What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 243 added, 154 removed, 568 unchanged (41% of the section changed)

3 unchanged sentences

(amounts in thousands, except per unit amounts)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

ASSETS (unaudited)

51 unchanged sentences

(amounts in thousands, except per unit amounts)

Three Months Ended March 31,

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

2022 2021 2022 2021

Rental revenue $ 149,339 $ 140,797 $ 296,853 $ 281,028

13 unchanged sentences

Total operating income

46,499 26,484 52,547 44,833

Other income (expense):

2 unchanged sentences

Loss on early extinguishment of debt — — — ( 214 )

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

Income tax benefit 1,596 2,106

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

Gain on disposition of property 27,170 — 27,170 —

Income before income taxes 49,058 3,226 30,241 ( 2,071 )

Income tax (expense) benefit ( 363 ) 1,185 1,233 3,291

Net income 48,695 4,411 31,474 1,220

Private perpetual preferred unit distributions ( 1,051 ) ( 1,051 ) ( 2,101 ) ( 2,101 )

Net loss attributable to non-controlling interest in other partnerships 159 $ — 222 —

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

Net income (loss) attributable to common unitholders $ 47,803 $ 3,360 $ 29,595 $ ( 881 )

Total weighted average units:

7 unchanged sentences

Empire State Realty OP, L.P.

Condensed Consolidated Statements of Comprehensive Loss

Condensed Consolidated Statements of Comprehensive Income

(amounts in thousands)

Three Months Ended March 31,

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

Other comprehensive income (loss):

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

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

2022 2021 2022 2021

Net income $ 48,695 $ 4,411 $ 31,474 $ 1,220

Other comprehensive income:

Unrealized gain (loss) on valuation of interest rate swap agreements 10,057 ( 95 ) 19,819 ( 36 )

amount reclassified into interest expense 2,741 2,898 6,036 5,767

Other comprehensive income 12,798 2,803 25,855 5,731

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

Comprehensive income 61,493 7,214 57,329 6,951

Net loss attributable to non-controlling interest in other partnerships 159 — 222 —

Other comprehensive income attributable to non-controlling interest ( 1,627 ) — ( 1,627 ) —

Comprehensive income attributable to OP unitholders $ 60,025 $ 7,214 $ 55,924 $ 6,951

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

1 unchanged sentence

Condensed Consolidated Statements of Capital

For The Three Months Ended March 31, 2022 and 2021

For The Three Months Ended June 30, 2022 and 2021

(amounts in thousands)

2 unchanged sentences

Private Perpetual Preferred Units Private Perpetual Preferred Unitholders Operating Partnership Units Operating Partnership Unitholders Operating Partnership Units Operating Partnership Unitholders Operating Partnership Units Operating Partnership Unitholders Operating Partnership Units Operating Partnership Unitholders Operating Partnership Units Operating Partnership Unitholders Non-controlling Interest in Other Partnerships Total Capital

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

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

Conversion of operating partnership units to ESRT Partner's Capital

— — 565 848 ( 119 ) ( 944 ) ( 288 ) 56 ( 83 ) 21 ( 75 ) 19 — —

Repurchases of common shares — — ( 6,611 ) ( 52,439 ) — — — — — — — — — ( 52,439 )

Equity compensation — — 4 318 194 5,447 — — — — — — — 5,765

Distributions — ( 1,051 ) — ( 5,802 ) — ( 2,841 ) — ( 763 ) — ( 201 ) — ( 100 ) — ( 10,758 )

Net income (loss) — 1,051 — 29,579 — 12,823 — 3,872 — 1,003 — 526 ( 159 ) 48,695

Other comprehensive income — — — 6,878 — 3,031 — 904 — 235 — 123 1,627 12,798

Balance at June 30, 2022 6,224 $ 29,940 163,684 $ 957,803 81,073 $ 665,520 21,746 $ ( 1,137 ) 5,738 $ ( 637 ) 2,862 $ ( 277 ) 14,881 $ 1,666,093

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

General Partner Limited Partners

Balance at March 31, 2021 6,224 $ 29,940 172,332 $ 1,053,495 80,656 $ 650,254 23,270 $ ( 1,418 ) 6,253 $ ( 727 ) 3,110 $ ( 349 ) $ — $ 1,731,195

Issuance of OP units, net of costs — — —

Conversion of operating partnership units to ESRT Partner's Capital

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

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

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

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

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

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

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

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

Empire State Realty OP, L.P.

Condensed Consolidated Statements of Capital

For The Six Months Ended June 30, 2022 and 2021

(amounts in thousands)

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

7 unchanged sentences

Other comprehensive income — — — 14,973 — 6,517 — 1,962 — 509 — 267 1,627 25,855

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

Balance at June 30, 2022 6,224 $ 29,940 163,684 $ 957,803 81,073 $ 665,520 21,746 $ ( 1,137 ) 5,738 $ ( 637 ) 2,862 $ ( 277 ) $ 14,881 $ 1,666,093

9 unchanged sentences

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

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

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

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

2 unchanged sentences

(amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows From Operating Activities

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

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income $ 31,474 $ 1,220

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 125,410 89,545

Gain on disposition of property ( 27,170 ) —

Amortization of non-cash items within interest expense 5,169 5,398

20 unchanged sentences

(amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows From Financing Activities

23 unchanged sentences

Derivative instruments at fair values included in accounts payable and accrued expenses 19,695 6,176

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

Conversion of operating partnership units to ESRT partner's capital 2,345 6,835

Disposal of land in connection with foreclosure 1,680 —

Extinguishment of debt in connection with property disposition 30,000 —

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

9 unchanged sentences

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.

As of June 30, 2022, our total portfolio contained 9.9 million rentable square feet of office, retail and multifamily space.

We owned 13 office properties (including three long-term ground leasehold interests) encompassing approximately 9.2 million rentable square feet of office space.

1 unchanged sentence

Our Manhattan office properties also contain an aggregate of approximately 0.5 million rentable square feet of retail space on their ground floor and/or contiguous levels.

Our remaining five office properties are located in Fairfield County, Connecticut and Westchester County, New York, encompassing in the aggregate approximately 1.8 million rentable square feet.

The majority of square footage for these five properties is located in densely populated metropolitan communities with immediate access to mass transportation.

Our remaining four office properties are located in Fairfield County, Connecticut and Westchester County, New York, encompassing in the aggregate approximately 1.6 million rentable square feet.

The majority of square footage for these four properties is located in densely populated metropolitan communities with immediate access to mass transportation.

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

As of March 31, 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.

As of June 30, 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 June 30, 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 March 31, 2022, ESRT owned approximately 60.3 % of our operating partnership units.

As of June 30, 2022, ESRT owned approximately 59.5 % of our operating partnership units.

Summary of Significant Accounting Policies

6 unchanged sentences

These financial statements should be read in conjunction with the financial statements and accompanying notes included in the financial statements for the year ended December 31, 2021 contained in our Annual Report on Form 10-K.

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 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 do not consider our business to be subject to material seasonal fluctuations, except that our observatory business is subject to tourism seasonality.

Historically, 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 March 31, 2022 and December 31, 2021.

We had no VIEs as of June 30, 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.

Property Disposition

During April 2022, we transferred 383 Main Avenue, Norwalk CT, which was encumbered by a $ 30.0 million mortgage, back to the lender in a consensual foreclosure and recognized a non-cash gain of $ 27.2 million, which is included in Gain on disposition of property in our condensed consolidated statements of operations.

In December 2021, we recorded a $ 7.7 million impairment charge on the property as we had concluded the cost basis of the asset exceeded its fair value given our reduced holding period and new intent to transfer property ownership to the lender.

