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Item 5. Market for Registrant’s Common Equity

2022-02-25 compared with 2021-02-26 · 12 added, 95 removed, 66 unchanged (62% of the section changed)

9 unchanged sentences

As of February 18, 2022, we had 576 registered holders of our Class A common stock and 578 registered holders of our Class B common stock.

As of February 19, 2021, our operating partnership had 632 registered holders of Series PR OP Units, 1,444 registered holders of Series ES OP Units, 440 registered holders of Series 60 OP Units and 309 registered holders of Series 250 OP Units.

As of February 18, 2022, we had approximately 603 registered holders of Series PR OP Units, 1,343 registered holders of Series ES OP Units, 406 registered holders of Series 60 OP Units and 288 registered holders of Series 250 OP Units.

Certain shares of common stock and OP Units are held in "street" name and accordingly, the number of beneficial owners of such shares of common stock and OP Units is not known or included in the foregoing totals.

2 unchanged sentences

Our actual results of operations will be affected by a number of factors, including the revenue we receive from our properties, our operating expenses, interest expense, the ability of our tenants to meet their obligations and unanticipated expenditures.

During August 2020, we announced the suspension of our third and fourth quarter 2020 dividends to holders of our Class A common stock and Class B common stock and to holders of Empire State Realty OP, L.P.’s Series ES, Series 250 and Series 60 operating partnership units and Series PR operating partnership units.

We had no taxable income in 2020, and therefore no requirement to pay any dividend on our common stock in either the third or fourth quarter of 2020.

During December 2020, we announced the continued dividend suspension for the first and second quarters of 2021.

We and our board believe that payment of a dividend is currently not the highest and best use of our balance sheet.

Our board regularly reviews our dividend policy.

During May 2021, we announced our decision to reinstate the quarterly dividend, one quarter earlier than previously announced, driven by confidence in the New York City recovery and improvement in our operating results and liquidity.

We declared dividends of $0.035 per share for the second, third and fourth quarters of 2021, which equates to an annualized rate of $0.14 per share.

Our board will continue our regular review of dividend and capital allocation policies.

Distributions declared by us will be authorized by our board in its sole discretion out of funds legally available therefore and will be dependent upon a number of factors, including restrictions under applicable law, our capital requirements and the distribution requirements necessary to maintain our qualification as a REIT.

1 unchanged sentence

Earnings and profits, which determine the tax treatment of distributions to securityholders, will differ from income reported for financial reporting purposes due to the differences for federal income tax purposes, including, but not limited to, treatment of loss on extinguishment of debt, revenue recognition, compensation expense, and basis of depreciable assets and estimated useful lives used to compute depreciation.

Dividends paid in the first quarter and second quarter of 2020 of $0.21 per share are classified for income tax purposes 100% as taxable ordinary dividends eligible for the Section 199A deduction.

Dividends paid in the second, third and fourth quarters of 2021 of $0.105 per share are classified for income tax purposes 16.2% as taxable ordinary dividends eligible for the Section 199A deduction and 83.8% as a return of capital.

Stockholder Return Performance

The following graph is a comparison of the cumulative total stockholder return on our Class A common stock, the Standard & Poor's 500 Index (the "S&P 500 Index"), the FTSE NAREIT All Equity Index (the "FTSE NAREIT All Equity Index") and the FTSE NAREIT Equity REIT Office Index ("FTSE NAREIT Equity REIT Office Index").

The graph assumes

that $100.00 was invested on December 31, 2015 and dividends were reinvested without the payment of any commissions.

The graph assumes that $100.00 was invested on December 31, 2016 and dividends were reinvested without the payment of any commissions.

There can be no assurance that the performance of our Class A common stock will continue in line with the same or similar trends depicted in the graph below.

12 unchanged sentences

An aggregate of approximately 11.0 million shares of our common stock are authorized for issuance under awards granted pursuant to the 2019 Plan.

Following adoption by our shareholders of the 2019 Plan, we agreed not to issue any new equity awards under the First Amended and Restated Empire State Realty Trust, Inc.

Following adoption by our shareholders of the 2019 Plan, we agreed not to issue any new equity awards under the First

Amended and Restated Empire State Realty Trust, Inc.

and Empire State Realty OP, L.P.

