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Item 2. Properties

2022-02-25 compared with 2021-02-26 · 41 added, 39 removed, 301 unchanged (21% of the section changed)

Our Portfolio Summary

As of December 31, 2020, our portfolio consisted of 14 office properties and six standalone retail properties totaling approximately 10.1 million rentable square feet and was approximately 85.9% occupied, yielding approximately $542.7 million of annualized rent.

As of December 31, 2021, our office and retail portfolio consisted of 14 office properties and six standalone retail properties totaling approximately 10.1 million rentable square feet and was approximately 82.4% occupied, yielding approximately $523.8 million of annualized rent.

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 dynamic retail corridors with convenient access to mass transportation, a diverse tenant base and high pedestrian traffic.

Giving effect to leases signed but not yet commenced, our portfolio was approximately 85.7% leased as of December 31, 2021.

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

In addition, we owned entitled land that will support the development of an approximately 0.4 million rentable square foot office building and garage ("Metro Tower") at the Stamford Transportation Center in Stamford, Connecticut, adjacent to one of our office properties.

The table below presents an overview of our portfolio as of December 31, 2020.

Office and Retail Portfolio

The table below presents an overview of our office and retail portfolio as of December 31, 2021.

Rentable Rent per

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Portfolio Total (12)

10,128,335 82.4 % $ 523,753,666 $ 62.73 730

(1) Excludes (i) 204,168 square feet of space across our portfolio attributable to building management use and tenant amenities and (ii) 79,613 square feet of space attributable to our observatory.

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(11) Includes 507,276 rentable square feet of retail space in our Manhattan office properties.

(12) Reduction in square feet and occupancy due to the transfer of the observatory gift shop to observatory operations.

(12) Excludes 16,175 square feet of retail rentable space at two multifamily properties.

Tenant Diversification

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Tenant Property Expiration (1)

LinkedIn Empire State Building Dec.

2036 16.0 years 365,886 3.6 % $ 22,380,058 4.1 %

Global Brands Group ESB, 1333 Broadway Oct.

2028 6.4 years 353,325 3.5 % 19,277,806 3.6 %

Li & Fung 1359 Broadway Jun.

LinkedIn Empire State Building Aug.

2036 14.7 years 418,552 4.1 % $ 26,656,726 5.1 %

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2029 7.1 years 11,334 0.1 % 10,528,487 2.0 %

Empire State Building Jan.

Li & Fung 1359 Broadway, ESB Oct.

2028 5.8 years 173,273 1.7 % 9,283,476 1.8 %

Macy's 111 West 33rd Street May 2030 8.4 years 131,117 1.3 % 8,185,511 1.6 %

Urban Outfitters 1333 Broadway Sept.

Empire State Building Jan.

2030 8.1 years 156,187 1.5 % 7,943,754 1.5 %

Signature Bank 1333 & 1400 Broadway Jul.

Urban Outfitters 1333 Broadway Sept.

2029 7.8 years 56,730 0.6 % 7,791,801 1.5 %

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2024 3.0 years 119,226 1.2 % 7,584,532 1.4 %

Signature Bank 1333 & 1400 Broadway Jul.

2035 12.8 years 124,884 1.2 % 7,540,459 1.4 %

The Interpublic Group of Co's, Inc.

111 West 33rd Street & 1400 B'way Jul.

111 West 33rd Street & 1400 B'way Feb.

2025 2.4 years 128,296 1.3 % 7,221,237 1.4 %

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2031 9.8 years 34,192 0.3 % 7,046,880 1.3 %

Duane Reade/Walgreen's ESB, 1350 B'Way, 250 West 57th Feb.

2027 3.9 years 47,541 0.5 % 6,776,108 1.2 %

HNTB Corporation Empire State Building Feb.

2029 7.2 years 105,143 1.0 % 6,982,283 1.3 %

Legg Mason First Stamford Place Sept.

2024 3.8 years 137,583 1.4 % 6,409,614 1.2 %

Fragoman 1400 Broadway Feb.

Franklin Templeton First Stamford Place Sept.

2024 2.8 years 137,583 1.4 % 6,426,634 1.2 %

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2029 7.3 years 104,386 1.0 % 5,974,821 1.1 %

ASCAP 250 West 57th Street Aug.

Fragoman 1400 Broadway Feb.

2035 13.2 years 107,680 1.1 % 5,922,400 1.1 %

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2029 7.9 years 86,492 0.9 % 5,649,928 1.1 %

ASCAP 250 West 57th Street Aug.

2034 12.7 years 87,943 0.9 % 5,465,025 1.0 %

On Deck Capital, Inc.

1400 Broadway Dec.

2026 5.0 years 83,266 0.8 % 5,004,365 1.0 %

Duane Reade ESB, 1350 Broadway May 2025 - Sept.

2027 4.5 years 39,142 0.4 % 4,830,412 0.9 %

Total $ 2,558,526 25.2 % $ 168,389,300 32.0 %

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Lease Expirations

During 2018 and 2019, we generally obtained higher base rents on new and renewed leases at our Manhattan office properties.

2020 was not representative due to COVID-19.

During 2019, we generally obtained higher base rents on new and renewed leases at our Manhattan office properties.

2021 and 2020 were not representative due to COVID-19.

These increased rents are partly due to an increase in the total rentable square footage of such space as a result of remeasurement and application of market loss factors to our space.

