Business Context and Reporting Period
Company: Empire State Realty Trust, Inc. and Empire State Realty OP, L.P.
Filing Type: Form 8-K (Current Report)
Date of Report: October 25, 2023
Reporting Period: Third Quarter 2023
This filing serves as a notification that the Company issued a press release and supplemental report regarding its financial results for the third quarter of 2023. The specific financial data is contained in Exhibits 99.1 and 99.2, which are incorporated by reference but not deemed "filed" for liability purposes under Section 18 of the Exchange Act.
Key Financial Metrics
The provided text defines the Company's non-GAAP financial measures but does not contain specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity for the third quarter of 2023. The filing outlines the following metrics used by management:
- Funds From Operations (FFO): Net income excluding impairment writedowns, gains/losses from debt restructurings and sales, plus real estate depreciation/amortization.
- Modified FFO: FFO adjusted for above or below-market ground lease amortization.
- Core FFO: Modified FFO excluding non-recurring items such as acquisition expenses, loss on early extinguishment of debt, severance, and IPO litigation expenses.
- Core Funds Available for Distribution (Core FAD): Core FFO adjusted for non-real estate depreciation, financing costs, capital expenditures, and straight-line rent adjustments.
- Net Operating Income (NOI): Property-level performance excluding cost of funds, depreciation, and corporate expenses.
- EBITDA and Adjusted EBITDA: Net income plus interest, taxes, depreciation, and amortization; Adjusted EBITDA further adds back impairment charges and gains on disposition.
- Net Debt to Adjusted EBITDA: A leverage ratio based on pro-rata gross debt less cash divided by trailing twelve months Adjusted EBITDA.
Material Changes
The filing text does not provide specific comparative data or material changes in financial performance versus the prior comparable period. It references the attached press release (Exhibit 99.1) for the actual results and trends.
Guidance, Outlook, and Risks
Management Commentary: Management emphasizes that non-GAAP measures (FFO, Core FFO, Core FAD, NOI) are useful for evaluating operating performance and comparing results among REITs, as they exclude non-cash accounting treatments like depreciation and amortization which may not reflect the actual value changes of real estate assets.
Risks and Limitations:
- Non-GAAP measures do not represent cash generated from operating activities and should not be considered alternatives to GAAP net income or cash flow.
- These measures are not indicative of cash available to fund ongoing needs or distributions.
- There is no assurance that the Company's calculations are comparable to similarly titled measures used by other REITs.
- NOI excludes significant economic costs such as capital expenditures and leasing costs necessary to maintain property performance.
Unusual Items: The definition of Core FFO explicitly excludes non-recurring items including acquisition expenses, loss on early extinguishment of debt, severance expenses, and IPO litigation expense.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) and Exhibit 99.2 (Supplemental Report) for the actual numerical values of Q3 2023 revenue, FFO, and NOI.
- Verify the specific impact of below-market ground lease amortization on Modified FFO, as this is a material non-cash adjustment for the Company.
- Confirm the Net Debt to Adjusted EBITDA ratio to assess current leverage levels, as the filing only defines the calculation method.
- Check for details on non-recurring expenses (severance, litigation, debt extinguishment) excluded from Core FFO to understand the quality of earnings.
- Examine the Same Store property definition to ensure accurate period-over-period comparisons of NOI, noting the exclusion of multifamily and held-for-sale properties.