Empire State Realty Trust, Inc. · NYSE:ESRT
Empire State Realty Trust — Investor Presentation (September 2016)
43 slides from Empire State Realty Trust's investor presentation, September 2016
Slide 1: Empire State Realty Trust September 2016
EMPIRE STATE REALTY TRUST September 2016
Slide 2: Disclaimer
Disclaimer 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 cl
Slide 3: Investor Highlights
Investor Highlights › Pure-play Manhattan and greater New York metropolitan area › Embedded, de-risked growth potential from four drivers of growth › Strong and flexible balance sheet, lowest leverage among Office REIT peers › Proven management team 3
Slide 4: Management Team
Management Team EXPERIENCED AND COMMITTED Anthony E. Malkin John B. Kessler Thomas P. Durels David A. Karp Thomas N. Keltner, Jr. Chairman & President & Chief Executive Vice President Executive Vice President Executive Vice President, Chief Executive Officer Operating Officer & Director of Leasing a
Slide 5: Delivered on Promises
Delivered on Promises STEADY CASH NOI GROWTH; EXECUTING ON LEASING Q2 2016 Steady Cash NOI Growth2 › 176,533 SF of leasing $360,000 › 58.1% spreads achieved on new $340,000 thousand Manhattan office $320,000 leases $300,000 › Signed larger leases $280,000 for longer term with $260,000 better credit
Slide 6: Portfolio Overview
Portfolio Overview PURE-PLAY MANHATTAN AND GREATER NEW YORK METROPOLITAN AREA 10.1 Million Total Rentable 9.4 Million Rentable Square Feet Square Feet of Office Space GNYM GNYM Office Office 18.5% 20% Retail 7.1% Manhattan Office Manhattan Office 74.4% 80% Company data and filings as of June 30, 201
Slide 7: Varied Tenant Base
Varied Tenant Base DIVERSIFIED BY INDUSTRY Other Non-Profit 13.1% Consumer 3.7% Goods 23.9% Media & Advertising 3.7% Technology 7.9% Finance, Insurance, Legal Services Real 3.7% Estate 18.2% Retail 14.0% Professional Services 11.8% Industry diversification by annualized fully escalated rent. Company
Slide 8: Manhattan Portfolio
Manhattan Portfolio Central Park 111 West 33rd Street One Grand Central Place 111 West 33 rd Street 1359 Broadway 1400 Broadway 8
Slide 9: Tenant Lease Expirations
Tenant Lease Expirations WELL LADDERED MANHATTAN OFFICE PORTFOLIO LEASE EXPIRATIONS 51.8% 10.6% 9.9% 6.8% 8.2% 7.0% 2.7% 3.0% Available SLNC 2016 2017 2018 2019 2020 Thereafter Company data and filings as of June 30, 2016. 9
Slide 10: Four Drivers of Embedded De-risked Growth
Four Drivers of Embedded De-risked Growth OVER 30% GROWTH POTENTIAL RELATIVE TO TTM CASH NOI OF $339M Signed Lease up of leases not vacant space commenced $40 M $27 M $108 Million Retail Redevelopment opportunity Opportunity $18 M $23 M Amounts reflect management’s estimates of additional revenues f
Slide 11: Signed Leases Not Commenced
Signed Leases Not Commenced 6/30/2016 Expected New Annual Incremental Tenant SF Escalated Commencement Rent Annual Rent Annual Rent Date Shutterstock, Inc. 25,289 $ 0.00 M $1.57 M July 2016 $1.57 M Macy’s 89,281 0.00 M 4.46 M July 2016 4.46 M Bank of America, N.A. 4,432 0.00 M 1.46 M Aug. 2016 1.46
Slide 12: Lease Up of Vacant Space
Lease Up of Vacant Space WITHIN MANHATTAN OFFICE PORTFOLIO Lease-up of ESRT’s vacant space Strong re-leasing spreads² Manhattan office submarket avg. occupancy¹ All leases Q2 2016 New leases Q2 2016 92.1% 92.1% 90.8% 89.8% $ 60.51 $ 61.49 89.3% 83.7% 75.0% $ 41.80 $ 38.86 51.4% Managing rent roll to
