Business Context and Reporting Period
This Form 8-K Current Report, dated July 27, 2020, is filed by Empire State Realty Trust, Inc. and Empire State Realty OP, L.P. The filing primarily serves to disclose the Company's financial results for the second quarter of 2020, which were announced via press release on July 29, 2020. Additionally, the report details significant executive compensation adjustments made in response to the ongoing impact of the COVID-19 pandemic.
Key Financial Metrics
The filing text does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. These metrics are contained within the attached press release (Exhibit 99.1) and supplemental report (Exhibit 99.2), which are incorporated by reference but not reproduced in the text of this 8-K. The document defines several non-GAAP financial measures used by the Company, including Funds From Operations (FFO), Modified FFO, Core FFO, Core Funds Available for Distribution (Core FAD), Net Operating Income (NOI), and EBITDA, noting that these are supplemental to GAAP net income.
Material Changes and Executive Compensation
Effective August 1, 2020, through December 31, 2020, the Company's Chairman, President, and CEO, Anthony E. Malkin, and Executive Vice President of Real Estate, Thomas P. Durels, have voluntarily reduced their annual base salaries due to the COVID-19 pandemic:
- Anthony E. Malkin: Salary reduced by one-third (1/3) from $810,000 to $540,000 per annum. This follows a previous reduction to $1.00 for the second quarter of 2020.
- Thomas P. Durels: Salary reduced by one-fourth (1/4) from $700,000 to $525,000 per annum.
Additionally, both executives agreed to reduce their 2021 long-term equity incentive compensation targets. The value of 2021 equity awards will be capped at no greater than 66% of the value of comparable 2020 awards. This results in a total reduction in LTI equity value of at least $3,912,082 for the two executives combined.
Guidance, Outlook, and Risks
The filing does not contain specific forward-looking guidance, outlook figures, or detailed risk factors beyond the general reference to the "ongoing impact of the COVID-19 pandemic" as the driver for executive compensation cuts. The document emphasizes that the non-GAAP measures presented (FFO, Core FAD, NOI, etc.) are not substitutes for GAAP net income or cash flow and may not be comparable to similarly titled measures used by other REITs.
Investor Verification Checklist
- Review the attached Press Release (Exhibit 99.1) and Supplemental Report (Exhibit 99.2) for specific Q2 2020 revenue, net income, FFO, and debt figures, as they are not listed in the 8-K text.
- Verify the impact of the executive salary and equity reductions on the Company's overall general and administrative expenses for the remainder of 2020.
- Assess the Company's liquidity position and ability to fund dividends by analyzing the Core FAD metric in the supplemental report, noting the filing's disclaimer that this is not a GAAP measure.
- Monitor future filings for updates on the operational impact of the COVID-19 pandemic on occupancy rates and rental income, which are key drivers of the Company's NOI.