Empire State Realty Trust, Inc. - FORM 8-K - EX-99.2

Attached files

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8-K - FORM 8-K - Empire State Realty Trust, Inc.	d188625d8k.htm
EX-99.1 - EX-99.1 - Empire State Realty Trust, Inc.	d188625dex991.htm

EXHIBIT 99.2

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EMPIRE STATE REALTY TRUST

Supplemental Operating and Financial Data

For the Quarter Ended March 31, 2016

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First Quarter 2016


*Table of Contents*	*Page*
*Summary*
Company Profile		3
Financial Highlights		4
*Selected Property Data*
Property Summary		5
Property Detail		10
Tenant Lease Expirations		11
Largest Tenants and Portfolio Tenant Diversification by Industry		14
Capital Expenditures and Redevelopment Program		15
Observatory Summary		16
*Financial information*
Condensed Consolidated Balance Sheets		17
Condensed Consolidated Statements of Income		18
Core FFO, Modified FFO, FFO, FAD and EBITDA		19
Net Operating Income		20
Consolidated Debt Analysis
Debt Summary		21
Debt Detail		22
Debt Maturities		23
Ground Leases		23
Supplemental Definitions		24

Forward-looking Statements

We make forward-looking statements in this supplemental package within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You should not rely on them as predictions of future events. For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Sections.

You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “contemplates,” “aims,” “continues,” “would” or “anticipates” or similar words or phrases in the positive or negative. In particular, forward looking statements include those pertaining to our capital resources, portfolio performance, dividend policy, results of operations, anticipated growth in our portfolio from operations, acquisitions, and market conditions and demographics.

Forward-looking statements involve numerous risks and uncertainties, many of which are difficult to predict and generally beyond our control. They depend on assumptions, data or methods which may be incorrect or imprecise, and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all).

The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: changes in our industry and markets, either nationally or in Manhattan or the greater New York metropolitan area; resolution of the litigations and arbitration involving our company; reduced demand for office or retail space; general volatility of the capital and credit markets and the market price of our Class A common stock and listed operating partnership units; changes in our business strategy; defaults on, early terminations of, or non-renewal of, leases by tenants; bankruptcy or insolvency of a major tenant or a significant number of smaller tenants; litigation; fluctuations in interest rates; increased operating costs; declining real estate valuations and impairment charges; availability, terms and deployment of capital; our failure to obtain necessary outside financing; our expected leverage; decreased rental rates or increased vacancy rates; breach of or the expiration of our ground lease; our failure to generate sufficient cash flows to service our outstanding indebtedness; our failure to redevelop, renovate and reposition properties successfully or on the anticipated timeline or at the anticipated costs; difficulties in identifying properties to acquire and completing acquisitions; risks of real estate acquisitions, dispositions and development (including our Metro Tower development site), including construction delays and cost overruns; our failure to operate acquired properties and operations successfully; our ability to manage our growth effectively; changes in governmental regulations, tax laws and rates and similar matters; estimates relating to our ability to make distributions to our securityholders in the future; our failure to qualify as a REIT; a future terrorist event in the U.S.; environmental uncertainties and risks related to adverse weather conditions and natural disasters; lack or insufficient amounts of insurance; financial market fluctuations; availability of, and our ability to attract and retain, qualified personnel; conflicts of interest affecting our senior management team; competition; changes in real estate and zoning laws and increases in real property tax rates; and our ability to comply with the laws, rules and regulations applicable to companies and, in particular, public companies. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, or new information, data or methods, future events or other changes after the date of this presentation, except as required by applicable law. For a further discussion of these and other factors that could impact our future results, performance or transactions, see the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 and other risks described in documents we subsequently file from time to time with the Securities and Exchange Commission.

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First Quarter 2016

COMPANY PROFILE

Empire State Realty Trust, Inc., or the Company, is a leading real estate investment trust (REIT) that owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the world’s most famous building.


*BOARD OF DIRECTORS*
Anthony E. Malkin	William H. Berkman		Alice M. Connell
Chairman and Chief Executive	Director		Director, Chair of
Officer			Finance Committee

Thomas J. DeRosa	Steven J. Gilbert		S. Michael Giliberto
Director	Director, Lead Director		Director, Chair of
			Audit Committee

James D. Robinson IV
Director, Chair of Compensation and Nominating/Corporate
Governance Committees

*EXECUTIVE MANAGEMENT*
Anthony E. Malkin	John B. Kessler		Thomas P. Durels
Chairman and Chief Executive	President and Chief Operating		Executive Vice President and
Officer	Officer		Director of Leasing and
			Operations

David A. Karp	Thomas N. Keltner, Jr.
Executive Vice President and Chief	Executive Vice President,
Financial Officer	General Counsel and Secretary

*COMPANY INFORMATION*
Corporate Headquarters	Investor Relations		New York Stock Exchange
One Grand Central Place	David A. Karp		Trading Symbol: ESRT
60 East 42nd Street	IR@empirestaterealtytrust.com
New York, NY 10165 www.empirestaterealtytrust.com
(212) 687-8700

*ANALYST COVERAGE*
*Firm*	*Analyst*	*Phone*	*Email*
Bank of America Merrill Lynch	James Feldman	(646) 855-5808	james.feldman@baml.com
BMO Capital Markets Corp.	John Kim	(212) 885-4115	jp.kim@bmo.com
Capital One Securities, Inc.	Thomas Lesnick	(571) 633-8191	thomas.lesnick@capitalone.com
Goldman Sachs & Co.	Brad Burke	(917) 343-2082	brad.burke@gs.com
Green Street Advisors	Jed Reagan	(949) 640-8780	jreagan@greenstreetadvisors.com
KeyBanc Capital Markets	Craig Mailman	(917) 368-2316	cmailman@key.com
Stifel Nicolaus	John Guinee	(443) 224-1307	jwguinee@stifel.com
Wells Fargo Securities, LLC	Brendan Maiorana	(443) 263-6516	brendan.maiorana@wellsfargo.com

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First Quarter 2016

Financial Highlights

(unaudited and dollars in thousands, except per share amounts)


	Three Months Ended
	March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015			March 31, 2015
Selected Items:
Revenue	$	157,074		$	165,200		$	175,779		$	164,773		$	151,882
EBITDA ⁽¹⁾	$	73,205		$	82,254		$	90,471		$	84,434		$	64,941
Cash net operating income ⁽¹⁾	$	76,459		$	83,066		$	89,490		$	84,926		$	67,656
Net income	$	16,705		$	19,370		$	26,085		$	26,585		$	7,888
Core funds from operations (“Core FFO”) ⁽¹⁾	$	58,154		$	66,179		$	70,573		$	68,255		$	52,670
Core funds available for distribution (“Core FAD”) ⁽¹⁾	$	48,141		$	52,552		$	59,197		$	55,903		$	42,645
Core FFO per share - diluted	$	0.22		$	0.25		$	0.27		$	0.26		$	0.20
Core FAD per share - diluted	$	0.18		$	0.20		$	0.22		$	0.21		$	0.16
Dividends declared and paid per share	$	0.085		$	0.085		$	0.085		$	0.085		$	0.085

Portfolio Statistics:
Number of properties		20			20			20			20			20
Total rentable square footage		10,080,601			10,063,752			10,087,018			10,042,025			10,018,399
Percent occupied ⁽²⁾		88.2	%		87.3	%		87.4	%		88.0	%		87.6	%

Observatory Metrics:
Number of visitors		719,000			949,000			1,327,000			1,165,000			622,000
Change in visitors year over year		15.6	%		-4.8	%		-5.5	%		-4.7	%		-6.3	%
Observatory revenues	$	21,181		$	27,647		$	35,702		$	30,600		$	18,223
Change in revenues year over year		16.5	%		-1.8	%		0.1	%		0.7	%		5.2	%

