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: December 13, 2017
Event: Entry into a Material Definitive Agreement for a private placement of senior unsecured notes.
Key Financial Metrics and Transaction Details
The Operating Partnership entered into a Note Purchase Agreement to issue and sell an aggregate of $450 million in senior unsecured notes. The issuance is structured across three series with the following terms:
- Series D Notes: $115 million principal, 4.08% interest, due January 22, 2028.
- Series E Notes: $160 million principal, 4.26% interest, due March 22, 2030.
- Series F Notes: $175 million principal, 4.44% interest, due March 22, 2033.
Issuance Terms: Notes are issued at 100% of aggregate principal amount. The obligations are unconditionally guaranteed by the Company's subsidiaries that guarantee the Credit Agreement or other material credit facilities.
Material Changes and Covenants
This filing represents a significant change in the Company's capital structure through the addition of new long-term debt. The Purchase Agreement includes specific financial covenants effective as of the last day of each fiscal quarter:
- Total indebtedness to total asset value ratio not to exceed 60%.
- Total secured indebtedness to total asset value ratio not to exceed 40%.
- Tangible net worth not less than $1.2 billion plus 75% of net equity proceeds received after June 30, 2017.
- Adjusted EBITDA to consolidated fixed charges ratio not less than 1.50x.
- Aggregate net operating income of unencumbered eligible properties to interest expense on unsecured indebtedness not less than 1.75x.
- Total unsecured indebtedness to unencumbered asset value not to exceed 60%.
The Company also amended its 2015 Note Purchase Agreement to conform covenants with the new Purchase Agreement.
Guidance, Outlook, and Use of Proceeds
Use of Proceeds: The Operating Partnership intends to use the net proceeds to repay certain mortgage indebtedness scheduled to mature during 2018 and for other general corporate purposes.
Closing Schedule:
- Series D Notes: Closing on December 22, 2017.
- Series E and F Notes: Closing on March 22, 2018.
Investor Verification Checklist
- Verify the successful closing of the Series D Notes on December 22, 2017, and Series E/F Notes on March 22, 2018.
- Confirm the specific mortgage indebtedness being repaid with the proceeds.
- Review the full text of the Note Purchase Agreement (Exhibit 10.1) for detailed definitions of Adjusted EBITDA and asset value calculations.
- Monitor compliance with the new financial covenants, particularly the tangible net worth and leverage ratios.
- Check for any subsequent filings regarding the amendment to the 2015 Note Purchase Agreement.