What changed in this filing

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Item 1. Business

2022-02-25 compared with 2021-02-26 · 56 added, 119 removed, 195 unchanged (47% of the section changed)

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("ESRT"), a self-administered and self-managed real estate investment trust ("REIT") conducts all of its business and owns (either directly or through subsidiaries) substantially all of its assets.

We own, manage, operate, acquire and reposition office and retail properties in Manhattan and the greater New York metropolitan area, including the Empire State Building, the world's most famous building.

We own and manage a well-positioned property portfolio of office, retail and multifamily assets in Manhattan and the greater New York metropolitan area.

As the owner of the Empire State Building, the World’s Most Famous Building, ESRT also owns and operates its iconic, newly reimagined Observatory Experience.

Empire State Realty Trust, Inc.'s Class A common stock, par value $0.01 per share, is listed on the New York Stock Exchange under the symbol "ESRT."

As of December 31, 2020, our total portfolio, contained 10.1 million rentable square feet of office and retail space, and was 85.9% occupied.

Including signed leases not yet commenced, our total portfolio was 88.7% leased.

As of December 31, 2021, our office and retail portfolio, contained 10.1 million rentable square feet of office and retail space, and was 82.4% occupied.

Including signed leases not yet commenced, our total office and retail portfolio was 85.7% leased.

As of December 31, 2021, we owned 14 office properties (including three long-term ground leasehold interests) encompassing approximately 9.4 million rentable square feet of office space, which were approximately 82.5% occupied or 85.3% leased including signed leases not yet commenced.

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As of December 31, 2021, our standalone retail properties were 100.0% leased.

The Empire State Building offers panoramic views of New York and neighboring states from its world-famous 86th and 102nd floor observatories which historically have drawn millions of visitors each year.

The 86th floor observatory has a heated 360-degree outdoor deck as well as indoor viewing galleries to accommodate guests day and night, all year-round.

The 102nd floor observatory is entirely indoors and offers a 360-degree view of New York City from 1,250 feet above ground.

Prior to the outbreak of the novel Coronavirus Disease 2019 ("COVID-19"), the number of visitors to the observatories was approximately 3.8 million and 3.5 million for the years ended December 31, 2018 and 2019, respectively.

More than 60% of visitors historically have been international travelers.

Due to government mandated closure from March 16, 2020 to July 20, 2020, travel restrictions on international and domestic tourists, and other impacts of the pandemic, the number of visitors declined for the year ended December 31, 2020 to 0.5 million visitors.

We had 422,000 visitors in the first quarter 2020, no visitors in the second quarter 2020, 30,000 visitors in the third quarter 2020 and 55,000 visitors in the fourth quarter 2020.

Additionally, at December 31, 2021, our portfolio included two multifamily properties located in Manhattan totaling 625 units.

We were organized as a Delaware limited partnership on November 28, 2011.

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Impact of COVID-19

From March 2020, the COVID-19 pandemic created a global crisis with attendant uncertainty, volatility and disruption of the economy and social systems in the United States and globally.

Beginning with March 2020, the novel coronavirus disease 2019 ("COVID-19") pandemic created a global crisis with attendant uncertainty, volatility and disruption of the economy and social systems in the United States and globally.

The stringent measures implemented by governments around the world to attempt to help control the spread of the virus have included business shutdowns and curtailments, and restrictions, prohibitions on all manner of events and gatherings, quarantines, "shelter-in-place" and "stay-at-home" orders, curfews, social distancing, and other measures.

The impacts have been especially harsh on the Northeastern United States, specifically New York City and the tri-state region, the business area for the company.

This has materially, adversely impacted parts of our business and we continue to face challenges.

Amidst these challenges, we moved swiftly and:

• reduced operating expenses across our portfolio;

• reduced general and administrative costs, including reductions in executive compensation, as well as salary reductions for nearly all employees who earned in 2019 more than $200,000 in salary and cash bonus compensation, as well as certain other employees involved in the operation of the observatories at the Empire State Building;

• bolstered our balance sheet with an additional $180.0 million, ten year secured financing to maximize operating runway and we have no outstanding debt maturities until November 2024 and $1.6 billion of liquidity as of December 31, 2020;

• instituted comprehensive health and safety protocols for our workforce and tenants;

• achieved a number of Environmental, Social and Governance ("ESG") accomplishments.

