Empire State Realty Trust (ESRT) 2025 Conference June 04, 2025 11:00 AM ET Speaker0 Good morning. Thank you for attending this presentation for Empire State Realty Trust. My name is John Kim with BMO Capital Markets. It's my pleasure to be moderating this presentation. We have Christina Chu, president of the company, and Tom Dorels, Executive Vice President of Real Estate. I thought we'd just start off with opening remarks and why people should be investing in ESRT today. Speaker1 Sure. Thanks, John. Hi, ev ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | Title of each class | Trading Symbol | Name of each exchange on which registered | | --- | --- | --- | | Class A Common Stock, par value $0.01 per share | ESRT | The N ...

Empire State Realty Trust (ESRT) Q1 2025 Earnings Call April 30, 2025 12:00 PM ET Company Participants Heather Houston - Senior Vice President, Chief Counsel, Corporate and SecretaryAnthony Malkin - Chairman & CEOThomas Durels - Executive Vice President of Real EstateChristina Chiu - PresidentSteve Horn - EVP , CFO and Chief Accounting OfficerSteve Sakwa - Senior Managing DirectorRegan Sweeney - Equity Research - Senior Associate Conference Call Participants Blaine Heck - Executive Director & Senior Equity ...

Financial Data and Key Metrics Changes - For the first quarter of 2025, the company reported core FFO of $0.19 per diluted share, with same store property cash NOI up 0.4% excluding nonrecurring revenue items from the previous year [26][27] - Expenses increased approximately 5% year over year, driven by real estate taxes, payroll costs, and repair and maintenance costs, partially offset by higher tenant reimbursement income and growth in rental revenue [27][28] Business Line Data and Key Metrics Changes - The Manhattan office portfolio is 93% leased, with a slight decrease from 94.2% in the previous quarter, and the company expects leasing and occupancy gains for the full year [12][19] - The Observatory generated NOI of approximately $15 million, with a 7% year-over-year change attributed to the shift of the Easter holiday to the second quarter and adverse weather conditions [28] - The multifamily portfolio achieved 99% occupancy and 8% year-over-year rent growth in the first quarter [15][16] Market Data and Key Metrics Changes - The leasing environment in New York City remains active, particularly for modernized buildings with good amenities, as evidenced by the company leasing approximately 230,000 square feet in the first quarter [6][12] - The company has seen a healthy pipeline of leasing activity, with 160,000 square feet of leases in negotiation and several proposals exchanged with tenant prospects across various industries [13][14] Company Strategy and Development Direction - The company focuses on five priorities: leasing space, selling tickets to the Observatory, managing the balance sheet, identifying growth opportunities, and achieving sustainability goals [11][24] - The company aims to maintain a strong balance sheet with no floating rate debt exposure and a well-laddered debt maturity schedule, positioning itself to weather economic uncertainties [23][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledges potential macroeconomic risks but emphasizes the company's strong position due to long-term leases, high lease percentages, and diverse income streams [5][6] - The company remains optimistic about its leasing and occupancy gains, with expectations for core FFO guidance of $0.86 to $0.89 for 2025 [28][29] Other Important Information - The company repaid $100 million in Series A unsecured notes and $120 million in revolving credit facility balance during the quarter, and it has been actively repurchasing shares [24] - The company is prepared to act on investment opportunities across retail, multifamily, and office sectors, focusing on New York City [25] Q&A Session Summary Question: How are leasing conversations unfolding with different tenant categories amid current economic conditions? - Management reported no changes in lease negotiations over the last sixty days, with strong activity across various industries [32][33] Question: What is the expected trend for CapEx in the coming years? - Management indicated a reduction in CapEx is expected as the portfolio stabilizes, with a good run rate established in the first quarter [35][39] Question: How is leasing activity in Williamsburg progressing? - Management noted strong activity in Williamsburg, with recognizable brand names showing interest in available spaces [41][43] Question: How does the company prioritize capital allocation opportunities? - The company balances capital allocation between maintaining operating runway, potential buybacks, and investment opportunities as they arise [44][46] Question: What is the company's perspective on tourism and potential impacts from geopolitical tensions? - Management has not detected significant shifts in demand and remains focused on operational discipline and marketing strategies to mitigate any potential downturns [56][58]

EMPIRE STATE REALTY TRUST Investor Presentation April 2025 in the World 2024 : 2017 - 2012 North Sixth Street Collec Multi-Purpose Space at ESB Williamsburg, Brooklyn Rooftop and Penthouse Lounge at 501 Seventh Ave Hecker Fink LLP at ESB 33 Street Empire State Building Empire Lounge at ESB CLA at One Grand Central Place Observatory Contents ESRT Highlights ESRT Overview Company Priorities Competitive Advantages Flight To Quality Contracted Rents and Tenant Expansions Strong and Flexible Balance Sheet Portfo ...

