What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-07 · 234 added, 194 removed, 557 unchanged (43% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

March 31, 2021 December 31, 2020

(amounts in thousands, except per unit amounts)

June 30, 2021 December 31, 2020

ASSETS (unaudited)

29 unchanged sentences

Private perpetual preferred units:

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

Private perpetual preferred units, $ 13.52 liquidation preference, 4,664 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

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

Series PR operating partnership units:

15 unchanged sentences

(amounts in thousands, except per unit amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Rental revenue $ 140,797 $ 137,999 $ 281,028 $ 286,112

10 unchanged sentences

Real estate taxes 31,354 29,579 62,801 58,833

Impairment charges — 4,101 — 4,101

Depreciation and amortization 45,088 52,783 89,545 98,876

20 unchanged sentences

Empire State Realty OP, L.P.

Condensed Consolidated Statements of Comprehensive Loss

Condensed Consolidated Statements of Comprehensive Income (Loss)

(amounts in thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net income (loss) $ 4,411 $ ( 19,618 ) $ 1,220 $ ( 11,330 )

7 unchanged sentences

Condensed Consolidated Statements of Capital

For The Three Months Ended March 31, 2021 and 2020

For The Three Months Ended June 30, 2021 and 2020

(amounts in thousands)

2 unchanged sentences

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

Issuance of OP units, net of costs — — — — — — — — — — — — —

Conversion of operating partnership units to ESRT Partner's Capital

— — 1,074 4,173 ( 521 ) ( 4,212 ) ( 347 ) 17 ( 141 ) 15 ( 65 ) 7 —

Repurchases of common shares — — — — — — — — — — — — —

Equity compensation — — ( 6 ) 240 106 5,064 — — — — — — 5,304

Distributions — ( 1,051 ) — ( 6,063 ) — ( 2,262 ) — ( 806 ) — ( 215 ) — ( 108 ) ( 10,505 )

Net income — 1,051 — 2,075 — 887 — 282 — 79 — 37 4,411

Other comprehensive income — — — 1,739 — 742 — 233 — 59 — 30 2,803

Balance at June 30, 2021 6,224 $ 29,940 173,400 $ 1,055,659 80,241 $ 650,473 22,923 $ ( 1,692 ) 6,112 $ ( 789 ) 3,045 $ ( 383 ) $ 1,733,208

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

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

Issuance of OP units, net of costs — — —

Conversion of operating partnership units to ESRT Partner's Capital

— — 2,717 13,955 ( 1,779 ) ( 13,875 ) ( 830 ) ( 76 ) ( 48 ) ( 2 ) ( 60 ) ( 2 ) —

Repurchases of common shares — — ( 6,500 ) ( 51,939 ) — — — — — — — — ( 51,939 )

Equity compensation — — 2 231 ( 355 ) 8,548 — — — — — — 8,779

Distributions — ( 1,047 ) — ( 18,194 ) — ( 8,770 ) — ( 2,587 ) — ( 712 ) — ( 358 ) ( 31,668 )

Net income (loss) — 1,047 — ( 12,793 ) — ( 5,316 ) — ( 1,812 ) — ( 496 ) — ( 248 ) ( 19,618 )

Other comprehensive income — — — 377 — 155 — 53 — 15 — 8 608

Balance at June 30, 2020 6,224 $ 29,940 173,347 $ 1,080,221 82,766 $ 647,520 24,529 $ ( 770 ) 6,776 $ ( 588 ) 3,405 $ ( 285 ) $ 1,756,038

Empire State Realty OP, L.P.

Condensed Consolidated Statements of Capital

For The Six Months Ended June 30, 2021 and 2020

(amounts in thousands)

General Partner Limited Partners

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

5 unchanged sentences

Distributions — ( 2,101 ) — ( 6,063 ) — ( 2,262 ) — ( 806 ) — ( 215 ) — ( 108 ) ( 11,555 )

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 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

Net income (loss) — 2,101 — ( 546 ) — ( 232 ) — ( 74 ) — ( 19 ) — ( 10 ) 1,220

Other comprehensive income — — — 3,553 — 1,508 — 481 — 126 — 63 5,731

Balance at June 30, 2021 6,224 $ 29,940 173,400 $ 1,055,659 80,241 $ 650,473 22,923 $ ( 1,692 ) 6,112 $ ( 789 ) 3,045 $ ( 383 ) $ 1,733,208