The impacts were especially harsh on the Northeastern United States, specifically New York City and the tri-state region, the business area for our company.

Most of these restrictions have been lifted as the impact of the COVID-19 pandemic on the tri-state area has improved as a result of various factors, including the vaccination of a large portion of the local population, with most businesses now being permitted to open at full capacity, but under other limitations which change from time to time and are intended to control the spread of COVID-19.

Additional information regarding the impact of COVID-19 on our business can be found under the section titled "Impact of COVID-19" included within Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Annual Report on Form 10-K and risks related to COVID-19 can be found under Part I, Item 1A, "Risk Factors," of this Annual Report on Form 10-K.

Our Competitive Strengths

We believe that we distinguish ourselves from other owners and operators of office and retail properties due to the following competitive strengths:

• Irreplaceable Portfolio of Office Properties in Midtown Manhattan at an Attractive Value Proposition .

Our Manhattan office properties are located in one of the most prized office markets in the world due to a combination of supply constraints, high barriers to entry, and long-term prospects for job creation.

These properties have undergone significant redevelopment to become fully modernized, with a focus on energy efficiency and indoor environmental quality.

Historically, the Empire State Building, our flagship property, has also provided us with a significant source of income from its observatories.

We believe the high quality of our buildings, services and amenities, their desirable locations and commuter access to mass transportation represent a value proposition with rents at a substantially lower price point than new construction and with a premium product offering over similar vintage unrenovated buildings.

Management believes these properties could not be replaced today for the value imputed by our current stock price.

• Well Located Retail Locations in Densely Populated Metropolitan Communities .

Our retail properties are comprised of retail space at the base of our Manhattan office properties, four standalone retail properties in Manhattan and two contiguous standalone retail properties in Westport, Connecticut.

All of the Manhattan properties are located in historically dynamic retail corridors with convenient access to mass transportation, a diverse tenant base and high pedestrian traffic and/or main destination locations, qualities which set them apart from retail properties in the high rent or low traffic corridors.

Our Westport, Connecticut retail properties are located on Main Street, the main pedestrian thoroughfare in Westport, and have the advantage of being adjacent to a large public parking plaza.

Our retail tenants cover a number of industries, and include Charles Schwab, JP Morgan Chase, Sephora, Target, TJ Maxx, Urban Outfitters, Lululemon, Athleta, Starbucks, ATT Mobile, Sprint, Chipotle, Footlocker, and Walgreens, among others.

We acknowledge that the COVID-19 pandemic has materially impacted in-store retail, with particular damage to locations typically patronized by daytime workers.

While we are constructive on the long-term trends of retail that serves daytime work populations, and well-located retail in general, the near term impacts of COVID-19 on retail are material and negative.

• Expertise in Repositioning and Redeveloping Manhattan Office Properties .

We redevelop, and reposition Manhattan office properties.

As of December 31, 2020, we have invested a total of $948.1 million (excluding tenant improvement costs and leasing commissions) in our Manhattan office properties since we assumed control of the day-to-day management of these properties in the period between 2002 through 2006.

Through our redevelopment work, our properties have become fully modernized, with a focus on energy efficiency and indoor environmental quality, and we have added tenant amenities such as the tenant-only fitness center and conference center at the Empire State Building, and a recently completed tenant-only lounge at 1400 Broadway.

• Leader in Energy Efficiency Retrofits .

We have pioneered certain practices in energy efficiency, beginning at the Empire State Building where we partnered with the Clinton Climate Initiative, Johnson Controls Inc., Jones Lang LaSalle and the Rocky Mountain Institute to create and implement a groundbreaking, replicable process for integrating energy efficiency retrofits in the existing built environment.

The reduced energy consumption lowers costs for us and our tenants, and we believe creates a competitive advantage for our properties.

