Empire State Realty OP, L.P. 10-K

ITEM 2. PROPERTIES Our Portfolio Summary As of December 31, 2020, our portfolio consisted of 14 office properties and six standalone retail properties totaling approximately 10.1 million rentable square feet and was approximately 85.9% occupied, yielding approximately $542.7 million of annualized rent. Giving effect to leases signed but not yet commenced, our portfolio was approximately 88.7% leased as of December 31, 2020. In addition, we owned entitled land that will support the development of an approximately 0.4 million rentable square foot office building and garage ("Metro Tower") at the Stamford Transportation Center in Stamford, Connecticut, adjacent to one of our office properties. The table below presents an overview of our portfolio as of December 31, 2020. Annualized Rentable Rent per Square Percent Annualized Occupied Number of Property Name Location or Sub-Market Feet (1) Occupied (2) Rent (3) Square Foot (4) Leases (5) Manhattan Office Properties - Office The Empire State Building (6) Penn Station -Times Sq. South 2,714,482 88.5 % $ 146,164,859 $ 60.81 156 One Grand Central Place Grand Central 1,246,992 84.1 % 63,066,902 60.13 166 1400 Broadway (7) Penn Station -Times Sq. South 917,716 86.7 % 44,774,783 56.28 23 111 West 33rd Street (8) Penn Station -Times Sq. South 641,034 97.5 % 38,724,599 61.99 23 250 West 57th Street Columbus Circle - West Side 474,120 80.2 % 23,984,301 63.08 35 501 Seventh Avenue Penn Station -Times Sq. South 461,380 80.2 % 18,623,265 50.36 24 1359 Broadway Penn Station -Times Sq. South 456,386 95.0 % 24,615,058 56.77 32 1350 Broadway (9) Penn Station -Times Sq. South 372,714 83.7 % 18,905,825 60.59 55 1333 Broadway Penn Station -Times Sq. South 295,530 81.9 % 13,651,149 56.40 10 Manhattan Office Properties - Office 7,580,354 87.2 % 392,510,741 59.38 524 Manhattan Office Properties - Retail The Empire State Building Penn Station -Times Sq. South 97,322 48.3 % (12) 5,269,902 112.03 10 One Grand Central Place Grand Central 68,733 100.0 % 8,852,409 128.79 14 1400 Broadway (7) Penn Station -Times Sq. South 20,176 77.2 % 1,684,407 108.18 7 112 West 34th Street (8) Penn Station -Times Sq. South 91,280 100.0 % 23,412,972 256.50 4 250 West 57th Street Columbus Circle - West Side 67,927 100.0 % 11,123,351 163.75 8 501 Seventh Avenue Penn Station -Times Sq. South 33,632 90.6 % 2,141,481 70.28 9 1359 Broadway Penn Station -Times Sq. South 27,506 100.0 % 2,070,046 75.26 6 1350 Broadway Penn Station -Times Sq. South 30,707 73.3 % 5,752,423 255.72 4 1333 Broadway Penn Station -Times Sq. South 67,001 100.0 % 9,637,653 143.84 4 Manhattan Office Properties - Retail 504,284 86.9 % 69,944,644 159.68 66 Sub-Total/Weighted Average Manhattan Office Properties - Office and Retail 8,084,638 87.2 % 462,455,385 65.61 590 29 Greater New York Metropolitan Area Office Properties First Stamford Place (10) Stamford, CT 776,397 81.4 % 29,189,351 44.68 44 Metro Center Stamford, CT 286,160 67.9 % 11,649,017 59.92 19 383 Main Street Norwalk, CT 260,401 56.1 % 4,349,131 29.76 22 500 Mamaroneck Avenue Harrison, NY 287,305 85.1 % 7,417,452 30.33 29 10 Bank Street White Plains, NY 234,941 93.3 % 8,038,498 36.67 33 Sub-Total/Weighted Average Greater New York Metropolitan Office Properties 1,845,204 79.0 % 60,643,449 41.60 147 Standalone Retail Properties 10 Union Square Union Square 57,984 94.7 % 6,671,112 121.51 11 1542 Third Avenue Upper East Side 56,250 100.0 % 4,191,658 74.52 4 1010 Third Avenue Upper East Side 44,662 100.0 % 3,634,510 81.38 2 77 West 55th Street Midtown 25,388 100.0 % 2,822,154 111.16 3 69-97 Main Street Westport, CT 16,874 82.9 % 1,520,235 108.63 