Empire State Realty Trust, Inc. · NYSE:ESRT
Empire State Realty Trust — Investor Presentation (February 2020)
36 slides from Empire State Realty Trust's investor presentation, February 2020
Slide 1: Investor Presentation February 2020
EMPIRE STATE REALTY TRUST Investor Presentation February 2020
Slide 2: Investor Highlights
Investor Highlights COMPETITIVE ADVANTAGES AND PROVEN PERFORMER Growth >» Four drivers of growth deliver embedded upside >» Market leading cash leasing spreads focused on Manhattan >» Positioned, between trophy/class A and class B properties, to outperform in any market Quality ¢ Fully modernized as
Slide 3: Portfolio Overview
Portfolio Overview PURE-PLAY MANHATTAN AND GREATER NEW YORK METROPOLITAN AREA 10.1 Million Total Rentable erm st J the Gotham By Square Feet ‘000 77TH ST °e ~ osrh st ° q o a [1010 Third avenue ay 2 fo 5 Z Manhattan Office 74.7% aiTHst © 25st ee0ce0e eco Office Properti: Company data and filings as
Slide 4: Varied Tenant Base
Varied Tenant Base DIVERSIFIED BY INDUSTRY High Quality Tenant Mix JCDecaux || shutterstock ] 'G Other Consumer Interpublic Group Non-Profit 3.9% 12873 Goods 9 PartnerRe . A Cenihis Linked [fi). D4 L Media & Advertising —_ 4.4% | EMPIRE STATE : REALTY TRUST Finance, Insurance, Real Estate 16.4% Lega
Slide 5: New Lease Asking Rents
NEW LEASE ASKING RENTS Well-located, redeveloped properties New Build and Aged Trophy Class A costs more; Class B offers less Asking rents from $59 PSF to $86 PSF 1For Midtown Manhattan direct spaces only. 2 Source: Cushman & Wakefield custom research. EMPIRE STATE
Slide 6: Tenant Expansions Fuel Leases
Tenant Expansions Fuel Leases Cumulative Growth from Tenant Expansions 2,000,000 240 ® 1,600,000 200 g te) g 160 8 8 1,200,000 & uw Ror 2 800,000 60 6 s 80 . o 1,174,443 3 2) 9 5 400,000 6 0 © - 742,515 40 €& 1 z 2013 2014 2015 » We focus on tenants which have potential for growth >» Tenants expand
Slide 7: Four Drivers of Revenue Growth
Four Drivers of Revenue Growth’ EMBEDDED UPSIDE Timing Realization: Burn-off of * $52 M of contractual revenue free rent * 2020: $24M . $29M Retail it Signed leases * 2021: $20M mare) vie v not commenced * 2022+: $8M $99 $23M Million4 * Average lease-up downtime is Office mark-to- 9-18 months market
Slide 8: Delivering on Cash NOI Growth
Delivering on Cash NOI Growth MANAGEMENT TEAM HAS DELIVERED Cash NO! Growth Even With Fluctuating Occupancy!? $400,000 90.5% $380,000 90.0% $360,000 89.5% $340,000 89.0% - $124M in $320,000 88.5% Cash NOI $300,000 88.0% Growth $280,000 87.5% $260,000 87.0% $240,000 86.5% 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4
Slide 9: Redevelopment Opportunity
Redevelooment Opportunity Tenant space to be redeveloped Empire State Building 170,000 SF Balance of Manhattan office portfolio 380,000 SF Total 550,000 SF 56% of Remaining Redevelopment Work is Scheduled to be Completed by the End of 2023! 200,000 150,000 SF 110,000 SF 100,000 40,000 SF 5,000 SF (S
Slide 10: Creating Full Floor Availabilities
Creating Full Floor Availabilities EMPIRE STATE REALTY TRUST REDEVELOPMENT CASE STUDY 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 entirely to three tenants 10
Slide 11: Superior Returns from Redevelopment
Superior Returns from Redevelooment AN ILLUSTRATION OF THE RETURNS ON INVESTMENTS White Box Pre-Built WEIGHTED AVERAGE INVESTMENT PER SQUARE FOOT Tenant space: Base building $64 $54 Tenant allowance / improvement $97 $133 Leasing commission $29 $19 TOTAL INVESTMENT $190 $206 TTM WEIGHTED AVERAGE UNL
Slide 12: Demonstrating Net Effective Rent Growth
Demonstrating Net Effective Rent Growth NEW MANHATTAN OFFICE LEASING, WHICH COMPRISES 80% OF MANHATTAN VOLUME TTM Net Effective Rent Growth on a YoY Basis ' 20.0% 17. 18.0% 8% 16.0% 14.8% 14.0% 12.0% 10.0% 8.0% eee ee ee ee ey ee ee ee 62% _ eee ee - 6.2% 6.0% 5.0% 3.5% median 4.0% 2.0% 0.0% 4Q 2018
Slide 13: Superior Cash Leasing Spreads
Superior Cash Leasing Spreads ILLUSTRATES MARK TO MARKET OPPORTUNITY Strong NYC office cash leasing spreads! Strong NYC office cash leasing spreads? Q4 2019 All leases Q4 2019 average 18.0% 17.5% A 17.5% * Total portfolio leases 20.2% 17.0% . 16.5% * Total Manhattan portfolio leases rN 17.5% 16.0% 1
Slide 14: Fortress Balance Sheet
Fortress Balance Sheet SIGNIFICANT CASH, LINE AVAILABILITY AND LOW LEVERAGE Net Debt / Cash and S-T EBITDA Investments Net Debt / Unsecured Credit Enterprise Value Facility Fixed Rate Weighted Avg. Outstanding Debt Debt Maturity Weighted Avg. Unencumbered Interest Rate Portfolio Company data and fil
Slide 15: Debt Maturity Schedule
($ millions) 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2028 and thereafter
Slide 16: Observatory Performance
Observatory Performance CONSISTENT PERFORMANCE AMID ECONOMIC CYCLES, FX MOVEMENTS AND NEW ATTRACTIONS Observatory annual revenue! (millions) Top of the Rock Reopens (3.0 Million Visitors = 3 $128.8 . gi24e 91271 Sp $112.2 $101.8 ill | 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Opens (1.0
Slide 17: Observatory is a Global Brand
Observatory is a Global Brand 79% OF VISITORS DECIDE TO VISIT BEFORE LEAVING HOME! Demographics': What Differentiates the ESB 63% International, 37% Domestic > Global and Iconic brand built 49% of Visitors are 18-34 years through: old Top Foreign Countries!: ° 88 years of popular cultural references
Slide 18: Observatory Ticket Mix
Observatory Ticket Mix ACTIVE MANAGEMENT OF TICKET MIX TO DRIVE REVENUE PER CAPITA Direct sales at full price is Offering different largest source experiences to capture incremental demand Growth in Observatory Revenue Per Capital.2 $36.00 $35.00 $34.00 $33.00 $32.00 $31.00 $30.00 $29.00 $28.00 $27.
Slide 19: Management Team
Anthony E. Malkin Chairman & Chief Executive Officer 31 years with ESRT 31 years in industry AB. from Harvard College Management Team EXPERIENCED AND COMMITTED John B. Kessler President & Chief Operating Officer 5 years with ESRT 31 years in industry AB. from Harvard College and M.B.A. from the Boot
Slide 20: Appendix
Slide 21: ESG Drives Long Term Value
ESG Drives Long Term Value SNAPSHOT OF REPRESENTATIVE INITIATIVES _ -Sustanabi ¢ Lowest kgCO2 psf of New York City office REITS' «Below Requirements of the 2024-2029 Threshold Under NYC’s Climate Mobilization Act Local Law 97 ¢ Electricity Consumption and Greenhouse Gas Emission down 16% and 9% Resp
Slide 22: ESG Actions
ESG Actions mu Patricia S. Han joined ESRT Board * Expands Board to 8 members ¢ Brings over 20 years of experience in the tech and media industry ¢ Expertise in digital media and e-commerce will aid in areas critical to our businesses uu = Chairman and CEO Tony Malkin is an Industry Leader ¢ Sole Ne
Slide 23: Sustainability In Action
m@ ROl-driven Energy Conservation Measure development and implementation m@ Energy Star and Energy Star for Tenant Spaces = Real-Time Energy Management = Tenant Energy Audits = Tenant Energy Management Software Programs m 100% Renewable Energy at Empire State Building Sustainability In Action SAMPLE
Slide 24: Free Rent Burn-Off and SLNC
Free Rent Burn-Off and SLNC SUMMARY COMMENCED LEASES IN FREE RENT PERIOD AND SIGNED LEASES NOT COMMENCED (SLNC) SCHEDULE Base Cash Rent Contributing to Cash NOI in the Following Years 2020 2021 2022 2023 Annualized Initial Base Cash Rent $28.518M $19.734M $28.518M $28.518M $28.518 M Total Portfolio
Slide 25: Signed Leases Not Commenced
