Empire State Realty Trust, Inc. - FORM 8-K - EX-99.2

Attached files

file	filename
8-K - FORM 8-K - Empire State Realty Trust, Inc.	d95492d8k.htm
EX-99.1 - EX-99.1 - Empire State Realty Trust, Inc.	d95492dex991.htm

Exhibit 99.2

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EMPIRE STATE REALTY TRUST

Supplemental Operating and Financial Data

For the Quarter Ended June 30, 2015

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Second Quarter 2015


*Table of Contents*	*Page*
*Summary*
Company Profile		3
Financial Highlights		4
*Selected Property Data*
Property Summary		5
Property Same Store Summary		9
Property Detail		10
Tenant Lease Expirations		11
Largest Tenants and Portfolio Tenant Diversification by Industry		14
Capital Expenditures and Redevelopment Program		15
Observatory Summary		16
*Financial information*
Condensed Consolidated Balance Sheets		17
Condensed Consolidated Statements of Income		18
Core FFO, Modified FFO, FFO, FAD and EBITDA		19
Net Operating Income		20
Consolidated Debt Analysis
Debt Summary		21
Debt Detail		22
Debt Maturities		23
Ground Leases		23
Supplemental Definitions		24

Forward-looking Statements

We make forward-looking statements in this supplemental package 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 protections of the safe harbor for forward-looking statements contained in such Sections.

You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “contemplates,” “aims,” “continues,” “would” or “anticipates” or similar words or phrases in the positive or negative. In particular, forward looking statements include those pertaining to our capital resources, portfolio performance, dividend policy, results of operations, anticipated growth in our portfolio from operations, acquisitions, and market conditions and demographics.

Forward-looking statements involve numerous risks and uncertainties, many of which are difficult to predict and generally beyond our control. They depend on assumptions, data or methods which may be incorrect or imprecise, and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all).

The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: changes in our industry and markets, either nationally or in Manhattan or the greater New York metropolitan area; resolution of the litigations and arbitration involving our company; reduced demand for office or retail space; general volatility of the capital and credit markets and the market price of our Class A common stock and listed operating partnership units; changes in our business strategy; defaults on, early terminations of, or non-renewal of, leases by tenants; bankruptcy or insolvency of a major tenant or a significant number of smaller tenants; litigation; fluctuations in interest rates; increased operating costs; declining real estate valuations and impairment charges; availability, terms and deployment of capital; our failure to obtain necessary outside financing; our expected leverage; decreased rental rates or increased vacancy rates; breach of or the expiration of our ground lease; our failure to generate sufficient cash flows to service our outstanding indebtedness; our failure to redevelop, renovate and reposition properties successfully or on the anticipated timeline or at the anticipated costs; difficulties in identifying properties to acquire and completing acquisitions; risks of real estate acquisitions, dispositions and development (including our Metro Tower development site), including construction delays and cost overruns; our failure to operate acquired properties and operations successfully; our ability to manage our growth effectively; changes in governmental regulations, tax laws and rates and similar matters; estimates relating to our ability to make distributions to our securityholders in the future; our failure to qualify as a REIT; a future terrorist event in the U.S.; environmental uncertainties and risks related to adverse weather conditions and natural disasters; lack or insufficient amounts of insurance; financial market fluctuations; availability of, and our ability to attract and retain, qualified personnel; conflicts of interest affecting our senior management team; competition; changes in real estate and zoning laws and increases in real property tax rates; and our ability to comply with the laws, rules and regulations applicable to companies and, in particular, public companies. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, or new information, data or methods, future events or other changes after the date of this presentation, except as required by applicable law. For a further discussion of these and other factors that could impact our future results, performance or transactions, see the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014 and other risks described in documents we subsequently file from time to time with the Securities and Exchange Commission.

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Second Quarter 2015

COMPANY PROFILE

Empire State Realty Trust, Inc., or the Company, is a leading real estate investment trust (REIT) that owns, manages, operates, acquires and repositions office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the world’s most famous office building.


*BOARD OF DIRECTORS*
Anthony E. Malkin	William H. Berkman	Alice M. Connell
Chairman and Chief Executive Officer	Director, Chair of Compensation and Nominating/Corporate Governance Committees	Director, Chair of Finance Committee

Thomas J. DeRosa	Steven J. Gilbert	S. Michael Giliberto
Director	Director, Lead Director	Director, Chair of Audit Committee

James D. Robinson IV
Director

*EXECUTIVE MANAGEMENT*
Anthony E. Malkin	John B. Kessler	Thomas P. Durels
Chairman and Chief Executive Officer	President and Chief Operating Officer	Executive Vice President and Director of Leasing and Operations

David A. Karp	Thomas N. Keltner, Jr.
Executive Vice President, Chief Financial Officer and Treasurer	Executive Vice President, General Counsel and Secretary

*COMPANY INFORMATION*
Corporate Headquarters	Investor Relations	New York Stock Exchange
One Grand Central Place	David A. Karp	Trading Symbol: ESRT
60 East 42nd Street	IR@empirestaterealtytrust.com
New York, NY 10165 www.empirestaterealtytrust.com
(212) 687-8700

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Second Quarter 2015

Financial Highlights

(unaudited and dollars in thousands, except per share amounts)


	Three Months Ended
Selected Items:	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014
Revenue	$	164,773		$	151,882		$	170,411		$	169,441		$	155,168
EBITDA ⁽¹⁾	$	84,434		$	64,941		$	79,846		$	83,698		$	71,911
Cash net operating income ⁽¹⁾	$	84,926		$	67,656		$	78,161		$	82,379		$	66,994
Net income	$	26,585		$	7,888		$	10,964		$	22,734		$	25,281
Core funds from operations (“Core FFO”) ⁽¹⁾	$	68,255		$	52,670		$	65,212		$	65,094		$	55,408
Core funds available for distribution (“Core FAD”) ⁽¹⁾	$	55,903		$	42,645		$	49,546		$	49,008		$	39,236
Core FFO per share - diluted	$	0.26		$	0.20		$	0.25		$	0.25		$	0.23
Core FAD per share - diluted	$	0.21		$	0.16		$	0.19		$	0.19		$	0.16
Dividends declared and paid per share	$	0.085		$	0.085		$	0.085		$	0.085		$	0.085

Portfolio Statistics:
Number of properties		20			20			20			20			18
Total rentable square footage		10,042,025			10,018,399			10,014,264			10,024,329			8,371,044
Percent occupied ⁽²⁾		88.0	%		87.6	%		88.6	%		88.7	%		88.6	%

Observatory Metrics:
Number of visitors		1,165,000			622,000			997,000			1,405,000			1,222,000
Change in visitors year over year		-4.7	%		-6.3	%		1.8	%		0.9	%		3.8	%
Observatory revenues	$	30,600		$	18,223		$	28,167		$	35,684		$	30,389
Change in revenues year over year		0.7	%		5.2	%		10.9	%		10.2	%		11.4	%

Ratios:
Consolidated Debt to Total Market Capitalization ⁽³⁾		26	%		24	%		25	%		28	%		23	%
Consolidated Debt and Perpetual Preferred Units to Total Market Capitalization ⁽³⁾		27	%		24	%		26	%		29	%		23	%
Consolidated Debt to EBITDA ⁽⁴⁾		5.2x			5.4x			5.6x			4.8x			4.3x
Consolidated Net Debt to EBITDA ⁽⁴⁾		5.1x			5.2x			5.4x			4.6x			4.1x
Interest Coverage Ratio		5.6x			4.4x			5.3x			5.5x			4.9x
Core FFO Payout Ratio ⁽⁵⁾		33	%		43	%		35	%		35	%		38	%
Core FAD Payout Ratio ⁽⁶⁾		41	%		53	%		46	%		46	%		53	%

Class A common stock price at quarter end	$	17.06		$	18.81		$	17.58		$	15.02		$	16.50
Average closing price	$	18.01		$	18.15		$	16.28		$	16.20		$	16.07
Dividends per share - annualized	$	0.34		$	0.34		$	0.34		$	0.34		$	0.34
Dividend yield ⁽⁷⁾		2.0	%		1.8	%		1.9	%		2.3	%		2.1	%
Private Perpetual Preferred Units outstanding ($16.62 liquidation value)		1,560,360			1,560,360			1,560,360			1,609,813			—

Class A common stock		113,119,634			110,598,327			106,030,449			97,035,359			94,486,204
Class B common stock		1,134,252			1,149,014			1,161,438			1,232,183			1,121,786
Operating partnership units		153,332,538			155,808,466			159,912,447			168,862,138			150,356,053

Total common stock and operating partnership units outstanding		267,586,424			267,555,807			267,104,334			267,129,680			245,964,043

Notes:

(1)	Represents non-GAAP financial measures. For a discussion on what these metrics represent and why the Company presents them, see page 24 and for a reconciliation of these metrics to net income, see pages 19 and 20.