4 103-107 Main Street Westport, CT 4,330 100.0 % 757,822 175.02 1 Sub-Total/Weighted Average Standalone Retail Properties 205,488 97.1 % 19,597,491 98.22 25 Portfolio Total 10,135,330 85.9 % $ 542,696,325 $ 62.34 762 Total/Weighted Average Office Properties 9,425,558 85.6 % $ 453,154,190 $ 56.17 671 Total/Weighted Average Retail Properties (11) 709,772 89.8 % 89,542,135 140.45 91 Portfolio Total 10,135,330 85.9 % $ 542,696,325 $ 62.34 762 (1) Excludes (i) 194,929 square feet of space across our portfolio attributable to building management use and tenant amenities and (ii) 79,613 square feet of space attributable to our observatory. (2) Based on leases signed and commenced as of December 31, 2020 and calculated as (i) rentable square feet less available square feet divided by (ii) rentable square feet. (3) Represents annualized base rent and current reimbursement for operating expenses and real estate taxes. (4) Represents annualized rent under leases commenced as of December 31, 2020 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 38,912 rentable square feet of space leased by our broadcasting tenants. (7) Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 43 years (expiring December 31, 2063). (8) Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 57 years (expiring May 31, 2077). (9) Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to us, of approximately 30 years (expiring July 31, 2050). (10) First Stamford Place consists of three buildings. (11) Includes 504,284 rentable square feet of retail space in our Manhattan office properties. (12) Reduction in square feet and occupancy due to the transfer of the observatory gift shop to observatory operations. 30 Tenant Diversification As of December 31, 2020, our office and retail portfolios were leased to a diverse tenant base consisting of approximately 762 leases. Our tenants represent a broad array of industries as follows: Diversification by Industry Percent (1) Arts and entertainment 3.0 % Broadcast 1.0 % Consumer goods 18.5 % Finance, insurance, real estate 17.3 % Government entity 2.0 % Healthcare 1.8 % Legal services 4.9 % Media and advertising 4.6 % Non-profit 4.4 % Professional services (not including legal services) 9.7 % Retail 16.5 % Technology 11.6 % Others 4.7 % Total 100.0 % (1) Based on annualized rent. The following table sets forth information regarding the 20 largest tenants in our portfolio based on annualized rent as of December 31, 2020. Weighted Percent of Average Total Portfolio Percent of Remaining Occupied Rentable Portfolio Lease Lease Square Square Annualized Annualized Tenant Property Expiration (1) Term (2) Feet (3) Feet (4) Rent (5) Rent (6) LinkedIn Empire State Building Dec. 2036 16.0 years 365,886 3.6 % $ 22,380,058 4.1 % Global Brands Group ESB, 1333 Broadway Oct. 2023 - Oct. 2028 6.4 years 353,325 3.5 % 19,277,806 3.6 % Li & Fung 1359 Broadway Jun. 2021-Oct. 2028 4.8 years 252,899 2.5 % 12,785,387 2.4 % PVH Corp. 501 Seventh Avenue Oct. 2028 7.8 years 237,281 2.3 % 11,890,257 2.2 % Centric Brands Inc. Empire State Building Oct. 2028 7.8 years 212,154 2.1 % 10,819,854 2.0 % Sephora 112 West 34th Street Jan. 2029 8.1 years 11,334 0.1 % 10,483,711 1.9 % Coty Inc. Empire State Building Jan. 2030 9.1 years 156,187 1.5 % 8,050,269 1.5 % Macy's 111 West 33rd Street May 2030 9.4 years 131,117 1.3 % 7,902,959 1.5 % Urban Outfitters 1333 Broadway Sept. 2029 8.8 years 56,730 0.6 % 7,634,773 1.4 % Signature Bank 1333 & 1400 Broadway Jul. 2030 - Apr. 2035 13.8 years 124,884 1.2 % 7,629,754 1.4 % Federal Deposit Insurance Corp. Empire State Building Dec. 2024 4.0 years 119,226 1.2 % 7,548,953 1.4 % The Interpublic Group