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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Empire State Realty Trust Inc | NYSE:ESRT | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.095 | 1.01% | 9.475 | 9.51 | 9.44 | 9.47 | 91,701 | 16:27:55 |
- Earnings Per Share of ($0.00) Per Fully Diluted Share -
- Core FFO of $0.17 Per Fully Diluted Share -
- $1.6 Billion of Liquidity, No Outstanding Debt Maturity Through 2024 -
- Indoor Environmental Quality and Energy Efficiency Differentiate Portfolio -
Empire State Realty Trust, Inc. (NYSE: ESRT) (the "Company"), a real estate investment trust with office and retail properties in Manhattan and the greater New York metropolitan area, today reported its operational and financial results for the fourth quarter of 2020.
“We took actions during the year to allow employee and tenant reentry with confidence to our buildings, collected rents, managed operating and capital expenses, promoted Empire State Building Observatory visits, supported our smaller retail tenants, and protected and fortified our balance sheet. Visits to the Observatory continue to grow gradually off a low base, despite interstate and international travel restrictions. We find ourselves in 2021 well-positioned with a long runway, a fully staffed investment team with a balance sheet that allows us the choice to expand our portfolio, and a more focused and improved team,” stated Anthony E. Malkin, Empire State Realty Trust’s Chairman, President and Chief Executive Officer. “In 2020 we made great improvements to our disclosure. In our first year of GRESB participation, ESRT earned the highest possible 5 Star Rating and Green Star recognition, and a score of 88, in the 2020 GRESB Real Estate Assessment, an achievement that places ESRT in the top 20% of all respondents. Additionally, ESRT achieved Fitwel Champion certification for 83% of our Manhattan portfolio. We are the first portfolio in the Americas to receive the WELL Health-Safety rating, and 76% of our portfolio by square feet is Energy Star certified. Our goal is to provide tenants with energy efficient, healthy environments that provide them with a landlord who helps them meet their own ESG goals and therefore increases the desirability of our portfolio.”
Fourth Quarter and Recent Highlights
Full Year Highlights
Investor Presentation Update
The Company has posted on the “Investors” section of its website (www.empirestaterealtytrust.com) the latest investor presentation, which contains additional information on the current impact of the COVID-19 pandemic on its businesses, financial condition and results of operations.
Portfolio Operations
As of December 31, 2020, the Company’s total portfolio contained 10.1 million rentable square feet which consisted of 9.4 million rentable square feet of office space and 0.7 million rentable square feet of retail space. As of December 31, 2020, the Company’s portfolio was occupied and leased as shown below. The Company’s occupancy levels fluctuate in certain periods due to the timing lag between the date of tenants’ move out and the lease commencement date of new leases.
December 31, 2020
September 30, 2020
December 31, 2019
Percent occupied:
Total portfolio
85.9%
85.9%
88.6%
Total office
85.6%
85.6%
88.5%
Manhattan office
87.2%
86.9%
89.8%
GNYMA office
79.0%
80.1%
83.0%
Total retail
89.8%
89.4%
90.3%
Percent leased (includes signed leases not commenced):
Total portfolio
88.7%
89.7%
91.2%
Total office
88.3%
89.4%
91.0%
Manhattan office
89.8%
90.9%
92.7%
GNYMA office
82.4%
83.1%
84.3%
Total retail
93.2%
93.4%
93.1%
Rent Collections
The Company maintained the following levels of property billings collections:
Total Billings Collection
2Q
3Q
4Q
Total Billings Collected
94%
95%
95%
Rent Deferrals
1%
0%
0%
Abated Rent Related to Amendments
1%
1%
1%
Security Deposits Applied
2%
1%
0%
Uncollected - Covered by Security Deposit
1%
2%
2%
Uncollected
1%
1%
2%
100%
100%
100%
Office
97%
97%
96%
Retail
77%
87%
87%
The Company has recorded a non-cash reduction of straight-line balances of $0.6 million and wrote off $1.6 million of tenant receivables assessed as uncollectible during the fourth quarter of 2020. These write offs against revenue resulted in a $0.01 negative impact for the fourth quarter of 2020.