Ratios:
Consolidated Debt to Total Market Capitalization ⁽³⁾		26	%		25	%		26	%		26	%		24	%
Consolidated Debt and Perpetual Preferred Units to
Total Market Capitalization ⁽³⁾		26	%		26	%		27	%		27	%		24	%
Consolidated Debt to EBITDA ⁽⁴⁾		4.9	x		5.1	x		5.1	x		5.2	x		5.4	x
Consolidated Net Debt to EBITDA ⁽⁴⁾		4.8	x		4.9	x		5.0	x		5.1	x		5.2	x
Interest Coverage Ratio		4.7	x		5.3	x		5.4	x		5.6	x		4.4	x
Core FFO Payout Ratio ⁽⁵⁾		40	%		34	%		32	%		33	%		43	%
Core FAD Payout Ratio ⁽⁶⁾		48	%		43	%		38	%		41	%		53	%

Class A common stock price at quarter end	$	17.53		$	18.07		$	17.03		$	17.06		$	18.81
Average closing price	$	16.51		$	17.95		$	17.19		$	18.01		$	18.15
Dividends per share - annualized	$	0.34		$	0.34		$	0.34		$	0.34		$	0.34
Dividend yield ⁽⁷⁾		1.9	%		1.9	%		2.0	%		2.0	%		1.8	%
Private Perpetual Preferred Units outstanding ($16.62 liquidation value)		1,560,360			1,560,360			1,560,360			1,560,360			1,560,360
Class A common stock		120,639,410			118,903,312			116,823,306			113,119,634			110,598,327
Class B common stock		1,107,290			1,120,067			1,130,728			1,134,252			1,149,014
Operating partnership units		147,692,115			147,550,632			149,625,374			153,332,538			155,808,466

Total common stock and operating partnership units outstanding		269,438,815			267,574,011			267,579,408			267,586,424			267,555,807

Notes:

(1)	Represents non-GAAP financial measures. For a discussion on what these metrics represent and why the Company presents them, see page 24 and for a reconciliation of these metrics to net income, see pages 19 and 20.

(2)	Based on leases signed and commenced as of end of period.

(3)

Market capitalization represents the sum of (i) Company’s common stock per share price as of March 31, 2016 multiplied by the total outstanding number of shares of common stock and operating partnership units as of March 31, 2016; (ii) the number of perpetual preferred units at March 31, 2016 multiplied by $16.62 and (iii) our outstanding indebtedness as of March 31, 2016.

(4)	Calculated based on trailing 12 months EBITDA.

(5)	Represents the amount of Core FFO paid out in distributions.

(6)	Represents the amount of Core FAD paid out in distributions.

(7)	Based on the closing price per share of Class A common stock on March 31, 2016.

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First Quarter 2016

Property Summary

(unaudited and dollars in thousands, except per square foot amounts)


	Three Months Ended March 31, 2016
				Manhattan			Greater New York			Standalone
	Total			Office			Office			Retail
	Portfolio			Portfolio⁽¹⁾			Portfolio			Portfolio			Observatory
Number of properties		20			9			5			6
Square feet		10,080,601			8,013,014			1,863,135			204,452
Occupancy ⁽²⁾		88.2	%		86.5	%		94.5	%		99.4	%

Revenue	$	156,529		$	110,730		$	19,954		$	4,664		$	21,181
Operating expenses		(72,717	)		(55,260	)		(8,048	)		(1,654	)		(7,755	)

Net operating income		83,812			55,470			11,906			3,010			13,426
Straight-line rent		(5,080	)		(5,278	)		202			(4	)		—
Above/below-market lease amortization		(4,231	)		(4,231	)		—			—			—
Below-market ground lease amortization		1,958			1,958			—			—			—

Cash net operating income	$	76,459		$	47,919		$	12,108		$	3,006		$	13,426

Leasing activity
Total leases executed		47			36			11			—
Total square footage executed		255,723			196,693			59,030			—
Average rent psf - leases executed	$	61.63		$	69.73		$	30.00		$	—
Previously escalated rents psf	$	43.12		$	45.18		$	35.06		$	—
Percentage of new rent over previously escalated rents		42.9	%		54.3	%		-14.4	%		—
Weighted average lease term		10.4 years

Leasing commission costs per square foot	$	20.60		$	25.17		$	5.39		$	—
Tenant improvement costs per square foot		58.14			68.73			22.88			—

Total LC and TI per square foot ⁽³⁾	$	78.74		$	93.90		$	28.27		$	—


Total Portfolio	Office			Retail			Total
Total square footage executed		242,098			13,625			255,723
Average rent psf - leases executed	$	52.29		$	207.39		$	61.63
Previously escalated rents psf	$	39.66		$	99.48		$	43.12
Percentage of new rent over previously escalated rents		31.9	%		108.5	%		42.9	%

Manhattan Office Portfolio	Office			Retail			Total
Total square footage executed		183,068			13,625			196,693
Average rent psf - leases executed	$	59.48		$	207.39		$	69.73
Previously escalated rents psf	$	41.14		$	99.48		$	45.18
Percentage of new rent over previously escalated rents		44.6	%		108.5	%		54.3	%

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First Quarter 2016

Property Summary

(unaudited and dollars in thousands, except per square foot amounts)


	Three Months Ended December 31, 2015
				Manhattan			Greater New York			Standalone
	Total			Office			Office			Retail
	Portfolio			Portfolio ⁽¹⁾			Portfolio			Portfolio			Observatory
Number of properties		20			9			5			6
Square feet		10,063,752			7,998,804			1,860,496			204,452
Occupancy ⁽²⁾		87.3	%		85.4	%		93.9	%		100.0	%

Revenue	$	164,725		$	112,958		$	19,234		$	4,886		$	27,647
Operating expenses		(73,034	)		(54,263	)		(8,350	)		(1,638	)		(8,783	)

Net operating income		91,691			58,695			10,884			3,248			18,864
Straight-line rent		(5,892	)		(5,934	)		(23	)		65			—
Above/below-market lease amortization		(4,691	)		(4,691	)		—			—			—
Below-market ground lease amortization		1,958			1,958			—			—			—

Cash net operating income	$	83,066		$	50,028		$	10,861		$	3,313		$	18,864

Leasing activity
Total leases executed		39			36			3			—	⁽⁴⁾
Total square footage executed		198,216			174,169			24,047			—
Average rent psf - leases executed	$	50.60		$	53.66		$	25.05		$	—
Previously escalated rents psf	$	37.75		$	39.25		$	26.43		$	—
Percentage of new rent over previously escalated rents		34.0	%		36.7	%		-5.2	%		—

Leasing commission costs per square foot	$	14.82		$	15.98		$	6.41		$	—
Tenant improvement costs per square foot		47.66			50.52			26.94			—

Total LC and TI per square foot ⁽³⁾	$	62.48		$	66.50		$	33.35		$	—


Total Portfolio	Office			Retail		Total
Total square footage executed		198,216			—		198,216
Average rent psf - leases executed	$	50.60		$	—	$	50.60
Previously escalated rents psf	$	37.75		$	—	$	37.75
Percentage of new rent over previously escalated rents		34.0	%		—		34.0	%

Manhattan Office Portfolio	Office			Retail		Total
Total square footage executed		174,169			—		174,169
Average rent psf - leases executed	$	53.66		$	—	$	53.66
Previously escalated rents psf	$	39.25		$	—	$	39.25
Percentage of new rent over previously escalated rents		36.7	%		—		36.7	%

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First Quarter 2016

Property Summary

(unaudited and dollars in thousands, except per square foot amounts)


	Three Months Ended September 30, 2015
				Manhattan			Greater New York			Standalone
	Total			Office			Office			Retail
	Portfolio			Portfolio ⁽¹⁾			Portfolio			Portfolio			Observatory
Number of properties		20			9			5			6
Square feet		10,087,018			8,021,017			1,861,549			204,452
Occupancy ⁽²⁾		87.4	%		85.7	%		93.6	%		100.0	%

Revenue	$	172,661		$	112,633		$	19,426		$	4,900		$	35,702
Operating expenses		(74,892	)		(57,178	)		(8,345	)		(1,473	)		(7,896	)

Net operating income		97,769			55,455			11,081			3,427			27,806
Straight-line rent		(5,441	)		(5,608	)		97			70			—
Above/below-market lease amortization		(4,795	)		(4,795	)		—			—			—
Below-market ground lease amortization		1,957			1,957			—			—			—