of Co's, Inc. 111 West 33rd Street & 1400 B'way Jul. 2024 0 Feb. 2025 3.8 years 128,296 1.3 % 7,335,059 1.4 % Foot Locker 112 West 34th Street Sept. 2031 10.8 years 34,192 0.3 % 6,927,262 1.3 % Duane Reade/Walgreen's ESB, 1350 B'Way, 250 West 57th Feb. 2021-Sept. 2027 3.9 years 47,541 0.5 % 6,776,108 1.2 % HNTB Corporation Empire State Building Feb. 2029 8.2 years 105,143 1.0 % 6,686,222 1.2 % Legg Mason First Stamford Place Sept. 2024 3.8 years 137,583 1.4 % 6,409,614 1.2 % Fragoman 1400 Broadway Feb. 2035 14.2 years 107,680 1.1 % 5,990,238 1.1 % Shutterstock Empire State Building Apr. 2029 8.3 years 104,386 1.0 % 5,970,510 1.1 % ASCAP 250 West 57th Street Aug. 2034 13.7 years 87,943 0.9 % 5,542,143 1.0 % The Michael J. Fox Foundation 111West 33rd Street Nov. 2029 8.9 years 86,492 0.9 % 5,453,341 1.0 % Total $ 2,860,279 28.3 % $ 183,494,278 33.9 % (1) Expiration dates are per lease and do not assume exercise of renewal or extension options. For tenants with more than two leases, the lease expiration is shown as a range. 31 (2) Represents the weighted average remaining lease term, based on annualized rent. (3) Based on leases signed and commenced as of December 31, 2020. (4) Represents the percentage of rentable square feet of our 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 our office and retail portfolios in the aggregate. Lease Expirations During 2018 and 2019, we generally obtained higher base rents on new and renewed leases at our Manhattan office properties. 2020 was not representative due to COVID-19. These increased rents are partly due to an increase in the total rentable square footage of such space as a result of remeasurement and application of market loss factors to our space. The following table sets forth new and renewal leases entered into at our Manhattan office properties (excluding the retail component of these properties), the weighted average annualized cash rent per square foot for new and renewal leases executed during the year, the previous weighted average annualized cash rent prior to the renewal or re-leasing of these leases and the percent increase in mark-to market rent. Year Ended December 31, 2020 2019 2018 New and renewal leases entered into during the year (square feet) 923,379 970,443 837,487 Weighted average annualized cash rent per square foot for new and renewal leases executed during the year $ 57.45 $ 65.91 $ 61.39 Weighted average annualized cash rent per square foot for previous leases $ 61.18 $ 54.72 $ 49.29 Increase (decrease) in mark-to-market rent (6.1) % 20.4 % 24.5 % The following tables set forth a summary schedule of expirations for leases in place as of December 31, 2020 plus available space for each of the ten calendar years beginning with the year ended December 31, 2020 at the properties in our portfolio. The information set forth in the table assumes that tenants exercise no renewal options and all early termination rights. All properties Percent of Rentable Portfolio Annualized Number Square Rentable Percent of Rent Per of Leases Feet Square Feet Annualized Annualized Rentable Year of Lease Expiration Expiring (1) Expiring (2) Expiring Rent (3) Rent Square Foot Available — 1,147,281 11.3 % $ — — % $ — Signed leases not commenced 10 282,429 2.8 % — — % — Fourth quarter 2020 17 102,881 1.0 % 4,800,242 0.9 % 46.66 2021 101 644,888 6.4 % 37,001,858 6.8 % 57.38 2022 109 558,970 5.5 % 35,116,241 6.5 % 62.82 2023 98 724,997 7.2 % 45,328,470 8.4 % 62.52 2024 88 824,459 8.1 % 50,848,316 9.4 % 61.67 2025 80 504,755 5.0 % 30,350,589 5.6 % 60.13 2026 59 725,725 7.2 % 40,522,526 7.5 % 55.84 2027 52 576,922 5.7 % 34,684,207 6.4 % 60.12 2028 36 1,066,098 