2013 Equity Incentive Plan ("2013 Plan", and collectively with the 2019 Plan, "the Plans"), which we adopted upon our IPO in 2013.

The shares of Class A common stock underlying any awards under the 2019 Plan and the 2013 Plan that are forfeited, canceled or otherwise terminated, other than by exercise, will be added back to the shares of Class A common stock available for issuance under the

For a further discussion of the Plans, see Note 10 to the consolidated financial statements included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

22 unchanged sentences

Repurchases of Equity Securities Stock and Publicly Traded Operating Partnership Unit Repurchase Program

On December 13, 2019, our board authorized the repurchase of up to $500 million of our Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units from January 1, 2020 through December 31, 2020 ("the 2020 Repurchase Program").

On December 11, 2020, our board approved a new authorization for the repurchase of up to $500 million of such securities from January 1, 2021 through December 31, 2021.

Under the repurchase program, we may purchase our Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units in accordance with applicable securities laws from time to time in the open market or in privately negotiated transactions.

Our Board of Directors authorized the repurchase of up to $500 million of our Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units from January 1, 2021 through December 31, 2021 and reauthorized a new $500 million from January 1, 2022 through December 31, 2023.

Under the program, we may purchase our Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units in accordance with applicable securities laws from time to time in the open market or in privately negotiated transactions.

The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to stock price, availability, trading volume and general market conditions.

5 unchanged sentences

December 2021 2,426,091 $ 9.09 2,426,091 $ 453,296

SELECTED FINANCIAL DATA.

The following table sets forth our selected financial data and should be read in conjunction with our Financial Statements and notes thereto included in Item 8, "Financial Statements and Supplementary Data" and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report on Form 10-K.

Year Ended December 31,

(amounts in thousands, except per share data) 2020 2019 2018 2017 2016

Operating Data

Total revenues $ 609,228 $ 731,343 $ 731,511 $ 709,526 $ 677,353

Operating expenses:

Property operating expenses 136,141 174,977 167,379 163,531 153,850

Ground rent expenses 9,326 9,326 9,326 9,326 9,326

General and administrative expenses 62,244 61,063 52,674 50,315 49,078

Observatory expenses 23,723 33,767 32,767 30,275 29,833

Real estate taxes 121,923 115,916 110,000 102,466 96,061

Acquisition expenses — — — — 98

Impairment charges (4)

6,204 — — — —

Depreciation and amortization 191,006 181,588 168,508 160,710 155,211

Total operating expenses 550,567 576,637 540,654 516,623 493,457

Operating income (loss)

58,661 154,706 190,857 192,903 183,896

Other income (expense):

Interest income 2,637 11,259 10,661 2,942 647

Interest expense (89,907) (79,246) (79,623) (68,473) (70,595)

Loss on early extinguishment of debt (86) — — (2,157) (552)

IPO litigation expense (5)

(1,165) — — — —

Loss from derivative financial instruments — — — (289) —

Income (loss) before income taxes (29,860) 86,719 121,895 124,926 113,396

Income tax benefit (expense) 6,971 (2,429) (4,642) (6,673) (6,146)

Net income (loss) (22,889) 84,290 117,253 118,253 107,250

Private perpetual preferred unit distributions (4,197) (1,743) (936) (936) (936)

Net (income) loss attributable to non-controlling interests 10,374 (33,102) (50,714) (54,670) (54,858)

Net income (loss) attributable to common stockholders $ (16,712) $ 49,445 $ 65,603 $ 62,647 $ 51,456

Dividends and distributions declared and paid per share $ 0.21 $ 0.42 $ 0.42 $ 0.42 $ 0.40

Net income (loss) per share attributable to common stockholders - basic $ (0.10) $ 0.28 $ 0.39 $ 0.40 $ 0.38

Net income (loss) per share attributable to common stockholders - diluted $ (0.10) $ 0.28 $ 0.39 $ 0.39 $ 0.38

Total weighted average shares - basic 175,169 178,340 167,571 158,380 133,881

Total weighted average shares - diluted 283,837 297,798 297,259 298,049 277,568

Balance Sheet Data

Commercial real estate properties, at cost $ 3,133,966 $ 3,109,433 $ 2,884,486 $ 2,667,655 $ 2,458,629

