Business Context and Reporting Period
This Form 8-K filing by Empire State Realty Trust, Inc. and Empire State Realty OP, L.P. was submitted on February 20, 2019. The report serves to disclose the Company's financial results for the fourth quarter of 2018. The filing incorporates by reference a press release and supplemental information regarding these results, which are furnished but not deemed "filed" under Section 18 of the Exchange Act.
Key Financial Metrics
The provided text does not contain specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. The filing focuses on defining the non-GAAP financial measures used to evaluate performance rather than reporting the specific figures for the period.
- Funds From Operations (FFO): Defined as net income excluding impairment writedowns, gains/losses from debt restructurings and sales, plus real estate depreciation and amortization, adjusted for non-controlling interests and unconsolidated partnerships.
- Modified FFO: Adds back adjustments for above or below-market ground lease amortization to traditional FFO.
- Core FFO: Adds back acquisition expenses, deferred tax asset write-offs, and losses on early extinguishment of debt to Modified FFO to exclude non-recurring items.
- Core Funds Available for Distribution (Core FAD): Derived from Core FFO by adding non-real estate depreciation and non-cash compensation, then deducting straight-line rent, leasing commissions, tenant improvements, and capital expenditures.
- Net Operating Income (NOI): A measure of property performance excluding cost of funds, depreciation, amortization, and general administrative expenses.
- EBITDA: Calculated as net income plus interest expense, income taxes, and depreciation and amortization.
Material Changes
The filing text does not provide specific data points or percentages to quantify material changes versus the prior comparable period. It references the issuance of a press release containing the fourth quarter 2018 results but does not summarize the specific variances within this document.
Guidance, Outlook, and Risks
The document does not contain forward-looking guidance, specific management commentary on future outlook, or a list of specific risks and contingencies for the upcoming period. However, it includes significant disclosures regarding the limitations of the non-GAAP measures presented:
- Limitations of Non-GAAP Measures: The Company explicitly states that 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 from operating activities.
- Comparability Risks: There is no assurance that these measures are comparable to similarly titled measures used by other REITs due to varying computation methods.
- Economic Reality: The text notes that these measures exclude capital expenditures and leasing costs necessary to maintain operating performance, which have real economic effects.
Investor Verification Checklist
- Verify the specific numerical values for Q4 2018 revenue, net income, and FFO in the attached press release (Exhibit 99.1) and supplemental report (Exhibit 99.2), as they are not included in this text.
- Confirm the reconciliation between GAAP net income and the non-GAAP measures (FFO, Core FFO, Core FAD) to understand the magnitude of adjustments.
- Review the specific details of the "below-market ground leases" mentioned in the Modified FFO definition to assess their impact on long-term earnings.
- Check the Company's website for the full supplemental information referenced in Item 2.02 and Item 7.01.