Empire State Realty Trust, Inc. · NYSE:ESRT
Empire State Realty Trust — Investor Presentation (March 2016)
43 slides from Empire State Realty Trust's investor presentation, March 2016
Slide 1: Empire State Realty Trust
EMPIRE STATE Sen ehh
Slide 2: Forward-looking statements
We make forward-looking statements in this presentation 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 pro
Slide 3: Investor Highlights
Investor Highlights >» Pure-play Manhattan and greater New York metropolitan area >» Embedded, de-risked growth >» Redevelopment of irreplaceable properties >» “Best-in-Class” balance sheet >» Experienced and proven management team EMPIRE STATE REALTY TRUST
Slide 4: Management Team
Management Team EXPERIENCED AND COMMITTED Anthony E. Malkin Chairman & Chief Executive Officer 27 years with ESRT 27 years in industry Bachelor’s degree from Harvard College John B. Kessler President & Chief Operating Officer 1 year with ESRT 27 years in industry Bachelor’s degree from Harvard Colle
Slide 5: Internal & External Opportunities
Internal & External Opportunities ADDITIONAL YEARS OF EMBEDDED, DE-RISKED GROWTH TO COME Internal Redevelopment External Growth Growth Irreplaceable assets in Consolidate, Patient, diligent, prime locations with redevelop and lease creative, and additional years of floors, and conscious of cycles in
Slide 6: Delivered on Promises
> fi BULOVA Delivered on Promises 1.2 million SF of leasing 53.8% spreads achieved on new Manhattan office leases BrightRoll | Johnson YG (0008000 Controls Company data and filings as of December 31, 2015. EMPIRE STATE REALTY T RUST Full Year 2015 390,000 SF of redevelopment delivered Signed larger
Slide 7: Pure-Play Manhattan and Greater New York Metropolitan Area
PURE-PLAY MANHATTAN AND GREATER NEW YORK METROPOLITAN AREA 10.1 Million Total Rentable 9.3 Million Rentable Square Feet Square Feet of Office Space Company data and filings as of December 31, 2015. EMPIRE STATE 7
Slide 8: Manhattan Portfolio
Manhattan Portfolio FOCUSED IN KEY MIDTOWN SUBMARKETS % % 681i ST e Central Park 1010 Third Ay 80TH ST oR — ee, 282 COLUMBUS GRCLE 57TH ST 77 West 55th Street 8 4 LEXINGTON AVE. & & E ee 0 BOTH ST THIRD AVE 42ND ST fey puatic teeny 1400 Broadway 501 Seventh Avenue 1359 Broadway 33 Broad’ ee@0 Hs dua
Slide 9: Tenant Lease Expirations
Tenant Lease Expirations MANHATTAN OFFICE PORTFOLIO 48.5% 12.8% 7.5% 71% 7.4% se, 86% — eo Available = SLNC 2016 2017 2018 2019 2020 _=—‘ Thereafter Company data and filings as of December 31, 2015. EMPIRE STATE 9 REALTY TRUST
Slide 10: De-risked Growth in Current Portfolio
De-risked Growth in Current Portfolio SIGNIFICANT EMBEDDED GROWTH POTENTIAL Signed Redevelopment leases not opportunit commenced Pp y Retail Lease up of opportunity vacant space $17M $39M Amounts reflect management's estimates of additional revenues from four drivers as of December 31, 2015 to be re
Slide 11: Signed Leases Not Commenced