8 unchanged sentences

Distributions — ( 2,097 ) — ( 37,181 ) — ( 17,619 ) — ( 5,264 ) — ( 1,435 ) — ( 723 ) ( 64,319 )

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 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

Net income (loss) — 2,097 — ( 8,298 ) — ( 3,464 ) — ( 1,182 ) — ( 322 ) — ( 161 ) ( 11,330 )

Other comprehensive loss — — — ( 10,117 ) — ( 4,171 ) — ( 1,417 ) — ( 391 ) — ( 195 ) ( 16,291 )

Balance at June 30, 2020 6,224 $ 29,940 173,347 $ 1,080,221 82,766 $ 647,520 24,529 $ ( 770 ) 6,776 $ ( 588 ) 3,405 $ ( 285 ) $ 1,756,038

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

2 unchanged sentences

(amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows From Operating Activities

2 unchanged sentences

Depreciation and amortization 89,545 98,876

Impairment charges — 4,101

Amortization of non-cash items within interest expense 5,398 4,233

3 unchanged sentences

Equity based compensation 10,038 14,670

Settlement of derivative contract — ( 20,281 )

Loss on early extinguishment of debt 214 86

15 unchanged sentences

(amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows From Financing Activities

37 unchanged sentences

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

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

As of June 30, 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 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.

As of June 30, 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 March 31, 2021, ESRT owned approximately 60.3 % of our operating partnership units.

As of June 30, 2021, ESRT owned approximately 60.7 % of our operating partnership units.

Summary of Significant Accounting Policies

13 unchanged sentences

The primary beneficiary is required to consolidate the VIE.

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

We had no VIEs as of June 30, 2021 and December 31, 2020.

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

21 unchanged sentences

Deferred Costs, Acquired Lease Intangibles and Goodwill

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

Deferred costs, net, consisted of the following as of June 30, 2021 and December 31, 2020 (amounts in thousands):

June 30, 2021 December 31, 2020

Leasing costs $ 205,599 $ 203,905

4 unchanged sentences

Total deferred costs, net, excluding net deferred financing costs $ 192,409 $ 201,721

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

At June 30, 2021 and December 31, 2020, $ 8.3 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 sheets.

Amortization expense related to deferred leasing costs and acquired deferred leasing costs was $ 6.1 million and $ 6.4 million for the three months ended June 30, 2021 and 2020, respectively, and $ 11.7 million and $ 12.3 million for the six months ended June 30, 2021 and 2020, respectively.

Amortization expense related to acquired lease intangibles was $ 1.6 million and $ 2.4 million for the three months ended June 30, 2021 and 2020, respectively, and $ 3.3 million and $ 4.4 million for the six months ended June 30, 2021 and 2020, respectively.

Amortizing acquired intangible assets and liabilities consisted of the following as of June 30, 2021 and December 31, 2020 (amounts in thousands):

June 30, 2021 December 31, 2020

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

1 unchanged sentence

Acquired below-market ground leases, net $ 340,820 $ 344,735

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Acquired below-market leases $ ( 75,082 ) $ ( 78,451 )

1 unchanged sentence

Acquired below-market leases, net $ ( 28,532 ) $ ( 31,705 )

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.

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $ 0.7 million and $ 1.4 million for the three months ended June 30, 2021 and 2020, respectively, and $ 1.4 million and $ 2.3 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 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.

6 unchanged sentences

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.

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 15.0 %.

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 March 31, 2021 and December 31, 2020 (amounts in thousands):

Principal Balance As of March 31, 2021

March 31, 2021 December 31, 2020 Stated

Debt consisted of the following as of June 30, 2021 and December 31, 2020 (amounts in thousands):

Principal Balance As of June 30, 2021

June 30, 2021 December 31, 2020 Stated

Rate Effective

34 unchanged sentences

______________

(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.

(1) The effective rate is the yield as of June 30, 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 %.

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

(4) At June 30, 2021, we were in compliance with all debt covenants.

Principal Payments

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

Aggregate required principal payments at June 30, 2021 are as follows (amounts in thousands):

Year Amortization Maturities Total

7 unchanged sentences

Deferred Financing Costs

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

Deferred financing costs, net, consisted of the following at June 30, 2021 and December 31, 2020 (amounts in thousands):

June 30, 2021 December 31, 2020

Financing costs $ 42,689 $ 35,365

1 unchanged sentence

Total deferred financing costs, net $ 22,351 $ 17,367

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.