Deferred Costs, Acquired Lease Intangibles and Goodwill

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

Deferred costs, net, consisted of the following as of June 30, 2022 and December 31, 2021 (amounts in thousands):

June 30, 2022 December 31, 2021

Leasing costs $ 217,415 $ 211,189

4 unchanged sentences

Total deferred costs, net, excluding net deferred financing costs $ 187,372 $ 195,205

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

At June 30, 2022 and December 31, 2021, $ 6.1 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 $ 7.3 million and $ 6.1 million for the three months ended June 30, 2022 and 2021, respectively, and $ 14.3 million and $ 11.7 million for the six months ended June 30, 2022 and 2021, respectively.

Amortization expense related to acquired lease intangibles was $ 4.1 million and $ 1.6 million for the three months ended June 30, 2022 and 2021, respectively, and $ 8.3 million and $ 3.3 million for the six months ended June 30, 2022 and 2021, respectively.

Amortizing acquired intangible assets and liabilities consisted of the following as of June 30, 2022 and December 31, 2021 (amounts in thousands):

June 30, 2022 December 31, 2021

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

1 unchanged sentence

Acquired below-market ground leases, net $ 332,988 $ 336,904

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Acquired below-market leases $ ( 64,635 ) $ ( 65,403 )

1 unchanged sentence

Acquired below-market leases, net $ ( 20,178 ) $ ( 24,941 )

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.

Rental revenue related to the amortization of below-market leases, net of above-market leases, was $ 1.7 million and $ 0.7 million for the three months ended June 30, 2022 and 2021, respectively, and $ 3.5 million and $ 1.4 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 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.

6 unchanged sentences

Our methodology to review goodwill impairment, which included a significant amount of judgment and estimates, provided a reasonable basis to determine whether impairment had occurred.

Based upon the results of the goodwill impairment test of the standalone observatory reporting unit, which is after the intercompany rent expense paid to the Real Estate reporting unit, we determined that the fair value of the observatory reporting unit exceeded its carrying value by less than 15.0 %.

Based upon the results of the second quarter 2022 goodwill impairment test of the standalone observatory reporting unit, which is after the intercompany rent expense paid to the Real Estate reporting unit, we determined that the fair value of the observatory reporting unit exceeded its carrying value by less than 15.0 %.

Many of the factors employed in determining whether or not goodwill is impaired are outside of our control, and it is reasonably likely that assumptions and estimates will change in future periods.

We will continue to assess the impairment of the observatory reporting unit goodwill going forward, and that continued assessment may again utilize a third-party valuation consulting firm.

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

Principal Balance As of March 31, 2022

March 31, 2022 December 31, 2021 Stated

Debt consisted of the following as of June 30, 2022 and December 31, 2021 (amounts in thousands):

Principal Balance As of June 30, 2022

June 30, 2022 December 31, 2021 Stated

Rate Effective

43 unchanged sentences

______________

(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.

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

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

(5) At June 30, 2022, we were in compliance with all debt covenants.

Principal Payments

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

Aggregate required principal payments at June 30, 2022 are as follows (amounts in thousands):

Year Amortization Maturities Total

5 unchanged sentences

Thereafter 35,975 1,606,282 1,642,257

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

Total $ 76,174 $ 2,223,957 $ 2,300,131

______________

(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 March 31, 2022 and December 31, 2021 (amounts in thousands):

March 31, 2022 December 31, 2021

Deferred financing costs, net, consisted of the following at June 30, 2022 and December 31, 2021 (amounts in thousands):

June 30, 2022 December 31, 2021

Financing costs $ 44,065 $ 44,637

1 unchanged sentence

Total deferred financing costs, net $ 19,338 $ 22,112

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.

Amortization expense related to deferred financing costs was $ 1.3 million and $ 1.1 million for the three months ended June 30, 2022 and 2021, respectively, and $ 2.7 million and $ 2.3 million for the six months ended June 30, 2022 and 2021, respectively.