(2)	Based on leases signed and commenced as of end of period.

(3)

Market capitalization represents the sum of (i) Company’s common stock per share price as of June 30, 2015 multiplied by the total outstanding number of shares of common stock and operating partnership units as of June 30, 2015; (ii) the number of perpetual preferred units at June 30, 2015 multiplied by $16.62 and (iii) our outstanding indebtedness as of June 30, 2015.

(4)	Calculated based on trailing 12 months EBITDA for the first and second quarters 2015 and the fourth quarter 2014. For prior quarters, quarterly EBITDA was annualized.

(5)	Represents the amount of Core FFO paid out in distributions.

(6)	Represents the amount of Core FAD paid out in distributions.

(7)	Based on the closing price per share of Class A common stock on June 30, 2015.

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Second Quarter 2015

Property Summary

(unaudited and dollars in thousands, except per square foot amounts)


	Three Months Ended June 30, 2015
				Manhattan			Greater New York			Standalone
	Total			Office			Office			Retail
	Portfolio			Portfolio⁽¹⁾			Portfolio			Portfolio			Observatory

Number of properties		20			9			5			6
Square feet		10,042,025			7,975,720			1,862,130			204,175
Occupancy ⁽²⁾		88.0	%		86.4	%		93.4	%		100.0	%

Revenue	$	163,805		$	109,252		$	19,511		$	4,442		$	30,600
Operating expenses		(70,639	)		(53,393	)		(8,345	)		(1,481	)		(7,420	)

Net operating income		93,166			55,859			11,166			2,961			23,180
Straight-line rent		(5,622	)		(5,643	)		(74	)		95			—
Above/below-market lease amortization		(4,576	)		(4,576	)		—			—			—
Below-market ground lease amortization		1,958			1,958			—			—			—

Cash net operating income	$	84,926		$	47,598		$	11,092		$	3,056		$	23,180


Leasing activity
Total leases executed		79			65			14			—
Total square footage executed		254,360			203,721			50,639			—
Average rent psf - leases executed	$	64.67		$	68.72		$	41.90		$	—
Previously escalated rents psf	$	44.31		$	44.42		$	43.67		$	—
Percentage of new rent over previously escalated rents		46.0	%		54.7	%		-4.0	%		—

Leasing commission costs per square foot	$	12.33		$	14.24		$	4.90		$	—
Tenant improvement costs per square foot		47.15			51.25			31.55			—

Total LC and TI per square foot ⁽³⁾	$	59.48		$	65.49		$	36.45		$	—


Total Portfolio	Office			Retail			Total
Total square footage executed		236,324			18,036			254,360
Average rent psf - leases executed	$	52.37		$	207.71		$	64.67
Previously escalated rents psf	$	40.70		$	91.08		$	44.31
Percentage of new rent over previously escalated rents		28.7	%		128.1	%		46.0	%

Manhattan Office Portfolio	Office			Retail			Total
Total square footage executed		185,685			18,036			203,721
Average rent psf - leases executed	$	55.22		$	207.71		$	68.72
Previously escalated rents psf	$	39.89		$	91.08		$	44.42
Percentage of new rent over previously escalated rents		38.4	%		128.1	%		54.7	%

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Second Quarter 2015

Property Summary

(unaudited and dollars in thousands, except per square foot amounts)


	Three Months Ended March 31, 2015
				Manhattan			Greater New York			Standalone
	Total			Office			Office			Retail
	Portfolio			Portfolio ⁽¹⁾			Portfolio			Portfolio			Observatory

Number of properties		20			9			5			6
Square feet		10,018,399			7,953,643			1,860,581			204,175
Occupancy ⁽²⁾		87.6	%		86.2	%		92.0	%		100.0	%

Revenue	$	149,829		$	107,733		$	19,118		$	4,755		$	18,223
Operating expenses		(74,738	)		(58,224	)		(8,039	)		(1,498	)		(6,977	)

Net operating income		75,091			49,509			11,079			3,257			11,246
Straight-line rent		(4,102	)		(4,349	)		271			(24	)		—
Above/below-market lease amortization		(5,291	)		(5,291	)		—			—			—
Below-market ground lease amortization		1,958			1,958			—			—			—

Cash net operating income	$	67,656		$	41,827		$	11,350		$	3,233		$	11,246


Leasing activity
Total leases executed		60			51			9			—
Total square footage executed		418,092			372,028			46,064			—
Average rent psf - leases executed	$	88.38		$	93.92		$	40.44		$	—
Previously escalated rents psf	$	35.43		$	35.00		$	39.14		$	—
Percentage of new rent over previously escalated rents		149.5	%		168.3	%		3.3	%		—

Leasing commission costs per square foot	$	37.58		$	41.21		$	8.22		$	—
Tenant improvement costs per square foot		52.41			53.46			43.95			—

Total LC and TI per square foot⁽³⁾	$	89.99		$	94.67		$	52.17		$	—


Total Portfolio	Office			Retail			Total
Total square footage executed		367,761			50,331			418,092
Average rent psf - leases executed	$	52.64		$	347.32		$	88.38
Previously escalated rents psf	$	35.33		$	36.14		$	35.43
Percentage of new rent over previously escalated rents		49.0	%		861.0	%		149.5	%

Manhattan Office Portfolio	Office			Retail			Total
Total square footage executed		321,697			50,331			372,028
Average rent psf - leases executed	$	54.27		$	347.32		$	93.92
Previously escalated rents psf	$	34.82		$	36.14		$	35.00
Percentage of new rent over previously escalated rents		55.9	%		861.0	%		168.3	%

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Second Quarter 2015

Property Summary

(unaudited and dollars in thousands, except per square foot amounts)


	Three Months Ended December 31, 2014
				Manhattan			Greater New York			Standalone
	Total			Office			Office			Retail
	Portfolio			Portfolio ⁽¹⁾			Portfolio			Portfolio			Observatory
Number of properties		20			9			5			6
Square feet		10,014,264			7,948,743			1,861,346			204,175
Occupancy ⁽²⁾		88.6	%		87.7	%		91.1	%		100.0	%

Revenue	$	165,041		$	113,789		$	18,497		$	4,588		$	28,167
Operating expenses		(75,655	)		(58,483	)		(7,591	)		(1,750	)		(7,831	)

Net operating income		89,386			55,306			10,906			2,838			20,336
Straight-line rent		(7,613	)		(7,538	)		(135	)		60			—
Above/below-market lease amortization		(5,613	)		(5,613	)		—			—			—
Below-market ground lease amortization		2,001			2,001			—			—			—

Cash net operating income	$	78,161		$	44,156		$	10,771		$	2,898		$	20,336


Leasing activity
Total leases executed		63			54			9			—
Total square footage executed		200,480			155,482			44,998			—
Average rent psf - leases executed	$	55.67		$	58.60		$	34.93		$	—
Previously escalated rents psf	$	44.12		$	45.23		$	36.30		$	—
Percentage of new rent over previously escalated rents		26.2	%		29.6	%		-3.8	%		—

Leasing commission costs per square foot	$	12.39		$	13.41		$	8.85		$	—
Tenant improvement costs per square foot		36.92			35.28			42.58			—