10.5 % 56,874,318 10.5 % 53.35 2029 36 884,355 8.7 % 63,326,520 11.7 % 71.61 2030 33 694,534 6.9 % 45,346,326 8.4 % 65.29 Thereafter 53 1,397,036 13.7 % 98,496,712 17.9 % 70.50 Total 772 10,135,330 100.0 % $ 542,696,325 100.0 % $ 62.34 32 Manhattan Office Properties (4) Percent of Rentable Portfolio Annualized Number Square Rentable Percent of Rent Per of Leases Feet Square Feet Annualized Annualized Rentable Year of Lease Expiration Expiring (1) Expiring (2) Expiring Rent (3) Rent Square Foot Available — 774,895 10.2 % $ — — % $ — Signed leases not commenced 6 195,102 2.6 % — — % — Fourth quarter 2020 12 91,610 1.2 % 4,210,460 1.1 % 45.96 2021 67 458,825 6.1 % 26,521,344 6.8 % 57.80 2022 78 368,577 4.9 % 22,264,654 5.7 % 60.41 2023 76 529,324 7.0 % 32,273,287 8.2 % 60.97 2024 64 577,298 7.6 % 34,915,973 8.9 % 60.48 2025 49 315,414 4.2 % 19,987,005 5.1 % 63.37 2026 39 506,757 6.7 % 29,576,193 7.5 % 58.36 2027 39 444,023 5.9 % 25,809,443 6.6 % 58.13 2028 22 946,217 12.5 % 51,063,206 13.0 % 53.97 2029 23 629,621 8.3 % 37,359,424 9.5 % 59.34 2030 19 585,265 7.7 % 34,849,320 8.9 % 59.54 Thereafter 36 1,157,426 15.1 % 73,680,432 18.7 % 63.66 Total 530 7,580,354 100.0 % $ 392,510,741 100.0 % $ 59.38 Greater New York Metropolitan Area Office Properties Percent of Rentable Portfolio Annualized Number Square Rentable Percent of Rent Per of Leases Feet Square Feet Annualized Annualized Rentable Year of Lease Expiration Expiring (1) Expiring (2) Expiring Rent (3) Rent Square Foot Available — 324,345 17.6 % $ — — % $ — Signed leases not commenced 2 63,146 3.4 % — — % — Fourth quarter 2020 2 400 — % 1,827 — % 4.57 2021 26 168,343 9.1 % 7,294,766 12.0 % 43.33 2022 23 142,027 7.7 % 5,465,506 9.0 % 38.48 2023 14 150,370 8.1 % 7,016,238 11.6 % 46.66 2024 13 214,998 11.7 % 9,704,716 16.0 % 45.14 2025 27 165,872 9.0 % 5,882,977 9.7 % 35.47 2026 13 150,557 8.2 % 6,581,335 10.9 % 43.71 2027 9 83,484 4.5 % 3,156,938 5.2 % 37.81 2028 9 107,564 5.8 % 3,816,282 6.3 % 35.48 2029 6 148,939 8.1 % 6,133,935 10.1 % 41.18 2030 4 36,578 2.0 % 1,806,175 3.0 % 49.38 Thereafter 1 88,581 4.8 % 3,782,754 6.2 % 42.70 Total 149 1,845,204 100.0 % $ 60,643,449 100.0 % $ 41.60 33 Retail (5) Percent of Rentable Portfolio Annualized Number Square Rentable Percent of Rent Per of Leases Feet Square Feet Annualized Annualized Rentable Year of Lease Expiration Expiring (1) Expiring (2) Expiring Rent (3) Rent Square Foot Available — 48,041 6.8 % $ — — % $ — Signed leases not commenced 2 24,181 3.4 % — — % — Fourth quarter 2020 3 10,871 1.5 % 587,955 0.7 % 54.08 2021 8 17,720 2.5 % 3,185,748 3.6 % 179.78 2022 8 48,366 6.8 % 7,386,081 8.2 % 152.71 2023 8 45,303 6.4 % 6,038,945 6.7 % 133.30 2024 11 32,163 4.5 % 6,227,627 7.0 % 193.63 2025 4 23,469 3.3 % 4,480,607 5.0 % 190.92 2026 7 68,411 9.6 % 4,364,998 4.9 % 63.81 2027 4 49,415 7.0 % 5,717,826 6.4 % 115.71 2028 5 12,317 1.7 % 1,994,830 2.2 % 161.96 2029 7 105,795 14.9 % 19,833,161 22.1 % 187.47 2030 10 72,691 10.2 % 8,690,831 9.7 % 119.56 Thereafter 16 151,029 21.4 % 21,033,526 23.5 % 139.27 Total 93 709,772 100.0 % $ 89,542,135 100.0 % $ 140.45 The Empire State Building (6) Percent of Rentable Portfolio Annualized Number Square Rentable Percent of Rent Per of Leases Feet Square Feet Annualized Annualized Rentable Year of Lease Expiration Expiring (1) Expiring (2) Expiring Rent (3) (7) Rent Square Foot Available — 205,638 7.6 % $ — — % $ — Signed leases not commenced 1 105,240 3.9 % — — % — Fourth quarter 2020 3 2,606 0.1 % 82,734 0.1 % 31.75 2021 22 118,965 4.4 % 6,884,714 4.7 % 57.87 2022 20 108,263 4.0 % 6,885,452 4.7 % 63.60 2023 25 112,852 4.2 % 7,712,795 5.3 % 68.34 2024 18 227,133 8.4 % 