Cash net operating income	$	89,490		$	47,009		$	11,178		$	3,497		$	27,806

Leasing activity
Total leases executed		67			55			12			—
Total square footage executed		338,477			286,746			51,731			—
Average rent psf - leases executed	$	53.55		$	57.08		$	33.96		$	—
Previously escalated rents psf	$	39.82		$	40.91		$	33.75		$	—
Percentage of new rent over previously escalated rents		34.5	%		39.5	%		0.6	%		—

Leasing commission costs per square foot	$	14.57		$	16.08		$	6.24		$	—
Tenant improvement costs per square foot		55.16			59.29			32.30			—

Total LC and TI per square foot ⁽³⁾	$	69.73		$	75.37		$	38.54		$	—


Total Portfolio	Office			Retail			Total
Total square footage executed		335,904			2,573			338,477
Average rent psf - leases executed	$	51.89		$	269.80		$	53.55
Previously escalated rents psf	$	39.06		$	138.63		$	39.82
Percentage of new rent over previously escalated rents		32.9	%		94.6	%		34.5	%

Manhattan Office Portfolio	Office			Retail			Total
Total square footage executed		284,173			2,573			286,746
Average rent psf - leases executed	$	55.15		$	269.80		$	57.08
Previously escalated rents psf	$	40.02		$	138.63		$	40.91
Percentage of new rent over previously escalated rents		37.8	%		94.6	%		39.5	%

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First Quarter 2016

Property Summary

(unaudited and dollars in thousands, except per square foot amounts)


	Three Months Ended June 30, 2015
				Manhattan			Greater New York			Standalone
	Total			Office			Office			Retail
	Portfolio			Portfolio ⁽¹⁾			Portfolio			Portfolio			Observatory
Number of properties		20			9			5			6
Square feet		10,042,025			7,975,720			1,862,130			204,175
Occupancy ⁽²⁾		88.0	%		86.4	%		93.4	%		100.0	%

Revenue	$	163,805		$	109,252		$	19,511		$	4,442		$	30,600
Operating expenses		(70,639	)		(52,720	)		(8,345	)		(1,481	)		(8,093	)

Net operating income		93,166			56,532			11,166			2,961			22,507
Straight-line rent		(5,622	)		(5,643	)		(74	)		95			—
Above/below-market lease amortization		(4,576	)		(4,576	)		—			—			—
Below-market ground lease amortization		1,958			1,958			—			—			—

Cash net operating income	$	84,926		$	48,271		$	11,092		$	3,056		$	22,507

Leasing activity
Total leases executed		79			65			14			—
Total square footage executed		254,360			203,721			50,639			—
Average rent psf - leases executed	$	64.67		$	68.72		$	41.90		$	—
Previously escalated rents psf	$	44.31		$	44.42		$	43.67		$	—
Percentage of new rent over previously escalated rents		46.0	%		54.7	%		-4.0	%		—

Leasing commission costs per square foot	$	12.33		$	14.24		$	4.90		$	—
Tenant improvement costs per square foot		47.15			51.25			31.55			—

Total LC and TI per square foot ⁽³⁾	$	59.48		$	65.49		$	36.45		$	—


Total Portfolio	Office			Retail			Total
Total square footage executed		236,324			18,036			254,360
Average rent psf - leases executed	$	52.37		$	207.71		$	64.67
Previously escalated rents psf	$	40.70		$	91.08		$	44.31
Percentage of new rent over previously escalated rents		28.7	%		128.1	%		46.0	%

Manhattan Office Portfolio	Office			Retail			Total
Total square footage executed		185,685			18,036			203,721
Average rent psf - leases executed	$	55.22		$	207.71		$	68.72
Previously escalated rents psf	$	39.89		$	91.08		$	44.42
Percentage of new rent over previously escalated rents		38.4	%		128.1	%		54.7	%

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First Quarter 2016

Property Summary

(unaudited and dollars in thousands, except per square foot amounts)


	Three Months Ended March 31, 2015
				Manhattan			Greater New York			Standalone
	Total			Office			Office			Retail
	Portfolio			Portfolio ⁽¹⁾			Portfolio			Portfolio			Observatory
Number of properties		20			9			5			6
Square feet		10,018,399			7,953,643			1,860,581			204,175
Occupancy ⁽²⁾		87.6	%		86.2	%		92.0	%		100.0	%

Revenue	$	149,829		$	107,733		$	19,118		$	4,755		$	18,223
Operating expenses		(74,738	)		(57,799	)		(8,039	)		(1,498	)		(7,402	)

Net operating income		75,091			49,934			11,079			3,257			10,821
Straight-line rent		(4,102	)		(4,349	)		271			(24	)		—
Above/below-market lease amortization		(5,291	)		(5,291	)		—			—			—
Below-market ground lease amortization		1,958			1,958			—			—			—

Cash net operating income	$	67,656		$	42,252		$	11,350		$	3,233		$	10,821

Leasing activity
Total leases executed		60			51			9			—
Total square footage executed		418,092			372,028			46,064			—
Average rent psf - leases executed	$	88.38		$	93.92		$	40.44		$	—
Previously escalated rents psf	$	35.43		$	35.00		$	39.14		$	—
Percentage of new rent over previously escalated rents		149.5	%		168.3	%		3.3	%		—

Leasing commission costs per square foot	$	37.58		$	41.21		$	8.22		$	—
Tenant improvement costs per square foot		52.41			53.46			43.95			—

Total LC and TI per square foot⁽³⁾	$	89.99		$	94.67		$	52.17		$	—


Total Portfolio	Office			Retail			Total
Total square footage executed		367,761			50,331			418,092
Average rent psf - leases executed	$	52.64		$	347.32		$	88.38
Previously escalated rents psf	$	35.33		$	36.14		$	35.43
Percentage of new rent over previously escalated rents		49.0	%		861.0	%		149.5	%

Manhattan Office Portfolio	Office			Retail			Total
Total square footage executed		321,697			50,331			372,028
Average rent psf - leases executed	$	54.27		$	347.32		$	93.92
Previously escalated rents psf	$	34.82		$	36.14		$	35.00
Percentage of new rent over previously escalated rents		55.9	%		861.0	%		168.3	%

Notes:

⁽¹⁾	Includes 518,792 rentable square feet of retail space in the Company’s nine Manhattan office properties.

⁽²⁾	Based on leases signed and commenced as of period end.

⁽³⁾	Presents all tenant improvement and leasing commission costs as if they were incurred in the period in which the lease was signed, which may be different than the period in which they were actually paid.

⁽⁴⁾	Excludes a standalone retail tenant that exercised a below-market renewal option contained within its lease for 48,377 square feet.

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First Quarter 2016

Property Detail

(unaudited)


									Annualized
									Rent
Property Name	Location or Sub-Market	Rentable Square Feet ⁽¹⁾		Percent Occupied ⁽²⁾			Annualized Rent ⁽³⁾		per Occupied Square Foot ⁽⁴⁾		Number of Leases ⁽⁵⁾
*Manhattan Office Properties - Office*
The Empire State Building ⁽⁶⁾	Penn Station -Times Sq. South		2,707,731		89.5	%	$	125,436,917	$	51.76		187
One Grand Central Place	Grand Central		1,198,416		83.3	%		52,178,566		52.28		237
1400 Broadway ⁽⁸⁾	Penn Station -Times Sq. South		901,786		90.6	%		35,874,987		43.90		45
111 West 33th Street ⁽⁹⁾	Penn Station -Times Sq. South		624,129		71.1	%		21,104,413		47.54		24
250 West 57th Street	Columbus Circle - West Side		483,244		73.9	%		18,488,683		51.77		121
501 Seventh Avenue	Penn Station -Times Sq. South		459,690		94.9	%		18,094,671		41.50		34
1359 Broadway	Penn Station -Times Sq. South		455,260		88.9	%		18,587,166		45.94		32
1350 Broadway ⁽¹⁰⁾	Penn Station -Times Sq. South		374,033		81.9	%		15,438,534		50.40		58
1333 Broadway	Penn Station -Times Sq. South		292,524		98.8	%		13,578,259		46.98		9

*Manhattan Office Properties - Office*			7,496,813		86.4	%		318,782,196		49.23		747