Total LC and TI per square foot⁽³⁾	$	49.31		$	48.69		$	51.43		$	—


	Three Months Ended September 30, 2014
				Manhattan			Greater New York			Standalone
	Total			Office			Office			Retail
	Portfolio			Portfolio ⁽¹⁾			Portfolio			Portfolio			Observatory
Number of properties		20			9			5			6
Square feet		10,024,329			7,976,822			1,843,332			204,175
Occupancy ⁽²⁾		88.7	%		87.7	%		91.8	%		100.0	%

Revenue	$	163,076		$	103,528		$	19,053		$	4,811		$	35,684
Operating expenses		(69,336	)		(52,916	)		(7,773	)		(1,538	)		(7,109	)

Net operating income		93,740			50,612			11,280			3,273			28,575
Straight-line rent		(8,543	)		(8,858	)		433			(118	)		—
Above/below-market lease amortization		(4,568	)		(4,568	)		—			—			—
Below-market ground lease amortization		1,750			1,750			—			—			—

Cash net operating income	$	82,379		$	38,936		$	11,713		$	3,155		$	28,575


Leasing activity
Total leases executed		57			48			9			—
Total square footage executed		181,743			143,290			38,453			—
Average rent psf - leases executed	$	51.11		$	55.80		$	33.65		$	—
Previously escalated rents psf	$	42.67		$	44.99		$	34.02		$	—
Percentage of new rent over previously escalated rents		19.8	%		24.0	%		-1.1	%		—

Leasing commission costs per square foot	$	14.30		$	16.97		$	4.34		$	—
Tenant improvement costs per square foot		43.54			53.14			7.79			—

Total LC and TI per square foot ⁽³⁾	$	57.84		$	70.11		$	12.13		$	—

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Second Quarter 2015

Property Summary

(unaudited and dollars in thousands, except per square foot amounts)


	Three Months Ended June 30, 2014
				Manhattan			Greater New York			Standalone
	Total			Office			Office			Retail
	Portfolio			Portfolio ⁽¹⁾			Portfolio			Portfolio			Observatory
Number of properties		18			7			5			6
Square feet		8,371,044			6,323,271			1,843,598			204,175
Occupancy ⁽²⁾		88.6	%		87.8	%		90.2	%		100.0	%

Revenue	$	140,477		$	86,693		$	18,991		$	4,404		$	30,389
Operating expenses		(60,902	)		(44,527	)		(7,902	)		(1,353	)		(7,120	)

Net operating income		79,575			42,166			11,089			3,051			23,269
Straight-line rent		(10,979	)		(10,540	)		(192	)		(247	)		—
Above/below-market lease amortization		(2,028	)		(2,028	)		—			—			—
Below-market ground lease amortization		426			426			—			—			—

Cash net operating income	$	66,994		$	30,024		$	10,897		$	2,804		$	23,269


Leasing activity
Total leases executed		69			58			11			—
Total square footage executed		211,259			172,212			39,047			—
Average rent psf - leases executed	$	49.05		$	51.54		$	37.53		$	—
Previously escalated rents psf	$	41.15		$	41.03		$	41.30		$	—
Percentage of new rent over previously escalated rents		19.2	%		25.6	%		-9.1	%		—

Leasing commission costs per square foot	$	15.20		$	16.52		$	9.41		$	—
Tenant improvement costs per square foot		45.65			51.29			20.78			—

Total LC and TI per square foot ⁽³⁾	$	60.85		$	67.81		$	30.19		$	—

Notes:

⁽¹⁾	Includes 515,374 rentable square feet of retail space in the Company’s nine Manhattan office properties.

⁽²⁾	Based on leases signed and commenced as of period end.

⁽³⁾	Presents all tenant improvement and leasing commission costs as if they were incurred in the period in which the lease was signed, which may be different than the period in which they were actually paid.

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Second Quarter 2015

Same Store Summary

(unaudited and dollars in thousands, except per square foot amounts)


	Total Portfolio (Excluding Observatory) - Same Store ⁽¹⁾
	Three Months Ended
	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014
Number of properties		18			18			18			18			18
Square feet		8,381,029			8,365,056			8,362,744			8,372,784			8,371,044
Occupancy ⁽²⁾		88.4	%		88.1	%		89.2	%		89.2	%		88.6	%

Revenue	$	112,618		$	111,387		$	116,347		$	110,414		$	110,088
Operating expenses		(54,818	)		(58,879	)		(58,815	)		(55,393	)		(53,782	)

Net operating income		57,800			52,508			57,532			55,021			56,306
Straight-line rent		(4,410	)		(3,272	)		(5,237	)		(7,132	)		(10,979	)
Above/below-market lease amortization		(1,664	)		(1,731	)		(2,449	)		(1,892	)		(2,028	)
Below-market ground lease amortization		426			426			426			426			426

Cash net operating income	$	52,152		$	47,931		$	50,272		$	46,423		$	43,725


Leasing activity
Total leases executed		74			50			56			55			69
Total square footage executed		232,220			281,110			172,168			179,366			212,259
Average rent psf - leases executed	$	65.05		$	53.27		$	60.03		$	51.20		$	49.05
Previously escalated rents psf	$	45.01		$	34.61		$	46.43		$	42.64		$	41.15
Percentage of new rent over previously escalated rents		44.5	%		53.9	%		29.3	%		20.1	%		19.2	%

Leasing commission costs per square foot	$	11.53		$	16.54		$	14.18		$	14.45		$	15.20
Tenant improvement costs per square foot		48.24			52.57			42.72			44.08			45.65

Total LC and TI per square foot ⁽³⁾	$	59.77		$	69.11		$	56.90		$	58.53		$	60.85


	Manhattan Office Portfolio - Same Store ⁽¹⁾
	Three Months Ended
	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014
Number of properties		7			7			7			7			7
Square feet		6,314,724			6,300,300			6,297,223			6,325,276			6,323,271
Occupancy ⁽²⁾		86.5	%		86.6	%		88.3	%		88.1	%		87.8	%

Revenue	$	88,665		$	87,514		$	93,262		$	86,550		$	86,693
Operating expenses		(44,992	)		(49,342	)		(49,474	)		(46,082	)		(44,527	)

Net operating income		43,673			38,172			43,788			40,468			42,166
Straight-line rent		(4,431	)		(3,519	)		(5,162	)		(7,447	)		(10,540	)
Above/below-market lease amortization		(1,664	)		(1,731	)		(2,449	)		(1,892	)		(2,028	)
Below-market ground lease amortization		426			426			426			426			426

Cash net operating income	$	38,004		$	33,348		$	36,603		$	31,555		$	30,024


Leasing activity
Total leases executed		60			41			47			46			58
Total square footage executed		181,581			235,046			127,170			140,913			172,212
Average rent psf - leases executed	$	69.67		$	55.61		$	64.36		$	56.00		$	51.54
Previously escalated rents psf	$	45.28		$	33.79		$	48.17		$	44.99		$	41.03
Percentage of new rent over previously escalated rents		53.9	%		64.6	%		33.6	%		24.5	%		25.6	%

Leasing commission costs per square foot	$	13.45		$	18.17		$	16.11		$	17.21		$	16.52
Tenant improvement costs per square foot		53.16			54.26			42.76			53.98			51.29

Total LC and TI per square foot ⁽³⁾	$	66.61		$	72.43		$	58.87		$	71.19		$	67.81

Notes:

⁽¹⁾	Defined as the total portfolio excluding 112 West 34th Street and 1400 Broadway which the Company acquired on July 15, 2014 and the observatory.

⁽²⁾	Based on leases signed and commenced as of period end.

⁽³⁾	Presents all tenant improvement and leasing commission costs as if they were incurred in the period in which the lease was signed, which may be different than the period in which they were actually paid.

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Second Quarter 2015

Property Detail

(unaudited)


Property Name	Location or Sub-Market	Rentable Square Feet⁽¹⁾		Percent Occupied ⁽²⁾			Annualized Rent ⁽³⁾		Annualized Rent per Occupied Square Foot ⁽⁴⁾		Number of Leases ⁽⁵⁾
*Manhattan Office Properties - Office*
The Empire State Building ⁽⁶⁾	Penn Station -Times Sq. South		2,663,407		84.7	%	$	108,449,173	$	48.07		195
One Grand Central Place	Grand Central		1,190,197		84.9	%		51,237,591		50.71		254
1400 Broadway ⁽⁸⁾	Penn Station -Times Sq. South		897,903		93.9	%		35,230,416		41.79		60
112 West 34th Street ⁽⁹⁾	Penn Station -Times Sq. South		652,599		74.2	%		22,605,501		46.68		28
250 West 57th Street	Columbus Circle - West Side		478,409		73.4	%		17,664,904		50.31		131
501 Seventh Avenue	Penn Station -Times Sq. South		459,462		96.9	%		19,017,716		42.72		36
1359 Broadway	Penn Station -Times Sq. South		454,041		91.5	%		18,706,716		45.03		35
1350 Broadway ⁽¹⁰⁾	Penn Station -Times Sq. South		371,804		90.1	%		16,325,002		48.73		69
1333 Broadway	Penn Station -Times Sq. South		292,524		100.0	%		13,335,426		45.59		10

*Manhattan Office Properties - Office*			7,460,346		86.2	%		302,572,445		47.03		818

*Manhattan Office Properties - Retail*
The Empire State Building ⁽⁷⁾	Penn Station -Times Sq. South		136,711		91.4	%		17,086,951		136.75		18
One Grand Central Place	Grand Central		64,070		95.2	%		6,572,324		107.75		14
1400 Broadway ⁽⁸⁾	Penn Station -Times Sq. South		17,146		73.5	%		1,365,850		108.38		8
112 West 34th Street ⁽⁹⁾	Penn Station -Times Sq. South		93,348		96.5	%		3,577,100		39.71		2
250 West 57th Street	Columbus Circle - West Side		48,633		85.7	%		5,276,157		126.59		6
501 Seventh Avenue	Penn Station -Times Sq. South		34,536		87.1	%		1,721,011		57.21		8
1359 Broadway	Penn Station -Times Sq. South		26,490		37.4	%		1,199,329		121.06		4
1350 Broadway ⁽¹⁰⁾	Penn Station -Times Sq. South		31,774		100.0	%		6,504,076		204.70		6
1333 Broadway	Penn Station -Times Sq. South		62,666		92.9	%		6,600,657		113.38		2

*Manhattan Office Properties - Retail*			515,374		89.3	%		49,903,455		108.41		68

*Sub-Total/Weighted Average*
*Manhattan Office Properties - Office and Retail*			7,975,720		86.4	%		352,475,900		51.13		886


*Greater New York Metropolitan Area*
*Office Properties*
First Stamford Place ⁽¹¹⁾	Stamford, CT		794,517		93.6	%		31,042,412		41.74		54
Metro Center	Stamford, CT		282,458		95.6	%		15,060,110		55.77		31
383 Main Street	Norwalk, CT		261,447		95.5	%		8,084,294		32.38		23
500 Mamaroneck Avenue	Harrison, NY		294,192		91.9	%		8,004,240		29.61		34
10 Bank Street	White Plains, NY		229,516		89.7	%		7,239,689		35.17		32

*Sub-Total/Weighted Average Greater New York*
*Metropolitan Area Office Properties*			1,862,130		93.4	%		69,430,745		39.91		174


*Standalone Retail Properties*
10 Union Square	Union Square		58,005		100.0	%		6,162,477		106.24		14
1542 Third Avenue	Upper East Side		56,250		100.0	%		3,601,883		64.03		4
1010 Third Avenue	Upper East Side		44,662		100.0	%		3,348,096		74.97		2
77 West 55th Street	Midtown		24,102		100.0	%		2,540,347		105.40		3
69-97 Main Street	Westport, CT		16,826		100.0	%		2,074,215		123.27		5
103-107 Main Street	Westport, CT		4,330		100.0	%		606,446		140.06		1

*Sub-Total/Weighted Average Standalone*
*Retail Properties*			204,175		100.0	%		18,333,464		89.79		29


*Portfolio Total*			10,042,025		88.0	%	$	440,240,109	$	49.82		1,089


*Total/Weighted Average Office Properties*			9,322,476		87.7	%	$	372,003,190	$	45.52		992
*Total/Weighted Average Retail Properties*			719,549		92.3	%		68,236,919		102.69		97

*Portfolio Total*			10,042,025		88.0	%	$	440,240,109	$	49.82		1,089

Notes:

(1)	Excludes (i) 185,203 square feet of space across the Company’s portfolio attributable to building management use and tenant amenities and (ii) 69,789 square feet of space attributable to the Company’s observatory.

(2)	Based on leases signed and commenced as of June 30, 2015.

(3)	Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.

(4)	Represents annualized rent under leases commenced as of June 30, 2015 divided by occupied square feet.

(5)	Represents the number of leases at each property or on a portfolio basis. If a tenant has more than one lease, whether or not at the same property, but with different expirations, the number of leases is calculated equal to the number of leases with different expirations.

(6)	Includes 86,902 rentable square feet of space leased by the Company’s broadcasting tenants.

(7)	Includes 5,300 rentable square feet of space leased by Host Services of New York, a licensee of the Company’s observatory.

(8)	Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 48 years (expiring December 31, 2063).

(9)	Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 62 years (expiring May 31, 2077).

(10)	Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 35 years (expiring July 31, 2050).

(11)	First Stamford Place consists of three buildings.

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Second Quarter 2015

Tenant Lease Expirations

(unaudited)


*Total Lease Expirations*	Number of Leases Expiring ⁽¹⁾		Rentable Square Feet Expiring ⁽²⁾		Percent of Portfolio Rentable Square Feet Expiring			Annualized Rent ⁽³⁾		Percent of Portfolio Annualized Rent ⁽⁴⁾			Annualized Rent Per Rentable Square Foot
Available		—		1,005,690		10.0	%	$	—		0.0	%	$	—
Signed leases not commenced		28		200,795		2.0	%		—		0.0	%		—
2015		161		553,456		5.5	%		24,962,984		5.7	%		45.10
2016		149		710,046		7.1	%		33,290,053		7.6	%		46.88
2017		171		764,925		7.6	%		37,537,099		8.5	%		49.07
2018		161		836,581		8.3	%		40,225,851		9.1	%		48.08
2019		108		679,655		6.8	%		31,603,331		7.2	%		46.50
2020		113		856,857		8.5	%		47,748,082		10.8	%		55.72
2021		55		532,521		5.3	%		27,748,992		6.3	%		52.11
2022		44		448,708		4.5	%		24,293,245		5.5	%		54.14
2023		36		544,752		5.4	%		28,504,362		6.5	%		52.33
2024		30		537,991		5.4	%		28,270,389		6.4	%		52.55
2025		23		210,524		2.1	%		11,956,366		2.7	%		56.79
Thereafter		38		2,159,524		21.5	%		104,099,355		23.6	%		48.20

Total		1,117		10,042,025		100.0	%	$	440,240,109		100.0	%	$	49.82

Notes:

(1)	If a lease has two different expiration dates, it is considered to be two leases (for the purpose of lease count and square footage).

(2)	Excludes (i) 185,203 rentable square feet of space across the Company portfolio attributable to building management use and tenant amenities and (ii) 69,789 square feet of space attributable to the Company’s observatory.

(3)	Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.

(4)	Represents the percentage of annualized rent of the Company’s office and retail portfolio in the aggregate.

