What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-05 · 197 added, 268 removed, 525 unchanged (47% of the section changed)

3 unchanged sentences

(amounts in thousands, except per unit amounts)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

ASSETS (unaudited)

43 unchanged sentences

( 845 ) ( 692 )

Total Empire State Realty OP, L.P.'s capital 1,648,619 1,671,080

Non-controlling interest in other partnerships 13,413 13,252

Total capital 1,662,032 1,684,332

4 unchanged sentences

(amounts in thousands, except per unit amounts)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Rental revenue $ 147,514 $ 140,231

10 unchanged sentences

Real estate taxes 30,004 31,447

Impairment charges — 2,103 — 6,204

Depreciation and amortization 67,106 44,457

1 unchanged sentence

Total operating income

13,203 11,928 58,036 39,235

Other income (expense):

2 unchanged sentences

Loss on early extinguishment of debt — ( 214 )

IPO litigation expense — ( 1,165 ) — ( 1,165 )

Loss before income taxes ( 18,817 ) ( 5,297 )

Income tax (expense) benefit ( 20 ) ( 38 ) 3,271 2,794

Income tax benefit 1,596 2,106

Net loss ( 17,221 ) ( 3,191 )

Private perpetual preferred unit distributions ( 1,050 ) ( 1,050 )

Net loss attributable to non-controlling interest in other partnerships 63 —

Net loss attributable to common unitholders $ ( 18,208 ) $ ( 4,241 )

10 unchanged sentences

(amounts in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Net loss $ ( 17,221 ) $ ( 3,191 )

Other comprehensive income (loss):

Unrealized gain (loss) on valuation of interest rate swap agreements ( 103 ) 64 ( 139 ) ( 19,340 )

Unrealized gain on valuation of interest rate swap agreements 9,763 59

amount reclassified into interest expense 3,294 2,869

Other comprehensive income (loss) 2,817 2,937 8,548 ( 13,354 )

Other comprehensive income 13,057 2,928

Comprehensive loss $ ( 4,164 ) $ ( 263 )

2 unchanged sentences

Condensed Consolidated Statements of Capital

For The Three Months Ended September 30, 2021 and 2020

(amounts in thousands)

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

General Partner Limited Partners

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

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

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

Conversion of operating partnership units to ESRT Partner's Capital

— — 542 931 ( 119 ) ( 960 ) ( 312 ) 17 ( 93 ) 10 ( 18 ) 2 —

Repurchases of common shares — — ( 626 ) ( 6,510 ) — — — — — — — — ( 6,510 )

Equity compensation — — ( 24 ) 180 33 5,198 — — — — — — 5,378

Distributions — ( 1,050 ) — ( 6,061 ) — ( 2,806 ) — ( 795 ) — ( 211 ) — ( 106 ) ( 11,029 )

Net income — 1,050 — ( 6,977 ) — ( 2,954 ) — ( 931 ) — ( 248 ) — ( 123 ) ( 10,183 )

Other comprehensive income (loss) — — 1,756 739 229 62 31 2,817

Balance at September 30, 2021 6,224 $ 29,940 173,292 $ 1,038,978 80,155 $ 649,690 22,611 $ ( 3,172 ) 6,019 $ ( 1,176 ) 3,027 $ ( 579 ) $ 1,713,681

General Partner Limited Partners

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

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

Conversion of operating partnership units to ESRT Partner's Capital

— — 779 2,386 ( 313 ) ( 2,435 ) ( 275 ) 23 ( 136 ) 19 ( 55 ) 7 —

Repurchases of common shares — — ( 1,134 ) ( 7,345 ) — — — — — — — — ( 7,345 )

Equity compensation — — — 334 ( 1,313 ) 5,170 — — — — — — 5,504

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

Net income — 1,050 — ( 8,204 ) — ( 3,490 ) — ( 1,145 ) — ( 320 ) — ( 160 ) ( 12,269 )

Other comprehensive income (loss) — — — 1,877 — 700 — 255 — 70 — 35 2,937

Balance at September 30, 2020 6,224 $ 29,940 172,992 $ 1,069,269 81,140 $ 647,465 24,254 $ ( 1,637 ) 6,640 $ ( 819 ) 3,350 $ ( 403 ) $ 1,743,815

Empire State Realty OP, L.P.

Condensed Consolidated Statements of Capital

For The Nine Months Ended September 30, 2021 and 2020

For The Three Months Ended March 31, 2022 and 2021

(amounts in thousands)

1 unchanged sentence

General Partner Limited Partners

Balance at December 31, 2021 6,224 $ 29,940 170,217 $ 998,128 79,820 $ 649,157 22,321 $ ( 4,058 ) 5,884 $ ( 1,395 ) 2,970 $ ( 692 ) $ 13,252 $ 1,684,332

Issuance of private perpetual preferred in exchange for common units — — — — — — — — — — — — —

Conversion of operating partnership units to ESRT Partner's Capital

— — 573 1,497 ( 190 ) ( 1,555 ) ( 287 ) 40 ( 63 ) 12 ( 33 ) 6 — —

Contributions from consolidated joint ventures — — — — — — — — — — — — 224 224

Repurchases of common units — — ( 1,255 ) ( 12,001 ) — — — — — — — — — ( 12,001 )

3 unchanged sentences

Other comprehensive income — — — 8,095 — 3,486 — 1,058 — 274 — 144 — 13,057

Balance at September 30, 2021 6,224 $ 29,940 173,292 $ 1,038,978 80,155 $ 649,690 22,611 $ ( 3,172 ) 6,019 $ ( 1,176 ) 3,027 $ ( 579 ) $ 1,713,681

Balance at March 31, 2022 6,224 $ 29,940 169,726 $ 978,421 80,998 $ 648,004 22,034 $ ( 5,206 ) 5,821 $ ( 1,695 ) 2,937 $ ( 845 ) $ 13,413 $ 1,662,032

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

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

Conversion of operating partnership units to ESRT Partner's Capital

4 unchanged sentences

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

Other comprehensive loss — — — ( 8,240 ) — ( 3,471 ) — ( 1,162 ) — ( 321 ) — ( 160 ) ( 13,354 )

Balance at September 30, 2020 6,224 $ 29,940 172,992 $ 1,069,269 81,140 $ 647,465 24,254 $ ( 1,637 ) 6,640 $ ( 819 ) 3,350 $ ( 403 ) $ 1,743,815

Other comprehensive income — — — 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

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

2 unchanged sentences

(amounts in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows From Operating Activities

2 unchanged sentences

Depreciation and amortization 67,106 44,457

Impairment charges — 6,204

Amortization of non-cash items within interest expense 14,593 2,733

3 unchanged sentences

Equity based compensation 4,460 4,734

Settlement of derivative contract — ( 20,281 )

Loss on early extinguishment of debt — 214

15 unchanged sentences

(amounts in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows From Financing Activities

Repayment of mortgage notes payable ( 2,092 ) ( 1,008 )

Proceeds from unsecured senior notes — 175,000

Proceeds from unsecured term loan — 175,000

Repayment of unsecured term loan — ( 50,000 )

Proceeds from unsecured revolving credit facility — 550,000

Repayment of unsecured revolving credit facility — ( 550,000 )

Deferred financing costs — ( 7,539 )

Contributions from consolidated joint ventures 224 —

Repurchases of common units ( 12,001 ) ( 3,533 )

Distributions ( 10,819 ) ( 1,050 )

Net cash (used in) provided by financing activities ( 43,239 ) 106,157

Net cash used in financing activities ( 24,688 ) ( 13,130 )

Net increase in cash and cash equivalents and restricted cash 8,029 39,458

14 unchanged sentences

Write-off of fully depreciated assets 4,744 4,853

Derivative instruments at fair values included in prepaid expenses and other assets 45 —

Derivative instruments at fair values included in accounts payable and accrued expenses 13,290 7,450

Conversion of limited partners' operating partnership units to ESRT partner's capital 1,497 2,662

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

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

7 unchanged sentences

(“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.

As of September 30, 2021, our total portfolio contained 10.1 million rentable square feet of office and retail space.

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.

As of March 31, 2022, our total portfolio contained 10.1 million rentable square feet of office, retail and multifamily space.

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

4 unchanged sentences

Additionally, we have entitled land at the Stamford Transportation Center in Stamford, Connecticut, adjacent to one of our office properties, that will support the development of an approximately 0.4 million rentable square foot office building and garage.

As of September 30, 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 March 31, 2022, 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.

Additionally, at March 31, 2022, our portfolio included two multifamily properties totaling 625 units.

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

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

As of September 30, 2021, ESRT owned approximately 60.8 % of our operating partnership units.

As of March 31, 2022, ESRT owned approximately 60.3 % of our operating partnership units.

Summary of Significant Accounting Policies

7 unchanged sentences

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

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

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

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

3 unchanged sentences

The primary beneficiary is required to consolidate the VIE.

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

We had no VIEs as of March 31, 2022 and December 31, 2021.

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

9 unchanged sentences

Actual results could differ from those estimates.

Recently Issued or Adopted Accounting Standards

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

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

The Lease Modification Q&A provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease.

This election is only available when total cash flows resulting from the modified lease are substantially similar to the cash flows in the original lease.

During March 2020, the FASB issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848).

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

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

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

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

Deferred Costs, Acquired Lease Intangibles and Goodwill

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

September 30, 2021 December 31, 2020

Deferred costs, net, consisted of the following as of March 31, 2022 and December 31, 2021 (amounts in thousands):

March 31, 2022 December 31, 2021

Leasing costs $ 215,278 $ 211,189

4 unchanged sentences

Total deferred costs, net, excluding net deferred financing costs $ 190,955 $ 195,205

At September 30, 2021 and December 31, 2020, $ 7.8 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 $ 10.4 million and $ 5.4 million for the three months ended September 30, 2021 and 2020, respectively, and $ 22.1 million and $ 17.7 million for the nine months ended September 30, 2021 and 2020, respectively.

Amortization expense related to acquired lease intangibles was $ 5.0 million and $ 1.5 million for the three months ended September 30, 2021 and 2020, respectively, and $ 8.3 million and $ 5.9 million for the nine months ended September 30, 2021 and 2020, respectively.

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

September 30, 2021 December 31, 2020

At March 31, 2022 and December 31, 2021, $ 6.6 million and $ 7.2 million, respectively, of net deferred financing costs associated with the unsecured revolving credit facility was included in deferred costs, net on the condensed consolidated balance sheets.

Amortization expense related to deferred leasing costs and acquired deferred leasing costs was $ 7.0 million and $ 5.6 million for the three months ended March 31, 2022 and 2021, respectively.

Amortization expense related to acquired lease intangibles was $ 4.2 million and $ 1.7 million for the three months ended March 31, 2022 and 2021, respectively.

Amortizing acquired intangible assets and liabilities consisted of the following as of March 31, 2022 and December 31, 2021 (amounts in thousands):

March 31, 2022 December 31, 2021

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

1 unchanged sentence

Acquired below-market ground leases, net $ 334,946 $ 336,904

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Acquired below-market leases $ ( 65,329 ) $ ( 65,403 )

1 unchanged sentence

Acquired below-market leases, net $ ( 22,459 ) $ ( 24,941 )

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $ 4.2 million and $ 0.7 million for the three months ended September 30, 2021 and 2020, respectively, and $ 5.6 million and $ 3.0 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, we had goodwill of $ 491.5 million.

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $ 1.8 million and $ 0.7 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, 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.

1 unchanged sentence

The 102nd observation deck was reopened on August 24, 2020.

The closure of our Observatory and subsequent reopening under international, national, and local travel restrictions and quarantines caused us during the quarter to choose to perform an impairment test related to goodwill.

The closure of our observatory and subsequent reopening under international, national, and local travel restrictions and quarantines caused us during the quarter ended June 30, 2020, and each subsequent quarter, to choose to perform an impairment test related to goodwill.

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

2 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 15.0 %.

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 September 30, 2021 and December 31, 2020 (amounts in thousands):

Principal Balance As of September 30, 2021

September 30, 2021 December 31, 2020 Stated

Debt consisted of the following as of March 31, 2022 and December 31, 2021 (amounts in thousands):

Principal Balance As of March 31, 2022

March 31, 2022 December 31, 2021 Stated

Rate Effective

10 unchanged sentences

383 Main Avenue (4)

30,000 30,000 4.44 % 4.56 % 6/30/2032

1333 Broadway 160,000 160,000 4.21 % 4.29 % 2/5/2033

345 East 94th Street - Series A 43,600 43,600 70.0 % of LIBOR plus 0.95 %

3.56 % 11/1/2030

345 East 94th Street - Series B 8,321 8,650 LIBOR plus 2.24 %

3.56 % 11/1/2030

561 10th Avenue - Series A 114,500 114,500 70.0 % of LIBOR plus 1.07 %

3.85 % 11/1/2033

561 10th Avenue - Series B 18,535 19,250 LIBOR plus 2.45 %

3.85 % 11/1/2033

Total mortgage debt 966,702 968,793

18 unchanged sentences

Deferred financing costs, net ( 14,045 ) ( 14,881 )

( 13,491 ) ( 15,235 )

Unamortized debt discount ( 8,387 ) ( 8,547 )

Total $ 2,309,270 $ 2,310,365

______________

(1) The effective rate is the yield as of September 30, 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 March 31, 2022 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 September 30, 2021, we were in compliance with all debt covenants.

(4) Ownership of 383 Main Avenue was transferred to the lender during April 2022.

(5) At March 31, 2022, we were in compliance with all debt covenants.

Principal Payments

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

Aggregate required principal payments at March 31, 2022 are as follows (amounts in thousands):

Year Amortization Maturities Total

5 unchanged sentences

Thereafter (1)

39,601 1,630,354 1,669,955

Total $ 83,673 $ 2,248,029 $ 2,331,702

______________

(1) Includes $ 30 million of mortgage debt on 383 Main Avenue that was discharged in April 2022.

Deferred Financing Costs

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

September 30, 2021 December 31, 2020

Deferred financing costs, net, consisted of the following at March 31, 2022 and December 31, 2021 (amounts in thousands):

March 31, 2022 December 31, 2021

Financing costs $ 44,637 $ 44,637

1 unchanged sentence

Total deferred financing costs, net $ 20,691 $ 22,112

Amortization expense related to deferred financing costs was $ 1.1 million and $ 1.0 million for the three months ended September 30, 2021 and 2020, respectively, and $ 3.4 million and $ 3.0 million for the nine months ended September 30, 2021 and 2020, respectively.

Amortization expense related to deferred financing costs was $ 1.4 million and $ 1.2 million for the three months ended March 31, 2022 and 2021, respectively.

Unsecured Revolving Credit and Term Loan Facilities

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.

On March 31, 2021, we entered into a second amendment to an existing credit agreement ("Amended Credit Agreement") that governs 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 Amended Credit Agreement amended the amended and restated credit agreement dated August 29, 2017 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 $ 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 September 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.

As of March 31, 2022 , we had no borrowings under the revolving credit facility and $ 215.0 million under the term loan facility.

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

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, 2022 , 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.

1 unchanged sentence

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 September 30, 2021, we were in compliance with these covenants.

As of March 31, 2022, we were in compliance with these covenants.

Senior Unsecured Notes

2 unchanged sentences

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 September 30, 2021, we were in compliance with these covenants.

As of March 31, 2022, we were in compliance with these covenants.

Accounts Payable and Accrued Expenses

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

September 30, 2021 December 31, 2020

Accounts payable and accrued expenses consisted of the following as of March 31, 2022 and December 31, 2021 (amounts in thousands):

March 31, 2022 December 31, 2021

Accrued capital expenditures $ 57,072 $ 49,247

Accounts payable and accrued expenses 32,342 41,664

Interest rate swap agreement liability 4,887 8,849

Interest rate swaps liability 13,290 25,308

Accrued interest payable 4,328 3,460

7 unchanged sentences

We are exposed to credit risk in the event of non-performance by these counterparties;

however, we currently do not anticipate that any of the counterparties will fail to meet their obligations.

however, we currently do not anticipate that any of the counterparties will fail to meet its obligations.

