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: July 29, 2015
Reporting Period: Second Quarter of 2015
This filing serves as a notification that the Company issued a press release announcing its financial results for the second quarter of 2015. The specific financial data is contained in attached Exhibits 99.1 (Press Release) and 99.2 (Supplemental Report), which are incorporated by reference but not deemed "filed" under Section 18 of the Exchange Act.
Key Financial Metrics
The provided text does not contain specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. The filing focuses on defining the non-GAAP financial measures used to evaluate performance rather than reporting the results themselves.
Defined Non-GAAP Measures:
- Funds From Operations (FFO): Net income excluding impairment writedowns, gains/losses from debt restructurings and sales, plus real estate-related depreciation and amortization.
- Modified FFO: FFO adjusted to add back above or below-market ground lease amortization (noted as material due to July 2014 acquisitions).
- Core FFO: Modified FFO adjusted to exclude IPO/formation transaction costs, acquisition expenses, severance, and specific lawsuit settlements.
- Core Funds Available for Distribution (Core FAD): Core FFO adjusted for non-real estate depreciation, financing costs, and capital expenditures to assess dividend funding ability.
- Net Operating Income (NOI): Property-level performance measure excluding cost of funds, depreciation, and corporate 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 or 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 overall results.
- Transaction Costs: Core FFO excludes expenses related to the Company's initial public offering (IPO), formation transactions, and a private perpetual preferred exchange offering.
- Legal Settlements: Core FFO adjustments include a gain on the 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 the specific Q2 2015 revenue, net income, and FFO figures in the attached Press Release (Exhibit 99.1).
- Review the Supplemental Report (Exhibit 99.2) for the detailed reconciliation of GAAP net income to FFO, Modified FFO, and Core FFO.
- Confirm the impact of the below-market ground lease amortization on the current quarter's results.
- Assess the specific amounts excluded from Core FFO regarding the Observatory lawsuit settlement and IPO-related expenses.
- Check the Company's website for the full text of the press release referenced in Item 2.02.