Leasing
Leasing activity has been reduced due to the impact of the COVID-19 pandemic. The below tables summarize leasing activity for the three months ended December 31, 2020:
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
26
395,035
$
52.52
$
55.53
(5.4%)
Retail (1)
7
18,321
$
132.75
$
234.27
(43.3%)
Total Overall
33
413,356
$
56.08
$
63.45
(11.6%)
(1) Approximately 80% of retail square footage involved leases with food retailers that contained a percentage rent component
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
8
321,848
$
54.00
$
57.67
(6.4%)
Renewal Office
11
36,571
$
50.80
$
48.99
3.7%
Total Office
19
358,419
$
53.67
$
56.78
(5.5%)
Significant Leases Executed During Fourth Quarter 2020
Observatory Results
Observatory revenue for January and February 2020 increased 13.2% year-over-year, after adjusting for the 102nd floor observation deck, which was closed for redevelopment in the first quarter 2019 and re-opened in the fourth quarter 2019. In compliance with the requirements of authorities, the Company closed the Observatory on March 16, 2020 due to the COVID-19 pandemic, and it remained closed until the 86th floor observation deck was reopened on July 20, 2020. The 102nd observation deck was reopened on August 24, 2020. Against the backdrop of international, and interstate travel restrictions, quarantines and a nationwide pandemic surge, the Observatory has seen steady, gradual weekly increases in visitors.
The Observatory hosted approximately 55,000 visitors in the fourth quarter of 2020, compared to 30,000 visitors in the third quarter of 2020 and visitors of 894,000 in the fourth quarter of 2019. Year-to-date in 2021 through February 14th, attendance was at nearly 9% of 2019 comparable period attendance. As a reminder, the first quarter is historically the seasonally lightest quarter for the Observatory due to the winter weather conditions. The Company remains confident attendance will return to pre COVID-19 levels, though that will take time and is not anticipated to occur in 2021.
Observatory revenue for the fourth quarter 2020 was $5.0 million, driven by low visitation levels. Observatory revenue included $1.3 million of deferred revenue from unused tickets, as well as $1.5 million of fixed license fee for the gift shop. Observatory expenses were $5.6 million in the fourth quarter 2020.
Balance Sheet
The Company has $1.6 billion of total liquidity as of December 31, 2020, which is comprised of $527 million of cash, plus an additional $1.1 billion available under its revolving credit facility. In November 2020, the Company closed on a $180 million mortgage loan for 250 West 57th Street. The new interest-only loan bears a fixed interest rate of 2.83% and matures in December 2030.
At December 31, 2020, 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 8.2 years. At December 31, 2020, the Company’s net debt to total market capitalization was 37.2% and net debt to adjusted EBITDA was 6.3x. The Company has no outstanding debt maturity until November 2024. The Company’s $1.1 billion unsecured revolving credit facility, which was undrawn as of December 31, 2020, matures in August 2021 and the Company has two six-month extension options.
In the fourth quarter and through February 16, 2021, the Company repurchased $25.3 million of its common stock at a weighted average price of $7.32 per share. This brings the cumulative total, since the stock repurchase program began on March 5, 2020 through February 16, 2021, to $147.2 million at a weighted average price of $8.34 per share, through a combination of open-market purchases and the execution of a 10b5-1 program.
Other Items
The Company recognized the following one-time benefit during the quarter:
Dividend
On December 14, 2020, the Company announced its decision to continue with the suspension of the dividend for the first and second quarters of 2021 for holders of the Company’s Class A common stock (NYSE: ESRT) and Class B common stock and to holders of the Series ES, Series 250 and Series 60 partnership units (NYSE Arca: ESBA, FISK and OGCP, respectively) and Series PR partnership units of Empire State Realty OP, L.P., the Company’s operating partnership (the “Operating Partnership”). The Board of Directors will continue its regular review of its dividend and capital allocation policies in light of changing circumstances.
On December 31, 2020, the Company paid a preferred dividend of $0.15 per unit for the fourth quarter 2020 to holders of the Operating Partnership’s Series 2014 private perpetual preferred units and a preferred dividend of $0.175 per unit for the fourth quarter 2020 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, February 18, 2021 at 1:00 pm Eastern time.
The webcast will be accessible on the “Investors” section of the Company’s website at www.empirestaterealtytrust.com. To listen to the live webcast, go to the site at least five minutes prior to the scheduled start time in order to register and download and install any necessary audio software. Shortly after the call, a replay of the webcast will be available for 90 days on the Company’s website.
The conference call can also be accessed by dialing 1-877-407-3982 for domestic callers or 1-201-493-6780 for international callers. A dial-in replay will be available starting shortly after the call until February 25, 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 13715501.
The Supplemental Report and Investor Presentation are integral components of quarterly earnings announcement and are now available on the “Investors” section of the Company’s website at www.empirestaterealtytrust.com.
The Company uses, and intends to continue to use, the Investors page of its website, which can be found at www.empirestaterealtytrust.com, as a means of disclosing material nonpublic information and of complying with its disclosure obligations under Regulation FD, including, without limitation, through the posting of investor presentations that may include material nonpublic information. Accordingly, investors should monitor the Investors page, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.
About Empire State Realty Trust
Empire State Realty Trust, Inc. (NYSE: ESRT) owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the “World's Most Famous Building.” The company's office and retail portfolio covers 10.1 million rentable square feet, as of Dec. 30, 2020, which consists of 9.4 million rentable square feet across 14 office properties, including nine in Manhattan, three in Fairfield County, Connecticut, and two in Westchester County, New York; as well as approximately 700,000 rentable square feet in the retail portfolio.