Total assets $ 4,150,695 $ 3,931,834 $ 4,195,780 $ 3,931,347 $ 3,890,953

Debt $ 2,136,649 $ 1,668,574 $ 1,918,933 $ 1,688,721 $ 1,612,331

Equity $ 1,731,307 $ 1,947,913 $ 1,991,109 $ 1,977,737 $ 1,982,863

Funds from operations attributable to common stockholders and non-controlling interests (1)

$ 162,519 $ 260,062 $ 282,609 $ 276,491 $ 260,519

Modified funds from operations attributable to common stockholders and non-controlling interests (2)

$ 170,350 $ 267,893 $ 290,440 $ 284,322 $ 268,350

Core funds from operations attributable to common stockholders and non-controlling interests (3)

$ 175,414 $ 267,893 $ 290,440 $ 286,925 $ 269,000

Net cash provided by operating activities $ 182,293 $ 232,591 $ 279,022 $ 194,202 $ 214,755

Net cash provided by (used in) investing activities $ (143,118) $ 149,744 $ (643,023) $ (223,013) $ (182,376)

Net cash provided by (used in) financing activities $ 257,167 $ (381,551) $ 104,617 $ (56,877) $ 470,941

______________

(1) We compute Funds From Operations ("FFO") in accordance with the “White Paper” on FFO published by the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income (loss) (determined in accordance with GAAP), excluding impairment writedowns of investments in depreciable real estate and investments in in-substance real estate investments, gains or losses from debt restructurings and sales of depreciable operating properties, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), less distributions to non-controlling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships and joint ventures.

FFO is a widely recognized non-GAAP financial measure for REITs that we believe, when considered with financial statements determined in accordance with GAAP, is useful to investors in understanding financial performance and providing a relevant basis for comparison among REITs.

In addition, FFO is useful to investors as it captures features particular to real estate performance by recognizing that real estate has generally appreciated over time or maintains residual value to a much greater extent than do other depreciable assets.

Investors should review FFO, along with GAAP net income, when trying to understand an equity REIT’s operating performance.

We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs.

However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of FFO as a measure of performance is limited.

There can be no assurance that FFO presented by us is comparable to similarly titled measures of other REITs.

FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP.

FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions.

Although FFO is a measure used for comparability in assessing the performance of REITs, as the NAREIT White Paper only provides guidelines for computing FFO, the computation of FFO may vary from one company to another.

For a reconciliation of FFO, see "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Funds from Operations."

(2) Modified FFO adds back an adjustment for any above or below-market ground lease amortization to traditionally defined FFO.

We consider this a useful supplemental measure in evaluating our operating performance due to the non-cash accounting treatment under GAAP, which stems from the third quarter 2014 acquisition of two option properties following our formation transactions as they carry significantly below market ground leases, the amortization of which is material to our overall results.

We present Modified FFO because we consider it an important supplemental measure of our operating performance in that it adds back the non-cash amortization of below-market ground leases.

There can be no assurance that Modified FFO presented by us is comparable to similarly titled measures of other REITs.

Modified FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP.

Modified FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions.

(3) Core FFO adds back to traditionally defined FFO the following items:

acquisition expenses, severance expenses and retirement equity compensation expenses, private perpetual preferred exchange offering expenses, deferred tax asset write-off, acquisition expenses, loss on early extinguishment of debt, gain on settlement of lawsuit related to the Observatory, net of income taxes and ground lease amortization, construction severance expenses and acquisition break-up fee.

We present Core FFO because we consider it an important supplemental measure of our operating performance in that it excludes items associated with the Offering and formation transactions.

There can be no assurance that Core FFO presented by us is comparable to similarly titled measures of other REITs.

Core FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP.

Core FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions.

For a reconciliation of Core FFO, see "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Core Funds from Operations."

(4) Reflects a $4.1 million write-off of prior expenditures on a potential energy efficiency project that is not economically feasible in today's regulatory environment and a $2.1 million write-off of prior expenditures on a development project that is unlikely to continue.

(5) Represents an accrued expense which reflects an estimated liability associated with the Initial Public Offering-related litigation.

Refer to “Financial Statements-Note 8-Commitments and Contingencies” in this Annual Report on Form 10-K for a description of relevant legal proceedings.

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity