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 27, 2016
Reporting Period: Second Quarter of 2016
This filing serves as a notification that the Company issued a press release announcing its financial results for the second quarter of 2016. The detailed financial data is contained in the attached press release (Exhibit 99.1) and supplemental information (Exhibit 99.2), which are incorporated by reference but not deemed "filed" for liability purposes under Section 18 of the Exchange Act.
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. These figures are referenced as being available in the attached Exhibits 99.1 and 99.2, which are not included in the input text.
Non-GAAP Measures Defined: The filing details the Company's methodology for several supplemental financial measures:
- Funds From Operations (FFO): Net income excluding impairment writedowns, gains/losses from debt restructurings and property sales, plus real estate depreciation/amortization, adjusted for non-controlling interests and discontinued operations.
- 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 excluding non-recurring items such as acquisition expenses, lawsuit settlement gains, deferred financing cost write-offs, and prepayment penalties.
- Core Funds Available for Distribution (Core FAD): Core FFO adjusted for non-real estate depreciation, straight-line rent, leasing commissions, tenant improvements, and capital expenditures to estimate dividend funding ability.
- Net Operating Income (NOI): Property-level performance measure excluding cost of funds, depreciation, acquisition expenses, and general administrative costs.
- EBITDA: Net income plus perpetual preferred unit distributions, interest, taxes, depreciation, amortization, and acquisition expenses.
Material Changes
The filing text does not provide specific quantitative comparisons to prior periods. It notes that the Company's Modified FFO calculation addresses the material impact of non-cash amortization stemming from the July 2014 acquisition of two properties with below-market ground leases.
Guidance, Outlook, and Risks
Management Commentary: Management emphasizes that these non-GAAP measures are useful for evaluating operating performance and comparing results among REITs, as they exclude non-cash accounting treatments and non-recurring items that may distort GAAP net income.
Risks and Limitations: The filing 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 GAAP 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 companies due to varying calculation methods.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) and Exhibit 99.2 (Supplemental Report) for the actual numerical values of Q2 2016 revenue, FFO, and Core FAD, as they are not present in the 8-K text.
- Verify the specific impact of the below-market ground lease amortization on Modified FFO compared to standard FFO.
- Confirm the reconciliation between GAAP Net Income and the various non-GAAP measures (FFO, Core FFO, EBITDA) to understand the magnitude of excluded non-recurring items.
- Assess the Company's ability to fund dividends by comparing Core FAD against declared dividend rates.