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

ITEM 2. PROPERTIES Our Portfolio Summary 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. Office and Retail Portfolio The table below presents an overview of our office and retail portfolio as of December 31, 2021. Annualized Rentable Rent per Square Percent Annualized Occupied Number of Property Name Location or Sub-Market Feet (1) Occupied (2) Rent (3) Square Foot (4) Leases (5) Manhattan Office Properties - Office The Empire State Building (6) Penn Station -Times Sq. South 2,715,148 82.0 % $ 138,571,093 $ 62.22 153 One Grand Central Place Grand Central 1,245,679 87.5 % 65,514,506 60.11 162 1400 Broadway (7) Penn Station -Times Sq. South 917,716 89.9 % 46,174,199 55.98 24 111 West 33rd Street (8) Penn Station -Times Sq. South 641,036 97.5 % 40,477,718 64.79 23 250 West 57th Street Columbus Circle - West Side 466,143 81.7 % 23,693,696 62.24 33 501 Seventh Avenue Penn Station -Times Sq. South 461,367 78.0 % 17,527,866 48.68 23 1359 Broadway Penn Station -Times Sq. South 456,129 70.8 % 19,041,630 58.98 26 1350 Broadway (9) Penn Station -Times Sq. South 372,060 79.4 % 17,504,941 59.26 54 1333 Broadway Penn Station -Times Sq. South 295,635 77.0 % 13,430,296 59.01 12 Manhattan Office Properties - Office 7,570,913 83.9 % 381,935,945 60.12 510 Manhattan Office Properties - Retail The Empire State Building Penn Station -Times Sq. South 100,196 46.1 % 5,530,491 119.80 11 One Grand Central Place Grand Central 68,733 98.9 % 8,615,690 126.80 12 1400 Broadway (7) Penn Station -Times Sq. South 20,176 77.2 % 1,731,713 111.21 7 112 West 34th Street (8) Penn Station -Times Sq. South 91,280 100.0 % 23,742,322 260.10 4 250 West 57th Street Columbus Circle - West Side 67,927 86.3 % 8,732,706 148.90 6 501 Seventh Avenue Penn Station -Times Sq. South 33,632 81.3 % 1,969,358 72.04 7 1359 Broadway Penn Station -Times Sq. South 27,624 88.5 % 1,554,701 63.62 5 1350 Broadway Penn Station -Times Sq. South 30,707 73.3 % 5,697,920 253.30 4 1333 Broadway Penn Station -Times Sq. South 67,001 100.0 % 9,812,303 146.45 4 Manhattan Office Properties - Retail 507,276 83.0 % 67,387,204 160.11 60 27 Sub-Total/Weighted Average Manhattan Office Properties - Office and Retail 8,078,189 83.9 % 449,323,149 66.33 570 Greater New York Metropolitan Area Office Properties First Stamford Place (10) Stamford, CT 777,174 77.4 % 26,604,240 44.24 40 Metro Center Stamford, CT 286,384 84.3 % 13,774,751 57.05 19 383 Main Street Norwalk, CT 260,081 46.0 % 3,601,000 30.08 18 500 Mamaroneck Avenue Harrison, NY 286,161 87.3 % 7,604,809 30.46 30 10 Bank Street White Plains, NY 234,985 85.3 % 7,420,613 37.01 30 Sub-Total/Weighted Average Greater New York Metropolitan Office Properties 1,844,785 76.6 % 59,005,413 41.77 137 Standalone Retail Properties 10 Union Square Union Square 57,857 30.4 % 4,160,690 236.40 9 1542 Third Avenue Upper East Side 56,250 100.0 % 3,343,039 59.43 4 1010 Third Avenue Upper East Side 44,662 100.0 % 3,658,188 81.91 2 77 West 55th Street Midtown 25,388 100.0 % 1,968,830 77.55 3 69-97 Main Street Westport, CT 16,874 82.9 % 1,591,181 113.70 4 103-107 Main Street Westport, CT 4,330 100.0 % 703,176 162.40 1 Sub-Total/Weighted Average Standalone Retail Properties 205,361 79.0 % 15,425,104 95.08 23 Portfolio Total 10,128,335 82.4 % $ 523,753,666 $ 62.73 730 Total/Weighted Average Office Properties 9,415,698 82.5 % $ 440,941,358 $ 56.78 647 Total/Weighted Average Retail