We believe that higher quality tenants in general place a higher priority on sustainability, controlling costs, and minimizing contributions to greenhouse gases.

As a result of our efforts, approximately 76% of our portfolio square feet is Energy Star certified, including the Empire State Building, even with the more stringent ENERGY STAR scoring methodology rolled out in late 2019.

As a result of the energy efficiency retrofits, we estimate that the Empire State Building has reduced energy use by 43% of its pre-retrofit level of energy use, resulting in over $6.9 million of annual energy cost savings at pre-retrofit utility rate levels.

We have implemented other cost justified energy efficiency retrofit projects in our Manhattan and greater New

York metropolitan area office properties based on our work at the Empire State Building.

Based on our calculations, we have no exposure to fines in 2024 under New York City's Local Law 97.

100% of our portfolio is contracted for renewable wind electricity as of January 2021.

Finally, we maintain a series of management practices utilizing recycling of tenant and construction waste, recycled content carpets, low off-gassing paints and adhesives, “green” pest control and cleaning solutions and recycled paper products throughout our office portfolio.

• Robust Environmental Leadership.

We are leaders in the environmental sustainability space.

Our Chairman, President and CEO, Anthony E.

Malkin, is the Chair of the Sustainability Policy Advisory Board of the Real Estate Roundtable and was appointed to the New York City Climate Mobilization Advisory Board for the implementation of Local Law 97, the sole landlord representative on the board.

He is a Co-Chair of Local Law 97 Technical Pathways for Commercial Building Working Group.

Our SVP and Director of Energy, Sustainability, and ESG, Dana Robbins Schneider, serves on the Local Law 97 Commercial Buildings Working Group, Board of Directors for Urban Green, REBNY Sustainability Committee, Real Estate Roundtable Sustainable Policy Advisory Committee, and is a LEED Fellow, member of the USGBC LEED Steering Committee, and NYSERDA Clean Fight final Judge.

In 2020, we were the first commercial real estate portfolio in the Americas to achieve the WELL Health-Safety Rating for Facility Operations and Management from the International WELL Building Institute.

The WELL Health-Safety Rating is an evidence-based, third-party verified rating for new and existing buildings focused on operational policies, maintenance protocols, emergency plans and stakeholder engagement strategies to help organizations prepare their spaces for re-entry in a post-COVID-19 environment.

We participated in the GRESB Real Estate Assessment for the first time in 2020 and earned the highest possible GRESB 5 Star Rating and Green Star recognition, and a score of 88, an achievement that places us in the top 20% of all respondents.

Our score is approximately 10 points higher than our peer group average and almost 20 points higher than the global GRESB Average.

We also achieved an A rating, which is the highest possible score, on the GRESB Public Disclosure.

GRESB is the leading ESG benchmark for real estate and infrastructure investments covering over 1,200 property companies, REITs, funds and development companies.

Furthermore, we were named a Fitwel champion in 2020 with Fitwel certified properties that represent 6.7 million square feet or approximately 83% of our Manhattan properties.

These Fitwel certifications were awarded to us for our leadership in health and sustainability achievements.

Fitwel is a rigorous third-party healthy building certification system operated by the Center for Active Design.

Fitwel was created as a joint initiative between the U.S.

Centers for Disease Control and Prevention and the General Services Administration to set the industry standard for evidence-based strategies that promote positive health outcomes for building occupants and communities.

76% of the square feet in our portfolio is ENERGY STAR Certified.

Our headquarters office is one of the charter Energy Star for Tenant certificants.

• Experienced and Committed Management Team with Proven Track Record .

Our senior management team is highly regarded in the real estate community and has extensive relationships with a broad range of brokers, owners, tenants and lenders.

We have developed relationships we believe enable us to both secure high credit-quality tenants on attractive terms, as well as provide us with potential acquisition opportunities.

We have substantial in-house expertise and resources in asset and property management, leasing, marketing, acquisitions, construction, development and financing and a platform that is highly scalable.

Members of our senior management team have worked in the real estate industry for an average of approximately 32 years with extensive experience in greater New York area real estate, through many economic cycles.

