What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2020-11-05 · 243 added, 393 removed, 508 unchanged (56% of the section changed)

3 unchanged sentences

(amounts in thousands, except unit and per unit amounts)

September 30, 2020

December 31, 2019

March 31, 2021 December 31, 2020

ASSETS (unaudited)

Commercial real estate properties, at cost:

Land $ 201,196 $ 201,196

Development costs 8,064 7,966

Building and improvements 2,943,148 2,924,804

3,152,408 3,133,966

accumulated depreciation ( 973,940 ) ( 941,612 )

8 unchanged sentences

Right of use assets 29,051 29,104

Goodwill 491,479 491,479

Total assets $ 4,151,523 $ 4,150,695

LIABILITIES AND CAPITAL

2 unchanged sentences

Unsecured term loan facilities, net 387,811 387,561

Unsecured revolving credit facility, net

Unsecured revolving credit facility — —

Accounts payable and accrued expenses 102,381 103,203

6 unchanged sentences

Private perpetual preferred units:

Private perpetual preferred units, $13.52 per unit liquidation preference, 4,664,038 and 4,610,383 issued and outstanding in 2020 and 2019, respectively

Private perpetual preferred units, $ 13.52 per unit liquidation preference, 4,664,038 issued and outstanding in 2021 and 2020, respectively

21,936 21,936

Private perpetual preferred units, $ 16.62 per unit liquidation preference, 1,560,360 issued and outstanding in 2021 and 2020

1 unchanged sentence

ESRT partner's capital ( 2,856,222 and 2,852,787 general partner operating partnership units and 169,475,649 and 168,712,617 limited partner operating partnership units outstanding in 2021 and 2020, respectively)

1,053,495 1,055,249

Limited partners' interests ( 80,656,332 and 80,355,297 limited partner operating partnership units outstanding in 2021 and 2020, respectively)

650,254 648,543

Series ES operating partnership units 23,270,194 and 23,677,975 limited partner operating partnership units outstanding in 2021 and 2020, respectively)

( 1,418 ) ( 1,348 )

Series 60 operating partnership units ( 6,253,569 and 6,424,567 limited partner operating partnership units outstanding in 2021 and 2020, respectively)

( 727 ) ( 721 )

Series 250 operating partnership units ( 3,110,231 and 3,255,480 limited partner operating partnership units outstanding in 2021 and 2020, respectively)

( 349 ) ( 356 )

Total capital 1,731,195 1,731,307

4 unchanged sentences

(amounts in thousands, except per unit amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Rental revenue $ 140,231 $ 148,113

10 unchanged sentences

Real estate taxes 31,447 29,254

Impairment charges

Depreciation and amortization 44,457 46,093

1 unchanged sentence

Total operating income

18,349 26,973

Other income (expense):

2 unchanged sentences

Loss on early extinguishment of debt ( 214 ) ( 86 )

IPO litigation expense

Income (loss) before income taxes ( 5,297 ) 7,906

Income tax benefit (expense)

Income tax benefit 2,106 382

Net income (loss) ( 3,191 ) 8,288

2 unchanged sentences

Total weighted average units:

Earnings per unit attributable to common unitholders:

Basic 277,881 292,645

Diluted 277,881 292,645

Earnings (loss) per unit attributable to common unitholders:

Basic $ ( 0.02 ) $ 0.02

Diluted $ ( 0.02 ) $ 0.02

Dividends per unit $ — $ 0.105

1 unchanged sentence

Empire State Realty OP, L.P.

Condensed Consolidated Statements of Comprehensive Income (Loss)

Condensed Consolidated Statements of Comprehensive Loss

(amounts in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Net income (loss) $ ( 3,191 ) $ 8,288

7 unchanged sentences

Condensed Consolidated Statements of Capital

For The Three Months Ended September 30, 2020 and 2019

(amounts in thousands)

Series PR Operating Partnership Units

Series ES Operating Partnership Units Limited Partners

Series 60 Operating Partnership Units Limited Partners

Series 250 Operating Partnership Units Limited Partners

General Partner

Limited Partners

Private Perpetual Preferred Units

Private Perpetual Preferred Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Total Capital

Balance at June 30, 2020

Conversion of operating partnership units to ESRT Partner's Capital

Repurchases of common shares

Equity compensation

Distributions

Other comprehensive income (loss)

Balance at September 30, 2020

Series PR Operating Partnership Units

Series ES Operating Partnership Units Limited Partners

Series 60 Operating Partnership Units Limited Partners

Series 250 Operating Partnership Units Limited Partners

General Partner

Limited Partners

Private Perpetual Preferred Units

Private Perpetual Preferred Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Total Capital

Balance at June 30, 2019

Conversion of operating partnership units to ESRT Partner's Capital

Equity compensation

Distributions

Other comprehensive income (loss)

Balance at September 30, 2019

The accompanying notes are an integral part of these consolidated financial statements

Empire State Realty OP, L.P.

Condensed Consolidated Statements of Capital

For The Nine Months Ended September 30, 2020 and 2019

For The Three Months Ended March 31, 2021 and 2020

(amounts in thousands)

Series PR Operating Partnership Units

Series ES Operating Partnership Units Limited Partners

Series 60 Operating Partnership Units Limited Partners

Series 250 Operating Partnership Units Limited Partners

General Partner

Limited Partners

Private Perpetual Preferred Units

Private Perpetual Preferred Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Total Capital

Series PR Operating Partnership Units Series ES Operating Partnership Units Limited Partners Series 60 Operating Partnership Units Limited Partners Series 250 Operating Partnership Units Limited Partners

General Partner Limited Partners

Private Perpetual Preferred Units Private Perpetual Preferred Unitholders Operating Partnership Units Operating Partnership Unitholders Operating Partnership Units Operating Partnership Unitholders Operating Partnership Units Operating Partnership Unitholders Operating Partnership Units Operating Partnership Unitholders Operating Partnership Units Operating Partnership Unitholders Total Capital

Balance at December 31, 2020 6,224 $ 29,940 171,565 $ 1,055,249 80,355 $ 648,543 23,678 $ ( 1,348 ) 6,424 $ ( 721 ) 3,255 $ ( 356 ) $ 1,731,307

1 unchanged sentence

Conversion of operating partnership units to ESRT Partner's Capital

— — 1,066 2,662 ( 342 ) ( 2,746 ) ( 408 ) 38 ( 171 ) 25 ( 145 ) 21 —

Repurchases of common units — — ( 383 ) ( 3,533 ) — — — — — — — — ( 3,533 )

1 unchanged sentence

Distributions — ( 1,050 ) — — — — — — — — — — ( 1,050 )

Net income — 1,050 — ( 2,621 ) — ( 1,119 ) — ( 356 ) — ( 98 ) — ( 47 ) ( 3,191 )

Other comprehensive income (loss) — — — 1,814 — 766 — 248 — 67 — 33 2,928

Balance at September 30, 2020

Series PR Operating Partnership Units

Series ES Operating Partnership Units Limited Partners

Series 60 Operating Partnership Units Limited Partners

Series 250 Operating Partnership Units Limited Partners

General Partner

Limited Partners

Private Perpetual Preferred Units

Private Perpetual Preferred Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Operating Partnership Units

Operating Partnership Unitholders

Total Capital

Balance at March 31, 2021 6,224 $ 29,940 172,332 $ 1,053,495 80,656 $ 650,254 23,270 $ ( 1,418 ) 6,253 $ ( 727 ) 3,110 $ ( 349 ) $ 1,731,195

General Partner Limited Partners

Balance at December 31, 2019 6,170 $ 29,151 181,894 $ 1,228,520 81,388 $ 680,580 25,810 $ 7,262 7,025 $ 1,593 3,535 $ 807 $ 1,947,913

Issuance of private perpetual preferred in exchange for common units 54 789 — — ( 97 ) ( 800 ) 43 11 — — — — —

Conversion of operating partnership units to ESRT Partner's Capital

— — 1,659 7,562 ( 894 ) ( 7,416 ) ( 494 ) ( 104 ) ( 201 ) ( 31 ) ( 70 ) ( 11 ) —

Repurchases of common units — — ( 6,571 ) ( 62,666 ) — — — — — — — — ( 62,666 )

