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Item 2. Properties

2023-02-28 compared with 2022-02-25 · 63 added, 118 removed, 224 unchanged (45% of the section changed)

Our Portfolio Summary

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

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

All of the Manhattan properties are located dynamic retail corridors with convenient access to mass transportation, a diverse tenant base and high pedestrian traffic.

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

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

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

Office and Retail Portfolio

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

Summary of Office and Retail Portfolio

As of December 31, 2022, our office and retail portfolio consisted of approximately 9.7 million rentable square feet and was approximately 85.2% occupied, yielding approximately $526.9 million of annualized rent.

We have 12 office properties and our retail properties are comprised of retail space at the base of our Manhattan office and multifamily properties, four standalone retail properties in Manhattan and two contiguous standalone retail properties in Westport, Connecticut (1) .

All of the Manhattan properties are located in dynamic retail corridors with convenient access to mass transportation, a diverse te nant base and high pedestrian traffic.

Giving effect to leases signed but not yet commenced, our office and retail portfolio was approximately 88.6% leased as of December 31, 2022.

Our real estate segment includes all activities related to the ownership, management, operation, acquisition, repositioning and disposition of all of our real estate assets other than the 86th and 102nd floor observatories at the Empire State Building, which are operated by our observatory segment.

(1) On February 1, 2023, the two retail properties in Westport, Connecticut were sold.

The tables below present an overview as of December 31, 2022.

Rentable Rent per

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Manhattan Office Properties - Office 7,572,479 86.0 % 394,619,464 60.58 494

Greater New York Metropolitan Area Office Properties

First Stamford Place (10)

Stamford, CT 776,386 75.8 % 25,161,553 42.74 43

Metro Center Stamford, CT 284,786 81.8 % 13,209,172 56.72 21

500 Mamaroneck Avenue (11)

Harrison, NY 286,335 90.4 % 7,681,621 29.69 34

Sub-Total/Weighted Average Greater New York Metropolitan Office Properties 1,347,507 80.2 % 46,052,346 42.63 98

Manhattan Office Properties - Retail

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Manhattan Office Properties - Retail 499,012 87.6 % 67,403,680 154.17 60

Sub-Total/Weighted Average Manhattan Office Properties - Office and Retail 8,078,189 83.9 % 449,323,149 66.33 570

Greater New York Metropolitan Area Office Properties

First Stamford Place (10)

Stamford, CT 777,174 77.4 % 26,604,240 44.24 40

Metro Center Stamford, CT 286,384 84.3 % 13,774,751 57.05 19

383 Main Street Norwalk, CT 260,081 46.0 % 3,601,000 30.08 18

500 Mamaroneck Avenue Harrison, NY 286,161 87.3 % 7,604,809 30.46 30

10 Bank Street White Plains, NY 234,985 85.3 % 7,420,613 37.01 30

Sub-Total/Weighted Average Greater New York Metropolitan Office Properties 1,844,785 76.6 % 59,005,413 41.77 137

Standalone Retail Properties

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77 West 55th Street Midtown 25,388 100.0 % 1,952,250 76.90 3

69-97 Main Street Westport, CT 16,874 82.9 % 1,591,181 113.70 4

103-107 Main Street Westport, CT 4,330 100.0 % 703,176 162.40 1

69-97 Main Street (12)

Westport, CT 16,874 100.0 % 1,866,809 110.63 5

103-107 Main Street (12)

Westport, CT 4,330 100.0 % 756,705 174.76 1

Sub-Total/Weighted Average Standalone Retail Properties 199,083 81.6 % 14,584,820 89.78 22

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

Multifamily Retail Properties

561 10th Avenue Hudson Yards 28,919 94.9 % 2,395,101 87.27 2

345 East 94th Street Upper East Side 3,700 100.0 % 247,782 66.97 1

298 Mulberry Street NoHo 10,365 100.0 % 1,645,002 158.71 1

Sub-Total/Weighted Average Multifamily Retail Properties 42,984 96.6 % 4,287,885 103.30 4

Office and Retail Portfolio Total 9,661,065 85.2 % $ 526,948,195 $ 63.98 678

Total/Weighted Average Office Properties 8,919,986 85.1 % $ 440,671,810 $ 58.02 592

Total/Weighted Average Retail Properties 741,079 86.5 % 86,276,385 134.56 86

712,637 81.8 % 82,812,308 142.02 83

Portfolio Total (12)

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

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

Office and Retail Portfolio Total 9,661,065 85.2 % $ 526,948,195 $ 63.98 678

(1) Excludes (i) 197,242 square feet of space across our commercial portfolio attributable to building management use and tenant amenities and (ii) 80,225 square feet of space attributable to our observatory.

(2) Based on leases signed and commenced as of December 31, 2022 and calculated as (i) rentable square feet less available square feet divided by (ii) rentable square feet.