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

As of September 30, 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 $ 4.9 million.

If we had breached any of these provisions at September 30, 2021, we could have been required to settle our obligation under the agreement at its termination value of $ 4.9 million.

As of September 30, 2021 and December 31, 2020, we had an interest rate LIBOR swap with an aggregate notional value of $ 265.0 million.

As of March 31, 2022, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $ 14.3 million.

If we had breached any of these provisions at March 31, 2022, we could have been required to settle our obligations under the agreements at their termination value of $ 14.3 million.

As of March 31, 2022 and December 31, 2021, we had interest rate LIBOR swaps and caps with an aggregate notional value of $ 451.3 million.

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

As of September 30, 2021 and December 31, 2020, the fair value of our derivative instrument amounted to $( 4.9 ) 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 September 30, 2021 and 2020, our cash flow hedge is deemed highly effective and a net unrealized gain (loss) of $ 2.8 million and $ 2.9 million for the three months ended September 30, 2021 and 2020, respectively, and a net unrealized gain (loss) of $ 8.5 million and $( 13.4 ) million for the nine months ended September 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).

As of March 31, 2022, the fair value of our interest rate swaps amounted to $ 0.05 million, which is included in prepaid assets and other expenses and $( 13.3 ) million which is included in accounts payable and accrued expenses on the condensed consolidated balance sheet.

As of December 31, 2021, the fair value of our interest rate swaps amounted to $( 25.3 ) million, which is included in accounts payable and accrued expenses on the condensed consolidated balance sheet.

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

Interest rate caps not designated as hedges are not speculative and are used to manage our exposure to interest rate movements, but do not meet the strict hedge accounting requirements.

As of March 31, 2022 and 2021, our cash flow hedges are deemed highly effective and a net unrealized gain (loss) of $ 13.1 million and $ 2.9 million for the three months ended March 31, 2022 and 2021, 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 loss related to derivatives will be reclassified to interest expense as interest payments are made on the debt.

We estimate that $( 7.0 ) million net loss of the current balance held in accumulated other comprehensive loss will be reclassified into interest expense within the next 12 months.

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

September 30, 2021 December 31, 2020

The table below summarizes the terms of agreements and the fair values of our derivative financial instruments as of March 31, 2022 and December 31, 2021 (dollar amounts in thousands):

March 31, 2022 December 31, 2021

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 $ — $ ( 1,193 ) $ — $ ( 3,184 )

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands):

Three Months Ended Nine Months Ended

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

Interest rate swap 36,820 70 % of 1 Month LIBOR

2.5000 % December 1, 2021 November 1, 2030 — ( 2,503 ) — ( 4,527 )

Interest rate swap 103,790 70 % of 1 Month LIBOR

2.5000 % December 1, 2021 November 1, 2033 — ( 9,417 ) — ( 15,945 )

Interest rate swap 10,710 70 % of 1 Month LIBOR

1.7570 % December 1, 2021 November 1, 2033 — ( 177 ) — ( 754 )

Interest rate swap 19,008 1 Month LIBOR 2.2540 % December 1, 2021 November 1, 2030 45 — — ( 898 )

Interest rate cap 6,780 70 % of 1 Month LIBOR

4.5000 % December 1, 2021 October 1, 2024 16 — 5 —

Interest rate cap 9,188 1 Month LIBOR 5.5000 % December 1, 2021 October 1, 2024 32 — 8 —

$ 93 $ ( 13,290 ) $ 13 $ ( 25,308 )

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, 2022 and 2021 (amounts in thousands):

Three months ended

Effects of Cash Flow Hedges March 31, 2022 March 31, 2021

Amount of gain (loss) recognized in other comprehensive income (loss) $ 9,763 $ 59

Amount of loss reclassified from accumulated other comprehensive loss into interest expense ( 3,294 ) ( 2,869 )

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on the condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands):

Three Months Ended Nine Months Ended

Effects of Cash Flow Hedges September 30, 2021 September 30, 2020 September 30, 2021 September 30, 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 months ended March 31, 2022 and 2021 (amounts in thousands):

Three months ended

Effects of Cash Flow Hedges March 31, 2022 March 31, 2021

Total interest expense presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded $ ( 25,014 ) $ ( 23,554 )

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Fair Valuation

The estimated fair values at September 30, 2021 and December 31, 2020 were determined by management, using available market information and appropriate valuation methodologies.

The estimated fair values at March 31, 2022 and December 31, 2021 were determined by management, using available market information and appropriate valuation methodologies.

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

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The fair value of derivative instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative.

Although the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by ourselves and our counterparties.

counterparties.

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 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 by us.

The following tables summarize the carrying and estimated fair values of our financial instruments as of September 30, 2021 and December 31, 2020 (amounts in thousands):

September 30, 2021

The fair values 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 by us.

The following tables summarize the carrying and estimated fair values of our financial instruments as of March 31, 2022 and December 31, 2021 (amounts in thousands):

March 31, 2022

Estimated Fair Value

Value Total Level 1 Level 2 Level 3

Interest rate swaps included in prepaid expenses and other assets $ 45 $ 45 $ — $ 45 $ —

Interest rate swap included in accounts payable and accrued expenses 13,290 13,290 — 13,290 —

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Unsecured term loan facilities 388,223 390,000 — — 390,000

Disclosure about the fair value of financial instruments is based on pertinent information available to us as of September 30, 2021 and December 31, 2020.