We take an intensive, hands-on approach to the management of our portfolio and quality brand building.

As of December 31, 2020, our named executive officers owned 12.7% of ESRT's common stock on a fully diluted basis (including shares of common stock and OP Units as to which Anthony E.

Malkin, our Chairman, President and CEO, disclaims beneficial ownership except to the extent of his pecuniary interest therein), and therefore their interests are aligned with those of ESRT's securityholders and they are incentivized to maximize returns to ESRT's securityholders.

• Flexible Balance Sheet Provides Operating Runway and Ability to Take Advantage of Opportunities That May Arise .

As of December 31, 2020, we had cash and cash equivalents of $526.7 million and our consolidated net debt represented 37.2% of enterprise value.

We had total debt outstanding of $2.2 billion, with a weighted average interest rate of 3.91% and a weighted average maturity of 8.2 years.

Additionally, we had $1.1 billion of available borrowing capacity under our unsecured revolving credit facility as of December 31, 2020.

Our credit facility matures in August 2021 and has two six-month extension options, subject to certain conditions.

As expected, we have begun a process to evaluate a potential recast or extension of the credit facility.

Excluding principal amortization, none of our debt

matures until November 2024.

We continue to extend and ladder our debt maturities, increase our access to a variety of capital sources and maintain modest leverage and ample liquidity.

Our flexible balance sheet provides operating runway to navigate the challenging market environment and the ability to take advantage of attractive investment opportunities that may arise.

Business and Growth Strategies

Our primary business objectives are to maximize cash flow and total returns to our shareholders and to increase the value of our properties through the pursuit of the following business and growth strategies:

• Lease-up Vacant Redeveloped Space.

To date, we have capitalized on the opportunity to capture the significant embedded, de-risked growth from repositioning of our Manhattan office portfolio.

We have redeveloped 95% of the office and retail space in our Manhattan portfolio and have the opportunity to lease up 690,000 square feet of currently vacant redeveloped office and retail space, of which 258,000 square feet are pre-built suites that are ready for immediate tenant occupancy.

We also expect to benefit from our price positioning, as our fully modernized portfolio offers energy efficiency, indoor environmental quality, services and amenities, and desirable locations near mass transit with rents substantially below new construction.

We acknowledge that the COVID-19 pandemic has materially impacted office use with the majority of our tenants’ employees not at work in their offices.

While we are constructive on the long-term importance of office use, we think that it will be several months before office use recommences and business return to the market to lease space at the same rate as in 2019.

• Capitalize on our Environmental Leadership .

We have pioneered certain practices in energy efficiency, beginning at the Empire State Building where we created and implemented a groundbreaking process to integrate energy efficiency retrofits in the existing built environment.

The reduced energy consumption lowers costs for us and our tenants, and we believe creates a competitive advantage for our properties.

We have implemented other cost justified energy efficiency retrofit projects in our Manhattan and greater New York metropolitan area office properties based on our work at the Empire State Building.

Based on our calculations, we have no exposure to fines in 2024 under New York City's Local Law 97.

Additionally, 100% of our portfolio has been contracted for renewable wind energy since January 2021.

Finally, we maintain a series of management practices to recycle tenant and construction waste, recycled content carpets, low off-gassing paints and adhesives, “green” pest control and cleaning solutions and recycled paper products throughout our office portfolio.

We have achieved a number of awards and certifications for our sustainability work, including among others, a GRESB 5 Star rating, ENERGY STAR Partner of the Year, a WELL Health-Safety Rating and Fitwel Champion.

As a result of our leadership we were selected to receive a $5.0 million grant in the first funding round of the Empire Building Challenge, a $50 million state initiative spearheaded by the New York State Research and Development Authority (NYSERDA) to reduce greenhouse gas emissions.

We believe that higher quality tenants in general place a higher priority on sustainability, controlling costs, and reduction in contributions to greenhouse gases.

• Pursue Attractive Acquisition and Redevelopment Opportunities .

We have built a dedicated investment function with our hire of a Chief Investment Officer and a full acquisitions team to position us to take advantage of potential opportunities.