Amortization expense related to deferred financing costs was $ 1.1 million and $ 1.0 million for the three months ended June 30, 2021 and 2020, respectively, and $ 2.3 million and $ 2.0 million for the six months ended June 30, 2021 and 2020, respectively.

Unsecured Revolving Credit and Term Loan Facilities

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.

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.

On March 19, 2020, we entered into a senior unsecured term loan facility (the “Term Loan Facility”) with Wells Fargo Bank, National Association, as administrative agent, Wells Fargo Securities, LLC as sole bookrunner, Wells Fargo Securities, LLC, Capital One, National Association, U.S.

Bank National Association and SunTrust Robinson Humphrey, Inc.

as Joint Lead Arrangers, Capital One, National Association, as syndication agent, U.S.

Bank National Association and Truist Bank, as documentation agents, and the lenders party thereto.

The Term Loan Facility is in the original principal amount of $ 175 million which we borrowed in full at closing.

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 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 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.

As described more fully in our Form 10-Q for the quarterly period ended March 31, 2021 (the "Q1 2021 10-Q"), in Q1 2021,we entered into an amended senior unsecured credit facility (the "Credit Facility") with Bank of America, N.A., as administrative agent and the other lenders party thereto.

The Credit Facility is in the initial maximum principal amount of up to $ 1.065 billion, which consists of $ 850.0 million revolving credit facility that matures on March 31, 2025, and a $ 215.0 million term loan facility that matures on March 19, 2025.

As of June 30, 2021, we had no borrowings under the revolving credit facility and $ 215.0 million under the term loan facility.

Additionally, as described more fully in the Q1 2021 10-Q, we have outstanding a senior unsecured term loan facility (the "Term Loan Facility") that we entered into on March 19, 2020 with Wells Fargo Bank, National Association, as administrative agent, and the other lenders party thereto.

The Term loan Facility is in the original principal amount of $ 175.0 million and matures on December 31, 2026.

As of June 30, 2021, our borrowings amounted to $ 175.0 million under the Term Loan Facility.

The terms of both the Credit Facility and the Term Loan Facility include customary covenants, including limitations on liens, investment, distributions, debt, fundamental changes, and transactions with affiliates and require certain customary financial reports.

It also requires compliance with financial ratios including a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a minimum unencumbered interest coverage ratio, and a maximum unsecured leverage ratio.

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

Both facilities also require compliance with financial ratios including a maximum leverage ratio, a maximum secured leverage ratio, a minimum fixed charge coverage ratio, a minimum unencumbered interest coverage ratio, and a maximum unsecured leverage ratio.

The agreements governing both facilities also contain 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 June 30, 2021, we were in compliance with the covenants.

Senior Unsecured Notes

On March 17, 2020, we entered into an agreement to issue and sell an aggregate $ 175 million of senior unsecured notes, consisting of (a) $ 100 million aggregate principal amount of 3.61 % Series G Senior Notes due March 17, 2032 (the “Series G Notes”) and (b) $ 75 million aggregate principal amount of 3.73 % Series H Senior Notes due March 17, 2035 (the “Series H Notes”).

The issue price for the Series G and H Notes was 100 % of the aggregate principal amount thereof.

The terms of the Series G and H Notes agreement include customary covenants, including limitations on liens, investment, distributions, debt, fundamental changes, and transactions with affiliates and require certain customary financial reports.

The terms of the senior unsecured notes include customary covenants, including limitations on liens, investment, distributions, debt, fundamental changes, and transactions with affiliates and require certain customary financial reports.

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

The agreements also contain 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 June 30, 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 March 31, 2021 and December 31, 2020 (amounts in thousands):

March 31, 2021 December 31, 2020

Accounts payable and accrued expenses consisted of the following as of June 30, 2021 and December 31, 2020 (amounts in thousands):

June 30, 2021 December 31, 2020

Accrued capital expenditures $ 52,891 $ 58,057

12 unchanged sentences

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 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.

As of June 30, 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 $ 6.2 million.

If we had breached any of these provisions at June 30, 2021, we could have been required to settle our obligation under the agreement at its termination value of $ 6.2 million.

As of June 30, 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 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.

As of June 30, 2021 and December 31, 2020, the fair value of our derivative instrument amounted to $( 6.2 ) 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.