Unsecured Revolving Credit and Term Loan Facilities

2 unchanged sentences

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

As of June 30, 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.

1 unchanged sentence

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.

As of June 30, 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.

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

The agreements governing both facilities also contain customary events of default (subject in certain cases to specified cure periods), including but not limited to non-payment, breach of covenants, representations or warranties, cross defaults, bankruptcy or other insolvency events, judgments, ERISA events, invalidity of loan documents, loss of real estate investment trust qualification, and occurrence of a change of control.

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

of real estate investment trust qualification, and occurrence of a change of control.

As of June 30, 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 March 31, 2022, we were in compliance with these covenants.

As of June 30, 2022, we were in compliance with these covenants.

Accounts Payable and Accrued Expenses

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

Accounts payable and accrued expenses consisted of the following as of June 30, 2022 and December 31, 2021 (amounts in thousands):

June 30, 2022 December 31, 2021

Accrued capital expenditures $ 67,815 $ 49,247

11 unchanged sentences

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

In May 2022, we entered into forward interest rate swaps that aggregate $ 390.0 million to replace the $ 265.0 million swap which currently fixes the interest rate on a portion of our outstanding term loans balance and is due to expire in August 2022.

The new swaps go into effect upon the expiration of the current swap and once effective, the interest rate on our term loans will be 100 % fixed.

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

As of March 31, 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.

As of June 30, 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 $ 6.1 million.

If we had breached any of these provisions at June 30, 2022, we could have been required to settle our obligations under the agreements at their termination value of $ 6.1 million.

As of June 30, 2022 and December 31, 2021, we had interest rate swaps and caps with an aggregate notional value of $ 841.3 million and $ 451.3 million, respectively.

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

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 June 30, 2022, the fair value of our interest rate swaps amounted to $ 4.1 million, which is included in prepaid assets and other expenses and $( 5.6 ) 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.

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).

As of June 30, 2022 and 2021, our cash flow hedges are deemed highly effective and a net unrealized gain (loss) of $ 12.8 million and $ 2.8 million for the three months ended June 30, 2022 and 2021, respectively, and a net unrealized gain (loss) of $ 25.9 million and $ 5.7 million for the six months ended June 30, 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 $ 2.4 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 March 31, 2022 and December 31, 2021 (dollar amounts in thousands):

March 31, 2022 December 31, 2021

The table below summarizes the terms of agreements and the fair values of our derivative financial instruments as of June 30, 2022 and December 31, 2021 (amounts in thousands):

June 30, 2022 December 31, 2021

Derivative Notional Amount Receive Rate Pay Rate Effective Date Expiration Date Asset Liability Asset Liability

10 unchanged sentences

Interest rate cap 9,188 1 Month LIBOR 5.5000 % December 1, 2021 October 1, 2024 26 — 8 —

Interest rate swap 175,000 1 Month SOFR 2.5620 % August 31, 2022 December 31, 2026 1,703 — — —

Interest rate swap 107,500 1 Month SOFR 2.6260 % August 19, 2022 March 19, 2025 828 — — —

Interest rate swap 107,500 1 Month SOFR 2.6280 % August 19, 2022 March 19, 2025 824 — — —

$ 4,120 $ ( 5,612 ) $ 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

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on accumulated other comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021 (amounts in thousands):

Three Months Ended Six Months Ended

Effects of Cash Flow Hedges June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Amount of gain (loss) recognized in other comprehensive income (loss) $ 10,057 $ ( 95 ) $ 19,819 $ ( 36 )

Amount of loss reclassified from accumulated other comprehensive loss into interest expense ( 2,741 ) ( 2,898 ) ( 6,036 ) ( 5,767 )

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

The table below shows the effect of our derivative financial instruments designated as cash flow hedges on the condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021 (amounts in thousands):

Three Months Ended Six Months Ended

Effects of Cash Flow Hedges June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Total interest expense presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded $ ( 25,042 ) $ ( 23,422 ) $ ( 50,056 ) $ ( 46,976 )

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

Amount of loss reclassified from accumulated other comprehensive income into interest expense ( 2,741 ) ( 2,898 ) ( 6,036 ) ( 5,767 )

Fair Valuation

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

The estimated fair values at June 30, 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.