Disclosure about the fair value of financial instruments is based on pertinent information available to us as of March 31, 2022 and December 31, 2021.

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

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

Operating expense reimbursements are reflected in our September 30, 2021 and 2020 condensed consolidated statements of operations as rental revenue.

Operating expense reimbursements are reflected in our March 31, 2022 and 2021 condensed consolidated statements of operations as rental revenue.

Rental revenue includes fixed and variable payments.

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

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

Three Months Ended Nine Months Ended

Rental revenue September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

The components of rental revenue for the three months ended March 31, 2022 and 2021 are as follows (amounts in thousands):

Three months ended

Rental revenue March 31, 2022 March 31, 2021

Fixed payments $ 133,401 $ 125,773

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Total rental revenue $ 147,514 $ 140,231

As of September 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):

As of March 31, 2022, 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 2022 $ 364,322

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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 $ 28.9 million and lease liabilities of $ 28.9 million in our consolidated balance sheets as of September 30, 2021.

Our operating lease agreements relate to three ground lease assets and are reflected in right-of-use assets of $ 28.8 million and lease liabilities of $ 28.8 million in our consolidated balance sheets as of March 31, 2022.

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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The ground leases are due to expire between the years 2050 and 2077, inclusive of extension options, and have no variable payments or residual value guarantees.

As our leases do not provide an implicit rate, we determined our incremental borrowing rate based on information available at the date of adoption of ASU No.

As our leases do not provide an implicit rate, we determined our incremental borrowing rate based on information available at the date of adoption of Accounting Standards Update No.

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

The weighted average incremental borrowing rate used to calculate the right-of-use assets and lease liabilities as of September 30, 2021 was 4.5 %.

The weighted average incremental borrowing rate used to calculate the right-of-use assets and lease liabilities as of March 31, 2022 was 4.5 %.

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

The weighted average remaining lease term as of September 30, 2021 was 48.6 years.

As of September 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):

The weighted average remaining lease term as of March 31, 2022 was 48.1 years.

As of March 31, 2022, 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 2022 $ 1,139

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Legal Proceedings

Except as described below, as of September 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.

Except as described below, as of March 31, 2022, 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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On September 27, 2021, the court denied Respondents' motion to vacate and entered judgement in the aforementioned amount, inclusive of accumulated interest.

Respondents are considering their options with respect to that ruling.

Respondents have appealed that ruling.

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 September 30, 2021, we estimate that we will incur approximately $ 85.2 million of capital expenditures (including tenant improvements and leasing commissions) on our properties pursuant to existing lease agreements.

At March 31, 2022, we estimate that we will incur approximately $ 102.9 million of capital expenditures (including tenant improvements and leasing commissions) on our properties pursuant to existing lease agreements.

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

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

At September 30, 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 March 31, 2022, 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 September 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 of March 31, 2022, management has no plans to remove or alter these properties in a manner that would trigger federal and other applicable regulations for asbestos removal, and accordingly, the obligations to remove the asbestos or asbestos-containing building materials from these properties have indeterminable settlement dates.

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

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

Required remediation to such properties has been completed, and as of September 30, 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 March 31, 2022, 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 September 30, 2021, there were 285,104,512 common stock and operating partnership units outstanding, of which 173,292,301 , or 60.8 %, were owned by ESRT and 111,812,211 , or 39.2 %, were owned by other partners, including ESRT directors, members of senior management and other employees.

As of March 31, 2022, there were 168,731,507 share of Class A common stock 994,837 shares of Class B common stock and 111,791,527 operating partnership units outstanding, of which 169,726,344 , or 60.3 %, were owned by ESRT and 111,791,527 , or 39.7 %, were owned by other partners, including ESRT directors, members of senior management and other employees.

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

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

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

Under the terms of the LTIP units, we will revalue for tax purposes its assets upon the occurrence of certain specified capital events, and any increase in valuation from the time of one such event to the next 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.

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

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

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

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

Stock and Publicly Traded Operating Partnership Unit Repurchase Program

ESRT's Board of Directors reauthorized the repurchase of up to $ 500 million of ESRT Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units through December 31, 2021.

ESRT's Board of Directors authorized the repurchase of up to $ 500 million of ESRT Class A common stock and the Operating Partnership’s Series ES, Series 250 and Series 60 operating partnership units from January 1, 2022 through December 31, 2023.

Under the program, ESRT may purchase ESRT Class A common stock and we may purchase our Series ES, Series 250 and Series 60 operating partnership units in accordance with applicable securities laws from time to time in the open market or in privately negotiated transactions.

The timing, manner, price and amount of any repurchases will be determined by ESRT and us at our discretion and will be subject to stock price, availability, trading volume and general market conditions.

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

The following table summarizes ESRT's purchases of equity securities in each of the three months ended September 30, 2021:

The timing, manner, price and amount of any repurchases will be determined by ESRT and us and will be subject to stock price, availability, trading volume, general market conditions, and

applicable securities laws 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, 2022:

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)

July 2021 — $ — — $ 496,467

August 2021 403,831 $ 10.54 403,831 $ 492,212

September 2021 221,771 $ 10.17 221,771 $ 489,958

January 2022 483,180 $ 9.52 483,180 $ 495,399

February 2022 50,000 $ 9.12 50,000 $ 494,943

March 2022 721,860 $ 9.62 721,860 $ 487,999

Private Perpetual Preferred Units

As of September 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").