Our flexible balance sheet, access to capital, expertise in redevelopment of existing property into modernized, fully amenitized, healthy buildings with energy efficiency and indoor environmental quality combined with our ability to offer operating partnership units in tax deferred acquisition transactions should give us significant flexibility in structuring and consummating acquisitions.

For the foreseeable future, we intend to focus our acquisition strategy primarily on Manhattan office properties and, to a lesser extent, office and multi-tenanted retail and multi-family properties in densely populated communities in the greater New York metropolitan area and other markets we may identify in the future.

We have built a dedicated investment function which includes our Chief Investment Officer and a full acquisitions team.

and positions us to take advantage of potential opportunities.

We believe our flexible balance sheet, access to capital, expertise in redevelopment and ability to offer OP units in tax deferred acquisition transactions should give us significant flexibility in structuring and consummating acquisitions.

In December 2021, we completed our first acquisition since the hire of our acquisitions team by purchasing two multifamily assets in Manhattan.

Properties for more information.

For the foreseeable future, we intend to focus our acquisition strategy primarily on NYC office, retail and multifamily properties where we can achieve attractive returns on invested capital.

We also believe there may be opportunities to acquire and reposition additional stand-alone retail spaces.

We believe we can identify investment opportunities where we can achieve attractive returns on invested capital.

Further, we have a development site, Metro Tower at the Stamford Transportation Center, which is adjacent to our Metro Center property, which we believe to be one of the premier office buildings in Connecticut.

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We do extensive diligence on our tenants’ (current and prospective) balance sheets, businesses and business models to determine if we will establish long-term relationships in which they will both renew with us and expand over time.

We have had 217 tenant expansions within our portfolio totaling over 1.9 million square feet since 2013.

• Enhanced our Observatory Operations.

In December 2019 we completed a comprehensive $160 million multi-year re-imagination and redevelopment of the entire observatory experience at the Empire State Building.

The new observatory includes a dedicated visitor entrance on 34th Street, a 10,000 square foot 2nd floor tactile and digital immersive museum experience that celebrates the Empire State Building, from the moment it was conceived to its place in pop-culture today, and the newly renovated 102nd floor observatory that features floor-to-ceiling glass windows where guests can step right to the edge of the World’s Most Famous Building.

The observatory’s recent renovations includes indoor environmental quality measures with MERV 13 filters, ventilation and an Atmos Air bipolar ionization air purification system, which we have installed in select spaces, which neutralizes more than 99.9%

of coronavirus particles, according to studies performed by Microchem Laboratory, one of the nation’s preeminent laboratories for testing EPA- and FDA-registered sanitizing products.

Visitor feedback of the new experience and our safety protocols has been very positive.

We have had greater than 200 tenant expansions within our portfolio totaling over 2.5 million square feet since 2013.

• Enhance and Recover our Observatory Operations.

Prior to the outbreak of COVID-19, the number of visitors to the observatories was approximately 3.8 million and 3.5 million for the years ended December 31, 2018 and 2019, respectively, including approximately two-thirds international visitors.

Part of our business strategy is to return to the profitability at the Empire State Building observatory that we experienced pre-COVID-19 in the first months after our December 2019 completion of its comprehensive

approximately $165 million multi-year re-imagination and redevelopment.

We plan to do this through enhanced operations such as timed-entry, enhanced marketing and cross-promotional activities as well as enhanced health and safety protocols, including indoor environmental quality measures with MERV 13 filters, ventilation and an Atmos Air bipolar ionization air purification system.

Visitor feedback of the new experience and our safety protocols has been very positive thus far.

Our focus is to maintain a brand that tenants associate with a consistently high level of quality of services, healthy buildings, amenities, maintenance, and tenant installations, with high performance design guidelines for energy efficiency and indoor environmental quality, and long-term financial stability.

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We protect our investments by regularly monitoring our properties, performing routine preventive maintenance, and implementing capital improvement programs in connection with property redevelopment and life cycle replacement of equipment and systems.

We presently self-manage all of our properties.

We presently self-manage all of our office and retail properties.