2 unchanged sentences

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.

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

1 unchanged sentence

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

The following tables summarize the carrying and estimated fair values of our financial instruments as of June 30, 2022 and December 31, 2021 (amounts in thousands):

June 30, 2022

Estimated Fair Value

12 unchanged sentences

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 March 31, 2022 and December 31, 2021.

Disclosure about the fair value of financial instruments is based on pertinent information available to us as of June 30, 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 March 31, 2022 and 2021 condensed consolidated statements of operations as rental revenue.

Operating expense reimbursements are reflected in our June 30, 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 months ended March 31, 2022 and 2021 are as follows (amounts in thousands):

Three months ended

Rental revenue March 31, 2022 March 31, 2021

The components of rental revenue for the three and six months ended June 30, 2022 and 2021 are as follows (amounts in thousands):

Three Months Ended Six Months Ended

Rental revenue June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Fixed payments $ 134,794 $ 124,432 $ 268,195 $ 250,204

1 unchanged sentence

Total rental revenue $ 149,339 $ 140,797 $ 296,853 $ 281,028

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):

As of June 30, 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 $ 244,025

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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 $ 28.8 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.

4 unchanged sentences

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

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

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

The weighted average remaining lease term as of June 30, 2022 was 47.9 years.

As of June 30, 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 $ 759

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Legal Proceedings

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.

Except as described below, as of June 30, 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.

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Respondents have appealed that ruling.

On May 10, 2022, Respondents moved to dismiss the appeal and judgment on the grounds that a recent decision of the United States Supreme Court held that the federal courts have no subject matter jurisdiction over the case.

Claimants opposed the motion, which is pending.

In addition, certain of the Claimants in the federal court action sought to pursue claims in that case against Respondents.

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Unfunded Capital Expenditures

At March 31, 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.

At June 30, 2022, we estimate that we will incur approximately $ 105.3 million of capital expenditures (including tenant improvements and leasing commissions) on our properties pursuant to existing lease agreements.

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

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

At March 31, 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.

At June 30, 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

3 unchanged sentences

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

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 of June 30, 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 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.

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

3 unchanged sentences

We carry insurance coverage on our properties of types and in amounts with deductibles that we believe are in line with coverage customarily obtained by owners of similar properties.

As of March 31, 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.

As of June 30, 2022, there were 162,689,535 share of Class A common stock 994,252 shares of Class B common stock and 111,420,579 operating partnership units outstanding, of which 163,683,787 , or 59.5 %, were owned by ESRT and 111,420,579 , or 40.5 %, 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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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 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)

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

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 June 30, 2022:

Period Total Number of Shares Purchased Weighted Average Price Paid per Share Maximum Approximate Dollar Value Available for Future Purchase (in thousands)

April 2022 2,308,026 $ 8.95 $ 467,350

May 2022 1,050,731 $ 8.09 $ 458,849

June 2022 3,252,202 $ 7.16 $ 435,560

Private Perpetual 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.

As of June 30, 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.

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Distributions

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.

Total distributions paid to OP unitholders were $ 9.7 million and $ 19.5 million for the three and six months ended June 30, 2022, respectively, and $ 9.5 million for the three and six months ended June 30, 2021.

Total distributions paid to preferred unitholders were $ 1.1 million and $ 2.1 million for the three and six months ended June 30, 2022, respectively, and $ 1.1 million and $ 2.1 million for the three and six months ended June 30, 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 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.

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.

An aggregate of 11.0 million shares of ESRT common stock is authorized for issuance under awards granted pursuant to the 2019 Plan, and as of June 30, 2022, 5.9 million shares of ESRT common stock remain available for future issuance.