Slide 13: Superior Leasing Spreads
Superior Leasing Spreads COMPARED TO PEER GROUP 50.0% 44.7% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 12.1% 10.0% 5.0% 0.0% 2016 Q2 Manhattan office leasing spreads ESRT Peer Group Company data and filings as of June 30, 2016. Reflects new and renewal leases. Peer group includes SL Green, Vornado Re
Slide 14: Manhattan Office Mark to Market
Manhattan Office Mark to Market CURRENT 2016 MARKET RENT VS. CURRENT FULLY ESCALATED RENT 2016 2017 2018 2019 2020 Current fully escalated rent PSF1 $ 49 $ 48 $ 51 $ 47 $ 49 Leased square feet expiring2 257,890 499,812 569,678 430,751 686,041 Weighted average starting rent $ 59 $ 57 $ 58 $ 58 $ 60 P
Slide 15: Vacant Office Space
Vacant Office Space Current vacancy (Manhattan Office / ESB) 870,000 SF / 230,000 SF Weighted average starting rent (Manhattan Office /ESB) $60 PSF / $66 PSF MANHATTAN OFFICE PORTFOLIO EMPIRE STATE BUILDING Broadcasting 8,000 SF Prebuilt Broadcasting Prebuilt 1% 286,000 SF 8,000 SF 80,000 SF 33% 1%
Slide 16: Leasing Opportunity
Leasing Opportunity INVENTORY OF CURRENT VACANT SPACE AND EXPECTED SPACE TO BE VACATED BY YEAR-END 2016 Square Feet Total portfolio vacant space 1,347,000 Less signed leases not commenced (276,000) Total portfolio net vacant space 1,070,000 Retail vacant space 99,000 GNYMA vacant space 99,000 Manhat
Slide 17: Redevelopment Opportunity
Redevelopment Opportunity EMBEDDED, DE-RISKED GROWTH Tenant space to be redeveloped Empire State Building 360,000 SF Balance of Manhattan office portfolio 1,040,000 SF Total 1,400,000 SF Probable Renovations of Undeveloped Space through 2020 300,000 210,000 SF 200,000 170,000 SF 135,000 SF 100,000 S
Slide 18: Creating Full Floor Availabilities
Creating Full Floor Availabilities REDEVELOPMENT CASE STUDY Floors 55-58 originally had 42 tenants Adjacent tenants are grouped by lease expiration dates Spaces are vacated as expired leases 2014 are not renewed Floors 55-58 leased to only 2 tenants 18
Slide 19: Redevelopment Capital Expenditures
Redevelopment Capital Expenditures NEARING SUBSTANTIAL COMPLETION OF COMMON AREA RENOVATIONS, $681 MILLION SPENT TO DATE Before Before After After Company data and filings as of June 30, 2016. 19
Slide 20: Superior Returns from Redevelopment
Superior Returns from Redevelopment AN ILLUSTRATION OF THE RETURNS ON INVESTMENTS White Box Pre-Built Low High Low High INVESTMENT PER SQUARE FOOT Tenant space: Base building $35 $65 $35 $65 Tenant allowance / improvement1 $60 $75 $115 $124 Leasing commission $25 $29 $16 $21 TOTAL INVESTMENT $120 $1
Slide 21: Manhattan Portfolio Proposition
Manhattan Portfolio Proposition DOMINANT POSITION WITH LITTLE COMPETITION Class A › › New construction and existing Asking rents of $85-$230 PSF › Pre-war trophies in great locations ESRT › Trophy Class A costs more › Class B offers less Class B › › Existing Asking rents of $58-66 PSF 21
Slide 22: Tenants Relocating to ESRT
Tenants Relocating to ESRT ATTRACTING TENANTS FROM ALL PARTS OF NYC AND BEYOND OVER PAST 12 MONTHS From Outside Manhattan 11 Tenants Representing 31,112 SF From Midtown (West) (Madison/Fifth, Penn Station/ Times Square South, Rockefeller Center, West Side) 18 Tenants Representing 145,357 SF From Mid
