Business Context and Reporting Period
This Form 8-K, filed on August 29, 2017, reports a material definitive agreement entered into by Empire State Realty OP, L.P. (the "Operating Partnership") and its general partner, Empire State Realty Trust, Inc. (the "Company"). The filing details the execution of an amended and restated senior unsecured revolving credit and term loan facility.
Key Financial Metrics and Facility Terms
- Total Facility Amount: Up to $1.365 billion, consisting of a $1.1 billion revolving credit facility and a $265 million term loan facility.
- Utilization: The $265 million term loan was borrowed in full at closing. The revolving credit facility is available for future draws.
- Expansion Capacity: The facility may be increased to a maximum aggregate principal amount of $1.75 billion.
- Interest Rates (at closing):
- Revolving Credit: 1.10% plus LIBOR.
- Term Loan: 1.20% plus LIBOR.
- Fees: A 0.15% facility fee on undrawn commitments under the revolving credit facility.
- Maturity Dates:
- Revolving Credit: August 29, 2021 (extendable by two six-month periods).
- Term Loan: August 29, 2022.
Material Changes Versus Prior Period
The new facility amends and restates the credit facility originally dated January 23, 2015. This represents a significant restructuring of the Company's senior unsecured debt capacity, increasing the total available principal from the prior arrangement to $1.365 billion with an option to expand to $1.75 billion.
Financial Covenants and Risks
The facility includes specific financial covenants that the Loan Parties must maintain:
- Total indebtedness to total asset value ratio shall not exceed 60%.
- Total secured indebtedness to total asset value ratio shall not exceed 40%.
- Tangible net worth must not be less than $1,249,392,000 plus 75% of net cash proceeds from equity issuances.
- Adjusted EBITDA to consolidated fixed charges ratio must not be less than 1.50x.
- Aggregate net operating income of unencumbered eligible properties to interest expense on unsecured indebtedness must not be less than 1.75x.
- Total unsecured indebtedness to unencumbered asset value ratio shall not exceed 60%.
Events of Default: Include non-payment, breach of covenants, cross-defaults, bankruptcy, loss of REIT qualification, and change of control.
Use of Proceeds: Working capital needs and general corporate purposes.
Investor Verification Checklist
- Verify the current leverage ratio to ensure compliance with the 60% total indebtedness to total asset value covenant.
- Confirm the current tangible net worth against the $1.249 billion threshold plus equity issuance adjustments.
- Review the full Amended and Restated Credit Agreement (Exhibit 10.1) for detailed definitions of "Adjusted EBITDA" and "Total Asset Value."
- Monitor the Company's credit rating, as interest rate spreads are tied to leverage ratios and credit ratings.
- Assess the impact of the new debt structure on the Company's ability to maintain REIT qualification.