*Manhattan Office Properties - Retail*
The Empire State Building ⁽⁷⁾	Penn Station -Times Sq. South		124,862		82.0	%		16,890,992		165.00		17
One Grand Central Place	Grand Central		67,463		96.3	%		6,964,575		107.17		14
1400 Broadway ⁽⁸⁾	Penn Station -Times Sq. South		22,367		66.5	%		1,621,923		109.01		9
112 West 34th Street ⁽⁹⁾	Penn Station -Times Sq. South		93,348		96.5	%		3,649,721		40.51		2
250 West 57th Street	Columbus Circle - West Side		49,375		90.2	%		6,517,978		146.37		7
501 Seventh Avenue	Penn Station -Times Sq. South		34,536		87.1	%		1,748,969		58.17		8
1359 Broadway	Penn Station -Times Sq. South		27,243		49.2	%		1,515,878		113.00		5
1350 Broadway ⁽¹⁰⁾	Penn Station -Times Sq. South		31,774		100.0	%		6,689,820		210.54		6
1333 Broadway	Penn Station -Times Sq. South		65,233		97.2	%		7,513,272		118.51		3

*Manhattan Office Properties - Retail*			516,201		88.2	%		53,113,129		116.60		71

*Sub-Total/Weighted Average Manhattan Office Properties - Office and Retail*			8,013,014		86.5	%		371,895,325		53.66		818

*Greater New York Metropolitan Area Office Properties*
First Stamford Place ⁽¹¹⁾	Stamford, CT		794,571		96.1	%		32,237,623		42.21		58
Metro Center	Stamford, CT		282,499		96.9	%		15,491,019		56.60		31
383 Main Street	Norwalk, CT		262,288		96.6	%		8,251,828		32.57		25
500 Mamaroneck Avenue	Harrison, NY		294,261		92.6	%		7,939,341		29.13		33
10 Bank Street	White Plains, NY		229,516		85.6	%		7,074,988		35.99		30

*Sub-Total/Weighted Average Greater New York Metropolitan Area Office Properties*			1,863,135		94.5	%		70,994,799		40.34		177

*Standalone Retail Properties*
10 Union Square	Union Square		58,005		98.0	%		6,136,169		107.99		12
1542 Third Avenue	Upper East Side		56,250		100.0	%		3,421,409		60.83		4
1010 Third Avenue	Upper East Side		44,662		100.0	%		3,469,240		77.68		2
77 West 55th Street	Midtown		24,102		100.0	%		2,549,882		105.80		3
69-97 Main Street	Westport, CT		17,103		100.0	%		2,086,838		122.02		5
103-107 Main Street	Westport, CT		4,330		100.0	%		697,353		161.05		1

*Sub-Total/Weighted Average Standalone Retail Properties*			204,452		99.4	%		18,360,892		90.33		27

*Portfolio Total*			10,080,601		88.2	%	$	461,251,016	$	51.86		1,022

*Total/Weighted Average Office Properties*			9,359,948		88.0	%	$	389,776,995	$	47.33		924
*Total/Weighted Average Retail Properties*			720,653		91.4	%		71,474,021		108.49		98

*Portfolio Total*			10,080,601		88.2	%	$	461,251,016	$	51.86		1,022

Notes:

(1)	Excludes (i) 181,351 square feet of space across the Company’s portfolio attributable to building management use and tenant amenities and (ii) 69,789 square feet of space attributable to the Company’s observatory.

(2)	Based on leases signed and commenced as of March 31, 2016.

(3)	Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.

(4)	Represents annualized rent under leases commenced as of March 31, 2016 divided by occupied square feet.

(5)	Represents the number of leases at each property or on a portfolio basis. If a tenant has more than one lease, whether or not at the same property, but with different expirations, the number of leases is calculated equal to the number of leases with different expirations.

(6)	Includes 86,902 rentable square feet of space leased by the Company’s broadcasting tenants.

(7)	Includes 5,300 rentable square feet of space leased by WDGF North America, a licensee of the Company’s observatory.

(8)	Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 48 years (expiring December 31, 2063).

(9)	Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 62 years (expiring May 31, 2077).

(10)	Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 35 years (expiring July 31, 2050).

(11)	First Stamford Place consists of three buildings.

Page 10

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First Quarter 2016

Tenant Lease Expirations

(unaudited)


*Total Lease Expirations*	Number of Leases Expiring ⁽¹⁾		Rentable Square Feet Expiring ⁽²⁾		Percent of Portfolio Rentable Square Feet Expiring			Annualized Rent ⁽³⁾		Percent of Annualized Rent			Annualized Rent Per Rentable Square Foot
Available		—		1,030,562		10.2	%	$	—		0.0	%	$	—
Signed leases not commenced		18		155,831		1.5	%		—		0.0	%		—
2016		139		628,727		6.2	%		30,738,190		6.7	%		48.89
2017		168		700,829		7.0	%		35,316,162		7.7	%		50.39
2018		167		852,189		8.5	%		42,376,356		9.2	%		49.73
2019		117		704,711		7.0	%		33,774,857		7.3	%		47.93
2020		133		925,979		9.2	%		47,955,919		10.4	%		51.79
2021		75		631,766		6.3	%		33,355,739		7.2	%		52.80
2022		48		479,622		4.8	%		26,930,919		5.8	%		56.15
2023		44		554,290		5.5	%		29,175,109		6.3	%		52.64
2024		35		530,840		5.3	%		28,179,847		6.1	%		53.09
2025		38		314,666		3.1	%		24,016,667		5.2	%		76.32
Thereafter		58		2,570,589		25.3	%		129,431,251		28.1	%		50.35

Total		1,040		10,080,601		100.0	%	$	461,251,016		100.0	%	$	51.86

Notes:

(1)	If a lease has two different expiration dates, it is considered to be two leases (for the purpose of lease count and square footage).

(2)	Excludes (i) 181,351 rentable square feet of space across the Company portfolio attributable to building management use and tenant amenities and (ii) 69,789 square feet of space attributable to the Company’s observatory.

(3)	Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.

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First Quarter 2016

Tenant Lease Expirations

(unaudited)


*Manhattan Office Properties ⁽¹⁾*	Number of Leases Expiring ⁽²⁾		Rentable Square Feet Expiring ⁽³⁾		Percent of Portfolio Rentable Square Feet Expiring			Annualized Rent ⁽⁴⁾		Percent of Annualized Rent			Annualized Rent Per Rentable Square Foot
Available		—		881,049		11.8	%	$	—		0.0	%	$	—
Signed leases not commenced		14		140,296		1.9	%		—		0.0	%		—
2016		116		467,708		6.2	%		21,532,688		6.8	%		44.90
2017		140		509,045		6.8	%		25,150,497		7.9	%		49.26
2018		124		561,220		7.5	%		29,570,750		9.3	%		52.86
2019		88		429,100		5.7	%		20,823,908		6.5	%		48.08
2020		95		635,228		8.5	%		32,457,062		10.2	%		49.87
2021		45		395,479		5.3	%		19,590,493		6.1	%		49.19
2022		30		216,825		2.9	%		12,005,023		3.8	%		55.59
2023		32		387,411		5.2	%		18,413,169		5.8	%		49.46
2024		19		350,107		4.7	%		16,037,513		5.0	%		45.88
2025		21		196,368		2.6	%		10,702,335		3.4	%		55.62
Thereafter		37		2,326,977		30.9	%		112,498,758		35.3	%		48.35

Total Manhattan office properties		761		7,496,813		100.0	%		318,782,196		100.0	%		49.23


*Greater New York Metropolitan Area Office Properties*
Available		—		101,654		5.5	%		—		0.0	%		—
Signed leases not commenced		1		1,526		0.1	%		—		0.0	%		—
2016		12		43,591		2.3	%		1,757,483		2.5	%		40.32
2017		22		145,335		7.8	%		5,951,173		8.4	%		40.95
2018		36		269,864		14.5	%		10,407,089		14.7	%		38.56
2019		22		248,849		13.4	%		9,822,562		13.8	%		39.47
2020		27		230,394		12.4	%		9,410,453		13.3	%		40.85
2021		24		206,785		11.1	%		9,063,376		12.8	%		43.83
2022		9		198,405		10.6	%		7,565,372		10.7	%		38.13
2023		6		118,242		6.3	%		5,317,361		7.5	%		44.97
2024		3		149,541		8.0	%		6,661,272		9.4	%		44.54
2025		10		83,805		4.5	%		2,963,483		4.2	%		35.36
Thereafter		6		65,144		3.5	%		2,075,175		2.9	%		31.86

Total greater New York metropolitan area office properties		178		1,863,135		100.0	%		70,994,799		100.0	%		40.34


*Retail Properties*
Available		—		47,859		6.6	%		—		0.0	%		—
Signed leases not commenced		3		14,009		1.9	%		—		0.0	%		—
2016		11		117,428		16.3	%		7,448,019		10.4	%		63.43
2017		6		46,449		6.4	%		4,214,492		5.9	%		90.73
2018		7		21,105		2.9	%		2,398,517		3.4	%		113.65
2019		7		26,762		3.7	%		3,128,387		4.4	%		116.90
2020		11		60,357		8.4	%		6,088,404		8.5	%		100.87
2021		6		29,502		4.1	%		4,701,870		6.6	%		159.37
2022		9		64,392		8.9	%		7,360,524		10.3	%		114.31
2023		6		48,637		6.7	%		5,444,579		7.6	%		111.94
2024		13		31,192		4.3	%		5,481,062		7.7	%		175.72
2025		7		34,493		4.8	%		10,350,849		14.5	%		300.09
Thereafter		15		178,468		25.0	%		14,857,318		20.8	%		83.25

Total retail properties		101		720,653		100.0	%		71,474,021		100.0	%		108.49

Total portfolio lease expirations		1,040		10,080,601		100.0	%	$	461,251,016		100.0	%	$	51.86

Notes:

(1)	Excludes (i) retail space in the Company’s Manhattan office properties and (ii) the Empire State Building broadcasting licenses and observatory operations.

(2)	If a lease has two different expiration dates, it is considered to be two leases (for the purpose of lease count and square footage).

(3)	Excludes (i) 181,351 rentable square feet of space across the Company portfolio attributable to building management use and tenant amenities and (ii) 69,789 square feet of space attributable to the Company’s observatory.

(4)	Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.

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First Quarter 2016

Tenant Lease Expirations

(unaudited)


*Empire State Building Office ⁽¹⁾*	Number of Leases Expiring ⁽²⁾		Rentable Square Feet Expiring ⁽³⁾		Percent of Portfolio Rentable Square Feet Expiring			Annualized Rent ^{(4) (5)}		Percent of Annualized Rent			Annualized Rent Per Rentable Square Foot
Available		—		245,496		9.1	%	$	—		0.0	%	$	—
Signed leases not commenced		3		39,016		1.4	%		—		0.0	%		—
2016		18		73,784		2.7	%		3,513,802		2.8	%		48.50
2017		26		94,385		3.5	%		5,378,410		4.3	%		56.98
2018		23		83,254		3.1	%		4,663,983		3.7	%		56.02
2019		16		65,146		2.4	%		3,268,003		2.6	%		50.16
2020		40		312,818		11.6	%		16,879,998		13.5	%		53.96
2021		14		95,689		3.5	%		5,084,832		4.1	%		53.14
2022		11		42,764		1.6	%		2,939,403		2.3	%		68.74
2023		10		67,256		2.5	%		3,209,296		2.6	%		47.72
2024		8		152,594		5.6	%		7,421,041		5.9	%		48.63
2025		6		57,285		2.1	%		3,122,027		2.5	%		54.50
Thereafter		15		1,378,244		50.9	%		69,956,122		55.8	%		50.76

Total Empire State Building office		190		2,707,731		100.0	%	$	125,436,917		100.0	%	$	51.76


*Empire State Building Broadcasting Licenses and Leases*	Annualized Base Rent ⁽⁶⁾		Annualized Expense Reimbursements		Annualized Rent ⁽⁴⁾		Percent of Annualized Rent
2016	$	18,450	$	14,883	$	33,333		0.1	%
2017		5,326,724		3,457,681		8,784,405		30.1	%
2018		6,168,780		3,200,109		9,368,889		32.1	%
2019		212,240		66,482		278,722		1.0	%
2020		2,004,144		603,031		2,607,175		8.9	%
2021		2,186,388		315,055		2,501,443		8.6	%
2022		2,483,367		296,549		2,779,916		9.5	%
2023		640,339		114,524		754,863		2.6	%
2024		43,260		44,005		87,265		0.3	%
2025		1,599,000		386,387		1,985,387		6.8	%

Total Empire State Building broadcasting licenses and leases	$	20,682,692	$	8,498,706	$	29,181,398		100.0	%

Notes:

(1)	Excludes retail space, broadcasting licenses and observatory operations

(2)	If a lease has two different expiration dates, it is considered to be two leases (for the purpose of lease count and square footage).

(3)	Excludes 25,937 rentable square feet of space attributable to building management use.

(4)	Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.

(5)	Includes approximately $4.6 million of annualized rent related to physical space occupied by broadcasting tenants for their broadcasting operations. Does not include license fees charged to broadcasting tenants.

(6)	Represents license fees for the use of the Empire State Building mast and base rent for physical space occupied by broadcasting tenants.

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First Quarter 2016

20 Largest Tenants and Portfolio Tenant Diversification by Industry

(unaudited)


20 Largest Tenants	Number of Leases		Number of Properties		Lease Expiration ⁽¹⁾	Weighted Average Remaining Lease Term⁽²⁾	Total Occupied Square Feet ⁽³⁾		Percent of Portfolio Rentable Square Feet ⁽⁴⁾			Annualized Rent ⁽⁵⁾		Percent of Portfolio Annualized Rent ⁽⁶⁾
1. Global Brands Group		4		3	Oct. 2023-Oct. 2028	11.5 years		675,882		6.7	%	$	31,432,964		6.8	%
2. Coty		1		1	Jan. 2030	13.8 years		311,242		3.1	%		16,019,709		3.5	%
3. LinkedIn		1		1	Feb. 2026	9.9 years		278,023		2.8	%		14,532,800		3.2	%
4. PVH Corp.		1		1	Oct. 2028	12.6 years		211,311		2.1	%		8,526,435		1.8	%
5. Thomson Reuters		4		2	Apr. 2018-Apr. 2020	3.3 years		147,208		1.5	%		7,719,003		1.7	%
6. Li & Fung		3		1	Oct. 2021-Oct. 2027	8.0 years		149,436		1.5	%		6,782,919		1.5	%
7. Federal Deposit Insurance Corporation		1		1	Feb. 2020	3.8 years		121,879		1.2	%		6,497,447		1.4	%
8. Urban Outfitters		1		1	Sept. 2029	13.5 years		56,730		0.6	%		6,392,536		1.4	%
9. Duane Reade		3		3	Feb. 2021-Sept. 2027	8.6 years		47,541		0.5	%		6,148,960		1.3	%
10. Legg Mason		1		1	Sept. 2024	8.5 years		138,868		1.3	%		6,129,367		1.3	%
11. On Deck Capital		3		1	Jan. 2016-Dec. 2026	10.5 years		112,177		1.1	%		5,834,367		1.3	%
12. Footlocker		2		1	Apr. 2016	0.1 years		170,187		1.6	%		5,527,692		1.2	%
13. Bank of America		3		3	Apr. 2016-Feb. 2018	0.5 years		29,671		0.3	%		5,499,728		1.2	%
14. WDGF North America		1		1	Dec 2025	9.9 years		5,300		0.1	%		5,351,820		1.2	%
15. Kohl’s		1		1	May 2029	13.2 years		113,032		1.0	%		4,657,375		1.0	%
16. HNTB Corporation		1		1	Feb. 2026	9.9 years		78,361		0.8	%		4,466,577		1.0	%
17. Aeropostale		2		1	Nov. 2016-Nov. 2020	1.9 years		88,760		0.9	%		4,282,608		0.9	%
18. Shutterstock		1		1	Sept. 2024	8.5 years		89,433		0.9	%		4,079,449		0.9	%
19. The Interpublic Group of Companies		1		1	Jul. 2024	8.3 years		87,076		0.9	%		3,864,691		0.8	%
20. Odyssey Reinsurance		1		1	Sept. 2022	6.5 years		101,619		1.0	%		3,857,080		0.8	%

Total		36						3,013,736		29.9	%	$	157,603,527		34.2	%

Notes:

(1)	Expiration dates are per lease and do not assume exercise of renewal or extension options. None of these leases contain early termination options. For tenants with more than two leases, the lease expiration is shown as a range.

(2)	Represents the weighted average lease term, based on annualized rent.

(3)	Based on leases signed and commenced as of March 31, 2016.

(4)	Represents the percentage of rentable square feet of the Company’s office and retail portfolios in the aggregate.

(5)	Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.

(6)	Represents the percentage of annualized rent of the Company’s office and retail portfolios in the aggregate.

Portfolio Tenant Diversification by Industry (based on annualized rent)

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First Quarter 2016

Capital Expenditures and Redevelopment Program

(unaudited)


	Three Months Ended
Capital expenditures	March 31, 2016		December 31, 2015		September 30, 2015		June 30, 2015		March 31, 2015
Tenant improvements - first generation	$	8,876	$	21,351	$	29,552	$	13,536	$	27,662
Tenant improvements - second generation		1,443		2,507		1,792		2,015		1,681
Leasing commissions - first generation		5,696		3,515		4,115		4,613		15,813
Leasing commissions - second generation		185		462		60		513		372
Building improvements - first generation		11,728		16,547		12,554		13,833		8,420
Building improvements - second generation		604		1,546		650		928		333

Total	$	28,532	$	45,928	$	48,723	$	35,438	$	54,281

Tenant space redevelopment by square feet ^{(1) (2)}

•

Future redevelopment (Empire State Building) - 430,000 square feet

•

Future redevelopment (other Manhattan properties) - 1,210,000 square feet

•

Redevelopment completed - 6,350,000 square feet

Inventory of vacant space⁽²⁾

•

Developed - 700,000 square feet, 78%

•

Undeveloped - 200,000 square feet, 22%

Inventory of undeveloped space⁽²⁾

•

Vacant - 200,000 square feet, 13%

•

Expires in 2016 - 350,000 square feet, 21%

•

Expires in 2017 and thereafter -1,090,000 square feet, 66%

Notes:

⁽¹⁾	These estimates are based on the Company’s current budgets (which do not include base building work in tenant spaces, tenant improvements and leasing commission costs) and are subject to change.

⁽²⁾

Redevelopment program is for the Manhattan office assets only. Square footage based on market measurement. Developed space includes space that has been demolished and completed asbestos abatement and available for lease up or ready to be prebuilt. Permanent building use spaces, amenity spaces and broadcasting spaces are excluded.

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First Quarter 2016

Observatory Summary

(unaudited and in thousands)


	Three Months Ended
Observatory NOI	March 31, 2016			December 31, 2015		September 30, 2015		June 30, 2015		March 31, 2015
Observatory revenue	$	21,181		$	27,647	$	35,702	$	30,600	$	18,223
Observatory expenses ⁽¹⁾		7,755			8,783		7,896		8,093		7,402

NOI		13,426			18,864		27,806		22,507		10,821
Intercompany rent expense ⁽²⁾		13,718			16,853		20,828		18,910		11,664

NOI after intercompany rent	$	(292	)	$	2,011	$	6,978	$	3,597	$	(843	)

Note:

⁽¹⁾

For all periods presented, certain Empire State Building public relations costs previously included in property operating expenses are included in observatory expenses. For the three months ended March 31, 2016, December 31, 2015, September 30, 2015, June 30, 2015 and March 31, 2015, these costs were $1,012, $621, $612, $673 and $425, respectively.

⁽²⁾	The observatory pays a market-based rent payment comprised of fixed and percentage rent to the Empire State Building. Intercompany rent is eliminated upon consolidation.

Annual Observatory Revenues 2011 to 2015

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First Quarter 2016

Condensed Consolidated Balance Sheets

(unaudited and dollars in thousands)


	March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015			March 31, 2015
Assets
Commercial real estate properties, at cost:
Land	$	201,196		$	201,196		$	201,196		$	201,196		$	201,196
Development costs		7,931			7,498			7,479			7,388			7,332
Building and improvements		2,089,792			2,067,636			2,036,187			1,996,318			1,967,260

		2,298,919			2,276,330			2,244,862			2,204,902			2,175,788
Less: accumulated depreciation		(490,427	)		(465,584	)		(445,549	)		(423,279	)		(399,851	)

Commercial real estate properties, net		1,808,492			1,810,746			1,799,313			1,781,623			1,775,937
Cash and cash equivalents		44,440			46,685			46,388			34,221			36,463
Restricted cash		60,165			65,880			64,899			69,709			61,007
Tenant and other receivables, net		14,828			18,782			32,406			16,431			12,759
Deferred rent receivables, net		127,148			122,048			116,208			111,897			106,226
Prepaid expenses and other assets		29,908			50,460			33,759			47,857			30,715
Deferred costs, net		304,977			310,679			324,388			340,351			354,586
Acquired below-market ground leases, net		381,934			383,891			385,849			387,807			389,765
Goodwill		491,479			491,479			491,479			491,479			491,479

Total assets	$	3,263,371		$	3,300,650		$	3,294,689		$	3,281,375		$	3,258,937

Liabilities and Equity
Mortgage notes payable, net	$	772,015		$	747,661		$	751,904		$	756,081		$	850,765
Senior unsecured notes, net		587,861			587,018			586,167			585,325			584,529
Unsecured term loan facility, net		262,640			262,545			262,457			—			—
Unsecured revolving credit facility, net		—			35,192			14,802			279,412			159,022
Accounts payable and accrued expenses		119,104			111,099			106,699			101,674			101,797
Acquired below-market leases, net		96,245			104,171			112,312			121,286			129,736
Deferred revenue and other liabilities		26,802			31,388			38,066			18,713			20,994
Tenants’ security deposits		49,729			48,890			49,672			46,338			44,388

Total liabilities		1,914,396			1,927,964			1,922,079			1,908,829			1,891,231
Total equity		1,348,975			1,372,686			1,372,610			1,372,546			1,367,706

Total liabilities and equity	$	3,263,371		$	3,300,650		$	3,294,689		$	3,281,375		$	3,258,937

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First Quarter 2016

Condensed Consolidated Statements of Income

(unaudited and in thousands, except per share amounts)


	Three Months Ended
	March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015			March 31, 2015
Revenues
Rental revenue	$	114,908		$	113,957		$	110,903		$	112,866		$	110,058
Tenant expense reimbursement		18,120			19,638			23,096			18,582			18,200
Observatory revenue		21,181			27,647			35,702			30,600			18,223
Construction revenue		—			—			—			374			1,607
Third party management and other fees		545			475			618			594			446
Other revenue and fees		2,320			3,483			5,460			1,757			3,348

Total revenues		157,074			165,200			175,779			164,773			151,882

Operating expenses
Property operating expenses ⁽¹⁾		39,104			38,297			41,052			37,262			42,027
Ground rent expenses		2,333			2,332			2,331			2,332			2,331
General and administrative expenses		10,918			9,678			10,182			9,113			9,100
Observatory expenses ⁽¹⁾		7,755			8,783			7,896			8,093			7,402
Construction expenses		—			—			—			353			2,869
Real estate taxes		23,525			23,622			23,613			22,952			22,978
Acquisition expenses		98			—			193			—			—
Depreciation and amortization		39,227			45,258			45,169			39,629			41,418

Total operating expenses		122,960			127,970			130,436			119,734			128,125

Total operating income		34,114			37,230			45,343			45,039			23,757
Other income (expense)
Interest expense		(17,951	)		(17,194	)		(16,680	)		(17,571	)		(16,047	)

Income before income taxes		16,163			20,036			28,663			27,468			7,710
Income tax (expense) benefit		542			(666	)		(2,578	)		(883	)		178

Net income		16,705			19,370			26,085			26,585			7,888
Perpetual preferred unit distributions		(234	)		(234	)		(234	)		(234	)		(234	)
Net income attributable to non-controlling interests		(9,043	)		(10,884	)		(14,631	)		(15,231	)		(4,516	)