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Second Quarter 2015

Tenant Lease Expirations

(unaudited)


*Manhattan Office Properties ⁽¹⁾*	Number of Leases Expiring ⁽²⁾		Rentable Square Feet Expiring ⁽³⁾		Percent of Portfolio Rentable Square Feet Expiring			Annualized Rent ⁽⁴⁾		Percent of Portfolio Annualized Rent ⁽⁵⁾			Annualized Rent Per Rentable Square Foot
Available		—		865,604		11.6	%	$	—		0.0	%	$	—
Signed leases not commenced		14		163,324		2.2	%		—		0.0	%		—
2015		144		503,678		6.8	%		22,447,914		7.4	%		44.57
2016		119		456,447		6.1	%		21,020,406		6.9	%		46.05
2017		141		552,354		7.4	%		26,393,758		8.7	%		47.78
2018		119		543,179		7.3	%		27,637,672		9.1	%		50.88
2019		80		399,247		5.4	%		18,594,575		6.1	%		46.57
2020		76		569,458		7.6	%		28,045,772		9.3	%		49.25
2021		35		366,791		4.9	%		17,020,131		5.6	%		46.40
2022		28		197,614		2.6	%		10,270,544		3.4	%		51.97
2023		23		377,873		5.1	%		17,893,526		5.9	%		47.35
2024		13		323,938		4.3	%		14,906,010		4.9	%		46.02
2025		13		112,517		1.5	%		6,290,710		2.1	%		55.91
Thereafter		27		2,028,322		27.2	%		92,051,427		30.4	%		45.38

Total Manhattan office properties		832		7,460,346		100.0	%		302,572,445		100.0	%		47.03


*Greater New York Metropolitan Area Office Properties*
Available		—		97,758		5.2	%		—		0.0	%		—
Signed leases not commenced		8		24,732		1.2	%		—		0.0	%		—
2015		11		45,760		2.5	%		1,930,695		2.8	%		42.19
2016		14		59,007		3.2	%		2,143,945		3.1	%		36.33
2017		24		166,122		8.9	%		6,675,186		9.6	%		40.18
2018		36		272,773		14.6	%		10,241,853		14.8	%		37.55
2019		22		253,464		13.6	%		9,873,703		14.2	%		38.96
2020		26		224,793		12.1	%		9,272,859		13.4	%		41.25
2021		13		134,223		7.2	%		5,841,631		8.4	%		43.52
2022		8		188,707		10.1	%		7,171,292		10.3	%		38.00
2023		6		118,242		6.3	%		5,244,052		7.6	%		44.35
2024		3		181,475		9.7	%		7,571,319		10.9	%		41.72
2025		8		78,377		4.2	%		2,776,632		4.0	%		35.43
Thereafter		3		16,697		1.0	%		687,578		1.0	%		41.18

Total greater New York metropolitan area office properties		182		1,862,130		100.0	%		69,430,745		100.0	%		39.91


*Retail Properties*
Available		—		42,328		5.9	%		—		0.0	%		—
Signed leases not commenced		6		12,739		1.8	%		—		0.0	%		—
2015		6		4,018		0.6	%		584,375		0.9	%		145.44
2016		16		194,592		27.0	%		10,125,702		14.8	%		52.04
2017		6		46,449		6.5	%		4,468,155		6.5	%		96.19
2018		6		20,629		2.9	%		2,346,326		3.4	%		113.74
2019		6		26,944		3.7	%		3,135,053		4.6	%		116.35
2020		11		62,606		8.7	%		10,429,451		15.3	%		166.59
2021		7		31,507		4.4	%		4,887,230		7.2	%		155.12
2022		8		62,387		8.7	%		6,851,409		10.0	%		109.82
2023		7		48,637		6.8	%		5,366,784		7.9	%		110.34
2024		14		32,578		4.5	%		5,793,060		8.5	%		177.82
2025		2		19,630		2.7	%		2,889,024		4.2	%		147.17
Thereafter		8		114,505		15.9	%		11,360,350		16.6	%		99.21

Total retail properties		103		719,549		100.0	%		68,236,919		100.0	%		102.69


Total portfolio lease expirations		1,117		10,042,025		100.0	%	$	440,240,109		100.0	%	$	49.82

Notes:

(1)	Excludes (i) retail space in the Company’s Manhattan office properties and (ii) the Empire State Building broadcasting licenses and observatory operations.

(2)	If a lease has two different expiration dates, it is considered to be two leases (for the purpose of lease count and square footage).

(3)	Excludes (i) 185,203 rentable square feet of space across the Company portfolio attributable to building management use and tenant amenities and (ii) 69,789 square feet of space attributable to the Company’s observatory.

(4)	Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.

(5)	Represents the percentage of annualized rent of the Company’s office and retail portfolio in the aggregate.

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Second Quarter 2015

Tenant Lease Expirations

(unaudited)


*Empire State Building Office ⁽¹⁾*	Number of Leases Expiring ⁽²⁾		Rentable Square Feet Expiring ⁽³⁾		Percent of Portfolio Rentable Square Feet Expiring			Annualized Rent ⁽⁴⁾		Percent of Portfolio Annualized Rent ⁽⁵⁾			Annualized Rent Per Rentable Square Foot
Available		—		280,690		10.5	%	$	—		0.0	%	$	—
Signed leases not commenced		4		128,734		4.8	%		—		0.0	%		—
2015		35		185,173		7.0	%		8,130,447		7.5	%		43.91
2016		14		56,747		2.1	%		2,554,742		2.4	%		45.02
2017		26		94,385		3.5	%		5,247,713		4.8	%		55.60
2018		24		90,601		3.4	%		4,696,182		4.3	%		51.83
2019		15		58,292		2.2	%		2,732,007		2.5	%		46.87
2020		34		282,140		10.6	%		14,878,426		13.7	%		52.73
2021		11		83,520		3.1	%		3,989,610		3.7	%		47.77
2022		12		46,381		1.7	%		2,529,495		2.3	%		54.54
2023		6		34,549		1.3	%		1,792,618		1.7	%		51.89
2024		7		140,386		5.3	%		6,849,630		6.3	%		48.79
2025		3		24,062		0.9	%		1,279,049		1.2	%		53.16
Thereafter		8		1,157,747		43.5	%		53,769,254		49.6	%		46.44

Total Empire State Building office		199		2,663,407		100.0	%	$	108,449,173		100.0	%	$	48.07

Notes:

(1)	Excludes retail space, broadcasting licenses and observatory operations

(2)	If a lease has two different expiration dates, it is considered to be two leases (for the purpose of lease count and square footage).

(3)	Excludes 57,226 rentable square feet of space attributable to building management use.

(4)	Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.

(5)	Represents the percentage of annualized rent of the Company’s office and retail portfolio in the aggregate.

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Second Quarter 2015

20 Largest Tenants and Portfolio Tenant Diversification by Industry

(unaudited)


20 Largest Tenants	Number of Leases		Number of Properties		Lease Expiration ⁽¹⁾	Weighted Average Remaining Lease Term⁽²⁾		Total Occupied Square Feet ⁽³⁾		Percent of Portfolio Rentable Square Feet ⁽⁴⁾			Annualized Rent ⁽⁵⁾		Percent of Portfolio Annualized Rent ⁽⁶⁾