As of June 30, 2021 and 2020, our cash flow hedge is deemed highly effective and a net unrealized gain (loss) of $ 2.8 million and $ 0.6 million for the three months ended June 30, 2021 and 2020, respectively, and a net unrealized gain (loss) of $ 5.7 million and $( 16.3 ) million for the six months ended June 30, 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 (loss).

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 March 31, 2021 and December 31, 2020 (dollar amounts in thousands):

March 31, 2021 December 31, 2020

The table below summarizes the terms of agreements and the fair values of our derivative financial instruments as of June 30, 2021 and December 31, 2020 (dollar amounts in thousands):

June 30, 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 $ — $ ( 6,176 ) $ — $ ( 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

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

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 six months ended June 30, 2021 and 2020 (amounts in thousands):

Three Months Ended Six Months Ended

Effects of Cash Flow Hedges June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Amount of gain (loss) recognized in other comprehensive income (loss) $ ( 95 ) $ ( 1,709 ) $ ( 36 ) $ ( 19,404 )

Amount of gain (loss) reclassified from accumulated other comprehensive (loss) into interest expense ( 2,898 ) ( 2,317 ) ( 5,767 ) ( 3,113 )

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

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

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 six months ended June 30, 2021 and 2020 (amounts in thousands):

Three Months Ended Six Months Ended

Effects of Cash Flow Hedges June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Total interest (expense) presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded $ ( 23,422 ) $ ( 23,928 ) $ ( 46,976 ) $ ( 43,546 )

1 unchanged sentence

Fair Valuation

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

The estimated fair values at June 30, 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.

4 unchanged sentences

The impact of such credit valuation adjustments, determined based on the fair value of each individual contract, was not significant to the overall valuation.

As a result, all of our derivatives were classified as Level 2 of the fair value hierarchy.

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 March 31, 2021 and December 31, 2020 (amounts in thousands):

March 31, 2021

As a result, all our derivatives were classified as Level 2 of the fair value hierarchy.

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 and unsecured revolving credit facility 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 June 30, 2021 and December 31, 2020 (amounts in thousands):

June 30, 2021

Estimated Fair Value

11 unchanged sentences

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.

Disclosure about the fair value of financial instruments is based on pertinent information available to us as of June 30, 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 March 31, 2021 and 2020 condensed consolidated statements of operations as rental revenue.

Operating expense reimbursements are reflected in our June 30, 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 months ended March 31, 2021 and 2020 are as follows (amounts in thousands):

Three Months Ended

Rental revenue March 31, 2021 March 31, 2020

The components of rental revenue for the three and six months ended June 30, 2021 and 2020 are as follows (amounts in thousands):

Three Months Ended Six Months Ended

Rental revenue June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Fixed payments $ 124,432 $ 122,393 $ 250,204 $ 252,906

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Total rental revenue $ 140,797 $ 137,999 $ 281,028 $ 286,112

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):

As of June 30, 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 2039 (amounts in thousands):

Remainder of 2021 $ 247,138

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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 $ 29.1 million and lease liabilities of $ 29.1 million in our consolidated balance sheet as of March 31, 2021.

Our operating lease agreements relate to three ground lease assets and are reflected in right-of-use assets of $ 29.0 million and lease liabilities of $ 29.0 million in our consolidated balance sheets as of June 30, 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 March 31, 2021 was 4.5 %.

The weighted average incremental borrowing rate used to calculate the right-of-use assets and lease liabilities as of June 30, 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 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):

The weighted average remaining lease term as of June 30, 2021 was 48.9 years.

As of June 30, 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 $ 759

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Legal Proceedings

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.

Except as described below, as of June 30, 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.

As previously disclosed, in October 2014, 12 former investors (the "Claimants") in Empire State Building Associates L.L.C.

(“ESBA”), which prior to the initial public offering of our company (the "Offering"), owned the fee title to the Empire State Building, filed an arbitration with the American Arbitration Association against Peter L.

(“ESBA”), which prior to the initial public offering of our company (the "Offering"), owned the fee title to the Empire

State Building, filed an arbitration with the American Arbitration Association against Peter L.

Malkin, Anthony E.

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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.

Respondents believe that such award in favor of the Claimants is entirely without merit and have sought to vacate 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.

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Unfunded Capital Expenditures

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.

At June 30, 2021, we estimate that we will incur approximately $ 89.1 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 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.

At June 30, 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

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

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 of June 30, 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 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.

Required remediation to such properties has been completed, and as of June 30, 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.