Equity compensation — — 146 154 4,503 5,737 — — — — — — 5,891

Distributions — ( 1,050 ) — ( 18,987 ) — ( 8,849 ) — ( 2,677 ) — ( 723 ) — ( 365 ) ( 32,651 )

Net income — 1,050 — 4,495 — 1,852 — 630 — 174 — 87 8,288

Other comprehensive income (loss) — — — ( 10,494 ) — ( 4,326 ) — ( 1,470 ) — ( 406 ) — ( 203 ) ( 16,899 )

Balance at September 30, 2019

Balance at March 31, 2020 6,224 $ 29,940 177,128 $ 1,148,584 84,900 $ 666,778 25,359 $ 3,652 6,824 $ 607 3,465 $ 315 $ 1,849,876

The accompanying notes are an integral part of these consolidated financial statements

2 unchanged sentences

(amounts in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows From Operating Activities

Net income (loss) $ ( 3,191 ) $ 8,288

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 44,457 46,093

Impairment charges

Amortization of non-cash items within interest expense 2,733 1,052

3 unchanged sentences

Equity based compensation 4,734 5,891

Settlement of derivative contract

Loss on early extinguishment of debt 214 86

8 unchanged sentences

Cash Flows From Investing Activities

Short-term investments

Development costs ( 98 ) ( 811 )

Additions to building and improvements ( 20,714 ) ( 39,799 )

Net cash (used in) provided by investing activities

Net cash used in investing activities ( 20,812 ) ( 40,610 )

The accompanying notes are an integral part of these consolidated financial statements

2 unchanged sentences

(amounts in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows From Financing Activities

1 unchanged sentence

Proceeds from unsecured senior notes — 175,000

Repayment of unsecured senior notes

Proceeds from unsecured term loan — 175,000

1 unchanged sentence

Proceeds from unsecured revolving credit facility — 550,000

Repayment of unsecured revolving credit facility

Deferred financing costs ( 7,539 ) ( 3,610 )

1 unchanged sentence

Distributions ( 1,050 ) ( 32,651 )

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities ( 13,130 ) 750,103

Net increase in cash and cash equivalents and restricted cash 39,458 774,267

17 unchanged sentences

Issuance of Series 2019 private perpetual preferred in exchange for common units — 789

Right of use assets

Ground lease liabilities

The accompanying notes are an integral part of these consolidated financial statements

8 unchanged sentences

We own, manage, operate, acquire and reposition office and retail properties in Manhattan and the greater New York metropolitan area.

As of September 30, 2020 , our total portfolio contained 10.1 million rentable square feet of office and retail space.

As of March 31, 2021, our total portfolio contained 10.1 million rentable square feet of office and retail space.

We owned 14 office properties (including three long-term ground leasehold interests) encompassing approximately 9.4 million rentable square feet of office space.

4 unchanged sentences

Additionally, we have entitled land at the Stamford Transportation Center 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.

As of September 30, 2020 , our portfolio included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of Westport, Connecticut, encompassing approximately 0.2 million rentable square feet in the aggregate.

As of March 31, 2021, our portfolio included four standalone retail properties located in Manhattan and two standalone retail properties located in the city center of Westport, Connecticut, encompassing approximately 0.2 million rentable square feet in the aggregate.

We were organized as a Delaware limited partnership on November 28, 2011 and operations commenced upon completion of the initial public offering of ESRT’s Class A common stock and related formation transactions on October 7, 2013.

ESRT, as the sole general partner in our company, has responsibility and discretion in the management and control of our company, and our limited partners, in such capacity, have no authority to transact business for, or participate in the management activities, of our company.

As of September 30, 2020 , ESRT owned approximately 60.0 % of our operating partnership units.

As of March 31, 2021, ESRT owned approximately 60.3 % of our operating partnership units.

Summary of Significant Accounting Policies

6 unchanged sentences

These financial statements should be read in conjunction with the financial statements and accompanying notes included in the financial statements for the year ended December 31, 2020 contained in our Annual Report on Form 10-K.

We do not consider our business to be subject to material seasonal fluctuations, except that our observatory business is subject to tourism seasonality and currently impacted by the COVID-19 pandemic.

Historically, approximately 16.0 % to 18.0 % of our annual observatory revenue was realized in the first quarter, 26.0 % to 28.0 % was realized in the second quarter, 31.0 % to 33.0 % was realized in the third quarter and 23.0 % to 25.0 % was realized in the fourth quarter.

Historically, prior to the outbreak of the COVID-19 pandemic, approximately 16.0 % to 18.0 % of our annual observatory revenue was realized in the first quarter, 26.0 % to 28.0 % was realized in the second quarter, 31.0 % to 33.0 % was realized in the third quarter and 23.0 % to 25.0 % was realized in the fourth quarter.

We consolidate entities in which we have a controlling financial interest.

In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we

consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members.

In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the partners/members.

For variable interest entities ("VIE"), we consolidate the entity if we are deemed to have a variable interest in the entity and through that interest we are deemed the primary beneficiary.

1 unchanged sentence

The primary beneficiary is required to consolidate the VIE.

We had no VIEs as of September 30, 2020 and December 31, 2019.

We had no VIEs as of March 31, 2021 and December 31, 2020.

We will assess the accounting treatment for each investment we may have in the future.

9 unchanged sentences

Actual results could differ from those estimates.

Revenue Recognition

For Coronavirus 2019 (“COVID-19”) pandemic related rent deferral agreements, we will generally elect to record rental revenue and a receivable during the deferral period.

Recently Issued or Adopted Accounting Standards

During April 2020, the Financial Accounting Standards Board ("FASB") staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 global pandemic.

Under existing lease guidance, the entity would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant, which would be accounted for under the lease modification framework, or if a lease concession was under the enforceable rights and obligations that existed in the original lease, which would be accounted for outside the lease modification framework.

5 unchanged sentences

During the first quarter 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the

presentation of derivatives consistent with past presentation.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

During January 2017, the FASB issued ASU No.

2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment, which contain amendments that modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value.

An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination.

Because these amendments eliminate Step 2 from the goodwill impairment test, they should reduce the cost and complexity of evaluating goodwill for impairment.

2017-04 should be applied on a prospective basis and the amendments adopted for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

We adopted this standard and related amendments on January 1, 2020 and such adoption did not have a material impact our consolidated financial statements.

During June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which contains amendments that replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

During November 2018, the FASB issued ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of Topic 326.

Instead, impairment of receivables arising from operating leases should be accounted in accordance with ASU No.

2016-02, Leases (Topic 842).

2016-13 and ASU No.

2018-19 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

Earlier adoption as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, is permitted.

The amendments must be adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified retrospective approach).

We adopted these standards on January 1, 2020 and such adoption did not have a material impact our consolidated financial statements.

Deferred Costs, Acquired Lease Intangibles and Goodwill

Deferred costs, net, consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

September 30, 2020

December 31, 2019

Deferred costs, net, consisted of the following as of March 31, 2021 and December 31, 2020 (amounts in thousands):

March 31, 2021 December 31, 2020

Leasing costs $ 203,730 $ 203,905

1 unchanged sentence

Acquired above-market leases 40,254 40,398

424,115 425,639

accumulated amortization ( 225,967 ) ( 223,918 )

Total deferred costs, net, excluding net deferred financing costs $ 198,148 $ 201,721

At September 30, 2020 and December 31, 2019, $ 2.7 million and $ 4.2 million , respectively, of net deferred financing costs associated with the unsecured revolving credit facility was included in deferred costs, net on the condensed consolidated balance sheet.

Amortization expense related to deferred leasing costs and acquired deferred leasing costs was $ 5.4 million and $ 6.2 million for the three months ended September 30, 2020 and 2019, respectively, and $ 17.7 million and $ 18.3 million for the nine months ended September 30, 2020 and 2019, respectively.

Amortization expense related to acquired lease intangibles was $ 1.5 million and $ 2.4 million for the three months ended September 30, 2020 and 2019, respectively, and $ 5.9 million and $ 8.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Amortizing acquired intangible assets and liabilities consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

September 30, 2020

December 31, 2019

At March 31, 2021 and December 31, 2020, $ 8.9 million and $ 2.1 million, respectively, of net deferred financing costs associated with the unsecured revolving credit facility was included in deferred costs, net on the condensed consolidated balance sheet.

Amortization expense related to deferred leasing costs and acquired deferred leasing costs was $ 5.6 million and $ 5.9 million for the three months ended March 31, 2021 and 2020, respectively.

Amortization expense related to acquired lease intangibles was $ 1.7 million and $ 2.0 million for the three months ended March 31, 2021 and 2020, respectively.

Amortizing acquired intangible assets and liabilities consisted of the following as of March 31, 2021 and December 31, 2020 (amounts in thousands):

March 31, 2021 December 31, 2020

Acquired below-market ground leases $ 396,916 $ 396,916

1 unchanged sentence

Acquired below-market ground leases, net $ 342,777 $ 344,735

September 30, 2020

December 31, 2019

March 31, 2021 December 31, 2020

Acquired below-market leases $ ( 77,686 ) $ ( 78,451 )

1 unchanged sentence

Acquired below-market leases, net $ ( 30,112 ) $ ( 31,705 )

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $ 0.7 million and $ 1.7 million for the three months ended September 30, 2020 and 2019, respectively, and $ 3.0 million and $ 5.8 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020 , we had goodwill of $ 491.5 million .

Goodwill was allocated $ 227.5 million to the observatory reportable segment and $ 264.0 million to the real estate segment.

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $ 0.7 million and $ 0.9 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, we had goodwill of $ 491.5 million.

Goodwill was allocated $ 227.5 million to the observatory reportable segment and $ 264.0 million to the real estate reportable segment.

In compliance with the requirements of authorities, we closed the Empire State Building Observatory on March 16, 2020 due to the COVID-19 pandemic and it remained closed until the 86th floor observation deck was reopened on July 20, 2020.

2 unchanged sentences

We engaged a third-party valuation consulting firm to perform the valuation process.

Based upon the results of the goodwill impairment test of the stand-alone Observatory reporting unit, which is after the intercompany rent expense paid to the Real Estate reporting unit, we determined that the fair value of the Observatory reporting unit exceeded its carrying value by less than 5.0 % .

Many of the factors employed in determining whether or not goodwill is impaired are outside of our control and it is reasonably likely that assumptions and estimates will change in future periods.

The analysis used a combination of the discounted cash flow method (a form of the income approach) utilizing Level 3 unobservable inputs and the guideline company method (a form of the market approach).

Significant assumptions under the former included revenue and cost projections, weighted average cost of capital, long-term growth rate and income tax considerations while the latter included guideline company enterprise values, revenue multiples and control premium rates.

Our methodology to review goodwill impairment, which included a significant amount of judgment and estimates, provided a reasonable basis to determine whether impairment had occurred.

Based upon the results of the goodwill impairment test of the standalone Observatory reporting unit, which is after the intercompany rent expense paid to the Real Estate reporting unit, we determined that the fair value of the Observatory reporting unit exceeded its carrying value by less than 10.0 %.

Many of the factors employed in determining whether or not goodwill is impaired are outside of our control and it is reasonably likely that

assumptions and estimates will change in future periods.

We will continue to assess the impairment of the Observatory reporting unit goodwill going forward and that continued assessment may again utilize a third-party valuation consulting firm.

Debt consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

Principal Balance

As of September 30, 2020

September 30, 2020

December 31, 2019

Debt consisted of the following as of March 31, 2021 and December 31, 2020 (amounts in thousands):

Principal Balance As of March 31, 2021

March 31, 2021 December 31, 2020 Stated

Rate Effective

Mortgage debt collateralized by:

Fixed rate mortgage debt

Metro Center $ 86,803 $ 87,382 3.59 % 3.68 % 11/5/2024

10 Union Square 50,000 50,000 3.70 % 3.97 % 4/1/2026

1 unchanged sentence

First Stamford Place (3)

180,000 180,000 4.28 % 4.71 % 7/1/2027

1010 Third Avenue and 77 West 55th Street 37,278 37,477 4.01 % 4.23 % 1/5/2028

250 West 57th Street 180,000 180,000 2.83 % 3.19 % 12/1/2030

10 Bank Street 31,795 32,025 4.23 % 4.36 % 6/1/2032

3 unchanged sentences

Senior unsecured notes:

Unsecured revolving credit facility (4)

LIBOR plus 1.10%

Series A 100,000 100,000 3.93 % 3.96 % 3/27/2025

Series B 125,000 125,000 4.09 % 4.12 % 3/27/2027

Series C 125,000 125,000 4.18 % 4.21 % 3/27/2030

Series D 115,000 115,000 4.08 % 4.11 % 1/22/2028

Series E 160,000 160,000 4.26 % 4.27 % 3/22/2030

Series F 175,000 175,000 4.44 % 4.45 % 3/22/2033

Series G 100,000 100,000 3.61 % 4.89 % 3/17/2032

Series H 75,000 75,000 3.73 % 5.00 % 3/17/2035

Unsecured term loan facility (4)

215,000 215,000 LIBOR plus 1.20 %

3.56 % 3/19/2025

Unsecured revolving credit facility (4)

— — LIBOR plus 1.30 %

Unsecured term loan facility (4)

175,000 175,000 LIBOR plus 1.50 %

3.60 % 12/31/2026

Total principal 2,150,876 2,151,884

1 unchanged sentence

( 14,575 ) ( 15,235 )

The effective rate is the yield as of September 30, 2020 and includes the stated interest rate, deferred financing cost amortization and interest associated with variable to fixed interest rate swap agreements.

Total $ 2,136,301 $ 2,136,649

______________

(1) The effective rate is the yield as of March 31, 2021 and includes the stated interest rate, deferred financing cost amortization and interest associated with variable to fixed interest rate swap agreements.

(2) Pre-payment is generally allowed for each loan upon payment of a customary pre-payment penalty.

(3) Represents a $ 164 million mortgage loan bearing interest at 4.09 % and a $ 16 million loan bearing interest at 6.25 %.

At September 30, 2020 , we were in compliance with all debt covenants.

(4) At March 31, 2021, we were in compliance with all debt covenants.

Principal Payments

Aggregate required principal payments at September 30, 2020 are as follows (amounts in thousands):

Aggregate required principal payments at March 31, 2021 are as follows (amounts in thousands):

Year Amortization Maturities Total

2021 $ 3,082 $ — $ 3,082

2022 5,628 — 5,628

2023 7,876 — 7,876

2024 7,958 77,675 85,633

2025 5,826 315,000 320,826

Thereafter 20,084 1,707,747 1,727,831

Total $ 50,454 $ 2,100,422 $ 2,150,876

Deferred Financing Costs

Deferred financing costs, net, consisted of the following at September 30, 2020 and December 31, 2019 (amounts in thousands):

September 30, 2020

December 31, 2019

Deferred financing costs, net, consisted of the following at March 31, 2021 and December 31, 2020 (amounts in thousands):

March 31, 2021 December 31, 2020

Financing costs $ 42,689 $ 35,365

1 unchanged sentence

Total deferred financing costs, net $ 23,487 $ 17,367

Amortization expense related to deferred financing costs was $ 1.0 million and $ 0.9 million for the three months ended September 30, 2020 and 2019, respectively, and $ 3.0 million and $ 2.9 million for the nine months ended September 30, 2020 and 2019, respectively.

Amortization expense related to deferred financing costs was $ 1.2 million and $ 0.9 million for the three months ended March 31, 2021 and 2020, respectively.

Unsecured Revolving Credit and Term Loan Facilities

On March 19, 2020, we entered into an amendment to an existing credit agreement with the lenders party thereto, Bank of America, N.A., as administrative agent, and Bank of America, Wells Fargo Bank, National Association and Capital One, National Association, as the letter of credit issuers party thereto.

The amendment amends the amended and restated senior unsecured revolving credit and term loan facility, entered into as of August 29, 2017, with Bank of America, N.A., as administrative agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC as Joint Lead Arrangers and Joint Bookrunners, Wells Fargo, National Association and Capital One, National Association, as co-syndication agents, and the lenders party thereto.

This new amended and restated senior unsecured revolving credit and term loan facility (the "Credit Facility") is in the original principal amount of up to $ 1.315 billion , which consists of a $ 1.1 billion revolving credit facility and a $ 215.0 million term loan facility.

We borrowed the term loan facility in full at closing.

On March 31, 2021, we entered into a second amendment to an existing credit agreement ("Amended Credit Agreement") that will govern an amended senior unsecured credit facility (the “Credit Facility”) with Bank of America, N.A., as administrative agent, and Bank of America, Wells Fargo Bank, National Association, Capital One, National Association and JPMorgan Chase Bank, N.A., as co-syndication agents, and the lenders and the letter of credit issuers party thereto.

The Amended Credit Agreement amends the amended and restated credit agreement dated August 29, 2017, as amended, by and among the parties named therein.

The Credit Facility is in the initial maximum principal amount of up to $ 1.065 billion, which consists of a $ 850.0 million revolving credit facility and a $ 215.0 million term loan facility.

We borrowed the term loan facility in full in August 2017.

We may request the Credit Facility be increased through one or more increases in the revolving credit facility or one or more increases in the term loan facility or the addition of new pari passu term loan tranches, for a maximum aggregate principal amount not to exceed $ 1.50 billion.

As of September 30, 2020 , we had no borrowings under the revolving credit facility and $ 215.0 million under the term loan facility.

The initial maturity of the unsecured revolving credit facility is August 2021.

We have the option to extend the initial term for up to two additional 6 -month periods, subject to certain conditions, including the payment of an extension fee equal to 0.0625 % and 0.075 % of the then outstanding commitments under the unsecured revolving credit facility on the first and the second extensions, respectively.

T he term loan facility matures in March 2025.

The Credit Facility will be used for our working capital needs and for other general corporate purposes.

As of March 31, 2021, we had no borrowings under the revolving credit facility and $ 215.0 million under the term loan facility.

The revolving credit facility matures on March 31, 2025.

We have the option to extend the initial term for up to two additional 6 -month periods, subject to certain conditions, including the payment of an extension fee equal to 0.0625 % and 0.075 % of the then outstanding commitments under the revolving credit facility on the first and the second extensions, respectively.

T he term loan facility matures on March 19, 2025.

We may prepay the loans under the Credit Facility at any time in whole or in part, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of Eurodollar Rate borrowings.

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We may request the Term Loan Facility be increased through one or more increases or the addition of new pari passu term loan tranches, for a maximum aggregate principal amount not to exceed $ 225 million.

As of September 30, 2020 , our borrowings amounted to $ 175.0 million under the Term Loan Facility.

As of March 31, 2021, our borrowings amounted to $ 175.0 million under the Term Loan Facility.

The Term Loan Facility matures on December 31, 2026.

We may prepay loans under the Term Loan Facility at any time in whole or in part, subject to reimbursement of the lenders’ breakage and redeployment costs in the case of prepayment of Eurodollar rate borrowings and, if the prepayment occurs on or before December 31, 2021, a prepayment fee.

If the prepayment occurs on or prior to December 31, 2020, the prepayment fee is equal to 2.0 % of the principal amount prepaid, and

If the prepayment occurs after December 31, 2020 but on or prior to December 31, 2021, the prepayment fee is equal to 1.0 % of the principal amount prepaid.

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The agreement also contains customary events of default (subject in certain cases to specified cure periods), including but not limited to non-payment, breach of covenants, representations or warranties, cross defaults, bankruptcy or other insolvency events, judgments, ERISA events, invalidity of loan documents, loss of real estate investment trust qualification, and occurrence of a change of control.

As of September 30, 2020 , we were in compliance with the covenants under the Credit Facility and the Term Loan Facility.

As of March 31, 2021, we were in compliance with the covenants under the Credit Facility and the Term Loan Facility.

Senior Unsecured Notes

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The agreement also contains customary events of default (subject in certain cases to specified cure periods), including but not limited to non-payment, breach of covenants, representations or warranties, cross defaults, bankruptcy or other insolvency events, judgments, ERISA events, the occurrence of certain change of control transactions and loss of real estate investment trust qualification.

As of September 30, 2020 , we were in compliance with the covenants under the outstanding senior unsecured notes.

As of March 31, 2021, we were in compliance with the covenants under the outstanding senior unsecured notes.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following as of September 30, 2020 and December 31, 2019 (amounts in thousands):

September 30, 2020

December 31, 2019

Accounts payable and accrued expenses consisted of the following as of March 31, 2021 and December 31, 2020 (amounts in thousands):

March 31, 2021 December 31, 2020

Accrued capital expenditures $ 60,536 $ 58,057

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We have agreements with our derivative counterparties that contain a provision where if we either default or are capable of being declared in default on any of our indebtedness, then we could also be declared in default on our derivative obligations.

As of September 30, 2020 , the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $ 10.3 million .

If we had breached any of these provisions at September 30, 2020 , we could have been required to settle our obligations under the agreements at their termination value of $ 10.3 million .

As of September 30, 2020 and December 31, 2019, we had interest rate LIBOR swaps with an aggregate notional value of $ 265.0 million and $ 390.0 million , respectively.

As of March 31, 2021, the fair value of the derivative in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to the agreement was $ 7.5 million.

If we had breached any of these provisions at March 31, 2021, we could have been required to settle our obligation under the agreement at its termination value of $ 7.5 million.

As of March 31, 2021 and December 31, 2020, we had an interest rate LIBOR swap with an aggregate notional value of $ 265.0 million and $ 265.0 million, respectively.

The notional value does not represent exposure to credit, interest rate or market risks.

As of September 30, 2020 and December 31, 2019, the fair value of our derivative instruments amounted to $( 10.2 ) million and $( 13.3 ) million , respectively, which is included in accounts payable and accrued expenses on the condensed consolidated balance sheets.

These interest rate swaps have been designated as cash flow hedges and hedge the variability in future cash flows associated with our existing variable-rate term loan facilities.

As of September 30, 2020 and 2019, our cash flow hedges are deemed highly effective and a net unrealized gain (loss) of $ 2.9 million and $( 5.9 ) million for the three months ended September 30, 2020 and 2019, respectively, and a net unrealized gain (loss) of $( 13.4 ) million and $( 25.4 ) million for the nine months ended September 30, 2020 and 2019, respectively, relating to both active and terminated hedges of interest rate risk, are reflected in the condensed consolidated statements of comprehensive income.

As of March 31, 2021 and December 31, 2020, the fair value of our derivative instrument amounted to $( 7.5 ) million and $( 8.8 ) million, respectively, which is included in accounts payable and accrued expenses on the condensed consolidated balance sheets.

This interest rate swap has been designated as a cash flow hedge and hedges the variability in future cash flows associated with our existing variable-rate term loan facilities.

As of March 31, 2021 and 2020, our cash flow hedge is deemed highly effective and a net unrealized gain (loss) of $ 2.9 million and $( 16.9 ) million for the three months ended March 31, 2021 and 2020, respectively, relating to both active and terminated hedges of interest rate risk, are reflected in the condensed consolidated statements of comprehensive income.

Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the debt.

We estimate that $( 11.5 ) million net loss of the current balance held in accumulated other comprehensive income (loss) will be reclassified into interest expense within the next 12 months.

The table below summarizes the terms of agreements and the fair values of our derivative financial instruments as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):

September 30, 2020

December 31, 2019

Notional Amount

Effective Date

Expiration Date

Interest rate swap

1 Month LIBOR

August 31, 2017

August 24, 2022

Interest rate swap

3 Month LIBOR

During the nine months ended September 30, 2020, we terminated the $ 125.0 million swap and paid a settlement fee of $ 20.3 million .

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands):

The table below summarizes the terms of agreements and the fair values of our derivative financial instruments as of March 31, 2021 and December 31, 2020 (dollar amounts in thousands):

March 31, 2021 December 31, 2020

Derivative Notional Amount Receive Rate Pay Rate Effective Date Expiration Date Asset Liability Asset Liability

Interest rate swap $ 265,000 1 Month LIBOR 2.1485 % August 31, 2017 August 24, 2022 $ — $ ( 7,450 ) $ — $ ( 8,849 )

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on accumulated other comprehensive income (loss) for the three months ended March 31, 2021 and 2020 (amounts in thousands):

Three Months Ended

Nine Months Ended

Effects of Cash Flow Hedges

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Effects of Cash Flow Hedges March 31, 2021 March 31, 2020

Amount of gain (loss) recognized in other comprehensive income (loss) $ 59 $ ( 17,695 )

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on the condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands):

Amount of gain (loss) reclassified from accumulated other comprehensive (loss) into interest expense ( 2,869 ) ( 796 )

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on the condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020 (amounts in thousands):

Three Months Ended

Nine Months Ended

Effects of Cash Flow Hedges

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Effects of Cash Flow Hedges March 31, 2021 March 31, 2020

Total interest (expense) presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded $ ( 23,554 ) $ ( 19,618 )

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into interest expense

Amount of gain (loss) reclassified from accumulated other comprehensive (loss) into interest expense ( 2,869 ) ( 796 )

Fair Valuation

The estimated fair values at September 30, 2020 and December 31, 2019 were determined by management, using available market information and appropriate valuation methodologies.

The estimated fair values at March 31, 2021 and December 31, 2020 were determined by management, using available market information and appropriate valuation methodologies.

Considerable judgment is necessary to interpret market data and develop estimated fair value.

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The fair value of our mortgage notes payable, senior unsecured notes - Series A, B, C, D, E, F, G and H, unsecured term loan facilities, unsecured revolving credit facility and ground lease liabilities which are determined using Level 3 inputs, are estimated by discounting the future cash flows using current interest rates at which similar borrowings could be made to us.

The following tables summarize the carrying and estimated fair values of our financial instruments as of September 30, 2020 and December 31, 2019 (amounts in thousands):

September 30, 2020

The following tables summarize the carrying and estimated fair values of our financial instruments as of March 31, 2021 and December 31, 2020 (amounts in thousands):

March 31, 2021

Estimated Fair Value

Interest rate swaps included in accounts payable and accrued expenses

Value Total Level 1 Level 2 Level 3

Interest rate swap included in accounts payable and accrued expenses $ 7,450 $ 7,450 $ — $ 7,450 $ —

Mortgage notes payable 775,276 772,147 — — 772,147

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Estimated Fair Value

Interest rate swaps included in accounts payable and accrued expenses

Value Total Level 1 Level 2 Level 3

Interest rate swap included in accounts payable and accrued expenses $ 8,849 $ 8,849 $ — $ 8,849 $ —

Mortgage notes payable 775,929 808,294 — — 808,294

Senior unsecured notes - Series A, B, C, D, E and F

Unsecured term loan facility

Disclosure about the fair value of financial instruments is based on pertinent information available to us as of September 30, 2020 and December 31, 2019.

Senior unsecured notes - Series A, B, C, D, E, F, G and H 973,159 1,039,857 — — 1,039,857

Unsecured term loan facilities 387,561 390,000 — — 390,000

Disclosure about the fair value of financial instruments is based on pertinent information available to us as of March 31, 2021 and December 31, 2020.

Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

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The leases provide for base monthly rentals and reimbursements for real estate taxes, escalations linked to the consumer price index or common area maintenance known as operating expense escalation.

Operating expense reimbursements are reflected in our September 30, 2020 and 2019 condensed consolidated statements of operations as rental revenue.

Operating expense reimbursements are reflected in our March 31, 2021 and 2020 condensed consolidated statements of operations as rental revenue.

Rental revenue includes fixed and variable payments.

Fixed payments primarily relate to base rent and variable payments primarily relate to tenant expense reimbursements for certain property operating costs.

The components of rental revenue for the three and nine months ended September 30, 2020 and 2019 are as follows (amounts in thousands):

The components of rental revenue for the three months ended March 31, 2021 and 2020 are as follows (amounts in thousands):

Three Months Ended

Nine Months Ended

Rental revenue

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Rental revenue March 31, 2021 March 31, 2020

Fixed payments $ 125,773 $ 130,514

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Total rental revenue $ 140,231 $ 148,113

As of September 30, 2020 , we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2038 (amounts in thousands):

As of March 31, 2021, we were entitled to the following future contractual minimum lease payments (excluding operating expense reimbursements) on non-cancellable operating leases to be received which expire on various dates through 2038 (amounts in thousands):

Remainder of 2021 $ 369,719

Thereafter 1,859,648

The above future minimum lease payments exclude tenant recoveries, amortization of deferred rent receivables and the net accretion of above-below-market lease intangibles.

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We determine if an arrangement is a lease at inception.

Our operating lease agreements relate to three ground lease assets and are reflected in right-of-use assets of $ 29.2 million and lease liabilities of $ 29.2 million in our consolidated balance sheet as of September 30, 2020 .

Our operating lease agreements relate to three ground lease assets and are reflected in right-of-use assets of $ 29.1 million and lease liabilities of $ 29.1 million in our consolidated balance sheet as of March 31, 2021.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

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2016-02, Leases (Topic 842), in determining the present value of lease payments.

The weighted average incremental borrowing rate used to calculate the right-of-use assets and lease liabilities as of September 30, 2020 was 4.5 % .

The weighted average incremental borrowing rate used to calculate the right-of-use assets and lease liabilities as of March 31, 2021 was 4.5 %.

Rent expense for lease payments related to our operating leases is recognized on a straight-line basis over the non-cancellable term of the leases.

The weighted average remaining lease term as of September 30, 2020 was 49.6 years.

As of September 30, 2020 , the following table summarizes our future minimum lease payments discounted by our incremental borrowing rates to calculate the lease liabilities of our leases (amounts in thousands):

The weighted average remaining lease term as of March 31, 2021 was 49.1 years.

As of March 31, 2021, the following table summarizes our future minimum lease payments discounted by our incremental borrowing rates to calculate the lease liabilities of our leases (amounts in thousands):

Remainder of 2021 $ 1,139

Thereafter 65,262

Total undiscounted cash flows 72,473

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Legal Proceedings

Except as described below, as of September 30, 2020 , we were not involved in any material litigation, nor, to our knowledge, was any material litigation threatened against us or our properties, other than routine litigation arising in the ordinary course of business such as disputes with tenants.

Except as described below, as of March 31, 2021, we were not involved in any material litigation, nor, to our knowledge, was any material litigation threatened against us or our properties, other than routine litigation arising in the ordinary course of business such as disputes with tenants.

We believe that the costs and related liabilities, if any, which may result from such actions will not materially affect our condensed consolidated financial position, operating results or liquidity.

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On August 26, 2020, the arbitration panel issued an award that denied all Claimants’ claims with one exception, on which it awarded Claimants approximately $ 1.2 million, inclusive of seven years of interest through October 2, 2020.

Respondents believe that such award in favor of the Claimants is entirely without merit, and are in active discussion about their next steps.

This amount was recorded as an IPO litigation expense in the consolidated statement of operations for the year ended December 31, 2020.

Respondents believe that such award in favor of the Claimants is entirely without merit, and have sought vacatur of that portion of the award.

In addition, certain of the Claimants in the federal court action sought to pursue claims in that case against Respondents.

Respondents believe that any such claims are meritless.

The magistrate judge assigned to the action has issued a Report and Recommendation rejecting Claimants’ claims;

the district judge will decide whether to adopt the Report and Recommendation.

Pursuant to indemnification agreements which were made with our directors, executive officers and chairman emeritus as part of our formation transactions, Anthony E.

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Unfunded Capital Expenditures

At September 30, 2020 , we estimate that we will incur approximately $ 130.1 million of capital expenditures (including tenant improvements and leasing commissions) on our properties pursuant to existing lease agreements.

At March 31, 2021, we estimate that we will incur approximately $ 99.3 million of capital expenditures (including tenant improvements and leasing commissions) on our properties pursuant to existing lease agreements.

We expect to fund these capital expenditures with operating cash flow, additional property level mortgage financings, our unsecured credit facility, cash on hand and other borrowings.

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Financial instruments that subject us to credit risk consist primarily of cash and cash equivalents, restricted cash, short-term investments, tenant and other receivables and deferred rent receivables.

At September 30, 2020 , we held on deposit at various major financial institutions cash and cash equivalents and restricted cash balances in excess of amounts insured by the Federal Deposit Insurance Corporation.

At March 31, 2021, we held on deposit at various major financial institutions cash and cash equivalents and restricted cash balances in excess of amounts insured by the Federal Deposit Insurance Corporation.

Asset Retirement Obligations

We are required to accrue costs that we are legally obligated to incur on retirement of our properties which result from acquisition, construction, development and/or normal operation of such properties.

Retirement includes sale, abandonment or

disposal of a property.

Retirement includes sale, abandonment or disposal of a property.

Under that standard, a conditional asset retirement obligation represents a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within a company’s control and a liability for a conditional asset retirement obligation must be recorded if the fair value of the obligation can be reasonably estimated.

Environmental site assessments and investigations have identified asbestos or asbestos-containing building materials in certain of our properties.

As of September 30, 2020 , management has no plans to remove or alter these properties in a manner that would trigger federal and other applicable regulations for asbestos removal, and accordingly, the obligations to remove the asbestos or asbestos-containing building materials from these properties have indeterminable settlement dates.

As of March 31, 2021, management has no plans to remove or alter these properties in a manner that would trigger federal and other applicable regulations for asbestos removal, and accordingly, the obligations to remove the asbestos or asbestos-containing building materials from these properties have indeterminable settlement dates.

As such, we are unable to reasonably estimate the fair value of the associated conditional asset retirement obligation.

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Certain of our properties have been inspected for soil contamination due to pollutants, which may have occurred prior to our ownership of these properties or subsequently in connection with its development and/or its use.

Required remediation to such properties has been completed, and as of September 30, 2020 , management believes that there are no obligations related to environmental remediation other than maintaining the affected sites in conformity with the relevant authority’s mandates and filing the required documents.

Required remediation to such properties has been completed, and as of March 31, 2021, management believes that there are no obligations related to environmental remediation other than maintaining the affected sites in conformity with the relevant authority’s mandates and filing the required documents.

All such maintenance costs are expensed as incurred.

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We carry insurance coverage on our properties of types and in amounts with deductibles that we believe are in line with coverage customarily obtained by owners of similar properties.

As of September 30, 2020 , there were 288,375,949 operating partnership units outstanding, of which 172,992,089 , or 60.0 % , were owned by ESRT and 115,383,860 , or 40.0 % , were owned by other partners, including ESRT directors, members of senior management and other employees.

As of March 31, 2021, there were 285,622,197 common stock and operating partnership units outstanding, of which 172,331,871 , or 60.3 %, were owned by ESRT and 113,290,326 , or 39.7 %, were owned by other partners, including ESRT directors, members of senior management and other employees.

On May 16, 2019, the Empire State Realty Trust, Inc.

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The vesting period for LTIP units, if any, will be determined at the time of issuance.

Under the terms of the LTIP units, we will revalue for tax purposes its assets upon the occurrence of certain specified events, and any increase in valuation from the time of grant until such event will be allocated first to the holders of LTIP units to equalize the capital accounts of such holders with the capital accounts of unitholders.

such holders with the capital accounts of unitholders.

Subject to any agreed upon exceptions, once vested and having achieved parity with unitholders, LTIP units are convertible into Series PR operating partnership units on a one-for-one basis.

LTIP units subject to time-based vesting, whether vested or not, receive the same per unit distributions as operating partnership units, which equal per share dividends (both regular and special) on our common stock.

Performance based LTIP units receive 10 % of such distributions currently, unless and until such LTIP units are earned based on performance, at which time they will receive the accrued and unpaid 90 % and will commence receiving 100 % of such distributions thereafter.

LTIP units subject to market-based vesting receive 10 % of such distributions currently, unless and until such LTIP units are earned based on performance, at which time they will receive the accrued and unpaid 90 % and will commence receiving 100 % of such distributions thereafter.

Stock and Publicly Traded Operating Partnership Unit Repurchase Program

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The authorization does not obligate ESRT or us to acquire any particular amount of securities, and the program may be suspended or discontinued at ESRT and our discretion without prior notice.

The following table summarizes ESRT's purchases of equity securities in each of the three months ended September 30, 2020 and the month of October 2020:

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plan

Maximum Approximate Dollar Value Available for Future Purchase (in thousands)

September 2020

The following table summarizes ESRT's purchases of equity securities in each of the three months ended March 31, 2021:

Period Total Number of Shares Purchased Weighted Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Approximate Dollar Value Available for Future Purchase (in thousands)

January 2021 337,339 $ 9.17 337,339 $ 496,908

February 2021 45,732 $ 9.65 45,732 $ 496,467

March 2021 — $ — — $ 496,467

Private Perpetual Preferred Units

As of September 30, 2020 , there were 4,664,038 Series 2019 Preferred Units ("Series 2019 Preferred Units") and 1,560,360 Series 2014 Private Perpetual Preferred Units ("Series 2014 Preferred Units").

As of March 31, 2021, there were 4,664,038 Series 2019 Preferred Units ("Series 2019 Preferred Units") and 1,560,360 Series 2014 Private Perpetual Preferred Units ("Series 2014 Preferred Units").

The Series 2019 Preferred Units have a liquidation preference of $ 13.52 per unit and are entitled to receive cumulative preferential annual cash distributions of $ 0.70 per unit payable in arrears on a quarterly basis.

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Distributions

Total distributions paid to OP unitholders were $ 0.0 million and $ 62.2 million for the three and nine months ended September 30, 2020 , respectively, and $ 31.9 million and $ 95.7 million for the three and nine months ended September 30, 2019, respectively.

Total distributions paid to preferred unitholders were $ 1.1 million and $ 3.1 million for the three and nine months ended September 30, 2020 , respectively, and $ 0.2 million and $ 0.7 million for the three and nine months ended September 30, 2019, respectively.

Total distributions paid to OP unitholders were $ 0.0 million and $ 31.6 million for the three months ended March 31, 2021 and 2020, respectively.

Total distributions paid to preferred unitholders were $ 1.1 million and $ 1.1 million for the three months ended March 31, 2021 and 2020, respectively.

Incentive and Share-Based Compensation

The Plans provide for grants to directors, employees and consultants consisting of stock options, restricted stock, dividend equivalents, stock payments, performance shares, LTIP units, stock appreciation rights and other incentive awards.

An aggregate of 11.0 million shares of ESRT common stock is authorized for issuance under awards granted pursuant to the 2019 Plan, and as of September 30, 2020 , 8.5 million shares of ESRT common stock remain available for future issuance.

An aggregate of 11.0 million shares of ESRT common stock is authorized for issuance under awards granted pursuant to the 2019 Plan, and as of March 31, 2021, 7.8 million shares of ESRT common stock remain available for future issuance.

In March 2021, we made grants of LTIP units to executive officers under the 2019 Plan.

At such time, we granted to executive officers a total of 745,155 LTIP units that are subject to time-based vesting and 3,358,767 LTIP units that are subject to market-based vesting, with fair market values of $ 5.6 million for the time-based vesting awards and $ 14.0 million for the market-based vesting awards.

In March 2020, we made grants of LTIP units and restricted stock to certain other employees

under the 2019 Plan.

At such time, we granted to executive officers a total of 364,199 LTIP units that are subject to time-based vesting and 1,007,156 LTIP units that are subject to market-based vesting, with fair market values of $ 3.4 million for the time-based vesting awards and $ 6.9 million for the

market-based vesting awards.

In March 2021, we made grants of LTIP units and restricted stock to certain other employees under the 2019 Plan.

At such time, we granted to certain other employees a total of 128,419 LTIP units and 113,333 shares of restricted stock that are subject to time-based vesting and 192,760 LTIP units that are subject to market-based vesting, with fair market values of $ 2.7 million for the time-based vesting awards and $ 1.5 million for the market-based vesting awards.

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The vesting of the LTIP units subject to market-based vesting is based on the achievement of relative total stockholder return hurdles over a three-year performance period, commencing on January 1, 2021.

Following the completion of the three -year performance period, our compensation committee will determine the number of LTIP units to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the award grant.

Following the completion of the three-year performance period, our Compensation and Human Capital Committee will determine the number of LTIP units to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the award grant.

These units then vest in two installments, with the first installment vesting on January 1, 2024 and the second installment vesting on January 1, 2025, subject generally to the grantee's continued employment on those dates.

Our named executive officers can elect to receive their annual incentive bonus in any combination of (i) cash or vested LTIP's at the face amount of such bonus or (ii) time-vesting LTIP's which would vest over three years , subject to continued employment, at 125 % of such face amount.

In March 2021, we also made one-time additional grants of LTIP units and restricted stock to an executive officer and certain other employees under the 2019 Plan.

At such time, we granted the executive officer 46,168 LTIP units that are subject to time-based vesting and we granted to certain other employees 85,409 LTIP units and 7,562 restricted stock that are subject to time-based vesting, with fair market values of $ 1.5 million.

These awards are subject to time-based vesting and vest over five years from January 1, 2021, subject generally to the grantee's continued employment.

The first installment vests 30 % on January 1, 2024, the second installment vests 30 % on January 1, 2025 and the remainder of 40 % will vest on January 1, 2026.

For awards granted in 2017, 2018, 2019 and 2020, our named executive officers can elect to receive their annual incentive bonus in any combination of (i) cash or vested LTIPs at the face amount of such bonus or (ii) time-vesting LTIPs which would vest over three years , subject to continued employment, at 125 % of such face amount.

For awards granted in 2021, the amounts vest at 120 % of such face amount.

In March 2021, we made grants of LTIP units to executive officers under the 2019 Plan in connection with the 2020 bonus election program.

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The first installment vests on January 1, 2022 and the remainder will vest thereafter in two equal annual installments.

In May 2020, we made grants of LTIP units under the 2019 Plan.

At such time, we granted our non-employee directors a total of 171,153 LTIP units that are subject to time-based vesting with fair market values of $ 1.1 million .

These awards vest ratably over three years from the date of the grant, subject generally to the director's continued service on our Board of Directors.

We also granted Christina Chiu, our Executive Vice President and Chief Financial Officer, a total of 82,199 LTIP units that are subject to time-based vesting and 116,927 LTIP units that are subject to market-based vesting, with fair market values of $ 0.5 million for the time-based vesting awards and $ 0.5 million for the market-based vesting awards.

We also granted certain other employees a total of 63,229 LTIP units that are subject to time-based vesting with a fair market value of $ 0.4 million .

The awards subject to time-based vesting vest ratably over three or four years from the date of grant, subject generally to the grantee's continued employment.

The first installment vests on the respective grant dates in May 2021 and the remainder will vest thereafter in two or three equal annual installments.

The vesting of the LTIP units subject to market-based vesting is based on the achievement of relative total stockholder return hurdles over a three -year performance period, commencing on May 7, 2020.

These units then vest in two installments, with the first installment vesting on May 7, 2023 and the second installment vesting on May 7, 2024, subject generally to the grantee's continued employment on those dates.

In August 2020, we granted R.

Paige Hood, our new non-employee director, a total of 25,242 LTIP units that are subject to time-based vesting with a fair market value of $ 0.2 million .

These awards vest ratably over three years from the date of the grant, subject generally to his continued service on our Board of Directors.

In COVID-19 disrupted markets during the first quarter of 2020, the LTIP units that are subject to market-based vesting were undervalued on initial appraisal, and the resulting number of LTIP units issued in March 2020 was reduced on final appraisal to match the original Board-approved dollar value.

In June 2020, we reduced the grants of LTIP units that are subject to market-based vesting which were awarded to executive officers and certain other employees by 666,933 LTIP units with fair market values of $ 2.8 million and 99,630 LTIP units with fair market values of $ 0.5 million , respectively.

In March 2020, we made grants of LTIP units to executive officers under the 2019 Plan.

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The first installment vests on January 1, 2021 and the remainder will vest thereafter in three equal annual installments.

The vesting of the LTIP units subject to market-based vesting is based on the achievement of relative total

stockholder return hurdles over a three -year performance period, commencing on January 1, 2019.

These units then vest in two installments, with the first installment vesting on January 1, 2023 and the second installment vesting on January 1, 2024, subject generally to the grantee's continued employment on those dates.

In March 2020, we made grants of LTIP units to executive officers under the 2019 Plan in connection with the 2019 bonus election program.

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The first installment vests on January 1, 2021 and the remainder will vest thereafter in two equal annual installments.

In October 2019 and May 2019, we made grants of LTIP units to our non-employee directors under the 2019 Plan.

In the aggregate, we granted a total of 76,718 LTIP units that are subject to time-based vesting with fair market values of $ 1.1 million .

The awards vest ratably over three years from May 17, 2019, subject generally to the director's continued service on our Board of Directors.

The first installment vests on May 17, 2020 and the remainder will vest thereafter in two equal annual installments.

Share-based compensation for time-based equity awards is measured at the fair value of the award on the date of grant and recognized as an expense on a straight-line basis over the shorter of (i) the stated vesting period, which is generally three or four years , or (ii) the period from the date of grant to the date the employee becomes retirement eligible, which may occur upon grant.

In May 2020, we made grants of LTIP units under the 2019 Plan.

At such time, we granted our non-employee directors a total of 171,153 LTIP units that are subject to time-based vesting with fair market values of $ 1.1 million.

These awards vest ratably over three years from the date of the grant, subject generally to the director's continued service on our Board of Directors.

We also granted Christina Chiu, our Executive Vice President and Chief Financial Officer, a total of 82,199 LTIP

units that are subject to time-based vesting and 116,927 LTIP units that are subject to market-based vesting, with fair market values of $ 0.5 million for the time-based vesting awards and $ 0.5 million for the market-based vesting awards.

We also granted certain other employees a total of 63,229 LTIP units that are subject to time-based vesting with a fair market value of $ 0.4 million.

The awards subject to time-based vesting vest ratably over three or four years from the date of grant, subject generally to the grantee's continued employment.

The first installment vests on the respective grant dates in May 2021 and the remainder will vest thereafter in two or three equal annual installments.

The vesting of the LTIP units subject to market-based vesting is based on the achievement of relative total stockholder return hurdles over a three-year performance period, commencing on May 7, 2020.

In December and August 2020, we granted Grant H.

Paige Hood, respectively, our new non-employee directors, a total of 31,117 LTIP units that are subject to time-based vesting with a fair market value of $ 0.2 million.

These awards vest ratably on each of the first three anniversaries of May 15, 2020, subject generally to their continued service on our Board of Directors.

Share-based compensation for time-based equity awards is measured at the fair value of the award on the date of grant and recognized as an expense on a straight-line basis over the shorter of (i) the stated vesting period, which is generally three , four or five years , or (ii) the period from the date of grant to the date the employee becomes retirement eligible, which may occur upon grant.

An employee is retirement eligible when the employee attains the (i) age of 65 and (ii) the date on which the employee has first completed ten years of continuous service with us or our affiliates.

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For LTIP unit awards that are time-based, the fair value of the awards was estimated based on the fair value of our stock at the grant date discounted for the restriction period during which the LTIP units cannot be redeemed or transferred and the uncertainty regarding if, and when, the book capital account of the LTIP units will equal that of the common units.

For restricted stock awards that are time-based, we estimate the stock compensation expense based on the fair value of the stock at the grant date.

LTIP units and ESRT restricted stock issued during the nine months ended September 30, 2020 were valued at $ 28.1 million .

For restricted stock awards, we estimate the stock compensation expense based on the fair value of the stock at the grant date.

LTIP units and ESRT restricted stock issued during the three months ended March 31, 2021 were valued at $ 18.3 million.

The weighted average per unit or share fair value was $ 8.38 for grants issued in 2021.

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No other stock options, dividend equivalents, or stock appreciation rights were issued or outstanding in 2021.

The following is a summary of ESRT restricted stock and LTIP unit activity for the nine months ended September 30, 2020 :

Restricted Stock

Weighted Average Grant Fair Value

The following is a summary of ESRT restricted stock and LTIP unit activity for the three months ended March 31, 2021:

Restricted Stock LTIP Units Weighted Average Grant Fair Value

Unvested balance at December 31, 2020 217,700 7,750,284 $ 6.94

Vested ( 70,338 ) ( 847,406 ) 11.94

Granted 120,895 2,059,840 8.38

Forfeited or unearned ( 9,495 ) ( 1,417,107 ) 5.47

Unvested balance at September 30, 2020

Unvested balance at March 31, 2021 258,762 7,545,611 $ 7.02

The LTIP unit and ESRT restricted stock awards are treated for accounting purposes as immediately vested upon the later of (i) the date the grantee attains the age of 60 or 65 , as applicable, and (ii) the date on which grantee has first completed ten years of continuous service with our company or its affiliates.

For award agreements that qualify, we recognize noncash compensation expense on the grant date for the time-based awards and ratably over the vesting period for the performance-based awards, and accordingly, we recognized $ 0.4 million and $ 2.3 million for the three and nine months ended September 30, 2020 , respectively, and $ 0.3 million and $ 1.8 million for the three and nine months ended September 30, 2019, respectively.

Unrecognized compensation expense was $ 1.7 million at September 30, 2020 , which will be recognized over a weighted average period of 2.3 years.

For the remainder of the LTIP unit and ESRT restricted stock awards, we recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized noncash compensation expense of $ 5.1 million and $ 17.9 million for the three and nine months ended September 30, 2020 , respectively, and $ 3.4 million and $ 13.6 million for the three and nine months ended September 30, 2019, respectively.

Unrecognized compensation expense was $ 31.4 million at September 30, 2020 , which will be recognized over a weighted average period of 2.3 years.

For award agreements that qualify, we recognize noncash compensation expense on the grant date for the time-based awards and ratably over the vesting period for the performance-based awards, and accordingly, we recognized $ 1.0 million and $ 1.6 million for the three months ended March 31, 2021 and 2020, respectively.

Unrecognized compensation expense was $ 2.1 million at March 31, 2021, which will be recognized over a weighted average period of 2.7 years.

For the remainder of the LTIP unit and ESRT restricted stock awards, we recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized noncash compensation expense of $ 3.8 million and $ 4.3 million for the three months ended March 31, 2021 and 2020, respectively.

Unrecognized compensation expense was $ 38.8 million at March 31, 2021, which will be recognized over a weighted average period of 2.7 years.

Earnings Per Unit

Earnings per unit for the three and nine months ended September 30, 2020 and 2019 is computed as follows (amounts in thousands, except per share amounts):

Earnings per unit for the three months ended March 31, 2021 and 2020 is computed as follows (amounts in thousands, except per share amounts):

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021 March 31, 2020

Net income (loss) $ ( 3,191 ) $ 8,288

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Weighted average units outstanding –- diluted 277,881 292,645

Earnings per share:

There were zero and 169,848 antidilutive shares and LTIP units for the three and nine months ended September 30, 2020 , respectively, and 452,457 and 288,053 antidilutive shares and LTIP units for the three and nine months ended September 30, 2019, respectively.

Earnings (loss) per share:

Basic $ ( 0.02 ) $ 0.02

Diluted $ ( 0.02 ) $ 0.02

There were 315,595 and 399,894 antidilutive shares and LTIP units for the three months ended March 31, 2021 and 2021, respectively .

Related Party Transactions

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We earned supervisory fees from entities affiliated with Anthony E.

Malkin, our Chairman and Chief Executive Officer, of $ 0.2 million and $ 0.2 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.7 million and $ 0.7 million for the nine months ended September 30, 2020 and 2019, respectively.

Malkin, our Chairman and Chief Executive Officer, of $ 0.2 million and $ 0.2 million for the three months ended March 31, 2021 and 2020, respectively.

These fees are included within third-party management and other fees.

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We earned property management fees from entities affiliated with Anthony E.

Malkin of $ 0.1 million and $ 0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.2 million and $ 0.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Malkin of $ 0.04 million and $ 0.1 million for the three months ended March 31, 2021 and 2020, respectively.

These fees are included within third-party management and other fees.

We receive rent generally at market rental rate for 5,447 square feet of leased space from entities affiliated with Anthony E.

We receive rent generally at the market rental rate for 5,447 square feet of leased space from entities affiliated with Anthony E.

Malkin at one of our properties.

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We also have agreements with these entities and excluded properties and businesses to provide them with general computer-related support services.

Total revenue aggregated $ 0.1 million and $ 0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.2 million and $ 0.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Total revenue aggregated $ 0.1 million and $ 0.1 million for the three months ended March 31, 2021 and 2020, respectively.

Segment Reporting

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We account for intersegment sales and rent as if the sales or rent were to third parties, that is, at current market prices.

The following tables provide components of segment profit for each segment for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands):

Three Months Ended September 30, 2020

Intersegment Elimination

The following tables provide components of segment net income (loss) for each segment for the three and three months ended March 31, 2021 and 2020 (amounts in thousands):

Three Months Ended March 31, 2021

Real Estate Observatory Intersegment Elimination Total

Rental revenue $ 140,231 $ — $ — $ 140,231

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Real estate taxes 31,447 — — 31,447

Impairment charge

Depreciation and amortization 44,419 38 — 44,457

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Total operating income (loss)

25,304 ( 6,955 ) — 18,349

Other income (expense):

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Loss on early extinguishment of debt

IPO litigation expense

( 214 ) — — ( 214 )

Income (loss) before income taxes 1,656 ( 6,953 ) — ( 5,297 )

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Expenditures for segment assets $ 23,331 $ 4 $ — $ 23,335

Three Months Ended September 30, 2019

Intersegment Elimination

Three Months Ended March 31, 2020

Real Estate Observatory Intersegment Elimination Total

Rental revenue $ 148,113 $ — $ — $ 148,113

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Total operating income

Other income (expense):

Interest income

Interest expense

Income before income taxes

Income tax expense

Segment assets

Expenditures for segment assets

Nine Months Ended September 30, 2020

Intersegment Elimination

Rental revenue

Intercompany rental revenue

Observatory revenue

Lease termination fees

Third-party management and other fees

Other revenue and fees

Total revenues

Operating expenses:

Property operating expenses

Intercompany rent expense

Ground rent expense

General and administrative expenses

Observatory expenses

Real estate taxes

Impairment charges

Depreciation and amortization

Total operating expenses

Total operating income (loss)

27,127 ( 154 ) — 26,973

Other income (expense):

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Loss on early extinguishment of debt

IPO litigation expense

Loss before income taxes

Income tax (expense) benefit

Expenditures for segment assets

Nine Months Ended September 30, 2019

Intersegment Elimination

Rental revenue

Intercompany rental revenue

Observatory revenue

Lease termination fees

Third-party management and other fees

Other revenue and fees

Total revenues

Operating expenses:

Property operating expenses

Intercompany rent expense

Ground rent expense

General and administrative expenses

Observatory expenses

Real estate taxes

Depreciation and amortization

Total operating expenses

Total operating income

Other income (expense):

Interest income

Interest expense

( 86 ) — — ( 86 )

Income before income taxes 8,060 ( 154 ) — 7,906

Income tax expense

Income tax (expense) benefit ( 227 ) 609 — 382

Net income $ 7,833 $ 455 $ — $ 8,288

Segment assets $ 4,409,281 $ 255,277 $ — $ 4,664,558

Expenditures for segment assets $ 26,570 $ 1,237 $ — $ 27,807

During the second quarter 2020, we wrote-off $ 4.1 million of prior expenditures on a potential energy efficiency project in our real estate segment that is not economically feasible in today's regulatory environment.

During the third quarter 2020, we also wrote off $ 2.1 million of prior expenditures on a build-to-suit development project in our real estate segment that was halted due to reconsideration by the user driven by the COVID-19 pandemic.

For the nine months ended September 30, 2020, the total $ 6.2 million write-off is shown as Impairment charge in the condensed consolidated statements of operations.

Subsequent Events

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

What changed 10-Q

Item 1. Financial Statements