1. Global Brands Group		3		2	Oct. 2021-Oct. 2028		13.3 years		698,488		7.0	%	$	29,124,620		6.6	%
2. Coty		1		1	Jan. 2030		14.6 years		311,242		3.1	%		15,279,653		3.5	%
3. PVH Corp.		1		1	Oct. 2028		13.3 years		211,311		2.1	%		9,021,270		2.0	%
4. Thomson Reuters		4		2	Apr. 2018-Apr. 2020		4.8 years		147,208		1.5	%		7,675,992		1.7	%
5. LinkedIn		1		1	Feb. 2026		10.7 years		152,411		1.5	%		7,332,856		1.7	%
6. Federal Deposit Insurance Corporation		1		1	Feb. 2020		4.7 years		121,879		1.2	%		6,680,153		1.5	%
7. Li & Fung		3		1	Oct. 2021-Oct. 2027		12.3 years		149,436		1.4	%		6,478,121		1.5	%
8. Urban Outfitters		1		1	Sept. 2029		14.3 years		56,730		0.6	%		6,200,000		1.4	%
9. Legg Mason		1		1	Sept. 2024		9.3 years		138,868		1.4	%		6,129,370		1.4	%
10. Duane Reade		3		3	Feb. 2021-Sept. 2027		12.2 years		47,541		0.5	%		6,080,640		1.4	%
11. Bank of America		3		3	Apr. 2016-Feb. 2018		2.7 years		29,671		0.3	%		5,449,463		1.2	%
12. Footlocker		2		1	Apr. 2016		0.8 years		170,187		1.7	%		5,421,107		1.2	%
13. Host Services of New York		1		1	May 2020		4.9 years		5,300		0.1	%		4,950,433		1.1	%
14. Aeropostale		2		1	Nov. 2015-Nov. 2016		1.4 years		88,760		0.9	%		4,793,074		1.1	%
15. Kohl’s		1		1	May 2029		13.9 years		111,834		1.1	%		4,461,846		1.0	%
16. On Deck Capital		1		1	Jan. 2025		9.6 years		87,941		0.9	%		4,390,976		1.0	%
17. Odyssey Reinsurance		1		1	Sept. 2022		7.3 years		101,619		1.0	%		3,843,803		0.9	%
18. The Interpublic Group of Companies		1		1	Aug. 2024		9.4 years		86,561		0.9	%		3,829,133		0.9	%
19. Shutterstock		1		1	Sept. 2024		9.3 years		82,331		0.8	%		3,658,715		0.8	%
20. Reed Elsevier		1		1	May 2022		6.9 years		102,376		1.0	%		3,449,420		0.8	%

Total		33							2,901,694		29.0	%	$	144,250,645		32.7	%

Notes:

(1)	Expiration dates are per lease and do not assume exercise of renewal or extension options. None of these leases contain early termination options. For tenants with more than two leases, the lease expiration is shown as a range.

(2)	Represents the weighted average lease term, based on annualized rent.

(3)	Based on leases signed and commenced as of June 30, 2015.

(4)	Represents the percentage of rentable square feet of the Company’s office and retail portfolios in the aggregate.

(5)	Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.

(6)	Represents the percentage of annualized rent of the Company’s office and retail portfolios in the aggregate.

Portfolio Tenant Diversification by Industry (based on annualized rent)

LOGO

Page 14

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Second Quarter 2015

Capital Expenditures and Redevelopment Program

(unaudited)


	Three Months Ended
Capital expenditures	June 30, 2015		March 31, 2015		December 31, 2014		September 30, 2014		June 30, 2014
Tenant improvements - first generation	$	13,536	$	27,662	$	29,620	$	28,462	$	16,827
Tenant improvements - second generation		2,015		1,681		1,020		3,090		3,250
Leasing commissions - first generation		4,613		15,813		2,481		2,945		1,207
Leasing commissions - second generation		513		372		386		1,401		1,229
Building improvements - first generation		13,833		8,420		13,678		24,328		11,721
Building improvements - second generation		928		333		2,391		893		344

Total	$	35,438	$	54,281	$	49,576	$	61,119	$	34,578

Building redevelopment program components

•

Upgrading common areas: lobbies, elevators, corridors and bathrooms

•

Installing energy efficient building systems

•

Improving roofs, windows and facades

•

Optimizing base floors for retail

Building redevelopment program costs ^(1) (2)

•

Spent to date: $616 million

•

To be invested: $55 to $85 million between 2015 and 2016

Tenant space redevelopment by square feet ^(1) (2)

•

Future redevelopment (Empire State Building) - 560,000 square feet

•

Future redevelopment (other Manhattan properties) - 1,530,000 square feet

•

Redevelopment completed - 5,900,000 square feet

Inventory of vacant space⁽²⁾

•

Developed - 560,000 square feet, 64%

•

Undeveloped - 310,000 square feet, 36%

Inventory of undeveloped space⁽²⁾

•

Vacant - 310,000 square feet, 15%

•

Expires in 2015 through 2016 - 780,000 square feet, 37%

•

Expires in 2017 and thereafter -1,000,000 square feet, 48%

Notes:

⁽¹⁾	These estimates are based on the Company’s current budgets (which do not include base building work in tenant spaces, tenant improvements and leasing commission costs) and are subject to change.

⁽²⁾

Redevelopment program is for the Manhattan office assets only. Square footage based on market measurement. Developed space includes space that has been demolished and completed asbestos abatement and available for lease up or ready to be prebuilt. Permanent building use spaces, amenity spaces and broadcasting spaces are excluded.

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Second Quarter 2015

Observatory Summary

(unaudited and in thousands)


	Three Months Ended
Observatory NOI	June 30, 2015		March 31, 2015			December 31, 2014		September 30, 2014		June 30, 2014
Observatory revenue	$	30,600	$	18,223		$	28,167	$	35,684	$	30,389
Observatory expenses		7,420		6,977			7,831		7,109		7,120

NOI		23,180		11,246			20,336		28,575		23,269
Intercompany rent expense ⁽¹⁾		18,910		11,664			17,874		19,936		16,283

NOI after intercompany rent	$	4,270	$	(418	)	$	2,462	$	8,639	$	6,986

Note:

⁽¹⁾	The observatory pays a market-based rent payment comprised of fixed and percentage rent to the Empire State Building. Intercompany rent is eliminated upon consolidation.

Annual Observatory Revenues 2010 to 2014

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Second Quarter 2015

Condensed Consolidated Balance Sheets

(unaudited and dollars in thousands)


	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014
Assets
Commercial real estate properties, at cost:
Land	$	201,196		$	201,196		$	201,196		$	201,172		$	187,566
Development costs		7,388			7,332			6,986			6,971			6,861
Building and improvements		1,996,318			1,967,260			1,931,681			1,899,467			1,508,309

		2,204,902			2,175,788			2,139,863			2,107,610			1,702,736
Less: accumulated depreciation		(423,279	)		(399,851	)		(377,552	)		(354,730	)		(332,766	)

Commercial real estate properties, net		1,781,623			1,775,937			1,762,311			1,752,880			1,369,970
Cash and cash equivalents		34,221			36,463			45,732			52,918			41,791
Restricted cash		69,709			61,007			60,273			63,821			55,482
Tenant and other receivables, net		16,431			12,759			23,745			29,837			26,185
Deferred rent receivables, net		111,897			106,226			102,104			94,837			85,948
Prepaid expenses and other assets		47,857			30,715			48,504			31,091			39,658
Deferred costs, net		352,940			368,637			370,460			392,397			304,652
Acquired below-market ground leases, net		387,807			389,765			391,887			392,756			61,460
Goodwill		491,479			491,479			491,479			491,479			491,479

Total assets	$	3,293,964		$	3,272,988		$	3,296,495		$	3,302,016		$	2,476,625


Liabilities and Equity
Mortgage notes payable	$	759,405		$	855,032		$	903,985		$	1,005,569		$	873,863
Senior unsecured notes		589,002			588,335			237,667			236,999			—
Unsecured revolving credit facility		285,000			165,000			—			—			—
Term loan and credit facility		—			—			470,000			355,600			355,000
Accounts payable and accrued expenses		101,674			101,797			96,563			97,413			74,807
Acquired below-market leases, net		121,286			129,736			138,859			148,493			120,219
Deferred revenue and other liabilities		18,713			20,994			27,876			24,728			18,722
Tenants’ security deposits		46,338			44,388			40,448			40,111			34,170

Total liabilities		1,921,418			1,905,282			1,915,398			1,908,913			1,476,781
Total equity		1,372,546			1,367,706			1,381,097			1,393,103			999,844

Total liabilities and equity	$	3,293,964		$	3,272,988		$	3,296,495		$	3,302,016		$	2,476,625

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Second Quarter 2015

Condensed Consolidated Statements of Income

(unaudited and in thousands, except per share amounts)


	Three Months Ended
	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014
Revenues
Rental revenue	$	112,866		$	110,058		$	112,259		$	106,152		$	92,210
Tenant expense reimbursement		18,582			18,200			18,160			20,034			14,304
Observatory revenue		30,600			18,223			28,167			35,684			30,389
Construction revenue		374			1,607			4,918			5,804			12,963
Third party management and other fees		594			446			451			561			753
Other revenue and fees		1,757			3,348			6,456			1,206			4,549