As of March 31, 2022, 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") outstanding.

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.

The Series 2019 Preferred Units are not redeemable at the option of the holders and are redeemable at our option only in the case of specific defined events.

The Series 2014 Preferred Units which have a liquidation preference of $ 16.62 per unit and are entitled to receive cumulative preferential annual cash distributions of $ 0.60 per unit payable in arrears on a quarterly basis.

The Series 2014 Preferred Units are not redeemable at the option of the holders and are redeemable at our option only in the case of specific defined events.

Both series are not redeemable at the option of the holders and are redeemable at our option only in the case of specific defined events.

Distributions

Total distributions paid to OP unitholders were $ 10.0 million and $ 19.4 million for the three and nine months ended September 30, 2021, respectively, and $ 0.0 million and $ 62.2 million for the three and nine months ended September 30, 2020, respectively.

Total distributions paid to preferred unitholders were $ 1.1 million and $ 3.2 million for the three and nine months ended September 30, 2021, respectively, and $ 1.1 million and $ 3.1 million for the three and nine months ended September 30, 2020, respectively.

Total distributions paid to OP unitholders were $ 9.8 million and $ 0.0 million for the three months ended March 31, 2022 and 2021.

Total distributions paid to preferred unitholders were $ 1.1 million and $ 1.1 million for the three months ended March 31, 2022 and 2021, respectively.

Incentive and Share-Based Compensation

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

An aggregate of 11.0 million shares of ESRT common stock is authorized for issuance under awards granted pursuant to the 2019 Plan, and as of September 30, 2021, 7.7 million shares of ESRT common stock remain available for future issuance.

In August 2021, we granted LTIP units under the 2019 Plan to Christina Chiu, our Executive Vice President and Chief Financial Officer, consisting of 8,772 LTIP units that are subject to time-based vesting and 26,930 LTIP units that are subject to market-based vesting, with fair market values of $ 0.075 million for the time-based vesting awards and $ 0.15 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 her continued employment.

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

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, 2022, 6.1 million shares of ESRT common stock remain available for future issuance.

In March 2022, we made grants of LTIP units to executive officers under the 2019 Plan, including a total of 412,689 LTIP units that are subject to time-based vesting, 694,383 LTIP units that are subject to market-based vesting and 515,369 units that are subject to performance-based vesting with fair market values of $ 3.2 million, $ 3.9 million and $ 3.1 million respectively.

In March 2022, we made grants of LTIP units and restricted stock to certain other employees under the 2019 Plan, including a total of 240,156 LTIP units and 210,212 shares of restricted stock that are subject to time-based vesting, 85,772 LTIP units that are subject to market-based vesting and 63,574 LTIP units that are subject to performance-based vesting, with fair market values of $ 2.1 million and $ 2.0 million, respectively, for the time-based vesting awards, $ 0.6 million for the market-based vesting awards and $ 0.5 million for the performance-based vesting awards.

The awards subject to time-based vesting vest ratably over four years, subject generally to the grantee's continued employment, with the first installment vesting on January 1, 2023.

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, 2022.

Following the completion of the three-year performance period, our compensation and human capital committee will determine the number of LTIP units to which she is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreement 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 her continued employment on those dates.

The vesting of the LTIP units subject to performance-based vesting is based on the achievement of (i) operational metrics over a one-year performance period, subject to a three-year absolute TSR modifier, and (ii) environmental, social and governance ("ESG") metrics over a three-year performance period, in each case, commencing on January 1, 2022.

Following the completion of the respective performance periods, 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 in connection with the award grant.

These units then vest in two equal installments on January 1, 2025 and January 1, 2026, subject generally to the grantee's continued employment on those dates.

In March 2022, 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 112,612 LTIP units that are subject

to time-based vesting and we granted to certain other employees a total of 84,475 LTIP units and 18,380 shares of restricted stock that are subject to time-based vesting, with a fair market value of $ 1.7 million and $ 0.2 million, respectively.

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

The first installment vests 30 % on January 1, 2025, the second installment vests 30 % on January 1, 2026 and the remainder of 40 % will vest on January 1, 2027.

In 2022 and prior years, our named executive officers could 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 a premium over such face amount ( 120 % for awards granted in 2021 and 2022;

125 % for years prior to 2021).

In March 2022, we made grants of LTIP units to executive officers under the 2019 Plan in connection with the 2021 bonus election program.

We granted to executive officers a total of 470,860 LTIP units that are subject to time-based vesting with a fair market value of $ 3.7 million.

Of these LTIP units, 53,980 LTIP units vested immediately on the grant date and 416,880 LTIP units vest ratably over three years from January 1, 2022, subject generally to the grantee's continued employment.

The first installment vests on January 1, 2023, and the remainder will vest thereafter in two equal annual installments.

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

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

During the second quarter of 2020, the Board approved changing the definition of retirement age from 60 to 65 starting with the grant awards issued in March 2020 under the 2019 Plan.

Share-based compensation for market-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 three or four years depending on retirement eligibility.

Share-based compensation for market-based equity awards and performance-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 three or four years .

Additionally, for the performance-based equity awards, we assess, at each reporting period, whether it is probable that the performance conditions will be satisfied.