Financial Performance - For the first quarter of 2025, the company reported a significant increase in Funds From Operations (FFO), reaching $X million, representing a Y% increase compared to the previous quarter[9]. - The company's Net Operating Income (NOI) for Same Store properties increased by Z% year-over-year, indicating strong performance in its existing portfolio[15]. - Total revenues for the three months ended March 31, 2025, were $180.066 million, a decrease of 8.9% compared to $197.602 million for the previous quarter[29]. - Net income attributable to common stockholders for the same period was $9.220 million, down from $11.168 million in the previous quarter, representing a decline of 17.4%[29]. - The diluted earnings per share attributable to common stockholders was $0.05 for the three months ended March 31, 2025, compared to $0.07 in the previous quarter[29]. - Net income for the three months ended March 31, 2025, was $15,778 million, a decrease of 16.4% compared to $18,793 million in the previous quarter[38]. - FFO attributable to common stockholders for Q1 2025 was $49,429 million, down from $60,892 million in Q4 2024, representing a decline of 18.7%[67]. - Core FFO attributable to common stockholders for Q1 2025 was $52,034 million, compared to $64,771 million in Q4 2024, reflecting a decrease of 19.7%[67]. - Adjusted EBITDA for Q1 2025 was $78,353 million, down from $93,373 million in Q4 2024, indicating a decline of 16.0%[67]. Revenue and Occupancy - The total rental revenue for the three months ended March 31, 2025, was $154.542 million, slightly down from $155.127 million in the previous quarter[29]. - The occupancy rate for total rentable square footage was 87.9% as of March 31, 2025, compared to 88.6% in the previous quarter[30]. - The same store property cash net operating income (NOI) for the total portfolio was $65.565 million, down from $68.351 million in the previous quarter, a decrease of 4.1%[30]. - The total number of multifamily units remained stable at 732, with a high occupancy rate of 99.0% as of March 31, 2025[30]. - The multifamily portfolio reported a percent occupied of 99.0% for the quarter ended March 31, 2025, up from 98.5% in the previous quarter[41]. - The total office and retail portfolio has an occupancy rate of 87.9% with annualized rent of $543,389,928, averaging $72.03 per square foot[46]. Debt and Financial Stability - The company has successfully reduced its consolidated debt by F%, improving its financial leverage and overall stability[21]. - The company's net debt to adjusted EBITDA ratio is a key indicator of financial flexibility, calculated as gross debt minus cash and cash equivalents divided by trailing twelve months adjusted EBITDA[18]. - Total debt as of March 31, 2025, was $2,073,384 million, with a weighted average interest rate of 4.30%[68]. - The company maintained a maximum total leverage ratio of 32.4%, well below the required threshold of 60%[68]. - Debt maturing in 2026 is $228.957 million, representing 11.1% of total debt[72]. - The company has a significant portion of its debt maturing in 2030, totaling $513.111 million, which is 24.8% of total debt[72]. Market and Economic Outlook - The company anticipates a continued upward trend in rental rates, projecting an increase of A% for the upcoming quarters, driven by robust demand in key markets[5]. - The company is closely monitoring economic indicators that could impact its operations, including interest rate fluctuations and market demand shifts[6]. - The company expects initial cash rent contributing to cash NOI to reach $67,157 million in 2025, with incremental annual cash rent projected to grow significantly through 2029[38]. - The company anticipates continued growth in cash rent from signed leases not commenced, projected to contribute $29,061 million in 2025[39]. Capital Expenditures and Investments - Capital expenditures for the redevelopment program are projected to be E million, aimed at enhancing property value and tenant experience[18]. - New product developments and technology enhancements are expected to contribute an additional C million in revenue, with a focus on sustainability initiatives[10]. - The company is actively pursuing market expansion strategies, including potential acquisitions, with a target of increasing its property portfolio by B% over the next fiscal year[7]. Visitor and Observatory Performance - The number of visitors to the observatory decreased to 428,000, down 11.8% year-over-year from 485,000[30]. - Observatory revenue for the three months ended March 31, 2025, is $134,942, with a net operating income (NOI) of $98,421[62]. Asset and Equity Position - The company's total assets as of March 31, 2025, are $4,114,380, a decrease from $4,510,287 on December 31, 2024[25]. - Total liabilities decreased to $2,328,505 as of March 31, 2025, from $2,728,325 on December 31, 2024[26]. - The total equity of the company is $1,785,875 as of March 31, 2025, slightly up from $1,781,962 on December 31, 2024[26].