Properties (11) 712,637 81.8 % 82,812,308 142.02 83 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. (2) Based on leases signed and commenced as of December 31, 2021 and calculated as (i) rentable square feet less available square feet divided by (ii) rentable square feet. (3) Represents annualized base rent and current reimbursement for operating expenses and real estate taxes. (4) Represents annualized rent under leases commenced as of December 31, 2021 divided by occupied square feet. (5) Represents the number of leases at each property or on a portfolio basis. If a tenant has more than one lease, whether or not at the same property, but with different expirations, the number of leases is calculated equal to the number of leases with different expirations. (6) Includes 37,110 rentable square feet of space leased by our broadcasting tenants. (7) Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 42 years (expiring December 31, 2063). (8) Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to the Company, of approximately 56 years (expiring May 31, 2077). (9) Denotes a ground leasehold interest in the property with a remaining term, including unilateral extension rights available to us, of approximately 29 years (expiring July 31, 2050). (10) First Stamford Place consists of three buildings. (11) Includes 507,276 rentable square feet of retail space in our Manhattan office properties. (12) Excludes 16,175 square feet of retail rentable space at two multifamily properties. 28 Tenant Diversification As of December 31, 2021, our office and retail portfolios were leased to a diverse tenant base consisting of approximately 730 leases. Our tenants represent a broad array of industries as follows: Diversification by Industry Percent (1) Arts and entertainment 3.1 % Broadcast 1.1 % Consumer goods 15.2 % Finance, insurance, real estate 17.0 % Government entity 2.1 % Healthcare 2.0 % Legal services 5.3 % Media and advertising 4.6 % Non-profit 4.6 % Professional services (not including legal services) 10.0 % Retail 17.1 % Technology 13.1 % Others 4.8 % Total 100.0 % (1) Based on annualized rent. The following table sets forth information regarding the 20 largest tenants in our portfolio based on annualized rent as of December 31, 2021. Weighted Percent of Average Total Portfolio Percent of Remaining Occupied Rentable Portfolio Lease Lease Square Square Annualized Annualized Tenant Property Expiration (1) Term (2) Feet (3) Feet (4) Rent (5) Rent (6) LinkedIn Empire State Building Aug. 2036 14.7 years 418,552 4.1 % $ 26,656,726 5.1 % PVH Corp. 501 Seventh Avenue Oct. 2028 6.8 years 237,281 2.3 % 11,343,800 2.2 % Centric Brands Inc. Empire State Building Oct. 2028 6.8 years 215,819 2.1 % 11,006,769 2.1 % Sephora 112 West 34th Street Jan. 2029 7.1 years 11,334 0.1 % 10,528,487 2.0 % Li & Fung 1359 Broadway, ESB Oct. 2023 -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 % Coty Inc. Empire State Building Jan. 2030 8.1 years 156,187 1.5 % 7,943,754 1.5 % Urban Outfitters 1333 Broadway Sept. 2029 7.8 years 56,730 0.6 % 7,791,801 1.5 % Federal Deposit Insurance Corp. Empire State Building Dec. 2024 3.0 years 119,226 1.2 % 7,584,532 1.4 % Signature Bank 1333 & 1400 Broadway Jul. 2030 - Apr. 