Signed Leases Not Commenced Tenant LinkedIn Expedia Macys Foot Locker Sephora CookFox Architects Coyne Public Relations Other SLNC Total SF 94,235 9,042 89,281 34,192 11,334 18,947 13,525 55,090 325,646 Company data and filings as of December 31, 2015. EMPIRE STATE REALTY TRUST 12/31/2015 Escalated
Slide 12: Embedded Growth on Re-Leasing
Embedded Growth on Re-Leasing WITHIN MANHATTAN OFFICE PORTFOLIO Lease-up of ESRT’s available space Strong re-leasing spreads’ Manhattan office submarket avg. occupancy’ All leases FY 2015 New leases FY 2015 : : . . 54.84 e $ “ * 86.4% 83.4%| 74.6% Managing rent roll to execute repositioning strategy
Slide 13: Superior Leasing Spreads
Superior Leasing Spreads COMPARED TO PEER GROUP 40.0% 37.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% ° 2015 Q4 Manhattan office leasing spreads HB ESRT Peer Group Company data and filings as of December 31, 2015. Reflects new and renewal leases. Peer group includes SL Green, Vornado Realty Trus
Slide 14: Manhattan Office Mark to Market
Manhattan Office Mark to Market CURRENT 2016 MARKET RENT VS. CURRENT FULLY ESCALATED RENT 2016 Current fully escalated rent PSF! $44 Leased square feet expiring? 477,265 Weighted average starting rent $57 PSF3 Embedded growth 29.5% 2017 $ 48 530,919 $58 20.8% 2018 $51 551,348 $57 11.8% Fully escalat
Slide 15: Vacant Office Space
Vacant Office Space MANHATTAN OFFICE PORTFOLIO Current vacancy 950,000 SF Weighted average starting rent $60 PSF Broadcasting 8,000 SF Storage 1% 44,000 Prebuilt 4% 297,000 31% Wiese) EMPIRE STATE Demo REALTY TRUST 310,000 33% Undeveloped 172,000 18% Weighted average starting rent is management's es
Slide 16: Vacant Office Space - Empire State Building
Vacant Office Space EMPIRE STATE BUILDING Current vacancy 250,000 SF Weighted average starting rent $66 PSF Prebuilt 69,000 28% Proadcartne i WPIRE STATE 3% REALTY TRUST Storage 26,000 10% Undeveloped 73,000 Off Market 29% 34,000 14% Weighted average starting rent is management's estimate for new le
Slide 17: Redevelopment Opportunity
Redevelooment Opportunity EMBEDDED, DE-RISKED GROWTH Tenant space to be redeveloped Empire State Building 470,000 SF Balance of Manhattan office portfolio 1,290,000 SF Total 1,760,000 SF 500,000 400,000 300,000 200,000 100,000 (SF) 0 Probable Renovations of Undeveloped Space through 2020 460,000 SF
Slide 18: Defining the Retail Opportunity
Defining the Retail Opportunity CREATING VALUE AT STREET LEVEL @& Santander 723,000 SF of total retail space Lo smet . SHAKE <> 94.3% occupied SHACK SS 474.1% positive spreads on 70,940 SF of leasing in 2015 ANN TAYLOR 15 high traffic locations on dynamic retail streets Bankot America DUANETeade YOU
Slide 19: Retail Mark to Market
Retail Mark to Market CURRENT 2016 MARKET RENT VS. CURRENT FULLY ESCALATED RENT Current fully escalated rent PSF! Leased square feet expiring? Weighted average starting rent PSF8 Embedded growth Vacant N/A 39,039 $10 N/A 2016 $93 88,102 $177 90.6% 2017 $149 20,895 $138 -7.4% 2018 $65 12,888 $113 73.