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

In 2022, each of our directors received 60 % of their $ 200,000 annual base retainer in the form of equity vesting ratably over four years , and could elect to receive the remaining 40 % of such base retainer in (i) cash at the face value of the award, (ii) immediately vesting equity at the face value of the award, or (iii) equity vesting ratably over three years at 120 % of the face amount.

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

In accordance with each director's election, we granted a total of 142,358 LTIP units that are subject to time-based vesting with fair market values of $ 1.1 million.

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

We also granted 51,284 LTIP units that are subject to immediate vesting with fair market values of $ 0.3 million.

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.

An employee is retirement eligible when the employee attains the (i) age of 65 for awards granted in 2020 and after and age of 60 for awards granted before 2020 and (ii) the date on which the employee has first completed ten years of continuous service with us or our affiliates.

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.

We recognize expense respective to the number of awards we expect to vest at the conclusion of the measurement period.

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

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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.

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.

For restricted stock awards, the fair value of the awards are based on the market price of ESRT stock at the grant date.

LTIP units and ESRT restricted stock issued during the six months ended June 30, 2022 were valued at $ 22.4 million.

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

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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 three months ended March 31, 2022:

The following is a summary of ESRT restricted stock and LTIP unit activity for the six months ended June 30, 2022:

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

3 unchanged sentences

Forfeited or unearned ( 9,874 ) — ( 1,311,839 ) — 7.20

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

Unvested balance at June 30, 2022 369,328 2,961,907 4,507,450 578,943 $ 6.67

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.

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 $ 0.6 million and $ 1.6 million for the three and six months ended June 30, 2022, respectively, and $ 0.4 million and $ 1.4 million for the three and six months ended June 30, 2021, respectively.

Unrecognized compensation expense was $ 1.5 million at June 30, 2022, which will be recognized over a weighted average period of 3.6 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 $ 5.4 million and $ 8.9 million for the three and six months ended June 30, 2022, respectively, and $ 4.8 million and $ 8.6 million for the three and six months ended June 30, 2021, respectively.

Unrecognized compensation expense was $ 35.1 million at June 30, 2022, which will be recognized over a weighted average period of 2.8 years.

Earnings Per Unit

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 )

Earnings per unit for the three and six months ended June 30, 2022 and 2021 is computed as follows (amounts in thousands, except per share amounts):

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Net income $ 48,695 $ 4,411 $ 31,474 $ 1,220

Private perpetual preferred unit distributions ( 1,051 ) ( 1,051 ) ( 2,101 ) ( 2,101 )

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Earnings allocated to unvested units ( 670 ) ( 113 ) ( 759 ) ( 113 )

Net loss attributable to common unitholders – basic and diluted $ ( 18,297 ) $ ( 4,241 )

Net income (loss) attributable to common unitholders – basic and diluted $ 47,133 $ 3,247 $ 28,836 $ ( 994 )

Weighted average units outstanding – basic 270,078 277,893 271,834 277,887

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Diluted $ 0.17 $ 0.01 $ 0.11 $ 0.00

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

There were 603 and 398 antidilutive shares and LTIP units for the three and six months ended June 30, 2022, respectively, and 1,051 and 955 antidilutive shares and LTIP units for the three and six months ended June 30, 2021, respectively.

Related Party Transactions

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We earned supervisory fees from entities affiliated with Anthony E.

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.

Malkin, our Chairman, President and Chief Executive Officer, of $ 0.3 million for the three months ended June 30, 2022 and 2021, and $ 0.5 million for the six months ended June 30, 2022 and 2021.

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

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

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

Malkin of $ 0.1 million and $ 0.1 million for the three months ended June 30, 2022 and 2021, respectively, and $ 0.1 million for the six months ended June 30, 2022 and 2021.