15,051,203 10.3 % 66.27 2025 13 101,439 3.7 % 6,600,804 4.5 % 65.07 2026 9 122,685 4.5 % 7,685,043 5.3 % 62.64 2027 9 35,511 1.3 % 2,097,113 1.4 % 59.06 2028 7 545,722 20.1 % 28,854,847 19.7 % 52.87 2029 7 282,020 10.4 % 17,364,861 11.9 % 61.57 2030 5 205,706 7.6 % 11,143,086 7.6 % 54.17 Thereafter 18 540,702 19.8 % 35,802,207 24.5 % 66.21 Total 157 2,714,482 100.0 % $ 146,164,859 100.0 % $ 60.81 34 The Empire State Building Broadcasting Licenses and Leases Annualized Percent of Annualized Expense Annualized Annualized Year of Lease Expiration Base Rent (8) Reimbursements Rent (3) Rent Fourth quarter 2020 $ 131,030 $ 46,505 $ 177,535 1.2 % 2021 — 50,772 50,772 0.3 % 2022 1,719,156 484,731 2,203,887 14.7 % 2023 283,668 60,254 343,922 2.3 % 2024 66,950 32,455 99,405 0.7 % 2025 1,855,080 204,048 2,059,128 14.4 % 2026 827,860 91,155 919,015 6.1 % 2027 807,668 92,835 900,503 6.0 % 2028 254,829 27,350 282,179 1.9 % 2029 — — — — % 2030 463,507 112,029 575,536 3.8 % Thereafter 6,404,336 910,532 7,314,868 48.6 % Total $ 12,814,084 $ 2,112,666 $ 14,926,750 100.0 % (1) If a lease has two different expiration dates, it is considered to be two leases (for the purposes of lease count and square footage). (2) Excludes (i) 194,929 rentable square feet across our portfolio attributable to building management use and tenant amenities and (ii) 79,613 square feet of space attributable to our observatory. (3) Represents annualized base rent and current reimbursement for operating expenses and real estate taxes. (4) Excludes (i) retail space in our Manhattan office properties and (ii) the Empire State Building broadcasting licenses and observatory operations. (5) Includes an aggregate of 504,284 rentable square feet of retail space in our Manhattan office properties. Excludes the Empire State Building broadcasting licenses and observatory operations. (6) Excludes retail space, broadcasting licenses and observatory operations. (7) Includes approximately $4.6 million of annualized rent related to physical space occupied by broadcasting tenants for their broadcasting operations. Does not include license fees charges to broadcast tenants. (8) Represents license fees for the use of the Empire State Building mast and base rent for the physical space occupied by broadcasting tenants. Undeveloped Properties We own entitled land in Stamford, Connecticut, adjacent to one of our office properties, that will support the development of an approximately 0.4 million rentable square foot office building and garage. The site is directly adjacent to Metro Center, one of our office properties, and the Stamford Transportation Center. All required zoning approvals have been obtained to allow for development of Metro Tower. We intend to develop Metro Tower when the appropriate combination of local market and other conditions is in place. Redevelopment and Repositioning From 20 02 through 2006, we gradually gained full control of the day-to-day management of our Manhattan office properties (with the estate of Leona M. Helmsley previously holding certain approval rights at some of these properties as a result of its interest in the entities owning the properties). Since then, we have been undertaking a comprehensive redevelopment and repositioning strategy of our Manhattan office properties that has included the physical improvement through upgrades and modernization of, and tenant upgrades in, such properties. Since we assumed full control of the day-to-day management of our Manhattan office properties beginning with One Grand Central Place in 2002, and through December 31, 2020, we have invested a total of approximately $948.1 million (excluding