Empire State Realty OP(FISK) - 2025 Q1 - Quarterly Report

markdown [PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%201.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Q1 2025 net income was **$15.8 million**, total assets decreased to **$4.11 billion**, and operating cash flow increased to **$83.1 million** [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$4.11 billion** from **$4.51 billion** as of March 31, 2025, with total liabilities at **$2.33 billion** due to debt repayments Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$4,114,380** | **$4,510,287** | | Cash and cash equivalents | $187,823 | $385,465 | | Commercial real estate properties, net | $2,518,498 | $2,512,460 | | Contract asset | $— | $170,419 | | **Total Liabilities** | **$2,328,505** | **$2,728,325** | | Senior unsecured notes, net | $1,097,212 | $1,197,061 | | Unsecured revolving credit facility | $— | $120,000 | | Debt associated with property in receivership | $— | $177,667 | | **Total Capital** | **$1,785,875** | **$1,781,962** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2025 net income increased to **$15.8 million** (from **$10.2 million**) due to a **$13.2 million** property gain, with total revenues at **$180.1 million** Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per unit) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $180,066 | $181,179 | | Rental revenue | $154,542 | $153,882 | | Observatory revenue | $23,161 | $24,596 | | Total Operating Income | $25,788 | $31,063 | | Gain on disposition of property | $13,170 | $— | | **Net Income** | **$15,778** | **$10,215** | | Net Income Attributable to Common Unitholders | $14,728 | $9,161 | | **Basic Earnings Per Unit** | **$0.06** | **$0.03** | | **Diluted Earnings Per Unit** | **$0.05** | **$0.03** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 operating cash flow was **$83.1 million**, but financing activities used **$233.0 million** for debt repayments, leading to a **$191.9 million** net cash decrease Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $83,146 | $70,926 | | Net cash used in investing activities | $(42,063) | $(71,269) | | Net cash used in financing activities | $(232,973) | $(21,302) | | **Net decrease in cash** | **$(191,890)** | **$(21,645)** | - Major financing activities in Q1 2025 included a **$100.0 million** repayment of senior unsecured notes and a **$120.0 million** repayment of the unsecured revolving credit facility[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail business, a **$13.2 million** property gain, **$100 million** senior note repayment, **$500 million** share repurchase availability, and segment NOI changes - As of March 31, 2025, the company's portfolio comprised approximately **7.9 million** rentable square feet of office space, **0.8 million** rentable square feet of retail space, and **732** residential units[24](index=24&type=chunk) - On February 5, 2025, the consensual foreclosure of First Stamford Place was completed, releasing the company from the senior mortgage obligation and recognizing a gain of **$13.2 million** from the deconsolidation of the related entity[36](index=36&type=chunk)[37](index=37&type=chunk) - On March 27, 2025, the Series A senior unsecured notes with an aggregate principal of **$100.0 million** matured and were repaid[51](index=51&type=chunk) - The company's share repurchase program, authorized through December 31, 2025, had **$500.0 million** remaining available as of March 31, 2025[90](index=90&type=chunk) - The company's two reportable segments are Real Estate and Observatory, with the Real Estate segment generating **$91.2 million** in Net Operating Income (NOI) and the Observatory segment incurring a Net Operating Loss of **$0.1 million** for Q1 2025[113](index=113&type=chunk)[116](index=116&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management reported Q1 2025 net income of **$14.7 million** and Core FFO of **$52.0 million**, with strong liquidity (**$187.8 million** cash) and **$2.1 billion** total debt, confident in its diversified portfolio [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Q1 2025 total revenues were **$180.1 million** (down **0.6%**), with net income rising to **$15.0 million** due to a **$13.2 million** property gain Revenue and Income Comparison (in thousands) | Metric | Q1 2025 | Q1 2024 | Change % | | :--- | :--- | :--- | :--- | | Total Revenues | $180,066 | $181,179 | (0.6)% | | Observatory Revenue | $23,161 | $24,596 | (5.8)% | | Rental Revenue | $154,542 | $153,882 | 0.4% | | Gain on disposition of property | $13,170 | $— | N/A | | **Net Income** | **$15,778** | **$10,215** | 