Empire State Realty Trust is a leader in energy efficiency in the built environment and sustainability space, with 76 percent of the eligible portfolio ENERGY STAR certified and 100 percent fully powered by renewable wind electricity. As the first commercial real estate portfolio in the Americas to achieve the evidence-based, third-party verified WELL Health-Safety Rating for health and safety, ESRT additionally earned the highest possible GRESB 5 Star Rating and Green Star recognition for sustainability performance in real estate and was named a Fitwel Champion for healthy, high-performance buildings. To learn more about Empire State Realty Trust, visit empirestaterealtytrust.com and follow ESRT on Facebook, Instagram, Twitter and LinkedIn.
Forward-Looking Statements
This press release includes “forward looking statements” within the meaning of the federal securities laws. Forward-looking statements may be identified by the use of words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “contemplates,” “aims,” “continues,” “would” or “anticipates” or the negative of these words and phrases or similar words or phrases. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: (i) economic, political and social impact of, and uncertainty relating to, the COVID-19 pandemic; (ii) resolution of legal proceedings involving the Company; (iii) reduced demand for office or retail space, including as a result of the COVID-19 pandemic; (iv) changes in our business strategy; (v) changes in technology and market competition that affect utilization of our office, retail, broadcast or other facilities; (vi) changes in domestic or international tourism, including due to health crises such as the COVID-19 pandemic, geopolitical events and/or currency exchange rates, which may cause a decline in Observatory visitors; (vii) defaults on, early terminations of, or non-renewal of, leases by tenants; (viii) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors, including the potential phasing out of LIBOR after 2021; (ix) declining real estate valuations and impairment charges; (x) termination or expiration of our ground leases; (xi) changes in our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due and potential limitations on our ability to borrow additional funds in compliance with drawdown conditions and financial covenants; (xii) decreased rental rates or increased vacancy rates; (xiii) our failure to redevelop and reposition properties, or to execute any newly planned capital project successfully or on the anticipated timeline or at the anticipated costs; (xiv) difficulties in identifying properties to acquire and completing acquisitions; (xv) risks related to our development projects (including our Metro Tower development site) and capital projects, including the cost of construction delays and cost overruns; (xvi) impact of changes in governmental regulations, tax laws and rates and similar matters; (xvii) our failure to qualify as a REIT; and (xviii) environmental uncertainties and risks related to adverse weather conditions, rising sea levels and natural disasters. 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, 2019, and the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 and other risks described in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission.
While forward-looking statements reflect the Company's good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to update or revise publicly any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes after the date of this press release, except as required by applicable law. Prospective investors should not place undue reliance on any forward-looking statements, which are based only on information currently available to the Company (or to third parties making the forward-looking statements).
Empire State Realty Trust, Inc.
Condensed Consolidated Statements of Operations
(unaudited and amounts in thousands, except per share data)
Three Months Ended December 31,
2020
2019
Revenues
Rental revenue
$
137,050
$
151,701
Observatory revenue
5,008
37,730
Lease termination fees
7,841
1,240
Third-party management and other fees
295
299
Other revenue and fees
1,205
3,963
Total revenues
151,399
194,933
Operating expenses
Property operating expenses
31,087
43,901
Ground rent expenses
2,332
2,332
General and administrative expenses
13,627
16,618
Observatory expenses
5,636
8,743
Real estate taxes
31,894
29,818
Depreciation and amortization
47,397
46,409
Total operating expenses
131,973
147,821
Total operating income
19,426
47,112
Other income (expense):
Interest income
108
1,352
Interest expense
(23,001
)
(18,534
)
Income (loss) before income taxes
(3,467
)
29,930
Income tax benefit
4,177
(1,210
)
Net income
710
28,720
Preferred unit distributions
(1,050
)
(1,041
)
Net (income) loss attributable to non-controlling interests
130
(10,880
)
Net income (loss) attributable to common stockholders
$
(210
)
$
16,799
Total weighted average shares
Basic
171,970
180,166
Diluted
278,471
296,852
Net income (loss) per share attributable to common stockholders
Basic
$
(0.00
)
$
0.09
Diluted
$
(0.00
)
$
0.09
Empire State Realty Trust, Inc.