Slide 23: Retail Opportunity
Retail Opportunity › 709,000 SF of total retail space › 83.6% occupied › Annualized fully escalated rent of $73.0 million › 99,000 SF of retail space available to lease in 15 high traffic locations › 112 W. 34th Street, Broadway corridor, and Empire State Building Company data and filings as of June
Slide 24: Retail Mark to Market
Retail Mark to Market CURRENT 2016 MARKET RENT VS. CURRENT FULLY ESCALATED RENT Vacant 2016 2017 2018 2019 2020 Current fully escalated rent PSF1 N/A $230 $148 $65 $153 $139 Leased square feet expiring2 101,416 900 20,895 13,364 29,481 29,918 Weighted average starting rent $124 $303 $163 $92 $287 $1
Slide 25: Creating Value Through Sustainability
Creating Value Through Sustainability EMPIRE STATE BUILDING CASE STUDY 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 Annual energy savings (kbtu) Demand co
Slide 26: Sustainability Measures
Sustainability Measures Energy Efficiency Example › 100% of portfolio has undergone whole building energy retrofit analysis Building Certification › 79% of portfolio has a full or partial building management system in-place Day to Day Green Practices › 100% of portfolio has waste recycling; green cl
Slide 27: Greater NY Metropolitan Portfolio
Greater NY Metropolitan Portfolio QUALITY ASSETS AND TENANTS › Best assets located Highway Metro-North Railroad 66-99 Main St Metro-North Train Westport 103-107 Main St near major 684 Stop 95 Norwalk transportation hubs 287 Stamford › Full amenities › 13.3% of 1H 2016 NOI White Plains › 18.5% of tot
Slide 28: Tenant Lease Expirations
Tenant Lease Expirations WELL LADDERED GREATER NY METROPOLITAN PORTFOLIO LEASE EXPIRATIONS Add 45.7% 12.7% 13.4% 13.4% 7.3% 5.3% 2.1% 0.1% Available SLNC 2016 2017 2018 2019 2020 Thereafter Company data and filings as of June 30, 2016. 28
Slide 29: Observatory Performance
Observatory Performance CONSISTENT PERFORMANCE THROUGH ECONOMIC CYCLES AND NEW ATTRACTIONS Positive tourism trends to New York City (millions) ‘01 – ‘15 CAGR 3.7% 56.4 58.3 52.7 54.3 47.1 48.8 50.9 42.7 43.8 46.0 45.8 37.8 39.9 35.2 35.3 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20
Slide 30: Who Visits the Observatory?
Who Visits the Observatory? International vs. Domestic: 65% International, 35% Domestic Domestic Age Group: 35% International 56% 18-34 years old 65% Male vs. Female: 57% Female, 43% Male Top 6 foreign countries: England/ France Canada Germany China Italy Scotland/ Wales Data from ESRT customer poll
Slide 31: Observatory Ticket Mix
Observatory Ticket Mix ACTIVE MANAGEMENT OF TICKET MIX TO MAXIMIZE MARGINS Pricing Adult Senior (62+) Child (6-12) Main Deck Only (86th Floor) $32.00 $29.00 $26.00 Direct sales at Main Deck Only (86th Floor) Express $65.00 $65.00 $65.00 full price is Main Deck + Top Deck (86th & 102nd Floors) $52.00
Slide 32: Valuing The Observatory
Valuing The Observatory SUM OF THE PARTS VALUES BOTH RENTAL REVENUE AND RESIDUAL PROFIT STREAMS Observatory Results – 2Q 2016 Trailing Twelve Months In $MM Revenue 116.4 Less Operating Expenses 31.3 NOI 85.1 Intercompany rent expense 69.9 NOI after intercompany rent 15.2 › If ESRT did not operate th
Slide 33: The Rockettes' New York Spectacular