tenant improvement costs and leasing commissions) in our Manhattan office properties pursuant to this program. We intend to fund capital improvements through a combination of operating cash flow, cash on hand and borrowings. The improvements, within our redevelopment and repositioning program, include restored, renovated and upgraded or new lobbies, elevator modernization, renovated public areas and bathrooms, refurbished or new windows, upgrade and standardization of retail storefront and signage, façade restorations, modernization of building-wide systems, with a focus on energy efficiency and indoor environmental quality, and enhanced tenant amenities. These improvements are designed to improve the overall value and attractiveness of our properties and have contributed significantly to our tenant repositioning efforts, which seek to increase our occupancy, raise our rental rates, increase our rentable square feet, increase our aggregate 35 rental revenue, lengthen our average lease term, increase our average lease size, and improve our tenant credit quality. We have also aggregated smaller spaces in order to offer larger blocks of office space, including multiple floors, that are attractive to larger, higher credit-quality tenants, as well as to offer new, pre-built suites with improved layouts. This strategy has shown what we believe to be attractive results to date, and we believe has the potential to improve our operating margins and cash flows in the future. We believe we will continue to enhance our tenant base and improve rents as our pre-redevelopment leases continue to expire and be re-leased. During the second quarter of 2017, we commenced a multi-year capital project at the Empire State Building which we believe improves the convenience for office tenants and their visitors, increases the value of our 34th Street facing retail space, enhances the observatory visitor experience, and increases observatory revenue per capita. In the first phase of the project, which we completed in the third quarter 2018, we relocated the present observatory entrance, previously located on Fifth Avenue, to a new, larger, dedicated entrance for observatory visitors at the western side of the Empire State Building on 34th Street. The new entrance eliminates observatory visitor flow into the Fifth Avenue lobby and streamlines the visitor exit from that lobby, thereby reducing observatory traffic in the lobby by more than 50% and improving Fifth Avenue access for our office tenants and their visitors. During the third quarter 2019 we completed the second phase of the project, the new second floor galleries and in the fourth quarter 2019 we completed the final phase, the redevelopment of the 80th floor and opened the newly renovated 102nd floor observatory. Expenditures, which began during the second quarter 2017, totaled $157.9 million through December 31, 2020. This investment is an example of continually looking at ways to innovate and enhance the office and retail tenant and visitor experience at the Empire State Building. The greater New York metropolitan area office market is soft, and we compete with properties that have been redeveloped recently or have planned redevelopment. We have spent approximately $36 million over 2018 through 2020 on our well-maintained and well-located properties’ common areas and amenities to ensure competitiveness and protect our market position. ITEM 3. LEGAL PROCEEDINGS Refer to “Financial Statements-Note 8-Commitments and Contingencies” in this Annual Report on Form 10-K for a description of any pending legal proceedings. ITEM 4. MINE SAFETY DISCLOSURE Not applicable. 36 PART II