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 press release and supplemental information attached as Exhibits 99.1 and 99.2, which are incorporated by reference but not deemed "filed" for Section 18 liability purposes.
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 disclosure of the reporting event and the definitions of non-GAAP financial measures.
Non-GAAP Measures Defined: The filing details the Company's methodology for calculating the following supplemental measures:
- Funds From Operations (FFO): Net income excluding impairment writedowns, gains/losses from debt restructurings and sales, plus real estate depreciation/amortization, adjusted for non-controlling interests and unconsolidated partnerships.
- 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, non-cash compensation, straight-line rent, leasing commissions, tenant improvements, and capital expenditures.
- Net Operating Income (NOI): Operating performance measure excluding cost of funds, depreciation, amortization, 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 only confirms the issuance of results for the third quarter of 2018.
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 is not a substitute for 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 leasing commissions.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) and Exhibit 99.2 (Supplemental Report) for the actual numerical values of revenue, FFO, NOI, and debt levels, as they are not present in the 8-K text.
- Verify the specific adjustments made to calculate Core FFO and Core FAD to understand the impact of non-recurring items and capital expenditures.
- Confirm the Company's liquidity position and ability to fund dividends, as the filing explicitly states that the presented non-GAAP measures are not indicative of cash available for distributions.
- Compare the Company's NOI calculation methodology with peer REITs, as the filing warns that definitions may vary significantly between companies.