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Increase (decrease) in mark-to-market rent (0.8) % (6.1) % 20.4 %

The following tables set forth a summary schedule of expirations for leases in place as of December 31, 2020 plus available space for each of the ten calendar years beginning with the year ended December 31, 2020 at the properties in our portfolio.

The following tables set forth a summary schedule of expirations for leases in place as of December 31, 2021 plus available space for each of the ten calendar years beginning with the year ended December 31, 2021 at the office and retail properties in our portfolio.

The information set forth in the table assumes that tenants exercise no renewal options and all early termination rights.

All properties

The table excludes 16,175 of retail rentable square feet at two multifamily properties.

All Office and Retail Properties

Rentable Portfolio Annualized

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(8) Represents license fees for the use of the Empire State Building mast and base rent for the physical space occupied by broadcasting tenants.

Undeveloped Properties

We own entitled land in Stamford, Connecticut, adjacent to one of our office properties, that will support the development of an approximately 0.4 million rentable square foot office building and garage.

The site is directly adjacent to Metro Center, one of our office properties, and the Stamford Transportation Center.

All required zoning approvals have been obtained to allow for development of Metro Tower.

We intend to develop Metro Tower when the appropriate combination of local market and other conditions is in place.

Investments in Real Estate

On December 22, 2021, we closed on the acquisition of two multifamily assets, the Victory (561 10th Avenue) and 345 East 94th Street, previously owned by a joint venture of Fetner Properties and an institutional owner.

The total transaction value was $307 million, inclusive of $186 million of assumed debt.

Fetner Properties retained a 10% equity stake and continues to manage onsite operations.

We will asset manage the properties, make all decisions, and have the right to assume day-to-day management for no additional consideration.

The two properties have a total of 625 units and were 96.4% occupied as of December 31, 2021.

Redevelopment and Repositioning

From 20 02 through 2006, we gradually gained full control of the day-to-day management of our Manhattan office properties (with the estate of Leona M.

Helmsley previously holding certain approval rights at some of these properties as a result of its interest in the entities owning the properties).

Since then, we have been undertaking a comprehensive redevelopment and repositioning strategy of our Manhattan office properties that has included the physical improvement through upgrades and modernization of, and tenant upgrades in, such properties.

W e have been undertaking a comprehensive redevelopment and repositioning strategy of our Manhattan office properties that has included the physical improvement through upgrades and modernization of, and tenant upgrades in, such properties.

Since we assumed full control of the day-to-day management of our Manhattan office properties beginning with One Grand Central Place in 2002, and through December 31, 2021, we have invested a total of approximately $966.7 million (excluding tenant improvement costs and leasing commissions) in our Manhattan office properties pursuant to this program.

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The improvements, within our redevelopment and repositioning program, include restored, renovated and upgraded or new lobbies, elevator modernization, renovated public areas and bathrooms, refurbished or new windows, upgrade and standardization of retail storefront and signage, façade restorations, modernization of building-wide systems, with a focus on energy efficiency and indoor environmental quality, and enhanced tenant amenities.

These improvements are designed to improve the overall value and attractiveness of our properties and have contributed significantly to our tenant repositioning efforts, which seek to increase our occupancy, raise our rental rates, increase our rentable square feet, increase our aggregate

rental revenue, lengthen our average lease term, increase our average lease size, and improve our tenant credit quality.

We have also aggregated smaller spaces in order to offer larger blocks of office space, including multiple floors, that are attractive to larger, higher credit-quality tenants, as well as to offer new, pre-built suites with improved layouts.

This strategy has shown what we believe to be attractive results to date, and we believe has the potential to improve our operating margins and cash flows in the future.

This strategy has shown

what we believe to be attractive results to date, and we believe has the potential to improve our operating margins and cash flows in the future.

We believe we will continue to enhance our tenant base and improve rents as our pre-redevelopment leases continue to expire and be re-leased.

During the second quarter of 2017, we commenced a multi-year capital project at the Empire State Building which we believe improves the convenience for office tenants and their visitors, increases the value of our 34th Street facing retail space, enhances the observatory visitor experience, and increases observatory revenue per capita.

In the first phase of the project, which we completed in the third quarter 2018, we relocated the present observatory entrance, previously located on Fifth Avenue, to a new, larger, dedicated entrance for observatory visitors at the western side of the Empire State Building on 34th Street.

The new entrance eliminates observatory visitor flow into the Fifth Avenue lobby and streamlines the visitor exit from that lobby, thereby reducing observatory traffic in the lobby by more than 50% and improving Fifth Avenue access for our office tenants and their visitors.

During the third quarter 2019 we completed the second phase of the project, the new second floor galleries and in the fourth quarter 2019 we completed the final phase, the redevelopment of the 80th floor and opened the newly renovated 102nd floor observatory.

Expenditures, which began during the second quarter 2017, totaled $157.9 million through December 31, 2020.

This investment is an example of continually looking at ways to innovate and enhance the office and retail tenant and visitor experience at the Empire State Building.

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 offering a premium product when compared to similar-vintage unrenovated buildings.

Management believes the replacement cost of these properties substantially exceeds their implied value by our current stock price.

The greater New York metropolitan area office market is soft, and we compete with properties that have been redeveloped recently or have planned redevelopment.

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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 2. Properties