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 31, 2018
Reporting Period: Third Quarter 2018
This filing serves as a notification that the Company issued a press release announcing its financial results for the third quarter of 2018. The actual financial data is contained in the attached press release (Exhibit 99.1) and supplemental information (Exhibit 99.2), which are incorporated by reference but not deemed "filed" for liability purposes under Section 18 of the Exchange Act.
Key Financial Metrics
Revenue, Profit, Cash Flow, Margins, Debt, and Liquidity: The provided text does not contain specific numerical values for revenue, net income, cash flow, margins, debt levels, or liquidity ratios. The filing text focuses exclusively on the definitions and methodologies for non-GAAP financial measures rather than reporting the actual results for the period.
Non-GAAP Measures Defined: The filing details the calculation methodologies for the following supplemental measures:
- Funds From Operations (FFO): Net income excluding impairment writedowns, gains/losses from debt restructurings and sales, plus real estate depreciation and amortization.
- Modified FFO: FFO adjusted for above or below-market ground lease amortization.
- Core FFO: Modified FFO adjusted for acquisition expenses, deferred tax asset write-offs, and loss on early extinguishment of debt.
- Core Funds Available for Distribution (Core FAD): Core FFO adjusted for non-real estate depreciation, financing costs, and capital expenditures to assess dividend funding ability.
- Net Operating Income (NOI): Operating performance measure excluding cost of funds, depreciation, and general administrative expenses.
- EBITDA: Net income plus interest, taxes, depreciation, and amortization.
Material Changes
The filing text does not provide specific data regarding material changes in financial performance compared to the prior comparable period. It references the existence of a press release containing these results but does not summarize the variances within the text provided.
Guidance, Outlook, and Risks
Management Commentary: Management emphasizes that these non-GAAP measures are useful for evaluating operating performance and comparing results among REITs. However, the filing explicitly states limitations for each measure:
- FFO, Modified FFO, Core FFO, and Core FAD do not represent cash generated from operating activities and are not alternatives to GAAP net income or cash flow.
- These measures are not indicative of cash available to fund ongoing needs or make distributions.
- NOI excludes significant economic costs such as capital expenditures and leasing costs necessary to maintain property performance.
- EBITDA should not be considered an alternative to net income or a measure of liquidity.
Risks and Contingencies: The filing notes that there can be no assurance that the Company's non-GAAP measures are comparable to those of other REITs due to varying computation methods. It also highlights that the utility of these measures is limited as they exclude real economic effects like capital expenditures and changes in property value.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) for actual Q3 2018 revenue, net income, and FFO figures.
- Review Exhibit 99.2 (Supplemental Report) for detailed reconciliations between GAAP net income and non-GAAP measures (FFO, Core FFO, Core FAD).
- Verify the specific impact of below-market ground lease amortization on Modified FFO, as noted as a material non-cash item.
- Confirm the Company's ability to fund dividends by analyzing the Core FAD metric against declared distributions.
- Compare the Company's NOI calculation methodology against peer REITs to ensure accurate performance benchmarking.