 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 13728485.

The Supplemental Report and Investor Presentation are additional components of the quarterly earnings announcement and are now available on the “Investors” section of the Company’s website at www.esrtreit.com.

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) is a NYC-focused REIT that owns and manages a well-positioned property portfolio of office, retail and multifamily assets in Manhattan and the greater New York metropolitan area. Owner of the Empire State Building, the World’s Most Famous Building, ESRT also owns and operates its iconic, newly reimagined Observatory Experience. The company is a leader in healthy buildings, energy efficiency, and indoor environmental quality, and has the lowest greenhouse gas emissions per square foot of any publicly traded REIT portfolio in New York City. As of March 31, 2022, ESRT’s portfolio is comprised of approximately 9.4 million rentable square feet of office space, 700,000 rentable square feet of retail space and 625 units across two multifamily properties. More information about Empire State Realty Trust can be found at esrtreit.com and by following 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, market, 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 herein, (iii) resolution of legal proceedings involving the Company; (iv) reduced demand for office, multifamily 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, including global hostilities, currency exchange rates, and/or competition from recently opened observatories in New York City, any or all of 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 phasing out of LIBOR after 2021; (x) declining real estate valuations and impairment charges; (xi) termination 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 execute any newly planned capital project successfully or on the anticipated timeline or at the anticipated costs; (xv) difficulties in identifying and completing acquisitions; (xvi) risks related to our development projects (including our Metro Tower development site); (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 climate change, adverse weather conditions, rising sea levels and natural disasters; and (xx) accuracy of our methodologies and estimates regarding ESG metrics and goals, tenant willingness and ability to collaborate in reporting ESG metrics and meeting ESG goals, and 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, see the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, 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,

 

2022

 

2021

Revenues

   

Rental revenue

 

$

147,514

 

 

$

140,231

 

Observatory revenue

 

 

13,241

 

 

 

2,603

 

Lease termination fees

 

 

1,173

 

 

 

1,289

 

Third-party management and other fees

 

 

310

 

 

 

276

 

Other revenue and fees

 

 

1,796

 

 

 

905

 

Total revenues

 

 

164,034

 

 

 

145,304

 

Operating expenses

     

Property operating expenses

 

 

38,644

 

 

 

30,279

 

Ground rent expenses

 

 

2,331

 

 

 

2,331

 

General and administrative expenses

 

 

13,686

 

 

 

13,853

 

Observatory expenses

 

 

6,215

 

 

 

4,588

 

Real estate taxes

 

 

30,004

 

 

 

31,447

 

Depreciation and amortization

 

 

67,106

 

 

 

44,457

 

Total operating expenses

 

 

157,986

 

 

 

126,955

 

Total operating income

 

 

6,048

 

 

 

18,349

 

Other income (expense):

 

 

 

 

 

Interest income

 

 

149

 

 

 

122

 

Interest expense

 

 

(25,014

)

 

 

(23,554

)

Loss on early extinguishment of debt

 

 

-

 

 

 

(214

)

Loss before income taxes

 

 

(18,817

)

 

 

(5,297

)

Income tax benefit

 

 

1,596

 

 

 

2,106

 

Net loss

 

 

(17,221

)

 

 

(3,191

)

Net loss attributable to noncontrolling interests:

 

 

 

 

 

Noncontrolling interest in the Operating Partnership

 

 

6,919

 

 

1,620

 

Noncontrolling interests in other partnerships

 

 

63

 

 

 

-

 

Preferred unit distributions

 

 

(1,050

)

 

 

(1,050

)

Net loss attributable to common stockholders

 

$

(11,289

)

 

$

(2,621

)

Total weighted average shares

     

Basic

 

 

169,731

 

 

 

171,735

 

Diluted

 

 

273,759

 

 

 

277,881

 

Net income (loss) per share attributable to common stockholders

     

 

 

Basic

 

$

(0.07

)

 

$

(0.02

)

Diluted

 

$

(0.07

)

 

$

(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,

 

2022

 