Slide 20: Varied Tenant Base
Varied Tenant DIVERSIFIED BY INDUSTRY shutterstsck Linked ffi). Seer ws ied; | OnDeck> || ji IPREO Non-Profit 2.9% Base Consumer Goods 22.4% TTT Te GLG De Interpublic Group Adverusing Pd EMPIRE STATE Finance, Insurance, . Technology , Real KOHES | xIMCCYS) COTY 3.6% Estate Legal Service: 3.7% 0) nso
Slide 21: Creating Full Floor Availabilities
Creating Full Floor Availabilities ADJACENT SPACES CONSOLIDATED OVER TIME Floors 55-58 originally had 42 tenants Adjacent tenants are grouped by lease expiration dates Spaces are vacated as expired leases are not renewed Floors 55-58 leased to only 2 tenants 21
Slide 22: Redevelopment Capital Expenditures
Redevelooment Capital Exoenditures NEARING SUBSTANTIAL COMPLETION OF COMMON AREA RENOVATIONS Addl. Spend on Manhattan Office (2016) $30-50 million 6% EMPIRE STATE REALTY TRUST Spent to Date $645 million 94% Company data and filings as of December 31, 2015. EMPIRE STATE 2 REALTY TRUST
Slide 23: Tenant Space Redevelopment
Tenant Space Redevelooment TYPICAL COSTS PER SQUARE FOOT Type Cost Total base building $35-65 PSF Market rate tenant allowance $60-70 PSF Commission $24-28 PSF Total costs for redevelopment All tenant improvement and commission ranges are based on typical 10-year lease. EMPIRE STATE REALTY TRUST $11
Slide 24: Pre-built
Pre-built TYPICAL COSTS PER SQUARE FOOT Type Cost Total base building $35-65 PSF Turn-key buildout $115-124 PSF Commission $16-21 PSF Total costs for redevelopment $166-210 PSF All tenant improvement and commission ranges are based on typical 5-year lease. EMPIRE STATE REALTY TRUST 24
Slide 25: Sustainability Measures Matrix
Sustainability Measures Matrix ESB One Grand 1400 n2 250 1333 1350 Central Place Broadway W 34th St W 57th St Broadway Broadway Whole Building Energy Retrofit Analysis x x x x x x x (Replicate ESB Model) Whole Building Energy Retrofit Implementation x x x x x x x Low-e window retrofit x x x x x x x
Slide 26: Sustainability Measures Matrix
Sustainability Measures Matrix Whole Building Energy Retrofit Analysis (Replicate ESB Model) Whole Building Energy Retrofit Implementation Low-e window retrofit High Performance Tenant Installation Required per Lease Submetering of All New Tenant Spaces Ut ies Billed by Submetering (as installed) Bu
Slide 27: The Empire State Building: Creating Value Through Sustainability
The Empire State Building CREATING VALUE THROUGH SUSTAINABILITY Skanska energy savings of 57% | Coty saves $1 million over lease term Utility costs represent the third largest component of tenant expenses after salaries and rent 16 14 Annual savings of Demand control ventilation $4.4M 12 6,514 insul
Slide 28: Greater NY Metropolitan Portfolio
Greater NY Metropolitan Portfolio MANHATTAN QUALITY ASSETS AND TENANTS >» Best assets located near major transportation hubs >» 93.9% occupied >» 94.2% leased >» Full amenities >» Captures Manhattan-based tenants that relocate or open satellite offices EMPIRE STATE 28 REALTY TRUST
Slide 29: Westport Norwalk Stamford
Highway 66-99 Main St › Metro-North Railroad Metro-North Train Westport 103-107 Main St Stop 684 › 95 Norwalk › 287 Stamford › White Plains Harrison ~30 miles to Midtown Manhattan First Stamford Place Metro Center 383 Main Avenue Office Standalone Retail 10 Bank Street 500 Mamaroneck Avenue
Slide 30: Tenant Lease Expirations
Tenant Lease Expirations GREATER NY METROPOLITAN PORTFOLIO bp CRANE, wun THOMSON “ * ‘lizabethArden REED ELSEVIER ALT 41.9% 13.8% 13.3% 13.2% 5.8% 8.3% —— 3.5% oe Available SLNC 2016 2017 2018 2019 2020 _=—s* Thereafter Company data and filings as of December 31, 2015. EMPIRE STATE 30 REALTY TRUST
Slide 31: Source: NYC & Company.
Source: NYC & Company. 9/11 31
Slide 32: Observatory Ticket Mix
Observatory Ticket Mix ACTIVELY MANAGE TICKET MIX TO MAXIMIZE MARGINS Senior Child . Pricing Adult i" Direct sales at (62+) (6-12) F = Main Deck Only (86th FI $32.00 $29.00 $26.00 full price is ain Deck Only (Beth Floor) la rg est source Main Deck Only (86th Floor) Express $65.00 $65.00 $65.00 voor)
Slide 33: Who Visits the Observatory?