Total revenues		164,773			151,882			170,411			169,441			155,168

Operating expenses
Property operating expenses		37,935			42,452			41,748			38,291			35,149
Ground rent expenses		2,332			2,331			2,375			2,066			447
Marketing, general, and administrative expenses		9,113			9,100			9,251			10,071			9,560
Observatory expenses		7,420			6,977			7,831			7,109			7,120
Construction expenses		353			2,869			5,423			6,095			12,795
Real estate taxes		22,952			22,978			23,702			21,870			18,186
Acquisition expenses		—			—			—			2,647			735
Depreciation and amortization		39,629			41,418			48,799			37,880			28,637

Total operating expenses		119,734			128,125			139,129			126,029			112,629

Total operating income		45,039			23,757			31,282			43,412			42,539
Other income (expense)
Interest expense		(17,571	)		(16,047	)		(19,816	)		(17,674	)		(14,629	)

Income before income taxes		27,468			7,710			11,466			25,738			27,910
Income tax (expense) benefit		(883	)		178			(502	)		(3,004	)		(2,629	)

Net income		26,585			7,888			10,964			22,734			25,281
Perpetual preferred unit distributions		(234	)		(234	)		(235	)		(241	)		—
Net income attributable to non-controlling interests		(15,231	)		(4,516	)		(6,587	)		(14,171	)		(15,447	)

Net income attributable to Empire State Realty Trust, Inc.	$	11,120		$	3,138		$	4,142		$	8,322		$	9,834


Weighted average common shares outstanding
Basic		112,852			109,400			103,022			97,729			95,466

Diluted		265,867			265,810			265,779			263,041			244,436


Net income per share attributable to Empire State Realty Trust, Inc.
Basic and Diluted	$	0.10		$	0.03		$	0.04		$	0.09		$	0.10


Dividends per share	$	0.085		$	0.085		$	0.085		$	0.085		$	0.085

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Second Quarter 2015

Funds from Operations (“FFO”), Modified Funds From Operations (“Modified FFO”), Core Funds from

Operations (“Core FFO”), Core Funds Available for Distribution (“Core FAD”) and EBITDA

(unaudited and in thousands, except per share amounts)


	Three Months Ended
	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014
Reconciliation of Net Income to FFO, Modified FFO and Core FFO
Net Income	$	26,585		$	7,888		$	10,964		$	22,734		$	25,281
Preferred unit distributions		(234	)		(234	)		(235	)		(241	)		—
Real estate depreciation and amortization		39,542			41,233			48,711			37,797			28,556

FFO		65,893			48,887			59,440			60,290			53,837
Amortization of below-market ground lease		1,958			1,958			2,001			1,750			426

Modified FFO		67,851			50,845			61,441			62,040			54,263
Deferred financing costs write-off and prepayment penalty		404			1,345			3,771			—			—
Construction severance expenses, net of taxes		—			480			—			—			—
Gain on settlement of lawsuit related to the Observatory, net of income taxes		—			—			—			—			(540	)
Private perpetual preferred exchange offering expenses		—			—			—			407			950
Acquisition expenses		—			—			—			2,647			735

Core FFO	$	68,255		$	52,670		$	65,212		$	65,094		$	55,408


Total weighted average shares and Operating Partnership Units
Basic and Diluted		265,867			265,810			265,779			263,041			244,436


FFO per share
Basic and Diluted	$	0.25		$	0.18		$	0.22		$	0.23		$	0.22


Modified FFO per share
Basic and Diluted	$	0.26		$	0.19		$	0.23		$	0.24		$	0.22


Core FFO per share
Basic and Diluted	$	0.26		$	0.20		$	0.25		$	0.25		$	0.23


Reconciliation of Core FFO to Core FAD
Core FFO	$	68,255		$	52,670		$	65,212		$	65,094		$	55,408
Add:
Amortization of deferred financing costs		1,054			1,076			1,541			2,653			1,375
Non-real estate depreciation and amortization		87			185			88			83			80
Amortization of non-cash compensation expense		1,230			1,694			813			939			944
Amortization of debt discount		668			668			668			356			—
Deduct:
Straight-line rental revenues		(5,622	)		(4,102	)		(7,613	)		(8,543	)		(10,979	)
Amortization of debt premiums		(1,737	)		(1,869	)		(1,753	)		(1,622	)		(738	)
Above/below-market rent revenue		(4,576	)		(5,291	)		(5,613	)		(4,568	)		(2,028	)
FF&E purchases		—			—			—			—			(3	)
Tenant improvements - second generation		(2,015	)		(1,681	)		(1,020	)		(3,090	)		(3,250	)
Building improvements - second generation		(928	)		(333	)		(2,391	)		(893	)		(344	)
Leasing commissions - second generation		(513	)		(372	)		(386	)		(1,401	)		(1,229	)

Core FAD	$	55,903		$	42,645		$	49,546		$	49,008		$	39,236


Core FAD per share
Basic and Diluted	$	0.21		$	0.16		$	0.19		$	0.19		$	0.16


Reconciliation of Net Income to EBITDA
Net income	$	26,585		$	7,888		$	10,964		$	22,734		$	25,281
Perpetual preferred unit distributions		(234	)		(234	)		(235	)		(241	)		—
Interest expense		17,571			16,047			19,816			17,674			14,629
Income tax expense (benefit)		883			(178	)		502			3,004			2,629
Depreciation and amortization		39,629			41,418			48,799			37,880			28,637
Acquisition expenses		—			—			—			2,647			735

EBITDA	$	84,434		$	64,941		$	79,846		$	83,698		$	71,911

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Second Quarter 2015

Net Operating Income (“NOI”)

(unaudited and dollars in thousands)


	Three Months Ended
	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014
Reconciliation of Net Income to NOI, Cash NOI and Same Store Cash NOI
Net income	$	26,585		$	7,888		$	10,964		$	22,734		$	25,281
Add:
Marketing, general and administrative expenses		9,113			9,100			9,251			10,071			9,560
Depreciation and amortization		39,629			41,418			48,799			37,880			28,637
Interest expense		17,571			16,047			19,816			17,674			14,629
Construction expenses		353			2,869			5,423			6,095			12,795
Acquisition expenses		—			—			—			2,647			735
Income tax expense (benefit)		883			(178	)		502			3,004			2,629
Less:
Construction revenue		(374	)		(1,607	)		(4,918	)		(5,804	)		(12,963	)
Third-party management and other fees		(594	)		(446	)		(451	)		(561	)		(753	)
Gain on settlement of lawsuit related to the Observatory		—			—			—			—			(975	)

Net operating income		93,166			75,091			89,386			93,740			79,575

Straight-line rent		(5,622	)		(4,102	)		(7,613	)		(8,543	)		(10,979	)
Above/below-market lease amortization		(4,576	)		(5,291	)		(5,613	)		(4,568	)		(2,028	)
Below-market ground lease amortization		1,958			1,958			2,001			1,750			426

Cash net operating income		84,926			67,656			78,161			82,379			66,994

Less: 112 West 34th St. and 1400 Broadway cash NOI		(9,594	)		(8,479	)		(7,553	)		(7,381	)		—
Less: Observatory NOI		(23,180	)		(11,246	)		(20,336	)		(28,575	)		(23,269	)

Total portfolio (excluding observatory) same-store cash net operating income	$	52,152		$	47,931		$	50,272		$	46,423		$	43,725

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Second Quarter 2015

Debt Summary

(unaudited and dollars in thousands)


	June 30, 2015							March 31, 2015
			Weighted Average							Weighted Average
Debt Summary	Balance		Interest Rate			Maturity (Years)		Balance		Interest Rate			Maturity (Years)
Fixed rate mortgage debt	$	741,089		5.53	%		3.2	$	743,979		5.53	%		3.5
Senior unsecured notes		600,000		3.47	%		8.9		600,000		3.47	%		9.1

