Empire State Realty Trust, Inc. · NYSE:ESRT
Empire State Realty Trust — Investor Presentation (May 2019)
35 slides from Empire State Realty Trust's investor presentation, May 2019
Slide 1: Investor Presentation May 2019
Investor Presentation May 2019
Slide 2: Investor Highlights
Investor Highlights COMPETITIVE ADVANTAGES AND PROVEN PERFORMER › Fully modernized assets, central locations, easy access to mass-transit › Four drivers of growth deliver embedded upside › Market leading cash leasing spreads focused on Manhattan › Positioned, between trophy/class A and class B prope
Slide 3: Portfolio Overview
Portfolio Overview PURE-PLAY MANHATTAN AND GREATER NEW YORK METROPOLITAN AREA 10.1 Million Total Rentable High Quality Diverse Square Feet Tenant Mix GNYMA GNYMA Office Office 18.2% 19.6% Retail 7.1% Manhattan Office Manhattan Office 80.4% 74.7% Company data and filings as of March 31, 2019. 3
Slide 4: Manhattan Portfolio
Manhattan Portfolio Office Properties Retail Properties 4
Slide 5: Manhattan Portfolio Market Position
Manhattan Portfolio Market Position NEW LEASE ASKING RENTS New Build Class A “Aged Trophy” Class A › New construction since 2008 › Stock constructed from 1970-2000 that needs base building renovation of approx. $100 PSF › Asking rents of $148 PSF 1,2 › Asking rents of $94 PSF 1,2 › Well-located, red
Slide 6: Tenant Expansions Fuel Leases
Tenant Expansions Fuel Leases Cumulative Growth from Tenant Expansions 1,600,000 200 Number of Transactions 181 163 160 Square Footage 1,200,000 132 120 800,000 108 90 1,171,443 1,292,163 80 400,000 49 901,585 649,690 742,515 40 26 133,708 294,503 - - 2013 2014 2015 2016 2017 2018 1Q 2019 › We focus
Slide 7: Four Drivers of Revenue Growth
Four Drivers of Revenue Growth 1 EMBEDDED UPSIDE Burn-off of free rent $32 M Signed leases not commenced Retail $19 M opportunity $107 $8 M Million4 Office mark-to- Lease up of market vacant opportunity3 redeveloped $18 M Manhattan office space2 $30 M 1 Amounts reflect management’s estimates of addi
Slide 8: Delivering on Cash NOI Growth
Delivering on Cash NOI Growth MANAGEMENT TEAM HAS DELIVERED Cash NOI Growth Even With Fluctuating Occupancy $400,000 90.0% $380,000 89.5% $360,000 thousand89.0% $340,000 88.5% $320,000 88.0% $300,000 87.5% $280,000 87.0% $260,000 86.5% $240,000 86.0% 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3
Slide 9: Redevelopment Opportunity
Redevelopment Opportunity Tenant space to be redeveloped Empire State Building 180,000 SF Balance of Manhattan office portfolio 430,000 SF Total 610,000 SF Probable Renovations of Undeveloped Space in 2019-20231 200,000 145,000 SF 115,000 SF 100,000 50,000 SF 20,000 SF 5,000 SF (SF) 0 2019 2020 2021
Slide 10: 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 entirely to two tenants 10
Slide 11: Superior Returns from Redevelopment
Superior Returns from Redevelopment 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: Superior Cash Leasing Spreads
Superior Cash Leasing Spreads ILLUSTRATES MARK TO MARKET OPPORTUNITY Strong NYC office leasing spreads1 Strong NYC office leasing spreads All leases Q1 2019 New leases Q1 2019 All leases Q1 2019 average3 $ 63.29 $ 63.74 16.0% 14.0% $ 55.50 $ 52.65 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% (0.
Slide 13: Fortress Balance Sheet
Fortress Balance Sheet SIGNIFICANT CASH, LINE AVAILABILITY AND LOW LEVERAGE 3.6x 22% $593MM $1.1BN+ Net Debt / Net Debt / Cash and S-T Unsecured EBITDA Enterprise Value Investments Credit Facility 100% 3.84% 7.8 years 79% of SF Fixed Rate Weighted Avg. Weighted Avg. Unencumbered Outstanding Debt Int
Slide 14: Best in Class Balance Sheet
Best in Class Balance Sheet MEETS NEEDS AND SUPPORTS GROWTH PEERS1 Net Debt / EBITDA 3.6x 7.5x Net Debt / 22% 42% Enterprise Value CURRENT DEBT MATURITY PROFILE (AS OF MARCH 31, 2019) ($ millions) $663 $203 $319 $250 $265 $460 $100 $194 $146 $78 $50 $125 $115 2019 2020 2021 2022 2023 2024 2025 2026
Slide 15: Observatory Performance
Observatory Performance CONSISTENT PERFORMANCE THROUGH ECONOMIC CYCLE AND NEW ATTRACTIONS One World Observatory Observatory annual revenue1 (millions) Opens 1.6 Million Visitors (estimated 2018) 2001 – 2018 CAGR 9/11 Museum Opens 10.2% 3.2 Million Visitors $131.2 2 (estimated 2018) $127.1 $124.8 $11
Slide 16: Observatory is a Global Brand
Observatory is a Global Brand 77% OF VISITORS DECIDE TO VISIT BEFORE LEAVING HOME1 International vs. Domestic1: What Differentiates the ESB 63% International › 87 years of popular cultural 37% Domestic references make ESB a Global Age Group1: brand 50% 18-34 years old › ESRT invests in strategies to
Slide 17: Observatory Ticket Mix
Observatory Ticket Mix ACTIVE MANAGEMENT OF TICKET MIX TO DRIVE REVENUE PER CAPITA Direct sales at full price is Introduction of variable Offering different largest source pricing during peak experiences to capture demand incremental demand Growth in Observatory Revenue Per Capita1,2 $34.00 $33.00 $
Slide 18: Valuing The Observatory
Valuing The Observatory SUM OF THE PARTS VALUES BOTH RENTAL REVENUE AND RESIDUAL PROFIT STREAMS Observatory Results – 1Q 2019 Trailing Twelve Months In $MM Visitor Revenue 125 (1) Gift Shop License Fee 5 Total Revenue 130 Less Operating Expenses 33 NOI 97 Less Intercompany rent expense 80 NOI after
Slide 19: 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 Real Estate & Chief Fi
Slide 20: Appendix
Appendix
Slide 21: Sustainability Leader
Sustainability Leader LEADER IN INVESTMENT AND RETURN ORIENTATED SUSTAINABILITY PRACTICES › Focus on quantifiable transparent results › Our key performance indicators (KPIs) focus on: • Reduction in energy consumption • Water use reduction • Waste management and recycling • Indoor environmental Tena
Slide 22: Sustainability In Action
Sustainability In Action SAMPLE INITIATIVES FROM FOUR FOCUS AREAS 22
Slide 23: Creating Value Through Sustainability
Creating Value Through Sustainability EMPIRE STATE BUILDING CASE STUDIES 3 ESB Tenant Energy Optimization Projects Examples Global Brands › Annual savings of Coty Group LinkedIn $4.4 M Energy reduction 31% 12% 38% › 3.1 year payback › Energy Star 861 ROI over lease term 328% 126% 93% › Quantifiable
Slide 24: Free Rent Burn-Off and SLNC
Free Rent Burn-Off and SLNC Base Cash Rent Contributing to Cash NOI in the Following Years on a Cumulative Basis Annualized Initial Base Total Portfolio 2019 2020 2021 2022 Cash Rent Commenced leases in $32.253 M $12.694 M $30.571 M $32.253 M $32.253 M free rent period Signed leases not 18.530 M 1.5
Slide 25: Vacant Office Space
Vacant Office Space Current vacancy / Redeveloped vacancy (Manhattan Office) 589,000 SF / 466,000 SF Weighted average starting rent (Manhattan Office) $64 PSF MANHATTAN OFFICE PORTFOLIO CURRENT VACANT SPACE SQ FEET Redeveloped Manhattan office space 466,000 Signed Leases Not Commenced (SLNC): Prebui
Slide 26: Manhattan Office Mark to Market
Manhattan Office Mark to Market CURRENT 2019 MARKET RENT VS. CURRENT FULLY ESCALATED RENT 9 mos 12 mos 12 mos 12 mos 12 mos 3 mos 2019 2020 2021 2022 2023 2024 Current fully escalated $52 $55 $55 $58 $56 $65 rent PSF1 Leased square feet 387,051 459,984 457,753 367,714 533,430 97,913 expiring2 Weight
Slide 27: Greater NY Office Mark to Market
Greater NY Office Mark to Market CURRENT 2019 MARKET RENT VS. CURRENT FULLY ESCALATED RENT 9 mos 12 mos 12 mos 12 mos 12 mos 3 mos 2019 2020 2021 2022 2023 2024 Current fully escalated $37 $46 $45 $38 $46 $30 rent PSF1 Leased square feet 221,092 203,933 210,934 116,525 120,187 7,876 expiring2 Weight
Slide 28: Retail Mark to Market and Vacant Space
Retail Mark to Market and Vacant Space CURRENT 2019 MARKET RENT VS. CURRENT FULLY ESCALATED RENT 9 12 12 12 12 3 months months months months months months Vacant 2019 2020 2021 2022 2023 2024 Current fully escalated rent N/A $169 $129 $156 $151 $130 $160 PSF1 Leased square feet 54,030 23,380 27,811
Slide 29: Tenants Relocating to ESRT
Tenants Relocating to ESRT ATTRACTED TENANTS FROM ALL PARTS OF NYC AND BEYOND OVER PAST 12 MONTHS From Outside Manhattan 7 Tenants Representing 34,441 SF From Midtown (West) (Madison/Fifth, Penn Station/ Times Square South, Rockefeller Center, West Side) 11 Tenants Representing 94,864 SF From Midtow
Slide 30: Retail Value Creation Case Study
Retail Value Creation Case Study SUCCESSFUL REPOSITIONING OF 112 WEST 34th STREET › 88,513 SF on 3 floors leased to one › New leases were signed with tenant, including 2 levels of office and Footlocker, Sephora and Target by storage, for $2.2 million in annualized March 2017 for annualized rent of f
Slide 31: Empire State Building CoBranding Case Study
Empire State Building CoBranding Case Study PARTNERSHIP WITH ABC, JIMMY KIMMEL LIVE!, GOOGLE, EMINEM AND INTERSCOPE RECORDS MEDIA COVERAGE 1.1B $1.8MM 112MM MEDIA IMPRESSIONS AD VALUE EQUIVALENCY SOCIAL MEDIA IMPRESSIONS Media impressions is based on U.S. print, online, and broadcast outlets; exclud
Slide 32: Greater NY Metropolitan Office Portfolio
Greater NY Metropolitan Office Portfolio QUALITY ASSETS AND TENANTS › Best assets located at or Highway Metro-North Railroad near major transit hubs Metro-North Train › Amenities update 684 Stop Norwalk underway 95 Stamford › 12.6% of 1Q 2019 NOI / White Plains 287 18.2% of total SF › 87.8% occupied
Slide 33: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Three Months Ended Year Ended Year Ended Year Ended Year Ended Period From 10/7/13 Reconciliation of Net Income to NOI March 31, December 31, September 30, June 30, March 31, Dec 31, Dec 31, Dec 31, Dec 31, through and Cash NOI 2019 2018 2018 2018 2018 2017 2016 2
Slide 34: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Three Months Ended Reconciliation of Rental Revenue and Tenant Twelve Months March 31, December 31, September 30, June 30, March 31, Expense Reimbursement to Cash Revenues to Date 2019 2018 2018 2018 2018 Rental revenue $ 514,337 $ 143,417 $ 123,261 $ 123,621 $ 12
Slide 35: 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
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