Who Visits the Observatory? IT’S NOT ALL FOREIGNERS, GRANDPARENTS AND PARENTS WITH CHILDREN International vs. Domestic: 65% International, 35% Domestic Domestic Age Group: 35% 55% 18-34 years old Devens Male vs. Female: 55% Female, 45% Male Top 6 foreign WW er = countries: VaiN England/ Scotland/ Wa
Slide 34: Midtown Day vs. Downtown Day
Midtown EMPIRE STATE REALTY TRUST Day vs. Downtown Day TWO SEPARATE DAYS Midtown Day Walking Time 1. Macy’s / Herald Square 6 minutes 2. Bryant Park 11 minutes 3. Madison Square Garden 8 minutes 4. Radio City Music Hall / Rockefeller Center 16 minutes Downtown Day 9/11 Memorial 9/11 Museum Statue of
Slide 35: Empire State
EMPIRE STATE MARCH 2015 1.2 million Facebook fans, 27,400+ Twitter followers and 41,000 Instagram followers AmNY Four full page ads with ESB logo (Circulation: 335,900+, total 1,343,600) New York Spring Spectacular City Week announcement email (Circulation: 622,202) Prize mention on website (400,000
Slide 36: Ford Mustang Anniversary
Ford Mustang 50 Anniversary APRIL 2014 103 million $31.7M MEDIA IMPRESSIONS AD VALUE >» CNN (16.2 million followers) >» BBC World (9.15 million followers) >» Huffington Post (5.4 million followers) » Associated Press (4.84 million followers) >» La Patilla, Venezuelan news outlet (4.63 million follow
Slide 37: Strong and Flexible Capital Structure Supports Numerous Financing Options
STRONG AND FLEXIBLE CAPITAL STRUCTURE SUPPORTS NUMEROUS FINANCING OPTIONS EMPIRE STATE FINANCIAL STRATEGY Low leverage with significant capacity Access toa variety of forms of capital 37
Slide 38: Fortress Balance Sheet
Fortress Balance Sheet CONTINUOUS IMPROVEMENT AND MAXIMUM FLEXIBILITY Total Debt to EBITDA! 6.0 5.9X EMPIRE STATE PEERS 5.8 REALTY TRUST 5.6X Total Debt / 5.6 EBITDA 5.1x 8.0x 5.4 Total Debt / a 5.2 Enterprise Value mo 5.1X 5.0 2013 2014 2015 12013 based on fourth quarter EBITDA annualized. Company
Slide 39: Unencumbering the Portfolio
Unencumbering the Portfolio ENHANCING CAPITAL FLEXIBILITY Repaid $580 million in mortgage loans, adding approximately 5.9 million square feet to the unencumbered pool since IPO At IPO 100% 99% > 50% > <1% 0% > Portfolio SF fj Encumbered HB unencumbered EMPIRE STATE REALTY TRUST Repaid $580 million,
Slide 40: Weighted Average Maturity Increased
WEIGHTED AVERAGE MATURITY INCREASED FROM 3.1 YEARS AT IPO TO 5.4 YEARS Prior DEBT MATURITY PROFILE (AT IPO OCTOBER 2013) ($ millions) $300 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 CURRENT DEBT MATURITY PROFILE (AS OF DECEMBER 2015) ($ millions) $350 2014 2015 2016 2017 2018 2019 2020 2
Slide 41: Low Leverage Capital Structure and Liquidity
Low Leverage Capital Structure1 Exchangeable Senior Mortgage Debt Unsecured Notes Senior $735 mm $250 mm Unsecured Notes 11% 4% $350 mm 5% Senior Unsecured Private Perpetual Preferred Term Loan $26 mm $265 mm <1% 4% $800mm Credit Facility2 $40 mm <1% Liquidity Equity $4,836 mm 76% 1 Based on stock p
Slide 42: Superior Returns from Redevelopment
Superior Returns from Redevelooment AN ILLUSTRATION OF THE RETURNS ON INVESTMENTS White Box Pre-Built Low High Low High INVESTMENT PER SQUARE FOOT Common area redevelopment $15 $25 $15 $25 Tenant space: Base building $35 $65 $35 $65 Tenant allowance / improvement $60 $70 $115 $124 Leasing commission
Slide 43: MetLife
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