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 Feb. 2025 2.4 years 128,296 1.3 % 7,221,237 1.4 % Foot Locker 112 West 34th Street Sept. 2031 9.8 years 34,192 0.3 % 7,046,880 1.3 % HNTB Corporation Empire State Building Feb. 2029 7.2 years 105,143 1.0 % 6,982,283 1.3 % Franklin Templeton First Stamford Place Sept. 2024 2.8 years 137,583 1.4 % 6,426,634 1.2 % Shutterstock Empire State Building Apr. 2029 7.3 years 104,386 1.0 % 5,974,821 1.1 % Fragoman 1400 Broadway Feb. 2035 13.2 years 107,680 1.1 % 5,922,400 1.1 % The Michael J. Fox Foundation 111West 33rd Street Nov. 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 % (1) Expiration dates are per lease and do not assume exercise of renewal or extension options. For tenants with more than two leases, the lease expiration is shown as a range. (2) Represents the weighted average remaining lease term, based on annualized rent. (3) Based on leases signed and commenced as of December 31, 2021. (4) Represents the percentage of rentable square feet of our office and retail portfolios in the aggregate. 29 (5) Represents annualized base rent and current reimbursement for operating expenses and real estate taxes. (6) Represents the percentage of annualized rent of our office and retail portfolios in the aggregate. Lease Expirations During 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. The following table sets forth new and renewal leases entered into at our Manhattan office properties (excluding the retail component of these properties), the weighted average annualized cash rent per square foot for new and renewal leases executed during the year, the previous weighted average annualized cash rent prior to the renewal or re-leasing of these leases and the percent increase in mark-to market rent. Year Ended December 31, 2021 2020 2019 New and renewal leases entered into during the year (square feet) 1,005,630 923,379 970,443 Weighted average annualized cash rent per square foot for new and renewal leases executed during the year $ 57.55 $ 57.45 $ 65.91 Weighted average annualized cash rent per square foot for previous leases $ 58.04 $ 61.18 $ 54.72 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, 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. The table excludes 16,175 of retail rentable square feet at two multifamily properties. All Office and Retail Properties Percent of Rentable Portfolio Annualized Number Square Rentable Percent of Rent Per of Leases Feet Square Feet Annualized Annualized Rentable Year of Lease Expiration Expiring (1) Expiring (2) Expiring Rent (3) Rent Square Foot Available — 1,448,024 14.3 % $ — — % $ — Signed leases not commenced 30 331,510 3.3 % — — % — Fourth quarter 2021 16 62,128 0.6 % 3,029,820 0.6 % 48.77 2022 105 575,796 5.7 % 32,670,890 6.2 % 56.74 2023 94 634,713 6.3 % 39,622,216 7.6 % 62.43 2024 94 838,787 8.3 % 48,675,426 9.3 % 58.03 2025 88 548,091 5.4 % 33,535,725 6.4 % 61.19 2026 71 791,371 7.8 % 42,960,506 8.2 % 54.29 2027 73 611,080 6.0 % 38,944,131 7.4 % 63.73 2028 40 918,804 9.1 % 48,951,154 9.3 % 53.28 2029 41 903,943 8.9 % 65,438,879 12.5 % 72.39 2030 36 717,208 7.1 % 47,398,789 9.0 % 66.09 2031 19 159,145 1.6 % 19,493,200 3.7 % 122.49 Thereafter 53 1,587,735 15.6 % 103,032,930 19.8 % 64.89 Total 760 10,128,335 100.0 % $ 523,753,666 100.0 % $ 62.73 30 Manhattan Office Properties (4) Percent of Rentable Portfolio Annualized Number Square Rentable Percent of Rent Per of Leases Feet Square Feet Annualized Annualized Rentable Year of Lease Expiration Expiring (1) Expiring (2) Expiring Rent (3) Rent Square Foot Available — 981,727 13.0 % $ — — % $ — Signed leases not commenced 18 236,152 