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(10) First Stamford Place consists of three buildings.

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

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

(11) We have entered into an agreement to sell this property.

The transaction is expected to close in the first quarter 2023, subject to customary closing conditions.

(12) Property was sold on February 1, 2023.

Tenant Diversification

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Legal services 5.3 %

Media and advertising 4.6 %

Non-profit 4.2 %

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Retail 17.7 %

Technology 13.1 %

Technology, media and advertising 18.0 %

Total 100.0 %

(1) Based on annualized rent.

The following table sets forth information regarding the 20 largest tenants in our portfolio based on annualized rent as of December 31, 2021.

The following table sets forth information regarding the 20 largest tenants in our commercial portfolio based on annualized rent as of December 31, 2022.

Weighted Percent of

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2036 13.7 years 501,409 5.2 % $ 32,772,732 6.2 %

Signature Bank 1333 & 1400 Broadway Jul.

2035 12.1 years 308,207 3.2 % 18,175,128 3.4 %

501 Seventh Avenue Oct.

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2028 4.8 years 173,273 1.8 % 9,260,886 1.8 %

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

Empire State Building Jan.

Target 112 West 34th St, 10 Union Sq.

2038 14.7 years 81,340 0.8 % 8,825,395 1.7 %

Macy's 111 West 33rd Street May 2030 7.4 years 131,117 1.4 % 8,382,100 1.6 %

Urban Outfitters 1333 Broadway Sept.

2029 6.8 years 56,730 0.6 % 7,955,384 1.5 %

Federal Deposit Insurance Corp.

Empire State Building Dec.

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

Signature Bank 1333 & 1400 Broadway Jul.

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

The Interpublic Group of Co's, Inc.

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

Coty Empire State Building Jan.

2030 7.1 years 156,187 1.6 % 7,950,113 1.5 %

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2031 8.8 years 34,192 0.4 % 7,745,959 1.5 %

Federal Deposit Insurance Corp.

Empire State Building Dec.

2024 2.0 years 119,226 1.2 % 7,567,274 1.4 %

HNTB Corporation Empire State Building Feb.

2029 6.2 years 105,143 1.1 % 6,982,050 1.3 %

Franklin Templeton First Stamford Place Sept.

The Michael J.

Fox Foundation 111 West 33rd Street Nov.

2029 6.9 years 86,492 0.9 % 6,219,167 1.2 %

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2035 12.2 years 107,680 1.1 % 5,922,400 1.1 %

The Michael J.

Fox Foundation 111West 33rd Street Nov.

Institutional Capital Network, Inc.

One Grand Central Place Feb.2023 - Oct.

2035 9.8 years 89,300 0.9 % 5,617,792 1.1 %

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2034 11.7 years 87,943 0.9 % 5,344,751 1.0 %

On Deck Capital, Inc.

1400 Broadway Dec.

Walgreens ESB, 1350 Broadway May 2025 - Sept.

2027 3.5 years 39,142 0.4 % 4,903,003 0.9 %

Duane Reade ESB, 1350 Broadway May 2025 - Sept.

The Interpublic Group of Co's, Inc.

111 West 33rd St & 1400 B'Way Jul.

2025 1.8 years 77,364 0.8 % 4,744,134 0.9 %

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Lease Expirations

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

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

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

The following table sets forth new and renewal leases entered into at our Manhattan office properties (excluding the retail component of these properties), the weighted average annualized cash rent per square foot for new and renewal leases executed during the year, the previous weighted average annualized cash rent prior to the renewal or re-leasing of these leases and the percent increase in mark-to market rent.

The following table sets forth new and renewal leases entered into at our properties, the weighted average annualized cash rent per square foot for new and renewal leases executed during the year, the previous weighted average annualized cash rent prior to the renewal or re-leasing of these leases and the percent increase (decrease) in mark-to-market rent.

Year Ended December 31,

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Increase (decrease) in mark-to-market rent 1.4 % (0.8) % (6.1) %

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

The following tables set forth a summary schedule of expirations for leases in place as of December 31, 2022 plus available space for each of the ten calendar years beginning with the year ended December 31, 2022 at the office and retail properties in our commercial portfolio.