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

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

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

Total revenue aggregated $ 0.1 million and $ 0.1 million for the three months ended June 30, 2022 and 2021, respectively, and $ 0.2 million for the six months ended June 30, 2022 and 2021.

Segment Reporting

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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

The following tables provide components of segment net income (loss) for each segment for the three and six months ended June 30, 2022 and 2021 (amounts in thousands):

Three Months Ended June 30, 2022

Real Estate Observatory Intersegment Elimination Total

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Interest expense ( 25,042 ) — — ( 25,042 )

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

Gain on disposition of property 27,170 — — 27,170

Income before income taxes 46,620 2,438 — 49,058

Income tax expense ( 38 ) ( 325 ) — ( 363 )

Net income $ 46,582 $ 2,113 $ — $ 48,695

Segment assets $ 3,969,257 $ 247,974 $ — $ 4,217,231

Expenditures for segment assets $ 13,115 $ — $ — $ 13,115

Three Months Ended June 30, 2021

Real Estate Observatory Intersegment Elimination Total

Rental revenue $ 140,797 $ — $ — $ 140,797

Intercompany rental revenue 6,029 — ( 6,029 ) —

Observatory revenue — 8,359 — 8,359

Lease termination fees 3,339 — — 3,339

Third-party management and other fees 327 — — 327

Other revenue and fees 586 — — 586

Total revenues 151,078 8,359 ( 6,029 ) 153,408

Operating expenses:

Property operating expenses 28,793 — — 28,793

Intercompany rent expense — 6,029 ( 6,029 ) —

Ground rent expense 2,332 — — 2,332

General and administrative expenses 14,089 — — 14,089

Observatory expenses — 5,268 — 5,268

Real estate taxes 31,354 — — 31,354

Depreciation and amortization 45,066 22 — 45,088

Total operating expenses 121,634 11,319 ( 6,029 ) 126,924

Total operating income (loss) 29,444 ( 2,960 ) — 26,484

Other income (expense):

Interest income 163 1 — 164

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

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

Income tax (expense) benefit ( 135 ) 1,320 — 1,185

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

Net income (loss) $ 6,050 $ ( 1,639 ) $ — $ 4,411

Segment assets $ 3,880,853 $ 242,619 $ — $ 4,123,472

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

Three Months Ended March 31, 2021

Six Months Ended June 30, 2022

Real Estate Observatory Intersegment Elimination Total

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Total operating expenses 295,433 41,805 ( 27,729 ) 309,509

Total operating income 25,304 ( 6,955 ) — 18,349

Total operating income (loss)

53,743 ( 1,196 ) — 52,547

Other income (expense):

1 unchanged sentence

Interest expense ( 50,056 ) — — ( 50,056 )

Gain on disposition of property 27,170 — — 27,170

Income (loss) before income taxes 31,432 ( 1,191 ) — 30,241

Income tax (expense) benefit ( 182 ) 1,415 — 1,233

Net income $ 31,250 $ 224 $ — $ 31,474

Expenditures for segment assets $ 51,999 $ 291 $ — $ 52,290

Six Months Ended June 30, 2021

Real Estate Observatory Intersegment Elimination Total

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

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

Observatory revenue — 10,962 — 10,962

Lease termination fees 4,628 — — 4,628

Third-party management and other fees 603 — — 603

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

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

Operating expenses:

Property operating expenses 59,072 — — 59,072

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

Ground rent expense 4,663 — — 4,663

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

Observatory expenses — 9,856 — 9,856

Real estate taxes 62,801 — — 62,801

Depreciation and amortization 89,485 60 — 89,545

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

Total operating income (loss) 54,748 ( 9,915 ) — 44,833

Other income (expense):

Interest income 283 3 — 286

Interest expense ( 46,976 ) — — ( 46,976 )

Loss on early extinguishment of debt

3 unchanged sentences

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

Segment assets $ 3,910,152 $ 241,371 $ — $ 4,151,523

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

1 unchanged sentence

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