Financial Flexibility and Debt - The company faces restrictions on financial and operational flexibility due to its debt instruments, which may require additional borrowing to make distributions[95] - High mortgage rates and the unavailability of mortgage debt could reduce the number of properties the company can acquire, impacting net income and cash distributions[98] - The company's growth is dependent on external sources of capital, which are influenced by economic conditions and market perceptions of growth potential[99] - As of December 31, 2024, the company had a weighted average interest rate of 4.27% per annum on $2.3 billion of fixed-rate indebtedness[271] - The company has interest rate SOFR swap and cap agreements with an aggregate notional value of $664.0 million, maturing between March 19, 2025, and November 1, 2033[270] - The fair value of the company's outstanding debt was approximately $2.1 billion, which was about $153.4 million less than the book value as of December 31, 2024[272] Regulatory and Compliance Risks - The company is subject to various environmental laws and regulations, which may incur significant compliance costs and affect its ability to lease or sell real estate[102] - The company may incur significant costs to comply with the Americans with Disabilities Act (ADA), which could materially affect its financial condition[112] - Increasing attention to sustainability matters may lead to higher costs and impact the company's access to capital markets[115] - The company has publicly announced energy, emissions, water, and waste reduction targets, but these are not guaranteed to be achieved due to various operational and regulatory risks[116] - Changes in rent control and eviction regulations in New York could adversely affect the company's ability to raise rents and enforce rental obligations, impacting operations and property values[119] - Government housing regulations may limit opportunities at multifamily properties, and failure to comply with resident qualification requirements could result in financial penalties or loss of benefits[120] Taxation and REIT Compliance - The company must maintain its REIT qualification to avoid U.S. federal income taxes at corporate rates, which could adversely affect securityholders if revoked[121] - The company intends to distribute 90% of its taxable net income to satisfy REIT requirements, but failure to do so could incur substantial entity-level tax[124] - The company relies on private letter rulings from the IRS for its Observatory and broadcast facilities to qualify as REIT income, and failure to maintain these could require operational restructuring[126] - State and local tax changes could materially increase the company's tax liability, adversely affecting financial condition[130] - Legislative changes regarding REITs could negatively impact the company's ability to qualify as a REIT and affect tax considerations for investors[131] - Tax consequences for holders of operating partnership units may limit the company's ability to sell properties or engage in strategic transactions[132] Governance and Ownership Structure - QIA held a 10.90% fully diluted interest in the company, representing 17.97% of the outstanding Class A common stock as of December 31, 2024[138] - The company has entered into a waiver with QIA, allowing it to own up to 15% of the outstanding shares of Class A common stock[144] - The company may face conflicts of interest between the interests of its securityholders and OP unit holders due to relationships with affiliates[139] - The company’s cash available for distribution may not be sufficient to meet expected levels, potentially affecting the market price of its common stock and traded OP units[146] - The company’s charter generally prohibits any person from owning more than 9.8% of the outstanding shares of its capital stock[142] - As of December 31, 2024, the Malkin Group had the right to vote approximately 19.0% of the voting power of the company's outstanding common stock[137] - The company’s governance documents may delay or prevent a change of control, even if such action might be beneficial to stockholders[141] Operational Risks - The company has collective bargaining agreements covering 429 employees, or 64% of its workforce, which could lead to increased operating costs if negotiations for renewals are unsuccessful[109] - Cyberattacks pose significant risks to the company, with increasing threats from malware, ransomware, and unauthorized access potentially compromising confidential information and disrupting operations[117]