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

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

All Office and Retail Properties

Office and Retail Portfolio

Rentable Portfolio Annualized

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Total 91 741,079 100.0 % $ 86,276,385 100.0 % $ 134.56

The Empire State Building (6)

Rentable Portfolio Annualized

Number Square Rentable Percent of Rent Per

of Leases Feet Square Feet Annualized Annualized Rentable

Year of Lease Expiration Expiring (1)

Expiring Rent (3) (7)

Rent Square Foot

Available — 430,014 15.8 % $ — — % $ —

Signed leases not commenced 2 58,120 2.1 % — — % —

Fourth quarter 2021 2 6,971 0.3 % 333,750 0.2 % 47.88

2022 21 120,124 4.4 % 6,881,935 5.0 % 57.29

2023 24 99,464 3.7 % 6,783,696 4.9 % 68.20

2024 23 271,661 10.0 % 18,074,834 13.0 % 66.53

2025 14 110,331 4.1 % 7,400,687 5.3 % 67.08

2026 12 132,831 4.9 % 8,224,278 5.9 % 61.92

2027 18 57,581 2.1 % 3,818,249 2.8 % 66.31

2028 7 371,238 13.7 % 19,810,835 14.3 % 53.36

2029 7 282,020 10.4 % 17,571,549 12.7 % 62.31

2030 6 210,800 7.8 % 11,468,411 8.3 % 54.40

2031 5 23,038 0.8 % 1,918,571 1.4 % 83.28

Thereafter 14 540,955 19.9 % 36,284,298 26.2 % 67.07

Total 155 2,715,148 100.0 % $ 138,571,093 100.0 % $ 62.22

The Empire State Building Broadcasting Licenses and Leases

Annualized Percent of

Annualized Expense Annualized Annualized

Year of Lease Expiration Base Rent (8)

Reimbursements Rent (3)

Fourth quarter 2021 $ 31,710 $ 14,903 $ 46,613 0.3 %

2022 — — — — %

2023 285,588 69,728 355,316 2.4 %

2024 68,958 39,416 108,374 0.7 %

2025 — — — — %

2026 848,556 103,900 952,456 6.4 %

2027 2,613,626 600,207 3,213,833 21.7 %

2028 261,200 9,633 270,833 1.8 %

2029 — — — — %

2030 2,082,250 326,484 2,408,734 16.3 %

2031 1,855,250 272,818 2,128,068 14.4 %

Thereafter 4,703,059 635,565 5,338,624 36.0 %

Total $ 12,750,197 $ 2,072,654 $ 14,822,851 100.0 %

(1) If a lease has two different expiration dates, it is considered to be two leases (for the purposes of lease count and square footage).

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

(2) Excludes (i) 184,725 rentable square feet across our commercial portfolio attributable to building management use and tenant amenities and (ii) 80,225 square feet of space attributable to our observatory.

(3) Represents annualized base rent and current reimbursement for operating expenses and real estate taxes.

(4) Excludes (i) retail space in our Manhattan office properties and (ii) the Empire State Building broadcasting licenses and observatory operations.

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

(5) Includes an aggregate of 541,996 rentable square feet of retail space in our Manhattan office properties and multifamily properties.

Excludes the Empire State Building broadcasting licenses and observatory operations.

(6) Excludes retail space, broadcasting licenses and observatory operations.

(7) Includes approximately $4.3 million of annualized rent related to physical space occupied by broadcasting tenants for their broadcasting operations.

Does not include license fees charges to broadcast tenants.

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

Investments in Real Estate

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

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

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

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

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

Redevelopment and Repositioning

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

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

We intend to fund capital improvements through a combination of operating cash flow, cash on hand and borrowings.

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

These improvements are designed to improve the overall value and attractiveness of our properties and have contributed significantly to our tenant repositioning efforts, which seek to increase our occupancy, raise our rental rates, increase our rentable square feet, increase our aggregate rental revenue, lengthen our average lease term, increase our average lease size, and improve our tenant credit quality.

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

This strategy has shown

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

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

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

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

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

We have spent approximately $41 million over 2018 through 2021 on our well-maintained and well-located properties’ common areas and amenities to ensure competitiveness and protect our market position.

Portfolio Transaction Activity

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 sale/disposition of properties in our condensed consolidated statement of operations.

Prior to the consummation of this transaction, 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.

On December 7, 2022, we closed on the sale of 10 Bank Street, White Plains, NY, which was encumbered by a $30.0 million mortgage, at a gross asset valuation of $42.0 million.

On December 20, 2022, we closed on the acquisition of a 100% free-market, full service multifamily asset located at 298 Mulberry Street in Manhattan for a purchase price of $114.9 million.

The property has a total of 96 units and was 100% leased as of December 31, 2022.

Subsequent to the year ended December 31, 2022, on February 1, 2023 we closed on the sale of 69-97 and 103-107 Main Street in Westport, Connecticut at a gross asset valuation of $40.0 million.

The Westport sale was a related party transaction approved in accordance with the Company's protocols.

See "Financial Statements - Note 11 Related Party Transactions ".

In December 2022, we also entered into a purchase and sale agreement for 500 Mamaroneck Avenue in Harrison, NY at a gross asset valuation of $53.0 million.

This transaction is expected to close in the first quarter of 2023, subject to customary closing conditions.

LEGAL PROCEEDINGS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 2. Properties