Business Context and Reporting Period
This Form 8-K Current Report was filed by Empire State Realty Trust, Inc. and Empire State Realty OP, L.P. on July 25, 2018. The filing serves to announce the Company's financial results for the second quarter of 2018. The report 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 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 as net income excluding impairment writedowns, gains/losses from debt restructurings and property sales, plus real estate depreciation and amortization.
- 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): Adjusts Core FFO by adding non-real estate depreciation and non-cash compensation, while 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 corporate-level expenses.
- EBITDA: Calculated as net income plus interest expense, income taxes, and depreciation and amortization.
Material Changes
The filing text does not contain specific data comparing the second quarter of 2018 to prior periods. It references a press release (Exhibit 99.1) and supplemental report (Exhibit 99.2) for detailed results, but the content of those exhibits is not included in the provided text.
Guidance, Outlook, and Risks
The filing includes extensive disclosures regarding the limitations of the non-GAAP measures presented:
- Limitations: The Company 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: There is no assurance that these measures are comparable to similarly titled measures used by other REITs due to varying computation methods.
- Utility: These measures are presented to assist investors in understanding operating performance, evaluating the ability to fund dividends, and assessing the ability to incur and service debt, but they exclude significant economic costs such as capital expenditures and leasing commissions.
Investor Verification Checklist
- Review the attached Press Release (Exhibit 99.1) for specific Q2 2018 revenue, net income, and FFO figures.
- Examine the Supplemental Report (Exhibit 99.2) for the reconciliation of GAAP net income to the non-GAAP measures (FFO, Modified FFO, Core FFO, Core FAD, NOI, EBITDA).
- Verify the specific impact of below-market ground lease amortization on Modified FFO.
- Confirm the amounts of capital expenditures and leasing commissions deducted to arrive at Core FAD.
- Check for any updates on debt levels or liquidity positions not detailed in this summary text.