3.1 % — — % — Fourth quarter 2021 11 48,900 0.6 % 2,799,183 0.7 % 57.24 2022 73 354,592 4.7 % 20,349,570 5.3 % 57.39 2023 74 474,339 6.3 % 29,082,557 7.6 % 61.31 2024 73 621,040 8.2 % 37,606,241 9.8 % 60.55 2025 54 354,559 4.7 % 22,963,843 6.0 % 64.77 2026 51 571,774 7.6 % 32,924,790 8.6 % 57.58 2027 51 440,876 5.8 % 26,386,783 6.9 % 59.85 2028 26 799,889 10.6 % 43,248,632 11.3 % 54.07 2029 27 647,901 8.6 % 38,825,165 10.2 % 59.92 2030 21 607,354 8.0 % 36,909,918 9.7 % 60.77 2031 10 79,806 1.1 % 5,650,883 1.5 % 70.81 Thereafter 39 1,352,004 17.7 % 85,188,380 22.4 % 63.01 Total 528 7,570,913 100.0 % $ 381,935,945 100.0 % $ 60.12 Greater New York Metropolitan Area Office Properties Percent of Rentable Portfolio Annualized Number Square Rentable Percent of Rent Per of Leases Feet Square Feet Annualized Annualized Rentable Year of Lease Expiration Expiring (1) Expiring (2) Expiring Rent (3) Rent Square Foot Available — 403,698 21.9 % $ — — % $ — Signed leases not commenced 7 28,427 1.5 % — — % — Fourth quarter 2021 3 1,836 0.1 % 51,622 0.1 % 28.12 2022 24 176,698 9.6 % 7,191,472 12.2 % 40.70 2023 15 152,874 8.3 % 7,159,068 12.1 % 46.83 2024 13 191,633 10.4 % 8,502,782 14.4 % 44.37 2025 31 173,068 9.4 % 6,329,977 10.7 % 36.58 2026 14 152,836 8.3 % 5,943,591 10.1 % 38.89 2027 15 114,165 6.2 % 4,394,893 7.4 % 38.50 2028 9 107,564 5.8 % 3,867,238 6.6 % 35.95 2029 6 149,116 8.1 % 6,507,235 11.0 % 43.64 2030 5 41,116 2.2 % 1,962,709 3.3 % 47.74 2031 — — — % — — % — Thereafter 2 151,754 8.2 % 7,094,826 12.1 % 46.75 Total 144 1,844,785 100.0 % $ 59,005,413 100.0 % $ 41.77 31 Retail (5) Percent of Rentable Portfolio Annualized Number Square Rentable Percent of Rent Per of Leases Feet Square Feet Annualized Annualized Rentable Year of Lease Expiration Expiring (1) Expiring (2) Expiring Rent (3) Rent Square Foot Available — 62,599 8.8 % $ — — % $ — Signed leases not commenced 5 66,931 9.4 % — — % — Fourth quarter 2021 2 11,392 1.6 % 179,015 0.2 % 15.71 2022 8 44,506 6.2 % 5,129,848 6.2 % 115.26 2023 5 7,500 1.1 % 3,380,591 4.1 % 450.75 2024 8 26,114 3.7 % 2,566,403 3.1 % 98.28 2025 3 20,464 2.9 % 4,241,905 5.1 % 207.29 2026 6 66,761 9.4 % 4,092,125 4.9 % 61.30 2027 7 56,039 7.9 % 8,162,455 9.9 % 145.66 2028 5 11,351 1.6 % 1,835,284 2.2 % 161.68 2029 8 106,926 15.0 % 20,106,479 24.3 % 188.04 2030 10 68,738 9.6 % 8,526,162 10.3 % 124.04 2031 9 79,339 11.1 % 13,842,317 16.7 % 174.47 Thereafter 12 83,977 11.7 % 10,749,723 13.0 % 128.01 Total 88 712,637 100.0 % $ 82,812,307 100.0 % $ 142.02 The Empire State Building (6) Percent of Rentable Portfolio Annualized Number Square Rentable Percent of Rent Per of Leases Feet Square Feet Annualized Annualized Rentable Year of Lease Expiration Expiring (1) Expiring (2) Expiring Rent (3) (7) Rent Square Foot Available — 430,014 15.8 % $ — — % $ — Signed leases not commenced 2 58,120 2.1 % — — % — Fourth quarter 2021 2 6,971 0.3 % 333,750 0.2 % 47.88 2022 21 120,124 4.4 % 6,881,935 5.0 % 57.29 2023 24 99,464 3.7 % 6,783,696 4.9 % 68.20 2024 23 271,661 10.0 % 18,074,834 13.0 % 66.53 2025 14 110,331 4.1 % 7,400,687 5.3 % 67.08 2026 12 132,831 4.9 % 8,224,278 5.9 % 61.92 2027 18 57,581 2.1 % 3,818,249 2.8 % 66.31 2028 7 371,238 13.7 % 19,810,835 14.3 % 53.36 2029 7 282,020 10.4 % 17,571,549 12.7 % 62.31 2030 6 210,800 7.8 % 11,468,411 8.3 % 54.40 2031 5 23,038 0.8 % 1,918,571 1.4 % 83.28 Thereafter 14 540,955 19.9 % 36,284,298 26.2 % 67.07 Total 155 2,715,148 100.0 % $ 