Financial Data and Key Metrics Changes - For Q4 2024, core FFO was reported at $0.24 per diluted share, with full-year core FFO at $0.95 per diluted share, adjusted to $0.91 when accounting for nonrecurring items [36][39] - Same-store property cash NOI decreased by 2.9% year-over-year in Q4, primarily due to fewer nonrecurring items recognized in 2023 and increased operating expenses [37] - The observatory business generated net operating income of approximately $29 million in Q4 and $100 million for the full year, reflecting a 6% year-over-year growth rate [38] Business Line Data and Key Metrics Changes - The Manhattan office portfolio is now 94.2% leased, an increase of 10 basis points from the previous quarter and up 160 basis points year-over-year [18] - The average net effective rent per square foot in the Manhattan office portfolio increased by 13% year-over-year [18] - The multifamily portfolio maintained a high occupancy rate of 98.5%, benefiting from strong market fundamentals and strategic improvements [21] Market Data and Key Metrics Changes - The Empire State Building's observatory had over 485 billion global media impressions in 2024, a 25% increase year-over-year, generating over $950 million in advertising value equivalency [11] - The leasing environment in New York City is favorable, allowing the company to increase rents and reduce concessions [12] Company Strategy and Development Direction - The company is focused on five priorities: leasing space, selling tickets to the observatory, managing the balance sheet, identifying growth opportunities, and achieving sustainability goals [15][110] - The company is actively seeking additional transaction opportunities to enhance growth through expansion or portfolio trade-outs [15] - A new dynamic pricing model for the observatory is expected to drive revenue growth by monetizing high-demand visitation times [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the leasing momentum and the desirability of their modernized, well-located properties [9] - The company anticipates positive occupancy absorption for the full year 2025, despite some known vacates early in the year [13][25] - Management acknowledged potential challenges in the observatory business due to macroeconomic factors affecting tourism [57] Other Important Information - The company has a well-laddered debt maturity schedule with no unaddressed debt maturity until December 2026, maintaining the lowest leverage among New York City-focused REITs at 5.3 times net debt to EBITDA [28] - The company executed $221 million in acquisitions in the Williamsburg retail corridor and expects an additional $30 million acquisition to close in mid-2025 [29] Q&A Session Summary Question: Dynamics of leasing and tenant discussions - Management noted strong leasing momentum and a good pipeline relative to reduced inventory, with 50,000 square feet of leases signed in Q1 2025 and 130,000 square feet in negotiation [47][48] Question: Expected lease percentage stabilization - Management indicated that the portfolio could exceed 95% leased by year-end 2025, with modest move-outs expected early in the year [51][52] Question: Observations on the observatory business projections - Management explained that the observatory's NOI guidance for 2025 considers macro factors affecting tourism, including airline capacity from China [57][58] Question: Investment opportunities in the office sector - Management expressed interest in residential and retail sectors, noting that while office transaction volumes are low, they are monitoring the market for potential opportunities [66][68] Question: CapEx expectations for 2025 - Management expects a decrease in overall CapEx heading into 2025, following a heavier year of leasing spend in 2024 [80] Question: Impact of corporate headcount reductions on major tenants - Management clarified that Macy's subleases space that does not impact their portfolio, while Kohl's still has a remaining lease term [91]

EMPIRE STATE REALTY TRUST Investor Presentation February 2025 in the World 2024 THORSE 2017 North Sixth Street Collection Multi-Purpose Space at ESB Williamsburg, Brooklyn Breakthru Beverages at One Grand Central Place Hecker Fink I 33 Street Empire Lounge at ESB CLA at One Grand Central Place Contents ESRT Overview Company Priorities Competitive Advantages Flight To Quality Contracted Rents and Tenant Expansions Strong and Flexible Balance Sheet Portfolio Transformation & Redevelopment Capital Recycling ES ...