2021

     

Net income (loss)

 

$

(17,221

)

 

$

(3,191

)

Noncontrolling interests in other partnerships

 

63

 

 

  

-

 

Preferred unit distributions

 

 

(1,050

)

 

 

(1,050

)

Real estate depreciation and amortization

 

 

65,414

 

 

 

43,104

 

FFO attributable to common stockholders and the Operating Partnership

 

 

47,206

 

 

 

38,863

 

 

   

Amortization of below-market ground leases

 

 

1,958

 

 

 

1,958

 

Modified FFO attributable to common stockholders and the Operating Partnership

 

 

49,164

 

 

 

40,821

 

 

 

 

 

 

Loss on early extinguishment of debt

 

 

-

 

 

 

214

 

 

 

 

 

 

Core FFO attributable to common stockholders and the Operating Partnership

 

$

49,164

 

 

$

41,035

 

 

 

 

 

Total weighted average shares

   

Basic

 

 

273,759

 

 

 

277,881

 

Diluted

 

 

273,759

 

 

 

277,881

 

     

FFO per share

   

Basic

 

$

0.17

 

 

$

0.14

 

Diluted

 

$

0.17

 

 

$

0.14

 

 

 

 

 

 

Modified FFO per share

 

 

 

 

Basic

 

$

0.18

 

 

$

0.15

 

Diluted

 

$

0.18

 

 

$

0.15

 

 

 

 

 

 

Core FFO per share

 

 

 

 

Basic

 

$

0.18

 

 

$

0.15

 

Diluted

 

$

0.18

 

 

$

0.15

 

     

Empire State Realty Trust, Inc.

Condensed Consolidated Balance Sheets

(unaudited and amounts in thousands)

   

 

 

March 31, 2022

 

December 31,
2021

Assets

   

Commercial real estate properties, at cost

 

$

3,535,367

 

 

$

3,500,917

 

Less: accumulated depreciation

 

 

(1,124,090

)

 

 

(1,072,938

)

Commercial real estate properties, net

 

 

2,411,277

 

 

 

2,427,979

 

Cash and cash equivalents

 

 

429,716

 

 

 

423,695

 

Restricted cash

 

 

52,951

 

 

 

50,943

 

Tenant and other receivables

 

 

17,800

 

 

 

18,647

 

Deferred rent receivables

 

 

226,565

 

 

 

224,922

 

Prepaid expenses and other assets

 

 

52,152

 

 

 

76,549

 

Deferred costs, net

 

 

197,602

 

 

 

202,437

 

Acquired below market ground leases, net

 

 

334,946

 

 

 

336,904

 

Right of use assets

 

 

28,842

 

 

 

28,892

 

Goodwill

 

 

491,479

 

 

 

491,479

 

Total assets

 

$

4,243,330

 

 

$

4,282,447

 

   

Liabilities and equity

   

Mortgage notes payable, net

 

$

947,479

 

 

$

948,769

 

Senior unsecured notes, net

 

 

973,426

 

 

 

973,373

 

Unsecured term loan facility, net

 

 

388,365

 

 

 

388,223

 

Accounts payable and accrued expenses

 

 

108,077

 

 

 

120,810

 

Acquired below market leases, net

 

 

22,459

 

 

 

24,941

 

Ground lease liabilities

 

 

28,842

 

 

 

28,892

 

Deferred revenue and other liabilities

 

 

84,380

 

 

 

84,358

 

Tenants’ security deposits

 

 

28,270

 

 

 

28,749

 

Total liabilities

 

 

2,581,298

 

 

 

2,598,115

 

Total equity

 

 

1,662,032

 

 

 

1,684,332

 

Total liabilities and equity

 

$

4,243,330

 

 

$

4,282,447

 

   

 

Contacts

Investors and Media
Empire State Realty Trust Investor Relations
(212) 850-2678
IR@esrtreit.com

Contacts

Investors and Media
Empire State Realty Trust Investor Relations
(212) 850-2678
IR@esrtreit.com