We proactively manage our properties and rent rolls to (i) aggregate smaller demised spaces to create large blocks of vacant space in order to attract high credit-quality tenants at higher rental rates, and (ii) create efficient, modern, pre-built offices that can be rented through several lease cycles and attract high credit-quality tenants.

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Our reportable segments consist of a real estate segment and an observatory segment.

Our real estate segment includes all activities related to the ownership, management, operation, acquisition, repositioning and disposition of our real estate assets.

Our real estate segment includes all activities related to the ownership, management, operation, acquisition, repositioning and disposition of our commercial and multifamily real estate assets, principally office properties, located in Manhattan and the greater New York metropolitan area.

Our observatory segment operates the 86th and 102nd floor observatories at the Empire State Building.

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We believe the existing properties are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA.

However, noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants.

However, noncompliance with the ADA could result in imposition of

fines or an award of damages to private litigants.

The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations as appropriate in this respect.

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We sometimes require our tenants to comply with environmental and health and safety laws and regulations and to indemnify us for any related liabilities in our leases with them.

But in the event of the bankruptcy or inability of any of our tenants to satisfy such obligations, we may be required to satisfy such obligations.

But in the event of the bankruptcy or inability of any of our tenants to satisfy such obligations, we may be required to satisfy

such obligations.

We are not presently aware of any instances of material non-compliance with environmental or health and safety laws or regulations at our properties, and we believe that we and/or our tenants have all material permits and approvals necessary under current laws and regulations to operate our properties.

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We are not presently aware of any material liabilities related to building conditions, including any instances of material non-compliance with asbestos requirements or any material liabilities related to asbestos.

In addition, our properties may contain or develop harmful mold or suffer from other indoor air quality issues, which could lead to liability for adverse health effects or property damage or costs for remediation.

Our properties may contain or develop harmful mold or suffer from other indoor air quality issues, which could lead to liability for adverse health effects or property damage or costs for remediation.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time.

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We are not presently aware of any material adverse indoor air quality issues at our properties.

In addition, we may become subject to new compliance requirements and/or new costs or taxes associated with natural resource or energy usage and related emissions (such as a carbon tax), which could increase our operating costs.

In particular, as the owner of large commercial buildings in New York City, we are subject to Local Law 97 passed by the New York City Council in April 2019, which for each such building establishes annual limits for greenhouse gas emissions, requires yearly emissions reports beginning in May 2025, and imposes penalties for emissions above such limits.

Based upon our present understanding of the law and calculations related thereto, we expect to pay no fine on any building in our portfolio in the 2024-2030 first period of enforcement.

Affordable Housing

Certain units in our multifamily properties are designated for lower income households and are therefore subject to supervision and regulation by state and federal governmental authorities regulate affordable housing rental activities.

See Risk Factors - Government housing regulations may limit opportunities at the multifamily properties in which we invest, and failure to comply with resident qualification requirements may result in financial penalties or loss of benefits – for more information.

We carry comprehensive liability, fire, extended coverage, earthquake, terrorism and rental loss insurance covering all of our Manhattan properties and our greater New York metropolitan area properties under a blanket policy.

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As a result, we remain only liable for the 20% coinsurance under TRIPRA for NBCR exposures within ESRT Captive Insurance, as well as a deductible equal to 20% of ESRT Captive Insurance’s prior year’s premium.

As long as we own ESRT Captive Insurance, we are responsible for ESRT Captive Insurance’s liquidity and capital resources, and ESRT Captive Insurance’s accounts are part of our consolidated financial statements.

As long as we own ESRT Captive Insurance, we are responsible for ESRT Captive Insurance’s liquidity and capital resources, and ESRT Captive Insurance’s accounts are part of our consolidated

financial statements.

If we experience a loss and ESRT Captive Insurance is required to pay under its insurance policy, we would ultimately record the loss to the extent of its required payment.

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If ESRT fails to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, ESRT will be subject to U.S.

federal income tax at regular corporate rates and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year during which it lost its REIT qualification.

federal income tax at regular corporate rates and may be precluded from qualifying as a REIT for the subsequent four taxable years following the

year during which it lost its REIT qualification.