Total fixed rate debt		1,341,089		4.61	%		5.7		1,343,979		4.61	%		6.0

Variable rate mortgage debt		—		—			—		91,000		1.53	%		2.6
Unsecured revolving credit facility		285,000		1.34	%		3.6		165,000		1.33	%		3.8

Total variable rate debt		285,000		1.34	%		3.6		256,000		1.40	%		3.4

Total debt		1,626,089		4.04	%		5.4		1,599,979		4.10	%		5.6

Premium/discount		7,318							8,388

Total	$	1,633,407						$	1,608,367


Available Capacity	Facility		Outstanding at June 30, 2015		Letters of Credit		Available Capacity at June 30, 2015
Unsecured revolving credit facility ⁽¹⁾	$	800,000	$	285,000	$	—	$	515,000


Covenant Summary	Required			Current Quarter			In Compliance
Maximum Total Leverage⁽²⁾		< 60	%		29.7	%	Yes
Maximum Secured Debt		< 40	%		13.8	%	Yes
Minimum Fixed Charge Coverage		> 1.50x			3.9x		Yes
Minimum Unencumbered Interest Coverage		> 1.75x			7.1x		Yes
Maximum Unsecured Leverage		< 60	%		25.0	%	Yes
Maximum Secured Recourse Indebtedness		< 10	%		0	%	Yes
Minimum Tangible Net Worth	$	745,356		$	941,927		Yes

Notes:

⁽¹⁾	The unsecured revolving credit facility has an accordion feature allowing for an increase in maximum aggregate principal balance to $1.25 billion under certain circumstances. This facility matures in January 2019 with two additional six-month extension options.

⁽²⁾	Represents the ratio of total indebtedness to total asset value as defined and determined in accordance with the credit facility agreement.

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Second Quarter 2015

Debt Detail

(unaudited and dollars in thousands)


	Stated Interest Rate (%)			Current Interest Rate (%)			Principal Balance		Maturity Date		Amortization
Fixed rate mortgage debt:
10 Union Square		6.00	%		6.00	%	$	20,466		5/1/2017		30 years
10 Bank Street		5.72	%		5.72	%		32,535		6/1/2017		30 years
1542 Third Avenue		5.90	%		5.90	%		18,427		6/1/2017		30 years
First Stamford Place		5.65	%		5.65	%		240,536		7/5/2017		30 years
383 Main Avenue, Norwalk, CT		5.59	%		5.59	%		29,565		7/5/2017		30 years
1010 Third Avenue and 77 West 55th Street		5.69	%		5.69	%		27,333		7/5/2017		30 years
1333 Broadway		6.32	%		6.32	%		69,118		1/5/2018		30 years
1400 Broadway (first lien mortgage loan)		6.12	%		6.12	%		69,218		2/5/2018		30 years
1400 Broadway (second lien mortgage loan)		3.35	%		3.35	%		9,702		2/5/2018		30 years
112 West 34th Street (first lien mortgage loan)		6.01	%		6.01	%		76,953		4/5/2018		30 years
112 West 34th Street (second lien mortgage loan)		6.56	%		6.56	%		9,702		4/5/2018		30 years
1350 Broadway		5.87	%		5.87	%		38,628		4/5/2018		30 years
Metro Center		3.59	%		3.59	%		98,906		11/5/2024		30 years

Total mortgage debt								741,089

Unsecured Revolving Credit Facility		LIBOR plus 1.15	%		1.34	%		285,000		1/23/2019		Interest only
Exchangeable senior unsecured notes		2.63	%		2.63	%		250,000		8/15/2019		Interest only
Senior unsecured notes (Series A)		3.93	%		3.93	%		100,000		3/27/2025		Interest only
Senior unsecured notes (Series B)		4.09	%		4.09	%		125,000		3/27/2027		Interest only
Senior unsecured notes (Series C)		4.18	%		4.18	%		125,000		3/27/2030		Interest only

Total / weighted average debt					4.04	%		1,626,089

Premium/discounts								7,318

Total							$	1,633,407

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Second Quarter 2015

Debt Maturities and Ground Lease Commitments

(unaudited and dollars in thousands)


Year	Amortization		Maturities ⁽¹⁾		Total		Percentage of Total Debt			Weighted Average Interest Rate of Maturing Debt

2015	$	5,943	$	—	$	5,943		0.4	%		n/a
2016		12,387		—		12,387		0.8	%		n/a
2017		10,070		355,761		365,831		22.5	%		5.69	%
2018		2,880		262,210		265,090		16.3	%		6.02	%
2019		2,188		535,000		537,188		33.0	%		1.94	%
Thereafter		11,975		427,675		439,650		27.0	%		3.97	%

Total debt	$	45,443	$	1,580,646		1,626,089		100.0	%		4.04	%

Premium/discount						7,318

Total					$	1,633,407

Note:

(1)	Assumes no extension options are exercised.

Debt Maturity Profile

LOGO

Ground Lease Commitments


Year	1350 Broadway		1400 Broadway		112 West 34th Street		Total
2015	$	54	$	337	$	367	$	758
2016		108		675		735		1,518
2017		108		675		735		1,518
2018		108		675		735		1,518
2019		108		675		735		1,518
Thereafter		2,547		13,500		42,201		58,248

	$	3,033	$	16,537	$	45,508	$	65,078

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Second Quarter 2015

Supplemental Definitions

Funds From Operations (“FFO”)

We compute 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 of operations, the utility of FFO as a measure of its 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.

Modified Funds From Operations (“Modified FFO”)

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 July 2014 acquisition of two properties 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.

Core Funds From Operations (“Core FFO”)

Core FFO adds back to Modified FFO the following items associated with the Company’s initial public offering, or IPO, and formation transactions: gain on consolidation of non-controlling entities, acquisition expenses, severance expenses and retirement equity compensation expenses. It also adds back private perpetual preferred exchange offering expenses, acquisition expenses, and gain on settlement of lawsuit related to the Observatory, net of income taxes, deferred financing cost write-off, prepayment penalties and construction severance expenses. The Company presents Core FFO because it considers it an important supplemental measure of its operating performance in that it excludes items associated with its IPO and formation transactions and other non-recurring items. There can be no assurance that Core FFO presented by the Company 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. In future periods, we may also exclude other items from Core FFO that we believe may help investors compare our results.

Core Funds Available for Distribution (“Core FAD”)

In addition to Core FFO, we present Core FAD by (i) adding to Core FFO non-real estate depreciation and amortization, the amortization of deferred financing costs, amortization of debt discounts and non-cash compensation expenses and (ii) deducting straight line rent, recurring second generation leasing commissions, tenant improvements, prebuilts, capital expenditures, furniture, fixtures & equipment, amortization of debt premiums and above/below market rent revenue. Core FAD is presented solely as a supplemental disclosure that we believe provides useful information regarding our ability to fund our dividends. Core FAD 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 FAD is not indicative of cash available to fund ongoing cash needs., including the ability to make cash distributions. There can be no assurance that Core FAD presented by us is comparable to similarly titled measures of other REITs.

Net Operating Income (NOI)

NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by; (i) the cost of funds of the property owner, (i) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (iii) acquisition expenses, or (iv) general and administrative expenses and other gains and losses that are specific to the property owner. The cost of funds is eliminated from net operating income because it is specific to the particular financing capabilities and constraints of the owner. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our office or retail properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed, purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue, generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness. NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income computed in accordance with GAAP. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not-be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

EBITDA

We compute EBITDA as net income plus perpetual preferred unit distributions, interest expense, income taxes, depreciation and amortization and acquisition expenses. We present EBITDA because we believe that EBITDA, along with cash flow from operating activities, investing activities and financing activities, provides investors with an additional indicator of its ability to incur and service debt. EBITDA should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance, as an alternative to net cash flows from operating activities (determined in accordance with GAAP), or as a measure of its liquidity.

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Empire State Realty Trust, Inc. - FORM 8-K - EX-99.2 - July 29, 2015

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Empire State Realty Trust, Inc. Reports