We expect that resolution of the environmental matters relating to the above will not have a material impact on our business, assets, consolidated financial condition, results of operations or liquidity.

We expect that resolution of the environmental matters relating to the above will not have a material impact on our business, assets, consolidated financial

condition, results of operations or liquidity.

However, we cannot be certain that we have identified all environmental liabilities at our properties, that all necessary remediation actions have been or will be undertaken at our properties or that we will be indemnified, in full or at all, in the event that such environmental liabilities arise.

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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 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.

As of June 30, 2021, there were 285,722,956 common stock and operating partnership units outstanding, of which 173,400,552 , or 60.7 %, were owned by ESRT and 112,322,404 , or 39.3 %, 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.

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.

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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 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

There were no purchases of equity securities during the three months ended June 30, 2021.

Private Perpetual 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").

As of June 30, 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 $ 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.

Total distributions paid to OP unitholders were $ 9.5 million and $ 9.5 million for the three and six months ended June 30, 2021, respectively, and $ 30.6 million and $ 62.2 million for the three and six months ended June 30, 2020, respectively.

Total distributions paid to preferred unitholders were $ 1.1 million and $ 2.1 million for the three and six months ended June 30, 2021, respectively, and $ 1.0 million and $ 2.1 million for the three and six months ended June 30, 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 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 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.

The awards subject to time-based vesting vest ratably over four years from January 1, 2021, subject generally to the grantee's continued employment.

The first installment vests on January 1, 2022 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, 2021.

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.

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.

We granted to executive officers a total of 235,729 LTIP units that are subject to time-based vesting with a fair market value of $ 2.2 million.

Of these LTIP units, 39,472 LTIP units vested immediately on the grant date and 196,257 LTIP units vest ratably over three years from January 1, 2021, subject generally to the grantee's continued employment.

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

In March 2020, 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 certain other employees a total of 113,971 LTIP units and 158,806 shares of restricted stock that are subject to time-based vesting and 502,475 LTIP units that are subject to market-based vesting, with fair market values of $ 2.3 million for the time-based vesting awards and $ 2.3 million for the market-based vesting awards.

The awards subject to time-based vesting vest ratably over four years from January 1, 2020, subject generally to the grantee's continued employment.

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

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.

We granted to executive officers a total of 624,380 LTIP units that are subject to time-based vesting with a fair market value of $ 4.4 million.

Of these LTIP units, 23,049 LTIP units vested immediately on the grant date and 601,331 LTIP units vest ratably over three years from January 1, 2020, subject generally to the grantee's continued employment.

The first installment vests on January 1, 2021 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 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.

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.

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 June 30, 2021, 7.7 million shares of ESRT common stock remain available for future issuance.

Annually, we make grants of LTIP units to our non-employee directors under the 2019 Plan.

In 2021, each of our directors received 60 % of their $ 200,000 annual base retainer in the form of equity vesting ratably over four years , and could elect to receive the remaining 40 % of such base retainer (i) in cash at the face value of the award, (ii) in immediately vesting equity at the face value of the award, or (iii) in equity vesting ratably over three years at 120 % of the face amount.

Each director could elect to receive any equity portion of the base retainer in either (i) LTIP units or (ii) restricted shares of our Class A common stock.

In accordance with each director's election, we granted a total of 126,713 LTIP units that are subject to time-based vesting with fair market values of $ 1.4 million and no restricted shares.

The LTIP units vest ratably over three or four years from the date of the grant, based on grantee election, subject generally to the director's continued service on our Board of Directors.

We also granted 8,324 LTIP units that are subject to immediate vesting with fair market values of $ 0.1 million.

In COVID-19 disrupted markets which created unusual volatility in our share price 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.

Thus, 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.

Such volatility was not material in 2021, and no such adjustment was needed in 2021.

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.

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Our stock price, along with the prices of the comparative indexes, is assumed to follow the Geometric Brownian Motion Process.

Geometric Brownian Motion is a common assumption when modeling in financial markets, as it allows the modeled quantity (in this case the stock price) to vary randomly from its current value and take any value greater than zero.

Geometric Brownian Motion is a common assumption when modeling in financial markets, as it allows the modeled quantity (in this case

the stock price) to vary randomly from its current value and take any value greater than zero.

The volatilities of the returns on our stock price and the comparative indexes were estimated based on implied volatilities and historical volatilities using a six-year look-back period.

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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.