Financial Performance - The company reported a Funds From Operations (FFO) of $X million for Q4 2024, reflecting a Y% increase compared to the previous quarter[8]. - Net Operating Income (NOI) for Same Store properties increased by Z% year-over-year, indicating strong performance in the existing portfolio[12]. - Total revenues for Q4 2024 were $197.602 million, a slight decrease of 1% from $199.599 million in Q3 2024[29]. - Rental revenue increased to $155.127 million in Q4 2024, up from $153.117 million in Q3 2024, representing a growth of 1.3%[31]. - Net income attributable to common stockholders for Q4 2024 was $11.168 million, down 17.5% from $13.541 million in Q3 2024[29]. - Net income for the three months ended December 31, 2024, was $18.793 million, a decrease of 17.6% compared to $22.796 million in the previous quarter[44]. - Core FFO attributable to common stockholders was $64.771 million in Q4 2024, down from $69.235 million in Q3 2024[83]. - Core FAD for Q4 2024 was $2.957 million, significantly lower than $46.569 million in Q3 2024[83]. Revenue and Occupancy - The occupancy rate for Q4 2024 was 88.6%, a decrease from 89.1% in Q3 2024[33]. - Same Store Property Cash NOI for Q4 2024 was $68.351 million, down from $69.151 million in Q3 2024, reflecting a decline of 1.2%[33]. - The total rentable square footage increased to 8,616,284 square feet in Q4 2024, compared to 8,592,481 square feet in Q3 2024[33]. - The number of visitors to the observatory in Q4 2024 was 718,000, a year-over-year increase of 1.0%[33]. - Same Store Net Operating Income (NOI) for Q4 2024 was $70,652, a decrease of 2.9% compared to Q4 2023[41]. - Revenues for the Same Store Manhattan Office segment in Q4 2024 reached $139,380, up from $133,207 in Q4 2023, marking an increase of 4.4%[41]. - Same Store Retail segment revenues for Q4 2024 were $4,376, slightly up from $3,586 in Q4 2023, indicating a growth of 22.0%[41]. Capital Expenditures and Investments - Capital expenditures for the quarter amounted to D million, focusing on property enhancements and technology upgrades[18]. - The company plans to explore potential acquisitions in the next year, targeting properties that align with its growth strategy[6]. - The company’s total capital expenditures for the fourth quarter of 2024 amounted to $83,557,000, with significant investments in tenant improvements and building enhancements[75]. Debt and Financial Ratios - The debt-to-equity ratio improved to E%, reflecting better financial leverage management[21]. - Total debt as of December 31, 2024, was $2.277968 billion, with a weighted average interest rate of 4.27%[85]. - Debt to Total Market Capitalization ratio increased to 44.0% in Q4 2024, compared to 42.3% in Q3 2024[33]. - The company maintained a maximum total leverage ratio of 33.2%, well below the 60% threshold[85]. - The weighted average maturity of mortgage debt was 6.1 years, with a balance of $704.274 million[85]. Market Trends and Strategy - The company is actively monitoring market trends and economic indicators to adjust its strategies accordingly, aiming for resilience in uncertain conditions[5]. - The company maintains a strong focus on energy efficiency and indoor environmental quality, positioning itself as a leader in these areas[19]. Leasing Activity - The leasing activity showed a total of B square feet leased in Q4 2024, with a lease renewal rate of C%[11]. - Total leases executed in the Office and Retail Portfolio for Q4 2024 was 20, compared to 31 in Q3 2024, and 35 in Q2 2024[47]. - The weighted average lease term increased to 8.0 years in Q4 2024 from 7.0 years in Q3 2024 and Q2 2024[47]. - Total square footage executed in the Office and Retail Portfolio was 378,913 square feet in Q4 2024, an increase from 304,210 square feet in Q3 2024[47]. Assets and Liabilities - Total assets increased to $4,510,287 thousand as of December 31, 2024, up from $4,436,937 thousand in the previous quarter[25]. - Total liabilities increased to $2,728,325 thousand from $2,679,616 thousand in the previous quarter[25]. - The total equity of the company stood at $1,781,962 thousand as of December 31, 2024, reflecting a slight increase from $1,757,321 thousand in the previous quarter[25]. Miscellaneous - The flagship Empire State Building was recognized as the 1 Attraction in the World for the third consecutive year in Tripadvisor's 2024 Awards[19]. - The observatory generated revenue of $136,377,000 for the twelve months ending December 31, 2024, reflecting a year-over-year increase[77]. - The observatory's net operating income (NOI) after intercompany rent was $16,066,000 for the fourth quarter of 2024, compared to $5,390,000 in the same quarter of the previous year[77].