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: April 28, 2015
Reporting Period: First Quarter of 2015
This filing announces the financial results for the first quarter of 2015. The detailed results and supplemental information are contained in attached Exhibits 99.1 (Press Release) and 99.2 (Supplemental Report), 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 filing text does not contain specific numerical values for revenue, net income, cash flow, margins, debt levels, or liquidity ratios. These figures are located in the referenced Exhibits 99.1 and 99.2, which are not included in the input text.
Non-GAAP Measures Defined: The filing details the methodology for several supplemental financial measures used by the Company:
- Funds From Operations (FFO): Net income excluding impairment writedowns, gains/losses from debt restructurings and sales of properties, plus real estate depreciation/amortization, adjusted for non-controlling interests and unconsolidated ventures.
- Modified FFO: FFO adjusted to add back amortization of above or below-market ground leases (specifically related to July 2014 acquisitions).
- Core FFO: Modified FFO adjusted to exclude IPO/formation transaction costs, acquisition expenses, severance, and certain litigation settlements.
- Core Funds Available for Distribution (Core FAD): Core FFO adjusted for non-real estate depreciation, financing costs, and deductions for capital expenditures, tenant improvements, and straight-line rent.
- Net Operating Income (NOI): Operating revenue less operating expenses, excluding financing costs, depreciation, and general administrative expenses.
- EBITDA: Net income plus preferred distributions, interest, taxes, depreciation, amortization, and acquisition expenses.
Material Changes and Unusual Items
The filing text does not provide specific comparative data to quantify material changes versus the prior period. However, it highlights the following context regarding unusual or non-recurring items:
- Ground Lease Amortization: The Company notes that the July 2014 acquisition of two properties resulted in significantly below-market ground leases, the amortization of which is material to results and is added back in Modified FFO.
- Transaction Costs: Core FFO excludes expenses related to the Company's initial public offering (IPO), formation transactions, and a private perpetual preferred exchange offering.
- Litigation: Core FFO adjustments include the gain on settlement of a lawsuit related to the Observatory.
Guidance, Outlook, and Risks
Guidance and Outlook: The filing text does not contain specific forward-looking guidance, earnings projections, or management commentary on future market conditions.
Risks and Limitations of Non-GAAP Measures: Management explicitly states that FFO, Modified FFO, Core FFO, Core FAD, NOI, and EBITDA:
- Do not represent cash generated from operating activities.
- Should not be considered alternatives to GAAP net income or cash flow from operating activities.
- Are not indicative of cash available to fund ongoing needs or make distributions.
- May not be comparable to similarly titled measures used by other REITs due to varying computation methods.
Investor Verification Checklist
- Verify specific Q1 2015 revenue, net income, and FFO figures in the attached Press Release (Exhibit 99.1).
- Review the reconciliation of GAAP net income to FFO, Modified FFO, Core FFO, and Core FAD in the Supplemental Report (Exhibit 99.2).
- Confirm the impact of the July 2014 property acquisitions on current ground lease amortization expenses.
- Assess the specific amounts excluded from Core FFO related to IPO and formation transaction costs.
- Check for any updates on the Observatory lawsuit settlement mentioned in the Core FFO definition.