Signed Leases Not Commenced SIGNED LEASES NOT COMMENCED SCHEDULE 12/31/19 New Annual Expected Base Rent Incremental Tenant SF Escalated Rent Commencement Annual Annual Rent GAAP Cash Revenue Diligent Corporation 14,214 $0.00 M $0.91M Jan. 2020 Sept. 2020 0.91M ranean cereal cae 15,086 0.00M 1.06 M A
Slide 26: Current vacancy / Redeveloped vacancy (Manhattan Office)
Current vacancy / Redeveloped vacancy (Manhattan Office) Vacant Office Space Weighted average starting rent (Manhattan Office) $64 PSF MANHATTAN OFFICE PORTFOLIO PIO 60,000 SF 11% Broadcasting 23,000 SF 4% Undeveloped 21,000 SF a 4% Storage 22,000 SF Prebuilt 213,000 SF 38% EMPIRE S REALTY TR Off Ma
Slide 27: Manhattan Office Mark to Market
Manhattan Office Mark to Market CURRENT 2020 MARKET RENT VS. CURRENT FULLY ESCALATED RENT Current fully escalated rent PSF! Leased square feet expiring2 Weighted Average Current Market Rent? Embedded Mark to Market % Growth 12 mos 12 mos 12 mos 2020 2021 2022 $55 $57 $59 395,968 419,381 380,806 $65
Slide 28: Greater NY Office Mark to Market
Greater NY Office Mark to Market CURRENT 2020 MARKET RENT VS. CURRENT FULLY ESCALATED RENT 12 mos 12 mos 12 mos 2020 2021 2022 Current fully escalated $49 $44 $38 rent PSF! Leased square feet eine: 188,619 211,165 131,159 Weighted Average Current Market Rent? 44 4 Sus Embedded Mark to - 0; - oO, - ‘
Slide 29: Retail Mark to Market and Vacant Space
Retail Mark to Market and Vacant Space CURRENT 2020 MARKET RENT VS. CURRENT FULLY ESCALATED RENT 12 12 12 12 12 months months months months months Vacant 2020 2021 2022 2023 2024 peeent fully escalated rent N/A $142 $157 $155 $219 $216 oernge feet 49,521 42,736 32,365 58,646 22,560 26,717 PACES MIST
Slide 30: Observatory Ticket Mix
Observatory Ticket Mix ACTIVE MANAGEMENT OF TICKET MIX TO MAXIMIZE MARGINS Retail Pricing - starting at Main Deck (86t Floor) & 294 Floor Museum? AM/PM Experience (86th Floor) & 2"4 Floor Museum? 1024 Deck, Main Deck (86th Floor) & 2"4 Floor Museum? Main Deck (86th Floor) & 2"4 Floor Museum Express?
Slide 31: Valuing The Observatory
Valuing The Observatory SUM OF THE PARTS VALUES BOTH RENTAL REVENUE AND RESIDUAL PROFIT STREAMS Observatory Results - 4Q 2019 Trailing Twelve Months In $MM Visitor Revenue 123 Gift Shop License Fee 6° Total Revenue 129 Less Operating Expenses 34 NOI 95 Less Intercompany rent expense 82 NOI after int
Slide 32: Media Coverage
MEDIA COVERAGE 20B+ $6.6MM+ 5IMM+ MEDIA IMPRESSIONS AD VALUE EQUIVALENCY SOCIAL MEDIA IMPRESSIONS TERRE Ehe New dork Cimes NEW YORK POST. The Empire State Building: Empire State Building to open ARCHITECTURAL RECOR Your View of New York City Renewing the Affair Empire State Building Opens New Observ
Slide 33: Norwalk, Stamford, White Plains
Highway Metro-North Railroad Metro-North Train Stop 684 Norwalk 95 Stamford White Plains 287 Harrison ~30 miles to Midtown Manhattan 10 Bank Street 500 Mamaroneck Avenue First Stamford Place Metro Center 383 Main Avenue
Slide 34: Reconciliation of Net Income to NOI and Cash NOI
Three Months Ended Year Ended Reconciliation of Net Income to NOI Decmeber 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, Dec 31, and Cash NOI 2019 2019 2019 2019 2018 2018 2018 2018 2017 Net Income $ 28,720 $ 26,784 $ 18,930 $ 9,856 $ 39,781 $ 29,230 $ 30,184 $ 1
Slide 35: Total Cash Revenues Reconciliation
Three Months Ended Twelve Months to December 31, September 30, June 30, March 31, Date 2019 2019 2019 2019 Rental revenue $ 511,136 $ 130,234 $ 129,098 $ 125,170 $ 126,634 Tenant expense reimbursement 75,278 21,467 21,127 15,901 16,783 Deduct: Straight-line rental revenues (20,057) (6,276) (5,174) (
Slide 36: 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. For these statements, we claim the protections of the safe harbor for forward-looking statements co
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