Changes in estimate are accounted for in the period of change through a cumulative catch-up adjustment.

For the market-based LTIP units, the fair value of the awards was estimated using a Monte Carlo Simulation model and discounted for the restriction period during which the LTIP units cannot be redeemed or transferred and the uncertainty regarding if, and when, the book capital account of the LTIP units will equal that of the common units.

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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.

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

The expected growth rate of the stock prices over the performance period is determined with consideration of the risk-free rate as of the grant date.

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

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

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

LTIP units and ESRT restricted stock issued during the nine months ended September 30, 2021 were valued at $ 20.0 million.

Additionally, for performance-based awards, we recognize expense respective to the number of awards we expect to vest at the conclusion of the measurement period.

We perform this assessment each reporting period.

LTIP units and ESRT restricted stock issued during the three months ended March 31, 2022 were valued at $ 21.0 million.

The weighted average per unit or share fair value was $ 7.21 for grants issued in 2022.

The per unit or share granted in 2021 was estimated on the respective dates of grant using the following assumptions:

The fair value per unit or share granted in 2022 was estimated on the respective dates of grant using the following assumptions:

an expected life from 2.0 to 5.3 years, a dividend rate of 2.0 %, a risk-free interest rate from 1.4 % to 2.0 %, and an expected price volatility from 37.0 % to 53.0 %.

No other stock options, dividend equivalents, or stock appreciation rights were issued or outstanding in 2022.

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

Restricted Stock LTIP Units Weighted Average Grant Fair Value

The following is a summary of ESRT restricted stock and LTIP unit activity for the three months ended March 31, 2022:

Restricted Stock Time-based LTIPs Market-based LTIPs Performance-based LTIPs Weighted Average Grant Fair Value

Unvested balance at December 31, 2021 214,408 2,499,592 5,039,134 — $ 7.02

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Forfeited or unearned ( 9,830 ) — ( 1,311,839 ) — 7.20

Unvested balance at September 30, 2021 227,165 7,538,726 $ 7.03

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 market-based awards, and accordingly, we recognized $ 0.7 million and $ 2.1 million for the three and nine months ended September 30, 2021, respectively, and $ 0.4 million and $ 2.3 million for the three and nine months ended September 30, 2020, respectively.

Unrecognized compensation expense was $ 2.3 million at September 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 $ 4.7 million and $ 13.3 million for the three and nine months ended September 30, 2021, respectively, and $ 5.1 million and $ 17.9 million for the three and nine months ended September 30, 2020, respectively.

Unrecognized compensation expense was $ 28.1 million at September 30, 2021, which will be recognized over a weighted average period of 2.4 years.

Unvested balance at March 31, 2022 365,516 2,969,049 4,507,450 578,943 $ 6.69

The time-based LTIPs 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 market-based and performance-based awards, and accordingly, we recognized $ 1.0 million and $ 1.0 million for the three months ended March 31, 2022 and 2021, respectively.

Unrecognized compensation expense was $ 0.8 million at March 31, 2022, which will be recognized over a weighted average period of 3.8 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 $ 3.5 million and $ 3.8 million for the three months ended March 31, 2022 and 2021, respectively.

Unrecognized compensation expense was $ 40.7 million at March 31, 2022, which will be recognized over a weighted average period of 2.8 years.

Earnings Per Unit

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

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Earnings per unit for the three months ended March 31, 2022 and 2021 is computed as follows (amounts in thousands, except per share amounts):

Three Months Ended

March 31, 2022 March 31, 2021

Net loss $ ( 17,221 ) $ ( 3,191 )

Private perpetual preferred unit distributions ( 1,050 ) ( 1,050 )

Net loss attributable to non-controlling interests in other partnerships 63 —

Earnings allocated to unvested units ( 89 ) —

7 unchanged sentences

Diluted $ ( 0.07 ) $ ( 0.02 )

There were 1,084,264 and 997,811 antidilutive shares and LTIP units for the three and nine months ended September 30, 2021, respectively, and zero and 169,848 antidilutive shares and LTIP units for the three and nine months ended September 30, 2020, respectively .

There were 194 and 316 antidilutive shares and LTIP units for the three months ended March 31, 2022 and 2021 .

Related Party Transactions

1 unchanged sentence

We earned supervisory fees from entities affiliated with Anthony E.

Malkin, our Chairman and Chief Executive Officer, of $ 0.3 million and $ 0.2 million for the three months ended September 30, 2021 and 2020, respectively, and $ 0.8 million and $ 0.7 million for the nine months ended September 30, 2021 and 2020, respectively.

Malkin, our Chairman, President and Chief Executive Officer, of $ 0.2 million and $ 0.2 million for the three months ended March 31, 2022 and 2021, respectively.

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

1 unchanged sentence

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

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

Malkin of $ 0.1 million and $ 0.04 million for the three months ended March 31, 2022 and 2021, respectively.

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

5 unchanged sentences

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

Total revenue aggregated $ 0.1 million and $ 0.1 million for the three months ended September 30, 2021 and 2020, respectively, and $ 0.2 million and $ 0.2 million for the nine months ended September 30, 2021 and 2020, respectively.

Total revenue aggregated $ 0.1 million and $ 0.1 million for the three months ended March 31, 2022 and 2021, respectively.

Segment Reporting

4 unchanged sentences

These two lines of businesses are managed separately because each business requires different support infrastructures, provides different services and has dissimilar economic characteristics such as investments needed, stream of revenues and marketing strategies.

