Business Context and Reporting Period
This Form 8-K filing by Empire State Realty OP, L.P. and Empire State Realty Trust, Inc. reports the announcement of financial results for the third quarter of 2016. The report was issued on November 2, 2016, and incorporates by reference a press release and supplemental information regarding the quarter's performance.
Key Financial Metrics
The filing text does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. Instead, it defines the non-GAAP financial measures used to evaluate performance:
- Funds From Operations (FFO): Defined per NAREIT guidelines, excluding impairment writedowns, gains/losses from debt restructurings and property sales, and adding back real estate depreciation and amortization.
- Modified FFO: Adds back adjustments for above or below-market ground lease amortization, specifically related to properties acquired in July 2014.
- Core FFO: Adds back non-recurring items to Modified FFO, including acquisition expenses, lawsuit settlement gains, deferred financing cost write-offs, and prepayment penalties.
- Core Funds Available for Distribution (Core FAD): Adjusts Core FFO for non-cash items and deducts capital expenditures, tenant improvements, and straight-line rent to estimate dividend funding ability.
- Net Operating Income (NOI): Measures property performance excluding cost of funds, depreciation, and corporate-level expenses.
- EBITDA: Calculated as net income plus preferred distributions, interest, taxes, depreciation, amortization, and acquisition expenses.
Material Changes
The filing text does not contain specific data comparing the current period to the prior comparable period. It references a press release (Exhibit 99.1) and supplemental report (Exhibit 99.2) for detailed results, which are not included in the provided text.
Guidance, Outlook, and Risks
The filing includes significant disclosures regarding the limitations of the non-GAAP measures presented:
- Limitations: FFO, Modified FFO, Core FFO, Core FAD, NOI, and EBITDA do not represent cash generated from operating activities and should not be considered alternatives to GAAP net income or cash flow.
- Comparability: There is no assurance that these measures are comparable to similarly titled measures used by other REITs due to varying computation methods.
- Unusual Items: Core FFO specifically excludes non-recurring items such as acquisition break-up fees and construction severance expenses.
Investor Verification Checklist
- Review the attached Press Release (Exhibit 99.1) for specific Q3 2016 revenue, net income, and FFO figures.
- Examine the Supplemental Report (Exhibit 99.2) for the detailed reconciliation of GAAP net income to FFO, Modified FFO, Core FFO, and Core FAD.
- Verify the impact of the July 2014 property acquisitions on ground lease amortization included in Modified FFO.
- Confirm the specific amounts of non-recurring expenses excluded from Core FFO, such as the Observatory lawsuit settlement and acquisition break-up fees.
- Assess the company's ability to fund dividends by comparing Core FAD against declared distributions.