54.5% | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, liquidity included **$187.8 million** cash and **$620.0 million** credit facility availability, with **$2.1 billion** total debt at **4.30%** weighted average interest - At March 31, 2025, liquidity included **$187.8 million** in cash and **$620.0 million** available under the unsecured revolving credit facility[137](index=137&type=chunk) - Total consolidated indebtedness was **$2.1 billion**, with a weighted average interest rate of **4.30%** and a weighted average maturity of **5.3 years**, with no mortgage debt maturities until April 2026[137](index=137&type=chunk)[142](index=142&type=chunk) Financial Covenant Compliance as of March 31, 2025 | Financial Covenant | Required | Actual | In Compliance | | :--- | :--- | :--- | :--- | | Maximum total leverage | < 60% | 32.4 % | Yes | | Maximum secured leverage | < 40% | 12.1 % | Yes | | Minimum fixed charge coverage | > 1.50x | 2.9x | Yes | | Minimum unencumbered interest coverage | > 1.75x | 4.4x | Yes | | Maximum unsecured leverage | < 60% | 24.2 % | Yes | [Non-GAAP Financial Measures (NOI, FFO)](index=33&type=section&id=Non-GAAP%20Financial%20Measures) Q1 2025 NOI was **$91.1 million** (down from **$92.9 million**), and Core FFO was **$52.0 million** (down from **$56.5 million**) Reconciliation to Core FFO (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $15,778 | $10,215 | | FFO attributable to common unitholders | $49,429 | $54,018 | | Modified FFO attributable to common unitholders | $51,387 | $55,976 | | **Core FFO attributable to common unitholders** | **$52,034** | **$56,529** | Reconciliation to NOI (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $15,778 | $10,215 | | **Net operating income** | **$91,076** | **$92,851** | [Outlook](index=36&type=section&id=Outlook) ESRT is well-positioned despite economic uncertainty, with diversified income streams, a modernized NYC portfolio, strong balance sheet, and no near-term debt maturities - The company believes it is in a good competitive position with diversified drivers of income across office, retail, multifamily, and the Empire State Building Observatory[180](index=180&type=chunk) - The business is supported by a well-positioned balance sheet, modest leverage, good access to liquidity, and the absence of near-term debt maturities[181](index=181&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) Primary market risk is interest rate changes, mitigated by **$2.1 billion** fixed-rate debt at **4.30%** and **$448.5 million** in interest rate swaps/caps - As of March 31, 2025, the weighted average interest rate on the **$2.1 billion** of fixed-rate indebtedness was **4.30%** per annum[185](index=185&type=chunk) - The company has interest rate swap and cap agreements with an aggregate notional value of **$448.5 million** to manage interest rate risk on floating-rate debt[184](index=184&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Disclosure controls were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[188](index=188&type=chunk) - No material changes to internal control over financial reporting occurred during the first quarter of 2025[189](index=189&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=37&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Legal proceedings, detailed in Note 9, include an ongoing arbitration dispute with former investors, which the company believes is meritless - For a description of legal proceedings, the report refers to Note 9 of the financial statements[190](index=190&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to risk factors were reported from the Annual Report on Form 10-K for the year ended December 31, 2024 - As of March 31, 2025, there have been no material changes to the risk factors from the Annual Report on Form 10-K for the year ended December 31, 2024[191](index=191&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) No unregistered equity sales or Q1 2025 repurchases occurred under the **$500 million** program, though **$2.1 million** of stock was repurchased subsequently - There were no repurchases of equity securities during the three months ended March 31, 2025, with **$500.0 million** remaining available under the repurchase authorization as of that date[193](index=193&type=chunk) - Subsequent to March 31, 2025, through May 7, 2025, ESRT repurchased **$2.1 million** of its Class A common stock at a weighted average price of **$6.90** per share[193](index=193&type=chunk) [Item 6. Exhibits](index=39&type=section&id=ITEM%206.%20EXHIBITS) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and XBRL data files