Net income attributable to common stockholders	$	7,428		$	8,252		$	11,220		$	11,120		$	3,138

Weighted average common shares outstanding
Basic		120,778			118,706			115,900			112,852			109,400

Diluted		266,641			266,048			265,873			265,867			265,810

Net income per share attributable to common stockholders
Basic and Diluted	$	0.06		$	0.07		$	0.10		$	0.10		$	0.03

Dividends per share	$	0.085		$	0.085		$	0.085		$	0.085		$	0.085

⁽¹⁾

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First Quarter 2016

Funds from Operations (“FFO”), Modified Funds From Operations (“Modified FFO”), Core Funds from

Operations (“Core FFO”), Core Funds Available for Distribution (“Core FAD”) and EBITDA

(unaudited and in thousands, except per share amounts)


	Three Months Ended
Reconciliation of Net Income to FFO, Modified FFO and Core FFO	March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015			March 31, 2015
Net Income	$	16,705		$	19,370		$	26,085		$	26,585		$	7,888
Preferred unit distributions		(234	)		(234	)		(234	)		(234	)		(234	)
Real estate depreciation and amortization		39,075			45,085			45,072			39,542			41,233

FFO attributable to common stockholders and non-controlled interests		55,546			64,221			70,923			65,893			48,887
Amortization of below-market ground lease		1,958			1,958			1,957			1,958			1,958

Modified FFO attributable to common stockholders and non-controlled interests		57,504			66,179			72,880			67,851			50,845
Deferred financing costs write-off and prepayment penalty		552			—			—			404			1,345
Acquisition break-up fee		—			—			(2,500	)		—			—
Acquisition expenses		98			—			193			—			—
Construction severance expenses, net of taxes		—			—			—			—			480

Core FFO attributable to common stockholders and non-controlled interests	$	58,154		$	66,179		$	70,573		$	68,255		$	52,670

Total weighted average shares and Operating Partnership Units
Basic and Diluted		266,134			266,048			265,873			265,867			265,810

FFO attributable to common stockholders and non-controlled interests per share
Basic and Diluted	$	0.21		$	0.24		$	0.27		$	0.25		$	0.18

Modified FFO attributable to common stockholders and non-controlled interests per share
Basic and Diluted	$	0.22		$	0.25		$	0.27		$	0.26		$	0.19

Core FFO attributable to common stockholders and non-controlled interests per share
Basic and Diluted	$	0.22		$	0.25		$	0.27		$	0.26		$	0.20


Reconciliation of Core FFO to Core FAD
Core FFO	$	58,154		$	66,179		$	70,573		$	68,255		$	52,670
Add:
Amortization of deferred financing costs		1,142			1,141			1,086			1,054			1,076
Non-real estate depreciation and amortization		152			173			97			87			185
Amortization of non-cash compensation expense		2,097			1,225			1,334			1,230			1,694
Amortization of debt discount		668			668			668			668			668
Deduct:
Straight-line rental revenues		(5,080	)		(5,892	)		(5,441	)		(5,622	)		(4,102	)
Amortization of debt premiums		(1,737	)		(1,736	)		(1,737	)		(1,737	)		(1,869	)
Above/below-market rent revenue		(4,231	)		(4,691	)		(4,795	)		(4,576	)		(5,291	)
Corporate and Observatory capital expenditures		(792	)		—			(86	)		—			—
Tenant improvements - second generation		(1,443	)		(2,507	)		(1,792	)		(2,015	)		(1,681	)
Building improvements - second generation		(604	)		(1,546	)		(650	)		(928	)		(333	)
Leasing commissions - second generation		(185	)		(462	)		(60	)		(513	)		(372	)

Core FAD	$	48,141		$	52,552		$	59,197		$	55,903		$	42,645

Core FAD attributable to common stockholders and non-controlled interests per share
Basic and Diluted	$	0.18		$	0.20		$	0.22		$	0.21		$	0.16


Reconciliation of Net Income to EBITDA
Net income	$	16,705		$	19,370		$	26,085		$	26,585		$	7,888
Perpetual preferred unit distributions		(234	)		(234	)		(234	)		(234	)		(234	)
Interest expense		17,951			17,194			16,680			17,571			16,047
Income tax expense (benefit)		(542	)		666			2,578			883			(178	)
Depreciation and amortization		39,227			45,258			45,169			39,629			41,418
Acquisition expenses		98			—			193			—			—

EBITDA	$	73,205		$	82,254		$	90,471		$	84,434		$	64,941

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First Quarter 2016

Net Operating Income (“NOI”)

(unaudited and dollars in thousands)


	Three Months Ended
Reconciliation of Net Income to NOI and Cash NOI	March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015			March 31, 2015
Net income	$	16,705		$	19,370		$	26,085		$	26,585		$	7,888
Add:
General and administrative expenses		10,918			9,678			10,182			9,113			9,100
Depreciation and amortization		39,227			45,258			45,169			39,629			41,418
Interest expense		17,951			17,194			16,680			17,571			16,047
Construction expenses		—			—			—			353			2,869
Acquisition expenses		98			—			193			—			—
Income tax expense (benefit)		(542	)		666			2,578			883			(178	)
Less:
Construction revenue		—			—			—			(374	)		(1,607	)
Third-party management and other fees		(545	)		(475	)		(618	)		(594	)		(446	)
Acquisition break-up fee		—			—			(2,500	)		—			—

Net operating income		83,812			91,691			97,769			93,166			75,091

Straight-line rent		(5,080	)		(5,892	)		(5,441	)		(5,622	)		(4,102	)
Above/below-market lease amortization		(4,231	)		(4,691	)		(4,795	)		(4,576	)		(5,291	)
Below-market ground lease amortization		1,958			1,958			1,957			1,958			1,958

Cash net operating income		76,459			83,066			89,490			84,926			67,656

Less: Observatory net operating income		(13,426	)		(18,864	)		(27,806	)		(22,507	)		(10,821	)

Total portfolio (excluding observatory) cash net operating income	$	63,033		$	64,202		$	61,684		$	62,419		$	56,835

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First Quarter 2016

Debt Summary

(unaudited and dollars in thousands)


	March 31, 2016								December 31, 2015
				Weighted Average								Weighted Average
				Interest			Maturity					Interest			Maturity
Debt Summary	Balance			Rate			(Years)		Balance			Rate			(Years)
Fixed rate mortgage debt	$	761,893			5.40	%		3.0	$	735,145			5.53	%		2.7
Senior unsecured notes		600,000			3.47	%		8.1		600,000			3.47	%		8.4

Total fixed rate debt		1,361,893			4.55	%		5.3		1,335,145			4.61	%		5.3

Unsecured revolving credit facility		—			—			—		40,000			1.58	%		3.1
Unsecured term loan facility ⁽¹⁾		265,000			2.03	%		6.4		265,000			2.03	%		6.7

Total variable rate debt		265,000			2.03	%		6.4		305,000			1.97	%		6.2

Total debt		1,626,893			4.14	%		5.4		1,640,145			4.12	%		5.4

Premium/discount		4,112								5,181
Deferred financing costs, net		(8,489	)							(12,910	)

Total	$	1,622,516							$	1,632,416

Notes:

⁽¹⁾	Beginning August 2017, LIBOR is fixed at 2.1485% under a variable to fixed interest rate swap agreement.


							Available
			Outstanding at				Capacity at
			March 31,		Letters		March 31,
Available Capacity	Facility		2016		of Credit		2016
Unsecured revolving credit facility ⁽¹⁾	$	800,000	$	—	$	—	$	800,000


				Current			In
Covenant Summary	Required			Quarter			Compliance
Maximum Total Leverage⁽²⁾		< 60	%		30.1	%	Yes
Maximum Secured Debt		< 40	%		14.3	%	Yes
Minimum Fixed Charge Coverage		> 1.50	x		3.8	x	Yes
Minimum Unencumbered Interest Coverage		> 1.75	x		7.1	x	Yes
Maximum Unsecured Leverage		< 60	%		24.0	%	Yes
Maximum Secured Recourse Indebtedness		< 10	%		0	%	Yes
Minimum Tangible Net Worth	$	745,356		$	960,292		Yes

Notes:

⁽¹⁾	The unsecured revolving credit facility has an accordion feature allowing for an increase in maximum aggregate principal balance to $1.25 billion under certain circumstances. This facility matures in January 2019 with two additional six-month extension options.