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 nine months ended September 30, 2021 and 2020 (amounts in thousands):

Three Months Ended September 30, 2021

We account for intersegment sales and rents as if the sales or rents 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 months ended March 31, 2022 and 2021 (amounts in thousands):

Three Months Ended March 31, 2022

Real Estate Observatory Intersegment Elimination Total

19 unchanged sentences

Interest expense ( 25,014 ) — — ( 25,014 )

Income (loss) before income taxes ( 11,382 ) 1,219 — ( 10,163 )

Loss before income taxes ( 15,188 ) ( 3,629 ) — ( 18,817 )

Income tax (expense) benefit ( 144 ) 1,740 — 1,596

Net income (loss) $ ( 11,329 ) $ 1,146 $ — $ ( 10,183 )

Net loss $ ( 15,332 ) $ ( 1,889 ) $ — $ ( 17,221 )

Segment assets $ 3,998,791 $ 244,539 $ — $ 4,243,330

Expenditures for segment assets $ 38,884 $ 291 $ — $ 39,175

Three Months Ended September 30, 2020

Three Months Ended March 31, 2021

Real Estate Observatory Intersegment Elimination Total

13 unchanged sentences

Real estate taxes 31,447 — — 31,447

Impairment charges 2,103 — — 2,103

Depreciation and amortization 44,419 38 — 44,457

4 unchanged sentences

Interest expense ( 23,554 ) — — ( 23,554 )

IPO litigation expense ( 1,165 ) — — ( 1,165 )

Loss on early extinguishment of debt

( 214 ) — — ( 214 )

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

3 unchanged sentences

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

Nine Months Ended September 30, 2021

Real Estate Observatory Intersegment Elimination Total

Rental revenue $ 420,586 $ — $ — $ 420,586

Intercompany rental revenue 16,271 — ( 16,271 ) —

Observatory revenue — 23,758 — 23,758

Lease termination fees 15,949 — — 15,949

Third-party management and other fees 917 — — 917

Other revenue and fees 2,412 138 — 2,550

Total revenues 456,135 23,896 ( 16,271 ) 463,760

Operating expenses:

Property operating expenses 92,429 — — 92,429

Intercompany rent expense — 16,271 ( 16,271 ) —

Ground rent expense 6,994 — — 6,994

General and administrative expenses 42,369 — — 42,369

Observatory expenses — 16,226 — 16,226

Real estate taxes 92,367 — — 92,367

Depreciation and amortization 155,244 95 — 155,339

Total operating expenses 389,403 32,592 ( 16,271 ) 405,724

Total operating income (loss)

66,732 ( 8,696 ) — 58,036

Other income (expense):

Interest income 494 3 — 497

Interest expense ( 70,553 ) — — ( 70,553 )

Loss on early extinguishment of debt

( 214 ) — — ( 214 )

Loss before income taxes ( 3,541 ) ( 8,693 ) — ( 12,234 )

Income tax (expense) benefit ( 365 ) 3,636 — 3,271

Net loss $ ( 3,906 ) $ ( 5,057 ) $ — $ ( 8,963 )

Expenditures for segment assets $ 64,655 $ 4 $ — $ 64,659

Nine Months Ended September 30, 2020

Real Estate Observatory Intersegment Elimination Total

Rental revenue $ 426,021 $ — $ — $ 426,021

Intercompany rental revenue 13,356 — ( 13,356 ) —

Observatory revenue — 24,049 — 24,049

Lease termination fees 1,575 — — 1,575

Third-party management and other fees 930 — — 930

Other revenue and fees 5,254 — — 5,254

Total revenues 447,136 24,049 ( 13,356 ) 457,829

Operating expenses:

Property operating expenses 105,054 — — 105,054

Intercompany rent expense — 13,356 ( 13,356 ) —

Ground rent expense 6,994 — — 6,994

General and administrative expenses 48,617 — — 48,617

Observatory expenses — 18,087 — 18,087

Real estate taxes 90,029 — — 90,029

Impairment charges 6,204 — — 6,204

Depreciation and amortization 143,522 87 — 143,609

Total operating expenses 400,420 31,530 ( 13,356 ) 418,594

Total operating income (loss) 46,716 ( 7,481 ) — 39,235

Other income (expense):

Interest income 2,438 91 — 2,529

Interest expense ( 66,906 ) — — ( 66,906 )

Loss on early extinguishment of debt

( 86 ) — — ( 86 )

IPO litigation expense ( 1,165 ) — — ( 1,165 )

Loss before income taxes ( 19,003 ) ( 7,390 ) — ( 26,393 )

Income tax (expense) benefit ( 692 ) 3,486 — 2,794

Net loss $ ( 19,695 ) $ ( 3,904 ) $ — $ ( 23,599 )

Expenditures for segment assets $ 77,503 $ 2,748 $ — $ 80,251

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.

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

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

Subsequent Events

On October 26, 2021, we signed conditional agreements for purchase of two multifamily assets in Manhattan totaling 625 residential units, for a total purchase price of approximately $ 307 million, inclusive of approximately $ 186 million of assumed debt.

An affiliate of one of the principal current owners of the properties would retain a 10 % equity stake and would continue to serve as property manager.

The transaction is subject to conditions, the satisfaction of which depend upon actions by third parties as well as by us.

As such, there can be no assurance that the transaction can or will be closed.

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