Empire State Realty Trust Announces New $715 Million Credit Facility

Rhea-AI Summary

Empire State Realty Trust, Inc. (NYSE: ESRT) announced a new $715 million credit facility for its operating partnership, enhancing liquidity and balance sheet flexibility. The facility includes a $620 million revolving credit and a $95 million term loan, with adjustable interest rates and sustainability-linked pricing. The new facility matures in 2029, replacing the previous ones set to mature in 2025.

Financial Analyst

The establishment of a new credit facility by Empire State Realty Trust, Inc. signals a strategic financial maneuver aimed at strengthening the company's liquidity and extending its debt maturity profile. The replacement of the existing facilities due in March 2025 with those maturing in 2029 provides a four-year extension, which can be perceived as a proactive approach to debt management. This extension affords the company more time to allocate resources effectively and potentially invest in opportunities without the immediate pressure of refinancing.

The initial interest rates pegged to the adjusted SOFR plus a margin reflect current market conditions and the company's creditworthiness. The sustainability-linked pricing mechanism is particularly noteworthy, as it aligns borrowing costs with environmental, social and governance (ESG) performance. This feature could incentivize the company to meet certain sustainability benchmarks, potentially leading to reduced borrowing costs and aligning with a growing trend of responsible corporate behavior that is being increasingly valued by investors and consumers alike.

Market Research Analyst

Empire State Realty Trust's new credit arrangement could signal confidence to the market regarding the company's financial stability and long-term strategy. The involvement of major financial institutions as arrangers and agents in this deal underscores the trust and credibility Empire State Realty Trust holds within the financial community. As the administrative and sustainability structuring agents, Bank of America's and BofA Securities' roles, respectively, suggest a strong backing and a focus on sustainability, which may resonate positively with stakeholders who prioritize ESG factors in their investment decisions.

Moreover, the extension of the credit facility to 2029 with optional extension periods provides a buffer against potential market volatility and interest rate fluctuations. This could be particularly advantageous given the current economic climate where interest rates are expected to rise. The credit facility's flexibility and the sustainability-linked pricing mechanism could be seen as forward-thinking, potentially attracting investors who are looking for companies with sound financial planning and a commitment to sustainability.

Environmental, Social and Governance (ESG) Expert

The inclusion of a sustainability-linked pricing mechanism within the new credit facility is a testament to Empire State Realty Trust's commitment to ESG principles. This mechanism typically involves setting specific sustainability targets, such as reducing greenhouse gas emissions, improving energy efficiency, or enhancing social governance practices. If the company successfully meets these benchmarks, it could benefit from lower borrowing costs. This not only provides a financial incentive to improve ESG performance but also aligns the company's financial strategy with broader societal values.

Such sustainability-linked loans are becoming more common as they offer a tangible way to integrate ESG goals into corporate finance. For stakeholders, this could enhance the company's reputation and potentially lead to a more favorable risk assessment by investors sensitive to sustainability issues. It is an example of how financial instruments are evolving to support and reward responsible corporate behavior, which could have long-term positive impacts on the company's brand and stakeholder relationships.

NEW YORK--(BUSINESS WIRE)-- Empire State Realty Trust, Inc. (NYSE: ESRT) (the “Company”) today announced that Empire State Realty OP, L.P., its operating partnership, has entered into a new credit facility in the principal amount of $715 million, which consists of a $620 million revolving credit facility and a $95 million term loan facility.

The new revolving credit facility matures on March 8, 2029, inclusive of two six-month extension periods at the option of the Company, and replaces the existing revolving credit facility that was due to mature in March 2025. The term loan facility matures on March 8, 2029, inclusive of two twelve-month extension periods at the option of the Company, and replaces the existing term loan facility that matures in March 2025.

Initial interest rates on the new facility, which may change based on Company leverage levels, are adjusted SOFR plus 130 basis points for any drawn portion of the revolving credit facility and adjusted SOFR plus 150 basis points for the term loan facility. In addition, the facility has a sustainability-linked pricing mechanism that reduces the borrowing spread if certain benchmarks are achieved each year.

“We are pleased with the successful execution of our new credit facility that maintains our strong liquidity position and extends our balance sheet flexibility as we continue to focus on generating stakeholder value,” said Christina Chiu, Empire State Realty Trust’s President.

The new credit facility was arranged by BofA Securities, Inc. and Wells Fargo Securities, LLC as joint bookrunners, and Bank of America, N.A. is the administrative agent. JPMorgan Chase Bank, N.A. and U.S. Bank National Association are additionally joint lead arrangers. U.S. Bank National Association is the documentation agent. Bank of Montreal and Goldman Sachs Bank USA are senior managing agents. BofA Securities, Inc. is the sustainability structuring agent.

About Empire State Realty Trust

Empire State Realty Trust, Inc. (NYSE: ESRT) is a NYC-focused REIT that owns and operates a portfolio of modernized, amenitized, and well-located office, retail, and multifamily assets. The Company is the recognized leader in energy efficiency and indoor environmental quality. ESRT’s flagship Empire State Building – the “World’s Most Famous Building” – includes its Observatory, the #1 attraction in the U.S. in Tripadvisor’s Travelers’ Choice Awards: Best of the Best for two consecutive years. As of December 31, 2023, ESRT's portfolio is comprised of approximately 8.6 million rentable square feet of office space, 0.7 million rentable square feet of retail space and 727 residential units. More information about Empire State Realty Trust can be found at esrtreit.com and by following ESRT on Facebook, Instagram, TikTok, X and LinkedIn.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240311834390/en/

Investors

Empire State Realty Trust Investor Relations

(212) 850-2678

IR@esrtreit.com

Source: Empire State Realty Trust, Inc.

What is the principal amount of the new credit facility announced by Empire State Realty Trust, Inc. (ESRT)?

Empire State Realty Trust, Inc. (ESRT) announced a new credit facility of $715 million.

What are the components of the new credit facility introduced by Empire State Realty Trust (ESRT)?

The new credit facility includes a $620 million revolving credit facility and a $95 million term loan facility.

When does the new revolving credit facility under the announced credit facility mature for Empire State Realty Trust (ESRT)?

The new revolving credit facility matures on March 8, 2029, with two optional six-month extension periods.

Who are the joint bookrunners for the new credit facility arranged by Empire State Realty Trust (ESRT)?

BofA Securities, Inc. and Wells Fargo Securities, LLC are the joint bookrunners for the new credit facility.

What is the role of Bank of America, N.A. in the new credit facility announced by Empire State Realty Trust (ESRT)?

Bank of America, N.A. is the administrative agent for the new credit facility.