⁽²⁾	Represents the ratio of total indebtedness to total asset value as defined and determined in accordance with the credit facility agreement.

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First Quarter 2016

Debt Detail

(unaudited and dollars in thousands)


	Stated			Current
	Interest			Interest			Principal			Maturity
	Rate (%)			Rate (%)			Balance			Date	Amortization
Fixed rate mortgage debt:
10 Bank Street		5.72	%		5.72	%	$	32,050		6/1/2017	30 years
1542 Third Avenue		5.90	%		5.90	%		18,117		6/1/2017	30 years
First Stamford Place		5.65	%		5.65	%		237,842		7/5/2017	30 years
383 Main Avenue, Norwalk, CT		5.59	%		5.59	%		29,119		7/5/2017	30 years
1010 Third Avenue and 77 West 55th Street		5.69	%		5.69	%		26,926		7/5/2017	30 years
1333 Broadway		6.32	%		6.32	%		68,404		1/5/2018	30 years
1400 Broadway (first lien mortgage loan)		6.12	%		6.12	%		68,483		2/5/2018	30 years
1400 Broadway (second lien mortgage loan)		3.35	%		3.35	%		9,548		2/5/2018	30 years
112 West 34th Street (first lien mortgage loan)		6.01	%		6.01	%		76,126		4/5/2018	30 years
112 West 34th Street (second lien mortgage loan)		6.56	%		6.56	%		9,608		4/5/2018	30 years
1350 Broadway		5.87	%		5.87	%		38,205		4/5/2018	30 years
Metro Center		3.59	%		3.59	%		97,465		11/5/2024	30 years
10 Union Square		3.70	%		3.70	%		50,000		4/1/2026	Interest only

Total mortgage debt								761,893

Unsecured revolving credit facility		LIBOR plus 1.15	%		1.58	%		—		1/23/2019	Interest only
Exchangeable senior unsecured notes		2.63	%		2.63	%		250,000		8/15/2019	Interest only
Unsecured term loan facility		LIBOR plus 1.60	%		2.03	%		265,000		8/24/2022	Interest only
Senior unsecured notes (Series A)		3.93	%		3.93	%		100,000		3/27/2025	Interest only
Senior unsecured notes (Series B)		4.09	%		4.09	%		125,000		3/27/2027	Interest only
Senior unsecured notes (Series C)		4.18	%		4.18	%		125,000		3/27/2030	Interest only

Total / weighted average debt					4.14	%		1,626,893

Premium/discounts								4,112
Deferred financing costs, net								(8,489	)

Total							$	1,622,516

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First Quarter 2016

Debt Maturities and Ground Lease Commitments

(unaudited and dollars in thousands)


Year	Amortization		Maturities ⁽¹⁾		Total			Percentage of Total Debt			Weighted Average Interest Rate of Maturing Debt
2016	$	9,053	$	—	$	9,053			0.6	%		n/a
2017		9,904		336,009		345,913			21.3	%		5.67	%
2018		2,880		262,210		265,090			16.3	%		6.02	%
2019		2,188		250,000		252,188			15.5	%		2.63	%
2020		2,268		—		2,268			0.1	%		n/a
Thereafter		9,706		742,675		752,381			46.2	%		3.28	%

Total debt	$	35,999	$	1,590,894		1,626,893			100.0	%		4.14	%

Premium/discount						4,112
Deferred financing costs, net						(8,489	)

Total					$	1,622,516

Note:

(1)	Assumes no extension options are exercised.

Debt Maturity Profile

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Ground Lease Commitments


Year	1350 Broadway		1400 Broadway		112 West 34th Street		Total
2016		81		507		551		1,139
2017		108		675		735		1,518
2018		108		675		735		1,518
2019		108		675		735		1,518
2020		108		675		735		1,518
Thereafter		2,439		12,825		41,466		56,730

	$	2,952	$	16,032	$	44,957	$	63,941

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First Quarter 2016

Supplemental Definitions

Funds From Operations (“FFO”)

We compute FFO in accordance with the “White Paper” on FFO published by the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding impairment writedowns of investments in depreciable real estate and investments in in-substance real estate investments, gains or losses from debt restructurings and sales of depreciable operating properties, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), less distributions to non-controlling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships and joint ventures. FFO is a widely recognized non-GAAP financial measure for REITs that we believe, when considered with financial statements determined in accordance with GAAP, is useful to investors in understanding financial performance and providing a relevant basis for comparison among REITs. In addition, FFO is useful to investors as it captures features particular to real estate performance by recognizing that real estate has generally appreciated over time or maintains residual value to a much greater extent than do other depreciable assets. Investors should review FFO, along with GAAP net income, when trying to understand an equity REIT’s operating performance. We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results of operations, the utility of FFO as a measure of its performance is limited. There can be no assurance that FFO presented by us is comparable to similarly titled measures of other REITs. FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. Although FFO is a measure used for comparability in assessing the performance of REITs, as the NAREIT White Paper only provides guidelines for computing FFO, the computation of FFO may vary from one company to another.

Modified Funds From Operations (“Modified FFO”)

Modified FFO adds back an adjustment for any above or below-market ground lease amortization to traditionally defined FFO. We consider this a useful supplemental measure in evaluating our operating performance due to the non-cash accounting treatment under GAAP, which stems from the July 2014 acquisition of two properties as they carry significantly below market ground leases, the amortization of which is material to our overall results. We present Modified FFO because we consider it an important supplemental measure of our operating performance in that it adds back the non-cash amortization of below-market ground leases. There can be no assurance that Modified FFO presented by us is comparable to similarly titled measures of other REITs. Modified FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Modified FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions.

Core Funds From Operations (“Core FFO”)

Core FFO adds back to Modified FFO the following items: private perpetual preferred exchange offering expenses, acquisition expenses, gain on settlement of lawsuit related to the Observatory, net of income taxes, deferred financing cost write-off, prepayment penalties, construction severance expenses and acquisition break-up fee. The Company presents Core FFO because it considers it an important supplemental measure of its operating performance in that it excludes non-recurring items. There can be no assurance that Core FFO presented by the Company is comparable to similarly titled measures of other REITs. Core FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Core FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions. In future periods, we may also exclude other items from Core FFO that we believe may help investors compare our results.

Core Funds Available for Distribution (“Core FAD”)

In addition to Core FFO, we present Core FAD by (i) adding to Core FFO non-real estate depreciation and amortization, the amortization of deferred financing costs, amortization of debt discounts and non-cash compensation expenses and (ii) deducting straight line rent, recurring second generation leasing commissions, tenant improvements, prebuilts, capital expenditures, furniture, fixtures & equipment, amortization of debt premiums and above/below market rent revenue. Core FAD is presented solely as a supplemental disclosure that we believe provides useful information regarding our ability to fund our dividends. Core FAD does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP. Core FAD is not indicative of cash available to fund ongoing cash needs., including the ability to make cash distributions. There can be no assurance that Core FAD presented by us is comparable to similarly titled measures of other REITs.

Net Operating Income (NOI)

NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by; (i) the cost of funds of the property owner, (ii) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (iii) acquisition expenses and break-up fee, or (iv) general and administrative expenses and other gains and losses that are specific to the property owner. The cost of funds is eliminated from net operating income because it is specific to the particular financing capabilities and constraints of the owner. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our office or retail properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed, purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue, generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness. NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income computed in accordance with GAAP. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not-be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

EBITDA

We compute EBITDA as net income plus perpetual preferred unit distributions, interest expense, income taxes, depreciation and amortization and acquisition expenses. We present EBITDA because we believe that EBITDA, along with cash flow from operating activities, investing activities and financing activities, provides investors with an additional indicator of its ability to incur and service debt. EBITDA should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of its liquidity.

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Empire State Realty Trust, Inc. - FORM 8-K - EX-99.2 - April 27, 2016

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Empire State Realty Trust, Inc. Reports