Condensed Consolidated Statements of Operations
(unaudited and amounts in thousands, except per share data)
Year Ended December 31,
2020
2019
Revenues
Rental revenue
$
563,071
$
586,414
Observatory revenue
29,057
128,769
Lease termination fees
9,416
4,352
Third-party management and other fees
1,225
1,254
Other revenue and fees
6,459
10,554
Total revenues
609,228
731,343
Operating expenses
Property operating expenses
136,141
174,977
Ground rent expenses
9,326
9,326
General and administrative expenses
62,244
61,063
Observatory expenses
23,723
33,767
Real estate taxes
121,923
115,916
Impairment charges
6,204
-
Depreciation and amortization
191,006
181,588
Total operating expenses
550,567
576,637
Total operating income
58,661
154,706
Other income (expense):
Interest income
2,637
11,259
Interest expense
(89,907
)
(79,246
)
Loss on early extinguishment of debt
(86
)
-
IPO litigation expense
(1,165
)
-
Income (loss) before income taxes
(29,860
)
86,719
Income tax benefit (expense)
6,971
(2,429
)
Net income (loss)
(22,889
)
84,290
Preferred unit distributions
(4,197
)
(1,743
)
Net (income) loss attributable to non-controlling interests
10,374
(33,102
)
Net income (loss) attributable to common stockholders
$
(16,712
)
$
49,445
Total weighted average shares
Basic
175,169
178,340
Diluted
283,837
297,798
Net income (loss) per share attributable to common stockholders
Basic
$
(0.10
)
$
0.28
Diluted
$
(0.10
)
$
0.28
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 December 31,
2020
2019
Net income
$
710
$
28,720
Preferred unit distributions
(1,050
)
(1,041
)
Real estate depreciation and amortization
45,690
45,298
FFO attributable to common stockholders and non-controlling interests
45,350
72,977
Amortization of below-market ground leases
1,958
1,958
Modified FFO attributable to common stockholders and non-controlling interests
47,308
74,935
Core FFO attributable to common stockholders and non-controlling interests
$
47,308
$
74,935
Total weighted average shares
Basic
278,427
296,852
Diluted
278,471
296,852
FFO per share
Basic
$
0.16
$
0.25
Diluted
$
0.16
$
0.25
Modified FFO per share
Basic
$
0.17
$
0.25
Diluted
$
0.17
$
0.25
Core FFO per share
Basic
$
0.17
$
0.25
Diluted
$
0.17
$
0.25
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)
Year Ended December 31,
2020
2019
Net income (loss)
$
(22,889
)
$
84,290
Preferred unit distributions
(4,197
)
(1,743
)
Real estate depreciation and amortization
184,245
177,515
Impairment charges, net of reimbursement
5,360
-
FFO attributable to common stockholders and non-controlling interests
162,519
260,062
Amortization of below-market ground leases
7,831
7,831
Modified FFO attributable to common stockholders and non-controlling interests
170,350
267,893
Loss on early extinguishment of debt
86
-
Severance expenses
3,813
-
IPO litigation expense
1,165
-
Core FFO attributable to common stockholders and non-controlling interests
$
175,414
$
267,893
Total weighted average shares
Basic
283,826
297,798
Diluted
283,837
297,798
FFO per share
Basic
$
0.57
$
0.87
Diluted
$
0.57
$
0.87
Modified FFO per share
Basic
$
0.60
$
0.90
Diluted
$
0.60
$
0.90
Core FFO per share
Basic
$
0.62
$
0.90
Diluted
$
0.62
$
0.90
Empire State Realty Trust, Inc.
Condensed Consolidated Balance Sheets
(unaudited and amounts in thousands)
December 31, 2020
December 31, 2019
Assets
Commercial real estate properties, at cost
$
3,133,966
$
3,109,433
Less: accumulated depreciation
(941,612
)
(862,534
)
Commercial real estate properties, net
2,192,354
2,246,899
Cash and cash equivalents
526,714
233,946
Restricted cash
41,225
37,651
Tenant and other receivables
21,541
25,423
Deferred rent receivables
222,508
220,960
Prepaid expenses and other assets
77,182
65,453
Deferred costs, net
203,853
228,150
Acquired below market ground leases, net
344,735
352,566
Right of use assets
29,104
29,307
Goodwill
491,479
491,479
Total assets
$
4,150,695
$
3,931,834
Liabilities and equity
Mortgage notes payable, net
$
775,929
$
605,542
Senior unsecured notes, net
973,159
798,392
Unsecured term loan facility, net
387,561
264,640
Accounts payable and accrued expenses
103,203
143,786
Acquired below market leases, net
31,705
39,679
Ground lease liabilities
29,104
29,307
Deferred revenue and other liabilities
88,319
72,015
Tenants’ security deposits
30,408
30,560
Total liabilities
2,419,388
1,983,921
Total equity
1,731,307
1,947,913
Total liabilities and equity
$
4,150,695
$
3,931,834
View source version on businesswire.com: https://www.businesswire.com/news/home/20210217005962/en/
Investors Empire State Realty Trust Investor Relations (212) 850-2678 IR@empirestaterealtytrust.com
Media Sard Verbinnen & Co. (212) 687-8080
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