The Rockettes’ New York Spectacular JUNE – AUGUST 2016 › ESRT partnered with Madison Square Garden Entertainment to integrate ESB within The New York Spectacular Starring the Radio City Rockettes › Set inclusion, Fifth Avenue window displays and tower lighting for opening night on June 15, 2016 › So
Slide 34: Empire State Building Tower Light Show
Empire State Building Tower Light Show A CELEBRATION HONORING 90 YEARS OF ICONIC MUSIC FROM TONY BENNETT › Lighting Ceremony with Tony Bennett and Lady Gaga › Lady Gaga and Tony Bennett “flipped the switch” at Tony Bennett’s birthday party to kick off the music-to-light show › ESB lighting integrate
Slide 35: CNN Integrates ESB Lights into 2016 US Election Coverage
CNN Integrates ESB Lights into 2016 US Election Coverage CO-BRANDING CASE STUDY › On-air use of ESB lighting to Financial Times @FT New York’s Empire State Building was turned announce results blue when Hillary Clinton was name the winner on.ft.com/1qXVDr7 › Total social media integration CBS New Yo
Slide 36: Strong and Flexible Balance Sheet
Strong and Flexible Balance Sheet CAPITAL STRUCTURE STRATEGY Low leverage with laddered debt maturities FINANCIAL STRATEGY Significant cash on hand Access to a variety of forms of capital 36
Slide 37: Fortress Balance Sheet
Fortress Balance Sheet STEADY IMPROVEMENT THROUGH PERFORMANCE Net Debt to EBITDA1 7.0 6.0 5.7X 5.4X PEERS 4.9X 5.0 Net Debt / EBITDA 3.1 x 7.2x 4.0 3.1X 3.0 2.0 Net Debt / 14% 37% Enterprise Value 1.0 0.0 2013 2014 2015 2016 1 2013 based on fourth quarter EBITDA annualized. 2014, 2015 and 2016 EBITD
Slide 38: Improved Balance Sheet Flexibility
Improved Balance Sheet Flexibility UNENCUMBERING THE PORTFOLIO Repaid $580 million in mortgage loans, adding approximately 5.9 million square feet to the unencumbered pool since IPO Repaid $580 million, At IPO including mortgage loans June 2016 99% 100% securing: 80% 59% 60% › Empire State Building
Slide 39: Debt Maturity
Debt Maturity WEIGHTED AVERAGE MATURITY INCREASED FROM 3.1 YEARS AT IPO TO 5.1 YEARS Prior DEBT MATURITY PROFILE (AT IPO OCTOBER 2013) ($ millions) $403 $381 $103 $193 $88 $92 $300 $0 $0 $0 $0 $0 $0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 CURRENT DEBT MATURITY PROFILE (AS OF JUNE 2016
Slide 40: Support for Future Growth
Support for Future Growth BALANCE SHEET STRENGTH AND FLEXIBILITY Low Leverage Capital Structure1 › Net debt / enterprise value: 14% Exchangeable Senior › Net debt / EBITDA: 3.1x Mortgage Debt Unsecured Notes Senior $250 mm Unsecured Notes › Interest coverage: 5.5x $759 mm 10% 3% $350 mm › Attractive
Slide 41: ESRT Metrics Since IPO
ESRT Metrics Since IPO DAILY VOLUME, FLOAT, AND COMPARABLE PERFORMANCE Daily Average Trading Volume in 2016YTD: 1,038,720 shares Volume Average Trading Volume in 2015: 844,333 shares Average Trading Volume in 2014: 590,317 shares Class A common shares now comprise 51% of the operating Float partners
Slide 42: MetLife
MetLife UJ
Slide 43: Appendix: Reconciliation of Non-GAAP Financial Measures
Appendix RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Three Months Ended June 30, March 31, December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, December 31, Reconciliation of Net Income to NOI and Cash NOI 2016 2016 2015 2015 2015 2015 2014 2014 2014 2014 201
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