LTIP units and ESRT restricted stock issued during the six months ended June 30, 2021 were valued at $ 19.8 million.

The weighted average per unit or share fair value was $ 8.55 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 three months ended March 31, 2021:

The following is a summary of ESRT restricted stock and LTIP unit activity for the six months ended June 30, 2021:

Restricted Stock LTIP Units Weighted Average Grant Fair Value

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Forfeited or unearned ( 14,540 ) ( 1,445,621 ) 5.56

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

Unvested balance at June 30, 2021 252,824 7,508,160 $ 7.04

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 $ 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.

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 $ 1.4 million for the three and six months ended June 30, 2021, respectively, and $ 0.3 million and $ 1.9 million for the three and six months ended June 30, 2020, respectively.

Unrecognized compensation expense was $ 2.3 million at June 30, 2021, which will be recognized over a weighted average period of 2.5 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 $ 4.8 million and $ 8.6 million for the three and six months ended June 30, 2021, respectively, and $ 8.5 million and $ 12.8 million for the three and six months ended June 30, 2020, respectively.

Unrecognized compensation expense was $ 34.7 million at June 30, 2021, which will be recognized over a weighted average period of 2.5 years.

Earnings Per Unit

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

March 31, 2021 March 31, 2020

Earnings per unit for the three and six months ended June 30, 2021 and 2020 is computed as follows (amounts in thousands, except per share amounts):

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Net income (loss) $ 4,411 $ ( 19,618 ) $ 1,220 $ ( 11,330 )

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Diluted $ 0.01 $ ( 0.07 ) $ 0.00 $ ( 0.05 )

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

There were 1,051,016 and 954,584 antidilutive shares and LTIP units for the three and six months ended June 30, 2021, respectively, and 109,649 and 254,772 antidilutive shares and LTIP units for the three and six months ended June 30, 2020, 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 March 31, 2021 and 2020, respectively.

Malkin, our Chairman and Chief Executive Officer, of $ 0.3 million and $ 0.2 million for the three months ended June 30, 2021 and 2020, respectively, and $ 0.5 million and $ 0.5 million for the six months ended June 30, 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 $ 0.04 million and $ 0.1 million for the three months ended March 31, 2021 and 2020, respectively.

Malkin of $ 0.1 million and $ 0.1 million for the three months ended June 30, 2021 and 2020, respectively, and $ 0.1 million and $ 0.2 million for the six months ended June 30, 2021 and 2020, respectively.

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

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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 March 31, 2021 and 2020, respectively.

Total revenue aggregated $ 0.1 million and $ 0.1 million for the three months ended June 30, 2021 and 2020, respectively, and $ 0.2 million and $ 0.2 million for the six months ended June 30, 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 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

The following tables provide components of segment net income (loss) for each segment for the three and six months ended June 30, 2021 and 2020 (amounts in thousands):

Three Months Ended June 30, 2021

Real Estate Observatory Intersegment Elimination Total

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Interest expense ( 23,422 ) — — ( 23,422 )

Loss on early extinguishment of debt

( 214 ) — — ( 214 )

Income (loss) before income taxes 6,185 ( 2,959 ) — 3,226

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Expenditures for segment assets $ 19,975 $ — $ — $ 19,975

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Real Estate Observatory Intersegment Elimination Total

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Real estate taxes 29,579 — — 29,579

Impairment charges 4,101 — — 4,101

Depreciation and amortization 52,758 25 — 52,783

Total operating expenses 136,669 8,080 ( 4,053 ) 140,696

Total operating income

Total operating income (loss) 8,328 ( 7,994 ) — 334

Other income (expense):

Interest income 1,441 85 — 1,526

Interest expense ( 23,928 ) — — ( 23,928 )

Loss before income taxes ( 14,159 ) ( 7,909 ) — ( 22,068 )

Income tax (expense) benefit ( 269 ) 2,719 — 2,450

Net loss $ ( 14,428 ) $ ( 5,190 ) $ — $ ( 19,618 )

Segment assets $ 4,305,105 $ 245,290 $ — $ 4,550,395

Expenditures for segment assets $ 20,100 $ 995 $ — $ 21,095

Six Months Ended June 30, 2021

Real Estate Observatory Intersegment Elimination Total

Rental revenue $ 281,028 $ — $ — $ 281,028

Intercompany rental revenue 10,961 — ( 10,961 ) —

Observatory revenue — 10,962 — 10,962

Lease termination fees 4,628 — — 4,628

Third-party management and other fees 603 — — 603

Other revenue and fees 1,491 — — 1,491

Total revenues 298,711 10,962 ( 10,961 ) 298,712

Operating expenses:

Property operating expenses 59,072 — — 59,072

Intercompany rent expense — 10,961 ( 10,961 ) —

Ground rent expense 4,663 — — 4,663

General and administrative expenses 27,942 — — 27,942

Observatory expenses — 9,856 — 9,856

Real estate taxes 62,801 — — 62,801

Depreciation and amortization 89,485 60 — 89,545

Total operating expenses 243,963 20,877 ( 10,961 ) 253,879

Total operating income (loss)

54,748 ( 9,915 ) — 44,833

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( 214 ) — — ( 214 )

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

Income (loss) before income taxes 7,841 ( 9,912 ) — ( 2,071 )

Income tax (expense) benefit ( 418 ) 3,709 — 3,291

Net income $ 7,833 $ 455 $ — $ 8,288

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

Net income (loss) $ 7,423 $ ( 6,203 ) $ — $ 1,220

Expenditures for segment assets $ 43,307 $ 4 $ — $ 43,311

Six Months Ended June 30, 2020

Real Estate Observatory Intersegment Elimination Total

Rental revenue $ 286,112 $ — $ — $ 286,112

Intercompany rental revenue 15,589 — ( 15,589 ) —

Observatory revenue — 19,630 — 19,630

Lease termination fees 1,244 — — 1,244

Third-party management and other fees 647 — — 647

Other revenue and fees 3,621 — — 3,621

Total revenues 307,213 19,630 ( 15,589 ) 311,254

Operating expenses:

Property operating expenses 71,218 — — 71,218

Intercompany rent expense — 15,589 ( 15,589 ) —

Ground rent expense 4,663 — — 4,663

General and administrative expenses 34,100 — — 34,100

Observatory expenses — 12,156 — 12,156

Real estate taxes 58,833 — — 58,833

Impairment charges 4,101 — — 4,101

Depreciation and amortization 98,843 33 — 98,876

Total operating expenses 271,758 27,778 ( 15,589 ) 283,947

Total operating income (loss) 35,455 ( 8,148 ) — 27,307

Other income (expense):

Interest income 2,078 85 — 2,163

Interest expense ( 43,546 ) — — ( 43,546 )

Loss on early extinguishment of debt

( 86 ) — — ( 86 )

Loss before income taxes ( 6,099 ) ( 8,063 ) — ( 14,162 )

Income tax (expense) benefit ( 496 ) 3,328 — 2,832

Net loss $ ( 6,595 ) $ ( 4,735 ) $ — $ ( 11,330 )

Expenditures for segment assets $ 46,672 $ 2,232 $ — $ 48,904

During the second quarter 2020, we wrote off $ 4.1 million of prior expenditures on a Combined Heat Power/Redundancy onsite power generation project in our real estate segment that is rendered economically unviable due to New York City's Local Law 97 and from its measurement of carbon from natural gas combustion generates fines.

For the three and six months ended June 30, 2020, the $ 4.1 million write-off is shown as an impairment charge in the condensed consolidated statements of operations.

Subsequent Events

On July 29, 2021, GBG USA Inc., an indirect wholly-owned subsidiary of Global Brands Group Holding Limited, announced that its North America wholesale business and certain subsidiaries and affiliates (collectively, “GBG USA”) filed for bankruptcy under Chapter 11.

At the time of the filing, GBG USA leased 353,325 square feet of office space at 1333 Broadway and the Empire State Building, or 3.5 %, of our total portfolio rentable square feet , representing approximately 3.6 % of total portfolio annualized rent.

Of that total, all but 191,000 square feet, or 1.9 % of our total portfolio rentable square feet, has been sublet to tenants, where both GBG USA and the subtenant are liable for the rent, and we have the right to require the subtenant to pay directly to us.

The sublets are for GBG USA’s entire premises at 1333 Broadway and have been in effect for several years.

We have current discussions to convert the subtenants to direct tenants.

We collected rent from GBG USA through June 2021 and have converted the full balance of its $ 17.0 million letter of credit to cash, which we will apply against amounts due to us.

In the short-term, we expect the current circumstances will cause us to record in the third quarter a non-cash write-off of $ 1.6 million in straight line rent receivables.

We actively monitor these developments to review our alternatives.

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