Even if ESRT qualifies for taxation as a REIT, it may be subject to certain U.S.

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The remainder of our investment in securities (other than government securities, securities of corporations that are treated as Taxable REIT Subsidiaries ("TRSs") and qualified REIT real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.

In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real

estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total securities can be represented by securities of one or more TRSs.

In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total securities can be represented by securities of one or more TRSs.

Rents from real property are generally not qualifying income for purposes of the REIT gross income tests if the rent is treated as “related party rent.” Related party rent generally includes (i) any rent paid by a corporation if the REIT (or any person who owns 10% or more of the stock of the REIT by value) directly or indirectly owns 10% or more of the stock of the corporation by vote or value and (ii) rent paid by a partnership if the REIT (or any person who owns 10% or more of the stock of the REIT by value) directly or indirectly owns an interest of 10% or more in the assets or net profits of the partnership.

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Observatory TRS leases the Empire State Building observatory from the operating partnership pursuant to a lease that provides for fixed base rental payments and variable rental payments equal to certain percentages of Observatory TRS’s gross receipts from the operation of the observatory.

Given the unique nature of the real estate comprising the observatory, we do not believe that there is any space in the Empire State Building or in the same geographic area as the Empire State Building that is likely to be considered sufficiently comparable to the observatory for the purpose of applying the exception to related party rent described above.

Given the unique nature of the real estate comprising the observatory, as of the date of such lease, we did not believe that there is any space in the Empire State Building or in the same geographic area as the Empire State Building that is likely to be considered sufficiently comparable to the observatory for the purpose of applying the exception to related party rent described above.

We have received from the IRS a private letter ruling that the rent that our operating partnership receives from Observatory TRS pursuant to the lease of the Empire State Building observatory is qualifying income for purposes of the REIT gross income tests so long as such rent reflects the fair market rental value of the Empire State Building observatory as determined by an appraisal rendered by a qualified third party appraiser.

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We are proud of the strides we have made in the past two years in terms of enhancing the gender and ethnic diversity of our board and management team through the appointment of new directors and a new Chief Financial Officer.

We also promoted our Senior Vice President and Director of Energy and Sustainability to Director of ESG with direct reporting lines to our Chairman, CEO, and President and our board.

We were selected for the 2022 Bloomberg Gender-Equality Index in our first year of participation.

Talent Acquisition and Retention

We know our future success depends upon our continued ability to attract, retain and motivate our valued employees.

We offer what we believe to be generally competitive compensation and benefits.

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Other employees may receive shares of stock in the company on multi-year employment anniversaries.

Employee Engagement.

We regularly collect employee feedback to understand and improve the employee experience at our company.

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Health, Safety and Wellness

We have been recognized for leadership in indoor environmental quality, retrofit energy efficiency, and sustainability in the built environment.

We have been recognized for leadership in indoor environmental quality, healthy buildings, retrofit energy efficiency, and sustainability in the built environment.

During the ongoing COVID-19 pandemic, we established protocols for building re-occupancy, including online screening for our staff, no-touch temperature checks for all entry to our buildings, and tests of indoor air quality and water systems.

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Our principal executive offices are located at 111 West 33rd Street, 12th floor, New York, New York 10120.

In addition, we have six additional regional leasing and property management offices in Manhattan and the greater New York metropolitan area.

In addition, we have five additional regional leasing and property management offices in Manhattan and the greater New York metropolitan area.

Our current facilities are adequate for our present and future operations, although we may add regional offices, depending upon our future operations.

Available Information

ESRT, our sole general partner, has a website address at http://www.empirestaterealtytrust.com.

ESRT, our sole general partner, has a website address at http://www.esrtreit.com.

The information found on, or otherwise accessible through, ESRT's website is not incorporated by reference into, and does not form a part of, this Annual Report on Form 10-K or any other report or document ESRT or we file with or furnish to the SEC and ESRT makes available, free of charge, on or through the SEC Filings section of its website, ESRT's and our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after ESRT or we electronically file such material with, or furnish it to, the SEC.

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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-K

Item 1. Business