138,571,093 100.0 % $ 62.22 32 The Empire State Building Broadcasting Licenses and Leases Annualized Percent of Annualized Expense Annualized Annualized Year of Lease Expiration Base Rent (8) Reimbursements Rent (3) Rent Fourth quarter 2021 $ 31,710 $ 14,903 $ 46,613 0.3 % 2022 — — — — % 2023 285,588 69,728 355,316 2.4 % 2024 68,958 39,416 108,374 0.7 % 2025 — — — — % 2026 848,556 103,900 952,456 6.4 % 2027 2,613,626 600,207 3,213,833 21.7 % 2028 261,200 9,633 270,833 1.8 % 2029 — — — — % 2030 2,082,250 326,484 2,408,734 16.3 % 2031 1,855,250 272,818 2,128,068 14.4 % Thereafter 4,703,059 635,565 5,338,624 36.0 % Total $ 12,750,197 $ 2,072,654 $ 14,822,851 100.0 % (1) If a lease has two different expiration dates, it is considered to be two leases (for the purposes of lease count and square footage). (2) Excludes (i) 204,168 rentable square feet across our portfolio attributable to building management use and tenant amenities and (ii) 79,613 square feet of space attributable to our observatory. (3) Represents annualized base rent and current reimbursement for operating expenses and real estate taxes. (4) Excludes (i) retail space in our Manhattan office properties and (ii) the Empire State Building broadcasting licenses and observatory operations. (5) Includes an aggregate of 507,276 rentable square feet of retail space in our Manhattan office properties. Excludes the Empire State Building broadcasting licenses and observatory operations. (6) Excludes retail space, broadcasting licenses and observatory operations. (7) Includes approximately $4.3 million of annualized rent related to physical space occupied by broadcasting tenants for their broadcasting operations. Does not include license fees charges to broadcast tenants. (8) Represents license fees for the use of the Empire State Building mast and base rent for the physical space occupied by broadcasting tenants. 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 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. We intend to fund capital improvements through a combination of operating cash flow, cash on hand and borrowings. The improvements, within our redevelopment and repositioning program, include restored, renovated and upgraded or new lobbies, elevator modernization, renovated public areas and bathrooms, refurbished or new windows, upgrade and standardization of retail storefront and signage, façade restorations, modernization of building-wide systems, with a focus on energy efficiency and indoor environmental quality, and enhanced tenant amenities. These improvements are designed to improve the overall value and attractiveness of our properties and have contributed significantly to our tenant repositioning efforts, which seek to increase our occupancy, raise our rental rates, increase our rentable square feet, increase our aggregate 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 33 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. 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. We have spent approximately $41 million over 2018 through 2021 on our well-maintained and well-located properties’ common areas and amenities to ensure competitiveness and protect our market position. ITEM 3. LEGAL PROCEEDINGS Refer to “Financial Statements-Note 9-Commitments and Contingencies” in this Annual Report on Form 10-K for a description of any pending legal proceedings. ITEM 4. MINE SAFETY DISCLOSURE Not applicable. 34 PART II